HI-Quality Company Updates

Thursday, Dec. 13, 2018

Starbucks-SBUX announced long-term growth plans of delivering double-digit growth in non-GAAP earnings per share. Starbucks reaffirms FY19 EPS guidance of $2.61-2.66, excluding non-recurring items, and sees FY19 revenues +5-7%. The revenue guidance ncludes ~2% net negative impact related to streamline-driven activities. The company expects global comparable store sales growth near the lower end of its current 3% to 5% range with plans to  add ~2,100 net new Starbucks stores globally. They also announced the launch of Starbucks Delivers to nearly a quarter of company-operated stores with Uber Eats, beginning in 2019. The company is expanding Starbucks Delivers in China – on the Ele.me on-demand delivery platform – to 2,000 stores across 30 cities in China since launching three months ago. Starbucks accelerates cold beverage innovation strategy, including plans to roll out Nitro Cold Brew in all U.S. company-operated stores in FY19. Starbucks highlights efforts to amplify the brand globally while showcasing new products and market opportunities for Global Coffee Alliance with Nestlé.

The board of directors of AbbVie-ABBV has authorized a $5 billion increase to AbbVie's existing stock repurchase program. Purchases may be made from time to time at management's discretion.

Wednesday, Dec, 12, 2018

TRowe Price Group-TROW reported preliminary month-end assets under management of $1.03 trillion as of November 30, 2018, up 4.1% from 12/31/17.

Monday, Dec. 10, 2018

The Board of Directors of Facebook-FB approved an increase of $9.0 billion in the amount authorized under the company’s share repurchase program. The Board has previously authorized repurchases of up to $15.0 billion of the Company’s Class A common stock under the program since it commenced in 2017, and this increase is incremental to the prior authorizations.

Thursday, Dec. 6, 2018

Ulta Beauty-ULTA bagged a 16% increase in net sales to $1.56 billion with net income up 25% to $131.2 million and EPS up 28% to $2.18. Comparable sales for stores open at least 14 months plus e-commerce sales increased 7.8%, driven by 5.3% transaction growth and 2.5% growth in average ticket. Retail comparable sales increased 4.4%, including salon comparable sales growth of 3.5%. E-commerce sales increased 43% to $170.7 million, representing 340 basis points of the total comp sales increase of 7.8%. Operating margins declined by 130 basis points to 10.8%, squeezed by increases in wages and marketing expenses to support growth, partially offset by lower corporate overhead. The company’s tax rate declined to 23.1% from 35.8% last year, primarily due to tax reform. The company opened 42 new stores during the quarter, bringing the total number of stores to 1,163 and the square footage to 12,222, up 9.7% from last year. Year-to-date, Ulta Beauty generated $542.2 million in operating cash flow and $285.8 million in free cash flow. During the quarter, the company repurchased 451,424 shares of its common stock at a cost of $119 million, or $263.61 per average share. Year-to-date, Ulta Beauty has repurchased 1,582,118 shares at a cost of $379.4 million, or $239.81 per average share. As of 11/3/2018, $282.8 million remained under the $625 million share repurchase program announced in March 2018. Ulta Beauty ended the third fiscal quarter with $297 million in cash and no long-term debt on its blemish-free balance sheet. Looking ahead, Ulta Beauty affirmed its previous full year guidance with sales increasing in the low teens on comp store growth of 7% to 8% and e-commerce sales growing in the 40% range. EPS are expected to increase in the low twenties percentage range, including the impact of about $500 million in share repurchases.

Thor Industries-THO reported fiscal first quarter revenues declined 21% to $1.76 billion with net income and EPS down 89% to $14 million and $0.26, respectively. Earnings reflected $57.1 million, or $1.02 per share, of acquisition-related costs for a foreign currency forward contract and transaction costs. Sales for the first quarter were down 21% for the Towable segment and down 24% for the Motorized segment. Unit sales in the Towable segment were down 26% and unit sales in the Motorized segment were down 36%. Overall gross profit margins declined to 11.8%, compared to 14.9% in the prior-year period, reflecting the impact of higher overall sales promotions and increased costs primarily associated with warranty expenses. Material costs also increased due to the implementation of tariffs. Free cash flow for the quarter was negative $50 million compared to a negative $21 million in the prior year. The previously announced acquisition of Erwin Hymer Group, Europe’s premier RV manufacturer, is expected to close near the end of calendar year 2018.

Biogen-BIIB exercised its option to obtain from Ionis a worldwide, exclusive, royalty-bearing license to develop and commercialize BIIB067 (IONIS-SOD1RX), an investigational treatment for amyotrophic lateral sclerosis (ALS) with superoxide dismutase 1 (SOD1) mutations. ALS with SOD1 mutations is a subtype of familial ALS and accounts for approximately two percent of all ALS cases. As a part of the option exercise, Biogen made a one-time $35 million payment to Ionis. Future payments may include potential post-licensing milestone payments of up to $55 million and royalties in the low to mid-teen percentages on annual worldwide net sales. Biogen will be solely responsible for the costs and expenses related to the development, manufacturing and commercialization of BIIB067 following the option exercise.

According to ADP’s National Employment Report, private sector employment increased by 179,000 jobs from October to November. “Although the labor market performed well, job growth decelerated slightly,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. ”Midsized businesses added nearly 70 percent of all jobs this month. This growth points to the midsized businesses’ ability to provide stronger wages and benefits. It also suggests they could be more insulated from the global challenges large enterprises face.” Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth is strong, but has likely peaked. This month’s report is free of significant weather effects and suggests slowing underlying job creation. With very tight labor markets, and record unfilled positions, businesses will have an increasingly tough time adding to payrolls.”


Wednesday, Dec. 5, 2018

Brown-Forman-BFB reported second fiscal quarter sales decreased slightly to $910 million with net income increasing 4% to $249 million and EPS increasing 6% to $0.52. Year-to-date, underlying net sales grew 5% on broad-based portfolio growth including a 5% increase for the Jack Daniel’s family of brands, a 25% increase for Woodford Reserve, a 15% increase in Herradura and an 11% increase in el Jimador. Emerging markets grew underlying net sales by 10%, developed international markets grew underlying net sales by 5% and the United States grew underlying net sales by 3%. During the first half of the year, Brown-Forman generated $219 million in free cash flow and returned $280 million to shareholders through dividends of $152 million and share repurchases of $128 million. Recently enacted retaliatory tariffs on American whiskey have created uncertainty around the company’s near-term outlook, making it difficult to accurately predict future results. However, management reaffirmed its full fiscal 2019 year EPS guidance of $1.65 to $1.75, representing 11% to 18% growth from last year and underlying sales growth of 6% to 7%.

Tuesday, Dec. 4, 2018

Mastercard-MA announced that its Board of Directors has increased the company’s quarterly cash dividend to 33 cents per share, a 32 percent increase over the previous dividend of 25 cents per share. The Board of Directors also approved a new share repurchase program, authorizing the company to repurchase up to $6.5 billion of its Class A common stock.


Stryker-SYK announced that its Board of Directors has declared a quarterly dividend of $0.52 per share payable on January 31, 2019 to shareholders of record at the close of business on December 31, 2018, representing an increase of approximately 11% versus the prior year and the previous quarter. “We continue to deliver strong financial results, and consistent with our stated capital allocation philosophy, are raising our dividend 11%," said Kevin A. Lobo, Chairman and Chief Executive Officer.

 


Wednesday, Nov. 28, 2018


The Walt Disney Company-DIS Board of Directors today announced a semi-annual cash dividend of $0.88 per share, payable January 10, 2019 to shareholders of record at the close of business on December 10, 2018. The Company last paid a semi-annual dividend of $0.84 per share in July. “Given our record financial performance in fiscal 2018, we are pleased to increase our dividend to shareholders, while continuing to invest for future growth with our pending acquisition of 21st Century Fox and the ongoing development of our direct-to-consumer business,” said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company. “This payment brings our total dividends for the fiscal year to $1.72 a share.”


Tuesday, Nov. 27, 2018

United Technologies-UTX announced the completion of its acquisition of Rockwell Collins and the company's intention to separate its commercial businesses, Otis and Carrier (formerly CCS), into independent entities. The separation will result in three global, industry-leading companies:  United Technologies, comprised of Collins Aerospace Systems and Pratt & Whitney, will be the preeminent systems supplier to the aerospace and defense industry; Collins Aerospace was formed through the combination of UTC Aerospace Systems and Rockwell Collins; Otis, the world's leading manufacturer of elevators, escalators and moving walkways; and Carrier, a global provider of HVAC, refrigeration, building automation, fire safety and security products with leadership positions across its portfolio. The proposed separation is expected to be effected through spin-offs of Otis and Carrier that will be tax-free for UTC shareowners for U.S. federal income tax purposes and occur in 2020.  Gregory Hayes will oversee the transition and will continue in his current role as UTC Chairman and CEO following the separation. The three independent companies will be appropriately capitalized with the financial flexibility to take advantage of future growth opportunities.  Each business will be better positioned to pursue a capital allocation strategy more suitable to its respective industry and risk and return profile, and enjoy greater flexibility with an independent equity currency and more appropriately aligned management and employee incentives.  UTC's commitment to strengthening its credit metrics remains unchanged.  Each independent company is expected to have a strong balance sheet and to maintain an investment grade credit rating.   Following separation, the three companies together are initially expected to pay a quarterly dividend that is in sum no less than 73.5 cents per share, although each company's dividend policy will be determined by its respective Board of Directors following the completion of the separation.  Until the planned transactions are completed, UTC expects to continue to pay a quarterly dividend of no less than 73.5 cents per share. The separation is expected to be completed in 2020, with separation activities occurring within the next 18-24 months.  UTC updated its 2018 outlook to include the acquisition of Rockwell Collins and now anticipates: Sales of $64.5 to $65.0 billion, up from $64.0 to $64.5 billion; Adjusted EPS dilution of approximately $0.10 from the acquisition, resulting in adjusted EPS of $7.10 to $7.20, down from $7.20 to $7.30; Free cash flow of $4.25 to $4.5 billion, down from $4.5 to $5.0 billion*; All outlook changes are related to the acquisition of Rockwell Collins. There is no change in the Company's previously provided 2018 expectations for organic sales growth of approximately 6 percent.  For 2019, UTC anticipates the acquisition to be $0.15 to $0.20 accretive to adjusted EPS, including the estimated impact of approximately $650 million of incremental intangible amortization associated with the transaction.  UTC also expects $500 to $750 million of accretion to free cash flow in 2019 from Rockwell Collins. The weighted average diluted shares outstanding for 2019 is expected to be approximately 872 million shares.

 

Monday, Nov. 26, 2018

Paychex-PAYX announced that it has entered into an agreement to acquire Oasis Outsourcing Acquisition Corporation ("Oasis"), the nation's largest privately owned professional employer organization (PEO) and an industry leader in providing human resources outsourcing services. The acquisition will significantly advance Paychex's leadership position in HR outsourcing, leveraging the scope of the company's technology platform and providing new clients access to Paychex's innovative products and technology-enabled services.  Paychex will now serve more than 1.4 million worksite employees (WSEs) through its HR outsourcing services. Oasis serves more than 8,400 clients across all 50 states with its HR solutions, employee benefits, payroll administration, and risk management services. The total cash purchase price is $1.2 billion and is expected to be financed through a combination of cash on Paychex's balance sheet and borrowings under existing credit facilities or new debt.  Paychex will see a number of revenue and cost synergies as a result of this transaction. Excluding transaction costs, the acquisition is expected to have minimal impact on fiscal year 2019 earnings per share. 

Friday, Nov. 23, 2018

United Technologies-UTX announced that it has received the final regulatory approval needed to close its acquisition of Rockwell Collins, Inc. The conclusion of the regulatory review by China's State Administration for Market Regulation clears the way for United Technologies to proceed with the proposed acquisition announced on September 4, 2017. The acquisition is expected to close within three business days.


Tuesday, Nov. 20, 2018

TJX Companies-TJX rang up a 12% increase in third quarter sales to $9.8 billion with net earnings increasing a fancy 19% to $762 million and EPS up 22% to $0.61. Excluding the impact from tax reform legislation and a pension settlement, adjusted EPS of $0.54 increased 8%. Consolidated comp store sales grew 7%, driven by strong customer traffic at every division. Marmaxx, TJX’s largest division, delivered a fashionable 9% comp store sales increase, marking the 17th consecutive quarter of increased customer traffic at TJX and Marmaxx. HomeGoods comp store sales grew 7% while TJX Canada comp store sales grew by 5% and TJX International sales grew 3%. Gross profit margin for the third quarter was 28.9%, down nearly 1% from last year, as strong expense leverage on the higher sales was more than offset by increased freight costs, supply chain expenses and an unfavorable inventory hedge comparison. Inventories jumped 17% to $5.5 billion ahead of an expected robust holiday selling season. During the third quarter, TJX opened 102 new stores, bringing the total number of stores to 4,296 as of Nov. 3, 2018. Management aims to operate 6,100 stores under its current brands and geographic footprint. During the third quarter, TJX generated $618 million in free cash flow, up 4% from last year, with the company returning a total of $841 million to shareholders through dividends of $241 million and share repurchases of $600 million at an average cost of $52.63 per share. TJX now expects to repurchase about $2.5 billion of TJX stock in fiscal 2019. Looking ahead to the fourth quarter, based on an expected 2% to 3% increase in comp store sales, adjusted EPS are to be in the range of $.56 to $.57, down 5% from last on incremental freight costs and wage increases and the timing of expenses. For the full year, based on estimated comp store sales growth of 5% on a consolidated basis and 6% at Marmaxx, management expects adjusted EPS in the range of $2.08 to $2.09, up 8% from last year.

Ross Stores-ROST reported third quarter revenues rose 7% to $3.5 billion with net income up 23% to $338 million and EPS up 26% to $.91.  Comparable store sales rose 3% during the quarter. Both sales and earnings were ahead of management’s forecast, despite being up against very strong multi-year comparisons. Though above plan, operating margin of 12.4% was down from last year as a higher merchandise margin was more than offset by increases in freight costs and labor costs. Free cash flow increased 29% year-to-date to $1.2 billion with the company paying $254 million in dividends and repurchasing 9.4 million shares for $806.5 million at an average price of approximately $85.80 per share. Management remains on track to repurchase $1.1 billion of stock for the full fiscal year. As Ross enters the holiday season, they expect the retail environment to remain fiercely competitive. While they hope to do better, Ross Stores continues to project fourth quarter comparable store sales gains of 1% to 2% versus a strong 5% last year. Fourth quarter EPS guidance was raised to $1.09-$1.14, which includes a one-time, non-cash benefit of approximately $.07 per share related to the favorable resolution of a tax matter. This also led to an increase in fiscal 2018 full year guidance for EPS in the range of $4.15-$4.20.

Maximus-MMS reported 2018 fourth quarter revenue and earnings of $558.4 million and $0.71 per share.  The revenue was down 10% from the prior year primarily due to contracts that completed without continuation, re-compete and extension awards that reset contract terms, contracts that were re-competed as small business awards and some rebid losses.  Operating income and EPS was negatively impacted by the loss of contracts and the lower margins experienced on new contract awards and the impact of the reset of re-compete and extension awards.  The pressure on revenue and earnings were felt across all of the company’s operating segments in the fourth quarter.  Full year 2018 revenue was slightly down from $2.45 billion in 2017 to $2.39 billion in 2018, primarily due to the contract work that was completed in the Federal segment without follow-on contract opportunities, existing contracts that were limited to small business firms when renewed and some losses of existing contract in competition.  Earnings increased from $3.17 per share in 2017 to $3.35 in 2018.  The earnings increase was primarily driven by the lower corporate tax rates which more than offset the impact of the lost revenue.  Operating and free cash flows remained strong, although slightly down year over year as new contract starts tend to use cash initially.  In 2018, Maximus repurchased 1.1 million shares of stock for $67.6 million or an average share price of $62.07. In November of 2018, Maximus completed the acquisition of select contracts specializing in operation of civilian citizen engagement center contracts from General Dynamics.  The contracts acquired will add revenue of $612.5 million dollars in 2019 (over 10 ½ months) with a corresponding increase in earnings of $0.45 per share.  The contracts were acquired for $400 million, in an all cash deal.  The two largest contracts in the purchase are to Medicare open enrollment, the contract is in place through 2023.  The second contract to operate the 2020 Census Questionnaire Assistance center will operate through June of 2021when the census is completed.  In addition to the revenue and earnings gained from the contracts, Maximus benefits with additional expertise in a core competency area, synergies from the increase in contract base which makes the company more rate competitive and increases the revenue in the Federal segment to over $1 billion, making the company more viable as a large government prime contractor in the Federal marketplace.  Overall the acquisition appears to be a good fit strategically and tactically for Maximus and its shareholders. Maximus provided guidance for 2019 with revenues, including the acquisition, expected in the range of $2.925 billion and $3.0 billion, an increase of 22.2% on the low end.  Earnings are projected between $3.55 and $3.75 per share for 2019, an increase of 6% on the low side.  Maximus begins the year with 93% of the estimated revenue in backlog.  The new contract pipeline for the company, including the re-compete of existing contracts that are expected to be bid in the next six months is $2.7 billion, consistent with prior years.  Approximately 75% of the pipeline consists of new contract opportunities that represent growth to the company if won. 

Hormel Foods-HRL reported fourth quarter sales increased 1% to $2.5 billion with net income up 20% to $261.4 million and EPS up 17% to $.48. For the full fiscal 2018 year, revenues increased 4% to $9.5 billion with net income up 20% to $1.0 billion and EPS up 19% to $1.86. Return on shareholders’ equity was a plump 17.3% during the year. Free cash flow increased 6% to $861.9 million during the year with the company paying $388.1 million in dividends and repurchasing $46.9 million of shares. Thanks to record earnings and cash flows, Hormel announced a 12% increase in its annual dividend, marking the 53rd consecutive year of dividend increases. This is the 10th consecutive year of double-digit dividend increases and the 90th year Hormel has paid a dividend. For fiscal 2019, management expects revenues in the range of $9.7 billion to $10.2 billion with EPS expected in the range of $1.77 to $1.91.

Monday, Nov. 19. 2018

Hormel Foods-HRL increased its dividend 12% to $.84 per share, marking the 53rd consecutive year of dividend increases.


Thursday, Nov. 15, 2018

Nike-NKE announced today that its Board of Directors has approved a 10% increase in its quarterly cash dividend to $0.22 per share on the company’s outstanding Class A and Class B Common Stock. “NIKE continues to fuel growth through our Consumer Direct Offense, while generating strong cash flow and increasing returns to shareholders,” said Mark Parker, Chairman, President and CEO of NIKE, Inc. “This is our 17th consecutive year of increasing dividend payouts, and combined with the new four-year $15 billion share repurchase program announced this summer, this commitment shows our continued confidence in NIKE’s ability to deliver sustainable, profitable, capital-efficient growth over the long-term.”

Brown-Forman-BFB announced today that its Board of Directors increased its quarterly cash dividend on its Class A and Class B Common Stock by 5.1% to $0.166 per share from the prior quarter’s $0.158 per share. As a result, the indicated annual cash dividend will rise from $0.632 per share to $0.664 per share. Paul Varga, Chief Executive Officer of Brown-Forman said, "Our 5.1% dividend increase marks the 35th consecutive year of dividend increases at Brown-Forman, and the 73rd year of paying quarterly dividends at the company. Returning cash to our shareholders has been an important contributor to our ability to generate great returns for our shareholders."

 

3M’s-MMM new five-year financial objectives – covering 2019 through 2023 – are: 3 to 5 percent organic local currency sales growth; 8 to 11 percent growth in earnings per share; 20 percent return on invested capital and 100 percent free cash flow conversion. In addition to its five-year goals, 3M  also outlined its expectations for 2019: 1 to 3 percent total sales growth; 2 to 4 percent organic local currency sales growth; Earnings per share of $10.60 to $11.05; 20 to 25 percent EPS growth, on a GAAP basis; 7 to 11 percent EPS growth, adjusting for certain 2018 items; 22 to 25 percent return on invested capital; and 95 to 105 percent free cash flow conversion (based on operating cash flow of $7.9 to $8.5 billion). In 2019, 3M plans to invest $2 billion in research and development – or approximately 6 percent of sales – along with $1.7 to $2 billion in capital expenditures. The company also plans gross share repurchases in the range of $2 to $4 billion for the year.

Wednesday, Nov. 14, 2018

 

Berkshire Hathaway-BRKB revealed in a regulatory filing new investment positions in Oracle-ORCL, J.P. Morgan,  PNC Financial and Travelers. Berkshire added to its positions in Bank of America, U.S. Bancorp, Bank of New York Mellon and Goldman Sachs during the third quarter.


Cisco Systems-CSCO reported solid fiscal first quarter results with revenues up 8% to $13.1 billion, net income up 48% to $3.5 billion and EPS routing up a 60% gain to $.77 thanks to accelerating growth and expanding margins. Strong execution and innovation led to broad-based growth across all geographies, product categories and customer segments. Revenue by geographic segment was: Americas up 5% helped by a favorable macroeconomic environment in the U.S.; EMEA up 11%; and APJC up 12%. Emerging market order growth was 16%, led by 50%+ growth in India, which is becoming a key market.  Double-digit growth in Applications (+18%) and Security (+11%) drove product growth with 15% growth in Enterprises leading customer growth. Free cash flow increased 22% during the first quarter to $3.6 billion with the company ending the quarter with $24.3 billion of net cash (cash and investments less long-term debt). During the quarter, Cisco repurchased $5.1 billion of its common stock and paid $1.5 billion in dividends. For the second quarter, management expects 5%-7% revenue growth with EPS in the range of $.56-$.61.

3M’s-MMM board  authorized the repurchase of up to $10 billion of 3M’s outstanding common stock, replacing the company’s existing repurchase program. “The strength of 3M’s business model – which includes strong cash generation – enables us to consistently deploy capital in a way that creates the greatest value for our customers and shareholders,” said Mike Roman, 3M chief executive officer. “Our first priority remains investing in our business, and we will also continue to return significant cash to our shareholders.” 3M has paid dividends to its shareholders without interruption for more than 100 years. Earlier this year, 3M marked 60 consecutive years of dividend increases.

Monday, Nov. 12, 2018

T. Rowe Price-TROW reported assets under management decreased 6.5% during the month of October 2018, but increased 2.2% since year end to $1.01 trillion as of 10/31/18.

Thursday, Nov. 8, 2018

Disney-DIS reported fiscal fourth quarter sales increased 12% to $14.3 billion with net income increasing 33% to $2.3 billion and EPS up 37% to $1.55. Fourth quarter results were driven by a magical 50% jump in Disney’s Studio Entertainment revenues to $2.2 billion with the division’s operating profits more than doubling to $596 million, powered by the hit sequel Incredibles 2 and Ant-Man and the Wasp. Parks and Resorts revenues increased 9% to $5.1 billion with operating income increasing 11% to $829 million, reflecting higher domestic park attendance and spending. Media Networks revenues increased 9% to $6 billion, driven by a 21% jump in broadcasting revenues, primarily due to sales of two Marvel series compared to one Marvel series last year. Media Networks operating income increased 4% to $1.5 billion, compressed by a loss at BAMTech due to ongoing technology investments. ESPN results were flat with higher subscription fees offset by a decline in advertising. Consumer Products & Interactive Media revenues declined 8% to $1.1 billion with operating income falling 10% to $337 million, squeezed by a $157 million asset impairment charge on roughly 40% of Disney’s investment in Vice Media and lower income from licensing activities. For the full fiscal year, Disney reported revenues increased 8% to $59 million with net income up 40% to $12.6 billion and EPS up 47% to $8.36. Disney generated a showy 25.8% return on shareholders’ equity in fiscal 2018 and $9.8 billion in free cash flow, up 13% from last year, with the company returning $6.1 billion to shareholders through dividends of $2.5 billion and share repurchases of $3.6 billion. During the quarterly conference call, the company predicted an accelerated timeline for the closing of its $71.3 billion acquisition of Fox to early 2019, which is driving Disney’s push to release its direct-to-consumer streaming service. During the conference call, Mr. Iger, Disney’s Chairman & CEO, unveiled the platform’s name, Disney+, which is set to launch in late 2019. Disney+ will focus on five key franchises, Star Wars, Marvel, Pixar, Disney and National Geographic. Looking ahead to first quarter of fiscal 2019, management warned that Studio Entertainment operating income could fall by $600 million due to difficult comps to last year’s Star Wars: The Last Jedi film. Furthermore, the company expects operating expenses to increase on continued Disney+ content, technology and marketing investments and climbing ESPN programming costs due to the timing of sporting events.

Ulta Beauty-ULTA, updating its financial guidance for the third quarter and fiscal 2018, issued three year sales growth and earnings per share targets, and provided an update on its long-term strategy. For the third quarter of fiscal 2018, the company achieved comparable sales growth, including e-commerce, of 7.8%, primarily driven by transaction growth, compared to guidance of 7% to 8% issued on August 30, 2018. Retail comparable sales growth was 4.4%, including salon comparable sales growth of 3.3%. E-commerce sales grew 42.2%. The Company reported a comparable sales increase of 10.3% in the third quarter of fiscal 2017. The Company expects to report diluted earnings per share for the third quarter of fiscal 2018 at the high end of the range of the Company’s prior guidance of $2.11 to $2.16. The Company reported diluted earnings per share for the third quarter of fiscal 2017 of $1.70. The Company is updating its previously announced fiscal 2018 guidance for comparable sales. For the full year, the Company expects to achieve comparable sales growth of approximately 7% to 8%, compared to previous guidance of 6% to 8%. The Company expects to deliver diluted earnings per share growth for fiscal 2018 in the low twenties percentage range, confirming its previous guidance. Ulta Beauty is issuing comparable sales and diluted earnings per share targets for fiscal 2019, 2020 and 2021. The Company expects to achieve comparable sales growth in the range of 5% to 7%, and grow diluted earnings per share in the mid to high teens percentage range. The Company expects to achieve modest operating margin expansion each year, balancing new investments in supply chain, digital innovation, and the guest experience with savings from a comprehensive cost optimization program. The Company is announcing a multi-year $150 to $200 million cost savings target to fund investments in future growth initiatives. Ulta’s U.S. store target is 1,500 to 1,700 stores with the company  planning to open 80 stores in 2019, 75 stores in 2020 and 70 stores in 2021. The company announced a new target for e-commerce fulfillment of two day delivery by 2021, supported by the opening of a Fast Fulfillment Center in 2019 serving e-commerce only orders, and implementing ship-from-store capability in select stores. Management is committed to working capital improvements with the goal of increasing inventory turns by 50 basis points over the next five years.

 Wednesday, Nov. 7, 2018

The TJX Companies-TJX distributed its 2 for 1 stock split as previously announced with the stock price adjusted accordingly.

Tuesday, Nov. 6, 2018


The board of directors of Automatic Data Processing-ADP approved a $0.10 increase in the quarterly cash dividend to an annual rate of $3.16 per share, Carlos Rodriguez, ADP's president and chief executive officer, announced today.  The increased cash dividend marks the 44th consecutive year in which ADP has raised its quarterly dividend. "The new $0.79 quarterly dividend represents a 25% increase in the quarterly dividend compared to a year ago, and is a strong signal of the board's confidence in ADP's future and its commitment to shareholder friendly actions," said Carlos Rodriguez.

Fastenal-FAST reported October net sales increased 17.5% to $469.8 million with daily net sales up 12.4% to $20.4 million. Daily sales growth by end market was 12.1% for manufacturing and 14.6% for non-residential construction. Daily sales growth by product line was 10.1% for fasteners and 14% for other products. Total personnel increased 4.4% to 21,446.

Monday, Nov. 5, 2018

Booking Holdings-BKNG reported better than expected booking growth in the third quarter as European travel increased as weather improved and the World Cup ended. Revenues in the third quarter increased 9% to $4.8 billion with net income up 3% to $1.8 billion and EPS up 8% to $37.02 per share. Third quarter gross travel bookings increased 12%, or 14% on a constant currency basis, over the prior year to $24.3 billion. Room nights booked increased 13% to 201.3 million, a new milestone of more than 200 million room nights booked in a single quarter. The number of restaurants on OpenTable is up 55% since Booking Holdings acquired the company with more than 330 million diners seated since 2014. Free cash flow increased 19% to $3.9 billion in the first nine months of the year with the company ending the quarter with net cash of $7.5 billion (cash and investment less long term debt). Year-to-date, the company repurchased $4.1 billion of its common stock, including $2.2 billion in the third quarter, as its shares outstanding were reduced by 4% year-to-date. The company has $6.4 billion remaining authorized for future share repurchases which should be completed within 2-3 years. Booking Holdings continues to invest heavily in China, which is one of the fastest growing countries for travel with the number of passports issued more than doubling to 120 million from 55 million just a few years ago. For the fourth quarter, total gross bookings are expected to increase 6%-9%, or 10%-13% on a constant currency basis. Revenue in the fourth quarter is expected to increase 13%-16% or 17%-20% on a constant currency basis with fourth quarter EPS expected in the range of $18.05-$18.55 and non-GAAP EPS expected in the range of $18.90-$19.40, representing 12%-15% growth.

Saturday, Nov. 3, 2018

Berkshire Hathaway-BRKB reported the company’s net worth during the first nine months of 2018 rose 8% since year end with book value equal to $228,712 per Class A share as of 9/30/18.

During the third quarter, net earnings more than quadrupled to $18.5 billion. New accounting rules in 2018 require Berkshire to book the net changes in unrealized appreciation/depreciation in net income instead of comprehensive income which resulted in an $11.7 billion gain in net earnings in the third quarter from investments and derivatives.

Berkshire’s five major investment holdings represent 69% of total equities. On its way to becoming the first U.S. stock to hit the trillion dollar market capitalization milestone,  Apple contributed to the substantial investment gain as the position was valued at $57.6 billion as of 9-30-18, a $29.4 billion increase since year end through the additional purchase of  shares  and market appreciation. Wells Fargo’s value dropped 17% since year end, or $4.9 billion, to $24.4 billion amid continued negative headlines on business practices.  On the other hand, Bank of America deposited a $5.8 billion gain since year end as the position was valued at $26.5 billion as of 9-30-18, reflecting additional purchases during the third quarter. Coca-Cola was relatively flat at $18.5 billion. American Express charged 7% higher, or $1 billion higher, to $16.1 billion since year end. 

In the third quarter of 2018, Berkshire’s operating revenues rose 6.5% to $63.4 billion with all operating business groups posting growth, led by 16% revenue growth at BNSF to $6.1 billion.  Operating earnings doubled during the quarter to $6.9 billion, thanks in large part to improved insurance results and aided by Berkshire’s tax rate falling from 35% to 21% during the period.

Berkshire’s insurance underwriting operations generated $441 million in earnings during the third quarter compared to a $1.4 billion loss in the prior year period. The prior year period included $3 billion in pre-tax losses from three major hurricanes in the U.S. and an earthquake in Mexico. The insurance operations reflected significantly improved results from GEICO and Berkshire Hathaway Reinsurance and reductions of liabilities for prior years’ property/casualty loss events.  Insurance investment income was 19% higher at $1.2 billion during the quarter, reflecting higher interest rates on short-term investments, higher dividend income due to increases in the portfolio of equity securities and a lower tax rate. The float of the insurance operations approximated $118 billion as of 9/30/18, an increase of $4 billion since year end.  The average cost of float was negative during the first nine months of the year as the underwriting operations generated pre-tax earnings of $2.3 billion.

Burlington Northern Santa Fe’s (BNSF) revenues rose 16% during the third quarter to $6.1 billion with net earnings chugging 34% higher to $1.4 billion, reflecting the favorable change in the tax rate. Pre-tax earnings rose 10% to $1.9 billion.  During the first nine months, BNSF generated a 6.1% comparative increase in average revenue per car/unit and a 4.6% increase in volume thanks to general economic growth across all business sectors, led by 24% revenue growth in the industrial and energy sectors, and tight truck capacity leading to conversion from highway to rail.

Berkshire Hathaway Energy reported revenues increased 7% to $5.7 billion during the third quarter with all groups, except PacifiCorp, contributing to the growth.  Net earnings increased 15% during the quarter to $1.1 billion primarily due to tax credits. On a pre-tax basis, earnings declined 6% to $1.17 billion due to lower utility margins reflecting increased depreciation, maintenance and other operating expenses.  Berkshire Hathaway Energy’s regulated subsidiaries anticipate passing the benefits of lower tax rates to customers which will produce lower revenues and pre-tax earnings in 2018 and future years when compared to 2017.

Berkshire’s Manufacturing businesses reported a 6% increase in revenue growth in the third quarter to $13.6 billion with operating earnings relatively flat at $2.0 billion. Revenue growth was broad based, led by Building Products with 8.5% growth and Industrial Products with 7% growth. Iscar’s revenues increased 12% during the quarter with pre-tax earnings also increasing significantly due to increased unit sales, increased manufacturing efficiencies, business acquisitions and favorable foreign exchange. Pre-tax earnings in the Building Products and Consumer Products groups declined during the period due to higher raw material and production costs in the Building Products group and a 24% decline in Forest River’s earnings in the Consumer Products group due in part to lower sales volume and higher material costs.

Service and Retailing revenues rose 2% during the quarter to $19.8 billion with pre-tax earnings up 25% to $672 million. Service revenues rose 13% to $3.1 billion with operating earnings up 41% to $444 million. TTI’s revenues increased 35% due to an industry-wide increase in demand for electronic components in many geographic markets around the world, acquisitions and favorable foreign currency changes. While TTI’s revenue increases were significant, demand is beginning to moderate. TTI accounted for 70% of the increase in earnings in this unit with  Charter Brokerage and NetJets  also contributing to the earnings growth.   Retailing revenues rose 2% during the quarter to $3.8 billion with operating earnings up 4.5% to $184 million, reflecting higher earnings from Berkshire Hathaway Automotive (BHA) and Louis Motorrad.   McLane’s revenues were relatively flat during the quarter at $12.8 billion. McLane operating earnings declined 2% to $44 million due to significant pricing pressures in an increasingly competitive grocery business environment.  The grocery and foodservices business will likely continue to be subject to intense competition over the remainder of 2018 and into 2019.

Finance and Financial Products revenues rose 13% during the quarter to $2.4 billion with net income jumping 22% to $390 million, reflecting the favorable tax change. Pre-tax earnings increased 7% to $530 million.  The revenue and earnings increase was led by Clayton Homes, reflecting higher unit sales, higher average prices and higher financial services revenues.  

Berkshire’s balance sheet continues to reflect significant liquidity and a strong capital base of $375.6 billion as of 9/30/18. Excluding railroad, energy and finance investments, Berkshire ended the quarter with $333.4 billion in investments allocated approximately 60.4% to equities ($201.2 billion), 5.5% to fixed-income investments ($18.2 billion), 5.2% to Kraft Heinz ($17.5 billion), and 28.9% in cash and equivalents ($96.5 billion).  

Berkshire’s financial strength allows Buffett to make significant investments and acquisitions. Apple was the largest stock investment in the first nine months of the year. Berkshire closed the previously announced $2.5 billion acquisition of Medical Liability Mutual Insurance Company on Oct. 1, 2018.

Free cash flow declined 43% during the first nine months to $16.5 billion due to the lapping of the big boost to float from the AIG deal in the prior year period.  During the first nine months, capital expenditures increased 19% and approximated $10 billion, including $6.4 billion for BNSF and Berkshire Hathaway Energy.  Berkshire Hathaway forecasts aggregate capital expenditures of about $9.8 billion in 2018 for these two businesses. During the first nine months, Berkshire sold and redeemed a net $25.1 billion in Treasury Bills and fixed-income investments and purchased a net $24.4 billion of equity securities, reflecting in part the purchase of Apple, Bank of America and other financial stocks and the sale of all IBM shares.

Berkshire revised its buyback policy which now permits Berkshire to repurchase shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett and Charlie Munger.  During the third quarter, Berkshire repurchased 2,984 equivalent A shares for $928 million at an average price of approximately $311,000 per A share with an additional 589 equivalent A shares repurchased subsequent to quarter end.

Berkshire Hathaway’s stock appears attractively valued, currently trading at $308,411 per A share and $206.57 per B share. Based on current business fundamentals, we expect Berkshire’s A shares to trade between $286,000-$366,000 per share and the B shares to trade between $191-$244 per share.  Buy.

 

Friday, Nov. 2, 2018

ADP-ADP reported fiscal first quarter revenues increased 8% to $3.3 billion with net earnings increasing 22% to $505.4 million and EPS up 24% to $1.15. Employer Services revenues increased 7% to $2.2 billion on a 2.4% increase in pays per control. Employer Services new business bookings increased 8% compared to a 3% decline in bookings during the same period last year. PEO Services revenues gained 10% to $986 million, boosted by a 9% increase in average worksite employees to 528,000. Interest in funds held for clients increased 19% to $118.5 million on a 1% increase in average funds held for clients to $22.2 billion and a 20 basis point increase in the average interest earned to 2.1%. During the quarter, ADP generated $106 million in free cash flow, down 38% from last year, squeezed by working capital changes. The company ended the quarter with $1.5 billion in cash and $736 million in long-term debt on its strong balance sheet. During the quarter, ADP returned $530 million to shareholders through dividends of $303 million and share buybacks of $227 million. Looking ahead to the full fiscal year, ADP expects revenues to increase 6% to 7% on a 4% to 6% increase in Employer Services revenues and an 8% to 9% increase in PEO revenues. U.S. pays per control are expected to increase by 2.5%. Average client funds balances are expected to increase 3% to 4% and the yield on the client funds portfolio is expected to increase 30 basis points to 2.2%, resulting in a 19% to 21% increase in client funds interest revenue to $556 million to $566 million. Adjusted EPS is expected to increase 15% to 17%.

AbbVie-ABBV reported strong third quarter results with revenues up a healthy 18% to $8.2 billion with net earnings up 68% to $2.7 billion and EPS jumping 79% to $1.81. On an adjusted basis, EPS increased a still vibrant 52% to $2.14. Third quarter global HUMIRA sales increased 9%, or 9.8% on an operational basis, to $5.124 billion, representing 62% of total revenues. In the U.S., HUMIRA sales grew 12.5% with patent protection expected through 2023. Internationally, HUMIRA is facing biosimilar competition with sales growth of 4% during the quarter. Global net revenues from the Hematologic Oncology portfolio were $1.068 billion during the third quarter, an increase of 48%, and poised for continued growth next year and beyond. Third quarter global IMBRUVICA net revenues were $972 million during the quarter, an increase of 41% with global HCV net revenues contributing $862 million to third quarter revenues and VENCLEXTA chipping in $96 million to the quarter’s sales. The company’s adjusted operating margin expanded 430 basis points during the quarter to 47.2% thanks to a higher gross margin, reflecting the termination of certain royalty payments, and improved operating efficiencies. AbbVie continues to invest 15% of sales in research and development supporting all stages of their robust pipeline, which is one of the best in the industry. With financial results well ahead of management’s expectations, the company raised their earnings outlook for the fourth time this year. For the full 2018 year, EPS is now expected in the range of $6.43-$6.45 with adjusted EPS expected in the range of $7.90-$7.92, representing growth of 41% at the midpoint. Given strong cash flows and confidence in the future, AbbVie raised its dividend 11.5% to a quarterly rate of $1.07 per share, which represents a healthy 5.4% dividend yield based on the company’s current price. Since the company’s inception in 2013, AbbVie has increased its dividend by 168%. In 2019, the company expects to report continued double-digit EPS growth despite biosimilar competition internationally, difficult comparisons and significant investments in new product development.

Cognizant Technology Solutions-CTSH reported third revenues increased 8.3% to $4.08 billion with net earnings declining 4% to $477 million and EPS declining 2% to $0.82. The decrease in net income was primarily due to higher net non-operating foreign exchange losses in 2018 driven by the depreciation of the Indian rupee versus the prior year period. Consulting & Technology Services represented 58% of total revenue and grew 6% while Outsourcing represented 42% of revenues and grew 11%. By business segment, Financial Services revenues increased 3% to $1.5 billion with digital revenue growth beginning to offset the pressure on run-the-bank spending. Healthcare revenues increased 10% to $1.2 billion as healthcare providers continue to shift their underlying business models from fee-for-service to value-based care.  Products and Resources revenue grew 12% to $863 million, led by strong growth from retail and manufacturing clients as traditional retailers race to strengthen their digital business channels to meet the Amazon challenge, and manufacturers push to automate and digitize manufacturing systems. Communications, Media and Technology revenues increased 17% to $562 million with Cognizant helping clients co-innovate networks of the future to move at speeds more than 30 times faster than current technology, leading to significant improvements in virtual reality, robotics and healthcare. During the quarter, Cognizant generated $768 million in free cash flow, up 11%, with the company returning $161 million to shareholders through dividends of $116 million and share repurchases of $45 million. During the third quarter, Cognizant repurchased 1.4 million shares, including 1.1 million, which represented final share settlement of the $600 million Accelerated Share Repurchase (ASR) program launched in June. In total, 7.6 million shares were repurchased under the ASR at an average price of $79.42 per share. Cognizant ended the quarter with $4.9 billion in cash & investments and $624 million in debt on its squeaky-clean balance sheet. Looking ahead to the full year, revenues are expected to increase 8.6% to 9% to $16.1 billion with non-GAAP earnings to be at least $4.50, up 19% from last year.

MSC Industrial Direct–MSM reported fiscal fourth quarter sales increased 11% to $838 million with net earnings of $73 million, up 20%, and EPS of $1.29, up 21%, thanks, in part, to U.S. tax reform which reduced the company’s effective income tax rate from 38% to 30%. Average daily sales grew 9.5% compared to last year’s fourth quarter. For the full year, revenues rose 11% to $3.2 billion with net income and EPS over 40% to $329 million and $5.80, respectively due in part to the impact of tax reform. Return on shareholders’ equity for the year was 23.7%. Free cash flow for the fiscal year increased 47% to $295 million with MSC Industrial returning $207 million to shareholders through dividends of $125 million and share repurchases of $82 million. The company believes it has 5% direct exposure and an additional 5% indirect exposure to tariffs on materials sourced from China with the percentages declining as supply chains adjust. The company expects to recover all tariff related costs through price increases. Looking ahead to the first quarter, sales are expected in the $821 million to $837 million range, up 7.9% at the midpoint, with EPS in the $1.28 to $1.34 range, up 24.8% at the midpoint. Average daily sales are expected to increase roughly 7.8%.

Thursday, Nov. 1, 2018

Starbucks Corporation-SBUX reported fiscal fourth quarter sales jolted ahead 11% to $6.3 billion with net income dipping 4% to $756 million and EPS increasing 4% to $.56 on fewer shares outstanding. Net income grinded lower on restructuring activities and charges related to Teavana mall store closures, partially offset by the company’s deal to license its consumer packaged goods business to Nestlé which closed on August 26, 2018. Global comparable store sales increased 3%, driven by a 4% increase in average ticket. Americas and U.S. comparable store sales increased 4% while China Asia Pacific same store sales increased 1%. Starbucks RewardsTMloyalty program grew to 15.3 million active members in the U.S., up 15% year-over-year. Mobile Order and Pay represented 14% of U.S. company-operated transactions. For the fiscal year, Starbucks reported sales of $24.7 billion, up 10%, with net earnings percolating up 57% to $4.5 billion and EPS up 65% to $3.24. Global comparable store sales increased 2%, driven by a 3% increase in average ticket. During fiscal 2018, Starbucks generated nearly $10 billion in free cash flow, up from $2.7 billion last year, thanks to the cash received in the Nestle deal. During the year, Starbucks returned $8.9 billion to shareholders through a combination of dividends and share repurchases. As part of its previously announced plan to return $25 billion to shareholders in the form of share buybacks and dividends through fiscal 2020, Starbucks announced that it is currently executing a $5 billion accelerated share repurchase program (ASR) of its common stock. Starbucks used proceeds from the recently completed Nestle transaction to execute the ASR, effective October 1, 2018. Looking ahead to fiscal 2019, the company expects revenue growth of 5% to 7% on comparable store sales growth near the lower end of its 3% to 5% range with EPS in the range of $2.32 to $2.37.

Apple-AAPL reported fourth quarter revenues rose 20% to a record $62.9 billion with net income climbing 32% to $14.1 billion and EPS up 41% to $2.91, also September quarter records. International sales accounted for 61% of the quarter’s revenues. Services revenues reached an all-time high of $10 billion, an increase of 27% thanks to more than 330 million subscriptions to Apple’s services. Apple Pay’s transaction volume more than tripled as it has become the number one mobile payment service with the company’s goal to replace the wallet. Apple’s revenue grew at double-digit rates in the fourth quarter in all geographic segments led by 34% growth in Japan. iPhone unit sales were flat but revenues were up 29% as the average selling price reached a record $793 due to the successful launch of new products. iPad and Mac gained market share during the quarter with revenues of $4.1 billion and $7.4 billion, respectively.  Other Products revenues increased 31% to $4.2 billion thanks to 50% growth in the Apple Watch, which is becoming essential to people’s lives. For the full fiscal 2018 year, revenues rose 16% to $265.6 billion with net income up 23% to $59.5 billion and EPS up a healthy 29% to $11.91. Return on shareholders’ equity was an impressive 56% for the year. Free cash flow increased 24% during the year to $64.1 billion. After paying $13.7 billion in dividends and repurchasing $72.7 billion of its common stock, including repurchasing 92.5 million shares in the fourth quarter for $19.4 billion at an average price of $209.73 per share, the company ended the year with $122.6 billion of net cash (cash and investments less debt).   With the strongest product and services lineup set for the upcoming fourth quarter holiday season, Tim Cook said he could not be more bullish about the company’s future. For the company’s fiscal 2019 first quarter, revenues are expected in the range of $89 billion to $93 billion with the gross margin between 38%-38.5%, operating expenses between $8.7 billion and $8.8 billion, other income of $300 million and a tax rate of about 16.5%.

MasterCard-MA reported third quarter revenues rose 15% to $3.9 billion with net income charging 33% higher to $1.9 billion and EPS up 36% to $1.82. Net revenue increased 17% on a currency-neutral basis driven by an increase in switched transactions of 16%, an increase in cross-border volumes of 17% on a local currency basis and a 13% increase in gross dollar volume, on a local currency basis, to $1.5 trillion. These increases were partially offset by an increase in rebates and incentives, primarily due to new and renewed agreements and increased volumes. Growth was broad-based across all geographic regions with solid double-digit growth across most regions. Overall, MasterCard is seeing solid global growth although management is watching reduced central bank stimulus, rising interest rates and rising trade tensions. Free cash flow increased 28% to $4.6 billion during the first nine months of the year with the company paying $785 million in dividends and repurchasing $4 billion of its shares. As of October 25th, MasterCard has $.8 billion remaining authorized for future share repurchases. MasterCard continues to see a healthy economic environment and believes revenues in 2018 will grow at a high-teen rate with operating expenses growing at a mid-teen rate leading to further profit margin expansion.


Wednesday, Oct. 31, 2018

Facebook-FB reported third quarter revenues jumped 33% to $13.7 billion with net income up 9% to $5.1 billion and EPS up 11% to $1.76. Revenue growth was broad-based across regions and business segments, but Facebook is investing significantly to improve safety and security threats which is impacting margins. The company estimates that more than 2.6 billion people now use Facebook, WhatsApp, Instagram or Messenger, with more than 2 billion people using at least one of the company’s services every day. People send 100 billion messages each day using Facebook’s Messenger. People share more than 1 billion Stories every day. Video is growing dramatically across the ecosystem with the company’s Watch growing more than threefold in the last quarter. Daily active users were 1.49 billion on average, an increase of 9% year over year. Monthly active users were 2.27 billion, an increase of 10%. Mobile advertising revenue increased 40% to $12.5 billion and represented approximately 92% of advertising revenue for the quarter up from 88% in the prior year period. There are more than six million advertisers active on Facebook and Instagram. Headcount was 33,606 as of quarter end, an increase of 45% from the prior year period. Facebook usage is generally stable in the saturated developed countries and is growing quickly in developing countries especially India, Indonesia and the Philippines. Asia Pacific had the strongest regional growth of 38% during the quarter followed by 34% growth in Europe and 33% growth in North America. During the quarter, the average price per ad increased 7% with the number of ad impressions up 25% driven by feed ads on Facebook and Instagram .Operating cash flow was up 31% to $21.7 billion with free cash flow relatively stable at $12 billion as the company invested $9.6 billion in capital expenditures year-to-date to build out its data centers, servers, network infrastructure and office facilities. Capital expenditures for the full year are expected in the range of $14 billion to $14.5 billion with capital expenditures increasing to the $18 billion to $20 billion range in 2019 to support the company’s future growth. During the third quarter, Facebook repurchased $4.3 billion of its common stock with $9.4 billion repurchased year-to-date. The company ended the quarter with a strong balance sheet with more than $41 billion in cash and investments.


Friday, Oct. 26, 2018

Westwood Holdings-WHG reported third quarter revenues dropped 11% to $29.9 million with net income up 30% to $5.4 million and EPS up 27% to $.62. Revenues declined on lower average assets under management resulting from net outflows and the sale of the Omaha-based private wealth business. Assets under management declined $2.8 billion to $20.8 billion as of quarter end. Third quarter earnings benefited from lower compensation expenses offset by lower asset-based fees and higher information technology expenses. The prior year quarter was negatively impacted by a $2.5 million legal settlement charge. During the quarter, the company increased its dividend 6%, marking the 16th consecutive year of dividend increases. The dividend currently yields 6.6%. Westwood ended the quarter with a strong financial position with no long-term debt and $125 million in cash and investments or $12.48 per share in cash.

Thursday, Oct. 25, 2018

Alphabet-GOOGL reported third quarter revenue rose 21% to $33.7 billion with net income and EPS each up 36% to $9.2 billion and $13.06, respectively. During the quarter, Google advertising revenues rose 20% to $28.9 billion with strong growth in mobile search. All geographic regions generated strong growth led by 29% growth from the Asia Pacific and China region. Google other revenues rose 29% to $4.6 billion and Other Bets revenue increased 25% to $146 million. Traffic acquisition costs increased 20% to $6.6 billion, representing 23% of Google advertising revenue. Paid clicks on Google properties increased 62% with cost per click declining 28% during the quarter. During the quarter, the company recognized an $843 million gain, or $1.20 per share, on equity securities as required by new accounting rules. During the first nine months of the year, free cash flow declined 6% to $16.9 billion primarily due to capital expenditures more than doubling to $18 billion as the company invests in data centers and real estate to support growth in its cloud business. During the same period, Alphabet repurchased $6.4 billion of its stock. The company ended the quarter with $106.4 billion in cash and investments and only $4 billion in long-term debt on its solid balance sheet.

Stryker-SYK reported a healthy 9% increase in third quarter sales to $3.2 billion with net income and EPS increasing 36% to $590 million and $1.55, respectively. Adjusted net earnings and EPS  increased 11% to $643 million and $1.69, respectively. In constant currency, sales increased 10% and organic net sales increased 7.9% in the quarter including 9.5% from increased unit volume partially offset by 1.6% from lower prices. Domestic sales increased 9% to $2.4 billion while international sales increased 5%, or 8% in constant currency, to $861 million. By business segment, Orthopaedics net sales of $1.2 billion increased 4% in the quarter and organic net sales increased 5% including 7.6% from increased unit volume partially offset by 2.6% from lower prices. During the quarter, Stryker completed its upgrade of installed MAKO robots while installing 37 new robots, 26 domestically and 11 overseas. Stryker sees a long runway ahead for MAKO robot installations, especially internationally where the company is in the early innings of the approval process. MedSurg net sales of $1.4 billion increased 9.5% and organic net sales increased 8.8% including 9.5% from increased unit volume partially offset by 0.7% from lower prices. Neurotechnology and Spine net sales of $600 million increased 17.4% and organic net sales increased 11.9% including 13.5% from increased unit volume partially offset by 1.6% from lower prices. Year-to-date, Stryker generated $1.15 billion in free cash flow, up from $468 million last year, boosted by the income increase, lower recall payments and efficient working capital management that were partially offset by toll taxes charged on cash held overseas under U.S. tax reform legislation. The company returned $828 million to shareholders through dividends of $528 million and share repurchases of $300 million. Stryker ended the quarter with $2.2 billion in cash, 30% of which is held outside the U.S, and $5.9 billion in long-term debt. Given the strong year-to-date results and management’s optimism about the fourth quarter, it raised 2018 guidance. Organic net sales growth is expected at the high end of the 7% to 7.5% range and adjusted earnings are expected in the range of $7.25 to $7.30. "We had another impressive quarter, as our talented teams continue to deliver strong results and execute on acquisitions," said Kevin A. Lobo, Chairman and Chief Executive Officer. "The strength of our operating model and culture is evident in the consistency of our performance over time, and we remain optimistic about the future."

T. Rowe Price-TROW reported third quarter revenues rose 12.6% to $1.4 billion with net income up 49% to $583 million and EPS up 47% to $2.30. Third quarter results included a $.27 per share gain from the sale of its 10% holding in Daiwa SB Investments. Assets under management (AUM) increased 14.3%, or $39.7 billion, to $1.084 trillion as of quarter end thanks to strong stock returns and solid net client inflows. The firm’s net cash inflows were $2.7 billion during the quarter. T. Rowe Price remains debt-free with ample liquidity including $4.1 billion in cash and investments in T. Rowe Price products. During the third quarter, the company spent $124.5 million to repurchase 1.1 million shares of its common stock at an average price of $110.76 per share. Year-to-date, the company has repurchased 5.4 million shares, or 2.2% of outstanding shares, for $574.88 million at an average price of $107.38.

Tractor Supply-TSCO reported third quarter sales increased 9% to $1.9 billion with net income plowing up a hearty 27% gain to $116.8 million and EPS up 32% to $.95. Sales growth was driven by a solid 5.1% increase in comparable store sales growth consisting of a 3.6% increase in the average ticket and a 1.4% increase in customer transactions. During the last 41 of 42 quarters, customer transactions have been positive. The increase in comparable store sales was primarily driven by broad-based strength in everyday merchandise along with robust growth across spring and summer seasonal categories. All merchandise categories delivered increased comparable store sales as did all geographic regions. The company opened 23 new Tractor Supply stores and seven new Petsense stores in the third quarter of 2018. Management plans to open 80 new Tractor Supply and 20 new Petsense stores for the full 2018 year. Free cash flow declined 15% through the first nine months to $159.7 million due to the increase in capital expenditures with capital spending for the full year targeted at $260 million-$280 million. Year-to-date, the company has paid $109 million in dividends and repurchased 4.3 million shares of its common stock for $289.2 million at an average cost of $67.25 per share. Since inception of the repurchase program, the company has repurchased $2.4 billion of its stock with $580 million remaining authorized for future share repurchases. Given the strength of the company’s business and the healthy macro economic environment with low unemployment and high consumer confidence, management raised their full year 2018 financial outlook with sales expected in the range of $7.84 billion to $7.87 billion, comparable store sales growth of 4.0% to 4.5% and EPS in the range of $4.23-$4.27, representing 28%-29% growth over last year.


Wednesday, Oct. 24, 2018

Microsoft-MSFT reported fiscal first quarter revenues rose 19% to $29.1 billion with net income and EPS up more than 34% to $8.8 billion and $1.14, respectively. Revenue in Productivity and Business Processes was $9.8 billion and increased 19% during the quarter driven by Office 365 commercial revenue growth of 36%. LinkedIn revenue increased 33% with 34% growth in sessions.  Revenue in Intelligent Cloud was $8.6 billion and increased 24% driven by Azure revenue growth of 76%. Revenues in More Personal Computing was $10.7 billion and increased 15% during the quarter with gaming revenue up 44% and Surface revenue up 14%. Free cash flow decreased 2.5% to $10.1 billion as a result of increased capital spending to support the cloud business. During the quarter, the company paid $3.2 billion in dividends and repurchased $3.7 billion of its shares. Microsoft ended the quarter with $135.9 billion in cash and $69.7 billion in long-term debt.

F5 Networks-FFIV reported fourth fiscal quarter revenue of $562.7 million, up 4.6% from last year, with net income of $133 million, down 2%, and EPS of $2.14, up 2% on fewer shares outstanding. Product sales increased 3% to $256 million and accounted for 46% of total revenue while services increased 6% to $306 million, and accounted for 54% of sales. Fourth quarter revenue growth was driven by demand for F5's software solutions which provide mission-critical application and security services in evolving multi-cloud environments. Gross margins and operating margins remained steady with last year at 83% and 28%, respectively, while F5’s tax rate increased to 17% from 12% last year, accounting for the year-over-year decline in net income. During the quarter, F5 generated $204 million in operating cash flow and $187 million in free cash flow. For the year, F5 reported revenues of $2.2 billion, up 3%, with net income of $454 million, up 8%, and EPS of $7.41, up 13%. During fiscal 2018, the company generated a powerful 35.3% return on shareholders’ equity. For the year, F5 generated $761 million in operating cash flow and $708 million in free cash flow. F5 ended the fiscal year with $1.45 billion in cash and no long term debt on its weatherproof balance sheet. The company repurchased $600 million shares during the fiscal year. Looking ahead to the first fiscal quarter ending 12/31/2018, management expects revenues in the range of $542 million to $552 million, up 6% at the mid-point, with adjusted EPS expected in the $2.51 to $2.54 range, up 12% at the midpoint. Given that F5 moved its manufacturing facilities to Mexico from China in 2018, tariffs will minimally impact the business. 

Biogen-BIIB reported a healthy 12% increase in third quarter revenues to $3.4 billion with net earnings increasing 18% to $1.4 billion and EPS up 17% to $7.40. Global sales of TECFIDERA—the most prescribed oral therapy for MS—were $1.1 billion, up 2% worldwide including 1% growth in the U.S. and 6% growth internationally. Sales of TYSABRI—the market leading high efficacy therapy for MS—were $470 million, flat with last year, on a 5% decline in U.S. sales which were offset by a 7% increase in international sales. Sales of Biogen’s Interferon MS therapies declined 11% to $590 million. Global sales of SPINRAZA—the first drug approved to treat children and adults with spinal muscular atrophy (SMA), a rare and often fatal genetic disease affecting muscle strength and movement—were $468 million, up from $271 million last year. Biogen received regulatory approval for SPINRAZA in five additional countries during the quarter with the treatment now offered in more than 30 countries. Biogen’s biosimilar sales increased 33% to $135 million. With its October launch of IMRALDI, a biosimilar referencing AbbVie’s HUMIRA, Biogen now offers biosimilars in Europe for all three major drugs to treat inflammatory conditions. During the quarter, Biogen made significant advances in building its pipeline beyond its leading portfolios in MS and Alzheimer’s, including notable progress in treatments for stroke, progressive supranuclear palsy and ALS. During the third quarter, Biogen generated $1.7 billion in cash flow from operations, ending the quarter with $5.7 billion in cash and equivalents and $5.9 billion in notes payable on its strong balance sheet, which provides ample resources to invest in the business while returning cash to shareholders. While Biogen did not repurchase any shares during the quarter, its Board approved a $3.5 billion share repurchase program. During the past several years, Biogen has repurchased about $10 billion of its shares. Looking ahead to the fourth quarter, management expects to increases its pipeline investments, which will be partially funded with G&A cost savings.

 


UPS-UPS reported third quarter sales increased a robust 8% to $17.4 billion with the company delivering 20% growth in net income and EPS to $1.5 billion and $1.73, respectively. Average revenue yield increased 4% during the quarter with base-pricing gains in all product categories. The U.S. Domestic segment experienced solid revenue growth of 8.1% to $10.4 billion, driven by high demand for the company’s solutions and robust yield expansion. International segment revenue increased 3% to $3.5 billion with revenue growth in all regions. Export volume also increased across all regions and exports grew nearly 3% on top of 19% growth last year. Supply Chain and Freight performance was outstanding during the quarter with double-digit growth in both revenue and adjusted profit. Revenues increased 12% to $3.5 billion with adjusted operating profit up 33% to $260 million. Year-to-date cash from operations expanded to $9.4 billion with free cash flow increasing to $4.9 billion. The company enjoyed strong free cash flow conversion greater than 100%. Year-to-date dividends per share increased 10%, producing an annual dividend yield in excess of 3%. The company repurchased 6.6 million shares year-to-date for about $750 million at an average cost of $113.64 per share. Capital expenditures year-to-date were $4.5 billion as the company completes 22 expansions in 2018, adding 5 million square feet of capacity,  including its recently opened highly-automated hub in Atlanta that will help support a successful  peak season this year. Capital expenditures for the full year remains planned at $6.5-$7.0 billion. UPS expects to deliver 800 million packages during peak season including more than 37 million packages on its peak day. Management reaffirmed 2018 adjusted EPS in a range of $7.03-$7.37. The global environment remains positive driven by U.S. GDP growth although unresolved China trade tensions and Brexit remain concerns.

Tuesday, Oct. 23, 2018

United Technologies-UTX reported third quarter revenue rose 10% to $16.5 billion with net income down 7% to $1.2 billion and EPS down 8% to 1.54. On an adjusted basis excluding restructuring and other items, EPS increased 12%. Sales growth was driven by 8% organic growth thanks to the company’s innovation across all business units. During the quarter, commercial aftermarket sales were up 9% at Pratt & Whitney and up 12% at UTC Aerospace Systems. Otis new equipment orders were up 9% organically with equipment orders at UTC Climate, Controls and Security up 13% organically. Free cash flow increased 69% year-to-date to $3.2 billion with the company paying $1.6 billion in dividends. Share repurchases were minimal as the company plans to allocate cash flows to paying back debt following the Rockwell Collins acquisition which is expected to be completed before year end. The Board of Directors will be evaluating strategic options for the company following the deal closing. Based on solid financial results, strong orders and growing backlog, management raised its outlook again for sales and earnings for the full 2018 year. The sales outlook was increased to $64-$64.5 billion driven by expected 6% organic growth with adjusted EPS expected in the range of $7.20-$7.30. Free cash flow should approximate $4.5 to $5.0 billion for the full year. Tariffs cost the company $.05 per share this year which management was mostly able to offset through increased pricing. Tariffs are a tax on the consumer, and there will be a limit on future price offsets. If current tariffs stay in place, it could result in a $.15 per share headwind in 2019.

 

 

3M-MMM posted third quarter sales that dipped slightly to $8.2 billion with net income increasing 8% to $1.5 billion and EPS up 10.7% to $2.58. Organic local-currency sales increased 1.3% on a 0.1% volume increase and a 1.2% price increase. Operating margin increased 10 basis points to 24.7%, boosted by productivity gains and price increases taken to offset higher raw material costs, largely offset by a 0.3% headwind from the Scott Safety acquisition and a negative 0.5% foreign currency impact. By business segment, Industrial sales of $3 billion were flat year-on-year and generated a 22% operating margin, down slightly year-on-year. Safety & Graphics sales of $1.7 billion increased 7% and generated a 24.8% operating margin, down 1.6% from last year, squeezed by the Scott Safety acquisition and portfolio and footprint actions. Healthcare sales of $1.4 billion declined 3% on a drop in drug delivery sales and generated a 30.9% operating margin, down 0.5% from last year. Electronics & Energy sales of $1.4 billion declined 5% year-on-year and generated a 31.7% operating margin, up 3.3% from last year, powered by last quarter’s communication markets business divestiture. Consumer sales of $1.2 billion declined 3.4% on continuing retailer destocking and generated operating margins of 23.5% down 0.8% from portfolio and footprint actions. During the quarter, 3M generated free cash flow of $1.8 billion, up 24% year-on-year, representing a free cash conversion rate of 114%. During the quarter, 3M returned $1.9 billion to shareholders via dividend payments of $794 million and share repurchases of $1.1 billion. Year-to-date, the company repurchased $3.6 billion shares and expects to repurchase between $4 billion to $5 billion for the full year. The company updated its 2018 EPS expectations to be in the range of $8.78 to $8.93 per share versus $9.08 to $9.38 previously. Excluding the full-year impacts from the communication markets business divestiture gain and related actions, a first-quarter legal settlement, and the Tax Cuts and Jobs Act-related expense, 3M now expects its adjusted 2018 earnings to be in the range of $9.90 to $10.00 per share versus prior expectation of $10.20 to $10.45. The update to the ranges reflects an estimated full-year earnings headwind of $0.05 per share from foreign currency versus a prior expectation of a benefit of $0.10 per share. 3M also updated its full-year organic local-currency sales growth guidance to approximately 3%, down from 3% to 4% previously and free cash flow conversion of 90% to 95% from previous guidance of 90% to 100%.

Canadian National Railway-CNI reported record third quarter revenues rose 14% to C$3.7 billion with net income chugging 18% higher to C$1.1 billion and EPS up 21% to C$1.54. Adjusted net income rose 11% with adjusted EPS up 15%. Revenue growth was driven by higher fuel surcharge rates, freight rate increases, the positive impact of foreign exchange translation and higher volumes. Pricing during the quarter increased 4.5%, one of the best quarters in years. Revenue growth was broad based across all business segments led by 25% growth for petroleum and chemicals. Revenue ton miles (RTM) increased four percent during the quarter with carloadings up three percent to 1,525 thousand. RTM growth is expected to be about 5% for the full year. The company’s operating ratio improved 230 basis points to 59.5%. Free cash flow declined 27% year-to-date to $1.7 billion as the company continued to heavily invest in infrastructure expansion projects with 22 of 27 expansion programs completed this year. The balance of the expansion projects remain on track for completion before winter. Capital expenditures for the full year should approximate $3.5 billion with a similar amount planned for 2019. As these investments gain traction, the company’s operating ratio should continue to improve as costs will come down due to a more efficient network. Management reaffirmed its outlook for 2018 full year adjusted earnings in the range of C$5.30-C$5.45, representing 6% to 9% growth. The company also announced a new 5.5 million share buyback over the next three months. Year-to-date, the company has repurchased C$1.5 billion of its shares and paid C$$1 billion in dividends.

 

Johnson & Johnson-JNJ announced that they have agreed with Ci:z Holdings Co., Ltd. (4924.T), a Japanese company focused on the marketing, development and distribution of a broad range of dermocosmetic, cosmetic and skincare products, to launch an all-cash offer (the "tender offer") to acquire all of the outstanding shares of the Company not already held by Johnson & Johnson and its affiliates for ¥5,900 per share, which equates to approximately $2.1 billion. The acquisition will include the Company's range of brands comprising Dr.Ci:Labo, Labo Labo and Genomer line of skincare products. The Company's skincare portfolio is expected to strengthen Johnson & Johnson's market presence in Japan with key customers, and more broadly bolster its offering in science-based, efficacious dermocosmetic brands.


Monday, Oct. 22, 2018

Polaris-PII reported third quarter revenues rose 12% to $1.7 billion with net income up 17% to $95.5 million and EPS up 17% to $1.50 thanks to broad-based growth across the business. New products have been well received and manufacturing and logistics have improved. International growth outpaced North American growth with Indian motorcycles gaining market share in every market served amid a challenging motorcycle market. Management is also pleased with the early performance of the Boat Holdings acquisition which added $134 million to third quarter sales with sales increasing 17% on a pro-forma basis. At the same time, the company is facing serious challenges from tariffs which are expected add $40 million to costs in 2018. Management is actively taking countermeasures to help offset these costs through supply chain negotiations, increased pricing and government relations with the company seeking exemption from the tariffs. Free cash flow declined 47% year-to-date to $196 million due in part to higher inventories and the timing of accrual payments. The company’s debt level doubled since last year due in part to the Boat Holdings acquisition. During the third quarter, the company repurchased 507,000 shares of its common stock for $55 million at an average cost of about $108.48 per share. Year-to-date, the company has repurchased 2,069,000 shares for $247 million at an average cost of $119.38 per share with 4.4 million shares authorized for future share repurchases. Despite the significant tariff uncertainty and a challenging motorcycle environment, which is impacting growth and profitability for that segment, Polaris is maintaining its adjusted sales and earnings guidance for the full year 2018. Adjusted sales are expected to increase 11% to 12% for the full year with adjusted EPS expected in the range of $6.48 to $6.58, representing 27% to 29% growth.

Friday, Oct. 19, 2018

Gentex-GNTX reported third quarter revenues increased 5% to $460.3 million with net income motoring 23% higher to $111.3 million and EPS up 35% to $.42 thanks to a lower tax rate and lower shares outstanding. These were solid results given that actual light vehicle production was about 5% below forecast in the primary markets of Europe, North America, Japan and Korea. New regulations that took effect in the third quarter in Europe adversely impacted unit shipments and revenue in Europe. Despite the difficult production environment, Gentex’s growth outpaced their primary markets by 8% quarter over quarter, driven by new launches and the continuing ramp up in productions of their Full Display Mirror. During the third quarter, gross margin declined to 37.6% compared to 39% in the prior year period--negatively impacted by 60 basis points due to tariffs that became effective in the quarter. Despite the tariffs, the company’s growth in China continues to outpace corporate growth by a wide margin. During the third quarter, Gentex repaid the remaining principal on its credit facility of $23.1 million and repurchased 7.5 million shares of its common stock at an average price of $22.98 per share for a total of $172.5 million. The company has approximately 12.2 million shares remaining available for future repurchase, which management plans to continue as they view the stock as “undervalued with the concerns over tariffs and gross margin overdone.” Management remains optimistic that the growth of their core auto-dimming mirrors and Full Display Mirrors will continue to provide growth rates well above vehicle production levels over the balance of 2018 and through calendar 2019. Management expects revenues for 2018 to be in the range of $1.854-$1.872 million, representing 3%-4% growth for the full year, with 2019 revenue growth expected in the range of 5%-10%.

Thursday, Oct. 18, 2018

Genuine Parts-GPC reported third quarter sales motored ahead 15% to $4.7 billion with net earnings up 39% to $220 million and EPS up 38% to $1.49. Excluding costs related to last year’s acquisition of Alliance Automotive Group (AAG) in Europe and the attempted transaction to spin-off S.P. Richards and the favorable impact of the $12 million termination fee, adjusted net income was $217.6 million, or $1.48 per share, up 28% and 29%, respectively.  Total sales for the third quarter included 4.3% comparable growth, the strongest growth since the fourth quarter of 2014. Third quarter sales for the Automotive Group were up 23.3% to $2.65 billion on a 3% comparable sales increase. Sales for the Industrial Group powered ahead 8.3% to $1.58 billion on 7% comparable sales growth. Sales for the Business Products Group increased 1.3% to $496 million on 1.3% comparable sales growth, the strongest growth since the first quarter of 2015. Operating profits expanded 20 basis points despite increases in freight and labor costs that exceeded sales growth. Year-to-date, Genuine Parts generated $834 million in free cash flow, up 87% from last year, revved up by the net income gain and tight working capital management. Genuine Parts’ 2018 dividend of $2.88 is up 7% from 2017 and represents the 62nd consecutive year of GPC dividend payments. While GPC has repurchased few shares year-to-date, 17.4 million shares remain under the current share buyback authorization and the company expects to be active in the market as its stock represents an attractive investment. So far, tariffs have had a negligible impact on GPC’s business. However, management keeps a watchful eye on list 3, which became effective in October imposing 10% tariffs on $200 billion of goods imported from China. Genuine Parts currently sources about 40% of its goods outside the U.S. with 20% impacted by the China tariffs, representing about 7% to 8% of GPC’s cost of goods sold. Given Genuine Parts’ strong competitive advantage, management expects to pass along tariff cost increases to its customers. Given the strong year-to-date performance, GPC raised its full year sales guidance to be up 14% to 15%, an increase from the prior guidance of up 13% to 14%. Adjusted EPS, which excludes any transaction-related costs, are now expected in the $5.60 to $5.70 range, tightened from previous guidance of $5.60 to $5.75. Genuine Parts continues to expect a full-year tax rate of approximately 25%, down markedly from the 35.7% rate paid in 2017.

Wednesday, Oct. 17, 2018

       

AbbVie-ABBV  announced the U.S. Food and Drug Administration (FDA) has accepted its supplemental New Drug Application (sNDA) for Priority Review for IMBRUVICA® (ibrutinib) in combination with obinutuzumab (GAZYVA®) in previously untreated adult patients with chronic lymphocytic leukemia or small lymphocytic lymphoma (CLL/SLL). If the sNDA is approved, the use of IMBRUVICA with obinutuzumab could become the first chemotherapy-free, anti-CD20 combination approved by the FDA for the first-line treatment of CLL/SLL. IMBRUVICA is currently FDA-approved to treat adults with CLL/SLL as a single-agent for all lines of therapy and in combination with bendamustine and rituximab (BR).IMBRUVICA is a once-daily, first-in-class Bruton's tyrosine kinase (BTK) inhibitor that is administered orally, and is jointly developed and commercialized by Pharmacyclics LLC, an AbbVie company, and Janssen Biotech, Inc, a Johnson & Johnson-JNJ company.

 

Tuesday, Oct. 16, 2018

Johnson & Johnson-JNJ reported third quarter sales rose 3.6% to $20.3 billion with net income up 4.5% to $3.9 billion and EPS up 5.1% to $1.44. On an operational basis, excluding acquisitions and divestitures, worldwide sales increased 6.1% with domestic sales up 3.9% and international sales up 8.5% and adjusted EPS up 7.9%. The solid third quarter results reflect continued market share gains in the Pharmaceutical business with sales up 6.7% to $10.3 billion driven by double-digit growth in nine key products; accelerating sales momentum and improved operational performance in the Consumer business with sales up 1.8% to $3.4 billion; and consistent progress in the Medical Devices business with sales dipping 0.2% to $6.6 billion. At quarter end, JNJ had $12 billion in net long-term debt, with $19 billion in cash and investments and $31 billion in long-term debt. Management raised their outlook for sales and earnings for the full 2018 year with sales now expected in the range of $81.0-$81.4 billion, representing operational growth of 5.5% to 6.0%, with adjusted EPS expected in the range of $8.13 to $8.18, representing operational growth of 9.3% to 10%.


Monday, Oct. 15, 2018

Ross Stores-ROST announced the recent opening of 30 Ross Dress for Less® ("Ross") and ten dd's DISCOUNTS® stores across 19 different states in September and October. These new locations complete the company's store growth plans for fiscal 2018 with the addition of 99 new stores. "This fall, we continued to expand our Ross and dd's footprints across our existing markets as well as expansion in our newer market – the Midwest," said Jim Fassio, President and Chief Development Officer. "We now operate nearly 1,500 Ross and over 230 dd's DISCOUNTS locations. Looking ahead, we continue to believe there is plenty of opportunity to further expand our store base for both chains given consumers' ongoing focus on value. As such, we recently updated our longer-term growth store potential to reflect our confidence that Ross can grow to 2,400 locations and dd's can become a chain of 600 stores."

Friday, Oct. 12, 2018

As part of Starbucks’-SBUX previously announced plan to return $25 billion to shareholders in the form of share buybacks and dividends through fiscal 2020, the company is currently executing a $5 billion accelerated share repurchase program (ASR). The Company used proceeds from the recently completed transaction with Nestlé S.A. to execute the ASR, effective October 1, 2018.

Thursday, Oct. 11, 2018

Walgreens Boots Alliance-WBA reported solid fourth quarter results with sales up 11% to $33.4 billion, operating income up 36% to $1.5 billion, net income up 89% to $1.5 billion and EPS more than doubling to $1.55 thanks to the benefits of share repurchases and a lower tax rate. Adjusted EPS increased 13% in the fourth quarter. For the full fiscal 2018 year, sales increased 11% to $131.5 billion with operating income up 15% to $6.4 billion, net income up 22% to $5.0 billion and EPS up 34% to $5.05. Return on shareholders’ equity for the year was a healthy 18.9%. Sales growth benefited from the acquisition of Rite-Aid stores, with organic sales growth up 4% for the quarter and 3% for the year. The integration of the Rite Aid stores is on track with expected synergies from the acquisition increased to $650 million annually from the previous forecast of $600 million. Walgreens continues to gain pharmacy market share in the U.S. as market share expanded to a record 21.7 % from 20.2% last year.  Free cash flow increased 17% during the year to $6.9 billion, the highest in the company’s history, with the company paying $1.7 billion in dividends and repurchasing $5.2 billion of its stock. In fiscal 2019, management plans to repurchase an additional $3 billion worth of shares as part of the previously announced $10 billion share repurchase program. Walgreens expects fiscal 2019 adjusted constant currency EPS growth of 7%-12% in the range of $6.40-$6.70. Recent strategic partnerships with LabCorp, Kroger, Alibaba and Birchbox should contribute to future growth.

Thor Industries-THO announced that its Board of Directors approved an increase in the amount of Thor’s regular quarterly dividend to $0.39 per share from $0.37 per share, an increase of 5%.

Wednesday, Oct. 10, 2018

Fastenal-FAST reported third quarter revenues rose 13% to $1.3 billion with operating income up 15% to $262.3 million and net income and EPS each hammering up 38% gains to $197.6 million and $.69, respectively, thanks to lower tax rates. Fastenal has reported six consecutive quarters of double-digit sales growth thanks to strong demand in manufacturing and growth in industrial vending and Onsite locations. During the quarter, Fastenal signed 5,877 vending devices, up 23.2% with product sales through the vending devices growing 20%. They signed 88 Onsites agreements, up 9% from the prior year period. National Accounts daily sales rose 18% in the third quarter. Non-residential construction daily sales were up 16.2% in the quarter, a new cycle high with fastener daily sale up 11% and non-fastener sales up 15%.  While gross margin declined 100 basis points during the quarter to 48.1% due to customer/product mix  and higher freight costs, the company’s operating margin expanded 30 basis points to 20.5% due to operating efficiencies. Free cash flow increased 7% year-to-date to $399 million with the company paying $327.5 million in dividends and repurchasing $40.4 million of its stock during the past nine months.

United Technologies’-UTX Board of Directors declared a dividend of 73.5 cents per share on the outstanding shares of UTC's common stock, which represents a 5 percent increase over the prior quarter's dividend amount.  The dividend will be payable December 10, 2018, to shareowners of record at the close of business on November 16, 2018. "The increase in our dividend reflects our ongoing commitment to remain disciplined in our capital allocation and deliver value to shareowners," said Gregory J. Hayes, Chairman and Chief Executive Officer of United Technologies. UTC has paid cash dividends on its common stock every year since 1936.

T.Rowe Price Group-TROW reported preliminary month-end assets under management of $1.08 trillionas of September 30, 2018, a 9.4% increase since year end.


Tuesday, Oct.9, 2018

MAXIMUS-MMS announced that it has signed a definitive asset purchase agreement to acquire certain assets of General Dynamics Information Technology's large-scale, citizen-engagement centers in the U.S. Federal civilian market. The acquisition is expected to strengthen MAXIMUS position in the administration of federal government programs across the United States. The $400 million all cash transaction is expected to close in mid-November.  The associated assets included in the asset purchase agreement had revenue of approximately $670 million for the twelve months ended June 2018. This revenue is primarily tied to cost reimbursable contracts and accordingly, operating margins typically average in the mid-single digit range. MAXIMUS currently anticipates that the assets associated with this transaction will generate approximately 10.5 months of revenue for its fiscal year 2019 in the range of $575 million to $600 million. The transaction is expected to be accretive by $0.10 to $0.15 of diluted earnings per share in fiscal year 2019 after consideration of one-time expenses, interest, non-cash charges, and cost synergies.

Friday, Oct. 5, 2018

Genuine Parts Company-GPC announced that Alliance Automotive Group (AAG), the Company's wholly-owned automotive distribution company based in London, U.K., has completed the acquisitions of two automotive businesses, U.K. based Platinum International Group Limited and TMS Motor Spares Ltd. Platinum International Group Limited (Platinum), headquartered in Manchester, England, is a leading value-added battery distributor in the automotive, industrial, marine and leisure markets, with nine U.K. locations and one location in the Netherlands.  Platinum currently sells to AAG and other trading group customers across the independent aftermarket, original equipment dealer and other market segments and significantly expands AAG's battery sourcing platform as well as other distribution, including lubricants.  The Platinum acquisition was effective October 2, 2018, and is expected to generate estimated annual revenues of $75 million (US$).  TMS Motor Spares Ltd. (TMS), headquartered in Carlisle, England, is a leading automotive parts distributor with 17 locations in Scotland and seven in England.  TMS further expands AAG's U.K. footprint, while also providing the first company-owned stores in Scotland.  The TMS acquisition was effective August 31, 2018, and the Company expects the acquired business to generate annual revenues of approximately $30 million (US$).

Thursday, Oct. 4, 2018

Arrowhead Pharmaceuticals Inc. announced that it entered into a license and collaboration agreement with Janssen Pharmaceuticals, Inc., part of the Janssen Pharmaceutical Companies of Johnson & Johnson-JNJ, to develop and commercialize ARO-HBV. In addition, Arrowhead entered into a research collaboration and option agreement with Janssen to potentially collaborate for up to three additional RNA interference (RNAi) therapeutics against new targets to be selected by Janssen. The transactions have a combined potential value of over $3.7 billion for Arrowhead. Under the terms of the agreement, Arrowhead will receive $175 million as an upfront payment. Separately, Johnson & Johnson Innovation – JJDC, Inc. (JJDC) will make a $75 million equity investment in Arrowhead at a price of $23.00 per share of Arrowhead common stock. Arrowhead is eligible to receive up to approximately $1.6 billion in milestone payments for the HBV license agreement, including a $50 million milestone payment linked to a Phase 2 study. Arrowhead is also eligible to receive approximately $1.9 billion in option and milestone payments for the collaboration agreement related to up to three additional targets. Arrowhead is further eligible to receive tiered royalties up to mid teens on product sales.

 

Wednesday, Oct. 3, 2018

Private sector employment increased by 230,000 jobs from August to September according to the September ADP National Employment Report®. “The labor market continues to impress,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Both the goods and services sectors soared. The professional and business services industry and construction served as key engines of growth. They added almost half of all new jobs this month.” Mark Zandi, chief economist of Moody’s Analytics, said, “The job market continues to power forward. Employment gains are broad-based across industries and company sizes. At the current pace of job creation, unemployment will fall into the low 3%’s by this time next year.”


Tuesday, Oct. 2, 2018

PepsiCo-PEP reported third quarter revenues increased 2% to $16.5 billion with net income popping 16% higher to $2.5 billion and EPS bubbling 18% higher to $1.75. Organic revenue growth of 4.9% during the quarter was the highest in three years. Core constant currency EPS growth was 9%. Very strong operating performance from the international divisions was propelled by developing and emerging markets with double-digit core constant currency growth. Frito-Lay North America generated solid net revenue and operating growth during the quarter while North America Beverages showed sequential improvement in revenues. Free cash flow declined 32% year-to-date, impacted by discretionary pension contributions. During the past nine months, PepsiCo paid $3.6 billion in dividends and repurchased $1.4 billion of its stock. For the full year, PepsiCo expects to generate $9 billion in operating cash flow with capital expenditures of about $3.3 billion and a pension contribution of $1.4 billion. The company expects to pay $5 billion in dividends for the full year and repurchase $2 billion of its stock. Given the strength of year-to-date results, PepsiCo raised their outlook for full-year organic revenue growth to at least 3%. However, foreign exchange headwinds resulted in a lower revision to the EPS outlook with core EPS of $5.65 expected, representing 8% growth.

Paychex-PAYX reported first fiscal quarter revenues rose 9% to $862.8 million with total service revenue increasing 9% to $845.7 million and interest on funds held for clients jumping 25% to $17.1 million due to higher interest rates earned.  Net income and EPS each processed up 16% gains during the quarter to $243.6 million and $.67, respectively, thanks to lower tax rates. The strong start to the fiscal year was a result of solid growth across all of the company’s major human capital management lines. Paychex experienced strong demand for their professional employer organization (PEO) services, achieving double-digit growth in the number of client worksite employees served. Insurance services revenues experienced solid growth benefiting from an increase in the number of health and benefits applicants. Free cash flow decreased 23% during the quarter to $249 million due to working capital changes. During the quarter, the company paid $201 million in dividends and repurchased 500,000 shares for $32.8 million at an average cost of $65.60 per share. Management reaffirmed its guidance for fiscal 2019 EPS growth of approximately 11% with Management Solutions revenue growth anticipated to be 4% for the year and PEO and Insurance Services revenue growth of 18% to 20%.


Monday, Oct. 1, 2018

Stryker-SYK announced the acquisition of privately-held HyperBranch Medical Technology, Inc. for a total equity value of approximately $220 million in an all cash transaction. HyperBranch is dedicated to developing medical devices based on its proprietary polymers and cross-linked hydrogels. Its Adherus AutoSpray Dural Sealant product is one of only two FDA-approved dural sealants on the market. The transaction is expected to have an immaterial impact to net earnings in 2018.

Friday, Sept. 28, 2018

Facebook-FB reported it recently discovered a security breach affecting nearly 50 million user accounts. The company says hackers exploited its "View As" feature, which lets people see what their profiles look like to someone else. Facebook says it has taken steps to fix the security problem and alerted law enforcement. To deal with the issue, Facebook reset some logins, so 90 million people have been logged out and will have to log in again. That includes anyone who has been subject to a "View As" lookup in the past year.

Walgreens Boots Alliance-WBA announced that the company has reached an agreement with the Securities and Exchange Commission (SEC) to fully resolve an investigation into forward-looking financial goals and related disclosures by Walgreen Co. (Walgreens). The disclosures at issue were made prior to the merger with Alliance Boots and the establishment of Walgreens Boots Alliance on December 31, 2014. The settlement does not involve any of Walgreens Boots Alliance’s current officers or executives, nor does it allege that anyone acted intentionally or recklessly at any time. In agreeing to the settlement, Walgreens Boots Alliance neither admits nor denies the SEC’s allegations that Walgreens and its then Chief Executive Officer (CEO) and then Chief Financial Officer (CFO) acted negligently in connection with statements made in the June 2013, October 2013, December 2013 and March 2014 earnings calls, by failing to adequately disclose the increased risk to achieving certain of Walgreens previously stated fiscal 2016 financial goals. Following warnings in December 2013 and March 2014, Walgreens withdrew those fiscal 2016 goals in June 2014. Pursuant to the agreement with the SEC, Walgreens Boots Alliance consented to the SEC’s issuance of an administrative order, and the company will pay a $34.5 million penalty, which has been fully reserved for, while the Walgreens then CEO and then CFO separately resolved the matter with the SEC.

Thursday, Sept. 27, 2018

Accenture-ACN reported fourth quarter revenues increased 11% to $10.1 billion with net income up 10% to $1.0 billion and EPS up 7% to $1.58 thanks to broad-based growth among the company’s business segments and geographies.  For the full fiscal 2018 year, revenues increased 14% to $39.6 billion with net income jumping 18% to $4.1 billion and EPS up 17% to $6.34. New bookings in the fourth quarter were $10.8 billion leading to record bookings of $42.8 billion for the full year thanks to strong demand for the company’s services as Accenture significantly gained market share. Return on shareholders’ equity for the year was an excellent 37.9%. Free cash flow increased 21% during the year to $5.4 billion with the company paying $1.7 billion in dividends during the year and repurchasing $2.6 billion of its shares, including 3.4 million shares in the fourth quarter for $552 million at an average cost of $163.24 per share. Accenture announced a 10% increase in its semi-annual dividend to $1.46 per share with plans to convert to a quarterly dividend in fiscal 2020. The Board of Directors also announced a new $5 billion share repurchase authorization which brings the total buyback authorization to $6 billion. With strong business momentum going into fiscal 2019, Accenture’s outlook is for revenue growth in the range of 5%-8%, with foreign exchange expected to have a negative 2.5% impact. The company expects EPS in the range of $6.98 to $7.25 with operating margin expected to expand 10 to 30 basis points. For fiscal 2019, Accenture expects free cash flow to be in the range of $5.1 billion to $5.5 billion.  

Hormel Foods-HRL announced that it will be investing approximately $150 million in an expansion of the company's Burke manufacturing facility in NevadaIowa. Burke is one of the leading providers of pizza toppings and other fully cooked meat products in the foodservice and prepared food industries. The 210,000-square-foot expansion is one of the largest in the company's history. Adding to the current 225,000 square feet of production, warehouse, and offices, the expansion would also add approximately 210 new jobs in addition to the current 350 team members.

Wednesday, Sept. 26, 2018

The Walt Disney Company-DIS has consented to Twenty-First Century Fox, Inc.’s decision to tender or sell its 39% stake in Sky plc as soon as allowable under terms of Comcast Corp.’s £17.28 per share offer for Sky. The current value of Fox’s Sky stake is more than $15 billion. The transaction, coupled with the divestiture of the Fox Sports Regional Networks, will significantly reduce the amount of debt Disney will incur in acquiring 21st Century Fox, and enable Disney to maintain its strong balance sheet as it continues to invest in content creation for its direct-to-consumer platforms. Disney will expand its considerable investment in the Disney-branded direct-to-consumer offering launching in late 2019 and the new ESPN+ sports streaming service, and will seek to increase investment in Hulu’s content offerings and international distribution. Disney and 21st Century Fox each currently hold 30% stakes in Hulu.

Tuesday, Sept.25, 2018

Nike-NKE reported first fiscal quarter revenues rose 10% to $9.9 billion with net income running 15% higher to $1.1 billion and EPS up 18% to $.67. The double-digit revenue growth was driven by the continued success of the Consumer Direct Offense, which fueled growth across all geographies. Sales in Greater China jumped 24% during the quarter representing the 17th consecutive quarter of double-digit growth in China. Digital sales growth was 36% during the quarter representing the fastest growth in all geographies. Nike’s strong 18% EPS growth was driven by the 10% revenue growth, 50 basis point gross margin expansion, selling and administrative expense leverage and a lower share count. Inventories were $5.2 billion at quarter end, flat with the prior year, with healthy inventories across all geographies due to strong full-price sell through on innovative new products. During the past quarter, Nike repurchased 17.8 million shares for about $1.4 billion at an average cost of $78.65 per share. Management reaffirmed their outlook for fiscal 2019 with revenue growth in the high single-digit range and gross margin expansion of 50 basis points.

FactSet-FDS reported fourth quarter revenues rose 5.9% to $326.6 million driven by organic revenue growth of 5.3%. The increase is due primarily to higher sales of research and analytics products, content and technology solutions and wealth management solutions. Client count during the quarter increased 167 to 5,142 with user count increasing 2,391 to 91,897. Annual client retention was 91%. The fourth quarter operating margin expanded to 25.5% with EPS advancing 16.4% to $1.77 thanks to the lower tax rate and fewer shares outstanding. For the full fiscal 2018 year, revenues increased 10.6% to $1.35 billion with net income up 3.4% to $267.1 million and EPS up 4.1% to $6.78. Annual subscription value increased 5.7% organically to $1.39 billion as of 8/31/18. Return on shareholders’ equity during the year expanded to 50.8%. Free cash flow increased 24% during the year to $352 million with the company paying $89 million in dividends and repurchasing $304 million of stock during the year, including 329,478 shares for $67.5 million at an average cost of $204.86 per share during the fourth quarter.  FactSet celebrated 40 years as a company with 38 years of consecutive revenue growth and 22 years of consecutive adjusted EPS growth. The company enters fiscal 2019 with strong momentum and an expanding suite of innovative workflow solutions to drive future growth. For fiscal 2019, management expects revenues in the range of $1.41 to $1.45 billion, representing 4%-7% growth, with EPS growing at double-digit rates in the range of $8.70-$8.90.

Monday, Sept. 24, 2018

Genuine Parts-GPC announced acquisitions for both its Industrial Group, Motion Industries, and its U.S. Automotive Parts Group. Motion Industries has entered into a definitive agreement to acquire Hydraulic Supply Company (HSC), with an effective close date of October 1, 2018. HSC, founded in 1947 and based in Sunrise, Florida, is a leading full-service fluid power distributor, with a broad product offering of hydraulic, pneumatic and industrial components and systems.  The Company expects HSC to generate estimated annual revenues of $85 million. In addition, the Company has entered into a definitive agreement to acquire Hastings Auto Parts, Inc. (Hastings), also with an effective close date of October 1, 2018.  Hastings is expected to generate approximate annual revenues of $10 million. Terms of the deals were not disclosed.

United Technologies-UTX has been awarded a contract worth up to $2.46 billion to supply the U.S. Air Force with aircraft parts.

 

Thursday, Sept. 20, 2018

Thor Industries-THO reported fiscal fourth quarter revenues declined 3.1% to $1.87 billion with net income and EPS down 26% to $88 million and $1.67, respectively. Earnings reflected reduced productions levels, higher promotion costs, elevated labor expense and increased raw materials cost primarily due to aluminum and steel tariffs. These costs were partially offset by a lower tax rate due to tax reform. Sales for the fourth quarter were flat for the Towable segment and down 13.2% for the Motorized segment. For the full year, revenues rose 14.9% to $8.3 billion with net income and EPS up nearly 15% to $430 million and $8.14, respectively. Return on shareholders’ equity was 22%. Free cash flow increased 8% during the year to $328 million with the company paying $78 million in dividends. Thor ended the year with $275 million of cash on its balance sheet after spending $145 million during the year to pay off the balance on their revolving line of credit. On September 18, 2018, Thor announced it had entered into a definitive agreement to acquire Erwin Hymer Group for approximately EUR 1.7 billion cash ($2 billion at the current exchange rate) and equity consisting of about 2.3 million shares of Thor’s common stock. The acquisition of Erwin Hymer Group, Europe’s premier RV manufacturer, is expected to close near the end of calendar year 2018.


Tuesday, Sept. 18, 2018

Microsoft-MSFT announced that its board of directors declared a quarterly dividend of $0.46 per share, reflecting a 4 cent or 9.5%increase over the previous quarter’s dividend. The dividend is payable Dec. 13, 2018, to shareholders of record on Nov. 15, 2018. The ex-dividend date will be Nov. 14, 2018.

Thor Industries-THO plans to acquire Erwin Hymer Group, a privately held international company, for an enterprise value of approximately €2.1 billion, with the purchase price to be funded with cash and equity. Equity consideration will consist of approximately 2.3 million shares of Thor. The Hymer family will thereby remain engaged in the industry. The combination creates the world’s largest RV manufacturer, with the leading position in both North America and Europe, and establishes a global sales and production footprint for the company. Thor expects the transaction to be accretive to earnings in the first year, before taking into account anticipated synergies, purchase accounting adjustments and transaction-related expenses. Subsequent to closing, Thor intends to repurchase shares both opportunistically and systematically in order to offset the issuance of shares to the Hymer family.

Mastercard-MA has reached an agreement to settle monetary damages claims in the U.S. merchant class-action litigation. The agreement formalizes prior discussions and has been executed by all of the defendants – including Mastercard, Visa and a number of banks – and the court-appointed class counsel for the merchants. The settlement is an amendment to the financial terms of the 2012 Class Settlement Agreement and will be filed with the court seeking approval. In addition to the original 2012 monetary terms, Mastercard’s share of the financial agreement is an additional $108 million, which is based upon the allocation of financial responsibility that was set out in the judgment and settlement sharing agreements that were executed in February 2011. In total, the defendants have agreed upon an additional payment of $900 million in the current agreement. The company recorded a $210 million charge in its second-quarter 2018 financial statements, which will cover the financial obligation under this agreement and for estimated liabilities related to filed and anticipated opt-out merchant cases. The merchant class-action that seeks the revision of network rules is not covered by this settlement agreement. That action remains outstanding while the parties are engaged in settlement negotiations.


 Monday. Sept. 17, 2018

Oracle-ORCL reported fiscal first quarter revenues increased 1% to $9.2 billion driven by cloud service and license support revenues increasing 3% to $6.6 billion. The vast majority of Enterprise Resource Planning (ERP) applications running in the cloud are either Oracle Fusion (with nearly 5,500 customers) or Oracle NetSuite systems (with over 15,000 customers) with Oracle continuing to increase its market share.  Net income increased 6% during the quarter to $2.3 billion with the operating margin stabilizing at 30% and with EPS up 14% to $.57 on lower shares outstanding due to the company’s substantial share buyback program. Free cash flow increased 4% during the quarter to $6.3 billion with the company repurchasing 212 million shares for nearly $10 billion during the quarter at an average cost of $47.17 per share as management views the stock as an “amazing deal and unbelievable buy.” In the last 12 months, the company has repurchased 440 million of it shares reducing its shares outstanding by 8.5%.  A new $12 billion share buyback program was authorized during the quarter bringing the total authorization to $20 billion. For the second fiscal quarter, Oracle expects revenues to be flat to up 2% due to tough comparisons with non-GAAP EPS up 11%-15%. Revenue growth is expected to accelerate in the second half. Management is optimistic that the company will deliver another fiscal year of double-digit non-GAAP EPS growth.

TJX Companies-TJX announced its Board of Directors has approved a 2-for-1 stock split of the its common stock by means of a stock dividend. Implementation of the stock split is subject to approval by TJX shareholders of an increase in the number of authorized shares of the Company’s common stock from 1.2 billion shares to 1.8 billion shares, and related Board approval. The increase will be voted on at a special shareholders meeting that is anticipated to be held on October 22, 2018, at which shareholders of record on September 27, 2018 would be entitled to vote. If approved, one additional share of the company’s common stock would be distributed on November 6, 2018 for each share held by shareholders of record on October 30, 2018. Ernie Herrman, Chief Executive Officer and President of The TJX Companies, Inc., stated, “We are pleased to announce this 2-for-1 stock split in addition to our regular quarterly cash dividend. TJX has a long and successful track record, and this stock split underscores our great confidence in the continued success of our Company.”

MAXIMUS-MMS announced that it has signed a new contract with the California Public Utilities Commission (CPUC) to administer the California LifeLine Program. The $36 million base contract is projected to run 30 months. There are two additional one-year contract extension options which would bring the total contract value to $65 million. The California LifeLine Program provides discounted home phone and cell phone services to qualified households. The California LifeLine discounts help consumers lower the cost of their phone bills. The scope of work as the California LifeLine Administrator includes eligibility determination, call center services, web-based enrollments and document intake and processing.

Thursday, Sept. 13, 2018

UPS-UPS quantified the financial benefits of its transformation initiatives based on the company’s outlook for revenue quality improvement and operating cost reductions between 2018 and 2022.  The company expects these actions to result in an incremental increase to adjusted earnings per share in the range of $1.00 to $1.20 by 2022.   The company is focused on four strategic imperatives where it is well-positioned for profitable growth: 

  • Continued expansion of high-growth international markets where the company efficiently connects domestic and export customers to its global network;
  • Profitable expansion from both B2B and B2C e-commerce, as U.S. industry package revenue is expected to grow by 40% from 2017 to 2022, and cross-border e-commerce volume is expected to grow by 28% over the next three years;
  • Further penetration of the Healthcare and Life Sciences logistics market, given the increasing shift toward home healthcare, where UPS’s trusted residential delivery network will provide new value for healthcare companies and consumers;
  • Enhancing services and value for Small- and Medium-sized Businesses, as the company repositions its commercial and service strategies to help this growing economic segment reduce logistics complexity and costs, and take advantage of UPS-offered technology platforms for growth.

UPS’s business strategy includes continued capital investment in its vast global network at previously announced levels. New and renovated facilities, aircraft and fleet assets are coming online at record levels during the next four years. In 2018, 2019 and 2020, UPS will add 350,000-400,000 pieces per hour of sortation capacity in the U.S. each year, which is about seven times the additional sortation capacity added in 2017, alone. Seven new ‘super hub’ automated sortation facilities will be opened during the period, with 30-35% higher efficiency than comparable less-automated facilities.  More than 70 expansion projects will be implemented during the period.  UPS will have completed 17 projects in 2018, in time for the peak holiday shipping season.

 

AbbVie-ABBV announced new patient-reported outcomes data from three pivotal Phase 3 trials evaluating risankizumab, an investigational interleukin-23 (IL-23) inhibitor, in adult patients with moderate to severe plaque psoriasis. Across all three trials, patients reported significant improvements in health-related quality of life, mental health and work productivity measures when treated with risankizumab.

AbbVie also announced new results from the ongoing Phase 2b study including longer-term (32-week) efficacy and safety data and patient-reported outcomes data evaluating upadacitinib, an investigational, once-daily oral JAK1-selective inhibitor, in adult patients with moderate to severe atopic dermatitis.2 Results from a pre-specified, interim analysis from the Phase 2b dose-ranging study showed that treatment with upadacitinib 7.5 mg, 15 mg or 30 mg resulted in greater improvements in itch and skin lesions, with statistically significant differences observed versus placebo at week 32. Atopic dermatitis is a common chronic, relapsing, inflammatory skin disease with associated comorbidities. One-third of atopic dermatitis patients have moderate to severe disease, which manifests as a debilitating, itchy rash with significant physical, psychological and economic burden. There is a large unmet need for therapies that are effective to manage the signs and symptoms of moderate to severe atopic dermatitis.

T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.09 trillion as of August 31, 2018, representing a 9.6% increase over year end assets.

 

Wednesday, Sept. 12, 2018

 

Apple-AAPL unveiled three new phones and a redesigned fourth generation Apple Watch with advanced medical features. The trio of new phones includes iPhone Xs, iPhone Xs Max and iPhone XR. The 5.8-inch iPhone Xs and 6.5-inch iPhone Xs Max feature Super Retina displays, a faster and improved dual camera system that offers breakthrough photo and video features, the first 7-nanometer chip in a smartphone, faster Face ID, wider stereo sound, a beautiful new gold finish and a Dual SIM to iPhone.  iPhone Xs and iPhone Xs Max come with iOS 12, the world’s most advanced mobile operating system. iOS 12 introduces new AR experiences, helps people rediscover and share photos, and makes communications more expressive and fun with new Animoji and Memoji. Screen Time helps customers understand and take control of the time they spend interacting with their iOS devices, Siri Shortcuts give any app the ability to work with Siri and new privacy features help protect users from being tracked on the web. iPhone Xs and iPhone Xs Max will be available for pre-order beginning Friday, September 14 and in stores beginning Friday, September 21 with price tags starting at $999 and $1,099, respectively. 

The iPhone XR integrates breakthrough technologies from iPhone XS in an all-screen glass and aluminum design with the most advanced LCD in a smartphone featuring a 6.1-inch Liquid Retina display and six beautiful finishes. iPhone XR brings the powerful A12 Bionic chip with next-generation Neural Engine, the TrueDepth camera system, Face ID and an advanced camera system that creates dramatic portraits using a single camera lens. iPhone XR will be available to pre-order beginning Friday, October 19 and in stores beginning Friday, October 26 with price tags starting at $749.  

The Apple Watch Series 4, with a 30%+ larger screen, brings advanced activity and communications features, along with revolutionary health capabilities, including a new accelerometer and gyroscope, which are able to detect hard falls, and an electrical heart rate sensor that can take an electrocardiogram (ECG) using the new ECG app, which has been granted a De Novo classification by the FDA. Despite the added features, the redesigned Apple Watch’s battery life remains at 18 hours with six hours of outdoor workout time.The new Apple Watch will begin shipping on September 21, with a $399 price tag for GPS and a $499 price tag for cellular. 

Monday, Sept. 10, 2018

Genuine Parts Company-GPC announced that it has received notice from Essendant of its intent to terminate the merger agreement to combine GPC's S.P. Richards business with Essendant, entered into on April 12, 2018. Essendant will be required to pay a termination fee to GPC in the amount of $12 million. GPC issued the following statement: “We believe that the prospects for S.P. Richards remain strong and that there is significant opportunity for S.P. Richards to grow and deepen its relationships with both independent dealers and other customer channels. As such, we are confident in our ability to drive growth and profitability for S.P. Richards and to support value creation for GPC shareholders.”

Walgreens-WBA and Fred’s, Inc. announced they have entered into a definitive asset purchase agreement, pursuant to which Walgreens will acquire pharmacy patient prescription files and related pharmacy inventory of 185 Fred’s stores located across 10 Southeastern states. Under the agreement, the aggregate consideration to be paid by Walgreens to Fred’s is $165 million.

Pratt & Whitney, a division of United Technologies-UTX, has been awarded a $437 million contract modification by the U.S. Air Force Life Cycle Management Center (AFLCMC) for next generation adaptive propulsion risk reduction for potential air superiority applications. 

Friday, Sept. 7, 2018

Fastenal-FAST reported net sales rose 13.7% to $467,893 for the month of August with daily sales also up 13.7% to $20,343. Daily sales growth by end market was 13.3% for manufacturing and 18.5% for non-residential construction. Daily sales growth by product line was 10.8% for fasteners and 16% for other products. Approximately 84% of the company’s Top 100 national accounts were growing sales in August compared to 74% last year. About 67.5% of Fastenal’s public branches were growing in August compared to 62.9% last year.  Total personnel increased 4.4% to 21,004.

Thursday, Sept. 6, 2018

Polaris Industries Inc.-PII will acquire all outstanding common stock of WSI Industries for $7.00 per share in cash, resulting in a WSI Industries enterprise value of approximately $23.9 million. WSI Industries, Inc.  is a leading contract manufacturer that specializes in the machining of complex, high-precision parts for a wide range of industries, including automotive, avionics and aerospace, energy, recreational vehicles, small engines, bioscience and the defense markets The merger, which is expected to close in the fourth calendar quarter of 2018. WSI Industries reported net sales of $25.9 million for the first three quarters of its fiscal 2018 ending August 26, 2018, of which 78% was attributable to sales to Polaris.

Private sector employment increased by 163,000 jobs from July to August according to the August ADP National Employment Report®.    “Although we saw a small slowdown in job growth, the market remains incredibly dynamic," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "Midsized businesses continue to be the engine of growth, adding nearly 70 percent of all jobs this month, and remain resilient in the current economic climate." Mark Zandi, chief economist of Moody's Analytics, said, "The job market is hot. Employers are aggressively competing to hold onto their existing workers and to find new ones. Small businesses are struggling the most in this competition, as they increasingly can't fill open positions." 

Thursday, Aug. 30, 2018

On Warren Buffett's 88th birthday he said in a CNBC interview that stocks continue to be attractive long-term investments today especially compared to bonds or real estate. He continues to buy stocks including a little more Apple-AAPL since the end of the second quarter. He also repurchased a little Berkshire Hathaway-BRKB under the company's revised buyback policy that permits Berkshire to repurchase shares at prices below Berkshire's intrinsic value as conservatively determined by Warren Buffett and Charlie Munger.

https://finance.yahoo.com/news/first-cnbc-cnbc-transcript-berkshire-162600021.html

Stryker-SYK plans to acquire K2M Group Holdings, Inc.  for $27.50 per share, or a total equity value of approximately $1.4 billion.  K2M, which was founded in 2004, has emerged as a key player in the roughly $10 billion spinal market. With annual sales approaching $300 million, K2M brings to Stryker`s Spine division a highly complementary and innovative portfolio, which includes a strong position in the complex spine market. Additionally, K2M`s broad portfolio will strengthen Stryker`s Spine offering in the core spinal segment, including an attractive minimally invasive spine portfolio, further Stryker`s capabilities in additive manufacturing, and expand the Company`s global footprint. K2M`s compelling product portfolio and sales force focus have driven a double-digit compounded annual growth rate over the past five years.  The acquisition of K2M is expected to close late in the fourth quarter of this year and is expected to have an immaterial dilutive impact to Stryker`s net earnings per diluted share and adjusted net earnings per diluted share in 2018. There is no change to Stryker`s previously announced expected adjusted net earnings per diluted share1 for the full year, which is a range of $7.22 - $7.27.

Wednesday, Aug. 29, 2018

Brown-Forman-BFB reported first fiscal quarter sales increased 6% to $766 million with net income and EPS increasing 12% to $200 million and $0.41, respectively. Underlying net sales grew 9% on broad-based portfolio growth including a 10% increase for the Jack Daniel’s family of brands, a 29% increase for Woodford Reserve, a 10% increase in Herradura and an 11% increase in el Jimador. Developed international markets grew underlying net sales by 16%, emerging markets grew underlying net sales by 11% and the United States grew underlying net sales by 2%. Tariffs added 2% to 3% to total underlying sales growth as customers in the European Union, Canada and Mexico built inventory ahead of retaliatory tariffs that went into effect in July. During the quarter, Brown-Forman generated $103 million in free cash flow and returned $77 million to shareholders through dividends of $76 million and share repurchases of $1 million. Given the competitive distilled spirit marketplace, the reduction in Brown-Forman’s tax rate from 22% to 17% and positive news coming from trade negotiations, the company has delayed increasing prices in response to the tariffs, which will hurt gross margins going forward. Therefore, management lowered its full fiscal 2019 year EPS guidance by 10 cents to $1.65 to $1.75, representing 11% to 18% growth from last year. Underlying sales growth of 6% to 7% is unchanged from prior guidance.

Monday, Aug. 27, 2018

AbbVie-ABBV announced that the U.S. Food and Drug Administration (FDA) approved IMBRUVICA® (ibrutinib) plus rituximab (RITUXAN®) for the treatment of adult patients with Waldenström's macroglobulinemia, a rare and incurable type of non-Hodgkin's lymphoma (NHL). With this approval, the IMBRUVICA prescribing information now includes combination use with rituximab, representing the first and only chemotherapy-free combination treatment specifically indicated for the disease. "We are pleased to have IMBRUVICA approved, both as a single agent and combination therapy with rituximab, to provide an additional efficacious treatment option for people living with Waldenström's macroglobulinemia," said Thorsten Graef, M.D., Ph.D., Head of Clinical Development at Pharmacyclics LLC, an AbbVie company. "We are proud of our robust clinical development program, and this new approval reflects our continuous commitment to exploring the full potential of IMBRUVICA's mechanism of action for treating patients with diseases that have great unmet medical need."


Friday, Aug. 24, 2019

Stockholders of Express Scripts Holding-ESRX approved the proposed acquisition of Express Scripts by Cigna. Cigna announced that its stockholders also adopted the merger agreement. "By approving our proposed combination, Cigna and Express Scripts stockholders recognize and validate the highly attractive value this transaction delivers to all stakeholders," said Tim Wentworth, President and Chief Executive Officer, Express Scripts.

Thursday, Aug. 23, 2018

Ross Stores-ROST reported second quarter sales rose 9% to $3.7 billion with net income up a dressy 23% to $389 million and EPS up 27% to $1.04. Comparable store sales were up 5% during the quarter driven by higher traffic and basket size. Sales were broad-based across product categories and geographies. These results were above management’s expectations.  Free cash flow increased 33% during the first half of the year to $836 million with the company paying $170 million in dividends and repurchasing 6.5 million shares for $529 million at an average cost of $81.38 per share during the same time period. As planned, the company plans to repurchase $1.075 billion of common stock during the full fiscal year. For the second half of the year, the company expects comparable store sales of 1%-2% as the business goes up against tough comparisons with full year EPS expected in the range of $4.01-$4.10, representing 13%-15% growth. Ross Stores raised their long-term projected store potential to 3,000 locations up from a previous target of 2,500 locations. The higher store potential provides a considerable amount of long-term growth opportunities given the current store base of 1,680 stores.

Hormel-HRL reported third quarter revenues rose 7% to $2.4 billion with both net income and EPS up 15% to $210 million and $.39, respectively. Volume was up 5% to 1.2 billion pounds, in part to recent acquisitions, with organic volume up 1% and organic net sales flat during the quarter. Grocery Products and International delivered solid profit results during the quarter despite increased tariffs in key markets. Refrigerated Foods branded value-added strategy was able to offset a dramatic 88% decline in commodity profits. Jenni-O Turkey Store also saw a strong increase in value-added sales. Increased advertising paid off with growth from brands such as Skippy, Natural Choice, Jennie-O, Applegate, Wholly Guacamole and Herdez. Hormel is selling its Fremont processing facility for $30 million in cash. The fiscal 2019 expense associated with this transaction is expected to be $15-$20 million related to relocating manufacturing lines and pension-related expenses. Year-to-date, free cash flow increased 22% to $506 million with share repurchases totaling $45 million for 1.3 million share repurchased at an average cost of $34.62 per share. The third quarter dividend marked the 90th year of uninterrupted dividends paid to shareholders with the dividend up 10% over the prior year. Capital expenditures for the full year are expected to total approximately $400 million with the company remaining in a strong financial position to fund capital needs. Management lowered its sales outlook for the full fiscal 2018 year to $9.4 billion to $9.6 billion due to lower pork commodity prices while reaffirming its EPS outlook in the range of $1.81-$1.95.

Wednesday, Aug. 22, 2018

AbbVie-ABBV announced that results from the Phase 3 ELARIS UF-EXTEND extension study (MI2-816) showed at month 12 that elagolix reduced heavy menstrual bleeding with 87.9 percent of women with uterine fibroids achieving clinical response. Uterine fibroids are the most common type of benign abnormal growth in a woman's pelvis. Most American women will develop fibroids at some point in their lives. Fibroids can be asymptomatic, but in approximately 25 percent of women, they can cause symptoms, such as heavy menstrual bleeding, painful periods, vaginal bleeding at times other than menstruation, and anemia. African American women are more likely to experience fibroids and do so at a younger age.


Tuesday, Aug. 21, 2018

TJX Companies-TJX rang up a 12% increase in sales to $9.3 billion with net income up 34% to $739.6 million and EPS up 38% to $1.17. Excluding an 18 cent benefit related to U.S. tax reform, second fiscal quarter EPS increased 16.5% year-over-year to $0.99. Consolidated comparable store sales increased 6%, driven by an increase in customer traffic at every division. TJX ended the quarter with 4,194 stores, up 1.3% from last year. By division, Marmaxx’s sales increased 11% to $5.8 billion on a 7% gain in comp store sales generating operating profit margins of 14.2%. Homegoods sales increased 15% to $1.3 billion on a 3% gain in comp store sales generating operating profit margins of 10.7%. TJX Canada sales increased 13% to $938 million on a 6% gain in comp store sales generating operating profit margins of 14.8%. TJX International sales increased 12% to $1.2 billion on a 4% gain in comp store sales generating operating profit margins of 4%. During the first half of the year, TJX generated $986.8 million in free cash flow, up 66% from last year, with the company returning $1.44 billion to shareholders through dividends of $441 million and share buybacks of $1 billion at an average per share cost of $88.50. The company continues to expect to repurchase about $2.5 billion to $3 billion of TJX stock during fiscal 2019. Given the robust year-to-date results, management raised its guidance for the full year and now expects adjusted EPS to be in the range of $4.10 to $4.14, up 6% to 8% from fiscal 2018. The guidance is based on expected comp store growth of 3% to 4%.

Monday, Aug. 20, 2018

PepsiCo-PEP has agreed to acquire all outstanding shares of SodaStream for $144.00 per share in cash, in a transaction valued at $3.2 billion. SodaStream is the #1 sparkling water brand in volume in the world and the leading manufacturer and distributor of Sparkling Water Makers. In 2017, SodaStream generated $543 million in revenues and $74 million in net income. PepsiCo's strong distribution capabilities, global reach, R&D, design and marketing expertise, combined with SodaStream's differentiated and unique product range will position SodaStream for further expansion and breakthrough innovation. The deal is expected to close by Jan. 2019.

Wednesday, Aug. 15, 2018

Cisco Systems-CSCO reported fourth quarter revenues rose 6% to $12.8 billion, with product revenue up 7% and service revenue up 3%. Net income increased 57% to $3.8 billion with EPS up 69% to $.81. The earnings reflect an $863 million dollar benefit related to U.S. tax reform. Recurring revenue was 32% of total revenue, up one percentage point year over year. Revenue by geographic segment was: Americas up 5%, EMEA up 8% and APJC up 6%. Product revenue performance reflected solid growth in Applications and Security, which increased 10% and 12%, respectively. Infrastructure Platforms increased by 7%.  For the full year, revenues rose 3% to $49.3 billion with net income of $.1 billion and EPS of $.02, each down 99%. The earnings include $10.4 billion in charges related to the Tax Cuts and Jobs Act. Return on shareholders’ equity was .3% during the year due to the tax related charges. Cisco held $46.5 billion of cash and investments as of the end of the quarter with $40.4 billion available in the United States. Free cash flow decreased 1% during the year to $12.8 billion with the company paying $6 billion in dividends and repurchasing $17.7 billion of its stock. CSCO has $19 billion remaining under the current share repurchase program. Management’s outlook for the first fiscal quarter of 2019 is for revenue growth of 5%-7% with GAAP EPS in the range of $.69-$.74.


Friday, Aug. 10, 2018

Maximus-MMS reported third fiscal quarter revenue of $597.9 million, down slightly from last year, with net income up 5% to $59.9 million and EPS up 5.8% to $0.91. This quarter’s revenue and operating income benefited $15.5 million from the signing of several change orders where the costs were reported in prior periods. By segment, Health Services revenue increased 7% to $359 million with operating income increasing 24% to $63.8 million thanks to the change orders. As expected U.S. Federal Services revenue fell 15% to $112.2 million with operating income declining 6% to $14.9 million. Human Services revenue declined 5% to $126.6 million with operating income falling 54% to $7.5 million, hurt by the wind-down of domestic and international contracts coupled with the ramp-up of new contracts. Management projects a slight operating loss for the segment during the fourth quarter. Free cash flow for the quarter declined 41% year-over-year to $64.1 million, squeezed by working capital needs. During the quarter, Maximus repurchased $60.9 million shares at an average cost per share of $61.26. As an expression of its confidence in the future, the company increased the annual dividend from 18 cents to $1.00, which represents a 1.5% current yield. In addition, the company announced a $200 million expansion in its share buyback program. When asked during the conference call about expectations, management said that given the challenging environment with unemployment at record lows, it expects revenues to grow in the single digits for 2019 with a return to double-digit growth in 2020.

Booking Holdings-BKNG booked a 17% increase in second quarter revenues to $3.5 billion with net income up 36% to $977 million and EPS up 40% to $20.13. Gross bookings--the total value of all travel services booked by customers net of cancellations--increased 15% over the prior year period to nearly $24 billion. Room nights sold increased 12% to 191 million, rental car days increased 1% to 20.9 million and airline tickets increased 5% to 1.9 million.  Average daily rates for accommodations, or ADRs, were relatively flat compared with last year, which was better than the forecasted decline of about 1%. As of June 30, Booking.com had a total of about 28.8 million reported listings, consisting of approximately 23.3 million reported listings in hotels, motels and resorts and about 5.5 million reported listings in homes, apartments and other unique places to stay. During the second quarter, the company generated $1.6 billion of operating cash flow, up 35% from last year’s second quarter. Free cash flow for the quarter was $1.5 billion, also up 35%, with the company returning about $1.2 billion to shareholders through share buybacks. Year-to-date, Booking Holdings has reduced its share count by about 2%. As of June 30, $8.6 billion remained under the current share purchase authorization, which is expected to be completed over the next two to three years with both programmatic and opportunistic share repurchases. At the end of the second quarter Booking Holdings reported $16.8 billion in cash and investments on its sturdy balance sheet and $7.8 billion in long-term debt. During the earnings conference call, management provided third quarter guidance that assumes growth rates will decelerate over the remainder of the quarter, mainly due to the law of large numbers, consistent with long-term trends. Booked room nights are expected to increase by 6% to 9% with total gross bookings growing by 3% to 6% in U.S. dollars, and by 5% to 8% on a constant currency basis. Constant currency accommodation (ADRs) will be about flat compared to prior year. Third quarter revenue is expected to increase by 6% to 9% in U.S. dollars and by 8% to 11% on a constant currency basis. Third quarter EPS is expected in the $35.85 to $36.85 range, up 4% to 7% year-over-year.

T. Rowe Price-TROW reported preliminary month-end assets under management of $1.07 trillion as of July 31, 2018, up 2% from June 30, 2018. Client transfers from mutual funds to other portfolios, including trusts and separate accounts, were $0.5 billion in July 2018 and $14.1 billion for the year-to-date period ended July 31, 2018.

Tuesday, Aug. 7, 2018

Walt Disney Company-DIS reported third fiscal quarter revenues increased 7% to $15.2 billion with net income up 23% to $2.9 billion and EPS up 29%, on fewer shares outstanding, to $1.95. Segment operating income increased 5% and Disney’s effective income tax rate fell from 31.6% in last year’s quarter to 20.6% this quarter. By segment, Media Networks revenue increased 5% to $6.2 billion with segment operating margins declining 80 basis points to 29.6%, squeezed by increased investments in “direct-to-consumer” platforms in response to the industry-wide shift from cable to streaming. Parks and Resorts revenue increased 6% to $5.2 billion with segment operating margins expanding nearly 200 basis points to 25.8%, thanks to increased guest spending at domestic parks and resorts, including the Disney Cruise Line. Studio Entertainment sales increased 20% to $2.9 billion, boosted by the successful launch of Avengers: Infinity War and Incredibles 2. Studio Entertainment segment operating margins declined nearly 200 basis points to 24.6%, hurt by a $100 million film impairment charge related to animated films that will not be released and lower domestic home entertainment results. Consumer Products & Interactive Media sales dropped 8% to $1 billion with segment operating margins declining 100 basis points to 32.4% due to lower Spider-Man and Cars licensing activities and a decrease in same-store sales. During the quarter, Disney repurchased $970 million shares at an average cost of $100 per share. Free cash flow during the quarter declined 25% to $2.5 billion. Year-to-date, Disney generated $7.2 billion in free cash flow, up 19%, with the company returning $4.8 billion to shareholders through dividends of $1.3 billion and share repurchases of $3.6 billion, or $104.05 per share. The company has suspended share repurchases until it works off much of the debt taken on to finance the Twenty-First Century Fox acquisition. During the quarterly conference call, Mr. Iger, Disney’s Chairman and CEO, said, “Having earned the overwhelming support of shareholders, we are more enthusiastic about the 21st Century Fox acquisition than ever, and confident in our ability to fully leverage these assets along with our own incredible brands, franchises and businesses to drive significant value across the entire company.”

Monday, Aug. 6, 2018

FactSet-FDS has been selected to be the primary market data provider for Merrill Lynch Wealth Management. Starting later this year, FactSet will deploy its Market Data solution to more than 15,000 wealth management professionals across Merrill Lynch. The web-based platform provides complete multi-asset class content, analytics and global market data.  The multi-year, enterprise level agreement also includes FactSet’s data feeds, which will be integrated into Merrill Lynch’s internal applications and client facing portals. This expanded relationship with one of the largest wealth managers in the world highlights the continued growth of FactSet’s Wealth Management business and reaffirms FactSet’s strategy of delivering enterprise solutions across the entire wealth management workflow. “Wealth management is a growing part of our business and currently represents approximately 10 percent of our Annual Subscription Value,” said Phil Snow, Chief Executive Officer, FactSet. “Being selected by Merrill Lynch demonstrates how quickly we have progressed in this space and is a testament to the strength of our overall offering. We are thrilled to be expanding our relationship with Bank of America and look forward to supporting the ongoing success of their global wealth management team.”

Saturday, Aug. 4, 2018

Berkshire Hathaway-BRKB reported the company’s net worth during the first half of 2018 rose 3% since year end with book value equal to $217,677 per Class A share as of 6/30/18.

During the second quarter, net earnings nearly tripled to $12 billion. New accounting rules in 2018 require Berkshire to book the net changes in unrealized appreciation/depreciation in net income instead of comprehensive income which resulted in a $5.1 billion gain in net earnings in the second quarter from investments and derivatives.

Berkshire’s five major investment holdings represent 70% of total equities. On its way to becoming the first U.S. stock to hit the trillion dollar market capitalization milestone,  Apple contributed to the substantial investment gain in the quarter as the position was valued at $47.2 billion as of 6-30-18, a $19 billion increase since year end through the additional purchase of  shares  and market appreciation. Wells Fargo’s stock dropped 10% since year end, or $2.9 billion, to $26.4 billion amid continued negative headlines on business practices.  During the first half, Bank of America and Coke each dropped 5%, or about $1 billion each in value, to $19.7 billion and $17.5 billion, respectively. America Express dipped $200,000 or 1% to $14.9 billion since year end. 

In the second quarter of 2018, Berkshire’s operating revenues rose 8% to $62.2 billion with all operating business groups posting growth, except McLane which dipped slightly.  Operating earnings rose a robust 67% during the quarter to $6.9 billion, aided by Berkshire’s tax rate falling from 35% to 21% during the period.

Berkshire’s insurance underwriting operations generated $943 million in earnings during the second quarter compared to a $22 million loss in the prior year period. The insurance operations reflected significantly improved results from GEICO and Berkshire Hathaway Reinsurance and reductions of liabilities for prior years’ property/casualty loss events.  Insurance investment income was 18% higher at $1.1 billion during the quarter, reflecting higher interest rates on short-term investments and a lower tax rate. The float of the insurance operations approximated $116 billion as of 6/30/18, an increase of $2 billion since year end.  The average cost of float was negative during the first half as the underwriting operations generated pre-tax earnings of $1.7 billion.

Burlington Northern Santa Fe’s (BNSF) revenues rose 12% during the second quarter to $5.9 billion with net earnings chugging 37% higher to $1.3 billion, reflecting the favorable change in the tax rate. Pre-tax earnings rose 8% to $1.7 billion.  During the first half, BNSF generated a 3.6% comparative increase in average revenue per car/unit and a 5.2% increase in volume thanks to general economic growth and tight truck capacity leading to conversion from highway to rail.

Berkshire Hathaway Energy reported revenues increased 10% to $5.1 billion during the second quarter with all groups, except NV Energy, contributing to the growth.  Net earnings increased 14% during the quarter to $581 million primarily due to tax credits. On a pre-tax basis, earnings declined 10% to $586 million due to lower utility margins reflecting increased depreciation, maintenance and other operating expenses.   

Berkshire’s Manufacturing businesses reported an 9% increase in revenue growth in the second quarter to $13.9 billion with operating earnings up 10% to $1.9 billion. Revenue and earnings growth was broad based, led by Industrial Products with double-digit growth. Iscar’s revenues increased 21% during the quarter with pre-tax earnings also increasing significantly due to increased unit sales, increased manufacturing efficiencies, business acquisitions and favorable foreign exchange. Building Products and Consumer Products also contributed to both earnings and revenue growth during the period.

Service and Retailing revenues rose 2% during the quarter to $19.5 billion with pre-tax earnings up 22% to $764 million. Service revenues rose 12% to $3.1 billion with operating earnings up 33% to $467 million. TTI’s revenues increased due to an industry-wide increase in demand for electronic components in many geographic markets around the world, acquisitions and favorable foreign currency changes. FlightSafety and Charter Brokerage generated revenue increases and NetJets also contributed to the earnings growth in this unit.  Retailing revenues rose 5% during the quarter to $3.9 billion with operating earnings up 13% to $230 million, reflecting higher earnings from Berkshire Hathaway Automotive (BHA) and Louis which saw revenues roar 20% higher.  McLane’s revenues dipped 1% during the quarter to $12.4 billion due to a decline in foodservice sales due to a net loss of customers. McLane operating earnings declined 3% to $67 million due to significant pricing pressures in an increasingly competitive grocery business environment.  The grocery and foodservices business will likely continue to be subject to intense competition over the remainder of 2018.

Finance and Financial Products revenues rose 17% during the quarter to $2.4 billion with net income jumping 33% to $429 million, reflecting the favorable tax change. Pre-tax earnings increased 15% to $565 million.  The revenue and earnings increase was led by Clayton Homes, reflecting higher unit sales, higher average prices and higher financial services revenues.  

Berkshire’s balance sheet continues to reflect significant liquidity and a strong capital base of $358.1 billion as of 6/30/18. Excluding railroad, energy and finance investments, Berkshire ended the quarter with $313.2 billion in investments allocated approximately 55.6% to equities ($174.0 billion), 5.9% to fixed-income investments ($18.5 billion), 5.6% to Kraft Heinz ($17.5 billion), and 32.9% in cash and equivalents ($103.2 billion).  

Berkshire’s financial strength allows Buffett to make significant investments and acquisitions. Apple was the largest stock investment in the first half of the year. Berkshire expects the previously announced $2.5 billion acquisition of Medical Liability Mutual Insurance Company to close in the third quarter of 2018.

Free cash flow declined 55% during the first half to $9.8 billion due to the lapping of the big boost to float from the AIG deal in the prior year period.  During the first half, capital expenditures increased 23% and approximated $6.3 billion, including $4.1 billion for BNSF and Berkshire Hathaway Energy.  Berkshire Hathaway forecasts aggregate capital expenditures of about $10 billion in 2018 for these two businesses. During the first half, Berkshire sold and redeemed a net $40.6 billion in Treasury Bills and fixed-income investments and purchased a net $11.8 billion of equity securities, reflecting in part the purchase of Apple and the sale of all IBM shares. There were no share repurchases of Berkshire Hathaway stock.  Berkshire revised its buyback policy which now permits Berkshire to repurchase shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett and Charlie Munger.  

Berkshire Hathaway’s stock appears attractively valued, currently trading at $304,671 per A share and $200.24 per B share. Based on current business fundamentals, we expect Berkshire’s A shares to trade between $280,000-$356,000 per share and the B shares to trade between $187-$237 per share.  Buy.

 

Friday, Aug. 3, 2018

Biogen’s-BIIB Board of Directors authorized a program to repurchase up to $3.5 billion of the company’s common stock The 2018 Share Repurchase Program does not have an expiration date. All share repurchases under the 2018 Share Repurchase Program will be retired.

Thursday, Aug. 2, 2018

Apple-AAPL became the first $1 trillion U.S. company by stock market capitalization. Started in the garage of co-founder Steve Jobs in 1976, Apple’s stock has soared more than 50,000 percent since its 1980 initial public offering compared to the S&P 500's approximately 2,000-percent increase during the same period. In 2006, the year before the iPhone launch, Apple generated less than $20 billion in sales and net profit just short of $2 billion. By last year, Apple’s sales had grown more than 11-fold to $229 billion - the fourth highest in the S&P 500 - and net income had grown at twice that rate to $48.4 billion, making Apple the most profitable U.S. corporation.

Cisco-CSCO announced its intent to acquire privately-held Duo Security, headquartered in Ann Arbor, Mich. Duo Security is the leading provider of unified access security and multi-factor authentication delivered through the cloud. Duo Security’s solution verifies the identity of users and the health of their devices before granting them access to applications – helping prevent cybersecurity breaches. Integration of Cisco’s network, device and cloud security platforms with Duo Security’s zero-trust authentication and access products will enable Cisco customers to easily and securely connect users to any application on any networked device. Under the terms of the agreement, Cisco will pay $2.35 billion in cash and assumed equity awards for Duo Security’s outstanding shares, warrants and equity incentives on a fully-diluted basis. The acquisition is expected to close during the first quarter of Cisco’s fiscal year 2019.

Cognizant Technology Solutions-CTSH reported second quarter revenues rose 9% to $4.0 billion with net income and EPS each down 3% to $456 million and $.78, respectively. The decrease was primarily due to non-operating foreign exchange losses and the initial funding of the Cognizant U.S. foundation. Adjusted Non-GAAP EPS increased 28% to $1.19 during the quarter with the operating margin expansion reflecting strong operational execution. Three of the four business segments posted double-digit revenue increases led by 16% growth in the Communications/Media and Technology segment. On a geographic basis, all regions generated growth led by Europe with 19% growth during the quarter. Cognizant is accelerating its shift to digital solutions and services which now account for 30% of total revenues and experienced better than 20% growth in the quarter with strong growth in artificial intelligence, analytics and cloud solutions. Free cash flow increased 25% during the first half of the year to $841 million with the company paying $236 million in dividends and repurchasing $949 million of its shares during the period. During the third quarter, the company expects to complete its $3.4 billion share repurchase program announced at the beginning of the year. Cognizant maintains a healthy balance sheet with more than $4.3 billion cash and minimal long-term debt.  For the full 2018 year, Cognizant expects revenues to be in the range $16.05 to $16.3 billion and raised their non-GAAP EPS outlook to be at least $4.50.


Wednesday, Aug. 1, 2018

Express Scripts-ESRX reported second quarter revenues rose 1% to $25.6 billion with net income up 9% to $877.3 million and EPS up 13% to $1.55. Healthy business fundamentals allowed the company to deliver strong core financial results while at the same time make investments to help improve patient, client and provider experiences. Free cash flow in the first half of the year grew 4% to $2.1 billion. The company has suspended its share repurchase program pending its merger agreement with Cigna which is expected to be completed by the end of the year although certain large Cigna investors are opposing the merger. Management’s outlook is for 2018 revenues to approximate $99 billion to $102 billion with adjusted EPS expected in the range of $9.00-$9.14 and cash flow from operations expected in the range of $5.8 billion to $6.2 billion. Express Scripts is having a strong selling season across both commercial and health plans and now expects their core business adjusted claims to increase by 2%-3% in 2019. The 2019 expected client retention rate was raised to 97.5%-98.5% as clients benefit from better health outcomes and savings and choose to remain clients.

Automatic Data Processing-ADP reported fourth quarter revenues increased 8% to $3.3 billion with net income down 59% to $108.7 million and EPS down 58% to $.25. The decline in earnings was due primarily to the impact of pre-tax charges related to the company’s voluntary early retirement program and other cost-saving initiatives. On an adjusted basis, EPS increased 39% during the quarter as operating margin increased about 300 basis points thanks to improved operational efficiencies. For the full year, revenues increased 8% to $13.3 billion with net income down 6% to $1.6 billion and EPS down 5% to $3.66. On an adjusted basis, EPS increased 18% to $4.35 benefiting from fewer shares outstanding and a lower tax rate as a result of tax reform. Return on shareholders’ equity expanded to 47% for the year. Worldwide new business bookings increased 18% in the fourth quarter and 8% for the full year. Employer Services client retention increased 50 basis points to 90.4% for the year. Free cash flow increased 22% during the year to $2.3 billion with the company paying dividends of $1.1 billion and repurchasing $989 million of its shares. ADP anticipates full year 2019 revenue growth of 5% to 7% with the operating margin expected to increase 100 to 125 basis points resulting in adjusted EPS growth of 19% to 21%. Client retention is expected to increase an additional 25 to 50 basis points in fiscal 2019.

Private sector employment increased by 219,000 jobs from June to July according to the July ADP National Employment Report®. "The labor market is on a roll with no signs of a slowdown in sight," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute-ADP. "Nearly every industry posted strong gains and small business hiring picked up." Mark Zandi, chief economist of Moody's Analytics, said, "The job market is booming, impacted by the deficit-financed tax cuts and increases in government spending. Tariffs have yet to materially impact jobs, but the multinational companies shed jobs last month, signaling the threat." 

Seritage Growth Properties, a national owner of 249 properties totaling over 39 million square feet of gross leasable area, announced that the company has entered into a $2.0 billion term loan facility with Berkshire Hathaway Life Insurance Company of Nebraska-BRKB. The $2.0 billion Term Loan Facility, which matures on July 31, 2023, provides for an initial funding of $1.6 billion at closing and includes a committed $400 million incremental funding facility. Funded amounts under the Term Loan Facility bear interest at a fixed annual rate of 7.00%, while amounts available under Incremental Funding Facility will be subject to a 1.00% annual fee until drawn.


Tuesday, July 31,2018

Apple-AAPL reported record third quarter results with sales increasing 17% to $53.3 billion and net income jumping 32% to $11.5 billion with EPS up 40% to $2.34. This was the strongest growth in 11 quarters, the seventh quarter of accelerating growth and the fourth quarter of double-digit growth. These excellent results were driven by continued strong sales of iPhone, Services and Wearables. iPhone unit sales increased 1% to 41.3 million with revenue up 20% to $29.9 billion as the average selling price of the iPhone increased 19% to $724. The iPhone continues to gain market share in many markets, including the U.S. and China, with the iPhone X the most popular version, scoring extremely high customer satisfaction ratings. Services revenues increased 31% to $9.5 billion during the third quarter with the company on track to double its 2016 Services revenues by 2020. Paid subscriptions to Apple Services exceeded 300 million, a 60% increase over last year. The App Store has turned 10 years old and exceeded management’s “wildest expectations.” App developers have earned more than $100 billion over the last decade with tens of millions of jobs created during this period. Both Apple Music and Apple Cloud services increased 50% during the quarter. Apple Pay had greater than one billion transactions with growth accelerating as Ebay, CVS and 7-11 stores are all getting ready to accept Apple Pay. Apple’s Wearables (the Apple Watch, Beat and AirPods) had revenue growth of 60% during the quarter and generated greater than $10 billion in revenues in the last four quarters. Apple’s growth was broad-based geographically with all reportable segments generating double-digit growth with the exception of Japan. International sales accounted for 60% of the quarter’s revenues. Year-to-date, free cash flow increased 20% to $47.6 billion with the company paying $10.2 billion in dividends and repurchasing $53.6 billion of its own shares including 112 million shares repurchased in the third quarter for $20 billion at an average cost of $178.57 per share. Apple ended the quarter with $243.7 billion of cash and investments or $129.1 billion of cash net of long-term debt. Management’s outlook for the fourth quarter is for revenues in the range of $60 billion to $62 billion, representing 16%-19% underlying growth. Gross margin is expected between 38%-38.5% with operating expenses between $7.95 billion and $8.05 billion, other income of $300 million and a tax rate of about 15%. Tim Cook, CEO of Apple, is “excited about the products and services in the pipeline, the limitless opportunities for augmented reality and the company’s significantly expanding services.”

Friday, July 26, 2018

AbbVie-ABBV reported second quarter revenues rose a healthy 19% to $8.3 billion with net income up 4% to $2.0 billion and EPS up 6% to $1.26. Excluding specified items such as intangible amortization, adjusted EPS increased 41% to $2.00.  Second quarter global HUMIRA sales of $5.2 billion increased 10% with U.S. HUMIRA sales up 10% thanks to strong prescription growth and international sales up 4%.  Global IMBRUVICA revenues rose 36% to $850 million due to very strong patient uptake. Second quarter HCV net revenues were $973 million and exceeded management’s expectations. AbbVie is making excellent progress with its R&D pipeline including significant advances across its Hematologic Oncology Portfolio while receiving recent FDA approval for ORILISSA to treat endometriosis in its Women’s Health unit. By 2020, AbbVie expects to have 20 new products which will diversify its revenues and help offset biosimilar competition for HUMIRA. At least seven of these new products are expected to be multi-billion assets. AbbVie’s adjusted operating margin expanded 150 basis points during the quarter to 44% with management still confident that operating margins will continue to expand to 50% by 2020. AbbVie is committed to returning significant cash to shareholders through dividends and the recently completed $7.5 billion share repurchase with $2.5 billion remaining authorized for future share repurchases. Given the strong first half results, AbbVie raised its EPS outlook for the third time this year to GAAP EPS expected in the range of $6.47-$6.57 with adjusted  EPS expected in the range of $7.76-$7.86, representing 39.5% growth at the midpoint.

Thursday, July 25, 2018

Starbucks-SBUX reported third quarter revenues rose 11% to $6.3 billion with net income perking up 23% to $852 million and EPS up 30% to $.61 primarily due to a lower tax rate thanks to tax reform. Global comparable store sales increased 1%, driven by a 3% increase in average ticket. Americas and U.S. comparable store sales increased1%, China Asia Pacific comp store sales increased 1% and China comp store sales decreased 2% due to competitive issues in delivery services. Starbucks plans to begin delivery service in Shanghai and Beijing and open 600 net new stores annually over the next five years in China with a goal to double the market’s store count from the end of fiscal 2017 to 6,000 stores across 230 cities by 2022. China still remains a huge growth opportunity for the company. The operating margin declined 190 basis points during the quarter to 16.5%, impacted by restructuring and impairment charges.  Active Starbucks Rewards membership in the U.S. increased 14% to 15.1 million. The company continued to gain market share in virtually every market it serves. In May, Starbucks announced it will form a global coffee alliance with Nestle to accelerate and grow the global reach of Starbucks brands in consumer packaged goods and foodservice. Nestle will pay Starbucks $7.15 billion when the deal closes in the fourth quarter. During the third quarter, Starbucks repurchased 17.1 million of its shares with 107 million shares remaining authorized for future share repurchases. Starbucks has committed to returning $25 billion to shareholders through dividends and share repurchases by 2020 with $5 billion already returned in the last three quarters. Management updated its 2018 outlook with 2,300 net new stores expected to be opened globally for the year. Global comparable store sales growth is expected just below the 3%-5% targeted range. Management continues to expect revenue growth in the high single digits with GAAP EPS in the range of $3.26-$3.28.

Tractor Supply-TSCO reported sales increased 10% to $2.2 billion with net income plowing up a 29% gain to $207.3 million and EPS roaring 35% higher to $1.69 thanks to the benefits of tax reform and a lower share count. Broad-based growth was seen across all merchandise categories and geographies during the quarter with robust growth across spring and summer seasonal categories and strong growth in pet food, livestock feed and birdfeed. The 5.6% comparable store sales increase was driven by a 3.7% increase in average ticket, the best increase seen in six years, and a 1.8% increase in transaction count. The higher average ticket was due to the sale of big-ticket items like zero-turn lawn mowers, log splitters and generators. This was the fourth consecutive quarter of comparable store sales growth greater than 3%. The macroeconomic environment is healthy with low unemployment and high consumer confidence which benefits sales. During the quarter, the company opened 25 new Tractor Supply stores and two net new PetSense stores with plans to open 80 new Tractor Supply stores and 20 new PetSense stores for the full year 2018. Tractor Supply enjoyed double-digit growth in its e-commerce sales with 70% of e-commerce customers participating in the “Buy Online and Pickup in Stores” program which is very cost effective. The company is seeing no material impact from tariffs at this time but is preparing for alternative suppliers and increased pricing, if necessary. Free cash flow increased 20% to $157.3 million thanks to good inventory management. The company increased its dividend 14.8% during the quarter, marking the 8th consecutive year of dividend increases with dividends paid totaling $71.4 million during the first half and share repurchases topping $252 million. The company expects to spend $260 million to $300 million on capital expenditures in 2018. Based on the solid first half results, management raised their guidance for the full year with sales expected in the range of $7.77 billion to $7.8 billion with comparable store sales growth of 3% to 3.5% for the full year and EPS in the range of $4.10-$4.20.

MasterCard-MA reported record second quarter revenues rose 20% to $3.7 billion with net income charging 33% higher to $1.6 billion and EPS up 36% to $1.50. Second quarter gross dollar volume was up 14%, on a local currency basis, to $1.5 trillion with purchase volume up 16% and cross-border volume up 19%. Growth was broad-based across all geographic regions led by Europe. Overall, MasterCard is seeing solid global growth although management is watching reduced central bank stimulus and rising trade tensions. In the U.S., economic growth is positive thanks to low unemployment and rising consumer sentiment which is helping retail sales. Europe is seeing stable growth, but Brexit is impacting confidence in the U.K. In Latin America, there is policy uncertainty around the recent Mexican elections and NAFTA discussions. Brazil is also facing election uncertainty. In Asia, rising oil prices and interest rates along with trade tensions are impacting growth. Overall, the global economy remains healthy which is supporting MasterCard’s double-digit volume and transaction growth with strong 24% e-commerce growth during the quarter. Free cash flow increased 21% to $2.4 billion during the first half of the year with the company paying $525 million in dividends and repurchasing $2.9 billion of its own shares, including 8.3 million shares at a cost of $1.5 billion or $180.72 per share during the second quarter. MasterCard has $2.1 billion remaining authorized for future share repurchases. Given the solid first half performance and a positive global GDP outlook, MasterCard believes revenues in 2018 will grow at a high-teen rate with operating expenses growing at a mid-teen rate leading to further profit margin expansion.

Wednesday, July 25, 2018

Westwood Holdings-WHG reported second quarter revenues declined 2% to $32.8 million with net income relatively flat at $8 million and EPS up 1% to $.94. Assets under management declined 4% to $21.6 billion due to net outflows of about $900 million and the sale of the Omaha-based private wealth business.  Westwood’s SmallCap strategy was selected to participate in the Morningstar U.S. Equity fund which will be marketed to investment advisers and 401(k) plans. Westwood’s LargeCap Value strategy beat its primary benchmark for the sixth consecutive quarter and has remained a fixture in the top decile peer ranking since its inception. The company introduced two new private equity offerings which have been well received.  At quarter end, the company had $108 million in cash and investments and no long-term debt on its strong balance sheet. The company’s dividend currently yields 4.5%.

Polaris-PII reported second quarter sales increased 10% to $1.5 billion with net income increasing 49% to $92.5 million and EPS increasing 47% to $1.43. Operating income increased 24% on the heels of cost controls and the tax rate declined to 18% from 33% thanks to U.S. tax reform. By segment, Off-Road Vehicles/Snowmobile segment sales increased 17% to $991 million, Motorcycles declined 13% to $171 million on weak heavyweight motorcycle sales, though mid-size motorcycle sales remained strong. Global Adjacent Markets sales increased 17% to $113 million, driven by strong government/defense sales, while Aftermarket sales increased 1% to $227 million and International sales increased 7% to $204 million, boosted by strong sales in the EMEA region. Core Parts, Garment & Accessories sales increased 11% to $215 million on strong apparel sales. During the first half of the year, Polaris generated $61 million in free cash flow, down from $181 million last year, due to higher factory inventory related to the higher sales and the model year changeover. The company returned $268 million to shareholders during the first half of the year through share repurchases of $192 million and dividends of $76 million. As of June 30, Polaris held $181.8 million in cash and $1.1 billion in long-term debt taken on to finance acquisitions. Given the uncertainty surrounding the global trade war and significantly higher cost pressures, Polaris narrowed 2018 earnings guidance. Sales are expected to increase 11% to 12% thanks to the recent acquisition of Boat Holdings, pricing actions and improved demand. However, gross profit margins were lowered 60 to 80 basis points as the company now expects $40 million in additional costs related to tariffs and logistics. Adjusted EPS, which excludes $0.28 from amortization and $0.10 of expenses from the Boat Holdings acquisition, are expected in the $6.48 to $6.58 range, up 27% to 29% from 2017.

Facebook-FB reported second quarter revenues rose 42% to $13.2 billion with net income up 31% to $5.1 billion and EPS up 32% to $1.74. Daily active users increased 11% to 1.47 billion with monthly active users also up 11% to 2.23 billion. Daily users declined 1 million in Europe to 279 million users due to new privacy rules with daily users relatively flat in the U.S. and Canada at 185 million users.  Mobile advertising represented approximately 91% of advertising revenue for the second quarter. Expenses rose 50% during the quarter as the company invested heavily to improve safety, security and privacy on its platforms. Headcount was 30,275 as of 6/30/18, an increase of 47% year over year. Capital expenditures for the second quarter were $3.5 billion as the company continues to invest in data centers, servers and office facilities with capital expenditures expected to approach $15 billion for the full year. Free cash flow in the first half of the year increased 1% to $7.9 billion with the company ending the quarter with more than $42 billion in cash and investments and no long-term debt. During the first half of the year, the company repurchased $5.1 billion of its own shares. Management provided a disappointing outlook for the second half of the year with sales growth expected to decelerate in the high single-digit range due to foreign exchange and data privacy headwinds as well as shifts to slower growth products. Expenses for the full year 2018 are expected to increase 50% to 60% as they spend on safety, marketing and content acquisition. In 2019, expense growth is also expect to exceed revenue growth with operating margins expect to trend lower over the next several years to the mid-30% range from 44% in the past quarter.

F5 Networks-FFIV reported third fiscal quarter revenue of $542.2 million, up 4.7%, net income up 26% to $123 million and EPS up 31% to $1.99 on fewer share outstanding. Operating income increased 9% to $154 million and the tax rate fell from 31% during last year’s third fiscal quarter to 20.4% this quarter. After many quarterly declines, Product revenue grew 1.6% to $239 million, lifted by security and software sales, public cloud and new multi-cloud application solutions. Service revenue increased 7% to $303 million. Year-to-date, F5 Networks generated $521 million in free cash flow, bringing the total cash and investments on the company’s weather-resistant balance sheet to more than $1.4 billion as of June 30, 2018. Year-to-date, F5 Networks repurchased $450 million of its shares. Looking ahead to the fourth fiscal quarter, management’s goal is to generate sales of between $555 million to $565 million, up 4% year-over-year at the midpoint. Fourth quarter EPS are targeted in the $1.77 to $1.80 range, down 17% at the midpoint, squeezed by an expected $0.39 charge as management restructures to better position the company to compete in growth markets.

T. Rowe Price-TROW reported second quarter revenues rose 13% to $1.3 billion with net income increasing 20% to $448.9 million and EPS up 18% to $1.77. The bottom line benefited from tax reform as the second quarter tax rate fell from 37.1% last year to 26.9% this year. Assets under management (AUM) ended the quarter at $1.044 trillion, representing a 15.5% increase over the prior year period. The firm’s net cash inflows were $7.6 billion in the second quarter with net market appreciation and income of $22.9 billion recorded in the quarter. T. Rowe Price remains debt-free with ample liquidity including $4.1 billion in cash and investments in T. Rowe Price products. During the first half of 2018, the company spent $450.3 million to repurchase 4.2 million shares, or 1.7% of its common shares outstanding, at an average price of $106.48. Capital expenditures for the full year are expected to be about $189 million.

 

Eisai Co., Ltd. and Biogen-BIIB announced detailed results from a Phase II clinical study (Study 202) of the investigational oral BACE (beta amyloid cleaving enzyme) inhibitor elenbecestat at the Alzheimer’s Association International Conference.  The study was conducted in the United States in patients with mild cognitive impairment (MCI) due to Alzheimer’s disease, or mild to moderate dementia due to Alzheimer’s disease (AD). The primary objective of the study was to assess the safety and tolerability of elenbecestat after 18 months of treatment. The incidence of treatment-emergent adverse events was similar between elenbecestat and placebo, and no dose-dependent response was observed for adverse events.  A statistically significant reduction of brain amyloid load as compared to placebo was observed with the results suggesting that elenbecestat could slow decline in cognitive function of patients with MCI due to Alzheimer’s disease, or mild to moderate dementia due to Alzheimer’s disease.

UPS-UPS reported second quarter revenues rose 10% to $17.5 billion with growth across all segments thanks to robust demand. Net income was up 7% to $1.5 billion and EPS rose 8% to $1.71. Second quarter 2018 results included a pre-tax charge of $263 million, or $.23 per share after-tax, due to costs related to the Voluntary Retirement Plan. On an adjusted basis excluding the charge, EPS increased 23% to $1.94. The average yield increased 4.6% led by the International and U.S. Deferred Air products. The International segment delivered its 14th consecutive quarter of constant currency double-digit operating growth with this segment enjoying its highest second quarter operating profit ever, led by Europe. The Supply Chain and Freight segment delivered another quarter of double-digit growth in revenue and adjusted operating profit with improved efficiencies producing the segment’s best profit growth in its history. Year-to-date cash flow from operations was $7.2 billion with free cash flow surging to $4.4 billion, driven by transformation initiatives and improved working capital. Year-to-date, the company paid $1.6 billion in dividends, an increase of 10%, and repurchased $511 million of it own shares. The company raised its 2018 free cash flow target to $5 billion. Management remains confident in delivering adjusted EPS in the range of $7.03 to $7.37, which represents 17%-23% growth. Capital expenditures are expected in the range of $6.5 billion to $7.0 billion in 2018. Despite trade concerns, the global economy remains healthy with global GDP expected to be greater than 3% in 2018. In the U.S., GDP growth is being aided by tax reform and reduced regulations which is boosting consumer confidence and retail sales while industrial demand remains solid. Europe is benefiting from positive business fundamentals and central bank stimulation despite concerns over Brexit. Asian growth is led by China despite increasing trade tensions. While UPS is closely monitoring the trade situation, the business is seeing minimal impact from tariffs at this time and is well positioned to help its customers navigate changing trade dynamics.

Tuesday, July 24, 2018

Biogen-BIIB reported second quarter revenues rose 9% to $3.4 billion with net income up .5% to $867 million and EPS up 2.7% to $4.18. Core Multiple sclerosis (MS) revenues declined 6% to $2.2 billion during the quarter due to unanticipated inventory drawdowns. Revenue growth during the quarter was driven primarily by SPINRAZA, which more than doubled over the prior year to $423 million. SPINRAZA patients increased 27% since the first quarter to 4,790, and management believes there is a significant opportunity for worldwide growth from this product as Biogen positions itself for long-term leadership in spinal muscular atrophy. Biosimilars revenue increased nearly 40% to $27 million. Today Biogen announced it has acquired ALG-801 (Phase 1a) and ALG-802 (preclinical) from AliveGen, Inc. ALG-801 (now known as BIIB110) and ALG-802 represent novel ways of targeting the myostatin pathway, which is one of the most thoroughly studied approaches for muscle enhancement. In June 2018 Biogen announced that it entered into an exclusive option agreement with TMS to acquire TMS-007. TMS-007 is believed to restore blood flow following acute stroke, with an extended treatment window versus current standard of care.  Biogen generated $1.1 billion in cash flow from operations in the quarter, ending the quarter with $4.4 billion in cash and investments and $5.9 billion in long-term debt. During the quarter, the company repurchased 9.6 million of its shares for $2.75 billion completing the accelerated share repurchase management announced last quarter. Management increased full year revenue guidance to $13.0 billion to $13.2 billion from the prior guidance of $12.7 billion to $13.0 billion. EPS guidance was reduced from a range of $22.20 to $23.20 to a range of $21.80 to $22.40.

Canadian National Railway-CNI reported second quarter revenue rose 9% to C$3.6 billion with net income up 27% to C$1.3 billion with EPS up 30% to C$1.77. Adjusted net income and EPS increased 11% and 13%, respectively. The increase in revenues was mainly attributable to increased volumes of Canadian grain, coal, overseas intermodal traffic, frac sand, refined petroleum products and U.S. grain aided by freight rate increases and higher fuel surcharge rates with same store pricing up a solid 4% during the quarter. Revenue ton-miles increased by 7% and carloadings increased by 6% to 1,506 thousand during the quarter. The railroad’s operating ratio improved by 9.6 points over the first quarter 2018 to 58.2% following a swift network recovery after a challenging winter. Free cash flow increased 20% in the second quarter to C$974 million with first half free cash flow down 22% to $1.3 billion due to higher capital expenditures and higher taxes. Canadian National Railway remains on track to complete its $2 billion share buyback authorization with $1.3 billion of its own shares repurchased since last October. Following the strong second quarter performance and with a robust demand environment and improving capacity, management aims to deliver adjusted 2018 EPS in the range of C$5.30-C$5.45, an increase from previous guidance of C$5.10-C$5.25. The company also increased their outlook for capital expenditures by C$100 million to C$3.5 billion with additional capital investment primarily going towards the purchase of new rail cars. Tariffs so far have had a minimal impact on the business with management optimistic that the strong demand environment will continue into 2019.

Stryker-SYK reported a healthy 10% increase in second quarter sales to $3.3 billion with net earnings and EPS increasing 16% to $452 million and $1.19, respectively. Organic net sales increased nearly 8% and acquisitions contributed 2% to second quarter growth. By business segment, Orthopaedics net sales of $1.2 billion increased 8% in the quarter, MedSurg net sales of $1.5 billion increased 10% while Neurotechnology and Spine net sales of $600 million increased 20%, driven by the Entellus acquisition. During the quarter, Stryker installed 39 new MAKO robots including 29 in the U.S. with 40% of the total sold to competitive accounts where Stryker expects to pick up market share. With 460 MAKO robots sold since launch compared with thousands of potential robot-assisted orthopedic surgery locations in the U.S., there is plenty of legroom for continued MAKO sales growth. More than 160 surgeons were trained on the MAKO robot during the quarter, bringing the total number of surgeons trained to 1,200. Year-to-date, Stryker generated $668 million in free cash flow, up 26% from the same period last year, with the company returning $652 million to shareholders through share buybacks of $300 million and dividends of $352 million. Stryker’s balance sheet remains strong with $1.9 billion in cash and $5.9 billion of long-term debt as of June 30th. Seventy-six percent of Stryker’s cash is held overseas. Based on Stryker’s year-to-date performance, the company now expects 2018 organic net sales growth to be in the range of 7% to 7.5%, up from 6.5% to 7% previously guided, with adjusted EPS in the range of $7.22 to $7.27, up from $7.18 to $7.25 previously guided.

3M-MMM posted strong second quarter results with broad-based organic growth, a double-digit increase in EPS, record sales and rising margins. Total second quarter sales increased 7% to $8.4 billion, an all-time high, with earnings up 17% to $1.9 billion and EPS up 19% to $3.07 on fewer shares outstanding. Second quarter EPS includes a $0.48 net gain from the June 2018 divestiture of 3M’s communication markets division which generated about $400 million in sales last year and was sold for $870 million in cash. By segment, Industrial sales increased 7% to $3.1 billion generating 23% operating margins, Safety & Graphics sales increased 16% to $1.8 billion generating 26.4% operating margins, Health Care sales increased 4% to $1.5 billion generating 28.6% operating margins, Electronics & Energy sales increased 5% to $1.3 billion generating 28% operating margins and Consumer sales increased 4% to $1.2 billion generating 21.4% operating margins. On a geographic basis, total sales grew 9.5% in EMEA (Europe, Middle East and Africa), 7.9% in Asia Pacific, 7.1% in the U.S. and 3.1% in Latin America/Canada. During the quarter, 3M generated $1.5 billion in free cash flow, up 14.5% year-over-year, with the company returning $2.4 billion to shareholders through share repurchases of $1.6 billion and dividends of $802 million. When asked during the quarterly conference call about the impact of tariffs on 3M’s business, management said, to date, the steel and aluminum tariffs have had a negligible impact on its business estimated at $10 million, or a penny a share. While 3M is closely monitoring the proposed Section 301 List 2 and List 3 items, given 3M’s ability to make changes to its sources and suppliers along with its ability to raise prices, management expects a minimal impact from tariffs. 3M updated its 2018 EPS expectations to reflect the full-year impact from the communication markets business divestiture and related actions. 3M now expects EPS in the range of $9.08 to $9.38 per share versus $8.68 to $9.03 previously. Excluding the full-year impacts from the communication markets business divestiture gain and related actions, a first-quarter legal settlement, and the Tax Cuts and Jobs Act-related expense, 3M now expects its adjusted 2018 EPS to be in the range of $10.20 to $10.45 per share versus prior expectation of $10.20 to $10.55. The update to the range reflects the impact of the divested income associated with the communication markets business which was not included in prior guidance and an increase in net interest expense. Free cash flow for 2018 is expected in the $4.9 billion to $5.7 billion range. 3M now expects its share repurchases to be in the range of $4 billion to $5 billion from $3 billion to $5 billion previously estimated. 

United Technologies-UTX reported second quarter sales rose 9% to $16.7 billion with net income and EPS each up 42% to $2.0 billion and $2.56, respectively. Excluding a $1.5 billion one-time gain on the sale of Taylor Company and other significant items, adjusted EPS of $1.97 was up 6% for the quarter.  Organic sales growth momentum continued with organic sales up 6%, representing the fourth consecutive quarter of organic sales growth of 5% or better thanks to investments in innovation across the company’s portfolio with construction and consumer sentiment remaining strong. During the quarter, commercial aftermarket sales were up 12% at both Pratt & Whitney and UTC Aerospace Systems. Otis new equipment orders were up 10% organically and equipment orders at UTC Climate, Controls and Security increased 8% organically. During the first half of the year, free cash flow declined 22% to $1.8 billion with the company paying $1 billion in dividends and repurchasing $1.4 billion of its shares during the same time period. Free cash flow for the full year is expected in the range of $4.5-$5.0 billion. Based on the solid year-to-date performance, management raised the low end of the 2018 sales outlook and now expects $63.5 to $64.5 billion of sales on improved organic growth of 5%-6%. The adjusted EPS outlook was also raised to a range of $7.10 to $7.25, which excludes $.10-$.15 per share of projected dilution from the pending Rockwell Collins acquisition which is expected to close in the third quarter. The impact of tariffs this year is expected to be relatively modest with the expected $.05 per share negative impact included in the guidance. Management, along with the board of directors, is conducting a strategic review of the operations as they evaluate the best way to maximize shareholder value with all options on the table.

AbbVie-ABBV announced that the U.S. Food and Drug Administration (FDA) approved ORILISSA™ (elagolix), the first and only oral gonadotropin-releasing hormone (GnRH) antagonist specifically developed for women with moderate to severe endometriosis pain. The FDA approved ORILISSA under priority review. ORILISSA represents the first FDA-approved oral treatment for the management of moderate to severe pain associated with endometriosis in over a decade and is expected to be available in U.S. retail pharmacies in early August 2018. "ORILISSA represents a significant advancement for women with endometriosis and physicians who need more options for the medical management of this disease," said Michael Severino, M.D., Executive Vice President, Research and Development and Chief Scientific Officer, AbbVie. "The approval of ORILISSA demonstrates AbbVie's continued commitment to address serious diseases and unmet needs." Endometriosis is one of the most common gynecologic disorders in the U.S. It affects an estimated one in 10 women of reproductive age and can be associated with pain symptoms that can be debilitating. Women can suffer for up to six to 10 years and visit multiple physicians before receiving a proper diagnosis.


Monday, July 23, 2018

Alphabet-GOOGL reported second quarter revenue rose 26% to $32.7 billion with net income and EPS each down 9% to $3.2 billion and $4.54, respectively. Excluding the $5 billion fine imposed by the European Commission which the company plans to appeal, net income and EPS each would have risen 32% to $8.2 billion and $11.75, respectively. During the quarter, Google advertising revenues rose 24% to $28.1 billion with mobile search leading the way. All geographic regions generated strong growth led by 36% growth from the Asia Pacific and China region. Google other revenues rose 37% to $4.4 billion, which included strong growth in Cloud, Play and Hardware. Other Bets revenue increased 49% to $147 million driven by Verily and Fiber. Waymo, the company’s driverless vehicle unit, has driven 8 million autonomous miles and is expected to begin commercial operations in Phoenix by the end of the year. Traffic acquisition costs increased 26% to $6.4 billion, representing 23% of Google advertising revenue. Paid clicks on Google properties increased 58% with cost per click declining 22% during the quarter. During the quarter, the company recognized a $1.1 billion gain, or $1.17 per share, on equity securities as required by new accounting rules. During the first half of the year, operating cash flow rose 28% to $21.8 billion with free cash flow declining 23% to $9 billion primarily due to capital expenditures more than doubling to $12.8 billion as the company invests in data centers, underseas cables and real estate to support growth in its cloud business. Alphabet repurchased $4.2 billion of its stock in the first half of the year. The company ended the quarter with a fortress balance sheet with $113.7 billion in cash and investments and only $4 billion in long-term debt. Management’s capital allocation priorities include continued investment in Google’s advertising business, which represents its biggest growth opportunity as they work to enhance user experiences and tools for advertisers especially in mobile search and on YouTube.

Friday, July 20, 2018

Gentex-GNTX reported second quarter revenues rose 3% to $454.9 million with net income driving 23% higher to $109 million and EPS jumping 29% to $.40, reflecting the benefits of tax reform and lower shares outstanding. Light vehicle production in North America declined 3%, which resulted in lower than expected unit shipments during the quarter. Additionally, OEM shutdowns related to a supplier fire, caused a revenue headwind of approximately 1% during the quarter. For the second quarter of 2018, the gross margin improved to 38.0% when compared to a gross margin of 37.7% in the second quarter of 2017, primarily as a result of improved product mix and purchasing cost reductions. During the first half of the year, the company repurchased 15.6 million of its shares at an average price of $22.36 per share. As of 6-30-18, the company had 19.7 million shares remaining authorized for future share repurchases. Gentex lowered its previously announced annual revenue guidance from the range of $1.89 - $1.97 billion to the range of $1.88 - $1.91 billion. Gross margins are expected to be 37.5% - 38.5% down from previous guidance of 38% - 39%, which includes the impact of additional tariff costs of $5 to $8 million.

Thursday, July 19, 2018

Microsoft-MSFT reported fiscal fourth quarter revenues rose 17.5% to $30.1 billion with net income and EPS up more than 10% to $8.9 billion and $1.14, respectively. Revenue in Productivity and Business Processes was $9.7 billion, up 13% during the quarter, helped by LinkedIn revenue which was up 37%. Revenue in Intelligent Cloud was $9.6 billion and increased 23% driven by Azure revenue growth of 89%. Revenues in More Personal Computing was $10.8 billion and increased 17% during the quarter led by a 39% increase in gaming revenue. For the full fiscal 2018 year, revenues rose 14.3% to $110 billion with net income and EPS falling 35% to $16.6 billion and $2.13, respectively. The earnings included a net charge of $13.7 billion, $1.75 per share, related to US tax reform. Return on shareholders’ equity was 16.5% for the year with free cash flow increasing 2.8% to $32.3 billion. During the year, the company repurchased $10.7 billion of its shares and paid $12.7 billion in dividends. Microsoft ended the year with $133.8 billion in cash and $72.2 billion in long-term debt.

Genuine Parts-GPC reported second quarter sales revved up 18% to a record $4.8 billion with net income and EPS increasing 19% to a record $227 million and $1.54, respectively. Total sales for the second quarter included 3% comparable growth and 14% from acquisitions, including Alliance Automotive Group (AAG) in Europe. Before the impact of certain transaction and other costs incurred related to Genuine Parts’ fourth quarter 2017 acquisition of AAG and the pending transaction to spin-off the Business Products Group, S.P. Richards, adjusted net income was $233.6 million, or $1.59 per share. Second quarter sales for the Automotive Group were up 27.7% to $2.7 billion, driven by a 2.1% comparable sales increase as well as the benefit of acquisitions. Sales for the Industrial Group were up 8.7% to $1.6 billion, including a 6.5% comparable sales increase while sales for the Business Products Group were flat with the prior year quarter in both total and comparable sales. During the first half of the year, Genuine Parts generated $390 million in free cash flow and paid dividends of $205 million. 2018 represents the 62nd consecutive year of dividend increases for Genuine Parts’ shareholders and the current $2.88 per share dividend is up 7% from last year. Despite an increase in Genuine Parts’ debt load to $2.5 billion to finance acquisitions, the company’s balance sheet remains strong. The average interest rate on Genuine Parts’ long-term debt is 2.98%. When asked about the impact of tariffs on GPC’s business, management said that the impact has been modest so far. But they are keeping a close eye on “List 3” tariffs slated to go into effect September 1 given that 40% of automotive parts imported by the company contain a China component. Management is working with suppliers to mitigate the impact of the proposed tariffs and has plenty of time to make adjustments before September 1 should the tariffs go into effect. Management expects to pass along price increases caused by tariffs to its customers. Given the strong year-to-date performance, the company increased its sales guidance up 13% to 14%, an increase from the prior guidance of up 12% to 13%.  Full year EPS are expected in the $5.49 to $5.64 range.  Adjusted EPS, which excludes any transaction-related costs, are expected in the $5.60 to $5.75 range. Genuine Parts currently expects a tax rate of about 25%, which is down considerably from last year’s 36% rate thanks to U.S. tax reform.


Wednesday, July 18, 2018

Alphabet-GOOGL said it will appeal against a record $5 billion fine levied by EU antitrust regulators over illegal restrictions on Android smartphone makers and mobile network operators. "Android has created more choice for everyone, not less," Google spokesman Al Verney said. "A vibrant ecosystem, rapid innovation and lower prices are classic hallmarks of robust competition. We will appeal the Commission's decision."

Walgreens Boots Alliance-WBA CEO Stefano Pessina disclosed that he purchased 1.7 million shares of the stock valued at about $108.5 million.

Tuesday, July 17, 2018

The Board of Directors of Berkshire Hathaway-BRKB has  authorized an amendment to Berkshire’s share repurchase program. The earlier share repurchase program provided that the price paid for repurchases would not exceed a 20% premium over the then-current book value of such shares. Under the amendment adopted by the Board of Directors, share repurchases can be made at any time that both Warren Buffett, Berkshire’s Chairman and CEO, and Charlie Munger, a Berkshire Vice Chairman, believe that the repurchase price is below Berkshire’s intrinsic value, conservatively determined. The current policy whereby share repurchases will not be made if they would reduce the value of Berkshire’s consolidated cash, cash equivalents and U.S. Treasury Bills holdings below $20 billion will continue. Berkshire will not initiate any share repurchases under the amended program until it publicly releases its second quarter earnings, currently scheduled after the close of the markets on Friday, August 3, 2018.

 

Johnson & Johnson-JNJ reported second quarter sales of $20.8 billion, up 10.6%, with net earnings of $4 billion, up 3.3%, and EPS of $1.45, up 3.6%. Domestic sales, which accounted for about half of the company’s total sales, increased 9.4% while International sales increased 12%, reflecting operational growth of 8% and a positive currency impact of 4%. The strong second-quarter results reflect double-digit growth in the Pharmaceutical business and accelerating sales momentum in the Medical Devices business. Pharmaceutical sales increased 20% to $10.4 billion, driven by strong sales of Darzalex and Imbruvica (immunotherapy oncology drugs), Stelara and Simponi (treatments for psoriasis and arthritis) and Opsumit, a drug acquired from Actelion to treat pulmonary hypertension. Medical Devices sales increased nearly 4% to $7 billion while Consumer sales increased slightly to $3.5 billion despite a drop in baby care product sales as retailers destocked in anticipation of product relaunches which began in July. During the quarter, binding offers were accepted to sell JNJ’s LifeScan business for $2.1 billion and its Advanced Sterilization Products business for $2.8 billion. JNJ also completed the acquisition of Medical Enterprises Distribution, a privately-held developer of the automated ME1000 Surgical Impactor for use in hip surgery and BeneVir Biopharm, a privately-held biopharmaceutical firm specializing in the development of oncolytic immunotherapies. In addressing current topics during the quarterly conference call, management stated it remains confident that its products do not contain asbestos and do not cause ovarian cancer and intends to vigorously pursue all available appellate remedies. Independent thorough reviews by the National Cancer Institute and the FDA confirm there is no scientific evidence to support claims that Johnson & Johnson’s baby power contains asbestos or that it causes cancer. On global trade, management believes fair and equitable trade is best for everyone and expects the issue of tariffs will be with us for some time. Management updated its sales guidance for the full-year 2018 to a range of $80.5 to $81.3 billion, up 5.3% to 6.3% year-over-year, with EPS expected in the range of $8.07 to $8.17, up 10.5% to 11.9%.

Friday, July 13, 2018

Brown-Forman-BFB has approved a $200 million share repurchase authorization, beginning July 13, 2018 through July 12, 2019. Under the repurchase program, the company can repurchase Class A and Class B common stock from time to time for cash in open market purchases, block transactions, and privately negotiated transactions in accordance with applicable federal securities laws. Paul Varga, chief executive officer of Brown-Forman said, "We are appropriately attentive to today's uncertain market environment, but remain optimistic about the long-term growth prospects for our brands around the world. We strive to deliver leading returns for our shareholders and believe this buyback authorization provides us with the flexibility to repurchase our shares when the market presents the opportunity." For almost 150 years, Brown-Forman Corporation has enriched the experience of life by responsibly building fine quality beverage alcohol brands, including Jack Daniel’s Tennessee Whiskey, Jack Daniel’s & Cola, Jack Daniel’s Tennessee Honey, Jack Daniel’s Tennessee Fire, Gentleman Jack, Jack Daniel’s Single Barrel, Finlandia, Korbel, el Jimador, Woodford Reserve, Old Forester, Canadian Mist, Herradura, New Mix, Sonoma-Cutrer, Early Times, Chambord, BenRiach, GlenDronach and Slane. Brown-Forman’s brands are supported by over 4,800 employees and sold in more than 170 countries worldwide.

A St. Louis jury rendered a $4.69 billion verdict against Johnson & Johnson-JNJ in a trial linking their baby powder to ovarian cancer. In a statement responding to the verdict,  the company said, "Johnson & Johnson is deeply disappointed in the verdict, which was the product of a fundamentally unfair process that allowed plaintiffs to present a group of 22 women, most of whom had no connection to Missouri, in a single case all alleging that they developed ovarian cancer. The result of the verdict, which awarded the exact same amounts to all plaintiffs irrespective of their individual facts, and differences in applicable law, reflects that the evidence in the case was simply overwhelmed by the prejudice of this type of proceeding.  Johnson & Johnson remains confident that its products do not contain asbestos and do not cause ovarian cancer and intends to pursue all available appellate remedies.  Every verdict against Johnson & Johnson in this court that has gone through the appeals process has been reversed and the multiple errors present in this trial were worse than those in the prior trials which have been reversed."

Thursday, July 12, 2018

T. Rowe Price-TROW reported assets under management of $1.04 trillion as of 6/30/18, a 5.3% increase since year end.

Wednesday, July 11, 2018

MSC Industrial Direct–MSM reported fiscal third quarter sales increased 11% to $828.3 million with net earnings of $79.1 million, up 30%, and EPS of $1.39, up 28%, thanks, in part, to U.S. tax reform which reduced the company’s effective income tax rate from 36% to 29%. Average daily sales grew 11.4% compared to last year’s third quarter. Recent acquisitions, which have exceeded management’s expectations, accounted for 500 basis points of the quarter’s sales growth while base business growth of 6.1% fell short of expectations given the robustness of the U.S. Industrial sector, hurt by the company’s sales effectiveness initiatives and the related lower sales headcount. The company’s sales initiatives, expected to return the company to high-single-digit base business growth during the second half of fiscal 2019, aim to strengthen MSC’s competitive advantage by focusing on growing areas that are technical and high-touch in nature. Fiscal third quarter free cash flow nearly doubled from the same period last year, driven by the net income increase and tight working capital management. The company generated solid year-to-date free cash flow of $199 million, up 65% year-over-year, with MSC Industrial returning more than $118 million to shareholders through dividends of $92.6 million and share repurchases of $25 million. When asked during the quarterly earnings conference call about the impact of tariffs on materials sourced from China, management stated that well under 20% its input materials are sourced from China and that its suppliers produced goods in factories spread across the globe and will shift production to the lowest cost geography. Looking ahead to the fourth quarter, sales are expected in the $829 million to $844 million range, up 11% at the midpoint, with EPS in the $1.24 to $1.30 range, up 19% at the midpoint. Average daily sales are expected to increase roughly 9.3%.

Fastenal-FAST reported second quarter revenues rose 13% to $1.3 billion with net earnings and EPS up more than 40% to $211 million and $.74, respectively. The earnings numbers reflect approximately $.15 per share of tax related benefits. The sales growth was driven by higher unit sales related primarily to continued strength in underlying market demand, industrial vending and Onsite locations. Fastenal signed 43 new national account contracts with revenues attributable to national accounts now representing 50.7% of total revenues. The company signed 5,537 vending devices, up 13% to 76,069 with sales in vending devices continuing to grow at a strong double-digit pace. Fastenal signed 81 new Onsite location during the quarter, an increase of 19% over the prior year period with 761 active sites as of quarter end. Gross profit declined 110 basis points to 48.7% with operating margins remaining flat at 21.2%. Free cash flow increased 6.4% during the first half of the year to $251 million with the company paying $213 million in dividends and repurchasing $40 million of its shares. The company increased the dividend for the third quarter 8% to $.40 per share and increased anticipated capital expenditures for the full year by 6% to $158 million related to upgrading and adding capacity to existing hub networks and purchases of property for future expansion. Reflecting the company’s long-term  growth record, Fastenal’s daily sales are now equal to the company’s annual sales at the time of its initial public offering in 1987.

Tuesday, July 10, 2018

PepsiCo-PEP reported second quarter sales increased 2.4% to $16.1 billion with net income declining 14% to $1.8 billion and EPS dropping 13% to $1.28. The earnings numbers reflect a $.54 per share expense related to US tax reform. On an organic basis, second quarter revenues rose 2.6% with core constant currency operating profit up 2%. North America food and snack sales increased 3.1% to $4.4 billion with operating profit increasing 4.4% to $1.3 billion. North America beverage sales decreased 1% to $5.2 billion with operating profit fizzling 16% lower to $747 million. International sales increased 4.7% to $6.5 billion led by a 10.8% increase in Europe, Sub-Saharan Africa. Free cash flow declined sharply to $142 million during the first half of the year with the company paying $2.3 billion in dividends and repurchasing $984 million of its shares. Management reaffirmed previous 2018 guidance with organic revenue growth expected to be at least 2.3% with core EPS up 9% to $5.70. Operating cash flow is expected to be $9 billion with free cash flow of $6 billion, reflecting capital spending of $3.6 billion and a discretionary pension expense of $1.4 billion. During 2018, management plans to pay $5 billion in dividends and repurchase approximately $2 billion of its shares.

Friday, July 6, 2018

Eisai Co., Ltd. and Biogen-BIIB announced positive topline results from the Phase II study with BAN2401, an anti-amyloid beta protofibril antibody, in 856 patients with early Alzheimer's disease. The study achieved statistical significance on key predefined endpoints evaluating efficacy at 18 months on slowing progression in Alzheimer's Disease Composite Score (ADCOMS) and on reduction of amyloid accumulated in the brain as measured using amyloid-PET (positron emission tomography). "The prospect of being able to offer meaningful disease-modifying therapies to individuals suffering from this terrible disease is both exciting and humbling," said Alfred Sandrock, M.D., Ph.D., executive vice president and chief medical officer at Biogen. "These BAN2401 18-month data offer important insights in the investigation of potential treatment options for patients with Alzheimer's disease and underscores that neurodegenerative diseases may not be as intractable as they once seemed."


Thursday, July 5, 2018

Private sector employment increased by 177,000 jobs from May to June according to the June ADP National Employment Report®.  "The labor market continues to march towards full employment," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "Healthcare led job growth once again and trade rebounded nicely."  Mark Zandi, chief economist of Moody's Analytics, said, "Business' number one problem is finding qualified workers. At the current pace of job growth, if sustained, this problem is set to get much worse. These labor shortages will only intensify across all industries and company sizes." 

Thursday June 28, 2018

Nike-NKE reported fourth quarter revenues rose 13% to $9.8 billion, driven by strong double-digit revenue growth in international markets and Nike Direct globally and a return to growth in North America. Net income jumped 13% in the quarter to $1.1 billion with EPS up 15% to $.69, thanks to gross margin expansion, a lower tax rate and lower shares outstanding. Gross margin expanded 60 basis points in the quarter due to higher average selling prices, margin expansion in Nike Direct and favorable full-price sales mix. For the full year, revenues rose 6% to $36.4 billion with net income down 54% to $1.9 billion and EPS down 53% to $1.17, due primarily to the impact of tax reform. Return on shareholders’ equity for the year was 19.7%. Inventories rose 4% for the year to $5.3 billion primarily driven by strong global demand. The company ended the year with $5.2 billion in cash and investments, $934 million lower than last year due to share repurchases, dividends and investments in infrastructure. During the fourth quarter, Nike repurchased 23.1 million for approximately $1.6 billion at an average price of $69.26 per share as part of the company’s four year $12 billion share repurchase program which is expected to be completed in 2019. Thanks to strong cash flows, Nike announced a new $15 billion share repurchase program. For fiscal 2019, management raised their outlook for revenue growth which is expected to improve to the high single-digit range with gross margin expansion of at least 50 basis points. Fueled by a complete digital transformation of the company, Nike expects its next wave of long-term, sustainable growth and profitability.

Biogen-BIIB announced it has exercised its option to purchase additional shares of Samsung Bioepis Co., Ltd., a joint venture established in 2012 by Samsung BioLogics Co., Ltd and Biogen. Under the terms of the 2012 joint venture agreement, Biogen will pay Samsung BioLogics approximately $700 million for the option shares, increasing Biogen`s ownership in Samsung Bioepis from approximately 5.4% to approximately 49.9%.  The completion of this share purchase is expected to close in the second half of 2018.   "We are very pleased with the progress made to date at Samsung Bioepis and believe exercising this option is an opportunity to create meaningful value for our shareholders," said Michel Vounatsos, chief executive officer at Biogen. "This option allows us to increase our ownership share in a leading biosimilar company at what we believe are attractive terms.  We look forward to building an important relationship with Samsung BioLogics."

Accenture-ACN reported third fiscal quarter net revenues of $10.3 billion, up 16% year-over-year, with net earnings and EPS up more than 50% to $1 billion and $1.60, respectively. Excluding a charge related to tax law changes this year and a pension settlement charge last year, adjusted EPS increased 18% to $1.79. Growth was strong and balanced across all dimensions of the business driven by Accenture’s unique position as the end-to-end leader operating at scale in the “New” (digital, cloud and security services), which now account for about 60% of total revenues. Consulting net revenues were $5.69 billion, up 18%, and Outsourcing net revenues were $4.63 billion, up 14%. By region, North America revenues increased 11% to $4.6 billion, Europe revenues increased 9% in local currency to $3.7 billion and Growth Markets increased 17% in local currency to $2 billion. New bookings reached a record $11.7 billion. During the quarter, Accenture generated $1.8 billion in free cash flow with $1.6 billion returned to shareholders through dividends of $855 million and share repurchases of $720 million, or $153.60 per average share. As of May 31, about $1.45 billion remained under the current repurchase authority. Accenture ended the quarter with more than $4.1 billion in cash and investments on its pristine balance sheet. Given the strong results, Accenture updated its guidance with fiscal 2018 revenues now expected to increase 9.5% to 10% in local currency terms, up from previous guidance of 7% to 10%. Reported earnings are expected in the $6.26 to $6.31 range, including a $.40 negative impact from tax law changes, compared to $6.40 to $6.49 previously, which included a $0.21 negative impact from tax law changes. Free cash flow is now expected in the $4.9 billion to $5.2 billion range compared to $4.6 billion to $4.9 billion previously.

Walgreens Boots Alliance-WBA reported third quarter revenues rose 14% to $34.3 billion with net income up 15.5% to $1.3 billion and EPS popping 26% higher to $1.35, thanks to the benefit of lower shares outstanding. Retail Pharmacy sales increased 15% in the quarter to $25.9 billion, thanks in part to the acquisition of Rite-Aid stores, with sales in comparable stores down 1.2%. Pharmacy sales accounted for 72.5% of this division’s sales. The division filled 285.2 million prescriptions in the quarter, an increase of 11.8% over the prior year period, primarily due to the addition of the Rite-Aid stores as prescriptions in comparable stores were unchanged. The division’s retail prescription market share increased 190 basis points to a record 22.4%. Retail sales in this division increased 5.2% with comparable store sales down 3.8%. Retail Pharmacy International third quarter sales increased 6.6% to $3 billion with sales down 2.1% on a constant currency basis. Pharmaceutical Wholesale third quarter sales increased 12.6% to $6 billion with constant currency sales up 4%, although this division lost market share due to challenging market conditions in certain continental European countries. Year-to-date, free cash flow increased 2% to $4.4 billion with the company paying $1.3 billion in dividends and repurchasing $2.5 billion of its shares during the same time period. Thanks to strong cash flows, Walgreens announced a 10% increase in the dividend, marking the 43rd consecutive year of dividend increases, and a new $10 billion share repurchase program which is expected to be completed over the next three years. Management raised the lower end of its fiscal 2018 adjusted EPS guidance by $.05 and now anticipates adjusted EPS of $5.90-$6.05 for the full fiscal year, representing 16%-19% growth. Asked about Amazon’s recent purchase of PillPack and its potential entry into the pharmaceutical space, management indicated that they are not complacent but also not especially worried as the pharmaceutical world is much more complex than the delivery of certain pills.


Wednesday, June 27, 2018

Paychex-PAYX reported fourth quarter revenues rose 9% to $871.1 million with net income and EPS each up 17% to $228.5 million and $.63, respectively. The strong finish to the year was driven by strong demand for the company’s human capital management solutions. As of 5-31-18, Paychex served over 650,000 payroll clients. Client retention for the year was greater than 81%.  Interest on funds held for clients increased 26% during the year to $63.5 million thanks to rising interest rates earned on the average $4 billion in client funds held throughout the year.  For the full year, revenues rose 7% to $3.4 billion with net income up 14% to $933.7 million and EPS up 15% to $2.58. Return on shareholders’ equity for the year was an impressive 46.1%. The company maintained a strong balance sheet ending the year with nearly $720 million in cash and investments and no long-term debt. Free cash flow increased 30% during the year to $1.1 billion with the company paying $739.7 million in dividends and repurchasing 2.5 million of its shares for $143.1 million at an average cost of $57.24 per share. The dividend was recently increased 12%.  Management’s outlook for fiscal 2019 is for total revenues expected to increase 6% to 7% with an operating margin of about 37%. Investment income is expected to increase 15% to 20% thanks to higher interest rates and the effective tax rate is expected to approximate 24% resulting in adjusted net income growth of approximately 11% to 12%.

The Walt Disney Company-DIS announced that the Antitrust Division of the United States Department of Justice (DOJ) has cleared the pending acquisition by Disney of Twenty-First Century Fox, Inc. The DOJ has entered into a consent decree with Disney and 21st Century Fox that allows the acquisition to proceed, while requiring the sale of the Fox Sports Regional Networks. Disney and Fox announced an amended acquisition agreement pursuant to which Disney will acquire Fox for $38 per share in cash and stock, immediately following the spin-off of the businesses comprising “New Fox” as previously announced.


Tuesday, June 26, 2018

FactSet Research Systems-FDS reported fiscal third quarter revenues rose 9% to $339.9 million, driven by 6% growth in organic revenue, thanks to higher sales of analytics products, content and technology solutions and wealth management solutions. Annual Subscription Value (ASV) increased 5.3% to $1.36 billion. Third quarter net income was up 14% to $74.7 million with EPS up 15% to $1.91. Bottom line results were aided by the benefits of tax reform, with the third quarter tax rate dropping to 16.5% compared to the prior year period’s 23.2%. Client count increased by 80 clients in the past three months to 4,975 with user count rising by 860 to 89,506 primarily driven by the company’s wealth management business. Client retention was 90% and employee count was up 3.5% to 9,197. Year-to-date, free cash flow increased 34% to $261 million with the company paying $65 million in dividends and repurchasing $236 million of its share during the same time period. The dividend was increased 14% during the quarter, marking the 13th consecutive year of dividend increases. With a robust share repurchase program, FactSet accelerated their share buybacks in the third quarter repurchasing 620,000 shares for $122 million at an average cost of $196.77 per share. After expanding the share buyback by $100 million due to the repatriation of foreign earnings, FactSet has $309.3 million currently available for future share repurchases. Management reaffirmed revenue guidance for fiscal 2018 with revenues expected in the range of $1.34 to $1.36 billion and increased the EPS outlook to a range of $6.92-$7.17 thanks to a solid pipeline going into the fourth quarter. Adjusted EPS is expected in the range of $8.37-$8.62, which at the midpoint represents 16% growth over last year’s adjusted earnings.

 

AbbVie-ABBV and Calico, a unit of Alphabet-GOOGL, focused on aging research and therapeutics, announced an extension of their collaboration to discover, develop and bring to market new therapies for patients with age-related diseases, including neurodegeneration and cancer. Working together with AbbVie, Calico pursues discovery-stage research and  development.  AbbVie provides scientific and clinical development support and will lend its commercial expertise to lead future development and commercialization activities. Since 2014, the collaboration between the two companies has produced more than two dozen early-stage programs addressing disease states across oncology and neuroscience and yielded new insights into the biology of aging. Under the terms of the agreement, the collaboration between the two companies is now extended for an additional three years. Calico will be responsible for research and early development until 2022 and will advance collaboration projects through Phase 2a through 2027. AbbVie will continue to support Calico in its early R&D efforts and, following completion of Phase 2a studies, will have the option to manage late-stage development and commercial activities. Both parties will share costs and profits equally. AbbVie and Calico will each commit to contribute an additional $500 million to the collaboration.

 Monday, June 25, 2018

MAXIMUS-MMS announced today that its Board of Directors has authorized the expansion of its share repurchase program of up to an aggregate of $200 million, which includes the remaining balance from the 2015 authorization of $49.3 million as of June 22, 2018.  “We remain good stewards of capital and we are committed to a sensible and disciplined approach to cash deployment. We will maintain the financial flexibility needed to continue to invest and grow the business while at the same time we believe that providing returns to shareholders and deploying capital, as demonstrated by this expansion of our share repurchase program, is an important component of our long-term strategy,” commented Bruce Caswell, President and Chief Executive Officer of MAXIMUS.

AbbVie-ABBV announced the U.S. Food and Drug Administration (FDA) has accepted for Priority Review a supplemental New Drug Application (sNDA) for IMBRUVICA® (ibrutinib) in combination with rituximab (RITUXAN®) as a new treatment option for Waldenström's macroglobulinemia (WM), a rare and incurable form of blood cancer. If approved, the sNDA would expand the prescribing information of IMBRUVICA in WM beyond its current approved use as a single agent for all lines of therapy to include combination use with rituximab. As a single-agent therapy, IMBRUVICA is the first and only FDA-approved treatment available for patients with WM. IMBRUVICA is a first-in-class Bruton's tyrosine kinase (BTK) inhibitor jointly developed and commercialized by Pharmacyclics LLC, an AbbVie company, and Janssen Biotech, Inc. Waldenström's macroglobulinemia is a rare and incurable form of non-Hodgkin's lymphoma (NHL). There are about 2,800 new cases of WM in the U.S. each year. In January 2015, IMBRUVICA received FDA approval for all lines of treatment in WM and as the first and only FDA-approved therapy specifically indicated for this disease.

 

Wednesday, June 20, 2018

The Walt Disney Company-DIS announced that it has signed an amended acquisition agreement with Twenty-First Century Fox, Inc. for $38 per share in cash and stock. Under the amended agreement, 21st Century Fox shareholders may elect to receive, for each share of 21st Century Fox common stock, $38 in either cash or shares of Disney common stock.  The overall mix of consideration paid to 21st Century Fox shareholders will be approximately 50% cash and 50% stock. The 21st Century Fox businesses to be acquired by Disney remain the same as under the original agreement. Since the original agreement was announced, the intrinsic value of these assets has increased, notably due to tax reform and operating improvements. Disney is expected to pay a total of approximately $35.7 billion in cash and issue approximately 343 million new shares to 21st Century Fox shareholders, representing about a 19% stake in Disney on a pro forma basis. Disney will also assume about $13.8 billion of net debt of 21st Century Fox. The acquisition price implies a total equity value of approximately $71.3 billion and a total transaction value of approximately $85.1 billion (assuming no tax adjustment). Disney has secured financing commitments for the cash portion of the acquisition. The amended transaction is expected to be accretive to Disney earnings per share before the impact of purchase accounting for the second fiscal year after the close of the transaction, and to yield at least $2 billion in cost synergies by 2021 from operating efficiencies realized through the combination of businesses. As announced in the original acquisition agreement, the businesses to be acquired by Disney include 21st Century Fox’s film production businesses, including Twentieth Century Fox, Fox Searchlight Pictures and Fox 2000 Pictures; Fox‘s television creative units, Twentieth Century Fox Television, FX Productions and Fox21; FX Networks; National Geographic Partners; Fox Sports Regional Networks; Fox Networks Group International; Star India; and Fox’s interests in Hulu, Sky plc, and Tata Sky. The acquisition will occur immediately after the spin-off by 21st Century Fox of the Fox Broadcasting network and stations, Fox News Channel, Fox Business Network, FS1, FS2 and Big Ten Network into a newly listed company referred to as New Fox. If 21st Century Fox completes its acquisition of the 61% of Sky it doesn’t already own prior to closing of the Disney acquisition, Disney would assume full ownership of Sky, including the assumption of its outstanding debt, upon closing. The acquisition will significantly increase Disney’s international footprint and expand the content and distribution for its direct-to-consumer (DTC) offerings, which include ESPN+ for sports fans; a Disney-branded streaming video-on-demand service launching in late 2019 that will feature Disney, Pixar, Marvel and Star Wars films along with a host of exclusive original content and library titles; and its ownership stake in Hulu. As a result of the acquisition, Disney will hold a controlling stake in Hulu. Disney believes the transaction has a clear and timely path to regulatory approval. Both companies have spent the past six months working toward meeting all conditions necessary for closing.  In light of the amended agreement, the companies are required to prepare updated SEC filings and proxy materials which will be sent to shareholders. A new date for the shareholder meetings will be announced.

Starbucks-SBUX lowered their guidance for fiscal 2018 with GAAP EPS expected in the range of $3.23-$3.26, aided by the favorable impact of tax reform, and non-GAAP EPS expected in the range of $2.39-$2.43. The company affirmed that they will open approximately 2300 new stores with capital expenditures expected to approximate $2 billion for the year. Global comparable store sales growth is expected at the lower end of their long-term 3% to 5% growth outlook. Net revenue growth is expected in the high single digit range for fiscal 2018 with operating margins expected to moderately decline for the year due to additional digital and partner investments. The company’s long-term targets call for annual net revenue growth in the high single digit range with annual non-GAAP EPS growth of at least 12% and annual return on invested capital of 25% or greater.

Tuesday, June 19, 2018

Oracle-ORCL reported fourth quarter revenue rose 3% to $11.3 billion with net income up 5% to $3.4 billion and EPS up 8% $.82. For the full year, revenues rose 6% to $39.8 billion with operating income up 8% to $13.7 billion and net income and EPS each down 59% to $3.8 billion and $.90, respectively. Earnings were negatively affected by the impact of tax reform. Revenue growth for the year was driven by 10% growth in cloud services and license support to $26.3 billion with 11% growth in applications revenues and 5% growth in platform and infrastructure revenues. On a geographic basis, Oracle reported 5% growth in the Americas and Asia Pacific and 7% growth in Europe/Middle East/Africa. Return on shareholders’ equity was 8.3% due to the lower earnings. Free cash flow increased 13% during the year to $13.7 billion with the company paying $3.1 billion in dividends and repurchasing $11.3 billion of its shares during fiscal 2018, including 106 million shares in the fourth quarter for $5 billion at an average cost of $47.17 per share. Since 2011, Oracle has reduced its shares outstanding by 20%. With management viewing Oracle’s stock as “very inexpensive,” share buybacks will likely continue at the same pace as in fiscal 2018. The company has $6.7 billion of net cash on its balance sheet as of year end ($67.3 billion of cash and investments less $60.6 billion of notes payable and other borrowings).For fiscal 2019, management expects revenue growth to exceed fiscal 2018’s 6% growth  as cloud revenues continue to accelerate with double-digit non-GAAP EPS growth anticipated as profit margins continue to expand. Capital expenditures in fiscal 2019 are expected to approximate $1.7 billion, relatively flat with fiscal 2018.

 

Walgreens Boots Alliance-WBA will replace General Electric in the Dow Jones Industrial Average, S&P Dow Jones Indices said in a statement. The change will take effect prior to the market’s open on June 26.

Starbucks-SBUX announced a set of strategic priorities and corresponding operational initiatives to accelerate growth and create long-term shareholder value. Starbucks detailed three strategic priorities to regain revenue and earnings momentum: 1) Accelerating growth in the U.S. and China, the company’s targeted long-term growth markets; 2) Expanding and leveraging the global reach of the brand through the Global Coffee Alliance; and 3) Sharpening the focus on increasing shareholder returns. Starbucks is optimizing its U.S. store portfolio at a more rapid pace in FY19, including shifting new company-operated store growth to underpenetrated markets, slowing licensed store growth, and increasing the closure of underperforming company-operated stores in its most densely penetrated markets to approximately 150 in FY19 from a historical average of up to 50 annually. In FY19, this will result in a slightly lower growth rate in net new company-operated stores. Starbucks is actively expanding the breadth and depth of digital relationships with current and new customers. The company has added 5 million new digitally registered customers since April 2018 and 2 million active Starbucks Rewards members year-over-year to 15 million, up 13 percent from the previous year. In FY19, the company expects newer digital initiatives to contribute one to two points of comp growth in the U.S., supported by a redesigned Starbucks Rewards program that provides customers more choice around redemptions and payment, as well as expanded personalization capabilities for customers that have a digital relationship with the company. With the execution of the company’s strategic priorities expected to improve the return profile of the business, the company now expects to return approximately $25 billion in cash to shareholders in the form of share buybacks and dividends through FY20. This represents a $10 billion increase from the cash return target announced on November 2, 2017. In support of an accelerated return of cash to shareholders, the Board of Directors approved a 20 percent increase in the company’s regular quarterly dividend and declared a cash dividend of $0.36 per share payable on August 24, 2018, to shareholders of record as of August 9, 2018. This represents the 8th annual increase in the company’s regular quarterly dividend. The company now anticipates 1 percent growth in comparable store sales globally in Q3 FY18.

Monday, June 18, 2018

JD.com, Inc., China’s leading technology-driven e-commerce company, and Google-GOOGL, announced that Google will invest $550 million in cash in JD.com as part of a strategic partnership. Google and JD plan to collaborate on a range of strategic initiatives, including joint development of retail solutions in a range of regions around the world, including Southeast Asia, the U.S. and Europe. By applying JD’s supply chain and logistics expertise and Google’s technology strengths, the two companies aim to explore the creation of next generation retail infrastructure solutions, with the goal of offering helpful, personalized and frictionless shopping experiences. JD also plans to make a selection of high-quality products available for sale through Google Shopping in multiple regions. Under the agreements, Google will receive 27,106,948 newly issued JD.com Class A ordinary shares at an issue price of $20.29 per share, equivalent to $40.58 per ADS, based on the volume-weighted average trading price over the prior 10 trading days.

Friday, June 15, 2018

Cognizant Technology Solutions-CTSH announced that it has entered into an accelerated share repurchase ("ASR") agreement with Morgan Stanley & Co. LLC to repurchase an aggregate of $600 million of Cognizant's Class A common stock.  In February 2017, the Company announced a plan to return $3.4 billion to stockholders by the end of 2018 through a combination of $2.7 billion in stock repurchases and $0.7 billion in dividends.  With the ASR announced today, the Company will deliver early on its commitment as to stock repurchases with the anticipated final settlement of the ASR during the third quarter of 2018.

Thursday, June 14, 2018

Polaris-PII reaffirmed 2018 EPS guidance of $6.05-$6.20, representing 25%-28% growth over last year. The Off-Road Vehicle retail market improved significantly in May following a weak April due to weather. Return on invested capital is critical to all aspects of the company’s management. Over the last five years, Polaris has invested approximately $2 billion in research and development, capital expenditures, and tooling. Over the same time, the company has deployed $1 billion in acquisitions, repurchased $1.2 billion of its shares and paid about $700 million in dividends, with the dividend increased for 23 consecutive years.

Tuesday, June 12, 2018

Automatic Data Processing-ADP remains committed to its objective of top quartile Total Shareholder Return (TSR) compared to the S&P 500.  Building on its revised Fiscal 2018 guidance announced on May 2, 2018, reflecting the positive developments outlined during Investor Day, and extending its financial outlook to Fiscal 2021, ADP now expects to achieve: Fiscal 2019 Adjusted EBIT Margin of 21% to 22%, which represents a full one year acceleration of the Fiscal 2020 Adjusted EBIT outlook communicated in its September 12, 2017 Investor Presentation; Fiscal 2021 Adjusted EBIT Margin of 23% to 25%; and Fiscal 2019 to 2021 annualized revenue growth of 7% to 9%, Adjusted EPS growth of 16% to 19%, and TSR of 18% to 21

T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.04 trillion as of May 31, 2018 increased 4.7% since year end.


Thursday, June 7, 2018

Biogen-BIIB announced it has entered into an exclusive option agreement with TMS Co., Ltd. to acquire TMS-007 and backup compounds. The agreement includes an upfront payment of $4 million and an additional $18 million payment if Biogen exercises its option, with up to $335 million in potential development and commercialization milestones as well as tiered royalties. TMS-007 is a plasminogen activator with a novel mechanism of action associated with breaking down blood clots, and is believed to inhibit local inflammation at the site of thrombosis. This unique combination could position TMS-007 as a best in class thrombolytic for individuals with acute ischemic stroke (AIS) with potential for an extended treatment window as compared to current thrombolytic agents. Stroke is the fifth leading cause of death in the U.S. with AIS accounting for approximately 85% of cases and large hemispheric infarction accounting for approximately 15% of AIS cases. 

Wednesday, June 6, 2018

Johnson & Johnson-JNJ announced that it has received a binding offer from Fortive Corporation to acquire its Advanced Sterilization Products (ASP) business, a division of Ethicon, Inc., for an aggregate value of approximately $2.8 billion, including $2.7 billion of cash. ASP is a global leader in innovative infection prevention solutions with 2017 net revenue of approximately $775 million. The transaction is expected to close no later than early 2019.

Thor Industries-THO reported record results as third quarter revenues rose 12% to $2.25 billion with net income up 6% to $133.8 million and EPS up 20% to $2.53, thanks in large part to the benefits of a lower tax rate due to tax reform. The company generated strong sales growth in both segments with Towables up 12.8% and Motorized up 8.8%. Gross profit margins declined in the quarter by 50 basis points to 14.1% reflecting an increase in warranty expense as well as slightly higher labor and material costs. Management is taking strategic actions to address the implementation of the recent steel and aluminum tariffs. Operating cash flow increased 8% year-to-date with the company paying down its revolving credit line to just $20 million subsequent to quarter end. The company ended the quarter with $147 million in cash after investing $46.9 million in a newly created joint venture named TH2, a digital platform designed for the global RV industry.  Consolidated recreational vehicle backlog declined to a still healthy $2 billion reflecting normalized ongoing demand for all products. Management expects another record year for Thor in fiscal 2018. Economic conditions and high consumer confidence along with favorable demographics remain favorable for continued industry growth for the foreseeable future.

Brown-Forman-BFB reported fourth quarter revenues rose 6% to $733 million with net income down 23% to $110 million and EPS down 24% to $.23. The earnings include $70 million, $.10 per share, negative impact form the creation of a charitable foundation. For the full year, revenues rose 8% to $3.25 billion with net income up 7% to $717 million and EPS up 8% to $1.48. Return on shareholders’ equity for the year was 54.5%. BFB’s free cash flow decreased 4% for fiscal 2018 to $505 million with the company paying $773 million in dividends including a $1 per share special dividend paid in April. For the year, underlying net sales and operating income grew 6% and 8%, respectively. The results were well-balanced by geography and portfolio driven by strong 6% underlying net sales growth of the Jack Daniel’s portfolio and 15% growth in the super-premium American whiskey portfolio. For fiscal 2019, management expects underlying net sales growth of 6%-7% with operating income growth of 7%-9% and EPS in the range of $1.75-$1.85. Chief Executive Officer Paul Varga will retire on 12/31/2018. Varga will be succeeded by Lawson Whiting, a 21-year veteran of the company, who currently serves as Chief Operating Officer.  

Fastenal-FAST reported May sales rose 12.5% to $431.4 million with average daily sales also up 12.5% $19.6 million. Manufacturing sales rose 11.9% with non-residential construction sales up 15.9%. Daily sales growth by product line was 9.1% for fasteners and 15% for other products. Total personnel increased 4% to 20,796 as of month end.

Tuesday, June 5, 2018

Eisai Co., Ltd.  and Biogen-BIIB announced  that elenbecestat was generally safe and well tolerated in a Phase II clinical study (Study 202) of the oral BACE (beta amyloid cleaving enzyme) inhibitor elenbecestat (development code: E2609) conducted in the United States, and the results demonstrated a statistically significant difference in amyloid beta (Aβ) levels in the brain measured by amyloid-PET (positron emission tomography). A numerical slowing of decline in functional clinical scales of a potentially clinically important difference was also observed, although this effect was not statistically significant. This study, a Phase II study of 70 patients, is the first study of a BACE inhibitor to show a statistically significant difference in amyloid beta in the brain while also suggesting a delay of clinical symptom decline in exploratory endpoints. "Biogen is heartened by the safety and tolerability results of this study of elenbecestat," said Alfred Sandrock, M.D., Ph.D., executive vice president and chief medical officer at Biogen. "We remain committed to research in Alzheimer's, an area of significant unmet need with a devastating impact on those living with the disease, their families, friends, and society."

AbbVie-ABBV announced positive top-line results from SELECT-EARLY showing that both doses of upadacitinib monotherapy (15 mg and 30 mg) met the primary endpoints of ACR50 at week 12 and clinical remission at week 24 versus methotrexate (MTX). Additionally, all ranked secondary endpoints were met. The ongoing study evaluates upadacitinib, an investigational oral JAK1-selective inhibitor, as a monotherapy treatment compared to methotrexate monotherapy in adult patients with moderate to severe rheumatoid arthritis who were methotrexate-naïve. Upadacitinib is not approved by regulatory authorities and its safety and efficacy have not been established. "SELECT-EARLY is the fifth pivotal trial that will support regulatory submissions for upadacitinib in rheumatoid arthritis later this year," said Michael Severino, M.D., executive vice president, research and development and chief scientific officer, AbbVie. "Results from SELECT-EARLY further support our belief that upadacitinib has the potential to be an important new treatment option for patients with rheumatoid arthritis." Rheumatoid arthritis, which affects an estimated 23.7 million people worldwide, is a chronic and debilitating disease. Methotrexate is commonly used as a first-line therapy in rheumatoid arthritis, but many patients do not respond to or cannot tolerate methotrexate. Early intervention with an effective treatment is critical to control the disease and prevent permanent joint damage and impaired physical function.

Monday, June 4, 2018

Starbucks-SBUX announced that Howard Schultz is stepping down as executive chairman and member of the Board of Directors and will be honored with the title of chairman emeritus effective June 26, 2018. During his four decades as CEO and Chairman, Schultz grew Starbucks from 11 stores to more than 28,000 stores in 77 countries, while demonstrating that a business can simultaneously deliver best-in-class financial performance and share success with its people and the communities it serves. Under Schultz’s leadership, Starbucks has delivered a 21,000% gain in the value of its stock price since its initial public offering in 1992. The company’s growth was fueled by his decisions to provide uncommon benefits for those who work for Starbucks, including comprehensive healthcare, stock ownership and free college tuition, even for those working part-time. This year, Starbucks was named the fifth most admired company in the world by Fortune, marking the 16th year in a row that the company has appeared on the global list. Starbucks was also named one of the World’s Most Ethical Companies by the Ethisphere Institute for the 12th consecutive year and was ranked as one of 2018’s Most Innovative Companies by Fast Company, most notably for its social-impact work.

Microsoft-MSFT announced it has reached an agreement to acquire GitHub, the world's leading software development platform where more than 28 million developers learn, share and collaborate to create the future.  The platform hosts a growing network of developers in nearly every country representing more than 1.5 million companies across healthcare, manufacturing, technology, financial services, retail and more. Together, the two companies will empower developers to achieve more at every stage of the development lifecycle, accelerate enterprise use of GitHub, and bring Microsoft's developer tools and services to new audiences. Under the terms of the agreement, Microsoft will acquire GitHub for $7.5 billion in Microsoft stock. The acquisition is expected to close by the end of the calendar year. Upon closing, Microsoft expects GitHub's financials to be reported as part of the Intelligent Cloud segment. Microsoft expects the acquisition will be accretive to operating income in fiscal year 2020 on a non-GAAP basis, and to have minimal dilution of less than 1 percent to earnings per share in fiscal years 2019 and 2020 on a non-GAAP basis, based on the expected close time frame. Non-GAAP excludes expected impact of purchase accounting adjustments, as well as integration and transaction-related expenses. An incremental share buyback, beyond Microsoft's recent historical quarterly pace, is expected to offset stock consideration paid within six months after closing. Microsoft will use a portion of the remaining ~$30 billion of its current share repurchase authorization for the purchase.  

Apple®-AAPL announced iOS 12, the latest version of the most advanced mobile operating system, designed to make everyday tasks faster and more responsive. iOS 12 changes the way iOS users see the world using AR, makes communications fun and expressive with Memoji™ and Group FaceTime®, and with Screen Time, helps customers understand and take control of the time they spend interacting with their iOS devices. iOS 12 introduces Siri® Shortcuts, enabling Siri to work with any app, delivering a much faster way to get things done. Apple® also previewed watchOS® 5, a significant update to the world’s most popular watch, helping users stay healthy and connected. Apple Watch® becomes an even stronger companion for fitness, communication and quick access to information with a host of new features including Activity Sharing competitions, auto-workout detection, advanced running features, Walkie-Talkie, Apple Podcasts and third-party apps on the Siri® watch face. Apple® also previewed tvOS™ 12, the powerful operating system designed for enjoying entertainment on the big screen, which takes the cinematic experience of Apple TV® 4K to the next level with support for Dolby Atmos audio, convenient new features to easily access the shows and movies you love and breathtaking aerials shot from space. Apple® also previewed macOS® Mojave, the latest version of the world’s most advanced desktop operating system, with new features inspired by pros but designed for everyone. In macOS Mojave, a new Dark Mode transforms the desktop with a dramatic new look that puts the focus on user content. The new Stacks feature organizes messy desktops by automatically stacking files into neat groups. Familiar iOS apps, including News, Stocks, Voice Memos and Home, are now available on the Mac® for the first time. FaceTime® now adds support for group calling, and the Mac App Store® gets a full redesign featuring rich editorial content and the addition of apps from top developers, including Microsoft, Adobe and others.


Thursday, May 31, 2018

Pratt & Whitney, a division of United Technologies-UTX, and the U.S. Department of Defense announced a $2 billion contract award for the 11th lot of F135 propulsion systems, powering all three variants of the F-35 Lightning II aircraft. The latest contract continues to support program affordability initiatives with reduction in propulsion system price. The 11th low rate initial production (LRIP) contract will cover 135 engines, as well as program management, engineering support, production support, spare modules, and spare parts. To date, Pratt & Whitney has delivered 375 F135 engines. Deliveries of LRIP 11 engines will start this year.

Waymo, the self-driving vehicle division of Alphabet-GOOGL,  announced plans to buy as many as 62,000 minivans from Fiat Chrysler in a deal worth potentially $2 billion as part of its plans to build a robot taxi fleet. It has already been testing a fleet in Phoenix. In March, Waymo announced a deal to acquire as many as 20,000 Jaguar vehicles for its luxury robot taxi fleet, which will launch in 2020.

Wednesday, May 30, 2018

AbbVie-ABBV expects to acquire approximately 71.4 million shares of its common stock at a price of $105 per share, for an aggregate cost of approximately $7.5 billion, relating to the Dutch auction tender offer. These shares represent approximately 4.5 percent of the shares outstanding.

Polaris Industries-PII announced that it has signed a definitive agreement to acquire Boat Holdings, LLC (“Boat Holdings”), a boat manufacturer owned by the Vogel family, management and Balmoral Funds, in an all-cash transaction valued at a net present value (NPV) of approximately $805 million. Polaris also expects that approximately $100 million NPV of future net tax benefits will accrue to the combined Company. When adjusted for the net tax benefit of $100 million, the transaction is valued at approximately $705 million. The 2017 Boat Holdings EBITDA multiple including the expected net tax benefits is approximately 9.5 times. The transaction is expected to close in the third quarter of 2018. Boat Holdings is the largest manufacturer of pontoon boats in the U.S., one of the largest and fastest growing segments in the marine industry. With a full offering of pontoon, deck and cruiser boats, Boat Holdings’ four recognized brands – Bennington, Godfrey, Hurricane and Rinker – are strategically positioned with over 200 base models across a range of price points and fully-custom built options. Boat Holdings leverages an asset-light manufacturing model, and offers boats through a robust network of dealers primarily in the United States and Canada. In 2017, Boat Holdings generated approximately $560 million in sales. Sales in the pontoon boat category have grown at an 11-percent compounded annual growth rate (CAGR) since 2010, while Boat Holdings’ leading pontoon brands, Bennington and Godfrey, have grown at an even faster pace over the same time period. Polaris expects that this acquisition offers Polaris a unique opportunity to meaningfully increase its addressable market and growth profile. The transaction is expected to be immediately accretive to Polaris’ earnings, and approximately $100 million of present value future tax benefits are expected to drive additional cash flow accretion. Further, Boat Holdings’ differentiated operating model enables fast, flexible production with low fixed assets and capital spending, leading to strong margins and naturally high free cash flow conversion.

Private sector employment increased by 178,000 jobs from April to May according to the May ADP National Employment Report®.  "The hot job market has cooled slightly as the labor market continues to tighten," said Ahu Yildirmaz, vice president and co-head of the ADP-ADP Research Institute. "Healthcare and professional services remain  a model of consistency and continue to serve as the main drivers of growth in the services sector and the broader labor market as well." Mark Zandi, chief economist of Moody's Analytics, said, "Job growth is strong, but slowing, as businesses are unable to fill a record number of open positions. Wage growth is accelerating in response, most notably for young, new entrants and those changing jobs. Finding workers is increasingly becoming businesses number one problem." 

Otis France has been awarded a historic contract for the installation of 171 escalators and moving walkways, associated with a 15-year maintenance contract and "mid-life" renovations. Otis is a unit of United Technologies-UTX.

 

Thursday, May 24, 2018

Despite unfavorable weather, Ross Stores-ROST rang up a 9% increase in first quarter sales to $3.6 billion with net earnings up a stylish 30% to $418 million and EPS up a dressy 35% to $1.11. Excluding the $0.17 tax benefit from U.S. tax reform, EPS increased 15%. Same store sales increased 3% on top of last year’s 3% increase on higher traffic and an increase in average basket size. Operating margin of 15.1% was down slightly year-over-year as an improvement in merchandise gross margin and favorable timing of packaway-related expenses were offset by higher freight costs and wage-related investments. The company opened 23 new stores during the quarter, including 6 new dd’s DISCOUNTS. During the quarter, Ross Stores generated $392 million in free cash flow, down 12% from last year, squeezed by a 19% jump in inventories due to higher packaway opportunities. In store inventories increased just 2%. During the quarter, Ross Stores returned $341 million to shareholders through dividends of $85.4 million and share repurchases of $255.4 million, or $77.27 per average share. The company is on track to repurchase $1.075 billion of its shares during 2018. At quarter’s end, Ross Stores registered more than $1.3 million in cash on its sturdy balance sheet. Looking ahead to the full year, the company expects same store sales to increase in the 1% to 2% range. Given the year-to-date results, the company raised its full year guidance with EPS now expected in the $3.92 to $4.05 range, up 12% from last year at the mid-point. The company expects to open 100 new locations during 2018, including 75 new Ross Stores and 25 dd’s DISCOUNTS.

Hormel Foods-HRL reported second quarter fiscal sales increased 6.5% to $2.3 billion with net income up 12.5% to $237 million and EPS up 12.8% to $0.44. Volume of 1.2 billion pounds increased 2.9%, benefiting from the inclusion of the Columbus and Fontanini acquisitions and strong results in the International segment. Operating margins declined 130 basis points to 13.1% on higher advertising expense, lower commodity profits and increased freight costs. During the first half of the fiscal year, Hormel generated $309 million in free cash flow and returned $234 million to shareholders through share repurchases of $45 million and dividends of $189 million, marking the company’s 359th consecutive quarterly dividend payment. Hormel ended the quarter with $262 million in cash and $810 million in debt as they continue to pay down short-term debt related to the Columbus Craft Meats acquisition. Management reaffirmed full year guidance with sales expected to be in the range of $9.7 - $10.1 billion and EPS in the $1.81 - $1.95 range.