HI-Quality Company Updates

Tuesday, Nov. 21, 2017

Hormel-HRL reported fourth quarter sales declined 5% to $2.5 billion with net income falling 11% to $218 million and EPS down 9% to $0.41. Volume declined 10%, cut by divestures and the impact of the 53rd week in fiscal 2016. By segment, Refrigerated Foods, representing 47% of net sales, declined 6% to $1.2 billion, primarily due to the divestiture of the Farmer John business which were partially offset by the acquisition of Fontanini Italian Meats and Sausages. Grocery Products, representing 20% of total sales, decreased 1% to $489 million on volume declines from SKIPPY® peanut butter and HORMEL® chili. Jennie-O Turkey Store sales, representing 19% of sales, declined 10% to $485 million, primarily due to the continued oversupply in the turkey industry, leading to lower turkey commodity prices. Specialty Foods sales declined 9% to $197 million on weak sales of MUSCLE MILK® protein products. International and Other sales increased 10% to $155 million due to the inclusion of sales of CERATTI® branded products, continued growth of SKIPPY® peanut butter, and strong exports of SPAM®. During the quarter, Hormel paid its 357th consecutive quarterly dividend and announced a 10% increase, marking 52 consecutive increases to the annual dividend. For the full fiscal 2017 year, revenues declined 4% to $9.2 billion with net income down 5% to $847 million and EPS down 4% to $1.57. Return on shareholders’ equity for the year was 17%. Hormel’s free cash flow increased 7% for fiscal 2017 to $793 million with the company paying $346 million in dividends and repurchasing $95 million of its shares. On October 31, Hormel announced it has entered into a definitive agreement to acquire Columbus Manufacturing, Inc., an authentic, premium deli meat and salami company. This strategic acquisition positions Hormel Foods as a total deli solutions provider and enhances its other strong deli brands. The purchase price is approximately $850 million. Total annual sales are approximately $300 million. Management provided full fiscal 2018 guidance of revenue in the range of $9.4 billion to $9.8 billion and EPS between $1.60 and $1.70, excluding the pending Columbus acquisition.


Friday, Nov. 17, 2017

Foot Locker announced an elevated partnership model with NIKE-NKE. The two companies are again joining forces to offer industry-leading experiences to consumers through innovative in-store and pop-up opportunities. The latest joint experience will come to life in New York in the form of a Sneakeasy – a window into what's next in NIKE and Jordan sneakers. House of Hoops by Foot Locker is now offering consumers the opportunity to get the hottest NIKE and Jordan basketball sneakers, as seen straight off NBA courts around the country. As top athletes sport special colorways of NIKE basketball shoes in game, consumers can find these player edition sneakers exclusively at select House of Hoops locations as early as the following day. Also as another of the several new elements elevating the consumer experience with NIKE, Foot Locker is hiring new experts, specially trained on NIKE in "NIKE Pro Athletes" and "NIKE Pro Leads" roles. These two new, full-time career opportunities were created by Foot Locker in partnership with NIKE to drive elevated customer experiences at Foot Locker by offering and sharing an emotional connection to the top NIKE products available in the market.


Thursday, Nov. 16, 2017

Ross Stores-ROST reported third quarter sales rose 8% to $3.3 billion with comparable store sales up a strong 4% as both increased traffic and the average ticket of a basket contributed to growth. Even though 15% of Ross Stores were closed for a period during the hurricanes in the quarter, post-storm sales surged resulting in minimal impact to overall sales from the hurricanes. Net earnings increased a dressy 12% during the quarter to $274 million with EPS up 16% to $.72, as operating margin improved 65 basis points to 13.3% due to a combinations of higher merchandise margin and leverage on above plan sales. Ross Stores continues to gain market share in a challenging retail environment. During the third quarter, Ross opened 30 new Ross Stores and 10 new dd’s Discounts stores ending the quarter with 1,627 locations in 37 states. Free cash flow increased 11% year-to-date to $898.8 million with the company paying $186.5 million in dividends during the same period. During the third quarter and the first nine months of fiscal 2017, the company repurchased 3.6 million and 10.5 million shares of its own common stock, respectively, for an aggregate price of $219 million at an average price of $60.83 per share in the quarter and $649 million or $61.81 per share year-to-date. Management remains on track to repurchase a total of $875 million of its stock for the full fiscal 2017 year. Given better than expected third quarter trends, the company raised its sales outlook with fourth quarter comparable store sales now expected to increase 2% to 3% with fourth quarter EPS expected in the range of $.88 to $.92, up 14%-15% over the prior year period which includes an $.08 benefit from the 53rd week in fiscal 2017. For the full fiscal year, EPS are expected in the range of $3.24 to $3.28.

NIKE-NKE announced that its Board of Directors has approved a quarterly cash dividend of $0.20 per share on the company’s outstanding Class A and Class B Common Stock. This represents an increase of 11 percent versus the prior quarterly dividend rate of $0.18 per share. The dividend declared today is payable on January 2, 2018 to shareholders of record at the close of business December 4, 2017. “This marks NIKE’s 16th consecutive year of increasing dividend payouts,” said Mark Parker, Chairman, President and CEO of NIKE, Inc. “Today’s announcement, combined with the four-year $12 billion share repurchase program we announced in 2015, demonstrates our continued confidence in generating strong cash flow and returns for shareholders through our new Consumer Direct Offense as we continue to invest in fueling sustainable, long-term growth and profitability.”

Brown-Forman-BFB announced that its Board of Directors increased its quarterly cash dividend on its Class A and Class B Common Stock by 8.2% to 19 3/4 cents per share from the prior quarter’s 18 1/4 cents per share. As a result, the indicated annual cash dividend will rise from $0.73 per share to $0.79 per share. Stockholders of record on December 7, 2017 will receive the cash dividend on January 2, 2018. Paul Varga, Chief Executive Officer of Brown-Forman said, "Our 8.2% dividend increase for calendar year 2018 marks the 34th consecutive year of dividend increases. Brown-Forman's strong cash flow generation and our continued prospects for growth underpin the quality and consistency of our dividend program." Brown-Forman has paid quarterly dividends for 72 consecutive years.


Wednesday, Nov. 15, 2017

Cisco Systems-CSCO reported first fiscal quarter revenues of $12.1 billion, down 2% year-over-year, with net income increasing 3% to $2.4 billion and EPS rising 4% to $0.48. A 1% uptick in service revenue to $3.1 billion was offset by a 3% decline in product revenue.  Product revenue  by category included a 4% decline in Infrastructure Platforms to $7 billion and a 16% decline in Other Products to $296 million. Applications and Security increased 6% and 8% to $1.2 billion and $585 million, respectively. During the quarter, Cisco continued to make progress on its multi-year transformation of the business from hardware to software and services with recurring revenue at 32% of total revenues, $5.2 billion deferred product revenue from recurring software and subscriptions and 52% of software revenue from subscriptions.  By geographic segment, Americas revenues of $7.4 billion were down 1%, EMEA sales of $2.9 billion were down 3% and APJC sales of $1.9 billion were down 1%. During the quarter, Cisco generated $3.1 billion in cash flow from operations, up 13% year-over-year. Cisco returned more than $3 billion to shareholders during the quarter through repurchasing about 51 million shares at an average price of $31.80 per share for an aggregate purchase price of $1.6 billion and dividends of $1.4 billion. Cisco ended the quarter with $72 billion of cash on its sturdy balance sheet, with $69 billion of the cash held overseas. Looking ahead to the second quarter, the company expects revenues to increase by 1% to 3% with non-GAAP EPS of $0.58 to $0.60. The company announced the acquisitions of privately held Springpath, Inc. and privately held Perspica, Inc. The Springpath acquisition is designed to enhance Cisco’s ability to deliver next-generation data center innovation to customers. The Perspica acquisition provides machine learning and data processing technology which enables customers to analyze large amounts of application-related data.


Tuesday, Nov. 14, 2017

The TJX Companies-TJX reported a solid 6% increase in third quarter sales to $8.8 billion with net income growing 17% to $641 million and EPS up 20% to $1.00. Excluding the combined $.08 impact of last year’s debt extinguishment charge and pension settlement charge, EPS is up 10% year-over-year. Consolidated comparable store sales were flat during the quarter, driven by an increase in customer traffic at every TJX division, offset by a decline in average ticket and hurricane related impacts. By division, Marmaxx sales increased 1% to $5.3 billion on a 1% decline in comparable store sales. HomeGoods sales increased 14% year-over-year to $1.2 billion on a 3% increase in same store sales. TJX Canada sales increased 15% to $983 million, also on a 4% same store sales increase while TJX International sales increased 13% to $1.3 billion on a 1% same store sales increase. During the quarter, TJX increased its square footage by 5% year-over-year, adding 139 stores bringing the total to 4,052 stores. TJX’s new brand, HomeSense, launched their first three stores during the quarter. During the third quarter, the Company repurchased a total of $350 million of TJX stock, retiring 4.9 million shares. During the first nine months of the year, the Company repurchased a total of $1.25 billion of TJX stock, retiring 16.9 million shares and paid $567 million in dividends. During the first half of the year, TJX generated $1.1 billion in free cash flow, bringing the total cash at quarter’s end to nearly $2.4 billion on its sturdy balance sheet. Looking ahead to the full fiscal year, sales are expected in the $35.6 billion to $35.7 billion range on a 1% to 2% increase in same store sales. EPS are expected in the range of $3.91 to $3.93, up 13% to 14%, marked up in part by an $0.11 benefit from the 53rd week in the fiscal 2018 calendar. Excluding this benefit, adjusted EPS are expected in the range of $3.80 to $3.82, up 8%. The company now expects to repurchase approximately $1.5 to $1.8 billion of TJX stock in fiscal 2018.

 

 Friday, Nov. 10, 2017

T. Rowe Price Group-TROW reported preliminary month-end assets under management of $971 billionas of October 31, 2017, representing a 20% increase since year end.  Client transfers from mutual funds to other portfolios were $2.5 billion for the month-ended October 31, 2017.


Thursday, Nov. 9, 2017

Walt Disney-DIS reported fourth quarter revenues declined 3% to $12.8 billion with net income down 1% to $1.7 billion and EPS up 3% to $1.13 on lower shares outstanding. Earnings in the fourth quarter were adversely impacted by $275 million or $.11 per share due to the impact of the hurricanes on Disney World which closed for two days, a cancelled animated movie and a valuation adjustment for the BamTech acquisition. For the full fiscal 2017 year, revenues declined 1% to $55.1 billion with net income down 4% to $9 billion and EPS off 1% to $5.69. Return on shareholders’ equity for the year was a magical 21.7%. Parks and Resorts were the bright spot during the year with revenues up 8% to $18.4 billion and operating income up 14% to $3.8 billion. Internationally, Disney benefited from a full year of operations at Shanghai Disney Resort and higher attendance and guest spending at DisneyLand Paris driven by the 25th Anniversary celebration. The increase at domestic operations was due to higher guest spending for admissions to the theme parks and sailing on cruise ships. On the other hand, the company’s other business segments all experienced declines in revenues and operating earnings both in the fourth quarter and for the full year. The decrease at Media Networks was due to contractual rate increases for sports programming, lower advertising revenue and higher losses from equity investments in BamTech and Hulu. Lower Studio Entertainment and Consumer Products & Interactive Media results were due to tough comparisons with the prior year period’s exceptional performance of the Star Wars franchise. Free cash flow increased 4% to $8.7 billion during the year. The company invested $3.6 billion in capital expenditures in 2017 with management planning to bump the capital expenditures up by another $1 billion in fiscal 2018 as they develop Star War Lands and a new Toy Story Land at the theme parks. In addition, the company paid $2.4 billion in dividends and repurchased 89.9 million of its own shares for $9.4 billion at an average cost of $104.56 per share in fiscal 2017. Since year end, the company has repurchased and additional 6.5 million shares for $650 million at an average price of about $100 per share with the company planning on repurchasing $6 billion of its stock in fiscal 2018. During fiscal 2018, earnings will be suppressed by higher cable expenses related to the BamTech consolidation and increased equity losses from Hulu as they continue to invest in content spending. Management’s highest priority in fiscal 2018 is streaming its sports and video content in scale direct to consumers. Management would not comment on the 21st Century Fox acquisition rumors by  Disney.

Maximus-MMS reported fourth quarter revenues were down slightly to $620.9 million but greater than expected principally due to strong Health Segment delivery and higher level of pass-through revenue from Australian operations. Net income and EPS during the quarter each rose 5% to $53.3 million and $.81, respectively, benefiting from a lower income tax rate during the quarter. The company’s capital allocation priorities remain first to use cash for selective acquisitions, then to pay the dividend and then for opportunistic share repurchases. Year-to-date signed contract awards at 9/30/17 totaled $2.8 billion with contracts pending (awarded but unsigned) totaling $1.3 billion. The sales pipeline at quarter end was $2.4 billion comprised of $624 million in proposals pending, $545 million in proposals in preparation and $1.2 billion in opportunities tracking. The pipeline is lower compared to the third quarter of fiscal 2017 due to the high level of contracts that converted into new awards. Maximus continues to feel lingering effects of industry pause in the federal market due to the transition in Washington. For the full fiscal 2017 year, revenues rose 2% to $2.45 billion with net income up 17% to $209.4 million and EPS up 18% to $3.17 which includes approximately $.14 of tax benefits. Return on shareholders’ equity for the year was 22%. Free cash flow more than doubled during the year to $313 million with the company repaying most of their credit facility and long-term debt, while also paying $11.7 million in dividends and repurchasing $28.9 million of its own shares. While no share repurchases occurred during the fourth quarter, the company has $110 million remaining authorized for future share repurchases. Management’s fiscal 2018 guidance is for revenue in the range of $2.48 billion to $2.55 billion with EPS in the range of $2.95 to $3.15, which includes the detrimental impacts from new contracts in startup of approximately $0.12 per share.


Tuesday, Nov. 7, 2017

Faiveley Transport, a subsidiary of Wabtec-WAB, has been awarded contracts worth more than $150 million by RailConnect NSW, a consortium consisting of the Hyundai Rotem Company, UGL Limited and Mitsubishi Electric Australia, to supply a complete range of railway systems and maintenance services for the 56 train sets (512 cars) of the New Intercity Fleet, New South Wales Australia.

The board of directors of ADP-ADP approved a $0.06 increase in the quarterly cash dividend to an annual rate of $2.52 per share, Carlos Rodriguez, ADP’s president and chief executive officer, announced today.  The increased cash dividend marks the 43rd consecutive year in which ADP has raised its quarterly dividend.   “This year’s 10.5% increase in our quarterly dividend is a strong signal of the board’s confidence in ADP’s future,” said Carlos Rodriguez.  

Monday, Nov. 6, 2017

The Priceline Group-PCLN  reported third quarter revenues rose 20.1% to $4.4 billion with net income and EPS each more than tripling to $1.7 billion and $34.43, respectively, as last year’s results included a significant $941 million impairment of goodwill charge related to the OpenTable acquisition. During the third quarter of 2017, the company’s global accommodation business booked 178 million room nights, up 19% from the prior year period. Booking.com had 1.5 million properties on its platform, up 41% over last year, which represents 26.9 million potentially bookable rooms, which management believes is the largest and most diverse selection of instantly bookable accommodations in the world. Third quarter gross travel bookings were $21.8 billion, an increase of 18% over a year ago. Gross profit increased 22% for the third quarter to $4.4 billion. Free cash flow increased 20% during the first nine months of the year to $3.3 billion with the company repurchasing $1.1 billion of its own shares during the same time period. Priceline ended the quarter with $18.4 billion in cash and investments and $8.8 billion of long-term debt on its strong balance sheet. For the fourth quarter, management expects its growth rate to decelerate due to the law of large numbers and difficult comparisons with the prior year. In addition, the company is investing heavily in brand advertising to drive traffic to its websites while also investing in operating expenses to support technology investments and the continued strong growth of vacation rental properties on its platforms. Vacation rental listings jumped 58% to 816,000 properties. For the fourth quarter, management expects total gross travel bookings to increase 9.5% to 14.5% with room nights booked expected to grow 8% to 13%. Gross profit in the fourth quarter is expected to increase 10.5% to 15.5% with operating margin pressure leading to fourth quarter EPS declining about 4% to $12.60 to $13.20.

Fastenal-FAST reported net sales for October rose 19.2% to $399.7 million with daily sales up 13.8% to $18.2 million. Manufacturing daily sales rose 15.8% while non-residential construction sales rose 6%. Daily sales growth by product line was 11.5% for fasteners and 15.5% for other products. Year-to-date, Fastenal has opened 17 new branches ending the month with 2,420 locations. Total personnel increased 3.5% to 20,550.


Friday, Nov. 3, 2017

Berkshire Hathaway-BRKB reported the company’s net worth during the first nine months of 2017 increased by 8.9% with book value equal to $187,435 per Class A share as of 9/30/17. The $25.3 billion increase in shareholders’ equity was due to the company’s $12.4 billion in net earnings during the first nine months and approximately $10.9 billion of gains in other comprehensive income related to changes in unrealized investment appreciation and $1.9 billion of foreign currency translation gains.  

Berkshire’s five major investment holdings, representing 62% of total equities, had mixed results since 12-31-16. Wells Fargo’s stock declined 3% to $26.9 billion amid continued negative headlines on business practices and increased legal costs. Apple became the apple of Buffett’s eye as the position size tripled since year end to $21.3 billion through appreciation and additional purchases.  Since year end, the American Express position charged 22% higher to $13.7 billion and Coca-Cola’s stock popped 8% to $18 billion.  Bank of America traded places with IBM in the top 5 positions as IBM shares had been trimmed back and Bank of America was valued at $17.7 billion at quarter end after Berkshire exercised all of their warrants and acquired 700,000 shares of Bank of America common stock on 8/24/17.   

Berkshire’s third quarter operating revenues rose 7.5% to $59.6 billion with all operating business groups contributing to the growth led by 18% revenue growth from the insurance group and 12% growth from the Finance and Financial Products group.  Net income declined 43% during the quarter to $4.1 billion.   Operating earnings (excluding investment and derivative gains/losses) declined 29% during the second quarter to $3.4 billion, due primarily to pre-tax insurance underwriting losses of approximately $3 billion ($1.95 billion after-tax) attributable to three major hurricanes (Harvey, Irma and Maria) and an earthquake in Mexico.  

Berkshire’s insurance underwriting operations generated a $1.4 billion loss during the second quarter compared to a $272 million profit in the prior year period.    Insurance investment income was 23% higher at $1 billion during the quarter, reflecting higher interest rates on short-term investments and certain fixed-income investments as well as higher dividend income.  The float of the insurance operations approximated a whopping $113 billion as of 9/30/17, an increase of $22 billion since 12/31/16 related in large part to the AIG deal and estimated liabilities related to catastrophe events. The average cost of float in the first nine months of the year was about 2.5% due to the aggregate pre-tax underwriting losses of $2.6 billion.

Burlington Northern Santa Fe’s (BNSF) revenues rose 3% during the third quarter to $5.3 billion with net earnings chugging 2% higher to $1.0 billion. During the first nine months, BNSF generated a 2% comparative increase in average revenue per car/unit and a 6% increase in volume. Overall volume growth moderated in the third quarter primarily due to lower grain exports, and Berkshire expects continued moderation in the fourth quarter.

Berkshire Hathaway Energy reported revenues increased 3% to $5.4 billion during the third quarter led by 17% growth in the real estate brokerage business to $965 million due in part to acquisitions and 6% growth at NV Energy to $1.1 billion.  Net earnings charged 3% higher during the quarter to $963 million due to earnings improvements at PacifiCorp, MidAmerican Energy and NV Energy.   

Berkshire’s manufacturing businesses reported a 6% increase in revenue growth in the quarter to $12.8 billion with operating earnings relatively unchanged at $2.0 billion. The results reflected in part the acquisitions of Precision Castparts and Duracell.  Growth was led by the Building products unit as revenues increased 10% to $3.1 billion  due to bolt-on acquisitions by Shaw and MiTek and sales volume increases by MiTek, Benjamin Moore and Johns Mansville. Consumer products led profit growth with a 28% gain to $348 million in pre-tax earnings due to increased earnings from Duracell and Forest River.

Service and Retailing revenues rose 4% during the quarter to $19.3 billion with pre-tax earnings down 3% to $536 million. Service revenues rose 6% to $2.8 billion with operating earnings up 3% to $315 million driven by TTI, NetJets and FlightSafety.   Retailing revenues rose 1% during the quarter to $3.8 billion with operating earnings up 22% to $176 million, reflecting higher earnings from Berkshire Hathaway Automotive (BHA).  McLane’s revenues rose 4% during the quarter to $12.8 billion due to a increase in grocery sales. However, operating earnings declined 58% to $45 million due to significant pricing pressures in an increasingly competitive grocery business environment. 

Finance and Financial Products revenues rose 12% during the quarter to $2.2 billion with net income increasing 1% to $341 million. The revenue increase was due to a 20% increase in home sales at Clayton Homes, reflecting higher unit sales and higher average prices.  Earnings reflected improved growth at Clayton Homes and Other businesses in the unit, partially offset by weakness in the Transportation equipment leasing business.   

Berkshire’s balance sheet continues to reflect significant liquidity and a strong capital base of $308.3 billion as of 9/30/17. Excluding utility and finance investments, Berkshire ended the quarter with $289.5 billion in investments allocated approximately 52.4% to equities ($151.6 billion), 7.7% to fixed-income investments ($22.2 billion), 1.1% to other investments, including preferred stock in Restaurant Brands International ($3.3 billion), 5.4% to Kraft Heinz ($15.7 billion, with a fair value of $25.2 billion as of 9-30-17), and 33.4% in cash and equivalents ($96.6 billion).  

Berkshire’s financial strength allows Buffett to make significant investments and acquisitions. Apple has been the biggest new recent investment now worth about $21 billion.  Berkshire expects the acquisition of Medical Liability Mutual Insurance Company with 6-30-17 assets and policyholders’ surplus of $5.5 billion and $2.1 billion, respectively, to close in early 2018. On July 7, 2017, Berkshire Hathaway Energy agreed to acquire 80.3% of Oncor Electric Delivery Company for $9 billion, but the deal was terminated by Energy Future Holding. On Oct. 3, 2017, Berkshire entered into an agreement to acquire a 38.6% interest in Pilot Flying J, one of the largest operators of travel centers in North America with approximately $20 billion in annual revenues with Berkshire becoming a majority owner in 2023 when they plan to acquire an additional 41.4% interest in Pilot Flying J.

Free cash flow increased 86% during the first nine months of the year to $29.1 billion, due primarily to the big boost to float in part from the AIG deal.  During the first nine months, capital expenditures declined 11% to approximately $8.4 billion, including $3.2 billion by Berkshire Hathaway Energy and $2.4 billion by BNSF. Berkshire Hathaway forecasts aggregate capital expenditures of about $2.6 billion over the balance of 2017 for these two businesses. During the first nine months of 2017, Berkshire purchased a net $5.8 billion in Treasury Bills and fixed-income investments and purchased a net $4.4 billion of equity securities, reflecting in part the purchase of Apple and the sale of IBM shares. There were no share repurchases of Berkshire Hathaway stock.   

Berkshire Hathaway’s stock appears fairly valued, currently trading at $280,470 per A share and $187 per B share. Based on current business fundamentals, we expect Berkshire’s A shares to trade between $227,000-$292,000 per share and the B shares to trade between $151-$195 per share.  Hold.

 

Thursday, Nov. 2, 2017

Apple-AAPL reported fourth quarter revenues rose 12% to $52.6 billion with net income up 19% to $10.7 billion and EPS up 24% to $2.07 resulting in a record fourth quarter. International sales accounted for 62% of the quarter’s revenues.  For the full fiscal 2017 year, revenues rose 6% to $229.2 billion with net income up 6% to $48.4 billion and EPS up 10% to $9.21. Return on shareholders’ equity for the year was an impressive 36.1%. The company ended the year in a strong fashion with growth in all product categories and the best quarter ever for Services, which grew revenues 34% in the quarter to a record $8.5 billion thanks to strong sales in the App Store,  icloudn, and Apple Music which saw subscriptions jump 75% in the quarter.  iPhone revenues grew 2% to $28.8 billion during the quarter with units up 3% to 46.7 million phones sold. iPad revenues grew 14% to $4.8 billion with unit growth of 11% to 10.3 million units sold and growth in all geographic regions as the iPad boasts a better than 50% market share in the tablet market. Mac revenues grew 25% to $7.2 billion on 10% unit growth to 5.3 million units as the Mac once again gained market share. Other products, including the Apple Watch and Apple TV, grew revenues 36% during the quarter to $3.2 billion. Revenue growth around the world was broad based with double-digit growth in the Americas, Europe and Greater China, which returned to growth with a 12% increase in revenues to $9.8 billion during the quarter.  Free cash flow declined 4% during the year to $51.1 billion due to working capital fluctuations. For the full year, the company paid $12.8 billion in dividends and repurchased $32.9 billion of its own shares, including 29.1 million shares repurchased for $4.5 billion in the fourth quarter at a price of about $154.54 per share. Apple ended the year with $268.9 billion in cash and investments and $97.2 billion of long-term debt on its balance sheet. Apple has completed $234 billion of its authorized $300 billion capital return program to shareholders. Apple expects this holiday season to result in the biggest quarter ever for the company with its exciting line up of new products, including the iPhone 8 and iPhone 8 Plus, Apple Watch Series 3, Apple TV 4K and the recent launch of the iPhone X which is experiencing very strong orders. For the first quarter of fiscal 2018, Apple is forecasting revenues in the range of $84 billion to $87 billion with gross margin between 38% to 38.5%, operating expenses between $7.65 billion and $7.75 billion, other income of $600 million and a tax rate of 25.5%.

 

Starbucks-SBUX reported fourth quarter sales dipped slightly from last year to $5.7 billion with net income of $788.5 million, down 1.6%, and EPS of $0.54, flat compared to last year. Excluding the extra week in 2016, sales grew 8%. Global comparable store sales increased 2%, or 3% excluding the impact of the hurricanes, driven by a 2% increase in average ticket and a 1% increase in transactions. During the quarter, Starbucks opened 603 new stores, including the closure of 54 Teavana-branded stores. Operating margins declined 360 basis points, squeezed by increased labor costs, the impact of the hurricanes, product mix, inventory write-offs and costs related to the Teavana-branded store closures. For the year, revenues grew to $22.4 billion, up 5%, with net income of $2.9 billion, up 2.4%, and EPS of $1.97, up 3.7%. Global comparable store sales increased 3%, boosted by a 7% comp growth in China. During the fiscal year, Starbucks rang up an impressive 52.9% return on shareholders’ equity. The company generated $2.65 billion in free cash flow during fiscal 2017, down 15% from last year, primarily due to increased capital expenditures and working capital demands. Starbucks returned nearly $3.5 billion to shareholders in fiscal 2017 through share repurchases of $2 billion and dividends of $1.5 billion. The Board announced a 20% increase in the fiscal 2018 quarterly dividend to $0.30 per share and that the company expects to return $15 billion to shareholders through dividends and share buybacks during the next three years, financed primarily by Starbuck’s robust cash flows. Starbucks also announced it will sell its TAZO tea brand to Unilever for $384 million, driving a single tea brand strategy with its super-premium tea brand, Teavana. Given that Starbucks has failed to meet its long-term targets during the past few years, the company revised them. Going forward, annual global comparable store sales are expected to grow 3% to 5% generating revenue growth in the high-single-digits with EPS growth of 12% or greater, down from the historical EPS growth target of 15% to 20%. Starbucks targets a 25% or greater return on invested capital going forward.

Fluor-FLR reported third quarter results with revenues up 2% to $4.9 billion. The company reported  earnings during the quarter of $94 million or $.67 per share compared to $5 million or $.03 per share in the prior year period. By segment, Energy, Chemicals & Mining segment revenue was up 4% to $2.4 billion with profit of $104 million, compared to a segment loss of $60 million a year ago. Industrial, Infrastructure & Power segment revenues were flat at $1.1 billion with segment profit up nearly 18% to $33 million. The Government segment revenue was up 12.5% to $766 million with segment profit up more than 15% to $30 million and Diversified Services segment revenue declined 1.3% to $624 million with segment profit increasing 20% to $35 million. New awards for the quarter were $3.8 billion, including $2.6 billion in Energy, Chemicals & Mining and $628 million in Industrial, Infrastructure & Power. Consolidated ending backlog was $32.9 billion compared to $44.3 billion in the prior year period. Free cash flow increased 16.5% in the first nine months to $334.3 million with the company paying $88.6 million in dividends, which remained flat with the prior year period. The company is narrowing its 2017 guidance for EPS to a range of $1.50 to $1.60, from the previous range of $1.40 to $1.70. Management is cautiously optimistic that the industry is moving from trough to recovery.

 

Becton Dickinson-BDX reported fourth fiscal quarter revenues of $3.2 billion, down 2% from last year’s fourth quarter, primarily due to the Respiratory Solutions business divestiture that was completed in October 2016.  On a comparable, currency-neutral basis, fourth quarter revenues grew 4.4%. Becton Dickinson reported net income of $289 million, or $1.24 per share, compared to net income of $19 million, or $0.09 per share, reported last year. This increase is primarily due to restructuring and other charges incurred in the prior-year period related to the attainment of cost synergies associated with the acquisition of CareFusion. For the full fiscal 2017 year, revenues decreased 3.1% to $12.1 billion with net income up 12.6% to $1.1 billion and EPS up 2.4% to $4.60. By business segment, BD Medical revenues fell 5.3% to $2.1 billion in the wake of the Respiratory Solutions divestiture. Comparable, currency-neutral revenues increased 3.9% reflecting strong performance in the Medication Management Solutions and Diabetes Care units, and solid performance in the Pharmaceutical Systems unit. BD Life Sciences sales of 1.1 billion increased 5.5% year-over-year, reflecting strong performance across the Biosciences, Diagnostic Systems and Preanalytical Systems units. Management continued to execute on the CareFusion commitments and will leverage lessons learned during the process in the C.R. Bard acquisition, which is expected to close before calendar year-end. Becton Dickinson expects full fiscal year 2018 revenues, excluding the C.R. Bard acquisition, to increase 5% to 6 and adjusted EPS is expected in the $10.55 and $10.65 range, up about 12%. 

Automatic Data Processing-ADP reported fiscal first quarter revenues rose 6% to $3.1 billion with net income up 9% to $401.5 million and EPS up 11% to $.90. Client retention increased 160 basis points for the quarter ahead of management’s expectations, reflecting the company’s continued progress in improving solutions for clients. The company has upgraded more than 83% of clients to strategic cloud platforms. Worldwide new business bookings declined 3% for the quarter in line with the company’s expectations with management reaffirming its outlook for 5% to 7% growth in new business bookings for the full year. Interest on funds held for clients increased 11% to $99 million in the quarter as average client fund balances increased 6% in the quarter to $21.2 billion. The average interest yield on client funds was 1.9% up 10 basis points compared to the prior year. Subsequent to quarter end, ADP acquired Global Cash Card, a leader in digital payments, including paycards and other electronic accounts for approximately $490 million. Free cash flow in the first quarter increased 62% to $95.1 million due to lower capital expenditures. During the first quarter, the company paid $253.7 million in dividends and repurchased $250.1 million of its own shares. Management raised their outlook for full year fiscal 2018 revenue growth to a range of 6%-8% compared to the prior forecast of 5% to 6% due in part to the Global Cash Card acquisition and more favorable foreign exchange. ADP now expects full year EPS to be down 1% to up 1% compared to the prior forecast of down 3% to down 1% with adjusted EPS growth now expected in the range of 5% to 7% compared to the prior forecast of 2% to 4% growth.

Wednesday, Nov. 1, 2017

The Cheesecake Factory – CAKE reported third quarter sales declined 1% to $555.4 million with net income falling 24% to $26.4 million and EPS dropping 20% to $0.56. Comparable restaurant sales declined 2.3%, including a 0.8% negative impact from Hurricanes Harvey, Irma and Maria. Excluding this weather impact, comparable restaurant sales declined 1.5% due to a decline in mall walk-in traffic. The company opened one new store during the quarter compared with no new stores opened during last year’s third quarter. Operating income fell 270 basis points, squeezed by higher hourly wage rates, increased repair and maintenance costs and higher marketing spend. Cash flow from operations for the first nine months of 2017 was about $154 million and free cash flow was $72 million, down 51% from last year. The company drew $30 million on its revolving credit to support third quarter repurchase activity. Looking ahead to the fourth quarter, Cheesecake Factory expects same store sales to be in the range of down 1% to flat. EPS are expected in the range of $0.50 and $0.54, down 21% year-over-year at the midpoint. For the full 2017 year, comparable sales are expected to decline by 1% and EPS are expected in the $2.57 and $2.61 range, down 8% from 2016, including the 4 cent negative hurricane impact in the third quarter and the continuing Puerto Rico impact during the fourth quarter. Total 2017 capital expenditures are expected in the $110 million to $115 million range and share repurchases are expected in the $125 million to $150 million range. Together with the dividend, Cheesecake Factory plans to return 100% of its free cash flow, expected between $175 million and $200 million, to shareholders in 2017. For fiscal 2018, Cheesecake Factory expects EPS of between $2.50 and $2.75 based on an assumed comparable sales range of flat to up 1%. While this EPS range reflects industry cost pressures, it also reflects a stabilization in sales trends during 2018. On the cost side, food inflation of 3% is expected across most  categories and wage rate inflation of about 5% is expected in 2018, consistent with the level experienced this year. Wage cost inflation is expected to be partially offset by more market-based pricing in 2018 to help mitigate rising labor costs. Cheesecake Factory expects to open as many as four to six company-owned restaurants in 2018, including one Grand Lux Café and as many as four to five restaurants internationally under licensing agreements in 2018, representing total unit growth of 3% to 4%.

Qualcomm-QCOM reported fourth quarter revenues declined 5% to $5.9 billion with net income plummeting 89% to $200 million and EPS diving 90% to $.11. For the full fiscal 2017 year, revenues declined 5% to $22.3 billion with net income and EPS each down 57% to $2.5 billion and $1.65, respectively. These results reflect the negative impact of significant regulatory and arbitration charges and actions taken by Apple and its contract manufacturers as well as a dispute with another licensee, who underpaid royalties in the second quarter and did not report or pay royalties due in the third and fourth quarter. Due to the complex litigation with these parties, management does not expect the disputes will be resolved anytime soon. Given the lower earnings, return on shareholders’ equity declined to a subpar 8% for fiscal 2017. Free cash flow also declined 42% for the year to $4 billion. During the year, the company paid $3.3 billion in dividends and repurchased $1.3 billion of its own shares. On a cumulative basis, Qualcomm has returned $58.7 billion to shareholders through dividends and share repurchases with $1.6 billion remaining authorized for future share repurchases. The company ended the year with $38.6 billion in cash and investments. This cash is earmarked for the $38 billion acquisition of NXP Semiconductors N.V., which management hopefully expects to close by calendar year end, although the transaction may close in early 2018. Management’s outlook for the first quarter of fiscal 2018 is for revenue in the range of $5.5 billion to $6.3 billion representing a decrease of 8% to an increase of 5% with GAAP EPS expected in the range of $.63-$.73, representing an increase of 37% to 59%. Excluding acquisition related and other items in the prior year period, non-GAAP EPS are expected in the range of $.85-$.95, representing a decline of 20% to 29%.

Cognizant Technology Solutions-CTSH reported third quarter sales increased a healthy 9.1% to $3.8 billion with net income and EPS increasing 11.5% and 15.1% to $495 million and $0.84, respectively. Consulting & Technology Service revenue increased 11.3% and Outsourcing Services increased 6.1 % with 38% of revenue from fixed price contracts. Two of Cognizant’s four segments delivered double-digit growth with Products and Resources (manufacturing and logistics) up 14% to $774 million and Communications, Media and Technology up 18.2% to $480 million. Healthcare revenues increased 9.3% to $1.1 billion and the segment completed the acquisitions of TMG Health and Top Tier Consulting. Financial Services revenues increased 3.8% to $1.4 billion, largely driven by insurance companies and double-digit growth in mid-tier banking. Quarter-end headcount stood at 256,100, down 700 mainly in response to the company’s realignment program. Cognizant’s balance sheet remains very healthy with $4.7 billion of cash and short-term investments. Cognizant completed its $1.5 billion accelerated share repurchase program in the third quarter and has committed to repurchasing an additional $1.2 billion. Year-to-date, Cognizant has returned more than $1.7 billion to shareholders through dividends of $179 million and share repurchases of nearly $1.6 billion. Given the strong first three quarters, management raised the low end of its full year revenue guidance to $14.78 to $14.84 billion from $14.7 to $14.84 billion and adjusted EPS of at least $3.70.

Private sector employment increased by 235,000 jobs from September to October according to the October ADP National Employment Report®"The job market remains healthy and hiring bounced back with one of the best performances we've seen all year," said Ahu Yildirmaz, vice president and co-head of the ADP-ADP Research Institute. "Although the service providing sector was hard hit last month due to the weather, we saw significant growth in professional services, especially in the higher paid professional technical jobs. Additionally, small businesses rebounded well from the impact of Hurricanes Harvey and Irma, posting very strong gains." Mark Zandi, chief economist of Moody's Analytics, said, "The job market rebounded strongly from the hit it took from Hurricanes Harvey and Irma. Resurgence in construction jobs shows the rebuilding is already in full swing. Looking through the hurricane-created volatility, job growth is robust." 

AbbVie-ABBV in cooperation with Neurocrine Biosciences, Inc. announced detailed results from two replicate Phase 3 extension studies evaluating the long-term efficacy and safety of elagolix, an investigational, orally administered gonadotropin-releasing hormone (GnRH) antagonist, being evaluated for the management of endometriosis with associated pain. In the extension studies, elagolix demonstrated sustained reduction in average monthly menstrual pelvic pain and non-menstrual pelvic pain in women through the 12-month treatment period. The safety and tolerability of elagolix was consistent with the anticipated effects of reduced estradiol levels and no new safety concerns were identified with elagolix use for the 12-month treatment period. "Endometriosis is a chronic and painful disease," said Eric Surrey, M.D., study investigator and Medical Director, Colorado Center of Reproductive Medicine. "The results presented today are positive for patients and are consistent with previous data that demonstrate elagolix has the potential to be an important non-surgical treatment option for women suffering from the most prevalent symptoms of endometriosis."


Tuesday, Oct. 31, 2017

MasterCard-MA reported record third quarter results as net revenues grew 18% to $3.4 billion with net income charging 21% higher to $1.4 billion and EPS up 24% to $1.34. Acquisitions contributed 2.5% to this growth. Switched transactions increased 17% to 16.9 billion with a 10% increase in gross dollar volume on a local currency basis to $1.4 trillion. Cross-border volume increased 15% on a local currency basis. As of 9/30/17, the company’s customers had issued 2.4 billion Mastercard and Maestro-branded cards. Free cash flow increased 6% year-to-date to $3.6 billion. During the first nine months, the company paid $709 million in dividends and repurchased $2.7 billion of its own shares, including 6.4 million shares at a cost of $838 million or an average price of about $130.94 per share. Subsequent to quarter end, MasterCard repurchased an additional 2 million shares at a cost of $286 million, which leaves $2 billion remaining under current share repurchase authorization. The outlook for the full 2017 year is for revenue growth in the mid-teens and adjusted operating expenses in the high single digit range. Economic growth around the world was generally positive which led to MasterCard’s accelerated volume growth as the company gained market share outside of the U.S.  In the U.S., steady economic growth was complemented by low unemployment and inflation with U.S. retail sales up 4.2% in the third quarter despite the hurricanes. In Europe, economic growth is steady with an uptrend in consumer confidence. The U.K. is experiencing concerns about Brexit, although unemployment is low. In Latin America, there are signs of improvement with Mexico’s economic growth stable despite the earthquake and Brazil recovering from its recession. In Asia, there is steady economic growth with China additive to MasterCard’s volume.

Hormel Foods-HRL announced it has entered into a definitive agreement to acquire Columbus Manufacturing, Inc., an authentic, premium deli meat and salami company, from Chicago-based Arbor Investments. This strategic acquisition positions Hormel Foods as a total deli solutions provider and enhances its other strong deli brands such as Hormel®, Jennie-O®, Applegate®, and DiLusso®. The purchase price is approximately $850 million. Total annual sales are approximately $300 million with an expected growth rate in excess of 5 percent. Hormel Foods expects this acquisition to be modestly accretive to earnings per share in fiscal 2018. Full-year accretion in fiscal 2019 is expected to be between 6 to 8 cents per share.

Friday, Oct. 27, 2017

AbbVie-ABBV reported third quarter revenue rose 9% to $7 billion with net income up 2% to $1.6 billion and EPS up 4% to $1.01. Adjusted revenue and EPS rose 9% and 17%, respectively. Third quarter global Humira sales increased 16% to $4.7 billion, driven by 19% sales of Humira in the U.S. Third quarter global Imbruvica revenues increased 37% to $688 million. AbbVie remains committed to returning cash to shareholders through growing dividends and substantial share repurchases. Accordingly, the company announced an 11% increase in its dividend to an annualized rate of $2.84 for fiscal 2018, which represents a healthy 3% dividend yield based on current valuations. Since its inception in 2013, AbbVie has increased its dividend more than 77%.  AbbVie raised its 2017 EPS outlook to $4.27-$4.29 with sales expected to increase 10% and adjusted EPS expected to grow 15% at the midpoint of an expected $5.53 to $5.5.5 range. Cash flow from operations is expected to exceed $8.5 billion in 2017.  For 2018, adjusted EPS guidance was forecast in the range of $6.37 to $6.57, reflecting growth of about 15% to 19%. AbbVie provided an update on its long-term strategic and financial objectives with total sales expected to approximate $37 billion by 2020. Global Humira sales are expected to approach $21 billion by 2020 and contribute significant cash flow through 2025 and beyond. Non-Humira sales are expected to compound at an annual rate of 17.6% through 2025 and grow from $9.6 billion in 2017 to $35 billion in 2025. Operating margin is expected to increase 100-200 basis points per year to 50% by 2020 with double-digit adjusted EPS growth expected through that time. The pipeline is expected to contribute nearly $30 billion to  revenues by 2024 with the company on track to launch more than 20 new products by 2020.

Bioverativ-BIVV reported third quarter revenues rose a healthy 27.2% to $291.6 million with net income and EPS down 16% to $67.9 million and $.63, respectively. Net income and EPS for third quarter 2016 were greatly increased by the realization of deferred tax assets resulting in an effective tax rate of 1.6% compared to the effective rate of 35.3% during the current quarter. ELOCTATE revenues increased 41% to $186.3 million and remained on a strong trajectory due to high patient retention, continued capture of patients switching to long-acting therapies, and the market shift to prophylactic treatment. ALPROLIX revenue rose 4% to $86.5 million despite increasing competition in hemophilia B. Collaboration revenues increased 39% to $16.8 million. During the quarter, Bioverativ entered into strategic research collaborations with Bicycle Therapeutics to develop innovative therapies to treat rare blood disorders and Invicro, LLC focused on expanding the use and adoption of leading imaging technologies to improve the diagnosis and management of joint disease in people with hemophilia. As of quarter end, Bioverativ had $224.1 million of cash on its solid balance sheet.


Thursday, Oct. 26, 2017

Alphabet-GOOGL reported third quarter revenues rose 24% to $27.8 billion with net income up 33% to $6.7 billion and EPS increasing 32% to $9.57. Revenue growth was broad based on a geographic basis with strong double-digit growth generated in all major geographic regions led by 33% growth in Other Americas and 29% growth in APAC. Advertising revenues increased 21% during the quarter to $24.1 billion. Aggregate paid clicks increased 47% with the aggregate cost per click declining 18%. Traffic acquisition costs (TAC) to Google Network Members and distribution partners increased 31.2% to $5.5 billion. Other Bets revenues rose 53% during the quarter to $302 million with the operating loss narrowing to $812 million. Headcount increased 11% over the prior year period to 78,101 Googlers as the company continues to invest in the cloud, YouTube and home hardware. Management believes these areas will provide strong growth for the company as ecommerce providers interested in cloud are working much more closely with Google to provide a seamless shopping experience and new categories, like Google Home, focus on improving the buyer experience. YouTube has more than 1.5 billion daily users on mobile and gets over 100 million hours of watch time in living rooms. Free cash flow decreased 8% during the first nine months of the year to $17.9 billion with the company ending the quarter with $100 billion of cash and investments on its fortress balance sheet with 60% of the cash held outside of the U.S. During the first nine months of the year, Alphabet repurchased $2.7 billion of its own shares but organic growth remains the priority for capital allocation.

Microsoft-MSFT reported first quarter revenue rose 12% to $24.5 billion with net income powering 16% higher to $6.6 billion and EPS up 17% to $.84. Revenue growth was driven by 28% growth in Productivity and Business Processes to $8.2 billion thanks to strong growth by Office 365 and LinkedIn, which contributed $1.1 billion to revenues and is expected to be accretive this year. Revenue in Intelligent Cloud increased 14% to $6.9 billion, driven by 17% growth in server products and cloud services revenues thanks to 90% growth in Azure revenue. Revenue in More Personal Computing was $9.4 billion and relatively unchanged with Surface revenue up 12% thanks to the new Surface laptop and search advertising revenue up 15% driven by higher revenue per search and search volume, while gaming revenue was flat. This quarter, Microsoft exceeded $20 billion in the commercial cloud annual revenue run rate, outpacing the goal set just two years ago. Free cash flow increased 10% during the quarter to $10.3 billion with the company paying $3 billion in dividends, reflecting the recent 8% increase in the dividend, and $2.6 billion in share repurchases, ending the quarter with a whopping $138.5 billion in cash and investments. For the second quarter, Microsoft expects revenue in Productivity and Business Processes in the range of $8.75-$8.95 billion, revenues in Intelligent Cloud in the range of $7.35-$7.55 billion and revenues in More Personal Computing in the range of $11.7-$12.1 billion. Cost of goods sold in the second quarter is expected in the $11-$11.2 billion range with operating expenses expected in the range of $9.1-$9.2 billion. For the full fiscal 2018 year, gross and operating margins are expected to be better than previously forecast.

Stryker-SYK reported healthy third quarter results with sales up 6% to $3 billion, earnings up 22% to $434 million and EPS up 21% to $1.14. Excluding costs related to amortization, product recalls, restructuring and acquisitions, net earnings increased 10%. By segment, Orthopaedics sales of $1.1 billion increased 5%, driven by a 6.5%  unit volume increase (despite procedure cancellations in Texas and Florida due to the hurricanes), which were  partially offset by 2% from lower prices. During the quarter, Stryker sold 33 MAKO robots, including 23 in the U.S., which powered knee  volume increases. Six hundred surgeons have been trained to perform MAKO total knee replacements, which total 9,400 since product launch. Ongoing trials indicate that MAKO may improve operating room efficiency and reduce the need for revision surgeries. MedSurg sales of $1.3 billion increased 7%, including 6% increased unit volume (including negative impacts of 4.6% related to Sage product recalls and 0.8% related to hurricanes). Neurotechnology and Spine net sales of $500 million increased 7% as softness in many product areas was more than offset by high demand for Stryker’s 3D-printed Tritanium products.  Year-to-date, Stryker generated $468 million in free cash flow, down from $910 million last year on recall-related payments of $492 million. Stryker ended the quarter with $2.7 billion in cash, including 80% held overseas, and $6.6 billion in long-term debt. Year-to-date , Stryker has returned more than $700 million to shareholders through dividends of $477 million and share repurchases of $230 million. In September, Stryker completed its $674 million purchase of NOVADAQ, a leading developer of fluorescence imaging technology, which is highly complementary to Stryker’s surgical visualization platform. The acquisition is expected to be neutral to 2018 earnings and accretive thereafter. Subsequent to quarter-end, Stryker announced plans to acquire VEXIM, a French medtech firm that specializes in vertebral compression fracture solutions which complements Stryker’s spine business, for  €183 million. VEXIM reported 2016 sales of €18.5 million, a 33% year-over-year increase.  The company's clinical trial for its SpineJack system is progressing and is slated to be approved for commercialization in 2018. Stryker reaffirmed its 2017 organic sales growth guidance of 6.5% to 7% and tightened its adjusted EPS range to $6.45 to $6.50 from $6.45 to $6.55 on the negative impact of the Sage recalls and weather disruptions.

UPS-UPS reported solid third quarter results with revenue up 7% to $16 billion, net earnings down 0.5% to $1.3 billion and EPS up 0.7% to $1.45. Revenue increased in all segments and major product categories, as expanded customer demand spread across the company’s broad product portfolio. U.S. Domestic Segment sales increased 3.9% to $9.6 billion, driven by Next Day Air and Ground product growth. U.S. Domestic operating profit declined 5.6% to $1.2 billion impacted by one less operating day and natural disasters. Despite foreign currency headwinds, International Segment sales grew 11.2% to $3.4 billion, with operating profits up 8.9% to $627 million. International Domestic daily shipments increased 5.7%, led by double-digit growth across several European countries. During the quarter, UPS received regulatory approval of UPS joint venture with SF Express, a small-package carrier in China. The Supply Chain and Freight Segment reported a 13.4% increase in revenue to $3 billion--the result of deeper alignment with preferred customers, strengthened revenue management initiatives and improved market conditions. Supply Chain Segment operating profits improved 9.7% year-over-year to $226 million. Year-to-date, UPS has generated $4.4 billion in operating cash flow. Earlier in the year, UPS stepped up its pace of investment in its network to capture “tremendous e-commerce and international growth opportunities.” Year-to-date capital expenditures were $3.7 billion, supporting their investment strategies. This year, UPS has paid dividends of nearly $2.1 billion, up 6.4% from last year, providing a current dividend yield of about 3%. So far this year, the company has repurchased 12.3 million shares for approximately $1.4 billion, reaffirming its commitment to return cash to shareowners. Given the solid year-to-date results, management increased the low end of its prior guidance of adjusted EPS in the range of $5.80 to $6.10 to $5.85 to $6.10. The guidance includes about $400 million, or $0.30 per share of pre-tax currency headwinds. UPS plans to deliver more than 750 million packages globally in the 25 days between Thanksgiving and New Year’s Eve. The record-breaking seasonal global delivery volume is approximately 5 percent above last year’s holiday peak shipping season volume. Of the 21 holiday delivery days before December 25, 17 are expected to exceed 30 million delivered packages. During the busy holiday shipping season, UPS flexes its global delivery network to process nearly double the regular daily volume of about 19 million packages and documents.  With the launch of UPS® Saturday ground pickup and delivery service, customers in nearly 4,700 cities and towns across the country will benefit from five additional ground pickup and delivery days between Thanksgiving and Christmas. Online and mobile commerce has transformed the retail industry, and UPS is ideally positioned to serve both consumer and business customers during even these busiest of times. UPS completed four new and expanded facility projects to create about 1 million square feet of additional automated operations space in 2017. Both package sorting and delivery capacity is increasing by about 6 percent over last year. This peak season, UPS plans to employ 95,000 temporary seasonal workers. 


T.Rowe Price-TROW reported third quarter revenues rose 12% to $1.2 billion with net income jumping 19% to $390.0 million and EPS up 22% to $1.56. Assets under management (AUM) increased 17% from the prior year period to $947.9 billion. The firm’s net cash inflows were $5.9 billion in the third quarter. Investors domiciled outside of the U.S. accounted for about 5% of the firm’s AUM. T. Rowe Price maintains a strong balance sheet which is debt-free and boasts more than $4 billion in cash and investments. During the first nine months of the year, the company repurchased 6.6 million shares, or 2.7% of its outstanding shares, for $456.7 million at an average price of $69.20 per share. William J. Stromberg, the company's president and chief executive officer, commented: "U.S. stocks continued to rise in the third quarter, with most major indexes finishing September at or near record highs. Led by emerging markets, international stocks again outperformed U.S. shares as international currencies remained strong relative to the U.S. dollar. Healthy credit conditions contributed to positive fixed income returns globally, with non-U.S. and high yield debt outperforming other sectors. Our assets under management this quarter grew by nearly five percent, boosted by robust market returns and our highest level of net inflows since the first quarter of 2014. Our relative investment performance remained strong across asset classes and time periods, which helped drive increased client interest in our investment solutions and our approach to active investment management. We are encouraged by the green shoots of activity we see in key strategic areas.”

Wednesday, Oct. 25, 2017

F5 Networks - FFIV reported record fourth fiscal quarter results with revenue of $538 million, up 2.4%, net earnings of $135.7 million, up 25%, and EPS of $2.14, up 30%. Excluding the impact of stock-based compensation, amortization of purchased intangible assets, restructuring charges, litigation expense and a non-recurring tax benefit, adjusted fourth quarter earnings and EPS booted up 11% and 16%, respectively. Growth was driven by Services and software based solutions. For the full fiscal year, F5 Networks reported sales of $2.1 billion, up 5%, with earnings of $421 million, up 15%, and EPS of $6.56, up 20%. Adjusted earnings and EPS increased 9% and 15%, respectively. F5 Networks generated an impressive 34.2% return on shareholders’ equity for fiscal 2017. During the year, the company generated more than $700 million in free cash flow and returned $600 million to shareholders through share repurchases, thereby reducing the number of shares outstanding by 4%. As of 9/30/2017, F5 Networks reported $1.3 billion of cash stashed on its debt-free balance sheet. Given the company's solid financial ground, the board announced an additional $1 billion share repurchase program in addition to the $173.7 million remaining under the program authorized in 2010. Commenting on the quarter, Franoçois Locoh-Donou, F5 President and CEO, said, " We finished fiscal 2017 on a solid note, delivering record fourth quarter and annual revenue and earnings. We are excited by the meaningful role we are playing in helping customers solve the complexity of deploying applications across on-premise and multi-cloud environments. We continued to see strong customer interest in our virtual edition and application security offerings during the fourth quarter, particularly in public cloud deployments. We expect the growing traction of our software based advanced application services will be a key driver of product revenue in fiscal 2018 and beyond."

Baxter International – BAX reported a healthy 6% increase in third quarter sales to $2.7 billion with earnings and EPS nearly doubling to $248 million and $0.45, respectively. Excluding special items related to business optimization, intangible asset amortization, Claris acquisition integration costs and post Hurricane Maria expenses in Puerto Rico, earnings and EPS increased 14% to $356 million and $0.64, respectively. Sales within the U.S. were about $1.1 billion, up 8%, while International sales totaled $1.6 billion, up 5%. By business segment, global sales for Hospital Products totaled $1.7 billion, up 7%, boosted by the U.S. fluid systems business, anesthesia and critical care products, hospital pharmacy compounding services plus favorable demand for injectable pharmaceuticals which included $27 million in sales from the July 27 acquisition of Claris. Baxter’s third quarter Renal sales increased 3% to $1 billion, driven by improved performance globally across all major product lines and therapies. Year-to-date operating cash flow increased 43% to $1.3 billion on the strong operational performance and improved working capital management. Free cash flow more than doubled year-over-year to $933 million, representing 91% of adjusted net earnings, which provided the company with enhanced flexibility to reinvest in the business, make bolt-on acquisitions, repurchase shares to offset stock option dilution and pay dividends, targeted at 35% of adjusted net income. Commenting on the third quarter, José E. Almeida, chairman and CEO, said, “Baxter’s solid performance in the third quarter reflects our continued focus on disciplined execution. We are advancing innovation and operational excellence across the organization to deliver positive results for our stakeholders – even as we respond to extraordinary challenges like the recent natural disasters across the Americas and the Caribbean. I’m proud of how our employees continuously step up to make a difference for our patients, healthcare providers, global communities and fellow colleagues.” Given the strong year-to-date performance, Baxter updated its full year guidance. Sales are now expected to increase by 4% versus prior guidance of 3% with adjusted earnings expected in the $2.40 to $2.43 range, representing a 22% to 24% increase over 2016, up from prior guidance of $2.34 to $2.40. Included in the guidance is a $70 million negative impact from Hurricane Maria expected during the fourth quarter. Baxter expects to generate $1.2 billion in free cash flow during 2017, up from prior guidance of $1.1 billion.

Westwood Holdings-WHG reported third quarter revenues rose 5% to $33.5 million primarily related to higher average assets under management (AUM) due to market appreciation. AUM at September 30, 2017 totaled $23.6 billion, up 11% from $21.3 billion and up 4% from $22.6 billion at September 30, 2016 and June 30, 2017, respectively. Net income declined 30% to $4.1 million in the third quarter with EPS down 32% to $.49. During the quarter, Westwood recorded a $2.5 million legal settlement charge, net of insurance recovery and taxes, related to resolution of litigation, which decreased third quarter 2017 diluted earnings per share by $0.30. Westwood agreed to sell their Omaha-based Private Wealth operations, which is expected to close by year end. No gain or loss is expected on the sale with Westwood expecting to serve as a subadvisor on a substantial portion of the assets. Free cash flow increased 4% year-to-date to $38.9 million with Westwood paying out $16.8 million in dividends. Westwood increased its quarterly dividend 10% to $.68 per share or $2.72 on an annualized basis, which represents a nearly 4% dividend yield at current market prices. This marks the 15th consecutive year the company has increased its dividend with more than $165 million in dividends having been distributed to shareholders during this period. At quarter-end, Westwood had $99.5 million in cash and investments, stockholders' equity of $155.4 million, and no debt.

Nike-NKE said at its Investor Day that it expects sales to grow high single digits and EPS to grow in mid-teens over the next 5 years with 75% of growth to come from outside of the U.S.

Walgreens Boots Alliance-WBA reported fourth quarter revenues rose 5.3% to $30.1 billion with net income down 22.1% to $802 million and EPS down 20% to $.76 mainly due to Rite Aid merger termination fees. Retail Pharmacy USA sales increased 7.5% to $22.3 billion during the quarter with comparable sales up 3.1%. Pharmacy sales, which accounted for 72.1% of the division’s sales, increased 12.6%, primarily due to higher prescription volumes, including mail and central specialty following the formation of AllianceRx Walgreens Prime. Comparable pharmacy sales increased 5.6 percent driven by higher volume. The division filled 250.2 million prescriptions, an increase of 9.0% over the prior year period. The division’s retail prescription market share increased 120 basis points over the year ago quarter to 20.5%. This was the division’s highest reported quarterly retail prescription market share in the U.S., for a second consecutive quarter. Retail Pharmacy International sales decreased 3.2% to $2.9 billion mainly due to currency translation. Pharmaceutical Wholesale sales increased 0.8% to $5.4 billion with comparable constant currency sales up 5.4%. Walgreens announced it had secured regulatory clearance for an amended and restated asset purchase agreement to purchase 1,932 stores, three distribution centers and related inventory from Rite Aid Corporation for $4.375 billion in cash and other consideration. Ownership is expected to be transferred in phases, with the goal being to complete the store transfers in spring 2018. The company expects to complete integration of the acquired stores and related assets within the next three years, at an estimated cost of approximately $750 million and an additional $500 million on store conversions and related activities. In addition to the strategic benefits of the transaction, the company expects to realize $300 million in annual synergies. These are expected to be fully realized within four years of the initial closing of this transaction. Following regulatory clearance for the Rite Aid transaction, the company has been able to carry out a complete review of its expected combined U.S. store portfolio to determine the scope of a program to optimize locations. This is expected to take place over an 18 month period beginning in spring 2018, resulting in estimated pre-tax charges to the company's GAAP financial results of approximately $450 million. Cost savings from the program are anticipated to be approximately $300 million per year, and are expected to be fully delivered by the end of fiscal 2020.  For the full fiscal 2017 year, revenues rose 0.7% to $118.2 billion with net income down 2.3% to $4.1 billion and EPS down 1.0% to $3.78. Return on shareholders’ equity for the year was 14.4%. Walgreens’ free cash flow decreased 9.5% for fiscal 2017 to $5.9 billion with the company paying $1.7 billion in dividends and repurchasing $5.2 billion of its shares including $3.8 billion during the quarter.  The company added $1 billion to the completed $5 billion share repurchase program. Management’s fiscal 2018 guidance is EPS in the range of $5.40 to $5.70 representing 8.8% growth at the midpoint over 2017 adjusted EPS. 

Express Scripts-ESRX reported that third quarter revenues declined 3% to $24.7 billion with net income up 16% to $841.7 million and EPS up a healthy 27% to $1.46. Adjusting for transitioning clients including Anthem, adjusted net income was flat and adjusted EPS was up 9%.  Adjusted claims declined 1% to 343.6 million partly impacted by the disruptions of the natural disasters during the quarter. Adjusted EBITDA per adjusted claim was up 1% to $5.67. Free cash flow was up 56% to $3.8 billion year-to-date. The company has repurchased 43.3 million of its own shares for $2.8 billion through the first nine months of the year at an average price of $64.67 per share. Management increased their adjusted earnings guidance for the full year with adjusted EPS now expected in the range of $6.97 to $7.05 versus previous guidance of $6.95 to $7.05, which represents 10% growth over last year at the midpoint of the range. Cash flow from operations in 2017 is expected to be in the range of $4.7 to $5.2 billion. Total adjusted year claims for the full 2017 year should approximate 1.4 billion with claims growth in 2018 likely to be flat to slightly down.  The company is increasing its expected 2018 retention rate for the 2017 selling season, excluding the impact of the remaining Coventry business rolling off in 2017, to be above 95%. The company's enterprise value initiative is currently estimated to cost approximately $600 million to $650 million and to deliver cumulative savings of nearly $1.2 billion by 2021.  This initiative is expected to help the company achieve its targeted compounded annual EBITDA growth rate for the core business from 2017-2020 of 2% to 4% and drive significant value to all of its patients and clients beginning in 2018. The EviCore acquisition, which serves 100 million patients nationally, is expected to close by the end of the year with the $3.6 billion price tag to be paid in cash and short-term debt. The acquisition is expected to generate strong free cash flow and be accretive in its first full year.  Express Scripts management noted that they are confident in their business model even if Amazon were to enter the pharmacy benefit management space while hinting that they may collaborate with Amazon in mail order delivery of pharmaceuticals to cash-paying patients not covered by insurance, which would be a net positive for the company.

 

Tuesday, Oct. 24, 2017

Canadian National Railway-CNI reported third quarter revenues rose 7% to C$3.2 billion with net income down 1% to C$958 million and EPS up 2% to C$1.27. Revenues increased for metals and minerals (31%), coal (23%), intermodal (12%), automotive (4%) and other revenues (2%). Revenues declined for forest products (2%), and grain and fertilizers (1%), while petroleum and chemicals revenues remained essentially flat. Revenue ton-miles  increased by 10% and carloadings increased by 11% to 1.5 million. Operating expenses increased by 10% to C$1.8 billion due to higher fuel prices and as the company ramped up hiring to meet an increased workload thanks to strong volume growth. The company’s operating ratio of 54.7% increased 140 basis points compared to the prior year quarter. Free cash flow increased 33% year-to-date to $2.3 billion thanks to higher earnings and lower capital expenditures compared with the earlier year period.  To meet the needs of an expanding North American economy and new growth opportunities, CNI is increasing investments in their infrastructure and equipment by C$100 million, for a total capital program of C$2.7 billion in 2017. After completing a $2 billion share buyback program, CNI announced a new $2 billion share buyback program for the next 12 months of Oct. 2017-Oct. 2018. Management  reaffirmed their 2017 adjusted diluted EPS outlook of C$4.95 to C$5.10, compared to last year’s adjusted diluted EPS of C$4.59, representing 8% to 11% growth. Favorable macro trends continue across Canada and the U.S. thanks to the recovery in the energy sector and higher consumer confidence with management “bullish” on the North American economy.

3M-MMM posted record third quarter sales of $8.2 billion, up 6%, with net income and EPS up 8% to $1.4 billion and $2.33, respectively. Organic local-currency sales growth of nearly 7% was broad-based across all geographies and business groups, driven by 3M’s strategic decision several years ago to invest heavily in fast-growing markets like semiconductors, data centers, automotive electrification, traffic safety and energy grids. By geography, total sales grew 11% in Asia Pacific, 7% in EMEA (Europe, Middle East and Africa), 6% in Latin America/Canada and 2% in the U.S. More than 60% of 3M’s sales come from outside the U.S. By business group, total sales grew 13% in Electronics and Energy to $1.3 billion, 8% in Health Care to $1.4 billion, 6% in Industrial to $2.6 billion and 2% in Consumer and Safety & Graphics to $1.2 billion and $1.5 billion, respectively. During the quarter, 3M generated $1.75 billion in operating cash flow, down 8% from last year on an increase in working capital needed to fuel the company’s global growth and business transformation. Free cash flow of $1.4 billion represented a notable 100% of net income. During the quarter, 3M returned $1.1 billion to shareholders through dividends of $701 million and share repurchases of $380 million. Given the strong year-to-date performance, 3M increased its guidance for 2017. Organic local currency growth is expected in the 4% to 5% range, up from previous guidance of 3% to 4% with earnings per share in the $9.00 to $9.10 range – up 10% to 12% year-on-year – versus a prior expectation of $8.80 to $9.05. Free cash flow is expected in the $4.9 to $5.6 billion range, representing a free cash flow conversion rate of 95% to 100%. Total 2017 gross share repurchases are estimated in the range of $2 to $2.5 billion.

Polaris-PII reported third quarter revenues rose 25% to a record $1.5 billion with net income jumping 153% to $82 million and EPS up 156% to $1.28. Aftermarket segment sales increased substantially due to Transamerican Auto Parts which added $191 million to sales in the third quarter. ORV (off-road vehicle) unit retail sales were up mid-teens percent in both ATVs and side-by-sides with revenue up 12% to $1.0 billion. Motorcycles segment sales were down 14% to $155 million but up 10% excluding 2016 Victory sales. Indian Motorcycle continue to deliver strong retail sales increasing 16% for the quarter. Global Adjacent Market segment sales increased 17% to $92 million. Free cash flow increased 36% during the first nine months of the year to $368 million with the company paying $109 million in dividends and repurchasing  $89 million of its own shares. As of quarter end, the company has 6.4 million shares authorized for future share repurchases. The company increased its full year 2017 sales guidance with adjusted sales expected to increase 18% to 19% with adjusted EPS expected in the range of $4.75 to $4.85, representing 36% to 39% growth over depressed adjusted EPS of $3.48 in 2016.

United Technologies-UTX reported third quarter sales increased nearly 5% versus the prior year to $15.1 billion. EPS declined 4% to $1.67 and net income from continuing operations declined 8% to $1.3 billion. Excluding restructuring and other items, EPS declined 2%. Management was encouraged by the macro economic environment although some of the markets UTX operates in continue to be challenged from a pricing standpoint. By business segment, Otis sales gained 5% to $3.2 billion, lifted by a 5% gain in service sales. New equipment orders at Otis were down 4% on a 24% decrease in North America off tough compares and a 25% increase in Europe. Climate, Controls and Security sales increased 6% to $4.7 billion on solid sales growth in all major businesses. Organic equipment orders were up 2% with operating profits up 4% on higher volumes and restructuring and productivity gains. Pratt & Whitney sales rose 15% to $4.3 billion on strength in commercial OE, military engines and commercial aftermarket. Aerospace Systems sales were flat at $3.6 billion, boosted by an 11% rise in the commercial aftermarket and offset by a 6% decline in commercial OE. Free cash flow was negative $0.5 billion for the quarter which included a $1.9 billion discretionary pension contribution. During the third quarter, the company invested $443 million in capital expenditures, up 12% year over year, as the company continues to focus on new materials and manufacturing processes. The company paid $1.5 billion in dividends and repurchased $1.4 billion of its own shares during the first nine months of the year. Total 2017 sales are expected in the $59.0 billion to $59.5 billion range, up on the lower end guidance from the second quarter projection of $58.5 billion to $59.5 billion. Free cash flow is expected to be $3.0 billion to $3.5 billion with adjusted EPS between $6.58 to $6.63, an increase over previous EPS guidance of $6.45 to $6.60.

Wabtec-WAB reported third quarter revenues rose 42% to $975.9 million with net income down 18% to $67.4 million and EPS down 23% to $.70. These results reflect the revenues, acquisition costs and higher interest expenses related to the Faiveley acquisition along with contract adjustments. Transit sales increased 97% during the quarter to $617.7 million due primarily to acquisitions with net income down 7% to $47.5 million. Freight sales were down 6% during the quarter to $340.2 million with net income down 21% to $61.6 million as the freight market remains sluggish. Backlog increased 2% to a record $4.5 billion at quarter end thanks to orders in all major markets and product categories, which bodes well for organic growth next year. Cash flow from operations was down significantly year-to-date due to working capital changes but is expected to improve next year and once again exceed net income, which is the company’s long-term goal. At the end of the quarter, the company had $228 million in cash and $1.9 billion in debt, which was 6% lower as the company begins to repay the debt related to the acquisition. Following the end of the quarter, Wabtec acquired AM General Contractor, a manufacturer of fire protection and extinguishing systems, mainly for transit rail cars. Based in Europe, AM has annual sales of about $25 million. Based on its year-to-date results and fourth quarter forecast, Wabtec lowered its guidance for the full year and expects revenues in 2017 to be about $3.8 billion and earnings per diluted share to be between $3.45-$3.50 excluding expenses for restructuring, integration and contract adjustments. The company’s adjusted operating margin target in the fourth quarter is expected to be about 15 percent.

 

Biogen-BIIB reported third quarter revenues rose 4% to $3.1 billion, or 13% on an adjusted basis for the spin-off of the hemophilia business. Net income rose a healthy 19% to $1.2 billion with EPS up 23% to $5.79 thanks to improved expense management. Multiple sclerosis (MS) revenues were $2.3 billion, demonstrating the resilience of Biogen’s core MS business as the company is maintaining market share at 38% despite increased competition. Spinraza sales rose 34% quarter over quarter to $271 million with U.S. patients increasing 75% since the second quarter. Biosimilar sales more than tripled from the same period last year to $101 million.  Biogen generated $1.1 billion in free cash flow during the quarter and ended the quarter with $6.6 billion in cash and investments and $6.5 billion in long-term debt. Biogen restructured its agreement with Neurimmune related to aducanumab. Biogen agreed to make a one-time payment in exchange for a reduction in Neurimmune’s royalty rate on potential sales of aducanumab. Biogen made important progress advancing their pipeline, including initiating new trials in Alzheimer’s disease and epilepsy and completing enrollment of studies in stroke and Parkinson’s disease. Over the balance of the year, Biogen anticipates seasonal pressure as well as increased spending as they invest behind their strategic priorities.

AbbVie-ABBV and Alector, a privately owned biotechnology company announced a global strategic collaboration to develop and commercialize medicines to treat Alzheimer's disease and other neurodegenerative disorders. Immuno-neurology is a rapidly evolving scientific area focused on harnessing the power of the immune system to attack devastating neurodegenerative disorders like Alzheimer's disease. There is increasing rationale – from large-scale human genetic analyses and animal model studies – that immune deficiencies within the central nervous system play an important role in the progression of  neurodegeneration. Alector has developed an innovative immuno-neurology technology platform to simultaneously address multiple pathologies associated with neurodegeneration. Under the terms of the agreement, AbbVie and Alector have agreed to research a portfolio of antibody targets and AbbVie has an option to global development and commercial rights to two targets.  Alector will conduct exploratory research, drug discovery and development for lead programs up to the conclusion of the proof of concept (PoC) studies. Upon exercise of the option, AbbVie will lead development and commercialization activities. Alector and AbbVie will co-fund development and commercialization and will share global profits equally. Alector will receive a $205 million upfront payment and a potential, future equity investment of up to $20 million.

 

Monday, Oct. 23, 2017

Cisco-CSCO plans to acquire publicly-held BroadSoft, Inc., headquartered in Gaithersburg, MD. Pursuant to the agreement, Cisco will pay $55 per share, in cash, in exchange for each share of BroadSoft, or an aggregate purchase price of approximately $1.9 billion net of cash. More and more businesses expect fully featured voice and contact center solutions with the ability to deploy them on-premises or in the cloud. By combining BroadSoft's open interface and standards-based cloud voice and contact center solutions delivered via Service Provider partners, with Cisco's leading meetings, hardware and services portfolio, the combined company will offer best-of-breed solutions for businesses of all sizes and deliver a full suite of collaboration capabilities to power the future of work. The acquisition is expected to close during the first quarter of calendar year 2018.

Eisai Co., Ltd.  and Biogen-BIIB   announced that the companies have expanded their existing agreement to jointly develop and commercialize investigational Alzheimer’s disease treatments. Under the terms of the agreement Eisai has exercised its option to co-develop and co-promote aducanumab, Biogen’s investigational anti-amyloid beta (Aβ) antibody for patients with Alzheimer’s disease (“AD”). The expanded agreement leverages each company’s respective geographic strengths for commercialization and adjusts the respective share of profits from potential sales of aducanumab. Biogen will receive 55 percent of the potential profits in the United States and 68.5 percent of the potential profits in Europe. Eisai will receive 80 percent of the potential profits in Japan and Asia (excluding China and South Korea). The companies will have a 50:50 co-promotion split of potential profits in the rest of the world. Further, Biogen will book sales in the United States, Europe, and rest of world markets while Eisai will book sales in Japan and Asia (excluding China, South Korea). Biogen will continue to lead the ongoing Phase 3 development of aducanumab and will remain solely responsible for all development costs for aducanumab until April 2018. Eisai will then reimburse Biogen for 15 percent of expenses from April 2018 through December 2018, and 45 percent from January 2019 onwards. Neither party is making any upfront payments associated with the exercise of the aducanumab option. Furthermore, Eisai’s and Biogen’s respective milestone payments under the original agreement for aducanumab and BAN2401, an anti-Aβ protofibril antibody, have been eliminated.

Alphabet’s-GOOGL Project Loon is a network of stratospheric balloons designed to deliver internet connectivity to rural and remote areas worldwide. Loon balloons sail on winds in the stratosphere, extending the reach of telecommunication partner’s networks into areas that are currently unconnected. Last month, Hurricane Maria made landfall in Puerto Rico as a Category 4 hurricane and caused significant damage to the island’s connectivity infrastructure. In the weeks following this disaster, the Project Loon team has been working with the Government of Puerto Rico, the FCC, the FAAFEMA, spectrum partners and international aviation authorities to bring balloon powered internet to the island to help. Working with AT&T, Project Loon is now supporting basic communication and internet activities like sending text messages and accessing information online for some people with LTE enabled phones.

 

Friday, Oct. 20, 2017

Gentex-GNTX reported third quarter sales rose 2% to $438.6 million with net income down 2% to $90.2 million and EPS down 3% to $.31. The 2% sales growth was driven by an increase of 12% in international auto-dimming mirror unit shipments as underlying light vehicle production in Europe, Japan and Korea was up 7%. The growth in international shipments was partially offset by a 7% decline in North American auto-dimming mirror unit shipments which in large part resulted from an 8% decline in North American light vehicle production due in part to intermittent plant shutdowns in the quarter. Gross margin declined 150 basis points to 39% during the quarter due to annual customer price reductions and the inability to leverage fixed overhead costs due to the lower growth in sales. Automotive net sales in the third quarter of 2017 were $428.2 million, an increase of 2% compared with automotive net sales of $419.8 million in the third quarter of 2016, driven by a 5% increase in auto-dimming mirror unit shipments on a quarter over quarter basis. Other net sales in the third quarter of 2017, which includes dimmable aircraft windows and fire protection products, were $10.5 million, an increase of 6%, compared to other net sales of $9.8 million in the third quarter of 2016. Cash flow from operations declined 1% during the first nine months to $352.5 million with free cash flow up slightly to $266 million on lower capital expenditures year-to-date. The company has lowered its capital expenditures outlook for the full year to a range of $110 million to $120 million. During the third quarter, Gentex repurchased 3.2 million shares of its common stock at an average price of $17.51 per share.  As of September 30, 2017, the company has approximately 14.9 million shares remaining available for repurchase. Gentex also repaid ahead of schedule $10 million of its debt and ended the quarter with no long-term debt and more than $790 million in cash on its strong balance sheet. Based on 2% growth in total light vehicle production forecast for 2017, current forecasted product mix and expense growth estimates, Gentex has updated certain of its 2017 guidance.  For the fourth quarter of 2017, the company estimates that revenue will increase between 5% and 10% versus the same quarter last year.  This should lead to sales for the full year in the range of $1.78 to $1.8 billion, down from the previous forecast of $1.79 to $1.83 billion. 

Thursday, Oct. 19, 2017

Genuine Parts-GPC reported third quarter sales rose 4% to $4.1 billion despite one less billing day and the disruption of three hurricanes and the earthquake in Mexico with net income down 15% to $158.4 million and EPS down 13% to $1.08, impacted by transaction costs related to the company’s pending $2 billion European acquisition of Alliance Automotive Group (AAG). This acquisition is expected to contribute $1.7 billion to revenues and be accretive to margins and cash flow immediately. The AAG acquisition is expected to close in November and add $.45 to $.50 per share to 2018 earnings. Genuine Parts announced two other acquisitions which are also expected to close in November, including Apache Hose & Belting Company, which is expected to generate annual revenues of $100 million, and Monroe Motor Products, which is expected to generate annual revenues of $25 million. Third quarter sales for the Automotive Group, which represents 52% of total revenues, were up 3.6% including an approximate 1% comparable sales increase.  Automotive sales are expected to accelerate in the fourth quarter due to the pending acquisitions. Sales at Motion Industries, the Industrial Group which accounts for 30% of revenues, were up 7.1%, including a 4% comparable sales increase with growth broad based due to favorable market conditions. Sales at EIS, the Electrical/Electronic Group which represents 5% of total sales, grew 11.6% due to acquisitions, with comparable sales down 1%.  Sales for S.P. Richards, the Office Products Group which accounts for 12% of total sales, were down 4.7% for the quarter in both total and comparable sales due to deteriorating trends and shifts in the office supply market. Third quarter profitability was impacted by lower gross margin and higher operating expenses, as initiatives to drive margin expansion did not meet management’s expectations due to lower than expected organic sales growth and the deleveraging of expenses. Free cash flow declined 32% year-to-date to $445 million due to lower earnings. During the first nine months of the year, Genuine Parts paid $296.5 million in dividends, repurchased $171.9 million of its own shares and made $289.4 million in acquisitions. The company plans to add $2 billion in debt to its sturdy balance sheet to finance the AAG acquisition. For the full year, cash flow from operations is expected in the range of $750 million to $800 million which is lower than originally forecasted but remains solid. For the full year 2017, the company is increasing its sales guidance from up 3% to 4% to up 4% to 4.5%.  The company is also updating diluted earnings per share to range from $4.47 to $4.52 and adjusted diluted earnings per share to range from $4.55 to $4.60.  This compares to the prior outlook of $4.70 to $4.75

Fluor-FLR announced that the company was awarded a contract by the U.S. Army Corps of Engineers Huntsville (Alabama) Engineering Center to help restore electric power to Puerto Rico. The six-month single award task order is valued at approximately $240 million.

Capital G, the growth investment fund of Alphabet-GOOGL, is investing $1 billion in Lyft.

Tuesday, Oct. 17, 2017

Johnson & Johnson-JNJ reported third quarter sales rose a healthy 10% to $19.7 billion with net income down 12% to $3.8 billion and EPS down 11% to $1.37. Adjusting for acquisitions, divestitures and special items, sales rose 4% with adjusted net income and EPS up 11% and 13%, respectively. Pharmaceutical sales rose 15% to $9.7 billion during the quarter driven by 24% growth in oncology products. Medical Devices sales rose 7% during the quarter to $6.6 billion driven by 48% growth in vision care related to strong contact sales and the Abbott Optical acquisition. Consumer sales rose 3% to $3.4 billion driven by 4% growth in both beauty and OTC, notably Tylenol. Geographic growth was balanced with 10% growth in the U.S. with sales of $10.3 billion and International sales up 11% to $9.4 billion. Sales growth accelerated in the third quarter as expected thanks in part to acquisitions. The unprecedented storms had limited impact on the Medical Device operations with lost surgery days having more of an impact than supply disruptions. JNJ’s manufacturing sites in Puerto Rico fared well with all sites back in operation with the aid of generators. JNJ ended the quarter with $19 billion in net debt ($16 billion in cash and $35 billion in debt) related to acquisitions. JNJ expects that the U.S. tax reform efforts are gaining meaningful momentum. A lower corporate tax rate and modern tax system will enable firms to manage their cash without penalty and also have a positive impact on job growth in the U.S. At the same time, JNJ is not factoring tax reform into their guidance for 2017. More favorable foreign exchange led management to raise their guidance for the full year with sales expected to continue to accelerate in the fourth quarter and grow 6% to 6.5% for the full year to $76.2 billion to $76.5 billion with EPS expected to increase 7.7% to 8.4% to a range of $7.25 to $7.30.

Thursday, Oct. 12, 2017

Baxter International-BAX shared updates regarding recovery efforts following the impact of Hurricane Maria on its Puerto Rico operations. While the company currently anticipates a reduction in revenue for fourth quarter 2017 as a result of the storm, the company expects to mitigate the related earnings impact through positive performance in other areas of the business. Baxter’s three Puerto Rico manufacturing sites sustained minimal structural damage from the impact of Hurricane Maria, and limited production activities resumed across its facilities within one week of the storm. Manufacturing operations are being driven by diesel generators designed to power the facilities and satellite communications are also being used to restore connectivity and support plant operations.

Wednesday, Oct. 11, 2017

Fastenal-FAST reported solid third quarter results with revenues up 11.8% to $1.1 billion and net income up 12.7% to $143.1 million with EPS bolting 13.4% higher to $.50. Sales growth accelerated in the third quarter with September daily sales growth up 15.3%. Improvement in underlying demand and traction in growth drivers led to the higher sales with the company signing a record 81 new Onsite locations, finishing the quarter with 555 active sites.  The goal for the full year is to have 275-300 Onsite signings compared to 176 last year.  During the quarter, Fastenal signed 4,771 industrial vending machines, comparable to the prior year period. The installed device count was 69,058 as of quarter end, an increase of 14.3%, with sales through the vending machines continuing to grow at a double-digit pace. The company also signed 42 new national account contracts during the quarter with national account customers now representing 48.7% of total revenues. Daily sales to national customers grew 17.3% during the third quarter. During the quarter, fastener products, representing 36% of sales, grew 12% in the quarter while non-fastener products, representing 64% of sales, grew 14.6% on a daily basis. Gross profit declined 20 basis points during the third quarter to 49.1% due to changes in product and customer mix, the impact of the hurricanes and commodity inflation. Gross margin is expected to improve in the fourth quarter.  Despite the lower gross margin, operating margin improved 20 basis points to 20.2% as year-to-date selling, general and administrative expenses as a percent of sales hit a record low. Free cash flow increased 66% during the quarter to $373.2 million driven by record operating cash flow of $455.9 million thanks to the higher earnings and good inventory management. During the first nine months of the year, Fastenal paid $277.1 million in dividends and repurchased $82.6 million of its own shares including 600,000 shares repurchased in the third quarter at an average price of about $43.03 per share. End markets remain positive with favorable macroeconomic conditions. Manufacturing, led by heavy machinery, general industrial and transportation continues to drive growth.

The Taiwan Fair Trade Commission said it will fine Qualcomm-QCOM $774.1 million for anti-trust violations of its chip technology.The Commission said in a Chinese-language statement that Qualcomm had a monopoly over the CDMA, WCDMA and LTE chip market and refused to licence its technology to other industry players. Qualcomm disagrees with the decision summarized in the TFTC's press release and intends to seek to stay any required behavioral measures and appeal the decision to the Taiwanese courts after receiving the TFTC's formal decision, which is expected in the next several weeks. The fine bears no rational relationship to the amount of Qualcomm's revenues or activities in Taiwan, and Qualcomm will appeal the amount of the fine and the method used to calculate it.

T. Rowe Price Group-TROW reported preliminary month-end assets under management of $948 billion as of September 30, 2017, up 16.9% since year end. Client transfers from mutual funds to other portfolios were $2.9 billion and $8.1 billion for the month- and quarter-ended September 30, 2017, respectively.

 

Tuesday, Oct. 10, 2017

Express Scripts-ESRX announced that it has reached an agreement to acquire privately-held eviCore healthcare, the industry leader in evidence-based medical benefit management services, for $3.6 billion. Combining Express Scripts' leading pharmacy benefit management offering and eviCore's highly complementary medical benefits management (MBM) platform will create a uniquely comprehensive patient benefit management solution. eviCore, which manages medical benefits for 100 million people, offers a broad range of integrated MBM solutions that drive significant and immediate cost reductions, and improved quality care outcomes. eviCore has leading positions managing benefits in categories including radiology, cardiology, musculoskeletal disorders, post-acute care and medical oncology – all important therapeutic areas that are in need of greater cost management. eviCore contracts with health plans and commercial clients to better ensure appropriate use of healthcare services. eviCore has approximately 4,000 employees and will operate as a standalone business unit within Express Scripts. The acquisition of eviCore will give Express Scripts an attractive entry point into a growing market. Today, pharmacy is an industry with approximately $400 billion in annual spend. Healthcare spend represents nearly $3.4 trillion. Medical benefit management is a large and growing market with more than $300 billion spent annually in the areas eviCore manages today. Establishing a cornerstone platform in this market will enable Express Scripts to build a uniquely comprehensive suite of solutions, with significant opportunities for cross-selling to both client bases. The combination of Express Scripts' leading independent PBM model and eviCore's industry-leading medical cost containment capabilities across an expanded client base will create an even more powerful partner for our clients, fully aligned with the interests of patients and payers. This will further differentiate Express Scripts and position the company to take advantage of the transition to value-based care and the increasing demand from payers for a more comprehensive set of service offerings and solutions.Excluding transaction related expenses and amortization of intangibles, Express Scripts expects the acquisition to be accretive to adjusted diluted earnings per share in its first full year of operation. The transaction is expected to close in the fourth quarter of 2017.

Faiveley Transport, a subsidiary of Wabtec-WAB, has been awarded contracts worth more than $100 million by Alstom and Bombardier Transportation to supply systems for the first 71 train sets of the new generation of double deck trains for Paris.  The trains will eventually run on lines D and E of the Paris network. Under the contracts Faiveley Transport will provide complete braking systems (air generation, brake control and bogie brakes), door systems, HVAC systems (cabin and saloon heating, ventilation and air conditioning), pantographs and tachometer systems.  The scope of supply includes the study, design, engineering, manufacture and delivery of the rail systems, which will involve Faiveley operating units in France, Germany, Italy, Sweden, and the Czech Republic. Deliveries are expected to start by September 2018 and to be completed by 2022.


Thursday, Oct. 5, 2017

Pratt & Whitney, a unit of United Technologies-UTX, has been awarded a $2.7 billion U.S. defense contract by the Pentagon for engine sustainment support for the F-117 stealth aircraft. The contract involves foreign military sales to the Britain, Canada, United Arab Emirates, Kuwait, Qatar, India and Australia.

Biogen-BIIB presented new data demonstrating that earlier initiation of treatment with SPINRAZA® (nusinersen) may improve motor function outcomes in infants and children with spinal muscular atrophy (SMA). Results continued to reinforce the favorable efficacy and safety profile of SPINRAZA. A new analysis from the Phase 3 ENDEAR study showed infants with SMA who initiated treatment earlier in the disease (shorter disease duration) demonstrated greater benefit and improvement in motor function outcomes.  “These studies contribute to a growing body of evidence that SPINRAZA can make a meaningful difference in the lives of people with SMA regardless of their age or stage of the disease,” said Alfred Sandrock, M.D., Ph.D., executive vice president and chief medical officer at Biogen. “Across studies, we continue to see evidence that earlier initiation of treatment with SPINRAZA can lead to improved clinical and functional outcomes.”

Wednesday, Oct. 4, 2017

PepsiCo-PEP reported third quarter revenues rose 1% to $16.2 billion with net income up 8% to $2.1 billion and EPS popping 9% higher to $1.49. Organic revenues grew 1.7% during the quarter with core constant currency EPS growth of 7%. Despite a challenging environment, each of the company’s operating sectors delivered results in line or ahead of management’s expectations with the exception of the North American Beverages (NAB) unit where revenues declined following two consecutive years of very strong third quarter growth. Management believes the factors impacting NAB are temporary and were impacted by unfavorable weather conditions during the third quarter and a marked slowdown in the convenience store sector. In addition, PepsiCo lost marked share in its carbonated beverage category as they had redirected marketing and shelf space to newer brands from the core Pepsi and Mountain Dew brands. Management is taking immediate actions to correct this issue and expects both sales and operating profits to improve in the fourth quarter for NAB. The good news is that the rest of PepsiCo’s business reported very strong results especially Frito-Lay which more than offset the weakness in NAB, resulting in operating margin expansion for the third quarter. Free cash flow declined 13% in the first nine months of the year to $4.6 billion due to working capital fluctuations.  During the same period, PepsiCo paid $3.3 billion in dividends and repurchased $1.5 billion of its own shares. The dividend reflects the 7% increase previously announced, which marked the 45th consecutive year of dividend increases. Although the company moderated their full-year organic revenue growth outlook to 3%, management raised guidance for core 2017 expected EPS by a dime to $5.23, representing 9% core constant currency EPS growth. The company continues to expect to generate $7 billion in free cash flow for the full year and pay dividends of $4.5 billion and repurchase approximately $2 billion of its own shares for the year.

Tuesday Oct. 3, 2017

Paychex-PAYX reported first fiscal quarter sales increased 4% to $816.8 million with net income and EPS increasing 5% to $227.8 million and $0.63, respectively. Payroll service revenue increased 2% to $457.8 million and Human Resource Service (HRS) revenue increased 7% to $345.3 million. Interest on Funds Held for Clients increased 14% to $13.7 million as the average rate of return increased 10 basis points from last year to 1.4%. Average Funds Held for Clients were $3.8 billion, essentially unchanged from last year as the impact of wage inflation was offset by a decrease in checks per client. As of 8/31/2017, Paychex counted $38.6 million in unrealized gains on Funds Held for Clients. Paychex’s financial position remained strong at quarter’s end with cash and corporate investments of $851.4 million and no long-term debt on its rock-solid balance sheet. During the quarter, Paychex generated $343.6 million in operating cash flow, up 17% year-over-year, boosted by the higher net income and timing of certain payments. Free cash flow was $325.6 million, up 19%, and represented more than 140% of net income. During the quarter, Paychex returned $273.2 million to shareholders through $94.1 million in share repurchases at an average cost of $58.81 per share and dividends of $179 million, up 8% from last year. During the quarter, the company announced a 9% increase in its quarterly dividend to 50 cents per share. In mid-August, Paychex completed its acquisition of HR Outsourcing, Inc., a professional employer organization serving small- to mid-sized businesses in 35 states, which is expected to add $65 to $70 million in annual revenue. Paychex updated its fiscal 2018 guidance to incorporate anticipated results from the acquisition. Total revenue is expected to increase 6% with a 5% to 6% increase in EPS.

Berkshire Hathaway – BRKB and Pilot Flying J jointly announced that Berkshire has made a significant minority investment in Pilot Travel Centers LLC. The Haslam family will continue to own a majority of Pilot Flying J and Jimmy Haslam will remain as chief executive officer. Pilot Flying J President Ken Parent and the Company’s management team will also remain in place.  The Company will continue to be headquartered in Knoxville, TN. Pilot Flying J is the largest operator of travel centers in North America, with more than 27,000 team members, 750 locations across the U.S. and Canada, and more than $20 billion in revenues. The investment will expand Pilot Flying J’s opportunities for growth, as the Company remains committed to delivering outstanding service for the trucking industry, professional  drivers, local communities and interstate travelers across North America.   Under the terms of the agreement, Berkshire will acquire a 38.6 percent equity stake in Pilot Flying J. The Haslam family will continue to hold a majority interest with 50.1 percent ownership in the Company and FJ Management, Inc., owned by the Maggelet family, will retain 11.3 percent ownership until 2023. In 2023, Berkshire will become the majority shareholder by acquiring an additional 41.4 percent equity stake and the Haslam family will retain 20 percent ownership in the Company and remain involved with Pilot Flying J.  “Pilot Flying J is built on a longstanding tradition of excellence and an unrivaled commitment to serving North America’s drivers,” said Warren Buffett, chairman, president and CEO of Berkshire Hathaway. “Jimmy Haslam and his team have created an industry leader and a key enabler of the nation’s economy. The Company has a smart growth strategy in place and we look forward to a partnership that supports the trucking industry for years to come.” Terms of the deal were not disclosed.

Monday, Oct. 2, 2017

Sangamo Therapeutics, Inc.,the leader in therapeutic genome editing, and Bioverativ-BIVV, a global biopharmaceutical company focused on the discovery, development, and commercialization of innovative therapies for hemophilia and other rare blood disorders, announced today that the U.S. Food and Drug Administration (FDA) has accepted the Investigational New Drug (IND) application for ST-400, a gene-edited cell therapy candidate for people with transfusion-dependent beta-thalassemia. Sangamo and Bioverativ are developing ST-400 as part of an exclusive worldwide collaboration to develop and commercialize gene-edited cell therapies for beta-thalassemia and sickle cell disease. "Beta-thalassemia is a serious, lifelong blood disorder, and many children and adults with the disease require frequent and demanding blood transfusions that may lead to iron overload and long-term organ damage," said Tim Harris, Ph.D., D.Sc., executive vice president of research and development at Bioverativ. "The advancement of ST-400 demonstrates our commitment to progressing novel science that has the potential to make a meaningful, lasting difference in the lives of people with beta-thalassemia."


Thursday, Sept. 28, 2017

Accenture-ACN reported fourth quarter net revenues rose 8% in both U.S. dollars and local currency, to $9.1 billion with net income dropping 13% to $983 million and EPS down 12% to $1.48. The prior year earnings reflect a $.37 per share gain from the gains on sales of businesses.  Excluding the gains, EPS rose 13% from the prior year period. For the full fiscal year, revenues increased 6% to $34.9 billion and adjusted EPS rose 11% to $5.91. Return on equity for the year was a strong 39%. New bookings for the quarter were $10.1 billion and $37.4 billion for the full year. On a geographic basis, Growth Markets, including Japan and Australia, led the way with a strong 14% increase for the fourth quarter and 12% for the full year. Growth in the operating groups was led by Products with 10% growth during the quarter and 14% for fiscal 2017. “The New” digital, cloud and security services generated strong double-digit growth which now approximate 50% of revenues. For fiscal 2017, Accenture’s free cash flow declined 4% to $4.5 billion with the company paying $1.6 billion in dividends and repurchasing $2.7 billion of its shares, including 5.2 million shares repurchased in the fourth quarter for $657 million at an average price of $127.09 per share. Accenture has $3.1 billion authorized for future share repurchases. Accenture also made $1.7 billion in acquisitions during fiscal 2017 with its strong balance sheet with $4.1 billion in cash and minimal long-term debt providing the company with financial flexibility to grow the business while returning significant cash to shareholders. For fiscal 2018, Accenture expects net revenue growth to be in the range of 5% to 8% in local currency and GAAP EPS of $6.36 to $6.60. Free cash flow is expected to be in the range of $4.4 to $4.7 billion for the full year. In addition, Accenture’s Board of Directors has declared a semi-annual cash dividend of $1.33 per share, an increase of $0.12 per share, or 10 percent, over its previous semi-annual dividend, declared in March.

AbbVie-ABBV announced  a global resolution of all intellectual property-related litigation with Amgen over Amgen's proposed biosimilar adalimumab product. Under the terms of the settlement agreements, AbbVie will grant to Amgen a non-exclusive license to AbbVie's intellectual property relating to HUMIRA beginning on certain dates in certain countries in which AbbVie has intellectual property.  The license period will begin on Jan. 31, 2023 in the U.S., on Oct. 16, 2018 in most countries in the European Union, and on other dates in various countries in which AbbVie has intellectual property.  Amgen will pay royalties as specified under the agreements. The precise terms are confidential between the parties. All litigation pending between the parties will be dismissed, and Amgen has acknowledged the validity of AbbVie's intellectual property related to HUMIRA.

Tuesday, Sept. 26, 2017

Nike-NKE reported fiscal first quarter revenues were flat at $9.1 billion with net income down 24% to $950 million and EPS down 22% to $.57. Return on invested capital was a strong 32%. International revenues now account for more than 55% of total revenues.  Sustained growth in international geographies and Nike Direct globally was offset by an expected decline in North American revenue due to the unprecedented disruption in the North American retail market. Earnings declined due to a gross margin decline, reflecting foreign currency headwinds, a higher effective tax rate compared to a tax benefit in the prior year period and higher foreign currency exchange losses partially offset by lower selling and administrative expenses. While revenues for Converse were down 16% during the quarter to $483 million driven by declines in North America, revenues for the Nike Brand were up 2% to $8.6 billion on a constant currency basis driven by growth in international markets including double-digit growth in China which topped $1 billion and solid growth in apparel to $2.7 billion. Inventories increased 6% during the quarter to $5.2 billion driven by higher average cost per unit due primarily to product mix. Cash increased $732 million to $5.5 billion as of quarter end. During the first quarter, Nike repurchased 15.3 million shares for approximately $849 million at an average price of $55.49 per share as part of the four-year $12 billion buyback program approved by the Board in 2015 with $6.7 billion still available for future repurchases. For the full fiscal 2018 year, Nike expects to report mid-single digit revenue growth thanks to strong international growth, an acceleration in Nike Direct to Consumer sales and lesser foreign exchange headwinds. Gross margin is expected to contract 50-100 basis points with SG&A expenses expected to increase at a mid-single digit rate, other expenses approximating $80 million and the tax rate expected in the 15%-17% range.

FactSet-FDS reported fiscal fourth quarter revenues rose 13.7% to $326.6 million with organic revenues up 6.3% to $301.3 million from the prior year period. Net income decreased 77% to $59.6 million and EPS declined 57% to $1.52 with the prior period including a one-time gain from the sale of the Market Metrics business. Operating margin declined to 25.2% from 30.5% in the prior year period primarily due to $11.2 million in restructuring actions and modifications to certain share-based compensation grants. On an adjusted basis, net income and EPS rose 8.9% and 12.4%, respectively. For the full year, revenues increased 8.3% to $1.22 billion and adjusted EPS rose 14.2% to $7.31. Return on equity for the year was a stellar 46%. Annual Subscription Value (ASV) increased 15%, or 5.7% organically, to $1.32 billion as of 8/31/17. ASV at any given time represents the forward-looking revenues for the next 12 months from all subscription services currently supplied to clients. Client count as of 8/31/17 was 4,744, a net increase of 115 clients during the fourth quarter. User count grew 2,821 to 88,846 in the past three months. Annual client retention was greater than 95% of ASV or 91% when expressed as a percentage of clients. Employee headcount was 9,074 at 8/31/17, up 699 people in the past 12 months, and up 2.4% on an organic basis from a year ago. Free cash flow totaled $283.7 million for 2017 which was relatively flat from the prior year. For the full year, FactSet paid $81 million in dividends and repurchased $261 million of its own shares, including 270,000 shares repurchased in the fourth quarter for $44.1 million at an average price of $163 per share. The company has $244.1 million remaining authorized for future share repurchases. During the first quarter fiscal 2018, management expects revenues to be in the range of $327 million to $333 million with EPS expected in the range of $1.75-$1.81. On an adjusted basis, first quarter EPS is expected in the range of $1.93-$1.99, representing 12% growth at the midpoint.

 

Friday, Sept. 25, 2017

Genuine Parts Company-GPC has agreed to acquire Alliance Automotive Group (AAG) from private equity funds managed by Blackstone and AAG's co-founders. The acquisition is valued at a total purchase price of about $2 billion including the repayment of AAG's outstanding debt. Headquartered in London, AAG is the second largest parts distributor in Europe, with a focus on light vehicle and commercial vehicle replacement parts through more than 1,800 company-owned stores and affiliated outlets across France, the U.K. and Germany. AAG has a consistent track record of organic revenue and earnings growth supported by strategic investments based on a proven M&A strategy to gain scale, efficiencies and geographic coverage.  AAG is expected to generate gross annual billings of approximately $2.3 billion including supplier direct billings, or $1.7 billion of revenue on a U.S. GAAP basis in 2017. Genuine Parts expects the acquisition to be immediately accretive to earnings in the first year after closing, expected during the fourth quarter of 2017. For 2018, incremental earnings per share is estimated at $0.45 to $0.50 and adjusted earnings per share is estimated at $0.65 to $0.70, which excludes the amortization of acquisition-related intangibles. Genuine Parts expects to incur one-time transaction costs in the fourth quarter of 2017. Paul Donahue, Genuine Parts Company's President and Chief Executive Officer, stated, "We are excited to combine with AAG and enter the European markets with critical scale and a leading market position in the automotive aftermarket. AAG is poised to contribute significant sales growth and earnings accretion to Genuine Parts Company and also serves to enhance the GPC platform for long-term, sustainable expansion across the global automotive parts industry. AAG has a strong management team and a deep bench of talent, and our similar cultures and histories make this acquisition an excellent strategic fit. We are confident this business investment will create significant value for our shareholders, and we welcome the AAG team to the Genuine Parts family. We look forward to their future contributions to our ongoing success."

Thursday, Sept. 21, 2017

Alphabet-GOOGL and HTC Corporation announced a definitive agreement under which certain HTC employees -- many of whom are already working with Google to develop Pixel smartphones -- will join Google. HTC will receive $1.1 billion in cash from Google as part of the transaction. Separately, Google will receive a non-exclusive license for HTC intellectual property.

Wednesday, Sept. 20, 2017

Microsoft-MSFT announced that its board of directors declared a quarterly dividend of $0.42 per share, reflecting a 3 cent or 7.6 percent increase over the previous quarter's dividend.

Dell EMC and its industry partners, General Dynamics and Microsoft-MSFT  have been awarded a $1 billion five-year U.S. Air Force contract to implement a Cloud Hosted Enterprise Services (CHES) program. It will improve efficiency and agility, encourage innovation, and generate cost savings across the Air Force's information technology enterprise.

Tuesday, Sept. 19, 2017

Walgreens Boots Alliance-WBA announced that it has secured regulatory clearance for an amended and restated asset purchase agreement to purchase 1,932 stores, three distribution centers and related inventory from Rite Aid Corporation for $4.375 billion in cash and other consideration. The amended and restated purchase agreement between the parties updates the terms of the agreement with Rite Aid announced in June 2017. The transaction has been approved by the boards of directors of Rite Aid and Walgreens Boots Alliance and is still subject to other customary closing conditions. Store purchases are expected to begin in October, with completion anticipated in spring 2018. Due to the expected timing of store purchases under the amended and restated asset purchase agreement, Walgreens Boots Alliance does not expect the transaction to have a significant impact to its adjusted diluted net earnings per share in its fiscal year ending 31 August 2018. The company expects to realize annual synergies from the new transaction of more than $300 million, which are expected to be fully realized within four years of the initial closing of the new transaction and derived primarily from procurement, cost savings and other operational matters. The amended and restated asset purchase agreement replaces the earlier purchase agreement entered into by the parties in June 2017, which included 2,186 stores and related assets for $5.175 billion in cash and other consideration.



Thursday, Sept. 14, 2017

Oracle-ORCL reported first fiscal quarter revenues rose 7% to $9.2 billion with net income and EPS each up 21% to $2.2 billion and $.52, respectively. Revenue growth was driven by total cloud revenues which jumped 51% to $1.5 billion, as the company gained market share. New software licenses declined 6% to $966 million while software license updates and product support rose 3% to $5 billion. Hardware revenue declined 5% to $943 million with services revenues up 6% to $860 million. Short-term deferred revenues were up 9% compared with a year ago to $10.3 billion. Operating income rose 7% to $2.8 billion with the operating margin at 31%. The bottom line was boosted by higher non-operating income and a lower tax rate. Free cash flow rose 9% during the first quarter to $6.1 billion with the company ending the quarter with cash (net of debt) of $13.6 billion. During the quarter, the company paid $788 million in dividends, a 28% increase over the prior year period. In addition, the company repurchased 10.2 million shares for around $500 million at an average price of about $49 per share with plans to increase the share buyback significantly in the second quarter. During the last 12 months, the company paid $2.8 billion in dividends and repurchase $2 billion of its own shares. For the second quarter, Oracle expects revenues to increase 4%-6% with EPS growing 7% to 13% in the range of $.66-$.70. In a few weeks, Oracle will announce the world’s first fully autonomous database cloud service. Using artificial intelligence to eliminate most sources of human error enables Oracle to guarantee 99.995% reliability, which equates to only 30 minutes of downtime in a year, while charging much less than competitors.  

Brown-Forman-BFB announced that it will invest $45 million in the Brown-Forman Cooperage in Louisville, Kentucky. The investment will modernize the Cooperage, reduce operating cost by improving efficiency, and allow the continued production of high quality barrels in Louisville. Brown-Forman Cooperage crafts more than 2,500 barrels per day for the aging of spirits such as Jack Daniel’s, Woodford Reserve, Old Forester, Early Times, Canadian Mist, el Jimador, and Herradura.

 

Wednesday, Sept. 13, 2017

T. Rowe Price Group-TROW reported preliminary month-end assets under management of $934 billionas of August 31, 2017, which represents a 15% increase since year end.  Client transfers from mutual funds to other portfolios were $1.4 billionfor the month-ended August 31, 2017.

Tuesday, Sept. 12, 2017

Apple-AAPL announced iPhone X, the future of the smartphone, in a gorgeous all-glass design with a beautiful 5.8-inch Super Retina display, A11 Bionic chip, wireless charging and an improved rear camera with dual optical image stabilization. iPhone X delivers an innovative and secure new way for customers to unlock, authenticate and pay using Face ID, enabled by the new TrueDepth camera. iPhone X will be available for pre-order beginning Friday, October 27 in more than 55 countries and territories, and in stores beginning Friday, November 3. iPhone X will be available in silver and space gray in 64GB and 256GB models starting at $999 (US) from apple.com and Apple Stores and is also available through Apple Authorized Resellers and carriers (prices may vary). 

Apple®-AAPL announced a new generation of iPhone®: iPhone 8 and iPhone 8 Plus. The new iPhone features a new glass and aluminum design in three beautiful colors made out of the most durable glass ever in a smartphone, Retina HD displays and A11 Bionic chip, and is designed for the ultimate augmented reality experience. The world’s most popular camera gets even better with single and dual cameras featuring Portrait Lighting on iPhone 8 Plus, and wireless charging brings a powerful new capability to iPhone. Both devices will be available for pre-order beginning Friday, September 15 in more than 25 countries and territories, and in stores beginning Friday, September 22. iPhone 8 and iPhone 8 Plus will be available in space gray, silver and an all-new gold finish in increased 64GB and 256GB capacity models starting at $699 (US) from Apple.com and Apple Stores and is also available through Apple Authorized Resellers and select carriers (prices may vary).

Apple®-AAPL introduced Apple Watch® Series 3, adding built-in cellular to the world’s number one watch. Whether users are out for a run, at the pool or just trying to be more active throughout their day, Apple Watch Series 3 with cellular allows them to stay connected, make calls, receive texts and more, even without iPhone® nearby. The third-generation Apple Watch is an amazing health and fitness companion with intelligent coaching features, water resistance 50 meters1 and a new barometric altimeter that measures relative elevation. Apple Watch Series 3 comes in two models, one with GPS and cellular, and one with GPS, both featuring a 70 percent faster dual-core processor and new wireless chip.


Monday, Sept. 11, 2017

AbbVie-ABBV announced positive top-line results from the Phase 3 SELECT-BEYOND clinical trial evaluating upadacitinib (ABT-494), an investigational oral JAK1-selective inhibitor, in patients with moderate to severe rheumatoid arthritis (RA) who did not adequately respond or were intolerant to treatment with biologic DMARDs (bDMARDs). Results showed that after 12 weeks of treatment, both once-daily doses of upadacitinib (15 mg and 30 mg) met the study's primary endpoints of ACR20* and low disease activity (LDA). All ranked secondary endpoints were also achieved with both doses.Upadacitinib is not approved by regulatory authorities and safety and efficacy have not been established. "We are very pleased with the positive results for upadacitinib in the SELECT-BEYOND trial. Particularly exciting is the proportion of patients who achieved clinical remission by week 12 and 24, despite having inadequate responses with previous biologic therapies," said Michael Severino, M.D., executive vice president, research and development and chief scientific officer, AbbVie. "Together with previously reported results from SELECT-NEXT, these data further support the potential for upadacitinib to be a meaningful treatment option for rheumatoid arthritis patients. We continue to build upon our leadership in immunology as we advance the development program for upadacitinib across a broad range of immune-mediated diseases." Rheumatoid arthritis is a chronic and debilitating disease that affects an estimated 23.7 million people worldwide.13 Despite progress in the treatment of RA, many patients still do not achieve remission or low disease activity targets.


Friday, Sept. 8, 2017

Pershing Square proposed to end its proxy contest if ADP-ADP were to agree to add Bill Ackman and both of Pershing Square's other two nominees to the ADP Board, expanding it from 10 to 13 directors. ADP responded: "ADP is always open to constructive input from our shareholders, and we thank Bill Ackman for presenting his ideas to the ADP Board. All 10 of our directors coordinated their schedules to meet with Mr. Ackman and four other Pershing Square employees at Mr. Ackman's request and spent two hours together in an in-depth discussion about ADP's business and his ideas. The Board subsequently convened an executive session, without Pershing Square or ADP management, to discuss Pershing Square's views and its answers to the questions posed by the Board during the session. The Board had previously reviewed in detail Pershing Square's August 17 investor presentation. After considering all of this input, the Board remains confident that ADP has the right corporate strategy in place and the right expertise on the Board to continue to transform its technology, streamline operations, and enhance its competitive advantages at an aggressive yet responsible pace, all of which will extend ADP's strong track record of value creation for clients and shareholders. In contrast, the Board believes Pershing Square's approach presents very significant risks to ADP's clients and shareholders."

Thursday, Sept. 7, 2017

Disney’s CEO, Bob Iger, spoke at a media investment conference. He noted that the parks business had a tremendous fiscal 2017 and expects fiscal 2018 will be even stronger. Toy Store Land will open in Orlando and Star Wars Lands will open in calendar 2019 in Orlando and California. A direct to consumer app will launch in late 2019 which will have exclusive Disney shows, including Star Wars and Marvel content. Disney will continue to invest capital into its franchises and branded content. The movie business is undergoing a secular change, and Disney’s mantra is to make movies big and make them great so that people will want to go see the films for the experience. They will stress quality over quantity. Disney's EPS in fiscal 2017 should be comparable to fiscal 2016 EPS. 

Fastenal-FAST reported August sales rose 12.8% to $411.5 million with average daily sales also up 12.8% to $17.9 million. Sales growth by end market was up 14.6% for manufacturing and 6.4% for non-residential construction. Daily sales growth by product line was up 12.2% for fasteners and 13.3% for other products. Year-to-date, the company has opened 13 new branches ending the month with 2,454 branch locations. Total personnel increased 1.1% to 20,111 at quarter end.

 

MasterCard-MA reaffirmed its mid-teens GAAP net revenue growth for 2017. For its fiscal year 2016-2018 three year compounded annual growth rate guidance, management raised net revenue growth to mid-teens from low double-digits and raised its adjusted EPS growth to approximately 20% from the mid-teens. 

 AbbVie-ABBV announced positive top-line results from the Phase 2b randomized, placebo-controlled, dose-ranging study of upadacitinib (ABT-494), an investigational, once-daily oral JAK1-selective inhibitor, in adult patients with moderate to severe atopic dermatitis not adequately controlled by topical treatments, or for whom topical treatments were not medically advisable. "Atopic dermatitis is a serious, chronic skin disease that can have a negative impact on patients' lives," said Emma Guttman-Yassky, M.D., Ph.D., Professor of Dermatology and Immunology, Icahn School of Medicine at Mount Sinai Medical Center and lead study investigator. "I am very encouraged that itch reduction was achieved within the first week and that up to half of patients achieved a 90 percent or more improvement in skin lesions (EASI 90) by week 16. These are both major concerns for patients with atopic dermatitis. With these results upadacitinib has the potential to be an important treatment option for patients."

Wednesday, Sept. 6, 2017

AbbVie-ABBV in cooperation with Neurocrine Biosciences, Inc, announced that it has submitted a New Drug Application (NDA) to the U.S. Food and Drug Administration for elagolix, an investigational, orally administered gonadotropin-releasing hormone (GnRH) antagonist, being evaluated for the management of endometriosis with associated pain.  In two replicate Phase 3 clinical studies, elagolix demonstrated superiority compared to placebo in reducing three types of endometriosis-associated pain – daily menstrual pelvic pain, non-menstrual pelvic pain and painful intercourse.

Tuesday, Sept. 5, 2017

United Technologies (UTC)-UTX and Rockwell Collins, Inc. announced that they have reached a definitive agreement under which United Technologies will acquire Rockwell Collins for $140.00 per share, in cash and UTC stock.   Rockwell Collins is a leader in aviation and high-integrity solutions for commercial and military customers and is globally recognized for its leading-edge avionics, flight controls, aircraft interior and data connectivity solutions. On a 2017 pro forma basis, its estimated sales are greater than $8 billion. UTC expects to fund the cash portion of the transaction consideration through debt issuances and cash on hand, and the company is committed to taking actions to maintain strong investment grade credit ratings. The transaction is projected to close by the third quarter of 2018. The purchase price implies a total equity value of $23 billion and a total transaction value of $30 billion, including Rockwell Collins' net debt. On a pro-forma 2017 basis, UTC is expected to have global sales of approximately $67 to $68 billion following the transaction, based on estimated results.  UTC expects the combination will be accretive to adjusted earnings per share after the first full year following closing and generate an estimated $500+ million of run-rate pre-tax cost synergies by year four. "We have demonstrated we can successfully integrate large acquisitions into our business and I have full confidence that the team has the capability to do it again," Hayes said. "Once we have completed the integration of Rockwell Collins and made progress towards reducing leverage back to historical levels, we will have an opportunity to explore a full range of strategic options for UTC." UTC also reaffirmed its expectations for 2017 sales of approximately $58.5 to $59.5 billion and adjusted earnings in the range of $6.45 to $6.60 per share. Management said they expect to halt share buybacks for the next three to four years as they use cash flow to repay debt.  Further mergers and acquisitions also will be limited.

 

Wednesday, Aug. 30, 2017

Brown-Forman-BFB reported first quarter revenues increased 8% to $929 million with net income up 24% to $178 million and EPS up 27% to $.46 on lower shares outstanding. The Jack Daniel’s family of brands delivered broad-based growth, with underlying net sales up 6%, including underlying growth of 4% for Jack Daniel’s Tennessee. The company’s bourbon brands delivered continued growth, including 16% underlying net sales growth from Woodford Reserve. Herradura and el Jimador tequila grew underlying net sales 18% and 13% respectively. Finlandia vodka grew underlying net sales 6%, helped by improved results in Poland and strong growth in Russia. The company’s developed markets outside of the U.S. underlying sales were flat while emerging markets sales continued to accelerate from last year’s sluggish start to the year, delivering 19% growth in the first quarter on an underlying basis. Travel Retail continues to deliver solid rates of growth, with underlying net sales up 12%. For the first three months of fiscal 2018, free cash flow decreased 34% to $74 million with the company paying $70 million in dividends during the period. The company has $1.7 billion of long-term debt and $238 million of cash on the balance sheet as of 7/31/2017. Management believes fiscal 2018 is on track to be another year of continued growth in underlying net sales and operating income despite the significant uncertainty that currently exists around the global geopolitical environment and intense competitive landscape in the developed world. The company reaffirmed full fiscal 2018 year underlying net sales growth of 4% to 5% with underlying operating income growth of 6% to 8%.  Management increased EPS guidance from $1.80 to $1.90 to a range of $1.85 to $1.95 which includes the slightly more favorable impact from foreign exchange and an improved tax rate of approximately 28%.

Private sector employment increased by 237,000 jobs from July to August according to the August ADP National Employment Report®. "In August, the goods-producing sector saw the best performance in months with solid increases in both construction and manufacturing," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "Additionally, the trade industry pulled ahead to lead job gains across all industries, adding the most jobs it has seen since the end of 2016. This could be an industry to watch as consumer spending and wage growth improves." Mark Zandi, chief economist of Moody's Analytics, said, "The job market continues to power forward. Job creation is strong across nearly all industries, company sizes. Mounting labor shortages are set to get much worse." 

 


Tuesday, Aug. 29, 2017

Berkshire Hathaway-BRKB become the largest shareholder of Bank of America Corp, with a 6.6% stake in the bank, by exercising its right to acquire 700 million shares of the bank’s shares for about $7.14 each. With Bank of America's stock closing at $23.58, Berkshire has more than tripled its investment that it made six years ago.

 

Fluor - FLR announced today that the Purple Line Transit Partners joint venture team broke ground on the Purple Line Light Rail project for the Maryland Department of Transportation (MDOT) and the Maryland Transit Administration (MTA). “Fluor is honored to break ground today on the second transit public-private partnership project in the U.S.,” said Hans Dekker,  president of Fluor’s infrastructure business line. “We bring robust megaproject experience and industry-leading abilities to successfully design, build, finance and manage complex projects. Located in the Washington Metropolitan Region, the project includes 21 stations along a 16-mile alignment extending from Bethesda, Maryland, in Montgomery County to New Carrollton, Maryland, in Prince George’s County. This new line will provide connections to several existing transit providers and improve mobility to major economic and job centers, as well as the University of Maryland in College Park. Passenger service is scheduled to begin in early 2022. Fluor is participating in the entire 36-year life cycle of the $5.6 billion project. Fluor is the managing partner of the design-build team. A Fluor-led team will provide 30 years of operations and maintenance services.

Apple - AAPL and Accenture - ACN are partnering to help businesses transform how their people engage with customers through innovative business solutions for iOS. The partnership will take full advantage of the power, simplicity and security of iOS, the leading enterprise mobility platform, and Accenture’s capabilities as a leader in industry and digital transformation to help companies unlock new revenue streams, increase productivity, improve customer experience and reduce costs. Accenture will create a dedicated iOS practice within Accenture Digital Studios in select locations around the world. Working together, the two companies will launch a new set of tools and services that help enterprise clients transform how they engage with customers using iPhone® and iPad®. “Starting 10 years ago with iPhone, and then with iPad, Apple has been transforming how work gets done, yet we believe that businesses have only just begun to scratch the surface of what they can do with our products,” said Tim Cook, Apple’s CEO. “Both Apple and Accenture are leaders in building incredible user experiences and together we can continue to truly modernize how businesses work through amazing solutions that take advantage of the incredible capabilities of Apple’s technologies.” Pierre Nanterme, Accenture’s chairman and CEO, said, “Based on our experience in developing mobile apps, we believe that iOS is the superior mobile platform for businesses and are excited to be partnering with Apple. By combining Accenture’s vast digital capabilities and industry expertise with Apple’s market leadership in creating products that delight customers, we are in a perfect position to help our clients transform the way they work.”