HI-Quality Company Updates

Thursday, Feb. 21, 2019

Hormel Foods-HRL reported first fiscal sales increased 1% to $2.4 billion with operating earnings increasingly slightly to $307 million, net earnings falling 20% to $241 million and EPS dropping 21% to $.44. By business segment, Refrigerated Foods sales increased 2% to $1.3 billion, led by the new Hormel Deli Solutions division, with strong gains coming from Columbus® branded items and Jennie-O® premium deli meats, Old Smokehouse® bacon and Hormel® Fire Braised™ products. Grocery Products sales increased slightly to $607 million, led by Herdez® salsas and sauces, Wholly Guacamole® dips, the SPAM® family of products, Muscle Milk® protein beverages and Hormel® bacon toppings, partially offset by declines in contract manufacturing. Jennie-O-Turkey Stores sales dipped slightly to $321 million as improved results in foodservice sales  of Jennie-O® raw boneless breasts and Jennie-O® cooked breasts were offset by two ground turkey product recalls prompted by salmonella concerns. International sales increased 2% to $154 million, driven by sales in China that exceeded expectations. During the quarter, Hormel generated $178 million in free cash flow, down 34% from last year, squeezed by the timing of hog purchases. Hormel returned $145 million to shareholders during the quarter through share repurchases of $45 million at an average cost of $40.91 per share and dividends of $100 million. The company paid its 362nd quarterly dividend at the annual rate of $0.84 per share, up 12% from last year, marking the 53rd consecutive year of dividend increases and the 10th consecutive year of double-digit increases. Hormel ended the quarter with $513 million in cash on its beefy balance sheet. The company announced the sale of its CytoSport business, which generated about $300 million in annual sales, to PepsiCo for $465 million in cash. Management expects the deal to close next quarter. Looking ahead to the full fiscal year, the company expects sales in the $9.7 billion to $10.2 billion range, up 4% from last year at the midpoint, with EPS in the range of $1.77 to $1.91, compared to $1.86 in fiscal 2018. Management will update this guidance for the impact of the CytoSport sale after the deal closes.

Tuesday, Feb. 19, 2019

Genuine Parts-GPC reported fourth quarter sales motored ahead 9.4% to $4.6 billion with operating income increasing 14.5% to $254 million, net income increasing 72% to $187 million on lower taxes and EPS increasing 74% on fewer shares outstanding. Fourth quarter sales for the Automotive Group were up 11.4% to $2.6 billion, on a 4% comparable sales increase, a 9% benefit from acquisitions and an unfavorable foreign currency translation of about 2%.  Sales for the Industrial Group were up 8.7% to $1.6 billion, on a 7% comparable sales increase and a 2% contribution from acquisitions.  Sales for the Business Products Group were up 1.6% to $457 million, consisting primarily of comparable sales growth. For the year, Genuine Parts reported sales increased 15% to $18.7 billion with net income up 31% to $810 million and EPS up 32% to $5.50. During 2018, the company generated a solid 23.3% return on shareholders’ equity and $913 million in free cash flow, up 30% from last year on working capital efficiencies. The company returned $508 million to shareholders during 2918 through dividends of $416 million and share repurchases of $92 million. Genuine Parts announced a 6% dividend increase for 2019. The company has paid a cash dividend every year since going public in 1948 and 2019 marks the 63rd consecutive year of increased dividends paid to Genuine Parts’ shareholders. Looking ahead to 2019, management expects sales to increase 3% to 4% with EPS of $5.75 to $5.90.


Friday, Feb. 15, 2019

Oracle-ORCL authorized the repurchase of up to an additional $12.0 billion of common stock under an existing share repurchase program. The stock repurchase authorization does not have an expiration date and the pace of repurchase activity will depend on factors such as Oracle’s working capital needs, cash requirements for acquisitions and dividend payments, debt repayment obligations or repurchases of Oracle’s debt, Oracle’s stock price, and economic and market conditions.

UPS-UPS increased its regularly quarterly dividend by 5.5% to $0.96 per share on all outstanding Class A and Class B shares. UPS has a long commitment to cash dividends. For nearly 50 years, the company has either increased or maintained its dividend. Since 2000, UPS’s dividend has more than quadrupled.


PepsiCo-PEP reported fourth quarter revenues were relatively flat at $19.5 billion with net income of $6.9 billion and EPS of $4.83 compared to losses in the prior year period due to tax reform charges. While adverse foreign exchange translation negatively impacted revenues, the underlying organic revenue growth accelerated in the second half with solid  4.6% organic revenue growth in the fourth quarter with strong core constant currency EPS growth of 17%. Frito-Lay North America and each of the international sectors performed very well while North America Beverages made progress throughout the year. For the full year, revenues increased 2% to $64.7 billion with net income popping 158% to $12.5 billion and EPS up 160% to $8.78, primarily due to the benefits of tax reform. Full 2018 year revenues rose 3.7% with core constant currency EPS growth of 9% to $5.66.  Return on shareholders’ equity bubbled higher to 86% in 2018. Free cash flow declined 13% during the year to $6.1 billion due primarily to tax factors. During the year, PepsiCo paid $4.9 billion in dividends and repurchased $2 billion of its common stock. PepsiCo announced a 3% increase in its 2019 dividend to $3.82 per share, marking the 47th consecutive annual dividend increase. For fiscal 2019, PepsiCo expects to pay dividends of $5 billion and repurchase $3 billion of its common stock. Full year fiscal 2019 organic revenue growth is expected to be 4% with a 1% decline in core constant currency EPS due to lapping one-time gains in 2018, a higher expected tax rate and 2019 incremental investments to strengthen the business. PepsiCo expects to generate $9 billion in operating cash flow in 2019 with a step-up in capital expenditures to $4.5 billion to support future growth, resulting in free cash flow of approximately $5 billion. The company expects long-term financial performance of 4%-6% organic revenue growth, core operating margin expansion of 20 to 30 basis points, high-single-digit core constant currency EPS growth and increasing core net returns on invested capital.

Wednesday, Feb. 13, 2019

Cisco Systems-CSCO reported second quarter revenues rose 5% to $12.4 billion with net income of $2.8 billion and EPS of $.63 compared to losses last year related to a tax charge in connection with tax reform. On an adjusted basis, net income rose 6% with EPS up 16% during the second quarter. Despite complex political and macroeconomic headwinds, Cisco’s results were solid with growth across all geographies and double-digit growth in Applications and Security. Free cash flow increased 5% during the first half of the year to $7.1 billion. During the first half, Cisco paid $3 billion in dividends and repurchased $10 billion of its common stock, including the repurchase of 111 million shares at an average price of $45.09 per share or $5 billion in aggregate in the second quarter. Cisco ended the quarter with cash and investments of more than $40 billion and long-term debt of $16 billion.  As part of its commitment to return cash to shareholders, Cisco announced a 6% increase in its dividend and the authorization of an additional $15 billion for share repurchases, bringing the total authorization to $24 billion. Management’s outlook for the third quarter is for 4%-6% revenue growth and EPS in the range of $.63 to $.68.

In the last year, Alphabet-GOOGL has hired more than 10,000 people in the U.S. and made over $9 billion in investments. Alphabet announced over $13 billion in investments throughout 2019 in data centers and offices across the U.S., with major expansions in 14 states. These new investments will give the company the capacity to hire tens of thousands of employees, and enable the creation of more than 10,000 new construction jobs in Nebraska, Nevada, Ohio, Texas, Oklahoma, South Carolina and Virginia. With this new investment, Google will now have a home in 24 total states, including data centers in 13 communities.

  

Focused on creating the next frontier of surgery, Johnson & Johnson-JNJ announced that Ethicon, Inc., entered into a definitive agreement to acquire Auris Health, Inc. for approximately $3.4 billion in cash. Additional contingent payments of up to $2.35 billion, in the aggregate, may be payable upon reaching certain predetermined milestones. Auris Health is a privately held developer of robotic technologies, initially focused in lung cancer, with an FDA-cleared platform currently used in bronchoscopic diagnostic and therapeutic procedures. This acquisition will accelerate Johnson & Johnson's entry into robotics with potential for growth and expansion into other interventional applications. Johnson & Johnson continues to make meaningful investments to transform the surgical experience, connecting digital solutions to enhance surgical performance. In addition to advancing the company's focused initiatives to combat lung cancer, Auris Health's technology will support Johnson & Johnson's vision of being a world leader across the continuum of surgical approaches, including open, laparoscopic, robotic and endoluminal. This move is also complementary to the acquisition of Orthotaxy's robotic technology for orthopaedics and the continued development of the Verb Surgical Platform, through a strategic partnership with Verily, the healthcare unit of Alphabet-GOOGL. "We are very committed to our partnership with Verily on the development of the Verb Surgical Platform.  Collectively, these technologies, together with our market-leading medical implants and solutions, create the foundation of a comprehensive digital ecosystem to help support the surgeon and patient before, during and after surgery," said Ms. McEvoy. The transaction is expected to close by the end of the second quarter of 2019.

T. Rowe Price-TROW declared a quarterly dividend of $0.76per share payable March 29, 2019 to stockholders of record as of the close of business on March 15, 2019. The quarterly dividend rate represents an 8.6% increase over the previous quarterly dividend rate of $0.70 per share. This will mark the 33rd consecutive year since the firm's initial public offering that the company will have increased its regular annual dividend. The Board also approved a 10 million share increase in the company's authorization to repurchase its common stock. This brings the total repurchase authorization to nearly 22.4 million shares.

Friday, Feb. 8, 2019

Maximus-MMS reported first quarter operating results with revenues up 7% to $664.6 million primarily attributed to the acquisition of the citizen engagement center contracts in the US Federal segment. The revenue growth was partially offset by headwinds from foreign currency translations of $7.2 million.  Organic revenue for the quarter was down as welfare-to-work contracts in Australia and the United Kingdom came to their natural conclusion. Operating income for the quarter was $74.1 million, yielding an operating margin of 11.2% as compared to 12.8% for the same period last year.  The operating profit margin declined primarily due to the lower margins on the newly acquired citizen engagement center contracts.  The newly acquired contracts are cost plus fixed fee, these type of contracts usually have margins in the single digits as the contractor is exposed to less cost risk in performing the work.  Additional pressure will be felt on margins as new contracts are fully operational for the quarters ahead.  Net income for the first quarter was $55.9 million or $0.86 per share, down 5% from $59.1 million in the prior year period.  The primary drivers behind the decrease in earnings are the increases in costs associated with the acquisition and amortization of intangible assets.  Operating cash flows for the quarter rang up the till at $59.3 million, an increase of 56.5% over the first quarter of last year. The increased cash flow was provided by reduced demands on cash from deferred revenue and compensation and benefits.  We can expect some additional improvement in cash flow as management focuses on its receivable collections.  Free cash flow for the quarter was $53.9 million. Maximus management indicated that the company’s business was not significantly impacted by the Government shutdown as the work being performed for the Federal government was either in areas with approved funding or were considered essential operations.  The biggest impact the company felt was in the slowdown in the approval of security clearances to add personnel to current contracts.  Maximus may see some pressure on cash flows in the second quarter, but this will be temporary until the Government catches up on processing invoices. Maximus started the year off strongly with nearly $1 billion dollars in new contract awards in the first quarter.  These awards and the additional revenue from the full operation of the newly acquired contracts will add to revenue over the next three quarters.  Maximus also exits the first quarter with a strong pipeline of contract opportunities totaling $19.9 billion over the next two years. The contract pipeline is comprised of potential new contract work and the re-competition of existing contracts.  As of December 31, 2018, Maximus sales pipeline is comprised of 78% of new contract opportunities which bodes well for growth in future years.  Maximus is currently undergoing a strategic change and focusing on the Federal government under the leadership of the new CEO and based on the first quarter results appears to be positioning this HI-quality company for the long-term.  Management affirmed guidance for 2019 with revenue of $2.925 to $3.0 billion expected.  Earnings per share are projected in the range of $3.55 to $3.75 for the fiscal 2019 year. 

Wednesday, Feb. 6, 2019

Westwood Holdings-WHG reported fourth quarter revenues declined 23% to $26.1 million with net income flat at $5.4 million and EPS up 3% to $.64. The decline in revenues was due to lower average assets under management (AUM) due to net outflows, market depreciation and the sale of the Omaha-based private wealth business. AUM at 12/31/18 totaled $16.6 billion, a 31% decline from the $24.2 billion held at 12/31/17.  For the full year, revenues declined 9% to $122.3 million with net income up 34% to $26.8 million and EPS up 32% to $3.13. Net income benefited from foreign currency gains, lower incentive compensation expense and a lower tax rate due to tax reform. Return on shareholders’ equity was 16.6% in 2018. Free cash flow declined 35% during the year to $30.5 million due primarily to net purchases of trading securities. During the year, Westwood paid dividends of $24.6 million and repurchased 108,289 shares of its common stock for $4 million at an average price of $36.93 per share. Westwood ended the year with a debt-free balance sheet and more than $118 million in cash and investments.

Cognizant Technology Solutions-CTSH reported fourth revenues increased 7.9% to $4.13 billion with net income of $648 million and EPS of $1.12 compared to a loss of $18 million or $.03 per share in the prior year. The prior year loss included a one-time $617 million expense related to U.S. tax reform. Excluding one-time items including the impact of tax reform , EPS increased 2% from last year. Consulting & Technology Services represented 58% of total revenue and grew 9.5% while Outsourcing represented 42% of revenues and grew 6%. Revenue growth was solid across all business segments led by 18.4% growth in Communications, Media and Technology followed by 14% growth in Products and Resources. For the full year, sales increased 8.9% to $16.1 billion with net income up 40% to $2.1 billion and EPS up 42% to $3.60. Return on shareholders’ equity for the year was 18%. Free cash flow increased 4% to $2.2 billion during the year with the company paying $468 million in dividends and repurchasing $1.26 billion of its common stock. Cognizant ended the year with $4.5 billion in cash & investments and $736 million in debt on its strong balance sheet. For 2019, management expects revenue growth of 7% to 9% in constant currency with adjusted operating margin of 19% resulting in adjusted EPS of $4.40. The company announced Brian Humphries as the new CEO effective April 1, 2019. Current CEO, Francisco D'Souza, will serve as Executive Vice Chairman on the board until the transition is complete at the end of June and will then remain on the board as Vice Chairman.

Fastenal’s-FAST January sales increased 13.3% to $446.9 million with average daily sales also up 13.3% to $20.3 million. Daily sales by end market increased 13.8% in manufacturing and 16.7% in non-residential construction. Daily sales growth by product lines increased 13.3% in fasteners and 13.6% in other products. The percentage of the top 100 national accounts growing was 88% compared to 79% in the prior year period. Total personnel increased 4.9% to 21,841.

Tuesday, Feb. 5, 2019

The 3M-MMM Board of Director declared a dividend on the company’s common stock of $1.44 per share for the first quarter of 2019, a 6 percent increase over the quarterly dividend paid in 2018. The dividend is payable March 12, 2019, to shareholders of record at the close of business on Feb. 15, 2019. "The strength of our business model enables 3M to consistently generate premium margins and strong cash flow, and to build on the company’s long history of returning cash to our shareholders," said Mike Roman, 3M chief executive officer. 3M has increased its dividend for 61 consecutive years and paid dividends to its shareholders without interruption for more than 100 years.

Disney-DIS reported flat first quarter sales at $15.3 billion with net income declining 37% to $2.8 billion and EPS dropping 36% to $1.86. These results were impacted by a net tax benefit in the prior year period. On an adjusted basis, EPS declined 3% during the quarter. Studio Entertainment revenues declined 27% during the quarter to $1.8 billion with operating income down 63% to $309 million due to difficult comparison with theatrical distributions in the prior year period. Parks, Experiences & Consumer Products revenues rose 5% during the quarter to $6.8 billion with operating income up 10% to $2.2 billion due to increased guest spending and higher occupied room nights a the theme parks and resorts. Media Networks revenue increased 7% to $5.9 billion with operating income also up 7% to $1.3 billion thanks to strong growth in the broadcasting segment. Direct-to-consumer and International sales dipped 1% in the quarter to $918 million with the operating loss widening to $136 million due to foreign exchange headwinds and increased investments in the ramp up of ESPN+. ESPN+ now has 2 million paid subscriptions for its streaming service which doubled in the last five months. Free cash flow declined 28% during the quarter to $904 million due to lower operating results and higher tax payments. Capital expenditures increased by $214 million to $1.2 billion driven by higher spending on new attractions at the domestic theme parks and resorts. Management is looking forward in fiscal 2019 to the successful completion of the 21st Century Fox acquisition and the launch of the Disney+ streaming service.

Monday, Feb. 4, 2019

Alphabet-GOOGL reported fourth quarter revenues rose 22% to $39.3 billion with net income of $8.9 billion and EPS of $12.77 compared to losses in the prior year quarter related to one-time tax transition charges. During the fourth quarter, Google advertising revenues increased 20% to $32.6 billion, representing 83% of total revenues. All geographic regions were strong with each region generating double-digit growth. Google other revenues rose 31% to $6.5 billion with Other Bets revenues up 18% to $154 million during the quarter. Google operating income in the quarter rose 13% to $9.7 billion with Other Bets operating loss widening to $1.3 billion. Total traffic acquisition costs increased 15% in the quarter to $7.54 billion. Paid clicks on Google properties increased 66% during the quarter with cost per click declining 29%. For the full year 2018, Alphabet’s revenues rose 23% to $136.8 billion with net income and EPS each up 142% to $30.7 billion and $43.70, respectively, thanks to the benefits of tax reform. Return on shareholders’ equity was 17.3% for the year. Free cash flow declined 4% during the year as capital expenditures jumped 91% to $25 billion as the company invested significant resources in data centers and other facilities to support future growth. Capital expenditure growth is expected to moderate in 2019. During 2018, Alphabet repurchased $9.1 billion of its common stock and announced a new $12.5 billion share repurchase program for 2019. Alphabet ended the year with a strong balance sheet with more than $109 billion in cash and marketable securities and $4 billion in long-term debt. Alphabet has eight products or services with more than one billion users each with plans to embed artificial intelligence in the products to make them even more valuable to users.

Thursday, Jan. 31, 2019

Polaris Industries-PII announced that its Board of Directors approved a 2 percent increase in the regular quarterly cash dividend, raising the payout to $0.61 per share. This increase represents the 24th consecutive year of Polaris increasing its dividend.

UPS-UPS reported fourth quarter revenue rose 5% to $19.8 billion with net income and EPS each down 59% to $453 million and $.52, respectively, which included a non-cash, after-tax pension charge of $1.2 billion or $1.42 per share. On an adjusted basis for specified items, EPS increased 17% during the quarter. During the fourth quarter, UPS reported average revenue yield expanded 4% with gains in all products. The company achieved record shipments and exceptional on-time service during the peak holiday season with the U.S. Domestic segment delivering more than 21 million packages, on average, per day. For the full 2018 year, total revenue increased 8% to $71.9 billion with net income and EPS each down 2% to $4.8 billion and $5.51, respectively. On an adjusted basis, EPS increased 21%. Free cash flow topped $6.4 billion as the company reinvested $6.6 billion in its global network. UPS paid dividends during the year of $3.2 billion, an increase of 10% over the prior year, and repurchased 8.9 million shares for $1 billion at an average price of about $112.35 per share. The company has earmarked another $1 billion for share repurchases in 2019. During 2019, UPS expects U.S. revenue to grow 4% to 6% and international revenue to grow 5% to 7% with total adjusted operating profit growth in the low-teens with all segments up double-digits thanks to margin expansion. Adjusted EPS are expected in the range of $7.45-$7.75 with adjusted free cash flow expected in the range of $3.5 to $4.0 billion. Capital expenditures are planned in the range of 8.5% to 10% of revenue in 2019, as the company continues to invest for the long haul including  an expected 18 new or retrofit automated global facilities. Management expects softer export and GDP growth in 2019 due to trade policy uncertainty.

Tractor Supply-TSCO reported fourth quarter sales increased 9% to $2.1 billion with net income up 25% to $136.9 million and EPS up 28% to $1.11. Earnings from the prior year include a charge of $4.9 million, or $.04 per share, related to U.S. tax reform. Sales growth was driven by a solid 5.7% increase in comparable store sales growth consisting of a 3% increase in the average ticket and a 2.6% increase in customer transactions. All geographic regions and all major product categories had positive comparable store sales growth. The company opened 17 new Tractor Supply stores and 4 new Petsense stores in the quarter and closed 10 underperforming Petsense stores. For the full year, sales increased 9% to $7.9 billion with net income up 26% to $532 million and EPS up 31% to $4.31. Return on shareholders’ equity for the year was a strong 34%. Free cash flow increased 9% to $416 million during the year. The company paid $147 million in dividends and repurchased $350 million of its common stock at an average price of $70.14 during the year. Since inception of the repurchase program, the company has repurchased $2.5 billion of its stock with $520 million remaining authorized for future share repurchases. For 2019, management expects revenues of $8.31 to $8.46 billion with EPS in the range of $4.60 to $4.75 reflecting earnings growth of 8.5% at the midpoint. Comparable stores sales growth is expected to be in the range of 2% to 4% with 80 new Tractor Supply and 10 to 15 new Petsense store openings.

Mastercard-MA reported fourth quarter revenue charged ahead by 15% to $3.8 billion with net earnings of $900 million, or $0.87 per share, compared to net income of $200 million, or $0.21 per share, last year. Excluding the impact of U.S. tax reform and other one-time items, fourth quarter income and EPS were $1.6 billion and $1.55, up 33% and 36%, respectively. Underlying revenue growth was 12%, driven by: a 17% increase in switched transactions; a 14% increase in gross local currency dollar volume to $1.5 trillion; and a 17% increase in local currency cross-border volumes, partially offset by an increase in rebates and incentives on new and renewed agreements and increased volumes. During the fourth quarter, Mastercard repurchased about 4.4 million shares at a cost of $888 million, or $201.82 per average share, and paid $259 million in dividends. Quarter-to-date through January 30, the company repurchased an additional 4 million shares at a cost of $773 million, which leaves $6 billion remaining undercurrent repurchase program authorizations. On a macro level, overall economic growth was solid in 2018 and Mastercard expects this growth to continue in 2019, albeit with some moderation. Management is carefully watching several factors including increased trade tensions, rising interest rates and other economic and political factors that could slow growth over the longer term. With low unemployment and positive consumer confidence, U.S. retail spending increased 4.8% year-over-year. Europe’s retail spending moderated and spending in the U.K. increased 3.5% despite concerns over Brexit. China’s slow-down has not directly affected Mastercard as the company does not have a domestic presence there though China’s slowdown has hurt the global economy. For 2018, Mastercard reported revenues increased 20% to $15 billion with net income of $5.9 billion and EPS of $5.60, compared to net income of $3.9 billion and EPS of $3.65 in 2017. Excluding the impact of U.S. tax reform and other one-time items, adjusted net earnings were $6.8 billion, or $6.49 per share, up 38% and 42%, respectively. During 2018, Mastercard generated a stellar 108.6% return on shareholders’ equity. The company generated $5.9 billion in free cash flow during 2018, up 10% from last year, and returned nearly $6 billion to shareholders through dividends of $1 billion and share repurchases of $4.9 billion at an average cost per share of $187.02. The company ended the year with $8.4 billion in cash & investments and $5.8 billion in long-term debt on its strong balance sheet. For 2019, management expects revenue growth in the low-teens with operating expenses in the high-single digits and an effective tax rate of 19% to 20%.


Wednesday, Jan. 30, 2019

Facebook-FB reported fourth quarter revenues jumped 30% to $16.9 billion with net income up 61% to $6.9 billion and EPS up 65% to $2.38. The prior year earnings include a charge of $2.3 billion, or $.77 per share, related to U.S. tax reform. The company estimates that more than 2.7 billion people now use Facebook, WhatsApp, Instagram or Messenger, with more than 2 billion people using at least one of the company’s services every day. Daily active users were 1.52 billion on average, an increase of 9% year over year. Monthly active users were 2.32 billion, an increase of 9%. Mobile advertising revenue represented approximately 93% of advertising revenue for the quarter up from 89% in the prior year period. There are more than seven million advertisers active on Facebook and Instagram. Headcount was 35,587 as of year-end, an increase of 42% year-over-year. Revenue growth was strong across all geographic region led by 34% growth in Asia Pacific followed by 31% growth in North America and 28% growth in Europe. For the full fiscal 2018 year, revenue increased 38% to $55.0 billion with net income up 39% to $22.1 billion and EPS up 40% to $7.57. Return on shareholders’ equity for the year was a likeable 26%. During the year, Facebook posted $15.4 billion in free cash flow, down 12%, as the company invested $13.9 billion in capital expenditures to build out its data centers, servers, network infrastructure and office facilities. The company repurchased $12.9 billion of its shares during the year and the Board approved an additional $9 billion repurchase program in December.

Microsoft-MSFT reported second fiscal quarter revenue increased 12% to $32.5 billion with net income of $8.4 billion and EPS of $1.08 compared to a loss of $6.3 billion, or $0.82 per share, reported in 2017. Excluding the impact of U.S. tax reform, net earnings and EPS increased 14% and 15%, respectively. By business segment, More Personal Computing revenue booted up 7% to $13 billion, driven by growth in Surface and Gaming. Search advertising revenue grew 14% while Windows OEM revenue declined by 5% due to computer chip shortages. Intelligent Cloud revenue increased 20% to $9.4 billion, driven by server products and cloud services. Azure revenue increased 76% while server products revenue grew 3%, powered by demand for premium versions and hybrid solutions and the inclusion of GitHub. Enterprise mobility installed base grew 57% to over 94 million seats. Productivity and Business Processes revenue increased 13% to $10.1 billion, driven by Office 365 and LinkedIn. Cash flow from operations during the quarter increased 13% to $8.9 billion while free cash flow dipped 2% to $5.2 billion on higher capital investments to support future growth in Microsoft’s cloud business. During the quarter, through dividend payments of $3.5 billion and share repurchases of $6.4 billion, Microsoft returned nearly $10 billion to shareholders, up 90% year-over-year, as the company works toward its goal of completely offsetting dilution from the GitHub acquisition. Microsoft ended the quarter with nearly $130 billion in cash & investments and $70 billion in long-term debt on its strong balance sheet. Looking ahead to the third fiscal quarter, Microsoft expects revenues in the $29.4 billion to $30.1 billion range, up 10% to 12% from 2018.

Stryker-SYK reported fourth quarter sales increased 9.4% to $3.8 billion with net earnings and EPS of $2.07 billion and $5.44, respectively, compared with a loss of $249 million, or $0.66 per share, last year. Excluding the impact of U.S. tax reform and other one-time items, net earnings and EPS increased 11% to $828 million and $2.18, respectively. By geography, domestic sales increased 10% to $2.8 billion and international sales increased 7% to $1 billion. By business segment, Orthopaedics sales increased 7% organically to $1.4 billion, driven by growth in Trauma & Extremities and Knees. MAKO robotic sales remained strong with a record 54 robots installed during the quarter, 40% of which were installed in competitive accounts, bringing the total robots installed to 642. Stryker certified an additional 250 trained MAKO surgeons during the quarter, bringing the total number of trained surgeons to 1,600. MedSurg and Neurotechnology & Spine sales increased 11% organically to $1.7 billion and $700 million, respectively. For 2018, Stryker reported a healthy 9% increase in sales to $13.6 billion with net income and EPS of $3.6 billion and $9.34, respectively, compared with 2017 net income and EPS of $1.0 billion and $2.68, respectively. Excluding the impact of U.S. tax reform and other one-time items, net earnings and EPS increased nearly 13% to $2.8 billion and $7.31, respectively. During 2018, Stryker generated $2.0 billion in free cash flow and returned more than $1 billion to shareholders through dividends of $703 million and share repurchases of $300 million. Stryker ended the year with $3.7 billion in cash & investments and $8.5 billion in long-term debt on its healthy balance sheet. During 2018, Stryker generated a strong 30.3% return on shareholders’ equity. Looking ahead to the full 2019 year, management expects organic net sales growth in the range of 6.5% to 7.5% with adjusted EPS in the $8.00 to $8.20 range, up 11% from 2018 at the mid-point.

Gentex-GNTX reported fourth quarter sales dimmed by 1.3% to $453.4 million with net income falling 18.5% to $106.3 million and EPS down 11% to $0.41 on fewer shares outstanding. During the fourth quarter, plant shutdowns and changes to production schedules at OEM’s, as well as order adjustments at certain Tier 1 customers, negatively impacted quarterly unit shipments and revenue. Actual vehicle production in Europe, North America, Japan, Korea and China declined by 6% during the quarter versus a 2% increase projected at the beginning of the fourth quarter. Total Auto-Dimming Mirror units shipped increased 2% to 10,225 units on an 11% increase in North American mirror shipments to 3,359 units and a 2% decline in international mirror shipments to 6,866 units. Gross margins fell to 37.9% from 39.2% last year, squeezed by tariffs that became effective during the third quarter. During the quarter, Gentex generated $137 million in free cash flow, up 5% from last year’s fourth quarter. The company repurchased 3.3 million of its shares during the quarter at an average price of $21 per share. For 2018, Gentex’s sales increased 2% to $1.8 billion with net income up 7.6% to $438 million and EPS up 15% to $1.62. A lower effective tax rate in 2018 (16% versus 24% in 2017) drove the 2018 earnings gain. During 2018, Gentex recorded an impressive 23.5% return on shareholders’ equity and generated $466.4 million in free cash flow, up 18% from 2017. Gentex repurchased 26.4 million shares during 2018 at an average price of $22.37 per share. As of December 31, 2018, 8.8 million shares remained available for repurchase under the current share repurchase program. Gentex ended the year with more than $524 million in cash & investments and $55 million in long-term debt on its super strong balance sheet. Based on a projected 1% increase in total light vehicle production, Gentex expects 2019 revenues in the range of $1.83 billion to $1.93 billion. Gross margins are expected in the 36% to 37% range and operating expenses in the $195 million to $200 million range, up 8% at the midpoint from 2018. Gentex estimates its 2019 effective tax rate in the 16% to 18% range.

Canadian National Railway-CNI reported record fourth quarter revenues rose 16% to C$3.8 billion with net income declining 56% to C$1.1 billion and EPS dropping 55% to C$1.56. Excluding the impact of U.S. tax reform and other one-time items, adjusted net income rose 22% with adjusted EPS up 24%. The increase in revenues was mainly attributable to higher volumes of petroleum crude and Canadian grain, freight rate increases, higher applicable fuel surcharge rates, and the positive translation impact of a weaker Canadian dollar. Revenue ton miles (RTM) increased 12% during the quarter with carloadings up 5% to 1,537 thousand. The company’s operating ratio improved 80 basis points to 61.9%. For the full fiscal 2018 year, sales increased 10% to C$14.3 billion with net income down 21% to C$4.3 billion and EPS down 19% to C$5.87. Return on shareholders’ equity for the year was a healthy 24.5%. During the year, CNI generated C$2.5 billion in free cash flow and returned C$3.3 billion to shareholders through C$2.0 billion in share repurchases and C$1.3 billion in dividend payments. The Board approved an additional 22 million share repurchase program starting February 1, 2019. For fiscal 2019, management expects to deliver high single-digit volume growth in terms of revenue ton miles and EPS growth in the low double-digit range compared to adjusted EPS of C$5.50 in 2018.

ADP-ADP reported fiscal second quarter revenues increased 8% to $3.5 billion with net earnings decreasing 17% to $558 million and EPS down 16% to $1.27. The prior year earnings included a one-time benefit of $233 million, or $.52 per share, benefit related to U.S. tax reform. Excluding the impact of tax reform and other one-time items, adjusted EPS increased 30% to $1.34. Employer Services revenues increased 7% to $2.5 billion on a 2.3% increase in pays per control. PEO Services revenues gained 12% to $1.1 billion, boosted by a 9% increase in average worksite employees to 545,000. Interest in funds held for clients increased 21% to $129 million on a 5% increase in average funds held for clients to $23.6 billion and a 30 basis point increase in the average interest earned to 2.2%. During the first six months of the fiscal year, ADP generated $852 million in free cash flow and ended the period with $2.8 billion in cash and $2 billion in long-term debt on its strong balance sheet. During the first half of the year, ADP returned $1.1 billion to shareholders through dividends of $605 million and share buybacks of $527 million. For the full fiscal year, ADP expects revenues to increase 6% to 7% on a 5% to 6% increase in Employer Services revenues and a 9% to 10% increase in PEO revenues. U.S. pays per control are expected to increase by 2.5%. Average client funds balances are expected to increase 4% and the yield on the client funds portfolio is expected to increase 30 basis points to 2.2%, resulting in a 19% to 21% increase in client funds interest revenue to $556 million to $566 million. Adjusted EPS is expected to increase 17% to 19% up from previous guidance of 15% to 17%.

T. Rowe Price-TROW reported fourth quarter revenues rose 0.6% to $1.3 billion with net income up 1.4% to $351.9 million and EPS up 2.9% to $1.41. For the full 2018 year, revenues rose 10.7% to $5.4 billion with net income up 22.7% to $1.8 billion and EPS up 21.8% to $7.27.Return on shareholders’ equity improved to 29.3% in 2018. Net client outflows during the fourth quarter were $8.4 billion due to elevated market volatility-driven redemptions similar to broad industry net cash flow trends. For the full year, net client inflows of $13.2 billion occurred. Assets under management (AUM) ended the year at $962 billion, a decline of 3% for the year due to steep equity declines especially in December. Organic AUM increased 1.3% for the year driven by diversified inflows across distribution channels and geographies, the strength of the multi-asset franchise and positive flows into international equity and fixed-income investments. The firm employed 7,022 associates at year end, an increase of 2% compared to the prior year. In 2019, operating expense growth is expected in the range of 4%-7% with capital expenditures expected to increase 19% to about $200 million for planned technology investments. T. Rowe Price remains debt-free with ample liquidity including cash and investments of $3.0 billion. During 2018, the company returned 100% of its net income to shareholders through dividends and share repurchases with 10.8 million shares repurchased, of 4.4% of shares outstanding, for $1.1 billion at an average price of $101.48 per share.

Tuesday, Jan. 29, 2019

Biogen-BIIB reported a 6.6% increase in fourth quarter revenues to $3.5 billion with net earnings of $947 million and EPS $4.73 compared to a loss of $166 million, $1.40 per share, in the prior year. Global sales of TECFIDERA—the most prescribed oral therapy for MS—were $1.1 billion, up 3%. Sales of TYSABRI—the market leading high efficacy therapy for MS—were $464 million, flat with last year, on a 2% increase in U.S. sales which were offset by a 1% decline in international sales. Sales of Biogen’s Interferon MS therapies declined 7% to $597 million. Global sales of SPINRAZA—the first drug approved to treat children and adults with spinal muscular atrophy (SMA)—were $470 million, up from $363 million last year. Biogen’s biosimilar sales increased 28% to $156 million with more than 100,000 patients using Biogen’s biosimilars. For the full fiscal 2018 year, sales increased 9.6% to $13.5 billion with net income up 75% to $4.4 billion and EPS up 81% to $21.58. Return on shareholders’ equity for the year was a healthy 34%. During the year, Biogen generated $6.2 billion in cash flow from operations, ending the year with $3.5 billion in cash and $5.9 billion in notes payable on its strong balance sheet. The company repurchased 14.8 million of its shares for $4.4 billion and has $2 billion remaining for additional share repurchases under the current Board approved program. For fiscal 2019, management expects revenues of $13.6 to $13.8 billion with EPS in the range of $26.75 - $27.65 reflecting earnings growth of 26% at the midpoint.

Apple-AAPL reported fiscal first quarter revenues declined 5% to $84.3 billion with product sales down 7% to $73.4 billion and services sales up 19% to a record $10.9 billion. International sales accounted for 62% of total revenues. As previously reported, revenues came in below expectations for the quarter due to the timing of new iPhone launches, foreign exchange headwinds, supply constraints and challenging macroeconomic conditions especially in Greater China, where sales declined 27% during the quarter to $13.1 billion. iPhone sales declined 15% during the quarter to $52 billion which was impacted by the lower sales in China, fewer subsidies for the phones worldwide and lower than expected upgrades as replacement batteries resulted in customers holding onto their old phones longer.  Net earnings were relatively flat at $20 billion during the quarter with EPS up 7% to a record $4.18. Mac sales increased 9% during the quarter to a record $7.4 billion thanks to strong demand for the MacBook Air and MacBook Mini. iPad sales increased 17% during the quarter to a record $6.7 billion, representing the fastest iPad growth in six years, due to the new iPad Pro, the most powerful mobile device ever. Wearables, Home and Accessories sales jumped 33% during the quarter to $7.3 billion, thanks to strong demand for the Apple Watch and Airpods with the company being supply constrained during the quarter. Services sales increased 19% to a record $10.9 billion as the active installed base of devices reached an all-time high of 1.4 billion during the quarter, growing in each geographic segment.  Active iPhone devices increased 75 million in the last 12 months to 900 million devices with the iPhone scoring 99% satisfaction ratings for the new products launched during the quarter. Apple’s subscriptions to its services increased by 120 million over the last 12 months to 360 million subscriptions at quarter end with the company expecting paid subscriptions to reach 500 million by 2020. Free cash flow declined 8% during the quarter to $23.3 billion with Apple ending the quarter with $245 billion in cash and investments or cash, net of debt, totaling $130 billion. During the first quarter, Apple paid $3.6 billion in dividends and repurchased $8.8 billion of its common stock. Since inception of the share repurchase program, Apple has repurchased $250 billion of its shares.  Apple will update its capital allocation strategy in the next quarter.  With management “optimistic about the company’s future and seeing great value in the stock,” further share repurchases are likely. Apple expects to announce “exciting” new product launches later this year. For the second fiscal quarter, Apple expects revenues between $55 billion to $59 billion, gross margin between 37% and 38%, operating expenses between $8.5 billion and $8.6 billion, other income of $300 million and a tax rate of about 17%.

Polaris-PII reported fourth quarter revenues rose 14% to $1.6 billion with net income and EPS approximately tripling to $91.5 million and $1.47, respectively, primarily due to tax reform. On an adjusted basis, fourth EPS rose 19% to $1.83.  For the full 2018 year, revenues rose 12% to $6.1 billion with net income up 94% to $335 million and EPS up 95% to $5.24. On an adjusted basis, EPS was up 29% for the year to $6.56. Return on shareholders’ equity in 2018 was 38.7%, reflecting a boost from higher leverage. During the year, Polaris acquired Boat Holdings which contributed to the financial results but also increased the company’s debt load significantly. Free cash flow declined 37% during the year to $252 million due to a big jump in inventories and higher capital expenditures. Polaris expects capital expenditures to rise further in 2019. During the year, the company paid $149 million in dividends and repurchased $349 million of its common stock. During 2019, management expects to give debt repayment a priority over share repurchases. The company announced its adjusted sales and earnings guidance for the full year 2019 with adjusted sales expected to increase in the range of 11% to 13% and adjusted net income expected to decline 5% to 9% to the range of $6.00 to $6.25 per share due to the impacts of tariffs, adverse foreign exchange and higher interest rates.

3M-MMM posted fourth quarter sales of $7.9 billion, down 0.6% from last year, with net income of $1.3 billion, up from $523 million last year, and EPS of $2.27, up from $0.85 last year. Excluding the impact from U.S. tax reform and other one-time items, adjusted EPS increased 10% to $2.31. Organic sales grew across all geographic areas and business groups. Organic sales increased 4.4% in the U.S., 5% in Latin America/Canada, 1.3% in EMEA and 2% in Asia Pacific. By business group, Industrial organic sales increased 2.5%, Safety & Graphics increased 3.3%, Health Care  increased 4.8%, Electronics & Energy  increased 4.1% and Consumer increased 1.9%. During the quarter, 3M generated $1.7 billion in free cash flow, up 23.3% from last year, representing an exceptional 128% conversion ratio. 3M returned $2.1 billion to shareholders during the quarter via dividends and gross share repurchases. For the year, 3M reported sales of $32.8 billion, up 3.5%, with net income of $5.35 billion, up 10.1%, and EPS of $8.89, up 12.1%. During 2018, 3M generated free cash flow of $4.86 billion, down slightly from last year, representing a 91% free cash flow conversion rate, squeezed by U.S. tax reform and a legal settlement. During 2018, 3M returned $8.1 billion to shareholders via share repurchases of $4.9 billion and dividends of $3.2 billion. 2018 marked the 60th consecutive year of annual dividend increases for 3M shareholders. During 2018, 3M generated a 54.3% return on shareholders’’ equity, boosted its $11.4 billion net debt position. Given slowing growth in its automotive and electronics end markets, especially in China, 3M lowered expected 2019 organic sales growth to 1% to 4% from 2% to 4%. EPS are expected in the range of $10.45 to $10.90, up 18% to 23% year-on-year. During 2019, the company expects to generate $5.8 billion to $6.7 billion in free cash flow and buyback $2 billion to $4 billion of its shares while investing $1.7 billion to $1.9 billion in capital expenditures, up 8% to 21% from 2018. 3M expects price increases to offset the impact of tariffs during 2019.

Monday, Jan. 28, 2019

Bank of Hawaii-BOH reported fourth quarter net income declined 5% to $53.9 million with EPS dropping 4% to $.62. Noninterest expenses in the fourth quarter included $4.1 million in one-time significant items related to employee separation, medical and legal expenses. The return on average assets for the fourth quarter was 1.26% compared to 1.0% in the prior year period. The return on average equity in the fourth quarter also improved to 17.05% compared to 13.85% in the prior year period. For the full year 2018, net income increased 19% to $219.6 million with EPS jumping 21% to $5.23. The return on average assets for the full year increased to 1.29% compared with 1.11% in 2017 with the return on average equity increasing to 17.63% in 2018 compared to 15.27% in 2017. During the year, loan and deposit balances continued to grow and net interest margin expanded to 3.05%, an increase of 12 basis points. The net interest margin is expected to continue to increase in 2019 by 3-4 basis points each quarter. The efficiency ratio for the full year was 56.7% compared to 55.7% in 2017. During 2018, Bank of Hawaii’s asset quality, capital and liquidity all remained strong. General economic conditions in Hawaii remained healthy during 2018 led by record-high visitors, low unemployment, rising real estate prices and an active construction industry. During the fourth quarter, the company repurchased 325,400 shares of common stock at a cost of $24.9 million under its share repurchase program at an average cost of $76.63 per share. Subsequent to year end, the company repurchased an additional 178,000 shares at an average cost of $72.68 per share.  From the beginning of the share repurchase program initiated in July 2001, the company has repurchased 55.3 million share for nearly $2.2 billion at an average cost of $39.14 per share. The Board of Directors recently expanded the share repurchase program authorization by an additional $130 million. Management’s capital allocation strategy is to pay out approximately 50% of net income in dividends to shareholders, maintain adequate capital ratios and use excess funds for share repurchases.

  

AbbVie-ABBV announced that the U.S. Food and Drug Administration (FDA) approved the use of IMBRUVICA® (ibrutinib) in combination with obinutuzumab (GAZYVA®) for adult patients with previously untreated chronic lymphocytic leukemia/small lymphocytic lymphoma (CLL/SLL). IMBRUVICA is jointly developed and commercialized by Pharmacyclics LLC, an AbbVie company, and Janssen Biotech, Inc, a Johnson & Johnson-JNJ company. "We are living in a time of significant advances in cancer treatment, particularly in blood cancers, and this latest IMBRUVICA FDA approval is an example. I am proud that we can now give physicians and patients a new option to treat CLL and SLL without the need for chemotherapy," said Danelle James, M.D., M.A.S., Head of Clinical Science, Pharmacyclics LLC, an AbbVie company.

Friday, Jan. 25, 2019

AbbVie-ABBV reported fourth quarter revenue rose 7.3% to $8.3 billion with the company reporting a net loss of $1.8 billion or ($1.23) per share. The loss reflects the recent partial $4.11 billion impairment charge related to intangible assets acquired as part of the 2016 acquisition of Stemcentrx. AbbVie will monitor the remaining $1 billion of intangible assets for further impairment.  Excluding specified items, adjusted fourth quarter EPS increased 28% to $1.90. During the fourth quarter, global HUMIRA sales increased 0.5% to $4.9 billion. In the U.S., HUMIRA sales grew 9.1% while international sales declined 14.8% operationally due to direct biosimilar competition in certain international markets during the quarter. During the quarter, global revenues from the hematologic oncology portfolio were $1.13 billion, an increase of 50%, including a 42% increase in global IMBRUVICA revenues to $1.0 billion. Fourth quarter global HCV sales were $862 million with other key products generating $1.3 billion in sales. For the full 2018 year, AbbVie’s revenues increased 16% to $32.8 billion with net income up 7% to $5.7 billion and EPS up 11% to $3.66. On an adjusted basis, EPS grew 41% to $7.91 driven by an 8% increase in full year global HUMIRA sales to $19.9 billion, representing 61% of total sales. The loss of patent protection for HUMIRA in international markets is expected to result in a 30%-35% drop in international HUMIRA sales in fiscal 2019 due to aggressive discounting by biosimilar competitors. Despite absorbing approximately $2.4 billion in erosion of sales due to competition, AbbVie expects sales in 2019 to increase 1% on a constant currency basis with the company generating double-digit EPS growth in the range of $7.39 to $7.49 even as the firm funds five major new product launches during the year, each with multibillion sales potential.

Thursday, Jan. 24, 2019

Starbucks-SBUX brewed up 9% revenue growth to a record $6.6 billion in their fiscal first quarter. Global comparable stores were up 4% in the quarter driven by a 3% increase in average ticket. Americas and U.S. comparable store sales increased 4% with transactions flat.  China comparable store sales increased 1% with transactions down. Total China sales increased 18% during the quarter due to new store openings. At the end of the quarter, Starbucks operated 3,700 stores in 158 cities in China. Starbucks is celebrating its 20th anniversary of operating in China but still considers the business in China to be in the early innings. During the quarter, Starbucks opened 541 net new stores yielding 29,865 stores at the end of the quarter. Over two-thirds of the new store openings during the quarter were outside the U.S. and approximately 50% were licensed. For the full fiscal 2019 year, Starbucks expects to open about 2,100 net new stores globally with capital expenditures approximating $2 billion.  he company’s operating margin declined 310 basis points to 15.3% primarily due to streamline-driven activities and employee investments. Operating income declined 9% during the quarter to $1 billion with net income and EPS down 66% and 61%, respectively, to $761 million and $.61, lapping a significant gain in the prior year period from the acquisition of a joint venture. For fiscal 2019, management expects sales to grow 5% to 7% with global comparable sales in the range of 3% to 4%. Operating margins are expected to be down slightly and EPS are expected in the range of $2.32-$2.37 for the full year. Management reaffirmed its goal of returning $25 billion in cash to shareholders through dividends and share repurchases by 2020. With the company distributing $9 billion in fiscal 2018 via dividends and buybacks and a $5 billion accelerated share repurchase program completed in the first fiscal quarter of 2019, the company is well on its way to meeting that goal.

Wednesday, Jan. 23, 2019

F5 Networks – FFIV reported first fiscal quarter revenue of $543.8 million up 4% from last year, with operating income increasing 11% to $158 million, net income increasing 48% to $130.9 million and EPS increasing 53% to $2.16. Sales growth was driven by continued momentum in software solutions, which drove year over year product revenue growth for the third consecutive quarter. Product revenues, which accounted for 43% of total sales, grew 3% to $234 million. Services revenues, which accounted for 57% of total sales, increased 5% to $310 million. Gross profit margins increased 80 basis points to 84.1%, driven by the increased software and services sales. During the quarter, F5 Networks generated $198 million in operating cash flow, up 4%, and $177 million in free cash flow, down 4% from last year on higher capital investments. During the quarter, the company repurchased $101 million of its shares at an average cost of $177.64 per share. F5 Networks ended the quarter with $1.55 billion in cash and investments on its debt-free balance sheet. Looking ahead to the second quarter, management expects sales between $543 million and $553 million, up 3% from last year at the midpoint, with adjusted earnings per share of $2.53 to $2.56, up 10% at the mid-point.   "As customers deploy applications across complex hybrid and multi-cloud environments, the need for consistent security and reliable performance is becoming increasingly evident," said Francois Locoh-Donou, F5 Networks' President and CEO. "We believe F5 is uniquely positioned to solve this growing challenge for our customers with the multi-cloud application services their applications demand."

 

United Technologies-UTX reported a stronger than expected fourth quarter with revenues up 15% to $18 billion, including 11% organic growth. Net income soared 73% to $686 million and EPS rose 66% to $.83 in the fourth quarter with adjusted EPS up 22% to $1.95. During the fourth quarter, commercial aftermarket sales were up 11% at Pratt & Whitney and up 8% organically at Collins Aerospace Systems. Otis new equipment orders were flat organically and equipment orders at Carrier increased 3% organically. For the full year 2018, revenues increased 11% to $66.5 billion, including 8% organic growth which was the best organic sales growth in over a decade. Net income for the year increased 16% to $5.3 billion with EPS up 14% to $6.50. In 2018, for the first time in over 30 years, Pratt & Whitney manufactured more than 1,000 large commercial and military engines as the aerospace market remains strong. Collins Aerospace was formed by the accretive acquisition of Rockwell Collins with the acquisition already performing better than expected. Carrier launched more than 100 new products during 2018. At Otis, the number of units under maintenance contract exceeded two million for the first time in the company’s history.  Return on shareholders’ equity for the year was 13%. Free cash flow increased 22% to $4.4 billion during the year with the company paying $2.2 billion in dividends and repurchasing $325 million of its common shares.  Management provided the following 2019 outlook with sales expected in the range of $75.5 billion to $77.0 billion, including organic sales growth of 3% to 5%. Adjusted EPS for 2019 is expected in the range of $7.70 to $8.00 with free cash flow of $4.5 billion to $5.0 billion expected. The economic environment in 2019 is looking good with worldwide GDP expected to increase 2.9% with China leading the way with 6.3% GDP growth. North America should generate GDP growth of about 2.4% with housing in the U.S. expected t rise, inflation remaining in check and consumption strong. UTX is seeing lower order rates in Europe with Western Europe’s GDP only expected to grow 1.4%  United Technologies is making good progress in separating the company into three industry-leading firms as previously announced which is expected to be completed by May 2020. Separation costs are expected in the range of $2.5 billion to $3.0 billion primarily related to tax and transaction costs and debt refinancing.

Tuesday, Jan. 22, 2019

Johnson & Johnson-JNJ reported fourth quarter revenues rose 1% to $20.4 billion with net income of $3 billion and EPS of $1.12. On an adjusted basis (excluding intangible amortization expense and special items), net income increased 12.5% to $5.4 billion with EPS up 13.2% to $1.97. For the full year, revenues rose 7% to $81.6 billion with net income up 2% to $15.3 billion and EPS of $5.61. On an adjusted basis, net earnings increased 10% to $26.7 billion with EPS up 12% to $8.18. Worldwide Pharmaceutical sales drove the growth for the year by increasing 12.4% to $40.7 billion thanks to market share gains and strong performance in oncology and continued growth in immunology products. Seven key products recorded double-digit growth including 39% growth in Imbruvica, a treatment for a type of blood or lymph node cancer. Worldwide Medical Device sales increased 1.5% for the year to $27 billion with accelerating sales momentum fueled by interventional solutions, advanced surgery and vision products. Worldwide Consumer sales increased 1.8% for the year to $13.9 billion driven by premium beauty products and strong U.S. over-the-counter consumption and market share gains. JNJ has a blockbuster portfolio with 26 platforms/products generating $1 billion or more in annual sales including 12 platforms/products generating $2 billion or more in annual sales. JNJ invested about $11 billion in research and development during the year to sustain its investments in innovation. Approximately 25% of sales has come from products launched in the last five years.  In addition, the company made 13 acquisitions and licensing agreements during the year. JNJ’s long-term strategy is to grow sales faster than the market; grow earnings faster than sales; generate a strong dividend yield and create value through strategic acquisitions and partnerships. JNJ boasts 35 consecutive years of adjusted operational earnings growth and 56 consecutive years of dividend increases while maintaining an AAA-rated balance sheet with net debt of $10.3 billion ($19.7 billion in cash and $30.5 billion of debt as of 12/31/18). Over the last 10 years, the company has returned approximately 50% of free cash flow to shareholders through dividends and share repurchases. Free cash flow increased 4% in 2018 to $18.6 billion with a new $5 billion share repurchase program announced. JNJ has completed about 20% of the repurchase program by buying $900 million of its common stock. The company announced its outlook for fiscal 2019 with sales expected in the range of $80.4 billion to $81.2 billion, reflection operational growth in the range of 0% to 1.0% and adjusted operational growth of 2% to 3%. The company also announced adjusted earnings guidance of $8.50-$8.65 for the full year reflecting expected operational growth in the range of 5.7% to 7.6%.

Friday, Jan. 18, 2019

 

Johnson & Johnson-JNJ announced that Janssen Pharmaceuticals, Inc., member of the Johnson & Johnson Family of Companies, entered into a research study in collaboration with Apple Inc.-AAPL to investigate whether a new heart health program using an app from Johnson & Johnson in combination with Apple Watch's irregular rhythm notifications and ECG app can accelerate the diagnosis and improve health outcomes of the 33 million people worldwide living with atrial fibrillation (AFib), a condition that can lead to stroke and other potentially devastating complications. In the U.S. alone, AFib is responsible for approximately 130,000 deaths and 750,000 hospitalizations every year. The study aims to analyze the impact of Apple Watch on the early detection and diagnosis of AFib, and the potential to improve outcomes including the prevention of stroke. A multi-year research program will be launched later in 2019. This large-scale program will occur in the U.S. only, and will be designed as a pragmatic randomized controlled research study for individuals age 65 years or older.

Thursday, Jan. 17, 2019

Fastenal-FAST reported fourth quarter revenues rose 13% to $1.2 billion with net income up 11% to $168.8 million and EPS up 11% to $.59. The increase was driven by higher unit sales related primarily to continued strength in underlying market demand and growth from industrial vending and Onsite locations. Sales of fastener products grew 11% on a daily basis, representing 34% of sales in the fourth quarter, with sales of non-fastener products growing 15%, representing 66% of fourth quarter sales. Operating leverage remained strong with operating margin expansion of 30 basis points during the quarter.  For the full year, revenues rose 13% to $5 billion with net income up 30% to $751.9 million and EPS up 31% to $2.62 benefiting in part from a lower tax rate. Return on shareholders’ equity improved to a strong 32.7% for the year. Free cash flow increased 15% during the year to $664.7 million with the company repurchasing $103 million of its common stock and paying $441.9 million in dividends. Fastenal also announced a 7.5% increase in its first quarter 2019 dividend to $.43 per share with the dividend yielding a solid 3%. Over the past decade, Fastenal has paid out $2.9 billion in dividends and repurchased 14 million of its shares for $600 million at an average price of $42.86 per share. Fastenal’s long-term goal is to grow the business from $5 billion to $10 billion in revenues in the years ahead while expanding operating margins and generating a high return on invested capital  which should continue to make the company a solid investment.


Tuesday, Jan. 15, 2019

    

Walgreens Boots Alliance-WBA and Microsoft-MSFT have joined forces to develop new health care delivery models, technology and retail innovations to advance and improve the future of health care. The companies will combine the power of Microsoft Azure, Microsoft's cloud and AI platform, health care investments, and new retail solutions with WBA's customer reach, convenient locations, outpatient health care services and industry expertise to make health care delivery more personal, affordable and accessible for people around the world. Through this agreement, Microsoft becomes WBA's strategic cloud provider, and WBA plans to migrate the majority of the company's IT infrastructure onto Microsoft Azure. This will include new transformational platforms in retail, pharmacy and business services, new capability in data and analytics, as well as certain legacy applications and systems. The company also plans to roll out Microsoft 365 to more than 380,000 employees and stores globally, empowering them with the tools for increased productivity, advanced security, internal collaboration and customer engagement.

Friday, Jan. 11, 2019

Microsoft-MSFT has been awarded a five-year contract worth $1.76 billion for delivering enterprise services for the Defense Department, Coast Guard and intelligence services.

 

T. Rowe Price Group-TROW reported preliminary month-end assets under management of $962 billion as of December 31, 2018, a decline of 3% for the year.

Wednesday, Jan. 9, 2019

MSC Industrial-MSM reported fiscal first quarter revenues rose 8% to $831.6 million with 230 basis points of acquisitive growth from AIS. Net income jumped 25% to $74.2 million with EPS up 27% to $1.33. Earnings benefited from a lower tax rate with EPS up 5%, excluding the tax benefit. The operating margin declined about 50 basis points in the first quarter to 12.4% due to a lower gross margin, impacted by product cost increases and mix shifts, and the impact of the AIS acquisition. Free cash flow declined 8% during the quarter to $66.8 million due to working capital changes and higher capital expenditures. During the quarter, the company paid $35 million in dividends and repurchased approximately 778,000 shares for $63.5 million for an average cost of $81.71 per share. The company’s stockkeeping units increased 20,000 during the quarter to 1.7 million. The industrial economy remained strong in the fiscal first quarter with no signs of recession although there is currently more uncertainty due to trade and economic overhangs and the government shutdown. Tariffs have had no material impact on gross margin so far. The company expects to implement a meaningful price increase in the second quarter given significant supplier price increase activity. The price increase along with increased traction from the sale transformation efforts drives management’s expectations for significantly higher operating margins in the second half of the year. The company expects net sales for the second quarter to be between $817 million and $833 million with average daily sales at the midpoint expected to increase around 9% with EPS expected in the range of $1.22-$1.28.

Tuesday, Jan. 8, 2019

Gentex-GNTX announced that its latest generation of dimmable aircraft windows will be offered as optional content on the new Boeing 777X. Electronically dimmable windows ( EDWs) are an electrochromic-based sunlight and heat control solution that eliminates the need for traditional window shades and lessens dependence on AC systems. EDWs allow passengers to selectively darken the aircraft windows as desired while still enabling them to view the scenery outside.


Friday, Jan. 4, 2019

AbbVie-ABBV determined that it will record an impairment charge on intangible assets acquired as part of AbbVie’s 2016 acquisition of Stemcentrx, Inc. (Stemcentrx). On December 5, 2018, AbbVie announced the decision to stop enrollment for the TAHOE trial, a Phase 3 study evaluating rovalpituzumab tesirine (RovaT), an investigational antibody-drug conjugate targeting the cancer-stem cell-associated delta-like protein 3, as a second-line therapy for advanced small-cell lung cancer. Following this decision, AbbVie began an evaluation of the Stemcentrx-related intangible assets for impairment. The estimated net impact of this impairment and the related adjustment to contingent consideration liabilities is approximately $4 billion. AbbVie continues to evaluate information with respect to the Stemcentrx-related clinical development programs and will monitor the remaining $1 billion of intangible assets for further impairment.

Thursday, Jan. 3, 2019

Private sector employment increased by 271,000 jobs from November to December according to the December ADP National Employment Report®.  "We wrapped up 2018 with another month of significant growth in the labor market," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute.  "Although there were increases in most sectors, the busy holiday season greatly impacted both trade and leisure and hospitality. Small businesses also experienced their strongest month of job growth all year." Mark Zandi, chief economist of Moody's Analytics, said, "Businesses continue to add aggressively to their payrolls despite the stock market slump and the trade war. Favorable December weather also helped lift the job market. At the current pace of job growth, low unemployment will get even lower." 

 

Wednesday, Jan. 2, 2019

Apple-AAPL is lowering guidance for the fiscal 2019 first quarter with revenue of approximately $84 billion now expected with gross margin of approximately 38%.  Operating expenses of approximately $8.7 billion are expected with other income/(expense) of approximately $550 million and a tax rate of approximately 16.5%. The number of shares used in computing diluted EPS is expected to be approximately 4.77 billion. The lower guidance is due to both macroeconomic and Apple-specific factors. Foreign exchange headwinds and economic weakness in emerging markets, notably China, adversely impacted results. In addition, the timing of iPhone launches, supply constraints of new products and fewer iPhone upgrades, due to fewer carrier subsidies and reduced pricing for iPhone battery replacements, also led to reduced revenue guidance. Apple did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of the revenue shortfall to guidance, and over 100% of the year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad. China’s economy began to slow in the second half of 2018. The government-reported GDP growth during the September quarter was the second lowest in the last 25 years. The economic environment in China has been further impacted by rising trade tensions with the United States. As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to Apple retail stores and channel partners in China declining as the quarter progressed. Market data has shown that the contraction in Greater China’s smartphone market has been particularly sharp. Despite these challenges, Apple believes that their business in China has a bright future. On a more positive note, categories outside of iPhone (Services, Mac, iPad, Wearables/Home/Accessories) combined to grow almost 19% year-over-year. Apple’s installed base of active devices hit a new all-time high—growing by more than 100 million units in 12 months. Services generated over $10.8 billion in revenue during the quarter, growing to a new quarterly record in every geographic segment, and Apple is on track to achieve their goal of doubling the size of this business from 2016 to 2020. Wearables grew by almost 50% year-over-year, as Apple Watch and AirPods were popular among holiday shoppers; launches of MacBook Air and Mac mini powered the Mac to year-over-year revenue growth and the launch of the new iPad Pro drove iPad to year-over-year double-digit revenue growth. Apple also expects to set all-time revenue records in several developed countries, including the United States, Canada, Germany, Italy, Spain, the Netherlands and Korea. And, while Apple saw challenges in some emerging markets, others set records, including Mexico, Poland, Malaysia and Vietnam. Despite the revenue shortfall, Apple expects to report a new all-time record for Apple’s earnings per share. Apple’s profitability and cash flow generation are strong, and the company expects to exit the quarter with approximately $130 billion in net cash.

 

Thursday, Dec. 20, 2018

Nike-NKE reported strong second quarter results with revenues and net income each jumping 10% to $9.4 billion and $847 million, respectively, with EPS up 13% to $.52.   Revenues for the Nike Brand were up 14% on a constant-currency basis to $8.9 billion driven by accelerated growth across all geographies and in Nike Direct led by 41% digital growth. Revenue grew in nearly every key category led by Sportswear with well-balanced double-digit growth across footwear and apparel globally. Revenues for Converse rose 6% on a constant-currency basis to $425 million driven by growth in Asia and digital. Gross margin increased 80 basis points during the quarter to 42.8% driven by higher average selling prices and margin expansion in Nike Direct. Inventories were $5.4 billion as of quarter end, up 1%, thanks to effective inventory management and strong demand for key franchises resulting in healthy inventories across all geographies. Cash declined $2.3 billion to $4.0 billion as of quarter end due to cash used for share repurchases, dividends, repayment of notes and investments in infrastructure. During the second quarter, Nike repurchased 16.1 million shares for about $1.3 billion at an average price of about $80.74 per share. Since Nov. 2015, the company has repurchased 183.3 million shares for $11.3 billion as part of the four-year $12 billion share buyback program. In June 2018, the Board authorized a new four-year $15 billion share repurchase program. Despite high uncertainty on a macro level, Nike is seeing strong and sustainable growth for fiscal 2019 and beyond thanks to strong demand for the company’s innovative products. Nike raised their financial outlook with sales in fiscal 2019 expected to increase at a high single-digit rate to low double-digit rate on a constant- currency basis with gross margin expected to increase 70 basis points for the full year thanks to higher average selling prices and increased unit sales.

Accenture-ACN reported fiscal first quarter revenues increased 7% to $10.6 billion with net income and EPS up 9% to $1.3 billion and $1.96, respectively.  New bookings for the quarter were $10.2 billion, with consulting bookings of $5.9 billion and outsourcing bookings of $4.3 billion. Free cash flow increased 9% during the quarter to $950 million with the company paying $933 million in dividends and repurchasing $788 million of its shares. The company has $5.2 billion remaining under the current share repurchase program. With a strong start to fiscal 2019, Accenture increased their outlook for revenue growth to the range of 6%-8% from the previous range of 5%-8%, with foreign exchange expected to have a negative 3% impact. The company also increased the lower end of EPS guidance and now expects EPS in the range of $7.01 to $7.25 compared to $6.98 to $7.25 previously. Operating margin is expected to expand 10 to 30 basis points to 14.5%-14.7%. For fiscal 2019, Accenture expects free cash flow to be in the range of $5.1 billion to $5.5 billion. 

Paychex-PAYX reported very good second quarter results and presented an optimistic outlook for the current selling season and beyond.  Paychex’s second quarter revenues were up 7% from the prior year to $858.9 million.  Management Solutions revenue for the quarter was $685.4 million, an increase of 5% over the prior year driven by increases in the client base and fees on retirement assets. The acquisition of the Lessor Group in February 2018 added 1% to the growth of this segment.   PEO and Insurance Services increased 15% to $155.2 million driven by growth in clients, client worksite employees and an increase in the number of health and benefit applicants.  Interest on Fund increased 31% to $18.3 million driven by higher average interest rates as average client held funds were flat, as increased wages and employees were offset by lower withholdings under the Tax Cuts and Jobs Act.  Operating income increased 1% to 307.2 million from the prior year. The 10% growth in total expenses to $551.7 million significantly offset the growth in revenue.  Expenses were driven by higher compensation costs, as Paychex increased headcount in operations and the sales force to support the growth in the business.  Paychex has invested in several business initiatives, technology and the continued growth of the PEO business that tamped down the operating income in the quarter.   The lower tax rates, 23.8% in 2018 versus 34.8% in 2017, allowed net income to jump 19% over the prior year to $235.8 million or $0.65 per diluted share.  The financial positon of the company is strong with $769 million in cash and investments with only $57.3 million in short term borrowings.  The balance sheet will change this quarter with the addition of $800 million in debt to finance its purchase of Oasis Outsourcing Group Holdings L.P. in the third quarter. Management was very optimistic about the current selling season and the opportunities for synergistic growth in the future with the acquisition of Oasis and the expanded geographies of the combined businesses. As Paychex heads into the important selling season, client retention rates are approaching all-time highs, new sale opportunities are trending up and pricing is holding to slightly improving.  Adding these factors to a fundamentally optimistic macro business environment, and Paychex should meet or exceed its outlook for 2019 and beyond.  Management did not see any signs of a negative trend in the next six months or more.  The biggest headwind currently is a tight labor market where businesses are turning down work because they cannot find qualified workers.  Management added that its growing PEO and HR services will provide a buffer in an economic downturn as regulations in the labor and employee benefits arena make it difficult for small and medium size shops to navigate growth or downturns without professional assistance.  Total revenue for fiscal 2019 is expected to increase 6%-7% with adjusted net income expected to increase 11%-12%.

Walgreens Boots Alliance-WBA rang up first fiscal quarter sales of $33.8 billion, up 10% from last year’s first quarter, with net income increasing 37% to $1.1 billion and EPS increasing 46% to $1.18. Excluding Rite-Aid acquisition-related expenses and other special items, adjusted net operating income declined by 4% to $1.7 billion, net income increased 7.6% to $1.4 billion and EPS increased 14% to $1.46, reflecting benefits from US tax reform and share repurchases. Retail Pharmacy USA sales were $25.7 billion, up 14%. Excluding the benefit from acquired Rite-Aid stores, organic sales growth was 4.6% during the quarter. Pharmacy sales, which accounted for 74.4% of the division’s sales in the quarter, increased 17.5%, primarily due to higher prescription volumes from the acquisition of Rite-Aid stores. Comparable pharmacy sales increased 2.8%. The division filled 289.8 million prescriptions, including immunizations, an increase of 11.4% over the year-ago quarter. Prescriptions filled in comparable stores increased 2%. Front-end retail sales increased 6% with comparable retail sales declining 3.2%, primarily due to the continued de-emphasis of select products such as tobacco and a difficult comparison with the prior year quarter. Retail Pharmacy International sales declined 6% to $2.9 billion, reflecting foreign currency headwinds and a weak retail environment in the UK. Pharmaceutical Wholesale sales dipped slightly to $5.7 billion, entirely due to a negative currency impact of 6.8%. During the quarter, the company generated $460 million in operating cash flow, and free cash flow was negative $10 million due to working capital investments and the integration of Rite-Aid stores. Walgreens Boots Alliance returned $1.3 billion to shareholders during the quarter through share repurchases of $912 million and dividends of $422 million. Management confirmed expected fiscal 2019 adjusted EPS constant currency growth of 7% to 12%. The company expects store and labor investments of about $150 million and share repurchases of $3 billion during 2019. During the earnings conference call, management announced the launch of its transformational cost management program which is targeting annual cost savings in excess of $1 billion by the end of the third year.


Wednesday, Dec. 19, 2018

Walgreens Boots Alliance-WBA and Verily, an Alphabet-GOOGL company, will collaborate on multiple projects under a broad agreement aimed at improving health outcomes for patients with chronic conditions, while also lowering the cost of care. Walgreens will be a first-choice retail pharmacy development and commercialization partner to Verily, and the organizations have agreed to work on and explore ways to improve access to advanced healthcare technologies and solutions – which may include sensors and software to help prevent, manage, screen and diagnose disease – with a shared goal of scaling deployment at Walgreens retail locations. Initially, the companies are developing a medication adherence pilot project that will deploy devices and other approaches designed to improve adherence. Walgreens together with Onduo, Verily’s joint venture with Sanofi, will also launch a virtual diabetes solution to Walgreens employees and family members with Type 2 diabetes through the Walgreens employee health plan. Onduo provides tools, coaching and remote access to specialty doctors to help people with diabetes to manage their condition anytime, anywhere. These initiatives are part of a broader strategic alliance designed to combine Verily’s healthcare technology innovation with Walgreens corner store presence and trusted pharmacy services. “We’re focused on finding innovative ways to deliver better patient care at lower costs, and working with the right healthcare partners to help bring new services and solutions to our patients and customers,” said Stefano Pessina, chief executive officer, Walgreens Boots Alliance, Inc. “The continued rise in chronic diseases today can be costly to patients as well as to our healthcare system. Working with Verily, we’ll look at how we can best support integrated and value-based care to meet our patients’ needs, as well as opportunities to address other chronic conditions over time.” “We are well aligned with Walgreens on the need to develop and bring to market solutions that help people better engage with their health and manage their chronic conditions. This relationship affords us the opportunity to jointly tackle real-world issues that significantly impact the health of individuals and communities,” said Andrew Conrad, chief executive officer, Verily. “Medication adherence, which represents one of the most significant and costly barriers to improving patient outcomes, is an area that I am most excited to work on with a partner like Walgreens.”

3M-MMM announced that it has entered into a definitive agreement to acquire the technology business of M*Modal, for a total enterprise value of $1.0 billion. M*Modal is a leading healthcare technology provider of cloud-based, conversational Artificial Intelligence (AI)-powered systems that help physicians efficiently capture and improve the patient narrative so they can spend more time with their patients and provide higher quality of care. Annual revenue of M*Modal’s technology business is estimated to be approximately $200 million. On a GAAP reported basis, 3M estimates the acquisition to be $0.10 dilutive to earnings in the first 12 months following completion of the transaction. Excluding purchase accounting adjustments and anticipated one-time expenses related to the transaction and integration, 3M estimates the acquisition to be neutral to earnings over the same period. The transaction is expected to close in the first half of 2019.

Cisco-CSCO announced the intent to acquire privately-held Luxtera, Inc, a semiconductor company based in Carlsbad, California that uses silicon photonics to build integrated optics capabilities for webscale and enterprise data centers, service provider market segments, and other customers. Luxtera’s technology, design, and manufacturing innovation significantly improves chip scale and performance, while lowering costs. Cisco plans to incorporate Luxtera’s technology across its intent-based networking portfolio, spanning enterprise, data center and service provider markets. "With Cisco’s 2018 Visual Networking Index projecting that global Internet traffic will increase threefold over the next five years, our customers are facing an exponential demand for Internet bandwidth,” said David Goeckeler, executive vice president and general manager, Networking and Security Business at Cisco. “Optics is a fundamental technology to enable this future. Coupled with our silicon and optics innovation, Luxtera will allow our customers to build the biggest, fastest and most efficient networks in the world.” Cisco will pay $660 million in cash and assumed equity awards for the acquisition of Luxtera. The acquisition is expected to close in the third quarter of Cisco's fiscal year 2019.

 

Tuesday, Dec. 18, 2018

FactSet-FDS reported fiscal first quarter revenues rose 7% to $351.6 million with net income up 20% to $84.3 million and EPS up 23% to $2.17. These solid results were driven by 6.6% organic sales growth and operating margin expansion of 1.5% to 28.6% during the quarter. Adjusted EPS rose 15% during the quarter driven primarily by higher revenues and a lower effective tax rate of 12.1% compared to 18.3% last year. Management is encouraged by continued strong demand for their data and technology offerings despite stock market volatility. Annual Subscription Value (ASV) plus professional services was $1.42 billion as of 11/30/18. User count increased by 23,312 to 115,209 in the last quarter driven by an increase in wealth management users. Annual client retention was greater than 95% of ASV. When expressed as a percentage of clients, annual retention was 91%. Employee count was up 1.9% in the past 12 months to 9,600. Free cash flow declined 33% to $36.8 million due to working capital changes and a 60% increase in capital expenditures to $9.5 million as the company builds out new office space and upgrades technology. During the quarter, FactSet repurchased 275,000 shares for $60.4 million at an average price of $220 per share. Over the past 12 months, the company has returned $429 million to shareholders in the form of share repurchases and dividends. FactSet has $181.3 million remaining for future share repurchases. Management reaffirmed 2019 sales and earnings guidance with revenue expected in the range of $1.41 billion to $1.45 billion. GAAP EPS is expected in the range of $8.70-$8.90 with adjusted EPS expected in the range of $9.45-$9.65, representing 12% growth at the midpoint.

Monday, Dec. 17, 2018

Oracle-ORCL reported second quarter revenues were relatively flat at $9.6 billion but up 2% on a constant currency basis. Cloud services and license support led the growth with 3% growth, or 5% growth on a constant currency basis, to $6.6 billion. Software revenue grew 5% driving operating cash flow of more than $15 billion over the last four quarters. The $1 billion Software as a Service business delivered overall bookings growth of 35% in the quarter. The company ended the quarter with a backlog of $30.1 billion with 62% of the backlog expected to be recognized in the next 12 months.  Net income rose 5%, or 9% on a constant currency basis, to $2.3 billion primarily due to a lower tax rate. Earning per share jumped 17% thanks to the company’s substantial share repurchase program. Free cash flow during the first half of the fiscal year increased 2% to $6.5 billion. Oracle paid $1.5 billion in dividends and repurchased $19.9 billion of its common stock during the first half, including 203 million shares in the second quarter for $10 billion at an average price of $49.26 per share. Over the last 12 months, the company has repurchased 602 million shares, reducing its shares outstanding by 12%. During the fiscal third quarter, revenue is expected to increase 2%-4% on a constant currency basis with non-GAAP EPS expected to increase 3%-5% in the range of $.83-$.85.

Johnson & Johnson-JNJ announced that the Board of Directors has authorized the repurchase of up to $5 billion of the company's common stock. "Based on our continued strong performance and, more importantly, the confidence we have in our business going forward, the Board of Directors and management team believe that the company's shares are an attractive investment opportunity," said Alex Gorsky, Chairman and Chief Executive Officer.  "Our strong cash flow enables us to simultaneously return value to shareholders through our regular quarterly dividend and share repurchases, while at the same time continuing to deploy capital that will further strengthen our robust enterprise pipeline and drive long-term growth." Johnson & Johnson reaffirms its full-year 2018 sales and adjusted earnings per share guidance of $81.0 to $81.4 billion and $8.13 to $8.18 per share, respectively.

 

Alkermes plc and Biogen-BIIB announced that Alkermes has submitted a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) for diroximel fumarate (BIIB098), a novel oral fumarate in development for the treatment of relapsing forms of multiple sclerosis (MS). “The filing of diroximel fumarate by our partners at Alkermes demonstrates our enduring commitment to people living with MS and builds on our established track record as a leader in the industry,” said Michael Ehlers, M.D., Ph.D., executive vice president, research & development at Biogen. “MS is a heterogeneous disease, and while there are a number of approved therapies available today, continued treatment advances remain an important priority.”


Alphabet-GOOGL plans to invest over $1 billion in capital improvements to establish a new 1.7 million square foot campus in New York, Google Hudson Square. New York City is now home to more than 7,000 employees, speaking 50 languages, working on a broad range of teams including Search, Ads, Maps, YouTube, Cloud, Technical Infrastructure, Sales, Partnerships and Research. With these recent investments in Google Chelsea and Google Hudson Square, Alphabet will have the capacity to more than double the number of Googlers in New York over the next 10 years.


Thursday, Dec. 13, 2018

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

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

Wednesday, Dec, 12, 2018

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

Monday, Dec. 10, 2018

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

Thursday, Dec. 6, 2018

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

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

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

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


Wednesday, Dec. 5, 2018

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

Tuesday, Dec. 4, 2018

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


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

 


Wednesday, Nov. 28, 2018


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


Tuesday, Nov. 27, 2018

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

 

Monday, Nov. 26, 2018

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

Friday, Nov. 23, 2018

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


Tuesday, Nov. 20, 2018

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

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

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

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

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