HI-Quality Company Updates

Friday, April 20, 2018

Gentex-GNTX reported first quarter revenues rose 3% to $465.4 million with net income driving 14% higher to $111.2 million and EPS jumping 21% to $.40, thanks to the benefits of tax reform and lower shares outstanding. Light vehicle production in the company’s primary regions declined in excess of 3%, which resulted in lower than expected unit shipments during the quarter. Additionally, a supplier production issue for certain electronic components affected the company’s ability to meet demand for Full Display Mirrors, which negatively impacted sales by 2%. Due to the lower than forecasted sales, the company’s gross margin declined from 38.8% in the prior year period to 37.1% as Gentex was unable to leverage fixed overhead costs.  Free cash flow increased 16% during the quarter to $121.2 million. During the first quarter, the company repurchased 9.3 million of its shares at an average price of $21.71 per share, including 5.5 million from its former CEO in accordance with his retirement agreement. As of 3-31-18, the company had 26 million shares remaining authorized for future share repurchases with plans to repurchase approximately $325 million of its stock over the balance of the year. Since the end of the quarter, the supplier issue has been resolved. Additionally, light vehicle production is expected to improve over the balance of 2018. As a result, Gentex is maintaining its previously announced annual guidance with revenue growth expected in the range of 5%-10% for the full year with margins expected to improve over the balance of the year.

Biogen-BIIB and Ionis Pharmaceuticals announced they have expanded their strategic collaboration through a new ten-year collaboration agreement to develop novel antisense drug candidates for a broad range of neurological diseases. This collaboration capitalizes on Biogen’s expertise in neuroscience research and drug development and Ionis’ leadership in RNA targeted therapies with the goal of developing a broad pipeline of investigational therapies. It builds upon a productive collaboration that produced SPINRAZA, the first and only approved treatment for patients with spinal muscular atrophy. Under the terms of the collaboration, Biogen will pay Ionis $1 billion in cash, which will include $625 million to purchase 11,501,153 shares of Ionis common stock at a price of $54.34 per share, at an approximately 25% cash premium, and a $375 million upfront payment. Biogen will have the option to license therapies arising out of this collaboration and will be responsible for their development and commercialization. In addition, Biogen may pay milestone payments, license fees and royalties on net sales. The companies plan to advance programs for a broad range of neurological diseases for which few treatment options exist today. Disease areas include dementia, neuromuscular diseases, movement disorders, ophthalmology, diseases of the inner ear, and neuropsychiatry. Biogen will have the first choice of neurology targets on which to exclusively collaborate with Ionis. In this collaboration, Ionis will be responsible for the identification of antisense drug candidates based on selected targets, while Biogen will be responsible for and pay for non-clinical studies, clinical development, manufacturing, and commercialization. Biogen and Ionis expect the deal to close in the second quarter of 2018.

Thursday, April 19, 2018

Genuine Parts-GPC reported first quarter sales rose 17.4% to $4.6 billion with net income up 10% to $176.6 million and EPS up 11.1% to $1.20, impacted by transaction costs related to the company’s acquisition of Alliance Automotive Group (AAG) and spin-off the Company's Business Products Group, S.P. Richards. First quarter sales for the Automotive Group were up 29.6% to $2.6 billion on a 1.5% comparable sales increase and sales contribution from AAG.  Sales for the Industrial Group, which includes both Motion Industries and EIS, were up 8.3% to $1.5 billion, powered by a 5% comparable sales increase. Sales for S.P. Richards, the Business Products Group, were down 4.8% for the quarter in both total and comparable sales to $474 million. Genuine Parts expects the S.P. Richards spin-off to be complete by the end of 2018. Free cash flow for the quarter increased 39% to $107 million with management expecting free cash flow of $400 million for the full year. During the quarter, the company paid $99 million in dividends. GPC is maintaining its full year sales and earnings guidance and continues to expect sales to be up 12% to 13% and adjusted diluted earnings per share, which excludes any first quarter and future transaction-related costs, to be $5.60 to $5.75. 

Wednesday, April 18, 2018

Canadian National Railway-CNI announced it will acquire 350 premium boxcars to serve growing demand from industrial customers across its North American network. “These additional boxcars, combined with our new locomotives, hundreds of new train crew members, and track expansion investments, will help give us the capacity and network resiliency we need for pulp, paper and metals customers,” said Doug MacDonald, vice president of bulk at CN.  As part of CN’s $3.2 billion capital program in 2018, the company is investing in new trade-enabling infrastructure this spring and summer, building new track and yard capacity to handle increased traffic across CN’s West Coast to Chicago corridor more efficiently. After adding approximately 400 conductors to the field so far this year, CN continues to hire with a particular focus on crews in Western Canada.   


Tuesday, April 17, 2018

Johnson & Johnson-JNJ reported first quarter revenues rose 12.6% to $20 billion with net income down 1.2% t0 $4.4 billion and EPS dipping .6% to $1.60. Excluding acquisitions and divestitures, operational sales growth was 4.3%.  On an adjusted basis, excluding intangible amortization and special items, net earnings increased 11.8% to $5.6 billion with EPS up 12.6% to $2.06. The Pharmaceutical business continued to deliver robust growth with worldwide sales up 19.4% to $9.8 billion driven by strong performance in oncology and international sales. Medical Devices and Consumer sales improved with Medical Devices sales up 7.5% to $6.8 billion due to strong product performance in Vision Care and Interventional Solutions and Consumer sales up 5.3% to $3.4 billion driven by new products and geographic expansion. Thanks to tax reform benefits, JNJ is increasing its investments in R&D and capital expenditures by 15% in the U.S. over the next four years to $30 billion. JNJ ended the quarter with $17 billion of net debt taken on for acquisitions. Following better than expected first quarter results, JNJ increased its sales guidance for the full year to a range of $81 billion to $81.8 billion, reflecting expected operational growth of 4%-5%, with adjusted EPS expected in the range of $8.00-$8.20, reflecting operational growth of 6.8%-9.6%.


Thursday, April 12, 2018

Automatic Data Processing-ADP declared a 69 cents per share quarterly dividend payable July 1, 2018 to shareholders of record on June 8, 2018. This dividend increase of 10% represents a return to shareholders of a portion of the benefits from the Tax Cuts and Jobs Act of December 2017.  The Board of Directors anticipates consideration of another dividend increase in November 2018 consistent with ADP’s historical pattern throughout its 43 year track record of annual dividend increases.

Genuine Parts-GPC agreed to combine its S.P. Richards office products business with Essendant. The transaction, which has been unanimously approved by Boards of both companies, is expected to be tax free to shareholders. The transaction combining Essendant and S.P. Richards is structured as a Reverse Morris Trust, in which Genuine Parts will separate S.P. Richards into a standalone company and spin off that standalone company to Genuine Parts shareholders, immediately followed by the merger of Essendant and the spun-off company. The transaction implies a $680 million valuation for S.P. Richards, reflecting the value of the Essendant shares to be issued at closing plus one-time cash payments to Genuine Parts of about $347 million. Upon closing, Genuine Parts shareholders will own about 51% and Essendant shareholders will own approximately 49% of the combined company. In addition to creating a platform with greater scale and the enhanced ability to serve customers, the combination is expected to unlock more than $75 million in annual run-rate cost synergies and more than $100 million in working capital improvements. The cost synergies will primarily be driven by sourcing, supply chain and selling, general and administrative efficiencies. The combined company expects 90% of the cost synergies to be realized within two years post-closing and to incur less than $50 million in one-time cash costs to realize the synergies. Paul Donahue, Genuine Parts Company President and Chief Executive Officer, added, "This transaction is the result of a comprehensive process to maximize the value of S.P. Richards and represents a key step in the execution of Genuine Parts Company's long-term strategy by enabling us to increase our focus on our larger, core global automotive and industrial businesses. In addition, the merger provides substantial upside to Genuine Parts Company shareholders through the significant value proposition of the combined company that will be better equipped to succeed in a dynamic and changing marketplace." The deal is expected to close by the end of 2018.

Walt Disney-DIS must match 21st Century Fox’s 11.7 billion pound bid ($14.6 billion at the time of the December 2016 bid) for the remaining 61% of Sky PLC that it did not already own, according to Britain’s Takeover Panel’s latest ruling. With 23 million customers in seven countries, Sky PLC is Europe’s largest pay-TV provider with a coveted integrated distribution platform that produces its own content.  Disney must make a cash offer for Sky PLC shares within 28 days of  closing its $52 billion acquisition of the majority of 21st Century Fox’s assets. Disney’s obligation to buy Sky PLC’s shares falls away if a third party buys more than 50% of Sky shares or if Disney’s deal to buy 21st Century Fox is blocked by regulators.

Wednesday, April 11, 2018

Fastenal-FAST reported first quarter revenues rose 13% to $1.2 billion with operating income up 10% to $234.5 million. Benefiting from the positive impact of tax reform, net earnings increased 30% to $174.3 million with EPS up 31% to $.61. The sales growth included 1.3% growth from the Mansco acquisition with the balance driven primarily from higher unit sales due to strength in underlying market demand and contributions from industrial vending and Onsite locations. Installed vending devices increased 14% in the first quarter to 73,561 with sales in vending devices continuing to grow at a strong double-digit pace. Fastenal signed 100 new Onsite location during the quarter, an increase of 56% over the prior year period with 678 active sites as of quarter end. The company signed 36 new national account contracts in the first quarter with national account customers representing 50% of total revenues in the period with sales growth of 17% during the quarter.  A price increase to mitigate inflation also contributed to growth. Fastener products represented 35% of sales in the first quarter and grew 11.8% while non-fastener products represented 65% of sales and grew 14.5% on a daily basis. Growth was led by heavy machinery and general industrial manufacturing as well as manufacturing in the transportation and construction sectors. Construction sales growth was 9.6% in the quarter. Gross profit declined 73 basis points to 48.7% in the first quarter impacted by changes in customer and product mix, the inclusion of Mansco which has lower gross margins and higher product and freight expenses. Operating margins declined 50 basis points primarily due to the lower gross margin offset by a 22 basis point improvement in operating and administrative expenses. Free cash flow declined 32% during the quarter to $128.2 million due primarily to higher accounts receivables as customers stretched out payments and higher capital expenditures. The company continues to anticipate capital expenditures for the full year of $149 million related to upgrading and adding capacity to existing hub networks and purchases of property for future expansion. During the quarter, Fastenal paid dividends of $106 million. Return on invested capital expanded to 27.9% during the quarter

T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.01 trillion as of March 31, 2018, an increase of 2% since year end. 


Tuesday, April 10, 2018

MSC Industrial-MSM reported fiscal second quarter revenues rose 9.3%, with daily sales also up 9.3%,  to $769 million with operating income up 13.2% to $98.1 million and net income and EPS each more than doubling to $117.6 million and $2.06, respectively. Net earnings and EPS were positively impacted by tax reform. Excluding the impact of tax reform, EPS increased 11.8% during the quarter. These solid results were due to a firm manufacturing environment and a positive customer outlook thanks to the tailwind provided by tax reform on future capital spending. The pricing environment also continued to improve with MSC Industrial able to implement a moderate price increase in late January. As a result, gross margins improved to 43.9% in the second quarter. Free cash flow increased 42% during the first half of the fiscal year to $100.9 million with the company paying $59.9 million in dividends and repurchasing $21.7 million of its shares during the same time period.  Strengthening market demand and a better pricing environment coupled with a focus on driving productivity bodes well for the future. The company expects average daily sales to increase about 11% in the third quarter (or 7% excluding the acquisition of DECO) with EPS expected in the range of $1.37 to $1.43.

Booking Holdings-BKNG announced it has reached a milestone of five million reported listings in homes, apartments and other unique places to stay. With more than five million reported listings in this category, Booking.com remains the global leader in providing consumers access to more accommodations - from traditional hotels to homes, villas, apartments and ryokans - than any other digital travel platform. In fact, the number of reported listings within this category on Booking.com has grown 27% compared to the previous year, growing faster than traditional options, such as hotels, motels and resorts. According to recent research that Booking.com conducted in 2017 with more than 57,000 travelers across 30 markets, 30% said they want to stay in an apartment, aparthotel or condo in 2018, further evidence that consumer demand for accommodation beyond the hotel remains strong. In fact, in other research conducted by Booking.com in 2017 with 19,000 travelers in 26 countries, one in five (21%) said that they would consider listing their own home on a travel accommodation site over the coming year. All of the more than five million reported listings in homes, apartments and other unique places to stay on Booking.com, whether it's an apartment in Chicago , a B&B in Tuscany or a villa in Bali , are instantly bookable, with no booking fees for customers, ever.

Monday, April 9, 2018

AbbVie-ABBV announced positive top-line results from the Phase 3 SELECT-COMPARE clinical trial showing that after 12 weeks, upadacitinib (15 mg, once-daily) met the primary endpoints of ACR20a and clinical remission versus placebo.  Michael Severino, M.D., executive vice president, research and development and chief scientific officer, AbbVie said,  "We are excited by these strong results which add to the body of evidence that support the potential of upadacitinib to be an important treatment option for patients with rheumatoid arthritis." Rheumatoid arthritis, which affects an estimated 23.7 million people worldwide, is a chronic and debilitating disease. Despite the range of available treatments, many patients with rheumatoid arthritis still do not achieve clinical remission or low disease activity targets.

 

Thursday, April 5, 2018

AbbVie-ABBV announced a global resolution of all intellectual property-related litigation with Samsung Bioepis over its proposed biosimilar adalimumab product. Under the terms of the settlement agreements, AbbVie will grant to Samsung Bioepis a non-exclusive license to AbbVie's intellectual property relating to HUMIRA beginning on certain dates in certain countries in which AbbVie has intellectual property: In the U.S., Samsung Bioepis' license period will begin on June 30, 2023. In most countries in the European Union, the license period will begin on October 16, 2018. Under the terms of the agreement, Samsung Bioepis will pay royalties to AbbVie for licensing its HUMIRA patents once its adalimumab biosimilar product is launched. As with the prior Amgen resolution, AbbVie will make no payments to Samsung Bioepis. All litigation pending between the parties, as well as all litigation with Samsung Bioepis' European partner, Biogen, will be dismissed. The precise terms of the agreements are confidential.

Wednesday, April 4, 2018

Microsoft-MSFT announced that they will invest $5 billion in the Internet of Things (IoT) over the next four years. A.T. Kearney predicts IoT will lead to a $1.9 trillion productivity increase and $177 billion in reduced costs by 2020. This effect will be pervasive, from connected homes and cars to manufacturers to smart cities and utilities—and everything in between.

The TJX Companies-TJX announced that its Board of Directors has raised the amount of its quarterly dividend by 25% from the last dividend paid. The Board declared a regular quarterly dividend in the amount of $.39 per share, payable June 7, 2018, to shareholders of record on May 17, 2018. Ernie Herrman, Chief Executive Officer and President of The TJX Companies, Inc., stated, “I am pleased to report that our Board of Directors has approved a 25% increase in our quarterly dividend. This marks our 22nd consecutive year of dividend increases. Over this period, the Company’s dividend has grown at a compound annual rate of 23%. In addition, we plan to increase our share buyback program, with approximately $2.5 to $3.0 billion of repurchases planned for Fiscal 2019. TJX continues to generate tremendous amounts of cash and excellent financial returns. Further, we are expecting a substantial cash benefit as a result of the recent changes in U.S. federal tax law, which is reflected in our plan to significantly increase our dividend and share buyback programs. These actions underscore our confidence in our ability to continue delivering profitable sales and strong cash flow that enables us to simultaneously reinvest in the growth of the business and return value to our shareholders.”

Private sector employment increased by 241,000 jobs from February to March according to the March ADP National Employment Report®.  "We saw impressive momentum in the first quarter of 2018 with more jobs added per month on average than in 2017," said Ahu Yildirmaz, vice president and co-head of the ADP-ADP Research Institute. "Midsized businesses added nearly half of all jobs this month, the best growth this segment has seen since the fall of 2014. The manufacturing industry also performed well, with its strongest increase in more than three years." Mark Zandi, chief economist of Moody's Analytics, said, "The job market is rip-roaring. Monthly job growth remains firmly over 200,000, double the pace of labor force growth. The tight labor market continues to tighten." 

Wednesday, March 28, 2018

Walgreens Boots Alliance- WBA reported second fiscal quarter sales of $33 billion, up more than 12%, with net earnings of $1.35 billion, up 27%, and EPS of $1.36, up 38.8% on fewer shares outstanding. On an adjusted basis, net income was up 16.6% to $1.7 billion and EPS was up 27.2% to $1.73. By segment, Retail Pharmacy USA reported sales of $24.5 billion, up 12.2%, on a 2.4% same store sales increase. Pharmacy sales increased 18.7% due to higher prescription volume including central specialty and mail following the formation of AllianceRx Walgreens Prime and from the acquired Rite Aid stores. Comparable pharmacy sales increased 5.1% on higher volume and brand inflation, partially offset by reimbursement pressure and the negative impact of generics. The division filled 269.2 million prescriptions (including immunizations) on a 30-day equivalents basis, an increase of 9.1%. Retail sales decreased.7% on a 2.7% decline in comparable retail sales. As of the end of the second quarter the company had acquired 1,542 Rite Aid stores. Since the end of the quarter the WBA completed the acquisition of all 1,932 stores. The transition of three distribution centers and related inventory is expected to begin during fiscal 2019. Retail Pharmacy International reported sales declined 2.6% in constant currency to $3.3 billion and declined 1.7% in constant currency same store sales, reflecting lower Boots UK retail sales. Pharmaceutical Wholesale sales of $5.8 billion increased 14.4%, 3.4% in constant currency, boosted by strong performance in emerging markets and offset by challenging conditions in certain continental European countries. The company generated $2.5 billion in free cash flow during the first half of the fiscal year, down from $2.7 billion last year, paid dividends of $815 million and returned $2.5 billion to shareholders through share buybacks. Management raised EPS guidance for fiscal 2018 from adjusted EPS of $5.45 to $5.70 to adjusted EPS of $5.85 to $6.05. The guidance includes an expected benefit from U.S tax reform with management expecting cash tax benefits in excess of $350 million for fiscal 2018.


Tuesday, March 27, 2018

FastSet Research-FDS reported fiscal second quarter revenues rose 13.9% to $335.2 million with organic revenues up 5.7% to $310.4 million from the prior year period. Net income declined 20.3% to $53.1 million and EPS decreased 20.8% to $1.33. The earnings included $22.9 million, or $0.57 per share, of tax charges primarily related to the one-time deemed repatriation tax on foreign earnings. Operating margin decreased to 28.5% compared with 31.2% in the prior year period. The decrease in operating margin is primarily related to a negative foreign exchange impact and incremental amortization of intangibles. On an adjusted basis, net income and EPS rose more than 17%. Annual Subscription Value (ASV) increased 13.4%, or 5.8% organically, to $1.35 billion as of 2/28/18. ASV at any given time represents the forward-looking revenues for the next 12 months from all subscription services currently supplied to clients. Client count as of quarter end was 4,895, a net increase of 86 clients in the quarter. User count increased by 53 to 88,646 in the past three months. Annual client retention was greater than 95% of ASV or 89% when expressed as a percentage of clients. Employee headcount was 9,361 at 2/28/18, up 9% during the past 12 months, and up 4.79% on an organic basis from a year ago. Free cash flow totaled $141.3 million during the first six months, up 28.5% over the prior year. FactSet paid $43.4 million in dividends and repurchased $113.9 million of its shares during the first half of the fiscal year. The Board of Directors approved an increase of $300 million to the existing share repurchase program, bringing the total available for repurchase to $431 million. FDS intends to repurchase its common stock in the range of $325 million to $375 million over the next 12 months. This is an increase of approximately $100 million to the annual spend on share repurchases thanks to the planned repatriation of foreign earnings. For full fiscal 2018, management reaffirmed its revenue guidance range of $1.34 billion to $1.36 billion. FDS lowered EPS guidance from the range of $7.60 to $7.80 to the range of $6.95 to $7.15 which includes the impact of U.S tax reform. On an adjusted basis, 2018 EPS is expected in the range of $8.35 to $8.55, representing 16% growth at the midpoint, up from previous guidance range of $8.25 to $8.45.

Monday, March 26, 2018

Paychex-PAYX reported third fiscal quarter revenues increased 9% to $866.5 million with net income and EPS up 29% to $260.4 million and $0.72, respectively. The earnings include a one-time benefit related to U.S. tax reform of $56.9 million, or $.16 per share. By segment, Total Service Revenue increased 8% to $848.4 million with Payroll Service Revenue increasing 2% to $455 million on growth in revenue per check. Human Resource Services (HRS) revenue increased 17% to $393.4 million boosted by increases in client bases in comprehensive HR outsourcing services, retirement services, time and attendance and insurance services. Interest on funds held for clients increased 37% to $18.1 million, primarily due to higher average interest rates earned. Funds held for clients were up 1% at $4.6 billion primarily due to strong calendar year-end bonus payments and wage inflation, partially offset by client mix. Paychex’s effective tax rate for the third quarter was 11.7%. Paychex’s financial position remained strong with no long-term debt and more than $826 million in cash and corporate investments reported on the company’s rock-solid balance sheet. Cash flows from operations were $988.9 million for the first nine months of the fiscal year, up 29%, driven by higher net income along with the timing of income taxes and PEO payroll accruals. Paychex paid $538.7 million in dividends during the first nine months of the fiscal year and repurchased 1.6 million shares for a total of $94.1 million. At the end of the third quarter, Paychex completed the acquisition of Lessor Group, a market-leading provider of payroll and HCM software solutions headquartered in Denmark and serving clients in Northern Europe. Paychex increased its prior guidance for the full fiscal year with total revenue expected to increase 7% and EPS expected to increase in the 13% to 14% range. The updated guidance includes the Lessor Group acquisition and U.S. tax reform.

In an SEC filing, Berkshire Hathaway-BRKA, disclosed that on March 15th Gebr. Knauf KG―a multinational, family-owned company based in Iphofen, Germany, well known for drywall gypsum boards―had offered to buy USG for $42 a share, representing a 22% premium over the March 14 closing price. Berkshire Hathaway is USG’s largest shareholder beneficially owning 14,757,258 shares of USG common stock, representing 10.46% of USG’s outstanding shares. On March 23, 2018, senior representatives of Gebr. Knauf and its financial advisors held a telephonic discussion with Warren Buffett and another senior executive of Berkshire. During the call, Berkshire proposed to grant Gebr. Knauf an option to purchase all of the USG shares held by Berkshire and its affiliates. The option would be exercisable only in connection with the consummation of the purchase by Knauf of all of the outstanding shares of USG at a price of not less than $42 per share. The option exercise price payable to Berkshire would be the same price paid to the other USG stockholders by Gebr. Knauf, less an option purchase price of $2 per share to be paid by Gebr. Knauf to Berkshire upon the grant of the option. Berkshire stated that its proposal was subject to legal review. Gebr. Knauf is currently evaluating Berkshire’s option proposal.


Friday, March 23, 2018

Nike-NKE reported fiscal third quarter revenues were up 7% to $9 billion with a net loss of $921 million or $.57 per share. The earnings included $2 billion, or $1.25 per share, of additional income tax expense related to U.S. tax reform. Return on invested capital excluding the one-time tax charge was a strong 32%. Revenues for the NIKE Brand were $8.5 billion, up 4% on a currency-neutral basis, driven by Greater China, EMEA and APLA, including double-digit growth in NIKE Direct and growth in Sportswear and NIKE Basketball. Revenues for Converse were $483 million, down 8% on a currency-neutral basis, as international and digital growth were more than offset by declines in North America. Inventories increased 9% to $5.4 billion driven primarily by strengthening demand globally. Income before income taxes decreased 12% to $1.2 billion as solid revenue growth was more than offset by lower gross margin, higher selling and administrative expense and lower other income. Cash decreased 9% to $3.7 billion as of quarter end. During the first nine months of the year, Nike repurchased 46.6 million shares for approximately $2.7 billion as part of the four-year $12 billion buyback program approved by the Board in 2015 with $4.8 billion still available for future repurchases. With the favorable impact of U.S tax reform, Nike expects to complete the buyback program in fiscal 2019. For the fourth quarter, Nike expects to report high single digit revenue growth with gross margins remaining flat to up slightly. For fiscal 2019, management expects mid to high single digit revenue growth with gross margin expansion. 

Thursday, March 22, 2018

Accenture-ACN reported second quarter revenues increased 15%, or 10% in constant currency, to $9.6 billion with net income and EPS each up 3% to $863.7 million and $1.37, respectively. Excluding a $.21 charge related to tax law changes, EPS would have increased 19% to $1.58. Operating income increased 13% to $1.28 billion with an operating margin of 13.4%. These strong results reflected broad-based, double-digit revenue growth as the company gained significant market share as it has done for the last four years. Communications, Media & Technology delivered the highest operating group growth during the quarter with 15% revenue growth to $1.9 billion. On a geographic basis, Growth Markets generated 15% revenue growth to $1.8 billion.  Accenture reported record new booking for the quarter of $10.3 billion with consulting bookings of $5.7 billion and outsourcing bookings of $4.6 billion. Free cash flow during the first half of the year increased 58% to $1.7 billion due to higher earnings and favorable working capital changes. During the first half, the company paid $854 million in dividends and repurchased $1.4 billion of its shares. Accenture updated its business outlook for fiscal 2018 with full year constant currency revenue growth now expected in the 7%-9% range with the adjusted EPS outlook raised to $6.61 to $6.70 and GAAP EPS expected in the range of $6.40 to $6.49, including the $.21 tax charge. The company’s operating margin is now expected to expand in the second half to 14.8% for the full year, consistent with last year. Accenture previously had expected operating margin to expand 10 to 30 basis points for the full year on an adjusted basis. The outlook for free cash flow was raised to $4.6 billion to $4.9 billion compared to the previous outlook of $4.4 billion to $4.7 billion. Management continues to expect to return $4.3 billion to shareholders in fiscal 2018 through dividends and share repurchases as they reduce their shares outstanding by 1% during the year.

 

AbbVie-ABBV announced that after consulting with the U.S. Food and Drug Administration (FDA), it will not seek accelerated approval for Rova-T in third-line relapsed/refractory (R/R) small cell lung cancer (SCLC) based on magnitude of effect across multiple parameters in this single-arm study. "We continue to believe Rova-T has potential for patients with small cell lung cancer and other DLL3-expressing cancers," said Mike Severino, M.D., executive vice president of research and development and chief scientific officer, AbbVie. "Although the results from the study were not what we hoped for, we look forward to receiving data from the ongoing Phase 3 studies in the first- and second-line settings and remain committed to developing Rova-T for the treatment of patients with small cell lung cancer."

Wednesday, March 21, 2018

Starbucks-SBUX at its 26th Annual Meeting of Shareholders highlighted three unique and core assets of the company: increasing digital engagement, growing relevancy in China and celebrating the Starbucks Reserve brand as the company’s innovation lab for the future. The number of stores in China has grown from 800 to 3,200 in the past five years, with an average of one new store opening every 15 hours. Starbucks remains on track to open more than 5,000 stores in China by 2021.

Tuesday, March 20, 2018

Oracle-ORCL reported third fiscal quarter revenues rose 6% to $9.8 billion with a net loss of $4 billion or $.98 per share. The earnings included a $6.9 billion adjustment related to U.S. tax reform.  Revenue growth was driven by total cloud revenues which jumped 32% to $1.6 billion, as the company gained market share. New software licenses were down 2% to $1.4 billion while software license updates and product support rose 6% to $5 billion. Hardware revenue declined 3% to $994 million with services revenues down 2% to $796 million. Short-term deferred revenues were up 8% compared with a year ago to $8 billion. Operating income rose 15% to $3.4 billion with the operating margin at 35%. Free cash flow rose 15% during the first nine months to $9.4 billion with the company ending the quarter with cash of $19.5 billion. During the first nine months of the fiscal year, the company paid $2.4 billion in dividends, a 28% increase over the prior year. In addition, the company repurchased $6.4 billion of its shares during the same period. For the fourth quarter, Oracle expects revenues to increase 1%-3% with adjusted EPS in the range of $.92 to $.95. Oracle’s autonomous database is now fully available in the Oracle Cloud. Using artificial intelligence to eliminate most sources of human error enables Oracle to guarantee 99.995% reliability, which equates to only 30 minutes of downtime in a year, while charging much less than competitors.

Friday, March 16, 2018

Johnson & Johnson-JNJ announced that it has received a binding offer from Platinum Equity, a leading private investment firm, to acquire its LifeScan business for approximately $2.1 billion.  LifeScan is a leader in blood glucose monitoring products with 2017 net revenue of approximately $1.5 billion. The deal is expected to close by the end of 2018 and was contemplated in JNJ’s previous sales and earnings guidance.

Wednesday, March 14, 2018

To capitalize on today’s rapidly changing media landscape and more closely align with the company’s priorities for future growth--including creating high-quality content, technological innovation, global expansion and direct-to-consumer distribution--The Walt Disney Company-DIS  announced a strategic reorganization of its businesses into four segments: the newly-formed Direct-to-Consumer and International; the combined Parks, Experiences and Consumer Products; Media Networks; and Studio Entertainment. The reorganization is effective immediately.

 

Cognizant Technology Solutions-CTSH announced that it has entered into an accelerated share repurchase ("ASR") agreement with Societe Generale to repurchase an aggregate of $300 million of Cognizant's Class A common stock.  This ASR agreement is a continuation of its previously announced $3.4 billion capital return plan.

 

Monday, March 12, 2018

Biogen-BIIB announced an agreement to acquire from Pfizer Inc. PF-04958242, a first-in-class, Phase 2b ready AMPA receptor potentiator for cognitive impairment associated with schizophrenia (CIAS). The purchase will include an upfront payment of $75 million with up to $515 million in additional development and commercialization milestone payments, as well as tiered royalties in the low to mid-teen percentages. AMPA receptors mediate fast excitatory synaptic transmission in the central nervous system, a process which can be disrupted in a number of neurological and psychiatric diseases, including schizophrenia. Biogen expects the deal to close in the second quarter of 2018.

T.Rowe Price Group-TROW reorted preliminary month-end assets under management of $1.02 trillionas of February 28, 2018, a 3.2% increase since year end.  Client transfers from mutual funds to other portfolios, including trusts and separate accounts, were $4.8 billionfor the month-ended February 28, 2018.

Friday, March 9, 2018

Gentex-GNTX announced that its Board of Directors recently approved and is subsequently announcing changes to the Company’s capital allocation strategy that is designed to increase the return of capital to shareholders, while at the same time continuing to invest in the technology evolution that is driving the growth of the Company. The capital allocation strategy is headlined by the Company’s newly announced targeted total cash position being lowered from $700 million to $525 million.  The Company's Board of Directors and management believe that a lower level of total cash, in combination with cash flow from operations, is sufficient to accomplish the goals of the Company and will provide the funding necessary to accomplish strategic initiatives in regard to dividends, capital expenditures, debt repayment and increased levels of share repurchases.  Details of the capital allocation strategy are highlighted as follow: Dividend increase of 10% from $.40 per share to $.44 per share annually is now effective and will begin with the next regularly scheduled quarterly dividend payment in April.  Capital expenditures for 2018 of $115 - $130 million (as previously announced), with future annual increases of capital expenditures expected to approximate the growth rates of revenue for the Company. Debt repayment of $78 million during the first three quarters of 2018 in preparation of the Company’s current credit facility maturing.  Additionally, the Board of Directors has authorized management to secure a line of credit of up to an additional $150 million to help fund any future business needs. Targeted share repurchase authorization of approximately $425 million for calendar year 2018.  A new Board of Directors approved share repurchase authorization of 20 million shares is in addition to those shares previously authorized for repurchase. 

 


Thursday, March 8, 2018

Brown-Forman-BFB reported third quarter revenues rose 9% to $1.2 billion with net income up 4% to $190 million and EPS up 4% to $.39. Year-to-date, underlying net sales and operating income grew 7% and 11%, respectively. The results were well-balanced by geography and driven by strong 8% underlying net sales growth of the Jack Daniel’s led American whiskey portfolio. Through 1/31/18, the company delivered a trailing 12 month operating margin of 34.4% and a return on invested capital of 21%.  Free cash flow increased 24% year-to-date to $462 million with the company paying $216 million in dividends. Brown-Forman plans to pay a special dividend of $1.00 per share on April 23, 2018. Management reaffirmed their underlying outlook for net sales growth of 6%-7% in fiscal 2018 with operating income growth of 8%-9% and  EPS expected in the range of $1.43-$1.48, which reflects the recent 5 for 4 stock split and a $.03 negative impact due to tax reform and a negative $.10 impact from creating a charitable foundation.   

Cigna announced that they will acquire Express Scripts-ESRX in a cash and stock transaction valued at approximately $67 billion, including Cigna’s assumption of approximately $15 billion in Express Scripts debt. Express Scripts shareholders will receive $48.75 in cash and .2434 shares of the combined company for each Express Scripts share held. Upon closing of the deal which is anticipated before the end of 2018, Cigna shareholders will own about 64% of the combined company and Express Scripts shareholders will own 36%. The combined company will retain the Cigna name. Upon completion of the transaction, Cigna is expected to have debt of approximately $41.1 billion and a debt to capitalization ratio of about 49% with the aim of achieving a ratio in the 30’s within 18-24 months after the transaction closes. The deal is expected to be accretive to Cigna’s earnings at a double-digit rate in the first full year after the deal closes with $600 million in synergies identified. In the future, Cigna anticipates its revenues to grow at a 6%-8% annual rate with earnings growing at a high single-digit rate with the company’s outlook for EPS in 2021 rising from a projected $18 per share to $20-$21 per share. The combined company is expected to generate substantial free cash flows and a strong return on invested capital.


Tuesday, March 6, 2018

Ross Stores-ROST reported fourth quarter revenues rose 16% to $4.1 billion with net income up a dressy 50% to $450.7 million and EPS up 55% to $1.19. These strong results reflected a $.10 per share benefit from the 53rd week in the fiscal 2017 year and a $.21 per share benefit from tax reform. For the full year, revenues rose 10% to $14.1 billion with net income up 22% to $1.4 billion and EPS up 25% to $3.55. Return on shareholders’ equity was a sparkling 45% during the year. Free cash flow increased 4% during the year to $1.3 billion. After paying $247.5 million in dividends and repurchasing 13.5 million shares for $875 million at an average price of $64.81 per share, the company ended the year with more than $1.3 billion in cash on its strong balance sheet. For fiscal 2018, the Board of Directors approved a 23% increase in the stock repurchase authorization to $1.075 billion and increased the quarterly dividend 41% to $.225 per share, reflecting the strength of the company’s balance sheet and the ongoing ability to generate significant free cash flows. Ross Stores has repurchased stock as planned every year since 1993 and raised their cash dividend annually since the inception of the program in 1994. For the 52-week period ending 2/2/19, the company is forecasting total sales to increase 3%-4% with same store sales expected to increase 1%-2% and EPS expected in the range of $3.86-$4.03. In fiscal 2018, the company plans to open about 100 new stores, including 75 Ross Dress for Less stores and 25 dd’s Discounts locations. From its current 1,600 total store base, management believes they can continue to add about 90-100 new stores a year to reach their targeted store base of 2,500 total stores within the next decade.

Fastenal-FAST reported February sales increased 14.8% to $372.8 million with average daily sales also up 14.8% to $18.6 million. Daily sales growth by end market was 15.9% growth for manufacturing and 10.5% for non-residential construction. Daily sales growth by product line was 13.1% for fasteners and 16.3% for other products. Daily sales growth by customer was 19% for National Accounts and 9% for non-National Accounts with 75% of the Top 100 National accounts growing and 65% of the public branches growing. Fasenal’s total employee headcount increased 6% to 20,982.

Cheesecake Factory-CAKE reaffirmed 2018 profit and same-store sales guidance. Management expects 2018 adjusted earnings per share of $2.64 to $2.80, with 2018 same-store sales expected to be flat to up 1.0%.  Looking out five years, the company targets same-store sales growth of about 1% to 2% and revenue growth of 6% to 7%, to achieve revenue of about $3 billion and EPS of $4.50 in 2022.

Monday, March 3, 2018

The Board of Directors of Canadian National-CNI announced that Luc Jobin is leaving CNI effective immediately. The Board has appointed Jean-Jacques Ruest Interim President and Chief Executive Officer until a permanent replacement is in place. Mr. Ruest has been with the company for twenty-two years, the last eight as Executive Vice-President and Chief Marketing Officer. The Board believes that in an increasingly competitive marketplace, CNI must respond with speed and innovation to retain its leadership position. The Board also recognizes the immediate operational and customer service challenges the company has been facing since Fall 2017 - led by high demand and insufficient network resiliency, coupled with severe winter weather conditions. An international search for a new CEO is underway. Despite more difficult winter conditions and a very challenging start to the year, the company remains confident about its future prospects. CNI reiterated its fiscal year 2018 guidance to deliver adjusted diluted earnings per share in the range of C$5.25 to C$5.40 this year and will continue to invest in the safety and efficiency of its network with a record capital program in 2018 of C$3.2 billion.


Friday, March 2, 2018

Biogen-BIIB and AbbVie-ABBV announced the voluntary worldwide withdrawal of ZINBRYTA for relapsing multiple sclerosis. The companies believe that characterizing the complex and evolving benefit/risk profile of ZINBRYTA will not be possible going forward given the limited number of patients being treated.

Wednesday, Feb. 28, 2018

The TJX Companies-TJX rang up fourth quarter sales of $11 billion, up a dressy 16% from last year, with net income of $877 million, up 29%, and EPS of $1.37, up 33%. Adjusted EPS--which excludes a $0.17 benefit from the Tax Cuts and Jobs Act legislation (TCJA), an $0.11 benefit from an extra week in this year’s fourth quarter and a $0.10 goodwill impairment charge related to the Sierra Trading Post acquisition—increased 16% to $1.19. Fourth quarter comparable sales increased a fancy 4% on top of last year’s 3% increase, thanks to increased traffic at each of TJX’s major divisions. During 2018, while many companies in beleaguered retail industry were reducing their bricks and mortar footprint, TJX added 258 stores, ending the year with 4,070 stores. For fiscal 2018, TJX rang up a record $35.9 billion in sales, up 8%, with net earnings of $2.6 billion, up 13%, and EPS of $4.04, up 17%. TJX generated a stunning 50.7% return on shareholders’ equity and $2 billion in free cash flow during fiscal 2018. TJX ended the year with more than $3.2 billion in cash and investments and $2.2 billion in long-term debt on its sturdy balance sheet. During fiscal 2018, TJX returned $2.4 billion to shareholders through share repurchases of $1.6 billion and dividends of $764 million. Looking ahead, TJX expects to continue benefitting from tax reform, primarily due to the lower corporate tax rate. As a result of the savings, TJX plans to provide bonuses for employees, make an incremental pension plan contribution, institute paid parental leave for U.S. associates along with enhanced vacation benefits, increase its charitable giving and significantly increase shareholder distributions. To that end, TJX announced a 25% increase in its dividend, marking the 22nd consecutive year of dividend increases. Over the past 22 years, TJX’s dividend has increased at a 23% average annual rate. TJX also announced its plan to repurchase $2.5 billion to $3 billion of TJX stock during fiscal 2019. With $1 billion remaining under the current authorization, the board added an additional $3 billion share buyback authorization, representing 6% of TJX shares outstanding at current prices. Since 1997, TJX has repurchased $19.6 billion of its shares. Looking ahead to fiscal 2019, TJX expects sales of $37.6 billion to $37.8 billion, up 5% year-over-year, with EPS in the range of $4.73 to $4.83 including a $.73 to $.75 benefit related to the TCJA. Adjusted EPS are expected to increase 6% to 8%.

Express Scripts-ESRX reported that fourth quarter revenues increased 2% to $25.4 billion with net income up 62% to $2.3 billion and EPS up a healthy 75% to $4.10. The earnings include $1.4 billion, $2.43 per share, attributable to US tax reform. Adjusted claims of 355.8 million were flat year over year. The company’s enterprise value initiative is estimated to cost approximately $600 million to $650 million and to deliver cumulative savings of nearly $1.2 billion by 2021, with an annual run rate of between $550 million to $600 million thereafter. This initiative is expected to help the company achieve its targeted compounded annual adjusted EBITDA growth rate for the core business from 2017-2020 of between 2% and 4%, and drive significant value to patients and clients beginning in 2018. For the full year, revenues declined .2% to $100.1 billion with net income up 33% to $4.5 billion and EPS up 44% to $7.74. Return on shareholders’ equity for the year was 25%. ESRX’s free cash flow increased 11% for 2017 to $5.1 billion with the company repurchasing 45.9 million of its shares for $2.9 billion. In December 2017, the Board of Directors of the company approved a 45 million share increase in the authorized number of shares that may be purchased under the share repurchase program. Management’s 2018 guidance is revenue in the range of $99 billion to $102 billion with adjusted EPS in the range of $9.27 to $9.47 representing 32% growth at the midpoint over 2017 adjusted EPS. Management’s guidance includes favorable impact of $1.60 per share from the new tax law. Express Scripts is using $20 million of the tax benefit to fund a bonus pool to reward non-executive employees. Total adjusted claims for 2018 is expected to be relatively flat in the range of 1.3 billion to 1.4 billion. With a significant number of their largest renewals completed, management expects consolidated retention rate for the 2018 selling season to reach 96% to 98%.

Tuesday, Feb. 27, 2018

Berkshire Hathaway-BRKB reported the company’s net worth during 2017 increased by 23% with book value equal to $211,750 per Class A share as of 12/31/17.  Over the last 53 years, Berkshire’s book value has grown at a 19.1% compounded annual rate with the market value of Berkshire’s stock compounding at a 20.9% rate, which is truly remarkable compared to the S&P 500 index (with dividends) compounding at a 9.9% annual rate over the same five-decade period.

The whopping $65.3 billion increase in shareholders’ equity  in 2017 was due to the company’s $45 billion in net earnings (which included a one-time $29 billion benefit from tax reform due to a reduction in deferred income tax liabilities as a result of the reduction in the U.S. corporate income tax rate from 35% to 21%)  and approximately $18.9 billion of gains in other comprehensive income related to changes in unrealized investment appreciation and $2.2 billion of foreign currency translation gains.  New accounting rules in 2018 will require Berkshire to book the net changes in unrealized appreciation in net income instead of comprehensive income, which would have resulted in an additional $19 billion gain to the bottom line in 2017 if the accounting rules had already been in place. These accounting changes will distort Berkshire’s earnings significantly in the future due to Berkshire’s ownership of $170 billion in marketable securities.

Berkshire’s five major investment holdings, representing 65% of total equities, contributed to the significant $19 billion change in unrealized appreciation in 2017. Wells Fargo’s stock rose 6% to $29.3 billion amid continued negative headlines on business practices, increased legal costs and the Federal Reserve slapping the bank with handcuffs on growth.  Apple became the apple of Buffett’s eye as the position grew to $28.2 billion as of 12-31-17 through appreciation and additional purchases. It was Buffett’s biggest stock purchase throughout 2017.  Bank of America was valued at $20.7 billion at 12/31/17, reflecting that Berkshire exercised all of their warrants and acquired 700,000 shares of Bank of America common stock on 8/24/17.   During 2017, American Express charged 35% higher to $15.1 billion and Coca-Cola’s stock popped 11% to $18.4 billion. IBM disappeared from the top 5 positions as IBM shares were sold throughout the year.

In 2017, Berkshire’s operating revenues rose 11.5% to $240 billion with all operating business groups contributing to the growth.  Net income increased 87% during the year to $44.9 billion, including the $29.1 billion tax reform benefit and $1.4 billion in investment and derivatives gains.   Operating earnings (excluding the tax benefit and investment and derivative gains/losses) declined 18% during 2017 to $14.5 billion, due primarily to pre-tax insurance underwriting losses of approximately $3 billion ($1.95 billion after-tax) attributable to three major hurricanes (Harvey, Irma and Maria) and wildfires in California.  

Berkshire’s insurance underwriting operations generated a $2.2 billion loss during the year compared to a $1.4 billion profit in the prior year period. This net loss impacted Berkshire’s net worth by less than 1%.   Insurance investment income was 8% higher at $3.9 billion during the year, reflecting higher interest rates on short-term investments and increased other investment income.  In December 2017, Restaurant Brand International (RBI) redeemed Berkshire’s $3 billion investment in 9% RBI Preferred stock, which will negatively impact investment income in 2018. The float of the insurance operations approximated $114 billion as of 12/31/17, an increase of $23 billion since 12/31/16 related in large part to the huge AIG deal and estimated liabilities related to catastrophe events. Berkshire reinsured up to $20 billion of long-tail losses that AIG had incurred. The premium for the AIG deal was a record $10.2 billion and one that Berkshire will not come close to repeating. Therefore, premium volume is expected to fall somewhat in 2018 with float expected to increase slowly for at least a few years. The average cost of float in 2017 was 3% due to the aggregate pre-tax underwriting losses of $3.2 billion. During the prior 14 years, the cost of float was negative as the insurance business generated pre-tax underwriting gains in each year which totaled $28.3 billion pre-tax.

Burlington Northern Santa Fe’s (BNSF) revenues rose 8% during the year to $21.4 billion with net earnings chugging 11% higher to $4.0 billion. During the year, BNSF generated a 2.4% comparative increase in average revenue per car/unit and a 5.3% increase in volume. Overall, volume growth moderated in the second half of the year.  While Berkshire believes the general economy will continue to be strong in 2018, BNSF expects a slower pace of volume growth for the year.

Berkshire Hathaway Energy reported revenues increased 6% to $18.9 billion during 2017 with all groups, except Northern Powergrid, contributing to the growth.   Net earnings declined 9% higher during the year to $$2.1 billion due in part to losses from the prepayment of certain long-term debt.   

Berkshire’s manufacturing businesses reported a 9% increase in revenue growth in 2017 to $50.4 billion with operating earnings up 11% to $6.9 billion. The results reflected in part the acquisitions of Precision Castparts and Duracell.  Revenue growth was led by the Building products unit as revenues increased 11% to $11.9 billion  due to bolt-on acquisitions by Shaw and MiTek and sales volume increases by MiTek, Benjamin Moore and Johns Mansville. Consumer products led profit growth with a 35% gain to $1.1 billion in pre-tax earnings due to increased earnings from Duracell and Forest River.

Service and Retailing revenues rose 3% during the year to $76.1 billion with pre-tax earnings up 6% to $2.4 billion. Service revenues rose 8% to $11.2 billion with operating earnings up 12% to $1.3 billion driven by TTI and NetJets.   Retailing revenues declined 1% during the year to $15.1 billion with operating earnings up 19% to $785 million, reflecting higher earnings from Berkshire Hathaway Automotive (BHA) as higher earnings from finance and insurance activities offset a 3.7% decline in new and used cars sold by BHA.  McLane’s revenues rose 4% during the year to $49.8 billion due to a increase in grocery sales. However, operating earnings declined 31% to $299 million due to significant pricing pressures in an increasingly competitive grocery business environment.  The grocery and foodservices business will likely continue to be subject to intense competition in 2018.

Finance and Financial Products revenues rose 9% during the year to $8.4 billion with net income declining 6% to $1.3 billion. The revenue increase was due to a 18% increase in home sales at Clayton Homes, reflecting higher unit sales and higher average prices.  The earnings decline reflected weakness in the Transportation equipment leasing business.   In response to weakened demand in the railcar and oil and gas industries, Berkshire undertook overhead cost reduction initiatives.

Berkshire’s balance sheet continues to reflect significant liquidity and a strong capital base of $348.3 billion as of 12/31/17. Excluding railroad, energy and finance investments, Berkshire ended the year with $307 billion in investments allocated approximately 53.4% to equities ($164.0 billion), 7.0% to fixed-income investments ($21.4 billion), 5.7% to Kraft Heinz ($17.6 billion, with a fair value of $25.3 billion as of 12-31-17), and 33.9% in cash and equivalents ($104.4 billion).  

Berkshire’s financial strength allows Buffett to make significant investments and acquisitions. Buffett lamented the drought of recent acquisitions as prices for large businesses have been far from “sensible,” but he believes Berkshire will still have opportunities to make very large purchases from time to time.  Apple was the biggest investment in 2017 now worth about $28 billion as of year end.  On Oct. 3, 2017, Berkshire entered into an agreement to acquire a 38.6% interest in Pilot Flying J, one of the largest operators of travel centers in North America with approximately $20 billion in annual revenues with Berkshire becoming a majority owner in 2023 when they plan to acquire an additional 41.4% interest in Pilot Flying J. During 2017, Berkshire’s acquisitions were relatively small at $2.7 billion with many of these being bolt-on acquisitions at Clayton Homes, Shaw Industries, HomeServices and Precision Castparts. Berkshire expects the previously announced $2.5 billion acquisition of Medical Liability Mutual Insurance Company with 9-30-17 assets and policyholders’ surplus of $5.8 billion and $2.3 billion, respectively, to close in the third quarter of 2018.

Free cash flow increased 74% during the year to $34.1 billion, due primarily to higher earnings and the big boost to float from the AIG deal.  During the year, capital expenditures declined 10% to approximately $11.7 billion, including $4.6 billion by Berkshire Hathaway Energy and $3.3 billion by BNSF. Berkshire Hathaway forecasts aggregate capital expenditures of about $9.7 billion in 2018 for these two businesses. During 2017, Berkshire purchased a net $22.4 billion in Treasury Bills and fixed-income investments and purchased a net $814 million of equity securities, reflecting in part the purchase of Apple and the sale of IBM shares. There were no share repurchases of Berkshire Hathaway stock.   

Berkshire Hathaway’s stock appears fairly valued, currently trading at $314,345 per A share and $210 per B share. Based on current business fundamentals, we expect Berkshire’s A shares to trade between $246,000-$319,000 per share and the B shares to trade between $164-$213 per share.  Hold.

 

Booking Holdings-BKNG (formerly Priceline.com) reported fourth quarter revenues clicked up 19% to $2.8 billion with operating income up 25% to $986 million. Including the $1.3 billion provisional net income tax expense recorded pursuant to the U.S. Tax Cuts and Jobs Act (TCJA), Booking Holdings recorded a $555 million, or $11.41 per share, loss for the quarter. Excluding the TCJA charge, net income increased 18% to $836 million. Fourth quarter gross bookings of all travel services were $18 billion, up 19% year-over-year. Room nights sold increased 17% to 152 million, rental car days increased 5% to 14.7 million and airline tickets sold increased 3% to 1.6 million. For 2017, total revenues traveled ahead 17% to $12.7 billion with net income and EPS increasing 10% to $2.3 billion and $46.86, respectively. During the year, Booking Holdings generated an exquisite 20.8% return on shareholders’ equity and $4.4 billion in free cash flow, up 16% from last year. In 2017, Booking Holdings returned $1.8 billion to shareholders via share buybacks. Booking Holdings ended the year with $8.8 billion in long-term debt and more than $17.8 billion in cash and investments on its well-heeled balance sheet. Given that the company’s overseas cash is now readily accessible thanks to the tax reform legislation, the board added an incremental $8 billion to Booking Holdings’ share repurchase program with $10 billion currently authorized for buybacks that will include programmatic and well as opportunist share repurchases. During the last three years, the company has returned more than $6 billion to shareholders through share repurchases, evidence of Booking Holdings commitment to returning cash to shareholders. For the first quarter, management expects room nights booked to increase between 8% and 12% with total gross bookings increasing 14.5% to 18.5%, or 6% to 10% in constant currency. Revenues are expected to increase 17.5% to 21.5%, or 9% to 13% on a constant currency basis, with EPS in the $9.05 to $9.45 range, up 2% year-over-year from the midpoint. Given Booking Holdings estimated high-single-digit current share of the global travel industry, management is confident of the long runway ahead for future growth.

The Walt Disney Company-DIS announced a 2 billion euro ($2.47 billion) investment to expand its French theme park Disneyland Paris, which it took full control in 2017. The development will include three new areas based on Marvel superheroes such as Spider-Man and the Hulk, Disney’s animated film Frozen and Star Wars, and will be rolled out in phases, starting in 2021. There will also be new attractions and live entertainment experiences.

Thursday, Feb. 22, 2018

Hormel Foods-HRL reported first fiscal sales increased 2% to $2.3 billion with net income up a fat 29% to $303 million and EPS up 27% to $0.56. Volume of 1.2 billion pounds declined 4%, gobbled up by the divestiture of the Farmer John business and the ongoing oversupply of turkeys which continues to challenge Hormel’s Jeannie-O-Turkey segment. Organic sales growth was led by many key brands including retail sales of Hormel® Black Label® bacon, Wholly Guacamole® dips, Muscle Milk® protein beverages and SPAM® products in addition to foodservice sales of Hormel® Bacon 1TM fully cooked bacon and Hormel® Fire BraisedTM meats. Thirty-five of Hormel’s brands hold the #1 or #2 category position. Operating margins declined 240 basis points to 13.2% on higher hog costs, one-time expenses related to the Columbus Craft Meats acquisition and increased freight costs. In the first quarter, Hormel recorded a one-time non-cash tax benefit of $68 million related to revaluing deferred tax liabilities and a $5 million charge related to mandatory repatriation tax, driving Hormel’s effective tax rate to 0.6% from 33.7% last year. With the expected $100 - $140 million cash flow benefit from tax reform in 2018, Hormel plans to invest in growing key domestic brands such as Jennie-O®, Hormel® Pepperoni® , Skippy®, Muscle Milk®, and its new plant-based protein brand Evolve® while investing in its employees through stock option awards to over 20,000 employees and raising the starting wage for all employees to $13 per hour by the end of fiscal 2018 and to $14 per hour by the end of fiscal 2020. During the first quarter, Hormel generated $251 million in free cash flow and returned $115 million to shareholders through share repurchases of $25 million and dividends of $90 million, at the annual rate of $0.75, up 10% from last year, marking the company’s 358th consecutive quarterly dividend payment and the 52nd year of annual dividend increases. Hormel ended the quarter with $386 million in cash and $880 million in debt as a result of the Columbus Craft Meats acquisition, which significantly enhances Hormel’s presence in the fast growing $35 billion Deli segment. Looking ahead to the full year, given continued Jeannie-O Turkey segment challenges, increased expenditures resulting from management’s approach to “invest and grow vs. protect and defend” and the benefit from tax reform, Hormel expects sales in the $9.7 - $10.1 billion range with EPS in the $1.81 - $1.95 range, up from prior guidance of $1.62 - $1.72.

Wednesday, Feb. 21, 2018

The Cheesecake Factory – CAKE reported fourth quarter sales declined 5% to $572 million with net income increasing 78% to $57.7 million and EPS rising 88% to $1.24. The  earning include a $38.5 million, $.83 per share,  benefit to the income tax provision from a revaluation of deferred tax assets and liabilities related to recently enacted tax reform. Comparable restaurant sales declined .9% year over year.  CAKE opened five Cheesecake Factory restaurants and one RockSugar Southeast Asian Kitchen during the quarter.  In addition, two Cheesecake Factory restaurants opened under licensing agreements internationally during the fourth quarter. For the full year, revenues declined 1% to $2.3 billion with net income up 13% to $157 million and EPS up 16% to $3.27. Return on shareholders’ equity for the year was 25%. CAKE’s operating cash flow decreased 21% for 2017 to $239 million with the company paying $50 million in dividends and repurchasing $123 million of its shares. Management’s 2018 guidance is EPS in the range of $2.64 to $2.80 representing 5% growth at the midpoint over 2017 adjusted EPS. Comparable restaurant sales are expected to be flat to up 1% for 2018. On the cost side, food inflation of 3% is expected across most categories and wage rate inflation of about 5% is expected in 2018, consistent with the level experienced this year. Wage cost inflation is expected to be partially offset by more market-based pricing in 2018 to help mitigate rising labor costs and favorable impact from tax reform. Cheesecake Factory expects to open four to six company-owned restaurants in 2018, including one Grand Lux Café and four to five restaurants internationally under licensing agreements in 2018, representing total unit growth of 3% to 4%. 

In cooperation with Neurocrine Biosciences, Inc., AbbVie-ABBV announced that the Phase 3 ELARIS UF-I study (M12-815) of elagolix met its primary endpoint. Uterine fibroids are the most common type of abnormal growth in a woman's pelvis and can affect up to 80 percent of women by age 50. Fibroids can be asymptomatic, but in approximately 25 percent of women, fibroids can cause symptoms, such as heavy menstrual bleeding, painful periods, vaginal bleeding at times other than menstruation, and anemia. African American women are more likely to experience fibroids and do so at a younger age. "Current non-surgical treatments are limited and women suffering from uterine fibroids need more therapeutic options," said Dawn Carlson, M.D., M.P.H., vice president, general medicine development. "The results from this study represent a significant advancement in the development of elagolix and demonstrate our continued commitment to address serious disease."

 

The Priceline Group-PCLN announced that it is changing its name to Booking Holdings Inc. Booking Holdings stock will begin trading under the new ticker symbol NASDAQ: BKNG on February 27, 2018. Glenn Fogel, Chief Executive Officer of Booking Holdings, said, "Over the last two decades, our business has expanded from just priceline.com, operating solely in the United States, into six primary brands with headquarters around the globe, operating in more than 220 countries and territories in over 40 languages, fulfilling one unified mission of helping people experience the world. Today, our largest brand is Booking.com, which has more than 1.5 million properties, averages over one million bookings per day and produces a significant majority of Booking Holdings' gross bookings and operating profit. We are at a defining moment in our company's history--making this change to more accurately align our company name with our largest business, connect our collective brands to a name that reflects their shared capability to help customers book amazing experiences, as well as better reflect the truly global operation that we have become today."


3M-MMM and the State of Minnesota reached a resolution of the State’s lawsuit against 3M related to certain PFCs present in the environment. Under the terms of the settlement, 3M and the State will partner to invest in the environment and community. 3M will provide an $850 million grant to the State for a special “3M Grant for Water Quality and Sustainability Fund.” As a result of this settlement, 3M will record a first quarter 2018 charge of approximately $1.10 to $1.15 per share inclusive of related legal fees.

 

Genuine Parts-GPC reported fourth quarter sales motored ahead 11% to $4.2 billion with net earnings skidding 29% to $108 million and EPS dropping 28% to $0.73. Excluding a $0.35 charge related to the Tax Cuts and Jobs Act (TCJA), transaction-related costs and results from the Alliance Automotive Group (AAG) acquisition which closed in November, adjusted EPS increased 10% to $1.12. Fourth quarter sales for the Automotive Group were up 17% to $2.3 billion on a 1% comparable sales increase and a 4% total sales increase before the 13% sales contribution from AAG.  Sales at Motion Industries, the Industrial Group, were up 7.4% to $1.2 billion, powered by a 5% comparable sales increase. Sales at EIS, the Electrical/Electronic Group, grew 8.9% to $193 million, with comparable sales down 2%.  Sales for S.P. Richards, the Business Products Group, were down 2.2% to $466 million on a 2% decline in comparable sales. Genuine Parts continues to invest in the rapidly growing Facility and Breakroom Supply business which now accounts for 35% of division sales. For the full year, Genuine Parts rang up record sales of $16.3 billion, up 6.3%, with net income of $617 million, down 10%, and EPS of $4.18, down 9%. Excluding TCJA and transaction-related charges and AAG operations, adjusted EPS plowed ahead  1% to $4.64. Genuine Parts ended the year with $315 million in cash and $2.6 billion in long-term debt including $2 billion issued to finance the AAG acquisition, which expands GPC’s footprint throughout Europe. The average interest rate paid on GPC’s long-term debt is 2.7%. During 2017, Genuine Parts generated a solid 18.1% return on shareholders’ equity and $658 million in free cash flow with the company returning $569 million to shareholders through dividends of $395 million and share repurchases of $174 million. Genuine Parts announced a 7% increase in its annual dividend to $2.88 per share. GPC has paid a cash dividend every year since its founding 90 years ago with 2018 marking the 62nd consecutive year of increased dividends paid to shareholders, Looking ahead to 2018, the company expects sales to zoom ahead 12% to 13% with EPS of $5.60 to $5.75, including the benefit of a full year of AAG and about $80 million to $90 million in lower taxes from TCJA. With the tax savings, Genuine Parts expects to invest an incremental $25 million - $40 million in its IT infrastructure, facilities and programs to benefit GPC employees.

Wabtec-WAB reported fourth quarter revenues rose 42% to $1.1 billion with net income up 32% to $49.9 million and EPS up 21% to $.51. These results reflect expenses of 18 cents per diluted share for contract adjustments, expenses of 13 cents per diluted share for the restructuring and integration actions and expenses of 8 cents per diluted share for the impact of U.S. tax reform. Transit sales increased 70% during the quarter to $712 million due primarily to acquisitions with operating income up 41% to $32.6 million. Freight sales were up 6.5% during the quarter to $364 million driven by sales from acquisitions with operating income up 1% to $68.3 million. Backlog increased 2% compared to the third quarter to a record $4.6 billion which included train control contracts worth about $140 million to provide equipment, project management and aftermarket services for various customers. In the fourth quarter, Wabtec acquired Melett, a manufacturer of turbochargers; AM General, a manufacturer of fire protection and extinguishing systems; and Axiom Rail Components, a supplier of bogies and adaptable suspension systems. For the full year, revenues rose 32% to $3.9 billion with net income down 14% to $262 million and EPS down 19% to $2.72. Return on shareholders’ equity for the year was 9.3% with operating cash flow declining 58% to $189 million. Management’s 2018 guidance is sales of $4.1 billion with adjusted EPS of $3.80 representing an 11% increase over 2017 adjusted EPS. The company’s operating margin target for the full year is 13.5% and its effective tax rate for the full year is expected to be about 23.5%.

Thursday, Feb. 15, 2018

AbbVie–ABBV increased its quarterly cash dividend by 35% from $0.71 per share to $0.96 per share and authorized a new $10 billion stock repurchase program. Since the company's inception in 2013, AbbVie has increased its dividend by 140%. AbbVie is a member of the S&P Dividend Aristocrats Index, which tracks companies that have annually increased their dividend for at least 25 consecutive years.

Wednesday, Feb. 14, 2018

Cisco Systems-CSCO reported second quarter revenues rose 3% to $11.9 billion, with both product and service revenue up 3%, and operating income up 7% to $3.1 billion. The company reported a net loss of $8.8 billion or ($1.78) per share, which included an $11.1 billion charge related to tax reform. Cisco held $73.7 billion of cash and investments as of the end of the second quarter and plans to repatriate $67 billion of the cash that was held outside the U.S. Recurring revenue was 33% of total revenue, up two points year over year, as the company continues to shift the business toward more software and recurring revenue. Revenue by geographic segment was: Americas up 5%, EMEA flat and APJC down 2%. Product revenue performance reflected solid growth in Applications and Security, which each increased 6%. Infrastructure Platforms increased by 2%. Free cash flow increased 13% during the first half of the year to $6.8 billion with the company paying $2.9 billion in dividends and repurchasing $5.5 billion of its stock during the same time period. Cisco announced a 14% increase in its dividend and an additional $25 billion authorization for stock repurchases that should be completed over the next 18-24 months. Management’s outlook for the third fiscal quarter of 2018 is for revenue growth of 3%-5% with GAAP EPS in the range of $.50-$.55.

Bioverativ-BIVV reported fourth quarter revenues increased 28% to $328.7 million with operating income up 39.9% to $117.9 million as operating margins expanded. Net income and EPS each declined 38% to $141.3 million and $1.30, respectively, reflecting incremental tax expense from tax reform. For the full year, revenues rose 31.7% to $1.2 billion with operating income up 52.9% to $447.2 million. Net income and EPS each declined 19% to $355.6 million and $3.28, respectively. Return on shareholders’ equity for the year was a healthy 39.6%. As previously reported, Sanofi will be acquiring Bioverativ for $105 per share in cash. We have tendered our shares, and the transaction should be completed in March 2018.

 

Phillips 66 announced it has agreed to repurchase 35 million shares of Phillips 66 common stock from a wholly-owned subsidiary of Berkshire Hathaway-BRKB for $93.725 per share. This $3.3 billion repurchase is expected to close on Feb. 14, 2018. "Phillips 66 is a great company with a diversified downstream portfolio and a strong management team," commented Warren E. Buffett, Berkshire Hathaway Chairman and CEO. "This transaction was solely motivated by our desire to eliminate the regulatory requirements that come with ownership levels above 10 percent. We remain one of Phillips 66's largest shareholders and plan to continue to hold the stock for the long term." At closing of this transaction, Phillips 66 will have 466.5 million shares outstanding of which Berkshire will have an equity ownership interest in 45.7 million shares.

Berkshire increased its position in Apple-AAPL by about 23 percent since the end of September to approximately 165.3 million shares worth $28 billion, making Apple its largest equity holding.

 

Tuesday, Feb. 13, 2018

T. Rowe Price Group-TROW announced that its Board of Directors has declared a quarterly dividend of $0.70 per share payable March 29, 2018 to stockholders of record as of the close of business on March 15, 2018. The quarterly dividend rate represents a 23% increase over the previous quarterly dividend rate of $0.57 per share. This will mark the 32nd consecutive year since the firm's initial public offering that the company will have increased its regular annual dividend.

PepsiCo-PEP reported flat fourth quarter sales of $19.5 billion with a loss of $710 million or ($.50) per share. Snacks/Food volume growth of 2% was offset by a 2% decline in Beverage volume growth. Earnings results included a $2.5 billion or $1.73 per share incremental tax expense related to tax reform. On an organic basis, fourth quarter revenues rose 2% with core constant currency operating profit up 6% and adjusted EPS up 8%. For the full year, revenues rose 1% to $63.5 billion with net income and EPS each declining 23% to $4.9 billion and $3.38, respectively, reflecting the incremental tax expense. A core effective tax rate in the low 20s will reflect the benefits of tax reform going forward. On an organic basis, revenue rose 2% with core constant currency operating profit up 5% and adjusted EPS up 9% for the year. Return on shareholders’ equity was a bubbly 44.4%. Free cash flow declined 12% to $7 billion during the year with the company paying $4.5 billion in dividends and repurchasing $2 billion of its shares. PepsiCo announced a 15% increase in its dividend to $3.71 boosted by the benefits of tax reform and  marking the 46th consecutive year of dividend increases.  For 2018, management expects revenue growth to be at least 1% with core EPS up 9% to $5.70. Operating cash flow is expected to be $9 billion with free cash flow of $6 billion, reflecting capital spending of $3.6 billion and a discretionary pension expense of $1.4 billion. During 2018, management plans to pay $5 billion in dividends, reflecting the 15% increase, and repurchase approximately $2 billion of its shares. A new three year share repurchase program of $15 billion was authorized. Ove the past five years, Pepsi has compounded organic revenue growth at a 4% annual rate with EPS compounding at a 9% annual rate as operating margins expanded 220 basis points. The dividend was increased 50% over this time period with the company returning $38 billion to shareholders through dividends and share repurchases.


Monday, Feb. 12, 2018

Wabtec-WAB has signed a contract worth about $62 million to design, install, test and commission Positive Train Control (PTC) for the Central Florida Rail Corridor (CFRC), which operates the SunRail commuter rail service. Under the contract, Wabtec will provide its Interoperable Electronic Train Management System (I-ETMS®) equipment for 24 locomotives and cab cars, a back-office server, wayside communications and signals, a dispatch system, training, and system integration. Installation is expected to be completed by the end of 2018.

T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.05 trillion as of January 31, 2018, representing a 5.7% increase since year end.  Client transfers from mutual funds to other portfolios were $3.7 billion for the month-ended January 31, 2018.

 Thursday, Feb. 8, 2018

Westwood Holdings-WHG reported fourth quarter revenues rose 9.1% to $33.9 million with operating income down 9% to $9.8 million due to higher employee compensation costs related to performance compensation and headcount increases. Net income declined 62% during the quarter to $2.9 million with EPS down 63% to $.34, reflecting the impact of incremental tax expense on repatriation of earnings from a Canadian subsidiary related to tax reform. For the full year, revenues rose 8.7% to $133.8 million with net income down 11.7% to $20 million and EPS down 14.1% to $2.38, reflecting the higher incremental tax and a $2.5 million litigation charge during the year. Assets under management (AUM) reached a record $24.2 billion as of year end, an increase of 14.2% over the prior year period. The $3 billion increase in AUM reflected $3.4 billion in market appreciation during the year net of $.4 million of outflows primarily related to the sale of its Omaha private wealth operations. Return on shareholders’ equity was 12.8% for the year. Free cash flow increased 3% to $46.8 million with the company paying dividends of $21.9 million during the year. During the past quarter, Westwood increased its dividend 10% to an annualized rate of $2.72, which provides a healthy 4.5% dividend yield based on the current stock price. With a strong debt-free balance sheet at year end boasting more than $105 million in cash, Westwood has the financial  flexibility to further enhance shareholder returns.

 

The UPS-UPS Board of Directors declared an increased regular quarterly dividend of $0.91 per share on all outstanding Class A and Class B shares, an increase of nearly 10% over the prior dividend. The dividend is payable March 7, 2018 to shareowners of record on Feb. 20, 2018. “Dividends remain a high priority at UPS,” said David Abney, UPS chairman and CEO. “Our strong cash flow from operations has enabled us to pay a stable or growing dividend for nearly 50 years.”   UPS has a long history of rewarding shareowners with generous cash dividends. The company has paid a cash dividend every year since 1969 and has more than quadrupled its dividend since it went public at the end of 1999.

Maximus-MMS reported first quarter revenues increased 3% to $623 million driven by revenue increases in the Health Services and Human Services Segments. Net income increased 27% to $59.1 million and EPS rose 25% to $.89. Earnings include a benefit of $7.5 million or $.11 per share related to U.S. tax reform.  Free cash flow declined 50% during the quarter to $31.4 million with the company paying $2.9 million in dividends and repurchasing $1 million of its shares during the same time period. Year-to-date signed contract awards at 12/31/17 totaled $1.2 billion with contracts pending (awarded but unsigned) totaling $236 million. The sales pipeline at quarter end was $3.2 billion comprised of $1 billion in proposals pending, $200 million in proposals in preparation and $1.9 billion in opportunities tracking. Maximus continues to see long procurement cycles in the federal market. Maximus reiterated their revenue guidance for fiscal 2018 with revenues expected to come in at the low end of the $2.475 billion to $2.550 billion range. The company increased EPS guidance to the range of $3.30 to $3.50 from prior guidance of $2.95 to $3.15, primarily due to the effects of U.S. tax reform.

Sanofi announced that on February 7, 2018 it commenced a tender offer to acquire all of the outstanding shares of common stock of Bioverativ-BIVV for $105 per share in cash as part of the previously announced merger agreement. The Offer is scheduled to expire one minute past 11:59 p.m., New York City time, on Wednesday, March 7, 2018, unless the Offer is extended.  

Wednesday, Feb. 7, 2018

Cognizant Technology Solutions-CTSH reported fourth quarter revenues rose 10.6% to $3.8 billion with operating income up 27.3% to $713 million. The company reported an $18 million loss in the fourth quarter, or ($.03) per share. The net loss reflected a one-time income tax expense of $617 million related to tax reform which reduced EPS by $1.04 per share. Management expects their tax rate to be 24% in 2018 and 24%-26% beginning in 2019. For the full year, revenues rose 9.8% to $14.8 billion with operating income up 12.6% to $2.7 billion. Net income declined 3.2% to $1.5 billion with EPS down 1% to $2.53, reflecting the impact of tax reform. Return on shareholders’ equity for the year was 14.1%. Cognizant reported double-digit revenue growth in all business segments for the quarter and the year with the exception of Financial Services, where revenues grew 5% for each period. On a geographic basis, the Rest of Europe (excluding the U.K) reported the strongest growth with 32% growth in the fourth quarter and 29% growth for the full year. Consulting revenue accounted for 57% of total revenues and grew 10% reflecting strong demand for the company’s technology services while outsourcing accounted for 43% of revenues and grew 11%. The company added seven strategic customers during the quarter, which generate revenues between $5 million and $50 million, bringing their total strategic customers to 357. During the quarter, Cognizant had 3900 net new hires with onsite utilization of employees at 92%. Free cash flow during the year increased 58% to $2.1 billion due to working capital changes with the company ending the year with a healthy balance sheet holding $5.1 billion in cash and investments and $698 million of long-term debt. During 2017, Cognizant paid their first dividend of $265 million and repurchased $1.9 billion of their shares. Thanks to confidence in sustainable future growth and the flexibility provided by tax reform to access cash held overseas, Cognizant substantially increased their dividend for 2018 by 33% to a quarterly rate of $.20 per share. In addition, the company expects to repurchase $1.2 billion of their shares by the end of 2018. Cognizant will also be investing $100 million in a new non-profit organization to provide education across the U.S. to train employees for the digital economy. Over the next five years, Cognizant plans to hire 25,000 U.S. workers.  For the full year 2018, Cognizant expects revenues to grow 8%-10% to a range of $16.0 billion to $16.3 billion with non-GAAP EPS expected to be at least $4.53.  

Tuesday, Feb. 6, 2018

Walt Disney-DIS reported fiscal first quarter revenues rose 4% to $15.4 billion with net income skipping 78% higher to $4.4 billion and EPS jumping 88% to $2.91. Excluding a $1.6 billion one-time net tax benefit and other items, EPS increased a still magical 22% for the quarter. Results were driven by Parks and Resorts with revenues up 13% to $5.2 billion and operating income up 21% to $1.3 billion due to increases at domestic parks and resorts, cruise line and vacation club businesses as well as at Disneyland Paris. Media Networks reported flat revenues at $6.2 billion with operating income declining 12% to $1.2 billion reflecting a loss at BAMTech and a decline at ESPN. Studio Entertainment revenues dipped 1% during the quarter to $2.5 billion with operating earnings down 2% to $829 million due to a decrease in home entertainment reflecting lower performance of Cars 3 in the current quarter compared to Finding Dory in the prior-year quarter. Consumer Products & Interactive Media revenues were down 2% in the quarter to $1.5 billion with operating income down 4% to $617 million due to decreases in merchandise licensing and retail businesses. Free cash flow more than tripled during the quarter to $1.3 billion due in part to lower pension plan contributions. During the quarter, Disney repurchased 12.8 million shares for $1.3 billion at an average cost of approximately $101.56 per share. Year-to-date, the company has repurchased 17.6 million shares for $1.8 billion. Management’s capital allocation strategy is to continue to invest in new content, increase its dividend and repurchase shares. With the Fox acquisition pending following regulatory approval expected in 12-18 months, management’s acquisition appetite will be curtailed for some time as they digest Fox. Management is enthusiastic about the Fox acquisition as it will provide Disney with more content, enhance their direct-to-consumer platform and greatly diversify the business internationally.

Fastenal-FAST reported January sales rose 17% to $394.4 million with average daily sales up 12% to $17.9 million. Manufacturing sales were up 13.3% with non-residential construction sales were up 7.9%. Fasteners daily sales growth was 10.1% with other product sales up 13.7%. Total personnel increased 6% to 20,814.

Friday, Feb. 2, 2018

Oracle’s-ORCL Board of Directors authorized the repurchase of up to an additional $12.0 billion of common stock under an existing share repurchase program.

Polaris Industries-PII announced that its Board of Directors approved a 3 percent increase in the regular quarterly cash dividend, raising the payout to $0.60 per share. This increase represents the 23rd consecutive year of Polaris increasing its dividend effective with the 2018 first quarter dividend. The first quarter dividend will be payable on March 15, 2018 to shareholders of record at the close of business on March 1, 2018. Scott Wine, Polaris’ Chairman and CEO, commented, “We have an unwavering commitment to being a customer-centric, highly efficient growth company. A disciplined approach to capital allocation is fundamental to that goal as we seek to create ongoing long-term value for our shareholders. Polaris’ 23rd consecutive annual dividend increase is a testament to that promise, and reflects our confidence that we will continue to strengthen our market leadership through a focus on superior innovation, productivity, safety, quality, and customer service.”

 

Wabtec-WAB announced an estimate of the impact of U.S. tax reform and its preliminary 2017 fourth quarter results.  The fourth quarter preliminary results include: Revenues of about $1.1 billion, GAAP earnings per diluted share of about 55 cents. GAAP earnings are expected to include the following impact from the U.S. tax reform bill that was enacted in December 2017:  expenses of about $55 million, or about 57 cents per diluted share, for the repatriation of earnings; and a benefit of about $52 million, or about 53 cents per diluted share, from a reduction in deferred tax liabilities.  Therefore, the net impact of U.S. tax reform in the fourth quarter is expected to be an expense of about $3 million, or about 4 cents per diluted share. GAAP earnings are also expected to include:  contract adjustments of about $24 million, or about 18 cents per diluted share, for higher-than-expected costs to complete certain existing contracts; and expenses of about $18 million, or about 13 cents per diluted share, for restructuring and integration actions. Cash from operations for the quarter was about $145 million, and the company had a  year-end net debt balance of about $1.6 billion. At year-end, the company had a record, multi-year backlog of about $4.6 billion, 2 percent higher than at the end of the third quarter. Raymond T. Betler, Wabtec’s president and chief executive officer, said:  “2017 was a year of transition and positioning the company for the future.  We made excellent progress on integrating the Faiveley acquisition, implemented common processes that we believe will improve our project execution and performance, improved our cash flow generation each quarter, and continued to invest in our growth strategies.  We are finalizing our financial plan for 2018 and expect to generate growth in revenues, adjusted earnings per diluted share and cash flow from operations.”


Thursday, Feb. 1, 2108

Alphabet-GOOGL reported fourth quarter revenues clicked up 24% to $32.3 billion with operating income up 24%. For the quarter, Alphabet reported a $3 billion, or $4.35 per share, net loss on a $9.9 billion, or $14.05 per share, charge related to the Tax Cuts & Jobs Act legislation. Excluding the charge, Alphabet’s net earnings and EPS increased 28% year-over-year. Google segment revenue increased 24% to $31.9 billion while Other Bets revenue increased 56%, driven by strong NEST holiday sales. Google advertising revenues increased 22% to $27.2 billion with Google properties revenue increasing 24% to $22 billion and Google Network Member’s Property revenues up 13% to $5 billion. Total TAC (traffic acquisition costs) increased 33% to $6.5 billion on a jump in TAC to Google Network Members as Google increasingly relies on partner platforms for mobile search origination. These costs are expected to ease after the first quarter of 2018. Sales and marketing expenses jumped 38% to $4.3 billion, boosted by ad buys to promote holiday hardware sales. Aggregate paid clicks increased 18% while cost-per-click declined 6%, less than the 14% decline in last year’s fourth quarter. For the year, Alphabet reported revenues increased 23% to $110.9 billion with net income and EPS falling 35% to $12.7 billion and $18.00, respectively. Alphabet generated a disappointing 8.3% return on shareholders’ equity for 2017 on the heels of charges related to tax reform. During 2017, Alphabet generated $24 billion in free cash flow ending the year with nearly $110 billion in cash and investments and $4 billion in long-term debt on its strong balance sheet. The company’s board announced a new $8.6 billion share buyback program for its class C shares.


Apple-AAPL reported record fiscal first quarter results as revenues rose 12.7% to $88.3 billion, net income climbed 12.2% to $20.1 billion and EPS jumped 15.8% to $3.89. These strong results occurred in a 13-week quarter compared to 14-weeks in the prior year period. Looking at the average revenue per week, growth was an even more impressive 21%. Growth was broad-based across all product categories with double-digit growth in all geographic segments during the quarter, led by 26% growth in Japan. International sales accounted for 65% of the quarter’s revenues. Apple’s installed base of devices reached 1.3 billion in January, which represents 30% growth in the last two years alone. iPhone X surpassed management’s expectations and has been the top-selling iPhone every week since it shipped in November. iPhone revenues grew 13% during the past quarter to $61.6 billion with unit shipments down 1% to 77,316,000 due to one less week in the quarter and average selling prices increasing 14.5% to $796. iPad revenues rose 6% during the quarter to $5.9 billion with average units increasing 1% to 13,170,000 as the iPad gained market share, boasting 46% of the U.S. tablet market versus 36% in the prior year period. Mac revenues and units declined 5% during the quarter to $7 billion and 5,112,000 units, respectively, with strong 13% growth in emerging markets. Services revenues increased 18% to $8.5 billion with paid subscriptions rising 30 million in the last quarter alone to 240 million subscribers to Apple services such as AppleCare, Apple Pay and the App Store, which had its best holiday season ever. Other Products sales jumped 36% to $5.5 billion with Apple wearables, such as the Apple Watch, Beats and AirPods, increasing revenues 70% during the quarter. Apple welcomed 538 million visitors to its Apple retail stores in 21 countries during the quarter with a new Apple retail store opening in Korea and Austria for the first time. Free cash flow increased 6.6% during the quarter to $25.5 billion. After paying $3.3 billion in dividends and repurchasing $10.1 billion of its shares during the quarter, the company ended the quarter with about $285 billion in cash and investments and $104 billion in long-term debt. Management plans to deploy cash in excess of debt to acquisition opportunities, dividends and share repurchases. Apple has $34 billion remaining authorized for future share repurchases after buying back a cumulative $176 billion of its stock.  In the past few years, 100% of free cash flow has been distributed to shareholders via dividends and share repurchases. Management plans to provide an update on its capital allocation strategy after the second quarter as is customary. Apple’s outlook for the second fiscal quarter of 2018 is for revenue between $60 billion and $62 billion, gross margin between 38% and 38.5%, operating expenses between $7.6 billion and $7.7 billion, other income of $300 million and a tax rate of approximately 15%.

Mastercard-MA rang up fourth quarter sales of $3.3 billion, up 20% year-over-year, with net income and EPS dropping 76% to $227 million and $0.21, respectively. Excluding charges related to the Tax Cuts & Jobs Act legislation of $873 million, or $0.82 per share, and charges related to the deconsolidation of Venezuela operations, net income increased 28% to $1.2 billion and EPS increased 33% to $1.14. Worldwide gross dollar volume increased 13% to $1.4 trillion, reflecting 9% growth in the U.S. to $423 billion and 14% growth in the rest of the world on strong growth across all regions, most notably in Europe. Switched transactions—payment authorization, clearing and settlement—increased 17% to 17.7 billion on a 5% increase in Mastercard branded cards to 2.4 billion cards at year end. During the fourth quarter, Mastercard paid dividends of $233 million and repurchased 6.9 million shares for $1 billion, or $144.93 per share. For the year, Mastercard reported net revenue of $12.5 billion, up 16%, net income of $3.9 billion, down 4%, and EPS of $3.65, down 1%. Excluding the impact of the TCJA law and Venezuela, 2017 net earnings and EPS increased 18% and 21%, respectively. During 2017, Mastercard generated a stellar 71.6% return on shareholders’ equity. The company generated $5.3 billion in free cash flow during 2017 and returned $4.7 billion to shareholders through dividends of $942 million and share repurchases of $3.8 billion, or $126.67 per share. Subsequent to year end, Mastercard repurchased an additional 1.8 million shares for $287 million, or $159.44 per share, which leaves $5 billion remaining under the current repurchase program authorization. Looking ahead to 2018, Mastercard updated its revenue guidance from up 12%-13% to up 13%-14% with EPS increasing in the mid-20% range. Spurred by an expected $450 million in annual tax savings from the TCJA, in addition to accelerating investments in strategic investments to fuel growth, Mastercard announced, that it would increase its employer match for employee retirement savings account to 10% and contribute $500 million over the next several years to Mastercard Center for Inclusive Growth, a non-profit devoted to advancing equitable and sustainable economic growth and financial inclusion around the world, which includes job training programs for U.S. workers.

Baxter International – BAX reported a healthy 5% increase in fourth quarter sales to $2.8 billion with a net loss of $71 million and $0.11 per share. The earnings include a net tax charge of $322 million, $.58 per share, related to the impact of U.S. tax reform. Sales within the U.S. were about $1.1 billion, up 1%, while International sales were more than $1.6 billion, up 8%. By business segment, global sales for Hospital Products totaled $1.7 billion, up 5%, boosted by strength in U.S. fluid systems business as well as favorable demand for injectable pharmaceuticals, which includes the contribution of approximately $30 million of sales from the acquisition of Claris. Baxter’s fourth quarter Renal sales increased 5% to $1.1 billion, driven by solid performance globally across both chronic and acute renal therapies. For the full year, revenues rose 4% to $10.6 billion with net income and EPS down 86% to $717 million and $1.30, respectively. The prior year earnings included a $.4 billion gain related to the Baxalta transaction. Baxter’s free cash flow increased 35% for 2017 to $1.2 billion with the company repurchasing $564 million of its shares. Management’s 2018 guidance is EPS in the range of $2.25 to $2.38 representing 78% growth at the midpoint over 2017 depressed EPS with sales expected to increase in the range of 6% to 7%.

UPS-UPS reported fourth quarter revenue rose 11%, at the highest rate in the last decade, to $18.8 billion with the company reporting $1.1 billion in net income and $1.27 in EPS compared to a $239 million loss last year or [$.27] per share. Fourth quarter results included a $.30 per share benefit from tax reform offset by a pension charge of $.70 per share. In the prior year period, the company reported a $1.90 per share pension charge. For the full year, UPS reported revenues rose 8.2% to $65.9 billion with net income up 43% to $4.9 billion and EPS up 45% to $5.61. These strong results reflected exceptionally strong revenue and yield growth coupled with the benefits from investments in the company’s network. International export shipments rose 16% in the fourth quarter and 15% for the full year. The International segment has generated four consecutive quarters of double-digit export growth with international operations poised to exceed domestic operations in the future. Supply Chain and Freight operating profit expanded at a double-digit rate on strong revenue growth of 21%. U.S. Domestic revenue was up 8.4% on higher package demand and yields. During the quarter, the company delivered 1.5 billion packages, up 5.7% over last year. On 90% of the days between Thanksgiving and Christmas, UPS delivered more than 30 million packages each day. UPS had record deliveries for peak season of 762 million, materially above last year and their plan due to strong retail sales. With shipments surging beyond network capacity during Cyber-periods, this did drive additional operating costs of $125 million. During the year, UPS made capital expenditures of $5.2 billion, paid dividends of $2.9 billion, an increase of 6.4% over the prior year, and repurchased 16.1 million shares for approximately $1.8 billion at an average cost of $111.80 per share. UPS expects its tax rate in 2018 to fall to the 23%-24% range.  Tax reform benefits will increase cash flow and net income by $.80-$.85 per share in 2018. With growth opportunities accelerating due to improved consumer spending, increased manufacturing and expanding business investments, UPS plans to reinvest part of its tax savings in growing its network through accelerated investments thanks to its high return on invested capital in the range of 23% to 28%. For 2018 and the next few years, UPS plans to annually invest $6.5 billion to $7.0 billion, or approximately 10% of revenues,  in capital expenditures dedicated to investments in new technology, aircraft and automated capacity. These investments will be accretive to the business and enable management to take advantage of the new tax laws which enable 100% deductibility of the expenses. At the same time, UPS expects to continue to increase its dividend and plans to repurchase $1 billion of its shares in 2018. Management’s outlook for 2018 is for adjusted EPS in the range of $7.03-$7.37, which represents high double-digit growth.

Wednesday, Jan. 31, 2018

Microsoft-MSFT reported fiscal second quarter revenues rose 12% to $28.9 billion and a net loss of $6.3 billion ($.82 per share) during the quarter. The loss reflected a $13.8 billion net charge related to the Tax Cuts and Jobs Act. Microsoft’s tax rate should approximate 16% in the second half of fiscal 2018 and be less than 21% in fiscal 2019. Excluding the tax charge, net income and EPS each rose a strong 20% during the quarter. Revenue in Productivity and Business Processes was $9 billion and increased 25% during the quarter driven by Office 365 commercial revenue growth of 41%. LinkedIn contributed revenue of $1.3 billion during the quarter with growth of over 20% for the fifth consecutive quarter. Revenue in Intelligent Cloud was $7.8 billion and increased 15% driven by Azure revenue growth of 98%. Revenues in More Personal Computing was $12.2 billion and increased 2% during the quarter with Xbox gaming revenue up 8% and Bing search advertising revenue up 15%. Free cash flow in the first half of the year increased 14% to $15.6 billion. During the first half, Microsoft paid $6.2 billion in dividends and repurchased $4.6 billion of its shares. With tax savings and the repatriation of its significant cash balances held offshore, management plans to continue to invest in its business, make strategic acquisitions like LinkedIn, which is performing better than expected, and return substantial cash to shareholders via dividends and share repurchases. Microsoft will now have the flexibility for all these capital allocation decisions without having to tap the debt markets which makes it easier and quicker to make the decisions. Microsoft ended the quarter with $142.8 billion in cash and $73.3 billion in long-term debt. Management anticipates growth to continue to accelerate as CEO’s demand increases in productivity, security and innovation from a trusted partner like Microsoft.

Tractor Supply-TSCO rang up fourth quarter sales of $1.93 billion, up 2% from last year, with net income of $110 million, down 11%, and EPS of $0.87, down 7% on fewer share outstanding. Excluding the impact of Tractor Supply’s net deferred tax asset revaluation required by the Tax Cuts and Jobs Act (TCJA), adjusted net income and EPS declined 7% and 3%, respectively, compressed by the impact of last year’s 53rd week, increased wages and incentive compensation along with higher infrastructure and technology investments. Comparable store sales grew 4% on a 2.7% increase in the number of transactions and a 1.3% increase in average ticket. The company opened 27 new Tractor Supply stores and closed seven Del’s stores and 6 new Petsense stores during the fourth quarter. During the quarter, Tractor Supply repurchased $42.8 million of its shares at an average cost of $61.63 per share. For 2017, Tractor Supply reported a 7% increase in sales to $7.3 billion with net income dipping 3.3% to $422.6 million and EPS up 1% to $3.30 on fewer shares outstanding. Comp store sales increased 2.7% with the company opening 115 net new stores including 25 Petsense stores. During 2017 Tractor Supply generated an impressive 29.8% return on shareholder equity and $381 million in free cash flow. The company returned $503 million to shareholders through share repurchases of $369 million at an average cost of $62.35 per share and dividends of $143 million. 2017 marked the seventh consecutive year of dividend increases paid by Tractor Supply. Looking ahead to 2018, net sales are expected in the $7.69 billion to $7.77 billion range on a 2% to 3% increase in comp store sales. The TCJA is expected to reduce the company’s effective tax rate to 23% - 23.5% from 36.7% with much of the savings reinvested in employee wages and incremental additions to capital expenditures to support growth initiatives. Net income is expected in the $490 million to $515 million range with EPS in the $3.95 to $4.15 range.

Amazon, Berkshire Hathaway-BRKB and JPMorgan Chase announced  that they are partnering on ways to address healthcare for their U.S. employees, with the aim of improving employee satisfaction and reducing costs. The three companies, which bring their scale and complementary expertise to this long-term effort, will pursue this objective through an independent company that is free from profit-making incentives and constraints. The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost. Tackling the enormous challenges of healthcare and harnessing its full benefits are among the greatest issues facing society today. By bringing together three of the world’s leading organizations into this new and innovative construct, the group hopes to draw on its combined capabilities and resources to take a fresh approach to these critical matters. “The ballooning costs of healthcare act as a hungry tapeworm on the American economy. Our group does not come to this problem with answers. But we also do not accept it as inevitable. Rather, we share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes,” said Berkshire Hathaway Chairman and CEO, Warren Buffett. “The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty,” said Jeff Bezos, Amazon founder and CEO. “Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind, and a long-term orientation.” “Our people want transparency, knowledge and control when it comes to managing their healthcare,” said Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co.. “The three of our companies have extraordinary resources, and our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans,” he added.

Automatic Data Processing-ADP reported fiscal second quarter revenues rose 8% to $3.2 billion with net income down 9% to $467.5 million and EPS down 7% to $1.05. Prior year second quarter earnings included a $205 million pre-tax gain on the sale of the CHSA and COBRA businesses. Client retention decreased 20 basis points for the quarter. Worldwide new business bookings increased 6% for the quarter in line with the company’s expectations with management reaffirming its outlook for 5% to 7% growth in new business bookings for the full year. Interest on funds held for clients increased 16% to $107 million in the quarter as average client fund balances increased 7% in the quarter to $22.5 billion. The average interest yield on client funds was 1.9% up 10 basis points compared to the prior year. Subsequent to quarter end, ADP acquired WorkMarket, a leading cloud-based freelance management solution provider for approximately $125 million. Free cash flow in the first half of fiscal 2018 decreased 23% to $557 with the company paying $507 million in dividends and repurchasing $408 million of its shares. Management raised their outlook for full year fiscal 2018 revenue growth to a range of 7%-8% compared to the prior forecast of 6% to 8% due in part to the Global Cash Card acquisition and more favorable foreign exchange. ADP now expects full year EPS to be up 8% to 9% compared to the prior forecast of down 1% to up 1% with adjusted EPS growth now expected in the range of 12% to 13% compared to the prior forecast of 5% to 7% growth. This forecast reflects the estimated benefits from tax reform and ADP now forecasts an adjusted effective tax rate for fiscal 2018 of 26.9% compared to the prior forecast of 31.7%.

In separate news, ADP-ADP reported that private sector employment increased by 234,000 jobs from December to January according to the January ADP National Employment Report®. "We've kicked off the year with another month of unyielding job gains," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "Service providers were firing on all cylinders, posting their strongest gain in more than a year. We also saw robust hiring from midsize and large companies, while job growth in smaller firms slowed slightly." Mark Zandi, chief economist of Moody's Analytics, said, "The job market juggernaut marches on. Given the strong January job gain, 2018 is on track to be the eighth consecutive year in which the economy creates over 2 million jobs. If it falls short, it is likely because businesses can't find workers to fill all the open job positions." 


Tuesday, Jan. 30, 2018

Stryker-SYK reported fourth quarter sales increased 10% to $3.5 billion on solid growth in all product and geographic segments. Stryker reported a net $249 million loss, or $.66 per share, for the quarter, hurt by an $833 million, or $2.19 per share, charge related to the Tax Cuts and Jobs Act (TCJA) legislation. Excluding the tax charge, amortization and other one-time items, EPS increased 10% to $1.96 per share. Domestic sales increased 9% to $2.5 billion while international sales increased 7% organically to $958 million. Orthopaedics sales gained 8% to $1.3 billion on the heels of double-digit growth in knees and Trauma & Extremities. Mako, Stryker’s robotic-arm assisted technology, continued to drive knee market-share gains during the quarter with 35 new installations made, including 27 in the U.S. and the first installation in Japan. During 2017, 42,500 surgeries were performed with the aid of Mako, up from 22,000 last year. MedSurg sales increased 11% to $1.58 billion on double-digit growth in instruments and endoscopy. Neurotechnology sales increased 12% to $586 million despite challenges in the spine market. For the year, Stryker reported sales of $12 billion, up 10% from last year, with net earnings and EPS sliding 38% to $1 billion and $4.35, respectively. Excluding the TCJA-related charge, amortization and other special items, net earnings and EPS increased 12% to $2.5 billion and $6.49, respectively. During 2017, Stryker generated a weak 10.2% return on shareholder equity and $961 million in free cash flow. Stryker returned $866 million to shareholders during 2017 through dividends of $636 million and share repurchases of $230 million. Stryker ended the year with $2.8 billion in cash and investments and $6.6 billion of long-term debt. Looking ahead to 2018, management expects organic sales growth in the 6% to 6.5% range with EPS in the $7.07 to $7.17 range. Stryker’s blended effective 2018 tax rate is expected in the 16.5% to 17.5% range.

T. Rowe Price-TROW reported fourth quarter revenues rose 18% to $1.3 billion with net income and EPS falling 9% to $347 million and $1.37, respectively. Excluding the $71 million, or $0.28 per share, charge related to the Tax Cuts and Jobs Act legislation and other one-time items, adjusted net income and EPS increased 26% to $384 million and $1.52, respectively. Assets under management (AUM) increased 22% to $991.1 billion. The firm’s net cash inflows were $3.7 billion during the fourth quarter. Performance of T. Rowe Price’s institutional strategies against their benchmarks remains very competitive, especially over longer time periods, with 88% of the firm's rated U.S. mutual funds ending the quarter with an overall rating of four or five stars from Morningstar. For the year ended 12/31/2017, T. Rowe Price reported revenues of $4.8 billion, up 14% from last year, net earnings of $1.5 billion, up 23%, and EPS of $5.97, up 26%. Excluding the impact of the U.S. tax law and other non-recurring items in both years, net earnings increased 18.5% to $1.4 billion and EPS increased 21% to $5.43. During 2017, T. Rowe Price generated a stellar 25.7% return on shareholders’ equity. The company generated nearly $1.4 billion in free cash flow during 2017 and returned $1.021 billion to shareholders via dividends and share buybacks. During 2017, the company repurchased 6.6 million shares, or 2.7% of its outstanding shares, for $458.1 million at an average cost of $69.41 per share, including $1.4 million to repurchase 15,000 shares at an average cost of $93.33 during the fourth quarter. T. Rowe Price maintains a strong balance sheet which is debt-free and boasts more than $4 billion in cash and investments. Looking ahead to 2018, management expects that the reduction of the corporate tax rate combined with other miscellaneous tax changes impacting deductions will result in a 24% to 27% effective tax rate in 2018. William J. Stromberg, T. Rowe Price’s president and CEO, commented: "Capping a year of strong gains, U.S. stocks again rose in the fourth quarter, pushing most major indexes further into record territory. Led by emerging markets, international stocks continued their strong run, outperforming U.S. shares in 2017. This was a very good quarter and year for T. Rowe Price, our clients, and our stockholders. Strong relative investment performance, robust markets, and healthy client activity boosted our assets under management by 22% in 2017, including 5% in the fourth quarter. Reflecting increased demand for our approach to active management, and our success in broadening our product offerings and distribution capabilities, our net flows and organic growth reached their highest annual levels since 2012."

Polaris-PII reported fourth quarter revenues rose 18% to a record $1.4 billion with net income and EPS declining 50% to $31.5 million and $.49, respectively. Results include a $55.4 million, or $.86 per share, charge related to the new U.S. tax law. Aftermarket segment sales increased substantially due to Transamerican Auto Parts which added $192 million to sales in the fourth quarter. ORV (off-road vehicle) unit retail sales were down low single digits with revenue up 13% to $994 million. Motorcycles segment sales were down 2% to $103 million but up 26% excluding 2016 Victory sales. Indian Motorcycle retail sales increased about 17%, with both heavyweight and mid-sized motorcycles increasing at similar mid-teens percent levels. Slingshot's retail sales were up significantly due to improved product availability compared to the fourth quarter last year. Global Adjacent Market segment sales increased 19% to $117 million. For the full year, revenues rose 20% to $5.4 billion with net income down 19% to $172 million and EPS down 18% to $2.69. Return on shareholders’ equity for the year was 18.5%. PII’s free cash flow increased 9% for 2017 to $396 million with the company paying $145 million in dividends and repurchasing $90 million of its shares. As of 12/31/2017, the company has 6.4 million shares authorized for future share repurchases. Management’s 2018 guidance is adjusted EPS in the range of $6.00 to $6.20 representing 25% growth at the midpoint over 2017 adjusted EPS. Total 2018 adjusted sales are expected to increase in the range of three percent to five percent to $5.6 billion to $5.7 billion. Management’s guidance includes favorable impact of $35 million, or $.55 per share, from the new tax law with their tax rate declining from 30% to 23%.


Friday, Jan. 26, 2018

Gentex Corporation–GNTX reported fourth quarter sales increased 9% to $460 million with net earnings and EPS racing ahead more than 47% to $130.5 million and $0.46, respectively, boosted by a $37.2 million, or $0.13 per share, tax benefit from the Tax Cuts and Jobs Act (TCJA). Excluding the TCJA tax adjustment, EPS gained 6.5% from last year. Auto-dimming mirror shipments increased 13% year-over-year on strong international shipments. Operating expenses increased 12% to $46.3 million and included $4.4 million in costs associated with the retirement of Gentex’s founder and former CEO. During the quarter, Gentex generated $127 million in free cash flow with the company paying off $28 million on its term loan and repurchasing 5.1 million shares at an average price of $19.96 per share. For the full year, net sales increased 7% to $1.8 billion on a 9% year-over-year increase in auto-dimming unit shipments. Net income increased 17% to $406.8 million with EPS up 18% to $1.41. Gentex earned an impressive 19.8% return on shareholder equity in 2017 and ended the year with $780 million in cash and investments on its now long-term debt-free balance sheet. During 2017, Gentex generated $394 million in free cash flow with the company repaying $107.6 million on its term loan and repurchasing 12 million shares at an average price of $20.98 per share. Subsequent to quarter end, Gentex repurchased and retired 5.5 million shares purchased from its former CEO at an average price of $20.98 per share. When asked on the quarterly conference call if the company’s approach to leverage would change after the founder’s retirement, Steve Downing, President and CEO, stated that Gentex’s core DNA is based on Midwestern values which views leverage with skepticism. With its robust cash flows, the company expects to continue buying back its shares. Looking ahead to 2018, despite flat projected vehicle production, Gentex expects sales to increase 5%-10% to $1.89 billion-$1.97 billion. Commenting on the future Steve Downing remarked, "The next two years present many challenges due to a flat-to-down light vehicle production environment, but we are currently forecasting solid revenue growth for both 2018 and 2019. The company recently showcased its expanding efforts to develop, market and sell uniquely designed and engineered future-focused products at CES [Consumer Electronics Show]. We have received very positive feedback from our customers who visited us at CES where we were able to demonstrate Gentex technology in mirrors, digital displays, camera monitoring systems, large area dimmable devices and connected car technologies which we believe will deliver profitable growth and shareholder value for years to come."

AbbVie-ABBV reported fourth quarter revenues rose 14% to $7.7 billion with net income and EPS each down 96% to $52 million and $.03, respectively. These results reflect tax charges of $.77 per share related to recent tax legislation. On an adjusted basis, EPS increased 23% to $1.48. For the full year, revenues rose 10% to $28.2 billion with net income down 11% to $5.3 billion and EPS off 9% to $3.30. On an adjusted basis, EPS for the full year increased 16% to $5.60. Full year global HUMIRA sales increased 15% to $18.4 billion with global IMBRUVICA sales increasing 41% to $2.6 billion. Management’s outlook for 2018 is for revenue growth of 13% to $32 billion with GAAP EPS of $6.45 to $6.55 as operating margins are expected to expand by 150 basis points. Adjusted EPS guidance is in the range of $7.33 to $7.43, representing impressive growth of 32% at the midpoint reflecting both strong operating performance and the positive impact of tax reform. Thanks in part to the additional cash flow provided by tax reform and the repatriation of cash held overseas, AbbVie plans to make investments of approximately $2.5 billion over the next five years in capital projects in the U.S. and is currently evaluating additional expansion of its U.S. facilities. In addition, the company plans a one-time contribution of $350 million to select U.S. charitable organizations in 2018 and enhancements to non-executive employee compensation while accelerating pension funding by $750 million.  In February 2018, the Board of Directors will consider enhanced shareholder returns through accelerated dividend growth and additional share repurchases.

Biogen-BIIB reported fourth quarter revenues rose 15% to a record $3.3 billion, or 26% on an adjusted basis for the spin-off of the hemophilia business. Biogen recorded a net loss of $297 million and a loss of $1.40 per share which includes a $1.2 billion, $5.51 per share, charge related to U.S. tax reform. Multiple sclerosis (MS) revenues were $2.3 billion with more than 340,000 patients being treated with Biogen products. Spinraza sales rose 34% quarter over quarter to $363 million with revenue outside the U.S. more than doubling quarter over quarter. Biosimilar sales increased 130% from the same period last year to $122 million. Biogen made important progress advancing their pipeline, including initiating new trials in Alzheimer’s disease, epilepsy, MS and stroke. In January 2018, Biogen acquired the exclusive worldwide rights to develop and commercialize Karyopharm Therapeutics Inc.’s Phase 1 ready investigational oral compound KPT-350 for the treatment of certain neurological and neurodegenerative conditions, primarily amyotrophic lateral sclerosis (ALS). Biogen will pay Karyopharm a one-time upfront payment of $10 million and up to an additional $207 million in milestones, plus tiered royalty payments on potential sales of KPT-350. For the full year, revenues rose 7% (15% adjusted for spin-off of the hemophilia business) to $12.3 billion with net income down 31% to $2.5 billion and EPS down 30% to $11.92. Return on shareholders’ equity for the year was 20% and the company returned $1.4 billion to shareholders through share repurchases. Management’s 2018 guidance is EPS in the range of $22.20 to $23.20 with total sales in the $12.7 billion to $13 billion range. Management’s guidance includes 200 basis points of favorable impact from the new tax law with their estimated effective tax rate expected to be 23.5% to 24.5%.


Thursday, Jan. 25, 2018

Starbucks-SBUX reported first fiscal quarter revenues rose 5.9% to $6.1 billion with operating income declining 1.5% to $1.1 billion and net earnings and EPS tripling to $2.2 billion and $1.57, respectively, reflecting gains from the acquisition of a joint venture and the disposition of certain operations. On a non-GAAP basis, EPS grew 25% to $.65 and included a $.07 per share benefit from the changes in the U.S. tax laws. Operating margins declined due to food-related mix shift in the Americas as well as restructuring costs.  Global comparable sales increased 2% during the quarter, driven by a 2% increase in average ticket. Americas and U.S. comp store sales increased 2% due a 2% increase in average ticket. The U.S. business comps came in below expectations due to underperformance in lobby holiday merchandise, changes in transactions in the afternoon and evenings due to the holidays and negative performance of stores in the malls due to less mall traffic. China comp store sales increased a robust 6% due to a 6% increase in transactions with China revenues up 30% in the first quarter thanks to the acquisition of East China positioning the company to accelerate growth in the key China market. Management believes China will have more stores than the U.S. in the future and be a key driver of future growth. The newly-opened Starbucks Reserve Roastery in Shanghai is now the largest Starbucks store in the world and is generating on a daily basis twice the average $32,000 in weekly sales of U.S. stores. Active membership in Starbucks Rewards in the U.S. grew 11% to 14.2 million members with member spending representing 37% of U.S. company-operated sales while Mobile Order and Pay represented 11% of U.S. company-operated transactions. Starbucks Card reached 42% of U.S. and Canada company-operated transactions. The company opened 700 new stores globally bringing total store count to 28,039 across 76 markets. The company returned a record $2 billion to shareholders in the quarter through a combination of dividends and share repurchases with management committed to returning $15 billion to shareholders over the next three years. During the quarter, the company repurchased 28.5 million of its shares outstanding with approximately 52 million shares remaining authorized for future share repurchases. For the full fiscal 2018 year, Starbucks plans to open approximately 2,300 net new stores globally and continues to expect 3% to 5% comparable store sales growth globally, although they now expect to be at the low end of that range given the soft first quarter. Consolidated revenue growth is expected to be 9% to 11% in fiscal 2018 with GAAP EPS expected in the range of $3.32 to $3.36 and non-GAAP EPS in the range of $2.48 to $2.53, which is $.18 to $.20 higher than previous guidance due to the favorable impact of tax legislation.

3M-MMM posted fourth quarter of $8 billion, up 9% from last year’s fourth quarter, with net income and EPS falling 55% to $523 million and $0.85, respectively. Excluding the $762 million, or $1.25 per share, net impact of the Tax Cuts and Jobs Act (TCJA), net earnings increased 11% and EPS of $2.10 increased nearly 12%. Organic local-currency sales growth of 5.2% reflected growth in all business groups, led by 11% organic local-currency growth in Electronics & Energy and Safety & Graphics, and all geographies, led by EMEA and Asia-Pacific. Operating margins of 22.8% expanded 10 basis points as strong organic volume growth was partially offset by the negative impact from incremental strategic investments and the Scott Safety acquisition which closed during the fourth quarter. Free cash flow of $1.4 billion declined by $372 million from last year’s fourth quarter due to a $600 million discretionary U.S. pension contribution. 3M’s strong fourth quarter capped a solid full year with 2017 sales up 5% to $31.7 billion, net income excluding the impact of TCJA up 11% to $5.6 billion and EPS excluding TCJA up 12% to $9.17. 3M generated a healthy 41.8% return on shareholders’ equity during 2017 and a 21% return on invested capital. During 2017, 3M generated nearly $4.9 billion in free cash flow, representing a robust 100% free cash flow conversion rate, and returned $4.8 billion to shareholders through share repurchases and dividends. Given strong business fundamentals and robust cash flow, 3M raised its dividend by 16% marking the 100th year of dividend payments, the 60th consecutive year of dividend increases and the doubling of the quarterly dividend in the last three years. Looking ahead to 2018, 3M raised its EPS guidance to reflect a drop in its effective tax rate from 26% - 27% to 20% - 22%. EPS is now expected in the $10.20 - $10.70 range, up 11% to 17% from 2017 excluding the TCJA impact. Guidance for organic local-currency growth of 3% - 5% remains unchanged.

Brown-Forman-BFB announced that its Board of Directors has approved a number of capital deployment actions aimed at benefiting shareholders, employees, and the community reflecting the strength of the company’s financial position and the anticipated positive benefits from tax reform. These actions include a stock split and a special dividend, as well as additional funding of the company’s defined benefit program and the creation of a charitable foundation. The stock split will be effected in the form of a dividend on both Class A and Class B common stock, payable in shares of Class B common stock. For every four shares of either Class A or Class B common stock held, shareholders of record as of the close of business on February 7, 2018 will receive one share of Class B common stock, with any fractional shares payable in cash. This will be the 14th stock split since the company’s listing in 1934. Assuming there had been no splits over that time period, one share of Class B common stock would be worth approximately $189,000 today. The company also declared a special dividend of $1.00 on its Class A and Class B common stock, which will be paid to stockholders of record on April 2, 2018 and they will receive the cash dividend on April 23, 2018. This equates to roughly $480 million after the implementation of the stock split. The company has also decided to fully fund its current pension liability of $120 million, further strengthening an important employee retirement benefit. Additionally, with the goal of helping to fund the company’s ongoing philanthropic endeavors in the communities where Brown-Forman employees live and work, the company is pursuing the creation of a foundation with a contribution of $60-$70 million. The company anticipates that the foundation’s proceeds will provide a consistent amount of revenue per year for its charitable giving program independent of the company’s yearly earnings. Brown-Forman’s Board of Directors also declared a regular quarterly cash dividend of 15 4/5 cents per share on its Class A and Class B common stock, reflective of the planned five for four stock split. Stockholders of record on March 5, 2018 will receive the cash dividend on April 2, 2018.


Wednesday, Jan. 24, 2018

F5 Networks-FFIV reported first fiscal quarter revenue of $523.2, up 1.4% year-over-year, with net income before income taxes of $144 million, up 3%, net income of $88 million, down 6%, and EPS of $1.41, down 2%. This quarter’s results include a $7 million provision for deemed repatriation and $11.6 million for the re-measurement of deferred taxes in the wake of the recently passed U.S. tax legislation. Product revenues were down 5% and represented 43% of total revenues during the quarter. Management expects this quarter represents the trough for product revenue declines. Services and software solutions increased 7% and represented 57% of total revenues. By customer segment, Enterprise accounted for 64% of sales, Service Providers accounted for 20% while government accounted for 16%. By region, Americas, 56% of total sales, increased 2%; AMEA, 27% of the total, increased 7%; APAC, 14% of the total, dipped 5% while Japan, 4% of the total, declined 12%. During the quarter, F5 Networks generated $183.5 million in free cash flow and repurchased $150 million shares at an average cost of $120.73 per share. F5 Networks ended the quarter with $1.35 billion in cash and investments on its debt-free balance sheet. Looking ahead to the second fiscal quarter, management expects revenues of $525 - $535 million, up 2.3% at the midpoint. EPS are expected in the $1.66 to $1.69 range, up 17% at the midpoint. "We continue to see momentum with our software offerings, driven by customers deploying our solutions on-premises and in the public cloud. Our recent State of Application Delivery report highlights a number of emerging trends across the global application landscape. It is clear, applications and related services are taking an increasingly important role as digital transformation reshapes the modern enterprise. We are well positioned to benefit from these broader industry trends as customers require more multi-cloud support, IT automation, and application security, " said François Locoh-Donou, F5 President and Chief Executive Officer.

United Technologies-UTX reported fourth quarter sales increased 7% versus the prior year to $15.7 billion. EPS and net income from continuing operations declined 60% to $.50 and $397 million, respectively. Excluding a $.90 charge related to tax law changes and a $.20 charge for restructuring and other items, adjusted EPS increased 3%. Management was encouraged by the macro economic environment although some of the markets UTX operates in continue to be challenged from a pricing standpoint. By business segment, Otis sales gained 6% on a constant currency basis to $3.3 billion, lifted by a 4% gain in service sales and 3% gain in new equipment orders. Climate, Controls and Security sales increased 6% to $4.5 billion in constant currency. Organic equipment orders were up 9% with operating profits up 12%. Pratt & Whitney sales rose 12% in constant currency to $4.5 billion on strength in military engines and commercial aftermarket.  In constant currency, Aerospace Systems sales increased 6% to $3.8 billion, boosted by a 10% rise in the commercial aftermarket. For the full year, revenues rose 5% to $59.8 billion with net income down 10% to $4.6 billion and EPS down 7% to $5.70. Return on shareholders’ equity for the year was 14.5%. UTX’s free cash flow decreased 23% for 2017 to $3.6 billion with the company paying $2.1 billion in dividends and repurchasing $1.5 billion of its shares.  Management’s 2018 guidance ((excluding the impact of the proposed Rockwell Collins acquisition) is adjusted EPS in the range of $6.85 to $7.10 representing 5% growth at the midpoint over 2017 adjusted EPS. Total 2018 sales are expected in the $62.5 billion to $64 billion range with free cash flow expected to be $4.5 billion to $5.0 billion. Management’s guidance includes $.23 of favorable impact from the new tax law with their estimated effective tax rate declining from 27.8% to 25.5%. UTX said it would use tax overhauls to repatriate at least $3 billion this year to help reduce debt from its purchase of Rockwell Collins. 

Building on a long history of providing relevant, industry-leading benefits, Starbucks Coffee Company-SBUX announced a series of new partner (employee) offerings that span across wage and benefits. These offerings will total more than $250 million for more than 150,000 partners and are accelerated by recent changes in the U.S. tax law. These new offerings are in addition to the nearly $7 billion of capital that Starbucks will deploy to build and renovate stores, manufacturing plants and technology platforms in the U.S. over the next five years.

The Walt Disney Company-DIS announced that more than 125,000 eligible employees will receive a one-time $1,000 cash bonus. The company will also make an initial investment of $50 million in a new and ongoing education program specifically designed to cover tuition costs for hourly employees. The two new initiatives represent a total allocation of more than $175 million in this fiscal year.

 Tuesday, Jan. 23, 2018

Canadian National Railway-CNI reported fourth quarter chugged ahead by 2% to C$3.3 billion while net income and EPS steamed ahead more than 150% to C$2.6 billion and C$3.48, respectively. Excluding deferred tax recovery of C$1.76 billion, or C$2.35 per share, from lower U.S. corporate tax rates, net income and EPS decreased 6% and 2%, respectively. Higher international container traffic via Prince Rupert and Vancouver ports, increased volumes of frac sand, freight rate increases and higher fuel surcharge rates powered the fourth quarter revenue increase. Carloadings increased 7% to 1,461 thousand. Revenue ton miles (RTM), which measures the relative weight and distance of rail freight transported, increased 1%. Operating expenses increased 9% on higher costs from increased volumes, capacity constraints due to rapidly changing market demands, challenging operating conditions from harsh early winter weather and higher fuel prices. For the full year, CNI reported revenues of C$13 billion, up 8%, net income of C$5.5 bilion, up 51%, and EPS of C$7.24, up 55%. Excluding the deferred tax recovery from recent U.S. tax legislation, adjusted net income and EPS increased 6% and 9%, respectively. Adjusted return on equity was a stellar 22.7%. During 2017, CNI generated C$2.8 billion in free cash flow, up 10% from last year, on higher net income and working capital efficiencies. The company returned C$3.2 billion to shareholders during 2017 through share repurchases of C$2 billion and C$1.2 billion in dividends. During the quarterly conference call, CNI announced a 10% increase in the quarterly dividend, tracking a 35% payout ratio. Given the favorable economic backdrop, in 2018, CNI will invest a record C$3.2 billion in the safety and efficiency of its network. About C$700 million of the total is slated for investments to increase capacity, including the purchase of 60 new locomotives, track infrastructure expansion and intermodal terminal improvements. About C$1.6 billion will be spent for track infrastructure maintenance, including C$400 million for continued installation of Positive Train Control (PTC) in the U.S. Looking ahead to 2018, the company expects RTM volume growth of 3% to 5% with overall pricing above inflation. Adjusted EPS are expected in the C$5.25 to C$5.40 range, up about 7% at the midpoint. Given difficult first half comps and investments in capacity that will come online during the second half of 2018, EPS growth will be weighted toward the back half of 2018.

 

Johnson & Johnson-JNJ reported fourth quarter revenues rose 11.5% to $20.2 billion while recording a net loss of $10.7 billion or ($3.99) per share for the quarter. The company reported a special item charge of $13.6 billion related to recently enacted tax legislation on the repatriation of cash held overseas. Management was pleased with the new tax legislation, which will enable JNJ to invest in innovation at higher levels to help address the most challenging unmet medical needs facing healthcare today. Healthcare accounts for 18% of U.S. GDP with pharmaceutical spending accounting for 14% of overall healthcare spending. . Adjusting for intangible amortization expense and special items, adjusted fourth quarter earnings rose 9.5% to $4.8 billion with adjusted EPS up 10.1% to $1.74. Operational sales during the fourth quarter rose 9.8% in the U.S. and 9.0% in international markets. Total consumer sales rose 3.1% during the quarter (.4% operationally) to $3.5 billion thanks to solid growth in the Beauty and OTC units. Pharmaceutical sales increased 17.6% (15.5% operationally) to $9.7 billion in the quarter driven by nearly 40% growth in the oncology division. Medical Devices reported fourth quarter sales growth of 8.3% (6.5% operationally) to $7.0 billion with vision care leading the way with 55% growth thanks in part to the Medical Optics acquisition.  For the full year 2017, JNJ reported sales increased 6.3% to $76.5 billion with net earnings and EPS each declining 92% to $1.3 billion and $.47, respectively. Adjusting for the special tax item and intangible amortization, adjusted earnings increased 6.8% for the year to $20.0 billion with adjusted EPS up 8.5% to $7.30. JNJ generated $17.8 billion in free cash flow in 2017. During the year, the company invested $10.5 billion in research and development, paid $9 billion in dividends, completed a $10 billion share repurchase program and deployed $35 billion in mergers and acquisitions. JNJ ended the year with $16.2 billion of net debt (reflecting $34.6 billion of debt taken on for acquisitions net of $18.4 billion in cash). For 2018, management expects to reports sales of $80.5 to $81.5 billion, representing 5.5% to 6.0% growth. (On a constant currency operational basis, sales should increase 3.5% to 4% to $79 to $80 billion). EPS growth is expected to be greater than sales growth as operating margins are expected to expand 100 basis points with the company reporting 7% to 9.5% growth in constant currency EPS in the range of $7.80 to $8.00 and on a reported basis a EPS range of $8.00 to $8.20 helped by foreign exchange tailwinds.  JNJ provided shareholders with a 24.4% total return in 2017, which was better than the performance of the stock market and their peers. JNJ’s market-beating returns have also been the case over the last three, five, ten and twenty years, which is a great way for the company to celebrate the 75th anniversary of JNJ’s credo.

Monday, Jan. 22, 2018

Sanofi and Bioverativ-BIVV have entered into a definitive agreement under which Sanofi will acquire all of the outstanding shares of Bioverativ for $105 per share in cash, representing an equity value of approximately $11.6 billion (on a fully diluted basis).  The transaction was unanimously approved by both the Sanofi and Bioverativ Boards of Directors. Under the terms of the merger agreement, Sanofi will commence a tender offer to acquire all of the outstanding shares of Bioverativ common stock at a price of $105 per share in cash.  The $105 per share acquisition price represents a 64 percent premium to Bioverativ’s closing price on January 19, 2018.    The tender offer is expected to commence in February 2018.

 

Thursday, Jan. 18, 2018

Accenture-ACN has been awarded a contract by the Veterans Benefits Administration (VBA) to upgrade and enhance its information technology infrastructure as part of the VBA’s commitment to improve the delivery of services it provides to Veterans. The contract has an estimated value of $62 million over the performance period, which includes a one-year base period with four one-year options.

Wednesday, Jan. 17, 2018

Apple-AAPL announced a new set of investments to build on its commitment to support the American economy and its workforce, concentrated in three areas where Apple has had the greatest impact on job creation: direct employment by Apple, spending and investment with Apple's domestic suppliers and manufacturers, and fueling the fast-growing app economy which Apple created with iPhone® and the App Store®. Apple is already responsible for creating and supporting over 2 million jobs across the United States and expects to generate even more jobs as a result of the initiatives being announced. Combining new investments and Apple's current pace of spending with domestic suppliers and manufacturers — an estimated $55 billion for 2018 — Apple's direct contribution to the US economy will be more than $350 billion over the next five years, not including Apple's ongoing tax payments, the tax revenues generated from employees' wages and the sale of Apple products. Planned capital expenditures in the US, investments in American manufacturing over five years and a record tax payment upon repatriation of overseas profits will account for approximately $75 billion of Apple's direct contribution. Apple, already the largest US taxpayer, anticipates repatriation tax payments of approximately $38 billion as required by recent changes to the tax law. A payment of that size would likely be the largest of its kind ever made. Apple expects to invest over $30 billion in capital expenditures in the US over the next five years and create over 20,000 new jobs through hiring at existing campuses and opening a new one. Apple already employs 84,000 people in all 50 states. Over $10 billion of Apple's expanded capital expenditures will be investments in data centers across the US. Over the last decade, Apple has invested billions of dollars in data centers and co-located facilities in seven US states, including North Carolina, Oregon, Nevada, Arizona, and a recently announced project in Iowa. All of Apple's US facilities, including offices, retail stores and data centers, are powered by 100 percent renewable energy sources like solar, wind and micro-hydro power, which Apple generates or purchases from local projects. Building on the initial success of the Advanced Manufacturing Fund announced last spring, Apple is increasing the size of the fund from $1 billion to $5 billion. The fund was established to support innovation among American manufacturers and help others establish a presence in the US. It is already backing projects with leading manufacturers in Kentucky and rural Texas. Apple works with over 9,000 American suppliers — large and small businesses in all 50 states — and each of Apple's core products relies on parts or materials made in the US or provided by US-based suppliers. The iOS app economy has created more than 1.6 million jobs in the US and generated $5 billion in revenue for American app developers in 2017. With demand for coding skills stronger than ever, today there are more than 500,000 unfilled programming-related positions across the country, and the US Bureau of Labor Statistics predicts that by 2020 there will be 1.4 million more software development jobs than applicants qualified to fill them. To address the coding skills gap and help prepare more people for jobs in software development, Apple created a powerful yet easy-to-learn coding language called Swift™, the free Swift Playgrounds™ app and a free curriculum, App Development with Swift, which are available to anyone and are already being used by millions of students at K-12 schools, summer camps and leading community colleges across the country. Over 100,000 students and teachers have also attended coding classes at Apple retail stores.

Fastenal-FAST reported fourth quarter revenues rose 14.8% to $1.1 billion with net income hammering up a 32.8% gain to $152.4 million and EPS jumping 33.5% to $.53. For the full 2017 year, revenues rose 10.8% to $4.4 billion with net income up 15.8% to $578.6 million and EPS up 16.2% to $2.01. The strong earnings growth in the fourth quarter reflected the positive impact of recently signed tax reform.  Excluding the impact of tax reform, EPS would still have risen at double-digit rates with fourth quarter EPS up 12.2% and full year EPS up 11.3%, which was a great way to celebrate the company’s 50th anniversary. Return on shareholders’ equity increased to a superb 27.6% for the year. Daily sales growth was strong with fourth quarter growth up 14.8% and full year growth up 11.3%. Fastener daily sales rose 13.4% in the fourth quarter with non-fastener sales accelerating to 16.1% growth in the quarter. National Accounts daily sales rose 14.5% in 2017 with 72 of the Top 100 National Accounts generating growth.  During the year, the company signed 207 Onsite location, up 53.4% from 2016. The company finished the year with 605 active Onsite locations with a goal of signing 360-385 new Onsite locations in 2018. During the year, Fastenal signed 19,355 vending devices, up 7.2% from 2016 and ended the year with an installed device base of 71,421.  Product sales through these devices grew high teens in 2017. The goal is to sign 21,000 to 23,000 vending devices in 2018. Free cash flow increased 41% during the year to $465.3 million thanks to higher earnings and lower capital expenditures. Capital expenditures should increase 32% in 2018 to $149 million as the company upgrades and adds capacity to their existing hub network and purchases property for potential future expansion. During the year, Fastenal repurchased $82.6 million of its shares and paid $369.1 million in dividends. Management increased the dividend by 15.6% for 2018 to a quarterly rate of $.37 per share.  Macroeconomic factors are favorable for Fastenal with U.S. industrial production growing. Manufacturing, led by heavy machinery, general industrial, energy and transportation, continues to drive growth while construction sales accelerated, achieving double-digit growth in Nov. and Dec. The benefit of tax reform changes will unleash potential for Fastenal by positively impacting cash generation and enabling the company to grow faster which should result in another strong year for the company in 2018.

Thursday, Jan. 11, 2018

T, Rowe Price Group-TROW reported preliminary month-end assets under management of $991 billion as of December 31, 2017, a 22% increase from the prior year. Client transfers from mutual funds to other portfolios were $1.7 billion and $4.2 billion for the month- and quarter-ended December 31, 2017, respectively.

 

Wednesday, Jan. 10, 2018

Berkshire Hathaway-BRKA Board of Directors voted to increase the number of directors comprising the entire Board of Directors from twelve to fourteen. Gregory E. Abel and Ajit Jain were then elected to serve as Directors to fill the resulting vacancies on the Board of Directors. In connection with their election to the Board of Directors, Warren E. Buffett, Berkshire Hathaway's Chairman and CEO, appointed Mr. Abel to be Berkshire Hathaway's Vice Chairman - Non-Insurance Business Operations and Mr. Jain to be its Vice Chairman - Insurance Operations. Mr. Abel joined Berkshire Hathaway Energy Company in 1992 and currently serves as its Chairman and CEO. Mr. Jain joined the Berkshire Hathaway Insurance Group in 1986 and currently serves as Executive Vice President of National Indemnity Company with overall responsibility for leading Berkshire's reinsurance operations. Mr. Buffett and Charles T. Munger, Vice Chairman of Berkshire Hathaway will continue in their existing positions, including being responsible for significant capital allocation decisions and investment activities.

 In a subsequent CNBC interview, Buffett said this was a step in Berkshire’s succession planning while at the same time acknowledging that his health was terrific. Buffett is 87 and Charlie Munger s 94 while Greg Abel is 55 and Ajit Jain is 66. All of them have Berkshire is their blood and Buffett felt it was the time to pass on institutional knowledge of all the Berkshire businesses to these men as part of a transition process. The Board of Directors agreed. There was nothing magical about the timing. Buffett said he could have made the decision five years ago.

Separately when questioned about the stock market’s current valuation, Buffett said that the stock markets are not richly valued relative to interest rates. Charlie Munger agreed noting that share prices are “not crazy” with bonds yielding 3%, but that it is harder to make money when stocks are selling at 20 times earnings than when they are selling at 15 times earnings. Berkshire continues to be a net buyer of stocks.. Buffett added that tax reform will have a huge impact on stock market values with tax rates cut from 35% to 21% with a company’s major silent shareholder (the government) basically taking less of a company’s earnings power. This increases a company’s earnings power by 20% as a company gets to retain 79% of their earnings versus 65%. A 20% increase in Burlington Northern Santa Fe’s earnings power is huge for Berkshire as is the reduction in Berkshire’s deferred tax liability that has been reduced from $35 billion to $21 billion on $100 billion of unrealized gains.  On cryptocurrencies, Buffett said he is almost certain that they will come to a bad ending, and Berkshire will not investing a cent in the cryptocurrencies like Bitcon. Charlie said Bitcoins and venture capital are in bubbles currently with too much money chasing too few deals. With more than $100 billion in cash, Buffett is still scouting for acquisitions, but nothing is in immediate sight.

 

Ctrip, China's largest online travel agent and the second largest in the world, announced that Ctrip Gourmet List, an industry leader in POI information and a leading domestic China sharing and discovery platform for restaurants, has formed a partnership with OpenTable, the world's leading provider of online restaurant reservations and part of The Priceline Group-PCLN. The partnership with OpenTable will allow Ctrip mobile app users to book tens of thousands of restaurants across North America. A premier OpenTable partner, Ctrip is also the first OpenTable partner in the Mainland Chinese market.  Ctrip Gourmet List has seen triple-digit growth since its launch and continues to rapidly expand the number of restaurants and destinations on its platform.  OpenTable seats more than 24 million diners per month via online reservations across more than 43,000 restaurants around the globe. Available in six languages, OpenTable has bookable restaurants in more than 20 countries.  In the third quarter of 2017, 57% of OpenTable's global seated diners originated on a mobile device. North America is an increasingly popular destination for Chinese travelers. According to Ctrip's data, Chinese visitors to North America in 2017 spent on average 16,000 RMB per person. Both the US and Canada were included on Ctrip's 2017 Top 20 Popular Country list, with three US cities in the top ten for long-haul trips, and Canada seeing over 60% growth year-on-year.   

 

Tuesday, Jan. 9, 2018

Stryker-SYK announced preliminary consolidated net sales of $3.5 billion and $12.4 billion, representing increases of 10.0% and 9.9%, respectively, for the fourth quarter and full 2017 year. Excluding the impact of foreign currency and acquisitions, net sales increased 8.1% and 7.1% in the fourth quarter and full year. Based on year-to-date performance, Stryker expects 2017 adjusted net earnings per diluted share to be toward the high end of the previously announced range of $6.45 to $6.50. With respect to U.S. tax reform, Stryker anticipates a modest headwind, which will be manageable within their overall 2018 financial targets.


Monday, Jan. 8, 2018

AbbVie-ABBV announced the U.S. Food and Drug Administration (FDA) granted Breakthrough Therapy Designation for the investigational, once-daily oral JAK1-selective inhibitor upadacitinib (ABT-494) in adult patients with moderate to severe atopic dermatitis who are candidates for systemic therapy. This Breakthrough Therapy Designation is supported by positive Phase 2b results previously announced in September 2017, and marks 13 Breakthrough Therapy Designations granted to AbbVie's investigational treatments since the company's inception in 2013. Atopic dermatitis, a chronic inflammatory skin disease, is characterized by skin erosion, oozing and crusting, redness, intense itching (pruritus) and dry skin. Symptoms can appear as a rash on the skin, or the skin may become thickened and leathery. The FDA's Breakthrough Therapy Designation program is intended to expedite the development and review of medicines with preliminary clinical evidence that indicate that the investigational treatment may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints.  In the U.S. alone, atopic dermatitis affects an estimated 28 million people of all ages, and can have a significant impact on the physical and psychosocial health of patients.

Baxter International-BAX is committed to advancing surgical innovation and  announced an agreement to acquire two hemostat and sealant products from Mallinckrodt plc: RECOTHROM Thrombin topical (Recombinant), the first and only stand-alone recombinant thrombin, and PREVELEAK Surgical Sealant, which is used in vascular reconstruction. Sales of the proposed acquired products totaled approximately $56 million in the twelve months preceding September 29, 2017. Upon closing, the deal is expected to be modestly accretive to Baxter’s 2018 adjusted earnings and increasingly accretive thereafter. Under the terms of the agreement, Baxter will acquire RECOTHROM and PREVELEAK for an upfront payment of approximately $153 million and potential contingent payments in the future. The transaction is expected to close in the first half of 2018.

Walgreens Boots Alliance-WBA disclosed it estimates a tax benefit of $200 million for fiscal 2018 as a result of the recently-enacted tax legislation. The drug store chain said it expects adjusted earnings per share to increase by 30 cents to 35 cents as a result of the legislation, which would be 5.3% to 6.2% above the current 2018 FactSet EPS consensus of $5.61.

 

Thursday, Jan. 4, 2018

Walgreens Boots Alliance- WBA rang up first fiscal quarter sales of $30.7 billion, up nearly 8%, with net earnings of $821 million, down 22%, and EPS of $0.81, down 16.5% on fewer shares outstanding. The decline in net earnings and EPS were mainly due to impairment of WBA’s equity investment in China pharmaceutical wholesaler, Guangzhou Pharmaceuticals, a loss from WBA’s share of AmerisourceBergen’s recently reported litigation accrual and benefits from the UK tax rate reduction recorded in the same quarter a year ago. Excluding these items, WBA’s adjusted first quarter earnings increased 8% to $1.3 billion. By segment, Retail Pharmacy USA reported sales of $22.5 billion, up 9%, on a 4.7% same store sales increase. Pharmacy sales, which accounted for 72.4% of the division’s sales, increased 14.1% primarily due to higher prescription volumes, including mail and central specialty following the formation of AllianceRx Walgreens Prime. Comparable pharmacy sales increased 7.4% on higher volume and brand inflation, partially offset by reimbursement pressure and the negative impact of generics. The division filled 260.2 million prescriptions (including immunizations) on a 30-day equivalents basis, an increase of 9.5%, and exceeded one billion prescriptions on a rolling annual basis for the first time. Retail sales decreased 2.8% on a 0.9% dip in comparable retail sales, with declines in consumables, general merchandise and personal care partially offset by growth in the health, wellness and beauty categories. Retail Pharmacy International reported sales of $3.1 billion, up 4%, on a 0.7% dip in constant currency same store sales, reflecting lower Boots UK retail sales on the heels of lower government reimbursements. Pharmaceutical Wholesale sales of $5.7 billion increased 5.6% on a 4.5% comparable sales increase, boosted by strong performance in emerging markets. The company generated $583 million in free cash flow during the quarter, up from $147 million last year, paid dividends of $413 million and returned $2.5 billion to shareholders through share buybacks, thereby completing the company’s $6 billion repurchase program announced in 2017 after the Rite Aid acquisition value was reduced. Subsequent to quarter end, WBA agreed to acquire 40% of Sinopharm Holding Guoda Drugstores, a leading retail pharmacy chain in China, where regulatory changes have opened up retail opportunities. WBA also agreed to sell part of its investment in Chinese wholesale partner, Guangzhou Pharmaceuticals, for a substantial cash return. While management welcomes the recently passed tax legislation as it “reinforces the appeal of investing here in the U.S.”, it is still evaluating the law’s impact on future earnings. Management raised the lower end of its guidance for fiscal 2018 by 5 cents and now anticipates adjusted EPS of $5.45 to $5.70.

Private sector employment increased by 250,000 jobs from November to December according to the December ADP National Employment Report®. "We've seen yet another month where the labor market has shown no signs of slowing," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "Throughout the year there was significant growth in services except for an overall loss of jobs in the shrinking information sector. Looking at company size, small businesses finished out 2017 on a high note adding more than double their monthly average for the past six months." Mark Zandi, chief economist of Moody's Analytics, said, "The job market ended the year strongly. Robust Christmas sales prompted retailers and delivery services to add to their payrolls. The tight labor market will get even tighter, raising the specter that it will overheat."

 


Thursday, Dec. 21, 2017

Nike-NKE reported fiscal second quarter revenues were up 5% to $8.6 billion with net income down 9% to $767 million and EPS down 8% to $.46. Return on invested capital was a strong 32%. International revenues now account for more than 55% of total revenues.  For the quarter, revenue growth was driven by international geographies and continued strength in NIKE Direct, partly offset by an expected decline in North America wholesale revenue. Earnings decreased as a decline in gross margin and higher selling and administrative expense more than offset revenue growth and a lower tax rate. While revenues for Converse were down 4% during the quarter to $408 million, driven by declines in North America, revenues for the Nike Brand were up 4% to $8.1 billion on a constant currency basis driven by EMEA, Greater China and APLA, including growth in the Sportswear and NIKE Basketball categories. Inventories increased 6% during the quarter to $5.3 billion driven by changes in foreign currency exchange rates and, to a lesser extent, an increase in NIKE Brand units. Cash decreased 1% to $4.3 billion as of quarter end. During the first half of the year, Nike repurchased 32 million shares for approximately $1.75 billion as part of the four-year $12 billion buyback program approved by the Board in 2015 with $5.8 billion still available for future repurchases. For the full fiscal 2018 year, Nike expects to report mid-single digit revenue growth thanks to strong international growth, an acceleration in Nike Direct to Consumer sales and lesser foreign exchange headwinds. Gross margin is expected to contract 50-100 basis points with SG&A expenses expected to increase at a mid-single digit rate and the tax rate expected in the 14%-16% range.

Paychex-PAYX reported second fiscal quarter revenues, net earnings and EPS increased 7% to $826.5 million, $271 million and $0.60, respectively. By segment, Total Service Revenue also increased 7% to $812.5 million with Payroll Service Revenue increasing 1% to $444.8 million on growth in revenue per check that was tempered by a slight drop in average client size. Wage growth increased nearly 3%, up from 2% last year. Human Resource Services (HRS) revenue increased 15% to $367.7 million, boosted by the HROI acquisition completed in August 2017 and strength in comprehensive HR outsourcing services including retirement, time and attendance and insurance services. Interest on funds held for clients increased 23% to $14 million, primarily due to higher average interest rates earned. Funds held for clients were largely flat at $3.7 billion as the impact from wage inflation was offset by client mix. Paychex’s effective tax rate for the second quarter was 35%. Paychex’s financial position remained strong with no long-term debt and more than $819 million in cash and corporate investments reported on the company’s rock-solid balance sheet. Cash flows from operations were $519.4 million for the first half of the fiscal year, up 26%, driven by higher net income along with the timing of income tax payments and accruals. Paychex paid $$359 million in dividend during the first half of the fiscal year and repurchased 1.6 million shares for a total of $94.1 million, compared to $166.2 million repurchased last year. During the second quarter conference call, management was probed on the potential impact of the recently passed tax legislation. While management has just begun to comb through the law’s details, it expects to see a 10% to 12% benefit from the lower 21% rate. With the savings, Paychex expects to accelerate investment in its “robust list” of high-value projects thereby improving the company’s competitive position while taking advantage of the provision allowing immediate expensing of capital expenditures. The company is working with the IRS daily to implement new withholding tables. Paychex affirmed its prior guidance for the full fiscal year with total revenue expected to increase 6% and EPS expected to increase in the 5% to 6% range.

Accenture-ACN reported first fiscal quarter net revenues rose 12% in U.S. dollars and 10% in local currency, to $9.5 billion with net income increasing 12% to $1.1 billion and EPS up 13% to $1.79. New bookings for the quarter were $10 billion, with consulting bookings of $5.9 billion and outsourcing bookings of $4 billion. On a geographic basis, Europe led the way with a strong 17% increase for the first quarter. Growth in the operating groups was led by Financial Services with 14% growth during the quarter. “The New” digital, cloud and security services generated strong double-digit growth which now approximate 55% of revenues. Accenture’s free cash flow declined 13% to $875 million with the company paying $854 million in dividends and repurchasing $563 million of its shares. Accenture has $2.6 billion authorized for future share repurchases. Accenture is planning $1.1 billion to $1.4 billion in acquisitions during fiscal 2018. Its strong balance sheet with $3.7 billion in cash and minimal long-term debt provides the company with financial flexibility to grow the business while returning significant cash to shareholders. For fiscal 2018, Accenture expects net revenue growth to be in the range of 6% to 8%, up from previous guidance of 5% to 8%. Management increased full year EPS guidance from the range of $6.36 to $6.60 to the range of $6.48 to $6.66 representing 21% growth at the midpoint. Free cash flow is expected to be in the range of $4.4 to $4.7 billion for the full fiscal year.


Wednesday, Dec. 20, 2017

Accenture –ACN won a prime position on U.S. Department of Agriculture (USDA) Shared Services Lines of Business Solutions (SSLoBS) blanket purchase agreement (BPA), making ACN one of nine firms eligible to compete for work under the five-year BPA, which has a total estimated value of $500 million.

 

TJX Companies - TJX received notice of an unsolicited “mini-tender” offer by TRC Capital Corporation (TRC Capital) to purchase up to 2,000,000 shares of TJX’s common stock at a price of $70.95 per share in cash. The offering price is 4.34 percent below the $74.17 per share closing price of TJX’s common stock on December 15, 2017, the last closing price prior to the commencement of the offer. TJX does not endorse TRC Capital’s unsolicited mini-tender offer and recommends that shareholders not tender their shares in response to TRC Capital’s offer because the offer is at a price below the December 19, 2017 closing common stock price of $76.06 per share. TJX is not affiliated or associated in any way with TRC Capital, its mini-tender offer or the mini-tender offer documents. TRC Capital has made many similar unsolicited mini-tender offers for shares of other public companies. Mini-tender offers seek to acquire less than 5 percent of a company’s outstanding shares, thereby avoiding many disclosure and procedural requirements of the U.S. Securities and Exchange Commission (SEC). As a result, investors are not provided with the same level of protections in mini-tender offers as are provided for larger tender offers under the U.S. securities laws. The SEC has cautioned investors that some bidders making mini-tender offers at below-market prices are, “hoping that they will catch investors off guard if the investors do not compare the offer price to the current market price.” The SEC’s guidance to investors on mini-tender offers is available at http://www.sec.gov/investor/pubs/minitend.htm. Shareholders should obtain current market quotations for their shares, consult with their broker or financial advisor, and exercise caution with respect to TRC Capital’s mini-tender offer.

Tuesday, Dec. 19, 2017

FactSet - FDS reported fiscal first quarter revenues rose 14.3% to $329.1 million with organic revenues up 5.8% to $304.3 million from the prior year period. Net income increased 5.7% to $70 million and EPS increased 6.7% to $1.77. Operating margin declined to 27.1% from 31.4% in the prior year period primarily due to $7.1 million in restructuring actions. On an adjusted basis, net income and EPS rose 15.4% and 16.6%, respectively. Annual Subscription Value (ASV) increased 12.8%, or 5.1% organically, to $1.32 billion as of 11/30/17. ASV at any given time represents the forward-looking revenues for the next 12 months from all subscription services currently supplied to clients. Client count as of 11/30/17 was 4,809, a net increase of 65 clients in the quarter. User count decreased 253 to 88,593 in the past three months. Annual client retention was greater than 95% of ASV or 90% when expressed as a percentage of clients. Employee headcount was 9,421 at 11/30/17, up 8.1% during the past 12 months, and up 2.9% on an organic basis from a year ago. Free cash flow totaled $55.2 million during the quarter up 43% over the prior year. FactSet paid $21.7 million in dividends and repurchased $31.7 million of its shares during the quarter. The company has $213.2 million remaining authorized for future share repurchases. For full fiscal 2018, management expects revenues to be in the range of $1.34 billion to $1.36 billion with EPS expected in the range of $7.60 to $7.80. On an adjusted basis, 2018 EPS is expected in the range of $8.25 to $8.45, representing 14% growth at the midpoint.

 

Express Scripts - ESRX increased the authorized number of shares that may be repurchased under the company's share repurchase program by an additional 45 million shares, or a total authorization of 375 million shares. 

 

Accenture - ACN has formed a strategic alliance with and made a minority investment in Maana, the pioneer in digital knowledge technology enabling industrial companies to accelerate digital transformation. The alliance will initially target oil and gas clients, with plans to expand to other industries. Terms of the investment were not disclosed.

Monday, Dec. 18, 2017

Oracle – ORCL agreed to acquire Aconex Limited, a leading cloud-based solution that manages team collaboration for construction projects, for $1.2 billion in cash. Aconex’s software digitally connects owners, builders and other teams, providing complete visibility and management of data, documents and costs across all stages of a construction project lifecycle.  The Oracle Construction and Engineering Cloud already offers customers the industry’s most advanced solutions for planning, scheduling and delivering large-scale projects. Together, Oracle and Aconex will provide an end-to-end offering for project management and delivery enabling customers to effectively plan, build, and operate construction projects. “Delivering projects on time and on budget are the highest strategic imperatives for any construction and engineering organization,” said Mike Sicilia, SVP and GM, Construction and Engineering Global Business Unit, Oracle. “With the addition of Aconex, we significantly advance our vision of offering the most comprehensive cloud-based project management solution for this $14 trillion industry.”

Friday,  Dec. 15, 2017

United Technologies–UTX’s Pratt & Whitney division secured a $6.7 billion contract to maintain F119 aircraft engines for U.S. Air Force fighter jets. The work will be performed at Pratt in East Hartford as well as at Air Force bases in Alaska, California, Hawaii, Utah, New Mexico, Nevada, Oklahoma, Virginia, Texas and Florida through December 2025. In addition, Delta Air Lines and Airbus Group selected Pratt & Whitney's Geared Turbofan™ (GTF) engine to power Delta's order of A321neo aircraft.  The order consists of 100 firm aircraft, and includes a 20-year EngineWise™ services agreement. Aircraft deliveries are expected to begin in the first quarter of 2020.

Oracle-ORCL reported second fiscal quarter revenues rose 6% to $9.6 billion with net income up 10% to $2.2 billion and EPS up 8% to $.52. Revenue growth was driven by total cloud revenues which jumped 44% to $1.5 billion, as the company gained market share. New software licenses were flat at $1.4 billion while software license updates and product support rose 4% to $5 billion. Hardware revenue declined 7% to $940 million with services revenues up 1% to $856 million. Short-term deferred revenues were up 9% compared with a year ago to $8.1 billion. Operating income rose 1% to $3.1 billion with the operating margin at 32%. Free cash flow rose 7% during the first half to $6.3 billion with the company ending the quarter with cash of $21.3 billion. During the first six months of the fiscal year, the company paid $1.6 billion in dividends, a 28% increase over the first half of the prior year. In addition, the company repurchased $1.4 billion of its shares during the same period with the Board of Directors increasing the authorization for future share repurchases by $12 billion. For the third quarter, Oracle expects revenues to increase 2%-4% with EPS in the range of $.68 to $.70. Oracle will soon deliver the world’s first fully autonomous database. Using artificial intelligence to eliminate most sources of human error enables Oracle to guarantee 99.995% reliability, which equates to only 30 minutes of downtime in a year, while charging much less than competitors.

Express Scripts–ESRX increased its previously issued consolidated 2017 full-year adjusted EPS guidance range of $6.97 to $7.05 to $7.00 to $7.08, which represents growth of 10% over consolidated 2016 adjusted EPS results at the midpoint of the range. The company anticipates achieving adjusted EPS for 2018 in the range of $7.67 to $7.87, representing growth of 9% to 12% from the midpoint of updated 2017 adjusted EPS guidance range. The 2018 guidance includes the pending acquisition of eviCore healthcare and assumes the completion of the company’s sale of its United BioSource subsidiary.

 Thursday, Dec. 14, 2017 


The Walt Disney Company-DIS agreed to acquire 21st Century Fox, including the Twentieth Century Fox Film and Television studios, along with the cable and international TV businesses, for about $52.4 billion in stock. Under the terms of the agreement, shareholders of 21st Century Fox will receive 0.2745 Disney shares for each 21st Century Fox share held, resulting in the issuance of about 515 million new Disney shares to 21st Century Fox shareholders, equivalent to a 25% stake in the newly combined company. Disney will also assume about $13.7 billion of 21st Century Fox’s net debt, implying a total transaction value of about $66.1 billion. As part of the deal, Mr. Iger agreed to continue as Chairman and Chief Executive Officer of The Walt Disney Company through the end of 2021. Immediately prior to the acquisition, 21st Century Fox will separate the Fox Broadcasting network and stations, Fox News Channel, Fox Business Network, FS1, FS2 and Big Ten Network into a newly listed company that will be spun off to its shareholders. The acquisition is expected to yield at least $2 billion in cost savings from efficiencies realized through the combination of businesses, and to be accretive to earnings before the impact of purchase accounting for the second fiscal year after the close of the transaction. Mr. Iger stated that the deal reflected “a changing media landscape, increasingly defined by transforming technology and evolving consumer expectations.” Bringing the two companies together will create a “multi-faceted global entertainment company with the content, the platforms and the reach” to compete in the evolving media business.

Cognizant Technology Solutions-CTSH announced it has entered into an accelerated share repurchase agreement with Barclays Bank to repurchase an aggregate of $300 million of Cognizant's Class A common stock. Approximately 3.58 million of the shares to be repurchased will be received by Cognizant on December 14, 2017. Final settlement of the transaction under the agreement is anticipated to occur during the first quarter of 2018.


Wednesday, Dec. 13, 2017

Apple-AAPL announced the latest award from its $1 billion Advanced Manufacturing Fund. Finisar, a leading manufacturer of optical communications components, will receive $390 million as part of Apple's commitment to support innovation and job creation by American manufacturers. The award will enable Finisar to exponentially increase its R&D spending and high-volume production of vertical-cavity surface-emitting lasers (VCSELs). VCSELs power some of Apple’s most popular new features, including Face ID®, Animoji™ and Portrait mode selfies made possible with the iPhone® X TrueDepth™ camera, as well as the proximity-sensing capabilities of AirPods®. As a result of Apple's commitment, Finisar will transform a long-shuttered, 700,000-square-foot manufacturing plant in Sherman, Texas, into the high-tech VCSEL capital of the U.S. creating more than 500 high-skill jobs, including engineers, technicians and maintenance teams.

Tuesday, Dec. 12, 2017

T. Rowe Price-TROW reported preliminary month-end assets under management of $991 billion as of November 30, up 2.1% from October 31.

 

AbbVie-ABBV announced results from MURANO, a randomized Phase 3 study of VENCLEXTA™/VENCLYXTO™ (venetoclax) combined with Rituxan® (rituximab) in patients with relapsed or refractory (R/R) chronic lymphocytic leukemia (CLL).  "The data from the MURANO trial represents the next evolution in a potential treatment option for patients with relapsed/refractory CLL, an indication for which we received Breakthrough Therapy Designation," said Michael Severino, M.D., AbbVie’s executive vice president, research and development and chief scientific officer.

 

Johnsons & Johnson-JNJ announced data from the Phase 3 ALCYONE study showing that DARZALEX® (daratumumab) in combination with bortezomib, melphalan and prednisone (VMP) significantly improved clinical outcomes, including reducing the risk of disease progression or death by 50 percent, in patients with newly diagnosed multiple myeloma who are ineligible for autologous stem cell transplantation (ASCT).


Monday, Dec. 11, 2017

3M-MMM announced that it has entered into agreements related to the sale of substantially all of its Communication Markets Division to Corning Incorporated, for $900 million. This business consists of optical fiber and copper passive connectivity solutions for the telecommunications industry including 3M’s xDSL, FTTx, and structured cabling solutions and, in certain countries, telecommunications system integration services. This business has annual global sales of approximately $400 million. The sale is expected to be completed in 2018. 3M expects to realize a gain of approximately $0.40 per share from this transaction, net of actions related to the divestiture.


Thursday, Dec. 7, 2017

Stryker-SYK announced a definitive merger agreement to acquire Entellus Medical, Inc. for $24.00 per share, or an equity value of approximately $662 million.  Entellus is a high-growth global medical technology company focused on delivering superior patient and physician experiences through products designed for the minimally invasive treatment of various ear, nose and throat (ENT) disease states. Founded in 2006, and headquartered in Plymouth, Minnesota, the company has a broad portfolio of ENT products, including the XprESS®  Multi-Sinus Dilation System and the LATERA® Absorbable Nasal Implant, which are highly complementary to the existing ENT portfolio of Stryker`s Instruments business. The transaction is expected to be dilutive to Stryker`s 2018 adjusted net EPS by approximately $0.04 and accretive thereafter.

Wednesday, Dec. 6, 2017

Stryker-SYK announced that its Board of Directors has declared a quarterly dividend of $0.47 per share payable on January 31, 2018 to shareholders of record at the close of business on December 29, 2017, representing an increase of approximately 11% versus the prior year and the previous quarter. "Our financial strength is reflected in the 11% increase in our dividend for 2018 as we continue to execute on our capital allocation strategy," said Kevin A. Lobo, Chairman and Chief Executive Officer. "With strong organic sales growth and leveraged adjusted earnings gains, we believe we are well positioned to continue to deliver dividend increases in line with our adjusted earnings growth."

Brown-Forman-BFB reported second quarter net sales increased 10% to $914 million with net income up 21% to $239 million and EPS up 23% to $.62. During the first six months of fiscal 2018, the Jack Daniel’s family of brands delivered broad-based growth, with underlying net sales up 7%, including underlying growth of 6% for Jack Daniel’s Tennessee. The company’s bourbon brands delivered continued growth, including 21% underlying net sales growth from Woodford Reserve. Herradura and el Jimador tequila grew underlying net sales 19% and 10% respectively. Finlandia vodka grew underlying net sales 8%, helped by improved results in Russia. The company’s developed markets outside of the U.S. underlying sales were up 5% while emerging markets sales continued to accelerate from last year’s sluggish start to the year, delivering 15% growth in the first half of the year on an underlying basis. Travel Retail continues to deliver solid rates of growth, with underlying net sales up 11%. For the first half of fiscal 2018, free cash flow increased 13% to $150 million with the company paying $140 million in dividends during the period. The company has $1.7 billion of long-term debt and $212 million of cash on the balance sheet as of 10/31/2017. The company increased full fiscal 2018 year underlying net sales growth guidance to 6% to 7% with underlying operating income growth of 8% to 9%.  Management increased EPS guidance from $1.85 to $1.95 to a range of $1.90 to $1.98 which includes the combined effect of top-line growth and a more favorable tax rate.

Walgreens Boots Alliance-WBA announces that it has reached an agreement with China National Accord Medicines Corporation Ltd. to become an investor in its subsidiary Sinopharm Holding Guoda Drugstores Co., Ltd. (“GuoDa”), which operates and franchises retail pharmacies across China. Following a public tender process, Walgreens Boots Alliance’s bid met all the requirements set by the seller to acquire a 40 percent minority stake in GuoDa through a capital increase worth RMB2.767 billion (around $416 million). Upon completion, Walgreens Boots Alliance would account for this stake as an equity method investment. GuoDa is a leading retail pharmacy chain in China, and has been pursuing its vision for expansion across the country in the context of the ongoing healthcare reforms and increasing importance of the pharmacy channel in the country. Walgreens Boots Alliance, as a global pharmacy-led enterprise, believes it is well positioned to provide its significant expertise to GuoDa and support its growth ambitions.

Fastenal-FAST reported November sales increased 15.4% to $365.5 million with average daily sales also up 15.4% to $17.4 million. By geography, U.S. sales rose 13.8% and total North American sales were up 15%. By end market, manufacturing sales rose 17.2% and non-residential construction sales were up 10.8%. By product line, sales rose 14.1% in fasteners and 16.6% in other products. Year-to-date, the company has opened 18 new branch locations ending the month with 2,421 locations. Total personnel increased 4% to 20,593.

Private sector employment increased by 190,000 jobs from October to November according to the November ADP National Employment Report(R). "The labor market continues to grow at a solid pace," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute-ADP. "Notably, manufacturing added the most jobs the industry has seen all year. As the labor market continues to tighten and wages increase it will become increasingly difficult for employers to attract and retain skilled talent."  Mark Zandi, chief economist of Moody's Analytics, said, "The job market is red hot, with broad-based job gains across industries and company sizes. The only soft spots are in industries being disrupted by technology, brick-and-mortar retailing being the best example. There is a mounting threat that the job market will overheat next year." 

 


Tuesday, Dec. 5, 2017

MasterCard-MA announced that its Board of Directors has declared a quarterly cash dividend of 25 cents per share, a 14 percent increase over the previous dividend of 22 cents per share. The Board of Directors also approved a new share repurchase program, authorizing the company to repurchase up to $4 billion of its Class A common stock. The new share repurchase program will become effective at the completion of the company’s previously announced $4 billion share repurchase program. The company has approximately $1.5 billion remaining under the current program authorization.

AbbVie-ABBV announced positive top-line results from IMMhance, the fourth pivotal Phase 3 clinical trial evaluating risankizumab (150 mg) for the treatment of patients with moderate to severe plaque psoriasis. "These positive results are consistent with the previous data we have seen with risankizumab throughout the pivotal Phase 3 clinical trial program," said Michael Severino, M.D., executive vice president, research and development and chief scientific officer, AbbVie. "With a significant portion of risankizumab patients achieving high levels of skin clearance, these results add to the data supporting risankizumab's potential to be an impactful new treatment option for patients living with psoriasis. We look forward to sharing additional data from the pivotal trial program with the scientific community and regulatory authorities as we prepare to move forward with global regulatory submissions."

Starbucks Reserve Roastery opened in Shanghai, the first fully immersive coffee experience in Asia. The Roastery is the epitome of coffee and retail innovation for Starbucks-SBUX in China, the company’s fastest growing market with more than 3,000 stores across 136 cities, unprecedented for any global consumer brand and with immense growth opportunity. Starbucks already has over 600 stores in Shanghai – the largest number of stores in any city where Starbucks has a presence.

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