HI Company Updates
Tuesday, Mar. 12, 2019
Biogen-BIIB announced that it has entered into a share purchase agreement with FUJIFILM Corporation under which Fujifilm will acquire the shares of Biogen’s subsidiary, which holds Biogen’s biologics manufacturing operations in Hillerød, Denmark, for up to $890 million in cash. As part of the proposed transaction, Biogen also announced that it will enter into manufacturing services agreements with Fujifilm. Following the completion of the transaction, Fujifilm will use the Hillerød site to produce commercial products for Biogen, such as TYSABRI, as well as other third-party products. The closing of the transaction is expected to occur in the second half of 2019. Biogen expects to record a total after-tax loss in the first quarter of 2019 of approximately $130 million to $150 million, or $0.66 to $0.76 per diluted share, related to the proposed transaction. This loss includes an estimate of $120 million associated with guarantees of future minimum purchase commitments.
Biogen-BIIB announced that it has entered into an agreement to acquire Nightstar Therapeutics, a clinical-stage gene therapy company based in London, which is focused on adeno-associated virus (AAV) treatments for inherited retinal disorders. Under the terms of the proposed acquisition, Biogen will pay $25.50 in cash for each NST share. This offer represents a total transaction value of approximately $800 million. Biogen expects to complete the acquisition by mid-year 2019.
Cognizant Technology Solutions-CTSH announced that it has entered into accelerated share repurchase ("ASR") agreements with HSBC Bank USA, National Association and Societe Generale to repurchase an aggregate of $600 million of Cognizant's Class A common stock. The ASR is part of the company's previously announced capital return plan to utilize approximately 50% of its global free cash flow on an annual basis for share repurchases and dividends.
Fastenal-FAST reported net sales in February increased 10.5% to $411.9 million with average daily sales also up 10.5% to $20.6 million. Daily sales growth by end market increased 11.6% for manufacturing and 11% for non-residential construction. Daily sales growth by product line increased 8.7% for fasteners and 11.9% for other products.
T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.07 trillion as of February 28, 2019, an 11% increase since 12/31/18.
Monday, Mar. 11, 2019
F5 Networks-FFIV announced a definitive agreement to acquire all issued and outstanding shares of privately-held NGINX, an open source leader in application delivery, for a total enterprise value of approximately $670 million, subject to certain adjustments. The acquisition of NGINX is expected to increase F5’s software revenue growth and increase the company’s software revenue mix in fiscal year 2019. It secures F5’s Horizon 2 (fiscal year 2021 to fiscal year 2022) objectives of mid-to-high single-digit revenue and double-digit non-GAAP earnings per share growth. Short-term, the company expects that the acquisition and organic investment in new and emerging solutions will result in modest earnings dilution in fiscal years 2019 and 2020.
Wednesday, Mar. 6, 2019
Thor Industries-THO reported fiscal second quarter revenues declined 35% to $1.29 billion with a net loss of $5.4 million or $.10 per share compared to prior year net income of $79.8 million or $1.51 per share. Earnings reflected $42.1 million, $.75 per share, of acquisition related costs. In addition, higher promotion costs and reduced fixed overhead absorption negatively impacted earnings during the quarter. Sales for the second quarter decreased 35.8% for the Towable segment and 33.7% for the Motorized segment. Thor generated $79.8 million of free cash flow during the first half of the year and paid $41.2 million in dividends. On February 1, 2019, Thor completed its acquisition of Erwin Hymer Group, Europe’s premier RV manufacturer. The acquisition is expected to be accretive to earnings in its first twelve months.
Brown-Forman-BFB reported third fiscal quarter sales increased 3% to $904 million with net income increasing 19% to $227 million and EPS increasing 21% to $0.47. Year-to-date, underlying net sales grew 5% on broad-based portfolio growth including a 4% increase for the Jack Daniel’s family of brands, a 24% increase for Woodford Reserve, a 14% increase in Herradura and a 15% increase in el Jimador. Emerging markets grew underlying net sales by 10%, developed international markets grew underlying net sales by 4% and the United States grew underlying net sales by 4%. During the first nine months of the year, Brown-Forman generated $493 million in free cash flow and returned $437 million to shareholders through dividends of $231 million and share repurchases of $206 million. Recently enacted retaliatory tariffs on American whiskey have created uncertainty around the company’s near-term outlook, making it difficult to accurately predict future results. However, management reaffirmed its full fiscal 2019 year EPS guidance of $1.65 to $1.75, representing 11% to 18% growth from last year and underlying sales growth of 6% to 7%.
Tuesday, Mar. 5, 2019
Ross Stores-ROST reported fourth quarter revenues increased 1% to $4.1 billion with net income down 2% to $442 million and EPS up 1% to $1.20. Sales and earnings for the prior year period included 14 weeks compared to 13 weeks in the current quarter. Comparable store sales rose 4% during the quarter. For the full fiscal 2018 year, revenues increased 6% to $15 billion with net income up 17% to $1.6 billion and EPS up 20% to $4.26. Return on shareholders’ equity was a dressy 48% during the year. Free cash flow increased 26% to $1.6 billion during the year with the company paying $337 million in dividends and repurchasing $1.1 billion of shares. The Board of Directors authorized a new program to repurchase $2.55 billion of its common stock over the next two years which equates to 8% of the total market value. For fiscal 2019, management expects total sales growth of 5%-6% with 1%-2% comparable store sales growth. Earnings per share are expected to be in the range of $4.30 to $4.50 reflecting 3% growth at the midpoint. The company plans to add 75 Ross Dress for Less and 25 dds Discounts stores in fiscal 2019.
Wednesday, Feb. 27, 2019
Booking Holdings-BKNG reported fourth quarter revenue rose 14.6% to $3.2 billion with net income of $646 million and EPS of $13.86 versus losses last year related to tax reform charges. During the quarter, room nights increased 13% while rental card days dipped .6% lower and airline tickets declined 1.3%. For the full year, revenues rose 14.6% to $14.5 billion with international operations contributing $13 billion to the revenues, an increase of 17% over the prior year. During 2018, net income soared 70.8% to $4 billion with EPS up 78% to $83.26. The prior year period was impacted by tax reform charges. Operating income for 2018 increased 17.7% to $5.3 billion. In 2018, the company achieved a new milestone exceeding three-quarters of a billion total booked room nights. Alternative accommodations (non-hotels) generated $2.8 billion in revenues during the year and accounted for 20% of revenues with the business nicely profitable. As of 12-31-18, the company had 5.7 million alternative accommodation listings. Return on shareholders’ equity improved in 2018 to a superb 45.5%. Free cash flow increased 12% during the year to $4.9 billion with the company repurchasing $6 billion of its common stock during the year. Fiscal 2019 is getting off to a slow start due to macroeconomic factors in Europe, which is Booking’s largest market. Travel in Europe has slowed due to uncertainty over Brexit, yellow vests in France, an economic slowdown in Germany and Italy in a flux. As a result, Booking expects total gross travel bookings to increase 5% to 7%. If foreign exchange headwinds and the Easter shift this year versus last year are excluded, gross bookings will likely increase 7% to 9%. Revenues in the first quarter are expected to be flat to down 2% with EPS expected in the range of $9.90 to $10.20. The company expects non-GAAP EPS for the full 2019 year, on a constant currency basis, to grow in the low double-digit range.
The TJX Companies-TJX reported fourth quarter sales rose 1.5% to a record $11.1 billion with net income down 4% to $841.5 million and EPS down 1% to $.68. Fourth quarter comparable store sales increased a strong 6% with customer traffic driving the comp sales increases at every division in the fourth quarter thanks to a terrific holiday season. The company’s excellent values on great brands and great gift giving assortments resulted in strong results in both the apparel and home businesses. For the full fiscal year, revenues rose 8.7% to $39 billion with net income and EPS each up 17.3% to $3.1 billion and $2.43, respectively. Full year comparable sales increased 6%, which marked the company’s 23rd consecutive year of comp sales growth. Return on shareholders’ equity was a dressy 44%. Free cash flow increased 51% during the year to $3.0 billion. Thanks to continue strong cash flow, the company paid dividends of $923 million during the year and repurchased $2.4 billion of its common stock. TJX announced an 18% increase in its dividend for fiscal 2020, marking the 23rd consecutive year of dividend increases. Over this time, the company’s dividend has grown at an impressive compound annual rate of 22%. The company also announced its plan to repurchase $1.75 to $2.25 billion of its common stock during fiscal 2020. Since 1997, the company has repurchased approximately $22.1 billion of its stock. For fiscal 2020, management expects revenues to rise 5% to 6% to a range of $41 billion to $41.2 billion on comparable store sales growth of 2% to 3% with EPS expected in the range of $2.55 to $2.60.
Sunday, Feb. 24, 2019
Berkshire Hathaway-BRKB reported the company’s net worth during 2018 rose 0.4% with book value equal to $212,503 per Class A share as of 12/31/18. Since 1965, Berkshire’s book value has compounded at an impressive 18.7% annual rate with Berkshire’s stock price compounding at an outstanding 20.5% annual rate compared to the S&P 500 index with dividends reinvested, compounding at 9.7% over the same time period.
Surprisingly, Warren Buffett announced that he will be “retiring” book value changes as a metric of Berkshire’s performance in future annual reports. He cited three reasons that the change in book value metric had lost the relevance it once had. First, Berkshire has gradually morphed from a company whose assets are concentrated in marketable stocks into one whose major value lies in its operating businesses. Second, while equity holdings are valued at market prices, operating companies are included in book value at an amount far below their current value. Third, it is likely that over time, Berkshire will be a significant repurchaser of its shares, which will result in intrinsic value per share going up, but book value per share going down.
During the fourth quarter, Berkshire reported a loss of $25.4 billion compared to a gain of $32.6 billion in the prior year period, which benefited from a $29.1 billion positive impact from the enactment of the 2017 Tax Act. New accounting rules in 2018 require Berkshire to book the net changes in unrealized appreciation/depreciation in net income instead of comprehensive income which resulted in a $28.1 billion paper loss in net earnings in the fourth quarter from investments and derivatives. In addition, Berkshire recorded a $3 billion impairment of intangible assets charge in the fourth quarter related to Berkshire’s equity interest in Kraft Heinz. Operating earnings in the fourth quarter increased 71% to $5.7 billion.
For the full year 2018, Berkshire’s operating revenues rose 3% to $247.6 billion and the company earned $4.0 billion, which included a 71% increase in operating earnings to $24.8 billion, the $3 billion non-cash Kraft Heinz impairment charge, $2.8 billion in realized gains from the sale of investment securities and a $20.6 billion paper loss from a reduction in the amount of unrealized capital gains that existed on investment holdings during the year.
Due to the new accounting rules, wild swings in reported earnings will continue as Berkshire’s huge equity portfolio is valued at nearly $173 billion as of 12-31-18. This portfolio will often experience one-day price fluctuations of $2 billion or more. During the volatile fourth quarter, there were several days the portfolio gained or lost more than $4 billion. Warren Buffett’s advice to shareholders is to focus on operating earnings and pay little attention to the paper gains and losses, as Berkshire’s investments are expected to deliver substantial gains over time.
Berkshire’s five major investment holdings represent 68% of total equities, including American Express at $14.5 billion (down $600 million year over year), Apple at $40.3 billion (up $12.1 billion due to additional purchases during the year), Bank of America at $22.6 billion (up $1.9 billion for the year), Coca-Cola at $18.9 billion (up $500 million for the year) and Wells Fargo at $20.7 billion (down $8.6 billion for the year).
During 2018, Berkshire’s insurance underwriting operations generated $1.6 billion in earnings compared to a $2.2 billion loss in the prior year period. The prior year period included $3 billion in pre-tax losses from three major hurricanes in the U.S. and an earthquake in Mexico. The insurance operations reflected significantly improved results from GEICO and Berkshire Hathaway Reinsurance and reductions of liabilities for prior years’ property/casualty loss events. Insurance investment income was 17% higher at $4.6 billion during the year, reflecting higher interest rates on short-term investments, higher dividend income due to increases in the portfolio of equity securities and a lower tax rate. The float of the insurance operations approximated $123 billion as of 12/31/18, an increase of $8 billion since year end 2017. The increase in float reflected the acquisition of MLMIC and overall growth of the insurance operations. The average cost of float was negative during 2018 as the underwriting operations generated pre-tax earnings of $2.0 billion. Berkshire has operated at an underwriting profit for 15 of the past 16 years with a total pre-tax gain of $27 billion.
Burlington Northern Santa Fe’s (BNSF) revenues rose 12% during 2018 to $23.9 billion with net earnings chugging 32% higher to $5.2 billion, reflecting the favorable change in the tax rate. Pre-tax earnings rose a solid 9% to $6.9 billion. During the year, BNSF generated a 6.2% comparative increase in average revenue per car/unit and a 4.1% increase in volume thanks to general economic growth across all business sectors, led by 16% revenue growth in the industrial and energy sectors, and tight truck capacity leading to conversion from highway to rail.
Berkshire Hathaway Energy reported revenues increased 6% to $20 billion during 2018 with all groups, except PacifiCorp, contributing to the growth. Net earnings increased 29% during the year to $2.6 billion primarily due to tax credits. On a pre-tax basis, earnings declined 1% to $2.5 billion due to lower utility margins reflecting increased depreciation, maintenance and other operating expenses.
Berkshire’s Manufacturing businesses reported a 7% increase in revenue growth in 2018 to $61.9 billion with operating earnings up 13% to $9.4 billion. Revenue growth was broad-based, led by Building Products with 10% growth to $18.7 billion, Industrial Products with 7% growth to $30.7 billion and Consumer Products with 3% growth to $12.5 billion. Industrial Products pre-tax earnings increased 15% to $5.8 billion during 2018. Iscar’s revenues increased 16% during the year with pre-tax earnings also increasing significantly due to increased unit sales, increased manufacturing efficiencies and business acquisitions. Pre-tax earnings in the Building Products and Consumer Products each rose 9% during the year to $2.3 billion and $1.2 billion, respectively. The earnings increase in Building Products was due to higher earnings from Clayton Homes and Shaw, partially offset by lower earnings from Johns Manville. The increase in Consumer Products reflected increases from Duracell and the apparel and footwear businesses, partly offset by lower earnings from Forest River and Larson Juhl.
Service and Retailing revenues rose 3% during the year to $78.9 billion with pre-tax earnings up 13% to $2.9 billion. Service revenues rose 10% to $13.3 billion in 2018 with operating earnings up 21% to $1.8 billion. TTI’s revenues increased 34% due to an industry-wide increase in demand for electronic components in many geographic markets around the world, acquisitions and favorable foreign currency changes. While TTI’s revenue increases were significant, demand is beginning to moderate due to the impact of tariffs. TTI accounted for 84% of the increase in earnings in this unit with XTRA, Charter Brokerage and NetJets also contributing to the earnings growth. Retailing revenues rose 4% during the year to $15.6 billion with operating earnings up 10% to $860 million, reflecting higher earnings from Berkshire Hathaway Automotive (BHA) and Louis Motorrad. McLane’s revenues were relatively flat during the year at $50 billion. McLane operating earnings declined 18% to $246 million due to significant pricing pressures in an increasingly competitive grocery business environment. McLane’s unfavorable operating conditions are expected to continue in 2019.
Berkshire’s balance sheet continues to reflect significant liquidity and a strong capital base of $349 billion as of 12/31/18, unmatched in corporate America. Excluding railroad, energy and finance investments, Berkshire ended the quarter with $319.2 billion in investments allocated approximately 54.1% to equities ($172.8 billion), 6.2% to fixed-income investments ($19.9 billion), 5.5% to equity method investments ($17.3 billion), and 34.2% in cash and equivalents ($109.2 billion).
Berkshire’s financial strength allows Buffett to make significant investments and acquisitions. Apple was the largest stock investment in 2018. Berkshire closed the previously announced $2.5 billion acquisition of Medical Liability Mutual Insurance Company on Oct. 1, 2018. Bolt-on acquisitions approximated $1 billion in 2018.
Free cash flow declined 33% during 2018 to $22.9 billion due to the lower 2018 earnings and the lapping of the big boost to float from the AIG deal in the prior year period. During 2018, capital expenditures increased 24% to $14.5 billion. In 2019, Berkshire expects capital expenditures to approximate $10.5 billion for BNSF and Berkshire Hathaway Energy. During 2018, Berkshire sold and redeemed a net $10.9 billion in Treasury Bills and fixed-income investments and purchased a net $24.4 billion of equity securities, reflecting $43 billion in purchases, including Apple, Bank of America and other financial stocks, and $19 billion in sales, including all of IBM shares. Buffett believes the stocks purchased “offered excellent value, far exceeding that available in takeover transactions.” With prices “sky-high” for elephant-sized acquisitions that possess decent long-term prospects, Berkshire will likely continue to expand in 2019 their holdings of marketable equities. Berkshire normally acquires a 5% to 10% interest in marketable securities, which makes JP Morgan a likely candidate for further purchase if valuations remain reasonable.
Berkshire revised its buyback policy which now permits Berkshire to repurchase shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett and Charlie Munger. During 2018, Berkshire repurchased $1.3 billion of its common stock.
Berkshire Hathaway’s stock appears attractively valued, currently trading at $302,000 per A share and $201.91 per B share. Based on current business fundamentals, we expect Berkshire’s A shares to trade between $273,000-$349,000 per share and the B shares to trade between $182-$232 per share. Buy.
Thursday, Feb. 21, 2019
Hormel Foods-HRL reported first fiscal sales increased 1% to $2.4 billion with operating earnings increasingly slightly to $307 million, net earnings falling 20% to $241 million and EPS dropping 21% to $.44. By business segment, Refrigerated Foods sales increased 2% to $1.3 billion, led by the new Hormel Deli Solutions division, with strong gains coming from Columbus® branded items and Jennie-O® premium deli meats, Old Smokehouse® bacon and Hormel® Fire Braised™ products. Grocery Products sales increased slightly to $607 million, led by Herdez® salsas and sauces, Wholly Guacamole® dips, the SPAM® family of products, Muscle Milk® protein beverages and Hormel® bacon toppings, partially offset by declines in contract manufacturing. Jennie-O-Turkey Stores sales dipped slightly to $321 million as improved results in foodservice sales of Jennie-O® raw boneless breasts and Jennie-O® cooked breasts were offset by two ground turkey product recalls prompted by salmonella concerns. International sales increased 2% to $154 million, driven by sales in China that exceeded expectations. During the quarter, Hormel generated $178 million in free cash flow, down 34% from last year, squeezed by the timing of hog purchases. Hormel returned $145 million to shareholders during the quarter through share repurchases of $45 million at an average cost of $40.91 per share and dividends of $100 million. The company paid its 362nd quarterly dividend at the annual rate of $0.84 per share, up 12% from last year, marking the 53rd consecutive year of dividend increases and the 10th consecutive year of double-digit increases. Hormel ended the quarter with $513 million in cash on its beefy balance sheet. The company announced the sale of its CytoSport business, which generated about $300 million in annual sales, to PepsiCo for $465 million in cash. Management expects the deal to close next quarter. Looking ahead to the full fiscal year, the company expects sales in the $9.7 billion to $10.2 billion range, up 4% from last year at the midpoint, with EPS in the range of $1.77 to $1.91, compared to $1.86 in fiscal 2018. Management will update this guidance for the impact of the CytoSport sale after the deal closes.
Tuesday, Feb. 19, 2019
Genuine Parts-GPC reported fourth quarter sales motored ahead 9.4% to $4.6 billion with operating income increasing 14.5% to $254 million, net income increasing 72% to $187 million on lower taxes and EPS increasing 74% on fewer shares outstanding. Fourth quarter sales for the Automotive Group were up 11.4% to $2.6 billion, on a 4% comparable sales increase, a 9% benefit from acquisitions and an unfavorable foreign currency translation of about 2%. Sales for the Industrial Group were up 8.7% to $1.6 billion, on a 7% comparable sales increase and a 2% contribution from acquisitions. Sales for the Business Products Group were up 1.6% to $457 million, consisting primarily of comparable sales growth. For the year, Genuine Parts reported sales increased 15% to $18.7 billion with net income up 31% to $810 million and EPS up 32% to $5.50. During 2018, the company generated a solid 23.3% return on shareholders’ equity and $913 million in free cash flow, up 30% from last year on working capital efficiencies. The company returned $508 million to shareholders during 2918 through dividends of $416 million and share repurchases of $92 million. Genuine Parts announced a 6% dividend increase for 2019. The company has paid a cash dividend every year since going public in 1948 and 2019 marks the 63rd consecutive year of increased dividends paid to Genuine Parts’ shareholders. Looking ahead to 2019, management expects sales to increase 3% to 4% with EPS of $5.75 to $5.90.
Friday, Feb. 15, 2019
Oracle-ORCL authorized the repurchase of up to an additional $12.0 billion of common stock under an existing share repurchase program. The stock repurchase authorization does not have an expiration date and the pace of repurchase activity will depend on factors such as Oracle’s working capital needs, cash requirements for acquisitions and dividend payments, debt repayment obligations or repurchases of Oracle’s debt, Oracle’s stock price, and economic and market conditions.
UPS-UPS increased its regularly quarterly dividend by 5.5% to $0.96 per share on all outstanding Class A and Class B shares. UPS has a long commitment to cash dividends. For nearly 50 years, the company has either increased or maintained its dividend. Since 2000, UPS’s dividend has more than quadrupled.
PepsiCo-PEP reported fourth quarter revenues were relatively flat at $19.5 billion with net income of $6.9 billion and EPS of $4.83 compared to losses in the prior year period due to tax reform charges. While adverse foreign exchange translation negatively impacted revenues, the underlying organic revenue growth accelerated in the second half with solid 4.6% organic revenue growth in the fourth quarter with strong core constant currency EPS growth of 17%. Frito-Lay North America and each of the international sectors performed very well while North America Beverages made progress throughout the year. For the full year, revenues increased 2% to $64.7 billion with net income popping 158% to $12.5 billion and EPS up 160% to $8.78, primarily due to the benefits of tax reform. Full 2018 year revenues rose 3.7% with core constant currency EPS growth of 9% to $5.66. Return on shareholders’ equity bubbled higher to 86% in 2018. Free cash flow declined 13% during the year to $6.1 billion due primarily to tax factors. During the year, PepsiCo paid $4.9 billion in dividends and repurchased $2 billion of its common stock. PepsiCo announced a 3% increase in its 2019 dividend to $3.82 per share, marking the 47th consecutive annual dividend increase. For fiscal 2019, PepsiCo expects to pay dividends of $5 billion and repurchase $3 billion of its common stock. Full year fiscal 2019 organic revenue growth is expected to be 4% with a 1% decline in core constant currency EPS due to lapping one-time gains in 2018, a higher expected tax rate and 2019 incremental investments to strengthen the business. PepsiCo expects to generate $9 billion in operating cash flow in 2019 with a step-up in capital expenditures to $4.5 billion to support future growth, resulting in free cash flow of approximately $5 billion. The company expects long-term financial performance of 4%-6% organic revenue growth, core operating margin expansion of 20 to 30 basis points, high-single-digit core constant currency EPS growth and increasing core net returns on invested capital.
Wednesday, Feb. 13, 2019
Cisco Systems-CSCO reported second quarter revenues rose 5% to $12.4 billion with net income of $2.8 billion and EPS of $.63 compared to losses last year related to a tax charge in connection with tax reform. On an adjusted basis, net income rose 6% with EPS up 16% during the second quarter. Despite complex political and macroeconomic headwinds, Cisco’s results were solid with growth across all geographies and double-digit growth in Applications and Security. Free cash flow increased 5% during the first half of the year to $7.1 billion. During the first half, Cisco paid $3 billion in dividends and repurchased $10 billion of its common stock, including the repurchase of 111 million shares at an average price of $45.09 per share or $5 billion in aggregate in the second quarter. Cisco ended the quarter with cash and investments of more than $40 billion and long-term debt of $16 billion. As part of its commitment to return cash to shareholders, Cisco announced a 6% increase in its dividend and the authorization of an additional $15 billion for share repurchases, bringing the total authorization to $24 billion. Management’s outlook for the third quarter is for 4%-6% revenue growth and EPS in the range of $.63 to $.68.
In the last year, Alphabet-GOOGL has hired more than 10,000 people in the U.S. and made over $9 billion in investments. Alphabet announced over $13 billion in investments throughout 2019 in data centers and offices across the U.S., with major expansions in 14 states. These new investments will give the company the capacity to hire tens of thousands of employees, and enable the creation of more than 10,000 new construction jobs in Nebraska, Nevada, Ohio, Texas, Oklahoma, South Carolina and Virginia. With this new investment, Google will now have a home in 24 total states, including data centers in 13 communities.
Focused on creating the next frontier of surgery, Johnson & Johnson-JNJ announced that Ethicon, Inc., entered into a definitive agreement to acquire Auris Health, Inc. for approximately $3.4 billion in cash. Additional contingent payments of up to $2.35 billion, in the aggregate, may be payable upon reaching certain predetermined milestones. Auris Health is a privately held developer of robotic technologies, initially focused in lung cancer, with an FDA-cleared platform currently used in bronchoscopic diagnostic and therapeutic procedures. This acquisition will accelerate Johnson & Johnson's entry into robotics with potential for growth and expansion into other interventional applications. Johnson & Johnson continues to make meaningful investments to transform the surgical experience, connecting digital solutions to enhance surgical performance. In addition to advancing the company's focused initiatives to combat lung cancer, Auris Health's technology will support Johnson & Johnson's vision of being a world leader across the continuum of surgical approaches, including open, laparoscopic, robotic and endoluminal. This move is also complementary to the acquisition of Orthotaxy's robotic technology for orthopaedics and the continued development of the Verb Surgical Platform, through a strategic partnership with Verily, the healthcare unit of Alphabet-GOOGL. "We are very committed to our partnership with Verily on the development of the Verb Surgical Platform. Collectively, these technologies, together with our market-leading medical implants and solutions, create the foundation of a comprehensive digital ecosystem to help support the surgeon and patient before, during and after surgery," said Ms. McEvoy. The transaction is expected to close by the end of the second quarter of 2019.
T. Rowe Price-TROW declared a quarterly dividend of $0.76per share payable March 29, 2019 to stockholders of record as of the close of business on March 15, 2019. The quarterly dividend rate represents an 8.6% increase over the previous quarterly dividend rate of $0.70 per share. This will mark the 33rd consecutive year since the firm's initial public offering that the company will have increased its regular annual dividend. The Board also approved a 10 million share increase in the company's authorization to repurchase its common stock. This brings the total repurchase authorization to nearly 22.4 million shares.
Friday, Feb. 8, 2019
Maximus-MMS reported first quarter operating results with revenues up 7% to $664.6 million primarily attributed to the acquisition of the citizen engagement center contracts in the US Federal segment. The revenue growth was partially offset by headwinds from foreign currency translations of $7.2 million. Organic revenue for the quarter was down as welfare-to-work contracts in Australia and the United Kingdom came to their natural conclusion. Operating income for the quarter was $74.1 million, yielding an operating margin of 11.2% as compared to 12.8% for the same period last year. The operating profit margin declined primarily due to the lower margins on the newly acquired citizen engagement center contracts. The newly acquired contracts are cost plus fixed fee, these type of contracts usually have margins in the single digits as the contractor is exposed to less cost risk in performing the work. Additional pressure will be felt on margins as new contracts are fully operational for the quarters ahead. Net income for the first quarter was $55.9 million or $0.86 per share, down 5% from $59.1 million in the prior year period. The primary drivers behind the decrease in earnings are the increases in costs associated with the acquisition and amortization of intangible assets. Operating cash flows for the quarter rang up the till at $59.3 million, an increase of 56.5% over the first quarter of last year. The increased cash flow was provided by reduced demands on cash from deferred revenue and compensation and benefits. We can expect some additional improvement in cash flow as management focuses on its receivable collections. Free cash flow for the quarter was $53.9 million. Maximus management indicated that the company’s business was not significantly impacted by the Government shutdown as the work being performed for the Federal government was either in areas with approved funding or were considered essential operations. The biggest impact the company felt was in the slowdown in the approval of security clearances to add personnel to current contracts. Maximus may see some pressure on cash flows in the second quarter, but this will be temporary until the Government catches up on processing invoices. Maximus started the year off strongly with nearly $1 billion dollars in new contract awards in the first quarter. These awards and the additional revenue from the full operation of the newly acquired contracts will add to revenue over the next three quarters. Maximus also exits the first quarter with a strong pipeline of contract opportunities totaling $19.9 billion over the next two years. The contract pipeline is comprised of potential new contract work and the re-competition of existing contracts. As of December 31, 2018, Maximus sales pipeline is comprised of 78% of new contract opportunities which bodes well for growth in future years. Maximus is currently undergoing a strategic change and focusing on the Federal government under the leadership of the new CEO and based on the first quarter results appears to be positioning this HI-quality company for the long-term. Management affirmed guidance for 2019 with revenue of $2.925 to $3.0 billion expected. Earnings per share are projected in the range of $3.55 to $3.75 for the fiscal 2019 year.
Wednesday, Feb. 6, 2019
Westwood Holdings-WHG reported fourth quarter revenues declined 23% to $26.1 million with net income flat at $5.4 million and EPS up 3% to $.64. The decline in revenues was due to lower average assets under management (AUM) due to net outflows, market depreciation and the sale of the Omaha-based private wealth business. AUM at 12/31/18 totaled $16.6 billion, a 31% decline from the $24.2 billion held at 12/31/17. For the full year, revenues declined 9% to $122.3 million with net income up 34% to $26.8 million and EPS up 32% to $3.13. Net income benefited from foreign currency gains, lower incentive compensation expense and a lower tax rate due to tax reform. Return on shareholders’ equity was 16.6% in 2018. Free cash flow declined 35% during the year to $30.5 million due primarily to net purchases of trading securities. During the year, Westwood paid dividends of $24.6 million and repurchased 108,289 shares of its common stock for $4 million at an average price of $36.93 per share. Westwood ended the year with a debt-free balance sheet and more than $118 million in cash and investments.
Cognizant Technology Solutions-CTSH reported fourth revenues increased 7.9% to $4.13 billion with net income of $648 million and EPS of $1.12 compared to a loss of $18 million or $.03 per share in the prior year. The prior year loss included a one-time $617 million expense related to U.S. tax reform. Excluding one-time items including the impact of tax reform , EPS increased 2% from last year. Consulting & Technology Services represented 58% of total revenue and grew 9.5% while Outsourcing represented 42% of revenues and grew 6%. Revenue growth was solid across all business segments led by 18.4% growth in Communications, Media and Technology followed by 14% growth in Products and Resources. For the full year, sales increased 8.9% to $16.1 billion with net income up 40% to $2.1 billion and EPS up 42% to $3.60. Return on shareholders’ equity for the year was 18%. Free cash flow increased 4% to $2.2 billion during the year with the company paying $468 million in dividends and repurchasing $1.26 billion of its common stock. Cognizant ended the year with $4.5 billion in cash & investments and $736 million in debt on its strong balance sheet. For 2019, management expects revenue growth of 7% to 9% in constant currency with adjusted operating margin of 19% resulting in adjusted EPS of $4.40. The company announced Brian Humphries as the new CEO effective April 1, 2019. Current CEO, Francisco D'Souza, will serve as Executive Vice Chairman on the board until the transition is complete at the end of June and will then remain on the board as Vice Chairman.
Fastenal’s-FAST January sales increased 13.3% to $446.9 million with average daily sales also up 13.3% to $20.3 million. Daily sales by end market increased 13.8% in manufacturing and 16.7% in non-residential construction. Daily sales growth by product lines increased 13.3% in fasteners and 13.6% in other products. The percentage of the top 100 national accounts growing was 88% compared to 79% in the prior year period. Total personnel increased 4.9% to 21,841.
Tuesday, Feb. 5, 2019
The 3M-MMM Board of Director declared a dividend on the company’s common stock of $1.44 per share for the first quarter of 2019, a 6 percent increase over the quarterly dividend paid in 2018. The dividend is payable March 12, 2019, to shareholders of record at the close of business on Feb. 15, 2019. "The strength of our business model enables 3M to consistently generate premium margins and strong cash flow, and to build on the company’s long history of returning cash to our shareholders," said Mike Roman, 3M chief executive officer. 3M has increased its dividend for 61 consecutive years and paid dividends to its shareholders without interruption for more than 100 years.
Disney-DIS reported flat first quarter sales at $15.3 billion with net income declining 37% to $2.8 billion and EPS dropping 36% to $1.86. These results were impacted by a net tax benefit in the prior year period. On an adjusted basis, EPS declined 3% during the quarter. Studio Entertainment revenues declined 27% during the quarter to $1.8 billion with operating income down 63% to $309 million due to difficult comparison with theatrical distributions in the prior year period. Parks, Experiences & Consumer Products revenues rose 5% during the quarter to $6.8 billion with operating income up 10% to $2.2 billion due to increased guest spending and higher occupied room nights a the theme parks and resorts. Media Networks revenue increased 7% to $5.9 billion with operating income also up 7% to $1.3 billion thanks to strong growth in the broadcasting segment. Direct-to-consumer and International sales dipped 1% in the quarter to $918 million with the operating loss widening to $136 million due to foreign exchange headwinds and increased investments in the ramp up of ESPN+. ESPN+ now has 2 million paid subscriptions for its streaming service which doubled in the last five months. Free cash flow declined 28% during the quarter to $904 million due to lower operating results and higher tax payments. Capital expenditures increased by $214 million to $1.2 billion driven by higher spending on new attractions at the domestic theme parks and resorts. Management is looking forward in fiscal 2019 to the successful completion of the 21st Century Fox acquisition and the launch of the Disney+ streaming service.
Monday, Feb. 4, 2019
Alphabet-GOOGL reported fourth quarter revenues rose 22% to $39.3 billion with net income of $8.9 billion and EPS of $12.77 compared to losses in the prior year quarter related to one-time tax transition charges. During the fourth quarter, Google advertising revenues increased 20% to $32.6 billion, representing 83% of total revenues. All geographic regions were strong with each region generating double-digit growth. Google other revenues rose 31% to $6.5 billion with Other Bets revenues up 18% to $154 million during the quarter. Google operating income in the quarter rose 13% to $9.7 billion with Other Bets operating loss widening to $1.3 billion. Total traffic acquisition costs increased 15% in the quarter to $7.54 billion. Paid clicks on Google properties increased 66% during the quarter with cost per click declining 29%. For the full year 2018, Alphabet’s revenues rose 23% to $136.8 billion with net income and EPS each up 142% to $30.7 billion and $43.70, respectively, thanks to the benefits of tax reform. Return on shareholders’ equity was 17.3% for the year. Free cash flow declined 4% during the year as capital expenditures jumped 91% to $25 billion as the company invested significant resources in data centers and other facilities to support future growth. Capital expenditure growth is expected to moderate in 2019. During 2018, Alphabet repurchased $9.1 billion of its common stock and announced a new $12.5 billion share repurchase program for 2019. Alphabet ended the year with a strong balance sheet with more than $109 billion in cash and marketable securities and $4 billion in long-term debt. Alphabet has eight products or services with more than one billion users each with plans to embed artificial intelligence in the products to make them even more valuable to users.
Thursday, Jan. 31, 2019
Polaris Industries-PII announced that its Board of Directors approved a 2 percent increase in the regular quarterly cash dividend, raising the payout to $0.61 per share. This increase represents the 24th consecutive year of Polaris increasing its dividend.
UPS-UPS reported fourth quarter revenue rose 5% to $19.8 billion with net income and EPS each down 59% to $453 million and $.52, respectively, which included a non-cash, after-tax pension charge of $1.2 billion or $1.42 per share. On an adjusted basis for specified items, EPS increased 17% during the quarter. During the fourth quarter, UPS reported average revenue yield expanded 4% with gains in all products. The company achieved record shipments and exceptional on-time service during the peak holiday season with the U.S. Domestic segment delivering more than 21 million packages, on average, per day. For the full 2018 year, total revenue increased 8% to $71.9 billion with net income and EPS each down 2% to $4.8 billion and $5.51, respectively. On an adjusted basis, EPS increased 21%. Free cash flow topped $6.4 billion as the company reinvested $6.6 billion in its global network. UPS paid dividends during the year of $3.2 billion, an increase of 10% over the prior year, and repurchased 8.9 million shares for $1 billion at an average price of about $112.35 per share. The company has earmarked another $1 billion for share repurchases in 2019. During 2019, UPS expects U.S. revenue to grow 4% to 6% and international revenue to grow 5% to 7% with total adjusted operating profit growth in the low-teens with all segments up double-digits thanks to margin expansion. Adjusted EPS are expected in the range of $7.45-$7.75 with adjusted free cash flow expected in the range of $3.5 to $4.0 billion. Capital expenditures are planned in the range of 8.5% to 10% of revenue in 2019, as the company continues to invest for the long haul including an expected 18 new or retrofit automated global facilities. Management expects softer export and GDP growth in 2019 due to trade policy uncertainty.
Tractor Supply-TSCO reported fourth quarter sales increased 9% to $2.1 billion with net income up 25% to $136.9 million and EPS up 28% to $1.11. Earnings from the prior year include a charge of $4.9 million, or $.04 per share, related to U.S. tax reform. Sales growth was driven by a solid 5.7% increase in comparable store sales growth consisting of a 3% increase in the average ticket and a 2.6% increase in customer transactions. All geographic regions and all major product categories had positive comparable store sales growth. The company opened 17 new Tractor Supply stores and 4 new Petsense stores in the quarter and closed 10 underperforming Petsense stores. For the full year, sales increased 9% to $7.9 billion with net income up 26% to $532 million and EPS up 31% to $4.31. Return on shareholders’ equity for the year was a strong 34%. Free cash flow increased 9% to $416 million during the year. The company paid $147 million in dividends and repurchased $350 million of its common stock at an average price of $70.14 during the year. Since inception of the repurchase program, the company has repurchased $2.5 billion of its stock with $520 million remaining authorized for future share repurchases. For 2019, management expects revenues of $8.31 to $8.46 billion with EPS in the range of $4.60 to $4.75 reflecting earnings growth of 8.5% at the midpoint. Comparable stores sales growth is expected to be in the range of 2% to 4% with 80 new Tractor Supply and 10 to 15 new Petsense store openings.
Mastercard-MA reported fourth quarter revenue charged ahead by 15% to $3.8 billion with net earnings of $900 million, or $0.87 per share, compared to net income of $200 million, or $0.21 per share, last year. Excluding the impact of U.S. tax reform and other one-time items, fourth quarter income and EPS were $1.6 billion and $1.55, up 33% and 36%, respectively. Underlying revenue growth was 12%, driven by: a 17% increase in switched transactions; a 14% increase in gross local currency dollar volume to $1.5 trillion; and a 17% increase in local currency cross-border volumes, partially offset by an increase in rebates and incentives on new and renewed agreements and increased volumes. During the fourth quarter, Mastercard repurchased about 4.4 million shares at a cost of $888 million, or $201.82 per average share, and paid $259 million in dividends. Quarter-to-date through January 30, the company repurchased an additional 4 million shares at a cost of $773 million, which leaves $6 billion remaining undercurrent repurchase program authorizations. On a macro level, overall economic growth was solid in 2018 and Mastercard expects this growth to continue in 2019, albeit with some moderation. Management is carefully watching several factors including increased trade tensions, rising interest rates and other economic and political factors that could slow growth over the longer term. With low unemployment and positive consumer confidence, U.S. retail spending increased 4.8% year-over-year. Europe’s retail spending moderated and spending in the U.K. increased 3.5% despite concerns over Brexit. China’s slow-down has not directly affected Mastercard as the company does not have a domestic presence there though China’s slowdown has hurt the global economy. For 2018, Mastercard reported revenues increased 20% to $15 billion with net income of $5.9 billion and EPS of $5.60, compared to net income of $3.9 billion and EPS of $3.65 in 2017. Excluding the impact of U.S. tax reform and other one-time items, adjusted net earnings were $6.8 billion, or $6.49 per share, up 38% and 42%, respectively. During 2018, Mastercard generated a stellar 108.6% return on shareholders’ equity. The company generated $5.9 billion in free cash flow during 2018, up 10% from last year, and returned nearly $6 billion to shareholders through dividends of $1 billion and share repurchases of $4.9 billion at an average cost per share of $187.02. The company ended the year with $8.4 billion in cash & investments and $5.8 billion in long-term debt on its strong balance sheet. For 2019, management expects revenue growth in the low-teens with operating expenses in the high-single digits and an effective tax rate of 19% to 20%.
Wednesday, Jan. 30, 2019
Facebook-FB reported fourth quarter revenues jumped 30% to $16.9 billion with net income up 61% to $6.9 billion and EPS up 65% to $2.38. The prior year earnings include a charge of $2.3 billion, or $.77 per share, related to U.S. tax reform. The company estimates that more than 2.7 billion people now use Facebook, WhatsApp, Instagram or Messenger, with more than 2 billion people using at least one of the company’s services every day. Daily active users were 1.52 billion on average, an increase of 9% year over year. Monthly active users were 2.32 billion, an increase of 9%. Mobile advertising revenue represented approximately 93% of advertising revenue for the quarter up from 89% in the prior year period. There are more than seven million advertisers active on Facebook and Instagram. Headcount was 35,587 as of year-end, an increase of 42% year-over-year. Revenue growth was strong across all geographic region led by 34% growth in Asia Pacific followed by 31% growth in North America and 28% growth in Europe. For the full fiscal 2018 year, revenue increased 38% to $55.0 billion with net income up 39% to $22.1 billion and EPS up 40% to $7.57. Return on shareholders’ equity for the year was a likeable 26%. During the year, Facebook posted $15.4 billion in free cash flow, down 12%, as the company invested $13.9 billion in capital expenditures to build out its data centers, servers, network infrastructure and office facilities. The company repurchased $12.9 billion of its shares during the year and the Board approved an additional $9 billion repurchase program in December.
Microsoft-MSFT reported second fiscal quarter revenue increased 12% to $32.5 billion with net income of $8.4 billion and EPS of $1.08 compared to a loss of $6.3 billion, or $0.82 per share, reported in 2017. Excluding the impact of U.S. tax reform, net earnings and EPS increased 14% and 15%, respectively. By business segment, More Personal Computing revenue booted up 7% to $13 billion, driven by growth in Surface and Gaming. Search advertising revenue grew 14% while Windows OEM revenue declined by 5% due to computer chip shortages. Intelligent Cloud revenue increased 20% to $9.4 billion, driven by server products and cloud services. Azure revenue increased 76% while server products revenue grew 3%, powered by demand for premium versions and hybrid solutions and the inclusion of GitHub. Enterprise mobility installed base grew 57% to over 94 million seats. Productivity and Business Processes revenue increased 13% to $10.1 billion, driven by Office 365 and LinkedIn. Cash flow from operations during the quarter increased 13% to $8.9 billion while free cash flow dipped 2% to $5.2 billion on higher capital investments to support future growth in Microsoft’s cloud business. During the quarter, through dividend payments of $3.5 billion and share repurchases of $6.4 billion, Microsoft returned nearly $10 billion to shareholders, up 90% year-over-year, as the company works toward its goal of completely offsetting dilution from the GitHub acquisition. Microsoft ended the quarter with nearly $130 billion in cash & investments and $70 billion in long-term debt on its strong balance sheet. Looking ahead to the third fiscal quarter, Microsoft expects revenues in the $29.4 billion to $30.1 billion range, up 10% to 12% from 2018.
Stryker-SYK reported fourth quarter sales increased 9.4% to $3.8 billion with net earnings and EPS of $2.07 billion and $5.44, respectively, compared with a loss of $249 million, or $0.66 per share, last year. Excluding the impact of U.S. tax reform and other one-time items, net earnings and EPS increased 11% to $828 million and $2.18, respectively. By geography, domestic sales increased 10% to $2.8 billion and international sales increased 7% to $1 billion. By business segment, Orthopaedics sales increased 7% organically to $1.4 billion, driven by growth in Trauma & Extremities and Knees. MAKO robotic sales remained strong with a record 54 robots installed during the quarter, 40% of which were installed in competitive accounts, bringing the total robots installed to 642. Stryker certified an additional 250 trained MAKO surgeons during the quarter, bringing the total number of trained surgeons to 1,600. MedSurg and Neurotechnology & Spine sales increased 11% organically to $1.7 billion and $700 million, respectively. For 2018, Stryker reported a healthy 9% increase in sales to $13.6 billion with net income and EPS of $3.6 billion and $9.34, respectively, compared with 2017 net income and EPS of $1.0 billion and $2.68, respectively. Excluding the impact of U.S. tax reform and other one-time items, net earnings and EPS increased nearly 13% to $2.8 billion and $7.31, respectively. During 2018, Stryker generated $2.0 billion in free cash flow and returned more than $1 billion to shareholders through dividends of $703 million and share repurchases of $300 million. Stryker ended the year with $3.7 billion in cash & investments and $8.5 billion in long-term debt on its healthy balance sheet. During 2018, Stryker generated a strong 30.3% return on shareholders’ equity. Looking ahead to the full 2019 year, management expects organic net sales growth in the range of 6.5% to 7.5% with adjusted EPS in the $8.00 to $8.20 range, up 11% from 2018 at the mid-point.
Gentex-GNTX reported fourth quarter sales dimmed by 1.3% to $453.4 million with net income falling 18.5% to $106.3 million and EPS down 11% to $0.41 on fewer shares outstanding. During the fourth quarter, plant shutdowns and changes to production schedules at OEM’s, as well as order adjustments at certain Tier 1 customers, negatively impacted quarterly unit shipments and revenue. Actual vehicle production in Europe, North America, Japan, Korea and China declined by 6% during the quarter versus a 2% increase projected at the beginning of the fourth quarter. Total Auto-Dimming Mirror units shipped increased 2% to 10,225 units on an 11% increase in North American mirror shipments to 3,359 units and a 2% decline in international mirror shipments to 6,866 units. Gross margins fell to 37.9% from 39.2% last year, squeezed by tariffs that became effective during the third quarter. During the quarter, Gentex generated $137 million in free cash flow, up 5% from last year’s fourth quarter. The company repurchased 3.3 million of its shares during the quarter at an average price of $21 per share. For 2018, Gentex’s sales increased 2% to $1.8 billion with net income up 7.6% to $438 million and EPS up 15% to $1.62. A lower effective tax rate in 2018 (16% versus 24% in 2017) drove the 2018 earnings gain. During 2018, Gentex recorded an impressive 23.5% return on shareholders’ equity and generated $466.4 million in free cash flow, up 18% from 2017. Gentex repurchased 26.4 million shares during 2018 at an average price of $22.37 per share. As of December 31, 2018, 8.8 million shares remained available for repurchase under the current share repurchase program. Gentex ended the year with more than $524 million in cash & investments and $55 million in long-term debt on its super strong balance sheet. Based on a projected 1% increase in total light vehicle production, Gentex expects 2019 revenues in the range of $1.83 billion to $1.93 billion. Gross margins are expected in the 36% to 37% range and operating expenses in the $195 million to $200 million range, up 8% at the midpoint from 2018. Gentex estimates its 2019 effective tax rate in the 16% to 18% range.
Canadian National Railway-CNI reported record fourth quarter revenues rose 16% to C$3.8 billion with net income declining 56% to C$1.1 billion and EPS dropping 55% to C$1.56. Excluding the impact of U.S. tax reform and other one-time items, adjusted net income rose 22% with adjusted EPS up 24%. The increase in revenues was mainly attributable to higher volumes of petroleum crude and Canadian grain, freight rate increases, higher applicable fuel surcharge rates, and the positive translation impact of a weaker Canadian dollar. Revenue ton miles (RTM) increased 12% during the quarter with carloadings up 5% to 1,537 thousand. The company’s operating ratio improved 80 basis points to 61.9%. For the full fiscal 2018 year, sales increased 10% to C$14.3 billion with net income down 21% to C$4.3 billion and EPS down 19% to C$5.87. Return on shareholders’ equity for the year was a healthy 24.5%. During the year, CNI generated C$2.5 billion in free cash flow and returned C$3.3 billion to shareholders through C$2.0 billion in share repurchases and C$1.3 billion in dividend payments. The Board approved an additional 22 million share repurchase program starting February 1, 2019. For fiscal 2019, management expects to deliver high single-digit volume growth in terms of revenue ton miles and EPS growth in the low double-digit range compared to adjusted EPS of C$5.50 in 2018.
ADP-ADP reported fiscal second quarter revenues increased 8% to $3.5 billion with net earnings decreasing 17% to $558 million and EPS down 16% to $1.27. The prior year earnings included a one-time benefit of $233 million, or $.52 per share, benefit related to U.S. tax reform. Excluding the impact of tax reform and other one-time items, adjusted EPS increased 30% to $1.34. Employer Services revenues increased 7% to $2.5 billion on a 2.3% increase in pays per control. PEO Services revenues gained 12% to $1.1 billion, boosted by a 9% increase in average worksite employees to 545,000. Interest in funds held for clients increased 21% to $129 million on a 5% increase in average funds held for clients to $23.6 billion and a 30 basis point increase in the average interest earned to 2.2%. During the first six months of the fiscal year, ADP generated $852 million in free cash flow and ended the period with $2.8 billion in cash and $2 billion in long-term debt on its strong balance sheet. During the first half of the year, ADP returned $1.1 billion to shareholders through dividends of $605 million and share buybacks of $527 million. For the full fiscal year, ADP expects revenues to increase 6% to 7% on a 5% to 6% increase in Employer Services revenues and a 9% to 10% increase in PEO revenues. U.S. pays per control are expected to increase by 2.5%. Average client funds balances are expected to increase 4% and the yield on the client funds portfolio is expected to increase 30 basis points to 2.2%, resulting in a 19% to 21% increase in client funds interest revenue to $556 million to $566 million. Adjusted EPS is expected to increase 17% to 19% up from previous guidance of 15% to 17%.
T. Rowe Price-TROW reported fourth quarter revenues rose 0.6% to $1.3 billion with net income up 1.4% to $351.9 million and EPS up 2.9% to $1.41. For the full 2018 year, revenues rose 10.7% to $5.4 billion with net income up 22.7% to $1.8 billion and EPS up 21.8% to $7.27.Return on shareholders’ equity improved to 29.3% in 2018. Net client outflows during the fourth quarter were $8.4 billion due to elevated market volatility-driven redemptions similar to broad industry net cash flow trends. For the full year, net client inflows of $13.2 billion occurred. Assets under management (AUM) ended the year at $962 billion, a decline of 3% for the year due to steep equity declines especially in December. Organic AUM increased 1.3% for the year driven by diversified inflows across distribution channels and geographies, the strength of the multi-asset franchise and positive flows into international equity and fixed-income investments. The firm employed 7,022 associates at year end, an increase of 2% compared to the prior year. In 2019, operating expense growth is expected in the range of 4%-7% with capital expenditures expected to increase 19% to about $200 million for planned technology investments. T. Rowe Price remains debt-free with ample liquidity including cash and investments of $3.0 billion. During 2018, the company returned 100% of its net income to shareholders through dividends and share repurchases with 10.8 million shares repurchased, of 4.4% of shares outstanding, for $1.1 billion at an average price of $101.48 per share.
Tuesday, Jan. 29, 2019
Biogen-BIIB reported a 6.6% increase in fourth quarter revenues to $3.5 billion with net earnings of $947 million and EPS $4.73 compared to a loss of $166 million, $1.40 per share, in the prior year. Global sales of TECFIDERA—the most prescribed oral therapy for MS—were $1.1 billion, up 3%. Sales of TYSABRI—the market leading high efficacy therapy for MS—were $464 million, flat with last year, on a 2% increase in U.S. sales which were offset by a 1% decline in international sales. Sales of Biogen’s Interferon MS therapies declined 7% to $597 million. Global sales of SPINRAZA—the first drug approved to treat children and adults with spinal muscular atrophy (SMA)—were $470 million, up from $363 million last year. Biogen’s biosimilar sales increased 28% to $156 million with more than 100,000 patients using Biogen’s biosimilars. For the full fiscal 2018 year, sales increased 9.6% to $13.5 billion with net income up 75% to $4.4 billion and EPS up 81% to $21.58. Return on shareholders’ equity for the year was a healthy 34%. During the year, Biogen generated $6.2 billion in cash flow from operations, ending the year with $3.5 billion in cash and $5.9 billion in notes payable on its strong balance sheet. The company repurchased 14.8 million of its shares for $4.4 billion and has $2 billion remaining for additional share repurchases under the current Board approved program. For fiscal 2019, management expects revenues of $13.6 to $13.8 billion with EPS in the range of $26.75 - $27.65 reflecting earnings growth of 26% at the midpoint.
Apple-AAPL reported fiscal first quarter revenues declined 5% to $84.3 billion with product sales down 7% to $73.4 billion and services sales up 19% to a record $10.9 billion. International sales accounted for 62% of total revenues. As previously reported, revenues came in below expectations for the quarter due to the timing of new iPhone launches, foreign exchange headwinds, supply constraints and challenging macroeconomic conditions especially in Greater China, where sales declined 27% during the quarter to $13.1 billion. iPhone sales declined 15% during the quarter to $52 billion which was impacted by the lower sales in China, fewer subsidies for the phones worldwide and lower than expected upgrades as replacement batteries resulted in customers holding onto their old phones longer. Net earnings were relatively flat at $20 billion during the quarter with EPS up 7% to a record $4.18. Mac sales increased 9% during the quarter to a record $7.4 billion thanks to strong demand for the MacBook Air and MacBook Mini. iPad sales increased 17% during the quarter to a record $6.7 billion, representing the fastest iPad growth in six years, due to the new iPad Pro, the most powerful mobile device ever. Wearables, Home and Accessories sales jumped 33% during the quarter to $7.3 billion, thanks to strong demand for the Apple Watch and Airpods with the company being supply constrained during the quarter. Services sales increased 19% to a record $10.9 billion as the active installed base of devices reached an all-time high of 1.4 billion during the quarter, growing in each geographic segment. Active iPhone devices increased 75 million in the last 12 months to 900 million devices with the iPhone scoring 99% satisfaction ratings for the new products launched during the quarter. Apple’s subscriptions to its services increased by 120 million over the last 12 months to 360 million subscriptions at quarter end with the company expecting paid subscriptions to reach 500 million by 2020. Free cash flow declined 8% during the quarter to $23.3 billion with Apple ending the quarter with $245 billion in cash and investments or cash, net of debt, totaling $130 billion. During the first quarter, Apple paid $3.6 billion in dividends and repurchased $8.8 billion of its common stock. Since inception of the share repurchase program, Apple has repurchased $250 billion of its shares. Apple will update its capital allocation strategy in the next quarter. With management “optimistic about the company’s future and seeing great value in the stock,” further share repurchases are likely. Apple expects to announce “exciting” new product launches later this year. For the second fiscal quarter, Apple expects revenues between $55 billion to $59 billion, gross margin between 37% and 38%, operating expenses between $8.5 billion and $8.6 billion, other income of $300 million and a tax rate of about 17%.
Polaris-PII reported fourth quarter revenues rose 14% to $1.6 billion with net income and EPS approximately tripling to $91.5 million and $1.47, respectively, primarily due to tax reform. On an adjusted basis, fourth EPS rose 19% to $1.83. For the full 2018 year, revenues rose 12% to $6.1 billion with net income up 94% to $335 million and EPS up 95% to $5.24. On an adjusted basis, EPS was up 29% for the year to $6.56. Return on shareholders’ equity in 2018 was 38.7%, reflecting a boost from higher leverage. During the year, Polaris acquired Boat Holdings which contributed to the financial results but also increased the company’s debt load significantly. Free cash flow declined 37% during the year to $252 million due to a big jump in inventories and higher capital expenditures. Polaris expects capital expenditures to rise further in 2019. During the year, the company paid $149 million in dividends and repurchased $349 million of its common stock. During 2019, management expects to give debt repayment a priority over share repurchases. The company announced its adjusted sales and earnings guidance for the full year 2019 with adjusted sales expected to increase in the range of 11% to 13% and adjusted net income expected to decline 5% to 9% to the range of $6.00 to $6.25 per share due to the impacts of tariffs, adverse foreign exchange and higher interest rates.
3M-MMM posted fourth quarter sales of $7.9 billion, down 0.6% from last year, with net income of $1.3 billion, up from $523 million last year, and EPS of $2.27, up from $0.85 last year. Excluding the impact from U.S. tax reform and other one-time items, adjusted EPS increased 10% to $2.31. Organic sales grew across all geographic areas and business groups. Organic sales increased 4.4% in the U.S., 5% in Latin America/Canada, 1.3% in EMEA and 2% in Asia Pacific. By business group, Industrial organic sales increased 2.5%, Safety & Graphics increased 3.3%, Health Care increased 4.8%, Electronics & Energy increased 4.1% and Consumer increased 1.9%. During the quarter, 3M generated $1.7 billion in free cash flow, up 23.3% from last year, representing an exceptional 128% conversion ratio. 3M returned $2.1 billion to shareholders during the quarter via dividends and gross share repurchases. For the year, 3M reported sales of $32.8 billion, up 3.5%, with net income of $5.35 billion, up 10.1%, and EPS of $8.89, up 12.1%. During 2018, 3M generated free cash flow of $4.86 billion, down slightly from last year, representing a 91% free cash flow conversion rate, squeezed by U.S. tax reform and a legal settlement. During 2018, 3M returned $8.1 billion to shareholders via share repurchases of $4.9 billion and dividends of $3.2 billion. 2018 marked the 60th consecutive year of annual dividend increases for 3M shareholders. During 2018, 3M generated a 54.3% return on shareholders’’ equity, boosted its $11.4 billion net debt position. Given slowing growth in its automotive and electronics end markets, especially in China, 3M lowered expected 2019 organic sales growth to 1% to 4% from 2% to 4%. EPS are expected in the range of $10.45 to $10.90, up 18% to 23% year-on-year. During 2019, the company expects to generate $5.8 billion to $6.7 billion in free cash flow and buyback $2 billion to $4 billion of its shares while investing $1.7 billion to $1.9 billion in capital expenditures, up 8% to 21% from 2018. 3M expects price increases to offset the impact of tariffs during 2019.
Monday, Jan. 28, 2019
Bank of Hawaii-BOH reported fourth quarter net income declined 5% to $53.9 million with EPS dropping 4% to $.62. Noninterest expenses in the fourth quarter included $4.1 million in one-time significant items related to employee separation, medical and legal expenses. The return on average assets for the fourth quarter was 1.26% compared to 1.0% in the prior year period. The return on average equity in the fourth quarter also improved to 17.05% compared to 13.85% in the prior year period. For the full year 2018, net income increased 19% to $219.6 million with EPS jumping 21% to $5.23. The return on average assets for the full year increased to 1.29% compared with 1.11% in 2017 with the return on average equity increasing to 17.63% in 2018 compared to 15.27% in 2017. During the year, loan and deposit balances continued to grow and net interest margin expanded to 3.05%, an increase of 12 basis points. The net interest margin is expected to continue to increase in 2019 by 3-4 basis points each quarter. The efficiency ratio for the full year was 56.7% compared to 55.7% in 2017. During 2018, Bank of Hawaii’s asset quality, capital and liquidity all remained strong. General economic conditions in Hawaii remained healthy during 2018 led by record-high visitors, low unemployment, rising real estate prices and an active construction industry. During the fourth quarter, the company repurchased 325,400 shares of common stock at a cost of $24.9 million under its share repurchase program at an average cost of $76.63 per share. Subsequent to year end, the company repurchased an additional 178,000 shares at an average cost of $72.68 per share. From the beginning of the share repurchase program initiated in July 2001, the company has repurchased 55.3 million share for nearly $2.2 billion at an average cost of $39.14 per share. The Board of Directors recently expanded the share repurchase program authorization by an additional $130 million. Management’s capital allocation strategy is to pay out approximately 50% of net income in dividends to shareholders, maintain adequate capital ratios and use excess funds for share repurchases.
AbbVie-ABBV announced that the U.S. Food and Drug Administration (FDA) approved the use of IMBRUVICA® (ibrutinib) in combination with obinutuzumab (GAZYVA®) for adult patients with previously untreated chronic lymphocytic leukemia/small lymphocytic lymphoma (CLL/SLL). IMBRUVICA is jointly developed and commercialized by Pharmacyclics LLC, an AbbVie company, and Janssen Biotech, Inc, a Johnson & Johnson-JNJ company. "We are living in a time of significant advances in cancer treatment, particularly in blood cancers, and this latest IMBRUVICA FDA approval is an example. I am proud that we can now give physicians and patients a new option to treat CLL and SLL without the need for chemotherapy," said Danelle James, M.D., M.A.S., Head of Clinical Science, Pharmacyclics LLC, an AbbVie company.
Friday, Jan. 25, 2019
AbbVie-ABBV reported fourth quarter revenue rose 7.3% to $8.3 billion with the company reporting a net loss of $1.8 billion or ($1.23) per share. The loss reflects the recent partial $4.11 billion impairment charge related to intangible assets acquired as part of the 2016 acquisition of Stemcentrx. AbbVie will monitor the remaining $1 billion of intangible assets for further impairment. Excluding specified items, adjusted fourth quarter EPS increased 28% to $1.90. During the fourth quarter, global HUMIRA sales increased 0.5% to $4.9 billion. In the U.S., HUMIRA sales grew 9.1% while international sales declined 14.8% operationally due to direct biosimilar competition in certain international markets during the quarter. During the quarter, global revenues from the hematologic oncology portfolio were $1.13 billion, an increase of 50%, including a 42% increase in global IMBRUVICA revenues to $1.0 billion. Fourth quarter global HCV sales were $862 million with other key products generating $1.3 billion in sales. For the full 2018 year, AbbVie’s revenues increased 16% to $32.8 billion with net income up 7% to $5.7 billion and EPS up 11% to $3.66. On an adjusted basis, EPS grew 41% to $7.91 driven by an 8% increase in full year global HUMIRA sales to $19.9 billion, representing 61% of total sales. The loss of patent protection for HUMIRA in international markets is expected to result in a 30%-35% drop in international HUMIRA sales in fiscal 2019 due to aggressive discounting by biosimilar competitors. Despite absorbing approximately $2.4 billion in erosion of sales due to competition, AbbVie expects sales in 2019 to increase 1% on a constant currency basis with the company generating double-digit EPS growth in the range of $7.39 to $7.49 even as the firm funds five major new product launches during the year, each with multibillion sales potential.
Thursday, Jan. 24, 2019
Starbucks-SBUX brewed up 9% revenue growth to a record $6.6 billion in their fiscal first quarter. Global comparable stores were up 4% in the quarter driven by a 3% increase in average ticket. Americas and U.S. comparable store sales increased 4% with transactions flat. China comparable store sales increased 1% with transactions down. Total China sales increased 18% during the quarter due to new store openings. At the end of the quarter, Starbucks operated 3,700 stores in 158 cities in China. Starbucks is celebrating its 20th anniversary of operating in China but still considers the business in China to be in the early innings. During the quarter, Starbucks opened 541 net new stores yielding 29,865 stores at the end of the quarter. Over two-thirds of the new store openings during the quarter were outside the U.S. and approximately 50% were licensed. For the full fiscal 2019 year, Starbucks expects to open about 2,100 net new stores globally with capital expenditures approximating $2 billion. he company’s operating margin declined 310 basis points to 15.3% primarily due to streamline-driven activities and employee investments. Operating income declined 9% during the quarter to $1 billion with net income and EPS down 66% and 61%, respectively, to $761 million and $.61, lapping a significant gain in the prior year period from the acquisition of a joint venture. For fiscal 2019, management expects sales to grow 5% to 7% with global comparable sales in the range of 3% to 4%. Operating margins are expected to be down slightly and EPS are expected in the range of $2.32-$2.37 for the full year. Management reaffirmed its goal of returning $25 billion in cash to shareholders through dividends and share repurchases by 2020. With the company distributing $9 billion in fiscal 2018 via dividends and buybacks and a $5 billion accelerated share repurchase program completed in the first fiscal quarter of 2019, the company is well on its way to meeting that goal.
Wednesday, Jan. 23, 2019
F5 Networks – FFIV reported first fiscal quarter revenue of $543.8 million up 4% from last year, with operating income increasing 11% to $158 million, net income increasing 48% to $130.9 million and EPS increasing 53% to $2.16. Sales growth was driven by continued momentum in software solutions, which drove year over year product revenue growth for the third consecutive quarter. Product revenues, which accounted for 43% of total sales, grew 3% to $234 million. Services revenues, which accounted for 57% of total sales, increased 5% to $310 million. Gross profit margins increased 80 basis points to 84.1%, driven by the increased software and services sales. During the quarter, F5 Networks generated $198 million in operating cash flow, up 4%, and $177 million in free cash flow, down 4% from last year on higher capital investments. During the quarter, the company repurchased $101 million of its shares at an average cost of $177.64 per share. F5 Networks ended the quarter with $1.55 billion in cash and investments on its debt-free balance sheet. Looking ahead to the second quarter, management expects sales between $543 million and $553 million, up 3% from last year at the midpoint, with adjusted earnings per share of $2.53 to $2.56, up 10% at the mid-point. "As customers deploy applications across complex hybrid and multi-cloud environments, the need for consistent security and reliable performance is becoming increasingly evident," said Francois Locoh-Donou, F5 Networks' President and CEO. "We believe F5 is uniquely positioned to solve this growing challenge for our customers with the multi-cloud application services their applications demand."
United Technologies-UTX reported a stronger than expected fourth quarter with revenues up 15% to $18 billion, including 11% organic growth. Net income soared 73% to $686 million and EPS rose 66% to $.83 in the fourth quarter with adjusted EPS up 22% to $1.95. During the fourth quarter, commercial aftermarket sales were up 11% at Pratt & Whitney and up 8% organically at Collins Aerospace Systems. Otis new equipment orders were flat organically and equipment orders at Carrier increased 3% organically. For the full year 2018, revenues increased 11% to $66.5 billion, including 8% organic growth which was the best organic sales growth in over a decade. Net income for the year increased 16% to $5.3 billion with EPS up 14% to $6.50. In 2018, for the first time in over 30 years, Pratt & Whitney manufactured more than 1,000 large commercial and military engines as the aerospace market remains strong. Collins Aerospace was formed by the accretive acquisition of Rockwell Collins with the acquisition already performing better than expected. Carrier launched more than 100 new products during 2018. At Otis, the number of units under maintenance contract exceeded two million for the first time in the company’s history. Return on shareholders’ equity for the year was 13%. Free cash flow increased 22% to $4.4 billion during the year with the company paying $2.2 billion in dividends and repurchasing $325 million of its common shares. Management provided the following 2019 outlook with sales expected in the range of $75.5 billion to $77.0 billion, including organic sales growth of 3% to 5%. Adjusted EPS for 2019 is expected in the range of $7.70 to $8.00 with free cash flow of $4.5 billion to $5.0 billion expected. The economic environment in 2019 is looking good with worldwide GDP expected to increase 2.9% with China leading the way with 6.3% GDP growth. North America should generate GDP growth of about 2.4% with housing in the U.S. expected t rise, inflation remaining in check and consumption strong. UTX is seeing lower order rates in Europe with Western Europe’s GDP only expected to grow 1.4% United Technologies is making good progress in separating the company into three industry-leading firms as previously announced which is expected to be completed by May 2020. Separation costs are expected in the range of $2.5 billion to $3.0 billion primarily related to tax and transaction costs and debt refinancing.
Tuesday, Jan. 22, 2019
Johnson & Johnson-JNJ reported fourth quarter revenues rose 1% to $20.4 billion with net income of $3 billion and EPS of $1.12. On an adjusted basis (excluding intangible amortization expense and special items), net income increased 12.5% to $5.4 billion with EPS up 13.2% to $1.97. For the full year, revenues rose 7% to $81.6 billion with net income up 2% to $15.3 billion and EPS of $5.61. On an adjusted basis, net earnings increased 10% to $26.7 billion with EPS up 12% to $8.18. Worldwide Pharmaceutical sales drove the growth for the year by increasing 12.4% to $40.7 billion thanks to market share gains and strong performance in oncology and continued growth in immunology products. Seven key products recorded double-digit growth including 39% growth in Imbruvica, a treatment for a type of blood or lymph node cancer. Worldwide Medical Device sales increased 1.5% for the year to $27 billion with accelerating sales momentum fueled by interventional solutions, advanced surgery and vision products. Worldwide Consumer sales increased 1.8% for the year to $13.9 billion driven by premium beauty products and strong U.S. over-the-counter consumption and market share gains. JNJ has a blockbuster portfolio with 26 platforms/products generating $1 billion or more in annual sales including 12 platforms/products generating $2 billion or more in annual sales. JNJ invested about $11 billion in research and development during the year to sustain its investments in innovation. Approximately 25% of sales has come from products launched in the last five years. In addition, the company made 13 acquisitions and licensing agreements during the year. JNJ’s long-term strategy is to grow sales faster than the market; grow earnings faster than sales; generate a strong dividend yield and create value through strategic acquisitions and partnerships. JNJ boasts 35 consecutive years of adjusted operational earnings growth and 56 consecutive years of dividend increases while maintaining an AAA-rated balance sheet with net debt of $10.3 billion ($19.7 billion in cash and $30.5 billion of debt as of 12/31/18). Over the last 10 years, the company has returned approximately 50% of free cash flow to shareholders through dividends and share repurchases. Free cash flow increased 4% in 2018 to $18.6 billion with a new $5 billion share repurchase program announced. JNJ has completed about 20% of the repurchase program by buying $900 million of its common stock. The company announced its outlook for fiscal 2019 with sales expected in the range of $80.4 billion to $81.2 billion, reflection operational growth in the range of 0% to 1.0% and adjusted operational growth of 2% to 3%. The company also announced adjusted earnings guidance of $8.50-$8.65 for the full year reflecting expected operational growth in the range of 5.7% to 7.6%.
Friday, Jan. 18, 2019
Johnson & Johnson-JNJ announced that Janssen Pharmaceuticals, Inc., member of the Johnson & Johnson Family of Companies, entered into a research study in collaboration with Apple Inc.-AAPL to investigate whether a new heart health program using an app from Johnson & Johnson in combination with Apple Watch's irregular rhythm notifications and ECG app can accelerate the diagnosis and improve health outcomes of the 33 million people worldwide living with atrial fibrillation (AFib), a condition that can lead to stroke and other potentially devastating complications. In the U.S. alone, AFib is responsible for approximately 130,000 deaths and 750,000 hospitalizations every year. The study aims to analyze the impact of Apple Watch on the early detection and diagnosis of AFib, and the potential to improve outcomes including the prevention of stroke. A multi-year research program will be launched later in 2019. This large-scale program will occur in the U.S. only, and will be designed as a pragmatic randomized controlled research study for individuals age 65 years or older.
Thursday, Jan. 17, 2019
Fastenal-FAST reported fourth quarter revenues rose 13% to $1.2 billion with net income up 11% to $168.8 million and EPS up 11% to $.59. The increase was driven by higher unit sales related primarily to continued strength in underlying market demand and growth from industrial vending and Onsite locations. Sales of fastener products grew 11% on a daily basis, representing 34% of sales in the fourth quarter, with sales of non-fastener products growing 15%, representing 66% of fourth quarter sales. Operating leverage remained strong with operating margin expansion of 30 basis points during the quarter. For the full year, revenues rose 13% to $5 billion with net income up 30% to $751.9 million and EPS up 31% to $2.62 benefiting in part from a lower tax rate. Return on shareholders’ equity improved to a strong 32.7% for the year. Free cash flow increased 15% during the year to $664.7 million with the company repurchasing $103 million of its common stock and paying $441.9 million in dividends. Fastenal also announced a 7.5% increase in its first quarter 2019 dividend to $.43 per share with the dividend yielding a solid 3%. Over the past decade, Fastenal has paid out $2.9 billion in dividends and repurchased 14 million of its shares for $600 million at an average price of $42.86 per share. Fastenal’s long-term goal is to grow the business from $5 billion to $10 billion in revenues in the years ahead while expanding operating margins and generating a high return on invested capital which should continue to make the company a solid investment.
Tuesday, Jan. 15, 2019
Walgreens Boots Alliance-WBA and Microsoft-MSFT have joined forces to develop new health care delivery models, technology and retail innovations to advance and improve the future of health care. The companies will combine the power of Microsoft Azure, Microsoft's cloud and AI platform, health care investments, and new retail solutions with WBA's customer reach, convenient locations, outpatient health care services and industry expertise to make health care delivery more personal, affordable and accessible for people around the world. Through this agreement, Microsoft becomes WBA's strategic cloud provider, and WBA plans to migrate the majority of the company's IT infrastructure onto Microsoft Azure. This will include new transformational platforms in retail, pharmacy and business services, new capability in data and analytics, as well as certain legacy applications and systems. The company also plans to roll out Microsoft 365 to more than 380,000 employees and stores globally, empowering them with the tools for increased productivity, advanced security, internal collaboration and customer engagement.
Friday, Jan. 11, 2019
Microsoft-MSFT has been awarded a five-year contract worth $1.76 billion for delivering enterprise services for the Defense Department, Coast Guard and intelligence services.
T. Rowe Price Group-TROW reported preliminary month-end assets under management of $962 billion as of December 31, 2018, a decline of 3% for the year.
Wednesday, Jan. 9, 2019
MSC Industrial-MSM reported fiscal first quarter revenues rose 8% to $831.6 million with 230 basis points of acquisitive growth from AIS. Net income jumped 25% to $74.2 million with EPS up 27% to $1.33. Earnings benefited from a lower tax rate with EPS up 5%, excluding the tax benefit. The operating margin declined about 50 basis points in the first quarter to 12.4% due to a lower gross margin, impacted by product cost increases and mix shifts, and the impact of the AIS acquisition. Free cash flow declined 8% during the quarter to $66.8 million due to working capital changes and higher capital expenditures. During the quarter, the company paid $35 million in dividends and repurchased approximately 778,000 shares for $63.5 million for an average cost of $81.71 per share. The company’s stockkeeping units increased 20,000 during the quarter to 1.7 million. The industrial economy remained strong in the fiscal first quarter with no signs of recession although there is currently more uncertainty due to trade and economic overhangs and the government shutdown. Tariffs have had no material impact on gross margin so far. The company expects to implement a meaningful price increase in the second quarter given significant supplier price increase activity. The price increase along with increased traction from the sale transformation efforts drives management’s expectations for significantly higher operating margins in the second half of the year. The company expects net sales for the second quarter to be between $817 million and $833 million with average daily sales at the midpoint expected to increase around 9% with EPS expected in the range of $1.22-$1.28.
Tuesday, Jan. 8, 2019
Gentex-GNTX announced that its latest generation of dimmable aircraft windows will be offered as optional content on the new Boeing 777X. Electronically dimmable windows ( EDWs) are an electrochromic-based sunlight and heat control solution that eliminates the need for traditional window shades and lessens dependence on AC systems. EDWs allow passengers to selectively darken the aircraft windows as desired while still enabling them to view the scenery outside.
Friday, Jan. 4, 2019
AbbVie-ABBV determined that it will record an impairment charge on intangible assets acquired as part of AbbVie’s 2016 acquisition of Stemcentrx, Inc. (Stemcentrx). On December 5, 2018, AbbVie announced the decision to stop enrollment for the TAHOE trial, a Phase 3 study evaluating rovalpituzumab tesirine (RovaT), an investigational antibody-drug conjugate targeting the cancer-stem cell-associated delta-like protein 3, as a second-line therapy for advanced small-cell lung cancer. Following this decision, AbbVie began an evaluation of the Stemcentrx-related intangible assets for impairment. The estimated net impact of this impairment and the related adjustment to contingent consideration liabilities is approximately $4 billion. AbbVie continues to evaluate information with respect to the Stemcentrx-related clinical development programs and will monitor the remaining $1 billion of intangible assets for further impairment.
Thursday, Jan. 3, 2019
Private sector employment increased by 271,000 jobs from November to December according to the December ADP National Employment Report®. "We wrapped up 2018 with another month of significant growth in the labor market," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "Although there were increases in most sectors, the busy holiday season greatly impacted both trade and leisure and hospitality. Small businesses also experienced their strongest month of job growth all year." Mark Zandi, chief economist of Moody's Analytics, said, "Businesses continue to add aggressively to their payrolls despite the stock market slump and the trade war. Favorable December weather also helped lift the job market. At the current pace of job growth, low unemployment will get even lower."
Wednesday, Jan. 2, 2019
Apple-AAPL is lowering guidance for the fiscal 2019 first quarter with revenue of approximately $84 billion now expected with gross margin of approximately 38%. Operating expenses of approximately $8.7 billion are expected with other income/(expense) of approximately $550 million and a tax rate of approximately 16.5%. The number of shares used in computing diluted EPS is expected to be approximately 4.77 billion. The lower guidance is due to both macroeconomic and Apple-specific factors. Foreign exchange headwinds and economic weakness in emerging markets, notably China, adversely impacted results. In addition, the timing of iPhone launches, supply constraints of new products and fewer iPhone upgrades, due to fewer carrier subsidies and reduced pricing for iPhone battery replacements, also led to reduced revenue guidance. Apple did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of the revenue shortfall to guidance, and over 100% of the year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad. China’s economy began to slow in the second half of 2018. The government-reported GDP growth during the September quarter was the second lowest in the last 25 years. The economic environment in China has been further impacted by rising trade tensions with the United States. As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to Apple retail stores and channel partners in China declining as the quarter progressed. Market data has shown that the contraction in Greater China’s smartphone market has been particularly sharp. Despite these challenges, Apple believes that their business in China has a bright future. On a more positive note, categories outside of iPhone (Services, Mac, iPad, Wearables/Home/Accessories) combined to grow almost 19% year-over-year. Apple’s installed base of active devices hit a new all-time high—growing by more than 100 million units in 12 months. Services generated over $10.8 billion in revenue during the quarter, growing to a new quarterly record in every geographic segment, and Apple is on track to achieve their goal of doubling the size of this business from 2016 to 2020. Wearables grew by almost 50% year-over-year, as Apple Watch and AirPods were popular among holiday shoppers; launches of MacBook Air and Mac mini powered the Mac to year-over-year revenue growth and the launch of the new iPad Pro drove iPad to year-over-year double-digit revenue growth. Apple also expects to set all-time revenue records in several developed countries, including the United States, Canada, Germany, Italy, Spain, the Netherlands and Korea. And, while Apple saw challenges in some emerging markets, others set records, including Mexico, Poland, Malaysia and Vietnam. Despite the revenue shortfall, Apple expects to report a new all-time record for Apple’s earnings per share. Apple’s profitability and cash flow generation are strong, and the company expects to exit the quarter with approximately $130 billion in net cash.