HI Quality Archives - 2022
Thursday, Dec. 22, 2022
Paychex-PAYX reported record second quarter revenues rose 7% to $1.2 billion with net income up 8% to $360.3 million and EPS up 9% to $.99. These solid results reflect the strong demand the company is seeing for its comprehensive suite of human resource solutions in a tight labor market. Higher client employment levels drove growth as wage inflation has been moderating and holding steady at about 5% over the last quarter. Paychex’s revenue retention is remaining above pre-pandemic levels with the company’s HR Outsourcing now serving over two million employees-hitting a new milestone. Free cash flow increased 26% to $620 million during the first half of the year with the company paying $569 million in dividends at an industry-leading dividend payout rate. The company maintains a strong liquidity position with no net debt. Return on equity on a rolling 12-month basis was a stellar 46%. Despite lower-than-expected revenue growth in its insurance solutions, Paychex raised its overall outlook for revenue growth for the full year to 8% and raised its adjusted EPS guidance from 11%-12% growth to 12%-14% growth given the solid performance in the first half of the year. Rising interest rates are serving as a tailwind for float income. Despite a challenging macroenvironment, Paychex’s small and mid-sized business customers have proven resilient. Paychex’s leading indicators are currently not pointing to any downturn for its customers.
General Dynamics-GD Electric Boat announced the U.S. Navy has awarded a $5.1-billion modification of the previously awarded Columbia Integrated Product and Process Development Contract for the Columbia class of submarines, the nation's next-generation sea-based strategic deterrent.
Johnson & Johnson-JNJ completed its $16.6 billion cash acquisition of Abiomed, Inc. which allows Johnson & Johnson’s MedTech unit to expand its portfolio in the high growth cardiovascular markets, adding solutions for heart recovery to its global market leading Biosense Webster electrophysiology business. The transaction will not have a material impact on financial results for 2022. As previously announced, the transaction will accelerate pro forma MedTech and Johnson & Johnson enterprise revenue growth. It is also expected to be slightly dilutive to neutral to adjusted earnings per share in the first year, considering the impact of financing, and then accretive by approximately $0.05 in 2024, and increasingly accretive thereafter.
The National Football League announced a multi-year agreement with Google-GOOGL granting YouTube TV and YouTube Primetime Channels the right to exclusively distribute NFL Sunday Ticket to consumers in the United States starting with the 2023 NFL season. The Wall Street Journal reported that Google will pay approximately $2 billion a year for the rights. The NFL and Google have been partners since the League first launched its official NFL channel on YouTube in 2015. Since then, the NFL YouTube channel has grown to more than 10 million subscribers who enjoy clips, highlights, game-day compilations and exclusive original content series like NFL Follies and NFL Film’s two-time Emmy winning flagship series Gameday All-Access, a mic’d up players show bringing fans inside the huddle and on the sidelines for exclusive access during the game.
Tuesday, Dec. 20, 2022
NIKE-NKE reported fiscal 2023 second quarter revenues jumped 17% to $13.3 billion with net income coming in flat at $1.3 billion and EPS increasing 2% to $0.85. By geography, North America sales increased 30% to $5.8 billion, Europe, Middle East & Africa sales increased 11% to $3.5 billion, Greater China sales decreased 3% to $1.8 billion and Asia Pacific & Latin America sales increased 19% to $1.6 billion. Gross margin decreased 300 basis points to 42.9%, primarily due to higher markdowns to liquidate inventory, particularly in North America; continued unfavorable changes in net foreign currency exchange rates, elevated freight and logistics costs and increased product input costs; partially offset by strategic pricing actions. NIKE Direct sales were up 16% to $5.4 billion, Nike Brand digital sales increased 25% and wholesale revenues increased 19%. NIKE continued its strong track record of investing to fuel growth and consistently increasing returns to shareholders, including 21 consecutive years of increasing dividend payouts. During the second quarter, NIKE paid dividends of $480 million to shareholders, up 10% from the prior year. In addition, the company repurchased $1.6 billion of its common stock, reflecting 16.5 million shares retired as part of the four-year, $18 billion program approved by the Board of Directors in June 2022. As of November 30, 2022, a total of 19 million shares have been repurchased under the program for a total of approximately $1.9 billion. Nike ended the quarter with $10.6 billion in cash and short-term investments, down approximately $4.5 billion from last year, as free cash flow was offset by share repurchases and cash dividends. Nike expects fiscal 2023 revenue to rise in the mid-single digit range and expects revenue to grow in the low-teen range on a currency-neutral basis.
FactSet-FDS reported first fiscal quarter revenue rose 18.9% to $504.8 million with net income jumping 27.1% to $136.8 million and EPS up 26.2% to $3.52. The revenue increase included the addition of the CUSIP Global Services (CGS) acquisition. Organic revenue grew 8.3% to $459.9 million. Annual Subscription Volume (ASV) plus professional services was $2.0 billion at 11/30/22 compared to $1.7 billion a year ago. The company’s operating margin expanded to 34.1% compared with 28.9% a year ago driven by higher revenue, lower personnel cost as a percentage of revenue, lower third-party content costs and reduced facilities expenses. Client count increased by 93 clients in the past three months to end the quarter at 7,631 primarily driven by an increase in corporate and wealth clients. User count increased by 977 to 180,959 primarily driven by an increase in wealth management, institutional asset management and asset owner users. Annual ASV retention was greater than 95%. When expressed as a percentage of clients, annual retention was 92%. Free cash flow increased 38% during the first quarter to $88.7 million with the company paying $33.7 million in dividends. Share repurchases have been suspended until at least the third quarter as the company is prioritizing repaying debt in connection with the CGS acquisition. The company still has $181.3 million authorized for future share repurchases. FactSet reaffirmed its financial outlook for fiscal 2023 with revenue expected in the range of $2.1 billion to $2.115 billion and EPS expected in the range of $12.70-$13.10. Despite an uncertain and challenging market, FactSet has been a consistent performer with a resilient business model.
3M-MMM announced it will exit per- and polyfluoroalkyl substance (PFAS) manufacturing and work to discontinue the use of PFAS across its product portfolio by the end of 2025. The current annual net sales of manufactured PFAS are approximately $1.3 billion, which is a relatively small percentage of overall revenues. Over the course of the exit from PFAS manufacturing, 3M expects to incur related total pre-tax charges of approximately $1.3 billion to $2.3 billion, including an estimated fourth quarter 2022 pre-tax charge in a range of $0.7 billion to $1.0 billion, primarily non-cash and related to asset impairments. Approximately 70-80% of the total charges are expected to be non-cash.
Friday, Dec. 16, 2022
Accenture-ACN reported first quarter results for fiscal 2023 with revenues up 5% in U.S. dollars, or 15% in local currency, to $15.7 billion, net income up 10% to $1.97 billion and EPS up 11% to $3.08. Consulting generated revenues of $8.44 billion, up 1%, or 10% in local currency, and Managed Services generated revenues of $7.3 billion, up 11%, or 20% in local currency. By region, Europe and Growth Markets generated high-double-digit local currency revenue growth while North America revenues grew 11% in local currency. By business segment, Communications, Media & Technology revenues increased 11%, Financial Services banked a 2% increase, Health & Public Service and Products both grew a healthy 15% and Resources jumped 21%. New bookings declined 3%, but were up 6% in local currency, from record bookings last year. Customers are taking longer to make decisions about purchases due to the weakening economy. During the quarter, Accenture generated $495 million in operating cash flow, down 7% from last year on higher working capital demands, and $396.6 million in free cash flow, up 14% from last year on a substantial drop in capital expenditures. During the quarter, Accenture returned $2.1 billion to shareholders through dividend payments of $706 million and share repurchases of $1.4 billion at an average cost per share of $272.83. For fiscal 2023, the company increased its quarterly dividend by 15% to $1.12 per share. Accenture ended the quarter with $6.2 billion in cash and investments, $45 million in long-term debt and $23.7 billion in shareholders’ equity on its pristine balance sheet. Looking ahead, Accenture expects revenue growth of 8% to 11% in local currency with foreign currency impacting the revenues by a negative 5%. EPS are expected in the range of $11.20 to $11.52, up from previous guidance of $11.09 to $11.41, and up 5% to 8% from fiscal 2022. Accenture continues to expect operating cash flow to be in the range of $8.5 billion to $9.0 billion; property and equipment additions to be $800 million; and free cash flow to be in the range of $7.7 billion to $8.2 billion. Accenture continues to expect to return at least $7.1 billion in cash to shareholders through dividends and share repurchases during fiscal 2023.
Monday, Dec. 12, 2022
Oracle-ORCL reported second quarter revenue increased 18% to $12.3 billion, powered by the infrastructure and applications cloud businesses that grew 53% and 40%, respectively. In addition, Fusion Cloud ERP grew 23% and NetSuite Cloud ERP grew 25%. Cerner contributed $1.5 billion to total revenues during the quarter. Oracle generated a profit of $1.7 billion, or $.63 per share, compared to losses last year due to a payment of a judgment related to a ten-year-old dispute surrounding former CEO Mark Hurd's employment. Year-to-date, Oracle generated free cash flow of $3.1 billion, compared to negative free cash flow of $278 million last year. During the first half of fiscal 2023, Oracle returned $2.7 billion to shareholders through dividend payments of $1.7 billion and share repurchases of $1 billion. The board of directors declared a quarterly cash dividend of $0.32 per share, payable on January 24th, 2023. Given the strong first-half performance, Oracle expects third quarter revenues to grow 17% to 19% and adjusted EPS in the range of $1.17 to $1.21.
Raytheon Technologies'-RTX Board of Directors authorized the repurchase of up to $6 billion of the company's outstanding common stock.
T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.34 trillion as of November 30, 2022. This represents a 4.7% increase since October and a 20.6% decline since year end.
Microsoft-MSFT is acquiring a 4% stake in the London Stock Exchange (LSEG) shares from the Blackstone-Reuters consortium for an undisclosed amount. The deal calls for LSEG to spend $2.8 billion over the next decade on Microsoft products, mainly its Azure cloud service. Microsoft expects to earn an additional $2.2 billion over 10 years from traders, investors, and financial advisers who do business with the LSEG and also use the cloud.
Wednesday, Dec. 7, 2022
Stryker-SYK announced that its Board of Directors has declared a quarterly dividend of $0.75 per share payable January 31, 2023 to shareholders of record at the close of business on December 30, 2022, representing an increase of 7.9% versus the prior year and previous quarter. “We remain confident in our growth outlook, despite the challenging macroeconomic environment”, said Kevin Lobo, Chair & CEO. “Consequently, we are proceeding with a steady increase in our dividend to $0.75 per share, reflecting 7.9% growth."
Brown-Forman-BFB reported second quarter net sales increased 10% (+16% on an organic basis) to $1.1 billion with net income and EPS both down 4% to $227 million and $0.47, respectively. The United States and developed international markets grew organic sales 11% and 14%, respectively, while organic sales in emerging markets jumped 27%. During the first half of fiscal 2023, Jack Daniel’s family of brands sales increased 9% (+17% organic) fueled by Jack Daniel’s Tennessee Whiskey, which experienced broad-based growth across all geographic clusters and the Travel retail channel. Premium bourbons, propelled by Woodford Reserve and Old Forester, delivered 39% sales growth (+40% organic) driven by higher volumes in the United States, which included an estimated net increase in distributor inventories as glass supply constraints eased. The tequila portfolio grew net sales 10% (+11% organic) led by Herradura and el Jimador. Ready-to-Drinks delivered double-digit reported net sales growth driven by consumer preference for convenience and flavor. Jack Daniel’s RTDs/Ready-to-Pours (RTPs) grew reported net sales 9% (+15% organic) led by Australia and Germany and New Mix delivered 48% reported net sales growth (+46% organic) fueled by Mexico with market share gains in the RTD category. Reported advertising expense grew 19% driven by increased investment in the United States to support Jack Daniel’s Tennessee Whiskey, Herradura, the launch of the Jack Daniel’s Bonded series, and Woodford Reserve. During the first half of the year, free cash flow decreased 16% to $255 million with the company paying $180 million in dividends during the same period. Despite foreign exchange and inflationary headwinds, Brown-Forman is on track to deliver another solid year of growth in fiscal 2023, reflected in the Board’s recent approval of a 9% increase in the quarterly cash dividend to $.2055 per share. Brown-Forman has paid regular quarterly cash dividends for 79 consecutive years and has increased the regular cash dividend for 39 consecutive years. The company raised their fiscal 2023 outlook, as they anticipate stronger growth despite global macroeconomic and geopolitical uncertainties. Brown-Forman now expects organic net sales and organic operating income growth in the high-single digit range, compared to mid-single digit growth in previous guidance.
Tuesday, Dec. 6, 2022
Mastercard-MA announced that its Board of Directors has declared a quarterly cash dividend of 57 cents per share, a 16 percent increase over the previous dividend of 49 cents per share. The Board of Directors also approved a new share repurchase program, authorizing the company to repurchase up to $9 billion of its Class A common stock.
Fastenal-FAST reported November net sales and daily sales each rose 10.2% to $577.8 million and $27.5 million, respectively. Sales growth by geography was led by 15.3% growth in Canada/Mexico followed by 10.5% growth in the United States and a 10.1% decline in the rest of the world. Manufacturing sales jumped 15.3% while non-residential construction sales dipped 0.9% during November. Sales of fasteners increased 8.7% while sales of safety items increased 9.6% and other product sales jumped 12%. Approximately 75% of the company’s Top 100 national accounts experienced growth during the quarter with 62% of the company’s public branches growing. Total personnel increased 9% to 22,378 as of the end of November.
Thursday, Dec. 1, 2022
PulteGroup-PHM announced that its Board of Directors voted to approve a 7% increase in the Company’s quarterly cash dividend to $0.16 per common share. "We are pleased to announce that for the fifth year in a row, PulteGroup’s Board has approved an increase in the Company’s dividend," said PulteGroup President and CEO Ryan Marshall. "This action demonstrates our ongoing commitment to returning funds to our shareholders through dividends and share repurchase."
Wednesday, Nov. 30, 2022
Hormel Foods-HRL reported fourth quarter sales declined 5% to $3.3 billion with net earnings down 1% to $281.7 million with EPS remaining flat at $.51. Net sales decreased due to reduced commodity sales and the impact from an additional week of sales last year. EPS was comparable with record results last year, driven by excellent growth in the Jennie-O Turkey Store segment. Gross profit margin improved during the quarter and full-year, driven by Jennie-O Turkey Store and strategic pricing actions. For the full fiscal 2022 year, revenue rose 9% to $12.5 billion with earnings and EPS increasing 10% to $999.9 million and $1.82, respectively. Return on equity for the year was 12.8%. Free cash flow increased 11% during the year to $857 million with the company paying $557.8 million in dividends. Hormel recently increased its dividend 6% to an annual dividend of $1.10. Hormel has increased the dividend 57 consecutive years and has paid a dividend for 94 years without interruption, compounding 12% over the last 10 years. Management is expecting the volatile, complex, and high-cost environment to continue in fiscal 2023. However, management believes higher levels of brand investment, increased production capacity and initial GoFWD actions will drive top-line growth next year. In fiscal 2023, Hormel expects net sales in the range of $12.6 billion to $12.9 billion, representing 1% to 3% growth with EPS expected in the range of $1.83 to $1.93, representing 1% to 6% growth. In addition, Hormel expects capital expenditures to increase 25% to $350 million, which includes a recently approved investment to support growth in China.
Monday, Nov. 28, 2022
UnitedHealth Group-UNH announced revenues for 2022 are now expected to be approximately $324 billion. Net earnings are expected to be $20.85 to $21.05 per share and adjusted net earnings of $21.85 to $22.05 per share. Adjusted net earnings only excludes the after-tax non-cash amortization expense pertaining to acquisition-related intangible assets. UnitedHealth Group also introduced its 2023 outlook which includes revenues of $357 billion to $360 billion, net earnings of $23.15 to $23.65 per share, and adjusted net earnings of $24.40 to $24.90 per share. Cash flows from operations are expected to range from $27 billion to $28 billion.
Tuesday, Nov. 22, 2022
Maximus-MMS reported fourth quarter revenues rose 6% to $1.2 billion with net income increasing 33% to $69 million and EPS up 36% to $1.13. For the full fiscal year, revenues increased 9% to $4.6 billion with net income and EPS down 30% to $203.8 million and $3.29, respectively. Adjusting for COVID-19 response work, normalized organic growth was approximately 18% over the prior year and driven by contributions from all three business segments. Signed contract awards during the year totaled a record $10.5 billion with contracts pending (awarded but unsigned) of $800 million. These awards include the previously announced Centers for Medicare & Medicaid Services Contract for contact Center Operations valued at $6.6 billion. The sales pipeline as of 9/30/22 was $30.7 billion (comprised of $3.4 billion in proposals pending, $3.1 billion in proposals in preparation and $24.2 billion in opportunities tracking). During fiscal 2022, Maximus generated a 13% return on shareholders’ equity and free cash flow of $234 million, down 51% compared to the prior year which benefited from short-term COVID-19 response work. During the year, the company paid $68.8 million in dividends and repurchased $96 million of its common stock. For fiscal 2023, Maximus expects revenues in the range of $4.75 billion to $4.9 billion and adjusted EPS in the range of $3.70-$4.00. In addition, Maximus expects free cash flow to range between $225 million and $275 million.
Monday, Nov. 21, 2022
The Board of Directors of Hormel Foods-HRL announced a 6 percent increase to the annual dividend to shareholders, marking the 57th consecutive annual dividend increase. Since becoming a public company in 1928, Hormel Foods Corporation has paid a regular quarterly dividend without interruption.
Friday, Nov. 19, 2022
Brown-Forman-BFB announced that its Board of Directors approved an increase of 9% to the quarterly cash dividend from $0.1885 per share to $0.2055 per share on its Class A and Class B Common Stock. As a result, the indicated annual cash dividend will rise from $0.7540 per share to $0.8220 per share. The dividend is payable on January 3, 2023, to stockholders of record on December 2, 2022. Brown-Forman, a member of the prestigious S&P 500 Dividend Aristocrats index, has paid regular quarterly cash dividends for 79 years and has increased the cash dividend for 39 consecutive years.
Thursday, Nov. 17, 2022
Ross Stores-ROST rang up $4.57 billion in third quarter sales, even with last year, with net earnings off 11.2% to $342 million and EPS down 8.3% to $1.00. Comparable store sales, which improved steadily during the quarter, declined 3% on top of a robust 14% gain during the same period last year. Operating margin during the quarter was 9.8% compared to 11.4% last year, reflecting the decline in comparable store sales as well as pressure from higher markdowns and unfavorable timing of packaway-related costs. During the quarter, the company added 28 new Ross Stores and 12 new dd's DISCOUNTS locations and expects to end 2022 with 1,693 Ross and 322 dd's DISCOUNTS locations. During the first nine months of the year, Ross Stores generated $54.8 million in free cash flow with the company returning $1.043 billion to shareholders through dividends of $324.6 million and share repurchases of $718.7 million including $244 million repurchased during the third quarter at an average cost per share of $87.14. The company remains on track to buy back a total of $950 million in 2022 under its two-year $1.9 billion repurchase program that extends through 2023. Ross Stores ended the quarter with $3.9 billion in cash, $2.6 billion in long-term debt and $4.1 billion in shareholders’ equity on its dressy balance sheet. Looking ahead, management expects a very promotional holiday selling season with ongoing inflationary headwinds to pressure its low-to-moderate income customers. However, given favorable sales and earnings comparisons in the fourth quarter, third quarter sales momentum and improved holiday assortments, it raised guidance. Fourth quarter same store sales are now expected to be flat to down 2% on top of a 9% gain in the prior year, with earnings per share forecasted in the range of $1.13 to $1.26. Earnings per share for fiscal 2022 are now projected to be in the range of $4.21 to $4.34 versus $4.87 last year on flat to up 3% sales growth. During the conference call, Barbara Rentler, CEO, concluded, “There remains a high level of uncertainty in today’s macroeconomic and geopolitical environment that continues to negatively impact consumer sentiment and demand. However, we remain confident in the off-price business model, which offers both value and convenience. Given consumers’ heightened focus on both of these attributes, it should bode well for our ability to expand our market share and profitability in the future.”
Wednesday, Nov. 16, 2022
TJX Companies-TJX reported sales declined 2.9% to $12.2 billion with net earnings increasing 3.9% to $1.062 billion and EPS up 8.3% to $0.91. U.S. comp store sales declined 2% compared to a 16% increase last year. By division, domestic Marmaxx sales increased 3% to $7.46 billion despite lapping 11% growth last year. Marmaxx’s third quarter sales growth was driven by apparel sales, signaling an increase in the company’s market share. HomeGoods sales declined 14% to $1.95 billion as consumer spending shifted in the pandemic’s aftermath. TJX Canada sales dipped 1% to $1.3 billion and International sales declined 16% to $1.48 billion on foreign currency headwinds. Inventories jumped 26% to $8.3 billion, higher than expected due to early receipt of merchandise as the supply chain continued to improve. Operating margin improved 20 basis points to 11.2% due to the timing of expenses, most of which will reverse during the fourth quarter. During the first nine months, TJX generated $1.06 billion in operating cash flow with the company returning $2.8 billion to shareholders through share repurchases of $1.8 billion at an average cost per share of $61.86 and dividends of $1 billion. TJX ended the quarter with $3.4 billion in cash, $2.9 billion in long-term debt and $5.7 billion in shareholders’ equity on its dressy balance sheet. Management believes the decline in same store sales will reverse during the holiday season with same store sales expected to be flat to up 1% during the fourth quarter. For the full year, EPS are expected in the $2.93 to $2.97 range, up from prior guidance of $2.87 to $2.95. Chief Executive Officer and President, Ernie Herman stated, “Across our geographies, our values and exciting, treasure-hunt shopping experience continued to resonate with consumers throughout the quarter. Looking forward, while not immune to macro factors, we are convinced that our flexible business model and value proposition will continue to be tremendous advantages, as they have been for more than four decades and through many kinds of retail and economic environments.”
Cisco Systems-CSCO reported fiscal first quarter revenues increased 6% to a record $13.6 billion with net income decreasing 10% to $2.7 billion and EPS down 7% to $.65. By segment, product revenue was up 11% and service revenue was flat. Total annualized recurring revenue (ARR) increased 7% to $23.2 billion and product ARR was up 12% year-over-year. Remaining performance obligations (RPO) increased 3% to $30.9 billion and product RPO was up 5% year-over-year. Free cash flow increased 15% to $3.8 billion during the first quarter with the company paying $1.6 billion in dividends and repurchasing $556 million of its commons stock during the quarter at an average price of $43.76 per share. Cisco has $14.7 billion remaining authorized for future share repurchases. Cisco maintains a strong balance sheet and ended the quarter with $19.8 billion in cash and investments, $7.6 billion in long-term debt and $40.3 billion in shareholders’ equity. Given the strong first quarter results, a significant backlog, strong RPO and easing supply constraints, management raised guidance for fiscal 2023. Management expects second quarter revenue growth of 4.5% to 6.5% and EPS to be in the range of $.59 to $.64. For the full fiscal year, Cisco now expects revenue growth of 4.5% to 6.5% and EPS to be in the range of $2.63 to $2.76.
Tuesday, Nov. 15, 2022
NIKE-NKE announced that its Board of Directors approved an 11% increase in its quarterly cash dividend to $0.34 per share, marking the company’s 21st consecutive year of increasing dividend payouts.
According to Mastercard SpendingPulseTM, U.S. retail sales excluding automotive is expected to grow +15% on Black Friday compared to last year. Mastercard SpendingPulse measures in-store and online retail sales across all forms of payment and is not adjusted for inflation. This Black Friday, Department Store sales are anticipated to be up nearly +25% year-over-year as consumers shop online and in-store at these one-stop shops for all the gifts on their holiday shopping list. Restaurants are expected to experience +35% year-over-year growth on Black Friday as consumers prioritize experiences and dining out with friends and family. Travel companies are also getting in on the promotional holiday. Separate from total retail sales, Airlines and Lodging are expected to experience double-digit growth on Black Friday as consumers plan their next getaway. As anticipated, early holiday promotions drove consumers online and into stores. According to Mastercard SpendingPulse, October U.S. retail sales excluding automotive increased 9.5% year over year and 23.6% compared to October 2019. E-commerce sales in October grew 12.7% year over year. Experiential sectors including Restaurants, Airlines and Lodging all saw double-digit growth compared to both 2021 and 2019. "In October we saw the strength in the labor market continue to support consumer purchasing power," said Michelle Meyer, U.S. Chief Economist, Mastercard Economics Institute. "Coupled with heavy online promotions, consumers got a head start on their holiday shopping, fueling another strong month of retail sales."
Monday, Nov. 14, 2022
Berkshire Hathaway-BRKB bought $9 billion of stocks during the third quarter. Warren Buffett added to his large Chevron and Occidental Petroleum positions, while Berkshire established new positions in Taiwan Semiconductor, Louisiana-Pacific and Jeffries Financial Group. He also sold about $5.3 billion of stocks including U.S. Bancorp, Bank of New York Mellon and Store Capital.
Thursday, Nov. 10, 2022
T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.28 trillionas of October 31, 2022, representing a 24% decline since year end.
Wednesday, Nov. 9, 2022
The board of directors of Automatic Data Processing-ADP approved a 20% increase in the quarterly cash dividend to an annual rate of $5.00 per share. The increased cash dividend marks the 48th consecutive year in which ADP has raised its quarterly dividend. In addition, the board of directors of ADP authorized the purchase of $5 billion of its common stock.
Meta Platforms-META is reducing its workforce by about 13%, or 11,000 employees, across the company’s business segments. The company’s outlook for fourth quarter 2022 revenue of $30-32.5 billion is unchanged. The 2022 and 2023 expense outlooks provided on the third quarter 2022 earnings conference call contemplated the financial impact of the announced layoffs. The 2022 expense outlook of $85-87 billion also remains unchanged and includes the estimated severance-related costs expected to be recorded in the fourth quarter of 2022 as well as the previously announced $900 million in estimated charges related to consolidating office facilities. The estimated impact of charges related to severance in the fourth quarter of 2022, net of reduced accruals for employee costs, is not material. The 2023 expense budget is now expected to be in the range of $94-100 billion, lowered from $96- 101 billion previously. This includes the previously disclosed $2 billion in estimated charges related to consolidating office facilities. The updated range reflects the plan to add fewer employees in 2023 than previously expected. Meta continues to anticipate that Reality Labs operating losses in 2023 will grow significantly year-over-year. In addition, Meta is updating its 2023 capital expenditures outlook to be in the range of $34-37 billion, narrowed from $34-39 billion.
Saturday, Nov. 5, 2002
Berkshire Hathaway-BRKB reported the company’s net worth during the first nine months of 2022 decreased by 10%, or $50.8 billion, to $455.4 billion with book value equal to about $310,661 per Class A share as of 9/30/22.
Berkshire Hathaway reported third quarter revenues increased 9% to $76.9 billion with all business segments reporting revenue growth. Berkshire reported a net loss of $2.7 billion during the third quarter compared to $10.3 billion in earnings in the prior year period. Investment gains and losses from changes in the market prices of Berkshire’s equity investments will produce significant volatility in earnings. Excluding investment and derivative losses of $10.4 billion, operating earnings jumped 20% to $7.8 billion in the third quarter, which better reflects the underlying strength of the business.
The investment losses were primarily paper losses from changes in unrealized gains of equity holdings during the third quarter given the stock market’s pullback. Berkshire’s five major equity investment holdings which represent about 73% of total equities held, include American Express at $20.5 billion (which charged 17% lower during the first nine months of 2022 or $4.3 billion); Apple at $126.5 billion (which dropped 21.5% during the first nine months or $34.7 billion); Bank of America at $31.2 billion (which declined $14.8 billion in value since year end); and Coca-Cola with the stock dropping 6%, or $1.3 billion, to $22.4 billion at the end of the first nine months of 2022. Chevron rounds out the top five at $24.4 billion after Buffett purchased more than $20 billion of Chevron during the first quarter.
During the third quarter, Berkshire’s insurance businesses generated losses from underwriting of $962 million, which included $2.7 billion from Hurricane Ian, compared to underwriting losses last year of $784 million, which included $1.7 billion in losses from Hurricane Ida and floods in Europe. Underwriting results were also negatively impacted by increases in claims frequencies and severities at GEICO due to significant cost inflation in automobile markets. Insurance investment income increased 21% during the quarter to $1.4 billion, reflecting higher dividend and interest income as interest rates have increased significantly this year. The float of the insurance operations approximated $150 billion as of quarter end, an increase of $3 billion since year end. The average cost of float was 0.24% as the combined insurance operations generated pre-tax operating losses of $358 million during the first nine months of 2022. In October 2022, Berkshire acquired insurer, Alleghany, which will add an estimated $13.5 billion to float.
Burlington Northern Santa Fe’s revenues chugged 16% higher during the third quarter to $6.7 billion, reflecting higher revenue per car/unit, with net earnings declining 6% to $1.4 billion due to lower overall freight volumes and higher average fuel and other operating costs. The volume decreases were in all business segments, except agricultural products, reflecting supply chain disruptions, network challenges, lower demand for crude by rail and lower building products shipments. Rail labor union discussions continue with further announcements expected in November.
Berkshire Hathaway Energy reported revenues rose 7% during the third quarter to $7.5 billion with net earnings rising 6% to $1.6 billion. The earnings increase reflected higher earnings from tax equity investments and from the natural gas pipeline and Northern Powergrid, partly offset by lower earnings from the U.S. regulated utilities and real estate brokerage business.
Berkshire’s Manufacturing businesses reported revenues rose 9% to $19.0 billion with operating earnings up 18% to $2.9 billion for the third quarter. The Buildings Products segment led the way for the quarter with revenues rising 19% to $7.6 billion and operating earnings jumping 48% to $1.2 billion thanks to strong demand for residential housing construction. Significant increases in mortgage interest rates will likely slow demand for new housing construction over the balance of the year. Berkshire’s operations also continue to be negatively impacted by persistent supply chain disruptions and significant cost increases for raw materials, freight, labor and other input costs.
Service and Retailing revenues increased 9% during the quarter to $23.1 billion with pre-tax earnings jumping 19% to $1.3 billion. The Service group led the way as revenue increased 15% to $4.8 billion with pre-tax earnings up 16% to $806 million thanks to strong growth from TTI, reflecting strong demand in nearly all electronic component markets, and the aviation business services due to higher training hours at FlightSafety and significantly higher customer flight hours at NetJets. However, during the third quarter, new orders slowed at TTI in part attributable to inventory levels within the supply chain.
Berkshire’s balance sheet continues to reflect very significant liquidity and a very strong capital base of $455.4 billion as of 9/30/22. Excluding railroad, energy and utility investments, Berkshire ended the quarter with $458.7 billion in investments allocated approximately 66.7% to equities ($306.2 billion), 4.1% to fixed-income investments ($18.6 billion), 22.9% in cash and equivalents ($105.2 billion) and 6.3% in equity method investments ($28.7 billion) which includes 26.5% of Kraft Heinz, 20.9% of Occidental Petroleum and 38.6% in Pilot Travel Centers. Berkshire’s share of Kraft and Pilot earnings and distributions are included in Berkshire’s consolidated financial statements and Occidental’s share will be included in the fourth quarter.
Free cash flow declined 28% during the first nine months of the year to $16.1 billion due to lower earnings and higher capital expenditures. During the first nine months, capital expenditures approximated $10.9 billion, which included $7.9 billion for BNSF and BHE, its railroad and utility and energy units. Berkshire expects capital expenditures for the balance of 2022 for BNSF and BHE to approximate $3.7 billion. During the first nine months of 2022, Berkshire paid cash of $66.2 billion to acquire equity securities and received proceeds of $17.3 billion from the sale of stocks. The stock purchases included about $21 billion in Chevron, about $11 billion in Occidental Petroleum, about $6 billion in Activision Blizzard as an arbitrage play, $5 billion in German stocks and Japanese stocks, $4 billion in HP, Inc. and an undisclosed additional amount of Apple. In addition, Berkshire purchased a net $22 billion in Treasury Bills and fixed-income investments. In June 2022, Berkshire Hathaway Energy (BHE) acquired the BHE common stock held by Greg Abel, Berkshire’s Vice Chairman, for $870 million. Subsequent to quarter end, Berkshire completed its purchase of Alleghany, a property and casualty reinsurance and insurance business, for $11.6 billion in cash. In the first quarter of 2023, Berkshire expects to acquire an additional 41.4% interest in Pilot with the value to be determined based on earnings in 2022 and net debt at year end. Berkshire will become the majority owner of Pilot at that time.
Berkshire repurchases its shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett and Charlie Munger. During the first nine months, Berkshire repurchased $5.2 billion of its common stock, including $1 billion in the third quarter. These repurchases included 1,821 Class A shares purchased at an average price of approximately $424,975 per share during July and September 2022. After quarter end, Berkshire repurchased an additional $500 million of its common stock in October.
On Aug. 16, 2022, the Inflation Reduction Act was signed into law. The 2022 act contains numerous provisions including a 15% corporate alternative minimum tax, expanded tax credits for clean energy incentives and a 1% excise tax on corporate stock repurchases, which all become effective in 2023. Berkshire currently does not expect a material impact on its financial statements from the act.
Friday, Nov. 4, 2022
Fastenal-FAST reported October net sales and average daily sales each increased 13.6% to $603.7 million and $28,750, respectively. Double-digit daily sales growth was generated in North America while the rest of the world declined. Manufacturing sales jumped 19% while non-residential construction sales were up 1%. All product lines generated double-digit sales growth led by Safety products which were up 14.7%. More than 80% of the company’s Top 100 national accounts are growing while 67% of the company’s public branches were growing. Headcount was up 9% to 22,210 at the end of October.
Thursday, Nov. 3, 2022
Starbucks-SBUX reported fourth quarter sales increased 3% to $8.4 billion with net income declining 50% to $878 million and EPS down 49% to $.76. Global comparable store sales increased 7%, driven by an 8% increase in average ticket. U.S. same store comps increased 11%, driven by a 10% increase in average ticket and a 1% increase in comparable transactions. International comparable store sales decreased 5% and China comparable store sales declined 16%, both primarily impacted by a decline in comparable transactions. During the quarter, Active Starbucks Rewards Memberships were up 16% in the U.S. to 28.7 million members. For fiscal 2022, sales increased 11% to a record $32.3 billion with net income and EPS both down slightly over 20% to $3.3 billion and $2.83, respectively. Operating margin decreased 250 basis points to 14.3%, primarily driven by investments and growth in labor including enhanced store partner wages, inflationary pressures, as well as sales deleverage related to COVID-19 restrictions in China. During the fiscal year, Starbucks generated a 11.7% return on assets and $2.6 billion in free cash flow. The company returned $6.3 billion to shareholders through dividend payments of $2.3 billion and share repurchases of $4 billion. The Board of Directors declared a cash dividend of $0.53 per share, payable on November 25, 2022. During the quarter, the company opened 763 net new stores with China surpassing 6,000 stores, pushing the global store count to record 35,711 stores. Management saw accelerating demand for Starbucks coffee around the world and early evidence of the success of their U.S. Reinvention investments in the fourth quarter. Looking ahead to fiscal 2023, Starbucks expects sales growth of 10% to 12% and EPS growth near the high end of 15% to 20%. In addition, the company expects global comparable store sales growth near the high end of 7% to 9% and global store growth of 7%. Management expects meaningfully higher margins in the second half of 2023, as margin benefits accumulate from the continued reinvention plan coupled with the expected recovery in China.
Wednesday, Nov. 2, 2022
Cognizant Technology Solutions-CTSH reported revenue grew 2.4% to $4.9 billion with net income increasing 15.6% to $629 million and EPS up 18.4% to $1.22. Adjusted EPS, which excludes discrete tax items, increased 10.4% to $1.17. By region, North America revenue increased 3.9%, or 4% in constant currency to $3.6 billion, Europe increased 3.3%, or 10.3% in constant currency, to $884 million and Rest of World revenue increased 2.3%, or 9.3% in constant currency, to $352 million. By business segment, Financial Services revenue dipped 1.5%, up 1.6% in constant currency, to $1.5 billion, driven by digital services among public sector clients in the UK and insurance clients, offset by a 180 basis point negative impact from the sale of the Samlink subsidiary completed during the first quarter. Heath Sciences revenue increased 3.8%, or 5.5% in constant currency, to $1.4 billion, driven by digital services among pharmaceutical and healthcare payor clients. Products & Resources revenue increased 3.7%, or 8.2% in constant currency, to $1.15 billion, driven by digital services among logistics, automotive, consumer goods and travel and hospitality clients. Communications, Media & Technology revenue increased 6%, or 10.4% in constant currency, to $783 million, driven by strength among digital native companies. Trailing 12-month voluntary attrition of 29% reflects continuing challenges related to staffing. However, management continues to focus on attracting, retaining and rallying employees which is expected to drive down attrition during the fourth quarter. Employee attrition along with competition for talent with digital skills led to fulfillment challenges that pressured bookings which declined 2% and represented an in-period book-to-bill of about 1.0x. Trailing 12-month bookings of $23.1 billion represented a book-to-bill of about 1.2x. During the quarter, the company generated $953 million in free cash flow, up 6.2% from last year. Cognizant repurchased $300 million of its shares during the quarter at an average cost of $65.22 per share, leaving $1.1 billion remaining under the repurchase authorization as of September 30, 2022. On November 2, 2022, the company increased its repurchase authorization by $2 billion. During the first nine months of 2022, the company generated $1.6 billion in free cash flow and returned $1.53 billion to shareholders through repurchases of $1.1 billion and dividends of $425 million. Cognizant ended the quarter with $2.7 billion in cash and short-term investments, $636 million in long-term debt and $12.0 billion in shareholders’ equity on its pristine balance sheet. Given year-to-date results, continuing fulfillment challenges related to staffing shortages along with macroeconomic and geopolitical uncertainties, management lowered guidance for the fourth quarter with revenue now expected to decline by 1.2% to 0.2%, or up 2.0% to 3.0% in constant currency, to $4.72 billion to $4.77 billion. For the full year, revenues are expected to grow 4.5%, or 7.0% in constant currency, to $19.3 billion with EPS in the range of $4.43 to $4.46, up 7% to 8% from last year and down from $4.51 to $4.57 previously guided.
Canadian National Railway-CNI announced that October was the single best month ever for Western Canadian grain movement on CN’s network. The company moved over 3.23 million metric tonnes of grain from Western Canada. This exceeds the previous record set in October 2020 by over 50,000 metric tonnes and follows an all-time record set for weekly movement earlier in the month. These records were accomplished despite some challenges in the supply chain that CN and its supply chain partners addressed by working together.
Booking Holdings-BKNG reported strong third quarter financial results with record revenues traveling 29% higher, or 47% on a constant currency basis, to $6.1 billion with net income and EPS both more than doubling to $1.7 billion and $41.98, respectively. Third quarter gross travel bookings soared 36%, or 52% on a constant currency basis, to $32.1 billion. Room nights booked in the third quarter jumped 31% to 240 million. Rental car days motored 25% higher while airline tickets flew 45% higher. Year-to-date, free cash flow jumped 75% to $4.1 billion with the company repurchasing $4.3 billion of its common stock. Booking has reduced its shares outstanding by 5% since the beginning of the year. In October, the company repurchased an additional $595 million of its common stock with $5.6 billion remaining authorized for future share repurchases. The company is gaining market share with 45% of its bookings done directly on its own app, which is the most downloaded online travel app which enables the company to directly engage with travelers. Despite rising concerns about the macroeconomic environment, the company is encouraged by an improvement in room night trends which continued into October and by the strong level of bookings for travel in early 2023. The company is not seeing travelers trading down to cheaper travel or shortening their stays. The company is seeing travel growth in all geographic regions with Asia’s delayed travel now recovering to exceed pre-pandemic levels.
Tuesday, Nov. 1, 2022
Stryker-SYK reported third quarter sales increased 7.7% to $4.5 billion with net income jumping 86% to $816 million and EPS up 88% to $2.14. Adjusted net earnings and EPS decreased 4% to $810 million and $2.12, respectively. Adjusted net earnings were impacted by worsening foreign currency and ongoing inflation, which is expected to impact full year results. By business segment, MedSurg and Neurotechnology sales increased 10.2% to $2.6 billion. Organic net sales increased 10.8% in the quarter including 9.8% from increased unit volume and 1% from higher prices. Orthopaedics and Spine sales grew 4.4% to $1.9 billion. Organic net sales increased 8.7% in the quarter including 11.6% from increased unit volume, partially offset by 2.9% from lower prices. During the first nine months, Stryker generated $1.6 billion in free cash flow with the company returning $788 million to shareholders through dividend payments. Stryker ended the quarter with $1.5 billion in cash and investments, $12.7 billion in long-term debt and $16.4 billion in shareholders’ equity. Considering third quarter results, the strong order book for capital equipment and the sales momentum in Stryker’s implant and capital businesses, management now expects full year 2022 organic net sales growth to be in the range of 8.5% to 9%. If foreign currency exchange rates hold near current levels, Stryker expects net sales in the full year to be adversely impacted by approximately 4% and adjusted EPS to be adversely impacted by approximately $.35 to $.40, to a range of $9.15 to $9.25.
Johnson & Johnson-JNJ announced an agreement to acquire Abiomed, a world leader in breakthrough heart, lung and kidney support technologies with an 18-year track record of profitable growth, for an upfront payment of $380.00 per share in cash, corresponding to an enterprise value of approximately $16.6 billion which includes cash acquired. Abiomed shareholders will also receive a non-tradeable contingent value right (CVR) entitling the holder to receive up to $35.00 per share in cash if certain commercial and clinical milestones are achieved. The transaction broadens Johnson & Johnson MedTech’s position as a growing cardiovascular innovator, advancing the standard of care in one of healthcare’s largest unmet need disease states: heart failure and recovery. Cardiovascular disease is the number one cause of death. All forms of cardiovascular disease lead to heart failure, which is a significant cost to health systems due to hospitalizations and extended length of stay. The proposed transaction will accelerate pro forma MedTech and Johnson & Johnson enterprise revenue growth. Johnson & Johnson expects the transaction to be slightly dilutive to neutral to adjusted earnings per share in the first year, considering the impact of financing, and then accretive by approximately $0.05 in 2024, and increasingly accretive thereafter. Johnson & Johnson expects to fund the transaction through a combination of cash on hand and short-term financing. Johnson & Johnson expects to maintain a strong balance sheet and to continue to support its stated capital allocation priorities of R&D investment, competitive dividends, value-creating acquisitions and strategic share repurchases. The transaction is expected to be completed prior to the end of the first quarter of 2023.
Friday, Oct. 28, 2022
Gentex-GNTX reported third quarter net sales jumped 24% to $493.6 million with net income down 5% to $72.7 million and EPS decreasing 3% to $.31. During the quarter, light vehicle production in the company’s primary markets increased 26% and the company had a record number of Full Display Mirror shipments. Nevertheless, product mix for the third quarter and overall sales levels were still impacted by customer order adjustments, supply chain challenges, and labor availability issues. Together, these headwinds resulted in unit shipments being approximately 750,000 units lower than the original forecast at the beginning of the quarter. Gross margin was 29.8% compared to 35.3% for the third quarter of 2021. Gross margin was impacted on a quarter over quarter basis by raw material cost increases, unfavorable product mix, labor cost increases, and prior commitments to annual customer price reductions. However, management is making progress on cost escalation conversations with customers, and they expect relief to begin during the fourth quarter, which should provide improvement in margin profile as they move through 2023 and into 2024. During the third quarter of 2022, the company repurchased 0.9 million shares of its common stock at an average price of $26 per share for a total of $22.3 million with 21.5 million shares remaining authorized for future share repurchases. The company maintains a strong balance sheet with more than $393 million in cash and investments, no long-term debt and $2 billion in shareholders’ equity. Based on the higher vehicle production forecast and the actual results of the third quarter, management updated their sales and gross margin outlook for 2022 to a range of revenues of $1.90 billion to $1.95 billion from the previous guidance of $1.87 billion to $1.97 billion with gross margins now expected to range between 32% to 33% from previous expectations of 33% to 34%. Additionally, based on the company’s current forecasts for light vehicle production for calendar year 2023, the company still expects calendar year 2023 revenue growth of approximately 15% - 20% above the new 2022 revenue guidance of $1.90 - $1.95 billion. Management believes now is an opportune time to invest in Gentex for the long-term investor, as they continue to have strong growth prospects, revenue growth and strong customer desire for their products.
Thursday, Oct. 27, 2022
Baxter International-BAX reported third quarter revenue increased a healthy 17% to $3.7 billion with a loss of $2.9 billion or ($5.83) per share. This loss reflects impairment charges of $3.1 billion related to Baxter’s acquisition of Hillrom primarily reflecting rising interest rates and broad declines in equity valuations. Excluding special items related to the Hillrom acquisition, Baxter’s adjusted net income was $414 million with EPS of $.82. U.S. revenue totaled $1.8 billion, up 40%, and international sales of $1.9 billion increased 1%. Among Baxter’s product categories, Renal Care, Clinical Nutrition and Advanced Surgery delivered mid-single-digit growth at constant currency rates. Medication Delivery performance was comparable to the same period in 2021 at constant currency rates. Growth in the quarter was partially offset by a low single-digit decline in Pharmaceuticals, primarily driven by increased generic competition. As expected, Acute Therapies and BioPharma Solutions both declined at constant currency rates, reflecting challenging year-over-year comparisons due to a return to normal sales patterns following increased COVID-19 related sales in the third quarter of 2021. Legacy Hillrom’s Front Line Care, Patient Support Systems and Surgical Solutions businesses contributed $735 million to third-quarter sales. Year-to-date, free cash flow declined 71% to $293 million, due to working capital changes. During the quarter, Baxter returned over $20 million to shareholders through share repurchases and paid a quarterly dividend of $.29 per share. For the full-year, Baxter now expects EPS of ($4.52) to ($4.45) and adjusted EPS of $3.53 to $3.60. The company expects sales growth of 17% to 18%, approximately 23% on a constant currency basis and low single digits on an operational basis. Baxter's updated full-year financial outlook reflects the Hillrom impairment charges, the continued impact from supply constraints for electromechanical components, foreign exchange pressures as well as increased interest expenses and a higher effective tax rate.
Apple-AAPL reported record fourth quarter results with revenues climbing 8% to $90.1 billion with net income up 1% to $20.7 billion and EPS up 4% to $1.29. Fourth quarter revenue growth was led by the 25% growth in Macs to $11.5 billion with iPhone sales growing 10% to $42.6 billion, Wearables, Home and Accessories sales growing 10% to $9.7 billion and Services revenues increasing 5% to $19.2 billion, while iPad sales declined 13% to $7.2 billion due primarily to foreign exchange headwinds and tough comparisons with the prior year period when new products were launched. Led by 23% growth in the Rest of Asia, Apple reported growth in all geographies during the fourth quarter except for Japan. For the full fiscal year, revenues increased 8% to $394.3 billion with net income up 5% to $99.8 billion and EPS up 9% to $6.11. Apple’s active installed base of devices reached all-time highs for all major product categories thanks to the strength of Apple’s ecosystem and unmatched customer loyalty. Apple’s paid subscriptions to its services exceed 900 million, an increase of 155 million since last year. Apple’s Services revenues reached a record $78 billion during the year, which is the size of a Fortune 50 company. During the year, free cash flow increased 20% to $111 billion. Apple paid $14.8 billion in dividends during the year and repurchased $89.4 billion of its common stock. Since the share repurchase program began, Apple has repurchased $550 billion of its common stock at an average price of $47 per share, demonstrating the success of the buyback program. During the important holiday December quarter, Apple expects the supply issues with iPhone 14 Pro and Pro Max to continue a little longer while Mac sales are expected to decline substantially due to challenging comparisons with the prior year period when new products were launched. Substantial foreign exchange headwinds of 10% are expected in the quarter due to the strong dollar. Services are expected to grow in the quarter but be impacted by foreign exchange headwinds and weaker gaming and digital advertising. Gross margin the upcoming quarter is expected to be between 42.5% and 43.5% with operating expenses in the range of $14.7 billion to $14.9 billion.
T. Rowe Price-TROW reported third quarter revenues declined 18.7% to $1.59 billion with net income falling 50.5% to $384.4 million and EPS dropping 49.8% to $1.66. During the quarter, assets under management fell $79.7 billion to $1.23 trillion on market depreciation of $55.1 billion and net outflows of $24.6 billion, largely driven by a handful of growth-oriented equity strategies amplified this quarter with redemptions from a few large institutional clients. The quarter’s investment advisory fee annualized effective rate of 42.5 basis points declined by 1.1 basis points from last year’s third quarter as clients shifted to lower fee asset classes, which was partially offset by higher-than-average fees on alternative asset products and lower money market fee waivers. Operating expenses increased 20% from last year on higher spend on compensation, technology and facilities mostly related to the OHA acquisition. During the first nine months of the year, T. Rowe Price generated $2.28 billion in free cash flow, down 21.4% from last year on the lower net income. Year-to-date, T. Rowe Price spent $744 million to repurchase 2.5% of its outstanding shares at an average cost per share of $130.35, including $224.5 million to repurchase 1.9 million shares during the third quarter. In addition, the firm paid dividends of $832.4 million with the stock now sporting an attractive 4.4% dividend yield. T. Rowe Price ended the quarter with $4.46 billion in cash and investments, no long-term debt and $8.9 billion in shareholders’ equity on its pristine balance sheet. Rob Sharps, chief executive officer and president, commented, “Throughout this year, we have taken steps to slow our expense growth, including focusing on our highest priority initiatives, slowing hiring, and reducing planned third party spend. We continue to evaluate market conditions and will consider other levers as needed to manage expense growth and support our ability to invest in strategic initiatives.”
Mastercard-MA reported third quarter revenues charged ahead 15%, or 23% on a currency neutral basis, to $5.8 billion with net income increasing 4% to $2.5 billion and EPS up 6% to $2.58. Primary drivers of the revenue increase included: gross dollar volume growth of 11% on a local currency basis to $2.1 trillion; cross-border volume growth of 44% on a local currency basis; switched transaction growth of 9%; and 17% growth in other revenues, driven primarily by Mastercard’s Cyber & Intelligence and Data & Services solutions. Consumer spending remains resilient and cross-border travel continues to recover. As of September 30, 2022, Mastercard had issued 3.0 billion Mastercard and Maestro branded cards accepted at 90 million merchants worldwide. Operating expenses increased 17% mainly due to higher personnel costs to support continued investments in strategic investments across payments, services and new network capabilities. During the first nine months of 2022, Mastercard generated $7.9 billion in free cash flow with the company returning $7.8 billion to shareholders through dividends of $1.4 billion and share repurchases of $6.3 billion at an average cost of $344.26 per share. Current quarter-to-date through October 24, Mastercard repurchased an additional $505 million if its shares at an average cost of $297.06 per share leaving $5.1 billion remaining under the approved share repurchase programs. As of September 30, 2022, Mastercard reported $7.6 billion in cash, $13.6 billion in long-term debt and $6.4 billion in shareholders’ equity on its sturdy balance sheet. Looking ahead to the fourth quarter, year-over-year net revenue is expected to grow at the high end of the mid-teens range on a currency neutral basis, boosted by resilient consumer spending, stable to slightly improved cross-border travel growth, higher rebates consistent with seasonal norms and lapping of strong year-ago results after border restriction were lifted. Operating expenses are expected to grow in the low double-digits. During the earnings conference call, Michael Miebach, Mastercard CEO, stated, “We will continue to monitor impacts related to elevated inflation and other macroeconomic and geopolitical risks. Our diversified business model and ability to modulate expenses position us well to navigate through periods of uncertainty while maintaining focus on our strategic objectives.”
Wednesday, Oct. 26, 2022
Meta Platforms-META reported third quarter revenue declined 4% to $27.7 billion with net income and EPS cut in half to $4.4 billion and $1.64, respectively. The revenue decline was primarily due to foreign exchange headwinds and would have been up 2% on a constant-currency basis. The low sales growth reflected weak advertising demand given the uncertain macroenvironment, especially among large advertisers. Earnings dropped due to a 45% increase in research and development expenses notably in the company’s Reality Labs unit focused on the metaverse, which reported a $3.7 billion loss during the quarter. Facebook daily active users were 1.98 billion, an increase of 3% over the prior year period. Facebook monthly active users were 2.96 billion at quarter end, an increase of 2%. During the third quarter, ad impressions delivered across the company’s family of apps increased by 17% while the average price per ad decreased by 18%. Free cash flow declined 48% during the first nine months to $13.6 billion due to the lower earnings and a significant increase in capital expenditures. Capital expenditures in 2022 are expected to be in the range of $32 billion to $33 billion and grow to $34 billion to $39 billion in 2023 driven by investments in data centers, servers and network infrastructure to increase artificial intelligence (AI) capacity. Year-to-date, Meta has repurchased $21.1 billion of its common stock, including $6.4 billion during the third quarter. The company has $17.8 billion remaining authorized for future share repurchases. The company ended the quarter with a strong balance sheet with $43 billion in cash and investments, $9.9 billion in long-term debt and $124.1 billion in shareholders' equity. Meta’s headcount was 87,314 as of quarter end, an increase of 28% year-over-year. To operate more efficiently, Meta is planning significant changes in hiring and expects headcount to remain approximately the same in 2023 as it currently stands. Revenues are expected in the range of $30.0 billion to $32.5 billion in the fourth quarter, including a 7% headwind from foreign exchange. Total expenses in 2022 are expected in the range of $85 billion to $87 billion, which are expected to increase to a range of $96 billion to $101 billion in 2023, including an estimated $2 billion charge to consolidate office facilities. The double-digit increase in expenses is driven by infrastructure-related expenses and Reality Labs hardware costs. The Reality Labs operating loss is expected to grow significantly in 2023.
SEI Investments-SEIC reported third quarter sales declined 3% to $471.3 million with net income dropping 55% to $61.7 million and EPS falling 54% to $0.45. SEI’s disappointing results were impacted by lower capital market performance, costs associated with the company’s voluntary separation agreement (VSA) and continuing inflationary pressures, especially for compensation. Third quarter results include charges related to the company’s VSA of $57.0 million, or $0.32 per share, and unrelated severance charges of $5.2 million, or $0.03 per share. Average assets under management in equity and fixed income programs, excluding LSV, decreased $33.4 billion, or 17%, to $166.4 billion in the third-quarter 2022 while average assets under administration decreased $69.1 billion, or 8%, to $786.6 billion. Earnings from LSV decreased 24% to $26.7 million due to net negative cash flows from existing clients, market depreciation and client losses. During the third quarter, cash flow from operations was $97.9 million, down 38.4% from last year, and free cash flow was $74.4 million, down 48.5% from last year. SEI Investments repurchased 890,000 shares during the quarter for $49.4 million at an average price of $55.55 per share. SEI Investments ended the quarter with $791.4 million in cash, no long-term debt and $1.9 billion in shareholders’ equity on its investment grade balance sheet. Looking ahead, management expects deconversion related to two clients’ M&A activity to result in a $12.4 million reduction in annual revenues. While still in negotiations with Wells Fargo, management expects deconversion of a portion of the business will result in a fourth quarter charge between $5 million and $7 million and a reduction in quarterly revenues between $1.3 million and $1.7 million.
General Dynamics-GD reported third quarter revenues rose 4% to $10 billion with net earnings up 5% to $902 million and EPS up 6% to $3.26. Orders remained strong across the company with a consolidated book-to-bill ratio, defined as orders divided by revenue, of 1.1-to-1 for the quarter. The company ended the quarter with $88.8 in backlog including Aerospace backlog of $19.1 billion which increased 29.7% from the prior year quarter. Total estimated contract value, the sum of all backlog components, was $125.8 billion at the end of the quarter. Aerospace revenues rose 14% to $2.3 billion as there was broad-based demand by model and geography. Aerospace had the best year-to-date order performance in over a decade with a book-to-bill ratio of 1.2 times. Marine Systems revenue increased 5% during the quarter to $2.8 billion with orders totaling $3.2 billion and a book-to-bill of 1.1 times. Combat Systems revenues increased 3% to $1.8 billion as broad-based demand drove backlog with a book-to-bill of 1.3 times. Technologies revenues declined 2% to $3.07 billion impacted by ongoing supply chain disruptions. Year-to-date, free cash flow was up 58% to $3.3 billion with the company paying over $1 billion in dividends and repurchasing $1.1 billion of its common shares. General Dynamics ended the quarter with $2.5 billion in cash, $9.2 billion in long-term debt and $17.7 billion in shareholders’ equity on its combat-ready balance sheet.
Automatic Data Processing-ADP reported strong first quarter results with revenues rising 10% to $4.2 billion with net income processing 11% growth to $779 million and EPS up 13% to $1.87. ADP achieved double-digit growth in revenues and earnings while exceeding the one million client milestone during the quarter. ADP processes $2.7 trillion annually in payrolls/taxes by paying more than 40 million workers in 140 countries, including one in six U.S. workers. With a strong labor market and higher interest rates, ADP exceeded its expectations for revenue growth and margin expansion and continues to enjoy momentum in new business bookings, pays per control, worksite employee growth, client funds interest revenue and client revenue retention. Free cash flow during the first quarter jumped more than sevenfold to $781.1 million due to favorable working capital changes. During the quarter the company paid $432.9 million in dividends and repurchased $333.3 million of its common stock. ADP has increased its dividend for 47 consecutive years. Following the strong start to fiscal 2023, ADP raised its outlook for growth for the full year with revenues expected to increase 8% to 9% and adjusted operating margin expected to expand 125 to 150 basis points leading to EPS growth of 15% to 17%.
Tuesday, Oct. 25, 2022
Visa-V rang up fiscal fourth quarter revenues of $7.8 billion, up 19% from last year, with net income charging ahead 10% to $3.9 billion and EPS up 13% to $1.86. Payments Volume increased 10%, Cross-Border Volume jumped 36% and processed transactions increased 12%. During the fourth quarter, Visa saw a continuation of spending trends present throughout 2022—strength in consumer payments, resilience in eCommerce and ongoing recovery in cross-border travel. These trends contributed to robust full-year year results with revenues jumping 22% to $29.3 billion, net income up 21% to $15.0 billion and EPS up 24% to $7.00. During fiscal 2022, Visa delivered an impressive 42.0% return on shareholders’ equity. Visa generated $17.9 billion in free cash flow during fiscal 2022, up 23% from last year and representing a stellar 120% of reported earnings. During the fiscal year, Visa returned $14.8 billion to shareholders through dividend payments of $3.2 billion and share repurchases of $11.6 billion at an average price per share of $205.97 leaving $5.1 billion remaining under the current buyback authorization. In October, the board authorized a new $12 billion stock buyback program and increased the dividend by 20%, marking the 13th year of consecutive annual dividend increases. Visa ended the quarter with $20.7 billion in cash and investments, $20.2 billion in long-term debt and $35.6 billion in shareholders’ equity on its pristine balance sheet. Despite expected foreign currency headwinds of 4% and 2% negative impact from Russia, management expects 2023 net revenue growth in the high-single-digits with low double-digit operating expense growth. Should there be a recession or a geopolitical shock that impacts its business, management will adjust spending plans by reprioritizing investments, scaling back or delaying programs, and reducing, as appropriate, personnel expenses, marketing spend, travel and other controllable categories while carefully balancing between short- and long-term considerations for long-term growth. Should interest rate continue to rise, nonoperating expense will benefit from higher interest income on cash balances. During the earnings conference call, Vasant Prabhu, Vice Chairman and Chief Financial Officer, stated, “As we've said before, we are not economic forecasters. Clearly, there's a high risk of a global recession, but we do not have a specific point of view on if, when, or the kind of recession we might have. For internal planning purposes, we are assuming no recession. Of course, we will stay very vigilant, closely monitoring our trends day by day. We will stay very flexible. We will have contingency plans in place should we have an economic or geopolitical shock that impacts our business. And we will be prepared to act fast should we need to.”
Canadian National Railway-CNI reported third quarter revenues chugged ahead 26% to a record C$4.5 billion, driven by higher fuel prices, freight rate increases and the positive translation impact of a weaker Canadian dollar. Net income decreased 14% to C$1.5 billion and EPS fell 10% to C$2.13, mainly due to the Kansas City Southern merger termination fee received in the third quarter of 2021. Excluding the one-time merger termination payment, adjusted EPS increased 40% to a record $2.13. Revenue ton miles (RTMs) increased 5% to 58.5 billion while freight revenue per RTMs increased 22% to 7.46 cents. Canadian National’s adjusted operating ratio improved by 180 basis points to 57.2%, reflecting operating improvements including a 1% increase in fuel efficiency and 5% increase in car velocity. During the first nine months of 2022, free cash flow increased 44% to C$2.9 billion with the company returning nearly C$5.2 billion to shareholders through dividends of C$1.5 billion and share repurchases of C$3.6 billion. Canadian National ended the quarter with C$906 million in cash, C$14.6 billion in long-term debt and C$22 billion in shareholders’ equity. For the full year, Canadian National continues to expect total revenue ton miles (RTMs) in the low single-digit range across a range of commodities and expects to deliver an operating ratio below 60%. Management now expects adjusted diluted EPS growth of 25% compared to the previous target of 15-20% growth and free cash flow of approximately C$4.2 billion compared to the previous target of C$3.7 billion to C$4.0 billion. In addition, the company continues to expect to invest approximately 17% of revenues in its capital program.
Microsoft-MSFT reported first quarter revenue increased 11% to $50.1 billion with operating income up 6% to $21.5 billion while net income decreased 14% to $17.6 billion, primarily due to a higher tax provision compared to the prior year period, with EPS down 13% to $2.35. Microsoft Cloud revenue increased 24% to $25.7 billion, led by strong demand across commercial businesses. Commercial bookings declined 3% year-over-year with strong renewal execution more than offset by unfavorable foreign exchange impact. Revenue in Productivity and Business Processes was up 9% to $16.5 billion, led by a 24% jump in Dynamics 365 revenue. Revenue in Intelligent Cloud was up 20% to $20.3 billion, led by Azure and other cloud services revenue growth of 35%. Revenue in More Personal Computing decreased slightly to $13.3 billion, primarily due to Windows OEM revenue declining 15%. During the quarter, Microsoft generated $16.9 billion in free cash flow, down 10% from last year, with the company returning nearly $10.2 billion to shareholders through dividend payments of $4.6 billion and share repurchases of $5.5 billion. Microsoft ended the quarter with $107.3 billion in cash and investments, $45.4 billion in long-term debt and $173.6 billion in shareholders’ equity on its strong balance sheet. For the second quarter of fiscal 2023, Microsoft expects revenues in the range of $52.35 billion to $53.35 billion. Microsoft is facing headwinds from foreign exchange, lower PC demand and weakness in online ads at LinkedIn.
Texas Instruments-TXN generated a 13% increase in third quarter revenue to $5.2 billion with net earnings increasing 18% to $2.3 billion and EPS up 19% to $2.47. By segment, Analog revenue grew 13% to $4.0 billion, Embedded Processing revenue grew 11% to $821 million and "Other" segment revenue grew 20% to $427 million. Personal electronics sales declined mid-teens sequentially on continued expected weakness and Industrial sales were flat with weakness beginning to broaden throughout the quarter. The automotive market remained strong, up about 10%, communications equipment increased high-single digits and enterprise systems increased mid-single digits. During the first nine months, Texas Instruments generated $1.97 billion in free cash flow with the company returning over $2.0 billion to shareholders through dividend payments of $1.05 billion and share repurchases of $996 million. In September, the company announced an 8% increase in the dividend, marking the 19th consecutive year of dividend increases and a $15 billion increase in the share repurchase authorizations. These actions reflect leadership’s commitment to returning free cash flow to its owners. Texas Instruments ended the quarter with $9.1 billion of cash and short-term investments and $7.4 billion in long-term debt, including $700 million issued during the third quarter. Total debt outstanding was $8.0 billion with a weighted average coupon of 2.8%. Commenting on the CHIPS Act that was recently signed into law, Chief Financial Officer Rafael Lizardi said, “The combination of the investment tax credit, the grant, as well as funding for research and development, will help make the U.S. semiconductor industry more competitive. We accrued about $50 million on the balance sheet in Q3 due to the 25% investment tax credit for investments in our U.S. factories. This will eventually flow through our income statement as lower depreciation, and we will receive the associated cash benefit in the future.” For the fourth quarter, management expects most of its end markets to decline sequentially, except for the automotive market. Fourth quarter revenues are expected in the range of $4.40 billion to $4.80 billion and earnings per share in the $1.83 to $2.11 range.
Alphabet-GOOGL reported third quarter revenues increased 6%, or 11% on a constant currency basis, to $65.1 billion with net income declining 27% to $18.9 billion and EPS off 24% to $1.40. Revenue growth was driven by healthy fundamental 4% growth in Search revenue to $39.5 billion and 38% growth in Google Cloud revenue to $6.9 billion. Google Cloud posted a $699 million loss during the quarter but remains on a longer-term path to profitability given its momentum. YouTube ads and Google network ad spend declined modestly during the quarter, as did advertising on Google Play due to lower gaming engagement. Specific end-market advertising spend pullbacks included insurance, loan, mortgage and crypto while travel and retail advertising spend increased. Overall costs increased during the quarter due to increased investments in data centers and hardware along with higher research and development and headcount costs. During the third quarter, the company added 12,700 employees and expects to slow the growth to half that number in the fourth quarter with further moderation in headcount expected in 2023. Alphabet plans to drive efficiency by realigning resources to invest in the biggest growth opportunities such as artificial intelligence in Search and monetizing YouTube Shorts. Free cash flow declined 9% to $44 billion primarily due to significant increases in capital expenditures for data centers. Alphabet used the cash to repurchase $44 billion of its common shares and ended the quarter with $147 billion in cash and investments, $14.7 billion in long-term debt and $253.6 billion in shareholders’ equity on its fortress balance sheet. Foreign exchange headwinds impacted third quarter sales by 6%, and the headwinds are expected to be even larger in the fourth quarter due to the strong dollar. Tough comparisons with last year’s fourth quarter will continue to impact growth rates of advertising revenues for YouTube, Network and Google Play in the fiscal 2022 fourth quarter. Alphabet has effectively managed through past business cycles but acknowledged increased uncertainty related to this cycle due to challenging macroeconomic conditions.
NVR, Inc.-NVR reported third quarter revenues increased 16% to $2.8 billion with net income increasing 24% to $411 million and EPS increasing 37% to $118.51. New orders decreased by 15% during the quarter to 4,421 units, compared to 5,201 units in 2021. However, the average sales price of new orders increased by 3% to $453,400. The cancellation rate in the third quarter was 15% compared to 9% in the prior year period. Settlements increased 5% during the quarter to 5,949 units. The average settlement price in the third quarter of 2022 was $460,500, an increase of 12%. The backlog of homes sold but not settled as of September 30, 2022 decreased on a unit basis by 11% to 10,758 units and decreased on a dollar basis by 5% to $5.09 billion year-over-year. Mortgage loan closings increased 2% to $1.66 billion during the quarter. During the first nine months, the company repurchased 295 million shares for an average price of $4,690 per share and ended the quarter with $1.8 billion in cash, $915 million in long-term debt and $3 billion in shareholders’ equity on its sturdy balance sheet.
3M-MMM posted a 3.6% decline in third quarter sales to $8.6 billion with net income jumping 169% to $3.86 billion and EPS up 176.8% to $6.77. Excluding the gain from 3M’s food safety divestiture (for which 3M received $1 billion in consideration) and other special items, EPS increased 4.3% to $2.69. Third quarter sales included headwinds of 1% from divestitures and 5% from foreign currency translation due to the dollar strength. Organic sales increased 2% which included a 1.4% negative impact from the decline in disposable respirator sales that have dropped significantly from pandemic highs. By segment, Safety & Industrial sales chugged ahead 1.7% organically to $2.9 billion on solid growth in auto aftermarket, roofing granules, electrical, abrasives and industrial adhesives and tapes, partially offset by declines in personal safety. Operating margins improved 2.5% to 23.2% as selling price actions, strong spending discipline and restructuring more than offset raw material and logistics inflation and manufacturing productivity challenges. Transportation & Electronics sales motored ahead by 3% to $2.2 billion on solid growth in automotive OEM, commercial solutions and advanced materials while transportation safety declined. Semiconductor supply chain challenges continued, and consumer electronics demand softened. Segment operating margins improved 2.5% to 21.2%. Consumer segment sales increased 1.5% organically to $1.4 billion on solid growth in consumer health and safety, stationery and office and home care while home improvement declined on strong comps. Back to school sales were softer than expected and retailers continue to reduce inventories build up as supply chains stabilized. Health Care sales increased 1.7% to $2.1 billion on strength in medical solutions, separation and purification sciences and health information systems while oral care declined as consumers curtailed discretionary dental expenditures due to inflationary pressures. Elective medical procedures recovered to 90% of pre-pandemic levels and are expected to reach 95% to 100% of pre-COVID levels during the fourth quarter provided hospitals can secure adequate staffing in face of labor shortages. Health Care operating profit margin dipped 1.7% to 21.8%. During the quarter, management began working to spin off the company’s Health Care business, thereby creating two world-class public companies. During the first nine months, 3M generated $3.0 billion in adjusted free cash flow, down 35% from last year on working capital demands, increases in capital expenditures for growth and sustainability and the cash impact from capitalizing R&D expenses for tax purposes. Year-to-date cash conversion ratio of 68% is expected to increase in the range of 85% to 95% for the full year. 3M returned $3.5 billion to shareholders year-to-date through share repurchases of $0.9 billion and dividends of $2.6 billion with the stock currently yielding an attractive 5.1%. 3M ended the quarter with $3.5 billion in cash and investments, $13.8 billion in long-term debt and $14.2 billion in shareholders’ equity on its balance sheet. Management continues to work through 3M's litigation challenges with major trials scheduled in February and June 2023. Given the uncertain macroeconomic environment and the continuing strength of the dollar, 3M updated its 2022 guidance. Sales growth is now expected in the -3.5% to -3.0% on organic growth of 1.5% to 2.0% with adjusted EPS in the $10.10 to $10.35 range. Operating cash flow of $6.8 billion to $7.4 billion is expected to contribute to 85% to 95% adjusted free cash flow conversion.
Raytheon Technologies-RTX reported third quarter revenues rose 5% to $17 billion with net income decreasing 1% to $1.4 billion and EPS up 1% to $.94. Earnings include $.27 per share of net significant and/or non-recurring charges and acquisition accounting adjustments. RTX generated over $22 billion of awards during the quarter. Backlog at the end of the quarter was $168 billion, including $101 billion from commercial aerospace and $67 billion from defense with a 1.32 book-to-bill ratio. Year-to-date, free cash flow decreased 60% to $1.1 billion. The company returned more than $4.7 billion to shareholders during the year through dividends of $2.3 billion and share repurchases of $2.4 billion. Management adjusted the prior 2022 outlook expecting sales of $67.0 billion – $67.3 billion, down from $67.75 billion - $68.75 billion, adjusted EPS of $4.70 - $4.80, up from $4.60-$4.80, free cash flow of approximately $4 billion and share repurchases of at least $2.5 billion.
UPS-UPS reported third quarter revenues rose 4% to$24.2 billion with net income delivering 11% growth to $2.6 billion and EPS up 12% to $2.96. The U.S. Domestic segment produced the strongest growth during the quarter with revenues up 8.2% to $15. 4 billion as revenue per piece increased 9.8% with operating profit up 18% thanks to expanding margins due to increased productivity. Despite a dynamic macroenvironment with high inflation, the strong job market in the U.S. is enabling healthy consumer spending. The International segment’s revenues increased 1.7% to $4.8 billion driven by a 6.4% increase in revenue per piece with operating profit down 5.1% to $997 million. The international markets weakened more than expected due to inflation, higher energy costs, continued Covid lockdowns in China and geopolitical tensions between Ukraine and Russia. Supply Chain Solutions revenues decreased 6% to $4.0 billion due to declines in air and ocean freight forwarding, partially offset by growth in logistics and healthcare businesses with operating profit up 3% to $450 million. Free cash flow declined 8% year-to-date to $8.5 billion with UPS paying $3.8 billion in dividends and repurchasing $2.2 billion of its common stock. For the full year, the company expects dividend payments to approximate $5.2 billion and share repurchases of at least $3.3 billion. UPS reaffirmed its financial targets for fiscal 2022 with revenues of $102 billion expected, an adjusted operating margin of about 13.7% and adjusted return on invested capital above 30%. UPS continues to gain market share on a global basis. For 2023, the company announced a 6.9% rate increase.
PulteGroup-PHM reported third quarter revenues increased 13% to $3.9 billion with net income up 32% to $627 million and EPS jumping 48% to $2.69. Home sale revenues for the third quarter increased 16% to $3.8 billion, reflecting a 15% increase in average sales price to $545,000, along with a 1% increase in closings to 7,047 homes. New orders decreased by 28% during the quarter to 4,924 homes, as higher mortgage rates, reduced affordability, and lower consumer confidence, slowed demand and resulted in an increased number of previous buyers cancelling their contracts. The cancellation rate in the third quarter was 24% compared to 10% in the prior year period. The company’s backlog at quarter end was 17,053 units, which is a decrease of 14% from the prior year. However, the dollar value of homes in backlog was $10.6 billion, which is an increase of 3% over last year. Mortgage capture rate was 77% for the quarter, down from 85% last year. Given changing industry dynamics resulting primarily from Federal Reserve actions to raise interest rates, PulteGroup continues to reassess all pending transactions prior to completing the purchase of the underlying land asset. As a result of this ongoing review process, in the third quarter the company elected to terminate a number of pending land transactions and wrote off $24 million of deposits and preacquisition expenses associated with the deals. During the quarter, Pulte invested $1.3 billion in land acquisition and development, with 56% of spending for development. PulteGroup controlled 231,662 lots with 50% held through option. Year-to-date free cash flow was negative $393 million compared to $496 million last year, due to higher capital expenditures and inventories. During the third quarter, PulteGroup repurchased 4.4 million shares of its common stock, or 2% of its common shares outstanding for $180 million, at an average price of $41.20 per share. The company ended the quarter with a debt-to-capital ratio of 22.5%. Year-to-date, PulteGroup returned $1.1 billion to shareholders through dividend payments of $110 million and share repurchases of $975 million. The dividend payout rate per share increased 17% in 2021 and an additional 7% for 2022. The ongoing strength of PulteGroup’s quarterly financial results has allowed the company to deliver a high return on equity of 32% for the trailing 12 months. The company ended the quarter with $449 million in cash and investments, $2.6 billion in long-term debt and $8.1 billion in shareholders’ equity on its sturdy balance sheet. While PulteGroup reported significant growth in third quarter earnings, demand clearly slowed in the period as dramatically higher interest rates created financial and psychological hurdles for potential homebuyers. In response to the challenging market conditions, management will continue to adjust sales and construction and investment practices as they work to turn inventory and balance housing starts to appropriately match the pace of sales.
Monday, Oct. 24, 2022
Bank of Hawaii-BOH reported third quarter net revenue increased 2.4% to $172.3 million with net income declining 16.7% to $50.8 million and EPS down 15.8% to $1.28. The net income decline was primarily due to a $6.9 million charge related to the bank’s exit from the leveraged lease market, a decrease in the negative provision for credit losses, lower PPP income and one-time items in last year’s third quarter. Net interest income increased 11.7% to $141.7 million and net interest margin increased 28 basis points to 2.6% due to higher interest rates and continued strong loan growth of 10.3% to $13.3 billion. Noninterest income declined 26% to $30.7 million primarily due to one-time items from the leveraged lease market exit in the quarter. Return on average assets dipped 16 basis points to 0.91% with return on average common equity equal to 16.98%. Bank of Hawaii ended the quarter with an efficiency ratio of 61.37%, up from 57.38% last year, on higher compensation expense and higher occupancy expense primarily due to last year’s one-time benefit from the sale of property. Asset quality remained strong during the quarter, well above that of a well-capitalized bank. With its 64% loan to deposit ratio, the bank maintains ample liquidity to fund continued growth. During the quarter, the bank repurchased $15.0 million of its shares at an average cost per share of $79.84 per share with $50.9 million remaining under the current share buyback authorization. Hawaii’s economy remained strong during the quarter with unemployment at 3.5%, at parity with the mainland for the first time since the pandemic began. Revenue per available room has fully recovered to pre-pandemic levels and Hawaii’s real estate market remains strong despite the rise in mortgage rates.
Friday, Oct. 21, 2022
Western Alliance-WAL reported third quarter net revenue banked a 21% increase to $663.9 million with net income up 11.4% to $264 million and EPS up 6.1% to $2.42. These record revenues and earnings were driven by sound organic growth in loans and deposits with asset quality strong and stable. Loans increased 30% on an annualized basis to $52.2 billion with total deposits increasing 14% to $55.6 billion. The speed and level of interest rate hikes did negatively impact mortgage banking related income which dropped sharply to $37.5 million during the quarter due to lower refinancing and mortgage originations. Net interest margin increased to 3.78% thanks to rising interest rates. Return on average assets was 1.53% with return on tangible common equity equal to 24.9%. The bank ended the quarter with an efficiency ratio of 45.5% which is expected to remain in the low 40% range. Quarter end book value per share was $43.39 while tangible book value increased 7% over the prior year to $37.16 per share. Tangible book value has compounded at a 19.4% annual rate since 2013. Over the past decade, Western Alliance has transformed the business through a diversification strategy and underwriting discipline which sustains superior asset quality. While the bank is preparing for a recession through its conservative underwriting, management is not currently seeing any signs of elevated credit stress. The bank is well capitalized and positioned well for slowing growth.
Thursday, Oct. 20, 2022
Genuine Parts-GPC reported record third quarter sales increased 18% to $5.7 billion with net income motoring 37% higher to $312.4 million and EPS up 38% to $2.20. The double-digit sales and earnings growth was driven by the resilience of the Automotive and Industrial businesses. This was the 6th consecutive quarter of double-digit sales growth and margin expansion led to the 9th consecutive quarter of double-digit adjusted EPS growth. The financial results reflect the integration of the Kaman Distribution Group acquisition. Free cash flow increased 15% year-to-date to $1 billion driven by higher net income and effective management of working capital. During the first nine months, Genuine Parts paid $369.5 million in dividends and repurchased $172.7 million of its common stock while spending $1.6 billion for acquisitions, including $1.3 billion for Kaman. Operating well in a challenging environment, Genuine Parts continues to gain market share and raised its sales and earnings outlook for the full year. In 2022, the company now expects 15%-16% total sales growth and EPS in the range of $8.29-$8.39 while affirming free cash flow in the $1.2 billion to $1.4 billion range.
Tractor Supply-TSCO reported third quarter sales increased 8% to $3.3 billion with net income increasing 4% to $234 million and EPS increasing 8% to $2.10 given the resilient underlying health of the business. Comparable store sales increased 5.7% driven by comparable average ticket growth of 7%, partially offset by a comparable average transaction count decline of 1.3%. Tractor Supply opened 11 new Tractor Supply stores and two new Petsense stores in the third quarter of 2022. Year-to-date, Tractor Supply generated $175 million in free cash flow, down from $489 million last year, due to higher capital expenditures and operating expenses. Year-to-date, Tractor Supply returned $916 million to shareholders through dividend payments of $308 million and share repurchases of $608 million at an average cost per share of $206.95. Tractor Supply ended the quarter with $211 million in cash, $1 billion in long-term debt and $1.9 billion in shareholders’ equity. The company updated its fiscal 2022 guidance to reflect the strong performance year-to-date and the recent acquisition of Orschein Farm and Home which closed on October 12, 2022. The acquisition is anticipated to add approximately $75 million to net sales in the fourth quarter. Management raised its financial outlook for the year and now expects net sales in the range of $14.06 billion to $14.12 billion, 5.4%-5.8% comparable store sales growth, net income in the range of $1.07 to $1.08 billion, EPS in the range of $9.55 to $9.63. Capital expenditures for the full year are expected between $650 million to $700 million, including the opening of approximately 60 to 70 new Tractor Supply stores and 10 new Petsense stores. In addition, management is very confident in their ability to gain market share and grow in 2023 due to previous efforts made to streamline the business and expects inflation to moderate in the second half of 2023.
Wednesday, Oct. 19, 2022
Berkshire Hathaway-BRKB announced the completion of the acquisition of Alleghany for $11.6 billion in cash. Alleghany owns operating subsidiaries and manages investments, anchored by a core position in property and casualty reinsurance and insurance and continues to be led by Joe Brandon.
Visa-V is partnering with Thunes to help individuals and small businesses move money internationally to 78 digital wallet providers, reaching 1.5 billion digital wallets across 44 countries and territories. This partnership will now expand Visa Direct’s reach to nearly 7 billion endpoints, including more than 3 billion cards, over 2 billion accounts and 1.5 billion digital wallets. For the unbanked individuals in emerging markets, digital wallets are gaining traction as an empowering first entry point to the financial system. Consumers are not required to have a card or account to load or receive funds directly to their digital wallet, opening the potential for greater financial inclusion and enabling underserved populations opportunities to access financial products that meaningfully impact how they live and work.
Tuesday, October 18, 2022
Johnson & Johnson-JNJ reported third quarter sales increased 2% to $23.7 billion with net earnings up 22% to $4.5 billion and EPS up 23% to $1.68. Pharmaceuticals led the growth with revenues growing 3% to $13.2 billion driven by double-digit growth in Oncology. Worldwide Medical Devices sales increased 2% to $6.7 billion, reflecting procedure recovery and benefits from innovation & commercial execution. Worldwide Consumer Health sales remained relatively flat at $3.8 billion. Year-to-date, JNJ generated $13 billion in free cash flow and ended the quarter with $31 billion in cash and investments and $32 billion in long-term debt. During the quarter, the company invested $3.6 billion in research and development to advance its promising innovative pipeline, paid $3 billion in dividends, and repurchased $2 billion of its common stock. JNJ updated 2022 full-year guidance with reported sales now expected to increase 1.8% -2.3% for the year to a range of $93 billion to $93.5 billion. Operational sales growth, which excludes foreign currency headwinds, is expected to exceed 7%. Adjusted EPS is now expected to increase 2.3% to 2.8% to a range of $10.02-$10.07. JNJ reaffirmed its fiscal 2025 year Pharmaceutical sales projection of $60 billion, which will account for 65%-70% of total sales after the planned spin-off of the Consumer Health business next year.
Roche Holdings-RHHBY provided a 9-month sales update as the company reported Group sales increased 1% to CHF 47 billion. Sales were impacted by significantly lower COVID-19 related sales in both divisions during the quarter. The demand for their newer medicines for multiple sclerosis, hemophilia, spinal muscular atrophy and cancer remains high. For the full 2022 year, Roche expects sales to grow in the low-single digit range at constant exchange rates. Core earnings per share are targeted to grow in the low- to mid-single-digit range at constant exchange rates. Roche expects to increase its dividend in Swiss francs further.
Friday, Oct. 14, 2022
UnitedHealth Group-UNH reported third quarter revenues rose 12% to $80.9 billion with net income and EPS each jumping 29% to $5.3 billion and $5.55, respectively. The strong revenue growth during the quarter included double-digit growth at both Optum and UnitedHealthcare, as the company is seeing a steady return to more normalized care since the pandemic. Margins improved as the business laps the negative impact from increased Covid costs last year. Cash flow from operations in the third quarter was $8.8 billion- or 1.6-times net income. Free cash flow increased a healthy 66% during the first nine months to $28.8 billion. Year-to-date, the company returned $10.5 billion to shareholders through dividend payments of $4.5 billion and share repurchases of $6 billion. UnitedHealth Group ended the quarter with $84 billion in cash and investments, $45 billion in long-term debt and $78 billion in shareholders’ equity on its healthy balance sheet. Return on equity of 28.5% during the quarter reflected the company’s sustained growth and efficient capital structure. Management raised their full year 2022 EPS outlook to a range of $20.85 to $21.05.
Thursday, Oct. 13, 2022
Fastenal-FAST rang up a 16% increase in third quarter sales to $1.8 billion with net income and EPS up 17% to $284.6 million and $0.50, respectively. Fastenal achieved double-digit daily sales growth in all nine product categories, including 18.2% for fasteners and 12.4% for safety. Increases in unit sales on strong demand and price increases drove third quarter sales higher. Solid demand in markets tied to industrial capital goods and commodities more than offset declines in markets tied to consumer goods and construction. Foreign exchange headwinds and the impact from hurricane Ian negatively affected sales by 60 basis points and 50 basis points, respectively. Pricing actions taken over the last twelve months to mitigate product and transportation cost inflation added 550 to 580 basis points to the year-over-year sales increase, down from 660 to 690 basis points during the second quarter. Contributions from price increases will continue to moderate during the fourth quarter as comps become more challenging. During the quarter, Fastenal signed 86 new onsite contracts, bringing the total active onsite locations to 1,567 and recorded 5,187 FASTBin and FASTVend signings and installations, bringing the final installed base to 99,409, up 10% from last year. Gross margins declined 40 basis points to 45.9% and operating margins increased 50 basis points to 21.0%. While spot prices for many inputs including fuel, transportation services and steel began to decline from peak costs, due to Fastenal’s long supply chain, it will likely take several quarters before input cost declines are reflected in cost of goods sold. During the quarter, Fastenal generated $257.9 million in operating cash flow, or 90.6% of net income. Free cash flow increased 75% from last year to $209.9 million with the company returning $273 million to shareholders through dividends of $177.5 million and share repurchases of $95.3 million. Fastenal ended the quarter with $231.5 million in cash and equivalents, $404.7 million in long-term debt and $3.2 billion in shareholders’ equity on its sturdy balance sheet. While Fastenal recorded healthy sales trends during September, feedback from the field suggests pockets of increasing customer caution.
Wednesday, Oct. 12, 2022
PepsiCo-PEP reported third quarter revenues rose 9% to $21.9 billion with net income up 21% to $2.7 billion and EPS popping 22% higher to $1.60. Organic revenue increased 16%, representing the fourth consecutive quarter of double-digit organic revenue growth. PepsiCo’s top-line performance was broad based across geographies as their North America and International businesses each delivered 16% organic revenue growth reflecting the company’s pricing power. These results reflect the continued strength of the company’s diversified portfolio and the resilience of the company’s global beverage and food businesses, which delivered 12% and 20% organic revenue growth, respectively. Free cash flow decreased 14% during the first nine months to $6.3 billion. PepsiCo returned $5.7 billion to shareholders through dividend payments of $4.6 billion and share repurchases of $1.1 billion of its common shares year-to-date. The company continues to expect to return approximately $7.7 billion to shareholders in fiscal 2022, comprised of both $6.2 billion in dividends and $1.5 billion in share repurchases. For the balance of the year, PepsiCo’s North America snacks and beverage businesses is expected to remain resilient, and PepsiCo remains focused on accelerating their cost management initiatives and further sharpening their revenue management capabilities as consumers adjust and adapt to persistent inflationary pressures. For the full 2022 year, management raised their revenue and earnings outlook with organic revenue growth expected to be about 12% and core EPS growth of 10%. PepsiCo’s management does not see signs of recession as consumers continue to buy its “small affordable luxuries” despite inflation.
Friday, Oct. 7, 2022
According to Mastercard SpendingPulseTM, U.S. retail sales excluding automotive increased +11% year-over-year in September. E-commerce sales continue to grow, up +10.7% year-over-year, highlighting the ongoing demand for the convenience of digital commerce. Mastercard SpendingPulse measures in-store and online retail sales across all forms of payment and it is not adjusted for inflation. Reflecting the broader contraction of the housing market, spending in and around the home is slowing. Furniture & Furnishing and Hardware sectors experienced minimal year-over-year growth, up +1.4% and +1.7% respectively. On the other hand, spending at Restaurants was up +10.9% year-over year, as consumers continue to enjoy eating out. Further, travel remains a priority as spending on Airlines and Lodging experienced double-digit year-over-year growth. This is consistent with the past several months.
Thursday, Sept. 29, 2022
Nike-NKE reported first quarter revenues rose 4% to $12.7 billion with net income treading 22% lower to $1.5 billion and EPS down 20% to $.93. On a geographic basis, double-digit revenue growth in North America reflected strong consumer demand for the company’s footwear and equipment, while revenues in Greater China declined 16%, impacted by Covid lockdowns. Nike Direct sales rose 8% to $5.1 billion on a reported basis and jumped 14% on a currency-neutral basis while Nike Digital sales increased 16% on a reported basis or 23% on a currency-neutral basis, led by 46% growth in EMEA. The company’s competitive advantages, including its strong brand and pipeline of innovative products, helped the company manage through economic volatility. Gross margin declined 220 basis points to 44.3% due to elevated freight and logistics costs, higher markdowns in Nike Direct as excess inventory was liquidated and foreign currency headwinds. Operating costs increased due to higher wages and other costs. The tax rate also increased significantly during the quarter. Inventories jumped 44% over the prior year period to $9.7 billion driven by elevated in-transit inventories from ongoing supply chain volatility. Nike continues to have a strong track record of investing to fuel growth and consistently increasing returns to shareholders, including 20 consecutive years of rising dividend payouts. In the first quarter, Nike returned $1.5 billion to shareholders, including dividends of $480 million, up 11% from the prior year, and share repurchases of $1 billion, reflecting 9 million retired shares. Nike expects to continue to liquidate excess inventories, primarily apparel, in the second quarter in what is expected to be a highly promotional retail environment. As a result, second quarter markdowns will lead to gross margin declines in the second quarter between 350-400 basis points. Higher freight costs, higher taxes and foreign exchange headwinds are also expected to persist in the second quarter. Nike has managed through cycles like this before and will continue to focus on leveraging its strong brand and financial position to meet strong consumer demand for its products. Nike currently does not see any economic slowdown and expects to gain market share in the next year despite uncertain macro conditions.
Berkshire Hathaway-BRKB bought another 5,985,190 shares of Occidental Petroleum at $57.52 - $61.595 per share worth about $352.5 million.
Wednesday, Sept. 28, 2022
Starbucks-SBUX announced that its Board of Directors has approved an increase in the company’s quarterly cash dividend from $0.49 to $0.53 per share, which raises the company’s annual dividend rate to $2.12 per share. Starbucks initiated its dividend in 2010 and has increased it in each of the past 12 years.
Paychex-PAYX reported first quarter sales increased 11% to $1.2 billion with net income and EPS increasing 14% to $379.2 million and $1.05, respectively. By segment, Management solutions revenue increased 12% to $905.5 million due to increases in client base and higher product penetration, including strong demand for HR Solutions, retirement, and time and attendance solutions. PEO and Insurance Solutions revenue increased 8% to $282.8 million due to the increase in number of worksite employees and an increase in PEO health insurance revenue. Interest on funds held for clients increased 24% to $17.9 million due to higher average interest rates. Paychex’s financial position remains strong with cash and corporate investments of $1.2 billion, long-term debt of $797.8 million and shareholders’ equity of $3.1 billion. Free cash flow decreased 6% during the quarter to $333.7 million, due to increased working capital needs. During the quarter, the company paid $284.6 million in dividends and generated an impressive 46% return on equity. Management increased its adjusted EPS outlook for fiscal 2023, now expecting growth of 11% to 12% compared to 9% to 10% growth in previous guidance. Total revenue is still expected to grow 7% to 8% in fiscal 2023. Management noted changes in the macroeconomic environment could alter guidance. Paychex believes they are well-positioned for growth in fiscal 2023 and beyond as they experienced record revenue retentions levels in the first quarter, bolstered by their leading-edge technology platform and continued investments in product development. In addition, interest rate increases will provide a tailwind for float income and management is balancing long-term investments with near-term cost discipline to navigate through uncertainty.
Thursday, Sept. 22, 2022
FactSet-FDS reported fourth quarter revenues rose 21% to $499.3 million with net income up 3% to $104.4 million and EPS increasing 2% to $2.69. For the full fiscal 2022 year, revenues rose 16% to $1.8 billion with net income and EPS each down 1% to $396.9 million and $10.25, respectively. FactSet has reported 42 straight years of revenue growth with adjusted earnings growth up for 26 consecutive years. Return on shareholders’ equity for fiscal 2022 was a superb 30%. Free cash flow decreased 1% during the year to $487 million, primarily due to higher working capital needs. The company returned $144.6 million to shareholders, paying nearly $126 million in dividends and repurchasing $18.6 million of its common shares. FactSet did not repurchase any of its common stock during the fourth quarter and has suspended share repurchases until at least the second half of fiscal 2023 to prioritize the repayment of debt. In April 2022, FactSet increased its quarterly cash dividend by 8.5% to $.89 per share, marking the 23rd consecutive year the company has increased dividends. Annual Subscription Value (ASV) plus professional services was $2 billion at year end, which represented 9.3% organic growth due to higher sales in FactSet’s Research & Advisory and Analytics & Trading solutions. Annual ASV retention was greater than 95%. When expressed as a percentage of clients, retention improved to 92%. Client count increased by 16.8% or 1,085 during the year, while users grew by 11.8% or 19,050 from the prior year. For fiscal 2023, organic ASV plus professional services is expected to increase in the range of $150 million-$180 million with revenue expected in the range of $2.1 billion to $2.12 billion and EPS expected in the range of $12.70-$13.10, representing 24%-27% growth.
Accenture-ACN reported fourth quarter revenues increased 15% to $15.4 billion with net income and EPS increasing 18% to $1.6 billion and $2.60, respectively. For the full year, revenues rose 22% to a record $61.6 billion with net income increasing 16% to $6.8 billion and EPS up 17% to $10.71. Growth was broad based with double-digit growth across geographies, industry groups and type of work. During the year, new bookings reached a record $71.7 billion, a 21% increase over fiscal 2021 new bookings. Return on shareholders’ equity was a strong 31% in fiscal 2022. Free cash flow increased 5% during the year to a record $8.8 billion. Accenture returned $6.57 billion to shareholders through $2.46 billion in dividends and $4.12 billion in share repurchases and ended the year with more than $8.2 billion in cash and investments on its strong balance sheet. The board of directors announced a 15% increase in the quarterly dividend to $1.12 per share and approved $3 billion of additional share repurchase authority bringing the total buyback authorization to $6.1 billion. For the first quarter of 2023, the company expects revenues to be in the range of $15.2 billion to $15.75 billion, an increase of 10% to 14% in local currency, reflecting the company’s assumption of an approximately negative 8.5% foreign-exchange impact compared with the first quarter of fiscal 2022. For fiscal 2023, Accenture expects revenue growth of 8% to 11% in local currency with EPS expected in the range of $11.09 to $11.41, reflecting a 4% to 7% increase from fiscal 2022 EPS. Free cash flow is expected in the range of $7.7 billion to $8.2 billion for fiscal 2023 with the company planning to return at least $7.1 billion to shareholders through dividends and share repurchases.
Tuesday, Sept. 20, 2022
Microsoft-MSFT announced that its board of directors declared a quarterly dividend of $0.68 per share, reflecting a 6 cent or 10% increase over the previous quarter's dividend. The dividend is payable Dec. 8, 2022, to shareholders of record on Nov. 17, 2022.
Thursday, Sept. 15, 2022
Texas Instruments-TXN said it will raise its quarterly cash dividend 8%, from $1.15 per share to $1.24, or $4.96 annualized, marking the 19th consecutive year of dividend increases. The board of directors also authorized the company to repurchase an additional $15 billion of its common stock over time. This is in addition to approximately $8.2 billion of previously authorized repurchases that remained at the end of June 2022. As of second quarter 2022, the company has reduced its outstanding shares by 47% through its share repurchases since the end of 2004. Dividend increases and share repurchases are integral pieces of TI's disciplined approach to capital management and reflect the company's continued strength in free cash flow generation and its commitment to return all free cash flow to its owners over time.
Wednesday, Sept. 14, 2022
Johnson & Johnson-JNJ announced that the Board of Directors has authorized the repurchase of up to $5 billion of the company's common stock. "The last few years have demonstrated the resilience of Johnson & Johnson. With continued confidence in our business and pipeline, the Board of Directors and management team believe that Company shares are an attractive investment opportunity," said Joaquin Duato, Chief Executive Officer. "With our strong cash flow and lowest level of net debt in five years, we have the ability to invest in innovation, grow our dividend, execute strategic acquisitions, and take this action to deliver shareholder returns and drive long-term growth." The company does not expect to incur debt to fund the share repurchase program. Johnson & Johnson reaffirms its full-year 2022 adjusted operational sales growth and earnings per share guidance of 6.5% - 7.5% and $10.65 to $10.75 per share, respectively.
Tuesday, Sept. 13, 2022
T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.34 trillionas of August 31, 2022, representing a 22% decline since year end.
At its Investor Day, Howard Schultz, interim CEO of Starbucks-SBUX, said that the company was expecting record new store growth, as well as double-digit revenue and earnings per share growth in the span of the next few quarters. The CEO also sees a return to stock buybacks soon, as well as continued strength in comparable-store sales. Starbucks is planning on opening about 2,000 stores from 2023 to 2025, which will deliver a 50% return on investment and 25% cash margins, said Chief Operating Officer John Culver. The new stores will be a mix of traditional stores, as well as drive-through only or pick-up only stores in a bid to broaden the portfolio. Culver predicts that North American revenue will increase by about 40% over the next three years and deliver “strong margin expansion.” In China, a key new market for Starbucks, the company is planning to operate 9,000 stores by 2025 — meaning it plans to open a new store in China every nine hours for the next three years. It is currently projecting to have 6,000 stores in China by the end of 2022. Starbucks committed a total of $1 billion to labor investments in 2022 in a bid to quell ongoing unionization efforts at its stores. The company also boosted wages to $17 an hour in the U.S. Technology also was an important theme at the investor day. Starbucks is planning to invest $450 million in fiscal 2023 across its existing U.S. store base to enhance automation and efficiency, with increased investments in 2024 and 2025. The company will also expand its mobile ordering experience across all stores, as well as its delivery capabilities with third-party partners including Uber Eats and DoorDash. Chief Marketing Officer Brady Brewer expects delivery will double in revenue in the next couple of years.
Raytheon Technologies-RTX updated its free cash flow outlook for the impact of the legislation requiring capitalization of Research and Experimentation for tax purposes and, as previously discussed, it now expects its full year 2022 free cash flow to be approximately $4.0 billion instead of approximately $6.0 billion. The company reaffirmed its full year outlook for sales of $67.75 - $68.75 billion, adjusted earnings per share of $4.60 - $4.80 and share repurchase of at least $2.5 billion of RTX shares.
Oracle Corporation-ORCL reported fiscal 2023 first quarter revenues increased 18% year-over-year to $11.4 billion with net income decreasing 37% to $1.5 billion and EPS down 35% to $0.56. Without the impact of the U.S. dollar strengthening compared to foreign currencies, EPS would have been 8 cents higher. Cloud services and license support revenues were up 14% to $8.4 billion and cloud license and on-premise license revenues were up 11% to $904 million. Short-term deferred revenues were $10.5 billion. Oracle's two cloud businesses, IaaS and SaaS, now represent over 30% of total revenue. These fast-growing and high-margin businesses are expected to boost Oracle’s constant currency organic revenue growth rate by double-digits and push earnings per share higher. Cerner is also expected to positively impact revenue and earnings per share growth in the coming quarters. This is the first quarter Oracle owned Cerner, and Cerner delivered the best revenue quarter in its history. Management expects them to do even better in the coming quarters as they develop an all-new suite of healthcare cloud services. During the quarter, Oracle generated $4.7 billion in free cash flow, up 8% from last year. The company returned $1.4 billion to shareholders during the quarter through dividends of $860 million and share repurchases of $552 million. Oracle ended the quarter with $11.2 billion in cash and investments and $75.5 billion in long-term debt, including debt taken on for the Cerner acquisition. For the second quarter, revenues are expected to grow in the 15% to 17% range with non-GAAP EPS in the $1.16 to $1.20 range.
Monday, Sept. 12, 2022
This holiday season, U.S. retail sales excluding automotive are expected to increase 7.1% year over year, according to the Mastercard SpendingPulse™ annual holiday forecast. "This holiday retail season is bound to be far more promotional than the last," said Steve Sadove, senior advisor for Mastercard and former CEO and Chairman of Saks Incorporated. "Easing supply chain issues coupled with the rapid shift in consumer spending trends and over-ordering inventory have left retailers in an interesting position ahead of the holidays. Retailers that were able to clear past merchandise and accurately forecast inventory needs will be the best positioned for growth."
Friday, Sept. 9, 2022
The chairman of Booking Holdings-BKNG, Robert J. Mylod, recently bought $4 million worth of the stock, signaling he finds the stock attractively valued.
Wednesday, Sept. 7, 2022
UnitedHealth Group-UNH and Walmart announced the beginning of an initial 10-year, wide-ranging collaboration, bringing together the collective expertise of both companies in serving millions of people with high-quality, affordable health services that improve health outcomes and improve the patient experience. The collaboration will start in 2023 with 15 Walmart Health locations in Florida and Georgia and expand into new geographies over time, ultimately serving hundreds of thousands of seniors and Medicare beneficiaries in value-based arrangements through multiple Medicare Advantage plans.
UPS-UPS announced it will hire more than 100,000 seasonal employees ahead of the holiday rush. Its streamlined, digital-first process now takes just 25 minutes for most people – from filling out an online application to receiving a job offer. And nearly 80% of seasonal positions do not require an interview. Seasonal opportunities are a proven pathway to a career at UPS – nearly 35,000 seasonal employees earned permanent positions following the 2021 holidays. UPS creates jobs that pay industry-leading wages and benefits, and rewards people who stay. A full-time UPS package delivery driver makes an average of $95,000 per year, plus an additional $50,000 in contributions to health, wellness and pension benefits.
Brutally hot temperatures and a persistent drought across the Great Plains and West haven't altered Tractor Supply's-TSCO sales trajectory for the rest of the year, CEO Hal Lawton told Yahoo Finance Live at Goldman Sachs's 29th annual retail conference on Wednesday. Lawton explained that although drought delayed spring for many of the company's consumers, "our business has been eerily consistent, stable, and resilient throughout all this year.”
Apple-AAPL introduced a variety of products including new iPhones, AirPods and Apple Watches with new and enhanced features. For example, the iPhone 14 will feature car crash detection and automatically call 911 and also feature emergency SOS via satellite which will be free for two years.
Fastenal-FAST reported August sales increased 21.4% to $644.7 million with average daily sales up 16.1% to $28.0 million. By geography, Canada/Mexico led the way with 17.5% growth followed by the United States with 16.5% growth. By end market, manufacturing growth was 23.5% with non-residential construction growth at a more modest 5.8%. By product line, fasteners led the way with 19.8% growth followed by 14.5% growth of other products and 11.7% growth of safety items. More than 80% of the company’s Top 100 accounts grew with 20% daily sales growth. Headcount at Fastenal increased 8.1% over the prior year to 21,862.
Thursday, Sept. 1, 2022
Hormel Foods-HRL reported third quarter revenue increased 6% to a record $3 billion with net income increasing 24% to $219 million and EPS up 25% to $.40. During the quarter, the company saw continued broad-based inflationary pressures, persistent upstream and downstream supply chain disruptions, limited turkey supply, and impacts in China from COVID-related restrictions and temporary plant shutdowns. In the current environment, Hormel has delivered seven straight quarters of record sales and four consecutive quarters of earnings growth, reflecting the effectiveness of management’s strategy and the importance of Hormel’s brands in uncertain times. Hormel brands are responding well to the pricing actions management previously implemented to help combat inflation. The Jennie-O Turkey Store segment significantly outperformed management’s profit expectations as the team managed limited turkey supply effectively and maximized operational performance. In addition, earnings growth was boosted from the Refrigerated Foods segment delivering double-digit earnings growth, more than offsetting lower commodity profitability and by the Planters snack nut business, which continues to meet management’s expectations. Year-to-date free cash flow increased 91% to $575 million primarily due to the jump in earnings. During the quarter, Hormel paid its 376th consecutive quarterly dividend, marking the 94th consecutive year of uninterrupted dividends. Management lowered earnings guidance as they expect elevated cost inflation to persist, primarily related to operations, logistics and raw material inputs but believes most of the escalated cost pressures they are currently absorbing as transient and likely to subside over the coming quarters. However, Hormel is confident in their ability to exceed their previous sales guidance due to strong demand for their brands, higher turkey markets and the pricing actions management has taken across the portfolio. Accordingly, Hormel raised its sales guidance for the full year to $12.2 billion to $12.8 billion with EPS now expected in the range of $1.78-$1.85, which includes the impact of the inflationary pressure on the business.
Wednesday, Aug. 31, 2022
Brown-Forman-BFB reported first quarter sales increased 11% to $1 billion with net income and EPS up 30% to $249 million and $.52, respectively. The United States and developed international markets grew net sales 7% and 9%, respectively, while net sales in emerging markets increased 17%. Travel Retail increased 77% reflecting higher volumes across much of the portfolio as travel continued to rebound. Jack Daniel’s family of brands grew net sales 11%, driven by double-digit sales growth from Jack Daniel’s Tennessee Whiskey. Premium bourbons, propelled by Woodford Reserve and Old Forester, delivered 35% net sales growth. Ready-to-Drink beverages delivered double-digit reported net sales growth, driven by strong performance in Australia and Germany. The tequila portfolio declined 4%, due to cycling significant growth during the same prior-year period and the current year impact of supply chain issues. Marketing investment increased 23% as the company supported brand momentum. Free cash flow decreased 18% during the first quarter to $140 million, due to lower working capital and higher capital expenditures. On July 28, 2022, the Brown-Forman Board of Directors declared a regular quarterly cash dividend of $0.1885 per share. Brown-Forman has paid regular quarterly cash dividends for 78 consecutive years and has increased the regular dividend for 38 consecutive years. Management anticipates continued growth in fiscal 2023 despite global macroeconomic and geopolitical uncertainties. Accordingly, management continues to expect fiscal 2023 net sales growth, organic sales growth, and operating income growth in the mid-single digit range. In addition, management is expecting reported gross margin to increase slightly, primarily due to the removal of tariffs on American Whiskey in the EU and U.K.
Friday, Aug. 26, 2022
3M-MMM reported the United States Bankruptcy Court in the Southern District of Indiana declined 3M subsidiary, Aearo Technologies' request for a preliminary injunction to ongoing litigation against 3M related to Combat Arms Earplug Version 2 products. Aearo and 3M argued that bankruptcy offered a faster and fairer way to compensate veterans who contend that earplugs made by Aearo caused hearing loss. 3M funded a $1 billion trust to settle the lawsuits which total more than 230,00 nationwide. Aearo Technologies and 3M disagree with the ruling and Aearo intends to appeal the decision. Aearo will continue in the chapter 11 proceedings, which it believes will offer a more efficient, equitable and expeditious pathway to resolution of these matters for all parties. 3M also will continue to vigorously defend its position in the multi-district litigation and in its appeals in that litigation.
Thursday, Aug.25, 2022
Ulta Beauty-ULTA reported second quarter sales increased 17% to $2.3 billion with net income increasing 18% to $296 million and EPS up 25% to $5.70. Comparable store sales increased 14% driven by an 8% increase in transactions and a 5.6% increase in average ticket. During the quarter, Ulta Beauty opened 7 net new stores, ending the quarter with 1,325 stores. During the quarter, Ulta repurchased $301.6 million shares at an average cost per share of $377.95, leaving $1.6 billion remaining under the current $2 billion authorization. Year-to-date, free cash flow increased 22% to $420 million and Ulta returned $441 million to shareholders through share buybacks. Ulta ended the quarter with $434 million in cash and $1.8 billion in shareholders’ equity on its clean, debt-free balance sheet. Based on the results for the first six months of fiscal 2022 and sales trends experience to date in August, the company has increased its outlook for fiscal 2022. Net sales are now expected in the $9.65 billion to $9.75 billion range on comp store growth of 9.5% to 10.5% with EPS of $20.70 to $21.20. This compares to prior guidance of sales in the $9.35 billion to $9.55 billion range on comp store growth of 6% to 8% with EPS in the $19.20 to $20.10 range.
Friday, Aug. 19, 2022
Berkshire Hathaway-BRKB received approval from the Federal Energy Regulatory Commission (FERC) to acquire up to 50% of Occidental Petroleum. The approval was necessary as Occidental owns FERC assets. Berkshire Hathaway Energy (BHE) also owns energy assets that are FERC-regulated and needed regulatory approval that further Occidental purchases would not have an adverse impact on competition. Berkshire currently owns more than 20% of Occidental. While some speculate that Berkshire is planning to acquire the remaining shares of Occidental it does not own, the filing also could just be a regulatory formality.
Thursday, Aug. 18, 2022
Ross Stores-ROST reported a 4.6% decline in second quarter sales to $4.6 billion with net income falling 22% to $384.5 million and EPS down 20% to $1.11. Same store sales fell 7% on top of last year’s robust 15% same store sales increase, which was the strongest period last year. Operating margins declined 280 basis points to 11.3%, reflecting the deleveraging effect of the same store sales decline, higher markdowns, and ongoing headwinds from increased freight costs that began increasing during the second half of 2021. These expenses were partially offset by lower incentive and COVID costs. At quarter end, total inventories jumped 55% to $2.7 billion. Packaway merchandise represented 41% of total inventory versus 30% in the same period last year when the company used a substantial amount of packaways to meet robust consumer demand. Supply chain congestion continued to ease during the second quarter, resulting in above-plan early receipts of merchandise now stored in packaway that will flow to stores throughout the fall season. The company added 21 new Ross and 8 dd’s DISCOUNTS locations during the quarter ending the period with 1,980 stores. Ross remains on track to open a total of about 100 locations in 2022, comprised of 75 Ross and 25 dd stores. During the first half of 2022, Ross Stores used $56 million cash in its operating activities and invested $243 million in capital expenditures. Ross Stores returned $692.2 million to shareholders during the first half of fiscal 2022, consisting of $217 million in dividends and $475 million in share repurchases, including $235 million during the second quarter at an average cost of $81.03 per share. The company expects to repurchase a total of $950 million of its stock during 2022 under its two-year $1.9 billion share repurchase program that extends into 2023. Ross Stores ended the quarter with $3.9 billion in cash, $2.5 billion in long-term debt and $4.1 billion in shareholders’ equity on its sturdy balance sheet. Given the disappointing first half results, the increasingly challenging and unpredictable macro-economic landscape and today’s more promotional retail environment, the company expects same store sales for the third quarter to decline 7% to 9% versus the strong 14% increase last year. Fourth quarter same store sales are expected to decline 4% to 7% on top of last year’s 9% increase. EPS for 2022 are expected in the $3.84 to $4.12 range, down 18% from last year at the mid-point.
Wednesday, Aug. 17, 2022
Cisco Systems-CSCO reported fourth quarter revenues remained flat at $13.1 billion with net income decreasing 6% to $2.8 billion and EPS down 4% to $.68. Cisco had continued progress on their business model transformation with total Annualized Recurring Revenue (ARR) at $22.9 billion in the fourth quarter of fiscal 2022, up 8% year over year. Total revenue exceeded management’s expectations in the fourth quarter, due to strong execution and numerous initiatives to reduce the impact of the global supply situation. Management’s operational discipline was reflected in their healthy operating margin and strong cash flow generation, enabling Cisco to return nearly $4 billion to shareholders in the fourth quarter. During the quarter, product revenue and service revenue remained flat. By product segment, growth was led by End-to-End Security up 20% to $984 million, Optimized Application Experiences up 8% to $185 million, and Collaboration up 2% to $1.2 billion. Growth in these segments was offset by Secure, Agile Networks down 1% to $6.1 billion and Internet for the Future down 10% to $1.3 billion. For the full fiscal 2022 year, revenues increased 3% to $51.6 billion with net income increasing 12% to $11.8 billion and EPS up 13% to $2.82. Cisco had strong demand during the year, with record full year product orders and backlog. Return on shareholders’ equity was an impressive 30% for the year. Free cash flow was down 14% to $12.7 billion, due to higher working capital needs. During fiscal 2022, Cisco returned $13.9 billion to shareholders through dividends of $6.2 billion and share repurchases of $7.7 billion. Cisco ended the year with a strong financial position with more than $19 billion in cash and investments, $8.4 billion in long-term debt and $39.8 billion in shareholders’ equity. Management’s outlook for the first quarter of fiscal 2023 is for revenue growth of 2%-4% and EPS in the range of $.64 to $.68. Guidance for the full fiscal year 2023 is for revenue growth of 4%-6% and EPS in the range of $2.77 to $2.88.
The TJX Companies-TJX reported net sales declined 1.9% during the second quarter to $11.8 billion with net income up 3% to $809.3 million and EPS up 7.8% to $.69. U.S. comparable store sales declined 5% as a higher average ticket was offset by lower traffic as customers were impacted by high inflation, especially in gas and food prices, which curtailed consumer discretionary spending. With gas prices easing, this should help second half results along with increased marketing programs focused on the value TJX provides its customers. TJX saw softness in the home categories with positive growth in the overall apparel business. The international businesses experienced constant currency sales growth with improved profitability. The company’s pre-tax margin of 9.2% was above the company’s plan as the company generated strong merchandise margins and had less freight and wage pressures. The strong profitability on lower sales speaks to the company’s strength and flexible business model with sharp team execution and good expense discipline. Inventories jumped 39% during the quarter to $7.1 billion but management is comfortable with its inventory levels, noting that inventory turnover is better than pre-Covid days. During the second quarter, the company generated $641 million of operating cash flow and paid $346 million in dividends and repurchased 11.8 million shares for $700 million at an average price of about $59.32 per share. During the first half, the company returned $2 billion to shareholders through$653 million in dividends and $1.3 billion of share repurchases. TJX expects to repurchase approximately $2.25 to $2.50 billion of TJX stock for the full fiscal year. For the full 2023 fiscal year, TJX lowered its expectation for U.S. comparable sales growth to a decrease of 2% to 3% versus its previous guidance of an increase of 1% to 2% while increasing its outlook for pre-tax profit margin to a range of 9.3% to 9.5%, which should generate EPS in the range of $2.87 to $2.95.
Friday, Aug. 12, 2022
Drivers for DoorDash Inc. are now delivering items to consumers purchased online from Facebook Marketplace as part of a new partnership between the delivery app and Facebook parent Meta Platforms-META. Meta and DoorDash tested the service in several U.S. cities in recent months, the companies said. The service lets Facebook users purchase and receive items from Marketplace without leaving their homes. It can deliver items that fit in a car trunk and are up to 15 miles away. Deliveries would be made within 48 hours.
Roche Holdings-RHHBY announced FDA approval of Xofluza to treat influenza in children aged five and older. This marks the first single-dose oral influenza medicine approved for children in this age group. Additionally, the FDA approved Xofluza for the prevention of influenza in children aged five to less than 12 years of age following contact with someone with influenza.
In separate news, Roche received FDA approval for expansion of the VENTANA MMR RxDx Panel. This approval advances the company's commitment to personalised healthcare through tests that determine which patients are most likely to respond to specific and targeted therapies for cancer patients.
UPS-UPS announced plans to acquire Bomi Group, an industry-leading multinational healthcare logistics provider. The transaction will add temperature-controlled facilities in 14 countries and nearly 3,000 highly-skilled Bomi Group team members to the UPS Healthcare network in Europe and Latin America. The acquisition will play a key role in the delivery of next-generation pharmaceutical and biologic treatments that increasingly require time-critical and temperature-sensitive logistics.
Wednesday, Aug. 9, 2022
T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.39 trillionas of July 31, 2022. This represents an 18% decline since year end.
Berkshire Hathaway-BRKB increased its investment in Occidental by 6.68 million shares, valued at $390.72 million, to 188.37 million shares, or 20.2% of the shares outstanding. At current prices, Berkshire Hathaway's common stock stake is valued at $11.72 billion.
Saturday, Aug. 6, 2022
Berkshire Hathaway-BRKB reported the company’s net worth during the first half of 2022 decreased by 9%, or $45 billion, to $461.2 billion with book value equal to about $314,082 per Class A share as of 6/30/22.
Berkshire Hathaway reported second quarter revenues increased 10% to $76.2 billion with the company reporting a net loss of $43.8 billion compared to $28.1 billion in earnings in the prior year period. Investment gains and losses from changes in the market prices of Berkshire’s equity investments will produce significant volatility in earnings. Excluding investment and derivative losses of $53 billion, operating earnings jumped 39% to $9.3 billion in the second quarter, which better reflects the underlying strength of the business.
The investment losses of $53 billion were primarily paper losses from changes in unrealized gains of equity holdings during the second quarter given the stock market’s sharp pullback. Berkshire’s five major equity investment holdings which represent about 69% of total equities held, include American Express at $21.0 billion (which charged 15% lower during the first half of 2022 or $3.8 billion); Apple at $125.1 billion (which dropped 22% during the first half or $36.1 billion with Buffett taking another bite of Apple as the price declined); Bank of America at $32.2 billion (which posted a 14% decline during the first half or $30.0 billion); and Coca-Cola with the stock popping 6% higher, or $1.5 billion, to $25.2 billion at the end of the first half. Chevron rounds out the top five at $23.7 billion after Buffett purchased more than $20 billion of Chevron during the first quarter.
During the second quarter, Berkshire’s insurance businesses generated earnings from underwriting of $581 million, which increased 55% over the prior year period due to increases in reinsurance activities more than offsetting ongoing increases in claims frequencies and severities at GEICO due to significant cost inflation in automobile markets. Insurance investment income increased 56% during the quarter to $1.9 billion, reflecting higher dividend and interest income. The float of the insurance operations approximated $147 billion as of quarter end, relatively unchanged from year end. The average cost of float was negative during the quarter as the underwriting operations generated earnings.
Burlington Northern Santa Fe’s revenues chugged 15% higher during the second quarter to $6.5 billion with net earnings rolling 10% higher to $1.7 billion reflecting higher revenue per car/unit partly offset by lower overall freight volumes and higher average fuel costs. The volume decreases were in all business groups reflecting supply chain disruptions, network challenges, lower demand for crude by rail and lower grain exports.
Berkshire Hathaway Energy reported revenues rose 7% during the second quarter to $6.5 billion with net earnings up 4% to $766 million. The earnings increase reflected higher earnings from tax equity investments and from the natural gas pipeline and Northern Powergrid, partly offset by the regulated utilities and real estate brokerage business.
Berkshire’s Manufacturing businesses reported revenues rose 14% to $19.8 billion with operating earnings up 12% to $3.0 billion for the second quarter. The Buildings Products segment led the way for the quarter with revenues rising 20% to $7.7 billion and operating earnings jumping 34% to $1.3 billion thanks to strong demand for residential housing construction. Significant increases in mortgage interest rates will likely slow demand for new housing construction over the balance of the year. Berkshire’s operations also continue to be negatively impacted by persistent supply chain disruptions and significant cost increases for raw materials, energy, freight and labor.
Service and Retailing revenues increased 8% during the quarter to $22.9 billion with pre-tax earnings relatively flat at $1.3 billion. The Service group led the way as revenue increased 19% to $4.7 billion with pre-tax earnings up 4% to $756 million thanks to strong growth from TTI, reflecting strong demand across all electronic component markets, and the aviation business services due to higher training hours at FlightSafety and significantly higher customer flight hours at NetJets.
Berkshire’s balance sheet continues to reflect very significant liquidity and a very strong capital base of $461.2 billion as of 6/30/22. Excluding railroad, energy and utility investments, Berkshire ended the quarter with $467.6 billion in investments allocated approximately 70.0% to equities ($327.7 billion), 4.6% to fixed-income investments ($21.1 billion), 3.7% to equity method investments ($17.5 billion), and 21.7% in cash and equivalents ($101.3 billion).
Free cash flow declined 39% during the first half of the year to $8.5 billion due to lower earnings and higher capital expenditures. During the first half, capital expenditures approximated $6.8 billion, which included $4.8 billion for BNSF and BHE, its railroad and utility and energy units. Berkshire expects capital expenditures for the balance of 2022 for BNSF and BHE to approximate $6.6 billion.
During the first half, Berkshire paid cash of $57.3 billion to acquire equity securities and received proceeds of $12.0 billion from the sale of stocks. The stock purchases included about $21 billion in Chevron, about $11 billion in Occidental Petroleum, about $6 billion in Activision Blizzard as an arbitrage play, $5 billion in German stocks and Japanese stocks, $4 billion in HP, Inc. and an undisclosed additional amount of Apple. In addition, Berkshire purchased a net $22 billion in Treasury Bills and fixed-income investments. Berkshire also announced an agreement to acquire Alleghany, a property and casualty reinsurance and insurance business, for $11.6 billion in cash with the deal expected to close in the fourth quarter of 2022. In June 2022, Berkshire Hathaway Energy (BHE) acquired the BHE common stock held by Greg Abel, Berkshire’s Vice Chairman, for $870 million.
Berkshire repurchases its shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett and Charlie Munger. During the first half, Berkshire repurchased $4.2 billion of its common stock, including $1 billion in the second quarter. These repurchases included 25,462 Class B shares acquired at an average price of $276.75 per share and 2,397 Class A shares purchased at an average price of $425,870 per share during June 2022. No shares were repurchased in April or May. After quarter end, Berkshire repurchased an additional $500 million of its common stock in July.
Thursday, Aug. 4, 2022
According to Mastercard SpendingPulseTM, which measures in-store and online retail sales across all forms of payment, U.S. retail spending excluding automotive increased a hot 11.2% year-over-year in July, while retail sales excluding automotive and gas rose 9.0%. Notably, e-commerce sales were up 11.7% year-over-year, a sharp increase after months of softer growth. Spending increases in July outpaced monthly year-over-year growth experienced thus far in 2022, with demand and higher prices both contributing factors. Consumers continue to navigate high inflation as they spend on wants and needs. The Grocery sector, for instance, saw sales up +16.8% in July due primarily to food price increases. On the other hand, Apparel (+16.6%) and Jewelry (+18.6%) sales saw strong demand-driven year-over-year growth, well outpacing sector-specific inflation. Travel remains a priority, with Lodging up 29.6% and Airline sales up 13.3%. Fuel & Convenience spending remains elevated (+32.3%), though the growth rate is down compared to June – reflecting price declines at the pump.After heating up during the pandemic, the U.S. housing market has cooled considerably since the beginning of 2022, slowing consumer spending on home-related goods.
Maximus-MMS reported third quarter revenue decreased 9% to $1.13 billion with net earnings and EPS down 66% to $31.3 million and $.51, respectively. The decline in revenue was offset by a combination of organic growth and acquired growth from the U.S. Federal Services Segment acquisitions. Adjusting for COVID-19 response work, normalized organic growth would be approximately 21% over the prior year period. By segment, U.S. Services Segment revenue decreased 8% to $399.3 million, primarily due to the expected reduction in short-term COVID-19 response work. Adjusting for this work, normalized organic growth in the segment was nearly 40% driven by ramping of new core work and COVID-19 response work that has evolved into longer term work with new customers gained during the pandemic. U.S. Federal Services Segment revenue decreased 15% to $525.5 million, driven by expected reductions in short-term COVID-19 response work, partially offset by contributions from the acquisitions of VES and Aidvantage. Adjusting for COVID-19 response work, normalized organic growth in the segment was approximately 6% over the prior year period. Outside the U.S. segment revenue increased 6% to $200.9 million. Results were net of a 9% currency headwind. Adjusting for COVID-19 response work, normalized organic growth in the segment was approximately 21% over the prior year period and driven primarily by ramping of the U.K. Restart Programme. Year-to-date signed contract awards totaled $4.02 billion and contracts pending totaled $476 million. During the quarter, Maximus generated free cash flow of $44.8 million compared to a negative free cash flow of $41.6 million in the prior year period and returned $65.1 million to shareholders through dividend payments of $17.1 million and share repurchases of $48 million. After quarter-end, the company repurchased an additional $22.3 million shares of common stock. Given the decline in revenues due to reductions in COVID-19 response work and earnings negatively impacted by the write-down in Outside the U.S. Segment, Maximus updated its guidance for the full fiscal year. Revenues are expected in the $4.55 billion to $4.65 billion range, compared to $4.5 billion to $4.7 billion, with EPS in the $2.85 to $3.05 range, down from prior guidance of $3.00 to $3.50. Free cash flow is expected in the $170 million to $210 million range, down from $175 million to $250 million previously guided. Looking ahead to fiscal 2023, management expects revenue to more than overcome $300 million year-over-year reductions in short-term COVID response work, meaning a positive organic growth projection. For earnings, a lift in profitability is expected over fiscal 2022.
Wednesday, Aug. 3, 2022
Booking Holdings-BKNG reported strong second quarter results with revenues flying 99% higher to $4.3 billion with the company reporting $857 million in net income and EPS of $21.07 compared to losses last year. Second quarter gross travel bookings increased 57% to $34.5 billion as room nights booked in the quarter increased 56% from the prior year period to 246 million. Rental car days booked motored 22% higher while airline tickets booked soared 31%. U.S. booking increased 30% with European bookings up 20% while Asia remained a weak spot given Covid restrictions. About 38% of bookings were processed through the company’s payments platform, which delivers more seamless, frictionless service. Alternative accommodations were up 25%, representing 32% of the overall mix. Bookings’ recovery from the pandemic reached another milestone with room nights booked for the second quarter surpassing 2019 levels for the first time. Free cash flow during the first half of the year was up fivefold to $4.2 billion with the company repurchasing $2.3 billion of its common stock. Booking accelerated its share repurchases given the share price pullback and repurchased an additional $811 million of stock in July with $7.4 billion remaining authorized for future share repurchases. Despite growth moderating and significant foreign exchange headwinds, Booking Holdings expects record third quarter revenues given an extremely busy summer travel season. Fourth quarter bookings currently are 15% higher than 2019 levels although are subject to cancellations. Current cancellation rates have been below 2019 levels. Despite macroeconomic challenges, Booking Holdings’ strong cash flow generation and solid balance sheet position the company well for long-term growth given the strong demand for travel.
NVR, Inc.-NVR announced today that its Board of Directors has authorized the repurchase of $500 million of its outstanding common stock. The company indicated that the authorization is a continuation of the stock repurchase program that began in 1994 and is consistent with NVR's strategy of maximizing shareholder value.
Tuesday, Aug. 2, 2022
Starbucks Corporation-SBUX reported fiscal third quarter revenues increased 9% to $8.15 billion with net earnings falling 21% to $912.9 million and EPS declining 18.6% to $0.86. Same store sales growth increased 3%, driven by a 6% increase in average ticket partially offset by a 3% decline in comparative transactions. Starbucks opened 318 net new stores during the quarter, ending the quarter with 34,948 stores. Active Starbucks Rewards Membership increased 13% in the U.S. during the third quarter to 27.4 million members. By region, U.S. revenues increased 13% to $6.1 billion with operating margins declining 230 basis points to 22% on inflationary pressures, increased labor costs, partially offset by price increases. U.S. same store sales increased 9% on a 1% increase in transactions and an 8% change in ticket. International sales declined 6% to $1.58 billion on an 18% drop in comp store sales, primarily related to pandemic-related shutdowns in China where same store sales fell 44%. Excluding China, international segment revenues increased 33%. Excluding China and the impact of foreign currency headwinds, international revenues increased 50%. Net international operating margins dropped to 8.5% from 19.4% last year, mainly related to the COVID shutdowns in China. Channel Development sales increases 16% to $479.7 million, driven by growth in the Global Coffee Alliance and ready-to-drink business. During the first nine months of the fiscal year, Starbucks generated $2.0 billion in free cash flow, down 42.5% from last year with the company returning $5.7 billion to shareholders year-to-date through cash dividends of $1.7 billion and share repurchases of $4.0 billion. Starbucks suspended share repurchases during the quarter. The company ended the quarter with $3.5 billion in cash and investments and nearly $14.0 billion in long-term debt. Although Starbucks has suspended forward guidance, it expects fourth quarter margins to decline from the third quarter due to continued uneven store reopenings in China and a step-up in investments in the company’s reinvention initiates including an expected doubling of compensation expenses from last year’s fourth quarter.
Monday, Aug. 1, 2022
PepsiCo-PEP and Celsius Holdings, Inc., maker of a leading global fitness energy drink, CELSIUS®, announced a definitive agreement forging a long-term strategic distribution arrangement. The distribution agreement initially transitions Celsius' current U.S. distribution to PepsiCo's best-in-class capabilities. As part of the transaction, PepsiCo will also make an investment in Celsius in support of its growth agenda and will nominate a director to serve on Celsius' Board of Directors. As part of the transaction, PepsiCo will make a net cash investment of $550 million to Celsius in exchange for convertible preferred stock. Shares underlying the transaction were priced at $75 per share, or approximately 7.33 million shares, which equates to an estimated 8.5% ownership in Celsius on an as-converted basis. The preferred shares are entitled to a 5% annual dividend.
July 28, 2022
Intel-INTC reported second quarter sales declined 22% to $15.3 billion with a net loss of $454 million, or $0.11 per share, compared with net income of $5.1 billion, or $1.24 per share, during last year’s second quarter. By business segment, Client Computing Group (CCG) revenue fell 25% to $7.7 billion on lower PC demand primarily in consumer and education as well as OEM inventory reduction. CCG operating income declined 73% to $1.1 billion on lower revenue, increased unit cost, investment in roadmap initiatives and inventory reserves. Data Center and AI Group (DCAI) revenue declined 16% to $4.6 billion on “once-in-ten-years” OEM inventory reductions and competitive pressure. DCAI operating plummeted 90% to $200 million on the lower revenue, investments in roadmap initiatives and inventory reserves. Network and Edge Group (NEX) revenue increased 11% to a record $2.3 billion led by strength in networking Ethernet and 5G products. NEX operating income fell 60% to $241 million on lower inventory sell-through and roadmap initiatives. Accelerated Computing Systems and Graphics Group (AXG) revenue increased 5% to $186 million. AXG generated an operating loss of $507 million on inventory reserves and roadmap investments. Mobileye revenue increased 41% to a record $460 million and generated a 43% increase in operating income to $190 million. Intel Foundry Services (IFS) revenue fell 54% to $122 million, driven by lower sales of mask writing tools, with the group generating a net loss of $155 million on lower revenue and the ramping of IFS operations. Operating expenses increased 11% to $6.3 billion. During the first six months of 2022, Intel generated operating cash flow of $6.7 billion, down 53% from last year. Capital expenditures of $11.8 billion increased 56% from last year and resulted in $5.1 billion of cash used year-to-date. Intel returned nearly $3 billion to shareholders during the first half of 2022 through dividend payments. Intel ended the quarter with $27.0 billion in cash and investments, $32.5 billion in long-term debt and $101.2 billion in shareholders’ equity. Given the disappointing year-to-date performance, Intel revised its full year guidance with revenues now expected in the $65 billion to $68 billion range, down 16% from last year at the mid-point, with EPS of $2.57 now expected, down nearly 50% from last year.
Apple-AAPL reported third quarter revenues increased 2% to a record $83 billion with net income down 11% to $19.4 billion and EPS down 8% to $1.20. Despite a challenging operating environment including Covid shutdowns, geopolitical tensions, foreign exchange headwinds, the loss of its Russia business and an uncertain macroeconomic environment, Apple set a June quarter revenue record driven by record iPhone and Services sales. Apple’s installed base of active devices reached an all-time high in every geographic segment and product category. The company has 860 million paid subscriptions which is up 160 million over the last 12 months. Supply constraints impacted sales especially for Macs and iPads, although were less than expected during the quarter. Free cash flow increased 19% year-to-date to $90.6 billion with Apple paying $11.1 billion in dividends and repurchasing $65 billion of its common stock during the same time. Apple ended the quarter with more than $179 billion in cash and investments, $94.7 billion in long-term debt and $58.1 billion in shareholders’ equity on its solid balance sheet. Despite significant foreign exchange headwinds, Apple expects fourth quarter revenue growth will accelerate sequentially from third quarter results as supply constraints ease. Gross margin is expected in the range of 41.5% to 42.5% with operating expenses in the range of $12.9 billion to $13.1 billion and a tax rate of about 16%.
Mastercard-MA reported second quarter revenues charged 21% higher to $5.5 billion with net income increasing 10% to $2.3 billion and EPS up 13% to $2.34. This strong growth was driven by robust consumer spending despite increasing inflationary pressures. During the quarter, gross dollar volume growth increased 14% to $2.1 trillion led by cross-border volume of 58% thanks to strong travel spending. Switched transactions increased 12%. Rebates and incentives increased 19% due to increased volumes and transactions and new and renewed deals. As of 6/30/22, the company’s customers had issued 3.0 billion Mastercard and Maestro-branded cards. Free cash flow increased 13% during the first half of the year to $4.0 billion with the company paying $956 million in dividends and repurchasing $4.8 billion of its common stock, including 6.9 million shares repurchased at a cost of $2.4 billion in the second quarter at an average cost of $347.83 per share. Mastercard has $6.7 billion authorized for future share repurchases. Mastercard is not seeing signs of recession given resilient consumer spending thanks to low unemployment, high wage increases and high consumer savings. Travel and lodging spending in the U.S. increased 25% with cross-border volume handily surpassing pre-pandemic levels in 2019. Spending in Europe is positive despite higher energy costs and the war in Ukraine. Spending in Asia has lagged the global recovery due to continued Covid restrictions with significant upside remaining in Asia. Mastercard raised its revenue outlook for the full year with low 20% growth expected on a constant currency basis.
T. Rowe Price-TROW reported net revenues declined 21.6% to $1.5 billion with net income and EPS declining 58% to $339.6 million and $1.46, respectively. Operating income declined 30.2% during the quarter to $668.6 million and the firm reported a non-operating loss for the quarter of $279.9 compared to a $143.9 non-operating gain last year. Assets under management (AUM) declined 15.6% during the quarter to $1.31 trillion on market depreciation and net distributions of $227.4 billion and net cash outflows of $14.7 billion, largely from growth-oriented equity strategies. Investment advisory fee annualized effective rate declined 2.5 basis points year-over-year to 42.7 basis points, squeezed by the July 2021 target date fee reductions, offset slightly by higher-than-average effective fee rate earned on the firm’s alternative asset class products. Over a ten-year period, 62% of T. Rowe’s equity strategies have outperformed passive peer median performance, 60% of the firm’s fixed-income strategies have outperformed the median while 97% of T. Rowe’s multi-asset strategies have outperformed passive peer median performance. During the first half of 2022, T. Rowe Price generated $1.5 billion in free cash flow, down 19% from last year, with the company returning $1.065 billion to shareholders through dividends of $556.2 million and share repurchases of $519.6 million at an average cost of $137.92 per share. T. Rowe Price ended the quarter with $5.4 billion in cash and investments and $8.96 billion in shareholders’ equity on its debt-free balance sheet. Management expects net outflows to persist until we see a more constructive equity market, improved performance in certain investment strategies, less overall market volatility and more traction from strategic growth investments. While the company remains committed to investing in initiatives to drive long-term growth, it is reducing the pace of hiring to slow the rate of expense growth in response to market conditions. According to Rob Sharps, CEO and president, “Delivering outstanding investment performance remains our top priority. While many of our strategies continue to produce strong results, especially over longer periods of time, several of our large equity strategies had challenged performance. We have experienced periods of softer performance in the past and we expect our disciplined investment process and focus on fundamentals will deliver the results our clients expect and deserve. Longer-term performance in our target date franchise remains strong”
July 27, 2022
Genuine Parts-GPC reported a record second quarter with sales motoring ahead 17% to $5.6 billion and net earnings and EPS nearly doubling to $372.5 million and $2.62, respectively. Adjusted net income, which excludes a non-recurring gain on the sale of S.P. Richards real estate partially offset by Kaman Distribution Group acquisition costs, increased 24% to $313 million and EPS jumped 26% to $2.20. Sales growth reflects an 11.5% gain in comp store sales and an 8.8% benefit from acquisitions, partially offset by a 3.2% foreign currency headwind. Automotive sales were $3.5 billion, up 8.5% from last year, powered by an 8.4% increase in comp store sales. Automotive operating margin increased 20 basis points to 9.3%. Industrial sales of $2.1 billion increased 34.5% from last year, driven by a 17.8% increase in comp store sales and a 17.6% contribution from acquisitions, partially offset by a 0.9% foreign currency headwind. Industrial segment operating margins increased 110 basis points from last year to 10.6%. "The strength in Automotive was broad-based across our global operations. Likewise, the continued strength in Industrial led to its fifth consecutive quarter of double-digit sales comps," said Will Stengel, GPC President. During the first half of 2022, Genuine Parts generated $638 million in free cash flow, or 103% of reported earnings, with the company returning $365.7 million to shareholders through dividends of $242.8 million and share repurchases $122.9 million. The company’s 2022 annual dividend of $3.58 per share is up 10% from last year, marking the 66th consecutive year of dividend increases. Genuine Parts ended the quarter with $519 million in cash, $3.3 billion in long-term debt and $3.6 billion in shareholder equity. Given its ongoing confidence in the business despite a dynamic and uncertain external landscape, management updated its 2022 guidance with sales now expected to increase 12% to 14%, up from prior guidance of 10% to 12%, with adjusted EPS in the $7.80 to $7.95 range, up from $7.70 to $7.85 previously. Free cash flow is expected in the $1.2 billion to $1.4 billion range.
Cognizant Technology Solutions-CTSH reported second quarter revenue increased 7% to $4.9 billion with net income increasing 12% to $577 million and EPS up 14% to $1.11. Digital accounted for 50% of total revenues. By business segment, Financial Services revenue increased 3% to $1.5 billion, Health Sciences increased 6% to $1.4 billion, Product & Resources increased 8% to $1.14 billion and Communications, Media & Technology increased 16% to $816 million. Operating margin increased 30 basis points to 15.5%. While second quarter bookings declined 3% from last year to $23.2 billion, Cognizant’s book to bill ratio remains at a healthy 1.2 times which bodes well for next year. Trailing 12-month voluntary attrition jumped to 32% from 18% last year and offshore utilization stood at 83% while onsite utilization was 91%. During the quarter, Cognizant generated $485 million in free cash flow, up 4% from last year, with the company returning $459 million to shareholders through $141 million in dividends and $318 million in share repurchases at an average cost of $71.43 per share. During the first half of 2022, the company returned $1.03 billion to shareholders through dividends of $284 million and share repurchases of $744 million at an average cost per share of $80.87. Cognizant ended the quarter with cash and investments of $2.8 billion, long-term debt of $608 million and shareholders’ equity of $12.0 billion on its healthy balance sheet. Given the first half results, management updated its guidance with revenues now expected in the $19.7 billion to $19.9 billion range, up 6.3% to 7.3% from last year, with EPS in the range of $4.51 to $4.57, up 9% to 11% from last year. This includes an increase in expected share repurchases to $1.2 billion up from prior guidance of $600 million.
Meta Platforms-META reported its first dip in revenues with a 1% decline in revenues during the second quarter to $28.8 billion. Earnings dropped 36% to $6.7 billion with EPS down 32% to $2.46 as the company continued to invest heavily in research and development with its plans to build out the metaverse over the next decade. Ad impressions delivered across the company’s Family of Apps increased by 15% year-over-year while the average price per ad decreased by 14%. These results reflected a weak advertising demand environment due to broad macroenvironment uncertainty along with Apple’s privacy changes which adversely impacted digital advertising. Meta’s family of apps reach 3.6 billion people monthly, an increase of 4% year-over-year. Facebook’s daily active users increased 3% on average for June to 1.97 billion as active monthly users increased 1% to 2.93 billion. Free cash flow declined 20% during the first half of the year to $13.3 billion primarily due to a 45% increase in capital expenditures as the company continues to invest in the business for long-term growth. For the full year, capital expenditures are expected in the range of $30 billion to $34 billion. Meta repurchased $14.7 billion of its common stock during the first half of the year with $24.3 billion remaining authorized for future share repurchases. Meta ended the quarter with a mighty balance sheet including $47 billion in cash and investments, no long-term debt and $125.8 billion in shareholders’ equity. Meta’s headcount increased 32% to 83,553 as of 6/30/22. Given economic challenges, the company plans to reduce its headcount over the next year and focus on priority areas like artificial intelligence and the metaverse. Meta expects third quarter revenues in the range of $26-$28.5 billion, reflecting the expectation that weak advertising demand will continue compared to the strong results seen in the prior year period. Third quarter Reality Labs revenue is also expected to be lower than second quarter revenues. Foreign exchange headwinds are expected to adversely impact revenue growth by 6% in the third quarter. Meta narrowed its total expenses expectation for the full year to a range of $85-$88 billion.
General Dynamics-GD reported second quarter revenues were relatively flat at $9.2 billion with net earnings up 3.9% to $766 million and EPS marching ahead 5.4% to $2.75. Operating margin expanded 20 basis points from the prior year period to 10.6%. Aerospace saw very strong demand during the quarter with margins showing steady improvement, while the defense segments demonstrated solid operating performance and had several important wins. Free cash flow more than doubled during the first half to $2.3 billion with the company paying $679 million in dividends and repurchasing $1.1 billion of its common stock. For the full year, the company continues to expect to convert more than 100% of earnings into free cash flow. Orders remained strong across the company with a consolidated book-to-bill ratio, defined as orders divided by revenue, of 1.1 to 1 for the quarter with strength in the Aerospace segment driven by strong order activity for Gulfstream with a book-to-bill of 2.2 to 1 during the quarter. Gulfstream has the highest backlog in over a decade. General Dynamics ended the quarter with a company-wide backlog of $87.6 billion. Given the robust demand in Aerospace, General Dynamic is not seeing any slowdown in its business and believes its durable and extended backlog positions the company well for 2023-2024. The company expects its fiscal 2022 EPS will come in at the high end of its previous guidance of $12.00-$12.15.
Automatic Data Processing-ADP reported fourth quarter revenue rose 10% to $4.1 billion with net income increasing 16% to $625 million and EPS up 19% to $1.50. With more than 990,000 clients around the world, ADP paid 1 in 6 U.S. workers last year and processed $2.7 trillion in payrolls and taxes. For the full year, revenue increased 10% to $16.5 billion with net earnings increasing 13% to $2.9 billion and EPS up 15% to $7.00. Over the course of fiscal 2022, ADP consistently exceeded revenue growth expectations driven by significant sales momentum and near-record client revenue retention of 92.1%. Record fourth quarter new business bookings produced 15% growth for the year to $1.7 billion and 15% growth in PEO average worksite employees. Return on shareholders’ equity for the year was an impressive 91%. Free cash flow remained relatively flat at $2.9 billion with the company paying $1.7 billion in dividends and repurchasing $2 billion of its common stock during the year. ADP has increased its dividend for 47 consecutive years. Management provided fiscal 2023 guidance, anticipating continued solid revenue and bookings growth, as well as healthy margin improvement from client funds interest growth and operating leverage from ongoing productivity gains. For fiscal 2023, management expects revenue growth of 7% to 9%, new business bookings of 6% to 9%, operating margin expansion of 100 to 125 basis points and adjusted EPS growth of 13% to 16%.
July 26, 2022
Visa-V rang up a 19% increase in sales during the fiscal third quarter to $7.3 billion with net income jumping 32% to $3.4 billion and EPS charging ahead 36% to $1.60. Key drivers of the strong second quarter sales growth included 12% growth in payments volume to $2.9 billion, 16% growth in processed transactions to 49.3 billion and 48% growth in cross-border volume excluding intra-Europe as traffic volume surpassed 2019 levels the first time since the pandemic began. By segment, Service revenues increased 13% to $3.2 billion, Data Processing revenues increased 8% to $3.6 billion, International Transaction Revenue increased 51% to $2.6 billion, Other Revenues increased 26% to $517 million and client incentives increased 21% to 2.6 billion, representing 26% of gross revenues. Visa ended the quarter with 3.9 billion cards issued, up 8% from last year. During the first nine months of the fiscal year, Visa generated $12.3 billion in free cash flow, representing 103% of net income, with the company returning $11.9 billion to shareholders through dividends of $2.4 billion and share repurchases of $9.5 billion including $2.5 billion repurchased during the third quarter at an average price of $202.16 per share. Visa ended the quarter with $16.3 billion in cash and investments, $20.5 billion in long-term debt and $35.5 billion in shareholder equity on its sturdy balance sheet. Fiscal year-to-date growth has been stable or improving in overall domestic payment volume with no indication of an economic slowdown or evidence of a pullback in consumer spending, including during the most recent weeks. As such, management assumes the trends it has seen in payments volume and processed transactions will continue through the fourth quarter.
Canadian National Railway-CNI reported record second quarter revenue of C$4.3 billion an increase of 21% with net income up 28% to C$1.3 billion and EPS chugging ahead 32% to C$1.92. The increase in revenues was mainly due to higher applicable fuel surcharge rates, freight rate increases, higher Canadian export volumes of coal via west coast ports, higher volumes of U.S. grain and the positive translation impact of a weaker Canadian dollar; partly offset by significantly lower export volumes of Canadian grain. Revenue ton miles increased 2% year-over-year to 60.5 billion and fuel efficiency improved by 4% to a record of 0.838 US gallons of locomotive fuel consumed per 1,000 gross ton miles. In addition, car velocity (car miles per day) improved by 2%. During the first half of the year, the company generated C$1.2 billion in free cash flow and returned C$3.4 billion to shareholders through share repurchases of C$2.4 billion and dividends paid of C$1 billion. Canadian National ended the quarter with C$465 million in cash, C$11.9 billion in long-term debt and C$21.7 billion in shareholders’ equity. Management reaffirmed 2022 guidance of 15-20% adjusted EPS growth and an operating ratio below 60% as well as a ROIC of approximately 15%. Canadian National maintained its free cash flow target in the range of C$3.7 billion to C$4 billion and expects to invest approximately 17% of revenues in its capital program. In addition, management continues to expect volume growth, in terms of Revenue ton miles (RTMs) in the low single-digit range and continues to expect significantly lower volumes of Canadian grain and lower volumes of potash as well as lumber and panels for 2022 compared to 2021.
Microsoft-MSFT reported fourth quarter revenues increased 12% to $51.9 billion with net income increasing 2% to $16.7 billion and EPS up 3% to $2.23. Commercial bookings grew 25% and Microsoft Cloud revenue was $25 billion, up 28% year over year. By segment, revenue in Intelligent Cloud increased 20% to $20.9 billion, driven by Azure and other cloud services. Revenue in Productivity and Business Processes increased 13% to $16.6 billion, driven by Office 365 Commercial and LinkedIn. Revenue in More Personal Computing rose 2% to $14.4 billion, driven by Search and news advertising. Microsoft returned $12.4 billion to shareholders in the form of share repurchases and dividends in the fourth quarter, an increase of 19% compared to the fourth quarter of 2021. During the quarter, Microsoft was impacted by evolving macroeconomic conditions and other unforeseen items including unfavorable exchange rate movement, extended shutdowns in China, reductions in advertising spending, employee severance expenses and the ongoing war in Ukraine. As a result, total revenue was negatively impacted by approximately $1.2 billion. For the full fiscal 2022-year, Microsoft’s revenue increased 18% to $193.8 billion with net income up 19% to $72.7 billion and EPS jumping 20% to $9.65. Return on shareholders’ equity for the year was an impressive 44%. Free cash flow increased 16% during the year to $65.1 billion with Microsoft paying $18.1 billion in dividends and repurchasing $32.7 billion of its common stock during the year. Microsoft ended the year with more than $104 billion in cash and investments, $47 billion in long-term debt and $167 billion in shareholders’ equity on its strong balance sheet. For the first fiscal quarter of 2023, Microsoft expects revenues in the range of $49.3 billion to $50.3 billion, representing 9%-11% growth over the prior year period. For the full 2023 year, Microsoft expects double-digit growth in revenues and operating income.
Alphabet-GOOGL reported second quarter revenues rose 13%, or 16% on a constant currency basis, to $69.7 billion with operating income relatively flat at $19.5 billion. Net income declined 14% to $16.0 billion with EPS off 11% to $1.21. Revenues were driven by double-digit growth in Search and Cloud. Google Cloud’s sales increased 36% and topped the $6 billion revenue milestone for the first time in a quarter with strong demand in all geographies. Search advertising growth was driven by the travel and retail sectors, with strong searches for summer travel and increased e-commerce in apparel. YouTube ads rose 5% during the quarter to $7.3 billion with growth slowing as the company lapped unusually strong results last year and a pullback by some advertisers in their spending budgets. YouTube Shorts are watched by over 1.5 billion users each month with over 30 billion daily views. Alphabet is seeking to monetize this part of its business. Free cash flow declined 6% during the first half to $27.9 billion, primarily due to a significant 45% increase in capital expenditures as the company is investing in servers and data centers for the long term despite an uncertain macroenvironment. The company repurchased $28.5 billion of its common stock during the first half and ended the second quarter with a fortress balance sheet with nearly $125 billion in cash and investments, $14.7 billion in long-term debt and $255.4 billion in shareholders’ equity. Alphabet’s employee headcount increased 21% from the prior year period to 174,014 at the end of the second quarter with the company planning to slow its hiring for the balance of the year and into 2023.
Texas Instruments-TXN reported second quarter revenues rose 14% to $5.2 billion with net income up 19% to $2.3 billion and EPS increasing 20% to $2.45. By segment, Analog revenues increased 15% to $4.0 billion, Embedded Processing revenues were up 5% to $821 million and Other revenues increased 19% to $399 million. While April started weak due to Covid-related restrictions in China, business accelerated in May as restrictions eased with the automotive market up more than 20%. During the quarter, TXN generated $1.2 billion in free cash flow and returned more than $2.2 billion to shareholders through dividends of $1.1 billion and share repurchases of $1.2 billion. Free cash flow over the trailing 12 months was $5.9 billion and 30% of revenues underscoring the strength of the company’s business model. During the past 12 months, Texas Instruments invested $3.2 billion in R&D and SG&A, invested $2.8 billion in capital expenditures and returned $6.2 billion to shareholders. Management’s third quarter outlook is for revenue in the range of $4.9 billion to $5.3 billion and EPS between $2.23 and $2.51.
Stryker-SYK reported second quarter sales increased 4.6% to $4.5 billion with net income and EPS up 11% to $656 million and $1.72, respectively. By business segment, MedSurg and Neurotechnology increased 8% to $2.55 billion, driven by solid growth in Instruments, Endoscopy and Neuro Cranial. Orthopaedics and Spine increased slightly to $1.9 billion on solid growth in Knees and Hips, powered by a healthy 19% increase in MAKO robot installations. Gross profit margins declined by 170 basis points as supply chain challenges resulted in spot buys of core components at premium prices to ensure Stryker’s capacity to meet strong demand for its products. As the quarter progressed, Stryker saw the need for spot buys begin to abate. For the six months ended 6/30/2022, Stryker generated $732 million in operating cash flow representing an earnings conversion ratio of 75%. Free cash flow declined nearly 60% year-over-year to $470 million. During the quarter, Stryker paid down $450 million of its long-term debt ending the quarter with $1.2 billion in cash and investments, $13.4 billion in long-term debt and $15.7 billion in shareholders’ equity. Given the healthy second quarter results, the strong order book for capital equipment and the sales momentum in its implant businesses, Stryker now expects 2022 organic sales growth in the 8% to 9% range, compared to previous guidance of 6% to 8%. Should foreign currency exchange rates hold near current levels, full year reported sales will be adversely impacted by 2% to 3% and EPS will be adversely impacted by about $0.25 to $0.30. Given the first half performance including continued supply chain challenges and the inflationary environment together with increased sales guidance, continued financial discipline and, most importantly, the future impact of foreign currency, the company now expects adjusted EPS in the range of $9.30 to $9.50, down from prior guidance of $9.60 to $10.00.
Raytheon Technologies-RTX reported second quarter revenues rose 3% to $16.3 billion with net income increasing 25% to $1.3 billion and EPS up 28% to $.88. Earnings include $.28 per share of net significant and/or non-recurring charges and acquisition accounting adjustments. The strong start to the summer travel season drove financial results ahead of management’s expectations. Resilient demand generated over $24 billion of awards during the quarter. Backlog at the end of the quarter was $161 billion, including $96 billion from commercial aerospace and $65 billion from defense with a 1.3 book-to-bill ratio. Free cash flow decreased 16% to $807 million during the quarter. The company returned more than $3.3 billion to shareholders in the first half through dividends of $1.5 billion and share repurchases of $1.8 billion. Management confirmed the prior 2022 outlook expecting sales of $67.75 billion to $68.75 billion, adjusted EPS of $4.60-$4.80, free cash flow of approximately $6 billion and share repurchases of at least $2.5 billion.
NVR, Inc.-NVR reported second quarter revenues increased 16% to $2.6 billion with net income up 35% to $433 million and EPS jumping 50% to $123.65. New orders decreased by 16% during the quarter to 4,663 units. However, the average sales price of new orders increased 7% to $471,600. The cancellation rate in the second quarter was 14% compared to 8% in the prior year period. Settlements increased 2% during the quarter to 5,820 units and the average settlement price increased 15% to $448,400. The backlog of homes sold but not settled as of June 30, 2022, decreased on a unit basis by 3% to 12,286 units and increased on a dollar basis by 8% to $5.82 billion. During the quarter, homebuilding revenue increased by 17% to $2.61 billion. Gross profit margin in the second quarter of 2022 increased to 26.3%, compared to 22.6% in the second quarter of 2021. Gross profit margins were favorably impacted by the increase in the average settlement price. Mortgage loan closings increased 5% to $1.65 billion during the quarter. During the first half of the year, the company repurchased 207 million shares for an average price of $4,903 per share and ended the quarter with $1.48 billion in cash, $915 million in long-term debt and $2.9 billion in shareholders’ equity on its sturdy balance sheet.
PulteGroup-PHM reported second quarter revenues increased 17% to $3.9 billion with net income up 30% to $652 million and EPS jumping 44% to $2.73, respectively. Record second quarter homebuilding revenues and gross margin drove a significant increase in EPS. Home sale revenues for the second quarter increased 18% to $3.8 billion, reflecting a 19% increase in average sales price to $531,000, partially offset by a less than 1% decrease in closings to 7,177 homes. New orders decreased by 23% during the quarter to 6,418 homes, as higher mortgage rates, reduced affordability, and lower consumer confidence, slowed demand and resulted in an increased number of previous buyers cancelling their contracts. The cancellation rate in the second quarter was 15% compared to 7% in the prior year period. The dollar value of new orders decreased 8% to $3.9 billion, and the company operated out of an average of 791 communities. The company’s backlog at quarter end was 19,176, which is a decrease of 4% from the prior year. However, the dollar value of homes in backlog was $11.6 billion, which is an increase of 18% over last year. Mortgage capture rate was 78% for the quarter, down from 86% last year. During the quarter, Pulte invested $1.1 billion in land acquisition and development, with 58% of spending on existing land assets. PulteGroup controlled 243,258 lots with 54% held through option, with a long-term target of controlling 65% to 70% of lots via option. Year-to-date free cash flow decreased 90% to $39.6 million, as management is focused on investing in the business to help combat the volatile environment. During the first half of 2022, the company paid out $74 million in dividends and repurchased 17.4 million shares of its common stock for $794 million at an average price of $45.63 per share, representing 7% of shares outstanding. The dividend payout rate per share increased 17% in 2021 and an additional 7% for 2022. The ongoing strength of PulteGroup’s quarterly financial results has allowed the company to deliver a high return on equity of 31% for the trailing 12 months. The company ended the quarter with $663 million in cash, $2 billion in long-term debt and $7.7 billion in shareholders’ equity on its sturdy balance sheet. While PulteGroup continues to deliver strong results and maintain a large backlog of sold homes, Federal Reserve actions to raise interest rates to combat inflation, combined with lower consumer confidence and increasing fears of a recession have worked to cool the demand environment. Even with the recent 200-basis point increase in mortgage rates impacting affordability, management continues to believe the desire for homeownership is high and the long-term outlook for housing remains positive.
3M-MMM reported second quarter sales declined 2.8% to $8.7 billion including a 4% foreign currency headwind with net income and EPS falling 95% to $78 million and $0.14, respectively. Excluding litigation expenses of $1.7 billion, or $2.34 per share, net income declined 12% and EPS declined 10%. By business segment, Safety & Industrial sales declined 3.4% to $2.9 billion, Transportation & Electronics sales declined 3.7% to $2.3 billion, Health Care sales increased 0.6% to $2.2 billion and Consumer sales declined 5% to $1.3 billion. Adjusted margins declined 240 basis points to 21%, squeezed by the decline in disposable respirator demand, COVID-related lockdowns in China, global supply chain challenges, raw materials and logistics cost inflation and foreign currency headwinds, partially offset by strong pricing, spending discipline and restructuring benefits. During the quarter, 3M generated $1.0 billion in adjusted free cash flow, down 41% from last year, due to working capital changes and the cash impact from capitalization of R&D for U.S. tax purposes. 3M returned $848 million to shareholders during the quarter through dividend payments. Share repurchases have been suspended pending the Food Safety separation expected to be completed by 9/1/2022. Year-to-date, 3M returned $2.5 billion to shareholders through dividends of $1.7 billion and share repurchases of $800 million. 3M ended the quarter with $3.0 billion in cash and equivalents, $14 billion in long-term debt and $13.8 billion in shareholders’ equity. During the quarterly conference call, 3M announced its intent to spin off its health care segment to shareholders as a publicly-traded company while retaining a 19.9% stake in the business. The standalone Health Care business will be a leading global diversified healthcare technology company with sales of about $8.6 billion focused on wound care, oral care, healthcare IT and biopharma filtration while the new 3M with sales of about $26.8 billion will focus on the Safety & Industrial, Transportation & Electronics and Consumer businesses. The New 3M will retain responsibility for non-Health Care related litigation, including those related to Combat Arms Earplugs and PFAS. In a separate announcement, 3M said it was taking action to resolve the Combat Arms Earplug litigation, including 115,000 filed claims and 120,000 claims on an administrative docket as of June 30, 2022. To that end, 3M’s wholly-owned subsidiary, Aearo Technologies, has voluntarily initiated chapter 11 proceedings seeking court supervision to help establish a $1 billion trust – funded by 3M – to efficiently and equitably resolve all claims determined to be entitled to compensation. 3M recorded a $1.2 billion, or $1.66 per share, charge related to the action. The chapter 11 process is intended to achieve an efficient and equitable resolution, reduce uncertainty and increase clarity for all stakeholders, while reducing the cost and time that could otherwise be required to litigate thousands of cases. The company updated its full year guidance to reflect foreign currency headwinds with the dollar at a 20-year high and macroeconomic uncertainty. Total sales growth is now expected in the -2.5% to -0.5% range on organic sales growth of 1.5% to 3.5% with EPS expected in the $7.32 to 7.82 range, down 25% from last year at the midpoint. Expected operating cash flow of $6.6 billion to $7.2 billion will contribute to a 90% to 100% free cash flow conversion rate.
UPS-UPS reported second quarter revenue increased 6% to $24.8 billion with net income and EPS each increasing 7% to $2.8 billion and $3.25, respectively. Despite volume dropping more than planned during the quarter, operating profit jumped 8.5% to $3.5 billion as the company posted the highest operating margin in 15 years with all business segments generating operating profit growth as innovation drove productivity. About half of the volume growth decline during the quarter was due to negotiations with Amazon, the company’s largest customer. UPS is restricting the volume it is taking from Amazon to make capacity room for more profitable volume business elsewhere. Revenue from Amazon is expected to be less than 11% of total revenues by the end of the year. Out of UPS’s top 20 customers, 65% grew their volume during the quarter. The macroenvironment remains dynamic. GDP forecasts have come down with global GDP growth expected to approximate 2.5% and U.S. GDP growth expected around 1.2% for the year. Despite higher inflation and interest rates in the U.S., consumer spending remains strong especially for services. The continued rolling lockdowns in China and geopolitical pressures in Ukraine are pressuring international volumes. However, supply chains are flowing better than a year ago, but we are not “out of the woods yet.” UPS is managing well through the challenges. Fuel prices are coming down which should help second half results, although wages are expected to rise. UPS reaffirmed its full-year financial targets with revenue expected to approximate $102 billion with adjusted operating margin of about 13.7%. Adjusted return on invested capital is expected to exceed 30%. Free cash flow increased 2% during the first half of the year to $6.9 billion with UPS paying $2.6 billion in dividends and repurchasing $1.2 billion of its common stock. For the full year, free cash flow is expected to approximate $9 billion with the company paying $5.2 billion in dividends and increasing its share repurchase target to $3 billion for the year.
Monday, July 25, 2022
Bank of Hawaii-BOH reported second quarter total revenue increased 4.3% to $175.1 million with net income declining 18.7% to $54.9 million and EPS down 17.9% to $1.38. The net income decline was primarily due to a $13.6 million smaller release of the allowance for credit losses. Net interest income increased 7.6% to $132.9 million on a 10 basis point increase in net interest margin to 2.47% owing to higher interest rates and continued strong loan growth. Total loans and leases were $13.0 billion, up 7.6% from last year, or up 12.1% excluding PPP loans, while total deposits reached a record high of $21.0 billion, up 4.2%. Bank of Hawaii’s 62% loan to asset ratio provides ample liquidity to fund continued growth. Noninterest income declined slightly from last year’s second quarter to $42.2 million while noninterest expense increased 6.6% year-over-year, reflecting the impact of higher compensation and occupancy expenses. During the second quarter, Bank of Hawaii generated an 18.2% return on average shareholders’ equity and 1% return on assets. Credit quality remained strong during the quarter with 80% of the loan portfolio secured with quality real estate with a combined average loan to value of 56%, non-performing loans of 0.12% and net loan charge-offs of 0.02%. Bank of Hawaii ended the quarter with a fortress-like capital position of 14.1%, far exceeding the 10% regulatory threshold for a well-capitalized bank. During the first half of 2022, Bank of Hawaii generated $145 million in free cash flow, down 28% from last year on lower year-to-date income and working capital changes. Bank of Hawaii returned $80.8 million to shareholders year-to-date through dividend payments of $56.5 million and share repurchases of $24.3 million including $10 million in share repurchases during the second quarter at an average cost of $75.94 per share. Bank of Hawaii's $2.80 cent annual dividend currently yields an attractive 3.6%. With 60% of earning assets repricing in the next two years, Bank of Hawaii’s balance sheet is well-positioned for rising rates.
Friday, July 22, 2022
Gentex-GNTX reported second quarter sales increased 8% to $463 million with net income decreasing 16% to $72.4 million and EPS down 13% to $.31, respectively. Sales for the quarter fell short of Gentex’s beginning quarter forecasts by approximately $70 to $80 million. The sales shortfall was primarily driven by the fact that light vehicle production in primary markets was 4% lower than forecasted at the beginning of the quarter and then was further compounded by supply shortages of certain electronic components that negatively impacted mix for some of the company’s advanced feature products. While there appears to be some improved stability in the light vehicle production environment as compared to a year ago, the company is still experiencing significant customer order fluctuations on a week-to-week basis. The industry dynamics continue to create a difficult forecasting environment. Nevertheless, the continuing strong demand for light vehicles, combined with the historically low level of light vehicle inventories, should create the opportunity for an improving sales environment throughout the rest of this year and into 2023. For the second quarter of 2022, the gross margin was 32.0%, compared to a gross margin of 35.4% for the second quarter of 2021. Gross margin was impacted by raw material cost increases, labor cost increases, lower than expected sales levels, product mix shifts and ongoing customer order volatility. For the third quarter of 2022, Gentex expects a 21% increase in light vehicle production compared to the same prior year period. For the calendar year 2022, the company expects a 4% increase in light vehicle production compared to calendar year 2021 and expects an 8% increase for fiscal 2023 compared to fiscal 2022. For fiscal 2022, Gentex expects revenues in the range of $1.87 billion to $1.97 billion with a gross margin in the range of 33% to 34%. For fiscal 2023, Gentex expects revenue to be about 15%-20% higher than the updated 2022 revenue estimates of $1.87-$1.97 billion. Gentex remains cash rich and debt-free as of quarter end. The company did not repurchase any shares of its common stock during the quarter as they focused on spending capital on raw material inventory to help fulfill high customer demand. Gentex intends to repurchase additional shares of its common stock in the future in support of the previously disclosed capital allocation strategy. While new component shortages, customer order changes and volatility are expected to continue throughout the rest of 2022 and into 2023, Gentex is encouraged that the overall backdrop in the industry should lead to increased demand in the automotive market over the next 12-18 months.
Thursday, July 21, 2022
Roche-RHHBY reported first half 2022 sales increased 5% to CHF 32.3 billion with net income increasing a healthy 12% to CHF 9.2 billion and EPS up 16%, on fewer shares outstanding, to CHF 10.54. Pharmaceuticals Division sales increase 3% to CHF 22.3 billion on continued strong demand for new medicines to treat severe diseases like hemophilia, cancer and neurological disorders, which more than offset the negative impact from biosimilar competition. Diagnostics Division sales grew 10% to CHF 9.95 billion due to Roche’s ongoing strong base business and solid demand for COVID-19 tests which is expected to decline in the second half of the year. During the first half of 2022, Roche generated CHF 7.8 billion in free cash flow, up 21% year-over-year, boosted by the increase in net income and a patent settlement. Roche returned CHF 7.67 billion to shareholders via dividend payments during the first half of 2022, ending the first half with cash and marketable securities of CHF 6.8 billion, long-term debt of CHF 22.5 billion and shareholders’ equity of CHF 25.2 billion. Management affirmed its 2022 full year guidance with sales growth expected flat to up low-single digits and core EPS growth in the low- to mid-single digits. Drivers of full year sales include accelerating growth in new pharmaceutical products and strong growth in the base diagnostic business, partially offset by about CHF 2.5 billion sales erosion from biosimilars and about CHF 5 billion from significantly reduced COVID-19 sales. Leadership expects further dividend increases in Swiss francs.
Tractor Supply-TSCO rang up record second quarter results with sales increasing 8% to $3.9 billion, net income plowing ahead 7% to $396 million and EPS up 11% to $3.53. Comparable store sales increased 5.5%, as compared to an increase of 10.5% in the prior year’s second quarter. Comparable store sales were driven by comparable average ticket growth of 7.5%, offset by a decrease in comparable average transaction count of 2%. Gross profit increased 7.7% to $1.39 billion and gross margin decreased 24 basis points to 35.5% from 35.8% in the prior year's second quarter. The Company's price management actions and other margin driving initiatives were able to offset most of the impact from significant product cost inflation pressures and higher transportation costs. In addition, Tractor Supply experienced the largest E-Commerce quarter in net sales in company history. During the first half of the year, free cash flow decreased 39% to $360 million, primarily due to double-digit growth in inventories. During the second quarter, the company returned $290.8 million to shareholders through share repurchases of $188.2 million at an average cost per share of $209.11 and cash dividends totaling $102.6 million. During the second quarter of 2022, the company opened 13 new Tractor Supply stores. Tractor Supply ended the quarter with $530.8 million in cash and investments and $987 million in long-term obligations on its sturdy balance sheet. Given the robust first half results, Tractor Supply upped its guidance with sales now expected in the $13.95 billion to $14.05 billion range. Comparable store sales are now expected to increase between 5.2% and 5.8%, up from prior guidance of 3% to 4.5%. EPS is now expected in the range of $9.48 to $9.60, up from previous guidance of $9.20 to $9.50. Management anticipates current high inflation and a volatile environment to persist for the remainder of the year, but if there is a recession, management expects it to be mild.
Wednesday, July 20, 2022
SEI Investments-SEIC reported second quarter revenues increased 1% to $481.7 million with net earnings falling 17% to $111.3 million and EPS declining 13% to $0.81. Assets under management increased 1% to $403.6 billion on a $60 billion jump in collective trust fund programs deposited at the end of the quarter. Expenses increased 8%, primarily due to increased personnel costs and the impact of inflation on wages and services, which resulted in a 450 basis point drop in operating margins to 24.1%. In June, SEI Investments initiated an enhanced voluntary separation program to long-tenured employees. As a result, the company expects to record a $54.0 million and $58.0 million charge in the third quarter. During the second quarter, SEI Investments generated cash flow from operations of $70.2 million, or $0.51 per share, and free cash flow of $52.4 million. This compares to last year’s second quarter cash flow from operations of $188.4 million, or $1.31 per share, and free cash flow of $171.3 million. The company repurchased 2.0 million shares during the second quarter for $109.3 million at an average price of $55.48 per share. SEI Investments ended the quarter with $771.7 million in cash, no long-term debt and $1.9 billion in shareholders’ equity on its strong balance sheet.
Tuesday, July 19, 2022
Johnson & Johnson-JNJ reported second quarter sales increased 3% to $24 billion with net income and EPS both declining 23% to $4.8 billion and $1.80, respectively. Adjusting for one-time items, adjusted EPS increased 4.4% to $2.59. By segment, Consumer Health and MedTech sales both declined 1% to $3.8 billion and $6.9 billion, respectively, due primarily to foreign exchange headwinds. Pharmaceutical sales increased 7% to $13.3 billion during the quarter driven by double-digit growth in Infectious Disease and Oncology products. JNJ continues to generate strong free cash flow which approximated $8 billion during the second quarter. JNJ ended the quarter with zero net long-term debt on its strong balance sheet. A key priority for deploying cash is the dividend with $3 billion paid in dividends during the quarter and $5.8 billion paid year-to-date. JNJ also invested $3.7 billion in R&D during the quarter to advance its promising pipeline of new products. For the full-year, management trimmed its outlook primarily due to foreign exchange headwinds and is expecting reported sales to increase 2.1%-3.1% to a range of $93.3 billion to $94.3 billion with adjusted EPS expected in the range of $10.00 to $10.10 as operating margins remain relatively flat due to prolonged inflationary pressures..
Monday, July 18, 2022
Ross Stores-ROST recently opened 21 Ross Dress for Less® ("Ross") and eight dd's DISCOUNTS® stores across 12 different states in June and July. These new locations are part of the Company's plans to add approximately 100 new stores – 75 Ross and 25 dd's DISCOUNTS – during fiscal 2022. Looking ahead, the company remains confident in its ability to grow to at least 2,900 Ross Dress for Less and 700 dd's DISCOUNTS locations over time. Together, Ross Dress for Less and dd's DISCOUNTS currently operate a total of 1,980 locations in 40 states, the District of Columbia, and Guam.
Friday, July 15, 2022
UnitedHealth Group-UNH reported second quarter revenues rose a healthy 13% to $80.3 billion with net income and EPS each up nearly 20% to $5.2 billion and $5.34, respectively. Well-balanced revenue growth during the quarter included double-digit growth at both Optum and UnitedHealthcare. Total people served by UnitedHealthcare has grown by over 600,000 in 2022, including 280,000 in the second quarter. Optum Health revenue per consumer served increased 30%, driven by growth in the number of people served under value-based care arrangements and continued expansion of the care services offered. In addition, Optum Insight’s revenue backlog increased by $2.3 billion and Optum Rx’s revenue grew 10% during the quarter. Cash flows from operations during the second quarter were $6.9 billion- or 1.3 times net income. Free cash flow increased 5% during the first half of the year to $10.9 billion with the company returning $7.9 billion to shareholders through dividends of $2.9 billion and share repurchases of $5 billion. UnitedHealth Group increased their dividend by 14% in June 2022. Return on equity during the second quarter of 27.9% reflected the company’s sustained earnings growth profile and efficient capital structure. The company ended the quarter with $70.4 billion in cash and investments, $45.7 billion in long-term debt and $76.2 billion in shareholders’ equity on its healthy balance sheet. Based upon first half performance and growth expectations, management raised its full year net earnings outlook to $20.45 to $20.95.
Thursday, July 14, 2022
Berkshire Hathaway-BRKB purchased another 4.3 million shares of Occidental Petroleum for about $250 million, giving it a 19.2% stake in the oil company. Berkshire now owns 179.4 million Occidental common shares worth about $10.4 billion.
Wednesday, July 13, 2022
Fastenal-FAST reported second quarter sales increased 18% to $1.7 billion with net income and EPS up 20% to $287.1 million and $0.50, respectively. The overall impact of product pricing on net sales in the second quarter was 660 to 690 basis points compared to the second quarter of 2021, reflecting actions taken over the last 12 months to mitigate the impact of marketplace inflation for products, particularly fasteners and transportation services. These efforts have allowed the company to sustain gross margin despite still-elevated material and transportation costs. Fastenal did not take any broad price increases in the second quarter but benefited from carryover from actions taken in the first quarter. Daily sales to manufacturing customers increased 23.1% and daily sales to non-residential construction customers increased 10.8% during the quarter. By segment, fasteners daily sales increased 21%, representing 34.6% of net sales during the quarter. Safety product daily sales increased 13.8% and represented 20.3% of net sales. Other products daily sales increased 17% representing 45.1% of sales during the quarter. Fastenal signed 102 new Onsite locations during the quarter, bringing the total to 1,501 active sites, up 13.5% from last year. This marks the first time that Fastenal has added over 100 Onsite locations in back-to-back quarters. Daily sales through Onsite locations increased more than 20%, primarily due to improved business activity from Onsite customers. Daily sales through Fastenal Managed Inventory (FMI) devices grew 36.8% for second-quarter 2022. Fastenal’s digital footprint represents 47.9% of sales, an increase from 41.4% of sales last year. During the second quarter, free cash flow decreased 24% to $104 million. Cash flow was impacted by higher working capital needs, which reflected significant product cost inflation and efforts to support customer growth. During the quarter, the company returned $227.8 million to shareholders through dividend payments of $178.5 million and share repurchases of $49.3 million. The board declared a $.31 dividend to be paid on August 24 and authorized repurchases by the company of up to an additional 8 million shares of its common stock. Fastenal ended the quarter with $248 million in cash, $310 million in long-term debt and $3.2 billion in shareholders’ equity on its sturdy balance sheet. Looking ahead to the remainder of the year, Fastenal will continue to take actions aimed at mitigating the impact of product and transportation cost inflation should the need arise. Despite still tight and long supply chains, Fastenal’s ability to source products is less chaotic. The company is still seeing healthy demand and strong customer backlogs, making them confident that the future looks bright. Fastenal is seeing the pandemic enter the endemic stage as severe travel curtailments have lifted. While hiring remains challenging, trends in applications received have improved. Fastenal continues to expect capital spending in the range of $180 million to $200 million in 2022.
T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.31 trillion as of June 30, 2022. This represents a 22% decline since year end.
Confirming a slowdown in hiring, Alphabet-GOOGL CEO, Sundar Pichai, said “The uncertain global economic outlook has been top of mind. Like all companies, we're not immune to economic headwinds. Because of the hiring progress achieved so far this year, we'll be slowing the pace of hiring for the rest of the year, while still supporting our most important opportunities. For the balance of 2022 and 2023, we'll focus our hiring on engineering, technical and other critical roles, and make sure the great talent we do hire is aligned with our long-term priorities.”
Tuesday, July 12, 2022
PepsiCo-PEP reported second quarter sales bubbled up 5% to $20.2 billion with net income and EPS down 39% to $1.4 billion and $1.03, respectively. The decline in earnings reflects the unfavorable impact of $1.4 billion in non-cash impairment charges related to the Russia-Ukraine conflict, the decision to sell or discontinue certain non-strategic brands in the Latin America division, and the decision to terminate agreement to distribute Bang Energy drinks. Organic revenues increased 13% and core constant currency EPS was up 10%. During the quarter, PepsiCo’s North American Frito-Lay and Quaker Foods businesses both delivered double-digit revenue growth as more consumers are eating at home. PepsiCo’s North American beverage business declined 1% but delivered 9% organic revenue growth as category growth and consumer demand remain robust. PepsiCo’s International snack business accelerated 20% organically and the International beverage business delivered 7% organic growth. PepsiCo increased year-over-year prices on average by 12% to help offset the rising costs of trucking, packaging and agricultural commodities. Even with the rising prices, consumers are continuing to buy treats like soda and chips, reflecting strong brand loyalty to PepsiCo products. During the first half of 2022, PepsiCo generated $382 million in free cash flow with the company returning $3.7 billion to shareholders through dividends of $3 billion and share buybacks of $700 million. PepsiCo ended the quarter with $5.7 billion in cash and investments, $33.2 billion in long-term debt and $18.5 billion in shareholders’ equity. For the full 2022 year, PepsiCo now expects revenue growth of 10%, versus prior guidance of 8%, and constant currency EPS growth of 8%. Core EPS is expected to be $6.63 compared to $6.26 in 2021. PepsiCo expects to return $7.7 billion to shareholders during 2022, mainly through dividend payments.
Thursday, July 7, 2022
Berkshire Hathaway-BRKB bought nearly 22 million additional shares of Occidental Petroleum for about $1.28 billion, increasing its stake in the company to more than 18%. If Berkshire reaches a 20% stake in Occidental, it likely will adopt the so-called equity method of accounting for the stake and reflect a proportional share of Occidental’s earnings in its results. That would mean a $2 billion annualized lift to Berkshire’s reported profits with Occidental expected to earn about $10 billion after taxes this year.
According to Mastercard SpendingPulseTM, which measures in-store and online retail sales across all forms of payment, U.S. consumer retail spending, excluding automotive, increased +9.5% year-over-year in June. Rising prices—particularly for necessities such as food and fuel—were a contributing factor. Excluding auto and gas, in-store spending was up +11.7% in June, and while e-commerce grew at a slower pace (+1.1%), sales for e-commerce remain roughly double June 2019 levels. As inflation persists, consumers are paying more for essentials. Two of the categories that have higher inflation have seen a lift in sales: June sales for Fuel & Convenience are up +42.1% and Grocery is +14%. Meanwhile, discretionary spending continued to drive growth across the fashion-forward sectors in June, including Jewelry +16.2% and Department Stores +8.6%. With summer in full swing, consumers continue to spend on travel experiences due to strong demand with Airline and Lodging both up +18.2%.
Wednesday, June 29, 2022
Paychex-PAYX reported strong fourth quarter results as revenues rose 11% to $1.1 billion, net income increased 13% to $296 million and EPS was up 12% to $.82. Double-digit growth during the fourth quarter was driven by a record level of new annualized revenue sold and client retention remained above pre-pandemic levels. Success in these areas resulted in Paychex achieving several milestones including over 730,000 total payroll clients and over 100,000 retirement clients. For the full fiscal 2022 year, Paychex reported revenues increased 14% to $4.5 billion, while net income and EPS both jumped 27% to $1.4 billion and $3.84, respectively. Return on shareholders’ equity was a superb 45% for the year. The company maintains a solid balance sheet with $1.2 billion in cash and investments, $798 million in long-term debt and $3.1 billion in shareholders’ equity. Free cash flow increased 20% during the year to $1.4 billion. The company raised the quarterly dividend 20% to $.79 per share, paying cumulative dividends of $2.77 per share totaling $1 billion, resulting in a dividend payout ratio of 72% for the year. In addition, Paychex repurchased $145.2 million of its common stock for an average price of $121 per share. Paychex is well positioned for growth in fiscal 2023 with total revenue anticipated to grow approximately 7% to 8% with adjusted EPS growth of 9%-10%. None of Paychex’s business indicators are currently pointing to recession given the strong employment picture.
Monday, June 24, 2022
Nike-NKE reported fourth quarter revenues decreased 1% to $12.2 billion with earnings decreasing 5% to $1.4 billion and EPS down 3% to $0.90. Fourth quarter results included non-recurring charges totaling approximately $150 million, associated with the deconsolidation of Russian operations and the transition of businesses in Argentina, Chile and Uruguay to strategic distributor models. Strong digital growth continued during the quarter as NIKE Direct revenues grew 7% and NIKE Brand Digital grew 15%. Both were driven by growth in APLA, North America and EMEA and partially offset by a decline in Greater China. For the year, Nike reported sales of $46.7 billion, up 5% from last year, with earnings up 6% to $6 billion and EPS up 5% to $3.75. During fiscal 2022, Nike generated a winning 40% return on shareholders’ equity. The company maintains a healthy balance sheet with nearly $13 billion in cash and investments, $8.9 billion in long-term debt and $15.2 billion in shareholders’ equity. Nike has a strong track record of investing to fuel growth and running up shareholder returns through share repurchases and dividends, including 20 consecutive years of dividend increases. During 2022, Nike returned $5.8 billion to shareholders through dividend payments of $1.8 billion and share repurchases of $4 billion at an average cost per share of $146.52. The company announced its board of directors has authorized a new four-year, $18 billion program to repurchase shares of its common stock.
Thursday, June 23, 2022
FactSet-FDS reported third quarter revenue rose 22% to $488.8 million with net income and EPS each dipping 26% to $74.9 million and $1.93, respectively. The increase in revenue was primarily due to the acquisition of CUSIP Global Services (CGS) in March 2022 and higher sales of research and advisory and analytics solutions. FactSet has had over 40 consecutive years of revenue growth. The decrease in earnings was primarily due to real estate impairment charges, amortization of intangible assets and cost related to the CGS acquisition. Operating margin declined to 19.9% compared with 29.5% in the prior year period because of charges related to vacating certain leased office space as well as amortization of intangible assets and costs related to the CGS acquisition. Adjusted operating margin improved to 36.6% compared to 31.6% in the prior year period, due to the strong performance of CGS. Annual Subscription Value (ASV) plus professional services was $1.9 billion as of 5/31/22. Annual ASV retention was greater than 95%, reflecting the strength of the company’s subscription-based model. Client count during the quarter increased by 147 to 7,319 with user count up 2,357 to 173,698. FactSet has been able to increase client productivity by 20%, giving the company strong pricing power in the industry. Operating margin declined to 19.9% compared with 29.5% in the prior year period because of charges related to vacating certain leased office space as well as amortization of intangible assets and costs related to the CGS acquisition. Adjusted operating margin improved to 36.6% compared to 31.6% in the prior year period, due to the strong performance of CGS. Free cash flow year-to-date increased 9% to $350.9 million and the company returned $92.3 million to shareholders through dividend payments. FactSet suspended their share repurchase program until at least the second half of fiscal 2023 to prioritize the repayment of debt related to the CGS acquisition. During the past quarter, the company increased its dividend 8.5%, marking the 22nd consecutive year of dividend increases. FactSet reaffirmed their full fiscal 2022 outlook, expecting revenue in the range of $1.8 billion to $1.83 billion and EPS in the range of $9.75 to $10.15.
Accenture-ACN reported fiscal third quarter revenues rose 22% to $16.2 billion with operating income rising 23% to $2.6 billion as operating margin expanded 10 basis points. Accenture continues to expect operating margin for the full year to expand 10 basis points to 15.2% Net income increased 15% to $1.8 billion, and EPS was up 16% to $2.79. EPS results included a $.15, or 6% negative impact, related to the disposition of the company’s business in Russia. These very strong financial results reflected continued broad-based demand across all the company’s markets, services and industries, with all segments generating double-digit growth. Accenture is growing three time higher than the market and gaining significant market share. New bookings for the quarter were $17 billion, the company’s second-highest ever, and a 10% increase in U.S. dollars and a 15% increase in local currency from the prior year period. Consulting bookings were $9.1 billion, or 54% of total new bookings, and outsourcing bookings were $7.8 billion, or 46% of total new bookings, with strong bookings expected to continue into the fourth quarter. Free cash flow increased 28% in the third quarter to $2.9 billion. Year-to-date, free cash flow was $5.2 billion with the company paying $1.8 billion in dividends and repurchasing $3.5 billion of its common stock, including 3.1 million shares repurchased in the third quarter at a cost of $972 million or about $313.54 per share. Accenture has about $3.7 billion remaining authorized for future share repurchases. Accenture raised its outlook for revenue growth for the full fiscal 2022 year to be in a range of 25.5% to 26.5% with EPS expected in the range of $10.61 to $10.70, an increase of 21% to 22% over adjusted EPS in the prior year period. The company continues to expect free cash flow for fiscal 2022 to be in the range of $8.0 billion to $8.5 billion. The company continues to expect to return $6.5 billion in cash to shareholders through dividends and share repurchases. Merger and acquisition activity is expected to be $2.5 billion in fiscal 2022 with an additional $1 billion in acquisitions expected to be closed in the first fiscal quarter of 2023. Accenture is in a good position to help clients in the event of a recessionary environment as the company helps clients leverage technology to grow and reduce costs.
Berkshire Hathaway-BRKA disclosed the purchase of approximately 9.55 million shares of Occidental Petroleum worth about$528.8 million during June 17-June 22, 2022, period. Berkshire owns about 15% of Occidental.
Monday, June 13, 2022
Oracle-ORCL reported fourth revenues increased 5% to $11.8 billion with net income decreasing 21% to $3.2 billion and EPS down 15% to $1.16. Total Cloud revenue jumped 19% to $2.9 billion. For the fiscal year ended May 31, revenues increased 5% to $42.4 billion with net income down 51% to $6.7 billion and EPS down 47% to $2.41 due in part to litigation charges. During fiscal 2022, free cash flow decreased to $5 billion with the company returning nearly $20 billion to shareholders through dividend payments of $3.5 billion and share repurchases of $16.2 billion. Oracle ended the fiscal year with $21.9 billion in cash and investments and $72.1 billion in long-term debt. The Cerner acquisition is expected to add $15 billion of debt to the balance sheet subsequent to year end. Management expects growth to accelerate during 2023 and beyond as the fast-growing cloud business becomes a larger portion of the business. For the first quarter, Oracle expects constant currency revenue growth of 20% to 22% with constant currency EPS of $1.09 to $1.13. In addition, Oracle expects cloud revenue, including the Cerner acquisition, to grow between 47% to 50% in constant currency for the first quarter and expects its cloud business to organically grow more than 30% in constant currency in fiscal 2023. “We believe that this revenue growth spike indicates that our infrastructure business has now entered a hyper-growth phase. Couple a high growth rate in our cloud infrastructure business with the newly acquired Cerner applications business—and Oracle finds itself in position to deliver stellar revenue growth over the next several quarters,” said Oracle CEO, Safra Catz.
Wednesday, June 8, 2022
Brown-Forman-BFB reported fourth quarter revenue rose 23% to $996 million with net income and EPS each up 26% to $151 million and $.31, respectively. For the full fiscal 2022 year, revenues rose 14% to $3.9 billion. Net income and EPS each declined 7% to $838 million and $1.74, respectively, primarily due to higher income taxes. Fiscal 2021 earnings included an estimated $.20 per share benefit from the gain on sale of the Early Times, Canadian Mist and Collingwood brands. The company delivered strong, broad-based reported net sales growth across all geographic clusters and the Travel Retail Channel. Supply Chain disruptions had an adverse effect on results. Jack Daniel’s Tennessee Whiskey fueled overall company performance with 20% net sales growth. Premium bourbons, led by Woodford Reserve and Old Forester, grew net sales 22% and the tequila portfolio grew net sales by 22%, driven by Herradura and el Jimador. Return on shareholders’ equity for the year was a bubbly 31%. Free cash flow during the year increased 6% to $798 million with the company paying $831 million in dividends, which included a special cash dividend of $1 per share. Brown-Forman has paid dividends for 78 consecutive years and has increased the dividend for 38 straight years. The company anticipates continued growth in fiscal 2023 despite global macroeconomic and geopolitical uncertainties. Accordingly, management expects mid-single digit growth in underlying sales and operating income. In addition, considering the effect of inflation and the removal of the EU and UK tariffs on American Whiskey, management projects gross margin to expand slightly with capital expenditures in the range of $190 million to $210 million.
Monday, June 6, 2022
Tractor Supply Company-TSCO currently forecasts second quarter net sales growth of 8% and comparable store sales growth of 5% as compared to the second quarter of fiscal 2021. Diluted earnings per share for the second quarter of fiscal 2022 is forecasted to be $3.48 or greater. "Tractor Supply is on track to deliver record results in the second quarter on both sales and earnings. As we moved through April and the weather has normalized, we have experienced strong sales of our seasonal products. The strength of our needs-based, demand-driven business continues as the team is effectively managing inventory levels, inflationary costs, and pressures across the global supply chain. We believe we are well positioned to have a strong second quarter," said Hal Lawton, Tractor Supply’s President and Chief Executive Officer.
Fastenal-FAST reported May revenues increased 23.5% to $589.2 million with daily sales up 17.6% to $28.1 million. Daily sales growth by geography was led by 19.1% growth in the United States. Daily growth by end market was 22.4% growth in manufacturing and 10.7% growth in non-residential construction. Daily sales growth by product line was led by 20% growth in fasteners followed by 16% growth in both safety and other products. Fastenal reported that 87% of its Top 100 national accounts grew during the month with 72% of its public branches growing. Total headcount increased 5.8% to 21,444 as of the end of May.
Thursday, June 2, 2022
Microsoft-MSFT lowered its fourth quarter outlook due to larger than expected foreign exchange headwinds and now expects revenue for the quarter to be between $51.94 billion and $52.74 billion, down from its prior range of $52.40 billion to $53.20 billion. It also cut the EPS view to between $2.24 and $2.32 per share from a prior expectation of between $2.28 and $2.35 per share.
Hormel Foods-HRL reported second quarter sales rose 19% to a record $3.1 billion, marking the sixth consecutive quarter of record sales. Net earnings and EPS each increased 14% to $262 million and $0.48, respectively. By segment, Refrigerated Foods sales were up 11% to $1.6 billion, driven by strong results in the foodservice business, more than offsetting higher operational and logistic costs. Grocery Product sales were up 7% to $874 million, led by the inclusion of the Planters snack nuts business. Jennie-O Turkey Stores sales jumped 16% to $407 million, led by foodservice, whole bird and retail sales. In addition, higher commodity prices and foodservice sales drove substantial improvement in segment profit. International & Other sales decreased 3.4% to $171 million, because of current export logistics challenges and lower commodity sales due to the company’s new pork supply agreement. Retail sales in China improved as pantry loading and sales to food security programs in response to COVID-related lockdowns helped offset declines. Free cash flow increased 62% during the first half to $449 million with the company paying $274 million in dividends. For fiscal 2022, Hormel reaffirmed its sales guidance with sales expected in the range of $11.7 billion to $12.5 billion and narrowed their earnings guidance with EPS now expected in the range of $1.87-$1.97.
Wednesday, June 1, 2022
Oracle-ORCL announced that all required antitrust approvals have been obtained for its proposed all-cash $28.3 billion acquisition of Cerner, including European Commission clearance. Cerner is a leading provider of digital information systems used within hospitals and health systems to enable medical professionals to deliver better healthcare to individual patients and communities. Oracle expects to complete the offer on June 6, 2022. "We expect this acquisition to be substantially accretive to Oracle's earnings on a non-GAAP basis in fiscal year 2023," said Safra Catz, Chief Executive Officer, Oracle. "Healthcare is the world's largest and most important vertical market—$3.8 trillion last year in the United States alone. We expect Cerner to be a huge growth engine for years to come."
3M-MMM expects a $300 million hit to revenue in the current quarter as COVID lockdowns in China impacted manufacturing operations in the country. The company expects an impact of 30 cents to per-share earnings in the second quarter from China and foreign exchange headwinds. China's "zero Covid" policy to combat the Omicron variant triggered fresh lockdowns and shut factories, hurting the sales prospects of businesses worldwide as consumers cut back spending in the world's second-biggest economy. 3M also noted impacts to the automotive and electronics end markets due to chip shortages driven by supply chain snags. Still, 3M expects some recovery in June despite high inflation. 3M is managing inflationary pressures with price and sourcing actions and productivity and yield improvements.
The Board of Directors of SEI Investments Company-SEIC approved an increase in its stock repurchase program by an additional $200 million, increasing the available authorization under the program to approximately $264 million.
Thursday, May 26, 2022
Ulta Beauty-ULTA reported very pretty results for the first fiscal quarter with revenues rising 21% to $2.3 billion, net income jumping 44% to $331 million and EPS climbing 54% to $6.30. Comparable sales increased 18%, driven by a 10% increase in transactions and a 7.3% increase in average ticket as customers are no longer hiding behind masks. These exceptional results were better than expected, supported by double-digit comparable sales growth across all major categories of cosmetics, haircare products, skincare and fragrances with prestige cosmetics gaining market share. Ulta successfully navigated the challenges of cost pressures, supply constraints and a tight labor market and delivered record operating margins of 18.7% which expanded 240 basis points over the prior year quarter. Free cash flow increased 20% to $355 million with the company repurchasing 331,834 shares of its common stock for $132.8 million at an average price of about $400.24 per share. The company has $1.87 billion remaining authorized for future share repurchases with plans to repurchase approximately $900 million of its stock in fiscal 2022. Given the strong start to the first quarter, Ulta Beauty increased its sales and earnings outlook for fiscal 2022 with revenues expected in the range of $9.35 billion to $9.55 billion and EPS in the range of $19.20 to $20.10. Ulta continues to plan on 50 net new store openings with capital expenditures in the range of $375 million to $425 million.
Wednesday, May 25, 2022
Baxter-BAX provided new long-range financial guidance for 2022 to 2025. Baxter expects constant currency sales growth of 4% to 5% on a compounded annual basis from 2022 through 2025. The company expects 2025 adjusted operating margin to expand by 350 to 400 basis points as compared to expected year-end 2022. Baxter anticipates free cash flow conversion of more than 80% by 2025. Baxter expects the acquisition of Hillrom to contribute up to $350 million of annual pre-tax cost synergies by 2025. In addition, the company expects to realize up to $200 million in incremental annual revenue synergies by 2025, reflecting the impact of market expansion across the broader portfolio as well as new innovation fueled by Baxter’s expanded capabilities following the acquisition. A strategic approach to capital allocation allows Baxter to continue investing in innovation and growth while returning value to investors.
Thursday, May 19, 2022
Ross Stores-ROST reported sales for the first quarter ended April 30, 2022 declined 4.1% to $4.3 billion with net income falling 29.0% to $338 million and EPS dropping 27.6% to $0.97. Comparable store sales declined 7% over a robust 13% gain in last year’s first quarter as COVID restrictions eased and the government pumped record amount of stimulus into the economy. Traffic trends, which started strong, dropped as the quarter progressed as discretionary spending by Ross Stores’ customer base was squeezed by food and fuel inflation. Merchandise margins declined 170 basis points on higher ocean and domestic freight costs, increased occupancy costs and higher wages. During the quarter, Ross Stores used $416 million in operating cash flow due to the timing of inventory purchases and related accounts payable. Inventory increased 57.5% from last year as easing of supply chains resulted in the early delivery of goods. This resulted in a higher percent of pack away inventory, 43% versus 34% last year. In-store inventory is consistent with management’s sales plan. During the quarter, Ross returned $349 million to shareholders through dividends of $109 million and $240 million of share repurchases at an average cost per share of $96.00. The company remains on pace to repurchase $950 million of its shares during fiscal 2022. Ross Stores ended the quarter with $4.0 billion in cash, $2.5 billion in long-term debt and $4.1 billion in shareholders’ equity on its strong balance sheet. Given the difficult first quarter and today’s increasingly uncertain macro-economic and geopolitical environment, management lowered its guidance for the balance of the year. Second quarter same store sales are projected to decrease 4% to 6% on top of a very strong 15% gain in the prior year period, with earnings per share projected to be $0.99 to $1.07 versus $1.39 in last year’s second quarter. Although the company expects sales and profitability to improve throughout the year, for the full fiscal year ending January 28, 2023, management now expects comparable store sales to decline 2% to 4% versus a 13% gain in fiscal 2021. Earnings per share for fiscal 2022 are projected to be in the $4.34 to $4.58 range, compared to $4.87 last year. Ms. Rentle, Ross Stores CEO, stated, “While the landscape in early 2022 has been tougher than expected and the year may prove to be more difficult than initially anticipated, we remain confident in our ability to successfully navigate through this period. We have shown in the past that our value-focused business model has served us well in both healthy and more uncertain external climates and believe the current challenging conditions will be no different.”
Wednesday, May 18, 2022
TJX-TJX rang up a fancy 13% increase in first quarter sales to $11.4 billion with net income up 10% to $587.5 million and EPS up 11% to $0.49 on fewer shares outstanding. Results include a $.19 charge related to a write-down of TJX’s minority investment in Familia, an off-price Russian retailer. U.S. comp store sales rounded down to flat over a 17% increase last year. By segment, Marmaxx sales increased 3.5% to $6.8 billion on a 3% increase in same store sales over a 12% increase last year, driven by an increase in customer traffic. HomeGoods sales declined 5% to $2.0 billion on a 7% decline in comp store sales over a 40% increase last year. TJX Canada sales increased 41% to $1.08 billion and TJX International sales increased 163% to $1.4 billion as these regions continued rebounding from COVID-related store closures. During the quarter, TJX increased its store count by 26 stores to a total of 4,715. Despite a 220 basis point jump in freight costs and a 70 basis point headwind from wage increases, TJX’s first quarter margins (adjusted for the divestiture of the Russian business) increased 220 basis points to 9.4%, driven by a reduction in COVID-related expenses, the company’s pricing initiatives, expense management and strong markon. Management expects to return to pre-COVID margins of 10.6% within three years. During the quarter, TJX used $634 million of operating cash flow due to the timing of inventory purchases and related accounts payable. In store inventory, which increased 37% from last year, is consistent with TJX’s plan to generate $51.3 billion to $51.8 billion in fiscal 2023 sales. TJX returned a total of $907 million to shareholders during the quarter through share repurchases of $600 million at an average cost per share of $63.16 and dividends of $307 million. TJX increased the dividend by 13% during the quarter, marking the 25th annual increase over TJX’s 26-year history as a public company. TJX ended the quarter with $4.3 billion in cash, $3.4 billion in long-term debt and $5.6 billion in shareholders' equity on its dressy balance sheet. Looking ahead to the full fiscal year, TJX expects U.S. comp store sales to increase 1% to 2% over a 17% increase in fiscal 2022 with adjusted EPS in the range of $3.13 to $3.20, up 10% to 12% from last year. The company expects to repurchase about $2.25 billion to $2.5 billion of its shares during fiscal 2023.
Cisco Systems-CSCO reported third quarter revenues were relatively flat at $12.8 billion with net income increasing 6% to $3 billion and EPS increasing 7% to $0.73. There was broad-based strength across the business with 8% year-over-year product order growth. Product revenue increased 3% to $9.4 billion and Service revenue decreased 8% to $3.4 billion. Cisco’s business model transformation is progressing well with total Annualized Recurring Revenue (ARR) increasing 11% to $22.4 billion. Free cash flow declined 12% during the first nine months of the year to $9.2 billion with the company paying $4.65 billion in dividends and repurchasing $5.3 billion of its common stock, including 5 million shares repurchased in the third quarter at an average price of $54.20 per share. Cisco maintains a strong balance sheet and ended the quarter with $20.1 billion in cash and investments, $8.4 billion in long-term debt and $40.4 billion in shareholders’ equity. For the fourth quarter of fiscal 2022, management expects revenue to decline 1% to 5.5% with EPS expected in the range of $.60 to $.70. For the full-year Cisco is expecting revenue growth of 2% to 3% and EPS of $2.75 to $2.85. “While Covid lockdowns in China and the war in Ukraine impacted our revenue in the quarter, the fundamental drivers across our business are strong and we remain confident in the long term,” said Chuck Robbins, chair and CEO of Cisco.
Tuesday, May 17, 2022
Berkshire Hathaway-BRKB disclosed trading activity during the first quarter in a regulatory filing as part of its $51 billion buying spree, the most Berkshire has invested in any three-month period in the company’s history. Buffett abided by his famous saying to be “greedy when others are fearful.” This filing reflected the previously disclosed multi-billion-dollar positions in Chevron, now valued at $27.5 billion; Occidental Petroleum, now valued at $9.7 billion; and HP, Inc. along with the expanded position in Activision Blizzard as part of a merger arbitrage play. New position revealed included purchases of $2.9 billion in Citigroup, $2.61 billion in Paramount, $1.13 billion in Celanese, $895 million in McKesson and $390 million in Ally Financial. Berkshire also disclosed new stakes in Markel Corp. and expanded positions in Floor and Décor, General Motors, Liberty Formula One Group and Restoration Hardware. Berkshire exited its positions in Wells Fargo, AbbVie and Bristol-Myers Squibb and reduced its Verizon stake by 99%.
Wednesday, May 11, 2022
Global travel platform Agoda, a Booking Holdings-BKNG company, announced its partnership with Visa-V, the world leader in digital payments, to offer interest-free credit card installments across its booking platform. Agoda will be the first global Online Travel Agency to offer this payment option with Visa in the Asia Pacific region.
T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.42 trillionas of April 30, 2022, which is a 16% decline since year end.
Genentech, a member of the Roche Group-RHHBY announced results from its Phase III SKYSCRAPER-01 study, an initial (first-line) treatment for people with PD-L1-high locally advanced or metastatic non-small cell lung cancer did not meet its co-primary endpoint of progression-free survival.
Friday, May 6, 2022
Berkshire Hathaway-BRKB bought another 5.9 million shares of Occidental Petroleum on May 2-3 for approximately $336 million, boosting its stake in the company to 15.2% worth about $8.8 billion. Berkshire also has warrants to buy an additional $5 billion of Occidental shares.
Thursday, May 5, 2022
Maximus-MMS reported second quarter revenue increased 22.7% to $1.18 billion with net income and EPS declining 38% to $50.1 million and $.80, respectively. Earning results reflected expectations for lower earnings caused primarily by delays in core programs returning to pre-pandemic levels as the COVID-19 response work continues its predicted decline. Year-to-date signed contracts as of 3-31-22 were $1.47 billion with contracts pending (awarded but unsigned) totaling $1.75 billion. The sales pipeline at quarter end was $29.8 billion, comprised of $7.4 billion in proposals pending, $3.6 billion in proposals in preparation and $18.8 billion in opportunities tracking. During the quarter, Maximus generated free cash flow of $98.2 million with the company returning $41.8 million to shareholders through dividend payments of $17.3 million and share repurchases of $24.5 million. The board of directors declared a quarterly cash dividend of $.28 per share payable on May 31, 2022. Maximus is maintaining revenue guidance for fiscal 2022 with revenue expected to range between $4.5 billion and $4.7 billion and expecting free cash flow in the range of $175 million and $250 million. Earnings guidance was lowered and is expected to be in the range of $3.00 to $3.50. The reduction to earnings guidance is comprised of three primary components. First, the Public Health Emergency (PHE) contract has been extended through mid-July, which is approximately a $0.30 EPS estimated impact for the one-quarter delay. The company has further lowered the bottom end of earnings guidance to allow for an additional PHE extension through mid-October, representing an additional $0.30 EPS of estimated impact. Second, further delays on ramping of new work in the U.S. Services and Outside the U.S. segments reduced guidance by an estimated $0.20 EPS. These delays are believed to be temporary and are partly attributable to ongoing COVID-19 disruptions. Third, the revised expectations for the Australia employment services rebid result in an estimated EPS reduction of approximately $0.15; the impact is outsized in fiscal year 2022 compared to subsequent periods and includes severance charges in the third quarter.
Fastenal-FAST reported April sales increased 14.8% to $570.7 million with average daily sales up 20.3% to $27.2 million. Daily sales growth by end market was up 25.7% for manufacturing and 13.4% for non-residential construction. Daily sales growth by product line was 25.5% for fasteners, 16.7% for Safety and 17.8% for Other products. About 90% of the company’s Top 100 national accounts experienced growth during the month. Fastenal’s headcount increased 4.4% to 21,306 as of 4/30/22 compared to the prior year period.
Wednesday, May 4, 2022
Cognizant-CTSH reported first quarter revenues rose 9.7% to $4.8 billion with net income up 11% to $563 million and EPS up 13% to $1.07. By segment, Financial Services revenue grew 4.8% to $1.5 billion, reflecting the demand for digital services, partially offset by client’s continued focus on cost optimization. Healthcare revenue grew 8.1% to $1.4 billion, driven by increased demand for digital services among life sciences clients. Products and Resources revenue grew 13.2% to $1.1 billion, driven by strong demand for digital services and included the benefit from recently completed acquisitions. Communications, Media and Technology revenue grew 18.1% to $776 million, reflecting strong demand for data services among digital native companies. Bookings grew 4% with trailing 12-month bookings of $23.4 billion. Free cash flow during the quarter jumped 100% to $186 million with the company returning $617 million to shareholders through dividend payments of $143 million and share repurchases of $474 million for an average price of $88.22 per share. Cognizant has $1.7 billion remaining authorized for future share repurchases. In addition, Cognizant declared a quarterly cash dividend of $.27 per share, payable on May 31, 2022. The company is expecting second quarter revenue to be in the range of $4.9-$4.94 billion or growth of 6.8%-7.8%. Full-year 2022 revenue is expected to be $19.8 billion to $20.2 billion, representing 7.2%-9.2% growth, with adjusted EPS expected to be in the range of $4.45-$4.55. “Our first quarter performance reflects strong revenue growth in our digital portfolio and a healthy demand environment. We remain focused on investing to support growth opportunities while also executing on pricing to offset the impact of compensation pressure driven by the continued labor supply-demand imbalance,” said Jan Siegmund, Chief Financial Officer.
Booking Holdings-BKNG booked revenues of $2.7 billion, up 136% from last year, and a net loss of $700 million, or $17.10 per share. Excluding net unrealized losses of $987 million on equity securities during the first quarter (compared to unrealized net gains on equity securities of $32 million last year) and other one-time items, adjusted net income was $161 million, or $3.90 per share, compared with last year’s $215 million, or $5.26 per share, loss. First quarter gross travel bookings, representing the total dollar value inclusive of taxes and fees of all travel services booked by its customers, were $27.3 billion, a record, and an increase of 129% year-over-year. Room nights booked in the 1st quarter of 2022 increased 100% year-over-year. Thirty-four percent of total revenues were paid for via Booking’s payments app versus thirteen percent in 2019. During the quarter, Booking Holdings generated nearly $1.7 billion in operating cash flow and $1.59 billion in free cash flow with the company returning $950 million to shareholders through share repurchases. In April, Booking repurchased an additional $320 million of its shares, which leaves about $9 billion remaining under the current share repurchase authorization that is expected to be completed during the next three years. Booking Holdings ended the quarter with $12.75 billion in cash and investments, $8.4 billion in long-term debt and $4.37 billion in shareholders’ equity on its sturdy balance sheet. "I am pleased to report a record $27 billion in gross bookings in the first quarter, the highest quarterly amount in our company’s history," said Glenn Fogel, Chief Executive Officer of Booking Holdings. "Despite an uncertain macroeconomic environment, we have seen continued strengthening of global travel trends so far in the second quarter of 2022, and we are preparing for a busy summer travel season ahead. I’m encouraged by how well our teams are executing to capture travel demand in this recovery environment and our progress in expanding our payments platform at Booking.com while we build towards our Connected Trip vision."
NVR, Inc.-NVR announced today that its Board of Directors has authorized the repurchase of $500 million of its outstanding common stock. The purchases will occur from time to time in the open market and/or in privately negotiated transactions as market conditions permit. The Company indicated that the authorization is a continuation of the stock repurchase program that began in 1994 and is consistent with NVR's strategy of maximizing shareholder value.
Tuesday, May 3, 2022
Starbucks-SBUX reported second fiscal quarter sales increased 15% to $7.6 billion with net earnings increasing 2.3% to $674.5 million and EPS increasing 3.6% to $0.58. Global comparable store sales increased 7%, driven by a 4% increase in average ticket, and a 3% increase in comparable transactions. Americas comparable store sales were up 12%, driven by a 7% increase in average ticket and a 5% increase in comparable transactions. International comparable store sales decreased 8%, primarily due to China comparable store sales decreasing 23%, driven by a 20% decline in comparable transactions and a 4% decline in average ticket. The company opened 313 net new stores during the quarter and ended the quarter with 34,630 stores, up 5% from last year. Active Starbucks Rewards Membership in the U.S. was up 17% year-over-year to 26.7 million members. During the first half, Starbucks generated $1.2 billion in free cash flow and returned approximately $5.1 billion to shareholders through dividend payments of $1.1 billion and share repurchases of $4 billion. Given the uncertainty around further mobility restrictions and lockdowns in China, as well as increasing inflationary headwinds, Starbucks has suspended guidance and share repurchases for the balance of fiscal 2022 with expectations that its financial results will be significantly pressured for the balance of the year. “We are single-mindedly focused on enhancing our core U.S. business through our partner, customer and store experiences. Given record demand and changes in customer behavior we are accelerating our store growth plans, primarily adding high-returning drive-thrus, and accelerating renovation programs so we can better meet demand and serve our customers where they are,” said Howard Schultz, interim chief executive officer.
Baxter International-BAX announced an increase in the company’s quarterly cash dividend to a rate of $0.29 per share of common stock. This represents an approximately 3.5% increase over the previous quarterly dividend rate of $0.28 per share, marking the 7th consecutive year of dividend increases. The indicated annual dividend rate is now $1.16 per share of common stock.
Saturday, April 30, 2022
Berkshire Hathaway-BRKB reported the company’s net worth during the first quarter of 2022 increased slightly by 0.4%, or $1.9 billion, to $508.1 billion with book value equal to about $345,439 per Class A share as of 3/31/22. Berkshire Hathaway reported first quarter revenues increased 10% to $70.8 billion with net income declining 53% to $5.5 billion. Excluding investment and derivative losses of $1.6 billion, operating earnings held relatively steady at $7. 0 billion.
The investment losses approximated $771 million in paper losses from changes in unrealized gains of equity holdings and $612 million in after-tax realized losses during the first quarter. Berkshire’s four major equity investment holdings which represent about 66% of total equities held, include American Express at $28.4 billion (which charged 15% higher during the quarter or $3.6 billion), Apple at $159.1 billion (which dipped 1% during the quarter or $2.1 billion), Bank of America at $42.6 billion (which dropped 7% during the quarter or $3.4 billion), and Chevron, which surprisingly replaced Coca-Cola as the fourth largest equity holding, at $25.9 billion after Buffett purchased more than $20 billion of Chevron during the first quarter. Buffett noted during the annual meeting that he also took another bite of Apple by adding to the position during the quarter.
During the first quarter, Berkshire’s insurance businesses generated earnings from underwriting of $47 million, which declined 94% from the prior year period due to ongoing increases in claims severities at GEICO due to significant cost inflation in automobile markets. Insurance investment income declined 3% during the quarter to $1.2 billion, reflecting lower dividend income. The float of the insurance operations increased $1 billion during the quarter to $148 billion. The average cost of float was negative during the quarter as the underwriting operations generated earnings.
Burlington Northern Santa Fe’s revenues chugged 11% higher during the quarter to $5.8 billion with net earnings rolling 10% higher to $1.4 billion reflecting higher revenue per car/unit partly offset by lower overall freight volumes and higher average fuel costs. The volume decrease was mainly from lower international intermodal shipments resulting from supply chain challenges and lower automotive shipments due to the global microchip shortage.
Berkshire Hathaway Energy reported revenues rose 1% during the first quarter to $6.0 billion with net earnings up 7% to $750 million. The earnings increase reflected higher earnings from the regulated utilities partly offset by lower earnings from the natural gas pipelines and real estate brokerage business.
Berkshire’s Manufacturing businesses reported revenues rose 16% to $18.4 billion with operating earnings up 16% to $2.8 billion for the quarter. The Buildings Products segment led the way for the quarter with revenues rising 19% to $6.7 billion and operating earnings jumping 49% to $1.1 billion thanks to strong demand for residential housing construction. Significant increases in mortgage interest rates will likely slow demand for new housing construction over the balance of the year.
Service and Retailing revenues increased 11% during the quarter to $21.6 billion with pre-tax earnings up 17% to $1.2 billion. The Service group led the way as revenue increased 26% to $4.5 billion with pre-tax earnings up 23% to $724 million thanks to strong growth from TTI, reflecting accelerating demand across all electronic component markets, and the aviation business services due to higher training hours at FlightSafety and significantly higher customer flight hours at NetJets.
Berkshire’s balance sheet continues to reflect very significant liquidity and a very strong capital base of $508.1 billion as of 3/31/22. Excluding railroad, energy and utility investments, Berkshire ended the quarter with $532.5 billion in investments allocated approximately 73.3% to equities ($390.5 billion), 4.1% to fixed-income investments ($21.7 billion), 3.3% to equity method investments ($17.6 billion), and 19.3% in cash and equivalents ($102.7 billion).
Free cash flow declined 45% during the quarter to $3.7 billion due to lower earnings and higher capital expenditures. During the quarter, capital expenditures approximated $3.1 billion, which included $2.2 billion for BNSF and BHE, its railroad and utility and energy units. Berkshire expects capital expenditures for the balance of 2022 for BNSF and BHE to approximate $9.4 billion.
During the quarter, Berkshire paid cash of $51.1 billion to acquire equity securities and received proceeds of $9.7 billion from the sale of stocks. These stock purchases included about $21 billion in Chevron, about $7 billion in Occidental Petroleum, about $6 billion in Activision Blizzard as an arbitrage play, $5 billion in German stocks and Japanese stocks, $4 billion in HP, Inc. and about $600 million of Apple. In addition, Berkshire purchased a net $14.4 billion in Treasury Bills and fixed-income investments. Berkshire also announced an agreement to acquire Alleghany, a property and casualty reinsurance and insurance business, for $11.6 billion in cash with the deal expected to close in the fourth quarter of 2022.
Berkshire repurchases its shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett and Charlie Munger. During the quarter, Berkshire repurchased $3.2 billion of its common stock. These repurchases included 3,582,355 Class B shares acquired at an average price of $322.88 per share and 332 Class A shares purchased at an average price of $485,015 per share during March 2022. No shares were repurchased in April.
Friday, April 29, 2022
Paychex-PAYX announced that its board of directors approved a $.13 increase in the company’s regular quarterly dividend, an increase of 20 percent. The dividend will increase from $.66 per share to $.79 per share and is payable May 26, 2022 to shareholders of record May 12, 2022. "The decision by the board to increase the quarterly dividend reflects the company’s strong year-to-date results, financial strength, and commitment to returning cash to shareholders," said Martin Mucci, Paychex chairman and CEO. "Our strong results this fiscal year have allowed us to make investments in the business to support our long-term growth as well as return capital to our shareholders, consistent with our long-term capital allocation strategy." With this increase, Paychex will return $1 billion in dividends to shareholders in Fiscal 2022.
Thursday, April 28, 2022
Intel-INTC reported first quarter revenue declined 7% to $18.4 billion with net income and EPS up more than 140% to $8.1 billion and $1.98, respectively. Excluding unrealized gains in equity investments, restructuring charges and other special items, net income and EPS declined 35% to $3.59 billion and $0.87, respectively. By business segment, Client Computing, which accounted for 50% of Intel sales, declined 13% owing to supply chain constraints due to Chinese COVID lockdowns and weak consumer demand for notebooks and PCs compared to last year’s COVID-driven demand surge. Data Center and AI group sales, which accounted for 33% of total sales, jumped 22% on strong demand from hyperscale and enterprise customers. Network and Edge group revenues, 12% of total sales, increased 23% to a quarterly record on strong cloud networking demand and post-COVID transformation of the edge. Emerging Business Segment, which includes Accelerated Computing Systems and Graphics, Mobileye and Intel Foundry Services (IFS) jumped 36% with IFS sales increasing 175% on increased tool deliveries and automotive revenue. Intel filed Mobileye’s draft registration statement with the SEC and expects the IPO to occur before year end. During the quarter, Intel generated $1.3 billion in free cash flow with the company returning $1.5 billion to shareholders through dividend payments. Intel ended the year with $38.7 billion in cash and investments, $32.8 billion in long-term debt and $103.1 billion in shareholder equity. For 2022, Intel expects revenues of about $76.0 billion, adjusted EPS of $3.60 and negative cash flow of $1 billion to $2 billion after an estimated $27 billion in capital expenditures. Pat Gelsinger, Intel CEO stated, "With a $1 trillion market opportunity ahead of us, we remain laser focused on our IDM 2.0 strategy. We executed well against that strategy in Q1, delivering key product and technology milestones and announcing plans to expand our manufacturing capacity in both the US and Europe to meet the continued demand for semiconductors and drive a more balanced, resilient global supply chain."
T. Rowe Price-TROW reported first quarter revenues increased 2% to $1.86 billion with net earnings and EPS falling 24% to $567.9 million and $2.41, respectively. Net operating income dipped 2% to $877.4 million on a 5.6% increase in operating expenses, mainly due to the inclusion of Oak Hill Advisors’ expenses following the $4 billion acquisition of the alternative investment shop that closed in December 2021 and higher technology costs related to outsourcing of technology development and retirement recordkeeping to FIS. During the quarter, T. Rowe Price reported a $198.5 million non-operating loss compared to income of $102.1 million last year. The firm's consolidated products and the supplemental savings plan hedge portfolio comprised nearly 80% of the net losses recognized during the quarter. Assets under management of $1.55 trillion declined $136.0 billion during the quarter owing to market depreciation of $130.7 billion and net cash outflows of $5.3 billion, including $18.0 billion withdrawn from equity funds. Investment advisory revenues earned from U.S. mutual funds declined 7% to $976.5 million on the heels of a 2% decline in assets under management and a 220 basis point decline in annualized fees to 43.2 basis points. During the quarter, T. Rowe Price generated $1.05 billion in free cash flow, up 12% from last year, with the company returning $599.3 million to shareholders through dividends of $279.2 million and share repurchases of $320.1 million at an average cost per share of $151.97. The company ended the quarter with nearly $4.5 billion in cash and investments, no long-term debt and $9.1 billion in shareholders’ equity on its pristine balance sheet. T. Rowe Price’s strong financial position allowed it to raise the quarterly dividend by 11% during the quarter, marking the 36th consecutive year of dividend increases since the company’s IPO in 1986.
Stryker-SYK reported first quarter net sales increased 8.1% to $4.3 billion with net income increasing 7% to $323 million and EPS up 6.3% to $0.84. By segment, Orthopaedics and Spine net sales of $1.8 billion increased 5.1% in the quarter and MedSurg and Neurotechnology was up 10.6% to $2.4 billion. During the quarter, Stryker generated $84 million in free cash flow with the company returning $262 million to shareholders through dividend payments. Stryker ended the quarter with $1.5 billion in cash and investments, $13.8 billion in long-term debt and $15 billion in shareholders’ equity. Given the dynamic supply chain pressures, COVID-19 pandemic uncertainty, strong orders for capital equipment, and considering the first quarter results, management now expects full year 2022 organic net sales growth towards the high end of guidance in the range of 6% to 8% and adjusted EPS of $9.60 to $10.00. "We delivered solid first quarter results in the face of a challenging macroeconomic environment," said Kevin A. Lobo, Chair and CEO. "We are encouraged by the steady improvement of surgery volumes and the robust demand for our capital products; however, we expect supply chain challenges to persist for much of the year."
FactSet-FDS announced that its Board of Directors approved an 8.5% increase in the regular quarterly cash dividend from $0.82 per share to $0.89 per share. The $0.07 per share increase marks the twenty-third consecutive year the Company has increased dividends on a stock split adjusted basis, demonstrating its ongoing commitment to providing value to shareholders.
Apple-AAPL reported second quarter revenue rose 9% to a record $97.3 billion with net income up 6% to $25.0 billion and EPS up 9% to $1.52. Apple set an all-time revenue record for Services, which jumped 17% to $19.8 billion with more than 825 million paid subscriptions, which increased by 165 million in the last 12 months. The App store, music, cloud and Apple Care services each set all-time records for sales. March quarter revenue records were set by iPhone with revenues ringing up a 6% gain to $50.6 billion; Mac with a 15% increase in revenues to $10.4 billion; and Wearables, Home and Accessories which had sales tick up 12% to $8.8 billion. iPad sales dipped 2% during the quarter to $7.6 billion as strong customer demand was offset by supply constraints. The Americas was the geographic segment with the strongest growth as revenues jumped 19% to $40.9 billion. European sales rose 5% to $23.2 billion with Greater China sales up 4% to $18.3 billion. Free cash flow increased 23% during the first half of the year to $69.8 billion with the company paying $7.3 billion in dividends and repurchasing $43.1 billion of its common shares. Given the company’s strong financial position with nearly $193 billion in cash and investments as of quarter end, the company announced a 5% increase in its dividend and an increase of $90 billion to its existing share repurchase program. Revenue growth in the third quarter is expected to be impacted by continued supply constraints due to Covid restrictions and silicon shortages in the $4-$8 billon range and foreign exchange headwinds of 3%. Gross margin is expected to be in the 42%-43% range with operating expenses of $12.7 billion to $12.9 billion with a tax rate of 16%.
Mastercard-MA reported first quarter revenues rose 24% to $5.2 billion with net incoming charging 49% higher to $2.6 billion and EPS ringing up a strong 52% gain to $2.68. Despite the challenging geopolitical environment, cross border volume jumped 52%, switched transactions experienced 22% growth and gross dollar volume increased 17% to $1.9 trillion on a local currency basis. Cross-border travel is above 2019 levels for the first time since the pandemic began with continued improvement in travel seen in all geographic regions. With pandemic restrictions lifted, consumers spending is robust with inflation not curtailing spending yet. Higher rent and gas prices may crowd out spending in other areas in the future. As of the end of the quarter, the company’s customers had issued 2.9 billion Mastercard and Maestro-branded cards. Card growth was down 4% as Russian cards were suspended. Excluding Russia, card growth increased 9%. Free cash flow increased 17% during the quarter to $1.6 billion with the company paying $479 million in dividends and repurchasing 6.8 million of its common shares at a cost of $2.4 billion or $352.94 per share with approximately $8.9 billion remaining authorized for future share repurchases. Given the better-than-expected start to the year, Mastercard expects revenues to increase at a high-teen rate for the full year 2022 with operating expenses increasing at a high single-digit rate which should result in profit margin expansion for the year.
Baxter International-BAX reported first quarter revenues rose 26% to $3.7 billion with net income and EPS each declining 76% to $71 million and $.14, respectively. Adjusted for the costs associated with the Hillrom acquisition, net income and EPS both increased 22% to $471 million and $.93, respectively. By segment, Medication Delivery achieved double-digit growth at constant currency rates, driven by improving rates of hospital admissions and increased sales of large and small volume parenteral solutions as well as infusion systems. BioPharma Solutions also achieved double-digit constant-currency growth, reflecting the year-over-year impact of multiple collaborations to help manufacture COVID-19 vaccines on a contract basis. Advanced Surgery delivered high single-digit growth at constant currency rates, driven by an improvement in the rate of surgical procedures compared to the same period last year. Additionally, Renal Care and Clinical Nutrition grew at low single digits year-over-year at constant rates. Growth was partially offset by a decline in Pharmaceuticals, due to generic competition for certain molecules and supply constraints impacting product availability. Acute Therapies declined high single digits at constant currency rates, following last year’s surging demand for continuous renal replacement therapy (CRRT) products in the comparable period to help treat COVID-19. During the quarter, Baxter generated free cash flow of $68 million with the company paying a quarterly dividend of $.28 per share. For the full-year 2022, Baxter now expects EPS in the range of $2.35 to $2.43 and sales growth of 23% to 24%. Baxter’s outlook reflects the impact from higher oil prices, ongoing supply chain challenges causing inflationary pressures as well as the removal of any contribution from the Novum IQ infusion system. For second-quarter 2022, Baxter expects sales growth of approximately 26% and EPS in the range of $.48 to .51. In addition, Baxter expects to moderate repurchases in the near-term to focus on de-levering.
Wednesday, April 27, 2022
Meta Platforms-FB reported first quarter revenue rose 7% to $27.9 billion with net income down 21% to $7.5 billion and EPS down 18% to $2.72. Results reflected a slowdown in e-commerce sales, lower ad demand in Europe due to the war in Ukraine and foreign exchange headwinds. Profits were impacted by higher employee costs as headcount increased 28% year-over-year to 77,805 as the company invests for the future, increased investments in Reality Labs as the company invests in building the metaverse and higher litigation costs. Meta continues to see a shift to time spent on short-form videos, such as Reels, which will take time to monetize. Management is confident that the Family of Apps side of the business can return to better revenue growth rates over time and sustain high operating margins, which will allow the company to grow while significantly investing in building the metaverse which they view as an immense long-term growth opportunity. Facebook daily active users increased 4% for March 2022 to an average of 1.96 billion with monthly active users increasing 3% to 2.94 billion. In the first quarter, ad impressions delivered across the Family of Apps increased by 15% with the average price per ad declining by 8%. Free cash flow increased 9% during the quarter to $8.6 billion with the company repurchasing $9.5 billion of its common stock with $29.4 billion remaining authorized for future share repurchases. Meta ended the quarter with a strong balance sheet with $43.8 billion in cash and investments, no long-term debt and $123.2 billion in shareholders’ equity. Second quarter revenue is expected to be in the range of $28-$30 billion, reflecting a continuation of trends seen in the first quarter including softness in ad spend due to the war in Ukraine and 3% in foreign exchange headwinds. Total expenses in 2022 were lowered to an expected range of $87-92 billion from previous expectations of $90-$95 billion.
ADP-ADP reported third quarter fiscal 2022 revenues increased 10% to $4.5 billion with net earnings increasing 15% to $929 million and EPS up 16% to $2.21. By segment, Employer Services revenues increased 8% to $3 billion with U.S. pays per control increasing 7%. PEO Services revenue increased 14% to $1.5 billion with Average Worksite Employees paid increasing 16% to about 688,000. Interest on funds held for clients increased 10% to $118 million on a 15% increase in Average Client Funds to $38.1 billion and a 10-basis point decline in average interest yield. During the quarter, ADP generated $2.1 billion in free cash flow with the company returning $2.7 billion to shareholders through dividends of $1.2 billion and share repurchases of $1.5 billion. ADP ended the quarter with $1.6 billion in cash, $2.9 billion in long-term debt and $4.1 billion in shareholders’ equity. Given the strong third quarter and the improving U.S. economy, ADP upped its fiscal 2022 guidance with revenue now expected to increase in the 9% to 10% range and EPS growth of 14% to 16%. “Our strong third quarter results reflect an improving demand environment combined with continued execution on our strategic plan to simplify, innovate and grow,” said Carlos Rodriguez, President and Chief Executive Officer, ADP.
Check Point Software Technologies-CHKP reported first quarter revenues increased 7% to $543 million with net income declining 7.4% to $169.4 million and EPS dipping 2.3% to $1.30. By segment, Product & Security subscriptions increased 11% to $317.5 million as the global increase in cyberattacks (up 54% from last year with 1 in every 53 organizations impacted by ransomeware) has prompted organizations to rethink the dated approach of disparate point security solutions and transition to Check Point’s unified approach of securing networks, the cloud and remote users with the company’s consolidated solution, Infinity, which offers real time threat prevention for the entire IT infrastructure. Software updates and maintenance revenues increased 2% to $225.2 million. Bookings increased double digits from last year across all regions, especially in the Americas, an early sign that investments to grow the U.S. business are generating results. Operating expenses increased 17% as Check Point moves toward its targeted 25% salesforce and R&D headcount increase designed to boost growth beginning in 2023. During the quarter, Check Point generated 6% growth in cash flow from operations and free cash flow to $398.0 million and $393.3 million, respectively, with the company repurchasing $325 million of its shares at an average cost per share of $130. The company ended the quarter with $3.8 billion in cash and investments, no long-term debt and $3.15 billion in shareholders’ equity on its super-secure balance sheet. While optimistic about the future, given all the uncertainty surrounding global unrest, supply chain bottlenecks, inflation and higher interest rates, Check Point left its 2022 estimates unchanged, projecting revenue to reach $2.2 to $2.375 billion, up 5.4% at the midpoint, and EPS of $5.68 to $6.28, down 1.6% from 2021 at the midpoint.
General Dynamics-GD reported first quarter revenues were relatively flat at $9.4 billion with net earnings up 3% to $730 million and EPS up 5% to $2.61. Aerospace backlog grew for the fifth consecutive quarter to the highest backlog in more than a decade, driven by continued strong Gulfstream demand. The Gulfstream book- to-bill ratio was two-to-one reflecting record first quarter aircraft orders. Aircraft services increased broadly to set a new quarterly record which resulted in the operating margin expanding 110 basis points to 12.8% for this segment. The defense segments also delivered solid performance on key programs with significant awards received for the three defense segments during the quarter. Orders remained strong across the company with a consolidated book-to-bill ratio of one-to-one for the quarter. General Dynamics ended the quarter with a company-wide backlog of $87.2 billion. Free cash flow during the quarter was extremely strong coming in at $1.8 billion, which was 2.5 times net earnings. For the year, General Dynamics expects free cash flow to exceed earnings thanks to strong order activity at Gulfstream and progress payments from Combat Systems. During the quarter, the company invested $141 million in capital expenditures, paid $330 million in dividends, a 6% increase over the prior year, and used $294 million to repurchase 1.3 million shares at an average price of $225 per share.
Tuesday, April 26, 2022
Microsoft-MSFT reported third quarter revenues for fiscal 2022 increased 18% to $49.4 billion with net income up 8% to $16.7 billion and EPS up 9% to $2.22. By segment, Productivity and Business Processes revenue increased 17% to $15.8 billion, boosted by 17% growth in Office 365, a 34% increase in LinkedIn revenue and a 35% increase in Dynamics 365 revenue. Intelligent Cloud revenue increased 26% to $19.1 billion and included 46% growth in Azure revenue. More Personal Computing revenue increased 11% to $14.5 billion on a 14% increase in Windows and Cloud services revenue, a 23% increase in Search and a 13% increase in Surface sales. During the third quarter, Microsoft generated $25.3 billion in operating cash flow, up 14% year-over-year and $20 billion in free cash flow, up 17% from last year. Microsoft returned $12.4 billion to shareholders in the form of share repurchases and dividends in the third quarter, an increase of 25% compared to the third quarter of fiscal year 2021. Microsoft ended the quarter with $104.6 billion in cash and investments, $48 billion in long-term debt and $162.9 billion in shareholders’ equity on its strong balance sheet. Looking ahead to the fourth quarter, leadership expects sales in the range of $52.4 billion to $53.2 billion.
Texas Instruments-TXN reported first quarter revenues rose 14% to $4.9 billion with net income and EPS increasing 26% to $2.2 billion and $2.35, respectively. Sustained demand in the industrial and automotive markets fueled 20% revenue growth in each segment. Demand for the company’s chips outstripped supply which led to strong margin expansion as the company had pricing power. By segment, Analog revenues increased 16% to $3.8 billion, Embedded Processing revenues were up 2% to $782 million and Other revenues increased 27% to $307 million. During the quarter, TXN generated $1.7 billion in free cash flow, a 10% increase year-over-year, and returned nearly $1.7 billion to shareholders through dividends of $1.1 billion and share repurchases of $589 million. Cash flow from operations was up 27% to $9.1 billion for the trailing 12 months. Free cash flow for the same period was $6.5 billion. Over the past 12 months, Texas Instruments invested $3.2 billion in R&D and SG&A, invested $2.6 billion in capital expenditures and returned $5 billion to shareholders. Management’s second quarter outlook is for revenue in the range of $4.2 billion to $4.8 billion and EPS between $1.84 and $2.26. This outlook reflects reduced demand from China-based customers due to COVID-19 restrictions in China.
Visa-V reported fiscal second quarter revenues charged ahead 25% to $7.2 billion with net income increasing 21% to $3.65 billion and EPS up 23% to $1.70. Key business drivers included a 17% increase in Payments Volume to $2.78 trillion, a 47% increase in Cross-Border Volume (excluding Intra-Europe), a 38% increase in total Cross-Border Volume and 19% growth in processed transactions to 48 billion. Visa ended the quarter with 3.922 billion Visa branded cards, up 9% from last year. By segment, Service Revenues increases 24% over the prior year to $3.5 billion, Data Processing revenues rose 16% to $3.5 billion, International Transaction revenues grew 48% to $2.2 billion while Other revenues increased 21% to $474 million and Client Incentives, a contra-revenue item, were $2.5 billion and represented 25.8% of gross revenues. During the first half of fiscal 2022, Visa generated $7.28 billion in free cash flow, up 11.6% from last year, representing nearly 96% of reported net income. Visa returned $8.66 billion to shareholders during the first half through $7 billion in share repurchases at an average cost of $210.11 per shares and dividend payments of $1.6 billion. Visa ended the quarter with more than $16 billion in cash and investments, $17.5 billion in long-term debt and $36 billion in shareholders’ equity on its solid balance sheet. Looking ahead, despite a 4% hit to revenues due the closure of business in Russia, management expects revenues to grow in the upper-teens to 20% during fiscal 2022. During the conference call, Alfred F. Kelly, Jr., Chairman and Chief Executive Officer, commented, “The Omicron variant impacts were short lived and the global economic recovery that began in the middle of last year continued. We had solid growth in most countries around the globe and across all elements of our business, with revenue growth of over 20% in consumer payments, new flows and value-added services. While the geopolitical environment remains uncertain, we expect continued growth driven by a robust travel recovery and through the enablement of traditional and newer ways to pay globally."
3M-MMM reported first quarter sales dipped slightly from last year to $8.8 billion with net income declining 20% to $1.3 billion and EPS falling 18.4% to $2.26. Excluding PFAS litigation and related remediation expenses, 3M’s EPS declined 10% to $2.65. By business segment, Safety & Industrial sales dipped 1.5% to $3.05 billion on mid-single digit organic growth in industrial adhesives and tapes, electrical markets, abrasives, and closure and masking systems while disposable respirator sales declined nearly $50 million, or 8% organically. Transportation & Electronics sales declined 2.3% to $2.34 billion on flat automotive sales and declining electronics and transportation safety as global semiconductor supply chain challenges continue impacting auto builds and electronics end-markets. Health Care sales increased 2.7% to $2.1 billion with organic growth across all divisions led by food safety, separation and purification sciences, medical solutions and health information systems. COVID-19 continues to impact U.S. elective procedures that are about 85% to 90% of pre-pandemic levels. Consumer sales increased nearly 2% to $1.3 billion with organic growth across all divisions, led by consumer health and safety and continued demand for home care, stationery and office and home improvement products. Adjusted operating margin declined 270 basis points from last year’s first quarter to 21.4%, pressured by raw material/logistic cost inflation and manufacturing productivity headwinds, partially offset by selling price actions and restructuring benefits. During the first quarter, 3M generated $587 million in free cash flow, down 57% from last year, due to higher cash compensation, litigation and remediation expenses and a 37% jump in capital expenditures for growth and sustainability investments. During the quarter, 3M returned $1.6 billion to shareholders through share repurchases of $773 million and dividend payments of $852 million. In February, 3M increased its quarterly dividend by 0.7% to $1.49 per share, marking the 64th consecutive year of dividend increases and 100 years of uninterrupted dividend payments. 3M ended the quarter with $3.4 billion in cash, $14.8 billion in long-term debt and $15.0 billion in shareholders’ equity. While the macroeconomic and geopolitical environment remains challenging and fluid, 3M continues to manage and navigate the headwinds facing its businesses. Given its first quarter PFAS related charges, 3M updated its full-year 2022 earnings outlook. 3M now expects its full-year 2022 earnings per share to be in the range of $9.89 to $10.39 versus a prior expectation of $10.15 to $10.65. The company’s full-year organic sales growth and free cash flow conversion ranges remain unchanged with cash flow conversion in the range of 90% to 100%. Share repurchases are expected in the $2 billion range.
Alphabet-GOOGL reported first quarter revenues rose 23% to $68 billion with operating income up 22% to $20 billion as operating margin held steady at 30%. Net income declined 8% to $16.4 billion with EPS down 6% to $24.62, reflecting changes in equity investment valuations. Revenue growth was driven by 44% growth in Google Cloud revenue to $5.8 billion, thanks to increased deal volume due to the digital transformation of businesses as hybrid work is here to stay, and 24% growth in Google Search revenue to $39.6 billion with strength in retail and travel searches. Time spent on YouTube continues to grow with 700 million hours of YouTube content watched every day. YouTube ad revenue rose 14% during the quarter. Free cash flow increased 15% during the quarter to $15.3 billion with the company repurchasing $13.3 billion of its common stock during the quarter. In the past 12 months, Alphabet has repurchased $52 billion of its common stock with the company announcing a new $70 billion share repurchase program. Alphabet’s fortress balance sheet can easily support this repurchase program with more than $164.5 billion in cash and investments, $14.8 billion in long-term debt and $254 billion in shareholders’ equity. The company will face tough comparisons during the second quarter of 2022 as it laps the strong economic recovery from last year, reflects the suspension of commercial activities in Russia and faces foreign exchange headwinds.
Canadian National Railway-CNI reported first quarter revenues chugged ahead 5% to C$3.708 billion with net earnings declining 5.9% to C$918 million and EPS down 4.4% to C$1.31. RTMs (measuring the weight and distance of freight transported) declined by 8% compared to the year-earlier period on a significantly smaller Canadian grain crop, persistent global supply chain disruptions and challenging operating conditions. Freight revenue per RTM increased by 15%, mainly driven by a significant decrease in the average length of haul, higher applicable fuel surcharge rates and freight rate increases. First quarter operating ratio (operating expenses as a percentage of revenues) of 66.9%, increased 4.4-points from last year due to higher fuel prices and costs related to harsher winter weather. During the first quarter, Canadian National generated operating cash flow of C$570 million and free cash flow of C$191 million, down from C$540 million last year, mainly due to working capital needs. The company returned C$1.8 billion to shareholders through its quarterly dividend of $0.7325 per share, up 19% from last year, totaling $509 million and share repurchases of C$1.29 billion at an average cost per share of $158.56. Canadian National ended the quarter with C$1.045 billion in cash, C$11.9 billion in long-term debt and $21.9 billion in shareholders’ equity. Due to challenging operating conditions in the first quarter as well as worldwide economic uncertainty, the company now expects to deliver 15-20% adjusted EPS growth, compared to its January 25, 2022 target of 20%. Canadian National now targets an operating ratio below 60% for 2022, compared to its prior target of 57% as well as about 15% of ROIC.
UPS-UPS reported first quarter revenues rose 6.4% to $24.4 billion with operating profit up 17.6% to $3.3 billion. Operating margin increased 70 basis points to 13.6% during the quarter as all business units delivered operating growth. Net income and EPS each declined 44% to $2.7 billion and $3.03, respectively, due to a change in pension income from the prior year period. These were solid financial results despite a challenging macro environment in the first quarter which resulted in daily volume coming in less than planned. Omicron hurt sales in January and pressured volumes. Later in the quarter, performance was impacted by record high inflation, a surge in energy prices and COVID-19 lockdowns in Asia. Total average daily volume in the US was down 3%, driven mostly by residential volume as UPS was lapping generous federal stimulus payments last year. UPS has ceased operations in Ukraine, Belarus, and Russia. Revenue from those three countries represented less than 1% of total revenue in 2021, but the war has impacted fuel prices which remains a concern. Free cash flow increased 6% during the quarter to $3.9 billion with UPS delivering $1.3 billion in dividends to shareholders and repurchasing $254 million of its common stock. For 2022, UPS reaffirmed its full-year financial targets with revenue of $102 billion expected with an adjusted operating margin of about 13.7%. UPS expects to generate an adjusted return on invested capital above 30% during the year. Capital expenditures for the year are expected to approximate $5.5 billion. UPS plans to pay about $5.2 billion in dividends and doubled its share repurchases for 2022 to a target of $2 billion given management’s confidence in its financial outlook and position.
Roche Group-RHHBY provided the first quarter sales update as the company reported Group sales increased 11% in constant exchange rates (CER) to CHF 16.4 billion. The 11% sales growth was driven by a 69% jump in Pharmaceutical sales in the Japan region to CHF 1.3 billion and a 24% increase in the Diagnostics Division to CHF 5.2 billion. The Diagnostics Division’s strong growth was due to good momentum in base business and continued high demand for COVID-19 tests. Pharmaceuticals Division sales increased 6% to CHF 11.1 billion. During the quarter, Vabysmo (medication for severe eye diseases) received FDA approval. For fiscal 2022, sales are expected to be stable or grow in the low-single digits and Core EPS is targeted to grow in the low to mid-single digit range (at constant exchange rates). Roche anticipates sales of COVID-19 medicines and diagnostics to decrease by approximately CHF 2 billion to around CHF 5 billion, and sales losses to biosimilars in the current year to be roughly CHF 2.5 billion. In addition, Roche expects to increase its dividend in Swiss francs further.
Raytheon Technologies-RTX reported first quarter revenues rose 3% to $15.7 billion with net income increasing 44% to $1.1 billion and EPS up 46% to $.73, respectively. Earnings include $.41 per share of net significant and/or non-recurring charges and acquisition accounting adjustments. Backlog at the end of the quarter was $154 billion, including $92 billion from commercial aerospace and $62 billion from defense. RTX generated $37 million of free cash flow, an 89% decrease due to inflation, global sanctions, labor availability and supply chain constraints. The company returned nearly $1.5 billion to shareholders through dividends of $745 million and share repurchases of $743 million. Management lowered the sales outlook for 2022, expecting sales of $67.75 billion to $68.75 billion, driven by global sanctions on Russia. RTX still expects adjusted EPS of $4.60-$4.80, free cash flow of approximately $6 billion and share repurchases of at least $2.5 billion.
NVR, Inc.-NVR reported first quarter revenues increased 17% to $2.38 billion with net income increasing 71% to $426 million and EPS jumping 84% to $116.56, respectively. Profitability jumped during the quarter due to higher home prices and lower lumber costs. New orders decreased by 6% during the quarter to 5,927 units. However, the average sales price of new orders increased by 13% to $465,700. The cancellation rate in the second quarter remained flat at 10%. Settlements increased 3% during the quarter to 5,214 units. The backlog of homes sold but not settled as of March 31, 2022 increased on a unit basis by 5% to 13,443 units and increased on a dollar basis by 20% to $6.23 billion. Mortgage loan closings increased 5% to $1.48 billion during the quarter. The company repurchased 146 million shares during the quarter, for an average price of $5,127 per share and ended the quarter with $2.2 billion in cash, $1.5 billion in long-term debt and $2.7 billion in shareholders’ equity on its sturdy balance sheet.
PepsiCo-PEP reported first quarter revenues rose 9% to $16.2 billion with net income and EPS popping over 100% higher to $4.2 billion and $3.06, respectively. These strong results reflect PepsiCo’s presence in growing, global categories. During the quarter, PepsiCo gained market share across many of its key global snacks and beverage markets with notable improvements in the U.S. snacks and beverage businesses. On the international front, the developing and emerging markets remained resilient despite the pandemic with double-digit growth in the Latin America, Africa, Middle East and South Asia regions. Despite higher than expected cost input inflation, PepsiCo raised its revenue outlook and now expects to deliver 8% organic revenue growth (previously 6%) in 2022 and continues to expect an 8% increase in core constant currency EPS thanks to productivity gains. In 2022, the company plans to return $7.7 billion to shareholders through $6.2 billion in dividends and $1.5 billion in share repurchases.
Monday, April 25, 2022
Bank of Hawaii Corporation – BOH reported first quarter revenues increased 3.2% to $168.8 million with net income and EPS declining 12% to $52.9 million and $1.32, respectively. Net interest income increased 4% to $125.3 million while net interest margin of 2.34% dipped slightly on loan growth of 3.3% to $12.5 billion. Bank of Hawaii’s deposits grew 6% to a new high of $20.7 billion, providing ample low cost, long duration liquidity to support future loan growth. Noninterest income of $43.6 million increased 1.4% from last year with noninterest expenses increasing 5.1% to $103.9 million as the company continued its innovation spend. During the quarter, Bank of Hawaii generated a 0.97% return on average assets, down 18 basis points from last year, and a 15.4% return on average common equity, down 221 basis points, on a lower loan loss provision release and seasonal payroll expenses. Bank of Hawaii’s asset quality remains strong, and its fortress capital position significantly exceeds regulatory guidelines for well-capitalized banks. During the quarter, the company repurchased $10.0 million of its shares at an average cost per share of $85.34 with $75.8 million remaining under the current authorization. Hawaii’s economy continues to recover with an unemployment rate of 4.1%, daily arrivals reaching pre-pandemic levels and continued strength in Oahu real estate.
Friday, April 22, 2022
Gentex-GNTX reported first quarter revenues dipped3% to $468.3 million with net income skidding 23% lower to $87.5 million and EPS sliding 20% lower to $.37. Light vehicle production in the company’s primary markets of North America, Europe and Japan/Korea declined by 11% because of the ongoing auto industry-wide component shortages and global supply chain constraints. Profits were impacted by raw material cost increases, elevated freight expenses, labor cost increases and ongoing customer order volatility. Despite the challenging first quarter, Gentex expects to see an improving sales environment over the balance of the year. The company is in active discussions with their customers to minimize the impact of inflationary pressures on the businesses while introducing new innovative products. Free cash flow declined during the quarter due to the lower earnings and increased working capital needs. During the quarter, the company repurchased 2.44 million of its common shares for $71.3 million at an average price per share of $29 per share. The company has 22.4 million shares remaining authorized for future share repurchases. Gentex maintains a cash-rich, debt-free balance sheet which provides the company with financial flexibility during difficult times. For 2022, Gentex expects revenue in the range of $1.87 to $2.02 billion with revenue growth of 15%-20% expected in 2023 as the auto industry recovers. Management expects record sales combined with a consistent and disciplined capital allocation strategy to result in excellent shareholder returns over the next several years.
Thursday, April 21, 2022
Genuine Parts – GPC reported record first sales that motored ahead 18.6% to $5.3 billion with net income increasing 13% to $246.8 million and EPS up 14.7% to $1.72. By segment, Automotive Parts sales increased 11% to $3.3 billion on a 10.3% increase in comparable sales while Industrials Parts sales increased 33.6% to $2.0 billion, reflecting a 17.9% contribution from the KDG acquisition and a 16% increase in comparable sales. Despite much higher than anticipated inflation, segment operating profits increased 50 basis points to 8.6%, boosted by price increases, ongoing expense management and execution of operational initiatives to improve productivity. During the quarter, Genuine Parts generated $398.8 million in operating cash flow and $320.8 million in free cash flow with the company returning $188.8 million to shareholders through dividend payments of $115.9 million and share repurchases of $72.9 million at an average cost per share of $128.07. The company announced a 10% increase in the 2022 dividend to $3.58 per share, marking the 66th consecutive increase in the dividend that has been paid every year since the company’s founding in 1928. Genuine Parts ended the quarter with $610.8 million in cash and equivalents, $3.4 billion in long-term debt and $3.6 billion in shareholders’ equity. Given the strong first quarter, Genuine Parts raised its 2022 guidance with sales now expected to increase in the 10% to 12% range, up from 9% to 11% previously guided, with EPS in the $7.56 to $7.71 range, up from $7.45 to $7.60 previously guided. Free cash flow remains expected in the $1.2 billion to $1.4 billion range.
Tractor Supply-TSCO reported first quarter revenues grew 8.3% to $3.0 billion with net income up 3.2% to $187.2 million and EPS sprouting 6.5% higher to $1.65. Comparable store sales increased 5.2% in the first quarter driven by ticket growth of 6.7% and a decline in average transaction count of 1.4%. Comparable store sales growth was driven by robust demand for everyday merchandise, including consumable, usable and edible products and strength in winter seasonal goods, partially offset by a slower start to the spring selling season due to colder weather across the nation. The company’s e-commerce sales experienced double-digit growth for the 39th consecutive quarter. The company’s price management actions helped offset the majority of the impact from significant product cost inflation, wage inflation and higher transportation costs. The company spent $112 million on capital expenditures during the quarter, paid dividends of $103.5 million and repurchased 1.4 million shares of its common stock for $296.2 million at an average price per share of $211.57. While new store openings were delayed in the first quarter due to the lingering impact of the pandemic and challenges facing the construction industry, the company is still targeting opening about 75-80 new Tractor Supply stores in 2022. While Tractor Supply handily beat first quarter expectations, management is prudently maintaining its full year outlook due to the uncertain inflation outlook with revenues expected in the $13.6 billion to $13.8 billion range, driven by 3% to 4.5% comparable store sales growth and EPS expected in the $9.20-$9.50 range.
Wednesday, April 20, 2022
SEI Investments-SEIC reported first quarter revenues increased 28% to $581.4 million with net income increasing 47% to $190.3 million and EPS up 53% to $1.36. First quarter results include a one-time fee related to the early termination of HSBC’s agreement which added $88 million to revenues and $86 million, or $0.47 per share, to earnings. Excluding the termination fee, revenues increased 8.3% and EPS were flat. Average assets under administration increased 9% from last year to $893.4 billion and average assets under management increased 5% to $293.6 billion. Operating expenses increased 13.6% from last year due to increased direct costs related to the revenue increase and increased personnel costs in a competitive labor market. During the quarter, SEI Investments generated $260.4 million in operating cash flow, or $1.86 per share, and free cash flow of $244.6 million. The company repurchased 1.7 million shares during the quarter for $100.1 million, or $58.43 per share. The company ended the quarter with $907.8 million in cash and equivalents, $30 million in debt and $1.97 billion in shareholders’ equity on its pristine balance sheet. During the earnings call, SEI announced that after 41 years since the company went public and 164 quarterly earnings calls, Al West, founder and CEO, is handing over the reins to Ryan Hicke who has worked at SEI for 24 years, including twelve years launching new businesses overseas for the company.
Tuesday, April 19, 2022
Johnson & Johnson-JNJ reported first quarter revenues increased 5% to $23.4 billion with net earnings and EPS each down 17% to $5.1 billion and $1.93, respectively. Net earnings were down primarily due to an increase in cost of goods sold, marketing expenses and research and development. Worldwide Pharmaceutical sales increased 6% to $12.8 billion driven by above-market performance in Oncology, Immunology and Neuroscience. Sales increased 5.9% in Medical Devices to $6.9 billion with growth driven by COVID-19 market recovery, driving market expansion and innovation. Worldwide Consumer Health Sales decreased 1.5% to $3.5 billion due to supply constraints in Skin Health/Beauty and Baby care. These declines were partly offset by a 15% increase in over-the-counter products. During the quarter, the company generated approximately $3.4 billion in free cash flow, invested $3.5 billion in research and development to advance its promising pipeline and paid $2.8 billion in dividends to shareholders. The company is maintaining 2022 full-year guidance for adjusted operational EPS and base business operational sales. Given foreign exchange headwinds, JNJ lowered guidance for estimated reported sales to $94.8 billion to $95.8 billion, representing a 3.8% to 4.8% increase over the prior yea. Adjusted EPS for 2022 is expected in the range of $10.15 to $10.35, a 3.6% to 5.6% increase over the prior year.
Thursday, April 14, 2022
UnitedHealth Group-UNH reported first quarter revenue rose $10 billion, or a healthy 14%, to $80.1 billion with net earnings up 3% to $5.0 billion and EPS increasing 4% to $5.27. The company delivered high-quality and diversified double-digit revenue growth at both Optum and UnitedHealthcare. Earnings growth was led by Optum Health thanks to continued expansion of care services offered with at-home and digital offering complementing and integrating with growing clinic-based and outpatient services, including ambulatory surgical care. Optum Health now expects to serve 600,000 new patients under such arrangements in 2022 compared to its initial outlook of 500,000 patients. Optum Rx experienced robust revenue growth of 11% during the quarter as adjusted scripts grew to 352 million compared to 329 million last year. UnitedHealth Group’s medical care ratio was 82% compared to 80.9% last year due to Covid effects and business mix. The first quarter operating cost ratio decreased to 14.2% from 14.6% in 2021 due to Covid effects and continued productivity advances. Management’s response to inflation is innovation which increases productivity and efficiency in the business. Digital tools, virtual visits and home care reduce costs by 15% which enables the company to lower premiums for patients. Free cash flow declined 12% during the quarter to $4.8 billion with the company paying $1.4 billion in dividends and repurchasing $2.5 billion of its common stock. For the full 2022 year, cash flow from operations is expected to approximate $24 billion. Even after completing two multi-billion dollar expected acquisitions in 2022, UnitedHealth still has ample financial capacity to expand further. Return on equity of 27.8% in the quarter reflected the company’s consistent and diverse earnings profile and efficient capital structure. Given the strong start to the new year, UnitedHealth increased its full year net earnings outlook to $20.30-$20.80 per share.
Wednesday, April 13, 2022
Fastenal-FAST reported first quarter sales rose 20.3% to $1.7 billion with net income and EPS jumping 28% to $269.6 million and $.47, respectively. This strong growth was due to robust demand, healthy pricing and good execution by management. Growth during the quarter was largely due to higher unit sales, most notably of fastener, safety and janitorial products. Underlying demand is improving with fastener daily sales growth increasing to 24.6% in March. During the quarter, Fastenal signed 106 new Onsite locations, with 1,440 active sites as of March 31, 2022, representing a 12.1% increase. Fastenal continues to believe the market will support a long-term rate of 375 to 400 annual Onsite signings which remains the goal for 2022. Free cash flow decreased 20% in the quarter to $194.5 million, primarily due to an increased need for working capital to support customer’s growth as business activity improves, as well as from inflation in inventory. The company paid $178.4 million in dividends an increase of 11% compared to the first quarter in 2021. Fastenal’s balance sheet remains solid with minimal debt and ample liquidity. Top and bottom-line growth during the past quarter was the strongest in a decade as the firm deployed technologies and strategies to improve efficiency during the pandemic. Supply chains and labor remain tight. However, conditions have stabilized, and customers are better able to plan and navigate around the challenges. This is leading to an improved outlook for future growth especially given favorable manufacturing conditions with 92% of the company’s Top 100 customers growing.
Thursday, April 7, 2022
Berkshire Hathaway-BRKB has accumulated an 11.4% stake worth $4.2 billion in HP, Inc., the computer and printer company.
Wednesday, April 6, 2022
As we lapped two years since the first Covid lockdowns, March reinforced the ongoing rebalance to pre-pandemic ways of consumer spending. From 45% spending growth at airlines to 46% spending growth on lodging, spending on services is making its comeback, while in-store retail sales are rebounding as consumer mobility increases. According to Mastercard SpendingPulse™, which measures in-store and online retail sales across all forms of payment, total retail sales excluding auto increased 8.4% year-over-year (YOY) and 18.0% compared to pre-pandemic spending (2019), not adjusted for inflation. “Retail sales remain strong but are stabilizing as consumers resume spending on passion areas like travel, live entertainment, indoor dining and other in-person activities,” said Steve Sadove, senior advisor for Mastercard and former CEO and Chairman of Saks Incorporated. “After nearly two years of cautious optimism around the broader reopening, it’s a healthy sign that consumers are returning to a balanced level of spending across retail sectors and services.”
Starbucks-SBUX marked the return of founder Howard Schultz as chief executive officer and as a director on the company’s Board. Schultz announced Starbucks will suspend its stock repurchasing program, effectively immediately. “This decision will allow us to invest more into our people and our stores — the only way to create long-term value for all stakeholders.”
Wednesday, March 30, 2022
Paychex-PAYX reported third quarter revenue increased 15% to $1.2 billion with net income and EPS each up 23% to $430.7 million and $1.19, respectively. Double-digit growth in both revenue and earnings is a result of progress against key initiatives. Paychex’s strong calendar year end and selling season led to record new sales and maintaining high levels of client retention. By segment, Management Solutions revenue increased 13% to $959.9 million, driven by increases in client base, high levels of retention and improved revenue per client, PEO and Insurance Solutions revenue increased 21% to $301.7 million due to an increase in the number of average worksite employees and growth in average wages per employee. Free cash flow increased 36% year-to-date to $1.1 billion with the company paying $714.9 million in dividends. The company’s financial position remained strong with cash and investments of $1.3 billion, net debt of $797 million and shareholders’ equity of $3.2 billion as of quarter end. With better than expected third quarter results, management raised their outlook for the full fiscal 2022 year with revenue growth in the range of 12% to 13% and adjusted EPS growth expected in the range of 22.5% to 23%.
Tuesday, March 29. 2022
The TJX Companies, Inc.-TJX announced that its Board of Directors has raised the amount of its quarterly dividend by 13% from the last dividend paid. The Board declared a regular quarterly dividend in the amount of $.295 per share, payable June 2, 2022, to shareholders of record on May 12, 2022. Ernie Herrman, Chief Executive Officer and President of The TJX Companies, Inc., stated, "I am pleased to report that our Board of Directors has approved a 13% increase in our quarterly dividend. This marks our 25th dividend increase over the last 26 years. Over this period, the Company’s dividend has grown at a compound annual rate of 21%. In addition, we plan to continue our significant share buyback program, with approximately $2.25 to $2.50 billion of repurchases planned for Fiscal 2023. These actions underscore our confidence in our ability to continue delivering profitable sales and strong cash flow, which enables us to simultaneously reinvest in the growth of the business and return significant value to our shareholders."
Optum, a unit of UnitedHeatlh-UNH, and LHC Group, a national patient-focused provider of high-quality in-home health care services, have agreed to combine to further strengthen their shared ability to advance value-based care, especially in the comfort of a patient’s own home. UnitedHealth agreed to acquire LHC Group’s outstanding common stock for $170 per share or $5.4 billion in cash and is expected to close in the second half of 2022. The acquisition is expected to be neutral to UnitedHealth Group’s outlook for adjusted net earnings per share in 2022, modestly accretive in 2023, and advancing strongly in subsequent years.
Thursday, March 24, 2022
FactSet-FDS reported second quarter revenues rose 10% to $431.1 million with net income and EPS each up 14% to $109.9 million and $2.84, respectively. Organic Annual Subscription Value (ASV) increased 9.4% in the second quarter to $1.7 billion thanks to higher sales of research and advisory and analytic solutions. FactSet completed its acquisition of CUSIP Global Services during the quarter for $1.925 billion, financed in part by $1 billion in senior notes. Client count increased by 413 clients during the quarter to 7,172 clients as of quarter end, primarily driven by an increase in corporate clients. User count increased by 9,180 to 171,341 in the past three months, primarily driven by an increase in research and advisory users. Client retention was a high 92%. Free cash flow declined 13% during the first half of the year to $174.4 million primarily due to higher estimated tax payments. During the first half, the company paid $61.4 million in dividends and repurchased $18.6 million of its common stock. FactSet did not repurchase any shares in the second quarter and is suspending its share repurchase program until at least the second half of fiscal 2023 to prioritize the repayment of debt. FactSet updated its outlook for fiscal 2022 with full year revenue increased to a range of $1.8 billion to $1.83 billion with EPS expected in a range of $9.75-$10.15.
Monday, March 21, 2022
Nike-NKE reported third quarter revenues increased 5%, or 8% on a currency-neutral basis, to $10.9 billion, led by NIKE Direct growth of 17%. Net earnings were down 4% to $1.4 billion, and EPS decreased 3% to $0.87. NIKE Brand Digital business fueled growth, increasing by 22%. This growth was driven by double-digit growth in North America, APLA and EMEA, partially offset by declines in Greater China. Further contributing to NIKE Direct growth was the steady normalization of traffic in NIKE owned physical retail stores with sales growth up 14%. By geography, North America sales increased 9% to $3.9 billion, EMEA sales increased 7% to $2.8 billion, Greater China revenues decreased 5% to $2.2 billion and Asia Pacific & Latin America sales were up 11% to $1.5 billion. Inventories increased 15% to $7.7 billion, driven by elevated in-transit inventories due to extended lead times from ongoing supply chain disruptions. Nike ended the quarter with cash and short-term investments of $13.5 billion, up approximately $939 million from last year, driven by strong free cash flow, partially offset by share repurchases and cash dividends. NIKE continues a strong track record of investing to fuel growth and consistently increasing returns to shareholders, including 20 consecutive years of increasing dividend payouts. In the third quarter, Nike returned approximately $1.7 billion to shareholders through dividends of $484 million, up 12% from last year, and share repurchases of $1.2 billion. As of February 28, 2022, a total of 68.9 million shares have been repurchased under the most recent four year $15 billion share repurchase program for a total of approximately $7.6 billion.
Berkshire Hathaway-BRKB announced they have entered into a definitive agreement to acquire all outstanding Alleghany shares for $848.02 per share in cash. Alleghany owns operating subsidiaries and manages investments anchored by a core position in property and casualty insurance and reinsurance. The transaction, which was unanimously approved by both Boards of Directors, represents a total equity value of approximately $11.6 billion. The acquisition price represents a multiple of 1.26 times Alleghany’s book value at December 31, 2021. The transaction is expected to close in the fourth quarter of 2022. Alleghany will operate as an independent subsidiary of Berkshire Hathaway after closing. Mr. Kirby, who controls 2.5% of Alleghany common shares, intends to vote his shares for the transaction. Under the terms of the definitive merger agreement, Alleghany may actively solicit and consider alternative acquisition proposals during a 25-day “go-shop” period. Alleghany has the right to terminate the merger agreement to accept a superior proposal during the go-shop period, subject to the terms and conditions of the merger agreement.
Friday, March 18, 2022
General Dynamics Information Technology (GDIT), a business unit of General Dynamics-GD, announced it has been awarded the User Facing and Data Center Services (UDS) contract by the National Geospatial-Intelligence Agency (NGA). UDS is a single-award indefinite delivery, indefinite quantity contract with a $4.5 billion ceiling and 10-year ordering period.
Berkshire Hathaway-BRKB purchased an additional 18.1 million shares of Occidental Petroleum for almost $1 billion during the past week at a weighted average cost of $54.41 per share, or a total of $985 million for the new shares. In total, Berkshire now reports owning 136.4 million common shares of the oil giant, currently valued at $7.7 billion. That represents more than 13% of OXY’s outstanding shares. Berkshire also holds warrants to buy nearly 84 million more shares at an exercise price just under $60 per share. They were obtained as part of the company’s 2019 deal that helped finance Occidental’s purchase of Anadarko. When they are included, Berkshire’s stake is almost 22%.
Thursday, March 17, 2022
Accenture-ACN reported second quarter revenues increased 24% to $15 billion with net income increasing 13% to $1.6 billion and EPS up 14% to $2.54. Excluding a gain on investments during the prior year quarter, adjusted EPS was up 25%. Operating income increased 25% to $2.06 billion with operating margin of 13.7%. New bookings increased 22% to a record $19.6 billion with record bookings in both consulting and outsourcing of $10.9 billion and $8.7 billion, respectively. Free cash flow decreased 41% during the first half of fiscal 2022 to $2.3 billion with the company paying $1.2 billion in dividends, an increase of 10%, and repurchasing $2.5 billion of its common shares. The company has $4.6 billion remaining authorized for future share repurchases. Accenture expects revenues for the third quarter to be in the range of $15.7 billion to $16.15 billion, an increase of 22% to 26%. The company raised its business outlook for the full fiscal 2022 year. Management now expects full year local currency revenue growth of 24% to 26% with double-digit earnings growth with EPS in the range of $10.61 to $10.81. Free cash flow for the full year is expected in the range of $8 billion to $8.5 billion with the company returning at least $6.5 billion to shareholders through dividends and share repurchases.
Tuesday, March 15, 2022
Intel-INTC announced the first phase of its plans to invest as much as 80 billion euros in the European Union over the next decade along the entire semiconductor value chain – from research and development (R&D) to manufacturing to state-of-the art packaging technologies. The announcement included plans to invest an initial 17 billion euros into a leading-edge semiconductor fab mega-site in Germany, to create a new R&D and design hub in France, and to invest in R&D, manufacturing and foundry services in Ireland, Italy, Poland and Spain. With this landmark investment, Intel plans to bring its most advanced technology to Europe, creating a next-generation European chip ecosystem and addressing the need for a more balanced and resilient supply chain.
Thursday, March 10, 2022
Oracle-ORCL reported fiscal 2022 third quarter revenues increased 4% to $10.5 billion with net earnings declining 54% to $2.3 billion and EPS declining 50% to $0.84 on fewer shares outstanding. Overall revenue growth was driven by Oracle’s rapidly growing Cloud Infrastructure, up 47%, and Cloud Applications business, including a 35% jump in Fusion ERP and a 29% jump in NetSuite ERP. Total Cloud revenue, which includes Cloud Infrastructure and Cloud Applications, is now running over $11 billion annually. Operating income dipped 1% to $3.8 billion on a 23% jump in Cloud services and license support expenses and a 12% increase in R&D as the company continues its transition to high-margin cloud offerings. Third quarter EPS include a 5 cent hit from a decline in the share price of gene-sequencing company, Oxford Nanopore, and an operating loss at server chip maker, Ampere. During the first nine months of fiscal 2022, Oracle generated $2.5 billion in free cash flow, down 75% from last year, on lower operating cash flow and a 2-fold plus increase in capital expenditures to $3.1 billion as the company continues to build out data centers worldwide. During the quarter, Oracle repurchased $600 million of its shares for an average cost per share of $85.71 and paid its 32 cent per share quarterly dividend. Oracle ended the quarter with $23 billion in cash and investments, $72 billion in long-term debt and a shareholders’ deficit of $8.2 billion. Looking ahead to the fourth quarter, Oracle expects revenue growth in the 3% to 5% range with EPS between $1.35 and $1.39. Capital expenditures are expected to be $1.1 billion, bringing the total for fiscal 2022 to $4 billion.
Ulta Beauty-ULTA reported fourth quarter revenues increased 24.1% to $2.7 billion with net income increasing 69% to $289.4 million and EPS up 79% to $5.41. These record fourth quarter results were due to the favorable impact from stronger consumer confidence and fewer Covid-19 restrictions. Comparable store sales were up 21.4%, driven by a 10.4% increase in transactions and a 9.9% increase in average ticket. During the fourth quarter, the company opened six new stores and ended the year with 1,308 stores. For the full year, revenues increased 40.3% to $8.6 billion with net income and EPS jumping over 400% to $985.8 million and $17.98 as the company was adversely impacted by the pandemic in fiscal 2020. Return on shareholders’ equity was an impressive 64% for the year. Free cash flow increased 35% to $887.1 million with the company repurchasing $1.5 billion of its common stock, including 1.9 million shares repurchased in the fourth quarter for $759.8 million at an average cost of $399.89 per share. On March 7, 2022, the company’s board of directors approved a new share repurchase program of $2 billion, which replaces the prior authorization implemented in March 2020. Since 2014, Ulta has purchased 14 million shares of its common stock for $3.9 billion. The company ended the year with $431.6 million in cash, $1.5 billion in operating lease liabilities and $1.5 billion in shareholders’ equity. For fiscal 2022, the company plans to open 50 net new stores with revenues expected in the range of $9.05 billion to $9.15 billion on comparable store sales growth of 3% to 4%. The company expects operating margin in the range of 13.7% to 14% with EPS in the range of $18.20-$18.70. In addition, Ulta expects to repurchase $900 million of its stock in fiscal 2022 with capital expenditures expected in the range of $375 million to $425 million.
T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.54 trillionas of February 28, 2022, which is 8.8% lower than year end assets under management reflecting the stock market’s pullback.
U.S. consumer spending maintained positive momentum in February, according to Mastercard SpendingPulseTM, which measures in-store and online retail sales across all forms of payment. Overall retail sales, excluding auto, increased 8.7% year-over-year and were up 17.3% compared to pre-pandemic spending (2019). “Despite inflation, consumers are putting their record savings to work and expressing themselves through fashion again—much to the benefit of the Apparel, Department Store, Luxury and Jewelry verticals, according to Mastercard SpendingPulse,” said Steve Sadove, senior advisor for Mastercard. Incorporated.
Tuesday, March 8, 2022
Alphabet’s-GOOGL Google unit announced that it has signed a definitive agreement to acquire Mandiant, Inc., a leader in dynamic cyber defense and response, for $23.00 per share, in an all-cash transaction valued at approximately $5.4 billion, inclusive of Mandiant’s net cash. Upon the close of the acquisition later this year, Mandiant will join Google Cloud.
Booking Holdings’-BKNG exposure to Eastern Europe on a booker basis, including Russia and Ukraine, represents a high single digit percentage of its total gross bookings. During the fourth quarter 2021 earnings conference call, the company disclosed that room nights for the first half of February were about in line with 2019 levels. For the full month of February, room nights were also about in line with 2019 levels. Over the last week, through Sunday March 6, room nights were down about 10% versus 2019 levels. The recent softening of room night trends was driven by Eastern Europe, primarily Russia, and to a lesser extent by Western Europe, which remains modestly above 2019 levels. The company is maintaining the forward-looking commentary provided on the earnings call for the first quarter and full year 2022.
Friday, March 4, 2022
Fastenal-FAST reported strong February net sales which increased 21% to $530.9 million with average daily sales also up 21% to $26.5 million. On a geographic basis, North American sales topped 20% and on an end market basis, manufacturing sales were up 26% and non-residential construction sales were up 20%. By product line, fastener sales were up 28%, safety sales were up 19% and other sales were up 17%.
Thursday, March 3, 2022
Brown-Forman-BFB reported third quarter revenues rose 14% to $1 billion with net income increasing 18% to $259 million and EPS up 19% to $.54. Year-to-date, underlying sales grew 11% driven by strong double-digit reported net sales growth led by emerging and developed international markets, with solid growth in the United States and a rebound in the Travel Retail channel. The company’s premium bourbons, led by Woodford Reserve and Old Forrester, grew reported net sales 10%. The tequila portfolio reported net sales were up 19%, driven by double-digit growth from Herradura and el Jimador. Year-to-date, free cash flow increased 17% to $621 million with the company paying $253 million in dividends. Brown-Forman has paid cash dividends for 78 consecutive years with the dividend increased each year for the last 38 years. With the company’s strong year-to-date performance and consumer demand along with supply chain constraints continuing to ease enabling some rebuild of inventory, Brown-Forman expects organic net sales growth of 11% to 13% and organic income growth of 12% to 16% for the full year. In addition, the company expects gross margin to be flat or slightly down with the costs associated with supply chain disruptions and inflationary cost headwinds being largely offset by a modest positive impact from the removal of tariffs in the EU.
Tuesday, March 1, 2022
Ross Stores-ROST rang up an 18% increase in fourth quarter sales to $5.0 billion with net income and EPS up more than 50% to $366 million and $1.04, respectively. Same store sales increased 9% from fourth quarter of 2019, driven by growth in the average basket size, partially offset by a decline in transactions due to the surge in Omicron cases. For the full fiscal year, sales increased more than 50% to $18.9 billion on a 13% jump in same store sales with net earnings of $1.7 billion, or $4.87 per share, compared to $85,000, or $0.24 per share, last year. During the year ended January 29, 2022, Ross Stores generated a fancy 42.3% return on shareholders’ equity and $1.2 billion in free cash flow, down 36% from last year, on a 50% jump in merchandise inventories, mainly due to an increase in in-transit merchandise due to longer lead times from industry-wide supply chain bottlenecks. Ross Stores returned over $1.0 billion to shareholders during the year through dividends of $405 million and share repurchases of $650 million. The company recently authorized a new two-year program to repurchase up to $1.9 billion of common stock through fiscal 2023, replacing the $850 million remaining under the prior May 2021 buyback authorization. The board also increased the quarterly cash dividend by 9% to $0.31 per share. Looking ahead, Barbara Rentler, CEO, commented, “Fiscal 2022 is extremely difficult to predict, especially early in the year. In addition to the ongoing Omicron surge that began just before Christmas, we are up against last year’s record government stimulus and the lifting of COVID restrictions that led to unprecedented consumer demand which fueled extraordinary sales gains in the spring of 2021.” With that said, sales are expected to increase 2% to 6% on flat to up 3% same store sales with EPS in the range of $4.71 to $5.12, compared to $4.87 in fiscal 2021.
Hormel Foods-HRL reported first quarter sales rose 24% to a record $3 billion, the fifth consecutive quarter of record net sales. Brands such as SPAM, Hormel Gatherings, Applegate, Columbus, WHOLLY Guacamole and Planters delivered exceptional growth during the quarter. Net earnings increased 8% to $239.5 million, and EPS increased 7% to $.44. By segment, Grocery Products revenue increased 48% to $855.5 million, Refrigerated Foods revenue increased 19% to $1.6 billion, with Jennie-O Turkey Store revenues up 15% to $384.4 million and International and Other revenues down 3.5% to $176.7 million. Free cash flow jumped over 100% during the quarter to $334 million with the company paying $132.9 million in dividends. Management is increasingly optimistic about generating sales and earnings growth in fiscal 2022. “We expect the demand environment to remain favorable, pricing actions to combat inflationary pressures and continued growth from products such as Columbus charcuterie, Applegate natural and organic meats, Planters snack nuts, and foodservice prepared proteins and pizza toppings. Additionally, we anticipate the operating environment to remain volatile, but our supply chain will continue to show improvement as labor pressures ease and new capacity comes online to support key growth platforms, such as dry sausage, pizza toppings and bacon,” said Jim Snee, president and CEO. For fiscal 2022, Hormel expects sales in the range of $11.7 billion-$12.5 billion with EPS expected in the range of $1.87-$2.03.
Berkshire Hathaway-BRKB reported the company’s net worth during 2021 increased 14.2%, or $63 billion, to $506.2 billion with book value equal to about $342,622 per Class A share as of 12/31/21. Berkshire Hathaway reported 2021 revenues increased 12% to $276 billion with net income more than doubling to $89.8 billion. Excluding significant investment gains of $62.3 billion, operating earnings jumped a strong 25% during the year to $27.5 billion.
The investment gains came primarily from Berkshire’s four major equity investment holdings which represent about 73% of total equities held, including American Express at $24.8 billion (which charged 36% higher during the year or $6.5 billion), Apple at $161.2 billion (which gained 34% during the year or $40.8 billion), Bank of America at $46.0 billion (which deposited a 47% gain in value through 12/31/21 or $14.7 billion), and Coca-Cola at $23.7 billion (popping 8% higher during the year or $1.8 billion).
In the annual report, Buffett noted Berkshire owns dozens of businesses but that the operations of the “Big Four” companies (the giants) account for a very large chunk of Berkshire’s value. The first giant is the cluster of insurance operations. During 2021, Berkshire’s insurance businesses generated earnings from underwriting of $728 million. This included underwriting earnings from primary insurance and underlying losses from reinsurance, which included after-tax losses from significant catastrophe losses, including Hurricane Ida and floods in Europe, which approximated $2.3 billion. Underwriting results in 2021 also reflected the effects of the premium reductions from the GEICO Giveback program, higher private passenger automobile claims frequencies as people began to drive more following the pandemic and higher losses in the life reinsurance business due to the pandemic. Insurance investment income declined 5% during the year to $4.8 billion, reflecting declines in interest rates on the company’s substantial holdings of cash and U.S. Treasury Bills. The float of the insurance operations has grown from $19 million when Berkshire entered the insurance business to approximate $147 billion as of 12/31/21, an increase of $9 billion during the year. The average cost of float was negative during 2021 as the underwriting operations generated earnings. Buffett believes that it is likely, but not assured, that Berkshire’s float can be maintained without incurring a long-term underwriting loss. Buffett further noted, “The insurance business is made to order for Berkshire. The product will never be obsolete, and sales volume will generally increase with both economic growth and inflation.”
Berkshire owns 5.55% of Apple, which makes it the second largest giant, after insurance, in terms of accounting for Berkshire’s value. Apple paid Berkshire $785 million in dividends last year, while Berkshire’s “share” of Apple’s earnings amounted to a “staggering” $5.6 billion. In the annual report, Buffett applauded Tim Cook, Apple’s “brilliant” CEO.
The third giant is Burlington Northern Santa Fe, with the railroad continuing to be “the number one artery of American commerce which makes it an indispensable asset for America as well as Berkshire.” BNSF trains traveled 143 million miles last year and carried 535 million tons of cargo, far exceeding any other American carrier. BNSF’s revenues chugged 12% higher during the year to $22.5 billion with net earnings rolling 16% higher to $6.0 billion reflecting overall higher freight volumes and lower costs due to improved productivity, partly offset by higher average fuel costs. Broad-based volume growth was up 7% during the year, led by 8% growth in consumer products driven by increased retail sales, inventory replenishment by retailers and increased e-commerce activity and 9% growth in coal attributable to increased electricity generation, higher natural gas prices and improved export demand.
The final giant is Berkshire Hathaway Energy whose earnings have increased 30-fold from the $122 million earned in 2000, the year Berkshire first purchased a stake in BHE. BHE has become a utility powerhouse and a leading force in wind, solar and transmission throughout most of the United States. BHE reported revenues charged ahead 19% during 2021 to $25.0 billion. Net earnings rose 13% during the year to $3.5 billion reflecting increased earnings from most of the energy business units and the real estate brokerage business. Earnings growth was led by 47% growth in natural gas pipelines, reflecting an acquisition; 23% growth in Northern Powergrid; and 20% growth at PacifiCorp.
Berkshire’s Manufacturing businesses reported revenues rose 16% to $68.7 billion with operating earnings up 23% to $9.8 billion for the year. The Consumer Products segment led the way for the year with revenues rising 28% to $15.6 billion and operating earnings gaining 42% to $2.0 billion, driven by strong results at Forest River due to robust demand for recreational vehicles, along with strong rebounds in the apparel, footwear, Richline and Larson-Juhl businesses. The Industrial and Buildings products segments also both generated double-digit sales and earnings growth during the year with strong results from Marmon, IMC and Clayton Homes.
Service and Retailing revenues increased 12% during the year to $84.3 billion with pre-tax earnings up 64% to $4.7 billion. Service group revenue increased 29% with pre-tax earnings up 67% thanks to strong growth from TTI, reflecting accelerating demand across all electronic component markets, and the aviation business services due to higher training hours at FlightSafety and significantly higher customer flight hours at NetJets. Retailing group revenues rose 20% during the year to $19 billion with pre-tax earnings up 76% to $1.8 billion thanks to strong demand for home furnishings from the home retailers and new and pre-owned vehicle sales at Berkshire Hathaway Automotive, although the second half saw new vehicle unit sales decline 18% reflecting the shortages in the industry attributable to the global computer chip shortages and other supply disruptions. McLane’s revenues increased 6% during the year to $49.5 billion with pre-tax earnings down 8% to $230 million. McLane’s operations have been adversely impacted by supply chain disruptions, including shortages of truck drivers, which is affecting inventory and customer deliveries along with higher fuel costs. This difficult operating environment is expected to continue in 2022.
Berkshire’s balance sheet continues to reflect very significant liquidity and a very strong capital base of $506.2 billion as of 12/31/21. Excluding railroad, energy and utility investments, Berkshire ended the year with $528.4 billion in investments allocated approximately 66.4% to equities ($350.7 billion), 3.1% to fixed-income investments ($16.4 billion), 3.3% to equity method investments ($17.4 billion), and 27.2% in cash and equivalents ($143.9 billion).
Free cash flow dipped 2% during the year to $26.1 billion. During the year, capital expenditures approximated $13.3 billion, which included $9.5 billion for BNSF and BHE, its railroad and utility and energy units. Berkshire expects capital expenditures in 2022 for BNSF and BHE to jump to $11.1 billion. Buffett noted in the annual report that Berkshire owns and operates more U.S.-based infrastructure assets--property, plant and equipment—than any other American corporation, topping $158 billion as of 12-31-21.
During the year, Berkshire sold or redeemed a net $35 billion in Treasury Bills and fixed-income investments and sold a net $7.4 billion of equity securities.
Berkshire repurchases its shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett and Charlie Munger. During the year, Berkshire repurchased $27 billion of its common stock including $6.9 billion in the fourth quarter. These repurchases included 6,259,164 Class B shares acquired at an average price of $287.62 per share and 1,828 Class A shares purchased at an average price of $439,626 per share during December 2021. After quarter end, Berkshire has acquired about $1.2 billion in additional shares of its common stock. During the past two years, Berkshire has repurchased 9% of the shares that were outstanding at year-end 2019 for $51.7 billion. This has enabled continuing shareholders to own about 10% more of all Berkshire Hathaway’s great businesses, including GEICO, Burlington Northern and Berkshire Hathaway Energy.
In the annual report, Warren Buffett discussed the three ways Berkshire Hathaway increases shareholder value. The primary way is to increase the long-term earnings power of Berkshire’s controlled businesses through internal growth or by making acquisitions. The second way is to buy stakes in publicly traded great businesses, like Berkshire’s 5.55% stake in Apple. The final path to value creation is to repurchase Berkshire shares when the price/value equation is right, which is the path Berkshire followed in 2021 given the dearth of attractive opportunities among the first two routes.
Wednesday, Feb. 23, 2022
The TJX Companies-TJX reported fourth quarter sales increased 27% to $13.9 billion with net income and EPS both up over 100% to $940.2 million and $.78, respectively. Overall, open-only comp store sales increased 10%, compared to fiscal 2020. HomeGoods and Marmaxx both had double-digit fourth quarter comp store sales in the U.S. compared to Fiscal 2020. TJX Canada and TJX international’s fourth quarter net sales and open-only comp store sales were both negatively impacted by government-mandated shopping restrictions throughout the quarter. For the full year, revenues increased 16% to $48.5 billion with net income and EPS each relatively flat at $3.3 billion and $2.70, compared to 2020. TJX generated a solid 55% return on shareholders’ equity for the year. Stores were closed for approximately 4% of Fiscal 2022 and 24% of Fiscal 2021 due to the pandemic. The company estimates that these closures may have resulted in approximately $1.45 to $1.61 billion in lost sales. During the year, TJX’s free cash flow decreased 50% to $2 billion as the company curtailed store openings in Fiscal 2021, due to the pandemic. However, the company still returned an impressive $3.4 billion to shareholders through share repurchases and dividends. The company ended the year with $6.2 billion in cash and announced a 13% increase to the quarterly dividend at a rate of $.295 per share. In addition, TJX announced that they plan to repurchase approximately $2.25 to $2.50 billion of its common stock during Fiscal 2023. For the first quarter of 2023, the company expects comparable store sales to be up 1% to 3% with EPS to be in the range of $.58 to $.61. For the full year, TJX expects comparable store sales to be up 3% to 4% and is not providing EPS guidance given the current uncertainty around how long elevated expense pressures may persist.
Booking Holdings-BKNG booked a 141% increase in fourth quarter revenues to $3.0 billion with net income of $618 million, or $14.94 per share, compared to a net loss of $165 million, or $4.02 per share, last year. Travel bookings surged 160% to $19.0 billion and room nights booked in the fourth quarter increased 100% from last year as higher vaccination rates and easing of travel restriction spurred travel prior to the spread of Omicron. For the year, Booking Holdings reported revenues of $11.0 billion, up 61% from last year, with net earnings of $1.2 billion, or $28.17 per share, compared to $59 million, or $1.44 per share, reported last year. Despite COVID-related challenges, Booking Holdings generated an impressive 18.9% return on shareholder equity during 2021 and $2.5 billion in free cash flow with the company returning $163 million to shareholders via share repurchases during the year. Leadership expects to complete its current share repurchase authorization during the next three years. Booking ended the year with $11.0 billion in cash, $8.9 billion in long-term debt and $6.2 billion in shareholders’ equity on its solid balance sheet. During the fourth quarter, Booking Holdings completed its $1.2 billion Getaroom acquisition and will roll it into the Priceline brand to improve B2B distribution for hotel partners while offering a robust technology stack for affiliate partners. Booking also announced the €1.63 billion acquisition of the Etraveli Group to build a frictionless global flights app as part of its Connected Trip vision. Glenn Fogel, Chief Executive Officer of Booking Holdings stated, "I am encouraged by the meaningful improvement in bookings we have seen so far in the first quarter of 2022. I believe we are well positioned as travel demand recovers, however, we do expect there will still be periods where COVID negatively impacts travel trends as we move through the year. As we look ahead to 2022, we remain focused on driving benefits to our traveler customers and to our supply partners alike while executing against our strategic priorities including building towards our Connected Trip vision."
Friday, Feb. 18, 2022
For 2022, Intel-INTC expects revenue of $76 billion, EPS of $3.55 and net capital expenditures of approximately $27 billion. Adjusted free cash flow is expected to be negative $1 billion to $2 billion as the company ramps its investments to accelerate long-term growth. Longer term, Intel expects year-over-year revenue growth moving to the mid- to high-single digits in 2023 and 2024, with year-over-year growth ramping to 10%-12% by 2026. As Intel’s investments begin to deliver faster growth, gross margins are expected to expand from the 51%-53% range over the next three years to 54%-58% in 2025 and 2026.
Thursday, Feb. 17, 2022
Genuine Parts-GPC reported fourth quarter sales increased 13% to $4.8 billion with net income from continuing operations increasing 49% to $255.9 million and EPS jumping 52% to $1.79. On an adjusted basis, EPS was up 17.8% in the fourth quarter. For the full year 2021, revenues increased 14% to $18.8 billion with net income from continuing operations and EPS both up more than 450% to $898.7 million and $6.27, due to prior year results being negatively impacted by the pandemic. Return on shareholders’ equity was an impressive 26% for the year. Automotive sales represented 66% of total sales in 2021 with industrial sales accounting for 34% of sales. Free cash flow was down 46% during the year to $992 million, primarily due to a benefit of the sale of accounts receivables and lower capital expenditures in the prior year. During the year, the company paid $465.6 million in dividends and repurchased $333.6 million of its common stock. Genuine Parts ended the year with $714.7 million in cash and cash equivalents, $2.4 billion in long-term debt and $3.5 billion in shareholders’ equity on its strong balance sheet. Genuine Parts announced a 10% increase in its dividend for 2022 to an annual rate of $3.58 per share, marking the 66th consecutive year of increased dividends. The company has paid a dividend every year since going public in 1948 with the dividend currently yielding a solid 2.3%. Genuine Parts expects 2022 sales growth of 9% to 11% with EPS in the range of $7.45 to $7.60. Cash flow from operations is expected in the range of $1.5 billion to $1.7 billion with free cash flow expected to be in the range of $1.2 billion to $1.4 billion for the year.
Baxter International-BAX reported fourth quarter revenues rose 10% to $3.5 billion with net income and EPS each up a healthy 42% to $238 million and $.47, respectively. For the full 2021 year, revenues increased 10% to $12.8 billion with net income up 17% to $1.3 billion and EPS up 19% to $2.53. These results included 19 days of contributions from the Hillrom acquisition. Amid the pandemic and global supply disruptions, these were solid financial results and reflect the sustained and strong demand for the company’s medically essential products. Free cash flow increased 27% during the year to $1.5 billion with the company returning $1.1 billion to shareholders through dividends of $500 million and share repurchases of about $600 million. In 2022, Baxter expects to moderate its share repurchases as it focuses on repaying debt related to the Hillrom acquisition. In 2022, Baxter expects sales growth of 24% to 25%, including the Hillrom acquisition. Operational sales growth is expected to approximate 4% with EPS expected in the range of $2.91-$3.01, representing 15% -19% growth.
NVR, Inc.-NVR announced that its Board of Directors has authorized the repurchase of $500 million of its outstanding common stock. The company indicated that the authorization is a continuation of the stock repurchase program that began in 1994 and is consistent with NVR's strategy of maximizing shareholder value.
Wednesday, Feb. 16, 2022
Cisco Systems-CSCO reported fiscal second quarter revenues rose 6% to $12.7 billion with the company routing up strong earnings with net income up 17% to $3.0 billion and EPS up 18% to $.71. Continued robust demand for Cisco’s products and services resulted in the third consecutive quarter of more than 30% total product order growth. This strong growth is driven by the digital transformation for customers with the move to hybrid work and hybrid cloud environments. Cisco ended the quarter with a record backlog that doubled from last year to $14 billion. The company also posted double-digit growth in annualized recurring revenue of $21.9 billion. Free cash flow declined 16% during the first half to $5.9 billion in part due to a tax payment that had been deferred. During the first half, Cisco paid $3.1 billion in dividends and repurchased $5.1 billion of its stock, including 82 million shares in the second quarter at an average cost of $58.36 per share. Cisco announced a 3% increase in its dividend and a new $15 billion share buyback authorization, bringing its total buyback authorization to $18 billion. The dividend increase and additional share buyback program reflects management’s commitment to returning excess cash to shareholders and confidence in the company’s ongoing strong cash flows. For fiscal 2022, Cisco expects revenue growth of 5.5%-6.5% with EPS expected in the range of $2.83-$2.92, representing 13%-17% growth over last year.
Tuesday, Feb. 15, 2022
Intel Corporation-INTC and Tower Semiconductor, a leading foundry for analog semiconductor solutions, announced a definitive agreement under which Intel will acquire Tower for $53 per share in cash, representing a total enterprise value of approximately $5.4 billion. The acquisition significantly advances Intel’s IDM 2.0 strategy as the company further expands its manufacturing capacity, global footprint and technology portfolio to address unprecedented industry demand. The transaction is expected to be immediately accretive to Intel’s non-GAAP EPS and close in approximately 12 months. Intel intends to fund the acquisition with cash from the balance sheet.
Monday, Feb. 14, 2022
Genuine Parts Company-GPC announced a 10% increase in its dividend for 2022 to an annual rate of $3.58 per share. GPC has paid a cash dividend every year since going public in 1948, and 2022 marks the 66th consecutive year of increased dividends paid to shareholders.
3M-MMM announced its 2022 guidance and highlighted its plan for sustainable long-term growth and shareholder value creation. 3M is expecting total sales growth of 1% to 4%, which includes organic sales growth of 2% to 5%, earnings per share (EPS) of $10.15 to $10.65, and robust cash flow. Included in this guidance is an anticipated decline in COVID-19-related disposable respirator demand in 2022, resulting in a headwind to organic growth of 2 percentage points and earnings per share of 45 cents. The company also said it expects $7.3 billion to $7.9 billion in operating cash flow in 2022, contributing to 90% to 100% free cash flow conversion. In 2022, 3M plans to invest approximately $4 billion in the combination of research and development and capital expenditures.
Benteler EV Systems, Beep Inc., and Mobileye, an Intel-INTC Company, announced a strategic collaboration to develop and deploy automotive-grade, fully electric, autonomous movers in public and private communities across North America. Aimed at first- and last-mile use cases in urban areas, the shuttles are due to begin production deployments in the United States in 2024.
Thursday, Feb. 10, 2022
Mastercard-MA SpendingPulse, which measures in-store and online retail sales across all forms of payment, jumped 7.2 percent year-over-year — and was buttressed by a 10.4 percent gain in online sales. “Despite the shadow of Omicron and elevated inflation, consumer spending was buoyed by pent-up savings, wage growth and the continued reopening of the ‘experience economy,'” Mastercard said in a statement. “Beneficiaries included department stores, apparel and luxury, which all saw double-digit growth.” January apparel sales rose 37.6 percent — which the company said was “the strongest growth rate for January in SpendingPulse history.”
PepsiCo-PEP reported fourth quarter revenues rose 12% to $25.2 billion with operating profit down 9% to $2.5 billion, reflecting higher commodity, transportation and labor costs. Fourth quarter net income and EPS each dropped 28% to $1.3 billion and $.95, respectively. For the full 2021-year, revenue rose 13% to $79.4 billion with operating profit up 11% to $11.1 billion. Full year 2021 net income and EPS each increased 7% to $7.6 billion and $5.49, respectively. Organic revenue growth accelerated to 9.5% for the full year with revenue growth broad-based across business segments and geographies as the company increased its brand support, strengthened operational execution and built a more sustainable food system. Return on shareholders’ equity during 2021 was a tasty 48%. Free cash flow increased 10% during the year to $6.9 billion, with the company returning $5.9 billion to shareholders through dividend payments of $5.8 billion and share repurchases of $106 million. For fiscal 2022, the company expects a 6% increase in organic revenue, an 8% increase in constant currency EPS growth and total cash paid to shareholders of approximately $7.7 billion through dividend payments of $6.2 billion and share repurchases of $1.5 billion. PepsiCo announced a 7% increase in its annualized dividend to $4.60, representing the 50th consecutive year of dividend increases. In addition, PepsiCo announced a new share repurchase program providing for the repurchase of up to $10 billion of PepsiCo common stock through February 28, 2026. In the first quarter of 2022, PepsiCo completed its previously announced divestiture of Tropicana, Naked and other select juice brands and expects to record a non-core pre-tax gain of approximately $3 billion as a result of this transaction.
Tuesday, Feb. 8, 2022
The 3M-MMM Board of Directors increased its quarterly dividend 1% to $1.49 per share for the first quarter of 2022. 3M has paid dividends to its shareholders without interruption for more than 100 years. 3M has returned over $14 billion to shareholders through dividends and share repurchase over the last three years. Returning value to shareholders remains a priority for the company as it moves forward.
T.Rowe Price Group-TROW announced that its Board of Directors has declared a quarterly dividend of $1.20per share payable March 30, 2022, to stockholders of record as of the close of business on March 15, 2022. The quarterly dividend rate represents an 11.1% increase over the previous quarterly dividend rate of $1.08per share. This will mark the 36th consecutive year since the firm's initial public offering that the company will have increased its regular annual dividend.
In other news, T, Rowe Price reported preliminary month-end assets under management of $1.58 trillion as of January 31, 2022, which was 6.5% decline from year end.
Friday, Feb. 4, 2022
Roche Holdings-RHHBY reported 2021 sales increased 8% to CHF 62.8 billion with net income dipping 1% CHF 14.9 billion and EPS declining 2% to CHF 16.20. Excluding one-time items, core EPS increased 3% to CHF 19.81. By business segment, Pharmaceutical Division sales increased 3% to CHF 45.0 billion as rapid growth in prescriptions for new drugs, such as Hemlibra to treat haemophilia and cancer immunotherapy Tecentriq, offset a CHF 4.5 billion sales headwind from biosimilars. Exposure to biosimilar headwinds is decreasing sharply with CHF 2.5 billion expected for 2022. Diagnostic Division sales jumped a healthy 29% to CHF 17.8 billion on continued strong demand for rapid antigen tests as well as lab-processed PCR tests. Roche has benefited from the tight labor market for qualified lab personnel as its platforms are much more automated than competing platforms. During 2021, Roche generated a stellar 56.9% return on shareholders’ equity and CHF 17.3 billion in free cash flow with the company paying dividends of CHF 8.1 billion. The company announced a 2% increase in the dividend to CHF 9.30 per share, marking the 35th year of consecutive dividend increases. Further, in December, Roche repurchased CHF 19 billion of its voting shares owned by Novartis. Roche ended the year with CHF 13.0 billion in cash and marketable securities, CHF 16.0 billion in long-term debt and CHF 24.5 billion in shareholders’ equity on its healthy balance sheet. Looking ahead to the full year 2022, Roche expects sales to be flat to up low-single digits, core EPS up low-to mid-single digits (including accretion of 4.4% from the share repurchase) and another dividend increase. Roche's pipeline remains robust with a record number of phase III study readouts expected in 2022.
Regeneron-REGN reported fourth quarter sales more than doubled to $5 billion with net income and EPS each up more than 90% to $2.2 billion and $19.69, respectively. These results included $2.3 billion in revenue attributable to REGEN-COV, the company’s antibody cocktail for COVID-19. Excluding those sales, revenues increased 17% for the quarter. For the full year 2021, revenues increased 89% to $16.1 billion with net income and EPS each up more than 130% to $8.1 billion and $71.97, respectively. Excluding REGEN-COV sales, revenues were still up a healthy 19% for the year thanks to impressive growth from core products, EYLEA and Dupixent. Regeneron generated a strong 43% return on shareholders’ equity in 2021. Free cash flow more than tripled to $6.5 billion during the year primarily due to the company’s collection of amounts due from the U.S. government in connection with REGN-COV sales. The company repurchased $1.5 billion of its common stock during the year and authorized a new $3 billion share repurchase program during the fourth quarter. Given the lack of efficacy of REGEN-COV against the Omicron variant, REGEN-COV is no longer authorized for use in the United States. Regeneron is working to develop next generation antibodies that will be active against Omicron and all other variants of concern. In addition, Regeneron has over 30 product candidates in clinical development. The company’s R&D engine is supported by the company’s strong balance sheet with more than $12.5 billion in cash as of year end to position the company for sustainable long-term growth.
Fastenal-FAST reported January net sales increased 21% to $540.5 million with daily sales up 15% to $25.7 million. Double-digit growth was seen in all geographies, end markets and product lines. Daily sales growth by end market was 21% for manufacturing and 13% for non-residential construction. Daily sales growth by product line was 21% for fasteners, 13% for safety and 11% for other products.
Thursday, Feb. 3, 2022
Maximus-MMS reported first fiscal quarter revenue rose 22% to $1.2 billion, driven by acquisitions and growth from start up operations outside of the U.S., with net income and EPS each down 17% to $53.3 million and $.85, respectively. The company expected lower earnings in the first half of fiscal 2022 due to delays in core programs returning to pre-pandemic levels while COVID-19 response work declined. In addition, upfront losses for the start up of operations outside of the U.S. will continue to ramp in the second quarter and reach breakeven at the midpoint of fiscal 2022. During the first quarter, Maximus used free cash flow of $9.2 million as anticipated to meet working capital requirements. Year-to-date signed contract awards at Dec. 31, 2021, totaled $454 million and contracts pending (awarded but unsigned) totaled $1.16 billion. The sales pipeline as of 12/31/21 was $33.2 billion comprised of approximately $8.9 billion in proposals pending, $2.4 billion in proposals in preparation and $21.8 billion in opportunities tracking. Maximus increased its revenue guidance for fiscal year 2022 with revenue now expected to range between $4.5 billion and $4.7 billion with EPS expected in the range of $4.00-$4.30 and free cash flow expected in the range of $225 million to $275 million, representing a 5%-6% free cash flow yield.
Check Point Software-CHKP reported fourth quarter revenue rose 6% to $599 million with net income decreasing 4% to $260 million and EPS up 2% at $1.98. Subscription revenue increased 14% to $204 million. Check Point began 2022 with multiple new initiatives to help drive growth and continue to improve their security. Check Point expanded their CloudGuard offering with the acquisition of Spectral, the fifth cloud acquisition for the company. In addition, they expanded their Salesforce, new record-breaking appliance series for the datacenter- Quantum Lightspeed and introduced a new logo and branding. For the full 2021 year, revenues rose 5% to $2.16 billion with net income down 4% to $816 million and EPS up 2% to $6.08. Return on shareholders’ equity for the year was a strong 25%. Free cash flow increased 3% to $1.16 billion during the year with the company repurchasing 10.9 million shares of its common stock during the year for $1.3 billion or an average price of about $119 per share. Check Point announced a $2 billion expansion to the share repurchase program with an authorization to repurchase up to $325 million each quarter. Check Point ended the year with an outstanding balance sheet with nearly $3.8 billion of cash and investments, no long-term debt and shareholders’ equity of $3.2 billion. For fiscal 2022, revenues are expected to increase to a range of $2.2 billion to $2.3 billion with EPS expected in a range of $6.90 to $7.50.
Wednesday, Feb. 2, 2022
Meta Platforms-FB (formerly Facebook) reported fourth quarter revenues increased 20% to $33.7 billion with net income declining 8% to $10.3 billion and EPS off 5% to $3.57. In the fourth quarter, ad impressions delivered across the Meta’s Family of Apps increased 13% and the average price per ad increased by 6%. Fourth quarter results were negatively impacted by increased litigation expenses. For the full year, Meta reported revenues increased 37% to a record $117.9 billion with net income jumping 35% to $39.4 billion and EPS increasing 36% to $13.77. These results include a $10.1 billion loss from the company’s Reality Labs, which includes augmented and virtual related consumer hardware, software and content, as the company invests in the metaverse, the immersive Internet. Return on shareholders’ equity was a likable 31.5% for the year. For the full year, impressions increased by 10% and the average price per ad increased 24%. Facebook daily active users increased 5% during the year to 1.93 billion while monthly active users increased 4% to 2.91 billion. Free cash flow increased 66% during the year to $39 billion after spending $19.2 billion on capital expenditures. Meta repurchased $44.5 billion of its stock during the year and has $38.8 billion authorized for future share repurchases. Meta ended the year with $48 billion in cash and investments, no long-term debt and $124.9 billion in shareholders’ equity on its fortress balance sheet. Headcount increased 23% during the year to 71,970. Meta expects first quarter revenue to be in the range of $27-$29 billion, representing 3%-11% growth. Growth is expected to be impacted by both impression and price growth. On the impression side, Meta expects continued headwinds from increased competition, such as TikTok, and a shift of engagement within the company’s apps towards video surfaces like Reels, which currently is monetizing at lower rates than Feed and Stories. On the pricing side, Meta will be lapping Apple’s iOS changes related to privacy which make it harder for the company to target and measure advertising for customers especially small businesses. Meta expects this to be a $10 billion headwind in e-commerce and gaming. In addition, customers are facing macroeconomic challenges due to inflationary pressures which are impacting their advertising budgets. Finally, foreign exchange headwinds will also impact growth. In 2022, Meta expects total expenses to increase to the $90-$95 billion range with capital expenditures expected in the range of $29-$34 billion, driven by investments in data centers, servers, network infrastructure and office facilities. Meta will change its stock ticker symbol from FB to META in the first half of 2022.
Cognizant Technology Solutions-CTSH reported fourth quarter revenues increased 14% to $4.8 billion with net income and EPS increasing more than 80% to $576 million and $1.10, respectively. Excluding one-time items, EPS increased 64%. Digital revenue increased 20% and now represents 45% of total revenue. By business segment, Financial Resources increased 19% to $1.55 billion driven by improving demand in both banking and insurance, Healthcare increased 8% to $1.4 billion led by life sciences, Products & Resources increased 18% to $1.1 billion on strong demand from manufacturing, logistics, energy and utilities and Communications, Media and Technology increased 13% to $744 million on continued strong demand from technology. Bookings grew 22% year-over-year, resulting in full-year bookings of $23.1 billion, representing a book-to-bill of about 1.2x. During the fourth quarter, Cognizant generated $825 million in operating cash flow and $760 million in free cash flow. Cognizant also announced a 12% increase in its quarterly dividend to $0.27 per share. For 2021, Cognizant reported revenues of $18.5 billion, up 11% from 2020, with net income and EPS increasing more than 50% to $2.1 billion and $4.05, respectively. During 2021 Cognizant generated a solid 17.8% return on shareholders’ equity and $2.2 billion in free cash flow with the company returning $1.3 billion to shareholders through dividends of $509 billion and share repurchases of $771 million. Cognizant ended the year with $2.7 billion in cash, $626 million in long-term debt and $12 billion in shareholders’ equity on its pristine balance sheet. Looking ahead to 2022, management expects revenues in the range of $20.0 billion to $20.5 billion, up 8% to 11% from last year, with adjusted EPS in the range of $4.46 to $4.60, up 10% at the midpoint.
Tuesday, Feb. 1, 2022
Starbucks-SBUX reported first fiscal quarter sales increased 19% to $8.1 billion with net earnings increasing 31% to $815.9 million and EPS up 30% to $0.69. Global comparable store sales increased 13%, driven by a 10% increase in comparable transactions and a 3% increase in average ticket. Americas comparable store sales increased 18%, primarily driven by a 12% increase in comparable transactions and a 6% increase in average ticket. International comparable store sales decreased 3%, driven by a 5% decline in average ticket, partially offset by a 2% increase in comparable transactions. The company opened 484 net new stores during the quarter and ended the quarter with a record 34,317 stores, of which 51% and 49% were company operated and licensed, respectively. Operating margins increased from 13.5% to 14.6% year-over-year, primarily driven by sales leverage from business recovery and the lapping of COVID-19 related costs in the prior year. During the quarter, Starbucks generated $1.45 billion in free cash flow and returned approximately $4.1 billion to shareholders through dividend payments of $576 million and share repurchases of $3.5 billion. Starbucks ended the quarter with over $4 billion in cash and short-term investments and $13.5 billion in long-term debt. Starbucks is providing fiscal year 2022 guidance, expecting EPS to decline 4% to 6%, revenue in the range of $32.5 billion to $33 billion, global comparable store sales growth in the high single-digits and expects to open approximately 2,000 new stores. “Although demand was strong, this pandemic has not been linear, and the macro environment remains dynamic as we experienced higher-than-expected inflationary pressures, increased costs due to Omicron and a tight labor market. We remain focused on actions that drive both top and bottom line growth, including industry-leading investments to attract, train and retain the best talent for our stores as customer occasions increase,” said Kevin Johnson, President and CEO.
NVR, Inc.-NVR reported fourth quarter revenues decreased 5% to $2.2 billion with net income increasing 10% to $334.5 million and EPS up 16% to $89.09. New orders increased by 4% during the quarter to 5,685 units. The average sales price of new orders increased by 14% to $454,900. The cancellation rate in the fourth quarter was 10% compared to 12% in the prior year period. Settlements decreased 16% during the quarter to 5,100 units. The backlog of homes sold but not settled as of December 31, 2021 increased on a unit basis by 10% to 12,730 units and increased on a dollar basis by 26% to $5.78 billion year-over-year. Mortgage loan closings decreased 11% to $1.48 billion during the quarter. For the full year, revenues rose 19% to $8.97 billion, with net income increasing 37% to $1.24 billion and EPS up 39% to $320.48. Return on shareholders’ equity was a strong 41% in fiscal 2021. During the year, the company repurchased 322 million shares for an average price of $4,776 per share and ended the year with $2.5 billion in cash, $1.5 billion in long-term debt and $3 billion in shareholders’ equity on its sturdy balance sheet.
Alphabet-GOOGL reported fourth quarter revenues clicked ahead 32% to $75.3 billion with net income up 37% to $20.6 billion and EPS up 38% to $30.69. Google advertising revenues increased 33% to $61.2 billion, propelled by a 36% increase in Google Search to $43.3 billion, a 25% increase in YouTube ads to $8.6 billion and a 26% increase in Google Network to $9.3 billion. Total TAC (traffic acquisition costs) increased 28% to $13.4 billion and represented 21.9% of advertising revenue, down 80 basis points from last year. Google Services operating income increased 36% to $26 billion, representing nearly 38% Google Services revenue. Google Cloud revenue increased 45% to $5.5 billion and generated a $890 million loss as the company continues to invest heavily in people and its cloud infrastructure. For the year Alphabet reported revenues of $257.6 billion, up 41% from 2020, with net income of $76.0 billion, up 89%, and EPS of $112.20, up 91%. During 2021, Alphabet generated operating cash flow of $91.7 billion and free cash flow of $67.0 billion with the company returning $50 billion to shareholders through share repurchases. Alphabet ended the quarter with nearly $140 billion in cash, $14.8 billion in long-term debt and $251.6 billion in shareholders’ equity on its pristine balance sheet. The company announced a 20 for 1 stock split in the form of a one-time special stock dividend. If approved by shareholders, the shares will be distributed on July 15, 2022.
UPS-UPS delivered excellent fourth quarter results with revenues increasing 11.5% to $27.8 billion and adjusted net income and EPS increasing more than 35% to $3.2 billion and $3.59, respectively. Fourth quarter revenues were fueled by an 11% increase in average revenue per piece, driven by the company’s shift to its “better not bigger” strategy focusing on serving its more profitable small-to-medium business (SMBs) customers, who now account for 26.8% of total U.S. volume, just shy of the 30% 2023 target. UPS maintains a “great relationship” with Amazon which accounted for 11.7% of total 2021 revenue compared with 11.6% in 2019. For the year, UPS reported a 15% increase in revenues to $97.3 billion with adjusted net income and EPS increasing more than 47% to $10.7 billion and $12.13, respectively. Operating margin increased 320 basis points to 13.5%, the highest in 14 years, while return on invested capital expanded 910 basis points to 30.8%. During 2021, UPS generated $15.0 billion in operating cash flow and $10.8 billion in free cash flow with the company returning $3.9 billion to shareholders through dividend payments of $3.4 billion and share repurchases of $500 million. After paying down $2.8 billion if its long-term debt, UPS ended the year with $10.6 billion in cash, $19.8 billion in long-term debt and $14.3 billion in shareholders’ equity. UPS announced a historic 49% increase in the quarterly dividend to $1.52, moving toward its goal of returning 50% of adjusted EPS to shareholders through dividend payments. Despite continued challenges from inflation, labor shortages, supply chain constraints and COVID, UPS expects to meet its 2023 targets in 2022. UPS expects to deliver $102 billion in 2022 revenues with operating margins of 13.7% and return on invested capital exceeding 30%. The company will invest about 5.4% of revenue in capital expenditures with 60% targeted for growth projects and 40% for maintenance of its existing infrastructure. UPS expects to return $5.2 billion to shareholders through dividend payments in 2022 and at least $1 billion through share repurchases.
Friday, Jan. 28, 2022
Gentex-GNTX reported fourth quarter net sales decreased 21% to $419.8 million, with net income and EPS falling 40% to $84.1 million and $0.35, respectively. The Company's revenue during the quarter was impacted by a 20% quarter over quarter reduction in light vehicle production in the Company's primary markets of North America, Europe, Japan and Korea. During the quarter, the electronics component shortages primarily impacted the Company's ability to meet customer demand for Full Display Mirror® (FDM), Integrated Toll Module (ITM), and other advanced feature unit shipments. For the full year, Gentex reported sales increased 3% to $1.73 billion with net income increasing 4% to $360.8 million and EPS up 6% to $1.50. Gentex shipped 1.123 million units of its Full Display Mirror® during 2021, a 7% increase compared to 2020, despite a 3% decline in global light vehicle production. In 2021, Gentex generated an 18.6% return on shareholders’ equity. During 2021, Gentex returned $439.9 million to shareholders through dividend payments of $115.3 million and share repurchases of $324.6 million at an average price of $33.81 per share. The company ended 2021 with $475 million in cash and investments, no long-term debt and $1.9 billion in shareholders’ equity on its shiny balance sheet. In 2022, Gentex expects revenue in the range of $1.87 billion to $2.02 billion with 2023 revenue growth of approximately 15% to 20% above the 2022 revenue guidance. “The fourth quarter of 2021 brought the perfect storm of lower revenue, significantly higher material costs, higher shipping costs, and higher labor costs and inefficiencies that negatively impacted gross margins more than we originally forecasted,” said Steve Downing, President and CEO. "While many of these headwinds will continue into the first half of 2022, we believe we have the ability to offset some of the impacts to gross margin as we move throughout the year," said Downing.
Thursday, Jan. 27, 2022
Apple-AAPL reported strong first fiscal quarter results with revenues up 11.2% to a record $123.9 billion and net income jumping a shiny 19.5% to $34.6 billion with EPS up 25% to $2.10. Gross margin expanded 160 basis points to 43.8% thanks to volume leverage and favorable product mix. Apple racked up record sales across geographies, led by 21% growth in China, and record product and service revenues, led by 25% growth in Mac and 24% growth in Services. iPhone sales rose 9% to $71.6 billion thanks to strong demand for the new iPhone 13. The exceptions to these superb results were a decline in sales during the quarter in Japan and in the iPad, which was severely supply constrained. Supply constraints are easing and should be less in the March quarter. Apple’s active installed base of devices increased to a record 1.8 billion. Paid subscriptions to Apple’s many services increased to 785 million, an increase of 165 million in the last 12 months. Free cash flow during the quarter increased 25% to a record $44.2 billion with the company paying $3.7 billion in dividends and repurchasing $20.5 billion of its common stock during the quarter. Apple ended the quarter with a fortress balance sheet with more than $202 billion in cash and investments, $106.6 billion in long-term debt and $71.9 billion in shareholders’ equity. Apple expects a solid second quarter with record revenues as Services are expected to grow at a double-digit rate. Gross margin is expected in the 42.5%-43.5% range with operating expenses of $12.5 billion to $12.7 billion and a tax rate of 16%.
Stryker Corporation-SYK reported fourth quarter sales increased 10.3% to $4.7 billion with reported earnings and EPS increasing 16% to $662 million and $1.73, respectively. For 2021, Stryker’s sales increased 19% to $17.1 billion with net earnings and EPS jumping 24% to $1.9 billion and $5.21, respectively. By segment, MedSurg and Neurotechnology increased 8.7% to $2.6 billion, and Orthopedics and Spine increased 12.5% to $2.1 billion. During 2021, Stryker generated a 13.4% return on shareholders’ equity and over $2.7 billion in free cash flow. The company returned $950 million in cash to shareholders in 2021 through dividend payments. Stryker ended the year with $3 billion in cash and investments, $12.4 billion in long-term debt and $14.8 billion in shareholders’ equity on its sturdy balance sheet. In 2022, management expects organic net sales growth of 6% to 8% and adjusted EPS of $9.60 to $10.00. Management believes the short-term outlook remains volatile. However, Stryker is going to continue to monitor and evaluate the impact the global response to the COVID-19 pandemic has had, and will continue to have, on their operations and financial results. "We delivered a strong year of financial results, despite the ongoing challenges of the pandemic," said Kevin Lobo, Chair & Chief Executive Officer. "Organic sales growth of over 7% versus 2019, coupled with double-digit adjusted EPS growth and excellent cash flow performance were all noteworthy achievements, as was the excellent integration of Wright Medical. We continue to be well-positioned for future growth."
Visa-V reported first quarter revenues rose 24% to $7.1 billion with net earnings charging ahead 27% to $4.0 billion and EPS up 29%. The strength of Visa’s network, growth in e-commerce, better than expected progress in the return of cross-border travel and a continuation of the recovery all contributed to the terrific results. Key business drivers during the quarter included a 20% increase in payments volume, a 40% jump in cross-border volume thanks to the loosening of border restrictions and a 21% increase in processed transactions. During the quarter, Visa generated $4.2 billion in operating cash flow and $4.1 billion in free cash flow with the company returning $4.9 billion to shareholders through dividend payments of $809 million and share repurchases of $4.1 billion at an average cost per share of $210.05. During the quarter, Visa announced a 17% increase in the quarterly dividend to $0.375 per share and added $12 billion to the company’s share repurchase program, bringing the current authorization to $12.6 billion. Visa ended the quarter with $18.0 billion in cash and investments, $17.7 billion in long-term debt and $36.2 billion in shareholders’ equity on its sturdy balance sheet. Looking ahead, management does not believe the current surge in the pandemic will curtail the recovery. It sees economies around the world continuing to improve and, as restrictions are lifted, continued recovery in cross-border travel. Net, net Visa benefits from inflation as ticket prices increase, Visa’s fees increase. Wage inflation appears reasonable from the company’s perspective. Leadership remains confident the company is well-positioned, via its multi-pronged growth strategy, to deliver strong, sustainable growth well into the future. For the full 2022 fiscal year, management expects revenue growth at the high end of the mid-teens range and for the pace to continue through fiscal 2023.
T. Rowe Price-TROW reported fourth quarter revenues increased 13.2% to $1.96 billion with net earnings declining 5.5% to $740.6 million and EPS down 4.5% to $3.18. Excluding non-recurring items in 2021 and 2020, net earnings increased 8.3% to $736 million and EPS increased 9.7% to $3.17. T. Rowe ended the quarter with $1.69 trillion assets under management, up nearly 15% from the third quarter, reflecting $46.9 billion in AUM from the Oak Hill Advisors (OHA) acquisition, $57.3 billion in market appreciation, partially offset by $22.7 billion in net outflows due to redemptions in U.S. equity growth portfolios as investors rebalanced after a period of robust returns. The annualized effective fee was 43.4 basis points during the quarter, down 5% from last year, squeezed by the July target date fund fee reductions, client transfers to lower fee vehicles and lower performance fees. For 2021, T. Rowe reported net revenues of $7.7 billion, up 24% from last year, with net income up 30% to $3.1 billion and EPS up 32% to $13.12. In 2021, T. Rowe generated a superb 33.3% return on shareholders’ equity. Operating cash flow of $3.4 billion represented a robust 1.14% of 2021 net income and free cash flow was $3.2 billion. During 2021, T. Rowe Price returned $2.8 billion to shareholders through the regular dividend, a special dividend and share buybacks of $1.1 billion to repurchase 2.6% of shares outstanding at an average cost of $191.20 per share. In addition, the company used $2.5 billion in cash to fund a portion of the OHA acquisition. T. Rowe’s balance sheet remains strong with over $2 billion in cash and discretionary investments at year end. While management expects investment flows to improve from the fourth quarter, it expects net flows for 2022 will be below the long-term target of 1% to 3% growth.
Tractor Supply–TSCO reported fourth quarter sales increased 15% to $3.3 billion with net income plowing ahead 63% to $221 million and EPS up 68% to $1.93. Comparable store sales increased 12.7%, driven by comparable average ticket growth and comparable average transaction growth of 10.3% and 2.4%, respectively. All geographic regions had comparable store sales growth. In addition, the company’s e-commerce sales experienced strong double-digit growth for the 38th consecutive quarter. The company opened 36 new Tractor Supply stores and one new Petsense store during the quarter, ending the year with 2,003 Tractor Supply Stores and 178 Petsense stores. For the full year, sales increased 19.9% to $12.73 billion with net income up 33% to $997 million and EPS up 35% to $8.61. Comparable store sales increased 16.9% for the full year. During 2021, Tractor Supply delivered a bountiful 49.7% return on shareholders’ equity and generated $510 million in free cash flow, down 54% from last year due to higher capital expenditures. The company returned $1 billion to shareholders through shares repurchases of $798.9 million at an average cost of $181.56 per share and $239 million in dividends. The board authorized a $2 billion increase to its existing share repurchase program, bringing the total amount authorized to date under the program to $6.5 billion. Tractor Supply ended the year with more than $878 million in cash, $986 million in long-term debt and $2 billion of shareholders’ equity on its fertile balance sheet. Reflecting confidence in the business and its bumper crop of cash flows, Tractor Supply increased the quarterly dividend in 2022 by a hefty 77% to $0.92 per share. In 2022, management expects net sales in the range of $13.6 billion to $13.8 billion, on a 3% to 4.5% increase in comparable store sales, and EPS in the range of $9.20 to $9.50. The company plans to repurchase $700 million to $800 million of its shares. In addition, management is expecting capital expenditures of $625 million to $675 million, anticipating opening approximately 75 to 80 new Tractor Supply stores, remodeling more than 150 stores and transforming the side lots in approximately 100 locations, along with opening 10 new Petsense stores. The company also anticipates the opening of its ninth distribution center in the fall of 2022. Tractor Supply provided long-term growth rate targets for fiscal 2022 to fiscal 2026, expecting annual sales growth of 6% to 7+%, comparable store sales growth of 4% to 5+% and EPS growth of 8% to 11+%.
Mastercard-MA reported fourth quarter revenues rose 27% to $5.2 billion with net income charging 33% higher to $2.4 billion and EPS up 35% to $2.41. Spending trends continue to improve with fourth quarter cross-border spending now above pre-pandemic levels. During the fourth quarter, gross dollar volume growth increased 23% to $2.1 trillion on a local currency basis. Cross-border volume jumped 53%. Switched transactions grew 27%. Other revenues increased 30%, including 9% growth from acquisitions with the remaining growth driven by the company’s Cyber & Intelligence and Data and Services solutions. As of 12-31-21, the company’s customers had issued 3 billion Mastercard and Maestro-branded cards. For the full year, 2021, revenues increased 23% to $18.9 billion with net income jumping 35% to $8.7 billion and EPS up 38% to $8.76. Return on shareholders’ equity topped 100% for the year. Free cash flow increased 32% to $9.1 billion with the company paying $1.7 billion in dividends and repurchasing 16.5 million shares of its common stock for $5.9 billion at an average price of about $357.58 per share. Since year end, the company has repurchased an additional $528 million of its stock which leaves $11.4 billion remaining authorized for future share repurchase. Mastercard is optimistic that the pandemic is moving towards an endemic with spending moving in the right direction especially in the travel sector. The company reaffirmed its growth objectives for 2022-2024 with revenues expected to compound at a high teens rate and EPS at a rate in the low 20% range. Operating margins should top 50% during the period.
Wednesday, Jan. 26, 2022
Intel-INTC reported fourth quarter revenues rose 3% to $20.5 billion with net income down 21% to $4.6 billion and EPS down 21% to $1.13. Fourth quarter revenue was led by an all-time record for the Data Center Group with strong server recovery in enterprise and government. The Internet of Things Group had a record quarter, reflecting strong demand on recovery from COVID-19 impacts. The Client Computing Group delivered another $10 billion quarter proving that PCs are more essential than ever. For the full 2021 year, revenues rose 1.5% to a record $79 billion with net income down 4.9% to $19.9 billion and EPS down 1.6% to $4.86. Intel generated a strong 20.8% return on shareholders’ equity for the year. Free cash flow declined 47% during they year to $11.3 billion due to lower earnings and working capital fluctuations. During the year, the company repurchased $2.4 billion of its common stock and paid $5.6 billion in dividends. Intel announced a 5% increase in its dividend for 2022 to $1.46 per share. For the first quarter of 2022, Intel is forecasting $18.3 billion in revenues and EPS of $.70. For the full year, the company sees strong demand across all its businesses tempered by supply constraints. Intel plans to take Mobileye public in mid-2022. Mobileye’s revenues increased 43% in 2021 to $1.4 billion.
SEI Investments Company-SEIC reported fourth quarter revenue increased 13% to $501.7 million with net income increasing 15% to $145 million and EPS up 20% to $1.03 on fewer shares outstanding. Average assets under administration increased 13% from last year to $884.3 billion and assets under management excluding LSV increased 16% to $301.0 billion. During the fourth quarter, SEI generated $149.2 million in operating cash flow, or $1.06 per share, and free cash flow of $138.7 million with the company repurchasing $95.5 million of its shares at an average cost of $62.44 per share. In December, SEI announced an 8% increase in the semi-annual dividend to $0.40 per share and a $200 million increase in the share repurchase authorization bringing the total to $261 million. For 2021, SEI reported sales increased 14% to $1.9 billion with net income up 22% to $546.6 million and EPS jumping 27% to $3.81. SEI generated an impressive 29.4% return in shareholder equity during 2021. SEI ended the year with $825.2 million in cash, $40 million in long-term debt and $1.86 billion in shareholders’ equity on its secure balance sheet. Reflecting on future growth prospects, Alfred West, SEI Chairman and CEO said, “As we continue to connect our markets to their future potential through our technology and investment solutions, we are well-positioned to continue seizing growth opportunities that will lead to increased shareholder value.”
General Dynamics-GD reported fourth quarter revenue dipped 2% during the fourth quarter to $10.3 billion with net earnings down 5% to $952 million and EPS off 1% to $3.39. For the full 2021 year, revenues increased 1.4% to $38.5 billion with net income up 2.8% to $3.3 billion and EPS marching 5% higher to $11.55. The defense segments collectively delivered record revenue and operating earnings for the year that were the highest in the company’s history. Return on shareholders’ equity for the year was a solid 18.4%. Free cash flow increased 17% to $3.4 billion with the company paying $1.3 billion in dividends and repurchasing approximately 10 million shares during the year for $1.8 billion at an average cost of $179 per share. Strong cash performance in all four business segments led to 104% cash conversion of earnings during the year with the company expecting to convert 100% of earnings to cash in 2022, a sign of a high-quality company. General Dynamics reduced debt by $1.5 billion in 2021 and spent $887 million on capital expenditures. Orders remained strong across the company with a consolidated book-to-bill ratio, defined as orders divided by revenue, of 1-to-1. Gulfstream had the highest orders in more than a decade due to “red-hot” demand for the planes with its backlog up 40% to $16.3 billion and a book-to-bill of 1.6-to-1 for the year. General Dynamics is expanding its facilities to help meet the strong demand for its Gulfstream planes. The company plans to deliver 123 planes in 2022, 148 planes in 2023 and 170 in 2024 with operating margins expected to expand by 300 basis points over 2022 levels. Company-wide backlog ended the year at $87.6 billion. For fiscal 2022, General Dynamics expects revenues in the range of $39.2 billion to $39.45 billion with EPS in the range of $12.00-$12.15.
ADP-ADP reported fiscal second quarter revenues increased 9% to $4 billion with net income increasing 7% to $694 million and EPS increasing 9% to $1.65. By business segment, Employer Services revenues increased 6% to $2.7 billion and PEO Services increased 15% to $1.3 billion. Interest on funds held for clients increased 1% to $106 million, average client funds balances increased 28% to $32.2 billion and the average interest yield on client funds decreased 40 basis points to 1.3%. During the first six months of fiscal 2021, ADP generated $1.13 billion in free cash flow, up 3% from last year with the company returning $1.77 billion to shareholders through dividend payments of $787 million and share repurchases of $990 million. ADP ended the quarter with $1.7 billion in cash and cash equivalents, $2.9 billion in long-term debt and $5 billion in shareholders’ equity on its strong balance sheet. Given the better-than-expected year-to-date performance, ADP increased its fiscal 2022 outlook with revenues expected to increase 8% to 9% and EPS expected to grow 11% to 13% as profit margins expand.
F5 Networks – FFIV reported fiscal first quarter revenues increased 10% to $687 million with net income and EPS increasing 7% to $94 million and $1.51, respectively. F5 Networks has delivered five consecutive quarters of double-digit revenue growth. First quarter revenue growth was driven by 19% product revenue growth, which accounted for 50% of total revenues. Services sales increased 2% to $343 million. During the quarter, F5 generated $79.8 million in free cash flow, returning $125 million to shareholders through share repurchases. The company ended the quarter with $859 million in cash and investments, $345 million in long-term debt and $2.4 billion in shareholders’ equity on its weather-resistant balance sheet. While demand for F5 Networks solutions remains robust, the company expects that its ability to meet customers’ continued strong demand for systems will be restricted by supply chain constraints for the remainder of fiscal year 2022. As a result, it expects fiscal second quarter revenue in a range of $610 to $650 million. It further expects fiscal year 2022 revenue growth in the range of 4.5% to 8%, down from its prior expectation of 8% to 9% growth. In addition, the company expects fiscal year 2022 software revenue growth near the top end of its previously provided 35% to 40% guidance range and global services revenue growth of 1% to 2%.
Tuesday, Jan. 25, 2022
Canadian National Railway-CNI reported fourth quarter revenue rose 3% to C$3.7 billion with net income and EPS each chugging more than 17% higher to C$1.2 billion and C$1.69, respectively. During the quarter, CNI had record operating income of C$1.5 billion, an 11% increase year over year. For the full year, revenue increased 5% to C$14.5 billion with net income and EPS up 37% to C$4.9 billion and C$6.89, respectively. Return on shareholders’ equity for the year was a solid 21.5%. Free cash flow increased 2% during the year to a record C$3.3 billion as capital expenditures were curtailed. With management increasingly optimistic about 2022, the company announced plans to invest 17% of revenues in its capital program. For fiscal 2022, Canadian National Railway is targeting to deliver approximately 20% EPS growth and free cash flow of C$4.0 billion. Demonstrating confidence in the long-term financial health of the company, the Board of Directors announced a 19% increase in the dividend, which marks the 26th consecutive year of dividend increases. In addition, the Company’s Board of Directors also approved a new C$5 billion share repurchase program over the next 12 months. CNI has appointed Tracy Robinson as President and CEO, effective February 28, 2022. Tracy brings more than 35 years of operational management, strategy development and project execution experience to help drive growth and profitability at CNI.
Microsoft-MSFT reported strong second quarter results with revenues rising 20% to $51.7 billion with net income growing 21% to $18.8 billion and EPS up 22% to $2.48. Revenue in Business Processes increased 19% to $15.9 billion driven by Office 365 and 37% growth at LinkedIn. Revenue in Intelligent Cloud jumped 26% to $18.3 billion driven by Azure and other cloud services revenue growth of 46%. Revenue in More Personal Computing increased 15% to $17.5 billion with search and news advertising revenue increasing 32%. Commercial bookings grew 32% during the quarter driven by an increase in the number of larger, long-term Azure contracts. Free cash flow during the first half of the year increased 20% to $27.4 billion with the company paying $8.9 billion in dividends and repurchasing $15.1 billion of its common stock. For the third quarter, Microsoft expects revenues in the range of $48.5 billion to $49.3 billion with cost of goods in the range of $15.5 billion and $15.7 billion and operating expenses in the range of $13.1 billion to $13.5 billion. For the full 2022 year, operating margin is expected to expand thanks to good execution in a strong demand environment across the business segments. Digital technology is essential to businesses and consumers. Microsoft is well positioned with innovative and high value products to drive long-term revenue and profit growth.
3M- MMM posted fourth quarter sales that were relatively flat at $8.6 billion due to supply chain challenges with net income and EPS decreasing 4% to $1.3 billion and $2.31, respectively. Total sales declined 2.2% in Safety and Industrial due to a decrease in roofing granules and personal safety. Consumer segment sales increased 4.1%, Health Care sales slightly increased and Transportation and Electronics sales decreased 1.5%. For the full year, 3M reported a 10% increase in sales to $35.4 billion with net income and EPS increasing 8% to $5.9 billion and $10.12, respectively. During 2021, 3M generated a superb 39% return on shareholders’ equity, a healthy 19.5% return on invested capital and robust free cash flow of $5.9 billion. This strong free cash flow enabled the company to reduce net debt by $1.2 billion, pay $3.4 billion in dividends and repurchase $2.2 billion of its own shares during 2021. As previously announced, 3M plans to divest its Food Safety business in 2022. 3M was able to partially offset inflation pressure during the year with pricing actions. The company is seeing the rate of increase in inflation slowing as they enter 2022. Management will provide full-year 2022 guidance on February 14th.
Raytheon Technologies-RTX reported fourth quarter revenues rose 4% to $17 billion with net income and EPS flying over 400% to $686 million and $.46, which included $929 million of acquisition accounting adjustments and net significant and/or non-recurring charges. For the full year 2021, revenues increased 14% to $64.4 billion with net income of $3.9 billion or $2.58 per share compared to a loss in the prior year resulting from the pandemic. Free cash flow increased 97% during the year to $5 billion with the company paying $2.9 billion in dividends and repurchasing $2.3 billion of its common stock. Backlog at the end of the year was $156 billion, including $93 billion from commercial aerospace and $63 billion from defense. Management’s outlook for 2022 is for sales of $68.5 billion to $69.5 billion with adjusted EPS of $4.60-$4.80. In addition, free cash flow in 2022 is expected to be approximately $6 billion and the company expects to repurchase at least $2.5 billion of RTX shares. “Raytheon Technologies is entering 2022 with continued momentum and resilience. The long-term outlook for our commercial aerospace and defense markets remains strong. Our focused A&D portfolio and intense focus on program execution position us well to deliver sales, earnings and free cash flow growth, as well as margin expansion across all businesses in 2022,” said Raytheon Technologies Chairman and CEO Greg Hayes.
Johnson & Johnson-JNJ reported healthy fourth quarter and full year 2021 results with double-digit growth in sales and earnings and strength across all business segments. In the fourth quarter, revenues rose 10% to $24.8 billion with net earnings and EPS more than doubling to $4.7 billion and $1.77, respectively. For the full year, revenues rose 14% to $93.8 billion with net income and EPS each up 42% to $20.9 billion and $7.81, respectively. Worldwide Pharmaceutical sales increased 14% during the year to $52.1 billion; Medical Devices sales increased 18% to $27.1 billion; and Consumer Health sales rose 4% to $14.6 billion. The Consumer Health business will not likely be spun off to shareholders until 2023. During 2021, Johnson & Johnson generated approximately $20 billion in free cash flow and ended the year in a net debt position of $2 billion. The company invested a record $14.7 billion in research and development to advance its promising product pipeline and paid $11 billion in dividends during the year. The dividend currently yields a healthy 2.6%. With continued strong cash flows, JNJ expects to be in a net cash position in 2022. The company plans to continue to increase its dividend in 2022 as it has for 59 consecutive years, make strategic acquisitions to drive future growth and resume modest share repurchases. For fiscal 2022, JNJ expects to report sales in the range of $98.9 billion to $100.4 billion, representing 5.5% to 7.0% growth, with adjusted EPS expected in the range of $10.40 to $10.60, representing 6.1% to 8.2% growth, as operating margins are expected to increase 50 basis points in 2022.
Monday, Jan. 24, 2022
Bank of Hawaii-BOH finished 2021 with solid financial performance despite the continued impacts of the pandemic. Fourth quarter revenue increased slightly to $168.9 million with net income up 1.3% to $61.9 million and EPS up 2% to $1.55. For the full 2021 year, revenue dipped 1.8% to $668.6 million with net income jumping 62.8% to a record $250.4 million and EPS up 61.9% to $6.25. Return on average assets for the full year increased to 1.14% compared with 0.79% in 2020. Return on shareholders’ equity increased to 16.9%. Core loan balances grew 6.2% in 2021 and deposits surpassed $20 billion, growing 11.8% in 2021. Overall asset quality remained good, and capital and liquidity remained strong. The bank paid out 44% of its earnings in 2021 in a dividend totaling $2.74 per share. During the fourth quarter, the bank repurchased 87,500 shares for $7.3 million at an average cost of $83.83 per share with $85.7 million remaining approved for future share repurchases. The Hawaii unemployment rate has been steadily improving since the start of the pandemic and stood at 6% in November 2021. The Hawaii real estate market is very good finishing with a record year. Total closed sales increased 18% with the median sales price of $990,000 for single family homes. The median days a home stayed on the market was 9 days and inventory remains tight. The condo market is also strong with closed sales up 53% in 2021. Visitor daily arrivals to Hawaii recovered strongly during the summer and reached 2019 levels, prior to the pandemic, which was remarkable without international travelers. Despite the recent downturn in visitors due to the Omicron variant, visitor counts should hopefully return to more normal levels in 2022. Domestic travelers are eager to visit Hawaii and international travelers should return.
Friday, Jan. 21, 2022
Intel-INTC announced plans for an initial investment of more than $20 billion in the construction of two new leading-edge chip factories in Ohio. The investment will help boost production to meet the surging demand for advanced semiconductors, powering a new generation of innovative products from Intel and serving the needs of foundry customers. To support the development of the new site, Intel pledged an additional $100 million toward partnerships with educational institutions to build a pipeline of talent and bolster research programs in the region.
Thursday, Jan. 20, 2022
MidAmerican Energy, a business unit of Berkshire Hathaway-BRKB, announced plans for a $3.9 billion renewable energy project in Iowa, including wind and solar generation, and the exploration of new technologies to advance the company’s transition to net-zero greenhouse gas emissions.
Wednesday, Jan. 19, 2022
UnitedHealth Group-UNH reported strong fourth quarter results with revenues increasing a healthy 13% to $73.7 billion and net income jumping 84% to $4.1 billion with EPS up 85% to $4.48. For the full year, revenues increased 12% to $287.6 billion with net income rising 12% to $17.3 billion and EPS up 13% to $18.08. Growth was broad-based across the Optum and UnitedHealthcare businesses with both units generating double-digit revenue growth for the year. The Optum business comprised over half of operating earnings for the year. The full year medical care ratio of 82.6% compared to 79.1% in the previous year with the increase due to higher COVID-19 costs. Return on shareholders’ equity for the year was a robust 23% reflecting strong overall performance and the efficient capital structure of the firm. Free cash flow dipped 1% to $19.9 billion for the year. In 2021, the company paid $5.3 billion in dividends, an increase of 15% over the prior year, and repurchased 12.8 million of its common shares for $5 billion at an average cost of approximately $390.63 per share. In 2022, UnitedHealth Group expects revenues in the range of $317 billion to $320 billion with EPS expected in the $20.20 to $20.70 range. Cash flow from operations is expected to increase to the $23 billion to $24 billion range approximating a healthy 1.2 times net income. With the strong cash flow, the company expects to accelerate investments in the business, continue to increase its dividend and repurchase between $5 billion to $6 billion of its shares in 2022. Management reaffirmed its long-term annual growth goal of 13%-16% thanks to accelerating innovation and expanding capabilities. While management noted labor pressures across the industry, the company believes it remains in a good position with strong recruiting and incentives, decent retention, technology investments to offset higher labor costs and the ability to price for inflation.
Fastenal-FAST reported fourth quarter revenues rose 13% to $1.53 billion with net income and EPS each fastening on 18% gains to $231.2 million and $.40, respectively. The fourth quarter of 2021 continued to experience strong, economically-driven growth in underlying demand for manufacturing and construction equipment and supplies, which drove higher unit sales that contributed to the increase in net sales in the period. Sales through Fastenal’s Digital Footprint accounted for 46.4% of sales in the fourth quarter. Management’s goal is to hit 55% in 2022, and they believe it can ultimately grow to approximately 85% of sales. For the full 2021 year, revenue rose 6% to $6 billion with net income up 8% to $925 million and EPS up 7% to $1.60. Return on shareholders’ equity for the year was an impressive 30.4%. Free cash flow decreased 34% during the year to $613.5 million due to meaningful increases in working capital to support growth and account for inflation. During the year, Fastenal returned $643.7 million to shareholders in the form of dividends. Fastenal announced an 11% increase in its dividend for 2022. The company ended the year with $236 million in cash, $330 million in long-term debt and $3 billion in shareholders’ equity on its strong balance sheet. The company plans to spend $180 million to $200 million on capital spending in 2022. Fastenal noted that the labor market and supply chains remain tight, thought product availability did improve in the fourth quarter. Material costs stabilized in the fourth quarter although at high levels. The company is addressing inflation through pricing and mix changes.
Tuesday, Jan. 18, 2022
Microsoft-MSFT announced plans to acquire Activision Blizzard Inc., a leader in game development and interactive entertainment content publisher, for $95 per share in an all-cash transaction valued at $68.7 billion, inclusive of Activision’s net cash. With three billion people actively playing games today, gaming is now the largest and fastest-growing form of entertainment. This acquisition will accelerate the growth in Microsoft’s gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse. With three billion people actively playing games today, gaming is now the largest and fastest-growing form of entertainment. When the transaction closes, Microsoft will become the world’s third-largest gaming company by revenue, behind Tencent and Sony. The planned acquisition includes iconic franchises from the Activision, Blizzard and King studios like “Warcraft,” “Diablo,” “Overwatch,” “Call of Duty” and “Candy Crush,” in addition to global eSports activities through Major League Gaming. The company has studios around the word with nearly 10,000 employees. Mobile is the largest segment in gaming, with nearly 95% of all players globally enjoying games on mobile. Through great teams and great technology, Microsoft and Activision Blizzard will empower players to enjoy the most-immersive franchises, like “Halo” and “Warcraft,” virtually anywhere they want. And with games like “Candy Crush,” Activision Blizzard´s mobile business represents a significant presence and opportunity for Microsoft in this fast-growing segment. The acquisition also bolsters Microsoft’s Game Pass portfolio with plans to launch Activision Blizzard games into Game Pass, which has reached a new milestone of over 25 million subscribers. With Activision Blizzard’s nearly 400 million monthly active players in 190 countries and three billion-dollar franchises, this acquisition will make Game Pass one of the most compelling and diverse lineups of gaming content in the industry. Upon close, Microsoft will have 30 internal game development studios, along with additional publishing and esports production capabilities. The deal is expected to close in fiscal year 2023 and will be accretive to non-GAAP earnings per share upon close.
Friday, Jan. 14, 2022
Roche-RHHBY Diagnostic was awarded a $340,000,000 firm-fixed-price contract for COVID-19 rapid antigen tests. Work will be performed in Indianapolis with an estimated completion date of March 14, 2022.
Booking Holdings-BKNG announced that KAYAK for Business, KAYAK's free corporate travel solution has integrated Southwest Airlines® into its platform making the process of booking a business trip and earning Southwest Rapid Rewards points easier. Through the integration, travelers and travel decision makers will be able to compare all available travel options in one place, making KAYAK for Business a one-stop-shop designed for small and medium sized businesses.
The Boeing Company has selected Collins Aerospace, a Raytheon Technologies-RTX business, to be the long-term provider of next-generation lavatories for the 737 family of aircraft.
Waymo Via, a unit of Alphabet-GOOGL, and J.B. Hunt Transport Services announced a long-term, strategic alliance that will advance innovative efforts to integrate commercial autonomous driving technology in transportation and logistics, with ultimate plans to complete fully autonomous transport in Texas in the next few years. Waymo has over a decade of experience in building autonomous driving technology, having driven over 20 million miles on public roads across 13+ U.S. states and 20 billion miles in simulation.
Wednesday, Jan. 12, 2022
T. Rowe Price-TROW reported its assets under management as of 12/31/21 were $1.69 trillion, representing a 14.8% increase for the year. This balance included $47 billion in fee-basis assets from the acquisition of Oak Hill Advisors completed on 12/29/21.
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