HI Quality Archives - 2023

Wednesday, Nov. 15, 2023

Cisco Systems-CSCO reported the strongest fiscal first quarter results in the company’s history in terms of revenue and profitability with revenues increasing 8% to $14.7 billion, net income increasing 36% to $3.6 billion and EPS up 37% to $.89. By segment, product revenue was up 9% and service revenue increased 4%. Total annualized recurring revenue (ARR) increased 5% to $24.5 billion and product ARR was up 10% year-over-year. Remaining performance obligations (RPO) increased 12% to $34.8 billion and product RPO was up 14% year-over-year. Free cash flow decreased 41% to $2.2 billion during the first quarter with the company paying $1.58 billion in dividends and repurchasing $1.3 billion of its commons stock during the quarter at an average price of $54.53 per share. The decrease in free cash flow was primarily due to unfavorable working capital items. Cisco has $9.7 billion remaining authorized for future share repurchases. Cisco maintains a strong balance sheet and ended the quarter with $23.5 billion in cash and investments, $6.7 billion in long-term debt and $45.2 billion in shareholders’ equity. Cisco lowered fiscal 2024 estimates, as they saw a slowdown of new product orders in the first quarter. The primary reason for the slowdown was that customers are currently focused on installing and implementing products in their environments following exceptionally strong product delivery over the past three quarters. Management expects second quarter revenue to be in the range of $12.6 billion to $12.8 billion and EPS to be in the range of $.59 to $.64. For the full fiscal year, Cisco now expects revenue to be in the range of $53.8 billion to $55 billion and EPS to be in the range of $2.97 to $3.08.

TJX Companies-TJX rang up a 9% increase in fiscal third quarter sales to $13.27 billion with net income up 12% to $1.19 billion and EPS charging ahead 13% to $1.03. Overall comp store sales increased 6%, driven entirely by customer traffic. Customer traffic was up across all divisions, overall apparel sales remained very strong and home goods sales accelerated sequentially from the second quarter. By business segment, Marmaxx U.S. sales increased 9% to $8.11 billion, HomeGoods U.S. sales increased 13% to $2.2 billion, TJX Canada sales increased 2% to $1.3 billion and TJX International sales increased 10% to $1.6 billion. Gross profit margins increased 100 basis points to 31.1% on lower freight costs and lower estimated shrinkage, partially offset by supply chain investments. Operating profit margins increased 80 basis points to 12% primarily due to expense leverage on above-plan sales and a 40-basis point benefit from the timing of expenses that will reverse during the next quarter, partially offset by a 30-basis point negative impact from the closing of HomeGoods’ e-commerce business after management failed to see a path to profitability in long-term projections. During the quarter, the company increased its store count by 50 stores to a total of 4,934 stores. TJX returned $1.0 billion to shareholders during the quarter through dividend payments of $380.0 million and share repurchases of $650.0 million at an average cost per share of $90.28. For the nine months ended October 28, TJX generated free cash flow of nearly $2.0 billion and returned $2.8 billion to shareholders through dividend payments of $1.1 billion and share repurchases of $1.7 billion at an average cost per share of $83.33. TJX ended the quarter with $4.3 billion in cash, $2.9 billion in long-term debt and $6.8 billion on its fashionable balance sheet. Given the dressy year-to-date results and the strong start to the fourth quarter, management raised its full fiscal 2024 guidance with sales now expected in the $53.7 billion to $53.9 billion range (up 7.8% from last year) on comparable store sales in the 4% to 5% range with EPS in the $3.71 to $3.74 range.

NIKE-NKE announced that its Board of Directors approved a 9% increase to its quarterly cash dividend to $0.370 per share. “Nike has a consistent track record of delivering strong cash flow and returns for shareholders and today’s announcement marks the 22nd consecutive year we have increased our dividend,” said John Donahoe, President & CEO, NIKE, Inc. “This dividend increase reflects our continued confidence in our strategies to generate sustainable, profitable growth, while investing for the future.”

Tuesday, Nov. 7, 2023

The board of directors of ADP-ADP approved a $0.15 increase in the quarterly cash dividend to an annual rate of $5.60 per share. "This 12% increase in our quarterly dividend signifies our 49th year of consecutive annual dividend increases. Our dividend is a cornerstone to our long-standing commitment to shareholder-friendly actions, and we are pleased to be one of a select group of companies with such a track record," said Maria Black, CEO.

Monday, Nov. 6, 2023

Fastenal-FAST reported October sales increased 6.8% to $644,652 million with average daily sales up 1.9% to $29.3 million. Monthly sales were strongest in Canada/Mexico with 8.2% growth and in Other End Markets with 6.1% growth. By product line, Safety products were up 6.4% with fastener sales down 2.6%. Growth is slowing by customer and channel type. Employee headcount is up 3.9% to 23,078.

Saturday, Nov. 5, 2023

Berkshire Hathaway-BRKB reported the company’s net worth during the first nine months of 2023 increased by 11%, or $51.9 billion, to $525.3 billion with book value equal to about $363,293 per Class A share as of 9/30/23. Berkshire boasts the largest shareholders’ equity of any U.S. company.

On a GAAP basis, Berkshire reported a net loss of $12.8 billion during the third quarter compared to a $2.8 billion loss in the prior year quarter. Investment gains and losses from changes in the market prices of Berkshire’s substantial equity investments will produce significant volatility in earnings and these investment unrealized “paper” gains or losses in any given quarter is usually meaningless. Berkshire’s five major equity investment holdings which represent about 78% of total equities held, include American Express at $22.44 billion (which charged 1% higher during the first nine months or $0.2 billion); Apple at $156.8 billion (which jumped 32% during the first nine months or a juicy $37.8 billion); Bank of America at $28.3 billion (which declined 17% or $5.9 billion in value year-to-date due to banking woes);  Coca-Cola at $22.4 billion (which fizzled 12% or $3 billion) and Chevron at $18.6 billion (which was 38% lower or $11.4 billion in value, reflecting partial sales of the position).

During the third quarter, Berkshire’s revenues rose 21% to $93.2 billion, aided by the $13.2 billion contribution from Pilot Travel Centers which was consolidated into Berkshire’s results following the acquisition of Berkshire’s additional 41.4% ownership interest in the company, bringing Berkshire’s total ownership in Pilot to approximately 80%. Excluding the acquisition of Pilot, revenues rose 4% during the third quarter. Berkshire’s operating earnings increased 40.6% during the third quarter to $10.7 billion, primarily led by a turnaround in Berkshire’s insurance businesses.

During the third quarter, Berkshire’s insurance businesses generated $2.4 billion from underwriting earnings compared to a loss of $1.1 billion in the prior year quarter due to improvements at GEICO, relatively low catastrophe losses, and the acquisition of Alleghany Insurance. Insurance investment income increased 75% during the quarter to $2.5 billion, reflecting higher interest income as short-term interest rates increased significantly. The float of the insurance operations increased $3 billion since year end to end the quarter at about $167 billion. The combined cost of float was negative during the first nine months due to the $2.4 billion in underwriting gains year-to-date.

Burlington Northern Santa Fe’s revenues declined 12.6% during the quarter to $5.8 billion, reflecting lower volumes of 4.8% and average revenue per car/unit decreasing 7.1% due to decreased rates per car/unit and lower surcharge revenue, partially offset by favorable changes in business mix. Net earnings rolled 15.3% lower to $1.2 billion. The decrease was primarily due to lower overall freight volumes and higher non-fuel operating costs, partially offset by lower fuel costs.

Berkshire Hathaway Energy reported revenues declined 3.6% during the third quarter to $7.3 billion with net earnings declining 68.9% to $498 million. The earnings decrease reflected lower earnings from the U.S. regulated utilities, increased wildfire loss estimates of $1.4 billion in the third quarter, as well as lower earnings from other energy businesses and real estate brokerage businesses.

Comparative operating results for Pilot Travel Center were detailed following the consolidation of the business with revenues and earnings highly dependent on fuel volumes, prices and margins. During the third quarter, Pilot’s revenues traveled 31% lower to $13.2 billion with pre-tax earnings declining 60% to $291 million due to significantly lower fuel prices as well as from lower fuel sales volumes.

Berkshire’s Manufacturing businesses reported third quarter revenues increased 0.9% to $19.2 billion with operating earnings up 6.7% to $3.1 billion. The industrial products segment led the way for the quarter with revenues rising 12% to $8.7 billion and operating earnings increasing 3.8% to $1.4 billion thanks to improvements at Precision Castparts, IMC and Marmon including acquisitions as part of the Alleghany deal. The building products segment revenue declined 11.2% to $6.7 billion and operating earnings declined 5.6% to $1.2 billion, primarily due to the significant increases in home mortgage rates slowing demand. The consumer products segment revenue increased 2% to $3.7 billion and operating earnings were up 78% to $483 million, primarily due to the Jazwares acquisition and improved earnings of the apparel and footwear businesses. 

Service and Retailing revenues increased 1.2% during the quarter to $23.4 billion with pre-tax earnings decreasing 1% to $1.3 billion. The Retailing group led the way as revenue increased 1% to $4.8 billion with pre-tax earnings up 4.5% to $414 million, primarily due to higher new vehicle sales and profits at Berkshire Hathaway Automotive.

Berkshire’s balance sheet continues to reflect significant liquidity and a very strong capital base of $525.3 billion as of 9/30/23. Excluding railroad, energy and utility investments, Berkshire ended the first half of the year with $520.5 billion in investments allocated approximately 61.2% to equities ($318.6 billion), 4.3% to fixed-income investments ($22.4 billion), 29.2% in cash and equivalents to a record ($152.0 billion) and 5.2% in equity method investments ($27.5 billion), which includes 26.5% ownership of Kraft Heinz and 25.3% ownership of Occidental Petroleum. Warren Buffett noted at the annual meeting he has no plans to acquire Occidental Petroleum.  

Free cash flow increased 31% during the first nine months to $21.1 billion due to higher earnings. During the nine months, capital expenditures approximated $13.7 billion, which included $9.4 billion for BNSF and BHE, its railroad and utility and energy units. Berkshire expects capital expenditures for BNSF and BHE to approximate $4.2 billion for the fourth quarter.

During the first nine months, Berkshire paid cash of $9.1 billion to acquire equity securities and received proceeds of $32.8 billion from the sale of stocks, including the partial sales of Chevron, BYD, the Chinese electric vehicle manufacture, and several bank holdings. The equity sales generated $3.9 billion in after-tax realized gains during the first nine months. In addition, Berkshire purchased a net $27.3 billion in Treasury Bills and fixed-income investments. On January 31, 2023, Berkshire acquired an additional 41.4% interest in Pilot for approximately $8.2 billion which brought Berkshire’s ownership of Pilot up to 80%. On September 1, 2023, Berkshire Hathaway Energy acquired an additional 50% interest in Cove Point LNG for $3.3 billion, which increased its interest to 75%.

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 $7 billion of its common stock, including $1.1 billion during the third quarter. These repurchases included 1,115 Class A shares purchased at an average price of approximately $550,814 per share and 143,675 Class B shares purchased an average price of $357.22 per share during September 2023.

Thursday, Nov. 2, 2023

Apple-AAPL reported fiscal fourth quarter sales dipped 1% to $89.5 billion with net income up 11% to $22.96 billion and EPS up 13% to $1.46. By category, iPhone sales increased 3% to a September quarter record of $43.8 billion. Mac sales slumped 34% to $7.6 billion on tough market conditions and difficult comps with last year’s record sales, iPad sales declined 10% to $6.44 billion, Wearables, Home and Accessories sales declined 3% to $9.3 billion and Services increased 16% to record $22.3 billion. By geography, Americas sales increased 1% to a September quarter record of $40.1 billion, Europe sales dipped 1.5% to $22.5 billion, China sales declined 2.5% to $15.1 billion on supply constraints for the new iPhone 15, Japan sales dropped 3.7% to $5.5 billion and Rest of Pacific sales dipped 1% to $6.3 billion. Operating margins increased to a record 45.2% from 42.3% last year, primarily due to product mix that more than offset the drag from foreign currency exchange. For the year, Apple reported sales and earnings declined by 2.8% to $383.285 billion and $97.0 billion, respectively, with EPS up slightly to $6.13 on fewer shares outstanding. During fiscal 2023, Apple generated a stellar 27.5% return on assets and $99.6 billion in free cash flow, down 10.6% from last year, on working capital changes. During fiscal 2023, Apple returned $92.6 billion to shareholders through dividends of $15 billion and share purchases of $77.6 billion, including $15.5 billion repurchased during the September quarter at an average cost per share of $182.35. During the past five years, Apple has bought repurchased more than $390 billion of its shares. Apple ended the fiscal year with $162.1 billion in cash and investments, $95.3 billion in long-term debt and $62.1 billion in shareholders’ equity on its shiny balance sheet. For the current holiday season quarter, Apple expects iPhone sales to be on par with last year despite one less selling week. Mac sales are expected to accelerate from the fourth quarter, booted up by new product launches. Gross margins are expected in the 45% to 46% range and operating expenses are anticipated in the $14.4 billion to $14.6 billion range.  During the fiscal year-end conference call, Tim Cook, president and CEO stated, "During the September quarter, we continued to face an uneven macroeconomic environment, including foreign exchange headwinds, and we've navigated these challenges by following the same principles that have always guided us. We've continued to invest in the future and managed for the long term. We've adapted continuously to circumstances beyond our control while being thoughtful and deliberate on spending. And we've carved a path of groundbreaking innovations and delivered with excellence every step of the way."


Stryker-SYK reported third quarter sales increased 9.6% to $4.9 billion with net income declining 15.2% to $692 million and EPS down 15.9% to $1.80. By business segment, MedSurg and Neurotechnology sales increased 10.5% to $2.9 billion. Organic net sales increased 10.1% in the quarter including 8.7% from increased unit volume and 1.4% from higher prices. Orthopaedics and Spine sales grew 8.4% to $2.1 billion. Organic net sales increased 8% in the quarter including 9.1% from increased unit volume, partially offset by 1.1% from lower prices. During the first nine months, Stryker generated $1.7 billion in free cash flow with the company returning $854 million to shareholders through dividend payments. Stryker ended the quarter with $1.9 billion in cash and investments, $10.4 billion in long-term debt and $17.9 billion in shareholders’ equity. Considering year-to-date results, the robust backlog for capital equipment and the continued positive procedural trends, management now expects full year 2023 organic net sales growth to be in the range of 10% to 10.5%. If foreign currency exchange rates hold near current levels, Stryker expects net sales in the full year to be adversely impacted by approximately 0.6% and adjusted EPS to be adversely impacted by approximately $0.10 to $0.15, to a range of $10.35 to $10.45. 

Booking Holdings-BKNG reported record third quarter revenues traveled 21% higher to $7.3 billion with net income soaring 51% to $2.5 billion and EPS flying 66% higher to $69.80.  During the third quarter, gross travel bookings by customers increased 24% to a record $39.8 billion as room nights booked jumped 15% to a record 276 million, rental car days motored ahead 20% to 20 million and airline tickets soared 57% to nine million.  A strong summer travel season contributed to these stellar results thanks to the resilience of leisure travel demand. The conflict in Israel and Gaza curtailed travel bookings to that region of the world in October as travel cancellations increased. Travel to Israel accounts for about 1% of total bookings. Free cash flow increased 41% during the first nine months of the year to $6.0 billion with the company repurchasing $7.9 billion of its stock, reducing its share count by 8% since the beginning of the year. Booking Holdings has $16 billion remaining authorized for future share repurchases and expects to increase its buyback activity in the fourth quarter given the attractive valuation of the stock. Travel trends are expected to remain favorable in the fourth quarter and into 2024 based on trips already booked.

Starbucks-SBUX brewed up an 11% fiscal fourth quarter sales increase to a record $9.37 billion with net earnings and EPS perking up 39% to $1.22 billion and $1.06, respectively. Operating margin of 18.2% increased from 14.2% in the prior year, primarily driven by in-store operational efficiencies, sales leverage and pricing, partially offset by previously committed investments in store partner wages and higher general and administrative costs related to Starbuck’s Reinvention Plan. Global same store sales increased 8%, driven by a 4% increase in average ticket and 3% increase in transactions. North America and U.S. comparable store sales increased 8%, driven by a 6% increase in average ticket and 2% increase in comparable transactions. International comparable store sales increased 5%, driven by a 6% increase in comparable transactions and 1% decline in average ticket. China comparable store sales increased 5%, driven by an 8% increase in comparable transactions and a 3% decline in average ticket. Channel Development segment sales of $486.1 million were relatively flat compared to last year on an increase in revenue in the Global Coffee Alliance partially offset by a decrease in global ready-to-drink revenue. Channel Development margins increased 520 basis points to 55.8% on growth in North American Coffee Partnership joint venture income. Starbucks opened 816 net new stores in during the fourth quarter, ending the period with 38,038 stores. Stores in the U.S. and China comprised 61% of the company’s global portfolio, with 16,352 and 6,806 stores in the U.S. and China, respectively. Starbucks Rewards loyalty program 90-day active members in the U.S. increased to 32.6 million, up 14% year-over-year. For the year, Starbucks sales increased 11.6% to $35.98 billion with net income steaming up 25.7% to $4.12 billion and EPS up 26.5% to $3.58. During fiscal 2023, Starbucks generated $3.68 billion in free cash flow, up 44% from last year, with the company returning $3.4 billion to shareholders through dividend payments of $2.4 billion and share repurchases of $984.4 million, including $301.6 million shares repurchased during the fourth quarter at an average cost per share of $97.29. During the quarter, the board declared a cash dividend of $0.57 per share, marking the 54th consecutive quarter of dividend payouts with compound average growth rate of about 20%. Starbucks ended the fiscal year with $4.64 billion in cash and investments and $13.55 billion in long-term debt. Looking ahead to fiscal 2024, Starbucks expects revenues to increase at the bottom of the 10% to 12% range on comparative store sales increases in the 5% to 7% range and EPS increasing in the 15% to 20% range on continuing margin expansion. Starbucks’ stated 50% dividend payout ratio demonstrates its confidence in the future. Laxman Narasimhan, chief executive officer, remarked during the fiscal year end conference call, “Looking ahead, we remain fully optimistic about our headroom across the U.S. and internationally, and we see limitless possibilities across all areas of the business. While the global business environment remains uncertain, we are confident in our ability to adapt and innovate to meet evolving consumer needs. We will continue to invest in our partners, to expand upon our reinvention, and to deliver on our sustainability and social impact initiatives, all while driving long-term growth. We feel very good about the business momentum for next year, the continued strength of the brand, and the opportunity for growth in the years ahead.”


Wednesday, Nov. 1, 2023

Cognizant Technology Solutions-CTSH reported revenue grew 0.8% to $4.9 billion with net income decreasing 16.5% to $525 million and EPS down 14.8% to $1.04. By region, North America revenue decreased 0.6% to $3.6 billion, Europe increased 9.7%, or 3% in constant currency, to $970 million and Rest of World revenue decreased 6.8%, or 3.4% in constant currency, to $328 million. By business segment, Financial Services revenue dipped 3%, or 4% in constant currency, to $1.5 billion. Heath Sciences revenue was flat, down 0.8% in constant currency, to $1.4 billion. Products & Resources revenue increased 1.9%, or 0.6% in constant currency, to $1.17 billion. Communications, Media & Technology revenue increased 8.2%, or 7.3% in constant currency, to $847 million. Trailing 12-month voluntary attrition was down 13 points year-over-year to 16.2%, reflecting management’s focus on attracting, retaining and rallying employees. Bookings in the third quarter grew 9% year-over-year. On a trailing-twelve-month basis, bookings grew 16% to $26.9 billion, which represented a book-to-bill of about 1.4x. During the quarter, the company generated $755 million in free cash flow, down 21% from last year, primarily due to the decline in earnings. Cognizant repurchased $300 million of its shares during the quarter at an average cost of $69.77 per share, leaving $2.1 billion remaining under the repurchase authorization as of September 30, 2023. In October 2023, the company declared a quarterly cash dividend of $0.29 per share, a 7% increase year-over-year. This dividend will be payable on November 30, 2023. During the first nine months of 2023, the company generated $1.4 billion in free cash flow and returned approximately $1.2 billion to shareholders through repurchases of $751 million and dividends of $445 million. Cognizant ended the quarter with $2.4 billion in cash and short-term investments, $614 million in long-term debt and $12.8 billion in shareholders’ equity on its pristine balance sheet. Management narrowed their full-year guidance range, reflecting recent discretionary spending pressure and its impact to near-term revenue expectations. Fourth quarter revenue is now expected to decline by 3.1% to 0.3%, or down 4.0% to 1.2% in constant currency, to $4.69 billion to $4.82 billion. For the full year, revenues are expected to decline 0.7% to flat, both as reported and in constant currency to a range of $19.3 billion to $19.4 billion. Adjusted EPS is expected to be in the range of $4.39 to $4.42. In addition, management updated their adjusted operating margin guidance to approximately 14.7%, which is the high-end of the prior range, reflecting management’s continued focus on enhancing operational discipline.


Monday, Oct. 30, 2023

Western Alliance-WAL announced it increased its latest dividend 2.8% from the prior quarter to $.37 per share payable on  December 1, 2023 to shareholders of record as of November 17, 2023.

Friday, Oct. 27, 2023

Gentex-GNTX reported third quarter sales motored 17% higher to $575.8 million with expanding profit margins driving net income 44% higher to $104.7 million and EPS up 45% to $.45. Despite the automaker strikes, unit shipments increased 10% during the quarter to 12.6 million units as the company gained market share. However, if the strikes persist throughout the fourth quarter, it could adversely impact sales $2.0-$2.5 million per week until the strikes are settled. Gross profit margin expanded 340 basis points to 33.1% during the third quarter as labor and supply chain issues improved significantly. The company’s goal is to improve the gross margin further to 35%-36% by the end of 2024. Free cash flow jumped significantly during the quarter due to the higher earnings and favorable working capital changes. Year-to-date, free cash flow increased more than 50% to $367.7 million. The company paid its quarterly dividend and repurchased $800 million shares of its common stock during the quarter at an average price of $32.41 per share with 18 million shares remaining approved for further share repurchases.  Gentex ended the quarter with a strong balance sheet with more than $550 million in cash and investments, no long-term debt and $2.3 billion in shareholders’ equity. Gentex is on pace for a record setting revenue year in 2023 with revenues expected in the $2.2 billion to $2.3 billion range. In 2024, the company expects revenues to increase an additional 10% to a range of $2.45-$2.55 billion thanks to strong demand for the company’s outside auto mirrors and advanced electronic features.

Thursday, Oct. 26, 2023

Tractor Supply-TSCO rang up a 4.3% increase in third quarter sales to $3.41 billion with net income up 8.9% to $255 million and EPS up 11% to $2.33. The increase in net sales was driven by contributions from the acquisition of Orscheln Farm and Home and new store openings.  Comparable store sales declined 0.4%, compared to an increase of 5.7% last year, on a comparable average ticket decline of 0.3% and a flat comparable average transaction count. Comparable store sales performance reflects continued strength in core year-round merchandise, including consumable, usable and edible (“C.U.E.”) products which significantly outpaced the chain average. This performance largely offset declines in demand for seasonal goods due to weather and for big-ticket items as consumers become more cautious about spending on discretionary items. During the quarter, Tractor Supply generated $411.2 million in free cash flow, compared to $175.2 million last year, on working capital efficiencies. During the first nine months of 2023, Tractor Supply plowed $818.6 million into shareholders’ cart through dividends of $338.2 million and $480.4 million in share repurchases. Management updated guidance for the full year, with net sales expected in the range of $14.5 billion to $14.6 billion and comp store sales even with last year. EPS is forecast to range from $10.00 to $10.10. Implied in this outlook is for fourth quarter comp store sales to be down low to mid-single digits as management anticipates continued discerning consumer spending and unfavorable compares relating to weather due to the ongoing El Nino pattern, combined with the cycling of last year's monumental winter storm, which drove 200 basis points of favorable impact on comps. Capital expenditures are expected in the range of $800 million to $850 million. Putting the revised guidance into perspective,  Hal Lawton, President and CEO reflected, “If you told me in January of 2020 that we would nearly double our top line sales and earnings and deliver strong cash return to shareholders, while increasing our capital investment and growth initiative, and investing in team member wages, and investing in brand building, and doing all this through a global pandemic, major disruptions in global supply chains, rapidly changing consumer shifts, also rapidly escalating costs, including the highest consumer inflation in 40 years, it would have been hard to imagine, but that's exactly what this team has delivered. Over the last four years, we've added $7 billion in incremental sales. We've grown our market share significantly, and we've increased our earnings by 115% and returned over $3.2 billion of cash to shareholders. Our resilient needs-based business model has a proven history of growing through various economic conditions.”

Texas Roadhouse-TXRH reported third quarter revenues increased a meaty 13% to $1.1 billion, on 8% comparable sale growth, with net income up 2% to $63.8 million and EPS up 3% to $.95.  Average weekly sales increased 7% to $138,668. Restaurant margin declined 80 basis points to 14.6% due to commodity inflation of 4.2%, primarily in beef prices, and wage and other labor inflation of 5.6%. Free cash flow declined 34% year-to-date to $146.8 million primarily due to capital spent on new store openings. Nine company restaurants and four franchise restaurants were opened during the quarter, including the first Jaggers franchise restaurant.  For the full year, the company expects to open as many as 27 new Texas Roadhouse and Bubba’s 33 company restaurants with total capital expenditures of $340 million.  The company has accelerated its 2024 development pipeline with 11 new company locations under construction. In 2024, capital expenditures are expected in the range of $340 million to $350 million. Through the first nine months, the company paid $110.4 million in dividends and repurchased $45.2 million of its stock. During the first four weeks of the fourth quarter, comparable store sales accelerated to 9.2% with customer traffic increasing 3.4% as the consumer has remained resilient. In addition, the company implemented a price menu increase of about 2.7%. For the full 2023 year, Texas Roadhouse expects positive comparable sales growth, including the benefit of menu pricing action to help offset commodity inflation of 5%-6% and wage inflation of 6% to 7%.  For 2024, the company expects positive comparable restaurant sales growth, store week growth of 8%, commodity inflation of 5% to 6% and wage inflation of 4% to 5%, which is moderating.

UPS-UPS reported third quarter revenues fell 12.8% to $21.1 billion with net income sinking 56.4% to $1.13 billion and EPS dropping 55.7% to $1.31 per share. Operating margins fell to 6.4% from 12.9%, pressured by $500 million of expense related to the new labor contract which is front-end loaded with 46% of the contract costs paid in the first year. However, over the five years of the contract, labor costs will increase at a reasonable average annual growth rate of 3.3%. By business segment, U.S. Domestic Package revenues fell 11.1% to $13.66 billion as customers diverted 1.5 million packages a day to competitors during negotiations with the Teamsters Union amid concerns about a potential work stoppage. UPS has since recaptured about 600,000 parcels and remains focused on winning back the remaining share. Despite the 11% drop in average daily volume, UPS delivered a 2% increase in revenue per piece. International Package revenue also declined 11.1% to $4.3 billion, driven by a 6.6% decrease in average daily volume and continued softness in Europe and Asia. Supply Chain Solutions revenue declined 21.4% to $3.1 billion due to market rate and volume declines pressured by excess market capacity. During the first nine months of 2023, UPS generated $4.72 billion in free cash flow, down 45% from last year, on lower net income and a 36% increase in capital expenditures to $3.12 billion. Since the beginning of 2023, UPS delivered $6.2 billion to shareholders through dividends of $4.0 billion and $2.25 billion from the now completed share buyback authorization. UPS announced investments of $1.3 billion to buy Happy Returns to improve its return business and MNX Global Logistics, a company that caters to the healthcare industry.  UPS ended the quarter with $7.3 billion in cash and investments, $18.9 billion in long-term debt and $19.2 billion in shareholders’ equity. Given the bumpy journey through record-high inflation, rising interest rates, disruptions in China, a war in Eastern Europe, now a humanitarian crisis in Israel and Gaza, and the disruption around US labor negotiations, UPS revised its full-year 2023 guidance with revenue now expected in the $91.3 billion and $92.3 billion range with consolidated operating margin between 10.8% and 11.3%, compared to revenues of $100.3 billion last year with an operating margin of 13.0%. Capital allocation includes capital expenditures of $5.3 billion and dividends of about $5.4 billion. UPS repaid $1.6 billion in debt year-to-date and expects to repay an additional EUR700 million of debt in the fourth quarter. In the fourth quarter, UPS plans to redeploy cash back into the business for growth initiatives, such as strategic acquisitions to drive shareowner value.

Mastercard-MA reported third quarter revenues increased 14% to $6.5 billion with net income charging 28% higher to $3.2 billion and EPS ringing up a 31% gain to $3.39. This strong growth reflected the growth in the company’s payment network and continued resilient consumer spending. During the quarter, the company reported 11% growth in gross dollar volume to $2.3 trillion, 21% growth in cross-border volume due to strong travel trends and 15% transaction growth.  As of quarter end, the company’s customers had issued 3.3 billion Mastercard and Maestro-branded cards. Year-to-date, free cash flow dipped 3% to $7.6 billion with the company paying $1.6 billion in dividends and repurchasing $7.2 billion of its common stock. Subsequent to quarter end, Mastercard repurchased an additional 1.2 million shares of its stock for  $475 million  an average cost of $395.83 per share  with $4.5 billion remaining authorized for future share repurchases. Despite elevated macroeconomic and geopolitical concerns, Mastercard expects a good holiday season as the strong labor market supports continued consumer spending. In the fourth quarter, the company expects double-digit revenue growth with single-digit expense growth which should result to further profit margin expansion.

Molina Healthcare-MOH reported third quarter revenues rose 8% to $8.5 billion with net income increasing 7% to $245 million and EPS up 16% to $5.05. Premium revenue increased 8% to $8.2 billion, reflecting the changing member mix year-over-year. Year-to-date, cash flow from operations was $2.4 billion- or 2.7-times net income. Free cash flow increased a healthy 150% during the first nine months to $2.3 billion. Molina ended the quarter with $9.7 billion in cash and investments, $2.2 billion in long-term debt and $3.9 billion in shareholders’ equity on its healthy balance sheet. Management expects full year 2023 adjusted EPS of at least $20.75, an increase of 16% year-over-year. Molina expects the Bright Healthcare’s California Medicare acquisition to close in the first quarter of 2024. Assuming a timely closing, management expects premium revenue of $38 billion in 2024, representing a 19% increase before executing additional strategic initiatives.

Wednesday, Oct. 25, 2023

Meta Platforms-META reported third quarter revenue increased 23% to $34.1 billion with net income and EPS up over 100% to $11.6 billion and $4.39, respectively. Facebook daily active users were 2.09 billion, an increase of 5% over the prior year period. Facebook monthly active users were 3.05 billion at quarter end, an increase of 3%. Reels is now net neutral to overall ad revenue and a big growth driver to the amount of time spent on Instagram.  Threads is just under 100 million active users with a great deal of potential over the next few years. During the third quarter, ad impressions delivered across the company’s family of apps increased by 31% while the average price per ad decreased by 6%. During the quarter, operating margin jumped to 40%, doubling from the year ago quarter, reflecting the company’s “year of efficiency” push to reduce costs. Free cash flow jumped over 100% during the first nine months to $32.1 billion. Year-to-date, Meta has repurchased $13.8 billion of its common stock, including $3.7 billion during the third quarter. The company has $37.22 billion remaining authorized for future share repurchases. The company ended the quarter with a strong balance sheet with $61.1 billion in cash and investments, $18.4 billion in long-term debt and $142.9 billion in shareholders' equity. Meta’s headcount was 66,185 as of quarter end, a decrease of 24% year-over-year. A substantial majority of the employees impacted by the layoffs are no longer included in the reported headcount. Revenues are expected in the range of $36.5 billion to $40 billion in the fourth quarter, including a 2% tailwind from foreign exchange. Total expenses in 2023 are expected in the range of $87 billion to $89 billion, lowered from prior range of $88 billion to $91 billion. Full-year 2024 total expenses are expected to be in the range of $94 billion to $99 billion, driven by higher infrastructure-related costs expected next year and growth in payroll expenses, as Meta continues to shift their workforce composition toward higher-cost technical roles with AI the biggest investment focus in 2024.  Meta expects Reality Labs operating losses to increase meaningfully year-over-year due to the company’s ongoing product development efforts in augmented reality.

Automatic Data Processing-ADP reported fiscal first quarter revenue rose 7% to $4.5 billion with net income processing a 10% gain to $859.4 million and EPS up 11% to $2.08. Growth and margin expansion exceeded management’s expectations as the company benefited from solid new business bookings growth, strong client revenue retention and higher interest revenue on client funds held (float income). U.S. pays per control (number of people on ADP’s clients’ payrolls) increased 2% during the quarter. The average worksite employees paid by PEO Services increased 2% to about 717,000. Free cash flow during the quarter dropped 57% to $287.2 million due primarily to working capital changes. During the quarter, ADP paid $515.8 million in dividends and repurchased $250 million of its stock. Despite moderating growth in PEO Services, ADP maintained its fiscal 2024 outlook with revenues expected to increase 6%-7% and EPS expected to grow 10%-12% on margin expansion of 60 to 80 basis points. ADP is planning for a soft economic landing and peak interest rates along with a favorable small business environment as business trends continue to normalize.

General Dynamics-GD reported third quarter revenues increased 6% to $10.6 billion with net earnings falling 7.3% to $836 million and EPS down 6.7% to $3.04. Backlog rose to a new record of $95.6 billion. By business segment, Aerospace revenues fell 13.4% to $2.0 billion on fewer deliveries due to lingering supply chain issues. However, trailing 12-month Aerospace segment orders topped $10 billion, driven by demand across all models, bringing the total backlog to $20 billion and book-to-bill ratio to 1.4 times for the third quarter. Combat Systems revenue shot up 24% to $2.2 billion generating the highest third quarter revenue and operating results in more than a decade.  During the quarter, Combat Systems receive $1 billion in orders for munitions-related and products and facilities expansion for additional capacity. Marine Systems revenue increased 8.4% to $3.0 billion, led by Columbia submarine volume. Marine Systems backlog increased 9.1% during the quarter to $47.7 billion, bringing the book-to-bill ratio to 2.3 times. Technologies segment revenue increased 7.9% to $3.3 billion. During the quarter, General Dynamics generated $1.1 billion in free cash flow, representing a robust 131% of net earnings, bringing the year-to-date total to $2.9 billion. During the first nine months of 2023, General Dynamics returned $1.5 billion to shareholders through dividend payments of $1.07 billion and share repurchases of $434 million. General Dynamics aslo repaid notes of $500 million during the quarter, bringing the total debt repayment to $2.25 billion during the past 12 months. General Dynamics ended the quarter with $1.35 billion in cash and equivalents, $9.25 billion in long-term debt and $19.96 billion in shareholders’ equity on its strong balance sheet.


Tuesday, Oct. 24, 2023

Canadian National Railway-CNI reported third quarter revenues declined 12% to $3.99 billion with net income declining 24% to $1.11 billion and EPS declining 21% to $1.69. Third quarter results were negatively impacted by continued weakness in consumer demand, external disruptions and unfavorable fuel surcharge lag, partially offset by higher volumes of Canadian grain and potash and the positive translation impact of a weaker Canadian dollar. Despite the West Coast port strike, fires and floods, on-train performance and velocity have remained steady with car velocity of 209 (car miles per day) declining 1% from last year, through network train speed of 19.7 mph declining 2%, fuel efficiency of 0.832 improving 1%, train length of 7,927 feet declining 3% and revenue ton miles (RTMs) of 55,640 declining 5%.  Operating ratio, defined as operating expenses as a percentage of revenues, worsened 480 basis points to 62% on lost leverage from lower intermodal revenue which fell 34% from last year, significant wage inflation and fuel surcharge lag. Free cash flow generated during the quarter fell 57% from last year to $595 million, squeezed by the lower net income, working capital changes and a 23% jump in capital expenditures to $917 million to improve the safety, efficiency and integrity of the railroad’s network. During the first nine months of 2023, Canadian National Railway generated $2.3 billion in free cash flow, down 10% from last year, with the company returning $5.0 billion to shareholders through dividends of $1.56 billion and share repurchases of $3.4 billion, including $1.2 billion shares repurchased during the third quarter at an average cost per share of $153.92. Canadian National ended the quarter with $491 million in cash and equivalents, $16.1 billion in long-term debt and $19.97 billion in shareholders’ equity on its solid balance sheet. Management continues to expect flat to slightly negative year-over-year growth in adjusted EPS in 2023 and reiterated its longer-term financial target with compounded annual EPS growth in the 10%-15% range over the 2024-2026 period, powered by growing volumes more than the economy, pricing above rail inflation and incrementally improving efficiency, all of which assumes a supportive economy. The railroad continues to reward long-term shareholders with 8% growth in dividend for 2023 and its 2023-2024 share repurchase program, with an increased budget now in the range of $4.5 billion.

Microsoft-MSFT reported fiscal first quarter revenues increased 13% to $56.5 billion with operating income up 25% to $27.0 billion and net income and EPS each jumping 27% to $22.3 billion and $2.99, respectively.  Microsoft is rapidly infusing AI across its products and services with copilots, AI assistants, driving productivity gains for customers across business sectors. The strong start to the fiscal year was led by 24% growth in Microsoft’s Cloud revenues to $31.8 billion with the Cloud gross margin improving to 73%. Azure is gaining market share with  60 datacenter regions in the world and best-in-class AI services. Azure’s growth in the second quarter is expected to increase 26% on a constant currency basis.  Free cash flow increased 22% during the quarter to $20.7 billion with Microsoft paying $5.1 billion in dividends and repurchasing $4.8 billion of its common stock during the quarter. Microsoft ended the quarter with a strong balance sheet with $144.0 billion in cash and investments, $41.9 billion in long-term debt and $220.7 billion in shareholders’ equity. Subsequent to quarter end, Microsoft completed its $69 billion acquisition of Activision which should result in strong gaming growth during the holiday season.

Texas Instruments-TXN reported a 14% decrease in third quarter revenue to $4.5 billion with net earnings decreasing 26% to $1.7 billion and EPS down 25% to $1.85.  By segment, Analog revenue declined 16% to $3.4 billion, Embedded Processing revenue grew 8% to $890 million and "Other" segment revenue declined 32% to $289 million. During the quarter, the industrial market was down mid-single digits, with weakness broadening across nearly all sectors and the automotive market continued to grow and was up mid-single digits. During the quarter, Texas Instruments generated $442 million in free cash flow with the company returning over $1 billion to shareholders through dividend payments of $1.1 billion and share repurchases of $46 million. Over the past 12 months, the company invested $3.7 billion in R&D and SG&A, invested $4.9 billion in capital expenditures and returned $5.6 billion to shareholders. In September, the company announced a 5% increase in the dividend, marking the 20th consecutive year of dividend increases. These actions reflect leadership’s commitment to returning free cash flow to its owners.  Texas Instruments ended the quarter with $8.9 billion of cash and short-term investments, $10.9 billion in long-term debt and $16.6 billion in shareholders’ equity on its solid balance sheet. Fourth quarter revenues are expected in the range of $3.93 billion to $4.27 billion and earnings per share in the $1.35 to $1.57 range, as the company continues to operate in a weak environment.

Visa-V reported fourth quarter revenues increased 11% to $8.6 billion with net income charging ahead by 19% to $4.68 billion and EPS up 22% to $2.27. Payments volume for the three months ended June 30, 2023, on which fiscal fourth quarter service revenues are recognized, increased 9% year-over-year in constant currency. Cross-border volume excluding transactions within Europe, which drives international transaction revenues, jumped 18% in constant-currency. Total cross-border volume on a constant-dollar basis increased 16% in the quarter. Total processed transactions, which represent transactions processed by Visa, for the fourth quarter were 56.0 billion, up 10% over the prior year.  As of September 30, Visa had 4.26 billion cards outstanding, up 7% from last year. For the full fiscal year ended September 30, net revenues increased 11%, or 13% in constant dollars, to $32.7 billion, driven by resilient consumer spending and ongoing recovery of cross-border travel spend versus 2019.  Net income swiped ahead 15% to $17.3 billion and EPS increased 18% to $8.28 on fewer shares outstanding. During fiscal 2023, Visa generated a stellar 44.6% return on shareholders’ equity and $19.7 billion in free cash flow, up 10% from last year. During fiscal 2023, Visa returned $15.85 billion to shareholders through dividend payments of $3.75 billion and share repurchases of $12.1 billion at an average cost per share of $222.98, including $4.1 billion repurchased during the fourth quarter at an average cost per share of $241.03. Visa also deposited $150 million into its litigation escrow account, which reduced shares outstanding at an average cost of $231.05 per share.  At the end of the quarter, $4.7 billion remained authorized for share repurchases.  In October, the board of directors authorized a new $25.0 billion multi-year class A common stock share repurchase program. The board also declared a 16% increase to Visa's quarterly cash dividend to $0.520 per share, marking the 14th consecutive year of dividend increases. Looking ahead to fiscal 2024, net revenues are expected to increase in the high-single-digits to low double-digits with EPS up in the high-teens.

Alphabet-GOOGL reported third quarter revenues increased 11% to $76.7 billion with operating income rising 28% to $21.3 billion, net income jumping 42% to $19.7 billion and EPS up 46% to $1.55. This double-digit growth is impressive for a company that just celebrates its 25th birthday!  Revenue growth was driven by meaningful growth in Search, YouTube and Cloud. AI-driven innovations are leading to product momentum across the business units as AI improves knowledge and learnings along with boosting productivity and creativity. The majority of the company’s customers are experimenting with AI to create relevant ads. YouTube Shorts now average over 70 billion daily views and are watched by over 2 billion users every month. Alphabet is focused on reengineering its cost base through slower headcount growth and optimizing its real estate footprint in order to help create capacity for AI investments. Free cash flow increased 40% during the first nine months of the year to $61.6 billion. After repurchasing $45.3 billion of its common shares year-to-date, Alphabet ended the quarter with a fortress balance sheet with more than $150 billion in cash and investments, $14 billion in long-term debt and $273 billion in shareholders’ equity. Alphabet is committed to judicious capital allocation to deliver sustainable financial value.

PulteGroup-PHM reported third quarter sales increased 3% to $4.0 billion with net income increasing 2% to $638.8 million and EPS up 8% to $2.90 on fewer shares outstanding. Average sales price for the third quarter increased 2% to $549,000 and closings inched up to 7,076, compared with 7,047 closings last year. Pulte continues to deliver industry leading home sale gross margins of 29.5%, up 460 basis points from last year, boosted by higher margin move-up and active-adult closings. Net new orders increased 43% to 7,065 homes with strong order gains across all buyer groups: first-time, move-up and active-adult. Average community count increased 12% to 923. Cancellation rate during the quarter was 9% of beginning backlog, flat with last year. Pulte ended the quarter with a backlog of 13,547 homes with a value of $8.1 billion. Pulte achieved an impressive 30% return on shareholders’ equity during the past 12 months, driven by the company’s competitive advantages which include its large geographic presence across 45 major markets, strong presence among all primary buyer groups and large-scale spec and build-to-order businesses. During the quarter, Pulte invested $1.2 billion in land acquisition and development and is on track to invest a total of about $4.0 billion for the full year. Year-to-date Pulte generated $1.8 billion in free cash flow with the company returning $807.7 million to shareholders through dividends of $107.7 million and share repurchases of $700 million, or 4.5% of its outstanding shares, including $300 million repurchased during the third quarter at an average cost per share of $78.95.  Over the past decade, Pulte has repurchased nearly 50% of its shares outstanding. Pulte ended the quarter with $1.86 billion in cash, $1.98 billion in long-term debt and $10.0 billion in shareholders’ equity on its fortress-like balance sheet. Based on the homes in production and current sales trends, Pulte expects about 8,000 closings during the fourth quarter, resulting in about 29,000 full year closings, down from the company’s previous guide of 29,500 closings. “The change in our guide reflects the more challenging affordability conditions resulting from higher rates, as well as the slight shift in our mix toward build-to-order homes, which won’t deliver until 2024,” said Bob O’Shaughnessy, PulteGroup’s chief financial officer, said on the earnings conference call.

NVR, Inc.-NVR reported third quarter revenues decreased 7% to $2.6 billion with net income increasing 5% to $433 million and EPS increasing 6% to $125.26. New orders increased by 7% during the quarter to 4,746 units, compared to 4,421 units in 2022. The average sales price of new orders increased by 1% to $456,100. The cancellation rate in the third quarter was 14% compared to 15% in the prior year period. Settlements decreased 6% during the quarter to 5,606 units. The average settlement price in the third quarter of 2023 was $448,000, a decrease of 3%. The backlog of homes sold but not settled as of September 30, 2023, decreased on a unit basis by 4% to 10,371 units and decreased on a dollar basis by 6% to $4.8 billion year-over-year. Mortgage loan closings decreased 2% to $1.62 billion during the quarter. During the first nine months, the company repurchased 134.8 million shares for an average price of $5,904 per share and ended the quarter with $2.9 billion in cash, $913 million in long-term debt and $4.2 billion in shareholders’ equity on its sturdy balance sheet.

RTX-RTX reported third quarter revenues declined 21% to $13.5 billion with the company reporting a loss of $984 million and EPS of <$.68>. These results reflect the previously disclosed charges related to the Pratt & Whitney powder metal manufacturing matter, along with acquisition accounting adjustments and other non-recurring charges. On an adjusted basis, sales rose 12% during the quarter with EPS up 3%. RTX has made significant progress in addressing the powder metal manufacturing issue and does not expect any significant future incremental financial impact. Historic demand across the commercial aerospace business and unprecedented demand in the defense business drove 12% organic growth during the third quarter and led to a record backlog of $190 billion, of which $115 billion was from commercial aerospace and $75 billion from defense. Air travel demands remains strong and is expected to persist through the holiday season. Due to elevated threats in Israel and Ukraine, defense spending globally is increasing as the geopolitical environment is the most “muddled” in 30 years.  Year-to-date, free cash flow increased 41% to $1.6 billion with the company paying $2.5 billion in dividends and repurchasing $2.6 billion of its shares. The company expects free cash flow in the fourth quarter to increase significantly with the company lifting its free cash flow target for the full year to $4.8 billion. Free cash flow is expected to increase in 2024 with a $7.5 billion target in 2025 reaffirmed. The company also increased its sales outlook for the year to $68.5 billion and tightened its EPS outlook range to $4.98 to $5.02 from previous guidance of $4.95 to $5.05. Given a “significant discount of the company’s stock price to its intrinsic value,” RTX announced it was proceeding immediately with a $10 billion accelerated share repurchase program and increasing its capital return commitment through 2025 to $36 billion to $37 billion. RTX sees “tremendous value” in its stock given the company’s bright future, and the accelerated share repurchase program will retire 10% of outstanding shares.

Monday, Oct. 23, 2023

Roche-RHHBY announced an agreement to acquire Telavant Holdings, Inc., a Roivant company, owned by Roivant Sciences Ltd. and Pfizer Inc.. Under the terms of the agreement, Roche will pay a purchase price of US$ 7.1 billion upfront and a near-term milestone payment of US$ 150 million. The agreement includes the development, manufacturing and commercialisation rights in the US and Japan for Telavant’s RVT-3101, a novel TL1A directed antibody. RVT-3101 is a promising new therapy in development for people suffering from inflammatory bowel disease, including ulcerative colitis and Crohn’s disease. Inflammatory bowel disease is a group of chronic gastrointestinal disorders with almost 8 million people diagnosed worldwide and 80% of all individuals not experiencing lasting remission. Given the antibody’s novel mode of action targeting both inflammation and fibrosis, it has potential to be applied in multiple other diseases.

Friday, Oct. 20, 2023

Western Alliance Bancorporation-WAL reported third quarter net revenue increased 8% to $716.2 million with net income declining 18% to $213.4 million and EPS falling 19% to $1.97. Net interest income totaled $587.0 million, down 2.5% from last year, driven by an increase in both the balances and rates of borrowings and deposits, partially offset by higher yields on Held for Investment loans. Western Alliance recorded a provision for credit losses of $12.1 million in the third quarter 2023, down from $28.5 million last year due to modest improvement in economic forecasts and stable asset quality.  Non-performing loans were $237 million, or 0.35% of total assets, up from 0.15% last year. Asset quality is solid with more than 50% of Western Alliance loans either insured or in historically low-to-no-loss categories. Commercial office real estate loans represent just 5% of the bank’s total loans and carry an average loan-to-value ratio of 55%.  The bank’s net interest margin was 3.67%, down 11 basis points from last year, on higher average balances and rates on deposits and short-term borrowings. Western Alliance’s diversified deposit businesses attracted more than $3.2 billion in deposits during the quarter which lowered the loan-to-deposit ratio to 91%. Total insured and collateralized deposits represent 82% of deposits and available liquidity coverage exceeds 290% of uninsured deposits. Total deposits of $54.3 billion declined 2.3% from last year.  Non-interest income more than doubled from last year to $129.2 million on a higher net gain on loan origination and sale activities, fair value gain adjustments and service charges and fees. Non-interest expense increased 39% to $426.2 million on a two-fold increase in deposit costs resulting in an efficiency ratio of 58.8%, compared to 45.5% last year. Return on average assets declined 29 basis points from last year to 1.24 and return on tangible common equity declined 7.6% from last year to a still solid 17.3%.  Tangible book value increased 17.5% to $43.66 per share and has grown at a 19.2% annual pace since 2013. Western Alliance capital levels continue to exceed “well capitalized” levels with a Common equity Tier 1 (CET1) of 10.6%, close to managements’ targeted 11%. For the fourth quarter, loans are expected to increase from $0 to $300 million with deposits expected to increase from $0 to $500 million. Western Alliance expects to return to prior quarterly balance sheet growth guidance of +$500.0 million for loans and +$2.0 billion for deposits in 2024. Fourth quarter net interest margin is expected in the 3.60% to 3.70% range with net charge offs expected in the 5 to 15 basis point range.

Thursday, Oct. 19, 2023

Roche-RHHBY reported group sales declined by 6% to CHF 44.1 billion during the first nine months of 2023, due to the significant drop in COVID-19 products and biosimilar erosion which accounted for 9% of sales. Excluding COVID-19 sales, Roche Group sales increased 9%. Excluding the impact of the Swiss franc’s strong appreciation, Group sales increased 1%. Continued high demand for newer medicines to treat severe diseases led to a 9% increase in Pharmaceuticals Division sales to CHF 33.6 billion. Roche’s top five growth drivers – Vabysmo (severe eye diseases), Ocrevus (multiple sclerosis), Hemlibra (haemophilia), Polivy (blood cancer) and Evrysdi (spinal muscular atrophy) – collectively generated total sales of CHF 11.2 billion, up 42% from the first nine months of 2022. U.S. sales increased by 8%, primarily driven by Vabysmo, Ocrevus and Hemlibra, which more than offset declining sales of medicines with expired patent protection. Sales in Europe grew 7%, mainly driven by Germany, UK and France. Sales growth of Vabysmo, Phesgo, Evrysdi and Hemlibra was partially offset by the impact of biosimilars and the absence of sales for Ronapreve (COVID-19). Sales in Japan experienced a 10% increase, primarily driven by Ronapreve, Polivy, Vabysmo, Hemlibra, Enspryng and Tamiflu (influenza). This sales growth more than offset the impact of biosimilars. Diagnostics Division sales fell 18% to CHF 10.4 billion on a significant drop in demand for COVID-19 tests (CHF 0.4 billion in the first nine months of 2023 versus CHF 3.6 billion in the same period last year). Excluding the impact of COVID-19 related sales, the Diagnostic division’s base business grew by 7%.  During the investor update, Roche reaffirmed its full-year guidance with Group sales to decline in the low-single digits at constant currency with net earnings broadly inline with the sales decline. Further increases in the dividend in Swiss francs is expected.

Genuine Parts-GPC reported third quarter sales motored ahead 2.6% to $5.8 billion with net income increasing 12.4% to $351.2 million and EPS up 13.2% to $2.49. Sales growth was driven by a 0.5% increase in comparable sales, a 1.7% benefit from acquisitions and a 0.4% net favorable impact of foreign currency. The third quarter of 2023 had one less selling day in the U.S. compared to the third quarter of 2022, which negatively impacted third quarter sales growth by about 1.2%. By business segment, Automotive global sales increased 4% to $3.6 billion on a 0.6% increase in global comparable sales, a 2.4% benefit from acquisitions and a net 0.9% favorable impact of foreign currency. Total automotive results benefited from global diversification with Europe delivering an 11% sales increase, marking the 8th consecutive quarter of double-digit sales growth. However, U.S. Automotive sales came in below expectations with a 1.1% sales decline on 2.9% negative comps, due in part to a reduction in inflation from 8% during last year’s third quarter to low-single-digits this year. Automotive segment profit of $322 million increased 4.1%, with segment profit margin of 8.9%, flat compared to last year. Industrial sales were $2.2 billion, up 0.6% from the same period in 2022, reflecting a 0.3% increase in comparable sales and a 0.6% benefit from acquisitions, slightly offset by a 0.3% unfavorable impact of foreign currency. Demand trends remain positive but moderated from the first half of 2023. Segment profit of $283 million increased 16.6%, with segment profit margin of 12.9%, up 180 basis points from the same period of the prior year. During the first nine months of 2023, Genuine Parts generated $732.6 million in free cash flow, down 27% from last year on working capital changes and a 43% increase in capital expenditures to improve efficiency. Year-to-date, Genuine Parts has returned $565.8 million to shareholders through dividend payments of $393.4 million and share repurchases of $172.3 million. Given recent business trends and financial results, current growth plans, strategic initiatives, global economic outlook, geopolitical conflicts and the potential impact on results, management raised the bottom of its 2023 EPS range to $9.20 to $9.30 from $9.15 to $9.30 while affirming prior guidance of sales growth in 4% to 6% range with free cash flow in the $1.3 billion to $1.4 billion range.


Tuesday, Oct. 17, 2023

Johnson & Johnson-JNJ reported third quarter sales increased 6.8% to $21.4 billion with net earnings from continuing operations flat at $4.31 billion and EPS up 4.3% to $1.69 on fewer shares outstanding from the Kenvue separation.  Johnson & Johnson received $13.2 billion in cash from the Kenvue separation that was finalized during the quarter, thereby reducing JNJ’s share count by 191 million, or 7% of its shares outstanding. Johnson and Johnson recorded a $21.9 billion gain from the separation during the quarter while retaining 180 million Kenvue shares, representing a 9.7% stake.  By business segment, Innovative Medicine, formerly JNJ’s Pharmaceutical segment, sales increased 5.1% to $13.89 billion, driven by oncology and immunology sales which grew 10.4% and 12.4%, respectively. Domestic Innovative Medicine sales, which accounted for 59% of segment sales, increased 10.9% while international sales declined by 2.3%, stemming from the loss of European patent exclusivity for JNJ’s prostate cancer drug, Zytiga. MedTech sales jumped a healthy 10% to $7.46 billion, boosted by the December 2022 $16.6 billion Abiomed acquisition. Free cash flow of $12 billion during the quarter was up from $5 billion recorded during the second quarter. During the quarter, Johnson & Johnson returned $2.9 billion to shareholders through dividend payments, bringing the year-to-date total to $8.9 billion. During the first nine months of 2023, JNJ repurchased $2.5 billion of its shares, thereby completing its current share repurchase program. Johnson & Johnson ended the quarter with $24.0 billion in cash and marketable securities and $30.0 billion in debt, resulting in a $6.0 billion net debt position.  Looking ahead, management raised its sales guidance to $83.6 billion to $84.0 billion, up 7.5% to 8% from 2022, with adjusted EPS expected in the $10.07 to $10.13 range, up 12.7% to 13.3% from last year. During the conference call, management provided an update on the talc litigation. Management is prepared to appeal the circuit court’s decision denying JNJ’s $8.9 billion settlement offer all the way to the Supreme Court. Meanwhile, the company is working with plaintiffs to reach an acceptable settlement for current and future lawsuits.


Friday, Oct. 13, 2023

UnitedHealth Group-UNH reported third quarter revenues rose 14% to $92.4 billion with net income increasing 11% to $5.8 billion and EPS up 12% to $6.24. The strong revenue growth during the quarter included double-digit growth at both Optum and UnitedHealthcare, driven by the continuing increase in the number of people served by Optum and UnitedHealthcare and the broadening of services offered. Cash flow from operations in the third quarter was $6.9 billion- or 1.1-times net income. Free cash flow increased a healthy 11% during the first nine months to $31.8 billion. Year-to-date, the company returned $11.5 billion to shareholders through dividend payments of $5 billion and share repurchases of $6.5 billion. UnitedHealth Group ended the quarter with $89.6 billion in cash and investments, $58.1 billion in long-term debt and $89.6 billion in shareholders’ equity on its healthy balance sheet. Return on equity of 28% during the quarter reflected the company’s consistent, broad-based earnings and efficient capital structure. Management raised their full year 2023 EPS outlook to a range of $23.60 to $23.75.

Thursday, Oct. 12, 2023 

Fastenal-FAST reported third quarter net sales increased 2% to $1.8 billion with net earnings and EPS each rising 4% to $295.5 million and $.52, respectively. Conditions remained challenging in the manufacturing sector in the third quarter, although September was the first month in the company’s history to generate $30 million per month in sales per day.  The company’s operating margin remained stable at 21%. The company effectively worked down its inventory resulting in strong cash flow. Year-to-date, Fastenal converted 121% of earnings into operating cash, the highest in a decade that has averaged 95%. Free cash flow increased 63% for the first nine months of 2023 to $341.2 million with the company paying $199.8 million in dividends, a 12.6% increase over the prior year period. Fastenal reduced its capital expenditure outlook for the full year to between $180 million to $190 million from the prior range of $210 million to $230 million, reflecting the deferral of several distribution center projects.

Hormel Foods-HRL provided its long-term growth objectives through 2026 with expected organic sales growth of 2%-3% and 5%-7% annual operating income growth to at least $250 million by 2026. Hormel’s highest priority from a cash flow perspective is paying its dividend which it has paid for 97 straight years and increased for 57 consecutive years. The company’s strong balance sheet and cash flows should also permit opportunistic share repurchases.  In negotiations with union members, Hormel Foods agreed to the largest wage increase in the company’s history. In addition to  hourly wage increases of $3-$6 an hour, the new contract nearly doubles bereavement leave, protects healthcare coverage, and increases both pension and 401k benefits. 

Microsoft-MSFT announced the IRS is seeking an additional tax payment of $28.9 billion plus penalties and interest for the tax years 2004 to 2013 related to intercompany transfer pricing. Microsoft disagrees with the proposed adjustments and will vigorously contest the issue through the IRS’s administrative appeals office and, if necessary, judicial proceedings. Based on the information currently available, Microsoft does not anticipate a significant increase or decrease to their tax contingencies for these issues within the next 12 months.

Wednesday, October 11, 2023

LVMH Moët Hennessy Louis Vuitton-LVMUY recorded organic revenue growth of 14% in the first nine months of 2023 to € 62.2 billion compared with the same period in 2022. After taking into account the negative 4% exchange rate impact, revenue for the Group was up 10%. Europe, Japan and the rest of Asia achieved double-digit organic growth. All business groups reported sustained organic revenue growth over the period, with the exception of Wines & Spirits which faced difficult comparisons with the prior year period. Selective Retailing generated the strongest business unit growth with organic revenue growth of 26% to € 12.4 billion as Sephora performed exceptionally well and continued to gain market share. In the third quarter, organic revenue growth slowed to 9% as growth slowed from China due to the country’s economic challenges.

Gentex-GNTX will own approximately 15% of VOXX International, a leading distributor of automotive and consumer electronics and biometric products,  after a series of purchase transactions with Avalon Park which will be completed in January 2024. The first purchase tranche was completed for $10 per share or approximately $15.7 million.

Tuesday, October 10, 2023

PepsiCo–PEP reported third quarter sales bubbled up 6.7% to $23.5 billion with net income increasing a sweet 14.4% to $3.1 billion and EPS popping 14.9% to $2.24. Organic revenue grew by 8.8% from last year, boosted by an 11% increase from pricing and product mix, partially offset by a 2.5% decline in organic sales volumes. By business segment, PepsiCo Beverages North America sales increased 8% to $7.16 billion, Frito-Lay North America sales increased 7% to $5.95 billion, Europe sales increased 2% to $3.7 billion, Latin American sales increased 21% to $3.06 billion, Africa, Middle East and South Asia sales fell 6% to $1.6 billion, Asia Pacific, Australia, New Zealand and China increased 4% to $1.2 billion and Quaker Foods North America sales increased 5% to $747 million. For the first nine months of 2023, PepsiCo generated $5.1 billion in free cash flow, up 36% from last year on working capital efficiencies, with the company returning $5.69 billion to shareholders through dividend payments of $4.94 billion and share repurchases of $751 million. PepsiCo ended the quarter with $10.27 billion in cash and investments, $35.84 billion in long-term debt and $18.8 billion in shareholders’ equity. Thus far, the impact of the weight-loss treatments on PepsiCo’s business is negligible and management remains optimistic about the snacking category’s future given several tailwinds, such as an increased snacking lifestyle due the rise of the middle class in emerging markets and continued urbanization with meals becoming smaller and more unstructured. Furthermore, during the past five years, the company has worked to transform its portfolio to align with health conscience consumer preferences, reducing sodium, fat and sugar content and launching healthy snacks and beverages. Macro events have led consumers to become more selective, trading down or choosing smaller sizes. However, across channels that tend to be leading growth indicators, including convenience and food service, management sees healthy demand. Looking ahead, management believes the company is well-positioned to adapt and execute in a dynamic consumer environment given its trusted brands and numerous investments in manufacturing, supply chain, productivity improvements, digitization and technology. As a result, the company raised its full year earnings outlook, projecting adjusted EPS of $7.54, up 11% from last year, on organic revenue growth of 10%. Meanwhile, PEP reiterated its 2023 organic revenue growth forecast of +10% and the expectation of returning $7.7 billion to shareholders through dividends of $6.7 billion and share repurchases of $1.0 billion. Given the strength of PepsiCo’s business and categories, for fiscal 2024, it expects to deliver results toward the upper end of long-term targets for organic revenue growth of 4% to 6% and high-single-digit EPS growth.

Tuesday, Oct. 3, 2023

Visa-V announced a new $100 million generative AI ventures initiative to invest in the next generation of companies focused on developing generative AI technologies and applications that will impact the future of commerce and payments. "With generative AI’s potential to be one of the most transformative technologies of our time, we are excited to expand our focus to invest in some of the most innovative and disruptive venture-backed startups building across generative AI, commerce and payments," said David Rolf, Head of Visa Ventures, Visa Inc.

Brown-Forman-BFB announced that its Board of Directors has approved a $400 million share repurchase authorization, commencing October 2, 2023, through October 1, 2024. Lawson Whiting, Brown-Forman’s President and Chief Executive Officer said, "Brown-Forman is appropriately attentive to today's uncertain market conditions while also confident in the long-term potential for our portfolio of brands. We always strive to deliver leading shareholder returns and believe this buyback authorization provides us the necessary flexibility to repurchase our shares when the market presents the right opportunity."

Thursday, Sept. 28, 2023

Nike-NKE reported fiscal first quarter revenues rose 2% to $12.9 billion with net income dipping 1% to $1.5 billion and EPS up 1% to $.94. Sales growth in China led the way with the second consecutive quarter of double-digit constant currency growth to $1.7 billion. Nike Direct revenues increased 6% to $5.4 billion with growth across all geographies. Inventories for the company were $8.7 billion down 10%. Nike continues to have a strong track record of investing to fuel growth and consistently increasing returns to shareholders, including 21 consecutive years of increasing dividend payouts. In the first quarter, Nike returned approximately $1.7 billion to shareholders through dividends of $524 million, up 9% from the prior year, and share repurchases of $1.1 billion, reflecting 10.5 million shares retired as part of the company’s four-year $18 billion share repurchase program approved in 2022. As of the end of the quarter, 54 million shares have been repurchased for a total of $5.9 billion at an average cost per share of $109.26 per share. Nike is seeing strong consumer demand in a healthy market for its products. For the full fiscal 2024 year, Nike expects mid single-digit revenue growth with gross margins expanding 140-160 basis points through strategic pricing and lowering supply chain costs.

Accenture-ACN reported fiscal fourth quarter sales increased 3.6% to $15.99 billion with net income falling 18% to $1.37 billion and EPS declining $17% to $2.15. By business segment, Communications, Media & Technology revenues declined 12% to $2.7 billion, Financial Services revenues increased 3% to $3.0 billion, Health & Public Services revenues increased 13% to $3.3 billion, Products revenues increased 5% to $4.8 billion and Resources revenues increased 10% to $2.2 billion. By geography, revenues increased 1% in North America to $7.6 billion, 7% in Europe to $5.3 billion and 6% in Growth Markets to $3.1 billion. New bookings during the quarter declined 10% from last year to $16.6 billion, reflecting customer caution about the macro environment that has impacted the pace of technology investment. For the full fiscal year, Accenture reported a 4% increase in revenues to $64.1 billion with net income dipping slightly to $6.87 billion and EPS inching up 1% to $10.77. Excluding business optimization expenses and a one-time investment gain, adjusted EPS increased 9% to $11.67. New bookings during the year increased 1% to a record $72.2 billion, reflecting a book-to-bill ratio of 1.1. During fiscal 2023, Accenture generated a solid 26.7% return on shareholders’ equity and $9.0 billion in free cash flow with the company returning $7.2 billion to shareholders through dividends of $2.8 billion and share repurchases of $4.3 billion, including $1 billion repurchased during the fourth quarter at an average cost per share of $322.58. About $6.5 billion remains authorized under the current share repurchase program. Accenture ended the fiscal year with $9.25 billion in cash and investments, $43.1 million of long-term debt and $25.69 billion in shareholders’ equity on its pristine balance sheet. The company raised its quarterly dividend by 15% to $1.29 per share.  Looking ahead to the first quarter of fiscal 2024, assuming a 2.5% benefit from foreign currency, management expects constant currency revenues to decline by 2% to be up by 2% on difficult comps. For the full 2024 fiscal year, revenue growth is expected in the 2% to 5% range with EPS in the $11.41 to $11.76 range, up 6% to 9% from fiscal 2023. The company expects free cash flow in the $8.7 billion to $9.3 billion range during fiscal 2024 with the company returning at least $7.7 billion to shareholders through dividends and share repurchases.


Wednesday, Sept. 27, 2023

Paychex-PAYX reported solid fiscal first quarter growth with total revenues increasing 7% to $1.3 billion, net income growing 11% to $419.2 million and EPS up 10% to $1.16. Demand for the company’s solutions remains strong as client seek the company’s technology and expertise amid a rapidly changing business environment. Paychex has been harnessing the power of Artificial Intelligence (AI) for the past decade thanks to its vast data sets which provide actionable insights to clients to help them improve efficiencies, make informed decisions on their workforce and deal with compliance challenges. Return on invested capital during the trailing 12 months was a superb 47%, reflecting the high profitability of the business. Free cash flow increased 85% during the first quarter to $617.1 million thanks to higher earnings and favorable working capital changes. During the quarter, Paychex paid $321.9 million in dividends. Paychex is seeing a stable macro environment for the small and mid-sized businesses it serves which continue to hire workers at a moderate level and with wage inflation continuing to normalize along with overall inflation. For the full fiscal 2024 year, Paychex expects revenues to increase at the high end of its previously projected 6%-7% growth forecast and raised its adjusted EPS growth outlook to 9%-10% in part due to the higher interest rates earned on funds held for clients, which should range between $140 million to $150 million.

 

Thursday, Sept. 21, 2023

Oracle-ORCL continues to expect to reach organic revenues of $65 billion by fiscal 2026,  including the Cerner business, while increasing its operating margin to 45%, and growing its annual EPS by better than 10%. At its Investor Day, Oracle said it is committed to these targets, but hopefully will exceed those goals as the next three years unfold.

Texas Instruments-TXN will raise its quarterly cash dividend 5%, from $1.24 per share to $1.30, or $5.20 annualized. The increase is consistent with TI's long-term objective for dividends by providing a sustainable and growing dividend and reflects the company's continued commitment to return all free cash flow to its owners over time. Today's announcement marks 20 consecutive years of dividend increases.

FactSet-FDS reported fourth quarter revenues rose 7% to $535.8 million with net income and EPS each declining 38% to $65.1 million and $1.68, respectively. The earnings decline reflected non-recurring charges and a higher tax provision, which had an adverse $.68 per share impact. On an adjusted basis, fourth quarter EPS declined 6%. For the full fiscal 2023 year, revenues increased 13% to $2.1 billion with net income jumping 18% to $468.1 million and EPS up 17% to $12.03.  Adjusted EPS increased 8%, as the company lapped a one-time charge in the prior year. This marks the 43rd consecutive year of revenue increases for the company and the 27th consecutive year that the company has increased its adjusted EPS. Return on shareholders’ equity for the year was a strong 28.9%. Free cash flow increased 20% during the year to $584.8 million with the company paying dividends of $138.6 million and repurchasing $176.7 million of its shares. FactSet increased its dividend 10% in April, marking the 24th straight year of dividend increases, and in June, expanded its share repurchase program by $300 million, highlighting the company’s commitment to return value to shareholders. During the year, client count increased by 5.1% or 383, while users grew by 5.6% or 9,900 from the prior year. Annual retention as a percentage of clients was 91%.  FactSet’s outlook for fiscal 2024 is for revenues in the range of $2,210 million to $2,230 million, representing growth of 6% to 7%, adjusted operating margin expansion of 10-50 basis points and EPS in the range of $14.20-$14.70, representing 18%-22% growth. FactSet expects the second half of the year to be stronger than the first half due to improved customer sentiment. The company is stepping up its development of generative AI tools given its vast trove of proprietary data.

Cisco-CSCO and Splunk, the cybersecurity and observability leader, announced a definitive agreement under which Cisco intends to acquire Splunk for $157 per share in cash, representing approximately $28 billion in equity value. The combination of these two established leaders in AI, security and observability will help make organizations more secure and resilient. The transaction is expected to be cash flow positive and gross margin accretive in the first fiscal year post close, and non-GAAP EPS accretive in year two. Additionally, it will accelerate Cisco's revenue growth and gross margin expansion. The transaction will not impact Cisco's previously announced share buyback program or dividend program.  The deal is expected to close by the end of the third quarter of calendar year 2024. 

Starbucks-SBUX announced that its Board of Directors approved an increase in the company’s quarterly cash dividend 7.5% from $0.53 to $0.57 per share which raises the company’s annual dividend rate to $2.28 per share. Starbucks initiated its dividend in 2010 at $0.05 per share and increased its dividend consecutively each year over the past 13 years at a CAGR of approximately 20%.

Tuesday, Sept. 19, 2023

Microsoft-MSFT increased its quarterly dividend 10% to $.75 per share, marking the 10th consecutive year of dividend increases. The dividend is payable Dec. 14, 2023, to shareholders of record on Nov. 16, 2023.


This holiday season, running November 1 through December 24, U.S. retail sales excluding automotive are expected to increase 3.7% year-over-year (YOY), according to Mastercard SpendingPulse™. After years of inventory and spending habits being in flux, the 2023 season will bring a broader rebalancing across categories, channels, and sectors in alignment with macroeconomic trends. While digital shopping habits became the new normal during the pandemic, this season’s shopper is looking to make purchases anytime, anywhere – in-store and online. With this omnichannel approach in mind, consumers are anticipated to shop across channels, with e-commerce expected to increase +6.7%, and in-store sales to increase +2.9% YOY. Electronics are anticipated to increase +6.0% YOY this season. The Restaurant sector is expected to continue its growth streak, increasing +5.4% YOY and outpacing Grocery growth (+3.9%), as consumers make plans to gather around tables and with loved ones for the holidays.

 

Monday, Sept. 11, 2023

Oracle-ORCL reported first quarter revenues rose 9% to $12.5 billion with net income jumping 56% to $2.4 billion and EPS up 54% to $.86. Revenue growth was driven by cloud services and license support revenue growth of 13% to $9.5 billion. This highly profitable recurring revenue stream combined with continued expense discipline led to 16% growth in non-GAAP EPS and 21% growth in free cash flow to $5.7 billion. Oracle expects very strong free cash flow generation for the balance of the year. During the quarter, Oracle paid $1.1 billion in dividends and repurchased $150 million of its shares. Oracle Chairman and CTO, Larry Ellison said generative AI may be the most important new computer technology ever.  Since fiscal year end, AI development companies have signed contracts to purchase more than $4 billion of capacity in Oracle’s Gen2 Cloud, twice as much as had been booked at the end of the fourth fiscal quarter. There is far more demand than supply and Oracle is building datacenters as fast as they can to support AI. Oracle currently has 64 cloud regions around the world. Oracle claims its RDMA interconnected NVIDIA Superclusters train AI models at twice the speed and less than half the cost of other clouds. For the second quarter, cloud revenue is expected to increase 27% to 29% on a constant currency basis with EPS expected in the range of $1.27-$1.31.

United Parcel Service-UPS said its new five-year contract covering some 340,000 Teamsters-represented workers in the United States would increase wage and benefit costs at a 3.3% compound annual growth rate over the life of the agreement through 7/31/28. Contract-related costs in the second half of 2023 are expected to be about $500 million more than UPS expected.

As previously disclosed, Pratt & Whitney, a unit of RTX-RTX, has determined that a rare condition in powder metal used to manufacture certain engine parts will require accelerated inspection of the PW1100G-JM (GTF) fleet, which powers the A320neo. To address the situation, RTX will record a pre-tax operating profit charge in the third quarter of 2023 of approximately $3 billion. RTX updated its financial outlook for fiscal 2023. The company expects to report sales in the range of $67.5 billion to $68.5 billion and confirmed its outlook for adjusted EPS of $4.95 to $5.05 and adjusted free cash flow of about $4.3 billion. RTX plans to repurchase $3 billion of its shares in 2023. The company reaffirmed sales growth and margin expansion commitments from 2020 to 2025. Free cash flow in 2025 is expected to approximate $7.5 billion, including a $1.5 billion adverse impact from the powder metal matter. RTX reaffirmed its $33 billion to $35 billion capital return commitment to shareholders from the merger through 2025.

Friday, Sept. 8, 2023

Bernard Arnault, CEO of LVMH Moët Hennessy Louis Vuitton-LVMUY, has bought €215 million ($230 million) of LVMH shares since late July according to regulatory filings. The French businessman and his family own about 48% of LVMH’s shares with almost 64% of the voting rights.

Thursday, Sept. 7, 2023

Fastenal-FAST reported August 2023 sales and average daily sales each increased 3.6% to $668.2 million and $29.0 million, respectively. By geography, sales jumped 9.0% in Canada/Mexico, rose 3.2% in the United States, and declined 4.7% in the rest of the world. By end market, sales were the strongest in heavy machinery which rose 8.6% with other end markets up 7.8%, while reseller sales declined 7.3% and non-residential construction sales declined 6.2%. By product line, Safety products increased 9.5% as Other sales increased 6.9% with Fastener sales down 3.8%. The percentage of the Top 100 national accounts growing during the month was 63% compared to 81% in the prior year period. Fastenal ended the quarter with 22,796 employees, an increase of 4.3%.

Thursday, Aug. 31, 2023

Hormel Foods-HRL reported fiscal third quarter sales declined 2% to $3 billion with net income down 26% to $162.7 million and EPS declining 25% to $.30. These results reflected a $70 million adverse arbitration ruling related to an isolated commercial dispute with a third party. On an adjusted basis, earnings would have been relatively flat. During the quarter, the company delivered volume growth in all business segments driven by a recovery in turkey and strong demand for many foodservice items and growth from leading brands including SPAM, Hormel Black Label bacon, Planters and Hormel pepperoni. Free cash flow dipped 2% year-to-date to $565 million with Hormel repurchasing $12 million of its stock and paying $442.6 million in plump dividends. For the balance of the fiscal year, Hormel expects continued softness in its International segment and earnings pressure from heightened competition at retail. As a result, the company lowered its sales and earnings outlook for the full fiscal 2023 year with sales expected to be flat to down 4% and EPS expected to be lower than last year in the range of $1.51 to $1.57.

Wednesday,  Aug. 30, 2023

Johnson & Johnson-JNJ updated its financial statements and 2023 guidance following the completion of the Kenvue separation. JNJ currently maintains a 9.5% stake in Kenvue, the consumer health business, which may be further monetized next year for tax purposes.  Kenvue’s financial results will be presented as discontinued operations and will include a gain of approximately $20 billion in the third quarter of 2023. JNJ expects to report sales from continuing operations in 2023 in the range of $83.2 billion to $84 billion, representing 7.5% growth at the midpoint of the range. The company’s adjusted operational EPS for 2023 is expected in the range of $9.90-$10.00, reflecting 11.5% growth at the midpoint of the range, reflecting improving profit margins. The company reduced its outstanding share count by about 191 million shares, with a partial year benefit of $.28  to EPS. JNJ will maintain its quarterly dividend of $1.19 per share.

Brown-Forman-BFB reported first quarter revenues increased 3% to $1.0 billion with net income and EPS both down 7% to $231 million and $.48, respectively. The first quarter growth was impacted by the difficult shipment comparison from fiscal 2023, when inventory was rebuilt which had been impacted by prior glass supply challenges. Portfolio growth was led by Gin Mare and Diplomatico brand, which collectively increased net sales by 2%. New Mix ready-to-drink (RTD) delivered very strong organic sales growth of 32%. The tequila brand el Jimador reported 26% organic sales growth and Jack Daniel’s Tennessee Apple reported 52% organic sales growth. The company’s overall gross margin expanded 90 basis points to 62.7% driven by favorable price/mix, lower supply chain disruption related costs and lower tariff-related costs. Operating expenses, however, were higher due to increased advertising expenses, acquisition costs and higher compensation related expenses. Brown-Forman used a net $11 million in cash during the first quarter as part of its capital expenditures which are planned in the $250 to $270 million range for the year. Brown-Forman paid $99 million in dividends during the quarter and has paid quarterly dividends for 79 consecutive years and has increased the dividend for 39 straight years. Brown-Forman continues to expect organic net sales growth for the full fiscal 2024 year in the range of 5% to 7% with operating income growth in the 6% to 8% range.

"[AI] will touch every sector, every industry, every business function, and significantly change the way we live and work," said Alphabet-GOOGL CEO Sundar Pichai. "This isn’t just the future. We are already starting to experience the benefits right now. As a company, we’ve been preparing for this moment for some time."  For example, Alphabet  is rolling out its “Duet AI” which integrates artificial intelligence into Google Meet, its video chat service. It can automatically improve the look, lighting and sound of a video caller. It will automatically generate captions in 18 languages, detecting what is being spoken and showing translation in real time. But perhaps most notable is a system that can use artificial intelligence to watch meetings and then recap them. Users can delegate note taking, so that an automatically generated summary of a meeting is sent to attendees when a meeting is over. And if someone arrives late to a meeting, they will be able to see a “summary so far” that will catch them up with everything that has been said. If they do not want to attend the meeting at all, they can choose “attend for me”, sending the AI to the meeting in behalf, passing on any message or input and then sending a recap after it is over. In another more personal example, Google will reveal an app it is developing to be used with GE Appliances that would allow a consumer to use AI to create recipes based on what they have in their refrigerator. Google Cloud’s CEO Thomas Kurian claimed that 50% of all artificial intelligence startups use Google Cloud, because its platform has a wide range of applications. He also said 70% of all AI unicorns, startups with valuations in excess of $1 billion, run on Google Cloud. "AI is maturing and there’s a range of different kind of models now. We offer 13 different kinds of accelerators, the widest in the world," Kurian said in an interview with CNBC.

Thursday, Aug. 24, 2023

Ulta Beauty-ULTA rang up a 10.1% increase in sales to $2.53 billion with net income inching up 1.5% to $300.1 billion and EPS up 5.6% to $6.02. Comparable sales--sales for stores open at least 14 months plus e-commerce sales--increased 8.0% compared to an increase of 14.4% in the second quarter of fiscal 2022, driven by a 9.0% increase in transactions and a 1.0% decrease in average ticket. Operating margins declined 150 basis points to 15.5% owing to lower merchandise margin, higher inventory shrink, higher supply chain costs, higher corporate overhead due to strategic investments, higher store payroll and benefits and higher store expenses. During the quarter, Ulta Beauty opened three new stores, relocated two stores and remodeled three stores, ending the quarter with 1,362 stores. During the first half of 2023, Ulta Beauty generated $244.1 million in free cash flow, down 47% from last year on working capital shifts and a 70% jump in capital expenditures to support IT and supply chain investments and the launch of luxury brands. During the first six months of fiscal 2023, the Company repurchased 1.1 million shares of its common stock at a cost of $559.0 million, including 593,629 shares repurchased during the second quarter at an average cost per share of $464.10, leaving $541.0 million remaining available under the $2.0 billion share repurchase program announced in March 2022. Management updated its guidance with fiscal 2023 sales now expected in the $11.05 billion to $11.15 billion range and EPS in the $25.10 to $25.60 range, both up slightly from prior guidance. Management expects comparable store growth in the low-single-digits for the second half of fiscal 2023 and expects third quarter EPS to be down from last year due to continuing trends in merchandise margin, shrink and capital expenditures that were shifted from the second quarter into the third quarter.

Thursday, Aug.  18, 2023

Ross Stores-ROST reported an 8% increase in second quarter sales to $4.9 billion with net income climbing 16% to $446.3 million and EPS up 19% to $1.32. Same store sales were up 5% versus down 7% in the second quarter of 2022. Operating margin was flat compared to last year at 11.3%. At quarter end, total inventories declined 15% to $2.3 billion, as the company is carefully managing expenses and inventory to maximize potential for both sales and earnings growth. During the quarter, the company added 81 new stores ending the quarter with 1,722 Ross locations and 339 dd’s DISCOUNTS locations. During the first half of 2023, Ross Stores generated free cash flow of $752.8 million compared to negative $299.6 million in the same period last year. Ross Stores returned $693.7 million to shareholders during the first half of fiscal 2023, consisting of $228.8 million in dividends and $464.9 million in share repurchases, including $230 million during the second quarter at an average cost of $104.54 per share. The company expects to repurchase a total of $950 million of its stock this year under its two-year $1.9 billion share repurchase program that extends through fiscal 2023. Ross Stores ended the quarter with $4.5 billion in cash, $2.5 billion in long-term debt and $4.4 billion in shareholders’ equity on its sturdy balance sheet. Given the improved second quarter performance, the company is raising their outlook for second half sales and earnings. Ross now expects same store sales for the third and fourth quarters of 2023 to be up 2% to 3% and up 1% to 2%, respectively. Based on these assumptions, same store sales for the 52 weeks ending January 27, 2024 are forecast to be in the range of up 2% to 3%. EPS for the third quarter is projected to be $1.16 to $1.21 versus $1.00 last year and $1.58 to $1.64 for the fourth quarter, compared to $1.31 in 2022. Based on the first half results and second half guidance, EPS for the 53 weeks ending February 3, 2024 is now planned to be in the range of $5.15 to $5.26 versus $4.38 last year.


Wednesday, Aug. 16, 2023

Cisco Systems-CSCO reported record fourth quarter results as revenues rose 16% to $15.2 billion with net income jumping 41% to $4.0 billion and EPS routing up 43% growth to $.97. For the full year, revenues rose 11% to $57.0 billion with net income up 7% to $12.6 billion and EPS up 9% to $3.07. Return on shareholders’ equity for the year was an impressive 28.4%, reflecting the high profitability of the business. Cisco’s strong financial results reflected solid customer demand, market share gains and innovation in key areas like artificial intelligence, security and cloud. Product orders during the quarter increased 30% sequentially with double-digit increases in all customer markets. Free cash flow during the year jumped 49% to $19.0 billion with the company paying $6.3 billion in dividends and repurchasing $4.3 billion of its stock, including the repurchase of 25 million shares in the fourth quarter for $1.3 billion at an average price of $50.49 per share. Cisco has $10.9 billion remaining authorized for future share repurchases and has committed to repurchasing approximately $5 billion of its stock a year while continuing to increase its dividend, which it has done for 12 consecutive years thanks to the strength and durability of its strong cash flows. For fiscal 2024, Cisco expects to generate revenues in the range of $57.0 billion to $58.2 billion with EPS expected in the range of $3.19 to $3.32.

The TJX Companies-TJX reported strong second quarter results with sales ringing up an 8% gain to $12.8 billion as overall comparable store sales increased 6%, driven entirely by increased customer traffic at every division.  The company’s largest division, Marmaxx, reported comparable store sales jumped 8% with very strong sales in both its apparel and home businesses. Second quarter net income and EPS growth each jumped more than 22% to $989 million and $.85, respectively, thanks in part to pre-tax profit margins expanding by 1.2 percentage points to 10.4%--again well above plan due to lower freight costs and above average sales. Free cash flow was very strong during the first half of the year and approximated $1.3 billion with the company paying $725 million in dividends and repurchasing $1.05 billion of its common stock at an average price of $79.55 per share. The company continues to expect to repurchase about $2.0 billion to $2.5 billion of its stock for the full fiscal year. The third quarter is off to a very strong start with “phenomenal” product availability for the fall and holiday season. The company is increasing its full year fiscal outlook for sales and profits with comparable store sales expected to increase 3% to 4% with total sales in the range of $53.5 billion to $53.8 billion and pre-tax margin expected in the range of 10.7% to 10.8% leading to EPS  in the range of $3.66 to $3.72, representing double-digit growth.

Thursday, Aug. 10, 2023

Johnson & Johnson-JNJ said the U.S. Food and Drug Administration had approved its antibody-based therapy for patients with a difficult-to-treat type of blood cancer. The therapy, talquetamab-tgvs branded as Talvey, belongs to a class of treatments called bispecific antibodies designed to bring a cancer cell and an immune cell together so the body's immune system can kill the cancer. Talvey was approved as a weekly or biweekly subcutaneous, or under-the-skin, injection to treat patients with relapsed multiple myeloma who have received at least four prior lines of treatment, the company said. Multiple myeloma is a form of cancer that starts in the bone marrow and ultimately disrupts the production of normal blood cells.

Tuesday, Aug. 8, 2023

UPS-UPS reported second quarter revenue declined 11% to $22.1 billion with net earnings dropping 27% to $2.1 billion and EPS down 25.5% to $2.42. By business segment, U.S. Domestic Package revenue declined 7% to $14.4 billion on a 10% volume decline in average daily volume (ADV) to 17.7 million due primarily to volume diverted as noise levels surrounding Teamster labor negotiations grew louder. As the July 31 strike deadline approached, customers diverted about 1 million ADV to other carriers while UPS lost about 200,000 ADV through reduced sales pipeline pull-through. Volume declines were partially offset by a 3.3% increase in revenue per piece thanks to strong base rates and customer mix. U.S. Domestic adjusted operating margins declined 30 basis points to 11.7% on a 6.5% decline in operating expenses as management leveraged technology to quickly adjust expenses to reduces volumes while also cutting management overhead. International revenue declined 13% to $4.4 billion as the sluggish macroeconomic environment and persistent inflation weighed on average daily volumes resulting in a 6.6% year-over-year decline to 3.16 million packages. International revenue per piece declined 5.7% due to lower fuel surcharges. International adjusted operating margins declined 330 basis points to 20.4%. Supply Chain Solutions revenues fell 23% to $3.2 billion as soft global demand, especially out of Asia, drive down forwarding market rates and volumes. Operating margins declined 180 basis points to 10.4%. For the first half of 2023, UPS generated $5.59 billion in operating cash flow, down 33% from last year owing to the net income decline and working capital demands. Free cash flow of $3.77 billion declined 45% from last year but represented a solid 95% of reported net income. UPS returned $4.2 billion to shareholders during the first half of 2023 through dividend payments of $2.7 billion and share repurchases of $1.5 billion at an average cost per share of about $178.  UPS plans to pay $5.4 billion in dividends and repurchase $3.0 billion share in 2023. UPS ended the first half of the year with $7.88 billion in cash and investments, $19.4 billion in long-term debt and $20.0 billion in shareholders’ equity. Given terms of the new labor contract which calls for compensation increases that will result in the average full-time driver earning $170,000 annually in pay and benefits by the end of the contract and part-timers earning at least $25.75 per hour plus full healthcare and pension benefit, management revised its 2023 guidance. Revenue of about $93.0 billion will decline about 7% from last year with adjusted operating margins of 11.8% from 13.0% in 2022. Capital expenditures of about $5.3 billion will increase 11% from last year as the company continues investing to grow in the most attractive segments of the market.


Saturday, Aug. 5, 2023

Berkshire Hathaway-BRKB reported the company’s net worth during the first half of 2023 increased by 14%, or $66.5 billion, to $539.9 billion with book value equal to about $372,847 per Class A share as of 6/30/23. Berkshire boasts the largest shareholders’ equity of any U.S. company.

On a GAAP basis, Berkshire reported net earnings of $35.9 billion during the second quarter compared to a $43.6 billion loss in the prior year quarter. Investment gains and losses from changes in the market prices of Berkshire’s substantial equity investments will produce significant volatility in earnings. Berkshire’s five major equity investment holdings which represent about 78% of total equities held, include American Express at $26.4 billion (which charged 18% higher during the first half of the year or $4.0 billion); Apple at $177.6 billion (which jumped 49% during the first half or a juicy $58.6 billion); Bank of America at $29.6 billion (which declined 13% or  $4.6 billion in value due to banking woes);  Coca-Cola at $24.1 billion (which fizzled 5% or $1.3 billion) and  Chevron at $19.4 billion (which was 35% lower or $10.6 billion in value, reflecting partial sales of the position).

During the second quarter, Berkshire’s revenues rose 21.4% to $92.5 billion during the quarter, aided by the $14.8 billion contribution from Pilot Travel Centers which was consolidated into Berkshire’s results following the acquisition of Berkshire’s additional 41.4% ownership interest in the company, bringing Berkshire’s total ownership in Pilot to approximately 80%. Berkshire’s operating earnings increased 6.6% during the second quarter to $10.0 billion, led by a turnaround in Berkshire’s insurance businesses.

During the second quarter, Berkshire’s insurance businesses generated $1.2 billion from underwriting earnings compared to $715 million in the prior year quarter due to improvements at GEICO and the Berkshire Hathaway Primary Group, which included the acquisition of Alleghany Insurance.  Insurance investment income increased 24% during the quarter to $2.4 billion, reflecting higher interest income as short-term interest rates increased significantly.  The float of the insurance operations increased $2 billion since year end to end the quarter at about $166 billion.  The combined cost of float was negative during the first half due to the $2.2 billion in underwriting gains during the first half of the year.

Burlington Northern Santa Fe’s revenues declined 12% during the quarter to $5.7 billion, reflecting lower volumes in all business groups due to moderating demand and the loss of an intermodal customer and a slightly lower average revenue per car/unit. Net earnings rolled 24% lower to $1.3 billion due to the 11% decrease in overall freight volumes and higher operating costs.

Berkshire Hathaway Energy reported revenues declined 3% during the second quarter to $6.4 billion with net earnings relatively unchanged at $785 million. The revenue decrease reflected lower revenues from the energy businesses and notably the real estate brokerage business held in this business sector.

Comparative operating results for Pilot Travel Center were detailed following the consolidation of the business with revenues and earnings highly dependent on fuel volumes, prices and margins. During the second quarter, Pilot’s revenues traveled 32% lower to $14.8 billion with pre-tax earnings declining 23% to $186 million due to significantly lower fuel prices as well as from lower fuel sales volumes.

Berkshire’s Manufacturing businesses reported second quarter revenues fell 3.4% to $19.1 billion with operating earnings up 2.5% to $3.1 billion. The industrial products segment led the way for the quarter with revenues rising 15% to $8.9 billion and operating earnings increasing 20% to $1.5 billion thanks to improvements at Precision Castparts, IMC and Marmon including acquisitions as part of the Alleghany deal. However, the results of the building products and consumer products segments generally deteriorated during the quarter with revenue and earnings down in both segments. Given the significant increase in interest rates, including home mortgage rates, demand has slowed for Berkshire’s home building businesses with some of the businesses expected to experience declines in revenues and earnings for the balance of 2023. In the consumer products segment, weakness in demand for recreational vehicles at Forest River due in part to rising interest rates and sluggish customer demand in the apparel group contributed to lower sales and earnings.

Service and Retailing revenues increased 0.6% during the quarter to $23 billion with pre-tax earnings increasing 9% to $1.4 billion. The Service group led the way as revenue increased 9% to $5.2 billion with pre-tax earnings up 9% to $824 million thanks to increased revenue and earnings from aviation services and the impact of the IPS acquisition, a provider of various services in facilities construction management.

Berkshire’s balance sheet continues to reflect significant liquidity and a very strong capital base of $539.9 billion as of 6/30/23. Excluding railroad, energy and utility investments, Berkshire ended the first half of the year with $545.2 billion in investments allocated approximately 64.8% to equities ($353.4 billion), 4.1% to fixed-income investments ($22.4 billion), 26.0% in cash and equivalents ($141.9 billion) and 5.1% in equity method investments ($27.5 billion), which includes 26.5% ownership of Kraft Heinz and 25.1% ownership of Occidental Petroleum. Warren Buffett noted at the annual meeting he has no plans to acquire Occidental Petroleum.  

Free cash flow increased 49% during the first half of the year to $12.7 billion due to the higher earnings.   During the first half, capital expenditures approximated $8.4 billion, which included $5.7 billion for BNSF and BHE, its railroad and utility and energy units. Berkshire expects capital expenditures for the remainder of 2023 for BNSF and BHE to approximate $8.3 billion.

During the first half, Berkshire paid cash of $7.4 billion to acquire equity securities and received proceeds of $25.8 billion from the sale of stocks, including the sale of part of Chevron in addition to several bank holdings. The equity sales generated $3.3 billion in after-tax realized gains during the first half.  In addition, Berkshire purchased a net $746 million in Treasury Bills and fixed-income investments. On January 31, 2023, Berkshire acquired an additional 41.4% interest in Pilot for approximately $8.2 billion which brought Berkshire’s ownership of Pilot up to 80%.  Subsequent to quarter end, Berkshire Hathaway Energy announced that it will acquire an additional 50% interest in Cove Point LNG, which will increase its interest to 75%. The transaction is valued at $3.3 billion and subject to regulatory approvals.

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 $5.9 billion of its common stock, including $1.4 billion during the second quarter. These repurchases included 627 Class A shares purchased at an average price of approximately $506, 477 per share and 2,134,093 Class B shares purchased an average price of $335.55 per share during June 2023.

 

 Friday, Aug. 4, 2023

Fastenal-FAST reported July net and average daily sales each increased 3.7% to $573.5 million and $28.7 million, respectively. Daily sales growth by geography was strongest in Canada/Mexico at 9.7%. By end market, manufacturing sales increased by 6.9% while non-residential construction declined by 9.5%.  By product line, Safety sales increased by 8.3% with Other sales up 6.6% partially offset by the 1.9% decline in Fasteners. About 66% of the company’s top 100 national accounts experienced growth compared to 85% in the prior year period. About 50% of the company’s public branches were growing compared to 72% last year. Total personnel increased 5% to 22,897 as of the end of July.

Thursday, Aug. 3, 2023

Apple-AAPL posted a 1% decline in sales during the fiscal third quarter to $81.8 billion with net income increasing 2.3% to $19.9 billion and EPS up 5% to $1.26. Record Service sales of $21.2 billion, up 8% year-over-year on more than 1 billion paid subscriptions, were offset by declines in iPhone, Mac and iPad sales. By product, iPhone sales declined 2.4% to $39.7 billion despite robust sales in China and Europe that were offset by a slowing smart phone market in the U.S. Mac sales declined 7% to $6.8 billion. During the quarter, Apple successfully transitioned all its Mac models from Intel chips to Apple silicon. iPad sales fell 20% to $5.8 billion on difficult comps. Wearables, Home and Accessories sales increased 2% to $8.3 billion on a record June in China and strong sales in Europe, emerging markets and the Middle East. Two-thirds of every buyer of Apple wearables during the quarter were new buyers. Air Pods, introduced seven years ago, have been a huge success with $40 billion in annual sales, nearly the size of a Fortune 500 company. During the quarter, Apple distributed its Vision Pro device, the company’s first major new product in a decade, to developers who will develop apps for “spatial computing” through the user’s eyes, voice and hands.  Apple expects to release the mixed-reality headset early next year. Services sales of $21.2 billion increased 8% on strength in cloud, video, Apple card and payments. Service revenues, with operating margins of 70%, are expected to continue to improve as users of Apple’s 2 billion plus device installed base become more engaged in the Apple ecosystem. During the first nine months of fiscal 2023, Apple generated $88.9 billion in operating cash flow, down 9% from last year on shifts in working capital. Free cash flow declined 12% to $80.1 billion on a 19% increase in capital expenditures. Year-to-date, Apple returned $67.8 billion of cash to shareholders through dividend payments of $11.3 billion and share repurchases of $56.5 billion, including $18 billion shares repurchased during the quarter at an average price per share of $174.76. Apple ended the quarter with $166.5 billion in cash and investments, $98.1 billion in long-term debt and $60 billion in shareholders’ equity on its shiny balance sheet. Looking ahead to the fiscal fourth quarter, Apple expects iPhone and Service sales to accelerate with Mac and iPad sales down double-digits. Gross margins are expected in the 44% to 45% range with operating expenses in the $13.5 billion to $13.7 billion range.


Stryker-SYK reported second quarter sales increased 11% to $5 billion with net income and EPS up 12% to $738 million and $1.93, respectively. During the quarter, organic net sales increased 11.9%, including 11.4% from increased unit volume and 0.5% from higher prices. By business segment, MedSurg and Neurotechnology increased 12% to $2.86 billion, driven by double-digit growth in Instruments, Medical and Neuro Cranial. Orthopaedics and Spine increased 9.9% to $2.1 billion on double-digit growth in Knees and Trauma and Extremities. Gross profit margin was 63.7% compared to 62.9% in the prior year period. For the six months ended 6/30/2023, Stryker generated $1.1 billion in operating cash flow representing an earnings conversion ratio of 85%. Free cash flow increased 80% year-over-year to $851 million with the company returning $569 million to shareholders through dividend payments. The board of directors declared a quarterly dividend of $0.75 per share payable on October 31, 2023, representing an increase of 7.9% versus the prior year. Stryker ended the quarter with $1.5 billion in cash and investments, $11.1 billion in long-term debt and $17.3 billion in shareholders’ equity. Given the healthy second quarter results, the strong order book for capital equipment and continued positive procedural trends, Stryker now expects 2023 organic sales growth in the 9.5% to 10.5% range. Should foreign currency exchange rates hold near current levels, full year reported sales will be unfavorably impacted by 0.3% and adjusted EPS will be adversely impacted by about $0.05 to $0.10. Given the first half performance and strong sales momentum, the company now expects adjusted EPS in the range of $10.25 to $10.45.

Booking Holdings-BKNG reported second quarter revenues traveled 27% higher to $5.5 billion as net income flew 51% higher to $1.3 billion with EPS jumping 66% to $34.89. Gross travel booking rose 15% to a record $39.7 billion during the quarter as the company continued to see robust leisure travel demand. This helped drive stronger than expected room night bookings growth of 9% along with 24% growth in rental car days and 58% growth in airline tickets during the quarter. Booking is seeing 48% of room nights booked directly from its own platforms on its mobile apps, which is up about 6% year over year. About 34% of total room nights booked were in alternative accommodations. Free cash flow increased 6% in the first half to $4.4 billion with the company repurchasing $5.2 billion of its common stock, including $3.1 billion repurchased in the second quarter. Since the beginning of the year, Booking has repurchased 5% of its shares outstanding and has $19 billion remaining authorized for future share repurchases which the company expects to complete within its previously stated four-year timeframe. Strong travel trends have continued into July with an acceleration in room nights growth of 20%, and the company expects a record summer travel season in the third quarter with cancellation rates below 2019 levels.  For the first time since the pandemic, international room nights have fully recovered. Asia is seeing the strongest growth with room nights growth of 45% in July. Booking Holdings announced generative AI-enabled travel assistants at both Priceline and Bookings.com which they expect to continue to integrate into all operations. Given the strong first half, Booking increased its financial outlook for the full year with gross travel bookings expected to increase 20% for the year with adjusted EBITDA margins expected to expand by 200 basis points.

Wednesday, Aug. 2, 2023

Cognizant-CTSH reported second quarter sales dipped 1% to $4.9 billion with net income dropping 20% to $463 million and EPS off 18% to $.91 given the uncertain economic backdrop. Growth in revenues in Products and Resources and Health Sciences was offset by declines in Financial Services and Communications, Media and Technology. As clients embrace generative AI, Cognizant announced it will build on Google Cloud's generative AI technology to create healthcare large language model (LLM) solutions, bringing the potential of generative AI to a range of healthcare business challenges. On a geographic basis, Continental Europe led the way with double-digit growth in revenues which was more than offset by a decline in North America. Year-over-year, Cognizant had strong bookings growth of 17% in the second quarter. On a trailing 12-month basis, bookings grew 14% to $26.4 billion, representing a book-to-bill of approximately 1.4x. Free cash flow declined 11% during the first half of the year to $599 million with the company paying dividends of $298 million and repurchasing $436 million of its common stock, including $200 million during the second quarter at an average price of $62.50 per share. Cognizant recently increased its dividend 7% and has $2.4 billion remaining authorized for future share repurchases. Full year 2023 revenue is expected in the range of $19.2 billion to $19.6 billion with adjusted EPS expected in the range of $4.25 to $4.48.


Apple-AAPL
announced that Apple Card's high-yield Savings account offered by Goldman Sachs has reached over $10 billion in deposits from users since launching in April.1 Savings enables Apple Card users to grow their Daily Cash rewards with a Savings account from Goldman Sachs, which offers a high-yield APY of 4.15 percent.


NVR, Inc.-NVR
announced that its Board of Directors has authorized the repurchase of $500 million of its outstanding common stock.

Tuesday, Aug. 1, 2023

Starbucks Corporation-SBUX reported fiscal third quarter revenues increased 12.5% to a record $9.2 billion with net earnings and EPS jumping 25% to $1.1 billion and $0.99, respectively. Same store sales growth increased 10%, driven by a 4% increase in average ticket and a 5% increase in comparative transactions. Starbucks opened 588 net new stores during the quarter, ending the quarter with 37,222 stores. Active Starbucks Rewards Membership increased 15% in the U.S. during the third quarter to 31.4 million members. By region, U.S. revenues increased 11% to $6.7 billion with operating margins declining 30 basis points to 21.7% on previously committed investments in labor. U.S. same store sales increased 7% on a 1% increase in transactions and a 6% increase in average ticket. International sales increased 24.5% to $1.97 billion with comp store sales increasing 24%, driven by a 21% increase in comparable transactions and a 2% increase in average ticket. China comparable store sales increased 46%, driven by a 48% increase in comparable transactions and a 1% decline in average ticket. International operating margin of 19% expanded from 8.5% last year, primarily driven by sales leverage including lapping mobility restrictions in China and prior year amortization expenses. Channel Development sales decreased 6% to $448.8 million, driven by a decline in revenue in the Global Coffee Alliance. During the first nine months of the fiscal year, Starbucks generated $2.4 billion in free cash flow, up 21% from last year with the company returning $2.5 billion to shareholders through cash dividends of $1.8 billion and share repurchases of nearly $700 million. During the quarter, Starbucks repurchased 2 million shares for $204 million or $102 per share and declared a quarterly cash dividend of $0.53 per share, payable on August 25, 2023. The company had 53 consecutive quarters of dividend payouts with CAGR greater than 20%.  For the full year, management expects global and U.S. comp sales growth of 7% to 9%, global revenue growth of 10% to 12% and EPS growth slightly above the high end of 15% to 20%. Starbucks expects global store growth of 7%, primarily driven by China store growth of 13%. In addition, management expects solid global margin expansion for the year.

According to the Paychex | IHS Markit Small Business Employment Watch, hourly earnings growth (3.95%) has dipped below four percent for the first time since 2021, and one-month annualized growth in hourly earnings remains below four percent for the fourth consecutive month. "Our latest jobs data shows a resilient labor market for small businesses," said John Gibson, Paychex president and CEO. "Wage inflation continues to decline, while the labor market remains tight for small businesses and their employees." "Job growth remains relatively flat while wage growth is moderating after its inflation-fueled acceleration last year," said James Diffley, chief regional economist, S&P Global Market Intelligence. "Both of these factors signal a stable economy not heading toward a significant downturn."

Monday, July 31, 2023


 Roche-RHBBY reported first half sales revenue declined 10% to CHF 30.62 billion with net income and EPS dropping 16% to CHF 7.14 billion to CHF 8.87, respectively. Sales in the Pharmaceuticals Division were CHF 22.7 billion, boosted by the continuing uptake of new medicines, which more than offset the negative impact from biosimilar competition. Pharmaceuticals operating margins declined 110 basis points to 44.5%. Diagnostics sales fell 23% to CHF 7.1 billion following the sharp decline in demand for COVID-19-related tests with operating margins dropping 670 basis points to 22%.  The division’s base business grew by 6% at constant currency across all regions, with immunodiagnostics, particularly cardiac tests, being the main growth driver. The Diagnostics Division’s portfolio of COVID-19 tests generated sales of CHF 0.4 billion in the first half of 2023, down 87% from 2022. First half operating cash flow declined 14% to CHF 7.9 billion with free cash flow declining 17.7% to CHF 6.16 billion. During the first half of the year, Roche returned CHF 7.79 billion to shareholders through dividend payments. Roche ended the first half of 2023 with CHF 7.51 billion in cash and investments, CHF 20.3 billion in long-term debt and CHF 26.5 billion in shareholders’ equity. For the full 2023 year, sales are expected to decline in the low-single digits with strong growth from ongoing Pharma launches offset by continued declines in Diagnostics. Core EPS is expected to decline in line with the sales decline. Roche expects further dividend increases in Swiss Francs.

Friday, July 28, 2023


Gentex-GNTX reported second quarter sales jumped 26% to a record $583.5 million with net income and EPS speeding ahead more than 50% to $109.2 million and $0.47, respectively. By business segment, Automotive net sales in the second quarter of 2023 were $574.1 million, up 27%, on record quarterly unit shipments of 12.9 million, driven by Gentex’s core electrochromic technology, continued growth in its Full Display Mirror product line and adoption of other value-add features in the market. Other net sales in the second quarter of 2023, which includes dimmable aircraft windows and fire protection products, were $9.4 million, down 10.5% from last year, on a decline in Fire protection sales, partially offset by an increase in Dimmable aircraft window sales. Gross margins increased 110 basis points from last year to 33.1%, driven by better overhead leverage from the higher sales levels, customer cost recoveries realized in the quarter and improvements in overtime costs, which helped offset certain incremental raw material cost increases that took effect in the first half of 2023. Late last year, management formulated its plan for margin recovery and estimated it would take until the end of 2024 to complete. The company is well on the way to accomplishing the goal of achieving a gross margin of 35-36% by the end of next year. During the second quarter, Gentex generated $120.9 million in operating cash flow, up 65% from last year, boosted by the net income increase and shifts in working capital. Free cash flow increased 87% from last year to $73.4 million. During the second quarter, Gentex repurchased 0.9 million shares of its common stock at an average price of $27.28 per share, leaving about 18.8 million shares remaining available for repurchase pursuant to the current share repurchase plan. Gentex intends to continue purchasing additional shares of its common stock in the future in support of its capital allocation strategy, but share repurchases will vary from time to time and will consider macroeconomic issues, market trends, and other factors deemed appropriate. Gentex ended the quarter with $497.5 million in cash and investments, no long-term debt and $2.2 billion in shareholders’ equity on its pristine balance sheet. Looking ahead the balance of 2023, management expects global light vehicle production to decrease 3% for the third quarter of 2023, as compared to light vehicle production for the third quarter of 2022. For calendar year 2023, light vehicle production is forecasted to increase 6%. Given the stellar year-to-date performance, Gentex updated its guidance with revenues expected in the $2.2 billion to $2.3 billion range and gross margins in the 32.5% to 33% range.


Thursday. July 27, 2023

Texas Roadhouse-TXRH reported a meaty 14.3% increase in second quarter revenue to $1.17 billion with net income increasing 13.6% to $82.27 million and EPS up 14.7% to $1.22. Comparable restaurant sales increased 9.1% at company restaurants and 9.2% at domestic franchise restaurants. Comparable restaurant sales at company restaurants for the first four weeks of the third quarter of 2023 increased 10.7%. Average weekly sales at company restaurants were $146,727, up 8.2% from last year, of which $18,496 were to-go sales, up 3.9% from last year and representing 12.6% of total revenue.  Restaurant margin dollars increased 8.3% to $182.8 million, primarily due to higher sales. Restaurant margin, as a percentage of restaurant and other sales, decreased 88 basis points to 15.7% as commodity inflation of 6.0% and wage and other labor inflation of 7.0% were partially offset by higher sales. Three company restaurants and three franchise restaurants were opened bringing the total to 709 restaurants on June 30, 2023. During the first half of 2023, Texas Roadhouse generated $288.2 million in operating cash flow and $133.7 million in free cash flow, down 30% from last year on working capital changes and a 42% jump in capital expenditures. The company returned $106.8 million to shareholders year-to-date via dividend payments of $73.7 million and share repurchases of $33.2 million, including $23.4 million purchased during the second quarter at an average cost per share of $109.36. Texas Roadhouse ended the quarter with $107.3 million in cash, no long-term debt and $1.08 billion in shareholders’ equity on its beefy balance sheet. Looking ahead to the full year, management reiterated positive comparable restaurant sales growth including the benefit of menu pricing actions and commodity cost inflation of 5% to 6%. Management updated its expectations with store week growth now expected at about 6%, as many as 28 Texas Roadhouse and Bubba’s 33 company restaurant openings and wage and other labor inflation of 6% to 7%. Total capital expenditures are expected around $300 million, up from $265 million originally expected. Jerry Morgan, CEO of Texas Roadhouse stated, “On the development front, we have a significant number of company and franchise locations that will open in the second half of the year. This includes the first franchise location for Jaggers, our fast-casual concept, that opened in Jacksonville, North Carolina, last week. We remain confident that our continued development of all three concepts, along with a strong balance sheet and disciplined capital allocation strategy will generate long-term shareholder value.”

Tractor Supply-TSCO rang up a 7.2% increase in sales to $4.18 billion with net earnings increasing 6.2% to $421.23 million and EPS up 8.5% to $3.83. Comparable store sales increased 2.5%, as compared to an increase of 5.5% in the prior year’s second quarter, driven by comparable average transaction count increase of 1.8% and comparable average ticket growth of 0.6%. Comparable store sales growth reflects continued strength in core year-round merchandise, including consumable, usable and edible (C.U.E.) products which significantly outpaced the chain average and offset softness in demand for seasonal goods and declines in big-ticket items as consumers spent more on services and became more cautious about large expenditures. Tractor Supply added 5 million customers to the Neighbors Rewards Club from last year and ended the quarter with 31 million members. Gross margin increased 69 basis points to 36.2% thanks to lower transportation costs, driven by improvement in the global supply chain and efficiencies from the new distribution center, modestly offset by negative product mix. During the first half of 2023, Tractor Supply generated $782.3 million in operating cash flow, up 25% from last year, and free cash flow of $432.7 million, up 20% from last year, on a 32% increase in capital investments. The company opened 17 new Tractor Supply stores and three new Petsense stores during the quarter. During the quarterly conference call, management updated its long-term store target to 3,000 U.S. stores, up 200 stores from its prior target. Management anticipates accelerating its annual new store growth to approximately 90 stores per year beginning in 2025, with a step up to 80 new stores in 2024 from an expected 70 stores this year. In addition, the company updated real estate strategy to include owned development and sale-leaseback capability to reduce store costs.  The company plans to periodically execute the sale-leaseback of its existing ownership of 117 stores over ten years to fund the cash required by the new development program and to capture the value of its existing real estate. For 2023, Tractor Supply expects an after-tax benefit of about $0.20 per share anticipated in the second half of the year from the sale-leaseback of 10 to 15 stores.  Year-to-date, Tractor Supply returned $571.9 million to shareholders through dividends of $226.2 million and share repurchases of $345.7 million, including $153.9 million repurchased during the second quarter at an average cost per share of $219.86. Given the first half performance, management updated its guidance with sales expected in the $14.8 billion to $14.9 billion range, up 4.5% from last year at the midpoint, on a 1.3% to 2.5% comparable store sales increase. Operating margins are expected in the 10.2% to 10.3% range with net income between $1.12 billion and $1.15 billion and EPS in the range of $10.20 to $10.40, up 6.1% from last year at the midpoint. In light of the new real estate strategy, anticipated capital expenditures for the year are now forecasted to be in the range of $800 million to $850 million, compared to the prior range of $700 million to $775 million. 

Mastercard-MA reported second quarter revenue increased 14% to $6.27 billion with net earnings charging ahead 25% to $2.85 billion and EPS increasing 28% to $3.00. Growth during the quarter was supported by resilient consumer spending, especially in travel and experiences, and the continued strength in services. Cross-border travel volume showed strong growth again this quarter, reaching 154% of pre-pandemic levels. By business segment, Payment Network revenue increased 13% to $4.07 billion, driven by 12% growth in cross dollar volume to $2.3 trillion, cross-border volume growth of 24% and switched transactions growth of 17%. These increases include 22% growth in payment network rebates and incentives provided to customers. As of June 30, 2023, Mastercard’s customers had issued 3.2 billion Mastercard and Maestro-branded cards. Value-added services and solutions net revenue increased 16% to $2.2 billion, driven primarily by the continued growth of Mastercard’s fraud and security solutions along with continued strong demand for consulting and marketing services. During the first six months of 2023, Mastercard generated $4.6 billion in operating cash flow, up 9% from last year, and free cash flow of $4.46 billion, up 8% from last year, on a 27% increase in capital expenditures to $157 million. Year-to-date, Mastercard returned $6.4 billion to shareholders through dividend payments of $1.1 billion and share repurchases of $5.3 billion at an average cost of $368.06 per share. Quarter-to-date through July 24, the Company repurchased $497 million of its shares at an average cost of $382.31 per share, which leaves $6.4 billion remaining under the approved share repurchase programs. Since the beginning of 2018, Mastercard has repurchased more than $30.0 billion of its shares. Mastercard ended the quarter with $6.5 billion in cash and investments, $14.3 billion in long-tern debt and $5.5 billion in shareholders’ equity. Mastercard expects full year 2023 revenues to grow in low-teens with operating expenses up in the high-single-digits.


Wednesday, July 26, 2023


 Meta Platforms-META reported second quarter revenue increased 11% to $32.0 billion with net income up 16% to $7.8 billion and EPS up 21% to $2.98. Family of Apps revenues increased 11% to $31.7 billion and generated operating margins of 41.7%.  Reality Labs revenue declined 3.2% to $276 million and generated a $3.7 billion operating loss thereby depressing Meta’s total operating margin to a still friendly 29%. Family daily active people (DAP) increased 7% to 3.07 billion on average for June 2023 while Family monthly active people (MAP) increased 6% to 3.88 billion.  Facebook daily active users (DAUs) increased 5% to 2.06 billion while Facebook monthly active users (MAUs) increased 3% to 3.03 billion. In the second quarter of 2023, ad impressions delivered across Meta’s Family of Apps increased by 34% year-over-year and the average price per ad decreased by 16% year-over-year. During the second quarter, Meta generated $11.1 billion in free cash flow, representing an impressive 1.4 times net income, with the company repurchasing $793 million of class A shares.  About $41 billion remains under the current share repurchase authorization. Meta ended the quarter with $52.4 billion in cash and investments, $18.4 billion in long-term debt and $134.0 billion in shareholders’ equity on its likable balance sheet. Looking ahead to the third quarter. Meta expects revenue in the range of $32 billion to $34.5 billion, up 20% from last year at the midpoint. Full-year 2023 total expenses are expected in the $88 billion to 91 billion range, up from the prior range of $86 billion to $90 billion due to legal-related expenses recorded in the second quarter of 2023. This outlook includes approximately $4 billion of restructuring costs related to facilities consolidation charges and severance and other personnel costs. Reality Labs operating losses are expected to increase year-over-year in 2023 from the $13.7 billion loss recorded last year. Expenses are expected to increase in 2024 as the company invests in its most compelling opportunities, including AI and the metaverse. Reality Labs operating losses are expected to increase meaningfully in 2024 due to ongoing product development efforts in augmented reality/virtual reality and investments to further scale Meta’s ecosystem. Total capital expenditures are expected to grow in 2024, driven by investments across both data centers and servers, particularly in support of AI work.


General Dynamics-GD reported second quarter revenue increased 10.5% to $10.2 billion with net earnings declining 3% to $744 million and EPS down 1.8% to $2.70.  All segments grew year-over-year with Defense rising by 12%. Orders of $11.9 billion resulted in record backlog of $91.4 billion and a book-to-bill ratio of 1.2x. By business segment, Aerospace revenues increased 5% to $1.95 billion with operating margins of 12.1%, down from 12.7% on a less favorable operating environment and higher R&D. Orders across the portfolio drove a 1.3x book-to-bill for the quarter including the highest number of Gulfstream backlog in more than a decade. Combat Systems revenue increased 15.5% to $1.92 billion with revenue up across all business units including a significant increase in international vehicle volumes and continued growth in artillery ammunition volumes. Combat Systems delivered operating margins of 13.0%, down 170 basis points attributable to program mix. Significant orders grew backlog to $15.1 billion, reflecting broadening market opportunities. Marine Systems revenue increased 15.4% to a record $3.1 billion led by double-digit growth in Electric Boat revenue. Segment operating revenue dipped to 7.7% from 8% last year due to ongoing supply chain challenges. Orders of $3.2 billion lifted segment backlog to $43.7 billion. Technologies revenue increased 7% to $3.2 billion with margins declining 130 basis points, reflecting new-start contracts and program mix. During the first half of the year, General Dynamics generated $1.82 billion of free cash flow, representing a strong 120% of net income. During the first half of 2023, the company returned $1.1 billion to shareholders through dividends of $705 million and share repurchases of $378 million. The company ended the quarter with $1.15 billion in cash and equivalents, $9.25 billion in long-term debt and $19.5 billion in shareholders’ equity on its strong balance sheet. Management updated full year guidance with revenues now expected at $42.45 billion, versus prior guidance of $41.2 billion to $42.3 billion with EPS in the $12.60 to $12.65 range, up 3.6% at the midpoint from 2022. The company expects to deliver five to six aircraft less than its earlier forecast of 145 jets in 2023, as supply chain issues and labor shortages hobble production.


ADP-ADP reported revenues for the fourth quarter of fiscal 2023 increased 8% to $4.5 billion with net earnings increasing 24% to $777 million and EPS up 25% to $1.87. During the quarter, Employer Services (ES) revenue increased 11% to $3.02 billion on a healthy 10% increase in bookings, record retention of 92.1% and a 3% increase in US pays per control. Employer Services margins increased 480 basis points to 30.8%, driven by growth in client funds interest revenue and operating leverage. PEO Services revenue increased 4% to $1.46 billion on 3% growth in average worksite employees to 722,000. PEO operating margin declined 110 basis points to 15.8% due to higher selling expenses associated with strong double-digit new business bookings growth.  Interest on funds held for clients increased 86% to $236 million on a 6% increase in average client funds balances to $34.7 billion and a 120 basis point increase in yield to 2.7%. For the fiscal year, ADP reported revenue increased 9% to $18.0 billion with net earnings increasing 16% to $3.4 billion and EPS increasing 17% to $8.21. During fiscal 2023, ADP generated a remarkable 97.2% return on shareholders’ equity due in no small part to its robust share repurchase program that has returned more than $11 billion to shareholders during the past ten years. During fiscal 2023, ADP returned $3.0 billion to shareholders through share repurchases of $1.12 billion and dividends of $1.9 billion. ADP ended the fiscal year with $2.8 billion in cash, $3.0 billion in long-term debt and $3.51 billion in shareholders’ equity. Looking ahead to fiscal 2024, ADP expects revenues to increase between 6% to 7% with operating margins expanding 60 to 80 basis points and EPS up 10% to 12%.


Tuesday, July 25, 2023

Texas Instruments-TXN reported second quarter revenues decreased 13% to $4.5 billion with net income down 25% to $1.7 billion and EPS decreasing 24% to $1.87. The company experienced continued weakness across their end markets with the exception of automotive. By segment, Analog revenues decreased 18% to $3.3 billion, Embedded Processing revenues were up 9% to $894 million and Other revenues decreased 10% to $359 million. Over the past 12 months TXN invested $3.6 billion in R&D and SG&A, invested $4.2 billion in capital expenditures and returned $6.5 billion to shareholders. During the quarter, free cash flow was negative $47 million compared to $1.2 billion in the same quarter a year ago. The company returned $1.2 billion to shareholders during the quarter through dividends of $1.1 billion and share repurchases of $79 million. Free cash flow over the trailing 12 months was $3.2 billion and 17% of revenues underscoring the strength of the company’s business model. Management’s third quarter outlook is for revenue in the range of $4.36 billion to $4.74 billion and EPS between $1.68 and $1.92.

NVR-NVR reported second quarter revenues declined 12.5% to $2.3 billion with net income declining 6.8% to $404 million and EPS falling 5.8% to $116.54. New orders in the second quarter increased 27% to 5,905 units. The average sales price of new orders in the second quarter was $447,300, a decrease of 5%. The cancellation rate was 11% in the second quarter compared to 14% in the prior year period. Settlements during the quarter decreased by 13% to 5,820 units with an average settlement price of $449,000, flat with last year. The backlog of homes sold but not settled as of quarter end decreased on a unit basis by 9% to 11,231 units and decreased on a dollar basis by 12% to $5.15 billion compared to the prior year period. Mortgage loan closings declined 16% to $1.4 billion although the capture rate improved to 86% from 84% in the prior period.

 

Alphabet-GOOGL reported second quarter revenues rose 7% to $74.6 billion with net income up 15% to $18.4 billion and EPS up 19% to $1.44. The continued resilience of Search with an acceleration of revenue growth in both Search and YouTube, as well as momentum in Cloud, drove the strong financial results in the quarter. Alphabet remains committed to re-engineering its cost base company wide to create capacity for new investments to deliver sustainable financial value for the long term. The company’s continued leadership in AI and excellence in engineering and innovation are driving the next evolution of Search and improving all the company’s services. Alphabet has 15 products that each serve half a billion people and six that serve over two billion each. For example, YouTube Shorts are now watched by over 2 billion logged-in users every month, up from 1.5 billion just one year ago. Thanks to improved operating performance, free cash flow jumped 40% during the first half of the year to $39 billion with the company repurchasing $29.5 billion of its stock. Alphabet ended the quarter with a fortress balance sheet with more than a $118 billion in cash and investments, $13.7 billion in long-term debt and $267.1 billion in shareholders’ equity. Alphabet and Google CFO Ruth Porat will assume the newly created role of President and Chief Investment Officer of Alphabet and Google effective Sept. 1, 2023. Ruth will continue to serve as CFO, including leading the company’s 2024 and long-range capital planning processes, while the company searches for and selects her successor.

LVMH Moët Hennessy Louis Vuitton-LVMUY rang up a 15% increase in revenue to  €42.24 billion in first half of 2023 with net profit and EPS jumping 30% to €6.53 billion and €16.93, respectively. Significant growth across all business groups except Wines & Spirits drove sales growth with strong growth in Europe and Asia. By business segment, Fashion & Leather Goods sales increased 17% to €21.16 billion, driven by remarkable performance by Louis Vuitton, Christian Dior, Celine, Loro Piana and Loewe which gained market share worldwide. Operating margins for the group dipped 101 basis points to 40.5%.  Selective Retailing revenue increased 26% to €8.36 billion on excellent performance by Sephora, particularly in Europe and the United States, while DFS benefited from the recovery in international travel. Operating margins for the segment expanded 330 basis points to 8.8%. Watches & Jewelry revenue increase 11% to €5.43 billion on accelerated growth in Tiffany & Co. and Bulgari. Operating margins for the segment were unchanged from last year at 20.1%. Perfumes & Cosmetics revenue increased 11% to €4.03 billion, boosted by strong growth in the United States, Japan, Europe and the Middle East. Operating margin for the segment increased 40 basis points to 11.1%. Wines & Spirits revenue declined 4% to €3.18 billion, hurt by unfavorable economic environments and high retailer inventory levels at the beginning of the year in the United States and China. During the first half of 2023, LVMH generated €14.5 billion in operating cash flow, down 7.1%, on shifts in working capital related to the sales increase. Free cash flow dropped 40% to €3.19 billion on a nearly 90% jump in capital expenditures to $3.56 billion due to acquisition of commercial real estate. LVMH ended the first half of 2023 with €6.15 billion in cash and equivalents, €8.9 billion in long-term debt and €57.7 in shareholders’ equity on its luxurious balance sheet.

Visa-V reported fiscal third quarter revenues increased 12% to $8.1 billion with net income charging ahead by 22% to $4.2 billion and EPS up 25% to $2.00. Excluding special items including ongoing litigation expense and unrealized gains/losses from equity investments, net income increased 7% to $4.5 billion and EPS increased 9% to $2.16.   Visa’s third quarter revenue growth reflects stable business trends with resilient consumer spending driving growth in payments volume and processed transactions. Cross-border volume continued to be a tailwind, fueled by travel growth from the ongoing recovery and summer tourism. Payments volume for the three months ended March 31, 2023, on which fiscal third quarter service revenues are recognized, increased 10% to $2.96 trillion. Payments volume for the third quarter increased 9% and cross-border volume increased 17%.  Total processed transactions increased 10% to 54.0 billion. By business segment, fiscal third quarter service revenues increased 15% to $3.7 billion, data processing revenues rose 15% to $4.1 billion and international transaction revenues grew 14% to $2.9 billion. Other revenues of $597 million rose 15% over the prior year. Client incentives, a contra revenue item, were $3.2 billion and represented 28.1% of gross revenues. Total Visa cards issued increased 7% from last year to 4.2 billion. During the first nine months of the fiscal year, Visa generated $13.8 billion in operating cash flow, up 7% from last year. Free cash flow of $13.1 billion represented 104% of reported net income, a sign of high-quality earnings. Year-to-date, Visa returned $11.2 billion to shareholders through dividend payments of $2.8 billion and share repurchases of $8.4 billion, including $3.0 billion during the third quarter at an average cost per share of $229.19. As of June 30, 2023, Visa had $8.8 billion remaining authorized for share repurchases.  On June 28, 2023, Visa announced it signed a definitive agreement to acquire Pismo, a cloud-native issuer processing and core banking platform with operations in Latin America, Asia Pacific and Europe, for $1 billion in cash. Visa ended the quarter with $18.8 billion in cash and investments, $20.3 billion in long-term debt and $39.0 billion in shareholders’ equity on its strong balance sheet. Looking ahead to the fiscal fourth quarter, Visa expects revenue growth in the low-double-digits with EPS growth in the mid-teens.

Microsoft-MSFT reported an 8% increase in revenue for fourth quarter of fiscal 2023 to $56.2 billion with net income up 20% to $20.1 billion and EPS rising 21% to $2.69. By business segment, Productivity and Business Processes revenue increased 10% to $18.3 billion, driven by Office 365 Commercial revenue growth of 15%, an increase in Microsoft 365 Consumer subscribers to 67.0 million, a 5% increase in LinkedIn revenue and 19% growth in Dynamics products and cloud services. Revenue in Intelligent Cloud increased 15% to $24.0 billion powered by a 26% jump in Azure and other cloud services revenue. More Personal Computing revenue declined 4% to $13.9 billion, hurt by a 12% decline in Windows OEM revenue and a 20% decline in device revenue, partially offset by a 2% increase in Window Commercial products and cloud services, a 5% increase in Xbox revenue, an 8% increase in Search and news advertising.  During the quarter, Microsoft generated $19.8 billion in free cash flow, up 12% from last year despite a 30% jump in capital expenditures as the company continues to invest in its AI infrastructure.  For full fiscal year, revenue increased 7% to $211.9 billion with net income declining slightly to $72.4 billion and EPS increasing slightly to $9.68. During fiscal 2023, Microsoft generated a stellar 35.1% return on shareholders’ equity and $59.5 billion in free cash flow. Microsoft returned $42.05 billion to shareholders during fiscal 2023 through dividend payments of $19.8 billion and share repurchases of $22.25 billion. Microsoft ended the fiscal year with $111.3 billion in cash, $42.0 billion in long-term debt and $206.2 billion in shareholders’ equity on its pristine balance sheet. Looking ahead to the first quarter of fiscal 2024, Microsoft expects Productivity and Business Processes revenue to grow between 9% and 11%, or $18 billion to $18.3 billion. Intelligent Cloud revenue is expected to grow between 15% and 16% to $23.3 billion to $23.6 billion. Segment revenue will continue to be driven by Azure which is expected to grow at a 25% to 26% pace in constant currency, including roughly 2 points from all Azure AI services. More Personal Computing revenue is expected in the range of $12.5 to $12.9 billion, down 3% to 6% from 2023. Capital expenditures are expected to increase sequentially on a dollar basis during the fiscal year, driven by investments AI infrastructure.



Canadian National Railway-CNI reported second quarter sales declined by 7% to C$4.06 billion with net income falling 12% to C$1.167 and EPS down 8.3% to C$1.76. The sales decline was mainly due to lower volumes of intermodal, crude oil, U.S. grain exports and forest products, on lower demand for freight services to move consumer goods and customer outages caused by Canadian wildfires, lower ancillary services including container storage and lower fuel surcharge revenues on lower fuel prices, partially offset by freight rate increases, the positive translation impact of a weaker Canadian dollar and higher export volumes of Canadian grain. Despite the many challenging external events during the quarter, Canadian National Railway’s operating performance generally improved with an injury frequency rate of 1 per 200,000 person hours improving 17%, through dwell of 6.8 entire railroad hours improving by 6%. Car velocity of 216 car miles per day improved 3% and through network train speed of 19.9 mph improved 3%. On the other hand, the accident rate of 1.91 per million train miles deteriorated 5% while fuel efficiency of 0.888 US gallons of locomotive fuel consumed per 1,000 gross ton miles was 6% less efficient. Train length of 7,934 feet declined 6%, and revenue ton miles (RTMs) of 55,877 million declined by 8%. During the quarter, Canadian National Railway generated C$1.11 billion in free cash flow with the company returning C$1.57 billion to shareholders during the quarter through dividends of C$521 million and share repurchases of C$1.045 billion. Canadian National continued to reward shareholders with an 8% increase in the dividend during 2023. Share repurchases are expected to be about C$4 billion during 2023 and 2024. Canadian National Railway ended the quarter with C$539 million in cash, C$15.8 billion in long-term debt and C$20.4 billion on shareholders’ equity on its strong balance sheet.  In light of the second quarter results and revised expectation of weaker than anticipated volumes in the second half of 2023, the company updated its full-year outlook and now expects flat to slightly negative year-over-year growth in adjusted diluted EPS in 2023, compared to prior guidance in the mid-single digits. Leadership reiterated its longer-term financial perspective and continues to target compounded annual EPS growth in the range of 10%-15% over the 2024-2026 period driven by growing volumes more than the economy, pricing above rail inflation and incrementally improving efficiency, all of which assumes a supportive economy.

PulteGroup-PHM reported second quarter revenues increased 8% to $4.2 billion with net income up 10% to $720 million and EPS jumping 18% to $3.21. Reported net income includes a $65 million pre-tax, or $0.21 per share, insurance benefit recorded in the period. Home sale revenues for the second quarter increased 8% to $4.1 billion, driven by a 3% increase in average sales price to $540,000, and a 5% increase in closings to 7,518 homes. New orders increased by 24% during the quarter to 7,947 homes, reflecting PulteGroup’s ability to help solve affordability challenges caused by today’s higher mortgage rates and capitalize on the ongoing strength in demand for new homes. The dollar value of new orders increased 9% to $4.3 billion, and the company operated out of an average of 903 communities, which was a 14% increase over the prior quarter. The cancellation rate in the second quarter was 9% of beginning backlog, down almost 350 basis points from the first quarter. The company’s backlog at quarter end decreased 29% to 13,558 and the dollar value of homes in backlog was $8.2 billion, which is a decrease of 29% over last year. Mortgage capture rate was 80% for the quarter, up from 78% last year. During the quarter, Pulte invested $370 billion in land acquisition and $523 million in development of existing land assets. PulteGroup controlled 214,416 lots with 51% held through option. Year-to-date free cash flow was $1.4 billion, representing an increase of over 300% compared to prior year. During the first half of 2022, the company paid out $72 million in dividends and repurchased 6.4 million shares of its common stock for $400 million at an average price of $62.28 per share, representing 3% of shares outstanding. 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 $1.7 billion in cash, $2 billion in long-term debt and $9.7 billion in shareholders’ equity on its sturdy balance sheet.  While there remains an extremely limited supply of existing homes, Pulte has an expanded community count and a much improved supply chain that has them well positioned to meet buyer demand going forward.


RTX-RTX reported second quarter sales rose 12% to $18.3 billion with net income and EPS increasing 2%, respectively to $1.3 billion and $0.90, respectively. Backlog at the end of the second quarter was a record $185 billion, of which $112 billion was from commercial aerospace and $73 billion was from defense. New awards of $25 billion during the quarter brought RTX’s book-to-bill ratio to 1.34 at quarter’s end.  By business segment, Collins Aerospace sales increased 17% to $5.85 billion with adjusted operating margins of 14.3%, up 200 basis points, driven by higher sales volume and favorable mix, partially offset by higher production costs, as well as higher R&D and SG&A expenses. Pratt and Whitney sales increased 15% to $5.7 billion, fueled by a 26% increase in commercial aftermarket and a 22% increase in commercial OE, partially offset by a 3% decrease in military sales. Pratt and Whitney generated operating margins 7.6%, up 150 basis points from last year, driven by drop through on higher commercial aftermarket sales and favorable large commercial OE mix, which partially offset higher production costs and higher R&D expenses. Raytheon Intelligence & Space sales increased 2% to $3.66 billion, powered by higher sales from Sensing and Effects and Cyber and Services programs, partially offset by lower sales from Command, Control and Communications programs. Adjusted operating margins dipped 70 basis points to 8.1% due to unfavorable mix and higher expenses, which more than offset improved productivity and a drop through on higher volume. Raytheon Missiles & Defense sales increased 12% to $4.0 billion on higher volume in Air Power, Advance Technology and Land Warfare & Air Defense programs. Adjusted operating margins increased 90 basis points to 10.4% on program efficiencies, partially offset by unfavorable mix resulting from early-stage production programs. During the quarter, RTX generated $193 million in free cash flow, down from $807 million last year, on working capital changes. RTX returned $1.44 billion to shareholders during the quarter through dividends of $844 million and share repurchases of $596 million with the company on track to repurchase $3 billion of its shares during 2023. RTX ended the quarter with $5.4 billion in cash, $32.7 billion in long-term debt and $74.1 billion in shareholders’ equity on its solid balance sheet. During the second quarter earnings conference call, management disclosed that a significant portion (1,200 out of more than 3,000) of it its Pratt & Whitney GTF engines that power Airbus A320neo jets will need "accelerated removals and inspections" during the next nine to twelve months, including 200 accelerated removals by mid-September. RTX discovered powder metal used to manufacture forged turbine disks in 2015 through mid-2021 was contaminated.  Shortly after the contamination was discovered, RTX refined the manufacturing process, so current and future deliveries will not be impacted. Management estimates inspection of the first 200 engines will use about $500 million of free cash flow. Given the strong year-to-date performance and the accelerated inspections, RTX updated full year guidance with sales now expected in the $73.0 billion to $74.0 billion range, compared to prior guidance of $72.0 billion to $73.0 billion, and representing 9% to 10% organic sales growth, up from prior guidance of 7% to 9%. Adjusted EPS are expected in the $4.95 to $5.05 range,  from prior guidance of $4.90 to $5.05. Free cash flow is expected to be about $4.3 billion, compared to prior guidance of $4.8 billion.

UPS-UPS and the International Brotherhood of Teamsters, the union representing about 330,000 UPS employees in the U.S., have reached a tentative five-year collective bargaining agreement, thereby averting a costly strike. The contract, which includes $30 billion in new money from UPS, raises wages for all workers, creates more full-time jobs and includes dozens of workplace protections and improvements. "Together, we reached a win-win-win agreement on the issues that are important to Teamsters leadership, our employees and to UPS and our customers," said Carol Tomé, UPS chief executive officer. "This agreement continues to reward UPS’s full- and part-time employees with industry-leading pay and benefits while retaining the flexibility we need to stay competitive, serve our customers and keep our business strong."


Monday, July 24, 2023

Bank of Hawaii-BOH reported second quarter net revenues declined 4.3% to $167.6 million with net income falling 19.7% to $44.1 million and EPS down 18.8% to $1.12. Net interest income declined 6.5% to $124.3 million, primarily due to higher funding costs, partially offset by higher earning asset yields.  Net interest margin was 2.22% in the second quarter, down 25 basis points from last year on higher funding costs and increased liquidity, partially offset by higher earning asset yields. Non-interest expense increased 1.1% to $104.0 million, representing an efficiency ratio of 62.07%, compared to 58.8% last year.  Return on average common equity was 14.95% during the quarter, compared with 18.19% in the same quarter of 2022. Return on average assets declined 23 basis points from last year’s second quarter to 0.77%. Total deposits increased 0.1% during the quarter to $20.5 billion. Noninterest-bearing deposits made up 29% of total deposit balances, down from 35% last year. Insured and collateralized deposits represent 61% of total deposit balances, up from 57% last year. Bank of Hawaii carries substantial liquidity of $8.5 billion in cash and liquidity lines to backstop its $8.1 billion in uninsured deposits. Total loans increased 0.7% during the quarter to $13.9 billion, boosted by both consumer and commercial businesses. Credit quality remained pristine with non-performing assets of 0.08% at quarter end and net charge offs of 0.04% in the quarter. Commercial real estate loans (CRE) and office loans were 27.3% and 2.7%, respectively, of total loans at quarter end with both categories having weighted average loan to value (LTVs) of 56%. Bank of Hawaii’s capital position, which is well-above regulatory well-capitalized levels, improved slightly during the quarter, as measured by CET 1 (11%), Tier 1 Capital (12.21%), Total Capital (13.24%) and Tier 1 Leverage (7.21). Hawaii’s economy remains strong with unemployment of 3% and May monthly visitor arrivals up 2.1% from last year to 790,500.

     

Johnson & Johnson–JNJ announced its intention to split-off at least 80.1% of the shares of Kenvue Inc.–KVUE through an exchange offer. Kenvue, formerly Johnson & Johnson’s Consumer Health business, completed its initial public offering in May 2023. Johnson & Johnson currently owns about 89.6% of the total outstanding shares of Kenvue common stock. The exchange offer will permit Johnson & Johnson shareholders to exchange some, all or none of their shares of Johnson & Johnson common stock for shares of Kenvue common stock at a 7% discount, subject to an upper limit of 8.0549 shares of Kenvue common stock per share of Johnson & Johnson common stock tendered and accepted in the exchange offer. If the upper limit is not in effect, tendering shareholders are expected to receive approximately $107.53 of Kenvue common stock for every $100 of Johnson & Johnson common stock tendered.  If the exchange offer is effectuated, Johnson & Johnson will no longer be the controlling shareholder of Kenvue, and Kenvue will operate as a separate and fully independent company. While Johnson & Johnson will retain talc-related liabilities for products sold in the United States and Canada, JNJ may not indemnify Kenvue for legal proceedings related to talc or talc-containing products sold in other jurisdictions.  The exchange offer is expected to be tax-free for U.S. Federal income tax purposes. The final exchange ratio, reflecting the number of shares of Kenvue common stock that tendering shareholders will receive for each share of Johnson & Johnson common stock will be announced by 9:00 a.m EDT on August  17, 2023 if the exchange offer is not extended or terminated “The separation of Kenvue further sharpens Johnson & Johnson’s focus on transformational innovation specifically in Pharmaceutical and MedTech” said Joaquin Duato, Chairman and Chief Executive Officer of Johnson & Johnson. “We believe now is the right time to distribute our Kenvue shares, and we are confident that a split-off is the appropriate path forward to bring value to our shareholders.”  “This filing marks an important milestone in Kenvue’s journey towards becoming a fully independent company,” says Thibaut Mongon, Kenvue Chief Executive Officer and Director. “As the world’s largest pure-play consumer health company by revenue, we have a clear vision, an agile operating model, strong fundamentals, and an inspiring purpose: to help people realize the extraordinary power of everyday care.”

Cognizant - CTSH announced an expansion of its relationship with Gilead Sciences which includes renewal and expansion of Cognizant services for a total expected value of $800 million over the next five years. This collaboration is aimed at enabling Gilead to streamline various parts of its business with the goal of faster time to market of various medicines for life-threatening diseases, including HIV, viral hepatitis, and cancer. "Over the past three years, Cognizant has demonstrated quality delivery, adaptability and dedication to Gilead's success," said Marc Berson, Senior Vice President and Chief Information Officer at Gilead Sciences. "Through this collaboration, Cognizant has provided critical expertise to progress our digital transformation journey while enabling stable, secure operations. This has allowed us to advance research and commercialization of transformative treatments for some of the world's most challenging diseases. We look forward to expanding this partnership to advance to the next phases of our capability roadmap."


Thursday, July 20, 2023

Genuine Parts-GPC reported record second quarter sales motored ahead 6% to $5.9 billion with net earnings decreasing 8% to $344 million and EPS down 7% to $2.44. Adjusted net income and EPS, which excludes a non-recurring gain on the sale of S.P. Richards real estate partially offset by Kaman Distribution Group acquisition costs, both increased 10%. Sales growth reflects a 4.9% gain in comp store sales and a 1.8% benefit from acquisitions, partially offset by a 1.1% foreign currency headwind. Automotive sales were $3.7 billion, up 5.4% from last year, powered by a 4.3% increase in comp store sales. Automotive operating margin decreased 30 basis points to 9%. Industrial sales of $2.3 billion increased 5.9% from last year, driven by a 6% increase in comp store sales and a 0.6% contribution from acquisitions, partially offset by a 0.7% foreign currency headwind. Industrial segment operating margins increased 190 basis points from last year to 12.5%. During the first half of 2023, Genuine Parts generated $252 million in free cash flow, with the company returning $394.7 million to shareholders through dividends of $259.9 million and share repurchases $134.8 million. The company’s 2023 annual dividend of $3.80 per share is up 6% from last year, marking the 67th consecutive year of dividend increases.  Genuine Parts ended the quarter with $530 million in cash, $2.9 billion in long-term debt and $4.1 billion in shareholder equity. For the full year, management continues to expect sales growth of 4% to 6%. The company once again raised their outlook for 2023 EPS, now expecting EPS in the $9.15 to $9.30 range, up from $8.95 to $9.10 previously. Free cash flow is expected in the $900 million to $1.0 billion range.

Johnson & Johnson-JNJ reported a strong second quarter as revenues rose 6% to $25.5 billion with net income up 7% to $5.1 billion and EPS up 9% to $1.96. Pharmaceutical worldwide adjusted operational sales grew 3.9% to $13.7 billion. Excluding the COVID-19 Vaccine, adjusted operational sales grew 6.2% with growth driven my multiple drug treatments in oncology, immunology, pulmonary hypertension and neuroscience. MedTech worldwide adjusted operational sales grew 9.9% to $7.8 billion, driven primarily by electrophysiology products in interventional solutions, trauma in orthopaedics, wound closure products in general surgery, biosurgery in advanced surgery, and contact lenses in vision. The pharmaceutical pipeline is progressing well with management confident of meeting its 2025 sales target of $57 billion for this unit. MedTech worldwide operational sales grew 14.7%, with the acquisition of Abiomed contributing 4.8%. Consumer Health worldwide adjusted operational sales increased 7.7% to $4.0 billion largely driven by over-the-counter (OTC) products. Major contributors to growth in OTC were TYLENOL and MOTRIN analgesics, upper respiratory products, international smoking cessation products, and IMODIUM in digestive health products. Additional contributors to growth were NEUTROGENA in skin health/beauty products and women’s health products outside the United States. JNJ plans to split-off its Consumer Health division, which went public as Kenvue this year with JNJ currently continuing to own 89.6% of the company. JNJ shareholders will have the opportunity to exchange all, part or none of their shares of JNJ for Kenvue. Terms of the split-off will be announced in coming days, and we will evaluate the terms of the deal when announced. After the split-off of the consumer division, JNJ will begin a new era as the largest and most diversified pharmaceutical and medtech healthcare company with 25 platforms generating greater than $1 billion in sales each. Research and development expenses during the first half were $7.4 billion, representing 15% of revenues, as JNJ further develops its product pipeline for future growth. During the second quarter, JNJ generated $5.4 billion in free cash flow compared to $8.1 billion in the prior year period, reflecting elevated tax payments this year. JNJ ended the quarter with $29 billion in cash and $46 billion in long-term debt for a net debt position of $17 billion. The company’s capital allocation priorities remain the same with cash first used to reinvest in its existing businesses, then used to increase the dividend as it has done for 61 consecutive years, then for strategic acquisition with excess cash used for share repurchases when valuations are attractive. Through the first half, JNJ returned $8.5 billion to shareholders through dividends and share repurchases. Based on the strong first half results, JNJ raised its full year sales and EPS guidance. Estimated reported sales growth is now expected to increase 6.5% to 7.5% to a range of $98.8 billion to $99.8 billion with adjusted EPS expected to increase 5.5% to 6.5% to a range of $10.70 to $10.80.

 

Wednesday, July 19, 2023

Western Alliance Bancorporation-WAL reported second quarter net revenues increased 8% to $669.3 million with net income declining 17.3% to $212.5 million and EPS falling 18% to $1.96. During the quarter, non-interest income was $119.0 million, compared to a $58.0 million loss during the first quarter when non-operating losses of $147.8 million were incurred to reposition the balance sheet in response the March disruption in the banking industry. Net interest margin declined by 37 basis points during the quarter to 3.42% due to higher rates on increased borrowings and higher deposits costs, partially offset by higher yields on loans.  Non-interest expense increased 44% from last year to $387.4 million, due primarily to higher insurance costs related to elevated insured and brokered deposit levels. The bank’s adjusted efficiency ratio was 50.5% for the second quarter, compared to 40.4% last year. Western Alliance generated a 1.23% return on average assets during the second quarter, compared to 1.62% last year, and an 18.2% return on average equity, compared with 25.6% last year.  Deposits as of June 30 were $51.0 billion, increasing $3.5 billion during the quarter and boosted by increases in brokered certificates of deposits and interest- bearing demand deposits. The bank established about 1,000 new commercial client relationships during the quarter resulting in about $1 billion in new deposits. Deposit momentum continued into the third quarter with deposits up an additional $3.2 billion quarter-to-date as of July 17th. As of June 30, 81% of the bank’s deposits were insured or collateralized and its uninsured deposit liquidity coverage was 276%.  Loans held for investment increased $1.4 billion to $47.9 billion. Provision for credit losses totaled $21.8 million for the second quarter 2023, compared $27.5 million for the second quarter 2022, reflective of a normalizing credit environment and heightened attention to commercial real estate. Net loan charge-offs in the second quarter 2023 were $7.4 million, or 0.06% of average loans, compared to $1.4 million, or 0.01%, last year. Nonaccrual loans increased $171 million to $256 million. Classified assets totaled $604 million on June 30, 2023, an increase of $258 million from last year. The ratio of classified assets to Tier 1 capital plus the allowance for credit losses, a common regulatory measure of asset quality, was 10.0% on June 30, 2023, compared to 6.7% last year. Western Alliance ended the quarter with a CET 1 ratio of 10.1%, up from 9.0% last year, and tangible book value of $43.09 per share, up 17.5% from last year. Looking ahead to the second half of 2023, management expects loans to increase $500 million per quarter and deposits to increase $2 billion per quarter. Growth in the CET 1 ratio is expected to continue to the targeted 11%. Net interest margin is expected to expand to the 3.5% to 3.6% range, adjusted efficiency ratio is expected in the high 40% on reduced borrowings  while net charge-offs are expected in the in the 5 to 15 basis point range. Operating pre-provision net revenue is expected to be consistent with $282.1 million recorded in the second quarter.


Microsoft-MSFT is accelerating its artificial intelligence (AI) transformation through partnership with other firms. Collaboration is a key component of Microsoft's success. Their partner ecosystem consists of more than 400,000 partners worldwide, and they play a key role in making new technology available to customers, especially in today's AI-focused world. Microsoft Inspire shares new opportunities and ways to engage with Microsoft products. Since launching the new Bing in February, Microsoft has heard from many corporate customers who are excited to empower their organizations with powerful new AI tools but are concerned that their companies' data will not be protected. That's why Microsoft is announcing Bing Chat Enterprise, which gives organizations AI-powered chat for work with commercial data protection. What goes in -- and comes out -- remains protected, giving commercial customers managed access to better answers, greater efficiency and new ways to be creative. Microsoft 365 Copilot is integrated into the apps millions of people use every day. Copilot jump-starts your creativity in Word, analyzes data in Excel, designs presentations in PowerPoint, triages your Outlook inbox, summarizes meetings in Teams – whether you attended or not – and so much more. The company announced pricing for Microsoft 365 Copilot which will be available for $30 per user per month for Microsoft 365 E3, E5, Business Standard and Business Premium customers when generally available. Microsoft 365 Copilot is integrated into the apps millions of people use every day. Copilot jump-starts your creativity in Word, analyzes data in Excel, designs presentations in PowerPoint, triages your Outlook inbox, summarizes meetings in Teams – whether you attended or not – and so much more. The company announced pricing for Microsoft 365 Copilot which will be available for $30 per user per month for Microsoft 365 E3, E5, Business Standard and Business Premium customers when generally available. Other partnership snapshots include that Meta-META and Microsoft have announced support for the Llama family of large language models on Azure and Windows. As part of this announcement, Microsoft will be Meta's preferred partner as they release their new version of Llama 2 to commercial customers for the first time.  Microsoft also highlighted an expansion of their strategic collaboration with Epic, a leading healthcare software company, using the power of AI to help clinicians spend less time on administrative functions and more time on providing quality care.

 In separate news, Microsoft and Activision Blizzard extended their $69 billion merger agreement until Oct. 18, 2023 to resolve regulatory concerns in the UK.

  Friday, July 14, 2023

UnitedHealth Group-UNH reported second quarter revenues grew a healthy 16% to $92.9 billion with net income rising 8% to $5.5 billion and EPS up 9% to $5.82. Strong growth during the quarter was balanced across the company’s businesses with double-digit growth in revenues at both Optum and UnitedHealthcare. Optum’s revenue growth led the way with 25% growth during the quarter to $56.3 billion. Year-to-date, total people served by UnitedHealthcare has increased over 1.1 members. The company’s medical care ratio increased to 83.2% from 81.5% in the prior year period as many people, especially seniors, who delayed elective procedures during the pandemic are now taking care of those operations. In addition, following the pandemic, many people are seeking help for mental and emotional health issues, including anxiety and depression, adding to health insurers’ claims expenses. UnitedHealth expects the elevated demand for its services to persist into 2024 and is planning accordingly. Free cash flow during the first half of the year jumped 135% to $25.8 billion with the company paying $3.3 billion in dividends and repurchasing $5.0 billion of its common stock. In June, the company increased its dividend 14%. Return on equity of 26.8% in the quarter reflected the company’s consistent, broad-based earnings and efficient capital structure. Based upon the strong first half as well as durable growth expectations, the company increased its full year net earnings outlook to $23.45 to $23.75.

Alphabet-GOOGL is expanding its Bard AI chatbot to include more than 40 languages, making the service available in most of the world.

In other news, Alphabet updated its policy to open new ways to transact blockchain-based digital content within apps and games on Google Play. From reimagining traditional games with user-owned content to boosting user loyalty through unique NFT rewards, the company is helping creative in-app experiences flourish and developers expand their businesses.

Thursday, July 13,  2023

Fastenal-FAST reported second quarter sales increased 6% to $1.88 billion with earnings increasing 4% to $392.6 million and EPS up 4.6% to $0.52. Softer manufacturing activity contributed to daily sales growth decelerating from 18% last year to 5.9%. Manufacturing (75% of sales) daily sales increased 10.4% due to Onsite and customer solution consultant (CSC) programs outpacing market growth. Construction (9.2% of sales) daily sales declined 8.8%, reflecting the shift in focus for traditional branches to larger, key accounts. National Accounts daily sales rose 10.3% during the quarter, with 73 of Fastenal’s top 100 customers growing. Cyclical factors, along with management’s delay in adjusting variable costs to keep pace with slower sales growth contributed to a 60-basis point decline in operating margins to 21%.   Operating cash flow nearly doubled from last year’s second quarter to $302.1 million, or 101.4% of net income, a sign of high-quality reported earnings. The improvement reflects easing of supply chain constraints which reduced working capital required to support customers’ operations. The company generated $246.2 million in free cash flow during the quarter with the company returning $200 million to shareholders through dividend payments. No shares were repurchased during the quarter.  Fastenal ended the quarter with $243.6 million in cash, $200.0 million in long-term debt and $3.381 billion in shareholders’ equity on its pristine balance sheet. Given stalled growth in U.S. Industrial Production with heavier manufacturing actually declining during the quarter and persistent sub-50 PMI readings which point to declining manufacturing activity, management expects a challenging second half of 2023.

PepsiCo-PEP reported second quarter sales bubbled up 10% to $22.3 billion with net income increasing 92% to $2.7 billion and EPS up 93% to $1.99. The increase in earnings reflects the lapping of $1.4 billion in non-cash impairment charges related to the Russia-Ukraine conflict during the second quarter of 2022. Organic revenues increased 13%, representing the seventh consecutive quarter of double-digit organic revenue growth and core constant currency EPS was up 15%. During the quarter, PepsiCo’s North America business delivered double-digit organic revenue and core operating profit growth, primarily due to double-digit growth in the Frito-Lay and beverage businesses. PepsiCo’s International snack business accelerated 17% organically and the International beverage business delivered 13% organic growth. During the first half of 2023, free cash flow increased 32% to $506 million with the company returning nearly $3.7 billion to shareholders through dividends of $3.2 billion and share buybacks of $453 million. PepsiCo ended the quarter with $6.5 billion in cash and investments, $36 billion in long-term debt and $17.7 billion in shareholders’ equity. For the full 2023 year, PepsiCo now expects revenue growth of 10%, versus prior guidance of 8%, and constant currency EPS growth of 12%, versus prior guidance of 9%. Core EPS is expected to be $7.47 compared to $6.79 in 2022. PepsiCo expects to return $7.7 billion to shareholders during 2023,  through dividend payments of $6.7 billion and share repurchases of $1.0 billion.

Wednesday, July 12, 2023

KPMG plans to invest $2 billion in artificial intelligence and cloud services across its business lines globally over the next five years through an expanded partnership with Microsoft-MSFT. As part of the expanded partnership, KPMG will have early access to an AI assistant called Microsoft 365 Copilot, before its launch to the general public. KPMG’s deal with Microsoft also includes the Azure cloud platform, through which the professional-services company already uses OpenAI to build and run apps.  KPMG expects the partnership to bring in more than $12 billion in revenue in the next five years.

In other news, a federal judge ruled that Microsoft-MSFT can close on its $69 billion acquisition of games-maker Activision Blizzard in the biggest merger in tech industry history.

Pratt & Whitney, an RTX-RTX business, announced that it has signed a $5.5 billion modification to the previously awarded F117 Engine Sustainment Support contract with the United States Air Force. The contract provides engine services for C-17s operated by the USAF and eight international partners. The sustainment work will be provided between now and the second half of 2027.  

Monday, July 10, 2023

Berkshire Hathaway Energy-BRKB announced it has executed an agreement to purchase Dominion Energy’s 50% limited partnership stake in the Cove Point LNG, LP business. The transaction is valued at $3.3 billion. It will be funded with cash on hand including cash realized from the liquidation of certain investments. Upon closing, Berkshire Hathaway Energy will own a 75% limited partnership stake in Cove Point LNG, LP.

Thursday, July 6, 2023

Meta Platforms-META announced the initial version of Threads, an app built by the Instagram team for sharing text updates and joining public conversations. Users may log in with their Instagram account and posts can be up to 500 characters long and include links, photos and videos up to five minutes long. Ten million users signed up for Threads, a Twitter rival, within seven hours of launch, according to CEO Mark Zuckerberg.

Thursday, June 29, 2023

Nike-NKE reported fourth quarter revenues increased 5% to $12.8 billion, with growth across all brands, channels and geographies. Net income declined 28% to $1 billion and EPS was down 27% to $0.66. Strong digital growth continued during the quarter as NIKE Direct revenues grew 15% and NIKE Brand Digital grew 14%. Gross margin decreased 140 basis points to 43.6%, primarily due to higher product input costs and elevated freight and logistics costs, higher markdowns and continued unfavorable changes in net foreign currency exchange rates — partially offset by strategic pricing actions and lapping higher inventory obsolescence reserves in Greater China in the prior period. For the year, Nike reported sales of $51.2 billion, up 10% from last year, with earnings down 16% to $5.1 billion and EPS down 14% to $3.23. During fiscal 2023, Nike generated a winning 36% return on shareholders’ equity. The company maintains a healthy balance sheet with $10.7 billion in cash and investments, $8.9 billion in long-term debt and $14 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 21 consecutive years of dividend increases. During 2023, Nike returned $7.5 billion to shareholders through dividend payments of $2 billion, representing a 10% increase from the prior year, and share repurchases of $5.5 billion at an average cost per share of $110. For the first quarter of fiscal 2024, Nike expects revenue growth to be flat to up low single-digits. For the full fiscal 2024 year, Nike expects revenue to grow mid-single digits, led by Nike Direct. Nike expects gross margins to expand 140 to 160 basis points, reflecting the beginning of recovery from transitory headwinds, including more favorable ocean freight rates starting halfway through the second quarter, and a modest improvement in markdowns versus the prior year.

Paychex-PAYX reported revenues for the fourth quarter ended 5/31/2023 increased 7% to $1.23 billion with net income and EPS up 18% to $350.4 million and $0.97, respectively.  Management Solutions revenues increased 7% to $905 million on an increase in the number of clients and client employees served for Human Capital Management (HCM) and worksite employees for HR solutions and higher revenue per client resulting from price increases and product attachment.  Professional Employer Organization (PEO) and Insurance sales increased 5% to $300 million on growth in the number of average PEO worksites and increases in average wages per worksite employee. Interest on funds held for clients increased 69% to $24.9 million in the fourth quarter and 73% to $99.8 million for the year, boosted by higher average interest rates and average investment balances, partially offset by offset higher net realized losses as the company repositioned its investment portfolio for the higher rate environment. Paychex ended the year with $4.12 billion in funds held for clients, up 12% from last year. For the fiscal year ended May 31, Paychex reported revenues increased 8% to $4.9 billion with net income and EPS increasing 12% to $1.56 billion and $4.30, respectively. Paychex generated a stellar 44.6% return on shareholders’ equity during fiscal 2023 and $1.56 billion in free cash flow, up 15% from last year, and representing 100% of reported earnings, signaling high-quality of reported earnings. Paychex returned $1.2 billion to shareholders during fiscal 2023 and ended the quarter with $1.6 billion in cash and investments, $798.2 million in long-term debt and $3.5 billion in shareholders’ equity on its rock-solid balance sheet. For fiscal 2024, Paychex expects revenues to increase 6% to 7% with adjusted EPS up 9% to 10%. Interest on Funds Held for Clients is expected in the $135 million to $145 million range, up 40% at the midpoint from 2023. Operating margins are expected in the 41% to 42% range.


Wednesday, June 28, 2023

Visa-V announced it has signed a definitive agreement to acquire Pismo, a cloud-native issuer processing and core banking platform with operations in Latin America, Asia Pacific and Europe, for $1 billion in cash. By acquiring Pismo, Visa will be positioned to provide core banking and issuer processing capabilities across debit, prepaid, credit and commercial cards for clients via cloud native APIs. Pismo’s platform will also enable Visa to provide support and connectivity for emerging payment rails, like Pix in Brazil, for financial institution clients. The transaction is expected to close by the end of 2023.

Cognizant-CTSH and ServiceNow announced a strategic partnership to advance adoption of AI-driven automation across industries. The expanded alliance is expected to help accelerate the path toward building a $1 billion combined business for Cognizant and ServiceNow.

Tuesday, June 27, 2023

Microsoft-MSFT CEO Satya Nadella told fellow executives and board members last year that the software company aims to reach $500 billion in revenue by the 2030 fiscal year, more than doubling from its current size, and implying at least 10% annual revenue growth. “We believe this ambition and approach will help us deliver in excess of 10% annual returns to our shareholders over that timeframe,” Nadella wrote in a document dated June 7, 2022. In the memo, Nadella used the phrase Microsoft Plus to describe products aimed at consumers. But he said the main driver of growth is Microsoft Cloud, including the Azure public cloud, parts of Microsoft 365 productivity software and portions of LinkedIn.

Monday, June 26, 2023

UnitedHealth Group-UNH is buying home health and hospice caregiver ,Amedisys, for $3.3 billion in cash, expanding UnitedHealth’s presence in home healthcare. Interest in the home health sector has been rising since the pandemic as patients and caregivers increasingly prefer accessing medical services from the safety of their homes.

Thursday, June 22, 2023

FactSet-FDS reported revenues for the third fiscal quarter ended May 31, 2023 increased 8.4% to $529.8 million with net income and EPS increasing more than 79% to $134.7 million and $3.46, respectively.  Adjusted earnings and EPS, which exclude lasts year’s charges related to restructuring charges and business acquisition costs, increased 1.8% and 0.8%, respectively. Annual Subscription Value (ASV) plus professional services was $2.1 billion at May 31, 2023, compared with $2.01 billion at May 31, 2022. Organic ASV plus professional services, which excludes the effects of acquisitions and dispositions completed within the last 12 months and foreign currency movements, was $2.1 billion at May 31, 2023, up $156.6 million from the prior year at a growth rate of 8.0%. Annual ASV retention was greater than 95%. Client count as of May 31, 2023 was 7,770, a net increase of 40 clients in the past three months, primarily driven by an increase in corporate and wealth management clients. User count increased by 1,382 to 187,845 in the past three months, driven by an increase in asset management, asset owner and wealth management users. During the quarter, FactSet Research generated $218.6 million in operating cash flow, up 14% from last year, while free cash flow increased 9.1% to $192.6 million, driven by working capital efficiencies as well as the timing of income tax payments. FactSet recently increased the dividend by 10%, marking the 24th consecutive year of dividend increases. During the quarter, FactSet repurchased 165,950 shares of its common stock for $67.1 million at an average price of $404.29 under the company’s existing share repurchase program, with $114.2 million remaining for share repurchases under this program. FactSet’s board recently approved a new share repurchase authorization of up to $300 million, which will be available on September 1, 2023. FactSet ended the quarter with $518.8 million in cash and investments, $1.7 billion in long-term debt and $1.7 billion in shareholders’ equity. Given the current uncertainty surrounding capital markets, FactSet updated its full fiscal year guidance, with revenues now expected in the lower end of the expected range of $2.08 billion to $2.1 billion compared to prior guidance of $2.1 billion to $2.115 billion and adjusted EPS in the $14.75 to $15.15 range compared to the prior range of $14.50 to $14.90 thanks to an increase in operating margins to 35% to 36% from 34% to 35%. The company expects to record a $45 million restructuring charge during the fourth quarter.


Wednesday June 21, 2023

Accenture-ACN reported third quarter revenues increased 3% to $16.6 billion with net income and EPS each rising 13% to $2.0 billion and $3.15, respectively. Revenue growth on a geographic basis was strongest in Europe with 7% growth. By industry group, Health and Public Services led the way and increased revenues by a healthy 14%. Adjusted operating margin expanded by 20 basis points to 16.3%. New bookings increased 2% to $17.2 billion with a book-to-bill ratio of 1.0. During the past quarter, Accenture added 26 clients with quarterly bookings of $100 million or more as the company gained market share.   Accenture is central to helping clients navigate generative artificial intelligence (AI) applications and plans to double its workforce related to AI due to strong demand. Year-to-date, free cash flow increased 1% to $5.8 billion with the company paying $2.1 billion in dividends and repurchasing $3.3 billion of its common shares. Accenture has $3.5 billion remaining authorized for future share repurchases. Thanks to strong cash flows, Accenture also made 20 acquisitions so far, this fiscal year for $1.3 billion to support future growth. For fiscal 2023, Accenture expects constant currency revenue growth in the range of 8% to 9% with a negative 4% impact from foreign currency. The company expects EPS in the range of $10.94 to $11.05 with free cash flow expected in the range of $8.1 billion to $8.6 billion. Accenture continues to expect to return at least $7.1 billion in cash to shareholders through dividends and share repurchases.

 

Accenture-ACN and Microsoft-MSFT expand collaboration to help organizations accelerate responsible adoption of generative AI. Expanding their decades-long collaboration, Accenture and Microsoft are collaborating to help organizations adopt the disruptive power of generative AI, accelerated by the cloud, to fundamentally transform their businesses. Together with their joint venture Avanade, the companies are co-developing new AI-powered industry and functional solutions to help clients harness generative AI across the enterprise. Accenture and Google- GOOGL Cloud help organizations scale advances in generative AI. Through a strategic expansion of their relationship, Accenture and Google Cloud will help organizations reinvent their businesses with generative AI to unlock new growth opportunities, supported by substantial new investments by Accenture. Accenture and AWS extend generative AI capabilities to accelerate adoption and value. Accenture announced an extension of their strategic collaboration with Amazon Web Services (AWS) to help clients leverage the value of large language models (LLMs) and generative AI for faster business transformation, utilizing the most comprehensive and broadly adopted cloud.

 

Warren E. Buffett has converted 9,129 A shares into 13,693,500 B shares in order to donate 13,693,432 shares worth about $4.6 billion of Berkshire Hathaway “B”-BRKB stock to five foundations: 10,453,008 to the Bill & Melinda Gates Foundation Trust, 1,045,300 shares to the Susan Thompson Buffett Foundation and 731,708 shares to each of the Sherwood Foundation, Howard G. Buffett Foundation and NoVo Foundation, his children’s’ foundations. Mr. Buffett’s comments follow: “The mathematics of the lifetime commitments to the five foundations are interesting. The schedule for annual grants was made on June 26, 2006, and has since been supplemented by significant grants to four of the five recipients. When originally made, I owned 474,998 Berkshire A shares worth about $43 billion and those shares represented more than 98% of my net worth. I have converted A shares into B shares before making contributions. During the following 17 years, I have neither bought nor sold any A or B shares nor do I intend to do so. The five foundations have received Berkshire B shares that had a value when received of about $50 billion, substantially more than my entire net worth in 2006. I have no debts and my remaining A shares are worth about $112 billion, well over 99% of my net worth. Nothing extraordinary has occurred at Berkshire; a very long runway, simple and generally sound decisions, the American tailwind and compounding effects produced my current wealth. My will provides that more than 99% of my estate is destined for philanthropic usage.”

 Tuesday, June 20, 2023

France's Teleperformance signed a $185 million deal with Microsoft-MSFT to launch its proprietary TP GenAI. Teleperformance, which employs 410,000 staff in 170 countries, hosts conference calls, maintains pay and salary accounts, and provides automated translations to clients. It said that a pilot of TP GenAI has seen up to a 25% reduction in call handling time, a 20% reduction in email response times, a 90% improvement in accurately addressing customer needs, a 35% increase in sales conversions, and near real-time insights on customer interactions.

Brown-Forman-BFB announces that it has reached an agreement to sell its Finlandia vodka brand to Coca-Cola HBC AG for $220 million. The purchase is expected to close in the second half of the 2023 calendar year.

Berkshire Hathaway-BRKB increased its ownership interest to 8.5% each in five of the leading Japanese trading companies, Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo. Presently these are the only publicly traded investments that Berkshire owns in Japan. Their aggregate value considerably exceeds that of Berkshire-held public stocks in any other country outside of the United States. Berkshire Hathaway's intention continues to be to hold its Japanese investments for the long term. Depending on price, Berkshire Hathaway may increase its holdings up to a maximum of 9.9% in any of the five investments.

Raytheon Technologies-RTX reaffirmed its guidance for fiscal 2023 with EPS of $4.90-5.05 and revenues of $72.0-73.0 billion. Additionally, the company reaffirmed its 2025 $9 billion free cash flow commitment and margin expansion of 550 to 650 basis points from 2020 to 2025. The company also expanded its post-merger shareowner capital return commitment from $20 billion in dividends and share repurchases to $33 to $35 billion through 2025.


Wednesday, June 14, 2023

UnitedHealth-UNH said ambulatory surgery practices, such as hip and knee replacements, are seeing very strong volumes following deferrals of the surgeries during the pandemic. In addition, more individuals are seeking care for behavioral health, such as depression and anxiety, at higher levels coming out of the pandemic. Accordingly, the company expects the Q2 medical care ratio to be moderately above the upper bound of its full year outlook.

Cognizant-CTSH announced that it is has created a new business group, Cognizant® Ocean, which will focus on helping clients in the "Blue Economy" apply digital technologies, such as AI and data analytics, to improve their business outcomes, reduce their carbon output and decarbonize the oceans. Cognizant also announced that it is collaborating with Tidal, a project inside X, Alphabet’s Moonshot Factory, to make Tidal’s ocean information platform widely available to the aquaculture market. 

Tuesday, June 13, 2023

Accenture-ACN announced a $3 billion investment over three years in its Data & AI practice to help clients across all industries rapidly and responsibly advance and use AI to achieve greater growth, efficiency and resilience. The investment builds on Accenture’s decade-plus leadership in AI. The company’s AI expertise spans more than 1,450 patents and pending patent applications worldwide and hundreds of client solutions at scale, ranging from marketing to retail and security to manufacturing. Accenture is currently working with many clients on generative AI projects. "Over the next decade, AI will be a mega-trend, transforming industries, companies, and the way we live and work, as generative AI transforms 40% of all working hours," said Paul Daugherty, group chief executive, Accenture Technology. "Our expanded Data & AI practice brings together the full power and breadth of Accenture in creating industry-specific solutions that will help our clients harness AI’s full potential to reshape their strategy, technology, and ways of working, driving innovation and value responsibly and faster than ever before."

Monday, June 12, 2023

Oracle-ORCL reported fourth quarter revenue increased17% to $13.8 billion with net income up 4% to $3.3 billion and EPS up 3% to $1.19. Cerner contributed $1.5 billion to total revenues. Cloud services and license support revenues increased 23% to $9.4 billion. Cloud license and on-premises license revenues were down 15% to $2.2 billion. For the full year, revenues increased 18% to a record $50 billion with Cerner contributing $5.9 billion to total revenues. Net income and EPS each jumped 27% for the year to $8.5 billion and $3.07, respectively. Free cash flow increased 68% to $8.5 billion during the year with the company paying $3.7 billion in dividends and repurchasing $1.3 billion of its common stock. Oracle expects very good free cash flow results in fiscal 2024. Cerner was part of the $27.7 billion in acquisitions Oracle made during fiscal 2023. "Oracle's Gen2 Cloud has quickly become the number 1 choice for running Generative AI workloads," said Oracle Chairman and CTO, Larry Ellison. "Why? Because Oracle has the highest performance, lowest cost GPU cluster technology in the world. NVIDIA themselves are using our clusters, including one with more than 4,000 GPUs, for their AI infrastructure. Our GPU clusters are built using the highest-bandwidth and lowest-latency RDMA network—and scale up to 32,000 GPUs. As a result, cutting edge companies doing LLM development such as Mosaic ML, Adept AI, Cohere plus 30 other AI development companies have recently signed contracts to purchase more than $2 billion of capacity in Oracle's Gen2 Cloud." Given “unprecedented demand” for cloud services, especially AI services, Oracle’s revenue growth is accelerating into fiscal 2024 with margins expanding. Cloud revenue, excluding Cerner, is expected to continue to grow at similar or higher rates to what the company experienced in FY23, even though its base is much bigger. For the first quarter, total revenues are expected to increase 8%-10% with cloud revenues expected to grow 29%-31% with non-GAAP EPS expected in the range of $1.12-$1.16, representing 9%-13% growth. Due to increased efficiencies, capital expenditures in fiscal 2024 should approximate $8.7 billion, similar to fiscal 2023, even as the company continues to expand its data centers.

Friday, June 9, 2023

The Pulte Family, the founding family of PulteGroup-PHM, and former member of the company's Board of Directors William J. Pulte, announced that they have taken a large position in the company by purchasing 171,037 shares of PulteGroup, Inc. for $11.9 million. William J. Pulte said, “Taking a significant position in PulteGroup stock is in line with our belief that the shares are vastly undervalued, if certain things are done."

Thursday, June 8, 2023

Brown-Forman-BFB reported fourth quarter revenue rose 5% to $1 billion with net income and EPS each up 36% to $207 million and $.43, respectively. For the full fiscal 2023 year, revenues rose 8% to $4.2 billion. Net income and EPS each declined 7% to $783 million and $1.63, respectively, largely driven by the effect of the acquisitions of Diplomático and Gin Mare, higher non-cash impairment charges, largely related to the Finlandia brand name and higher pension settlement charges. The company delivered strong, broad-based reported net sales growth across all geographic clusters and the Travel Retail Channel. Portfolio growth was led by Woodford Reserve as reported net sales increased 26% and Jack Daniel’s Ready-to-Drink/Ready-to-Pour with sales growth of 11%. Reported gross margin contracted 180 basis points driven by inflation, supply chain disruption costs and foreign exchange headwinds. Return on shareholders’ equity for the year was a bubbly 24%. Free cash flow during the year decreased 43% to $457 million, primarily due to lower earnings and increased working capital needs. The company returned $378 million to shareholders through dividend payments. Brown-Forman has paid dividends for 79 consecutive years and has increased the dividend for 39 straight years. The company is optimistic for continued growth in fiscal 2024. However, management believes trends will normalize after two consecutive years of double-digit organic net sales growth. Accordingly, management expects organic net sales growth in the 5% to 7% range, organic operating income growth in the 6% to 8% range and capital expenditures in the range of $250 million to $270 million.

UnitedHealth Group’s-UNH Board of Directors authorized a 14% increase to its quarterly cash dividend. A cash dividend of $1.88 per share, will be paid on June 27, 2023, to all shareholders of record of UNH common stock as of the close of business June 19, 2023. 

Google Cloud -GOOGL announced a collaboration with Mayo Clinic to transform healthcare with generative AI, starting with Enterprise Search in Generative AI App Builder (Gen App Builder), to improve the efficiency of clinical workflows, make it easier for clinicians and researchers to find the information they need, and ultimately to help improve patient outcomes. In addition, Google Cloud announced today that its Enterprise Search on Gen App Builder is now ready to support HIPAA compliance.

Cisco-CSCO announced it is reimagining the way people work with new, powerful generative AI technology. Cisco will harness large language models (LLMs) across its Collaboration and Security portfolios to help organizations drive productivity and simplicity for their workforce.

 

Tuesday, June 6, 2023

Leading online travel agency, Priceline-BKNG, and Google Cloud-GOOGL announced that Priceline plans to deploy Google Cloud's generative AI technologies across both customer-facing and internal parts of its business. Customers will soon be able to engage with a new, generative AI-powered chatbot and will also begin to see more personalized offerings when searching for hotels worldwide. In addition, Priceline employees will benefit from increased and easier access to internal information and realize productivity gains by using AI to automate some of their time-intensive coding and content generation tasks.

Apple-AAPL unveiled a number of new products and updates for existing products at its Worldwide Developer Conference. Apple also introduced the $3,499 Apple Vision Pro™, a revolutionary spatial computer that seamlessly blends digital content with the physical world, while allowing users to stay present and connected to others. Vision Pro creates an infinite canvas for apps that scales beyond the boundaries of a traditional display and introduces a fully three-dimensional user interface controlled by the most natural and intuitive inputs possible — a user's eyes, hands, and voice. Featuring visionOS™, the world's first spatial operating system, Vision Pro lets users interact with digital content in a way that feels like it is physically present in their space. The breakthrough design of Vision Pro features an ultra-high-resolution display system that packs 23 million pixels across two displays, and custom Apple silicon in a unique dual-chip design to ensure every experience feels like it's taking place in front of the user's eyes in real time. Apple and Disney will partner to deliver content with Disney+ on the device.


 

Fastenal-FAST reported May sales increased 10% to $649 million with daily sales up 5% to $29.5 million. Sales growth of 14% was strongest in the Mexico/Canada region. By end markets, manufacturing sales increased. 9.7% with non-residential construction sales down 9.5%. Fastener sales dipped 1% with Safety sales up 7% and other products sales up 9%. Growth by customer segment has slowed since last year but 71% of the company’s top 100 national accounts continue to grow and 52% of its public branches still growing.

Thursday, June 1, 2023

Hormel Foods-HRL reported fiscal second quarter revenues slipped 4% to $3.0 billion with net income and EPS each dropping 17% to $217.2 million and $.40, respectively. Solid profit growth from the Foodservice segment was more than offset by lower results from the Retail segment due to unfavorable product mix and higher costs and the International segment, which remained challenged by a slower-than-expected recovery in China and less turkey available for export. Free cash flow improved in the second quarter but was still down 27% in the first half of the fiscal year to $326.2 million. During the first half, Hormel repurchased $12.3 million of its stock and paid a plump $292.6 million in dividends. Hormel has paid uninterrupted dividends for 95 consecutive years. Hormel expects growth in sales and earnings to resume in the second half of fiscal 2023 as higher turkey volume resumes and inventories normalize in key categories, such as bacon, pepperoni, snack nuts and the SPAM family of products. Hormel also remains focused on reducing costs further and improving profit margins. The company reaffirmed its sales and earnings outlook for the full fiscal 2023 year with sales expected to grow 1% to 3%, generating EPS in the range of $1.70 to $1.82, representing growth of 2% to 10% over the prior year.

Wednesday, May 31, 2023

Apple-AAPL announced the App Store® ecosystem facilitated $1.1 trillion in developer billings and sales in 2022, building on developers’ track record of strong, resilient growth, an independent study by economists from Analysis Group found. Developer billings and sales grew by 29 percent between 2021 and 2022. The App Store continues to create incredible opportunity for developers around the world, with more than 90 percent of the billings and sales accruing solely to developers and businesses of all sizes — without any commission paid to Apple. Additionally, new analysis from the Progressive Policy Institute found the iOS app economy now supports more than 4.8 million jobs across the U.S. and Europe, with approximately 2.4 million in each region.

Brown-Forman-BFB announces plans to expand its Casa Herradura tequila distillery in Jalisco, Mexico. The approximate $200 million USD investment will allow the company to meet the increasing global demand for its premium tequilas. Construction is expected to begin in July 2023.  Tequila is the fastest growing spirits category globally by value with the majority of the growth within the category driven by the super premium+ price segment. The U.S. market accounts for 32 million 9L cases, and $12 billion in retail value. 

Visa-V announced volume and transaction data for May 2023. May U.S. payments volume on a year-over-year basis was up 5%. Credit grew 5% and Debit grew 6%. May payments volume year-over-year growth for key international markets was relatively consistent with April 2023 year-over-year growth. May cross-border volume, excluding intra-Europe transactions, was 151% of 2019, with card not present volume excluding travel at 175% of 2019. May travel cross-border volume into and from the Asia Pacific region and into the U.S. continued to improve relative to 2019 levels. May global processed transactions grew 9% year-over-year.

Berkshire Hathaway-BRKB continues to add to its Occidental Petroleum position with recent purchases under $60 per share pushing Berkshire’s ownership to approximately 25% of the oil giant. Buffett had said at the annual meeting he was not seeking control of the company.

Thursday, May 25, 2023

Ulta Beauty-ULTA reported first quarter sales increased a pretty 12% to $2.6 billion with net income up 5% to $347.1 million and EPS up 9% to $6.88. Strong 9.3% comparable sales growth was driven by an 11% increase in transactions and a 1.5% decrease in average ticket. Loyalty member growth increase 9% during the quarter to 41 million people. Gross profit increased 12.1% to $1.1 billion and ticked slightly lower as a percentage of sales to 40.0% from 40.1% in the prior year period due to higher inventory shrink, lower merchandise margins and higher supply chain costs. Operating income increased 1% to $442.1 million, reflecting the deleverage of selling, general and administrative expenses. Free cash flow declined 45% during the quarter to $195.1 million due primarily to an increase in inventories to support higher demand, product cost increases, 41 net new stores, new brand launches and brand expansions. During the first quarter, the company repurchased 541,108 shares of its common stock for $285.8 million or an average cost per share of $528.18 per share. Ulta has $816.5 million remaining authorized for future share repurchases. The company ended the quarter with an attractive balance sheet with more than $636 million in cash, no long-term debt and $2.0 billion in shareholders’ equity. Ulta Beauty raised its revenue outlook for the full year to $11.0 billion to $11.1 billion with comparable store sales growth of 4% to 5% still expected. The company continues to expect to open 25-30 new stores and remodel or relocate 20-30 stores.  The company’s operating margin outlook was lowered to a range of 14.5% to 14.8% from its previous outlook of 14.7% to 15.0% due to an increased promotional environment and increased shrink (organized theft from retailers is an ongoing problem).   Nevertheless, increased interest income and a lower expected tax rate led Ulta Beauty to reaffirm its EPS outlook in the range of $24.70-$25.40 for the full fiscal year with share repurchases of approximately $900 million expected for the year.

Thursday, May 18, 2023

Ross Stores-ROST rang up a 3.7% increase in sales to $4.49 billion with net earnings increasing 9.7% to $371.2 million and EPS up 12.4% to $1.09. Comparable store sales increased 1% on healthy traffic that was partially offset by lower AUR. Sales were strongest in cosmetics and accessories and in the Midwest. Home goods were flat and apparel sales lagged. Operating margin for the period was 10.1%, down from 10.8% in 2022, primarily reflecting higher incentive compensation versus last year when management underperformed expectations. During the quarter, Ross Stores generated $245.9 million in free cash flow as inventories declined 16% thanks to the lapping of last year’s bloated inventory resulting from the easing of supply chain pressures. Average store inventories increased 2%. Ross returned $349.3 million to shareholders during the quarter through dividends of $114.8 million and share repurchases of $234.5 million at an average cost of $106.36 per share. The company remains on track to repurchase a total of $950 million shares during fiscal 2023. Ross Stores ended the quarter with $4.4 billion in cash and equivalents, $2.5 billion in long-term debt and $4.3 billion in shareholders’ equity on its fancy balance sheet. Looking ahead to the second quarter, comparable store sales are projected to be relatively flat with EPS of $1.07 to $1.14 versus $1.11 for the same period last year. Based on first quarter results and guidance for the second quarter, comparable store sales for the 52 weeks ending January 27, 2024, are still planned to be relatively flat. EPS for the 53 weeks ending February 3, 2024 are expected in the range of $4.77 to $4.99 compared to $4.38 for the 52 weeks ended January 28, 2023. This guidance includes an estimated benefit to full year 2023 earnings per share of about $0.15 from the 53rd week. Barbara Rentler, Chief Executive Officer, commented, ““There remains a high level of uncertainty in today’s macro-economic and geopolitical environments. In addition, prolonged inflationary pressures continue to negatively impact our low-to-moderate income customers’ discretionary spend. As such, we remain focused on delivering the most compelling values possible to maximize our opportunities for growth.”

Wednesday, May 17, 2023

Cisco Systems-CSCO reported third quarter revenues increased 14% to $14.6 billion with net income increasing 6% to $3.2 billion and EPS increasing 7% to $0.78. During the quarter, Cisco delivered record revenue and double-digit growth in both software and subscription revenue.  Annualized recurring revenue (ARR) increased 6% to $23.8 billion and remaining performance obligations (RPO) increased 6% to $32.1 billion, with 53% of this amount to be recognized as revenue over the next 12 months. During the quarter, orders were down 23%. Cash flow from operating activities increased 43% to a record $5.2 billion. Free cash flow jumped 44% during the first nine months of the year to $13.3 billion with the company paying $1.6 billion in dividends and repurchasing $1.3 billion of its common stock, including 25 million shares repurchased in the third quarter at an average price of $49.45 per share. Cisco maintains a strong balance sheet and ended the quarter with $23.3 billion in cash and investments, $6.7 billion in long-term debt and $42.3 billion in shareholders’ equity. During the quarter, Cisco closed the acquisition of Valtix, a privately held cloud network security company. For the fourth quarter of fiscal 2023, management expects revenue growth in the range of 14% to 16% with EPS expected in the range of $1.05 to $1.07. For the full-year, Cisco raised guidance now expecting revenue growth of 10% to 10.5% and EPS of $3.80 to $3.82.

The TJX Companies-TJX reported first quarter revenues rose 3% to $11.8 billion as overall comparable store sales increased 3%, at the high end of the company’s plan, driven by an increase in customer traffic. On a business segment basis, Marmaxx, the company’s largest division, led the way with 5% comparable store sales growth, driven by very strong sales in apparel and accessories. HomeGoods’ comp sales were down following extraordinary growth during the pandemic. TJX Canada and TJX International both delivered comp sales growth and customer traffic increases.  Net earnings in the first quarter jumped a dressy 52% to $891 million with EPS up 55% to $.76. On an adjusted basis, EPS increased 12% as last year’s first quarter included a charge related to a write-down of the company’s business in Russia.  The company’s pre-tax margin of 10.3% during the quarter was well above the company’s plan as freight costs have come down more than expected. The company’s free cash flow during the quarter jumped to $384 million as inventories declined 8% as the company lapped last year’s elevated inventory due to supply chain delays.  The company ended the quarter with $5.0 billion in cash after the company paid dividends of $343 million, which were increased 13% in the first quarte,r and repurchased  $492 million of its common stock at a cost of about $75.69 per share.  The company continues to expect to repurchase about $2.0 billion to $2.5 billion of its stock for the full fiscal year from its abundant cash flows. Given the strong start to the fiscal year, TJX expects revenues in the range of $52.7 billion to $53.2 billion and raised its pre-tax operating margin to a range of 10.3%-10.5% with EPS expected in the range of $3.49-$3.58.

Western Alliance-WAL reported its deposits grew by more than $2 billion as of May 12. . The bank also said insured deposits represented 79% of the total up from 68% at the end of the first quarter, which is the highest insured deposit percentage among the top-50 largest banks.

Thursday, May 11, 2023

Western Alliance-WAL provided an update on its deposits. Total Deposits were approximately $49.4 billion as of Tuesday, May 9, with quarter-to-date deposit growth of $1.8 billion from $47.6 billion as of March 31 and higher by approximately $600 million from $48.8 billion as of Tuesday, May 2, the date of the last deposit status release. Insured deposits were approximately 79% of total deposits as of Tuesday, May 9 compared to 68% as of March 31. Readily available liquidity is approximately double the amount of uninsured deposits as of May 9. The increase in deposits amidst heightened market volatility and challenges at competitors exemplifies the strength and resilience of the bank and its customer relationships. The $2 billion quarter-over-quarter deposit growth rate guidance is unchanged.

Alphabet-GOOGL introduced several new products, including the Pixel Fold, a foldable smartphone starting at $1,799. On the artificial intelligence (AI) front, Alphabet  introduced "Help Me Write", which is an AI tool for G-Mail.  This update will roll out with other updates. The company also incorporated AI into search and  will also add AI features to Google Maps this summer. The company will introduce "Magic Editor" into photo editing with Google Photos later this year. Alphabet also announced it is removing the waitlist process and making Bard, its AI chatbot, available in over 180 countries and territories, with more coming soon.

Microsoft-MSFT is freezing salaries for all full-time workers as it navigates macroeconomic uncertainty and invests in a major shift towards artificial intelligence.

Bricklin Dwyer, Mastercard-MA chief economist and head of the Mastercard Economics Institute, said,  "In the first full year of unfettered travel since the pandemic, consumers are acting on pent-up desire to explore new locales, connect with friends and family, and accumulate experiences to make up for lost time. Despite evolving economic landscapes, resilient consumers continue to prioritize travel. And with new corridors emerging and China reopening, the 2023 outlook indicates good reason to be optimistic."

Wednesday, May 10. 2023

T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.35 trillion as of April 30, 2023, which is 6.1% higher than year end. Preliminary net outflows for April 2023 were $3.7 billion.

Saturday, May 6, 2023

Berkshire Hathaway-BRKB reported the company’s net worth during the first quarter of 2023 increased by 6.6%, or $31.1 billion, to $504.6 billion with book value equal to about $348,000 per Class A share as of 3/31/23. Berkshire boasts the largest shareholders’ equity of any U.S. company.

On a GAAP basis, Berkshire reported net earnings of $35.5 billion during the first quarter compared to $5.6 billion in earnings in the prior year quarter. Investment gains and losses from changes in the market prices of Berkshire’s substantial equity investments will produce significant volatility in earnings. Berkshire’s five major equity investment holdings which represent about 77% of total equities held, include American Express at $25.0 billion (which charged 12% higher during the quarter or $2.6 billion); Apple at $151 billion (which jumped 27% during the quarter or a juicy $32 billion); Bank of America at $29.5 billion (which declined 14% or $4.7 billion in value due to banking woes during the quarter); Coca-Cola at $24.8 billion (which slipped 2% or $600 million) and Chevron at $21.6 billion (which was 28% lower or $8.4 billion in value, reflecting partial sales of the position and lower oil prices).

During the first quarter, Berkshire’s revenues rose 20.5% to $85.4 billion during the quarter, aided by the $9.5 billion contribution from Pilot Travel Centers which was consolidated into Berkshire’s results following the acquisition of Berkshire’s additional 41.4% ownership interest in the company, bringing Berkshire’s total ownership in Pilot to approximately 80%. Berkshire’s operating earnings increased 12.6% during the first quarter to $8.1 billion, led by a turnaround in Berkshire insurance business.

During the first quarter, Berkshire’s insurance businesses generated $911 million from underwriting earnings compared to $167 million in the prior year quarter due to improvements at GEICO and the Berkshire Hathaway Primary Group, which included the acquisition of Alleghany Insurance. Insurance investment income increased 68% during the quarter to nearly $2 billion, reflecting higher dividend and interest income as interest rates increased significantly. The float of the insurance operations increased $1 billion to end the quarter at about $165 billion. The combined cost of float was negative during the first quarter due to the $1.2 billion in pre-tax underwriting gains during the quarter.

Burlington Northern Santa Fe’s revenues chugged 2% higher during the quarter to $5.9 billion, reflecting higher revenue per car/unit from higher fuel surcharges and increased rates. Net earnings dropped 9% to $1.2 billion due to a 10% decrease in overall freight volumes and higher average fuel and other operating costs.
Berkshire Hathaway Energy reported revenues rose 7% during the quarter to $6.5 billion with net earnings charging 46% lower to $416 million. The decrease reflected lower earnings from the U.S. regulated utilities, other energy businesses and the real estate brokerage business.

Berkshire’s Manufacturing businesses reported first quarter revenues dipped 0.7% to $18.3 billion with operating earnings down 8% to $2.6 billion. The industrial products segment led the way for the quarter with revenues rising 19% to $8.9 billion and operating earnings also increasing 19% to $1.4 billion thanks to improvements at Precision Castparts, Lubrizol, IMC and Marmon including acquisitions as part of the Alleghany deal. However, the results of the building products and consumer products segments generally deteriorated during the quarter with revenue and earnings down in both segments. Given the significant increase in interest rates, including home mortgage rates, demand has slowed for Berkshire’s home building businesses which are expected to experience declines in revenues and earnings for the balance of 2023. In the consumer products segment, weakness in demand for recreational vehicles at Forest River due in part to rising interest rates and supply chain issues in the apparel group contributed to lower sales and earnings. The weakness in both groups is expected to persist in the near term.

Service and Retailing revenues increased 6% during the quarter to $23 billion with pre-tax earnings increasing 10% to $1.3 billion. The Service group led the way as revenue increased 18% to $5.3 billion with pre-tax earnings up 16% to $837 million thanks to increased revenue from aviation services, the impact of a $302 million acquisition and increased revenue from TTI, a distributor of electronic components. New orders slowed at TTI, in part, attributable to elevated inventory levels within the supply chain, which may lead to lower revenues in future periods.

Berkshire’s balance sheet continues to reflect significant liquidity and a very strong capital base of $504.6 billion as of 3/31/23. Excluding railroad, energy and utility investments, Berkshire ended the year with $504.8 billion in investments allocated approximately 65.0% to equities ($328.2 billion), 4.6% to fixed-income investments ($22.5 billion), 25.2% in cash and equivalents ($127.7 billion) and 5.2% in equity method investments ($26.4 billion), which includes 26.5% ownership of Kraft Heinz and 23.5% ownership of Occidental Petroleum. Warren Buffett noted at the annual meeting he has no plans to acquire Occidental Petroleum.

Free cash flow increased 33% during the quarter to nearly $5 billion due to higher earnings. During the quarter, capital expenditures approximated $3.7 billion, which included $2.6 billion for BNSF and BHE, its railroad and utility and energy units. Berkshire expects capital expenditures for the remainder of 2023 for BNSF and BHE to approximate $11.7 billion.

During the first quarter, Berkshire paid cash of $2.9 billion to acquire equity securities and received proceeds of $13.3 billion from the sale of stocks. In addition, Berkshire purchased a net $7.2 billion in Treasury Bills and fixed-income investments. On January 31, 2023, Berkshire acquired an additional 41.4% interest in Pilot for approximately $8.2 billion which brought Berkshire’s ownership of Pilot up to 80%.

Berkshire repurchases its shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett and Charlie Munger. During the first quarter, Berkshire repurchased $4.5 billion of its common stock. These repurchases included 4,386 Class A shares purchased at an average price of approximately $465,791 per share and 4,500,593 Class B shares purchased an average price of $305.57 per share during March 2023.

 Thursday, May 4, 2023

Apple-AAPL reported second quarter revenue declined 3% to $94.8 billion with net income decreasing 3% to $24.2 billion and EPS coming in flat at $1.52. Apple set an all-time revenue record for Services, which increased 5% to $20.9 billion, and Apple’s installed base of active devices reached an all-time high. In addition, the March quarter was a record for iPhone despite the challenging macroeconomic environment. Free cash flow decreased 20% during the first half of the year to $55.9 billion, primarily due to working capital needs. The company returned $46.5 billion to shareholders through dividend payments of $7.4 billion and share repurchases of $39.1 billion. Given the company’s strong financial position with $166 billion in cash and investments as of quarter end, the company announced a 4% increase in its dividend, marking the eleventh consecutive year of dividend increases. In addition, the board of directors authorized an additional $90 billion to its existing share repurchase program, reflecting management’s confidence in Apple’s future and the value they see in the stock. Management expects third quarter revenue to decline approximately 3% year-over-year.

Booking Holdings-BKNG booked a 40% increase in first quarter revenues to $3.78 billion with net income of $266 million, compared to a net loss of $700 million last year, and EPS of $7.00, compared to a net loss of $17.10 per share last year. Gross bookings and room nights reached records levels, surpassing expectations, on pent-up demand that drove consumers to book flights and hotels despite recession concerns. Gross travel bookings, which refers to the total dollar value, generally inclusive of taxes and fees, of all travel services booked, net of cancellations, were $39.4 billion, an increase of 44% from last year and room nights booked increased 38%. Rental car days increased 23% to 19 million while airline tickets flew 73% higher to 8 million. During the quarter, Booking Holdings generated $2.8 billion in free cash flow on the strong summer bookings that generated $2.3 billion in working capital. Booking Holdings returned $2.15 billion in cash to shareholders via share repurchases and paid down $500 million in long-term debt. The company ended the quarter with $14.5 billion in cash and investments, $11.3 billion in long-term debt and $1.1 billion in shareholders’ equity. Despite strong bookings in the first 4 months of the year, management maintained its outlook for 2023 with 2023 revenue as a percentage of gross bookings to be about 50 basis points higher than in 2022, which will result in year-over-year revenue growth higher than year-over-year gross bookings growth.  


Celebrating its 30th Anniversary, Texas Roadhouse-TXRH reported beefy first quarter results with revenues jumping 18.9% to a record $1.2 billion with net income up 14.9% to $86.4 million and EPS jumping 18.4% to $1.28. Comparable restaurant sales increased 12.9% at company restaurants, driven by a 7.6% increase in traffic to record guest counts and a 5.3% check increase.  Average weekly sales at company restaurants increased 12.2% to $148,437 of which 12.8% were to-go sales. Restaurant margin dollars increased 15.2% to $185.7 million primarily due to higher sales. The restaurant margin decreased 53 basis points to 15.9% due to commodity inflation of 8.9% and wage and other labor inflation of 8.0%. Beef prices remain elevated and wage pressures remain persistent. However, wage pressure is expected to moderate over the balance of the year. During the quarter, six company restaurants and one international franchise restaurant were opened, and eight domestic franchise restaurants were acquired. Free cash flow declined 12% during the quarter to $122.2 million due primarily to an increase in capital expenditures. During the quarter, the company paid off its long-term debt, paid dividends of $36.9 million, an increase of 20% over last year, and repurchased 92,751 shares of common stock for $9.6 million at an average price of $103.50 per share. Comparable restaurant sales for the first five weeks of the second fiscal quarter increased 8.6%. In addition, the company implemented a menu price increase of 2.2% in late March. Management reiterated the following expectations for 2023, including positive comparable restaurant sales growth, the opening of  25 to 30 new Texas Roadhouse and Bubba’s 33 company restaurant, store week growth of at least 6%, commodity cost inflation of 5% to 6%, wage and other labor inflation of 5% to 6% and total capital expenditures of about $265 million.

Western Alliance Bancorporation-WAL reaffirmed its financial strength as well as its deposit growth guidance in response to recent industry events. Western Alliance released the following key financial metrics, which reinforce the Bank’s strength, soundness, and stability. The bank’s deposits have stabilized with total deposits of $48.8 billion as of Tuesday, May 2. Quarter-to-date deposits are up $1.2 billion, and the bank reaffirmed its $2 billion quarter-over-quarter deposit growth guidance. Insured deposits represent over 74% of total deposits. Liquidity coverage of uninsured deposits was approximately 165%. Balance sheet repositioning actions remain on track with the completion of $6 billion of full-year select asset dispositions expected. Western Alliance’s CET1 ratio was approximately 9.7% as of April 30 compared to 9.4% as of March 31. The Tangible Common Equity-to-Tangible Assets ratio has increased to approximately 6.7% from 6.5% over the same time period. Acknowledging the bank’s capital strength, the Board declared its Q2 2023 common dividend of $0.36 per share on May 2, which is unchanged from Q1 2023.

In separate news, Western Alliance Bancorp issued this statement: "The Financial Times' report today that Western Alliance is considering a potential sale of all or part of its business is categorically false in all respects. There is not a single element of the article that is true. Western Alliance is not exploring a sale, nor has it hired an advisor to explore strategic options. It is shameful and irresponsible that the Financial Times has allowed itself to be used as an instrument of short sellers and as a conduit for spreading false narratives about a financially sound and profitable bank. We are considering all of our legal options in response to today's article."

Fastenal-FAST reported April net sales increased 2.7% to $586.2 million with average daily sales up 7.8% to $29.3 million. Growth was strongest in Canada/Mexico at 14% with U.S. sales up 7% and the rest of the world sales up 4%. Manufacturing sales increased 13% with non-residential construction sales down 8% during the month. Growth by product line was 1% for Fasteners, 10% for Safety and 12% for Other items. Growth by customer channel is slowing with 78% of its Top 100 national accounts growing and 53% of its public branches growing. Total personnel increased 7% since last year to 22,821 at the end of April.

Wednesday, May, 3, 2023

Cognizant Technology Solutions-CTSH reported first quarter revenues dipped 0.3%, or rose 1.5% on a constant currency basis, to $4.8 billion with net income up 3% to $580 million and EPS up 6.5% to $1.14. Health Sciences and Communications, Media and Technology provided the strongest growth during the quarter by business segment. On a geographic basis, the United Kingdom generated the strongest revenue growth with 14% growth driven by double-digit growth in financial services. During the first quarter, bookings grew 28% year-over-year which included several large deals including a new five-year agreement with Nike. On a trailing-twelve-month basis, bookings grew 9% to a record $25.6 billion which represented a book-to-bill of approximately 1.3X.   Cognizant generated $631 million in free cash flow during the quarter, which was up more than threefold. This strong free cash flow enabled the company to pay $150 million in dividends and repurchase 3.2 million of its common shares for $222 million of its stock during the quarter at an average price of $69.38 per share. The company has $2.6 billion authorized for future share repurchases. Cognizant expects revenue for the full-year 2023 in the range of $19.2 billion to $19.6 billion, relatively flat with last year given challenging macro conditions, with adjusted EPS expected in the range of $4.11 to $4.34. In 2023, the company expects to return $1.4 billion to shareholders through share repurchases of $800 million and dividends of $600 million.

Canadian National Railway-CNI reaffirmed the railroad still aims to deliver adjusted diluted earnings per share (EPS) growth in the mid single digits over 2022. In addition, the railroad is targeting to deliver 10%-15% diluted EPS growth over the next 3 years by growing volumes more than the economy, pricing above rail inflation and incrementally improving efficiency.

 Tuesday, May 2, 2023

T. Rowe Price-TROW reported first quarter revenues declined 18% to $1.5 billion with net income tumbling 26% to $411 million and EPS falling 24% to $1.83. Assets under management fell 13.5% from the prior year quarter to end at $1.3 trillion, reflecting $16.1 billion in net client outflows given the uncertain market environment and weak demand for large cap growth investment strategies. Investment advisory fees account for 90% of total revenues. The investment advisory fee declined from 43.2 basis points in the prior year quarter to 42.7 basis points driven by a mix shift toward lower fee asset classes.  T. Rowe Price maintains a strong balance sheet with $4.7 billion in cash and investments, no long-term debt and $9.0 billion shareholders’ equity.  T. Rowe Price increased its dividend for the 37th consecutive year, and the dividend currently yields about 4.4%.  At the same time, the company expects consistent organic growth to take some time to resume as the company has lost market share in its equity strategies which comprise the largest part of its portfolios.

 Starbucks-SBUX reported second quarter sales perked up 14% to $8.7 billion as global comparable store sales increased 11%, primarily driven by a 6% increase in comparable transactions and a 4% increase in average ticket.  Starbucks saw robust recovery in China and expects China to remain on track to achieve 13% net new store growth for this year. China reported better than expected sales as the country reopened from the pandemic as comparable store sales increased 3%, driven by a 4% increase in comparable transactions and a 1% decline in average ticket.  Internationally, strong comps were captured across the regions outside of China with markets like Japan and the U.K. posting double-digit comps for the eighth consecutive quarter.  The company opened 464 net new stores during the quarter, ending the period with 36,634 stores globally with 51% company-operated and 49% licensed. At the end of the quarter, stores in the U.S. and China comprised 61% of the company’s global portfolio, with 16,044 and 6,243 stores in the U.S. and China, respectively. The company’s operating margin of 15.2% increased from 12.4% in the prior year, primarily driven by sales leverage, pricing, productivity improvement and a gain on the sale of Seattle's Best Coffee brand. Net earnings brewed up a robust 35% gain to $908.3 million with EPS up 36% to $.79. Starbucks Rewards loyalty program of 90-day active members in the U.S. increased to 30.8 million, up 15% year-over-year.  Free cash flow increased 17% during the first half of the fiscal 2023 year to $1.4 billion with the company paying $1.2 billion in dividends and repurchasing $479 million of its common stock.   The company reaffirmed its fiscal year 2023 guidance with U.S. comparable sales growth expected to grow in the range of 7% to 9%. Global comp growth is expected to be near the high end of 7% to 9%. U.S. store count is expected to grow by approximately 3% with global store growth expected to reach approximately 7%.For the full year, EPS growth is expected in the range of 15%-20%.

Monday, May 1, 2023

 

Stryker-SYK reported first quarter sales increased a healthy 11.8% to $4.78 billion with net income and EPS increasing more than 80% to $592 million and $1.54, respectively. Excluding special items in both years, adjusted earnings of $820 million and EPS of $2.14 increased 9% from last year. Organic net sales increased 13.6% in the quarter including 12.9% from increased unit volume and 0.7% from higher prices. MedSurg and Neurotechnology net sales of $2.7 billion increased 11.0% in the quarter on strong sales of endoscopy and medical equipment.  Orthopaedics and Spine net sales of $2.1 billion increased 12.7% in the quarter on a 22% increase in knees and double-digit growth in hips and trauma and extremities. During the quarter, Stryker generated $445 million in free cash flow, up from $203 million last year, owing to the collection of last year’s elevated receivable balance. Stryker generated $315 million in free cash flow during the first quarter, paid down $100 million of debt and returned $284 million to shareholders through dividend payments. Stryker ended the quarter with $1.8 billion in cash and investments, $11.9 billion in long-term debt and $16.9 billion in shareholders’ equity. Given the strong first quarter, its strong order book for capital equipment and ongoing procedural recovery, management now expects full year 2023 organic net sales growth to be in the range of 8.0% to 9.0% with adjusted EPS to be in the range of $10.05 to $10.25, up 8.7% at the midpoint from 2022.

Friday, April 28, 2023

Gentex-GNTX reported first quarter revenues increased 18% to a record $550.8 million with net income up 12% to $97.6 million and EPS motoring 14% higher to $.42. Many of the supply chain issues that had held back auto production during 2022 have improved, and the strong demand for Gentex’s products combined with the increased light vehicle production led to the record sales as the company gained market share. Gross profit margin improved to 31.7% in the first quarter, a 50-basis point improvement from the fourth quarter. Following a challenging 2022 which reflected higher raw material, labor and freight costs along with overall inflation, Gentex expects gross margin to improve to the 35%-36% range by the end of 2024 thanks to price increases and other actions taken to reduce costs. During the quarter, the company repurchased one million shares of its common stock at an average price of $27.19 per share with 19.7 million shares remaining authorized for future share repurchases. The company ended the quarter with a strong balance sheet with more than $470 million in cash and investments, no long-term debt and $2.1 billion in shareholders’ equity.  Gentex reaffirmed its outlook for the full 2023 year with revenue expected to approximate $2.2 billion with an additional 10% revenue growth expected in 2024.

Paychex-PAYX announced that its board of directors approved a $.10 increase in the company’s regular quarterly dividend, an increase of 13 percent. "Our board’s decision to again increase the quarterly dividend demonstrates our strong financial position and confidence in our ability to continue to return value to our shareholders, while also investing for growth in the business today and in the future," said Paychex President and CEO,  John Gibson. In fiscal 2023, ending on May 31, 2023, Paychex expects to return approximately $1.2 billion in dividends to shareholders.

 

Thursday, April 27, 2023


 Tractor Supply-TSCO rang up a 9% increase in first quarter sales to $3.3 billion with net income declining 2.2% to $183.1 million and EPS flat with last year at $1.65. The increase in net sales was driven by the acquisition of Orscheln Farm and Home, new store openings and growth in comparable store sales. Comparable store sales increased 2.1%, down from 5.2% last year, on materially softer demand in seasonal products due to wetter, colder and snowier weather in many markets during the last three weeks in March, and to a lesser extent a mild January. Comparable average ticket grew 2.8% and comparable average transaction count decreased 0.7%. Gross margin increased 52 basis points to 35.5% owing to Tractor Supply’s consistent execution of an everyday low-price strategy, lower transportation costs and other margin-driving initiatives that more than offset the impact from product cost inflation pressures and product mix from the robust growth of lower margin consumable, usable and edible products. Operating margins declined 67 basis points, squeezed by growth in depreciation and amortization, the onboarding of a new distribution center and costs related to the Orscheln Farm and Home acquisition. Inventories increased 18% from last year to $3.1 billion due to inflation and the delay in the start of the spring selling season. During the quarter, Tractor Supply used $138.4 million of cash to fund operations and invest in capital expenditures while plowing $310.6 million to shareholders through share repurchases of $197.2 million at an average cost per share of $219.11 and dividend payments of $113.4 million. Tractor Supply ended the quarter with $190.1 million in cash, $1.6 billion in long-term debt and $1.9 billion in shareholders’ equity on its balance sheet. Management affirmed its prior guidance for 2023 with sales expected in the $15.0 billion to $15.3 billion range, up 6.7% from last year at the midpoint, with EPS between $10.30 to $10.60, up 7.6% at the midpoint. “We believe that our customer remains healthy, as evidenced by positive comparable transactions in our last two months, and that we continue to gain market share. As spring has arrived across our markets, we are pleased with the improved sales trends we are seeing. With the majority of the year ahead of us and given our track record of nimbly managing the business, we are confirming our financial outlook for fiscal 2023,” said Hal Lawton, president and chief executive officer of Tractor Supply.


Wednesday, April 26, 2023

Meta Platforms-META reported first quarter revenue rose 3% to $28.6 billion with net income down 24% to $5.7 billion and EPS down 19% to $2.20. Profits were impacted by total restructuring charges of $1.1 billion during the first quarter, reflecting Meta Platforms continued push towards efficiency. Excluding these charges, Meta’s operating margin would have been four percentage points higher, and EPS would have been $.44 higher for the first quarter. Headcount decreased 1% year-over-year to 77,114. The employees that would be impacted by the planned 2023 layoffs are included in the reported headcount as of March 31, 2023. Meta continues to see a shift to time spent on short-form videos, such as Reels, which is currently monetizing at lower rates than Feed and Stories. However, Meta expects Reels to be revenue neutral by the end of fiscal 2023. Facebook daily active users increased 4% for March 2023 to an average of 2.04 billion with monthly active users increasing 2% to 2.99 billion. In the first quarter, ad impressions delivered across the Family of Apps increased by 26% with the average price per ad declining by 17%. Free cash flow decreased 17% during the quarter to $7.2 billion, primarily due to higher capital expenditures. The company repurchased $9.2 billion of its common stock with $41.73 billion remaining authorized for future share repurchases. Meta ended the quarter with a strong balance sheet with $37.4 billion in cash and investments, $9.9 billion in long-term debt and $124.7 billion in shareholders’ equity. Second quarter revenue is expected to be in the range of $29.5-$32 billion. Total expenses in 2023 were lowered to an expected range of $86-$90 billion, including $3-$5 billion of restructuring costs related to facilities consolidation charges and severance and other personnel costs. Meta continues to expect Reality Labs operating losses to increase year-over-year in 2023.

Roche Group-RHHBY reported first quarter sales declined 3% in constant exchange rates (CER), or 7% in Swiss Francs, to CHF 15.32 billion. As expected, significantly lower demand for COVID-19 tests led to the sales decrease. Excluding the effects of COVID-19 related sales, Roche Group sales increased 8%. Pharmaceuticals Division sales increased 9% in constant currency to CHF 11.7 billion on strong demand for newer medicines. Roche boasts one of the youngest pharmaceutical portfolios in the industry with 19 new medicines launched since 2015 now generating more than 50% of Roche’s pharmaceutical sales. The top five contributors to growth – Vabysmo (severe eye disease), Ocrevus (multiple sclerosis), Hemlibra (haemophilia), Evrysdi (spinal muscular atrophy) and Tecentriq (cancer immunotherapy) generated additional sales of CHF 1.1 billion during the quarter. Vabysmo is already the strongest growth driver just five quarters from launch with anticipated annual sales of CHF 2.0 billion. The impact of the competition from biosimilars for the established cancer medicines Avastin, Herceptin and MabThera/Rituxan slowed down further, reducing sales by about CHF 330 million during the quarter. Diagnostics Division sales declined 28% in constant currency to CHF 3.6 billion. Excluding exceptionally high demand for COVID-19 tests in the first quarter of 2022 that resulted in CHF 1.9 billion in sales, Diagnostic Division core sales increased 4%. Immunodiagnostic products, particularly cardiac tests, were the main growth drivers increasing 9% from last year. Additional growth came from the virology base business, up 12%, blood screening, up 15%, and diagnostics solutions for the detection and monitoring of cervical cancer, up 22%. Looking ahead to the full year, management expects sales to decline low-single digits due tough comps on last year’s CHF 5 billion in Covid-related sales. Core EPS will decline in line with sales growth and management expects further dividend growth in Swiss francs. Roche CEO Thomas Schinecker remarked, “We saw strong growth in the first quarter in both divisions’ base business, which largely compensated for the expected drop in sales of COVID-19 tests. We made progress in our pipeline in the first quarter, especially in blood cancer. Besides our recent approvals for our bispecific antibody medicines, Lunsumio and Columvi, we have also just received US approval of Polivy as first-line treatment for an aggressive form of blood cancer. In ophthalmology, Vabysmo, a medicine for severe eye diseases, has shown positive phase III data in retinal vein occlusion. If approved, this would be the third indication for Vabysmo which has already become our strongest growth driver just a year after its launch. We confirm our outlook for 2023.”


General Dynamics-GD reported first quarter revenue increased 5% to $9.9 billion with operating income up 3% to $938 million and net income relatively flat at $730 million as EPS rose modestly to $2.64. Despite persistent supply chain headwinds, the company delivered solid operating results. The business segment with the strongest revenue growth during the quarter was Marine Systems with revenues bubbling 13% higher to $3.0 billion, led by Columbia construction with the first boat approximately 33% complete. The highest operating earnings growth came from Combat Systems with earnings marching 8% higher to $245 million with orders at their highest level in more than eight years.  In the Aerospace segment, supply chain disruptions impacted aircraft deliveries and manufacturing efficiency during the quarter, although the company generated record revenues for aircraft services. Given concerns over the regional bank failures, customer orders for aircraft were paused for about three weeks during the quarter. The Technologies segment generated the highest quarterly earnings in four years as the business unit received significant awards during the quarter. Due to working capital changes, free cash flow declined 29% during the quarter to $1.3 billion but was still 178% of earnings with cash conversion of earnings expected to be greater than 100% for the full year. During the quarter, General Dynamics paid $345 million in dividends and repurchased 400,000 shares for $90 million at an average cost of about $220 per share. The  strong cash flow well positions the company to invest in its business, retire debt with $750 million expected to be paid off in the second quarter and return value to shareholders through growing dividends and share repurchases. The company’s consolidated book-to-bill ratio was  0.9 to 1 for the quarter with the company-wide backlog up 3% to $89.8 billion. 

ADP-ADP reported third quarter fiscal 2023 revenues increased 9% to $4.9 billion with net earnings increasing 12% to $1.0 billion and EPS increasing 14% to $2.51. By business segment, Employer Services (ES) revenues increased 11% to $3.34 billion on a 4% increase in pays per control which is indicative of moderating but healthy overall labor demand, record new bookings and a high level of client retention. PEO Services revenues increased 5% to $1.59 billion on a 3% increase in average worksite employees to 710,000 and re-accelerating PEO bookings.  Average client fund balances increased 3% from last year to $39.2 billion and the average client funds yield of 2.5%, compared to 1.2% last year, drove a 111% increase in interest on funds held for clients to $249.4 million. For the nine months ended 3/31/2023, ADP generated $2.9 billion in free cash flow, up 40% from last year, and representing an impressive 109% of reported earnings. Growth in free cash flow was driven by the increase in net income and effective working capital management, partially offset by a 15% increase in capital expenditures to $145.4 million as the company continues to invest in the business to drive sustainable long-term growth. During the first nine months of fiscal 2023, ADP returned $2.2 billion to shareholders through dividend payments of $1.386 billion and share repurchases totaling $817.5 million. Management tightened its fiscal 2023 guidance with EPS now expected to increase 16% to 17%, versus the prior range of 15% to 17%, on an 8% to 9% growth in revenues.


Tuesday, April 25, 2023

Visa-V reported fiscal second quarter revenues charged ahead 11% to $8 billion with net income increasing 17% to $4.3 billion and EPS up 20% to $2.03. Key business drivers included a 10% increase in Payments Volume to nearly $3 trillion, a 32% increase in Cross-Border Volume (excluding Intra-Europe), a 24% increase in total Cross-Border Volume and 12% growth in processed transactions to 50.1 billion. Visa ended the quarter with 4.2 billion Visa branded cards, up 7% from last year. By segment, Service Revenues increased 7% over the prior year to $3.7 billion, Data Processing revenues rose 10% to $3.8 billion, International Transaction revenues grew 24% to $2.7 billion while Other revenues increased 16% to $551 million and Client Incentives, a contra-revenue item, were $2.9 billion and represented 26.7% of gross revenues. During the first half of fiscal 2023, Visa generated $7.57 billion in free cash flow, up 4% from last year, representing nearly 90% of reported net income. Visa returned $7.2 billion to shareholders during the first half through $5.3 billion in share repurchases and dividend payments of $1.9 billion. The company had $11.8 billion of remaining authorized funds for share repurchases as of March 31, 2023. In addition, the board of directors declared a quarterly cash dividend of $.45 per share, payable on June 1, 2023. Visa ended the quarter with more than $19 billion in cash and investments, $20.6 billion in long-term debt and $38.5 billion in shareholders’ equity on its solid balance sheet.

Microsoft-MSFT reported revenues for the fiscal 2023 third quarter increased 7% to $52.9 billion with net income increasing 9% to $18.3 billion and EPS up 10% to $2.45. By business segment, revenue in Productivity and Business Processes was $17.5 billion, up 11%, driven by a 13% increase in Office commercial products and cloud services on 14% growth in Office 365 Commercial revenue, 8% growth in LinkedIn and 25% growth in Dynamics 365 revenue. Microsoft 365 consumer subscribers grew to 65.4 million. Revenue in Intelligent Cloud was $22.1 billion, up 16%, on a 27% increase in Azure and other cloud services. Revenue in More Personal Computing was $13.3 billion, down a less-than-expected 9%, with Windows OEM revenue decreasing 28%, Devices revenue decreasing 30% and Search and News advertising increasing 10%. Bing now boasts of 100 million active daily users boosted by its dive into artificial intelligence. During the quarter, Microsoft generated $24.4 billion in operating cash flow, representing an impressive 134% of reported earnings. Free cash flow of $17.8 billion declined 11% from last year on a 24% jump in capital expenditures as management focuses on leading the generational shift to AI and a discrete tax payment. During the quarter, Microsoft returned nearly $10.6 billion to shareholders through dividend payments of $5.1 billion and share repurchases of $5.5 billion at an average cost per share of $255.56. Looking ahead to the fourth quarter, revenues are expected in the $54.85 billion to $55.85 billion range, up 12% from last year at the midpoint.  

 

Texas Instruments-TXN reported first quarter revenue declined 11% to $4.38 billion with net income declining 22% to $1.71 billion and EPS declining 21% to $1.85. By business segment, Analog revenue declined 14% to $3.3 billion with operating profits declining 27% to $1.57 billion. Embedded Processing revenue increased 6% to $8323 million with operating margins declining 25% to $237 million. During the quarter, Texas Instruments experienced weakness across all end markets except for automotive. Personal electronics and enterprise markets both declined by 30% while industrial was flat and automotive increased mid-single digits. Operating cash flow declined 46% to $1.16 billion on the lower net income and an inventory buildup while free cash flow plummeted to $178 million from $1.7 billion last year on a greater than two-fold jump in capital expenditures. The company expects capital expenditures to average $5 billion annually over the next five years. Texas Instruments ended the quarter with $9.5 billion in cash and investments, $9.6 billion in long-tern debt and $15.2 billion in shareholders’ equity on its strong balance sheet. Second quarter revenue are expected in the $4.17 billion to $4.53 billion range, down 16.5% at the midpoint from last year, with EPS in the $1.62 to $1.88 range, down 29% at the midpoint. While management expects weak demand to persist, its focus remains on increasing free cash flow per share over the long-term.


Alphabet-GOOGL reported first quarter revenues increased 3%, or 6% on a constant currency basis, to $69.8 billion with net income down 8% to $15.1 billion and EPS off 5% to $1.17.  These results included $2.6 billion in charges related to reductions in workforce and office space. During the quarter, Search continued to perform well, especially in travel searches, with Cloud gaining momentum. Google advertising revenues were relatively flat reflecting challenging macro conditions for many parts of the economy including finance and retail. Google Cloud provided the strongest growth during the quarter with revenues increasing 28% to $7.5 billion with the segment posting its first profitable quarter with $191 million in operating income.  Alphabet also introduced important product updates anchored in deep computer science and artificial intelligence (AI), including Bard its chatbot. To accelerate progress in AI, the company is combining Google Research (the Brain Team) with Deep Mind. Advancements in AI will drive growth in Search and across Alphabet’s product lines with a number of organizations using its generative AI large language models across Google Cloud, Workspace and other offerings.  AI will open up knowledge for billions of people. Free cash flow increased 12% during the quarter to $17.2 billion with the company repurchasing $14.6 billion of its stock. Alphabet announced a new $70 billion share repurchase program. Alphabet ended the quarter with a fortress balance sheet with more than $146 billion in cash and investments, $13.7 billion in long-term debt and shareholders’ equity of $260.9 billion.

PepsiCo-PEP reported first quarter revenues popped 10% higher to $17.8 billion with net income lower by 55% to $1.9 billion and EPS down 54% to $1.40. Last year’s results included a $3.3 billion gain from the sales of Tropicana and other juice brands. On an adjusted basis, core EPS increased 18% during the quarter.  Organic revenue increased 14.3% during the quarter, representing the sixth consecutive quarter of double-digit organic growth. The revenue growth was broad-based across geographies as North America and International businesses delivered 14% and 15% organic revenue growth, respectively. The strong performance during the quarter reflected the strength of PepsiCo’s trusted brands, diversified portfolio and the resilience of consumer demand trends as the global beverages and convenient foods businesses delivered 12% and 16% organic revenue growth, respectively. Ongoing productivity led to the company’s core operating profit increasing 17% as the core operating margin expanded 95 basis points. Given the strong first quarter, PepsiCo increased its outlook for fiscal 2023 with organic revenue growth of 8% now expected (previously 6%) and 9% core constant currency EPS growth anticipated (previously 8%). The company plans to return about $7.7 billion to shareholders comprised of $6.7 billion in dividends and $1.0 billion in share repurchases. PepsiCo remains committed to its capital allocation policy of investing in its business, paying and growing its annual dividend, selectively making strategic acquisitions and repurchasing shares.

UPS-UPS reported first quarter revenues declined 6% to $22.9 billion with net income trucking 29% lower to $1.9 billion and EPS down 28% to $2.19. During the quarter, a deceleration in U.S. retail sales resulted in lower volume than anticipated as consumers shifted discretionary spending from goods to services. U.S. average daily volume declined 5.4%, which was nearly offset by a 4.8% increase in productivity. Volume has stabilized in April.  In addition, ongoing demand weakness in Asia adversely impacted both International and Supply Chain Solutions results. Free cash flow declined 56% during the quarter to $1.8 billion reflecting the lower income, a $1.2 billion pension plan contribution and working capital changes. During the quarter, UPS paid $1.3 billion in dividends and repurchased $751 million of its stock. The capital allocation policy for UPS during 2023 is to reinvest $5.3 billion in capital expenditures, pay dividends of about $5.4 billion and target share repurchases of about $3.0 billion. During the first quarter, the global volume environment deteriorated due to challenging macro conditions and changes in consumer behavior. As a result, UPS expects full-year revenue and adjusted operating margin to be at the low end of its previously guided range with consolidated revenue expected to approximate $97.0 billion for the year, generating an adjusted operating margin of around 12.8%. UPS in in continued negotiations with the Teamsters which has been “noisy” but is progressing, and management is hopeful they should reach an agreement by July.

PulteGroup-PHM reported first quarter total revenues increased 13.5% to $3.57 billion with net income up 17% to $532 million and EPS up 28% to $2.35 on fewer shares outstanding. Home sale revenues increased 15% to $3.49 billion reflecting a 9% increase in the average sales prices to $545,000 in combination with a 6% increase in closings to 6,394.  First quarter closings benefited from the company’s decision to increase production of “spec” or quick move-in homes for first-time home buyers, as well as the ongoing resolution of pandemic-related supply chains issues.  PulteGroup’s financial services operations reported first quarter pre-tax income of $14 million, down from $41 million last years, owing to lower loan volumes, the more competitive pricing environment and the industry-wide increase in mortgage incentives experienced in the period plus a decline in capture rate to 78% from 81% last year. First quarter gross orders totaled 8,898 homes, up 1% from last year. Net new orders for the first quarter decreased 8% to 7,354 homes, reflecting strong orders from first-time home buyers more than offset by declines in orders from move-up buyers and older adults. The cancelation rate in the first quarter was 13%, up from 4% last year, but down sequentially from the fourth quarter thanks to relatively stable mortgage rate increases. The dollar value of net new orders in the first quarter decreased 20% from the prior year to $3.8 billion and the quarter end backlog was 13,129 homes valued at $8.0 billion, down 31% from last year. The average sales price in backlog was $608,000, an increase of 5% over the prior year. During the quarter, lots under control fell 10% from last year with the company walking away from 5,300 optioned lots, bringing the total for the past 12 months to 50,000 lots as the company manages through this phase of the housing cycle.  Management expects to invest $3.5 billion to $4.0 billion in land acquisition and development, down from $4.5 billion last year. During the quarter, PulteGroup generated $687.6 million in free cash flow compared to $177.0 million last year on higher net income and reduced inventory. PulteGroup returned $186.4 million to shareholders during the quarter through dividends of $36.4 million and share repurchases of $150 million at an average cost of $54.30 per share. The Board approved a $1.0 billion increase in the share repurchase authorization, bringing the total available for future repurchases to $1.2 billion. Since the initiation of its share buyback program, PulteGroup has repurchased 40% of its shares outstanding, reflecting the company’s commitment to consistently returning capital to shareholders. PulteGroup ended the quarter with $1.28 billion in cash, $2.0 billion in long-term debt and $9.3 billion in shareholders’ equity on its built-to-last balance sheet. Ryan Marshall, CEO and president stated, “Within an evolving macro environment, consumers across all buyer segments and price points continue to demonstrate a strong desire for homeownership. With interest rates more stable and the supply of new and existing homes generally in balance with demand, we remain optimistic about the housing industry as we navigate this phase of the housing cycle.”

Raytheon Technologies-RTX reported first quarter revenues rose 10% to $17.2 billion, including 10% organic growth. Net income increased 32% to $1.4 billion, and EPS was up 35% to $.97. Earnings include $.25 per share of net significant and/or non-recurring charges and acquisition accounting adjustments. These strong financial results reflected continued global airline travel and defense systems demand. Backlog at the end of the quarter was a record $180 billion, including $109 billion from commercial aerospace and $71 billion from defense. During the quarter, RTX received $21 billion in new awards and had an impressive book to bill ratio of 1.25. During the quarter, the company had $1.3 billion in outflows of cash to support operations and capital expenditures. However, management expects free cash flow of approximately $4.8 billion for the full year. The company returned nearly $1.4 billion to shareholders through dividends of $790 million and share repurchases of $562 million. The Board of Directors declared a quarterly cash dividend of $.59 per share, representing a 7% increase. Raytheon Technologies has paid a cash dividend every year since 1936. Management reaffirmed its outlook for 2023, expecting sales of $72 billion to $73 billion, adjusted EPS of $4.90-$5.05 and share repurchases of $3 billion.

NVR, Inc.-NVR reported first quarter revenues decreased 8% to $2.1 billion with net income decreasing 19% to $344 million and EPS down 14% to $99.89. New orders decreased by 1% during the quarter to 5,888 units. The average sales price of new orders decreased by 5% to $441,200. The cancellation rate in the first quarter was 14% compared to 10% in the first quarter of 2022. Settlements decreased 11% during the quarter to 4,639 units. The average settlement price in the first quarter increased 4% to $459,400. The backlog of homes sold but not settled as of March 31, 2023 decreased on a unit basis by 23% to 10,411 units and decreased on a dollar basis by 23% to $4.79 billion. Mortgage loan closings decreased 17% to $1.24 billion during the quarter. The company repurchased 21.2 million shares during the quarter, for an average price of $5,197 per share and ended the quarter with $2.8 billion in cash, $914 million in long-term debt and $3.8 billion in shareholders’ equity on its sturdy balance sheet.

Johnson & Johnson-JNJ announced that Kenvue Inc., a wholly owned subsidiary of Johnson & Johnson comprising its Consumer Health Business, has launched a roadshow for the initial public offering ("IPO") of 151,204,000 shares of its common stock. The IPO price is currently expected to be between $20.00 and $23.00 per share. Kenvue has applied to list its common stock on the New York Stock Exchange under the symbol "KVUE." After the completion of the IPO, Johnson & Johnson will own 1,716,160,000 shares of Kenvue’s common stock, representing 91.9% of the total outstanding shares of Kenvue’s common stock.

Monday, April 24, 2023

Canadian National Railway-CNI reported record first quarter results with revenues accelerating 16% to C$4.3 billion, net earnings steaming ahead 33% to C$1.22 billion and EPS up 39% to C$1.82. Increased revenues were powered by higher fuel surcharge revenue on higher fuel prices, higher export volumes of Canadian grain, freight rate increases and favorable foreign exchange on a weaker Canadian dollar, partially offset by lower intermodal volumes. First quarter operating ratio declined 540 basis points to 61.5%, the lowest since 2016, on a 29% increase in car velocity to 211 miles per day and a 20% increase in through network train speed to 20.1 miles per hour. During the quarter, the railroad delivered 6% more volume with 15,000 less cars thanks to superb execution. Injury frequency declined 17% while the accident rate declined 41%. During the quarter, Canadian National generated C$594 million in free cash flow, up from C$191 million last year, on the higher net income and improvement in working capital utilization. Canadian National ended the quarter with C$484 million in cash, C$14.3 billion in long-term debt and C$20.9 billion in shareholders’ equity. During the quarter, the company returned C$1.686 billion to shareholders through dividend payments of C$526 million and share repurchases of C$1.16 billion. About 32 million shares remain under the current share repurchase authorization and the company expects to repurchase about C$4.0 billion of its shares during 2023. The board increased the dividend per share rate for 2023 by 8% to C$0.79. While management believes North America is currently in a recession due to a 6% decline in April volumes and it expects industrial production to decline for 2023, given the strong first quarter results, the company increased its full year guidance with EPS now projected to increase in the mid-single digit range, up from previous guidance of low-single digits.

Separately, Canadian National announced it has teamed up with Union Pacific Railroad and GMXT to create Falcon Premium intermodal service, a best-in-class Mexico-US-Canada service with a seamless rail connection in Chicago, Illinois. The service will directly connect all CN origin points within Canada and Detroit, Michigan to GMXT terminals in Mexico: Monterrey, Nuevo Leon, and Silao, Guanajuato. This service will directly benefit intermodal customers shipping automotive parts, food, FAK (freight all kinds), home appliances and temperature-controlled products.

Bank of Hawaii-BOH reported first quarter revenue declined 2.9% to $176.7 million due in part to lower mortgage banking income with net income down 14.6% to $46.8 million and EPS lower by 13.6% to $1.14.  An industry-wide increase in FDIC insurance expense and higher payroll and separation expenses led to the lower earnings. The return on average equity was 15.79% in the first quarter compared to 15.4% in the prior year period. Amid a challenging macro environment for banks, Bank of Hawaii delivered solid operating performance. Average deposits grew 0.4% in the first quarter and were essentially flat with a year ago.  Deposit costs, while rising, continue to benefit from Hawaii’s unique deposit base which is diversified and long-tenured. Approximately 98% of the bank’s depositors are fully FDIC-insured. Over 50% of the bank’s depositors have had a relationship with the bank for more than 20 years with another 26% of the depositors doing business with the bank for more than 10 years.  Loans grew 1.3% on a linked quarter basis with growth across both the consumer and commercial portfolios. Credit quality remains excellent with non-performing loans lower than in prior periods. Annualized net charge-offs were 0.08% during the quarter. Net interest margin increased 13 basis points from the prior year quarter to 2.47% due to higher earning asset yields. Total assets increased 4.1% from a year ago to $23.9 billion primarily duet to growth in earning assets. The company’s capital levels remain well within the well-capitalized guidelines with the Tier 1 Capital Ratio at 12.1% compared to 13.2% a year ago. During the quarter, Bank of Hawaii declared its quarterly dividend of $.70 per share to be paid in June and repurchased 150,000 shares of its common stock for a total cost of $9.9 million or $66 per share with the remaining buyback authority at $126 million. Given the uncertainty around potential increased bank regulations, Bank of Hawaii will remain judicious in further share repurchases this year. Bank of Hawaii’s lending philosophy is to lend in markets they understand (89% of loans are in Hawaii) and to relationships they understand. About 80% of the bank’s loan portfolio is secured with real estate with a combined weighted average loan to value of 55%. Bank of Hawaii believes the bank has an exceptional deposit base, substantial liquidity, high-quality assts and solid regulatory capital which will enable the bank to manage through current challenges in the banking industry.

Thursday, April 20, 2023


SEI Investments-SEIC reported first quarter revenues fell 19% to $469.1 million with net income dropping 43.8% to $107.0 million and EPS falling 42% to $0.79. Excluding a one-time early termination fee of $88 million or $0.47 per share recorded during last year’s first quarter, revenues declined 4.9% and EPS declined 11.2%.  By business segment, Asset Management, Administration and Distribution Fee revenue declined 5.7% to $371.8 million due to lower assets under management owing to last year’s market decline and client Iosses in the Investment Advisors and Institutional Investors markets. Information Processing and Software Servicing Fee revenues of $97.3 million fell 48%, or 2% excluding last year’s $88.0 million early termination fee. Earnings from LSV declined 11% to $28.9 million on client withdrawals, client losses and market depreciation. Average equity and fixed-income assets under management excluding LSV declined by 12.4% to $254.8 billion while average assets under administration declined 5.9% to $840.7 million.  Cash flow from operations declined 56% year-over-year to $114.4 million while free cash flow dropped 61.3% to $94.7 million. During the first quarter, SEI repurchased 1.4 million shares of its common stock for $80.3 million at an average price of $59.03 per share with $263 million currently authorized for repurchase.  SEI ended the quarter with $834.4 million in cash and equivalents, no long-term debt and $2.0 billion in shareholders’ equity on its pristine balance sheet. “Our first-quarter results reflect strong sales across most of our business lines, especially in technology and investment processing. Revenues and profits were slightly impacted by cash flows in our asset management businesses. We have a clear strategic focus on driving growth and will be very diligent about managing expenses across the company,” said CEO Ryan Hicke. “We are encouraged by overall sales results, as well as the size and makeup of our pipelines, reflecting changes we have made over the last year. We will thoughtfully align our capital to opportunities for growth and deliver the solutions our markets value. I believe SEI’s future is ripe with opportunity, and we will be aggressive in executing our long-term growth strategy.”


Genuine Parts-GPC reported record first quarter sales of $5.8 billion, up 9%, with net income and EPS each motoring 24% higher to $304 million and $2.14, respectively. These strong financial results exceeded management’s expectations and continued to benefit from the company’s business mix and geographic diversity. Global Automotive sales were driven by the strong performance of businesses outside the U.S. In the Industrial segment, broad-based sales growth led to the eight consecutive quarter of double-digit sales comps and the eleventh consecutive quarter of margin expansion. Free cash flow declined 66% to $109 million due to working capital changes. During the quarter, the company repurchased approximately 411,000 shares for $67.5 million at an average price of about $164.23 per share. The company also paid dividends of $126.2 million during the quarter, which included a 6% increase in the dividend, marking the 67th consecutive year of increased dividends. Given the solid start to 2023, the company expects another strong year of profitable growth with revenues expected to increase 4% to 6%. The company raised its outlook for EPS to a range of $8.95 to $9.10 from previous guidance of $8.80 to $8.95. The company also raised its outlook for free cash flow to a range of $900 million to $1.0 billion. Genuine Parts remains well-positioned with the financial strength and flexibility to support future growth, disciplined capital allocation and enhanced shareholder value.

Wednesday, April 19, 2023

Western Alliance-WAL reported first quarter net revenue dipped 0.7% to $551.9 million with net income declining 40.8% to $142.2 million and EPS down 42.3% to $1.28. Return on average assets and on tangible common equity of .81% and 12.2% compared to the prior year 1.64% and 23.9%, respectively. The recent turbulence in the banking industry impacted results. Following the collapse of Silicon Valley Bank and Signature Bank, Western Alliance experienced elevated net deposit outflows. However, thanks to Western Alliance’s diversified deposit franchise, deposit balances quickly stabilized by the end of the quarter to $47.6 billion, which was a $4.6 billion or 8.8% decline year-over-year. Since quarter end, deposits have increased an additional $2 billion to $49.6 billion as of April 14th, with total insured deposits representing 73% of total deposits, which is well above industry norms compared to the 50 largest U.S. banks. Western Alliance repositioned its balance sheet which included surgical sales of assets and loan reclassifications resulting in a charge of $109.7 million during the quarter. However, this resulted in an immediately accretive impact on regulatory capital with tangible book value increasing 11.9 % year-over-year  to $41.56 per share and a Common Equity Tier (CET) 1 ratio of 9.4% which increased from 9.0%. The bank continues to exceed well-capitalized levels. The bank’s efficiency ratio held steady at 43.2% with net interest margin expanding o 3.79% from 3.32% compared to the prior year thanks to higher interest rates. WAL plans to continue to strengthen its capital by increasing its CET1 ratio to greater than 10% by the second quarter with a medium target of 11%. Accordingly, share repurchases have been suspended. Western Alliance has significant access to liquidity and funding capacity and repaid all its borrowings from the Federal Reserve discount window by 3/31/23. The bank’s focus on sound financial fundamentals and stable asset quality have helped them navigate through this challenging time. Western Alliance’s outlook is for loan growth of $500 million per quarter and deposit growth of $2 billion per quarter. Net interest margin is expected to range from 3.65% to 3.75% with net charge-offs in the range of 5 basis points to 15 basis points.


Tuesday, April 18, 2023

The Board of Directors of SEI Investments Company-SEIC approved an increase in its stock repurchase program by an additional $250 million, increasing the available authorization under the program to approximately $263 million.

Johnson & Johnson-JNJ reported first quarter worldwide sales of $24.7 billion, up 5.6% (or up 9% excluding foreign currency impacts) with a net loss of $68 million compared with net income of $5.15 billion last year, and a net loss per share of $0.03 compared with net income per share of $1.93 last year. First quarter earnings include a $6.9 billion charge related to the talc litigation whereby Johnson & Johnson agreed to contribute up to a present value of $8.9 billion, payable over 25 years, to resolve all current and future talc claims equitably. If the proposed settlement is approved by the court and agreed to by 75% of litigants, the settlement would resolve all current and future talc-related claims. Adjusted earnings per share, which excludes the proposed settlement and other special items, increased 3% to $2.68 per share. By region, sales increased 9.7% in the U.S. to $12.5 billion, sales in Europe increased 10% in constant currency to $6.3 billion and sales in Asis-Pacific/Africa increased 4% to $4.3 billion. First quarter sales were strong across all three business segments with Pharmaceutical sales increasing 7.2% in constant currency to $13.4 billion thanks to strong uptake in new drugs partially offset by sales declines for drugs, most notably REMICADE and IMBRUVICA, that have lost patent exclusivity. Medtech also delivered strong growth with sales up 11% in constant currency to $7.5 billion   driven by electrophysiology, contact lenses, wound care and an uptick in knee replacements above pre-COVID levels. Consumer Health sales increased 11% in constant currency to $3.9 billion, on strong sales of OTC products, including TYLENOL and MOTRIN, upper respiratory products during a difficult flu season, IMODIUM, international smoking cessation products and Neutrogena and Aveeno products. The company filed documents with regulators to spinoff its consumer health division, renamed Kenvue, and expects the spinoff to be completed during 2023. R&D continues to be the number one prior for cash with $3.6 billion, or nearly 15% of sales, invested during the quarter. During the quarter, JNJ generated about $2.5 billion in free cash flow and returned $5.4 billion to shareholders through share repurchases of $2.5 billion and dividends of $2.9 billion. The Board approved a 5.3% increase in the dividend, marking the 61st consecutive year of dividend increases for Johnson & Johnson. The company ended the quarter with $33 billion in cash and investments and $53 billion in long-term debt on its AAA-rated balance sheet. Looking ahead to the full year, sales are expected in the $97.9 billion to $98.9 billion range, up 5.5% to 6.5% from 2022 with adjusted EPS in the $10.60 to $10.70 range, up 4.5% to 5.5% from last year.


Friday, April 14, 2023

UnitedHealth Group-UNH reported healthy first quarter results with revenues rising 15% to $91.9 billion and net earnings increasing 12% to $5.6 billion with EPS up 13% to $5.95. These results reflected double-digit growth in revenues and operating earnings at both Optum and UnitedHealthcare. During the quarter, UnitedHealthcare grew to serve nearly 2 million more people than a year ago with broad-based growth. Recent Medicaid contract awards in Indiana and Texas expanded the products and geographies served. UnitedHealthcare also expects another year of market-leading growth in serving more people through its Medicare Advantage offering. Optum Insight’s revenue backlog increased by 35% to $30.7 billion, compared to a year ago, driven by the acquisition of Change Healthcare and growth in comprehensive managed services offerings for health systems. Optum Rx’s revenues grew 15% in the first quarter thanks to high client retention and new clients with adjusted scripts growing to 378 million compared to 352 million last year. The first quarter medical care ratio, reflecting the share of premiums spent on patient care, ticked up to 82.2% from 82.0% in the prior year quarter due to business mix. The operating cost ratio increased to 14.8% from 14.2% in 2022 due to business mix and investments to support future growth. Free cash flow during the quarter more than tripled to $16.3 billion which reflected the impact of April CMS payments received at the end of March. Adjusted free cash flows were $5.1 billion, consistent with the company’s outlook and down about 4% from the prior year period. The company returned $3.5 billion to shareholders during the quarter through $1.5 billion in dividends and $2.0 billion in share repurchases. Return on equity of 28.2% in the quarter reflected the company’s consistent and diverse earnings profitability and efficient capital structure. Given the strong start to the new year, the company increased its full year net earnings outlook to $23.25 to $23.75 per share, a $.10 per share increase over prior guidance. The company also reaffirmed its long-term adjusted EPS growth of 13%-16%. 

Thursday, April 13, 2023

Fastenal-FAST reported first quarter sales increased 9.1% to $1.86 billion with net income up 9.5% to $295.1 million and EPS up 10.4% to $0.52. Higher unit sales contributed to first quarter sales growth, reflecting strong demand in markets tied to industrial capital goods and commodities which more than offset a modest contraction for construction supplies. Daily sales for fasteners, Fastenal’s most cyclical product category, increased 7% during the quarter but slowed to 2.3% in March, reflecting slowing manufacturing demand consistent with the drop in the U.S. PMI during March to 46.3. Price increases added about 290 to 320 basis points to growth during the quarter, a carryover from broad pricing actions taken in 2022 to mitigate marketplace inflation for Fastenal’s products and services which has since stabilized. Fastenal signed 89 new Onsite locations during the quarter, finishing the quarter with 1,674 sites, up 16% from last year. The company signed 5,902 FMI Technology devices during the quarter, bringing the total installed base to 104,671 devices, up nearly 11% from last year’s first quarter. Sales generated from Fastenal’s Digital Footprint, a growth-driver for the business, represented 54% of total sales during the quarter, up from 47% last year. During the quarter, Fastenal generated $388.5 million in operating cash flow, up nearly 70% from last year and representing 1.3 times reported net income, owing to the normalization of global supply chains which allowed Fastenal to support customer growth with less working capital and a reduction in inventory inflation from last year. Fastenal generated $354.8 million in free cash flow during the quarter with the company returning $199.8 million to shareholders through dividend payments. The company did not repurchase any shares during the quarter. Fastenal ended the quarter with $239.8 million in cash, $200 million in long-term debt and $3.3 billion in shareholders’ equity on its super secure balance sheet.


T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.34 trillionas of March 31, 2023, which represented a 5.2% increase since year end. Preliminary net outflows for March 2023 were $4.5 billion.

Wednesday, April 12, 2023

In an interview, Warren Buffett, CEO of Berkshire Hathaway, said people should not be panicked about the banking industry or the safety of U.S. bank deposits, despite the recent failures of Silicon Valley Bank and Signature Bank. On the recent banking turmoil, Buffett recalled what a banker once told him, “I don’t know why we keep looking for new ways to lose money when the old ones are working so well.” This time around, the banks didn’t make the same sort of mistakes that they made back in 2008 or 2009. He added that while more banks "will go bust," the industry's recent problems do not resemble those that helped trigger the 2008 global financial crisis. "Sometimes they [banks] go broke because they make too many dumb loans, and sometimes because they mismatch maturities," Buffett said. Unlike in 2008, Buffett said banks may not have made mistakes in the quality of loans they made, rather they "have mismatched assets and liabilities." However, he added banks have "mismanaged" assets and liabilities for a long time, and "every now and then it bites them in a big way." “The costs of the FDIC are borne by the banks. Banks have never cost the Federal Government a dime. The public doesn’t understand that,” Buffett said. “Nobody is going to lose money on a deposit in a U.S. bank. It’s not going to happen.” That does not mean shareholders and creditors of banks can’t lose money on a poorly run bank. Berkshire sold off most of its bank investments in recent years besides its major Bank of America stake because of Buffett’s concerns. “I don’t like it when people get too focused on the earnings number and forget what in my view is basic banking principles,” he said.

Buffett said inflation can do terrible things so that remains a concern, and the economy does appear to be slowing down based on the reports he sees from Berkshire’s businesses. Buffett expects decent results from the Berkshire insurance business this year with other businesses like the railroad and retailers experiencing weaker results. However, Buffett reiterated his longstanding philosophy that Berkshire doesn’t make investing decisions based on macroeconomic factors. Over the last 58 years, Berkshire's focus has remained on buying good businesses run by people they like at a decent price.  

During the past quarter, Buffett remarked that Berkshire’s cash and U.S. Treasuries have increased from the $128 billion reported at  year end despite Berkshire having increased its stake in Pilot by $7-plus billion to 80% ownership and repurchasing $4 billion of Berkshire’s stock. Buffett noted that every working day $100 million in cash flows into Berkshire’s copious coffers ,and Buffett remains vigilant in seeking to intelligently allocate the capital.

LVMH Moët Hennessy Louis Vuitton-LVMH recorded revenue of 21 billion euros in the first quarter of 2023, up 17% compared to the same period of 2022. Organic revenue growth was 17%. LVMH had an excellent start to the year, within a geopolitical and economic environment which remains uncertain. Europe and Japan, which enjoyed strong growth momentum, benefited from robust demand from local customers and international travelers; the United States, a market which continues to grow, had a steady performance. Asia experienced a significant rebound following the lifting of health restrictions. LVMH said U.S. sales rose 8% in the first quarter with 24% growth in Europe and 34% growth in Japan. Sales rose 14% in the rest of Asia, which includes China. Fashion and leather goods, the company’s largest division, delivered an 18% increase in quarterly sales to €10.73 billion. The company said Louis Vuitton, its largest brand, had an excellent start to the year, while Dior “continued to perform remarkably well across all its products.” Watches and Jewelry also performed strongly, with sales up 11%. Traffic in Sephora stores in North America, Europe and the Middle East helped push up sales at the selective retail division by 30%. The DFS travel retail business also benefited from the recovery of international travel and, in particular, from the gradual return of travelers to Hong Kong and Macao.

Tuesday, April 11, 2023

Warren Buffett, CEO of Berkshire Hathaway-BRKB,  is in Japan to meet with five Japanese trading houses in which Berkshire invests. Berkshire Hathaway recently raised its stakes in the five Japanese trading houses to 7.4% and said he may invest more in Japan. Berkshire plans to sell more yen-denominated bonds. The trading houses are Itochu Corp, Marubeni Corp, Mitsubishi Corp, Mitsui & Co and Sumitomo Corp. Known as "sogo shosha," Japanese trading houses trade in a wide variety of materials, products and food, often serving as intermediaries, and provide logistical support. They are also deeply involved in the real economy in such areas as commodities, shipping and steel.

In a separate interview, Warren Buffett called geopolitical tensions "a consideration" in Berkshire Hathaway’s decision to sell most of its stake in Taiwanese chipmaker TSMC just a few months after buying it. Berkshire had bought more than $4.1 billion of Taiwan Semiconductor Manufacturing Co's shares between July and September 2022, but in February said it had sold 86% of its stake by year-end. Buffett described TSMC as a well-managed company, but said Berkshire had better places to deploy capital.

Tuesday, April 5, 2023

Johnson & Johnson-JNJ announced that its subsidiary LTL Management LLC (LTL) has re-filed for voluntary Chapter 11 bankruptcy protection to obtain approval of a reorganization plan that will equitably and efficiently resolve all claims arising from cosmetic talc litigation against the company and its affiliates in North America. To that end, the company has agreed to contribute up to a present value of $8.9 billion, payable over 25 years, to resolve all the current and future talc claims, which is an increase of $6.9 billion over the $2 billion previously committed in connection with LTL’s initial bankruptcy filing in October 2021. LTL also has secured commitments from over 60,000 current claimants to support a global resolution on these terms.

Western Alliance Bancorporation-WAL provided a preview of the following unaudited financial information as of March 31, 2023: Total insured deposits, including collateralized and pass-through insured deposits, represent approximately 68% of total deposits, significantly higher than year-end. As of quarter-end, immediately available liquidity (on-balance sheet liquidity and unused borrowing capacity) exceeded uninsured deposits, with a coverage ratio greater than 140%. As of quarter-end, the Bank had no borrowings outstanding from the Federal Reserve’s discount window after balance sheet repositioning. Western Alliance expects its CET1 ratio to be materially consistent with year-end 2022. Unrealized losses on Securities and Held for Investment (HFI) loans have improved since year-end primarily due to lower interest rates, as well as other factors. Unrealized losses on securities-held-for-investment loans improved to $2.9 billion on a pretax basis from $4.2 billion at the end of 2022.    Western Alliance maintains non-interest bearing deposits in excess of residential loans, which are the primary contributor to unrealized losses on HFI loans. Kenneth A. Vecchione, President and CEO of Western Alliance Bank, concluded, "Western Alliance’s uniquely flexible, diversified business model positioned us to weather the liquidity tightness that enveloped the industry over the past month. Put simply, Western Alliance Bank is different; this diversification continues to distinguish us from monoline or sector-concentrated peer banks. This also demonstrates the value of Western Alliance’s scalable national funding channels and allows us to continue to serve clients across sectors, geographies, or macro trends." 

Western Alliance also disclosed that end of quarter total deposits were $47.6 billion compared to $53.6 billion as of December 31, 2022. As noted previously, the Bank experienced elevated net deposit outflows surrounding the announcements of the Silicon Valley Bank and Signature Bank closures in mid-March, concentrated primarily in their Technology and Innovation and Settlement Services groups, with net outflows falling sharply and returning to normalized levels by March 17. Since March 20, deposit balances stabilized and grew approximately $900 million to quarter end. Since March 31, quarter-to-date deposit growth has continued this trajectory and increased an additional $1.2 billion as of April 4. Total insured deposits, including collateralized and pass-through insured deposits, represent approximately 68% of total deposits, significantly higher than year-end. This increase in the proportion of insured deposits following the elevated outflows in mid-March was driven almost entirely by strong utilization and growth in reciprocal deposits and collateralized deposits for clients.

Monday, April 4, 2023

Small business employment has grown consistently during the first quarter of 2023, according to the Paychex | IHS Markit Small Business Employment Watch. The Small Business Jobs Index, which measures employment growth, increased modestly (0.06%) from the previous month to 99.73. The March report also showed average hourly earnings increased slightly from the previous month to 4.64 percent. “The small business economy continues to demonstrate durability with the jobs index advancing each month this year along with moderate wage gains," said James Diffley, chief regional economist, S&P Global Market Intelligence.

Raytheon Technologies-RTX was awarded a $1.2 billion foreign military sales contract from the U.S. Army to provide Switzerland with the Patriot™ air defense system. With the sale, Switzerland becomes the 18th global Patriot partner and the eighth European country to choose the system as the backbone of their air defense.

Tuesday, March 28, 2023

 Paychex-PAYX reported fiscal third quarter revenues increased 8% to $1.38 billion with earnings up 9% to $467.4 million and EPS up 8% to $1.29.  By business segment, Management Solutions revenue increased 7% to $1.0 billion on an increase in the number of clients and clients' employees served for human capital management (HCM) and worksite employees for HR Solutions, higher revenue per client from pricing and increased demand for HR Solutions, retirement, and time and attendance solutions. Professional Employer Organization (PEO) and Insurance Solutions revenue increased 6% to $321.2 million, led by growth in the number of average worksite employees and increases in average wages per worksite employee and higher state unemployment insurance revenues. Interest on funds held for clients, or float, increased 144% to $35.3 million thanks to the 450 basis point increase in interest rates and a 15% increase in funds held for clients to $4.2 billion. For the nine months ended 2/28/2023, Paychex generated $1.2 billion in free cash flow, or 100% of reported net earnings with the company returning $854.1 million to shareholders through dividend payments. Paychex ended the quarter with $1.3 billion in cash, $798.1 million in long-term debt and $3.4 billion in shareholders’ equity on its pristine balance sheet. Given year-to-date results, management raised guidance for the full 2023 fiscal year with revenues now expected to grow about 8%. Management Solutions revenue is now expected to grow slightly above 8%, at the top of the previous range of 7% to 8%. PEO and Insurance Solutions outlook is unchanged with growth in the range of 5% to 7%, although it is expected towards the lower end of the range. Interest on funds held for clients is expected to be in the range of $100 million to $105 million with net other income between $10 million and $15 million thanks to higher interest rates. Adjusted income is expected to grow in the range of 13% to 14%, up from 12% to 14% previously guided. John Gibson, President and Chief Executive Officer, commented, " We continue to see a stable macro environment and demand for our solutions. Small businesses have demonstrated remarkable resiliency, as they continue to contend with a constantly changing labor market, inflation, and increasing regulations and interest rates going into calendar year 2023. More than ever, businesses are seeking the assistance and support of stable trusted partners to help them navigate these issues. Paychex is well positioned with our unique blend of leading-edge technology solutions, human resources and compliance expertise and our long-standing track record of being there for our customers when they need us the most.”

The TJX Companies-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 $.3325 per share, payable June 1, 2023, to shareholders of record on May 11, 2023. Ernie Herrman, Chief Executive Officer and President of The TJX Companies, Inc., stated, "I am pleased to announce that our Board of Directors has approved a 13% increase in our quarterly dividend. This marks our 26th dividend increase over the last 27 years. Over this period, the Company’s dividend has grown at a compound annual rate of 20%. In addition, we plan to continue our significant share buyback program, with approximately $2.0 to $2.5 billion of repurchases planned for Fiscal 2024. These actions underscore our confidence in our ability to continue delivering strong sales, profitability, and cash flow, which allows us to simultaneously reinvest in the growth of the business and return significant value to our shareholders."

Thursday, March 23, 2023

FactSet-FDS reported second quarter revenues rose 19% to $515.1 million with net income increasing 20% to $131.6 million and EPS up 19% to $3.38. Organic Annual Subscription Value (ASV) increased 9.1% in the second quarter to $1.9 billion thanks to increased sales of Content & Technology and Analytics & Trading solutions. Operating margin increased 430 basis points to 32.9%, driven by higher revenue, lower personnel cost as a percentage of revenue, lower third-party content costs, the lapping of the previous year’s impairment charge of $10.3 million and reduced facilities expenses. Client count increased by 99 clients during the quarter to 7,730 clients as of quarter end, primarily driven by an increase in corporate and wealth management clients. User count increased by 5,504 to 186,463 in the past three months, primarily driven by an increase in wealth management and corporate users. Client retention was a high 92%. Free cash flow increased 35% during the first half of the year to $235.9 million, driven by higher net income. During the first half of the year, the company paid $67.5 million in dividends. FactSet did not repurchase any shares in the first half of the year to prioritize the repayment of debt. FactSet anticipates resuming the existing share repurchase program in the third and fourth fiscal quarters of 2023. As of February 28, 2023, $181.3 million is available for share repurchases under the existing share repurchase program. FactSet lowered its outlook for fiscal 2023 with full year revenue now expected to be in the range of $2.08 billion to $2.1 billion with EPS expected in a range of $12.45-$12.85. FactSet expects organic ASV growth of $145-$175 million. This represents growth of 8.0% at the midpoint of $160 million, a deceleration of 100 basis points when compared to previous guidance of $150 million to $180 million, due to an expected decline in ASV growth in the core business during the second half of the fiscal year.

Accenture-ACN reported second quarter revenues rose 5% to $15.8 billion with net income down 7% to $1.6 billion and EPS off 6% to $2.39. These results included $.30 per share in restructuring costs, as the company begins to reduce its workforce to reduce costs associated with cumulative wage inflation. Over the next two years, Accenture plans to let go 19,500 employees, or 2.5% of its workforce.  Excluding the restructuring costs, adjusted EPS increased 6% as adjusted operating margin expanded by 10 basis points. For the full year, adjusted operating margin expansion is expected in the range of 10 to 30 basis points. Revenue growth was broad-based by geographic market and industry group.  Accenture reported record new bookings during the quarter of $22.1 billion, which increased 13% in U. S. dollars or 17% on a local currency basis, with consulting and managed services bookings of $10.7 billion and $11.4 billion, respectively. With all strategies leading to technology, Accenture experienced strong growth in key services surrounding cloud, data, artificial intelligence (AI) and security. Free cash flow increased12% during the first half of the year to $2.6 billion with the company paying $1.4 billion in dividends, 15% higher than last year, and repurchasing $2.5 billion of its stock. Accenture has $4.2 billion remaining authorized for future share repurchases. For fiscal 2023, Accenture expects revenue growth to be in the range of 8% to 10% with EPS in the range of $10.84 to $11.06, representing 1% to 3% growth. This includes $.96 per share for restructuring costs and $.39 per share for an anticipated gain on an investment. Accenture increased its free cash flow outlook for the year by $300 million to a range of $8.0 billion to $8.5 billion with the company continuing to expect to return $7.1 billion in cash to shareholders through dividends and share repurchases.

Genuine Parts-GPC reaffirmed its full-year 2023 financial guidance for total sales growth of 4% to 6% to a range of $22.98 billion to $23.42 billion with EPS expected in the range of $8.80 to $8.95 and free cash flow in the range of $800 million to $1.0 billion. The company also provided its 2025 financial outlook with total sales expected in the $26.5 billion to $27 billion range and EPS in the range of $11.00 to $11.50. Cumulative free cash flow for the three-year period from 2023 to 2025 is expected in the $2.6 billion to $2.8 billion range.

Wednesday, March 22, 2023

Berkshire Hathaway- BRKB Vice Chairman Greg Abel recently bought 55 shares of class A Berkshire stock at a price of $447,259 for $24.6 million of Berkshire shares, bringing the total value of his stake in the company to about $105 million.

Tuesday, March 21, 2023

Nike-NKE reported sales during the third fiscal quarter jumped 14% to $12.4 billion with net income falling 11% to $1.24 billion and EPS slipping 9% to $0.79. Nike Direct sales increased 17% to $5.3 billion, led by a 20% leap in Nike Brand Digital sales and a 19% increase in Nike store sales. Wholesale revenues jogged ahead 12% on strong sell-throughs. By geography, Nike achieved a 27% sales growth pace in North America, 17% in EMEA and 10% in the Asia Pacific region.  While Nike's revenue fell 8% in China during the quarter, sales have rebounded during the last two months amid the reopening of the country’s economy.  Gross margins declined 330 basis points to 43.3%, pressured by higher markdowns to liquidate late arriving seasonal product inventory, continued unfavorable changes in foreign currency exchange rates, higher product input costs and elevated freight, logistics and supply chain costs that were partially offset by strategic pricing decisions. Management continues to work through its inventory, which increased 16% during the quarter, and expects to end 2023 with a healthy, but lean, inventory position. Nike continues to have a strong track record of investing to fuel growth and consistently increase returns to shareholders, including 21 consecutive years of increasing dividends. In the third quarter, Nike returned about $2.0 billion to shareholders, including dividends of $528 million, up 9% from last year, and share repurchases of $1.5 billion, reflecting 12.9 million retired shares as part of the four-year, $18 billion program approved by the Board in June 2022. As of February 28, 2023, a total of $3.4 billion has been repurchased under the program at an average cost per share of $106.25. Nike ended the third quarter of fiscal 2023 with $10.8 billion in cash and investments, $8.9 billion in long-term debt and $14.5 billion in shareholders’ equity on its winning balance sheet. While management is carefully monitoring consumer demand amid macroeconomic uncertainty, it raised its full year guidance with sales now expected to grow in the high-single-digits organically resulting in flat to low-single-digit growth in reported sales. Gross margins are expected to fall 250 basis points, at the low end of prior guidance, as the company accelerates actions to reduce the pandemic-related inventory buildup.


Tractor Supply Company-TSCO announced an $850,000 donation to American Farmland Trust (AFT) in celebration of the company’s 85th anniversary. This will provide 85 grants of $10,000 each which will help farmers start, grow and sustain their farms and preserve agricultural land.

Alphabet-GOOGL announced that they are starting to open access to Bard, their experimental tool to let you collaborate with generative artificial intelligence (AI). Bard may boost productivity, accelerate ideas and fuel curiosity. Bard is powered by a research large language model (LLM), specifically a lightweight and optimized version of LaMDA, and will be updated with newer, more capable models over time. It’s grounded in Google's understanding of quality information. While LLMs are an exciting technology, they’re not without their faults. For instance, because they learn from a wide range of information that reflects real-world biases and stereotypes, those sometimes show up in their outputs. And they can provide inaccurate, misleading or false information while presenting it confidently. For example, when Google asked Bard to wrap up its blog post in a fun way, this was the response: “And that’s all for the day, folks! Thanks for reading, and as always, remember to stay hydrated and eat your vegetables. Until next time, Bard out!”

Friday, March 17, 2023

Western Alliance Bancorp-WAL provided an end of the week update, reaffirming its financial strength. Western Alliance remains in a strong position, with immediately available liquidity of over $20 billion as of March 16, 2023. The bank experienced elevated net deposit outflows on Monday, March 13, immediately following the announcement of the Signature Bank closure on March 12, concentrated primarily in its Technology & Innovation group. Since then, net outflows have fallen sharply, with deposit balance fluctuations returning to normalized levels in recent days, including significant inflows and new account openings. As of March 16, 2023, insured deposits represented more than 55% of total deposits, including deposits eligible for "pass-through" deposit insurance. The bank again highlighted two critical strengths that positions it well in the current environment: 1) A Strong Capital Base: As of year-end 2022, Western Alliance's CET1 ratio was 9.3% and unrealized losses on its held-to-maturity and available-for-sale investment portfolios totaled $1.1 billion. After adjusting for these losses, the bank's CET1 ratio would be 7.9%, meaning that even in the unlikely event that the bank was required to recognize this charge, its capital levels would remain above those required to be considered well capitalized. This compares favorably to many of the largest banks in the country. 2) A Diversified Deposit Base: Western Alliance Bank serves a highly diverse national and regional commercial customer base, representing a broad range of industries, client types, and geographies, including a diversified suite of deposit channels such as Regional Commercial banking, HOA, Mortgage Warehouse, and Business Escrow Services, among others. For example, deposits within the Technology and Innovation group, which has been disproportionally impacted by the recent market turbulence, represented less than 8% of total deposits as of March 16, 2023. A substantial percentage of these accounts are tied to broader banking relationships that include treasury management services and/or credit facilities that have proven to make these deposits more resilient to runoff.

 

Thursday, March 16, 2023

Berkshire Hathaway-BRKB bought another 7,886,964 shares worth of Occidental Petroleum for nearly $467 million or $59.17 per share.

Wednesday,  March, 15, 2023

Bank of Hawaii-BOH issued a statement noting the bank has ample liquidity and overall deposit balances remain stable. Their $10.6 billion of open lines and available collateral exceeds the $9.1 billion of uninsured or uncollateralized deposit balances.

Tuesday, March 14, 2023

LVMH Moët Hennessy Louis Vuitton S.E.-LVMUY has announced a share buyback program for a maximum amount of one billion five hundred million euros over a period beginning on March 1st, 2023 and ending on or before July 20th, 2023.

Roche Holdings-RHHBY increased its dividend 2%, marking the 36th consecutive year of dividend increases.

Meta Platforms-META said it would cut an additional 10,000 jobs, just four months after it let go 11,000 employees. “We expect to reduce our team size by around 10,000 people and to close around 5,000 additional open roles that we haven’t yet hired," Chief Executive Officer Mark Zuckerberg said in a message to staff. The move underscores Zuckerberg's push to turn 2023 into the "Year of Efficiency" with promised cost cuts of $5 billion in expenses to between $89 billion and $95 billion.

Monday, March 13, 2023

Bank of Hawaii-BOH provided an operational overview considering recent industry events and market volatility. Over its 125-year history, the bank has shown steady, measured and balanced deposit growth which has compounded at a 5.9% annual rate over the last decade including a $33 million increase in deposits on March 10, 2023. Deposits are well-diversified by industry and depositor type – the average consumer balance is $18,000; the average commercial balance is $134,000. Approximately 98% of depositors are fully insured by the FDIC.   The bank has ample liquidity and its regulatory capital ratios remain strong. The bank is rated Aa3 by Moody’s Investor Service for long-term deposits which is the highest deposit rating in Hawaii and one of the highest in the U.S. Approximately 80% of the bank’s loan portfolio is secured by quality real estate with a weighted combined loan to value ratio of 56%. The bank maintains a conservative and liquid investment portfolio. The operational takeaways are that Bank of Hawaii operates in an unique and competitively advantaged deposit market, has an exceptional deposit base, has substantial liquidity backup and high quality assets.

Western Alliance Bancorp-WAL President and CEO Kenneth Vecchione issued the following statement on March 13, 2023: "Since the statement we released last week, Western Alliance has taken additional steps to strengthen its liquidity position to ensure that we are in a position to meet all of our client funding needs, including increasing our borrowing capacity. As of this morning, cash reserves exceed $25 billion and are growing, while deposit outflows have been moderate. Including accounts eligible for pass-through insurance, insured deposits exceed 50% of total deposits." Mr. Vecchione added: "We also welcome the banking agencies' statement yesterday expressing their commitment to ensuring liquidity within the banking system, and their confidence in the strength of the banking industry. Although there have been no sales of securities to date, if adjusted to reflect unrealized losses in our held-to-maturity and available for sale investment book, our CET1 capital ratio as of 12/31/22 would be approximately 7.9%, which compares very favorably to peers and reflects the fundamental strength of our bank."

 

Friday, March 10, 2023

Oracle-ORCL reported fiscal 2023 third quarter revenues increased 18% to $12.4 billion with net earnings declining 18% to $1.9 billion and EPS down 19% to $0.68.  Overall revenue growth was driven by Oracle’s rapidly growing Cloud Infrastructure, up 55%, and the Cloud Applications business, up 42%. Total Cloud revenue, which includes Cloud Infrastructure and Cloud Applications, is now running over $16 billion annually. Since June of last year when Oracle acquired Cerner, that business has increased its healthcare contract base by approximately $5 billion with Cerner contributing $1.5 billion to total revenues during the quarter. While management is pleased with the early success of the Cerner business, they expect the signing of new healthcare contracts to accelerate over the next few quarters. During the first nine months of fiscal 2023, Oracle generated $4.7 billion in free cash flow, up 92% from last year. Oracle returned $3.7 billion to shareholders through share repurchases of $1.1 billion and dividend payments of $2.6 billion. During the quarter, the Board of Directors declared a quarterly cash dividend of $.40, up 25% from $.32. Looking ahead to the fourth quarter, Oracle expects revenue growth in the 15% to 17% range with EPS between $1.56 and $1.60. 

Western Alliance Bank-WAL, in light of recent industry events, updates the following financial (unaudited) information:

  • Deposits remain strong with the following balances, as of 3/9/2023:
  • Total deposits of $61.5 billion, an increase of $7.8 billion since year end, led by our deposit verticals of Settlement Services, Home Owner Associations and Mortgage Warehouse. The company expects deposits to moderately decline from these levels by quarter end due to typical seasonal and monthly activity.
  • Total technology-related deposits of $6.5 billion, which are down $201 million quarter to date, as of 3/9/2023
  • Total Equity Fund Resources & Life Sciences deposits of $1.5 billion, which are up $118 million quarter to date, as of 3/9/2023
  • Liquidity remains robust with available liquidity, as of 3/9/2023:
    • Cash held on balance sheet of approximately $2.5 billion, as of 3/9/2023
    • Fully collateralized credit facility from the Federal Home Loan Bank of San Francisco of $13.1 billion with a $0 balance, as of 3/9/2023
    • Uncommitted credit lines from various financial institutions of $4.6 billion with a $198 million balance, as of 3/9/2023
    • Fully collateralized credit facility from the Federal Reserve Bank of San Francisco of $5.2 billion with a $0 balance, as of 3/9/2023
    • Unpledged available for sale marketable securities of $5.3 billion with an adverse mark of $383 million already captured in Accumulated Other Comprehensive Income (AOCI), as of 2/28/2023, that could be liquidated or pledged to provide additional liquidity, if needed
    • Held to maturity securities of less than 2% of assets with an unrecognized adverse mark of only $192 million, as of 2/28/2023
  • Capital remains strong with CET1 of 9.32%, as of 12/31/2022. We expect CET1 to continue to rise from year end levels to 9.5% or higher at first quarter end
  • Asset quality remains excellent, and we have experienced no significant changes since year end, including classified assets, non-performing assets, and charge-offs
  • Furthermore, Western Alliance affirms its full-year deposit growth guidance of 13% – 17%

 

T. Rowe Price-TROW reported preliminary month-end assets under management of $1.31 trillionas of February 28, 2023, representing a 3.1% increase since year end. Preliminary net outflows for February 2023were $5.9 billion.


Thursday, March 9, 2023

Ulta Beauty-ULTA reported pretty fourth quarter results with both sales and net income increasing 18% to $3.2 billion and $340.8 million, respectively, with EPS up 24% to $6.68. Comparable store sales increased 15.6%, driven by a 13.6% increase in transactions and a 1.8% increase in average ticket. These strong results reflected the continued resilience of the beauty category, retail price increases and the impact of new brands and product innovation. For the first time in the company’s 33-year history, Ulta Beauty’s annual revenue topped $10 billion with net income exceeding $1 billion. For the full fiscal year, revenues rose 18% to $10.2 billion with net income growing an alluring 26% to $1.2 billion with EPS up a shiny 34% to a record $24.01. Return on shareholders’ equity was a gorgeous and profitable  63.3%. Free cash flow rose 32% to $1.7 billion with the company repurchasing 2.2 million of its shares during the year for $900 million at an average cost of about $409.09 per share. The company has $1.1 billion remaining authorized for future share repurchases. Ulta Beauty ended the year with strong momentum. The company’s outlook for fiscal 2023 is for net sales between $10.95 billion to $11.05 billion, representing 7% to 8% growth, driven by 4% to 5% comparable store sales growth and the opening of 25-30 new stores. The company’s operating margin is expected in the range of 14.7% to 15.0%, leading to EPS of $24.70 to $25.40, representing 3% to 6% growth. Capital expenditures are expected in the range of $400 million to $475 million.

Wednesday, March 8, 2023

Brown-Forman-BFB reported third quarter revenues rose 4% to $1.0 billon with net income and EPS dropping 61% to $259 million and $.54, respectively. These results reflect lower gross margin and higher operating expenses driven by inflation, supply chain disruptions and foreign exchange headwinds. In addition, a non-cash impairment charge of $96 million for the Finlandia brand name and a $27 million pension settlement charge were incurred during the quarter. During the first nine months of the fiscal year, Brown-Forman’s free cash flow declined 53% to $294 million primarily due to the lower earnings. Fiscal year-to-date, the company has paid $279 million in dividends. Brown-Forman has paid dividends for 79 consecutive years and increased the dividend for 39 consecutive years. Reflecting the continued strength of the company’s diverse brands, strong consumer demand and the return of inventories to more normalized levels following the pandemic, Brown-Forman expects organic net sales to increase 8% to 10% for the full fiscal 2023 year with organic operating income up in the high-single digit range. Capital expenditures for the full year are planned to be in the range of $190 million to $210 million.  

The board of directors of General Dynamics-GD declared a regular quarterly dividend of $1.32 per share on the company's common stock, payable May 12, 2023, to shareholders of record on April 14, 2023. This is the 26th consecutive annual dividend increase authorized by the General Dynamics board, and represents a 4.8% increase over last year's dividend.

Private sector employment increased by 242,000 jobs in February and annual pay was up 7.2 percent year-over-year, according to the February ADP® National Employment ReportTM produced by the ADP Research Institute® in collaboration with the Stanford Digital Economy Lab ("Stanford Lab"). "There is a tradeoff in the labor market right now," said Nela Richardson, chief economist, ADP.  "We're seeing robust hiring, which is good for the economy and workers, but pay growth is still quite elevated. The modest slowdown in pay increases, on its own, is unlikely to drive down inflation rapidly in the near-term."

 Berkshire Hathaway-BRKB purchased another 5,801,791 shares of Occidental Petroleum worth about $354.5 million at an average price of $61.10 per share  between March 3 to March 7, 2023. This brings Berkshire’s stake in the company up to 22.2%. Those shares would generate about $144 million of annual dividends, following a 38% increase that Occidental announced last month. Berkshire also owns $10 billion of Occidental preferred stock that throws off $800 million of annual dividends, plus warrants to buy another $5 billion of common stock.

Tuesday, March 7, 2023

Fastenal-FAST reported February 2023 net sales and average daily sales each increased 9.6% for the month to $582.1 million and $29.1 million, respectively. Daily sales growth by geography was led by 15.8% growth in Canada/Mexico. Daily sales growth by end market was 15.8% growth in manufacturing partially offset by a 1.8% decline in non-residential construction. Daily sales growth by product line was 8.0% for fasteners, 3.2% for safety products and 13.8% for other products. Approximately 83% of the company’s Top 100 national accounts are growing which is down from 89% a year ago. About 59.5% of the company’s branches were growing compared to 76.9% a year ago. Total personnel increased 8.3% over the prior year period to 22,706.

 

The rate of hiring for U.S. small businesses increased in February led by hiring in the leisure and hospitality industry according to the latest Paychex | IHS Markit Small Business Employment Watch. The Small Business Jobs Index, which measures national employment growth for businesses with fewer than 50 workers, continued to increase to 99.66 while the rate of hourly wage growth declined to 4.49 percent year-over-year in February. The one-month annualized hourly wage growth rate remained below four percent for the third consecutive month. "Small businesses have posted positive job gains to begin 2023," said James Diffley, chief regional economist at IHS Markit. "At the same time, hourly wage increases are moderating, which is in the right direction for a soft landing."

 

Meta Platforms-META announced that Facebook is off to a great start this year with the company achieving a major milestone of 2 billion daily active users—the highest it has ever been. The company’s focus this year is on artificial intelligence, messaging, creators and monetization.

Monday, March 6, 2023

Pratt & Whitney, a Raytheon Technologies-RTX business, announced today that it has been awarded a $5.2 billion contract to support production of the 15th and 16th lots of F135 engines, with an option to award a 17th Lot, powering all three variants of the F-35 Lightning II fighter aircraft. The total contract value for lots 15-17, with exercised options, is approximately $8 billion and will fund over 418 F135 engines with options for the U.S. as well as international customers. Since program inception, Pratt & Whitney's "war on cost" efforts have reduced the average unit cost of an F135 by more than 50 percent, contributing to an estimated $8.1 billion in cumulative engine savings over the life of the program.

Thursday, March 2, 2023

Hormel Foods-HRL reported first quarter sales declined 2% to $2.9 billion, with net income and EPS declining 9% to $217 million and $.40, respectively. Volume and net sales declined for each segment due to lower fresh pork availability resulting from the company’s new pork supply agreement and lower turkey volumes due to the ongoing impacts of highly pathogenic avian influenza (HPAI) in the company’s vertically integrated turkey supply chain. In addition, Hormel faced incredibly difficult operating conditions in China throughout the quarter. Free cash flow declined 49% to $172 million with the company paying $142 million in dividends. Demand for Hormel’s leading retail brands remains favorable. Hormel is expecting strong growth in the foodservice segment for the remainder of the year and anticipates the near-term challenges for the international segment to abate over the coming months. Compared to expectations heading into the year, earnings are being pressured by increased inefficiencies across the supply chain related to higher inventory levels and softness in the snack nuts category. Management is taking action to address these challenges and expects improved business performance as the year progresses. For fiscal 2023, Hormel reaffirmed sales guidance, expecting sales growth of 1% to 3% and lowered earnings guidance, now expecting EPS in the range of $1.70-$1.82.

Tuesday, Feb. 28, 2023

Ross Stores-ROST rang up a 3.9% increase in fourth quarter sales to $5.2 billion with earnings up a fancy 22% to $447 million and EPS up a fashionable 26% to $1.31. Comp store sales increased 1% on an increase in transactions as traffic remained flat. By category, shoes sales, especially athletic shoes, were strong during the holiday season and regionally, Florida saw the strongest sales. Operating margin increased 90 basis points to 10.7%, mainly driven by lower freight costs and incentive costs that were partially offset by unfavorable timing of packaway-related expenses. For the year, Ross Stores reported sales dipped 1.2% to $18.7 billion on a 4% decline in same store sales with earnings falling 12.7% to $1.5 billion and EPS down 10.1% to $4.38. During 2022, Ross Stores generated a dressy 35.3% return on shareholders’ equity and free cash flow of $1.0 billion. The company returned nearly $1.4 billion to shareholders during the year through dividend payments of $431 million and share repurchases of $950.0 million, including $231 million during the fourth quarter at an average cost per share of $110. Company leadership expects to complete the $950 million remaining under its current share repurchase authorization during 2023. Reflecting its continued commitment to enhancing shareholder value and returns as well as confidence in the company’s future cash flows and the strength of its balance sheet, Ross Stores increased its quarterly dividend by 8% to $0.335 per share. Ross Stores ended the year with $4.55 billion in cash, $2.46 billion in long-term debt and $4.29 billion in shareholders’ equity on its impressive balance sheet. Looking ahead to 2023, given the highly uncertain macroeconomic and geopolitical environments, management expects same store sales to be flat generating sales growth of 1% to 4% thanks to a 53rd week with EPS between $4.65 to $4.95, up 10% at the midpoint from fiscal 2022. Capital expenditures are expected to top $800 million for the year, up over 20% from last year, as the company expects to open 100 new stores, invest in its distribution centers ramping up capacity to support expected growth and up its investments in technology including merchandise tools.  Elevated inflation is expected to continue impacting the company’s low-to-moderate income customers.


Monday, Feb. 27, 2023

As part of Meta’s-META commitment to open science, the company is publicly releasing LLaMA (Large Language Model Meta AI), a state-of-the-art foundational large language model designed to help researchers advance their work in this subfield of artificial intelligence. Smaller, more performant models such as LLaMA enable others in the research community who don’t have access to large amounts of infrastructure to study these models, further democratizing access in this important, fast-changing field.


Saturday, Feb. 26, 2023

Berkshire Hathaway-BRKB reported the company had a good year in 2022 with revenues rising 9% to $302 billion and operating earnings increasing 12% to a record $30.8 billion. The company’s net worth during 2022 decreased by 6.7%, or $33.8 billion, to $472.4 billion with book value equal to about $323,600 per Class A share as of 12/31/22.


On a GAAP basis, Berkshire reported a net loss of $22.8 billion during 2022 compared to $89.8 billion in earnings in the prior year period. Investment gains and losses from changes in the market prices of Berkshire’s substantial equity investments will produce significant volatility in earnings. The investment losses were primarily paper losses from changes in unrealized gains of equity holdings during the year given the stock market’s correction. Berkshire’s five major equity investment holdings which represent about 75% of total equities held, include American Express at $22.4 billion (which charged 10% lower during the year or $2.4 billion); Apple at $119 billion (which dropped 26.2% during the year or $42.2 billion); Bank of America at $34.2 billion (which declined $11.8 billion in value); and Coca-Cola with the stock popping 7% higher, or $1.7 billion, to $25.4 billion at the end of the year. Chevron rounds out the top five at $30 billion after Buffett purchased more than $20 billion of Chevron during the first quarter of 2022.


In his letter to shareholders, Buffett reflected on a couple of his large holdings. In1994, Berkshire acquired Coca-Cola for $1.3 billion with its value growing to $25.4 billion at the end of 2022 while Berkshire’s annual dividends from Coca-Cola have steadily increased from $75 million to $704 million. American Express is much the same story with Berkshire’s purchase of American Express in 1995 at $1.3 billion growing to $22.4 billion at the end of 2022 while its annual dividends have steadily grown from $41 million to $302 million. Buffett concluded with this lesson for investors: “The weeds wither away in significance as the flowers bloom. Over time, it takes just a few winners to work wonders. And yes, it helps to start early and live into your 90’s as well. “


During 2022, Berkshire’s insurance businesses generated losses from underwriting of $90 million compared to underwriting gains last year of $728 million. Catastrophe losses during the year included $2.4 billion from Hurricane Ian. Underwriting results were also negatively impacted by increases in claims frequencies and severities at GEICO due to significant cost inflation in automobile markets. Thanks to premium rate increases, GEICO expects to generate an underwriting profit in 2023. 2022 underwriting results were favorably impacted by higher earnings from reinsurance underwriting and foreign currency exchange rate gains. Insurance investment income increased 35% during the year to $6.5 billion, reflecting higher dividend and interest income as interest rates increased significantly in 2022. The float of the insurance operations increased $17 billion to end the year at about $164 billion. The increase in float includes $14 billion related to the acquisition of Alleghany Corporation. Berkshire’s float has increased 8,000-fold since 1967 through acquisitions, operations and innovations and with disciplined underwriting these funds have a decent chance of being cost-free over time. The average cost of float was nominal in 2022 due to the $90 million underwriting loss during the year.


Burlington Northern Santa Fe’s revenues chugged 12% higher during the year to $25.2 billion, reflecting higher revenue per car/unit, with net earnings dipping 1% to $5.9 billion due to lower overall freight volumes and higher average fuel and other operating costs. The 5.8% volume decrease for the year was in all business segments except for coal which was flat, reflecting supply chain disruptions, network challenges, lower demand for crude by rail and lower building products shipments.


Berkshire Hathaway Energy reported revenues rose 5% during the year to $26.4 billion with net earnings rising 9% to $3.9 billion. The earnings increase reflected higher earnings from other energy businesses, including tax equity investments and the Northern Powergrid businesses, as well as from the natural gas pipeline businesses, partly offset by lower earnings from the real estate brokerage business.


Berkshire’s Manufacturing businesses reported revenues rose 10% to $75.8 billion with operating earnings up 14% to $11.2 billion in 2022. The Buildings Products segment led the way for the year with revenues rising 16% to $28.9 billion and operating earnings jumping 41% to $4.8 billion thanks to strong demand for residential housing construction. However, significant increases in mortgage interest rates slowed demand for new housing construction during the fourth quarter so that comparative revenues and earnings in the near term will likely decline from current levels. Berkshire’s operations also were negatively impacted by supply chain disruptions and significant cost increases for raw materials, freight, labor and other input costs.


Service and Retailing revenues increased 9% during the year to $91.5 billion with pre-tax earnings increasing 7% to $5.0 billion. The Service group led the way as revenue increased 20% to $19.0 billion with pre-tax earnings up 14% to $3.0 billion 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 and fourth quarters, new orders slowed at TTI in part attributable to elevated inventory levels within the supply chain.


Berkshire’s balance sheet continues to reflect significant liquidity and a very strong capital base of $472.4 billion as of 12/31/22. Excluding railroad, energy and utility investments, Berkshire ended the year with $487 billion in investments allocated approximately 63.4% to equities ($308.8 billion), 5.2% to fixed-income investments ($25.1 billion), 25.6% in cash and equivalents ($125.0 billion) and 5.8% in equity method investments ($28.0 billion) which includes 26.6% ownership of Kraft Heinz, 21.4% of Occidental Petroleum and 38.6% in Pilot Travel Centers as of year end.


Free cash flow declined 16% during the year to $21.8 billion due to lower earnings and higher capital expenditures. During the year, capital expenditures approximated $15.5 billion, which included $11 billion for BNSF and BHE, its railroad and utility and energy units. Berkshire expects capital expenditures for 2023 for BNSF and BHE to approximate $13.7 billion.


During 2022, Berkshire paid cash of $67.9 billion to acquire equity securities and received proceeds of $33.7 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 $27.5 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. On Oct. 19,2022, Berkshire completed its purchase of Alleghany, a property and casualty reinsurance and insurance business, for $11.5 billion in cash, which held cash and investments of $19.7 billion. On January 31, 2023, Berkshire acquired an additional 41.4% interest in Pilot for approximately $8.2 billion which brought Berkshire’s ownership of Pilot up to 80%.


Berkshire repurchases its shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett and Charlie Munger. During 2022, Berkshire repurchased $7.9 billion of its common stock, including $2.6 billion in the fourth quarter. These repurchases included 584 Class A shares purchased at an average price of approximately $468,114 per share and 3,046,794 Class B shares purchased an average price of $303.83 per share during December 2022.


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.

Thursday, Feb. 23, 2023

Booking Holdings-BKNG booked a 36% increase in fourth quarter revenues to $4 billion with net income increasing 100% to $1.2 billion, and EPS up 114% to $31.92 per share. Travel bookings jumped 44% to $27.3 billion and room nights booked in the fourth quarter increased 39% from last year. For the year, Booking Holdings reported record revenues of $17.1 billion, up 56% from last year, with net income and EPS both traveling over 100% higher to $3.1 billion and $76.35, respectively. During the year, Booking Holdings generated a 110% return on shareholders’ equity and free cash flow increased 146% to $6.5 billion. The company returned $6.6 billion to shareholders via share repurchases, reducing the share count by 22% during the year. In addition, management announced a new $20 billion share repurchase program and expect to complete the program within the next four years as they plan to return all free cash flow to shareholders. Booking ended the year with $12.4 billion in cash, $11.9 billion in long-term debt and $2.7 billion in shareholders’ equity on its solid balance sheet. Management is encouraged by the continued strength and resiliency of demand from travelers last year and into the new year, with room nights booked in January 2023 up 26% compared to 2019 pre-pandemic levels, or up about 60% year-over-year.

Genuine Parts-GPC reported fourth quarter sales revved ahead 15% to $5.5 billion with net earnings sliding 2% to $252.0 million and EPS dipping 1.9% to $1.77. Excluding discrete items totaling $39.6 million, or $0.28 per share, fourth quarter earnings and EPS increased 13.8% and 14.5%, respectively. By segment, Automotive sales increased 7.6% to $3.4 billion on an 8.2% comp store increase. Automotive results were driven by strong team execution amid favorable industry fundamentals including a lift in total U.S. miles driven on abating fuel prices, a reduction in mass transit ridership and increased airfares and an aging US auto fleet that reached an all-time high of 12.1 years in 2022. Industrial sales increased nearly 30% to $2.1 billion reflecting a 16.7% increase in comp store sales and a 14.3% contribution from the KDG acquisition, slightly offset by a 1.4% unfavorable foreign currency impact. The KDG acquisition integration is progressing at a better-than-expected pace with $30 million of synergies recognized in 2022 with at least $20 million more expected during the next two years.  Despite the challenging macroeconomic and geopolitical environment, Genuine Parts reported a record 2022 with sales racing ahead 17% to $22.1 billion and net income and EPS increasing more than 30% to $1.18 billion and $8.31, respectively. Excluding discrete items, earnings and EPS increased 19.1% and 20.1%, respectively. During 2022, Genuine Parts generated an impressive 31.2% return on shareholders’ equity and $1.13 billion in free cash flow, up 13.6% from last year despite a 28% increase in capital expenditures to enhance data and digital capabilities including AI and supply chain productivity. During 2022, Genuine Parts returned $719 million to shareholders through dividends of $496 million and share repurchases of $223 million including $50 million purchased during the fourth quarter at an average cost per share of $172.41. The company increased its 2023 dividend by 6% to $3.80 per share, marking the 67th consecutive year of dividend increases. Genuine Parts ended the year with $653.5 million in cash, $3.1 billion in long-term debt and $3.8 billion in shareholders' equity on its solid balance sheet. Looking ahead to 2023, management expects sales to increase 4% to 6% from last year with EPS expected in the $8.80 to $8.95 range, up about 7% from last year. Free cash flow is expected in the $800 million to $1.0 billion range.


Wednesday, Feb. 22, 2023

The TJX Companies-TJX reported fourth quarter revenues rose 4.8% to $14.5 billion with net income charging 10.4% higher to $1.0 billion and EPS ringing up a 14.1% gain to $.89. Comparable store sales growth of 4% during the quarter was driven by 7% comp store sales growth at Marmaxx due to very strong sales of apparel and accessories. For the full year, revenues increased 2.9% to $49.9 billion with net income up 6.5% to $3.5 billion and EPS up 10% to $2.97. Return on shareholders’ equity for the year was a fancy 55%. Free cash flow for the year increased a dressy 31% to $2.6 billion with the company paying $1.3 billion in dividends and repurchasing $2.2 billion of its common stock. In fiscal 2024, the company expects to increase its dividend 13% and repurchase between $2 billion and $2.5 billion of its stock from its strong cash flows. Comparable store sales are expected to increase 2% to 3% in fiscal 2024 leading to revenues of $52.5 billion to $53.2 billion, representing 5%-7% growth. Operating margins are expected to expand 30-50 basis points leading to EPS in the range of $3.39-$3.51 for fiscal 2024. Fiscal 2024 is off to a great start, and management remains confident in improving profitability this year and reaching its pretax profit margin target of 10.6% in fiscal 2025. Longer term, TJX is on track to become an increasingly profitable $60 billion-plus revenue company.

 

Tuesday, Feb. 21, 2023

Genuine Parts Company-GPC announced today a 6% increase in its regular quarterly cash dividend for 2023. At its February 21, 2023 meeting, GPC's Board of Directors increased the cash dividend payable to an annual rate of $3.80 per share from $3.58 per share in 2022. The quarterly cash dividend of ninety-five cents ($0.95) per share is payable April 3, 2023 to shareholders of record March 3, 2023. GPC has paid a cash dividend every year since going public in 1948, and 2023 marks the 67th consecutive year of increased dividends paid to shareholders.

Wednesday, Feb. 15, 2023

Cisco Systems-CSCO reported fiscal second quarter revenues rose 7% to $13.6 billion with net income declining 7% to $2.8 billion and EPS down 6% to $.67. During the quarter, product revenue increased 9% to $10.2 billion and service revenue was up 2% to $3.4 billion. In addition, Cisco reported revenue growth in all geographies. The company posted 6% growth in annualized recurring revenue of $23.3 billion and subscription revenue growth of 15%. Free cash flow increased 48% during the first half to $8.4 billion. Cisco paid $3.1 billion in dividends and repurchased $1.8 billion of its stock, including 26 million shares in the second quarter at an average cost of $47.72 per share. In addition, Cisco announced a 3% increase in its dividend to be paid on April 26, 2023. The dividend increase reflects the strength of Cisco’s cash flow generation and management’s commitment to returning excess cash to shareholders. Cisco maintains a strong balance sheet and ended the quarter with $22.1 billion in cash and investments, $7.6 billion in long-term debt and $41.5 billion in shareholders’ equity. Management raised their full year outlook, driven by its growing recurring revenue base and remaining performance obligations, along with a healthy backlog and the steps they have taken to improve supply. For fiscal 2023, Cisco expects revenue growth of 9%-10.5% with EPS expected in the range of $2.85-$2.96, representing 1%-5% growth over last year.

Friday, Feb. 10, 2023

T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.35 trillion as of January 31, 2023, representing a 5.8% increase since year end. Preliminary net outflows for January 2023 were $5.7 billion. In a separate announcement T. Rowe Price raised its dividend by 1.7% from last year to $1.22 per share, marking the 37th consecutive year of dividend increases since the firm's initial public offering.

Thursday, Feb. 9, 2023

PepsiCo-PEP reported fourth quarter revenues rose 11% to $27.9 billion with net income and EPS each dropping 61% to $518 million and $.37, respectively. Core constant currency EPS increased 10%, while the decline in reported EPS reflects a $1.6 billion impairment charge, primarily related to its SodaStream business. During the quarter, organic revenue increased 14.6%, representing the fifth consecutive quarter of double-digit organic revenue growth. For the full 2022-year, revenue rose 9% to $86.3 billion with net income and EPS each increasing 17% to $8.9 billion and $6.42, respectively. Organic revenue growth accelerated to 14.4% for the full year, reflecting the geographical and category diversity of PepsiCo’s portfolio with both the global beverage and convenient foods businesses performing well. Return on shareholders’ equity during 2022 was a tasty 52%. Free cash flow decreased 20% during the year to $5.6 billion, primarily due to higher capital expenditures. The company returned $7.6 billion to shareholders through dividend payments of $6.1 billion and share repurchases of $1.5 billion. For fiscal 2023, 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 $6.7 billion and share repurchases of $1 billion. PepsiCo announced a 10% increase in its annualized dividend to $5.06, representing the 51st consecutive year of dividend increases. In addition, PepsiCo expects an approximate 2-percentage-point foreign exchange translation headwind to impact reported net revenue and core EPS growth.

Maximus-MMS reported fiscal 2023 first quarter sales increased a healthy 8.5% to $1.25 billion with net income falling 25% to $40.0 million and EPS down 23.5% to $0.65. Organic revenue grew 10.3%, driven by new or expanded programs in all three business segments on strong demand for services Maximus provides.  Net income declined on tough comps from last year’s profitable short-term COVID response work and lower interest expense due to last year’s historically low interest rates. By segment, U.S. Federal Services revenue increased 6.2% to $618.2 million, owing to strong clinical services demand and higher revenue on a large, cost-plus contract. U.S. Services revenue increased 13.7% to $439.5 million, driven by contributions from new work wins in core areas such as eligibility support and clinical services. Outside the U.S. revenue increased 5%, or 16% organically, to $191.6 million, fueled by the U.K. Restart Programme which reached full run-rate during the quarter. During the quarter, Maximus used $134.7 million in cash flow from operations compared to $2.9 million used last year and free cash flow outflow was $150.4 million compared to a $9.2 million outflow last year. While the quarter’s cash flows were anticipated to be lower due to timing of tax payments, collections were lighter than expected, and as a result, DSO were 74 days on 12/31/2022, well above the targeted range of 60 to 70 days. During January, cash collections improved allowing for $75 million in debt reduction during January. Maximus returned $17.0 million to shareholders during the quarter via dividend payments with the company ending the quarter with $63.1 million in cash and equivalents, $1.49 billion in long-term debt and $1.58 billion in shareholders’ equity. Management’s capital allocation strategy is focused on paying down debt and making strategic acquisitions for long-term growth. Total pipeline opportunities of $30.5 billion, of which 74% represents new work, includes pending proposals of $6.0 billion, proposals in preparation of $1.7 billion and $22.8 billion in tracked opportunities. Under the Omnibus spending bill passed at the end of 2022, Medicaid eligibility redeterminations, which were halted by the COVID-19 public health emergency, will restart in 2023 on a proscribed timeline. Maximus teams are currently working with states to prepare for redetermination volume from 91 million Medicaid recipients which is expected to begin in the third quarter of fiscal 2023 with run-rate levels expected in the fourth quarter and extending into fiscal 2024. Given the ramp up in redeterminations volume and strong momentum from the first quarter, Maximus raised its fiscal 2023 guidance. Management now expects revenue to range between $4.85 billion and $5.0 billion, compared to prior revenue guidance of between $4.75 billion and $4.90 billion. Adjusted operating income is expected to range between $415 million and $440 million, compared to a previous range between $390 million and $415 million. Adjusted EPS is now expected to range between $4.00 and $4.30 per share, compared to prior guidance of between $3.70 and $4.00 per share. Free cash flow remains expected in the $225 million and $275 million range and reflects expected working capital increases as a result of higher revenue later in the fiscal year.


Tractor Supply Company-TSCO announced that its Board of Directors declared a quarterly cash dividend of $1.03 per share of the Company’s common stock. This represents an increase of 12 percent versus the prior quarterly dividend rate of $0.92 per share. "Today’s announcement marks the 14th consecutive year of increasing dividend payouts by Tractor Supply. This increase demonstrates the Board’s confidence in our Life Out Here strategy and strong cash flow generation, as we continue to invest for future growth while returning capital to shareholders," said Cynthia Jamison, Tractor Supply’s Chairman of the Board.

Google-GOOGL announced new ways its Maps are getting more immersive and sustainable, Immersive view is an entirely new way to explore a place — letting you feel like you’re right there, even before you visit. Using advances in artificial intelligence (AI) and computer vision, immersive view fuses billions of Street View and aerial images to create a rich, digital model of the world. And it layers helpful information on top like the weather, traffic, and how busy a place is. Say you’re planning a visit to the Rijksmuseum in Amsterdam. You can virtually soar over the building and see where things like the entrances are. With the time slider, you can see what the area looks like at different times of day and what the weather will be like. You can also spot where it tends to be most crowded so you can have all the information you need to decide where and when to go. If you’re hungry, glide down to the street level to explore nearby restaurants — and even take a look inside to quickly understand the vibe of a spot before you book your reservation.

 Roche-RHHBY announced that it has expanded its collaboration with Janssen Biotech, a unit of Johnson & Johnson-JNJ, to create companion diagnostics for targeted therapies, further strengthening research and innovation activities. The new, expanded agreement broadens opportunities for Roche and Janssen to collaborate in the precision medicine field with multiple companion diagnostics technologies, including immunohistochemistry, digital pathology, next generation sequencing, polymerase chain reaction and immunoassays.

 

Monday, Feb. 6, 2023

Sundar Pichai, CEO of Google and Alphabet-GOOGL, released a statement regarding their next steps in their artificial intelligence (AI) efforts. Here are a few highlights: AI is the most profound technology we are working on today. Whether it’s helping doctors detect diseases earlier or enabling people to access information in their own language, AI helps people, businesses and communities unlock their potential. And it opens up new opportunities that could significantly improve billions of lives. That’s why we re-oriented the company around AI six years ago — and why we see it as the most important way we can deliver on our mission: to organize the world’s information and make it universally accessible and useful. Two years ago we unveiled next-generation language and conversation capabilities powered by our Language Model for Dialogue Applications (or LaMDA for short). We’ve been working on an experimental conversational AI service, powered by LaMDA, that we’re calling Bard. And today, we’re taking another step forward by opening it up to trusted testers ahead of making it more widely available to the public in the coming weeks. Bard seeks to combine the breadth of the world’s knowledge with the power, intelligence and creativity of our large language models. It draws on information from the web to provide fresh, high-quality responses. Bard can be an outlet for creativity, and a launchpad for curiosity.

Thursday, Feb. 2, 2023


Despite lower COVID-related sales of about CHF 1 billion, Roche-RHHBY reported 2022 revenues edged up 1% to CHF 66.4 billion with net income declining 11% to CHF 12.4 billion and EPS down 5% to CHF 15.37. By segment, Pharmaceuticals division sales increased 1% to CHF 45.6 billion thanks to the continuing uptake of newer medicines including its haemophilia treatment,  recently approved monclonal antibody treatment for macular degeneration, cancer immunotherapy and multiple sclerosis drug that offset the negative impact from biosimilar competition and lower sales of Actemra/RoActemra for COVID-19. Diagnostics sales dipped slightly to CHF 17.7 billion as growth in routine testing of 7% compensated for a drop in demand for COVID-19-related products. During 2022, Roche generated a healthy 44.4% return on shareholders’ equity and CHF 15.0 billion in free cash flow, down 13% from last year on higher taxes and working capital changes. During 2022, Roche returned CHF 7.8 billion to shareholders through dividend payments. The company announced a 2% increase in its dividend to CHF 9.50, marking the 36th consecutive annual dividend increase that has compounded at a 12.9% average annual rate since 1989. Roche ended the year with CHF 9.77 billion in cash and investments, CHF 21.4 billion in long-term debt and CHF 28.0 billion in shareholders equity on its healthy balance sheet. Looking ahead to the full 2023 year, sales and earnings are expected to decline in the low-single-digits with further increases in the dividend expected.

Starbucks-SBUX reported first fiscal quarter sales increased 8% to a record $8.7 billion with net earnings increasing 5% to $855.2 million and EPS up 7% to $0.74. Global comparable store sales increased 5%, driven by a 7% increase in average ticket, partially offset by a 2% decline in comparable transactions. Americas comparable store sales increased 10%, primarily driven by a 1% increase in comparable transactions and a 9% increase in average ticket. International comparable store sales decreased 13%, driven by a 1% decline in average ticket and a 12% decline in comparable transactions. The company opened 459 net new stores during the quarter and ended the quarter with 36,170 stores, of which 51% and 49% were company operated and licensed, respectively. Operating margins decreased from 14.6% to 14.4% year-over-year, primarily driven by previously committed investments in labor including enhanced store partner wages and benefits, inflationary pressures and sales deleverage in China, partially offset by strategic pricing in North America and sales leverage across markets outside of China. Starbucks Rewards loyalty program 90-day active members in the U.S. increased to 30.4 million, up 15% year-over-year. During the quarter, Starbucks generated $1.1 billion in free cash flow and returned approximately $799.7 million to shareholders through dividend payments of $608.3 million and share repurchases of $191.4 million. The company has approximately 50.6 million shares available for purchase remaining under current authorization and the board of directors declared a cash dividend of $.53 per share, payable on February 24, 2023. The company had 51 quarters of consistent dividend payouts with a compound annual growth rate greater than 20%. The company expects to return approximately $20 billion to shareholders by the end of fiscal 2025 between dividends and share repurchases.  Starbucks reaffirmed fiscal year 2023 guidance, expecting EPS growth on the high end of 15% to 20% range, global revenue growth in the range of 10% to 20%, global comparable store sales growth near the high end of 7% to 9% and global store growth of approximately 7%.

Cognizant Technology Solutions-CTSH reported fourth quarter revenues edged up 1.3% to $4.8 billion with net income slipping 9.5% to $521 million and EPS down 7.3% to $1.02. Fourth quarter earnings includes a $59 million impairment of capitalized costs related to a large volume-based contract with a Health Sciences customer in anticipation of lower volumes. By segment, Financial Services revenue declined 4.3% to $1.5 billion and included a 180-basis point negative impact related to the previously disclosed sale of the Samlink subsidiary, partially offset by growth among public sector clients in the United Kingdom and insurance clients. Health Sciences revenue grew 4.1% to $1.4 billion, driven by digital services among pharmaceutical and healthcare payer clients. Products and Resources revenue grew 2.9% to $1.15 billion, fueled by digital services among logistics, automotive, utilities, consumer goods and travel and hospitality clients. Communications, Media and Technology revenue grew 5.4% to $784 million, powered by strength among digital native companies. Bookings during the fourth quarter grew 12% from last year and stood at $24.1 billion at year-end, representing a book-to-bill ratio of 1.2 times during 2022. For 2022, Cognizant reported revenues increased 5% to $19.4 billion with net income up 7.2% to $2.3 billion and EPS up 9% to $4.41. The company generated a solid 18.6% return on shareholders’ equity during 2022 and free cash flow of $2.2 billion. Cognizant repurchased 5.2 million shares for $300 million during the fourth quarter at an average cost per share of $57.69 and 19.0 million shares for $1.3 billion for the full year, leaving $2.8 billion authorized for future share repurchases. In addition, Cognizant Technology Solutions declared a quarterly cash dividend of $0.29 per share, a 7% increase from last year.  First quarter 2023 revenue is expected to be in the $4.71 billion -$4.76 billion range, a decline of 1.5% to 2.5%, or a decline of 1.0% to flat in constant currency. Management intends to provide full year 2023 guidance in its next earnings release in early May.

Alphabet-GOOGL reported fourth quarter revenues edged up 1% to $76.05 billion with net income falling 34% to $13.6 billion and EPS dropping 31.4% to $1.05. By segment, Google Advertising revenue declined 3.6% to $59.0 billion on a 1.6% drop in Google Search revenues to $42.6 billion, a 7.8% drop in YouTube ads to $8.0 billion and a 9% decline in Google Network revenue to $8.5 billion. Advertisers pulled back on spending as rising inflation and interest rates stoked concerns over consumer spending. Google Other, which includes the App Store, Pixel phones, Fitbit and Nest home products, revenues increased 7.8% to $8.8 billion while Google Cloud revenues increased 32% to $7.3 billion. With a 46% decline in Cloud’s operating loss to $480 million, the segment is well on its path to profitability. Other Bets, which includes health technology and Alphabet’s AI activities dubbed DeepMind, generated a loss of $1.6 billion during the quarter. Given advances made in Google’s artificial intelligence-based large language models, the company plans to shortly integrate AI across all its products and services, including Search during the coming months. For the year, Alphabet reported revenues clicked ahead 10% to $282.8 billion with net income falling 21% to $59.97 billion and EPS dropping 19% to $4.56. During 2022, Alphabet generated an impressive 23.4% return on shareholders’ equity and $60 billion in free cash flow, down 10% from last year. Alphabet returned $59.3 billion to shareholders through share repurchases and ended the year with $113.8 billion in cash and investments, $15 billion in long-term debt and $256 million in shareholders’ equity. Significant work is underway to improve all aspects of Alphabet’s cost structure including a workforce reduction of 12,000 roles for which it will record a charge of $1.9 billion to $2.3 billion during the current quarter. Alphabet will also take a $500 million charge for actions it is taking to optimize global office space. Sundar Pichai, CEO of Alphabet, remarked, “Our long-term investments in deep computer science make us extremely well-positioned as AI reaches an inflection point, and I’m excited by the AI-driven leaps we’re about to unveil in Search and beyond. There’s also great momentum in Cloud, YouTube subscriptions, and our Pixel devices. We’re on an important journey to re-engineer our cost structure in a durable way and to build financially sustainable, vibrant, growing businesses across Alphabet.”

Apple-AAPL reported fiscal first quarter revenues declined 6% to $117.2 billion with net income down 13% to $30 billion and EPS down 10% to $1.88. On a constant currency basis, revenues would have risen in most of the company’s geographic markets. Significant foreign exchange headwinds, supply constraints from Covid-19 lockdowns in China, which impacted iPhone 14 Pro and iPhone 14 Pro Max availability during the important holiday season, and a challenging macro environment all impacted operations during the quarter.  Production in China is now back where the company would like it to be. Services revenues increased 6% to $20.8 billion to set an all-time record during the quarter. Subscriptions to services increased by 150 million during the last 12 months to exceed 935 million subscriptions which is up fourfold over the last five years.  Apple achieved a major milestone during the quarter as its active base of active devices crossed the 2 billion mark, hitting an all-time high for all major product categories and doubling from seven years ago. Free cash flow declined 32% during the first quarter to a still strong $30.2 billion due to the lower earnings and working capital changes. During the quarter, Apple paid $3.8 billion in dividends and repurchased 133 million shares of its common stock for $19.5 billion for an average cost of $146.43 per share. The company expects fiscal second quarter revenue performance to be similar to the first quarter with foreign exchange headwinds still significant but moderating.  Services revenue is expected to grow year over year.  Second quarter iPhone revenue performance is expected to accelerate from the first quarter. iPad and Mac revenue is expected to decline by double digits. The company expects gross margin to be between 43.5%-44.5% with operating expenses in the range of $13.7 billion to $13.9 billion and a tax rate of 16%.

Wednesday, Feb. 1, 2023

Texas Instruments-TXN provided an overview of their capital allocation strategy.  Executives believe the best measure to judge a company’s performance over time is growth of free cash flow per share as that is what drives long-term value for shareholders. Since 2004, the company has compounded its free cash flow per share by 11% annually. The dividend has been increased for 19 consecutive years and compounded at an annual 25% annual rate. During the same time period, the company has reduced its share count by 47% through substantial share repurchases when the stock sells at a discount to its cash flow value.  Texas Instruments has a great business model, a disciplined approach to capital allocation and a focus on efficiency. The business model is built around four sustainable competitive advantages: manufacturing and technology, a broad product portfolio, the reach of their market channels, and diverse and long-lived positions.  After accretive investments in the business to grow free cash flow for the long term, the remaining cash is returned to shareholders over time via dividends and share repurchases.

 

Meta Platforms-META reported fourth quarter revenues decreased 4% to $32.2 billion with net income declining 55% to $4.6 billion and EPS down 52% to $1.76. Fourth quarter results were negatively impacted by restructuring charges of $4.2 billion and foreign exchange rates. Had foreign exchange rates remained at 2021 levels, revenue would have been $2.01 billion higher.  In the fourth quarter, ad impressions delivered across the Meta’s Family of Apps increased 23% and the average price per ad decreased by 22%. For the full year, Meta reported revenues decreased 1% to $116.6 billion with net income declining 41% to $23.2 billion and EPS down 38% to $8.59. These results include a $13.7 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 still friendly 18.4% for the year. For the full year, ad impressions increased by 18% and the average price per ad decreased 16%.  Facebook daily active users increased 5% during the year to a record 2 billion while monthly active users increased 2% to 2.96 billion. Free cash flow decreased 51% during the year to $19 billion, primarily due to a 68% increase in capital expenditures compared to the prior year. Meta repurchased $27.93 billion of its stock during the year and has $10.87 billion authorized for future share repurchases. In addition, Meta announced a new  $40 billion increase to the share repurchase authorization. Meta ended the year with $40.7 billion in cash and investments, $9.9 billion in long-term debt and $125.7 billion in shareholders’ equity on its fortress balance sheet. Headcount increased 20% during the year to 86,482. The reported headcount includes a substantial majority of the approximately 11,000 employees impacted by the layoff Meta previously announced, who will no longer be reflected in the headcount by the end of the first quarter. Meta expects first quarter revenue to be in the range of $26-$28.5 billion. Full-year total expenses are expected to be in the range of $89-$95 billion, lowered from the prior outlook of $94-$100 billion due to slower anticipated growth in payroll expenses and cost of revenue. In addition, Meta now expects to record an estimated $1 billion in restructuring charges in 2023 related to consolidating their office facilities footprint. This is down from prior estimate of $2 billion, as Meta recorded a portion of the charges in the fourth quarter. For 2023, Meta expects capital expenditures to be in the range of $30-$33 billion, lowered from previous estimate of $34-$37 billion. The reduced outlook reflects the shift to a new data center that is more cost efficient and can support both AI and non-AI workloads.

Tuesday, Jan. 31, 2023

Stryker-SYK reported a healthy 10.7% increase in fourth quarter sales to $5.2 billion with net income and EPS declining 15% to $563 million and $1.47, respectively. Excluding a $216 million, or $0.57 per share, goodwill impairment charge and other items, fourth quarter EPS increased 10.7% from last year to $3.00. Organic sales increased 13.2% during the quarter, powered by 19.3% growth in MedSurg and Neurotechnology organic sales and 8.3% growth in Orthopaedics and Spine organic sales. For 2022, sales increased 7.8% to $18.45 billion with earnings and EPS up more than 18% to $2.36 billion and $6.17, respectively.  During 2022, Stryker generated a 14.2% return on shareholders’ equity and $2.0 billion in free cash flow, down 25.6% from last year, on a jump in accounts receivable that will be collected during the current quarter and a 21% increase in inventories due to advanced purchases to mitigate the impact of supply chain issues and inflation. During 2022, Stryker returned $1.05 billion to shareholders through dividend payments. Given its focus on paying down debt taken on for the $3 billion Vocera Communications acquisition, Stryker did not repurchase any shares during 2022. Stryker ended the year with $1.9 billion in cash and investments, $11.8 billion in long-term debt and $16.6 billion in shareholders’ equity on its sturdy balance sheet. Looking ahead to 2023, management expects continued macro-economic volatility caused by alleviating supply chain disruptions, inflationary risks and currency fluctuations. Despite the volatile macro-economic environment, Stryker has strong momentum in many parts of its business heading into 2023 and expects organic net sales growth in the range of 7.0% to 8.5% with adjusted EPS in the range of $9.85 to $10.15. Based on the steady progress of pricing actions, Stryker expects the impact of price to be between 0% and -0.5%.

NVR, Inc.-NVR reported fourth quarter revenues increased 22% to $2.7 billion with net income increasing 36% to $454.7 million and EPS up 50% to $133.44. New orders decreased by 27% during the quarter to 4,153 units. The average sales price of new orders increased by 1% to $459,000. The cancellation rate in the fourth quarter was 18% compared to 10% in the prior year period. Settlements increased 13% during the quarter to 5,749 units and the average settlement price increased 9% to $464,000. The backlog of homes sold but not settled as of December 31, 2022, decreased on a unit basis by 28% to 9,162 units and decreased on a dollar basis by 25% to $4.33 billion year-over-year. Mortgage loan closings increased 3% to $1.52 billion during the quarter. For the full year, revenues rose 18% to $10.5 billion, with net income increasing 40% to $1.7 billion and EPS jumping 53% to $491.82. Return on shareholders’ equity was a strong 49% in fiscal 2022. During the year, the company repurchased 323 million shares for an average price of $4,635.71 per share and ended the year with $2.5 billion in cash, $915 million in long-term debt and $3.5 billion in shareholders’ equity on its sturdy balance sheet.

PulteGroup-PHM reported fourth quarter revenues increased 19% to a record $5.1 billion with net income up 33% to $882 million and EPS jumping 48% to $3.85. Home sale revenues for the fourth quarter increased 20% to $5.1 billion, reflecting a 17% increase in average sales price to $571,000, along with a 3% increase in closings to 8,848 homes. New orders decreased by 41% during the quarter to 3,964 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 quarter was 32% compared to 11% in the prior year period. The company’s backlog at quarter end was 12,169 units, which is a decrease of 32% from the prior year. The dollar value of homes in backlog was $7.7 billion, which is a decrease of 22% over last year. Mortgage capture rate was 75% for the quarter, down from 85% last year. During the quarter, Pulte invested $1.1 billion in land acquisition and development and PulteGroup ended 2022 with 211,112 lots under control with 48% held through option. For the full-year, revenues increased 17% to $16.2 billion with net income increasing 34% to $2.6 billion and EPS up 48% to $11.01. Return on shareholders’ equity for 2022 was a lofty 29%. PulteGroup generated free cash flow of $556 million compared to $931 million last year, due to higher capital expenditures and inventories. During the quarter, PulteGroup repurchased 2.4 million shares of its common stock for $100 million, at an average price of $41.81 per share. In 2022, the company repurchased 24.2 million shares for $1.1 billion, at an average price of $44.48 per share. The 24.2 million common shares repurchased represent approximately 9.7% of shares outstanding at the beginning of 2022. In addition, the dividend payout rate per share increased 7% with the company paying dividends of $144 million during the year. The strong fourth quarter results allowed PulteGroup to lower its debt-to-capital ratio to 18.7%. The company ended the year with $1.2 billion in cash and investments, $2 billion in long-term debt and $8.9 billion in shareholders’ equity on its sturdy balance sheet.

UPS-UPS reported fourth quarter revenues declined 3% to $27.0 billion with net income up 12% to $3.5 billion and EPS up 13% to $3.96. Fourth quarter results included a net benefit from a pension gain. On an adjusted basis, EPS increased 1%. While revenues increased domestically in the fourth quarter, they declined internationally and in supply chain solutions due in part to softness in China trade lanes and volume and market rate declines in air and ocean freight forwarding. For the full year, revenues increased 3% to $100.3 billion with net income and EPS each down 10% to $11.5 billion and $13.20, respectively. Return on shareholders’ equity was a robust 58.4% for the year with return on invested capital expanding to 31.3%. Free cash flow declined 14% during the year to $9.3 billion with the company paying $5.1 billion in dividends and repurchasing $3.5 billion of its common stock. Free cash flow is expected to top $8 billion in 2023. UPS announced a 6.6% increase in its dividend for 2023, which marks the 14th consecutive year of dividend increases, and announced a new $5 billion buyback program. UPS also plans to invest $5.3 billion in capital expenditures in 2023 to automate and expand operations further to improve productivity. For the full year 2023, UPS expects revenues to be between $97 billion to $99.4 billion with an adjusted operating margin between 12.8% and 13.6%. UPS executives said the company’s 2023 outlook reflects an expectation for the U.S. to face a mild recession in the first half of the year before a recovery in the second half. Trade growth worldwide is expected to slow this year as import demand weakens across major economies due to a recession in Europe and with China not recovering until later in the year. “We expect 2023 to be a bumpy year,” said Brian Newman, chief financial officer at UPS, citing rising interest rates, high inflation, Russia’s war in Ukraine, Covid-19 disruptions in China and labor negotiations in the United States.

The rate of hourly wage growth for U.S. small businesses continued to decline to 4.66 percent year-over-year in January according to the latest Paychex | IHS Markit Small Business Employment Watch. Additionally, the one-month annualized earnings growth fell to 2.88 percent in January, the lowest level since December of 2020. Our small business wage data indicates that wage gains are moderating, as has been the aim of monetary policy by the Fed," said James Diffley, chief regional economist at IHS Markit. "Although small businesses have struggled in attracting and retaining employees over the past two years, the job index shows they continue to make gains in hiring with the easing of wage increases," said John Gibson, Paychex-PAYX  president and CEO. "The wage index also shows that employees of small businesses are increasing their hours worked to increase their earnings."

Friday, Jan. 27, 2023

Gentex-GNTX reported fourth quarter revenues rose 18% to $493.6 million with net income up 2% to $86.2 million and EPS up 6% to $.37 as the company gained market share.  For the year, revenues increased 11% to a record $1.9 billion with net income dropping 12% to $318.8 million and EPs down 9% to $1.36 due to a difficult operating environment impacted by customer order volatility, supply constraints and cost inflation in raw materials, labor and almost every other facet of the business. 2022 Full Display Mirror unit shipments grew by 49% year over year to 1.68 million units despite significant supply chain issues.  Return on shareholders’ equity was a shiny 15.4%. Free cash flow declined 35% during the year to $191.8 million due primarily to capital expenditures more than doubling as the company invests for the future. Capital expenditures are expected to increase further in 2023 to a range of $200 million to $225 million. Gentex repurchased 4.04 million shares of its common stock at an average price of $28.19 per share during the year for a total of $113.9 million with 20.8 million shares remaining authorized for future share repurchases.  Gentex expects 2023 revenues to approximate $2.2 billion with gross margin of 32%-33% and operating expenses of $260-$270 million with a tax rate in the range of 15%-17%. While margins are expected to improve in 2023, the expansion is expected to occur in the second half of the year. For fiscal 2024, revenues are expected to increase an additional 10% over 2023’s revenues with margins continuing to improve as gross margin is targeted in the 35%-36% range by the end of 2024.  The improving revenue environment will be driven by expected 4% growth in light vehicle production each year over the next two years and the company’s expanding product portfolio. Improving margins will result from a better supply environment and internal cost controls, which should lead to increasing shareholder returns over the next two years.

Thursday, Jan. 26, 2023

Visa-V reported first quarter revenues rose 12% to $7.9 billion with net earnings increasing 6% to $4.2 billion and EPS up 8% to $1.99. During the first quarter, Visa saw stable payments volume and processed transaction growth and a continued cross-border travel recovery. Key business drivers during the quarter included a 7% increase in payments volume, a 22% jump in cross-border volume and a 10% increase in processed transactions. Excluding Intra-Europe, cross-border volume charged ahead 31%. During the quarter, Visa generated $4.2 billion in operating cash flow and $3.9 billion in free cash flow with the company returning over $4 billion to shareholders through dividend payments of $945 million and share repurchases of $3.1 billion at an average cost per share of $198.74. On January 24th, Visa announced a 20% increase in the quarterly dividend to $0.45 per share and has $14 billion remaining authorized for future share repurchase. Visa ended the quarter with $18.9 billion in cash and investments, $20.5 billion in long-term debt and $36.9 billion in shareholders’ equity on its sturdy balance sheet. For the second quarter, Visa expects constant dollar revenue growth in the mid-teens.

Tractor Supply-TSCO rang up a 20.7% increase in fourth quarter sales to $4.0 billion with net earnings plowing ahead 22.4% to $270.9 million and EPS jumping 25.9% to $2.43. Fourth quarter sales included an extra week as part of the 53-week 2022 calendar which accounted for about 6.8 points of the 20.7% sales growth. Comparable store sales increased 8.6%, driven by comparable average ticket growth of 6.3% and comparable average transaction count increase of 2.3%. Comparable store sales growth reflects continued strength in every day, needs-based merchandise, including consumable, usable and edible “C.U.E.” products, winter seasonal goods and year-round product categories. Comparable store sales in the quarter benefited by about two percentage points from Elliott, the late December winter storm. During the quarter, the company saw a significant moderation in the rate of price increases from vendors and moderation in transportation costs that management believes peaked in the fourth quarter. For the year, Tractor Supply reported an 11.6% increase in sales to $14.2 billion with net income increasing 9.2% to $1.09 billion and EPS up 12.8% to $9.71. The company drove an impressive 53.3% return on shareholders’ equity during 2022 and generated $583.6 million in free cash flow. Tractor Supply returned $1.11 billion to shareholders in 2022 through dividends of $409.6 million and $700.1 million in share repurchases. The company ended 2022 with $202.5 million in cash, $1.16 billion in long-term debt and $2.04 billion of shareholders’ equity on its sturdy balance sheet. Looking ahead to 2023, management anticipates it will continue to operate in an ever challenging and changing macro environment. It expects the economy in the near to medium-term to remain resilient with flat to modestly positive real growth. Wages are increasing and consumers continue to tap pent-up savings to support spending. For fiscal 2023, management forecasts net sales of $15 billion to $15.3 billion with EPS in the $10.30 to $10.60 range. Comparable store sales growth is anticipated to be in the range of 3.5% to 5.5%. Capital expenditures are forecasted to be $700 million to $775 million, with about 80% for growth initiatives. The company remains committed to returning cash to shareholders through the combination of a growing dividend and share repurchases. For 2023, share purchases are expected in a range of $575 million to $675 million, estimated to reduce the weighted average shares outstanding by about 2%.  During the earnings conference call Hal Lawton, CEO, remarked, “Whatever economic environment plays out this year or any year for that matter, we’re confident that our business will remain resilient and build on our strong track record of consistent and stable growth across all economic environments.”


T. Rowe Price-TROW reported fourth quarter revenues declined 22% to $1.5 billion with net income and EPS plunging 64% to $266 million and $1.16, respectively. For the full year, revenues declined 15% to $6.5 billion with earnings and EPS dropping 49% to $1.6 billion and $6.70, respectively. Given the sharp earnings drop, return on equity declined to a still respectable 17.6% for the year. Net client outflows were $17.1 billion in the fourth quarter and $61.7 billion for the full year largely driven by growth equity strategies. The company’s ending assets under management as of year end declined 25% to $1.275 billion as stocks closed out their worst year since 2008 and the Bloomberg U.S. Aggregate Bond Index suffered its worst year since its inception in 1976. Recession worries and warnings of further rate hikes continued into year end. Whether central banks can achieve “soft landings” and tame inflation remains to be seen with the consensus expecting at least a modest economic downturn in the U.S. with perhaps deeper slumps ahead in Europe. The company’s balance sheet remains cash-rich and debt-free. T. Rowe Price paid an annual dividend of $4.80, which represents a 4.1% dividend yield at the current market price. During the year, the company repurchased 6.8 million shares for $855.3 million at an average cost of $125.78 per share, reducing its average shares outstanding to 224.3 million, the lowest year-end level since its IPO. Over its 85-year history, T. Rowe Price has successfully navigated uncertainty and market volatility. While headwinds are expected to persist in 2023, T. Rowe Price expects more constructive markets, improved performance, and traction in its growth initiatives to return the firm to positive organic growth over time.

Mastercard-MA reported fourth quarter revenues rose 12%, or 17% on a constant currency basis, to $5.8 billion with net income up 6% to $2.5 billion and EPS up 9% to $2.62.  During the fourth quarter, gross dollar volume grew 8%, on a local currency basis, to $2.1 trillion driven by cross-border volume growth of 31%. Switched transactions grew 8%. Other revenues increased 11% during the quarter, driven primarily by the company’s Cyber & Intelligence and Data & Services solutions. Rebates and incentives increased 14% primarily due to increased volumes and transactions and new and renewed deals. As of year end, the company’s customers had issued 3.1 billion Mastercard and Maestro-branded cards. For the full year, revenues charged 18% higher to $22.2 billion with net income up 14% to $9.9 billion and EPS up 17% to $10.22. Return on shareholders’ equity was greater than 100% thanks to strong earnings and a shrinking equity base reflecting substantial share repurchases. During the year, Mastercard repurchased 25.7 million shares at a cost of $8.8 billion or $342.21 per share and paid $1.9 billion of dividends. Free cash flow increased 19% during the year to $10.8 billion. Mastercard has $11.6 billion remaining authorized for future share repurchases. Mastercard ended the year with strong financial results and notable wins, with banks such as Citizens, Citi, Bank of America and Chase, which will help them continue to capitalize on the tremendous secular shift to digital payments. Low unemployment, elevated consumer savings, moderating energy costs and the opening of China, with global cross-border travel volume up 59% last year, has led to “remarkably resilient consumer spending” despite macroeconomic and geopolitical uncertainty. Mastercard will “manage with agility” if macroeconomic conditions change. For the full year 2023, the company expects revenues to grow at low double-digit rates with operating expenses up in the high-single digit range which should lead to operating margin expansion for the year.

Wednesday, Jan. 25, 2023

SEI Investments Company-SEIC reported fourth quarter revenue decreased 9% to $456.6 million with net income decreasing 23% to $112.2 million and EPS down 19% to $.83. Revenues from Assets under management (AUM), administration, and distribution fees declined primarily from the significant market depreciation during 2022. Average AUM decreased 11% from last year to $789.9 billion and AUM excluding LSV decreased 19% to $162.4 billion. During the fourth quarter, SEI generated $137.6 million in operating cash flow, or $1.01 per share, and free cash flow of $120.3 million with the company repurchasing $79.6 million of its shares at an average cost of $59.36 per share. For the full-year, SEI reported sales increased 4% to $1.99 billion with net income decreasing 13% to $475.5 million and EPS down 9% to $3.46. SEI generated an impressive 24% return on shareholder equity during 2022. SEI ended the year with $853 million in cash, no long-term debt and $1.95 billion in shareholders’ equity on its pristine balance sheet. Management believes the current environment presents growth opportunities and SEI remains focused on growth through new client signings, important recontracts, and successful delivery of solutions to their markets.

Western Alliance Bancorporation-WAL banked a 25% increase in fourth quarter revenue to $701.2 million with net income up 19.1% to $289.8 million and EPS up 15.1% to $2.67. Net interest income increased 42% to $639.7 million on a 28% increase in total loans to $51.8 billion and a 65-basis point increase in net interest margin to 3.98%. Total deposits grew by 13% to $53.64 billion. Non-interest income declined 44% from last year’s fourth quarter to $61.5 million, pressured by lower mortgage loan production with the rise in interest rates. For the year, Western Alliance Bancorporation reported revenue of $2.54 billion, up 30.1% from 2021, with net income up 16.6% to $1.04 billion and EPS up 11.9% to $9.70. Net interest income increased 43% to $2.2 billion driven primarily from interest income on loan growth and higher loan yields, partially offset by increased interest expense from deposits, short-term borrowings and credit linked notes issued during the year. Non-interest income declined nearly 20% to $324.6 million due to an 18% drop in mortgage production. The bank’s provision for credit losses totaled $68.1 million, up from a $21.4 million benefit recorded last year, due to continued economic uncertainty and loan growth during the year. Non-performing loans to total assets were 0.14% and the bank’s still stellar efficiency ratio of 44.9% increased 4.7% from last year. During 2022, Western Alliance generated an impressive 19.5% return on shareholders’ equity and 1.62% return on average assets. Tangible book valued increased 6.4% to $40.25 and CET1 capital at 9.3% continued to exceed “well capitalized” levels. Asset quality remains strong with 27% of loans insured. Looking ahead to 2023, net interest margin is expected in the 4% to 4.1% range with net interest income expected to grow 20% to 25%. Loan growth is expected in the 10% to 15% range while deposits are expected to increase 13% to 17%. CET1 capital is expected to reach 9.75% to 10% and net charge-offs are expected to normalize given economic uncertainties.


General Dynamics-GD reported fourth quarter revenue increased 5.4% to $10.85 billion with net income increasing 4.2% to $992 million and EPS increasing 5.6% to $3.58. Boosted by Russia’s invasion of Ukraine and the increased threat environment, General Dynamics ended the quarter with record backlog of $91.1 billion on a book-to-bill ratio of 1.2 times for the quarter and an estimated contact value of $127.7 billion. For the year, General Dynamics reported a 2.4% increase in revenue to $39.41 billion with net income up 4.1% to $3.4 billion and EPS up 5.5% to $12.19. By business segment, Aerospace, which includes Gulfstream and global aviation services, generated a 5.3% increase in revenue to $8.57 billion with operating margins of 13.2%. Segment backlog has increased for eight consecutive quarters and ended the year at $19.9 billion on a book-to-bill ratio of 1.5 times. Marine Systems revenue increased 4.9% from last year to $11.04 billion with operating margins of 8.1%. Segment backlog rose to $45.7 billion on a book-to-bill ratio of 1.1 times and included $5.1 billion for follow-on Columbia-class submarines and $535 million related to the Virginia-class submarines, both significant contracts awarded during the quarter.  Combat Systems, producer of the Abrams tank, Stryker combat vehicles and weapons systems for naval, air and ground forces, reported revenues of $7.31 billion, flat compared to last year, with operating margins above 14% for the 10th consecutive year. Segment backlog declined slightly to $13.3 billion on a book-to-bill ratio of 1.1 times. Despite substantial supply chains disruptions, General Dynamics Technology segment reported flat revenue of $12.5 billion with operating margins of 9.8%. Segment backlog dipped slightly from last year to $39.6 billion on a book-to-bill ratio of 1.1 times. During 2022, General Dynamics generated a powerful 18.3% return on shareholders’ equity and free cash flow of $3.47 billion, or 102% of net income, up 2.4% from last year despite a 26% jump in capital expenditures related to timing of project spending. The company returned nearly $2.6 billion to shareholders during 2022 through dividends of $1.37 billion and share repurchases of $1.23 billion at an average cost per share just under $226.  General Dynamics ended the quarter with $1.2 billion in cash, $9.2 billion in long-term debt and $18.6 billion in shareholders’ equity on its strong balance sheet.  Looking ahead to 2023, management expects revenues in the range of $41.2 billion and $41.3 billion, up 4.7% from 2022, and EPS between $12.60 and $12.65, up 3.6% from 2022 at the mid-range.

Automatic Data Processing-ADP reported fiscal second quarter revenues increased 9% to $4.4 billion with the company processing a 17% jump in net income to $813.1 million and an 18% gain in EPS to $1.95. These results reflected the strong growth in new business bookings, client revenue retention near record levels and continued healthy employment trends within ADP’s client base. Interest earned on funds held for clients (float income)  increased 77% to $187 million, reflecting a 4% increase in the average client funds balance to $33.4 billion and a 90 basis points increase in the average interest yield to 2.2%. During the first half of the year, free cash flow increased 34% to $1.5 billion with the company paying $865.5 million in dividends and repurchasing $553.5 million of its common stock. ADP maintained its full year guidance for fiscal 2023 for 8% to 9% revenue growth and 15% to 17% adjusted EPS growth with margin expansion of 125 to 150 basis points. While ADP notes that job growth is slowing, the company does not see any broad-based softness in the labor market despite more than 50,000 layoffs announced recently in the technology sector.

Tuesday, Jan. 24, 2023

Microsoft-MSFT reported second quarter revenues increased 2% to $52.7 billion with net income declining 12% to $16.4 billion and EPS down 11% to $2.20. Revenue in Business Processes increased 7% to $17 billion driven by Office 365 and 21% growth in Dynamics 365 products. Revenue in Intelligent Cloud jumped 18% to $21.5 billion driven by Azure and other cloud services revenue growth of 31%. Revenue in More Personal Computing decreased 19% to $14.2 billion, primarily driven by a 39% decrease in Windows OEM and Devices revenue. Microsoft cloud revenue was $27.1 billion, up 22% year-over-year. Free cash flow during the first half of the year decreased 20% to $21.8 billion with the company paying $9.7 billion in dividends and repurchasing $11 billion of its common stock. The decrease in free cash flow was due to a 23% decline in working capital during the quarter. Excluding 16 points for a tax payment, working capital declined 7% as strong cloud billings and collections were more than offset by higher employee and supplier payments. Microsoft ended the quarter with $99.5 billion in cash, $44.1 billion in long-term debt and $183.1 billion in shareholders’ equity on its strong balance sheet. For the third quarter, Microsoft expects revenues in the range of $50.5 billion to $51.5 billion with cost of goods in the range of $15.65 billion and $15.85 billion and operating expenses in the range of $14.7 billion to $14.8 billion. For the full 2023-year, operating margin is expected to decrease roughly 2 points year-over-year, excluding the employee severance expenses of $800 million, impairment charges resulting from changes to Microsoft’s hardware portfolio, and costs related to lease consolidation activities. Management believes they are well positioned to be a leader in artificial intelligence ( AI) and recently announced that they will be the exclusive cloud provider for OpenAI. Microsoft will soon add support for OpenAI’s ChatGPT, enabling customers to use it in their own applications for the first time.

Canadian National Railway-CNI reported fourth quarter revenue steamed  21% higher to C$4.54 billion with net income chugging ahead 18.2% to C$1.42 billion and EPS up 23.5% to C$2.10. Solid bulk volumes offset weakness in the Merchandise and Consumer Products segments while management’s disciplined approach to pricing led to rail-inflation-plus pricing on renewals. During the quarter, softness from the economic slowdown deepened in lumber, intermodal, chemicals and plastics. Canadian National’s new management team ushered in improvements in key operating metrics including a 6% increase in revenue ton miles (RTMs), a 15% increase in total freight revenue per RTM and a 20% increase in total freight revenue per carload.  Reported operating efficiency improved by 40 basis points to 57.9%. For the full year, revenues increased 18% to C$17.1 billion with net income up 4.5% to C$5.12 billion and EPS up 7.8% to C$7.44. Canadian National delivered a stellar 23.9% return on shareholders’ equity during 2022 and free cash flow of C$3.9 billion with the company returning C$6.7 billion to shareholders through dividends of C$2.0 billion and share repurchases of C$4.7 billion. The company increased its dividend 8% for 2023, marking the 27th consecutive annual increase, and initiated a new share repurchase program to repurchase up to 32 million shares for about C$4 billion through the end of January 2024, reflecting a prudent repurchase approach amid a softening economy. The company ended the year with C$328 million in cash and equivalents, C$14.4 billion in long-term debt and C$21.4 billion in shareholders’ equity on its sturdy balance sheet. Looking ahead to 2023, management expects a mild recession with negative North American industrial production. On the conference call, Tracy Robinson, CEO, stated, “Canadian National has dealt with recessions in the past and will deal with them in the future” and is well-positioned to increase volume greater than the change in industrial production. The company expects to deliver a low-single digit adjusted EPS growth during 2023 by focusing on growing with customers, driving further operating efficiencies and pricing above rail-inflation.   

Texas Instruments-TXN reported fourth quarter revenues declined 3% to $4.7 billion with net income declining 8% to $2 billion and EPS down 6% to $2.13. As expected, these results reflected weaker demand in all end markets except for automotive. For the full year, revenues rose 9% to $20.0 billion with net income up 13% to $8.7 billion and EPS chipping in 14% growth to $9.41. Return on shareholders’ equity was an impressive 60% for the year. Free cash flow dropped 6% during the year to $5.9 billion which represented 30% of revenue and reflected the quality of the company’s product portfolio as well as the efficiency of its manufacturing strategy. During 2022, the company paid $4.3 billion in dividends and repurchased $3.6 billion of its common stock. The dividend was increased 8% in the fourth quarter, marking the 19th consecutive year of dividend increases.  As customers continue to reduce inventory, Texas Instruments expects weaker demand for its products  to persist in the first quarter of 2023 with revenue expected in the range of $4.17 billion to $4.53 billion and EPS in the range of $1.64 to $1.90.

 

3M-MMM posted a 6.2% decline in fourth quarter sales to $8.08 billion with net income skidding 59.6% to $541 million and EPS sliding 57.7% to $0.98.  Sales declined in all four 3M business segments during the fourth quarter compared to last year. 3M’s slower than expected sales growth was due to rapid declines in consumer-facing markets, such as consumer electronics and retail, a dynamic that accelerated in December as consumers sharply cut discretionary spending and retailers adjusted inventory levels. 3M also saw significant slowing in China due to COVID-related disruptions along with moderating demand among some industrial markets. Health care continue to be challenged in its recovery to pre-pandemic levels amid labor shortages and constrained hospital budgets.  Fourth quarter earnings include an $800 million pre-tax charge related to the company’s decision to exit the PFAS forever chemical business by the end of 2025 that will ultimately result in total exit costs of between $1.3 billion to $2.3 billion. For the full year, 3M reported sales declined 3.2% to $34.2 billion with net income slipping 2.4% to $5.78 billion and EPS flat at $10.21. During 2022, 3M generated a remarkable $39.1% return on shareholders’ equity and free cash flow of $3.8 billion, down 34.4% from last year. 3M returned $4.8 billion to shareholders during 2022 through dividends of $3.37 billion and share repurchases of $1.46 billion. 3M ended the year with $3.89 billion in cash and investments, $14.0 billion in long-term debt and $14.8 billion in shareholders’ equity. In 2022, management made continued progress in its planned health care spinoff, which will create two world-class public companies better positioned to drive growth and value creation. In addition, management continued working through PFAS related litigation and toward a mediated resolution for Combat Arms litigation. Looking ahead, 3M expects market and macroeconomic challenges to persist in 2023. While supply chains are improving, management still sees headwinds for material availability and inflation, albeit at a lower level.  Based on this outlook, organic sales growth is expected in the range of -3% to flat which includes price increases in the low-single-digits with adjusted EPS of between $8.50 to $9.00, down 13.4% from 2022 at the midpoint. Adjusted free cash flow conversion of 90 to 100% is expected for 2023. Given the outlook, 3M announced it will reduce about 2500 global manufacturing roles to further align the business with expected production volumes. 


The Justice Department, along with the Attorneys General of several states, filed a civil antitrust suit against Google for monopolizing multiple digital advertising technology products. Google’s parent, Alphabet-GOOGL, responded that, "DOJ is doubling down on a flawed argument that would slow innovation, raise advertising fees, and make it harder for thousands of small businesses and publishers to grow." This litigation will likely take years to resolve.

Johnson & Johnson-JNJ reported fourth quarter revenues declined 4% to $23.7 billion, with net income decreasing 26% to $3.5 billion and EPS down 25% to $1.33. The decline in fourth quarter revenues was primarily driven by unfavorable foreign exchange and reduced COVID-19 vaccine sales. For the full year, revenues rose 1% to $94.9 billion with net income and EPS each down 14% to $17.9 billion and $6.73, respectively. Worldwide Pharmaceutical sales increased 2% during the year to $52.6 billion; MedTech sales increased 1% to $27.4 billion; and Consumer Health sales were relatively flat at $15 billion. During 2022, Johnson & Johnson generated approximately $17 billion in free cash flow and ended the year in a net debt position of $16 billion. The company invested $14.6 billion in research and development to advance its promising product pipeline and paid $11.7 billion in dividends during the year. In addition, JNJ repurchased $2.5 billion of its common stock, with approximately 50% of the repurchase program completed. The board of directors recently declared a cash dividend for the first quarter of 2023 of $1.13 per share, payable on March 7, 2023. The dividend currently yields a healthy 2.69%. For fiscal 2023, JNJ expects to report sales in the range of $96.9 billion to $97.9 billion, representing 4.5% to 5.5% growth, with adjusted EPS expected in the range of $10.45 to $10.65, representing 3% to 5% growth.

Raytheon Technologies-RTX reported fourth quarter revenue rose 6% to $18.1 billion with net income and EPS more than doubling to $1.4 billion and $.96, respectively. On an adjusted basis for acquisition costs and non-recurring charges, EPS was up 18% in the fourth quarter. For the full year, revenues rose 4%, or 6% organically, to $67.1 billion with net income up 34% to $5.2 billion and EPS up 36% to $3.51. These solid results reflected the rapid commercial aerospace recovery with commercial aftermarket sales up 25%. During the year, Raytheon received $86 billion of new awards with a full year book-to-bill ratio of 1.28. The company ended the year with a near record backlog of $175 billion, of which $106 billion was from commercial aerospace and $69 billion was from defense.  Return on shareholders’ equity for the year was 7.2%. Free cash flow dipped 3% during the year to $4.9 billion with the company paying $3.1 billion in dividends and repurchasing $2.8 billion of its common stock. Raytheon is well positioned to capture growing demand in the aerospace and defense markets in 2023 and expects to deliver sales growth and margin expansion along with strong free cash flow generation. Supply chain and labor inflation costs of about $2 billion are expected to be offset by increased pricing and cost reductions during the year. For the full year 2023, revenues are expected in the range of $72 billion to $73 billion, representing 7% to 9% organic growth, with adjusted EPS expected in the range of $4.90-$5.05, representing 3%-6% growth. Strong expected 20% operating profit growth will be partially offset by higher pension, tax and interest costs. Free cash flow for 2023 is expected to approximate $4.8 billion with the company targeting $3 billion in share repurchases for the year. Raytheon remains committed to returning at least $20 billion to shareholders post-merger through early 2024. During the second half of 2023, Raytheon plans to reorganize into three focused business segments which will be Collins Aerospace, Pratt & Whitney and Raytheon.

Monday, Jan. 23, 2023

Bank of Hawaii - BOH reported fourth quarter revenues increased 7.7% to $181.9 million with net income declining 4.2% to $59.3 million and EPS slipping 3.2% to $1.50. The net income decline reflects a small provision for credit losses during this year’s fourth quarter versus a $9.7 million benefit last year. Net interest income increased 11.4% from last year to $140.7 million on strong loan growth and a 26-basis point increase in net interest margin to 2.6%, boosted by the higher rate environment. Noninterest income declined 3.3% to $41.2 billion, pinched by market volatility and higher mortgage rates.  Asset quality remains strong with 80% of the bank’s loan portfolio secured with high-quality real estate with a combined weighted average loan to value of 56%. Total deposits increased 1.3% from last year to $20.6 billion. While Bank of Hawaii’s total deposit cost increased 40-basis points to 0.46%, its deposit mix of low cost, long-tenured, sticky core deposits helped mitigate the cost associated with rising rates. During the quarter, Bank of Hawaii returned $15.0 million to shareholders through share repurchases at an average cost per share of $77.77. The Board increased the share repurchase authorization by $100 million with $135.9 million currently approved for future share repurchases. With the current $0.70 dividend, the stock yields an attractive 3.57%.  For the year, total revenue increased 4.4% to $698.1 million with net income falling 13% to $217.9 million and EPS down 12.3% to $5.48. During 2022, Bank of Hawaii generated a solid 16.5% return on shareholders’ equity and 0.98% return on average assets. During the quarterly conference call, Peter Ho, CEO stated, “As we enter into 2023, the forward view on the economy is somewhat cloudy. Economic conditions, while buoyant currently, may possibly be tested in the coming days by the continued effects of tighter Fed policy. Asset values may also be challenged by higher rates. Bank of Hawaii remains well geared for potentially choppier waters. Our credit portfolio is the beneficiary of conservative underwriting standards not just of late, but over the course of many years. Our deposit base is a great source of strength, diversified, granular and long tenured. Our investment assets are both abundant, high quality and highly liquid.”


Microsoft-MSFT said it is making a multiyear, multibillion-dollar investment in OpenAI, which could approximate $10 billion according to media reports.  This will substantially increase its investment in the popular ChatGPT chatbot as Microsoft looks to expand the use of artificial intelligence in its products. Microsoft said the latest partnership builds upon the company’s 2019 and 2021 investments in OpenAI. Microsoft plans to incorporate artificial-intelligence tools into all its products and make them available as platforms for other businesses to build on, Chief Executive Satya Nadella said.  Microsoft is incorporating artificial-intelligence software into its suite of products, ranging from its design app Microsoft Design to search app Bing. It also will help finance the computing power OpenAI needs to run its various products on Microsoft’s Azure cloud platform.

 

Friday. Jan. 20, 2023

Alphabet--GOOGL said it would cut its staff by 12,000, or 6% of its workforce, in its largest-ever round of layoffs. CEO Sundar Pichai acknowledged that the company "hired for a different economic reality than the one we face today."

Thursday, Jan. 19, 2023

Fastenal-FAST reported fourth quarter revenues rose 11% to $1.7 billion with net income increasing 6% to $245.6 million and EPS up 7% to $.43. Sales through Fastenal’s Digital Footprint accounted for 52.6% of sales in the fourth quarter, versus 46.4% in the fourth quarter of 2021. Management anticipates they will hit 65% of sales running through their digital footprint in 2023. For the full year, revenue rose 16% to $6.9 billion with net income and EPS up nearly 18% to $1.1 billion and $1.89, respectively. 2022 was a year of milestones for Fastenal, with eCommerce revenues surpassing $1 billion in sales, international sales exceeding $1 billion in sales and company-wide net earnings topping $1 billion. Fastenal reported that 79 of their top 100 customers are growing and 62% of their branches are growing. Return on shareholders’ equity for the year was an impressive 34%. Free cash flow increased 25% during the year to $767.2 million, with Fastenal returning $949.1 million to shareholders through dividends of $711.3 million and share repurchases of $237.8 million. Fastenal announced a 13% increase in its dividend for the first quarter of 2023. The company ended the year with $230 million in cash, $353 million in long-term debt and $3.1 billion in shareholders’ equity on its strong balance sheet. Fastenal noted that they experienced moderating demand and normalization of supply chains during the quarter. In addition, the company did not take any broad pricing actions in the fourth quarter, as price levels in the market remained stable.

Monday, Jan. 18, 2023

Microsoft-MSFT said it would eliminate 10,000 jobs, or about 5% of its workforce, and take a $1.2 billion ($.12 per share) charge to earnings in the second quarter of 2023, as its cloud-computing customers reassess their spending and the company braces for potential recession. At the same time, Microsoft is looking at adding to its $1-billion stake in OpenAI, the startup behind the Silicon Valley chatbot known as ChatGPT, which Microsoft plans to soon market through its cloud service.

Friday, Jan. 13, 2023

UnitedHealth Group-UNH reported healthy fourth quarter results with revenues rising 12% to $82.8 billion, net income increasing 17% to $4.8 billion and EPS up 18% to $5.03. For the full year 2022, revenues rose 13% to $324.2 billion as net income jumped 16% to $20.1 billion with EPS up 17% to $21.18. Return on shareholders’ equity for the year was a strong 25%, reflecting the company’s strong overall growth and efficient capital structure.  The company delivered broad-based growth thanks to double-digit growth at both Optum and UnitedHealthcare driven primarily by serving more people and serving them more comprehensively. People served domestically by UnitedHealthcare grew by over 1.2 million in 2022. Free cash flow increased18% during the year to $23.4 billion with the company paying $6 billion in dividends and repurchasing $7 billion of its common shares. Cash paid for acquisitions during the year, including Change Healthcare, topped $21 billion with the acquisitions expanding the company’s capabilities. The company continues to see tremendous growth opportunities through its investments in technology and innovation. UnitedHealth Group affirmed its 2023 growth outlook with revenues expected to increase 10%-11% to a range of $357 billion to $360 billion with net earnings increasing 9%-12% to $23.15 to $23.65 per share. Cash flow from operations for the year is expected to increase to a range of $27 billion to $28 billion in 2023.

Thursday, Jan. 12, 2023

In addition to a leadership transition, Cognizant Technologies-CTSH revised its fourth quarter and full-year revenue expectations to approximately $4.8 billion and $19.4 billion, respectively, compared to prior expectations of $4.72-$4.77 billion for the fourth quarter and $19.3 billion for the full year. This reflects a year-over-year increase of approximately 1.3% (or 4.1% in constant currency1) for the fourth quarter and growth of approximately 5.0% (or 7.5% in constant currency) for full-year 2022. Additionally, the company now expects full-year 2022 Adjusted Operating Margin of approximately 15.3%, compared to prior guidance of 15.6%, and full-year 2022 Adjusted Diluted EPS of approximately $4.38-$4.40, compared to prior guidance of $4.43-$4.46. This updated guidance includes a negative impact on Adjusted Operating Margin of approximately 30 basis points and Adjusted Diluted EPS of approximately $0.08 from the impairment of certain capitalized costs related to a large volume-based contract with a Health Sciences customer. The impairment is principally driven by the company's expectation of lower volumes.

T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.28 trillion as of December 31, 2022, reflecting a 25% decline for the year. Preliminary net outflows for the fourth quarter of 2022 were $17.1 billion, bringing preliminary year-to-date net outflows to $61.7 billion.

Wednesday, January 4, 2023

According to Accenture-ACN, growing consumer and business interest in the metaverse as a creator economy and tool to enhance day-to-day tasks is expected to fuel a $1 trillion commerce opportunity by the end of 2025. While gaming is appealing for 59% of metaverse users, only 4% of consumers see the metaverse as just a gaming platform. In fact, 70% say they intend to use the metaverse to access products and services across media and entertainment, fitness, retail, travel and healthcare. These preferences vary by age, with younger consumers more interested in media and fitness and those older in accessing health services in new ways. Still, what all have in common is a desire to enhance the things they already do every day, such as the experience of working-out at home (cited by 60%) or improving interactions with health professionals (55%).

Texas Instruments-TXN introduced new automotive battery cell and pack monitors with the most accurate measurement capability available on the market, maximizing electric vehicle (EV) drive time and enabling safer operation. As EVs grow in popularity, advanced battery management systems (BMS) are helping overcome critical barriers to widespread adoption. With a focus on solving complex system design challenges, TI provides the most advanced, comprehensive portfolio of BMS devices, enabling automakers to create a safer, more reliable driving experience and accelerate EV adoption.

Tuesday, January 3, 2023

Paychex-PAYX reported that the rate of hourly wage growth for U.S. small businesses continued to decline to 4.95 percent year-over-year in December, as small business job growth remains steady. "Despite various headwinds including inflation, difficulties in staffing, and changing regulations, U.S. small businesses have continually proven to be innovative and resilient through the challenges presented to them since the start of the pandemic," said John Gibson, Paychex president and CEO. "As we enter 2023, small business owners and their employees are working more hours and finding ways to deal with inflation and higher credit costs."