HI Quality Archives - 2024

Thursday, Dec. 19, 2024

Nike-NKE reported fiscal second quarter sales fell 8% to $12.4 billion with net income dropping 26% to $1.16 billion and EPS slipping by 24% to $0.78. NIKE direct revenues declined 13% to $5.0 billion and wholesale revenues declined 3% to $6.9 billion. Converse revenues declined 17% to $429.0 million. Nike brand revenues declined 7% to $11.95 billion with footwear dropping 11% to $7.66 billion, apparel dipping 1% to $3.74 billion and equipment sprinting ahead 14% to $544.0 million. Digital sales fell 21% and store sales fell 2%. North America and EMEA sales declined 10% to $1.4 billion and $831.0 million, respectively. Greater China sales plummeted 27% to $375.0 million and Asia Pacific & Latin America sales dropped 12% to $460.0 million. Gross margin decreased 100 basis points to 43.6%, primarily due to higher discounts and changes in channel mix partially offset by lower product input costs as well as lower warehousing and logistics costs. NIKE continues to have a strong track record of consistently increasing returns to shareholders, including 23 consecutive years of increasing dividends.  During the quarter, Nike returned about $1.6 billion to shareholders through dividends of $557 million, up 7% from last year and share repurchases of $1.1 billion at $83.97 per share, as part of the company’s four-year, $18 billion program approved by the Board of Directors in June 2022. As of November 30, 2024, a total of about $11.3 billion has been returned to shareholders through share repurchases at an average cost per share of about $100.17. Nike ended the quarter with $9.8 billion in cash and investments, $7.97 billion in long-term debt and $14.03 billion in shareholders’ equity on its strong balance sheet. NIKE’s new CEO, Elliott Hill, and his team are taking actions to reposition the company which includes liquidating aged inventory via higher discounts to wholesalers and in factory stores, investments in sports marketing and transitioning NIKE Direct to a full price model. For the third quarter of fiscal 2025, NIKE expects revenues to decline by low-double-digits with gross margins declining 300 to 350 basis points with the headwinds of repositioning being the strongest in the fourth quarter.

FactSet-FDS reported fiscal first quarter sales increased 5% to $568.7 million with net income and EPS up 1% to $150.0 million and $3.89, respectively. ASV, the forward-looking revenues for the next 12 months from all subscription services currently supplied to clients, was $2,265.9 million on November 30, 2024, up 5% from last year. By geography, Americas revenues increased 5% to $367.2 million with ASV increasing 5%, EMEA revenues increased 3% to $143. 8 million with ASV increasing 4% and Asia Pacific revenues increased 6.7% to $57.7 million with ASV increasing 6%. At the end of the first quarter, client count was 8,249, a net increase of 32 clients in the past three months, driven by an increase in partners, private equity and venture capital and wealth. The count includes clients with ASV of $10,000 and more. User count increased by 1,886 to 218,267 in the past three months, primarily driven by an increase in wealth management users. Annual ASV retention was greater than 95%. When expressed as a percentage of clients, annual retention was 91%. Employee headcount was 12,575, up 0.5% over the last 12 months, with the increase primarily in the content and technology groups. Free cash flow of $60.5 million declined 56% from last year, owing to resolution of a tax dispute and increased capital expenditures to build out AI infrastructure and other technology. During the quarter, FactSet returned $88.0 million to shareholders via dividend payments of $39.2 million and share repurchases of $48.8 million at an average cost per share of $467.00. The company ended the quarter with $358.8 million in cash and investments, $1.3 billion in long-term debt and $2.0 billion in shareholders’ equity on its strong balance sheet. Management reaffirmed its guidance for fiscal 2025 with organic ASV expected to grow in the range of $90 million to $140 million, up 5% at the midpoint from fiscal 2024. Revenues are expected in the range of $2,285 million to $2,305 million, up 4% at the midpoint from last year, and EPS is expected to be in the range of $15.10 to $15.70, up 11% at the midpoint.

For the second quarter of fiscal 2025, Paychex-PAYX reported a 5% increase in total revenue, reaching $1.3 billion. Diluted earnings per share (EPS) rose by 6% to $1.14, and net income increased by 5% to $413.4 million, highlighting strong financial performance despite the expiration of the Employee Retention Tax Credit (ERTC) program. Free cash flow decreased by 17% to $758.5 million during the first half, reflecting working capital changes. During the first half, the company paid dividends totaling $706.2 million and repurchased 828,855 shares for $104.5 million.  As Paychex enters the selling season, demand for its comprehensive solutions remains strong. The company has launched new award-winning products designed for small and medium-sized businesses, addressing challenges in the labor market and rising healthcare costs. Paychex is particularly excited about its latest offering, HR Analytics with AI Insights, which combines real-time data with generative AI capabilities, providing businesses with enterprise-level tools for strategic decision-making. With robust financial results, a strong market position, and innovative solutions designed to meet evolving business needs, Paychex continues to be a trusted partner for small and medium-sized enterprises seeking effective human resource management solutions. The company's commitment to leveraging technology and exceptional service positions it well for future growth in a complex business landscape. For the full fiscal 2025 year, Paychex reaffirmed its outlook for total revenue growth of 4% to 5.5% with adjusted EPS growth of 5% to 7%.

Accenture-ACN reported fiscal first quarter revenues rose 9% to $17.7 billion with net income and EPS each up 16% to $2.3 billion and $3.59, respectively. The strong results reflected broad-based revenue growth across all the geographic markets and industry groups the company serves as the company gained market share. First quarter new bookings increased 1% to $18.7 billion, including 30 quarterly client bookings of more than $100 million with generative AI new bookings of $1.2 billion. Free cash flow doubled during the quarter to $870 million with the company paying $926 million in dividends and repurchasing $898 million of its common stock. The company’s total remaining share repurchase authorization is approximately $5.9 billion. For fiscal 2025, the company raised its revenue growth outlook to be in a range of 4% to 7% in local currency compared to its previous forecast of 3% to 6% with EPS now expected to be in the range of $12.43-$12.79 compared to the previous outlook of $12.55 to $12.91, in part due to foreign exchange headwinds. Free cash flow is still expected to be in the range of $8.8 billion to $9.5 billion with the company expecting to return at least $8.3 billion in cash to shareholders through dividends and share repurchases.

Wednesday, Dec. 18, 2024

Gentex-GNTX agreed to acquire all the outstanding shares of VOXX not already owned by Gentex for a purchase price of $7.50 per share. The majority of the revenue of VOXX is comprised of automotive OEM and aftermarket business, as well as the consumer electronics industry. Through the transaction, Gentex will gain full access to the EyeLock^® iris biometric technology, which represents a unique, extremely accurate and highly secure method of authentication, which will provide further product applications into the Gentex automotive, aerospace and medical markets. The acquisition will also include the Premium Audio Company, which is known as the most innovative and complete premium audio solution provider in the consumer technology space and includes world renowned brands such as Klipsch^®, Onkyo^® and Integra^®.  The company expects that its annual revenue will increase in the range of $350 million to $400 million per year as a result of the acquisition. Based on initial estimates and expectations, the company expects an approximate pro-forma annual EBITDA contribution of $40 to $50 million as the result of the acquisition once the profitability improvement measures have been executed. In addition, Gentex expects to have post-closing tax benefits of approximately $15 - $20 million pertaining to tax loss and tax credit carryforwards derived from the acquisition. Gentex believes the acquisition of VOXX will contribute to its long-term growth and profitability strategies and create shareholder value through increasing revenue in existing and new markets, potential growth stemming from acquired technologies, significant net asset values and trapped tax losses, as well as the combined brand value and reputation of the VOXX family of brands.

Tuesday, Dec. 17, 2024

Mastercard-MA announced that its Board of Directors has declared a quarterly cash dividend of 76 cents per share, a 15 percent increase over the previous dividend of 66 cents per share. The cash dividend will be paid on February 7, 2025 to holders of record of its Class A common stock and Class B common stock as of January 9, 2025. The Board of Directors also approved a new share repurchase program, authorizing the company to repurchase up to $12 billion of its Class A common stock. The new share repurchase program will become effective at the completion of the company’s previously announced $11 billion program (December 2023). As of December 13, 2024, the company had approximately $3.9 billion remaining under the current approved share repurchase program.

Waymo, the robotaxi company owned by Alphabet-GOOGL, is set to partner with Japan's largest taxi operator Nihon Kotsu and a taxi-hailing app GO in Tokyo in early 2025.  There, Waymo will learn and adapt to left-hand traffic and new driving nuances associated with operating in one of the world's most densely populated urban environments. This expansion into Japan aligns with the country's vision for the future of transportation. Over the years, the Japanese National and Tokyo Metropolitan governments have been proactively working to address the evolving transportation needs of society and foster the adoption of innovative technologies that can enhance safety and mobility. Waymo is engaging with Japanese policymakers, regulators, and local safety officials to ensure a responsible and seamless implementation of Waymo's technology to Tokyo's streets.

 TA Connections, a Corpay-CPAY company, announced a strategic collaboration with Uber for Business. This includes the introduction of a new integration within TA Disruption Hub, TA Connections' flight disruption management solution, which allows airlines to assist disrupted passengers by scheduling Uber rides for passengers. TA Disruption Hub allows airlines to support passengers that experience flight disruptions by providing a holistic recovery plan which includes flight rebooking, meal vouchers, accommodations, transportation— and now, Uber rides to help them get home or to a hotel. Airlines can easily request and manage Uber rides within the application, reducing the workload on busy airline customer service teams. Additionally, the integration provides airlines with greater visibility into, and enables better costs control regarding, the rides they schedule for disrupted passengers. For passengers, the integration will make for a seamless rider experience, giving them the ability to view their trip details, driver location, and pickup point.

Thursday, Dec. 12, 2024

Alphabet-GOOGL reported viewers globally streamed over one billion hours of content daily on their TVs. Watch time of sports content on TV grew over 30% year over year, as users visit YouTube to get their lineup of clips, highlights, and post-game interviews, all in one place. Podcast watching is growing rapidly on TVs. Viewers watched over 400 million hours of podcasts monthly on living room devices. They’ve been tuning into podcasts similarly to how one would tune into a late-night talk show. Due to the rising cost of content, YouTube is increasing its membership pricing 14% to $82.99 per month from $72.99. The updated price will continue to include 100+ channels, a DVR with unlimited storage, up to six accounts per household, and three concurrent streams.

In other news, Google has launched Gemini 2.0, its latest artificial intelligence model, which is claimed to be twice as fast as its predecessor. This new version is set to power virtual agents that assist users in various tasks. Gemini 2.0 can generate images and audio across languages and is designed to assist in Google searches and coding projects.

Visa-V announced that with Visa Direct, funds transferred to U.S. bank accounts will be available within one minute or less starting in April 2025. Consumers, businesses, and governments can use Visa Direct to deposit funds to bank accounts linked to eligible debit cards in real-time.

Wednesday, Dec. 11, 2024

As part of Booking Holdings’-BKNG previously announced restructuring program, the company estimates over the next three years approximately $400 to $450 million in annualized savings with the majority of the estimated savings to be realized after 2025. Booking currently expects that restructuring costs will be incurred in the next two to three years and are estimated to be approximately one times the expected annual run rate saving.

Intersect Power, announced a strategic partnership with Google-GOOGL and TPG Rise Climate to provide scaled renewable power and storage solutions to new data centers. The partnership is designed to deliver gigawatts of new data center capacity across the US with Intersect Power catalyzing a targeted $20 billion in renewable power infrastructure investment by the end of the decade.

In January 2021, Microsoft-MSFT announced a minority investment in Cruise, an autonomous vehicle company which is a majority-owned subsidiary of General Motors (GM). On December 10, 2024, GM announced its intent to realign its autonomous driving strategy, no longer fund Cruise's robotaxi development work, and pursue the acquisition of minority investor shares. As a result, Microsoft expects to record an impairment charge of approximately $800 million in the second quarter of fiscal year 2025. This charge will be recorded in other income and expense and was not included in second quarter guidance provided on October 30, 2024. It is estimated to have a negative impact of approximately $0.09 to second quarter diluted earnings per share.

Tuesday, Dec. 10, 2024

Stryker-SYK announced that its Board of Directors has declared a quarterly dividend of $0.84 per share payable January 31, 2025 to shareholders of record at the close of business on December 31, 2024, representing an increase of 5.0% versus the prior year and previous quarter. 

Monday, Dec. 9, 2024

Oracle-ORCL reported fiscal second quarter revenues rose 9% to $14.0 billion with net income jumping 26% to $3.2 billion and EPS up 24% to $1.10. Cloud revenue increased 24% during the quarter to $5.9 billion led by cloud infrastructure revenue rising 52% to $2.4 billion due to record AI demand with cloud application revenue up 10% to $3. 5 billion. Growth in the company’s AI segment of the infrastructure business was “extraordinary” with GPU consumption up 336% in the quarter as the company delivered the world’s largest and fastest AI SuperComputer.  The company’s total remaining performance obligations rose 49% to $97 billion. This should lead  the company’s impressive cloud growth to continue to accelerate into the second half with total Oracle Cloud revenue expected to top $25 billion this fiscal year, which is “just the beginning of the beginning.”  Free cash flow in the first half of the fiscal year declined 48% to $2.5 billion as the company is heavily investing in capital expenditures to meet growing demand. During the first fiscal half, the company paid $2.2 billion in dividends and repurchased $898 million of its common stock. Over the trailing 12 months, Oracle’s operating cash flow increased 19% to $20.3 billion. Capital expenditures in fiscal 2025 will double from last year to meet rising demand for its datacenters. Oracle Cloud infrastructure, which is faster and less expensive than others, trains several of the world’s most important generative AI models. Oracle just signed an agreement with Meta for them to use Oracle’s AI Cloud infrastructure to develop AI agents on Meta’s Llama models. Oracle now has multi-cloud agreements with Microsoft, Google, Amazon’s AWS and Meta.  Larry Ellison, Oracle Chairman and CTO, said, “The Oracle Cloud trains dozens of specialized AI models and embeds hundreds of AI agents in cloud applications. For example, Oracle’s AI Agents automate drug design, image and genomic analysis for cancer diagnostics, audio updates to electronic health records for patient care, satellite image analysis to predict and improve agricultural output, fraud and money laundering detection, dual-factor biometric computer logins and real time video weapons detection in schools. Oracle trained AI models and AI Agents will improve the rate of scientific discovery, economic development and corporate growth throughout the world. The scale of opportunity is unimaginable.” In the third quarter, non-GAAP and constant currency revenue growth is expected in the 9%-11% range with EPS expected to grow 7%-9% to a range of $1.50-$1.54. The strengthening of the dollar will adversely impact EPS by $.03 per share.

Google’s-GOOGL Quantum AI team unveiled Willow, a state-of-the-art quantum computing chip that has demonstrated the ability to not only exponentially correct errors, but also process certain computations faster than supercomputers could within known timescales in physics. This is a significant milestone in the Quantum AI team’s journey to create a reliable quantum computer that can expand human knowledge for the benefit of all people. Quantum is a new approach to computing, where people are building machines that use quantum mechanics — the fundamental language of the universe — to break through the limits of classical computing.

Thursday, Dec. 5, 2024

Ulta Beauty-ULTA reported a 1.7% increase in net sales, reaching $2.53 billion, up from $2.49 billion, primarily driven by contributions from newly opened stores. Comparable sales rose by 0.6%, supported by a 0.5% increase in transaction volume and a 0.1% rise in average ticket size. However, net income decreased 3% to $242.2 million, down from $249.5 million in the prior year. On a positive note, EPS improved slightly by 1.3% to $5.14, compared to $5.07. Merchandise inventories increased by approximately 1.9%, totaling around $2.4 billion, largely due to the expansion of the store network. In the third quarter of 2024, Ulta actively repurchased about 731,458 shares at a cost of approximately $267 million, bringing the total share repurchases for the first nine months of fiscal 2024 to about 1.9 million shares for around $764 million. During this quarter, Ulta opened 28 new stores, remodeled 27, and closed two, concluding the period with a total of 1,437 stores covering nearly 15 million square feet of retail space. With better-than-expected results in the third quarter, Ulta raised its sales and EPS outlook for fiscal 2024 with sales now expected in the $11.1 billion to $11.2 billion range and EPS in the range of $23.30 to $23.75 compared to the prior outlook of $22.60 to $23.50.

Fastenal-FAST reported November sales dipped 1.5% to $590.8 million due to one fewer business day in the month than last November with average daily sales increasing 3.4% to $29.5 million. Fastenal reported growth across all geographies led by 8.7% growth in Canada/Mexico. Fastenal also reported growth in all product lines led by 5.5% growth in Safety products. About 59% of the company’s Top 100 national accounts experienced growth compared to 57% in the prior year period. The company’s employee headcount increased 2% over the past year to 23,661.

Tractor Supply-TSCO updated its long-term growth targets with net sales expected to increase 6%-8%, driven by comparable store sales growth of 3% to 5%. Operating margins of 10%-10.5% should lead to EPS growth of 8%-11%. The company plans to invest approximately 4% of net sales in capital expenditures and repurchase 1% to 2% of its net share float. In 2025, the company anticipates opening 90 new Tractor Supply stores and approximately 10 new Petsense by Tractor Supply stores. The company updated its total addressable market to approximately $225 billion from $180 billion and its long-term store count to 3,200, an increase of 200 locations. The Board of Directors of Tractor Supply approved a 5-for-1 stock split of the company's  common stock to make its stock more accessible to team members and investors. Shareholders of record as of December 16, 2024, will receive four additional shares for each share held, which will be distributed after market close on December 19, 2024. Tractor Supply's shares are expected to begin trading on a stock-split adjusted basis at the market open on December 20, 2024. This represents the fifth stock split for Tractor Supply since it went public more than 30 years ago in 1994.

Brown-Forman-BFB reported fiscal second quarter net sales dipped 1% to $1.1 billion, with organic sales up 3%, as net income increased 7% to $258 million, and EPS rose 9% to $.55. The reported net sale declines in the first half were primarily due to the Finlandia and Sonoma-Cutrer divestitures. Free cash flow more than tripled in the first half to $57 million with the company paying $206 million in dividends. Brown-Forman recently raised its dividend 4%, marking the 41^st consecutive year of dividend increases. Despite challenging economic and geopolitical conditions, the company anticipates a return to growth in fiscal 2025 with performance accelerating in the second half thanks to the strength of its portfolio of  brands, gains in international markets and the benefits of normalizing inventory trends. Tariff uncertainty poses a risk which the company is working to mitigate. For fiscal 2025, Brown-Forman expects organic net sales growth of 2% to 4% with operating income growth also in the 2% to 4% range. The outlook for capital expenditures for the year has been updated to a range of $180 million to $190 million from the prior outlook of $195 million to $205 million.

Google-GOOGL DeepMind introduced its newest AI model, GenCast, which can predict weather and the risks of extreme conditions with state-of-the-art accuracy, delivering faster and more accurate forecasts up to 15 days ahead. More accurate weather predictions can help officials prepare for natural disasters, which can save lives and protect homes and communities.

In other news, Alphabet's Waymo said it will expand its autonomous ride-hailing services to Miami, Florida, adding another city to its operations as it seeks to gain an edge in an increasingly competitive market. The company plans to introduce its vehicles to Miami's streets early next year and aims to launch services to riders in 2026, offering ride-hailing through the Waymo One app.

Wednesday, Dec. 4, 2024

General Dynamics-GD Board authorized the repurchase of an additional 10 million shares of the company’s stock on the open market.

Hormel Foods-HRL reported fourth quarter revenue dipped 2% to $3.1 billion with net income up 12% to $220.2 million and EPS up 11% to $.40. For the full year, revenues dipped 2% to $11.9 billion with net income and EPS each up 1% to $805 million and $1.47, respectively. The year was challenged by a steep decline in whole bird turkey commodity markets and the production disruption at the company’s Planters nuts facility in Suffolk, VA with both these issues expected to persist into the fiscal first quarter of 2025. Return on shareholders’ equity for the year was 9.7%. Free cash flow increased 30% during the year to $1 billion with the company paying a record $615 million in dividends during the year. Returning capital to shareholders is a top priority. The dividend was raised 3% for fiscal 2025, marking 59 consecutive years of rising dividends and 96 years of dividend payments. For fiscal 2025, Hormel Foods expects net sales in the range of $11.9 billion to $12.2 billion on organic sales growth of 1% to 3% with EPS in the range of $1.51 to $1.65.

UnitedHealth Group-UNH reaffirmed its fiscal 2024 EPS guidance of $27.50-$27.75 and in fiscal 2025, expects adjusted EPS of $29.50-$30.00, excluding non-recurring items, and revenues of $450 billion -$455 billion.  Cash flows from operations are expected to range from $32 billion to $33 billion with the company paying about $7.6 billion in dividends and repurchasing approximately $10 billion of its stock.

In sad news, the CEO of UnitedHealthcare, Brian Thompson, 50, was shot and killed in midtown Manhattan in an apparent targeted attack as he was about to attend the company’s annual investor conference, which was subsequently cancelled.

Tuesday, Dec. 3, 2024

Corpay-CPAY announced its Chief Financial Officer, Tom Panther, will be leaving effective March 15, 2025, to become the CFO of the National Christian Foundation. The company has initiated an executive search to identify a new CFO.  The company currently expects its fourth quarter 2024 organic revenue and  earnings results to be in line with the guidance provided on November 7, 2024, with EPS in the range of $5.25-$5.45.

Amazon-AMZN announced that LG AI Research, the artificial intelligence (AI) research hub of South Korean conglomerate LG Group, has used the world's leading cloud to develop its new pathology foundation model (FM) for earlier cancer diagnosis and treatment. The histopathology image-specific model, EXAONEPath, can securely analyze microscopic images of tissue samples from cancer patients to reduce genetic testing times from two weeks to less than one minute, helping medical professionals improve the speed and effectiveness of treatments.

In other news, Amazon announced that its Black Friday Week and Cyber Monday holiday shopping event—from November 21 through December 2—was its biggest ever compared to the same 12-day period ending on Cyber Monday in prior years. The deal event saw record sales and a record number of items sold.

Monday, Dec. 2, 2024

According to preliminary insights from Mastercard SpendingPulse™, U.S. retail sales excluding automotive were up +3.4% on Black Friday, November 29 compared to Black Friday 2023. Mastercard SpendingPulse measures in-store and online retail sales, representing all payment types, and is not adjusted for inflation.  Online Retail sales increased +14.6%, while In-store sales were up a more modest +0.7%, compared to Black Friday last year. Jewelry, Electronics and Apparel remain the top gift sectors for the holidays, with particular strength in e-commerce for Apparel on Black Friday.

Tuesday, Nov. 26, 2024

Roche Holdings-RHHBY announced that it plans to acquire Poseida Therapeutics, Inc.  for approximately $1.0 billion in cash and potentially $500 million in equity value ( contingent value rights).  Poseida's R&D portfolio includes pre-clinical and clinical-stage off-the-shelf (also referred to as allogeneic) CAR-T therapies across several therapeutic areas including haematological malignancies, solid tumours, and autoimmune disease, as well as manufacturing capabilities and technology platforms. The transaction is expected to close in the first quarter of 2025.

The Board of Directors of Hormel Foods-HRL announced a 3 percent increase to the annual dividend to shareholders, marking the 59^th consecutive annual dividend increase. Since becoming a public company in 1928, Hormel Foods Corporation has paid a regular quarterly dividend without interruption.

Thursday, Nov. 21, 2024

Ross Stores-ROST rang up a 3% increase in sales for the quarter ended Oct. 28 to $5.07 billion with net income up 9% to $488.8 million and EPS up 11.3% to $1.48. Comp store growth increased 1%, driven entirely by traffic. Management expressed disappointment in the sales growth deceleration from solid gains reported in first half of the fiscal year. While the company’s low-to-moderate income customers continue to face persistently high costs on necessities pressuring their discretionary spending, management believes execution of its merchandising initiatives fell short during the quarter. In addition, a combination of severe weather during the quarter from Hurricanes Helene and Milton, along with unseasonably warm temperatures, also negatively impacted results. Despite the sales growth disappointment, operating margin increased 70 basis points to 11.9% as lower incentive, freight, distribution costs along with lower than anticipated shrink more than offset the planned decline in merchandise margin. During the quarter, Ross Stores repurchased $262.0 million of its shares at an average cost per of $145.56 and remains on track to buy back a total of $1.05 billion in common stock during fiscal 2024 under the company’s two-year $2.1 billion repurchase program. During the first nine months of fiscal 2024, Ross Stores generated $960.3 million in free cash flow with the company returning $1.154 billion to shareholders through share repurchases of $787.5 million and dividends of $367.5 million. Ross Stores ended the quarter with $4.4 billion in cash, $1.5 billion in long-term debt and $5.3 billion in shareholders’ equity on its exquisite balance sheet. Based on year-to-date results and its fourth quarter forecast, earnings per share for the 52 weeks ending February 1, 2025 are now expected to be in the range of $6.10 to $6.17, up 10% at the midpoint from 2023.

Brown-Forman-BFB announced that its Board of Directors approved an increase of 4% to the quarterly cash dividend, marking 41 consecutive years of dividend increases. Brown-Forman is a member of the prestigious S&P 500 Dividend Aristocrats index and has paid regular quarterly cash dividends for 81 years.

As part of its lawsuit over how Google distributes Search, the U.S. Department of Justice (DOJ) filed a proposal that seeks dramatic changes to Google services, including the divestiture of the company’s Chrome browser.  Google, a unit of Alphabet-GOOGL,  plans to appeal the decision stating, “DOJ’s approach would result in unprecedented government overreach that would harm American consumers, developers, and small businesses — and jeopardize America’s global economic and technological leadership at precisely the moment it’s needed most.”

Wednesday, Nov. 20, 2024

Microsoft CEO Satya Nadella indicated in a recent  interview that the company’s AI investments are paying off as  Co-Pilot is the fastest selling suite in the company's history. Customers are seeing the return on investment (ROI) from Co-Pilot and scaling it. Bing Search was one of the fastest growing businesses last quarter.

The TJX Companies-TJX announced third-quarter results for Fiscal 2025, reporting net sales of $14.1 billion, a 6% increase compared to the same quarter last year. Net income rose 8.9% to $1.3 billion, with earnings per share (EPS) reaching $1.14, significantly exceeding the company’s expectations. The pretax profit margin was reported at 12.3%, reflecting strong operational performance that has led to an upward revision of the full-year guidance for both pretax profit margin and EPS. During the first nine months, TJX repurchased $1.7 billion of its stock and paid $1.2 billion in dividends, demonstrating a robust commitment to returning capital while continuing to invest in growth initiatives. For the full year, the company expects to repurchase $2.25 billion to $2.5 billion of its stock.  By division, Marmaxx net sales increased 4% to $8.4 billion, HomeGoods sales rose 7% to $2.4 billion, TJX Canada sales grew 5% to $1.4 billion, and TJX International sales surged 16% to $1.9 billion. The company reported a 3% increase in comparable store sales, driven entirely by an increase in customer transactions, indicating strong appeal for TJX’s value proposition and shopping experience. Looking ahead, CEO Ernie Herrman noted that the fourth quarter had started strongly and expressed confidence in opportunities for the holiday shopping season, emphasizing that TJX is providing a dynamic shopping experience with excellent value for consumers. Additionally, the company completed its investment in a joint venture with Grupo Axo, further expanding TJX's international footprint into Mexico while announcing plans to enter Spain in early 2026.  After quarter end, the company completed its investment in Brands for Less which will lead to further international expansion into the Middle East.  For the full year Fiscal 2025, the company continues to expect consolidated comparable store sales to be up 3%. The company is increasing its outlook for pretax profit margin to be 11.3% and raising its diluted earnings per share outlook to be in the range of $4.15 to $4.17.

Friday, Nov. 15, 2024

NIKE-NKE announced that its Board of Directors has declared a quarterly cash dividend of $0.40 per share on the Company’s outstanding Class A and Class B Common Stock payable on January 2, 2025, to shareholders of record at the close of business on December 2, 2024. This represents an increase of 8 percent versus the prior quarterly dividend rate of $0.37 per share. Today’s announcement marks the 23rd consecutive year that Nike has increased its quarterly dividend.

 Thursday, Nov. 14, 2024

FactSet-FDS reaffirmed its guidance for fiscal 2025 and sees EPS of $16.80-17.40 with revenues in the range of $2,285 million to $2,305 million and an operating margin in the range of 32.5% to 33.5%. The company also announced its new medium-term outlook with an adjusted 2028 adjusted operating margin of 37% to 38% by year end fiscal 2028  and adjusted diluted EPS growth of high single digits to low double digits on average annually through fiscal 2028. FactSet is building on its proven track record of consistent growth through all economic cycles by maintaining a disciplined capital allocation framework of sustained organic investment, return of capital to shareholders, and a strategic approach to M&A to drive sustainable growth acceleration and value creation.

The European Commission confirmed it fined Meta Platforms-META  €797.72 million ($843 million) over abusive practices benefitting Facebook Marketplace. Meta said it would appeal the fine by the commission. It denied using competitors’ data in a way that disadvantages them and said the company imposes safeguards to ensure it doesn’t do so.

PulteGroup-PHM has voted to increase the company’s quarterly cash dividend by 10% to $0.22 per common share. "Today’s action marks the sixth increase in PulteGroup’s dividend since 2019, as we have doubled the per share payout during this period to the $0.22 per share announced today," said PulteGroup President and CEO, Ryan Marshall. "In combination with our share repurchases, 2024 marks the fourth year in a row that PulteGroup will have returned over $1.0 billion to shareholders through dividends and share repurchases."

Wednesday, Nov. 13, 2024

Waymo opened its robotaxi service to anyone who wants a ride around Los Angeles, marking another milestone in the evolution of self-driving car technology since the company began as a secret project at Google 15 years ago. Waymo, the leader in the robotaxi industry, says it now transports more than 50,000 weekly passengers. Waymo's robotaxis have driven more than 20 million fully autonomous miles and provided more than 2 million rides to passengers without encountering a serious accident that resulted in its operations being sidelined. As Waymo continues to expand to other cities, the company recently raised $5.6 billion from its corporate parent Alphabet-GOOGL  and a list of other investors that included venture capital firm Andreesen Horowitz and financial management firm T. Rowe Price.

The Justice Department and three U.S. states filed a lawsuit  to block UnitedHealth Group's-UNH  $3.3 billion purchase of Amedisys Inc over concern the deal would harm competition in the market for home health services, the department said.

Mastercard-MA provided performance objectives for 2025-2027. Net revenue is expected to compound at an annual growth rate at the high-end of low-double-digits.  One of the key highlights of these 2025-2027 objectives is to deliver a net revenue CAGR in the high teens for the company's value-added services and solutions. Earnings per share  are expected to compound at a mid-teens rate over the same time period.

Friday, Nov. 8, 2024

Molina Healthcare’s -MOH outlook over the next three years is to deliver 11%-13% annual premium revenue growth with 7%-9% representing organic growth and approximately 4% coming from acquisitions. The company aims for a 4%-5% pre-tax margins with a medical cost ratio in the range of 87.5%-88.5% and general and administrative expenses less than 7%. This should lead to adjusted EPS growth of 13%-15% annually with 11%-13% coming from earnings growth and about 2% from share repurchases. Molina reaffirmed its 2024 revenue guidance of $38 billion with adjusted EPS of at least $23.50. The company’s initial outlook for 2025 is for revenue growth of at least $41 billion with a premium revenue target of $52 to $55 billion in 2027.

Thursday, Nov. 7, 2024

Corpay-CPAY reported third quarter revenues increased 6% to $1.03 billion, the first time quarterly revenues exceeded the $1.0 billion milestone, with net income increasing 2% to $276.4 million and EPS up 7% to $3.90. Same store sales remained flat, retention improved slightly to 92% and new bookings grew by 14%, led by 28% growth in Corporate Payments new bookings. By segment, Vehicle Payments increased 4% to $522.0 million, Corporate Payments charged ahead by 18% to $320.0 million, Lodging Payments declined 5% to $134.0 million and Gift & Payroll Cards dipped 6% to $66.0 million.  During the quarter, Corpay generated $355 million of free cash flow and repurchased $90.0 million shares at an average cost of $300 per share, mainly to offset dilution from employee stock options. The Board recently authorized an additional $1.0 billion to the company’s share repurchase program, bringing the total currently authorized to $1.5 billion. Acquisitions to enhance technology and expand the customer base remains the top priority for Corpay’s capital allocation strategy while share repurchases will be made opportunistically. For the nine months ended September 30, 2024, Corpay generated $1.16 billion in free cash flow, representing a robust 153% of reported earnings, with the company repurchasing $1.0 billion of its stock. Corpay ended the quarter with $1.3 billion in cash, $5.3 billion in long-term debt and $3.1 billion in shareholders’ equity. Looking ahead to the full year, Corpay expects revenue in the range of $3.98 billion to $4.0 billion, up 6% from last year at the midpoint, and EPS in the range of $14.82 and $15.02, up 13% at the midpoint. For 2025, Corpay expects organic revenue growth in the 9% to 11% range and cash EPS in the ballpark of $22.

Wednesday, Nov. 6, 2024

The board of directors of ADP-ADP approved a $0.14 increase in the quarterly cash dividend to an annual rate of $6.16 per share.   The increased cash dividend marks the 50^th consecutive year in which ADP has raised its quarterly dividend. "Our dividend is a cornerstone of our long-standing commitment to our shareholders and this 10% increase signifies the Board's confidence in the financial strength of ADP", said Maria Black, President and CEO of ADP.  

Fastenal-FAST reported net sales in October increased 7.5% to $692.8 million with daily sales up 2.8% to $30.1 million. The company generated growth in all geographic regions with Safety and Other products growing 5.8% and 5.1%, respectively, while Fasteners declined 2.0%. About 61% of the company’s Top 100 national accounts experienced growth compared to 52% in the prior year period. Total personnel increased 2.5% to 20,902 year-over-year.

Saturday, Nov. 2, 2024

Berkshire Hathaway-BRKB reported the company’s net worth during the first nine months of 2024 increased by 12%, or $67.8 billion, to $629.1 billion with book value equal to about $437,581 per Class A share as of 9/30/24. Berkshire boasts the largest shareholders’ equity of any U.S. company.

On a GAAP basis, Berkshire reported net earnings of $26.3 billion during the third quarter compared to a loss of $12.8 billion 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 70% of total equities held, include American Express at $41.1 billion (which charged 45% higher during the first nine months of the year or $12.7 billion); Apple at $69.9 billion (which Buffett continued to pare back by selling 100 million shares in the third quarter and sliced the position by two-thirds since year end); Bank of America at $31.7 billion (which Buffett continues to make withdrawals from and was $3.1 billion lower than year end); Coca-Cola at $28.7 billion (which popped 22% higher or $5.1 billion) and Chevron at $17.5 billion (which slid 7% lower or $1.3 billion.)

During the third quarter, Berkshire’s revenues were relatively unchanged at $92.8 billion. Berkshire’s operating earnings decreased 6% during the third quarter to $10.1 billion primarily due to the company’s insurance-underwriting businesses.

During the third quarter, Berkshire’s insurance businesses generated $750 million from underwriting earnings compared to $2.4 billion in the prior year quarter with the 69% decline due primarily to estimated losses of $565 million from Hurricane Helene, increases in liabilities for prior accident years’ claims, foreign exchange headwinds and accruals in connection with a bankruptcy settlement agreement related to a non-insurance affiliate. Estimated losses from Hurricane Milton, which struck Florida in October and caused significant damage, could be between $1.3 billion and $1.5 billion and will be reflected in fourth quarter results.  Insurance investment income increased 48% during the quarter to $3.7 billion, driven by higher interest income from short-term investments in U.S. Treasury Bills.  The float of the insurance operations rose 3% since year end to approximately$174 billion.

Burlington Northern Santa Fe’s revenues rose 3% in the third quarter to $5.9 billion. Average revenue per car/unit declined 5.2% due to lower fuel surcharges and business mix changes, however, this was offset by an 8.3% increase in car/unit volumes in the third quarter led by 17% growth in consumer products volume and 15% growth in agricultural products volume. Net earnings chugged 13% higher to $1.4 billion during the quarter due to improved productivity and lower fuel and operating costs.

Berkshire Hathaway Energy reported revenues increased 0.7% during the third quarter to $7.3 billion. Net earnings more than tripled to $1.6 billion, reflecting comparative declines in litigation-related charges affecting the U.S. utilities from the wildfires and higher earnings from natural gas pipelines.

During the third quarter, Pilot’s revenues traveled 19% lower to $10.6 billion with pre-tax earnings skidding 25% lower to $217 million. The decline in revenue was attributable to lower average fuel prices and a decline in volumes from wholesale fuel and fuel marketing businesses with pre-tax earnings reflecting higher operating costs. Net income, however, rose 8% to $198 million as interest expense declined 42% in the third quarter due to reduced borrowings and lower rates as Pilot borrowed $5.7 billion from certain Berkshire insurance subsidiaries and repaid its third-party borrowings.

Berkshire’s Manufacturing businesses reported second quarter revenues increased 2.6% to $19.7 billion with operating earnings up 1.9% to $3.1 billion. The industrial products segment generated a 3% increase in revenues to $9.0 billion with operating earnings rising 4% to $1.5 billion thanks to improvements at Precision Castparts amid the higher demand for aerospace products and higher volumes and lower raw material costs at Lubrizol.  The building products segment revenues increased 3% to $6.9 billion but operating earnings decreased 8% to $1.1 billion. The decline in earnings primarily reflected lower earnings from financial services at Clayton Homes due to increased insurance claims from weather events, increased loan loss provisions and higher interest expenses. The consumer products segment revenues increased 1% to $3.8 billion with operating earnings jumping 19% to $576 million. The higher revenues were generated by Forest River, Jazwares and Brooks Sports partially offset by lower revenues from Fruit of the Loom, Garan and Richline. The increase in earnings was driven by the increase in earnings from apparel and footwear, Duracell and Forest River.

Service and Retailing revenues decreased 3.7% during the quarter to $22.6 billion with pre-tax earnings decreasing 22% to $1.0 billion. The Service group revenues were relatively unchanged at $5.1 billion with pre-tax earnings down 26% to $569 million. The earnings decline reflected the impact of lower sales and price competition at TTI, a distributor of electronic components, whose earnings plummeted 48%. Excess inventory levels within supply chains contributed to lower customer demand at TTI with these conditions expected to persist over the balance of the year. The retailing group revenues were down 3% to $4.7 billion with pre-tax earnings down 26% to $308 million. Nearly all Berkshire retailers generated lower earnings in 2024 compared to 2023, reflecting challenging business conditions that contributed to reduced sales and increased operating expenses. McLane’s revenues declined 6% to $12.7 billion due to lower unit volumes primarily in the restaurant business, while earnings increased 25% to $145 million thanks to higher gross margins and lower operating expenses.

Berkshire’s balance sheet continues to reflect significant liquidity and a very strong capital base of $629.1 billion as of 9/30/24. Excluding railroad, energy and utility investments, Berkshire ended the first nine months of the year with $638.1 billion in investments allocated approximately 42.6% to equities ($271.7 billion), 2.5% to fixed-income investments ($16.0 billion), 50.2% in cash and short-term investments ($320.3 billion) and 4.7% in equity method investments ($30.1 billion), which includes 26.9% ownership of Kraft Heinz and 28.2% ownership of Occidental Petroleum.

Free cash flow declined 41% during the first nine months of the year to $12.3 billion which reflected $17.5 billion of income tax payments derived from taxable gains on sales of equity securities, including significant sales of Apple and Bank of America. Sales of equity securities produced taxable gains of $23.4 billion in the third quarter and $97.1 billion in the first nine months of 2024. During the first nine months, capital expenditures were relatively unchanged from the prior year period at $13.6 billion, which included $9.0 billion for BNSF and BHE, its railroad and utility and energy units. Berkshire expects capital expenditures for the remainder of 2024 for BNSF and BHE to approximate $3.7 billion.

During the first nine months, Berkshire paid cash of $5.8 billion to acquire equity securities and received proceeds of $133.2 billion from the sale of stocks, including the significant paring of Apple and Bank of America.  Berkshire purchased a net $127.6 billion in Treasury Bills and fixed-income investments during the first nine months of the year. In January 2024, Berkshire acquired the remaining noncontrolling interests in Pilot for approximately $2.6 billion which brought Berkshire’s ownership of Pilot up to 100%.

Berkshire repurchases its shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett.  During the first nine months, Berkshire repurchased $2.9 billion of its common stock. No shares were repurchased in the third quarter. Berkshire’s swelling cash hoard to a record $320 billion and lack of share repurchases signals that Buffett likely believes that many stocks, including Apple, Bank of America and Berkshire’s stock, itself, are fairly valued at current price levels.

Thursday, Oct. 31, 2024

Apple-AAPL reported fiscal fourth quarter sales increased 6% to $94.9 billion, a new September quarter record, with net income declining 36% to $14.7 billion and EPS down 34% to $0.97. Fourth quarter results included a $10.2 billion charge related to the reversal of the European General Court's State Aid decision. Sales in the Americas increased 6% to $41.7 billion, sales in Europe jumped 11%, Greater China sales were flat at $15.0 billion, Japan sales increased 8% to $5.9 billion and Rest of Asia Pacific sales jumped 17% to $7.4 billion. By category, iPhone sales increased 6% to a new September quarter record of $46.2 billion, Mac sales increased 2% to $7.7 billion, iPad sales grew by 8% to $7.0 billion and Wearables, Home and Accessories sales declined by 3% to $9.0 billion. Services sales rose a shiny 12% to $25.0 billion, an all-time record, thanks to double-digit growth across most categories and increased customer interaction with a record installed base of products. Paid accounts grew double digits on more than 1 billion subscriptions which have doubled since 2020.   For the full fiscal 2024 year, Apple’s sales increased 7% to $180.7 billion with net earnings declining 3.4% to $93.7 billion and EPS dipping 1% to $6.08. During the fiscal year, Apple generated a shiny 25.7% return on assets and $108.8 billion in free cash flow, up 9% from last year and representing a robust 116% of reported net income. Apple returned $110.2 billion in cash to shareholders in fiscal 2024 through dividends of $15.2 billion and share repurchases of $94.9 billion. Apple ended the fiscal year with $156.7 billion in cash and investments, $85.8 billion in long-term debt and $57.0 billion in shareholders’ equity on its rosy balance sheet. For the first quarter of fiscal 2025 ended Dec. 31, 2024, Apple expects sales to grow in the low to mid-single digits with gross margins between 46% and 47%. Tim Cook, Apple’s CEO remarked, “During the quarter, we were excited to announce our best products yet, with the all-new iPhone 16 lineup, Apple Watch Series 10, AirPods 4, and remarkable features for hearing health and sleep apnea detection. And this week, we released our first set of features for Apple Intelligence, which sets a new standard for privacy in AI and supercharges our lineup heading into the holiday season.”

Amazon-AMZN reported fiscal third quarter revenues rose 11% to $158.9 billion with net income soaring 55% to $15.3 billion and EPS jumping 52% to $1.43. North America segment sales increased 9% to $95.5 billion with operating income up 33% to $5.7 billion. International segment sales increased 12% to $35.9 billion with the segment turning a profit of $1.3 billion compared to a loss of $0.1 billion in the prior year period. AWS segment sales increased 19% to $27.5 billion with operating income up 49% to $10.4 billion. During the past nine months, free cash flow more than tripled top $15.1 billion even as the company continues to significantly increase its capital expenditures in support of building out its data centers and AI infrastructure. Amazon expects capital expenditures to approach $75 billion for the full 2024 year and increase further in 2025 as the company continues to aggressively invest in a “once-in-a-lifetime” AI opportunity.  AWS's AI business is a multi-billion-dollar revenue run rate business that continues to grow at a triple digit year over year percentage and is growing more than three times faster than AWS, itself, at this stage of its evolution. In the last 18 months, AWS has released nearly twice as many machine learning and AI features as the other leading cloud providers combined. To help compete with Nvidia, Amazon released its second version of AWS Trainium which is starting to ramp up. Amazon is seeing significant interest in these chips which will be very compelling for customers on price performance. On the retail side, Amazon is continuing to lower prices and ship more quickly as customers are price-conscious and looking for deals.  Unit growth continues to be strong and outpaced revenue growth in the last few months. Amazon held its annual Prime Big Deal Days shopping event with record sales, number of items sold, and Prime member participation, saving Prime members more than $1 billion with deals across its store. Amazon recently announced its first-ever fuel savings offer for Prime members, saving U.S. members 10 cents a gallon on fuel at approximately 7,000 bp, Amoco and ampm locations. Amazon announced plans to expand Amazon Pharmacy Same-Day Delivery of medications to nearly half the U.S. in 2025 by accelerating the roll out of new pharmacies in 20 more U.S. cities by the end of next year so nearly half the US will have the ability to have their medications delivered to their door within hours. Amazon continues to innovate in robotics to speed delivery, lower costs  and further improve safety in its fulfillment network. Amazon is optimistic about the upcoming holiday season and plans to hire 250,000 people across its U.S. operations to provide peak service during the peak season.

Starbucks-SBUX reported a 7% decline in global comparable store sales and a 3% decrease in consolidated net revenues, totaling $9.1 billion. The company's GAAP earnings per share stood at $0.80, marking a 25% drop compared to the previous year. This downturn was largely attributed to weakened revenue in North America, particularly a 6% decline in U.S. comparable store sales, driven by a 10% decrease in transactions, although this was partially offset by a 4% increase in average ticket prices. Despite accelerated investments in an expanded product range and more frequent in-app promotions aimed at boosting customer engagement, these efforts did not yield the desired results, leading to performance that fell short of expectations. In China, comparable store sales plummeted by 14%,  due to an 8% decline in average ticket prices and a 6% drop in transactions, amidst heightened competition and a challenging macroeconomic environment impacting consumer spending. For the full fiscal year 2024, global comparable store sales decreased by 2%, while consolidated net revenues rose by 1% to $36.2 billion. The GAAP earnings per share for the year was reported at $3.31, down 8% from the prior year. The disappointing performance for the year stemmed from significant traffic declines coupled with cautious consumer behavior and competitive pressures in China. In a positive development, Starbucks announced that its Board of Directors approved a 7% increase in the quarterly cash dividend, raising it from $0.57 to $0.61 per share, marking the 14th consecutive year of dividend increases. During fiscal 2024, Starbucks generated approximately $3.32 billion in free cash flow, down 9.7% from the previous year, while returning $3.9 billion to shareholders through dividend payments of $2.6 billion and share repurchases totaling $1.3 billion.Starbucks also introduced its new initiative, "Back to Starbucks," aimed at revitalizing the customer experience and strengthening connections with patrons, especially those not enrolled in the rewards program. Key elements of this initiative include optimizing staffing levels, reintroducing condiment coffee stations, simplifying menus, enhancing equipment processes, and streamlining mobile ordering systems. These efforts are designed to align with the interests of customers, staff, and shareholders as Starbucks seeks to reaffirm its identity as a welcoming community coffeehouse.

Mastercard-MA reported third quarter revenue charged ahead by 13% to $7.4 billion with net income up 2% to $3.3 billion and EPS up 4% to $3.53. Excluding unrealized losses on equity investments and  litigation and restructuring charges, net income increased 12% to $3.6 billion and EPS grew 15% to $3.89. Growth in Mastercard’s payment network undergirded by a solid macro environment, moderating inflation and a strong, albeit less robust, labor market and strong value-added services and solutions sales drove Mastercard’s revenue growth during the quarter.  Payment network net revenue increased 10% to $4.6 billion, driven by gross dollar volume growth of 10% to $2.5 trillion. Cross-border volume jumped 17% and switched transactions grew 11%. Value-added services and solutions net revenue increased 18% to $2.7 billion on strong demand for consulting and marketing services, scaling of Mastercard’s fraud & security and identity & authentication solutions and pricing. Year-to-date, Mastercard generated $9.6 billion in free cash flow, up 27% from last year, lifted by higher net income and working capital efficiencies. Through September 30, 2024, Mastercard returned $9.4 billion to shareholders through dividends of $1.8 billion and share repurchases of $7.6 billion at an average cost per share of $460.60.  Fourth quarter-to-date through October 28, the Mastercard repurchased an additional $983.0 million of its shares at an average cost per share of $491.50, which leaves $5.6 billion remaining under the approved share repurchase program. Mastercard ended the quarter with $11.4 billion in cash and investments, $17.6 billion in long-term debt and $7.5 billion in shareholders’ equity. Looking ahead to the fourth quarter, Mastercard expects net revenues to grow in the low teens with operating expenses increasing in the low-single-digits. Michael Miebach, Mastercard CEO remarked, “We continue to invest in our suite of differentiated services to grow our addressable market, protect the ecosystem and add value in every transaction. This includes the planned acquisitions of Recorded Future and Minna Technologies, which are expected to add leading AI-powered threat intelligence and subscription management capabilities to meet the needs of our customers.”

Wednesday, Oct. 30, 2024

Stryker-SYK announced third quarter sales increased by 11.9% to $5.5 billion with net income increasing 20.5% to $834 million and EPS up by 20.0% to $2.16. MedSurg and Neurotechnology sales reached $3.2 billion, up 12.8%, with organic growth of 12.7%. Orthopaedics and Spine generated $2.3 billion in sales, a growth of 10.7%, with organic sales increasing by 9.7%. Stryker reported a healthy gross profit margin of 64.0%. Stryker’s free cash flow increased 4% to $1. 8 billion during the past nine months with the company paying $914 million in dividends.  Stryker revised its full-year 2024 organic net sales growth forecast to between 9.5% and 10.0% thanks to sustained demand for their products and healthy procedural volumes.  Factoring in a $.10 per share headwind from foreign exchange, Stryker expects adjusted  EPS in the range of $12.00 to $12.10 . Overall, Stryker's performance indicates robust demand for its medical technologies and a positive trajectory heading into the final quarter of the year, supported by product innovation and strategic acquisitions.

Meta Platforms-META reported third quarter revenue increased 19% to $40.6 billion with net income increasing 35% to $15.7 billion and EPS up 37% to $6.03. Facebook daily active people was 3.29 billion on average for September 2024, an increase of 5% over the prior year period. During the third quarter, ad impressions delivered across the company’s family of apps increased by 7% and the average price per ad increased by 11%. Meta saw strong momentum with Meta AI, with 500 million active users and on track to have the most-used AI assistant in the world. Free cash flow increased 26% during the first nine months to $40.5 billion. Year-to-date, Meta has returned $33.9 billion to shareholders through share repurchases of $30.1 billion and dividends of $3.8 billion. The company ended the quarter with a strong balance sheet with $76.9 billion in cash and investments, $28.8 billion in long-term debt and $164.5 billion in shareholders' equity. Meta’s headcount was 72,404 as of quarter end, an increase of 9% year-over-year. Revenues are expected in the range of $45 billion to $48 billion in the fourth quarter. Total expenses in 2024 are expected in the range of $96 billion to $98 billion, updated from prior range of $96 billion to $99 billion.  Meta expects Reality Labs operating losses to increase meaningfully year-over-year due to the company’s ongoing product development efforts and investments to further scale the company’s ecosystem. Meta expects full-year capital expenditures will be in the range of $38 billion to $40 billion, updated from prior guidance of $37 billion to $40 billion, with the company continuing to expect significant capital expenditures growth in 2025. Given this, along with the back-end weighted nature of Meta’s 2024 capital expenditures, the company expects significant acceleration in infrastructure expense growth next year as they recognize higher growth in depreciation and operating expenses of their expanded infrastructure fleet.

Microsoft-MSFT reported fiscal first quarter revenues increased 16% to $65.6 billion with net income up 11% to $24.7 billion and EPS up 10% to $3.30. AI-driven transformation is changing work across every role, function, and business process with Microsoft helping customers apply their AI platforms and tools to drive new growth and improve operating efficiencies.  Revenue in Productivity and Business Processes was $28.3 billion and increased 12%, driven by Microsoft 365 Commercial cloud revenue growth of 15%. Revenue in Intelligent Cloud was $24.1 billion and increased 20% driven by Azure and other cloud services revenue growth of 33%. Revenue in More Personal Computing was $13.2 billion and increased 17%, with Xbox content and services revenue increasing 61% driven by 53 points of net impact from the Activision acquisition. Free cash flow declined 7% to $19.3 billion during the quarter as capital expenditures jumped 50% to $14.9 billion to meet rapidly growing demand for cloud data centers. Microsoft returned $9.0 billion to shareholders in the form of $5.6 billion in dividends and $4.1 billion in share repurchases in the first quarter of fiscal year 2025. For the second quarter, Microsoft expects 10% to 11% growth in Productivity and Business Processes with revenue expected in the range of $28.7 to $29.0 billion.  For Intelligent Cloud, the company expects revenue of $25.55 billion to $25.85 billion, or 18%-20% growth.  Azure Q2 revenue growth is expected to be up 31%-32%. Microsoft expects Azure consumption growth to be stable compared to Q1 with Microsoft planning to add more sequential dollars to Azure than any other quarter in history. Microsoft expects the contribution from AI services to be similar to last quarter, given the continued capacity constraints in datacenters and power, as well as some capacity that shifted out of Q2 and into the second half of the year. Microsoft still expects Azure growth to accelerate from the first half as the company’s capital investments create an increase in available AI capacity to serve more of the growing demand. In the second fiscal quarter, Microsoft expects More Personal Computing revenues in the range of $13.85-$14.25 billion. Overall, second quarter revenues should be in the range of $68.1 billion to $69.1 billion with operating margins expected to expand. Microsoft’s AI business should cross $10 billion in revenue in the second fiscal quarter, which will be the fastest business in its history to achieve this milestone.

Cognizant Technology Solutions-CTSH reported third quarter revenues increased 3% to $5.0 billion with net income increasing 11% to $582.0 million and EPS increasing 12.5% to $1.17. By segment, Financial Services revenue inched up 0.7% to $1.49 billion, Health Sciences increased a healthy 7.8% to $1.5 billion, Products & Resources rose 5% to $1.2 billion and Communications, Media & Technology declined 3.7% to $816.0 million. As of September 30, 2024. trailing twelve-month backlog stood at $26.2 billion, flat with last year, and representing a book-to-bill ratio of 1.3x. During the quarter, Cognizant Technology signed 6 deals over $100.0 million, bringing the total number of large deals signed to 19 versus such 17 deals during all of 2023. Trailing 12-month voluntary attrition was 14.6%, an improvement from last year’s 16.2%. During the quarter, the company generated $791.0 million in free cash flow, representing a robust 136% of reported net income, and returned $391.0 million to shareholders through dividend payments $149.0 million and share repurchases of $242.0 million at an average cost per share of $73.54. For the nine months ended September 30, Cognizant generated $990.0 million in free cash flow, down 27% from last year due to a tax settlement, with the company returning $901.0 million to shareholders through dividends of $450.0 million and share repurchases of $451.0 million, leaving $1.4 billion remaining under the current buyback authorization. During the quarter, Cognizant completed its $1.3 billion acquisition of Belcan in cash and stock.  Belcan is a leading global supplier of Engineering Research & Development (ER&D) services for the commercial aerospace, defense, space, marine and industrial verticals. Cognizant ended the quarter with $2.1 billion in cash and investments, $1.2 billion in long-term debt and $14.5 billion in shareholders’ equity on its pristine balance sheet. Management tightened its full year guidance with revenue now expected in the $19.7 billion to $19.8 billion range, up 1.6% to 2.1% from last year with adjusted EPS between $4.63 to $4.67, up 2% at the midpoint from last year. The company expects to generate $1.2 billion in free cash flow for the full year, representing a free cash flow conversion rate of 80%.  

Booking Holdings-BKNG reported third quarter revenues rose 9% to $8.0 billion with net income relatively flat at $2.5 billion and EPS up 6.5% to $74.34. On an adjusted basis, EPS traveled 16% higher after excluding one-time tax matters. Gross travel bookings jumped 9% to $43.4 billion during the quarter. Room nights booked increased 8% to nearly 300 million during the quarter primarily due to improvement in European travel. Asia also performed will with the U.S. travel bookings stable, as the company gained market share. In addition, rental car day sales motored 16% higher during the quarter with airline ticket sales soaring 39% higher. During the past nine months, free cash flow increased 28% to $7.2 billion with the company repurchasing $5.3 billion of its stock and paying $885 million in dividends. Demand for travel remains resilient and generative AI has become  a transformational technology and an important tool for trip planning and increasing overall operating efficiencies. Given the better than expected third quarter results, the company raised its outlook for the full year with revenue growth expected to approximate 10% and adjusted EPS growth expected to increase at a high-teens rate.

ADP-ADP reported revenues for the first quarter of fiscal 2025 increased 7% to $4.8 billion with net income increasing 11% to $956.3 million and EPS up 12.5% to $2.34. By business segment, Employer Services revenues increased 7% to $3.26 billion on a 2% increase on U.S. pays per control, a 5% increase in client funds balances to $32.8 billion and an increase in average client funds yield to 3.1% from 2.6% last year.  New business bookings and client retention remained strong. Operating margins for the segment increased 260 basis points to 35.7%, driven by operating leverage and continued client funds interest revenue growth to $253.0 million, up 26% from last year. PEO Services revenues excluding zero-margin pass-throughs also increased 7% to $1.58 billion on a 3% increase in worksite employees to 737,000. New business bookings were strong, and PEO pays per control modestly decelerated. Margins declined by 80 basis points to 14.3%, pressured by higher workers’ compensation program costs and higher zero-margin pass-through revenue growth. During the quarter, ADP generated $765.6 million in free cash flow, up from $287.2 million last year, on higher net income and working capital efficiencies. During the quarter, the company returned $945.2 million to shareholders through $572.6 million in dividend payments and $372.6 million in share repurchases. Subsequent to quarter-end, ADP acquired WorkForce Software, a leading workforce management solutions provider that specializes in supporting large, global enterprises, for about $1.2 billion in cash. This acquisition expands ADP's global offering of workforce management solutions and enables future innovation in the space. During the quarter, ADP issued $1.0 billion aggregate principal amount of 4.450% senior notes due 2034. ADP ended the quarter with $8.3 billion in cash and investments, $3.0 billion in long-term debt and $5.3 billion in shareholders’ equity on its strong balance sheet. Given the strong start to fiscal 2025, ADP now expects revenues to increase 6% to 7%, up from prior guidance of 5% to 6%, with operating margins increasing 30 to 50 basis points, down from previous guidance of a 60 to 80 basis point increase, due to costs associated with the WorkForce Software acquisition and higher interest expense on the ten-year notes. Putting it all together, ADP now expects EPS to increase in the 7% to 9% range, down from original guidance of a 8% to 10% increase.

Private sector employment increased by 233,000 jobs in October, its highest level since July 2023, and annual pay was up 4.6 percent year-over-year, according to the October ADP® National Employment Report™ produced by ADP Research in collaboration with the Stanford Digital Economy Lab ("Stanford Lab"). Manufacturing was the only sector to shed jobs.The ADP National Employment Report is an independent measure and high-frequency view of the private-sector labor market based on actual, anonymized payroll data of more than 25 million U.S. employees. This measure reflects the number of employees on ADP client payrolls (Payroll Employment) to provide a richer understanding of the labor market. ADP's pay measure uniquely captures the earnings of a cohort of almost 10 million employees over a 12-month period. "Even amid hurricane recovery, job growth was strong in October," said Nela Richardson, chief economist, ADP. "As we round out the year, hiring in the U.S. is proving to be robust and broadly resilient."

Tuesday, Oct. 29, 2024

Alphabet-GOOGL reported third quarter revenues increased 15% to $88.3 billion with operating income rising 34% to $28.5 billion, net income jumping 34% to $26.3 billion and EPS up 37% to $2.12.  By segment, Google services revenues increased 13% to $76.5 billion, led by strength across Google Search & other, Google subscriptions, platforms, and devices, and YouTube ads. Google Cloud revenues increased 35% to $11.4 billion led by accelerated growth in Google Cloud Platform (GCP) across AI infrastructure, Generative AI Solutions, and core GCP products. In Search, Alphabet’s new AI features are expanding what people can search for and how they search for it. In Cloud, Alphabet’s AI solutions are helping drive deeper product adoption with existing customers, attract new customers and win larger deals. YouTube’s total ads and subscription revenues surpassed $50 billion over the past four quarters for the first time and YouTube short’s are getting over 70 billion views a day. Free cash flow decreased 22% during the first nine months of the year to $47.9 billion, primarily due to the 80% increase in capital expenditures. Year-to-date, Alphabet returned $51.5 billion to shareholders through share repurchases of $46.6 billion and dividends of $4.9 billion. The company announced a cash dividend of $0.20 per share that will be paid on December 16, 2024. Alphabet ended the quarter with a fortress balance sheet with more than $129 billion in cash and investments, $12.3 billion in long-term debt and $314 billion in shareholders’ equity.

Visa-V reported fiscal fourth quarter revenues charged ahead 12% to $9.6 billion with net income up 14% to %5.3 billion and EPS up 17% to $2.65. Payments volume for the three months ended June 30, 2024, on which fiscal fourth quarter service revenue is recognized, increased 7%. Payments volume for the quarter increased 8% over the prior year, while cross-border volume excluding transactions within Europe, which drives international transaction revenue, increased 13%. Total processed transactions, representing transactions processed by Visa, increased 10% to 61.5 billion. Fiscal fourth quarter service revenue increased 8% to $4.2 billion, Data processing revenue rose 8% to $4.6 billion and International transaction revenue grew 9% to $3.5 billion. Other revenue jumped 30% to $969 million and client incentives increased 6% to $3.6 billion. Visa boasted of 4.6 cards as of quarter-end, up 7% from last year. For the full 2024 fiscal year, net revenue rose 10% to $35.9 billion, driven by growth in payments volume, cross-border volume and processed transactions. Full fiscal year net income jumped 14% to $19.7 billion and EPS increased 17% to $9.73. During fiscal 2024, Visa generated $18.7 billion in free cash flow and returned $20.9 billion to shareholders through dividend payments of $4.2 billion and share repurchases of $16.7 billion, including $5.8 billion repurchased during the fourth quarter at an average cost per share of $270.85. As of September 30, 2024, $13.1 billion remained under Visa’s share repurchase authorization. During September, Visa deposited $1.5 billion into its litigation escrow account, which was previously established under the Company’s U.S. retrospective responsibility plan to insulate the company and its class A stockholders from financial liability for certain litigation cases. This deposit has the same economic effect on earnings per share as repurchasing class A common stock as it reduces each of the as-converted class B-1 common stock and class B-2 common stock share counts at a volume weighted average price of $274.62. Visa’s Board recently approved a 13% increase in the quarterly dividend to $0.59 per share. Visa ended the quarter with $12.0 billion in cash, $5.7 billion in investments, $20.8 billion in long-term debt and $39.1 billion in shareholders’ equity on its strong balance sheet. Looking ahead to fiscal 2025, Visa expects net revenue growth in the high single-digits to low double-digits with EPS growth at the high end of low double-digits.  

Accenture Federal Services-ACN has been awarded a Task Order of up to $1.6 billion to efficiently scale and enhance the U.S. Air Force’s multi-cloud Cloud One environment. The length of the Accenture Federal Services Cloud One Task Order support contract is up to five years and 3 months.

Cognizant-CTSH announced that it has signed a strategic collaboration agreement with Amazon Web Services (AWS), with plans to deliver advanced technology solutions and cloud computing services, focused on enhancing smart manufacturing capabilities for global enterprises across industries.

Corpay-CPAY announced certain preliminary financial results for its third quarter ended September 30, 2024. Revenue is expected to be $1.029 billion as same store sales remained stable sequentially in the third quarter and were essentially flat. Segment results were in line with management’s expectations. Earnings per diluted share is expected to be $3.90 with adjusted earnings per diluted share expected to be $5.00. The company is reiterating full year adjusted earnings per share guidance of $19.00 at the midpoint of its previous outlook. "We’re pleased that our third quarter results finished at the higher end of our revenue and earnings guidance ranges. Our confidence in our fourth quarter outlook is higher today than in August, and calls for low double digit organic revenue growth, and an annualized Cash EPS exit run-rate above $21.00," said Ron Clarke, chairman and chief executive officer, Corpay, Inc.

Friday, Oct. 24, 2024

Gentex-GNTX reported record third quarter sales increased 6% to $608.5 million, with net earnings motoring 17% higher to $122.5 million and EPS increasing 18% to $0.53. The gross margin improved slightly to 33.5% from 33.2%, attributed to higher revenue and cost reductions, although affected by an unfavorable product mix. Operating expenses rose by 13% to $78.3 million, driven mainly by staffing and engineering costs, particularly for R&D related to new product launches. Gentex maintains a cash-rich, debt-free balance sheet with cash and investments approximating 22% of shareholders’ equity. During the quarter, Gentex repurchased 3.2 million shares at an average price of $30.16 per share, with approximately 10.1 million shares remaining authorized for future repurchases. CEO Steve Downing noted that while the deterioration in global light vehicle production resulted in a sales shortfall of $20 million to $25 million in the quarter, Gentex still outperformed its primary markets by 12% despite the weakness in end markets.  Gentex is focused on addressing the slower growth environment through cost controls, expense management and reduced capital expenditures to align with updated revenue forecasts. The timeline to achieve the company’s targeted gross margin of 35% - 36% has been pushed into 2025 due to industry headwinds, but leadership maintains confidence in reaching this goal. Gentex continues to be on pace for record revenues in 2024 and 2025 with 2024 revenues expected in the range of $2.35 billion to $2.40 billion and 2025 revenues expected in the range of $2.45 billion to $2.55 billion.

Thursday, Oct. 23, 2024

Kinsale Capital Group-KNSL reported total revenues increased 33% to $418.1 million with net income and EPS jumping 50% to $114.2 million and $4.90, respectively. Gross written premiums were $448.6 million for the third quarter of 2024, an increase of 18.8% driven by strong submission flow from brokers and a favorable, yet increasingly competitive, pricing environment. Underwriting income of $86.9 million (up 20% from last year), resulted in a combined ratio— the sum of the loss ratio and expense ratio—of 75.7%, up 90 basis points from last year.  The increase in underwriting income was largely due to premium growth and lower relative net commissions offset, in part, by higher catastrophe losses. Loss and expense ratios were 56.1% and 19.6%, respectively, for the third quarter of 2024 compared to 53.9% and 20.9% last year. The loss ratio for the current quarter included 3.8 points, or $13.6 million, of net catastrophe losses, primarily related to Hurricanes Helene, Francine and Beryl and tornadoes in the Midwest. While it is still too early to project exact numbers, management expects losses from Milton to be less than $10.0 million. Net investment income increased 46.4% to $39.6 million, driven by a 28% increase in Kinsale’s “float” to $2.16 billion and the increase in interest rates.  Funds are generally invested conservatively in high quality securities with an average credit quality of "AA-" and the weighted average duration of the fixed-maturity investment portfolio, including cash equivalents, was 3.1 years as of 9/30/2024. Kinsale generated a robust 32.3% annualized return on equity during the first nine months of 2024 and $749.8 million in free cash flow. Kinsale returned $10.5 million to shareholders during the first nine months of 2024 and the company's Board authorized  $100.0 million share repurchase program. Kinsale ended the quarter with $111.7 million in cash, $184.1 million in long-term debt and $1.4 billion in shareholders’ equity on its fortress-like balance sheet. “Our third quarter results reflect the continued execution of our strategy of disciplined underwriting and technology-enabled low costs. Our reported 75.7% combined ratio includes a modest 3.8 points of net catastrophe losses. Looking ahead, we remain confident in our ability to drive profitable growth and deliver long-term value for stockholders,” said Chairman and Chief Executive Officer, Michael P. Kehoe.

ResMed-RMD reported first quarter revenues rose 11% to $1.2 billion with operating income jumping 34% to $387.3 million and net income and EPS each rising a not-so-sleepy 42% to $311.4 million and $2.11, respectively.  These strong results were driven by increased demand for the company’s sleep devices and masks portfolio as well as strong growth across the Residential Care Software business. Operational excellence resulted in strong profit margin expansion with gross margin improving 420 basis points to 58.6% mainly due to manufacturing efficiencies and component cost improvements and an increase in average selling prices. Gross margin is expected to range between 59% to 60% for the full fiscal 2025 year. Free cash flow increased 20% during the first quarter to $308 million with the company paying $78 million in dividends and repurchasing $50 million of its common stock. For the balance of the year, the company expects to repurchase $75 million of its stock each quarter. The company is benefiting from several tailwinds including the GLP1 weight-loss drugs, which are driving more patients to address sleep apnea, along with Samsung and Apple providing sleep apnea detection on their watches (wearables).   

Tractor Supply Company-TSCO reported its third-quarter earnings, revealing a 1.6% increase in revenues to $3.47 billion, while net income fell 5.3% to $241.5 million, and earnings per share (EPS) decreased 3.9% to $2.24. The revenue growth was driven by new store openings. Comparable store sales declined 0.2%, as compared to the third quarter of 2023, driven by a comparable average transaction count increase of 0.3%, offset by a comparable average ticket decrease of 0.5. The decline in comparable store sales reflects continued strength in big-ticket categories, which was offset by decreases in year-round discretionary categories. During the first nine months of the year, free cash flow declined 11% to $365.6 million due to working capital changes, primarily an increase in inventories.  Year-to-date, the company paid $355.2 million in dividends and repurchased $406.7 million of its common stock, including approximately 600,000 shares for $149.8 million in the latest quarter.  In a significant strategic move, Tractor Supply announced the acquisition of Allivet, a leading online pet pharmacy, in an all-cash deal aimed at enhancing its offerings for the 37 million Neighbor's Club members, particularly benefiting the 75% who own pets. The acquisition is expected to close in the fiscal first quarter of 2025.  Tractor Supply updated its full-year 2024 guidance, now forecasting EPS between $10.10 and $10.40 and sales ranging from $14.85 billion to $15 billion, both slightly higher than the previous outlook.

Texas Roadhouse-TXRH reported third quarter revenue increased a meaty 13.5% to $1.27 billion with net income and EPS blooming 32% to $84.4 million and $1.26, respectively. Comparable store sales increased 8.5% at company restaurants and 7.2% at domestic franchise restaurants. Average weekly sales at company restaurants increased 7.6% to $149,176 of which $18,914 were to-go sales, up 10.9% from last year.  Restaurant margin, as a percentage of restaurant and other sales, increased to 16.0% from 14.6% in the prior year, driven primarily by higher sales. The benefit of a higher average guest check and improved labor productivity more than offset wage and other labor inflation of 4.7% and commodity inflation of 1.3%. Seven company restaurants and three franchise restaurants were opened during the quarter. For the first nine months of the year, Texas Roadhouse generated $269.6 million in free cash flow, up from $146.8 million last year owing to the jump in net income and working capital efficiencies. Texas Roadhouse returned $166.9 million to shareholders during the first nine months of 2024 through dividend payments of $122.2 million and share repurchases of $44.7 million. Texas Roadhouse ended the quarter with $189.2 million in cash, $802.6 million in operating lease obligations and $1.3 billion in shareholders’ equity on its beefy balance sheet. Texas Roadhouse recently celebrated its 20^th anniversary as a public company and its growth from one brand to three, 175 restaurants to 775 and 10,000 employees to 100,000. Comparable restaurant sales at company restaurants for the first four weeks of the fourth quarter increased 8.3%. In addition, Texas Roadhouse implemented a menu price increase of approximately 0.9% in late September. For the fourth quarter, management expects commodity cost inflation of less than 1%, wage, other labor inflation of about 4.5%, positive comparable restaurant sales growth including the benefit of menu pricing actions, store week growth of about 7.5%, including a benefit of 2% from the 53rd week. Total capital expenditures of $360 million to $370 million are expected for the full year. Management provided initial expectations for 2025 with positive comparable restaurant sales growth including the benefit of 2024 menu pricing actions, store week growth of approximately 5%, including a benefit of 2% from the planned franchise acquisition of 13 restaurants during the first quarter, commodity cost inflation of 2% to 3%, wage and other labor inflation of 4% to 5%. Total capital expenditures of approximately $400 million will enable the company to continue opening new restaurants, acquire 13 franchise restaurants, upgrading current restaurants and completing its digital kitchen conversion for all restaurants. Jerry Morgan, Chief Executive Officer of Texas Roadhouse, Inc. commented, “We are extremely pleased in such a competitive environment to report another quarter of continued traffic growth at each of our brands. This is a credit to the hard work of our operators who create an environment where Roadies want to work and guests want to dine.”

UPS-UPS reported third quarter revenues rose 6% to $22.2 billion with net income and EPS each jumping 37% to $1.5 billion and $1.80, respectively, as the company delivered solid growth after a challenging 18-month period. These results included an after-tax net benefit of $36 million or $.04 per share from the divestiture of the Coyote Logistics business. Despite a weak macro environment in the U.S. Domestic segment due to slowing online sales and lower industrial production, UPS’s revenues increased 5.8% to $14.5 billion, driven by a 6.5% increase in average daily volume, which is the highest volume growth in three years. The commercial business, notably retailers, helped drive the volume growth along with improved productivity. The International Segment revenues increased 3.4% to $4.4 billion driven primarily by a 2.5% increase in revenue per piece with volume growth trends expected to continue to improve. UPS is enhancing its international delivery to include Saturday deliveries at no extra cost to customers. The Supply Chains Solutions segment posted 8% growth during the quarter to $3.4 billion due primarily to growth in air and ocean forwarding and the continued onboarding of the new USPS air cargo contract. UPS also continues to expand its complex healthcare logistics business with $2.5 billion in healthcare revenue. UPS is preparing for a successful holiday season with the peak season compressed to just 17 days between Thanksgiving and Christmas. This tight shopping schedule may result in more shoppers going into stores rather than shopping online to complete their holiday shopping. Nevertheless, UPS expects to deliver two million more packages than last year.  Free cash flow for the first nine months of the year declined 15% to $4.0 billion with UPS paying out $4.0 billion in dividends and completing its $500 million share repurchase program for the year. UPS revised its outlook for the full 2024 year to reflect the disposition of Coyote Logistics and the outlook for the fourth quarter with revenues now expected to approximate $91.1 billion with the company’s adjusted operating margin lifted to 9.6%. For the full year, UPS expects to generate $5.1 billion in free cash flow, after spending $4.0 billion on capital expenditures. For the full year, UPS expects to pay $5.4 billion in dividends.

Molina Healthcare-MOH reported third quarter revenue increased 21% to $10.3 billion with net income jumping 33% to $326.0 million and EPS popping 34% to $5.65. Excluding litigation, one-time termination benefits and other non-recurring items, adjusted EPS increased 19% to $6.01. Premium revenue increased 18% to $9.7 billion, reflecting new contract wins, acquisitions and growth in Molina’s current footprint, partially offset by Medicaid redeterminations. The Consolidated Medical Care Ratio (MCR) for the third quarter was 89.2% and reflects continued focus on managing medical costs. Medicaid MCR was 90.5% which included 50 basis points due to a premium California rate reduction retroactive to the beginning of 2024 and about 20 basis points from “new store” Medicaid plans. Excluding the rate reduction and new stores, Medicaid MCR was about 89.8%, higher than the company’s long-term expectations due to redetermination-related acuity shifts and higher utilization for long-term services, pharmacy and behavioral health services. The Medicare MRO was 89.6%, which reflects higher utilization, partially offset by benefit adjustments. The Marketplace MCR was a better-than-expected 73.0%, reflecting strong operating performance. Molina Heathcare’s adjusted general and administrative ratio for the quarter was 6.4%, reflecting disciplined cost management, one-time vendor credits and operating leverage. Operating cash flow for the nine months was $868 million, down 63% from last year, owing to the net impact of timing differences in government receivables and payables, Medicare and Medicaid prepayments, risk corridor settlement activity and timing differences in receipts and payments of provider payables. The company generated $779.0 million in free cash flow year-to-date and returned $500.0 million to shareholders through share repurchases at an average cost per share of $333.33. Molina Healthcare ended the quarter with $9.2 billion in cash and investments, $2.3 billion in long-term debt and $4.8 billion in shareholders’ equity on its healthy balance sheet. Looking ahead to the full year, premium revenue for the full year is unchanged and expected to be about $38 billion, up 17% from last year. Adjusted EPS for the full year is expected to be at least $23.50, representing 13% growth. Continued strong performance due to Marketplace, operating leverage and higher net investment income are expected to offset the higher-than-expected trend in Medicaid and Medicare in the second half of the year. “We are pleased with our performance in the quarter and, in a challenging environment, continued to execute on the fundamentals of the business,” said Joseph Zubretsky, President and CEO. “Our results reflect continued operating discipline despite the unprecedented short-term dynamics caused by redeterminations. We believe all of our businesses are well positioned for sustainable profitable growth.”

Wednesday, Oct. 23, 2024

General Dynamics-GD reported third quarter revenue increased 10.4% to $11.7 billion with net income up 11.2% to $903.0 million and EPS up 10.2% to $3.34. Quarter-end backlog stood at $92.6 billion and resulted in a book-to-bill ratio of 1.1 with an estimated contract value of $137.6 billion. By business segment, Aerospace sales increased 22.1% to $2.48 billion with profit margins of 12.3%, down 90 basis points from last year, on supply chain and other challenges. GD had expected to deliver 15 G700 aircraft during the quarter, but due to a confluence of factors including delays in engine certification, longer supplemental certification for highly customized interiors, component rework due to supply chain issues and a four-day work stoppage in the wake of hurricane Helene, only 4 G700s were delivered during the third quarter. Management now expects to deliver 27 G700s during the fourth quarter including 5 in October, 9 in November and 13 in December. It now expects to deliver 42 G700s in 2024 rather than 50-52 originally expected. Given the delivery shift into the fourth quarter and 2025, management expects a significant improvement in aerospace segment operating margins. Marine Systems revenue increased 20% to $3.6 billion with operating margins of 7.2%, up 20 basis points from last year. Combat Systems revenue were flat at $2.2 billion with operating margins of 14.7%, up 120 basis points from last year. Technologies revenue increased 2% to $3.4 billion with 9.7% operating margins. During the third quarter, General Dynamics generated $1.2 billion in free cash flow, representing a robust 130% of net income while returning $434.0 million to shareholders through dividend payments of $390.0 million and share repurchases of $44.0 million at an average cost of $293.33 per share. Year-to-date, General Dynamics generated $1.39 billion in free cash flow, down 52% from last year on working capital changes. General Dynamics ended the quarter with $2.1 billion in cash, $7.3 billion in long-term debt and $23.0 billion of shareholders’ equity on its well-armored balance sheet. For 2024, management expects sales of $48.0 billion, up 15% from last year with operating margins of 10.3%, up 30 basis points from 2023, and EPS of $14.00, up 16% from 2023. Management expects to fall short of its goal to convert at least 100% of net income into free cash flow during 2024.

PulteGroup-PHM reported third-quarter revenues increased 12% to $4.5 billion, with net income up 9% to $698 million and EPS improving 16% to $3.38. The Company's financial services operations generated pre-tax income of $55 million, a significant increase of 90% over last year's pre-tax income of $29 million. This increase reflects higher volumes in the Company’s homebuilding operations and a more favorable operating environment. Home sale revenues for the third quarter also rose 12% to $4.3 billion, driven by a 12% increase in closings to 7,924 homes. The average selling price of homes closed during the period was $548,000, effectively unchanged from the prior year. Net new orders for the quarter totaled 7,031 homes, consistent with the 7,065 homes reported in the prior year. The value of these new orders was $3.9 billion, representing a 3% increase year-over-year. The average community count for the third quarter was 957, up 4% from the previous year. At the end of the third quarter, the Company’s backlog stood at 12,089 homes, valued at $7.7 billion. The mortgage capture rate for the quarter was 87%, an increase from 84% last year.  During the past nine months, Pulte’s free cash flow declined 45% to $1.0 billion. Through the first nine months of 2024, Pulte returned $1 billion to shareholders through share repurchases and dividends. This is an increase of $200 million or 25% from last year in terms of funds allocated back to investors. The Company concluded the quarter with $1.5 billion in cash and a debt-to-capital ratio of 12.3%. In 2024, 30-year mortgages have fluctuated throughout the year, with buyer confidence ebbing and flowing in sympathy. Housing affordability remains a tough hurdle to get over for many potential home buyers.  October showed the highest web traffic, foot traffic, and lead volume of the year, but the recent rise in interest rates has led to a more typical seasonal selling pattern and incentives have remained elevated consequently. Between rate volatility, the impact of hurricanes, and the upcoming presidential election, Pulte believes the upcoming spring selling season will offer the best assessment of fundamental housing demand.

Starbucks-SBUX reported preliminary financial results for its 13-week fiscal fourth quarter and 52-week fiscal year ended September 29, 2024. For the fourth quarter of fiscal year 2024, global comparable store sales declined 7%, and consolidated net revenues declined 3% to $9.1 billion, or a 3% decline on a constant currency basis. GAAP earnings per share is $0.80, down 25% over prior year. The company’s results were primarily driven by softness in North America’s revenues in the quarter, specifically a 6% decline in U.S. comparable store sales, driven by a 10% decline in comparable transactions, partially offset by a 4% increase in average ticket. The accelerated investments in an expanded range of product offerings coupled with more frequent in-app promotions and integrated marketing to entice frequency across the customer base did not improve customer behaviors, resulting in lower-than-expected performance. Additionally, China comparable store sales declined 14%, driven by an 8% decline in average ticket compounded by a 6% decline in comparable transactions, weighed down by intensified competition and a soft macro environment that impacted consumer spending. For the full fiscal year 2024, global comparable store sales declined 2%, and consolidated net revenues increased 1% to $36.2 billion, also a 1% increase on a constant currency basis. GAAP earnings per share is $3.31, down 8% over prior year. The lower-than-expected performance for the full fiscal year was a result of a pronounced traffic decline, including a cautious consumer environment, as well as the macro and competitive environment in China pressuring results further. Given the company’s CEO transition coupled with the current state of the business, guidance will be suspended for the full fiscal year 2025. This will allow ample opportunity to complete an assessment of the business and solidify key strategies, while stabilizing and positioning the business for long-term growth which “will take time.” With a strategic reset underway, the company remains committed to creating shareholder value and announced that its Board of Directors approved a 7% increase in the quarterly cash dividend from $0.57 to $0.61 per share.  The dividend increase demonstrates the company’s confidence in the long-term growth of the business.

Roche Holdings-RHHBY reported Group sales grew by 6% at constant exchange rates (CER) (2% in CHF) in the first nine months of 2024, driven by the high demand for both their medicines and diagnostics.  Excluding COVID-19-related products, sales increased by 8%.  In the third quarter, Group sales rose by 9% (6% in CHF), as they did in the second quarter.  Pharmaceuticals Division sales rose by 7% in the first nine months; the strong growth of 9% in the base business was driven by continued high demand for the company’s newer medicines to treat severe diseases.  Vabysmo (serious eye diseases), Phesgo (breast cancer) and Ocrevus (multiple sclerosis) were major growth drivers.  Diagnostics Division sales increased by 5% in the first nine months, while the base business grew by 8% due to higher demand for immunodiagnostic, pathology and molecular solutions.  Roche confirmed its outlook for 2024 and  expects an increase in Group sales in the mid single digit range (CER). Core earnings per share are targeted to grow in the high single digit range (CER), excluding the impact from the resolution of tax disputes in 2023. Roche expects to further increase its dividend in Swiss francs.

Tuesday, Oct. 22, 2024

Canadian National Railway-CNI reported revenues chugged ahead 3.1% to C$4.11 billion with net income and EPS slipping 2% to C$1.1 billion and C$1.72, respectively.  Car Velocity and Through Dwell, the average time a car resides within terminal boundaries expressed in hours, both remained flat at 208 miles/day and 7.1 hours, respectively, despite a network shutdown in July due to the Jasper wildfire and labor disputes that briefly stopped train service in August. Both metrics rebounded in September, posting the best monthly performance since 2018, demonstrating CNI’s operating resilience and ability to quickly align resources to match demand. Carloads dipped 1.7% to 1.3 million while freight revenue per revenue ton mile (RTM) increased 1% to C$6.94 and freight revenue per carload increased 4.4% to C$3.0 million. By end-market, revenue from petroleum and chemicals increased 11% to C$839.0 million and grain and fertilizers increased 9% to C$786.0 million. These gains offset single-digit revenue declines from metals and minerals, coal and automotive, reflecting a weaker than expected macro environment. During the first nine months of 2024, Canadian National Railway generated C$2.1 billion in free cash flow on a 15% increase in capital expenditures to improve the safety, efficiency and integrity of CNI’s network. At the same time, CNI returned C$4.1 billion to shareholders through dividends of C$1.6 billion and share repurchases of C$2.45 billion. Management affirmed its full year guidance with adjusted EPS growth in the low single-digit range assuming RTM growth at the low end of the 3% - 5% range. Capital expenditures are on track with guidance and expected at C$3.5 billion for the year. Adjusted return on invested capital is expected in the 13% to 15% range and dividend growth is set at 7%.

RTX-RTX reported third quarter sales of $20.1 billion, up 49% from last year, with net income of $1.47 billion, up from last year’s $984 million loss, and EPS of $1.09, up from last year’s $0.68 loss.    Adjusted sales increased 6% (or 8% organically when excluding the divestiture of the Cybersecurity business) from last year which included a charge related to the Pratt powder metal matter that reduced sales by $5.4 billion, net income by $2.2 billion and EPS by $1.53. Pratt continues to work through customer settlements with agreements made with 28 customers representing 75% of the total. Pratt expects inspections and remedies to ramp during the fourth quarter. RTX ended the quarter with record backlog of $221.0 billion and booked over $36.0 billion in new orders during the quarter resulting in a book-to-bill ratio of 1.8 to 1. By segment, Collins Aerospace sales increased 6% to $7.1 billion with adjusted operating margins of 15.5%, up slightly from last year. Defense sales accelerated by 14%, Commercial aftermarket sales increased 9% and Commercial OE sales declined by 8% in the wake of the ongoing workers strike at Boeing. Pratt & Whitney adjusted sales increased 14% to $7.2 billion with adjusted operating margins expanding 170 basis points to 8.2%, owing to higher commercial aftermarket (up 13%) and military sales (up 20%). Raytheon segment sales dipped 1% to $6.4 billion with adjusted operating margins expanding by 160 basis points to 10.4%. Excluding the Cybersecurity divestiture, Raytheon adjusted sales increased 5%. During the third quarter, RTX generated $2.5 billion in operating cash flow and $2.0 billion in free cash flow, representing a robust 134% of reported earnings. During the first nine months of 2024, RTX generated $4.04 billion in free cash flow with the company returning $3.8 billion to shareholders through dividends of $2.4 billion and $394.0 million in share repurchases on the completion of its accelerated share repurchase program. The company is on track to return $36.0 billion to $37.0 billion to shareholders since the 2020 merger of United Technologies and Raytheon through 2025. RTX ended the quarter with $6.7 billion in cash, $38.8 billion in long-term debt and $62.8 billion in shareholders’ equity on its solid balance sheet. Given robust end market demand and strong year-to-date results, RTX raised its guidance for the full year with organic sales growth of 8% to 9% to $79.25 billion to $79.75 billion, from previous guidance of $78.75 billion to $79.5 billion, with EPS expected in the $5.50 to $5.58 range, up from prior guidance of $5.35 to $5.45, and operating cash flow $4.7 billion. RTX expects to disburse $1.0 billion during the fourth quarter to settle powdered metal claims bringing the total this year to $1.25 billion.

Genuine Parts-GPC reported third quarter sales increased 3% to $5.97 billion with net income and EPS each declining 35% to $226.6 million and $1.62, respectively. These results came in below expectations primarily due to continued weakness in market conditions in Europe and in the company’s industrial business. Industrial production as measured by the Purchasing Managers Index (PMI), has experienced the longest period of contraction in over 33 years. The company was also adversely impacted during the quarter by the impact of the CrowdStrike outage and lost revenues from the hurricanes. During the first nine months of the year, free cash flow dipped 3% to $710 million with the company making $954 million in strategic acquisitions, paying $411 million in dividends and repurchasing $112.5 million of its stock thanks to the company’s ongoing financial strength and ample liquidity.  With the external environment expected to remain challenging for the balance of 2024, Genuine Parts revised its financial outlook lower. Total sales growth is expected to range from 1% to 2% compared to the previous outlook of 1% to 3% growth. Automotive sales are expected to improve to 3% to 4% growth with Industrial sales weakening to a decline of 1% to 2%. Earnings per share were also revised lower to a range of $6.60 to $6.80 from the previous outlook of $8.55 to $8.75. The company reaffirmed is cash flow from operations in the range of $1.3 billion to $1.5 billion which will enable Genuine Parts to continue to increase its dividend as it has for 68 consecutive years through all types of economic climates. Management remains confident that when the manufacturing economy improves, the company will be well positioned to gain profitable market share as it continues to invest in the business for the long term.

Monday, Oct. 21, 2024

Ross Stores-ROST recently opened 43 Ross Dress for Less^® ("Ross") and four dd's DISCOUNTS^® stores across 22 different states in September and October. These new locations complete the company's store growth plans for fiscal 2024, with the addition of 89 new locations throughout the year. Looking ahead, Ross remains confident in its expansion plans and sees plenty of opportunity to grow to at least 2,900 Ross Dress for Less and 700 dd's DISCOUNTS locations over time. Together, Ross Dress for Less and dd's DISCOUNTS currently operate a total of 2,192 locations in 43 states, the District of Columbia, and Guam.

Thursday, Oct. 17, 2024

FactSet-FDS reaffirmed its fiscal 2025 financial outlook with revenues expected to increase 4% to 6% to a range of $2,285 million to $2,305 million with EPS in the range of $15.10-$15.70.

Raytheon Company, a wholly-owned subsidiary of RTX Corporation-RTX, entered into a deferred prosecution agreement with the Department of Justice to resolve previously disclosed criminal and civil government investigations into payments made by Raytheon in connection with certain Middle East contracts since 2012. Raytheon has agreed to pay penalties of $959 million related to the matter.

Wednesday, Oct. 16, 2024

Ulta Beauty-ULTA reaffirms its guidance for fiscal Jan. 2025 and sees EPS in the range of $22.60-23.50.  Ulta Beauty has long returned excess capital to shareholders through an active share repurchase program. Since launching its stock repurchase program in 2014, Ulta Beauty has returned more than $6 billion to shareholders, while continuing to make strategic growth investments. On October 15, 2024, the Company's board of directors approved a new share repurchase authorization of $3.0 billion. Ulta Beauty's new long-term financial targets for 2026 and beyond are 4% to 6% net sales growth, mid-single-digit operating profit growth, while targeting operating margins around 12% of net sales, and low double-digit diluted EPS growth. Ulta Beauty's disciplined capital allocation priorities will continue to emphasize efficiently funding ongoing operations, reinvesting in the business to drive growth, with capital expenditures remaining between 4% and 5% of net sales, and returning excess cash to shareholders through share repurchases.

Tuesday, Oct. 15, 2024

UnitedHealth-UNH reported third quarter revenues rose a healthy 9% to $100.8 billion with net income and EPS each up 4% to $6.1 billion and $6.51, respectively. These solid results reflected broad-based growth in the number of people served by Optum and UnitedHealthcare despite the impact of the cyberattack at Change Healthcare. The consumers served by UnitedHealthcare’s commercial domestic offerings grew 2.4 million year- to- date.  Adjusted scripts at Optum grew to nearly 410 million compared to 380 million last year thanks to new customers served. The third quarter medical care ratio was 85.2% compared to 82.3% last year due in part to funding reductions by CMS Medicare and business and member mix. The third quarter operating cost ratio was 13.2% compared to 13.3% in the prior year period reflecting continued strong operation cost efficiency.  Return on equity of 26.3% in the quarter reflected the company’s consistent, broad-based earnings and efficient capital structure. The company’s free cash flow declined 40% during the first nine months to $19.2 billion primarily due to the lower earnings. UnitedHealth paid $5.6 billion in dividends and repurchased $4.0 billion of its common stock during the last nine months while also providing $8.9 billion in loans to care providers related to the cyberattack. For the full year, UnitedHealth reaffirmed its earnings outlook of $15.50-$15.75, which reflects the disposition of the Brazil operations and the $.75 per share impact of business disruption costs related to the cyberattack. The company’s adjusted net earning outlook was trimmed by $.25 per share to $27.50 to $27.75 with a preliminary conservative EPS outlook of $30 per share for fiscal 2025. The company restated its long-term growth objective of 13%-16% annually after the 2025 transition year.

LVMH Moët Hennessy Louis Vuitton-LVMUY recorded revenue of €60.8 billion in the first nine months of 2024, a decline of 2% from the prior year period. Europe and the United States posted slight growth on a constant currency basis; Japan continued to achieve double-digit revenue growth; the rest of Asia reflected in particular the strong growth in spending by Chinese customers in Europe and Japan. In the third quarter, the slight decline in revenue mainly arose from lower growth seen in Japan, essentially due to the stronger yen. The Wines & Spirits business group saw a revenue decline (-8% organic) in the first nine months of 2024. The Fashion & Leather Goods business group, which was broadly stable on an organic basis over the first nine months of 2024, showed good resilience and gained market share. The Perfumes & Cosmetics business group achieved organic revenue growth of 5% in the first nine months of 2024. The Watches & Jewelry business group saw a slight decline on an organic basis in the first nine months of 2024. In Selective Retailing, organic revenue growth was 6% in the first nine months of 2024. Sephora performed remarkably well and continued to gain market share in North America, Europe and the Middle East.  Despite an uncertain economic and geopolitical environment, the Group remains confident and will draw on its powerful brands and the talent of its teams to reinforce its global leadership position in luxury goods once again in 2024. 

Roche Holdings-RHHBY reported that positive two-year date demonstrates the majority of children with spinal muscular atrophy treated with Genentech’s Evrysdi are able to sit, stand and walk independently.

Johnson & Johnson-JNJ reported third quarter revenues increased 5.2% (6.3% operationally) to $22.5 billion with net income dropping 37.5% to $2.7 billion and EPS falling 34.3% to $1.11. Excluding talc litigation charges, restructuring and other special items, adjusted net income declined 13.3% to $5.9 billion and EPS fell 9% to $2.42. By business segment, Innovative Medicine sales increased 5%, or 6.3% operationally, to $14.6 billion driven by oncology (up 20.5%) and pulmonary hypertension (up 17%) with 11 assets across the portfolio delivering double-digit growth. MedTech sales increased 5.8% (6.4% operationally) to $7.89 billion. Cardiovascular and electrophysiology delivered double-digit growth of 10.7%, driven by global procedure growth and new product uptake. Abiomed sales increased 16.3% with strong growth in all regions and continued adoption of Impella 5.5 and Impella RP technology. During the quarter, Johnson & Johnson generated about $14.0 billion in free cash flow and returned $3.0 billion to shareholders through dividend payments while also investing $5.0 billion in research & development and $18.0 billion in strategic inorganic growth opportunities. The company ended the quarter with $20.0 billion in cash and marketable securities and $36.0 billion in long-term debt on its AAA-rated balance sheet. Management updated its full-year guidance with adjusted operational sales expected in the 5.7% to 6.2% range to $89.4 billion to $89.8 billion, up from previous growth guidance of 5.5% to 6.0%. Adjusted EPS are now expected in the range of $9.88 to $9.98, or down 0.4% to up 0.6% from 2023.   

Friday, Oct. 11, 2024

Fastenal-FAST reported third quarter net sales increased 3.5% to $1.9 billion with net earnings increasing 1% to $298 million and EPS remained flat at $0.52. An increase in unit sales during the quarter was primarily due to growth with larger customers and Onsite locations opened in the last two years. The company’s operating margin remained stable at 20%. Year-to-date, Fastenal converted 99.7% of earnings into operating cash. Free cash flow decreased 23% for the first nine months of 2024 to $724.2 million, primarily attributable to inventory, which swung to a use of cash versus a source of cash. The company paid $669.9 million in dividends, an 11.7% increase over the prior year period. For the full year, Fastenal expects capital expenditures to be in the range of $235 million to $255 million, an increase from $160.6 million in 2023. The expected growth on a year-to-year basis is based on spending to complete their Utah distribution center, investments in picking technology and equipment in their hubs and branches, higher outlays for FMI hardware reflecting higher targeted signings and a mix of more expensive machines, and an increase in spending on IT.

Berkshire Hathaway-BRKB further trimmed its holdings in Bank of America last week. After three months of selling, Berkshire netted approximately $10 billion from its sales and now owns less than 10% of the bank so any further sales of the bank will only need to be disclosed on a quarterly basis.

Cognizant-CTSH and Palo Alto Networks are partnering to deliver AI-driven cybersecurity capabilities and services for enterprises across industries. The partnership combines Cognizant's longstanding track record of providing cybersecurity services with Palo Alto Networks industry-leading, AI-powered platforms to drive better security outcomes.

Thursday, Oct. 10, 2024

Later this month, Apple TV+-AAPL will be available via Amazon’s–AMZN Prime Video in the U.S. as an add-on subscription for $9.99 per month. Prime members who subscribe to Apple TV+ via Prime Video will have access to premium entertainment including Severance, Slow Horses, The Morning Show, Presumed Innocent, Shrinking, Hijack, Loot, Palm Royale, as well as global hit films such as Wolfs, The Instigators and more, plus Major League Soccer and Major League Baseball sporting events.

Amazon-AMZN announced that Prime Big Deal Days was its biggest October shopping event ever. More Prime members shopped compared to last year and took advantage of early holiday deals, marking the kickoff to the holiday season with higher sales and more items sold during the two-day event than any previous October shopping event. Globally, Prime members saved more than $1 billion across millions of deals, including on seasonal merchandise and gifts.

Tuesday, Oct. 8, 2024

Pepsico-PEP reported third quarter revenue dipped 0.6% (up 1% organically) to $23.3 billion with net income and EPS down 5% to $2.9 billion and $2.13, respectively. Pepsico’s third quarter results were negatively impacted by cumulative impacts of inflationary pressures and higher borrowing costs that continue to impact consumers budgets and spending patterns. By reporting segment, Frito-Lay North America sales dipped 1% to $5.9 billion, Quaker Foods sales fell 13% to $648 million (reflecting the continued impact of product recalls), Pepsico North America sales fell flat at $7.2 billion, Latin America sales declined 5% to $2.9 billion, Europe sales bubbled up 7% to $3.9 billion, AMEA sales declined 4% to $1.6 billion and Asia Pacific sales dropped 2% to $1.2 billion.  Operating profit declined 50 basis points to 16.6% on continued technology investments to improve productivity and an increase in advertising and marketing spend to elevate Pepsico’s brands. For the nine months ended 9/7/2024, Pepsico’s free cash flow decline 18.5% to $3.7 billion, representing 42% of reported revenue, with the company returning $6.1 billion to shareholders through dividends of $5.4 billion and share repurchases of $760 million. Pepsico ended the third quarter with $8.1 billion in cash and investments, $38.5 billion in long-term debt and $19.6 billion in shareholders equity. Given the subdued performance of Pepsico’s categories and year-to-date results, management now expects to deliver a low-single-digit increase in organic revenue versus prior guidance of about 4% organic growth. Given its strong pipeline of productivity initiatives and focus on profitable growth, management expects to deliver at least 8% core constant currency EPS growth in 2024. Pepsico continues to expect total 2024 cash returns to shareholders of about $8.2 billion through $7.2 billion in dividends and $1.0 billion in share repurchases. According to Ramon Laguarta, Chairman and CEO, this growth “is a testament to the long-term resilience of our categories and businesses and their ability to deliver profitable growth. And we continue to believe we have the right people, strategies and advantaged capabilities to succeed in the marketplace and make PepsiCo an ‘Even Faster, Even Stronger, and Even Better’ organization in the future.”

Friday, Oct. 4, 2024

Hyundai Motor and Waymo, Google's-GOOGL Self-Driving Car Project, announced they have entered into a multi-year, strategic partnership. In the first phase of this partnership, the companies will integrate Waymo's sixth generation fully autonomous technology -- the Waymo Driver -- into Hyundai's all-electric IONIQ 5 SUV, which will be added to the Waymo One fleet over time.

In other news, Google has steadily improved its NotebookLM podcast generation feature, dubbing it a personal AI research assistant with Google’s most advanced AI model, Gemini 1.5 Pro, powering a dialogue between two hosts. The service, which is still free, lets users upload up to 50 sources ranging from website links and PDF documents to MP3 audio files and YouTube videos. After uploading sources, users can ask the model questions grounded by the information in those sources.

Meta-META announced it has built a new AI model called Movie Gen that can create realistic-seeming video and audio clips in response to user prompts. Movie Gen also can generate background music and sound effects synced to the content of the videos.

Thursday, Oct. 3, 2024

Accenture-ACN and NVIDIA announced an expanded partnership, including Accenture’s formation of a new NVIDIA Business Group, to help the world’s enterprises rapidly scale their AI adoption. The new Accenture NVIDIA Business Group will accelerate momentum with generative AI and help clients scale agentic AI systems—the next frontier of gen AI—to drive new levels of productivity and growth. This significant investment will be supported by over 30,000 professionals receiving training globally to help clients reinvent processes and scale enterprise AI adoption. An early focus for the partnership is on using generative AI agents to automate tasks, including in marketing and factory automation.

Microsoft-MSFT said it would invest 4.3 billion euros ($4.75 billion) over the next two years to strengthen artificial intelligence (AI) infrastructure and cloud capacity in Italy.

To meet the rapidly growing demand for its artificial intelligence (AI) and cloud services in Malaysia, Oracle-ORCL announced plans to invest more than $6.5 billion to open a public cloud region in the country.

Tuesday, Oct. 1, 2024

Nike-NKE reported fiscal first quarter revenues declined 10% to $11.6 billion, reflecting declines across all geographies, with net income running 28% lower to $1.1 billion and EPS stumbling 26% to $.70. Gross margin increased 120 basis points to 45.4% thanks to lower product costs, lower warehousing and logistics costs and benefits from strategic pricing actions. Inventories were $8.3 billion down 5% compared to the prior year, reflecting product mix shifts and lower product input costs. Cash increased $1.5 billion from last year to $10.3 billion at the end of the quarter partially offset by dividends of $558 million, up 6% from the prior year, and share repurchases of $1.2 billion. Nike announced Elliott Hill will return to the company on Oct. 14, 2024, as CEO to lead Nike’s next stage of growth as the company accelerates its pace of newness and innovation.  Given the CEO transition, the company has withdrawn its full year guidance and postponed its Investor Day and will now provide guidance on a quarterly basis. The company expects second quarter revenues to decline 8%-10% with gross margin declining 150 basis points due to increased promotional activity given elevated inventory in the marketplace. Nike has yet to turn the corner, and it will take time to expand its market share.

Johnson & Johnson-JNJ announced an investment of more than $2 billion to build a state-of-the-art biologics manufacturing facility in Wilson, North Carolina. The new facility will expand production of the company's portfolio and pipeline of innovative biologics in support of Johnson & Johnson's broader plan to advance more than 70 novel therapy and product expansion filings and launches by the end of the decade. Construction is anticipated to begin in the first half of 2025.

Paychex-PAYX reported sustained growth in revenues and earnings in the fiscal first quarter with revenues up 3% to $1.3 billion and net income and EPS each up 2% to $427.4 million and $1.18, respectively. Small and mid-sized businesses remain resilient as the U.S. labor market gradually returns to pre-pandemic levels and wage inflation continues to moderate. Paychex is launching several new digital and artificial intelligence (AI) driven solutions to help clients succeed in attracting, retaining and engaging their workforce. The company’s cash flow generation remains strong despite free cash flow dropping 22% during the quarter to $510.5 million due to working capital changes. During the quarter, the company paid $353.4 million in dividends and repurchased 828,855 shares of its common stock for $104.0 million at an average cost of $125.47 per share.  Paychex reaffirmed its fiscal year 2025 outlook with total revenues expected to grow 4.0% to 5.5% and adjusted EPS expected to grow 5% to 7% despite expectations for lower interest on funds held for client and other income due to declining interest rates.

Berkshire Hathaway-BRKB will take full ownership of Berkshire Hathaway Energy, after the unit agreed to pay $2.37 billion for the 8% stake owned by the family of the late Walter Scott, former board member of Berkshire Hathaway.  Berkshire Hathaway Energy will acquire 4.42 million shares of its voting common stock and a $100 million bond maturing in 2057, in exchange for the $2.37 billion in cash and a $600 million, one-year note. Scott's family will also receive about 1.6 million Berkshire Class B shares, worth about $737 million. Berkshire Hathaway Energy expects to complete the transactions in the current quarter.

PepsiCo-PEP announced that it has entered into a definitive agreement to acquire Garza Food Ventures LLC, dba Siete Foods ("Siete") for $1.2 billion. Founded in 2014, Siete produces authentic heritage-inspired tortillas, salsas, seasonings, sauces, cookies, snacks and more. Siete's products can be found in grocery stores, club stores, and organic food retailers primarily across the U.S. The transaction is expected to close in the first half of 2025. 

Pratt & Whitney, an RTX-RTX business, has been awarded a contract valued up to $1.3 billion to continue work on the F135 Engine Core Upgrade (ECU), which will deliver enhanced durability to the engine. The ECU also provides power and cooling for Block 4 and beyond capabilities for all three variants of the F-35 global enterprise. The F135 program is a major driver of economic growth in the states of Connecticut, Maine, and around the country; supporting more than 57,000 jobs across 43 states.

Monday, Sept. 30, 2024

ResMed-RMD unveiled its 2030 Strategy to drive growth, profitability, and shareholder returns at an Investor Day in New York City. ResMed also announced its five-year revenue and earnings growth outlook, reflecting ResMed’s plans to accelerate product and technology innovation, operational excellence, commercial execution, and financial strength. ResMed’s new five-year financial outlook includes high-single-digit revenue growth and earnings growth higher than revenue growth. Driven by the new strategy, ResMed expects to help more than 500 million people worldwide achieve their full health potential in 2030. Brett Sandercock, Chief Financial Officer of ResMed, said, “Our financial strength and low capital requirements create robust cash generation, and our capital allocation strategy will continue to prioritize innovation – through reinvestment in our core business, a disciplined and strategic approach to M&A, and a balanced capital return policy. We are confident this approach will deliver significant value to shareholders as we execute our 2030 Strategy.”

Johnson & Johnson-JNJ files for U.S. FDA approval of DARZALEX FASPRO®-based quadruplet regimen for newly diagnosed multiple myeloma patients for whom transplant is not planned.

Mastercard-MA and Amazon Payment Services-AMZN have signed a multi-year commercial partnership agreement to digitize payment acceptance in Middle East and Africa, across countries including Bahrain, Egypt, Jordan, Kuwait, Lebanon, Oman, Qatar, South Africa and UAE.

Friday, Sept. 27, 2024

Alphabet's Google-GOOGL CEO says, 'We’re investing $3.3 billion in South Carolina to break ground on two new data centers, expand our cloud and data center infrastructure, create local jobs, and support economic activity.”

Thursday, Sept. 26, 2024

Accenture-ACN reported fourth quarter revenues rose 3% to $16.4 billion with net income up 23% to $1.7 billion and EPS up 24% to $2.66. For the full fiscal 2024 year, revenues increased 1% to $64.9 billion with net income and EPS each up 6% to $7.4 billion and $11.44, respectively. The company’s operating margin expanded 110 basis points for the year. Return on shareholders’ equity was an impressive 26.2%. New bookings increased 21% in the fourth quarter to $20.1 billion and increased 13% for the full year to a record $81.2 billion, including a record 125 quarterly client bookings of more than $100 million. The book-to-bill ratio for the year was 1.3 times. Generative AI new booking approximated $1 billion in the fourth quarter and $3 billion for the full year. Accenture continues to accelerate its leadership in Generative AI, which the company believes is the “most transformative technology of the next decade.” Free cash flow dipped 4% for the year to $8.6 billion with the company paying $3.2 billion in dividends and repurchasing $4.5 billion of its stock during the year. For fiscal 2025, Accenture increased its dividend 15% and announced an additional $4 billion share repurchase program authorization, bringing the total authorization up to $6.7 billion. For fiscal 2025, Accenture expects revenue growth to be in the range of 3% to 6% with operating margin expansion of 60 to 100 basis points to a range of 15.6% to 15.8%, leading to 10%-13% growth in EPS to a range of $12.55-$12.91. Free cash flow in fiscal 2025 is expected to be in the range of $8.8 to $9.5 billion with the company expecting to return at least $8.3 billion to shareholders through dividends and share repurchases.

Microsoft-MSFT pledged to invest 14.7 billion reais ($2.70 billion) in Brazil over three years to enhance its cloud infrastructure and artificial intelligence (AI) in Latin America's largest economy. The company said it will expand its cloud and AI infrastructure in several datacenters in Sao Paulo  and offer AI training to some 5 million people over the next three years.  Microsoft said massive adoption of AI could add as much as 4.2 percentage points to Brazil's economic growth by the end of the decade.

Wednesday, Sept. 25, 2024

Meta-META unveiled updates to the company's virtual reality headset and Ray Ban smart glasses along with AI advances as it demonstrates its next generation of computing platforms beyond smartphones and computers. Meta, which introduced the Quest 3 last year, also showed off a cheaper version of the VR goggles — the 3S — that will cost $299. The Ray Ban smart glasses let an AI assistant “see what you see, hear what you hear” and help you go about your day. Meta CEO Mark Zuckerberg showed off some impressive upgrades to the company's hit Ray-Ban Meta Glasses during the company's Meta Connect event, including the ability to translate live conversations, offer continuous talking features, and recognize the world around you. Meta AI now has 500 million users. One of the biggest additions to Meta AI is the new natural voice tool, where users can verbally ask the assistant questions and receive responses from famous voices, including John Cena, Judi Dench and Kristen Bell. The feature will be rolled out on Instagram, WhatsApp, Messenger and Facebook.

Berkshire Hathaway-BRKB recently sold another 21.6 million shares of Bank of America for $862.7 million, raising its total sale proceeds to nearly $9 billion over the last several months. Berkshire still holds a 10.5% stake in the bank and will be required to continue to report its sales until its position falls below 10%.

Tuesday, Sept. 24, 2024

The U.S. Justice Department has filed an antitrust lawsuit against Visa-V, alleging that the company uses its size and dominance to stifle competition in the debit card market, costing consumers and businesses billions of dollars. The complaint says Visa penalizes merchants and banks who don't use Visa's own payment processing technology to process debit transactions, even though alternatives exist. Visa earns an incremental fee from every transaction processed on its network. According to the DOJ's complaint, 60% of debit transactions in the United States run on Visa’s debit network, allowing it to charge over $7 billion in fees each year for processing those transactions. In a statement, Julie Rottenberg, Visa’s general counsel, said the lawsuit doesn’t take into account the “ever expanding universe of companies offering new ways to pay for goods and services.” “Today’s lawsuit ignores the reality that Visa is just one of many competitors in a debit space that is growing, with entrants who are thriving,” Rottenberg said. She added the lawsuit is “meritless” and the company will defend itself “vigorously.”

Monday, Sept. 23, 2024

Johnson & Johnson-JNJ announced that its subsidiary, Red River Talc LLC (“Red River”), filed a voluntary prepackaged Chapter 11 bankruptcy case to fully and finally resolve all current and future claims related to ovarian cancer arising from cosmetic talc litigation against the company. Approximately 83% of current claimants and the future claims representatives support the proposed bankruptcy plan. Red River increased its settlement commitment by $1.75 Billion to approximately $8 Billion. In aggregate, the contemplated settlement represents a present value of approximately $8 billion to be paid over 25 years, totaling approximately $10 billion nominal.

Friday, Sept. 20, 2024

Berkshire Hathaway's subsidiary, BNFS Railway reaches a tentative, five-year collective bargaining agreements. If ratified, the agreements will provide a 3.5-percent average wage increase per year over the next five years. They will also offer railroaders more vacation earlier in their career and meaningful enhancements to an already robust suite of health care benefits.

In separate news, Berkshire Hathaway-BRKB sold another 22,272,071 shares of Bank of America worth more than $896 million.

NIKE-NKE announces that Elliott Hill will become President and CEO, effective October 14, 2024, and John Donahoe will retire from his role as President and CEO and from the Board of Directors. Throughout the course of his career at Nike, Hill held senior leadership positions across Europe and North America and was responsible for helping grow the business to more than $39 billion. Before retiring in 2020, he was President - Consumer and Marketplace leading all commercial and marketing operations for Nike and Jordan Brand, including the P&L across the company's four geographies. He retired from Nike in 2020.

Microsoft-MSFT and Constellation Energy have signed a 20-year deal to supply power to the company, including reopening one of the nuclear reactors on Three Mile Island. Under the deal,  Microsoft will buy energy from the renewed plant to power its data centers, which have become even more energy hungry as the company looks to build up its AI capabilities.

Thursday, Sept. 19, 2024

Alphabet-GOOGL is bringing new AI tools to YouTube to enable new ways to connect people, ignite creativity, drive businesses, and champion new voices. Alphabet will also expand YouTube Shopping to new countries so more people across the globe can share favorite products with fans and grow their business. There are now over 250,000 creators in YouTube Shopping.

Genentech, a member of the Roche Group-RHHBY, announced today positive topline results of the Phase III CENTERSTONE study of Xofluza® (baloxavir marboxil), an antiviral, showing a reduction in the transmission of influenza viruses. The study met its primary endpoint, demonstrating that a single, oral dose of Xofluza taken by people infected with influenza significantly reduced the likelihood of others in their household contracting the virus. Xofluza was well tolerated with no new safety signals identified. This is the first time that any antiviral used in the treatment of a respiratory viral illness has demonstrated a transmission reduction benefit in a global Phase III study. If approved, the treatment will reduce the spread of infection in the household and could help limit transmission within communities and societies, easing the burden of both seasonal and pandemic influenza on healthcare systems.

FactSet-FDS reported fiscal fourth quarter revenues increased 5% to $562.2 million with net income jumping 37% to $89.5 million and EPS up 38% to $2.32. Annual Subscription Value (ASV) increased 4.7% to $2.28 billion. Operating margin increased 100 basis points to 22.7%, mainly due to a decrease in employee compensation costs, growth in revenues and lapping of the prior year's facilities impairment charge, partially offset by a $54 million charge related to a Massachusetts sales tax dispute. During the quarter, FactSet generated $137.2 million in free cash flow, down 12.2% from last year’s fourth quarter, primarily due to lower net cash provided by operating activities and a jump in capital expenditures to support generative AI offerings. For the full year, revenue increased 5.6% to $2.2 billion, representing the 44^th consecutive year of revenue growth, with net income and EPS increasing 15% to $537.1 million and $13.91, respectively. During the fiscal year ended August 31, FactSet generated a stellar 28.0% return on shareholders’ equity and $614.7 million in free cash flow, representing an impressive 114% of reported net earnings.  FactSet returned $385.9 million to shareholders during fiscal 2024 through dividend payments of $150.7 million and share repurchases of $235.2 million at an average cost per share of $437.40, including $63.0 million repurchased during the fourth quarter at an average cost per share of $412.09. FactSet increased its dividend by 6% during the third quarter, marking the 25^th year of consecutive dividend increases. FactSet ended the fiscal year with $492.6 million in cash and investments, $1.2 billion in long-term debt and $2.1 billion in shareholders’ equity on its strong balance sheet. Looking ahead to fiscal 2025, expects revenues in the range of $2.285 billion and $2.31 billion, up 4.2% from fiscal 2024 at the midpoint, with EPS in the range of $15.10 to $15.70, up 10.7% from last year at the midpoint. Management expects the second half of the fiscal year to be stronger than the first half.  

Tuesday, Sept. 17, 2024

Microsoft-MSFT announced a 10% increase in its quarterly dividend to $0.83 per share as well as a new $60 billion share repurchase authorization, reflecting the company’s strong cash flows.

In separate news, Microsoft announced enhancements to its generative artificial intelligence chatbot Copilot, as well as plans to add Copilot tools to its Microsoft 365 productivity apps.

Accenture-ACN has invested, through Accenture Ventures, in Martian, a technology company that has built a patent-pending Large Language Model (LLM) router. For any prompt, Martian’s router will find and use the LLM that will give users the best result at the lowest cost. As part of this investment, Accenture plans to integrate Martian’s advanced model router offering into its proprietary "switchboard" services that can customize large-language models (LLMs) for specific data sources and use cases for greater impact of AI systems.

Monday, Sept.  16, 2024

General Dynamics NASSCO, a subsidiary of General Dynamics-GD, has announced that it has received a block-buy contract from the U.S. Navy for the construction of up to eight additional John Lewis-class fleet replenishment oilers. The tenth ship, and first under the new contract, has been awarded for $780 million. If all eight ships are ultimately exercised and including incentives and other contract options in support of those ships, the contract value will total over $6.7 billion.

Friday, Sept. 13, 2024

Genentech, a member of the Roche Group-RHHBY, announced today that the United States Food and Drug Administration (U.S. FDA) has approved Ocrevus Zunovo™  for the treatment of relapsing multiple sclerosis (RMS) and primary progressive multiple sclerosis (PPMS). Ocrevus Zunovo is the first and only twice-a-year, healthcare professional (HCP)-administered approximately 10-minute subcutaneous injection approved for both these forms of multiple sclerosis, giving people living with MS more treatment options.

Beginning in early 2025, Alphabet’s-GOOGL Waymo and Uber will bring autonomous ride-hailing to Austin and Atlanta, only on the Uber app. In these cities, Uber will manage and dispatch a fleet of Waymo's fully autonomous, all-electric Jaguar I-PACE vehicles that will grow to hundreds over time. Riders who request an UberX, Uber Green, Uber Comfort, or Uber Comfort Electric may be matched with a Waymo for qualifying trips. Through this expanded partnership, Uber will provide fleet management services including vehicle cleaning, repair, and other general depot operations. Waymo will continue to be responsible for the testing and operation of the Waymo Driver, including roadside assistance and certain rider support functions.

Thursday, Sept. 12, 2024

Mastercard-MA expanded its cybersecurity services with an agreement to acquire the world’s largest global threat intelligence company, Recorded Future, from Insight Partners for $2.65 billion. Recorded Future has more than 1,900 clients in 75 countries.  Recorded Future provides real-time visibility into potential threats by analyzing a broad set of data sources to provide insights that enable its customers to take action to mitigate risks. This ability, coupled with Recorded Future's use of AI and other best-in-class technologies, will add to Mastercard's identity, fraud prevention, real-time decisioning and cybersecurity services, bringing expanded threat intelligence capabilities to its network of merchants and financial institutions. Cybercrime is expected to cost $9.2 trillion globally this year. The transaction is anticipated to close by the first quarter of 2025.

Ajit Jain, Warren’s Buffett’s insurance chief and top executive, sold about half of his stake in Berkshire Hathaway-BRKB. The 73-year-old vice chairman of insurance operations sold 200 shares of Berkshire Class A shares on Monday at an average price of $695,418 per share for roughly $139 million. That left him holding  61 shares, while family trusts established by himself and his spouse for the benefit of his descendants hold 55 shares and his non-profit corporation Jain Foundation owns 50 shares. It’s unclear what motivated Jain’s sales, but he did take advantage of Berkshire’s recent high price.  “This appears to be a signal that Ajit views Berkshire as being fully valued,” said David Kass, a finance professor at the University of Maryland’s Robert H. Smith School of Business. “I think at best it is a sign that the stock is not cheap,” said Bill Stone, CIO at Glenview Trust Company and a Berkshire shareholder. “At over 1.6 times book value, it is probably around Buffett’s conservative estimate of intrinsic value. I don’t expect many, if any, stock repurchases from Berkshire around these levels.”

The U.S. Food and Drug Administration authorized the first over-the-counter (OTC) hearing aid software device, Hearing Aid Feature, intended to be used with compatible versions of the Apple-AAPL  AirPods Pro headphones. Once installed and customized to the user’s hearing needs, the Hearing Aid Feature enables compatible versions of the AirPods Pro to serve as an OTC hearing aid, intended to amplify sounds for individuals 18 years or older with perceived mild to moderate hearing impairment. More than 30 million American adults report some degree of hearing loss. Hearing loss can be caused by aging, exposure to loud noises, certain medical conditions, and other factors. Hearing loss can have a negative effect on communication, relationships, school or work performance and emotional well-being. Using hearing aids has been linked to reductions in the frequency or severity of cognitive decline, depression and other health problems in older adults. 

Oracle-ORCL raised its sales outlook for fiscal 2026 to at least $66 billion from a prior target of $65 billion. In addition, the company said annual revenue will rise to at least $104 billion in fiscal 2029 from $53 billion in fiscal 2024, an optimistic signal on the growth prospects of the company’s cloud infrastructure business.

 Wednesday, Sept. 11, 2024

Canadian National Railway-CNI announced that its operations have recovered following several months of labor uncertainty as well as a complete shutdown of its Canadian network, and that it is adjusting its 2024 guidance and long-term financial outlook. Due to the impact of CN's labor uncertainty and work stoppage, the impact of the wildfires in Alberta, weaker than expected demand in forest products and metals, as well as the delayed recovery of overseas intermodal due to on-going port labor uncertainty, CN is revising its 2024 full year financial guidance. The quarter-to-date additional impact of labor uncertainty and the work stoppage, as well as the wildfires in Alberta, is estimated at around $0.20 of EPS. CN now expects to deliver adjusted diluted EPS growth in the low single-digit range, compared to its July 23, 2024, expectation of mid to high single-digit growth. The company continues to expect to invest approximately C$3.5 billion in its capital program. As a result of the reduction to earnings, CN now expects adjusted return on invested capital (ROIC) to be in the 13%-15% range, compared to its July 23, 2024, expectation of approximately 15%. In light of  the updated expectations for 2024, and a weaker than expected economic environment, CN is replacing all its current financial outlook for the 2024-2026 period with the following: CN is now targeting compounded annual adjusted diluted EPS growth in the high single digit range.

Starbucks’-SBUX new CEO, Brian Niccol, commented in an open letter on his plans for Starbucks in the year ahead: "For our U.S. business, we're making investments in technology that enhance the partner and customer experience, improve our supply chain and evolve our app and mobile ordering platform. Internationally, we see enormous potential for growth, especially in regions like the Middle East, where we'll work to dispel misconceptions about our brand, and in Asia Pacific, Europe and Latin America, where the love for Starbucks is strong. In China, we need to understand the potential path to capture growth and capitalize on our strengths in this dynamic market."

Tuesday, Sept. 10, 2024

Apple-AAPL expects to record a one-time income tax charge in its fourth fiscal quarter ending September 28, 2024, of up to approximately $10 billion, which will increase the company's effective tax rate for the quarter after the Court of Justice of the European Union (EU)  overturned a lower court ruling on Irish tax breaks for the company which date back to  2016.

The Court of Justice of the European Union (EU) also ruled against Alphabet's-GOOGL Google, which had appealed a  2.4-billion-euro ($2.7 billion) fine in 2017 for abusing its dominant position by favoring its own shopping services over those of its competitors.

Monday, Sept. 9, 2024

Oracle-ORCL reported fiscal first quarter revenues rose 7% to $13.3 billion with net income up 21% to $2.9 billion and EPS up 20% to $1.03.  Cloud service revenues rose 21% to $5.6 billion driven by 45% growth in Cloud Infrastructure (IaaS) revenue to $2.2 billion and 10% growth in Cloud Application (SaaS) revenue of $3.5 billion. Total remaining performance obligations were up 53% to a record $99 billion. The strong contract backlog will increase revenue growth throughout fiscal 2025. Oracle signed a MultiCloud agreement with Amazon Web Services (AWS) with Oracle’s latest technology embedded in AWS cloud datacenters. AWS customers will get easy and convenient access to the Oracle database. Oracle has 162 cloud datacenters in operation and under construction around the world. The largest of these datacenters is 800 megawatts and will contain acres of Nvidia GPU clusters for training large scale AI models. During the first quarter, 42 additional cloud GPU contracts were signed for $3 billion. Oracle’s database business growth is increasing as a result of its Multicloud agreements with Microsoft and Google. With the addition of the Amazon agreement, customers will be able to use the latest Oracle database technology from within every Hyperscaler’s cloud. Free cash flow declined 9% during the quarter to $5.1 billion as the company invested $2.3 billion in capital expenditures due to strong demand. Capital expenditures are expected to double this year as the company is rapidly expanding capacity to meet strong public and private cloud demand which is exceeding supply. During the quarter, the company paid $1.1 billion in dividends and repurchased $150 million of its common stock. For the second quarter, revenues are expected to increase 7%-9% with EPS growth of 6%-10% in the range of $1.42-$1.46. Oracle still expects to report double-digit revenue growth for the full year.

Apple-AAPL introduced new tools called “Apple Intelligence” which include a new Siri voice assistant and a variety of text-generations and photo-editing capabilities for the new iPhone 16 and the iPhone 15 Pro.  New Apple Watches and Airpods were also introduced with enhanced features such as a sleep apnea tests and hearing tests with the Airpods  able to serve as hearing aids.

Friday, Sept. 6, 2024

Fastenal-FAST reported August sales declined 2.3% to $652.7 million on fewer business days in the month with average daily sales up 2.1% to $29.7 million. Fastenal reported growth in all geographic segments. Growth by product line was led by 5.8% growth in Safety products, 3.7% growth in Other products and a 2.2% decline in Fasteners. About 52% of the company’s Top 100 national accounts grew during the month compared to 63% in the prior year period. The company’s employee headcount increased 2.7% from the prior year period to 23,410.

Berkshire Hathaway-BRKB continued its sale of Bank of America stock last week, reducing its stake to 864 million shares or 11.1% of the bank. Berkshire has sold about 16% of its holdings for a total of about $7 billion this year.

Wednesday, Sept. 4, 2024

Hormel Foods-HRL reported fiscal third quarter sales declined 2% to $2.9 billion with net income increasing 8% to $176.7 million and EPS up 6% to $.32. The increase in earnings benefitted from the lapping of an unfavorable arbitration ruling. By segment, retail volume declined 9% with net sales declining 7% and segment profit down 15%, primarily due to significant year-over-year volume and pricing declines for whole bird turkeys and lowers sales of Planters snack nuts resulting from production disruptions. The Foodservice segment volumes were up 2%, with net sales increasing 7% and segment profit down 3%, driven by strong performance across the turkey, premium prepared proteins, bacon and pepperoni products. The international segment volumes were down 13%, with net sales down 2% and segment profit jumping 78%, primarily driven by robust volume and sales growth for SPAM. Free cash flow jumped 22% year-to-date to $685 million with Hormel paying $459.9 million in plump dividends. For the balance of the fiscal year, Hormel expects net sales in the range of $11.8 billion to $12.1 billion, reflecting lower than expected commodity markets, production disruption and declines in its contract manufacturing business. In addition, management narrowed its expected EPS range to $1.45 to $1.51 compared to previous guidance of $1.45 to $1.55.

Thursday, Aug. 29, 2024

Ulta Beauty-ULTA reported a 1% increase in sales to $2.55 billion with net income decreasing 16% to $253 million and EPS down 12% to $5.30. Comparable sales--sales for stores open at least 14 months plus e-commerce sales--decreased 1.2% compared to an increase of 8% in the second quarter of fiscal 2023, driven by a 1.8% decrease in transactions and a 0.6% increase in average ticket. Operating margins declined to 12.9% compared to 15.5% owing to lower merchandise margin, deleverage of store fixed costs, deleverage of store payroll and benefits, and higher corporate overhead due to strategic investments. During the quarter, Ulta Beauty opened 17 new stores, relocated one store, remodeled nine stores and closed one store, ending the quarter with 1,411 stores. During the first half of 2024, Ulta Beauty generated $172.6 million in free cash flow, down 23% from last year on working capital shifts. During the first six months of fiscal 2024, the Company repurchased 1.1 million shares of its common stock at a cost of $497.5 million, including 549,852 shares repurchased during the second quarter at an average cost per share of $386.10, leaving $1.6 billion remaining available under the $2.0 billion share repurchase program announced in March 2024. Management lowered its guidance with fiscal 2024 sales now expected in the $11.0 billion to $11.2 billion range and EPS in the $22.60 to $23.50 range. Management expects comparable store growth in the range of (2%) to 0% for the second half of fiscal 2024.

Brown-Forman-BFB reported sales declined 8% (-4% organic) to $951.0 million with net income falling 16% to $195.0 million and EPS down 14% to $0.41. Net sales declined across all geographic aggregations partially due to the timing of shipments in the year-ago period related to inventory replenishment and pricing. Net sales growth of Diplomático Rum, Old Forester and Woodford Reserve were more than offset by net sales declines led by Jack Daniel’s Tennessee Whiskey and the Finlandia divestiture. Net sales for Whiskey products decreased 5% (-3% organic). Growth of Old Forester and Woodford Reserve was more than offset by lower volumes of Jack Daniel’s Tennessee Whiskey, partially due to comparisons against the timing of shipments in the year ago period. Jack Daniel’s Tennessee Whiskey was also impacted by the negative effect of foreign exchange, primarily reflecting the strengthening of the dollar against the Turkish lira. Net sales for the Tequila portfolio declined 23%. el Jimador’s net sales declined 26% led by lower volumes in the United States, Colombia and Mexico. Herradura’s net sales declined 15% (-14% organic) led by lower volumes in Mexico, which experienced a challenging economic environment. Net sales for the Ready-to-Drink (RTD) portfolio declined 12% (-4% organic). New Mix’s net sales declined 11% (-9% organic) driven by lower volumes in Mexico, while gaining market share. Net sales of Jack Daniel’s portfolio declined 13% (-2% organic) led by lower volumes due to the impact of the Jack Daniel’s Country Cocktails business model change with production transitioned to Pabst Brewing Company. Rest of Portfolio's net sales declined 18% (+1% organic) driven by the Finlandia divestiture and the negative effect of foreign exchange, partially offset by the positive contribution from Diplomático. Gross profit declined 13% (-8% organic) with a gross margin reduction of 330 basis points largely related to the timing of input cost fluctuations coupled with high inventory levels. Operating income decreased 14% (-13% organic) with an operating margin decrease of 200 basis points to 29.6%. The decrease in operating margin was largely driven by the timing of input cost fluctuations coupled with high inventory levels, the divestitures of Finlandia and Sonoma-Cutrer and the negative effect of foreign exchange. During the quarter, Brown-Forman generated $17 million in operating cash flow, down 55% from last year, and used $24.0 million in its operations. During the quarter, the company paid $103.0 million in dividends to shareholders. Brown-Forman, a member of the prestigious S&P 500 Dividend Aristocrats Index, has paid regular quarterly cash dividends for 80 consecutive years and has increased the regular dividend for 40 consecutive years. Brown-Forman ended the quarter with $686.0 million in cash and investments, $2.4 billion in long-term debt and $3.47 billion in shareholders’ equity on its cheery balance sheet. Management expects 2025 will be a tale of two halves with profitability improving during the second half of the fiscal year. The company affirmed its prior guidance with net organic sales and operating margin growth in the 2% to 4% range. Capital expenditures are expected in the $195.0 million to $205.0 million range.

Wednesday, Aug. 28, 2024

Berkshire Hathaway-BRKB reached a $1 trillion market capitalization on Aug. 28, two days before Warren Buffett’s 94^th birthday. Berkshire is the first non-technology stock in the U.S.  to reach the trillion-dollar milestone. Berkshire joined six other companies above $1 trillion: Apple, Nvidia, Microsoft, Google parent Alphabet, Amazon.com and Facebook parent Meta Platforms.

In separate news, Berkshire Hathaway sold an additional $982 million of Bank of America stock at the end of August. He has trimmed his position in the stock by 13% since mid-July generating $5.4 billion in proceeds. Berkshire still remains the bank’s largest shareholder with 903.8 million shares worth about $35.9 billion.

Thursday, Aug. 22, 2024

Ross Stores-ROST reported second quarter revenues rose 7%, with comparable store sales up 4%,  to $5.3 billion. The strongest sales categories during the quarter came from the cosmetics and children’s segments. Net income jumped 18% to $527.1 million, and EPS rang up a 21% gain to $1.59, thanks to lower distribution and incentive costs leading to improved profitability. These results came in better than expected as the company’s strong value offerings resonated with their low-to-moderate income customers who continue to feel persistent inflation pressure on necessities, which impact their discretionary spending. Free cash flow declined 17% during the first fiscal half of the year to $627 million due primarily  to working capital changes. Average inventories were up 3% during the quarter with inventories well positioned for the second half of the year as the company works with new vendors. During the first half, Ross paid $246 million in dividends and repurchased $525 million of its common stock, including 1.8 million shares repurchased in the second quarter for $262 million at an average cost of $145.55 per share. Ross remains on track to repurchase $1.05 billion of its common stock during fiscal 2024 as part of its two-year $2.1 billion buyback authorization. Based on the strong first half performance, Ross reaffirmed its outlook for sales growth of 3%-5% for the full fiscal year and raised its earnings outlook to a range of $6.00-$6.13, representing growth of 8%-10%. The company plans to open 90 new stores during the year.

Wednesday, Aug. 21, 2024

TJX-TJX rang up a 6% increase fiscal second quarter sales to $13.5 billion with net income up 11% to $1.1 billion and EPS up 13% to $0.96. Comparable stores sales of 4% was entirely driven by customer transactions, which increased at every division.  Operating margin of 10.9% expanded by 0.5 percentage points, primarily due to a benefit from lower freight costs and stronger sales, partially offset by higher incentive compensation accruals and a contribution to the TJX Foundation. By division, Marmaxx sales jumped 7% to $8.4 billion, HomeGoods sales increased 4% to $2.1 billion, TJX Canada expanded 2% to $1.2 billion and TJX International sales rose 4% to $1.7 billion. TJX marked a milestone in the second quarter by opening its 5,000th store. Management sees a runway for 6,300 stores across its current banners and geographies. During the second quarter, TJX generated $1.6 billion of operating cash flow, representing a fancy 146% of reported net income. During the first half of fiscal 2025, TJX generated $2.4 billion in operating cash flow and $1.4 billion in free cash flow, up 9% from last year. TJX’s robust cash flow and strong balance sheet enables it to invest in growing the business while returning significant cash to shareholders. During the quarter, TJX signed a definitive agreement to make an investment of about $360 million for a 35% ownership stake in privately held Brands for Less (BFL). BFL is based in Dubai and is the region’s only major off-price branded apparel, toys and home fashions retailer. BFL currently operates over 100 stores, primarily in the UAE and Saudi Arabia, as well as an e-commerce business. The transaction is expected to be slightly accretive to earnings per share in fiscal 2026. During the quarter, TJX returned $982 million to shareholders through share repurchases of $559 million at an average cost per share of $109.61 per share and dividends of $423 million. During the first half of fiscal 2025, TJX returned a total of $1.9 billion to shareholders through share repurchases of $1.1 billion and dividends of $800 million. TJX ended the quarter with $5.3 billion in cash, $2.9 billion and $7.8 billion in shareholders’ equity on its dressy balance sheet. Given the above plan first half results and the strong start to the third quarter, management raised full year guidance with sales now expected in $55.8 billion to $56.1 billion range, up 3.5% from last year at the midpoint, on a 3% increase in same store sales with profit margins of 11.2% and EPS in the $4.09 to $4.13 range, up 6.5% from last year at the mid-point. TJX continues to expect to repurchase approximately $2.0 to $2.5 billion of TJX stock during the fiscal year ending February 1, 2025.

Tuesday, Aug. 20, 2024

Roche-RHHBY announced that it is supporting the international response to the mpox global health emergency with its diagnostic tests developed for mpox, formerly known as monkeypox. Mpox, a viral disease that can spread easily between people and from infected animals, was declared a Public Health Emergency of International Concern by the World Health Organization (WHO) (14 August 2024).

 Berkshire Hathaway-BRKB-sold 13,968,943 shares of Bank of America at $39.00 - $39.74 worth approximately $550.7 million during the period of 8/15-8/19.

Johnson & Johnson-JNJ said the FDA has approved Rybrevant plus Lazcluze for the treatment of patients with non-small cell lung cancer. This is a chemotherapy-free treatment for lung cancer. This approval came after a Phase 3 study showed the combination reduced the risk of disease progression or death by 30% compared to AstraZeneca’s osimertinib, which is also used to treat non-small-cell lung carcinomas. John Reed, J&J’s executive vice president of pharmaceutical research and development, called the FDA’s approval “an incredible step towards our goal of altering the trajectory of lung cancer and reducing the impact of the world’s leading cause of cancer mortality.”

In separate news, Johnson & Johnson entered into an agreement to acquire V-Wave, a privately-held company focused on developing innovative treatment options for patients with heart failure. The planned acquisition of V-Wave will extend Johnson & Johnson MedTech's position as an innovation leader in addressing cardiovascular disease. JNJ will pay an upfront payment of $600 million with the potential for additional regulatory and commercial milestone payments up to approximately $1.1 billion. The transaction is expected to close before the end of 2024.

Alphabet’s-GOOGL subsidiary, Waymo, has emerged as the clear frontrunner for self-driving taxis.  The company announced that its customers were taking more than 100,000 paid rides weekly—double the number from just a few months ago in May. It’s a signal that Waymo is extending its lead over its robo-taxi competitors and that its ride-hailing business could become a meaningful revenue stream for Google’s parent company.

Wednesday, Aug. 14, 2024

Cisco-CSCO reported fourth quarter revenues declined 10% to $13.6 billion with net income plummeting 45% to $2.2 billion and EPS dropping 44% to $.54. Revenues declined in all geographies with product revenues down 15% and services revenues up 6%. During the fourth quarter, the company returned to a more normalized demand environment with the inventory adjustment now behind them. During the fourth quarter, Cisco experienced steady demand with double-digit order growth in all business segments. For the full fiscal 2024 year, revenues declined 6% to $53.8 billion with net income down 18% to $10.3 billion and EPS off 17% to $2.54. Total subscription revenue of $27.4 billion, including the Splunk acquisition, accounted for 51% of total revenue. Total annualized recurring revenue of $29.6 billion rose 22% over last year and included $4.3 billion from Splunk. Cisco’s return on shareholders’ equity was 22.7% for the year. Free cash flow declined 48% during the year to $10.2 billion due primarily to the lower earnings and the timing of a large tax payment. During the year, the company paid $6.4 billion in dividends, marking its 13^th consecutive year of dividend increases, and repurchased $5.8 billion of its stock. Cisco has $52 billion remaining authorized for future share repurchase. In order to reallocate its resources to the fastest-growing parts of its business including AI, cloud and cybersecurity, Cisco announced a restructuring plan which will result in the layoff of 7% of its workforce and result in $1 billion in pre-tax severance charges. For fiscal 2025, Cisco expects revenue in the range of $55.0 billion to $56.2 billion with EPS in the range of $1.93 to $2.05, which includes the charges.

Tuesday, Aug. 13, 2024

Starbucks-SBUX announced that Brian Niccol, former CEO of Chipotle has been appointed chairman and chief executive officer. Niccol will start in his new role on September 9, 2024. Starbucks chief financial officer, Rachel Ruggeri, will serve as interim CEO until that time. Mellody Hobson, Starbucks board chair, will become lead independent director. "Having followed Brian’s leadership and transformation journey at Chipotle, I’ve long admired his leadership impact. His retail excellence and track record in delivering extraordinary shareholder value recognizes the critical human element it takes to lead a culture and values driven enterprise. I believe he is the leader Starbucks needs at a pivotal moment in its history. He has my respect and full support," said Howard Schultz, Starbucks founder and chairman emeritus. "I thank Mellody and the Starbucks board for their deep commitment to shaping the future of this remarkable global phenomenon that is Starbucks."

Wednesday, Aug. 7, 2024

Corpay-CPAY reported second quarter revenues rose 3%, 6% organically, to $975.7 million with net income up 5% to $251.7 million and EPS driving 10% higher to $3.52. These results were ahead of management’s expectations. The company’s most recent business trends all are improving with client retention rising 1% to 92%, same store sales increasing 2% sequentially and new bookings up 21%. The company’s Corporate Payments revenue continued to grow in the high teens and with the addition of two acquisitions, that business segment is expected to grow to 40% of revenues by the end of 2025 compared to 30% currently. The Vehicle Payments segment also delivered solid performance during the quarter while the U.S. local fleet and lodging business is improving and should resume organic growth by the fourth quarter with revenue growth accelerating going into 2025. During the first half of the year, Corpay generated $806 million in free cash flow and repurchased 3.3 million of its shares for about $947 million at an average price of $286.96 per share. The company plans to repurchase additional shares in the second half from the expected $400 million in proceeds received from small divestitures. Corpay reaffirmed its outlook for the full year with revenues expected in the range of $3.975 billion and $4.025 billion with net income expected in the range of $14.85 to $15.15.

Tuesday, Aug. 6, 2024

 A decision by U.S. District Court Judge Amit Mehta ruled that Google's exclusive search arrangements on Android and Apple devices reinforced its dominance, and effectively blocked search competitors from succeeding in the market. It means the tech giant violated Section 2 of the Sherman Act to become the world's dominant search engine (Google currently controls about 90% of the online search market). "Google is a monopolist, and it has acted as one to maintain its monopoly," Mehta wrote in the 276-page decision. As an example, Google paid $26B in revenue share payments in 2021 alone, which was "nearly four times more than all of Google's other search-specific costs combined." The deals gave Google default placement of its search engine at partners' key search access points, and "its partners also agreed not to preload any other general search engine on the device." The remedies proposed for the decision could range from a breakup of the company and forced divestitures to limits on search agreements.  

In response, Google said: “This decision recognizes that Google offers the best search engine, but concludes that we shouldn’t be allowed to make it easily available. We appreciate the Court’s finding that Google is ‘the industry’s highest quality search engine, which has earned Google the trust of hundreds of millions of daily users,’ that Google ‘has long been the best search engine, particularly on mobile devices,’ ‘has continued to innovate in search’ and that ‘Apple and Mozilla occasionally assess Google’s search quality relative to its rivals and find Google’s to be superior.’ Given this, and that people are increasingly looking for information in more and more ways, we plan to appeal. As this process continues, we will remain focused on making products that people find helpful and easy to use.” – Kent Walker, President, Global Affairs. Google’s appeal of the decision will likely take years to resolve before any final action is taken.

Fastenal-FAST reported that net sales increased 10.5% in July to $633.8 million with average daily sales inching up 0.5% to $28.3 million. On a geographic basis, average daily sales growth was led by Canada/Mexico with 2.8% growth. By end market, Other Manufacturing led the way with 4.5% growth while Reseller markets were down 14.9% in July. Daily sales growth by product line was 7.5% growth in Safety products, 1.6% growth in Other products and a 6.3% decline in Fasteners. About 48% of the company’s top 100 national accounts experienced growth in July compared to 66% in the prior year period. The company’s employee headcount was up 3.2% at the end of July to 23,625.

Saturday, August 3, 2024

Berkshire Hathaway-BRKB reported the company’s net worth during the first half of 2024 increased by 7%, or $40.4 billion, to $601.7 billion with book value equal to about $418,800 per Class A share as of 6/30/24. Berkshire boasts the largest shareholders’ equity of any U.S. company.

On a GAAP basis, Berkshire reported net earnings of $30.3 billion during the second quarter compared to $35.9 billion 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 72% of total equities held, include American Express at $35.1 billion (which charged 24% higher during the first half of the year or $6.7 billion); Apple at $84.2 billion (which Buffett sliced in half  was 52% lower or $90.1 billion in value); Bank of America at $41.1 billion (which increased 18% or  $6.3 billion); Coca-Cola at $25.5 billion (which popped 8% or $1.9 billion) and Chevron at $18.6 billion (which dipped 1% lower or $200 million in value).

During the second quarter, Berkshire’s revenues rose 1% to $93.6 billion, aided by the improvement in insurance operations. Berkshire’s operating earnings increased 15.5% during the second quarter to $11.6 billion, led by a turnaround in Berkshire’s insurance businesses.

During the second quarter, Berkshire’s insurance businesses generated $2.2 billion from underwriting earnings compared to $1.2 billion in the prior year quarter with the 81% gain due primarily to improved operating results at GEICO and no losses from significant catastrophe events. Insurance investment income increased 40% during the quarter to $3.3 billion, driven by higher interest income from short-term investments in U.S. Treasury Bills.  The float of the insurance operations remained flat since year end at about $169 billion.

Burlington Northern Santa Fe’s revenues were relatively unchanged in the second quarter at $5.7 billion. Average revenue per car/unit declined 3.7% due to lower fuel surcharges and business mix changes, offset by a 4.2% increase in car/unit volumes in the second quarter led by 15% growth in consumer products volume and 11% growth in agricultural products volume. Net earnings rolled 3% lower to $1.2 billion during the quarter, negatively affected by litigation charges, but the railroad’s earnings otherwise benefited from improved productivity and lower operating costs.

Berkshire Hathaway Energy reported revenues increased 2% during the second quarter to $6.5 billion. Net earnings decreased 17% to $655 million, driven by a 38% decrease in the U.S. utilities segment reflecting a pre-tax loss accrual for wildfires of $251 million in the second quarter.

During the second quarter, Pilot’s revenues traveled 12% lower to $13 billion with pre-tax earnings increasing 7% to $199 million. The decline in revenue was attributable to lower average fuel prices and a decline in volumes from wholesale fuel and fuel marketing businesses.

Berkshire’s Manufacturing businesses reported second quarter revenues increased 4.5% to $19.8 billion with operating earnings relatively unchanged at $3.1 billion. The industrial products segment led the way for the quarter with revenues rising 4% to $9.2 billion and operating earnings increasing 9.5% to $1.7 billion thanks to improvements at Precision Castparts amid the higher demand for aerospace products and higher volumes and lower raw material costs at Lubrizol.  The building products segment revenues increased 3% to $6.9 billion but operating earnings decreased 12% to $1.1 billion. The decline in earnings reflected the increased cost of building Clayton Homes and higher operating expenses. The consumer products segment revenues increased 4% to $3.6 billion with operating earnings up 7% to $382 million. The higher revenues were generated by Forest River, Jazwares and Brooks Sports partially offset by lower revenues from Fruit of the Loom and Richline. The increase in earnings was driven by a 41% increase in apparel and footwear earnings, primarily due to Brooks Sports, the impact of lower product and supply chain costs and the effects of restructuring activities of Berkshire’s apparel businesses in 2023.

Service and Retailing revenues decreased 2.7% during the quarter to $22.4 billion with pre-tax earnings decreasing 20% to $1.1 billion. The Service group revenues were relatively unchanged at $5.2 billion with pre-tax earnings down 23% to $633 million. The earnings decline reflected the impact of lower sales and price competition at TTI, a distributor of electronic components, whose earnings plummeted 50%. Excess inventory levels within supply chains contributed to lower customer demand at TTI with these conditions expected to persist over the balance of the year. The retailing group revenues were down 4.5% to $4.7 billion with pre-tax earnings down 23% to $336 million. Nearly all retailers generated lower earnings in 2024 compared to 2023, reflecting challenging business conditions that contributed to reduced sales and increased operating expenses. McLane’s revenues declined 3% to $12.5 billion due to lower unit volumes primarily in the restaurant business, while earnings increased 10% to $142 million thanks to higher gross margins and lower operating expenses.

Berkshire’s balance sheet continues to reflect significant liquidity and a very strong capital base of $601.7 billion as of 6/30/24. Excluding railroad, energy and utility investments, Berkshire ended the first half of the year with $603.2 billion in investments allocated approximately 47% to equities ($284.9 billion), 2.8% to fixed-income investments ($16.8 billion), 45% in cash and short-term investments ($271.5. billion) and 5% in equity method investments ($30.1 billion), which includes 26.9% ownership of Kraft Heinz and 28.8% ownership of Occidental Petroleum.

Free cash flow increased 20% during the first half of the year to $15.2 billion due to the higher net cash flows provided from operating activities of $24.2 billion. Operating cash flows over the remainder of 2024 will be reduced by significant income tax payments due to the large taxable gains from the sale of Apple and other stocks. Sales of equity securities produced taxable gains of $59.6 billion in the second quarter and $73.7 billion in the first six months of 2024. During the first half, capital expenditures increased 6% to approximately $8.9 billion, which included $5.9 billion for BNSF and BHE, its railroad and utility and energy units. Berkshire expects capital expenditures for the remainder of 2024 for BNSF and BHE to approximate $7.4 billion.

During the first half, Berkshire paid cash of $4.3 billion to acquire equity securities and received proceeds of $97.1 billion from the sale of stocks, including the significant paring of Apple. After quarter end, Berkshire also disclosed the sale of more than $3.8 billion of Bank of America stock.  Berkshire purchased a net $94 billion in Treasury Bills and fixed-income investments during the first half of the year. In January 2024, Berkshire acquired the remaining noncontrolling interests in Pilot for approximately $2.6 billion which brought Berkshire’s ownership of Pilot up to 100%.

Berkshire repurchases its shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett.  During the first half, Berkshire repurchased $2.9 billion of its common stock, including $345 million repurchased during the second quarter, which is the smallest quarterly amount repurchased since the repurchase program began. No shares were repurchased in June and only 100 shares were repurchased in May at an average price of $626,686 per Class A share.  Berkshire’s swelling cash hoard to a record $271.5 billion and slowing share repurchases signals that Buffett likely believes that many stocks, including Apple, Bank of America and Berkshire’s stock, itself, are fairly valued at current price levels.

Thursday, Aug. 1, 2024

ResMed-RMD reported a healthy 9% increase in fiscal fourth quarter sales to $1.22 billion with net income and EPS jumping 27% to $292.2 million and $1.98, respectively.  Ongoing demand drove profitable growth across products, resupply and software-as-a-service. Total Devices revenue increased 5% to $635.1 million, Masks and accessories revenue grew 14% to $436.2 million and Software-as-a-service revenue increased 10% to $151.9 million. Gross margin increased by 350 basis points on reduced freight, manufacturing cost improvements, price increases and favorable mix. For the fiscal year ended June 30, ResMed reported sales increased 11% to $4.69 billion with net income and EPS increasing 14% to $1.02 billion and $6.92, respectively. For the year, ResMed generated an impressive 21% return on shareholders’ equity and free cash flow of $1.3 billion, more than doubling from last year on the net income increase, working capital efficiencies and a 17% decline in capital expenditures to $99.5 million. Free cash flow represented a robust 128% of reported earnings, pointing to the high-quality of ResMed’s reported earnings. For the year, ResMed returned $432.3 million to shareholders through share repurchases of $150 million and dividend payments of $282.3 million. ResMed resumed its $50 million quarterly share repurchase program during the second quarter and raised its dividend by 10% during the fourth quarter. Looking ahead to fiscal 2025, ResMed remains optimistic about future profitable growth given its position as the global leader in digital health for sleep and respiratory care and the huge and largely untapped market for sleep apnea care.  

Apple-AAPL posted a 5% increase in sales during the fiscal third quarter to $85.8 billion with net income increasing 8% to $21.4 billion and EPS up 11% to $1.40. Record Service sales of $24.2 billion, up 14% year-over-year on well over 1 billion paid subscriptions, more than double the number of paid subscriptions four years ago. By product, iPhone sales declined 1% to $39.3 billion, Mac sales increased 2% to $7 billion, iPad sales jumped 24% to $7.2 billion and Wearables, Home and Accessories sales decreased 2% to $8.1 billion. The jump in iPad revenues was driven by the launch of a new AI-focused iPad Pro and a larger iPad Air in May. During the quarter, Apple’s installed base of active devices reached a new all-time high in all geographic segments, thanks to very high levels of customer satisfaction and loyalty. During the first nine months of fiscal 2024, free cash flow increased 6% to $84.9 billion with the company returning $81.3 billion to shareholders through dividend payments of $11.4 billion and share repurchases of $69.9 billion. The board of directors declared a cash dividend of $0.25 per share, payable on August 15, 2024. Apple ended the quarter with $153 billion in cash and investments, $86.2 billion in long-term debt and $66.7 billion in shareholders’ equity on its shiny balance sheet. Looking ahead to the fiscal fourth quarter, management expects revenue to grow at a similar level to the 5% increase it posted during the third quarter. In addition, Apple expects double-digit Service revenue growth and operating expenses in the $14.2 billion to $14.4 billion range.

Booking Holdings-BKNG booked a 7.3% increase in second quarter revenues to $5.86 billion with net income increasing 17.9% to $1.5 billion and EPS flying 27.2% higher to $44.38. Excluding the impact of currency changes, discrete tax and regulatory items and unrealized gains/losses from investments, adjusted net income increased 3% to $1.4 billion and EPS increased 11% to $41.90.  Gross Bookings increased 4.4% (or 6% in constant currency) to $41.4 billion with Room Nights sold increasing 7% to 287 million, Rental Car Days motoring ahead 10% to 22 million and Airline Tickets sold winging 27.7% higher to 11 million. For the first half of the year, Booking Holdings generated $4.95 billion in free cash flow, up 11% from last year, and representing a robust 216% of reported net income, boosted by the large amount deferred merchant bookings which increased 6.6% from last year to $3.3 billion. During the first half of 2024, Booking Holdings returned $4.1 billion to shareholders through share repurchases of $3.5 billion and dividend payments of $594 million. Booking Holdings paid it first dividend in March of 2024 at an annual rate of $35.00 per share. Booking Holdings ended the quarter with $16.8 billion in cash and investments and $13.4 billion in long-term debt on its first-class balance sheet.  Looking ahead to the full year, Booking expects revenue growth of 7% with EPS growth greater than 15%.

Wednesday, July 31, 2024

Cognizant Technology Solutions-CTSH reported revenues declined 0.7% to $4.85 billion with net income jumping 22% to $566 million and EPS popping 25% to $1.14. Adjusted EPS, which excludes restructuring charges in both 2024 and 2023, increased 6.4% to $1.17. By business segment, Financial Services revenue, which accounted for 30% of total revenue, fell 1.1% to $1.45 billion, Health Sciences revenue, also 30% of total revenue, increased 1.5% to $1.46 billion, Products & Resources, 23% of total revenue, declined 4.3% to $1.13 billion and Communications, Media & Technology, 17% of revenue, increased 1.2% to $816 million. By geography, North America revenue increased 0.9% to $3.6 billion, Europe revenue declined 5.5% to $914 million and Rest of World revenue declined 4.2% to $316 million. Trailing twelve-month bookings declined 2.6% from last year to $26.2 billion and second quarter bookings increased 5% year-over-year, resulting in a book-to-bill ratio of 1.4x. Twelve-month voluntary attrition improved to 13.6% from 19.9% last year and employee utilization stood at 83% compared to 84% last year. During the quarter, Cognizant Technology generated $183 million in free cash flow, representing just 32% of reported earnings, with the company returning $226 million to shareholders through dividends of $150 million and share repurchases of $76 million, leaving $1.6 billion remaining under the current authorization. The company ended the quarter with $2.2 billion in cash and investments, $590 million in long-term debt and $13.9 billion in shareholders’ equity on its pristine balance sheet. Looking ahead to the full year, revenues are expected in the $19.3 billion to $19.5 billion range, down 0.5% to up 1% from last year, with adjusted EPS in the $4.62 to $4.70 range, up 2.4% from last year at the midpoint.  The company expects to return $1.1 billion to shareholders during 2024.

 Meta Platforms-META reported second quarter revenue increased 22% to $39 billion with net income and EPS jumping 73% to $13.5 billion and $5.16. Family of Apps revenues increased 22% to $38.7 billion and generated operating margins of 49.9%.  Reality Labs revenue increased 28% to $353 million and generated a $4.5 billion operating loss thereby depressing Meta’s total operating margin to a still friendly 38%. Family daily active people (DAP) increased 7% to 3.27 billion on average for June 2024. In the second quarter of 2024, ad impressions delivered across Meta’s Family of Apps increased by 10% year-over-year and the average price per ad increased by 10% year-over-year. Year-to-date, free cash flow increased 31% to $24 billion, despite a 12% increase in capital expenditures as the company continues to invest in its AI infrastructure. Meta returned $23.8 billion to shareholders through share repurchases of $21.3 billion and dividend payments of $2.5 billion. Meta ended the quarter with $58.1 billion in cash and investments, $18.4 billion in long-term debt and $156.8 billion in shareholders’ equity on its likable balance sheet. Looking ahead to the third quarter. Meta expects revenue in the range of $38.5 billion to $41 billion, up 17% from last year at the midpoint. Full-year 2024 total expenses are expected in the $96 billion to 99 billion range, unchanged from prior outlook. Reality Labs operating losses are expected to increase meaningfully year-over-year in 2024, due to ongoing product development efforts and investments to further scale Meta’s ecosystem. Meta expects infrastructure costs will be a significant driver of expense growth next year as they recognize depreciation and operating costs associated with their expanded infrastructure footprint. Full-year capital expenditures are expected to be in the range of $37 billion to $40 billion, updated from the prior range of $35 billion to $40 billion. While Meta continues to refine plans for next year, they currently expect significant capital expenditures growth in 2025 as they continue to invest in AI research and product development.

Mastercard-MA reported an 11% increase (or 13% on a currency-neutral basis) in second quarter revenues to $6.96 billion with net income charging ahead 15% (or 17% on a currency-neutral basis) to $3.26 billion and EPS up 17% (or 19% on a currency-neutral basis) to $3.50. Mastercard’s revenue growth was broad-based across its payment network and value-added services and solutions segments, powered by growth in key international markets like Europe and Latin America coupled with a healthy U.S. consumer. Increased U.S. consumer spending came on the heels of a still robust labor market and wage increases despite the headwinds of higher interest rates and inflation. Payment network net revenue increased 7% (or 9% on a currency-neutral basis) to $4.38 billion. Primary drivers of the increase included gross dollar volume growth of 9%, on a local currency basis, to $2.4 trillion, cross-border volume growth of 17% and switched transactions growth of 11%. Payment network rebates and incentives increased 14%, or 16% on a currency-neutral basis, primarily due to key customer accounts as well as new and renewed deals. Mastercard ended the quarter with 3.4 billion Mastercard and Maestro cards issued, up 7% year-over-year. Value-added services and solutions net revenue increased 18% to $2.58 billion, powered by strong demand for consulting, data analytics and marketing services, as well as the scaling of Mastercard’s fraud and security and identity and authentication solutions. During the first half of the year, Mastercard generated $4.5 billion in free cash flow with the company returning $5.86 billion to shareholders through dividend payments of $1.2 billion and share repurchases of $4.63 billion, including $2.6 billion repurchased during the second quarter at an average cost per share of $448.28. During the first four weeks of July, Mastercard repurchased an additional $820 million of its shares at an average cost per share of $431.58, leaving $8.7 billion remaining under the approved share repurchase program. Mastercard ended the quarter with $7.36 billion in cash and investments, $16.5 billion in long-term debt and $7.4 billion in shareholders’ equity. For the full year, Mastercard expects revenue growth in the low-double-digits with operating expenses expected to increase in the high-end of the high-single-digits as the company continues to invest in growth drivers for the short, medium and long-term, including generative IA.

ADP-ADP reported revenues for the fourth quarter of fiscal 2023 increased 6% to $4.8 billion with net earnings increasing 7% to $829 million and EPS up 8% to $2.02. During the quarter, Employer Services (ES) revenue increased 7% to $3.2 billion. Employer Services new business bookings increased 7% to $2 billion, with client retention of 92% and a 2% increase in US pays per control during fiscal 2024. Employer Services margins increased 220 basis points to 33%, driven by growth in client funds interest revenue and operating leverage. PEO Services revenue increased 6% to $1.55 billion on 3% growth in average worksite employees to 742,000. PEO operating margin declined 240 basis points to 13.4%, reflecting unfavorable actuarial loss development in workers’ compensation reserves.  Interest on funds held for clients increased 17% to $277 million on a 4% increase in average client funds balances to $36.1 billion and a 30 basis point increase in yield to 3.1%. For the fiscal year, ADP reported revenue increased 7% to $19.2 billion with net earnings increasing 10% to $3.8 billion and EPS increasing 11% to $9.10. During fiscal 2024, ADP generated a remarkable 83% return on shareholders’ equity. During fiscal 2024, ADP returned $3.4 billion to shareholders through share repurchases of $1.2 billion and dividends of $2.2 billion. ADP ended the fiscal year with $2.9 billion in cash, $3.0 billion in long-term debt and $4.5 billion in shareholders’ equity. Looking ahead to fiscal 2025, ADP expects revenues to increase between 5% to 6% with operating margins expanding 60 to 80 basis points and EPS up 8% to 10%.

Tuesday, July 30, 2024

Microsoft-MSFT reported a 15% increase in revenue for the fourth quarter of fiscal 2024 to $64.7 billion with net income and EPS up 10% to $22 billion and $2.95, respectively. By business segment, Productivity and Business Processes revenue increased 11% to $20.3 billion, driven by Office 365 Commercial revenue growth of 12%, a 10% increase in Microsoft 365 Consumer subscribers to 82.5 million, a 10% increase in LinkedIn revenue and 16% growth in Dynamics products and cloud services. Revenue in Intelligent Cloud increased 19% to $28.5 billion powered by a 29% jump in Azure and other cloud services revenue. More Personal Computing revenue increased 14% to $15.9 billion, driven by 12 points of net impact from the Activision acquisition. During the quarter, Microsoft generated $23.3 billion in free cash flow, up 18% from last year despite a 55% jump in capital expenditures as the company continues to invest in its AI infrastructure.  For full fiscal year, revenue increased 16% to $245.1 billion with net income and EPS increasing 22% to $88.1 billion and $11.80, respectively. During fiscal 2024, Microsoft generated a stellar 32.8% return on shareholders’ equity and $74 billion in free cash flow. Microsoft returned $39 billion to shareholders during fiscal 2024 through dividend payments of $21.8 billion and share repurchases of $17.2 billion. Microsoft ended the fiscal year with $75.5 billion in cash, $42.7 billion in long-term debt and $268.5 billion in shareholders’ equity on its pristine balance sheet. Looking ahead to the first quarter of fiscal 2025, Microsoft expects Productivity and Business Processes revenue to grow between 9% and 11%, or $20.3 billion to $20.6 billion. Intelligent Cloud revenue is expected to grow between 18% and 19% to $28.6 billion to $28.9 billion. Segment revenue will continue to be driven by Azure which is expected to grow at a 28% to 29% pace in constant currency. More Personal Computing revenue is expected in the range of $14.9 to $15.3 billion, up 9% to 12% from 2024. For the full year, revenue is expected to grow double-digits and capital expenditures is expected to be higher than fiscal 2024, driven by investments AI infrastructure.

Stryker-SYK reported second quarter sales increased 8.5% to $5.4 billion with net income increasing 11.8% to $825 million and EPS up 10.9% to $2.14. During the quarter, organic net sales increased 9%, including 7.9% from increased unit volume and 1.1% from higher prices. By business segment, MedSurg and Neurotechnology net sales increased 9% to $3.1 billion, driven by double-digit growth in Instruments and Neuro Cranial. Orthopaedics and Spine increased 7.9% to $2.3 billion on high single-digit growth in Hips and Trauma and Extremities. Gross profit margin was 63% compared to 63.7% in the prior year period. Free cash flow decreased 39% year-over-year to $518 million with the company returning $609 million to shareholders through dividend payments. Stryker ended the quarter with $1.9 billion in cash and investments, $10.1 billion in long-term debt and $19.7 billion in shareholders’ equity. Given the healthy second quarter results, positive outlook related to sustained procedural volumes and healthy demand for capital products, Stryker now expects 2024 organic sales growth in the 9% to 10% range. Should foreign currency exchange rates hold near current levels, full year reported sales will be unfavorably impacted and adjusted EPS will be adversely impacted by about $0.10 to $0.15. Given the first half performance and strong sales momentum, the company now expects adjusted EPS in the range of $11.90 to $12.10.

Starbucks-SBUX reported fiscal third quarter sales declined 0.6% to $9.11 billion with net income dropping 7.6% to $1.05 billion and EPS falling 6.1% to $0.93. Global comparable store sales declined 3%, driven by a 5% decline in comparable transactions, partially offset by a 2% increase in average ticket. North America comparable store sales declined 2%, driven by a 6% decline in comparable transactions, partially offset by a 3% increase in average ticket. International comparable store sales declined 7%, driven by a 4% decline in average ticket and a 3% decline in comparable transactions which included a 14% decline in China comparable store sales on a 7% decline in both average ticket and comparable transactions. The company opened 526 net new stores during the quarter, ending the period with 39,477 stores. U.S. and China comprised 61% of the company’s global portfolio with 16,730 and 7,306 stores in the U.S. and China, respectively. Operating margin fell 70 basis points in the third quarter, hurt by increased promotions and higher wages. During the first nine months of the fiscal year, Starbucks generated $2.6 billion in free cash flow, up 6% from last year, and representing a respectable 91% of reported earnings. During the first nine months of the fiscal year, Starbucks returned $3.2 billion to shareholders through dividends of $1.94 billion and share repurchases of $1.27 billion. Starbucks ended the quarter with $4.1 billion in cash and investments, $15.6 billion in long-term debt and $30.1 billion in total assets on its BBB-rated balance sheet. Starbucks reaffirmed its prior guidance with global revenue growth expected in the low-single digits on a low-single digit decline to flat comps with China comps also declining in the low-single digits. Management anticipates global net new store growth of about 6% on a 4% increase in the US and about 12% store growth in China. Operating margins are expected to be flat year-over-year.  EPS growth is expected in the flat to low-single digits range.  Management expects sequential revenue growth from the third to fourth quarter with pressure on margin and earnings easing in the fourth quarter as its action plans take hold.

Friday, July 26, 2024

Kinsale Capital Group-KNSL reported second quarter revenues jumped 30% to $384.6 million with net income and EPS increasing 27.2% to $92.6 million and $3.97, respectively. Net operating earnings—net income minus after-tax realized and unrealized investment gains/losses—increased 30% to $87.4 million. Management believes net operating earnings presents a better picture of the company’s underlying operating performance than net income. Gross written premiums were $529.8 million for the second quarter, up 20.9% from last year, reflecting strong submission flow from brokers and a favorable pricing environment. Underwriting income—net income minus after-tax realized and unrealized investment gains/losses, interest expense, other income and expenses and income tax—increased 23.6% to $76.1 million, largely due to a combination of premium growth and lower relative sales commissions.  Loss and expense ratios were 56.6% and 21.1%, respectively, for the second quarter, resulting in an industry-leading combined ratio of 77.7%. Net investment surged 48.3% to $35.8 million, driven by an 18.9% increase in Kinsale’s “float” to $2.0 billion and higher interest rates. During the quarter, the company’s investment portfolio returned 4.3% annualized compared to 3.8% last year. Its conservative investment portfolio consists of about 92% invested in AA-rated bonds with an average duration of about three years and 8% invested in high-quality stocks, an allocation that is expected to grow to 10% over time, enabled by the company’s conservative approach to reserves and continued robust cash flow.  Annualized operating return on equity was 28.8% for the six months ended 6/30/2024. During the first six months of the year, Kinsale generated $482.0 million in free cash flow, up 15% from last year, representing a robust 2.5 times earnings. The company returned $7.0 million to shareholders during the first half of the year through dividend payments. On the conference call, Mike Kehoe, Chairman and CEO, stated that Kinsale strives to be capital efficient and has no desire to have “a super abundance of capital beyond what we need to operate the business.” Excess capital will be returned to shareholders through dividends or share buybacks with a bias towards share repurchases. Kinsale ended the quarter with $171.0 in cash, $184.0 in long-term debt and $1.3 billion in shareholders’ equity on its strong balance sheet.

Gentex-GNTX reported second quarter sales dipped 2% to $572.9 million with net earnings and EPS each driving 21% lower to $86.0 million and $.37, respectively. During the quarter, light vehicle production weakened in most of the company’s primary markets as automakers pulled back production in June given high dealer inventories. With sales levels coming in below forecast and unfavorable product mix, the company’s gross margin declined to 32.9% during the quarter compared to 33.1% in the prior year period.  Higher operating expenses and lower other income also impacted earnings during the quarter. During the first half of the year, Gentex’s free cash flow increased 29% to $195.5 million with the company repurchasing 1.4 million of its shares at an average price of $34.43 per share during the quarter. The company has 13.2 million shares remaining available for repurchase and will likely be more aggressive on share repurchases given current attractive valuation levels.  While production levels for automakers returned to normal in July, light vehicle production  is expected to decline 2% in 2024 and grow 2% in 2025. Gentex expects to return to meaningful growth and profitability in the second half of the year and continues to expect to report record revenues in 2024 and 2025 despite the temporary setback in the second quarter. The company also expects to achieve its goal of gross margins in the range of 35%-36% over time. For fiscal 2024, revenues are expected in the range of $2.4 billion to $2.5 billion with gross margin in the range of 34% to 34.5%.

Thursday, July 25, 2024

Texas Roadhouse-TXRH reported a meaty 14.5% increase in second quarter revenue to $1.3 billion with net income increasing 46% to $120 million and EPS up 47% to $1.79. Comparable restaurant sales increased 9.3% at company restaurants and 8.3% at domestic franchise restaurants. Comparable restaurant sales at company restaurants for the first four weeks of the third quarter of 2024 increased 8%. Average weekly sales at company restaurants were $158,991, up 8.4% from last year, of which $19,975 were to-go sales, up 8% from last year. Restaurant margin dollars increased 32.7% to $242.6 million, primarily due to higher sales. Restaurant margin, as a percentage of restaurant and other sales, increased to 18.2% from 15.7%in the prior year driven by higher sales. The benefit of a higher average guest check and improved labor productivity more than offset wage and other labor inflation of 4.4% and commodity inflation of 0.4%. During the quarter, six company restaurants and three franchise restaurants were opened bringing the total to 762 restaurants on June 30, 2024. During the first half of 2024, Texas Roadhouse generated $221.8 million in free cash flow, up 66% from last year. The company returned $116.6 million to shareholders year-to-date via dividend payments of $81.5 million and share repurchases of $35.1 million. Texas Roadhouse ended the quarter with $197.4 million in cash, no long-term debt and $1.26 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 wage and other labor inflation of 4% to 5%. Management updated its expectations with store week growth now expected at about 7.5%, including a benefit of 2% from the 53^rd week and commodity cost inflation of approximately 2%. Total capital expenditures are expected to be in the range of $360 million to $370 million. Jerry Morgan, CEO of Texas Roadhouse stated, “We continued our momentum in the current quarter as strong traffic trends and some relief on commodity inflation led to increased profitability across all of our brands. With our operators delivering solid operating results, and a balanced development pipeline, we are well positioned for the second half of the year.”

Roche-RHHBY reported revenue for the first half of 2024 increased 5% at constant exchange rates (CER) to CHF 29.85 billion with net earnings declining 4% at CER to CHF 8.05 billion and EPS increasing 9% at CER to CHF 10.23. Sales growth accelerated to 9% at CER during the second quarter as the decline in COVID-19-related sales no longer had an impact on overall sales. For the first half of 2024, Pharmaceuticals Division sales increased 5% at CER or 8% excluding COVID-19-related sales to CHF 22.6 billion with operating margins of 50.4%, up 100 basis points from last year. Pharmaceutical sales were driven primarily by higher sales of Vabysmo (severe eye diseases), with growing demand for Phesgo (breast cancer), Ocrevus (multiple sclerosis), Polivy (blood cancer) and Evrysdi (spinal muscular atrophy). These five medicines together generated total sales of CHF 7.3 billion, an increase of CHF 1.8 billion from the first half of 2023. The eye medicine Vabysmo, launched in early 2022, which nearly doubled sales during the first half of 2024 remained a major growth driver, generating sales of CHF 1.8 billion on growing demand in all regions, mainly the US.  Roche remains encouraged by the potential for its obesity and type-2 diabetes molecules to become a best-in-class therapy and expects to launch phase 2 trials in 2025. Diagnostic Division sales increased 5% at CER, or 9% excluding COVID-19-related sales to CHF 7.2 billion with operating margins dipping 70 basis points to 22.0%.  Immunodiagnostic products, which include cardiac, oncology and thyroid tests, were the main growth drivers (11%). Additional growth came from clinical chemistry (8%), advanced staining techniques in oncology (11%) and from companion diagnostics (46%). The continued good growth in the division’s base business was partially offset by the expected sales decline of COVID-19-related products. Management remains encouraged by the upcoming launch of its Continuous Glucose Monitor, the first monitor that incorporates predictive algorithms to prevent problems. During the first half of 2024, Roche generated CHF 8.4 billion in free cash flow, up 9% at CER, with the company returning CHF 7.89 billion to shareholders through dividend payments. Based on the strong half-year results, Roche raised its outlook for the full year with sales growth at CER expected in the mid-single-digits and EPS growth in the high-single-digits excluding the impact from the resolution of a tax matter in 2023. In addition, the company expects further dividend increase in Swiss francs.

Tractor Supply-TSCO reported second quarter revenues rose 1.5% to $4.2 billion with net income up 1% to $425.2 million and EPS up 3% to $3.93. Comparable store sales dipped 0.5% due to a comparable average transaction decline of 0.6%, partially offset by a comparable average ticket increase of 0.1%. Consumer spending shifts to services from goods and inflation pressured comparable store sales during the quarter as cautious consumers moderated their spending as unemployment ticked higher this year. The company expects long-term comparable store sales to return to 4.0%-4.5% growth over the longer term. During the quarter, the company opened 21 new Tractor Supply stores and three new Petsense stores with good productivity from the new stores. Free cash flow increased 8% during the first half of the year to $467.5 million with the company paying $237.3 million in dividends and repurchasing $255.8 million of its stock. For the full year, the company expects to return $1 billion to shareholders through dividends and share repurchases. Tractor Supply updated its full year 2024 outlook for revenues and EPS by tightening its previous outlook. Sales are now expected in the range of $14.8 billion to $15.0 billion compared to the previous outlook of $14.7 billion to $15. 1 billion with EPS now expected in the range of $10.00 to $10.40 for the year compared to the previous outlook of $9.85 to $10.50.

RTX-RTX reported second quarter sales increased 10% to $19.7 billion with net income falling to $111.0 million from $1.3 billion last year and EPS dropping to $0.08 from $0.90 last year. Excluding $0.29 of acquisition accounting adjustments, $0.03 of restructuring and other non-recurring charges, a $0.68 charge related to the expected resolution of several legacy legal matters and a $0.33 charge related to a fixed price development contract with a foreign customer at Raytheon, adjusted EPS of $1.41 was up 9% from last year. RTX ended the quarter with $206 billion in backlog, reflecting “unprecedented” demand and a book-to-bill ratio of 1.25x.  By business segment, Collins Aerospace reported organic sales increased 10% to $7.0 billion with adjusted operating margins of 16.4%, up 210 basis points from last year. Pratt & Whitney organic sales throttled ahead 19% to $6.8 billion with adjusted operating margins increasing 30 basis points to 7.9%. The division made good progress on working through its contaminated powdery metal issue. Support agreements in-line with management’s assumptions have been reached with 65% of affected customers and inspections have been ramping up according to plan with less than 1% requiring repairs. Raytheon reported organic sales increased 4% to $6.6 billion with adjusted operating margins increasing 90 basis points to 10.8%. During the quarter, the company generated $2.2 billion in free cash flow on increased working capital efficiencies. RTX delivered $867 million to shareholders during the quarter, mainly through dividend payments that were up 7% from last year, while also reducing its debt by $750.0 million.  Year-to-date, Raytheon returned nearly $1.7 billion to shareholders via dividends of $1.6 billion and $100 million in share repurchases. Raytheon ended the quarter with $6.0 billion in cash, $40.3 billion in long-term debt, and $59.0 billion in shareholders’ equity. Given the strength in its end markets and year-to-date performance, Raytheon lifted its guidance with sales now expected in the $78.75 billion to $79.5 billion range, up from prior guidance of $78.0 billion to $79.0 billion with adjusted EPS now expected in $5.35 to $5.45 range, up from prior guidance of $5.25 to $5.40. Full year free cash flow is now expected to approximate $4.7 billion, down from previous guidance of $5.7 billion, due to about $1.0 billion in payments to settle legacy legal matters and $500.0 million in payments for terminating its fixed-price development contract, partially offset by $500.0 million in operating cash flow improvements. Excluding non-recurring cash outflows, Raytheon expects to deliver free cash flow of $7.0 billion to $7.5 billion annually.  

Molina Healthcare-MOH reported second quarter revenues rose a healthy 19% to $9.9 billion with net income and EPS each dipping 3% to $301 million and $5.17, respectively. On an adjusted basis, earnings and EPS both increased 4%. The higher revenue reflected new contract wins, acquisitions and growth in the current business, partially offset by the impact of Medicaid redeterminations. The flagship Medicaid business continued to perform well during the period with strong contributions from both the Medicare and Marketplace businesses.  As of the end of the quarter, the company served about 5.6 million members, an increase of 8% compared to the prior year period. The company’s consolidated medical cost ratio (MCR) during the second quarter was 88.6% and reflects continued focus on managing medical costs. Free cash flow declined during the first half driven primarily by timing differences in government receivables and payables and tax payments. Cash flows are expected to normalize in the second half of the year. Molina reaffirmed its 2024 full year guidance with premium revenue expected to be approximately $38 billion, representing 17% growth, with EPS of at least $23.50 expected, representing about 13% growth. The company also expressed confidence in a strong foundation for growth in 2025 and beyond.

Wednesday, July 24, 2024

LVMH-LVMUY reported a 1% decline in sales to €41.7 billion with net income and EPS declining 14% to €7.2 billion and €14.54, respectively. By business segment, Wines & Spirits reported a 9% decline in organic revenue during the first half of the year to €2.81 billion with operating profits declining 520 basis points to 27.7%.  Segment results reflect the ongoing normalization of demand that began in 2023, the gradual recovery of cognac in the U.S. and tight control of inventory, especially in China. The Fashion & Leather Goods business group recorded organic revenue growth of 1% during the first half of the year to €20.8 billion with operating margins 130 basis points to a still high 38.8%.  Flagship brands Louis Vuitton and Christian Dior showed good resilience but margins were pressures by Chinese buyers who took the two hour ferry ride to Japan to gobble up bargains as the yen hit 30-year lows against the yuan. The Perfumes & Cosmetics business group recorded organic revenue growth of 6% to €4.14 billion with operating margins dipping 30 basis points to 10.8%. Results reflect rapid growth in fragrances and makeup and ongoing success in LVMH’s iconic brands. The Watches & Jewelry business reported a 3% decline in organic revenue to €5.15 billion with operating margins falling 310 basis points to 17.0%, squeezed by exchange rate fluctuations. Tiffany & Co. continued to showcase its iconic lines through initiatives including a new campaign that received an excellent response. Selective Retailing reported an 8% increase in organic revenue growth to €8.6 billion with operating margins increasing slightly to 9.1%. Sephora rang up new records for revenue and earnings while DFS sales continue to recover though they remain below 2019 levels. During the first half of the year, LVMH generated €4.56 billion in free cash flow, up 46% from last year, due to the timing of tax payments, a 24% drop in capital expenditures and working capital efficiencies. The company paid €4.2 billion in dividends during the first half of the year. When asked on the conference call about share buybacks, Jean-Jacques Guiony, CFO, stated that political and taxation uncertainties make share buybacks unwise until government policies become certain. LVMH ended the first half with €8.3 billion in cash and investments, €11.5 billion in long-term debt and €66.5 billion in shareholders’ equity on its exquisite balance sheet.  In an uncertain geopolitical and economic environment, LVMH remains confident and focused on continuously enhancing the desirability of its brands, drawing on the exceptional quality of its products and excellence in retail. The company’s focus on the highest quality across all its activities, combined with the energy and unparalleled creativity of its teams, will reinforce the LVMH Group’s global leadership position in luxury goods once again in 2024.

General Dynamics-GD reported an 18% jump in revenues to $12.0 billion with net earnings soaring 22% to $905.0 million and EPS up 21% to $3.26. Company-wide backlog was $91.3 billion with a total estimated contract value of $129.8 billion. The consolidated book-to-bill ratio, defined as orders divided by revenue, was 0.8-to-1 for the quarter.  By business segment, Aerospace revenues skyrocketed 51% to $2.94 billion, powered by new aircraft deliveries and aircraft services. Gulfstream delivered 37 jets during the quarter including 11 of the newly certified G700 planes, four fewer than expected. One of the four has since been delivered and the other three should follow shortly. The division expects to deliver 160 business jets during 2024, including 50 to 52 G700s. Aerospace operating margins fell 120 basis points to 10.9% due to the extended certification period. Orders increased 8% to $2.7 billion, resulting in a backlog of $20 billion and a book-to-bill ratio of 0.9 to 1. Combat Systems revenue increased 19% to $2.3 billion generating a 13.7% operating margin, up 70 basis points from last year. Backlog grew to $16.7 billion on $3.4 billion of orders, the highest since 2014, bringing the book-to-bill ratio of 1.5x for the quarter. Marine Systems reported a 13% increase in revenues to $3.5 billion driven by the Columbia-class and increased Virginia-class programs. Operating margins dipped 60 basis points to 7.1% on contract delays and supply chain challenges. Backlog sank 5.5% to $41.3 billion on a drop in orders from $3.2 billion last year to $700 million during the most recent quarter. Technologies reported a 2.5% increase in revenue to $3.3 billion with a 13% increase in operating earnings to $320.0 million. Backlog of $13.2 billion is down slightly due to an international divestiture. During the quarter, General Dynamics generated $613 million in free cash flow, up 18% from last year, representing a cash conversion ratio of 68%. Year-to-date, the company generated $176.0 million in free cash flow, down from $1.8 billion last year, as the company built its working capital to fund major programs like the G700. This working capital build will unwind during the second half of 2024 resulting in a full year cash conversion approaching 100%. Year-to-date, General Dynamics returned $889.0 million to shareholders through dividends of $750 million and share repurchases of $139.0 million, including $34 million purchased during the second quarter at an average cost of $285.71 per share. For the full year, General Dynamics expects revenue in the range of $47.8 billion to $48.2 billion, up 13.5% from last year at the midpoint, with EPS in the range of $14.40 to $14.50, up 20.2% at the midpoint.

Tuesday, July 23, 2024

Alphabet-GOOGL reported second quarter revenues increased 14% to $84.7 billion with net income jumping 29% to $23.6 billion and EPS up 31% to $1.89. The company’s strong operating margin expansion from 29% in the prior year period to 32% this quarter reflects good cost management with operating margin expansion expected for the full year. This strong performance reflected ongoing strength in Search and momentum in Cloud, which for the first time exceeded $10 billion in quarterly revenues and $1 billion in operating profit. Alphabet’s deep partnership with Oracle significantly expanded joint cloud offerings to a large customer base.  Year-to-date, Alphabet’s AI infrastructure and generative AI for Cloud customers have already generated billions in revenues and are being used by more than two million developers. AI is supporting increases in Search usage and satisfaction as it is delivering better responses on more types of Search. All six of Alphabet’s products with more than two billion monthly users each are using the company’s Gemini AI. Revenues from YouTube ads increased 13% during the quarter to $8.7 billion as YouTube has remained number one in the U.S. streaming watch time according to Nielsen. Views of YouTube Shorts and connected TVs more than doubled last year. In Other Bets, Waymo, the company’s fully autonomous car driven by AI, has provided more than two million trips to date and has driven more than 20 million fully autonomous miles on public roads with Alphabet planning to continue to significantly invest in Waymo. Free cash flow declined 21% during the first half of the year to $30 billion as the company continues to heavily invest in servers and datacenters with $25 billion spent on capital expenditures in the first half to support future growth. During the first half, the company paid $2.5 billion in dividends and repurchased $31.4 billion of its common stock. The company ended the quarter with a fortress balance sheet with nearly $135 billion in cash and investments, $13.2 billion in long-term debt and $300.8 billion in shareholders’ equity.

Canadian National Railway-CNI reported second quarter sales increased 7% to C$4.3 billion with net income falling 5% to C$1.1 billion and EPS down 1% to C$1.75. Train length of 8,015 feet increased 1% and revenue ton miles (RTMs) of 59,936 million increased by 7%. The railroad’s operating ratio, defined as operating expenses as a percentage of revenues, of 64.0%, increased 3.4-points and adjusted operating ratio of 62.2%, increased 1.6-points due to some transient challenges impacting costs along with traffic diversions due to labor uncertainty. During the quarter, Canadian National Railway generated C$960 million in free cash flow with the company returning C$1.62 billion to shareholders during the quarter through dividends of C$535 million and share repurchases of C$1.086 billion. Canadian National will continue to reward shareholders with a 7% increase in the dividend and share buybacks of up to 32 million common shares during 2024. The company updated its full-year outlook and now expects adjusted diluted EPS growth in the mid to high single-digit range, compared to prior guidance of approximately 10% growth. Return on invested capital is now expected to be approximately 15% compared to its previous expectation of ranging between 15% and 17%, which remains the railroad’s long-term target. 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.

Visa-V rang up a 10% increase in fiscal third quarter revenues to $8.9 billion with net earnings charging ahead 17% to $4.87 billion and EPS jumping 20% to $2.40. Payments volumes increased 7%, Cross-Border volume excluding intra-Europe transactions grew 14%, Cross-Border total nominal volume increased 12% and Transactions increased 10% to 59.3 billion. Much of the payments growth came from Europe and Latin America, but U.S. payments grew by 5.1%, faster than U.S. economic growth pointing to stable consumer spending though spending moderated in the lower-spend cohort. Total cards grew 8% to 4.5 billion at quarter’s end. By business segment, Service revenue increase 8% to $3.97 billion, Data Processing increased 9% to $4.49 billion, International Transaction revenue increased 9% to $3.2 billion and other revenue jumped 31% to $780 million on strong consulting and marketing ahead of the Olympics. Incentives, up 11%, offset revenues by $3.5 billion. During the first nine months of the fiscal year, Visa generated $12.3 billion in free cash flow, down 5.6% from last year on working capital changes. Visa returned $14.0 billion to shareholders fiscal  year-to-date through dividends of $3.2 billion and share buybacks of $10.87 billion. On June 30, 2024, $18.9 billion remained under the current share buyback authorization. Visa continues investing in AI to increase sales throughout the ecosystem while reducing fraud. Visa ended the quarter with $19.7 billion in cash and investments, $20.6 billion in long-term debt and shareholders’ equity of $39.7 billion on its strong balance sheet. Looking ahead to the full fiscal year, Visa expects net revenue growth in the low double-digits, with operating expenses increasing in the high single-digits to low double-digits and EPS up low-teens.

UPS-UPS reported second quarter revenues dipped 1.1% to $21.8 billion with net income and EPS each dropping 32% to $1.4 billion and $1.65, respectively. These results included an after-tax charge of $120 million or $.14 per share to settle an international regulatory matter and for other charges. While results came in less than management had expected due to a shift in product mix to lower value services, this quarter was the first quarter in nine quarters that the company returned to volume growth in the U.S. following the surge in volume during the pandemic. As expected, due to union labor wage increases, the company’s operating profit declined during the first half of the year with expectations that the company will return to operating profit growth in the second half of the year. Free cash flow declined 11% during the first half of the year to $3.3 billion with the company paying $2.7 billion in dividends. For the full year, UPS now expects revenues to approximate $93 billion with an adjusted operating margin of 9.4% which is lower than its previous guidance of 10% to 10.6% based on the expectation that customers will continue to trade down to lower cost services such as ground versus air.  The company expects to exit the year with an operating margin of 10% and a goal of improving that margin to 12% over the long term. For the full year, free cash flow is expected to approximate $5.8 billion with the company planning $4.0 billion in capital expenditures, dividends of $5.4 billion and share repurchases resuming at $500 million in 2024 and targeted at $1 billion, annually, thereafter.

Genuine Parts-GPC reported second quarter sales increased 0.8% to $6.0 billion with net income and EPS declining 14% to $295.5 million and $2.11, respectively. Sales growth reflects a 2.2% benefit from acquisitions, partially offset by a 0.9% decrease in comparable sales and 0.5% unfavorable impact of foreign currency.  Excluding restructuring and acquisition integration costs, net income dipped 1% and EPS was flat. By business segment, Industrial sales declined 1.1% to $2.2 billion on a 1.6% decline in comp store sales, both pressured by the longest period of weak industrial activity since the Great Recession. Five of GPC’s fourteen end markets remained positive during the quarter. Industrial operating margins declined 2% to $277 million, representing 12.4% of sales, down 10 basis points from last year. Automotive sales increased 2% to $3.7 billion on a 0.6% dip in same store sales due to accelerated softness in Europe and choppy demand in the U.S. automotive aftermarket. Segment operating profit declined 5% to $314 million, representing 8.4% of sales, down 60 basis points on sales deleverage combined with cost inflation outpacing sales growth. Despite the difficult macroeconomic and geopolitical environment, during the first half of 2024, the company generated robust free cash flow of $352.6 million, up 40% from last year, on working capital efficiencies. Genuine Parts returned $347.0 million to shareholders year-to-date through dividends of $272.0 million and share repurchases of $75.0 million at an average cost of $147.06 per share. Genuine Part’s 2024 cash dividend of $4.00 per share, up 5% from last year, marks the 68^th consecutive year of dividend increases. During the first half of 2024, the company invested $580.0 million in acquisitions, including the purchase of MPEC, the largest independent operator of NAPA Auto Parts in the U.S., operating 181 stores in six Mid-West states. This acquisition aligns with the company’s goal of increasing NAPA store ownership in priority market to boost profits. Genuine Parts ended the quarter with $555.3 million in cash, $3.0 billion in long-term debt and $4.5 billion in shareholders’ equity on its strong balance sheet. Given uncertainty surrounding the timing of interest rate cuts that should boost industrial activity and consumer confidence, management moderated its 2024 guidance. Full year sales are now expected to increase in the 1% to 3% range, down from previous guidance of 3% to 5%, with EPS expected in the $8.55 to $8.75 range, down from previous guidance of $9.05 to $9.20. The company reiterated its guidance for operating cash flow which remains in the $1.3 billion to $1.5 billion range with free cash flow still expected in the $800 million to $1.0 billion range.

PulteGroup-PHM reported second quarter revenues increased 10% to $4.6 billion with net income up 12% to $809 million and EPS jumping 19% to $3.83. Reported net income for the quarter includes a $52 million pre-tax, or $0.19 per share, insurance benefit recorded in the period, and a $13 million, or $0.06 per share, benefit related to the favorable resolution of certain state tax matters. Prior year reported net income included a $65 million pre-tax, or $0.21 per share, insurance benefit recorded in the period. Home sale revenues for the second quarter increased 10% to $4.4 billion, driven by an 8% increase in closings to 8,097 homes, combined with a 2% increase in average sales price to $549,000. New orders decreased by 4% during the quarter to 7,649 homes, reflecting the higher interest rates which impacted affordability and overall consumer confidence. The dollar value of new orders increased 2% to $4.4 billion, and the company operated out of an average of 934 communities, which was a 3% increase over the prior quarter. The cancellation rate in the second quarter was 9% of beginning backlog, which is consistent with last year. The company’s backlog at quarter end decreased 4% to 12,982 and the dollar value of homes in backlog was $8.1 billion, which is a decrease of 1% over last year. Mortgage capture rate was 86% for the quarter, up from 80% last year. During the quarter, Pulte invested $474 million in land acquisition and $738 million in development of existing land assets. PulteGroup controlled approximately 225,000 lots with 53% held through option. Year-to-date free cash flow was $602 million, representing a decrease of 57%, primarily due to an increase in inventories. During the first half of 2024, the company returned $645 million to shareholders through dividends and share repurchases. During the quarter, PulteGroup repurchased 2.8 million shares at an average price of $113.79. Since 2013, the company has bought back almost 50% of its shares and the dividend has increased 4-fold including the recent 25% increase to $0.20 per share. The ongoing strength of PulteGroup’s quarterly financial results has allowed the company to deliver a high return on equity of 27% for the trailing 12 months. The company ended the quarter with $1.4 billion in cash, $1.6 billion in long-term debt and $11.2 billion in shareholders’ equity on its sturdy balance sheet.

Molina Healthcare-MOH announced that it has entered into a definitive agreement to acquire ConnectiCare Holding Company, Inc. The purchase price for the transaction is $350 million, representing 25% of expected 2024 premium revenue of $1.4 billion. ConnectiCare is a leading health plan in the state of Connecticut serving approximately 140,000 members across Marketplace, Medicare, and certain commercial products as of June 30, 2024. The acquisition represents a strong strategic fit for Molina, adding an established government business, recognized brand, and a statewide provider network. The acquisition is expected to add $1.00 per share to new store embedded earnings. "The addition of ConnectiCare to Molina brings a well-rounded government sponsored healthcare plan, and a new state, to our portfolio," said Joe Zubretsky, President and CEO of Molina. "Today’s announcement demonstrates the continuing success of our strategy of acquiring stable revenue streams, deploying capital efficiently, and delivering value through the application of the standard Molina playbook." Molina intends to fund the purchase with cash on hand. The transaction is expected to close in the first half of 2025.

Friday, July 19, 2024

Molina Healthcare-MOH announced that the Florida Agency for Healthcare Administration (AHCA) has awarded a new Medicaid managed care contract to Molina’s health plan subsidiary, Molina Healthcare of Florida, Inc. Under the contract award in Miami-Dade and Monroe Counties, Molina expects to serve approximately 90,000 Medicaid beneficiaries. The contract term is expected to commence on January 1, 2025, and to run through December 31, 2030. 

Microsoft-MSFT suffered an outage that impacted airlines, banks and other firms worldwide due to a Crowdstrike cybersecurity update for Windows. Microsoft 365 services have been restored.

Wednesday, July 17, 2024

Johnson & Johnson-JNJ reported second quarter sales increased 4.3% to $22.4 billion with net income falling 12.8% to $4.69 billion and EPS declining 5.9% to $1.93. Excluding special items, adjusted EPS increased 10.2% to $2.82. By business segment, Innovative Medicine sales increased 5.5%, or 8.8% operationally excluding the COVID-19 vaccine, to $14.5 billion, driven by DARZALEX, ERLEADA and Other Oncology in Oncology, TREMFYA and STELARA in Immunology, and SPRAVATO in Neuroscience. MedTech worldwide sales increased 2.2%, or 4.4% operationally, to $7.96 billion with acquisitions and divestitures positively impacting growth by 0.4%. Operational sales growth was driven primarily by electrophysiology products and Abiomed in Cardiovascular and wound closure products in General Surgery.  During the quarter, Johnson & Johnson generated about $7.5 billion in free cash flow and returned $3.0 billion to shareholders through dividend payments. Johnson & Johnson deployed $17.0 billion in strategic in growth opportunities during the quarter. The company ended the quarter with about $25 billion in cash and investments and $41 billion in debt on its AAA-rated balance sheet. During the conference call, management provided an update on the talc litigation. In conjunction with plaintiff attorneys, Johnson & Johnson has committed $8.0 billion over 25 years to resolve 99.5% of the lawsuits. Plaintiffs have until July 26 to vote on the proposed settlement. If 75% of plaintiffs approve the settlement, Johnson & Johnson will move ahead with plans to split into two entities with the talc liability-holding entity filing for bankruptcy. Johnson & Johnson updated its 2024 guidance to reflect improved performance and the impact for the recent acquisitions of Shockwave Medical, Proteologix, and NM26 Bispecific Antibody. Reported 2024 sales are expected to increase 4.7% to 5.2% to between $88.0 billion and $88.4 billion with operating margins declining 120 basis points due to the recent acquisitions and adjusted EPS inching ahead 0.5% to 1.5% to between $9.97 to $10.07. Management expects sales growth for Innovative Medicine will slow during the second half of the year on the anticipated entry of STELARA biosimilars and continued uptake from recently launched products.  MedTech sales growth is expected to accelerate in the back half of the year on a recovery in contact lenses, further expansion into high-growth segments including the integration of its Shockwave acquisition and continued growth of new products.  

Roche Holdings-RHHBY announced positive topline results from two arms of an ongoing multi-part Phase I clinical trial for CT-996, an investigational, once-daily, oral small molecule GLP-1 receptor agonist being developed for the treatment of both type 2 diabetes and obesity. The data showed that treatment with CT-996 in participants with obesity and without type 2 diabetes resulted in a clinically meaningful placebo-adjusted mean weight loss of -6.1% within four weeks. CT-996 was well tolerated, with mostly mild or moderate gastrointestinal-related adverse events, consistent with the safety profile of the incretin drug class. There were no treatment discontinuations related to the study drug. The study results also showed that blood levels of CT-996 were largely unaffected either during fasting or after a standardised high-fat meal. Thus, CT-996 could potentially be dosed without regard to meal timing, thereby affording greater dosing flexibility for patients. Based on the study data, CT-996 is anticipated to be used not only as a therapy for achieving glycaemic control and inducing weight loss, but also potentially for oral weight maintenance therapy following weight loss induced by injectables.

Tuesday, July 16, 2024

UnitedHealth Group-UNH reported second quarter revenues rose 6% to $98.9 billion with net income dropping 23% to $4.2 billion and EPS down 22% to $4.54. On an adjusted basis, excluding charges related to the cyberattack at Change Healthcare and the sale of South American operations, EPS increased 11% during the quarter. The nearly $6 billion increase in revenues was led by strong expansion in people served at Optum and UnitedHeathcare’s commercial domestic offerings which grew 2.3 million year-to-date. The second quarter medical cost ratio increased to 85.1% from the prior year’s 83.2% reflecting the cyberattack charges and the effects of CMS’s Medicare funding reductions and business and member mix. The company’s operating cost ratio of 13.3% compared favorably to 14.9% in 2023, reflecting continued strong operating cost efficiency. Cash flow from operations in the second quarter was $6.7 billion- or 1.5-times net income. In June, the company increased its dividend 12%, marking the 15^th consecutive year of double-digit increases. The company maintained its adjusted earnings outlook for 2024 of $27.50 to $28.00 per share as it was able to absorb the charges related to the cyberattack due to strong growth across its businesses and strong and sustained operating efficiency. UnitedHealth is well positioned for continued growth in 2025.

Friday, July 12, 2024

Fastenal-FAST rang up a 1.8% increase in second quarter sales to $1.9 billion with net income and EPS dipping 2% to $292.7 million and $0.51, respectively.  Daily Sales Rate growth continued to decline to 1.8% from 5.9% last year, pressured by sub-50 PMI readouts in 19 of the last 20 months, marking one of the longest periods of weak manufacturing activity since 1971. Despite the weak macroenvironment, Fastenal’s leadership team remains encouraged by efforts to accelerate customer acquisition with the second consecutive quarter of strong Onsite and FMI (Fastenal Managed Inventory) signings and low double-digit growth in national account signings. These market share gains should be increasingly impactful to sales trends during the second half of 2024 into 2025. Operating margins declined 80 basis points from last year on unfavorable customer and product mix, short-term supply chain inefficiencies to support certain warehousing clients and increased costs from Fastenal’s 2024 Customer Expo. During the quarter, Fastenal generated $201.9 million in free cash flow, down 18% from last year, reflecting the shift from rightsizing inventory from the bulge built to counter pandemic-related supply chain interruptions to maintaining it.  Fastenal returned $223.3 million to shareholders during the quarter through dividend payments. Fastenal ended the quarter with $255.5 million in cash, $125.0 million in long-term debt and $3.5 billion in shareholders’ equity on its pristine balance sheet. Fastenal anticipates net capital spending in the $235.0 million to $255.0 million range, reflecting greater spending on FMI devices and Fastenal Intelligence, Fastenal’s in-house AI offering.  In a separate announcement, Fastenal said it appointed Jeff Watts, a 28-year company veteran with deep global sales experience, to the position of President and Chief Sales Officer, effective August 1, 2024. Mr. Watts will assume the President role from Dan Florness, who will be voluntarily vacating the President position on the effective date. Mr. Florness will continue to serve as Fastenal's CEO and as a member of its Board of Directors.

Thursday, July 11, 2024

PepsiCo-PEP reported second quarter revenues increased approximately 1% to $22.5 billion with net income and EPS each popping 12% higher to $3.1 billion and $2.23, respectively. Strong gross and operating margin expansion led to the double-digit earnings growth thanks to strong productivity initiatives. The more modest revenue growth during the quarter was impacted by the recalls at Quaker Oats and value-conscious consumers cutting back on spending or switching to cheaper supermarket-brands for Frito-Lay products due to persistent inflationary pressures. In North America, sequential volume trends improved for PepsiCo beverages led by accelerated growth for Pepsi and Mountain Dew and market share gains by Gatorade. Internationally, PepsiCo fared even better with organic revenues up 5.5% and core operating profit up 10% despite a cautious consumer in China. PepsiCo continues to see a long runway for profitable growth over the next decade for the $36 billion international business, which represents nearly 40% of total revenues. During the first half, PepsiCo paid $3.5 billion in dividends and repurchased $461 million of its common stock. For the full year, the company continues to expect to pay $7.2 billion in dividends and repurchase $1 billion of stock. For 2024, the company now expects approximately 4% organic revenue growth (previously at least 4%) and continues to expect at least 8% growth in core constant currency EPS.

Raytheon-RTX was awarded a $1.2 billion contract to supply Germany with additional Patriot^® air and missile defense systems. Patriot is the only combat-proven ground-based air and missile defense capability available in the world to defeat advanced long-range cruise missiles, tactical ballistic missiles, and the full spectrum of air-breathing threats. Patriot is the foundation of air defense for 19 countries, including Germany, the U.S. and Ukraine, and it continues to demonstrate its effectiveness against the most advanced and complex threats.

Friday, June 28, 2024

Warren Buffett, CEO of Berkshire Hathaway-BRKB, donated another $5.3 billion or more than 13 million shares of Berkshire Hathaway Class B shares to five charitable foundations.  During the past 18 years, the five foundations have received Berkshire B shares with a value when received of about $55 billion. Buffett’s remaining A shares are currently worth about $130 billion, with more than 99% of that amount also earmarked for philanthropic usage.  Buffett noted that, “Nothing extraordinary has occurred at Berkshire; a very long runway, simple but generally sound capital deployment, the American tailwind and compounding effects produced my current wealth.”  When 93-year-old Warren Buffett dies, he specified that nearly all of his remaining wealth will go to a new charitable trust overseen by his daughter and two sons. His three children must decide unanimously which philanthropic purposes the money then goes to serve. Buffett quipped, “I like to think I can think outside the box, but I’m not sure if I can think outside the box when it’s 6 feet below the surface and do a better job than three people who are on the surface who I trust completely.” Buffett, nevertheless, shares his personal perspective about giving. “It should be used to help the people that haven’t been as lucky as we have been,” he said. “There’s eight billion people in the world, and me and my kids, we’ve been in the luckiest 100th of 1% or something. There’s lots of ways to help people.”

Thursday, June 27, 2024

Nike-NKE reported fourth quarter revenues dipped 2% to $12.6 billion with net income racing 45% higher to $1.5 billion and EPS up 50% to $.99. Gross margin increased 110 basis points to 44.7%, primarily due to strategic pricing actions and lower freight and logistics costs. For the full year, revenues were relatively flat at $51.4 billion with net income up 12% to $5.7 billion and EPS up 15% to $3.73. Return on shareholders’ equity for the year expanded to a robust 39.7%. During fiscal 2024, operating cash flow increased 27% to $7.4 billion thanks to significant working capital improvement. For the year, Nike paid $2.2 billion in dividends, up 8% from the prior year, and repurchased 41.4 million shares of its common stock for $4.3 billion at an average price of $103.86 per share. The company has approximately $9 billion remaining authorized for future share repurchases. Nike faced challenges in the fourth quarter, such as foreign exchange headwinds, softness in traffic in Greater China and lower overall consumer spending due to macro uncertainty. Revenues in Nike’s lifestyle brands declined due to gaps in innovation compared to its competitors. These challenges are expected to persist in fiscal 2025, resulting in the company disappointingly lowering its outlook for the year as it works through a product cycle transition and rebalances its portfolio. For fiscal 2025, Nike now expects revenue to be down mid single digits versus its initial outlook for positive growth. The fiscal 2025 first quarter revenues are expected to drop 10% as its new products will not yet be at scale but revenues are expected to sequentially improve for the balance of the year with innovative footwear concepts coming in the second half of fiscal 2025.  Nike will be tightly managing costs and expects gross margin to improve 10 to 30 basis points for the year.  

Wednesday, June 26. 2024

Paychex-PAYX reported fiscal fourth quarter revenues increased 5% to $1.3 billion with net income and EPS each up 8% to $379.9 million and $1.05, respectively. Interest on funds held for clients increased 54% during the quarter to $38.2 million primarily due to higher average interest rates and invested balances. For the full fiscal 2024 year, revenues increased 5% to $5.3 billion and net income and EPS each increased 9% to $1.7 billion and $4.67, respectively. Return on shareholders’ equity for the year was an exceptional 44.5%. Paychex’s financial position and cash flow generation remained strong in fiscal 2024. Free cash flow increased 11% during the year to $1.7 billion with the company paying $1.3 billion in dividends and repurchasing 1.5 million shares of its common stock for $169.2 million at an average cost of $112.80 per share. Paychex’s clients, small and mid-sized businesses, continue to face a challenging operating environment due to complex regulations, a tight labor market and inflationary pressures. In addition to its other services, Paychex is developing solutions to help clients find qualified candidates to hire, which remains one of the most difficult challenges for small businesses. For fiscal 2025, Paychex anticipates revenue growth in the range of 4% to 5.5% with adjusted EPS growth in the range of 5% to 7%. Interest on funds held for clients is expected to grow to be in the range of $150 million to $160 million.

Monday, June 24, 2024

UPS-UPS announced it has entered into an agreement to sell its Coyote Logistics business unit to RXO, Inc., for $1.025 billion to allow the company to focus on its core business. The transaction is expected to close by the end of the year at which time UPS will update its financial outlook.

Friday, June 21, 2024

FactSet-FDS reported a 4.3% increase in revenues to $552.7 million for the third quarter of fiscal 2024 with net income rising 17.4% to $158.1 million and EPS jumping 18.2% to $4.09. Annual Subscription Value (ASV)--the forward-looking revenues for the next 12 months from all subscription services currently supplied to clients--plus professional services increased 4.7% to $2.22 billion and annual ASV retention was greater than 95%. Buy-side and sell-side organic ASV growth rates for the third quarter of fiscal 2024 were 5.3% and 3.7%, respectively. Buy-side clients, including institutional asset managers, wealth managers, asset owners, hedge funds, partners and corporate clients, accounted for 82% of organic ASV. The remaining organic ASV came from sell-side firms, including broker-dealers, banking and advisory, and private equity and venture capital firms. FactSet added 9 new clients during the quarter, bringing the total number of clients to 8,029. User count increased by 1,662 to 208,140.  Operating margins increased 410 basis points to 36.6%, mainly due to a reduction in bonus accruals, a one-time payroll tax adjustment and a higher capitalization benefit. During the quarter, FactSet generated $216.9 million in free cash flow, up 11.4% from last year. The company returned $99.4 million to shareholders through share repurchases of $59.8 million at an average cost per share of $442.12 and dividends of $39.6 million. FactSet increased its dividend by 6% during the quarter, marking the 25^th year of consecutive dividend increases and the 44^th consecutive year of dividend payments. During the first nine months of the fiscal year, FactSet generated $477.5 million in free cash flow, up 11.4% from last year and representing a robust 107% of reported net income. FactSet ended the quarter with $522.0 million in cash and investments, $183.6 million in long-term debt and $1.9 billion in shareholders’ equity on its pristine balance sheet. Given the delayed recovery in end markets and continued investments in AI technology coupled with tight personnel and real estate cost controls, FactSet revised its guidance with revenues. Organic ASV plus professional services is expected to grow 4.8%. Revenues are expected to be in the range of $2.18 billion to $2.19 billion (down from prior guide of $2.2 billion to $2.2 billion) with operating margins of 33.7% to 34.0% range (up from prior guide of 32.5% to 33.0%). EPS is expected to be in the range of $14.55 to $14.95 (up from prior guide of $13.95 to $14.35).

Thursday, June 20, 2024

Accenture-ACN reported relatively flat third quarter revenues at $16.5 billion with net income and EPS each dipping 3% to $1.98 billion and $3.04, respectively, primarily due to a higher tax rate. By industry group, Health and Public Service had the strongest growth of 10% during the quarter. On a geographic basis, revenues were flat in North America with EMEA revenues down 1% and growth in other markets up 6%.  The company achieved strong new quarterly bookings of over $22 billion, up 22% over last year. Year-to-date, new bookings increased 11% to $61.1 billion with a book-to-bill ratio of 1.3. This included 23 clients with quarterly bookings of over $100 million bringing the year-to-date total to 92 clients with bookings greater than $100 million. Year-to-date, Accenture generated $2 billion in generative AI sales, which demonstrates the company’s early lead in this critical technology. The company did state that clients recognize the importance of AI but are taking it slow in adopting the technology due to the investments needed to scale the business. Accenture provided 13 million hours of training to its own employees with 55,000 employees now skilled in AI. Free cash flow declined 6% during the first nine months of the fiscal year to $5.4 billion with the company paying dividends of $2.4 billon and repurchasing $3.9 billion of its common stock. For the full fiscal 2024 year, Accenture expects revenue growth in the 1.5% to 2.5% range with EPS in the range of $11.29-$11.44, representing 5% to 6% growth. Free cash flow is expected in the range of $9.3 billion to $9.9 billion with the company planning to return at least $7.7 billion to shareholders through dividends and share repurchases.

Corpay-CPAY announced that it has signed a definitive agreement to acquire GPS Capital Markets, LLC. Terms were not provided. GPS provides business-to-business cross-border and treasury management solutions to upper middle market companies, primarily in the US. The transaction is expected to close in early 2025.  "GPS is our third largest deal ever. We’re quite excited about GPS’ assets including a blue-chip roster of clients, a team of terrific FX specialists, and a market leading FX netting technology," said Ron Clarke, chairman and chief executive officer, Corpay, Inc. "GPS presents significant revenue and expense synergies and will be accretive to our 2025 cash EPS. This acquisition puts us well on our way to scaling our Corporate Payments business to nearly $2 billion by 2026." Following the acquisition, Corpay will process cross-border payments for approximately 23,000 customers in more than 145 currencies across six continents. Additionally, Corpay currently expects second quarter 2024 results to be in line with the midpoint of the financial guidance provided in its earnings release on May 8, 2024. 

Monday, June 17, 2024

For over a decade, PulteGroup’s-PHM Built to Honor® program has provided the gift of a new, mortgage-free home to veterans injured during their term of service. In 2024, the Company has already handed over the keys to three deserving veterans and has plans for an additional 10 homes to be gifted this year. Inclusive of these 2024 projects, PulteGroup’s Built to Honor program will have donated a total of 94 homes across 19 states since the program’s inception in 2013.

Wednesday, June, 12, 2024

Oracle-ORCL reported fourth quarter revenues increased 3% to $14.3 billion with net income down 5% to $3.1 billion and EPS down 7% to $1.11. Revenue growth during the quarter was driven by 20% growth in Cloud Revenue to $5.3 billion. The company’s total remaining performance obligations (RPO) jumped 44% to $98 billion, with 39% of the RPO expected to be recognized as revenue in fiscal 2025, as Oracle signed the largest sales contracts in its history due to enormous demand for AI training of large language models and neural networks in the Oracle cloud. Massive contracts were signed by more than 30 customers, including contracts from Nvidia, Microsoft, Google, XAI and OpenAI. The world’s largest and most successful AI companies are using Oracle’s datacenters because they are faster, less expensive and more secure than others. During the year, Oracle’s free cash flow increased 39% to $11.8 billion with the company paying $4.4 billion in dividends and repurchasing $1.2 billion of its common stock. Oracle spent $6.9 billion on capital expenditures in fiscal 2024 with that amount expected to double in fiscal 2025 as the company expands its capacity to meet an enormous backlog and pipeline given strong Cloud demand with Cloud Infrastructure services expected to grow faster than 50%. For the first fiscal quarter of 2025, Oracle expects revenues to grow 5% to 7% with non-GAAP EPS expected in the range of $1.31-$1.35. Revenues, earnings and cash flow growth is expected to get stronger and accelerate each quarter during fiscal 2025 with double-digit revenue growth expected for the full year.

Tuesday, June 11, 2024

Apple-AAPL recently announced its new personal intelligence system, Apple Intelligence, at the Worldwide Developers Conference (WWDC) 2024. This system is designed to enhance the capabilities of iPhone, iPad, and Mac by integrating powerful AI generative models with personal context. It aims to deliver intelligence that is both helpful and relevant to users. Key features of Apple Intelligence include a privacy-focused approach to artificial intelligence; new writing tools that enable rewriting, proofreading, summarizing text and more; capabilities to create images from sketches; the ability to call up photographs of specific family members; and the ability to gauge traffic patterns before starting a commute. Siri will be able to tap into ChatGPT for enhanced conversational abilities. Apple Intelligence is set to transform user experience by simplifying everyday tasks and providing a more intuitive interaction with their devices.

Friday, June, 7, 2024

The TJX Companies-TJX announced that it has entered into a definitive agreement for a joint venture with Grupo Axo, S.A.P.I. de C.V. ("Axo") an operator of global brands in Mexico and South America that includes both full- and off-price formats. Under the terms of the agreement, TJX would own 49 percent and Axo would own 51 percent of the joint venture. The financial terms would be announced after closing which is expected to be later this year. TJX does not anticipate this proposed transaction to have a material impact on its previously communicated sales, profit or earnings per share guidance for its current Fiscal Year 2025, but the expansion into Mexico should provide future growth in another region of the world.

Thursday, June 6, 2024

Fastenal-FAST reported May net sales and average daily sales each increased 1.5% to $658.7 million and $29.9 million, respectively. Sales rose in each geography with the U.S. up 1.6%, Canada/Mexico inching 0.3% higher and the Rest of the World up 4.8%. By product line, Safety sales led the way with 7.5% growth with Other sales up 3.0% and Fastener sales down 4.1%. About 58% of the company’s Top 100 national accounts are growing compared to 71% a year ago. Fastenal’s total personnel increased 3.2% to 23,619 compared to last year.

Wednesday, June 5, 2024

UnitedHealth Group increased its quarterly dividend a healthy 12% to $2.10 per share, marking the 15^th consecutive year of dividend increases.

Brown-Forman-BFB reported fourth quarter revenue declined 8% to $964 million with net earnings increasing 29% to $266 million and EPS up 31% to $0.56. Fourth quarter earnings include a $175 million pre-tax gain from the sale of its Sonoma-Cutrer wine business. For the full 2024 fiscal year, Brown-Forman reported a 1% decline in sales to $4.2 billion with net earnings increasing 31% to $1.0 billion and EPS up 32% to $2.14. Results include a $267 million pre-tax gain from the sale of Finlandia and Sonoma-Cutrer. Sales for Whiskey products declined 3% (-2% organic), driven by lower volumes for Jack Daniel’s Tennessee Whiskey and Jack Daniel’s Tennessee Honey reflecting an estimated net decrease in distributor inventories. This decline was partially offset by the growth of Jack Daniel’s Tennessee Apple and the rest of the whiskey portfolio, including Jack Daniel’s super-premium expressions and Glenglassaugh old and rare cask sales. Sales for the Tequila portfolio decreased 4% (-7% organic). Herradura’s sales declined 10% led by lower volumes in the United States, reflecting an estimated net decrease in distributor inventories. el Jimador’s sales were flat (-1% organic) driven by lower volumes in Mexico and the United States offset by higher prices.  The Ready-to-Drink (RTD) portfolio delivered sales growth of 2% (flat on an organic basis). New Mix’s reported net sales increased 32% (+17% organic) fueled by higher prices. Sales of Jack Daniel’s RTD portfolio declined 6% (-5% organic) driven by lower volumes of Jack Daniel's & Cola RTD, partially offset by the continued launch of the Jack Daniel’s & Coca-Cola RTD. Sales were negatively impacted by an estimated net decrease in distributor inventories in the United States. Diplomático and Gin Mare drove the significant increase in the Rest of Portfolio's sales growth of 61% (+15% organic) led by the Developed International markets and the United States. Gross margin increased 150 basis points to 60.5%, driven by favorable price/mix and lower supply chain disruption related costs, partially offset by higher input costs and the negative effect of foreign exchange. During fiscal 2024, Brown-Forman delivered a cheerful 29.1% return on shareholders’ equity and $419 million in free cash flow, down 8% from last year. The company returned $804 million to shareholders during the fiscal year through dividends of $404 million and share repurchases of $400 million. Brown-Forman ended the fiscal year with $446 million in cash, $2.4 billion in long-term debt and $3.5 billion in shareholders’ equity on its strong balance sheet. For fiscal 2025, the 154-year-old company expects organic net sales growth in the 2% to 4% range with organic operating income growth in the 2% to 4% range and capital expenditures in the $195 million to $205 million range.

Thursday, May 30, 2024

Ulta Beauty-ULTA rang up a 3.5% increase in first quarter sales to $2.73 billion with net income falling 9.8% to $313.1 million and EPS declining 6% to $6.47.  Comparable sales increased 1.6%, driven by a 1.3% increase in transactions and a 0.3% increase in average ticket. Operating income declined 210 basis points on lower merchandise margins, higher inventory shrink, higher corporate overhead for strategic investments, higher store payroll and benefits and higher store IT expenses. During the quarter, Ulta Beauty opened 12 new stores, closed 2 stores and relocated 1 store, bringing the total number of stores at quarter-end to 1, 395. Free cash flow fell 65% from last year to $68.3 million, squeezed by the lower net income and working capital changes. During the quarter, the company repurchased $285.1 million of its common stock at an average cost per share of $485.00.  As of May 4, 2024, $1.8 billion remained available under the $2.0 billion share repurchase program announced in March 2024.  Ulta Beauty ended the quarter with $524.6 million in cash, no long-term debt and $2.3 billion in shareholders’ equity on its glamorous balance sheet. Given that management expects dynamics faced in the first quarter to continue for the balance of the year, it updated full year guidance with sales now expected in the $11.5 billion to $11.6 billion range (from $11.7 billion to $11.8 billion previously) on comparable store sales of 2% to 3% (from 4% to 5% previously) with operating margins in the 13.7% to 14.0% range (from 14.0% to 14.3% previously) and EPS in the $25.20 to $26.00 range (from $26.20 to $27.00 previously). Ulta Beauty anticipates repurchasing $1.0 billion of its shares during 2024.  

Hormel Foods-HRL reported second quarter revenues dipped 3% to $2.9 billion with net income dropping 13% to $189.3 million and EPS down 15% to $.34. Volume growth in the Foodservice segment was more than offset by lower volume in the Retail and International segments during the quarter. Earnings declined as the benefit from lower logistics expenses and higher interest and investment income was more than offset by the impact from lower net sales and higher SG&A expenses. Hormel saw a significant improvement in its operating cash flows during the first half with free cash flow jumping a plump 66% to $533 million with the company paying $305 million in dividends. For fiscal 2024, the company reaffirmed its sales growth outlook of 1% to 3%, although the sales growth will likely come in at the low end of the range given challenges in the turkey business. The company did update its full year earnings per share outlook to a range of $1.45 to $1.55 from previous expectations of $1.43 to $1.57.

Thursday, May 23, 2024

Ross Stores-ROST reported fiscal first quarter sales rose 8% to $4.9 billion with comparable sales up 3% despite macroeconomic headwinds that continued to pressure the company’s low-to-moderate income customers’ discretionary spending. Net income rang up a 31% gain to $488 million with EPS up 34% to $1.46 as expenses came in lower than planned. The company’s operating margin of 12.2% rose 205 basis points compared to 10.1% in last year’s first quarter. This improvement was primarily driven by lower distribution, incentive, and freight costs that were partially offset by the planned decline in merchandise margin to provide better values for its customers. During the first quarter of fiscal 2024, a total of 1.9 million shares of common stock were repurchased for an aggregate price of $262 million under the company’s new two-year $2.1 billion authorization approved by its Board of Directors in March 2024. The Company remains on track to buy back a total of $1.05 billion in common stock during fiscal 2024. Based on first quarter results and forward guidance, comparable store sales for the 52 weeks ending February 1, 2025 remain unchanged at up 2% to 3%, with earnings per share for the 2024 fiscal year now raised to be in the range of $5.79 to $5.98 versus $5.56 for the 53 weeks ended February 3, 2024.

Wednesday, May 22, 2024

The TJX Companies-TJX reported a strong fiscal first quarter with sales up 6% to $12.5 billion and net income and EPS each increasing a dressy 20% to $1.1 billion and $.93, respectively. Comparable store sales rose 3% during the quarter, at the high end of the company’s plan, and were entirely driven by an increase in customer transactions. Comp store sales growth was experienced at every division with sales growth reported in every geography during the quarter. This  points to the  exciting values on great brands  the company provides around the globe as it continues to gain market share. The first quarter pretax profit margin of 11.1% increased 0.8%, well above the company’s plan primarily due to lower freight costs, a reserve release and higher net interest income. Free cash flow dropped 17% during the quarter to $318 million, primarily due to an increase in capital expenditures as the company opened a net 18 new stores to end the quarter with 4,954 store locations.  During the quarter, TJX paid $380 million in dividends and repurchased $509 million of its stock. TJX continues to expect to repurchase $2.0 billion to $2.5 billion of its stock during the fiscal year thanks to its excellent financial position. For the full fiscal year, TJX continues to expect comparable store sales growth in the 2% to 3% range and increased its outlook for pretax profit margins to be in the range of 11.0 % to 11.1% resulting in higher EPS  now expected in the range of $4.03 to $4.09.

Thursday, May 16, 2024

Roche Holdings-RHHBY announced results from the Phase I clinical trial of CT-388, a dual GLP-1/GIP receptor agonist being developed for the treatment of obesity and type 2 diabetes. The study found that a once-weekly subcutaneous injection of CT-388 over 24 weeks resulted in significant weight loss in healthy adults with obesity compared to placebo. The weight loss achieved with CT-388 was clinically meaningful, with a mean placebo-adjusted weight loss of 18.8%.

Berkshire Hathaway-BRKB revealed a $6.7 billion investment in the insurer, Chubb.

Johnson & Johnson-JNJ announced that it has entered into a definitive agreement to acquire Proteologix, Inc., a privately-held biotechnology company focused on bispecific antibodies for immune-mediated diseases, for $850 million in cash, with potential for an additional milestone payment. The acquisition advances Johnson & Johnson’s leading Dermatology portfolio with opportunity to address significant unmet need in atopic dermatitis (AD) and and offers the potential to provide best-in-disease therapeutics for people with moderate to severe AD and asthma. Atopic dermatitis, also referred to as eczema, is the most common inflammatory skin disease, impacting more than 100 million adults worldwide.

Wednesday, May 15, 2024

Cisco Systems-CSCO reported third quarter revenues decreased 13% to $12.7 billion with net income and EPS down 41% to $1.9 billion and $0.46, respectively. Annualized recurring revenue (ARR) increased 22% to $29.2 billion and remaining performance obligations (RPO) increased 21% to $38.8 billion, with 52% of this amount to be recognized as revenue over the next 12 months.  Free cash flow declined 50% during the first nine months of the year to $6.7 billion with the company paying $4.8 billion in dividends and repurchasing $3.7 billion of its common stock, including 26 million shares repurchased in the third quarter at an average price of $49.22 per share. Cisco maintains a strong balance sheet and ended the quarter with $18.8 billion in cash and investments, $20.1 billion in long-term debt and $45.8 billion in shareholders’ equity. During the quarter, Cisco closed the acquisition of Splunk, a public cybersecurity and observability company and Isovalent, a privately held cloud native solutions company. For the fourth quarter of fiscal 2024, management expects revenue in the range of $13.4 billion to $13.6 billion with EPS expected in the range of $0.46 to $0.51. For the full-year, Cisco expects revenue in the range of $53.6 to $53.8 billion and EPS of $2.46 to $2.51.

Wednesday, May 8, 2024

Corpay-CPAY reported first quarter revenues increased 4% to $935.3 million, or up 8% excluding the Russia divestiture, with net income up 7% to $229.8 million and EPS up 8% to $3.12. Same store sales declined 2%, up from down 3% last quarter.  By business segment, Vehicle Payments were flat at $494.1 million with operating profits of 45.7%, Corporate Payments increased 17% to $265.4 billion with operating profits of 39.5%, Lodging Payments declined 9% to $111.3 million with operating margins of 42.5% and other up 12% to $64.5 million with operating margins of 30.5%. During the quarter, Corpay generated $309.0 million in free cash flow, down 63% from last year on unfavorable working capital changes. During the quarter, Corpay repurchased $321.0 million of its shares for an average cost per share of $291.82 and an additional $450.0 million in April at an average cost per share of $321.43. The company expects to complete its $800 million share buy back program in May. Corpay ended the quarter with $1.3 billion in cash, $4.86 billion in long-term debt and $3.25 billion in shareholders’ equity. Given undated unfavorable foreign exchange rates and the expectation of higher-for-longer interest rates, management updated guidance with revenues now expected in the $3.96 billion to $4.04 billion range, up 6% from last year, with adjusted EPS in the $18.80 to $19.20 range, up 12% from last year.

Microsoft-MSFT announced a broad investment package designed to strengthen the role of Southeast Wisconsin as a hub for AI-powered economic activity, innovation, and job creation. These investments include $3.3B in cloud computing and AI infrastructure, the creation of the country's first manufacturing-focused AI co-innovation lab, and an AI skilling initiative to equip more than 100,000 of the state's residents with essential AI skills.

Google-GOOGL DeepMind has released a new version of AlphaFold, a landmark tool for predicting protein structures, that puts the artificial intelligence software on a path to make breakthroughs in biology research and bolster a business that Google’s AI chief says could be worth north of $100 billion. 

Saturday, May 4, 2024

Berkshire Hathaway-BRKB reported the company’s net worth during the first quarter of 2024 increased by 1.8%, or $10.2 billion, to $571.5 billion with book value equal to about $397,697 per Class A share as of 3/31/24. Berkshire boasts, by far, the largest shareholders’ equity of any U.S. company.

On a GAAP basis, Berkshire reported net earnings of $12.7 billion for the first quarter of 2024 compared to $35.5 billion in the prior year. 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 period are usually meaningless. Berkshire’s five major equity investment holdings which represent about 75% of total equities held as of 3-31-24, include American Express at $34.5 billion (which charged 21% higher during the first quarter or $6.1 billion); Apple at $135.4 billion (which dropped 22% in value during the quarter, or $38.9 billion, reflecting the 11% drop in the stock price during the quarter and an approximate 13% sale of the position during the quarter); Bank of America at $39.2 billion (which deposited a 13% gain during the quarter or $4.4 billion);  Coca-Cola at $24.5 billion (which popped 4% during the quarter or $900 million) and Chevron at $19.4 billion (which spurted 3% higher during the quarter or $600 million in value).  

During the first quarter of 2024, Berkshire’s revenues rose 5% to $89.8 billion, aided by the improvement in the insurance operations and the contribution from the Pilot Travel Centers acquisition. In the first quarter, Berkshire’s operating earnings increased 39% to $11.2 billion, primarily led by a turnaround in Berkshire’s insurance businesses.

During the first quarter, the insurance segment generated $2.6 billion from underwriting earnings compared to $911 million in the prior year quarter due to improvements at GEICO and no losses from significant catastrophe events.  Insurance investment income increased 32% during the quarter to $2.6 billion, reflecting higher interest income from short-term investments. The float of the insurance operations remained relatively unchanged during the first quarter at about $168 billion.

In the first quarter, Burlington Northern Santa Fe’s revenues declined 4% to $5.6 billion, reflecting 9.9% lower revenue per car/unit, due to lower fuel surcharges and unfavorable business mix, partially offset by higher volumes of 6.6%.  Net earnings rolled 8% lower to $1.1 billion for the quarter, reflecting wage inflation and other benefits costs.

Berkshire Hathaway Energy’s revenues dimmed 3% lower during the quarter to $6.3 billion while net earnings charged 72% higher to $717 million. The earnings increase reflected higher earnings from the U.S. regulated utilities, natural gas pipelines and other energy businesses, partly offset by lower earnings from the real estate brokerage businesses in connection with litigation around commission payments to real estate agents. Subsequent to quarter end, Berkshire’s HomeServices agreed to a $250 million settlement to be paid over the next four years. On the utility side, wildfire litigation is ongoing with $7 billion in complaints and demands filed in Oregon and California as of 3-31-24. Subsequent to quarter end, a new complaint by 1,000 individual class members is seeking $5 billion in economic and $25 billion in noneconomic damages related to the wildfires. All the litigation will be challenged as investigations into the cause and origin of each wildfire are complex and ongoing with the litigation expected to take years to resolve.

In the first quarter, Pilot’s revenues traveled 14% lower to $12.5 billion due to lower average commodity prices and a decline in volumes from wholesale fuel and fuel marketing businesses. Pre-tax earnings declined 69% to $70 million due to lower margins on retail fuel sales and higher operating expenses.  

Berkshire’s Manufacturing businesses reported first quarter revenues rose 1% to $18.5 billion with operating earnings up 12% to $2.9 billion. The Industrial products’ operating earnings increased 8% to $1.5 billion thanks to improvements at Precision Castparts due in part to higher demand for aerospace products. The Building products’ operating earnings hammered out a 12% gain to $1.0 billion as profit margins expanded due in part to lower raw material and manufacturing costs. The Consumer products’ operating earnings motored 29% higher during the quarter to $355 million, primarily due to the turnaround at Forest River and the apparel and footwear businesses. 

Service and Retailing revenues decreased 4% during the quarter to $22.2 billion with pre-tax earnings dropping 20% to $1.1 billion. These results reflected broad-based weakness in several sectors, including at TTI, a distributor of electronic components, aviation services, Berkshire Hathaway Automotive and the home furnishings businesses.

Berkshire’s balance sheet continues to reflect significant liquidity and a very strong capital base of $571.5 billion as of 3/31/24. Excluding railroad, energy and utility investments, Berkshire ended the quarter with $565 billion in investments allocated approximately 59.5% to equities ($335.9 billion), 3.0% to fixed-income investments ($17.2 billion), 32.3% in cash and equivalents to a record $182.3 billion and 5.2% in equity method investments ($29.6 billion), which includes 26.8% ownership of Kraft Heinz and 28.2% ownership of Occidental Petroleum.   

Free cash flow increased 24% during the quarter to $6.2 billion due to favorable working capital changes. During the quarter, capital expenditures increased 18% to $4.4 billion, which included $2.9 billion for BNSF and BHE, its railroad and utility and energy units. Berkshire expects capital expenditures for BNSF and BHE to approximate $10.8 billion for the balance of 2024. On January 16, 2024, Berkshire acquired the remaining 20% noncontrolling ownership interest in Pilot for $2.6 billion.

During the first quarter, Berkshire purchased a net $15.6 billion in Treasury Bills and fixed-income investments, paid $2.7 billion to acquire equity securities and received proceeds of $20.0 billion from the sale of stocks, including the sale of approximately 13% of its holding in Apple. The sale proceeds increased Berkshire’s cash holdings which Buffett indicated would exceed $200 billion by the end of the second quarter. The equity sales generated $11.2 billion in after-tax realized gains during the quarter thanks to the highly profitable bite taken out of Apple. Buffett indicated that tax considerations played a part in his decision to trim back Apple as he expects tax rates to increase in the future.  Apple is expected to remain Berkshire’s largest equity holding in the future as Buffett noted it was an “even better business” than American Express or Coca-Cola which are “wonderful businesses.”

Berkshire repurchases its shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett.  During the first quarter, Berkshire repurchased $2.6 billion of its common stock. The most recent repurchases included 424 Class A shares purchased at an average price of approximately $623,206 per share in March 2024.  

The shares repurchased during the quarter included $1.0 billion of Berkshire stock repurchased from Ruth Gottesman (the wife of former Berkshire board director, Sandy Gottesman) who gave the $1.0 billion in proceeds to the Albert Einstein College of Medicine to ensure that no student there will ever have to pay tuition. On the same day, Berkshire repurchased an additional $500 million from another family that was using the proceeds for an anonymous charitable gift.  As Buffett concluded the annual meeting, he said, “If you are lucky in life, make sure a bunch of other people are lucky, too.” Berkshire Hathaway shareholders have taken that message to heart.

Thursday, May 2, 2024

Apple-AAPL reported fiscal second quarter sales dipped 4% to $90.75 billion with net earnings declining 2% to $23.6 billion and EPS up slightly to $1.53, a new record. Product revenue fell 10% to $66.9 billion and services revenue increased 14.2% to $23.9 billion. By geography, sales declined 1.4% in the Americas to $37.3 billion, were flat in Europe at $24.1 billion, down 8% in China to $16.4 billion, down 13% in Japan to $6.3 billion and down 17% in rest of Asia Pacific to $6.7 billion. By product, iPhone sales fell 10% to $46.0 billion, Mac sales increased 4% to $7.5 billion, iPad sales fell 17% to $5.6 billion Wearables and Home and Accessories declined 10% to $7.9 billion. Apple’s installed base for its products reached an all-time high which drove the increase in Service sales to a new record. During the first half of the fiscal year, Apple generated $58.2 billion in free cash flow, up 4% from last year. The company returned $50.9 billion to shareholders during the first six months of the fiscal year through dividend payments of $7.5 billion and $43.3 billion in share repurchases. Apple increased its cash dividend by 4% and authorized an additional program to buy back $110 billion of stock, the largest in the company's history. Apple ended the quarter with $162 billion in cash and marketable securities, $91.8 billion in long-term debt and $74.2 billion in shareholders’ equity on its shiny balance sheet. Looking ahead to the third quarter, management expects sales to grow low-single digits with gross margins in the 45.5% to 46.5% range and operating expenses in the $14.3 billion to $14.5 billion range.

Texas Roadhouse-TXRH reported beefy first quarter results with revenues increasing 12.5% to $1.3 billion with net income and EPS jumping 31% to $113 million and $1.69, respectively. Comparable restaurant sales increased 8.4% at company restaurants and increased 7.7% at domestic franchise restaurants. Average weekly sales at company restaurants increased 7% to $159,378 of which 13% were to-go sales. Restaurant margin dollars increased 23% to $228.4 million primarily due to higher sales. The restaurant margin increased to 17.4% from 15.9% driven by higher sales partially offset by higher general liability insurance expense. The benefit of a higher average guest check and improved labor productivity more than offset wage and other labor inflation of 4.3% and commodity inflation of 0.9%. During the quarter, nine company restaurants and three franchise restaurants were opened. Year-to-date, the company has opened 10 company restaurants with another 18 currently under construction and expects to open 30 company restaurants for the full year. Free cash flow increased 36% during the quarter to $165.8 million, with the company returning $49.7 million to shareholders through dividends of $40.8 million and share repurchases of $8.9 million. Comparable restaurant sales for the first five weeks of the second fiscal quarter increased 9.3%. In addition, the company implemented a menu price increase of 2.2% in late March. Management reiterated the following expectations for 2024, including positive comparable restaurant sales growth, store week growth of approximately 8%, wage and other labor inflation of 4% to 5% and total capital expenditures of $340 to $350 million. In addition, management updated their expectation for commodity cost inflation of approximately 3%.

Booking Holdings-BKNG reported first quarter revenues rose 17% to $4.4 billion with net income nearly tripling to $776 million and EPS more than tripling to $22.69. Gross travel bookings increased 10% to $43.5 billion. Room nights booked increased 9% from the prior year quarter with rental car days up 11% and airline tickets soaring 33%. Free cash flow declined 8% during the first quarter to $2.6 billion due to working capital changes with the company paying its first quarterly dividend of $299 million and repurchasing $1.8 billion of its stock.  Alternative accommodation listings increased 11% during the quarter to 7.4 million with connected transactions (hotel, air, cars and/or experiences booked together) increasing 50%. Connected trips represent a high single-digit percentage of total transactions but are growing rapidly. There has been no sign of travelers trading down to lower-cost travel despite inflationary pressures.  Booking continues to see resilient global leisure travel demand, including for bookings scheduled to take place during the peak summer travel season. While the second quarter room night growth will benefit from the shift in Easter timing, it will be offset by the impact from the geopolitical tensions in the Middle East and a smaller bookings window. As a result, second quarter room nights booked will likely decelerate from the first quarter to 4% to 6% growth with revenue growth also expected in the 4% to 6% range. As the company continues its technology spending on generative AI,  operating expenses in the second quarter are expected to grow faster than sales. The second half of the year will see easier comparisons in growth than the first half, and Bookings continues to expect a strong year in 2024.

RTX-RTX announced today that its Board of Directors declared a dividend of 63 cents per outstanding share of RTX common stock, which represents an increase of 6.8 percent over the prior quarter's dividend amount. "The growth of RTX's dividend reflects our confidence that our portfolio is strong and demand for our products continues to grow," said RTX President and CEO Chris Calio. "We are on track to return between $36 and $37 billion of capital to shareowners through dividends and share repurchases from the date of the merger through 2025." RTX has paid cash dividends on its common stock every year since 1936.

FactSet-FDS announced that its Board of Directors approved a 6% increase in the regular quarterly cash dividend of $0.98 per share to $1.04 per share. The $0.06 per share increase marks the twenty-fifth consecutive year the Company has increased dividends on a stock split-adjusted basis, demonstrating its ongoing commitment to providing value to shareholders.

Wednesday, May 1, 2024

Cognizant Technology Solutions-CTSH reported first quarter revenues dipped 1.1%, or declined 1.2% on a constant currency basis, to $4.8 billion, which was above the high-end of the guidance range. Net income declined 6% to $546 million and EPS was down 4% to $1.10. Cognizant signed eight deals during the quarter, each with a total contract value of at least $100 million. Communications, Media and Technology provided the strongest growth during the quarter by business segment. During the first quarter, bookings declined 6% year-over-year. On a trailing-twelve-month basis, bookings grew 1% to $25.9 billion which represented a book-to-bill of approximately 1.3X. Free cash flow decreased 97% to $16 million, primarily due to a previously disclosed $360 million tax payment. During the quarter, Cognizant paid $151 million in dividends and repurchased 1.4 million of its common shares for $110 million at an average price of $78.57 per share. The company has $1.7 billion authorized for future share repurchases and declared quarterly cash dividend of $0.30 per share. Second quarter revenue is expected to be $4.75 to $4.82 billion, a decline of 2.9% to a decline of 1.4%. Cognizant expects revenue for the full-year 2024 in the range of $18.9 billion to $19.7 billion, a decline of 2.2% to growth of 1.8%, with adjusted EPS expected in the range of $4.50 to $4.68.

Mastercard-MA reported first quarter revenues rose 11% to $6.3 billion with net income charging 28% higher to $3.0 billion and EPS up 31% to $3.22. On an adjusted basis, earnings and EPS were up 16% and 19%, respectively. The strong revenue and earnings growth was powered by healthy consumer spending, strong cross-border volume growth and new deal wins in every region. During the quarter, gross dollar volume growth increased 10% to $2.3 trillion, switched transactions growth was 13% and cross-border volume growth jumped 18%, due to strong travel. As of March 31, 2024, the company’s customers had issued 3.4 billion Mastercard and Maestro-branded cards. Free cash flow declined 16% during the quarter to $1.5 billion due to changes in working capital. During the quarter, the company paid $616 million in dividends and repurchased nearly $2.0 billion of its common stock. Subsequent to quarter end, Mastercard repurchase an additional 1.7 million shares for $815 million at an average cost of $479.41 per share, which leaves $11.3 billion remaining authorized for future share repurchases. Despite geopolitical uncertainty, the strong labor market, solid wage growth and moderating inflation enable a favorable environment for continued consumer spending. Mastercard expects 2024 revenue growth at the low end of low double-digits and operating expense growth in the mid single-digits.

Johnson & Johnson-JNJ announced a proposed Plan of Reorganization (the "Plan") by its subsidiary, LLT Management LLC ("LLT"), for the comprehensive and final resolution of all current and future claims related to ovarian cancer arising from cosmetic talc litigation against it and its affiliates in the United States. The Plan commits the Company to pay ovarian claimants a present value of approximately $6.475 billion to be paid over 25 years, which is a far better recovery than the claimants stand to recover at trial. Most ovarian claimants have not recovered and will not recover anything at trial. Indeed, the Company has prevailed in approximately 95% of ovarian cases tried to date, including every ovarian case tried over the last six years. In addition, based upon the historical run rate, it would take decades to litigate the remaining cases, and therefore, most claimants will never have "their day in court." To account for these settlements and the comprehensive resolution of the ovarian claims through the Plan, the Company recorded an incremental charge of approximately $2.7 billion in the first quarter of 2024, for a total reserve of approximately $11.0 billion (or $13.7 billion nominal payable over 25 years).

Paychex-PAYX announced that its Board of Directors approved a quarterly dividend of $0.98 per share, an increase of $0.09 (or 10%) from the prior quarterly dividend of $0.89 per share, payable on May 30, 2024 to shareholders of record as of May 10, 2024. "We are increasing our dividend based on the strong financial position of the company and the healthy free cash flow generation of the business," said John Gibson, Paychex president and CEO. "While we continue to prioritize investing in the long-term growth of the company, we remain committed to returning excess capital to our shareholders." For the fiscal year ending on May 31, 2024, Paychex expects to return approximately $1.3 billion in dividends to shareholders, continuing a tradition of paying consecutive quarterly cash dividends every year since 1988.

ADP-ADP reported fiscal third quarter revenues increased 7% to $5.3 billion with net income up 14% to $1.2 billion and EPS up 15% to $2.88. By business segment, Employer Services revenues increased 8% to $3.59 billion on a 2% increase in U.S. pays per control. Employer Services operating margin increased 230 basis points to 39.6%, thanks to strong revenue growth supported by solid new business bookings, better-than expected retention, consistent pays per control growth, and an increase in client funds interest revenue. Average client funds balances increased 6% to $41.7 billion generating a 29% increase in interest on funds held for clients to $321.0 million on a 50-basis point increase in interest yield to 3.1%. PEO Services revenues increased 5% to $1.7 billion on a 3% increase in average worksite employees to 732,000. PEO Services operating margin declined 220 basis points to 14.2%, reflecting a lower workers’ compensation reserve release and a greater percentage of zero-margin benefits pass through revenue versus last year.. During the first nine months of the fiscal year, ADP generated $2.6 billion in free cash flow, down 5% from last year on working capital changes. The company returned $2.4 billion to shareholders during the first nine months of the fiscal year through share repurchases of $796.2 million and dividends of $1.61 billion. ADP boasts of 49 consecutive years of dividend increases and remains committed to a 55% to 60% dividend payout ratio. ADP’s long-standing share purchase program to return excess cash to shareholders has reduced the share count by about 1% annually over the last 10 years. ADP ended the quarter with cash of $3.3 billion, long-term debt of $3.0 billion and shareholders’ equity of $4.6 billion on its pristine balance sheet. Looking ahead to the full fiscal year, ADP affirmed its guidance with revenue growth in the 6% to 7% range and adjusted EPS up 10% to 12%.

Tuesday, April 30, 2024

Starbucks-SBUX reported second quarter net revenues slipped 2% to $8.6 billion with net income dropping 15% to $772.4 million and EPS lower by 14% to $.68. The results were disappointing and did not meet management’s expectations driven by a complex operating environment including a more cautious U.S. consumer, economic volatility in the Middle East and a slower-than-expected recovery in China along with increased price competition. Global comparable sales declined 4% driven by a 6% decline in comparable transactions offset by a 2% increase in average ticket. The company’s operating margin declined 2% during the quarter to 12.8% driven by deleverage, incremental investments in wages and benefits and increased promotional activities.  During the quarter, the company added 364 net new stores and ended the period with 38,951 stores, including 16,600 in the U.S. and 7,093 in China. The company is confident of growing its store base to more than 50,000 stores by 2030 as the new stores are accretive to earnings and generate high returns on invested capital.  Free cash flow increased 20% during the first half of the fiscal year to $1.6 billion with the company paying $1.3 billion in dividends and repurchasing $1.3 billion of its common stock.  Given the disappointing underperformance of the business in the U.S., China and the Middle East during the second quarter and continued headwinds, Starbucks lowered its financial outlook for fiscal 2024. Global revenue growth is now expected to be in the low single-digits for the full year compared to its previous outlook for 7% to 10% growth. Earnings per share now are expected to be flat to up low single-digits compared to its previous outlook for 15% to 20% growth. Longer-term, the company reaffirmed its outlook for 5% annual comp store sales  growth and 15% EPS growth due to the power of the Starbucks brand and loyal consumer base.

Stryker-SYK reported first quarter sales increased a healthy 9.7% to $5.2 billion with net income and EPS jumping 33.1% to $788.0 million and $2.05, respectively. Excluding special items, EPS grew 16.8%. Organic net sales increased 10.0% in the quarter including 9.3% from increased unit volume and 0.7% from higher prices. By business segment, MedSurg and Neurotechnology net sales of $3.0 billion increased 11.5% in the quarter, or 11.6% organically including 10.2% from increased unit volume and 1.4% from higher prices. Orthopaedics and Spine net sales of $2.2 billion increased 7.5% in the quarter, or 8.0% organically including 8.2% from increased unit volume partially offset by 0.2% from lower prices. During the quarter, Stryker generated $204.0 million in operating cash flow and $37.0 million in free cash flow, down from $315.0 million last year on working capital demands and a 29% increase in capital expenditures. For 2024, management expects a free cash flow conversion rate of 70% to 80%. During the quarter, Stryker returned $304.0 million to shareholders through dividend payments. Stryker ended the quarter with $2.4 billion in cash and investments, $10.8 in long-term debt and $19.2 billion in shareholders’ equity. Given the company’s solid first quarter results, strong procedural volumes and healthy demand for its capital products, management now expects full year 2024 organic net sales growth to be in the range of 8.5% to 9.5%. With momentum heading into the rest of the year and its commitment to expand operating margins by 200 basis points by the end of 2025, management now expects adjusted 2024 EPS in the range of $11.85 to $12.05.

Friday, April 26, 2024

Gentex-GNTX reported first quarter revenues rose 7% to a record $590.2 million with net income motoring 11% higher to $108.2 million and EPS up 12% to $.47. Gross margin expanded 260 basis points to 34.3% as a result of raw material cost reductions, higher sales levels, price changes and manufacturing efficiencies. Management remains confident in reaching gross margins in the range of 35% to 36% by the end of 2024. Free cash flow increased 26% during the quarter to $98 million, with the company repurchasing 1.2 million of its shares at an average price of $35.84 per share. The company has approximately 14.7 million shares remaining authorized for future share repurchases. Gentex ended the quarter with more than $576 million in cash and investments, no long-term debt and $2.3 billion in shareholders’ equity on its shiny clean balance sheet. Gentex is on pace for record setting revenues in 2024 and 2025 with 2024 revenues expected in the $2.45 billion to $2.55 billion range and 2025 revenues expected in the $2.65 billion to $2.75 billion range. This growth is being driven by the expansion of product content including advanced feature growth and new electronic technologies.

Thursday, April 25, 2024

Alphabet-GOOGL reported first quarter revenues increased 15%, or 16% on a constant currency basis, to $80.5 billion with net income increasing 57% to $23.7 billion and EPS up 62% to $1.89. During the quarter, Search, YouTube and Cloud led the way with strong double-digit revenue growth. The company expects YouTube and Cloud to end the year with a greater than $100 billion revenue run rate. Alphabet has started bringing AI to the main search page and is seeing increases in search usage and increased user satisfaction. Management believes the current AI transformation is a once in a generation opportunity and that they have a clear path to monetization. Alphabet’s Board of Directors approved the initiation of a quarterly dividend of $0.20 per share that will be paid on June 17, 2024. In addition, management authorized the company to repurchase up to an additional $70 billion of its class A and Class C shares. Free cash flow decreased 2% during the quarter to $16.8 billion, reflecting the 91% increase in capital expenditures, as the company is committed to investing in AI. Management expects capital expenditures to remain at this level or slightly higher for the remainder of the year. During the quarter, the company repurchased $15.7 billion of its stock. Alphabet ended the quarter with a fortress balance sheet with more than $142 billion in cash and investments, $13.2 billion in long-term debt and shareholders’ equity of $292.8 billion.

Microsoft-MSFT reported fiscal third quarter revenues increased 17% to a record $61.9 billion with net income and EPS each jumping 20% to $21.9 billion and $2.94, respectively. The company reported double-digit revenue growth in all three business segments during the quarter with growth driven by Microsoft Cloud revenue which floated 23% higher to $35.1 billion. Microsoft’s Copilot is ushering in a new era of AI transformation, driving improved productivity and better business outcomes across every role and every industry.  Year-to-date, free cash flow jumped 28% to $50.7 billion with the company paying $16.2 billion in dividends and repurchasing $13 billion of its common stock during the past nine months, while investing $30.6 billion in capital expenditures to support cloud and AI offerings. Microsoft ended the quarter with a strong balance sheet with $80.0 billion in cash and investments, $42.7 billion in long-term debt and $253.2 billion in shareholders’ equity. For the fourth quarter, Microsoft expects revenues in the $63.5 billion to $64.5 billion range with 200 basis points of operating margin expansion for the year. In fiscal 2025, total revenues and operating income are both expected to grow at double-digit ranges. Capital expenditures are expected to be higher in fiscal 2025 than in fiscal 2024 as the company makes substantial investments in becoming a leader in AI which represents a significant growth opportunity. Demand for AI services is exceeding supply.

ResMed-RMD reported third quarter fiscal year 2024 sales increased 7% to $1.2 billion with net income and EPS increasing 29% to $300.5 million and $2.04, respectively. By product, Devices revenue increased 5% to $638.2 million, Masks revenue increased 10% to $410.8 million and Software-as-a-Service increased 8% to $148.0 million. Gross margins increased 260 basis points to 57.9%, mainly due to reduced freight and manufacturing costs. During the quarter, ResMed generated $380.8 million in free cash flow, up 50% from last year and representing a robust 127% of net income. The company returned $120.5 million to shareholders during the quarter through dividend payments of $70.5 million and share purchases of $50.0 million.  ResMed ended the quarter with $237.9 million in cash, $997.0 million in long-term debt and $4.63 billion in shareholders’ equity on its strong balance sheet. Management believes the market for its products is very large, growing and under-penetrated. Big tech with wearables that track sleep and big pharma with the new class of GLP-1 drugs are driving more patents into the healthcare system thereby producing more sleep apnea diagnosis and prescribed PAP therapy. The company is tracking 660,000 subjects with a sleep apnea diagnosis who have been prescribed a GLP-1 drug and have found that this cohort is 10.5% more likely than the general population to initiate PAP therapy. These patients have a higher PAP resupply rates 1-year and 2-years post-setup which indicates they are more likely to continue treatment. Management expects that ResMed will be a major beneficiary of advertising and marketing dollars spent by big pharma to promote the new class of weight-loss drugs.    

Molina Healthcare-MOH reported first quarter revenues rose a healthy 22% to $9.9 billion with net income and EPS each down 6% to $301 million and $5.17, respectively. Premium revenues increased 21% to $9.5 billion during the quarter, reflecting new contract wins, acquisitions and growth in the current footprint, partially offset by Medicaid redeterminations. The decline in earnings reflected a shift in the quarterly earnings pattern based on the significant increase in new business in 2024. The consolidated medical care ratio in the first quarter was 88.5% and was in line with management’s expectations,  reflecting changes in member mix due to growth across all segments and continued strong medical cost management. Free cash flow declined 79% during the quarter to $187 million driven by the impact of timing differences in government receivables and payables. Molina reaffirmed its outlook for the full fiscal 2024 year with premium revenue expected to approximate $38 billion, a 17% increase from last year, with adjusted EPS expected to grow 13% to at least $23.50. The company also has a solid foundation for growth in 2025 and beyond, with the recent Bright Healthcare acquisition expected to add $1.00 per share to earnings in 2026.

Tractor Supply-TSCO rang up a 3% increase in sales to $3.39 billion with net income plowing ahead 8% to $198.2 million and EPS jumping 11% to $1.83. Comp store sales grew at a 1.1% pace on a 1.3% increase in transactions and a slight decline in average ticket. Comparable store sales growth reflects strength in seasonal merchandise and big-ticket items like tractors and riding mowers, partially offset by declines for year-round discretionary categories as lower-income customers curtailed spending on all but necessities. Operating margins increased 37 basis points to 7.4% thanks to merchandise cost controls and lower freight costs due to lower ocean freight rates and efficiencies created by supply chain investments. The company opened 17 new Tractor Supply stores and 4 new Petsense by Tractor Supply stores during the quarter. As of quarter end, Tractor Supply operated 500 garden centers within its stores. During the quarter, Tractor Supply generated $100.3 million in free cash flow and returned $236.7 million to shareholders through dividends of $118.8 million and share repurchases of $117.8 million at an average cost per share of $234.80. During the quarter, Tractor Supply raised its dividend by 7%, marking the 15^th consecutive year of dividend increases. The company ended the quarter with $264.1 million in cash, $1.73 billion in long-term debt and $2.12 billion in shareholders’ equity on its sturdy balance sheet. Looking ahead to the full year, management expects to continue taking market share while also facing macroeconomic headwinds. Management affirmed prior guidance with net sales in the $14.7 billion to $15.1 billion range on a minus 1% to plus 1.5% change in comp stores, operating margins in the 9.7% to 10.1% range and EPS in the $9.85 to $10.50 range.

Wednesday, April 24, 2024

Meta Platforms-META reported first quarter revenue rose 27% to $36.5 billion with net income up 117% to $12.4 billion and EPS up 114% to $4.71. Facebook daily active users increased 7% for March 2024 to an average of 3.24 billion. In the first quarter, ad impressions delivered across the Family of Apps increased by 20% with the average price per ad up 6%. Headcount decreased 10% year-over-year to 69,329. Free cash flow increased 79% during the quarter to $12.8 billion. The company returned $16.3 billion to shareholders through share repurchases of $15 billion and dividends of $1.3 billion. Meta ended the quarter with a strong balance sheet with $64.3 billion in cash and investments, $18.4 billion in long-term debt and $149.5 billion in shareholders’ equity. Second quarter revenue is expected to be in the range of $36.5-$39 billion. Total expenses in 2024 is expected to be in the range of $96-$99 billion, updated from prior outlook of $94-$99 billion due to higher infrastructure and legal costs. Meta continues to expect Reality Labs operating losses to increase meaningfully year-over-year due to ongoing product development efforts and investments to further scale their ecosystem. Management expects capital expenditures for 2024 to be in the range of $35-$40 billion, increased from prior range of $30-$37 billion, as they continue to accelerate their infrastructure investments to support their artificial intelligence (AI) roadmap. Meta expects capital expenditures will continue to increase next year as they invest aggressively to support their ambitious AI research and product development efforts. Meta said AI was already helping to improve app engagement, which naturally leads to more ads as they deliver more value. More than 50% of the content people see on Instagram, for example, is AI recommended.

General Dynamics-GD reported first quarter revenues rose 9% to $10.7 billion with net earnings marching 10% higher to $799 million and EPS up 9% to $2.88. The company’s operating margin expanded 20 basis points to 9.7%.  It was a strong start to 2024, despite the company not receiving FAA certification for the G700 until March 29^th.  The company expects to make up the G700 deliveries that had been anticipated in the first quarter during the balance of the year. Despite the delay, the Aerospace division posted double-digit revenue and earnings growth in the first quarter. Aerospace orders in the quarter totaled $2. 4 billion, growing the backlog 6% to $20.5 billion with a book-to-bill of 1.2 to 1 for the quarter.  In the defense segment, orders in the quarter totaled $8.8 billion, with strength in Combat Systems and Technologies which had book-to-bill ratios of 1.6 to 1 and 1.2 to 1, respectively. Company-wide backlog grew 4.4% to $93.7 billion at the end of the quarter.  During the quarter, net cash used by operating activities was $278 million due to working capital needs brought on in part due to the delay in the G700 deliveries. General Dynamics expects strong cash performance for the balance of the year with 100% free cash flow conversion. During the quarter, the company paid $361 million in dividends and repurchased $105 million of stock. Capital expenditures for the full year are expected to approximate between 2% to 2.5% of revenues primarily for increasing infrastructure in its shipyards in the Marine Systems division. The company will provide an updated revenue and earnings outlook on the next conference call.

Roche Holdings-RHHBY reported first quarter sales grew by 2% at constant exchange rates (-6% in CHF), driven by the strong growth of newer medicines and diagnostics. Excluding COVID-19-related products, sales increased by 7%. Going forward, there will be no further material impact of the COVID-19 sales decline. The Pharmaceuticals Division base business grew by 7%, driven by strong sales of medicines to treat severe diseases, such as Vabysmo (eye diseases), Phesgo (breast cancer), Ocrevus (multiple sclerosis), Polivy (blood cancer) and Hemlibra (haemophilia A). Divisional sales growth was 2%, reflecting the impact of the expected decline in sales of the COVID-19 medicine Ronapreve. The Diagnostics Division base business grew by 8%, supported by growth across all regions because of demand for immunodiagnostic products, clinical chemistry tests and advanced staining solutions. As this growth was partially offset by the lower demand for COVID-19 tests, divisional sales grew by 2%. Highlights in the first quarter included: US approvals of Xolair (food allergies) and Alecensa (early-stage lung cancer); Positive phase III data for Xolair (food allergies), Columvi (blood cancer) and Ocrevus subcutaneous injection (multiple sclerosis); positive phase II results for zilebesiran (hypertension in people with high cardiovascular risk); new positive long-term data for Vabysmo (retinal vein occlusion, a severe eye disease); US approval for the first molecular test to screen for malaria in blood donors; and US Breakthrough Device Designation for blood tests to support earlier Alzheimer’s disease diagnosis. Roche confirmed its outlook for 2024 sales in the mid single-digit range at constant exchange rates. Core earnings per share are targeted to develop broadly in line with sales growth, excluding the impact from the resolution of tax disputes in 2023. Roche expects to further increase its dividend in Swiss francs.

Tuesday, April 23, 2024

Canadian National Railway-CNI reported first quarter revenue declined 1.5% to C$4.25 billion with net income declining 9.6% to C$1.1 billion and EPS down 5.5% to C$1.72. (Last year’s record first quarter performance included a 10-cent fuel lag tailwind.) Car velocity of 205 miles per day, through dwell hours of 7.1 and train speed of 18.7 miles per hour were essentially flat despite weather headwinds in the quarter. By industry, total revenue ton miles (RTM) increased for petroleum & chemicals (up 6%), metals & minerals (up 4%), intermodal (up 2%) and automotive (up 6%) while coal RTMs fell 21% due to several closed Canadian coal mines that are now open, forest products declined 5% and grains and fertilizers were flat. During the quarter, the company generated C$1.1 billion in operating cash flow, up 6% from last year on working capital efficiencies, and free cash flow of C$529.0 million, down 11% from last year on a 27% increase in capital expenditures to C$588.0 million. During the quarter, the company returned C$1.5 billion to shareholders through dividend payments of C$540.0 million and share repurchases of C$955.0 million at an average cost per share of C$171.98. Canadian National Railway ended the quarter with C$412.0 million in cash, C$16.8 billion in long-term debt and C$19.9 billion in shareholders’ equity. Looking ahead to the reminder of 2024, confident that it is on track with its growth initiatives, management affirmed its guidance with adjusted EPS expected to increase 10% from 2023. Capital expenditures are expected to be C$3.5 billion and return on invested capital is expected in the 15% to 17% range. The company expects to continue rewarding shareholders with 7% dividend growth and share buybacks.   

Visa-V reported fiscal second quarter revenues increased 10% to $8.8 billion with net income increasing 10% to $4.7 billion and EPS charging higher by 12% to $2.29.  These results included litigation charges of $424 million and $57 million for lease consolidation costs. Excluding these and other items, adjusted EPS jumped 20% higher. There was stable growth in the key business drivers during the quarter with payments volume up 8%, processed transactions up 11% and cross-border volume up 16%, thanks to strong travel volume. Consumer spending is stable domestically and strong in most major international markets, except for China where spending remains weak.  During the first half of the fiscal year, free cash flow was relatively unchanged at $7.6 billion. During the first half of the fiscal year, Visa paid $2.1 billion in dividends and repurchased $6.3 billion of stock, including 9.7 million shares of Class A common stock repurchased at an average cost of $280.80 per share, or $2.7 billion, during the second quarter. The company has $23.6 billion remaining authorized for future share repurchases. Visa reaffirmed its outlook for the full fiscal year with net revenue growth expected in the low double-digit range and EPS growth in the low-teens.

UPS-UPS reported first quarter revenues declined 5% to $21.7 billion with net income and EPS each nosediving 41% to $1.1 billion and $1.30, respectively. U.S. average volume declined 3.2% during the first quarter, but the rate of decline slowed as the quarter progressed with March down less than 1%. International average daily volume declined 5.8% during the quarter due to a challenging macro environment. Supply Chain Solutions revenues declined 5% during the quarter due to market rate declines in forwarding. During the quarter, UPS was awarded a 5.5-year contract to become the primary air cargo provided of the U.S. Postal Service which will leverage existing resources. The contract is expected to be accretive to operating margins and EPS in the first year and throughout the contract. During the first quarter, free cash flow increased 30% to $2.3 billion due to favorable changes in working capital and pension contributions. UPS paid $1.3 billion in dividends during the quarter. UPS remains committed to a stable and growing dividend with a targeted 50% dividend payout ratio. In the second half of 2024, UPS expects to return to growth in volume and revenues. Labor cost growth will drop substantially as they lap year one of the union labor contract which had increased compensation by 13%. Accordingly, profit margins are expected to expand in the second half of the year. UPS maintained its full year 2024 outlook for revenues in the $92.0-$94.5 billion range with adjusted operating margins in the range of 10.0% to 10.6%. Capital expenditures for the year are expected to approximate 5% of revenues or about $4.5 billion. Free cash flow is expected in the range of $5.9 billion to $6.7 billion before reflecting any further pension contributions. The company’s pension plans are 90% funded. UPS reaffirmed its three-year financial targets with revenues expected to be between $108 billion and $114 billion by 2026 with an adjusted operating profit margin of 13%.

PulteGroup-PHM reported first quarter total revenues increased 10% to $3.95 billion with net income up 25% to $663 million and EPS up 32% to $3.10. Reported net income for the quarter includes a $38 million pre-tax, or $0.14 per share, gain related to the sale of a joint venture, and a $27 million pre-tax, or $0.09 per share, insurance benefit recorded in the period. Home sale revenues increased 10% to $3.8 billion, reflecting an 11% increase in closings to 7,095 homes, partially offset by a 1% decrease in the average sales prices to $538,000. PulteGroup’s financial services operations reported first quarter pre-tax income of $41 million, up from $14 million in the prior period. Pre-tax income benefited from higher closing volumes, a more favorable operating environment and higher capture across all business lines, including a capture rate of 84% in its mortgage operations, up from 78% last year. Net new orders for the first quarter increased 14% to 8,379 homes, reflecting both higher gross orders and a lower cancelation rate which fell to 10% of beginning period backlog, which is down from 13% in the first quarter of last year. The company’s quarter end backlog was 13,430 homes valued at $8.2 billion, up 3% from last year. Management remains on track to invest approximately $5 billion in land acquisition and development in 2024. During the quarter, PulteGroup generated $216 million in free cash flow compared to $687 million last year, primarily due to increased inventory. PulteGroup returned $289 million to shareholders during the quarter through dividends of $43 million and share repurchases of $246 million at an average cost of $106.73 per share. Since 2013, PulteGroup has repurchased almost 50% of its shares outstanding and the dividend has increased four-fold, reflecting the company’s commitment to consistently returning capital to shareholders. PulteGroup ended the quarter with $1.7 billion in cash, $2.0 billion in long-term debt and $10.7 billion in shareholders’ equity on its built-to-last balance sheet. Management believes that they are well positioned to expand their market share and estimates that the country has a structural shortage of several million homes, after more than a decade of underbuilding.

PepsiCo-PEP reported first quarter revenue increased 2% (3% organically) to $18.3 billion with net income and EPS each popping 6% higher to $2.0 billion and $1.48, respectively. Global organic volume growth trends both in convenient foods and beverages showed sequential improvement from last quarter with strong performance from the International business and market share gains at Frito Lay in North America. Product recalls at Quaker Foods in North America detracted about 1% from organic growth.  Profit margins expanded in the first quarter driven by productivity enhancements. During the quarter, PepsiCo used $1 billion of cash for working capital needs. In addition, the company paid $1.8 billion in dividends during the quarter.  Geographically, PepsiCo expects its International organic revenue growth to exceed North America revenue growth in 2024, with the International business having a long runway for profitable growth. The International business accounts for about 40% of revenue.  The company expects the financial impact associated with the product recalls at Quaker foods and inflationary pressures to moderate for the balance of the year. As a result, PepsiCo continues to expect at least 4% organic revenue growth and at least 8% constant currency EPS growth for fiscal 2024. Total cash returns to shareholders during the year are expected to approximate $8.2 billion, comprised of dividends of $7.2 billion and share repurchases of $1.0 billion.

RTX-RTX reported first quarter sales shot up 12% to $19.3 billion with net income up 20% to $1.71 billion and EPS up 32% to $1.28. Excluding one-time items in both years, adjusted earnings were flat, and EPS increased 10%. Demand remained robust for Raytheon’s products with over $25 billion in new awards during the quarter resulting in record backlog of $202.0 billion and a book-to-bill ratio of 1.34. Commercial original equipment sales increased 33% year-over-year, commercial aftermarket sales increased 11% and defense sales increased 7%. By business segment, Collins Aerospace organic sales increased 9% to $6.7 billion. Collins operating margin fell 200 basis points on a $175 million charge related to the initiation of alternative titanium sources to replace Russian-owned sources. Pratt & Whitney organic sales increased 23% to $6.5 billion on strong demand for large commercial engines. Operating margins declined 150 basis points, dragged down by higher R&D and other expenses. The division continues to work through early stages of the recall of 3,000 engines due to a powdery metal issue which is expected to continue for another three years. Management has completed customer compensation agreements with 9 customers representing about 1/3 of the fleet and management believes it is within guidance for the settlements.  Raytheon segment organic sales increased 6% to $6.7 billion with operating margins skyrocketing nearly 600 basis points on a $400 million gain on the sale of the Cybersecurity, Intelligence and Services division, higher volume and improved productivity. During the quarter, RTX generated operating cash flow of $342.0 million, compared to last year’s $863.0 million operating cash outflow. During the quarter, Raytheon returned $825 million to shareholders through dividend payments of $769.0 million and share repurchases of $56.0 million. Raytheon ended the quarter with $5.6 billion in cash, $42.3 billion in long-term debt and $60.5 billion in shareholders’ equity. Looking ahead, management remains positive about its business prospects and is operating in one of the strongest demand periods of its history. RTX estimates that its products address about 2/3 of the recently passed $60.0 billion supplemental appropriation bill targeted for Ukraine and 30% of the $34.4 billion targeted for Israel and the Indo-Pacific. Management affirmed it 2024 guidance with sales of $78.0 billion to $79.0 billion, adjusted EPS in the $5.25 to $5.40 range and free cash flow of about $5.7 billion. Organic sales are expected to increase mid to high-single digits for Collins Aerospace, low double-digits for Pratt & Whitney and low to mid-single digits for Raytheon.

Thursday, April 18, 2024

Genuine Parts-GPC reported first quarter sales increased slightly to $5.8 billion with net income stalling 18% lower to $248.9 million and EPS falling 17% to $1.78. Excluding the $62.0 million, or $0.44 per share, after-tax cost of restructuring, net income and EPS increased 2% and 3.7%, respectively. By segment, Industrial global sales increased 2.2% to $2.2 billion on a 2.6% decline in comp store sales atop last year’s strong 12% comp store increase. Strength in iron & steel, chemicals, auto and mining end markets along with the positive PMI recorded in March gives management confidence in the strength of the business for the remainder of the year. Disciplined cost management drove a 70-basis point increase in Industrial segment operating margins to 12.3%. Automotive global sales increased 2% to $3.6 billion on flat comp store sales atop last year’s solid 7% comp sales increase. Total Automotive results benefited from continued growth in Europe and Australasia. Actions taken by management, expected to build throughout the year, drove an improvement in Automotive operating margins by 10-basis points to 7.6%. During the quarter, Genuine Parts generated $318.3 million in operating cash flow, up 61% from last year, on working capital efficiencies. The company generated $202.6 million in free cash flow and returned $170.1 million to shareholders through dividend payments of $132.6 million and share repurchases of $37.5 million at an average cost per share of $141.76. To standardize the customer store experience, the company repurchased 45 independently-owned NAPA stores during the quarter, compared to 33 in 2023 and 16 in 2022. Genuine Parts ended the quarter with $1.05 billion in cash, $3.03 billion in long-term debt and $4.4 billion in shareholders’ equity on its industrial strength balance sheet. Given the better-than-expected start to the year, Genuine Parts updated its guidance with EPS now expected in the $9.05 to $9.20 range, up from previous guidance of $8.95 to $9.15. Sales are still expected to grow 3% to 5%, operating cash flow is expected in the $1.3 billion to $1.5 billion range and free cash flow is expected in the $800.0 million to $1.0 billion range.

Tuesday, April 16, 2024

LVMH-LVMUY reported first quarter revenue dipped 2% to €20.7 billion in the first quarter of 2024. Despite an uncertain geopolitical and economic environment, organic revenue grew 3% on a difficult comparison with last year’s 17% sales growth. Sales grew 2% organically in the U.S. and Europe to €4.8 billion and €3.1 billion, respectively, while sales in Japan jumped 32% to €1.9 billion due to Chinese travelers buying in Japan, while Asia, excluding Japan, sales fell 6% to €6.8 billion as Chinese concentrated their buying in Japan. By segment or maison, Fashion & Leather Goods sales declined 2% to €10.5 billion. Fashion & Leather sales increased 2% organically on strength in Louis Vuitton, Christian Dior Couture, Celine, Fendi, Berturi, Rimowa, Loewe and Marc Jacobs. Selectively Retailing sales increased 5%, or 11% organically, to €4.2 billion on broad-based market share gain by Sephora and the gradual recovery in DFS as travel continues to rebound.   Watches & Jewelry sales declined 5%, or 2% organically, to €2.47 billion as elevation of the Tiffany brand continues, on good momentum from Bulgari and success of iconic lines from TAG Heuer. Perfumes & Cosmetics sales increased 3%, or 7% organically, to €2.2 billion on strong performance across all categories offered by Christian Dior, Guerlain, Givenchy, Parfums Kenzo, Benefit and Fenty Beauty. Wines & Spirits declined 16%, or 12% organically, to €1.4 billion on soft consumer demand, difficult comparisons and cautious restocking by retailers in the U.S. With its focus on innovative and high-quality products and expanding its store network, LVHM is well-positioned to continue to gain market share.  

UnitedHealth Group-UNH reported first quarter revenues rose 8.6% to $99.8 billion with broad-based growth at Optum and UnitedHealthcare. The company reported a loss of $1.4 billion or $1.53 per share during the first quarter. The loss reflected a primarily non-cash $7 billion currency-related charge due to the previously announced sale of its Brazil operations. In addition, the loss reflected a $.74 per share impact from the Change Healthcare cyberattack, including $.49 per share to support direct response efforts and $.25 per share in business disruption impacts. UnitedHealth has provided over $6 billion in advance funding and interest-free loans to support care providers in need due to the cyberattack. The company has swiftly and effectively addressed the cyberattack and estimates the full year 2024 impact from the attack to be in the range of $1.15-$1.35 per share. On an adjusted basis, EPS increased 10% to $6.91 thanks to a strong expansion in the number of people served at Optum and UnitedHealthcare. Overall care patterns in the first quarter were consistent with the company’s expectations. The first quarter 2024 medical care ratio rose to 84.3% from 82.2%, including 40 basis points of impact due to accommodations to support care providers from the cyberattack along with the revenue effects of the Medicare funding restrictions. Cash flows from operations in the first quarter declined substantially to $1.1 billion and were affected by approximately $3 billion due to the company’s cyberattack response actions and the timing of public sector cash receipts. During the quarter, the company paid $1.7 billion in dividends and repurchased $3.1 billion of its common stock and ended the quarter with $78.6 billion in cash and investments, $63.9 billion in long-term debt and $92.4 billion in shareholders’ equity on its strong balance sheet. The company updated its full-year 2024 net earnings outlook to $17.60 to $18.20 per share to reflect the Brazil sale and the estimated direct response costs of the cyberattack.  Even with the substantial disruptions during the quarter, the company maintained its adjusted net earnings outlook of $27.50 to $28.00 per share for the year.

Johnson & Johnson-JNJ reported worldwide sales increased 2.3% to $21.4 billion with net income and EPS of $5.35 billion and $2.20, respectively, compared to a net loss of $491 million, or $0.19 per share, last year. Excluding the $6.9 billion talc charge during last year's first quarter and other one-time items, earnings and EPS increased 3.8% and 12.4%, respectively.  U.S. sales increased 7.8% to $11.6 billion while international sales declined 3.4% to $9.77 billion, hurt by a loss in COVID-related sales. By business segment, Innovative Medicine sales increased 1.1% to $13.56 billion and operating margins remained flat at 42.9%. Growth in newly launched drugs offset the drop in COVID-related sales and competition from biosimilars. MedTech worldwide sales grew 4.5% to $7.82 billion, driven primarily by electrophysiology products and Abiomed in Cardiovascular and wound closure products in General Surgery. Orthopaedics sales increased 4.3% on an increase in procedures caused by COVID-related delays which is expected to continue in the second quarter and uptake in Johnson & Johnson’s VELYS Robotic assisted solution. Medtech operating margins also remained flat at 26.4%. During the quarter, Johnson & Johnson generated free cash flow of about $3.0 billion with the company returning $2.9 billion to shareholders through dividend payments. The company announced a 4.2% increase in the dividend, marking the 62^nd consecutive year of dividend increases. The company’s capital allocation strategy remains unchanged with the highest priority placed on funding organic growth as evidenced by R&D investments accounting for a whopping 16.6% of sales. Johnson & Johnson ended the quarter with $26 billion in cash and $33 billion in long-term debt on its AAA-rated balance sheet. Management tightened its guidance for 2024 with sales now expected in the $88.0 billion to $88.4 billion range, up 4.7% to 5.2% from 2023 with adjusted EPS in the $10.57 to $10.72 range, up 6.6% to 8.1%. 

Thursday, April 11, 2024

Fastenal-FAST reported first quarter sales increased 2% to $1.9 billion with net income increasing 1% to $297.7 million and EPS increasing 0.6% to $0.52. Daily sales grew 1.9%, reflecting sluggish overall demand, weather impacts and timing of the Easter holiday.  Fastener sales declined 4.4%, weighed down by weak industrial production and negative pricing. Safety sales increased a healthy 8.3%, driven by strong FMI device signings that averaged 105 per day during the quarter.  The warehousing end market slowed from November/December but remained strong, further contributing to safety products growth. National Accounts' daily sales rose 6.3% in the quarter, with 57 of Fastenal’s top 100 customers growing. Operating margins declined 80 basis points to 20.6% on higher compensation and healthcare expenses. Management expects margins during the second quarter to be weighed down by non-recurring marketing expenses to spur growth. During the first quarter, Fastenal generated $335.6 million in operating cash flow, down 13.6% from last year, as the pace of inventory reduction slowed to reflect smoother post-pandemic supply chains.   Free cash flow of $284.8 million declined 20% from last year on a 50% increase in capital spending. The company expects this pace of capital expenditure growth to continue for the balance of 2024 as it invests in hub capacity, facility capabilities, FMI device purchases and IT spending. Fastenal returned $223.2 million of capital to shareholders during the quarter through dividend payments, up from $199.8 million last year.  Fastenal ended the quarter with $237.1 million in cash, $200.0 million in long-term debt and $3.4 billion in shareholders’ equity on its fortress-like balance sheet.

Roche-RHHBY announced that its Elecsys pTau217 assay received Breakthrough Device Designation from the FDA. This blood test, which is being developed in collaboration with Eli Lilly, will be used to help identify the presence or absence of amyloid pathology in individuals, which can help ensure they are able to receive appropriate care. This may include participation in clinical trials or access to approved disease-modifying therapies. If approved, the test could help rapidly broaden access to a more timely and accurate diagnosis and potentially mitigate the impact of Alzheimer's disease on people and society.

Wednesday, April 10. 2024

Both Alphabet-GOOGL and Meta Platforms-META announced the launch of new chips for artificial intelligence workloads.

Friday, April 5, 2024

Johnson & Johnson-JNJ will acquire all outstanding shares of Shockwave for $335.00 per share in cash, corresponding to an enterprise value of about $13.1 billion including cash acquired. Shockwave has transformed the treatment of complex calcified arterial disease through the pioneering development of intravascular lithotripsy.  Shockwave is ultimately expected to become Johnson & Johnson MedTech’s thirteenth priority platform, as defined by annual sales of at least $1 billion. Johnson & Johnson expects the transaction to be operationally accretive upon closing, but considering the impact of financing costs, is expected to dilute EPS by about $0.10 in 2024 and $0.17 in 2025. Johnson & Johnson expects to fund the transaction through a combination of cash on hand and debt. In addition, Johnson & Johnson expects to maintain a strong balance sheet and to continue to support its stated capital allocation priorities of R&D investment, competitive dividends, value-creating acquisitions and strategic share repurchases. The closing of the transaction is expected to occur by mid-year 2024 subject to the receipt of Shockwave’s shareholder approval, as well as the receipt of applicable regulatory approvals and other customary closing conditions. Joaquin Duato, Chairman and Chief Executive Officer of Johnson & Johnson, said, “With our focus on Innovative Medicine and MedTech, Johnson & Johnson has a long history of tackling cardiovascular disease – the leading cause of death globally. The acquisition of Shockwave and its leading IVL technology provides a unique opportunity to accelerate our impact in cardiovascular intervention and drive greater value for patients, shareholders and health systems.”

Wednesday, April 3, 2024

Ulta Beauty-ULTA  said during an investment conference that overall category growth was slowing more than expected. If the category slowdown continues, “we would expect our Q1 comp to be on the lower end of that first-half guide that we provided of the low single digit.” However, the company reaffirmed its guidance for FY25 (Jan), and sees EPS of $26.20-27.00 and revenues of $11.7-11.8 billion. 

Tuesday, April 2, 2024

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. 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 27th dividend increase over the last 28 years. Over this period, TJX’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 2025. These actions underscore our confidence in our ability to continue to drive sales, increase profitability, and deliver strong cash flow, allowing us to simultaneously reinvest in the growth of the business and return significant value to our shareholders."

Paychex-PAYX reported third quarter revenues increased 4% to $1.4 billion with net income and EPS each processing a 7% gain to $498.6 million and $1.38, respectively. Total revenue growth reflected a lower contribution from the Employee Retention Tax Credit (ERTC) service as that program winds down following the pandemic. The company was still able to expand its operating margin by 80 basis points to 45.1% during the quarter due to ongoing expense discipline during a period of moderating small business employment and wage growth due in part to a tight labor market for qualified workers and inflationary pressures. Paychex’s rolling 12-month return on shareholders’ equity was an impressive 47%. The company’s financial position and free cash flow generation remained strong with free cash flow increasing 31% fiscal year-to-date to $1.6 billion. During the first nine months, the company paid $963 million in dividends and repurchased $169 million of its shares outstanding. The company’s consistent free cash flow generation supports its industry-leading dividend payout ratio with the dividend currently yielding approximately 3%. Paychex continues to see a steady macro environment with no signs of recession. Given the curtailment of the ERTC program, Paychex lowered its revenue growth outlook for fiscal 2024 to a range of 5% to 6% versus its previous outlook for 6%-7% outlook. For fiscal 2025, the company provided a preliminary outlook for 5% revenue growth.

Monday, April 1, 2024

UPS-UPS announced the company has been awarded a significant air cargo contract by the United Stated Postal Service (USPS). This award is effective immediately and greatly expands the existing relationship between the two organizations. Following a transition period, UPS will become the USPS’s primary air cargo provider and move the majority of USPS air cargo in the US.

Tuesday, March 26, 2024

Visa-V and Mastercard-MA reached an estimated $30 billion settlement to limit credit and debit card fees for merchants while capping those rates into 2030. The antitrust settlement is one of the largest in U.S. history, and upon court approval would resolve claims in litigation that began in 2005.

At an investor conference, UPS-UPS stated that after coming off a difficult market in 2023, the small package industry is poised to return to growth in 2024 and beyond. Carol Tomé, UPS chief executive officer said, “The growth and productivity initiatives we are executing will result in higher revenue, expanded operating margins and increased free cash flow to deliver long-term value to our shareowners.” The company outlined its 2026 non-GAAP targets as follows:  consolidated revenue is expected to range from approximately $108 billion to approximately $114 billion with a consolidated adjusted operating margin above 13%. Free cash flow is expected to be in the range of between $17 billion and $18 billion.  Capital spending from 2024–2026 of is expected to approximate 5.5% of total revenue.

Monday, March 25, 2024

FLEETCOR Technologies, Inc.-FLT, a leading global payments company, announced  it has rebranded the company Corpay, Inc. The name change better reflects the company’s current portfolio of corporate payment solutions. The company will begin trading today on the New York Stock Exchange under the new ticker symbol CPAY.

Thursday, March 21, 2024

Nike-NKE reported fiscal third quarter revenues were up slightly to $12.4 billion with net income trotting 5% lower to $1.2 billion and EPS down 3% to $.77, reflecting restructuring charges of $.21.  Nike Direct revenues were up slightly to $5.4 billion while wholesale revenues increased 3% to $6.6 billion. On a geographic basis, Nike brand sales increased 3% in North America to $5.1 billion; 5% in Greater China to $2.1 billion; 3% in Asia Pacific and Latin America to $1.6 billion; which were partially offset by a 4% decline in EMEA to $3.1 billion during the quarter. Converse sales declined 20% to $495 million during the quarter. Gross margin during the quarter expanded 150 basis points to 44.8% primarily driven by strategic pricing actions and lower ocean freight and logistics costs. Inventories declined a healthy 13% during the quarter to $7.7 billion with weeks of supply at the lowest level since the pandemic. During the quarter, Nike paid dividends of $562 million, an increase of 6% from the prior year, and repurchased 7.9 million of its shares for $866 million. The company has $10 billion remaining authorized for future share repurchases. In other news, the German soccer federation announced a deal for Nike to supply all of Germany’s national teams with its apparel and equipment from 2027 to 2034. Nike expects sales to increase about 1% for the full year fiscal 2024, as the company continues its restructuring efforts. In fiscal 2025, Nike expects sales and earning to grow with operating margins expanding, excluding restructuring charges, although the first half is expected to see sales decline in the low single-digit range as the company transitions to new brands. Footwear products introduced over the past several quarters are on track to generate a multi-billion dollar run rate on an annual basis. The Olympics this summer will also enable Nike to showcase its new products.

FactSet-FDS reported fiscal 2024 second quarter revenues increased 6% to $545.95 million with net income up 7.1% to $140.9 million and EPS up 8.0% to $3.65. Revenue growth during the quarter was driven by asset owners, corporates, hedge funds and private equity and venture capital clients.  Key operational metrics during the quarter include greater than 95% ASV (annual subscription value) retention and 90% client retention, an 11% increase in user count to 206,478 and a 4% increase in client count to 8,020.  Annual subscription growth plus professional services grew 5.4% to $2.21 billion on the heels of robust demand for FactSet’s financial data and analytics services. Net cash provided by operating activities decreased 13% to $143.8 million during the second quarter of fiscal 2024, primarily due to the timing of remitted payroll taxes related to employee stock compensation as well as income tax payments made in the period. Quarterly free cash flow decreased 17% to $121.9 million, compressed by a decrease in net cash provided by operating activities and higher capital expenditures. During the quarter, FactSet repurchased 113,050 shares for $52.3 million at an average cost per share of $462.23, leaving $188 million remaining under the current share repurchase program. During the first half of fiscal 2024, FactSet returned $186.3 million to shareholders through dividends of $74.1 million and share purchases of $112.2 million. Given challenging market conditions that have caused customers to reduce headcount and delay decision-making for expenditures, FactSet now expects finishing fiscal 2024 at the bottom range of its previous guidance. Revenues are now expected in the range of $2.2 billion to $2.21 billion with EPS in the range of $13.95 to $14.35.

Accenture-ACN reported fiscal second quarter revenues of $15.8 billion, relatively flat with last year. Consulting revenues decreased 3% to $8.0 billion and managed services revenues increased 3% to $7.8 billion. Net income and EPS each increased 10% during the quarter to $1.7 billion and $2.63, respectively, as the operating margin expanded 70 basis points to 13%. New bookings during the quarter dipped 2% to $21.6 billion, although still represented the company’s second highest level of new bookings with a book-to-bill ratio of 1.4. The company had a record 39 clients with quarterly bookings over $100 million. Generative AI new bookings exceeded $600 million during the quarter and $1.1 billion during the first half of the fiscal year. Free cash flow declined 8% during the first half to $2.4 billion with the company paying $1.6 billion in dividends, a 15% increase over last year, and repurchasing $2.5 billion of its stock. Accenture has $4.6 billion remaining authorized for future share repurchases. Accenture has made 23 acquisitions during the first half of the year for $2.9 billion to serve the needs of its clients and expand its growth opportunities. Given an uncertain geopolitical and macro environment, Accenture’s clients are delaying decision making on their technology spending. As a result, the company lowered its financial outlook for fiscal 2024 and now expects revenue growth in the range of 1% to 3%, compared to 2% to 5% previously with EPS now expected to increase 6% to 8% in the range of $11.41 to $11.64, compared to $11.41 to $11.76 previously. The company continues to expect free cash flow in the range of $8.7 billion to $9.3 billion with the company expecting to return at least $7.7 billion in cash to shareholders through dividends and share repurchases.

Raytheon-RTX was awarded a $1.2 billion contract to supply Germany with Patriot® air and missile defense systems. These systems will augment Germany's existing air defense infrastructure with additional Patriot equipment.

In an antitrust complaint, the U.S. Department of Justice sued Apple-AAPL, accusing the company of an illegal monopoly on smartphones. The Justice Department alleges that Apple uses its market power to prevent competitors from offering innovative services such as digital wallets and limited the functionality of hardware products that compete with Apple’s own devices. The suit also claims that Apple makes it difficult for users to switch to devices that don’t use Apple’s operating system, such as Android smartphones. Apple said it plans to vigorously defend against the lawsuit. “This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets,” an Apple spokesman said in a statement. “If successful, it would hinder our ability to create the kind of technology people expect from Apple—where hardware, software, and services intersect.”

Thursday, March 15, 2024

Ulta Beauty-ULTA reported pretty fourth quarter results with sales increasing 10% to $3.55 billion, net income jumping 16% to $394.4 million and EPS up 21% to $8.08. Comparable store sales increased 2.5%, driven by a 4.5% increase in transactions and a 1.9% decrease in average ticket. For the full fiscal year, revenues rose 10% to $11.2 billion with net income increasing 4% to $1.29 billion and EPS up 8% to $26.03. Return on shareholders’ equity was a gorgeous and profitable 56.6%. Free cash flow declined 11% to $1 billion with the company repurchasing 2.2 million of its shares during the year for $1 billion at an average cost of about $454.54 per share. The company’s board of directors approved a new share repurchase authorization of $2 billion. Since 2014, Ulta Beauty has returned $5.8 billion to shareholders through its share repurchase program, while continuing to make strategic growth investments. Ulta Beauty announced the formation of a joint venture with Axo, a highly experienced operator of global brands, to launch and operate Ulta Beauty in Mexico in 2025. International expansion represents an incremental, long-term opportunity for Ulta to extend their reach and leverage their differentiated value proposition. The company’s outlook for fiscal 2024 is for net sales between $11.7 billion to $11.8 billion, representing 4% to 5% growth, driven by 4% to 5% comparable store sales growth and the opening of 60-65 new stores. The company’s operating margin is expected in the range of 14% to 14.3%, leading to EPS of $26.2 to $27.0 representing 1% to 4% growth. Capital expenditures are expected in the range of $415 million to $490 million.

Tuesday, March 12, 2024

At Roche Holdings’-RHHBY annual meeting, Severin Schwan, chairman, said, "Both the Pharmaceuticals and Diagnostics Divisions delivered strong results in 2023. In particular, I would like to emphasise the strong development of our base business. As a result, we grew on a currency-adjusted basis - despite the significant decline in sales of COVID-19 products. We have a broad product pipeline with 82 drug candidates, ten of which are already in the final phase of clinical development. We have a strong presence in the key areas of oncology, immunology and neurology. We are also expanding into new areas, including obesity. In our Diagnostics Division, we will launch more new products in 2024 than ever before. We are well positioned for the future." In addition, shareholders approved an increase in the dividend for the past financial year to 9.60 Swiss francs (gross) per share and non-voting equity security. This is the 37th dividend increase in succession.

Monday, March 11, 2024

Oracle-ORCL reported fiscal third quarter revenues rose 7% to $13.3 billion with net income soaring 27% to $2.4 billion and EPS up 25% to $.85. Cloud revenue increased 25% to $5.1 billion, led by 49% growth in cloud infrastructure (IaaS) to $1.8 billion. This is the first quarter that cloud revenues exceeded license revenues as the company continues its cloud transformation with margins expanding thanks to economies of scale in the cloud. Large new cloud infrastructure contracts signed in the third quarter drove Oracle’s Remaining Performance Obligations up 29% to over $80 billion—an all-time record with 43% of the $80 billion expected to be recognized as revenue over the next four quarters. Oracle continues to receive large contracts reserving cloud infrastructure capacity because the demand for Oracle’s Gen2 AI infrastructure substantially exceeds supply due to the company’s superior price performance. Oracle believes the company’s Gen2 Cloud infrastructure business will remain in a “hypergrowth” phase for the foreseeable future. During the third quarter, Oracle finished moving most Cerner customers to Oracle’s Gen2 Cloud Infrastructure. During the fourth quarter, Oracle will start delivering its completely new Ambulatory Clinic Cloud Application Suite to these customers. This new AI-driven system features an integrated voice interface called the Clinical Digital Assistant that automatically generates doctors’ notes and updates Electronic Health Records—saving time and improving health data accuracy. This revolutionary healthcare technology is expected to transform Cerner and Oracle Health into a high-growth business for years to come. Free cashflow jumped 80% during the first nine months to $8.5 billion with the company paying $3.3 billion in dividends and repurchasing $1.1 billion of its stock. Over the last 12 months, free cash flow has increased 68% to $12.3 billion as Oracle is benefiting from its cloud transformation. In the fourth quarter, overall revenue is expected to increase 4%-6% with non-GAAP EPS expected in the range of $1.62-$1.66. Oracle’s pipeline is growing rapidly as its win rate is increasing with revenues expected to accelerate significantly in fiscal 2025.

Thursday, March 7, 2024

FLEETCOR Technologies-FLT said it plans to rebrand the company to Corpay. The name change better reflects the company’s current portfolio of corporate payment solutions. This name change will take effect on March 25, 2024 when the company’s stock begins trading on the New York Stock Exchange under the new ticker symbol CPAY.

Wednesday, March 6, 2024

The board of directors of General Dynamics-GD declared a regular quarterly dividend of $1.42 per share on the company's common stock, payable May 10, 2024, to shareholders of record on April 12, 2024. This is the 27th consecutive annual dividend increase authorized by the General Dynamics board and represents a 7.6% increase over last year's dividend.

Brown-Forman-BFB reported sales for the three months ended 1/31/2024 dipped 1% to $1.07 billion with operating income up 116% to $373 million, net income up 186% to $285 million and EPS up 189% to $0.60. Excluding special items related to acquisitions and divestitures, foreign exchange and last year’s $96 million impairment charge for the Finlandia brand name, operating income increased 5%.  Year-to-date, sales increased 1% to $3.2 billion thanks to recently acquired brands, Gin Mare and Diplomatico, and a shiny 44% increase  in Jack Daniel’s Apple sales, partially offset by a 6% decline in Jack Daniel’s Tennessee Whiskey. By region, growth in Emerging markets (up 9%) and Travel Retail (up 3%) was partially offset by declines in Developed International markets (down 2%) and the U.S. (down 1%), reflecting normalizing global trends after two years of very strong growth. Over the past three years, reported sales have increased at an 8% average compound annual growth rate. Year-to-date gross margins increased 250 basis points, driven by favorable price/mix (290 points), input cost declines (90 basis points) partially offset by foreign exchange headwinds and costs related to acquisitions and divestitures. For the nine months ended 1/31/2024, Brown-Forman generated $214 million in free cash flow, down 27% from last year, with the company returning $700 million to shareholders through share repurchases of $400 million and dividends of $300 million. Brown-Forman, a member of the prestigious S&P 500 Dividend Aristocrats Index, has paid quarterly dividends for 80 consecutive years and increased its dividend for 40 consecutive years, including the 6% increase in fiscal 2024.   Given the continued challenging operating environment following two years of double-digit organic sales growth, normalizing industry trends and evolving macroeconomic conditions, the company now expects fiscal 2024 organic sales growth to be flat, reflecting the slower than anticipated year-to-date growth, with organic operating income growth of 0% to 2% on gross margin improvement. Capital expenditures are expected in the range of $230 million to $240 million.

Tuesday, March 5, 2024

Ross Stores-ROST rang up a 16% increase in fourth quarter sales to $6 billion with earnings up a fancy 36% to $610 million and EPS up a fashionable 39% to $1.82. Comp store sales increased 7% and operating margin increased 165 basis points to 12.4%, mainly due to the strong gains in same store sales and lower freight costs that were partially offset by higher incentives. For the year, Ross Stores reported sales increased 9% to $20.4 billion with earnings jumping 24% to $1.87 billion and EPS up 27% to $5.56. During 2023, Ross Stores generated a dressy 38% return on shareholders’ equity and free cash flow of $1.75 billion. The company returned $1.4 billion to shareholders during the year through dividend payments of $455 million and share repurchases of $950.0 million, including $247 million during the fourth quarter at an average cost per share of $130. The Company’s Board of Directors recently approved a new two-year $2.1 billion stock repurchase authorization for fiscal 2024 and 2025. This new program represents an 11% increase over the recently completed repurchase program. In addition, Ross Stores increased its quarterly dividend by 10% to $0.3675 per share, 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 ended the year with $4.87 billion in cash, $2.21 billion in long-term debt and $4.87 billion in shareholders’ equity on its impressive balance sheet. Looking ahead to 2024, while the company is encouraged by the sustained sales momentum that began in the second quarter and continued through the holiday season, there remains ongoing uncertainty in the macroeconomic and geopolitical environments. Management expects same store sales to grow 2% to 3% with EPS between $5.64 to $5.89, compared to $5.56 for fiscal 2023. For the first quarter, management expects comparable store sales to be up 2% to 3% with EPS in the range of $1.29 to $1.35, up from $1.09 in the first quarter of 2023. Capital expenditures are expected to be approximately $840 million for the year, as the company expects to open 90 new stores. While inflation has moderated, housing, food and gasoline costs remain elevated and continue to pressure the company’s low-to-moderate income customers.

Monday, March 4, 2024

The European Union fined Apple-AAPL almost $2 billion saying Apple set unfair rules for developers of music-streaming apps, like Spotify, resulting in users paying significantly higher prices for music streaming subscriptions. The European Commission said the investigation into Apple’s app-store practices found the company violated antitrust rules by restricting app developers from telling users about alternative ways to subscribe to music-streaming services. The commission said it ordered Apple to remove the provisions that prevent developers from telling users about other ways to subscribe. Apple said it plans to appeal the decision, which it said was reached “despite the Commission’s failure to uncover any credible evidence of consumer harm.”

Thursday, Feb. 29, 2024

Hormel Foods-HRL reported fiscal first quarter revenues increased 1% to $3.0 billion with net income up 1% to $218.9 million and EPS flat at $.40. These better-than-expected results reflected volume growth across all business segments thanks to the strength of the company’s brands, robust demand for foodservice products and the momentum in the Planters® snack nuts business. Free cash flow more than doubled during the quarter to $356.8 million as the supply chain improved and inventories were brought down. During the quarter, Hormel paid $150.3 million in dividends. Hormel reaffirmed its net sales outlook of 1% to 3% for fiscal 2024 with EPS in the $1.43 to $1.57 range. EPS is expected to decline in the fiscal second quarter due to continued headwinds in the turkey business, but then profit growth is expected in the second half of the year in all business segments,  thanks to continued growth in Foodservice, improvement in the International business and impacts from pricing and innovation in the Retail business.

Wednesday, Feb. 28, 2024

The TJX Companies-TJX reported strong fourth quarter results with revenues ringing up a 13% gain to $16.4 billion with comparable store sales up 5%, above the company’s plan, and driven by an increase in customer transactions in all segments of the business. Fourth quarter net income jumped a dressy 35% to $1.4 billion, as margins expanded well above the company’s plan, with EPS up 37% to $1.22.  For the full fiscal 2024 year, revenues surpassed the $50 billion revenue milestone as sales increased 9% to $54.2 billion with net income up 28% to $4.5 billion and EPS up 30% to $3.86. Return on shareholders’ equity was an impressive 61% for the year. Free cash flow increased 65% to $4.3 billion during the year with the company paying $1.5 billion in dividends and repurchasing $2.5 billion of its common stock. Thanks to its strong cash flows, TJX announced a 13% increase in its dividend for fiscal 2025 with plans to repurchase $2.0 billion to $2.5 billion of its stock in the new fiscal year.  TJX continues to gain market share across all its geographies and is off to a good start for the new fiscal year. TJX expects comparable store sales to be up 2% to 3% in fiscal 2025 with EPS expected in the range of $3.94 to $4.02.

Saturday, Feb. 24, 2024

Warren Buffett paid tribute to Charlie Munger in the annual report, describing Charlie as the architect of Berkshire Hathaway. In 1965, Munger set the investment strategy for Berkshire when he advised Buffett “to buy wonderful businesses at a fair price rather than fair businesses at a wonderful price.” This has resulted in Berkshire becoming a great business with a diverse stream of earnings power and the highest net worth of any U.S. company. Thanks to its immense financial strength, “Berkshire is built to last.” Buffett provided his own advice to investors, “When you find a truly wonderful business, stick with it. Patience pays, and one wonderful business can offset the many mediocre decisions that are inevitable. “

Berkshire Hathaway-BRKB reported the company’s net worth during 2023 increased by 18.5%, or $87.8 billion, to $561.3 billion with book value equal to about $389,367 per Class A share as of 12/31/23. Berkshire boasts, by far, the largest shareholders’ equity of any U.S. company.

On a GAAP basis, Berkshire reported net earnings of $96.2 billion for the year compared to a $22.8 billion loss in the prior year. 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 period are usually meaningless. Berkshire’s five major equity investment holdings which represent about 79% of total equities held, include American Express at $28.4 billion (which charged 27% higher during 2023 or $6.0 billion); Apple at $174.3 billion (which jumped 46% during the year or a juicy $55.3 billion); Bank of America at $34.8 billion (which gained 2% or $600 million);  Coca-Cola at $23.6 billion (which fizzled 7% or -$1.8 billion) and Chevron at $18.8 billion (which was 37% lower or $11.2 billion in value, reflecting partial sales of the position during the year). Berkshire has resumed purchases of Chevron.

During 2023, Berkshire’s revenues rose 21% to $364.5 billion, aided by the 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% in 2023. Subsequent to year end, Berkshire acquired the remaining 20% interest in Pilot for $2.6 billion. Excluding the acquisition of Pilot, revenues rose 4% for the year. In 2023, Berkshire’s operating earnings increased 21% to $37.4 billion, primarily led by a turnaround in Berkshire’s insurance businesses.

During the year, Berkshire’s insurance businesses performed “exceptionally well” setting records in sales, float and underwriting profits. The insurance segment generated $5.4 billion from underwriting earnings compared to a loss of $30 million in the prior year due to improvements at GEICO, relatively low catastrophe losses, and the acquisition of Alleghany Insurance. Insurance investment income increased 48% during the year to $9.6 billion, reflecting higher interest income as short-term interest rates increased significantly. The float of the insurance operations increased $5 billion during the year to end 2023 at about $169 billion. The combined cost of float was negative during the year due to the $5.4 billion in underwriting gains. Berkshire’s insurance businesses have had an excellent underwriting record, operating at an underwriting profit for 18 of the last 20 years.

In 2023, Burlington Northern Santa Fe’s “earnings declined more than expected as revenues fell.” Burlington Northern Santa Fe’s revenues declined 7% during the year to $23.5 billion, reflecting lower volumes of 6% and average revenue per car/unit decreasing 0.6%, primarily due to lower surcharge revenue, partially offset by favorable changes in business mix. Net earnings rolled 14% lower to $5.1 billion for the year. The decrease was primarily due to lower overall freight volumes and higher non-fuel operating costs, partially offset by lower fuel costs.

An adverse regulatory environment led to a “severe earnings disappointment” at Berkshire Hathaway Energy.  While Berkshire Hathaway Energy’s revenues remained relatively flat at $26 billion for the year, net earnings declined 40% to $2.3 billion. The earnings decrease reflected lower earnings from the U.S. regulated utilities, increased wildfire loss estimates of $1.7 billion in 2023, 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 11 months of consolidation in 2023, Pilot’s revenues traveled 22% lower to $56.8 billion as pre-tax earnings declined 55% to $1.1 billion due to significantly lower fuel prices as well as from lower fuel sales volumes. Pilot sold approximately 16.2 billion gallons of diesel fuel, gasoline and other fuel-related products in 2023 compared to 18.4 billion gallons in 2022.

Berkshire’s Manufacturing businesses reported 2023 revenues relatively flat at $75.4 billion with operating earnings up 2% to $11.4 billion. The Industrial products segment led the way for the year with revenues rising 13% to $34.9 billion and operating earnings increasing 17% to $5.7 billion thanks to improvements at Precision Castparts, IMC and Marmon including acquisitions as part of the Alleghany deal. The Building products segment revenue declined 10% to $26.0 billion and operating earnings declined 13% to $4.2 billion, primarily due to the significant increases in home mortgage rates slowing demand. The Consumer products segment revenue decreased 9% to $14.6 billion, reflecting lower revenues at Forest River as RV sales dropped due to higher interest rates, while operating earnings were up 3% to $1.6 billion, primarily due to the Jazwares acquisition and improved earnings of the apparel and footwear businesses. 

Service and Retailing revenues increased 1.0% during the year to $92.6 billion with pre-tax earnings increasing 3% to $5.2 billion. These results reflected the impact of acquisitions and improvements in aviation services.

Berkshire’s balance sheet continues to reflect significant liquidity and a very strong capital base of $561.3 billion as of 12/31/23. Excluding railroad, energy and utility investments, Berkshire ended the year with $570 billion in investments allocated approximately 62.1% to equities ($353.8 billion), 4.2% to fixed-income investments ($23.8 billion), 28.6% in cash and equivalents (to a record $163.3 billion) and 5.1% in equity method investments ($29.0 billion), which includes 26.7% ownership of Kraft Heinz and 27.8% ownership of Occidental Petroleum. Warren Buffett noted he has no plans to acquire Occidental Petroleum but plans to hold his position in the company indefinitely. Berkshire also plans to hold or increase his 9% stakes in five large Japanese trading companies which operate in a highly-diversified manner similar to Berkshire.  

Free cash flow increased 36% during the year to $29.8 billion due to higher earnings and favorable working capital changes. During the year, capital expenditures approximated $19.4 billion, which included $13.1 billion for BNSF and BHE, its railroad and utility and energy units. Berkshire expects capital expenditures for BNSF and BHE to approximate $14.3 billion in 2024.

During 2023, Berkshire paid cash of $16.5 billion to acquire equity securities and received proceeds of $40.6 billion from the sale of stocks, including the partial sales of Chevron, BYD, the Chinese electric vehicle manufacture, HPQ and several bank holdings. The equity sales generated $5.0 billion in after-tax realized gains during the year. In addition, Berkshire purchased a net $29.5 billion in Treasury Bills and fixed-income investments.  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.  During 2023, Berkshire repurchased $9.2 billion of its common stock, including $2.2 billion during the fourth quarter. These repurchases included 103 Class A shares purchased at an average price of approximately $541,062 per share in December 2023.  

Thursday, Feb. 22, 2024

Booking Holdings-BKNG booked a 18% increase in fourth quarter revenues to $4.7 billion with net income decreasing 82% to $222 million, and EPS down 80% to $6.28 per share. On an adjusted basis, net income increased 18% to $1.1 billion, and EPS was up 29% to $32.00. Travel bookings jumped 16% to $31.7 billion and room nights booked in the fourth quarter increased 9% from last year. For the year, Booking Holdings reported record revenues of $21.4 billion, up 25% from last year, with net income increasing 40% to $4.3 billion and EPS traveling over 50% higher to $117.40. During the year, air travel tickets increased 58% with the company continuing to see a healthy increase in customers for flights. Free cash flow increased 13% to $7 billion with the company returning $10.4 billion to shareholders via share repurchases. In addition, management announced the initiation of a quarterly dividend of $8.75 per share, payable on March 28, 2024. Booking ended the year with $13.1 billion in cash, and $12.2 billion in long-term debt on its solid balance sheet. The company is expecting EPS growth of over 14% for 2024. Management continues to see resiliency in global leisure travel demand and is seeing a strong start to bookings in 2024, setting up for another potential record summer travel season.

Thursday, Feb. 16, 2024

Texas Roadhouse-TXRH reported fourth quarter revenues increased a meaty 15% to $1.2 billion, on 10% comparable sale growth, with net income and EPS up 21% to $72.4 million and $1.08, respectively. Average weekly sales increased 9% to $141,653 of which $17.8 million were to-go sales compared to $16.4 million in the prior year. Restaurant margin increased 75 basis points to 15.3% driven by higher sales partially offset by commodity inflation of 3.2%, wage and other labor inflation of 5.5% and higher general liability insurance expense. For the full year, revenues increased 15% to $4.6 billion on 10% comparable sales growth at company restaurants and 9.8% increase at domestic franchise restaurants. Net income increased 13% to $304.9 million and EPS increased 14% to $4.54. During the year, average weekly sales increased 9% to $143,837. Restaurant margin decreased 36 basis points to 15.4% primarily due to commodity inflation of 5.6%, wage and other labor inflation of 6.6% and higher general liability insurance expense partially offset by higher sales. Free cash flow declined 18% to $217.9 million primarily due to capital spent on new store openings. The company returned $197.2 million to shareholders through dividends of $147.2 million and share repurchases of $50 million for an average price per share of $109.88. The Company’s Board of Directors authorized the payment of a quarterly cash dividend of $0.61 per share, representing an 11% increase and will be distributed on March 26, 2024. During the quarter, 12 company restaurants and seven franchise restaurants were opened. For the full year, 30 company restaurants and 15 franchise restaurants were opened. Texas Roadhouse ended the year with $104.2 million in cash, no long-term debt and $1.1 billion in shareholders’ equity on its beefy balance sheet. The company has accelerated its 2024 development pipeline with 19 new company locations under construction. In 2024, capital expenditures are expected in the range of $340 million to $350 million. The company expects to open approximately 30 restaurants during the year. During the first 50 days of the first quarter, comparable store sales increased 6.8%. The company plans to implement a price menu increase of about 2.2% in late March. For the full 2024 year, Texas Roadhouse expects positive comparable sales growth, including the benefit of menu pricing action to help offset commodity inflation of 5% and wage inflation of 4% to 5%. In addition, management expects store week growth of 8%.

Wednesday, Feb. 15, 2024

Genuine Parts-GPC reported a solid fourth quarter as revenues rose 1% to $5.6 billion with net income motoring 26% higher to $316.9 million and EPS up 28% to $2.26.  For the full year, revenues increased 5% to $23.1 billion with net income increasing 11% to $1.3 billion and EPS up 12% to $9.33. This was the third consecutive year of double-digit earnings growth despite a challenging business environment. The value and benefit of the company’s diverse business was evident during the year as solid results from the company’s Industrial and International Automotive businesses offset softness in the U.S. Automotive business.  Return on shareholders’ equity for the year was an impressive 29.8%. Free cash flow declined 18% for the year to $922.9 million due to working capital changes. During the year, the company repurchased $261 million of its stock and paid $526.7 million in dividends. Genuine Parts announced a 5% increase in the dividend for 2024, which marked the 68^th consecutive year of dividend increases. Genuine Parts is planning a global restructuring to improve the efficiency of the business which will result in costs of about $100 million to $200 million in 2024. The company’s outlook for 2024 is for sales growth of 3% to 5% with EPS in the range of $8.95 to $9.15.  Excluding the restructuring charge, adjusted EPS in 2024 is expected to range from $9.70 to $9.90, representing 4% to 6% growth.  The company expects to generate $1.3 billion to $1.5 billion in operating cash flow in 2024 or $800 million to $1.0 billion in free cash flow.

In a regulatory filing, Berkshire Hathaway-BRKB revealed it had pared its large position in Apple-AAPL last quarter by 10 million shares but continues to hold 905 million shares of Apple worth about $166 billion. Berkshire also purchased approximately another 20 million shares of Occidental Petroleum and 16 million shares of Chevron.

Tuesday, Feb. 14, 2024

Cisco-CSCO reported sales for the second quarter of fiscal 2024 fell 6% to $12.8 billion with net income declining 5% to $2.6 billion and EPS dipping 3% to $0.65. Overall product revenue was down 9% to $9.2 billion as customers have become more cautious amid an uncertain macroeconomic and geopolitical environment, and services revenue increased 3.5% to $3.5 billion, reflecting management’s focus on shifting to recurring subscription revenue. While Cisco saw growth in its security (up 3% to $973 million), collaboration (up 3% to $989 million), and observability (up 16% to $188 million) segments in the quarter, its core networking business saw revenue decline 12% to $7.08 billion. Orders declined 12% during the second quarter as customers work through installation of networking equipment inventory stockpiles. While that logjam may resolve itself during the second half of the fiscal year, weak spending by telecommunications and cable companies will likely persist. Reflecting the company’s shift to software and services, Cisco announced a reorganization with the expectation of laying off 5% of its global workforce of 84,900 resulting in a pre-tax charge of about $800 million, most of which will be recognized in the fiscal third and fourth quarters of 2024. In addition, the $28.0 billion acquisition of software maker, Splunk, is expected to be completed by April 30. During the quarter, Cisco repurchased $1.25 billion of its shares at an average cost per share of $49.54 and paid $1.58 billion in dividends. During the first six months of the fiscal year, Cisco generated $2.88 billion in free cash flow, down 66% from last year, due to timing of a large tax payment. Cisco returned $5.67 billion to shareholders during the first half of the fiscal year through share repurchases of $2.5 billion and dividends of $3.2 billion. The company announced a 3% increase in its dividend reflecting its commitment to delivering value to its shareholders and its confidence in the stability of its cash flow generation. Cisco ended the quarter with $25.7 billion in cash and investments, $6.7 billion in long-term debt and $46.3 billion in shareholders’ equity on its clean balance sheet. Looking ahead to the full fiscal year that ends in July, the company now expects revenue in the range of $51.5 billion to $52.5 billion, down from $57 billion in fiscal 2023, with EPS in the range of $2.61 to $2.73, down from $3.07 last year.  

Friday, Feb. 9, 2024

Pepsico-PEP reported fourth quarter sales dipped 0.5% to $27.85 billion with net income and EPS up more than 150% to $1.3 billion and $0.94, respectively. Excluding impairment, restructuring and recall charges, PepsiCo’s fourth quarter net income and EPS increased 6.6% to $2.46 billion and $1.78, respectively. North American food and beverage sales, which account for about 60% of total sales, declined during the quarter as multiple price hikes and tightening household budgets weighed on demand. For the year, PepsiCo sales bubbled up 6% to $91.5 billion with net earnings and EPS up 2% to $9.1 billion and $6.56, respectively. Excluding special items and foreign currency, PepsiCo’s EPS popped 14% for the year, the third consecutive year of double-digit core constant currency EPS growth. Organic sales increased 9.5% during 2023 on a 2% declined in convenient foods volume and a 1% decline in beverage volumes. For the year, PepsiCo delivered a 46.2% return on shareholders equity and $7.9 billion in free cash flow. The company returned $7.7 billion to shareholders during 2023 through dividend payments of $6.7 billion and share repurchases of $1.0 billion. PepsiCo ended the year with $10.0 billion in cash and investments, $37.6 billion in long-term debt and $18.6 billion in shareholders’ equity. Looking ahead to 2024, PepsiCo expects to deliver at least 4% organic revenue growth and at least 8% core constant currency EPS growth. The company also announced a 7% increase in the dividend for 2024, which represents the 52^nd consecutive annual increase. The company also expects to repurchase about $1.0 billion worth of its shares during 2024.  

Thursday, Feb. 8, 2024

Molina Healthcare-MOH reported fourth quarter sales increased 10% to $9.05 billion with net income of $216.0 million and EPS of $3.70 compared to $56.0 million and $0.96, respectively, last year. Excluding last year’s $208.0 million charge related to the reduction in leased space to accommodate the move to a permanent remote work environment, net income increased 6% and EPS increased 7%. Fourth quarter medical cost ratio (MCR)—the percentage of premiums spent on medical expenses—increased 80 basis points to 89.1%, reflecting higher Medicare utilization of supplemental benefits, in-home services and high-cost drugs.  For the year, the company reported a healthy 7% revenue increase to $34.1 billion with net income up 37% to $1.2 billion and EPS up 39% to $18.77. Excluding last year’s impairment charge, net income and EPS increased 16% during 2023. The company’s MCR for the year was 88.1%, flat with last year. Year-end membership declined 5% to 5.0 million, owing to Medicaid redeterminations.  During 2023, Molina Healthcare generated an impressive 25.9% return on shareholders’ equity and $1.58 billion in free cash flow, up from $682.0 million last year. The growth in free cash flow was due to the growth in earnings from organic growth, new starts and acquisitions plus the net impact of timing differences in government receivables and payables. The company ended the year with $9.1 billion in cash and investments, $2.18 billion in long-term debt and $4.2 billion in shareholders’ equity on its sturdy balance sheet. Looking ahead to 2024, management expects revenue to increase 16% to $39.6 billion with net income and EPS up 17% to $1.28 billion and $22.00, respectively. Membership is expected to increase 14% to 5.7 million.

Wednesday, Feb. 7, 2024

Fastenal-FAST reported January sales rose 6% to $639.9 million with average daily sales up 1.6%. The harsh winter weather is anticipated to have negatively impacted sales by 1.2% to 1.5%. Growth was experienced in all geographic regions during the month. By end market, manufacturing and other end markets experienced growth while non-residential construction and reseller markets contracted. By product line, safety and other products grew while fasteners contracted. Approximately 60% of the company’s Top 100 national accounts were growing in January compared to 78% last January. Total headcount was up 3.6% in the past year to 23,380.

Tuesday, Feb. 6, 2024

Cognizant-CTSH reported fourth quarter revenues dipped 2% to $4.8 billion with net income up 7% to $558 million and EPS up 9% to $1.11 as the company’s adjusted operating margin improved to 16.1% reflecting good cost controls. For the full year, revenues were relatively unchanged at $19.4 billion with net income down 7% to $2.1 billion and EPS off 5% to $4.21. Return on shareholders’ equity was a solid 16% in 2023. Full-year bookings increased 9% to $26.3 billion driven by new clients and large deals. Free cash flow declined 10% during the year to $2 billion with the company repurchasing $1.1 billion of its stock and paying $591 million of dividends. Cognizant has $1.8 billion remaining authorized for future share repurchases and increased its dividend 3% for 2024 to an annualized rate of $1.20 per share. Cognizant plans to continue to invest in generative AI, cloud, data modernization, digital engineering and the Internet of Everything to design and deliver solutions to its clients. Cognizant expects 2024 revenues in the range of $19.0 billion to $19.8 billion with operating margins expected to expand 20 to 40 basis points, leading to adjusted EPS in the range of $4.60 to $4.68.

Tractor Supply Company-TSCO announced that its Board of Directors declared a quarterly cash dividend of $1.10 per share of the company’s common stock. This represents an increase of 7 percent versus the prior quarterly dividend rate of $1.03 per share. "The strong and consistent cash flow of Tractor Supply supports our 15^th year of consecutive dividend increases. This increase reflects our Board’s continued confidence in our Life Out Here strategy to generate shareholder value, while investing for our future," said Edna Morris, Tractor Supply’s Chairman of the Board.

Thursday, Feb. 1, 2024

Roche Group-RHHBY reported sales declined 7% to CHF 58.7 billion with net income and EPS declining 9% to CHF 12.36 billion and CHF 18.57, respectively.  The strong Swiss franc weighed on the value of overseas sales which account for most of Roche’s sales. On a constant exchange rate (CER) basis, 2023 sales increased 1% with net income increasing 7% and EPS up 6%. Pharmaceutical sales declined 2%, or up 6% on a CER basis, to CHF 44.6 billion, owing to ongoing high demand for newer drugs partially offset by a decline in a trio of established cancer drugs facing biosimilar competition and dwindling demand for Ronapreve used to treat COVID-19. Excluding Ronapreve, Roche’s pharmaceutical sales increased 9% at CER. Eye medicine Vabysmo continued to be the top growth driver increasing 324% to CHF 2.36 billion, followed by Roche’s MS treatment, Ocrevus, which grew sales 13% to CHF 6.38 billion, Hemlibra for haemophilia A with a 16% sales increase to CHF 4.15 billion and Polivy, a blood cancer treatment, with a 108% sales increase to CHF 837 million. With 82 new molecular entities (NMEs) and a total of 146 projects, Roche has a promising pipeline with a wide variety of therapeutic approaches including Inavolisib to treat breast cancer, Xolair to treat food allergies and CT-388, a GLP-1/GIP agonist with best-in-class potential in treating obesity. Diagnostic division sales declined 20% to CHF 14.1 billion, or down 13% at CER, owing to difficult comps with last year’s high demand for COVID-19 tests. Excluding last year’s COVID-related sales of CHF 4.1 billion in 2022 and this year’s sales of CHF 800 million, the diagnostic division rang up a 7% in sales on strong demand for its base business offerings across all regions. During 2023, Roche Group generated a healthy 39.2% return on shareholders’ equity and CHF 12.4 billion in free cash flow with the company returning CHF 7.9 billion to shareholders through dividend payments. The company increased its dividend by 1% to CHF 9.60 per share for 2024. Roche ended the year with CHF 10.5 billion in cash and investments, CHF 24.8 billion in long-term debt and CHF 33.3 billion in shareholders’ equity on its strong balance sheet. Looking ahead to 2024, group sales are expected to grow in the mid-single-digits on continued strong base business growth in both divisions with COVID-19 sales declining by CHF 1.1 billion and loss of exclusivity negatively impacting sales by about CHF 1.6 billion. EPS growth is expected to be broadly in line with sales with further increases in the dividend on the horizon. The first quarter of 2024 is the final quarter impacted by declining COVID-19 related sales.

Apple-AAPL reported first quarter sales for fiscal 2024 increased 2% to $119.6 billion with net earnings up 13% to $33.9 billion and EPS up 16% to $2.18 to an all-time high. Product sales of $96.5 billion were flat with last year despite one less selling week during this year’s first quarter. By product, iPhone sales increased 6% to $69.7 billion on the strong adoption of the new iPhone 15. While sales in Greater China declined 13%, Apple’s products represented four of the top six smartphone models in urban China during the quarter. Sales in India grew double digits to a record. Mac sales returned to growth during the quarter, booting up a 1% increase to $7.78 billion despite one less selling week. iPad sales fell 25% to $7.0 billion on difficult comps with last year when the new iPad was launched. Wearables, Home and Accessories sales dropped 11% to $11.95 billion on difficult comps with last year’s launch of the second generation AirPod Pro and the launch of the Series 8 and SE watches. Services revenues increased 11% to an all-time high of $23.1 billion on the heels of Apple’s record 2.2 billion installed base, up from 2 billion last year, as consumers increase their engagement with Apple’s ecosystem. Apple is poised to launch Apple Vision Pro, a revolutionary spatial computer that seamlessly blends digital content with the physical world making it a promising tool for large enterprises like Nike, Walmart, Stryker, SAP and Bloomberg to increase productivity. Gross margin of 45.9% increased from 43.0% last year, boosted by sales leverage and mix, partially offset by currency headwinds. Apple generated $37.5 billion in free cash flow during the quarter, representing a shiny 111% of reported net income, a sign of high-quality reported earnings. Apple returned almost $27 billion to shareholders during the quarter through dividend payments of $3.8 billion and share repurchases of $20.14 billion at average cost of $180.30 per share. Apple also retired an additional 6 million shares under the 2019 ASR. Apple ended the quarter with $172.6 billion in cash and investments, $95.1 billion in long-term debt and $74.1 billion in shareholders’ equity on its AA+ balance sheet. Looking ahead to the second quarter, Apple expects iPhone sales to be flat compared with last year when excluding $5 billion in sales added post-COVID to replenish inventories and Services are expected to grow double-digits. Gross margins are expected in the 46% to 47% range with operating expenses in the $14.3 billion to $14.5 billion range and the tax rate coming in at 16%.   

Meta Platforms-META reported strong fourth quarter results with revenues surging 25% to $40.1 billion and net income and EPS each more than tripling to $14.0 billion and $5.33, respectively, as the company lapped restructuring charges in the prior year to set up its “year of efficiency.” During the quarter, Meta experienced strong engagement trends across its apps as over 3.1 billion people, an increase of 8%, used one of the company’s apps, such as Facebook, Instagram, Reels, Threads, Messenger and/or WhatsApp, at least once a day. Meta is seeing sustained and strong growth in Reels, a TikTok alternative, as people reshare Reels 3.5 billion times every day.  More than 130 million users are now active on Threads, a Twitter (X) alternative. In the fourth quarter, ad impressions delivered over this Family of Apps, increased by 21% and the average price per ad increased by 2%. Family of Apps ad revenue increased 24% to $38.7 billion during the quarter as ad revenue growth benefitted from online commerce, gaming, entertainment and media strength.  Reality Labs crossed over the $1 billion revenue milestone for the first time during the quarter with Quest 3 and Quest 2 both performing well. Reality Labs’ operating losses are expected to continue to increase meaningfully as Meta invests heavily in its development efforts in augmented reality/virtual reality.  For the full year, Meta reported revenues rose 16% to $134.9 billion with net income jumping 69% to $39.1 billion and EPS advancing 73% to $14.87. Meta’s “year of efficiency” delivered these strong results as the company focused on reducing costs and improving productivity, which led to a 22% decline in headcount by year end to 67,317. Return on shareholders’ equity improved to a likable 25.5%. Free cash flow spurted 130% higher to $43.8 billion  with the company repurchasing $20 billion of its stock. Meta has $30.9 billion remaining authorized for future share repurchases and announced an expansion of its share buybacks by an additional $50 billion.  In addition, Meta initiated a $.50 per share quarterly dividend payable on March 26, 2024, given its robust cash flows. The company ended the year with a fortress balance sheet with more than $91 billion in cash and investments, $18.4 billion in long-term debt and $153.2 billion in shareholders’ equity. Meta expects first quarter revenue to be in the range of $34.5 billion to $37 billion. Full year total expenses are expected to be in the range of $94 billion to $99 billion. Capital expenditures are expected to increase significantly and be in the range of $30 billion to $37 billion in 2024 driven by investments in servers and data centers as the company invests in the growing demand for artificial intelligence (AI) capacity.

Tractor Supply-TSCO reported fourth quarter sales declined 8.6% to $3.66 billion with net income down 8.5% to $248 million and EPS declining 6.2% to $2.28. Last year’s fourth quarter included an extra sales week as part of the 53-week calendar in 2022, which negatively impacted sales performance by about 5.6%. Unseasonably warm weather if thought to have negatively impacted sales by about 400 basis points from last year. The decrease in net sales was also attributable to a decline in comparable store sales, partially offset by positive sales contributions from new stores. Comparable store sales decreased 4.2%, driven by a comparable average ticket decline of 1.5% and a comparable average transaction count decline of 2.7%. Comparable store sales performance reflects continued strength in year-round consumable, usable and edible (“C.U.E.”) categories, offset by softness in cold weather products, discretionary categories and, to a lesser extent, big ticket items as consumers shifted post-COVID spending from goods to services. In the fourth quarter of 2022, comparable store sales benefited by approximately 200 basis points from a late December winter storm. Gross profit decreased 5.2% to $1.29 billion while gross margin increased 129 basis points to 35.3% from 34.0% last year, boosted by ongoing lower transportation costs and disciplined product cost management, modestly offset by negative product mix. For the year, Tractor supply rang up a 2.5% sales increase to $14.56 billion with net income up 2% to $1.11 billion and EPS up 4% to $10.09. During 2023, Tractor Supply generated an impressive 51.5% return on shareholders’ equity, $1.3 billion in operating cash flow and $580.2 million in free cash flow as the company continued to invest in new stores and remodels, two new distribution centers and technology. During 2023, Tractor Supply returned over $1.0 billion to shareholders through dividends of $449.6 million and share repurchases of $594.4 million. The company ended the year with $397.1 million in cash, $1.7 billion in long-term debt and $2.15 billion in shareholders’ equity. Looking ahead to 2024, management expects sales in the $14.7 billion to $15.1 billion, up 2% at the midpoint from 2023 on comparable store sales of -1% to +1.5% with net income in the $1.06 billion to $1.13 billion range, down 1.4% at the midpoint and EPS in the range of $9.85 to $10.50, up almost 1% at the midpoint.

Wednesday, Jan. 31, 2024

ADP-ADP reported second quarter revenues rose 6% to $4.7 billion as net income increased 8% to $878.4 million with EPS up 9% to $2.13. Interest on funds held for clients increased 20% to $225 million as the average yield on client funds increased 50 basis points to 2.8% on the average client funds balance of $32.6 billion. Free cash flow decreased 17% to $1.2 billion during the first half due to changes in working capital. ADP paid $1.0 billion in dividends and repurchased $505 million of stock during the first half of the year and still held $1.6 billion in cash and investments as of 12-31-23. ADP expects full year 2024 revenues to increase 6% to 7% with margins expanding 60 to 70 basis points leading to adjusted EPS growth of 10% to 12%.

Mastercard-MA reported fourth quarter revenues charged ahead 13% to $6.5 billion with net income up 11% to $2.8 billion and EPS up 13% to $2.97.  The revenue jump was driven by growth in Mastercard’s payment network thanks to resilient consumer spending during the holiday season as labor markets remained strong and continued growth in revenues from Mastercard’s value-added services and solutions. Payment network net revenue increased 9% on 10% growth in gross dollar volume to $2.4 trillion, 18% growth in cross-border volume and 12% growth in switched transactions. Value-added services and solutions net revenue increased 19% on continued growth of cyber and intelligence solutions, the continued scaling of fraud and security solutions and identity and authentication solutions, as well as continued growth in marketing, data analytics, consulting and loyalty solutions. Fourth quarter operating margins declined 320 basis points from last year on a 21% increase in total operating expenses due to a pre-tax litigation charge of $308 million and an increase in personnel costs. For the year, Mastercard reported revenues increased 13% to $25.1 billion with net income increasing 13% to $11.2 billion and EPS up 15% to $11.83. During 2023 Mastercard generated a stellar 26.4% return on assets and $11.6 billion in free cash flow, representing an impressive 104% of reported earnings. During the year, Mastercard returned $11.2 billion to shareholders through dividends of $2.2 billion and share repurchases of $9.0 billion, including $1.8 billion repurchased during the fourth quarter at an average cost per share of $400.00. During the first four weeks of January, Mastercard repurchased an additional $586.0 million shares at an average cost per share of $418.57. Mastercard ended the year with $8.6 billion in cash, $14.3 billion in long-term debt and $6.9 billion in shareholders’ equity on its sturdy balance sheet. Given the strong U. S.  labor market and rising wages along with slowing but still elevated inflation, market share gains plus the secular trend with global payments shifting from cash to card, Mastercard expects 2024 sales and expenses to grow in the low-double-digits range with the first quarter revenues expected to be in the lower end of the range due to tough comparisons with last year.  

Tuesday, January 30, 2024

Stryker-SYK reported a healthy 11.8% increase in fourth quarter sales to $5.8 billion with net income and EPS increasing over 100% to $1.14 billion and $2.98, respectively. Excluding regulatory and legal matters and other special items, net income and EPS increased 15% to $1.3 billion and $3.46, respectively. Commercial execution, including many successful product introductions was excellent across the business segments and regions. Globally, for both the fourth quarter and the full year, Stryker generated double-digit organic sales growth in instruments, endoscopy, medical, neuro cranial, hips, knees and trauma and extremities. For the year, Stryker reported sales increased 11% to $20.5 billion with net income and EPS increasing 34% to $3.17 billion and $8.25, respectively. Excluding one-time items, Stryker’s net income and EPS increased 14% to $4.1 billion and $10.60, respectively. During 2023, Stryker generated an impressive 17.0% return on shareholders’ equity and $3.1 billion in free cash flow with the company returning $1.14 billion to shareholders through dividend payments. Stryker ended the year with $3.0 billion in cash and investments, $10.9 billion in long-term debt and $18.6 billion in shareholders’ equity on its solid balance sheet. Based on the company’s momentum from 2023, strong procedural volumes, healthy demand for capital products and a stabilizing macro-economic environment, it expects 2024 organic net sales growth to be in the range of 7.5% to 9.0% and adjusted EPS to be in the range of $11.70 to $12.00.

Microsoft-MSFT reported second quarter revenues increased 18% to $62 billion with net income and EPS each jumping 33% to $21.9 billion and $2.93, respectively. Revenue in Productivity Business Processes increased 13% to $19.2 billion driven by Office 365 and 27% growth in Dynamics 365 products. Revenue in Intelligent Cloud increased 20% to $25.9 billion driven by Azure and other cloud services revenue growth of 30%. Revenue in More Personal Computing increased 19% to $16.9 billion, primarily driven by 15 points of net impact from the Activision acquisition. Microsoft cloud revenue was $33.7 billion, up 24% year-over-year. Free cash flow during the first half of the year increased 37% to $29.8 billion with the company paying $10.6 billion in dividends and repurchasing $8.8 billion of its common stock. Microsoft ended the quarter with $94.4 billion in cash and investments, $44.9 billion in long-term debt and $238.3 billion in shareholders’ equity on its strong balance sheet. For the third quarter, Microsoft expects revenues in the range of $60 billion to $61 billion with cost of goods in the range of $18.6 billion and $18.8 billion and operating expenses in the range of $15.8 billion to $15.9 billion. For the full 2024-year, Microsoft expects operating margin to expand 1 to 2 points.  "We’ve moved from talking about AI to applying AI at scale," said Satya Nadella, chairman and chief executive officer of Microsoft. "By infusing AI across every layer of our tech stack, we’re winning new customers and helping drive new benefits and productivity gains across every sector.”

Alphabet-GOOGL reported fourth quarter revenues increased 13% to $86.3 billion with net income surging 51% to $20.7 billion and EPS jumping 56% to $1.64. These strong results were driven by ongoing strength in Search with Google Search revenues up 13% during the quarter to $48.0 billion, led by growth in retail advertising. YouTube ads revenue rose 16% during the quarter to $9.2 billion on an increase in direct response and brand ads. Revenues in Google subscriptions, platforms and devices jumped 23% during the quartet to $10.8 billion as momentum in subscriptions to YouTube continued with both YouTube Music and YouTube TV performing exceptionally well. Subscriptions to the NFL Sunday ticket scored a touchdown. Google Cloud revenues rose a lofty 26% to $9.2 billion thanks to growing demand for generative AI as the company expands its relationships with other companies. Other Bets revenues nearly tripled during the quarter to $657 million thanks to Waymo and generative AI advances in healthcare. Google is launching the Gemini era, which will fuel the next generation of advances in generative AI as the technology can run on everything from data centers to mobile devices. For the full year, Alphabet’s revenues increased 9% to $307.4 billion with net income jumping 23% to $73.8 billion and EPS rising 27% to $5.80. Return on shareholders’ equity for the year improved to an impressive 26%. Free cash flow rose 16% during the year to $69.5 billion with the company repurchasing $61.5 billion of its stock. Alphabet ended the year with a fortress balance sheet with nearly $142 billion in cash and investments, $13 billion in long-term debt and $283 billion in shareholders’ equity.  Alphabet expects healthy profitability to continue in 2024 as the company prioritizes its products, optimizes AI and streamlines its operations with headcount down 4% at year end. Alphabet will continue to heavily invest in servers and data centers to support the growing demand for AI  with capital expenditures expected to increase notably over the $32.3 billion invested in 2023.

Starbucks-SBUX brewed up an 8.2% increase in first quarter sales to a record $9.4 billion with net income steaming up 19.8% to $1.02 billion and EPS jolting up 21.6% to $0.90. Global comparable store sales increased 5%, driven by a 3% increase in transactions and a 2% increase in average ticket.  North America and U.S. comparable store sales increased 5%, driven by a 4% increase in average ticket and 1% increase in comparable transactions while International comparable store sales increased 7%, driven by a 11% increase in comparable transactions and 3% decline in average ticket. China comparable store sales increased 10%, driven by a 21% increase in comparable transactions and 9% decline in average ticket as consumers became cautious. Active U.S. Starbucks rewards membership increased 13% to 34.3 million. Starbucks opened 549 net new stores in the quarter, ending the period with 38,587 stores, including 16,466 and 6,975 stores in the U.S. and China, respectively. Operating margin expanded by 140 basis points, driven by sales leverage and in-store operating efficiencies as management’s reinvention efforts bear fruit.  Operating efficiencies were partially offset by investment in store partner wages and benefits as well as costs associated with reinvention efforts.  During the quarter, Starbucks generated $1.79 billion in free cash flow, representing a stellar 175% of reported net income. The company returned $1.9 billion through dividend payments of $648.1 million and share repurchases of $1.27 billion at an average cost of $101.56 per share. During the fourth quarter, Starbucks declared a cash dividend of $0.57, up 5.6% from last year and marking the 55^th consecutive quarter of dividend payouts with a CAGR of about 20%. Starbucks ended the quarter with $3.6 billion in cash and $13.6 billion in long-term debt.  Given expected headwinds, Starbucks revised its full year global revenue growth in the range of 7% to 10%, down from the previous range of the low end of 10% to 12%. Full year global and US comp growth is now expected in the range of 4% to 6%, down from the previous range of 5% to 7%. China comp growth is now expected in the low-single-digits for the balance of the year, revised from the previous range of 4% to 6% in the second through fourth quarters with higher comp in the first quarter. Full year global store growth is projected at approximately 7% with EPS growth in the range of 15% to 20%.  Starbucks expects EPS to be the lowest in second quarter and meaningfully below full fiscal year guidance ranges due to the ongoing headwinds that are expected to stabilize in the second half of the fiscal year.

PulteGroup-PHM reported fourth quarter sales declined 15.5% to $4.29 billion with net income down 19.4% to $711.0 million and EPS down 14.8% to $3.28 on fewer shares outstanding. Average sales price declined by 2% during the quarter to $547,000 and closings were down 14% to 7,615 homes. The company experienced a significant increase in buyer activity as interest rates moved lower from a multi-decade peak of nearly 8% in late October to 6.6% at year-end, resulting in robust December activity. As a result of increasing demand, the company began building more spec homes to ensure adequate supply during the spring 2024 selling season. Net new orders increased 57% in the fourth quarter to 6,214 homes, bringing the total backlog of homes to 12,146 homes (flat with 12/31/2022) with a value of $7.3 billion ($601,021 average selling price) at year-end. Pulte’s cancellation rate dropped to 9% of beginning backlog, from 11% in 2022. For the year, PulteGroup reported a slight increase in sales to $16.1 billion with net income dipping slightly to $2.6 billion and EPS increasing 6.4% to $11.72 on fewer shares outstanding. The company generated a robust 25.1% return on shareholders’ equity during 2023. For the year, Pulte generated $2.1 billion in free cash flow with the company returning $1.14 billion to shareholders through dividends of $142.5 million and share repurchases of $1.0 billion at an average cost per share of $72.50, including $300 million repurchased during the fourth quarter at an average cost per share of $83.03 per share. During 2023, PulteGroup reduced its shares outstanding by 6.1%. Since initiating its share repurchase program in 2013, the company has reduced its share count by almost 50% at an average cost per share of $32.16, representing a great investment for shareholders given that the stock currently trades over $100 per share. Reflecting its confidence in its future cash flow generation and its ongoing commitment to return excess cash to shareholders, PulteGroup announced a $1.5 billion increase in its share repurchase program, bringing the total authorized to $1.8 billion. The company also increased its dividend by 25% for 2024. PulteGroup ended the year with $1.8 billion in cash, $1.96 billion in long-term debt and $10.4 billion in shareholders’ equity on its sturdy balance sheet. Looking ahead to the future, PulteGroup expects to increase unit sales volume in the 5% to 10% range with 2024 falling toward the bottom of the range given that it walked away from land options at the end of 2022 due to falling demand. These forfeited land options flow through to 2024 sales. Given years of stifled building in the aftermath of the Great Recession and the lack of existing homes for sale due to years of historically low mortgage rates, the company is optimistic about future demand for new homes and its ability to profitably supply that demand.

UPS-UPS reported disappointing fourth quarter results that capped off a difficult year due to a challenging macroeconomic environment, as soft demand led to overcapacity in the industry, along with the adverse impact of labor negotiations during the year which resulted in a diversion of volume to competitors and higher labor costs.  During the fourth quarter, revenue declined 8% to $24.9 billion with net income and EPS each plunging 53% to $1.6 billion and $1.87, respectively. For the full year, revenues declined 9% to $90.6 billion with net income falling 42% to $6.7 billion and EPS dropping 41% to $7.80. Return on shareholders’ equity declined to 38.7% with free cash flow down 46% to $5.1 billion. During the year, UPS paid $5.4 billion in dividends and repurchased $2.3 billion of its stock. UPS modestly increased its dividend for 2024 by less than 1% to an annualized rate of $6.52 per share, marking the 15^th consecutive year of dividend increases. UPS is taking actions to deal with the challenging environment, including laying off 12,000 employees for $1 billion in cost savings and considering the sale of its Coyote truck load brokerage business due to volatile financial results. For the full year 2024, UPS expects revenues to increase, primarily in the back half of the year, to a range of $92.0 billion to $94.5 billion with an adjusted operating margin in the range of 10.0% to 10.6% compared to 10.9% in 2023. The company expects free cash flow in the range of $4.5 billion to $5.3 billion after investing$4.5 billion in capital expenditures. Dividend payments should approximate $5.4 billion in 2024.

Friday, Jan 26, 2024

Western Alliance Bancorporation-WAL reported fourth quarter net revenue declined 4.7% to $682.2 million with net earnings and EPS declining 50% to $144.7 million and $1.33, respectively.  The bank’s efficiency ratio deteriorated to 66.8% from 46.9% during last year’s fourth quarter owing to an increase in deposit costs and a $66.3 million FDIC Special Assessment partially offset by a $39.3 million benefit from repaying the Bank Term Funding loan at a discount. Total deposits grew nearly 3% from last year to $55.3 billion while loans dipped 3% to $50.3 billion, resulting in a loan to deposit ratio of 91%. Management aims to bring that number to the mid-80s level with loans expected to grow by $500.0 million per quarter and deposits growing by $2.0 billion per quarter during 2024. Net interest margin dropped to 3.65% from 3.98% last year on higher deposit interest expense. Asset quality remained strong with non-performing assets representing 0.40% of total assets and annualized charge-offs to average loans outstanding of 0.06%. Commercial real estate loans accounted for 19% of the bank’s total loans with 23% of the loans carrying a loan to value ratio under 40%. Office building loans accounted for 25% of commercial loans and 5% of total loans with 80% carrying a loan to value ratio greater than 51%. Return on assets and return on tangible equity were 0.84% and 11.9%, respectively, compared to 1.67% and 27.0% last year. For the year, Western Alliance reported net revenue increased 3.1% to $2.6 billion with net income and EPS falling more than 30% to $722.4 million and $6.54, respectively. Net interest income increased 5.5% to $2.3 billion and non-interest income fell 13.5% to $280.7 million. During 2023, Western Alliance generated an 11.9% return on shareholders’ equity. The bank ended the year with $14.6 billion in cash, $8.1 billion in long-term debt and $6.1 billion in shareholders’ equity. With a CET1 ratio of 10.8%, Western Alliance exceeds “well capitalized” levels. Tangible book value increased 16.2% from last year to $46.72 per share and has grown at an average compound annual growth rate of 19.5% since the end of 2013. Looking ahead to 2024, management expects net interest income to increase between 5% and 10%, non-interest income to increase 10% to 20%, non-interest expense to increase 0% to 2% and net charge-offs to increase 10 to 15 basis points. Capital ratios will continue to strengthen with the CET1 ratio expected to exceed 11%.  

Gentex-GNTX reported fourth quarter revenues increased 19% to $589.1 million with net income roaring 36% higher to $116.9 million and EPS up 35% to $.50. These strong results reflected a 6% increase in light vehicle production in the company’s primary markets and a 330-basis improvement in gross margin to 34.5% as price increases helped offset inflation pressures. For the full 2023 year, Gentex reported a 20% increase in revenues to a record $2.3 billion with net income motoring 34% higher to $428.4 million and EPS reflecting a shiny 35% gain to $1.84. Full Display Mirror shipments increased 45% during the year to 2.44 million units. Return on shareholders’ equity expanded to a pleasing 18.5% on a cash-rich, debt-free balance sheet. For the full year, the company paid $112.2 million in dividends and repurchased 4.93 million of its shares at an average price of $29.61 per share for a total of $144.7 million, including 2.22 million shares repurchased in the fourth quarter at an average price of $30.76 per share. Gentex has 15.9 million shares remaining authorized for future share repurchases. In 2024, Gentex expects revenues in the range of $2.45 billion to $2.55 billion. Gentex expects gross margins to continue to improve in 2024 which will help them achieve a 35% to 36% targeted gross margin by the end of the year.  The 2024 record revenues and profitability should lead to increased shareholder returns over the next several years.

Thursday, Jan. 25, 2024

Despite economic and geopolitical uncertainty during 2023, LVMH Group-LVMUY rang up another record year with sales increasing 9% to €86.2 billion, net earnings increasing 7.7% to €15.2 billion and EPS up 8.2% to €30.33. Revenue growth was strong across all business groups, with the exception of wines and spirits, and the business gained market share worldwide. Europe, Japan and rest of Asia all generated double-digit organic sales growth. By business Maisons, or groups, Fashion and Leather Goods rang up €42.2 billion in sales, up 9.1% from last year, and generated profit margins of 39.9%, boosted by an exceptional level of profitability maintained by Louis Vuitton and Christian Dior Couture. Wines and Spirits sales declined 7% to €6.6 billion on the normalization of post-COVID Hennessy cognac sales and a mixed recovery in China. The group generated robust operating margins of 31.9% on firm price increases. Perfumes and Cosmetics delivered sales of €8.3 billion on remarkable growth in J’adore and Miss Dior and generated operating margins of 8.6%. Watches and Jewelry sales increased 3% to €10.9 billion, highlighted by the spectacular transformation of Tiffany, the iconic New York jewelry house, strong momentum from Bulgari sales and further innovation in watches. The group generated impressive operating margins of 19.8%. Selective retailing, which includes Sephora and DFS, rang up a 20.4% sales increase, driven by another record-breaking year for Sephora and recovery at DFS with the reopening of borders, though DFS sales remain below 2019 levels. The group generated operating margins of 7.8%. During 2023, LVMH Group generated an exquisite 24.9% return on shareholders’ equity and free cash of €8.1 billion, down 20% from last year on a 51% increase in operating investments to grow the business. During 2023, LVMH Group returned €9.1 billion to shareholders through dividend payments of €7.6 billion and share repurchases of €1.5 billion at a cost equivalent to $167.49 per ADR. Over the past five years, dividends per share have grown at an average annual 17% pace. LVMH ended the year with €7.8 billion in cash, €11.2 billion in long-term debt and €61.0 billion in shareholders’ equity on its refined balance sheet. Looking ahead to 2024, leadership plans to further expand LVMH’s global leadership by focusing on the creativity, quality and distribution of its products, continuing to grow its Maisons by enhancing desirability and fostering the firm’s entrepreneurial spirit.

Visa-V reported fiscal first quarter revenues increased 9% to $8.6 billion with net income charging 17% higher to $4.9 billion and EPS jumping 20% to $2.39 as consumer spending remains resilient. The company is off to a solid start for fiscal 2024 driven by relatively stable growth in overall payments volume and processed transactions, plus strong growth in cross-border volume. During the first quarter, payments volume increased 8%, processed transactions rose 9% and cross-border volume increased 16%, as travel has more than surpassed pre-pandemic levels. Free cash flow declined 15% to $3.3 billion during the quarter due primarily to a sharp increase in cash used for client incentives. During the quarter, the company paid $1.1 billion in dividends and repurchased 14 million of its class A shares for $3.4 billion at an average cost of $239.45 per share. The company has $26.4 billion remaining authorized for future share repurchases. Visa reaffirmed its outlook for the full 2024 fiscal year with revenue growth expected in the low double-digit range and EPS growth in the low-teens.

Wednesday, Jan. 24, 2024

General Dynamics-GD reported fourth revenues flew ahead by 7.5% to $11.67 billion with net income gaining 1.3% to $1.01 billion and EPS up 1.7% to $3.64, representing the highest quarterly EPS and revenue in the company’s history. By business segment, Marine Systems generated the strongest growth at 15% to $3.4 billion, followed by Aerospace at 12% to $2.7 billion, Combat Systems up 8.5% to $2.4 billion and Technologies dipping 3.1% to $3.2 billion.  A pair of contract modifications for the Columbia-class submarine program buoyed Marine Systems results, while the wars in Ukraine and the Middle East drove increased orders for armored vehicles and munitions in the Combat Systems unit. After initially expecting FAA certification this past summer, the company is confident that its new G700 Gulfstream jet will receive certification during the current quarter, unlocking a "surge of deliveries", according to CEO Phebe Novakovic. Operating margins declined 30 basis points to 11.0%, pressured by lingering supply chain issues. Orders remain strong and broad-based, pushing General Dynamics’ backlog to nearly $93.6 billion, the highest year-end total in company history. This resulted in a book to bill ratio of 1.1 times for the second year in a row. Total estimated contract value of total backlog was $132 billion at year-end. For the year, General Dynamics generated revenues of $42.3 billion, up 7.3% from last year, with net income dipping 2.2% to $3.3 billion and EPS down 1.4% to $12.02. During 2023, General Dynamics generated a solid 15.6% return on shareholders’ equity and $3.81 billion in free cash flow, representing an impressive 115% of net income. During the year, the company returned $1.86 billion to shareholders through dividends of $1.4 billion and $434.0 million in share repurchases. General Dynamics ended the year with $1.9 billion in cash, $8.75 billion in long-term debt and $21.3 billion in shareholders’ equity. In 2024, the company expects revenues in the $46.3 billion to $46.4 billion range, up 9.5% from 2023, with EPS in the range of $14.35 to $14.45, up nearly 20% from 2023.

ResMed-RMD reported second quarter revenues rose 12.5% to $1.2 billion with net income and EPS each dropping 7.2% to $208.8 million and $1.42, respectively. During the quarter, the company recorded restructuring charges and masks with magnets safety notification expenses, which should be behind them for the remainder of the year. On an adjusted basis, EPS rose 13.3% to $1.88. These results reflect double-digit growth across the company’s combined device, masks and accessories, and residential care software businesses as well as cost discipline to support an acceleration in profitability. Free cash flow more than quadrupled to $505 million during the first half of the year thanks to higher earnings and stable working capital needs with the company paying $141.3 million of dividends and resuming its share repurchase program with 335,000 shares repurchased during the last quarter for $50 million at an average cost of $149.25 per share. The company plans to continue to repurchase approximately $50 million of its stock per quarter. The company’s capital allocation strategy is to reinvest about 6%-7% of revenues in research and development for future growth, make strategic acquisitions, pay a meaningful and sustained dividend and opportunistically repurchase shares.  ResMed remains a market leader in a very large and growing market for sleep and breathing health. The company revealed the results of a sleep apnea study of 529,000 patients who were prescribed a GLP-1 drug (for weight loss). The study found that they were 10% more likely to initiate PAP (positive airway pressure) therapy, as they became more engaged in their health which is good news for ResMed.

Tuesday, Jan. 23, 2024

Canadian National Railway-CNI reported fourth quarter revenues dipped 1.6% to $4.471 billion with net income steaming ahead 50% to $2.13 billion and EPS surging 57% to $3.29. Excluding a $112 million after-tax property sale gain and a $713 million net deferred income tax recovery, fourth quarter net income declined 8.1% to $1.3 billion and EPS fell 3.8% to $2.02. The revenue decline was attributed to a decrease in container storage fees and a lower fuel surcharge as record potash shipments and strong refined petroleum and natural gas liquids, partially offset by freight rate increases and lower grain and international intermodal shipments. Fourth quarter car velocity chugged ahead by 4% to 215 miles per day and was among the best in recent history, indicative of a strong overall network health.  Same store pricing continued to exceed rail cost inflation, supported by strong service with Local Service Commitment defined as the percentage of cars that successfully completed their daily average operating plan increasing 11% to 93%. For the year, revenues declined 1.6% to $16.83 billion with net income increasing 10% to $5.12 billion and EPS up 14.7% to $8.53. Excluding the aforementioned forth quarter special items, adjusted income declined 6.5% to $4.8 billion and EPS dipped 2.4% on fewer shares outstanding to $7.28. During 2023, Canadian National Railway generated a stellar 28.0% return on shareholders’ equity and $3.8 billion in free cash flow with the company returning over $6.6 billion to shareholders through dividend payments of $2.07 billion and share repurchases of $4.55 billion. Canadian National Railway’s board approved a 7% increase in the 2024 dividend, marking the 28^th consecutive year of dividend increases. In addition, the board approved a new Normal course issuer bid (NCIB) that permits the company to purchase up to 32 million shares (about 5% of outstanding shares) over a 12-month period beginning February 1, 2024. Canadian National ended the year with $475 million in cash, $16.1 billion in long-term debt and $20.1 billion on shareholders’ equity on its strong balance sheet. Looking ahead to 2024, management expects to deliver 10% growth in adjusted EPS and return on invested capital of 15% to 17%.

Texas Instruments-TXN reported fourth quarter revenues declined 13% to $4.1 billion with net income and EPS each down 30% to $1.5 billion and $1.49, respectively. These results reflected increasing weakness across industrial sectors and a sequential decline in automotive. For the full year, revenues declined 13% to $17.5 billion with net income and EPS each down 25% to $6.5 billion and $7.07, respectively. Return on shareholders’ equity was an impressive 39% for the year. Free cash flow dropped 77% during the year to $1.3 billion, primarily due to lower earnings and higher capital expenditures. During 2023, the company paid $4.5 billion in dividends and repurchased $293 million of its common stock. The dividend was increased 5% in the fourth quarter, marking the 20^th 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 2024 with revenue expected in the range of $3.45 billion to $3.75 billion and EPS in the range of $0.96 to $1.16.

RTX-RTX reported fourth quarter revenues increased 10% to $19.9 billion with income from continuing operations relatively flat at $1.4 billion and EPS up 9% to $1.05, on lower shares outstanding. For the full 2023 year, revenues increased 3% to $68.9 billion with net income from continuing operations dropping 39% to $3.2 billion and EPS down 36% to $2.23.  Given the lower earnings, return on shareholders’ equity fell to a subpar 5.3%. These results reflect the issues with the previously disclosed Pratt powder metal matter resulting in engine recalls. RTX is making consistent progress on resolving the powder metal matter. On an adjusted basis, EPS increased 6% for the year to $5.06.  Demand for RTX’s products remains strong as air traffic has surpassed pre-pandemic levels. Commercial aerospace aftermarket sales were up 23% for the year. On the defense side of RTX’s business, the increasing global threats have led to $51 billion of new awards with a book-to-bill ratio of 1.24. Overall, RTX ended the year with a record backlog of $196 billion, which increased 12%, including $118 billion from commercial aerospace and $78 billion from defense. Free cash flow increased 12% during the year to $5.5 billion with RTX paying $3.2 billion in dividends and repurchasing $12.9 billion of its common stock during the year, including $10 billion in accelerated share repurchases in the fourth quarter. RTX has returned $29 billion in cash to shareholders since the merger, achieving significant progress toward its capital return commitment of between $36 billion to $37 billion through 2025. The company’s outlook for full year 2024 is for sales of $78 to $79 billion with adjusted EPS in the range of $5.25 to $5.40. Free cash flow is expected to approximate $5.7 billion in 2024 and accelerate to $7.5 billion in 2025.

Johnson & Johnson-JNJ reported fourth quarter sales increased a healthy 7.3% to $21.4 billion with net income up 28% to $4.1 billion and EPS up 39% to $1.70. Adjusted earnings from continuing operations-- which excludes expenses related to litigation, amortization, restructuring and one-time items plus income from unrealized security gains—increased 2.4% to $5.6 billion and adjusted EPS increased 11.7% on fewer shares outstanding to $2.29. By business segment, Innovative Medicine sales increased 4.2%, or 9.5% operationally when excluding the COVID-19 vaccine business, to $13.7 billion, driven by oncology, immunology and pulmonary hypertension sales. Innovative Medicine operating margins dipped slightly to 37.4% on an increase in R&D investments. MedTech sales increased a strong 13.3% to $7.67 billion, powered by procedure growth, new product sales and the acquisition of Abiomed.  MedTech operating margins declined 9% to 15.5%, squeezed by an $84 million charge to reorganize its orthopedic business and exit certain markets while increasing its reach into global growth markets, expenses related to the Abiomed acquisition, inflationary impact on inventories moving through cost of goods sold and AI expenses.  For the year, Johnson & Johnson reported sales increased 6.5% to $85.2 billion with net income dropping 18.6% to $13.3 billion and EPS falling 15.3% to $5.20. Excluding charges related to talc litigation and other special items, net income and EPS increased 6.8% and 11.1%, respectively. J&J continues to pursue paths to achieve a final resolution to the talc litigation including a recent agreement in principle with 43 State Attorneys General to resolve talc claims. During 2023, Johnson & Johnson generated free cash flow of about $18.0 billion and returned $14.3 billion to shareholders through share repurchases of $2.5 billion through its now completed $5 billion share repurchase authorization and $11.8 billion in dividends. In addition, J&J reduced its share count by 7% during 2023 without using cash via its tax-free exchange of Kenvue shares. During 2023, Johnson & Johnson increased its dividend by 5.3%, marking the 61^st consecutive year of dividend increases. The company plans to continue increasing its dividend as an important piece of its capital allocation strategy. J&J ended the year with $23 billion in cash and marketable securities and $29 billion in long-term debt on its strong balance sheet. The company’s robust free cash flow and strong AAA-rated balance sheet enables it to invest in the business, make acquisitions to fuel growth while also returning cash to shareholders. Looking ahead to 2024, management expects sales to increase 4.5% to 5.5% to $87.8 billion to $88.6 billion with adjusted EPS up 7.4% at the mid-point to a range between $10.55 to $10.75.

Friday, Jan. 19. 2024

Paychex-PAYX announced that the company’s board of directors have authorized the purchase of up to $400 million of its common stock beginning February 1, 2024. The authorization expires May 31, 2027.

Thursday, Jan. 18, 2024

Fastenal-FAST reported fourth quarter sales increased 3.7% to $1.76 billion with net income up 8.5% to $266.4 million and EPS up 8.4% to $0.46. Revenue growth was driven by higher to Onsite sales and sales to large customers. Despite 14 months of falling manufacturing activity represented by an average PMI of 46.9 during the quarter, Fastenal’s daily sales grew by 3.7% on strength in Warehousing sales to support retailer-oriented customers during the holiday shopping season, product mix and easier comps. For the year, Fastenal’s sales increased 5.2% to $7.35 billion with net earnings up 6.3% to $1.16 billion and EPS up 6.7% to $2.02. During 2023, Fastenal delivered an exceptional 34.5% return on shareholders’ equity and a 64% increase in free cash flow to $1.26 billion, representing an impressive 109% of net income. Fastenal’s jump in free cash flow was fueled by the absence of last year’s supply chain constraints, slower business activity and internal process improvements. Fastenal’s strong free cash flow and sturdy balance sheet enabled it to return $1.02 billion to shareholders during 2023, including a special dividend of $0.38 per share in December.  Believing that cash belongs to shareholders, leadership paid the special dividend after determining it has ample cash to fund its growing operations in 2024 and beyond. This special dividend comes on the heels of special dividends paid in December 2008 at the depth of the great recession, December 2012 when the country found itself on the edge of a fiscal cliff and in December 2020 at the depths of the pandemic. During the past ten years, Fastenal has returned over $6.2 billion to shareholders through cash dividends of $5.4 billion and share repurchases of $827.9 million at an average cost per share of $26.03. In addition, the company announced an 11.4% increase in its quarterly cash dividend to $0.39 per share. Fastenal ended the year with $221.3 million in cash, $200.0 million in long-term debt and $3.35 billion in shareholders’ equity on its sturdy balance sheet.

Wednesday, Jan. 17, 2024

After settling litigation, Berkshire Hathaway-BRKB has acquired Pilot Corporation’s remaining 20% interest in Pilot Travel Centers and now owns 100% of Pilot Travel Centers. While terms were not disclosed for the latest purchase, Berkshire originally paid $2.8 billion for 38.6% of the truck-stop operator in 2017, then paid another $8.2 billion to boost its stake to 80% last January. Pilot grew from a single gas station in 1958 into the fifth-largest private company in America with more than 750 locations across the US and Canada. Under the Pilot Flying J, Pilot Travel Centers, and Mr. Fuel brands, it provides services like gas pumps, fast-food restaurants, parking, laundry, and showers to truck drivers and other motorists. It sells about 14 billion gallons of fuel and $3 billion worth of food and merchandise a year. Pilot's revenues jumped from about $20 billion in 2017 to $42 billion in the first nine months of last year, and the company now generates over $1 billion in annual pre-tax earnings.

Friday, Jan. 12, 2024

UnitedHealth Group-UNH reported fourth quarter revenues increased a healthy 14% to $94.4 billion with net income increasing 14.6% to $5.46 billion and EPS up nearly 16% to $5.83. UNH’s medical care ratio – the percentage of premiums used to cover claims - increased 220 basis points from last year’s fourth quarter to 85%. This increase was driven by a year-end uptick in RSV vaccinations and higher COVID costs that aren’t expected to impact 2024 costs as well as increased costs related to outpatient orthopedic and cardiac procedures for seniors. For the full year, revenues increased 15% to $371.6 billion on double-digit growth at both Optum and UnitedHealthcare, driven by serving more people more comprehensively across offerings. Net income increased 11% to $22.4 billion and EPS increased 12.7% to $23.86. Full year medical care ratio was 83.2% compared to 82% last year on elevated outpatient care for seniors during the fourth quarter and business mix. During 2023, UNH generated a healthy 23.7% return on shareholders’ equity and $25.7 billion in free cash flow, representing a robust 1.11% of net income. The company returned $14.8 billion to shareholders’ during 2023 through dividends of $6.8 billion and share repurchases of $8 billion. UNH ended the year with $77.2 billion in cash and investments, $58.3 billion in long-term debt and $94.4 billion in shareholders’ equity. Management affirmed its prior guidance of 2024 with revenues in the $$400 billion to $403 billion range and EPS between $27.50 and $28.00. This guidance excludes the impact of the sale of the company’s operations in Brazil that will result in a $7 billion, mostly non-cash charge, on accumulated foreign currency losses and a $6 billion dip in full year revenues. Given pricing and benefit design actions, management forecasts its medical care ratio in the range of 83.5% to 84.5%.

Wednesday,  Jan. 10, 2024

In partnership with Oxford Economics, Cognizant-CTSH revealed findings from its new economic impact study New Work, New World, which predicted that 90% of jobs will be disrupted in some way by generative AI (gen AI), setting the stage for a profound shift in how we approach work, productivity and economic growth. Generative AI offers the potential to improve operational efficiency, create new revenue streams, innovate products and services, and ultimately redefine businesses. AI adoption is expected to skyrocket over the next decade with economic advancement soaring. Generative AI technology could boost U.S. productivity by 1.7%-3.5% and grow the U.S. GDP between $477 billion and $1 trillion in annual value over the next 10 years, based on business adoption rates. Half of all jobs (52%) are predicted to significantly change as generative AI is integrated to automate job tasks. As a result, approximately 9% of the current U.S. workforce may be displaced, with 1% potentially struggling to find new employment based on historical economic shifts.

Monday, Jan. 8, 2024

Johnson & Johnson-JNJ announced it has entered into a definitive agreement to acquire Ambrx Biopharma, Inc., a clinical-stage biopharmaceutical company with a proprietary synthetic biology technology platform to design and develop next-generation antibody drug conjugates (ADCs), in an all-cash merger transaction for a total equity value of approximately $2.0 billion, or $1.9 billion net of estimated cash acquired. Ambrx is advancing a focused portfolio of clinical and preclinical programs designed to optimize efficacy and safety of its candidate therapeutics in multiple cancer indications, including metastatic castration-resistant prostate cancer metastatic HER2+ breast cancer and renal cell carcinoma.