HI-Quality Company Updates

Tuesday, Oct. 3, 2023

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

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

Thursday, Sept. 28, 2023

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

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

Wednesday, Sept. 27, 2023

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


Thursday, Sept. 21, 2023

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

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

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

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

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

Tuesday, Sept. 19, 2023

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

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


Monday, Sept. 11, 2023

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

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

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

Friday, Sept. 8, 2023

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

Thursday, Sept. 7, 2023

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

Thursday, Aug. 31, 2023

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

Wednesday,  Aug. 30, 2023

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

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

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