HI-Quality Company Updates

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 15th 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 29th.  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 62nd 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 68th 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 52nd 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 15th 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 55th 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 15th 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 28th 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 20th 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 61st 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.

Stryker-SYK announced that it surpassed $20 billion in annual sales for the first time in its history during the month of December, 2023.

Friday, Dec. 29, 2023

UnitedHealth-UNH entered into an agreement to sell its operations in Brazil to a private investor. The company expects to close the sale in the first half of 2024. Upon closing, the company expects to record a charge of approximately $7 billion, which will be excluded from adjusted earnings, the majority of which is non-cash and due to the cumulative impact of foreign currency translation losses. In connection with the action, the company's 2024 net earnings outlook will be impacted by the expected charge, while the company is reaffirming the 2024 adjusted earnings outlook of EPS in the range of $27.50-$28.00.

Thursday, Dec. 21, 2023

Nike-NKE reported second quarter sales increased 1% to $13.4 billion with net income jumping 19% to $1.6 billion and EPS up 21% to $1.03. Nike Direct revenues increased 6% during the quarter to $5.7 billion with the strongest Black Friday sales ever. The company continues to gain market share. Gross margin increased 170 basis points during the quarter to 44.6% driven by strategic pricing actions and lower ocean freight rates.  During the quarter, inventories declined 14% to $8 billion with free cash flow growth accelerating. The company ended the quarter with cash of about $9.9 billion, down $700 million, reflecting dividends paid during the second quarter of $523 million, up 9% from the prior period, and share repurchases of $1.2 billion at an average cost per share of $100.84 per share. As Nike looks ahead to a softer second-half revenue outlook, the company is identifying up to $2 billion in cumulative cost savings over the next three years by simplifying its product line and increasing automation to drive great efficiency. As part of this commitment to streamline its organization, the company expects to take pre-tax restructuring charges of approximately $400 million to $450 million that will be largely recognized in the third quarter of fiscal 2024, primarily associated with employee severance costs. Given macro headwinds in Europe and China  resulting in cautious consumer spending,  softer digital sales, a promotional market environment  and a stronger U.S. dollar, the company lowered its revenue outlook for the full fiscal 2024 to just 1%,  but maintained its earnings outlook given disciplined expense management and the expectations for gross margin to expand 140-150 basis points for the full year.

Paychex-PAYX reported second quarter total revenue increased 6% to $1.3 billion with net income and EPS each up 9% to $392.7 million and $1.08, respectively.  Return on shareholders’ equity on a trailing 12-month basis was  a highly profitable 47%. The company is still seeing strong demand for its services in a tight labor market. While the company is not seeing any signs of recession, small businesses continue to show moderation in both wage inflation and job growth, especially among seasonal workers. The company’s revenue retention remains above pre-pandemic levels with client retention improving year-over-year. Free cash flow increased 41% during the first half of the year to $924.9 million on the higher earnings and favorable working capital changes. Paychex paid $642.1 million in dividends during the first half and repurchased 1.5 million of its common stock for $169.2 million at a cost of about $112.80 per share. The company’s consistent free cash flow generation supports its industry-leading dividend payout ratio. For fiscal 2024, Paychex expects revenue growth of 6%-7% and raised its adjusted EPS growth outlook to 10%-11%.

Tuesday, Dec. 19, 2023

FactSet-FDS reported first fiscal quarter revenue rose 7.4% to $542.2 million with net income increasing 8.6% to $148.5 million and EPS up 9.1% to $3.84. Organic revenue grew 7.2% to $541.4 million, primarily due to higher Wealth sales and increased sales of data. Annual Subscription Volume (ASV) plus professional services was $2.2 billion at 11/30/23 compared to $2 billion a year ago. The company’s operating margin expanded to 34.9% compared with 34.1% a year ago driven by a decrease in professional fees, personnel and facilities costs partially offset by higher technology related expenses. Client count increased by 24 clients in the past three months to end the quarter at 7,945, primarily driven by an increase in private equity/venture capital, corporate and wealth clients. User count increased by 17,111 to 207,083 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 90%. Free cash flow increased 56% during the first quarter to $138.7 million with the company returning $97 million to shareholders through dividend payments of $37.1 million and share repurchases of $59.9 million at an average cost per share of $440.67. The company still has $240.1 million authorized for future share repurchases. FactSet updated its financial outlook for fiscal 2024 with revenue expected in the range of $2.2 billion to $2.21 billion (down from $2.21 billion to $2.23 billion) and EPS expected in the range of $13.95 to $14.35 (down from $14.20 to $14.70). As part of FactSet's continuing focus on cost optimization, the company expects to take a $10 to $15 million charge during the second quarter of fiscal 2024. Cost reduction items will include both variable costs and personnel-related costs.

Accenture-ACN reported first quarter revenues rose 3% to $16.2 billion with net income relatively unchanged at $1.97 billion and EPS up 1% to $3.10. On a geographic basis, North America revenues declined 1% to $7.6 billion, EMEA revenues increased 2% to $5.88 billion, and Growth Markets increased 5% to $2.98 billion. Revenue growth by industry groups was led by 12% growth in Health and Public Services to $3.4 billion while Communications, Media and Technology revenues declined 11% to $2.7 billion. New bookings in the quarter increased 14% to $18.4 billion with 30 clients with quarterly bookings of more than $100 million. Accenture leads the industry in generative AI with over $450 million in new bookings. Free cash flow increased 8% during the quarter to $429.6 million with the company paying $810 million in dividends, a 15% increased from the prior period, and $1.2 billion in share repurchases at an average cost of $315.79 per share. The company has $5.4 billion authorized for future share repurchases. For fiscal 2024, the company continues to expect revenue growth to be in the range of 2% to 5% in constant currency with EPS in the range of $11.41 to $11.76, representing growth of 6% to 9% as operating margins are expected to expand 110 to 130 basis points. Free cash flow for 2024 is expected 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.

Monday, Dec. 18, 2023

Molina Healthcare-MOH announced that on December 13, 2023, the Company amended its purchase agreement for the acquisition of Bright HealthCare’s California Medicare business. The purchase price for the transaction, net of certain tax benefits, is reduced from the previously announced $510 million to approximately $425 million, and now represents 23% of expected 2023 premium revenue of $1.8 billion. As previously stated by Molina, the acquisition adds $1.00 per share to new store embedded earnings and is expected to close on or about January 1, 2024.

Thursday, Dec. 14, 2023

Berkshire Hathaway-BRKB  bought another 10,482,162 shares of Occidental Petroleum worth approximately  $589 million and now holds a stake of 238.5 million shares worth $13.6 billion in the energy company, or a 27% interest in the business.

Roche Holding-RHHBY completed its $7.1 billion acquisition of Telavant and the rights in the US and Japan to RVT-3101, a promising new therapy in development for people suffering from inflammatory bowel disease, including ulcerative colitis and Crohn’s disease. An additional payment of $150 million in cash is payable upon the completion of a near-term milestone.


Tuesday, Dec. 12, 2023

Alphabet-GOOGL lost an antitrust case after a jury decided that Google maintains a monopoly in its app store’s distribution and payments market, following a case brought by Fortnite-developer Epic Games. A judge will decide next year what remedies Epic will be awarded. Epic originally said in its lawsuit that it wasn’t seeking monetary damages or favorable treatment from Google but did want it to open up its Android ecosystem. Google has said it intends to challenge the decision. Epic had previously lost its antitrust case against Apple.

Monday, Dec. 11, 2023

Oracle-ORCL reported second quarter revenues increased 5% to $12.9 billion with net income jumping 44% to $2.5 billion and EPS up 40% to $.91. Growth was driven by Oracle’s Cloud Revenue which rose 25% during the quarter to $4.8 billion. Demand for the company’s Cloud Infrastructure and Generative AI services is increasing at an “astronomical rate.” The cloud businesses are now at nearly a $20 billion-dollar annual revenue run rate.  As a measure of demand, Oracle’s total Remaining Performance Obligations climbed to over $65 billion—exceeding annual revenue. Oracle is in the process of expanding 66 of their existing cloud datacenters and building 100 new cloud datacenters in countries around the world to meet the growing demand. In the next few months, the company is turning on 20 new Oracle cloud datacenters collocated with and connected to Microsoft Azure. Oracle will accelerate its capital expenditures in the second half of the year to increase the datacenter capacity with capital expenditures for the full year expected to approach $8 billion. Free cash flow during the first half of the year increased 53% to $4.7 billion with the company paying $2.2 billion in dividends and repurchasing $600 million of its stock, including four million shares in the second quarter for $450 million at an average price of $112.50 per share. For the third quarter, Oracle expects revenues to increase 6%-8% with non-GAAP EPS expect in the range of $1.35-$1.39, representing 10%-14% growth.

Thursday, Dec. 7, 2023

Alphabet’s-GOOGL Google is rolling out an upgraded version of its generative AI platform Bard, called Gemini, across the U.S. and in more than 170 countries which promises to be its “most capable” model yet. Google claims Gemini is the first AI model to beat “human experts” in its range of intelligence tests. Google said Gemini will be “multi-modal”, meaning it will be able to operate and combine different types of information across words, pictures, video and sound. Gemini is also the most flexible model yet — able to efficiently run on everything from data centres to mobile devices. Google said it will be building in safeguards while working “collaboratively” with governments and experts to help head off the mounting risks from AI.

Wednesday, Dec. 6, 2023

Brown-Forman-BFB reported second quarter revenues rose 1% to $1.1 billion with net income and EPS each up 6% to $242 million and $.50, respectively. While growing less than management expected due to slowing trends in whisky and tequila consumption, the company delivered strong gross margin expansion and continued to invest strongly behind their brands. The company expects their premium portfolio and broad geographic footprint will position the business for accelerated growth in the second half of the year. Free cash flow dropped substantially during the first half of the year to $93 million due to working capital changes. During the first half, the company paid $197 million in dividends and repurchased $42 million of its stock. Through the end of November, Brown-Forman has repurchased $181 million of its $400 million share buyback authorization. Brown-Forman also increased its dividend 6%, marking 40 years of consecutive dividend increases. The company has paid dividends for 80 straight years. An evolving global macroenvironment continues to create a challenging operating environment which tempered expectations for the balance of the year. Brown Forman now expects organic net sales growth in the 3% to 5% range with organic operating income growth in the 4% to 6% range. Capital expenditures are planned in the range of $250 million to $270 million. The company expects a $.12 per share accretive impact to EPS from the sale of Finlandia Vodka. The company also does not expect any additional tariffs imposed on American whiskey this year from Europe as trade negotiations continue.

Fastenal-FAST reported November net and daily sales each increased 3.8% to $600 million and $28.6 million, respectively. Daily sales growth by geography was led by Canada/Mexico with 8.6% growth. Daily sales growth by product line was led by Safety with 10.8% growth while fastener sales declined 3%. Total personnel increased 3.7 to 23,204.

Tuesday, Dec. 5, 2023

Mastercard-MA announced that its Board of Directors has declared a quarterly cash dividend of 66 cents per share, a 16 percent increase over the previous dividend of 57 cents per share. The cash dividend will be paid on February 9, 2024 to holders of record of its Class A common stock and Class B common stock as of January 9, 2024. The Board of Directors also approved a new share repurchase program, authorizing the company to repurchase up to $11 billion of its Class A common stock.The new share repurchase program will become effective at the completion of the company’s previously announced $9 billion program (December 2022). As of December 1, 2023, the company had approximately $3.5 billion remaining under the current approved share repurchase program.

 

Stryker-SYK announced that its Board of Directors has declared a quarterly dividend of $0.80 per share payable January 31, 2024 to shareholders of record at the close of business on December 29, 2023, representing an increase of 6.7% versus the prior year and previous quarter. “We continue to deliver strong growth and solid financial performance, and aligning with our capital allocation strategy we are raising our dividend 6.7%,” said Kevin Lobo, Chair and Chief Executive Officer.

Given the company’s confidence in its future growth prospects and the strength of its pipeline, Johnson & Johnson-JNJ provided long-term financial targets and expects at least 3% operational sales growth in 2025, despite a STELARA biosimilar entry in the United States and 5%-7% operational sales CAGR from 2025-2030. In the MedTech business, the company expects to grow operational sales in the upper range of its markets, which are projected to grow 5%-7% through 2027 and generate one-third of sales from new products in 2027. The company’s Innovative Medicine industry-leading pipeline is expected to deliver more than 20 novel therapies and more than 50 product expansions by 2030. In addition, by 2030, Johnson & Johnson’s Innovative Medicine pipeline and portfolio are expected to deliver 5%-7% operational sales growth from 2025-2030. With robust free cash flow generation and a healthy balance sheet, the company intends to continue its focus on its capital allocation strategy including continued investment in R&D, increasing dividends on an annual basis, executing strategic business development initiatives for inorganic growth and assessing share repurchases, when appropriate. In 2024, JNJ expects operational sales growth in the range of 5-6% and adjusted operational earnings per share growth of 7.3% at the midpoint with a range of $10.55-$10.75. The company’s 2024 guidance range reflects an approximate $0.15 dilutive impact to adjusted operational EPS associated with the previously announced acquisition of Laminar, Inc. 

Monday, Dec. 4, 2023

Roche-RHHBY announced the entry into a definitive merger agreement to acquire Carmot Therapeutics, Inc., a privately owned US company based in Berkeley, California for $2.7 billion in cash with an additional $400 million paid depending on the achievement of certain milestones. Carmot’s R&D portfolio includes clinical stage subcutaneous and oral incretins with best-in-class potential to treat obesity in patients with and without diabetes, as well as a number of preclinical programs. “We are encouraged by the clinical data for the lead asset CT-388, which demonstrated substantial weight loss in Phase 1b. These data suggest the potential for a differentiated profile to treat obesity and its associated diseases”, says Levi Garraway, Roche’s Chief Medical Officer and Head of Global Product Development. “The broad Carmot portfolio offers different routes of administration and opportunities to develop combination therapies that treat obesity and potentially other indications.”

We were deeply saddened to learn of the passing of Charles T. Munger, the Vice Chairman of Berkshire Hathaway, who died last week about one month shy of his 100th birthday.  After attending my first Berkshire Hathaway meeting more than 25 years ago, I immediately fell in love with Charlie’s wisdom, wit, and curmudgeonly manner of answering shareholder questions. I still fondly recall the annual meeting I received his autograph, which is a prized possession.

Warren Buffett, CEO of Berkshire Hathaway, said: “Berkshire Hathaway could not have been built to its present status without Charlie’s inspiration, wisdom and participation.” In fact, Buffett has said his greatest investment accomplishment was, “Recruiting Charlie!” In 1972, Charlie Munger helped shape Berkshire’s investment philosophy during the acquisition of See’s Candies with the lesson that: “It is better to buy a good business at a fair price than a fair business at a good price.”

Charlie Munger was a great exemplar and teacher to millions of long-term investors, including us. In reviewing our notes from the Berkshire Hathaway annual meetings that we summarized every June in our newsletter for the past quarter century, I have included a few timeless lessons Warren and Charlie imparted to us over the years:

1997

Insurance is Berkshire Hathaway’s most important business activity and provides a major opportunity for the company’s continued outstanding performance. Buffett forewarned shareholders to occasionally expect a huge loss from this business. Charlie grumbled that if Berkshire must write out a check for $1 billion, it will be “irritating,” but certainly won’t put them out of business, since it will be a tiny fraction of their liquid assets.

1998

During the dot-com mania, Warren and Charlie noted it was very tough to allocate capital since they were not finding bargains as they looked around the world. While Berkshire continually seeks ways to sensibly deploy its growing capital, Buffett noted, “It may be some time before we find the opportunities that get us truly excited.” Buffett asserted, “We will wait indefinitely for good values to reappear.” When turning to Charlie to respond, Charlie dryly retorted, “I have nothing to add.” This common refrain always made the crowd laugh.

1999

Buffett was asked about the Long Term Capital Management (LTCM) debacle that helped cause a sharp decline in the stock market when the hedge fund imploded. He noted that super bright, extremely talented people, who had their own net worth at risk, caused the problem because of too much leverage. Charlie added, “This will not be the last convulsion we see in derivatives.” Buffett was called to see if he would be interested in helping bail out LTCM. He was on vacation in Yellowstone Park at the time and made an unaccepted bid for LTCM. He showed shareholders a picture of him on his cell phone negotiating the deal in front of an erupting Old Faithful. Buffett joked the picture should be dubbed, “The Geezer and the Geyser.”

2000

Berkshire’s insurance business provided the company with over $25 billion in float. (Today, float approximates $167 billion!) Float is the insurance premiums that Berkshire gets to invest before losses have to be paid out, an interval that sometimes extends for many years. Charlie noted, “I’ve been amazed by the growth and cost of our float. It’s wonderful to grow billions of dollars of float at a cost well below Treasury rates.” Warren and Charlie’s remarkable skill in investing Berkshire’s growing float has resulted in the incredible compounding of Berkshire’s net worth over the years.

2001

Charlie commented that Berkshire is willing to lay off large sums of money for good businesses run by smart people when the businesses can be acquired at a reasonable price. He noted that if Berkshire borrows money at 3% through its insurance business and earns 13% returns from its operating businesses, that’s a pretty good position to be in. He wryly added, “You don’t need more intelligence than that at corporate headquarters.”

2002

In the prior year, Berkshire’s net worth declined for the first time since 1965 due to a $2 billion insurance loss related to the 9/11 terrorist acts. Buffett openly criticized himself for having recognized the potential for huge monetary damages from terrorist acts but failing to price it in Berkshire’s insurance policies. Charlie added, “Sept. 11 has made us less weak, foolish and sloppy. We now are facing reality with more intelligence.” Since Sept. 11, Berkshire is either excluding terrorist risks or pricing it into policies issued but excluding nuclear, chemical or biological events.

On a lighter note, Berkshire acquired Fruit of the Loom. Buffett quipped that the idea to buy the company came from Charlie when he called and said, “Warren, we have to get in women’s underwear!” Warren figured since Charlie was 78, “It is now or never!”

 

2003

Munger has adopted an approach to business and life that he refers to as worldly wisdom. Munger believes that by using a range of different models from many different disciplines—psychology, history, mathematics, physics, philosophy, biology, and so on—a person adds a tremendous interlocking strength to our understanding of how the world works. Charlie stated, “Economics involves too complex a system… economics should emulate physics’ basic ethos, but its search for precision in physics-like formulas is almost always wrong in economics.”

2004

Berkshire Hathaway’s cash on the balance sheet tripled last year to $30 billion. (Today, it tops $318 billion!) Charlie presciently remarked that much of Berkshire’s future value will be determined by how well they deploy the growing amounts of cash with the hope that they will invest it as well as they have in the past.

2005

Despite expressing concerns about the trade deficit, U.S. dollar, pensions, hedge funds, real estate and potential terrorist activity, Buffett said, “Overall, I’m an enormous bull on the U.S. This is the most remarkable success story in the history of the world. It does not make sense to bet against America. If you can buy very good businesses at attractive valuations, it is crazy to sit out of the market due to macro factors.”Charlie added that the best time to buy into a well-run company is when there is “a batch of bad news.”

 

2006

Warren Buffett explained that investing is not that complicated. Investors just need to “find the best pockets of undervaluation, have the courage of their conviction and buy when others are paralyzed by fear.” He further added that investors don’t need a ton of ideas—just one idea worth a ton.” He quoted Ben Graham: “You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.” He further instructed investors to focus on what is “important and knowable” and pay heed to Graham’s wise observation that “the market is there to serve you, not instruct you.” Charlie more succintly summarized, “We simply try to buy things for less than they’re worth.”

2007

Warren Buffett favors businesses where he “knows the answers.” If he can’t determine what the nature of a business will look like in 5-10 years, he won’t invest in it. When you invest in great businesses, you don’t need  huge margins of safety. Charlie added that margin of safety boils down to getting more value than you are paying. Buffett seeks businesses with high returns on capital and  good management that can be held for a long time. Both Charlie and Warren emphasized staying within your circle of competence when investing. Charlie said Berkshire throws almost all investment decisions into the “Too Hard” pile and only focuses on making easy investment decisions.

2008

In the midst of the Great Financial Crisis, Charlie exclaimed that it is crazy to allow companies to get too big to fail, especially in today’s “culture of greed and overconfidence in algorithms.” It is “demented” to allow derivative accounting to have become embedded in the financial system. It is too easy for financial institutions to report earnings and assets that are “good until reached for.” Charlie continued, “Wall Street believes in the tooth fairy. The accounting profession utterly failed us.”

2009

Buffett stated Berkshire’s competitive advantage is its business model and culture, which is very difficult to copy. Other competitive advantages include Berkshire Hathaway’s loyal shareholders, managers who understand business differently and Berkshire’s ability to provide private businesses with a good home. Berkshire’s culture is deeply embedded in the CEO’s of its various companies and will continue. This will provide long-lasting advantages to Berkshire even without Buffett and Munger around. Charlie added that many companies in the U.S. are “run stupidly.” When they focus on quarterly earnings management, they make terrible business decisions. This is not the case at Berkshire. The “stupid practices” of the rest of the world will give Berkshire a competitive advantage well into the future.

2010

Following the Great Financial Crisis, Charlie exclaimed, “If all derivatives vanished from the face of the earth, it would be a safer place.” He added that if he were in charge of financial reform, he would make “Paul Volker look like a sissy!” He would reduce the activites of the investment banks. He noted we should not have financial statements that no one can understand. “Crazy complexity is unproductive!” He added that if you give banks the flexibility “to do whatever they damn please, they will go plumb crazy, which is what they did.”

On the increase in government debt and inflation concerns, Charlie bluntly stated, “If I can be an optimist when I’m nearly dead, surely the rest of you can handle a little inflation!”

2011

When asked about investing in gold as an inflation hedge, Buffett said, “If you take all of the gold in the world and put it into a cube, it would be about 67 feet on a side, and you could get a ladder and get up on top of it. You can fondle it, you can polish it, and you can stare at it. But it isn’t going to do anything. All you can hope is that someone down the road will pay you more for it down the road.” Charlie agreed, “There’s something peculiar in buying an asset that will only really go up if the world goes to hell.” Buffett concluded that a smarter and safer strategy to beat inflation would be to concentrate your efforts on investing in businesses that have little debt, the ability to increase prices and a history of paying strong dividends.

2012

Given the news of Buffett’s prostate cancer, he was asked how he was feeling. He replied, “I feel terrific. I love what I do. I have more fun every day, a good immune system and a great diet,” as he munched on See’s peanut brittle and chugged cherry Cokes throughout the meeting. His radiation treatments will not involve hospitalization, and the survival rate is 99.5%. Charlie joked that he resented all the attention and sympathy Buffett was receiving as he believed that he had more prostate cancer than Buffett, but he just doesn’t get tested for it. Both see the prostate cancer as a non-event for Berkshire. In a post-Buffett/Munger Berkshire Hathaway, the culture is unlikely to change with a well-thought out succession plan in place. Charlie added that the first $200 billion of market capitalization was hard for Berkshire to create, but the second $200 billion will be pretty easy to achieve given the momentum of Berkshire’s businesses. Buffett agreed that Berkshire has the businesses in place to take Berkshire’s market capitalization to $400 billion in the future. (Today, Berkshire’s market capitalization tops $777 billion!)

2013

Buffett believes the Berkshire brand will continue to generate attractive returns without Buffett having to be at the helm. Charlie noted that in the early days, Berkshire earned attractive returns because Buffett was a value investor who had little competition. Today, Berkshire earns attractive returns because Berkshire is a good home for good companies again with little competition. Charlie added that Berkshire’s ability to “stay sane when others like to go crazy” is a competitive advantage.

2014

Charlie emphasized that Berkshire’s business model “has legs” and will go on for a long time. It is a credible business model with enough advantages to last a long time. He said, “Berkshire will keep doing what we are doing and learn from our mistakes.” The momentum and ecosystem are in place. He advised young folks, “Do not be too eager to sell Berkshire stock.”

2015

Over the past 50 years, Berkshire Hathaway’s stock has compounded at a glittering 21.6% annual rate versus the 9.9% annual return of the S&P 500 (with dividends reinvested). If you had invested $10,000 in the S&P 500 index 50 years ago, you would now have more than $1.1 million. In contrast, if you had invested the same $10,000 with a young whippersnapper named Warren Buffett, you would now have over $182 million. This windfall demonstrates not only the magic of compounding high returns over long periods of time but also how active management with sound investment principles outperforms passive investments by a landslide. Charlie stated, “Berkshire will do fine after we are gone. In fact, it will do better in dollar terms.  We will never gain as much in percentage terms as we did in the beginning years. There is a worse tragedy than having Berkshire’s growth slow a little.” Buffett laughed, “Name one!”

 

2016

 

When asked how he thinks ahead of the crowd, Buffett remarked, “I owe a great deal to Ben Graham in terms of investing, and I owe a great deal to Charlie in terms of learning a lot about business. I spent a lifetime looking at businesses and why some work and why some don’t work…pattern recognition. As Yogi Berra said, ‘You can see a lot just by observing.’ That’s pretty much what Charlie and I have been doing for a long time. It is important to recognize what you can’t do.  We’ve generally tried only to swing at things in our particular strike zone. It’s really not much more complicated than that. You don’t need the IQ in the investment business that you need at certain activities in life. You do have to have emotional control. We’ve seen very smart people do very stupid things with unnecessary risks.  Charlie explained, “There are a few simple tricks that work well.  Temperament that has a combination of patience and opportunism in it is one.  I think it’s largely inherited, but it can be learned to some extent. Another factor that Berkshire has done so well is we really try to behave well. I had a great-grandfather that when he died, the preacher said, ‘None envy the man’s success won fairly and used wisely.’ It’s exactly what Berkshire is trying to do. It works!”

 

 

 

2017

 

After famously avoiding technology investments, Buffett said, “Fairly recently, we took a large position in Apple, which I do regard more as a consumer goods company in terms of certain economic characteristics. It has a huge tech component in terms of what that product can do or what other people might come along to do to leapfrog it in some way. I certainly can get a lot of information on consumer behavior and then try to draw inferences as to what consumer behavior is likely to be in the future.” Charlie Munger noted, “I think it’s a very good sign that you bought Apple. It shows either one of two things. Either you’ve gone crazy or you’re learning.  I prefer the learning explanation.”  Buffett laughed, “So do I, actually.”

 

2018

 

Buffett forecast, “Cryptocurrencies will come to bad endings. Along with the fact that nothing is being produced in the way of value from the asset, you also have the problem that it draws in a lot of charlatans and that sort of thing.  It’s something where people who are of less than stellar character see an opportunity to clip people who are trying to get rich because their neighbors are getting rich buying this stuff. It will come to a bad ending.” Charlie muttered, “Well, I like cryptocurrencies a lot less than you do. To me, it’s just dementia. I think the people who are professional traders that go into trading cryptocurrencies, it’s just disgusting. It’s like somebody else is trading turds and you decide, I can’t be left out. “

 

2019

 

One of Berkshire’s investment managers (not Buffett) recently made a nearly $1 billion investment in Amazon. Charlie Munger revealed, “I don’t mind not having caught Amazon early. I give myself a pass on that. But I feel like a horse’s ass for not identifying Google better.”  Buffett agreed, “He’s saying we blew it. And we did have some insights into that because we were using them at GEICO, and we were seeing the results produced. And we saw that we were paying $10 a click, or whatever it might’ve been, for something that had a marginal cost to them of exactly zero. And we saw it was working for us.” Charlie added, “We could see in our own operations how well that Google advertising was working. And we just sat there sucking our thumbs. So, we’re ashamed. We’re trying to atone. Maybe Apple was atonement.”

 

 

 

2020

 

At the height of the global pandemic, Berkshire’s annual meeting was held virtually and without the thousands of attendees. Buffett’s opening comments were: “This is the annual meeting of Berkshire Hathaway. It doesn’t look like an annual meeting. It doesn’t feel exactly like an annual meeting, and it particularly doesn’t feel like an annual meeting because my partner of 60 years, Charlie Munger, is not sitting up here. I think most of the people that come to our meeting really come to listen to Charlie. But I want to assure you, Charlie at 96 is in fine shape. His mind is as good as ever. His voice is as strong as ever, but it just didn’t seem like a good idea to have him make the trip to Omaha for this meeting. Charlie is really taking to this new life. He’s added Zoom to his repertoire.”

 

2021

 

Buffett discussed that Berkshire spent about $25 billion last year repurchasing shares. “We can’t buy companies as cheap as we can buy our own, and we can’t buy stocks as cheap as we can buy our own.” Buffett explained that share repurchases are a way essentially of distributing cash to the people that want the cash when other co-owners mostly want you to re-invest it. Charlie added, “Well, if you’re repurchasing stock, just to bull it higher, it’s deeply immoral, but if you’re repurchasing stock because it’s a fair thing to do in the interest of your existing shareholders, it’s a highly moral act, and the people who are criticizing it are bonkers.”

 

2022

 

Charlie Munger said, “I like having big reserves of oil. If I were running the benevolent despot of the United States, I would just leave most of the oil we have here, and I’d pay whatever the Arabs charge for their oil and I’d pay it cheerfully and conserve my own. I think it’s going to be very precious stuff over the next 200 years. And nobody else has my view, so it doesn’t bother me, I just think they’re all wrong.”

 

2023

 

Charlie Munger’s advice for a good life: “It's so simple to spend less than you earn, avoid toxic people, toxic activities, keep learning all your life, defer gratification because you prefer it that way, and if you do it all this way, you will succeed. If not, you will need a lot of unusual luck.”

 

*****

 

 

 Charlie Munger succeeded in living a good life, and we will greatly miss him.

 



Thursday, Nov. 30, 2023

Ulta Beauty-ULTA rang up a 6% increase in sales to $2.5 billion with net income declining 9% to $249 million and EPS down 5% to $5.07. Comparable sales--sales for stores open at least 14 months plus e-commerce sales--increased 4.5% compared to an increase of 14.6% in the third quarter of fiscal 2022, driven by a 5.9% increase in transactions and a 1.4% decrease in average ticket. Gross profit increased 3% to $992.1 million. As a percentage of net sales, gross profit decreased to 39.9% compared to 41.2%, primarily due to lower merchandise margin, higher inventory shrink and higher supply chain costs, partially offset by strong growth in other revenue. During the quarter, Ulta Beauty opened 12 new stores, relocated two stores and remodeled 11 stores, ending the quarter with 1,374 stores. During the first nine months, Ulta Beauty generated $46.9 million in free cash flow, down 87% from last year on working capital shifts and a 52% jump in capital expenditures to support IT and supply chain investments and the launch of luxury brands. During the first nine months of fiscal 2023, the company repurchased 1.8 million shares of its common stock at a cost of $840.5 million, including 686,689 shares repurchased during the third quarter at an average cost per share of $409.94. About $259.0 million remains available under the $2.0 billion share repurchase program announced in March 2022. Ulta ended the quarter with an attractive balance sheet with more than $121 million in cash, no long-term debt and $2 billion in shareholders’ equity. Management updated its guidance with fiscal 2023 sales now expected in the $11.10 billion to $11.15 billion range, comparable store sales growth of 5.0% to 5.5% and EPS in the $25.20 to $25.60 range, up slightly from prior guidance.

Johnson & Johnson-JNJ noted that as a result of its previously announced acquisition of Laminar, a privately-held medical device company focused on eliminating the left atrial appendage (LAA) in patients with non-valvular atrial fibrillation (AFib), it has adjusted its expected adjusted EPS for 2023, reducing it by $0.17.  Johnston & Johnson acquired Laminar for an upfront payment of $400 million with additional potential clinical and regulatory milestone payments in 2024. For the full 2023 year, JNJ lowered guidance with adjusted EPS now expected in the $9.90-9.96 range, down from previous guidence of $10.07-10.13. Additionally, the asset acquisition is expected to have an approximate negative $0.15 EPS impact in fiscal year 2024.

Wednesday, Nov. 29, 2023

Hormel-HRL reported fourth quarter sales declined 3% to $3.2 billion with net income dropping 30% to $195.9 million and EPS falling 29% to $0.36. Volume for the fourth quarter was flat year-over-year as higher turkey volumes were offset by lower retail volumes. Operating profit declined 280 basis points to 8.4%. By segment, Retail sales, which accounted for 62% of total sales, declined 4% due in part to difficult comps for Skippy spreads. Retail segment operating profits fell 40%, squeezed by the lower sales, product mix and a $28 million impairment charge related to the Justin’s acquisition. Food Service sales, which accounted for 32% of total sales, increased 2.2% to $1.03 billion, with segment operating profits up 13%.  International sales declined 12%, owing to continued softness in China and lower branded export demand.  International segment operating profits fell 67% due to the sales decline. For the full fiscal 2023 year, sales dipped 3% to $12.1 billion with net income falling 12% to $793.6 million and EPS down 11% to $1.45. During fiscal 2023, Hormel generated a 10.3% return on shareholders’ equity and strong operating cash flow of $1.05 billion, representing a meaty 132% of reported net income. Hormel generated $777.6 million in free cash flow, down 9% from last year and returned a record amount of cash to shareholders through dividend payments of $592.9 million. The company announced a 3% increase in the dividend for fiscal 2024 to $1.13 per share. Hormel boasts of paying dividends without interruption for 95 years, including 58 consecutive years of dividend increases. During the past decade, Hormel’s dividend has compounded at an 11% annual rate. Hormel ended the fiscal year with $753.2 million in cash and investments, $2.36 billion in long-term debt and $7.7 billion in shareholders’ equity on its beefy balance sheet. Looking ahead to fiscal 2024, net sales are expected to grow between 1% and 3% with EPS in the $1.43 to $1.57 range, up 3% at the mid-point. Management expects earnings to decline in the first half of the year due to the impact from lower turkey markets, lower volumes in the retail segment and softness in its China business. Hormel expects segment profit growth from all three segments in the back half of the year and a modest benefit to net earnings from its transformation and modernization initiative. "Looking ahead, our teams continue to navigate through a dynamic operating environment characterized by slowing consumer demand, inflationary pressures and headwinds in our turkey business," Jim Snee, chairman of the board, president and chief executive officer said. "We expect fiscal 2024 to be a year of investment, consistent with the plan we outlined at our recent investor day. We remain focused on our strategic priorities, executing on our transformation and modernization initiative, fueling our innovation pipeline and exiting the year with momentum in our business segments. I remain confident that we have the right brands, strategy, people and culture to deliver on our commitment to improve our business and drive long-term shareholder returns and growth."

Tuesday, Nov. 28, 2023

As announced in the third quarter earnings release, UnitedHealth Group-UNH 2023 net earnings are expected to be $23.60 to $23.75 per share and adjusted net earnings $24.85 to $25.00 per share. UnitedHealth Group’s outlook for 2024 outlook includes revenues of $400 billion to $403 billion, net earnings of $26.20 to $26.70 per share and adjusted net earnings of $27.50 to $28.00 per share. Adjusted net earnings only excludes the after-tax non-cash amortization expense pertaining to acquisition-related intangible assets. Cash flows from operations are expected to range from $30 billion to $31 billion. 

 

Tuesday, Nov. 21, 2023

Genentech, a member of the Roche Group- RHHBY announced a multi-year strategic research collaboration with NVIDIA that couples Genentech’s artificial intelligence (AI) capabilities, extensive biological and molecular datasets, and research expertise with NVIDIA’s world-leading accelerated computing capabilities and AI to speed up drug discovery and development. The collaboration is designed to significantly enhance Genentech’s advanced AI research programs by transforming its generative AI models and algorithms into a next-generation AI platform, expediting the discovery and delivery of novel therapies and medicines to people.


The Board of Directors of Hormel Foods-HRL announced a 3 percent increase to the annual dividend to shareholders, marking the 58th consecutive annual dividend increase. The Board of Directors authorized the first quarterly dividend of 28.25 cents ($0.2825) a share to be paid on Feb. 15, 2024, to stockholders of record at the close of business on Jan. 16, 2024. The Feb. 15 payment will be the 382nd consecutive quarterly dividend paid by the Company. Since becoming a public company in 1928, Hormel Foods Corporation has paid a regular quarterly dividend without interruption.

Monday, Nov. 20, 2023

Fastenal-FAST reported its board of directors declared a special one-time dividend of $0.38 per share to be paid in cash on December 20, 2023 to shareholders of record at the close of business on December 6, 2023.

Thursday, Nov. 16, 2023

Ross Stores-ROST rang up an 8% increase in fiscal third quarter sales to $4.9 billion with net income jumping 30.8% to $447.3 million and EPS charging ahead 33% to $1.33. Same store sales increased 5%, mostly due to increased traffic.  Operating margins expanded 140 basis points to 11.2% as leverage from same store sales gain and lower freight costs was partially offset by higher incentives and store wages.  Ross completed its 2023 expansion program during the quarter by adding 43 new Ross Stores and 8 new dd’s DISCOUNTS stores, which brings the total stores added year-to-date to 97 stores including 72 new Ross Stores and 25 new dd’s DISCOUNTS stores. Management expects to end the fiscal year with 1,764 Ross Stores and 345 dd’s DISCOUNTS stores for a net increase of 94 stores for the fiscal year. For the first nine months of the fiscal year, Ross generated $1.57 billion in operating cash flow, up from $472.7 million last year, boosted by higher net income and working capital efficiencies. Free cash flow of $1.03 billion increased from $54.8 million last year. Year-to-date, Ross Stores returned $1.05 billion to shareholders through dividend payments of $342.1 million and share repurchases of $703.4 million, including $239 million repurchased during the third quarter at an average cost per share of $113.80. Ross Stores ended the quarter with $4.5 billion in cash, $2.2 billion in long-term debt and $4.6 billion in shareholders’ equity on its dressy balance sheet. Given the better-than-expected year-to-date results, Ross Stores now expects fiscal year EPS of $5.30 to $5.36, up 21.7% from last year at the mid-point, including 16 cents from this year’s 53rd week. Sales are expected to increase in the 8% to 10% range with operating margins of between 11.3% to 11.5% compared to 10.7% last year. The 53rd week is expected to contribute about 65 basis points to the operating margin expansion. During the earnings conference call, Barbara Rentler, CEO, remarked, “Looking ahead, despite all the challenges in the external environment, we are encouraged by our healthy above planned results to date this year. We also remain confident in the resilience of the off-price sector and our ability to operate successfully within it, especially given consumers’ heightened focus on value and convenience. As a result, we remain optimistic about the company’s future prospects and our ability to extend market share and profitability over time.”

Brown-Forman-BFB announced today that its Board of Directors approved an increase of 6% to the quarterly cash dividend from $0.2055 per share to $0.2178 per share on its Class A and Class B Common Stock. As a result, the indicated annual cash dividend will rise from $0.8220 per share to $0.8712 per share. The dividend is payable on January 2, 2024, to stockholders of record on December 1, 2023.  Brown-Forman’s President and Chief Executive Officer Lawson Whiting said, “We are proud to continue the long tradition of delivering excellent returns to our shareholders. This marks the 40th consecutive year of dividend increases and reinforces our confidence in Brown-Forman's long-term growth outlook.” Brown-Forman, a member of the prestigious S&P 500 Dividend Aristocrats index, has paid regular quarterly cash dividends for 80 years and has increased the cash dividend for 40 consecutive years.

In separate news, Brown-Forman announced that The Duckhorn Portfolio, Inc., a premier wine group, will acquire Sonoma-Cutrer Vineyards and related brand trademarks for approximately $400 million in cash and stock. In exchange, Brown-Forman will receive an ownership percentage of approximately 21.5% in The Duckhorn Portfolio and $50 million USD. The transaction is expected to close in the fourth quarter of fiscal year 2024. Upon closing, Brown-Forman will receive two seats on The Duckhorn Portfolio’s Board of Directors.

 

PulteGroup-PHM announced today that its Board of Directors has voted to increase the Company’s quarterly dividend by 25% to $0.20 per common share.  The increase will be effective with the Company’s next scheduled dividend, which is payable January 3, 2024, to shareholders of record at the close of business on December 19, 2023. “Over the past five years, PulteGroup has generated $6.9 billion of cash flow from operations which have been used to fund our growth, while returning almost $4.0 billion to shareholders through dividends and share repurchases,” said PulteGroup President and CEO, Ryan Marshall.  “The Board’s decision to increase our dividend by 25% reflects our commitment to returning capital to our shareholders.”