HI-Quality Company Updates

Friday, Aug. 12, 2022

Drivers for DoorDash Inc. are now delivering items to consumers purchased online from Facebook Marketplace as part of a new partnership between the delivery app and Facebook parent Meta Platforms-META. Meta and DoorDash tested the service in several U.S. cities in recent months, the companies said. The service lets Facebook users purchase and receive items from Marketplace without leaving their homes. It can deliver items that fit in a car trunk and are up to 15 miles away. Deliveries would be made within 48 hours.

Roche Holdings-RHHBY announced FDA approval of Xofluza to treat influenza in children aged five and older. This marks the first single-dose oral influenza medicine approved for children in this age group. Additionally, the FDA approved Xofluza for the prevention of influenza in children aged five to less than 12 years of age following contact with someone with influenza.

In separate news, Roche received FDA approval for expansion of the VENTANA MMR RxDx Panel. This approval advances the company's commitment to personalised healthcare through tests that determine which patients are most likely to respond to specific and targeted therapies for cancer patients.

UPS-UPS announced plans to acquire Bomi Group, an industry-leading multinational healthcare logistics provider. The transaction will add temperature-controlled facilities in 14 countries and nearly 3,000 highly-skilled Bomi Group team members to the UPS Healthcare network in Europe and Latin America. The acquisition will play a key role in the delivery of next-generation pharmaceutical and biologic treatments that increasingly require time-critical and temperature-sensitive logistics.

Wednesday, Aug. 9, 2022

T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.39 trillionas of July 31, 2022. This represents an 18% decline since year end.

Berkshire Hathaway-BRKB increased its investment in Occidental by 6.68 million shares, valued at $390.72 million, to 188.37 million shares, or 20.2% of the shares outstanding. At current prices, Berkshire Hathaway's common stock stake is valued at $11.72 billion. 

Saturday, Aug. 6, 2022

Berkshire Hathaway-BRKB reported the company’s net worth during the first half of 2022 decreased by 9%, or $45 billion, to $461.2 billion with book value equal to about $314,082 per Class A share as of 6/30/22.

Berkshire Hathaway reported second quarter revenues increased 10% to $76.2 billion with the company reporting a net loss of $43.8 billion compared to $28.1 billion in earnings in the prior year period. Investment gains and losses from changes in the market prices of Berkshire’s equity investments will produce significant volatility in earnings. Excluding investment and derivative losses of $53 billion, operating earnings jumped 39% to $9.3 billion in the second quarter, which better reflects the underlying strength of the business.

The investment losses of $53 billion were primarily paper losses from changes in unrealized gains of equity holdings during the second quarter given the stock market’s sharp pullback. Berkshire’s five major equity investment holdings which represent about 69% of total equities held, include American Express at $21.0 billion (which charged 15% lower during the first half of 2022 or $3.8 billion); Apple at $125.1 billion (which dropped 22% during the first half or $36.1 billion with Buffett taking another bite of Apple as the price declined); Bank of America at $32.2 billion (which posted a 14% decline during the first half or $30.0 billion); and Coca-Cola with the stock popping 6% higher, or $1.5 billion, to $25.2 billion at the end of the first half. Chevron rounds out the top five at $23.7 billion after Buffett purchased more than $20 billion of Chevron during the first quarter.

During the second quarter, Berkshire’s insurance businesses generated earnings from underwriting of $581 million, which increased 55% over the prior year period due to increases in reinsurance activities more than offsetting ongoing increases in claims frequencies and severities at GEICO due to significant cost inflation in automobile markets. Insurance investment income increased 56% during the quarter to $1.9 billion, reflecting higher dividend and interest income. The float of the insurance operations approximated $147 billion as of quarter end, relatively unchanged from year end. The average cost of float was negative during the quarter as the underwriting operations generated earnings.

Burlington Northern Santa Fe’s revenues chugged 15% higher during the second quarter to $6.5 billion with net earnings rolling 10% higher to $1.7 billion reflecting higher revenue per car/unit partly offset by lower overall freight volumes and higher average fuel costs. The volume decreases were in all business groups reflecting supply chain disruptions, network challenges, lower demand for crude by rail and lower grain exports.

Berkshire Hathaway Energy reported revenues rose 7% during the second quarter to $6.5 billion with net earnings up 4% to $766 million. The earnings increase reflected higher earnings from tax equity investments and from the natural gas pipeline and Northern Powergrid, partly offset by the regulated utilities and real estate brokerage business.

Berkshire’s Manufacturing businesses reported revenues rose 14% to $19.8 billion with operating earnings up 12% to $3.0 billion for the second quarter. The Buildings Products segment led the way for the quarter with revenues rising 20% to $7.7 billion and operating earnings jumping 34% to $1.3 billion thanks to strong demand for residential housing construction. Significant increases in mortgage interest rates will likely slow demand for new housing construction over the balance of the year. Berkshire’s operations also continue to be negatively impacted by persistent supply chain disruptions and significant cost increases for raw materials, energy, freight and labor.
Service and Retailing revenues increased 8% during the quarter to $22.9 billion with pre-tax earnings relatively flat at $1.3 billion. The Service group led the way as revenue increased 19% to $4.7 billion with pre-tax earnings up 4% to $756 million thanks to strong growth from TTI, reflecting strong demand across all electronic component markets, and the aviation business services due to higher training hours at FlightSafety and significantly higher customer flight hours at NetJets.

Berkshire’s balance sheet continues to reflect very significant liquidity and a very strong capital base of $461.2 billion as of 6/30/22. Excluding railroad, energy and utility investments, Berkshire ended the quarter with $467.6 billion in investments allocated approximately 70.0% to equities ($327.7 billion), 4.6% to fixed-income investments ($21.1 billion), 3.7% to equity method investments ($17.5 billion), and 21.7% in cash and equivalents ($101.3 billion).
Free cash flow declined 39% during the first half of the year to $8.5 billion due to lower earnings and higher capital expenditures. During the first half, capital expenditures approximated $6.8 billion, which included $4.8 billion for BNSF and BHE, its railroad and utility and energy units. Berkshire expects capital expenditures for the balance of 2022 for BNSF and BHE to approximate $6.6 billion.

During the first half, Berkshire paid cash of $57.3 billion to acquire equity securities and received proceeds of $12.0 billion from the sale of stocks. The stock purchases included about $21 billion in Chevron, about $11 billion in Occidental Petroleum, about $6 billion in Activision Blizzard as an arbitrage play, $5 billion in German stocks and Japanese stocks, $4 billion in HP, Inc. and an undisclosed additional amount of Apple. In addition, Berkshire purchased a net $22 billion in Treasury Bills and fixed-income investments. Berkshire also announced an agreement to acquire Alleghany, a property and casualty reinsurance and insurance business, for $11.6 billion in cash with the deal expected to close in the fourth quarter of 2022. In June 2022, Berkshire Hathaway Energy (BHE) acquired the BHE common stock held by Greg Abel, Berkshire’s Vice Chairman, for $870 million.

Berkshire repurchases its shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett and Charlie Munger. During the first half, Berkshire repurchased $4.2 billion of its common stock, including $1 billion in the second quarter. These repurchases included 25,462 Class B shares acquired at an average price of $276.75 per share and 2,397 Class A shares purchased at an average price of $425,870 per share during June 2022. No shares were repurchased in April or May. After quarter end, Berkshire repurchased an additional $500 million of its common stock in July.

Thursday, Aug. 4, 2022

According to Mastercard SpendingPulseTM, which measures in-store and online retail sales across all forms of payment, U.S. retail spending excluding automotive increased a hot 11.2% year-over-year in July, while retail sales excluding automotive and gas rose 9.0%. Notably, e-commerce sales were up 11.7% year-over-year, a sharp increase after months of softer growth. Spending increases in July outpaced monthly year-over-year growth experienced thus far in 2022, with demand and higher prices both contributing factors. Consumers continue to navigate high inflation as they spend on wants and needs. The Grocery sector, for instance, saw sales up +16.8% in July due primarily to food price increases. On the other hand, Apparel (+16.6%) and Jewelry (+18.6%) sales saw strong demand-driven year-over-year growth, well outpacing sector-specific inflation. Travel remains a priority, with Lodging up 29.6% and Airline sales up 13.3%. Fuel & Convenience spending remains elevated (+32.3%), though the growth rate is down compared to June – reflecting price declines at the pump.After heating up during the pandemic, the U.S. housing market has cooled considerably since the beginning of 2022, slowing consumer spending on home-related goods.

Maximus-MMS reported third quarter revenue decreased 9% to $1.13 billion with net earnings and EPS down 66% to $31.3 million and $.51, respectively. The decline in revenue was offset by a combination of organic growth and acquired growth from the U.S. Federal Services Segment acquisitions. Adjusting for COVID-19 response work, normalized organic growth would be approximately 21% over the prior year period. By segment, U.S. Services Segment revenue decreased 8% to $399.3 million, primarily due to the expected reduction in short-term COVID-19 response work. Adjusting for this work, normalized organic growth in the segment was nearly 40% driven by ramping of new core work and COVID-19 response work that has evolved into longer term work with new customers gained during the pandemic.  U.S. Federal Services Segment revenue decreased 15% to $525.5 million, driven by expected reductions in short-term COVID-19 response work, partially offset by contributions from the acquisitions of VES and Aidvantage. Adjusting for COVID-19 response work, normalized organic growth in the segment was approximately 6% over the prior year period. Outside the U.S. segment revenue increased 6% to $200.9 million. Results were net of a 9% currency headwind. Adjusting for COVID-19 response work, normalized organic growth in the segment was approximately 21% over the prior year period and driven primarily by ramping of the U.K. Restart Programme. Year-to-date signed contract awards totaled $4.02 billion and contracts pending totaled $476 million. During the quarter, Maximus generated free cash flow of $44.8 million compared to a negative free cash flow of $41.6 million in the prior year period and returned $65.1 million to shareholders through dividend payments of $17.1 million and share repurchases of $48 million. After quarter-end, the company repurchased an additional $22.3 million shares of common stock. Given the decline in revenues due to reductions in COVID-19 response work and earnings negatively impacted by the write-down in Outside the U.S. Segment, Maximus updated its guidance for the full fiscal year. Revenues are expected in the $4.55 billion to $4.65 billion range, compared to $4.5 billion to $4.7 billion, with EPS in the $2.85 to $3.05 range, down from prior guidance of $3.00 to $3.50. Free cash flow is expected in the $170 million to $210 million range, down from $175 million to $250 million previously guided. Looking ahead to fiscal 2023, management expects revenue to more than overcome $300 million year-over-year reductions in short-term COVID response work, meaning a positive organic growth projection. For earnings, a lift in profitability is expected over fiscal 2022.

Wednesday, Aug. 3, 2022

Booking Holdings-BKNG reported strong second quarter results with revenues flying 99% higher to $4.3 billion with the company reporting $857 million in net income and EPS of $21.07 compared to losses last year. Second quarter gross travel bookings increased 57% to $34.5 billion as room nights booked in the quarter increased 56% from the prior year period to 246 million. Rental car days booked motored 22% higher while airline tickets booked soared 31%. U.S. booking increased 30% with European bookings up 20% while Asia remained a weak spot given Covid restrictions. About 38% of bookings were processed through the company’s payments platform, which delivers more seamless, frictionless service. Alternative accommodations were up 25%, representing 32% of the overall mix. Bookings’ recovery from the pandemic reached another milestone with room nights booked for the second quarter surpassing 2019 levels for the first time. Free cash flow during the first half of the year was up fivefold to $4.2 billion with the company repurchasing $2.3 billion of its common stock. Booking accelerated its share repurchases given the share price pullback and repurchased an additional $811 million of stock in July with $7.4 billion remaining authorized for future share repurchases. Despite growth moderating and significant foreign exchange headwinds, Booking Holdings expects record third quarter revenues given an extremely busy summer travel season. Fourth quarter bookings currently are 15% higher than 2019 levels although are subject to cancellations. Current cancellation rates have been below 2019 levels.  Despite macroeconomic challenges, Booking Holdings’ strong cash flow generation and solid balance sheet position the company well for long-term growth given the strong demand for travel.

NVR, Inc.-NVR announced today that its Board of Directors has authorized the repurchase of $500 million of its outstanding common stock.  The company indicated that the authorization is a continuation of the stock repurchase program that began in 1994 and is consistent with NVR's strategy of maximizing shareholder value. 

Tuesday, Aug. 2, 2022

Starbucks Corporation-SBUX reported fiscal third quarter revenues increased 9% to $8.15 billion with net earnings falling 21% to $912.9 million and EPS declining 18.6% to $0.86. Same store sales growth increased 3%, driven by a 6% increase in average ticket partially offset by a 3% decline in comparative transactions. Starbucks opened 318 net new stores during the quarter, ending the quarter with 34,948 stores. Active Starbucks Rewards Membership increased 13% in the U.S. during the third quarter to 27.4 million members. By region, U.S. revenues increased 13% to $6.1 billion with operating margins declining 230 basis points to 22% on inflationary pressures, increased labor costs, partially offset by price increases. U.S. same store sales increased 9% on a 1% increase in transactions and an 8% change in ticket. International sales declined 6% to $1.58 billion on an 18% drop in comp store sales, primarily related to pandemic-related shutdowns in China where same store sales fell 44%. Excluding China, international segment revenues increased 33%. Excluding China and the impact of foreign currency headwinds, international revenues increased 50%.  Net international operating margins dropped to 8.5% from 19.4% last year, mainly related to the COVID shutdowns in China. Channel Development sales increases 16% to $479.7 million, driven by growth in the Global Coffee Alliance and ready-to-drink business. During the first nine months of the fiscal year, Starbucks generated $2.0 billion in free cash flow, down 42.5% from last year with the company returning $5.7 billion to shareholders year-to-date through cash dividends of $1.7 billion and share repurchases of $4.0 billion. Starbucks suspended share repurchases during the quarter. The company ended the quarter with $3.5 billion in cash and investments and nearly $14.0 billion in long-term debt. Although Starbucks has suspended forward guidance, it expects fourth quarter margins to decline from the third quarter due to continued uneven store reopenings in China and a step-up in investments in the company’s reinvention initiates including an expected doubling of compensation expenses from last year’s fourth quarter.  


Monday, Aug. 1, 2022

PepsiCo-PEP and Celsius Holdings, Inc., maker of a leading global fitness energy drink, CELSIUS®, announced a definitive agreement forging a long-term strategic distribution arrangement. The distribution agreement initially transitions Celsius' current U.S. distribution to PepsiCo's best-in-class capabilities. As part of the transaction, PepsiCo will also make an investment in Celsius in support of its growth agenda and will nominate a director to serve on Celsius' Board of Directors. As part of the transaction, PepsiCo will make a net cash investment of $550 million to Celsius in exchange for convertible preferred stock. Shares underlying the transaction were priced at $75 per share, or approximately 7.33 million shares, which equates to an estimated 8.5% ownership in Celsius on an as-converted basis. The preferred shares are entitled to a 5% annual dividend.

July 28, 2022

Intel-INTC reported second quarter sales declined 22% to $15.3 billion with a net loss of $454 million, or $0.11 per share, compared with net income of $5.1 billion, or $1.24 per share, during last year’s second quarter. By business segment, Client Computing Group (CCG) revenue fell 25% to $7.7 billion on lower PC demand primarily in consumer and education as well as OEM inventory reduction. CCG operating income declined 73% to $1.1 billion on lower revenue, increased unit cost, investment in roadmap initiatives and inventory reserves. Data Center and AI Group (DCAI) revenue declined 16% to $4.6 billion on “once-in-ten-years” OEM inventory reductions and competitive pressure. DCAI operating plummeted 90% to $200 million on the lower revenue, investments in roadmap initiatives and inventory reserves. Network and Edge Group (NEX) revenue increased 11% to a record $2.3 billion led by strength in networking Ethernet and 5G products. NEX operating income fell 60% to $241 million on lower inventory sell-through and roadmap initiatives. Accelerated Computing Systems and Graphics Group (AXG) revenue increased 5% to $186 million. AXG generated an operating loss of $507 million on inventory reserves and roadmap investments.  Mobileye revenue increased 41% to a record $460 million and generated a 43% increase in operating income to $190 million.  Intel Foundry Services (IFS) revenue fell 54% to $122 million, driven by lower sales of mask writing tools, with the group generating a net loss of $155 million on lower revenue and the ramping of IFS operations. Operating expenses increased 11% to $6.3 billion. During the first six months of 2022, Intel generated operating cash flow of $6.7 billion, down 53% from last year. Capital expenditures of $11.8 billion increased 56% from last year and resulted in $5.1 billion of cash used year-to-date. Intel returned nearly $3 billion to shareholders during the first half of 2022 through dividend payments. Intel ended the quarter with $27.0 billion in cash and investments, $32.5 billion in long-term debt and $101.2 billion in shareholders’ equity. Given the disappointing year-to-date performance, Intel revised its full year guidance with revenues now expected in the $65 billion to $68 billion range, down 16% from last year at the mid-point, with EPS of $2.57 now expected, down nearly 50% from last year.   

Apple-AAPL reported third quarter revenues increased 2% to a record $83 billion with net income down 11% to $19.4 billion and EPS down 8% to $1.20. Despite a challenging operating environment including Covid shutdowns, geopolitical tensions, foreign exchange headwinds, the loss of its Russia business and an uncertain macroeconomic environment, Apple set a June quarter revenue record driven by record iPhone and Services sales. Apple’s installed base of active devices reached an all-time high in every geographic segment and product category.  The company has 860 million paid subscriptions which is up 160 million over the last 12 months. Supply constraints impacted sales especially for Macs and iPads, although were less than expected during the quarter. Free cash flow increased 19% year-to-date to $90.6 billion with Apple paying $11.1 billion in dividends and repurchasing $65 billion of its common stock during the same time. Apple ended the quarter with more than $179 billion in cash and investments, $94.7 billion in long-term debt and $58.1 billion in shareholders’ equity on its solid balance sheet. Despite significant foreign exchange headwinds, Apple expects fourth quarter revenue growth will accelerate sequentially from third quarter results as supply constraints ease. Gross margin is expected in the range of 41.5% to 42.5% with operating expenses in the range of $12.9 billion to $13.1 billion and a tax rate of about 16%.

Mastercard-MA reported second quarter revenues charged 21% higher to $5.5 billion with net income increasing 10% to $2.3 billion and EPS up 13% to $2.34. This strong growth was driven by robust consumer spending despite increasing inflationary pressures. During the quarter, gross dollar volume growth increased 14% to $2.1 trillion led by cross-border volume of 58% thanks to strong travel spending. Switched transactions increased 12%. Rebates and incentives increased 19% due to increased volumes and transactions and new and renewed deals. As of 6/30/22, the company’s customers had issued 3.0 billion Mastercard and Maestro-branded cards. Free cash flow increased 13% during the first half of the year to $4.0 billion with the company paying $956 million in dividends and repurchasing $4.8 billion of its common stock, including 6.9 million shares repurchased at a cost of $2.4 billion in the second quarter at an average cost of $347.83 per share. Mastercard has $6.7 billion authorized for future share repurchases. Mastercard is not seeing signs of recession given resilient consumer spending thanks to low unemployment, high wage increases and high consumer savings. Travel and lodging spending in the U.S. increased 25% with cross-border volume handily surpassing pre-pandemic levels in 2019. Spending in Europe is positive despite higher energy costs and the war in Ukraine. Spending in Asia has lagged the global recovery due to continued Covid restrictions with significant upside remaining in Asia. Mastercard raised its revenue outlook for the full year with low 20% growth expected on a constant currency basis.

T. Rowe Price-TROW reported net revenues declined 21.6% to $1.5 billion with net income and EPS declining 58% to $339.6 million and $1.46, respectively. Operating income declined 30.2% during the quarter to $668.6 million and the firm reported a non-operating loss for the quarter of $279.9 compared to a $143.9 non-operating gain last year. Assets under management (AUM) declined 15.6% during the quarter to $1.31 trillion on market depreciation and net distributions of $227.4 billion and net cash outflows of $14.7 billion, largely from growth-oriented equity strategies. Investment advisory fee annualized effective rate declined 2.5 basis points year-over-year to 42.7 basis points, squeezed by the July 2021 target date fee reductions, offset slightly by higher-than-average effective fee rate earned on the firm’s alternative asset class products. Over a ten-year period, 62% of T. Rowe’s equity strategies have outperformed passive peer median performance, 60% of the firm’s fixed-income strategies have outperformed the median while 97% of T. Rowe’s multi-asset strategies have outperformed passive peer median performance. During the first half of 2022, T. Rowe Price generated $1.5 billion in free cash flow, down 19% from last year, with the company returning $1.065 billion to shareholders through dividends of $556.2 million and share repurchases of $519.6 million at an average cost of $137.92 per share. T. Rowe Price ended the quarter with $5.4 billion in cash and investments and $8.96 billion in shareholders’ equity on its debt-free balance sheet. Management expects net outflows to persist until we see a more constructive equity market, improved performance in certain investment strategies, less overall market volatility and more traction from strategic growth investments. While the company remains committed to investing in initiatives to drive long-term growth, it is reducing the pace of hiring to slow the rate of expense growth in response to market conditions. According to Rob Sharps, CEO and president, “Delivering outstanding investment performance remains our top priority. While many of our strategies continue to produce strong results, especially over longer periods of time, several of our large equity strategies had challenged performance. We have experienced periods of softer performance in the past and we expect our disciplined investment process and focus on fundamentals will deliver the results our clients expect and deserve. Longer-term performance in our target date franchise remains strong”


July 27, 2022

Genuine Parts-GPC reported a record second quarter with sales motoring ahead 17% to $5.6 billion and net earnings and EPS nearly doubling to $372.5 million and $2.62, respectively. Adjusted net income, which excludes a non-recurring gain on the sale of S.P. Richards real estate partially offset by Kaman Distribution Group acquisition costs, increased 24% to $313 million and EPS jumped 26% to $2.20. Sales growth reflects an 11.5% gain in comp store sales and an 8.8% benefit from acquisitions, partially offset by a 3.2% foreign currency headwind. Automotive sales were $3.5 billion, up 8.5% from last year, powered by an 8.4% increase in comp store sales. Automotive operating margin increased 20 basis points to 9.3%. Industrial sales of $2.1 billion increased 34.5% from last year, driven by a 17.8% increase in comp store sales and a 17.6% contribution from acquisitions, partially offset by a 0.9% foreign currency headwind. Industrial segment operating margins increased 110 basis points from last year to 10.6%. "The strength in Automotive was broad-based across our global operations. Likewise, the continued strength in Industrial led to its fifth consecutive quarter of double-digit sales comps," said Will Stengel, GPC President.  During the first half of 2022, Genuine Parts generated $638 million in free cash flow, or 103% of reported earnings, with the company returning $365.7 million to shareholders through dividends of $242.8 million and share repurchases $122.9 million. The company’s 2022 annual dividend of $3.58 per share is up 10% from last year, marking the 66th consecutive year of dividend increases.  Genuine Parts ended the quarter with $519 million in cash, $3.3 billion in long-term debt and $3.6 billion in shareholder equity. Given its ongoing confidence in the business despite a dynamic and uncertain external landscape, management updated its 2022 guidance with sales now expected to increase 12% to 14%, up from prior guidance of 10% to 12%, with adjusted EPS in the $7.80 to $7.95 range, up from $7.70 to $7.85 previously. Free cash flow is expected in the $1.2 billion to $1.4 billion range.

Cognizant Technology Solutions-CTSH reported second quarter revenue increased 7% to $4.9 billion with net income increasing 12% to $577 million and EPS up 14% to $1.11. Digital accounted for 50% of total revenues. By business segment, Financial Services revenue increased 3% to $1.5 billion, Health Sciences increased 6% to $1.4 billion, Product & Resources increased 8% to $1.14 billion and Communications, Media & Technology increased 16% to $816 million. Operating margin increased 30 basis points to 15.5%. While second quarter bookings declined 3% from last year to $23.2 billion, Cognizant’s book to bill ratio remains at a healthy 1.2 times which bodes well for next year. Trailing 12-month voluntary attrition jumped to 32% from 18% last year and offshore utilization stood at 83% while onsite utilization was 91%. During the quarter, Cognizant generated $485 million in free cash flow, up 4% from last year, with the company returning $459 million to shareholders through $141 million in dividends and $318 million in share repurchases at an average cost of $71.43 per share. During the first half of 2022, the company returned $1.03 billion to shareholders through dividends of $284 million and share repurchases of $744 million at an average cost per share of $80.87. Cognizant ended the quarter with cash and investments of $2.8 billion, long-term debt of $608 million and shareholders’ equity of $12.0 billion on its healthy balance sheet. Given the first half results, management updated its guidance with revenues now expected in the $19.7 billion to $19.9 billion range, up 6.3% to 7.3% from last year, with EPS in the range of $4.51 to $4.57, up 9% to 11% from last year. This includes an increase in expected share repurchases to $1.2 billion up from prior guidance of $600 million.


Meta Platforms-META reported its first dip in revenues with a 1% decline in revenues during the second quarter to $28.8 billion. Earnings dropped 36% to $6.7 billion with EPS down 32% to $2.46 as the company continued to invest heavily in research and development with its plans to build out the metaverse over the next decade. Ad impressions delivered across the company’s Family of Apps increased by 15% year-over-year while the average price per ad decreased by 14%. These results reflected a weak advertising demand environment due to broad macroenvironment uncertainty along with Apple’s privacy changes which adversely impacted digital advertising. Meta’s family of apps reach 3.6 billion people monthly, an increase of 4% year-over-year. Facebook’s daily active users increased 3% on average for June to 1.97 billion as active monthly users increased 1% to 2.93 billion. Free cash flow declined 20% during the first half of the year to $13.3 billion primarily due to a 45% increase in capital expenditures as the company continues to invest in the business for long-term growth. For the full year, capital expenditures are expected in the range of $30 billion to $34 billion.  Meta repurchased $14.7 billion of its common stock during the first half of the year with $24.3 billion remaining authorized for future share repurchases. Meta ended the quarter with a mighty balance sheet including $47 billion in cash and investments, no long-term debt and $125.8 billion in shareholders’ equity. Meta’s headcount increased 32% to 83,553 as of 6/30/22. Given economic challenges, the company plans to reduce its headcount over the next year and focus on priority areas like artificial intelligence and the metaverse. Meta expects third quarter revenues in the range of $26-$28.5 billion, reflecting the expectation that weak advertising demand will continue compared to the strong results seen in the prior year period. Third quarter Reality Labs revenue is also expected to be lower than second quarter revenues. Foreign exchange headwinds are expected to adversely impact revenue growth by 6% in the third quarter. Meta narrowed its total expenses expectation for the full year to a range of $85-$88 billion.

General Dynamics-GD reported second quarter revenues were relatively flat at $9.2 billion with net earnings up 3.9% to $766 million and EPS marching ahead 5.4% to $2.75. Operating margin expanded 20 basis points from the prior year period to 10.6%. Aerospace saw very strong demand during the quarter with margins showing steady improvement, while the defense segments demonstrated solid operating performance and had several important wins. Free cash flow more than doubled during the first half to $2.3 billion with the company paying $679 million in dividends and repurchasing $1.1 billion of its common stock. For the full year, the company continues to expect to convert more than 100% of earnings into free cash flow. Orders remained strong across the company with a consolidated book-to-bill ratio, defined as orders divided by revenue, of 1.1 to 1 for the quarter with strength in the Aerospace segment driven by strong order activity for Gulfstream with a book-to-bill of 2.2 to 1 during the quarter. Gulfstream has the highest backlog in over a decade. General Dynamics ended the quarter with a company-wide backlog of $87.6 billion. Given the robust demand in Aerospace, General Dynamic is not seeing any slowdown in its business and believes its durable and extended backlog positions the company well for 2023-2024.  The company expects its fiscal 2022 EPS will come in at the high end of its previous guidance of $12.00-$12.15.

Automatic Data Processing-ADP reported fourth quarter revenue rose 10% to $4.1 billion with net income increasing 16% to $625 million and EPS up 19% to $1.50. With more than 990,000 clients around the world, ADP paid 1 in 6 U.S. workers last year and processed $2.7 trillion in payrolls and taxes. For the full year, revenue increased 10% to $16.5 billion with net earnings increasing 13% to $2.9 billion and EPS up 15% to $7.00. Over the course of fiscal 2022, ADP consistently exceeded revenue growth expectations driven by significant sales momentum and near-record client revenue retention of 92.1%. Record fourth quarter new business bookings produced 15% growth for the year to $1.7 billion and 15% growth in PEO average worksite employees. Return on shareholders’ equity for the year was an impressive 91%. Free cash flow remained relatively flat at $2.9 billion with the company paying $1.7 billion in dividends and repurchasing $2 billion of its common stock during the year. ADP has increased its dividend for 47 consecutive years. Management provided fiscal 2023 guidance, anticipating continued solid revenue and bookings growth, as well as healthy margin improvement from client funds interest growth and operating leverage from ongoing productivity gains. For fiscal 2023, management expects revenue growth of 7% to 9%, new business bookings of 6% to 9%, operating margin expansion of 100 to 125 basis points and adjusted EPS growth of 13% to 16%.

July 26, 2022

Visa-V rang up a 19% increase in sales during the fiscal third quarter to $7.3 billion with net income jumping 32% to $3.4 billion and EPS charging ahead 36% to $1.60. Key drivers of the strong second quarter sales growth included 12% growth in payments volume to $2.9 billion, 16% growth in processed transactions to 49.3 billion and 48% growth in cross-border volume excluding intra-Europe as traffic volume surpassed 2019 levels the first time since the pandemic began. By segment, Service revenues increased 13% to $3.2 billion, Data Processing revenues increased 8% to $3.6 billion, International Transaction Revenue increased 51% to $2.6 billion, Other Revenues increased 26% to $517 million and client incentives increased 21% to 2.6 billion, representing 26% of gross revenues.  Visa ended the quarter with 3.9 billion cards issued, up 8% from last year. During the first nine months of the fiscal year, Visa generated $12.3 billion in free cash flow, representing 103% of net income, with the company returning $11.9 billion to shareholders through dividends of $2.4 billion and share repurchases of $9.5 billion including $2.5 billion repurchased during the third quarter at an average price of $202.16 per share. Visa ended the quarter with $16.3 billion in cash and investments, $20.5 billion in long-term debt and $35.5 billion in shareholder equity on its sturdy balance sheet.  Fiscal year-to-date growth has been stable or improving in overall domestic payment volume with no indication of an economic slowdown or evidence of a pullback in consumer spending, including during the most recent weeks. As such, management assumes the trends it has seen in payments volume and processed transactions will continue through the fourth quarter.  


Canadian National Railway-CNI reported record second quarter revenue of C$4.3 billion an increase of 21% with net income up 28% to C$1.3 billion and EPS chugging ahead 32% to C$1.92. The increase in revenues was mainly due to higher applicable fuel surcharge rates, freight rate increases, higher Canadian export volumes of coal via west coast ports, higher volumes of U.S. grain and the positive translation impact of a weaker Canadian dollar; partly offset by significantly lower export volumes of Canadian grain. Revenue ton miles increased 2% year-over-year to 60.5 billion and fuel efficiency improved by 4% to a record of 0.838 US gallons of locomotive fuel consumed per 1,000 gross ton miles. In addition, car velocity (car miles per day) improved by 2%. During the first half of the year, the company generated C$1.2 billion in free cash flow and returned C$3.4 billion to shareholders through share repurchases of C$2.4 billion and dividends paid of C$1 billion. Canadian National ended the quarter with C$465 million in cash, C$11.9 billion in long-term debt and C$21.7 billion in shareholders’ equity. Management reaffirmed 2022 guidance of 15-20% adjusted EPS growth and an operating ratio below 60% as well as a ROIC of approximately 15%. Canadian National maintained its free cash flow target in the range of C$3.7 billion to C$4 billion and expects to invest approximately 17% of revenues in its capital program.  In addition, management continues to expect volume growth, in terms of Revenue ton miles (RTMs) in the low single-digit range and continues to expect significantly lower volumes of Canadian grain and lower volumes of potash as well as lumber and panels for 2022 compared to 2021.

Microsoft-MSFT reported fourth quarter revenues increased 12% to $51.9 billion with net income increasing 2% to $16.7 billion and EPS up 3% to $2.23.  Commercial bookings grew 25% and Microsoft Cloud revenue was $25 billion, up 28% year over year. By segment, revenue in Intelligent Cloud increased 20% to $20.9 billion, driven by Azure and other cloud services. Revenue in Productivity and Business Processes increased 13% to $16.6 billion, driven by Office 365 Commercial and LinkedIn. Revenue in More Personal Computing rose 2% to $14.4 billion, driven by Search and news advertising. Microsoft returned $12.4 billion to shareholders in the form of share repurchases and dividends in the fourth quarter, an increase of 19% compared to the fourth quarter of 2021. During the quarter, Microsoft was impacted by evolving macroeconomic conditions and other unforeseen items including unfavorable exchange rate movement, extended shutdowns in China, reductions in advertising spending, employee severance expenses and the ongoing war in Ukraine. As a result, total revenue was negatively impacted by approximately $1.2 billion. For the full fiscal 2022-year, Microsoft’s revenue increased 18% to $193.8 billion with net income up 19% to $72.7 billion and EPS jumping 20% to $9.65. Return on shareholders’ equity for the year was an impressive 44%. Free cash flow increased 16% during the year to $65.1 billion with Microsoft paying $18.1 billion in dividends and repurchasing $32.7 billion of its common stock during the year. Microsoft ended the year with more than $104 billion in cash and investments, $47 billion in long-term debt and $167 billion in shareholders’ equity on its strong balance sheet. For the first fiscal quarter of 2023, Microsoft expects revenues in the range of $49.3 billion to $50.3 billion, representing 9%-11% growth over the prior year period. For the full 2023 year, Microsoft expects double-digit growth in revenues and operating income.

Alphabet-GOOGL reported second quarter revenues rose 13%, or 16% on a constant currency basis, to $69.7 billion with operating income relatively flat at $19.5 billion. Net income declined 14% to $16.0 billion with EPS off 11% to $1.21. Revenues were driven by double-digit growth in Search and Cloud. Google Cloud’s sales increased 36% and topped the $6 billion revenue milestone for the first time in a quarter with strong demand in all geographies. Search advertising growth was driven by the travel and retail sectors, with strong searches for summer travel and increased e-commerce in apparel. YouTube ads rose 5% during the quarter to $7.3 billion with growth slowing as the company lapped unusually strong results last year and a pullback by some advertisers in their spending budgets.  YouTube Shorts are watched by over 1.5 billion users each month with over 30 billion daily views. Alphabet is seeking to monetize this part of its business.  Free cash flow declined 6% during the first half to $27.9 billion, primarily due to a significant 45% increase in capital expenditures as the company is investing in servers and data centers for the long term despite an uncertain macroenvironment. The company repurchased $28.5 billion of its common stock during the first half and ended the second quarter with a fortress balance sheet with nearly $125 billion in cash and investments, $14.7 billion in long-term debt and $255.4 billion in shareholders’ equity.  Alphabet’s employee headcount increased 21% from the prior year period to 174,014 at the end of the second quarter with the company planning to slow its hiring for the balance of the year and into 2023. 

Texas Instruments-TXN reported second quarter revenues rose 14% to $5.2 billion with net income up 19% to $2.3 billion and EPS increasing 20% to $2.45. By segment, Analog revenues increased 15% to $4.0 billion, Embedded Processing revenues were up 5% to $821 million and Other revenues increased 19% to $399 million. While April started weak due to Covid-related restrictions in China, business accelerated in May as restrictions eased with the automotive market up more than 20%. During the quarter, TXN generated $1.2 billion in free cash flow and returned more than $2.2 billion to shareholders through dividends of $1.1 billion and share repurchases of $1.2 billion. Free cash flow over the trailing 12 months was $5.9 billion and 30% of revenues underscoring the strength of the company’s business model.  During the past 12 months, Texas Instruments invested $3.2 billion in R&D and SG&A, invested $2.8 billion in capital expenditures and returned $6.2 billion to shareholders. Management’s third quarter outlook is for revenue in the range of $4.9 billion to $5.3 billion and EPS between $2.23 and $2.51.

Stryker-SYK reported second quarter sales increased 4.6% to $4.5 billion with net income and EPS up 11% to $656 million and $1.72, respectively. By business segment, MedSurg and Neurotechnology increased 8% to $2.55 billion, driven by solid growth in Instruments, Endoscopy and Neuro Cranial. Orthopaedics and Spine increased slightly to $1.9 billion on solid growth in Knees and Hips, powered by a healthy 19% increase in MAKO robot installations. Gross profit margins declined by 170 basis points as supply chain challenges resulted in spot buys of core components at premium prices to ensure Stryker’s capacity to meet strong demand for its products. As the quarter progressed, Stryker saw the need for spot buys begin to abate. For the six months ended 6/30/2022, Stryker generated $732 million in operating cash flow representing an earnings conversion ratio of 75%.  Free cash flow declined nearly 60% year-over-year to $470 million. During the quarter, Stryker paid down $450 million of its long-term debt ending the quarter with $1.2 billion in cash and investments, $13.4 billion in long-term debt and $15.7 billion in shareholders’ equity. Given the healthy second quarter results, the strong order book for capital equipment and the sales momentum in its implant businesses, Stryker now expects 2022 organic sales growth in the 8% to 9% range, compared to previous guidance of 6% to 8%. Should foreign currency exchange rates hold near current levels, full year reported sales will be adversely impacted by 2% to 3% and EPS will be adversely impacted by about $0.25 to $0.30. Given the first half performance including continued supply chain challenges and the inflationary environment together with increased sales guidance, continued financial discipline and, most importantly, the future impact of foreign currency, the company now expects adjusted EPS in the range of $9.30 to $9.50, down from prior guidance of $9.60 to $10.00.   

Raytheon Technologies-RTX reported second quarter revenues rose 3% to $16.3 billion with net income increasing 25% to $1.3 billion and EPS up 28% to $.88. Earnings include $.28 per share of net significant and/or non-recurring charges and acquisition accounting adjustments. The strong start to the summer travel season drove financial results ahead of management’s expectations. Resilient demand generated over $24 billion of awards during the quarter.  Backlog at the end of the quarter was $161 billion, including $96 billion from commercial aerospace and $65 billion from defense with a 1.3 book-to-bill ratio.  Free cash flow decreased 16% to $807 million during the quarter. The company returned more than $3.3 billion to shareholders in the first half through dividends of $1.5 billion and share repurchases of $1.8 billion. Management confirmed the prior 2022 outlook expecting sales of $67.75 billion to $68.75 billion, adjusted EPS of $4.60-$4.80, free cash flow of approximately $6 billion and share repurchases of at least $2.5 billion.

NVR, Inc.-NVR reported second quarter revenues increased 16% to $2.6 billion with net income up 35% to $433 million and EPS jumping 50% to $123.65. New orders decreased by 16% during the quarter to 4,663 units. However, the average sales price of new orders increased 7% to $471,600. The cancellation rate in the second quarter was 14% compared to 8% in the prior year period. Settlements increased 2% during the quarter to 5,820 units and the average settlement price increased 15% to $448,400. The backlog of homes sold but not settled as of June 30, 2022, decreased on a unit basis by 3% to 12,286 units and increased on a dollar basis by 8% to $5.82 billion. During the quarter, homebuilding revenue increased by 17% to $2.61 billion. Gross profit margin in the second quarter of 2022 increased to 26.3%, compared to 22.6% in the second quarter of 2021. Gross profit margins were favorably impacted by the increase in the average settlement price. Mortgage loan closings increased 5% to $1.65 billion during the quarter. During the first half of the year, the company repurchased 207 million shares for an average price of $4,903 per share and ended the quarter with $1.48 billion in cash, $915 million in long-term debt and $2.9 billion in shareholders’ equity on its sturdy balance sheet.

PulteGroup-PHM reported second quarter revenues increased 17% to $3.9 billion with net income up 30% to $652 million and EPS jumping 44% to $2.73, respectively. Record second quarter homebuilding revenues and gross margin drove a significant increase in EPS. Home sale revenues for the second quarter increased 18% to $3.8 billion, reflecting a 19% increase in average sales price to $531,000, partially offset by a less than 1% decrease in closings to 7,177 homes. New orders decreased by 23% during the quarter to 6,418 homes, as higher mortgage rates, reduced affordability, and lower consumer confidence, slowed demand and resulted in an increased number of previous buyers cancelling their contracts. The cancellation rate in the second quarter was 15% compared to 7% in the prior year period. The dollar value of new orders decreased 8% to $3.9 billion, and the company operated out of an average of 791 communities. The company’s backlog at quarter end was 19,176, which is a decrease of 4% from the prior year. However, the dollar value of homes in backlog was $11.6 billion, which is an increase of 18% over last year. Mortgage capture rate was 78% for the quarter, down from 86% last year. During the quarter, Pulte invested $1.1 billion in land acquisition and development, with 58% of spending on existing land assets. PulteGroup controlled 243,258 lots with 54% held through option, with a long-term target of controlling 65% to 70% of lots via option. Year-to-date free cash flow decreased 90% to $39.6 million, as management is focused on investing in the business to help combat the volatile environment. During the first half of 2022, the company paid out $74 million in dividends and repurchased 17.4 million shares of its common stock for $794 million at an average price of $45.63 per share, representing 7% of shares outstanding. The dividend payout rate per share increased 17% in 2021 and an additional 7% for 2022. The ongoing strength of PulteGroup’s quarterly financial results has allowed the company to deliver a high return on equity of 31% for the trailing 12 months. The company ended the quarter with $663 million in cash, $2 billion in long-term debt and $7.7 billion in shareholders’ equity on its sturdy balance sheet. While PulteGroup continues to deliver strong results and maintain a large backlog of sold homes, Federal Reserve actions to raise interest rates to combat inflation, combined with lower consumer confidence and increasing fears of a recession have worked to cool the demand environment. Even with the recent 200-basis point increase in mortgage rates impacting affordability, management continues to believe the desire for homeownership is high and the long-term outlook for housing remains positive.

3M-MMM reported second quarter sales declined 2.8% to $8.7 billion including a 4% foreign currency headwind with net income and EPS falling 95% to $78 million and $0.14, respectively. Excluding litigation expenses of $1.7 billion, or $2.34 per share, net income declined 12% and EPS declined 10%. By business segment, Safety & Industrial sales declined 3.4% to $2.9 billion, Transportation & Electronics sales declined 3.7% to $2.3 billion, Health Care sales increased 0.6% to $2.2 billion and Consumer sales declined 5% to $1.3 billion. Adjusted margins declined 240 basis points to 21%, squeezed by the decline in disposable respirator demand, COVID-related lockdowns in China, global supply chain challenges, raw materials and logistics cost inflation and foreign currency headwinds, partially offset by strong pricing, spending discipline and restructuring benefits. During the quarter, 3M generated $1.0 billion in adjusted free cash flow, down 41% from last year, due to working capital changes and the cash impact from capitalization of R&D for U.S. tax purposes. 3M returned $848 million to shareholders during the quarter through dividend payments. Share repurchases have been suspended pending the Food Safety separation expected to be completed by 9/1/2022. Year-to-date, 3M returned $2.5 billion to shareholders through dividends of $1.7 billion and share repurchases of $800 million. 3M ended the quarter with $3.0 billion in cash and equivalents, $14 billion in long-term debt and $13.8 billion in shareholders’ equity. During the quarterly conference call, 3M announced its intent to spin off its health care segment to shareholders as a publicly-traded company while retaining a 19.9% stake in the business.  The standalone Health Care business will be a leading global diversified healthcare technology company with sales of about $8.6 billion focused on wound care, oral care, healthcare IT and biopharma filtration while the new 3M with sales of about $26.8 billion will focus on the Safety & Industrial, Transportation & Electronics and Consumer businesses. The New 3M will retain responsibility for non-Health Care related litigation, including those related to Combat Arms Earplugs and PFAS. In a separate announcement, 3M said it was taking action to resolve the Combat Arms Earplug litigation, including 115,000 filed claims and 120,000 claims on an administrative docket as of June 30, 2022. To that end, 3M’s wholly-owned subsidiary, Aearo Technologies, has voluntarily initiated chapter 11 proceedings seeking court supervision to help establish a $1 billion trust – funded by 3M – to efficiently and equitably resolve all claims determined to be entitled to compensation. 3M recorded a $1.2 billion, or $1.66 per share, charge related to the action. The chapter 11 process is intended to achieve an efficient and equitable resolution, reduce uncertainty and increase clarity for all stakeholders, while reducing the cost and time that could otherwise be required to litigate thousands of cases. The company updated its full year guidance to reflect foreign currency headwinds with the dollar at a 20-year high and macroeconomic uncertainty. Total sales growth is now expected in the -2.5% to -0.5% range on organic sales growth of 1.5% to 3.5% with EPS expected in the $7.32 to 7.82 range, down 25% from last year at the midpoint. Expected operating cash flow of $6.6 billion to $7.2 billion will contribute to a 90% to 100% free cash flow conversion rate.

UPS-UPS reported second quarter revenue increased 6% to $24.8 billion with net income and EPS each increasing 7% to $2.8 billion and $3.25, respectively. Despite volume dropping more than planned during the quarter, operating profit jumped 8.5% to $3.5 billion as the company posted the highest operating margin in 15 years with all business segments generating operating profit growth as innovation drove productivity. About half of the volume growth decline during the quarter was due to negotiations with Amazon, the company’s largest customer. UPS is restricting the volume it is taking from Amazon to make capacity room for more profitable volume business elsewhere. Revenue from Amazon is expected to be less than 11% of total revenues by the end of the year. Out of UPS’s top 20 customers, 65% grew their volume during the quarter. The macroenvironment remains dynamic. GDP forecasts have come down with global GDP growth expected to approximate 2.5% and U.S. GDP growth expected around 1.2% for the year. Despite higher inflation and interest rates in the U.S., consumer spending remains strong especially for services. The continued rolling lockdowns in China and geopolitical pressures in Ukraine are pressuring international volumes. However, supply chains are flowing better than a year ago, but we are not “out of the woods yet.”  UPS is managing well through the challenges. Fuel prices are coming down which should help second half results, although wages are expected to rise. UPS reaffirmed its full-year financial targets with revenue expected to approximate $102 billion with adjusted operating margin of about 13.7%. Adjusted return on invested capital is expected to exceed 30%.  Free cash flow increased 2% during the first half of the year to $6.9 billion with UPS paying $2.6 billion in dividends and repurchasing $1.2 billion of its common stock. For the full year, free cash flow is expected to approximate $9 billion with the company paying $5.2 billion in dividends and increasing its share repurchase target to $3 billion for the year.

Monday, July 25, 2022

Bank of Hawaii-BOH reported second quarter total revenue increased 4.3% to $175.1 million with net income declining 18.7% to $54.9 million and EPS down 17.9% to $1.38. The net income decline was primarily due to a $13.6 million smaller release of the allowance for credit losses. Net interest income increased 7.6% to $132.9 million on a 10 basis point increase in net interest margin to 2.47% owing to higher interest rates and continued strong loan growth. Total loans and leases were $13.0 billion, up 7.6% from last year, or up 12.1% excluding PPP loans, while total deposits reached a record high of $21.0 billion, up 4.2%.  Bank of Hawaii’s 62% loan to asset ratio provides ample liquidity to fund continued growth. Noninterest income declined slightly from last year’s second quarter to $42.2 million while noninterest expense increased 6.6% year-over-year, reflecting the impact of higher compensation and occupancy expenses. During the second quarter, Bank of Hawaii generated an 18.2% return on average shareholders’ equity and 1% return on assets. Credit quality remained strong during the quarter with 80% of the loan portfolio secured with quality real estate with a combined average loan to value of 56%, non-performing loans of 0.12% and net loan charge-offs of 0.02%. Bank of Hawaii ended the quarter with a fortress-like capital position of 14.1%, far exceeding the 10% regulatory threshold for a well-capitalized bank. During the first half of 2022, Bank of Hawaii generated $145 million in free cash flow, down 28% from last year on lower year-to-date income and working capital changes. Bank of Hawaii returned $80.8 million to shareholders year-to-date through dividend payments of $56.5 million and share repurchases of $24.3 million including $10 million in share repurchases during the second quarter at an average cost of $75.94 per share. Bank of Hawaii's $2.80 cent annual dividend currently yields an attractive 3.6%.  With 60% of earning assets repricing in the next two years, Bank of Hawaii’s balance sheet is well-positioned for rising rates.  

Friday, July 22, 2022

Gentex-GNTX reported second quarter sales increased 8% to $463 million with net income decreasing 16% to $72.4 million and EPS down 13% to $.31, respectively. Sales for the quarter fell short of Gentex’s beginning quarter forecasts by approximately $70 to $80 million. The sales shortfall was primarily driven by the fact that light vehicle production in primary markets was 4% lower than forecasted at the beginning of the quarter and then was further compounded by supply shortages of certain electronic components that negatively impacted mix for some of the company’s advanced feature products. While there appears to be some improved stability in the light vehicle production environment as compared to a year ago, the company is still experiencing significant customer order fluctuations on a week-to-week basis. The industry dynamics continue to create a difficult forecasting environment. Nevertheless, the continuing strong demand for light vehicles, combined with the historically low level of light vehicle inventories, should create the opportunity for an improving sales environment throughout the rest of this year and into 2023.  For the second quarter of 2022, the gross margin was 32.0%, compared to a gross margin of 35.4% for the second quarter of 2021. Gross margin was impacted by raw material cost increases, labor cost increases, lower than expected sales levels, product mix shifts and ongoing customer order volatility. For the third quarter of 2022, Gentex expects a 21% increase in light vehicle production compared to the same prior year period. For the calendar year 2022, the company expects a 4% increase in light vehicle production compared to calendar year 2021 and expects an 8% increase for fiscal 2023 compared to fiscal 2022. For fiscal 2022, Gentex expects revenues in the range of $1.87 billion to $1.97 billion with a gross margin in the range of 33% to 34%. For fiscal 2023, Gentex expects revenue to be about 15%-20% higher than the updated 2022 revenue estimates of $1.87-$1.97 billion. Gentex remains cash rich and debt-free as of quarter end. The company did not repurchase any shares of its common stock during the quarter as they focused on spending capital on raw material inventory to help fulfill high customer demand. Gentex intends to repurchase additional shares of its common stock in the future in support of the previously disclosed capital allocation strategy. While new component shortages, customer order changes and volatility are expected to continue throughout the rest of 2022 and into 2023, Gentex is encouraged that the overall backdrop in the industry should lead to increased demand in the automotive market over the next 12-18 months.

Thursday, July 21, 2022

Roche-RHHBY reported first half 2022 sales increased 5% to CHF 32.3 billion with net income increasing a healthy 12% to CHF 9.2 billion and EPS up 16%, on fewer shares outstanding, to CHF 10.54. Pharmaceuticals Division sales increase 3% to CHF 22.3 billion on continued strong demand for new medicines to treat severe diseases like hemophilia, cancer and neurological disorders, which more than offset the negative impact from biosimilar competition. Diagnostics Division sales grew 10% to CHF 9.95 billion due to Roche’s ongoing strong base business and solid demand for COVID-19 tests which is expected to decline in the second half of the year. During the first half of 2022, Roche generated CHF 7.8 billion in free cash flow, up 21% year-over-year, boosted by the increase in net income and a patent settlement. Roche returned CHF 7.67 billion to shareholders via dividend payments during the first half of 2022, ending the first half with cash and marketable securities of CHF 6.8 billion, long-term debt of CHF 22.5 billion and shareholders’ equity of CHF 25.2 billion. Management affirmed its 2022 full year guidance with sales growth expected flat to up low-single digits and core EPS growth in the low- to mid-single digits.  Drivers of full year sales include accelerating growth in new pharmaceutical products and strong growth in the base diagnostic business, partially offset by about CHF 2.5 billion sales erosion from biosimilars and about CHF 5 billion from significantly reduced COVID-19 sales. Leadership expects further dividend increases in Swiss francs. 


Tractor Supply-TSCO rang up record second quarter results with sales increasing 8% to $3.9 billion, net income plowing ahead 7% to $396 million and EPS up 11% to $3.53. Comparable store sales increased 5.5%, as compared to an increase of 10.5% in the prior year’s second quarter. Comparable store sales were driven by comparable average ticket growth of 7.5%, offset by a decrease in comparable average transaction count of 2%. Gross profit increased 7.7% to $1.39 billion and gross margin decreased 24 basis points to 35.5% from 35.8% in the prior year's second quarter. The Company's price management actions and other margin driving initiatives were able to offset most of the impact from significant product cost inflation pressures and higher transportation costs. In addition, Tractor Supply experienced the largest E-Commerce quarter in net sales in company history. During the first half of the year, free cash flow decreased 39% to $360 million, primarily due to double-digit growth in inventories. During the second quarter, the company returned $290.8 million to shareholders through share repurchases of $188.2 million at an average cost per share of $209.11 and cash dividends totaling $102.6 million. During the second quarter of 2022, the company opened 13 new Tractor Supply stores. Tractor Supply ended the quarter with $530.8 million in cash and investments and $987 million in long-term obligations on its sturdy balance sheet. Given the robust first half results, Tractor Supply upped its guidance with sales now expected in the $13.95 billion to $14.05 billion range. Comparable store sales are now expected to increase between 5.2% and 5.8%, up from prior guidance of 3% to 4.5%. EPS is now expected in the range of $9.48 to $9.60, up from previous guidance of $9.20 to $9.50. Management anticipates current high inflation and a volatile environment to persist for the remainder of the year, but if there is a recession, management expects it to be mild.

Wednesday, July 20, 2022

SEI Investments-SEIC reported second quarter revenues increased 1% to $481.7 million with net earnings falling 17% to $111.3 million and EPS declining 13% to $0.81. Assets under management increased 1% to $403.6 billion on a $60 billion jump in collective trust fund programs deposited at the end of the quarter. Expenses increased 8%, primarily due to increased personnel costs and the impact of inflation on wages and services, which resulted in a 450 basis point drop in operating margins to 24.1%. In June, SEI Investments initiated an enhanced voluntary separation program to long-tenured employees. As a result, the company expects to record a $54.0 million and $58.0 million charge in the third quarter. During the second quarter, SEI Investments generated cash flow from operations of $70.2 million, or $0.51 per share, and free cash flow of $52.4 million. This compares to last year’s second quarter cash flow from operations of $188.4 million, or $1.31 per share, and free cash flow of $171.3 million. The company repurchased 2.0 million shares during the second quarter for $109.3 million at an average price of $55.48 per share. SEI Investments ended the quarter with $771.7 million in cash, no long-term debt and $1.9 billion in shareholders’ equity on its strong balance sheet.


Tuesday, July 19, 2022

Johnson & Johnson-JNJ reported second quarter sales increased 3% to $24 billion with net income and EPS both declining 23% to $4.8 billion and $1.80, respectively. Adjusting for one-time items, adjusted EPS increased 4.4% to $2.59. By segment, Consumer Health and MedTech sales both declined 1% to $3.8 billion and $6.9 billion, respectively, due primarily to foreign exchange headwinds.  Pharmaceutical sales increased 7% to $13.3 billion during the quarter driven by double-digit growth in Infectious Disease and Oncology products. JNJ continues to generate strong free cash flow which approximated $8 billion during the second quarter. JNJ ended the quarter with zero net long-term debt on its strong balance sheet. A key priority for deploying cash is the dividend with $3 billion paid in dividends during the quarter and $5.8 billion paid year-to-date.  JNJ also invested $3.7 billion in R&D during the quarter to advance its promising pipeline of new products. For the full-year, management trimmed its outlook primarily due to foreign exchange headwinds and is expecting reported sales to increase 2.1%-3.1% to a range of $93.3 billion to $94.3 billion with adjusted EPS expected in the range of $10.00  to $10.10 as operating margins remain relatively flat due to prolonged inflationary pressures..

Monday, July 18, 2022

Ross Stores-ROST recently opened 21 Ross Dress for Less® ("Ross") and eight dd's DISCOUNTS® stores across 12 different states in June and July. These new locations are part of the Company's plans to add approximately 100 new stores – 75 Ross and 25 dd's DISCOUNTS – during fiscal 2022. Looking ahead, the company remains confident in its ability to grow to at least 2,900 Ross Dress for Less and 700 dd's DISCOUNTS locations over time. Together, Ross Dress for Less and dd's DISCOUNTS currently operate a total of 1,980 locations in 40 states, the District of Columbia, and Guam.

Friday, July 15, 2022

UnitedHealth Group-UNH reported second quarter revenues rose a healthy 13% to $80.3 billion with net income and EPS each up nearly 20% to $5.2 billion and $5.34, respectively. Well-balanced revenue growth during the quarter included double-digit growth at both Optum and UnitedHealthcare. Total people served by UnitedHealthcare has grown by over 600,000 in 2022, including 280,000 in the second quarter. Optum Health revenue per consumer served increased 30%, driven by growth in the number of people served under value-based care arrangements and continued expansion of the care services offered. In addition, Optum Insight’s revenue backlog increased by $2.3 billion and Optum Rx’s revenue grew 10% during the quarter. Cash flows from operations during the second quarter were $6.9 billion- or 1.3 times net income. Free cash flow increased 5% during the first half of the year to $10.9 billion with the company returning $7.9 billion to shareholders through dividends of $2.9 billion and share repurchases of $5 billion. UnitedHealth Group increased their dividend by 14% in June 2022. Return on equity during the second quarter of 27.9% reflected the company’s sustained earnings growth profile and efficient capital structure. The company ended the quarter with $70.4 billion in cash and investments, $45.7 billion in long-term debt and $76.2 billion in shareholders’ equity on its healthy balance sheet. Based upon first half performance and growth expectations, management raised its full year net earnings outlook to $20.45 to $20.95.

Thursday, July 14, 2022

Berkshire Hathaway-BRKB purchased another 4.3 million shares of Occidental Petroleum for about $250 million, giving it a 19.2% stake in the oil company. Berkshire now owns 179.4 million Occidental common shares worth about $10.4 billion.


Wednesday, July 13, 2022

Fastenal-FAST reported second quarter sales increased 18% to $1.7 billion with net income and EPS up 20% to $287.1 million and $0.50, respectively. The overall impact of product pricing on net sales in the second quarter was 660 to 690 basis points compared to the second quarter of 2021, reflecting actions taken over the last 12 months to mitigate the impact of marketplace inflation for products, particularly fasteners and transportation services. These efforts have allowed the company to sustain gross margin despite still-elevated material and transportation costs. Fastenal did not take any broad price increases in the second quarter but benefited from carryover from actions taken in the first quarter. Daily sales to manufacturing customers increased 23.1% and daily sales to non-residential construction customers increased 10.8% during the quarter. By segment, fasteners daily sales increased 21%, representing 34.6% of net sales during the quarter. Safety product daily sales increased 13.8% and represented 20.3% of net sales. Other products daily sales increased 17% representing 45.1% of sales during the quarter. Fastenal signed 102 new Onsite locations during the quarter, bringing the total to 1,501 active sites, up 13.5% from last year. This marks the first time that Fastenal has added over 100 Onsite locations in back-to-back quarters. Daily sales through Onsite locations increased more than 20%, primarily due to improved business activity from Onsite customers. Daily sales through Fastenal Managed Inventory (FMI) devices grew 36.8% for second-quarter 2022. Fastenal’s digital footprint represents 47.9% of sales, an increase from 41.4% of sales last year. During the second quarter, free cash flow decreased 24% to $104 million. Cash flow was impacted by higher working capital needs, which reflected significant product cost inflation and efforts to support customer growth. During the quarter, the company returned $227.8 million to shareholders through dividend payments of $178.5 million and share repurchases of $49.3 million. The board declared a $.31 dividend to be paid on August 24 and authorized repurchases by the company of up to an additional 8 million shares of its common stock. Fastenal ended the quarter with $248 million in cash, $310 million in long-term debt and $3.2 billion in shareholders’ equity on its sturdy balance sheet. Looking ahead to the remainder of the year, Fastenal will continue to take actions aimed at mitigating the impact of product and transportation cost inflation should the need arise. Despite still tight and long supply chains, Fastenal’s ability to source products is less chaotic. The company is still seeing healthy demand and strong customer backlogs, making them confident that the future looks bright. Fastenal is seeing the pandemic enter the endemic stage as severe travel curtailments have lifted. While hiring remains challenging, trends in applications received have improved. Fastenal continues to expect capital spending in the range of $180 million to $200 million in 2022.

T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.31 trillion as of June 30, 2022. This represents a 22% decline since year end.



Confirming a slowdown in hiring, Alphabet-GOOGL CEO, Sundar Pichai, said “The uncertain global economic outlook has been top of mind. Like all companies, we're not immune to economic headwinds. Because of the hiring progress achieved so far this year, we'll be slowing the pace of hiring for the rest of the year, while still supporting our most important opportunities. For the balance of 2022 and 2023, we'll focus our hiring on engineering, technical and other critical roles, and make sure the great talent we do hire is aligned with our long-term priorities.”


Tuesday, July 12, 2022

PepsiCo-PEP reported second quarter sales bubbled up 5% to $20.2 billion with net income and EPS down 39% to $1.4 billion and $1.03, respectively. The decline in earnings reflects the unfavorable impact of $1.4 billion in non-cash impairment charges related to the Russia-Ukraine conflict, the decision to sell or discontinue certain non-strategic brands in the Latin America division, and the decision to terminate agreement to distribute Bang Energy drinks. Organic revenues increased 13% and core constant currency EPS was up 10%. During the quarter, PepsiCo’s North American Frito-Lay and Quaker Foods businesses both delivered double-digit revenue growth as more consumers are eating at home. PepsiCo’s North American beverage business declined 1% but delivered 9% organic revenue growth as category growth and consumer demand remain robust. PepsiCo’s International snack business accelerated 20% organically and the International beverage business delivered 7% organic growth. PepsiCo increased year-over-year prices on average by 12% to help offset the rising costs of trucking, packaging and agricultural commodities. Even with the rising prices, consumers are continuing to buy treats like soda and chips, reflecting strong brand loyalty to PepsiCo products. During the first half of 2022, PepsiCo generated $382 million in free cash flow with the company returning $3.7 billion to shareholders through dividends of $3 billion and share buybacks of $700 million. PepsiCo ended the quarter with $5.7 billion in cash and investments, $33.2 billion in long-term debt and $18.5 billion in shareholders’ equity. For the full 2022 year, PepsiCo now expects revenue growth of 10%, versus prior guidance of 8%, and constant currency EPS growth of 8%. Core EPS is expected to be $6.63 compared to $6.26 in 2021. PepsiCo expects to return $7.7 billion to shareholders during 2022, mainly through dividend payments.

Thursday, July 7, 2022

Berkshire Hathaway-BRKB bought nearly 22 million additional shares of Occidental Petroleum for about $1.28 billion, increasing its stake in the company to more than 18%. If Berkshire reaches a 20% stake in Occidental, it likely will adopt the so-called equity method of accounting for the stake and reflect a proportional share of Occidental’s earnings in its results. That would mean a $2 billion annualized lift to Berkshire’s reported profits with Occidental expected to earn about $10 billion after taxes this year. 

According to Mastercard SpendingPulseTM, which measures in-store and online retail sales across all forms of payment, U.S. consumer retail spending, excluding automotive, increased +9.5% year-over-year in June. Rising prices—particularly for necessities such as food and fuel—were a contributing factor. Excluding auto and gas, in-store spending was up +11.7% in June, and while e-commerce grew at a slower pace (+1.1%), sales for e-commerce remain roughly double June 2019 levels. As inflation persists, consumers are paying more for essentials. Two of the categories that have higher inflation have seen a lift in sales: June sales for Fuel & Convenience are up +42.1% and Grocery is +14%. Meanwhile, discretionary spending continued to drive growth across the fashion-forward sectors in June, including Jewelry +16.2% and Department Stores +8.6%.  With summer in full swing, consumers continue to spend on travel experiences due to strong demand with Airline and Lodging  both up +18.2%.

 

Wednesday, June 29, 2022

Paychex-PAYX reported strong fourth quarter results as revenues rose 11% to $1.1 billion, net income increased 13% to $296 million and EPS was up 12% to $.82. Double-digit growth during the fourth quarter was driven by a record level of new annualized revenue sold and client retention remained above pre-pandemic levels. Success in these areas resulted in Paychex achieving several milestones including over 730,000 total payroll clients and over 100,000 retirement clients. For the full fiscal 2022 year, Paychex reported revenues increased 14% to $4.5 billion, while net income and EPS both jumped 27% to $1.4 billion and $3.84, respectively. Return on shareholders’ equity was a superb 45% for the year. The company maintains a solid balance sheet with $1.2 billion in cash and investments, $798 million in long-term debt and $3.1 billion in shareholders’ equity. Free cash flow increased 20% during the year to $1.4 billion. The company raised the quarterly dividend 20% to $.79 per share, paying cumulative dividends of $2.77 per share totaling $1 billion, resulting in a dividend payout ratio of 72% for the year. In addition, Paychex repurchased $145.2 million of its common stock for an average price of $121 per share. Paychex is well positioned for growth in fiscal 2023 with total revenue anticipated to grow approximately 7% to 8% with adjusted EPS growth of 9%-10%. None of Paychex’s business indicators are currently pointing to recession given the strong employment picture.

Monday, June 24, 2022

Nike-NKE reported fourth quarter revenues decreased 1% to $12.2 billion with earnings decreasing 5% to $1.4 billion and EPS down 3% to $0.90. Fourth quarter results included non-recurring charges totaling approximately $150 million, associated with the deconsolidation of Russian operations and the transition of businesses in Argentina, Chile and Uruguay to strategic distributor models. Strong digital growth continued during the quarter as NIKE Direct revenues grew 7% and NIKE Brand Digital grew 15%. Both were driven by growth in APLA, North America and EMEA and partially offset by a decline in Greater China. For the year, Nike reported sales of $46.7 billion, up 5% from last year, with earnings up 6% to $6 billion and EPS up 5% to $3.75. During fiscal 2022, Nike generated a winning 40% return on shareholders’ equity. The company maintains a healthy balance sheet with nearly $13 billion in cash and investments, $8.9 billion in long-term debt and $15.2 billion in shareholders’ equity. Nike has a strong track record of investing to fuel growth and running up shareholder returns through share repurchases and dividends, including 20 consecutive years of dividend increases. During 2022, Nike returned $5.8 billion to shareholders through dividend payments of $1.8 billion and share repurchases of $4 billion at an average cost per share of $146.52. The company announced its board of directors has authorized a new four-year, $18 billion program to repurchase shares of its common stock.

Thursday, June 23, 2022

FactSet-FDS reported third quarter revenue rose 22% to $488.8 million with net income and EPS each dipping 26% to $74.9 million and $1.93, respectively. The increase in revenue was primarily due to the acquisition of CUSIP Global Services (CGS) in March 2022 and higher sales of research and advisory and analytics solutions. FactSet has had over 40 consecutive years of revenue growth. The decrease in earnings was primarily due to real estate impairment charges, amortization of intangible assets and cost related to the CGS acquisition. Operating margin declined to 19.9% compared with 29.5% in the prior year period because of charges related to vacating certain leased office space as well as amortization of intangible assets and costs related to the CGS acquisition. Adjusted operating margin improved to 36.6% compared to 31.6% in the prior year period, due to the strong performance of CGS. Annual Subscription Value (ASV) plus professional services was $1.9 billion as of 5/31/22.  Annual ASV retention was greater than 95%, reflecting the strength of the company’s subscription-based model. Client count during the quarter increased by 147 to 7,319 with user count up 2,357 to 173,698. FactSet has been able to increase client productivity by 20%, giving the company strong pricing power in the industry. Operating margin declined to 19.9% compared with 29.5% in the prior year period because of charges related to vacating certain leased office space as well as amortization of intangible assets and costs related to the CGS acquisition. Adjusted operating margin improved to 36.6% compared to 31.6% in the prior year period, due to the strong performance of CGS. Free cash flow year-to-date increased 9% to $350.9 million and the company returned $92.3 million to shareholders through dividend payments. FactSet suspended their share repurchase program until at least the second half of fiscal 2023 to prioritize the repayment of debt related to the CGS acquisition. During the past quarter, the company increased its dividend 8.5%, marking the 22nd consecutive year of dividend increases. FactSet reaffirmed their full fiscal 2022 outlook, expecting revenue in the range of $1.8 billion to $1.83 billion and EPS in the range of $9.75 to $10.15.

Accenture-ACN reported fiscal third quarter revenues rose 22% to $16.2 billion with operating income rising 23% to $2.6 billion as operating margin expanded 10 basis points. Accenture continues to expect operating margin for the full year to expand 10 basis points to 15.2% Net income increased 15% to $1.8 billion, and EPS was up 16% to $2.79. EPS results included a $.15, or 6% negative impact, related to the disposition of the company’s business in Russia. These very strong financial results reflected continued broad-based demand across all the company’s markets, services and industries, with all segments generating double-digit growth. Accenture is growing three time higher than the market and gaining significant market share. New bookings for the quarter were $17 billion, the company’s second-highest ever, and a 10% increase in U.S. dollars and a 15% increase in local currency from the prior year period. Consulting bookings were $9.1 billion, or 54% of total new bookings, and outsourcing bookings were $7.8 billion, or 46% of total new bookings, with strong bookings expected to continue into the fourth quarter. Free cash flow increased 28% in the third quarter to $2.9 billion. Year-to-date, free cash flow was $5.2 billion with the company paying $1.8 billion in dividends and repurchasing $3.5 billion of its common stock, including 3.1 million shares repurchased in the third quarter at a cost of $972 million or about $313.54 per share. Accenture has about $3.7 billion remaining authorized for future share repurchases. Accenture raised its outlook for revenue growth for the full fiscal 2022 year to be in a range of 25.5% to 26.5% with EPS expected in the range of $10.61 to $10.70, an increase of 21% to 22% over adjusted EPS in the prior year period. The company continues to expect free cash flow for fiscal 2022 to be in the range of $8.0 billion to $8.5 billion. The company continues to expect to return $6.5 billion in cash to shareholders through dividends and share repurchases. Merger and acquisition activity is expected to be $2.5 billion in fiscal 2022 with an additional $1 billion in acquisitions expected to be closed in the first fiscal quarter of 2023. Accenture is in a good position to help clients in the event of a recessionary environment as the company helps clients leverage technology to grow and reduce costs.


Berkshire Hathaway-BRKA disclosed the purchase of approximately 9.55 million shares of Occidental Petroleum worth about$528.8 million during June 17-June 22, 2022, period. Berkshire owns about 15% of Occidental.

Monday, June 13, 2022

Oracle-ORCL reported fourth revenues increased 5% to $11.8 billion with net income decreasing 21% to $3.2 billion and EPS down 15% to $1.16. Total Cloud revenue jumped 19% to $2.9 billion. For the fiscal year ended May 31, revenues increased 5% to $42.4 billion with net income down 51% to $6.7 billion and EPS down 47% to $2.41 due in part to litigation charges. During fiscal 2022, free cash flow decreased to $5 billion with the company returning nearly $20 billion to shareholders through dividend payments of $3.5 billion and share repurchases of $16.2 billion. Oracle ended the fiscal year with $21.9 billion in cash and investments and $72.1 billion in long-term debt. The Cerner acquisition is expected to add $15 billion of debt to the balance sheet subsequent to year end.  Management expects growth to accelerate during 2023 and beyond as the fast-growing cloud business becomes a larger portion of the business. For the first quarter, Oracle expects constant currency revenue growth of 20% to 22% with constant currency EPS of $1.09 to $1.13. In addition, Oracle expects cloud revenue, including the Cerner acquisition, to grow between 47% to 50% in constant currency for the first quarter and expects its cloud business to organically grow more than 30% in constant currency in fiscal 2023. “We believe that this revenue growth spike indicates that our infrastructure business has now entered a hyper-growth phase. Couple a high growth rate in our cloud infrastructure business with the newly acquired Cerner applications business—and Oracle finds itself in position to deliver stellar revenue growth over the next several quarters,” said Oracle CEO, Safra Catz.

Wednesday, June 8, 2022

Brown-Forman-BFB reported fourth quarter revenue rose 23% to $996 million with net income and EPS each up 26% to $151 million and $.31, respectively. For the full fiscal 2022 year, revenues rose 14% to $3.9 billion. Net income and EPS each declined 7% to $838 million and $1.74, respectively, primarily due to higher income taxes. Fiscal 2021 earnings included an estimated $.20 per share benefit from the gain on sale of the Early Times, Canadian Mist and Collingwood brands. The company delivered strong, broad-based reported net sales growth across all geographic clusters and the Travel Retail Channel. Supply Chain disruptions had an adverse effect on results. Jack Daniel’s Tennessee Whiskey fueled overall company performance with 20% net sales growth. Premium bourbons, led by Woodford Reserve and Old Forester, grew net sales 22% and the tequila portfolio grew net sales by 22%, driven by Herradura and el Jimador.  Return on shareholders’ equity for the year was a bubbly 31%. Free cash flow during the year increased 6% to $798 million with the company paying $831 million in dividends, which included a special cash dividend of $1 per share. Brown-Forman has paid dividends for 78 consecutive years and has increased the dividend for 38 straight years. The company anticipates continued growth in fiscal 2023 despite global macroeconomic and geopolitical uncertainties. Accordingly, management expects mid-single digit growth in underlying sales and operating income. In addition, considering the effect of inflation and the removal of the EU and UK tariffs on American Whiskey, management projects gross margin to expand slightly with capital expenditures in the range of $190 million to $210 million.

Monday, June 6, 2022

Tractor Supply Company-TSCO currently forecasts second quarter net sales growth of 8% and comparable store sales growth of 5% as compared to the second quarter of fiscal 2021. Diluted earnings per share for the second quarter of fiscal 2022 is forecasted to be $3.48 or greater. "Tractor Supply is on track to deliver record results in the second quarter on both sales and earnings. As we moved through April and the weather has normalized, we have experienced strong sales of our seasonal products. The strength of our needs-based, demand-driven business continues as the team is effectively managing inventory levels, inflationary costs, and pressures across the global supply chain. We believe we are well positioned to have a strong second quarter," said Hal Lawton, Tractor Supply’s President and Chief Executive Officer.

Fastenal-FAST reported May revenues increased 23.5% to $589.2 million with daily sales up 17.6% to $28.1 million. Daily sales growth by geography was led by 19.1% growth in the United States. Daily growth by end market was 22.4% growth in manufacturing and 10.7% growth in non-residential construction. Daily sales growth by product line was led by 20% growth in fasteners followed by 16% growth in both safety and other products. Fastenal reported that 87% of its Top 100 national accounts grew during the month with 72% of its public branches growing. Total headcount increased 5.8% to 21,444 as of the end of May.

Thursday, June 2, 2022

Microsoft-MSFT lowered its fourth quarter outlook due to larger than expected foreign exchange headwinds and now expects revenue for the quarter to be between $51.94 billion and $52.74 billion, down from its prior range of $52.40 billion to $53.20 billion. It also cut the EPS view to between $2.24 and $2.32 per share from a prior expectation of between $2.28 and $2.35 per share.

Hormel Foods-HRL reported second quarter sales rose 19% to a record $3.1 billion, marking the sixth consecutive quarter of record sales. Net earnings and EPS each increased 14% to $262 million and $0.48, respectively. By segment, Refrigerated Foods sales were up 11% to $1.6 billion, driven by strong results in the foodservice business, more than offsetting higher operational and logistic costs. Grocery Product sales were up 7% to $874 million, led by the inclusion of the Planters snack nuts business. Jennie-O Turkey Stores sales jumped 16% to $407 million, led by foodservice, whole bird and retail sales. In addition, higher commodity prices and foodservice sales drove substantial improvement in segment profit. International & Other sales decreased 3.4% to $171 million, because of current export logistics challenges and lower commodity sales due to the company’s new pork supply agreement. Retail sales in China improved as pantry loading and sales to food security programs in response to COVID-related lockdowns helped offset declines. Free cash flow increased 62% during the first half to $449 million with the company paying $274 million in dividends. For fiscal 2022, Hormel reaffirmed its sales guidance with sales expected in the range of $11.7 billion to $12.5 billion and narrowed their earnings guidance with EPS now expected in the range of $1.87-$1.97.

Wednesday, June 1, 2022

Oracle-ORCL announced that all required antitrust approvals have been obtained for its proposed all-cash $28.3 billion acquisition of Cerner, including European Commission clearance. Cerner is a leading provider of digital information systems used within hospitals and health systems to enable medical professionals to deliver better healthcare to individual patients and communities. Oracle expects to complete the offer on June 6, 2022. "We expect this acquisition to be substantially accretive to Oracle's earnings on a non-GAAP basis in fiscal year 2023," said Safra Catz, Chief Executive Officer, Oracle. "Healthcare is the world's largest and most important vertical market—$3.8 trillion last year in the United States alone. We expect Cerner to be a huge growth engine for years to come."

3M-MMM expects a $300 million hit to revenue in the current quarter as COVID lockdowns in China impacted manufacturing operations in the country. The company expects an impact of 30 cents to per-share earnings in the second quarter from China and foreign exchange headwinds. China's "zero Covid" policy to combat the Omicron variant triggered fresh lockdowns and shut factories, hurting the sales prospects of businesses worldwide as consumers cut back spending in the world's second-biggest economy. 3M also noted impacts to the automotive and electronics end markets due to chip shortages driven by supply chain snags. Still, 3M expects some recovery in June despite high inflation. 3M is managing inflationary pressures with price and sourcing actions and productivity and yield improvements.

 The Board of Directors of SEI Investments Company-SEIC approved an increase in its stock repurchase program by an additional $200 million, increasing the available authorization under the program to approximately $264 million.

 

Thursday, May 26, 2022

Ulta Beauty-ULTA reported very pretty results for the first fiscal quarter with revenues rising 21% to $2.3 billion, net income jumping 44% to $331 million and EPS climbing 54% to $6.30. Comparable sales increased 18%, driven by a 10% increase in transactions and a 7.3% increase in average ticket as customers are no longer hiding behind masks. These exceptional results were better than expected, supported by double-digit comparable sales growth across all major categories of cosmetics, haircare products, skincare and fragrances with prestige cosmetics gaining market share. Ulta successfully navigated the challenges of cost pressures, supply constraints and a tight labor market and delivered record operating margins of 18.7% which expanded 240 basis points over the prior year quarter. Free cash flow increased 20% to $355 million with the company repurchasing 331,834 shares of its common stock for $132.8 million at an average price of about $400.24 per share. The company has $1.87 billion remaining authorized for future share repurchases with plans to repurchase approximately $900 million of its stock in fiscal 2022. Given the strong start to the first quarter, Ulta Beauty increased its sales and earnings outlook for fiscal 2022 with revenues expected in the range of $9.35 billion to $9.55 billion and EPS in the range of $19.20 to $20.10. Ulta continues to plan on 50 net new store openings with capital expenditures in the range of $375 million to $425 million.

Wednesday, May 25, 2022

Baxter-BAX provided new long-range financial guidance for 2022 to 2025. Baxter expects constant currency sales growth of 4% to 5% on a compounded annual basis from 2022 through 2025. The company expects 2025 adjusted operating margin to expand by 350 to 400 basis points as compared to expected year-end 2022. Baxter anticipates free cash flow conversion of more than 80% by 2025. Baxter expects the acquisition of Hillrom to contribute up to $350 million of annual pre-tax cost synergies by 2025. In addition, the company expects to realize up to $200 million in incremental annual revenue synergies by 2025, reflecting the impact of market expansion across the broader portfolio as well as new innovation fueled by Baxter’s expanded capabilities following the acquisition. A strategic approach to capital allocation allows Baxter to continue investing in innovation and growth while returning value to investors.