HI-Quality Company Updates

Wednesday, Nov. 30, 2022

Hormel Foods-HRL reported fourth quarter sales declined 5% to $3.3 billion with net earnings down 1% to $281.7 million with EPS remaining flat at $.51. Net sales decreased due to reduced commodity sales and the impact from an additional week of sales last year. EPS was comparable with record results last year, driven by excellent growth in the Jennie-O Turkey Store segment. Gross profit margin improved during the quarter and full-year, driven by Jennie-O Turkey Store and strategic pricing actions.  For the full fiscal 2022 year, revenue rose 9% to $12.5 billion with earnings and EPS increasing 10% to $999.9 million and $1.82, respectively. Return on equity for the year was 12.8%. Free cash flow increased 11% during the year to $857 million with the company paying $557.8 million in dividends. Hormel recently increased its dividend 6% to an annual dividend of $1.10. Hormel has increased the dividend 57 consecutive years and has paid a dividend for 94 years without interruption, compounding 12% over the last 10 years. Management is expecting the volatile, complex, and high-cost environment to continue in fiscal 2023. However, management believes higher levels of brand investment, increased production capacity and initial GoFWD actions will drive top-line growth next year. In fiscal 2023, Hormel expects net sales in the range of $12.6 billion to $12.9 billion, representing 1% to 3% growth with EPS expected in the range of $1.83 to $1.93, representing 1% to 6% growth. In addition, Hormel expects capital expenditures to increase 25% to $350 million, which includes a recently approved investment to support growth in China.

Monday, Nov. 28, 2022

UnitedHealth Group-UNH announced revenues for 2022 are now expected to be approximately $324 billion. Net earnings are expected to be $20.85 to $21.05 per share and adjusted net earnings of $21.85 to $22.05 per share.  Adjusted net earnings only excludes the after-tax non-cash amortization expense pertaining to acquisition-related intangible assets. UnitedHealth Group  also introduced its 2023 outlook which includes revenues of $357 billion to $360 billion, net earnings of $23.15 to $23.65 per share, and adjusted net earnings of $24.40 to $24.90 per share. Cash flows from operations are expected to range from $27 billion to $28 billion.

Tuesday, Nov. 22, 2022

Maximus-MMS reported fourth quarter revenues rose 6% to $1.2 billion with net income increasing 33% to $69 million and EPS up 36% to $1.13. For the full fiscal year, revenues increased 9% to $4.6 billion with net income and EPS down 30% to $203.8 million and $3.29, respectively.  Adjusting for COVID-19 response work, normalized organic growth was approximately 18% over the prior year and driven by contributions from all three business segments. Signed contract awards during the year totaled a record $10.5 billion with contracts pending (awarded but unsigned) of $800 million. These awards include the previously announced Centers for Medicare & Medicaid Services Contract for contact Center Operations valued at $6.6 billion. The sales pipeline as of 9/30/22 was $30.7 billion (comprised of $3.4 billion in proposals pending, $3.1 billion in proposals in preparation and $24.2 billion in opportunities tracking). During fiscal 2022, Maximus generated a 13% return on shareholders’ equity and free cash flow of $234 million, down 51% compared to the prior year which benefited from short-term COVID-19 response work. During the year, the company paid $68.8 million in dividends and repurchased $96 million of its common stock.  For fiscal 2023, Maximus expects revenues in the range of $4.75 billion to $4.9 billion and adjusted EPS in the range of $3.70-$4.00. In addition, Maximus expects free cash flow to range between $225 million and $275 million.

Monday, Nov. 21, 2022

The Board of Directors of Hormel Foods-HRL announced a 6 percent increase to the annual dividend to shareholders, marking the 57th consecutive annual dividend increase. Since becoming a public company in 1928, Hormel Foods Corporation has paid a regular quarterly dividend without interruption.

Friday, Nov. 19, 2022

Brown-Forman-BFB announced that its Board of Directors approved an increase of 9% to the quarterly cash dividend from $0.1885 per share to $0.2055 per share on its Class A and Class B Common Stock. As a result, the indicated annual cash dividend will rise from $0.7540 per share to $0.8220 per share. The dividend is payable on January 3, 2023, to stockholders of record on December 2, 2022. Brown-Forman, a member of the prestigious S&P 500 Dividend Aristocrats index, has paid regular quarterly cash dividends for 79 years and has increased the cash dividend for 39 consecutive years.

Thursday, Nov. 17,  2022

Ross Stores-ROST rang up $4.57 billion in third quarter sales, even with last year, with net earnings off 11.2% to $342 million and EPS down 8.3% to $1.00. Comparable store sales, which improved steadily during the quarter, declined 3% on top of a robust 14% gain during the same period last year. Operating margin during the quarter was 9.8% compared to 11.4% last year, reflecting the decline in comparable store sales as well as pressure from higher markdowns and unfavorable timing of packaway-related costs. During the quarter, the company added 28 new Ross Stores and 12 new dd's DISCOUNTS locations and expects to end 2022 with 1,693 Ross and 322 dd's DISCOUNTS locations.  During the first nine months of the year, Ross Stores generated $54.8 million in free cash flow with the company returning $1.043 billion to shareholders through dividends of $324.6 million and share repurchases of $718.7 million including $244 million repurchased during the third quarter at an average cost per share of $87.14. The company remains on track to buy back a total of $950 million in 2022 under its two-year $1.9 billion repurchase program that extends through 2023. Ross Stores ended the quarter with $3.9 billion in cash, $2.6 billion in long-term debt and $4.1 billion in shareholders’ equity on its dressy balance sheet. Looking ahead, management expects a very promotional holiday selling season with ongoing inflationary headwinds to pressure its low-to-moderate income customers. However, given favorable sales and earnings comparisons in the fourth quarter, third quarter sales momentum and improved holiday assortments, it raised guidance. Fourth quarter same store sales are now expected to be flat to down 2% on top of a 9% gain in the prior year, with earnings per share forecasted in the range of $1.13 to $1.26. Earnings per share for fiscal 2022 are now projected to be in the range of $4.21 to $4.34 versus $4.87 last year on flat to up 3% sales growth. During the conference call, Barbara Rentler, CEO, concluded, “There remains a high level of uncertainty in today’s macroeconomic and geopolitical environment that continues to negatively impact consumer sentiment and demand. However, we remain confident in the off-price business model, which offers both value and convenience. Given consumers’ heightened focus on both of these attributes, it should bode well for our ability to expand our market share and profitability in the future.”


Wednesday, Nov. 16, 2022


TJX Companies-TJX reported sales declined 2.9% to $12.2 billion with net earnings increasing 3.9% to $1.062 billion and EPS up 8.3% to $0.91. U.S. comp store sales declined 2% compared to a 16% increase last year. By division, domestic Marmaxx sales increased 3% to $7.46 billion despite lapping 11% growth last year. Marmaxx’s third quarter sales growth was driven by apparel sales, signaling an increase in the company’s market share. HomeGoods sales declined 14% to $1.95 billion as consumer spending shifted in the pandemic’s aftermath. TJX Canada sales dipped 1% to $1.3 billion and International sales declined 16% to $1.48 billion on foreign currency headwinds. Inventories jumped 26% to $8.3 billion, higher than expected due to early receipt of merchandise as the supply chain continued to improve.  Operating margin improved 20 basis points to 11.2% due to the timing of expenses, most of which will reverse during the fourth quarter.  During the first nine months, TJX generated $1.06 billion in operating cash flow with the company returning $2.8 billion to shareholders through share repurchases of $1.8 billion at an average cost per share of $61.86 and dividends of $1 billion.  TJX ended the quarter with $3.4 billion in cash, $2.9 billion in long-term debt and $5.7 billion in shareholders’ equity on its dressy balance sheet. Management believes the decline in same store sales will reverse during the holiday season with same store sales expected to be flat to up 1% during the fourth quarter. For the full year, EPS are expected in the $2.93 to $2.97 range, up from prior guidance of $2.87 to $2.95. Chief Executive Officer and President, Ernie Herman stated, “Across our geographies, our values and exciting, treasure-hunt shopping experience continued to resonate with consumers throughout the quarter. Looking forward, while not immune to macro factors, we are convinced that our flexible business model and value proposition will continue to be tremendous advantages, as they have been for more than four decades and through many kinds of retail and economic environments.”

Cisco Systems-CSCO reported fiscal first quarter revenues increased 6% to a record $13.6 billion with net income decreasing 10% to $2.7 billion and EPS down 7% to $.65. By segment, product revenue was up 11% and service revenue was flat. Total annualized recurring revenue (ARR) increased 7% to $23.2 billion and product ARR was up 12% year-over-year. Remaining performance obligations (RPO) increased 3% to $30.9 billion and product RPO was up 5% year-over-year. Free cash flow increased 15% to $3.8 billion during the first quarter with the company paying $1.6 billion in dividends and repurchasing $556 million of its commons stock during the quarter at an average price of $43.76 per share. Cisco has $14.7 billion remaining authorized for future share repurchases. Cisco maintains a strong balance sheet and ended the quarter with $19.8 billion in cash and investments, $7.6 billion in long-term debt and $40.3 billion in shareholders’ equity. Given the strong first quarter results, a significant backlog, strong RPO and easing supply constraints, management raised guidance for fiscal 2023. Management expects second quarter revenue growth of 4.5% to 6.5% and EPS to be in the range of $.59 to $.64. For the full fiscal year, Cisco now expects revenue growth of 4.5% to 6.5% and EPS to be in the range of $2.63 to $2.76.

 Tuesday, Nov. 15, 2022

NIKE-NKE announced that its Board of Directors approved an 11% increase in its quarterly cash dividend to $0.34 per share, marking the company’s 21st consecutive year of increasing dividend payouts.  

According to Mastercard SpendingPulseTM, U.S. retail sales excluding automotive is expected to grow +15% on Black Friday compared to last year. Mastercard SpendingPulse measures in-store and online retail sales across all forms of payment and is not adjusted for inflation. This Black Friday, Department Store sales are anticipated to be up nearly +25% year-over-year as consumers shop online and in-store at these one-stop shops for all the gifts on their holiday shopping list. Restaurants are expected to experience +35% year-over-year growth on Black Friday as consumers prioritize experiences and dining out with friends and family. Travel companies are also getting in on the promotional holiday. Separate from total retail sales, Airlines and Lodging are expected to experience double-digit growth on Black Friday as consumers plan their next getaway. As anticipated, early holiday promotions drove consumers online and into stores. According to Mastercard SpendingPulse, October U.S. retail sales excluding automotive increased 9.5% year over year and 23.6% compared to October 2019. E-commerce sales in October grew 12.7% year over year. Experiential sectors including Restaurants, Airlines and Lodging all saw double-digit growth compared to both 2021 and 2019. "In October we saw the strength in the labor market continue to support consumer purchasing power," said Michelle Meyer, U.S. Chief Economist, Mastercard Economics Institute. "Coupled with heavy online promotions, consumers got a head start on their holiday shopping, fueling another strong month of retail sales."

 

Monday, Nov. 14, 2022

Berkshire Hathaway-BRKB bought $9 billion of stocks during the third quarter. Warren Buffett added to his large Chevron and Occidental Petroleum positions, while Berkshire established new positions in Taiwan Semiconductor, Louisiana-Pacific and Jeffries Financial Group. He also sold about $5.3 billion of stocks including U.S. Bancorp, Bank of New York Mellon and Store Capital.

Thursday, Nov. 10, 2022

T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.28 trillionas of October 31, 2022, representing a 24% decline since year end.

Wednesday, Nov. 9, 2022

The board of directors of Automatic Data Processing-ADP approved a 20% increase in the quarterly cash dividend to an annual rate of $5.00 per share. The increased cash dividend marks the 48th consecutive year in which ADP has raised its quarterly dividend. In addition, the board of directors of ADP authorized the purchase of $5 billion of its common stock.  

Meta Platforms-META is reducing its workforce by about 13%, or 11,000 employees, across the company’s business segments. The company’s outlook for fourth quarter 2022 revenue of $30-32.5 billion is unchanged. The 2022 and 2023 expense outlooks provided on the third quarter 2022 earnings conference call contemplated the financial impact of the announced layoffs. The 2022 expense outlook of $85-87 billion also remains unchanged and includes the estimated severance-related costs expected to be recorded in the fourth quarter of 2022 as well as the previously announced $900 million in estimated charges related to consolidating office facilities. The estimated impact of charges related to severance in the fourth quarter of 2022, net of reduced accruals for employee costs, is not material. The 2023 expense budget is now expected to be in the range of $94-100 billion, lowered from $96- 101 billion previously. This includes the previously disclosed $2 billion in estimated charges related to consolidating office facilities. The updated range reflects the plan to add fewer employees in 2023 than previously expected. Meta continues to anticipate that Reality Labs operating losses in 2023 will grow significantly year-over-year. In addition, Meta is updating its 2023 capital expenditures outlook to be in the range of $34-37 billion, narrowed from $34-39 billion.

Saturday, Nov. 5, 2002

Berkshire Hathaway-BRKB reported the company’s net worth during the first nine months of 2022 decreased by 10%, or $50.8 billion, to $455.4 billion with book value equal to about $310,661 per Class A share as of 9/30/22.

Berkshire Hathaway reported third quarter revenues increased 9% to $76.9 billion with all business segments reporting revenue growth. Berkshire reported a net loss of $2.7 billion during the third quarter compared to $10.3 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 $10.4 billion, operating earnings jumped 20% to $7.8 billion in the third quarter, which better reflects the underlying strength of the business.

The investment losses were primarily paper losses from changes in unrealized gains of equity holdings during the third quarter given the stock market’s pullback. Berkshire’s five major equity investment holdings which represent about 73% of total equities held, include American Express at $20.5 billion (which charged 17% lower during the first nine months of 2022 or $4.3 billion); Apple at $126.5 billion (which dropped 21.5% during the first nine months or $34.7 billion); Bank of America at $31.2 billion (which declined $14.8 billion in value since year end); and Coca-Cola with the stock dropping 6%, or $1.3 billion, to $22.4 billion at the end of the first nine months of 2022. Chevron rounds out the top five at $24.4 billion after Buffett purchased more than $20 billion of Chevron during the first quarter.

During the third quarter, Berkshire’s insurance businesses generated losses from underwriting of $962 million, which included $2.7 billion from Hurricane Ian, compared to underwriting losses last year of $784 million, which included $1.7 billion in losses from Hurricane Ida and floods in Europe. Underwriting results were also negatively impacted by increases in claims frequencies and severities at GEICO due to significant cost inflation in automobile markets. Insurance investment income increased 21% during the quarter to $1.4 billion, reflecting higher dividend and interest income as interest rates have increased significantly this year. The float of the insurance operations approximated $150 billion as of quarter end, an increase of $3 billion since year end. The average cost of float was 0.24% as the combined insurance operations generated pre-tax operating losses of $358 million during the first nine months of 2022. In October 2022, Berkshire acquired insurer, Alleghany, which will add an estimated $13.5 billion to float.

Burlington Northern Santa Fe’s revenues chugged 16% higher during the third quarter to $6.7 billion, reflecting higher revenue per car/unit, with net earnings declining 6% to $1.4 billion due to lower overall freight volumes and higher average fuel and other operating costs. The volume decreases were in all business segments, except agricultural products, reflecting supply chain disruptions, network challenges, lower demand for crude by rail and lower building products shipments. Rail labor union discussions continue with further announcements expected in November.

Berkshire Hathaway Energy reported revenues rose 7% during the third quarter to $7.5 billion with net earnings rising 6% to $1.6 billion. The earnings increase reflected higher earnings from tax equity investments and from the natural gas pipeline and Northern Powergrid, partly offset by lower earnings from the U.S. regulated utilities and real estate brokerage business.

Berkshire’s Manufacturing businesses reported revenues rose 9% to $19.0 billion with operating earnings up 18% to $2.9 billion for the third quarter. The Buildings Products segment led the way for the quarter with revenues rising 19% to $7.6 billion and operating earnings jumping 48% to $1.2 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, freight, labor and other input costs.

Service and Retailing revenues increased 9% during the quarter to $23.1 billion with pre-tax earnings jumping 19% to $1.3 billion. The Service group led the way as revenue increased 15% to $4.8 billion with pre-tax earnings up 16% to $806 million thanks to strong growth from TTI, reflecting strong demand in nearly all electronic component markets, and the aviation business services due to higher training hours at FlightSafety and significantly higher customer flight hours at NetJets. However, during the third quarter, new orders slowed at TTI in part attributable to inventory levels within the supply chain.

Berkshire’s balance sheet continues to reflect very significant liquidity and a very strong capital base of $455.4 billion as of 9/30/22. Excluding railroad, energy and utility investments, Berkshire ended the quarter with $458.7 billion in investments allocated approximately 66.7% to equities ($306.2 billion), 4.1% to fixed-income investments ($18.6 billion), 22.9% in cash and equivalents ($105.2 billion) and 6.3% in equity method investments ($28.7 billion) which includes 26.5% of Kraft Heinz, 20.9% of Occidental Petroleum and 38.6% in Pilot Travel Centers. Berkshire’s share of Kraft and Pilot earnings and distributions are included in Berkshire’s consolidated financial statements and Occidental’s share will be included in the fourth quarter.

Free cash flow declined 28% during the first nine months of the year to $16.1 billion due to lower earnings and higher capital expenditures. During the first nine months, capital expenditures approximated $10.9 billion, which included $7.9 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 $3.7 billion. During the first nine months of 2022, Berkshire paid cash of $66.2 billion to acquire equity securities and received proceeds of $17.3 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. In June 2022, Berkshire Hathaway Energy (BHE) acquired the BHE common stock held by Greg Abel, Berkshire’s Vice Chairman, for $870 million. Subsequent to quarter end, Berkshire completed its purchase of Alleghany, a property and casualty reinsurance and insurance business, for $11.6 billion in cash. In the first quarter of 2023, Berkshire expects to acquire an additional 41.4% interest in Pilot with the value to be determined based on earnings in 2022 and net debt at year end. Berkshire will become the majority owner of Pilot at that time.

Berkshire repurchases its shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett and Charlie Munger. During the first nine months, Berkshire repurchased $5.2 billion of its common stock, including $1 billion in the third quarter. These repurchases included 1,821 Class A shares purchased at an average price of approximately $424,975 per share during July and September 2022. After quarter end, Berkshire repurchased an additional $500 million of its common stock in October.

On Aug. 16, 2022, the Inflation Reduction Act was signed into law. The 2022 act contains numerous provisions including a 15% corporate alternative minimum tax, expanded tax credits for clean energy incentives and a 1% excise tax on corporate stock repurchases, which all become effective in 2023. Berkshire currently does not expect a material impact on its financial statements from the act.

Friday, Nov. 4, 2022

Fastenal-FAST reported October net sales and average daily sales each increased 13.6% to $603.7 million and $28,750, respectively. Double-digit daily sales growth was generated in North America while the rest of the world declined. Manufacturing sales jumped 19% while non-residential construction sales were up 1%. All product lines generated double-digit sales growth led by Safety products which were up 14.7%. More than 80% of the company’s Top 100 national accounts are growing while 67% of the company’s public branches were growing. Headcount was up 9% to 22,210 at the end of October.

Thursday, Nov. 3, 2022

Starbucks-SBUX reported fourth quarter sales increased 3% to $8.4 billion with net income declining 50% to $878 million and EPS down 49% to $.76. Global comparable store sales increased 7%, driven by an 8% increase in average ticket. U.S. same store comps increased 11%, driven by a 10% increase in average ticket and a 1% increase in comparable transactions. International comparable store sales decreased 5% and China comparable store sales declined 16%, both primarily impacted by a decline in comparable transactions. During the quarter, Active Starbucks Rewards Memberships were up 16% in the U.S. to 28.7 million members. For fiscal 2022, sales increased 11% to a record $32.3 billion with net income and EPS both down slightly over 20% to $3.3 billion and $2.83, respectively. Operating margin decreased 250 basis points to 14.3%, primarily driven by investments and growth in labor including enhanced store partner wages, inflationary pressures, as well as sales deleverage related to COVID-19 restrictions in China. During the fiscal year, Starbucks generated a 11.7% return on assets and $2.6 billion in free cash flow. The company returned $6.3 billion to shareholders through dividend payments of $2.3 billion and share repurchases of $4 billion. The Board of Directors declared a cash dividend of $0.53 per share, payable on November 25, 2022.  During the quarter, the company opened 763 net new stores with China surpassing 6,000 stores, pushing the global store count to record 35,711 stores. Management saw accelerating demand for Starbucks coffee around the world and early evidence of the success of their U.S. Reinvention investments in the fourth quarter. Looking ahead to fiscal 2023, Starbucks expects sales growth of 10% to 12% and EPS growth near the high end of 15% to 20%. In addition, the company expects global comparable store sales growth near the high end of 7% to 9% and global store growth of 7%. Management expects meaningfully higher margins in the second half of 2023, as margin benefits accumulate from the continued reinvention plan coupled with the expected recovery in China.

Wednesday, Nov. 2, 2022

Cognizant Technology Solutions-CTSH reported revenue grew 2.4% to $4.9 billion with net income increasing 15.6% to $629 million and EPS up 18.4% to $1.22. Adjusted EPS, which excludes discrete tax items, increased 10.4% to $1.17. By region, North America revenue increased 3.9%, or 4% in constant currency to $3.6 billion, Europe increased 3.3%, or 10.3% in constant currency, to $884 million and Rest of World revenue increased 2.3%, or 9.3% in constant currency, to $352 million. By business segment, Financial Services revenue dipped 1.5%, up 1.6% in constant currency, to $1.5 billion, driven by digital services among public sector clients in the UK and insurance clients, offset by a 180 basis point negative impact from the sale of the Samlink subsidiary completed during the first quarter. Heath Sciences revenue increased 3.8%, or 5.5% in constant currency, to $1.4 billion, driven by digital services among pharmaceutical and healthcare payor clients. Products & Resources revenue increased 3.7%, or 8.2% in constant currency, to $1.15 billion, driven by digital services among logistics, automotive, consumer goods and travel and hospitality clients. Communications, Media & Technology revenue increased 6%, or 10.4% in constant currency, to $783 million, driven by strength among digital native companies. Trailing 12-month voluntary attrition of 29% reflects continuing challenges related to staffing. However, management continues to focus on attracting, retaining and rallying employees which is expected to drive down attrition during the fourth quarter. Employee attrition along with competition for talent with digital skills led to fulfillment challenges that pressured bookings which declined 2% and represented an in-period book-to-bill of about 1.0x. Trailing 12-month bookings of $23.1 billion represented a book-to-bill of about 1.2x. During the quarter, the company generated $953 million in free cash flow, up 6.2% from last year. Cognizant repurchased $300 million of its shares during the quarter at an average cost of $65.22 per share, leaving $1.1 billion remaining under the repurchase authorization as of September 30, 2022. On November 2, 2022, the company increased its repurchase authorization by $2 billion. During the first nine months of 2022, the company generated $1.6 billion in free cash flow and returned $1.53 billion to shareholders through repurchases of $1.1 billion and dividends of $425 million. Cognizant ended the quarter with $2.7 billion in cash and short-term investments, $636 million in long-term debt and $12.0 billion in shareholders’ equity on its pristine balance sheet. Given year-to-date results, continuing fulfillment challenges related to staffing shortages along with macroeconomic and geopolitical uncertainties, management lowered guidance for the fourth quarter with revenue now expected to decline by 1.2% to 0.2%, or up 2.0% to 3.0% in constant currency, to $4.72 billion to $4.77 billion. For the full year, revenues are expected to grow 4.5%, or 7.0% in constant currency, to $19.3 billion with EPS in the range of $4.43 to $4.46, up 7% to 8% from last year and down from $4.51 to $4.57 previously guided.

Canadian National Railway-CNI announced that October was the single best month ever for Western Canadian grain movement on CN’s network. The company moved over 3.23 million metric tonnes of grain from Western Canada. This exceeds the previous record set in October 2020 by over 50,000 metric tonnes and follows an all-time record set for weekly movement earlier in the month. These records were accomplished despite some challenges in the supply chain that CN and its supply chain partners addressed by working together.

 

Booking Holdings-BKNG reported strong third quarter financial results with record revenues traveling 29% higher, or 47% on a constant currency basis, to $6.1 billion with net income and EPS both more than doubling to $1.7 billion and $41.98, respectively. Third quarter gross travel bookings soared 36%, or 52% on a constant currency basis, to $32.1 billion. Room nights booked in the third quarter jumped 31% to 240 million. Rental car days motored 25% higher while airline tickets flew 45% higher. Year-to-date, free cash flow jumped 75% to $4.1 billion with the company repurchasing $4.3 billion of its common stock. Booking has reduced its shares outstanding by 5% since the beginning of the year. In October, the company repurchased an additional $595 million of its common stock with $5.6 billion remaining authorized for future share repurchases. The company is gaining market share with 45% of its bookings done directly on its own app, which is the most downloaded online travel app which enables the company to directly engage with travelers. Despite rising concerns about the macroeconomic environment, the company is encouraged by an improvement in room night trends which continued into October and by the strong level of bookings for travel in early 2023. The company is not seeing travelers trading down to cheaper travel or shortening their stays.  The company is seeing travel growth in all geographic regions with Asia’s delayed travel now recovering to exceed pre-pandemic levels.

Tuesday, Nov. 1, 2022

Stryker-SYK reported third quarter sales increased 7.7% to $4.5 billion with net income jumping 86% to $816 million and EPS up 88% to $2.14. Adjusted net earnings and EPS decreased 4% to $810 million and $2.12, respectively. Adjusted net earnings were impacted by worsening foreign currency and ongoing inflation, which is expected to impact full year results. By business segment, MedSurg and Neurotechnology sales increased 10.2% to $2.6 billion. Organic net sales increased 10.8% in the quarter including 9.8% from increased unit volume and 1% from higher prices. Orthopaedics and Spine sales grew 4.4% to $1.9 billion. Organic net sales increased 8.7% in the quarter including 11.6% from increased unit volume, partially offset by 2.9% from lower prices. During the first nine months, Stryker generated $1.6 billion in free cash flow with the company returning $788 million to shareholders through dividend payments. Stryker ended the quarter with $1.5 billion in cash and investments, $12.7 billion in long-term debt and $16.4 billion in shareholders’ equity. Considering third quarter results, the strong order book for capital equipment and the sales momentum in Stryker’s implant and capital businesses, management now expects full year 2022 organic net sales growth to be in the range of 8.5% to 9%. If foreign currency exchange rates hold near current levels, Stryker expects net sales in the full year to be adversely impacted by approximately 4% and adjusted EPS to be adversely impacted by approximately $.35 to $.40, to a range of $9.15 to $9.25. 

Johnson & Johnson-JNJ announced an agreement to acquire Abiomed, a world leader in breakthrough heart, lung and kidney support technologies with an 18-year track record of profitable growth, for an upfront payment of $380.00 per share in cash, corresponding to an enterprise value of approximately $16.6 billion which includes cash acquired. Abiomed shareholders will also receive a non-tradeable contingent value right (CVR) entitling the holder to receive up to $35.00 per share in cash if certain commercial and clinical milestones are achieved. The transaction broadens Johnson & Johnson MedTech’s position as a growing cardiovascular innovator, advancing the standard of care in one of healthcare’s largest unmet need disease states: heart failure and recovery. Cardiovascular disease is the number one cause of death. All forms of cardiovascular disease lead to heart failure, which is a significant cost to health systems due to hospitalizations and extended length of stay. The proposed transaction will accelerate pro forma MedTech and Johnson & Johnson enterprise revenue growth. Johnson & Johnson expects the transaction to be slightly dilutive to neutral to adjusted earnings per share in the first year, considering the impact of financing, and then accretive by approximately $0.05 in 2024, and increasingly accretive thereafter. Johnson & Johnson expects to fund the transaction through a combination of cash on hand and short-term financing. Johnson & Johnson expects to maintain a strong balance sheet and to continue to support its stated capital allocation priorities of R&D investment, competitive dividends, value-creating acquisitions and strategic share repurchases. The transaction is expected to be completed prior to the end of the first quarter of 2023.   

Friday, Oct. 28, 2022

Gentex-GNTX reported third quarter net sales jumped 24% to $493.6 million with net income down 5% to $72.7 million and EPS decreasing 3% to $.31. During the quarter, light vehicle production in the company’s primary markets increased 26% and the company had a record number of Full Display Mirror shipments. Nevertheless, product mix for the third quarter and overall sales levels were still impacted by customer order adjustments, supply chain challenges, and labor availability issues. Together, these headwinds resulted in unit shipments being approximately 750,000 units lower than the original forecast at the beginning of the quarter. Gross margin was 29.8% compared to 35.3% for the third quarter of 2021. Gross margin was impacted on a quarter over quarter basis by raw material cost increases, unfavorable product mix, labor cost increases, and prior commitments to annual customer price reductions. However, management is making progress on cost escalation conversations with customers, and they expect relief to begin during the fourth quarter, which should provide improvement in margin profile as they move through 2023 and into 2024. During the third quarter of 2022, the company repurchased 0.9 million shares of its common stock at an average price of $26 per share for a total of $22.3 million with 21.5 million shares remaining authorized for future share repurchases. The company maintains a strong balance sheet with more than $393 million in cash and investments, no long-term debt and $2 billion in shareholders’ equity. Based on the higher vehicle production forecast and the actual results of the third quarter, management updated their sales and gross margin outlook for 2022 to a range of revenues of $1.90 billion to $1.95 billion from the previous guidance of $1.87 billion to $1.97 billion with gross margins now expected to range between 32% to 33% from previous expectations of 33% to 34%. Additionally, based on the company’s current forecasts for light vehicle production for calendar year 2023, the company still expects calendar year 2023 revenue growth of approximately 15% - 20% above the new 2022 revenue guidance of $1.90 - $1.95 billion. Management believes now is an opportune time to invest in Gentex for the long-term investor, as they continue to have strong growth prospects, revenue growth and strong customer desire for their products.

Thursday, Oct. 27, 2022

Baxter International-BAX reported third quarter revenue increased a healthy 17% to $3.7 billion with a loss of $2.9 billion or ($5.83) per share. This loss reflects impairment charges of $3.1 billion related to Baxter’s acquisition of Hillrom primarily reflecting rising interest rates and broad declines in equity valuations. Excluding special items related to the Hillrom acquisition, Baxter’s  adjusted net income was $414 million with EPS of $.82. U.S. revenue totaled $1.8 billion, up 40%, and international sales of $1.9 billion increased 1%. Among Baxter’s product categories, Renal Care, Clinical Nutrition and Advanced Surgery delivered mid-single-digit growth at constant currency rates. Medication Delivery performance was comparable to the same period in 2021 at constant currency rates. Growth in the quarter was partially offset by a low single-digit decline in Pharmaceuticals, primarily driven by increased generic competition. As expected, Acute Therapies and BioPharma Solutions both declined at constant currency rates, reflecting challenging year-over-year comparisons due to a return to normal sales patterns following increased COVID-19 related sales in the third quarter of 2021. Legacy Hillrom’s Front Line Care, Patient Support Systems and Surgical Solutions businesses contributed $735 million to third-quarter sales. Year-to-date, free cash flow declined 71% to $293 million, due to working capital changes. During the quarter, Baxter returned over $20 million to shareholders through share repurchases and paid a quarterly dividend of $.29 per share. For the full-year, Baxter now expects EPS of ($4.52) to ($4.45) and adjusted EPS of $3.53 to $3.60. The company expects sales growth of 17% to 18%, approximately 23% on a constant currency basis and low single digits on an operational basis. Baxter's updated full-year financial outlook reflects the Hillrom impairment charges, the continued impact from supply constraints for electromechanical components, foreign exchange pressures as well as increased interest expenses and a higher effective tax rate.

Apple-AAPL reported record fourth quarter results with revenues climbing 8% to $90.1 billion with net income up 1% to $20.7 billion and EPS up 4% to $1.29.  Fourth quarter revenue growth was led by the 25% growth in Macs to $11.5 billion with iPhone sales growing 10% to $42.6 billion, Wearables, Home and Accessories sales growing 10% to $9.7 billion and Services revenues increasing 5% to $19.2 billion, while iPad sales declined 13% to $7.2 billion due primarily to foreign exchange headwinds and tough comparisons with the prior year period when new products were launched. Led by 23% growth in the Rest of Asia, Apple reported growth in all geographies during the fourth quarter except for Japan. For the full fiscal year, revenues increased 8% to $394.3 billion with net income up 5% to $99.8 billion and EPS up 9% to $6.11.  Apple’s active installed base of devices reached all-time highs for all major product categories thanks to the strength of Apple’s ecosystem and unmatched customer loyalty. Apple’s paid subscriptions to its services exceed 900 million, an increase of 155 million since last year. Apple’s Services revenues reached a record $78 billion during the year, which is the size of a Fortune 50 company. During the year, free cash flow increased 20% to $111 billion. Apple paid $14.8 billion in dividends during the year and repurchased $89.4 billion of its common stock. Since the share repurchase program began, Apple has repurchased $550 billion of its common stock at an average price of $47 per share, demonstrating the success of the buyback program. During the important holiday December quarter, Apple expects the supply issues with iPhone 14 Pro and Pro Max to continue a little longer while Mac sales are expected to decline substantially due to challenging comparisons with the prior year period when new products were launched. Substantial foreign exchange headwinds of 10% are expected in the quarter due to the strong dollar. Services are expected to grow in the quarter but be impacted by foreign exchange headwinds and weaker gaming and digital advertising. Gross margin the upcoming quarter is expected to be between 42.5% and 43.5% with operating expenses in the range of $14.7 billion to $14.9 billion.  

T. Rowe Price-TROW reported third quarter revenues declined 18.7% to $1.59 billion with net income falling 50.5% to $384.4 million and EPS dropping 49.8% to $1.66. During the quarter, assets under management fell $79.7 billion to $1.23 trillion on market depreciation of $55.1 billion and net outflows of $24.6 billion, largely driven by a handful of growth-oriented equity strategies amplified this quarter with redemptions from a few large institutional clients. The quarter’s investment advisory fee annualized effective rate of 42.5 basis points declined by 1.1 basis points from last year’s third quarter as clients shifted to lower fee asset classes, which was partially offset by higher-than-average fees on alternative asset products and lower money market fee waivers. Operating expenses increased 20% from last year on higher spend on compensation, technology and facilities mostly related to the OHA acquisition. During the first nine months of the year, T. Rowe Price generated $2.28 billion in free cash flow, down 21.4% from last year on the lower net income. Year-to-date, T. Rowe Price spent $744 million to repurchase 2.5% of its outstanding shares at an average cost per share of $130.35, including $224.5 million to repurchase 1.9 million shares during the third quarter. In addition, the firm paid dividends of $832.4 million with the stock now sporting an attractive 4.4% dividend yield. T. Rowe Price ended the quarter with $4.46 billion in cash and investments, no long-term debt and $8.9 billion in shareholders’ equity on its pristine balance sheet. Rob Sharps, chief executive officer and president, commented, “Throughout this year, we have taken steps to slow our expense growth, including focusing on our highest priority initiatives, slowing hiring, and reducing planned third party spend. We continue to evaluate market conditions and will consider other levers as needed to manage expense growth and support our ability to invest in strategic initiatives.”

Mastercard-MA reported third quarter revenues charged ahead 15%, or 23% on a currency neutral basis, to $5.8 billion with net income increasing 4% to $2.5 billion and EPS up 6% to $2.58. Primary drivers of the revenue increase included: gross dollar volume growth of 11% on a local currency basis to $2.1 trillion; cross-border volume growth of 44% on a local currency basis; switched transaction growth of 9%; and 17% growth in other revenues, driven primarily by Mastercard’s Cyber & Intelligence and Data & Services solutions. Consumer spending remains resilient and cross-border travel continues to recover. As of September 30, 2022, Mastercard had issued 3.0 billion Mastercard and Maestro branded cards accepted at 90 million merchants worldwide. Operating expenses increased 17% mainly due to higher personnel costs to support continued investments in strategic investments across payments, services and new network capabilities. During the first nine months of 2022, Mastercard generated $7.9 billion in free cash flow with the company returning $7.8 billion to shareholders through dividends of $1.4 billion and share repurchases of $6.3 billion at an average cost of $344.26 per share. Current quarter-to-date through October 24, Mastercard repurchased an additional $505 million if its shares at an average cost of $297.06 per share leaving $5.1 billion remaining under the approved share repurchase programs. As of September 30, 2022, Mastercard reported $7.6 billion in cash, $13.6 billion in long-term debt and $6.4 billion in shareholders’ equity on its sturdy balance sheet. Looking ahead to the fourth quarter, year-over-year net revenue is expected to grow at the high end of the mid-teens range on a currency neutral basis, boosted by resilient consumer spending, stable to slightly improved cross-border travel growth, higher rebates consistent with seasonal norms and lapping of strong year-ago results after border restriction were lifted. Operating expenses are expected to grow in the low double-digits. During the earnings conference call, Michael Miebach, Mastercard CEO, stated, “We will continue to monitor impacts related to elevated inflation and other macroeconomic and geopolitical risks. Our diversified business model and ability to modulate expenses position us well to navigate through periods of uncertainty while maintaining focus on our strategic objectives.”


Wednesday, Oct. 26, 2022

Meta Platforms-META reported third quarter revenue declined 4% to $27.7 billion with net income and EPS cut in half to $4.4 billion and $1.64, respectively. The revenue decline was primarily due to foreign exchange headwinds and would have been up 2% on a constant-currency basis. The low sales growth reflected weak advertising demand given the uncertain macroenvironment, especially among large advertisers.  Earnings dropped due to a 45% increase in research and development expenses notably in the company’s Reality Labs unit focused on the metaverse, which reported a $3.7 billion loss during the quarter. Facebook daily active users were 1.98 billion, an increase of 3% over the prior year period. Facebook monthly active users were 2.96 billion at quarter end, an increase of 2%. During the third quarter, ad impressions delivered across the company’s family of apps increased by 17% while the average price per ad decreased by 18%. Free cash flow declined 48% during the first nine months to $13.6 billion due to the lower earnings and a significant increase in capital expenditures. Capital expenditures in 2022 are expected to be in the range of $32 billion to $33 billion and grow to $34 billion to $39 billion in 2023 driven by investments in data centers, servers and network infrastructure to increase artificial intelligence (AI) capacity. Year-to-date, Meta has repurchased $21.1 billion of its common stock, including $6.4 billion during the third quarter. The company has $17.8 billion remaining authorized for future share repurchases. The company ended the quarter with a strong balance sheet with $43 billion in cash and investments, $9.9 billion in long-term debt and $124.1 billion in shareholders' equity. Meta’s headcount was 87,314 as of quarter end, an increase of 28% year-over-year. To operate more efficiently, Meta is planning significant changes in hiring and expects headcount to remain approximately the same in 2023 as it currently stands. Revenues are expected in the range of $30.0 billion to $32.5 billion in the fourth quarter, including a 7% headwind from foreign exchange. Total expenses in 2022 are expected in the range of $85 billion to $87 billion, which are expected to increase to a range of $96 billion to $101 billion in 2023, including an estimated $2 billion charge to consolidate office facilities. The double-digit increase in expenses is driven by infrastructure-related expenses and Reality Labs hardware costs. The Reality Labs operating loss is expected to grow significantly in 2023.

SEI Investments-SEIC reported third quarter sales declined 3% to $471.3 million with net income dropping 55% to $61.7 million and EPS falling 54% to $0.45. SEI’s disappointing results were impacted by lower capital market performance, costs associated with the company’s voluntary separation agreement (VSA) and continuing inflationary pressures, especially for compensation. Third quarter results include charges related to the company’s VSA of $57.0 million, or $0.32 per share, and unrelated severance charges of $5.2 million, or $0.03 per share. Average assets under management in equity and fixed income programs, excluding LSV, decreased $33.4 billion, or 17%, to $166.4 billion in the third-quarter 2022 while average assets under administration decreased $69.1 billion, or 8%, to $786.6 billion.  Earnings from LSV decreased 24% to $26.7 million due to net negative cash flows from existing clients, market depreciation and client losses. During the third quarter, cash flow from operations was $97.9 million, down 38.4% from last year, and free cash flow was $74.4 million, down 48.5% from last year.  SEI Investments repurchased 890,000 shares during the quarter for $49.4 million at an average price of $55.55 per share. SEI Investments ended the quarter with $791.4 million in cash, no long-term debt and $1.9 billion in shareholders’ equity on its investment grade balance sheet. Looking ahead, management expects deconversion related to two clients’ M&A activity to result in a $12.4 million reduction in annual revenues. While still in negotiations with Wells Fargo, management expects deconversion of a portion of the business will result in a fourth quarter charge between $5 million and $7 million and a reduction in quarterly revenues between $1.3 million and $1.7 million.  


General Dynamics-GD reported third quarter revenues rose 4% to $10 billion with net earnings up 5% to $902 million and EPS up 6% to $3.26. 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. The company ended the quarter with $88.8 in backlog including Aerospace backlog of $19.1 billion which increased 29.7% from the prior year quarter. Total estimated contract value, the sum of all backlog components, was $125.8 billion at the end of the quarter. Aerospace revenues rose 14% to $2.3 billion as there was broad-based demand by model and geography. Aerospace had the best year-to-date order performance in over a decade with a book-to-bill ratio of 1.2 times. Marine Systems revenue increased 5% during the quarter to $2.8 billion with orders totaling $3.2 billion and a book-to-bill of 1.1 times. Combat Systems revenues increased 3% to $1.8 billion as broad-based demand drove backlog with a book-to-bill of 1.3 times. Technologies revenues declined 2% to $3.07 billion impacted by ongoing supply chain disruptions. Year-to-date, free cash flow was up 58% to $3.3 billion with the company paying over $1 billion in dividends and repurchasing $1.1 billion of its common shares. General Dynamics ended the quarter with $2.5 billion in cash, $9.2 billion in long-term debt and $17.7 billion in shareholders’ equity on its combat-ready balance sheet.

Automatic Data Processing-ADP reported strong first quarter results with revenues rising 10% to $4.2 billion with net income processing 11% growth to $779 million and EPS up 13% to $1.87.  ADP achieved double-digit growth in revenues and earnings while exceeding the one million client milestone during the quarter. ADP processes $2.7 trillion annually in payrolls/taxes by paying more than 40 million workers in 140 countries, including one in six U.S. workers.  With a strong labor market and higher interest rates, ADP exceeded its expectations for revenue growth and margin expansion and continues to enjoy momentum in new business bookings, pays per control, worksite employee growth, client funds interest revenue and client revenue retention. Free cash flow during the first quarter jumped more than sevenfold to $781.1 million due to favorable working capital changes. During the quarter the company paid $432.9 million in dividends and repurchased $333.3 million of its common stock. ADP has increased its dividend for 47 consecutive years. Following the strong start to fiscal 2023, ADP raised its outlook for growth for the full year with revenues expected to increase 8% to 9% and adjusted operating margin expected to expand 125 to 150 basis points leading to EPS growth of 15% to 17%.

Tuesday, Oct. 25, 2022

Visa-V rang up fiscal fourth quarter revenues of $7.8 billion, up 19% from last year, with net income charging ahead 10% to $3.9 billion and EPS up 13% to $1.86. Payments Volume increased 10%, Cross-Border Volume jumped 36% and processed transactions increased 12%. During the fourth quarter, Visa saw a continuation of spending trends present throughout 2022—strength in consumer payments, resilience in eCommerce and ongoing recovery in cross-border travel. These trends contributed to robust full-year year results with revenues jumping 22% to $29.3 billion, net income up 21% to $15.0 billion and EPS up 24% to $7.00. During fiscal 2022, Visa delivered an impressive 42.0% return on shareholders’ equity. Visa generated $17.9 billion in free cash flow during fiscal 2022, up 23% from last year and representing a stellar 120% of reported earnings. During the fiscal year, Visa returned $14.8 billion to shareholders through dividend payments of $3.2 billion and share repurchases of $11.6 billion at an average price per share of $205.97 leaving $5.1 billion remaining under the current buyback authorization. In October, the board authorized a new $12 billion stock buyback program and increased the dividend by 20%, marking the 13th year of consecutive annual dividend increases. Visa ended the quarter with $20.7 billion in cash and investments, $20.2 billion in long-term debt and $35.6 billion in shareholders’ equity on its pristine balance sheet. Despite expected foreign currency headwinds of 4% and 2% negative impact from Russia, management expects 2023 net revenue growth in the high-single-digits with low double-digit operating expense growth.  Should there be a recession or a geopolitical shock that impacts its business, management will adjust spending plans by reprioritizing investments, scaling back or delaying programs, and reducing, as appropriate, personnel expenses, marketing spend, travel and other controllable categories while carefully balancing between short- and long-term considerations for long-term growth. Should interest rate continue to rise, nonoperating expense will benefit from higher interest income on cash balances. During the earnings conference call, Vasant Prabhu, Vice Chairman and Chief Financial Officer, stated, “As we've said before, we are not economic forecasters. Clearly, there's a high risk of a global recession, but we do not have a specific point of view on if, when, or the kind of recession we might have. For internal planning purposes, we are assuming no recession. Of course, we will stay very vigilant, closely monitoring our trends day by day. We will stay very flexible. We will have contingency plans in place should we have an economic or geopolitical shock that impacts our business. And we will be prepared to act fast should we need to.”  


Canadian National Railway-CNI reported third quarter revenues chugged ahead 26% to a record C$4.5 billion, driven by higher fuel prices, freight rate increases and the positive translation impact of a weaker Canadian dollar. Net income decreased 14% to C$1.5 billion and EPS fell 10% to C$2.13, mainly due to the Kansas City Southern merger termination fee received in the third quarter of 2021. Excluding the one-time merger termination payment, adjusted EPS increased 40% to a record $2.13. Revenue ton miles (RTMs) increased 5% to 58.5 billion while freight revenue per RTMs increased 22% to 7.46 cents. Canadian National’s adjusted operating ratio improved by 180 basis points to 57.2%, reflecting operating improvements including a 1% increase in fuel efficiency and 5% increase in car velocity. During the first nine months of 2022, free cash flow increased 44% to C$2.9 billion with the company returning nearly C$5.2 billion to shareholders through dividends of C$1.5 billion and share repurchases of C$3.6 billion. Canadian National ended the quarter with C$906 million in cash, C$14.6 billion in long-term debt and C$22 billion in shareholders’ equity. For the full year, Canadian National continues to expect total revenue ton miles (RTMs) in the low single-digit range across a range of commodities and expects to deliver an operating ratio below 60%. Management now expects adjusted diluted EPS growth of 25% compared to the previous target of 15-20% growth and free cash flow of approximately C$4.2 billion compared to the previous target of C$3.7 billion to C$4.0 billion. In addition, the company continues to expect to invest approximately 17% of revenues in its capital program.

Microsoft-MSFT reported first quarter revenue increased 11% to $50.1 billion with operating income up 6% to $21.5 billion while net income decreased 14% to $17.6 billion, primarily due to a higher tax provision compared to the prior year period, with EPS down 13% to $2.35. Microsoft Cloud revenue increased 24% to $25.7 billion, led by strong demand across commercial businesses. Commercial bookings declined 3% year-over-year with strong renewal execution more than offset by unfavorable foreign exchange impact. Revenue in Productivity and Business Processes was up 9% to $16.5 billion, led by a 24% jump in Dynamics 365 revenue. Revenue in Intelligent Cloud was up 20% to $20.3 billion, led by Azure and other cloud services revenue growth of 35%. Revenue in More Personal Computing decreased slightly to $13.3 billion, primarily due to Windows OEM revenue declining 15%. During the quarter, Microsoft generated $16.9 billion in free cash flow, down 10% from last year, with the company returning nearly $10.2 billion to shareholders through dividend payments of $4.6 billion and share repurchases of $5.5 billion. Microsoft ended the quarter with $107.3 billion in cash and investments, $45.4 billion in long-term debt and $173.6 billion in shareholders’ equity on its strong balance sheet. For the second quarter of fiscal 2023, Microsoft expects revenues in the range of $52.35 billion to $53.35 billion. Microsoft is facing headwinds from foreign exchange, lower PC demand and weakness in online ads at LinkedIn.

Texas Instruments-TXN generated a 13% increase in third quarter revenue to $5.2 billion with net earnings increasing 18% to $2.3 billion and EPS up 19% to $2.47.  By segment, Analog revenue grew 13% to $4.0 billion, Embedded Processing revenue grew 11% to $821 million and "Other" segment revenue grew 20% to $427 million. Personal electronics sales declined mid-teens sequentially on continued expected weakness and Industrial sales were flat with weakness beginning to broaden throughout the quarter.  The automotive market remained strong, up about 10%, communications equipment increased high-single digits and enterprise systems increased mid-single digits. During the first nine months, Texas Instruments generated $1.97 billion in free cash flow with the company returning over $2.0 billion to shareholders through dividend payments of $1.05 billion and share repurchases of $996 million. In September, the company announced an 8% increase in the dividend, marking the 19th consecutive year of dividend increases and a $15 billion increase in the share repurchase authorizations. These actions reflect leadership’s commitment to returning free cash flow to its owners.  Texas Instruments ended the quarter with $9.1 billion of cash and short-term investments and $7.4 billion in long-term debt, including $700 million issued during the third quarter. Total debt outstanding was $8.0 billion with a weighted average coupon of 2.8%. Commenting on the CHIPS Act that was recently signed into law, Chief Financial Officer Rafael Lizardi said, “The combination of the investment tax credit, the grant, as well as funding for research and development, will help make the U.S. semiconductor industry more competitive. We accrued about $50 million on the balance sheet in Q3 due to the 25% investment tax credit for investments in our U.S. factories. This will eventually flow through our income statement as lower depreciation, and we will receive the associated cash benefit in the future.” For the fourth quarter, management expects most of its end markets to decline sequentially, except for the automotive market. Fourth quarter revenues are expected in the range of $4.40 billion to $4.80 billion and earnings per share in the $1.83 to $2.11 range.

Alphabet-GOOGL reported third quarter revenues increased 6%, or 11% on a constant currency basis, to $65.1 billion with net income declining 27% to $18.9 billion and EPS off 24% to $1.40. Revenue growth was driven by healthy fundamental 4% growth in Search revenue to $39.5 billion and 38% growth in Google Cloud revenue to $6.9 billion. Google Cloud posted a $699 million loss during the quarter but remains on a longer-term path to profitability given its momentum. YouTube ads and Google network ad spend declined modestly during the quarter, as did advertising on Google Play due to lower gaming engagement. Specific end-market advertising spend pullbacks included insurance, loan, mortgage and crypto while travel and retail advertising spend increased. Overall costs increased during the quarter due to increased investments in data centers and hardware along with higher research and development and headcount costs. During the third quarter, the company added 12,700 employees and expects to slow the growth to half that number in the fourth quarter with further moderation in headcount expected in 2023.  Alphabet plans to drive efficiency by realigning resources to invest in the biggest growth opportunities such as artificial intelligence in Search and monetizing YouTube Shorts. Free cash flow declined 9% to $44 billion primarily due to significant increases in capital expenditures for data centers. Alphabet used the cash to repurchase $44 billion of its common shares and ended the quarter with $147 billion in cash and investments, $14.7 billion in long-term debt and $253.6 billion in shareholders’ equity on its fortress balance sheet. Foreign exchange headwinds impacted third quarter sales by 6%, and the headwinds are expected to be even larger in the fourth quarter due to the strong dollar. Tough comparisons with last year’s fourth quarter will continue to impact growth rates of advertising revenues for YouTube, Network and Google Play in the fiscal 2022 fourth quarter. Alphabet has effectively managed through past business cycles but acknowledged increased uncertainty related to this cycle due to challenging macroeconomic conditions.

NVR, Inc.-NVR reported third quarter revenues increased 16% to $2.8 billion with net income increasing 24% to $411 million and EPS increasing 37% to $118.51. New orders decreased by 15% during the quarter to 4,421 units, compared to 5,201 units in 2021. However, the average sales price of new orders increased by 3% to $453,400. The cancellation rate in the third quarter was 15% compared to 9% in the prior year period. Settlements increased 5% during the quarter to 5,949 units. The average settlement price in the third quarter of 2022 was $460,500, an increase of 12%. The backlog of homes sold but not settled as of September 30, 2022 decreased on a unit basis by 11% to 10,758 units and decreased on a dollar basis by 5% to $5.09 billion year-over-year. Mortgage loan closings increased 2% to $1.66 billion during the quarter. During the first nine months, the company repurchased 295 million shares for an average price of $4,690 per share and ended the quarter with $1.8 billion in cash, $915 million in long-term debt and $3 billion in shareholders’ equity on its sturdy balance sheet.

3M-MMM posted a 3.6% decline in third quarter sales to $8.6 billion with net income jumping 169% to $3.86 billion and EPS up 176.8% to $6.77. Excluding the gain from 3M’s food safety divestiture (for which 3M received $1 billion in consideration) and other special items, EPS increased 4.3% to $2.69. Third quarter sales included headwinds of 1% from divestitures and 5% from foreign currency translation due to the dollar strength. Organic sales increased 2% which included a 1.4% negative impact from the decline in disposable respirator sales that have dropped significantly from pandemic highs. By segment, Safety & Industrial sales chugged ahead 1.7% organically to $2.9 billion on solid growth in auto aftermarket, roofing granules, electrical, abrasives and industrial adhesives and tapes, partially offset by declines in personal safety. Operating margins improved 2.5% to 23.2% as selling price actions, strong spending discipline and restructuring more than offset raw material and logistics inflation and manufacturing productivity challenges. Transportation & Electronics sales motored ahead by 3% to $2.2 billion on solid growth in automotive OEM, commercial solutions and advanced materials while transportation safety declined. Semiconductor supply chain challenges continued, and consumer electronics demand softened. Segment operating margins improved 2.5% to 21.2%. Consumer segment sales increased 1.5% organically to $1.4 billion on solid growth in consumer health and safety, stationery and office and home care while home improvement declined on strong comps. Back to school sales were softer than expected and retailers continue to reduce inventories build up as supply chains stabilized.  Health Care sales increased 1.7% to $2.1 billion on strength in medical solutions, separation and purification sciences and health information systems while oral care declined as consumers curtailed discretionary dental expenditures due to inflationary pressures. Elective medical procedures recovered to 90% of pre-pandemic levels and are expected to reach 95% to 100% of pre-COVID levels during the fourth quarter provided hospitals can secure adequate staffing in face of labor shortages. Health Care operating profit margin dipped 1.7% to 21.8%. During the quarter, management began working to spin off the company’s Health Care business, thereby creating two world-class public companies. During the first nine months, 3M generated $3.0 billion in adjusted free cash flow, down 35% from last year on working capital demands, increases in capital expenditures for growth and sustainability and the cash impact from capitalizing R&D expenses for tax purposes. Year-to-date cash conversion ratio of 68% is expected to increase in the range of 85% to 95% for the full year.  3M returned $3.5 billion to shareholders year-to-date through share repurchases of $0.9 billion and dividends of $2.6 billion with the stock currently yielding an attractive 5.1%. 3M ended the quarter with $3.5 billion in cash and investments, $13.8 billion in long-term debt and $14.2 billion in shareholders’ equity on its  balance sheet. Management continues to work through 3M's litigation challenges with major trials scheduled in February and June 2023. Given the uncertain macroeconomic environment and the continuing strength of the dollar, 3M updated its 2022 guidance. Sales growth is now expected in the -3.5% to -3.0% on organic growth of 1.5% to 2.0% with adjusted EPS in the $10.10 to $10.35 range. Operating cash flow of $6.8 billion to $7.4 billion is expected to contribute to 85% to 95% adjusted free cash flow conversion.

Raytheon Technologies-RTX reported third quarter revenues rose 5% to $17 billion with net income decreasing 1% to $1.4 billion and EPS up 1% to $.94. Earnings include $.27 per share of net significant and/or non-recurring charges and acquisition accounting adjustments. RTX generated over $22 billion of awards during the quarter.  Backlog at the end of the quarter was $168 billion, including $101 billion from commercial aerospace and $67 billion from defense with a 1.32 book-to-bill ratio.  Year-to-date, free cash flow decreased 60% to $1.1 billion. The company returned more than $4.7 billion to shareholders during the year through dividends of $2.3 billion and share repurchases of $2.4 billion. Management adjusted the prior 2022 outlook expecting sales of $67.0 billion – $67.3 billion, down from $67.75 billion - $68.75 billion, adjusted EPS of $4.70 - $4.80, up from $4.60-$4.80, free cash flow of approximately $4 billion and share repurchases of at least $2.5 billion.

UPS-UPS reported third quarter revenues rose 4% to$24.2 billion with net income delivering 11% growth to $2.6 billion and EPS up 12% to $2.96.  The U.S. Domestic segment produced the strongest growth during the quarter with revenues up 8.2% to $15. 4 billion as revenue per piece increased 9.8% with operating profit up 18% thanks to expanding margins due to increased productivity. Despite a dynamic macroenvironment with high inflation, the strong job market in the U.S. is enabling healthy consumer spending. The International segment’s revenues increased 1.7% to $4.8 billion driven by a 6.4% increase in revenue per piece with operating profit down 5.1% to $997 million. The international markets weakened more than expected due to inflation, higher energy costs, continued Covid lockdowns in China and geopolitical tensions between Ukraine and Russia. Supply Chain Solutions revenues decreased 6% to $4.0 billion due to declines in air and ocean freight forwarding, partially offset by growth in logistics and healthcare businesses with operating profit up 3% to $450 million. Free cash flow declined 8% year-to-date to $8.5 billion with UPS paying $3.8 billion in dividends and repurchasing $2.2 billion of its common stock. For the full year, the company expects dividend payments to approximate $5.2 billion and share repurchases of at least $3.3 billion. UPS reaffirmed its financial targets for fiscal 2022 with revenues of $102 billion expected, an adjusted operating margin of about 13.7% and adjusted return on invested capital above 30%.  UPS continues to gain market share on a global basis. For 2023, the company announced a 6.9% rate increase.

PulteGroup-PHM reported third quarter revenues increased 13% to $3.9 billion with net income up 32% to $627 million and EPS jumping 48% to $2.69. Home sale revenues for the third quarter increased 16% to $3.8 billion, reflecting a 15% increase in average sales price to $545,000, along with a 1% increase in closings to 7,047 homes. New orders decreased by 28% during the quarter to 4,924 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 third quarter was 24% compared to 10% in the prior year period.  The company’s backlog at quarter end was 17,053 units, which is a decrease of 14% from the prior year. However, the dollar value of homes in backlog was $10.6 billion, which is an increase of 3% over last year. Mortgage capture rate was 77% for the quarter, down from 85% last year. Given changing industry dynamics resulting primarily from Federal Reserve actions to raise interest rates, PulteGroup continues to reassess all pending transactions prior to completing the purchase of the underlying land asset. As a result of this ongoing review process, in the third quarter the company elected to terminate a number of pending land transactions and wrote off $24 million of deposits and preacquisition expenses associated with the deals. During the quarter, Pulte invested $1.3 billion in land acquisition and development, with 56% of spending for development. PulteGroup controlled 231,662 lots with 50% held through option. Year-to-date free cash flow was negative $393 million compared to $496 million last year, due to higher capital expenditures and inventories. During the third quarter, PulteGroup repurchased 4.4 million shares of its common stock, or 2% of its common shares outstanding for $180 million, at an average price of $41.20 per share. The company ended the quarter with a debt-to-capital ratio of 22.5%. Year-to-date, PulteGroup returned $1.1 billion to shareholders through dividend payments of $110 million and share repurchases of $975 million. 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 32% for the trailing 12 months. The company ended the quarter with $449 million in cash and investments, $2.6 billion in long-term debt and $8.1 billion in shareholders’ equity on its sturdy balance sheet. While PulteGroup reported significant growth in third quarter earnings, demand clearly slowed in the period as dramatically higher interest rates created financial and psychological hurdles for potential homebuyers. In response to the challenging market conditions, management will continue to adjust sales and construction and investment practices as they work to turn inventory and balance housing starts to appropriately match the pace of sales.

Monday, Oct. 24, 2022

Bank of Hawaii-BOH reported third quarter net revenue increased 2.4% to $172.3 million with net income declining 16.7% to $50.8 million and EPS down 15.8% to $1.28. The net income decline was primarily due to a $6.9 million charge related to the bank’s exit from the leveraged lease market, a decrease in the negative provision for credit losses, lower PPP income and one-time items in last year’s third quarter. Net interest income increased 11.7% to $141.7 million and net interest margin increased 28 basis points to 2.6% due to higher interest rates and continued strong loan growth of 10.3% to $13.3 billion. Noninterest income declined 26% to $30.7 million primarily due to one-time items from the leveraged lease market exit in the quarter. Return on average assets dipped 16 basis points to 0.91% with return on average common equity equal to 16.98%. Bank of Hawaii ended the quarter with an efficiency ratio of 61.37%, up from 57.38% last year, on higher compensation expense and higher occupancy expense primarily due to last year’s one-time benefit from the sale of property. Asset quality remained strong during the quarter, well above that of a well-capitalized bank. With its 64% loan to deposit ratio, the bank maintains ample liquidity to fund continued growth. During the quarter, the bank repurchased $15.0 million of its shares at an average cost per share of $79.84 per share with $50.9 million remaining under the current share buyback authorization. Hawaii’s economy remained strong during the quarter with unemployment at 3.5%, at parity with the mainland for the first time since the pandemic began. Revenue per available room has fully recovered to pre-pandemic levels and Hawaii’s real estate market remains strong despite the rise in mortgage rates.


Friday, Oct. 21, 2022

Western Alliance-WAL reported third quarter net revenue banked a 21% increase to $663.9 million with net income up 11.4% to $264 million and EPS up 6.1% to $2.42. These record revenues and earnings were driven by sound organic growth in loans and deposits with asset quality strong and stable. Loans increased 30% on an annualized basis to $52.2 billion with total deposits increasing 14% to $55.6 billion. The speed and level of interest rate hikes did negatively impact mortgage banking related income which dropped sharply to $37.5 million during the quarter due to lower refinancing and mortgage originations. Net interest margin increased to 3.78% thanks to rising interest rates. Return on average assets was 1.53% with return on tangible common equity equal to 24.9%. The bank ended the quarter with an efficiency ratio of 45.5% which is expected to remain in the low 40% range. Quarter end book value per share was $43.39 while tangible book value increased 7% over the prior year to $37.16 per share. Tangible book value has compounded at a 19.4% annual rate since 2013. Over the past decade, Western Alliance has transformed the business through a diversification strategy and underwriting discipline which sustains superior asset quality. While the bank is preparing for a recession through its conservative underwriting, management is not currently seeing any signs of elevated credit stress. The bank is well capitalized and positioned well for slowing growth.

Thursday, Oct. 20, 2022

Genuine Parts-GPC reported record third quarter sales increased 18% to $5.7 billion with net income motoring 37% higher to $312.4 million and EPS up 38% to $2.20. The double-digit sales and earnings growth was driven by the resilience of the Automotive and Industrial businesses. This was the 6th consecutive quarter of double-digit sales growth and margin expansion led to the 9th consecutive quarter of double-digit adjusted EPS growth. The financial results reflect the integration of the Kaman Distribution Group acquisition. Free cash flow increased 15% year-to-date to $1 billion driven by higher net income and effective management of working capital. During the first nine months, Genuine Parts paid $369.5 million in dividends and repurchased $172.7 million of its common stock while spending $1.6 billion for acquisitions, including $1.3 billion for Kaman. Operating well in a challenging environment, Genuine Parts continues to gain market share and raised its sales and earnings outlook for the full year. In 2022, the company now expects 15%-16% total sales growth and EPS in the range of $8.29-$8.39 while affirming free cash flow in the $1.2 billion to $1.4 billion range.

Tractor Supply-TSCO reported third quarter sales increased 8% to $3.3 billion with net income increasing 4% to $234 million and EPS increasing 8% to $2.10 given the resilient underlying health of the business. Comparable store sales increased 5.7% driven by comparable average ticket growth of 7%, partially offset by a comparable average transaction count decline of 1.3%. Tractor Supply opened 11 new Tractor Supply stores and two new Petsense stores in the third quarter of 2022. Year-to-date, Tractor Supply generated $175 million in free cash flow, down from $489 million last year, due to higher capital expenditures and operating expenses. Year-to-date, Tractor Supply returned $916 million to shareholders through dividend payments of $308 million and share repurchases of $608 million at an average cost per share of $206.95. Tractor Supply ended the quarter with $211 million in cash, $1 billion in long-term debt and $1.9 billion in shareholders’ equity. The company updated its fiscal 2022 guidance to reflect the strong performance year-to-date and the recent acquisition of Orschein Farm and Home which closed on October 12, 2022. The acquisition is anticipated to add approximately $75 million to net sales in the fourth quarter. Management raised its financial outlook for the year and now expects net sales in the range of $14.06 billion to $14.12 billion, 5.4%-5.8% comparable store sales growth, net income in the range of $1.07 to $1.08 billion, EPS in the range of $9.55 to $9.63. Capital expenditures for the full year are expected between $650 million to $700 million, including the opening of approximately 60 to 70 new Tractor Supply stores and 10 new Petsense stores. In addition, management is very confident in their ability to gain market share and grow in 2023 due to previous efforts made to streamline the business and expects inflation to moderate in the second half of 2023.

Wednesday, Oct. 19, 2022

Berkshire Hathaway-BRKB announced the completion of the acquisition of Alleghany for $11.6 billion in cash. Alleghany owns operating subsidiaries and manages investments, anchored by a core position in property and casualty reinsurance and insurance and continues to be led by Joe Brandon.

Visa-V is partnering with Thunes to help individuals and small businesses move money internationally to 78 digital wallet providers, reaching 1.5 billion digital wallets across 44 countries and territories. This partnership will now expand Visa Direct’s reach to nearly 7 billion endpoints, including more than 3 billion cards, over 2 billion accounts and 1.5 billion digital wallets. For the unbanked individuals in emerging markets, digital wallets are gaining traction as an empowering first entry point to the financial system. Consumers are not required to have a card or account to load or receive funds directly to their digital wallet, opening the potential for greater financial inclusion and enabling underserved populations opportunities to access financial products that meaningfully impact how they live and work.


Tuesday, October 18, 2022

Johnson & Johnson-JNJ reported third quarter sales increased 2% to $23.7 billion with net earnings up 22% to $4.5 billion and EPS up 23% to $1.68. Pharmaceuticals led the growth with revenues growing 3% to $13.2 billion driven by double-digit growth in Oncology. Worldwide Medical Devices sales increased 2% to $6.7 billion, reflecting procedure recovery and benefits from innovation & commercial execution. Worldwide Consumer Health sales remained relatively flat at $3.8 billion. Year-to-date, JNJ generated $13 billion in free cash flow and ended the quarter with $31 billion in cash and investments and $32 billion in long-term debt. During the quarter, the company invested $3.6 billion in research and development to advance its promising innovative pipeline, paid $3 billion in dividends, and repurchased $2 billion of its common stock. JNJ updated 2022 full-year guidance with reported sales now expected to increase 1.8% -2.3% for the year to a range of $93 billion to $93.5 billion. Operational sales growth, which excludes foreign currency headwinds, is expected to exceed 7%. Adjusted EPS is now expected to increase 2.3% to 2.8% to a range of $10.02-$10.07. JNJ reaffirmed its fiscal 2025 year Pharmaceutical sales projection of $60 billion, which will account for 65%-70% of total sales after the planned spin-off of the Consumer Health business next year.

Roche Holdings-RHHBY provided a 9-month sales update as the company reported Group sales increased 1% to CHF 47 billion. Sales were impacted by significantly lower COVID-19 related sales in both divisions during the quarter. The demand for their newer medicines for multiple sclerosis, hemophilia, spinal muscular atrophy and cancer remains high. For the full 2022 year, Roche expects sales to grow in the low-single digit range at constant exchange rates. Core earnings per share are targeted to grow in the low- to mid-single-digit range at constant exchange rates. Roche expects to increase its dividend in Swiss francs further.


Friday, Oct. 14, 2022

UnitedHealth Group-UNH reported third quarter revenues rose 12% to $80.9 billion with net income and EPS each jumping 29% to $5.3 billion and $5.55, respectively. The strong revenue growth during the quarter included double-digit growth at both Optum and UnitedHealthcare, as the company is seeing a steady return to more normalized care since the pandemic. Margins improved as the business laps the negative impact from increased Covid costs last year. Cash flow from operations in the third quarter was $8.8 billion- or 1.6-times net income. Free cash flow increased a healthy 66% during the first nine months to $28.8 billion. Year-to-date, the company returned $10.5 billion to shareholders through dividend payments of $4.5 billion and share repurchases of $6 billion. UnitedHealth Group ended the quarter with $84 billion in cash and investments, $45 billion in long-term debt and $78 billion in shareholders’ equity on its healthy balance sheet. Return on equity of 28.5% during the quarter reflected the company’s sustained growth and efficient capital structure. Management raised their full year 2022 EPS outlook to a range of $20.85 to $21.05.

Thursday, Oct. 13, 2022

Fastenal-FAST rang up a 16% increase in third quarter sales to $1.8 billion with net income and EPS up 17% to $284.6 million and $0.50, respectively. Fastenal achieved double-digit daily sales growth in all nine product categories, including 18.2% for fasteners and 12.4% for safety.   Increases in unit sales on strong demand and price increases drove third quarter sales higher. Solid demand in markets tied to industrial capital goods and commodities more than offset declines in markets tied to consumer goods and construction. Foreign exchange headwinds and the impact from hurricane Ian negatively affected sales by 60 basis points and 50 basis points, respectively. Pricing actions taken over the last twelve months to mitigate product and transportation cost inflation added 550 to 580 basis points to the year-over-year sales increase, down from 660 to 690 basis points during the second quarter. Contributions from price increases will continue to moderate during the fourth quarter as comps become more challenging. During the quarter, Fastenal signed 86 new onsite contracts, bringing the total active onsite locations to 1,567 and recorded 5,187 FASTBin and FASTVend signings and installations, bringing the final installed base to 99,409, up 10% from last year.  Gross margins declined 40 basis points to 45.9% and operating margins increased 50 basis points to 21.0%. While spot prices for many inputs including fuel, transportation services and steel began to decline from peak costs, due to Fastenal’s long supply chain, it will likely take several quarters before input cost declines are reflected in cost of goods sold. During the quarter, Fastenal generated $257.9 million in operating cash flow, or 90.6% of net income. Free cash flow increased 75% from last year to $209.9 million with the company returning $273 million to shareholders through dividends of $177.5 million and share repurchases of $95.3 million. Fastenal ended the quarter with $231.5 million in cash and equivalents, $404.7 million in long-term debt and $3.2 billion in shareholders’ equity on its sturdy balance sheet. While Fastenal recorded healthy sales trends during September, feedback from the field suggests pockets of increasing customer caution.

Wednesday, Oct. 12, 2022

PepsiCo-PEP reported third quarter revenues rose 9% to $21.9 billion with net income up 21% to $2.7 billion and EPS popping 22% higher to $1.60. Organic revenue increased 16%, representing the fourth consecutive quarter of double-digit organic revenue growth. PepsiCo’s top-line performance was broad based across geographies as their North America and International businesses each delivered 16% organic revenue growth reflecting the company’s pricing power. These results reflect the continued strength of the company’s diversified portfolio and the resilience of the company’s global beverage and food businesses, which delivered 12% and 20% organic revenue growth, respectively. Free cash flow decreased 14% during the first nine months to $6.3 billion. PepsiCo returned $5.7 billion to shareholders through dividend payments of $4.6 billion and share repurchases of $1.1 billion of its common shares year-to-date. The company continues to expect to return approximately $7.7 billion to shareholders in fiscal 2022, comprised of both $6.2 billion in dividends and $1.5 billion in share repurchases. For the balance of the year, PepsiCo’s North America snacks and beverage businesses is expected to remain resilient, and PepsiCo remains focused on accelerating their cost management initiatives and further sharpening their revenue management capabilities as consumers adjust and adapt to persistent inflationary pressures. For the full 2022 year, management raised their revenue and earnings outlook with organic revenue growth expected to be about 12% and core EPS growth of 10%. PepsiCo’s management does not see signs of recession as consumers continue to buy its “small affordable luxuries” despite inflation.  


Friday, Oct. 7, 2022

According to Mastercard SpendingPulseTM, U.S. retail sales excluding automotive increased +11% year-over-year in September. E-commerce sales continue to grow, up +10.7% year-over-year, highlighting the ongoing demand for the convenience of digital commerce. Mastercard SpendingPulse measures in-store and online retail sales across all forms of payment and it is not adjusted for inflation. Reflecting the broader contraction of the housing market, spending in and around the home is slowing. Furniture & Furnishing and Hardware sectors experienced minimal year-over-year growth, up +1.4% and +1.7% respectively. On the other hand, spending at Restaurants was up +10.9% year-over year, as consumers continue to enjoy eating out. Further, travel remains a priority as spending on Airlines and Lodging experienced double-digit year-over-year growth. This is consistent with the past several months.

Thursday, Sept. 29, 2022

Nike-NKE reported first quarter revenues rose 4% to $12.7 billion with net income treading 22% lower to $1.5 billion and EPS down 20% to $.93.  On a geographic basis, double-digit revenue growth in North America reflected strong consumer demand for the company’s footwear and equipment, while revenues in Greater China declined 16%, impacted by Covid lockdowns.  Nike Direct sales rose 8% to $5.1 billion on a reported basis and jumped 14% on a currency-neutral basis while Nike Digital sales increased 16% on a reported basis or 23% on a currency-neutral basis, led by 46% growth in EMEA. The company’s competitive advantages, including its strong brand and pipeline of innovative products, helped the company manage through economic volatility. Gross margin declined 220 basis points to 44.3% due to elevated freight and logistics costs, higher markdowns in Nike Direct as excess inventory was liquidated and foreign currency headwinds. Operating costs increased due to higher wages and other costs. The tax rate also increased significantly during the quarter. Inventories jumped 44% over the prior year period to $9.7 billion driven by elevated in-transit inventories from ongoing supply chain volatility. Nike continues to have a strong track record of investing to fuel growth and consistently increasing returns to shareholders, including 20 consecutive years of rising dividend payouts. In the first quarter, Nike returned $1.5 billion to shareholders, including dividends of $480 million, up 11% from the prior year, and share repurchases of $1 billion, reflecting 9 million retired shares. Nike expects to continue to liquidate excess inventories, primarily apparel, in the second quarter in what is expected to be a highly promotional retail environment. As a result, second quarter markdowns will lead to gross margin declines in the second quarter between 350-400 basis points. Higher freight costs, higher taxes and foreign exchange headwinds are also expected to persist in the second quarter. Nike has managed through cycles like this before and will continue to focus on leveraging its strong brand and financial position to meet strong consumer demand for its products. Nike currently does not see any economic slowdown and expects to gain market share in the next year despite uncertain macro conditions.

 Berkshire Hathaway-BRKB bought another 5,985,190 shares of Occidental Petroleum at $57.52 - $61.595 per share worth about $352.5 million.

Wednesday, Sept. 28, 2022

Starbucks-SBUX announced that its Board of Directors has approved an increase in the company’s quarterly cash dividend from $0.49 to $0.53 per share, which raises the company’s annual dividend rate to $2.12 per share. Starbucks initiated its dividend in 2010 and has increased it in each of the past 12 years.

Paychex-PAYX reported first quarter sales increased 11% to $1.2 billion with net income and EPS increasing 14% to $379.2 million and $1.05, respectively. By segment, Management solutions revenue increased 12% to $905.5 million due to increases in client base and higher product penetration, including strong demand for HR Solutions, retirement, and time and attendance solutions. PEO and Insurance Solutions revenue increased 8% to $282.8 million due to the increase in number of worksite employees and an increase in PEO health insurance revenue. Interest on funds held for clients increased 24% to $17.9 million due to higher average interest rates. Paychex’s financial position remains strong with cash and corporate investments of $1.2 billion, long-term debt of $797.8 million and shareholders’ equity of $3.1 billion. Free cash flow decreased 6% during the quarter to $333.7 million, due to increased working capital needs. During the quarter, the company paid $284.6 million in dividends and generated an impressive 46% return on equity. Management increased its adjusted EPS outlook for fiscal 2023, now expecting growth of 11% to 12% compared to 9% to 10% growth in previous guidance. Total revenue is still expected to grow 7% to 8% in fiscal 2023. Management noted changes in the macroeconomic environment could alter guidance. Paychex believes they are well-positioned for growth in fiscal 2023 and beyond as they experienced record revenue retentions levels in the first quarter, bolstered by their leading-edge technology platform and continued investments in product development. In addition, interest rate increases will provide a tailwind for float income and management is balancing long-term investments with near-term cost discipline to navigate through uncertainty.

Thursday, Sept. 22, 2022

FactSet-FDS reported fourth quarter revenues rose 21% to $499.3 million with net income up 3% to $104.4 million and EPS increasing 2% to $2.69. For the full fiscal 2022 year, revenues rose 16% to $1.8 billion with net income and EPS each down 1% to $396.9 million and $10.25, respectively. FactSet has reported 42 straight years of revenue growth with adjusted earnings growth up for 26 consecutive years.  Return on shareholders’ equity for fiscal 2022 was a superb 30%.  Free cash flow decreased 1% during the year to $487 million, primarily due to higher working capital needs. The company returned $144.6 million to shareholders, paying nearly $126 million in dividends and repurchasing $18.6 million of its common shares. FactSet did not repurchase any of its common stock during the fourth quarter and has suspended share repurchases until at least the second half of fiscal 2023 to prioritize the repayment of debt. In April 2022, FactSet increased its quarterly cash dividend by 8.5% to $.89 per share, marking the 23rd consecutive year the company has increased dividends. Annual Subscription Value (ASV) plus professional services was $2 billion at year end, which represented 9.3% organic growth due to higher sales in FactSet’s Research & Advisory and Analytics & Trading solutions. Annual ASV retention was greater than 95%. When expressed as a percentage of clients, retention improved to 92%. Client count increased by 16.8% or 1,085 during the year, while users grew by 11.8% or 19,050 from the prior year. For fiscal 2023, organic ASV plus professional services is expected to increase in the range of $150 million-$180 million with revenue expected in the range of $2.1 billion to $2.12 billion and EPS expected in the range of $12.70-$13.10, representing 24%-27% growth.

Accenture-ACN reported fourth quarter revenues increased 15% to $15.4 billion with net income and EPS increasing 18% to $1.6 billion and $2.60, respectively. For the full year, revenues rose 22% to a record $61.6 billion with net income increasing 16% to $6.8 billion and EPS up 17% to $10.71. Growth was broad based with double-digit growth across geographies, industry groups and type of work. During the year, new bookings reached a record $71.7 billion, a 21% increase over fiscal 2021 new bookings. Return on shareholders’ equity was a strong 31% in fiscal 2022. Free cash flow increased 5% during the year to a record $8.8 billion. Accenture returned $6.57 billion to shareholders through $2.46 billion in dividends and $4.12 billion in share repurchases and ended the year with more than $8.2 billion in cash and investments on its strong balance sheet.  The board of directors announced a 15% increase in the quarterly dividend to $1.12 per share and approved $3 billion of additional share repurchase authority bringing the total buyback authorization to $6.1 billion. For the first quarter of 2023, the company expects revenues to be in the range of $15.2 billion to $15.75 billion, an increase of 10% to 14% in local currency, reflecting the company’s assumption of an approximately negative 8.5% foreign-exchange impact compared with the first quarter of fiscal 2022. For fiscal 2023, Accenture expects revenue growth of 8% to 11% in local currency with EPS expected in the range of $11.09 to $11.41, reflecting a 4% to 7% increase from fiscal 2022 EPS. Free cash flow is expected in the range of $7.7 billion to $8.2 billion for fiscal 2023 with the company planning to return at least $7.1 billion to shareholders through dividends and share repurchases.

Tuesday, Sept. 20, 2022

Microsoft-MSFT announced that its board of directors declared a quarterly dividend of $0.68 per share, reflecting a 6 cent or 10% increase over the previous quarter's dividend. The dividend is payable Dec. 8, 2022, to shareholders of record on Nov. 17, 2022.

Thursday, Sept. 15, 2022

Texas Instruments-TXN said it will raise its quarterly cash dividend 8%, from $1.15 per share to $1.24, or $4.96 annualized, marking the 19th consecutive year of dividend increases. The board of directors also authorized the company to repurchase an additional $15 billion of its common stock over time. This is in addition to approximately $8.2 billion of previously authorized repurchases that remained at the end of June 2022. As of second quarter 2022, the company has reduced its outstanding shares by 47% through its share repurchases since the end of 2004. Dividend increases and share repurchases are integral pieces of TI's disciplined approach to capital management and reflect the company's continued strength in free cash flow generation and its commitment to return all free cash flow to its owners over time.

 Wednesday, Sept. 14, 2022

Johnson & Johnson-JNJ announced that the Board of Directors has authorized the repurchase of up to $5 billion of the company's common stock. "The last few years have demonstrated the resilience of Johnson & Johnson. With continued confidence in our business and pipeline, the Board of Directors and management team believe that Company shares are an attractive investment opportunity," said Joaquin Duato, Chief Executive Officer. "With our strong cash flow and lowest level of net debt in five years, we have the ability to invest in innovation, grow our dividend, execute strategic acquisitions, and take this action to deliver shareholder returns and drive long-term growth." The company does not expect to incur debt to fund the share repurchase program. Johnson & Johnson reaffirms its full-year 2022 adjusted operational sales growth and earnings per share guidance of 6.5% - 7.5% and $10.65 to $10.75 per share, respectively.

Tuesday, Sept. 13, 2022

T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.34 trillionas of August 31, 2022, representing a 22% decline since year end.

At its Investor Day, Howard Schultz, interim CEO of Starbucks-SBUX, said that the company was expecting record new store growth, as well as double-digit revenue and earnings per share growth in the span of the next few quarters. The CEO also sees a return to stock buybacks soon, as well as continued strength in comparable-store sales. Starbucks is planning on opening about 2,000 stores from 2023 to 2025, which will deliver a 50% return on investment and 25% cash margins, said Chief Operating Officer John Culver. The new stores will be a mix of traditional stores, as well as drive-through only or pick-up only stores in a bid to broaden the portfolio. Culver predicts that North American revenue will increase by about 40% over the next three years and deliver “strong margin expansion.” In China, a key new market for Starbucks, the company is planning to operate 9,000 stores by 2025 — meaning it plans to open a new store in China every nine hours for the next three years. It is currently projecting to have 6,000 stores in China by the end of 2022. Starbucks committed a total of $1 billion to labor investments in 2022 in a bid to quell ongoing unionization efforts at its stores. The company also boosted wages to $17 an hour in the U.S. Technology also was an important theme at the investor day. Starbucks is planning to invest $450 million in fiscal 2023 across its existing U.S. store base to enhance automation and efficiency, with increased investments in 2024 and 2025. The company will also expand its mobile ordering experience across all stores, as well as its delivery capabilities with third-party partners including Uber Eats and DoorDash. Chief Marketing Officer Brady Brewer expects delivery will double in revenue in the next couple of years.

Raytheon Technologies-RTX updated its free cash flow outlook for the impact of the legislation requiring capitalization of Research and Experimentation for tax purposes and, as previously discussed, it now expects its full year 2022 free cash flow to be approximately $4.0 billion instead of approximately $6.0 billion. The company reaffirmed its full year outlook for sales of $67.75 - $68.75 billion, adjusted earnings per share of $4.60 - $4.80 and share repurchase of at least $2.5 billion of RTX shares.

Oracle Corporation-ORCL reported fiscal 2023 first quarter revenues increased 18% year-over-year to $11.4 billion with net income decreasing 37% to $1.5 billion and EPS down 35% to $0.56. Without the impact of the U.S. dollar strengthening compared to foreign currencies, EPS would have been 8 cents higher. Cloud services and license support revenues were up 14% to $8.4 billion and cloud license and on-premise license revenues were up 11% to $904 million. Short-term deferred revenues were $10.5 billion. Oracle's two cloud businesses, IaaS and SaaS, now represent over 30% of total revenue. These fast-growing and high-margin businesses are expected to boost Oracle’s constant currency organic revenue growth rate by double-digits and push earnings per share higher. Cerner is also expected to positively impact revenue and earnings per share growth in the coming quarters. This is the first quarter Oracle owned Cerner, and Cerner delivered the best revenue quarter in its history. Management expects them to do even better in the coming quarters as they develop an all-new suite of healthcare cloud services. During the quarter, Oracle generated $4.7 billion in free cash flow, up 8% from last year. The company returned $1.4 billion to shareholders during the quarter through dividends of $860 million and share repurchases of $552 million. Oracle ended the quarter with $11.2 billion in cash and investments and $75.5 billion in long-term debt, including debt taken on for the Cerner acquisition. For the second quarter, revenues are expected to grow in the 15% to 17% range with non-GAAP EPS in the $1.16 to $1.20 range.

Monday, Sept. 12, 2022

This holiday season, U.S. retail sales excluding automotive are expected to increase 7.1% year over year, according to the Mastercard SpendingPulse™ annual holiday forecast. "This holiday retail season is bound to be far more promotional than the last," said Steve Sadove, senior advisor for Mastercard and former CEO and Chairman of Saks Incorporated. "Easing supply chain issues coupled with the rapid shift in consumer spending trends and over-ordering inventory have left retailers in an interesting position ahead of the holidays. Retailers that were able to clear past merchandise and accurately forecast inventory needs will be the best positioned for growth."

Friday, Sept. 9, 2022

The chairman of Booking Holdings-BKNG, Robert J. Mylod, recently bought $4 million worth of the stock, signaling he finds the stock attractively valued.

Wednesday, Sept. 7, 2022

UnitedHealth Group-UNH and Walmart announced the beginning of an initial 10-year, wide-ranging collaboration, bringing together the collective expertise of both companies in serving millions of people with high-quality, affordable health services that improve health outcomes and improve the patient experience. The collaboration will start in 2023 with 15 Walmart Health locations in Florida and Georgia and expand into new geographies over time, ultimately serving hundreds of thousands of seniors and Medicare beneficiaries in value-based arrangements through multiple Medicare Advantage plans.

UPS-UPS announced it will hire more than 100,000 seasonal employees ahead of the holiday rush. Its streamlined, digital-first process now takes just 25 minutes for most people – from filling out an online application to receiving a job offer. And nearly 80% of seasonal positions do not require an interview. Seasonal opportunities are a proven pathway to a career at UPS – nearly 35,000 seasonal employees earned permanent positions following the 2021 holidays. UPS creates jobs that pay industry-leading wages and benefits, and rewards people who stay. A full-time UPS package delivery driver makes an average of $95,000 per year, plus an additional $50,000 in contributions to health, wellness and pension benefits.

Brutally hot temperatures and a persistent drought across the Great Plains and West haven't altered Tractor Supply's-TSCO  sales trajectory for the rest of the year, CEO Hal Lawton told Yahoo Finance Live at Goldman Sachs's 29th annual retail conference on Wednesday. Lawton explained that although drought delayed spring for many of the company's consumers, "our business has been eerily consistent, stable, and resilient throughout all this year.”

Apple-AAPL introduced a variety of products including new iPhones, AirPods and Apple Watches with new and enhanced features. For example, the iPhone 14 will feature car crash detection and automatically call 911 and also feature emergency SOS via satellite which will be free for two years.

Fastenal-FAST reported August sales increased 21.4% to $644.7 million with average daily sales up 16.1% to $28.0 million. By geography, Canada/Mexico led the way with 17.5% growth followed by the United States with 16.5% growth. By end market, manufacturing growth was 23.5% with non-residential construction growth at a more modest 5.8%. By product line, fasteners led the way with 19.8% growth followed by 14.5% growth of other products and 11.7% growth of safety items. More than 80% of the company’s Top 100 accounts grew with 20% daily sales growth. Headcount at Fastenal increased 8.1% over the prior year to 21,862.

Thursday, Sept. 1, 2022

Hormel Foods-HRL reported third quarter revenue increased 6% to a record $3 billion with net income increasing 24% to $219 million and EPS up 25% to $.40. During the quarter, the company saw continued broad-based inflationary pressures, persistent upstream and downstream supply chain disruptions, limited turkey supply, and impacts in China from COVID-related restrictions and temporary plant shutdowns. In the current environment, Hormel has delivered seven straight quarters of record sales and four consecutive quarters of earnings growth, reflecting the effectiveness of management’s strategy and the importance of Hormel’s brands in uncertain times. Hormel brands are responding well to the pricing actions management previously implemented to help combat inflation. The Jennie-O Turkey Store segment significantly outperformed management’s profit expectations as the team managed limited turkey supply effectively and maximized operational performance. In addition, earnings growth was boosted from the Refrigerated Foods segment delivering double-digit earnings growth, more than offsetting lower commodity profitability and by the Planters snack nut business, which continues to meet management’s expectations.  Year-to-date free cash flow increased 91% to $575 million primarily due to the jump in earnings. During the quarter, Hormel paid its 376th consecutive quarterly dividend, marking the 94th consecutive year of uninterrupted dividends. Management lowered earnings guidance as they expect elevated cost inflation to persist, primarily related to operations, logistics and raw material inputs but believes most of the escalated cost pressures they are currently absorbing as transient and likely to subside over the coming quarters. However, Hormel is confident in their ability to exceed their previous sales guidance due to strong demand for their brands, higher turkey markets and the pricing actions management has taken across the portfolio. Accordingly, Hormel raised its sales guidance for the full year to $12.2 billion to $12.8 billion with EPS now expected in the range of $1.78-$1.85, which includes the impact of the inflationary pressure on the business.

Wednesday, Aug. 31, 2022

Brown-Forman-BFB reported first quarter sales increased 11% to $1 billion with net income and EPS up 30% to $249 million and $.52, respectively. The United States and developed international markets grew net sales 7% and 9%, respectively, while net sales in emerging markets increased 17%. Travel Retail increased 77% reflecting higher volumes across much of the portfolio as travel continued to rebound. Jack Daniel’s family of brands grew net sales 11%, driven by double-digit sales growth from Jack Daniel’s Tennessee Whiskey. Premium bourbons, propelled by Woodford Reserve and Old Forester, delivered 35% net sales growth. Ready-to-Drink beverages delivered double-digit reported net sales growth, driven by strong performance in Australia and Germany. The tequila portfolio declined 4%, due to cycling significant growth during the same prior-year period and the current year impact of supply chain issues. Marketing investment increased 23% as the company supported brand momentum. Free cash flow decreased 18% during the first quarter to $140 million, due to lower working capital and higher capital expenditures. On July 28, 2022, the Brown-Forman Board of Directors declared a regular quarterly cash dividend of $0.1885 per share. Brown-Forman has paid regular quarterly cash dividends for 78 consecutive years and has increased the regular dividend for 38 consecutive years. Management anticipates continued growth in fiscal 2023 despite global macroeconomic and geopolitical uncertainties. Accordingly, management continues to expect fiscal 2023 net sales growth, organic sales growth, and operating income growth in the mid-single digit range. In addition, management is expecting reported gross margin to increase slightly, primarily due to the removal of tariffs on American Whiskey in the EU and U.K.

Friday, Aug. 26, 2022

3M-MMM reported the United States Bankruptcy Court in the Southern District of Indiana declined 3M subsidiary, Aearo Technologies' request for a preliminary injunction to ongoing litigation against 3M related to Combat Arms Earplug Version 2 products. Aearo and 3M argued that bankruptcy offered a faster and fairer way to compensate veterans who contend that earplugs made by Aearo caused hearing loss. 3M funded a $1 billion trust to settle the lawsuits which total more than 230,00 nationwide. Aearo Technologies and 3M disagree with the ruling and Aearo intends to appeal the decision. Aearo will continue in the chapter 11 proceedings, which it believes will offer a more efficient, equitable and expeditious pathway to resolution of these matters for all parties. 3M also will continue to vigorously defend its position in the multi-district litigation and in its appeals in that litigation.


Thursday, Aug.25, 2022

Ulta Beauty-ULTA reported second quarter sales increased 17% to $2.3 billion with net income increasing 18% to $296 million and EPS up 25% to $5.70. Comparable store sales increased 14% driven by an 8% increase in transactions and a 5.6% increase in average ticket. During the quarter, Ulta Beauty opened 7 net new stores, ending the quarter with 1,325 stores. During the quarter, Ulta repurchased $301.6 million shares at an average cost per share of $377.95, leaving $1.6 billion remaining under the current $2 billion authorization. Year-to-date, free cash flow increased 22% to $420 million and Ulta returned $441 million to shareholders through share buybacks. Ulta ended the quarter with $434 million in cash and $1.8 billion in shareholders’ equity on its clean, debt-free balance sheet. Based on the results for the first six months of fiscal 2022 and sales trends experience to date in August, the company has increased its outlook for fiscal 2022. Net sales are now expected in the $9.65 billion to $9.75 billion range on comp store growth of 9.5% to 10.5% with EPS of $20.70 to $21.20. This compares to prior guidance of sales in the $9.35 billion to $9.55 billion range on comp store growth of 6% to 8% with EPS in the $19.20 to $20.10 range.

Friday, Aug. 19, 2022

Berkshire Hathaway-BRKB received approval from the Federal Energy Regulatory Commission (FERC) to acquire up to 50% of Occidental Petroleum. The approval was necessary as Occidental owns FERC assets. Berkshire Hathaway Energy (BHE) also owns energy assets that are FERC-regulated and needed regulatory approval that further Occidental purchases would not have an adverse impact on competition.  Berkshire currently owns more than 20% of Occidental. While some speculate that Berkshire is planning to acquire the remaining shares of Occidental it does not own, the filing also could just be a regulatory formality.

Thursday, Aug. 18, 2022

Ross Stores-ROST reported a 4.6% decline in second quarter sales to $4.6 billion with net income falling 22% to $384.5 million and EPS down 20% to $1.11. Same store sales fell 7% on top of last year’s robust 15% same store sales increase, which was the strongest period last year. Operating margins declined 280 basis points to 11.3%, reflecting the deleveraging effect of the same store sales decline, higher markdowns, and ongoing headwinds from increased freight costs that began increasing during the second half of 2021. These expenses were partially offset by lower incentive and COVID costs. At quarter end, total inventories jumped 55% to $2.7 billion. Packaway merchandise represented 41% of total inventory versus 30% in the same period last year when the company used a substantial amount of packaways to meet robust consumer demand. Supply chain congestion continued to ease during the second quarter, resulting in above-plan early receipts of merchandise now stored in packaway that will flow to stores throughout the fall season. The company added 21 new Ross and 8 dd’s DISCOUNTS locations during the quarter ending the period with 1,980 stores. Ross remains on track to open a total of about 100 locations in 2022, comprised of 75 Ross and 25 dd stores. During the first half of 2022, Ross Stores used $56 million cash in its operating activities and invested $243 million in capital expenditures. Ross Stores returned $692.2 million to shareholders during the first half of fiscal 2022, consisting of $217 million in dividends and $475 million in share repurchases, including $235 million during the second quarter at an average cost of $81.03 per share. The company expects to repurchase a total of $950 million of its stock during 2022 under its two-year $1.9 billion share repurchase program that extends into 2023. Ross Stores ended the quarter with $3.9 billion in cash, $2.5 billion in long-term debt and $4.1 billion in shareholders’ equity on its sturdy balance sheet. Given the disappointing first half results, the increasingly challenging and unpredictable macro-economic landscape and today’s more promotional retail environment, the company expects same store sales for the third quarter to decline 7% to 9% versus the strong 14% increase last year. Fourth quarter same store sales are expected to decline 4% to 7% on top of last year’s 9% increase. EPS for 2022 are expected in the $3.84 to $4.12 range, down 18% from last year at the mid-point.        

Wednesday, Aug. 17, 2022

Cisco Systems-CSCO reported fourth quarter revenues remained flat at $13.1 billion with net income decreasing 6% to $2.8 billion and EPS down 4% to $.68. Cisco had continued progress on their business model transformation with total Annualized Recurring Revenue (ARR) at $22.9 billion in the fourth quarter of fiscal 2022, up 8% year over year. Total revenue exceeded management’s expectations in the fourth quarter, due to strong execution and numerous initiatives to reduce the impact of the global supply situation. Management’s operational discipline was reflected in their healthy operating margin and strong cash flow generation, enabling Cisco to return nearly $4 billion to shareholders in the fourth quarter.  During the quarter, product revenue and service revenue remained flat. By product segment, growth was led by End-to-End Security up 20% to $984 million, Optimized Application Experiences up 8% to $185 million, and Collaboration up 2% to $1.2 billion. Growth in these segments was offset by Secure, Agile Networks down 1% to $6.1 billion and Internet for the Future down 10% to $1.3 billion. For the full fiscal 2022 year, revenues increased 3% to $51.6 billion with net income increasing 12% to $11.8 billion and EPS up 13% to $2.82. Cisco had strong demand during the year, with record full year product orders and backlog. Return on shareholders’ equity was an impressive 30% for the year. Free cash flow was down 14% to $12.7 billion, due to higher working capital needs. During fiscal 2022, Cisco returned $13.9 billion to shareholders through dividends of $6.2 billion and share repurchases of $7.7 billion. Cisco ended the year with a strong financial position with more than $19 billion in cash and investments, $8.4 billion in long-term debt and $39.8 billion in shareholders’ equity. Management’s outlook for the first quarter of fiscal 2023 is for revenue growth of 2%-4% and EPS in the range of $.64 to $.68. Guidance for the full fiscal year 2023 is for revenue growth of 4%-6% and EPS in the range of $2.77 to $2.88.

 

The TJX Companies-TJX reported net sales declined 1.9% during the second quarter to $11.8 billion with net income up 3% to $809.3 million and EPS up 7.8% to $.69. U.S. comparable store sales declined 5% as a higher average ticket was offset by lower traffic as customers were impacted by high inflation, especially in gas and food prices, which curtailed consumer discretionary spending. With gas prices easing, this should help second half results along with increased marketing programs focused on the value TJX provides its customers. TJX saw softness in the home categories with positive growth in the overall apparel business. The international businesses experienced constant currency sales growth with improved profitability.  The company’s pre-tax margin of 9.2% was above the company’s plan as the company generated strong merchandise margins and had less freight and wage pressures. The strong profitability on lower sales speaks to the company’s strength and flexible business model with sharp team execution and good expense discipline. Inventories jumped 39% during the quarter to $7.1 billion but management is comfortable with its inventory levels, noting that inventory turnover is better than pre-Covid days. During the second quarter, the company generated $641 million of operating cash flow and paid $346 million in dividends and repurchased 11.8 million shares for $700 million at an average price of about $59.32 per share. During the first half, the company returned $2 billion to shareholders through$653 million in dividends and $1.3 billion of share repurchases. TJX expects to repurchase approximately $2.25 to $2.50 billion of TJX stock for the full fiscal year. For the full 2023 fiscal year, TJX lowered its expectation for U.S. comparable sales growth to a decrease of 2% to 3% versus its previous guidance of an increase of 1% to 2% while increasing its outlook for pre-tax profit margin to a range of 9.3% to 9.5%, which should generate EPS in the range of $2.87 to $2.95.

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.