HI-Quality Archive - 2018
Ross Stores-ROST reported fourth quarter revenues increased 1% to $4.1 billion with net income down 2% to $442 million and EPS up 1% to $1.20. Sales and earnings for the prior year period included 14 weeks compared to 13 weeks in the current quarter. Comparable store sales rose 4% during the quarter. For the full fiscal 2018 year, revenues increased 6% to $15 billion with net income up 17% to $1.6 billion and EPS up 20% to $4.26. Return on shareholders’ equity was a dressy 48% during the year. Free cash flow increased 26% to $1.6 billion during the year with the company paying $337 million in dividends and repurchasing $1.1 billion of shares. The Board of Directors authorized a new program to repurchase $2.55 billion of its common stock over the next two years which equates to 8% of the total market value. For fiscal 2019, management expects total sales growth of 5%-6% with 1%-2% comparable store sales growth. Earnings per share are expected to be in the range of $4.30 to $4.50 reflecting 3% growth at the midpoint. The company plans to add 75 Ross Dress for Less and 25 dds Discounts stores in fiscal 2019.
Thursday, Dec. 20, 2018
Nike-NKE reported strong second quarter results with revenues and net income each jumping 10% to $9.4 billion and $847 million, respectively, with EPS up 13% to $.52. Revenues for the Nike Brand were up 14% on a constant-currency basis to $8.9 billion driven by accelerated growth across all geographies and in Nike Direct led by 41% digital growth. Revenue grew in nearly every key category led by Sportswear with well-balanced double-digit growth across footwear and apparel globally. Revenues for Converse rose 6% on a constant-currency basis to $425 million driven by growth in Asia and digital. Gross margin increased 80 basis points during the quarter to 42.8% driven by higher average selling prices and margin expansion in Nike Direct. Inventories were $5.4 billion as of quarter end, up 1%, thanks to effective inventory management and strong demand for key franchises resulting in healthy inventories across all geographies. Cash declined $2.3 billion to $4.0 billion as of quarter end due to cash used for share repurchases, dividends, repayment of notes and investments in infrastructure. During the second quarter, Nike repurchased 16.1 million shares for about $1.3 billion at an average price of about $80.74 per share. Since Nov. 2015, the company has repurchased 183.3 million shares for $11.3 billion as part of the four-year $12 billion share buyback program. In June 2018, the Board authorized a new four-year $15 billion share repurchase program. Despite high uncertainty on a macro level, Nike is seeing strong and sustainable growth for fiscal 2019 and beyond thanks to strong demand for the company’s innovative products. Nike raised their financial outlook with sales in fiscal 2019 expected to increase at a high single-digit rate to low double-digit rate on a constant- currency basis with gross margin expected to increase 70 basis points for the full year thanks to higher average selling prices and increased unit sales.
Accenture-ACN reported fiscal first quarter revenues increased 7% to $10.6 billion with net income and EPS up 9% to $1.3 billion and $1.96, respectively. New bookings for the quarter were $10.2 billion, with consulting bookings of $5.9 billion and outsourcing bookings of $4.3 billion. Free cash flow increased 9% during the quarter to $950 million with the company paying $933 million in dividends and repurchasing $788 million of its shares. The company has $5.2 billion remaining under the current share repurchase program. With a strong start to fiscal 2019, Accenture increased their outlook for revenue growth to the range of 6%-8% from the previous range of 5%-8%, with foreign exchange expected to have a negative 3% impact. The company also increased the lower end of EPS guidance and now expects EPS in the range of $7.01 to $7.25 compared to $6.98 to $7.25 previously. Operating margin is expected to expand 10 to 30 basis points to 14.5%-14.7%. For fiscal 2019, Accenture expects free cash flow to be in the range of $5.1 billion to $5.5 billion.
Paychex-PAYX reported very good second quarter results and presented an optimistic outlook for the current selling season and beyond. Paychex’s second quarter revenues were up 7% from the prior year to $858.9 million. Management Solutions revenue for the quarter was $685.4 million, an increase of 5% over the prior year driven by increases in the client base and fees on retirement assets. The acquisition of the Lessor Group in February 2018 added 1% to the growth of this segment. PEO and Insurance Services increased 15% to $155.2 million driven by growth in clients, client worksite employees and an increase in the number of health and benefit applicants. Interest on Fund increased 31% to $18.3 million driven by higher average interest rates as average client held funds were flat, as increased wages and employees were offset by lower withholdings under the Tax Cuts and Jobs Act. Operating income increased 1% to 307.2 million from the prior year. The 10% growth in total expenses to $551.7 million significantly offset the growth in revenue. Expenses were driven by higher compensation costs, as Paychex increased headcount in operations and the sales force to support the growth in the business. Paychex has invested in several business initiatives, technology and the continued growth of the PEO business that tamped down the operating income in the quarter. The lower tax rates, 23.8% in 2018 versus 34.8% in 2017, allowed net income to jump 19% over the prior year to $235.8 million or $0.65 per diluted share. The financial positon of the company is strong with $769 million in cash and investments with only $57.3 million in short term borrowings. The balance sheet will change this quarter with the addition of $800 million in debt to finance its purchase of Oasis Outsourcing Group Holdings L.P. in the third quarter. Management was very optimistic about the current selling season and the opportunities for synergistic growth in the future with the acquisition of Oasis and the expanded geographies of the combined businesses. As Paychex heads into the important selling season, client retention rates are approaching all-time highs, new sale opportunities are trending up and pricing is holding to slightly improving. Adding these factors to a fundamentally optimistic macro business environment, and Paychex should meet or exceed its outlook for 2019 and beyond. Management did not see any signs of a negative trend in the next six months or more. The biggest headwind currently is a tight labor market where businesses are turning down work because they cannot find qualified workers. Management added that its growing PEO and HR services will provide a buffer in an economic downturn as regulations in the labor and employee benefits arena make it difficult for small and medium size shops to navigate growth or downturns without professional assistance. Total revenue for fiscal 2019 is expected to increase 6%-7% with adjusted net income expected to increase 11%-12%.
Walgreens Boots Alliance-WBA rang up first fiscal quarter sales of $33.8 billion, up 10% from last year’s first quarter, with net income increasing 37% to $1.1 billion and EPS increasing 46% to $1.18. Excluding Rite-Aid acquisition-related expenses and other special items, adjusted net operating income declined by 4% to $1.7 billion, net income increased 7.6% to $1.4 billion and EPS increased 14% to $1.46, reflecting benefits from US tax reform and share repurchases. Retail Pharmacy USA sales were $25.7 billion, up 14%. Excluding the benefit from acquired Rite-Aid stores, organic sales growth was 4.6% during the quarter. Pharmacy sales, which accounted for 74.4% of the division’s sales in the quarter, increased 17.5%, primarily due to higher prescription volumes from the acquisition of Rite-Aid stores. Comparable pharmacy sales increased 2.8%. The division filled 289.8 million prescriptions, including immunizations, an increase of 11.4% over the year-ago quarter. Prescriptions filled in comparable stores increased 2%. Front-end retail sales increased 6% with comparable retail sales declining 3.2%, primarily due to the continued de-emphasis of select products such as tobacco and a difficult comparison with the prior year quarter. Retail Pharmacy International sales declined 6% to $2.9 billion, reflecting foreign currency headwinds and a weak retail environment in the UK. Pharmaceutical Wholesale sales dipped slightly to $5.7 billion, entirely due to a negative currency impact of 6.8%. During the quarter, the company generated $460 million in operating cash flow, and free cash flow was negative $10 million due to working capital investments and the integration of Rite-Aid stores. Walgreens Boots Alliance returned $1.3 billion to shareholders during the quarter through share repurchases of $912 million and dividends of $422 million. Management confirmed expected fiscal 2019 adjusted EPS constant currency growth of 7% to 12%. The company expects store and labor investments of about $150 million and share repurchases of $3 billion during 2019. During the earnings conference call, management announced the launch of its transformational cost management program which is targeting annual cost savings in excess of $1 billion by the end of the third year.
Wednesday, Dec. 19, 2018
Walgreens Boots Alliance-WBA and Verily, an Alphabet-GOOGL company, will collaborate on multiple projects under a broad agreement aimed at improving health outcomes for patients with chronic conditions, while also lowering the cost of care. Walgreens will be a first-choice retail pharmacy development and commercialization partner to Verily, and the organizations have agreed to work on and explore ways to improve access to advanced healthcare technologies and solutions – which may include sensors and software to help prevent, manage, screen and diagnose disease – with a shared goal of scaling deployment at Walgreens retail locations. Initially, the companies are developing a medication adherence pilot project that will deploy devices and other approaches designed to improve adherence. Walgreens together with Onduo, Verily’s joint venture with Sanofi, will also launch a virtual diabetes solution to Walgreens employees and family members with Type 2 diabetes through the Walgreens employee health plan. Onduo provides tools, coaching and remote access to specialty doctors to help people with diabetes to manage their condition anytime, anywhere. These initiatives are part of a broader strategic alliance designed to combine Verily’s healthcare technology innovation with Walgreens corner store presence and trusted pharmacy services. “We’re focused on finding innovative ways to deliver better patient care at lower costs, and working with the right healthcare partners to help bring new services and solutions to our patients and customers,” said Stefano Pessina, chief executive officer, Walgreens Boots Alliance, Inc. “The continued rise in chronic diseases today can be costly to patients as well as to our healthcare system. Working with Verily, we’ll look at how we can best support integrated and value-based care to meet our patients’ needs, as well as opportunities to address other chronic conditions over time.” “We are well aligned with Walgreens on the need to develop and bring to market solutions that help people better engage with their health and manage their chronic conditions. This relationship affords us the opportunity to jointly tackle real-world issues that significantly impact the health of individuals and communities,” said Andrew Conrad, chief executive officer, Verily. “Medication adherence, which represents one of the most significant and costly barriers to improving patient outcomes, is an area that I am most excited to work on with a partner like Walgreens.”
3M-MMM announced that it has entered into a definitive agreement to acquire the technology business of M*Modal, for a total enterprise value of $1.0 billion. M*Modal is a leading healthcare technology provider of cloud-based, conversational Artificial Intelligence (AI)-powered systems that help physicians efficiently capture and improve the patient narrative so they can spend more time with their patients and provide higher quality of care. Annual revenue of M*Modal’s technology business is estimated to be approximately $200 million. On a GAAP reported basis, 3M estimates the acquisition to be $0.10 dilutive to earnings in the first 12 months following completion of the transaction. Excluding purchase accounting adjustments and anticipated one-time expenses related to the transaction and integration, 3M estimates the acquisition to be neutral to earnings over the same period. The transaction is expected to close in the first half of 2019.
Cisco-CSCO announced the intent to acquire privately-held Luxtera, Inc, a semiconductor company based in Carlsbad, California that uses silicon photonics to build integrated optics capabilities for webscale and enterprise data centers, service provider market segments, and other customers. Luxtera’s technology, design, and manufacturing innovation significantly improves chip scale and performance, while lowering costs. Cisco plans to incorporate Luxtera’s technology across its intent-based networking portfolio, spanning enterprise, data center and service provider markets. "With Cisco’s 2018 Visual Networking Index projecting that global Internet traffic will increase threefold over the next five years, our customers are facing an exponential demand for Internet bandwidth,” said David Goeckeler, executive vice president and general manager, Networking and Security Business at Cisco. “Optics is a fundamental technology to enable this future. Coupled with our silicon and optics innovation, Luxtera will allow our customers to build the biggest, fastest and most efficient networks in the world.” Cisco will pay $660 million in cash and assumed equity awards for the acquisition of Luxtera. The acquisition is expected to close in the third quarter of Cisco's fiscal year 2019.
Tuesday, Dec. 18, 2018
FactSet-FDS reported fiscal first quarter revenues rose 7% to $351.6 million with net income up 20% to $84.3 million and EPS up 23% to $2.17. These solid results were driven by 6.6% organic sales growth and operating margin expansion of 1.5% to 28.6% during the quarter. Adjusted EPS rose 15% during the quarter driven primarily by higher revenues and a lower effective tax rate of 12.1% compared to 18.3% last year. Management is encouraged by continued strong demand for their data and technology offerings despite stock market volatility. Annual Subscription Value (ASV) plus professional services was $1.42 billion as of 11/30/18. User count increased by 23,312 to 115,209 in the last quarter driven by an increase in wealth management users. Annual client retention was greater than 95% of ASV. When expressed as a percentage of clients, annual retention was 91%. Employee count was up 1.9% in the past 12 months to 9,600. Free cash flow declined 33% to $36.8 million due to working capital changes and a 60% increase in capital expenditures to $9.5 million as the company builds out new office space and upgrades technology. During the quarter, FactSet repurchased 275,000 shares for $60.4 million at an average price of $220 per share. Over the past 12 months, the company has returned $429 million to shareholders in the form of share repurchases and dividends. FactSet has $181.3 million remaining for future share repurchases. Management reaffirmed 2019 sales and earnings guidance with revenue expected in the range of $1.41 billion to $1.45 billion. GAAP EPS is expected in the range of $8.70-$8.90 with adjusted EPS expected in the range of $9.45-$9.65, representing 12% growth at the midpoint.
Monday, Dec. 17, 2018
Oracle-ORCL reported second quarter revenues were relatively flat at $9.6 billion but up 2% on a constant currency basis. Cloud services and license support led the growth with 3% growth, or 5% growth on a constant currency basis, to $6.6 billion. Software revenue grew 5% driving operating cash flow of more than $15 billion over the last four quarters. The $1 billion Software as a Service business delivered overall bookings growth of 35% in the quarter. The company ended the quarter with a backlog of $30.1 billion with 62% of the backlog expected to be recognized in the next 12 months. Net income rose 5%, or 9% on a constant currency basis, to $2.3 billion primarily due to a lower tax rate. Earning per share jumped 17% thanks to the company’s substantial share repurchase program. Free cash flow during the first half of the fiscal year increased 2% to $6.5 billion. Oracle paid $1.5 billion in dividends and repurchased $19.9 billion of its common stock during the first half, including 203 million shares in the second quarter for $10 billion at an average price of $49.26 per share. Over the last 12 months, the company has repurchased 602 million shares, reducing its shares outstanding by 12%. During the fiscal third quarter, revenue is expected to increase 2%-4% on a constant currency basis with non-GAAP EPS expected to increase 3%-5% in the range of $.83-$.85.
Johnson & Johnson-JNJ announced that the Board of Directors has authorized the repurchase of up to $5 billion of the company's common stock. "Based on our continued strong performance and, more importantly, the confidence we have in our business going forward, the Board of Directors and management team believe that the company's shares are an attractive investment opportunity," said Alex Gorsky, Chairman and Chief Executive Officer. "Our strong cash flow enables us to simultaneously return value to shareholders through our regular quarterly dividend and share repurchases, while at the same time continuing to deploy capital that will further strengthen our robust enterprise pipeline and drive long-term growth." Johnson & Johnson reaffirms its full-year 2018 sales and adjusted earnings per share guidance of $81.0 to $81.4 billion and $8.13 to $8.18 per share, respectively.
Alkermes plc and Biogen-BIIB announced that Alkermes has submitted a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) for diroximel fumarate (BIIB098), a novel oral fumarate in development for the treatment of relapsing forms of multiple sclerosis (MS). “The filing of diroximel fumarate by our partners at Alkermes demonstrates our enduring commitment to people living with MS and builds on our established track record as a leader in the industry,” said Michael Ehlers, M.D., Ph.D., executive vice president, research & development at Biogen. “MS is a heterogeneous disease, and while there are a number of approved therapies available today, continued treatment advances remain an important priority.”
Alphabet-GOOGL plans to invest over $1 billion in capital improvements to establish a new 1.7 million square foot campus in New York, Google Hudson Square. New York City is now home to more than 7,000 employees, speaking 50 languages, working on a broad range of teams including Search, Ads, Maps, YouTube, Cloud, Technical Infrastructure, Sales, Partnerships and Research. With these recent investments in Google Chelsea and Google Hudson Square, Alphabet will have the capacity to more than double the number of Googlers in New York over the next 10 years.
Thursday, Dec. 13, 2018
Starbucks-SBUX announced long-term growth plans of delivering double-digit growth in non-GAAP earnings per share. Starbucks reaffirms FY19 EPS guidance of $2.61-2.66, excluding non-recurring items, and sees FY19 revenues +5-7%. The revenue guidance ncludes ~2% net negative impact related to streamline-driven activities. The company expects global comparable store sales growth near the lower end of its current 3% to 5% range with plans to add ~2,100 net new Starbucks stores globally. They also announced the launch of Starbucks Delivers to nearly a quarter of company-operated stores with Uber Eats, beginning in 2019. The company is expanding Starbucks Delivers in China – on the Ele.me on-demand delivery platform – to 2,000 stores across 30 cities in China since launching three months ago. Starbucks accelerates cold beverage innovation strategy, including plans to roll out Nitro Cold Brew in all U.S. company-operated stores in FY19. Starbucks highlights efforts to amplify the brand globally while showcasing new products and market opportunities for Global Coffee Alliance with Nestlé.
The board of directors of AbbVie-ABBV has authorized a $5 billion increase to AbbVie's existing stock repurchase program. Purchases may be made from time to time at management's discretion.
Wednesday, Dec, 12, 2018
- T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.03 trillion as of November 30, 2018, up 4.1% from 12/31/17.
Monday, Dec. 10, 2018
The Board of Directors of Facebook-FB approved an increase of $9.0 billion in the amount authorized under the company’s share repurchase program. The Board has previously authorized repurchases of up to $15.0 billion of the Company’s Class A common stock under the program since it commenced in 2017, and this increase is incremental to the prior authorizations.
Thursday, Dec. 6, 2018
Ulta Beauty-ULTA bagged a 16% increase in net sales to $1.56 billion with net income up 25% to $131.2 million and EPS up 28% to $2.18. Comparable sales for stores open at least 14 months plus e-commerce sales increased 7.8%, driven by 5.3% transaction growth and 2.5% growth in average ticket. Retail comparable sales increased 4.4%, including salon comparable sales growth of 3.5%. E-commerce sales increased 43% to $170.7 million, representing 340 basis points of the total comp sales increase of 7.8%. Operating margins declined by 130 basis points to 10.8%, squeezed by increases in wages and marketing expenses to support growth, partially offset by lower corporate overhead. The company’s tax rate declined to 23.1% from 35.8% last year, primarily due to tax reform. The company opened 42 new stores during the quarter, bringing the total number of stores to 1,163 and the square footage to 12,222, up 9.7% from last year. Year-to-date, Ulta Beauty generated $542.2 million in operating cash flow and $285.8 million in free cash flow. During the quarter, the company repurchased 451,424 shares of its common stock at a cost of $119 million, or $263.61 per average share. Year-to-date, Ulta Beauty has repurchased 1,582,118 shares at a cost of $379.4 million, or $239.81 per average share. As of 11/3/2018, $282.8 million remained under the $625 million share repurchase program announced in March 2018. Ulta Beauty ended the third fiscal quarter with $297 million in cash and no long-term debt on its blemish-free balance sheet. Looking ahead, Ulta Beauty affirmed its previous full year guidance with sales increasing in the low teens on comp store growth of 7% to 8% and e-commerce sales growing in the 40% range. EPS are expected to increase in the low twenties percentage range, including the impact of about $500 million in share repurchases.
Thor Industries-THO reported fiscal first quarter revenues declined 21% to $1.76 billion with net income and EPS down 89% to $14 million and $0.26, respectively. Earnings reflected $57.1 million, or $1.02 per share, of acquisition-related costs for a foreign currency forward contract and transaction costs. Sales for the first quarter were down 21% for the Towable segment and down 24% for the Motorized segment. Unit sales in the Towable segment were down 26% and unit sales in the Motorized segment were down 36%. Overall gross profit margins declined to 11.8%, compared to 14.9% in the prior-year period, reflecting the impact of higher overall sales promotions and increased costs primarily associated with warranty expenses. Material costs also increased due to the implementation of tariffs. Free cash flow for the quarter was negative $50 million compared to a negative $21 million in the prior year. The previously announced acquisition of Erwin Hymer Group, Europe’s premier RV manufacturer, is expected to close near the end of calendar year 2018.
Biogen-BIIB exercised its option to obtain from Ionis a worldwide, exclusive, royalty-bearing license to develop and commercialize BIIB067 (IONIS-SOD1RX), an investigational treatment for amyotrophic lateral sclerosis (ALS) with superoxide dismutase 1 (SOD1) mutations. ALS with SOD1 mutations is a subtype of familial ALS and accounts for approximately two percent of all ALS cases. As a part of the option exercise, Biogen made a one-time $35 million payment to Ionis. Future payments may include potential post-licensing milestone payments of up to $55 million and royalties in the low to mid-teen percentages on annual worldwide net sales. Biogen will be solely responsible for the costs and expenses related to the development, manufacturing and commercialization of BIIB067 following the option exercise.
According to ADP’s National Employment Report, private sector employment increased by 179,000 jobs from October to November. “Although the labor market performed well, job growth decelerated slightly,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. ”Midsized businesses added nearly 70 percent of all jobs this month. This growth points to the midsized businesses’ ability to provide stronger wages and benefits. It also suggests they could be more insulated from the global challenges large enterprises face.” Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth is strong, but has likely peaked. This month’s report is free of significant weather effects and suggests slowing underlying job creation. With very tight labor markets, and record unfilled positions, businesses will have an increasingly tough time adding to payrolls.”
Wednesday, Dec. 5, 2018
Brown-Forman-BFB reported second fiscal quarter sales decreased slightly to $910 million with net income increasing 4% to $249 million and EPS increasing 6% to $0.52. Year-to-date, underlying net sales grew 5% on broad-based portfolio growth including a 5% increase for the Jack Daniel’s family of brands, a 25% increase for Woodford Reserve, a 15% increase in Herradura and an 11% increase in el Jimador. Emerging markets grew underlying net sales by 10%, developed international markets grew underlying net sales by 5% and the United States grew underlying net sales by 3%. During the first half of the year, Brown-Forman generated $219 million in free cash flow and returned $280 million to shareholders through dividends of $152 million and share repurchases of $128 million. Recently enacted retaliatory tariffs on American whiskey have created uncertainty around the company’s near-term outlook, making it difficult to accurately predict future results. However, management reaffirmed its full fiscal 2019 year EPS guidance of $1.65 to $1.75, representing 11% to 18% growth from last year and underlying sales growth of 6% to 7%.
Tuesday, Dec. 4, 2018
Mastercard-MA announced that its Board of Directors has increased the company’s quarterly cash dividend to 33 cents per share, a 32 percent increase over the previous dividend of 25 cents per share. The Board of Directors also approved a new share repurchase program, authorizing the company to repurchase up to $6.5 billion of its Class A common stock.
Stryker-SYK announced that its Board of Directors has declared a quarterly dividend of $0.52 per share payable on January 31, 2019 to shareholders of record at the close of business on December 31, 2018, representing an increase of approximately 11% versus the prior year and the previous quarter. “We continue to deliver strong financial results, and consistent with our stated capital allocation philosophy, are raising our dividend 11%," said Kevin A. Lobo, Chairman and Chief Executive Officer.
Wednesday, Nov. 28, 2018
The Walt Disney Company-DIS Board of Directors today announced a semi-annual cash dividend of $0.88 per share, payable January 10, 2019 to shareholders of record at the close of business on December 10, 2018. The Company last paid a semi-annual dividend of $0.84 per share in July. “Given our record financial performance in fiscal 2018, we are pleased to increase our dividend to shareholders, while continuing to invest for future growth with our pending acquisition of 21st Century Fox and the ongoing development of our direct-to-consumer business,” said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company. “This payment brings our total dividends for the fiscal year to $1.72 a share.”
Tuesday, Nov. 27, 2018
United Technologies-UTX announced the completion of its acquisition of Rockwell Collins and the company's intention to separate its commercial businesses, Otis and Carrier (formerly CCS), into independent entities. The separation will result in three global, industry-leading companies: United Technologies, comprised of Collins Aerospace Systems and Pratt & Whitney, will be the preeminent systems supplier to the aerospace and defense industry; Collins Aerospace was formed through the combination of UTC Aerospace Systems and Rockwell Collins; Otis, the world's leading manufacturer of elevators, escalators and moving walkways; and Carrier, a global provider of HVAC, refrigeration, building automation, fire safety and security products with leadership positions across its portfolio. The proposed separation is expected to be effected through spin-offs of Otis and Carrier that will be tax-free for UTC shareowners for U.S. federal income tax purposes and occur in 2020. Gregory Hayes will oversee the transition and will continue in his current role as UTC Chairman and CEO following the separation. The three independent companies will be appropriately capitalized with the financial flexibility to take advantage of future growth opportunities. Each business will be better positioned to pursue a capital allocation strategy more suitable to its respective industry and risk and return profile, and enjoy greater flexibility with an independent equity currency and more appropriately aligned management and employee incentives. UTC's commitment to strengthening its credit metrics remains unchanged. Each independent company is expected to have a strong balance sheet and to maintain an investment grade credit rating. Following separation, the three companies together are initially expected to pay a quarterly dividend that is in sum no less than 73.5 cents per share, although each company's dividend policy will be determined by its respective Board of Directors following the completion of the separation. Until the planned transactions are completed, UTC expects to continue to pay a quarterly dividend of no less than 73.5 cents per share. The separation is expected to be completed in 2020, with separation activities occurring within the next 18-24 months. UTC updated its 2018 outlook to include the acquisition of Rockwell Collins and now anticipates: Sales of $64.5 to $65.0 billion, up from $64.0 to $64.5 billion; Adjusted EPS dilution of approximately $0.10 from the acquisition, resulting in adjusted EPS of $7.10 to $7.20, down from $7.20 to $7.30; Free cash flow of $4.25 to $4.5 billion, down from $4.5 to $5.0 billion*; All outlook changes are related to the acquisition of Rockwell Collins. There is no change in the Company's previously provided 2018 expectations for organic sales growth of approximately 6 percent. For 2019, UTC anticipates the acquisition to be $0.15 to $0.20 accretive to adjusted EPS, including the estimated impact of approximately $650 million of incremental intangible amortization associated with the transaction. UTC also expects $500 to $750 million of accretion to free cash flow in 2019 from Rockwell Collins. The weighted average diluted shares outstanding for 2019 is expected to be approximately 872 million shares.
Monday, Nov. 26, 2018
Paychex-PAYX announced that it has entered into an agreement to acquire Oasis Outsourcing Acquisition Corporation ("Oasis"), the nation's largest privately owned professional employer organization (PEO) and an industry leader in providing human resources outsourcing services. The acquisition will significantly advance Paychex's leadership position in HR outsourcing, leveraging the scope of the company's technology platform and providing new clients access to Paychex's innovative products and technology-enabled services. Paychex will now serve more than 1.4 million worksite employees (WSEs) through its HR outsourcing services. Oasis serves more than 8,400 clients across all 50 states with its HR solutions, employee benefits, payroll administration, and risk management services. The total cash purchase price is $1.2 billion and is expected to be financed through a combination of cash on Paychex's balance sheet and borrowings under existing credit facilities or new debt. Paychex will see a number of revenue and cost synergies as a result of this transaction. Excluding transaction costs, the acquisition is expected to have minimal impact on fiscal year 2019 earnings per share.
Friday, Nov. 23, 2018
United Technologies-UTX announced that it has received the final regulatory approval needed to close its acquisition of Rockwell Collins, Inc. The conclusion of the regulatory review by China's State Administration for Market Regulation clears the way for United Technologies to proceed with the proposed acquisition announced on September 4, 2017. The acquisition is expected to close within three business days.
Tuesday, Nov. 20, 2018
TJX Companies-TJX rang up a 12% increase in third quarter sales to $9.8 billion with net earnings increasing a fancy 19% to $762 million and EPS up 22% to $0.61. Excluding the impact from tax reform legislation and a pension settlement, adjusted EPS of $0.54 increased 8%. Consolidated comp store sales grew 7%, driven by strong customer traffic at every division. Marmaxx, TJX’s largest division, delivered a fashionable 9% comp store sales increase, marking the 17th consecutive quarter of increased customer traffic at TJX and Marmaxx. HomeGoods comp store sales grew 7% while TJX Canada comp store sales grew by 5% and TJX International sales grew 3%. Gross profit margin for the third quarter was 28.9%, down nearly 1% from last year, as strong expense leverage on the higher sales was more than offset by increased freight costs, supply chain expenses and an unfavorable inventory hedge comparison. Inventories jumped 17% to $5.5 billion ahead of an expected robust holiday selling season. During the third quarter, TJX opened 102 new stores, bringing the total number of stores to 4,296 as of Nov. 3, 2018. Management aims to operate 6,100 stores under its current brands and geographic footprint. During the third quarter, TJX generated $618 million in free cash flow, up 4% from last year, with the company returning a total of $841 million to shareholders through dividends of $241 million and share repurchases of $600 million at an average cost of $52.63 per share. TJX now expects to repurchase about $2.5 billion of TJX stock in fiscal 2019. Looking ahead to the fourth quarter, based on an expected 2% to 3% increase in comp store sales, adjusted EPS are to be in the range of $.56 to $.57, down 5% from last on incremental freight costs and wage increases and the timing of expenses. For the full year, based on estimated comp store sales growth of 5% on a consolidated basis and 6% at Marmaxx, management expects adjusted EPS in the range of $2.08 to $2.09, up 8% from last year.
Ross Stores-ROST reported third quarter revenues rose 7% to $3.5 billion with net income up 23% to $338 million and EPS up 26% to $.91. Comparable store sales rose 3% during the quarter. Both sales and earnings were ahead of management’s forecast, despite being up against very strong multi-year comparisons. Though above plan, operating margin of 12.4% was down from last year as a higher merchandise margin was more than offset by increases in freight costs and labor costs. Free cash flow increased 29% year-to-date to $1.2 billion with the company paying $254 million in dividends and repurchasing 9.4 million shares for $806.5 million at an average price of approximately $85.80 per share. Management remains on track to repurchase $1.1 billion of stock for the full fiscal year. As Ross enters the holiday season, they expect the retail environment to remain fiercely competitive. While they hope to do better, Ross Stores continues to project fourth quarter comparable store sales gains of 1% to 2% versus a strong 5% last year. Fourth quarter EPS guidance was raised to $1.09-$1.14, which includes a one-time, non-cash benefit of approximately $.07 per share related to the favorable resolution of a tax matter. This also led to an increase in fiscal 2018 full year guidance for EPS in the range of $4.15-$4.20.
Maximus-MMS reported 2018 fourth quarter revenue and earnings of $558.4 million and $0.71 per share. The revenue was down 10% from the prior year primarily due to contracts that completed without continuation, re-compete and extension awards that reset contract terms, contracts that were re-competed as small business awards and some rebid losses. Operating income and EPS was negatively impacted by the loss of contracts and the lower margins experienced on new contract awards and the impact of the reset of re-compete and extension awards. The pressure on revenue and earnings were felt across all of the company’s operating segments in the fourth quarter. Full year 2018 revenue was slightly down from $2.45 billion in 2017 to $2.39 billion in 2018, primarily due to the contract work that was completed in the Federal segment without follow-on contract opportunities, existing contracts that were limited to small business firms when renewed and some losses of existing contract in competition. Earnings increased from $3.17 per share in 2017 to $3.35 in 2018. The earnings increase was primarily driven by the lower corporate tax rates which more than offset the impact of the lost revenue. Operating and free cash flows remained strong, although slightly down year over year as new contract starts tend to use cash initially. In 2018, Maximus repurchased 1.1 million shares of stock for $67.6 million or an average share price of $62.07. In November of 2018, Maximus completed the acquisition of select contracts specializing in operation of civilian citizen engagement center contracts from General Dynamics. The contracts acquired will add revenue of $612.5 million dollars in 2019 (over 10 ½ months) with a corresponding increase in earnings of $0.45 per share. The contracts were acquired for $400 million, in an all cash deal. The two largest contracts in the purchase are to Medicare open enrollment, the contract is in place through 2023. The second contract to operate the 2020 Census Questionnaire Assistance center will operate through June of 2021when the census is completed. In addition to the revenue and earnings gained from the contracts, Maximus benefits with additional expertise in a core competency area, synergies from the increase in contract base which makes the company more rate competitive and increases the revenue in the Federal segment to over $1 billion, making the company more viable as a large government prime contractor in the Federal marketplace. Overall the acquisition appears to be a good fit strategically and tactically for Maximus and its shareholders. Maximus provided guidance for 2019 with revenues, including the acquisition, expected in the range of $2.925 billion and $3.0 billion, an increase of 22.2% on the low end. Earnings are projected between $3.55 and $3.75 per share for 2019, an increase of 6% on the low side. Maximus begins the year with 93% of the estimated revenue in backlog. The new contract pipeline for the company, including the re-compete of existing contracts that are expected to be bid in the next six months is $2.7 billion, consistent with prior years. Approximately 75% of the pipeline consists of new contract opportunities that represent growth to the company if won.
Hormel Foods-HRL reported fourth quarter sales increased 1% to $2.5 billion with net income up 20% to $261.4 million and EPS up 17% to $.48. For the full fiscal 2018 year, revenues increased 4% to $9.5 billion with net income up 20% to $1.0 billion and EPS up 19% to $1.86. Return on shareholders’ equity was a plump 17.3% during the year. Free cash flow increased 6% to $861.9 million during the year with the company paying $388.1 million in dividends and repurchasing $46.9 million of shares. Thanks to record earnings and cash flows, Hormel announced a 12% increase in its annual dividend, marking the 53rd consecutive year of dividend increases. This is the 10th consecutive year of double-digit dividend increases and the 90th year Hormel has paid a dividend. For fiscal 2019, management expects revenues in the range of $9.7 billion to $10.2 billion with EPS expected in the range of $1.77 to $1.91.
Monday, Nov. 19. 2018
Hormel Foods-HRL increased its dividend 12% to $.84 per share, marking the 53rd consecutive year of dividend increases.
Thursday, Nov. 15, 2018
Nike-NKE announced today that its Board of Directors has approved a 10% increase in its quarterly cash dividend to $0.22 per share on the company’s outstanding Class A and Class B Common Stock. “NIKE continues to fuel growth through our Consumer Direct Offense, while generating strong cash flow and increasing returns to shareholders,” said Mark Parker, Chairman, President and CEO of NIKE, Inc. “This is our 17th consecutive year of increasing dividend payouts, and combined with the new four-year $15 billion share repurchase program announced this summer, this commitment shows our continued confidence in NIKE’s ability to deliver sustainable, profitable, capital-efficient growth over the long-term.”
Brown-Forman-BFB announced today that its Board of Directors increased its quarterly cash dividend on its Class A and Class B Common Stock by 5.1% to $0.166 per share from the prior quarter’s $0.158 per share. As a result, the indicated annual cash dividend will rise from $0.632 per share to $0.664 per share. Paul Varga, Chief Executive Officer of Brown-Forman said, "Our 5.1% dividend increase marks the 35th consecutive year of dividend increases at Brown-Forman, and the 73rd year of paying quarterly dividends at the company. Returning cash to our shareholders has been an important contributor to our ability to generate great returns for our shareholders."
3M’s-MMM new five-year financial objectives – covering 2019 through 2023 – are: 3 to 5 percent organic local currency sales growth; 8 to 11 percent growth in earnings per share; 20 percent return on invested capital and 100 percent free cash flow conversion. In addition to its five-year goals, 3M also outlined its expectations for 2019: 1 to 3 percent total sales growth; 2 to 4 percent organic local currency sales growth; Earnings per share of $10.60 to $11.05; 20 to 25 percent EPS growth, on a GAAP basis; 7 to 11 percent EPS growth, adjusting for certain 2018 items; 22 to 25 percent return on invested capital; and 95 to 105 percent free cash flow conversion (based on operating cash flow of $7.9 to $8.5 billion). In 2019, 3M plans to invest $2 billion in research and development – or approximately 6 percent of sales – along with $1.7 to $2 billion in capital expenditures. The company also plans gross share repurchases in the range of $2 to $4 billion for the year.
Wednesday, Nov. 14, 2018
Berkshire Hathaway-BRKB revealed in a regulatory filing new investment positions in Oracle-ORCL, J.P. Morgan, PNC Financial and Travelers. Berkshire added to its positions in Bank of America, U.S. Bancorp, Bank of New York Mellon and Goldman Sachs during the third quarter.
Cisco Systems-CSCO reported solid fiscal first quarter results with revenues up 8% to $13.1 billion, net income up 48% to $3.5 billion and EPS routing up a 60% gain to $.77 thanks to accelerating growth and expanding margins. Strong execution and innovation led to broad-based growth across all geographies, product categories and customer segments. Revenue by geographic segment was: Americas up 5% helped by a favorable macroeconomic environment in the U.S.; EMEA up 11%; and APJC up 12%. Emerging market order growth was 16%, led by 50%+ growth in India, which is becoming a key market. Double-digit growth in Applications (+18%) and Security (+11%) drove product growth with 15% growth in Enterprises leading customer growth. Free cash flow increased 22% during the first quarter to $3.6 billion with the company ending the quarter with $24.3 billion of net cash (cash and investments less long-term debt). During the quarter, Cisco repurchased $5.1 billion of its common stock and paid $1.5 billion in dividends. For the second quarter, management expects 5%-7% revenue growth with EPS in the range of $.56-$.61.
3M’s-MMM board authorized the repurchase of up to $10 billion of 3M’s outstanding common stock, replacing the company’s existing repurchase program. “The strength of 3M’s business model – which includes strong cash generation – enables us to consistently deploy capital in a way that creates the greatest value for our customers and shareholders,” said Mike Roman, 3M chief executive officer. “Our first priority remains investing in our business, and we will also continue to return significant cash to our shareholders.” 3M has paid dividends to its shareholders without interruption for more than 100 years. Earlier this year, 3M marked 60 consecutive years of dividend increases.
Monday, Nov. 12, 2018
T. Rowe Price-TROW reported assets under management decreased 6.5% during the month of October 2018, but increased 2.2% since year end to $1.01 trillion as of 10/31/18.
Thursday, Nov. 8, 2018
Disney-DIS reported fiscal fourth quarter sales increased 12% to $14.3 billion with net income increasing 33% to $2.3 billion and EPS up 37% to $1.55. Fourth quarter results were driven by a magical 50% jump in Disney’s Studio Entertainment revenues to $2.2 billion with the division’s operating profits more than doubling to $596 million, powered by the hit sequel Incredibles 2 and Ant-Man and the Wasp. Parks and Resorts revenues increased 9% to $5.1 billion with operating income increasing 11% to $829 million, reflecting higher domestic park attendance and spending. Media Networks revenues increased 9% to $6 billion, driven by a 21% jump in broadcasting revenues, primarily due to sales of two Marvel series compared to one Marvel series last year. Media Networks operating income increased 4% to $1.5 billion, compressed by a loss at BAMTech due to ongoing technology investments. ESPN results were flat with higher subscription fees offset by a decline in advertising. Consumer Products & Interactive Media revenues declined 8% to $1.1 billion with operating income falling 10% to $337 million, squeezed by a $157 million asset impairment charge on roughly 40% of Disney’s investment in Vice Media and lower income from licensing activities. For the full fiscal year, Disney reported revenues increased 8% to $59 million with net income up 40% to $12.6 billion and EPS up 47% to $8.36. Disney generated a showy 25.8% return on shareholders’ equity in fiscal 2018 and $9.8 billion in free cash flow, up 13% from last year, with the company returning $6.1 billion to shareholders through dividends of $2.5 billion and share repurchases of $3.6 billion. During the quarterly conference call, the company predicted an accelerated timeline for the closing of its $71.3 billion acquisition of Fox to early 2019, which is driving Disney’s push to release its direct-to-consumer streaming service. During the conference call, Mr. Iger, Disney’s Chairman & CEO, unveiled the platform’s name, Disney+, which is set to launch in late 2019. Disney+ will focus on five key franchises, Star Wars, Marvel, Pixar, Disney and National Geographic. Looking ahead to first quarter of fiscal 2019, management warned that Studio Entertainment operating income could fall by $600 million due to difficult comps to last year’s Star Wars: The Last Jedi film. Furthermore, the company expects operating expenses to increase on continued Disney+ content, technology and marketing investments and climbing ESPN programming costs due to the timing of sporting events.
Ulta Beauty-ULTA, updating its financial guidance for the third quarter and fiscal 2018, issued three year sales growth and earnings per share targets, and provided an update on its long-term strategy. For the third quarter of fiscal 2018, the company achieved comparable sales growth, including e-commerce, of 7.8%, primarily driven by transaction growth, compared to guidance of 7% to 8% issued on August 30, 2018. Retail comparable sales growth was 4.4%, including salon comparable sales growth of 3.3%. E-commerce sales grew 42.2%. The Company reported a comparable sales increase of 10.3% in the third quarter of fiscal 2017. The Company expects to report diluted earnings per share for the third quarter of fiscal 2018 at the high end of the range of the Company’s prior guidance of $2.11 to $2.16. The Company reported diluted earnings per share for the third quarter of fiscal 2017 of $1.70. The Company is updating its previously announced fiscal 2018 guidance for comparable sales. For the full year, the Company expects to achieve comparable sales growth of approximately 7% to 8%, compared to previous guidance of 6% to 8%. The Company expects to deliver diluted earnings per share growth for fiscal 2018 in the low twenties percentage range, confirming its previous guidance. Ulta Beauty is issuing comparable sales and diluted earnings per share targets for fiscal 2019, 2020 and 2021. The Company expects to achieve comparable sales growth in the range of 5% to 7%, and grow diluted earnings per share in the mid to high teens percentage range. The Company expects to achieve modest operating margin expansion each year, balancing new investments in supply chain, digital innovation, and the guest experience with savings from a comprehensive cost optimization program. The Company is announcing a multi-year $150 to $200 million cost savings target to fund investments in future growth initiatives. Ulta’s U.S. store target is 1,500 to 1,700 stores with the company planning to open 80 stores in 2019, 75 stores in 2020 and 70 stores in 2021. The company announced a new target for e-commerce fulfillment of two day delivery by 2021, supported by the opening of a Fast Fulfillment Center in 2019 serving e-commerce only orders, and implementing ship-from-store capability in select stores. Management is committed to working capital improvements with the goal of increasing inventory turns by 50 basis points over the next five years.
Wednesday, Nov. 7, 2018
The TJX Companies-TJX distributed its 2 for 1 stock split as previously announced with the stock price adjusted accordingly.
Tuesday, Nov. 6, 2018
The board of directors of Automatic Data Processing-ADP approved a $0.10 increase in the quarterly cash dividend to an annual rate of $3.16 per share, Carlos Rodriguez, ADP's president and chief executive officer, announced today. The increased cash dividend marks the 44th consecutive year in which ADP has raised its quarterly dividend. "The new $0.79 quarterly dividend represents a 25% increase in the quarterly dividend compared to a year ago, and is a strong signal of the board's confidence in ADP's future and its commitment to shareholder friendly actions," said Carlos Rodriguez.
Fastenal-FAST reported October net sales increased 17.5% to $469.8 million with daily net sales up 12.4% to $20.4 million. Daily sales growth by end market was 12.1% for manufacturing and 14.6% for non-residential construction. Daily sales growth by product line was 10.1% for fasteners and 14% for other products. Total personnel increased 4.4% to 21,446.
Monday, Nov. 5, 2018
Booking Holdings-BKNG reported better than expected booking growth in the third quarter as European travel increased as weather improved and the World Cup ended. Revenues in the third quarter increased 9% to $4.8 billion with net income up 3% to $1.8 billion and EPS up 8% to $37.02 per share. Third quarter gross travel bookings increased 12%, or 14% on a constant currency basis, over the prior year to $24.3 billion. Room nights booked increased 13% to 201.3 million, a new milestone of more than 200 million room nights booked in a single quarter. The number of restaurants on OpenTable is up 55% since Booking Holdings acquired the company with more than 330 million diners seated since 2014. Free cash flow increased 19% to $3.9 billion in the first nine months of the year with the company ending the quarter with net cash of $7.5 billion (cash and investment less long term debt). Year-to-date, the company repurchased $4.1 billion of its common stock, including $2.2 billion in the third quarter, as its shares outstanding were reduced by 4% year-to-date. The company has $6.4 billion remaining authorized for future share repurchases which should be completed within 2-3 years. Booking Holdings continues to invest heavily in China, which is one of the fastest growing countries for travel with the number of passports issued more than doubling to 120 million from 55 million just a few years ago. For the fourth quarter, total gross bookings are expected to increase 6%-9%, or 10%-13% on a constant currency basis. Revenue in the fourth quarter is expected to increase 13%-16% or 17%-20% on a constant currency basis with fourth quarter EPS expected in the range of $18.05-$18.55 and non-GAAP EPS expected in the range of $18.90-$19.40, representing 12%-15% growth.
Saturday, Nov. 3, 2018
Berkshire Hathaway-BRKB reported the company’s net worth during the first nine months of 2018 rose 8% since year end with book value equal to $228,712 per Class A share as of 9/30/18.
During the third quarter, net earnings more than quadrupled to $18.5 billion. New accounting rules in 2018 require Berkshire to book the net changes in unrealized appreciation/depreciation in net income instead of comprehensive income which resulted in an $11.7 billion gain in net earnings in the third quarter from investments and derivatives.
Berkshire’s five major investment holdings represent 69% of total equities. On its way to becoming the first U.S. stock to hit the trillion dollar market capitalization milestone, Apple contributed to the substantial investment gain as the position was valued at $57.6 billion as of 9-30-18, a $29.4 billion increase since year end through the additional purchase of shares and market appreciation. Wells Fargo’s value dropped 17% since year end, or $4.9 billion, to $24.4 billion amid continued negative headlines on business practices. On the other hand, Bank of America deposited a $5.8 billion gain since year end as the position was valued at $26.5 billion as of 9-30-18, reflecting additional purchases during the third quarter. Coca-Cola was relatively flat at $18.5 billion. American Express charged 7% higher, or $1 billion higher, to $16.1 billion since year end.
In the third quarter of 2018, Berkshire’s operating revenues rose 6.5% to $63.4 billion with all operating business groups posting growth, led by 16% revenue growth at BNSF to $6.1 billion. Operating earnings doubled during the quarter to $6.9 billion, thanks in large part to improved insurance results and aided by Berkshire’s tax rate falling from 35% to 21% during the period.
Berkshire’s insurance underwriting operations generated $441 million in earnings during the third quarter compared to a $1.4 billion loss in the prior year period. The prior year period included $3 billion in pre-tax losses from three major hurricanes in the U.S. and an earthquake in Mexico. The insurance operations reflected significantly improved results from GEICO and Berkshire Hathaway Reinsurance and reductions of liabilities for prior years’ property/casualty loss events. Insurance investment income was 19% higher at $1.2 billion during the quarter, reflecting higher interest rates on short-term investments, higher dividend income due to increases in the portfolio of equity securities and a lower tax rate. The float of the insurance operations approximated $118 billion as of 9/30/18, an increase of $4 billion since year end. The average cost of float was negative during the first nine months of the year as the underwriting operations generated pre-tax earnings of $2.3 billion.
Burlington Northern Santa Fe’s (BNSF) revenues rose 16% during the third quarter to $6.1 billion with net earnings chugging 34% higher to $1.4 billion, reflecting the favorable change in the tax rate. Pre-tax earnings rose 10% to $1.9 billion. During the first nine months, BNSF generated a 6.1% comparative increase in average revenue per car/unit and a 4.6% increase in volume thanks to general economic growth across all business sectors, led by 24% revenue growth in the industrial and energy sectors, and tight truck capacity leading to conversion from highway to rail.
Berkshire Hathaway Energy reported revenues increased 7% to $5.7 billion during the third quarter with all groups, except PacifiCorp, contributing to the growth. Net earnings increased 15% during the quarter to $1.1 billion primarily due to tax credits. On a pre-tax basis, earnings declined 6% to $1.17 billion due to lower utility margins reflecting increased depreciation, maintenance and other operating expenses. Berkshire Hathaway Energy’s regulated subsidiaries anticipate passing the benefits of lower tax rates to customers which will produce lower revenues and pre-tax earnings in 2018 and future years when compared to 2017.
Berkshire’s Manufacturing businesses reported a 6% increase in revenue growth in the third quarter to $13.6 billion with operating earnings relatively flat at $2.0 billion. Revenue growth was broad based, led by Building Products with 8.5% growth and Industrial Products with 7% growth. Iscar’s revenues increased 12% during the quarter with pre-tax earnings also increasing significantly due to increased unit sales, increased manufacturing efficiencies, business acquisitions and favorable foreign exchange. Pre-tax earnings in the Building Products and Consumer Products groups declined during the period due to higher raw material and production costs in the Building Products group and a 24% decline in Forest River’s earnings in the Consumer Products group due in part to lower sales volume and higher material costs.
Service and Retailing revenues rose 2% during the quarter to $19.8 billion with pre-tax earnings up 25% to $672 million. Service revenues rose 13% to $3.1 billion with operating earnings up 41% to $444 million. TTI’s revenues increased 35% due to an industry-wide increase in demand for electronic components in many geographic markets around the world, acquisitions and favorable foreign currency changes. While TTI’s revenue increases were significant, demand is beginning to moderate. TTI accounted for 70% of the increase in earnings in this unit with Charter Brokerage and NetJets also contributing to the earnings growth. Retailing revenues rose 2% during the quarter to $3.8 billion with operating earnings up 4.5% to $184 million, reflecting higher earnings from Berkshire Hathaway Automotive (BHA) and Louis Motorrad. McLane’s revenues were relatively flat during the quarter at $12.8 billion. McLane operating earnings declined 2% to $44 million due to significant pricing pressures in an increasingly competitive grocery business environment. The grocery and foodservices business will likely continue to be subject to intense competition over the remainder of 2018 and into 2019.
Finance and Financial Products revenues rose 13% during the quarter to $2.4 billion with net income jumping 22% to $390 million, reflecting the favorable tax change. Pre-tax earnings increased 7% to $530 million. The revenue and earnings increase was led by Clayton Homes, reflecting higher unit sales, higher average prices and higher financial services revenues.
Berkshire’s balance sheet continues to reflect significant liquidity and a strong capital base of $375.6 billion as of 9/30/18. Excluding railroad, energy and finance investments, Berkshire ended the quarter with $333.4 billion in investments allocated approximately 60.4% to equities ($201.2 billion), 5.5% to fixed-income investments ($18.2 billion), 5.2% to Kraft Heinz ($17.5 billion), and 28.9% in cash and equivalents ($96.5 billion).
Berkshire’s financial strength allows Buffett to make significant investments and acquisitions. Apple was the largest stock investment in the first nine months of the year. Berkshire closed the previously announced $2.5 billion acquisition of Medical Liability Mutual Insurance Company on Oct. 1, 2018.
Free cash flow declined 43% during the first nine months to $16.5 billion due to the lapping of the big boost to float from the AIG deal in the prior year period. During the first nine months, capital expenditures increased 19% and approximated $10 billion, including $6.4 billion for BNSF and Berkshire Hathaway Energy. Berkshire Hathaway forecasts aggregate capital expenditures of about $9.8 billion in 2018 for these two businesses. During the first nine months, Berkshire sold and redeemed a net $25.1 billion in Treasury Bills and fixed-income investments and purchased a net $24.4 billion of equity securities, reflecting in part the purchase of Apple, Bank of America and other financial stocks and the sale of all IBM shares.
Berkshire revised its buyback policy which now permits Berkshire to repurchase shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett and Charlie Munger. During the third quarter, Berkshire repurchased 2,984 equivalent A shares for $928 million at an average price of approximately $311,000 per A share with an additional 589 equivalent A shares repurchased subsequent to quarter end.
Berkshire Hathaway’s stock appears attractively valued, currently trading at $308,411 per A share and $206.57 per B share. Based on current business fundamentals, we expect Berkshire’s A shares to trade between $286,000-$366,000 per share and the B shares to trade between $191-$244 per share. Buy.
Friday, Nov. 2, 2018
ADP-ADP reported fiscal first quarter revenues increased 8% to $3.3 billion with net earnings increasing 22% to $505.4 million and EPS up 24% to $1.15. Employer Services revenues increased 7% to $2.2 billion on a 2.4% increase in pays per control. Employer Services new business bookings increased 8% compared to a 3% decline in bookings during the same period last year. PEO Services revenues gained 10% to $986 million, boosted by a 9% increase in average worksite employees to 528,000. Interest in funds held for clients increased 19% to $118.5 million on a 1% increase in average funds held for clients to $22.2 billion and a 20 basis point increase in the average interest earned to 2.1%. During the quarter, ADP generated $106 million in free cash flow, down 38% from last year, squeezed by working capital changes. The company ended the quarter with $1.5 billion in cash and $736 million in long-term debt on its strong balance sheet. During the quarter, ADP returned $530 million to shareholders through dividends of $303 million and share buybacks of $227 million. Looking ahead to the full fiscal year, ADP expects revenues to increase 6% to 7% on a 4% to 6% increase in Employer Services revenues and an 8% to 9% increase in PEO revenues. U.S. pays per control are expected to increase by 2.5%. Average client funds balances are expected to increase 3% to 4% and the yield on the client funds portfolio is expected to increase 30 basis points to 2.2%, resulting in a 19% to 21% increase in client funds interest revenue to $556 million to $566 million. Adjusted EPS is expected to increase 15% to 17%.
AbbVie-ABBV reported strong third quarter results with revenues up a healthy 18% to $8.2 billion with net earnings up 68% to $2.7 billion and EPS jumping 79% to $1.81. On an adjusted basis, EPS increased a still vibrant 52% to $2.14. Third quarter global HUMIRA sales increased 9%, or 9.8% on an operational basis, to $5.124 billion, representing 62% of total revenues. In the U.S., HUMIRA sales grew 12.5% with patent protection expected through 2023. Internationally, HUMIRA is facing biosimilar competition with sales growth of 4% during the quarter. Global net revenues from the Hematologic Oncology portfolio were $1.068 billion during the third quarter, an increase of 48%, and poised for continued growth next year and beyond. Third quarter global IMBRUVICA net revenues were $972 million during the quarter, an increase of 41% with global HCV net revenues contributing $862 million to third quarter revenues and VENCLEXTA chipping in $96 million to the quarter’s sales. The company’s adjusted operating margin expanded 430 basis points during the quarter to 47.2% thanks to a higher gross margin, reflecting the termination of certain royalty payments, and improved operating efficiencies. AbbVie continues to invest 15% of sales in research and development supporting all stages of their robust pipeline, which is one of the best in the industry. With financial results well ahead of management’s expectations, the company raised their earnings outlook for the fourth time this year. For the full 2018 year, EPS is now expected in the range of $6.43-$6.45 with adjusted EPS expected in the range of $7.90-$7.92, representing growth of 41% at the midpoint. Given strong cash flows and confidence in the future, AbbVie raised its dividend 11.5% to a quarterly rate of $1.07 per share, which represents a healthy 5.4% dividend yield based on the company’s current price. Since the company’s inception in 2013, AbbVie has increased its dividend by 168%. In 2019, the company expects to report continued double-digit EPS growth despite biosimilar competition internationally, difficult comparisons and significant investments in new product development.
Cognizant Technology Solutions-CTSH reported third revenues increased 8.3% to $4.08 billion with net earnings declining 4% to $477 million and EPS declining 2% to $0.82. The decrease in net income was primarily due to higher net non-operating foreign exchange losses in 2018 driven by the depreciation of the Indian rupee versus the prior year period. Consulting & Technology Services represented 58% of total revenue and grew 6% while Outsourcing represented 42% of revenues and grew 11%. By business segment, Financial Services revenues increased 3% to $1.5 billion with digital revenue growth beginning to offset the pressure on run-the-bank spending. Healthcare revenues increased 10% to $1.2 billion as healthcare providers continue to shift their underlying business models from fee-for-service to value-based care. Products and Resources revenue grew 12% to $863 million, led by strong growth from retail and manufacturing clients as traditional retailers race to strengthen their digital business channels to meet the Amazon challenge, and manufacturers push to automate and digitize manufacturing systems. Communications, Media and Technology revenues increased 17% to $562 million with Cognizant helping clients co-innovate networks of the future to move at speeds more than 30 times faster than current technology, leading to significant improvements in virtual reality, robotics and healthcare. During the quarter, Cognizant generated $768 million in free cash flow, up 11%, with the company returning $161 million to shareholders through dividends of $116 million and share repurchases of $45 million. During the third quarter, Cognizant repurchased 1.4 million shares, including 1.1 million, which represented final share settlement of the $600 million Accelerated Share Repurchase (ASR) program launched in June. In total, 7.6 million shares were repurchased under the ASR at an average price of $79.42 per share. Cognizant ended the quarter with $4.9 billion in cash & investments and $624 million in debt on its squeaky-clean balance sheet. Looking ahead to the full year, revenues are expected to increase 8.6% to 9% to $16.1 billion with non-GAAP earnings to be at least $4.50, up 19% from last year.
MSC Industrial Direct–MSM reported fiscal fourth quarter sales increased 11% to $838 million with net earnings of $73 million, up 20%, and EPS of $1.29, up 21%, thanks, in part, to U.S. tax reform which reduced the company’s effective income tax rate from 38% to 30%. Average daily sales grew 9.5% compared to last year’s fourth quarter. For the full year, revenues rose 11% to $3.2 billion with net income and EPS over 40% to $329 million and $5.80, respectively due in part to the impact of tax reform. Return on shareholders’ equity for the year was 23.7%. Free cash flow for the fiscal year increased 47% to $295 million with MSC Industrial returning $207 million to shareholders through dividends of $125 million and share repurchases of $82 million. The company believes it has 5% direct exposure and an additional 5% indirect exposure to tariffs on materials sourced from China with the percentages declining as supply chains adjust. The company expects to recover all tariff related costs through price increases. Looking ahead to the first quarter, sales are expected in the $821 million to $837 million range, up 7.9% at the midpoint, with EPS in the $1.28 to $1.34 range, up 24.8% at the midpoint. Average daily sales are expected to increase roughly 7.8%.
Thursday, Nov. 1, 2018
Starbucks Corporation-SBUX reported fiscal fourth quarter sales jolted ahead 11% to $6.3 billion with net income dipping 4% to $756 million and EPS increasing 4% to $.56 on fewer shares outstanding. Net income grinded lower on restructuring activities and charges related to Teavana mall store closures, partially offset by the company’s deal to license its consumer packaged goods business to Nestlé which closed on August 26, 2018. Global comparable store sales increased 3%, driven by a 4% increase in average ticket. Americas and U.S. comparable store sales increased 4% while China Asia Pacific same store sales increased 1%. Starbucks RewardsTMloyalty program grew to 15.3 million active members in the U.S., up 15% year-over-year. Mobile Order and Pay represented 14% of U.S. company-operated transactions. For the fiscal year, Starbucks reported sales of $24.7 billion, up 10%, with net earnings percolating up 57% to $4.5 billion and EPS up 65% to $3.24. Global comparable store sales increased 2%, driven by a 3% increase in average ticket. During fiscal 2018, Starbucks generated nearly $10 billion in free cash flow, up from $2.7 billion last year, thanks to the cash received in the Nestle deal. During the year, Starbucks returned $8.9 billion to shareholders through a combination of dividends and share repurchases. As part of its previously announced plan to return $25 billion to shareholders in the form of share buybacks and dividends through fiscal 2020, Starbucks announced that it is currently executing a $5 billion accelerated share repurchase program (ASR) of its common stock. Starbucks used proceeds from the recently completed Nestle transaction to execute the ASR, effective October 1, 2018. Looking ahead to fiscal 2019, the company expects revenue growth of 5% to 7% on comparable store sales growth near the lower end of its 3% to 5% range with EPS in the range of $2.32 to $2.37.
Apple-AAPL reported fourth quarter revenues rose 20% to a record $62.9 billion with net income climbing 32% to $14.1 billion and EPS up 41% to $2.91, also September quarter records. International sales accounted for 61% of the quarter’s revenues. Services revenues reached an all-time high of $10 billion, an increase of 27% thanks to more than 330 million subscriptions to Apple’s services. Apple Pay’s transaction volume more than tripled as it has become the number one mobile payment service with the company’s goal to replace the wallet. Apple’s revenue grew at double-digit rates in the fourth quarter in all geographic segments led by 34% growth in Japan. iPhone unit sales were flat but revenues were up 29% as the average selling price reached a record $793 due to the successful launch of new products. iPad and Mac gained market share during the quarter with revenues of $4.1 billion and $7.4 billion, respectively. Other Products revenues increased 31% to $4.2 billion thanks to 50% growth in the Apple Watch, which is becoming essential to people’s lives. For the full fiscal 2018 year, revenues rose 16% to $265.6 billion with net income up 23% to $59.5 billion and EPS up a healthy 29% to $11.91. Return on shareholders’ equity was an impressive 56% for the year. Free cash flow increased 24% during the year to $64.1 billion. After paying $13.7 billion in dividends and repurchasing $72.7 billion of its common stock, including repurchasing 92.5 million shares in the fourth quarter for $19.4 billion at an average price of $209.73 per share, the company ended the year with $122.6 billion of net cash (cash and investments less debt). With the strongest product and services lineup set for the upcoming fourth quarter holiday season, Tim Cook said he could not be more bullish about the company’s future. For the company’s fiscal 2019 first quarter, revenues are expected in the range of $89 billion to $93 billion with the gross margin between 38%-38.5%, operating expenses between $8.7 billion and $8.8 billion, other income of $300 million and a tax rate of about 16.5%.
MasterCard-MA reported third quarter revenues rose 15% to $3.9 billion with net income charging 33% higher to $1.9 billion and EPS up 36% to $1.82. Net revenue increased 17% on a currency-neutral basis driven by an increase in switched transactions of 16%, an increase in cross-border volumes of 17% on a local currency basis and a 13% increase in gross dollar volume, on a local currency basis, to $1.5 trillion. These increases were partially offset by an increase in rebates and incentives, primarily due to new and renewed agreements and increased volumes. Growth was broad-based across all geographic regions with solid double-digit growth across most regions. Overall, MasterCard is seeing solid global growth although management is watching reduced central bank stimulus, rising interest rates and rising trade tensions. Free cash flow increased 28% to $4.6 billion during the first nine months of the year with the company paying $785 million in dividends and repurchasing $4 billion of its shares. As of October 25th, MasterCard has $.8 billion remaining authorized for future share repurchases. MasterCard continues to see a healthy economic environment and believes revenues in 2018 will grow at a high-teen rate with operating expenses growing at a mid-teen rate leading to further profit margin expansion.
Wednesday, Oct. 31, 2018
Facebook-FB reported third quarter revenues jumped 33% to $13.7 billion with net income up 9% to $5.1 billion and EPS up 11% to $1.76. Revenue growth was broad-based across regions and business segments, but Facebook is investing significantly to improve safety and security threats which is impacting margins. The company estimates that more than 2.6 billion people now use Facebook, WhatsApp, Instagram or Messenger, with more than 2 billion people using at least one of the company’s services every day. People send 100 billion messages each day using Facebook’s Messenger. People share more than 1 billion Stories every day. Video is growing dramatically across the ecosystem with the company’s Watch growing more than threefold in the last quarter. Daily active users were 1.49 billion on average, an increase of 9% year over year. Monthly active users were 2.27 billion, an increase of 10%. Mobile advertising revenue increased 40% to $12.5 billion and represented approximately 92% of advertising revenue for the quarter up from 88% in the prior year period. There are more than six million advertisers active on Facebook and Instagram. Headcount was 33,606 as of quarter end, an increase of 45% from the prior year period. Facebook usage is generally stable in the saturated developed countries and is growing quickly in developing countries especially India, Indonesia and the Philippines. Asia Pacific had the strongest regional growth of 38% during the quarter followed by 34% growth in Europe and 33% growth in North America. During the quarter, the average price per ad increased 7% with the number of ad impressions up 25% driven by feed ads on Facebook and Instagram .Operating cash flow was up 31% to $21.7 billion with free cash flow relatively stable at $12 billion as the company invested $9.6 billion in capital expenditures year-to-date to build out its data centers, servers, network infrastructure and office facilities. Capital expenditures for the full year are expected in the range of $14 billion to $14.5 billion with capital expenditures increasing to the $18 billion to $20 billion range in 2019 to support the company’s future growth. During the third quarter, Facebook repurchased $4.3 billion of its common stock with $9.4 billion repurchased year-to-date. The company ended the quarter with a strong balance sheet with more than $41 billion in cash and investments.
Friday, Oct. 26, 2018
Westwood Holdings-WHG reported third quarter revenues dropped 11% to $29.9 million with net income up 30% to $5.4 million and EPS up 27% to $.62. Revenues declined on lower average assets under management resulting from net outflows and the sale of the Omaha-based private wealth business. Assets under management declined $2.8 billion to $20.8 billion as of quarter end. Third quarter earnings benefited from lower compensation expenses offset by lower asset-based fees and higher information technology expenses. The prior year quarter was negatively impacted by a $2.5 million legal settlement charge. During the quarter, the company increased its dividend 6%, marking the 16th consecutive year of dividend increases. The dividend currently yields 6.6%. Westwood ended the quarter with a strong financial position with no long-term debt and $125 million in cash and investments or $12.48 per share in cash.
Thursday, Oct. 25, 2018
Alphabet-GOOGL reported third quarter revenue rose 21% to $33.7 billion with net income and EPS each up 36% to $9.2 billion and $13.06, respectively. During the quarter, Google advertising revenues rose 20% to $28.9 billion with strong growth in mobile search. All geographic regions generated strong growth led by 29% growth from the Asia Pacific and China region. Google other revenues rose 29% to $4.6 billion and Other Bets revenue increased 25% to $146 million. Traffic acquisition costs increased 20% to $6.6 billion, representing 23% of Google advertising revenue. Paid clicks on Google properties increased 62% with cost per click declining 28% during the quarter. During the quarter, the company recognized an $843 million gain, or $1.20 per share, on equity securities as required by new accounting rules. During the first nine months of the year, free cash flow declined 6% to $16.9 billion primarily due to capital expenditures more than doubling to $18 billion as the company invests in data centers and real estate to support growth in its cloud business. During the same period, Alphabet repurchased $6.4 billion of its stock. The company ended the quarter with $106.4 billion in cash and investments and only $4 billion in long-term debt on its solid balance sheet.
Stryker-SYK reported a healthy 9% increase in third quarter sales to $3.2 billion with net income and EPS increasing 36% to $590 million and $1.55, respectively. Adjusted net earnings and EPS increased 11% to $643 million and $1.69, respectively. In constant currency, sales increased 10% and organic net sales increased 7.9% in the quarter including 9.5% from increased unit volume partially offset by 1.6% from lower prices. Domestic sales increased 9% to $2.4 billion while international sales increased 5%, or 8% in constant currency, to $861 million. By business segment, Orthopaedics net sales of $1.2 billion increased 4% in the quarter and organic net sales increased 5% including 7.6% from increased unit volume partially offset by 2.6% from lower prices. During the quarter, Stryker completed its upgrade of installed MAKO robots while installing 37 new robots, 26 domestically and 11 overseas. Stryker sees a long runway ahead for MAKO robot installations, especially internationally where the company is in the early innings of the approval process. MedSurg net sales of $1.4 billion increased 9.5% and organic net sales increased 8.8% including 9.5% from increased unit volume partially offset by 0.7% from lower prices. Neurotechnology and Spine net sales of $600 million increased 17.4% and organic net sales increased 11.9% including 13.5% from increased unit volume partially offset by 1.6% from lower prices. Year-to-date, Stryker generated $1.15 billion in free cash flow, up from $468 million last year, boosted by the income increase, lower recall payments and efficient working capital management that were partially offset by toll taxes charged on cash held overseas under U.S. tax reform legislation. The company returned $828 million to shareholders through dividends of $528 million and share repurchases of $300 million. Stryker ended the quarter with $2.2 billion in cash, 30% of which is held outside the U.S, and $5.9 billion in long-term debt. Given the strong year-to-date results and management’s optimism about the fourth quarter, it raised 2018 guidance. Organic net sales growth is expected at the high end of the 7% to 7.5% range and adjusted earnings are expected in the range of $7.25 to $7.30. "We had another impressive quarter, as our talented teams continue to deliver strong results and execute on acquisitions," said Kevin A. Lobo, Chairman and Chief Executive Officer. "The strength of our operating model and culture is evident in the consistency of our performance over time, and we remain optimistic about the future."
T. Rowe Price-TROW reported third quarter revenues rose 12.6% to $1.4 billion with net income up 49% to $583 million and EPS up 47% to $2.30. Third quarter results included a $.27 per share gain from the sale of its 10% holding in Daiwa SB Investments. Assets under management (AUM) increased 14.3%, or $39.7 billion, to $1.084 trillion as of quarter end thanks to strong stock returns and solid net client inflows. The firm’s net cash inflows were $2.7 billion during the quarter. T. Rowe Price remains debt-free with ample liquidity including $4.1 billion in cash and investments in T. Rowe Price products. During the third quarter, the company spent $124.5 million to repurchase 1.1 million shares of its common stock at an average price of $110.76 per share. Year-to-date, the company has repurchased 5.4 million shares, or 2.2% of outstanding shares, for $574.88 million at an average price of $107.38.
Tractor Supply-TSCO reported third quarter sales increased 9% to $1.9 billion with net income plowing up a hearty 27% gain to $116.8 million and EPS up 32% to $.95. Sales growth was driven by a solid 5.1% increase in comparable store sales growth consisting of a 3.6% increase in the average ticket and a 1.4% increase in customer transactions. During the last 41 of 42 quarters, customer transactions have been positive. The increase in comparable store sales was primarily driven by broad-based strength in everyday merchandise along with robust growth across spring and summer seasonal categories. All merchandise categories delivered increased comparable store sales as did all geographic regions. The company opened 23 new Tractor Supply stores and seven new Petsense stores in the third quarter of 2018. Management plans to open 80 new Tractor Supply and 20 new Petsense stores for the full 2018 year. Free cash flow declined 15% through the first nine months to $159.7 million due to the increase in capital expenditures with capital spending for the full year targeted at $260 million-$280 million. Year-to-date, the company has paid $109 million in dividends and repurchased 4.3 million shares of its common stock for $289.2 million at an average cost of $67.25 per share. Since inception of the repurchase program, the company has repurchased $2.4 billion of its stock with $580 million remaining authorized for future share repurchases. Given the strength of the company’s business and the healthy macro economic environment with low unemployment and high consumer confidence, management raised their full year 2018 financial outlook with sales expected in the range of $7.84 billion to $7.87 billion, comparable store sales growth of 4.0% to 4.5% and EPS in the range of $4.23-$4.27, representing 28%-29% growth over last year.
Wednesday, Oct. 24, 2018
Microsoft-MSFT reported fiscal first quarter revenues rose 19% to $29.1 billion with net income and EPS up more than 34% to $8.8 billion and $1.14, respectively. Revenue in Productivity and Business Processes was $9.8 billion and increased 19% during the quarter driven by Office 365 commercial revenue growth of 36%. LinkedIn revenue increased 33% with 34% growth in sessions. Revenue in Intelligent Cloud was $8.6 billion and increased 24% driven by Azure revenue growth of 76%. Revenues in More Personal Computing was $10.7 billion and increased 15% during the quarter with gaming revenue up 44% and Surface revenue up 14%. Free cash flow decreased 2.5% to $10.1 billion as a result of increased capital spending to support the cloud business. During the quarter, the company paid $3.2 billion in dividends and repurchased $3.7 billion of its shares. Microsoft ended the quarter with $135.9 billion in cash and $69.7 billion in long-term debt.
F5 Networks-FFIV reported fourth fiscal quarter revenue of $562.7 million, up 4.6% from last year, with net income of $133 million, down 2%, and EPS of $2.14, up 2% on fewer shares outstanding. Product sales increased 3% to $256 million and accounted for 46% of total revenue while services increased 6% to $306 million, and accounted for 54% of sales. Fourth quarter revenue growth was driven by demand for F5's software solutions which provide mission-critical application and security services in evolving multi-cloud environments. Gross margins and operating margins remained steady with last year at 83% and 28%, respectively, while F5’s tax rate increased to 17% from 12% last year, accounting for the year-over-year decline in net income. During the quarter, F5 generated $204 million in operating cash flow and $187 million in free cash flow. For the year, F5 reported revenues of $2.2 billion, up 3%, with net income of $454 million, up 8%, and EPS of $7.41, up 13%. During fiscal 2018, the company generated a powerful 35.3% return on shareholders’ equity. For the year, F5 generated $761 million in operating cash flow and $708 million in free cash flow. F5 ended the fiscal year with $1.45 billion in cash and no long term debt on its weatherproof balance sheet. The company repurchased $600 million shares during the fiscal year. Looking ahead to the first fiscal quarter ending 12/31/2018, management expects revenues in the range of $542 million to $552 million, up 6% at the mid-point, with adjusted EPS expected in the $2.51 to $2.54 range, up 12% at the midpoint. Given that F5 moved its manufacturing facilities to Mexico from China in 2018, tariffs will minimally impact the business.
Biogen-BIIB reported a healthy 12% increase in third quarter revenues to $3.4 billion with net earnings increasing 18% to $1.4 billion and EPS up 17% to $7.40. Global sales of TECFIDERA—the most prescribed oral therapy for MS—were $1.1 billion, up 2% worldwide including 1% growth in the U.S. and 6% growth internationally. Sales of TYSABRI—the market leading high efficacy therapy for MS—were $470 million, flat with last year, on a 5% decline in U.S. sales which were offset by a 7% increase in international sales. Sales of Biogen’s Interferon MS therapies declined 11% to $590 million. Global sales of SPINRAZA—the first drug approved to treat children and adults with spinal muscular atrophy (SMA), a rare and often fatal genetic disease affecting muscle strength and movement—were $468 million, up from $271 million last year. Biogen received regulatory approval for SPINRAZA in five additional countries during the quarter with the treatment now offered in more than 30 countries. Biogen’s biosimilar sales increased 33% to $135 million. With its October launch of IMRALDI, a biosimilar referencing AbbVie’s HUMIRA, Biogen now offers biosimilars in Europe for all three major drugs to treat inflammatory conditions. During the quarter, Biogen made significant advances in building its pipeline beyond its leading portfolios in MS and Alzheimer’s, including notable progress in treatments for stroke, progressive supranuclear palsy and ALS. During the third quarter, Biogen generated $1.7 billion in cash flow from operations, ending the quarter with $5.7 billion in cash and equivalents and $5.9 billion in notes payable on its strong balance sheet, which provides ample resources to invest in the business while returning cash to shareholders. While Biogen did not repurchase any shares during the quarter, its Board approved a $3.5 billion share repurchase program. During the past several years, Biogen has repurchased about $10 billion of its shares. Looking ahead to the fourth quarter, management expects to increases its pipeline investments, which will be partially funded with G&A cost savings.
UPS-UPS reported third quarter sales increased a robust 8% to $17.4 billion with the company delivering 20% growth in net income and EPS to $1.5 billion and $1.73, respectively. Average revenue yield increased 4% during the quarter with base-pricing gains in all product categories. The U.S. Domestic segment experienced solid revenue growth of 8.1% to $10.4 billion, driven by high demand for the company’s solutions and robust yield expansion. International segment revenue increased 3% to $3.5 billion with revenue growth in all regions. Export volume also increased across all regions and exports grew nearly 3% on top of 19% growth last year. Supply Chain and Freight performance was outstanding during the quarter with double-digit growth in both revenue and adjusted profit. Revenues increased 12% to $3.5 billion with adjusted operating profit up 33% to $260 million. Year-to-date cash from operations expanded to $9.4 billion with free cash flow increasing to $4.9 billion. The company enjoyed strong free cash flow conversion greater than 100%. Year-to-date dividends per share increased 10%, producing an annual dividend yield in excess of 3%. The company repurchased 6.6 million shares year-to-date for about $750 million at an average cost of $113.64 per share. Capital expenditures year-to-date were $4.5 billion as the company completes 22 expansions in 2018, adding 5 million square feet of capacity, including its recently opened highly-automated hub in Atlanta that will help support a successful peak season this year. Capital expenditures for the full year remains planned at $6.5-$7.0 billion. UPS expects to deliver 800 million packages during peak season including more than 37 million packages on its peak day. Management reaffirmed 2018 adjusted EPS in a range of $7.03-$7.37. The global environment remains positive driven by U.S. GDP growth although unresolved China trade tensions and Brexit remain concerns.
Tuesday, Oct. 23, 2018
United Technologies-UTX reported third quarter revenue rose 10% to $16.5 billion with net income down 7% to $1.2 billion and EPS down 8% to 1.54. On an adjusted basis excluding restructuring and other items, EPS increased 12%. Sales growth was driven by 8% organic growth thanks to the company’s innovation across all business units. During the quarter, commercial aftermarket sales were up 9% at Pratt & Whitney and up 12% at UTC Aerospace Systems. Otis new equipment orders were up 9% organically with equipment orders at UTC Climate, Controls and Security up 13% organically. Free cash flow increased 69% year-to-date to $3.2 billion with the company paying $1.6 billion in dividends. Share repurchases were minimal as the company plans to allocate cash flows to paying back debt following the Rockwell Collins acquisition which is expected to be completed before year end. The Board of Directors will be evaluating strategic options for the company following the deal closing. Based on solid financial results, strong orders and growing backlog, management raised its outlook again for sales and earnings for the full 2018 year. The sales outlook was increased to $64-$64.5 billion driven by expected 6% organic growth with adjusted EPS expected in the range of $7.20-$7.30. Free cash flow should approximate $4.5 to $5.0 billion for the full year. Tariffs cost the company $.05 per share this year which management was mostly able to offset through increased pricing. Tariffs are a tax on the consumer, and there will be a limit on future price offsets. If current tariffs stay in place, it could result in a $.15 per share headwind in 2019.
3M-MMM posted third quarter sales that dipped slightly to $8.2 billion with net income increasing 8% to $1.5 billion and EPS up 10.7% to $2.58. Organic local-currency sales increased 1.3% on a 0.1% volume increase and a 1.2% price increase. Operating margin increased 10 basis points to 24.7%, boosted by productivity gains and price increases taken to offset higher raw material costs, largely offset by a 0.3% headwind from the Scott Safety acquisition and a negative 0.5% foreign currency impact. By business segment, Industrial sales of $3 billion were flat year-on-year and generated a 22% operating margin, down slightly year-on-year. Safety & Graphics sales of $1.7 billion increased 7% and generated a 24.8% operating margin, down 1.6% from last year, squeezed by the Scott Safety acquisition and portfolio and footprint actions. Healthcare sales of $1.4 billion declined 3% on a drop in drug delivery sales and generated a 30.9% operating margin, down 0.5% from last year. Electronics & Energy sales of $1.4 billion declined 5% year-on-year and generated a 31.7% operating margin, up 3.3% from last year, powered by last quarter’s communication markets business divestiture. Consumer sales of $1.2 billion declined 3.4% on continuing retailer destocking and generated operating margins of 23.5% down 0.8% from portfolio and footprint actions. During the quarter, 3M generated free cash flow of $1.8 billion, up 24% year-on-year, representing a free cash conversion rate of 114%. During the quarter, 3M returned $1.9 billion to shareholders via dividend payments of $794 million and share repurchases of $1.1 billion. Year-to-date, the company repurchased $3.6 billion shares and expects to repurchase between $4 billion to $5 billion for the full year. The company updated its 2018 EPS expectations to be in the range of $8.78 to $8.93 per share versus $9.08 to $9.38 previously. Excluding the full-year impacts from the communication markets business divestiture gain and related actions, a first-quarter legal settlement, and the Tax Cuts and Jobs Act-related expense, 3M now expects its adjusted 2018 earnings to be in the range of $9.90 to $10.00 per share versus prior expectation of $10.20 to $10.45. The update to the ranges reflects an estimated full-year earnings headwind of $0.05 per share from foreign currency versus a prior expectation of a benefit of $0.10 per share. 3M also updated its full-year organic local-currency sales growth guidance to approximately 3%, down from 3% to 4% previously and free cash flow conversion of 90% to 95% from previous guidance of 90% to 100%.
Canadian National Railway-CNI reported record third quarter revenues rose 14% to C$3.7 billion with net income chugging 18% higher to C$1.1 billion and EPS up 21% to C$1.54. Adjusted net income rose 11% with adjusted EPS up 15%. Revenue growth was driven by higher fuel surcharge rates, freight rate increases, the positive impact of foreign exchange translation and higher volumes. Pricing during the quarter increased 4.5%, one of the best quarters in years. Revenue growth was broad based across all business segments led by 25% growth for petroleum and chemicals. Revenue ton miles (RTM) increased four percent during the quarter with carloadings up three percent to 1,525 thousand. RTM growth is expected to be about 5% for the full year. The company’s operating ratio improved 230 basis points to 59.5%. Free cash flow declined 27% year-to-date to $1.7 billion as the company continued to heavily invest in infrastructure expansion projects with 22 of 27 expansion programs completed this year. The balance of the expansion projects remain on track for completion before winter. Capital expenditures for the full year should approximate $3.5 billion with a similar amount planned for 2019. As these investments gain traction, the company’s operating ratio should continue to improve as costs will come down due to a more efficient network. Management reaffirmed its outlook for 2018 full year adjusted earnings in the range of C$5.30-C$5.45, representing 6% to 9% growth. The company also announced a new 5.5 million share buyback over the next three months. Year-to-date, the company has repurchased C$1.5 billion of its shares and paid C$$1 billion in dividends.
Johnson & Johnson-JNJ announced that they have agreed with Ci:z Holdings Co., Ltd. (4924.T), a Japanese company focused on the marketing, development and distribution of a broad range of dermocosmetic, cosmetic and skincare products, to launch an all-cash offer (the "tender offer") to acquire all of the outstanding shares of the Company not already held by Johnson & Johnson and its affiliates for ¥5,900 per share, which equates to approximately $2.1 billion. The acquisition will include the Company's range of brands comprising Dr.Ci:Labo, Labo Labo and Genomer line of skincare products. The Company's skincare portfolio is expected to strengthen Johnson & Johnson's market presence in Japan with key customers, and more broadly bolster its offering in science-based, efficacious dermocosmetic brands.
Monday, Oct. 22, 2018
Polaris-PII reported third quarter revenues rose 12% to $1.7 billion with net income up 17% to $95.5 million and EPS up 17% to $1.50 thanks to broad-based growth across the business. New products have been well received and manufacturing and logistics have improved. International growth outpaced North American growth with Indian motorcycles gaining market share in every market served amid a challenging motorcycle market. Management is also pleased with the early performance of the Boat Holdings acquisition which added $134 million to third quarter sales with sales increasing 17% on a pro-forma basis. At the same time, the company is facing serious challenges from tariffs which are expected add $40 million to costs in 2018. Management is actively taking countermeasures to help offset these costs through supply chain negotiations, increased pricing and government relations with the company seeking exemption from the tariffs. Free cash flow declined 47% year-to-date to $196 million due in part to higher inventories and the timing of accrual payments. The company’s debt level doubled since last year due in part to the Boat Holdings acquisition. During the third quarter, the company repurchased 507,000 shares of its common stock for $55 million at an average cost of about $108.48 per share. Year-to-date, the company has repurchased 2,069,000 shares for $247 million at an average cost of $119.38 per share with 4.4 million shares authorized for future share repurchases. Despite the significant tariff uncertainty and a challenging motorcycle environment, which is impacting growth and profitability for that segment, Polaris is maintaining its adjusted sales and earnings guidance for the full year 2018. Adjusted sales are expected to increase 11% to 12% for the full year with adjusted EPS expected in the range of $6.48 to $6.58, representing 27% to 29% growth.
Friday, Oct. 19, 2018
Gentex-GNTX reported third quarter revenues increased 5% to $460.3 million with net income motoring 23% higher to $111.3 million and EPS up 35% to $.42 thanks to a lower tax rate and lower shares outstanding. These were solid results given that actual light vehicle production was about 5% below forecast in the primary markets of Europe, North America, Japan and Korea. New regulations that took effect in the third quarter in Europe adversely impacted unit shipments and revenue in Europe. Despite the difficult production environment, Gentex’s growth outpaced their primary markets by 8% quarter over quarter, driven by new launches and the continuing ramp up in productions of their Full Display Mirror. During the third quarter, gross margin declined to 37.6% compared to 39% in the prior year period--negatively impacted by 60 basis points due to tariffs that became effective in the quarter. Despite the tariffs, the company’s growth in China continues to outpace corporate growth by a wide margin. During the third quarter, Gentex repaid the remaining principal on its credit facility of $23.1 million and repurchased 7.5 million shares of its common stock at an average price of $22.98 per share for a total of $172.5 million. The company has approximately 12.2 million shares remaining available for future repurchase, which management plans to continue as they view the stock as “undervalued with the concerns over tariffs and gross margin overdone.” Management remains optimistic that the growth of their core auto-dimming mirrors and Full Display Mirrors will continue to provide growth rates well above vehicle production levels over the balance of 2018 and through calendar 2019. Management expects revenues for 2018 to be in the range of $1.854-$1.872 million, representing 3%-4% growth for the full year, with 2019 revenue growth expected in the range of 5%-10%.
Thursday, Oct. 18, 2018
Genuine Parts-GPC reported third quarter sales motored ahead 15% to $4.7 billion with net earnings up 39% to $220 million and EPS up 38% to $1.49. Excluding costs related to last year’s acquisition of Alliance Automotive Group (AAG) in Europe and the attempted transaction to spin-off S.P. Richards and the favorable impact of the $12 million termination fee, adjusted net income was $217.6 million, or $1.48 per share, up 28% and 29%, respectively. Total sales for the third quarter included 4.3% comparable growth, the strongest growth since the fourth quarter of 2014. Third quarter sales for the Automotive Group were up 23.3% to $2.65 billion on a 3% comparable sales increase. Sales for the Industrial Group powered ahead 8.3% to $1.58 billion on 7% comparable sales growth. Sales for the Business Products Group increased 1.3% to $496 million on 1.3% comparable sales growth, the strongest growth since the first quarter of 2015. Operating profits expanded 20 basis points despite increases in freight and labor costs that exceeded sales growth. Year-to-date, Genuine Parts generated $834 million in free cash flow, up 87% from last year, revved up by the net income gain and tight working capital management. Genuine Parts’ 2018 dividend of $2.88 is up 7% from 2017 and represents the 62nd consecutive year of GPC dividend payments. While GPC has repurchased few shares year-to-date, 17.4 million shares remain under the current share buyback authorization and the company expects to be active in the market as its stock represents an attractive investment. So far, tariffs have had a negligible impact on GPC’s business. However, management keeps a watchful eye on list 3, which became effective in October imposing 10% tariffs on $200 billion of goods imported from China. Genuine Parts currently sources about 40% of its goods outside the U.S. with 20% impacted by the China tariffs, representing about 7% to 8% of GPC’s cost of goods sold. Given Genuine Parts’ strong competitive advantage, management expects to pass along tariff cost increases to its customers. Given the strong year-to-date performance, GPC raised its full year sales guidance to be up 14% to 15%, an increase from the prior guidance of up 13% to 14%. Adjusted EPS, which excludes any transaction-related costs, are now expected in the $5.60 to $5.70 range, tightened from previous guidance of $5.60 to $5.75. Genuine Parts continues to expect a full-year tax rate of approximately 25%, down markedly from the 35.7% rate paid in 2017.
Wednesday, Oct. 17, 2018
AbbVie-ABBV announced the U.S. Food and Drug Administration (FDA) has accepted its supplemental New Drug Application (sNDA) for Priority Review for IMBRUVICA® (ibrutinib) in combination with obinutuzumab (GAZYVA®) in previously untreated adult patients with chronic lymphocytic leukemia or small lymphocytic lymphoma (CLL/SLL). If the sNDA is approved, the use of IMBRUVICA with obinutuzumab could become the first chemotherapy-free, anti-CD20 combination approved by the FDA for the first-line treatment of CLL/SLL. IMBRUVICA is currently FDA-approved to treat adults with CLL/SLL as a single-agent for all lines of therapy and in combination with bendamustine and rituximab (BR).1 IMBRUVICA is a once-daily, first-in-class Bruton's tyrosine kinase (BTK) inhibitor that is administered orally, and is jointly developed and commercialized by Pharmacyclics LLC, an AbbVie company, and Janssen Biotech, Inc, a Johnson & Johnson-JNJ company.
Tuesday, Oct. 16, 2018
Johnson & Johnson-JNJ reported third quarter sales rose 3.6% to $20.3 billion with net income up 4.5% to $3.9 billion and EPS up 5.1% to $1.44. On an operational basis, excluding acquisitions and divestitures, worldwide sales increased 6.1% with domestic sales up 3.9% and international sales up 8.5% and adjusted EPS up 7.9%. The solid third quarter results reflect continued market share gains in the Pharmaceutical business with sales up 6.7% to $10.3 billion driven by double-digit growth in nine key products; accelerating sales momentum and improved operational performance in the Consumer business with sales up 1.8% to $3.4 billion; and consistent progress in the Medical Devices business with sales dipping 0.2% to $6.6 billion. At quarter end, JNJ had $12 billion in net long-term debt, with $19 billion in cash and investments and $31 billion in long-term debt. Management raised their outlook for sales and earnings for the full 2018 year with sales now expected in the range of $81.0-$81.4 billion, representing operational growth of 5.5% to 6.0%, with adjusted EPS expected in the range of $8.13 to $8.18, representing operational growth of 9.3% to 10%.
Monday, Oct. 15, 2018
Ross Stores-ROST announced the recent opening of 30 Ross Dress for Less® ("Ross") and ten dd's DISCOUNTS® stores across 19 different states in September and October. These new locations complete the company's store growth plans for fiscal 2018 with the addition of 99 new stores. "This fall, we continued to expand our Ross and dd's footprints across our existing markets as well as expansion in our newer market – the Midwest," said Jim Fassio, President and Chief Development Officer. "We now operate nearly 1,500 Ross and over 230 dd's DISCOUNTS locations. Looking ahead, we continue to believe there is plenty of opportunity to further expand our store base for both chains given consumers' ongoing focus on value. As such, we recently updated our longer-term growth store potential to reflect our confidence that Ross can grow to 2,400 locations and dd's can become a chain of 600 stores."
Friday, Oct. 12, 2018
As part of Starbucks’-SBUX previously announced plan to return $25 billion to shareholders in the form of share buybacks and dividends through fiscal 2020, the company is currently executing a $5 billion accelerated share repurchase program (ASR). The Company used proceeds from the recently completed transaction with Nestlé S.A. to execute the ASR, effective October 1, 2018.
Thursday, Oct. 11, 2018
Walgreens Boots Alliance-WBA reported solid fourth quarter results with sales up 11% to $33.4 billion, operating income up 36% to $1.5 billion, net income up 89% to $1.5 billion and EPS more than doubling to $1.55 thanks to the benefits of share repurchases and a lower tax rate. Adjusted EPS increased 13% in the fourth quarter. For the full fiscal 2018 year, sales increased 11% to $131.5 billion with operating income up 15% to $6.4 billion, net income up 22% to $5.0 billion and EPS up 34% to $5.05. Return on shareholders’ equity for the year was a healthy 18.9%. Sales growth benefited from the acquisition of Rite-Aid stores, with organic sales growth up 4% for the quarter and 3% for the year. The integration of the Rite Aid stores is on track with expected synergies from the acquisition increased to $650 million annually from the previous forecast of $600 million. Walgreens continues to gain pharmacy market share in the U.S. as market share expanded to a record 21.7 % from 20.2% last year. Free cash flow increased 17% during the year to $6.9 billion, the highest in the company’s history, with the company paying $1.7 billion in dividends and repurchasing $5.2 billion of its stock. In fiscal 2019, management plans to repurchase an additional $3 billion worth of shares as part of the previously announced $10 billion share repurchase program. Walgreens expects fiscal 2019 adjusted constant currency EPS growth of 7%-12% in the range of $6.40-$6.70. Recent strategic partnerships with LabCorp, Kroger, Alibaba and Birchbox should contribute to future growth.
Thor Industries-THO announced that its Board of Directors approved an increase in the amount of Thor’s regular quarterly dividend to $0.39 per share from $0.37 per share, an increase of 5%.
Wednesday, Oct. 10, 2018
Fastenal-FAST reported third quarter revenues rose 13% to $1.3 billion with operating income up 15% to $262.3 million and net income and EPS each hammering up 38% gains to $197.6 million and $.69, respectively, thanks to lower tax rates. Fastenal has reported six consecutive quarters of double-digit sales growth thanks to strong demand in manufacturing and growth in industrial vending and Onsite locations. During the quarter, Fastenal signed 5,877 vending devices, up 23.2% with product sales through the vending devices growing 20%. They signed 88 Onsites agreements, up 9% from the prior year period. National Accounts daily sales rose 18% in the third quarter. Non-residential construction daily sales were up 16.2% in the quarter, a new cycle high with fastener daily sale up 11% and non-fastener sales up 15%. While gross margin declined 100 basis points during the quarter to 48.1% due to customer/product mix and higher freight costs, the company’s operating margin expanded 30 basis points to 20.5% due to operating efficiencies. Free cash flow increased 7% year-to-date to $399 million with the company paying $327.5 million in dividends and repurchasing $40.4 million of its stock during the past nine months.
United Technologies’-UTX Board of Directors declared a dividend of 73.5 cents per share on the outstanding shares of UTC's common stock, which represents a 5 percent increase over the prior quarter's dividend amount. The dividend will be payable December 10, 2018, to shareowners of record at the close of business on November 16, 2018. "The increase in our dividend reflects our ongoing commitment to remain disciplined in our capital allocation and deliver value to shareowners," said Gregory J. Hayes, Chairman and Chief Executive Officer of United Technologies. UTC has paid cash dividends on its common stock every year since 1936.
T.Rowe Price Group-TROW reported preliminary month-end assets under management of $1.08 trillionas of September 30, 2018, a 9.4% increase since year end.
Tuesday, Oct.9, 2018
MAXIMUS-MMS announced that it has signed a definitive asset purchase agreement to acquire certain assets of General Dynamics Information Technology's large-scale, citizen-engagement centers in the U.S. Federal civilian market. The acquisition is expected to strengthen MAXIMUS position in the administration of federal government programs across the United States. The $400 million all cash transaction is expected to close in mid-November. The associated assets included in the asset purchase agreement had revenue of approximately $670 million for the twelve months ended June 2018. This revenue is primarily tied to cost reimbursable contracts and accordingly, operating margins typically average in the mid-single digit range. MAXIMUS currently anticipates that the assets associated with this transaction will generate approximately 10.5 months of revenue for its fiscal year 2019 in the range of $575 million to $600 million. The transaction is expected to be accretive by $0.10 to $0.15 of diluted earnings per share in fiscal year 2019 after consideration of one-time expenses, interest, non-cash charges, and cost synergies.
Friday, Oct. 5, 2018
Genuine Parts Company-GPC announced that Alliance Automotive Group (AAG), the Company's wholly-owned automotive distribution company based in London, U.K., has completed the acquisitions of two automotive businesses, U.K. based Platinum International Group Limited and TMS Motor Spares Ltd. Platinum International Group Limited (Platinum), headquartered in Manchester, England, is a leading value-added battery distributor in the automotive, industrial, marine and leisure markets, with nine U.K. locations and one location in the Netherlands. Platinum currently sells to AAG and other trading group customers across the independent aftermarket, original equipment dealer and other market segments and significantly expands AAG's battery sourcing platform as well as other distribution, including lubricants. The Platinum acquisition was effective October 2, 2018, and is expected to generate estimated annual revenues of $75 million (US$). TMS Motor Spares Ltd. (TMS), headquartered in Carlisle, England, is a leading automotive parts distributor with 17 locations in Scotland and seven in England. TMS further expands AAG's U.K. footprint, while also providing the first company-owned stores in Scotland. The TMS acquisition was effective August 31, 2018, and the Company expects the acquired business to generate annual revenues of approximately $30 million (US$).
Thursday, Oct. 4, 2018
Arrowhead Pharmaceuticals Inc. announced that it entered into a license and collaboration agreement with Janssen Pharmaceuticals, Inc., part of the Janssen Pharmaceutical Companies of Johnson & Johnson-JNJ, to develop and commercialize ARO-HBV. In addition, Arrowhead entered into a research collaboration and option agreement with Janssen to potentially collaborate for up to three additional RNA interference (RNAi) therapeutics against new targets to be selected by Janssen. The transactions have a combined potential value of over $3.7 billion for Arrowhead. Under the terms of the agreement, Arrowhead will receive $175 million as an upfront payment. Separately, Johnson & Johnson Innovation – JJDC, Inc. (JJDC) will make a $75 million equity investment in Arrowhead at a price of $23.00 per share of Arrowhead common stock. Arrowhead is eligible to receive up to approximately $1.6 billion in milestone payments for the HBV license agreement, including a $50 million milestone payment linked to a Phase 2 study. Arrowhead is also eligible to receive approximately $1.9 billion in option and milestone payments for the collaboration agreement related to up to three additional targets. Arrowhead is further eligible to receive tiered royalties up to mid teens on product sales.
Wednesday, Oct. 3, 2018
Private sector employment increased by 230,000 jobs from August to September according to the September ADP National Employment Report®. “The labor market continues to impress,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Both the goods and services sectors soared. The professional and business services industry and construction served as key engines of growth. They added almost half of all new jobs this month.” Mark Zandi, chief economist of Moody’s Analytics, said, “The job market continues to power forward. Employment gains are broad-based across industries and company sizes. At the current pace of job creation, unemployment will fall into the low 3%’s by this time next year.”
Tuesday, Oct. 2, 2018
PepsiCo-PEP reported third quarter revenues increased 2% to $16.5 billion with net income popping 16% higher to $2.5 billion and EPS bubbling 18% higher to $1.75. Organic revenue growth of 4.9% during the quarter was the highest in three years. Core constant currency EPS growth was 9%. Very strong operating performance from the international divisions was propelled by developing and emerging markets with double-digit core constant currency growth. Frito-Lay North America generated solid net revenue and operating growth during the quarter while North America Beverages showed sequential improvement in revenues. Free cash flow declined 32% year-to-date, impacted by discretionary pension contributions. During the past nine months, PepsiCo paid $3.6 billion in dividends and repurchased $1.4 billion of its stock. For the full year, PepsiCo expects to generate $9 billion in operating cash flow with capital expenditures of about $3.3 billion and a pension contribution of $1.4 billion. The company expects to pay $5 billion in dividends for the full year and repurchase $2 billion of its stock. Given the strength of year-to-date results, PepsiCo raised their outlook for full-year organic revenue growth to at least 3%. However, foreign exchange headwinds resulted in a lower revision to the EPS outlook with core EPS of $5.65 expected, representing 8% growth.
Paychex-PAYX reported first fiscal quarter revenues rose 9% to $862.8 million with total service revenue increasing 9% to $845.7 million and interest on funds held for clients jumping 25% to $17.1 million due to higher interest rates earned. Net income and EPS each processed up 16% gains during the quarter to $243.6 million and $.67, respectively, thanks to lower tax rates. The strong start to the fiscal year was a result of solid growth across all of the company’s major human capital management lines. Paychex experienced strong demand for their professional employer organization (PEO) services, achieving double-digit growth in the number of client worksite employees served. Insurance services revenues experienced solid growth benefiting from an increase in the number of health and benefits applicants. Free cash flow decreased 23% during the quarter to $249 million due to working capital changes. During the quarter, the company paid $201 million in dividends and repurchased 500,000 shares for $32.8 million at an average cost of $65.60 per share. Management reaffirmed its guidance for fiscal 2019 EPS growth of approximately 11% with Management Solutions revenue growth anticipated to be 4% for the year and PEO and Insurance Services revenue growth of 18% to 20%.
Monday, Oct. 1, 2018
Stryker-SYK announced the acquisition of privately-held HyperBranch Medical Technology, Inc. for a total equity value of approximately $220 million in an all cash transaction. HyperBranch is dedicated to developing medical devices based on its proprietary polymers and cross-linked hydrogels. Its Adherus AutoSpray Dural Sealant product is one of only two FDA-approved dural sealants on the market. The transaction is expected to have an immaterial impact to net earnings in 2018.
Friday, Sept. 28, 2018
Facebook-FB reported it recently discovered a security breach affecting nearly 50 million user accounts. The company says hackers exploited its "View As" feature, which lets people see what their profiles look like to someone else. Facebook says it has taken steps to fix the security problem and alerted law enforcement. To deal with the issue, Facebook reset some logins, so 90 million people have been logged out and will have to log in again. That includes anyone who has been subject to a "View As" lookup in the past year.
Walgreens Boots Alliance-WBA announced that the company has reached an agreement with the Securities and Exchange Commission (SEC) to fully resolve an investigation into forward-looking financial goals and related disclosures by Walgreen Co. (Walgreens). The disclosures at issue were made prior to the merger with Alliance Boots and the establishment of Walgreens Boots Alliance on December 31, 2014. The settlement does not involve any of Walgreens Boots Alliance’s current officers or executives, nor does it allege that anyone acted intentionally or recklessly at any time. In agreeing to the settlement, Walgreens Boots Alliance neither admits nor denies the SEC’s allegations that Walgreens and its then Chief Executive Officer (CEO) and then Chief Financial Officer (CFO) acted negligently in connection with statements made in the June 2013, October 2013, December 2013 and March 2014 earnings calls, by failing to adequately disclose the increased risk to achieving certain of Walgreens previously stated fiscal 2016 financial goals. Following warnings in December 2013 and March 2014, Walgreens withdrew those fiscal 2016 goals in June 2014. Pursuant to the agreement with the SEC, Walgreens Boots Alliance consented to the SEC’s issuance of an administrative order, and the company will pay a $34.5 million penalty, which has been fully reserved for, while the Walgreens then CEO and then CFO separately resolved the matter with the SEC.
Thursday, Sept. 27, 2018
Accenture-ACN reported fourth quarter revenues increased 11% to $10.1 billion with net income up 10% to $1.0 billion and EPS up 7% to $1.58 thanks to broad-based growth among the company’s business segments and geographies. For the full fiscal 2018 year, revenues increased 14% to $39.6 billion with net income jumping 18% to $4.1 billion and EPS up 17% to $6.34. New bookings in the fourth quarter were $10.8 billion leading to record bookings of $42.8 billion for the full year thanks to strong demand for the company’s services as Accenture significantly gained market share. Return on shareholders’ equity for the year was an excellent 37.9%. Free cash flow increased 21% during the year to $5.4 billion with the company paying $1.7 billion in dividends during the year and repurchasing $2.6 billion of its shares, including 3.4 million shares in the fourth quarter for $552 million at an average cost of $163.24 per share. Accenture announced a 10% increase in its semi-annual dividend to $1.46 per share with plans to convert to a quarterly dividend in fiscal 2020. The Board of Directors also announced a new $5 billion share repurchase authorization which brings the total buyback authorization to $6 billion. With strong business momentum going into fiscal 2019, Accenture’s outlook is for revenue growth in the range of 5%-8%, with foreign exchange expected to have a negative 2.5% impact. The company expects EPS in the range of $6.98 to $7.25 with operating margin expected to expand 10 to 30 basis points. For fiscal 2019, Accenture expects free cash flow to be in the range of $5.1 billion to $5.5 billion.
Hormel Foods-HRL announced that it will be investing approximately $150 million in an expansion of the company's Burke manufacturing facility in Nevada, Iowa. Burke is one of the leading providers of pizza toppings and other fully cooked meat products in the foodservice and prepared food industries. The 210,000-square-foot expansion is one of the largest in the company's history. Adding to the current 225,000 square feet of production, warehouse, and offices, the expansion would also add approximately 210 new jobs in addition to the current 350 team members.
Wednesday, Sept. 26, 2018
The Walt Disney Company-DIS has consented to Twenty-First Century Fox, Inc.’s decision to tender or sell its 39% stake in Sky plc as soon as allowable under terms of Comcast Corp.’s £17.28 per share offer for Sky. The current value of Fox’s Sky stake is more than $15 billion. The transaction, coupled with the divestiture of the Fox Sports Regional Networks, will significantly reduce the amount of debt Disney will incur in acquiring 21st Century Fox, and enable Disney to maintain its strong balance sheet as it continues to invest in content creation for its direct-to-consumer platforms. Disney will expand its considerable investment in the Disney-branded direct-to-consumer offering launching in late 2019 and the new ESPN+ sports streaming service, and will seek to increase investment in Hulu’s content offerings and international distribution. Disney and 21st Century Fox each currently hold 30% stakes in Hulu.
Tuesday, Sept.25, 2018
Nike-NKE reported first fiscal quarter revenues rose 10% to $9.9 billion with net income running 15% higher to $1.1 billion and EPS up 18% to $.67. The double-digit revenue growth was driven by the continued success of the Consumer Direct Offense, which fueled growth across all geographies. Sales in Greater China jumped 24% during the quarter representing the 17th consecutive quarter of double-digit growth in China. Digital sales growth was 36% during the quarter representing the fastest growth in all geographies. Nike’s strong 18% EPS growth was driven by the 10% revenue growth, 50 basis point gross margin expansion, selling and administrative expense leverage and a lower share count. Inventories were $5.2 billion at quarter end, flat with the prior year, with healthy inventories across all geographies due to strong full-price sell through on innovative new products. During the past quarter, Nike repurchased 17.8 million shares for about $1.4 billion at an average cost of $78.65 per share. Management reaffirmed their outlook for fiscal 2019 with revenue growth in the high single-digit range and gross margin expansion of 50 basis points.
FactSet-FDS reported fourth quarter revenues rose 5.9% to $326.6 million driven by organic revenue growth of 5.3%. The increase is due primarily to higher sales of research and analytics products, content and technology solutions and wealth management solutions. Client count during the quarter increased 167 to 5,142 with user count increasing 2,391 to 91,897. Annual client retention was 91%. The fourth quarter operating margin expanded to 25.5% with EPS advancing 16.4% to $1.77 thanks to the lower tax rate and fewer shares outstanding. For the full fiscal 2018 year, revenues increased 10.6% to $1.35 billion with net income up 3.4% to $267.1 million and EPS up 4.1% to $6.78. Annual subscription value increased 5.7% organically to $1.39 billion as of 8/31/18. Return on shareholders’ equity during the year expanded to 50.8%. Free cash flow increased 24% during the year to $352 million with the company paying $89 million in dividends and repurchasing $304 million of stock during the year, including 329,478 shares for $67.5 million at an average cost of $204.86 per share during the fourth quarter. FactSet celebrated 40 years as a company with 38 years of consecutive revenue growth and 22 years of consecutive adjusted EPS growth. The company enters fiscal 2019 with strong momentum and an expanding suite of innovative workflow solutions to drive future growth. For fiscal 2019, management expects revenues in the range of $1.41 to $1.45 billion, representing 4%-7% growth, with EPS growing at double-digit rates in the range of $8.70-$8.90.
Monday, Sept. 24, 2018
Genuine Parts-GPC announced acquisitions for both its Industrial Group, Motion Industries, and its U.S. Automotive Parts Group. Motion Industries has entered into a definitive agreement to acquire Hydraulic Supply Company (HSC), with an effective close date of October 1, 2018. HSC, founded in 1947 and based in Sunrise, Florida, is a leading full-service fluid power distributor, with a broad product offering of hydraulic, pneumatic and industrial components and systems. The Company expects HSC to generate estimated annual revenues of $85 million. In addition, the Company has entered into a definitive agreement to acquire Hastings Auto Parts, Inc. (Hastings), also with an effective close date of October 1, 2018. Hastings is expected to generate approximate annual revenues of $10 million. Terms of the deals were not disclosed.
United Technologies-UTX has been awarded a contract worth up to $2.46 billion to supply the U.S. Air Force with aircraft parts.
Thursday, Sept. 20, 2018
Thor Industries-THO reported fiscal fourth quarter revenues declined 3.1% to $1.87 billion with net income and EPS down 26% to $88 million and $1.67, respectively. Earnings reflected reduced productions levels, higher promotion costs, elevated labor expense and increased raw materials cost primarily due to aluminum and steel tariffs. These costs were partially offset by a lower tax rate due to tax reform. Sales for the fourth quarter were flat for the Towable segment and down 13.2% for the Motorized segment. For the full year, revenues rose 14.9% to $8.3 billion with net income and EPS up nearly 15% to $430 million and $8.14, respectively. Return on shareholders’ equity was 22%. Free cash flow increased 8% during the year to $328 million with the company paying $78 million in dividends. Thor ended the year with $275 million of cash on its balance sheet after spending $145 million during the year to pay off the balance on their revolving line of credit. On September 18, 2018, Thor announced it had entered into a definitive agreement to acquire Erwin Hymer Group for approximately EUR 1.7 billion cash ($2 billion at the current exchange rate) and equity consisting of about 2.3 million shares of Thor’s common stock. The acquisition of Erwin Hymer Group, Europe’s premier RV manufacturer, is expected to close near the end of calendar year 2018.
Tuesday, Sept. 18, 2018
Microsoft-MSFT announced that its board of directors declared a quarterly dividend of $0.46 per share, reflecting a 4 cent or 9.5%increase over the previous quarter’s dividend. The dividend is payable Dec. 13, 2018, to shareholders of record on Nov. 15, 2018. The ex-dividend date will be Nov. 14, 2018.
Thor Industries-THO plans to acquire Erwin Hymer Group, a privately held international company, for an enterprise value of approximately €2.1 billion, with the purchase price to be funded with cash and equity. Equity consideration will consist of approximately 2.3 million shares of Thor. The Hymer family will thereby remain engaged in the industry. The combination creates the world’s largest RV manufacturer, with the leading position in both North America and Europe, and establishes a global sales and production footprint for the company. Thor expects the transaction to be accretive to earnings in the first year, before taking into account anticipated synergies, purchase accounting adjustments and transaction-related expenses. Subsequent to closing, Thor intends to repurchase shares both opportunistically and systematically in order to offset the issuance of shares to the Hymer family.
Mastercard-MA has reached an agreement to settle monetary damages claims in the U.S. merchant class-action litigation. The agreement formalizes prior discussions and has been executed by all of the defendants – including Mastercard, Visa and a number of banks – and the court-appointed class counsel for the merchants. The settlement is an amendment to the financial terms of the 2012 Class Settlement Agreement and will be filed with the court seeking approval. In addition to the original 2012 monetary terms, Mastercard’s share of the financial agreement is an additional $108 million, which is based upon the allocation of financial responsibility that was set out in the judgment and settlement sharing agreements that were executed in February 2011. In total, the defendants have agreed upon an additional payment of $900 million in the current agreement. The company recorded a $210 million charge in its second-quarter 2018 financial statements, which will cover the financial obligation under this agreement and for estimated liabilities related to filed and anticipated opt-out merchant cases. The merchant class-action that seeks the revision of network rules is not covered by this settlement agreement. That action remains outstanding while the parties are engaged in settlement negotiations.
Monday. Sept. 17, 2018
Oracle-ORCL reported fiscal first quarter revenues increased 1% to $9.2 billion driven by cloud service and license support revenues increasing 3% to $6.6 billion. The vast majority of Enterprise Resource Planning (ERP) applications running in the cloud are either Oracle Fusion (with nearly 5,500 customers) or Oracle NetSuite systems (with over 15,000 customers) with Oracle continuing to increase its market share. Net income increased 6% during the quarter to $2.3 billion with the operating margin stabilizing at 30% and with EPS up 14% to $.57 on lower shares outstanding due to the company’s substantial share buyback program. Free cash flow increased 4% during the quarter to $6.3 billion with the company repurchasing 212 million shares for nearly $10 billion during the quarter at an average cost of $47.17 per share as management views the stock as an “amazing deal and unbelievable buy.” In the last 12 months, the company has repurchased 440 million of it shares reducing its shares outstanding by 8.5%. A new $12 billion share buyback program was authorized during the quarter bringing the total authorization to $20 billion. For the second fiscal quarter, Oracle expects revenues to be flat to up 2% due to tough comparisons with non-GAAP EPS up 11%-15%. Revenue growth is expected to accelerate in the second half. Management is optimistic that the company will deliver another fiscal year of double-digit non-GAAP EPS growth.
TJX Companies-TJX announced its Board of Directors has approved a 2-for-1 stock split of the its common stock by means of a stock dividend. Implementation of the stock split is subject to approval by TJX shareholders of an increase in the number of authorized shares of the Company’s common stock from 1.2 billion shares to 1.8 billion shares, and related Board approval. The increase will be voted on at a special shareholders meeting that is anticipated to be held on October 22, 2018, at which shareholders of record on September 27, 2018 would be entitled to vote. If approved, one additional share of the company’s common stock would be distributed on November 6, 2018 for each share held by shareholders of record on October 30, 2018. Ernie Herrman, Chief Executive Officer and President of The TJX Companies, Inc., stated, “We are pleased to announce this 2-for-1 stock split in addition to our regular quarterly cash dividend. TJX has a long and successful track record, and this stock split underscores our great confidence in the continued success of our Company.”
MAXIMUS-MMS announced that it has signed a new contract with the California Public Utilities Commission (CPUC) to administer the California LifeLine Program. The $36 million base contract is projected to run 30 months. There are two additional one-year contract extension options which would bring the total contract value to $65 million. The California LifeLine Program provides discounted home phone and cell phone services to qualified households. The California LifeLine discounts help consumers lower the cost of their phone bills. The scope of work as the California LifeLine Administrator includes eligibility determination, call center services, web-based enrollments and document intake and processing.
Thursday, Sept. 13, 2018
UPS-UPS quantified the financial benefits of its transformation initiatives based on the company’s outlook for revenue quality improvement and operating cost reductions between 2018 and 2022. The company expects these actions to result in an incremental increase to adjusted earnings per share in the range of $1.00 to $1.20 by 2022. The company is focused on four strategic imperatives where it is well-positioned for profitable growth:
- Continued expansion of high-growth international markets where the company efficiently connects domestic and export customers to its global network;
- Profitable expansion from both B2B and B2C e-commerce, as U.S. industry package revenue is expected to grow by 40% from 2017 to 2022, and cross-border e-commerce volume is expected to grow by 28% over the next three years;
- Further penetration of the Healthcare and Life Sciences logistics market, given the increasing shift toward home healthcare, where UPS’s trusted residential delivery network will provide new value for healthcare companies and consumers;
- Enhancing services and value for Small- and Medium-sized Businesses, as the company repositions its commercial and service strategies to help this growing economic segment reduce logistics complexity and costs, and take advantage of UPS-offered technology platforms for growth.
UPS’s business strategy includes continued capital investment in its vast global network at previously announced levels. New and renovated facilities, aircraft and fleet assets are coming online at record levels during the next four years. In 2018, 2019 and 2020, UPS will add 350,000-400,000 pieces per hour of sortation capacity in the U.S. each year, which is about seven times the additional sortation capacity added in 2017, alone. Seven new ‘super hub’ automated sortation facilities will be opened during the period, with 30-35% higher efficiency than comparable less-automated facilities. More than 70 expansion projects will be implemented during the period. UPS will have completed 17 projects in 2018, in time for the peak holiday shipping season.
AbbVie-ABBV announced new patient-reported outcomes data from three pivotal Phase 3 trials evaluating risankizumab, an investigational interleukin-23 (IL-23) inhibitor, in adult patients with moderate to severe plaque psoriasis. Across all three trials, patients reported significant improvements in health-related quality of life, mental health and work productivity measures when treated with risankizumab.
AbbVie also announced new results from the ongoing Phase 2b study including longer-term (32-week) efficacy and safety data and patient-reported outcomes data evaluating upadacitinib, an investigational, once-daily oral JAK1-selective inhibitor, in adult patients with moderate to severe atopic dermatitis.2 Results from a pre-specified, interim analysis from the Phase 2b dose-ranging study showed that treatment with upadacitinib 7.5 mg, 15 mg or 30 mg resulted in greater improvements in itch and skin lesions, with statistically significant differences observed versus placebo at week 32. Atopic dermatitis is a common chronic, relapsing, inflammatory skin disease with associated comorbidities. One-third of atopic dermatitis patients have moderate to severe disease, which manifests as a debilitating, itchy rash with significant physical, psychological and economic burden. There is a large unmet need for therapies that are effective to manage the signs and symptoms of moderate to severe atopic dermatitis.
T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.09 trillion as of August 31, 2018, representing a 9.6% increase over year end assets.
Wednesday, Sept. 12, 2018
Apple-AAPL unveiled three new phones and a redesigned fourth generation Apple Watch with advanced medical features. The trio of new phones includes iPhone Xs, iPhone Xs Max and iPhone XR. The 5.8-inch iPhone Xs and 6.5-inch iPhone Xs Max feature Super Retina displays, a faster and improved dual camera system that offers breakthrough photo and video features, the first 7-nanometer chip in a smartphone, faster Face ID, wider stereo sound, a beautiful new gold finish and a Dual SIM to iPhone. iPhone Xs and iPhone Xs Max come with iOS 12, the world’s most advanced mobile operating system. iOS 12 introduces new AR experiences, helps people rediscover and share photos, and makes communications more expressive and fun with new Animoji and Memoji. Screen Time helps customers understand and take control of the time they spend interacting with their iOS devices, Siri Shortcuts give any app the ability to work with Siri and new privacy features help protect users from being tracked on the web. iPhone Xs and iPhone Xs Max will be available for pre-order beginning Friday, September 14 and in stores beginning Friday, September 21 with price tags starting at $999 and $1,099, respectively.
The iPhone XR integrates breakthrough technologies from iPhone XS in an all-screen glass and aluminum design with the most advanced LCD in a smartphone featuring a 6.1-inch Liquid Retina display and six beautiful finishes. iPhone XR brings the powerful A12 Bionic chip with next-generation Neural Engine, the TrueDepth camera system, Face ID and an advanced camera system that creates dramatic portraits using a single camera lens. iPhone XR will be available to pre-order beginning Friday, October 19 and in stores beginning Friday, October 26 with price tags starting at $749.
The Apple Watch Series 4, with a 30%+ larger screen, brings advanced activity and communications features, along with revolutionary health capabilities, including a new accelerometer and gyroscope, which are able to detect hard falls, and an electrical heart rate sensor that can take an electrocardiogram (ECG) using the new ECG app, which has been granted a De Novo classification by the FDA. Despite the added features, the redesigned Apple Watch’s battery life remains at 18 hours with six hours of outdoor workout time.The new Apple Watch will begin shipping on September 21, with a $399 price tag for GPS and a $499 price tag for cellular.
Monday, Sept. 10, 2018
Genuine Parts Company-GPC announced that it has received notice from Essendant of its intent to terminate the merger agreement to combine GPC's S.P. Richards business with Essendant, entered into on April 12, 2018. Essendant will be required to pay a termination fee to GPC in the amount of $12 million. GPC issued the following statement: “We believe that the prospects for S.P. Richards remain strong and that there is significant opportunity for S.P. Richards to grow and deepen its relationships with both independent dealers and other customer channels. As such, we are confident in our ability to drive growth and profitability for S.P. Richards and to support value creation for GPC shareholders.”
Walgreens-WBA and Fred’s, Inc. announced they have entered into a definitive asset purchase agreement, pursuant to which Walgreens will acquire pharmacy patient prescription files and related pharmacy inventory of 185 Fred’s stores located across 10 Southeastern states. Under the agreement, the aggregate consideration to be paid by Walgreens to Fred’s is $165 million.
Pratt & Whitney, a division of United Technologies-UTX, has been awarded a $437 million contract modification by the U.S. Air Force Life Cycle Management Center (AFLCMC) for next generation adaptive propulsion risk reduction for potential air superiority applications.
Friday, Sept. 7, 2018
Fastenal-FAST reported net sales rose 13.7% to $467,893 for the month of August with daily sales also up 13.7% to $20,343. Daily sales growth by end market was 13.3% for manufacturing and 18.5% for non-residential construction. Daily sales growth by product line was 10.8% for fasteners and 16% for other products. Approximately 84% of the company’s Top 100 national accounts were growing sales in August compared to 74% last year. About 67.5% of Fastenal’s public branches were growing in August compared to 62.9% last year. Total personnel increased 4.4% to 21,004.
Thursday, Sept. 6, 2018
Polaris Industries Inc.-PII will acquire all outstanding common stock of WSI Industries for $7.00 per share in cash, resulting in a WSI Industries enterprise value of approximately $23.9 million. WSI Industries, Inc. is a leading contract manufacturer that specializes in the machining of complex, high-precision parts for a wide range of industries, including automotive, avionics and aerospace, energy, recreational vehicles, small engines, bioscience and the defense markets The merger, which is expected to close in the fourth calendar quarter of 2018. WSI Industries reported net sales of $25.9 million for the first three quarters of its fiscal 2018 ending August 26, 2018, of which 78% was attributable to sales to Polaris.
Private sector employment increased by 163,000 jobs from July to August according to the August ADP National Employment Report®. “Although we saw a small slowdown in job growth, the market remains incredibly dynamic," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "Midsized businesses continue to be the engine of growth, adding nearly 70 percent of all jobs this month, and remain resilient in the current economic climate." Mark Zandi, chief economist of Moody's Analytics, said, "The job market is hot. Employers are aggressively competing to hold onto their existing workers and to find new ones. Small businesses are struggling the most in this competition, as they increasingly can't fill open positions."
Thursday, Aug. 30, 2018
On Warren Buffett's 88th birthday he said in a CNBC interview that stocks continue to be attractive long-term investments today especially compared to bonds or real estate. He continues to buy stocks including a little more Apple-AAPL since the end of the second quarter. He also repurchased a little Berkshire Hathaway-BRKB under the company's revised buyback policy that permits Berkshire to repurchase shares at prices below Berkshire's intrinsic value as conservatively determined by Warren Buffett and Charlie Munger.
https://finance.yahoo.com/news/first-cnbc-cnbc-transcript-berkshire-162600021.html
Stryker-SYK plans to acquire K2M Group Holdings, Inc. for $27.50 per share, or a total equity value of approximately $1.4 billion. K2M, which was founded in 2004, has emerged as a key player in the roughly $10 billion spinal market. With annual sales approaching $300 million, K2M brings to Stryker`s Spine division a highly complementary and innovative portfolio, which includes a strong position in the complex spine market. Additionally, K2M`s broad portfolio will strengthen Stryker`s Spine offering in the core spinal segment, including an attractive minimally invasive spine portfolio, further Stryker`s capabilities in additive manufacturing, and expand the Company`s global footprint. K2M`s compelling product portfolio and sales force focus have driven a double-digit compounded annual growth rate over the past five years. The acquisition of K2M is expected to close late in the fourth quarter of this year and is expected to have an immaterial dilutive impact to Stryker`s net earnings per diluted share and adjusted net earnings per diluted share in 2018. There is no change to Stryker`s previously announced expected adjusted net earnings per diluted share1 for the full year, which is a range of $7.22 - $7.27.
Wednesday, Aug. 29, 2018
Brown-Forman-BFB reported first fiscal quarter sales increased 6% to $766 million with net income and EPS increasing 12% to $200 million and $0.41, respectively. Underlying net sales grew 9% on broad-based portfolio growth including a 10% increase for the Jack Daniel’s family of brands, a 29% increase for Woodford Reserve, a 10% increase in Herradura and an 11% increase in el Jimador. Developed international markets grew underlying net sales by 16%, emerging markets grew underlying net sales by 11% and the United States grew underlying net sales by 2%. Tariffs added 2% to 3% to total underlying sales growth as customers in the European Union, Canada and Mexico built inventory ahead of retaliatory tariffs that went into effect in July. During the quarter, Brown-Forman generated $103 million in free cash flow and returned $77 million to shareholders through dividends of $76 million and share repurchases of $1 million. Given the competitive distilled spirit marketplace, the reduction in Brown-Forman’s tax rate from 22% to 17% and positive news coming from trade negotiations, the company has delayed increasing prices in response to the tariffs, which will hurt gross margins going forward. Therefore, management lowered its full fiscal 2019 year EPS guidance by 10 cents to $1.65 to $1.75, representing 11% to 18% growth from last year. Underlying sales growth of 6% to 7% is unchanged from prior guidance.
Monday, Aug. 27, 2018
AbbVie-ABBV announced that the U.S. Food and Drug Administration (FDA) approved IMBRUVICA® (ibrutinib) plus rituximab (RITUXAN®) for the treatment of adult patients with Waldenström's macroglobulinemia, a rare and incurable type of non-Hodgkin's lymphoma (NHL). With this approval, the IMBRUVICA prescribing information now includes combination use with rituximab, representing the first and only chemotherapy-free combination treatment specifically indicated for the disease. "We are pleased to have IMBRUVICA approved, both as a single agent and combination therapy with rituximab, to provide an additional efficacious treatment option for people living with Waldenström's macroglobulinemia," said Thorsten Graef, M.D., Ph.D., Head of Clinical Development at Pharmacyclics LLC, an AbbVie company. "We are proud of our robust clinical development program, and this new approval reflects our continuous commitment to exploring the full potential of IMBRUVICA's mechanism of action for treating patients with diseases that have great unmet medical need."
Friday, Aug. 24, 2019
Stockholders of Express Scripts Holding-ESRX approved the proposed acquisition of Express Scripts by Cigna. Cigna announced that its stockholders also adopted the merger agreement. "By approving our proposed combination, Cigna and Express Scripts stockholders recognize and validate the highly attractive value this transaction delivers to all stakeholders," said Tim Wentworth, President and Chief Executive Officer, Express Scripts.
Thursday, Aug. 23, 2018
Ross Stores-ROST reported second quarter sales rose 9% to $3.7 billion with net income up a dressy 23% to $389 million and EPS up 27% to $1.04. Comparable store sales were up 5% during the quarter driven by higher traffic and basket size. Sales were broad-based across product categories and geographies. These results were above management’s expectations. Free cash flow increased 33% during the first half of the year to $836 million with the company paying $170 million in dividends and repurchasing 6.5 million shares for $529 million at an average cost of $81.38 per share during the same time period. As planned, the company plans to repurchase $1.075 billion of common stock during the full fiscal year. For the second half of the year, the company expects comparable store sales of 1%-2% as the business goes up against tough comparisons with full year EPS expected in the range of $4.01-$4.10, representing 13%-15% growth. Ross Stores raised their long-term projected store potential to 3,000 locations up from a previous target of 2,500 locations. The higher store potential provides a considerable amount of long-term growth opportunities given the current store base of 1,680 stores.
Hormel-HRL reported third quarter revenues rose 7% to $2.4 billion with both net income and EPS up 15% to $210 million and $.39, respectively. Volume was up 5% to 1.2 billion pounds, in part to recent acquisitions, with organic volume up 1% and organic net sales flat during the quarter. Grocery Products and International delivered solid profit results during the quarter despite increased tariffs in key markets. Refrigerated Foods branded value-added strategy was able to offset a dramatic 88% decline in commodity profits. Jenni-O Turkey Store also saw a strong increase in value-added sales. Increased advertising paid off with growth from brands such as Skippy, Natural Choice, Jennie-O, Applegate, Wholly Guacamole and Herdez. Hormel is selling its Fremont processing facility for $30 million in cash. The fiscal 2019 expense associated with this transaction is expected to be $15-$20 million related to relocating manufacturing lines and pension-related expenses. Year-to-date, free cash flow increased 22% to $506 million with share repurchases totaling $45 million for 1.3 million share repurchased at an average cost of $34.62 per share. The third quarter dividend marked the 90th year of uninterrupted dividends paid to shareholders with the dividend up 10% over the prior year. Capital expenditures for the full year are expected to total approximately $400 million with the company remaining in a strong financial position to fund capital needs. Management lowered its sales outlook for the full fiscal 2018 year to $9.4 billion to $9.6 billion due to lower pork commodity prices while reaffirming its EPS outlook in the range of $1.81-$1.95.
Wednesday, Aug. 22, 2018
AbbVie-ABBV announced that results from the Phase 3 ELARIS UF-EXTEND extension study (MI2-816) showed at month 12 that elagolix reduced heavy menstrual bleeding with 87.9 percent of women with uterine fibroids achieving clinical response. Uterine fibroids are the most common type of benign abnormal growth in a woman's pelvis. Most American women will develop fibroids at some point in their lives. Fibroids can be asymptomatic, but in approximately 25 percent of women, they can cause symptoms, such as heavy menstrual bleeding, painful periods, vaginal bleeding at times other than menstruation, and anemia. African American women are more likely to experience fibroids and do so at a younger age.
Tuesday, Aug. 21, 2018
TJX Companies-TJX rang up a 12% increase in sales to $9.3 billion with net income up 34% to $739.6 million and EPS up 38% to $1.17. Excluding an 18 cent benefit related to U.S. tax reform, second fiscal quarter EPS increased 16.5% year-over-year to $0.99. Consolidated comparable store sales increased 6%, driven by an increase in customer traffic at every division. TJX ended the quarter with 4,194 stores, up 1.3% from last year. By division, Marmaxx’s sales increased 11% to $5.8 billion on a 7% gain in comp store sales generating operating profit margins of 14.2%. Homegoods sales increased 15% to $1.3 billion on a 3% gain in comp store sales generating operating profit margins of 10.7%. TJX Canada sales increased 13% to $938 million on a 6% gain in comp store sales generating operating profit margins of 14.8%. TJX International sales increased 12% to $1.2 billion on a 4% gain in comp store sales generating operating profit margins of 4%. During the first half of the year, TJX generated $986.8 million in free cash flow, up 66% from last year, with the company returning $1.44 billion to shareholders through dividends of $441 million and share buybacks of $1 billion at an average per share cost of $88.50. The company continues to expect to repurchase about $2.5 billion to $3 billion of TJX stock during fiscal 2019. Given the robust year-to-date results, management raised its guidance for the full year and now expects adjusted EPS to be in the range of $4.10 to $4.14, up 6% to 8% from fiscal 2018. The guidance is based on expected comp store growth of 3% to 4%.
Monday, Aug. 20, 2018
PepsiCo-PEP has agreed to acquire all outstanding shares of SodaStream for $144.00 per share in cash, in a transaction valued at $3.2 billion. SodaStream is the #1 sparkling water brand in volume in the world and the leading manufacturer and distributor of Sparkling Water Makers. In 2017, SodaStream generated $543 million in revenues and $74 million in net income. PepsiCo's strong distribution capabilities, global reach, R&D, design and marketing expertise, combined with SodaStream's differentiated and unique product range will position SodaStream for further expansion and breakthrough innovation. The deal is expected to close by Jan. 2019.
Wednesday, Aug. 15, 2018
Cisco Systems-CSCO reported fourth quarter revenues rose 6% to $12.8 billion, with product revenue up 7% and service revenue up 3%. Net income increased 57% to $3.8 billion with EPS up 69% to $.81. The earnings reflect an $863 million dollar benefit related to U.S. tax reform. Recurring revenue was 32% of total revenue, up one percentage point year over year. Revenue by geographic segment was: Americas up 5%, EMEA up 8% and APJC up 6%. Product revenue performance reflected solid growth in Applications and Security, which increased 10% and 12%, respectively. Infrastructure Platforms increased by 7%. For the full year, revenues rose 3% to $49.3 billion with net income of $.1 billion and EPS of $.02, each down 99%. The earnings include $10.4 billion in charges related to the Tax Cuts and Jobs Act. Return on shareholders’ equity was .3% during the year due to the tax related charges. Cisco held $46.5 billion of cash and investments as of the end of the quarter with $40.4 billion available in the United States. Free cash flow decreased 1% during the year to $12.8 billion with the company paying $6 billion in dividends and repurchasing $17.7 billion of its stock. CSCO has $19 billion remaining under the current share repurchase program. Management’s outlook for the first fiscal quarter of 2019 is for revenue growth of 5%-7% with GAAP EPS in the range of $.69-$.74.
Friday, Aug. 10, 2018
Maximus-MMS reported third fiscal quarter revenue of $597.9 million, down slightly from last year, with net income up 5% to $59.9 million and EPS up 5.8% to $0.91. This quarter’s revenue and operating income benefited $15.5 million from the signing of several change orders where the costs were reported in prior periods. By segment, Health Services revenue increased 7% to $359 million with operating income increasing 24% to $63.8 million thanks to the change orders. As expected U.S. Federal Services revenue fell 15% to $112.2 million with operating income declining 6% to $14.9 million. Human Services revenue declined 5% to $126.6 million with operating income falling 54% to $7.5 million, hurt by the wind-down of domestic and international contracts coupled with the ramp-up of new contracts. Management projects a slight operating loss for the segment during the fourth quarter. Free cash flow for the quarter declined 41% year-over-year to $64.1 million, squeezed by working capital needs. During the quarter, Maximus repurchased $60.9 million shares at an average cost per share of $61.26. As an expression of its confidence in the future, the company increased the annual dividend from 18 cents to $1.00, which represents a 1.5% current yield. In addition, the company announced a $200 million expansion in its share buyback program. When asked during the conference call about expectations, management said that given the challenging environment with unemployment at record lows, it expects revenues to grow in the single digits for 2019 with a return to double-digit growth in 2020.
Booking Holdings-BKNG booked a 17% increase in second quarter revenues to $3.5 billion with net income up 36% to $977 million and EPS up 40% to $20.13. Gross bookings--the total value of all travel services booked by customers net of cancellations--increased 15% over the prior year period to nearly $24 billion. Room nights sold increased 12% to 191 million, rental car days increased 1% to 20.9 million and airline tickets increased 5% to 1.9 million. Average daily rates for accommodations, or ADRs, were relatively flat compared with last year, which was better than the forecasted decline of about 1%. As of June 30, Booking.com had a total of about 28.8 million reported listings, consisting of approximately 23.3 million reported listings in hotels, motels and resorts and about 5.5 million reported listings in homes, apartments and other unique places to stay. During the second quarter, the company generated $1.6 billion of operating cash flow, up 35% from last year’s second quarter. Free cash flow for the quarter was $1.5 billion, also up 35%, with the company returning about $1.2 billion to shareholders through share buybacks. Year-to-date, Booking Holdings has reduced its share count by about 2%. As of June 30, $8.6 billion remained under the current share purchase authorization, which is expected to be completed over the next two to three years with both programmatic and opportunistic share repurchases. At the end of the second quarter Booking Holdings reported $16.8 billion in cash and investments on its sturdy balance sheet and $7.8 billion in long-term debt. During the earnings conference call, management provided third quarter guidance that assumes growth rates will decelerate over the remainder of the quarter, mainly due to the law of large numbers, consistent with long-term trends. Booked room nights are expected to increase by 6% to 9% with total gross bookings growing by 3% to 6% in U.S. dollars, and by 5% to 8% on a constant currency basis. Constant currency accommodation (ADRs) will be about flat compared to prior year. Third quarter revenue is expected to increase by 6% to 9% in U.S. dollars and by 8% to 11% on a constant currency basis. Third quarter EPS is expected in the $35.85 to $36.85 range, up 4% to 7% year-over-year.
T. Rowe Price-TROW reported preliminary month-end assets under management of $1.07 trillion as of July 31, 2018, up 2% from June 30, 2018. Client transfers from mutual funds to other portfolios, including trusts and separate accounts, were $0.5 billion in July 2018 and $14.1 billion for the year-to-date period ended July 31, 2018.
Tuesday, Aug. 7, 2018
Walt Disney Company-DIS reported third fiscal quarter revenues increased 7% to $15.2 billion with net income up 23% to $2.9 billion and EPS up 29%, on fewer shares outstanding, to $1.95. Segment operating income increased 5% and Disney’s effective income tax rate fell from 31.6% in last year’s quarter to 20.6% this quarter. By segment, Media Networks revenue increased 5% to $6.2 billion with segment operating margins declining 80 basis points to 29.6%, squeezed by increased investments in “direct-to-consumer” platforms in response to the industry-wide shift from cable to streaming. Parks and Resorts revenue increased 6% to $5.2 billion with segment operating margins expanding nearly 200 basis points to 25.8%, thanks to increased guest spending at domestic parks and resorts, including the Disney Cruise Line. Studio Entertainment sales increased 20% to $2.9 billion, boosted by the successful launch of Avengers: Infinity War and Incredibles 2. Studio Entertainment segment operating margins declined nearly 200 basis points to 24.6%, hurt by a $100 million film impairment charge related to animated films that will not be released and lower domestic home entertainment results. Consumer Products & Interactive Media sales dropped 8% to $1 billion with segment operating margins declining 100 basis points to 32.4% due to lower Spider-Man and Cars licensing activities and a decrease in same-store sales. During the quarter, Disney repurchased $970 million shares at an average cost of $100 per share. Free cash flow during the quarter declined 25% to $2.5 billion. Year-to-date, Disney generated $7.2 billion in free cash flow, up 19%, with the company returning $4.8 billion to shareholders through dividends of $1.3 billion and share repurchases of $3.6 billion, or $104.05 per share. The company has suspended share repurchases until it works off much of the debt taken on to finance the Twenty-First Century Fox acquisition. During the quarterly conference call, Mr. Iger, Disney’s Chairman and CEO, said, “Having earned the overwhelming support of shareholders, we are more enthusiastic about the 21st Century Fox acquisition than ever, and confident in our ability to fully leverage these assets along with our own incredible brands, franchises and businesses to drive significant value across the entire company.”
Monday, Aug. 6, 2018
FactSet-FDS has been selected to be the primary market data provider for Merrill Lynch Wealth Management. Starting later this year, FactSet will deploy its Market Data solution to more than 15,000 wealth management professionals across Merrill Lynch. The web-based platform provides complete multi-asset class content, analytics and global market data. The multi-year, enterprise level agreement also includes FactSet’s data feeds, which will be integrated into Merrill Lynch’s internal applications and client facing portals. This expanded relationship with one of the largest wealth managers in the world highlights the continued growth of FactSet’s Wealth Management business and reaffirms FactSet’s strategy of delivering enterprise solutions across the entire wealth management workflow. “Wealth management is a growing part of our business and currently represents approximately 10 percent of our Annual Subscription Value,” said Phil Snow, Chief Executive Officer, FactSet. “Being selected by Merrill Lynch demonstrates how quickly we have progressed in this space and is a testament to the strength of our overall offering. We are thrilled to be expanding our relationship with Bank of America and look forward to supporting the ongoing success of their global wealth management team.”
Saturday, Aug. 4, 2018
Berkshire Hathaway-BRKB reported the company’s net worth during the first half of 2018 rose 3% since year end with book value equal to $217,677 per Class A share as of 6/30/18.
During the second quarter, net earnings nearly tripled to $12 billion. New accounting rules in 2018 require Berkshire to book the net changes in unrealized appreciation/depreciation in net income instead of comprehensive income which resulted in a $5.1 billion gain in net earnings in the second quarter from investments and derivatives.
Berkshire’s five major investment holdings represent 70% of total equities. On its way to becoming the first U.S. stock to hit the trillion dollar market capitalization milestone, Apple contributed to the substantial investment gain in the quarter as the position was valued at $47.2 billion as of 6-30-18, a $19 billion increase since year end through the additional purchase of shares and market appreciation. Wells Fargo’s stock dropped 10% since year end, or $2.9 billion, to $26.4 billion amid continued negative headlines on business practices. During the first half, Bank of America and Coke each dropped 5%, or about $1 billion each in value, to $19.7 billion and $17.5 billion, respectively. America Express dipped $200,000 or 1% to $14.9 billion since year end.
In the second quarter of 2018, Berkshire’s operating revenues rose 8% to $62.2 billion with all operating business groups posting growth, except McLane which dipped slightly. Operating earnings rose a robust 67% during the quarter to $6.9 billion, aided by Berkshire’s tax rate falling from 35% to 21% during the period.
Berkshire’s insurance underwriting operations generated $943 million in earnings during the second quarter compared to a $22 million loss in the prior year period. The insurance operations reflected significantly improved results from GEICO and Berkshire Hathaway Reinsurance and reductions of liabilities for prior years’ property/casualty loss events. Insurance investment income was 18% higher at $1.1 billion during the quarter, reflecting higher interest rates on short-term investments and a lower tax rate. The float of the insurance operations approximated $116 billion as of 6/30/18, an increase of $2 billion since year end. The average cost of float was negative during the first half as the underwriting operations generated pre-tax earnings of $1.7 billion.
Burlington Northern Santa Fe’s (BNSF) revenues rose 12% during the second quarter to $5.9 billion with net earnings chugging 37% higher to $1.3 billion, reflecting the favorable change in the tax rate. Pre-tax earnings rose 8% to $1.7 billion. During the first half, BNSF generated a 3.6% comparative increase in average revenue per car/unit and a 5.2% increase in volume thanks to general economic growth and tight truck capacity leading to conversion from highway to rail.
Berkshire Hathaway Energy reported revenues increased 10% to $5.1 billion during the second quarter with all groups, except NV Energy, contributing to the growth. Net earnings increased 14% during the quarter to $581 million primarily due to tax credits. On a pre-tax basis, earnings declined 10% to $586 million due to lower utility margins reflecting increased depreciation, maintenance and other operating expenses.
Berkshire’s Manufacturing businesses reported an 9% increase in revenue growth in the second quarter to $13.9 billion with operating earnings up 10% to $1.9 billion. Revenue and earnings growth was broad based, led by Industrial Products with double-digit growth. Iscar’s revenues increased 21% during the quarter with pre-tax earnings also increasing significantly due to increased unit sales, increased manufacturing efficiencies, business acquisitions and favorable foreign exchange. Building Products and Consumer Products also contributed to both earnings and revenue growth during the period.
Service and Retailing revenues rose 2% during the quarter to $19.5 billion with pre-tax earnings up 22% to $764 million. Service revenues rose 12% to $3.1 billion with operating earnings up 33% to $467 million. TTI’s revenues increased due to an industry-wide increase in demand for electronic components in many geographic markets around the world, acquisitions and favorable foreign currency changes. FlightSafety and Charter Brokerage generated revenue increases and NetJets also contributed to the earnings growth in this unit. Retailing revenues rose 5% during the quarter to $3.9 billion with operating earnings up 13% to $230 million, reflecting higher earnings from Berkshire Hathaway Automotive (BHA) and Louis which saw revenues roar 20% higher. McLane’s revenues dipped 1% during the quarter to $12.4 billion due to a decline in foodservice sales due to a net loss of customers. McLane operating earnings declined 3% to $67 million due to significant pricing pressures in an increasingly competitive grocery business environment. The grocery and foodservices business will likely continue to be subject to intense competition over the remainder of 2018.
Finance and Financial Products revenues rose 17% during the quarter to $2.4 billion with net income jumping 33% to $429 million, reflecting the favorable tax change. Pre-tax earnings increased 15% to $565 million. The revenue and earnings increase was led by Clayton Homes, reflecting higher unit sales, higher average prices and higher financial services revenues.
Berkshire’s balance sheet continues to reflect significant liquidity and a strong capital base of $358.1 billion as of 6/30/18. Excluding railroad, energy and finance investments, Berkshire ended the quarter with $313.2 billion in investments allocated approximately 55.6% to equities ($174.0 billion), 5.9% to fixed-income investments ($18.5 billion), 5.6% to Kraft Heinz ($17.5 billion), and 32.9% in cash and equivalents ($103.2 billion).
Berkshire’s financial strength allows Buffett to make significant investments and acquisitions. Apple was the largest stock investment in the first half of the year. Berkshire expects the previously announced $2.5 billion acquisition of Medical Liability Mutual Insurance Company to close in the third quarter of 2018.
Free cash flow declined 55% during the first half to $9.8 billion due to the lapping of the big boost to float from the AIG deal in the prior year period. During the first half, capital expenditures increased 23% and approximated $6.3 billion, including $4.1 billion for BNSF and Berkshire Hathaway Energy. Berkshire Hathaway forecasts aggregate capital expenditures of about $10 billion in 2018 for these two businesses. During the first half, Berkshire sold and redeemed a net $40.6 billion in Treasury Bills and fixed-income investments and purchased a net $11.8 billion of equity securities, reflecting in part the purchase of Apple and the sale of all IBM shares. There were no share repurchases of Berkshire Hathaway stock. Berkshire revised its buyback policy which now permits Berkshire to repurchase shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett and Charlie Munger.
Berkshire Hathaway’s stock appears attractively valued, currently trading at $304,671 per A share and $200.24 per B share. Based on current business fundamentals, we expect Berkshire’s A shares to trade between $280,000-$356,000 per share and the B shares to trade between $187-$237 per share. Buy.
Friday, Aug. 3, 2018
Biogen’s-BIIB Board of Directors authorized a program to repurchase up to $3.5 billion of the company’s common stock The 2018 Share Repurchase Program does not have an expiration date. All share repurchases under the 2018 Share Repurchase Program will be retired.
Thursday, Aug. 2, 2018
Apple-AAPL became the first $1 trillion U.S. company by stock market capitalization. Started in the garage of co-founder Steve Jobs in 1976, Apple’s stock has soared more than 50,000 percent since its 1980 initial public offering compared to the S&P 500's approximately 2,000-percent increase during the same period. In 2006, the year before the iPhone launch, Apple generated less than $20 billion in sales and net profit just short of $2 billion. By last year, Apple’s sales had grown more than 11-fold to $229 billion - the fourth highest in the S&P 500 - and net income had grown at twice that rate to $48.4 billion, making Apple the most profitable U.S. corporation.
Cisco-CSCO announced its intent to acquire privately-held Duo Security, headquartered in Ann Arbor, Mich. Duo Security is the leading provider of unified access security and multi-factor authentication delivered through the cloud. Duo Security’s solution verifies the identity of users and the health of their devices before granting them access to applications – helping prevent cybersecurity breaches. Integration of Cisco’s network, device and cloud security platforms with Duo Security’s zero-trust authentication and access products will enable Cisco customers to easily and securely connect users to any application on any networked device. Under the terms of the agreement, Cisco will pay $2.35 billion in cash and assumed equity awards for Duo Security’s outstanding shares, warrants and equity incentives on a fully-diluted basis. The acquisition is expected to close during the first quarter of Cisco’s fiscal year 2019.
Cognizant Technology Solutions-CTSH reported second quarter revenues rose 9% to $4.0 billion with net income and EPS each down 3% to $456 million and $.78, respectively. The decrease was primarily due to non-operating foreign exchange losses and the initial funding of the Cognizant U.S. foundation. Adjusted Non-GAAP EPS increased 28% to $1.19 during the quarter with the operating margin expansion reflecting strong operational execution. Three of the four business segments posted double-digit revenue increases led by 16% growth in the Communications/Media and Technology segment. On a geographic basis, all regions generated growth led by Europe with 19% growth during the quarter. Cognizant is accelerating its shift to digital solutions and services which now account for 30% of total revenues and experienced better than 20% growth in the quarter with strong growth in artificial intelligence, analytics and cloud solutions. Free cash flow increased 25% during the first half of the year to $841 million with the company paying $236 million in dividends and repurchasing $949 million of its shares during the period. During the third quarter, the company expects to complete its $3.4 billion share repurchase program announced at the beginning of the year. Cognizant maintains a healthy balance sheet with more than $4.3 billion cash and minimal long-term debt. For the full 2018 year, Cognizant expects revenues to be in the range $16.05 to $16.3 billion and raised their non-GAAP EPS outlook to be at least $4.50.
Wednesday, Aug. 1, 2018
Express Scripts-ESRX reported second quarter revenues rose 1% to $25.6 billion with net income up 9% to $877.3 million and EPS up 13% to $1.55. Healthy business fundamentals allowed the company to deliver strong core financial results while at the same time make investments to help improve patient, client and provider experiences. Free cash flow in the first half of the year grew 4% to $2.1 billion. The company has suspended its share repurchase program pending its merger agreement with Cigna which is expected to be completed by the end of the year although certain large Cigna investors are opposing the merger. Management’s outlook is for 2018 revenues to approximate $99 billion to $102 billion with adjusted EPS expected in the range of $9.00-$9.14 and cash flow from operations expected in the range of $5.8 billion to $6.2 billion. Express Scripts is having a strong selling season across both commercial and health plans and now expects their core business adjusted claims to increase by 2%-3% in 2019. The 2019 expected client retention rate was raised to 97.5%-98.5% as clients benefit from better health outcomes and savings and choose to remain clients.
Automatic Data Processing-ADP reported fourth quarter revenues increased 8% to $3.3 billion with net income down 59% to $108.7 million and EPS down 58% to $.25. The decline in earnings was due primarily to the impact of pre-tax charges related to the company’s voluntary early retirement program and other cost-saving initiatives. On an adjusted basis, EPS increased 39% during the quarter as operating margin increased about 300 basis points thanks to improved operational efficiencies. For the full year, revenues increased 8% to $13.3 billion with net income down 6% to $1.6 billion and EPS down 5% to $3.66. On an adjusted basis, EPS increased 18% to $4.35 benefiting from fewer shares outstanding and a lower tax rate as a result of tax reform. Return on shareholders’ equity expanded to 47% for the year. Worldwide new business bookings increased 18% in the fourth quarter and 8% for the full year. Employer Services client retention increased 50 basis points to 90.4% for the year. Free cash flow increased 22% during the year to $2.3 billion with the company paying dividends of $1.1 billion and repurchasing $989 million of its shares. ADP anticipates full year 2019 revenue growth of 5% to 7% with the operating margin expected to increase 100 to 125 basis points resulting in adjusted EPS growth of 19% to 21%. Client retention is expected to increase an additional 25 to 50 basis points in fiscal 2019.
Private sector employment increased by 219,000 jobs from June to July according to the July ADP National Employment Report®. "The labor market is on a roll with no signs of a slowdown in sight," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute-ADP. "Nearly every industry posted strong gains and small business hiring picked up." Mark Zandi, chief economist of Moody's Analytics, said, "The job market is booming, impacted by the deficit-financed tax cuts and increases in government spending. Tariffs have yet to materially impact jobs, but the multinational companies shed jobs last month, signaling the threat."
Seritage Growth Properties, a national owner of 249 properties totaling over 39 million square feet of gross leasable area, announced that the company has entered into a $2.0 billion term loan facility with Berkshire Hathaway Life Insurance Company of Nebraska-BRKB. The $2.0 billion Term Loan Facility, which matures on July 31, 2023, provides for an initial funding of $1.6 billion at closing and includes a committed $400 million incremental funding facility. Funded amounts under the Term Loan Facility bear interest at a fixed annual rate of 7.00%, while amounts available under Incremental Funding Facility will be subject to a 1.00% annual fee until drawn.
Tuesday, July 31,2018
Apple-AAPL reported record third quarter results with sales increasing 17% to $53.3 billion and net income jumping 32% to $11.5 billion with EPS up 40% to $2.34. This was the strongest growth in 11 quarters, the seventh quarter of accelerating growth and the fourth quarter of double-digit growth. These excellent results were driven by continued strong sales of iPhone, Services and Wearables. iPhone unit sales increased 1% to 41.3 million with revenue up 20% to $29.9 billion as the average selling price of the iPhone increased 19% to $724. The iPhone continues to gain market share in many markets, including the U.S. and China, with the iPhone X the most popular version, scoring extremely high customer satisfaction ratings. Services revenues increased 31% to $9.5 billion during the third quarter with the company on track to double its 2016 Services revenues by 2020. Paid subscriptions to Apple Services exceeded 300 million, a 60% increase over last year. The App Store has turned 10 years old and exceeded management’s “wildest expectations.” App developers have earned more than $100 billion over the last decade with tens of millions of jobs created during this period. Both Apple Music and Apple Cloud services increased 50% during the quarter. Apple Pay had greater than one billion transactions with growth accelerating as Ebay, CVS and 7-11 stores are all getting ready to accept Apple Pay. Apple’s Wearables (the Apple Watch, Beat and AirPods) had revenue growth of 60% during the quarter and generated greater than $10 billion in revenues in the last four quarters. Apple’s growth was broad-based geographically with all reportable segments generating double-digit growth with the exception of Japan. International sales accounted for 60% of the quarter’s revenues. Year-to-date, free cash flow increased 20% to $47.6 billion with the company paying $10.2 billion in dividends and repurchasing $53.6 billion of its own shares including 112 million shares repurchased in the third quarter for $20 billion at an average cost of $178.57 per share. Apple ended the quarter with $243.7 billion of cash and investments or $129.1 billion of cash net of long-term debt. Management’s outlook for the fourth quarter is for revenues in the range of $60 billion to $62 billion, representing 16%-19% underlying growth. Gross margin is expected between 38%-38.5% with operating expenses between $7.95 billion and $8.05 billion, other income of $300 million and a tax rate of about 15%. Tim Cook, CEO of Apple, is “excited about the products and services in the pipeline, the limitless opportunities for augmented reality and the company’s significantly expanding services.”
Friday, July 26, 2018
AbbVie-ABBV reported second quarter revenues rose a healthy 19% to $8.3 billion with net income up 4% to $2.0 billion and EPS up 6% to $1.26. Excluding specified items such as intangible amortization, adjusted EPS increased 41% to $2.00. Second quarter global HUMIRA sales of $5.2 billion increased 10% with U.S. HUMIRA sales up 10% thanks to strong prescription growth and international sales up 4%. Global IMBRUVICA revenues rose 36% to $850 million due to very strong patient uptake. Second quarter HCV net revenues were $973 million and exceeded management’s expectations. AbbVie is making excellent progress with its R&D pipeline including significant advances across its Hematologic Oncology Portfolio while receiving recent FDA approval for ORILISSA to treat endometriosis in its Women’s Health unit. By 2020, AbbVie expects to have 20 new products which will diversify its revenues and help offset biosimilar competition for HUMIRA. At least seven of these new products are expected to be multi-billion assets. AbbVie’s adjusted operating margin expanded 150 basis points during the quarter to 44% with management still confident that operating margins will continue to expand to 50% by 2020. AbbVie is committed to returning significant cash to shareholders through dividends and the recently completed $7.5 billion share repurchase with $2.5 billion remaining authorized for future share repurchases. Given the strong first half results, AbbVie raised its EPS outlook for the third time this year to GAAP EPS expected in the range of $6.47-$6.57 with adjusted EPS expected in the range of $7.76-$7.86, representing 39.5% growth at the midpoint.
Thursday, July 25, 2018
Starbucks-SBUX reported third quarter revenues rose 11% to $6.3 billion with net income perking up 23% to $852 million and EPS up 30% to $.61 primarily due to a lower tax rate thanks to tax reform. Global comparable store sales increased 1%, driven by a 3% increase in average ticket. Americas and U.S. comparable store sales increased1%, China Asia Pacific comp store sales increased 1% and China comp store sales decreased 2% due to competitive issues in delivery services. Starbucks plans to begin delivery service in Shanghai and Beijing and open 600 net new stores annually over the next five years in China with a goal to double the market’s store count from the end of fiscal 2017 to 6,000 stores across 230 cities by 2022. China still remains a huge growth opportunity for the company. The operating margin declined 190 basis points during the quarter to 16.5%, impacted by restructuring and impairment charges. Active Starbucks Rewards membership in the U.S. increased 14% to 15.1 million. The company continued to gain market share in virtually every market it serves. In May, Starbucks announced it will form a global coffee alliance with Nestle to accelerate and grow the global reach of Starbucks brands in consumer packaged goods and foodservice. Nestle will pay Starbucks $7.15 billion when the deal closes in the fourth quarter. During the third quarter, Starbucks repurchased 17.1 million of its shares with 107 million shares remaining authorized for future share repurchases. Starbucks has committed to returning $25 billion to shareholders through dividends and share repurchases by 2020 with $5 billion already returned in the last three quarters. Management updated its 2018 outlook with 2,300 net new stores expected to be opened globally for the year. Global comparable store sales growth is expected just below the 3%-5% targeted range. Management continues to expect revenue growth in the high single digits with GAAP EPS in the range of $3.26-$3.28.
Tractor Supply-TSCO reported sales increased 10% to $2.2 billion with net income plowing up a 29% gain to $207.3 million and EPS roaring 35% higher to $1.69 thanks to the benefits of tax reform and a lower share count. Broad-based growth was seen across all merchandise categories and geographies during the quarter with robust growth across spring and summer seasonal categories and strong growth in pet food, livestock feed and birdfeed. The 5.6% comparable store sales increase was driven by a 3.7% increase in average ticket, the best increase seen in six years, and a 1.8% increase in transaction count. The higher average ticket was due to the sale of big-ticket items like zero-turn lawn mowers, log splitters and generators. This was the fourth consecutive quarter of comparable store sales growth greater than 3%. The macroeconomic environment is healthy with low unemployment and high consumer confidence which benefits sales. During the quarter, the company opened 25 new Tractor Supply stores and two net new PetSense stores with plans to open 80 new Tractor Supply stores and 20 new PetSense stores for the full year 2018. Tractor Supply enjoyed double-digit growth in its e-commerce sales with 70% of e-commerce customers participating in the “Buy Online and Pickup in Stores” program which is very cost effective. The company is seeing no material impact from tariffs at this time but is preparing for alternative suppliers and increased pricing, if necessary. Free cash flow increased 20% to $157.3 million thanks to good inventory management. The company increased its dividend 14.8% during the quarter, marking the 8th consecutive year of dividend increases with dividends paid totaling $71.4 million during the first half and share repurchases topping $252 million. The company expects to spend $260 million to $300 million on capital expenditures in 2018. Based on the solid first half results, management raised their guidance for the full year with sales expected in the range of $7.77 billion to $7.8 billion with comparable store sales growth of 3% to 3.5% for the full year and EPS in the range of $4.10-$4.20.
MasterCard-MA reported record second quarter revenues rose 20% to $3.7 billion with net income charging 33% higher to $1.6 billion and EPS up 36% to $1.50. Second quarter gross dollar volume was up 14%, on a local currency basis, to $1.5 trillion with purchase volume up 16% and cross-border volume up 19%. Growth was broad-based across all geographic regions led by Europe. Overall, MasterCard is seeing solid global growth although management is watching reduced central bank stimulus and rising trade tensions. In the U.S., economic growth is positive thanks to low unemployment and rising consumer sentiment which is helping retail sales. Europe is seeing stable growth, but Brexit is impacting confidence in the U.K. In Latin America, there is policy uncertainty around the recent Mexican elections and NAFTA discussions. Brazil is also facing election uncertainty. In Asia, rising oil prices and interest rates along with trade tensions are impacting growth. Overall, the global economy remains healthy which is supporting MasterCard’s double-digit volume and transaction growth with strong 24% e-commerce growth during the quarter. Free cash flow increased 21% to $2.4 billion during the first half of the year with the company paying $525 million in dividends and repurchasing $2.9 billion of its own shares, including 8.3 million shares at a cost of $1.5 billion or $180.72 per share during the second quarter. MasterCard has $2.1 billion remaining authorized for future share repurchases. Given the solid first half performance and a positive global GDP outlook, MasterCard believes revenues in 2018 will grow at a high-teen rate with operating expenses growing at a mid-teen rate leading to further profit margin expansion.
Wednesday, July 25, 2018
Westwood Holdings-WHG reported second quarter revenues declined 2% to $32.8 million with net income relatively flat at $8 million and EPS up 1% to $.94. Assets under management declined 4% to $21.6 billion due to net outflows of about $900 million and the sale of the Omaha-based private wealth business. Westwood’s SmallCap strategy was selected to participate in the Morningstar U.S. Equity fund which will be marketed to investment advisers and 401(k) plans. Westwood’s LargeCap Value strategy beat its primary benchmark for the sixth consecutive quarter and has remained a fixture in the top decile peer ranking since its inception. The company introduced two new private equity offerings which have been well received. At quarter end, the company had $108 million in cash and investments and no long-term debt on its strong balance sheet. The company’s dividend currently yields 4.5%.
Polaris-PII reported second quarter sales increased 10% to $1.5 billion with net income increasing 49% to $92.5 million and EPS increasing 47% to $1.43. Operating income increased 24% on the heels of cost controls and the tax rate declined to 18% from 33% thanks to U.S. tax reform. By segment, Off-Road Vehicles/Snowmobile segment sales increased 17% to $991 million, Motorcycles declined 13% to $171 million on weak heavyweight motorcycle sales, though mid-size motorcycle sales remained strong. Global Adjacent Markets sales increased 17% to $113 million, driven by strong government/defense sales, while Aftermarket sales increased 1% to $227 million and International sales increased 7% to $204 million, boosted by strong sales in the EMEA region. Core Parts, Garment & Accessories sales increased 11% to $215 million on strong apparel sales. During the first half of the year, Polaris generated $61 million in free cash flow, down from $181 million last year, due to higher factory inventory related to the higher sales and the model year changeover. The company returned $268 million to shareholders during the first half of the year through share repurchases of $192 million and dividends of $76 million. As of June 30, Polaris held $181.8 million in cash and $1.1 billion in long-term debt taken on to finance acquisitions. Given the uncertainty surrounding the global trade war and significantly higher cost pressures, Polaris narrowed 2018 earnings guidance. Sales are expected to increase 11% to 12% thanks to the recent acquisition of Boat Holdings, pricing actions and improved demand. However, gross profit margins were lowered 60 to 80 basis points as the company now expects $40 million in additional costs related to tariffs and logistics. Adjusted EPS, which excludes $0.28 from amortization and $0.10 of expenses from the Boat Holdings acquisition, are expected in the $6.48 to $6.58 range, up 27% to 29% from 2017.
Facebook-FB reported second quarter revenues rose 42% to $13.2 billion with net income up 31% to $5.1 billion and EPS up 32% to $1.74. Daily active users increased 11% to 1.47 billion with monthly active users also up 11% to 2.23 billion. Daily users declined 1 million in Europe to 279 million users due to new privacy rules with daily users relatively flat in the U.S. and Canada at 185 million users. Mobile advertising represented approximately 91% of advertising revenue for the second quarter. Expenses rose 50% during the quarter as the company invested heavily to improve safety, security and privacy on its platforms. Headcount was 30,275 as of 6/30/18, an increase of 47% year over year. Capital expenditures for the second quarter were $3.5 billion as the company continues to invest in data centers, servers and office facilities with capital expenditures expected to approach $15 billion for the full year. Free cash flow in the first half of the year increased 1% to $7.9 billion with the company ending the quarter with more than $42 billion in cash and investments and no long-term debt. During the first half of the year, the company repurchased $5.1 billion of its own shares. Management provided a disappointing outlook for the second half of the year with sales growth expected to decelerate in the high single-digit range due to foreign exchange and data privacy headwinds as well as shifts to slower growth products. Expenses for the full year 2018 are expected to increase 50% to 60% as they spend on safety, marketing and content acquisition. In 2019, expense growth is also expect to exceed revenue growth with operating margins expect to trend lower over the next several years to the mid-30% range from 44% in the past quarter.
F5 Networks-FFIV reported third fiscal quarter revenue of $542.2 million, up 4.7%, net income up 26% to $123 million and EPS up 31% to $1.99 on fewer share outstanding. Operating income increased 9% to $154 million and the tax rate fell from 31% during last year’s third fiscal quarter to 20.4% this quarter. After many quarterly declines, Product revenue grew 1.6% to $239 million, lifted by security and software sales, public cloud and new multi-cloud application solutions. Service revenue increased 7% to $303 million. Year-to-date, F5 Networks generated $521 million in free cash flow, bringing the total cash and investments on the company’s weather-resistant balance sheet to more than $1.4 billion as of June 30, 2018. Year-to-date, F5 Networks repurchased $450 million of its shares. Looking ahead to the fourth fiscal quarter, management’s goal is to generate sales of between $555 million to $565 million, up 4% year-over-year at the midpoint. Fourth quarter EPS are targeted in the $1.77 to $1.80 range, down 17% at the midpoint, squeezed by an expected $0.39 charge as management restructures to better position the company to compete in growth markets.
T. Rowe Price-TROW reported second quarter revenues rose 13% to $1.3 billion with net income increasing 20% to $448.9 million and EPS up 18% to $1.77. The bottom line benefited from tax reform as the second quarter tax rate fell from 37.1% last year to 26.9% this year. Assets under management (AUM) ended the quarter at $1.044 trillion, representing a 15.5% increase over the prior year period. The firm’s net cash inflows were $7.6 billion in the second quarter with net market appreciation and income of $22.9 billion recorded in the quarter. T. Rowe Price remains debt-free with ample liquidity including $4.1 billion in cash and investments in T. Rowe Price products. During the first half of 2018, the company spent $450.3 million to repurchase 4.2 million shares, or 1.7% of its common shares outstanding, at an average price of $106.48. Capital expenditures for the full year are expected to be about $189 million.
Eisai Co., Ltd. and Biogen-BIIB announced detailed results from a Phase II clinical study (Study 202) of the investigational oral BACE (beta amyloid cleaving enzyme) inhibitor elenbecestat at the Alzheimer’s Association International Conference. The study was conducted in the United States in patients with mild cognitive impairment (MCI) due to Alzheimer’s disease, or mild to moderate dementia due to Alzheimer’s disease (AD). The primary objective of the study was to assess the safety and tolerability of elenbecestat after 18 months of treatment. The incidence of treatment-emergent adverse events was similar between elenbecestat and placebo, and no dose-dependent response was observed for adverse events. A statistically significant reduction of brain amyloid load as compared to placebo was observed with the results suggesting that elenbecestat could slow decline in cognitive function of patients with MCI due to Alzheimer’s disease, or mild to moderate dementia due to Alzheimer’s disease.
UPS-UPS reported second quarter revenues rose 10% to $17.5 billion with growth across all segments thanks to robust demand. Net income was up 7% to $1.5 billion and EPS rose 8% to $1.71. Second quarter 2018 results included a pre-tax charge of $263 million, or $.23 per share after-tax, due to costs related to the Voluntary Retirement Plan. On an adjusted basis excluding the charge, EPS increased 23% to $1.94. The average yield increased 4.6% led by the International and U.S. Deferred Air products. The International segment delivered its 14th consecutive quarter of constant currency double-digit operating growth with this segment enjoying its highest second quarter operating profit ever, led by Europe. The Supply Chain and Freight segment delivered another quarter of double-digit growth in revenue and adjusted operating profit with improved efficiencies producing the segment’s best profit growth in its history. Year-to-date cash flow from operations was $7.2 billion with free cash flow surging to $4.4 billion, driven by transformation initiatives and improved working capital. Year-to-date, the company paid $1.6 billion in dividends, an increase of 10%, and repurchased $511 million of it own shares. The company raised its 2018 free cash flow target to $5 billion. Management remains confident in delivering adjusted EPS in the range of $7.03 to $7.37, which represents 17%-23% growth. Capital expenditures are expected in the range of $6.5 billion to $7.0 billion in 2018. Despite trade concerns, the global economy remains healthy with global GDP expected to be greater than 3% in 2018. In the U.S., GDP growth is being aided by tax reform and reduced regulations which is boosting consumer confidence and retail sales while industrial demand remains solid. Europe is benefiting from positive business fundamentals and central bank stimulation despite concerns over Brexit. Asian growth is led by China despite increasing trade tensions. While UPS is closely monitoring the trade situation, the business is seeing minimal impact from tariffs at this time and is well positioned to help its customers navigate changing trade dynamics.
Tuesday, July 24, 2018
Biogen-BIIB reported second quarter revenues rose 9% to $3.4 billion with net income up .5% to $867 million and EPS up 2.7% to $4.18. Core Multiple sclerosis (MS) revenues declined 6% to $2.2 billion during the quarter due to unanticipated inventory drawdowns. Revenue growth during the quarter was driven primarily by SPINRAZA, which more than doubled over the prior year to $423 million. SPINRAZA patients increased 27% since the first quarter to 4,790, and management believes there is a significant opportunity for worldwide growth from this product as Biogen positions itself for long-term leadership in spinal muscular atrophy. Biosimilars revenue increased nearly 40% to $27 million. Today Biogen announced it has acquired ALG-801 (Phase 1a) and ALG-802 (preclinical) from AliveGen, Inc. ALG-801 (now known as BIIB110) and ALG-802 represent novel ways of targeting the myostatin pathway, which is one of the most thoroughly studied approaches for muscle enhancement. In June 2018 Biogen announced that it entered into an exclusive option agreement with TMS to acquire TMS-007. TMS-007 is believed to restore blood flow following acute stroke, with an extended treatment window versus current standard of care. Biogen generated $1.1 billion in cash flow from operations in the quarter, ending the quarter with $4.4 billion in cash and investments and $5.9 billion in long-term debt. During the quarter, the company repurchased 9.6 million of its shares for $2.75 billion completing the accelerated share repurchase management announced last quarter. Management increased full year revenue guidance to $13.0 billion to $13.2 billion from the prior guidance of $12.7 billion to $13.0 billion. EPS guidance was reduced from a range of $22.20 to $23.20 to a range of $21.80 to $22.40.
Canadian National Railway-CNI reported second quarter revenue rose 9% to C$3.6 billion with net income up 27% to C$1.3 billion with EPS up 30% to C$1.77. Adjusted net income and EPS increased 11% and 13%, respectively. The increase in revenues was mainly attributable to increased volumes of Canadian grain, coal, overseas intermodal traffic, frac sand, refined petroleum products and U.S. grain aided by freight rate increases and higher fuel surcharge rates with same store pricing up a solid 4% during the quarter. Revenue ton-miles increased by 7% and carloadings increased by 6% to 1,506 thousand during the quarter. The railroad’s operating ratio improved by 9.6 points over the first quarter 2018 to 58.2% following a swift network recovery after a challenging winter. Free cash flow increased 20% in the second quarter to C$974 million with first half free cash flow down 22% to $1.3 billion due to higher capital expenditures and higher taxes. Canadian National Railway remains on track to complete its $2 billion share buyback authorization with $1.3 billion of its own shares repurchased since last October. Following the strong second quarter performance and with a robust demand environment and improving capacity, management aims to deliver adjusted 2018 EPS in the range of C$5.30-C$5.45, an increase from previous guidance of C$5.10-C$5.25. The company also increased their outlook for capital expenditures by C$100 million to C$3.5 billion with additional capital investment primarily going towards the purchase of new rail cars. Tariffs so far have had a minimal impact on the business with management optimistic that the strong demand environment will continue into 2019.
Stryker-SYK reported a healthy 10% increase in second quarter sales to $3.3 billion with net earnings and EPS increasing 16% to $452 million and $1.19, respectively. Organic net sales increased nearly 8% and acquisitions contributed 2% to second quarter growth. By business segment, Orthopaedics net sales of $1.2 billion increased 8% in the quarter, MedSurg net sales of $1.5 billion increased 10% while Neurotechnology and Spine net sales of $600 million increased 20%, driven by the Entellus acquisition. During the quarter, Stryker installed 39 new MAKO robots including 29 in the U.S. with 40% of the total sold to competitive accounts where Stryker expects to pick up market share. With 460 MAKO robots sold since launch compared with thousands of potential robot-assisted orthopedic surgery locations in the U.S., there is plenty of legroom for continued MAKO sales growth. More than 160 surgeons were trained on the MAKO robot during the quarter, bringing the total number of surgeons trained to 1,200. Year-to-date, Stryker generated $668 million in free cash flow, up 26% from the same period last year, with the company returning $652 million to shareholders through share buybacks of $300 million and dividends of $352 million. Stryker’s balance sheet remains strong with $1.9 billion in cash and $5.9 billion of long-term debt as of June 30th. Seventy-six percent of Stryker’s cash is held overseas. Based on Stryker’s year-to-date performance, the company now expects 2018 organic net sales growth to be in the range of 7% to 7.5%, up from 6.5% to 7% previously guided, with adjusted EPS in the range of $7.22 to $7.27, up from $7.18 to $7.25 previously guided.
3M-MMM posted strong second quarter results with broad-based organic growth, a double-digit increase in EPS, record sales and rising margins. Total second quarter sales increased 7% to $8.4 billion, an all-time high, with earnings up 17% to $1.9 billion and EPS up 19% to $3.07 on fewer shares outstanding. Second quarter EPS includes a $0.48 net gain from the June 2018 divestiture of 3M’s communication markets division which generated about $400 million in sales last year and was sold for $870 million in cash. By segment, Industrial sales increased 7% to $3.1 billion generating 23% operating margins, Safety & Graphics sales increased 16% to $1.8 billion generating 26.4% operating margins, Health Care sales increased 4% to $1.5 billion generating 28.6% operating margins, Electronics & Energy sales increased 5% to $1.3 billion generating 28% operating margins and Consumer sales increased 4% to $1.2 billion generating 21.4% operating margins. On a geographic basis, total sales grew 9.5% in EMEA (Europe, Middle East and Africa), 7.9% in Asia Pacific, 7.1% in the U.S. and 3.1% in Latin America/Canada. During the quarter, 3M generated $1.5 billion in free cash flow, up 14.5% year-over-year, with the company returning $2.4 billion to shareholders through share repurchases of $1.6 billion and dividends of $802 million. When asked during the quarterly conference call about the impact of tariffs on 3M’s business, management said, to date, the steel and aluminum tariffs have had a negligible impact on its business estimated at $10 million, or a penny a share. While 3M is closely monitoring the proposed Section 301 List 2 and List 3 items, given 3M’s ability to make changes to its sources and suppliers along with its ability to raise prices, management expects a minimal impact from tariffs. 3M updated its 2018 EPS expectations to reflect the full-year impact from the communication markets business divestiture and related actions. 3M now expects EPS in the range of $9.08 to $9.38 per share versus $8.68 to $9.03 previously. Excluding the full-year impacts from the communication markets business divestiture gain and related actions, a first-quarter legal settlement, and the Tax Cuts and Jobs Act-related expense, 3M now expects its adjusted 2018 EPS to be in the range of $10.20 to $10.45 per share versus prior expectation of $10.20 to $10.55. The update to the range reflects the impact of the divested income associated with the communication markets business which was not included in prior guidance and an increase in net interest expense. Free cash flow for 2018 is expected in the $4.9 billion to $5.7 billion range. 3M now expects its share repurchases to be in the range of $4 billion to $5 billion from $3 billion to $5 billion previously estimated.
United Technologies-UTX reported second quarter sales rose 9% to $16.7 billion with net income and EPS each up 42% to $2.0 billion and $2.56, respectively. Excluding a $1.5 billion one-time gain on the sale of Taylor Company and other significant items, adjusted EPS of $1.97 was up 6% for the quarter. Organic sales growth momentum continued with organic sales up 6%, representing the fourth consecutive quarter of organic sales growth of 5% or better thanks to investments in innovation across the company’s portfolio with construction and consumer sentiment remaining strong. During the quarter, commercial aftermarket sales were up 12% at both Pratt & Whitney and UTC Aerospace Systems. Otis new equipment orders were up 10% organically and equipment orders at UTC Climate, Controls and Security increased 8% organically. During the first half of the year, free cash flow declined 22% to $1.8 billion with the company paying $1 billion in dividends and repurchasing $1.4 billion of its shares during the same time period. Free cash flow for the full year is expected in the range of $4.5-$5.0 billion. Based on the solid year-to-date performance, management raised the low end of the 2018 sales outlook and now expects $63.5 to $64.5 billion of sales on improved organic growth of 5%-6%. The adjusted EPS outlook was also raised to a range of $7.10 to $7.25, which excludes $.10-$.15 per share of projected dilution from the pending Rockwell Collins acquisition which is expected to close in the third quarter. The impact of tariffs this year is expected to be relatively modest with the expected $.05 per share negative impact included in the guidance. Management, along with the board of directors, is conducting a strategic review of the operations as they evaluate the best way to maximize shareholder value with all options on the table.
AbbVie-ABBV announced that the U.S. Food and Drug Administration (FDA) approved ORILISSA™ (elagolix), the first and only oral gonadotropin-releasing hormone (GnRH) antagonist specifically developed for women with moderate to severe endometriosis pain. The FDA approved ORILISSA under priority review. ORILISSA represents the first FDA-approved oral treatment for the management of moderate to severe pain associated with endometriosis in over a decade and is expected to be available in U.S. retail pharmacies in early August 2018. "ORILISSA represents a significant advancement for women with endometriosis and physicians who need more options for the medical management of this disease," said Michael Severino, M.D., Executive Vice President, Research and Development and Chief Scientific Officer, AbbVie. "The approval of ORILISSA demonstrates AbbVie's continued commitment to address serious diseases and unmet needs." Endometriosis is one of the most common gynecologic disorders in the U.S. It affects an estimated one in 10 women of reproductive age and can be associated with pain symptoms that can be debilitating. Women can suffer for up to six to 10 years and visit multiple physicians before receiving a proper diagnosis.
Monday, July 23, 2018
Alphabet-GOOGL reported second quarter revenue rose 26% to $32.7 billion with net income and EPS each down 9% to $3.2 billion and $4.54, respectively. Excluding the $5 billion fine imposed by the European Commission which the company plans to appeal, net income and EPS each would have risen 32% to $8.2 billion and $11.75, respectively. During the quarter, Google advertising revenues rose 24% to $28.1 billion with mobile search leading the way. All geographic regions generated strong growth led by 36% growth from the Asia Pacific and China region. Google other revenues rose 37% to $4.4 billion, which included strong growth in Cloud, Play and Hardware. Other Bets revenue increased 49% to $147 million driven by Verily and Fiber. Waymo, the company’s driverless vehicle unit, has driven 8 million autonomous miles and is expected to begin commercial operations in Phoenix by the end of the year. Traffic acquisition costs increased 26% to $6.4 billion, representing 23% of Google advertising revenue. Paid clicks on Google properties increased 58% with cost per click declining 22% during the quarter. During the quarter, the company recognized a $1.1 billion gain, or $1.17 per share, on equity securities as required by new accounting rules. During the first half of the year, operating cash flow rose 28% to $21.8 billion with free cash flow declining 23% to $9 billion primarily due to capital expenditures more than doubling to $12.8 billion as the company invests in data centers, underseas cables and real estate to support growth in its cloud business. Alphabet repurchased $4.2 billion of its stock in the first half of the year. The company ended the quarter with a fortress balance sheet with $113.7 billion in cash and investments and only $4 billion in long-term debt. Management’s capital allocation priorities include continued investment in Google’s advertising business, which represents its biggest growth opportunity as they work to enhance user experiences and tools for advertisers especially in mobile search and on YouTube.
Friday, July 20, 2018
Gentex-GNTX reported second quarter revenues rose 3% to $454.9 million with net income driving 23% higher to $109 million and EPS jumping 29% to $.40, reflecting the benefits of tax reform and lower shares outstanding. Light vehicle production in North America declined 3%, which resulted in lower than expected unit shipments during the quarter. Additionally, OEM shutdowns related to a supplier fire, caused a revenue headwind of approximately 1% during the quarter. For the second quarter of 2018, the gross margin improved to 38.0% when compared to a gross margin of 37.7% in the second quarter of 2017, primarily as a result of improved product mix and purchasing cost reductions. During the first half of the year, the company repurchased 15.6 million of its shares at an average price of $22.36 per share. As of 6-30-18, the company had 19.7 million shares remaining authorized for future share repurchases. Gentex lowered its previously announced annual revenue guidance from the range of $1.89 - $1.97 billion to the range of $1.88 - $1.91 billion. Gross margins are expected to be 37.5% - 38.5% down from previous guidance of 38% - 39%, which includes the impact of additional tariff costs of $5 to $8 million.
Thursday, July 19, 2018
Microsoft-MSFT reported fiscal fourth quarter revenues rose 17.5% to $30.1 billion with net income and EPS up more than 10% to $8.9 billion and $1.14, respectively. Revenue in Productivity and Business Processes was $9.7 billion, up 13% during the quarter, helped by LinkedIn revenue which was up 37%. Revenue in Intelligent Cloud was $9.6 billion and increased 23% driven by Azure revenue growth of 89%. Revenues in More Personal Computing was $10.8 billion and increased 17% during the quarter led by a 39% increase in gaming revenue. For the full fiscal 2018 year, revenues rose 14.3% to $110 billion with net income and EPS falling 35% to $16.6 billion and $2.13, respectively. The earnings included a net charge of $13.7 billion, $1.75 per share, related to US tax reform. Return on shareholders’ equity was 16.5% for the year with free cash flow increasing 2.8% to $32.3 billion. During the year, the company repurchased $10.7 billion of its shares and paid $12.7 billion in dividends. Microsoft ended the year with $133.8 billion in cash and $72.2 billion in long-term debt.
Genuine Parts-GPC reported second quarter sales revved up 18% to a record $4.8 billion with net income and EPS increasing 19% to a record $227 million and $1.54, respectively. Total sales for the second quarter included 3% comparable growth and 14% from acquisitions, including Alliance Automotive Group (AAG) in Europe. Before the impact of certain transaction and other costs incurred related to Genuine Parts’ fourth quarter 2017 acquisition of AAG and the pending transaction to spin-off the Business Products Group, S.P. Richards, adjusted net income was $233.6 million, or $1.59 per share. Second quarter sales for the Automotive Group were up 27.7% to $2.7 billion, driven by a 2.1% comparable sales increase as well as the benefit of acquisitions. Sales for the Industrial Group were up 8.7% to $1.6 billion, including a 6.5% comparable sales increase while sales for the Business Products Group were flat with the prior year quarter in both total and comparable sales. During the first half of the year, Genuine Parts generated $390 million in free cash flow and paid dividends of $205 million. 2018 represents the 62nd consecutive year of dividend increases for Genuine Parts’ shareholders and the current $2.88 per share dividend is up 7% from last year. Despite an increase in Genuine Parts’ debt load to $2.5 billion to finance acquisitions, the company’s balance sheet remains strong. The average interest rate on Genuine Parts’ long-term debt is 2.98%. When asked about the impact of tariffs on GPC’s business, management said that the impact has been modest so far. But they are keeping a close eye on “List 3” tariffs slated to go into effect September 1 given that 40% of automotive parts imported by the company contain a China component. Management is working with suppliers to mitigate the impact of the proposed tariffs and has plenty of time to make adjustments before September 1 should the tariffs go into effect. Management expects to pass along price increases caused by tariffs to its customers. Given the strong year-to-date performance, the company increased its sales guidance up 13% to 14%, an increase from the prior guidance of up 12% to 13%. Full year EPS are expected in the $5.49 to $5.64 range. Adjusted EPS, which excludes any transaction-related costs, are expected in the $5.60 to $5.75 range. Genuine Parts currently expects a tax rate of about 25%, which is down considerably from last year’s 36% rate thanks to U.S. tax reform.
Wednesday, July 18, 2018
Alphabet-GOOGL said it will appeal against a record $5 billion fine levied by EU antitrust regulators over illegal restrictions on Android smartphone makers and mobile network operators. "Android has created more choice for everyone, not less," Google spokesman Al Verney said. "A vibrant ecosystem, rapid innovation and lower prices are classic hallmarks of robust competition. We will appeal the Commission's decision."
Walgreens Boots Alliance-WBA CEO Stefano Pessina disclosed that he purchased 1.7 million shares of the stock valued at about $108.5 million.
Tuesday, July 17, 2018
The Board of Directors of Berkshire Hathaway-BRKB has authorized an amendment to Berkshire’s share repurchase program. The earlier share repurchase program provided that the price paid for repurchases would not exceed a 20% premium over the then-current book value of such shares. Under the amendment adopted by the Board of Directors, share repurchases can be made at any time that both Warren Buffett, Berkshire’s Chairman and CEO, and Charlie Munger, a Berkshire Vice Chairman, believe that the repurchase price is below Berkshire’s intrinsic value, conservatively determined. The current policy whereby share repurchases will not be made if they would reduce the value of Berkshire’s consolidated cash, cash equivalents and U.S. Treasury Bills holdings below $20 billion will continue. Berkshire will not initiate any share repurchases under the amended program until it publicly releases its second quarter earnings, currently scheduled after the close of the markets on Friday, August 3, 2018.
Johnson & Johnson-JNJ reported second quarter sales of $20.8 billion, up 10.6%, with net earnings of $4 billion, up 3.3%, and EPS of $1.45, up 3.6%. Domestic sales, which accounted for about half of the company’s total sales, increased 9.4% while International sales increased 12%, reflecting operational growth of 8% and a positive currency impact of 4%. The strong second-quarter results reflect double-digit growth in the Pharmaceutical business and accelerating sales momentum in the Medical Devices business. Pharmaceutical sales increased 20% to $10.4 billion, driven by strong sales of Darzalex and Imbruvica (immunotherapy oncology drugs), Stelara and Simponi (treatments for psoriasis and arthritis) and Opsumit, a drug acquired from Actelion to treat pulmonary hypertension. Medical Devices sales increased nearly 4% to $7 billion while Consumer sales increased slightly to $3.5 billion despite a drop in baby care product sales as retailers destocked in anticipation of product relaunches which began in July. During the quarter, binding offers were accepted to sell JNJ’s LifeScan business for $2.1 billion and its Advanced Sterilization Products business for $2.8 billion. JNJ also completed the acquisition of Medical Enterprises Distribution, a privately-held developer of the automated ME1000 Surgical Impactor for use in hip surgery and BeneVir Biopharm, a privately-held biopharmaceutical firm specializing in the development of oncolytic immunotherapies. In addressing current topics during the quarterly conference call, management stated it remains confident that its products do not contain asbestos and do not cause ovarian cancer and intends to vigorously pursue all available appellate remedies. Independent thorough reviews by the National Cancer Institute and the FDA confirm there is no scientific evidence to support claims that Johnson & Johnson’s baby power contains asbestos or that it causes cancer. On global trade, management believes fair and equitable trade is best for everyone and expects the issue of tariffs will be with us for some time. Management updated its sales guidance for the full-year 2018 to a range of $80.5 to $81.3 billion, up 5.3% to 6.3% year-over-year, with EPS expected in the range of $8.07 to $8.17, up 10.5% to 11.9%.
Friday, July 13, 2018
Brown-Forman-BFB has approved a $200 million share repurchase authorization, beginning July 13, 2018 through July 12, 2019. Under the repurchase program, the company can repurchase Class A and Class B common stock from time to time for cash in open market purchases, block transactions, and privately negotiated transactions in accordance with applicable federal securities laws. Paul Varga, chief executive officer of Brown-Forman said, "We are appropriately attentive to today's uncertain market environment, but remain optimistic about the long-term growth prospects for our brands around the world. We strive to deliver leading returns for our shareholders and believe this buyback authorization provides us with the flexibility to repurchase our shares when the market presents the opportunity." For almost 150 years, Brown-Forman Corporation has enriched the experience of life by responsibly building fine quality beverage alcohol brands, including Jack Daniel’s Tennessee Whiskey, Jack Daniel’s & Cola, Jack Daniel’s Tennessee Honey, Jack Daniel’s Tennessee Fire, Gentleman Jack, Jack Daniel’s Single Barrel, Finlandia, Korbel, el Jimador, Woodford Reserve, Old Forester, Canadian Mist, Herradura, New Mix, Sonoma-Cutrer, Early Times, Chambord, BenRiach, GlenDronach and Slane. Brown-Forman’s brands are supported by over 4,800 employees and sold in more than 170 countries worldwide.
A St. Louis jury rendered a $4.69 billion verdict against Johnson & Johnson-JNJ in a trial linking their baby powder to ovarian cancer. In a statement responding to the verdict, the company said, "Johnson & Johnson is deeply disappointed in the verdict, which was the product of a fundamentally unfair process that allowed plaintiffs to present a group of 22 women, most of whom had no connection to Missouri, in a single case all alleging that they developed ovarian cancer. The result of the verdict, which awarded the exact same amounts to all plaintiffs irrespective of their individual facts, and differences in applicable law, reflects that the evidence in the case was simply overwhelmed by the prejudice of this type of proceeding. Johnson & Johnson remains confident that its products do not contain asbestos and do not cause ovarian cancer and intends to pursue all available appellate remedies. Every verdict against Johnson & Johnson in this court that has gone through the appeals process has been reversed and the multiple errors present in this trial were worse than those in the prior trials which have been reversed."
Thursday, July 12, 2018
T. Rowe Price-TROW reported assets under management of $1.04 trillion as of 6/30/18, a 5.3% increase since year end.
Wednesday, July 11, 2018
MSC Industrial Direct–MSM reported fiscal third quarter sales increased 11% to $828.3 million with net earnings of $79.1 million, up 30%, and EPS of $1.39, up 28%, thanks, in part, to U.S. tax reform which reduced the company’s effective income tax rate from 36% to 29%. Average daily sales grew 11.4% compared to last year’s third quarter. Recent acquisitions, which have exceeded management’s expectations, accounted for 500 basis points of the quarter’s sales growth while base business growth of 6.1% fell short of expectations given the robustness of the U.S. Industrial sector, hurt by the company’s sales effectiveness initiatives and the related lower sales headcount. The company’s sales initiatives, expected to return the company to high-single-digit base business growth during the second half of fiscal 2019, aim to strengthen MSC’s competitive advantage by focusing on growing areas that are technical and high-touch in nature. Fiscal third quarter free cash flow nearly doubled from the same period last year, driven by the net income increase and tight working capital management. The company generated solid year-to-date free cash flow of $199 million, up 65% year-over-year, with MSC Industrial returning more than $118 million to shareholders through dividends of $92.6 million and share repurchases of $25 million. When asked during the quarterly earnings conference call about the impact of tariffs on materials sourced from China, management stated that well under 20% its input materials are sourced from China and that its suppliers produced goods in factories spread across the globe and will shift production to the lowest cost geography. Looking ahead to the fourth quarter, sales are expected in the $829 million to $844 million range, up 11% at the midpoint, with EPS in the $1.24 to $1.30 range, up 19% at the midpoint. Average daily sales are expected to increase roughly 9.3%.
Fastenal-FAST reported second quarter revenues rose 13% to $1.3 billion with net earnings and EPS up more than 40% to $211 million and $.74, respectively. The earnings numbers reflect approximately $.15 per share of tax related benefits. The sales growth was driven by higher unit sales related primarily to continued strength in underlying market demand, industrial vending and Onsite locations. Fastenal signed 43 new national account contracts with revenues attributable to national accounts now representing 50.7% of total revenues. The company signed 5,537 vending devices, up 13% to 76,069 with sales in vending devices continuing to grow at a strong double-digit pace. Fastenal signed 81 new Onsite location during the quarter, an increase of 19% over the prior year period with 761 active sites as of quarter end. Gross profit declined 110 basis points to 48.7% with operating margins remaining flat at 21.2%. Free cash flow increased 6.4% during the first half of the year to $251 million with the company paying $213 million in dividends and repurchasing $40 million of its shares. The company increased the dividend for the third quarter 8% to $.40 per share and increased anticipated capital expenditures for the full year by 6% to $158 million related to upgrading and adding capacity to existing hub networks and purchases of property for future expansion. Reflecting the company’s long-term growth record, Fastenal’s daily sales are now equal to the company’s annual sales at the time of its initial public offering in 1987.
Tuesday, July 10, 2018
PepsiCo-PEP reported second quarter sales increased 2.4% to $16.1 billion with net income declining 14% to $1.8 billion and EPS dropping 13% to $1.28. The earnings numbers reflect a $.54 per share expense related to US tax reform. On an organic basis, second quarter revenues rose 2.6% with core constant currency operating profit up 2%. North America food and snack sales increased 3.1% to $4.4 billion with operating profit increasing 4.4% to $1.3 billion. North America beverage sales decreased 1% to $5.2 billion with operating profit fizzling 16% lower to $747 million. International sales increased 4.7% to $6.5 billion led by a 10.8% increase in Europe, Sub-Saharan Africa. Free cash flow declined sharply to $142 million during the first half of the year with the company paying $2.3 billion in dividends and repurchasing $984 million of its shares. Management reaffirmed previous 2018 guidance with organic revenue growth expected to be at least 2.3% with core EPS up 9% to $5.70. Operating cash flow is expected to be $9 billion with free cash flow of $6 billion, reflecting capital spending of $3.6 billion and a discretionary pension expense of $1.4 billion. During 2018, management plans to pay $5 billion in dividends and repurchase approximately $2 billion of its shares.
Friday, July 6, 2018
Eisai Co., Ltd. and Biogen-BIIB announced positive topline results from the Phase II study with BAN2401, an anti-amyloid beta protofibril antibody, in 856 patients with early Alzheimer's disease. The study achieved statistical significance on key predefined endpoints evaluating efficacy at 18 months on slowing progression in Alzheimer's Disease Composite Score (ADCOMS) and on reduction of amyloid accumulated in the brain as measured using amyloid-PET (positron emission tomography). "The prospect of being able to offer meaningful disease-modifying therapies to individuals suffering from this terrible disease is both exciting and humbling," said Alfred Sandrock, M.D., Ph.D., executive vice president and chief medical officer at Biogen. "These BAN2401 18-month data offer important insights in the investigation of potential treatment options for patients with Alzheimer's disease and underscores that neurodegenerative diseases may not be as intractable as they once seemed."
Thursday, July 5, 2018
Private sector employment increased by 177,000 jobs from May to June according to the June ADP National Employment Report®. "The labor market continues to march towards full employment," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "Healthcare led job growth once again and trade rebounded nicely." Mark Zandi, chief economist of Moody's Analytics, said, "Business' number one problem is finding qualified workers. At the current pace of job growth, if sustained, this problem is set to get much worse. These labor shortages will only intensify across all industries and company sizes."
Thursday June 28, 2018
Nike-NKE reported fourth quarter revenues rose 13% to $9.8 billion, driven by strong double-digit revenue growth in international markets and Nike Direct globally and a return to growth in North America. Net income jumped 13% in the quarter to $1.1 billion with EPS up 15% to $.69, thanks to gross margin expansion, a lower tax rate and lower shares outstanding. Gross margin expanded 60 basis points in the quarter due to higher average selling prices, margin expansion in Nike Direct and favorable full-price sales mix. For the full year, revenues rose 6% to $36.4 billion with net income down 54% to $1.9 billion and EPS down 53% to $1.17, due primarily to the impact of tax reform. Return on shareholders’ equity for the year was 19.7%. Inventories rose 4% for the year to $5.3 billion primarily driven by strong global demand. The company ended the year with $5.2 billion in cash and investments, $934 million lower than last year due to share repurchases, dividends and investments in infrastructure. During the fourth quarter, Nike repurchased 23.1 million for approximately $1.6 billion at an average price of $69.26 per share as part of the company’s four year $12 billion share repurchase program which is expected to be completed in 2019. Thanks to strong cash flows, Nike announced a new $15 billion share repurchase program. For fiscal 2019, management raised their outlook for revenue growth which is expected to improve to the high single-digit range with gross margin expansion of at least 50 basis points. Fueled by a complete digital transformation of the company, Nike expects its next wave of long-term, sustainable growth and profitability.
Biogen-BIIB announced it has exercised its option to purchase additional shares of Samsung Bioepis Co., Ltd., a joint venture established in 2012 by Samsung BioLogics Co., Ltd and Biogen. Under the terms of the 2012 joint venture agreement, Biogen will pay Samsung BioLogics approximately $700 million for the option shares, increasing Biogen`s ownership in Samsung Bioepis from approximately 5.4% to approximately 49.9%. The completion of this share purchase is expected to close in the second half of 2018. "We are very pleased with the progress made to date at Samsung Bioepis and believe exercising this option is an opportunity to create meaningful value for our shareholders," said Michel Vounatsos, chief executive officer at Biogen. "This option allows us to increase our ownership share in a leading biosimilar company at what we believe are attractive terms. We look forward to building an important relationship with Samsung BioLogics."
Accenture-ACN reported third fiscal quarter net revenues of $10.3 billion, up 16% year-over-year, with net earnings and EPS up more than 50% to $1 billion and $1.60, respectively. Excluding a charge related to tax law changes this year and a pension settlement charge last year, adjusted EPS increased 18% to $1.79. Growth was strong and balanced across all dimensions of the business driven by Accenture’s unique position as the end-to-end leader operating at scale in the “New” (digital, cloud and security services), which now account for about 60% of total revenues. Consulting net revenues were $5.69 billion, up 18%, and Outsourcing net revenues were $4.63 billion, up 14%. By region, North America revenues increased 11% to $4.6 billion, Europe revenues increased 9% in local currency to $3.7 billion and Growth Markets increased 17% in local currency to $2 billion. New bookings reached a record $11.7 billion. During the quarter, Accenture generated $1.8 billion in free cash flow with $1.6 billion returned to shareholders through dividends of $855 million and share repurchases of $720 million, or $153.60 per average share. As of May 31, about $1.45 billion remained under the current repurchase authority. Accenture ended the quarter with more than $4.1 billion in cash and investments on its pristine balance sheet. Given the strong results, Accenture updated its guidance with fiscal 2018 revenues now expected to increase 9.5% to 10% in local currency terms, up from previous guidance of 7% to 10%. Reported earnings are expected in the $6.26 to $6.31 range, including a $.40 negative impact from tax law changes, compared to $6.40 to $6.49 previously, which included a $0.21 negative impact from tax law changes. Free cash flow is now expected in the $4.9 billion to $5.2 billion range compared to $4.6 billion to $4.9 billion previously.
Walgreens Boots Alliance-WBA reported third quarter revenues rose 14% to $34.3 billion with net income up 15.5% to $1.3 billion and EPS popping 26% higher to $1.35, thanks to the benefit of lower shares outstanding. Retail Pharmacy sales increased 15% in the quarter to $25.9 billion, thanks in part to the acquisition of Rite-Aid stores, with sales in comparable stores down 1.2%. Pharmacy sales accounted for 72.5% of this division’s sales. The division filled 285.2 million prescriptions in the quarter, an increase of 11.8% over the prior year period, primarily due to the addition of the Rite-Aid stores as prescriptions in comparable stores were unchanged. The division’s retail prescription market share increased 190 basis points to a record 22.4%. Retail sales in this division increased 5.2% with comparable store sales down 3.8%. Retail Pharmacy International third quarter sales increased 6.6% to $3 billion with sales down 2.1% on a constant currency basis. Pharmaceutical Wholesale third quarter sales increased 12.6% to $6 billion with constant currency sales up 4%, although this division lost market share due to challenging market conditions in certain continental European countries. Year-to-date, free cash flow increased 2% to $4.4 billion with the company paying $1.3 billion in dividends and repurchasing $2.5 billion of its shares during the same time period. Thanks to strong cash flows, Walgreens announced a 10% increase in the dividend, marking the 43rd consecutive year of dividend increases, and a new $10 billion share repurchase program which is expected to be completed over the next three years. Management raised the lower end of its fiscal 2018 adjusted EPS guidance by $.05 and now anticipates adjusted EPS of $5.90-$6.05 for the full fiscal year, representing 16%-19% growth. Asked about Amazon’s recent purchase of PillPack and its potential entry into the pharmaceutical space, management indicated that they are not complacent but also not especially worried as the pharmaceutical world is much more complex than the delivery of certain pills.
Wednesday, June 27, 2018
Paychex-PAYX reported fourth quarter revenues rose 9% to $871.1 million with net income and EPS each up 17% to $228.5 million and $.63, respectively. The strong finish to the year was driven by strong demand for the company’s human capital management solutions. As of 5-31-18, Paychex served over 650,000 payroll clients. Client retention for the year was greater than 81%. Interest on funds held for clients increased 26% during the year to $63.5 million thanks to rising interest rates earned on the average $4 billion in client funds held throughout the year. For the full year, revenues rose 7% to $3.4 billion with net income up 14% to $933.7 million and EPS up 15% to $2.58. Return on shareholders’ equity for the year was an impressive 46.1%. The company maintained a strong balance sheet ending the year with nearly $720 million in cash and investments and no long-term debt. Free cash flow increased 30% during the year to $1.1 billion with the company paying $739.7 million in dividends and repurchasing 2.5 million of its shares for $143.1 million at an average cost of $57.24 per share. The dividend was recently increased 12%. Management’s outlook for fiscal 2019 is for total revenues expected to increase 6% to 7% with an operating margin of about 37%. Investment income is expected to increase 15% to 20% thanks to higher interest rates and the effective tax rate is expected to approximate 24% resulting in adjusted net income growth of approximately 11% to 12%.
The Walt Disney Company-DIS announced that the Antitrust Division of the United States Department of Justice (DOJ) has cleared the pending acquisition by Disney of Twenty-First Century Fox, Inc. The DOJ has entered into a consent decree with Disney and 21st Century Fox that allows the acquisition to proceed, while requiring the sale of the Fox Sports Regional Networks. Disney and Fox announced an amended acquisition agreement pursuant to which Disney will acquire Fox for $38 per share in cash and stock, immediately following the spin-off of the businesses comprising “New Fox” as previously announced.
Tuesday, June 26, 2018
FactSet Research Systems-FDS reported fiscal third quarter revenues rose 9% to $339.9 million, driven by 6% growth in organic revenue, thanks to higher sales of analytics products, content and technology solutions and wealth management solutions. Annual Subscription Value (ASV) increased 5.3% to $1.36 billion. Third quarter net income was up 14% to $74.7 million with EPS up 15% to $1.91. Bottom line results were aided by the benefits of tax reform, with the third quarter tax rate dropping to 16.5% compared to the prior year period’s 23.2%. Client count increased by 80 clients in the past three months to 4,975 with user count rising by 860 to 89,506 primarily driven by the company’s wealth management business. Client retention was 90% and employee count was up 3.5% to 9,197. Year-to-date, free cash flow increased 34% to $261 million with the company paying $65 million in dividends and repurchasing $236 million of its share during the same time period. The dividend was increased 14% during the quarter, marking the 13th consecutive year of dividend increases. With a robust share repurchase program, FactSet accelerated their share buybacks in the third quarter repurchasing 620,000 shares for $122 million at an average cost of $196.77 per share. After expanding the share buyback by $100 million due to the repatriation of foreign earnings, FactSet has $309.3 million currently available for future share repurchases. Management reaffirmed revenue guidance for fiscal 2018 with revenues expected in the range of $1.34 to $1.36 billion and increased the EPS outlook to a range of $6.92-$7.17 thanks to a solid pipeline going into the fourth quarter. Adjusted EPS is expected in the range of $8.37-$8.62, which at the midpoint represents 16% growth over last year’s adjusted earnings.
AbbVie-ABBV and Calico, a unit of Alphabet-GOOGL, focused on aging research and therapeutics, announced an extension of their collaboration to discover, develop and bring to market new therapies for patients with age-related diseases, including neurodegeneration and cancer. Working together with AbbVie, Calico pursues discovery-stage research and development. AbbVie provides scientific and clinical development support and will lend its commercial expertise to lead future development and commercialization activities. Since 2014, the collaboration between the two companies has produced more than two dozen early-stage programs addressing disease states across oncology and neuroscience and yielded new insights into the biology of aging. Under the terms of the agreement, the collaboration between the two companies is now extended for an additional three years. Calico will be responsible for research and early development until 2022 and will advance collaboration projects through Phase 2a through 2027. AbbVie will continue to support Calico in its early R&D efforts and, following completion of Phase 2a studies, will have the option to manage late-stage development and commercial activities. Both parties will share costs and profits equally. AbbVie and Calico will each commit to contribute an additional $500 million to the collaboration.
Monday, June 25, 2018
MAXIMUS-MMS announced today that its Board of Directors has authorized the expansion of its share repurchase program of up to an aggregate of $200 million, which includes the remaining balance from the 2015 authorization of $49.3 million as of June 22, 2018. “We remain good stewards of capital and we are committed to a sensible and disciplined approach to cash deployment. We will maintain the financial flexibility needed to continue to invest and grow the business while at the same time we believe that providing returns to shareholders and deploying capital, as demonstrated by this expansion of our share repurchase program, is an important component of our long-term strategy,” commented Bruce Caswell, President and Chief Executive Officer of MAXIMUS.
AbbVie-ABBV announced the U.S. Food and Drug Administration (FDA) has accepted for Priority Review a supplemental New Drug Application (sNDA) for IMBRUVICA® (ibrutinib) in combination with rituximab (RITUXAN®) as a new treatment option for Waldenström's macroglobulinemia (WM), a rare and incurable form of blood cancer. If approved, the sNDA would expand the prescribing information of IMBRUVICA in WM beyond its current approved use as a single agent for all lines of therapy to include combination use with rituximab. As a single-agent therapy, IMBRUVICA is the first and only FDA-approved treatment available for patients with WM. IMBRUVICA is a first-in-class Bruton's tyrosine kinase (BTK) inhibitor jointly developed and commercialized by Pharmacyclics LLC, an AbbVie company, and Janssen Biotech, Inc. Waldenström's macroglobulinemia is a rare and incurable form of non-Hodgkin's lymphoma (NHL). There are about 2,800 new cases of WM in the U.S. each year. In January 2015, IMBRUVICA received FDA approval for all lines of treatment in WM and as the first and only FDA-approved therapy specifically indicated for this disease.
Wednesday, June 20, 2018
The Walt Disney Company-DIS announced that it has signed an amended acquisition agreement with Twenty-First Century Fox, Inc. for $38 per share in cash and stock. Under the amended agreement, 21st Century Fox shareholders may elect to receive, for each share of 21st Century Fox common stock, $38 in either cash or shares of Disney common stock. The overall mix of consideration paid to 21st Century Fox shareholders will be approximately 50% cash and 50% stock. The 21st Century Fox businesses to be acquired by Disney remain the same as under the original agreement. Since the original agreement was announced, the intrinsic value of these assets has increased, notably due to tax reform and operating improvements. Disney is expected to pay a total of approximately $35.7 billion in cash and issue approximately 343 million new shares to 21st Century Fox shareholders, representing about a 19% stake in Disney on a pro forma basis. Disney will also assume about $13.8 billion of net debt of 21st Century Fox. The acquisition price implies a total equity value of approximately $71.3 billion and a total transaction value of approximately $85.1 billion (assuming no tax adjustment). Disney has secured financing commitments for the cash portion of the acquisition. The amended transaction is expected to be accretive to Disney earnings per share before the impact of purchase accounting for the second fiscal year after the close of the transaction, and to yield at least $2 billion in cost synergies by 2021 from operating efficiencies realized through the combination of businesses. As announced in the original acquisition agreement, the businesses to be acquired by Disney include 21st Century Fox’s film production businesses, including Twentieth Century Fox, Fox Searchlight Pictures and Fox 2000 Pictures; Fox‘s television creative units, Twentieth Century Fox Television, FX Productions and Fox21; FX Networks; National Geographic Partners; Fox Sports Regional Networks; Fox Networks Group International; Star India; and Fox’s interests in Hulu, Sky plc, and Tata Sky. The acquisition will occur immediately after the spin-off by 21st Century Fox of the Fox Broadcasting network and stations, Fox News Channel, Fox Business Network, FS1, FS2 and Big Ten Network into a newly listed company referred to as New Fox. If 21st Century Fox completes its acquisition of the 61% of Sky it doesn’t already own prior to closing of the Disney acquisition, Disney would assume full ownership of Sky, including the assumption of its outstanding debt, upon closing. The acquisition will significantly increase Disney’s international footprint and expand the content and distribution for its direct-to-consumer (DTC) offerings, which include ESPN+ for sports fans; a Disney-branded streaming video-on-demand service launching in late 2019 that will feature Disney, Pixar, Marvel and Star Wars films along with a host of exclusive original content and library titles; and its ownership stake in Hulu. As a result of the acquisition, Disney will hold a controlling stake in Hulu. Disney believes the transaction has a clear and timely path to regulatory approval. Both companies have spent the past six months working toward meeting all conditions necessary for closing. In light of the amended agreement, the companies are required to prepare updated SEC filings and proxy materials which will be sent to shareholders. A new date for the shareholder meetings will be announced.
Starbucks-SBUX lowered their guidance for fiscal 2018 with GAAP EPS expected in the range of $3.23-$3.26, aided by the favorable impact of tax reform, and non-GAAP EPS expected in the range of $2.39-$2.43. The company affirmed that they will open approximately 2300 new stores with capital expenditures expected to approximate $2 billion for the year. Global comparable store sales growth is expected at the lower end of their long-term 3% to 5% growth outlook. Net revenue growth is expected in the high single digit range for fiscal 2018 with operating margins expected to moderately decline for the year due to additional digital and partner investments. The company’s long-term targets call for annual net revenue growth in the high single digit range with annual non-GAAP EPS growth of at least 12% and annual return on invested capital of 25% or greater.
Tuesday, June 19, 2018
Oracle-ORCL reported fourth quarter revenue rose 3% to $11.3 billion with net income up 5% to $3.4 billion and EPS up 8% $.82. For the full year, revenues rose 6% to $39.8 billion with operating income up 8% to $13.7 billion and net income and EPS each down 59% to $3.8 billion and $.90, respectively. Earnings were negatively affected by the impact of tax reform. Revenue growth for the year was driven by 10% growth in cloud services and license support to $26.3 billion with 11% growth in applications revenues and 5% growth in platform and infrastructure revenues. On a geographic basis, Oracle reported 5% growth in the Americas and Asia Pacific and 7% growth in Europe/Middle East/Africa. Return on shareholders’ equity was 8.3% due to the lower earnings. Free cash flow increased 13% during the year to $13.7 billion with the company paying $3.1 billion in dividends and repurchasing $11.3 billion of its shares during fiscal 2018, including 106 million shares in the fourth quarter for $5 billion at an average cost of $47.17 per share. Since 2011, Oracle has reduced its shares outstanding by 20%. With management viewing Oracle’s stock as “very inexpensive,” share buybacks will likely continue at the same pace as in fiscal 2018. The company has $6.7 billion of net cash on its balance sheet as of year end ($67.3 billion of cash and investments less $60.6 billion of notes payable and other borrowings).For fiscal 2019, management expects revenue growth to exceed fiscal 2018’s 6% growth as cloud revenues continue to accelerate with double-digit non-GAAP EPS growth anticipated as profit margins continue to expand. Capital expenditures in fiscal 2019 are expected to approximate $1.7 billion, relatively flat with fiscal 2018.
Walgreens Boots Alliance-WBA will replace General Electric in the Dow Jones Industrial Average, S&P Dow Jones Indices said in a statement. The change will take effect prior to the market’s open on June 26.
Starbucks-SBUX announced a set of strategic priorities and corresponding operational initiatives to accelerate growth and create long-term shareholder value. Starbucks detailed three strategic priorities to regain revenue and earnings momentum: 1) Accelerating growth in the U.S. and China, the company’s targeted long-term growth markets; 2) Expanding and leveraging the global reach of the brand through the Global Coffee Alliance; and 3) Sharpening the focus on increasing shareholder returns. Starbucks is optimizing its U.S. store portfolio at a more rapid pace in FY19, including shifting new company-operated store growth to underpenetrated markets, slowing licensed store growth, and increasing the closure of underperforming company-operated stores in its most densely penetrated markets to approximately 150 in FY19 from a historical average of up to 50 annually. In FY19, this will result in a slightly lower growth rate in net new company-operated stores. Starbucks is actively expanding the breadth and depth of digital relationships with current and new customers. The company has added 5 million new digitally registered customers since April 2018 and 2 million active Starbucks Rewards members year-over-year to 15 million, up 13 percent from the previous year. In FY19, the company expects newer digital initiatives to contribute one to two points of comp growth in the U.S., supported by a redesigned Starbucks Rewards program that provides customers more choice around redemptions and payment, as well as expanded personalization capabilities for customers that have a digital relationship with the company. With the execution of the company’s strategic priorities expected to improve the return profile of the business, the company now expects to return approximately $25 billion in cash to shareholders in the form of share buybacks and dividends through FY20. This represents a $10 billion increase from the cash return target announced on November 2, 2017. In support of an accelerated return of cash to shareholders, the Board of Directors approved a 20 percent increase in the company’s regular quarterly dividend and declared a cash dividend of $0.36 per share payable on August 24, 2018, to shareholders of record as of August 9, 2018. This represents the 8th annual increase in the company’s regular quarterly dividend. The company now anticipates 1 percent growth in comparable store sales globally in Q3 FY18.
Monday, June 18, 2018
JD.com, Inc., China’s leading technology-driven e-commerce company, and Google-GOOGL, announced that Google will invest $550 million in cash in JD.com as part of a strategic partnership. Google and JD plan to collaborate on a range of strategic initiatives, including joint development of retail solutions in a range of regions around the world, including Southeast Asia, the U.S. and Europe. By applying JD’s supply chain and logistics expertise and Google’s technology strengths, the two companies aim to explore the creation of next generation retail infrastructure solutions, with the goal of offering helpful, personalized and frictionless shopping experiences. JD also plans to make a selection of high-quality products available for sale through Google Shopping in multiple regions. Under the agreements, Google will receive 27,106,948 newly issued JD.com Class A ordinary shares at an issue price of $20.29 per share, equivalent to $40.58 per ADS, based on the volume-weighted average trading price over the prior 10 trading days.
Friday, June 15, 2018
Cognizant Technology Solutions-CTSH announced that it has entered into an accelerated share repurchase ("ASR") agreement with Morgan Stanley & Co. LLC to repurchase an aggregate of $600 million of Cognizant's Class A common stock. In February 2017, the Company announced a plan to return $3.4 billion to stockholders by the end of 2018 through a combination of $2.7 billion in stock repurchases and $0.7 billion in dividends. With the ASR announced today, the Company will deliver early on its commitment as to stock repurchases with the anticipated final settlement of the ASR during the third quarter of 2018.
Thursday, June 14, 2018
Polaris-PII reaffirmed 2018 EPS guidance of $6.05-$6.20, representing 25%-28% growth over last year. The Off-Road Vehicle retail market improved significantly in May following a weak April due to weather. Return on invested capital is critical to all aspects of the company’s management. Over the last five years, Polaris has invested approximately $2 billion in research and development, capital expenditures, and tooling. Over the same time, the company has deployed $1 billion in acquisitions, repurchased $1.2 billion of its shares and paid about $700 million in dividends, with the dividend increased for 23 consecutive years.
Tuesday, June 12, 2018
Automatic Data Processing-ADP remains committed to its objective of top quartile Total Shareholder Return (TSR) compared to the S&P 500. Building on its revised Fiscal 2018 guidance announced on May 2, 2018, reflecting the positive developments outlined during Investor Day, and extending its financial outlook to Fiscal 2021, ADP now expects to achieve: Fiscal 2019 Adjusted EBIT Margin of 21% to 22%, which represents a full one year acceleration of the Fiscal 2020 Adjusted EBIT outlook communicated in its September 12, 2017 Investor Presentation; Fiscal 2021 Adjusted EBIT Margin of 23% to 25%; and Fiscal 2019 to 2021 annualized revenue growth of 7% to 9%, Adjusted EPS growth of 16% to 19%, and TSR of 18% to 21
T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.04 trillion as of May 31, 2018 increased 4.7% since year end.
Thursday, June 7, 2018
Biogen-BIIB announced it has entered into an exclusive option agreement with TMS Co., Ltd. to acquire TMS-007 and backup compounds. The agreement includes an upfront payment of $4 million and an additional $18 million payment if Biogen exercises its option, with up to $335 million in potential development and commercialization milestones as well as tiered royalties. TMS-007 is a plasminogen activator with a novel mechanism of action associated with breaking down blood clots, and is believed to inhibit local inflammation at the site of thrombosis. This unique combination could position TMS-007 as a best in class thrombolytic for individuals with acute ischemic stroke (AIS) with potential for an extended treatment window as compared to current thrombolytic agents. Stroke is the fifth leading cause of death in the U.S. with AIS accounting for approximately 85% of cases and large hemispheric infarction accounting for approximately 15% of AIS cases.
Wednesday, June 6, 2018
Johnson & Johnson-JNJ announced that it has received a binding offer from Fortive Corporation to acquire its Advanced Sterilization Products (ASP) business, a division of Ethicon, Inc., for an aggregate value of approximately $2.8 billion, including $2.7 billion of cash. ASP is a global leader in innovative infection prevention solutions with 2017 net revenue of approximately $775 million. The transaction is expected to close no later than early 2019.
Thor Industries-THO reported record results as third quarter revenues rose 12% to $2.25 billion with net income up 6% to $133.8 million and EPS up 20% to $2.53, thanks in large part to the benefits of a lower tax rate due to tax reform. The company generated strong sales growth in both segments with Towables up 12.8% and Motorized up 8.8%. Gross profit margins declined in the quarter by 50 basis points to 14.1% reflecting an increase in warranty expense as well as slightly higher labor and material costs. Management is taking strategic actions to address the implementation of the recent steel and aluminum tariffs. Operating cash flow increased 8% year-to-date with the company paying down its revolving credit line to just $20 million subsequent to quarter end. The company ended the quarter with $147 million in cash after investing $46.9 million in a newly created joint venture named TH2, a digital platform designed for the global RV industry. Consolidated recreational vehicle backlog declined to a still healthy $2 billion reflecting normalized ongoing demand for all products. Management expects another record year for Thor in fiscal 2018. Economic conditions and high consumer confidence along with favorable demographics remain favorable for continued industry growth for the foreseeable future.
Brown-Forman-BFB reported fourth quarter revenues rose 6% to $733 million with net income down 23% to $110 million and EPS down 24% to $.23. The earnings include $70 million, $.10 per share, negative impact form the creation of a charitable foundation. For the full year, revenues rose 8% to $3.25 billion with net income up 7% to $717 million and EPS up 8% to $1.48. Return on shareholders’ equity for the year was 54.5%. BFB’s free cash flow decreased 4% for fiscal 2018 to $505 million with the company paying $773 million in dividends including a $1 per share special dividend paid in April. For the year, underlying net sales and operating income grew 6% and 8%, respectively. The results were well-balanced by geography and portfolio driven by strong 6% underlying net sales growth of the Jack Daniel’s portfolio and 15% growth in the super-premium American whiskey portfolio. For fiscal 2019, management expects underlying net sales growth of 6%-7% with operating income growth of 7%-9% and EPS in the range of $1.75-$1.85. Chief Executive Officer Paul Varga will retire on 12/31/2018. Varga will be succeeded by Lawson Whiting, a 21-year veteran of the company, who currently serves as Chief Operating Officer.
Fastenal-FAST reported May sales rose 12.5% to $431.4 million with average daily sales also up 12.5% $19.6 million. Manufacturing sales rose 11.9% with non-residential construction sales up 15.9%. Daily sales growth by product line was 9.1% for fasteners and 15% for other products. Total personnel increased 4% to 20,796 as of month end.
Tuesday, June 5, 2018
Eisai Co., Ltd. and Biogen-BIIB announced that elenbecestat was generally safe and well tolerated in a Phase II clinical study (Study 202) of the oral BACE (beta amyloid cleaving enzyme) inhibitor elenbecestat (development code: E2609) conducted in the United States, and the results demonstrated a statistically significant difference in amyloid beta (Aβ) levels in the brain measured by amyloid-PET (positron emission tomography). A numerical slowing of decline in functional clinical scales of a potentially clinically important difference was also observed, although this effect was not statistically significant. This study, a Phase II study of 70 patients, is the first study of a BACE inhibitor to show a statistically significant difference in amyloid beta in the brain while also suggesting a delay of clinical symptom decline in exploratory endpoints. "Biogen is heartened by the safety and tolerability results of this study of elenbecestat," said Alfred Sandrock, M.D., Ph.D., executive vice president and chief medical officer at Biogen. "We remain committed to research in Alzheimer's, an area of significant unmet need with a devastating impact on those living with the disease, their families, friends, and society."
AbbVie-ABBV announced positive top-line results from SELECT-EARLY showing that both doses of upadacitinib monotherapy (15 mg and 30 mg) met the primary endpoints of ACR50 at week 12 and clinical remission at week 24 versus methotrexate (MTX). Additionally, all ranked secondary endpoints were met. The ongoing study evaluates upadacitinib, an investigational oral JAK1-selective inhibitor, as a monotherapy treatment compared to methotrexate monotherapy in adult patients with moderate to severe rheumatoid arthritis who were methotrexate-naïve. Upadacitinib is not approved by regulatory authorities and its safety and efficacy have not been established. "SELECT-EARLY is the fifth pivotal trial that will support regulatory submissions for upadacitinib in rheumatoid arthritis later this year," said Michael Severino, M.D., executive vice president, research and development and chief scientific officer, AbbVie. "Results from SELECT-EARLY further support our belief that upadacitinib has the potential to be an important new treatment option for patients with rheumatoid arthritis." Rheumatoid arthritis, which affects an estimated 23.7 million people worldwide, is a chronic and debilitating disease. Methotrexate is commonly used as a first-line therapy in rheumatoid arthritis, but many patients do not respond to or cannot tolerate methotrexate. Early intervention with an effective treatment is critical to control the disease and prevent permanent joint damage and impaired physical function.
Monday, June 4, 2018
Starbucks-SBUX announced that Howard Schultz is stepping down as executive chairman and member of the Board of Directors and will be honored with the title of chairman emeritus effective June 26, 2018. During his four decades as CEO and Chairman, Schultz grew Starbucks from 11 stores to more than 28,000 stores in 77 countries, while demonstrating that a business can simultaneously deliver best-in-class financial performance and share success with its people and the communities it serves. Under Schultz’s leadership, Starbucks has delivered a 21,000% gain in the value of its stock price since its initial public offering in 1992. The company’s growth was fueled by his decisions to provide uncommon benefits for those who work for Starbucks, including comprehensive healthcare, stock ownership and free college tuition, even for those working part-time. This year, Starbucks was named the fifth most admired company in the world by Fortune, marking the 16th year in a row that the company has appeared on the global list. Starbucks was also named one of the World’s Most Ethical Companies by the Ethisphere Institute for the 12th consecutive year and was ranked as one of 2018’s Most Innovative Companies by Fast Company, most notably for its social-impact work.
Microsoft-MSFT announced it has reached an agreement to acquire GitHub, the world's leading software development platform where more than 28 million developers learn, share and collaborate to create the future. The platform hosts a growing network of developers in nearly every country representing more than 1.5 million companies across healthcare, manufacturing, technology, financial services, retail and more. Together, the two companies will empower developers to achieve more at every stage of the development lifecycle, accelerate enterprise use of GitHub, and bring Microsoft's developer tools and services to new audiences. Under the terms of the agreement, Microsoft will acquire GitHub for $7.5 billion in Microsoft stock. The acquisition is expected to close by the end of the calendar year. Upon closing, Microsoft expects GitHub's financials to be reported as part of the Intelligent Cloud segment. Microsoft expects the acquisition will be accretive to operating income in fiscal year 2020 on a non-GAAP basis, and to have minimal dilution of less than 1 percent to earnings per share in fiscal years 2019 and 2020 on a non-GAAP basis, based on the expected close time frame. Non-GAAP excludes expected impact of purchase accounting adjustments, as well as integration and transaction-related expenses. An incremental share buyback, beyond Microsoft's recent historical quarterly pace, is expected to offset stock consideration paid within six months after closing. Microsoft will use a portion of the remaining ~$30 billion of its current share repurchase authorization for the purchase.
Apple®-AAPL announced iOS 12, the latest version of the most advanced mobile operating system, designed to make everyday tasks faster and more responsive. iOS 12 changes the way iOS users see the world using AR, makes communications fun and expressive with Memoji™ and Group FaceTime®, and with Screen Time, helps customers understand and take control of the time they spend interacting with their iOS devices. iOS 12 introduces Siri® Shortcuts, enabling Siri to work with any app, delivering a much faster way to get things done. Apple® also previewed watchOS® 5, a significant update to the world’s most popular watch, helping users stay healthy and connected. Apple Watch® becomes an even stronger companion for fitness, communication and quick access to information with a host of new features including Activity Sharing competitions, auto-workout detection, advanced running features, Walkie-Talkie, Apple Podcasts and third-party apps on the Siri® watch face. Apple® also previewed tvOS™ 12, the powerful operating system designed for enjoying entertainment on the big screen, which takes the cinematic experience of Apple TV® 4K to the next level with support for Dolby Atmos audio, convenient new features to easily access the shows and movies you love and breathtaking aerials shot from space. Apple® also previewed macOS® Mojave, the latest version of the world’s most advanced desktop operating system, with new features inspired by pros but designed for everyone. In macOS Mojave, a new Dark Mode transforms the desktop with a dramatic new look that puts the focus on user content. The new Stacks feature organizes messy desktops by automatically stacking files into neat groups. Familiar iOS apps, including News, Stocks, Voice Memos and Home, are now available on the Mac® for the first time. FaceTime® now adds support for group calling, and the Mac App Store® gets a full redesign featuring rich editorial content and the addition of apps from top developers, including Microsoft, Adobe and others.
Thursday, May 31, 2018
Pratt & Whitney, a division of United Technologies-UTX, and the U.S. Department of Defense announced a $2 billion contract award for the 11th lot of F135 propulsion systems, powering all three variants of the F-35 Lightning II aircraft. The latest contract continues to support program affordability initiatives with reduction in propulsion system price. The 11th low rate initial production (LRIP) contract will cover 135 engines, as well as program management, engineering support, production support, spare modules, and spare parts. To date, Pratt & Whitney has delivered 375 F135 engines. Deliveries of LRIP 11 engines will start this year.
Waymo, the self-driving vehicle division of Alphabet-GOOGL, announced plans to buy as many as 62,000 minivans from Fiat Chrysler in a deal worth potentially $2 billion as part of its plans to build a robot taxi fleet. It has already been testing a fleet in Phoenix. In March, Waymo announced a deal to acquire as many as 20,000 Jaguar vehicles for its luxury robot taxi fleet, which will launch in 2020.
Wednesday, May 30, 2018
AbbVie-ABBV expects to acquire approximately 71.4 million shares of its common stock at a price of $105 per share, for an aggregate cost of approximately $7.5 billion, relating to the Dutch auction tender offer. These shares represent approximately 4.5 percent of the shares outstanding.
Polaris Industries-PII announced that it has signed a definitive agreement to acquire Boat Holdings, LLC (“Boat Holdings”), a boat manufacturer owned by the Vogel family, management and Balmoral Funds, in an all-cash transaction valued at a net present value (NPV) of approximately $805 million. Polaris also expects that approximately $100 million NPV of future net tax benefits will accrue to the combined Company. When adjusted for the net tax benefit of $100 million, the transaction is valued at approximately $705 million. The 2017 Boat Holdings EBITDA multiple including the expected net tax benefits is approximately 9.5 times. The transaction is expected to close in the third quarter of 2018. Boat Holdings is the largest manufacturer of pontoon boats in the U.S., one of the largest and fastest growing segments in the marine industry. With a full offering of pontoon, deck and cruiser boats, Boat Holdings’ four recognized brands – Bennington, Godfrey, Hurricane and Rinker – are strategically positioned with over 200 base models across a range of price points and fully-custom built options. Boat Holdings leverages an asset-light manufacturing model, and offers boats through a robust network of dealers primarily in the United States and Canada. In 2017, Boat Holdings generated approximately $560 million in sales. Sales in the pontoon boat category have grown at an 11-percent compounded annual growth rate (CAGR) since 2010, while Boat Holdings’ leading pontoon brands, Bennington and Godfrey, have grown at an even faster pace over the same time period. Polaris expects that this acquisition offers Polaris a unique opportunity to meaningfully increase its addressable market and growth profile. The transaction is expected to be immediately accretive to Polaris’ earnings, and approximately $100 million of present value future tax benefits are expected to drive additional cash flow accretion. Further, Boat Holdings’ differentiated operating model enables fast, flexible production with low fixed assets and capital spending, leading to strong margins and naturally high free cash flow conversion.
Private sector employment increased by 178,000 jobs from April to May according to the May ADP National Employment Report®. "The hot job market has cooled slightly as the labor market continues to tighten," said Ahu Yildirmaz, vice president and co-head of the ADP-ADP Research Institute. "Healthcare and professional services remain a model of consistency and continue to serve as the main drivers of growth in the services sector and the broader labor market as well." Mark Zandi, chief economist of Moody's Analytics, said, "Job growth is strong, but slowing, as businesses are unable to fill a record number of open positions. Wage growth is accelerating in response, most notably for young, new entrants and those changing jobs. Finding workers is increasingly becoming businesses number one problem."
Otis France has been awarded a historic contract for the installation of 171 escalators and moving walkways, associated with a 15-year maintenance contract and "mid-life" renovations. Otis is a unit of United Technologies-UTX.
Thursday, May 24, 2018
Despite unfavorable weather, Ross Stores-ROST rang up a 9% increase in first quarter sales to $3.6 billion with net earnings up a stylish 30% to $418 million and EPS up a dressy 35% to $1.11. Excluding the $0.17 tax benefit from U.S. tax reform, EPS increased 15%. Same store sales increased 3% on top of last year’s 3% increase on higher traffic and an increase in average basket size. Operating margin of 15.1% was down slightly year-over-year as an improvement in merchandise gross margin and favorable timing of packaway-related expenses were offset by higher freight costs and wage-related investments. The company opened 23 new stores during the quarter, including 6 new dd’s DISCOUNTS. During the quarter, Ross Stores generated $392 million in free cash flow, down 12% from last year, squeezed by a 19% jump in inventories due to higher packaway opportunities. In store inventories increased just 2%. During the quarter, Ross Stores returned $341 million to shareholders through dividends of $85.4 million and share repurchases of $255.4 million, or $77.27 per average share. The company is on track to repurchase $1.075 billion of its shares during 2018. At quarter’s end, Ross Stores registered more than $1.3 million in cash on its sturdy balance sheet. Looking ahead to the full year, the company expects same store sales to increase in the 1% to 2% range. Given the year-to-date results, the company raised its full year guidance with EPS now expected in the $3.92 to $4.05 range, up 12% from last year at the mid-point. The company expects to open 100 new locations during 2018, including 75 new Ross Stores and 25 dd’s DISCOUNTS.
Hormel Foods-HRL reported second quarter fiscal sales increased 6.5% to $2.3 billion with net income up 12.5% to $237 million and EPS up 12.8% to $0.44. Volume of 1.2 billion pounds increased 2.9%, benefiting from the inclusion of the Columbus and Fontanini acquisitions and strong results in the International segment. Operating margins declined 130 basis points to 13.1% on higher advertising expense, lower commodity profits and increased freight costs. During the first half of the fiscal year, Hormel generated $309 million in free cash flow and returned $234 million to shareholders through share repurchases of $45 million and dividends of $189 million, marking the company’s 359th consecutive quarterly dividend payment. Hormel ended the quarter with $262 million in cash and $810 million in debt as they continue to pay down short-term debt related to the Columbus Craft Meats acquisition. Management reaffirmed full year guidance with sales expected to be in the range of $9.7 - $10.1 billion and EPS in the $1.81 - $1.95 range.
Wednesday, May 23, 2018
United Technologies-UTX announced plans to hire 35,000 people and make investments of more than $15 billion in research and development and capital expenditures in the United States over the next five years (2018-2022). "United Technologies is growing globally and growing the fastest in the United States," said Gregory J. Hayes, Chairman & CEO, United Technologies Corporation. "Over the past three years, we have created more jobs in the U.S. than in the rest of the world combined." The competitive tax system resulting from U.S. tax reform is encouraging global companies, such as United Technologies, to make long-term investments in innovation in America.
Tuesday, May 22, 2018
The TJX Companies-TJX reported first quarter revenues rose 12% to $8.7 billion with net income up a dressy 34% to $716 million and EPS up 38% to $1.13. These results reflect a $.17 per share benefit from tax reform. On an adjusted basis, EPS still rose a strong 17%. Comparable store sales increased 3% during the quarter driven by higher customer traffic in all four major divisions. Marmaxx, the company’s largest division, saw comparable store sales increase 4% during the quarter, marking the 15th consecutive quarter of rising customer traffic. Free cash flow more than doubled to $460 million during the quarter with the company paying $197 million in dividends and repurchasing $395 million of its shares. The dividend reflects the 25% dividend increase the company announced, which marked the 22nd consecutive year of dividend increases. Given strong cash flows, management anticipates repurchasing $2.5 to $3.0 billion of TJX stock for the full year. Given the strong first quarter results, management raised their EPS outlook for the full year with EPS expected in the range of $4.75-$4.83, representing an 18%-20% increase over the prior year. On an adjusted basis for the benefits of tax reform, EPS is expected to increase in the range of 5%-6% based upon estimated comparable store sales growth of 1%-2%.
Monday, May 21, 2018
The Middleby Corporation announced that it has entered into a definitive agreement to acquire the Taylor Company from UTC Climate, Controls & Security, a unit of United Technologies-UTX for $1.0 billion in cash The deal is expected to close early in the third quarter of 2018.
Thursday, May 17, 2018
Cisco Systems-CSCO reported third quarter revenues rose 4% to $12.5 billion, with product revenue up 5% and service revenue up 3%. Net income increased 7% to $2.7 billion with EPS up 12% to $.56. Recurring revenue was 32% of total revenue, up two percentage points year over year, as the company continues to shift the business toward more software and recurring revenue. Revenue by geographic segment was: Americas up 2%, EMEA up 9% and APJC up 7%. Product revenue performance reflected solid growth in Applications and Security, which each increased 19% and 11%, respectively. Infrastructure Platforms increased by 2%. Cisco held $54.4 billion of cash and investments as of the end of the third quarter with $47.5 billion available in the United States. Free cash flow decreased 2% during the first nine months of the year to $8.9 billion with the company paying $4.4 billion in dividends and repurchasing $11.6 billion of its stock during the same time period. CSCO has $25 billion remaining under the current share repurchase program. Management’s outlook for the fourth fiscal quarter of 2018 is for revenue growth of 4%-6% with GAAP EPS in the range of $.55-$.60.
Genuine Parts Company-GPC commented on its previously announced definitive merger agreement to combine GPC's S.P. Richards business with Essendant response to the announcement of Staples, Inc.'s conditional, non-binding proposal to acquire Essendant for $11.50 per share in cash. Staples is privately owned by Sycamore Partners, which filed a Schedule 13D reporting its acquisition of a 9.9% ownership stake in Essendant. On May 7, 2018, GPC demonstrated its confidence in the upside value creation of this merger by proposing to Essendant enhanced transaction terms under which, in addition to owning 49% of the combined company on a diluted basis, Essendant shareholders would receive a Contingent Value Right ("CVR") for each Essendant share held immediately prior to the closing of the transaction. Through the CVR, GPC would provide Essendant shareholders with a potential cash payment of up to $4.00 per CVR based on how Essendant shares trade during a 20-day measurement period at the later of the end of 2019 or 12 months from the closing of the transaction. The cash payment would be equal to $12.00 minus the greater of the weighted average share price of the combined company during the measurement period or $8.00.
Thursday, May 10, 2018
Maximus-MMS reported second quarter revenues decreased 1.5% to $613 million due to the expected revenue decline in the U.S. Federal Services Segment from contracts that ended. Net income increased 5.7% to $55.5 million and EPS rose 5% to $.84. Free cash flow for the first half of the year declined 16.5% to $103.4 million with the company paying $5.9 million in dividends and repurchasing $1 million of its shares during the same time period. Year-to-date signed contract awards at 3/31/18 totaled $1.4 billion with contracts pending (awarded but unsigned) totaling $489.1 million. The sales pipeline at quarter end was $3 billion comprised of $700 million in proposals pending, $300 million in proposals in preparation and $2 billion in opportunities tracking. Maximus continues to see long procurement cycles and more protests and extensions in the federal market. Maximus lowered their revenue guidance for fiscal 2018 from the range of $2.475 billion to $2.550 billion to the range of $2.40 billion to $2.44 billion. The company reduced the upper end of EPS guidance to the range of $3.30 to $3.40 from prior guidance of $3.30 to $3.50 due to the expected lower revenue.
Tractor Supply Company-TSCO announced that its Board of Directors declared a quarterly cash dividend of $0.31 per share of the Company’s common stock, up from the previous $0.27 per share, which represents a 14.8% increase. “For the eighth consecutive year, we are pleased to increase the dividend as we look to return cash to our shareholders. The Board continues to have confidence in Tractor Supply’s ability to execute its ONETractor strategy and deliver sustainable cash generation and long-term growth,” said Cynthia Jamison, Tractor Supply Company’s Chairman of the Board.
T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.02 trillion as of April 30, 2018, a 3% increase since year end.
Wednesday, May 9, 2018
Booking Holdings-BKNG reported first quarter revenues rose 21% to $2.9 billion while booking a 33% increase in net income to $607 million with EPS soaring 35% higher to $12.34. These strong results reflected the second consecutive quarter of operating margin expansion thanks to the company’s performance marketing optimization efforts. The company has 5.2 million listings and expects that to grow as they add more single-house rentals to their listing base and continue their geographic expansion. Gross travel bookings increased 21% during the quarter, or 12% on a constant currency basis, to $25 billion. Room nights booked increased 13.2% to 196.8 million with rental car days booked rising slightly to 18.7 million and airline tickets booked increasing 1.9% to 1.8 million. Free cash flow jumped 64% during the quarter to $508 million. During the quarter, the company repurchased $719 million of its stock and ended the quarter with more than $16 billion of cash and investments and $8 billion of long-term debt on its balance sheet. The company has $10 billion remaining authorized for future share repurchases which they expect to complete in the next two to three years. Management’s outlook for the second quarter is for total gross travel bookings growth of 10%-14% with room nights booked growing 7%-11%. This should lead to revenue growth in the second quarter of 11.5%-15.5% with EPS expected in the range of $15.50-$16.15, reflecting 10% growth at the midpoint.
Tuesday, May 8, 2018
The Walt Disney Company-DIS reported second fiscal quarter revenues increased 9% to $14.5 billion with net income up 23% to $2.9 billion and EPS up 30% to $1.50. Revenues from Media Networks, Disney’s largest division, increased 3% to $6.1 billion with operating earnings falling 6% to $2 billion due to a loss at BAMTech, Disney’s streaming video platform, and Hulu along with higher programming costs at ESPN. Sales at Disney’s Park and Resorts increased 13% to $4.9 billion and operating earnings increased 27% to $1 billion on higher guest spending and attendance growth. Studio Entertainment revenues increased 21% to $2.5 billion with operating income popping 29% to $847 million thanks to blockbuster movies Black Panther which has rung up $1.3 billion in box office revenues since opening in July and Avengers: Infinity War which has rung up more than $1 billion in revenues since its opening in late April. Consumer Products & Interactive Media revenues increased 2% to $1.1 billion and segment operating income decreased 4% to $354 million as higher income from licensing activities was more than offset by a decrease in comparable retail store sales. Disney’s effective tax rate fell to 20.7% from 32.3% last year thanks to U.S. tax reform. During the quarter, Disney generated more than $3.4 billion in free cash flow, up 48% from last year. The company repurchased 12.2 million shares during the quarter for $1.3 billion, or $106.56 per average share. Year-to-date, Disney has returned $3.9 billion to shareholders through dividends of $1.3 billion and share repurchases of $2.6 billion. During the quarter, Disney announced a corporate reorganization to better position the company to deliver an enhanced experience to consumers worldwide via transformative technology platforms. “Driven by strong results in our parks and resorts and studio businesses, our Q2 performance reflects our continued ability to drive significant shareholder value,” said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company. “Our ability to create extraordinary content like Black Panther and Avengers: Infinity War and leverage it across all business units, the unique value proposition we’re creating for consumers with our DTC platforms, and our recent reorganization strengthen our confidence that we are very well positioned for future growth.”
Berkshire Hathaway-BRKB reported the company’s net worth during the first quarter of 2018 was relatively unchanged with book value equal to $211,184 per Class A share as of 3/31/18.
New accounting rules in 2018 require Berkshire to book the net changes in unrealized appreciation/depreciation in net income instead of comprehensive income which resulted in a $1.1 billion loss in net earnings in the first quarter compared to $4.1 billion in earnings in the prior year period due to $6.4 billion in after-tax losses from investments and derivatives.
Berkshire’s five major investment holdings, representing 68% of total equities, contributed to the $6.4 billion investment loss in the first quarter. Wells Fargo’s stock dropped 14%, or $4.1 billion, to $25.2 billion amid continued negative headlines on business practices and a $1 billion fine for its bad behavior. During the first quarter, American Express and Coke each dropped $1 billion in value to $14.1 billion and $17.4 billion, respectively. Bank of America rose 1.4%, or $300,000, to $21 billion. Apple continued to be the apple of Buffett’s eye as the position grew to $40.7 billion as of 3-31-18 through the additional purchases of 75 million shares in the quarter for $12 billion to $13 billion.
In the first quarter of 2018, Berkshire’s operating revenues declined 9% to $58.5 billion with all operating business groups posting growth, except Berkshire Hathaway Reinsurance which recorded $10.2 billion in premiums earned in the prior year period related to the big AIG deal in 2017. Operating earnings rose a robust 49% during the quarter to $5.3 billion, aided by Berkshire’s tax rate falling from 35% to 21% during the period. At the annual meeting, Buffett stated that Berkshire’s current normalized annualized earnings power is about $20 billion to $21 billion, which should continue to grow over time.
Berkshire’s insurance underwriting operations generated a $407 million in earnings during the first quarter compared to a $267 million loss in the prior year period. The insurance operations reflected significantly improved results from GEICO and reductions of losses for prior years’ property/casualty loss events. Insurance investment income was 12% higher at $1.0 billion during the quarter, reflecting higher interest rates on short-term investments and a fair value adjustment related to a limited partnership investment. The float of the insurance operations approximated $116 billion as of 3/31/18, an increase of $2 billion since year end. The average cost of float was negative during the first quarter as the underwriting operations generated pre-tax earnings of $518 million.
Burlington Northern Santa Fe’s (BNSF) revenues rose 8.5% during the first quarter to $5.6 billion with net earnings chugging 37% higher to $1.1 billion, reflecting the favorable change in the tax rate. Pre-tax earnings rose 12.5% to $1.5 billion. During the quarter, BNSF generated a 1.8% comparative increase in average revenue per car/unit and a 5.1% increase in volume. BNSF expects modest volume growth over the remainder of the year.
Berkshire Hathaway Energy reported revenues increased 6.6% to $4.5 billion during the first quarter with all groups, except PacifiCorp, contributing to the growth. Net earnings increased 22% during the quarter to $585 million primarily due to tax credits. On a pre-tax basis, earnings declined 17% to $487 million due to lower utility margins reflecting increased depreciation, maintenance and other operating expenses.
Berkshire’s Manufacturing businesses reported a 7% increase in revenue growth in the first quarter to $12.9 billion with operating earnings up 25% to $1.9 billion, reflecting improved results at Duracell and lapping a loss from Lubrizol in the prior year period. Revenue and earnings growth was broad based, led by Industrial Products with Building Products and Consumer Products also contributing to both earnings and revenue growth during the period.
Service and Retailing revenues rose 3% during the quarter to $18.8 billion with pre-tax earnings up 20% to $575 million. Service revenues rose 13% to $2.9 billion with operating earnings up 37% to $357 million. TTI’s revenues increased 33% due to an industry-wide increase in demand for electronic components in many geographic markets around the world, acquisitions and favorable foreign currency changes. FlightSafety, Charter Brokerage and NetJets also contributed to the earnings growth in this unit. Retailing revenues rose 5% during the quarter to $3.6 billion with operating earnings up 19% to $158 million, reflecting higher earnings from Berkshire Hathaway Automotive (BHA) and the timing of Easter sales at See’s Candies. McLane’s revenues rose 1% during the quarter to $12.2 billion due to an increase in grocery sales. However, operating earnings declined 32% to $60 million due to significant pricing pressures in an increasingly competitive grocery business environment. The grocery and foodservices business will likely continue to be subject to intense competition over the remainder of 2018.
Finance and Financial Products revenues rose 12% during the quarter to $2.1 billion with net income jumping 29% to $374 million, reflecting the favorable tax change. Pre-tax earnings increased 10% to $494 million. The revenue and earnings increase was led by Clayton Homes, reflecting higher unit sales, higher average prices and higher financial services revenues.
Berkshire’s balance sheet continues to reflect significant liquidity and a strong capital base of $347.4 billion as of 3/31/18. Excluding railroad, energy and finance investments, Berkshire ended the quarter with $302.9 billion in investments allocated approximately 55% to equities ($166.7 billion), 6.6% to fixed-income investments ($19.9 billion), 5.8% to Kraft Heinz ($17.7 billion, with a fair value of $20.3 billion as of 3-31-17), and 33.6% in cash and equivalents ($98.6 billion).
Berkshire’s financial strength allows Buffett to make significant investments and acquisitions. Apple was the largest investment in the first quarter with Buffett spending $12-$13 billion for 75 million additional shares. Berkshire expects the previously announced $2.5 billion acquisition of Medical Liability Mutual Insurance Company to close in the third quarter of 2018.
Free cash flow declined 69% during the first quarter to $5 billion due to lower earnings and the lapping of the big boost to float from the AIG deal in the prior year period. During the quarter, capital expenditures approximated $2.6 billion, including $1.6 billion by Berkshire Hathaway Energy and BNSF. Berkshire Hathaway forecasts aggregate capital expenditures of about $10 billion in 2018 for these two businesses. During the first quarter, Berkshire sold and redeemed a net $35.6 billion in Treasury Bills and fixed-income investments and purchased a net $10.5 billion of equity securities, reflecting in part the purchase of Apple and the sale of all IBM shares. There were no share repurchases of Berkshire Hathaway stock.
Berkshire Hathaway’s stock appears fairly valued, currently trading at $295,700 per A share and $196 per B share. Based on current business fundamentals, we expect Berkshire’s A shares to trade between $246,000-$319,000 per share and the B shares to trade between $164-$213 per share. Hold.
Monday, May 7, 2018
Cognizant Technology Solutions-CTSH reported first quarter revenues grew a solid 10% to $3.9 billion with operating income up 22% to $693 million, net income down 7% to $520 million and EPS down 4% to $.88. Revenue from digital services grew by 27% year-over-year, or three times the company average, and now accounts for 29% of total company revenue. By business segment, Financial Services revenue increased 6% to $1.5 billion, led by growth in large strategic insurance deals, growth in mid-tier banking clients and digital services partially offset by sluggishness in money center bank business. Healthcare revenues increased a healthy 12% to $1.1 billion, thanks to consistent demand across payer clients with increasing interest in Cognizant’s digital, analytics, cloud and virtualization solutions. Products and Resources revenues increased 11% to $821 million, fueled by strong growth in digital services to manufacturing and logistics clients which offset sluggish growth in retail. Communications, Media and Technology grew by 18% to $509 million on an expansion of creating and curating digital content. Headcount grew by 1,400 from last year’s first quarter, bringing the total to 261,400. Annualized attrition was 20.3% while offshore utilization was 83% and on-site was 92%. During the quarter, Cognizant generated $292 million in free cash flow, up 38% from last year. Cognizant ended the quarter with $4.9 billion in cash and investments (including $2 billion repatriated from overseas in response to the recent tax reform) and $673 million in long-term debt on its sturdy balance sheet. During the quarter, Cognizant returned $434 million to shareholders through dividend payments of $118 million and share repurchases of $316 million. The company is on track to achieve its plan, announced in February 2017, to return $3.4 billion to shareholders by the end of 2018 with $2.1 billion in share repurchases including its $300 million accelerated share repurchase program launched during the first quarter and $383 million in cash dividends paid to date. During April, Cognizant completed its $500 million acquisition of Bolder Healthcare Solutions which will expand the range of Cognizant’s digital healthcare solutions and is expected to generate $100 million in revenues during 2018. For the full year, management expects revenues of $16 billion to $16.3 billion, up 9% at the mid-point. The company lowered its adjusted EPS guidance to $4.47 from prior guidance of $4.53 due to updated interpretation of the Global Intangible Low Taxed Income (GILTI) provision of the U.S. tax reform legislation. This provision limits the amount of eligible foreign tax credits and is expected to negatively impact 2018 EPS by 9 cents.
FactSet Research Systems-FDS increased its dividend by 14% to $0.64 per share. The $0.08 per share dividend increase marks the thirteenth consecutive year of dividend increases, highlighting FactSet’s continued commitment to returning value to its shareholders. The cash dividend will be paid on June 19, 2018 to holders of record of FactSet’s common stock at the close of business on May 31, 2018.
Starbucks Corporation-SBUX will form a global coffee alliance with Nestlé S.A. to accelerate and grow the global reach of Starbucks brands in Consumer Packaged Goods (CPG) and Foodservice. As part of the alliance, Nestlé will obtain the rights to market, sell, and distribute Starbucks®, Seattle’s Best Coffee®, Starbucks Reserve®, Teavana™, Starbucks VIA® and Torrefazione Italia® packaged coffee and tea in all global at-home and away-from-home channels. Nestlé will pay Starbucks $7.15 billion in closing consideration, and Starbucks – with a focus on long-term shareholder value creation – will retain a significant stake as licensor and supplier of roast and ground and other products going forward. Additionally, the Starbucks brand portfolio will be represented on Nestlé’s single-serve capsule systems. Starbucks intends to use the after-tax proceeds from this up-front payment primarily to accelerate share buybacks and now expects to return approximately $20 billion in cash to shareholders in the form of share buybacks and dividends through fiscal year 2020. Additionally, the transaction is expected to be earnings per share accretive by the end of fiscal year 2021 or sooner, with no change to the company’s currently stated long-term financial targets.
Friday, May 4, 2018
In an interview with CNBC’s Becky Quick, Warren Buffett revealed that Berkshire Hathaway-BRKA had purchased another 75 million shares of Apple-AAPL during the first quarter, bringing Berkshire’s total Apple position to more than 240 million shares valued at more than $43 billion.
Thursday. May 3, 2018
Express Scripts-ESRX reported first quarter revenues rose 11% to $24.8 billion with net income up 14% to $632.2 million and EPS up a healthy 22% to $1.10. Total adjusted claims declined 3% to 340.1 million during the quarter due primarily to the loss of certain public sector clients that had been previously disclosed. Adjusted EBITDA was up 3% to $1.5 billion with adjusted EPS up 33%. The core business grew earnings primarily due to the inclusion of eviCore in the quarter as well as supply chain initiatives and growth in the Accredo specialty pharmacy. The company reaffirmed its core business 2018 EBITDA guidance in the range of $5.25 billion to $5.4 billion, representing 8% growth over last year’s adjusted figures. Free cash flow increased 48% in the quarter to $1.4 billion due to higher net income and changes in working capital primarily related to the timing of accounts payable payments. During the quarter, the company repurchased a total of 5.4 million shares for $411.3 million at an average price of $76.17 per share. Express Scripts has currently suspended its share repurchase program due to the pending merger with Cigna, which is expected to close by year end pending regulatory review. Express Scripts reaffirmed its expected 2018 retention rate range for the 2018 selling season of 96% to 98%. For the full 2018 year, revenue is expected in the range of $99 billion to $102 billion with adjusted EPS lowered to $9.00 to $9.14 from previous guidance of $9.27 to $9.47, primarily due to the suspension of the share repurchase program. Cash flow from operations is expected in the range of $5.775 billion to $6.275 billion in 2018.
Wednesday, May 2, 2018
Automatic Data Processing-ADP reported fiscal third quarter revenues rose 8%, 6% on an organic basis, to $3.7 billion with net income tabulating up a 9% gain to $643.1 million and EPS up 11% to $1.45. Employer Services revenues increased 7% during the quarter as the number of employees on ADP’s clients’ payrolls in the U.S. increased 2.9%. Employer Services client retention was up 170 basis points over the prior year period. Employer Services operating margin declined 20 basis points due to pressures from acquisitions and foreign currency. PEO Services revenues increased 10%, driven by a 9% increase in average worksite employees with average worksite employees paid approximating 512,000. PEO Services segment margin increased 40 basis points. Interest on funds held for clients increased 21% to $135 million as average client fund balances increased 6% to $28.8 billion with the average interest yield increasing 20 basis points to 1.9%. Free cash flow increased 10% year-to-date to $1.7 billion with the company paying $785.1 million in dividends and repurchasing $596.2 million of its shares during the same time period. ADP raised its quarterly dividend 10%, representing a return to shareholders of a portion of the benefits from tax reform. The Board anticipates considering another dividend increase in November 2018 consistent with ADP’s historical pattern throughout its 43 year track record of annual dividend increases. Worldwide new business bookings increased 9% for the quarter, with management raising their outlook for 6%-7% growth for the full year. ADP maintained its fiscal 2018 revenue growth outlook at 7%-8% and raised their 2018 EPS growth outlook to 11%-12% with adjusted EPS growth expected in the range of 16%-17%.
Private sector employment increased by 204,000 jobs from March to April according to the April ADP National Employment Report®. "The labor market continues to maintain a steady pace of strong job growth with little sign of a slowdown," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "However, as the labor pool tightens it will become increasingly difficult for employers to find skilled talent. Job gains in the high-skilled professional and business services industry accounted for more than half of all jobs added this month. The construction industry, which also relies on skilled labor, continued its six month trend of steady job gains as well." Mark Zandi, chief economist of Moody's Analytics, said, "Despite rising trade tensions, more volatile financial markets, and poor weather, businesses are adding a robust more than 200,000 jobs per month. At this pace, unemployment will soon be in the threes, which is rarified and risky territory, as the economy threatens to overheat."
Mastercard-MA rang up a 31% increase in first quarter sales to $3.6 billion with net income up 38% to $1.5 billion and EPS up 41% to $1.41. Underlying currency-neutral revenue growth was 20%, driven by a 17% increase in switched transactions to 16.7 billion, a 21% increase in cross-border local-currency volumes and a 14% increase in gross dollar volume, on a local currency basis, to $1.4 trillion. These increases were partially offset by an increase in rebates and incentives, primarily due to increased volumes and new and renewed agreements. Purchase transaction growth grew at double-digit rates globally, buoyed by growing worldwide consumer confidence. The number of Mastercard and Maestro branded cards grew by 3% from last year to 2.4 billion cards. During the quarter, Mastercard generated $953 million in free cash flow, up 44% from last year’s first quarter. Mastercard returned $1.6 billion to shareholders during the quarter through dividend payments of $263 million and share repurchases of $1.4 billion at an average cost of $177.22 per share. During April, Mastercard purchased an additional $608 million of its shares at an average cost of $173.71 per share, leaving $3.3 billion remaining under the current repurchase authorization. Looking ahead to the full year, Mastercard is well-positioned to deliver strong results with revenue now expected to increase in the high-teens, up from the prior mid-teen estimate. Operating expenses are now expected to increase in the mid-teens, up from the prior low double-digit growth estimate. In response to U.S. tax reform, the company is accelerating its investments in safety, security and digital solutions to drive long-term growth.
Tuesday, May 1, 2018
Apple-AAPL reported a very successful second quarter with record revenues up 16% to $61.1 billion and record net income up 25% to $13.8 billion and EPS up a shiny 30% to $2.73. The strong revenue growth was broad-based both on a geographic basis and by product category and represented the sixth consecutive quarter of accelerating growth. Revenues grew in all geographies led by more than 20% growth in both Greater China and Japan. International sales accounted for 65% of the quarter’s revenues. iPhone revenues grew 14% to $38 billion with unit growth up 3% to 52.2 million as the firm’s average selling price (ASP) continued to increase thanks to the iPhone X being the most popular phone purchased throughout the quarter as iPhones continued to gain market share. iPad revenues grew 6% during the quarter to $4.1 billion as unit sales increased 2% to 9.1 million. Mac sales were flat at $5.8 billion with unit sales down 3% to 4.1 million during the quarter. Services sales grew 31% to $9.2 billion with Other Products revenues, including the AirPods, Beats and Apple Watch, increased 38% to $4 billion. Thanks to Apple’s huge installed base of users, paid subscriptions for Apple’s Services increased more than 100 million to over 270 million as of quarter end. Free cash flow increased 9% during the first half of the year to $36.4 billion with the company paying $6.5 billion in dividends and repurchasing $32.9 billion of its shares during the same time period. Apple ended the quarter with $267 billion in cash and $101 billion of long-term debt. Thanks to tax reform, Apple plans to invest $350 billion in the U.S. over the next five years including creating more than 20,000 new jobs at Apple. The company announced a new $100 billion share buyback program and a 16% increase in the dividend. With dividend payments approaching $15 billion, Apple is now one of the biggest dividend payers in the world. Management indicated that more of their capital return program currently is being allocated to share buybacks as management believes the stock is undervalued. From the inception of its capital return program in 2012 through March 2018, Apple has returned $275 billion to shareholders, including $200 billion in share repurchases. Management’s outlook for the third quarter is for revenue between $51.5 billion and $53.5 billion with gross margin between 38%-38.5%, operating expenses between $7.7 billion and $7.8 billion, other income of $400 million and a tax rate of approximately 14.5%. Tim Cook, Apple’s CEO, is “very bullish on Apple’s future” thanks to a huge installed base of more than 1.3 billion products growing at a double-digit pace, a new pipeline of innovative new products, including augmented reality products, high customer loyalty, services growing dramatically, a strong balance sheet and a generous capital return program. In terms of potential trade wars with China, Tim Cook said he was optimistic that they could be avoided. He said China and U.S. have unavoidable mutuality. China only wins if the U.S. wins and the U.S. wins only if China wins, and the world only wins if both China and the U.S. win.
Cisco-CSCO announced its intent to acquire Accompany, a privately held company based in Los Altos, Calif. The company provides an AI-driven relationship intelligence platform for finding new prospects, navigating the selling process, and strengthening relationships. Accompany Founder and CEO Amy Chang will join Cisco as senior vice president in charge of the Collaboration Technology Group. Cisco will acquire Accompany for $270 million in cash and assumed equity awards. The acquisition is expected to close in Cisco’s fourth quarter of fiscal year 2018.
AbbVie-ABBV announced that it has commenced a modified "Dutch auction" tender offer to purchase for cash up to $7.5 billion of its common stock at a price not less than $99.00 per share and not more than $114.00 per share.
MSC Industrial-MSM has acquired All Integrated Solutions (AIS) from New York-based private equity firm High Road Capital Partners. AIS is a leading value-added distributor of industrial fasteners and components, MRO supplies and assembly tools based in Franksville, Wisconsin. The stock purchase transaction closed on April 30, 2018. AIS's revenue in calendar 2017 was approximately $66 million. Rustom Jilla, MSC's executive vice president and chief financial officer, said, "This acquisition of AIS aligns very well with our strategy and our capital allocation philosophy, representing an exciting opportunity for MSC. The purchase price was roughly $86 million, subject to working capital adjustments. Inclusive of transaction and post-closing costs, we expect approximately 5 cents of EPS dilution in fiscal 2018, a roughly neutral impact on EPS in fiscal 2019 and steadily increasing accretion going forward."
Biogen-BIIB and Neurimmune announced that Biogen has exercised its option to further reduce the previously negotiated royalty rates payable on potential future sales of aducanumab, Biogen’s Phase 3 investigational treatment for early Alzheimer’s disease. Biogen will make a one-time $50 million payment to Neurimmune in exchange for a 5% reduction in the original royalty rates on potential commercial sales of aducanumab, which follows the 15% reduction in royalty rates announced in October 2017. The reduced royalty rates on potential commercial sales of aducanumab will be in the high single digits to low-teens. Biogen licensed the worldwide rights to aducanumab from Neurimmune in 2007.
Friday, April 27, 2018
Paychex-PAYX announced that its board of directors approved a $0.06 increase in the company’s regular quarterly dividend, an increase of 12 percent. The dividend will go from $.50 per share to $0.56 per share and is payable on May 24, 2018 to shareholders of record on May 9, 2018. “This dividend increase demonstrates our commitment to providing a benefit to our shareholders as a result of the Tax Cuts and Jobs Act (TCJA) and continues the company’s history of providing outstanding shareholder value and a leading dividend yield,” said Martin Mucci, Paychex president and CEO. “Paychex is uniquely positioned in our industry to benefit from the TCJA due to our strong margins. As we realize these tax benefits, we continue to invest in strategic growth opportunities. These investments, combined with our financial strength, enable us to expand the returns we deliver to our shareholders.”
Thursday, April 26, 2018
Microsoft-MSFT reported fiscal third quarter revenues rose 15.5% to $26.8 billion with net income and EPS up more than 35% to $7.4 billion and $.95, respectively. Revenue in Productivity and Business Processes was $9 billion and increased 17% during the quarter driven by Office 365 commercial revenue growth of 42%. LinkedIn contributed revenue of $1.3 billion during the quarter with growth of over 20% for the sixth consecutive quarter. Revenue in Intelligent Cloud was $7.9 billion and increased 17% driven by Azure revenue growth of 93%. Revenues in More Personal Computing was $9.9 billion and increased 13% during the quarter with Xbox software and service revenue up 24% and Surface revenue up 32%. Management anticipates growth to continue to accelerate in the fourth quarter and into fiscal 2019. Free cash flow in the first nine months of the year increased 9.5% to $24.8 billion which was somewhat moderated by increased capital spending in the quarter. During the same period, Microsoft paid $9.5 billion in dividends and repurchased $8.4 billion of its shares with $30 billion remaining in the current authorized buyback program. Microsoft ended the quarter with $132.3 billion in cash and $73.5 billion in long-term debt.
Starbucks-SBUX reported second quarter revenues rose 14% to $6 billion with net earnings up 1% to $660 million and EPS up 4% to $.47 primarily due to tax benefits from tax reform and share repurchases. Comparable store sales were up 2% globally, driven by a 3% increase in average ticket. Comparable store sales were up 2% in the U.S. and up 4% in China. Comparable store sales improved throughout the quarter growing from 1% in January to 3% in March. The company’s operating margin declined to 12.8% down 490 basis points during the quarter due to higher wages, food mix shifts and to planned restructuring and impairment charges. The Starbucks Rewards loyalty program added 1.6 million active members in the U.S., up 12% over the prior year. The company opened 468 net new Starbucks stores in the second quarter and now operates more than 28,000 stores across 76 markets. The company has 3,200 stores in 141cities in China with significant opportunity for future growth in China with the Chinese population expected to reach 600 million by 2021, double the U.S. population. Currently, the Chinese drink ½ cup of coffee per capita per year compared to 300 cups of coffee per person per year in the U.S. During the quarter, the company closed 298 Teavana stores. During the quarter, the company returned $2 billion to shareholders in the form of dividends and share repurchases as part of its three year plan to return $15 billion to investors. To help finance the share buyback, the company issued $1.6 billion in bonds. Starbucks announced a new 100 million share repurchase authorization, bringing the total authorization up to 124 million shares. Starbucks plans to open 2,300 net new Starbucks store in fiscal 2018. Comparable store sales growth in fiscal 2018 is expected to be at the low end of the company 3%-5% growth outlook. Management continues to expect revenue growth in the high single-digit range with GAAP EPS in the range of $3.32-$3.36 and non-GAAP EPS in the range of $2.48-$2.53.
Stryker-SYK reported strong first quarter sales growth of 10% to $3.2 billion with net income dipping slightly to $443 million and EPS declining 1% to $1.16. Excluding charges related to amortization, acquisitions, recalls, legal, tax and other one-off items, adjusted EPS of $1.68 increased 13.5% from last year’s first quarter, exceeding expectations. Organic net sales increased 7% in the quarter including 8.6% from increased unit volume partially offset by 1.6% from lower prices. Sales growth was broad-based across all segments and geographies. Orthopaedics net sales of $1.2 billion increased 7.7% and 4.7% organically, including 6.9% from increased unit volume partially offset by 2.2% from lower prices. MedSurg net sales of $1.4 billion increased 11.1% and 7.8% organically, including 8.3% from increased unit volume partially offset by 0.5% from lower prices. Neurotechnology and Spine net sales of $600 million increased 16.7% in the quarter and 10.1% organically, including 13.1% from increased unit volume partially offset by 3% from lower prices. Stryker installed 28 MAKO robots during the quarter including 24 in the U.S. compared with 18 installed during the same period last year including 11 installed in the U.S. MAKO robots are currently installed in 400 U.S. hospitals. About half of the 4,000 domestic hospitals are suitable for MAKO installations which provides a long runway for MAKO sales. During the quarter, 160 surgeons were trained to operate on the MAKO robot, bringing the total to 1,100. About 8,200 MAKO procedures were performed during the first quarter compared to 1,100 last year, and up from 7,150 in the prior quarter. During the quarter, Stryker generated $176 million in free cash flow, paid $176 million in dividends and repurchased $300 million shares to offset dilution from stock compensation. Given the robust year-to-date results, Stryker updated its full year guidance with 2018 organic sales growth expected in the range of 6.5% to 7% and adjusted EPS expected in the range of $7.18 to $7.25.
T. Rowe Price-TROW announced the Board approved a new 10 million share increase in the company's authorization to repurchase its common stock. This brings the total repurchase authorization to 21.0 million shares.
AbbVie-ABBV reported first quarter revenues increased a healthy 21% to $7.9 billion with net income and EPS up more than 60% to $2.8 billion and $1.74, respectively. Adjusted EPS, which excludes specific items including the impact of tax reform, increased 46%, well above expectations. Worldwide Humira sales increased 14% to $4.7 billion, including U.S. sales of $3 billion, up 11%, and International sales of $1.7 billion, up 9% excluding the 11% positive impact from foreign currency exchange. Sales of Imbruvica, AbbVie’s immunotherapy to treat various forms of blood cancer, increased nearly 40% to $762 million while sales of AbbVie’s hepatitis C treatments were $919 million, including $850 million from sales of Mavyret which was approved and launched late last year. While still in early launch stages, management is exceedingly pleased with Mavyret’s strong uptake in both the U.S. and international markets. Given the company’s strong year-to-date performance, robust cash flow and its undervalued stock price due to the market’s overreaction to AbbVie’s decision not to seek accelerated approval for Rova-T to treat small cell lung cancer, management announced a $7.5 billion Dutch auction tender offer expected to roll out as early as May 1, 2018. The tender offer is part of AbbVie’s previously announced $10 billion repurchased program, and is part of the company’s response to U.S. tax reform that has incentivized it to boost cash returned to shareholders, invest in domestic research & development and increase wages. AbbVie anticipates a 13% tax rate over the next five years as a result of increased domestic income and investment. Given AbbVie’s robust drug pipeline and strong start to 2018, it updated full year guidance with sales of $32.6 billion now expected and adjusted EPS in the range of $7.66 to $7.76, up 38% at the midpoint. This guidance is up from prior guidance range of $7.33 to $7.43 and includes the expected impact of the European launch of Humira biosimilars during the fourth quarter.
Tractor Supply-TSCO reported first quarter revenues rose 8% to $1.7 billion with net income roaring 18% higher to $71.4 million and EPS plowing up a 24% gain to $.57. Comparable store sales grew 3.7% during the quarter despite an unseasonably cool spring thanks to a 3.2% increase in transaction count and a .5% increase in the average ticket. The comparable sales growth was broad based across all geographic regions. The increase in comparable store sales was primarily driven by strength in everyday merchandise, such as pet food, livestock feed and bird feed, along with strong demand for winter seasonal categories, such as portable heating and snow removal items. Gross margin increased 8.8% to $563.5 million as gross margin expanded 36 basis points to 33.5% due to strong sell-through of winter seasonal categories. Selling, general and administrative expenses increased 11.2% during the quarter to $468.9 million due to higher wages and increased utility and maintenance expenses. The tax rate dropped from 35.6% to 20.9% in the first quarter thanks to tax reform which greatly boosted the bottom line. During the quarter, the company opened 15 new Tractor Supply stores, including its 1700th location, and four Petsense stores. For the full year, the company plans to open 80 new Tractor Supply stores and 20 Petsense stores. E-commerce sales continue to grow at double-digit rates with customers ordering products online and picking up the merchandise at the company’s stores. Working capital improved during the quarter as inventories were up 1% on a per store basis and accounts payable management improved significantly. During the quarter, the company paid $33.6 million in dividends and repurchased 2.4 million of its shares for $157.5 million at an average price of $65.63 per share. Since inception of the share repurchase program in 2007, the company has repurchased $2.3 billion of its shares with $712 million remaining authorized for future share repurchases. Management reaffirmed its guidance for 2018 with sales expected to increase 6%-7% for the full year to a range of $7.69 billion to $7.77 billion with EPS expected in the range of $3.95-$4.14, representing growth of 20%-26%.
UPS-UPS delivered double-digit growth in revenues and earnings in the first quarter with revenues up 10% to $17.1 billion, net income up 15% to $1.3 billion and EPS up 17% to $1.55. U.S. Domestic revenues increased 7.2% to $10.2 billion thanks to strong market demand across all products with operating profit down 20% to $756 million due to headwinds from severe winter weather in the quarter that resulted in extra costs of $85 million along with costs related to Saturday delivery, network projects and higher pension expenses. Revenues and operating profit in the International segment both rose 15% to $3.5 billion and $594 million, respectively, as average daily exports grew 12% led by Europe and U.S. trade lanes. Revenue in the Supply Chain and Freight segment increased 16% to $3.4 billion, driven by 27% sales growth in the Forwarding business, with operating profit up 14% to $170 million. UPS generated $2.6 billion of free cash flow during the quarter and paid $840 million in dividends (a 10% increase over the prior year) and repurchased 2.2 million of its shares for $250 million at an average price of $113.64 per share. For the full year, UPS expects to generate $4.5 billion -$5 billion of free cash flow. Capital expenditures in 2018 are planned in the range of $6.5 billion to $7.0 billion as the company continues its transformation process to make the business more efficient and add capacity to meet growing demand with a long-term target of return on invested capital in the 23%-28% range. Management reaffirmed its full year 2018 outlook for adjusted EPS of $7.03- $7.37 per share, representing 17%-23% growth over last year’s adjusted earnings as the overall economy remains strong. Global GDP is expected to be 3.5% in 2018, the fastest expansion seen since 2010.
PepsiCo-PEP reported first quarter sales increased 4.3% to $12.6 billion with net income increasing 1.9% to $1.3 billion and EPS rising 3.3% to $.94. On an organic basis, first quarter revenues rose 2.3% with core constant currency operating profit down 5%. North America food and snack sales increased 3% to $4.2 billion with operating profit declining .7% to $1.2 billion. North America beverage sales decreased 1% to $4.4 billion with operating profit fizzling 23% to $388 million. International sales increased 12.5% to $3.9 billion led by a 15% increase in Europe, Sub-Saharan Africa. Free cash flow declined sharply to a negative $1.7 billion during the quarter with the company paying $1.2 billion in dividends and repurchasing $493 million of its shares. Management reaffirmed previous 2018 guidance with organic revenue growth expected to be at least 2.3% with core EPS up 9% to $5.70. Operating cash flow is expected to be $9 billion with free cash flow of $6 billion, reflecting capital spending of $3.6 billion and a discretionary pension expense of $1.4 billion. During 2018, management plans to pay $5 billion in dividends and repurchase approximately $2 billion of its shares.
Johnson & Johnson-JNJ announced that its Board of Directors has declared a 7.1% increase in the quarterly dividend rate, from $0.84 per share to $0.90 per share. "In recognition of our 2017 results, strong financial position and confidence in the future of Johnson & Johnson, the Board has voted to increase the quarterly dividend for the 56th consecutive year," said Alex Gorsky, Chairman and Chief Executive Officer of the company.
Wednesday, April 25, 2018
F5 Networks-FFIV reported second fiscal quarter sales increased 3% to $533 million with net income up 18% to $110 million and EPS up 24% to $1.77 on fewer shares outstanding. Revenue from Products, which accounted for 45% of total revenues, dipped 1% to $237.6 million. Software sales, representing 15% of Product sales, grew at a 28% clip, driven by demand for F5 Networks’ security solutions for public cloud deployments. Services, which account for 55% of total revenues, increased 7% to $295.7 million, driven by the company’s expertise in helping customers navigate through the complexities of multi-cloud environments. Deferred revenues, primarily maintenance agreements, grew 8.7% to $1 billion. Enterprise customers accounted for 66% of second quarter sales, Service Providers accounted for 21% and Government accounted for 13%, including 5% from the U.S. Federal Government. By geography, Americas sales, 55% of the total, increased 1%, AEMA sales, 26% of the total, increased 8%, APAC sales, 14% of the total, increased 2% while Japan, 4% of the total, declined 6%. Operating margins increased 20 basis points from last year to 27%. The company’s income tax rate declined to 25%, down from 33% last year. During the quarter, F5 Networks generated $175 million in free cash flow, up 6% year-over-year, adding to the company’s cash stash which totaled $1.4 billion as of 3/31/2018 on its debt-free balance sheet. During the quarter, F5 Networks repurchased 1.4 million shares for $150 million, or $140.82 per average share. For the third fiscal quarter, the company targets sales of $535 million to $545 million, up 4% at the midpoint, with earnings of $110.2 million to $112 million, up 14% at the midpoint, and EPS of $1.79 to $1.82, up 19% at the midpoint. Given its new product offerings, management expects Product sales to return to year-over-year growth in the back half of the fiscal year.
The Cheesecake Factory-CAKE reported first quarter revenues rose 4.8% to $590.7 million with net income sliced 25.7% lower to $26 million and EPS down 23% to $.57. The company returned to positive same store sales growth in the quarter with better than expected 2.1% growth which was broad-based across all geographies as The Cheesecake Factory gained market share. The bottom line was negatively impacted by higher labor costs to support the better guest traffic levels. In addition, the company incurred higher than expected insurance costs of $.06 per share from insurance claims and $.05 per share in one-time litigation costs. The Cheesecake Factory was once again named brand of the year in the casual dining category by the Harris Poll. The company continues to expect to open as many as four to six restaurants in fiscal 2018, including one Grand Lux Café, as well as the first location of a fast casual concept the company is developing internally. In addition, the company expects as many as four restaurants to open internationally under licensing agreements in 2018, including the first location in Beijing which opened in January and the second location in Saudi Arabia. The company is planning to spend $80-$90 million in capital expenditures during the year. During the first quarter, the company generated $75 million in cash flow from operations and repurchased 700,000 of its shares for $34.9 million at an average price of $49.86 per share. Management’s outlook for the full year 2018 is for same store sales growth of 1%-2% in line with its long-term growth goals and EPS in the range of $2.62-$2.74, reflecting staffing inflation of 6% and food inflation of 2.5%.
Westwood Holdings-WHG reported first quarter revenue increased 3% to $33.6 million with net income up 32% to $8 million and EPS up 27% to $.93. The increases in revenues was primarily related to performance-based fees of $1.3 million earned in the quarter. All of the company’s U.S. value and multi-asset strategies outperformed their primary benchmarks during the quarter. Assets under management declined $1.6 billion since year end to $22.6 billion due primarily to net outflows. Net earnings benefited from a $524 million gain on the sale of the Omaha-based Private Wealth operations that closed during the quarter. The company celebrated its 35th year in business with a debt-free balance sheet boasting more than $100 million in cash and investments. The company sports an attractive dividend yield of 4.8% based on the current market capitalization.
T. Rowe Price-TROW reported first quarter revenues rose 17.3% to $1.3 billion with net income up 17.5% to $443.1 million and EPS up 14.9% to $1.77. Despite market headwinds, assets under management increased 2.3% to $23.1 billion in the first quarter to $1.01 trillion. The firm’s net cash inflows were $11.3 billion with net market appreciation and income of $11.8 billion during the quarter. Investors domiciled outside of the U.S. accounted for about 6% of assets under management. T. Rowe Price remains debt-free with ample liquidity including cash and investments of more than $3 billion. During the quarter, the company repurchased 2.9 million of its outstanding shares, or 1.2%, for $313.5 million at an average price of $106.84 per share. The company plans to spend $180 million on capital expenditures during the year to be funded from operating resources. William J. Stromberg, the company's president and chief executive officer, commented: "This was another very good quarter for the firm and our clients. Despite volatile markets that generally edged lower, our assets under management increased 2.3% during the first quarter of 2018. This growth was supported by investment performance that remains strong versus peers and benchmarks, and by near-record quarterly net inflows exceeded only by those in the first quarter of 2012. The diversity of our flows across geographies, client segments, and asset classes, continues to reflect robust investor interest in our approach to active management.”
AbbVie-ABBV announced positive results from the ongoing Phase 2b/3 SELECT-SUNRISE clinical trial, showing that at 12 weeks, all doses of upadacitinib (7.5 mg, 15 mg and 30 mg, once-daily) met the study's primary endpoint of ACR20 versus placebo. Certain key efficacy endpoints were also achieved versus placebo. "We are encouraged by these data, which show that upadacitinib provides improvements in important measures such as achieving ACR response and clinical remission, in people living with rheumatoid arthritis in Japan," said Michael Severino, M.D., executive vice president, research and development and chief scientific officer, AbbVie. "SELECT-SUNRISE reflects our continued commitment to offering innovative solutions with the potential to improve the lives of Japanese patients living with this serious, debilitating condition." Rheumatoid arthritis, which affects an estimated 1 million people in Japan, is a chronic and debilitating disease. Despite increasing availability of a range of treatments in Japan, some patients with rheumatoid arthritis still do not achieve clinical remission or tight control of their disease.
In separate news, AbbVie announced that it has submitted a Biologics License Application to the U.S. Food and Drug Administration for risankizumab, an investigational interleukin-23 (IL-23) inhibitor, being evaluated for treatment of patients with moderate to severe plaque psoriasis.
Tuesday, April 24, 2018
Polaris-PII reported first quarter revenues rose 12.4% to $1.3 billion with net income of $55.7 million and EPS of $.85 compared to losses in the prior year period. On an adjusted basis, EPS was up 41% over last year. These solid financial results exceeded management’s expectations. Off-Road Vehicle (ORV) and Snowmobile segment sales, including parts, garments and accessories (PG&A), increased 15% during the quarter to $724 million driven by growth across all categories with new product demand strong. Average selling price for ORV was up 4%. Motorcycle segment sales, including PG&A, increased 9% to $132 million with Indian motorcycle sales up double-digits as the motorcycles continued to gain market share. The new Indian Jack Daniels Scout Bobber sold out in less than 10 minutes. Global Adjacent Markets segment sales increased 24% to $113 million as performance was strong across the government/defense unit with merger and acquisition opportunities robust. Aftermarket segment sales increased 1% to $220 million with TAP sales down slightly due to soft industry light-duty truck sales. The company’s innovation pipeline is robust with new products being launched across the business segments. International sales were up 27% to $211 million as Polaris maintains the number one market share for ORV outside of North America. Total first quarter 2018 dealer inventory was up 6% over the prior year period with ORV dealer inventory flat. Free cash flow was negative in the first quarter due to higher inventories to support future demand and a significant increase in capital expenditures for distribution and tooling. For the full year, management expects operating cash flow to be down about 10% due to higher working capital needs and the timing of accrual payments. Given the solid first quarter results, the company is raising its full year sales and earnings guidance and now expects sales growth to be in the range of 4%-6% with adjusted net income expected to be in the range of $6.05-$6.20 per share. The revised guidance takes into account additional costs related to commodity price increases, higher freight costs and the estimated impact of additional tariffs totaling approximately $15 million on a pre-tax basis.
Biogen-BIIB reported first quarter revenues rose 11% to $3.1 billion with net income up 57% to $1.2 billion and EPS up 60% to $5.54. Adjusting for charges taken last year, underlying net income and EPS still rose a healthy 14% and 16%, respectively. Core Multiple sclerosis (MS) revenues declined 4% to $2.1 billion during the quarter due to seasonality and inventory drawdowns. Revenue growth during the quarter was driven primarily by SPINRAZA, which contributed $364 million in global revenues, biosimilars, which contributed $128 million and Other Revenues of $164 million. SPINRAZA patients increased 25% since the fourth quarter to 4,100, and management believes there is a significant opportunity for worldwide growth from this product as Biogen positions itself for long-term leadership in spinal muscular atrophy. Biogen continued to expand and advance its pipeline of potential breakthrough treatments for areas of high unmet needs. In April 2018, Biogen and Ionis Pharmaceuticals announced a new 10-year exclusive collaboration agreement to develop a new pipeline of gene-based therapies for neurological diseases. In March 2018, Biogen announced an agreement to acquire from Pfizer BIIB104, a potential treatment for cognitive impairment associated with schizophrenia, representing the company’s first program in neuropsychiatry. Biogen generated strong $1.5 billion in cash flow from operations in the quarter, ending the quarter with $7.2 billion in cash and investments and $5.9 billion in long-term debt. During the quarter, the company repurchased 900,000 of its shares for $250 million at an average cost of $277.78 per share. The company has $2.5 billion remaining authorized for future share repurchases. With the stock currently appearing undervalued to management, they plan to accelerate their share repurchases. Biogen will be celebrating its 40th anniversary next month with the new management team focused on strong execution of its core business while increasing R&D productivity and new business development.
3M-MMM posted an 8% increase in first quarter sales to a record $8.3 billion with net income and EPS declining 55% to $602 million and $0.98, respectively. Excluding the $897 million payment to Minnesota to settle a $5 billion water contamination lawsuit and a $217 million expense related to tax reform, adjusted EPS increased 16%. Sales growth was broad-based across all business groups with Safety and Graphics sales up 15% to $1.8 billion, Industrial and Health Care both up 7% to $3.1 billion and $1.5 billion, respectively, Consumer up 5% to $1.1 billion and Electronic and Energy up 4.6% to $1.3 billion. On a geographic basis, total sales grew 13.7% in EMEA (Europe, Middle East and Africa), 10% in Asia Pacific, 4.3% in Latin America/Canada and 3.5% in the U.S. Adjusted operating margin increased 30 basis points to 23%. 3M’s free cash flow was a negative $161 million, down $862 million from last year, squeezed by the legal settlement. The company returned $1.7 billion to shareholders during the quarter through share buybacks of $937 million and dividends of $810 million, which represents a 16% year-over-year dividend increase. During the quarter, 3M increased its long-term debt by $1.6 billion and spent $304 million on capital investments, up 6% from last year. When asked on the conference call about the impact of potential tariffs on the business, management stated that its strategy of locally-based manufacturing, especially in China, provides a shield of protection from trade wars. Given softness in certain markets, namely the automotive aftermarket, consumer electronics, oral care and drug delivery, 3M lowered its organic local-currency growth to 3% to 4%, down from the previous estimate of 3% to 5%. Adjusted EPS are now expected in the $10.20 to $10.55 range versus prior guidance of $10.20 to $10.70. Free cash flow conversion is expected in the 90% to 100% range. For the full year, 3M expects to invest $1.5 billion to $1.8 billion in capital expenditures and repurchase $3 billion to $5 billion of its shares.
United Technologies-UTX reported first quarter sales increased 10% versus the prior year to $15.2 billion. EPS and net income declined 6% to $1.62 and $1.3 billion, respectively. The prior year included a one-time benefit of $.29 per share, so on an adjusted basis EPS increased 20%. By business segment, Otis sales gained 8% to $3 billion with organic sales up 1% and new equipment orders down 4%. Climate, Controls and Security sales increased 12% to $4.4 billion. Organic equipment orders were up 10% driven by a 37% increase in transport refrigeration. Pratt & Whitney sales rose 15% to $4.3 billion on strength in military engines and commercial aftermarket. Aerospace Systems sales increased 6% to $3.8 billion, boosted by a 16% rise in the commercial aftermarket and a 15% increase in military, partially offset by an 8% decline in commercial OE. UTX’s free cash flow decreased 83% for the first quarter to $116 million with the company paying $535 million in dividends and repurchasing $25 million of its shares. Management increased 2018 adjusted EPS guidance from the range of $6.85 to $7.10 to the range of $6.95 to $7.15. Total 2018 sales are expected in the $63 billion to $64.5 billion range, up $.5 billion on the lower and upper end of previous guidance. UTX reaffirmed 2018 free cash flow expectations of $4.5 billion to $5.0 billion.
Monday, April 23, 2018
Alphabet-GOOGL reported first quarter revenues increased 26% to $31.1 billion with net income up 73% to $9.4 billion and EPS jumping 72% to $13.33. These results include a $3 billion unrealized gain, or $3.40 per share, from Alphabet’s investment in Uber and other companies. A new accounting standard now requires unrealized gains and losses to flow through the income statement. Excluding the gain, underlying earnings and EPS were still strong with net income up 29% and EPS up 28% during the quarter thanks to the benefits of tax reform. Google advertising revenues increased 24% during the quarter to $26.6 billion with strong growth in all geographic regions. Google other revenues increased 36% to $4.4 billion reflecting strong results in cloud, hardware (including Nest products) and Google Play. Other Bets revenues rose 14% to $150 million primarily due to growth in the Fiber and Verily health units. Management is very excited about Waymo, the company’s self-driving car unit, although they are still in the early stages of this Other Bet with 5 million miles having been driven autonomously. Waymo signed a contract with Jaguar to use their technology in their electric cars with production set to begin in 2020. Google’s operating income rose 12% to $8.4 billion as traffic acquisition costs increased 36% due to the increase in mobile search. Traffic acquisition costs are expected to increase at a slower pace over the balance of the year. Other Bets operating loss narrowed to $571 million with Alphabet’s consolidated operating income up 7% during the quarter. Datacenter costs, content acquisition costs for YouTube and investments in R&D pressured operating margins during the quarter. Free cash flow declined 38% during the quarter to $4.3 billion primarily due to the significant increase in purchases of property and equipment to $7.3 billion as Alphabet continues to build out its technology infrastructure on a global basis. During the first quarter, the company repurchased $2.2 billion of its shares and ended the quarter with nearly $103 billion of cash and marketable securities on its fortress balance sheet.
Canadian National Railway-CNI reported revenues of C$3.2 billion, down slightly from last year, with net income declining 16% to C$741 million and EPS falling 14% to C$1.00. The decrease in revenues was mainly due to reduced revenue ton miles (RTMs) resulting from challenging operating conditions, including harsh winter weather and low network resiliency, as well as the negative translation impact of a stronger Canadian dollar. RTMs, measuring the relative weight and distance of rail freight transported by CNI, declined by 4%. Rail freight revenue per RTM increased by 4%, mainly driven by favorable changes in traffic mix, while carloadings for the quarter increased by 3% to 1,408 thousand. Revenues declined 11% for grain and fertilizers, 6% for forest products, 4% for automotive, 3% for petroleum and chemicals while revenues increased 10% for intermodal, 10% for coal and 7% for metals and minerals. Operating expenses for the first quarter increased by 9% to C$2.164 billion, mainly driven by higher costs due to challenging operating conditions, including harsh winter weather and low network resiliency, higher training costs for new employees and higher fuel prices. CNI’s operating ratio, (operating expenses as a percentage of revenues), was 67.8% in the first quarter of 2018, up six percentage points from last year. Free cash flow for the first quarter of 2018 was C$322 million, compared with C$848 million for the year-earlier period, squeezed by the lower net income and working capital demands. During the quarter, CNI realized C$150 million from the sale of East Coast assets, paid dividends of C$336 million and repurchased 6.5 million shares for C$631 million, or $97.48 per average share. Given the need to build capacity, especially in Western Canada, and improve resiliency, CNI increased its capital expenditure program to C$3.4 billion, up $200 billion from prior guidance, with approximately C$400 million being invested in new track infrastructure. Due to weaker than expected RTMs in the first quarter and a longer than anticipated construction period needed for significant infrastructure capacity projects in 2018, CNI revised its 2018 outlook. Full year adjusted EPS is now expected in the range of C$5.10 to C$5.25, down from initial guidance in the range of C$5.25 to C$5.40.
Biogen-BIIB announced new findings detailing the benefits that SPINRAZA® (nusinersen) demonstrates for both infantile- and later-onset spinal muscular atrophy (SMA) populations, including improvement in motor function as well as increased survival for the most severely affected. “These results reinforce SPINRAZA’s unprecedented and compelling efficacy across a broad range of SMA populations, enabling patients to improve mobility and motor function – and, for the most severely affected, increase their chances of survival,” said Alfred Sandrock, M.D., Ph.D., executive vice president and chief medical officer at Biogen. “We look forward to continuing to work with healthcare providers, institutions and SMA communities to provide access to SPINRAZA for those in need, no matter their age, disease severity or duration of the disease.”
Friday, April 20, 2018
Gentex-GNTX reported first quarter revenues rose 3% to $465.4 million with net income driving 14% higher to $111.2 million and EPS jumping 21% to $.40, thanks to the benefits of tax reform and lower shares outstanding. Light vehicle production in the company’s primary regions declined in excess of 3%, which resulted in lower than expected unit shipments during the quarter. Additionally, a supplier production issue for certain electronic components affected the company’s ability to meet demand for Full Display Mirrors, which negatively impacted sales by 2%. Due to the lower than forecasted sales, the company’s gross margin declined from 38.8% in the prior year period to 37.1% as Gentex was unable to leverage fixed overhead costs. Free cash flow increased 16% during the quarter to $121.2 million. During the first quarter, the company repurchased 9.3 million of its shares at an average price of $21.71 per share, including 5.5 million from its former CEO in accordance with his retirement agreement. As of 3-31-18, the company had 26 million shares remaining authorized for future share repurchases with plans to repurchase approximately $325 million of its stock over the balance of the year. Since the end of the quarter, the supplier issue has been resolved. Additionally, light vehicle production is expected to improve over the balance of 2018. As a result, Gentex is maintaining its previously announced annual guidance with revenue growth expected in the range of 5%-10% for the full year with margins expected to improve over the balance of the year.
Biogen-BIIB and Ionis Pharmaceuticals announced they have expanded their strategic collaboration through a new ten-year collaboration agreement to develop novel antisense drug candidates for a broad range of neurological diseases. This collaboration capitalizes on Biogen’s expertise in neuroscience research and drug development and Ionis’ leadership in RNA targeted therapies with the goal of developing a broad pipeline of investigational therapies. It builds upon a productive collaboration that produced SPINRAZA, the first and only approved treatment for patients with spinal muscular atrophy. Under the terms of the collaboration, Biogen will pay Ionis $1 billion in cash, which will include $625 million to purchase 11,501,153 shares of Ionis common stock at a price of $54.34 per share, at an approximately 25% cash premium, and a $375 million upfront payment. Biogen will have the option to license therapies arising out of this collaboration and will be responsible for their development and commercialization. In addition, Biogen may pay milestone payments, license fees and royalties on net sales. The companies plan to advance programs for a broad range of neurological diseases for which few treatment options exist today. Disease areas include dementia, neuromuscular diseases, movement disorders, ophthalmology, diseases of the inner ear, and neuropsychiatry. Biogen will have the first choice of neurology targets on which to exclusively collaborate with Ionis. In this collaboration, Ionis will be responsible for the identification of antisense drug candidates based on selected targets, while Biogen will be responsible for and pay for non-clinical studies, clinical development, manufacturing, and commercialization. Biogen and Ionis expect the deal to close in the second quarter of 2018.
Thursday, April 19, 2018
Genuine Parts-GPC reported first quarter sales rose 17.4% to $4.6 billion with net income up 10% to $176.6 million and EPS up 11.1% to $1.20, impacted by transaction costs related to the company’s acquisition of Alliance Automotive Group (AAG) and spin-off the Company's Business Products Group, S.P. Richards. First quarter sales for the Automotive Group were up 29.6% to $2.6 billion on a 1.5% comparable sales increase and sales contribution from AAG. Sales for the Industrial Group, which includes both Motion Industries and EIS, were up 8.3% to $1.5 billion, powered by a 5% comparable sales increase. Sales for S.P. Richards, the Business Products Group, were down 4.8% for the quarter in both total and comparable sales to $474 million. Genuine Parts expects the S.P. Richards spin-off to be complete by the end of 2018. Free cash flow for the quarter increased 39% to $107 million with management expecting free cash flow of $400 million for the full year. During the quarter, the company paid $99 million in dividends. GPC is maintaining its full year sales and earnings guidance and continues to expect sales to be up 12% to 13% and adjusted diluted earnings per share, which excludes any first quarter and future transaction-related costs, to be $5.60 to $5.75.
Wednesday, April 18, 2018
Canadian National Railway-CNI announced it will acquire 350 premium boxcars to serve growing demand from industrial customers across its North American network. “These additional boxcars, combined with our new locomotives, hundreds of new train crew members, and track expansion investments, will help give us the capacity and network resiliency we need for pulp, paper and metals customers,” said Doug MacDonald, vice president of bulk at CN. As part of CN’s $3.2 billion capital program in 2018, the company is investing in new trade-enabling infrastructure this spring and summer, building new track and yard capacity to handle increased traffic across CN’s West Coast to Chicago corridor more efficiently. After adding approximately 400 conductors to the field so far this year, CN continues to hire with a particular focus on crews in Western Canada.
Tuesday, April 17, 2018
Johnson & Johnson-JNJ reported first quarter revenues rose 12.6% to $20 billion with net income down 1.2% t0 $4.4 billion and EPS dipping .6% to $1.60. Excluding acquisitions and divestitures, operational sales growth was 4.3%. On an adjusted basis, excluding intangible amortization and special items, net earnings increased 11.8% to $5.6 billion with EPS up 12.6% to $2.06. The Pharmaceutical business continued to deliver robust growth with worldwide sales up 19.4% to $9.8 billion driven by strong performance in oncology and international sales. Medical Devices and Consumer sales improved with Medical Devices sales up 7.5% to $6.8 billion due to strong product performance in Vision Care and Interventional Solutions and Consumer sales up 5.3% to $3.4 billion driven by new products and geographic expansion. Thanks to tax reform benefits, JNJ is increasing its investments in R&D and capital expenditures by 15% in the U.S. over the next four years to $30 billion. JNJ ended the quarter with $17 billion of net debt taken on for acquisitions. Following better than expected first quarter results, JNJ increased its sales guidance for the full year to a range of $81 billion to $81.8 billion, reflecting expected operational growth of 4%-5%, with adjusted EPS expected in the range of $8.00-$8.20, reflecting operational growth of 6.8%-9.6%.
Thursday, April 12, 2018
Automatic Data Processing-ADP declared a 69 cents per share quarterly dividend payable July 1, 2018 to shareholders of record on June 8, 2018. This dividend increase of 10% represents a return to shareholders of a portion of the benefits from the Tax Cuts and Jobs Act of December 2017. The Board of Directors anticipates consideration of another dividend increase in November 2018 consistent with ADP’s historical pattern throughout its 43 year track record of annual dividend increases.
Genuine Parts-GPC agreed to combine its S.P. Richards office products business with Essendant. The transaction, which has been unanimously approved by Boards of both companies, is expected to be tax free to shareholders. The transaction combining Essendant and S.P. Richards is structured as a Reverse Morris Trust, in which Genuine Parts will separate S.P. Richards into a standalone company and spin off that standalone company to Genuine Parts shareholders, immediately followed by the merger of Essendant and the spun-off company. The transaction implies a $680 million valuation for S.P. Richards, reflecting the value of the Essendant shares to be issued at closing plus one-time cash payments to Genuine Parts of about $347 million. Upon closing, Genuine Parts shareholders will own about 51% and Essendant shareholders will own approximately 49% of the combined company. In addition to creating a platform with greater scale and the enhanced ability to serve customers, the combination is expected to unlock more than $75 million in annual run-rate cost synergies and more than $100 million in working capital improvements. The cost synergies will primarily be driven by sourcing, supply chain and selling, general and administrative efficiencies. The combined company expects 90% of the cost synergies to be realized within two years post-closing and to incur less than $50 million in one-time cash costs to realize the synergies. Paul Donahue, Genuine Parts Company President and Chief Executive Officer, added, "This transaction is the result of a comprehensive process to maximize the value of S.P. Richards and represents a key step in the execution of Genuine Parts Company's long-term strategy by enabling us to increase our focus on our larger, core global automotive and industrial businesses. In addition, the merger provides substantial upside to Genuine Parts Company shareholders through the significant value proposition of the combined company that will be better equipped to succeed in a dynamic and changing marketplace." The deal is expected to close by the end of 2018.
Walt Disney-DIS must match 21st Century Fox’s 11.7 billion pound bid ($14.6 billion at the time of the December 2016 bid) for the remaining 61% of Sky PLC that it did not already own, according to Britain’s Takeover Panel’s latest ruling. With 23 million customers in seven countries, Sky PLC is Europe’s largest pay-TV provider with a coveted integrated distribution platform that produces its own content. Disney must make a cash offer for Sky PLC shares within 28 days of closing its $52 billion acquisition of the majority of 21st Century Fox’s assets. Disney’s obligation to buy Sky PLC’s shares falls away if a third party buys more than 50% of Sky shares or if Disney’s deal to buy 21st Century Fox is blocked by regulators.
Wednesday, April 11, 2018
Fastenal-FAST reported first quarter revenues rose 13% to $1.2 billion with operating income up 10% to $234.5 million. Benefiting from the positive impact of tax reform, net earnings increased 30% to $174.3 million with EPS up 31% to $.61. The sales growth included 1.3% growth from the Mansco acquisition with the balance driven primarily from higher unit sales due to strength in underlying market demand and contributions from industrial vending and Onsite locations. Installed vending devices increased 14% in the first quarter to 73,561 with sales in vending devices continuing to grow at a strong double-digit pace. Fastenal signed 100 new Onsite location during the quarter, an increase of 56% over the prior year period with 678 active sites as of quarter end. The company signed 36 new national account contracts in the first quarter with national account customers representing 50% of total revenues in the period with sales growth of 17% during the quarter. A price increase to mitigate inflation also contributed to growth. Fastener products represented 35% of sales in the first quarter and grew 11.8% while non-fastener products represented 65% of sales and grew 14.5% on a daily basis. Growth was led by heavy machinery and general industrial manufacturing as well as manufacturing in the transportation and construction sectors. Construction sales growth was 9.6% in the quarter. Gross profit declined 73 basis points to 48.7% in the first quarter impacted by changes in customer and product mix, the inclusion of Mansco which has lower gross margins and higher product and freight expenses. Operating margins declined 50 basis points primarily due to the lower gross margin offset by a 22 basis point improvement in operating and administrative expenses. Free cash flow declined 32% during the quarter to $128.2 million due primarily to higher accounts receivables as customers stretched out payments and higher capital expenditures. The company continues to anticipate capital expenditures for the full year of $149 million related to upgrading and adding capacity to existing hub networks and purchases of property for future expansion. During the quarter, Fastenal paid dividends of $106 million. Return on invested capital expanded to 27.9% during the quarter
T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.01 trillion as of March 31, 2018, an increase of 2% since year end.
Tuesday, April 10, 2018
MSC Industrial-MSM reported fiscal second quarter revenues rose 9.3%, with daily sales also up 9.3%, to $769 million with operating income up 13.2% to $98.1 million and net income and EPS each more than doubling to $117.6 million and $2.06, respectively. Net earnings and EPS were positively impacted by tax reform. Excluding the impact of tax reform, EPS increased 11.8% during the quarter. These solid results were due to a firm manufacturing environment and a positive customer outlook thanks to the tailwind provided by tax reform on future capital spending. The pricing environment also continued to improve with MSC Industrial able to implement a moderate price increase in late January. As a result, gross margins improved to 43.9% in the second quarter. Free cash flow increased 42% during the first half of the fiscal year to $100.9 million with the company paying $59.9 million in dividends and repurchasing $21.7 million of its shares during the same time period. Strengthening market demand and a better pricing environment coupled with a focus on driving productivity bodes well for the future. The company expects average daily sales to increase about 11% in the third quarter (or 7% excluding the acquisition of DECO) with EPS expected in the range of $1.37 to $1.43.
Booking Holdings-BKNG announced it has reached a milestone of five million reported listings in homes, apartments and other unique places to stay. With more than five million reported listings in this category, Booking.com remains the global leader in providing consumers access to more accommodations - from traditional hotels to homes, villas, apartments and ryokans - than any other digital travel platform. In fact, the number of reported listings within this category on Booking.com has grown 27% compared to the previous year, growing faster than traditional options, such as hotels, motels and resorts. According to recent research that Booking.com conducted in 2017 with more than 57,000 travelers across 30 markets, 30% said they want to stay in an apartment, aparthotel or condo in 2018, further evidence that consumer demand for accommodation beyond the hotel remains strong. In fact, in other research conducted by Booking.com in 2017 with 19,000 travelers in 26 countries, one in five (21%) said that they would consider listing their own home on a travel accommodation site over the coming year. All of the more than five million reported listings in homes, apartments and other unique places to stay on Booking.com, whether it's an apartment in Chicago , a B&B in Tuscany or a villa in Bali , are instantly bookable, with no booking fees for customers, ever.
Monday, April 9, 2018
AbbVie-ABBV announced positive top-line results from the Phase 3 SELECT-COMPARE clinical trial showing that after 12 weeks, upadacitinib (15 mg, once-daily) met the primary endpoints of ACR20a and clinical remission versus placebo. Michael Severino, M.D., executive vice president, research and development and chief scientific officer, AbbVie said, "We are excited by these strong results which add to the body of evidence that support the potential of upadacitinib to be an important treatment option for patients with rheumatoid arthritis." Rheumatoid arthritis, which affects an estimated 23.7 million people worldwide, is a chronic and debilitating disease. Despite the range of available treatments, many patients with rheumatoid arthritis still do not achieve clinical remission or low disease activity targets.
Thursday, April 5, 2018
AbbVie-ABBV announced a global resolution of all intellectual property-related litigation with Samsung Bioepis over its proposed biosimilar adalimumab product. Under the terms of the settlement agreements, AbbVie will grant to Samsung Bioepis a non-exclusive license to AbbVie's intellectual property relating to HUMIRA beginning on certain dates in certain countries in which AbbVie has intellectual property: In the U.S., Samsung Bioepis' license period will begin on June 30, 2023. In most countries in the European Union, the license period will begin on October 16, 2018. Under the terms of the agreement, Samsung Bioepis will pay royalties to AbbVie for licensing its HUMIRA patents once its adalimumab biosimilar product is launched. As with the prior Amgen resolution, AbbVie will make no payments to Samsung Bioepis. All litigation pending between the parties, as well as all litigation with Samsung Bioepis' European partner, Biogen, will be dismissed. The precise terms of the agreements are confidential.
Wednesday, April 4, 2018
Microsoft-MSFT announced that they will invest $5 billion in the Internet of Things (IoT) over the next four years. A.T. Kearney predicts IoT will lead to a $1.9 trillion productivity increase and $177 billion in reduced costs by 2020. This effect will be pervasive, from connected homes and cars to manufacturers to smart cities and utilities—and everything in between.
The TJX Companies-TJX announced that its Board of Directors has raised the amount of its quarterly dividend by 25% from the last dividend paid. The Board declared a regular quarterly dividend in the amount of $.39 per share, payable June 7, 2018, to shareholders of record on May 17, 2018. Ernie Herrman, Chief Executive Officer and President of The TJX Companies, Inc., stated, “I am pleased to report that our Board of Directors has approved a 25% increase in our quarterly dividend. This marks our 22nd consecutive year of dividend increases. Over this period, the Company’s dividend has grown at a compound annual rate of 23%. In addition, we plan to increase our share buyback program, with approximately $2.5 to $3.0 billion of repurchases planned for Fiscal 2019. TJX continues to generate tremendous amounts of cash and excellent financial returns. Further, we are expecting a substantial cash benefit as a result of the recent changes in U.S. federal tax law, which is reflected in our plan to significantly increase our dividend and share buyback programs. These actions underscore our confidence in our ability to continue delivering profitable sales and strong cash flow that enables us to simultaneously reinvest in the growth of the business and return value to our shareholders.”
Private sector employment increased by 241,000 jobs from February to March according to the March ADP National Employment Report®. "We saw impressive momentum in the first quarter of 2018 with more jobs added per month on average than in 2017," said Ahu Yildirmaz, vice president and co-head of the ADP-ADP Research Institute. "Midsized businesses added nearly half of all jobs this month, the best growth this segment has seen since the fall of 2014. The manufacturing industry also performed well, with its strongest increase in more than three years." Mark Zandi, chief economist of Moody's Analytics, said, "The job market is rip-roaring. Monthly job growth remains firmly over 200,000, double the pace of labor force growth. The tight labor market continues to tighten."
Wednesday, March 28, 2018
Walgreens Boots Alliance- WBA reported second fiscal quarter sales of $33 billion, up more than 12%, with net earnings of $1.35 billion, up 27%, and EPS of $1.36, up 38.8% on fewer shares outstanding. On an adjusted basis, net income was up 16.6% to $1.7 billion and EPS was up 27.2% to $1.73. By segment, Retail Pharmacy USA reported sales of $24.5 billion, up 12.2%, on a 2.4% same store sales increase. Pharmacy sales increased 18.7% due to higher prescription volume including central specialty and mail following the formation of AllianceRx Walgreens Prime and from the acquired Rite Aid stores. Comparable pharmacy sales increased 5.1% on higher volume and brand inflation, partially offset by reimbursement pressure and the negative impact of generics. The division filled 269.2 million prescriptions (including immunizations) on a 30-day equivalents basis, an increase of 9.1%. Retail sales decreased.7% on a 2.7% decline in comparable retail sales. As of the end of the second quarter the company had acquired 1,542 Rite Aid stores. Since the end of the quarter the WBA completed the acquisition of all 1,932 stores. The transition of three distribution centers and related inventory is expected to begin during fiscal 2019. Retail Pharmacy International reported sales declined 2.6% in constant currency to $3.3 billion and declined 1.7% in constant currency same store sales, reflecting lower Boots UK retail sales. Pharmaceutical Wholesale sales of $5.8 billion increased 14.4%, 3.4% in constant currency, boosted by strong performance in emerging markets and offset by challenging conditions in certain continental European countries. The company generated $2.5 billion in free cash flow during the first half of the fiscal year, down from $2.7 billion last year, paid dividends of $815 million and returned $2.5 billion to shareholders through share buybacks. Management raised EPS guidance for fiscal 2018 from adjusted EPS of $5.45 to $5.70 to adjusted EPS of $5.85 to $6.05. The guidance includes an expected benefit from U.S tax reform with management expecting cash tax benefits in excess of $350 million for fiscal 2018.
Tuesday, March 27, 2018
FastSet Research-FDS reported fiscal second quarter revenues rose 13.9% to $335.2 million with organic revenues up 5.7% to $310.4 million from the prior year period. Net income declined 20.3% to $53.1 million and EPS decreased 20.8% to $1.33. The earnings included $22.9 million, or $0.57 per share, of tax charges primarily related to the one-time deemed repatriation tax on foreign earnings. Operating margin decreased to 28.5% compared with 31.2% in the prior year period. The decrease in operating margin is primarily related to a negative foreign exchange impact and incremental amortization of intangibles. On an adjusted basis, net income and EPS rose more than 17%. Annual Subscription Value (ASV) increased 13.4%, or 5.8% organically, to $1.35 billion as of 2/28/18. ASV at any given time represents the forward-looking revenues for the next 12 months from all subscription services currently supplied to clients. Client count as of quarter end was 4,895, a net increase of 86 clients in the quarter. User count increased by 53 to 88,646 in the past three months. Annual client retention was greater than 95% of ASV or 89% when expressed as a percentage of clients. Employee headcount was 9,361 at 2/28/18, up 9% during the past 12 months, and up 4.79% on an organic basis from a year ago. Free cash flow totaled $141.3 million during the first six months, up 28.5% over the prior year. FactSet paid $43.4 million in dividends and repurchased $113.9 million of its shares during the first half of the fiscal year. The Board of Directors approved an increase of $300 million to the existing share repurchase program, bringing the total available for repurchase to $431 million. FDS intends to repurchase its common stock in the range of $325 million to $375 million over the next 12 months. This is an increase of approximately $100 million to the annual spend on share repurchases thanks to the planned repatriation of foreign earnings. For full fiscal 2018, management reaffirmed its revenue guidance range of $1.34 billion to $1.36 billion. FDS lowered EPS guidance from the range of $7.60 to $7.80 to the range of $6.95 to $7.15 which includes the impact of U.S tax reform. On an adjusted basis, 2018 EPS is expected in the range of $8.35 to $8.55, representing 16% growth at the midpoint, up from previous guidance range of $8.25 to $8.45.
Monday, March 26, 2018
Paychex-PAYX reported third fiscal quarter revenues increased 9% to $866.5 million with net income and EPS up 29% to $260.4 million and $0.72, respectively. The earnings include a one-time benefit related to U.S. tax reform of $56.9 million, or $.16 per share. By segment, Total Service Revenue increased 8% to $848.4 million with Payroll Service Revenue increasing 2% to $455 million on growth in revenue per check. Human Resource Services (HRS) revenue increased 17% to $393.4 million boosted by increases in client bases in comprehensive HR outsourcing services, retirement services, time and attendance and insurance services. Interest on funds held for clients increased 37% to $18.1 million, primarily due to higher average interest rates earned. Funds held for clients were up 1% at $4.6 billion primarily due to strong calendar year-end bonus payments and wage inflation, partially offset by client mix. Paychex’s effective tax rate for the third quarter was 11.7%. Paychex’s financial position remained strong with no long-term debt and more than $826 million in cash and corporate investments reported on the company’s rock-solid balance sheet. Cash flows from operations were $988.9 million for the first nine months of the fiscal year, up 29%, driven by higher net income along with the timing of income taxes and PEO payroll accruals. Paychex paid $538.7 million in dividends during the first nine months of the fiscal year and repurchased 1.6 million shares for a total of $94.1 million. At the end of the third quarter, Paychex completed the acquisition of Lessor Group, a market-leading provider of payroll and HCM software solutions headquartered in Denmark and serving clients in Northern Europe. Paychex increased its prior guidance for the full fiscal year with total revenue expected to increase 7% and EPS expected to increase in the 13% to 14% range. The updated guidance includes the Lessor Group acquisition and U.S. tax reform.
In an SEC filing, Berkshire Hathaway-BRKA, disclosed that on March 15th Gebr. Knauf KG―a multinational, family-owned company based in Iphofen, Germany, well known for drywall gypsum boards―had offered to buy USG for $42 a share, representing a 22% premium over the March 14 closing price. Berkshire Hathaway is USG’s largest shareholder beneficially owning 14,757,258 shares of USG common stock, representing 10.46% of USG’s outstanding shares. On March 23, 2018, senior representatives of Gebr. Knauf and its financial advisors held a telephonic discussion with Warren Buffett and another senior executive of Berkshire. During the call, Berkshire proposed to grant Gebr. Knauf an option to purchase all of the USG shares held by Berkshire and its affiliates. The option would be exercisable only in connection with the consummation of the purchase by Knauf of all of the outstanding shares of USG at a price of not less than $42 per share. The option exercise price payable to Berkshire would be the same price paid to the other USG stockholders by Gebr. Knauf, less an option purchase price of $2 per share to be paid by Gebr. Knauf to Berkshire upon the grant of the option. Berkshire stated that its proposal was subject to legal review. Gebr. Knauf is currently evaluating Berkshire’s option proposal.
Friday, March 23, 2018
Nike-NKE reported fiscal third quarter revenues were up 7% to $9 billion with a net loss of $921 million or $.57 per share. The earnings included $2 billion, or $1.25 per share, of additional income tax expense related to U.S. tax reform. Return on invested capital excluding the one-time tax charge was a strong 32%. Revenues for the NIKE Brand were $8.5 billion, up 4% on a currency-neutral basis, driven by Greater China, EMEA and APLA, including double-digit growth in NIKE Direct and growth in Sportswear and NIKE Basketball. Revenues for Converse were $483 million, down 8% on a currency-neutral basis, as international and digital growth were more than offset by declines in North America. Inventories increased 9% to $5.4 billion driven primarily by strengthening demand globally. Income before income taxes decreased 12% to $1.2 billion as solid revenue growth was more than offset by lower gross margin, higher selling and administrative expense and lower other income. Cash decreased 9% to $3.7 billion as of quarter end. During the first nine months of the year, Nike repurchased 46.6 million shares for approximately $2.7 billion as part of the four-year $12 billion buyback program approved by the Board in 2015 with $4.8 billion still available for future repurchases. With the favorable impact of U.S tax reform, Nike expects to complete the buyback program in fiscal 2019. For the fourth quarter, Nike expects to report high single digit revenue growth with gross margins remaining flat to up slightly. For fiscal 2019, management expects mid to high single digit revenue growth with gross margin expansion.
Thursday, March 22, 2018
Accenture-ACN reported second quarter revenues increased 15%, or 10% in constant currency, to $9.6 billion with net income and EPS each up 3% to $863.7 million and $1.37, respectively. Excluding a $.21 charge related to tax law changes, EPS would have increased 19% to $1.58. Operating income increased 13% to $1.28 billion with an operating margin of 13.4%. These strong results reflected broad-based, double-digit revenue growth as the company gained significant market share as it has done for the last four years. Communications, Media & Technology delivered the highest operating group growth during the quarter with 15% revenue growth to $1.9 billion. On a geographic basis, Growth Markets generated 15% revenue growth to $1.8 billion. Accenture reported record new booking for the quarter of $10.3 billion with consulting bookings of $5.7 billion and outsourcing bookings of $4.6 billion. Free cash flow during the first half of the year increased 58% to $1.7 billion due to higher earnings and favorable working capital changes. During the first half, the company paid $854 million in dividends and repurchased $1.4 billion of its shares. Accenture updated its business outlook for fiscal 2018 with full year constant currency revenue growth now expected in the 7%-9% range with the adjusted EPS outlook raised to $6.61 to $6.70 and GAAP EPS expected in the range of $6.40 to $6.49, including the $.21 tax charge. The company’s operating margin is now expected to expand in the second half to 14.8% for the full year, consistent with last year. Accenture previously had expected operating margin to expand 10 to 30 basis points for the full year on an adjusted basis. The outlook for free cash flow was raised to $4.6 billion to $4.9 billion compared to the previous outlook of $4.4 billion to $4.7 billion. Management continues to expect to return $4.3 billion to shareholders in fiscal 2018 through dividends and share repurchases as they reduce their shares outstanding by 1% during the year.
AbbVie-ABBV announced that after consulting with the U.S. Food and Drug Administration (FDA), it will not seek accelerated approval for Rova-T in third-line relapsed/refractory (R/R) small cell lung cancer (SCLC) based on magnitude of effect across multiple parameters in this single-arm study. "We continue to believe Rova-T has potential for patients with small cell lung cancer and other DLL3-expressing cancers," said Mike Severino, M.D., executive vice president of research and development and chief scientific officer, AbbVie. "Although the results from the study were not what we hoped for, we look forward to receiving data from the ongoing Phase 3 studies in the first- and second-line settings and remain committed to developing Rova-T for the treatment of patients with small cell lung cancer."
Wednesday, March 21, 2018
Starbucks-SBUX at its 26th Annual Meeting of Shareholders highlighted three unique and core assets of the company: increasing digital engagement, growing relevancy in China and celebrating the Starbucks Reserve brand as the company’s innovation lab for the future. The number of stores in China has grown from 800 to 3,200 in the past five years, with an average of one new store opening every 15 hours. Starbucks remains on track to open more than 5,000 stores in China by 2021.
Tuesday, March 20, 2018
Oracle-ORCL reported third fiscal quarter revenues rose 6% to $9.8 billion with a net loss of $4 billion or $.98 per share. The earnings included a $6.9 billion adjustment related to U.S. tax reform. Revenue growth was driven by total cloud revenues which jumped 32% to $1.6 billion, as the company gained market share. New software licenses were down 2% to $1.4 billion while software license updates and product support rose 6% to $5 billion. Hardware revenue declined 3% to $994 million with services revenues down 2% to $796 million. Short-term deferred revenues were up 8% compared with a year ago to $8 billion. Operating income rose 15% to $3.4 billion with the operating margin at 35%. Free cash flow rose 15% during the first nine months to $9.4 billion with the company ending the quarter with cash of $19.5 billion. During the first nine months of the fiscal year, the company paid $2.4 billion in dividends, a 28% increase over the prior year. In addition, the company repurchased $6.4 billion of its shares during the same period. For the fourth quarter, Oracle expects revenues to increase 1%-3% with adjusted EPS in the range of $.92 to $.95. Oracle’s autonomous database is now fully available in the Oracle Cloud. Using artificial intelligence to eliminate most sources of human error enables Oracle to guarantee 99.995% reliability, which equates to only 30 minutes of downtime in a year, while charging much less than competitors.
Friday, March 16, 2018
Johnson & Johnson-JNJ announced that it has received a binding offer from Platinum Equity, a leading private investment firm, to acquire its LifeScan business for approximately $2.1 billion. LifeScan is a leader in blood glucose monitoring products with 2017 net revenue of approximately $1.5 billion. The deal is expected to close by the end of 2018 and was contemplated in JNJ’s previous sales and earnings guidance.
Wednesday, March 14, 2018
To capitalize on today’s rapidly changing media landscape and more closely align with the company’s priorities for future growth--including creating high-quality content, technological innovation, global expansion and direct-to-consumer distribution--The Walt Disney Company-DIS announced a strategic reorganization of its businesses into four segments: the newly-formed Direct-to-Consumer and International; the combined Parks, Experiences and Consumer Products; Media Networks; and Studio Entertainment. The reorganization is effective immediately.
Cognizant Technology Solutions-CTSH announced that it has entered into an accelerated share repurchase ("ASR") agreement with Societe Generale to repurchase an aggregate of $300 million of Cognizant's Class A common stock. This ASR agreement is a continuation of its previously announced $3.4 billion capital return plan.
Monday, March 12, 2018
Biogen-BIIB announced an agreement to acquire from Pfizer Inc. PF-04958242, a first-in-class, Phase 2b ready AMPA receptor potentiator for cognitive impairment associated with schizophrenia (CIAS). The purchase will include an upfront payment of $75 million with up to $515 million in additional development and commercialization milestone payments, as well as tiered royalties in the low to mid-teen percentages. AMPA receptors mediate fast excitatory synaptic transmission in the central nervous system, a process which can be disrupted in a number of neurological and psychiatric diseases, including schizophrenia. Biogen expects the deal to close in the second quarter of 2018.
T.Rowe Price Group-TROW reorted preliminary month-end assets under management of $1.02 trillionas of February 28, 2018, a 3.2% increase since year end. Client transfers from mutual funds to other portfolios, including trusts and separate accounts, were $4.8 billionfor the month-ended February 28, 2018.
Friday, March 9, 2018
Gentex-GNTX announced that its Board of Directors recently approved and is subsequently announcing changes to the Company’s capital allocation strategy that is designed to increase the return of capital to shareholders, while at the same time continuing to invest in the technology evolution that is driving the growth of the Company. The capital allocation strategy is headlined by the Company’s newly announced targeted total cash position being lowered from $700 million to $525 million. The Company's Board of Directors and management believe that a lower level of total cash, in combination with cash flow from operations, is sufficient to accomplish the goals of the Company and will provide the funding necessary to accomplish strategic initiatives in regard to dividends, capital expenditures, debt repayment and increased levels of share repurchases. Details of the capital allocation strategy are highlighted as follow: Dividend increase of 10% from $.40 per share to $.44 per share annually is now effective and will begin with the next regularly scheduled quarterly dividend payment in April. Capital expenditures for 2018 of $115 - $130 million (as previously announced), with future annual increases of capital expenditures expected to approximate the growth rates of revenue for the Company. Debt repayment of $78 million during the first three quarters of 2018 in preparation of the Company’s current credit facility maturing. Additionally, the Board of Directors has authorized management to secure a line of credit of up to an additional $150 million to help fund any future business needs. Targeted share repurchase authorization of approximately $425 million for calendar year 2018. A new Board of Directors approved share repurchase authorization of 20 million shares is in addition to those shares previously authorized for repurchase.
Thursday, March 8, 2018
Brown-Forman-BFB reported third quarter revenues rose 9% to $1.2 billion with net income up 4% to $190 million and EPS up 4% to $.39. Year-to-date, underlying net sales and operating income grew 7% and 11%, respectively. The results were well-balanced by geography and driven by strong 8% underlying net sales growth of the Jack Daniel’s led American whiskey portfolio. Through 1/31/18, the company delivered a trailing 12 month operating margin of 34.4% and a return on invested capital of 21%. Free cash flow increased 24% year-to-date to $462 million with the company paying $216 million in dividends. Brown-Forman plans to pay a special dividend of $1.00 per share on April 23, 2018. Management reaffirmed their underlying outlook for net sales growth of 6%-7% in fiscal 2018 with operating income growth of 8%-9% and EPS expected in the range of $1.43-$1.48, which reflects the recent 5 for 4 stock split and a $.03 negative impact due to tax reform and a negative $.10 impact from creating a charitable foundation.
Cigna announced that they will acquire Express Scripts-ESRX in a cash and stock transaction valued at approximately $67 billion, including Cigna’s assumption of approximately $15 billion in Express Scripts debt. Express Scripts shareholders will receive $48.75 in cash and .2434 shares of the combined company for each Express Scripts share held. Upon closing of the deal which is anticipated before the end of 2018, Cigna shareholders will own about 64% of the combined company and Express Scripts shareholders will own 36%. The combined company will retain the Cigna name. Upon completion of the transaction, Cigna is expected to have debt of approximately $41.1 billion and a debt to capitalization ratio of about 49% with the aim of achieving a ratio in the 30’s within 18-24 months after the transaction closes. The deal is expected to be accretive to Cigna’s earnings at a double-digit rate in the first full year after the deal closes with $600 million in synergies identified. In the future, Cigna anticipates its revenues to grow at a 6%-8% annual rate with earnings growing at a high single-digit rate with the company’s outlook for EPS in 2021 rising from a projected $18 per share to $20-$21 per share. The combined company is expected to generate substantial free cash flows and a strong return on invested capital.
Tuesday, March 6, 2018
Ross Stores-ROST reported fourth quarter revenues rose 16% to $4.1 billion with net income up a dressy 50% to $450.7 million and EPS up 55% to $1.19. These strong results reflected a $.10 per share benefit from the 53rd week in the fiscal 2017 year and a $.21 per share benefit from tax reform. For the full year, revenues rose 10% to $14.1 billion with net income up 22% to $1.4 billion and EPS up 25% to $3.55. Return on shareholders’ equity was a sparkling 45% during the year. Free cash flow increased 4% during the year to $1.3 billion. After paying $247.5 million in dividends and repurchasing 13.5 million shares for $875 million at an average price of $64.81 per share, the company ended the year with more than $1.3 billion in cash on its strong balance sheet. For fiscal 2018, the Board of Directors approved a 23% increase in the stock repurchase authorization to $1.075 billion and increased the quarterly dividend 41% to $.225 per share, reflecting the strength of the company’s balance sheet and the ongoing ability to generate significant free cash flows. Ross Stores has repurchased stock as planned every year since 1993 and raised their cash dividend annually since the inception of the program in 1994. For the 52-week period ending 2/2/19, the company is forecasting total sales to increase 3%-4% with same store sales expected to increase 1%-2% and EPS expected in the range of $3.86-$4.03. In fiscal 2018, the company plans to open about 100 new stores, including 75 Ross Dress for Less stores and 25 dd’s Discounts locations. From its current 1,600 total store base, management believes they can continue to add about 90-100 new stores a year to reach their targeted store base of 2,500 total stores within the next decade.
Fastenal-FAST reported February sales increased 14.8% to $372.8 million with average daily sales also up 14.8% to $18.6 million. Daily sales growth by end market was 15.9% growth for manufacturing and 10.5% for non-residential construction. Daily sales growth by product line was 13.1% for fasteners and 16.3% for other products. Daily sales growth by customer was 19% for National Accounts and 9% for non-National Accounts with 75% of the Top 100 National accounts growing and 65% of the public branches growing. Fasenal’s total employee headcount increased 6% to 20,982.
Cheesecake Factory-CAKE reaffirmed 2018 profit and same-store sales guidance. Management expects 2018 adjusted earnings per share of $2.64 to $2.80, with 2018 same-store sales expected to be flat to up 1.0%. Looking out five years, the company targets same-store sales growth of about 1% to 2% and revenue growth of 6% to 7%, to achieve revenue of about $3 billion and EPS of $4.50 in 2022.
Monday, March 3, 2018
The Board of Directors of Canadian National-CNI announced that Luc Jobin is leaving CNI effective immediately. The Board has appointed Jean-Jacques Ruest Interim President and Chief Executive Officer until a permanent replacement is in place. Mr. Ruest has been with the company for twenty-two years, the last eight as Executive Vice-President and Chief Marketing Officer. The Board believes that in an increasingly competitive marketplace, CNI must respond with speed and innovation to retain its leadership position. The Board also recognizes the immediate operational and customer service challenges the company has been facing since Fall 2017 - led by high demand and insufficient network resiliency, coupled with severe winter weather conditions. An international search for a new CEO is underway. Despite more difficult winter conditions and a very challenging start to the year, the company remains confident about its future prospects. CNI reiterated its fiscal year 2018 guidance to deliver adjusted diluted earnings per share in the range of C$5.25 to C$5.40 this year and will continue to invest in the safety and efficiency of its network with a record capital program in 2018 of C$3.2 billion.
Friday, March 2, 2018
Biogen-BIIB and AbbVie-ABBV announced the voluntary worldwide withdrawal of ZINBRYTA for relapsing multiple sclerosis. The companies believe that characterizing the complex and evolving benefit/risk profile of ZINBRYTA will not be possible going forward given the limited number of patients being treated.
Wednesday, Feb. 28, 2018
The TJX Companies-TJX rang up fourth quarter sales of $11 billion, up a dressy 16% from last year, with net income of $877 million, up 29%, and EPS of $1.37, up 33%. Adjusted EPS--which excludes a $0.17 benefit from the Tax Cuts and Jobs Act legislation (TCJA), an $0.11 benefit from an extra week in this year’s fourth quarter and a $0.10 goodwill impairment charge related to the Sierra Trading Post acquisition—increased 16% to $1.19. Fourth quarter comparable sales increased a fancy 4% on top of last year’s 3% increase, thanks to increased traffic at each of TJX’s major divisions. During 2018, while many companies in beleaguered retail industry were reducing their bricks and mortar footprint, TJX added 258 stores, ending the year with 4,070 stores. For fiscal 2018, TJX rang up a record $35.9 billion in sales, up 8%, with net earnings of $2.6 billion, up 13%, and EPS of $4.04, up 17%. TJX generated a stunning 50.7% return on shareholders’ equity and $2 billion in free cash flow during fiscal 2018. TJX ended the year with more than $3.2 billion in cash and investments and $2.2 billion in long-term debt on its sturdy balance sheet. During fiscal 2018, TJX returned $2.4 billion to shareholders through share repurchases of $1.6 billion and dividends of $764 million. Looking ahead, TJX expects to continue benefitting from tax reform, primarily due to the lower corporate tax rate. As a result of the savings, TJX plans to provide bonuses for employees, make an incremental pension plan contribution, institute paid parental leave for U.S. associates along with enhanced vacation benefits, increase its charitable giving and significantly increase shareholder distributions. To that end, TJX announced a 25% increase in its dividend, marking the 22nd consecutive year of dividend increases. Over the past 22 years, TJX’s dividend has increased at a 23% average annual rate. TJX also announced its plan to repurchase $2.5 billion to $3 billion of TJX stock during fiscal 2019. With $1 billion remaining under the current authorization, the board added an additional $3 billion share buyback authorization, representing 6% of TJX shares outstanding at current prices. Since 1997, TJX has repurchased $19.6 billion of its shares. Looking ahead to fiscal 2019, TJX expects sales of $37.6 billion to $37.8 billion, up 5% year-over-year, with EPS in the range of $4.73 to $4.83 including a $.73 to $.75 benefit related to the TCJA. Adjusted EPS are expected to increase 6% to 8%.
Express Scripts-ESRX reported that fourth quarter revenues increased 2% to $25.4 billion with net income up 62% to $2.3 billion and EPS up a healthy 75% to $4.10. The earnings include $1.4 billion, $2.43 per share, attributable to US tax reform. Adjusted claims of 355.8 million were flat year over year. The company’s enterprise value initiative is estimated to cost approximately $600 million to $650 million and to deliver cumulative savings of nearly $1.2 billion by 2021, with an annual run rate of between $550 million to $600 million thereafter. This initiative is expected to help the company achieve its targeted compounded annual adjusted EBITDA growth rate for the core business from 2017-2020 of between 2% and 4%, and drive significant value to patients and clients beginning in 2018. For the full year, revenues declined .2% to $100.1 billion with net income up 33% to $4.5 billion and EPS up 44% to $7.74. Return on shareholders’ equity for the year was 25%. ESRX’s free cash flow increased 11% for 2017 to $5.1 billion with the company repurchasing 45.9 million of its shares for $2.9 billion. In December 2017, the Board of Directors of the company approved a 45 million share increase in the authorized number of shares that may be purchased under the share repurchase program. Management’s 2018 guidance is revenue in the range of $99 billion to $102 billion with adjusted EPS in the range of $9.27 to $9.47 representing 32% growth at the midpoint over 2017 adjusted EPS. Management’s guidance includes favorable impact of $1.60 per share from the new tax law. Express Scripts is using $20 million of the tax benefit to fund a bonus pool to reward non-executive employees. Total adjusted claims for 2018 is expected to be relatively flat in the range of 1.3 billion to 1.4 billion. With a significant number of their largest renewals completed, management expects consolidated retention rate for the 2018 selling season to reach 96% to 98%.
Tuesday, Feb. 27, 2018
Berkshire Hathaway-BRKB reported the company’s net worth during 2017 increased by 23% with book value equal to $211,750 per Class A share as of 12/31/17. Over the last 53 years, Berkshire’s book value has grown at a 19.1% compounded annual rate with the market value of Berkshire’s stock compounding at a 20.9% rate, which is truly remarkable compared to the S&P 500 index (with dividends) compounding at a 9.9% annual rate over the same five-decade period.
The whopping $65.3 billion increase in shareholders’ equity in 2017 was due to the company’s $45 billion in net earnings (which included a one-time $29 billion benefit from tax reform due to a reduction in deferred income tax liabilities as a result of the reduction in the U.S. corporate income tax rate from 35% to 21%) and approximately $18.9 billion of gains in other comprehensive income related to changes in unrealized investment appreciation and $2.2 billion of foreign currency translation gains. New accounting rules in 2018 will require Berkshire to book the net changes in unrealized appreciation in net income instead of comprehensive income, which would have resulted in an additional $19 billion gain to the bottom line in 2017 if the accounting rules had already been in place. These accounting changes will distort Berkshire’s earnings significantly in the future due to Berkshire’s ownership of $170 billion in marketable securities.
Berkshire’s five major investment holdings, representing 65% of total equities, contributed to the significant $19 billion change in unrealized appreciation in 2017. Wells Fargo’s stock rose 6% to $29.3 billion amid continued negative headlines on business practices, increased legal costs and the Federal Reserve slapping the bank with handcuffs on growth. Apple became the apple of Buffett’s eye as the position grew to $28.2 billion as of 12-31-17 through appreciation and additional purchases. It was Buffett’s biggest stock purchase throughout 2017. Bank of America was valued at $20.7 billion at 12/31/17, reflecting that Berkshire exercised all of their warrants and acquired 700,000 shares of Bank of America common stock on 8/24/17. During 2017, American Express charged 35% higher to $15.1 billion and Coca-Cola’s stock popped 11% to $18.4 billion. IBM disappeared from the top 5 positions as IBM shares were sold throughout the year.
In 2017, Berkshire’s operating revenues rose 11.5% to $240 billion with all operating business groups contributing to the growth. Net income increased 87% during the year to $44.9 billion, including the $29.1 billion tax reform benefit and $1.4 billion in investment and derivatives gains. Operating earnings (excluding the tax benefit and investment and derivative gains/losses) declined 18% during 2017 to $14.5 billion, due primarily to pre-tax insurance underwriting losses of approximately $3 billion ($1.95 billion after-tax) attributable to three major hurricanes (Harvey, Irma and Maria) and wildfires in California.
Berkshire’s insurance underwriting operations generated a $2.2 billion loss during the year compared to a $1.4 billion profit in the prior year period. This net loss impacted Berkshire’s net worth by less than 1%. Insurance investment income was 8% higher at $3.9 billion during the year, reflecting higher interest rates on short-term investments and increased other investment income. In December 2017, Restaurant Brand International (RBI) redeemed Berkshire’s $3 billion investment in 9% RBI Preferred stock, which will negatively impact investment income in 2018. The float of the insurance operations approximated $114 billion as of 12/31/17, an increase of $23 billion since 12/31/16 related in large part to the huge AIG deal and estimated liabilities related to catastrophe events. Berkshire reinsured up to $20 billion of long-tail losses that AIG had incurred. The premium for the AIG deal was a record $10.2 billion and one that Berkshire will not come close to repeating. Therefore, premium volume is expected to fall somewhat in 2018 with float expected to increase slowly for at least a few years. The average cost of float in 2017 was 3% due to the aggregate pre-tax underwriting losses of $3.2 billion. During the prior 14 years, the cost of float was negative as the insurance business generated pre-tax underwriting gains in each year which totaled $28.3 billion pre-tax.
Burlington Northern Santa Fe’s (BNSF) revenues rose 8% during the year to $21.4 billion with net earnings chugging 11% higher to $4.0 billion. During the year, BNSF generated a 2.4% comparative increase in average revenue per car/unit and a 5.3% increase in volume. Overall, volume growth moderated in the second half of the year. While Berkshire believes the general economy will continue to be strong in 2018, BNSF expects a slower pace of volume growth for the year.
Berkshire Hathaway Energy reported revenues increased 6% to $18.9 billion during 2017 with all groups, except Northern Powergrid, contributing to the growth. Net earnings declined 9% higher during the year to $$2.1 billion due in part to losses from the prepayment of certain long-term debt.
Berkshire’s manufacturing businesses reported a 9% increase in revenue growth in 2017 to $50.4 billion with operating earnings up 11% to $6.9 billion. The results reflected in part the acquisitions of Precision Castparts and Duracell. Revenue growth was led by the Building products unit as revenues increased 11% to $11.9 billion due to bolt-on acquisitions by Shaw and MiTek and sales volume increases by MiTek, Benjamin Moore and Johns Mansville. Consumer products led profit growth with a 35% gain to $1.1 billion in pre-tax earnings due to increased earnings from Duracell and Forest River.
Service and Retailing revenues rose 3% during the year to $76.1 billion with pre-tax earnings up 6% to $2.4 billion. Service revenues rose 8% to $11.2 billion with operating earnings up 12% to $1.3 billion driven by TTI and NetJets. Retailing revenues declined 1% during the year to $15.1 billion with operating earnings up 19% to $785 million, reflecting higher earnings from Berkshire Hathaway Automotive (BHA) as higher earnings from finance and insurance activities offset a 3.7% decline in new and used cars sold by BHA. McLane’s revenues rose 4% during the year to $49.8 billion due to a increase in grocery sales. However, operating earnings declined 31% to $299 million due to significant pricing pressures in an increasingly competitive grocery business environment. The grocery and foodservices business will likely continue to be subject to intense competition in 2018.
Finance and Financial Products revenues rose 9% during the year to $8.4 billion with net income declining 6% to $1.3 billion. The revenue increase was due to a 18% increase in home sales at Clayton Homes, reflecting higher unit sales and higher average prices. The earnings decline reflected weakness in the Transportation equipment leasing business. In response to weakened demand in the railcar and oil and gas industries, Berkshire undertook overhead cost reduction initiatives.
Berkshire’s balance sheet continues to reflect significant liquidity and a strong capital base of $348.3 billion as of 12/31/17. Excluding railroad, energy and finance investments, Berkshire ended the year with $307 billion in investments allocated approximately 53.4% to equities ($164.0 billion), 7.0% to fixed-income investments ($21.4 billion), 5.7% to Kraft Heinz ($17.6 billion, with a fair value of $25.3 billion as of 12-31-17), and 33.9% in cash and equivalents ($104.4 billion).
Berkshire’s financial strength allows Buffett to make significant investments and acquisitions. Buffett lamented the drought of recent acquisitions as prices for large businesses have been far from “sensible,” but he believes Berkshire will still have opportunities to make very large purchases from time to time. Apple was the biggest investment in 2017 now worth about $28 billion as of year end. On Oct. 3, 2017, Berkshire entered into an agreement to acquire a 38.6% interest in Pilot Flying J, one of the largest operators of travel centers in North America with approximately $20 billion in annual revenues with Berkshire becoming a majority owner in 2023 when they plan to acquire an additional 41.4% interest in Pilot Flying J. During 2017, Berkshire’s acquisitions were relatively small at $2.7 billion with many of these being bolt-on acquisitions at Clayton Homes, Shaw Industries, HomeServices and Precision Castparts. Berkshire expects the previously announced $2.5 billion acquisition of Medical Liability Mutual Insurance Company with 9-30-17 assets and policyholders’ surplus of $5.8 billion and $2.3 billion, respectively, to close in the third quarter of 2018.
Free cash flow increased 74% during the year to $34.1 billion, due primarily to higher earnings and the big boost to float from the AIG deal. During the year, capital expenditures declined 10% to approximately $11.7 billion, including $4.6 billion by Berkshire Hathaway Energy and $3.3 billion by BNSF. Berkshire Hathaway forecasts aggregate capital expenditures of about $9.7 billion in 2018 for these two businesses. During 2017, Berkshire purchased a net $22.4 billion in Treasury Bills and fixed-income investments and purchased a net $814 million of equity securities, reflecting in part the purchase of Apple and the sale of IBM shares. There were no share repurchases of Berkshire Hathaway stock.
Berkshire Hathaway’s stock appears fairly valued, currently trading at $314,345 per A share and $210 per B share. Based on current business fundamentals, we expect Berkshire’s A shares to trade between $246,000-$319,000 per share and the B shares to trade between $164-$213 per share. Hold.
Booking Holdings-BKNG (formerly Priceline.com) reported fourth quarter revenues clicked up 19% to $2.8 billion with operating income up 25% to $986 million. Including the $1.3 billion provisional net income tax expense recorded pursuant to the U.S. Tax Cuts and Jobs Act (TCJA), Booking Holdings recorded a $555 million, or $11.41 per share, loss for the quarter. Excluding the TCJA charge, net income increased 18% to $836 million. Fourth quarter gross bookings of all travel services were $18 billion, up 19% year-over-year. Room nights sold increased 17% to 152 million, rental car days increased 5% to 14.7 million and airline tickets sold increased 3% to 1.6 million. For 2017, total revenues traveled ahead 17% to $12.7 billion with net income and EPS increasing 10% to $2.3 billion and $46.86, respectively. During the year, Booking Holdings generated an exquisite 20.8% return on shareholders’ equity and $4.4 billion in free cash flow, up 16% from last year. In 2017, Booking Holdings returned $1.8 billion to shareholders via share buybacks. Booking Holdings ended the year with $8.8 billion in long-term debt and more than $17.8 billion in cash and investments on its well-heeled balance sheet. Given that the company’s overseas cash is now readily accessible thanks to the tax reform legislation, the board added an incremental $8 billion to Booking Holdings’ share repurchase program with $10 billion currently authorized for buybacks that will include programmatic and well as opportunist share repurchases. During the last three years, the company has returned more than $6 billion to shareholders through share repurchases, evidence of Booking Holdings commitment to returning cash to shareholders. For the first quarter, management expects room nights booked to increase between 8% and 12% with total gross bookings increasing 14.5% to 18.5%, or 6% to 10% in constant currency. Revenues are expected to increase 17.5% to 21.5%, or 9% to 13% on a constant currency basis, with EPS in the $9.05 to $9.45 range, up 2% year-over-year from the midpoint. Given Booking Holdings estimated high-single-digit current share of the global travel industry, management is confident of the long runway ahead for future growth.
The Walt Disney Company-DIS announced a 2 billion euro ($2.47 billion) investment to expand its French theme park Disneyland Paris, which it took full control in 2017. The development will include three new areas based on Marvel superheroes such as Spider-Man and the Hulk, Disney’s animated film Frozen and Star Wars, and will be rolled out in phases, starting in 2021. There will also be new attractions and live entertainment experiences.
Thursday, Feb. 22, 2018
Hormel Foods-HRL reported first fiscal sales increased 2% to $2.3 billion with net income up a fat 29% to $303 million and EPS up 27% to $0.56. Volume of 1.2 billion pounds declined 4%, gobbled up by the divestiture of the Farmer John business and the ongoing oversupply of turkeys which continues to challenge Hormel’s Jeannie-O-Turkey segment. Organic sales growth was led by many key brands including retail sales of Hormel® Black Label® bacon, Wholly Guacamole® dips, Muscle Milk® protein beverages and SPAM® products in addition to foodservice sales of Hormel® Bacon 1TM fully cooked bacon and Hormel® Fire BraisedTM meats. Thirty-five of Hormel’s brands hold the #1 or #2 category position. Operating margins declined 240 basis points to 13.2% on higher hog costs, one-time expenses related to the Columbus Craft Meats acquisition and increased freight costs. In the first quarter, Hormel recorded a one-time non-cash tax benefit of $68 million related to revaluing deferred tax liabilities and a $5 million charge related to mandatory repatriation tax, driving Hormel’s effective tax rate to 0.6% from 33.7% last year. With the expected $100 - $140 million cash flow benefit from tax reform in 2018, Hormel plans to invest in growing key domestic brands such as Jennie-O®, Hormel® Pepperoni® , Skippy®, Muscle Milk®, and its new plant-based protein brand Evolve® while investing in its employees through stock option awards to over 20,000 employees and raising the starting wage for all employees to $13 per hour by the end of fiscal 2018 and to $14 per hour by the end of fiscal 2020. During the first quarter, Hormel generated $251 million in free cash flow and returned $115 million to shareholders through share repurchases of $25 million and dividends of $90 million, at the annual rate of $0.75, up 10% from last year, marking the company’s 358th consecutive quarterly dividend payment and the 52nd year of annual dividend increases. Hormel ended the quarter with $386 million in cash and $880 million in debt as a result of the Columbus Craft Meats acquisition, which significantly enhances Hormel’s presence in the fast growing $35 billion Deli segment. Looking ahead to the full year, given continued Jeannie-O Turkey segment challenges, increased expenditures resulting from management’s approach to “invest and grow vs. protect and defend” and the benefit from tax reform, Hormel expects sales in the $9.7 - $10.1 billion range with EPS in the $1.81 - $1.95 range, up from prior guidance of $1.62 - $1.72.
Wednesday, Feb. 21, 2018
The Cheesecake Factory – CAKE reported fourth quarter sales declined 5% to $572 million with net income increasing 78% to $57.7 million and EPS rising 88% to $1.24. The earning include a $38.5 million, $.83 per share, benefit to the income tax provision from a revaluation of deferred tax assets and liabilities related to recently enacted tax reform. Comparable restaurant sales declined .9% year over year. CAKE opened five Cheesecake Factory restaurants and one RockSugar Southeast Asian Kitchen during the quarter. In addition, two Cheesecake Factory restaurants opened under licensing agreements internationally during the fourth quarter. For the full year, revenues declined 1% to $2.3 billion with net income up 13% to $157 million and EPS up 16% to $3.27. Return on shareholders’ equity for the year was 25%. CAKE’s operating cash flow decreased 21% for 2017 to $239 million with the company paying $50 million in dividends and repurchasing $123 million of its shares. Management’s 2018 guidance is EPS in the range of $2.64 to $2.80 representing 5% growth at the midpoint over 2017 adjusted EPS. Comparable restaurant sales are expected to be flat to up 1% for 2018. On the cost side, food inflation of 3% is expected across most categories and wage rate inflation of about 5% is expected in 2018, consistent with the level experienced this year. Wage cost inflation is expected to be partially offset by more market-based pricing in 2018 to help mitigate rising labor costs and favorable impact from tax reform. Cheesecake Factory expects to open four to six company-owned restaurants in 2018, including one Grand Lux Café and four to five restaurants internationally under licensing agreements in 2018, representing total unit growth of 3% to 4%.
In cooperation with Neurocrine Biosciences, Inc., AbbVie-ABBV announced that the Phase 3 ELARIS UF-I study (M12-815) of elagolix met its primary endpoint. Uterine fibroids are the most common type of abnormal growth in a woman's pelvis and can affect up to 80 percent of women by age 50. Fibroids can be asymptomatic, but in approximately 25 percent of women, fibroids can cause symptoms, such as heavy menstrual bleeding, painful periods, vaginal bleeding at times other than menstruation, and anemia. African American women are more likely to experience fibroids and do so at a younger age. "Current non-surgical treatments are limited and women suffering from uterine fibroids need more therapeutic options," said Dawn Carlson, M.D., M.P.H., vice president, general medicine development. "The results from this study represent a significant advancement in the development of elagolix and demonstrate our continued commitment to address serious disease."
The Priceline Group-PCLN announced that it is changing its name to Booking Holdings Inc. Booking Holdings stock will begin trading under the new ticker symbol NASDAQ: BKNG on February 27, 2018. Glenn Fogel, Chief Executive Officer of Booking Holdings, said, "Over the last two decades, our business has expanded from just priceline.com, operating solely in the United States, into six primary brands with headquarters around the globe, operating in more than 220 countries and territories in over 40 languages, fulfilling one unified mission of helping people experience the world. Today, our largest brand is Booking.com, which has more than 1.5 million properties, averages over one million bookings per day and produces a significant majority of Booking Holdings' gross bookings and operating profit. We are at a defining moment in our company's history--making this change to more accurately align our company name with our largest business, connect our collective brands to a name that reflects their shared capability to help customers book amazing experiences, as well as better reflect the truly global operation that we have become today."
3M-MMM and the State of Minnesota reached a resolution of the State’s lawsuit against 3M related to certain PFCs present in the environment. Under the terms of the settlement, 3M and the State will partner to invest in the environment and community. 3M will provide an $850 million grant to the State for a special “3M Grant for Water Quality and Sustainability Fund.” As a result of this settlement, 3M will record a first quarter 2018 charge of approximately $1.10 to $1.15 per share inclusive of related legal fees.
Genuine Parts-GPC reported fourth quarter sales motored ahead 11% to $4.2 billion with net earnings skidding 29% to $108 million and EPS dropping 28% to $0.73. Excluding a $0.35 charge related to the Tax Cuts and Jobs Act (TCJA), transaction-related costs and results from the Alliance Automotive Group (AAG) acquisition which closed in November, adjusted EPS increased 10% to $1.12. Fourth quarter sales for the Automotive Group were up 17% to $2.3 billion on a 1% comparable sales increase and a 4% total sales increase before the 13% sales contribution from AAG. Sales at Motion Industries, the Industrial Group, were up 7.4% to $1.2 billion, powered by a 5% comparable sales increase. Sales at EIS, the Electrical/Electronic Group, grew 8.9% to $193 million, with comparable sales down 2%. Sales for S.P. Richards, the Business Products Group, were down 2.2% to $466 million on a 2% decline in comparable sales. Genuine Parts continues to invest in the rapidly growing Facility and Breakroom Supply business which now accounts for 35% of division sales. For the full year, Genuine Parts rang up record sales of $16.3 billion, up 6.3%, with net income of $617 million, down 10%, and EPS of $4.18, down 9%. Excluding TCJA and transaction-related charges and AAG operations, adjusted EPS plowed ahead 1% to $4.64. Genuine Parts ended the year with $315 million in cash and $2.6 billion in long-term debt including $2 billion issued to finance the AAG acquisition, which expands GPC’s footprint throughout Europe. The average interest rate paid on GPC’s long-term debt is 2.7%. During 2017, Genuine Parts generated a solid 18.1% return on shareholders’ equity and $658 million in free cash flow with the company returning $569 million to shareholders through dividends of $395 million and share repurchases of $174 million. Genuine Parts announced a 7% increase in its annual dividend to $2.88 per share. GPC has paid a cash dividend every year since its founding 90 years ago with 2018 marking the 62nd consecutive year of increased dividends paid to shareholders, Looking ahead to 2018, the company expects sales to zoom ahead 12% to 13% with EPS of $5.60 to $5.75, including the benefit of a full year of AAG and about $80 million to $90 million in lower taxes from TCJA. With the tax savings, Genuine Parts expects to invest an incremental $25 million - $40 million in its IT infrastructure, facilities and programs to benefit GPC employees.
Wabtec-WAB reported fourth quarter revenues rose 42% to $1.1 billion with net income up 32% to $49.9 million and EPS up 21% to $.51. These results reflect expenses of 18 cents per diluted share for contract adjustments, expenses of 13 cents per diluted share for the restructuring and integration actions and expenses of 8 cents per diluted share for the impact of U.S. tax reform. Transit sales increased 70% during the quarter to $712 million due primarily to acquisitions with operating income up 41% to $32.6 million. Freight sales were up 6.5% during the quarter to $364 million driven by sales from acquisitions with operating income up 1% to $68.3 million. Backlog increased 2% compared to the third quarter to a record $4.6 billion which included train control contracts worth about $140 million to provide equipment, project management and aftermarket services for various customers. In the fourth quarter, Wabtec acquired Melett, a manufacturer of turbochargers; AM General, a manufacturer of fire protection and extinguishing systems; and Axiom Rail Components, a supplier of bogies and adaptable suspension systems. For the full year, revenues rose 32% to $3.9 billion with net income down 14% to $262 million and EPS down 19% to $2.72. Return on shareholders’ equity for the year was 9.3% with operating cash flow declining 58% to $189 million. Management’s 2018 guidance is sales of $4.1 billion with adjusted EPS of $3.80 representing an 11% increase over 2017 adjusted EPS. The company’s operating margin target for the full year is 13.5% and its effective tax rate for the full year is expected to be about 23.5%.
Thursday, Feb. 15, 2018
AbbVie–ABBV increased its quarterly cash dividend by 35% from $0.71 per share to $0.96 per share and authorized a new $10 billion stock repurchase program. Since the company's inception in 2013, AbbVie has increased its dividend by 140%. AbbVie is a member of the S&P Dividend Aristocrats Index, which tracks companies that have annually increased their dividend for at least 25 consecutive years.
Wednesday, Feb. 14, 2018
Cisco Systems-CSCO reported second quarter revenues rose 3% to $11.9 billion, with both product and service revenue up 3%, and operating income up 7% to $3.1 billion. The company reported a net loss of $8.8 billion or ($1.78) per share, which included an $11.1 billion charge related to tax reform. Cisco held $73.7 billion of cash and investments as of the end of the second quarter and plans to repatriate $67 billion of the cash that was held outside the U.S. Recurring revenue was 33% of total revenue, up two points year over year, as the company continues to shift the business toward more software and recurring revenue. Revenue by geographic segment was: Americas up 5%, EMEA flat and APJC down 2%. Product revenue performance reflected solid growth in Applications and Security, which each increased 6%. Infrastructure Platforms increased by 2%. Free cash flow increased 13% during the first half of the year to $6.8 billion with the company paying $2.9 billion in dividends and repurchasing $5.5 billion of its stock during the same time period. Cisco announced a 14% increase in its dividend and an additional $25 billion authorization for stock repurchases that should be completed over the next 18-24 months. Management’s outlook for the third fiscal quarter of 2018 is for revenue growth of 3%-5% with GAAP EPS in the range of $.50-$.55.
Bioverativ-BIVV reported fourth quarter revenues increased 28% to $328.7 million with operating income up 39.9% to $117.9 million as operating margins expanded. Net income and EPS each declined 38% to $141.3 million and $1.30, respectively, reflecting incremental tax expense from tax reform. For the full year, revenues rose 31.7% to $1.2 billion with operating income up 52.9% to $447.2 million. Net income and EPS each declined 19% to $355.6 million and $3.28, respectively. Return on shareholders’ equity for the year was a healthy 39.6%. As previously reported, Sanofi will be acquiring Bioverativ for $105 per share in cash. We have tendered our shares, and the transaction should be completed in March 2018.
Phillips 66 announced it has agreed to repurchase 35 million shares of Phillips 66 common stock from a wholly-owned subsidiary of Berkshire Hathaway-BRKB for $93.725 per share. This $3.3 billion repurchase is expected to close on Feb. 14, 2018. "Phillips 66 is a great company with a diversified downstream portfolio and a strong management team," commented Warren E. Buffett, Berkshire Hathaway Chairman and CEO. "This transaction was solely motivated by our desire to eliminate the regulatory requirements that come with ownership levels above 10 percent. We remain one of Phillips 66's largest shareholders and plan to continue to hold the stock for the long term." At closing of this transaction, Phillips 66 will have 466.5 million shares outstanding of which Berkshire will have an equity ownership interest in 45.7 million shares.
Berkshire increased its position in Apple-AAPL by about 23 percent since the end of September to approximately 165.3 million shares worth $28 billion, making Apple its largest equity holding.
Tuesday, Feb. 13, 2018
T. Rowe Price Group-TROW announced that its Board of Directors has declared a quarterly dividend of $0.70 per share payable March 29, 2018 to stockholders of record as of the close of business on March 15, 2018. The quarterly dividend rate represents a 23% increase over the previous quarterly dividend rate of $0.57 per share. This will mark the 32nd consecutive year since the firm's initial public offering that the company will have increased its regular annual dividend.
PepsiCo-PEP reported flat fourth quarter sales of $19.5 billion with a loss of $710 million or ($.50) per share. Snacks/Food volume growth of 2% was offset by a 2% decline in Beverage volume growth. Earnings results included a $2.5 billion or $1.73 per share incremental tax expense related to tax reform. On an organic basis, fourth quarter revenues rose 2% with core constant currency operating profit up 6% and adjusted EPS up 8%. For the full year, revenues rose 1% to $63.5 billion with net income and EPS each declining 23% to $4.9 billion and $3.38, respectively, reflecting the incremental tax expense. A core effective tax rate in the low 20s will reflect the benefits of tax reform going forward. On an organic basis, revenue rose 2% with core constant currency operating profit up 5% and adjusted EPS up 9% for the year. Return on shareholders’ equity was a bubbly 44.4%. Free cash flow declined 12% to $7 billion during the year with the company paying $4.5 billion in dividends and repurchasing $2 billion of its shares. PepsiCo announced a 15% increase in its dividend to $3.71 boosted by the benefits of tax reform and marking the 46th consecutive year of dividend increases. For 2018, management expects revenue growth to be at least 1% with core EPS up 9% to $5.70. Operating cash flow is expected to be $9 billion with free cash flow of $6 billion, reflecting capital spending of $3.6 billion and a discretionary pension expense of $1.4 billion. During 2018, management plans to pay $5 billion in dividends, reflecting the 15% increase, and repurchase approximately $2 billion of its shares. A new three year share repurchase program of $15 billion was authorized. Ove the past five years, Pepsi has compounded organic revenue growth at a 4% annual rate with EPS compounding at a 9% annual rate as operating margins expanded 220 basis points. The dividend was increased 50% over this time period with the company returning $38 billion to shareholders through dividends and share repurchases.
Monday, Feb. 12, 2018
Wabtec-WAB has signed a contract worth about $62 million to design, install, test and commission Positive Train Control (PTC) for the Central Florida Rail Corridor (CFRC), which operates the SunRail commuter rail service. Under the contract, Wabtec will provide its Interoperable Electronic Train Management System (I-ETMS®) equipment for 24 locomotives and cab cars, a back-office server, wayside communications and signals, a dispatch system, training, and system integration. Installation is expected to be completed by the end of 2018.
T. Rowe Price Group-TROW reported preliminary month-end assets under management of $1.05 trillion as of January 31, 2018, representing a 5.7% increase since year end. Client transfers from mutual funds to other portfolios were $3.7 billion for the month-ended January 31, 2018.
Thursday, Feb. 8, 2018
Westwood Holdings-WHG reported fourth quarter revenues rose 9.1% to $33.9 million with operating income down 9% to $9.8 million due to higher employee compensation costs related to performance compensation and headcount increases. Net income declined 62% during the quarter to $2.9 million with EPS down 63% to $.34, reflecting the impact of incremental tax expense on repatriation of earnings from a Canadian subsidiary related to tax reform. For the full year, revenues rose 8.7% to $133.8 million with net income down 11.7% to $20 million and EPS down 14.1% to $2.38, reflecting the higher incremental tax and a $2.5 million litigation charge during the year. Assets under management (AUM) reached a record $24.2 billion as of year end, an increase of 14.2% over the prior year period. The $3 billion increase in AUM reflected $3.4 billion in market appreciation during the year net of $.4 million of outflows primarily related to the sale of its Omaha private wealth operations. Return on shareholders’ equity was 12.8% for the year. Free cash flow increased 3% to $46.8 million with the company paying dividends of $21.9 million during the year. During the past quarter, Westwood increased its dividend 10% to an annualized rate of $2.72, which provides a healthy 4.5% dividend yield based on the current stock price. With a strong debt-free balance sheet at year end boasting more than $105 million in cash, Westwood has the financial flexibility to further enhance shareholder returns.
The UPS-UPS Board of Directors declared an increased regular quarterly dividend of $0.91 per share on all outstanding Class A and Class B shares, an increase of nearly 10% over the prior dividend. The dividend is payable March 7, 2018 to shareowners of record on Feb. 20, 2018. “Dividends remain a high priority at UPS,” said David Abney, UPS chairman and CEO. “Our strong cash flow from operations has enabled us to pay a stable or growing dividend for nearly 50 years.” UPS has a long history of rewarding shareowners with generous cash dividends. The company has paid a cash dividend every year since 1969 and has more than quadrupled its dividend since it went public at the end of 1999.
Maximus-MMS reported first quarter revenues increased 3% to $623 million driven by revenue increases in the Health Services and Human Services Segments. Net income increased 27% to $59.1 million and EPS rose 25% to $.89. Earnings include a benefit of $7.5 million or $.11 per share related to U.S. tax reform. Free cash flow declined 50% during the quarter to $31.4 million with the company paying $2.9 million in dividends and repurchasing $1 million of its shares during the same time period. Year-to-date signed contract awards at 12/31/17 totaled $1.2 billion with contracts pending (awarded but unsigned) totaling $236 million. The sales pipeline at quarter end was $3.2 billion comprised of $1 billion in proposals pending, $200 million in proposals in preparation and $1.9 billion in opportunities tracking. Maximus continues to see long procurement cycles in the federal market. Maximus reiterated their revenue guidance for fiscal 2018 with revenues expected to come in at the low end of the $2.475 billion to $2.550 billion range. The company increased EPS guidance to the range of $3.30 to $3.50 from prior guidance of $2.95 to $3.15, primarily due to the effects of U.S. tax reform.
Sanofi announced that on February 7, 2018 it commenced a tender offer to acquire all of the outstanding shares of common stock of Bioverativ-BIVV for $105 per share in cash as part of the previously announced merger agreement. The Offer is scheduled to expire one minute past 11:59 p.m., New York City time, on Wednesday, March 7, 2018, unless the Offer is extended.
Wednesday, Feb. 7, 2018
Cognizant Technology Solutions-CTSH reported fourth quarter revenues rose 10.6% to $3.8 billion with operating income up 27.3% to $713 million. The company reported an $18 million loss in the fourth quarter, or ($.03) per share. The net loss reflected a one-time income tax expense of $617 million related to tax reform which reduced EPS by $1.04 per share. Management expects their tax rate to be 24% in 2018 and 24%-26% beginning in 2019. For the full year, revenues rose 9.8% to $14.8 billion with operating income up 12.6% to $2.7 billion. Net income declined 3.2% to $1.5 billion with EPS down 1% to $2.53, reflecting the impact of tax reform. Return on shareholders’ equity for the year was 14.1%. Cognizant reported double-digit revenue growth in all business segments for the quarter and the year with the exception of Financial Services, where revenues grew 5% for each period. On a geographic basis, the Rest of Europe (excluding the U.K) reported the strongest growth with 32% growth in the fourth quarter and 29% growth for the full year. Consulting revenue accounted for 57% of total revenues and grew 10% reflecting strong demand for the company’s technology services while outsourcing accounted for 43% of revenues and grew 11%. The company added seven strategic customers during the quarter, which generate revenues between $5 million and $50 million, bringing their total strategic customers to 357. During the quarter, Cognizant had 3900 net new hires with onsite utilization of employees at 92%. Free cash flow during the year increased 58% to $2.1 billion due to working capital changes with the company ending the year with a healthy balance sheet holding $5.1 billion in cash and investments and $698 million of long-term debt. During 2017, Cognizant paid their first dividend of $265 million and repurchased $1.9 billion of their shares. Thanks to confidence in sustainable future growth and the flexibility provided by tax reform to access cash held overseas, Cognizant substantially increased their dividend for 2018 by 33% to a quarterly rate of $.20 per share. In addition, the company expects to repurchase $1.2 billion of their shares by the end of 2018. Cognizant will also be investing $100 million in a new non-profit organization to provide education across the U.S. to train employees for the digital economy. Over the next five years, Cognizant plans to hire 25,000 U.S. workers. For the full year 2018, Cognizant expects revenues to grow 8%-10% to a range of $16.0 billion to $16.3 billion with non-GAAP EPS expected to be at least $4.53.
Tuesday, Feb. 6, 2018
Walt Disney-DIS reported fiscal first quarter revenues rose 4% to $15.4 billion with net income skipping 78% higher to $4.4 billion and EPS jumping 88% to $2.91. Excluding a $1.6 billion one-time net tax benefit and other items, EPS increased a still magical 22% for the quarter. Results were driven by Parks and Resorts with revenues up 13% to $5.2 billion and operating income up 21% to $1.3 billion due to increases at domestic parks and resorts, cruise line and vacation club businesses as well as at Disneyland Paris. Media Networks reported flat revenues at $6.2 billion with operating income declining 12% to $1.2 billion reflecting a loss at BAMTech and a decline at ESPN. Studio Entertainment revenues dipped 1% during the quarter to $2.5 billion with operating earnings down 2% to $829 million due to a decrease in home entertainment reflecting lower performance of Cars 3 in the current quarter compared to Finding Dory in the prior-year quarter. Consumer Products & Interactive Media revenues were down 2% in the quarter to $1.5 billion with operating income down 4% to $617 million due to decreases in merchandise licensing and retail businesses. Free cash flow more than tripled during the quarter to $1.3 billion due in part to lower pension plan contributions. During the quarter, Disney repurchased 12.8 million shares for $1.3 billion at an average cost of approximately $101.56 per share. Year-to-date, the company has repurchased 17.6 million shares for $1.8 billion. Management’s capital allocation strategy is to continue to invest in new content, increase its dividend and repurchase shares. With the Fox acquisition pending following regulatory approval expected in 12-18 months, management’s acquisition appetite will be curtailed for some time as they digest Fox. Management is enthusiastic about the Fox acquisition as it will provide Disney with more content, enhance their direct-to-consumer platform and greatly diversify the business internationally.
Fastenal-FAST reported January sales rose 17% to $394.4 million with average daily sales up 12% to $17.9 million. Manufacturing sales were up 13.3% with non-residential construction sales were up 7.9%. Fasteners daily sales growth was 10.1% with other product sales up 13.7%. Total personnel increased 6% to 20,814.
Friday, Feb. 2, 2018
Oracle’s-ORCL Board of Directors authorized the repurchase of up to an additional $12.0 billion of common stock under an existing share repurchase program.
Polaris Industries-PII announced that its Board of Directors approved a 3 percent increase in the regular quarterly cash dividend, raising the payout to $0.60 per share. This increase represents the 23rd consecutive year of Polaris increasing its dividend effective with the 2018 first quarter dividend. The first quarter dividend will be payable on March 15, 2018 to shareholders of record at the close of business on March 1, 2018. Scott Wine, Polaris’ Chairman and CEO, commented, “We have an unwavering commitment to being a customer-centric, highly efficient growth company. A disciplined approach to capital allocation is fundamental to that goal as we seek to create ongoing long-term value for our shareholders. Polaris’ 23rd consecutive annual dividend increase is a testament to that promise, and reflects our confidence that we will continue to strengthen our market leadership through a focus on superior innovation, productivity, safety, quality, and customer service.”
Wabtec-WAB announced an estimate of the impact of U.S. tax reform and its preliminary 2017 fourth quarter results. The fourth quarter preliminary results include: Revenues of about $1.1 billion, GAAP earnings per diluted share of about 55 cents. GAAP earnings are expected to include the following impact from the U.S. tax reform bill that was enacted in December 2017: expenses of about $55 million, or about 57 cents per diluted share, for the repatriation of earnings; and a benefit of about $52 million, or about 53 cents per diluted share, from a reduction in deferred tax liabilities. Therefore, the net impact of U.S. tax reform in the fourth quarter is expected to be an expense of about $3 million, or about 4 cents per diluted share. GAAP earnings are also expected to include: contract adjustments of about $24 million, or about 18 cents per diluted share, for higher-than-expected costs to complete certain existing contracts; and expenses of about $18 million, or about 13 cents per diluted share, for restructuring and integration actions. Cash from operations for the quarter was about $145 million, and the company had a year-end net debt balance of about $1.6 billion. At year-end, the company had a record, multi-year backlog of about $4.6 billion, 2 percent higher than at the end of the third quarter. Raymond T. Betler, Wabtec’s president and chief executive officer, said: “2017 was a year of transition and positioning the company for the future. We made excellent progress on integrating the Faiveley acquisition, implemented common processes that we believe will improve our project execution and performance, improved our cash flow generation each quarter, and continued to invest in our growth strategies. We are finalizing our financial plan for 2018 and expect to generate growth in revenues, adjusted earnings per diluted share and cash flow from operations.”
Thursday, Feb. 1, 2108
Alphabet-GOOGL reported fourth quarter revenues clicked up 24% to $32.3 billion with operating income up 24%. For the quarter, Alphabet reported a $3 billion, or $4.35 per share, net loss on a $9.9 billion, or $14.05 per share, charge related to the Tax Cuts & Jobs Act legislation. Excluding the charge, Alphabet’s net earnings and EPS increased 28% year-over-year. Google segment revenue increased 24% to $31.9 billion while Other Bets revenue increased 56%, driven by strong NEST holiday sales. Google advertising revenues increased 22% to $27.2 billion with Google properties revenue increasing 24% to $22 billion and Google Network Member’s Property revenues up 13% to $5 billion. Total TAC (traffic acquisition costs) increased 33% to $6.5 billion on a jump in TAC to Google Network Members as Google increasingly relies on partner platforms for mobile search origination. These costs are expected to ease after the first quarter of 2018. Sales and marketing expenses jumped 38% to $4.3 billion, boosted by ad buys to promote holiday hardware sales. Aggregate paid clicks increased 18% while cost-per-click declined 6%, less than the 14% decline in last year’s fourth quarter. For the year, Alphabet reported revenues increased 23% to $110.9 billion with net income and EPS falling 35% to $12.7 billion and $18.00, respectively. Alphabet generated a disappointing 8.3% return on shareholders’ equity for 2017 on the heels of charges related to tax reform. During 2017, Alphabet generated $24 billion in free cash flow ending the year with nearly $110 billion in cash and investments and $4 billion in long-term debt on its strong balance sheet. The company’s board announced a new $8.6 billion share buyback program for its class C shares.
Apple-AAPL reported record fiscal first quarter results as revenues rose 12.7% to $88.3 billion, net income climbed 12.2% to $20.1 billion and EPS jumped 15.8% to $3.89. These strong results occurred in a 13-week quarter compared to 14-weeks in the prior year period. Looking at the average revenue per week, growth was an even more impressive 21%. Growth was broad-based across all product categories with double-digit growth in all geographic segments during the quarter, led by 26% growth in Japan. International sales accounted for 65% of the quarter’s revenues. Apple’s installed base of devices reached 1.3 billion in January, which represents 30% growth in the last two years alone. iPhone X surpassed management’s expectations and has been the top-selling iPhone every week since it shipped in November. iPhone revenues grew 13% during the past quarter to $61.6 billion with unit shipments down 1% to 77,316,000 due to one less week in the quarter and average selling prices increasing 14.5% to $796. iPad revenues rose 6% during the quarter to $5.9 billion with average units increasing 1% to 13,170,000 as the iPad gained market share, boasting 46% of the U.S. tablet market versus 36% in the prior year period. Mac revenues and units declined 5% during the quarter to $7 billion and 5,112,000 units, respectively, with strong 13% growth in emerging markets. Services revenues increased 18% to $8.5 billion with paid subscriptions rising 30 million in the last quarter alone to 240 million subscribers to Apple services such as AppleCare, Apple Pay and the App Store, which had its best holiday season ever. Other Products sales jumped 36% to $5.5 billion with Apple wearables, such as the Apple Watch, Beats and AirPods, increasing revenues 70% during the quarter. Apple welcomed 538 million visitors to its Apple retail stores in 21 countries during the quarter with a new Apple retail store opening in Korea and Austria for the first time. Free cash flow increased 6.6% during the quarter to $25.5 billion. After paying $3.3 billion in dividends and repurchasing $10.1 billion of its shares during the quarter, the company ended the quarter with about $285 billion in cash and investments and $104 billion in long-term debt. Management plans to deploy cash in excess of debt to acquisition opportunities, dividends and share repurchases. Apple has $34 billion remaining authorized for future share repurchases after buying back a cumulative $176 billion of its stock. In the past few years, 100% of free cash flow has been distributed to shareholders via dividends and share repurchases. Management plans to provide an update on its capital allocation strategy after the second quarter as is customary. Apple’s outlook for the second fiscal quarter of 2018 is for revenue between $60 billion and $62 billion, gross margin between 38% and 38.5%, operating expenses between $7.6 billion and $7.7 billion, other income of $300 million and a tax rate of approximately 15%.
Mastercard-MA rang up fourth quarter sales of $3.3 billion, up 20% year-over-year, with net income and EPS dropping 76% to $227 million and $0.21, respectively. Excluding charges related to the Tax Cuts & Jobs Act legislation of $873 million, or $0.82 per share, and charges related to the deconsolidation of Venezuela operations, net income increased 28% to $1.2 billion and EPS increased 33% to $1.14. Worldwide gross dollar volume increased 13% to $1.4 trillion, reflecting 9% growth in the U.S. to $423 billion and 14% growth in the rest of the world on strong growth across all regions, most notably in Europe. Switched transactions—payment authorization, clearing and settlement—increased 17% to 17.7 billion on a 5% increase in Mastercard branded cards to 2.4 billion cards at year end. During the fourth quarter, Mastercard paid dividends of $233 million and repurchased 6.9 million shares for $1 billion, or $144.93 per share. For the year, Mastercard reported net revenue of $12.5 billion, up 16%, net income of $3.9 billion, down 4%, and EPS of $3.65, down 1%. Excluding the impact of the TCJA law and Venezuela, 2017 net earnings and EPS increased 18% and 21%, respectively. During 2017, Mastercard generated a stellar 71.6% return on shareholders’ equity. The company generated $5.3 billion in free cash flow during 2017 and returned $4.7 billion to shareholders through dividends of $942 million and share repurchases of $3.8 billion, or $126.67 per share. Subsequent to year end, Mastercard repurchased an additional 1.8 million shares for $287 million, or $159.44 per share, which leaves $5 billion remaining under the current repurchase program authorization. Looking ahead to 2018, Mastercard updated its revenue guidance from up 12%-13% to up 13%-14% with EPS increasing in the mid-20% range. Spurred by an expected $450 million in annual tax savings from the TCJA, in addition to accelerating investments in strategic investments to fuel growth, Mastercard announced, that it would increase its employer match for employee retirement savings account to 10% and contribute $500 million over the next several years to Mastercard Center for Inclusive Growth, a non-profit devoted to advancing equitable and sustainable economic growth and financial inclusion around the world, which includes job training programs for U.S. workers.
Baxter International – BAX reported a healthy 5% increase in fourth quarter sales to $2.8 billion with a net loss of $71 million and $0.11 per share. The earnings include a net tax charge of $322 million, $.58 per share, related to the impact of U.S. tax reform. Sales within the U.S. were about $1.1 billion, up 1%, while International sales were more than $1.6 billion, up 8%. By business segment, global sales for Hospital Products totaled $1.7 billion, up 5%, boosted by strength in U.S. fluid systems business as well as favorable demand for injectable pharmaceuticals, which includes the contribution of approximately $30 million of sales from the acquisition of Claris. Baxter’s fourth quarter Renal sales increased 5% to $1.1 billion, driven by solid performance globally across both chronic and acute renal therapies. For the full year, revenues rose 4% to $10.6 billion with net income and EPS down 86% to $717 million and $1.30, respectively. The prior year earnings included a $.4 billion gain related to the Baxalta transaction. Baxter’s free cash flow increased 35% for 2017 to $1.2 billion with the company repurchasing $564 million of its shares. Management’s 2018 guidance is EPS in the range of $2.25 to $2.38 representing 78% growth at the midpoint over 2017 depressed EPS with sales expected to increase in the range of 6% to 7%.
UPS-UPS reported fourth quarter revenue rose 11%, at the highest rate in the last decade, to $18.8 billion with the company reporting $1.1 billion in net income and $1.27 in EPS compared to a $239 million loss last year or [$.27] per share. Fourth quarter results included a $.30 per share benefit from tax reform offset by a pension charge of $.70 per share. In the prior year period, the company reported a $1.90 per share pension charge. For the full year, UPS reported revenues rose 8.2% to $65.9 billion with net income up 43% to $4.9 billion and EPS up 45% to $5.61. These strong results reflected exceptionally strong revenue and yield growth coupled with the benefits from investments in the company’s network. International export shipments rose 16% in the fourth quarter and 15% for the full year. The International segment has generated four consecutive quarters of double-digit export growth with international operations poised to exceed domestic operations in the future. Supply Chain and Freight operating profit expanded at a double-digit rate on strong revenue growth of 21%. U.S. Domestic revenue was up 8.4% on higher package demand and yields. During the quarter, the company delivered 1.5 billion packages, up 5.7% over last year. On 90% of the days between Thanksgiving and Christmas, UPS delivered more than 30 million packages each day. UPS had record deliveries for peak season of 762 million, materially above last year and their plan due to strong retail sales. With shipments surging beyond network capacity during Cyber-periods, this did drive additional operating costs of $125 million. During the year, UPS made capital expenditures of $5.2 billion, paid dividends of $2.9 billion, an increase of 6.4% over the prior year, and repurchased 16.1 million shares for approximately $1.8 billion at an average cost of $111.80 per share. UPS expects its tax rate in 2018 to fall to the 23%-24% range. Tax reform benefits will increase cash flow and net income by $.80-$.85 per share in 2018. With growth opportunities accelerating due to improved consumer spending, increased manufacturing and expanding business investments, UPS plans to reinvest part of its tax savings in growing its network through accelerated investments thanks to its high return on invested capital in the range of 23% to 28%. For 2018 and the next few years, UPS plans to annually invest $6.5 billion to $7.0 billion, or approximately 10% of revenues, in capital expenditures dedicated to investments in new technology, aircraft and automated capacity. These investments will be accretive to the business and enable management to take advantage of the new tax laws which enable 100% deductibility of the expenses. At the same time, UPS expects to continue to increase its dividend and plans to repurchase $1 billion of its shares in 2018. Management’s outlook for 2018 is for adjusted EPS in the range of $7.03-$7.37, which represents high double-digit growth.
Wednesday, Jan. 31, 2018
Microsoft-MSFT reported fiscal second quarter revenues rose 12% to $28.9 billion and a net loss of $6.3 billion ($.82 per share) during the quarter. The loss reflected a $13.8 billion net charge related to the Tax Cuts and Jobs Act. Microsoft’s tax rate should approximate 16% in the second half of fiscal 2018 and be less than 21% in fiscal 2019. Excluding the tax charge, net income and EPS each rose a strong 20% during the quarter. Revenue in Productivity and Business Processes was $9 billion and increased 25% during the quarter driven by Office 365 commercial revenue growth of 41%. LinkedIn contributed revenue of $1.3 billion during the quarter with growth of over 20% for the fifth consecutive quarter. Revenue in Intelligent Cloud was $7.8 billion and increased 15% driven by Azure revenue growth of 98%. Revenues in More Personal Computing was $12.2 billion and increased 2% during the quarter with Xbox gaming revenue up 8% and Bing search advertising revenue up 15%. Free cash flow in the first half of the year increased 14% to $15.6 billion. During the first half, Microsoft paid $6.2 billion in dividends and repurchased $4.6 billion of its shares. With tax savings and the repatriation of its significant cash balances held offshore, management plans to continue to invest in its business, make strategic acquisitions like LinkedIn, which is performing better than expected, and return substantial cash to shareholders via dividends and share repurchases. Microsoft will now have the flexibility for all these capital allocation decisions without having to tap the debt markets which makes it easier and quicker to make the decisions. Microsoft ended the quarter with $142.8 billion in cash and $73.3 billion in long-term debt. Management anticipates growth to continue to accelerate as CEO’s demand increases in productivity, security and innovation from a trusted partner like Microsoft.
Tractor Supply-TSCO rang up fourth quarter sales of $1.93 billion, up 2% from last year, with net income of $110 million, down 11%, and EPS of $0.87, down 7% on fewer share outstanding. Excluding the impact of Tractor Supply’s net deferred tax asset revaluation required by the Tax Cuts and Jobs Act (TCJA), adjusted net income and EPS declined 7% and 3%, respectively, compressed by the impact of last year’s 53rd week, increased wages and incentive compensation along with higher infrastructure and technology investments. Comparable store sales grew 4% on a 2.7% increase in the number of transactions and a 1.3% increase in average ticket. The company opened 27 new Tractor Supply stores and closed seven Del’s stores and 6 new Petsense stores during the fourth quarter. During the quarter, Tractor Supply repurchased $42.8 million of its shares at an average cost of $61.63 per share. For 2017, Tractor Supply reported a 7% increase in sales to $7.3 billion with net income dipping 3.3% to $422.6 million and EPS up 1% to $3.30 on fewer shares outstanding. Comp store sales increased 2.7% with the company opening 115 net new stores including 25 Petsense stores. During 2017 Tractor Supply generated an impressive 29.8% return on shareholder equity and $381 million in free cash flow. The company returned $503 million to shareholders through share repurchases of $369 million at an average cost of $62.35 per share and dividends of $143 million. 2017 marked the seventh consecutive year of dividend increases paid by Tractor Supply. Looking ahead to 2018, net sales are expected in the $7.69 billion to $7.77 billion range on a 2% to 3% increase in comp store sales. The TCJA is expected to reduce the company’s effective tax rate to 23% - 23.5% from 36.7% with much of the savings reinvested in employee wages and incremental additions to capital expenditures to support growth initiatives. Net income is expected in the $490 million to $515 million range with EPS in the $3.95 to $4.15 range.
Amazon, Berkshire Hathaway-BRKB and JPMorgan Chase announced that they are partnering on ways to address healthcare for their U.S. employees, with the aim of improving employee satisfaction and reducing costs. The three companies, which bring their scale and complementary expertise to this long-term effort, will pursue this objective through an independent company that is free from profit-making incentives and constraints. The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost. Tackling the enormous challenges of healthcare and harnessing its full benefits are among the greatest issues facing society today. By bringing together three of the world’s leading organizations into this new and innovative construct, the group hopes to draw on its combined capabilities and resources to take a fresh approach to these critical matters. “The ballooning costs of healthcare act as a hungry tapeworm on the American economy. Our group does not come to this problem with answers. But we also do not accept it as inevitable. Rather, we share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes,” said Berkshire Hathaway Chairman and CEO, Warren Buffett. “The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty,” said Jeff Bezos, Amazon founder and CEO. “Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind, and a long-term orientation.” “Our people want transparency, knowledge and control when it comes to managing their healthcare,” said Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co.. “The three of our companies have extraordinary resources, and our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans,” he added.
Automatic Data Processing-ADP reported fiscal second quarter revenues rose 8% to $3.2 billion with net income down 9% to $467.5 million and EPS down 7% to $1.05. Prior year second quarter earnings included a $205 million pre-tax gain on the sale of the CHSA and COBRA businesses. Client retention decreased 20 basis points for the quarter. Worldwide new business bookings increased 6% for the quarter in line with the company’s expectations with management reaffirming its outlook for 5% to 7% growth in new business bookings for the full year. Interest on funds held for clients increased 16% to $107 million in the quarter as average client fund balances increased 7% in the quarter to $22.5 billion. The average interest yield on client funds was 1.9% up 10 basis points compared to the prior year. Subsequent to quarter end, ADP acquired WorkMarket, a leading cloud-based freelance management solution provider for approximately $125 million. Free cash flow in the first half of fiscal 2018 decreased 23% to $557 with the company paying $507 million in dividends and repurchasing $408 million of its shares. Management raised their outlook for full year fiscal 2018 revenue growth to a range of 7%-8% compared to the prior forecast of 6% to 8% due in part to the Global Cash Card acquisition and more favorable foreign exchange. ADP now expects full year EPS to be up 8% to 9% compared to the prior forecast of down 1% to up 1% with adjusted EPS growth now expected in the range of 12% to 13% compared to the prior forecast of 5% to 7% growth. This forecast reflects the estimated benefits from tax reform and ADP now forecasts an adjusted effective tax rate for fiscal 2018 of 26.9% compared to the prior forecast of 31.7%.
In separate news, ADP-ADP reported that private sector employment increased by 234,000 jobs from December to January according to the January ADP National Employment Report®. "We've kicked off the year with another month of unyielding job gains," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "Service providers were firing on all cylinders, posting their strongest gain in more than a year. We also saw robust hiring from midsize and large companies, while job growth in smaller firms slowed slightly." Mark Zandi, chief economist of Moody's Analytics, said, "The job market juggernaut marches on. Given the strong January job gain, 2018 is on track to be the eighth consecutive year in which the economy creates over 2 million jobs. If it falls short, it is likely because businesses can't find workers to fill all the open job positions."
Tuesday, Jan. 30, 2018
Stryker-SYK reported fourth quarter sales increased 10% to $3.5 billion on solid growth in all product and geographic segments. Stryker reported a net $249 million loss, or $.66 per share, for the quarter, hurt by an $833 million, or $2.19 per share, charge related to the Tax Cuts and Jobs Act (TCJA) legislation. Excluding the tax charge, amortization and other one-time items, EPS increased 10% to $1.96 per share. Domestic sales increased 9% to $2.5 billion while international sales increased 7% organically to $958 million. Orthopaedics sales gained 8% to $1.3 billion on the heels of double-digit growth in knees and Trauma & Extremities. Mako, Stryker’s robotic-arm assisted technology, continued to drive knee market-share gains during the quarter with 35 new installations made, including 27 in the U.S. and the first installation in Japan. During 2017, 42,500 surgeries were performed with the aid of Mako, up from 22,000 last year. MedSurg sales increased 11% to $1.58 billion on double-digit growth in instruments and endoscopy. Neurotechnology sales increased 12% to $586 million despite challenges in the spine market. For the year, Stryker reported sales of $12 billion, up 10% from last year, with net earnings and EPS sliding 38% to $1 billion and $4.35, respectively. Excluding the TCJA-related charge, amortization and other special items, net earnings and EPS increased 12% to $2.5 billion and $6.49, respectively. During 2017, Stryker generated a weak 10.2% return on shareholder equity and $961 million in free cash flow. Stryker returned $866 million to shareholders during 2017 through dividends of $636 million and share repurchases of $230 million. Stryker ended the year with $2.8 billion in cash and investments and $6.6 billion of long-term debt. Looking ahead to 2018, management expects organic sales growth in the 6% to 6.5% range with EPS in the $7.07 to $7.17 range. Stryker’s blended effective 2018 tax rate is expected in the 16.5% to 17.5% range.
T. Rowe Price-TROW reported fourth quarter revenues rose 18% to $1.3 billion with net income and EPS falling 9% to $347 million and $1.37, respectively. Excluding the $71 million, or $0.28 per share, charge related to the Tax Cuts and Jobs Act legislation and other one-time items, adjusted net income and EPS increased 26% to $384 million and $1.52, respectively. Assets under management (AUM) increased 22% to $991.1 billion. The firm’s net cash inflows were $3.7 billion during the fourth quarter. Performance of T. Rowe Price’s institutional strategies against their benchmarks remains very competitive, especially over longer time periods, with 88% of the firm's rated U.S. mutual funds ending the quarter with an overall rating of four or five stars from Morningstar. For the year ended 12/31/2017, T. Rowe Price reported revenues of $4.8 billion, up 14% from last year, net earnings of $1.5 billion, up 23%, and EPS of $5.97, up 26%. Excluding the impact of the U.S. tax law and other non-recurring items in both years, net earnings increased 18.5% to $1.4 billion and EPS increased 21% to $5.43. During 2017, T. Rowe Price generated a stellar 25.7% return on shareholders’ equity. The company generated nearly $1.4 billion in free cash flow during 2017 and returned $1.021 billion to shareholders via dividends and share buybacks. During 2017, the company repurchased 6.6 million shares, or 2.7% of its outstanding shares, for $458.1 million at an average cost of $69.41 per share, including $1.4 million to repurchase 15,000 shares at an average cost of $93.33 during the fourth quarter. T. Rowe Price maintains a strong balance sheet which is debt-free and boasts more than $4 billion in cash and investments. Looking ahead to 2018, management expects that the reduction of the corporate tax rate combined with other miscellaneous tax changes impacting deductions will result in a 24% to 27% effective tax rate in 2018. William J. Stromberg, T. Rowe Price’s president and CEO, commented: "Capping a year of strong gains, U.S. stocks again rose in the fourth quarter, pushing most major indexes further into record territory. Led by emerging markets, international stocks continued their strong run, outperforming U.S. shares in 2017. This was a very good quarter and year for T. Rowe Price, our clients, and our stockholders. Strong relative investment performance, robust markets, and healthy client activity boosted our assets under management by 22% in 2017, including 5% in the fourth quarter. Reflecting increased demand for our approach to active management, and our success in broadening our product offerings and distribution capabilities, our net flows and organic growth reached their highest annual levels since 2012."
Polaris-PII reported fourth quarter revenues rose 18% to a record $1.4 billion with net income and EPS declining 50% to $31.5 million and $.49, respectively. Results include a $55.4 million, or $.86 per share, charge related to the new U.S. tax law. Aftermarket segment sales increased substantially due to Transamerican Auto Parts which added $192 million to sales in the fourth quarter. ORV (off-road vehicle) unit retail sales were down low single digits with revenue up 13% to $994 million. Motorcycles segment sales were down 2% to $103 million but up 26% excluding 2016 Victory sales. Indian Motorcycle retail sales increased about 17%, with both heavyweight and mid-sized motorcycles increasing at similar mid-teens percent levels. Slingshot's retail sales were up significantly due to improved product availability compared to the fourth quarter last year. Global Adjacent Market segment sales increased 19% to $117 million. For the full year, revenues rose 20% to $5.4 billion with net income down 19% to $172 million and EPS down 18% to $2.69. Return on shareholders’ equity for the year was 18.5%. PII’s free cash flow increased 9% for 2017 to $396 million with the company paying $145 million in dividends and repurchasing $90 million of its shares. As of 12/31/2017, the company has 6.4 million shares authorized for future share repurchases. Management’s 2018 guidance is adjusted EPS in the range of $6.00 to $6.20 representing 25% growth at the midpoint over 2017 adjusted EPS. Total 2018 adjusted sales are expected to increase in the range of three percent to five percent to $5.6 billion to $5.7 billion. Management’s guidance includes favorable impact of $35 million, or $.55 per share, from the new tax law with their tax rate declining from 30% to 23%.
Friday, Jan. 26, 2018
Gentex Corporation–GNTX reported fourth quarter sales increased 9% to $460 million with net earnings and EPS racing ahead more than 47% to $130.5 million and $0.46, respectively, boosted by a $37.2 million, or $0.13 per share, tax benefit from the Tax Cuts and Jobs Act (TCJA). Excluding the TCJA tax adjustment, EPS gained 6.5% from last year. Auto-dimming mirror shipments increased 13% year-over-year on strong international shipments. Operating expenses increased 12% to $46.3 million and included $4.4 million in costs associated with the retirement of Gentex’s founder and former CEO. During the quarter, Gentex generated $127 million in free cash flow with the company paying off $28 million on its term loan and repurchasing 5.1 million shares at an average price of $19.96 per share. For the full year, net sales increased 7% to $1.8 billion on a 9% year-over-year increase in auto-dimming unit shipments. Net income increased 17% to $406.8 million with EPS up 18% to $1.41. Gentex earned an impressive 19.8% return on shareholder equity in 2017 and ended the year with $780 million in cash and investments on its now long-term debt-free balance sheet. During 2017, Gentex generated $394 million in free cash flow with the company repaying $107.6 million on its term loan and repurchasing 12 million shares at an average price of $20.98 per share. Subsequent to quarter end, Gentex repurchased and retired 5.5 million shares purchased from its former CEO at an average price of $20.98 per share. When asked on the quarterly conference call if the company’s approach to leverage would change after the founder’s retirement, Steve Downing, President and CEO, stated that Gentex’s core DNA is based on Midwestern values which views leverage with skepticism. With its robust cash flows, the company expects to continue buying back its shares. Looking ahead to 2018, despite flat projected vehicle production, Gentex expects sales to increase 5%-10% to $1.89 billion-$1.97 billion. Commenting on the future Steve Downing remarked, "The next two years present many challenges due to a flat-to-down light vehicle production environment, but we are currently forecasting solid revenue growth for both 2018 and 2019. The company recently showcased its expanding efforts to develop, market and sell uniquely designed and engineered future-focused products at CES [Consumer Electronics Show]. We have received very positive feedback from our customers who visited us at CES where we were able to demonstrate Gentex technology in mirrors, digital displays, camera monitoring systems, large area dimmable devices and connected car technologies which we believe will deliver profitable growth and shareholder value for years to come."
AbbVie-ABBV reported fourth quarter revenues rose 14% to $7.7 billion with net income and EPS each down 96% to $52 million and $.03, respectively. These results reflect tax charges of $.77 per share related to recent tax legislation. On an adjusted basis, EPS increased 23% to $1.48. For the full year, revenues rose 10% to $28.2 billion with net income down 11% to $5.3 billion and EPS off 9% to $3.30. On an adjusted basis, EPS for the full year increased 16% to $5.60. Full year global HUMIRA sales increased 15% to $18.4 billion with global IMBRUVICA sales increasing 41% to $2.6 billion. Management’s outlook for 2018 is for revenue growth of 13% to $32 billion with GAAP EPS of $6.45 to $6.55 as operating margins are expected to expand by 150 basis points. Adjusted EPS guidance is in the range of $7.33 to $7.43, representing impressive growth of 32% at the midpoint reflecting both strong operating performance and the positive impact of tax reform. Thanks in part to the additional cash flow provided by tax reform and the repatriation of cash held overseas, AbbVie plans to make investments of approximately $2.5 billion over the next five years in capital projects in the U.S. and is currently evaluating additional expansion of its U.S. facilities. In addition, the company plans a one-time contribution of $350 million to select U.S. charitable organizations in 2018 and enhancements to non-executive employee compensation while accelerating pension funding by $750 million. In February 2018, the Board of Directors will consider enhanced shareholder returns through accelerated dividend growth and additional share repurchases.
Biogen-BIIB reported fourth quarter revenues rose 15% to a record $3.3 billion, or 26% on an adjusted basis for the spin-off of the hemophilia business. Biogen recorded a net loss of $297 million and a loss of $1.40 per share which includes a $1.2 billion, $5.51 per share, charge related to U.S. tax reform. Multiple sclerosis (MS) revenues were $2.3 billion with more than 340,000 patients being treated with Biogen products. Spinraza sales rose 34% quarter over quarter to $363 million with revenue outside the U.S. more than doubling quarter over quarter. Biosimilar sales increased 130% from the same period last year to $122 million. Biogen made important progress advancing their pipeline, including initiating new trials in Alzheimer’s disease, epilepsy, MS and stroke. In January 2018, Biogen acquired the exclusive worldwide rights to develop and commercialize Karyopharm Therapeutics Inc.’s Phase 1 ready investigational oral compound KPT-350 for the treatment of certain neurological and neurodegenerative conditions, primarily amyotrophic lateral sclerosis (ALS). Biogen will pay Karyopharm a one-time upfront payment of $10 million and up to an additional $207 million in milestones, plus tiered royalty payments on potential sales of KPT-350. For the full year, revenues rose 7% (15% adjusted for spin-off of the hemophilia business) to $12.3 billion with net income down 31% to $2.5 billion and EPS down 30% to $11.92. Return on shareholders’ equity for the year was 20% and the company returned $1.4 billion to shareholders through share repurchases. Management’s 2018 guidance is EPS in the range of $22.20 to $23.20 with total sales in the $12.7 billion to $13 billion range. Management’s guidance includes 200 basis points of favorable impact from the new tax law with their estimated effective tax rate expected to be 23.5% to 24.5%.
Thursday, Jan. 25, 2018
Starbucks-SBUX reported first fiscal quarter revenues rose 5.9% to $6.1 billion with operating income declining 1.5% to $1.1 billion and net earnings and EPS tripling to $2.2 billion and $1.57, respectively, reflecting gains from the acquisition of a joint venture and the disposition of certain operations. On a non-GAAP basis, EPS grew 25% to $.65 and included a $.07 per share benefit from the changes in the U.S. tax laws. Operating margins declined due to food-related mix shift in the Americas as well as restructuring costs. Global comparable sales increased 2% during the quarter, driven by a 2% increase in average ticket. Americas and U.S. comp store sales increased 2% due a 2% increase in average ticket. The U.S. business comps came in below expectations due to underperformance in lobby holiday merchandise, changes in transactions in the afternoon and evenings due to the holidays and negative performance of stores in the malls due to less mall traffic. China comp store sales increased a robust 6% due to a 6% increase in transactions with China revenues up 30% in the first quarter thanks to the acquisition of East China positioning the company to accelerate growth in the key China market. Management believes China will have more stores than the U.S. in the future and be a key driver of future growth. The newly-opened Starbucks Reserve Roastery in Shanghai is now the largest Starbucks store in the world and is generating on a daily basis twice the average $32,000 in weekly sales of U.S. stores. Active membership in Starbucks Rewards in the U.S. grew 11% to 14.2 million members with member spending representing 37% of U.S. company-operated sales while Mobile Order and Pay represented 11% of U.S. company-operated transactions. Starbucks Card reached 42% of U.S. and Canada company-operated transactions. The company opened 700 new stores globally bringing total store count to 28,039 across 76 markets. The company returned a record $2 billion to shareholders in the quarter through a combination of dividends and share repurchases with management committed to returning $15 billion to shareholders over the next three years. During the quarter, the company repurchased 28.5 million of its shares outstanding with approximately 52 million shares remaining authorized for future share repurchases. For the full fiscal 2018 year, Starbucks plans to open approximately 2,300 net new stores globally and continues to expect 3% to 5% comparable store sales growth globally, although they now expect to be at the low end of that range given the soft first quarter. Consolidated revenue growth is expected to be 9% to 11% in fiscal 2018 with GAAP EPS expected in the range of $3.32 to $3.36 and non-GAAP EPS in the range of $2.48 to $2.53, which is $.18 to $.20 higher than previous guidance due to the favorable impact of tax legislation.
3M-MMM posted fourth quarter of $8 billion, up 9% from last year’s fourth quarter, with net income and EPS falling 55% to $523 million and $0.85, respectively. Excluding the $762 million, or $1.25 per share, net impact of the Tax Cuts and Jobs Act (TCJA), net earnings increased 11% and EPS of $2.10 increased nearly 12%. Organic local-currency sales growth of 5.2% reflected growth in all business groups, led by 11% organic local-currency growth in Electronics & Energy and Safety & Graphics, and all geographies, led by EMEA and Asia-Pacific. Operating margins of 22.8% expanded 10 basis points as strong organic volume growth was partially offset by the negative impact from incremental strategic investments and the Scott Safety acquisition which closed during the fourth quarter. Free cash flow of $1.4 billion declined by $372 million from last year’s fourth quarter due to a $600 million discretionary U.S. pension contribution. 3M’s strong fourth quarter capped a solid full year with 2017 sales up 5% to $31.7 billion, net income excluding the impact of TCJA up 11% to $5.6 billion and EPS excluding TCJA up 12% to $9.17. 3M generated a healthy 41.8% return on shareholders’ equity during 2017 and a 21% return on invested capital. During 2017, 3M generated nearly $4.9 billion in free cash flow, representing a robust 100% free cash flow conversion rate, and returned $4.8 billion to shareholders through share repurchases and dividends. Given strong business fundamentals and robust cash flow, 3M raised its dividend by 16% marking the 100th year of dividend payments, the 60th consecutive year of dividend increases and the doubling of the quarterly dividend in the last three years. Looking ahead to 2018, 3M raised its EPS guidance to reflect a drop in its effective tax rate from 26% - 27% to 20% - 22%. EPS is now expected in the $10.20 - $10.70 range, up 11% to 17% from 2017 excluding the TCJA impact. Guidance for organic local-currency growth of 3% - 5% remains unchanged.
Brown-Forman-BFB announced that its Board of Directors has approved a number of capital deployment actions aimed at benefiting shareholders, employees, and the community reflecting the strength of the company’s financial position and the anticipated positive benefits from tax reform. These actions include a stock split and a special dividend, as well as additional funding of the company’s defined benefit program and the creation of a charitable foundation. The stock split will be effected in the form of a dividend on both Class A and Class B common stock, payable in shares of Class B common stock. For every four shares of either Class A or Class B common stock held, shareholders of record as of the close of business on February 7, 2018 will receive one share of Class B common stock, with any fractional shares payable in cash. This will be the 14th stock split since the company’s listing in 1934. Assuming there had been no splits over that time period, one share of Class B common stock would be worth approximately $189,000 today. The company also declared a special dividend of $1.00 on its Class A and Class B common stock, which will be paid to stockholders of record on April 2, 2018 and they will receive the cash dividend on April 23, 2018. This equates to roughly $480 million after the implementation of the stock split. The company has also decided to fully fund its current pension liability of $120 million, further strengthening an important employee retirement benefit. Additionally, with the goal of helping to fund the company’s ongoing philanthropic endeavors in the communities where Brown-Forman employees live and work, the company is pursuing the creation of a foundation with a contribution of $60-$70 million. The company anticipates that the foundation’s proceeds will provide a consistent amount of revenue per year for its charitable giving program independent of the company’s yearly earnings. Brown-Forman’s Board of Directors also declared a regular quarterly cash dividend of 15 4/5 cents per share on its Class A and Class B common stock, reflective of the planned five for four stock split. Stockholders of record on March 5, 2018 will receive the cash dividend on April 2, 2018.
Wednesday, Jan. 24, 2018
F5 Networks-FFIV reported first fiscal quarter revenue of $523.2, up 1.4% year-over-year, with net income before income taxes of $144 million, up 3%, net income of $88 million, down 6%, and EPS of $1.41, down 2%. This quarter’s results include a $7 million provision for deemed repatriation and $11.6 million for the re-measurement of deferred taxes in the wake of the recently passed U.S. tax legislation. Product revenues were down 5% and represented 43% of total revenues during the quarter. Management expects this quarter represents the trough for product revenue declines. Services and software solutions increased 7% and represented 57% of total revenues. By customer segment, Enterprise accounted for 64% of sales, Service Providers accounted for 20% while government accounted for 16%. By region, Americas, 56% of total sales, increased 2%; AMEA, 27% of the total, increased 7%; APAC, 14% of the total, dipped 5% while Japan, 4% of the total, declined 12%. During the quarter, F5 Networks generated $183.5 million in free cash flow and repurchased $150 million shares at an average cost of $120.73 per share. F5 Networks ended the quarter with $1.35 billion in cash and investments on its debt-free balance sheet. Looking ahead to the second fiscal quarter, management expects revenues of $525 - $535 million, up 2.3% at the midpoint. EPS are expected in the $1.66 to $1.69 range, up 17% at the midpoint. "We continue to see momentum with our software offerings, driven by customers deploying our solutions on-premises and in the public cloud. Our recent State of Application Delivery report highlights a number of emerging trends across the global application landscape. It is clear, applications and related services are taking an increasingly important role as digital transformation reshapes the modern enterprise. We are well positioned to benefit from these broader industry trends as customers require more multi-cloud support, IT automation, and application security, " said François Locoh-Donou, F5 President and Chief Executive Officer.
United Technologies-UTX reported fourth quarter sales increased 7% versus the prior year to $15.7 billion. EPS and net income from continuing operations declined 60% to $.50 and $397 million, respectively. Excluding a $.90 charge related to tax law changes and a $.20 charge for restructuring and other items, adjusted EPS increased 3%. Management was encouraged by the macro economic environment although some of the markets UTX operates in continue to be challenged from a pricing standpoint. By business segment, Otis sales gained 6% on a constant currency basis to $3.3 billion, lifted by a 4% gain in service sales and 3% gain in new equipment orders. Climate, Controls and Security sales increased 6% to $4.5 billion in constant currency. Organic equipment orders were up 9% with operating profits up 12%. Pratt & Whitney sales rose 12% in constant currency to $4.5 billion on strength in military engines and commercial aftermarket. In constant currency, Aerospace Systems sales increased 6% to $3.8 billion, boosted by a 10% rise in the commercial aftermarket. For the full year, revenues rose 5% to $59.8 billion with net income down 10% to $4.6 billion and EPS down 7% to $5.70. Return on shareholders’ equity for the year was 14.5%. UTX’s free cash flow decreased 23% for 2017 to $3.6 billion with the company paying $2.1 billion in dividends and repurchasing $1.5 billion of its shares. Management’s 2018 guidance ((excluding the impact of the proposed Rockwell Collins acquisition) is adjusted EPS in the range of $6.85 to $7.10 representing 5% growth at the midpoint over 2017 adjusted EPS. Total 2018 sales are expected in the $62.5 billion to $64 billion range with free cash flow expected to be $4.5 billion to $5.0 billion. Management’s guidance includes $.23 of favorable impact from the new tax law with their estimated effective tax rate declining from 27.8% to 25.5%. UTX said it would use tax overhauls to repatriate at least $3 billion this year to help reduce debt from its purchase of Rockwell Collins.
Building on a long history of providing relevant, industry-leading benefits, Starbucks Coffee Company-SBUX announced a series of new partner (employee) offerings that span across wage and benefits. These offerings will total more than $250 million for more than 150,000 partners and are accelerated by recent changes in the U.S. tax law. These new offerings are in addition to the nearly $7 billion of capital that Starbucks will deploy to build and renovate stores, manufacturing plants and technology platforms in the U.S. over the next five years.
The Walt Disney Company-DIS announced that more than 125,000 eligible employees will receive a one-time $1,000 cash bonus. The company will also make an initial investment of $50 million in a new and ongoing education program specifically designed to cover tuition costs for hourly employees. The two new initiatives represent a total allocation of more than $175 million in this fiscal year.
Tuesday, Jan. 23, 2018
Canadian National Railway-CNI reported fourth quarter chugged ahead by 2% to C$3.3 billion while net income and EPS steamed ahead more than 150% to C$2.6 billion and C$3.48, respectively. Excluding deferred tax recovery of C$1.76 billion, or C$2.35 per share, from lower U.S. corporate tax rates, net income and EPS decreased 6% and 2%, respectively. Higher international container traffic via Prince Rupert and Vancouver ports, increased volumes of frac sand, freight rate increases and higher fuel surcharge rates powered the fourth quarter revenue increase. Carloadings increased 7% to 1,461 thousand. Revenue ton miles (RTM), which measures the relative weight and distance of rail freight transported, increased 1%. Operating expenses increased 9% on higher costs from increased volumes, capacity constraints due to rapidly changing market demands, challenging operating conditions from harsh early winter weather and higher fuel prices. For the full year, CNI reported revenues of C$13 billion, up 8%, net income of C$5.5 bilion, up 51%, and EPS of C$7.24, up 55%. Excluding the deferred tax recovery from recent U.S. tax legislation, adjusted net income and EPS increased 6% and 9%, respectively. Adjusted return on equity was a stellar 22.7%. During 2017, CNI generated C$2.8 billion in free cash flow, up 10% from last year, on higher net income and working capital efficiencies. The company returned C$3.2 billion to shareholders during 2017 through share repurchases of C$2 billion and C$1.2 billion in dividends. During the quarterly conference call, CNI announced a 10% increase in the quarterly dividend, tracking a 35% payout ratio. Given the favorable economic backdrop, in 2018, CNI will invest a record C$3.2 billion in the safety and efficiency of its network. About C$700 million of the total is slated for investments to increase capacity, including the purchase of 60 new locomotives, track infrastructure expansion and intermodal terminal improvements. About C$1.6 billion will be spent for track infrastructure maintenance, including C$400 million for continued installation of Positive Train Control (PTC) in the U.S. Looking ahead to 2018, the company expects RTM volume growth of 3% to 5% with overall pricing above inflation. Adjusted EPS are expected in the C$5.25 to C$5.40 range, up about 7% at the midpoint. Given difficult first half comps and investments in capacity that will come online during the second half of 2018, EPS growth will be weighted toward the back half of 2018.
Johnson & Johnson-JNJ reported fourth quarter revenues rose 11.5% to $20.2 billion while recording a net loss of $10.7 billion or ($3.99) per share for the quarter. The company reported a special item charge of $13.6 billion related to recently enacted tax legislation on the repatriation of cash held overseas. Management was pleased with the new tax legislation, which will enable JNJ to invest in innovation at higher levels to help address the most challenging unmet medical needs facing healthcare today. Healthcare accounts for 18% of U.S. GDP with pharmaceutical spending accounting for 14% of overall healthcare spending. . Adjusting for intangible amortization expense and special items, adjusted fourth quarter earnings rose 9.5% to $4.8 billion with adjusted EPS up 10.1% to $1.74. Operational sales during the fourth quarter rose 9.8% in the U.S. and 9.0% in international markets. Total consumer sales rose 3.1% during the quarter (.4% operationally) to $3.5 billion thanks to solid growth in the Beauty and OTC units. Pharmaceutical sales increased 17.6% (15.5% operationally) to $9.7 billion in the quarter driven by nearly 40% growth in the oncology division. Medical Devices reported fourth quarter sales growth of 8.3% (6.5% operationally) to $7.0 billion with vision care leading the way with 55% growth thanks in part to the Medical Optics acquisition. For the full year 2017, JNJ reported sales increased 6.3% to $76.5 billion with net earnings and EPS each declining 92% to $1.3 billion and $.47, respectively. Adjusting for the special tax item and intangible amortization, adjusted earnings increased 6.8% for the year to $20.0 billion with adjusted EPS up 8.5% to $7.30. JNJ generated $17.8 billion in free cash flow in 2017. During the year, the company invested $10.5 billion in research and development, paid $9 billion in dividends, completed a $10 billion share repurchase program and deployed $35 billion in mergers and acquisitions. JNJ ended the year with $16.2 billion of net debt (reflecting $34.6 billion of debt taken on for acquisitions net of $18.4 billion in cash). For 2018, management expects to reports sales of $80.5 to $81.5 billion, representing 5.5% to 6.0% growth. (On a constant currency operational basis, sales should increase 3.5% to 4% to $79 to $80 billion). EPS growth is expected to be greater than sales growth as operating margins are expected to expand 100 basis points with the company reporting 7% to 9.5% growth in constant currency EPS in the range of $7.80 to $8.00 and on a reported basis a EPS range of $8.00 to $8.20 helped by foreign exchange tailwinds. JNJ provided shareholders with a 24.4% total return in 2017, which was better than the performance of the stock market and their peers. JNJ’s market-beating returns have also been the case over the last three, five, ten and twenty years, which is a great way for the company to celebrate the 75th anniversary of JNJ’s credo.
Monday, Jan. 22, 2018
Sanofi and Bioverativ-BIVV have entered into a definitive agreement under which Sanofi will acquire all of the outstanding shares of Bioverativ for $105 per share in cash, representing an equity value of approximately $11.6 billion (on a fully diluted basis). The transaction was unanimously approved by both the Sanofi and Bioverativ Boards of Directors. Under the terms of the merger agreement, Sanofi will commence a tender offer to acquire all of the outstanding shares of Bioverativ common stock at a price of $105 per share in cash. The $105 per share acquisition price represents a 64 percent premium to Bioverativ’s closing price on January 19, 2018. The tender offer is expected to commence in February 2018.
Thursday, Jan. 18, 2018
Accenture-ACN has been awarded a contract by the Veterans Benefits Administration (VBA) to upgrade and enhance its information technology infrastructure as part of the VBA’s commitment to improve the delivery of services it provides to Veterans. The contract has an estimated value of $62 million over the performance period, which includes a one-year base period with four one-year options.
Wednesday, Jan. 17, 2018
Apple-AAPL announced a new set of investments to build on its commitment to support the American economy and its workforce, concentrated in three areas where Apple has had the greatest impact on job creation: direct employment by Apple, spending and investment with Apple's domestic suppliers and manufacturers, and fueling the fast-growing app economy which Apple created with iPhone® and the App Store®. Apple is already responsible for creating and supporting over 2 million jobs across the United States and expects to generate even more jobs as a result of the initiatives being announced. Combining new investments and Apple's current pace of spending with domestic suppliers and manufacturers — an estimated $55 billion for 2018 — Apple's direct contribution to the US economy will be more than $350 billion over the next five years, not including Apple's ongoing tax payments, the tax revenues generated from employees' wages and the sale of Apple products. Planned capital expenditures in the US, investments in American manufacturing over five years and a record tax payment upon repatriation of overseas profits will account for approximately $75 billion of Apple's direct contribution. Apple, already the largest US taxpayer, anticipates repatriation tax payments of approximately $38 billion as required by recent changes to the tax law. A payment of that size would likely be the largest of its kind ever made. Apple expects to invest over $30 billion in capital expenditures in the US over the next five years and create over 20,000 new jobs through hiring at existing campuses and opening a new one. Apple already employs 84,000 people in all 50 states. Over $10 billion of Apple's expanded capital expenditures will be investments in data centers across the US. Over the last decade, Apple has invested billions of dollars in data centers and co-located facilities in seven US states, including North Carolina, Oregon, Nevada, Arizona, and a recently announced project in Iowa. All of Apple's US facilities, including offices, retail stores and data centers, are powered by 100 percent renewable energy sources like solar, wind and micro-hydro power, which Apple generates or purchases from local projects. Building on the initial success of the Advanced Manufacturing Fund announced last spring, Apple is increasing the size of the fund from $1 billion to $5 billion. The fund was established to support innovation among American manufacturers and help others establish a presence in the US. It is already backing projects with leading manufacturers in Kentucky and rural Texas. Apple works with over 9,000 American suppliers — large and small businesses in all 50 states — and each of Apple's core products relies on parts or materials made in the US or provided by US-based suppliers. The iOS app economy has created more than 1.6 million jobs in the US and generated $5 billion in revenue for American app developers in 2017. With demand for coding skills stronger than ever, today there are more than 500,000 unfilled programming-related positions across the country, and the US Bureau of Labor Statistics predicts that by 2020 there will be 1.4 million more software development jobs than applicants qualified to fill them. To address the coding skills gap and help prepare more people for jobs in software development, Apple created a powerful yet easy-to-learn coding language called Swift™, the free Swift Playgrounds™ app and a free curriculum, App Development with Swift, which are available to anyone and are already being used by millions of students at K-12 schools, summer camps and leading community colleges across the country. Over 100,000 students and teachers have also attended coding classes at Apple retail stores.
Fastenal-FAST reported fourth quarter revenues rose 14.8% to $1.1 billion with net income hammering up a 32.8% gain to $152.4 million and EPS jumping 33.5% to $.53. For the full 2017 year, revenues rose 10.8% to $4.4 billion with net income up 15.8% to $578.6 million and EPS up 16.2% to $2.01. The strong earnings growth in the fourth quarter reflected the positive impact of recently signed tax reform. Excluding the impact of tax reform, EPS would still have risen at double-digit rates with fourth quarter EPS up 12.2% and full year EPS up 11.3%, which was a great way to celebrate the company’s 50th anniversary. Return on shareholders’ equity increased to a superb 27.6% for the year. Daily sales growth was strong with fourth quarter growth up 14.8% and full year growth up 11.3%. Fastener daily sales rose 13.4% in the fourth quarter with non-fastener sales accelerating to 16.1% growth in the quarter. National Accounts daily sales rose 14.5% in 2017 with 72 of the Top 100 National Accounts generating growth. During the year, the company signed 207 Onsite location, up 53.4% from 2016. The company finished the year with 605 active Onsite locations with a goal of signing 360-385 new Onsite locations in 2018. During the year, Fastenal signed 19,355 vending devices, up 7.2% from 2016 and ended the year with an installed device base of 71,421. Product sales through these devices grew high teens in 2017. The goal is to sign 21,000 to 23,000 vending devices in 2018. Free cash flow increased 41% during the year to $465.3 million thanks to higher earnings and lower capital expenditures. Capital expenditures should increase 32% in 2018 to $149 million as the company upgrades and adds capacity to their existing hub network and purchases property for potential future expansion. During the year, Fastenal repurchased $82.6 million of its shares and paid $369.1 million in dividends. Management increased the dividend by 15.6% for 2018 to a quarterly rate of $.37 per share. Macroeconomic factors are favorable for Fastenal with U.S. industrial production growing. Manufacturing, led by heavy machinery, general industrial, energy and transportation, continues to drive growth while construction sales accelerated, achieving double-digit growth in Nov. and Dec. The benefit of tax reform changes will unleash potential for Fastenal by positively impacting cash generation and enabling the company to grow faster which should result in another strong year for the company in 2018.
Thursday, Jan. 11, 2018
T, Rowe Price Group-TROW reported preliminary month-end assets under management of $991 billion as of December 31, 2017, a 22% increase from the prior year. Client transfers from mutual funds to other portfolios were $1.7 billion and $4.2 billion for the month- and quarter-ended December 31, 2017, respectively.
Wednesday, Jan. 10, 2018
Berkshire Hathaway-BRKA Board of Directors voted to increase the number of directors comprising the entire Board of Directors from twelve to fourteen. Gregory E. Abel and Ajit Jain were then elected to serve as Directors to fill the resulting vacancies on the Board of Directors. In connection with their election to the Board of Directors, Warren E. Buffett, Berkshire Hathaway's Chairman and CEO, appointed Mr. Abel to be Berkshire Hathaway's Vice Chairman - Non-Insurance Business Operations and Mr. Jain to be its Vice Chairman - Insurance Operations. Mr. Abel joined Berkshire Hathaway Energy Company in 1992 and currently serves as its Chairman and CEO. Mr. Jain joined the Berkshire Hathaway Insurance Group in 1986 and currently serves as Executive Vice President of National Indemnity Company with overall responsibility for leading Berkshire's reinsurance operations. Mr. Buffett and Charles T. Munger, Vice Chairman of Berkshire Hathaway will continue in their existing positions, including being responsible for significant capital allocation decisions and investment activities.
In a subsequent CNBC interview, Buffett said this was a step in Berkshire’s succession planning while at the same time acknowledging that his health was terrific. Buffett is 87 and Charlie Munger s 94 while Greg Abel is 55 and Ajit Jain is 66. All of them have Berkshire is their blood and Buffett felt it was the time to pass on institutional knowledge of all the Berkshire businesses to these men as part of a transition process. The Board of Directors agreed. There was nothing magical about the timing. Buffett said he could have made the decision five years ago.
Separately when questioned about the stock market’s current valuation, Buffett said that the stock markets are not richly valued relative to interest rates. Charlie Munger agreed noting that share prices are “not crazy” with bonds yielding 3%, but that it is harder to make money when stocks are selling at 20 times earnings than when they are selling at 15 times earnings. Berkshire continues to be a net buyer of stocks.. Buffett added that tax reform will have a huge impact on stock market values with tax rates cut from 35% to 21% with a company’s major silent shareholder (the government) basically taking less of a company’s earnings power. This increases a company’s earnings power by 20% as a company gets to retain 79% of their earnings versus 65%. A 20% increase in Burlington Northern Santa Fe’s earnings power is huge for Berkshire as is the reduction in Berkshire’s deferred tax liability that has been reduced from $35 billion to $21 billion on $100 billion of unrealized gains. On cryptocurrencies, Buffett said he is almost certain that they will come to a bad ending, and Berkshire will not investing a cent in the cryptocurrencies like Bitcon. Charlie said Bitcoins and venture capital are in bubbles currently with too much money chasing too few deals. With more than $100 billion in cash, Buffett is still scouting for acquisitions, but nothing is in immediate sight.
Ctrip, China's largest online travel agent and the second largest in the world, announced that Ctrip Gourmet List, an industry leader in POI information and a leading domestic China sharing and discovery platform for restaurants, has formed a partnership with OpenTable, the world's leading provider of online restaurant reservations and part of The Priceline Group-PCLN. The partnership with OpenTable will allow Ctrip mobile app users to book tens of thousands of restaurants across North America. A premier OpenTable partner, Ctrip is also the first OpenTable partner in the Mainland Chinese market. Ctrip Gourmet List has seen triple-digit growth since its launch and continues to rapidly expand the number of restaurants and destinations on its platform. OpenTable seats more than 24 million diners per month via online reservations across more than 43,000 restaurants around the globe. Available in six languages, OpenTable has bookable restaurants in more than 20 countries. In the third quarter of 2017, 57% of OpenTable's global seated diners originated on a mobile device. North America is an increasingly popular destination for Chinese travelers. According to Ctrip's data, Chinese visitors to North America in 2017 spent on average 16,000 RMB per person. Both the US and Canada were included on Ctrip's 2017 Top 20 Popular Country list, with three US cities in the top ten for long-haul trips, and Canada seeing over 60% growth year-on-year.
Tuesday, Jan. 9, 2018
Stryker-SYK announced preliminary consolidated net sales of $3.5 billion and $12.4 billion, representing increases of 10.0% and 9.9%, respectively, for the fourth quarter and full 2017 year. Excluding the impact of foreign currency and acquisitions, net sales increased 8.1% and 7.1% in the fourth quarter and full year. Based on year-to-date performance, Stryker expects 2017 adjusted net earnings per diluted share to be toward the high end of the previously announced range of $6.45 to $6.50. With respect to U.S. tax reform, Stryker anticipates a modest headwind, which will be manageable within their overall 2018 financial targets.
Monday, Jan. 8, 2018
AbbVie-ABBV announced the U.S. Food and Drug Administration (FDA) granted Breakthrough Therapy Designation for the investigational, once-daily oral JAK1-selective inhibitor upadacitinib (ABT-494) in adult patients with moderate to severe atopic dermatitis who are candidates for systemic therapy. This Breakthrough Therapy Designation is supported by positive Phase 2b results previously announced in September 2017, and marks 13 Breakthrough Therapy Designations granted to AbbVie's investigational treatments since the company's inception in 2013. Atopic dermatitis, a chronic inflammatory skin disease, is characterized by skin erosion, oozing and crusting, redness, intense itching (pruritus) and dry skin. Symptoms can appear as a rash on the skin, or the skin may become thickened and leathery. The FDA's Breakthrough Therapy Designation program is intended to expedite the development and review of medicines with preliminary clinical evidence that indicate that the investigational treatment may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. In the U.S. alone, atopic dermatitis affects an estimated 28 million people of all ages, and can have a significant impact on the physical and psychosocial health of patients.
Baxter International-BAX is committed to advancing surgical innovation and announced an agreement to acquire two hemostat and sealant products from Mallinckrodt plc: RECOTHROM Thrombin topical (Recombinant), the first and only stand-alone recombinant thrombin, and PREVELEAK Surgical Sealant, which is used in vascular reconstruction. Sales of the proposed acquired products totaled approximately $56 million in the twelve months preceding September 29, 2017. Upon closing, the deal is expected to be modestly accretive to Baxter’s 2018 adjusted earnings and increasingly accretive thereafter. Under the terms of the agreement, Baxter will acquire RECOTHROM and PREVELEAK for an upfront payment of approximately $153 million and potential contingent payments in the future. The transaction is expected to close in the first half of 2018.
Walgreens Boots Alliance-WBA disclosed it estimates a tax benefit of $200 million for fiscal 2018 as a result of the recently-enacted tax legislation. The drug store chain said it expects adjusted earnings per share to increase by 30 cents to 35 cents as a result of the legislation, which would be 5.3% to 6.2% above the current 2018 FactSet EPS consensus of $5.61.
Thursday, Jan. 4, 2018
Walgreens Boots Alliance- WBA rang up first fiscal quarter sales of $30.7 billion, up nearly 8%, with net earnings of $821 million, down 22%, and EPS of $0.81, down 16.5% on fewer shares outstanding. The decline in net earnings and EPS were mainly due to impairment of WBA’s equity investment in China pharmaceutical wholesaler, Guangzhou Pharmaceuticals, a loss from WBA’s share of AmerisourceBergen’s recently reported litigation accrual and benefits from the UK tax rate reduction recorded in the same quarter a year ago. Excluding these items, WBA’s adjusted first quarter earnings increased 8% to $1.3 billion. By segment, Retail Pharmacy USA reported sales of $22.5 billion, up 9%, on a 4.7% same store sales increase. Pharmacy sales, which accounted for 72.4% of the division’s sales, increased 14.1% primarily due to higher prescription volumes, including mail and central specialty following the formation of AllianceRx Walgreens Prime. Comparable pharmacy sales increased 7.4% on higher volume and brand inflation, partially offset by reimbursement pressure and the negative impact of generics. The division filled 260.2 million prescriptions (including immunizations) on a 30-day equivalents basis, an increase of 9.5%, and exceeded one billion prescriptions on a rolling annual basis for the first time. Retail sales decreased 2.8% on a 0.9% dip in comparable retail sales, with declines in consumables, general merchandise and personal care partially offset by growth in the health, wellness and beauty categories. Retail Pharmacy International reported sales of $3.1 billion, up 4%, on a 0.7% dip in constant currency same store sales, reflecting lower Boots UK retail sales on the heels of lower government reimbursements. Pharmaceutical Wholesale sales of $5.7 billion increased 5.6% on a 4.5% comparable sales increase, boosted by strong performance in emerging markets. The company generated $583 million in free cash flow during the quarter, up from $147 million last year, paid dividends of $413 million and returned $2.5 billion to shareholders through share buybacks, thereby completing the company’s $6 billion repurchase program announced in 2017 after the Rite Aid acquisition value was reduced. Subsequent to quarter end, WBA agreed to acquire 40% of Sinopharm Holding Guoda Drugstores, a leading retail pharmacy chain in China, where regulatory changes have opened up retail opportunities. WBA also agreed to sell part of its investment in Chinese wholesale partner, Guangzhou Pharmaceuticals, for a substantial cash return. While management welcomes the recently passed tax legislation as it “reinforces the appeal of investing here in the U.S.”, it is still evaluating the law’s impact on future earnings. Management raised the lower end of its guidance for fiscal 2018 by 5 cents and now anticipates adjusted EPS of $5.45 to $5.70.
Private sector employment increased by 250,000 jobs from November to December according to the December ADP National Employment Report®. "We've seen yet another month where the labor market has shown no signs of slowing," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "Throughout the year there was significant growth in services except for an overall loss of jobs in the shrinking information sector. Looking at company size, small businesses finished out 2017 on a high note adding more than double their monthly average for the past six months." Mark Zandi, chief economist of Moody's Analytics, said, "The job market ended the year strongly. Robust Christmas sales prompted retailers and delivery services to add to their payrolls. The tight labor market will get even tighter, raising the specter that it will overheat."
Thursday, Dec. 21, 2017
Nike-NKE reported fiscal second quarter revenues were up 5% to $8.6 billion with net income down 9% to $767 million and EPS down 8% to $.46. Return on invested capital was a strong 32%. International revenues now account for more than 55% of total revenues. For the quarter, revenue growth was driven by international geographies and continued strength in NIKE Direct, partly offset by an expected decline in North America wholesale revenue. Earnings decreased as a decline in gross margin and higher selling and administrative expense more than offset revenue growth and a lower tax rate. While revenues for Converse were down 4% during the quarter to $408 million, driven by declines in North America, revenues for the Nike Brand were up 4% to $8.1 billion on a constant currency basis driven by EMEA, Greater China and APLA, including growth in the Sportswear and NIKE Basketball categories. Inventories increased 6% during the quarter to $5.3 billion driven by changes in foreign currency exchange rates and, to a lesser extent, an increase in NIKE Brand units. Cash decreased 1% to $4.3 billion as of quarter end. During the first half of the year, Nike repurchased 32 million shares for approximately $1.75 billion as part of the four-year $12 billion buyback program approved by the Board in 2015 with $5.8 billion still available for future repurchases. For the full fiscal 2018 year, Nike expects to report mid-single digit revenue growth thanks to strong international growth, an acceleration in Nike Direct to Consumer sales and lesser foreign exchange headwinds. Gross margin is expected to contract 50-100 basis points with SG&A expenses expected to increase at a mid-single digit rate and the tax rate expected in the 14%-16% range.
Paychex-PAYX reported second fiscal quarter revenues, net earnings and EPS increased 7% to $826.5 million, $271 million and $0.60, respectively. By segment, Total Service Revenue also increased 7% to $812.5 million with Payroll Service Revenue increasing 1% to $444.8 million on growth in revenue per check that was tempered by a slight drop in average client size. Wage growth increased nearly 3%, up from 2% last year. Human Resource Services (HRS) revenue increased 15% to $367.7 million, boosted by the HROI acquisition completed in August 2017 and strength in comprehensive HR outsourcing services including retirement, time and attendance and insurance services. Interest on funds held for clients increased 23% to $14 million, primarily due to higher average interest rates earned. Funds held for clients were largely flat at $3.7 billion as the impact from wage inflation was offset by client mix. Paychex’s effective tax rate for the second quarter was 35%. Paychex’s financial position remained strong with no long-term debt and more than $819 million in cash and corporate investments reported on the company’s rock-solid balance sheet. Cash flows from operations were $519.4 million for the first half of the fiscal year, up 26%, driven by higher net income along with the timing of income tax payments and accruals. Paychex paid $$359 million in dividend during the first half of the fiscal year and repurchased 1.6 million shares for a total of $94.1 million, compared to $166.2 million repurchased last year. During the second quarter conference call, management was probed on the potential impact of the recently passed tax legislation. While management has just begun to comb through the law’s details, it expects to see a 10% to 12% benefit from the lower 21% rate. With the savings, Paychex expects to accelerate investment in its “robust list” of high-value projects thereby improving the company’s competitive position while taking advantage of the provision allowing immediate expensing of capital expenditures. The company is working with the IRS daily to implement new withholding tables. Paychex affirmed its prior guidance for the full fiscal year with total revenue expected to increase 6% and EPS expected to increase in the 5% to 6% range.
Accenture-ACN reported first fiscal quarter net revenues rose 12% in U.S. dollars and 10% in local currency, to $9.5 billion with net income increasing 12% to $1.1 billion and EPS up 13% to $1.79. New bookings for the quarter were $10 billion, with consulting bookings of $5.9 billion and outsourcing bookings of $4 billion. On a geographic basis, Europe led the way with a strong 17% increase for the first quarter. Growth in the operating groups was led by Financial Services with 14% growth during the quarter. “The New” digital, cloud and security services generated strong double-digit growth which now approximate 55% of revenues. Accenture’s free cash flow declined 13% to $875 million with the company paying $854 million in dividends and repurchasing $563 million of its shares. Accenture has $2.6 billion authorized for future share repurchases. Accenture is planning $1.1 billion to $1.4 billion in acquisitions during fiscal 2018. Its strong balance sheet with $3.7 billion in cash and minimal long-term debt provides the company with financial flexibility to grow the business while returning significant cash to shareholders. For fiscal 2018, Accenture expects net revenue growth to be in the range of 6% to 8%, up from previous guidance of 5% to 8%. Management increased full year EPS guidance from the range of $6.36 to $6.60 to the range of $6.48 to $6.66 representing 21% growth at the midpoint. Free cash flow is expected to be in the range of $4.4 to $4.7 billion for the full fiscal year.
Wednesday, Dec. 20, 2017
Accenture –ACN won a prime position on U.S. Department of Agriculture (USDA) Shared Services Lines of Business Solutions (SSLoBS) blanket purchase agreement (BPA), making ACN one of nine firms eligible to compete for work under the five-year BPA, which has a total estimated value of $500 million.
TJX Companies - TJX received notice of an unsolicited “mini-tender” offer by TRC Capital Corporation (TRC Capital) to purchase up to 2,000,000 shares of TJX’s common stock at a price of $70.95 per share in cash. The offering price is 4.34 percent below the $74.17 per share closing price of TJX’s common stock on December 15, 2017, the last closing price prior to the commencement of the offer. TJX does not endorse TRC Capital’s unsolicited mini-tender offer and recommends that shareholders not tender their shares in response to TRC Capital’s offer because the offer is at a price below the December 19, 2017 closing common stock price of $76.06 per share. TJX is not affiliated or associated in any way with TRC Capital, its mini-tender offer or the mini-tender offer documents. TRC Capital has made many similar unsolicited mini-tender offers for shares of other public companies. Mini-tender offers seek to acquire less than 5 percent of a company’s outstanding shares, thereby avoiding many disclosure and procedural requirements of the U.S. Securities and Exchange Commission (SEC). As a result, investors are not provided with the same level of protections in mini-tender offers as are provided for larger tender offers under the U.S. securities laws. The SEC has cautioned investors that some bidders making mini-tender offers at below-market prices are, “hoping that they will catch investors off guard if the investors do not compare the offer price to the current market price.” The SEC’s guidance to investors on mini-tender offers is available at http://www.sec.gov/investor/pubs/minitend.htm. Shareholders should obtain current market quotations for their shares, consult with their broker or financial advisor, and exercise caution with respect to TRC Capital’s mini-tender offer.
Tuesday, Dec. 19, 2017
FactSet - FDS reported fiscal first quarter revenues rose 14.3% to $329.1 million with organic revenues up 5.8% to $304.3 million from the prior year period. Net income increased 5.7% to $70 million and EPS increased 6.7% to $1.77. Operating margin declined to 27.1% from 31.4% in the prior year period primarily due to $7.1 million in restructuring actions. On an adjusted basis, net income and EPS rose 15.4% and 16.6%, respectively. Annual Subscription Value (ASV) increased 12.8%, or 5.1% organically, to $1.32 billion as of 11/30/17. ASV at any given time represents the forward-looking revenues for the next 12 months from all subscription services currently supplied to clients. Client count as of 11/30/17 was 4,809, a net increase of 65 clients in the quarter. User count decreased 253 to 88,593 in the past three months. Annual client retention was greater than 95% of ASV or 90% when expressed as a percentage of clients. Employee headcount was 9,421 at 11/30/17, up 8.1% during the past 12 months, and up 2.9% on an organic basis from a year ago. Free cash flow totaled $55.2 million during the quarter up 43% over the prior year. FactSet paid $21.7 million in dividends and repurchased $31.7 million of its shares during the quarter. The company has $213.2 million remaining authorized for future share repurchases. For full fiscal 2018, management expects revenues to be in the range of $1.34 billion to $1.36 billion with EPS expected in the range of $7.60 to $7.80. On an adjusted basis, 2018 EPS is expected in the range of $8.25 to $8.45, representing 14% growth at the midpoint.
Express Scripts - ESRX increased the authorized number of shares that may be repurchased under the company's share repurchase program by an additional 45 million shares, or a total authorization of 375 million shares.
Accenture - ACN has formed a strategic alliance with and made a minority investment in Maana, the pioneer in digital knowledge technology enabling industrial companies to accelerate digital transformation. The alliance will initially target oil and gas clients, with plans to expand to other industries. Terms of the investment were not disclosed.
Monday, Dec. 18, 2017
Oracle – ORCL agreed to acquire Aconex Limited, a leading cloud-based solution that manages team collaboration for construction projects, for $1.2 billion in cash. Aconex’s software digitally connects owners, builders and other teams, providing complete visibility and management of data, documents and costs across all stages of a construction project lifecycle. The Oracle Construction and Engineering Cloud already offers customers the industry’s most advanced solutions for planning, scheduling and delivering large-scale projects. Together, Oracle and Aconex will provide an end-to-end offering for project management and delivery enabling customers to effectively plan, build, and operate construction projects. “Delivering projects on time and on budget are the highest strategic imperatives for any construction and engineering organization,” said Mike Sicilia, SVP and GM, Construction and Engineering Global Business Unit, Oracle. “With the addition of Aconex, we significantly advance our vision of offering the most comprehensive cloud-based project management solution for this $14 trillion industry.”
Friday, Dec. 15, 2017
United Technologies–UTX’s Pratt & Whitney division secured a $6.7 billion contract to maintain F119 aircraft engines for U.S. Air Force fighter jets. The work will be performed at Pratt in East Hartford as well as at Air Force bases in Alaska, California, Hawaii, Utah, New Mexico, Nevada, Oklahoma, Virginia, Texas and Florida through December 2025. In addition, Delta Air Lines and Airbus Group selected Pratt & Whitney's Geared Turbofan™ (GTF) engine to power Delta's order of A321neo aircraft. The order consists of 100 firm aircraft, and includes a 20-year EngineWise™ services agreement. Aircraft deliveries are expected to begin in the first quarter of 2020.
Oracle-ORCL reported second fiscal quarter revenues rose 6% to $9.6 billion with net income up 10% to $2.2 billion and EPS up 8% to $.52. Revenue growth was driven by total cloud revenues which jumped 44% to $1.5 billion, as the company gained market share. New software licenses were flat at $1.4 billion while software license updates and product support rose 4% to $5 billion. Hardware revenue declined 7% to $940 million with services revenues up 1% to $856 million. Short-term deferred revenues were up 9% compared with a year ago to $8.1 billion. Operating income rose 1% to $3.1 billion with the operating margin at 32%. Free cash flow rose 7% during the first half to $6.3 billion with the company ending the quarter with cash of $21.3 billion. During the first six months of the fiscal year, the company paid $1.6 billion in dividends, a 28% increase over the first half of the prior year. In addition, the company repurchased $1.4 billion of its shares during the same period with the Board of Directors increasing the authorization for future share repurchases by $12 billion. For the third quarter, Oracle expects revenues to increase 2%-4% with EPS in the range of $.68 to $.70. Oracle will soon deliver the world’s first fully autonomous database. Using artificial intelligence to eliminate most sources of human error enables Oracle to guarantee 99.995% reliability, which equates to only 30 minutes of downtime in a year, while charging much less than competitors.
Express Scripts–ESRX increased its previously issued consolidated 2017 full-year adjusted EPS guidance range of $6.97 to $7.05 to $7.00 to $7.08, which represents growth of 10% over consolidated 2016 adjusted EPS results at the midpoint of the range. The company anticipates achieving adjusted EPS for 2018 in the range of $7.67 to $7.87, representing growth of 9% to 12% from the midpoint of updated 2017 adjusted EPS guidance range. The 2018 guidance includes the pending acquisition of eviCore healthcare and assumes the completion of the company’s sale of its United BioSource subsidiary.
Thursday, Dec. 14, 2017
The Walt Disney Company-DIS agreed to acquire 21st Century Fox, including the Twentieth Century Fox Film and Television studios, along with the cable and international TV businesses, for about $52.4 billion in stock. Under the terms of the agreement, shareholders of 21st Century Fox will receive 0.2745 Disney shares for each 21st Century Fox share held, resulting in the issuance of about 515 million new Disney shares to 21st Century Fox shareholders, equivalent to a 25% stake in the newly combined company. Disney will also assume about $13.7 billion of 21st Century Fox’s net debt, implying a total transaction value of about $66.1 billion. As part of the deal, Mr. Iger agreed to continue as Chairman and Chief Executive Officer of The Walt Disney Company through the end of 2021. Immediately prior to the acquisition, 21st Century Fox will separate the Fox Broadcasting network and stations, Fox News Channel, Fox Business Network, FS1, FS2 and Big Ten Network into a newly listed company that will be spun off to its shareholders. The acquisition is expected to yield at least $2 billion in cost savings from efficiencies realized through the combination of businesses, and to be accretive to earnings before the impact of purchase accounting for the second fiscal year after the close of the transaction. Mr. Iger stated that the deal reflected “a changing media landscape, increasingly defined by transforming technology and evolving consumer expectations.” Bringing the two companies together will create a “multi-faceted global entertainment company with the content, the platforms and the reach” to compete in the evolving media business.
Cognizant Technology Solutions-CTSH announced it has entered into an accelerated share repurchase agreement with Barclays Bank to repurchase an aggregate of $300 million of Cognizant's Class A common stock. Approximately 3.58 million of the shares to be repurchased will be received by Cognizant on December 14, 2017. Final settlement of the transaction under the agreement is anticipated to occur during the first quarter of 2018.
Wednesday, Dec. 13, 2017
Apple-AAPL announced the latest award from its $1 billion Advanced Manufacturing Fund. Finisar, a leading manufacturer of optical communications components, will receive $390 million as part of Apple's commitment to support innovation and job creation by American manufacturers. The award will enable Finisar to exponentially increase its R&D spending and high-volume production of vertical-cavity surface-emitting lasers (VCSELs). VCSELs power some of Apple’s most popular new features, including Face ID®, Animoji™ and Portrait mode selfies made possible with the iPhone® X TrueDepth™ camera, as well as the proximity-sensing capabilities of AirPods®. As a result of Apple's commitment, Finisar will transform a long-shuttered, 700,000-square-foot manufacturing plant in Sherman, Texas, into the high-tech VCSEL capital of the U.S. creating more than 500 high-skill jobs, including engineers, technicians and maintenance teams.
Tuesday, Dec. 12, 2017
T. Rowe Price-TROW reported preliminary month-end assets under management of $991 billion as of November 30, up 2.1% from October 31.
AbbVie-ABBV announced results from MURANO, a randomized Phase 3 study of VENCLEXTA™/VENCLYXTO™ (venetoclax) combined with Rituxan® (rituximab) in patients with relapsed or refractory (R/R) chronic lymphocytic leukemia (CLL). "The data from the MURANO trial represents the next evolution in a potential treatment option for patients with relapsed/refractory CLL, an indication for which we received Breakthrough Therapy Designation," said Michael Severino, M.D., AbbVie’s executive vice president, research and development and chief scientific officer.
Johnsons & Johnson-JNJ announced data from the Phase 3 ALCYONE study showing that DARZALEX® (daratumumab) in combination with bortezomib, melphalan and prednisone (VMP) significantly improved clinical outcomes, including reducing the risk of disease progression or death by 50 percent, in patients with newly diagnosed multiple myeloma who are ineligible for autologous stem cell transplantation (ASCT).
Monday, Dec. 11, 2017
3M-MMM announced that it has entered into agreements related to the sale of substantially all of its Communication Markets Division to Corning Incorporated, for $900 million. This business consists of optical fiber and copper passive connectivity solutions for the telecommunications industry including 3M’s xDSL, FTTx, and structured cabling solutions and, in certain countries, telecommunications system integration services. This business has annual global sales of approximately $400 million. The sale is expected to be completed in 2018. 3M expects to realize a gain of approximately $0.40 per share from this transaction, net of actions related to the divestiture.
Thursday, Dec. 7, 2017
Stryker-SYK announced a definitive merger agreement to acquire Entellus Medical, Inc. for $24.00 per share, or an equity value of approximately $662 million. Entellus is a high-growth global medical technology company focused on delivering superior patient and physician experiences through products designed for the minimally invasive treatment of various ear, nose and throat (ENT) disease states. Founded in 2006, and headquartered in Plymouth, Minnesota, the company has a broad portfolio of ENT products, including the XprESS® Multi-Sinus Dilation System and the LATERA® Absorbable Nasal Implant, which are highly complementary to the existing ENT portfolio of Stryker`s Instruments business. The transaction is expected to be dilutive to Stryker`s 2018 adjusted net EPS by approximately $0.04 and accretive thereafter.
Wednesday, Dec. 6, 2017
Stryker-SYK announced that its Board of Directors has declared a quarterly dividend of $0.47 per share payable on January 31, 2018 to shareholders of record at the close of business on December 29, 2017, representing an increase of approximately 11% versus the prior year and the previous quarter. "Our financial strength is reflected in the 11% increase in our dividend for 2018 as we continue to execute on our capital allocation strategy," said Kevin A. Lobo, Chairman and Chief Executive Officer. "With strong organic sales growth and leveraged adjusted earnings gains, we believe we are well positioned to continue to deliver dividend increases in line with our adjusted earnings growth."
Brown-Forman-BFB reported second quarter net sales increased 10% to $914 million with net income up 21% to $239 million and EPS up 23% to $.62. During the first six months of fiscal 2018, the Jack Daniel’s family of brands delivered broad-based growth, with underlying net sales up 7%, including underlying growth of 6% for Jack Daniel’s Tennessee. The company’s bourbon brands delivered continued growth, including 21% underlying net sales growth from Woodford Reserve. Herradura and el Jimador tequila grew underlying net sales 19% and 10% respectively. Finlandia vodka grew underlying net sales 8%, helped by improved results in Russia. The company’s developed markets outside of the U.S. underlying sales were up 5% while emerging markets sales continued to accelerate from last year’s sluggish start to the year, delivering 15% growth in the first half of the year on an underlying basis. Travel Retail continues to deliver solid rates of growth, with underlying net sales up 11%. For the first half of fiscal 2018, free cash flow increased 13% to $150 million with the company paying $140 million in dividends during the period. The company has $1.7 billion of long-term debt and $212 million of cash on the balance sheet as of 10/31/2017. The company increased full fiscal 2018 year underlying net sales growth guidance to 6% to 7% with underlying operating income growth of 8% to 9%. Management increased EPS guidance from $1.85 to $1.95 to a range of $1.90 to $1.98 which includes the combined effect of top-line growth and a more favorable tax rate.
Walgreens Boots Alliance-WBA announces that it has reached an agreement with China National Accord Medicines Corporation Ltd. to become an investor in its subsidiary Sinopharm Holding Guoda Drugstores Co., Ltd. (“GuoDa”), which operates and franchises retail pharmacies across China. Following a public tender process, Walgreens Boots Alliance’s bid met all the requirements set by the seller to acquire a 40 percent minority stake in GuoDa through a capital increase worth RMB2.767 billion (around $416 million). Upon completion, Walgreens Boots Alliance would account for this stake as an equity method investment. GuoDa is a leading retail pharmacy chain in China, and has been pursuing its vision for expansion across the country in the context of the ongoing healthcare reforms and increasing importance of the pharmacy channel in the country. Walgreens Boots Alliance, as a global pharmacy-led enterprise, believes it is well positioned to provide its significant expertise to GuoDa and support its growth ambitions.
Fastenal-FAST reported November sales increased 15.4% to $365.5 million with average daily sales also up 15.4% to $17.4 million. By geography, U.S. sales rose 13.8% and total North American sales were up 15%. By end market, manufacturing sales rose 17.2% and non-residential construction sales were up 10.8%. By product line, sales rose 14.1% in fasteners and 16.6% in other products. Year-to-date, the company has opened 18 new branch locations ending the month with 2,421 locations. Total personnel increased 4% to 20,593.
Private sector employment increased by 190,000 jobs from October to November according to the November ADP National Employment Report(R). "The labor market continues to grow at a solid pace," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute-ADP. "Notably, manufacturing added the most jobs the industry has seen all year. As the labor market continues to tighten and wages increase it will become increasingly difficult for employers to attract and retain skilled talent." Mark Zandi, chief economist of Moody's Analytics, said, "The job market is red hot, with broad-based job gains across industries and company sizes. The only soft spots are in industries being disrupted by technology, brick-and-mortar retailing being the best example. There is a mounting threat that the job market will overheat next year."
Tuesday, Dec. 5, 2017
MasterCard-MA announced that its Board of Directors has declared a quarterly cash dividend of 25 cents per share, a 14 percent increase over the previous dividend of 22 cents per share. The Board of Directors also approved a new share repurchase program, authorizing the company to repurchase up to $4 billion of its Class A common stock. The new share repurchase program will become effective at the completion of the company’s previously announced $4 billion share repurchase program. The company has approximately $1.5 billion remaining under the current program authorization.
AbbVie-ABBV announced positive top-line results from IMMhance, the fourth pivotal Phase 3 clinical trial evaluating risankizumab (150 mg) for the treatment of patients with moderate to severe plaque psoriasis. "These positive results are consistent with the previous data we have seen with risankizumab throughout the pivotal Phase 3 clinical trial program," said Michael Severino, M.D., executive vice president, research and development and chief scientific officer, AbbVie. "With a significant portion of risankizumab patients achieving high levels of skin clearance, these results add to the data supporting risankizumab's potential to be an impactful new treatment option for patients living with psoriasis. We look forward to sharing additional data from the pivotal trial program with the scientific community and regulatory authorities as we prepare to move forward with global regulatory submissions."
Starbucks Reserve Roastery opened in Shanghai, the first fully immersive coffee experience in Asia. The Roastery is the epitome of coffee and retail innovation for Starbucks-SBUX in China, the company’s fastest growing market with more than 3,000 stores across 136 cities, unprecedented for any global consumer brand and with immense growth opportunity. Starbucks already has over 600 stores in Shanghai – the largest number of stores in any city where Starbucks has a presence.
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Wednesday, Nov. 29, 2017
The Walt Disney Company-DIS Board of Directors announced a semi-annual cash dividend of $0.84 per share, payable January 11, 2018 to shareholders of record at the close of business on December 11, 2017. The company last paid a semi-annual dividend of $0.78 per share in July. “Disney’s incomparable collection of iconic brands and franchises continues to deliver strong returns, and we are pleased to increase our dividend to shareholders to $0.84 per share,” said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company. “This payment brings our total dividends for fiscal 2017 to $1.62 a share.”
Tuesday, Nov. 21, 2017
Hormel-HRL reported fourth quarter sales declined 5% to $2.5 billion with net income falling 11% to $218 million and EPS down 9% to $0.41. Volume declined 10%, cut by divestures and the impact of the 53rd week in fiscal 2016. By segment, Refrigerated Foods, representing 47% of net sales, declined 6% to $1.2 billion, primarily due to the divestiture of the Farmer John business which were partially offset by the acquisition of Fontanini Italian Meats and Sausages. Grocery Products, representing 20% of total sales, decreased 1% to $489 million on volume declines from SKIPPY® peanut butter and HORMEL® chili. Jennie-O Turkey Store sales, representing 19% of sales, declined 10% to $485 million, primarily due to the continued oversupply in the turkey industry, leading to lower turkey commodity prices. Specialty Foods sales declined 9% to $197 million on weak sales of MUSCLE MILK® protein products. International and Other sales increased 10% to $155 million due to the inclusion of sales of CERATTI® branded products, continued growth of SKIPPY® peanut butter, and strong exports of SPAM®. During the quarter, Hormel paid its 357th consecutive quarterly dividend and announced a 10% increase, marking 52 consecutive increases to the annual dividend. For the full fiscal 2017 year, revenues declined 4% to $9.2 billion with net income down 5% to $847 million and EPS down 4% to $1.57. Return on shareholders’ equity for the year was 17%. Hormel’s free cash flow increased 7% for fiscal 2017 to $793 million with the company paying $346 million in dividends and repurchasing $95 million of its shares. On October 31, Hormel announced it has entered into a definitive agreement to acquire Columbus Manufacturing, Inc., an authentic, premium deli meat and salami company. This strategic acquisition positions Hormel Foods as a total deli solutions provider and enhances its other strong deli brands. The purchase price is approximately $850 million. Total annual sales are approximately $300 million. Management provided full fiscal 2018 guidance of revenue in the range of $9.4 billion to $9.8 billion and EPS between $1.60 and $1.70, excluding the pending Columbus acquisition.
Friday, Nov. 17, 2017
Foot Locker announced an elevated partnership model with NIKE-NKE. The two companies are again joining forces to offer industry-leading experiences to consumers through innovative in-store and pop-up opportunities. The latest joint experience will come to life in New York in the form of a Sneakeasy – a window into what's next in NIKE and Jordan sneakers. House of Hoops by Foot Locker is now offering consumers the opportunity to get the hottest NIKE and Jordan basketball sneakers, as seen straight off NBA courts around the country. As top athletes sport special colorways of NIKE basketball shoes in game, consumers can find these player edition sneakers exclusively at select House of Hoops locations as early as the following day. Also as another of the several new elements elevating the consumer experience with NIKE, Foot Locker is hiring new experts, specially trained on NIKE in "NIKE Pro Athletes" and "NIKE Pro Leads" roles. These two new, full-time career opportunities were created by Foot Locker in partnership with NIKE to drive elevated customer experiences at Foot Locker by offering and sharing an emotional connection to the top NIKE products available in the market.
Thursday, Nov. 16, 2017
Ross Stores-ROST reported third quarter sales rose 8% to $3.3 billion with comparable store sales up a strong 4% as both increased traffic and the average ticket of a basket contributed to growth. Even though 15% of Ross Stores were closed for a period during the hurricanes in the quarter, post-storm sales surged resulting in minimal impact to overall sales from the hurricanes. Net earnings increased a dressy 12% during the quarter to $274 million with EPS up 16% to $.72, as operating margin improved 65 basis points to 13.3% due to a combinations of higher merchandise margin and leverage on above plan sales. Ross Stores continues to gain market share in a challenging retail environment. During the third quarter, Ross opened 30 new Ross Stores and 10 new dd’s Discounts stores ending the quarter with 1,627 locations in 37 states. Free cash flow increased 11% year-to-date to $898.8 million with the company paying $186.5 million in dividends during the same period. During the third quarter and the first nine months of fiscal 2017, the company repurchased 3.6 million and 10.5 million shares of its own common stock, respectively, for an aggregate price of $219 million at an average price of $60.83 per share in the quarter and $649 million or $61.81 per share year-to-date. Management remains on track to repurchase a total of $875 million of its stock for the full fiscal 2017 year. Given better than expected third quarter trends, the company raised its sales outlook with fourth quarter comparable store sales now expected to increase 2% to 3% with fourth quarter EPS expected in the range of $.88 to $.92, up 14%-15% over the prior year period which includes an $.08 benefit from the 53rd week in fiscal 2017. For the full fiscal year, EPS are expected in the range of $3.24 to $3.28.
NIKE-NKE announced that its Board of Directors has approved a quarterly cash dividend of $0.20 per share on the company’s outstanding Class A and Class B Common Stock. This represents an increase of 11 percent versus the prior quarterly dividend rate of $0.18 per share. The dividend declared today is payable on January 2, 2018 to shareholders of record at the close of business December 4, 2017. “This marks NIKE’s 16th consecutive year of increasing dividend payouts,” said Mark Parker, Chairman, President and CEO of NIKE, Inc. “Today’s announcement, combined with the four-year $12 billion share repurchase program we announced in 2015, demonstrates our continued confidence in generating strong cash flow and returns for shareholders through our new Consumer Direct Offense as we continue to invest in fueling sustainable, long-term growth and profitability.”
Brown-Forman-BFB announced that its Board of Directors increased its quarterly cash dividend on its Class A and Class B Common Stock by 8.2% to 19 3/4 cents per share from the prior quarter’s 18 1/4 cents per share. As a result, the indicated annual cash dividend will rise from $0.73 per share to $0.79 per share. Stockholders of record on December 7, 2017 will receive the cash dividend on January 2, 2018. Paul Varga, Chief Executive Officer of Brown-Forman said, "Our 8.2% dividend increase for calendar year 2018 marks the 34th consecutive year of dividend increases. Brown-Forman's strong cash flow generation and our continued prospects for growth underpin the quality and consistency of our dividend program." Brown-Forman has paid quarterly dividends for 72 consecutive years.
Wednesday, Nov. 15, 2017
Cisco Systems-CSCO reported first fiscal quarter revenues of $12.1 billion, down 2% year-over-year, with net income increasing 3% to $2.4 billion and EPS rising 4% to $0.48. A 1% uptick in service revenue to $3.1 billion was offset by a 3% decline in product revenue. Product revenue by category included a 4% decline in Infrastructure Platforms to $7 billion and a 16% decline in Other Products to $296 million. Applications and Security increased 6% and 8% to $1.2 billion and $585 million, respectively. During the quarter, Cisco continued to make progress on its multi-year transformation of the business from hardware to software and services with recurring revenue at 32% of total revenues, $5.2 billion deferred product revenue from recurring software and subscriptions and 52% of software revenue from subscriptions. By geographic segment, Americas revenues of $7.4 billion were down 1%, EMEA sales of $2.9 billion were down 3% and APJC sales of $1.9 billion were down 1%. During the quarter, Cisco generated $3.1 billion in cash flow from operations, up 13% year-over-year. Cisco returned more than $3 billion to shareholders during the quarter through repurchasing about 51 million shares at an average price of $31.80 per share for an aggregate purchase price of $1.6 billion and dividends of $1.4 billion. Cisco ended the quarter with $72 billion of cash on its sturdy balance sheet, with $69 billion of the cash held overseas. Looking ahead to the second quarter, the company expects revenues to increase by 1% to 3% with non-GAAP EPS of $0.58 to $0.60. The company announced the acquisitions of privately held Springpath, Inc. and privately held Perspica, Inc. The Springpath acquisition is designed to enhance Cisco’s ability to deliver next-generation data center innovation to customers. The Perspica acquisition provides machine learning and data processing technology which enables customers to analyze large amounts of application-related data.
Tuesday, Nov. 14, 2017
The TJX Companies-TJX reported a solid 6% increase in third quarter sales to $8.8 billion with net income growing 17% to $641 million and EPS up 20% to $1.00. Excluding the combined $.08 impact of last year’s debt extinguishment charge and pension settlement charge, EPS is up 10% year-over-year. Consolidated comparable store sales were flat during the quarter, driven by an increase in customer traffic at every TJX division, offset by a decline in average ticket and hurricane related impacts. By division, Marmaxx sales increased 1% to $5.3 billion on a 1% decline in comparable store sales. HomeGoods sales increased 14% year-over-year to $1.2 billion on a 3% increase in same store sales. TJX Canada sales increased 15% to $983 million, also on a 4% same store sales increase while TJX International sales increased 13% to $1.3 billion on a 1% same store sales increase. During the quarter, TJX increased its square footage by 5% year-over-year, adding 139 stores bringing the total to 4,052 stores. TJX’s new brand, HomeSense, launched their first three stores during the quarter. During the third quarter, the Company repurchased a total of $350 million of TJX stock, retiring 4.9 million shares. During the first nine months of the year, the Company repurchased a total of $1.25 billion of TJX stock, retiring 16.9 million shares and paid $567 million in dividends. During the first half of the year, TJX generated $1.1 billion in free cash flow, bringing the total cash at quarter’s end to nearly $2.4 billion on its sturdy balance sheet. Looking ahead to the full fiscal year, sales are expected in the $35.6 billion to $35.7 billion range on a 1% to 2% increase in same store sales. EPS are expected in the range of $3.91 to $3.93, up 13% to 14%, marked up in part by an $0.11 benefit from the 53rd week in the fiscal 2018 calendar. Excluding this benefit, adjusted EPS are expected in the range of $3.80 to $3.82, up 8%. The company now expects to repurchase approximately $1.5 to $1.8 billion of TJX stock in fiscal 2018.
Friday, Nov. 10, 2017
T. Rowe Price Group-TROW reported preliminary month-end assets under management of $971 billionas of October 31, 2017, representing a 20% increase since year end. Client transfers from mutual funds to other portfolios were $2.5 billion for the month-ended October 31, 2017.
Thursday, Nov. 9, 2017
Walt Disney-DIS reported fourth quarter revenues declined 3% to $12.8 billion with net income down 1% to $1.7 billion and EPS up 3% to $1.13 on lower shares outstanding. Earnings in the fourth quarter were adversely impacted by $275 million or $.11 per share due to the impact of the hurricanes on Disney World which closed for two days, a cancelled animated movie and a valuation adjustment for the BamTech acquisition. For the full fiscal 2017 year, revenues declined 1% to $55.1 billion with net income down 4% to $9 billion and EPS off 1% to $5.69. Return on shareholders’ equity for the year was a magical 21.7%. Parks and Resorts were the bright spot during the year with revenues up 8% to $18.4 billion and operating income up 14% to $3.8 billion. Internationally, Disney benefited from a full year of operations at Shanghai Disney Resort and higher attendance and guest spending at DisneyLand Paris driven by the 25th Anniversary celebration. The increase at domestic operations was due to higher guest spending for admissions to the theme parks and sailing on cruise ships. On the other hand, the company’s other business segments all experienced declines in revenues and operating earnings both in the fourth quarter and for the full year. The decrease at Media Networks was due to contractual rate increases for sports programming, lower advertising revenue and higher losses from equity investments in BamTech and Hulu. Lower Studio Entertainment and Consumer Products & Interactive Media results were due to tough comparisons with the prior year period’s exceptional performance of the Star Wars franchise. Free cash flow increased 4% to $8.7 billion during the year. The company invested $3.6 billion in capital expenditures in 2017 with management planning to bump the capital expenditures up by another $1 billion in fiscal 2018 as they develop Star War Lands and a new Toy Story Land at the theme parks. In addition, the company paid $2.4 billion in dividends and repurchased 89.9 million of its own shares for $9.4 billion at an average cost of $104.56 per share in fiscal 2017. Since year end, the company has repurchased and additional 6.5 million shares for $650 million at an average price of about $100 per share with the company planning on repurchasing $6 billion of its stock in fiscal 2018. During fiscal 2018, earnings will be suppressed by higher cable expenses related to the BamTech consolidation and increased equity losses from Hulu as they continue to invest in content spending. Management’s highest priority in fiscal 2018 is streaming its sports and video content in scale direct to consumers. Management would not comment on the 21st Century Fox acquisition rumors by Disney.
Maximus-MMS reported fourth quarter revenues were down slightly to $620.9 million but greater than expected principally due to strong Health Segment delivery and higher level of pass-through revenue from Australian operations. Net income and EPS during the quarter each rose 5% to $53.3 million and $.81, respectively, benefiting from a lower income tax rate during the quarter. The company’s capital allocation priorities remain first to use cash for selective acquisitions, then to pay the dividend and then for opportunistic share repurchases. Year-to-date signed contract awards at 9/30/17 totaled $2.8 billion with contracts pending (awarded but unsigned) totaling $1.3 billion. The sales pipeline at quarter end was $2.4 billion comprised of $624 million in proposals pending, $545 million in proposals in preparation and $1.2 billion in opportunities tracking. The pipeline is lower compared to the third quarter of fiscal 2017 due to the high level of contracts that converted into new awards. Maximus continues to feel lingering effects of industry pause in the federal market due to the transition in Washington. For the full fiscal 2017 year, revenues rose 2% to $2.45 billion with net income up 17% to $209.4 million and EPS up 18% to $3.17 which includes approximately $.14 of tax benefits. Return on shareholders’ equity for the year was 22%. Free cash flow more than doubled during the year to $313 million with the company repaying most of their credit facility and long-term debt, while also paying $11.7 million in dividends and repurchasing $28.9 million of its own shares. While no share repurchases occurred during the fourth quarter, the company has $110 million remaining authorized for future share repurchases. Management’s fiscal 2018 guidance is for revenue in the range of $2.48 billion to $2.55 billion with EPS in the range of $2.95 to $3.15, which includes the detrimental impacts from new contracts in startup of approximately $0.12 per share.
Tuesday, Nov. 7, 2017
Faiveley Transport, a subsidiary of Wabtec-WAB, has been awarded contracts worth more than $150 million by RailConnect NSW, a consortium consisting of the Hyundai Rotem Company, UGL Limited and Mitsubishi Electric Australia, to supply a complete range of railway systems and maintenance services for the 56 train sets (512 cars) of the New Intercity Fleet, New South Wales Australia.
The board of directors of ADP-ADP approved a $0.06 increase in the quarterly cash dividend to an annual rate of $2.52 per share, Carlos Rodriguez, ADP’s president and chief executive officer, announced today. The increased cash dividend marks the 43rd consecutive year in which ADP has raised its quarterly dividend. “This year’s 10.5% increase in our quarterly dividend is a strong signal of the board’s confidence in ADP’s future,” said Carlos Rodriguez.
Monday, Nov. 6, 2017
The Priceline Group-PCLN reported third quarter revenues rose 20.1% to $4.4 billion with net income and EPS each more than tripling to $1.7 billion and $34.43, respectively, as last year’s results included a significant $941 million impairment of goodwill charge related to the OpenTable acquisition. During the third quarter of 2017, the company’s global accommodation business booked 178 million room nights, up 19% from the prior year period. Booking.com had 1.5 million properties on its platform, up 41% over last year, which represents 26.9 million potentially bookable rooms, which management believes is the largest and most diverse selection of instantly bookable accommodations in the world. Third quarter gross travel bookings were $21.8 billion, an increase of 18% over a year ago. Gross profit increased 22% for the third quarter to $4.4 billion. Free cash flow increased 20% during the first nine months of the year to $3.3 billion with the company repurchasing $1.1 billion of its own shares during the same time period. Priceline ended the quarter with $18.4 billion in cash and investments and $8.8 billion of long-term debt on its strong balance sheet. For the fourth quarter, management expects its growth rate to decelerate due to the law of large numbers and difficult comparisons with the prior year. In addition, the company is investing heavily in brand advertising to drive traffic to its websites while also investing in operating expenses to support technology investments and the continued strong growth of vacation rental properties on its platforms. Vacation rental listings jumped 58% to 816,000 properties. For the fourth quarter, management expects total gross travel bookings to increase 9.5% to 14.5% with room nights booked expected to grow 8% to 13%. Gross profit in the fourth quarter is expected to increase 10.5% to 15.5% with operating margin pressure leading to fourth quarter EPS declining about 4% to $12.60 to $13.20.
Fastenal-FAST reported net sales for October rose 19.2% to $399.7 million with daily sales up 13.8% to $18.2 million. Manufacturing daily sales rose 15.8% while non-residential construction sales rose 6%. Daily sales growth by product line was 11.5% for fasteners and 15.5% for other products. Year-to-date, Fastenal has opened 17 new branches ending the month with 2,420 locations. Total personnel increased 3.5% to 20,550.
Friday, Nov. 3, 2017
Berkshire Hathaway-BRKB reported the company’s net worth during the first nine months of 2017 increased by 8.9% with book value equal to $187,435 per Class A share as of 9/30/17. The $25.3 billion increase in shareholders’ equity was due to the company’s $12.4 billion in net earnings during the first nine months and approximately $10.9 billion of gains in other comprehensive income related to changes in unrealized investment appreciation and $1.9 billion of foreign currency translation gains.
Berkshire’s five major investment holdings, representing 62% of total equities, had mixed results since 12-31-16. Wells Fargo’s stock declined 3% to $26.9 billion amid continued negative headlines on business practices and increased legal costs. Apple became the apple of Buffett’s eye as the position size tripled since year end to $21.3 billion through appreciation and additional purchases. Since year end, the American Express position charged 22% higher to $13.7 billion and Coca-Cola’s stock popped 8% to $18 billion. Bank of America traded places with IBM in the top 5 positions as IBM shares had been trimmed back and Bank of America was valued at $17.7 billion at quarter end after Berkshire exercised all of their warrants and acquired 700,000 shares of Bank of America common stock on 8/24/17.
Berkshire’s third quarter operating revenues rose 7.5% to $59.6 billion with all operating business groups contributing to the growth led by 18% revenue growth from the insurance group and 12% growth from the Finance and Financial Products group. Net income declined 43% during the quarter to $4.1 billion. Operating earnings (excluding investment and derivative gains/losses) declined 29% during the second quarter to $3.4 billion, due primarily to pre-tax insurance underwriting losses of approximately $3 billion ($1.95 billion after-tax) attributable to three major hurricanes (Harvey, Irma and Maria) and an earthquake in Mexico.
Berkshire’s insurance underwriting operations generated a $1.4 billion loss during the second quarter compared to a $272 million profit in the prior year period. Insurance investment income was 23% higher at $1 billion during the quarter, reflecting higher interest rates on short-term investments and certain fixed-income investments as well as higher dividend income. The float of the insurance operations approximated a whopping $113 billion as of 9/30/17, an increase of $22 billion since 12/31/16 related in large part to the AIG deal and estimated liabilities related to catastrophe events. The average cost of float in the first nine months of the year was about 2.5% due to the aggregate pre-tax underwriting losses of $2.6 billion.
Burlington Northern Santa Fe’s (BNSF) revenues rose 3% during the third quarter to $5.3 billion with net earnings chugging 2% higher to $1.0 billion. During the first nine months, BNSF generated a 2% comparative increase in average revenue per car/unit and a 6% increase in volume. Overall volume growth moderated in the third quarter primarily due to lower grain exports, and Berkshire expects continued moderation in the fourth quarter.
Berkshire Hathaway Energy reported revenues increased 3% to $5.4 billion during the third quarter led by 17% growth in the real estate brokerage business to $965 million due in part to acquisitions and 6% growth at NV Energy to $1.1 billion. Net earnings charged 3% higher during the quarter to $963 million due to earnings improvements at PacifiCorp, MidAmerican Energy and NV Energy.
Berkshire’s manufacturing businesses reported a 6% increase in revenue growth in the quarter to $12.8 billion with operating earnings relatively unchanged at $2.0 billion. The results reflected in part the acquisitions of Precision Castparts and Duracell. Growth was led by the Building products unit as revenues increased 10% to $3.1 billion due to bolt-on acquisitions by Shaw and MiTek and sales volume increases by MiTek, Benjamin Moore and Johns Mansville. Consumer products led profit growth with a 28% gain to $348 million in pre-tax earnings due to increased earnings from Duracell and Forest River.
Service and Retailing revenues rose 4% during the quarter to $19.3 billion with pre-tax earnings down 3% to $536 million. Service revenues rose 6% to $2.8 billion with operating earnings up 3% to $315 million driven by TTI, NetJets and FlightSafety. Retailing revenues rose 1% during the quarter to $3.8 billion with operating earnings up 22% to $176 million, reflecting higher earnings from Berkshire Hathaway Automotive (BHA). McLane’s revenues rose 4% during the quarter to $12.8 billion due to a increase in grocery sales. However, operating earnings declined 58% to $45 million due to significant pricing pressures in an increasingly competitive grocery business environment.
Finance and Financial Products revenues rose 12% during the quarter to $2.2 billion with net income increasing 1% to $341 million. The revenue increase was due to a 20% increase in home sales at Clayton Homes, reflecting higher unit sales and higher average prices. Earnings reflected improved growth at Clayton Homes and Other businesses in the unit, partially offset by weakness in the Transportation equipment leasing business.
Berkshire’s balance sheet continues to reflect significant liquidity and a strong capital base of $308.3 billion as of 9/30/17. Excluding utility and finance investments, Berkshire ended the quarter with $289.5 billion in investments allocated approximately 52.4% to equities ($151.6 billion), 7.7% to fixed-income investments ($22.2 billion), 1.1% to other investments, including preferred stock in Restaurant Brands International ($3.3 billion), 5.4% to Kraft Heinz ($15.7 billion, with a fair value of $25.2 billion as of 9-30-17), and 33.4% in cash and equivalents ($96.6 billion).
Berkshire’s financial strength allows Buffett to make significant investments and acquisitions. Apple has been the biggest new recent investment now worth about $21 billion. Berkshire expects the acquisition of Medical Liability Mutual Insurance Company with 6-30-17 assets and policyholders’ surplus of $5.5 billion and $2.1 billion, respectively, to close in early 2018. On July 7, 2017, Berkshire Hathaway Energy agreed to acquire 80.3% of Oncor Electric Delivery Company for $9 billion, but the deal was terminated by Energy Future Holding. On Oct. 3, 2017, Berkshire entered into an agreement to acquire a 38.6% interest in Pilot Flying J, one of the largest operators of travel centers in North America with approximately $20 billion in annual revenues with Berkshire becoming a majority owner in 2023 when they plan to acquire an additional 41.4% interest in Pilot Flying J.
Free cash flow increased 86% during the first nine months of the year to $29.1 billion, due primarily to the big boost to float in part from the AIG deal. During the first nine months, capital expenditures declined 11% to approximately $8.4 billion, including $3.2 billion by Berkshire Hathaway Energy and $2.4 billion by BNSF. Berkshire Hathaway forecasts aggregate capital expenditures of about $2.6 billion over the balance of 2017 for these two businesses. During the first nine months of 2017, Berkshire purchased a net $5.8 billion in Treasury Bills and fixed-income investments and purchased a net $4.4 billion of equity securities, reflecting in part the purchase of Apple and the sale of IBM shares. There were no share repurchases of Berkshire Hathaway stock.
Berkshire Hathaway’s stock appears fairly valued, currently trading at $280,470 per A share and $187 per B share. Based on current business fundamentals, we expect Berkshire’s A shares to trade between $227,000-$292,000 per share and the B shares to trade between $151-$195 per share. Hold.
Thursday, Nov. 2, 2017
Apple-AAPL reported fourth quarter revenues rose 12% to $52.6 billion with net income up 19% to $10.7 billion and EPS up 24% to $2.07 resulting in a record fourth quarter. International sales accounted for 62% of the quarter’s revenues. For the full fiscal 2017 year, revenues rose 6% to $229.2 billion with net income up 6% to $48.4 billion and EPS up 10% to $9.21. Return on shareholders’ equity for the year was an impressive 36.1%. The company ended the year in a strong fashion with growth in all product categories and the best quarter ever for Services, which grew revenues 34% in the quarter to a record $8.5 billion thanks to strong sales in the App Store, icloudn, and Apple Music which saw subscriptions jump 75% in the quarter. iPhone revenues grew 2% to $28.8 billion during the quarter with units up 3% to 46.7 million phones sold. iPad revenues grew 14% to $4.8 billion with unit growth of 11% to 10.3 million units sold and growth in all geographic regions as the iPad boasts a better than 50% market share in the tablet market. Mac revenues grew 25% to $7.2 billion on 10% unit growth to 5.3 million units as the Mac once again gained market share. Other products, including the Apple Watch and Apple TV, grew revenues 36% during the quarter to $3.2 billion. Revenue growth around the world was broad based with double-digit growth in the Americas, Europe and Greater China, which returned to growth with a 12% increase in revenues to $9.8 billion during the quarter. Free cash flow declined 4% during the year to $51.1 billion due to working capital fluctuations. For the full year, the company paid $12.8 billion in dividends and repurchased $32.9 billion of its own shares, including 29.1 million shares repurchased for $4.5 billion in the fourth quarter at a price of about $154.54 per share. Apple ended the year with $268.9 billion in cash and investments and $97.2 billion of long-term debt on its balance sheet. Apple has completed $234 billion of its authorized $300 billion capital return program to shareholders. Apple expects this holiday season to result in the biggest quarter ever for the company with its exciting line up of new products, including the iPhone 8 and iPhone 8 Plus, Apple Watch Series 3, Apple TV 4K and the recent launch of the iPhone X which is experiencing very strong orders. For the first quarter of fiscal 2018, Apple is forecasting revenues in the range of $84 billion to $87 billion with gross margin between 38% to 38.5%, operating expenses between $7.65 billion and $7.75 billion, other income of $600 million and a tax rate of 25.5%.
Starbucks-SBUX reported fourth quarter sales dipped slightly from last year to $5.7 billion with net income of $788.5 million, down 1.6%, and EPS of $0.54, flat compared to last year. Excluding the extra week in 2016, sales grew 8%. Global comparable store sales increased 2%, or 3% excluding the impact of the hurricanes, driven by a 2% increase in average ticket and a 1% increase in transactions. During the quarter, Starbucks opened 603 new stores, including the closure of 54 Teavana-branded stores. Operating margins declined 360 basis points, squeezed by increased labor costs, the impact of the hurricanes, product mix, inventory write-offs and costs related to the Teavana-branded store closures. For the year, revenues grew to $22.4 billion, up 5%, with net income of $2.9 billion, up 2.4%, and EPS of $1.97, up 3.7%. Global comparable store sales increased 3%, boosted by a 7% comp growth in China. During the fiscal year, Starbucks rang up an impressive 52.9% return on shareholders’ equity. The company generated $2.65 billion in free cash flow during fiscal 2017, down 15% from last year, primarily due to increased capital expenditures and working capital demands. Starbucks returned nearly $3.5 billion to shareholders in fiscal 2017 through share repurchases of $2 billion and dividends of $1.5 billion. The Board announced a 20% increase in the fiscal 2018 quarterly dividend to $0.30 per share and that the company expects to return $15 billion to shareholders through dividends and share buybacks during the next three years, financed primarily by Starbuck’s robust cash flows. Starbucks also announced it will sell its TAZO tea brand to Unilever for $384 million, driving a single tea brand strategy with its super-premium tea brand, Teavana. Given that Starbucks has failed to meet its long-term targets during the past few years, the company revised them. Going forward, annual global comparable store sales are expected to grow 3% to 5% generating revenue growth in the high-single-digits with EPS growth of 12% or greater, down from the historical EPS growth target of 15% to 20%. Starbucks targets a 25% or greater return on invested capital going forward.
Fluor-FLR reported third quarter results with revenues up 2% to $4.9 billion. The company reported earnings during the quarter of $94 million or $.67 per share compared to $5 million or $.03 per share in the prior year period. By segment, Energy, Chemicals & Mining segment revenue was up 4% to $2.4 billion with profit of $104 million, compared to a segment loss of $60 million a year ago. Industrial, Infrastructure & Power segment revenues were flat at $1.1 billion with segment profit up nearly 18% to $33 million. The Government segment revenue was up 12.5% to $766 million with segment profit up more than 15% to $30 million and Diversified Services segment revenue declined 1.3% to $624 million with segment profit increasing 20% to $35 million. New awards for the quarter were $3.8 billion, including $2.6 billion in Energy, Chemicals & Mining and $628 million in Industrial, Infrastructure & Power. Consolidated ending backlog was $32.9 billion compared to $44.3 billion in the prior year period. Free cash flow increased 16.5% in the first nine months to $334.3 million with the company paying $88.6 million in dividends, which remained flat with the prior year period. The company is narrowing its 2017 guidance for EPS to a range of $1.50 to $1.60, from the previous range of $1.40 to $1.70. Management is cautiously optimistic that the industry is moving from trough to recovery.
Becton Dickinson-BDX reported fourth fiscal quarter revenues of $3.2 billion, down 2% from last year’s fourth quarter, primarily due to the Respiratory Solutions business divestiture that was completed in October 2016. On a comparable, currency-neutral basis, fourth quarter revenues grew 4.4%. Becton Dickinson reported net income of $289 million, or $1.24 per share, compared to net income of $19 million, or $0.09 per share, reported last year. This increase is primarily due to restructuring and other charges incurred in the prior-year period related to the attainment of cost synergies associated with the acquisition of CareFusion. For the full fiscal 2017 year, revenues decreased 3.1% to $12.1 billion with net income up 12.6% to $1.1 billion and EPS up 2.4% to $4.60. By business segment, BD Medical revenues fell 5.3% to $2.1 billion in the wake of the Respiratory Solutions divestiture. Comparable, currency-neutral revenues increased 3.9% reflecting strong performance in the Medication Management Solutions and Diabetes Care units, and solid performance in the Pharmaceutical Systems unit. BD Life Sciences sales of 1.1 billion increased 5.5% year-over-year, reflecting strong performance across the Biosciences, Diagnostic Systems and Preanalytical Systems units. Management continued to execute on the CareFusion commitments and will leverage lessons learned during the process in the C.R. Bard acquisition, which is expected to close before calendar year-end. Becton Dickinson expects full fiscal year 2018 revenues, excluding the C.R. Bard acquisition, to increase 5% to 6 and adjusted EPS is expected in the $10.55 and $10.65 range, up about 12%.
Automatic Data Processing-ADP reported fiscal first quarter revenues rose 6% to $3.1 billion with net income up 9% to $401.5 million and EPS up 11% to $.90. Client retention increased 160 basis points for the quarter ahead of management’s expectations, reflecting the company’s continued progress in improving solutions for clients. The company has upgraded more than 83% of clients to strategic cloud platforms. Worldwide new business bookings declined 3% for the quarter in line with the company’s expectations with management reaffirming its outlook for 5% to 7% growth in new business bookings for the full year. Interest on funds held for clients increased 11% to $99 million in the quarter as average client fund balances increased 6% in the quarter to $21.2 billion. The average interest yield on client funds was 1.9% up 10 basis points compared to the prior year. Subsequent to quarter end, ADP acquired Global Cash Card, a leader in digital payments, including paycards and other electronic accounts for approximately $490 million. Free cash flow in the first quarter increased 62% to $95.1 million due to lower capital expenditures. During the first quarter, the company paid $253.7 million in dividends and repurchased $250.1 million of its own shares. Management raised their outlook for full year fiscal 2018 revenue growth to a range of 6%-8% compared to the prior forecast of 5% to 6% due in part to the Global Cash Card acquisition and more favorable foreign exchange. ADP now expects full year EPS to be down 1% to up 1% compared to the prior forecast of down 3% to down 1% with adjusted EPS growth now expected in the range of 5% to 7% compared to the prior forecast of 2% to 4% growth.
Wednesday, Nov. 1, 2017
The Cheesecake Factory – CAKE reported third quarter sales declined 1% to $555.4 million with net income falling 24% to $26.4 million and EPS dropping 20% to $0.56. Comparable restaurant sales declined 2.3%, including a 0.8% negative impact from Hurricanes Harvey, Irma and Maria. Excluding this weather impact, comparable restaurant sales declined 1.5% due to a decline in mall walk-in traffic. The company opened one new store during the quarter compared with no new stores opened during last year’s third quarter. Operating income fell 270 basis points, squeezed by higher hourly wage rates, increased repair and maintenance costs and higher marketing spend. Cash flow from operations for the first nine months of 2017 was about $154 million and free cash flow was $72 million, down 51% from last year. The company drew $30 million on its revolving credit to support third quarter repurchase activity. Looking ahead to the fourth quarter, Cheesecake Factory expects same store sales to be in the range of down 1% to flat. EPS are expected in the range of $0.50 and $0.54, down 21% year-over-year at the midpoint. For the full 2017 year, comparable sales are expected to decline by 1% and EPS are expected in the $2.57 and $2.61 range, down 8% from 2016, including the 4 cent negative hurricane impact in the third quarter and the continuing Puerto Rico impact during the fourth quarter. Total 2017 capital expenditures are expected in the $110 million to $115 million range and share repurchases are expected in the $125 million to $150 million range. Together with the dividend, Cheesecake Factory plans to return 100% of its free cash flow, expected between $175 million and $200 million, to shareholders in 2017. For fiscal 2018, Cheesecake Factory expects EPS of between $2.50 and $2.75 based on an assumed comparable sales range of flat to up 1%. While this EPS range reflects industry cost pressures, it also reflects a stabilization in sales trends during 2018. On the cost side, food inflation of 3% is expected across most categories and wage rate inflation of about 5% is expected in 2018, consistent with the level experienced this year. Wage cost inflation is expected to be partially offset by more market-based pricing in 2018 to help mitigate rising labor costs. Cheesecake Factory expects to open as many as four to six company-owned restaurants in 2018, including one Grand Lux Café and as many as four to five restaurants internationally under licensing agreements in 2018, representing total unit growth of 3% to 4%.
Qualcomm-QCOM reported fourth quarter revenues declined 5% to $5.9 billion with net income plummeting 89% to $200 million and EPS diving 90% to $.11. For the full fiscal 2017 year, revenues declined 5% to $22.3 billion with net income and EPS each down 57% to $2.5 billion and $1.65, respectively. These results reflect the negative impact of significant regulatory and arbitration charges and actions taken by Apple and its contract manufacturers as well as a dispute with another licensee, who underpaid royalties in the second quarter and did not report or pay royalties due in the third and fourth quarter. Due to the complex litigation with these parties, management does not expect the disputes will be resolved anytime soon. Given the lower earnings, return on shareholders’ equity declined to a subpar 8% for fiscal 2017. Free cash flow also declined 42% for the year to $4 billion. During the year, the company paid $3.3 billion in dividends and repurchased $1.3 billion of its own shares. On a cumulative basis, Qualcomm has returned $58.7 billion to shareholders through dividends and share repurchases with $1.6 billion remaining authorized for future share repurchases. The company ended the year with $38.6 billion in cash and investments. This cash is earmarked for the $38 billion acquisition of NXP Semiconductors N.V., which management hopefully expects to close by calendar year end, although the transaction may close in early 2018. Management’s outlook for the first quarter of fiscal 2018 is for revenue in the range of $5.5 billion to $6.3 billion representing a decrease of 8% to an increase of 5% with GAAP EPS expected in the range of $.63-$.73, representing an increase of 37% to 59%. Excluding acquisition related and other items in the prior year period, non-GAAP EPS are expected in the range of $.85-$.95, representing a decline of 20% to 29%.
Cognizant Technology Solutions-CTSH reported third quarter sales increased a healthy 9.1% to $3.8 billion with net income and EPS increasing 11.5% and 15.1% to $495 million and $0.84, respectively. Consulting & Technology Service revenue increased 11.3% and Outsourcing Services increased 6.1 % with 38% of revenue from fixed price contracts. Two of Cognizant’s four segments delivered double-digit growth with Products and Resources (manufacturing and logistics) up 14% to $774 million and Communications, Media and Technology up 18.2% to $480 million. Healthcare revenues increased 9.3% to $1.1 billion and the segment completed the acquisitions of TMG Health and Top Tier Consulting. Financial Services revenues increased 3.8% to $1.4 billion, largely driven by insurance companies and double-digit growth in mid-tier banking. Quarter-end headcount stood at 256,100, down 700 mainly in response to the company’s realignment program. Cognizant’s balance sheet remains very healthy with $4.7 billion of cash and short-term investments. Cognizant completed its $1.5 billion accelerated share repurchase program in the third quarter and has committed to repurchasing an additional $1.2 billion. Year-to-date, Cognizant has returned more than $1.7 billion to shareholders through dividends of $179 million and share repurchases of nearly $1.6 billion. Given the strong first three quarters, management raised the low end of its full year revenue guidance to $14.78 to $14.84 billion from $14.7 to $14.84 billion and adjusted EPS of at least $3.70.
Private sector employment increased by 235,000 jobs from September to October according to the October ADP National Employment Report®. "The job market remains healthy and hiring bounced back with one of the best performances we've seen all year," said Ahu Yildirmaz, vice president and co-head of the ADP-ADP Research Institute. "Although the service providing sector was hard hit last month due to the weather, we saw significant growth in professional services, especially in the higher paid professional technical jobs. Additionally, small businesses rebounded well from the impact of Hurricanes Harvey and Irma, posting very strong gains." Mark Zandi, chief economist of Moody's Analytics, said, "The job market rebounded strongly from the hit it took from Hurricanes Harvey and Irma. Resurgence in construction jobs shows the rebuilding is already in full swing. Looking through the hurricane-created volatility, job growth is robust."
AbbVie-ABBV in cooperation with Neurocrine Biosciences, Inc. announced detailed results from two replicate Phase 3 extension studies evaluating the long-term efficacy and safety of elagolix, an investigational, orally administered gonadotropin-releasing hormone (GnRH) antagonist, being evaluated for the management of endometriosis with associated pain. In the extension studies, elagolix demonstrated sustained reduction in average monthly menstrual pelvic pain and non-menstrual pelvic pain in women through the 12-month treatment period. The safety and tolerability of elagolix was consistent with the anticipated effects of reduced estradiol levels and no new safety concerns were identified with elagolix use for the 12-month treatment period. "Endometriosis is a chronic and painful disease," said Eric Surrey, M.D., study investigator and Medical Director, Colorado Center of Reproductive Medicine. "The results presented today are positive for patients and are consistent with previous data that demonstrate elagolix has the potential to be an important non-surgical treatment option for women suffering from the most prevalent symptoms of endometriosis."
Tuesday, Oct. 31, 2017
MasterCard-MA reported record third quarter results as net revenues grew 18% to $3.4 billion with net income charging 21% higher to $1.4 billion and EPS up 24% to $1.34. Acquisitions contributed 2.5% to this growth. Switched transactions increased 17% to 16.9 billion with a 10% increase in gross dollar volume on a local currency basis to $1.4 trillion. Cross-border volume increased 15% on a local currency basis. As of 9/30/17, the company’s customers had issued 2.4 billion Mastercard and Maestro-branded cards. Free cash flow increased 6% year-to-date to $3.6 billion. During the first nine months, the company paid $709 million in dividends and repurchased $2.7 billion of its own shares, including 6.4 million shares at a cost of $838 million or an average price of about $130.94 per share. Subsequent to quarter end, MasterCard repurchased an additional 2 million shares at a cost of $286 million, which leaves $2 billion remaining under current share repurchase authorization. The outlook for the full 2017 year is for revenue growth in the mid-teens and adjusted operating expenses in the high single digit range. Economic growth around the world was generally positive which led to MasterCard’s accelerated volume growth as the company gained market share outside of the U.S. In the U.S., steady economic growth was complemented by low unemployment and inflation with U.S. retail sales up 4.2% in the third quarter despite the hurricanes. In Europe, economic growth is steady with an uptrend in consumer confidence. The U.K. is experiencing concerns about Brexit, although unemployment is low. In Latin America, there are signs of improvement with Mexico’s economic growth stable despite the earthquake and Brazil recovering from its recession. In Asia, there is steady economic growth with China additive to MasterCard’s volume.
Hormel Foods-HRL announced it has entered into a definitive agreement to acquire Columbus Manufacturing, Inc., an authentic, premium deli meat and salami company, from Chicago-based Arbor Investments. This strategic acquisition positions Hormel Foods as a total deli solutions provider and enhances its other strong deli brands such as Hormel®, Jennie-O®, Applegate®, and DiLusso®. The purchase price is approximately $850 million. Total annual sales are approximately $300 million with an expected growth rate in excess of 5 percent. Hormel Foods expects this acquisition to be modestly accretive to earnings per share in fiscal 2018. Full-year accretion in fiscal 2019 is expected to be between 6 to 8 cents per share.
Friday, Oct. 27, 2017
AbbVie-ABBV reported third quarter revenue rose 9% to $7 billion with net income up 2% to $1.6 billion and EPS up 4% to $1.01. Adjusted revenue and EPS rose 9% and 17%, respectively. Third quarter global Humira sales increased 16% to $4.7 billion, driven by 19% sales of Humira in the U.S. Third quarter global Imbruvica revenues increased 37% to $688 million. AbbVie remains committed to returning cash to shareholders through growing dividends and substantial share repurchases. Accordingly, the company announced an 11% increase in its dividend to an annualized rate of $2.84 for fiscal 2018, which represents a healthy 3% dividend yield based on current valuations. Since its inception in 2013, AbbVie has increased its dividend more than 77%. AbbVie raised its 2017 EPS outlook to $4.27-$4.29 with sales expected to increase 10% and adjusted EPS expected to grow 15% at the midpoint of an expected $5.53 to $5.5.5 range. Cash flow from operations is expected to exceed $8.5 billion in 2017. For 2018, adjusted EPS guidance was forecast in the range of $6.37 to $6.57, reflecting growth of about 15% to 19%. AbbVie provided an update on its long-term strategic and financial objectives with total sales expected to approximate $37 billion by 2020. Global Humira sales are expected to approach $21 billion by 2020 and contribute significant cash flow through 2025 and beyond. Non-Humira sales are expected to compound at an annual rate of 17.6% through 2025 and grow from $9.6 billion in 2017 to $35 billion in 2025. Operating margin is expected to increase 100-200 basis points per year to 50% by 2020 with double-digit adjusted EPS growth expected through that time. The pipeline is expected to contribute nearly $30 billion to revenues by 2024 with the company on track to launch more than 20 new products by 2020.
Bioverativ-BIVV reported third quarter revenues rose a healthy 27.2% to $291.6 million with net income and EPS down 16% to $67.9 million and $.63, respectively. Net income and EPS for third quarter 2016 were greatly increased by the realization of deferred tax assets resulting in an effective tax rate of 1.6% compared to the effective rate of 35.3% during the current quarter. ELOCTATE revenues increased 41% to $186.3 million and remained on a strong trajectory due to high patient retention, continued capture of patients switching to long-acting therapies, and the market shift to prophylactic treatment. ALPROLIX revenue rose 4% to $86.5 million despite increasing competition in hemophilia B. Collaboration revenues increased 39% to $16.8 million. During the quarter, Bioverativ entered into strategic research collaborations with Bicycle Therapeutics to develop innovative therapies to treat rare blood disorders and Invicro, LLC focused on expanding the use and adoption of leading imaging technologies to improve the diagnosis and management of joint disease in people with hemophilia. As of quarter end, Bioverativ had $224.1 million of cash on its solid balance sheet.
Thursday, Oct. 26, 2017
Alphabet-GOOGL reported third quarter revenues rose 24% to $27.8 billion with net income up 33% to $6.7 billion and EPS increasing 32% to $9.57. Revenue growth was broad based on a geographic basis with strong double-digit growth generated in all major geographic regions led by 33% growth in Other Americas and 29% growth in APAC. Advertising revenues increased 21% during the quarter to $24.1 billion. Aggregate paid clicks increased 47% with the aggregate cost per click declining 18%. Traffic acquisition costs (TAC) to Google Network Members and distribution partners increased 31.2% to $5.5 billion. Other Bets revenues rose 53% during the quarter to $302 million with the operating loss narrowing to $812 million. Headcount increased 11% over the prior year period to 78,101 Googlers as the company continues to invest in the cloud, YouTube and home hardware. Management believes these areas will provide strong growth for the company as ecommerce providers interested in cloud are working much more closely with Google to provide a seamless shopping experience and new categories, like Google Home, focus on improving the buyer experience. YouTube has more than 1.5 billion daily users on mobile and gets over 100 million hours of watch time in living rooms. Free cash flow decreased 8% during the first nine months of the year to $17.9 billion with the company ending the quarter with $100 billion of cash and investments on its fortress balance sheet with 60% of the cash held outside of the U.S. During the first nine months of the year, Alphabet repurchased $2.7 billion of its own shares but organic growth remains the priority for capital allocation.
Microsoft-MSFT reported first quarter revenue rose 12% to $24.5 billion with net income powering 16% higher to $6.6 billion and EPS up 17% to $.84. Revenue growth was driven by 28% growth in Productivity and Business Processes to $8.2 billion thanks to strong growth by Office 365 and LinkedIn, which contributed $1.1 billion to revenues and is expected to be accretive this year. Revenue in Intelligent Cloud increased 14% to $6.9 billion, driven by 17% growth in server products and cloud services revenues thanks to 90% growth in Azure revenue. Revenue in More Personal Computing was $9.4 billion and relatively unchanged with Surface revenue up 12% thanks to the new Surface laptop and search advertising revenue up 15% driven by higher revenue per search and search volume, while gaming revenue was flat. This quarter, Microsoft exceeded $20 billion in the commercial cloud annual revenue run rate, outpacing the goal set just two years ago. Free cash flow increased 10% during the quarter to $10.3 billion with the company paying $3 billion in dividends, reflecting the recent 8% increase in the dividend, and $2.6 billion in share repurchases, ending the quarter with a whopping $138.5 billion in cash and investments. For the second quarter, Microsoft expects revenue in Productivity and Business Processes in the range of $8.75-$8.95 billion, revenues in Intelligent Cloud in the range of $7.35-$7.55 billion and revenues in More Personal Computing in the range of $11.7-$12.1 billion. Cost of goods sold in the second quarter is expected in the $11-$11.2 billion range with operating expenses expected in the range of $9.1-$9.2 billion. For the full fiscal 2018 year, gross and operating margins are expected to be better than previously forecast.
Stryker-SYK reported healthy third quarter results with sales up 6% to $3 billion, earnings up 22% to $434 million and EPS up 21% to $1.14. Excluding costs related to amortization, product recalls, restructuring and acquisitions, net earnings increased 10%. By segment, Orthopaedics sales of $1.1 billion increased 5%, driven by a 6.5% unit volume increase (despite procedure cancellations in Texas and Florida due to the hurricanes), which were partially offset by 2% from lower prices. During the quarter, Stryker sold 33 MAKO robots, including 23 in the U.S., which powered knee volume increases. Six hundred surgeons have been trained to perform MAKO total knee replacements, which total 9,400 since product launch. Ongoing trials indicate that MAKO may improve operating room efficiency and reduce the need for revision surgeries. MedSurg sales of $1.3 billion increased 7%, including 6% increased unit volume (including negative impacts of 4.6% related to Sage product recalls and 0.8% related to hurricanes). Neurotechnology and Spine net sales of $500 million increased 7% as softness in many product areas was more than offset by high demand for Stryker’s 3D-printed Tritanium products. Year-to-date, Stryker generated $468 million in free cash flow, down from $910 million last year on recall-related payments of $492 million. Stryker ended the quarter with $2.7 billion in cash, including 80% held overseas, and $6.6 billion in long-term debt. Year-to-date , Stryker has returned more than $700 million to shareholders through dividends of $477 million and share repurchases of $230 million. In September, Stryker completed its $674 million purchase of NOVADAQ, a leading developer of fluorescence imaging technology, which is highly complementary to Stryker’s surgical visualization platform. The acquisition is expected to be neutral to 2018 earnings and accretive thereafter. Subsequent to quarter-end, Stryker announced plans to acquire VEXIM, a French medtech firm that specializes in vertebral compression fracture solutions which complements Stryker’s spine business, for €183 million. VEXIM reported 2016 sales of €18.5 million, a 33% year-over-year increase. The company's clinical trial for its SpineJack system is progressing and is slated to be approved for commercialization in 2018. Stryker reaffirmed its 2017 organic sales growth guidance of 6.5% to 7% and tightened its adjusted EPS range to $6.45 to $6.50 from $6.45 to $6.55 on the negative impact of the Sage recalls and weather disruptions.
UPS-UPS reported solid third quarter results with revenue up 7% to $16 billion, net earnings down 0.5% to $1.3 billion and EPS up 0.7% to $1.45. Revenue increased in all segments and major product categories, as expanded customer demand spread across the company’s broad product portfolio. U.S. Domestic Segment sales increased 3.9% to $9.6 billion, driven by Next Day Air and Ground product growth. U.S. Domestic operating profit declined 5.6% to $1.2 billion impacted by one less operating day and natural disasters. Despite foreign currency headwinds, International Segment sales grew 11.2% to $3.4 billion, with operating profits up 8.9% to $627 million. International Domestic daily shipments increased 5.7%, led by double-digit growth across several European countries. During the quarter, UPS received regulatory approval of UPS joint venture with SF Express, a small-package carrier in China. The Supply Chain and Freight Segment reported a 13.4% increase in revenue to $3 billion--the result of deeper alignment with preferred customers, strengthened revenue management initiatives and improved market conditions. Supply Chain Segment operating profits improved 9.7% year-over-year to $226 million. Year-to-date, UPS has generated $4.4 billion in operating cash flow. Earlier in the year, UPS stepped up its pace of investment in its network to capture “tremendous e-commerce and international growth opportunities.” Year-to-date capital expenditures were $3.7 billion, supporting their investment strategies. This year, UPS has paid dividends of nearly $2.1 billion, up 6.4% from last year, providing a current dividend yield of about 3%. So far this year, the company has repurchased 12.3 million shares for approximately $1.4 billion, reaffirming its commitment to return cash to shareowners. Given the solid year-to-date results, management increased the low end of its prior guidance of adjusted EPS in the range of $5.80 to $6.10 to $5.85 to $6.10. The guidance includes about $400 million, or $0.30 per share of pre-tax currency headwinds. UPS plans to deliver more than 750 million packages globally in the 25 days between Thanksgiving and New Year’s Eve. The record-breaking seasonal global delivery volume is approximately 5 percent above last year’s holiday peak shipping season volume. Of the 21 holiday delivery days before December 25, 17 are expected to exceed 30 million delivered packages. During the busy holiday shipping season, UPS flexes its global delivery network to process nearly double the regular daily volume of about 19 million packages and documents. With the launch of UPS® Saturday ground pickup and delivery service, customers in nearly 4,700 cities and towns across the country will benefit from five additional ground pickup and delivery days between Thanksgiving and Christmas. Online and mobile commerce has transformed the retail industry, and UPS is ideally positioned to serve both consumer and business customers during even these busiest of times. UPS completed four new and expanded facility projects to create about 1 million square feet of additional automated operations space in 2017. Both package sorting and delivery capacity is increasing by about 6 percent over last year. This peak season, UPS plans to employ 95,000 temporary seasonal workers.
T.Rowe Price-TROW reported third quarter revenues rose 12% to $1.2 billion with net income jumping 19% to $390.0 million and EPS up 22% to $1.56. Assets under management (AUM) increased 17% from the prior year period to $947.9 billion. The firm’s net cash inflows were $5.9 billion in the third quarter. Investors domiciled outside of the U.S. accounted for about 5% of the firm’s AUM. T. Rowe Price maintains a strong balance sheet which is debt-free and boasts more than $4 billion in cash and investments. During the first nine months of the year, the company repurchased 6.6 million shares, or 2.7% of its outstanding shares, for $456.7 million at an average price of $69.20 per share. William J. Stromberg, the company's president and chief executive officer, commented: "U.S. stocks continued to rise in the third quarter, with most major indexes finishing September at or near record highs. Led by emerging markets, international stocks again outperformed U.S. shares as international currencies remained strong relative to the U.S. dollar. Healthy credit conditions contributed to positive fixed income returns globally, with non-U.S. and high yield debt outperforming other sectors. Our assets under management this quarter grew by nearly five percent, boosted by robust market returns and our highest level of net inflows since the first quarter of 2014. Our relative investment performance remained strong across asset classes and time periods, which helped drive increased client interest in our investment solutions and our approach to active investment management. We are encouraged by the green shoots of activity we see in key strategic areas.”
Wednesday, Oct. 25, 2017
F5 Networks - FFIV reported record fourth fiscal quarter results with revenue of $538 million, up 2.4%, net earnings of $135.7 million, up 25%, and EPS of $2.14, up 30%. Excluding the impact of stock-based compensation, amortization of purchased intangible assets, restructuring charges, litigation expense and a non-recurring tax benefit, adjusted fourth quarter earnings and EPS booted up 11% and 16%, respectively. Growth was driven by Services and software based solutions. For the full fiscal year, F5 Networks reported sales of $2.1 billion, up 5%, with earnings of $421 million, up 15%, and EPS of $6.56, up 20%. Adjusted earnings and EPS increased 9% and 15%, respectively. F5 Networks generated an impressive 34.2% return on shareholders’ equity for fiscal 2017. During the year, the company generated more than $700 million in free cash flow and returned $600 million to shareholders through share repurchases, thereby reducing the number of shares outstanding by 4%. As of 9/30/2017, F5 Networks reported $1.3 billion of cash stashed on its debt-free balance sheet. Given the company's solid financial ground, the board announced an additional $1 billion share repurchase program in addition to the $173.7 million remaining under the program authorized in 2010. Commenting on the quarter, Franoçois Locoh-Donou, F5 President and CEO, said, " We finished fiscal 2017 on a solid note, delivering record fourth quarter and annual revenue and earnings. We are excited by the meaningful role we are playing in helping customers solve the complexity of deploying applications across on-premise and multi-cloud environments. We continued to see strong customer interest in our virtual edition and application security offerings during the fourth quarter, particularly in public cloud deployments. We expect the growing traction of our software based advanced application services will be a key driver of product revenue in fiscal 2018 and beyond."
Baxter International – BAX reported a healthy 6% increase in third quarter sales to $2.7 billion with earnings and EPS nearly doubling to $248 million and $0.45, respectively. Excluding special items related to business optimization, intangible asset amortization, Claris acquisition integration costs and post Hurricane Maria expenses in Puerto Rico, earnings and EPS increased 14% to $356 million and $0.64, respectively. Sales within the U.S. were about $1.1 billion, up 8%, while International sales totaled $1.6 billion, up 5%. By business segment, global sales for Hospital Products totaled $1.7 billion, up 7%, boosted by the U.S. fluid systems business, anesthesia and critical care products, hospital pharmacy compounding services plus favorable demand for injectable pharmaceuticals which included $27 million in sales from the July 27 acquisition of Claris. Baxter’s third quarter Renal sales increased 3% to $1 billion, driven by improved performance globally across all major product lines and therapies. Year-to-date operating cash flow increased 43% to $1.3 billion on the strong operational performance and improved working capital management. Free cash flow more than doubled year-over-year to $933 million, representing 91% of adjusted net earnings, which provided the company with enhanced flexibility to reinvest in the business, make bolt-on acquisitions, repurchase shares to offset stock option dilution and pay dividends, targeted at 35% of adjusted net income. Commenting on the third quarter, José E. Almeida, chairman and CEO, said, “Baxter’s solid performance in the third quarter reflects our continued focus on disciplined execution. We are advancing innovation and operational excellence across the organization to deliver positive results for our stakeholders – even as we respond to extraordinary challenges like the recent natural disasters across the Americas and the Caribbean. I’m proud of how our employees continuously step up to make a difference for our patients, healthcare providers, global communities and fellow colleagues.” Given the strong year-to-date performance, Baxter updated its full year guidance. Sales are now expected to increase by 4% versus prior guidance of 3% with adjusted earnings expected in the $2.40 to $2.43 range, representing a 22% to 24% increase over 2016, up from prior guidance of $2.34 to $2.40. Included in the guidance is a $70 million negative impact from Hurricane Maria expected during the fourth quarter. Baxter expects to generate $1.2 billion in free cash flow during 2017, up from prior guidance of $1.1 billion.
Westwood Holdings-WHG reported third quarter revenues rose 5% to $33.5 million primarily related to higher average assets under management (AUM) due to market appreciation. AUM at September 30, 2017 totaled $23.6 billion, up 11% from $21.3 billion and up 4% from $22.6 billion at September 30, 2016 and June 30, 2017, respectively. Net income declined 30% to $4.1 million in the third quarter with EPS down 32% to $.49. During the quarter, Westwood recorded a $2.5 million legal settlement charge, net of insurance recovery and taxes, related to resolution of litigation, which decreased third quarter 2017 diluted earnings per share by $0.30. Westwood agreed to sell their Omaha-based Private Wealth operations, which is expected to close by year end. No gain or loss is expected on the sale with Westwood expecting to serve as a subadvisor on a substantial portion of the assets. Free cash flow increased 4% year-to-date to $38.9 million with Westwood paying out $16.8 million in dividends. Westwood increased its quarterly dividend 10% to $.68 per share or $2.72 on an annualized basis, which represents a nearly 4% dividend yield at current market prices. This marks the 15th consecutive year the company has increased its dividend with more than $165 million in dividends having been distributed to shareholders during this period. At quarter-end, Westwood had $99.5 million in cash and investments, stockholders' equity of $155.4 million, and no debt.
Nike-NKE said at its Investor Day that it expects sales to grow high single digits and EPS to grow in mid-teens over the next 5 years with 75% of growth to come from outside of the U.S.
Walgreens Boots Alliance-WBA reported fourth quarter revenues rose 5.3% to $30.1 billion with net income down 22.1% to $802 million and EPS down 20% to $.76 mainly due to Rite Aid merger termination fees. Retail Pharmacy USA sales increased 7.5% to $22.3 billion during the quarter with comparable sales up 3.1%. Pharmacy sales, which accounted for 72.1% of the division’s sales, increased 12.6%, primarily due to higher prescription volumes, including mail and central specialty following the formation of AllianceRx Walgreens Prime. Comparable pharmacy sales increased 5.6 percent driven by higher volume. The division filled 250.2 million prescriptions, an increase of 9.0% over the prior year period. The division’s retail prescription market share increased 120 basis points over the year ago quarter to 20.5%. This was the division’s highest reported quarterly retail prescription market share in the U.S., for a second consecutive quarter. Retail Pharmacy International sales decreased 3.2% to $2.9 billion mainly due to currency translation. Pharmaceutical Wholesale sales increased 0.8% to $5.4 billion with comparable constant currency sales up 5.4%. Walgreens announced it had secured regulatory clearance for an amended and restated asset purchase agreement to purchase 1,932 stores, three distribution centers and related inventory from Rite Aid Corporation for $4.375 billion in cash and other consideration. Ownership is expected to be transferred in phases, with the goal being to complete the store transfers in spring 2018. The company expects to complete integration of the acquired stores and related assets within the next three years, at an estimated cost of approximately $750 million and an additional $500 million on store conversions and related activities. In addition to the strategic benefits of the transaction, the company expects to realize $300 million in annual synergies. These are expected to be fully realized within four years of the initial closing of this transaction. Following regulatory clearance for the Rite Aid transaction, the company has been able to carry out a complete review of its expected combined U.S. store portfolio to determine the scope of a program to optimize locations. This is expected to take place over an 18 month period beginning in spring 2018, resulting in estimated pre-tax charges to the company's GAAP financial results of approximately $450 million. Cost savings from the program are anticipated to be approximately $300 million per year, and are expected to be fully delivered by the end of fiscal 2020. For the full fiscal 2017 year, revenues rose 0.7% to $118.2 billion with net income down 2.3% to $4.1 billion and EPS down 1.0% to $3.78. Return on shareholders’ equity for the year was 14.4%. Walgreens’ free cash flow decreased 9.5% for fiscal 2017 to $5.9 billion with the company paying $1.7 billion in dividends and repurchasing $5.2 billion of its shares including $3.8 billion during the quarter. The company added $1 billion to the completed $5 billion share repurchase program. Management’s fiscal 2018 guidance is EPS in the range of $5.40 to $5.70 representing 8.8% growth at the midpoint over 2017 adjusted EPS.
Express Scripts-ESRX reported that third quarter revenues declined 3% to $24.7 billion with net income up 16% to $841.7 million and EPS up a healthy 27% to $1.46. Adjusting for transitioning clients including Anthem, adjusted net income was flat and adjusted EPS was up 9%. Adjusted claims declined 1% to 343.6 million partly impacted by the disruptions of the natural disasters during the quarter. Adjusted EBITDA per adjusted claim was up 1% to $5.67. Free cash flow was up 56% to $3.8 billion year-to-date. The company has repurchased 43.3 million of its own shares for $2.8 billion through the first nine months of the year at an average price of $64.67 per share. Management increased their adjusted earnings guidance for the full year with adjusted EPS now expected in the range of $6.97 to $7.05 versus previous guidance of $6.95 to $7.05, which represents 10% growth over last year at the midpoint of the range. Cash flow from operations in 2017 is expected to be in the range of $4.7 to $5.2 billion. Total adjusted year claims for the full 2017 year should approximate 1.4 billion with claims growth in 2018 likely to be flat to slightly down. The company is increasing its expected 2018 retention rate for the 2017 selling season, excluding the impact of the remaining Coventry business rolling off in 2017, to be above 95%. The company's enterprise value initiative is currently estimated to cost approximately $600 million to $650 million and to deliver cumulative savings of nearly $1.2 billion by 2021. This initiative is expected to help the company achieve its targeted compounded annual EBITDA growth rate for the core business from 2017-2020 of 2% to 4% and drive significant value to all of its patients and clients beginning in 2018. The EviCore acquisition, which serves 100 million patients nationally, is expected to close by the end of the year with the $3.6 billion price tag to be paid in cash and short-term debt. The acquisition is expected to generate strong free cash flow and be accretive in its first full year. Express Scripts management noted that they are confident in their business model even if Amazon were to enter the pharmacy benefit management space while hinting that they may collaborate with Amazon in mail order delivery of pharmaceuticals to cash-paying patients not covered by insurance, which would be a net positive for the company.
Tuesday, Oct. 24, 2017
Canadian National Railway-CNI reported third quarter revenues rose 7% to C$3.2 billion with net income down 1% to C$958 million and EPS up 2% to C$1.27. Revenues increased for metals and minerals (31%), coal (23%), intermodal (12%), automotive (4%) and other revenues (2%). Revenues declined for forest products (2%), and grain and fertilizers (1%), while petroleum and chemicals revenues remained essentially flat. Revenue ton-miles increased by 10% and carloadings increased by 11% to 1.5 million. Operating expenses increased by 10% to C$1.8 billion due to higher fuel prices and as the company ramped up hiring to meet an increased workload thanks to strong volume growth. The company’s operating ratio of 54.7% increased 140 basis points compared to the prior year quarter. Free cash flow increased 33% year-to-date to $2.3 billion thanks to higher earnings and lower capital expenditures compared with the earlier year period. To meet the needs of an expanding North American economy and new growth opportunities, CNI is increasing investments in their infrastructure and equipment by C$100 million, for a total capital program of C$2.7 billion in 2017. After completing a $2 billion share buyback program, CNI announced a new $2 billion share buyback program for the next 12 months of Oct. 2017-Oct. 2018. Management reaffirmed their 2017 adjusted diluted EPS outlook of C$4.95 to C$5.10, compared to last year’s adjusted diluted EPS of C$4.59, representing 8% to 11% growth. Favorable macro trends continue across Canada and the U.S. thanks to the recovery in the energy sector and higher consumer confidence with management “bullish” on the North American economy.
3M-MMM posted record third quarter sales of $8.2 billion, up 6%, with net income and EPS up 8% to $1.4 billion and $2.33, respectively. Organic local-currency sales growth of nearly 7% was broad-based across all geographies and business groups, driven by 3M’s strategic decision several years ago to invest heavily in fast-growing markets like semiconductors, data centers, automotive electrification, traffic safety and energy grids. By geography, total sales grew 11% in Asia Pacific, 7% in EMEA (Europe, Middle East and Africa), 6% in Latin America/Canada and 2% in the U.S. More than 60% of 3M’s sales come from outside the U.S. By business group, total sales grew 13% in Electronics and Energy to $1.3 billion, 8% in Health Care to $1.4 billion, 6% in Industrial to $2.6 billion and 2% in Consumer and Safety & Graphics to $1.2 billion and $1.5 billion, respectively. During the quarter, 3M generated $1.75 billion in operating cash flow, down 8% from last year on an increase in working capital needed to fuel the company’s global growth and business transformation. Free cash flow of $1.4 billion represented a notable 100% of net income. During the quarter, 3M returned $1.1 billion to shareholders through dividends of $701 million and share repurchases of $380 million. Given the strong year-to-date performance, 3M increased its guidance for 2017. Organic local currency growth is expected in the 4% to 5% range, up from previous guidance of 3% to 4% with earnings per share in the $9.00 to $9.10 range – up 10% to 12% year-on-year – versus a prior expectation of $8.80 to $9.05. Free cash flow is expected in the $4.9 to $5.6 billion range, representing a free cash flow conversion rate of 95% to 100%. Total 2017 gross share repurchases are estimated in the range of $2 to $2.5 billion.
Polaris-PII reported third quarter revenues rose 25% to a record $1.5 billion with net income jumping 153% to $82 million and EPS up 156% to $1.28. Aftermarket segment sales increased substantially due to Transamerican Auto Parts which added $191 million to sales in the third quarter. ORV (off-road vehicle) unit retail sales were up mid-teens percent in both ATVs and side-by-sides with revenue up 12% to $1.0 billion. Motorcycles segment sales were down 14% to $155 million but up 10% excluding 2016 Victory sales. Indian Motorcycle continue to deliver strong retail sales increasing 16% for the quarter. Global Adjacent Market segment sales increased 17% to $92 million. Free cash flow increased 36% during the first nine months of the year to $368 million with the company paying $109 million in dividends and repurchasing $89 million of its own shares. As of quarter end, the company has 6.4 million shares authorized for future share repurchases. The company increased its full year 2017 sales guidance with adjusted sales expected to increase 18% to 19% with adjusted EPS expected in the range of $4.75 to $4.85, representing 36% to 39% growth over depressed adjusted EPS of $3.48 in 2016.
United Technologies-UTX reported third quarter sales increased nearly 5% versus the prior year to $15.1 billion. EPS declined 4% to $1.67 and net income from continuing operations declined 8% to $1.3 billion. Excluding restructuring and other items, EPS declined 2%. Management was encouraged by the macro economic environment although some of the markets UTX operates in continue to be challenged from a pricing standpoint. By business segment, Otis sales gained 5% to $3.2 billion, lifted by a 5% gain in service sales. New equipment orders at Otis were down 4% on a 24% decrease in North America off tough compares and a 25% increase in Europe. Climate, Controls and Security sales increased 6% to $4.7 billion on solid sales growth in all major businesses. Organic equipment orders were up 2% with operating profits up 4% on higher volumes and restructuring and productivity gains. Pratt & Whitney sales rose 15% to $4.3 billion on strength in commercial OE, military engines and commercial aftermarket. Aerospace Systems sales were flat at $3.6 billion, boosted by an 11% rise in the commercial aftermarket and offset by a 6% decline in commercial OE. Free cash flow was negative $0.5 billion for the quarter which included a $1.9 billion discretionary pension contribution. During the third quarter, the company invested $443 million in capital expenditures, up 12% year over year, as the company continues to focus on new materials and manufacturing processes. The company paid $1.5 billion in dividends and repurchased $1.4 billion of its own shares during the first nine months of the year. Total 2017 sales are expected in the $59.0 billion to $59.5 billion range, up on the lower end guidance from the second quarter projection of $58.5 billion to $59.5 billion. Free cash flow is expected to be $3.0 billion to $3.5 billion with adjusted EPS between $6.58 to $6.63, an increase over previous EPS guidance of $6.45 to $6.60.
Wabtec-WAB reported third quarter revenues rose 42% to $975.9 million with net income down 18% to $67.4 million and EPS down 23% to $.70. These results reflect the revenues, acquisition costs and higher interest expenses related to the Faiveley acquisition along with contract adjustments. Transit sales increased 97% during the quarter to $617.7 million due primarily to acquisitions with net income down 7% to $47.5 million. Freight sales were down 6% during the quarter to $340.2 million with net income down 21% to $61.6 million as the freight market remains sluggish. Backlog increased 2% to a record $4.5 billion at quarter end thanks to orders in all major markets and product categories, which bodes well for organic growth next year. Cash flow from operations was down significantly year-to-date due to working capital changes but is expected to improve next year and once again exceed net income, which is the company’s long-term goal. At the end of the quarter, the company had $228 million in cash and $1.9 billion in debt, which was 6% lower as the company begins to repay the debt related to the acquisition. Following the end of the quarter, Wabtec acquired AM General Contractor, a manufacturer of fire protection and extinguishing systems, mainly for transit rail cars. Based in Europe, AM has annual sales of about $25 million. Based on its year-to-date results and fourth quarter forecast, Wabtec lowered its guidance for the full year and expects revenues in 2017 to be about $3.8 billion and earnings per diluted share to be between $3.45-$3.50 excluding expenses for restructuring, integration and contract adjustments. The company’s adjusted operating margin target in the fourth quarter is expected to be about 15 percent.
Biogen-BIIB reported third quarter revenues rose 4% to $3.1 billion, or 13% on an adjusted basis for the spin-off of the hemophilia business. Net income rose a healthy 19% to $1.2 billion with EPS up 23% to $5.79 thanks to improved expense management. Multiple sclerosis (MS) revenues were $2.3 billion, demonstrating the resilience of Biogen’s core MS business as the company is maintaining market share at 38% despite increased competition. Spinraza sales rose 34% quarter over quarter to $271 million with U.S. patients increasing 75% since the second quarter. Biosimilar sales more than tripled from the same period last year to $101 million. Biogen generated $1.1 billion in free cash flow during the quarter and ended the quarter with $6.6 billion in cash and investments and $6.5 billion in long-term debt. Biogen restructured its agreement with Neurimmune related to aducanumab. Biogen agreed to make a one-time payment in exchange for a reduction in Neurimmune’s royalty rate on potential sales of aducanumab. Biogen made important progress advancing their pipeline, including initiating new trials in Alzheimer’s disease and epilepsy and completing enrollment of studies in stroke and Parkinson’s disease. Over the balance of the year, Biogen anticipates seasonal pressure as well as increased spending as they invest behind their strategic priorities.
AbbVie-ABBV and Alector, a privately owned biotechnology company announced a global strategic collaboration to develop and commercialize medicines to treat Alzheimer's disease and other neurodegenerative disorders. Immuno-neurology is a rapidly evolving scientific area focused on harnessing the power of the immune system to attack devastating neurodegenerative disorders like Alzheimer's disease. There is increasing rationale – from large-scale human genetic analyses and animal model studies – that immune deficiencies within the central nervous system play an important role in the progression of neurodegeneration. Alector has developed an innovative immuno-neurology technology platform to simultaneously address multiple pathologies associated with neurodegeneration. Under the terms of the agreement, AbbVie and Alector have agreed to research a portfolio of antibody targets and AbbVie has an option to global development and commercial rights to two targets. Alector will conduct exploratory research, drug discovery and development for lead programs up to the conclusion of the proof of concept (PoC) studies. Upon exercise of the option, AbbVie will lead development and commercialization activities. Alector and AbbVie will co-fund development and commercialization and will share global profits equally. Alector will receive a $205 million upfront payment and a potential, future equity investment of up to $20 million.
Monday, Oct. 23, 2017
Cisco-CSCO plans to acquire publicly-held BroadSoft, Inc., headquartered in Gaithersburg, MD. Pursuant to the agreement, Cisco will pay $55 per share, in cash, in exchange for each share of BroadSoft, or an aggregate purchase price of approximately $1.9 billion net of cash. More and more businesses expect fully featured voice and contact center solutions with the ability to deploy them on-premises or in the cloud. By combining BroadSoft's open interface and standards-based cloud voice and contact center solutions delivered via Service Provider partners, with Cisco's leading meetings, hardware and services portfolio, the combined company will offer best-of-breed solutions for businesses of all sizes and deliver a full suite of collaboration capabilities to power the future of work. The acquisition is expected to close during the first quarter of calendar year 2018.
Eisai Co., Ltd. and Biogen-BIIB announced that the companies have expanded their existing agreement to jointly develop and commercialize investigational Alzheimer’s disease treatments. Under the terms of the agreement Eisai has exercised its option to co-develop and co-promote aducanumab, Biogen’s investigational anti-amyloid beta (Aβ) antibody for patients with Alzheimer’s disease (“AD”). The expanded agreement leverages each company’s respective geographic strengths for commercialization and adjusts the respective share of profits from potential sales of aducanumab. Biogen will receive 55 percent of the potential profits in the United States and 68.5 percent of the potential profits in Europe. Eisai will receive 80 percent of the potential profits in Japan and Asia (excluding China and South Korea). The companies will have a 50:50 co-promotion split of potential profits in the rest of the world. Further, Biogen will book sales in the United States, Europe, and rest of world markets while Eisai will book sales in Japan and Asia (excluding China, South Korea). Biogen will continue to lead the ongoing Phase 3 development of aducanumab and will remain solely responsible for all development costs for aducanumab until April 2018. Eisai will then reimburse Biogen for 15 percent of expenses from April 2018 through December 2018, and 45 percent from January 2019 onwards. Neither party is making any upfront payments associated with the exercise of the aducanumab option. Furthermore, Eisai’s and Biogen’s respective milestone payments under the original agreement for aducanumab and BAN2401, an anti-Aβ protofibril antibody, have been eliminated.
Alphabet’s-GOOGL Project Loon is a network of stratospheric balloons designed to deliver internet connectivity to rural and remote areas worldwide. Loon balloons sail on winds in the stratosphere, extending the reach of telecommunication partner’s networks into areas that are currently unconnected. Last month, Hurricane Maria made landfall in Puerto Rico as a Category 4 hurricane and caused significant damage to the island’s connectivity infrastructure. In the weeks following this disaster, the Project Loon team has been working with the Government of Puerto Rico, the FCC, the FAA, FEMA, spectrum partners and international aviation authorities to bring balloon powered internet to the island to help. Working with AT&T, Project Loon is now supporting basic communication and internet activities like sending text messages and accessing information online for some people with LTE enabled phones.
Friday, Oct. 20, 2017
Gentex-GNTX reported third quarter sales rose 2% to $438.6 million with net income down 2% to $90.2 million and EPS down 3% to $.31. The 2% sales growth was driven by an increase of 12% in international auto-dimming mirror unit shipments as underlying light vehicle production in Europe, Japan and Korea was up 7%. The growth in international shipments was partially offset by a 7% decline in North American auto-dimming mirror unit shipments which in large part resulted from an 8% decline in North American light vehicle production due in part to intermittent plant shutdowns in the quarter. Gross margin declined 150 basis points to 39% during the quarter due to annual customer price reductions and the inability to leverage fixed overhead costs due to the lower growth in sales. Automotive net sales in the third quarter of 2017 were $428.2 million, an increase of 2% compared with automotive net sales of $419.8 million in the third quarter of 2016, driven by a 5% increase in auto-dimming mirror unit shipments on a quarter over quarter basis. Other net sales in the third quarter of 2017, which includes dimmable aircraft windows and fire protection products, were $10.5 million, an increase of 6%, compared to other net sales of $9.8 million in the third quarter of 2016. Cash flow from operations declined 1% during the first nine months to $352.5 million with free cash flow up slightly to $266 million on lower capital expenditures year-to-date. The company has lowered its capital expenditures outlook for the full year to a range of $110 million to $120 million. During the third quarter, Gentex repurchased 3.2 million shares of its common stock at an average price of $17.51 per share. As of September 30, 2017, the company has approximately 14.9 million shares remaining available for repurchase. Gentex also repaid ahead of schedule $10 million of its debt and ended the quarter with no long-term debt and more than $790 million in cash on its strong balance sheet. Based on 2% growth in total light vehicle production forecast for 2017, current forecasted product mix and expense growth estimates, Gentex has updated certain of its 2017 guidance. For the fourth quarter of 2017, the company estimates that revenue will increase between 5% and 10% versus the same quarter last year. This should lead to sales for the full year in the range of $1.78 to $1.8 billion, down from the previous forecast of $1.79 to $1.83 billion.
Thursday, Oct. 19, 2017
Genuine Parts-GPC reported third quarter sales rose 4% to $4.1 billion despite one less billing day and the disruption of three hurricanes and the earthquake in Mexico with net income down 15% to $158.4 million and EPS down 13% to $1.08, impacted by transaction costs related to the company’s pending $2 billion European acquisition of Alliance Automotive Group (AAG). This acquisition is expected to contribute $1.7 billion to revenues and be accretive to margins and cash flow immediately. The AAG acquisition is expected to close in November and add $.45 to $.50 per share to 2018 earnings. Genuine Parts announced two other acquisitions which are also expected to close in November, including Apache Hose & Belting Company, which is expected to generate annual revenues of $100 million, and Monroe Motor Products, which is expected to generate annual revenues of $25 million. Third quarter sales for the Automotive Group, which represents 52% of total revenues, were up 3.6% including an approximate 1% comparable sales increase. Automotive sales are expected to accelerate in the fourth quarter due to the pending acquisitions. Sales at Motion Industries, the Industrial Group which accounts for 30% of revenues, were up 7.1%, including a 4% comparable sales increase with growth broad based due to favorable market conditions. Sales at EIS, the Electrical/Electronic Group which represents 5% of total sales, grew 11.6% due to acquisitions, with comparable sales down 1%. Sales for S.P. Richards, the Office Products Group which accounts for 12% of total sales, were down 4.7% for the quarter in both total and comparable sales due to deteriorating trends and shifts in the office supply market. Third quarter profitability was impacted by lower gross margin and higher operating expenses, as initiatives to drive margin expansion did not meet management’s expectations due to lower than expected organic sales growth and the deleveraging of expenses. Free cash flow declined 32% year-to-date to $445 million due to lower earnings. During the first nine months of the year, Genuine Parts paid $296.5 million in dividends, repurchased $171.9 million of its own shares and made $289.4 million in acquisitions. The company plans to add $2 billion in debt to its sturdy balance sheet to finance the AAG acquisition. For the full year, cash flow from operations is expected in the range of $750 million to $800 million which is lower than originally forecasted but remains solid. For the full year 2017, the company is increasing its sales guidance from up 3% to 4% to up 4% to 4.5%. The company is also updating diluted earnings per share to range from $4.47 to $4.52 and adjusted diluted earnings per share to range from $4.55 to $4.60. This compares to the prior outlook of $4.70 to $4.75.
Fluor-FLR announced that the company was awarded a contract by the U.S. Army Corps of Engineers Huntsville (Alabama) Engineering Center to help restore electric power to Puerto Rico. The six-month single award task order is valued at approximately $240 million.
Capital G, the growth investment fund of Alphabet-GOOGL, is investing $1 billion in Lyft.
Tuesday, Oct. 17, 2017
Johnson & Johnson-JNJ reported third quarter sales rose a healthy 10% to $19.7 billion with net income down 12% to $3.8 billion and EPS down 11% to $1.37. Adjusting for acquisitions, divestitures and special items, sales rose 4% with adjusted net income and EPS up 11% and 13%, respectively. Pharmaceutical sales rose 15% to $9.7 billion during the quarter driven by 24% growth in oncology products. Medical Devices sales rose 7% during the quarter to $6.6 billion driven by 48% growth in vision care related to strong contact sales and the Abbott Optical acquisition. Consumer sales rose 3% to $3.4 billion driven by 4% growth in both beauty and OTC, notably Tylenol. Geographic growth was balanced with 10% growth in the U.S. with sales of $10.3 billion and International sales up 11% to $9.4 billion. Sales growth accelerated in the third quarter as expected thanks in part to acquisitions. The unprecedented storms had limited impact on the Medical Device operations with lost surgery days having more of an impact than supply disruptions. JNJ’s manufacturing sites in Puerto Rico fared well with all sites back in operation with the aid of generators. JNJ ended the quarter with $19 billion in net debt ($16 billion in cash and $35 billion in debt) related to acquisitions. JNJ expects that the U.S. tax reform efforts are gaining meaningful momentum. A lower corporate tax rate and modern tax system will enable firms to manage their cash without penalty and also have a positive impact on job growth in the U.S. At the same time, JNJ is not factoring tax reform into their guidance for 2017. More favorable foreign exchange led management to raise their guidance for the full year with sales expected to continue to accelerate in the fourth quarter and grow 6% to 6.5% for the full year to $76.2 billion to $76.5 billion with EPS expected to increase 7.7% to 8.4% to a range of $7.25 to $7.30.
Thursday, Oct. 12, 2017
Baxter International-BAX shared updates regarding recovery efforts following the impact of Hurricane Maria on its Puerto Rico operations. While the company currently anticipates a reduction in revenue for fourth quarter 2017 as a result of the storm, the company expects to mitigate the related earnings impact through positive performance in other areas of the business. Baxter’s three Puerto Rico manufacturing sites sustained minimal structural damage from the impact of Hurricane Maria, and limited production activities resumed across its facilities within one week of the storm. Manufacturing operations are being driven by diesel generators designed to power the facilities and satellite communications are also being used to restore connectivity and support plant operations.
Wednesday, Oct. 11, 2017
Fastenal-FAST reported solid third quarter results with revenues up 11.8% to $1.1 billion and net income up 12.7% to $143.1 million with EPS bolting 13.4% higher to $.50. Sales growth accelerated in the third quarter with September daily sales growth up 15.3%. Improvement in underlying demand and traction in growth drivers led to the higher sales with the company signing a record 81 new Onsite locations, finishing the quarter with 555 active sites. The goal for the full year is to have 275-300 Onsite signings compared to 176 last year. During the quarter, Fastenal signed 4,771 industrial vending machines, comparable to the prior year period. The installed device count was 69,058 as of quarter end, an increase of 14.3%, with sales through the vending machines continuing to grow at a double-digit pace. The company also signed 42 new national account contracts during the quarter with national account customers now representing 48.7% of total revenues. Daily sales to national customers grew 17.3% during the third quarter. During the quarter, fastener products, representing 36% of sales, grew 12% in the quarter while non-fastener products, representing 64% of sales, grew 14.6% on a daily basis. Gross profit declined 20 basis points during the third quarter to 49.1% due to changes in product and customer mix, the impact of the hurricanes and commodity inflation. Gross margin is expected to improve in the fourth quarter. Despite the lower gross margin, operating margin improved 20 basis points to 20.2% as year-to-date selling, general and administrative expenses as a percent of sales hit a record low. Free cash flow increased 66% during the quarter to $373.2 million driven by record operating cash flow of $455.9 million thanks to the higher earnings and good inventory management. During the first nine months of the year, Fastenal paid $277.1 million in dividends and repurchased $82.6 million of its own shares including 600,000 shares repurchased in the third quarter at an average price of about $43.03 per share. End markets remain positive with favorable macroeconomic conditions. Manufacturing, led by heavy machinery, general industrial and transportation continues to drive growth.
The Taiwan Fair Trade Commission said it will fine Qualcomm-QCOM $774.1 million for anti-trust violations of its chip technology.The Commission said in a Chinese-language statement that Qualcomm had a monopoly over the CDMA, WCDMA and LTE chip market and refused to licence its technology to other industry players. Qualcomm disagrees with the decision summarized in the TFTC's press release and intends to seek to stay any required behavioral measures and appeal the decision to the Taiwanese courts after receiving the TFTC's formal decision, which is expected in the next several weeks. The fine bears no rational relationship to the amount of Qualcomm's revenues or activities in Taiwan, and Qualcomm will appeal the amount of the fine and the method used to calculate it.
T. Rowe Price Group-TROW reported preliminary month-end assets under management of $948 billion as of September 30, 2017, up 16.9% since year end. Client transfers from mutual funds to other portfolios were $2.9 billion and $8.1 billion for the month- and quarter-ended September 30, 2017, respectively.
Tuesday, Oct. 10, 2017
Express Scripts-ESRX announced that it has reached an agreement to acquire privately-held eviCore healthcare, the industry leader in evidence-based medical benefit management services, for $3.6 billion. Combining Express Scripts' leading pharmacy benefit management offering and eviCore's highly complementary medical benefits management (MBM) platform will create a uniquely comprehensive patient benefit management solution. eviCore, which manages medical benefits for 100 million people, offers a broad range of integrated MBM solutions that drive significant and immediate cost reductions, and improved quality care outcomes. eviCore has leading positions managing benefits in categories including radiology, cardiology, musculoskeletal disorders, post-acute care and medical oncology – all important therapeutic areas that are in need of greater cost management. eviCore contracts with health plans and commercial clients to better ensure appropriate use of healthcare services. eviCore has approximately 4,000 employees and will operate as a standalone business unit within Express Scripts. The acquisition of eviCore will give Express Scripts an attractive entry point into a growing market. Today, pharmacy is an industry with approximately $400 billion in annual spend. Healthcare spend represents nearly $3.4 trillion. Medical benefit management is a large and growing market with more than $300 billion spent annually in the areas eviCore manages today. Establishing a cornerstone platform in this market will enable Express Scripts to build a uniquely comprehensive suite of solutions, with significant opportunities for cross-selling to both client bases. The combination of Express Scripts' leading independent PBM model and eviCore's industry-leading medical cost containment capabilities across an expanded client base will create an even more powerful partner for our clients, fully aligned with the interests of patients and payers. This will further differentiate Express Scripts and position the company to take advantage of the transition to value-based care and the increasing demand from payers for a more comprehensive set of service offerings and solutions.Excluding transaction related expenses and amortization of intangibles, Express Scripts expects the acquisition to be accretive to adjusted diluted earnings per share in its first full year of operation. The transaction is expected to close in the fourth quarter of 2017.
Faiveley Transport, a subsidiary of Wabtec-WAB, has been awarded contracts worth more than $100 million by Alstom and Bombardier Transportation to supply systems for the first 71 train sets of the new generation of double deck trains for Paris. The trains will eventually run on lines D and E of the Paris network. Under the contracts Faiveley Transport will provide complete braking systems (air generation, brake control and bogie brakes), door systems, HVAC systems (cabin and saloon heating, ventilation and air conditioning), pantographs and tachometer systems. The scope of supply includes the study, design, engineering, manufacture and delivery of the rail systems, which will involve Faiveley operating units in France, Germany, Italy, Sweden, and the Czech Republic. Deliveries are expected to start by September 2018 and to be completed by 2022.
Thursday, Oct. 5, 2017
Pratt & Whitney, a unit of United Technologies-UTX, has been awarded a $2.7 billion U.S. defense contract by the Pentagon for engine sustainment support for the F-117 stealth aircraft. The contract involves foreign military sales to the Britain, Canada, United Arab Emirates, Kuwait, Qatar, India and Australia.
Biogen-BIIB presented new data demonstrating that earlier initiation of treatment with SPINRAZA® (nusinersen) may improve motor function outcomes in infants and children with spinal muscular atrophy (SMA). Results continued to reinforce the favorable efficacy and safety profile of SPINRAZA. A new analysis from the Phase 3 ENDEAR study showed infants with SMA who initiated treatment earlier in the disease (shorter disease duration) demonstrated greater benefit and improvement in motor function outcomes. “These studies contribute to a growing body of evidence that SPINRAZA can make a meaningful difference in the lives of people with SMA regardless of their age or stage of the disease,” said Alfred Sandrock, M.D., Ph.D., executive vice president and chief medical officer at Biogen. “Across studies, we continue to see evidence that earlier initiation of treatment with SPINRAZA can lead to improved clinical and functional outcomes.”
Wednesday, Oct. 4, 2017
PepsiCo-PEP reported third quarter revenues rose 1% to $16.2 billion with net income up 8% to $2.1 billion and EPS popping 9% higher to $1.49. Organic revenues grew 1.7% during the quarter with core constant currency EPS growth of 7%. Despite a challenging environment, each of the company’s operating sectors delivered results in line or ahead of management’s expectations with the exception of the North American Beverages (NAB) unit where revenues declined following two consecutive years of very strong third quarter growth. Management believes the factors impacting NAB are temporary and were impacted by unfavorable weather conditions during the third quarter and a marked slowdown in the convenience store sector. In addition, PepsiCo lost marked share in its carbonated beverage category as they had redirected marketing and shelf space to newer brands from the core Pepsi and Mountain Dew brands. Management is taking immediate actions to correct this issue and expects both sales and operating profits to improve in the fourth quarter for NAB. The good news is that the rest of PepsiCo’s business reported very strong results especially Frito-Lay which more than offset the weakness in NAB, resulting in operating margin expansion for the third quarter. Free cash flow declined 13% in the first nine months of the year to $4.6 billion due to working capital fluctuations. During the same period, PepsiCo paid $3.3 billion in dividends and repurchased $1.5 billion of its own shares. The dividend reflects the 7% increase previously announced, which marked the 45th consecutive year of dividend increases. Although the company moderated their full-year organic revenue growth outlook to 3%, management raised guidance for core 2017 expected EPS by a dime to $5.23, representing 9% core constant currency EPS growth. The company continues to expect to generate $7 billion in free cash flow for the full year and pay dividends of $4.5 billion and repurchase approximately $2 billion of its own shares for the year.
Tuesday Oct. 3, 2017
Paychex-PAYX reported first fiscal quarter sales increased 4% to $816.8 million with net income and EPS increasing 5% to $227.8 million and $0.63, respectively. Payroll service revenue increased 2% to $457.8 million and Human Resource Service (HRS) revenue increased 7% to $345.3 million. Interest on Funds Held for Clients increased 14% to $13.7 million as the average rate of return increased 10 basis points from last year to 1.4%. Average Funds Held for Clients were $3.8 billion, essentially unchanged from last year as the impact of wage inflation was offset by a decrease in checks per client. As of 8/31/2017, Paychex counted $38.6 million in unrealized gains on Funds Held for Clients. Paychex’s financial position remained strong at quarter’s end with cash and corporate investments of $851.4 million and no long-term debt on its rock-solid balance sheet. During the quarter, Paychex generated $343.6 million in operating cash flow, up 17% year-over-year, boosted by the higher net income and timing of certain payments. Free cash flow was $325.6 million, up 19%, and represented more than 140% of net income. During the quarter, Paychex returned $273.2 million to shareholders through $94.1 million in share repurchases at an average cost of $58.81 per share and dividends of $179 million, up 8% from last year. During the quarter, the company announced a 9% increase in its quarterly dividend to 50 cents per share. In mid-August, Paychex completed its acquisition of HR Outsourcing, Inc., a professional employer organization serving small- to mid-sized businesses in 35 states, which is expected to add $65 to $70 million in annual revenue. Paychex updated its fiscal 2018 guidance to incorporate anticipated results from the acquisition. Total revenue is expected to increase 6% with a 5% to 6% increase in EPS.
Berkshire Hathaway – BRKB and Pilot Flying J jointly announced that Berkshire has made a significant minority investment in Pilot Travel Centers LLC. The Haslam family will continue to own a majority of Pilot Flying J and Jimmy Haslam will remain as chief executive officer. Pilot Flying J President Ken Parent and the Company’s management team will also remain in place. The Company will continue to be headquartered in Knoxville, TN. Pilot Flying J is the largest operator of travel centers in North America, with more than 27,000 team members, 750 locations across the U.S. and Canada, and more than $20 billion in revenues. The investment will expand Pilot Flying J’s opportunities for growth, as the Company remains committed to delivering outstanding service for the trucking industry, professional drivers, local communities and interstate travelers across North America. Under the terms of the agreement, Berkshire will acquire a 38.6 percent equity stake in Pilot Flying J. The Haslam family will continue to hold a majority interest with 50.1 percent ownership in the Company and FJ Management, Inc., owned by the Maggelet family, will retain 11.3 percent ownership until 2023. In 2023, Berkshire will become the majority shareholder by acquiring an additional 41.4 percent equity stake and the Haslam family will retain 20 percent ownership in the Company and remain involved with Pilot Flying J. “Pilot Flying J is built on a longstanding tradition of excellence and an unrivaled commitment to serving North America’s drivers,” said Warren Buffett, chairman, president and CEO of Berkshire Hathaway. “Jimmy Haslam and his team have created an industry leader and a key enabler of the nation’s economy. The Company has a smart growth strategy in place and we look forward to a partnership that supports the trucking industry for years to come.” Terms of the deal were not disclosed.
Monday, Oct. 2, 2017
Sangamo Therapeutics, Inc.,the leader in therapeutic genome editing, and Bioverativ-BIVV, a global biopharmaceutical company focused on the discovery, development, and commercialization of innovative therapies for hemophilia and other rare blood disorders, announced today that the U.S. Food and Drug Administration (FDA) has accepted the Investigational New Drug (IND) application for ST-400, a gene-edited cell therapy candidate for people with transfusion-dependent beta-thalassemia. Sangamo and Bioverativ are developing ST-400 as part of an exclusive worldwide collaboration to develop and commercialize gene-edited cell therapies for beta-thalassemia and sickle cell disease. "Beta-thalassemia is a serious, lifelong blood disorder, and many children and adults with the disease require frequent and demanding blood transfusions that may lead to iron overload and long-term organ damage," said Tim Harris, Ph.D., D.Sc., executive vice president of research and development at Bioverativ. "The advancement of ST-400 demonstrates our commitment to progressing novel science that has the potential to make a meaningful, lasting difference in the lives of people with beta-thalassemia."
Thursday, Sept. 28, 2017
Accenture-ACN reported fourth quarter net revenues rose 8% in both U.S. dollars and local currency, to $9.1 billion with net income dropping 13% to $983 million and EPS down 12% to $1.48. The prior year earnings reflect a $.37 per share gain from the gains on sales of businesses. Excluding the gains, EPS rose 13% from the prior year period. For the full fiscal year, revenues increased 6% to $34.9 billion and adjusted EPS rose 11% to $5.91. Return on equity for the year was a strong 39%. New bookings for the quarter were $10.1 billion and $37.4 billion for the full year. On a geographic basis, Growth Markets, including Japan and Australia, led the way with a strong 14% increase for the fourth quarter and 12% for the full year. Growth in the operating groups was led by Products with 10% growth during the quarter and 14% for fiscal 2017. “The New” digital, cloud and security services generated strong double-digit growth which now approximate 50% of revenues. For fiscal 2017, Accenture’s free cash flow declined 4% to $4.5 billion with the company paying $1.6 billion in dividends and repurchasing $2.7 billion of its shares, including 5.2 million shares repurchased in the fourth quarter for $657 million at an average price of $127.09 per share. Accenture has $3.1 billion authorized for future share repurchases. Accenture also made $1.7 billion in acquisitions during fiscal 2017 with its strong balance sheet with $4.1 billion in cash and minimal long-term debt providing the company with financial flexibility to grow the business while returning significant cash to shareholders. For fiscal 2018, Accenture expects net revenue growth to be in the range of 5% to 8% in local currency and GAAP EPS of $6.36 to $6.60. Free cash flow is expected to be in the range of $4.4 to $4.7 billion for the full year. In addition, Accenture’s Board of Directors has declared a semi-annual cash dividend of $1.33 per share, an increase of $0.12 per share, or 10 percent, over its previous semi-annual dividend, declared in March.
AbbVie-ABBV announced a global resolution of all intellectual property-related litigation with Amgen over Amgen's proposed biosimilar adalimumab product. Under the terms of the settlement agreements, AbbVie will grant to Amgen a non-exclusive license to AbbVie's intellectual property relating to HUMIRA beginning on certain dates in certain countries in which AbbVie has intellectual property. The license period will begin on Jan. 31, 2023 in the U.S., on Oct. 16, 2018 in most countries in the European Union, and on other dates in various countries in which AbbVie has intellectual property. Amgen will pay royalties as specified under the agreements. The precise terms are confidential between the parties. All litigation pending between the parties will be dismissed, and Amgen has acknowledged the validity of AbbVie's intellectual property related to HUMIRA.
Tuesday, Sept. 26, 2017
Nike-NKE reported fiscal first quarter revenues were flat at $9.1 billion with net income down 24% to $950 million and EPS down 22% to $.57. Return on invested capital was a strong 32%. International revenues now account for more than 55% of total revenues. Sustained growth in international geographies and Nike Direct globally was offset by an expected decline in North American revenue due to the unprecedented disruption in the North American retail market. Earnings declined due to a gross margin decline, reflecting foreign currency headwinds, a higher effective tax rate compared to a tax benefit in the prior year period and higher foreign currency exchange losses partially offset by lower selling and administrative expenses. While revenues for Converse were down 16% during the quarter to $483 million driven by declines in North America, revenues for the Nike Brand were up 2% to $8.6 billion on a constant currency basis driven by growth in international markets including double-digit growth in China which topped $1 billion and solid growth in apparel to $2.7 billion. Inventories increased 6% during the quarter to $5.2 billion driven by higher average cost per unit due primarily to product mix. Cash increased $732 million to $5.5 billion as of quarter end. During the first quarter, Nike repurchased 15.3 million shares for approximately $849 million at an average price of $55.49 per share as part of the four-year $12 billion buyback program approved by the Board in 2015 with $6.7 billion still available for future repurchases. For the full fiscal 2018 year, Nike expects to report mid-single digit revenue growth thanks to strong international growth, an acceleration in Nike Direct to Consumer sales and lesser foreign exchange headwinds. Gross margin is expected to contract 50-100 basis points with SG&A expenses expected to increase at a mid-single digit rate, other expenses approximating $80 million and the tax rate expected in the 15%-17% range.
FactSet-FDS reported fiscal fourth quarter revenues rose 13.7% to $326.6 million with organic revenues up 6.3% to $301.3 million from the prior year period. Net income decreased 77% to $59.6 million and EPS declined 57% to $1.52 with the prior period including a one-time gain from the sale of the Market Metrics business. Operating margin declined to 25.2% from 30.5% in the prior year period primarily due to $11.2 million in restructuring actions and modifications to certain share-based compensation grants. On an adjusted basis, net income and EPS rose 8.9% and 12.4%, respectively. For the full year, revenues increased 8.3% to $1.22 billion and adjusted EPS rose 14.2% to $7.31. Return on equity for the year was a stellar 46%. Annual Subscription Value (ASV) increased 15%, or 5.7% organically, to $1.32 billion as of 8/31/17. ASV at any given time represents the forward-looking revenues for the next 12 months from all subscription services currently supplied to clients. Client count as of 8/31/17 was 4,744, a net increase of 115 clients during the fourth quarter. User count grew 2,821 to 88,846 in the past three months. Annual client retention was greater than 95% of ASV or 91% when expressed as a percentage of clients. Employee headcount was 9,074 at 8/31/17, up 699 people in the past 12 months, and up 2.4% on an organic basis from a year ago. Free cash flow totaled $283.7 million for 2017 which was relatively flat from the prior year. For the full year, FactSet paid $81 million in dividends and repurchased $261 million of its own shares, including 270,000 shares repurchased in the fourth quarter for $44.1 million at an average price of $163 per share. The company has $244.1 million remaining authorized for future share repurchases. During the first quarter fiscal 2018, management expects revenues to be in the range of $327 million to $333 million with EPS expected in the range of $1.75-$1.81. On an adjusted basis, first quarter EPS is expected in the range of $1.93-$1.99, representing 12% growth at the midpoint.
Friday, Sept. 25, 2017
Genuine Parts Company-GPC has agreed to acquire Alliance Automotive Group (AAG) from private equity funds managed by Blackstone and AAG's co-founders. The acquisition is valued at a total purchase price of about $2 billion including the repayment of AAG's outstanding debt. Headquartered in London, AAG is the second largest parts distributor in Europe, with a focus on light vehicle and commercial vehicle replacement parts through more than 1,800 company-owned stores and affiliated outlets across France, the U.K. and Germany. AAG has a consistent track record of organic revenue and earnings growth supported by strategic investments based on a proven M&A strategy to gain scale, efficiencies and geographic coverage. AAG is expected to generate gross annual billings of approximately $2.3 billion including supplier direct billings, or $1.7 billion of revenue on a U.S. GAAP basis in 2017. Genuine Parts expects the acquisition to be immediately accretive to earnings in the first year after closing, expected during the fourth quarter of 2017. For 2018, incremental earnings per share is estimated at $0.45 to $0.50 and adjusted earnings per share is estimated at $0.65 to $0.70, which excludes the amortization of acquisition-related intangibles. Genuine Parts expects to incur one-time transaction costs in the fourth quarter of 2017. Paul Donahue, Genuine Parts Company's President and Chief Executive Officer, stated, "We are excited to combine with AAG and enter the European markets with critical scale and a leading market position in the automotive aftermarket. AAG is poised to contribute significant sales growth and earnings accretion to Genuine Parts Company and also serves to enhance the GPC platform for long-term, sustainable expansion across the global automotive parts industry. AAG has a strong management team and a deep bench of talent, and our similar cultures and histories make this acquisition an excellent strategic fit. We are confident this business investment will create significant value for our shareholders, and we welcome the AAG team to the Genuine Parts family. We look forward to their future contributions to our ongoing success."
Thursday, Sept. 21, 2017
Alphabet-GOOGL and HTC Corporation announced a definitive agreement under which certain HTC employees -- many of whom are already working with Google to develop Pixel smartphones -- will join Google. HTC will receive $1.1 billion in cash from Google as part of the transaction. Separately, Google will receive a non-exclusive license for HTC intellectual property.
Wednesday, Sept. 20, 2017
Microsoft-MSFT announced that its board of directors declared a quarterly dividend of $0.42 per share, reflecting a 3 cent or 7.6 percent increase over the previous quarter's dividend.
Dell EMC and its industry partners, General Dynamics and Microsoft-MSFT have been awarded a $1 billion five-year U.S. Air Force contract to implement a Cloud Hosted Enterprise Services (CHES) program. It will improve efficiency and agility, encourage innovation, and generate cost savings across the Air Force's information technology enterprise.
Tuesday, Sept. 19, 2017
Walgreens Boots Alliance-WBA announced that it has secured regulatory clearance for an amended and restated asset purchase agreement to purchase 1,932 stores, three distribution centers and related inventory from Rite Aid Corporation for $4.375 billion in cash and other consideration. The amended and restated purchase agreement between the parties updates the terms of the agreement with Rite Aid announced in June 2017. The transaction has been approved by the boards of directors of Rite Aid and Walgreens Boots Alliance and is still subject to other customary closing conditions. Store purchases are expected to begin in October, with completion anticipated in spring 2018. Due to the expected timing of store purchases under the amended and restated asset purchase agreement, Walgreens Boots Alliance does not expect the transaction to have a significant impact to its adjusted diluted net earnings per share in its fiscal year ending 31 August 2018. The company expects to realize annual synergies from the new transaction of more than $300 million, which are expected to be fully realized within four years of the initial closing of the new transaction and derived primarily from procurement, cost savings and other operational matters. The amended and restated asset purchase agreement replaces the earlier purchase agreement entered into by the parties in June 2017, which included 2,186 stores and related assets for $5.175 billion in cash and other consideration.
Thursday, Sept. 14, 2017
Oracle-ORCL reported first fiscal quarter revenues rose 7% to $9.2 billion with net income and EPS each up 21% to $2.2 billion and $.52, respectively. Revenue growth was driven by total cloud revenues which jumped 51% to $1.5 billion, as the company gained market share. New software licenses declined 6% to $966 million while software license updates and product support rose 3% to $5 billion. Hardware revenue declined 5% to $943 million with services revenues up 6% to $860 million. Short-term deferred revenues were up 9% compared with a year ago to $10.3 billion. Operating income rose 7% to $2.8 billion with the operating margin at 31%. The bottom line was boosted by higher non-operating income and a lower tax rate. Free cash flow rose 9% during the first quarter to $6.1 billion with the company ending the quarter with cash (net of debt) of $13.6 billion. During the quarter, the company paid $788 million in dividends, a 28% increase over the prior year period. In addition, the company repurchased 10.2 million shares for around $500 million at an average price of about $49 per share with plans to increase the share buyback significantly in the second quarter. During the last 12 months, the company paid $2.8 billion in dividends and repurchase $2 billion of its own shares. For the second quarter, Oracle expects revenues to increase 4%-6% with EPS growing 7% to 13% in the range of $.66-$.70. In a few weeks, Oracle will announce the world’s first fully autonomous database cloud service. Using artificial intelligence to eliminate most sources of human error enables Oracle to guarantee 99.995% reliability, which equates to only 30 minutes of downtime in a year, while charging much less than competitors.
Brown-Forman-BFB announced that it will invest $45 million in the Brown-Forman Cooperage in Louisville, Kentucky. The investment will modernize the Cooperage, reduce operating cost by improving efficiency, and allow the continued production of high quality barrels in Louisville. Brown-Forman Cooperage crafts more than 2,500 barrels per day for the aging of spirits such as Jack Daniel’s, Woodford Reserve, Old Forester, Early Times, Canadian Mist, el Jimador, and Herradura.
Wednesday, Sept. 13, 2017
T. Rowe Price Group-TROW reported preliminary month-end assets under management of $934 billionas of August 31, 2017, which represents a 15% increase since year end. Client transfers from mutual funds to other portfolios were $1.4 billionfor the month-ended August 31, 2017.
Tuesday, Sept. 12, 2017
Apple-AAPL announced iPhone X, the future of the smartphone, in a gorgeous all-glass design with a beautiful 5.8-inch Super Retina display, A11 Bionic chip, wireless charging and an improved rear camera with dual optical image stabilization. iPhone X delivers an innovative and secure new way for customers to unlock, authenticate and pay using Face ID, enabled by the new TrueDepth camera. iPhone X will be available for pre-order beginning Friday, October 27 in more than 55 countries and territories, and in stores beginning Friday, November 3. iPhone X will be available in silver and space gray in 64GB and 256GB models starting at $999 (US) from apple.com and Apple Stores and is also available through Apple Authorized Resellers and carriers (prices may vary).
Apple®-AAPL announced a new generation of iPhone®: iPhone 8 and iPhone 8 Plus. The new iPhone features a new glass and aluminum design in three beautiful colors made out of the most durable glass ever in a smartphone, Retina HD displays and A11 Bionic chip, and is designed for the ultimate augmented reality experience. The world’s most popular camera gets even better with single and dual cameras featuring Portrait Lighting on iPhone 8 Plus, and wireless charging brings a powerful new capability to iPhone. Both devices will be available for pre-order beginning Friday, September 15 in more than 25 countries and territories, and in stores beginning Friday, September 22. iPhone 8 and iPhone 8 Plus will be available in space gray, silver and an all-new gold finish in increased 64GB and 256GB capacity models starting at $699 (US) from Apple.com and Apple Stores and is also available through Apple Authorized Resellers and select carriers (prices may vary).
Apple®-AAPL introduced Apple Watch® Series 3, adding built-in cellular to the world’s number one watch. Whether users are out for a run, at the pool or just trying to be more active throughout their day, Apple Watch Series 3 with cellular allows them to stay connected, make calls, receive texts and more, even without iPhone® nearby. The third-generation Apple Watch is an amazing health and fitness companion with intelligent coaching features, water resistance 50 meters1 and a new barometric altimeter that measures relative elevation. Apple Watch Series 3 comes in two models, one with GPS and cellular, and one with GPS, both featuring a 70 percent faster dual-core processor and new wireless chip.
Monday, Sept. 11, 2017
AbbVie-ABBV announced positive top-line results from the Phase 3 SELECT-BEYOND clinical trial evaluating upadacitinib (ABT-494), an investigational oral JAK1-selective inhibitor, in patients with moderate to severe rheumatoid arthritis (RA) who did not adequately respond or were intolerant to treatment with biologic DMARDs (bDMARDs). Results showed that after 12 weeks of treatment, both once-daily doses of upadacitinib (15 mg and 30 mg) met the study's primary endpoints of ACR20* and low disease activity (LDA). All ranked secondary endpoints were also achieved with both doses.Upadacitinib is not approved by regulatory authorities and safety and efficacy have not been established. "We are very pleased with the positive results for upadacitinib in the SELECT-BEYOND trial. Particularly exciting is the proportion of patients who achieved clinical remission by week 12 and 24, despite having inadequate responses with previous biologic therapies," said Michael Severino, M.D., executive vice president, research and development and chief scientific officer, AbbVie. "Together with previously reported results from SELECT-NEXT, these data further support the potential for upadacitinib to be a meaningful treatment option for rheumatoid arthritis patients. We continue to build upon our leadership in immunology as we advance the development program for upadacitinib across a broad range of immune-mediated diseases." Rheumatoid arthritis is a chronic and debilitating disease that affects an estimated 23.7 million people worldwide.13 Despite progress in the treatment of RA, many patients still do not achieve remission or low disease activity targets.
Friday, Sept. 8, 2017
Pershing Square proposed to end its proxy contest if ADP-ADP were to agree to add Bill Ackman and both of Pershing Square's other two nominees to the ADP Board, expanding it from 10 to 13 directors. ADP responded: "ADP is always open to constructive input from our shareholders, and we thank Bill Ackman for presenting his ideas to the ADP Board. All 10 of our directors coordinated their schedules to meet with Mr. Ackman and four other Pershing Square employees at Mr. Ackman's request and spent two hours together in an in-depth discussion about ADP's business and his ideas. The Board subsequently convened an executive session, without Pershing Square or ADP management, to discuss Pershing Square's views and its answers to the questions posed by the Board during the session. The Board had previously reviewed in detail Pershing Square's August 17 investor presentation. After considering all of this input, the Board remains confident that ADP has the right corporate strategy in place and the right expertise on the Board to continue to transform its technology, streamline operations, and enhance its competitive advantages at an aggressive yet responsible pace, all of which will extend ADP's strong track record of value creation for clients and shareholders. In contrast, the Board believes Pershing Square's approach presents very significant risks to ADP's clients and shareholders."
Thursday, Sept. 7, 2017
Disney’s CEO, Bob Iger, spoke at a media investment conference. He noted that the parks business had a tremendous fiscal 2017 and expects fiscal 2018 will be even stronger. Toy Store Land will open in Orlando and Star Wars Lands will open in calendar 2019 in Orlando and California. A direct to consumer app will launch in late 2019 which will have exclusive Disney shows, including Star Wars and Marvel content. Disney will continue to invest capital into its franchises and branded content. The movie business is undergoing a secular change, and Disney’s mantra is to make movies big and make them great so that people will want to go see the films for the experience. They will stress quality over quantity. Disney's EPS in fiscal 2017 should be comparable to fiscal 2016 EPS.
Fastenal-FAST reported August sales rose 12.8% to $411.5 million with average daily sales also up 12.8% to $17.9 million. Sales growth by end market was up 14.6% for manufacturing and 6.4% for non-residential construction. Daily sales growth by product line was up 12.2% for fasteners and 13.3% for other products. Year-to-date, the company has opened 13 new branches ending the month with 2,454 branch locations. Total personnel increased 1.1% to 20,111 at quarter end.
MasterCard-MA reaffirmed its mid-teens GAAP net revenue growth for 2017. For its fiscal year 2016-2018 three year compounded annual growth rate guidance, management raised net revenue growth to mid-teens from low double-digits and raised its adjusted EPS growth to approximately 20% from the mid-teens.
AbbVie-ABBV announced positive top-line results from the Phase 2b randomized, placebo-controlled, dose-ranging study of upadacitinib (ABT-494), an investigational, once-daily oral JAK1-selective inhibitor, in adult patients with moderate to severe atopic dermatitis not adequately controlled by topical treatments, or for whom topical treatments were not medically advisable. "Atopic dermatitis is a serious, chronic skin disease that can have a negative impact on patients' lives," said Emma Guttman-Yassky, M.D., Ph.D., Professor of Dermatology and Immunology, Icahn School of Medicine at Mount Sinai Medical Center and lead study investigator. "I am very encouraged that itch reduction was achieved within the first week and that up to half of patients achieved a 90 percent or more improvement in skin lesions (EASI 90) by week 16. These are both major concerns for patients with atopic dermatitis. With these results upadacitinib has the potential to be an important treatment option for patients."
Wednesday, Sept. 6, 2017
AbbVie-ABBV in cooperation with Neurocrine Biosciences, Inc, announced that it has submitted a New Drug Application (NDA) to the U.S. Food and Drug Administration for elagolix, an investigational, orally administered gonadotropin-releasing hormone (GnRH) antagonist, being evaluated for the management of endometriosis with associated pain. In two replicate Phase 3 clinical studies, elagolix demonstrated superiority compared to placebo in reducing three types of endometriosis-associated pain – daily menstrual pelvic pain, non-menstrual pelvic pain and painful intercourse.
Tuesday, Sept. 5, 2017
United Technologies (UTC)-UTX and Rockwell Collins, Inc. announced that they have reached a definitive agreement under which United Technologies will acquire Rockwell Collins for $140.00 per share, in cash and UTC stock. Rockwell Collins is a leader in aviation and high-integrity solutions for commercial and military customers and is globally recognized for its leading-edge avionics, flight controls, aircraft interior and data connectivity solutions. On a 2017 pro forma basis, its estimated sales are greater than $8 billion. UTC expects to fund the cash portion of the transaction consideration through debt issuances and cash on hand, and the company is committed to taking actions to maintain strong investment grade credit ratings. The transaction is projected to close by the third quarter of 2018. The purchase price implies a total equity value of $23 billion and a total transaction value of $30 billion, including Rockwell Collins' net debt. On a pro-forma 2017 basis, UTC is expected to have global sales of approximately $67 to $68 billion following the transaction, based on estimated results. UTC expects the combination will be accretive to adjusted earnings per share after the first full year following closing and generate an estimated $500+ million of run-rate pre-tax cost synergies by year four. "We have demonstrated we can successfully integrate large acquisitions into our business and I have full confidence that the team has the capability to do it again," Hayes said. "Once we have completed the integration of Rockwell Collins and made progress towards reducing leverage back to historical levels, we will have an opportunity to explore a full range of strategic options for UTC." UTC also reaffirmed its expectations for 2017 sales of approximately $58.5 to $59.5 billion and adjusted earnings in the range of $6.45 to $6.60 per share. Management said they expect to halt share buybacks for the next three to four years as they use cash flow to repay debt. Further mergers and acquisitions also will be limited.
Wednesday, Aug. 30, 2017
Brown-Forman-BFB reported first quarter revenues increased 8% to $929 million with net income up 24% to $178 million and EPS up 27% to $.46 on lower shares outstanding. The Jack Daniel’s family of brands delivered broad-based growth, with underlying net sales up 6%, including underlying growth of 4% for Jack Daniel’s Tennessee. The company’s bourbon brands delivered continued growth, including 16% underlying net sales growth from Woodford Reserve. Herradura and el Jimador tequila grew underlying net sales 18% and 13% respectively. Finlandia vodka grew underlying net sales 6%, helped by improved results in Poland and strong growth in Russia. The company’s developed markets outside of the U.S. underlying sales were flat while emerging markets sales continued to accelerate from last year’s sluggish start to the year, delivering 19% growth in the first quarter on an underlying basis. Travel Retail continues to deliver solid rates of growth, with underlying net sales up 12%. For the first three months of fiscal 2018, free cash flow decreased 34% to $74 million with the company paying $70 million in dividends during the period. The company has $1.7 billion of long-term debt and $238 million of cash on the balance sheet as of 7/31/2017. Management believes fiscal 2018 is on track to be another year of continued growth in underlying net sales and operating income despite the significant uncertainty that currently exists around the global geopolitical environment and intense competitive landscape in the developed world. The company reaffirmed full fiscal 2018 year underlying net sales growth of 4% to 5% with underlying operating income growth of 6% to 8%. Management increased EPS guidance from $1.80 to $1.90 to a range of $1.85 to $1.95 which includes the slightly more favorable impact from foreign exchange and an improved tax rate of approximately 28%.
Private sector employment increased by 237,000 jobs from July to August according to the August ADP National Employment Report®. "In August, the goods-producing sector saw the best performance in months with solid increases in both construction and manufacturing," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "Additionally, the trade industry pulled ahead to lead job gains across all industries, adding the most jobs it has seen since the end of 2016. This could be an industry to watch as consumer spending and wage growth improves." Mark Zandi, chief economist of Moody's Analytics, said, "The job market continues to power forward. Job creation is strong across nearly all industries, company sizes. Mounting labor shortages are set to get much worse."
Tuesday, Aug. 29, 2017
Berkshire Hathaway-BRKB become the largest shareholder of Bank of America Corp, with a 6.6% stake in the bank, by exercising its right to acquire 700 million shares of the bank’s shares for about $7.14 each. With Bank of America's stock closing at $23.58, Berkshire has more than tripled its investment that it made six years ago.
Fluor - FLR announced today that the Purple Line Transit Partners joint venture team broke ground on the Purple Line Light Rail project for the Maryland Department of Transportation (MDOT) and the Maryland Transit Administration (MTA). “Fluor is honored to break ground today on the second transit public-private partnership project in the U.S.,” said Hans Dekker, president of Fluor’s infrastructure business line. “We bring robust megaproject experience and industry-leading abilities to successfully design, build, finance and manage complex projects. Located in the Washington Metropolitan Region, the project includes 21 stations along a 16-mile alignment extending from Bethesda, Maryland, in Montgomery County to New Carrollton, Maryland, in Prince George’s County. This new line will provide connections to several existing transit providers and improve mobility to major economic and job centers, as well as the University of Maryland in College Park. Passenger service is scheduled to begin in early 2022. Fluor is participating in the entire 36-year life cycle of the $5.6 billion project. Fluor is the managing partner of the design-build team. A Fluor-led team will provide 30 years of operations and maintenance services.
Apple - AAPL and Accenture - ACN are partnering to help businesses transform how their people engage with customers through innovative business solutions for iOS. The partnership will take full advantage of the power, simplicity and security of iOS, the leading enterprise mobility platform, and Accenture’s capabilities as a leader in industry and digital transformation to help companies unlock new revenue streams, increase productivity, improve customer experience and reduce costs. Accenture will create a dedicated iOS practice within Accenture Digital Studios in select locations around the world. Working together, the two companies will launch a new set of tools and services that help enterprise clients transform how they engage with customers using iPhone® and iPad®. “Starting 10 years ago with iPhone, and then with iPad, Apple has been transforming how work gets done, yet we believe that businesses have only just begun to scratch the surface of what they can do with our products,” said Tim Cook, Apple’s CEO. “Both Apple and Accenture are leaders in building incredible user experiences and together we can continue to truly modernize how businesses work through amazing solutions that take advantage of the incredible capabilities of Apple’s technologies.” Pierre Nanterme, Accenture’s chairman and CEO, said, “Based on our experience in developing mobile apps, we believe that iOS is the superior mobile platform for businesses and are excited to be partnering with Apple. By combining Accenture’s vast digital capabilities and industry expertise with Apple’s market leadership in creating products that delight customers, we are in a perfect position to help our clients transform the way they work.”
Friday, Aug. 25, 2017
Hormel-HRL reported third quarter sales declined 4% to $2.2 billion with net income falling 7% to $183 million and EPS down 6% to $0.34. Volume declined 9%, cut by divestures and continuing challenges at Jeannie-O Turkey. Despite record-high input costs for pork bellies and beef trim, operating income edged up 1% to a record $278 million on lower advertising and personnel expenditures. By segment, Refrigerated Foods, representing 49% of net sales, declined 6% to $1.1 billion, primarily due to the divestiture of the Farmer John business. HORMEL® BACON 1TM fully cooked bacon, HORMEL® pepperoni, HORMEL® BLACK LABEL® bacon, HORMEL® pepperoni, and HORMEL GATHERINGS® party trays all posted strong sales growth during the quarter. Grocery Products, representing 19% of total sales, increased 6% to $422 million thanks to strong sales of WHOLLY GUACAMOLE® dips, an additional period of JUSTIN'S® specialty nut butters and higher sales of SKIPPY® peanut butter products. Jennie-O Turkey Store sales, representing 17% of sales, declined 9% to $369 million, gobbled up by lower turkey commodity prices and pricing pressure from competing proteins. Specialty Foods sales declined 7% to $197 million on wimpy sales of MUSCLE MILK® protein products. Cash flow from operations was $250 million in the third quarter, up from $213 million last year, due to decreases in working capital. Free cash flow increased 41% year-over-year to $208 million on lower capital expenditures. Fiscal year-to-date free cash flow declined by 14% to $395 million on working capital demands. Hormel returned $350 million to shareholders year-to-date through share repurchases of $94 million and dividends of $256 million. During the quarter, Hormel paid its 356th consecutive quarterly dividend completing its 89th year of dividend payments. Hormel announced strategic investments during the quarter, including the $425 million acquisition of Fontanini Italian Meats and Sausages to complement Hormel’s branded foodservice business while providing much-needed production capacity for the pizza toppings business. Hormel also announced the $104 million acquisition of the Ceratti® brand, a premium value-added meats company in Brazil. In addition, management committed over $130 million to expand production capacity for precooked bacon in Wichita, Kansas to increase bacon capacity. Given expected continued earnings pressure from higher input costs for key raw materials such as bellies, pork trim, and beef trim along with continuing challenges at Jennie-O Turkey Store, Hormel lowered its full year guidance to $1.54 - $1.58 per share from the low end of $1.65 to $1.71 per share.
Wednesday, Aug. 23, 2017
Gentex’s-GNTX Board of Directors authorized the purchase of an additional 15 million shares of its common stock. As of August 23, 2017, including the most recent authorization, the Company has a total of approximately 15.7 million shares remaining available for repurchase. The Company intends to continue to repurchase additional shares of its common stock in the future depending on macroeconomic issues, market trends and other factors that the Company deems appropriate.
Stryker-SYK announced that the company has informed the U.S. Food and Drug Administration (FDA) of a voluntary product recall involving specific lots of Oral Care products sold through the company`s Sage Products business unit (Sage). The recalled products contain Oral Care solutions manufactured for Sage by a third-party supplier and were distributed between July 2015 and August 2017. To date, Stryker has not been made aware of any serious adverse events associated with the Oral Care products recall. However, there have been some reports of minor irritation and allergic reaction. Stryker has discontinued business with the third-party supplier and all Oral Care solutions are being manufactured in-house by Sage. Stryker expects to resume shipping Oral Care products in September and anticipates a return to full supply capacity by year end. Based on the estimated impact to sales and operating income, Stryker now expects full year organic sales growth and adjusted net earnings per diluted share to be at the lower end of its previously stated range of 6.5% to 7.0% and $6.45-$6.55, respectively.
Alphabet-GOOGL is entering a partnership with Walmart to bring hundreds of thousands of products at Walmart that can be purchased through voice with the Assistant on Google Home or on the Google Express website or app to help make shopping faster and easier. Alphabet is offering free delivery within one to three days on Google Express as long as an order is above each store’s minimum.
Tuesday, Aug. 22, 2017
Microsoft-MSFT and Halliburton announced a strategic alliance to drive digital transformation across the oil and gas industry. The relationship will combine the expertise of a global leader in cloud and digital transformation with a global leader in exploration and production (E&P) science, software and services. Researchers and engineers from both companies will leverage and optimize Microsoft technologies in machine learning, augmented reality (AR), user interactions and Industrial Internet of Things, as well as Azure's high-performant infrastructure and built-in computing capabilities to deliver tightly integrated solutions across the energy value chain. Areas of collaboration include: applying deep learning to reservoir characterization, modeling and simulation, building domain-specific visualization for mixed reality, creating highly interactive applications and fueling the digitalization of E&P assets. “Halliburton is focused on delivering intelligent cloud solutions to drive the next generation of efficient oil and gas exploration and production,” said Jason Zander, corporate vice president of Microsoft Azure. "We are excited to bring the power of Azure’s hyperscale, hybrid and global cloud platform technologies to this alliance to enhance the value chain for our mutual customers."
Monday, Aug. 21, 2017
Berkshire Hathaway Energy-BRKA confirms its proposal to acquire Energy Future Holdings and its interest in Oncor Electric Delivery Company has been terminated due to a higher bid for Oncor. "We are disappointed our agreement to acquire Oncor has been terminated," said Greg Abel, Berkshire Hathaway Energy chairman, president and CEO. The Berkshire deal included a $270 million break up fee that was to be paid to Berkshire if the deal did not go through.
Genuine Parts-GPC announced the company has increased the number of shares of its common stock authorized for repurchase by 15 million shares. Mr. Donahue stated, "The Company will continue to make advantageous purchases from time to time on the open market or in unsolicited negotiated transactions." The Company's share repurchase program originally authorized the repurchase of 15 million shares in August 1994, another 15 million in April 1999, August 2006, and November 2008, for a total authorization of 60 million shares. Through the current date, the Company has purchased approximately 57.6 million shares under this program and remains authorized to complete the purchase of the approximately 2.4 million shares outstanding. Mr. Donahue concluded, "We are pleased with the progress in the current repurchase program and believe this additional authorization will help to further enhance shareholder value."
Cisco-CSCO announced its intent to acquire Springpath, Inc., a Sunnyvale-based leader in hyperconvergence software. Springpath has developed a distributed file system purpose-built for hyperconvergence that enables server-based storage systems. The acquisition will allow Cisco to continue to deliver next-generation data center innovation to its customers. Cisco will acquire Springpath for $320 million in cash and assumed equity awards, plus additional retention-based incentives. The acquisition is expected to close in Cisco's first quarter of fiscal year 2018.
Thursday, Aug. 17, 2017
Ross Stores-ROST reported second quarter sales rose 8% to $3.4 billion with net income ringing up a 12% gain to $316 million and EPS jumping 16% to $.82. Strong 4% comparable store sales growth was driven by both customer traffic and an increase in the ticket price of the average shopping basket. Sales growth was broad-based by both product category and geographic region led by growth in shoes and home goods and solid growth in the Midwest of the U.S. During the quarter, the company opened 21 new Ross Stores and 7 new dd’s Discounts. For the full year, management plans to open 70 new Ross Stores and 22 new dd’s Discounts. The company’s operating margin expanded 50 basis points to 14.9% and outperformed management’s expectations due to a combination of higher merchandising margin and leverage on above-plan sales gains. Free cash flow for the first half of the year was comparable to last year at $629 million. During the first half, the company paid $125 million in dividends and repurchased 6.9 million of its own shares for $430 million at an average price of about $62.31 per share. Management expects to repurchase $875 million of its shares during fiscal 2017 as part of its two-year $1.75 billion share repurchase authorization. Based on first half results, management expects EPS for the full year to increase 12% to 14% to a range of $3.16 to $3.23 with comparable store sales growth expected to increase 1% to 2% in the second half of the year.
Hormel Foods-HRL announced it has acquired Fontanini Italian Meats and Sausages, a branded foodservice business, from Capitol Wholesale Meats, Inc. The company is based in the Chicago metropolitan area and specializes in authentic Italian meats and sausages, as well as a variety of other premium meat products including pizza toppings and meatballs. The transaction was structured as an asset sale with a purchase price of $425 million.
Wednesday, Aug. 16, 2017
Cisco Systems-CSCO reported fourth quarter revenues declined 4% to $12.1 billion with net income and EPS each dropping 14% to $2.4 billion and $.48, respectively. Product revenue was down 5% during the quarter with service revenue up 1%. Product revenue was weak across most business units but rose 5% in Wireless and 3% in Security. Revenue by geographic segment was down 6% in the Americas, down 6% in EMEA and up 6% in APJC. Product gross margin declined in the fourth quarter to 60.3% compared to 62.2% in the prior year period primarily due to memory pricing pressures, which are expected to continue in the next few quarters. For the full fiscal 2017 year, revenues declined 2% to $48 billion with net income down 11% to $9.6 billion and EPS down 10% to $1.90. Excluding the SP Video CPE Business which was divested, net income would have been flat at $12 billion and non-GAAP EPS would have been up 1% to $2.39. Deferred revenue increased 12% for the year to $18.5 billion with deferred service revenue up 6% and deferred product revenue up 23% driven by subscription-based and software offerings. The portion of product deferred revenue related to recurring software and subscription offers increased 50%. Return on shareholders’ equity for the year was a solid 14.5%. Free cash flow increased 4% during the year to $12.9 billion. The company returned more than 70% of the free cash flow to shareholders via $5.5 billion in dividends and $3.7 billion in share repurchases as the company repurchased 118 million of its own shares during the year at an average price of $31.38 per share. Since the inception of the repurchase program, Cisco has repurchased and retired 4.7 billion Cisco shares for $100.3 billion at an average price of $21.30 per share. The company ended the year with $70.5 billion in cash and $25.7 billion in long-term debt on its sturdy balance sheet. As Cisco continues its multi-year transition to more of a subscription and software business from a hardware business, management expects fiscal 2018 first quarter revenues to decline 1% to 3% with EPS expected in the range of $.48 to $.53.
Tuesday, Aug. 15, 2017
The TJX Companies-TJX rang up a fashionable 6% increase in second quarter sales to $8.4 billion with net income slipping to $553 million from $562 million last year and EPS up slightly to $0.85 from $0.84 on fewer shares outstanding. Second quarter EPS were hurt by a $0.04 foreign currency headwind, higher wages and losses on inventory hedges. However, merchandise margins increased again this quarter. Consolidated comparable store sales were up 3%, driven by an increase in customer traffic at every TJX division, partially offset by a decline in average retail as this quarter’s hottest categories came with a lower average ticket. Management is confident that TJX is gaining market share at each of its four major divisions. By division, Marmaxx sales increased 4% to $5.3 billion on a 2% increase in comparable store sales. HomeGoods sales increased 17% year-over-year to $1.2 billion on a 7% increase in same store sales. TJX Canada sales increased 10% to $832 million, also on a 7% same store sales increase while TJX International sales increased 4% to $1.1 billion on a 1% same store sales increase. During the quarter, TJX increased its square footage by 5% year-over-year, adding 51 stores bringing the total to 3,913 stores. TJX’s new brand, HomeSense, will launch next week with the opening of its first store in Framingham, MA. During the second quarter, TJX repurchased $550 million of its common shares, retiring 7.5 million shares at an average per share cost of $73.33. During the first half of the year, the company repurchased $900 million of TJX stock, retiring 12 million shares and paid $369 million in dividends, up 20% from last year. During the first half of the year, TJX generated $596 million in free cash flow, bringing the total cash at quarter’s end to nearly $3 billion on its sturdy balance sheet. Looking ahead to the full fiscal year, sales are expected in the $35.6 billion to $35.8 billion range on a 1% to 2% increase in same store sales. EPS are expected in the range of $3.89 to $3.93, up 12% to 14%, marked up in part by an $0.11 benefit from the 53rd week in the fiscal 2018 calendar. Excluding this benefit, adjusted EPS are expected in the range of $3.78 to $3.82, up 7% to 8%. The company now expects to repurchase approximately $1.5 to $1.8 billion of TJX stock in fiscal 2018.
Tuesday, Aug. 8, 2017
Walt Disney-DIS reported fiscal third quarter revenues were flat at $14.2 billion compared to the prior year period with net income down 9% to $2.4 billion and EPS down 5% to $1.51. Media Networks revenues declined 1% to $5.9 billion with operating income down 22% to $1.8 billion during the quarter due to the expected higher NBA programming costs at ESPN. Parks and Resorts were the bright spot during the quarter with revenues up 12% to $4.9 billion and operating income up a magical 18% to $1.2 billion, reflecting an increase at international operations. Shanghai Disney Resort had a full quarter of operations this year compared to the prior year period which also included pre-opening costs. Shanghai Disney Resort has had 13 million visitors since it opened 14 months ago with extremely high occupancy at the resort hotels. Shanghai Disney is expected to be profitable in its first full year of operations. Studio Entertainment revenues declined 16% during the quarter to $2.4 billion with operating income down 17% to $639 million due to tough comparisons with the prior year period. Consumer Products and Interactive Media revenues declined 5% to $1.1 billion with operating income up 12% to $362 million thanks to increases in the merchandising and games businesses. Year-to-date free cash flow increased 3% to $6.1 billion with Disney paying $1.2 billion of dividends and repurchasing 64.3 million of its own shares for $6.8 billion at an average cost of $105.75 per share. Management remains committed to repurchasing $9 billion to $10 billion of its shares for the full year. Disney announced plans to acquire an additional 42% stake in BAMTech, a global leader in direct-to-consumer streaming technology and marketing services, data analytics and commerce management for $1.58 billion. Disney previously had acquired a 33% stake in BAMTech and now with its majority ownership, Disney plans to launch its ESPN-branded multi-sports video streaming service in early 2018 followed by a new Disney-branded direct-to-consumer streaming service in 2019. With this strategic shift in the way Disney plans to distribute their content, they plan to end their distribution agreement with Netflix for subscription streaming of new releases beginning in 2019. Management believes this new strategy will enable them to leverage the strength of their great brands with the direct-to-consumer services marking a new growth opportunity for the firm. The BamTech transaction is expected to be modestly dilutive to Disney’s earnings per share for two years. Additional dilution will be dependent on the company’s licensing approach and the level of investment in original programming.
The Priceline Group-PCLN booked second quarter revenues of $3 billion, up 18% year-over-year, with net income and EPS up 24% to $720 million and $14.39, respectively. Gross profit increased 21% to $2.95 billion. Second quarter gross bookings —the total value of all travel services booked by the company’s customers — were $20.8 billion, up 16%, or 19% on a constant currency basis. Room nights sold increased 21% to 170.2 million, rental car days increased 12% to 20.7 million while airline tickets sold declined 9% to 1.8 million. During the quarter, Bookings.com added 150,000 properties to its platform, bringing the total number of properties to 1.3 million, up 39% from last year. During the second quarter, Priceline repurchased $344 million of its shares. Year-to-date, Priceline generated $1.5 billion in free cash flow, up 16% from last year’s first half, bringing the total amount of cash and investments on its five-star balance sheet to $16.6 billion. Looking ahead to the third quarter, Priceline expects room nights booked and total gross travel bookings to increase by 11% to 16%. Gross profit is expected to increase 15.5% to 20.5%, or 12.5% to 17.5% on a constant currency basis. Net income and EPS adjusted for specified items including the $940 million, or $18.70 per share, goodwill impairment charge recorded during last year’s third quarter, are expected to increase 4% to 9%. The decline in the rate of earnings growth is due to the timing in brand advertising and difficult comps as bookings accelerated during the second half of 2016. During the quarterly conference call, Mr. Fogel, Priceline Group CEO, remarked, "We are pleased with the performance of the business and will continue to build our franchise by adding properties to the platform and by investing in technology, customer experience and content expansion."
Saturday, Aug. 5, 2017
Berkshire Hathaway-BRKB reported the company’s net worth during the first half of 2017 increased by 6.2% with book value equal to $182,816 per Class A share as of 6/30/17. The $17.7 billion increase in shareholders’ equity was due to the company’s $8.3 billion in net earnings during the first half and approximately $9.4 billion of gains in other comprehensive income primarily related to changes in unrealized investment appreciation.
Berkshire’s five major investment holdings, representing 62% of total equities, had mixed results since 12-31-16. Wells Fargo’s stock declined 1% to $27.3 billion amid continued negative headlines on business practices and increased legal costs. Apple became the apple of Buffett’s eye as the position size more than doubled since year end to $19.4 billion through appreciation and additional purchases. Since year end, the American Express position charged 14% higher to $12.8 billion and Coca-Cola’s stock popped 8% to $17.9 billion. On the other hand, the IBM stake dropped 39% to $8.3 billion as Buffett shed a significant amount of his IBM shares.
Berkshire’s second quarter operating revenues rose 7% to $57.4 billion with all operating business groups contributing to the growth led by 13% revenue growth from the insurance group and 15% growth from the BNSF railroad. Net income declined 15% during the quarter to $4.3 billion. Operating earnings (excluding investment and derivative gains/losses) declined 11% during the second quarter to $4.1 billion, due primarily to losses from underwriting in the insurance businesses and the impact of foreign currency exchange rate losses.
Berkshire’s insurance underwriting operations generated a $22 million loss during the second quarter compared to a $337 million profit in the prior year period. Underwriting gains from GEICO, General Re and Berkshire Hathaway Primary Group were more than offset by $400 million in underwriting losses from Berkshire Hathaway Reinsurance Group due primarily to the increased deferred charge amortization related to the reinsurance businesses including the AIG Agreement. Insurance investment income was 1% lower at $965 million during the quarter due to lower dividend income from the redemption of Dow Chemical’s preferred stock. The float of the insurance operations approximated a whopping $107 billion as of 6/30/17, an increase of $16 billion since 12/31/16 related in large part to the AIG deal. The average cost of float in the first half of the year was about .4% due to the aggregate pre-tax underwriting loss of $403 million.
Burlington Northern Santa Fe’s (BNSF) revenues rose 15% during the second quarter to $5.2 billion with net earnings chugging 24% higher to $958 million. During the first half, BNSFgenerated a 4.1% comparative increase in average revenue per car/unit and a 7.6% increase in volume. Year-to-date volume was 5 million cars/units driven by a rebound in freight revenue growth from coal and broad-based growth from consumer products, industrial products and agricultural products thanks to improving economic conditions. Berkshire expects overall volume growth will moderate in the second half of 2017.
Berkshire Hathaway Energy reported revenues increased 8% to $4.6 billion during the second quarter with all divisions except Northern Powergrid contributing to the revenue growth. Net earnings charged 7% higher during the quarter to $516 million due to earnings improvements at NV Energy, a 19% increase in the real estate brokerage business earnings due to recent acquisitions, and a lower tax rate.
Berkshire’s manufacturing businesses reported a 4% increase in revenue growth in the quarter to $12.7 billion with operating earnings up 15% to $1.9 billion. The results reflected in part the acquisitions of Precision Castparts and Duracell. Growth was led by the Building products unit as revenues increased 10% to $3.1 billion due to bolt-on acquisitions by Shaw and MiTek as pre-tax earnings rebounded 31% to $401 million.
Service and Retailing revenues rose 4% during the quarter to $19.1 billion with pre-tax earnings up 7% to $624 million. Service revenues rose 8% to $3.8 billion with operating earnings soaring 19% to $351 million primarily due to improvements at NetJets and volume increases at most of TTI’s operations. Retailing revenues declined 1% during the quarter to $3.8 billion with operating earnings up 27% to $204 million. The revenue decrease reflected a decline in revenues at Berkshire Hathaway Automotive (BHA) due to lower vehicle units sold. The increase in earnings was due to higher earnings from BHA, the home furnishing retailers, Pampered Chef and See’s Candies. McLane’s revenues rose 4% during the quarter to $12.6 billion due to a 4.6% increase in grocery sales. However, operating earnings declined 47% to $69 million due to significant pricing pressures in an increasingly competitive grocery business environment.
Finance and Financial Products revenues rose 2% during the quarter to $2 billion with net income declining 16% to $332 million. The revenue increase was due to a 13% increase in home sales at Clayton Homes, reflecting higher unit sales and higher average prices. Earnings were negatively impacted by the transportation and equipment leasing business, lower earnings from CORT furniture leasing and lower dividend and interest income on investments.
Berkshire’s balance sheet continues to reflect significant liquidity and a strong capital base of $300.7 billion as of 6/30/17. Excluding utility and finance investments, Berkshire ended the quarter with $277.3 billion in investments allocated approximately 48.8% to equities ($135.3 billion), 8.4% to fixed-income investments ($23.4 billion), 6.1% to other investments, including preferred stocks in Bank of America and Restaurant Brands International ($16.8 billion), 5.6% to Kraft Heinz ($15.6 billion, with a fair value of $27.9 billion as of 6-30-17), and 31.1% in cash and equivalents ($86.2 billion).
Berkshire’s financial strength allows Buffett to make significant investments and acquisitions. Apple has been the biggest new recent investment now worth about $19 billion. Berkshire expects the acquisition of Medical Liability Mutual Insurance Company with 3-31-17 assets and policyholders’ surplus of $5.6 billion and $2.1 billion, respectively, to close in late 2017. On July 7, 2017, Berkshire Hathaway Energy agreed to acquire 80.3% of Oncor Electric Delivery Company for $9 billion with the intention to acquire the remaining 19.7% through separate agreements with this transaction expected to close in the fourth quarter of 2017.
Free cash flow more than doubled during the first half to $21.5 billion, due primarily to the big boost to float from the AIG deal. During the first half, capital expenditures declined 16% to approximately $5.1 billion, including $1.8 billion by Berkshire Hathaway Energy and $1.5 billion by BNSF. Berkshire Hathaway forecasts aggregate capital expenditures of about $4.8 billion over the balance of 2017 for these two businesses. During the first half of 2017, Berkshire purchased a net $14.2 billion in Treasury Bills and fixed-income investments and purchased a net $5.8 billion of equity securities, including the purchase of Apple and the sale of IBM shares. There were no share repurchases of Berkshire Hathaway stock.
Berkshire Hathaway’s stock appears fairly valued, currently trading at $270,000 per A share and $180 per B share. Based on current business fundamentals, we expect Berkshire’s A shares to trade between $224,000-$285,000 per share and the B shares to trade between $150-$190 per share. Hold.
Friday, Aug. 4, 2017
Fastenal-FAST reported July net sales increased 12.9% to $350 million with average daily sales also up 12.9% to $17.5 million. Daily sales growth by end market was up 14.2% in manufacturing and 6.6% in non-residential construction. Daily sales growth by product line was 11.3% in fasteners and 14.1% in other products. Year-to-date, the company has opened 12 new locations and ended the quarter with 2,453 branch locations. Total personnel remained relatively flat at 20,230.
Automatic Data Processing-ADP issued the following statement regarding ADP's recent communications from Pershing Square Capital Management that Pershing is seeking effective control of ADP through five Board seats at ADP's 2017 Annual Meeting as well as a CEO change. "Pershing first contacted ADP on August 1, and William Ackman said it beneficially owns 8% of ADP, largely in derivatives. Mr. Ackman requested that ADP extend the August 10 deadline for nomination of directors by 30 to 45 days and said he planned to nominate five directors, including himself, to ADP's 10-member Board. He also said CEO Carlos Rodriguez should be replaced." "ADP is open to constructive input from our shareholders, and our Board respects the right of shareholders to nominate directors. However, ADP has a clearly defined Board nomination process, and the 2017 deadline for director nominations has been public for nearly a year. The Board has unanimously determined that it is not in the best interests of ADP or its other shareholders to accede to Pershing Square's last-minute request for an extension." "Since Carlos Rodriguez became CEO nearly six years ago, ADP's total shareholder return of 202% is well in excess of the S&P 500 TSR of 128% -- and is many multiples of Pershing's TSR of 29%." "ADP has a strong and independent Board, including four new directors who have joined since 2014: Michael Gregoire, CEO of CA Technologies; Peter Bisson, former global leader of McKinsey's High Tech Practice; William Ready, EVP and Chief Operating Officer of PayPal; and Sandra Wijnberg, Executive Advisor and former Partner of Aquiline Holdings. These directors have deep expertise in technology, operations and finance and provide important perspective on advancing ADP's global strategy." "We believe our current Board has an effective balance of leadership continuity and fresh perspectives that will help us to continue this strong track record of delivering value to shareholders while successfully executing on our 'All in on HCM' strategy."
Thursday, Aug. 3, 2017
Fluor-FLR reported disappointing second quarter results with revenues down 3% to $4.7 billion. The company reported a loss during the quarter of $24 million or $.17 per share compared to a profit of $102 million or $.72 per share in the prior year period. Results for the quarter included an after-tax charge of $124 million, or $.89 per share, for estimated cost increases on three gas-fired power projects. Due to the continued challenges on gas-fired power projects, Fluor has made recent management and organizational changes in the power segment and is changing its review process. New awards for the quarter were $3.2 billion, including $1.1 billion in Government, $860 million in Energy, Chemicals and Mining, $672 million in Industrial, Infrastructure and Power and $554 million in Diversified Services. Consolidated backlog declined in every business segment to $37.6 billion at the end of the quarter compared to $47.2 billion in the prior year period. Lack of clarity on government regulatory reform has slowed awards. Free cash flow increased in the first half to $286.3 million with the company paying $59.3 million in dividends, which remained flat with the prior year period. As a result of the charge during the quarter and the wind down of a nuclear project, the company is once again lowering its 2017 EPS guidance to a range of $1.40 to $1.70 from the previous range of $2.25 to $2.75. Management acknowledged that they had lost credibility with investors due to poor execution and would be working hard to regain trust.
Cognizant Technology Solutions-CTSH reported second quarter sales increased a healthy 9% to $3.7 billion with net income and EPS nearly doubling to $470 million and $0.80, respectively. Excluding the 2016 income tax expense related to a one-time $2.8 billion remittance from the company’s Indian subsidiary to non-Indian Cognizant entities and other specific items, adjusted EPS of $0.93 increased 7% year-over-year. Consulting & Technology Service revenue, which accounted for 59% of total sales during the quarter, increased 11%, reflecting robust demand for digital enterprise solutions. Outsourcing Services increased a slower 6% due to the timing of client engagements, which are expected to pick up in the second half of the year. Three of Cognizant’s four segments delivered double-digit growth with Healthcare up 10% to $1.1 billion, Products and Resources (manufacturing and logistics) up 13% to $747 million and Communications, Media and Technology up 17% to $467 million. Financial Services revenues increased 4% to $1.4 billion, largely driven by insurance companies. Large money-center banks continue to take a conservative approach to spend with a focus on optimizing costs while sales to mid-tier banking accounts remained quite strong. Quarter-end headcount stood at 256,800, down 4,400 mainly in response to the company’s voluntary separation offer made to employees as Cognizant realigns its resources with its digital transformation business opportunities. Cognizant’s balance sheet remains very healthy with $4.4 billion of cash and short-term investments. Net of debt, this was down by $900 million from December 31, reflecting the use of cash on hand to primarily fund the ASR. Cognizant expects to complete its $1.5 billion accelerated share repurchase program in the third quarter. Year-to-date, Cognizant has returned $1.6 billion to shareholders through dividends of $89 million and share repurchases of $1.5 billion. Given the strong first half of the year, management raised the low end of its full year revenue growth guidance to 9% to 10% (from previous guidance of 8% to 10%) with 2017 revenues now expected in the $14.7 to $14.84 billion range and adjusted EPS of at least $3.67.
Becton, Dickinson and Company-BDX reported third fiscal quarter revenues of $3 billion, down 5% from last year’s third quarter, primarily due to the Respiratory Solutions business divestiture that was completed in October 2016 and foreign currency headwinds On a comparable, currency-neutral basis, third quarter revenues grew 2.4%. Becton Dickinson reported a third quarter loss of $165 million, or $0.75 per share, compared to net income of $390 million, or $1.80 per share, reported last year. This year’s third quarter results were hurt by a $741 million charge related to the company’s decision to amend provisions for dispensing equipment leases within the Medication Management Solutions business. Lease modifications, which allow for more customer flexibility, were made in conjunction with Becton Dickinson’s new “go-to-market” business model. By business segment, BD Medical revenues fell 9% to $2 billion in the wake of the Respiratory Solutions divestiture. Comparable, currency-neutral revenues increased 1.3% year-over-year, reflecting solid performance in Medication and Procedural Solutions, Diabetes Care and Pharmaceutical Systems. BD Life Sciences sales of $997 million increased 3.5% year-over-year, reflecting strong performance in the Biosciences unit and solid growth in the Diagnostic Systems and Preanalytical Systems units. Year-to-date free cash flow declined 34% to $957 million on lower earnings and working capital changes. At June 30, 2017, Becton Dickinson held $13.9 billion in cash and equivalents, which included net proceeds raised through public offerings of stock and debt during the third quarter of about $4.8 billion and $9.6 billion, respectively. Debt issued by Becton Dickinson during the quarter matures in 2019 through 2047 with coupons of 2.1% to 4.7%. During the first nine months of fiscal year 2017, the company paid cash dividends of $478 million and also repurchased about $220 million of stock under an accelerated share repurchase agreement. Management made good progress during the quarter on integrating the Carefusion acquisition and will leverage lessons learned during the process in the $24 billion C.R. Bard acquisition, which is expected to close before calendar year-end. Becton Dickinson expects full fiscal year 2017 revenues to decrease 3% to 3.5%, primarily due to the Respiratory Solutions business divestiture. This is an improvement from previously issued guidance of a 3.5% to 4% decrease, thanks to favorable foreign currency movements. Comparable, currency-neutral revenues will increase 4.5% to 5%. EPS are expected in the $5.10 and $5.15 range, up 14% to 15%. Becton Dickinson raised its adjusted EPS guidance to be between $9.42 and $9.47, up 10% from fiscal 2016.
Maximus-MMS reported third quarter revenues decreased 3% to $600.4 million principally due to foreign currency impacts and the expected wind down of a Veterans Affairs subcontract in the U.S. Federal Services Segment. Despite the lower revenues, operating margin remained relatively flat during the quarter at a solid 13.6%. Net income and EPS during the quarter each rose 9% to $56.9 million and $.86, respectively, benefiting from research and development tax credits related to tax returns for prior years, which added $.06 per share to the bottom line. Free cash flow more than doubled during the first nine months to $206 million with the company repaying most of their credit facility and long-term debt, paying $8.8 million in dividends and repurchasing $28.9 million of its own share during the same time period. While no share repurchases occurred during the third quarter, the company has $109 million remaining authorized for future share repurchases. The company’s capital allocation priorities remain first to use cash for selective acquisitions, then to pay the dividend and then for opportunistic share repurchases. Year-to-date signed contract awards at 6/30/17 totaled $1.8 billion with contracts pending (awarded but unsigned) totaling $259.8 million. The sales pipeline at quarter end was $3.3 billion comprised of $800 million in proposals pending, $700 million in proposals in preparation and $1.8 billion in opportunities tracking. Approximately $3.3 billion of the pipeline is new work and reflects opportunities across all three business segments. Maximus continues to see a general slowdown and procurement delays in the federal market due to the transition in Washington. Maximus reiterated it revenue guidance for fiscal 2017 with revenues expected to come in at the low end of the $2.425 billion to $2.475 billion range. Management raised their fiscal 2017 EPS outlook to a range of $3.05 to $3.15 from prior guidance of $3.00 to $3.10, primarily due to the tax credit recorded in the third quarter.
Bioverativ-BIVV reported second quarter revenues rose a healthy 38% to $289.1 million with net income up 21% to $77.1 million and EPS up 20% to $.71. These strong results were driven by 29% product revenue growth as ELOCTATE continues to capture both new patients and patients switching from short-acting therapies and benefits from an increased shift to prophylactic treatments in hemophilia A. Despite increasing competition in hemophilia B, ALPROLIX benefited from patients moving from on-demand to prophylactic treatment. Collaboration revenues continued to deliver strong growth as both royalty and contract manufacturing revenues increased significantly during the quarter. During the quarter, Bioverativ completed the acquisition of True North Therapeutics, a rare disease biotechnology company, for $395.7 million through a combination of cash on hand and borrowings. As of quarter end, Bioverativ had $137.4 million in cash and $49.5 million in short-term debt. Given strong execution in the quarter, management raised their outlook for revenue growth for the full 2017 year to 23% to 25% growth with the operating margin expected in the range of 36% to 39%.
Wednesday, Aug. 2, 2017
The Cheesecake Factory-CAKE reported second quarter revenues rose 2%, with comparable store sales down .5%, to $569.9 million with net income dipping 1% to $38.2 million and EPS flat at $.78 compared to the prior year period. The quarter came in softer than expected with weak sales trends attributed to uncertainty on the part of many consumers and unfavorable weather in the East and Midwest. The company plans to open as many as eight company-owned restaurants in fiscal 2017, including one relocation. In addition, the company expects to open as many as four restaurants under licensing agreements internationally in fiscal 2017, including the first location that opened in Hong Kong to much success. During the first half, the firm generated $114 million in cash flow from operations and $61 million in free cash flow after spending $53 million on capital expenditures. Given the stability of the company’s cash flows and positive long-term prospects for the business, the board increased the quarterly dividend a sweet 21% to $.29 per share. During the second quarter, the company repurchased 400 million of its own shares at a cost of $21.3 million at an average price of $53.25 per share with the company planning to repurchase about $125 million of its shares for the full fiscal 2017 year as management plans to return substantially all of its free cash flow to shareholders through dividends and share repurchases. Given the continued softness in restaurant industry spending and an increasingly competitive business environment, management lowered their outlook for sales and earnings for the full year with comparable store sales now expected to decline 1% for the full year and 2017 EPS expected in the range of $2.62 to $2.70, representing a disappointing 5% to 7% decline in earnings per share from the prior year, compared to previous guidance of EPS in the range of $2.93 to $3.02.
AbbVie-ABBV announced the U.S. Food and Drug Administration (FDA) has approved IMBRUVICA® (ibrutinib) for the treatment of adult patients with chronic graft-versus-host-disease (cGVHD) after failure of one or more lines of systemic therapy.1With this approval, IMBRUVICA becomes the first and only therapy specifically approved for adults with cGVHD, a serious and debilitating potential consequence of stem cell or bone marrow transplant.IMBRUVICA, a first-in-class Bruton's tyrosine kinase (BTK) inhibitor, is jointly developed and commercialized by Pharmacyclics LLC, an AbbVie company, and Janssen Biotech, Inc, a unit of Johnson & Johnson-JNJ. "Stem cell and bone marrow transplants can be life-saving treatment options for people with blood cancers or marrow failure syndromes; however, nearly half of transplant patients subsequently develop chronic graft-versus-host-disease, or cGVHD, in which the donor's immune cells damage the patient's normal organs and their quality of life," said David Miklos, M.D., Ph.D., Associate Professor of Medicine (Blood and Marrow Transplantation), Stanford University, and lead investigator of the IMBRUVICA cGVHD clinical study.* "With IMBRUVICA, we observed sustained responses lasting five months or longer across multiple organs affected by this debilitating condition for 48 percent of all patients. This approval represents a major advance and provides physicians with a new option for adults with steroid refractory cGVHD."
Private sector employment increased by 178,000 jobs from June to July according to the July ADP National Employment Report®. "Job gains continued to be strong in the month of July," said Ahu Yildirmaz, vice president and co-head of the ADP-ADP Research Institute. "However, as the labor market tightens employers may find it more difficult to recruit qualified workers." Mark Zandi, chief economist of Moody's Analytics, said, "The American job machine continues to operate in high gear. Job gains are broad-based across industries and company sizes, with only manufacturers reducing their payrolls. At this pace of job growth, unemployment will continue to quickly decline."
Tuesday, Aug. 1, 2017
Apple-AAPL reported strong third quarter results with revenues rising 7% to $45.4 billion, net income climbing 12% to $8.7 billion and EPS jumping 18% to $1.67. These results were driven by unit and revenue growth in all product categories. iPhone units grew 2% during the quarter to 41 million with revenues growing 3% to $24.8 billion as the average selling price expanded 2% to $606 per phone thanks to continued strong demand for the iPhone 7 Plus. Over the past decade, Apple has sold a cumulative 1.2 billion iPhones. With a large installed base available for upgrades, a higher number of Android folks switching to Apple and first time buyers in emerging markets relatively untapped, opportunities continue to abound for future iPhone growth. Mac units grew 1% during the quarter to 4.3 million units with revenues up 7% to $5.6 billion as the Mac continued to gain market share. The iPad resumed growth in the quarter with 15% growth in units to 11.4 million with revenues up 2% to $5 billion during the quarter as the iPad boasts 89% market share for tablets costing more than $200. Services revenues grew 22% during the quarter to a record $7.3 billion (the size of a Fortune 100 company) thanks in large part to sales in the App Store, music streaming and iCloud storage. Subscribers to Apple’s Services increased by 20 million to 185 million subscribers at quarter end. Apple Pay is growing around the world and is the number one mobile payment service encompassing 90% of global transactions on mobile phones. Other Products increased 23% to $2.7 billion during the quarter led by 50% growth in the Apple Watch, which is the number one smart watch in the world. Tim Cook, the company’s CEO, is very excited about new products coming out this fall across all product lines. Augmented reality is expected to be “big and profound and one of the huge things we will marvel about” as it enhances entertainment, gaming and consumer and enterprise experiences. On a geographic basis, Apple generated double-digit growth in the Americas, Europe and the Rest of Asia Pacific, with Greater China being the laggard experiencing a 10% decline in revenues to $8 billion. Free cash flow declined 4% during the first nine months of the year to $39.3 billion due to working capital fluctuations. During the first nine months, Apple paid $9.5 billion in dividends and repurchased $25 billion of its own shares, including 30.4 million shares repurchased in the third quarter for $4.5 billion at an average price of $148.03 per share. As of quarter end, Apple has completed $229 billion of its $300 billion capital return program and still ended the quarter with a whopping $261.5 billion in cash and investments and $90 billion in long-term debt as 94% of its cash is held outside the U.S. Apple’s outlook for the fourth quarter is for revenues between $49 billion and $52 billion, gross margin between 37.5% and 38%, operating expenses between $6.7 billion and $6.8 billion, other income of $100 million and a tax rate of 25.5%.
Friday, July 28, 2017
Stryker-SYK reported second quarter sales increased a healthy 6% to $3 billion with net income and EPS increasing 3% to $391 million and $1.03, respectively. Excluding items related to recalls, restructuring and acquisitions, adjusted EPS increased 10% year-over-year to $1.53, topping the high-end of the company’s guidance. All of Stryker’s segments, Orthopaedics, MedSurg and Neurotechnology & Spine delivered strong top-line gains. Growth was well-balanced geographically with organic growth of 7% to $2.2 billion in the U.S. and 5.5% to $811 million outside the U.S. Orthopaedics net sales of $1.1 billion increased 5.5% in the quarter, including 8.6% from increased unit volume, partially offset by 2.4% due to lower prices. MedSurg net sales of $1.3 billion increased 6.2% in the quarter, including 7.1% from increased unit volume, partially offset by 0.4% due to lower prices. Neurotechnology & Spine net sales of $500 million increased 7% in the quarter, including 10% from increased unit volume, partially offset by 2% due to lower prices. During the quarter, Stryker installed 26 MAKO robots globally, a 50% increase from last year. Training on the MAKO Total Knee continues at a solid pace with more than 400 surgeons trained to-date, helping to drive MAKO Total Knee surgeries since launch to more than 5,000. On the clinical front, Stryker continues to gather data to quantify measured outcomes with respect to hospital stay, return to work, range of motion, stability, discharge to rehab and patient satisfaction for both MAKO and traditional knee replacements. Stryker expects to begin reporting the data in 2018 and believes the data will drive ongoing knee market share gains. Year-to-date, Stryker has generated $531 million in free cash flow, up 1% from last year, and representing 64% of reported net earnings. In June, Stryker announced the acquisition of NOVADAQ, a leading developer of fluorescent imaging technology used in a variety of procedures including cardiac, general, colon and plastic surgery. NOVADAQ’s technology complements Stryker’s portfolio of visualization technologies and will allow the company to expand into new surgical procedures where it does not currently compete. The $701 million deal, net of roughly $47 million in cash, is expected to close during the third quarter. Year-to-date, Stryker has returned $548 million to shareholders through dividends of $318 million and share repurchases of $230 million. No shares were repurchased during the second quarter. Stryker’s balance sheet remains strong with $3.7 billion of cash and marketable securities with about 89% held outside the U.S. Based on the healthy first half performance, Stryker now expects 2017 organic sales growth to be in the range of 6.5% to 7%, compared with prior guidance of 5.5% to 6.5%. Adjusted EPS is now expected in the range of $6.45 to $6.55 excluding anticipated dilution from the NOVADAQ acquisition of $.03 to $.05. Stryker’s prior adjusted EPS guidance range was $6.35 to $6.45.
AbbVie-ABBV reported second quarter sales increased a healthy 8% to $6.9 billion with net income up 19% to $1.9 billion and EPS up 21% to $1.19. Adjusted net earnings and EPS increased 10.5% and 12.7%, respectively. Global HUMIRA sales increased a healthy 13.7% to $4.7 billion despite increasing competition from new classes of drugs and biosimilars. In the U.S., HUMIRA sales grew 18% to $3.2 billion while international HUMIRA sales grew 5.5% to $1.5 billion, including a 3.6% unfavorable impact from foreign exchange. Second-quarter global IMBRUVICA, AbbVie’s drug to treat leukemia, net revenues were $626 million, with U.S. sales of $528 million and international profit sharing of $98 million for the quarter, reflecting growth of 42.6%. AbbVie made significant progress on its pipeline during the quarter including positive top-line results from its new drug to treat severe rheumatoid arthritis and phase 2 studies for patients with Crohn’s disease. After second quarter earnings were released, AbbVie announced the European Commission (EC) granted marketing authorization for MAVIRET®, a once-daily, ribavirin-free treatment for adults with chronic hepatitis C virus (HCV) infection across all major genotypes. MAVIRET is a new, 8-week, pan-genotypic treatment for patients without cirrhosis and new to treatment, who comprise the majority of the estimated 71 million people worldwide living with HCV. AbbVie also reported positive data on new indications for IMBRUVICA. Asked during the conference call about the deployment of AbbVie’s ever-growing cash stash, Richard A. Gonzalez, chairman and CEO, commented on priorities for cash. The first prioirty is to build the pipeline, then to reinvest in the business through acquisitions, next growing the dividend and then repurchasing shares opportunistically. If tax reform were to occur, which is impossible to handicap, greater access to AbbVie’s overseas cash would provide the company with many options to grow the business and reward shareholders. AbbVie confirmed its EPS guidance for the full-year 2017 of $4.55 to $4.65 with adjusted EPS for the full-year 2017 of $5.44 to $5.54, representing growth of 13.9% at the mid-point.
The European Commission (EC) has granted AbbVie-ABBV marketing authorization for MAVIRET®, a once-daily, ribavirin-free treatment for adults with chronic hepatitis C virus (HCV) infection across all major genotypes (GT1-6). MAVIRET is a new, 8-week, pan-genotypic treatment for patients without cirrhosis and new to treatment, who comprise the majority of the estimated 71 million people worldwide living with HCV. EC authorization is supported by data from AbbVie’s registrational studies showing a combined 97.5% cure rate with just 8 weeks of treatment in GT1-6 patients without cirrhosis and new to treatment. This high cure rate was achieved in patients with varied patient and viral characteristics and including those with difficult-to-treat CKD. For compensated cirrhotic patients, a 98% cure rate was achieved with 12 weeks of treatment. For GT3 treatment-experienced patients with or without compensated cirrhosis, a 96% cure rate was achieved with 16 weeks of treatment. Less than 0.1% of patients discontinued treatment due to adverse reactions. The most commonly reported adverse reactions were headache and fatigue.
Starbucks-SBUX reported third quarter revenues rose 8% to $5.7 billion with net income and EPS dropping 8% to $692 million and $.47, respectively. Global comparable store sales increased 4% with U.S. comp store sales up 5%, driven by a 5% increase in average ticket. China comp store sales increased 7%, driven by a 5% increase in transactions. Starbucks opened 575 net new stores during the quarter, bringing the total store count to 26,736 in 75 countries. By fiscal 2021, the company plans to open 12,000 new stores globally. Active membership in Starbucks Rewards grew 8% from last year’s third quarter to 13.3 million members. Starbucks Rewards represented 36% of U.S. company-operated sales in the quarter with Mobile Payment reaching 30% of transactions and Mobile Order and Pay growing to 9% of transactions. The company’s third quarter operating margin declined 110 basis points to 18.4%, primarily due to $102 million of goodwill and store asset impairment charges related to Teavana. Management concluded that underperformance of Teavana’s mall-based stores is likely to persist. As a result, Starbucks will close all 379 Teavana stores during the coming year. While additional Teavana related charges will be incurred during the next several quarters, management expects the elimination of ongoing Teavana operating losses and associated overhead will result in a fairly rapid exit cost payback period. The company is investing in a new generation of digital innovation that will begin rolling out in waves starting this fall. Starbuck’s new technology stack provides a scalable cloud-based platform for rewards and ordering, improved customer data organization and tighter integration with store-based operating systems, including inventory and production management. In addition, Starbucks announced that it will acquire the remaining 50% stake in its East China operations for $1.3 billion from its joint venture partners. The purchase gives Starbucks complete control of its 1,300 stores in the Shanghai, Jiangsu and Zhejiang provinces. Mainland China is Starbucks largest and fastest growing international market with 2,800 stores in 130 cities. The company expects the acquisition to add $1 billion in revenue during the first year following closing of the deal. The company repurchased 3.5 million of its shares in the third quarter with 95 million shares remaining authorized for future share repurchases. Year-to-date, Starbucks has returned $1.2 billion to shareholders through share repurchases. Returning cash to shareholders remains a priority with Starbucks targeting a 40% to 50% dividend payout ratio. Given the choppy retail environment, Starbucks lowered its fiscal revenue growth outlook to the low end of the previously forecasted 8% - 10% range, excluding one point of FX and two points of impact from the 53rd week in fiscal 2016. EPS guidance for fiscal 2017 was lowered from $2.08- $2.12 to $1.96 - $1.97, up 3% to 4% from 2016.
Thursday, July 27, 2017
UPS-UPS delivered strong second quarter results with revenue up 8% to $15.8 billion, net earnings up 9% to $1.4 billion and EPS up 11% to $1.58. Revenue increased in all segments and major categories as increased customer demand spread across UPS’s broad product portfolio. U.S. Domestic Segment sales increased 8% to $9.7 billion, driven by growing demand for e-commerce deliveries, base-price increases and higher fuel surcharges. U.S. Domestic operating profit increased more than 13% to $1.4 billion on a 60 basis point profit margin expansion to 14.3%. Despite strong foreign currency headwinds, International Segment sales grew 3% to $3.2 billion, fueled by demand for UPS’s export solutions. International shipments jumped 12%, led by mid-teen growth in Europe and double-digit growth in China. While reported International operating profits declined 5% to $583 million, foreign currency neutral operating profits increased 14%. The Supply Chain and Freight Segment reported a 12% increase in revenue to $2.8 billion on the heels of improving economic conditions across all of UPS’s non-retail markets. Supply Chain Segment operating profits improved 24% year-over-year to $238 million. Year-to-date, UPS has generated $2.6 billion in operating cash flow. Earlier in the year, UPS stepped up its pace of investment in its network to capture “tremendous e-commerce and international growth opportunities.” To that end, the company has invested $2 billion year-to-date in creating its next generation smart, global logistics network. This year, UPS has paid dividends of nearly $1.4 billion, up 6.4% from last year, providing a current dividend yield of about 3%. So far this year, the company has repurchased 8.4 million shares for about $900 million, or $107.14 per average share. Looking ahead, UPS expects foreign currency headwinds and continued costs for strategic initiatives to weigh on second half results. Given the solid year-to-date results, management affirmed its prior guidance of adjusted EPS in the range of $5.80 to $6.10.
MasterCard-MA reported second quarter revenue rose 13% to a record $3.1 billion with net income up 20% to $1.2 billion and EPS up 24% to $1.10. These strong results were driven by a 9% increase in both gross dollar volume and purchase volume with adjusted gross dollar volume of $1.3 trillion. Cross-border volume jumped 14% and switched transactions increased 17% to 16 billion during the quarter. Acquisitions, primarily Vocalink, contributed 2% to growth. As of quarter end, the company’s customers had issued 2.4 billion MasterCard and Maestro-branded cards. Free cash flow declined 5% to $1.9 billion during the first half of the year due primarily to higher capital expenditures. During the first half, the company paid $474 million in dividends and repurchased $1.9 billion of is own shares, including 8 million shares repurchased for $931 million in the second quarter at an average price of $116.38 per share. Subsequent to quarter end through July 24, the company repurchased an additional 1.8 million shares for $226 million at an average price of $125.55 per share, which leaves $2.9 billion remaining available for future share repurchases under the current repurchase authorization. MasterCard ended the quarter with nearly $7 billion in cash and investments and $5.3 billion of long-term debt on its balance sheet. For the full 2017 year, management expects constant currency revenues to grow at a low double-digit rate with expenses increasing at a high single-digit rate as underlying profit margins expand. The Vocalink acquisition is expected to be $.05-$.06 per share dilutive in 2017. Consumer confidence around the world appears to be improving with steady growth seen in the U.S. amid low unemployment and low interest rates. Europe is expecting 2% GDP growth this year with consumer confidence high especially in Germany and Spain. Despite Brexit, U.K. sales have increased 5%, and Asia is seeing strong growth especially in India. Mexico continues to report solid growth with consumer and business confidence improving in Brazil.
Automatic Data Processing-ADP reported fourth quarter revenues rose 6% to $3.1 billion with net income down 6% to $265.8 million and EPS down 5% to $.59. Fourth quarter earnings were impacted by a contraction in margins as the company is investing in product, sales and service including dual operation costs related to the service alignment initiative. Client retention improved 60 basis points during the quarter, but declined 50 basis points for the full year to 90%. For the full fiscal 2017 year, revenues rose 6% to $12.4 billion with net income up 16% to $1.7 billion and EPS up 18.5% to $3.85. Worldwide new business bookings declined a disappointing 5% during the year to $1.65 billion due to uncertainty coming from Washington around healthcare reform and tough comparisons with the prior year bookings. Return on shareholders’ equity for the year was an impressive 43.6%. Free cash flow increased 9% during the year to $1.9 billion. During the year, ADP paid $995 million in dividends and repurchased $1.3 billion of its own shares. Management’s outlook for fiscal 2018 is for revenue growth of 5% to 6%, which assumes renewed growth in worldwide new business bookings of 5% to 7% from clients in 110 countries around the world. ADP expects reported EPS to decline 1% to 3% with adjusted EPS expected to increase 2% to 4%. The earnings growth forecast assume an adjusted effective tax rate increase of 210 basis points to 33% and an adjusted EBIT margin declined of 25 to 50 basis points for the full year, as the company continues invest in its Employer Services segment. Interest on funds held for clients is expected to increase 11% due to anticipated growth in average client funds balances and a higher average yield earned on these balances.
Wednesday, July 26, 2017
F5 Networks-FFIV reported third fiscal quarter revenues increased 4% to $518 million with net income up 6.4% to $97,662 and EPS up 11% to $1.52 on fewer shares outstanding. Third quarter revenues fell shy of the company’s goal of $520 to $530 million due to slower activity in EMEA and Japan along with a “pause” in activity as customers evaluate how a long-term cloud strategy may impact their application deployment architectures. According to Francois Locoh-Donou, F5’s new president and CEO, where customers have made decisions around their cloud strategy, F5 Networks “has become a critical partner in providing consistent application services and security across environments.” Product sales of $235 million increased 2% year-over-year while Service revenue increased 7% to $283 million. During the quarter, the company repurchased 1.2 million shares for $150 million at an average cost per share of $129.37. Under the current share repurchase authorization $324 million remains. Year-to-date, F5 Networks generated nearly $500 million in free cash flow. F5 repurchased $450 million of its shares during the first three quarters of 2017. The company ended the quarter with more than $1.2 billion in cash and investments and no long-term debt on its weather-resistant balance sheet. Reacceleration of product revenue is management’s top priority. To that end, several new products were recently introduced to improve F5’s position in enabling multi-cloud deployments. These new products include Application Connector 1.0 for connecting public and private cloud application infrastructures, support for BIG-IP in the Google Cloud Platform, and Container Connector and Application Services Proxy for microservices environments. Looking ahead to the fourth quarter ending September 30, the company has set a revenue goal of $530 million to $540 million, up 1% to 3% from last year’s fourth quarter, with an EPS target of $1.64 to $1.67, flat to up 2% from last year.
Westwood Holdings-WHG reported second quarter revenues rose 9% to $33.8 million with net income jumping 35% to $7.8 million and EPS up 20% to $.83 as compensation costs were well managed. Revenues rose primarily related to higher average assets under management (AUM) which totaled $22.6 billion as of quarter end. AUM from global and emerging markets strategies reached a record $5.1 billion during the quarter on the five-year anniversary of this unit. Free cash flow declined 10% during the first half of the year to $26.6 million with Westwood paying $11.7 million in dividends during the past six months. The dividend currently yields a hefty 4.25% as the company returns most of its free cash flow to shareholders. Westwood ended the quarter with a debt-free balance sheet and more than $88 million in cash and investments, representing nearly $10 per share in cash. Westwood celebrated its 15th year as a public company in July with its market cap rising more than 10-fold over that time period as the company has increased its dividend each year for 15 years, maintained a strong balance sheet and generated strong free cash flows.
Express Scripts-ESRX reported that revenues inched ahead by .5% in the second quarter to $25.3 billion with net income up 11% to $801.8 million and EPS jumping a healthy 21% to $1.37 on lower shares outstanding. Adjusted claims were 350 million, flat with the prior year period. EBITDA per adjusted claim increased 1% to $5.21. The company’s core PBM business, excluding Anthem and transitioning clients, had EBITDA per adjusted claim growth of 5.8%. While Anthem has not provided formal written notice that it does not intend to renew its contract with Express Scripts, management believes it is unlikely its contract with Anthem will be extended with litigation ongoing. Anthem revenues comprised 19% of revenues in the second quarter and Anthem EBITDA was 33% of second quarter EBITDA. Express Scripts is developing a multi-year enterprise-wide initiative to transform their organization by the end of 2021 which is estimated to cost about $600 million to $650 million and deliver cumulative savings of nearly $1.2 billion by 2021. This initiative is expected to help the company achieve its targeted core PBM compounded annual EBITDA growth rate from 2017-2020 of 2% to 4%. During the first half of the year, Express Scripts’ free cash flow increased 92% to nearly $2 billion. The company used the free cash flow to repurchase $2 billion of its own shares, including 18.5 million shares repurchased in the second quarter for $1.2 billion at an average price of $64.87 per share. Due to the loss of a few state contracts, Express Scripts lowered its expected 2018 retention rate to a range of 94% to 96%. The company raised its adjusted 2017 EPS outlook to $6.95 to $7.05, representing 9% to 10% growth with total adjusted claims expected in the range of 1,385 million to 1,415 million. Net cash flow from operations is expected in the range of $4.7 to $5.2 billion for the full year 2017. This represents a 13% cash flow yield based on the company’s current market capitalization.
Baxter International-BAX reported second quarter sales of $2.6 billion, an increase of 1% from last year, with earnings and EPS falling 78% to $265 million and $0.48, respectively. Excluding last year’s $2.08 per share gain related to the spin-off of Baxalta along with other special items, adjusted EPS from continuing operations increased a healthy 37% to $0.63. A 1.40% increase in adjusted gross margins contributed to the adjusted earnings’ gain. Favorable pricing and product mix, manufacturing efficiencies and benefits from Baxter’s ongoing business transformation initiative boosted Baxter’s adjusted gross margins to 45.2%. Domestic sales were $1.1 billion, up 4%, while international sales were $1.5 billion, down 2% on a reported basis and up 1% on a constant currency basis. Global sales for Hospital Products totaled $1.6 billion in the second quarter, increasing 1% on continued strength in Baxter’s U.S. fluid systems business, favorable demand for parenteral nutrition therapies and pre-mixed injectable pharmaceuticals, as well as for select anesthesia and critical care products. Renal sales totaled $968 million, flat on a GAAP basis and up 3% on an operational basis. Operational growth in the quarter was driven by increased sales for in-center hemodialysis (HD) products in the U.S., international acute renal care sales and global sales of peritoneal dialysis (PD) therapies. Year-to-date free cash flow was $488 million, up $400 million from last year on strong operational cash flow, lower capital expenditures and management’s focus on driving working capital efficiencies. Given the strong year-to-date performance, Baxter raised its guidance with sales now expected to grow 3% with adjusted EPS from continuing operations in the $2.34 to $2.40 range. This guidance assumes the imminent closure of the company’s proposed acquisition of Claris Injectables and a flat share count. For the full year, Baxter expects to generate $1.8 billion in cash flow from operations and $1.1 billion in free cash flow. As a result of Baxter’s ongoing business transformation efforts designed to accelerate performance, the company increased its long-range projections. Baxter expects sales to grow about 4% on a compounded annual basis from 2016 to 2020 and now anticipates an adjusted operating margin in 2020 of about 20%, compared to previous guidance of 17% to 18%. The company anticipates 2020 adjusted EPS of $3.25 to $3.40 per share. Baxter also increased its cash flow expectations for 2020 and now anticipates operating cash flow of approximately $2.65 billion. Capital expenditures are expected to total $650 million in 2020, resulting in free cash flow generation of approximately $2 billion, an increase of $250 million versus prior guidance. “Baxter’s increased financial outlook and enhanced free cash flow generation provide the flexibility to invest in the business both organically and inorganically while also returning meaningful value to shareholders through dividends and share repurchases,” said Jay Saccaro, executive vice president and chief financial officer.
Tuesday, July 25, 2017
Canadian National Railway-CNI delivered strong second quarter results with revenues powering ahead 17% to a quarterly record of C$3.3 billion, net earnings rising 20% to C$1 billion and EPS jumping 24% to C$1.36. By market segment, revenues increased 33% for both metals & minerals and coal, 23% for grain & fertilizers, 20% for automotive, 17% for intermodal, 12% for petroleum & chemicals and 6% for forest products. Revenue increases were fueled by higher volumes across several sectors, such as Canadian grain and fertilizers, overseas intermodal traffic, frac sand, coal and petroleum coke exports, crude oil and finished vehicles. Also contributing to increased revenues were higher fuel surcharge rates and freight rate increases. Carloadings for the quarter increased by 14% to 1.4 million. Revenue ton-miles (RTMs), measuring the relative weight and distance of rail freight transported by CNI, increased by 18% year-over-year. Rail freight revenue per RTM decreased by 1% over the year-earlier period, mainly due to an increase in the average length of haul. Operating expenses for the second quarter increased by 18% to C$1.8 billion, thanks, in large part, to higher fuel costs. During the quarter, Canadian National generated C$811 million in free cash flow, up 39% from last year’s second quarter, powered by higher cash earnings and favorable changes in working capital. CNI returned C$831 million to shareholders during the second quarter through dividend payments of C$310 million and share repurchases of C$521 million, for an average cost per share of C$99.38. As of 6/30/2017, the company had 19 million shares available for repurchase under the current authorization. Management continues to see growth across a range of commodities, particularly in intermodal traffic, frac sand, Canadian grain, coal exports and finished vehicles, as well as volume weakness in U.S. thermal coal shipments to domestic markets. Looking ahead, management expects to see growth in volumes of crude oil and petroleum coke, and lower volumes for U.S. grain given the difficult year-over-year comps. North American industrial production is expected to increase by about 2%. Given management’s expectation for the economy, the strong year-to-date performance along with challenging second half comps and headwinds from the strengthening Canadian dollar, CNI expects to deliver 2017 EPS in the range of C$4.95 to C$5.10, up 8% to 11% from 2016.
T. Rowe Price-TROW reported second quarter net revenues rose 12% to $1.2 billion with net income up 84% to $373.9 million and EPS up 90% to $1.50. Last year’s results included a nonrecurring charge of $100.7 million related to the Dell appraisal rights matter, which reduced EPS by $.39. Excluding this charge, net earnings would still have increased a strong 23% with EPS charging 27% higher. Investment advisory fees increased 13% during the quarter as ending assets under management (AUM) increased 16% to $903.6 billion. The $42 billion increase in AUM was due to $3.7 billion in net cash inflows and $38.3 billion in net market appreciation during the quarter. The firm’s net cash flows by asset classes were $5.1 billion into bond, money market and stable value assets offset by a $1.4 billion reduction in stock and blended asset classes. Net cash flows into the firm’s targeted retirement portfolios were $3.1 billion with $213.8 billion held in the target date retirement portfolios as of quarter end. T. Rowe Price continues to maintain a debt-free balance sheet with ample liquidity including $3.2 billion in cash and sponsored investment holdings. During the first half of the year, the company repurchased 6.5 million shares, or 2.6% of its outstanding shares, including 1.9 million shares repurchased for $130.7 million in the second quarter at an average price of $68.79 per share. William J. Stromberg, the company's president and chief executive officer, commented: "U.S.stocks rose broadly in the second quarter of 2017 with many major indexes reaching all-time highs. International stocks outperformed U.S.shares, aided by strengthening currencies relative to the U.S.dollar. Fixed income returns were also positive with healthy credit conditions in the U.S. and abroad.”
Biogen-BIIB reported second quarter revenues rose 6% to $3.1 billion with net income declining 18% to $862 million and EPS down 15% to $4.07. Excluding the hemophilia revenues that were spun-off as Bioverativ-BIVV, Biogen’s revenues rose a healthy 15%, driven by strength in Multiple Sclerosis (MS) revenues, including a 13% increase in TECFIDERA sales to $1.1 billion during the second quarter. Additionally, SPINRAZA revenues grew substantially to $203 million during the quarter with SPINRAZA approved in Europe, Japan and Canada for spinal muscular atrophy. Earnings were impacted by a $120 million charge related to the acquisition of a Phase-3 ready stroke asset from Remedy Pharmaceuticals and a $360 million payment related to an exclusive license agreement with Bristol-Myers Squibb for Phase-2 anti-tau antibody with potential in Alzheimer’s disease and progressive supranuclear palsy. During the second quarter, Biogen repurchased approximately 2.9 million shares of its common stock for $782 million at an average price of about $269.65 per share. The company ended the quarter with $5.5 billion of cash and investments, with about 80% of the cash held outside the U.S., and $6.5 billion in long-term debt. Biogen’s new capital allocation focus is to invest in building its pipeline through increased business development activity, but also recognizes the value of opportunistically returning excess cash to shareholders through share repurchases. Biogen increased its full year 2017 revenue guidance to $11.5 to $11.8 billion related to faster than anticipated adoption of SPINRAZA in the U.S. with the EPS range lowered to $17.05 to $17.65, reflecting the Remedy Pharmaceutical charge and the first quarter impairment charge related to the settlement of a license agreement with Forward Pharma.
United Technologies-UTX delivered solid second quarter results with global sales increasing nearly 3% to $15.3 billion and EPS growing 5% to $1.80 while net income from continuing operations was flat at $1.5 billion. Excluding restructuring and other items, EPS increased 2%. Management was encouraged by the macro economic environment although some of the markets UTX operates in continue to be challenged from a pricing standpoint. By business segment, Otis sales gained 1% to $3.1 billion, lifted by a 5% gain in service sales. New equipment orders at Otis were flat on a 6% increase in North America and 3% increase in China, offset by a 14% decline in orders from Europe. Climate, Controls and Security sales increased 6% to $4.7 billion on solid sales growth in commercial refrigeration and North American residential HVAC. Organic equipment orders were up 11% with operating margins down 2% due to an unfavorable mix and pricing pressure. Pratt & Whitney sales rose 7% to $4 billion on strength in the military engines which were up 30%. Aerospace Systems sales decreased 2% to $3.6 billion, boosted by a 7% rise in the commercial aftermarket, offset by an 8% decline in commercial. United Technologies generated $2.1 billion in operating cash flow and $1.7 billion in free cash flow, representing 118% of net income. During the second quarter, the company invested $446 million in capital expenditures, up 23% year over year, as the company continues to focus on new materials and manufacturing processes. The company paid $1 billion in dividends and repurchased $1.4 billion of its own shares during the first six months of the year. Management maintains its commitment to the $3.5 billion in repurchases planned for the full year and reiterated its $1 billion to $2 billion placeholder for opportunistic M&A during 2017. Total 2017 sales are expected in the $58.5 billion to $59.5 billion range, up from the first quarter projection of $57.5 billion to $59 billion. Free cash flow is expected to be 90 to 100 percent of net income with adjusted EPS between $6.45 to $6.60, a $.15 increase on the lower end over previous guidance of $6.30.
Wabtec-WAB reported second quarter revenues rose 29% to $932.3 million with net income down 20% to $72 million and EPS down 25% to $.75. These results reflect the acquisition of Faiveley which contributed to an 80% increase in Transit sales to $587.4 million. Freight sales declined 13% during the quarter to $344.8 million due to lower revenues from freight car and locomotive components and a slower than expected ramp up of certain projects. Net earnings were negatively impacted by restructuring and transaction expenses related to the Faiveley integration and on-going cost-reduction activities. Excluding theses expenses, the company’s operating margin was 13.2% which was relatively stable with its adjusted operating margin last year. Net interest expense jumped substantially, reflecting a higher debt balance of $2 billion due mainly to the Faiveley acquisition. During the quarter, the company’s total multi-year backlog increased 10% compared to the first quarter to a record $4.5 billion with significant projects in global markets. Book to bill was 1.4, a positive sign for future growth. In Freight, backlog has now increased for three consecutive quarters with demand appearing stable in key markets. New orders included more than $350 million for Transit projects in Europe and Australia and more than $60 million for train control and signaling projects in the U.S. During the quarter, Wabtec acquired Thermal Transfer, a manufacturer of heat exchanges for industrial markets, with sales of about $25 million and Semvac, a manufacturer of sanitation systems for locomotives and transit vehicles with sales of about $15 million. While Wabtec expects adjusted operating margin to expand in the fourth quarter to 15%, the company lowered its 2017 full year sales and earnings outlook due to the revised timing of sales and projects, representing about 5% of sales, being pushed out by customers and freight market conditions rebounding slower than expected in a still sluggish aftermarket environment. As a result, 2017 sales are now expected to be about$3.85 billion with adjusted EPS now expected to be between $3.55 and $3.70, excluding expected restructuring and transaction expenses related to Faiveley.
3M-MMM posted solid second quarter results with sales up 2% to $7.8 billion, earnings up 23% to $1.6 billion and EPS up 24% to $2.58. Excluding the $.57 gain on divestitures partially offset by $.24 of investments in accelerated growth programs, productivity and portfolio actions, second quarter EPS increased 8% year-over-year. Organic sales growth during the quarter was strong and broad-based across all five of 3M’s business groups. By business segment, organic local-currency sales increased 8.4% in Electronics and Energy, 3.8% in Industrial, 3.2% in Safety and Graphics, 2.5% in Health Care and 0.7% in Consumer. On a geographic basis, total sales grew 8.3% in Asia Pacific, 2.5% in Latin America/Canada, and 0.5% in the U.S., with sales declining 3.6% in EMEA (Europe, Middle East and Africa). During the second quarter, 3M generated $1.3 billion in free cash flow, up 41% from last year, primarily due to lower cash tax payments. The company returned $1.2 billion to shareholders during the second quarter including $701 million in dividends and $494 million in share repurchases. 3M now expects to repurchase $2 - $3.5 billion of its shares during 2017, versus $2.5 to $4.5 billion previously estimated. Given the strong year-to-date results, the company updated its 2017 guidance. Organic sales growth is now expected in the 3% to 5% range, up from the prior guided range of 2% to 5% with EPS now expected to be $8.80 to $9.05, up from previous guidance of $8.70 to $9.05. Estimates exclude the pending acquisition of Scott Safety and the divestiture of 3M’s electronic monitoring business.
Monday, July 24, 2017
Alphabet-GOOGL reported second quarter revenues rose 21%, or 23% on a constant currency basis, to $26 billion with net income and EPS each declining 28% to $3.5 billion and $5.01, respectively. These results reflect a $2.7 billion fine by the European Commission related to Google’s display and ranking of shopping search results infringing on European competition law. Excluding the substantial fine, net income and EPS would have risen about 28% during the quarter thanks to strong underlying worldwide growth in mobile search and YouTube. Revenue growth was broad based on a geographic basis with strong double-digit growth generated in all major geographic regions. Aggregate paid clicks increased 52% with the aggregate cost per click declining 23% due to the shift to mobile search. Other Bets revenues rose 34% during the quarter to $248 million driven by Nest, Fiber and Verily with the operating loss narrowing to $772 million. Headcount increased 14% over the prior year period to 75,606 Googlers as the company continues to invest in the cloud, YouTube and home hardware. Free cash flow increased 5% during the first half of the year to $12 billion with the company ending the quarter with $95 billion of cash and investments on its fortress balance sheet with 61% of the cash held outside of the U.S. During the first half, Alphabet repurchased $3.7 billion of its own shares. Management is optimistic that artificial intelligence will solve complex problems in medicine and science and sees tremendous growth in Google cloud.
Friday, July 21, 2017
Gentex-GNTX reported second quarter sales rose 5% to $443 million with net income up 2% to $88.5 million and EPS up 3% to $.31. The 5% growth in net sales was driven by a 6% increase in auto-dimming mirror unit shipments despite overall automotive light vehicle production in the company’s primary regions declining by approximately 1%. The gross profit margin declined by 170 basis points to 37.7% in the second quarter due primarily to unfavorable product mix due to a higher percentage of base auto-dimming mirror shipments versus advance feature mirrors shipped in the prior period quarter. Gentex expects product mix to improve in the second half of the year based on orders and the release of new products. Cash flow from operations declined 14% during the first half to $131.2 million due to working capital changes. During the second quarter, the company repurchased 2.2 million of its shares with 3.1 million shares remaining available for repurchase. Management will be aggressive with future share repurchases when short-term issues result in market overreactions in their stock price. During the second quarter, the company paid down $25 million of debt with the company ending the quarter with $814 million in cash and investments and $9 million in long-term debt on its strong balance sheet. Gentex expects 2017 revenue in the range of $1.79 to $1.83 billion with gross margin expected in the 38.5% to 39% range and operating expenses expected in the range of $165 to $170 million. Management continues to expect revenues in 2018 to grow in the 6% to 10% range based on light vehicle production forecasts and current forecasted product mix.
Polaris-PII reported second quarter revenues rose 21% to $1.4 billion with net income sliding 13% lower to $62 million and EPS down 11% to $.97. Aftermarket segment sales increased substantially due to the acquisition of Transamerican Auto Parts which added $209.1 million to sales in the second quarter. Polaris North American ORV (off-road vehicle) unit retail sales were down by a low-single digits percent as competitive headwinds and weak agricultural and energy headwinds persist, while Indian Motorcycle continue to deliver strong retail sales increasing 17% for the quarter. Earnings were negatively impacted by costs related to the wind down of Victory Motorcycles, certain Transamerican Auto Parts integration and inventory costs and manufacturing network realignment costs. Free cash flow declined 21% during the first half of the year to $182 million with the company paying $73 million in dividends and repurchasing and retiring $66 million of its own shares, including 502,000 shares repurchased in the second quarter for $43.8 million at an average price of $87.25 per share. As of quarter end, the company has 6.7 million shares authorized for future share repurchases. The company increased its full year 2017 sales guidance with adjusted sales expected to increase 12% to 14% with adjusted EPS expected in the range of $4.35 to $4.50, representing 25% to 29% growth over depressed adjusted EPS of $3.48 in 2016.
Thursday, July 20, 2017
Microsoft-MSFT reported fourth quarter revenue rose 13% to $23.3 billion with net income and EPS each more than doubling to $6.5 billion and $.83, respectively, thanks to stronger than expected performance across all business segments and in all three large geographic regions, including the U.S., Germany and Japan. For the full fiscal 2017 year, revenues rose 5% to $90 billion with net income up 26% to $21.2 billion and EPS up 29% to $2.71. Innovation across the cloud platforms drove the strong results with commercial cloud annualized revenues exceeding an $18.9 billion run rate and on track to meet the goal of $20 billion in annualized revenues in fiscal 2018. Return on shareholders’ equity was an impressive 29% for the year. Free cash flow increased 26% during the year to $31.4 billion thanks to the higher earnings and favorable working capital management. During the year, the company repurchased $11.8 billion of its shares, including $1.6 billion in the fourth quarter, and paid $11.8 billion in dividends. During the year, Microsoft spent $25.9 billion on acquisitions, including LinkedIn which contributed $2.3 billion to revenues while incurring an operating loss of $948 million. As of year end, Microsoft held $133 billion in cash and investments and $76 billion in long-term debt on its balance sheet. Key trends for fiscal 2018 should continue to reflect strong commercial demand as companies continue to transition to the cloud. Gross margin and operating margin is expected to contract by 1% due in part to amortization charges and incremental investments related to LinkedIn.
Genuine Parts-GPC reported second quarter sales motored ahead 5% to $4.1 billion, a new record. Net income for the second quarter dipped 1% to $190 million with EPS increasing 1% to $1.29, on fewer shares outstanding. Management was encouraged by the steady and consistent year-to-date sales growth in each of the company’s four distribution businesses, with the strongest growth in the Industrial and Electrical segments. By segment, Automotive Group sales increased 4% to $2.2 billion, including a 1.5% comparable sales increase, driven by NAPA’s customer loyalty program which now has 5 million members and management’s “Retail Impact Initiative.”Despite the “hysteria” about the impact of online retailing on NAPA’s do-it-yourself auto parts distribution business, management remains confident about the future of its auto parts distribution business given the increase in both basket size and number of transactions in its refurbished stores, now expected to number 500 by year’s end, up from 450 last year. During the quarter, the automotive group made several acquisitions which are expected to add $100 million to GPC’s annual revenues. Sales at GPC’s Industrial segment, Motion Industries, revved up 7% to $1.3 billion, powered by a 5% comparable sales increase. Sales growth was broad-based across GPC’s industrial market, product and customer base, fueled by strength in the oil patch. Office Products Group sales increased 5% to $504 million despite a 4% decrease in comparable sales. Continued declines in tradition office supply product sales were more than offset by Facility, Breakroom Supplies and Safety sales growth from acquisitions. GPC’s Electrical Group grew 11% to $205 million, powered by the Empire Wire acquisition. Net operating margins dipped 50 basis points to 7.2%, compressed by increases in labor and freight costs, by GPC’s global digital initiative and IT investments. Year-to-date, the company generated $291 million in free cash flow, down 39% year-over-year, squeezed by working capital needs, specifically a 9% increase in inventories which were temporarily bloated from acquisitions. Genuine Parts’ balance sheet is a key company strength with the flexibility and capacity to support future growth. Year-to-date, Genuine Parts returned $351 million to shareholders through share repurchases of $154 million and dividend payments of $197 million. 2017 marks the 61st consecutive year of dividend increases for Genuine Parts. The $2.70 dividend is 57% of EPS and currently yields 3%. Looking ahead to the full year, given that management had anticipated being further along in its cost saving initiatives at quarter’s end, full year EPS guidance was revised to $4.70 to $4.75 from prior guidance of $4.75 to $4.85. Second half EPS are expected to increase 4% to 6% bringing the total full year EPS growth to 2.5% to 3.5%. Free cash flow is expected in the $750 million to $810 million range. Prior guidance for a year-over-year sales increase of 3% to 4% remains unchanged.
Wednesday, July 19, 2017
Qualcomm-QCOM reported third quarter revenues declined 11% to $5.4 billion with net income and EPS each down 40% to $866 million and $.58, respectively. The third quarter results included a reduction in operating cash flow due to a $940 million payment to BlackBerry and a $927 million payment related to the Korea Free Trade Commission (KFTC) fine. In addition, results were negatively impacted as a result of actions taken by Apple’s contract manufacturers, who did not fully report and did not pay royalties due on sales of Apple products, as well as the previously disclosed dispute with another licensee, who did not report or pay royalties due in the third quarter of fiscal 2017. With leading technologies and the pending $38 billion acquisition of NXP which is expected to close by the end of 2017, management believes they are well positioned to address a larger set of growth opportunities ahead than at any other time in their history. At the end of the quarter, Qualcomm held $37.8 billion in cash and marketable securities and $19 billion in long-term debt. This includes $11.0 billion of unsecured floating and fixed-rate notes issued in May, which are intended to be used to finance, in part, the acquisition of NXP. For the 9 months ending June 25th, Qualcomm’s free cash flow declined 62% to $1.8 billion due to lower earnings with the company paying out $2.4 billion in dividends and repurchasing $1 billion of its own shares. The company has $2 billion remaining authorized for future share repurchases. Cumulatively, Qualcomm has returned $57.5 billion to shareholders through dividends and share repurchases. Qualcomm’s outlook for the fourth quarter is abnormally wide with revenues expected in the range of $5.4 billion to $6.2 billion, representing a decline of 13% to flat with EPS expected in the range of $.55 - $.65, representing a decline of 39% to 49% with the decline in earnings primarily related to disputes in the high margin licensing business segment
Alphabet-GOOGL announced that X, its moonshot factory, has released Glass Enterprise Edition after two years in limited production. Glass is a very small, lightweight wearable computer with a transparent display that brings information into the wearer’s line of sight. In a work setting, Glass can be clipped onto glasses or industry frames like safety goggles providing hands-free on-the-job content. Workers in many fields--manufacturing, logistics, field services and healthcare--find it useful to consult a wearable device for information and other resources while their hands are busy. Read more.
Tuesday, July 18, 2017
Johnson & Johnson-JNJ reported second quarter revenues rose 2% to $18.8 billion with net income down 4% to $3.8 billion and EPS down 2% to $1.40. On an adjusted basis excluding special items and intangible amortization, net earnings rose 3% with EPS up a solid 5%. Worldwide Consumer sales increased 1.7% during the quarter to $3.5 billion with primary contributors to growth including Neutrogena beauty products, domestic over-the-counter products and international anti-smoking aids. Worldwide Pharmaceutical sales dipped .2% during the quarter to $8.6 billion impacted by divestitures. On an operational basis, sales increased .5% driven by new products and the strength of core products. The pharmaceutical pipeline continued its strong momentum with the approval of TREMFYA subsequent to quarter end for the treatment of adults living with moderate to severe plaque psoriasis. During the quarter, JNJ completed the acquisition of Actelion, a leading biopharmaceutical company, for a total of $30 billion in cash which establishes a new therapeutic area as well as another engine for growth for JNJ. Worldwide Medical Devices sales increased 4.9% during the quarter to $6.7 billion, which included the first full quarter of the recently completed acquisition of Abbott Medical Optics. Medical Devices growth was driven by electrophysiology products in the cardiovascular business, Acuvue contact lenses in the vision care business and advanced surgery products. The company ended the quarter with $13 billion in cash and $35 billion in debt related to recent acquisitions. JNJ has completed their previously announced $10 billion share repurchase program. Sales growth is expected to accelerate in the second half of the year due to the recent acquisitions and easier comparisons for the pharmaceutical business. JNJ raised their sales and earnings outlook for the full 2017 year and now expects to report sales of $75.8 billion to $76.1 billion, reflecting 5.4% to 5.9% growth, with EPS expected in the range of $7.12 t $7.22, reflecting 6%-7% growth.
Monday, July 17, 2017
Ross Stores-ROST announces the recent opening of 21 Ross Dress for Less® ("Ross") and seven dd's DISCOUNTS® stores across 15 different states in June and July. These new locations are part of the Company's plans to add approximately 70 Ross and 20 dd's locations in 2017. "With this opening group, we continued to expand Ross and dd's in both new and existing markets. Ross grew in its newest market – the Midwest – as well as existing markets, including California, Texas, and Florida. And in June, dd's opened its 200th location and expanded into its newest state of Pennsylvania," said Jim Fassio, President and Chief Development Officer. "Looking ahead, we remain confident in our expansion plans and continue to see plenty of opportunity to grow across all of our markets. We continue to believe that over the long-term, Ross can grow to 2,000 locations and dd's can become a chain of 500 stores."
Thursday, July 13, 2017
Paychex-PAYX announced that its board of directors approved a $0.04 increase in the company’s regular quarterly dividend, an increase of nine percent. The dividend will go from $0.46 per share to $0.50 per share and is payable on August 24, 2017 to shareholders of record on August 1, 2017. “The dividend increase continues the company’s history of providing outstanding shareholder value,” said Martin Mucci, Paychex president and CEO. “As we begin a new fiscal year, we continue to invest in strategic growth opportunities and our employees. These investments, combined with our financial strength, enable us to expand the returns we deliver to our shareholders.” During the fiscal year ended May 31, 2017, Paychex returned more than $662 million in dividends, or 81% of net income, to shareholders.
T. Rowe Price Group-TROW reported preliminary month-end assets under management of $904 billion as of June 30, 2017. Client transfers from mutual funds to other portfolios were $4.2 billion and $7.6 billion for the month- and quarter-ended June 30, 2017, respectively.
Wednesday, July 12, 2017
Walgreens Boots Alliance, Inc-WBA announced that its board of directors has declared a quarterly dividend of 40 cents per share, an increase of 6.7 percent. The increased dividend is payable 12 September 2017 to stockholders of record 18 August 2017, and raises the annual rate from $1.50 per share to $1.60 per share. This marks the 42nd consecutive year that Walgreens Boots Alliance and its predecessor company, Walgreen Co., have raised the dividend.
Fastenal-FAST reported second quarter revenues rose 11% to $1.1 billion with net income and EPS each hammering up 13% gains to $148.9 million and $.52, respectively. The increase in net sales returned the company to double-digit sales growth and was driven by higher unit sales from an improvement in underlying market demand, growth in the industrial vending business and growth in new and existing Onsite locations as Fastenal gained market share. Daily sales of fastener products, representing 36% of sales, grew 7.9% during the quarter while the non-fastener products, representing 64% of sales, jumped 12.2%. Gross profit margin improved 30 basis points to 49.8% during the quarter due to changes in product and customer mix and progress in supply chain initiatives. Good control over operating costs resulted in incremental margins topping 25%. Free cash flow increased 43% during the first half of the year to $236 million due primarily to the improvement in net earnings and a reduction in capital expenditure. For the full year, the outlook for capital expenditures was increased to $127 million from previous guidance of $119 million due to higher anticipated spending on supply chain and information technology. During the first half, Fastenal paid $185 million in dividends and repurchased $57 million of its own shares, including 1.3 million shares purchased in the second quarter at an average price of $43.62 per share. The board of directors announced a new 5 million share repurchase program. The company’s conservative balance sheet provides management with the financial flexibility to invest in the business, increase the dividend and use excess cash to repurchase shares. With the manufacturing economy improving, the company’s end markets remain positive with sales accelerating throughout the second quarter. With Fastenal seeing success in all of their growth drivers, management appeared upbeat about prospects for the remainder of the year.
Tuesday, July 11, 2017
PepsiCo-PEP reported second quarter revenues rose 2% to $15.7 billion with net income bubbling up 5% to $2.1 billion and EPS up 6% to $1.45. On an organic basis, revenues rose 3% with core constant currency EPS growth of 13%. These results included a $.06 favorable impact on EPS related to a gain associated with the sale of a minority interest in Britvic, plc. The company plans to reinvest this gain. PepsiCo’s second quarter results were solid amid pockets of macroeconomic challenges, especially in the Mideast, and an increasingly changing retail and consumer landscape. On an organic volume basis, beverages were down 2% with food/snacks up 2%. Organic revenue growth was driven by 8% growth in Latin America with operating profit growth led by Frito-Lay North America and improvements in the Europe Sub-Saharan Africa region. Free cash flow during the first half declined 38% to $1.4 billion primarily due to working capital fluctuations. During the first half, PepsiCo paid $2.2 billion in dividends and repurchased $942 million of its own common shares. For the full year, the company expects to generate approximately $10 billion in cash flow from operations, spend $3 billion on capital expenditures and produce $7 billion in free cash flow. The majority of the free cash flow is expected to be returned to shareholders in 2017 via $4.5 billion in dividends and $2 billion in share repurchases. Consistent with its previous guidance, PepsiCo expects organic revenue growth of at least 3% with core constant currency growth of 8% to $5.13 in core 2017 EPS.
Friday, July 7, 2017
Berkshire Hathaway Energy, a subsidiary of Berkshire Hathaway-BRKB, announced it has executed a definitive merger agreement to acquire reorganized Energy Future Holdings, which will ultimately result in the acquisition of Oncor, an energy delivery company serving approximately10 million Texans. The all-cash consideration for reorganized Energy Future Holdings is $9 billion. The transaction is currently expected to be completed in the fourth quarter of 2017. “Oncor is an excellent fit for Berkshire Hathaway, and we are pleased to make another long-term investment in Texas – when we invest in Texas, we invest big!” Buffett said in a statement. “Oncor is a great company with similar values and outstanding assets.”
Qualcomm-QCOM announced that it is filing a complaint with the United States International Trade Commission (ITC) alleging that Apple-AAPL has engaged in the unlawful importation and sale of iPhones that infringe one or more claims of six Qualcomm patents covering key technologies that enable important features and functions in iPhones. Qualcomm is requesting that the ITC institute an investigation into Apple's infringing imports and ultimately issue a Limited Exclusion Order (LEO) to bar importation of those iPhones and other products into the United States to stop Apple's unlawful and unfair use of Qualcomm's technology. The Company is seeking the LEO against iPhones that use cellular baseband processors other than those supplied by Qualcomm's affiliates. Additionally, Qualcomm is seeking a Cease and Desist Order barring further sales of infringing Apple products that have already been imported and to halt the marketing, advertising, demonstration, warehousing of inventory for distribution and use of those imported products in the United States. "Qualcomm's inventions are at the heart of every iPhone and extend well beyond modem technologies or cellular standards," said Don Rosenberg, executive vice president and general counsel of Qualcomm. "The patents we are asserting represent six important technologies, out of a portfolio of thousands, and each is vital to iPhone functions. Apple continues to use Qualcomm's technology while refusing to pay for it. These lawsuits seek to stop Apple's infringement of six of our patented technologies." Qualcomm expects that the ITC investigation will commence in August and that the case will be tried next year.
Friday, June 30, 2017
On June 28, 2017, Bank of America Corporation announced that it plans to increase its quarterly dividend to $0.12 per common share. When this occurs, Berkshire Hathaway-BRKB will exercise its warrants to acquire 700,000,000 shares of Bank of America Common Stock at the exercise price of $7.142857 per common share. Pursuant to the terms of the warrants, Berkshire expects to use its $5 billion of Bank of America Corporation 6% Preferred Stock that it currently owns as the consideration to acquire the common shares. Berkshire will become Bank of America’s largest shareholder, owning about 7% of the shares outstanding. Rub-a-dub-dub, the idea to invest in Bank of America in 2011 came to Warren Buffett while he was literally in the bathtub. The result has been a bubbly $12 billion gain for Berkshire along with about $1.7 billion in dividends. As Buffett joked at the recent annual meeting, “I spent a lot of time in the bathtub since and nothing has come to me. Clearly, I either need a new bathtub or we have to get into a different kind of market. “
Thursday, June 29, 2017
Nike-NKE reported fourth quarter revenues rose 5% to $8.7 billion with net income up 19% to $1 billion and EPS up 22% to $.60. For the full fiscal 2017 year, revenues rose 6% to $34.4 billion with net income up 13% to $4.2 billion and EPS up 16% to $2.51. Return on shareholders’ equity for the year was a hefty 34.2%. International geographies and the Direct-to-Consumer (DTC) businesses globally led strong revenue growth in the fourth quarter and full year. International sales account for more than 50% of total revenues with international growth led by 17% constant currency growth from Greater China, 14% growth from Emerging Markets and 11% growth from Western Europe during fiscal 2017. Total Nike Footwear revenues rose 8% for the year on a constant currency basis to $21 billion with apparel up 9% to $9.7 billion. The strong earnings growth during fiscal 2017 was driven by solid revenue growth, a lower tax rate and a lower average share count which was slightly offset by a lower gross margin. Inventories at the end of the year were up 4% to $5.1 billion as a 3% decrease in Nike Brand wholesale unit inventories was more than offset by increases in average product cost per unit and growth in the DTC businesses. The company’s cash and investments increased $722 million during the year to $6.2 billion on the company’s muscular balance sheet as of year end. During the fourth quarter, Nike repurchased 14.9 million shares for approximately $820 million at an average price of $55.03 per share as part of the four-year $12 billion share repurchase program approved by the Board in 2015. Since then, the company has repurchased 79.8 million shares for approximately $4.4 billion at an average price of about $55.13 per share. Nike is in the process of launching a new pilot program in fiscal 2018 with Amazon which will combine Amazon’s convenience with the strength of the Nike brand. For fiscal 2018, management expects revenues on a constant currency basis to increase in the mid-to-high-single digit range with growth expected across all geographies with constant currency gross margins expected to expand 30-50 basis points, leading to double-digit growth in operating income. However, $700 million in foreign currency headwinds will result in reported revenues growing in the mid-single digit range with modest gross margin contraction.
Walgreens Boots Alliance-WBA reported third quarter revenues rose 2% to $30.1 billion with net income up 5% to $1.2 billion and EPS up 6% to $1.07. Retail Pharmacy USA sales increased 6% to $22.5 billion during the quarter with comparable sales up 4%. Pharmacy sales, which accounted for 69.9% of the division’s sales, increased 10%, driven by 6% comparable store sales growth, due to higher prescription volumes including mail and central specialty following the formation of strategic partnerships which brought more patients to the U.S. pharmacies. The division filled 255.2 million prescriptions, an increase of 8.5% over the prior year period. The division’s retail prescription market share increased 110 basis points over the year ago quarter to a record 20.5%, the highest reported market share in the U.S. Retail Pharmacy International sales decreased 10.3% to $2.8 billion mainly due to currency translation. Pharmaceutical Wholesale sales decreased 7.9% to $5.3 billion mainly due to currency translation with comparable constant currency sales up 3.7%. Walgreens announced a new agreement with Rite Aid under which Walgreens will purchase 2,186 stores, three distribution centers and related inventory from Rite Aid for $5.175 billion in cash. This revised agreement which was prompted by a longer than expected FTC review is smaller than the previous acquisition agreement which has been terminated. Management views the new agreement as more attractive than the original deal and simpler to deliver both operationally and financially. Walgreens expects $400 million per annum in synergies within a few years with the deal expected to be modestly accretive to earnings in the first year after closing as the deal expands Walgreens’ network and population coverage. Due to the significantly lower cost of the deal, Walgreens announced a new $5 billion share buyback program which is in addition to the $1 billion buyback program that was recently completed. Walgreens’ free cash flow increased 1% year-to-date to $4.3 billion with the company paying $1.2 billion in dividends and repurchasing $1.5 billion of its shares through the first nine months of the year. The company raised the lower end of its guidance for fiscal year 2017 by $.08 and now anticipates adjusted EPS in the range of $4.98-$5.08. With respect to potential competition from Amazon, Walgreens said they did not think Amazon would be interested in participating in their space, but if they did, Walgreens would be well prepared for the potential competition and could even partner with Amazon, which might present the company with other growth opportunities. Management believes Mr. Market had an emotional rather than rational reaction to potential competition from Amazon.
Biogen-BIIB will present robust efficacy and safety data from Phase 2 and 3 SPINRAZA® (nusinersen) studies at the Cure SMA 2017 Annual SMA Conference in Orlando, Fl, June 29 – July 2, 2017. The breadth of data presented reinforces the significant and clinically meaningful efficacy of SPINRAZA on the achievement of motor milestones and measures of motor function across a broad range of individuals with spinal muscular atrophy (SMA), as well as on survival endpoints in infantile-onset SMA. “Data presented at the Cure SMA 2017 Annual SMA Conference further demonstrate the significant impact of SPINRAZA and the benefits of early treatment initiation. We are encouraged to see unprecedented motor function gains in infants on permanent ventilation and a continued favorable benefit-risk profile across a broad population including no increase in risk of adverse events in children who have developed scoliosis.” said Wildon Farwell, M.D., M.P.H., senior medical director, Clinical Development, Biogen. “As part of our mission to make a meaningful difference in the lives of those affected by SMA, we continue to collect and evaluate data to provide a deeper understanding of the impact of SPINRAZA across SMA populations and share those results with the SMA community.”
Wednesday, June 28, 2017
Paychex-PAYX reported fourth quarter revenues rose 6% to $798.6 million with net income and EPS each up 10% to $195.3 million and $.54, respectively. For the full year, revenues rose 7% to $3.2 billion, crossing the $3 billion milestone for the first time, with net income and EPS each up 8% to $817.3 million and $2.25, respectively. Return on shareholders’ equity for the year was a sterling 41.8%. As of 5/31/17, Paychex served approximately 605,000 payroll clients, consistent with a year ago. While new business starts are back at pre-recession levels, there were a surprisingly large number of bankruptcies among small business clients. Client retention declined slightly to 81% due primarily to operational changes implemented during the year. Free cash flow declined 6% during the year to $866.1 million due to working capital fluctuations. The company paid $662.3 million in dividends during the year and repurchased 2.9 million of its own shares for $166.2 million at an average price of $57.31 per share. Paychex ended the fiscal 2017 year with a strong financial position with no long-term debt and $777 million in cash and investments. Management’s outlook for fiscal 2018 is for total revenues and net income each expected to increase 5% with operating margins expanding to 40%.
Tuesday, June 27, 2017
FactSet-FDS reported fiscal third quarter revenues rose 9%, or 6% organically, to $312.1 million with net income down 2% to $65.4 million and EPS up 3% to $1.66. Operating margin declined to 28.1% from 31.1% in the prior year period primarily due to acquisition-related costs. On an adjusted basis, net income and EPS rose 8% and 13%, respectively. Annual Subscription Value (ASV) increased 10%, or 6% organically, to $1.28 billion as of 5/31/17. ASV at any given time represents the forward-looking revenues for the next 12 months from all subscription services currently supplied to clients. During the quarter, the company paid $205.2 million and $20 million in cash, respectively, for BISAM Technologies S.A., a leading provider of portfolio performance and attribution, and Interactive Data Managed Solutions, a managed solutions and portal provider for the global wealth management industry. Client count as of 5/31/17 was 4,629, a net increase of 225 clients, including 117 net new clients from the acquisitions. User count grew 237 to 86,025 in the past three months. Annual client retention was greater than 95% of ASV or 92% when expressed as a percentage of clients. Employee headcount was 8,885, a 5.2% increase on an organic basis. Free cash flow declined 14% during the first nine months to $194 million due to working capital needs. Year-to-date, FactSet has paid $59 million in dividends and repurchased $215 million of its own shares, including 300,000 shares repurchased in the third quarter for $48.3 million at an average price of $161 per share. The company has $288.2 million remaining authorized for future share repurchases which management is committed to buying in the fourth quarter and into fiscal 2018. During the fourth quarter, management expects revenues to be in the range of $321 million to $328 million with EPS expected in the range of $1.67-$1.73. On an adjusted basis, fourth quarter EPS is expected in the range of $1.86-$1.92, representing 12% growth at the midpoint.
The European Commission has fined Alphabet-GOOGL $2.7 billion for breaching EU antitrust rules. The European Commission claims Google has abused its market dominance as a search engine by giving an illegal advantage to another Google product, its comparison shopping service. The company must now end the conduct within 90 days or face penalty payments of up to 5% of the average daily worldwide revenue of Alphabet. Alphabet responded that “Given the evidence, we respectfully disagree with the conclusions announced today. We will review the Commission’s decision in detail as we consider an appeal, and we look forward to continuing to make our case.”
Monday, June 26, 2017
Waymo, the self-driving car unit of Alphabet-GOOGL, has reached an agreement for Avis Budget Group Inc. to manage its fleet of autonomous vehicles. Avis will service and store Waymo’s Chrysler Pacifica minivans in Phoenix. Waymo will own the vehicles and pay Avis for its service, an arrangement that is set for multiple years but not exclusive. Financial terms of the deal were not released.
Berkshire Hathaway-BRKB has taken a 9.8% stake in Store Capital Corp, a real estate company that invests in single-tenant properties, for $377.1 million. Store plans to use proceeds from the offering to buy properties, repay debt and other purposes.
Thursday, June 22, 2017
Accenture-ACN reported third quarter net revenues rose 5%, or 7% in local currency, to $8.9 billion with net income dropping 26% to $705 million and EPS down 25% to $1.05. The earnings reflect a $510 million, or $.47 per share, pension termination settlement charge. Excluding the charge, operating income rose 5% to $1.38 billion with a 15.5% operating margin consistent with the prior year and EPS rose 8% to $1.52. New bookings for the quarter were $9.8 billion with record consulting bookings of $5.2 billion and outsourcing bookings of $4.6 billion. During the quarter, the company gained significant market share with broad-based growth across most of the business from an industry, geographic and capability standpoint. On a geographic basis, Growth Markets, including Japan and Australia, led the way with strong double-digit growth. Growth in the operating groups was led by Products with 15% growth during the quarter. “The New” digital, cloud and security services generated strong double-digit growth which now approximate 50% of revenues. For the first nine months of the year, Accenture’s free cash flow increased 20% to $2.7 billion with the company paying $1.6 billion in dividends and repurchasing $2 billion of its shares, including 4.9 million shares repurchased in the third quarter for $589 million at an average price of $120.50 per share. Accenture has $3.7 billion authorized for future share repurchases. Accenture also made $1.2 billion in acquisitions year-to-date with its strong balance sheet with $3.4 billion in cash and minimal long-term debt providing the company with financial flexibility to grow the business while returning significant cash to shareholders. For the full year fiscal 2017, Accenture now expects net revenue growth to be in the range of 6% to 7% in local currency compared to previous guidance of 6% to 8% growth. Including the impact of the pension charge, GAAP EPS is now expected in the range of $5.37 to $5.44. Free cash flow is still expected to be in the range of $4.0 to $4.3 billion for the full year.
Berkshire Hathaway-BRKB announced that it has agreed to make an initial investment of C$153,225,739 to acquire 16,044,580 common shares of Home Capital Group Inc. on a private placement basis, representing an approximate 19.99% equity stake in Home Capital on a post-issuance basis (25% on a pre-issuance basis). Berkshire also agreed to make an additional investment of C$246,774,261 to acquire 23,955,420 Common Shares on a private placement basis, which, together with its initial investment, would represent an approximate 38.39% equity stake in Home Capital. Concurrently with the execution of the Investment Agreement, Home Capital caused Home Trust Company, as borrower, to agree to enter into a new C$2 billion loan facility with a wholly-owned subsidiary of Berkshire, as the agent and initial lender, to be secured against a portfolio of mortgages originated by Home Trust Company.
Wednesday, June 21, 2017
Oracle-ORCL reported fourth quarter revenues rose 3% to $10.9 billion led by a 58% increase in total cloud revenues to $1.4 billion, topping the $1 billion milestone for the first time in a quarter. Net income and EPS each increased 15% during the quarter to $3.2 billion and $.76, respectively. The company continues to experience rapid adoption of the Oracle Cloud led by the 75% growth in their Software as a Service (SaaS) business in the fourth quarter. For the full fiscal 2017 year, revenues rose 3% to $37.7 billion as cloud revenues jumped 60% to $4.6 billion with software license updates and product support up 2% to $19.2 billion. Net income for the year increased 5% to $9.3 billion with EPS up 7% to $2.21. Return on shareholders’ equity for the year was a solid 17.2%. Free cash flow dipped 3% to $12.1 billion as the company continued to invest in its cloud capital expenditures. In fiscal 2018, cloud capital expenditures should stabilize around $1 billion. During the year, the company paid $2.6 billion in dividends and repurchased a net $1.4 billion of its own shares including 11 million shares in the fourth quarter for $500 million at an average price of $45.45 per share. The cloud hyper-growth is expanding Oracle’s operating margin as SaaS gross margin is expected to expand to close to 80% by year end. Accordingly, management expects EPS growth to accelerate in fiscal 2018 with double-digit EPS growth expected for the full year. AT&T has agreed to migrate thousands of existing Oracle databases to the Oracle Cloud with more big customers expected to do large-scale migrations to the Oracle Cloud in the year ahead.
Monday, June 19, 2017
Stryker-SYK announced a definitive agreement to acquire NOVADAQ Technologies Inc. for $11.75 per share, or $701 million with a net purchase price of $654 million, reflecting net cash of approximately $47 million. NOVADAQ is a leading developer of fluorescence imaging technology that provides surgeons with visualization of blood flow in vessels, and related tissue perfusion in cardiac, cardiovascular, gastrointestinal, plastic, microsurgical, and reconstructive procedures. NOVADAQ was founded in 2000 and is headquartered in Mississauga, Canada. The transaction is expected to close at the end of the third quarter and is expected to be dilutive to Stryker`s 2017 adjusted net earnings per diluted share by $0.03 - $0.05. There is no change to Stryker`s 2017 estimated adjusted net earnings per diluted share, which is in the range of $6.35 - $6.45. For 2018, this transaction is expected to be neutral to Stryker`s earnings and accretive thereafter.
International Consolidated Airlines Group S.A. (IAG) has signed a memorandum of understanding with Pratt & Whitney for the PurePower Geared Turbofan™ (GTF) engine to power 47 firm Airbus A320neo family aircraft. Pratt & Whitney is a division of United Technologies-UTX. "Pratt & Whitney appreciates IAG's faith in the GTF engine, which has demonstrated its promised fuel burn savings, emissions, and reduction in noise footprint," said Chris Calio, president, Commercial Engines. "The PurePower GTF engine is a game-changing, break-through technology with more than 200,000 hours of passenger service. There are 67 aircraft with 13 operators flying 250 flights per day to over 100 destinations on four continents." IAG is the parent company of Aer Lingus, British Airways, Iberia and Vueling.
Accenture-ACN is leading a "call to action" and responding with blockchain and biometric technologies to support ID2020, a global public-private partnership dedicated to solving the challenges of identity faced by more than 1.1 billion people around the world. Approximately one-sixth of the world's population cannot participate in cultural, political, economic and social life because they lack the most basic information: documented proof of their existence. Establishing identity is critical to accessing a wide range of activities, including education, healthcare, voting, banking, mobile communications, housing, and family and childcare benefits. The goal of ID2020 is to make digital identity a reality through a technology-forward approach that will leverage secure and well-established systems. Accenture, in partnership with Microsoft-MSFT and Avanade, has developed an identity prototype based on blockchain technology – a type of database system that enables multiple parties to share access to the same data with an extremely high level of confidence and security.
Friday, June 16, 2017
As Walt Disney-DIS celebrates the first year anniversary of the Shanghai Disney theme park, the company reported more than 11 million people have visited the park since it opened with the park breaking even in its first year which Disney CEO, Bob Iger, called an “extraordinary achievement.” Half of the park's visitors are from the Shanghai region and the other half are from elsewhere in China.
Thursday, June 15, 2017
NIKE-NKE announced the Consumer Direct Offense, a new company alignment that allows Nike to better serve the consumer personally, at scale. Leveraging the power of digital, Nike will drive growth—by accelerating innovation and product creation, moving even closer to the consumer through Key Cities, and deepening one-to-one connections. Trevor Edwards, President of the NIKE Brand, will drive the Consumer Direct Offense through integrated category, geography, marketplace, product, merchandising, digital, and direct-to-consumer teams. In the new alignment, Nike will drive growth by deeply serving consumers in 12 key cities, across 10 key countries: New York, London, Shanghai, Beijing, Los Angeles, Tokyo, Paris, Berlin, Mexico City, Barcelona, Seoul, and Milan. These key cities and countries are expected to represent over 80 percent of Nike’s projected growth through 2020. Nike’s leadership and organizational changes will streamline and speed up strategic execution. The changes are also expected to result in an overall reduction of approximately 2 percent of the company’s global workforce. “The future of sport will be decided by the company that obsesses the needs of the evolving consumer,” said Mark Parker, NIKE, Inc. Chairman, President, and CEO. “Through the Consumer Direct Offense, we’re getting even more aggressive in the digital marketplace, targeting key markets and delivering product faster than ever.”
Wednesday, June 14, 2017
United Technologies’-UTX Board of Directors declared, effective July 5, 2017, a dividend of 70 cents per outstanding share of common stock, which represents a 6.1 percent increase over the prior quarter's dividend amount. The dividend will be payable September 10, 2017, to shareowners of record at the close of business August 18. "Today's announcement to increase our dividend reflects our ongoing commitment to remain disciplined in our capital allocation and deliver value to shareowners through our long-term growth strategy" said UTC Chairman and Chief Executive Officer Greg Hayes. UTC has paid cash dividends on its common stock every year since 1936.
The U.S. Food and Drug Administration (FDA) has accepted Bioverativ’s-BIVV Investigational New Drug (IND) application for BIVV001, a novel, investigational Factor VIII therapy designed to potentially extend protection from bleeding episodes via prophylactic once-weekly dosing or longer for patients with hemophilia A. BIVV001 is the only investigational Factor VIII therapy in development that has been designed to overcome the von Willebrand factor ceiling, which is believed to impose a half-life limitation on current Factor VIII therapies. “We are very pleased by the announcement from Bioverativ that clinical enrollment is planned to begin in the latter half of 2017. This represents the second clinical trial involving an XTEN-based product to be initiated this year,” remarked Volker Schellenberger, CEO and President of Amunix. “We look forward to the evaluation of BIVV001 in the clinic and the continued progression of Bioverativ’s hemophilia programs that exploit the advantages offered by the XTEN technology platform.”
Baxter International-BAX announced an agreement with Dorizoe Lifesciences Limited (Dorizoe), a full-service global contract research and development (R&D) organization, that will facilitate accelerated development of more than 20 generic injectable products—including anti-infectives, oncolytics and cardiovascular medicines. Dorizoe will work with Baxter to perform certain product development activities, and Baxter will hold worldwide manufacturing and commercialization rights. “This partnership extends Baxter’s growing pipeline of generic injectables, further strengthening our portfolio with a broad range of high-quality essential medicines,” said Robert Felicelli, president, Pharmaceuticals, Baxter. “We look forward to working with Dorizoe to bring their highly skilled technical expertise together with Baxter’s manufacturing leadership and hospital channel strength to better serve the needs of patients around the world.” Baxter estimates that the global sterile generic injectables segment is more than $40 billion, with a compound annual growth rate of approximately 10 percent (2010 – 2015). Baxter currently participates in a niche portion of the segment, producing difficult-to-manufacture oncology drugs and standard-dose, ready-to-use premixed injectable products. Baxter recently announced plans to expand its presence in the space with the pending acquisition of Claris Injectables Limited (Claris). The acquisition of Claris, which is expected to close in the second half of 2017, will provide Baxter with a currently marketed portfolio of molecules in anesthesia and analgesics, renal, anti-infectives and critical care in a variety of presentations including bags, vials and ampoules along with a robust pipeline and high-quality manufacturing capabilities. Baxter also recently announced a strategic partnership with ScinoPharm—one of the world’s leading active pharmaceutical ingredient (API) manufacturers—to develop, manufacture and commercialize five generic injectables used in cancer treatment, with an option to add up to 15 additional injectable molecules.
Tuesday, June 13, 2017
The Cheesecake Factory-CAKE updated its outlook for second quarter fiscal 2017 comparable sales. The Company now expects comparable sales at The Cheesecake Factory restaurants for the second quarter of fiscal 2017 to be down approximately 1%. The Company expects this to impact second quarter margins and earnings per share. “We have continued to outperform the casual dining industry quarter to date, with over half of our regions posting positive comparable sales for the period, including key markets of California, Texas and Florida,” said David Overton, Chairman and Chief Executive Officer. “More broadly however, we have seen heightened volatility in week to week sales trends, indicative of uncertainty on the part of many consumers. Specifically, we have seen pockets of softness as we moved through the quarter, notably in the East and Midwest where we also faced unfavorable weather that reduced patio usage.” Overton continued, “We believe The Cheesecake Factory brand is as strong as ever and our underlying operating metrics remain solid. We are managing the business for the long term, continuing to provide delicious and memorable dining experiences for our guests, while executing on our diversified growth drivers and effectively allocating our strong cash flow to position the Company to generate sustained shareholder returns.”
Wednesday, June 7, 2017
Brown-Forman-BFB reported fourth quarter revenues declined 5% to $694 million with net income down 72% to $144 million and EPS off 71% to $.37. For the full fiscal 2017 year, revenues declined 3% to $3 billion with net income down 37% to $669 million and EPS down 34% to $1.71. These results reflect the impact of acquisitions, divestitures and adverse foreign exchange between fiscal 2016 and 2017. On an underlying basis, the company reported 3% growth in revenues for the full year with operating income up 7% and EPS up 5%. This year’s results translated into the 10th straight year of growth in underlying sales and operating income with underlying operating income growth of 7% approximating the 10-year average of 8% growth. The company’s underlying operating margin of 33% in fiscal 2017 exceeded its 10-year average operating margin of 30% with the return on invested capital (ROIC) of 19% in fiscal 2017 approximating its average 20% ROIC over the last 10 years, demonstrating the company’s historical track record of high-quality and consistent profitability. Return on shareholders’ equity for fiscal 2017 was a cheery 49%. The company generated underlying growth in all of its top ten markets in fiscal 2017 with double-digit growth experienced in Mexico, France and Japan. Jack Daniel’s generated solid 3% underlying growth during the year with Woodford Reserve and Old Forrester chugging up strong 20% growth and the tequila brands toasting 12% growth during the year. Free cash flow increased 27% during the year to $527 million. Brown-Forman paid $274 million in dividends during the year and repurchased 11.9 million of its shares for $561 million at an average price of $47 per share. Since fiscal 2013, the company has returned $4.3 billion to shareholders through dividends and share repurchases. Despite a volatile global economy, especially in emerging markets, management’s outlook for fiscal 2018 is for underlying net sales growth of 4% to 5% led by the Jack Daniel’s family of brands, the company’s premium bourbon and tequila brands and helped by new products such as the launch of Jack Daniel’s Tennessee Rye and Slane Irish Whiskey. Underlying operating income growth is expected in the 6% to 8% range with EPS expected in the range of $1.80 to $1.90.
AbbVie-ABBV announced positive top-line results from the Phase 3 SELECT-NEXT clinical trial evaluating upadacitinib (ABT-494), an investigational oral JAK1-selective inhibitor, in patients with moderate to severe rheumatoid arthritis (RA) who did not adequately respond to treatment with conventional synthetic DMARDs (csDMARDs). Results showed that after 12 weeks of treatment, both doses of upadacitinib (15 mg and 30 mg) met the study's primary endpoints of ACR20 and low disease activity. Key secondary endpoints were also achieved and included ACR50, ACR70 and clinical remission. "We are excited by these promising results for upadacitinib. Selective inhibition of the JAK1 pathway may offer a novel treatment for rheumatoid arthritis patients who do not adequately respond to conventional therapies," said Michael Severino, M.D., executive vice president, research and development and chief scientific officer, AbbVie. "We are especially encouraged by the results on the more stringent measures of efficacy, such as ACR70, low disease activity and clinical remission. We look forward to seeing the full results from our Phase 3 program. AbbVie's longstanding leadership in the treatment of immune-mediated diseases provides an opportunity to build upon our understanding and develop innovative therapies to address unmet patient needs." AbbVie is continuing to evaluate the potential of upadacitinib across several immune-mediated conditions. Phase 3 trials of upadacitinib in psoriatic arthritis are ongoing, and it is also being investigated to treat Crohn's disease, ulcerative colitis and atopic dermatitis.
Building upon its history of industry-leading bold actions, Express Scripts-ESRX announced a new Advanced Opioid ManagementSMsolution that will better address our nation's opioid-addiction epidemic by working comprehensively with patients, prescribers and pharmacies to minimize early exposure while helping prevent progression to overuse and abuse.
Wabtec-WAB has signed a contract worth about $22 million to design, install, test and commission Positive Train Control (PTC) for the Belt Railway Company of Chicago (BRC). Under the contract, Wabtec will provide its Interoperable Electronic Train Management System (I-ETMS®) equipment for five locomotives, a back-office server, office hosting, wayside and communications design, a track database, construction, training, and system integration. The contract is expected to be completed in 2018.
Tuesday, June 6, 2017
Apple-AAPL introduced new versions of all of its various software products. Apple also introduced new Macs and iPads along with a Siri-enabled speaker called HomePod, which can check iMessages, check sports scores and be used to listen to podcasts. The HomePod will be priced at $349 and start shipping in the U.S. in December. Amazon will be added to the Apple TV app. Apple Pay will feature person to person payments. Apple Music now has over 27 million paying subscribers, the APP store has 500 million weekly users with $70 billion having been paid out to APP store developers.
Fastenal-FAST reported total sales in May rose 14.9% to $383.5 million with average daily sales up 9.7% to $17.4 million. Daily sales growth by end market rose 8.1% for manufacturing customers and 7.2% for non-residential construction customers. Sales by product line rose 6.7% for fasteners and 11.3% for other products. Year-to-date, the company has opened 9 new stores and ended the month with 2,484 store locations. Total personnel declined 1.4% to 19,996 at the end of May.
Monday, June 5, 2017
IMBRUVICA is jointly developed and commercialized by Pharmacyclics LLC, an AbbVie-ABBV company, and Janssen Biotech, Inc., a Johnson & Johnson-JNJ company. Recent data, which assessed the impact of treatment on the immune system and changes in circulating cells, found that IMBRUVICA reduced cancerous cells and other cells of the immunosuppressive tumor microenvironment including CLL cells (90 percent), myeloid-derived suppressor cells (MDSC, 61 percent) and some T cells (27-52 percent). At the same time, IMBRUVICA spared non-cancerous immune system cells, including naïve T cells, T memory stem cells (TSCM) and natural killer (NK) cells through one year of treatment. The data were derived from the Phase 3 RESONATE™-2 trial (PCYC-1115), which found IMBRUVICA reduced the risk of progression or death of treatment-naïve patients with CLL compared to the traditional chemotherapeutic chlorambucil.
Thursday, June 1, 2017
3M-MMM announced that it has entered into an agreement to sell its electronic monitoring business to an affiliate of Apax Partners, a leading global private equity advisory firm, for $200 million. 3M’s business, with annual sales of approximately $95 million, is a provider of electronic monitoring technologies, serving hundreds of correctional and law enforcement agencies around the world. The transaction is expected to close in the third quarter of 2017, and upon completion of this transaction, 3M expects to record a gain of approximately $0.15 per share from this divestiture.
The European Commission has granted a marketing authorization for SPINRAZA®(nusinersen) for the treatment of 5q spinal muscular atrophy (SMA), Biogen-BIIB announced. SPINRAZA is the first approved treatment in the European Union for SMA, a leading genetic cause of death in infants that is marked by progressive, debilitating muscle weakness. SPINRAZA was reviewed under the European Medicines Agency’s accelerated assessment program, intended to expedite access to patients with unmet medical needs.
Private sector employment increased by 253,000 jobs from April to May according to the May ADP National Employment Report®. "May proved to be a very strong month for job growth," said Ahu Yildirmaz, vice president and co-head of the ADP-ADP Research Institute. "Professional and business services had the strongest monthly increase since 2014. This may be an indicator of broader strength in the workforce since these services are relied on by many industries." Mark Zandi, chief economist of Moody's Analytics, said, "Job growth is rip-roaring. The current pace of job growth is nearly three times the rate necessary to absorb growth in the labor force. Increasingly, businesses' number one challenge will be a shortage of labor."
Friday, May 26, 2017
The United States Department of Energy announced that Four Rivers Nuclear Partnership, LLC., a CH2M-led company with partners Fluor-FLR and BWX Technologies, Inc., was awarded the Paducah Deactivation and Remediation (D&R) Contract at the Paducah Gaseous Diffusion Plant. The Paducah site is situated on approximately 3,500 acres in Western Kentucky, eight miles west of Paducah, Kentucky, and 3.5 miles south of the Ohio River. The performance based contract is valued at approximately $1.5 billion over ten years; the base term is five years valued at approximately $750 million, followed by three-year and two-year option periods, valued at an approximate total of $750 million combined. A transition period is scheduled to begin on June 2017.
Thursday, May 25, 2017
Hormel-HRL reported second fiscal quarter sales declined 5% to $2.2 billion with net income and EPS dipping 2% to $211 million and $0.39, respectively. Ongoing challenges in the turkey industry gobbled up Hormel sales and earnings as turkey prices remained at seven year lows due to overproduction, which is expected to persist until industry-wide production is cut. Pricing pressure from competing proteins and increased expenditures on biosecurity to protect the flocks from future flu outbreaks also ate up Jennie-O segment results during the quarter. For the quarter, Jennie-O Turkey Store segment sales dropped 8% to $388 million on a 6% volume decline with segment operating profit falling 29% to $64 million. Refrigerated Foods segment sales declined 6% to $1 billion and operating profit was flat, primarily due to the divestiture of the profitable Farmer John subsidiary which is no longer strategically aligned with Hormel’s business. Excluding the divestiture, Refrigerated Foods sales increased 5% year-over-year. Grocery Products sales increased 8% to $432 million and segment profit increased 15%, fattened by the addition of JUSTIN'S® specialty nut butters as well as the strong performance of WHOLLY GUACAMOLE® dips and SPAM® luncheon meat. Specialty Foods sales declined 24% to $208 million with operating profit declining 16%, primarily related to the divestiture of Diamond Crystal Brands in May 2016 and reduced contract packaging sales. International sales increased 19% to $131 million with profit margins up 38% on strong exports of fresh pork and beefed-up SPAM® luncheon meats sales. During the quarter, Hormel generated operating cash flow of $84 million, down 55% from last year, squeezed by a $30 million tax payment and compensation accruals. Capital expenditures were $39 million during the quarter compared to $66 million last year. For the full fiscal year, Hormel expects capital expenditures of $190 million. Hormel ended the quarter with $549 million in cash and $250 million in long-term debt on its sturdy balance. On May 15th, Hormel paid its 355th consecutive quarterly dividend at the annual rate of $0.68. Given expected continued weakness in turkey prices, management pushed its full year guidance to the lower end of the $1.65 to $1.71 range.
After rumors that Constellation Brands had indicated interest in acquiring Brown-Forman-BFB, Brown-Forman issued the following statement from Geo. Garvin Brown IV, Chairman of the Board of Directors, and Paul C. Varga, Chief Executive Officer: "As a matter of corporate policy, Brown-Forman does not comment on market rumors or speculation. However, it is important to reiterate that Brown-Forman is not for sale. For nearly 150 years, the Company and the Brown family have been committed to preserving Brown-Forman as a thriving, family controlled, independent company. That commitment is unchanged, and our goal is to continue creating value for all shareholders for generations to come."
Tuesday, May 24, 2017
Bioverativ-BIVV announced that it has entered into a definitive agreement to acquire South San Francisco-based True North Therapeutics, a privately-held, clinical-stage rare disease biotechnology company, for an upfront payment of $400 million plus assumed cash. True North investors are also eligible to receive additional payments of up to $425 million contingent on the achievement of future development, regulatory and sales milestones. As part of the acquisition, Bioverativ will obtain worldwide rights to True North’s lead candidate, TNT009, a first-in-class monoclonal antibody in development to treat cold agglutinin disease (CAD). CAD is a rare and chronic hemolytic condition that often leads to severe anemia, requiring numerous transfusions, and can result in life-threatening thrombotic events. There are no approved therapies for CAD, which occurs in approximately 16 people per million globally, including an estimated 5,000 people in the United States. In May 2017, the U.S. Food and Drug Administration (FDA) granted TNT009 breakthrough therapy designation for the treatment of hemolysis in patients with primary CAD, and plans for the full clinical development program, including a registrational program, are underway. Breakthrough therapy designation was created by the FDA to expedite the development and review of medicines that target serious or life-threatening conditions and have shown preliminary evidence of potential clinical benefit. The acquisition will be financed through a combination of cash on hand and debt. It is expected to close in mid-2017.
Thursday, May 18, 2017 Gentex-GNTX reported that its Board of Directors approved an increase in its quarterly cash dividend to $0.10 (10 cents) per share, representing an increase of 11 percent over the current dividend rate. The Board subsequently declared a quarterly cash dividend of $0.10 per share that will be payable July 19, 2017, to shareholders of record of the common stock at the close of business on July 6, 2017. Since 2003, Gentex has consistently grown its dividend as an efficient and consistent level of return of capital to shareholders, which represents an approximate 2 percent yield based on the Company’s current stock price. This dividend increase continues to be a key part of the Company’s overall capital allocation strategy and is evidence that the management and board of directors continue to believe in the importance of returning value to Gentex shareholders while representing further confidence in the Company’s future earnings potential.
Remedy Pharmaceuticals, a privately-held pharmaceutical company focused on bringing life-saving treatments to people affected by central nervous system diseases and injuries, announced that Biogen-BIIB completed an asset purchase of its Phase 3 candidate, CIRARA. Biogen made an upfront payment of $120 million to Remedy and may also pay additional milestone payments and royalties.
Express Scripts-ESRX, through a wholly owned subsidiary, Innovative Product Alignment, LLC, today announced it will participate in Walgreens Boots Alliance-WBA Development GmbH (WBAD) group purchasing organization. In addition, Econdisc Contracting Solutions, a group purchasing organization that contracts with manufacturers to source generic pharmaceuticals on behalf of its participants, will have access to WBAD's sourcing efforts through an arrangement between Econdisc and Innovative Product Alignment. These two organizations will immediately begin developing a transition plan to maximize supply chain efficiencies.
Wabtec-WAB has signed a contract worth about $40 million to design, install, test and commission Positive Train Control (PTC) for the South Florida Regional Transportation Authority (SFRTA), which operates the Tri-Rail commuter rail service. Under the contract, Wabtec will provide its Interoperable Electronic Train Management System (I-ETMS®) equipment for 42 locomotives and cab cars, a back-office server, wayside communications and signals, a dispatch system, training, and system integration. Installation is expected to be completed by the end of 2018.
Qualcomm-QCOM demonstrated dynamic electric vehicle charging (DEVC), which allows vehicles to charge while driving. Based on the Qualcomm Halo™ wireless electric vehicle charging technology (WEVC), Qualcomm Technologies designed and built a wireless DEVC system capable of charging an electric vehicle (EV) dynamically at up to 20 kilowatts at highway speeds. Qualcomm Technologies also demonstrated simultaneous charging, in which two vehicles on the same track can charge dynamically at the same time. The vehicles can pick up charge in both directions along the track, and in reverse, further showcasing how the Qualcomm Halo DEVC system has been designed to support real-world implementation of dynamic charging.
Wednesday, May 17, 2017 Cisco Systems-CSCO reported third fiscal quarter revenues of $11.9 billion, down 1% year-over-year, with net income increasing 7% to $2.5 billion and EPS rising 9% to $0.50. A modest uptick in Product revenue was offset by a 2% decline in service revenue. The uptick in Product revenue to $8.9 billion was led by Wireless and Security, which increased by 13% and 9%, respectively. Switching revenue increased by 2%. NGN Routing, Collaboration, Data Center and Service Provider Video revenue decreased by 2%, 4%, 5% and 30%, respectively. During the quarter, Cisco continued to make progress on its multi-year transformation of the business from hardware to software and services with 31% of revenues generated from subscriptions, up from 29% during last year’s third quarter. By geographic segment, Americas revenues of $7 billion were flat on weakness by the Federal Government sector due to uncertainty surrounding the budget and weakness in Mexico. EMEA sales of $3 billion were also flat on currency headwinds in the UK and uncertainty surrounding oil prices in the Middle East. APJC sales of $1.9 billion were down 2% on tough China comps. Operating income increased 6% thanks to an 8% decline in operating expenses. As part of its restructuring efforts, Cisco announced plans to lay off an additional 1,100 people with $150 million of additional pre-tax charges expected. During the quarter, Cisco generated $3.4 billion in cash flow from operations, up 10% year-over-year. Cisco returned $2 billion to shareholders during the quarter through repurchasing about 15 million shares at an average price of $33.71 per share for an aggregate purchase price of $500 million and dividends of $1.5 billion, up 11% from last year. In the third quarter of fiscal 2017, Cisco completed its acquisition of AppDynamics, which provides cloud application and business monitoring platforms designed to help companies improve application and business performance. Cisco also announced plans to acquire companies that will expand offerings in software-defined wide area networks, advanced analytics and AI. Cisco ended the quarter with $68 billion of cash on its sturdy balance sheet, with $65 billion of the cash held overseas. Looking ahead to the fourth quarter, the company expects revenues to decline by 4% to 6% with EPS of $0.46 to $0.51, down from $0.56 last year.
Qualcomm-QCOM file a complaint in the United States District Court for the Southern District of California against FIH Mobile Ltd. and Hon Hai Precision Industry Co., Ltd., (together known as Foxconn), Pegatron Corporation, Wistron Corporation, and Compal Electronics, Inc., the four manufacturers of all Apple-AAPL iPhones and iPads sold worldwide, for breaching their license agreements and other commitments with Qualcomm and refusing to pay for use of Qualcomm's licensed technologies. Qualcomm seeks an order that would require the defendants to comply with their long-standing contractual obligations to Qualcomm, as well as declaratory relief and damages. Despite a long history of consistently paying royalties under their license agreements with Qualcomm, the manufacturers now are refusing to pay royalties on the Apple products they produce. While not disputing their contractual obligations to pay for the use of Qualcomm's inventions, the manufacturers say they must follow Apple's instructions not to pay. The license agreements with the manufacturers in many cases were entered into before Apple sold its first iPhone and Apple is not a party to the agreements. Further, the defendants are continuing to pay Qualcomm royalties for use of Qualcomm's technology in non-Apple products, under the very same agreements that apply to the Apple products. Qualcomm has already filed a separate claim against Apple for its unlawful interference with the license agreements between Qualcomm and these manufacturers.
Tuesday, May 16, 2017 The TJX Companies-TJX rang up first fiscal quarter sales of $7.8 billion, up 3% year-over-year, with net income increasing 5.5% to $536 million and EPS increasing a fashionable 8% to $0.82. Despite unfavorable weather in many parts of the country, comp store sales increased 1% over last year’s 7% jump, driven by customer traffic as the company gained market share in each of its four divisions. Domestic Marmaxx sales increased 2% to $5 billion while HomeGoods sales increased a fancy 11% to $1.1 billion. TJX Canada sales increased 8% to $739 million while TJX International sales dipped 3% to $957 million, pressured by transactional foreign currency headwinds. Operating margins declined by 20 basis points, as hedging gains and a strong merchandise margin were offset by wage increases and additional investments in the supply chain, IT, new concepts, new stores and remodels to support future growth. During the quarter, TJX added 50 new stores including 17 new HomeGoods stores. In a few months, the company will open its first U.S. HomeSense store, a new concept in home goods off-price retailing that is expected to drive future growth. During the quarter, TJX generated $190 million in free cash flow, up 6% from last year. The company returned $519 million to shareholders through share repurchases of $350 million, at $77.78 per share, and dividends of $169 million. During the quarter, TJX increased the per share dividend by 20%, marking the 21st consecutive year of annual dividend increases. TJX ended the quarter with $3 billion in cash and investments and $2 billion in long-term debt on its sturdy balance sheet. Looking ahead, TJX expects second quarter sales to increase 4% to $8.2 billion with EPS of $0.81 to $0.83 versus $0.84 reported last year. Second quarter earnings are expected to be squeezed by wage increases and the negative impact from foreign currency, partially offset by a benefit from a change in accounting rules for stock-based compensation. For the full 2018 fiscal year which includes a 53rd week, sales are expected in the $35.3 to $35.6 billion range, up 6% to 7% from last year. The company raised the bottom range of its EPS guidance range with EPS now expected in the $3.82 to $3.89 range, up from $3.46 reported in 2017. The company expects to repurchase $1.3 billion to $1.8 billion of its shares during fiscal 2018.
Friday, May 12, 2017 Apple®-AAPL announced Corning Incorporated will receive $200 million from Apple’s new Advanced Manufacturing Fund as part of the company’s commitment to foster innovation among American manufacturers. The investment will support Corning’s R&D, capital equipment needs and state-of-the-art glass processing. Corning's 65-year-old Harrodsburg facility has been integral to the 10-year collaboration between these two innovative companies and will be the focus of Apple’s investment. Apple has committed to investing at least $1 billion with US-based companies as part of the fund, which is designed to foster innovative production and highly skilled jobs that will help lay the foundation for a new era of technology-driven manufacturing in the US. In the US, Apple now supports 2 million jobs across all 50 states, including 450,000 jobs attributable to Apple’s spend and investment with US-based suppliers. Last year alone, Apple spent over $50 billion with more than 9,000 domestic suppliers and manufacturers.
Becton Dickinson-BDX announced exercise of option to purchase additional shares by underwriters of public equity offerings, increasing total gross proceeds to $4.95 billion. Becton Dickinson intends to use the proceeds from the offerings to finance a portion of the cash consideration payable in connection with the previously announced acquisition of C. R. Bard, Inc. The acquisition is expected to close in the fall of 2017.
Wednesday, May 10, 2017 Wabtec-WAB increased its regular quarterly dividend by 20 percent, to 12 cents per share from 10 cents per share. The new dividend rate will be payable initially Aug. 28, 2017 to shareholders of record Aug. 14, 2017. This is the seventh consecutive year Wabtec has increased its dividend.
Priceline-PCLN reported first quarter revenues rose 14% to $2.4 billion with net income and EPS up 22% year-over-year to $456 million and $9.11 respectively. First quarter gross travel bookings were $20.7 billion, an increase of 24% over a year ago (or approximately 27% on a constant currency basis.) Gross profit was $2.3 billion, a 16% increase from the prior year (or 17% on a constant currency basis.) International operations contributed gross profit in the first quarter of $2.0 billion, a 17% increase (or 19% on a constant currency basis.) Booking.com's total property count now stands at over 1.2 million, which represents a year-over-year increase of 36%. The Booking.com platform now includes approximately 640,000 instantly bookable vacation rental properties, which is a year-over-year growth rate of 51%. During the first quarter, room nights booked increased 27% to 173 million while rental car days grew 15% driven mainly by Rentalcars.com. Free cash flow increased 6% to $310 million in the first quarter with the company repurchasing $212 million of its own shares. Priceline ended the quarter with $5.4 billion of cash and short-term investments and $7.3 billion of long-term debt on its balance sheet. Management’s outlook for the second quarter is for a 16%-21% increase in the room nights booked, a 12%-17% increase in gross total bookings, a 14%-19% increase in gross profit and EPS in the range of $12.55 - $13.25 which, at the midpoint, is up by about 11% versus prior year.
Tuesday, May 9, 2017 The Walt Disney Company- DIS reported second fiscal quarter sales increased 3% to $13.3 billion with net income up 11% to $2.4 billion and EPS up 15%, on fewer shares outstanding, to $1.50. By segment, Media Networks sales increased 3% to $5.9 billion and operating income dipped 3% to $2.2 billion. The decrease in operating income was due to higher NBA programming costs, partially offset by advertising revenue growth thanks to higher rates that were partially offset by a decline in subscribers. Management continues to work through disruption caused by the shift from tradition cable platforms to mobile digital platforms. Given the strong demand for live sports, Disney’s iconic brands and management’s embrace of change in the rapidly evolving media landscape, Robert Iger, Chairman and CEO, remains confident that no other company is better positioned to benefit from the disruption in the media marketplace. Disney continues to invest in digital technology including BAMTECH, a direct-to-consumer livestream platform that will provide consumers with flexible subscription options with a broad array of live sporting events. Parks and Resorts revenues increased 9% to $4.3 billion with segment operating income increasing a magical 20% to $750 million. Operating income increased on the heels of growth at Disney’s domestic parks and resorts and last year’s third quarter opening of Shanghai Disney Resort, which expects to soon welcome its 10 millionth guest. Studio Entertainment revenues dipped 1% to $2 billion and segment operating income increased 21% to $656 million. Consumer Products & Interactive Media declined 11% to $1.1 billion and segment operating income increased 3% to $367 million. During the quarter, Disney generated $2.6 billion in free cash flow, up 7% year-over-year. The company ended the quarter with about $8 billion in cash and investments and $17 billion in long-term debt, which represented about 36% of shareholders’ equity. During the quarter, Disney repurchased 18.6 million shares for $2 billion. The company now expects to repurchase $9 billion to $10 billion of its shares during 2017. Looking ahead, management expects modest growth for this fiscal year with robust growth returning in fiscal 2018.
Berkshire Hathaway-BRKB reported the company’s net worth during the first quarter of 2017 increased by 3.5% with book value equal to $178,073 per Class A share as of 3/31/17. The $9.9 billion increase in shareholders’ equity was due to the company’s $4.1 billion in net earnings and approximately $5.8 billion of gains in other comprehensive income primarily related to changes in unrealized investment appreciation.
Berkshire’s major investment holdings had mixed results since 12-31-16. Wells Fargo’s stock rose a scant 0.7% to $27.8 billion. Apple became the apple of Buffett’s eye as the position size more than doubled since year end to $19.2 billion through appreciation and additional purchases. Since year end, American Express rose 7% to $12 billion and Coca-Cola’s stock popped 2% to $17 billion. On the other hand, IBM dropped 17% to $11.2 billion as Buffett shed a third of his IBM shares.
Berkshire’s first quarter operating revenues rose 26% to $64.5 billion, reflecting in part the $10.2 billion in cash premiums received in connection with the retroactive reinsurance agreement with AIG during the quarter. Excluding the premium, operating revenues rose 6% during the quarter. Net income declined 27% during the quarter to $4.1 billion, reflecting the decline in investment and derivative gains to $504 million compared to the prior year gains of $1.9 billion related to the P&G and Duracell transaction. Operating earnings (excluding investment and derivative gains/losses) declined 5% during the first quarter to $3.6 billion, due primarily to weakness in the insurance businesses.
Berkshire’s insurance underwriting operations generated a $267 million loss during the first quarter compared to a $213 million profit in the prior year period. Increased underwriting gains from GEICO and Berkshire Hathaway Primary Group were more than offset by underwriting losses from General Re and Berkshire Hathaway Reinsurance Group due to increased loss estimates for prior years’ loss events, higher losses from current year catastrophe events and increased deferred charge amortization related to the reinsurance businesses. Insurance investment income was relatively unchanged at $908 million during the quarter. The float of the insurance operations approximated $105 billion as of 3/31/17, an increase of $14 billion since yearend 2016 related in large part to the AIG deal.
Burlington Northern Santa Fe’s (BNSF) revenues rose 9% during the first quarter to $5.2 billion with net earnings chugging 7% higher to $838 million, reflecting a 3% comparative increase in average revenue per car/unit and a 6% increase in volume to 2.5 million cars/units driven by a rebound in freight revenue growth from coal and broad-based growth from consumer products, industrial products and agricultural products thanks to improving economic conditions.
Berkshire Hathaway Energy reported revenues increased 3% to $4.3 billion during the first quarter with net earnings charging 14% higher to $501 million due to improvements at most of the utilities as well as a lower tax rate.
Berkshire’s manufacturing businesses reported a 15% increase in revenue growth in the quarter to $12.1 billion with operating earnings relatively flat at $1.5 billion. The revenue increase reflected in part the acquisitions of Precision Castparts and Duracell. Operating earnings included a pre-tax loss of $184 million in connection with the disposition of an underperforming business acquired by Lubrizol. Excluding this loss, pre-tax earnings for the manufacturing businesses increased 13% during the quarter.
Service and Retailing revenues rose 3% during the quarter to $18.2 billion with pre-tax earnings up 5% to $481 million. Service revenues rose 11% to $2.6 billion with operating earnings soaring 16% to $260 million primarily due to improvements at NetJets and volume increases at most of TTI’s operations. Retailing revenues declined 2% during the quarter to $3.5 billion with operating earnings up 34% to $133 million. The revenue decrease reflected a decline in revenues at Berkshire Hathaway Automotive (BHA) due to lower vehicle units sold and the timing of the Easter shift at See’s Candies. The increase in earnings was due to lower operating expenses at BHA and Nebraska Furniture Mart. McLane’s revenues rose 3% during the quarter to $12. 1 billion due to a 4% increase in grocery sales. Operating earnings declined 35% to $88 million due to pricing pressures in an increasingly competitive business environment.
Finance and Financial Products revenues rose 8% during the quarter to $1.9 billion with net income declining 3% to $303 million. The revenue increase was due to a 31% increase in home sales at Clayton Homes, reflecting a 20% increase in unit sales and higher average prices. Earnings were negatively impacted by the transportation and equipment leasing business due to lower railcar sales, lower railcar and trailer fleet utilization rates and lower volume and demand for cranes and other products and services.
Berkshire’s balance sheet continues to reflect significant liquidity and a strong capital base of $293 billion as of 3/31/17. Excluding utility and finance investments, Berkshire ended the quarter with $266.4 billion in investments allocated approximately 50.1% to equities ($133.4 billion), 8.6% to fixed-income investments ($22.9 billion), 5.7% to other investments, including preferred stocks in Bank of America and Restaurant Brands International ($15.3 billion), 5.8% to Kraft Heinz ($15.4 billion, with a fair value of $29.6 billion as of 3-31-17), and 29.8% in cash ($79.4 billion).
Berkshire’s financial strength allows Buffett to make significant investments and acquisitions. Apple has been the biggest new recent investment now worth about $19 billion with Buffett admitting his trigger finger is itchy after no substantial business acquisitions in 15 months. With total cash at Berkshire approximating $100 billion and earning next to nothing, Buffett spoke of paying dividends if attractive investment opportunities do not appear over the next three years.
Free cash flow more than doubled during the first quarter to $16 billion, due primarily to the big boost to float from the AIG deal. During the first quarter, capital expenditures declined 17% to approximately $2.4 billion, including $865 million by Berkshire Hathaway Energy and $674 million by BNSF. Berkshire Hathaway forecasts aggregate capital expenditures of about $6.5 billion over the balance of 2017 for these two businesses. During the first quarter of 2017, Berkshire purchased a net $11.3 billion in Treasury Bills and fixed-income investments and purchased a net $7.1 billion of equity securities, including the purchase of Apple and reflecting the sale of IBM shares. There were no share repurchases of Berkshire Hathaway stock.
Berkshire Hathaway’s stock appears fairly valued, currently trading at $246,589 per A share and $164 per B share. Based on current business fundamentals, we expect Berkshire’s A shares to trade between $196,000-$252,000 per share and the B shares to trade between $131-$168 per share. Hold.
FactSet-FDS announced that its Board of Directors approved a 12% increase in the regular quarterly cash dividend from $0.50 per share to $0.56 per share. The $0.06 per share increase marks the twelfth consecutive year the Company has increased dividends, highlighting its continued commitment to returning value to its shareholders. The cash dividend will be paid on June 20, 2017 to holders of record of FactSet-FDS announced that its Board of Directors approved a 12% increase in the regular quarterly cash dividend from $0.50 per share to $0.56 per share. The $0.06 per share increase marks the twelfth consecutive year the Company has increased dividends, highlighting its continued commitment to returning value to its shareholders. The cash dividend will be paid on June 20, 2017 to holders of record of FactSet’s common stock at the close of business on May 31, 2017.
Friday, May 5, 2017 Cognizant Technology Solutions-CTSH reported first quarter revenues rose 11% to $3.5 billion with net income up 26% to $557 million and EPS up 28% to $.92. These solid results reflected the company’s accelerating shift to digital services and solutions to create value for clients and shareholders with non-GAAP operating margins expected to expand to 22% in 2019 from 18.9% in the first quarter of 2017 due to the higher-margin digital business and improved operational efficiencies. Growth was broad-based both in business segments and by geographies. All business segments with the exception of Financial Services generated double-digit growth in the quarter as did all geographies with the exception of the U.K. Consulting and technology services represented 58% of total sales and rose 10.6% in the quarter with outsourcing revenues, representing 42% of total sales, rising 10.9% in the quarter. As the company is realigning its business, it is slowing hiring with net new employees of 1,000 added during the quarter to end the quarter with 261,200 total employees. Attrition was 14.7% during the quarter with onsite utilization of 91%. Free cash flow rose significantly during the quarter to $161 million thanks to the higher earnings and favorable working capital changes. The company spent $1.5 billion on an accelerated share repurchase program during the quarter and also announced its initial quarterly dividend of $.15 per share to be paid on May 31, 2017. Even after the hefty share buyback, Cognizant ended the quarter with a strong balance sheet with $4.3 billion in cash and investments and $772 million in long-term debt. For the full year, Cognizant expects revenue to be in the range of $14.56 billion to $14.84 billion with non-GAAP EPS expected to be at least $3.64.
Fluor-FLR reported first quarter results with revenues up 9% to $4.8 billion and net income and EPS each falling 41% to $61 million and $.43, respectively. The primary reasons for the decline in results is the progression of current projects from higher margin engineering activities to lower margin construction activities, foreign exchange expenses based on the strengthening of the Mexican peso and a pre-tax charge of approximately $30 million for unanticipated cost increases on projects in the Industrial, Infrastructure & Power segment. New awards for the quarter were $2.3 billion, including $817 million in Energy, Chemicals and Mining, $777 million in Industrial, Infrastructure & Power, $546 million in Diversified Services (previously Maintenance, Modification & Asset Integrity) and $173 million in Government. Consolidated ending backlog decreased 10% to $41.6 billion as of quarter end and reflected an adjustment to the Magnox RSRL which will now end in August 2019. During the quarter, the company generated $270 million in cash from operating activities and $203 million in free cash flow with Fluor ending the quarter with $2.2 billion in cash and $1.5 billion in long-term debt. Fluor paid $30 million in dividends during the quarter. The lowest commodity prices in recent history and unprecedented contraction in customer spending has impacted Fluor’s operations. Market conditions and company operations are expected to improve in the second half of 2017 and beyond. As a result of the lower than expected first quarter results and risks around the pace of new awards, Fluor lowered their EPS guidance for 2017 to a range of $2.25 to $2.75 from the previous range of $2.75-$3.25.
Thursday, May 4, 2017 Maximus-MMS reported second quarter revenue grew 3% to $622 million driven by 6% growth in the Health Services Segment to $349 million. On a constant currency basis, revenue would have increased 4% with most of the growth being organic. The company’s net income rose 8% during the quarter to $52.5 million with EPS up 8% to $.80 driven by favorable results on several volume-based contracts in both the U.S. Federal Services and Health Services segments. Second quarter 2016 included out-of-period revenue and pre-tax income of $15.2M ($0.16 of diluted EPS) related to two contracts in the Health Services Segment. Excluding these items from Q2 FY16, year-over year revenue would have grown 5% and diluted EPS would have grown 38%. During the second quarter of fiscal 2017, Maximus generated strong cash flows from operations of $65.7 million and free cash flow of $60.5 million. During the first two quarters of FY17, the company paid $5.8 million in dividends and repurchased $5.9 million of common stock. The company has $109 million remaining authorized for future share repurchases. Year-to-date signed contract awards at 3/31/17 totaled $1.5 billion and includes a three-year contract extension with the State of New York. New contracts pending (awarded but unsigned) totaled $155.1 million. The sales pipeline at 3/31/17 was $3.3 billion, comprised of approximately $.6 billion in proposals pending, $.9 billion in proposals in preparations and $1.9 billion in opportunities tracking. Maximus reiterated its 2017 revenue guidance of $2.425 billion to $2.475 billion and narrowed EPS guidance from $2.90 to $3.10 to $3.00 to $3.10. The company is also reiterating free cash flow guidance in the range of $170 million to $220 million, representing 27% to 64% growth in free cash flow over last year.
Bioverativ-BIVV reported healthy first quarter revenue growth of 35% to $259 million with net income up 4% to $69.3 million and EPS up 3% to $.62. The revenue growth was driven by strong ongoing performance from the hemophilia portfolio as an increasing number of patients are treated with the company’s therapies across each of their geographies. Cash flow from operations more than doubled during the first quarter to $108 million. Bioverativ’s strong financial position with no long-term debt and more than $358 million in cash as of quarter end provides the company with the ability to invest in innovation while remaining focused on maximizing shareholder value. Management’s outlook for fiscal 2017 is for 17% to 19% revenue growth and non-GAAP operating margins in the range of 43% to 47%. After a strong start to the year, Bioverativ’s priorities are to maximize ELOCTATE AND ALPROLIX SALES, advance its new product pipeline and pursue strategic merger and acquisition opportunities to build a successful rare disease company.
Apple-AAPL announced it is launching a $1 billion investment fund to grow advanced manufacturing in the United States. “If we can create many manufacturing jobs ... [they] create more jobs around them because you have a service industry that builds up around them,” Tim Cook, Apple’s CEO, said in a CNBC interview.
Fluor-FLR announced that the Fluor-led joint venture comprised of Fluor and Balfour Beatty Infrastructure, Inc., was selected by the Texas Department of Transportation (TxDOT) as the design-build and capital maintenance team for the estimated $625 million Southern Gateway reconstruction and improvement project located along Interstate I-35E and U.S. 67 in Dallas. Fluor will book its share of the contract value into backlog in the second quarter of 2017.
Fastenal-FAST reported April sales rose 3.7% to $343.8 million with average daily sales up 8.9% to $17,188. Daily sales growth by end market was 7.1% in manufacturing and 6.6% in non-residential construction. Daily sales growth by product line was 6% for fasteners and 10.7% for other items. Fastenal has opened 7 new locations year-to-date and ended April with a total store count of 2,482. Total personnel declined 3% to 19,883.
Wednesday, May 3, 2017 The Cheesecake Factory-CAKE reported first quarter revenue rose 2% to $563 million with net income up 3% to $35 million and EPS up 4% to $.71. Comparable store sales increased .3% and reflected the 29th consecutive quarter of positive comparable sales, again outperforming the casual dining industry. The comps moderated during the quarter due to weather and the shift in the Easter holiday. While pricing was up 2.4% during the quarter, traffic declined 2.3% as many patios had to be closed due to weather. The company opened its first Hong Kong location under a licensing agreement to greater than expected demand. The Cheesecake Factory also plans its first location in Canada with a company-owned store planned for Toronto later this year. The company expects to open as many as eight company-owned restaurants in fiscal 2017 and four to five restaurants under licensing agreements internationally. Capital expenditures should range between $125 million to $140 million for the full year. Free cash flow was $29 million in the first quarter with the company repurchasing 150,000 shares at a cost of $9.3 million at an average price of $62 per share. Management plans to continue to return free cash flow to shareholders through dividends and share repurchases with $100 million in share repurchases earmarked for fiscal 2017. Due to the weak consumer environment with first quarter GDP at just .7% in a low-growth environment, the company expects a modest tempering of revenue growth with comparable store sales now expected in the .5% to 1.5% range for the full fiscal 2017 year with EPS in the range of $2.93 to $3.02.
Automatic Data Processing-ADP reported fiscal third quarter revenues rose 5% to $3.4 billion with net income up 10% to $587.9 million and EPS up 12% to $1.31, which included tax benefits and a lower share count due to share repurchases. Operating earnings increased 4% as operating margin declined 20 basis points during the quarter to 24.6% driven by slower revenue growth and investments in product, sales and services. Management was disappointed in a 7% decline in new business bookings during the quarter as well as Employer Services client revenue retention which declined 170 basis points compared to last year. The decline in client retention was due in part to ADP migrating customers from legacy platforms to upgraded platforms with some customers electing to forgo the upgrade and move elsewhere to take the business back in-house. New business bookings have been on pause given the political uncertainty around many of the services ADP provides especially as related to the Affordable Care Act. ADP now assumes worldwide new business bookings will decrease 5% to 7% compared to the prior forecast of flat new business bookings for the year. Interest on funds held for clients increased 9% to $112 million during the quarter as average client fund balances increased 2% to $27.3 billion and the average interest yield on client funds increased 10 basis points to 1.6%. Free cash flow increased 35% during the first nine months to $1.5 billion with the company paying $739 million in dividends and repurchasing $957 million of its shares, including 1.9 million shares for $191 million in the latest quarter at an average price of $100.52 per share. Despite a very challenging quarter, management reaffirmed its guidance for the full fiscal 2017 year with revenues expected to grow 6% and adjusted EPS growth of 13% to 14% with 50 basis points of adjusted operating margin expansion. ADP continues to expect to repurchase $1.2 to $1.4 billion of its own shares for the full fiscal year funded by existing cash.
Tuesday, May 2, 2017 Apple-AAPL reported second quarter revenues rose 4.6% to $52.9 billion with net income up 4.9% to $11 billion and EPS up 10.5% to $2.10. International sales accounted for 65% of the quarter’s revenue. Revenue growth accelerated from the December quarter due to continued robust demand for iPhone 7 Plus. iPhone revenues rose 1% to $33.2 billion with unit growth dipping 1% as the average selling price increased 2% to $655. iPad sales declined 12% during the quarter to $3.9 billion on a 13% decline in unit volume although these results were better than management expected. The iPad resumed growth in the U.S. during the quarter and maintains an 81% market share for tablets costing more than $200. Mac sales increased 14% to $5.8 billion on unit growth of 4% compared to flat growth in the PC market as the Mac gained market share. Services increased 18% during the quarter to $7 billion with the Services unit on its way to becoming the size of a Fortune 100 company. Apple has 165 million subscribers to its various Services with a 15 million pickup in subscribers since December with 40% growth in the App Store. Other products, including the Apple TV, Apple Watch, Beats, iPods and AirPods, grew revenues 31% during the quarter to $2.9 billion with Apple Watch sales doubling. Free cash flow was relatively flat for the first half of the year at $33 billion. Apple paid $6.1 billion in dividends in the first half and repurchased $18 billion of its own shares, ending the quarter with more than $256 billion in cash and investments and $84.5 billion of long-term debt on its strong balance sheet. Given the strength of the business and management’s confidence in the future, Apple announced another $50 billion increase in their capital return program as management’s goal is to return free cash flow to shareholders. The Board increased the share repurchase authorization to $210 billion from $175 billion. The Board also approved a 10.5% increase in the dividend, making Apple one of the largest dividend payers in the world. From the inception of its capital return program in August 2012, Apple has returned over $211 billion to shareholders, including $151 billion in share repurchases. In the next four quarters, Apple expects to return $89 billion to shareholders, representing about 12% of the company’s current market capitalization. About 93% of Apple’s massive cash stash is held outside the U.S. If Apple could repatriate its cash at a lower tax rate through potential tax reform, they would reassess their capital return program For fiscal 2017, Apple expects revenues between $43.5 billion and $45.5 billion with a gross margin between 37.5% and 38.5%, operating expenses between $6.6 billion and $6.7 billion and other income of $450 million with a tax rate of 25.5%. (On a separate matter, Apple acknowledged that it was withholding royalty payments to Qualcomm-QCOM under their ongoing litigation until the court decides a reasonable royalty rate or the companies come to a settlement. )
Mastercard-MA reported first quarter revenues charged up 12% to $2.7 billion with net income increasing 14% to $1.1 billion and EPS up 16% to $1.00. First quarter worldwide Gross Dollar Volume (GVD) increased 5% to 1.2 trillion, reflecting 2% growth in the U.S. and 6%, or 11% in local currency, growth outside the U.S. During the quarter, Mastercard saw a modest pickup in global growth, although uncertainty about the direction of trade policies remains a concern. U.S. consumer and business confidence remained strong during the quarter. With the rising U.S. employment, wages are beginning to increase and retail spend, excluding autos, increased nearly 4% year-over-year. Brazil is showing signs of rebounding from its two-year recession and unemployment in Europe closed in on a nine-year low during the quarter. Germany’s economy remained solid while rising inflation and some uncertainty surrounding the impact of the Brexit negotiations weighed on growth in the U.K., Italy and France. Despite some ongoing uncertainty in China, economic indicators show high consumer and business confidence with moderate growth. India’s growth continues to be strong, and Mastercard is working with the government to support electronic payments as part of the country’s demonetization efforts. Meanwhile, Mastercard continues to drive double-digit volume and transaction growth across most markets. Cross-border volume—transactions where the merchant’s country differs from the cardholder’s country—increased a solid 13% while switched transactions (authorization, clearing and settlement) rose 17% globally to 14.7 billion, with strong double-digit growth in all regions except the U.S. Globally, there are 2.4 billion Mastercard-branded cards. During the quarter, Mastercard generated $681 million in free cash flow, down 33% year-over-year, on changes in working capital needs and higher capital expenditures. Mastercard completed two acquisitions, VocaLink and NuData Security, with the goal of expanding into new payment flows and enhancing its safety and security offerings. Looking ahead to the full year, Mastercard expects net revenue to increase at a low-double-digit rate on a currency-neutral basis with operating expenses to grow in the high-single-digits including higher expenditures to support the rollout of Masterpass and other innovations.
Cisco-CSCO announced its intent to acquire Viptela Inc., a privately held software-defined wide area network (SD-WAN) company based in San Jose. Viptela will expand Cisco's SD-WAN portfolio with increased functionality and simplicity delivered through the cloud. Cisco will acquire Viptela for $610 million in cash and assumed equity awards. The acquisition is expected to close in the second half of calendar 2017.
Becton Dickinson-BDX reported second quarter revenues declined 3% to $3 billion with net income up 2% to $344 million and EPS up 1% to $1.58. The revenue decline reflected the divestiture of the Respiratory Solutions business. On a comparable, currency-neutral basis, revenue grew 5% during the quarter and adjusted currency-neutral EPS grew 13%. The company reported underlying operating margin expansion of 180 basis points during the quarter on its way to expected 200-225 operating margin expansion for the full year due to operational efficiencies and manufacturing synergies. The BD Medical segment reported revenues of $2 billion reflecting strong performance in the Medication and Procedural Solutions and Medication Management Solutions units. The BD Life Sciences unit increased revenues 5% to $982 million reflecting strong performance in the Diagnostics Systems and Preanalytical Systems units. On a geographic basis, U.S. revenues were $1.6 billion with revenues outside the U.S. of $1.3 billion. Revenues in China grew 12% and revenues in emerging markets grew 9%. With the pending acquisition of C.R. Bard which is expected to close in the Fall of 2017, the combined company will have revenues approximating $16 billion and a presence in almost every country around the world. Despite a change in accounting for a business unit which will curtail EPS by $.20-$.25, management reaffirmed its guidance for the full fiscal 2017 year with reported revenues expected to decline 3.5% to 4% due to the divestiture. Excluding the divestiture, currency-neutral revenue should increase 4.5% to 5% for the year. Fiscal 2017 reported EPS should be between $7.73 and $7.83, representing growth of approximately 72% to 74%, while on a currency-neutral basis, adjusted EPS should be between $9.35 to $9.45, representing growth of approximately 9% to 10% over last year’s adjusted EPS. Free cash flow should approximate $2 billion for fiscal 2017 with the company using most of the cash to pay down debt related to the acquisition of CareFusion. Over the last two years, $3.5 billion of the CareFusion debt has been repaid.
Baxter International-BAX announced that its Board of Directors has declared a 23 percent increase in the company’s quarterly dividend rate, from the previous rate of $0.13 per Baxter common share to $0.16 per share. The dividend is payable on July 3, 2017 to stockholders of record as of June 2, 2017. “Baxter is pleased to raise our quarterly dividend rate, which reflects the company’s strong financial performance and commitment to enhancing shareholder value,” said José (Joe) E. Almeida, chairman and chief executive officer. “This new rate aligns with our disciplined approach to capital allocation, as we strategically balance reinvestment in the business to drive sustainable growth along with returning value to our shareholders.”
Friday, April 28, 2017 Qualcomm-QCOM announced that it has been informed by Apple-AAPL that Apple is withholding payments to its contract manufacturers for the royalties those contract manufacturers owe under their licenses with Qualcomm for sales during the quarter ended March 31, 2017. Apple has indicated it will continue this behavior until its dispute with Qualcomm is resolved. As a result of the above developments, Qualcomm updated financial guidance for the third quarter of fiscal 2017 to exclude royalty revenues from Apple's contract manufacturers. The contract manufacturers may make some form of partial payment, but initial indications are that any payment would likely be insignificant. As a result of these actions, the company is adjusting financial guidance to assume that no payment is made, and therefore no revenues are recognized, in the quarter. Current guidance is for third quarter revenues to declined 7% to 21% with EPS expected to decline 36% to 46% to a range of $.52-$.62.
Microsoft-MSFT reported fiscal third quarter revenues rose 8% to $22.1 billion with net income up 28% to $4.8 billion and EPS 30% higher to $.61. On an adjusted constant-currency basis, revenue rose 7% with net income up 16% and EPS up 19%. Revenue in Productivity and Business Processes grew 22% (up 23% constant currency) to $8 billion driven by Office 365 commercial revenue growth of 45% as Office 365 consumer subscribers increased to 26.2 million. The LinkedIn acquisition contributed $975 million. Revenue in Intelligent Cloud grew 11% (12% in constant currency) to $6.8 billion with Azure revenue up 93%. Revenue in More Personal Computing declined 7% (down 7% in constant currency) to $8.8 billion Surface revenue decreased 26% and Windows commercial products and cloud services revenue grew 6%. Gaming revenue increased 4% with more than 50 million active users. The company generated $9 billion in free cash flow, up 11% year over year, with the company ending the quarter with $126 billion in cash and investments and $76 billion in long-term debt. Year-to-date, the company repurchased $10 billion of stock and paid $8.8 billion in dividends. The third quarter results showed continued demand for Microsoft’s cloud-based services with commercial cloud annualized revenue running at a rate exceeding $15 billion with the company on track to achieve $20 billion in cloud revenues in fiscal 2018.
Thursday, April 27, 2017 Starbucks-SBUX reported second quarter revenues rose 6% to $5.3 billion with net income up 14% to $652.8 million and EPS up 15% to $.45. Global comparable store sales increased 3% with U.S. comp store sales up 3% comprised of a 4% increase in average ticket and a 2% decrease in transactions. China comp store sales increased 7% driven by a 6% increase in transactions. On the negative side, the decline in mall traffic is impacting mall-based Teavana stores which have seen growing declines in sales. The company’s operating margin expanded 40 basis points to a second quarter record 17.7% primarily due to sales leverage. The company repurchased 11.3 million of its shares in the second quarter for $600 million at an average price of approximately $53.10 per share with 99 million shares remaining authorized for future share repurchases. Active membership in Starbucks Rewards grew 11% year over year to 13.3 million members. Starbucks Rewards represented 36% of U.S. company-operated sales in the quarter with Mobile Payment reaching 29% of transactions and Mobile Order and Pay growing to 8% of transactions. Total stores reached 26,161 in 75 countries globally, with the opening of 427 net new stores during the quarter. U.S. business accelerated sequentially during the quarter, culminating with a 4% U.S. comp in March with further acceleration seen in April. Management is highly confident that the company will deliver mid-single digit comps for the full fiscal 2017 year. The company is making investments to increase throughput and capacity in its stores with accelerating momentum in beverage, food and technology innovation which will be introduced in the months ahead. Starbucks Roasteries are under construction in key cities around the world which will further elevate the company’s strong global brand. By fiscal 2021, the company plans to open 12,000 new stores globally and 3,400 net new stores in the U.S. Management maintained their long-term guidance for 10% annual growth in sales and 15%-20% growth in EPS. However, given short-term issues, Starbucks lowered their fiscal revenue growth outlook to the low end of their previously forecasted +8-10% growth range, excluding an extra week and foreign exchange, and lowered their forecasted fiscal 2017 EPS range to $2.08-2.12 from $2.12-2.14.
Alphabet-GOOGL reported first quarter revenues rose 22% to $25 billion with net income up 29% to $5.4 billion and EPS up 28% to $7.73. On a geographic basis, revenues clicked up 25% in the U.S. to $11.8 billion, EMEA revenues rose 13% to $8.1 billion, APAC revenues gained 26% to $3.6 billion and Other Americas revenues increased 34% to $1.3 billion. Google segment revenues rose 22% to $24.5 billion with operating income up 22% to $7.6 billion during the quarter. Google advertising revenues increased 19% to $21 billion. During the quarter, Google expanded safeguards for ad placement by broadening the definition of inappropriate content and adding controls for advertisers including the deployment of machine learning to identify extreme content. Aggregate paid clicks jumped 44% during the quarter with aggregate cost-per-click down 19% due to explosion in mobile. Traffic acquisition costs (TAC) increased 22% to $4.6 billion and represented 22% of Google’s advertising revenue. Other Bets revenues rose 48% to $244 million with the operating loss expanding to $855 million from $774 million last year. In the Other Bets segment, Waymo, Alphabet’s standalone driverless car unit, embarked on an early rider program where applicants accepted into the program summon a Waymo driverless car via an app to go wherever they want in the Phoenix metropolitan area at any hour. The free program will allow Alphabet to collect reams of data about how driverless cars will be used in practice. Nest, high-speed Internet provider Google Fiber and Verily, the life sciences start-up, also contributed to Other Bets results. Operating cash flow increased 25% from last year’s first quarter to $9.5 billion. Google’s capital expenditures increased 18% year-over-year to $2.4 billion as the company continued its investment in the Google cloud and machine learning. Other Bets capital expenditures declined to $170 million, down from $277 million last year, as management paced Other Bets investments based on milestones obtained. Free cash flow increased 35% to $7 billion with the company repurchasing $1.1 billion of its own shares during the quarter. Alphabet ended the quarter with $92 billion in cash and marketable securities on its fortress balance sheet. Cash held overseas accounted for about 60% of Alphabet’s total cash hoard.
AbbVie-ABBV reported a healthy 10% increase in first quarter sales to $6.5 billion with net income increasing 26% to $1.7 billion and EPS increasing 28% to $1.06. Excluding amortizations and other specified items, adjusted EPS increased 11% year-over-year to $1.28. Global HUMIRA sales, which accounted for about 63% of total sales during the quarter, increased 15% to $4 billion. Domestic HUMIRA sales grew 23% to $2.7 billion on a 12% volume increase. Despite the presence of biosimilar completion in Europe, international HUMIRA sales grew 3% to $1.4 billion. Global sales of IMBRUVICA, AbbVie’s treatment for blood cancer, increased 45% to $551 million. During the quarter, AbbVie continued its strong commercial execution and made significant pipeline progress. Highlights include the submission of a supplemental New Drug Application for IMBRUVICA in chronic graft-versus-host-disease, the first therapy specifically approved to treat this condition. IMBRUVICA was approved to treat marginal zone lymphoma, marking the fifth unique type of blood cancer indication for the drug. In women’s health, the company successfully completed Phase 2 trials demonstrating the efficacy of elagolix, AbbVie’s drug to treat uterine fibroids. The FDA accepted AbbVie’s New Drug Application and granted priority review for the company’s next generation drug to treat hepatitis C virus, a once daily treatment shown to be effective in curing even the most difficult to treat strains of the virus in 8 weeks. The company also announced the start of two Phase 2 trials to evaluate a drug to treat early Alzheimer’s disease and PSP. In addition, AbbVie expects to report on dozen pivotal late-stage trials during 2017 in addition to announcing several regulatory submissions and approvals. Talk of tax reform has been “incredibly encouraging” for AbbVie’s leadership team as reform will improve the company’s global competitive position. Access to overseas cash will encourage companies like AbbVie that have considerable offshore cash to invest in the U.S. and create U.S. jobs. HUMIRA generates tremendous, sustainable cash flow, which exceeds cash needed to reinvest in the business. Once there is clarity about the specifics of tax reform, AbbVie will assess the best way to reward shareholders for the incredible success of HUMIRA. Management confirmed its EPS guidance for the full-year 2017 of $4.55 to $4.65. Adjusted EPS are expected to increase nearly 14% at the guidance midpoint.
Johnson & Johnson-JNJ announced that its Board of Directors has declared a 5.0% increase in the quarterly dividend rate, from $0.80 per share to $0.84 per share. "In recognition of our 2016 results, strong financial position and confidence in the future of Johnson & Johnson, the Board has voted to increase the quarterly dividend for the 55th consecutive year," said Alex Gorsky, Chairman and Chief Executive Officer of the company. At the new rate, the indicated dividend on an annual basis is $3.36 per share compared to the previous rate of $3.20 per share.
Westwood Holdings-WHG reported first quarter revenue rose 12% to $32.6 million with net income up 72% to $6.1 million and EPS up 66% to $.73. The increase in revenues was related to higher average assets under management (AUM) which increased 5% from the prior year to end the quarter at $22.1 billion. Assets under advisement totaled $1.1 billion compared to $325 million in the prior year period. Non-U.S. clients reached a record 20% of AUM. Emerging Markets strategies outperformed their benchmarks with double-digit returns in the quarter. The new tax-efficient, high-conviction Select Equity strategy is off to a good start, outperforming its benchmark for the quarter. Free cash flow declined 41% during the quarter primarily due to fewer sales of investments. The company ended the quarter with a strong balance sheet with no long-term debt and more than $75 million in cash and investments or $8.48 per share in cash. The company paid out $6.5 million in dividends during the quarter, a 15% increase over the prior year, with the dividend currently yielding an attractive 4.6%.
UPS-UPS reported first quarter revenue increased 6% to $15.3 billion with net income up 2% to $1.2 billion and EPS up 4% to $1.32. The company delivered healthy growth across all three business segments, led by13% revenue growth in the Supply Chain & Freight business. Operating profit in the Supply Chain & Freight business jumped 22% and contributed to improved earnings along with strong underlying performance in the International segment and solid results in the Domestic segment. Total fuel expenses increased 43% during the quarter which dampened profit growth. UPS is heavily reinvesting in its business to support future growth with capital expenditures of $938 million during the first quarter. Management expects capital expenditures will approximate 5% to 6% of sales this year. During the quarter, the company paid dividends of $774 million, an increase of 6.4% over last year, with the company targeting a 50%-55% dividend payout ratio over the long term. UPS also repurchased 4.2 million shares during the quarter for $450 million at an average price of $107.14 per share. The company expects share repurchases will approximate $1 billion to $1.8 billion this year. UPS reaffirmed 2017 adjusted EPS guidance to be between $5.80-$6.10, which includes more than $400 million or $.30 per share of pre-tax currency headwinds. Management noted that the U.S. economic outlook has improved with economic growth expected to increase slightly for the balance of the year. Consumer confidence is at a 15-year high and the labor market is tightening. Global growth is showing positive momentum with trade accelerating. Export growth is at the highest level since 2010 with UPS growing market share around the world. Management believes the proposed corporate tax reform which would lower corporate tax rates to 15% would be “very, very positive” for UPS, which has an effective tax rate of 35% currently. Lower corporate tax rates would help American companies be more competitive and increase jobs.
Wednesday, April 26, 2017 F5 Networks-FFIV reported second fiscal quarter sales increased 7% to $518 million with net income up 24% to $93 million and EPS storming ahead 29% to $1.43 on fewer shares outstanding. Sales growth was powered by new product introductions and strong U.S. enterprise and service provider sales. Product revenue, which represented 47% of total sales, increased 7% year-over-year, up from 2% growth in the first quarter. Service revenue, representing 53% of total sales, also increased 7% during the quarter. By geography, the Americas (56% of total sales) increased 7%, while Europe, Middle East & Africa (EMEA) sales (24% of total sales) increased 4%, Asia-Pacific (15% of total sales) increased 16% while Japan (5% of total sales) dipped slightly. Enterprise customers accounted for 65% of sales during the quarter while service providers accounted for 22% and government customers accounted for 13%, including 4% from the U.S. Federal government. Four distributors accounted for more than 10% of F5 Networks’ sales during the quarter. During the quarter, the company generated $175.3 million in cash flow from operations and $165.7 million in free cash flow, representing 178% of reported net income, swollen by $84 million in deferred revenue booked during the quarter. During the second quarter, F5 Networks repurchased 1.1 million shares at an average price of $138.16 per share for a total of $150 million. F5 Networks ended the quarter with $1.2 billion in cash and investments on its weather-resistant balance sheet. Several new products scheduled to begin shipping in the current quarter are expected to drive product revenue growth during the third quarter. These products are designed to help customers deploy their applications across a variety of cloud environments. Products include Application Connector 1.0 for connecting public and private cloud application infrastructures, support for BIG-IP in the Google Public Cloud, and Container Connector and Application Services Proxy for microservices environments. Optimism surrounding the new product launches is tempered by ongoing uncertainty in the EMEA region. Therefore, management expects third fiscal quarter sales of $520 to $530 million, up 5.7% year-over-year at the midpoint, with EPS in the range of $1.47 to $1.50, up 15% at the midpoint.
United Technologies-UTX delivered solid first quarter results with global sales increasing 3% to $13.8 billion, net income from continuing operations growing 18% to $1.4 billion and EPS jumping 23% to $1.73. Excluding restructuring and other items, EPS increased 1%. Sales growth during the quarter was broad-based with all four business segments generating top line growth. Management was encouraged by signs of momentum in the global economy during the quarter with “really good strength in the U.S.” and recovery in Europe. Even in China, United Technologies saw good economic growth, although some of the markets UTX operates in continue to be challenged from a pricing standpoint. By business segment, Otis sales gained 3.3% to $2.8 billion, lifted by a 6% gain in service sales. New equipment orders at Otis were up 4% on a 30% increase in North America and Europe, partially offset by a 10% decline in orders from China. Climate, Controls and Security sales increased 4% to $3.9 billion on solid sales growth in commercial refrigeration and North American HVAC. New equipment orders were up 7%, the strongest quarterly growth since the fourth quarter of 2014. Pratt & Whitney sales rose 5% to $3.8 billion on strength in the commercial and military aftermarket. Aerospace Systems sales gained 3% to $3.6 billion, boosted by a 12% rise in the commercial aftermarket. During the quarter, United Technologies generated $993 million in operating cash flow and $668 million in free cash flow, representing 48% of net income. During the first quarter, the company invested $325 million in capital expenditures, up 30% from last year’s first quarter, as the company continues to focus on new materials and manufacturing processes. To that end, UTX launched a state-of-the-art digital accelerator during the quarter as part of a $300 million investment over several years, focused on leveraging software, analytics and the Internet of Things to drive enhanced customer experience, product innovation and productivity improvements. The company paid $505 million in dividends during the quarter and repurchased $930 million shares, well on its way to the $3.5 billion in repurchases planned for the full year. During the conference call, management reiterated its $1 billion to $2 billion placeholder for opportunistic M&A during 2017 and its outlook for the full year. Total 2017 sales are expected in the $57.5 billion to $59 billion range, up 1% to 3% on organic sales growth of 2% to 4%. Free cash flow is expected to be 90 to 100 percent of net income with adjusted EPS between $6.30 to $6.60.
- Rowe Price-TROW reported first quarter revenues rose 12% to $1.1 billion with net income up 26% to $377.2 million and EPS up 31% to $1.54. Excluding the impact of a $50 million insurance recovery, net income and EPS still grew at double-digit rates of 14% and 17%, respectively. Assets under management increased 13% year over year to $861.6 billion as of quarter end. The $50.8 billion increase in assets under management reflected a net $700 million in cash inflows and $50.1 billion in net market appreciation. The firm’s net cash flows continued to be impacted by clients reallocating to passive investments. T. Rowe Price remains debt-free with ample liquidity including cash and investment holdings of $2.2 billion and redeemable seed capital investments in sponsored investment portfolios of $1.3 billion. The company’s shares outstanding decreased since year end, as the firm spent $316.3 million to repurchase 4.6 million of its own shares (1.9% of outstanding shares) at an average price of $68.76 per share during the first quarter. The company provides a stalwart dividend yielding more than 3% based on current market prices. William J. Stromberg, the company's president and chief executive officer, commented: "Solid earnings expectations and strengthening global economic data helped U.S. stocks sustain their post-election rally and record tangible gains in the first quarter of 2017. Indexes did turn mixed in March, however, following the Federal Reserve's mid-month decision to raise short-term interest rates and concerns that the new administration's legislative agenda could face greater headwinds than previously believed.”
Baxter International-BAX reported first quarter revenue increased 4%, or 7% on an operational basis, to $2.5 billion with net income and EPS from continuing operations both down 92% to $273 million and $.50, respectively. On an adjusted basis, excluding special items related to business optimization and intangible asset amortization, EPS was $.58, representing a 61% increase over last year’s adjusted EPS, excluding the gain from the spinoff of Baxalta. Strong operational performance and a disciplined focus on cost management led to a solid start to 2017. Adjusted operating margin expanded 590 basis points to 16.4% during the quarter. Baxter has a robust product pipeline with 100+ product launches planned between 2016 and 2020. Free cash flow improved significantly during the quarter to $83 million reflecting effective working capital management and lower capital expenditures. Management expects free cash flow to exceed $1 billion for the full year. The company’s capital deployment policy is to reinvest in the business, target a 35% dividend payout, repurchase shares and make acquisitions that add value for shareholders. During the first quarter, Baxter repurchased 1 million shares for $50 million at an average price of $50 per share. The Claris Injectables acquisition is expected to close in the second half of 2017. Excluding the Claris acquisition, Baxter raised its financial outlook for 2017 with sales now expected to grow 1%-2% on a reported basis or 2%-3% on a constant currency basis with EPS, before special items, expected in the range of $2.20-$2.28, representing 12% to 16% growth over last year’s adjusted EPS.
Tuesday, April 25, 2017 Wabtec-WAB reported first quarter revenues rose 19% to $916 million with net income down 22% to $73.9 million and EPS down 25% to $.77. Higher sales in the Transit Group, due primarily to the Faiveley acquisition, offset lower sales in the Freight Group which were affected mainly by lower revenues from train control-related equipment and services and lower industry deliveries of new freight cars and locomotives. Earnings were negatively impacted by lower gross margins, higher operating expenses and significantly higher interest expense related to the debt taken on for the Faiveley acquisition. Management is focused on repaying the debt from its strong cash flow generation. At quarter end, the company had cash of $280 million and debt of $1.87 billion. Wabtec is also using its free cash flow to fund internal growth, make other strategic acquisitions and pay dividends and repurchase shares. During the first quarter, Wabtec acquired Aero Transportation Products, a manufacturer of hatch covers and outlet gates for freight cars with annual sales of $40 million. Subsequent to quarter end, Wabtec acquired Thermal Transfer, a maker of heat exchangers for industrial markets, with annual sales of about $25 million and Semvac, a European-based manufacturer of sanitation systems for transit vehicles with annual sales of about $15 million. During the quarter, the company announced a $97 million contract to provide signaling and communications services to TEX Rail, a new commuter rail line being developed by the Fort Worth Transportation Authority. The company ended the quarter with a record multi-year backlog of $4.1 billion with a book to bill ratio of one. The rolling 12-month backlog is $2 billion. Wabtec reaffirmed its 2017 financial guidance with revenues expected to be about $4.1 billion with adjusted EPS expected to be between $3.95 and $4.15, excluding restructuring and transaction expenses related to the Faiveley acquisition. This represents 6%-7% growth at the midpoint compared to last year’s adjusted earnings. Management expects quarterly results to improve sequentially as it continues to integrate the acquisitions.
Stryker-SYK reported a healthy 18% increase in first quarter sales to $2.96 billion with net earnings up 10% to $444 million and EPS up 9% to $1.17. Excluding the 10.6% impact of acquisitions, net sales in the quarter increased 8.2% in constant currency, including 9.2% from increased unit volume partially offset by 1% due to lower prices. First quarter results were well-balanced across geographies and business segments. U.S. sales increased 19% to $2.17 billion while sales outside the U.S. increased 17% to $789 million. By segment, MedSurg sales surged 36% to $1.3 billion, boosted by the Physio-Control and Sage Products acquisitions that contributed $245 million to Stryker’s sales during the quarter. Orthopaedics sales increased 7.4% to $1.3 billion on the heels of the full launch of Stryker’s Mako robotic knee replacement platform. During the quarter, 18 Mako robots were installed, including 11 in the U.S. Through forty training centers, two hundred surgeons have been trained to perform total knee replacements using the Mako platform. Management remains very optimistic about capturing significant total knee replacement market share with the Mako platform. Neurotechnology and Spine sales increased 7.3% to $515 million. Stryker ended the quarter with $3.3 billion in cash and $7.2 billion in long-term debt taken on to finance acquisitions. During the quarter, Stryker generated $151 million in operating cash flow and $12 million in free cash flow, down 42% from last year’s first quarter, squeezed by working capital needs and a 21% jump in capital expenditures to $139 million. During the quarter, Stryker paid $159 million in dividends and bought back $230 million shares, mainly to offset dilution. Stryker affirmed 2017 guidance with organic sales growth in the range of 5.5% - 6.5% and adjusted EPS in the range of $6.35 - $6.45.
Biogen-BIIB reported first quarter revenues grew 3% to $2.8 billion with net income down 23% to $748 million and EPS off 22% to $3.46, negatively impacted by the $263 million settlement and licensing agreement with Forward Pharma . On a non-GAAP basis, EPS was up 9% over the prior year to $5.20. The launch of SPINRAZA, Biogen’s treatment for spinal muscular atrophy, is off to a promising start with first quarter revenues of $47 million. Cash and marketable securities decreased 26% during the quarter to $5.7 billion, with long-term debt decreasing 8% to $6.0 billion. During the first quarter of 2017, Biogen repurchased approximately 2 million shares of stock for a total value of $584 million. Since the end of the quarter, the Company has repurchased an additional 2 million shares for a total value of $543 million. Biogen announced an agreement with Bristol-Myers Squibb to exclusively license BMS-986168, an experimental medicine with potential in Alzheimer’s disease and progressive supranuclear palsy (PSP), a rare condition that affects movement, speech, vision, and cognitive function. Biogen anticipates making an upfront payment of $300 million to Bristol-Myers Squibb in the second quarter of 2017 as well as a near-term $60 million milestone payment to the former stockholders of iPierian, Inc. These amounts exceed the estimated $100 million in business development expense assumed in Biogen’s previously announced 2017 full year financial guidance.
Polaris-PII reported that first quarter sales increased 17% to $1.15 billion with a net loss of $2.9 million or $0.05 per diluted share, compared with net income of $46.9 million, or $0.71 per diluted share, for the prior year. The reported net loss included costs related to the wind down of Victory Motorcycles and certain Transamerican Auto Parts (TAP) integration and inventory step up costs taken in the first quarter. Adjusted net income for the first quarter excluding these costs, was $48.3 million, or $0.75 per diluted share. Off-Road Vehicle and Snowmobile sales increased 2% during the quarter to $724.1 million in the face of ongoing softness in ORV retail sales in North American oil markets. Motorcycle sales decreased 35% in the first quarter to $120.3 million with Indian motorcycles up 11%, Slingshot sales constricted by the recall and Victory wind down. Global Adjacent Market sales increased 24% to $91.6 million due mainly to the Taylor-Dunn acquisition. Sales in the new Aftermarket segment was $217.8 million with $202 million from the TAP acquisition. On the lower earnings, free cash flow decreased to $12 million. During the first quarter, the company paid $36 million in dividends and retired 256 thousand shares for approximately $21.8 million at an average price of about $85.15 per share. The company has 7.2 million shares remaining authorized for repurchase. Management maintained their EPS guidance for 2017 in the range of $4.25-$4.50 with 2017 sales up in the range of 10% to 13%.
Express Scripts-ESRX reported first quarter revenue dipped .5% to $24.7 billion with net income up 3.8% to $546.3 million and EPS up 11.1% to $.90. Total adjusted claims processed declined 1% to 351.7 million with EBITDA per adjusted claim up 4% to $4.25. Free cash flow increased 42% in the first quarter to $1 billion with the company repurchasing $837 million of its own shares during the period. The overshadowing news of the quarter was management’s disclosure that Anthem, their largest client, has indicated that they will not renew their contract with Express Scripts when it expires in 2019. In 2016, Anthem contributed $17 billion, or 17%, to Express Scripts’ revenues as the company processed 219.6 million claims for Anthem, representing 16% of total claims processed. Anthem’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was 30% of total EBITDA in 2016. Ongoing litigation continues with Anthem. While the loss of its largest customer is material to the company’s operations, management believes the outlook for its core pharmacy benefit management business with a diverse client base of more than 65 million members and volume of more than one billion adjusted prescriptions annually positions the company for continued success over the long term. Excluding Anthem, Express Scripts is targeting 2% to 4% compounded annual EBITDA growth from 2017 through 2020, which should continue to generate significant cash flow from operations. Management’s goal is to use 30% of the cash flow to repay debt with the balance to be used to fund internal growth, make strategic acquisitions and for share repurchases. Express Scripts increased its guidance for 2017 adjusted EPS from a range of $6.82 to $7.02 to a range of $6.90 to $7.04, which represents growth of 9% over 2016 adjusted EPS at the midpoint. Cash flow from operations is expected in the range of $4.7 billion to $5.2 billion for 2017, which represents a cash flow yield of nearly 14% based on the company’s current market capitalization. Client retention in 2018 is expected in the range of 95%-98%, which includes Anthem.
3M-MMM posted global sales of $7.7 billion, up 4% year-on-year, with net earnings increasing 4% to $1.3 billion and EPS up 5% to $2.16. First quarter growth was broad-based across all geographies, led by 10% organic local currency growth in Asia Pacific. EMEA (Europe, Middle East and Africa) sales increased 4%, Latin America/Canada sales gained 2.3% and U.S. sales nudged ahead 1.4%. By business segment, organic local-currency sales growth was 11.5% in Electronics and Energy, 5.7% in Industrial, 4.8% in Safety and Graphics, 3.1% in Health Care, with a decline of 1.2% in Consumer as inventory levels continue to adjust in the wake of office supply industry consolidation. Operating income was $1.8 billion and operating income margins for the quarter were 23.1%, down 100 basis points from last year due to an incremental $136 million of strategic investments in growth, productivity and portfolio actions. During the first quarter, 3M generated operating cash flow of $1 billion and free cash flow of $701 million, which was down 26% from last year’s first quarter, primarily due to a higher U.S. pension contribution. 3M returned $1.4 billion to shareholders during the quarter which included a 6% increase in the annual dividend to $702 million, marking the 59th consecutive year of annual increases for 3M shareholders. During the last five years, 3M has doubled its per share dividend. Given the strong start to the year, 3M raised its guidance and now forecasts organic local-currency sales growth to be 2% to 5%, up from previous guidance of 1% to 3%. 3M expects earnings in the range of $8.70 to $9.05 per share--up 7% to 11% year-on-year--versus a prior expectation of $8.45 to $8.80. This includes a $0.05 to $0.10 benefit from the gain on the pending sale of Identity Management, net of various investments to drive growth and improve productivity. 3M expects the $850 million sale of Identity Management (estimated $205 million in annual sales) to close during the second quarter.
Monday, April 24, 2017 Canadian National Railway-CNI reported first quarter revenues rolled 8% higher to C$3.2 billion with net income chugging 12% higher to C$884 million and EPS climbing 16% higher to C$1.16. Thanks to strong demand, CNI delivered record first-quarter volumes, including a 14% increase in Western Canadian grain tonnage. Revenue growth was broad-based during the quarter as revenue increased 39% for coal, 16% for grain and fertilizers, 16% for metals and minerals, 10% for automotive, 7% for intermodal and 1% for petroleum and chemicals, while revenues declined 3% for forest products. Carloadings increased 9% to 1,386 thousand while rail freight revenue per carload decreased by 1%, but was up 1% on a constant currency basis.Revenue ton-miles (RTM), measuring the relative weight and distance rail freight transported by CNI, increased by 14%, but rail freight revenue per RTM decreased by 6% due to an increases in the average length of haul and foreign exchange headwinds. The company’s operating ratio increased .5% to 59.4% as operating expenses increased 9% during the quarter due in part to a 51% increase in fuel costs, volume-related costs and adverse winter conditions. Free cash flow increased 44% during the quarter to C$860 million due to higher income and lower capital expenditures compared to the prior year period. CNI paid C$313 million in dividends, a 10% increase over the prior year, and repurchased C$499 million of its shares during the quarter as part of a C$2 billion buyback program. Given the solid start to the year, management raised their outlook for the full year of 2017 with adjusted EPS now expected in the range of C$4.95 to C$5.10, representing 8% to 11% growth over last year’s adjusted EPS. CNI also increased its capital expenditure program by C$100 million to C$2.6 billion to go towards the purchase of 22 high-horsepower locomotives and other projects to support growth.
Becton, Dickinson and Company-BDX announced an agreement to acquire C. R. Bard, a medical technology leader in the fields of vascular, urology, oncology and surgical specialty products, for $317.00 per Bard common share in cash and stock, for a total consideration of $24 billion. The combination will create a highly differentiated medical technology company uniquely positioned to improve both the process of care and the treatment of disease for patients and healthcare providers. The transaction will build on BD's leadership position in medication management and infection prevention with an expanded offering of solutions across the care continuum. Additionally, Bard's strong product portfolio and innovation pipeline will increase BD's opportunities in fast-growing clinical areas, and the combination will enhance growth opportunities for the combined company in non-U.S. markets. This transaction will be immediately accretive and is expected to generate high-single digit accretion to adjusted earnings per share (EPS) in fiscal year 2019. Approximately $300 million of estimated annual, pre-tax, run-rate cost synergies are expected by fiscal year 2020. Separately, BD also expects to benefit from revenue synergies beginning in fiscal year 2019. The transaction is expected to improve BD's gross margins by approximately 300 basis points in fiscal year 2018, increase BD's earnings per share growth trajectory to the mid-teens, and generate strong cash flow. The combined company will have a large and growing presence in emerging markets, including $1 billion in annual revenue in China. Under the terms of the transaction, Bard common shareholders will be entitled to receive approximately $222.93 in cash and 0.5077 shares of BD stock per Bard share, or a total of value of $317.00 per Bard common share based on BD's closing price on April 21, 2017. At closing, Bard shareholders will own approximately 15 percent of the combined company. BD expects to contribute approximately $1.7 billion of available cash to fund the transaction, along with, subject to market conditions, approximately $10 billion of new debt and approximately $4.5 billion of equity and equity linked securities issued to the market. Bard shareholders will also receive $8 billion of BD common stock. BD has also obtained fully committed bridge financing. At closing, BD estimates the combined company will have pro forma leverage of approximately 4.7x and is committed to deleveraging to below 3.0x leverage within three years of closing. BD expects to continue the suspension of its share repurchase program. BD is also committed to annual dividend increases while reinvesting in the business to continue to drive long-term growth.
Friday, April 21, 2017 Gentex-GNTX reported first quarter revenues increased 12% to $453.5 million with net earnings motoring 22% higher to $97.5 million and EPS up 18% to $.33. Auto sales growth of 13% during the quarter to $445.6 million was driven by a 12% increase in auto-dimming mirror unit shipments compared to 3% growth in relevant light vehicle production. Other sales, which includes dimmable aircraft windows and fire protection products, declined 33% to $7.9 million. Gross margin dipped 30 basis points to 38.8% during the quarter as the result of annual customer price reductions, which were partially offset by purchasing cost reductions and favorable product mix. Higher investment income and a lower tax rate led to the strong net earnings growth in the quarter. During the quarter, Gentex repurchased 1.5 million of its shares with 5.3 million shares remaining authorized for future share repurchases. The company paid down $40 million on its revolver loan with the goal of paying down its debt early thanks to its strong cash flow generation. The company ended the quarter with $798 million in cash and investments, representing approximately $2.78 per share in cash. Global light vehicle production is expected to increase 1% for the full 2017 year. As a result, Gentex is maintaining its revenue guidance for 2017 of $1.78 to $1.85 billion with gross margin expected in the 39% to 40% range.
Thursday, April 20, 2017 Qualcomm-QCOM reported second quarter revenues declined 10% to $5 billion with net income and EPS each down 36% to $749 million and $.50, respectively. These results included a $947 million reduction in revenues, or $.48 per share, which was related to the BlackBerry arbitration settlement and an $868 million, or $.49 per share charge, related to the Korea Free Trade Commission investigation. In addition, due to ongoing litigation with Apple, Apple’s contract manufacturers reported, but underpaid, royalties to Qualcomm in the second quarter equal to the $1 billion that Qualcomm has not paid Apple under the disputed agreement. Qualcomm is battling litigation on many fronts as it protects the value of their technologies which enables today’s robust mobile communications ecosystem. With leading technologies and the pending $38 billion acquisition of NXP which is expected to close by the end of 2017, management believes they are well positioned to address a larger set of growth opportunities ahead than at any other time in their history. On a non-GAAP basis, excluding the litigation settlements and other items, Qualcomm reported revenues increased 8% to $6 billion with net income up 28% to $2 billion and EPS up 29% to $1.34 thanks to healthy growth across the QTL licensing and QCT semiconductor businesses, especially in the automotive, networking and IoT (Interent of Things) growth areas. During the second quarter, total reported device sales increased 18% to $82.6 billion with estimated reported 3G/4G device shipments up 19% to 398 million to 402 million with average selling price in the range of $204-$210. At the end of the quarter, Qualcomm held $28.9 billion in cash and $9.9 billion in long-term debt. During the first half of fiscal 2017, Qualcomm’s free cash flow declined 40% to $1.9 billion due to lower earnings with the company paying out $1.6 billion in dividends and repurchasing $727 million of its own shares. The company has $2.3 billion remaining authorized for future share repurchases. Cumulatively, Qualcomm has returned $56.4 billion to shareholders through dividends and share repurchases. Given the uncertainty related to the Apple dispute, Qualcomm’s outlook for the third quarter in unusually wide with revenues expected in the range of $5.3 billion to $6.1 billion, representing a decline of 12% to an increase of 1% with EPS expected in the range of $.67-$.92, representing a decline of 5% to 31% with the decline in earnings primarily attributable to acquisition-related items.
Wednesday, April 19, 2017 Genuine Parts-GPC reported first quarter sales motored ahead 5% to $3.9 billion with net income up 1% to $160 million and EPS up 3% to $1.08. First quarter sales growth was the strongest quarterly growth since the fourth quarter of 2014, driven by high-single-digit growth in international automotive, industrial and office supply, partially offset by sluggish U.S. automotive sales. By segment, Automotive sales increased 3% to $2 billion on a 0.5% comp store increase. U.S. automotive sales, which accounted for 70% of the segment’s sales, increased 1% year-over-year with comp store sales dipping 1% in the wake of mild winter weather in the Northeast. International Automotive sales increased 8% on 4% comp store sales growth. Industrial sales powered ahead 7% to $1.2 billion, marking the strongest growth since the fourth quarter of 2014, thanks to the increase in domestic industrial production and a rebound in the energy patch. Office Products sales increased 9% to $519 million, boosted by 11% growth from acquisitions in the fast-growing Facility, Breakroom and Safety market partly offset by a 2% decline in traditional office supply sales. Electrical segment sales increased 5% to $184 million on a 2.5% comp store sales increase. Operating margins dipped 40 basis points to 6.2%, squeezed by deleveraging from domestic auto parts and traditional office products sales, acquisition costs and increased IT spending. During the quarter, Genuine Parts generated free cash flow of $77 million, down 38% year-over-year, on a jump in working capital needs and capital expenditures. During the quarter, the company repurchased 1 million shares for $92 million with 3.2 million shares remaining authorized for repurchase. Genuine Parts announced its 61st consecutive annual dividend increase with the 2017 dividend up 3% from 2016 to $2.70 per share, representing 57% of 2016 EPS. Given the strong first quarter performance which is expected to progressively improve throughout the year, management raised its 2017 EPS guidance to $4.75 - $4.85 from prior guidance of $4.70 - $4.80. Sales growth is expected in the +3% to +4% range.
Abbott-ABT reported first quarter revenues rose 29.7% to $6.3 billion with net earnings up 32.5% and EPS from continuing operations of $.22 versus $.04 in the prior year period. These results reflect the acquisition of St. Jude Medical, which occurred on Jan. 4, 2017 and provides Abbott with expanded opportunities for future growth in the medical device arena. The integration of St. Jude Medical is going well despite a recent FDA warning letter regarding quality control at one of the manufacturing sites, which Abbott is addressing. Adjusting for acquisitions and divestitures and other special items, sales on a comparable operational basis increased 3.2% during the quarter with adjusted EPS up 17.1% to $.48, above management’s guidance due primarily to timing of certain expenses. Abbott has market leadership positions in all of its business units with business segment sales of $1.2 billion in Diagnostics during the first quarter which increased 4.7% on an operational basis; Medical Devices sales of $2.4 billion which increased 4.5% on a comparable operational basis; Nutrition sales of $1.6 billion which declined 1%; and Established Pharmaceutical sales of $950 million, which increased 5.7%. Challenging conditions in the Chinese infant formula market continued to impact international Nutrition performance contributing to the decline in that segment’s sales during the quarter. During the first quarter, Abbott received FDA approval for MRI-conditioning labeling for both the Assurity MRI pacemaker and the Tendril MRI pacing lead. Abbott launched its new Ensite Precision cardiac mapping system, which helps physicians more effectively treat patients experiencing arrhythmias in the heart. Abbott released real-world data from 50,000 users of its sensor-based FreeStyle Libre glucose monitoring system. The data showed that FreeStyle Libre use was associated with higher frequency of glucose testing and better diabetes outcomes, including improved control of glucose levels. For the full year 2017, Abbott expects revenues to grow at a mid-single digit rate with GAAP EPS in the range of $.92-$1.02 and non-GAAP EPS in the range of $2.40-$2.50, representing double-digit growth. This outlook does not include results from the pending Alere acquisition, which is expected to close in the third quarter of 2017.
Genuine Parts-GPC agreed to acquire Merle's Automotive Supply (Merle's), with an effective close date of May 1, 2017. Merle's, founded in 1969 and based in Tucson, Arizona, is a 14 location automotive parts distributor serving both the commercial and retail markets in the greater Tucson and southern Arizona area. Merle's is expected to generate approximate annual revenues of $45 million. Paul Donahue, GPC President and Chief Executive Officer, stated, "Merle's is a leading automotive distributor in the greater Tucson area, and this strategic acquisition significantly enhances our automotive store footprint and competitiveness in the Arizona marketplace. We are excited to welcome the Merle's team to the U.S. Automotive Parts and GPC family and look forward to working with them and continuing our shared tradition of providing quality parts and excellent service to our customers."
Tuesday, April 18, 2017 Johnson & Johnson-JNJ reported first quarter sales rose 1.6% to $17.8 billion with net income dipping .8% to $4.4 billion and EPS up 1.3% to $1.61. Excluding the net impact of acquisitions and divestitures, on an operational basis worldwide sales increased 1.2% with domestic sales dropping .7% and international sales increasing 3.4%. Adjusting earnings to exclude intangible amortization and special items, net earnings increased 3.8% with EPS up 5.8%. On an operational basis, worldwide consumer sales of $3.2 billion decreased 2.3% due to a consumer slowdown in the U.S. impacted by higher gas prices and delayed tax refunds and a slowdown in international consumer sales due to inflation in Latin America and macro factors in Asia. JNJ expects consumer sales to rebound for the balance of the year. On an operational basis, worldwide pharmaceutical sales of $8.2 billion increased 2.2%, driven by new products and the strength of core products. The acquisition of Actelion, a leading biopharmaceutical company, for $30 billion is expected to close in the second quarter and be accretive to earnings. Worldwide medical devices sales of $6.3 billion increased 1.7% on an operational basis driven by electrophysiology products in the cardiovascular business, Acuvue contact lenses in the vison care business and endocutters in the advanced surgery business, partially offset by declines in the diabetes business. Operating income increased 5.3% during the first quarter due to good cost management and a larger net gain in other income. The operating margin is expected to remain stable or increase slightly for the full year. A higher effective tax rate led to the dip in net earnings for the quarter, while lower shares outstanding resulted in the increase in EPS. JNJ expects to complete its current share buyback program in the second quarter. The company ended the quarter with net cash of $7 billion ($39 billion in cash less $32 billion in long-term debt). Management raised their sales and earnings outlook for the full year 2017 to reflect the pending acquisition of Actelion with reported sales expected to be in the $75.4-$76.1 billion range, representing 4.8% to 5.8% growth, and reported EPS expected in the range of $7.00-$7.15, representing 4% to 6.2% growth.
Friday, April 14, 2017 With today's approval of Apple’s-AAPL application to test vehicles in autonomous technology mode on California public roads, Apple officially enters the race with Alphabet-GOOGL, Tesla, BMW, Baidu, GM and 24 others to create the next generation car. Apple first publicly announced its intention to develop the technology in December when Steve Kenner, Apple’s director of product integrity, wrote to the head of the National Highway Traffic Safety Administration stating that Apple “is investing heavily in the study of machine learning and automation, and is excited about the potential of automated systems in many areas, including transportation.”
Abbott-ABT and Alere announced today that the companies have agreed to amend the existing terms of their agreement for Abbott's acquisition of Alere. Under the amended terms, Abbott will pay $51 per common share to acquire Alere, for a new expected equity value of approximately $5.3 billion, reduced from the originally expected equity value of approximately $5.8 billion. The transaction is expected to close by the end of the third quarter of 2017. Additionally, the companies have agreed to dismiss their respective lawsuits. On Feb. 1, 2016, Abbott and Alere announced a definitive agreement for Abbott to acquire Alere, the global leader in point of care diagnostics, which will significantly expand Abbott's global diagnostics presence and leadership. Point of care testing is a $5.5 billion segment and one of the fastest growing in vitro diagnostics segments, in part, because many health care systems are increasing their reliance on these easy-to-use, quick, accurate technologies to inform patient care decisions.
Thursday, April 13, 2017 Biogen-BIIB announced an agreement to exclusively license BMS-986168, a Phase 2-ready experimental medicine with potential in Alzheimer’s disease (AD) and progressive supranuclear palsy (PSP), from Bristol-Myers Squibb (BMY). BMS-986168 is an antibody targeting extracellular tau, the protein that forms the deposits, or tangles, in the brain associated with AD and other neurodegenerative tauopathies such as PSP. PSP is a rare and devastating condition that affects movement, speech, vision, and cognitive function. Biogen plans to rapidly initiate Phase 2 studies for BMS-986168 in both AD and PSP. The addition of BMS-986168 to Biogen’s pipeline signifies both a broader commitment to rare neurodegenerative diseases as well as a strengthened focus on AD, a condition that affects millions of patients and families. With an expanded AD pipeline that includes a range of anti-tau and anti-amyloid candidates as well as a BACE inhibitor program, Biogen is targeting multiple mechanisms implicated in the disease. Under the agreement, Biogen will receive worldwide rights to BMS-986168. Biogen will be responsible for the full development and global commercialization of BMS-986168 in AD and PSP. Bristol-Myers Squibb will receive an upfront payment of $300 million from Biogen and may receive up to $410 million for additional milestone payments and potential royalties. Biogen will also assume all remaining obligations to the former stockholders of iPierian, Inc. related to Bristol-Myers Squibb’s acquisition of the company in 2014. Biogen may pay up to $550 million in remaining milestones plus royalties including a near term $60 million milestone.
Wednesday, April 12, 2017 Fastenal-FAST reported solid first quarter results with revenues up 6% to $1 billion and net earnings and EPS each also up 6% to $134.2 million and $.46, respectively. This was the strongest first quarter in two years as industrial demand is improving. The increase in sales was driven by higher unit sales, resulting from increases in sales at existing locations, growth in the industrial vending business and growth in new and existing Onsite locations. Sales of fastener products, representing 35.6% of total sales, grew .8% while sales of non-fastener products, representing 64.4% of total sales, grew 9.4% during the quarter. Gross profit declined 40 basis points to 49.4% in the first quarter due primarily to a change in customer and product mix. Total full-time equivalent headcount dipped 1.7% to 16,756 at quarter end. During the quarter, Fastenal signed 5,437 industrial vending machines, an increase of 17% over the prior year period with the goal of signing 22,000 to 24,000 vending machines for the full year. Net sales through the vending machines continued to grow at a double-digit pace. The company’s Onsite locations increased 33% during the quarter to 64 locations. Fastenal also signed 43 new national account contracts during the quarter, representing 48% of total revenues with national account sales increasing 9% during the quarter. The improving pace of business with national accounts benefited from the pick up in industrial demand, especially for oil and gas sector customers. On the last day of the quarter, Fastenal acquired Manufacturers Supply Company (Mansco) for $57.9 million. Mansco is an industrial distributor that is generating $50 million in revenue. Fastenal’s free cash flow increased 38% during the first quarter to $189.2 million, thanks to improved earnings and lower capital expenditures. Fastenal paid $92.6 million in dividends during the quarter. Management is encouraged by improving customer business activity which should benefit the balance of the year.
Qualcomm-QCOM announced a binding interim arbitration award requiring Qualcomm to refund a sum of $814.9 million, plus interest and attorneys' fees, to BlackBerry related to royalties for certain past sales of subscriber units. The parties had agreed to arbitrate a contract dispute relating to one specific issue: whether Qualcomm's voluntary per unit royalty cap program applied to BlackBerry's non-refundable prepayments of royalties for sales of a specified number of subscriber units from 2010 through the end of 2015. While Qualcomm does not agree with the decision, it is binding and not appealable. The arbitration decision was limited to prepayment provisions unique to BlackBerry's license agreement with Qualcomm and has no impact on agreements with any other licensee.
Tuesday, April 11,2017 Qualcomm-QCOM filed its Answer and Counterclaims to the January lawsuit brought by Apple-AAPL against the Company in the U.S. District Court for the Southern District of California. Qualcomm's filing details the value of the technologies Qualcomm has invented, contributed and shared with the industry through its licensing program, as well as Apple's failure to engage in good faith negotiations for a license to Qualcomm's 3G and 4G standard essential patents on fair, reasonable and non-discriminatory terms. The filing also outlines how Apple breached agreements and mischaracterized agreements and negotiations with Qualcomm; interfered with Qualcomm's long-standing agreements with Qualcomm licensees that manufacture iPhones and iPads for Apple; encouraged regulatory attacks on Qualcomm's business in various jurisdictions around the world by misrepresenting facts and making false statements; chose not to utilize the full performance of Qualcomm's modem chips in its iPhone 7, misrepresented the performance disparity between iPhones using Qualcomm modems and those using competitor-supplied modems; and threatened Qualcomm in an attempt to prevent it from making any public comparisons about the superior performance of the Qualcomm-powered iPhones. Qualcomm seeks, among other things, damages from Apple for reneging on its promises in several agreements and to enjoin Apple from further interference with Qualcomm's agreements with the companies that manufacture iPhones and iPads for Apple.
Thursday, April 6, 2017 Wabtec-WAB has acquired Thermal Transfer Corp., a supplier of industrial heat exchangers. The company has annual sales of about $25 million. Thermal Transfer manufactures heat exchangers and related components for a variety of industrial markets. The majority of its sales are in the U.S. and in the aftermarket.
Wednesday, April 5, 2017 Walgreens Boots Alliance-WBA rang up second fiscal quarter sales of $29.4 billion, down 2.4% year-over-year, with net earnings of $1 billion, up 14%, and EPS of $.98, up 15%. Retail Pharmacy USA sales increased 1.5% to $21.8 billion as comp store sales increased 2.4% from last year’s second quarter. Pharmacy sales, which accounted for 66.5% of the division’s sales in the quarter, increased 3.7% on a 4.2% jump in comp store sales, primarily due to volume increases. The division filled 246.7 million prescriptions, up nearly 6% from last year. Prescriptions filled in comparable stores increased 8%, the highest comp growth in more than seven years, thanks to Medicare Part D growth and volume growth from previously announced strategic partnerships. Market share growth increased 100 basis points from last year to 20.4%. U.S. retail sales declined nearly 3% on an .8% dip in same store sales as declines in general merchandise and personal care were partially offset by solid growth in the health and wellness and beauty categories. Walgreens continued its efforts to boost retail sales by expanding and revamping its beauty offerings in 2,000 stores last year with 1,000 more expected this year. Retail Pharmacy International sales of $3.1 billion fell 14.5% on a 3.7% comp store decline, hurt by foreign currency translation and lower pharmacy funding by the U.K.’s National Health Service. On a constant currency basis, Retail Pharmacy International sales dipped 1.9%. Pharmaceutical Wholesale sales declined 10.6% to $5 billion, squeezed by foreign currency translation. On a constant currency basis Pharmaceutical Wholesale same store sales increased 5% year-over-year. Walgreens Boots Alliance operating income during the second quarter fell 20% to $1.5 billion. Excluding equity earnings from AmerisourceBergen, adjusted operating income increased 8.4% on a constant currency basis, boosted by $1.5 billion in cost savings. Year-to-date free cash flow increased 13% to $2.7 billion. During the first half of the fiscal year, the company returned $1.3 billion to shareholders through cash dividends of $817 million and shares buybacks of $457 billion. Walgreens Boots Alliance announced a new $1 billion share buyback, initiated in response its to robust free cash flow and the revised consideration for Rite Aid merger, which now is expected to close by the end of July. Management maintained its fiscal 2017 guidance of adjusted EPS of $4.90 to $5.08.
Monday, April 3, 2017 FactSet-FDS announced that it has completed its acquisition of the Interactive Data Managed Solutions business (IDMS) from Intercontinental Exchange. With a client base of more than 700 financial institutions across Europe and the United States, IDMS is a leading managed solutions and portal provider helping clients adapt to the wealth industry’s digital transformation. The last twelve months revenues, as of February 28, 2017, for the IDMS business were $68 million. IDMS is expected to be accretive by $0.03 to adjusted diluted EPS for FactSet’s fiscal 2017.
UPS-UPS for the first time offers Saturday ground delivery and Saturday pickup services, delivering shippers industry-leading Saturday choices. The time-in-transit improvement is one of the largest in the company’s 109-year-history. This planned expansion is expected to create more than 6,000 new UPS jobs nationwide when operations are fully implemented by the end of 2018.
Walgreens-WBA and pharmacy benefit manager Prime Therapeutics LLC announced the closing of their transaction to form a combined central specialty pharmacy and mail services company, as part of a strategic alliance first announced by the companies last August.
Thursday, March 30, 2017 AbbVie-ABBV announced that the U.S. Food and Drug Administration (FDA) approved the inclusion of moderate to severe fingernail psoriasis data in the HUMIRA® (adalimumab) prescribing information for patients with moderate to severe chronic plaque psoriasis. HUMIRA is now the first-and-only biologic treatment with data on fingernail psoriasis in its U.S. prescribing information. Fingernail psoriasis affects half of all psoriasis patients. It is a form of chronic plaque psoriasis characterized by pitting, deformation, thickening, discoloration, pain and separation of the nail from the nail bed. Nail psoriasis can also contribute to social stigmatization and impact quality of life.
Genuine Parts-GPC and Inenco Group announced that they have entered into a definitive strategic agreement whereby Inenco will issue new shares to Genuine Parts Company, representing a 35% stake in Inenco for approximately $70 million (US$) in cash. The effective date of the investment is April 3, 2017. Inenco Group, founded in 1954 and headquartered in Sydney, Australia, is one of Australasia's leading industrial distributors of key product categories such as bearings, power transmission and seals. It has 161 locations across Australia and New Zealand as well as an emerging presence in Asia, and generates estimated annual revenues of approximately $325 million (US$). The parties have agreed to a structure by which Genuine Parts Company will have the opportunity to acquire the remaining 65% stake in Inenco at a later date, subject to certain conditions being satisfied.
Wednesday, March 29, 2017 Paychex-PAYX reported third quarter revenues rose 6% to $795.8 million with net income and EPS each clocking in 12% gains to $202.5 million and $.56, respectively. Payroll service revenue increased 2% to $446.6 million driven mainly by growth in revenue per check and the client base. Human Resource Services revenue increased 12% to $336 million with time and attendance services reflecting double-digit growth. Interest on funds held for clients jumped 11% to $13.2 million thanks to slightly higher interest rates earned due to the Fed rate increases, which will be more accretive in fiscal 2018. Operating margin expanded from 37.2% to 38.5% during the quarter thanks to solid expense control while a lower tax rate also helped boost double-digit net income growth. Return on shareholders’ equity over the last 12 months was a sterling 41%. Paychex’s financial position remains strong with cash and investments topping $844 million and no long-term debt on its stalwart balance sheet as of quarter end. Free cash flow dipped 3% year-to-date to $702.5 million due primarily to working capital fluctuations. During the first nine months, Paychex has paid $496.9 million in dividends and repurchased 2.9 million of its shares for $166.2 million at an average price of approximately $57.31 per share. For the full fiscal 2017 year, management expects total service revenues to increase in the range of 7% to 8% generating a 7% increase in net income. The company is encouraged by the growing confidence in the small business environment and remains well positioned to assist their clients address future changes in the political and regulatory landscape.
Tuesday, March 28, 2017 FactSet-FDS reported second quarter revenues rose 4% to $294.4 million with net income down 2% to $66.7 million and EPS up 3% to $1.68. Excluding the Market Metrics business which was sold, organic revenues grew 7% with adjusted net income up 9% and adjusted EPS up 14%. U.S. revenues increased 1% to $191.6 million and increased 6% organically. International revenues increased 12% to $102.7 million and grew 9%, excluding acquisitions, dispositions and the impact of foreign exchange. Annual Subscription Value (ASV) increased 4% to $1.19 billion as of Feb. 28, 2017 with organic ASV up 6.5%. Annual client retention was greater than 95% of ASV and when expressed as a percentage of clients, annual retention was 93%. Free cash flow declined 20% during the first half of the year to $110 million due primarily to working capital changes with the company paying $40 million in dividends and repurchasing $166 million of its shares including 480,000 shares in the second quarter for $81.1 million at an average cost of $169.03 per share. The Board of Directors authorized a $300 million expansion of the share repurchase program with $336.5 million now available for future share repurchases. Over the last six years, FactSet has returned 94% of free cash flow to shareholders through dividends and share repurchases. FactSet recently completed two acquisitions of BISAM for $205.2 million in cash and Interactive Data Managed Solutions (IDMS) with terms not disclosed. BISAM is expected to be accretive by $.02 per share to adjusted 2017 EPS and dilutive by $.06 per share to GAAP EPS with IDMS expected to have an immaterial impact on 2017 EPS. Management’s outlook for the fiscal third quarter is for revenues in the range of $301 million to $307 million, representing 6% growth at the midpoint, and EPS in the range of $1.68 to $1.74 with adjusted EPS expected in the range of $1.80 to $1.86, representing 12% growth at the midpoint.
Thursday, March 23, 2017 The Walt Disney Company-DIS Board of Directors announced extended Robert A. Iger’s contract as Chairman and Chief Executive Officer to July 2, 2019.
Accenture-ACN reported second quarter revenues rose 5% in U.S. dollars and 6% in local currency to $8.3 billion with net income down 37% to $839 million and EPS off 36% to $1.33. Last year’s results included a $.74 per share gain on the sale of Navitaire. Excluding this gain, EPS was down 1% for the quarter primarily due to a higher tax rate. Operating income during the second quarter rose 5% to $1.14 billion with an operating margin of 13.7% unchanged from the prior year. New bookings for the quarter were $9.2 billion evenly divided between consulting bookings and outsourcing bookings. Revenue growth was broad-based across operating groups and geographies, led by 14% growth in Products and 12% growth in Growth Markets. New, high-growth areas such as digital, cloud and security services now account for more than 45% of total revenues and are growing at double-digit rates. Free cash flow increased 37% during the first half of the year to $1 billion. Accenture spent $829 million on 16 acquisitions during the first half while paying $785 million in dividends and repurchasing 12 million of its own shares for $1.4 billion at an average price of $116.67 per share. Accenture has $4.3 billion remaining authorized for future share repurchases. The company ended the quarter with more than $3.4 billion in cash and investments and minimal long-term debt on its strong balance sheet. For fiscal 2017, Accenture expects net revenue growth to be in the range of 6% to 8% in local currency with EPS in the range of $5.31-$5.48, which includes the impact of a non-cash pension settlement charge of $.39 per share. For fiscal 2017, the company continues to expect free cash flow to be in the range of $4.0 to $4.3 billion with acquisitions for the full year earmarked at $1.5 billion, which is expected to contribute 2% to growth.
Wednesday, March 22, 2017 Starbucks-SBUX hosted its 25th Annual Meeting of Shareholders and honored the accomplishments of the company in delivering record financial results, including approximately 18,000% in shareholder returns since the company’s Initial Public Offering 25 years ago, and more than $10 billion in cash distributed to shareholders via dividends and share repurchases over the past five years alone. Starbucks highlighted its strong pipeline of innovation for future growth across coffee, tea, food, digital, China and partner investments. Starbucks announced plans to create more than 240,000 new jobs globally (68,000 in the U.S.) as it reiterates intent to open 12,000 new stores globally and 3,400 new stores in the U.S. by FY21, including 100 more Military Family Stores in the U.S. to support military communities. Opened in 2014, Starbucks first Roastery located in Seattle is already serving as a foundation for the company’s coffee innovation pipeline, providing a halo to the rest of the business. This premium coffee pipeline will continue to expand as the company opens Roastery locations in Shanghai (2017), New York (2018), Milan (2018) and Tokyo (2018) with the potential for 20-30 Roasteries globally over time. Building on its food business through customer-driven innovation, the company plans to launch Starbucks Mercato, a new menu of lunch items that features fresh and flavorful grab-and-go salads and sandwiches that meet a variety of dietary lifestyles and are made daily, with leftover items donated nightly to local food banks through Starbucks FoodShare program with Feeding America. The Mercato menu will start with more than 100 stores in Chicago with plans to expand to other U.S. markets in the future. Starbucks continues to offer the largest and most robust mobile ecosystem of any retailer in the world, with over 13 million Starbucks Rewards members, approximately 9 million mobile paying customers, with one out of three now using Mobile Order & Pay, and more than $6 billion loaded onto prepaid Starbucks Cards in North America during 2016 alone. In China, customers have continued to embrace the Starbucks brand, with some of the company’s most innovative, efficient and profitable stores producing record revenue and strong same-store sales growth in FY16. Starbucks now operates more than 2,600 stores in 127 cities in China and employs nearly 40,000 partners, opening over a store a day – a growth rate that will continue to accelerate well into the future.
Tuesday, March 21, 2017 Nike-NKE reported fiscal third quarter revenues rose a solid 5%, or 7% on a constant currency basis, to $8.4 billion with net income jumping 20% to $1.1 billion and EPS scoring 24% growth to $.68. Consumer demand in all geographies drove NIKE Brand revenue growth to $7.9 billion led by double-digit growth in Western Europe, Greater China and the Emerging Markets. International revenues now account for more than 50% of total revenues and are growing at double-digit rates. This was the 14th consecutive quarter of double-digit growth in Western Europe and the 11th consecutive quarter of double-digit growth in China, which represents a “massive” long-term growth opportunity. Nike is celebrating its 20th anniversary in China, which enjoys a rapidly growing sports culture. Revenues for Converse were $498 million, up 3% on a constant currency basis, driven by growth in North America. EPS grew faster than sales primarily due to selling and administrative expense leverage, higher other income, a lower effective tax rate and a lower average share count which more than offset a lower gross margin. Return on invested capital for the trailing 12 months was greater than 33%. Inventories rose 7% to $4.9 billion compared to the prior year as a 3% decline in NIKE Brand wholesale unit inventories was offset by increases in average product costs per unit and higher inventories associated with 13% growth in direct to consumer sales. Cash and short-term investments were $6.2 billion at quarter end, up $1.1 billion compared to the prior year period due to growth in net income and the proceeds from the issuance of debt in the second fiscal quarter of 2017, which more than offset share repurchases, higher dividends and investments in infrastructure. During the third quarter, Nike repurchased 8.9 million shares for approximately $475 million at an average cost of about $53.37 per share. The company has $8.4 billion remaining authorized for future repurchases as part of the four-year $12 billion repurchase program approved in November 2015. Worldwide futures orders were down 4% or 1% on a constant currency basis. Management’s outlook for the fourth quarter is for mid-single digit growth in revenues, or high-single digit growth on a constant currency basis. Gross margin is expected to contract 150-175 basis points primarily due to adverse foreign exchange with selling and administrative expenses expected to be flat. For fiscal 2018, Nike expects revenue growth across all geographies with expanding profitability. However, foreign exchange will remain a significant headwind due to the strong dollar, which has resulted in $1.6 billion to $2 billion of headwinds on EPS growth in the 2016-2018 time period, with the biggest impact expected in 2018. Management will continue to work hard to mitigate these headwinds.
Apple®-AAPL updated its most popular-sized iPad®, featuring a brighter 9.7-inch Retina® display and best-in-class performance at its most affordable price ever, starting at $329 (US). Designed for unmatched portability and ease of use, along with incredible performance and all-day battery life, iPad is the world’s most popular tablet and the primary computing device for millions of customers around the world. Through the more than 1.3 million apps designed specifically for iPad, customers can do even more, from learning to code with Swift Playgrounds™ and reading books on the large screen to boosting productivity through Microsoft Office and using multitasking features like Split Screen. Apple® also introduced Clips, a new app that makes it quick and fun for anyone to create expressive videos on iPhone® and iPad®. The app features a unique design for combining video clips, photos and music into great-looking videos to share with friends through the Messages app, or on Instagram, Facebook and other popular social networks. Apple® also announced iPhone® 7 and iPhone 7 Plus (PRODUCT)RED Special Edition in a vibrant red aluminum finish, in recognition of more than 10 years of partnership between Apple and (RED). This gives customers an unprecedented way to contribute to the Global Fund and bring the world a step closer to an AIDS-free generation.
Monday, March 20, 2017 Disney’s-DIS “Beauty and the Beast” movie opened to $170M domestically and $180 million overseas. This is a record opening for a family film and a record March open. “Beauty and the Beast” is on track to cross $1 billion worldwide compared to a reported $160 million budget. Nothing beastly about those beautiful numbers!
FactSet-FDS acquired BISAM Technologies S.A. for $205.2 million from Aquiline Capital Partners and company insiders. With more than 160 employees worldwide, BISAM is a leading provider of portfolio performance and attribution, multi-asset risk, GIPS composites management and reporting. FactSet borrowed $575 million under a new revolving credit facility to fund the transaction and repay existing debt. BISAM’s annual revenues as of December 31, 2016 were over $28 million. The transaction is expected to be accretive by $0.02 to adjusted diluted EPS and dilutive by $0.06 to GAAP diluted EPS for the remainder of fiscal 2017.
Thursday, March 16, 2017 3M-MMM announced that it has entered into a definitive agreement to acquire Scott Safety from Johnson Controls for a total enterprise value of $2.0 billion. Scott Safety is a premier manufacturer of innovative products, including self-contained breathing apparatus (SCBA) systems, gas and flame detection instruments, and other safety devices that complement 3M’s personal safety portfolio. Scott Safety’s products help protect firefighters, industrial workers, police, military, homeland security forces, and rescue teams around the world from environmental hazards. The business had annual revenues in 2016 of approximately $570 million. On a GAAP reported basis, 3M estimates the acquisition to be $0.10 dilutive to earnings in the first 12 months following completion of the transaction. Excluding purchase accounting adjustments and anticipated one-time expenses related to the transaction and integration, 3M estimates the acquisition to be $0.10 accretive to earnings over the same period. The transaction is expected to close in the second half of 2017. 3M will finance the transaction through a combination of cash and debt.
Wednesday, March 15, 2017 Oracle-ORCL reported third quarter total revenues rose 2% to $9.2 billion with net income up 5% to $2.2 billion and EPS up 6% to $.53. Cloud software as a service (SaaS) and platform as a service (PaaS) revenue jumped 73% during the quarter to $1 billion with total cloud revenues up 62% to $1.2 billion as cloud infrastructure as a service (IaaS) revenue rose 17% to $178 million. New software licenses declined 16% to $1.4 billion as customers are increasingly shifting their business to the cloud. Software license updates and product support revenue was up 2% to $4.8 billion. Total hardware revenue declined 9% to $1 billion with total service revenue up 2% to $812 million. The “hyper-growth” in the cloud has rapidly driven the company’s SaaS and PaaS businesses to scale with the total cloud business reaching the $5 billion annualized revenue mark. The cloud business is beginning to overtake the software licensing business, with the higher cloud margins expected to result in earnings and cash flows growing faster than sales in the years ahead. Short-term deferred revenue grew 7% year over year to $7.4 billion. Operating cash flow on a trailing 12-month period was $13.5 billion. Free cash flow declined 8% year-to-date to $8.2 billion primarily due to the timing of working capital changes. Fiscal year-to-date, Oracle has paid $1.8 billion in dividends and repurchased $3.1 billion of its shares. Oracle announced that its board of directors increased the quarterly dividend 27% from $.15 per share to $.19 per share. Total revenue for the fourth quarter is expected to range from a 1% decline to a 2% gain, with SaaS and PaaS revenue growing 69% to 73% and IaaS revenue growth accelerating to 25% to 29%. Earnings per share are expected in the range of $.78 to $.82 on a constant currency basis in the fourth quarter with EPS expected to grow at double-digit rates in fiscal 2018.
UPS-UPS announced plans to build an additional six compressed natural gas (CNG) fueling stations and add 390 new CNG tractors and terminal trucks and 50 liquefied natural gas (LNG) vehicles to its alternative fuel and advanced technology fleet. UPS further cements its leadership in the alternative fuel market while continuing to reduce its environmental footprint with this more than $90 million investment in natural gas.
Tuesday, March 14, 2017 Cognizant Technology Solutions-CTSH announced that it has entered into accelerated share repurchase ("ASR") agreements with Barclays Bank PLC, Citibank N.A., and UBS AG, London Branch to repurchase an aggregate of $1.5 billion of Cognizant's Class A common stock. Under the terms of the ASR agreements, approximately 21.5 million of the shares to be repurchased will be received by Cognizant on March 14, 2017. "We are pleased to initiate this accelerated share repurchase program as we begin to execute on our enhanced capital return program," said Francisco D'Souza, Chief Executive Officer. "These repurchases demonstrate the commitment of the Board and management to deliver on our previously announced comprehensive plan to enhance shareholder return."
AbbVie-ABBV announced that priority review has been granted by the Japanese Ministry of Health, Labour and Welfare (MHLW) for its treatment of all major genotypes of the chronic hepatitis C virus (HCV). This priority review follows European Medicines Agency (EMA) accelerated assessment and U.S. Food and Drug Administration (FDA) priority review designations in December 2016 and January 2017 respectively. "We will work closely with the Japanese Pharmaceuticals and Medical Devices Agency (PMDA) as part of our commitment to provide a potential cure for as many people living with HCV as possible," said Michael Severino, M.D., executive vice president, research and development and chief scientific officer, AbbVie. "We are pleased that G/P has now been recognized as a potential important therapy for people living with HCV through the receipt of priority review designations by regulatory authorities in Japan, the EU and the U.S."
Stryker-SYK announced the commercial launch of the highly anticipated robotic-arm assisted total knee arthroplasty application for use with its Mako System. This latest advancement distinguishes the Mako System as the first and only robotic technology that can be used across the joint replacement service line to perform total knee, total hip and partial knee replacements. Total knee replacements in the United States are expected to increase 673 percent by 2030, yet studies have shown that approximately 30 percent of patients are dissatisfied after conventional surgery. As this procedural growth materializes, surgeons will continue to seek clinical solutions that leverage technological advancements to improve their patient`s satisfaction. More than 83,000 Mako robotic-arm assisted procedures, including total knee, partial knee and total hip replacements, have been performed through 2016. More than 350 Mako Systems have been placed in the United States with over 1,400 Mako Total Knee replacements performed to date.
Wabtec-WAB has acquired Aero Transportation Products (ATP), a manufacturer of engineered freight car components. The company has annual sales of about $40 million. Terms of the deal were not disclosed. ATP manufactures hatch covers and outlet gates for freight cars, which adds to Wabtec’s portfolio of engineered products. ATP’s sales are mainly in the U.S., so it expects to benefit from Wabtec’s worldwide presence in key freight markets such as Australia and South America.
Johnson & Johnson-JNJ announced that final Phase 1 clinical trial show that business-unit Janssen Pharmaceutical Companies' investigational "prime-boost" Ebola vaccine regimen induced a durable immune response in 100 percent of healthy volunteers one year following vaccination. Janssen in partnership with Bavarian Nordic rapidly scaled up production of the vaccine regimen and now has approximately 1,800,000 regimens available, with the capacity to produce several million regimens if needed.
Monday, March 13, 2017 Fluor-FLR announced that its global alliance framework agreement with Yara Belgium SA, Europe’s largest producer of ammonia and nitrate fertilizer, has been extended by three years and expanded to provide engineering, procurement and construction management services to support Yara’s global operations.
Friday, March 10, 2017 United Technologies-UTX reaffirmed its guidance for fiscal 2017 and sees EPS of $6.30 to $6.60 with revenues in the range of $57.5 billion to $59 billion.
Wednesday, March 8, 2017 Qualcomm-QCOM announced a collaboration with Microsoft-MSFT to accelerate next generation cloud services on its 10 nanometer Qualcomm Centriq™ 2400 platform. This collaboration will span multiple future generations of hardware, software and systems.
Private sector employment increased by 298,000 jobs from January to February according to the February ADP National Employment Report®. "February proved to be an incredibly strong month for employment with increases we have not seen in years," said Ahu Yildirmaz, vice president and co-head of the ADP-ADP Research Institute. "Gains were driven by a surge in the goods sector, while we also saw the information industry experience a notable increase." Mark Zandi, chief economist of Moody's Analytics said, "February was a very good month for workers. Powering job growth were the construction, mining and manufacturing industries. Unseasonably mild winter weather undoubtedly played a role. But near record high job openings and record low layoffs underpin the entire job market."
Tuesday, March 7, 2017 Qualcomm-QCOM announced that its Board of Directors has approved a 7.5 percent increase in the Company's quarterly cash dividend to an annualized rate of $2.28 per share. Steve Mollenkopf, CEO of Qualcomm Incorporated, said, "We are pleased to announce an increase in our quarterly dividend, a reflection of our commitment to returning capital to stockholders as we continue targeted investments in our technology roadmap. We look forward to closing the pending acquisition of NXP later this calendar year and expect the strong combined cash profile of Qualcomm and NXP to further strengthen our foundation for future capital returns for our stockholders."
Brown-Forman-BFB reported third quarter revenues were essentially flat at $808 million with net income down 4% to $182 million and EPS up 1% to $.47 on lower shares outstanding. Excluding acquisition/divestiture activity and adverse foreign exchange, underlying sales rose 4% with operating income up 3% during the quarter. Sales growth was driven by the continued gains for the Jack Daniel’s family of brands, including Tennessee Whiskey, Tennessee Honey and Gentleman Jack. The company’s bourbon brands delivered continued growth, including double-digit underlying net sales growth from Woodford Reserve and Old Forrester. Herradura and el Jimador tequila grew underlying net sales double digits in the U.S. Sonoma-Cutre grew underlying net sales high single-digits and Korbel was up low single-digits. The company’s developed markets outside of the U.S. grew year-to-date underlying sales by 3% while emerging markets sales continued to improve in the third quarter with 5% growth. Global Travel Retail results enjoyed a solid rebound from last year’s depressed levels with net sales up 7% on an underlying basis. For the first nine months of fiscal 2017, free cash flow increased 4% to $374 million with the company paying $203 million in dividends during the period and repurchasing 11.8 million shares for $561 million at an average price of $47 per share. Total debt increased to $2.2 billion as of 1/31/17 related to the issuance of two Eurobonds at favorable interest rates. The company has $330 million remaining authorized for future share repurchases. Management believes fiscal 2017 is on track to be another year of continued growth in underlying net sales and operating income despite the significant uncertainty that currently exists around the global economic and geopolitical environment, not to mention foreign exchange volatility. The company anticipates for the full fiscal 2017 year underlying net sales growth of 3% to 4% with underlying operating income growth of 5% to 7%, resulting in EPS of $1.71 to $1.76, including foreign exchange headwinds of approximately $.06 per share.
Monday, Mar. 6, 2017 Fastenal-FAST reported net sales increased 1.1% in February to $324.8 million with average daily sales up 6.1% to $16.2 million. Daily sales growth by end market was up 6.3% for manufacturing customers and 6.2% for non-residential construction customers. Sales by product line were up 1.5% for fasteners and 9.1% for other items. Year-to-date, Fastenal has opened four new stores, ending the month with 2,507 store locations. Employee headcount was down 4.4% at the end of the month to 19,872.
Friday, Mar. 3, 2017 Fastenal-FAST announced it has signed an agreement to acquire certain assets of industrial and fastener supply distributor Manufacturer's Supply Company (Mansco) with the deal expected to close by the end of March. The company focuses on fastener products, with a particularly strong market position with commercial furniture OEMs. As such, this acquisition gives Fastenal a presence in a market where it has not meaningfully contributed in the past, while providing Mansco with additional tools with which to service its customer base. Mansco generated approximately $50 million of revenue in 2016, largely from its flagship Michigan location. The company is profitable and the transaction should be accretive in the first twelve months, though it should not be material to earnings per share.
Thursday, Mar. 2, 2017 Cognizant Technology Solutions-CTSH announced the acquisition of Brilliant Service Co. Ltd., an intelligent products and solutions company headquartered in Osaka, Japan, specializing in digital strategy, product design and engineering, the Internet of Things (IoT), and enterprise mobility. As part of the acquisition, a team of 70 professionals with extensive digital solutions experience and insights in the Japanese market will join Cognizant. The terms of the transaction were not disclosed.
Tuesday, Feb. 28, 2017 Last year, YouTube, a unit of Alphabet-GOOGL, hit a big milestone with people around the world now watching a billion hours of YouTube’s content every single day, rewarding their curiosity, discovering great music, keeping up with the news, connecting with their favorite personalities or catching up with the latest trend. YouTube’s aggressive use of artificial intelligence to recommend videos has led to this 10-fold increase in viewership since 2012, which is set to outpace U.S. television viewership.
Baxter International-BAX and ScinoPharm Taiwan, Ltd. announced a strategic partnership to develop, manufacture and commercialize five injectable drugs used in a range of cancer treatments, including lung cancer, multiple myeloma and breast cancer, as well as medication to treat nausea and vomiting, common side effects of chemotherapy. The arrangement also provides Baxter the option to partner with ScinoPharm—one of the world’s leading active pharmaceutical ingredient (API) manufacturers—on as many as 15 additional injectable molecules. Current branded sales of the initial five products included in this partnership total more than $4 billion annually. These products will join Baxter’s existing portfolio of generic injectable medications, which includes difficult-to-manufacture oncology drugs and a broad portfolio of standard-dose, ready-to-use premixed injectable products such as anti-infectives, analgesics and critical care medicines.
Monday, Feb. 27, 2017 The Priceline Group-PCLN reported fourth quarter revenues rose 17% to $2.3 billion with net income booking a strong 34% gain to $674 million and EPS traveling 35% higher to $13.47 thanks to expanding margins. During the fourth quarter, room nights booked accelerated to 31% growth while rental car days motored 14% higher. For the full year, revenues rose 17% to $10.7 billion with net income down 16% to $2.1 billion and EPS off 14% to $42.65, impacted by a $941 million non-cash goodwill impairment charge related to OpenTable. Return on equity for the year was a celebratory 21.7%. Free cash flow increased 27% during the year to $3.7 billion with cash and investments at the end of the year growing to $13.9 billion with long-term debt holding steady at about $6.2 billion. During the year, the company repurchased $1 billion of its own shares. Priceline expanded its share repurchase authorization by $2 billion with $4 billion now remaining available for future share repurchases. Potential tax reform will enable the company to access its cash, as the majority of it resides outside the U.S. Management’s outlook for the first quarter is for room nights booked to increase between 20% to 25%. Total gross travel bookings are expected to grow 17% to 22%, or 19% to 24% on a constant currency basis. Gross profit is expected to increase 9.5% to 14.5%, or 11% to 16% on a constant currency basis, with operating margins declining due to Easter seasonal timing differences. Priceline’s EPS should range between $7.50 to $7.90 during the fiscal first quarter.
Saturday, Feb. 25, 2017 Berkshire Hathaway-BRKB reported the company’s net worth during 2016 increased by 10.7% with book value equal to $172,108 per Class A share as of 12/31/16. Over the last 52 years, book value has compounded at a 19% annual rate from $19 to $172,108. Berkshire’s stock price jumped 23.4% last year. Over the last 52 years, Berkshire’s stock price has compounded at a 20.8% annual return compared to the 9.7% annual return of the S&P 500 index (with dividends included).
The $27.5 billion increase in shareholders’ equity in 2016 was due to the company’s $24.1 billion in net earnings and $3.3 billion of gains in other comprehensive income primarily related to changes in unrealized investment appreciation, partially offset by the impact of foreign currency. Approximately 56% of Berkshire’s $122 billion equity portfolio as of 12-31-16 is concentrated in four securities. During 2016, IBM’s fair market value tabulated a $2.3 billion increase in market value, or a 21% gain, while American Express’ stock price charged up a 7% gain with a $700 million increase in market value during the year. Despite negative publicity, Wells Fargo gained 1% for the year with a $400 million increase in market value while Coca-Cola fizzled 3% lower with a $600 million decline in market value.
Berkshire’s operating revenues rose 7.5% to $215.8 billion in 2016. Net income was relatively unchanged at $24.1 billion, which included $6.5 billion in investment and derivative gains, including after-tax gains of $2.7 billion from the disposition of preferred stock in Wrigley and Kraft Heinz and conversion of preferred stock of Dow Chemical and $1.9 billion in after-tax gains from the exchange of Procter & Gamble stock for Duracell. Operating earnings (excluding investment and derivative gains/losses) increased 1.3% during the year to $17.6 billion.
Berkshire’s huge and growing insurance operation again operated at an underwriting profit in 2016, marking 14 consecutive years of underwriting pre-tax profits which totaled $28 billion, including $1.4 billion in 2016 due in part to increased earnings from Berkshire Hathaway Reinsurance Group and General Re. Thanks to low costs, GEICO’s gecko “gobbles up market share year after year,” ending 2016 with about 12% of industry volume compared to 2.5% in 1995, the year Berkshire acquired control of the company. GEICO’s growth accelerated dramatically during the second half of 2016 as the company increased its new business efforts. Berkshire Hathaway Specialty Insurance, formed less than three years ago, increased volume 40% in 2016, reaching $1.3 billion with the company poised to become one of the world’s leading P/C insurers. Berkshire’s insurance float, the money that doesn’t belong to Berkshire but which the company can invest for Berkshire’s business, also increased to a record $92 billion as of 12-31-16. Subsequent to year end, Berkshire wrote a huge policy with AIG that increased float to more than $100 billion. During the past 16 years, float has grown from $28 billion to $100 billion which has generated significant investment income for the company. Total insurance investment income approximated $3.6 billion in 2016, representing more than 20% of total operating earnings.
Burlington Northern Santa Fe (BNSF), the company’s railroad, reported a 10% decline in revenues during 2016 to $19.8 billion with net income rolling 16% lower to $3.6 billion due to a 5% decline in unit volume and a 5.2% decline in average revenue per car/unit. BNSF experienced declining demand during the year especially in their coal and crude oil categories. Coal had the largest decline, driven by structural changes in that business as well as competition from low natural gas prices. Berkshire expects the long-term demand outlook for U.S. and global coal consumption to be lower. In addition, Berkshire expects low oil production and pipeline displacement will continue to negatively impact the demand for crude oil shipments in 2017. Despite the weak 2016 financial results, Warren Buffett and Charlie Munger “love our railroad, which was one of our better purchases.”
Berkshire Hathaway Energy (BHE) reported a sales decline of 2% during 2016 to $17.9 billion with net income up 7% to $2.3 billion. All of Berkshire’s energy units, with the exception of MidAmerican, posted revenue declines during the year. BHE earnings improved reflecting in part lower fuel prices and changes in fuel mix. The company’s real estate brokerage operation is also included in this group with revenue up 11% to $2.8 billion during 2016 and operating earnings up 18% to $225 million. HomeServices owns 38 realty company with more than 29,000 agents in 28 states and participated in $86 billion in volume last year. Berkshire expects to acquire many more realtors and franchisees in this business during the next decade.
Berkshire’s many dozens of smaller non-insurance companies increased revenues 11% to $120 billion with earnings up 20% to $5.6 billion. The growth is due primarily to the inclusion of Precision Castparts and Duracell which were acquired during the year. Excluding Precision Castparts and Duracell, manufacturing revenues were flat and pre-tax earnings declined reflecting sluggish demand for many product categories. This collection of 44 businesses selling everything from lollipops to jet airplanes is expected to expand both in numbers and earnings as the years go by. Viewed as a single entity, the companies in this group earned 24% on net tangible assets of $24 billion in 2016 despite holding large quantities of excess cash and using only token amounts of leverage.
Berkshire’s Finance and Financial Products sector generated $7.7 billion in revenues in 2016, a 10% increase over the prior year, with net income up 4% to $1.4 billion. This growth was led by Clayton Homes with an 18% increase in revenues to $4.2 billion. Last year, Clayton became America’s largest home builder, delivering 42,075 units that accounted for 5% of all new American homes. Marmon’s railcar business experienced a major slowdown in demand last year, which will cause earnings to decline in 2017. Fleet utilization dropped from 97% to 91%, with the drop particularly severe at the large fleet purchased from GE in 2015. Marmon’s crane and container rentals have weakened as well.
New additions to Berkshire’s Top 15 investments this year included Apple valued at $7.1 billion as of year end, Delta Airlines valued at $2.7 billion, Southwest Airlines valued at $2.2 billion and United Continental valued at $1.9 billion. (Subsequent to year end, Warren Buffett revealed he significantly increased his stake in Apple with the value now closer to $17 billion.) Berkshire has the option to buy 700 million shares of Bank of America at any time prior to Sept. 2021 for $5 billion. At year end, these shares were worth $15.5 billion, so Bank of America is in effect Berkshire’s third largest equity investment after Wells Fargo valued at $27.6 billion and Coca-Cola valued at $16.6 billion as of year end.
Kraft Heinz is excluded from the Top 15 common stock investments as it is part of a control group, since Berkshire owns 27% of the company. Under equity accounting, Kraft Heinz is carried on Berkshire’s balance sheet at $15.3 billion but has a year end market value of $28.4 billion.
Some of the stocks in the Top 15 are the responsibility of either Todd Combs or Ted Weschler, who each independently manages more than $10 billion for Berkshire. While Buffett has often said his ideal holding period for controlled businesses is “forever,” he pointed out in this year’s letter that they have made no commitment to hold any of the marketable securities forever. (This may be a hint that one or more of the “Inevitables” such as Coca-Cola or American Express may be sold in the future.)
Berkshire’s balance sheet continues to reflect significant liquidity and a strong capital base of $283 billion as of 12/31/16. Excluding utility and finance investments, Berkshire ended the year with $244.5 billion in investments allocated approximately 49.2% to equities ($120.5 billion), 9.6% to fixed-income investments ($23.4 billion), 5.9% to other investments, including preferred stocks in Bank of America and Restaurant Brands International ($14.4 billion), 6.3% to Kraft Heinz ($15.3 billion), and 29% in cash ($70.9 billion).
Berkshire’s financial strength allows Buffett to make significant investments and acquisitions. During 2016, Berkshire acquired Precision Castparts for $32.7 billion and Duracell in exchange for Procter & Gamble shares, which had a fair value of $4.2 billion. Berkshire’s many subsidiaries also continue to regularly make bolt-on acquisitions, which totaled $1.4 billion in 2016. Many more bolt-on deals are expected in future years. Free cash flow jumped 27% during 2016 to $19.6 billion, primarily due to a 19% decline in capital expenditures to $13 billion. During 2016, capital expenditures included $5.1 billion by Berkshire Hathaway Energy and $3.8 billion by BNSF. BNSF and Berkshire Hathaway Energy forecast aggregate capital expenditures to be about $8.6 billion in 2017. During 2016, Berkshire sold or redeemed a net $12 billion in equities, including Procter & Gamble and Wal-Mart. There were no share repurchases of Berkshire Hathaway stock during 2016, with Berkshire authorized to repurchase large amounts of Berkshire stock at 1.2 times or less of book value as that level represents a significant discount to Berkshire’s intrinsic value.
Berkshire’s intrinsic value far exceeds its book value. Berkshire’s per-share intrinsic value is expected to continue to build in the future by following the company’s simple blueprint: (1) constantly improving the basic earnings power of the many subsidiaries, (2) further increasing their earnings through bolt-on acquisitions, (3) benefiting from the growth of investments, (4) repurchasing Berkshire shares when they are available at a meaningful discount from intrinsic value and (5) making an occasional large acquisition. (Kraft Heinz’s recent rebuffed offer for Unilever is an example of the type of elephant Buffett would like to “shoot.”)
Berkshire Hathaway’s stock appears fully valued, currently trading at $255,040 per A share and $170 per B share. Based on current business fundamentals, we expect Berkshire’s A shares to trade between $197,000-$255,000 per share and the B shares to trade between $131-$170 per share. Hold.
Friday, Mar. 3, 2017 Fastenal-FAST announced it has signed an agreement to acquire certain assets of industrial and fastener supply distributor Manufacturer's Supply Company (Mansco) with the deal expected to close by the end of March. The company focuses on fastener products, with a particularly strong market position with commercial furniture OEMs. As such, this acquisition gives Fastenal a presence in a market where it has not meaningfully contributed in the past, while providing Mansco with additional tools with which to service its customer base. Mansco generated approximately $50 million of revenue in 2016, largely from its flagship Michigan location. The company is profitable and the transaction should be accretive in the first twelve months, though it should not be material to earnings per share.
Thursday, Mar. 2, 2017 Cognizant Technology Solutions-CTSH announced the acquisition of Brilliant Service Co. Ltd., an intelligent products and solutions company headquartered in Osaka, Japan, specializing in digital strategy, product design and engineering, the Internet of Things (IoT), and enterprise mobility. As part of the acquisition, a team of 70 professionals with extensive digital solutions experience and insights in the Japanese market will join Cognizant. The terms of the transaction were not disclosed.
Tuesday, Feb. 28, 2017 Last year, YouTube, a unit of Alphabet-GOOGL, hit a big milestone with people around the world now watching a billion hours of YouTube’s content every single day, rewarding their curiosity, discovering great music, keeping up with the news, connecting with their favorite personalities or catching up with the latest trend. YouTube’s aggressive use of artificial intelligence to recommend videos has led to this 10-fold increase in viewership since 2012, which is set to outpace U.S. television viewership.
Baxter International-BAX and ScinoPharm Taiwan, Ltd. announced a strategic partnership to develop, manufacture and commercialize five injectable drugs used in a range of cancer treatments, including lung cancer, multiple myeloma and breast cancer, as well as medication to treat nausea and vomiting, common side effects of chemotherapy. The arrangement also provides Baxter the option to partner with ScinoPharm—one of the world’s leading active pharmaceutical ingredient (API) manufacturers—on as many as 15 additional injectable molecules. Current branded sales of the initial five products included in this partnership total more than $4 billion annually. These products will join Baxter’s existing portfolio of generic injectable medications, which includes difficult-to-manufacture oncology drugs and a broad portfolio of standard-dose, ready-to-use premixed injectable products such as anti-infectives, analgesics and critical care medicines.
Monday, Feb. 27, 2017 The Priceline Group-PCLN reported fourth quarter revenues rose 17% to $2.3 billion with net income booking a strong 34% gain to $674 million and EPS traveling 35% higher to $13.47 thanks to expanding margins. During the fourth quarter, room nights booked accelerated to 31% growth while rental car days motored 14% higher. For the full year, revenues rose 17% to $10.7 billion with net income down 16% to $2.1 billion and EPS off 14% to $42.65, impacted by a $941 million non-cash goodwill impairment charge related to OpenTable. Return on equity for the year was a celebratory 21.7%. Free cash flow increased 27% during the year to $3.7 billion with cash and investments at the end of the year growing to $13.9 billion with long-term debt holding steady at about $6.2 billion. During the year, the company repurchased $1 billion of its own shares. Priceline expanded its share repurchase authorization by $2 billion with $4 billion now remaining available for future share repurchases. Potential tax reform will enable the company to access its cash, as the majority of it resides outside the U.S. Management’s outlook for the first quarter is