3D Systems Can Hardly Meet Demand
August 8, 2013
Three dimensional printing pioneer 3D Systems (click ticker for report: ) reported fantastic second quarter results. Revenue surged 45% year-over-year to $121 million, handily exceeding consensus expectations. Non-GAAP earnings per share increased 11% year-over-year to $0.20, slightly below consensus estimates. For a firm in a high revenue growth phase, free cash flow is solid year-to-date at $9 million, equal to 6% of total revenue. Image Source: DDD 2Q 2013 Presentation Revenue growth was broad-based, as ‘Products’ revenue surged 60% year-over-year to $83.4 million. ‘Services’ revenue grew at a slightly lower rate, up 19% year-over-year to $37 million. 3D Systems also posted decent gross-margin expansion, up 40 basis points firmwide to 51.8%. ‘Printers and other products’ gross margins surged 250 basis
Why Zoetis’ Second Quarter Was Decent
August 8, 2013
Former Pfizer (click ticker for report: ) business unit Zoetis (ZTS) announced solid second quarter results Tuesday morning. Zoetis is relatively new as a public company, and this was the first time it reported results as a completely separate entity. Zoetis focuses on animal nutrition for both livestock and domesticated animals and is among the few animal nutrition “pure plays” available to investors. In the period, revenue increased 2% on a year-over-year basis (4% excluding currency), to $1.1 billion, roughly in-line with consensus estimates. Adjusted net income per share rose 3% year-over-year to $0.35, also consistent with consensus expectations. The majority of Zoetis’ revenue comes from the US (39% in the second quarter), where revenue grew 4% year-over-year to $437
Emerson’s Cash Flow Remains Strong
August 8, 2013
Dividend Growth Newsletter portfolio holding Emerson Electric (click ticker for report: ) posted another slow quarter Tuesday morning. Revenue declined 2% year-over-year to $6.3 billion in its third quarter (ended June), slightly below consensus expectations. Earnings per share, adjusted for one-time charges, declined 7% year-over-year to $0.97. Although headline results were relatively weak, free cash flow increased 20% year-over-year to $850 million, equal to 13% of total revenue. On the positive side, Emerson announced it was selling 51% of its embedded computing and power business to private equity firm Platinum Equity for $300 million. The deal caused a $0.05 repatriation charge as the firm had to bring back foreign-held cash, but the big charge came from the $503 million goodwill
Lone Ranger Can’t Ruin Disney’s Free Cash Flow
August 7, 2013
Tuesday after the market close, media conglomerate Disney (click ticker for report: ) announced slightly disappointing third-quarter results. Revenue fell slightly short of consensus expectations, growing 4% year-over-year to $11.6 billion. Earnings grew a mediocre 2% year-over-year to $1.03 per share (excluding one-time items), which was actually slightly better than consensus estimates. Though headline numbers were weak, free cash flow for the third quarter surged 27% year-over-year to $2.7 billion, equal to 23% of total revenue. The big disappointment during the third quarter came from Disney’s Studio Entertainment business. Revenue declined 2% year-over-year to $1.6 billion, while operating income fell 36% year-over-year to $201 million. This comes as no surprise as The Lone Ranger is already considered a flop. Since
Why We Didn’t Get Excited About First Solar
August 7, 2013
Tuesday afternoon, solar panel maker First Solar (click ticker for report: ) announced disappointing second-quarter results, confirming some of the issues we have long held with its business. Valuentum subscribers know that we don’t like the firm’s long-term prospects considering the industry’s ultra-competitiveness and First Solar’s forecast of weak gross margins. During the quarter, revenue at First Solar declined 46% year-over-year, to $520 million, more than $200 million short of consensus estimates. Earnings per share were 71% lower than a year ago, coming in at $0.37, again well below consensus expectations. Free cash flow was also materially weaker, registering $168 million (down 49% year-over-year) and equal to 32% of revenue. Image Source: FSLR 2Q 2013 Earnings Slides The situation for
ADP Issues Decent Fiscal Fourth Quarter, Strong Guidance
August 7, 2013
On Thursday morning, payroll processing firm Automatic Data Processing (click ticker for report: ) announced decent fourth quarter results. Revenue increased 7% year-over-year to $2.8 billion, roughly in-line with consensus estimates. Earnings were a penny shy of consensus expectations, increasing 6% year-over-year to $0.55. ADP benefits greatly from increased employment, particularly since the firm is synonymous with payroll processing and management. Revenue from its ‘Employer Services’ division grew 8% year-over-year during the quarter to $2 billion. Management noted that growth was organically driven, as the firm didn’t make many acquisitions. Bookings increased at a double-digit pace during the fourth quarter, and we saw its pretax operating margins jump 120 basis points year-over-year. Client retention for the segment was robust during 2013
American Eagle and the Difficulty of Investing in Teen Retailers
August 7, 2013
Monday after the market close, teen retailer American Eagle (click ticker for report: ) reduced its second quarter earnings outlook. After a relatively weak first quarter, the firm was generally optimistic about its prospects heading into the second quarter, predicting flat same-store sales and earnings per share of $0.19-$0.21. However, earlier this week the firm said earnings per share will now be closer to $0.10 for the second quarter, a decline of 50% compared to the same period a year ago. Same-store sales that were predicted to be flat will actually be down 7% year-over-year (compared to 8% growth in the same period a year ago). Thus, same-store sales are only about 1% higher than they were two years ago.
Gorilla Glass Continues to Drive Success at Corning
August 7, 2013
Last week, glass maker Corning (click ticker for report: ) reported strong second quarter results. Revenue jumped 11% year-over-year to $2 billion, easily exceeding consensus estimates. Core earnings per share increased 23% year-over-year to $0.32, also ahead of consensus expectations. Free cash flow was up slightly from a year ago at $151 million, equal to 8% of total revenue. Corning’s ‘Display Technologies’ business (think screens) drove the lion’s share of growth as sales surged 21% year-over-year to $670 million, with earnings up 11% year-over-year. The lack of earnings leverage in the ‘Display Technologies’ comes from the presence of cheap foreign competition, which has led to market price declines. With further industry price declines imminent, controlling costs will be essential to
Buffett Proves Berkshire Is More Than an Index
August 7, 2013
For years, skeptics have labeled the company essentially an index, but Warren Buffett’s Berkshire Hathaway (BRK.A) reported fantastic second-quarter results Friday afternoon. Revenue jumped 16% year-over-year to $44.7 billion, easily exceeding consensus expectations. Operating earnings were also strong, growing 5% year-over-year to $2,384 per share, also better than consensus estimates. The Oracle’s favorite metric, book value per share, is up 7.6% year-to-date to $122,900. Insurance On a segment basis, insurance underwriting profits were a tad weaker than the year prior, down 14% year-over-year to $530 million. Of course, underwriting is a notoriously volatile business because the timing of catastrophic events is inherently unpredictable. The year-to-date trend is positive, as profits have more than doubled. Still, the long-term trend remains the
Exxon Misses, ConocoPhillips Raises Production, and Shell Writes Down North American Shale Assets
August 6, 2013
As Valuentum members are aware, we think the oil majors each have their own respective strengths and weaknesses. Exxon Mobil (XOM) has consistently earned the best economic returns (ROCE) among peers, but its stock price is rich, trading at the high end of our fair value estimate range (at the time of this writing). ConocoPhillips (COP) continues to raise its production forecasts and is the second-best value-creator (ROCE) in the group. However, Chevron (CVX) has the strongest balance sheet among peers (it has the only net cash position), and by extension, is better-positioned to raise its dividend during the troughs of future energy-price cycles. Meanwhile, BP (BP) continues to deal with the aftermath of its well-publicized 2010 oil spill in
