Potash Corp Struggles with Weak Nutrient Prices
July 29, 2013
Nutrient fertilizer producer Potash Corp (click ticker for report: ) posted weak second quarter results Thursday morning. Revenue declined 11% year-over-year to $2.1 billion, worse than consensus estimates had anticipated. Earnings per share, adjusted for one-time items, declined 26% year-over-year to $0.73 per share, which was also worse than consensus expectations. Free cash flow remained terrific at $848 million, equal to 40% of revenue. Image Source: POT 2Q 2013 Investor Slides Potash’s issue during the second quarter was the material decline in potash (the mineral) gross margins. Prices declined significantly, falling 18% year-over-year to $356 per tonne as robust North American farmer demand (up 28% year-over-year) was more than offset by lower realized prices shipped via Canpotex. Price is paramount
3M Posts Poor Second Quarter Results; Operating Income Declines
July 29, 2013
On July 25, industrial conglomerate 3M (click ticker for report: ) reported relatively lackluster second quarter results. Organic local-currency sales grew 2.3% and earnings per share of $1.71 advanced 3% versus the same period a year ago, but operating income slipped due to material cost pressures. We also note the earnings-per-share growth was enhanced by a lower tax rate and share buybacks, revealing lower quality expansion (we prefer operating income growth—not just earnings-per-share growth). Still, free cash flow of $1.28 billion generated during the period exceeded net income and accounted for roughly 16.6% of sales. 3M’s ‘Health Care’ division led the charge, with organic local-currency revenue advancing 5.7% in the period. The firm’s ‘Industrial’, ‘Consumer’, and ‘Safety & Graphics’ segments
AbbVie’s Humira Continues to Drive Strong Performance; Pipeline Advances
July 29, 2013
On Friday, AbbVie (click ticker for report: ) reported better-than-expected second quarter results and revealed a number of advancements to its strong and growing pipeline. During the period, revenue advanced 4.4% (5.1% excluding currency) as the firm benefited from Humira’s global sales growth of 12% (16% growth in the US) and double-digit expansion from several other products including Synthroid, Creon, Zemplar and Duodopa. Excluding the decline in TriCor/Trilipix sales due to loss of exclusivity, sales would have jumped 10.3% in the period. Second-quarter adjusted earnings per share of $0.82 beat the consensus estimate by a couple pennies. The global biopharmaceutical firm noted significant advancements in its pipeline. AbbVie has received Breakthrough Therapy designation from the FDA for its genotype 1
GM Rides North America to Success
July 27, 2013
US automaker General Motors (click ticker for report: ) announced solid second quarter results Thursday morning, echoing the strength we saw from competitor and Best Idea portfolio holding Ford (click ticker for report: ). Revenue increased 4% year-over-year to $39.1 billion, modestly exceeding consensus estimates. Earnings-per-share was also strong, though down 7% year-over-year to $0.84 on an adjusted basis. Automotive free cash flow was $2.6 billion, approximately 7% of total revenue. Image Source: GM 2Q 2013 Charts As with Ford, North America drove profitability as revenue increased 9% year-over-year to $23.5 billion, and segment EBIT increased 5% year-over-year to $2 billion. Even as the broader auto market recovery has advanced, we can see from the above chart that GM hasn’t
Precision Castparts Reports Record Fiscal First Quarter Results
July 27, 2013
On Thursday, Best Ideas Newsletter portfolio holding Precision Castparts (click ticker for report: ) issued decent first quarter fiscal 2014 results. Though performance fell below consensus estimates, the aerospace engine casting provider achieved record diluted earnings per share, record consolidated segment operating margins (27.2%), and strong cash generation in the period. We’re expecting significant earnings expansion in coming years as a result of its recent acquisition of Titanium Metals (TIMET) coupled with the current high-level of commercial aircraft deliveries. Revenue expanded 20% in the period thanks to elevated aircraft build rates and acquisitive activity, while consolidated segment operating income jumped 25%. The operating margin in its ‘Investment Cast Products’ segment advanced 140 basis points, to 34.6%, despite relatively flat segment
Productivity on the Rise at Starbucks
July 26, 2013
Global coffee shop powerhouse Starbucks (click ticker for report: ) posted strong third quarter results Thursday afternoon. Total revenue increased 13% year-over-year to $3.7 billion, roughly in-line with consensus estimates. Earnings per share jumped 28% year-over-year to $0.55, a few pennies above consensus expectations. Increased store productivity continues to be the major driver behind Starbucks’ fantastic revenue growth. Global same-store sales advanced 8% year-over-year on traffic that was 7% higher than that in the year-ago period. Same-store sales increased across all geographies, but the US was particularly strong, with comp growth of 9% year-over-year. Only a few years ago did the market wonder if Starbucks’ premium coffee products were simply too expensive to keep consumers coming back. We think that
Amazon Fails to Turn a Profit
July 26, 2013
Thursday afternoon, e-commerce heavyweight Amazon (click ticker for report: ) reported mediocre second quarter results. Revenue increased 22% year-over-year to $15.7 billion, falling short of consensus estimates. Earnings per share swung to a loss of $0.02, which was also worse than consensus expectations. Free cash flow for the quarter was surprisingly positive at $25 million, equal to less than 1% of revenue. Amazon remains firmly entrenched in “investment” mode, as the firm spent well over $800 million on internal investments during the second quarter. The company specifically cites spending on fulfillment centers and server infrastructure as well as continued investment in the Amazon Prime Instant stream. Within the not-so-distant future, we can envision an Amazon where same-day shipping is the
Pepsi Profits from Strong Gross Margins
July 26, 2013
Beverage and snack giant Pepsi (click ticker for report: ) reported strong second quarter earnings improvement Wednesday morning. Core earnings per share increased 17% year-over-year to $1.31, easily exceeding consensus estimates. Organic revenue rose 4% year-over-year, but reported revenue increased just 2% year-over-year to $16.8 billion, still slightly ahead of consensus. Free cash flow year-to-date stands at $2.1 billion, equal to 7% of total revenues. The headline for the second quarter at Pepsi was gross margin improvement. “Core” gross margins increased 120 basis points year-over-year, and reported gross margins improved 110 basis points year-over-year to 53%. The firm benefitted from lower input costs, so the improvement mostly came from external factors rather than internal improvements. Even though Pepsi ramped up
Firms Raising Their Dividend In the Week Ending July 26 Included Hershey and Republic Services
July 26, 2013
Below we provide a list of firms that increased/decreased their dividends for the week ending July 26. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports, please click here. Increases Atlas Energy (ATLS): now $0.44 per share quarterly dividend, was $0.31. Bar Harbor Bankshares(BHB): now $0.315 per share quarterly dividend, was $0.31. Barnes Group (B): now $0.11 per share quarterly dividend, was $0.10. BBCN Bancorp (BBCN): now $0.075 per share quarterly dividend, was $0.05. Celanese Corporation (CE): now $0.18 per share quarterly dividend, was $0.09. Crane Co (CR): now $0.30 per share quarterly dividend, was $0.28. Fidelity Southern Corporation (LION): now $0.02 per share quarterly dividend, was $0.01. First
Qualcomm Rises on Strong Revenue Growth
July 26, 2013
Chipmaker Qualcomm (click ticker for report: ) reported fantastic third quarter results Wednesday afternoon. Revenue surged 35% year-over-year to $6.2 billion, handily exceeding consensus estimates. Non-GAAP earnings per share jumped 21% year-over-year to $1.03, roughly in-line with consensus estimates. Free cash flow was fantastic at $1.85 billion, equivalent to 30% of revenue. Image Source: QCOM 3Q FY13 Presentation It’s interesting to see average selling prices (ASPs) for 3G/4G devices increase $13 sequentially to $230 during the March quarter, indicating a shift towards higher-end devices. Qualcomm also forecasts ASPs to range from $223-$229 for fiscal year 2013, an increase of 2-5% year-over-year. Clearly, pricing growth is not as robust in the smartphone space as it once was, but the market still
