DuPont’s Second Quarter Results Secondary to Performance Chemicals Announcement
July 24, 2013
Chemical and agricultural conglomerate DuPont (click ticker for report: ) announced uneventful second quarter results Tuesday morning which were overshadowed by the firm announcing it will explore “strategic alternatives” for its performance chemicals business. The firm believes spinning of its highly-cyclical titanium dioxide business will allow it to focus on higher-growth segments and reduce performance volatility. We’ll address this issue later. During the second quarter, DuPont’s revenue declined 1% year-over-year to $9.8 billion—slightly below consensus estimates. Earnings per share declined 15% year-over-year to $1.28 per share, a touch better than consensus expectations. Image Source: DD 2Q 2013 Investor Presentation The bigger story is that the firm is exploring strategic alternatives for its ‘Performance Chemicals’ business. DuPont believes spinning off its
Netflix’s Second Quarter Was Fine; The Stock Is Just Expensive
July 24, 2013
Content streaming service Netflix (click ticker for report: ) posted solid second quarter results Monday afternoon. Revenue increased 20% year-over-year to $1.02 billion, roughly in-line with consensus expectations. Earnings per share quadrupled year-over-year to $0.49, well above consensus estimates. The firm also generated positive free cash flow of $12.9 million, or about 2% of revenue. The format for the earnings call stole the show from the actual results. Eschewing the traditional call with analysts, Netflix instead had CEO Reed Hastings, CFO David Wells, and Chief Content Officer Ted Sarandos sit down with CNBC’s Julia Boorstin and Rich Greenfield of BTIG to discuss the results. While some may be upset with the exclusive choices, we do not have any problem with
Kimberly-Clark Posts Solid Second Quarter Results
July 23, 2013
Wisconsin-based consumer products company Kimberly-Clark (click ticker for report: ) posted solid second quarter results Monday morning. Revenue was flat year-over-year at $5.7 billion, just a touch below consensus estimates. Adjusted earnings per share increased 8% year-over-year to $1.41, slightly above consensus expectations. Even though headline numbers were strong, free cash flow totaled $356 million, equal to just under 7% of revenue (not as strong as we would have liked, but still good). Kimberly-Clark’s ‘Personal Care’ segment, the firm’s largest division, underperformed the rest of the company, with revenue declining 1% year-over-year to $2.4 billion. European operations are being pared back, and it now no longer sells its legendary Huggies brand in any European market except for Italy. North American
Soft Sales Growth at McDonald’s Is No Surprise
July 23, 2013
Fast food heavyweight McDonald’s (click ticker for report: ) reported an uneventful second quarter Monday morning. Revenue increased 2% year-over-year to $7.1 billion, in-line with consensus estimates. Earnings per share fell a few cents short of consensus estimates, growing 5% year-over-year to $1.38 per share. CEO Don Thompson tends to cite the macroeconomic environment as the main driver of persistent weakness at McDonald’s. This argument certainly holds weight in Europe, in our view, but we do not believe the soft 1% same-store sales growth rate in the US was macro-related. Rather, we think the company’s premium product offerings aren’t packing the same punch as new products did in previous years. McDonald’s performed relatively well during the Great Recession thanks to
Disney Contract Extension Outshines Weak Revenue Growth at Hasbro
July 22, 2013
Monday morning, Dividend Growth Newsletter portfolio holding Hasbro (click ticker for report: ) reported slightly weaker than anticipated second quarter results. Revenue declined 6% year-over-year to $766 million, well below consensus estimates. Earnings per share, adjusted for a one-time charge, also came in below consensus expectations, falling 12% year-over-year to $0.29. Year-to-date, free cash flow is up to 66% to $245 million, which equates to 17% of revenues (an excellent number). Though headline numbers weren’t quite as strong as anticipated, the market is focused on the contract extension Hasbro inked with Disney (click ticker for report: ) to keep Marvel and Star Wars products exclusive to Hasbro. We’re not surprised by the deal extension, but some market participants may have
Intuitive Surgical Reduces Its Outlook Amid Regulatory Concern
July 22, 2013
Thursday afternoon, medical device maker Intuitive Surgical (click ticker for report: ) reported weak second quarter results and reduced its full-year outlook. Revenue jumped 8% year-over-year to $579 million, falling short of consensus expectations. Earnings per share increased 4% year-over-year to $3.90, below consensus estimates. Of course, these headlines are no surprise after the company pre-announced weak results earlier this month. We’ve of the firm but are sticking with our small position in the portfolio of our Best Ideas Newsletter. The big news in the press release was the extremely bearish revenue guidance given by management. After announcing first-quarter results, the firm provided a revenue growth outlook of 16%-19% for fiscal year 2013. With the market for da Vinci systems
The Danaher Business System Continues to Drive Strong Free Cash Flow Conversion
July 22, 2013
Diversified industrial firm Danaher (click ticker for report: ) reported better than expected second quarter results Thursday. Revenue advanced 4% to $4.7 billion (organic revenue growth was 2.5%), which led to nearly a 4% increase in operating income. The firm’s gross margin improved 100 basis points, and core operating margin grew 95 basis points. Adjusted diluted earnings per share increased 7.5% to $0.87 (which beat consensus estimates of $0.85). Year-to-date, free cash flow has fallen nearly 10%, though it still represents 13.9% of revenue, which is a very healthy number. Revenue growth across Danaher’s segments was modest, with the exception of its ‘Test & Measurement’ segment, which was roughly flat during the period. The company experienced sequential improvement in Brazil
Verizon Shows Off Cash-Flow Generating Prowess in Second Quarter
July 21, 2013
Thursday morning, Verizon (click ticker for report: ) reported in-line but strong second quarter results and raised its capital spending guidance for 2013, casting a positive light on the telecom equipment makers. We continue to pay very close attention to Verizon’s operating performance, as we consider the firm one of our top contenders for addition to our Dividend Growth portfolio. Verizon’s revenue performance during the quarter was solid (up more than 4% on a consolidated basis), with wireless service revenues and wireless retail service revenues both up about 8%. The company posted 941,000 retail postpaid net additions (up 6% year-over-year), driving total retail postpaid connections to 94.3 million (retail postpaid churn was 0.93% in the second quarter). Apple’s (click ticker
Philip Morris’ Second Quarter Reveals Volume Pressures
July 21, 2013
Philip Morris (click ticker for report: ) issued lower-than-expected revenue and earnings in its second quarter Thursday. Net revenues, excluding excise taxes and currency, rose modestly (0.5%) thanks to improvements in ‘Latin America and Canada,’ while operating income, excluding unfavorable currency movements, fell more than 3% (led by more than a 9% slide in operating income in its ‘Asia’ division). Adjusted diluted earnings per share nudged up a penny, to $1.37, and we note that such improvement was augmented by its share repurchase program. Philip Morris’ cigarette shipment volume of 228.9 billion units fell nearly 4%. Though the pace of the volume decline slowed from the first quarter of the year, performance was clearly subdued, and volumes in the ‘Eastern
Chipotle Surprises to the Upside
July 20, 2013
Thursday afternoon, restaurant chain Chipotle (click ticker for report: ) posted solid second quarter results. Revenue jumped 18% year-over-year to $817 million, easily exceeding consensus estimates. Earnings per share were also above the Street’s consensus, growing 10% year-over-year to $2.82. Thus far in 2013, the firm has generated $187 million in free cash flow, equal to 15% of total revenue. Outperformance in Chipotle’s second quarter results was largely driven by a 5.5% same-store sales growth rate. Co-CEO Steve Ells explained that all the company needed to bolster comparable store sales relative to consensus was a little marketing. On the conference call, he elaborated on this point, saying: “In addition to our Cultivate Festivals, we are now well into our skillfully
