P&G Delivers Fantastic Results
January 25, 2013
After sputtering along for the past few years, consumer product giant Procter & Gamble (click ticker for report: ) has returned to solid growth, reporting strong second-quarter results for its 2013 fiscal year Friday. Revenue rose 3% year-over-year to $22.2 billion, handily beating consensus expectations. Earnings growth was also fantastic, with core earnings per share jumping 12% compared to the year-ago period to $1.22, a stark advance from its prior lackluster growth (Image Source: P&G Earnings Presentation). The firm’s gross margin in the quarter expanded 80 basis points year-over-year to 50.9% as the company benefits from relatively flat cost inflation and incremental price increases. SG&A grew about 2% year-over-year, but the cost item remained flat as a percentage of sales.
Microsoft Remains a Terrific Company
January 25, 2013
Dividend Growth Newsletter portfolio holding Microsoft (click ticker for report: ) reported solid second-quarter fiscal 2013 results Thursday afternoon. Revenue jumped 3% year-over-year (5% non-GAAP) to $21.5 billion, roughly in line with consensus figures. Earnings per share declined 3% year-over-year (+4% non-GAAP) to $0.76 per share, a penny better than the consensus estimate. The performance from the Windows Division was relatively strong, in our view. 60 million Windows 8 licenses sold is a pretty solid number (as the image below shows), though we think the company (and the industry) would have liked to see the new operating system perform better (Image Source: Microsoft 2Q Earnings Presentation). We place a lot of the blame on the OEMs such as Dell (click ticker for
Tales from the Rails
January 25, 2013
Since rails are heavily tied to weakening coal shipments, there was a great deal of skepticism about the industry’s strength during the back half of 2012. However, we saw evidence (AAR data) that indicated an altering freight mix (auto sales, intermodal, petroleum shipments, crushed stone, gravel and sand) could compensate for coal shipment weakness. Let’s dig into how the group is performing now that fourth-quarter results for a few of them have come in. On Thursday, Union Pacific’s (click ticker for report: ) fourth-quarter report revealed that its performance during the period was solid. Despite the weak coal shipments, revenue grew 3% year-over-year to $5.3 billion, roughly in line with consensus expectations. Earnings were better than anticipated, growing 10% year-over-year, to $2.19 a share.
Bristol-Myers Squibb Beats Estimates
January 24, 2013
Despite facing a steep patent cliff, pharmaceutical firm Bristol-Myers Squibb (click ticker for report: ) posted decent fourth-quarter results Thursday morning. Revenue declined 23% year-over-year to $4.2 billion, slightly better than the consensus prediction. Operating earnings per share declined 11% year-over-year to $0.47, which was also better than consensus estimates. 2012 was expected to be a tough year for the company, as it had US patents expire on Plavix and Avapro/Avalide, and total sales fell 23% for the quarter. However, strong international growth of 6% allowed the company to achieve 12% revenue expansion, excluding the aforementioned drugs. Costs were also reduced substantially, as the firm cut advertising and product-promotion spending 26% year-over-year to $212 million and slashed SG&A spending 6%
Revenue Upside at Defense Contractors May Now Be Capped
January 24, 2013
On Thursday, defense contractors Lockheed Martin (click ticker for report: ) and Raytheon (click ticker for report: ) reported mixed fourth-quarter results. Though both ended the year with strong backlogs, we think cautious commentary regarding sequestration risk may put a cap on future revenue upside (relative to expectations). Lockheed Martin’s bottom-line missed the mark during the fourth quarter, but revenue came in slightly better than expected. The defense contractor issued 2013 guidance of $44.5-$46 billion in sales and $8.80-$9.10 in earnings per share, both ranges higher than consensus estimates. The firm ended 2012 with a record backlog of $82.3 billion (implying a book-to-bill ratio of 1.03 for the year), representing roughly 1.75 times expected 2013 revenue (Image Source: LMT 4Q Earnings
Netflix Surges on Strong Subscriber Growth
January 24, 2013
Wednesday afternoon, DVD rental and video streaming service Netflix (click ticker for report: ) reported much better than anticipated fourth-quarter results. Revenue increased 13% year-over-year to $945 million, easily exceeding consensus expectations. Earnings surprised materially to the upside, coming in at a positive $0.13 per share compared to a projected loss of $0.12. The big shock during the quarter was the sequential acceleration in the streaming business, both internationally and domestically. Domestic subscriber additions during the quarter jumped 77% sequentially, to 2.05 million. Given the breadth and depth of its TV lineup, this shouldn’t be the surprise that it turned out to be. Netflix is quickly becoming a relatively strong substitute for cable due to its incredible amount of content,
Apple’s Fiscal First-Quarter Weekly Revenue Up 27%; Bottom-Line Earnings Beat; Street Is Off Its Rocker
January 24, 2013
Legendary investor Warren Buffett was taught by his mentor Benjamin Graham about the mood swings of Mr. Market. Buffett expanded this idea, famously characterizing Mr. Market as schizophrenic. It appears the latest bout of irrationality has been extended to Apple (click ticker for report: ). Apple is the most valuable company in the world, the most widely held, and the most watched. It has possibly more metrics to “meet” than almost any other firm. During its fiscal first quarter, Apple easily exceeded consensus bottom-line estimates with earnings of $13.81 per share, though that number was down compared to a year ago due to calendar timing (the most recently-reported quarter of 2013 was 13 weeks while last year’s quarter was 14
United Technologies Looks to a Strong 2013 After a Transformative 2012
January 24, 2013
United Technologies (click ticker for report: ) posted mixed fourth-quarter results as it ended what we’d describe as a transformational year. The company scooped up aerospace supplier Goodrich and a larger stake in International Aero Engines (IAE) during 2012, two moves we applaud as both increase the firm’s exposure to a burgeoning commercial aerospace delivery advance in coming years. Sales during the quarter jumped 14% from the prior-year period, though organic expansion was flat. The company’s adjusted segment operating margin came in at 13.3%, roughly 200 basis points lower than last year’s quarterly mark. Earnings per share in the quarter dropped 27% from the same period a year ago, but after adjusting for restructuring items, profits fell just 9%. Free cash flow,
McDonald’s Beats Estimates
January 23, 2013
Fast-food goliath McDonald’s (click ticker for report: ) announced slightly better-than-expected fourth quarter results Wednesday morning. Revenue grew 2% year-over-year to $7 billion, a touch better than consensus expectations. Earnings, which have seen estimates slashed during the past several months, were a few pennies better than anticipated, growing 4% year-over-year to $1.38 per share. We’re not too fixated on the “beat,” but rather the weakness we are seeing at the core business. Global same-store sales increased just 0.1% during the quarter—McDonald’s worst in years! Same-store sales in the US jumped 0.3% year-over-year in the fourth quarter with flat operating income—the top-line was better than the rest of the company, but certainly is not a strong figure. McDonald’s continues to focus on
IBM Reports Solid Fourth Quarter; Remains on Track to Reach Earnings Goals
January 23, 2013
On Tuesday, IBM (click ticker for report: ) reported strong fourth-quarter results that showed flat revenue growth but solid non-GAAP operating earnings-per share expansion (up 14%) and GAAP earnings-per-share expansion (up 11%). Software sales advanced 4%, while services revenue fell 1%, both measures adjusted for currency. The firm’s systems and technology revenue fell 1%, but z mainframe revenue jumped an impressive 56%. Non-GAAP gross margin reached 52.3% of sales, up 2.1 percentage points from the year-ago quarter. Free cash flow increased $0.6 billion to $9.5 billion (an impressive 32.4% of sales in the period). Importantly, services backlog advanced roughly $1 billion, to $140 billion, after adjusting for currency. For all of 2012, IBM achieved record profit, earnings per share, and
