Boeing Reports Solid Third Quarter; Commercial Aerospace Backlog Remains Strong
October 24, 2012
On Wednesday, aerospace giant Boeing (click ticker for report: ) reported excellent third-quarter results that showed solid backlog trends and improving cash flow. We continue to think aerospace is one the strongest sectors in the global economy, boasting significant visibility as a result of the tremendous backlogs of the airframe makers. We do not expect to make a change to our fair value estimate of Boeing at this time. Boeing’s revenue advanced 13% during the period thanks to commercial airplane sales, which jumped 28% on higher delivery volume. Operating earnings rose roughly 6% in its commercial business, while defense earnings were roughly flat from the year-ago period. Excluding pension expense, earnings per share advanced 5% during the quarter. We continue
Investors Can Dislike Facebook But Third Quarter Results Were Strong
October 24, 2012
Social networking kingpin Facebook (click ticker for report: ) reported strong third quarter results Tuesday afternoon as the company navigates the shift towards mobile computing. Revenue surged 32% year-over-year to $1.2 billion, while earnings were flat at $0.12 per share as operating margins fell. However, both numbers exceeded consensus estimates and were surprisingly strong given the weakness we saw last week from Google (click ticker for report: ). Facebook continues to win eyeballs as usage and users continue to surge. Monthly active users increased 26% year-over-year to 1.01 billion, daily active users grew 28% year-over-year to 584 million, and mobile active users grew 61% year-over-year to 604 million. Facebook remains the number one application for both Android and iOS. Despite
United Technologies’ Third Quarter Results Left Much to Be Desired
October 23, 2012
On Tuesday, United Technologies (click ticker for report: ) reported weak third-quarter results. Sales advanced 6%, but earnings dropped by a similar amount, excluding restructuring costs. Organic sales fell 2% as negative foreign currency fluctuations adversely impacted expansion by 3 percentage points. The company’s operating margin also fell 100 basis points from the prior-year period, after adjusting for restructuring costs and net one-time items. Though the results weren’t as strong as we would have liked, we don’t expect any change to our fair value estimate to be material. New equipment orders were solid at Otis and in its North American residential HVAC business, but commercial aerospace spares orders dropped over 20% at Pratt & Whitney and 6% at UTC Aerospace
Coach Returns to Growth after a Weak Fourth Quarter
October 23, 2012
Aspirational luxury brand Coach (click ticker for report: ) reported strong earnings for its fiscal year 2013 first quarter Tuesday morning. Revenue and earnings were roughly in-line with expectations, with revenue growing 11% year-over-year to $1.16 billion and earnings expanding 5% year-over-year to $0.78 per share. The company also announced a $1.5 billion share buyback program. After a rough fourth quarter, North American same-store sales rebounded, growing 5.5% year-over-year, driving total sales up 8% to $784 million. This compares to the firm’s anemic 1.7% same-store sales growth during its previous quarter. Department store sales in North America were flat, though the stores ordered fewer inventories than a year ago. Coach’s Legacy collection, which CEO Lew Frankfort highlighted in the press
Honeywell Shows Continued Strong Execution; Revenue Environment Weakens
October 23, 2012
Last Friday, Honeywell (click ticker for report: ) reported mixed third-quarter results that showed weakness in Europe (as expected) but strength in commercial aerospace, infrastructure spending, and oil and gas investments. Though revenue was roughly flat from the same period a year ago, organic sales edged up 2% and earnings per share from continuing operations jumped nearly 40%, though the firm benefited from a more-favorable tax rate in the most recently reported quarter. The company lowered its 2012 revenue guidance modestly, but it only narrowed the range of its 2012 proforma earnings per share outlook to $4.45-$4.50 per share (was $4.40-$4.55 per share), still representing a double-digit increase from last year. Free cash flow for the year is expected to
General Electric Reveals Strong Earnings Expansion in Third Quarter; Backlog Growth Stalls
October 23, 2012
General Electric (click ticker for report: ) kicked off third-quarter results for large industrial bellwethers last Friday. The industrial conglomerate saw its industrial revenues advance 6%, excluding currency fluctuations, thanks to industrial segment organic revenue growth of 8% (up 10% year-to-date). Excluding the effects of the preferred stock redemption that occurred in the third quarter of last year, operating earnings per share jumped 13%. The company recorded positive earnings growth in all five of its industrial segments for the first time since the third quarter of 2005. Our fair value estimate remains unchanged. Organically, the firm’s energy infrastructure and transportation segments led the charge, but we were interested to see that its aviation segment did not continue its steady advance
Yahoo Beats Estimates; We Like Mayer’s Strategy
October 23, 2012
Web content firm Yahoo (click ticker for report: ) reported better than expected third quarter results Monday afternoon. Revenue grew 2% year-over-year to $1.09 billion, a touch better than consensus estimates. Operating income per share, which excludes the gain on sale of Alibaba, grew 66% year-over-year to $0.35, which was much better than the consensus expectation. Most of Yahoo’s profitability gains came from shrinking the workforce, which fell by 1,700 employees on a year-over-year basis, to 12,000. Sales and marketing expenses were cut 7% year-over-year to $269 million, while product development costs fell 5%. This focus on cost cutting allowed the company to generate adjusted operating cash flow of $496 million, up 39% compared to the third quarter of 2011.
Hasbro Reports a Strong Third Quarter
October 22, 2012
Toymaker and dividend-growth gem Hasbro (click ticker for report: ) reported better than expected earnings and revenue that was in-line with consensus estimates Monday morning. The firm saw revenue remain roughly flat at $1.35 billion but grow 1%, if adjusted for negative currency impacts. Earnings per share fell 2% to $1.24. We thought results might be a little stronger than reported after Mattel’s (click ticker for report: ) strong earnings, but we still think the quarter was solid. Revenue in the US grew only 1% to $774.5 million, but operating profits surged 20% year-over-year to $154.2 million. The firm’s focus has clearly yielded positive results. Net of currency impacts, international toy revenues were up 1% as well, though down 7%
Ancestry.com Taken Private at $32 Per Share
October 22, 2012
Management, private-equity firm Permia, and Spectrum Equity will take Ancestry.com private. We don’t like the deal, but we will move on from this position.
McDonald’s Sales Growth Looks Anemic in the Third Quarter
October 22, 2012
Fast-food chain McDonald’s (click ticker for report: ) reported mediocre third quarter results Friday morning. Revenue growth was weak, coming in flat year-over-year, though up 4% on a currency-neutral basis, in-line with expectations. Earnings fell 1% year-over-year to $1.43 per share, a few cents lower than consensus estimates. Weakness was broad-based, with aggregate same-store sales growing only 1.9%. The weakest geographic region was surprisingly the US, where same-store sales grew only 1.2% year-over-year. The firm has tried to move away from its value offerings to grab margin dollars as input costs soar, but the change hasn’t been effective. Still, management expects the McRib and the introduction of the Cheddar Bacon Onion to drive incremental growth in the US during the
