Tuesday, October 28, 2008

ESV 3Q08 Earnings (James Fowler)

ESV reported a 5.8% increase in net income Y/Y of $282.3M, $1.99 per diluted share, on revenues of $635.8M for 3Q08, compared to income of $266.7M, $1.82 per diluted share on revenues of $536.4M for the same period last year. ESV incurred a loss of $18.9M, $0.13 per diluted share, related to the loss of ENSCO 74, a Gulf of Mexico jackup rig. The rig is believed to have sunk in the aftermath of Hurricane Ike. Average day rates for the jack up fleet for the third quarter increased 10% to $156,900, as compared to $142,100 in the previous quarter last year. Rig utilization was also increased over last year with a rate of 97%, compared to 90%. The first of seven new ultra-deepwater rigs was delivered in September and is currently mobilizing to the Gulf of Mexico. Their balance sheet remained strong with $486M in cash and short term investments and only $300M in debt which half if is not due until 2027.

ESV still seems to be trading at a discount relative to fundamentals. The company will have all of the ultra-deepwater rigs operational by 2012 and anticipates the fleet will contribute approximately one-third of revenue once operational. ESV seems to be highly correlated to the price of oil, and after the price of oil peaking at $144 per barrel; ESV has traded off along with the price of oil. ESV has a strong balance sheet, favorable contract backlog, and is taking a conservative approach to internally funding the rig expansion program. I believe that price of oil is going to stabilize around $80 per barrel in the near future and begin to increase again once we are out of these hard economic times. Sentiment is to hold the position.

Tuesday, October 21, 2008

DD Q3 08 Earnings

DuPont Co reported lower third-quarter earnings on Tuesday, hurt by hurricane-related charges and lower volume shipments, and cut its full-year forecast. Revenue rose 9.3 percent Y/Y to $7.3 billion, largely because of higher pricing in all regions. Net income in the quarter fell to $367 million, or 40 cents a share, from $526 million, or 56 cents a share, a year earlier. Excluding a charge for plant damage, lost inventory and other problems from the hurricanes, the company earned 56 cents a share, down from 59 cents a year earlier.
-cnbc.com (full article @ http://www.cnbc.com/id/27291899/for/cnbc/)

Hey I mean when the street's looking for 51 cents/share and you come out at 40 cents/share that's a problem. Obviously they felt an impact from hurricane-related problems; in the form of a significant item of about 16 cents/share for clean up and repair) and about 120M during Q3 and Q4 to replace equipment. On the call and in the investor presentation management cited that although they feel that their balance sheet is strong and they have good access to the commercial paper market, challenges that they will continue to face are the ongoing credit crisis, as well as high raw material, energy, and transportation costs. They also cut their EPS outlook for the year to $3.25 to $3.30 per share. It previously had forecast $3.45 to $3.55. Wall Street had been expecting $3.49. Bottom line, we bought it at 51.82 and its trading at 33.28 at the close 10/21/08. We think it's too late to sell and we don't really see reason for much more downside and management still has a good vision for the business. Ag and Nutrition, which was one of the main reasons we purchased it, had solid results. It was up 22% from Q3 07 with 40% top-line growth in Latin America sales. Couple that with the evenutal recovery of the auto and housing market, we can hopefully make up most of what we have lost on it so far and possibly be realizing gains in the not too distant future. It's a strong company, with good management and the fundamental reasons for us purchasing it have not changed.