Friday, October 30, 2009

Waste Managment Q3

Waste Management came out with earnings last Thursday which were better than expected. They posted earnings of $277 million compared to $310 million in Q3 2008. This represents a 9.5% decrease which management has attributed to lower prices for their recycled materials. To counteract the lower prices in recycled materials and lower volumes, management has enacted cost cutting measures which include freezing salaries, and cutting jobs which will save an excess of $120 million. This is on top of the restructuring of the company which I mentioned when I pitched it would save them $60 million per year. The cost cutting measures can be seen by WM’s drop of 14% in revenue, while only a 9.5% decrease in profits.

Management has said that they expect this is the bottom for the company, and they are optimistic about the future and an increase in recycling prices and volumes in garbage hauling. Recycling prices have improved every quarter and have risen 80% since their lows in January.

Moving forward I agree with management’s outlook. As we come out of the recession we should see a return of companies disposing of trash in the frequency before the crisis, and a further rise in recycling prices. Prices for collection and disposal rose 2.9% and it is expected the WM will keep prices up even though volumes are decreasing. Management has stated before they would rather keep prices steady and lose customers that go to cheaper trash haulers, than keep prices low and become less profitable. Management has taken successful steps in their cost-cutting measures, and I believe they will continue in the future.

Thursday, October 29, 2009

Corning 3Q09

Corning has reported net sales at $1,479 million, net income at $643 million, and EPS at $0.41. Earnings beat analyst’s expectations by $0.03.

Corning has reported sales in Display Technologies were $679 million and were slightly higher than the previous quarter. Telecommunication revenue was $450 million an increase of 3% from the previous quarter. This increase can be attributed to increased fiber sales in China and a continuously increasing demand for private networks throughout North America. Environmental Technologies revenue was reported at $167 million, an increase of 27%. This increase is can be attributed to high demand for automotive environmental products spurred through the “Cash for Clunkers” program. Specialty Materials revenues were reported at $90 million an increase of 27% attributed to high demand of “Gorilla Glass” used in notebooks and portable electronics. Life Sciences revenue was reported at $92 million, a $12 million increase from the second quarter. Corning’s Life Sciences segment has acquired Axygen Bioscience Inc.

Management expects Display Technology volume to be flat to slightly down in the fourth quarter. They expect a natural decline in Telecommunications and Environmental Technology due to normal seasonal trends. Demand for LCD televisions should remain high as retailers continue to compete for low pricing of television units.

I feel that the thesis originally created for Corning remains intact. LCD sales will continue to increase as more competitive pricing infiltrates the market and the economy begins to pick up. New environmental regulation on 2010 and 2011 car lines will continue to drive Corning’s Environmental sector. The acquisition of Axygen will continue to strengthen life sciences performance. However, there is an inherent risk of oversupply in the display technologies if LCD unit sales do not continue to grow as expected. I believe corning should continue to hold a BUY rating.

Chad Schneider

Tuesday, October 27, 2009

Valero Q309

Valero Energy, the worlds largest independent oil refiner, missed earnings as it posted a second consecutive quarterly loss amid shrinking margins and low demand. Valero reported a Q3 loss of $489M or $0.87 a share, versus a prior year loss of $1.5B or $2.18 a share. Excluding the asset impairment loss, created by the permanent shutdown of the gas supplier complex at the Delaware City refinery, the company reported a net loss of $219M or $0.39 a share. The main reason for this shutdown was to help simplify the refinery's operations, in an effort to make it more cost effective and to improve reliability.

Valero reported a third quarter 2009 operating loss of $579M versus $1.8B of operating income in the third quarter of 2008. Excluding the asset impairment loss, the operating loss for the quarter was $162M. Valero's balance sheet remains similar to last quarter, with total debt of $7.4B and a cash balance of $1.6B. They also have an additional $4.5B in liquidity. Daily throughput remains 208,000 barrels less a day than the third quarter of 2008.

Although Valero is being hurt by lower margins on diesel and jet fuel, its retail segment reported the highest income ever at $111M, due to lower selling expenses and strong business in the U.S. and Canada.

Looking forward Valero expects a fourth quarter loss of at least as large as the third quarter's, mainly due to weakened margins. With the loss incurred in the current quarter, and the expected loss in the fourth quarter, management has mentioned that it may have to reevaluate its dividend-to-payout level. "If industry conditions do not improve measurably, the dividend level will have to be reevaluated"

Although Valero is suffering from weakened margins, it still remains competitive and its business strategy has not been affected. They look to maintain their strong balance sheet and sufficient liquidity. Management has also stated that they will focus on matters within their control, by optimizing operations.

-Thomas Boeje

Visa Q4

Visa Inc,V, posted higher-than-expected quarterly earnings on Tuesday, as consumers used their debit cards more, and the company raised prices, sending shares up 2.4 percent.The world's largest payment network also authorized a $1 billion share repurchase plan, and said the decline in payment volume was easing in the United States, in the first sign of stabilization on its business since the financial crisis.

Net income was $514 million, or 69 cents a share, for the fourth quarter ended September 30, compared with a net loss of $356 million, or 45 cents, a year earlier.
Net operating revenue rose 10 percent to $1.9 billion, beating analysts estimates of $1.8 billion, helped by higher prices and higher transactions. On an adjusted basis, quarterly net income rose 23 percent to $552 million, or 74 cents per share.

The payment network reiterated net revenue growth at the lower end of the 11 percent to 15 percent range in its fiscal 2010 year, and annual diluted class A common stock earnings per share growth of more than 20 percent.

Visa forecast marketing expenses of less than $1 billion in 2010, and capital expenditures in the $200 million to $250 million range, up to one-third less than in 2009.The company also estimated earnings per share will rise more than 20 percent in its 2011 fiscal year.

Visa continues to be one of our most consistent performers in our portfolio. Increased debit transactions was the main focus of our thesis and this is proving to be the main driver of their operations, since they have the largest market share. Increasing transaction prices have also increased their incomes and the company is still finding ways to cut expenses down. The company is looking to increase EPS by 20% for 2010. They have one of the best management teams and management has done a great job keeping this company profitable and healthy. This company keeps getting stronger and I believe will perform better as the general payment method keeps shifting from paper to plastic methods, along with an increase in debit transactions for the upcoming holiday season.

-Richie Civello

Ensco International 3Q09

Ensco reported diluted eps from continuing operations of $1.05, compared to $2.06 last year. Earnings from discontinued operations was zero as opposed to a loss $.09 last year.

Revenues in third quarter 2009 declined to $425 million from $620 million a year ago. Average day rates increased year-to-year for the deepwater segment, but declined for the premium jackup fleet. Rig utilization in third quarter 2009 declined in all of the operating segments, compared to the prior year. Total third quarter 2009 operating expenses increased to $250 million from $247 million last year, primarily due to an increase in depreciation related to ENSCO 8500 commencing operations.

Ensco recently added an Ultra-deepwater semisubmersible rig to their fleet and they expect that their deepwater revenue will grow significantly in 2010 and 2011. Furthermore the company projects Jackup utlization rates to rise.


Deepwater segment revenues grew by 131% year-to-year to $63 million in third quarter 2009, mostly driven by commencement of ENSCO 8500 operations in early-June 2009. The average deepwater rig day rate increased to $387,000 from $362,000 a year ago, however, utilization declined to 64% from 87% in third quarter 2008.

Revenue from Jackup fleet totaled $363 million in third quarter 2009, down from $592 million a year ago. The decline was largely due to a decrease in utilization to 61% from 97% last year and an $8,000 decline in the average day rate to $148,000.

They still maintain a strong financial position with more than a billion dollars of cash and cash equivalents, $350 million in a revolving credit facility, LTD is $266 million and there contract backlog stands at $3.3 billion.

Some thoughts about 3Q09 and outlook going forward. If oil continues to maintain it current trend of increasing price or even stays around $80 dollars a barrel the company could see an increase in upstream spending. This will play an important role in the companies Jackup segment going forward. Currently there is an oversupply in the Jackup drilling market which is driving day and utilization rates down. This is something to be cautious about going forward given that the Jackup segment accounts for over 80% of the company revenue. Furthermore, I would be cautious of a pullback in oil prices given the current over supply. Currently the US oil inventories are 339.1 million, leaving stockpiles 9.4 percent above the five-year average for the period.

If anyone has any question please email me at

James Menicucci

Ecolab's Q3 profit boosted by cost cuts and H1N1 scare

Ecolab (ECL) reported 3rd quarter earnings this morning (10/27).

Ecolab's Net Income rose 15% to $145 million in the 3rd quarter ended 9/30/09 as compared to the 2nd quarter of $126 million. This raise in profit was mainly due to the demand of hand sanitizer spurred by the H1N1 flu outbreak and cost-cutting. Their EPS rose to $0.60 from last quarters EPS of $0.50 and were in line with analysts expectations and on the top end of management's guidance. Although profit increased, revenue fell 5% to $1.54 billion, which was also in line with analyst expectations.

Despite the decline in revenue for the quarter, Ecolab CEO, chairman and president Douglas Baker Jr. said in a press statement that the company saw “steady demand” in its food, beverage and health care markets. It’s also seen demand for its hand sanitizer products grow, due to the H1N1 virus.

Commenting on the quarter, Douglas M. Baker said, “We continue to make solid progress. The quarter was on track, reflecting our focus on new business growth, appropriate pricing and structural cost improvement to offset soft market conditions and yield the strong earnings gain. We’re very pleased with the work our team has done to deliver these strong results across all geographies in a difficult economy. We continue to build our business, invest in our future and deliver.

Ecolab has narrowed the range for its pro forma earnings per share forecast, which excludes special gains and charges and discrete tax items, for the full year ending December 31, 2009 to $1.98 to $2.01 from the previous forecast of $1.96 to $2.02.

ECL shares were trading down to $45.10 (-1.81%) as of 2 pm Tuesday.

I have updated the ECL model and increased the price target to $50.32, which represents 10% upside from the current price.

UASBIG feels very comfortable in continuing to hold Ecolab. With high demand for their diverse product lines, consistent buybacking of shares, and the H1N1 scare, we believe Ecolab shareholders will benefit.

~Nick Iuliucci

Monday, October 26, 2009

Ecolab Earns 2009 Tekne Green Company Award

Today Ecolab announced that they had received this award that honors businesses that practice environmental awareness/responsibility and incorporate sustainability into their overall business model.

Ecolab has achieved significant reductions in both energy and water usage in its plants worldwide. The company has committed to reducing its greenhouse gas emissions by 20 percent per dollar sales from 2006 to 2012 as part of the U.S. EPA Climate Leaders program, and has achieved LEED-EB Gold certification for its Research, Development and Engineering facilities in Eagan, Minn.

With sales of $6 billion and more than 26,000 associates, Ecolab Inc. (NYSE: ECL) is the global leader in cleaning, sanitizing, food safety and infection prevention products and services. Ecolab delivers comprehensive programs and services to foodservice, food and beverage processing, healthcare, and hospitality markets in more than 160 countries.

Ecolab (45.87) was flat (-0.23) in early morning trading. They report 3Q earnings tomorrow (10/27) before market open.

~Nick Iuliucci

Saturday, October 24, 2009

3Q 2009 Earnings for Illinois Tool Works Incorporate

Illinois Tool Works Inc. posted 3Q 2009 earnings this past Tuesday, October 20th.

The highly diversified industrial parts manufacturer announced a third-quarter profit of $0.66 per share, revenue of $3.580 billion, and net income of $302 million.

Year-over-year EPS declined 11 cents a share from $0.87 per share in 3Q 2008. However, ITW beat the estimates on the street, which were around $0.53 per share.

Overall revenue dropped nearly 20 percent from last year’s third quarter revenues of $4.464 billion and profits fell $151 million from $453.5 million in 3Q 2008. Management was able to offset these significant declines by implementing extremely effective cost measures as operating margins only decreased 1.5% from 15% in 3Q 2008 to 13.5% in 3Q 2009. In addition, operating margins increased by 360 basis points from 2Q 2009. Sales have dropped dramatically from the previous year as almost all of ITW’s end users have significantly reduced production and output, therefore decreasing the demand for ITW’s products. In addition, ITW sells a good chunk of their industrial productions through various distributors who have focused on using up inventory stock piles to fulfill orders instead of purchasing products through ITW in an effort to increase their own performance.

Management expects total revenue for 2009 to fall within $14.124 billion (-11% of 2008 revenue) to $15.075 billion (-5% of 2008 revenue). The 2009 profit outlook range is $1.74 to $1.80 per share. Current estimates on the street range from $1.64 to $1.87 per share. Management was also upbeat about the significant improvement in their auto related sales in North America. This improvement may be slightly illusionary as the auto market was at an incredible low last year and sales were boosted significantly in the 3Q by the temporary “cash for clunkers” program. Regardless, any improvement in the auto industry is a good one. In addition, management has seen a significant increase in the residential housing starts over the past 9 months and projects the housing market in North America to continue its slow creep.

As far as ITW going forward, it is hard to tell. Management does not give any profound or significant guidance and it is clear that their main focus has been on managing operating costs. One of our original catalysts regarding ITW was their strong acquisition history. However, there was an all time low in acquisitions during 3Q 2009, but management has stated that projected acquisitions in the fourth quarter could be as high as $200 million. There is no doubt that ITW is a tremendously diversified company with over 875 operations in 54 countries. It may be worthwhile to wait and see how ITW’s acquisition strategy pans out over the fourth quarter. It is a solid company that has performed well for us, but if management does not focus on increasing shareholder value relatively soon, it should be put up on the chopping block so we can take our gains and using them towards a more worthwhile investment.

-Matthew Opanowski

3Q 2009 Earnings for Caterpillar Incorporated

Caterpillar Inc. posted 3Q 2009 earnings this past Tuesday, October 20th.

The industrial machine giant announced a third-quarter profit of $0.64 per share, revenue of $7.298 billion, and net income of $404 million.

Year-over-year EPS declined 75 cents a share from $1.39 per share in 3Q 2008. However, CAT destroyed the estimates on the street, which ranged from $0.04 to $0.06 per share.

Overall revenue dropped 44 percent from last year’s third quarter revenues of $12.981 billion and profits fell $464 million from $868 million in 3Q 2008. Despite these significant declines, management is still very pleased with CAT’s performance in light of the economic environment and has implemented effective trough management. The drop in profit was primarily due to significantly lower sales volume worldwide. Instead of purchasing new equipment from CAT, dealers across the world focused on using up current inventory stock piles.

Management has tightened their expected 2009 revenue range to $32 to $33 billion which is slightly lower than the midpoint range of $35 billion they announced at the beginning of the year. However, the 2009 profit outlook range has improved to $1.85 to $2.05 per share, excluding redundancy costs, from the previous range of $1.15 to $2.25 per share. Current estimates on the street range from $1.88 to $2.15 per share. Management also expects revenues for 2010 to increase in the range of 10 to 25 percent of overall revenues in 2009.

On Friday, October 23rd we sold half of our current position in CAT. This was a wise choice as it allows us to capture some of the tremendous return we obtained by purchasing CAT, but also allows us to wait and see what will happen with CAT going forward. Our original thesis was not only that CAT was a recession pick, but that the proposed economic stimulus plans would benefit CAT tremendously. We still have not had a major infrastructure push here in America yet, but it has already begun in China. As a whole, revenues in CAT’s Asia/Pacific region declined the least compared to the other regions CAT operates in. Additionally, since dealers have relied on their inventory to fulfill orders, once the economy starts to pick up so will construction and mining operations and dealers will have to replenish inventories and fulfill orders by going through CAT.

-Matthew Opanowski

Friday, October 23, 2009

E.I du Pont De Nemour and Co.

DuPont Released third Quarter earnings on Tuesday, October 20th

Revenue declined 18% to $5.69 billion, missing estimates of $6.27 billion.
The sales drop was mostly due to 12% drop in sales and a 2% drop in prices.

Revened dropped 21% in the U.S, 27% in Europe, the middle East, and Africa.

Even with lower revenue, Dupont managed to increase net income by 11 percent year over year by cutting costs. Net income increased to 409 million, or 45 cents a share, which beat earnings by 12 cents. They decreased costs by about 700 million. In the upcoming quater, managment tends to further decrease costs by shutting plants and cutting jobs.

Full year EPS will be 1.95-2.05, which was narrows the gap from last estimates of 1.70-2.10. However, analysts had the EPS at around $1.83.

Coatings & Color Technologies and Electronic & Communication Technologies were down by single digit percentages, but but were positive. Performance Materials turned last year's $91 million pre-tax loss to a positive $230 million, however, last years loss was due to a hurricane. Finally, Safety & Protection dipped from $251 million to $93 million on lower demand and an impairment charge..

Overall, Dupont is a good company and there operations are truly unique. Going, foward, at this time we are no long holders of this position and possibly in the future we could reevaluate Dupont and determine any possible buybacks.

Thursday, October 22, 2009

Monday, October 12, 2009

25 Things the iPhone has Rendered Useless

Wednesday, October 7, 2009

Nike Earnings Report

Nike released 1st Qtr FY2010 earnings on September 29,2009.

Revenue was down 12% versus prior year to $4.8B.

Diluted EPS up 1% from prior year to $1.04.

Inventories down 7% versus prior year.

Net Income was basically flat at $513M.

On the close of Sept. 29th NKE traded at $60.09 and the next day Sept. 30th, they closed up 7.7% to $64.70.

As of 12:35 on Wednesday October 7, 2009, they were trading at $63.14.

Since June 30th to today, their share price is up nearly 22%.

Bloomberg 19 Analysts covering it. 9 Buys, 9 Holds, and 1 Sell.
Goldman Sachs has a Buy/Neutral recommendation and a target price of $75.

Will continue to monitor.

~Michael A. Williams