Saturday, January 30, 2010
Non-GAAP operating margin was 25.8 percent in the fourth quarter, representing an increase of approximately 300 basis points over the same period in 2008. The increase in operating margin primarily resulted from gross margin expansion and synergies. Full year operating margin was 26.6 percent; an increase of 300 basis points over the prior year, resulting from improved gross margin and decreased headcount and travel related expenses. Full year cash flow from operating activities was $715 million, capital expenditures were $181 million and free cash flow was $534 million.
For 2010 I see continued growth for Life Technologies. As I have mentioned before molecular research is a growing field of interest for governments and is evidenced by the 25% raise of organic growth in Asia Pacific. I continue to see this growth through 2010. Life Tech is also entering the flow cytometry market with the first of its kind flow cytometry system, Attune(TM), designed to use sound waves to precisely control the movement of cells, a 1.4 billion dollar market. Furthermore, In fact, by the second half of this year when the SOLiD 4hq package, an upgrade to SOLiD 4, will be available, researchers will be able to generate 300 gigabases of mappable data DNA at 99.99% accuracy. Management is predicting a non-GAAP EPS for 2010 of around 3.30-3.50. I maintain that a price target of 57.00 is a conservative one, and my model will be updated with 4Q numbers which will be sent out tomorrow.
Friday, January 29, 2010
Thursday, January 28, 2010
Despite slight setbacks in a few of Corning’s many segments our investment thesis holds true. The demand for LCD TV’s will continue to rise and prices will remain flat if not fall according to analyst’s expectations.
Substantial growth in Verizon is being fueled through the Wireless Segment with an additional 2.2 million wireless subscribers reported this quarter. Growth is expected to continue especially due to the new structure of wireless devices. A majority of new devices now require a data plan which has allowed Verizon to boost profits due to data services high profit margin.
Verizon is currently trading at $29.33 which is down 2.59%. This can be justified through the general pull back in the market, Verizon’s obligation to pay severance settlements, and concerns of malware infiltrating the Android application system. However these were all risks that have been factored into the model and thesis. Verizon’s continued growth, success of the Droid, and strong dividend leaves me confident in its future performance in the portfolio.
Going forward I would like to update the model and think about repositioning ourselves within the energy sector.
Wednesday, January 27, 2010
The increase in underwriting by $215million was said to be the main catalyst for the record profits. The underwriting gain of $540million was in par with Q4 2008, and the company had a combined ratio of 94.2% compared to 91% the previous year. There was also an increase in the alternative investments. Catastrophe losses were lower than expected as well which increased the bottom line.
Written premiums decreased 4% due to customers cutting back on their policies, and we should expect premium growth to remain flat or negative until the economy bounces back. Travelers is in good financial position though, with a strong balance sheet and continued positive combined ratios. Travelers is continuing with their share-repurchase program and they have raised guidance for 2010 to $5.20-$5.50 from $4.70.
Specific to the fourth quarter, global comparable sales rose 2.3%. US operating income in the fourth quarter increased 5% while Europe grew by 20% and APMEA jumped up by 51%. These figures were driven by Australian sales, Chinese store expansion, and some lower commodity costs. Fourth quarter EPS were at $1.11, up $0.08 because of liability resolution from a former transaction in Latin America. Currency translation increased by $ 0.07 per share. The fourth quarter dividend was $0.55 per share of common stock.
Jim Skinner, CEO, was quoted as saying "McDonald’s 2009 results reflect the broad-based strength of our global business…Our in-demand food and beverages, unparalleled convenience and superior value at every level of our menu enabled us to serve 60 million customers per day during 2009, up 2 million per day over the prior year. In addition, McDonald’s profitability increased as we marked our sixth consecutive year of positive comparable sales in every geographic segment and generated higher global revenues, operating income and earnings per share in constant currencies - all tremendous accomplishments given the tough global economy… As we begin 2010, McDonald’s January global comparable sales trend remains positive. We will continue our fiscal discipline by investing prudently and returning excess cash to shareholders. I am confident that the collective efforts of our franchisees, suppliers and employees will continue to drive value for all stakeholders."
Transportation and Construction products segments were the only segments to post increases in revenue, 9.46 percent and 4.0 percent respectively. Polymers and fluids was almost flat with a 1.1 percent decline. Power systems and electronics, which houses ITW's welding unit, was down 17.8 percent in the quarter because of the overall construction market. However, these revenue figures were expected.
For 2009, ITW profit fell 38 percent from $1.52 billion to $947 million or down from $2.91 per share to 1.89 per share.
Going forward in 2010, ITW is estimated an increase of revenue of 10 to 14 percent. They expect an increase of earnings per share of $2.43 to $2.93 and analysts are expecting earnings of $2.76 per share.
In addition to earnings, the talks of purchasing the remaining minority shares in Alcon have been stalled due to "an undervalued offer" Alliance Bernstein who represents Alcon, has urged Alcon's board of directors to protect minority shareholders until a better compensation package can be drawn together. regardless of Alcon's stance in the matter, Novartis is prepared to force the transaction by seizing Nestle's remaining shares in the company thus controlling the company.
Novartis has also publicly stated their interests in U.S pharmaceutical company Corthera and plan to purchase the company for $120 million. This company will help Novartis develop a drug to aid against heart failure. The acquisition is planned to be completed by the end of Q1 2010. The drug created by Corthera is in its 3rd trial phase.
Novartis continues to display their dominance in the pharmaceutical industry through their globalization tactics and strong product versatility. The company will be releasing their Q1 earnings on April 19, 2010.
Tuesday, January 26, 2010
Apple Inc. posted its best quarter ever in terms of quarterly revenues and earnings. Quarterly revenues were up 32% to $15.68B and quarterly net income increased over 50% to $3.38B, assisted by a record operating margin of 30.1% for the quarter. Earnings per share were $3.67 per share, which beat a consensus estimate of $2.08 per share by $1.59 and likewise topped their own guidance of $1.70 to $1.78 per share. This represents earnings per share growth of 46.8% year-over-year. Cash and marketable securities increased by $5.8B from $34B to $39.8B. Apple shares rose by as much as $5.26 to $208.33 in afterhours trading after their earnings release, an increase of 2.58%. This represents a gain of about 117% on UASBIG’s original position.
Quarterly records for Mac and iPhone sales were set for the quarter. Mac sales increased by 33% year-over-year nearly double the 17% growth for the market estimated by the IDC for the same quarter, while Apple sold over 8.7 million iPhones for the quarter, an increase of over 100% versus an estimated 35% growth estimate for the smartphone industry made by Canalys. 17 new carriers were added and there is now iPhone distribution in 86 different countries.
Unit sales of music players decreased from 22.7 to 21 million units year-over-year, but strong demand for the higher priced iPod Touch products boosted sale revenues by 1%. Apple still maintains a commanding 70% market share for United States MP3 players.
Apple continues to exceed analyst beat expectations, although the record numbers are not incredibly surprising given the new revenue recognition accounting changes that were approved by FASB in the latter end of 2009. These changes allow Apple to recognize sales of iPhones and Apple TV immediately, rather than on a subscription basis spread over a 24-month period. The intensity of the smartphone industry is increasing with the emergence of Google-based phones such as the Motorola Droid and the Google Nexus One, but neither is at quite the same level and they are merely serving as substitutes to the iPhone on non-AT&T carriers. Going forward, UASBIG has a tentative price target of $235, subject to the new product launch at 1PM this Wednesday and any divergence from the single wireless carrier model in the United States.
Monday, January 25, 2010
The press release can be found at http://finance.yahoo.com/news/Precision-Castparts-3Q-profit-apf-2313076662.html?x=0&.v=1
UASBIG will update the model and decide what action is best to take.
Thursday, January 14, 2010
Eldorado keeps outperforming their production targets each quarter. The recent merger with Sino-gold will allow EGO to continue to produce more and more gold at less than a $400 cash cost. It should just be a matter of time before EGO hits my price target of $16 a share. EGO closed at $14.90 today (1/14/10).
Monday, January 11, 2010
ECL was up almost 2% to $46.11 in trading Monday before the closing bell.
The full news release can be viewed at http://investor.ecolab.com/releasedetail.cfm?ReleaseID=436639
My price target of just over $50 remains for Ecolab and I will continue to monitor the position.