Friday, February 26, 2010

Ecolab Declares Regular Dividend

The Board of Directors of Ecolab Inc. declared a regular quarterly cash dividend of $0.155 per common share, to be paid April 15, 2010, to shareholders of record at the close of business on March 9, 2010. Ecolab has paid cash dividends on its common stock for 73 consecutive years.

At the same time, the Board of Directors authorized the company to repurchase up to 10 million additional shares of Ecolab stock. As of December 31, 2009, Ecolab had approximately 2.7 million shares remaining under a previous repurchase authorization approved in October 2006. Ecolab had approximately 236.3 million shares outstanding on January 31, 2010.

Ecolab is currently trading at $45.54 with a price target of $50, representing about 10% additional upside. The dividend and share repurchase announcement reiterate some of the reasons why ECL was purchased.

Wednesday, February 24, 2010

Transocean Ltd. (NYSE:RIG) was down 5% today after it reported net income attributable to controlling interest for the three months ended December 31, 2009 of $723 million, or $2.24 per diluted share, on revenues of $2.733 billion. Thia was below analyst expectations. The results compare to net income attributable to controlling interest of $754 million, or $2.35 per diluted share, on revenues of $3.270 billion, for the three months ended December 31, 2008.

Fourth quarter 2009 results were favorably impacted by certain net additions, after tax, totaling $10 million, or $0.03 per diluted share, as follows:

  • $34 million for the gain on sale of an interest in a joint venture,
  • $24 million of income related to the settlement of litigation matters,
  • Partially offset by $48 million of net charges primarily related to discrete tax items, the retirement of debt and adjustments associated with the GlobalSantaFe merger.

For the year ended December 31, 2009, net income attributable to controlling interest totaled $3.181 billion, or $9.84 per diluted share, on revenues of $11.556 billion. Net income for the year ended December 31, 2009 included after-tax charges of $498 million, or $1.55 per diluted share, resulting primarily from the fourth quarter items listed above, in addition to charges earlier this year of $334 million on impairments of intangible assets and two rigs held for sale, $132 million on litigation matters and $42 million of net charges primarily related to discrete tax items, the retirement of debt and adjustments associated with the GlobalSantaFe merger.

For 2008, net income attributable to controlling interest was $4.031 billion, or $12.53 per diluted share, on revenues of $12.674 billion. Net income for the year ended December 31, 2008 included after-tax charges of $401 million, or $1.24 per diluted share, primarily related to impairments of goodwill and other intangible assets, write-downs of two rigs held for sale and additional depreciation, depletion and amortization expense resulting from an adjustment to the useful lives of certain rigs acquired in the GlobalSantaFe merger.

Operations Quarterly Review

Revenues for the three months ended December 31, 2009 decreased to $2.733 billion, compared to revenues of $2.823 billion during the three months ended September 30, 2009. The decrease was primarily due to a $219 million reduction in revenue resulting from the stacking of rigs and reduced revenue efficiency, partially offset by a $136 million increase in revenue due to the commencement of operations of three of our newbuild drillships and improvement in average dayrates for floaters.

Operating and maintenance expenses totaled $1.296 billion for the fourth quarter 2009, down seven percent compared to $1.396 billion for the prior quarter. The $100 million quarter-to-quarter reduction in operating and maintenance costs occurred as a result of $137 million in litigation settlement expenses in the third quarter 2009 and a $24 million favorable impact from litigation settlements in the fourth quarter 2009. These items were partially offset by shipyard extensions, increases in maintenance projects and commencement of operations of our newbuilds. In addition, the fourth quarter was favorably impacted by $43 million of reduced costs from stacked rigs and negatively impacted by unplanned costs of $28 million due to an operational incident affecting a jackup.

Depreciation, depletion and amortization expense was $382 million in the fourth quarter 2009, up four percent versus $367 million for the third quarter 2009. The increase was due to the impact on depreciation in the fourth quarter of 2009 from the commencement of operations of the newbuild units, compared to the prior quarter.

General and administrative expenses were $46 million for the fourth quarter 2009 compared to $54 million in the prior quarter. The $8 million decrease was due, in part, to reduced year-end accruals related to one-time personnel expenses.

Liquidity and Interest Expense

Interest expense, net of amounts capitalized for the fourth quarter 2009, increased to $119 million compared to $115 million in the third quarter 2009. The increase was due to the impact of two months of interest expense in the third quarter 2009 compared to the full quarter of interest expense in the fourth quarter 2009 for the Petrobras 10000 capital lease. As of December 31, 2009, total debt was $11.7 billion, compared to $11.9 billion as of September 30, 2009.

Cash flow from operating activities decreased to $1.175 billion for the fourth quarter 2009 compared to $1.406 billion for the third quarter 2009. For the full year 2009, cash flow from operating activities totaled $5.598 billion compared to $4.959 billion for the full year 2008.

Effective Tax Rate

Transocean's Annual Effective Tax Rate(1), which excludes various discrete items, for the fourth quarter 2009 and the full year ended December 31, 2009 was 17.4 percent and 16.0 percent, respectively. The Effective Tax Rate(2) for the fourth quarter 2009 and the full year ended December 31, 2009 was 20.1 percent and 19.2 percent, respectively. Transocean's Effective Tax Rate reflects the impact of changes in estimates as well as the impact of impairments.

James Menicucci

Sunday, February 21, 2010

Schlumberger to buy Smith International - Dan Goldfarb

Schlumberger (SLB) has agreed to purchase Smith International (SII) for $11.3 Billion in an all stock transaction. The transaction is the biggest U.S. merger for this year and is Schlumberger’s biggest acquisition, according to Bloomberg data. It’s also the biggest acquisition of an oilfield-services company since Bloomberg began tracking merger statistics more than a decade ago.

Schlumberger is the world’s largest oilfield services company and Smith International is the biggest drilling fluids provider. They are both direct competitors of National Oilwell Varco (NOV) and the merger will add to Schlumberger's already dominant market share in the oil & well services industry.

I still intend on pitching National Oilwell Varco as a buy, given their strong balance sheet and excellent management team. I feel the current M&A activity in this industry is a good sign for the industry as a whole, and given their strong financial position, NOV is well positioned to take advantage of such activity. The following are links to articles giving more detail on the acquisition:

Other comments are welcomed and encouraged. I would like to get the group's opinion on the issue. My model will be sent out shortly.

Friday, February 19, 2010

PCP reaches price target- Shane Lockhart

Precision Castparts Corp has reached its price target. I'm currently reviewing the model

CHK Q4 2009 Earnings - Dan Goldfarb

Chesapeake Energy Corporation narrowed its fourth-quarter net loss to $530 million, or 84 cents a share, compared with a loss of $1 billion, or $1.74 a share, in a year-earlier quarter. Adjusted fourth-quarter income was $490 million, or 77 cents a share. Revenue declined over 25% to $2.22 billion from $2.98 billion a year ago. Adjusted fourth-quarter income was $490 million, or 77 cents a share. Analysts were looking for adjusted earnings of 68 cents a share on $1.86 billion in revenue.

On the operational side, Chesapeake 4th quarter production hit a new quarterly record with a daily average of 2.618 Bcfe and a new annual record with a daily average of 2.481 Bcfe (13% and 8% growth year over year). This has led the company to increase their 2010 and 2011 production forecast for the second time in six weeks. The company is also anticipating a 50% increase in their liquid production over the next two years. In 2009 Chesapeake also increased reserves by over 25% leading the company to increase daily production goals to 3.5-3.7 Bcfe by year end 2012.

Over the last year, Chesapeake had increased their exposure to the domestic shale plays (from 4 to 6 primary locations) as well as their physical ownership of land in some of those areas. It is estimated that their Andarko and Northeastern PA (just 1 of those 6 locations) leaseholds alone contribute a value of $8 per share. This is an example of the increased asset base Chesapeake has assembled over the last few years.

Given Chesapeake’s increased production outlook and ongoing drilling success despite continued poor economic conditions, Chesapeake Energy is a buy/hold. Their increased exposure to the US shale plays and strategic purchases/acquisitions give Chesapeake huge earnings potential growth and great value in the near term.

Thursday, February 18, 2010

Wal-Mart 4Q 2010

Wal-mart posted earnings today, Thursday February 18th for the fourth quarter of fiscal year 2010. They beat the street estimates of 1.12 with a reported earnings per share of 1.23$ and adjusted earnings of 1.17. For FY 2010, Wal-marts estimates were 3.57-3.61$ and posted earnings per share of 3.72$ and adjusted earnings per share of 3.66, which beat their own estimates. Profit's increased 22% from the preceding year. 2010 profits were 4.63$ billion, compared to last years profits of 3.79$ billion.

Net sales for 2010 were more than $405 billion, with international net sales exceeding $100 billion for the first time in Wal-Mart history. International segments are performing better then expected and are really hurdling over obstacles. However, U.S same store sales fell 1.6% which discouraged investors and shares fell to 53.20$ premarket.

Overall, Wal-mart had a great fourth quarter. Fourth quarter operating income was $7.3 billion up 13.8% or $881 million from last year.

Going forward into the first quarter of the 2011 fiscal year, they forecasts earnings per share from continuing operations to be .81-.85$

Wednesday, February 17, 2010

WM Sees Increasing Profits

Waste Management posted a profit of .52 cents a share in Q4 due in large part to costs cuts and increasing recycling commodity pricing. This is a 6% increase from the prior year quarter. For the full year WM recorded $2.01 a share, down from $2.19 a share in 2008.

Revenue for the Q4 was down 3.3%, but this is better than the drop of 14.2% seen in Q3. Volumes also went down 6.4% in total with commercial, residential, and industrial taking drops of 5.1%, 2.6%, and 15.4% respectively. The drops in volume were offset by the month to month increases in recycling commodity prices that we have seen since February 2009. Waste Management also saw higher than expected benefits from its reorganization which was targeted to lower costs $120 million over the year. The company has successfully seen costs drop due to redesigning of routes to compensate for lower volumes, and cuts to the hours given.

New business pricing increased as well in the commercial and industrial segments 6% and 12% respectively. Volumes are expected to be negative in the first half of 2010, but the second half we should see positive increases. The severe weather that we are seeing in Q1 should impact profits. Management has stated that there are acquisition opportunities in the $250-$350 million range that they are looking at. Guidance for 2010 is $2.09-$2.13. I believe that WM has yet to see the full impact of its costs cuts, and that their entry into the medical waste field, and potential acquisitions poses as a positive outlook for future growth.

Thursday, February 11, 2010

Ecolab improves 4Q earnings, but shares plummet

Despite posting higher profits in the fourth quarter of 2009, ECL shares sank over 5% Thursday as a result of slightly missing analyst estimates.

Ecolab had reported EPS of $0.48, which was below the street forecast of $0.56. This represents a 45% increase from the 4th quarter EPS in 08 of $0.33.

Ecolab reported a profit of $115.8 million, or 48 cents per share. That's up from $80 million, or 33 cents per share, in the last quarter of 2008. Excluding one-time items, the company said it earned 55 cents per share.

Revenue grew 5% to $1.56 billion in the quarter, which is identical to what analysts were expecting.

Going forward,in 2010, ECL said they expected to earn $2.17 and $2.25 per share while analysts were expecting $2.26. Management said they feel that demand is starting to bottom, which is a good sign.

Here at UASBIG, we feel that Ecolab is still a hold because of their unique and diversified business.

I will update the model shortly and blog about any changes to my price target.

Fitch rates Life Tech's new unsecured notes


Wednesday, February 10, 2010

MCD January Sales [Roopa Bhopale]

McDonald's saw an overall 2.6% rise in January sales at outlets open at least a year.

US Same-store sales however dropped 0.7%, dipping back into negative territory after improving in December.

Other regions did show growth with same-store sales rising 4.3% both in Europe and Asia/Pacific, Middle East and Africa.

January systemwide sales increased 9.1% (4.3% on a constant-currency basis).

Wednesday, February 3, 2010

Visa Q1- Richie C.

Visa’s profits rose 33 percent in the fiscal first-quarter on increased revenue, even as consumers pull back sharply on spending amid the recession. The payment processing giant reported net income of $763 million, or $1.02 per share, compared with $574 million, or 74 cents per share a year ago. Revenue growth was strong in all segments, climbing 13 percent to $1.96 billion from $1.74 billion a year ago, driven by strong growth in all revenue categories, particularly data processing revenues and international transaction revenues. Analysts surveyed by Thomson Reuters expected 91 cents per share on revenue of $1.92 billion, on average. Visa said payment volume for the period ended Dec. 31 grew 8.5 percent to $769 million. Total cards carrying the Visa brands rose 5 percent worldwide to 1.8 billion, and processed transactions for the three months ended Dec. 31 grew 12 percent to 10.9 billion. CEO Joseph Saunders said in a conference call with analysts that the improved results reflect a continued shift to electronic payments, particularly to debit cards, which saw a 17 percent increase in payment volume in the quarter from the year-ago period. Debit transactions now make up 54 percent of total U.S. payment volume, the company said. The company said it expects 2010 revenue growth between 11 percent and 15 percent and earnings per share growth above 20 percent.

With Visa seeing more of its revenues derived from debit card transactions, and Visa controlling more than half of the American debit card market, even if credit is not granted as easily to its customers as in the past Visa still looks strong. During a very tight year, more cards were still issued and profits were much higher than last year and beat expectations for this quarter.

IP-Tough Road Ahead

IP posted a loss of 24 cents a share last quarter compared to the $4.25 loss from the previous year. Sales fell 9% for last quarter. For 2009 year IP earned $663million, or $1.55 a share. The losses for 2008 were attributable to a $1.8billion write-off related to the shrinking paper business and restructuring charges.

Throughout 2009 IP lowered its debt, overhead, and cut costs by cutting employees and closing unsuccessful paper mills. They fired 10,000 employees since June 2008 and took steps to improve its balance sheet. Shares fell 5% on Wednesday, due in large part to the company saying that rising input prices would hurt their bottom line in the 1st quarter. Input prices are expected to increase up to $120million in the Q1 2010, compared to $36million in Q4 2009. The increased costs are attributed to the wet and cold whether in the south which made it difficult to harvest the fiber. This led to increased energy consumption and increased distribution costs due to the lack of wood. January and February will be tough months for IP, but the Q2 is expected to be better.

"We have announced price increases for all of our global manufacturing businesses and we are getting good implementation, but not as quickly as input costs may go up,"
-CEO John Faraci

Monday, February 1, 2010

CAT Fourth Quarter Earnings

Caterpillar posted fourth quarter earnings on January 27th to end it’s 2009 fiscal year. CAT posted earnings for the fourth quarter of $232 million, or at .36 cents a share, which is a 65% decrease from Q4 '08 which posted earnings of $661 million, or $1.08 per share. **Removing costs which are closely associated with thousands of job cuts, profit was .41 cents a share, which beats the street estimate of .28 cents a share.

Fourth quarter sales fell 39 percent down to $7.9 billion and analysts had estimated sales of $7.93 billion. Full-year profit fell down to $895 million, or $1.43 per share, from $3.56 billion, or $5.66 per share from 2008.

CAT has a positive outlook for 2010, however, “guidance looks light”. CAT estimates that sales will increase 10-25 percent in 2010 with a profit of $2.50 per share.