Thursday, October 28, 2010

International Paper Co. (IP) F3Q10 Earnings 10/27/10-(Jeremy Pellizzari)

International Paper reported third-quarter earnings on 10/27/2009. They reported record earnings of $397 million or $0.91 per share, which beat the market expectations of $0.79 per share. This is an increase from second-quarter EPS of $0.41, and an increase from 3Q 2009 EPS of $0.37. The increase in earnings for this quarter was led by strong business, realization of price increases and restructuring, improved operations, and a favorable business mix.

The Industrial Packaging segment saw a record increase in earnings due to realization of price increases and improved input costs. Its profits grew 17% year over year and 7% sequentially amounting to $2.6 billion. The Printing Papers segment saw a 5% revenue growth year over year and 7% revenue growth sequentially. This can be attributed to favorable pulp and paper pricing, reduced fixed costs, fewer mill outages, bad debt recovery, and increased volumes to the U.S. and Europe. Consumer Packaging posted revenues of $870 million, up 10% year over year and 3% sequentially. Higher volumes, realization of price increases, and fewer maintenance outages drove the improvement. The Forest Products segment sold off a majority of their land portfolio and recorded revenues of $205 million, which was an improvement from the $5 million both sequentially and year over year. Their last segment, xpedx, which is their distribution segment, shows a year over year increase of 5% to revenues and an 8% sequential increase in revenues. Although revenue increased, they showed a drop in operating profit of 15%, due to increased overhead and lower margins.

The company reported an increase in free cash flow of more than $750 million dollars and ended the quarter with more than $1.4 billion dollars in cash on hand. They also reduced their long-term debt by $200 million and put $1.4 billion dollars into their pension plan. Some investors were concerned with the debt of the company and the status of their pension plan and I believe they are showing steps towards taking care of these issues. John Faraci, CEO, stated in their fourth-quarter outlook that they expect to continue to see strong earnings and free cash flow, but at seasonally lower levels than the third quarter. I believe the company has a strong outlook for the long-term, but don’t see much higher return in the near future.


Eco-Lab Releases 3Q Results

Ecolab reported their earnings on 10/26/10, and reported a rise in 3Q rise of 20 percent due to higher domestic and international sales. The Company claims are Net Income grew $174.2 million or 74 cents per share, compared to be 60 cents per share in the same quarter a year ago. Revenue was $1.56 billion, which is an increase of about 1 percent from just under $1.55 billion. Analyst had expected profit to be 65 cents per share and 1.59 billion in revenue (Thomson Reuters Poll). The cleaning and sanitizing revenue grew 4% to $719 million. However, other U.S service revenue was only $118 million.

International revenue climbed 3 % to $775 million, particularly in Kay, Asia Pacific and Latin America. The introduction of the Scrub-N-Go, the floor cleaner for QSR restaurants, was a huge factor for earnings in Kay. The Company wishes to continue this growth in Kay and to continue to be aggressive gaining accounts and achieve better sales. For fourth quarter predictions, analysts believe the company will show earnings of $ .59-$ .61 per share.

Wednesday, October 27, 2010

Ensco Plc (ESV) Q3 2010

Ensco Plc (ESV) reported Q3 earnings on 10/20/2010, posting EPS of $0.92- beating analyst estimate of $0.89. Q3 revenue was $428,000,000, up 5% from Q3 of 2009. Ensco 8503 was completed on time in Singapore, bringing the total ultra deepwater semi’s to 5 (four 8500 series, and one 7500). Deepwater drilling revenue was up 77% compared to Q3 of 2009, driven mainly by Ensco 8501. Deepwater drilling expense was up 38% due to the addition of Ensco 8501, and Ensco 8502. Ensco 7500 was placed in the ship yard, offsetting $10,000,000 of the deepwater drilling revenue. Ensco 109, an ultra high speed jack up suited for deep gas drilling, was acquired at $186,000,000 as well. Ensco 69 disputes have been settled, resulting in Ensco 69’s reclassification in continuing operations. This added $0.04 to EPS. There is a pending agreement to sell Ensco 60, moving the rig to discontinued operations as a result. The company is expecting $26,000,000 for the sale of Ensco 60, but has not recognized that transaction yet. This negatively impacted EPS by $0.01, as opposed to adding $0.04 as it did in Q3 of 2009.

No revenue was recognized for Ensco 8502, as a result of a pending contract. This rig was placed in service on August 13th, and has been recognized as an operating expense. Resolving this dispute is a key objective for ESV in Q4. Another factor is going to be Ensco’s ultimate contracting for the 7500 rig. Management claims that they have had an increase in requests regarding the rig, but still have not made their final decision. Q4 revenues are expected to be between $345- $400 million, with the wide range resulting from the uncertainties in the deepwater segment. Ensco is poised well in comparison to its competitors in regards to new regulations expected within the industry. The government of Singapore honored Ensco with a Safety Award for their construction of Ensco 8503.


Ford Releases Strong 3Q Earnings

Yesterday, October 26th, Ford Motor Company posted unexpectedly strong 3Q earnings, proving the company is making a turnaround. This is the 6th continuous quarter of profit posted for the company, as F is gaining market share and sustaining growth. F reported a better than expected earnings of $1.7 billion, or $0.43 a share, up $690 million, or $0.14 a share, from a year earlier. F market share increased to 15.9% this quarter, up from 14.6% a year ago.

Ford being the only car maker to avoid a US government bailout, is has been diligently working to improve it's balance sheet by paying off debts and eliminating liabilities. Ford's total debt will be paid down to $22.8 billion, compared to $33.6 billion a year ago. The reduction of company debt will save F an estimated $800 million in annual interest payments. Company officials predict debt net of cash, currently standing at $2.6 billion, will be eliminated by the end of the year, which is one year earlier than the company predicted 3 months ago. The good press surrounding the company has been reflected in it's stock price which hit $14 on Monday.

Tuesday, October 26, 2010

LIFE 3Q Earnings

Life Technologies announced today their quarterly earnings for the third quarter FY2010 ending September 30th. They reported third quarter GAAP revenue of $867million. Their EPS was $0.56, and FCF was $187million. On a Non-GAAP basis revenue was $869 million which was an increase of 8% from $805 reported in Q3 of 2009. Non-GAAP gross margins were 66.8% 20 bp lower than prior years due to impact from mix of sales. Non-GAAP operating margin however was 29% which was an increase of 170 bp from last year’s 3rd quarter. This improvement resulted from acquisition related synergies and cost controls implemented this year.

Cash flow from operating activities for the third quarter was $215 million. Third quarter capital expenditures were $28 million and resulting free cash flow was $187 million. The company ended the quarter with $537 million in cash and short-term investments, including $19 million held as restricted cash. Regional organic growth rates for the quarter compared to the same quarter of the prior year were as follows: the Americas increased 8 percent, Europe 5 percent, and Asia Pacific 7 percent. Japan declined 1 percent. Revenue from orders transacted through Life Technologies’ eCommerce channels grew 26% percent during the quarter. Over 50% of all transactions are processed using eCommerce platforms.

LIFE beat expected EPS by 9 cents $0.87 over $0.78 Non-GAAP forecasted. Management has risen their guidance for FY 2010 to $3.48-$3.52 from $3.35-$3.50. With LIFE beating estimates again this quarter, it extends their record of beating estimates I believe now for as far back as Q1 2009. Afterhours the stock has been up 2%. Historically LIFE has seen significant slowdown in business during 3Q yet these were not far off of Q2. With management increasing their outlook I believe we should be seeing upside in the stock as the market prices management’s new guidance in. Furthermore, LIFE has been producing mid-high single digit organic growth since 2007 and this quarter’s organic growth was 6% providing evidence that management is capable of continuing this growth which will result in an increase of equity value. I will update the model with this quarter’s results and post my new price target.

-Michael Arias

Monday, October 25, 2010

Travelers Companies (TRV) 3Q Earnings

On Thursday October 21, The Travelers Companies Inc. (TRV) beat the consensus estimate of $1.51 when they reported third-quarter earnings per share of $2.11, up from $1.65 in the same period last year. TRVs quarterly Revenue of 6.48 Billion, net written premiums of 5.46 Billion, and net income of 1.005 Billion, all topped their respective 2009 figures of 6.33 billion, 5.34 billion, and 935 million. The combined ratio rose slightly to 90.6% but remained on the profitable side of the 100% benchmark. TRV also increased their full year EPS target range to $5.75 - $5.95, surpassing the $5.69 per share analysts had forecasted. This was the solid quarter TRV needed to restore investor confidence after missing estimates in their last two attempts.

The EPS increase outpaced the growth of the core business because net income included a one time, after tax, gain of $133 million, catastrophe claims were much lower than normal, and the number of outstanding shares decreased by 92 million.

Travelers CEO and Chairman Jay Fishman characterized the situation this way, "While current profitability across our diversified commercial insurance businesses is solid, the general economic environment continues to present challenges. Reinvestment yields are low by historical standards and exposure and pricing remain flat."

UASBIG will continue to hold TRV, but we are currently investigating the capital allocation strategies of TRV and their competitors. TRV returns a high percentage of excess capital to shareholders through dividends and stock repurchases, but they might be compromising their long term health by not expanding their core business. 94% of their operations take place in the ultracompetitive, and economically challenged domestic market, while the remaining 6% is spread over the equally demanding markets in Canada, the United Kingdom, and the Republic of Ireland. The opposite approach is being taken by some competing Property and Casualty companies. They are using excess capital to expand into the developing Asian and South American markets. At this point it is unclear which strategy is more prudent, but UASBIG will continue to monitor the situation.


Verizon Communications 3Q Earnings

Verizon reported 3rd quarter 2010 earnings of $0.58 per share beating analysts’ expectations of $0.56 per share by 4.32%.

VZ reported cash flows from operations of $25.2 billion and free cash flow of $13.4 billion up 25.3%. The company added an additional 997,000 customers this quarter amounting to totals of 93.2 million customers and 101.1 million connections. VZ also saw 226,000 additional FIOS internet subscribers and 204,000 FIOS TV subscribers demonstrated growth in the company’s wireline segment.

Verizon will be releasing the Apple iPad WiFi starting October 28th and will be launching the Droid X and Droid 2 in the future. Verizon has demonstrated that product and contract development is of priority and has exemplified hard evidence of the company’s ability to compete with other wireless device and service providers. With strong capital gains in the third quarter, expected additional upside in the 4th, and a dividend yield a little over 6%, UASBIG Tech/Telecomm analysts are confident in Verizon’s position in the portfolio.


Caterpillar 3Q Earnings

Caterpillar: The third quarter went extremely well for Cat. Improved numbers reflect what management said was improved demand for construction equipment in both developed and emerging markets. Consensus analyst estimates according to Reuters were eps of 1.09. Cat topped these estimates reporting an eps of $1.22 compared with an eps of .64 in q3 of last year. Sales and revenue were 11.13 billion up 53% from last year. Machinery and engines sales were $10.45 billion, a 59% rise from $6.58 billion a year ago. While machinery sales grew 84% to $7.20 billion, engines sales increased 21% to $3.25 billion.


Sunday, October 24, 2010


ITW reported third quarter earnings of $419.3 million which translates to 83 cents per share. This was a significant increase from q3 of last year which had earnings of 60 cents per share. the stock beat consensus street estimates by a penny. Despite narrowly beating expectations the stock took a major hit last week when it was downgraded by Deutsche Bank from a buy to a hold. Deutsche lowered their 12 month price target from $59 to $54.

Novartis AG Beats Estimates

Q3 earnings for Novartis have increased, beating both analyst expectations and management’s forecast. Novartis reported $2.3 billion in net income this quarter, or 99 cents per share. Income rose to $2.3 billion from 2.1 billion in Q3 2009, representing an increase of 10 percent. Core earnings per share rose by 16 percent to $1.36 per share, beating analyst expectations of $1.29 per share.

New drugs Afinitor and Gilenya, along with the acquisition of Alcon, helped boost sales 13 percent. Novartis acquired part of Alcon, an eye-care product company, in 2008, and strong Q3 results may help them in their plan to buy out the rest of the company. Novartis is currently offering 2.8 shares per share of Alcon, and any boost in share price will make the offer more attractive.

~Ryan Kennedy

Thursday, October 21, 2010

MCD 3Q earnings

McDonald's Corp. posted 3Q earnings today, beating analyst estimates. For the three months ending Sept. 30, McDonald's earned $1.39 billion, or $1.29 per share, up from $1.26 billion or $1.15 per share last year. The company had heavy sales with it's frappes, fruit smoothies, and items on the dollar menu. The posted earnings pushed the stock price past it's 52-week high, hiting $79.48. This marks another continuous quarter of MCD outperforming competitors, Burger King and Wedny's. Unlike its competitors, MCD has launched popular items like the Angus Snack Wrap, frappees and smoothies, and is expected to sell oatmeal to go, available all day long. Sales at stores globally that have been open longer than 13 months had average increase of 6%.


Gilead Earnings Beats Estimates

Driven by an increase in sales of its HIV drug portfolio, Gilead Sciences beat estimates, reporting 3Q net income of $704 million, or 83 cents a share. This represents a 4.6% increase over the company's 3Q results of last year. When adjusted, the company posted earnings of 90 cents a share, beating the street consensus of 87 cents a share.

Total sales of Gilead's antiviral drugs, which includes HIV and other viral diseases, rose 12% this past quarter to $1.65 billion. Meanwhile, Atripla and Truvada both beat expectations as well. The headlining drugs recorded 3Q sales of $748 million and $669 million, respectively


Western Digital (WDC) FY2011 Q1 Earnings

Western Digital Corp (WDC) posted first quarter earnings for fiscal year 2011 on October 19th 2010. Earnings were $0.81 beating analysts’ expectations by 3.70%.

WDC announced quarter one FY2011 revenue of $2.4 Billion, hard-drive shipments of 50.7 million and net income of $197 Million compared to quarter one FY2010 revenue of $2.2 Billion, 44.1 million shipping hard-drives, and net income of $288 Million.

President and CEO John Coyne stated that even with competitive pricing in the industry, WDC was capable of remaining profitable, grew revenues and shipments, and generated $390 Million in cash from operations.

UASBIG Tech/Telecomm analysts are interested in WDC ability to continue competing with its main competitor Seagate. With recent news regarding Seagate’s possible privatization, WDC is left in a unique place within the industry. WDC also faces significant competition from other memory product producers, producing non magnetic memory products that offer high sustainability and performance.


Apple 4Q Earnings

Apple posted earnings of $4.64 per share compared to
expectations of $4.08. This quarter is yet another record
for AAPL and we expect that with holiday season
approaching this will only go up next quarter. Net income
was up 70% year over year with revenue growing 67%.

Apple sold 14.1 million iPhones from July through september beating
analyst estimates of 12 million. CFO Peter Oppenheimer stated "had the
company been able to make more iPhones, that number would have been even
higher". With strong catalysts looking forward such as the new line of
iPods, the iPad and possible Iphone contracts with other service providers.


Bank of America Q3

On Tuesday Bank of America reported a net loss of $7.65 billion, or -77 cents per share. This net loss included a non-cash goodwill impairment of $10.4 billion. When excluding this non-reoccurring charge, the company reported a net income of 3.1 billion or 27 cents per share. The impairment charge resulted from the Dobb-Frank Consumer Protection Act that limits the fees a bank can charge for debit and credit card use. The normalized earnings of 27 cents per share beat the street consensus of 16 cents per share.

For the quarter Bank of America strengthened its tier one capital ratios, increased asset management fees from the Merrill Lynch acquisition, and the investment bank remains number two in global investment banking fees. On the other hand, due to financial reform, Bank of America expects to see declines in the Global Card Services segment and in fees collected for overdrafts.

Bank of America’s share price was hit hard even after the positive earnings surprise because of developing news that the company may have to repurchase bad loans that were not serviced properly by Countrywide. The Federal Reserve Bank of New York and Pimco are two the major players who are putting pressure on Bank of America to repurchase the loans. The amounts to be repurchased in unknown right now, but investors fear it could be billions.

Joe Doran

Friday, October 15, 2010

Western Digital Rally

Western Digital Corporation rallied 8.14% today on news that its main rival Seagate Technology has received an offer to go private. Reports claim that this would be the largest LBO of the year if the deal were to go through. There have been no official releases from Western Digital on who made the offer, however Western Digital has confirmed that they have hired Morgan Stanley and Perella Weinberg Partners for financial and legal advice.

This news break has comes at an interesting time for UASBIG, as our Tech/Telecomm analysts have demonstrated hesitation on WDC’s ability to compete with Seagate. This coming weekend will leave time for UASBIG to further evaluate the situation before market open on Monday.


Monday, October 11, 2010

Alcoa Reports 3Q Earnings

Alcoa reported 3rd Quarter earnings on Thursday beating analyst estimates for adjusted earnings per share. Income from continuing operations came in at $61 Million or $.06 per share, and revenue increased 15% versus 3Q'09. Adjusted EBITDA was $602 Million with an 11% EBITDA margin. This rise in revenue can be attributed to higher volumes in the aerospace and construction industries. LME aluminum prices still continue to hurt Alcoa's bottom line but cost cutting strategies have helped offset these price effects.

Alcoa still remains extremely healthy in terms of cash flow. FCF remained high at $176 Million, and debt to cap was 270 bp lower at 35.7%. Alcoa also reduced their debt by $491 Million and extended their debt maturity profile.

Looking forward UASBIG expects LME Aluminum prices to rise in accordance with global economic growth. Alcoa is positioned very well to take advantage as the market for Aluminum continues to recover, but can also survive if these prices continue to lag, as evidenced by the past 3 quarters. Our main and only concerns are fears of deflation and stagnant economic growth. Aside from these concerns we still believe that Aloca remains a great position in our portfolio.

-Thomas Boeje