LIFE released this morning, second quarter GAAP earnings per share of $0.58 and non-GAAP earnings of $0.91. Analysts interviewed by Reuters had an average expectation of $0.87(exculding special items). FCF for the second quarter was $203 million. Growth of revenue on a non-GAAP basis y/y was 8% rising from $839 mil to $906 mil. Managment has announced a share buy back program in which they are going to spend up to $350 mil. This will enhance existing shareholder value.
Revenue increase was caused by growth in genetic systems and cell systems divisions. Non-GAAP gross margin expanded to 67.7% a 100 bp improvement over the prior years period. This was a result of price realization, synergies, manufacturing productivity and royalty revenue partially offset by product mix. Non-GAAP operating margin was a record 30.1%, a 290 bp increase from last years period.
Growth by region over the prior years period was as follows, Americas grew 7%, Europe 4%, Asia Pacific 19% and Japan declined 4%. Revenue from LIFE's e-commerce website channel grew 14% during the quarter. Approximately 52% of all transactions are now processed using eCommerce platforms. This helps in lowering margins through automated online systems of ordering LIFEs products.
The company has updated its expectations for fiscal year 2010 to full year non-GAAP earnings of $3.35-$3.50. The stock was down today by 6% and closed at $42.40. Currently the stock seems to be oversold, and I think instiutional selling brought down the price today as portfolio managers may have been re-allocating their funds into other sectors. Another reason maybe the fact that historically the third quarter has usually been a slower quarter for LIFE. Regardless, I believe that my investment thesis remains intact and I will update my model with this quarters numbers.
Thursday, July 29, 2010
Monday, July 26, 2010
(NYSE: ITW) today reported 2010 second quarter diluted income per share from continuing operations of $0.83, a 131 percent improvement versus diluted income per share of $0.36 in the 2009 second quarter. The growth in earnings was achieved even though the Company experienced a higher than expected tax rate, which had a negative impact of $0.03 per share. The 2010 second quarter tax rate of 31.6 percent was 260 basis points higher than the rate the Company originally forecasted in April of 2010.
Thursday, July 22, 2010
The Travelers Companies Q2
Travelers reported quarter 2 profits of 670 million or $1.35 per share. The consensus for the quarter was $1.49 per share meaning travelers came up 14 cents short. The reason for the short coming was an unexpected rise in flooding and hail storms. On a positive note, Travelers had a 1% increase in net written premiums which beat analyst estimates. Year over year Travelers profits have fallen from 740 million to 670 million but EPS has risen from $1.27 to $1.35 due to Travelers repurchasing shares.
Travelers also decided to cut its full-year earnings forecast by 10 cents. The insurer said the rate of renewal from commercial customers is not meeting original expectations, which led to the drop in the forecast. Travelers now expects profit to range between $5.20 and $5.45 per share for the year. Analyst predict a profit of $5.71 per share for the year, but that estimate does not include investment gains and losses that are factored into net income.
Joe Doran
Travelers also decided to cut its full-year earnings forecast by 10 cents. The insurer said the rate of renewal from commercial customers is not meeting original expectations, which led to the drop in the forecast. Travelers now expects profit to range between $5.20 and $5.45 per share for the year. Analyst predict a profit of $5.71 per share for the year, but that estimate does not include investment gains and losses that are factored into net income.
Joe Doran
Saturday, July 17, 2010
Novartis AG Misses Earnings Expectations but Raises FY 2010 Guidance
Novartis AG barely missed meeting the street’s net income estimate of $2.43 billion, instead posting net income of $2.42 billion for the second quarter. However, Novartis has also raised its sales forecast for FY 2010 after second quarter net income increased by 19%. Management now expects sales to increase at mid-to-high single digit pace this year, compared with the more pessimistic mid-single digit range given earlier in the year. Fueling this sales increase has been the strong sales growth of newer products such as Lucentis and Exforge, which are needed to offset the loss in revenue that will be experienced in 2012 due to patent expiration of the drugs Divoan and Gleevec.
Sales of the hypertension drug Diovan gain a percent in generate $1.55 billion in revenue, beating street estimates of $1.5 billion. Gleevec, another flagship drug for Novartis AG, beat analyst estimates with revenue of $1.08 billion. Encouraging signs for the company has been the growth in its other underlying businesses aside from pharmaceuticals. New products accounted for nearly 21% of total sales for the quarter, with Exforge’s revenue growth of 35% and Lucentis’ revenue growth of 28%.
Novartis AG is still very much interested in diversifying its current medical inventory through the purchase of Alcon Inc., the world’s largest eye-care company. However, this process has not been without controversy as Alcon’s independent directors still believe the offer of 2.8 Novartis shares for every remaining public share of Alcon is still inadequate and are fighting to resist this offer. Novartis already has a 25% minority stake in the company and expects to complete the purchase of Nestle SA’s 52% stake in Alcon for $28.1 billion in the third or fourth quarter of this year.
Ultimately, I agree with Analyst’s predictions that Novartis is one of the more attractive pharmaceuticals out there currently. The company is already proving that their new products can offset the loss in revenue that will occur due to patent expiration and their attempt to diversify their business s leads me to believe that the company has set itself up for success.
Sales of the hypertension drug Diovan gain a percent in generate $1.55 billion in revenue, beating street estimates of $1.5 billion. Gleevec, another flagship drug for Novartis AG, beat analyst estimates with revenue of $1.08 billion. Encouraging signs for the company has been the growth in its other underlying businesses aside from pharmaceuticals. New products accounted for nearly 21% of total sales for the quarter, with Exforge’s revenue growth of 35% and Lucentis’ revenue growth of 28%.
Novartis AG is still very much interested in diversifying its current medical inventory through the purchase of Alcon Inc., the world’s largest eye-care company. However, this process has not been without controversy as Alcon’s independent directors still believe the offer of 2.8 Novartis shares for every remaining public share of Alcon is still inadequate and are fighting to resist this offer. Novartis already has a 25% minority stake in the company and expects to complete the purchase of Nestle SA’s 52% stake in Alcon for $28.1 billion in the third or fourth quarter of this year.
Ultimately, I agree with Analyst’s predictions that Novartis is one of the more attractive pharmaceuticals out there currently. The company is already proving that their new products can offset the loss in revenue that will occur due to patent expiration and their attempt to diversify their business s leads me to believe that the company has set itself up for success.
-Dave Siegel
Friday, July 16, 2010
Alcoa Beats Earnings Estimates
Alcoa kicked off earnings season on Monday, beating analyst estimates. Income from continuing operations came in at $137mm, or $0.13 per share, compared to a year-over-year loss of $312mm or $0.32 per share and a $194mm loss or $0.19 per share sequentially. Analysts were expecting Alcoa to earn 12 cents for Q2. Revenues increased 6% quarter over quarter, mainly driven by higher volumes in key end markets. EBITDA margin was 14%. This increase in margins can me attributed to Alcoa's continuing cash sustainability initiatives, mainly in the area of decreased head-count. They also managed to generate positive free cash flow.
Although LME Aluminum prices have decreased dramatically during the quarter, stronger volumes coupled with lower energy costs and favorable exchange rates more than offset this decrease in prices. FCF came in at $87mm, and Alcoa has $1.34b in cash on hand. This increase in FCF is being driven by Procurement reductions, overhead reductions, and days in working capital reductions, all part of Alcoas continuing CSI.
Management projects that aluminum demand will increase 10%-12% in 2010, and are maintaing their long term outlook of 6% CAGR growth through 2020. Demand will increase in lightweight, versatile materials for building, as well as other key markets as a result of increasing global population, and the need for recyclable and lightweight materials in the automotive industry.
Looking forward I believe that global economic recovery will help drive Alcoa's earnings. Management has done a great job steering the company through rough operating environments, and these initiates will increase Alcoas ability to generate cash going forward. As worldwide demand increases for aluminum, Alcoa will benefit from higher realized LME pricing, increasing margins and Income. Some risks going forward include tightening in China, as China is the largest producer and consumer of Aluminum in the world, and pricing is directly correlated to their usage. I recommend a HOLD rating on Alcoa, but will have to update my model for a new target price.
-Thomas Boeje
Although LME Aluminum prices have decreased dramatically during the quarter, stronger volumes coupled with lower energy costs and favorable exchange rates more than offset this decrease in prices. FCF came in at $87mm, and Alcoa has $1.34b in cash on hand. This increase in FCF is being driven by Procurement reductions, overhead reductions, and days in working capital reductions, all part of Alcoas continuing CSI.
Management projects that aluminum demand will increase 10%-12% in 2010, and are maintaing their long term outlook of 6% CAGR growth through 2020. Demand will increase in lightweight, versatile materials for building, as well as other key markets as a result of increasing global population, and the need for recyclable and lightweight materials in the automotive industry.
Looking forward I believe that global economic recovery will help drive Alcoa's earnings. Management has done a great job steering the company through rough operating environments, and these initiates will increase Alcoas ability to generate cash going forward. As worldwide demand increases for aluminum, Alcoa will benefit from higher realized LME pricing, increasing margins and Income. Some risks going forward include tightening in China, as China is the largest producer and consumer of Aluminum in the world, and pricing is directly correlated to their usage. I recommend a HOLD rating on Alcoa, but will have to update my model for a new target price.
-Thomas Boeje
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