Wednesday, August 31, 2011

JOYGoes Up in 3Q-2011

In the fiscal third quarter profit jumped 46% due to an increase in the underground mining equipment business and bookings.

JOY Global earned $1.61 share in the 3Q, which beat the estimate of $ 1.53. The success in this quarter has resulted in JOYG lifting its earnings from continuing operations of $ 5.70 to $6 share on revenue of $4.3 billion to $4.5 billion.
Gross margin moved to 34.9% from 34.1%. The underground mining business jumped 31%, from 33% increase in original equipment shipments and 29% increase in aftermarket sales. Sales rose 24% at the smaller surface mining segment.

Chief executive Mike Sutherlin commented, “Commodity and energy fundamentals remain intact despite expectations of slowing industrial production and global economic growth. We have not encountered any instances of projects being deferred, delayed or de-prioritized.”

The company is in the process of acquiring Chinese mining-equipment manufacturer International Mining Machinery Holdings Ltd, which would give it access to smaller Chinese mine operators. JOYG announced its plans to sell the drilling products business of LeTourneau acquisition to Cameron International Corp. (CAM) for $375 million in cash.

This positive news comes after the company took a hit from the US economic woes of early August.

As reported at 12:15pm: 85.41(+3.06, 3.72%).

Monday, August 29, 2011

MSG Reports Results for Second Quarter

Revenues for MSG’s second quarter include the scheduled shutdown of Madison Square Garden due to the renovations. This shutdown is expected to continue into October 2011. The company is currently shifting to a new fiscal year ending June 30th.

MSG Media revenues rose 3.8% to 139.6 million, advertising revenue increased $2.4 million as compared to 2010. MSG Entertainment Revenues decreased 23.1%, which is primarily attributed to lower event related revenues at the Garden and the Theater at Madison Square Garden due to renovation. From Mid April to June 30th of last year MSG earned 12 million dollars in event related revenues and 6.5 million in direct adjusted operating cash flow contribution for events. This serves as a point of reference as to what possible revenue was missed due to the transformation. Within MSG Entertainment segment the Beacon theatre was able to offset some of the loss producing higher then expected revenues. MSG Sports increased 18% to 75.4 million mainly due to playoff revenues as both the New York Knicks and New York Rangers advanced to the playoffs.

While management is unable to comment on the current NBA lockout MSG is more favorably placed in comparison to peers, as business operation doesn’t solely rely on the NBA or even the New York Knicks. Revenue for event venues, contracts for other sports within broadcasting, the New York Rangers franchise, the New York Redbulls contract and the increase in Fuse ratings the Madison Square Garden company will continue to pull in cash needed for their transformation and continuing operations. Despite of the lockout MSG has been able to renew over 90% of season ticket holders for the New York Nicks and 85% for the New York Rangers. MSG will continue to be closely monitored by UASBIG as the lockout continues. Look for the broadcast of Quicksilver Pro-New York surf competition September 1-15 in Long Beach New York, as MSG and Fuse are the official broadcast partners.

Friday, August 19, 2011


Yesterday Qualcomm (QCOM) fell below its stop loss of $48.11. Although Year to Date QCOM is down 3%, the S&P is down almost 9%. This shows that the decrease in stock price is for the most part attributable to the market decline. Technology experienced a large sell off yesterday. However, The two technology stocks the portfolio holds, Verizon (VZ) and QCOM, have bright futures. The iphone is expected to be released this September and QCOM will be providing the chips for it. Verizon has ran into issues with union workers striking. Many of the workers on strike work in the land line business segment which does not represent a large portion of VZ's revenue. Verizon is still the largest mobile phone provider in the US.

Friday, August 12, 2011

Polo Ralph Lauren Reports First Quarter Fiscal 2012 Results

Net revenues for the first quarter of Fiscal 2012 increased 32% to $1.5 billion as compared to $1.2 million in Q1 2011 and better then the expected $1.43 billion. Operating income rose 62% to $282 million. Net income for the first quarter increased 52% to $184 million while diluted EPS increased 57% to $1.90 per share better then analysts’ estimates of $1.45.

The company credits strong comparable stores growth and improvement across most retail concepts for the increase in retail operating income, which rose 67%. Cost of goods inflation as well as incremental expenses for South Korean operation offset retail-operating income. Wholesale operating income rose 40% due to higher global shipment volumes. Licensing operating income rose 6% to $25 million. Comps at the segment level included: 14% at Ralph Lauren, 20% at Factory Stores, 16% at club Monaco and 28% at

Management provided guidance for the second quarter of 2012 as they expect consolidated revenues to increase at a high teens to low 20% rate. Wholesale revenues are expected to grow at a mid teens rate at a second quarter while retail sales are expected to grow at a mid 20% rate. RL has performed well in spite of consumer sentiment and rising costs beating analyst expectations. RL has proven that they can mitigate the macro commodity increases more effectively than comparable peers and UASBIG expects the company will continue to perform favorably for our portfolio.


Tuesday, August 9, 2011

Endo Pharmaceuticals (ENDP) Q2 Results

Endo Pharmaceuticals (ENDP) appreciated 6.90% after releasing strong second quarter results. The company reported impressive top-line revenues of $608 million, an increase of 53% over Q2 2010. Net income grew by 6% from $51 million to $55 million, and adjusted EPS grew by $0.24 to $1.05, slightly missing analyst expectations of $1.06.

Endo Pharmaceuticals saw substantial sales growth in many different areas, including branded drugs, generic drugs, and medical devices. The organic growth in branded drug sales can primarily be attributed to their pain medication segment, with sales of Opana ER climbing 64%. Generic drug sales also grew substantially, as the company began to benefit from the acquisition of Qualitest Pharmaceuticals. Generic drug sales soared 381%, and now make up approximately 22% of the firm's total revenues, compared to 7% during the same time last year. Lastly, the firm saw substantial growth in the devices segment, as the acquisition of HealthTronics began taking effect. The firm saw a $76 million jump in device revenues due to the acquisition, and which now represent 13% of the total revenues. Although a large portion of sales revenues were driven by acquisitions, these results are positive as the firm continues to see organic growth in its pain franchise of Opana ER and Voltaren Gel. Management has revised sales estimates upwards, as it expects to capitalize on the acquisition of American Medical, the fourth major acquisition for the company.

During the second quarter, Endo Pharmaceuticals saw an increase in expenses due to cost of goods sold and selling, general, and administrative costs. Both cost of goods sold and S,G, & A expenses increased due to the major acquisitions and increased product sales. Gross margins decreased from 73% to 61%, as the newly acquired product line-ups offer lower profit margins than the firm's legacy products.

I view these results as strong, and am confident in the position going forward. As of the 8/10/2011 close, the company is trading at $32.92, which is $1.84 below the stop-loss. The position has dropped 11.62% since the beginning of August, primarily on macroeconomic factors and market volatility, rather than company fundamentals. Despite this drop, I am confident in the firms potential going forward, and its ability to grow organically, as well as capitalize on acquisition synergies.


Monday, August 8, 2011

Hartford Financial Services Q2 & Sell

As the initiating and covering analyst, it is my opinion that the Hartford Financial Services (HIG) should be sold. Despite its eye-catching absolute valuations, the release of Q2 and the corresponding conference call depict a company that is now less attractive in terms of performance, outlook, and valuation. HIG has also crossed below its stop loss.

Performance: Hartford Financial Services announced Q2 earnings inline with their pre-announced numbers. The preliminary release was intended to soften the impact of six uncommon items that reduced after tax net income by $538M. They were (after tax): catastrophe losses of $290M, an asbestos related reserve increase of $206M, A charge of $73M for a discontinued software project, A negative DAC unlock charge of $21M, and A tax benefit of $52M million related to a resolution of a tax matter with the IRS. This turbulence, and the announcement of a $500M share repurchase authorization have clouded the essential issue. The Hartford’s post 2009 improvements have not kept pace with their competitors, or the domestic economy. Of their eight segments, only the global annuity business has posted increases in both revenue and operating margin from the first six months of 2010 to the corresponding period of 2011. These stagnant results have created rumors that management will have to start selling non-core pieces of the company. Bloomberg has reported on rumors that the mutual fund business will be the first to be sold.

Outlook: Given the nearly flat results of first half in 2011 and the uncertain macroeconomic conditions going forward, it’s unsurprising that HIG will not reach its internal targets. Management’s primary goal for 2011 was to close the gap between their relatively high cost of capital and their industry lagging ROE. CEO Liam McGee framed the issue this way, “we targeted an 11% ROE run rate for the company by the end of 2012. We remain committed to increasing ROE, but given the impact of the macroeconomic environment on some of our original assumptions, we now expect it will take longer to reach the 11% goal… [T]he economy has grown more slowly than we anticipated then, and interest rates have remained at historically low levels.” On a segment specific level, this means the P&C divisions are not expected to grow significantly and the variable annuity division is not yet fully operational. The new products that were announced in June have only been active for a month and there are still offerings awaiting approval from the SEC. HIG is also exposed to a fair amount of sector and industry risk as the market is still grappling with the repercussions of sovereign downgrades.

Valuation: When HIG was pitched in early April it was one of the few insurance companies that was trading at a significant discount to book value. However, the combination of solid performance by the life insurance sector and the general market decline has increased the number of companies trading under book value. When money starts to flow back into the financial sector, whenever that maybe, it seems more likely that buyers will find the handful of industy leader that are trading under book to be more compelling than Hartford, specifically PRU(.81), MET(.72), LNC(.54), TRV(.88), and ALL(.72).

Ultimately, I feel that redirecting the funds now will take advantage of UASBIG’s speed and flexibility to avoid risks and refocus on more appropriate areas of the financial sector.


Friday, August 5, 2011

Market Plummets - Energy Tanks

The market’s energy sector was down 6.22%; the Dow and S&P 500 were down 4.31% and 4.78%, respectively. The market eliminated all gains made year to date. The uncertainty and fear in the market is what led to the extravagant losses today. The U.S. credit rating may be cut in the coming weeks. There are talks that the Fed will introduce QE3. The Japanese and the Swiss have taken measures to weaken their currencies. U.S. unemployment and manufacturing numbers are disappointing. Fears of a double dip recessions are also present in the market. Fears that the global economy is slowing also caused a sharp decline in the the price of crude oil. Oil fell $5.48 (-5.96%) to 86.45, its lowest point since February.

Our energy stocks, Halliburton Company (HAL), Chesapeake Energy Corporation (CHK), and Devon Energy Corporation (DVN), had a completely disastrous day.

HAL fell to $48.03 (-9.48%), wiping absolutely all gains made in the months of June and July of almost 10%. CHK fell to $31.35 (-8.41%) after rising almost 18% from July 1st to August 3rd. DVN fell to $71.65 (-5.46%), it continues to struggle. We should not panic like the rest of the market. I think we will see these stocks rise again in the next week. Earnings have been strong for our energy stocks.

-Alex Perez