Tuesday, November 29, 2011

JOY Global 'to the World'; Joy Global up 7% on the day

On November 29, 2011, Joy Global saw an incredible one day rise of $5.94 per share, to settle at a price of 84.72. This seven and a half percent rise was mostly due to the fact that we are in the midst of extremely volatile times for financial markets. Opening the day with the two positive stories, the legendary sales on Black Friday combined with positive news regarding negotiations concerning the debt crisis in Europe, was able to give way for a two a half percent rise in the Dow Jones Industrial.

The reasons pertaining to Joy’s particularly favorable numbers could be the result of a multitude of factors. Firstly, being one of the more risky companies within its sub-industry, Joy had dropped over 8 percent from November 18-25 on speculation of possible takeovers and moves into China by one of their main competitors, Caterpillar, Joy could have been undervalued coming into the day, and saw over exaggerated gains. The only official news released by the company for the day was its announcement that it would be giving out a dividend of $0.175 for the quarter, which did seem to be encountered as a surprise by the market. So with limited aspects for growth on the day, I do not think we can see this rise in the company’s market share as a significant source of growth, but rather a move with the market that could perhaps do the opposite with any negative news in the upcoming days.

-Matthew Buechele

Monday, November 21, 2011

Illinois Tool Works Sale

We made the decision to sell our position in Illinois Tool Works, Inc. Based on the fact that we hit our price target and believe our thesis upon which we bought into ITW has been fulfilled. Also, we are bearish on ITW going forward due to their high exposure to Europe, specifically Italy. We will be recognizing a 30% plus gain.

-John Astarita

Monday, November 14, 2011

Allscripts: Profit Rises and Beats Estimates

Allscripts beat analysts’ Q3 estimates and saw a significant jump in year-over-year growth, accelerating revenue, and net income. For the Q3, Allscripts Healthcare Solutions (MDRX) recorded revenue of $371.4 million, up 13% from last year’s Q3, with about 65% of this revenue noted to be reoccurring. System sales revenue grew 15% year-over-year, reflecting revenue sales from new client sales in the quarter. Professional services revenue increased 22% year-over-year and attributed to the decline in gross margin. Maintenance revenue climbed 9%, due to robust go-live activity in both their acute and ambulatory segments. Transaction processing and other revenue grew approximately 11%. Gross margin was recorded at 45.7% compared to 48.9% in the prior year, due to a broader mix of professional services and higher number of third-party system sales in the third quarter of 2011.

Operating profit margin was 20.3%. Furthermore, net income for Q3 totaled $47.3 million, a 28% increase over the $36.8 million over the last year. Diluted adjusted earnings per share were $0.25, a 32% increase over last year and beat analyst’s estimates of $0.23 earnings per share. For the third quarter of 2011, cash flow from operations totaled $42.2 million. They also eliminated $45.5 million in borrowings, the largest quarterly reduction to date. Allscripts recorded $267 million in bookings, representing a 34% growth year-over-year. It should be noted that these numbers have been adjusted and are non-GAAP, essentially excluding the costs related to its $1.3 billion buyout of Eclipsys last year.

Allscripts sees regulatory issues as an opportunity for growth in the future. The revisions in the healthcare system and adoption of EHR and IT services will likely contribute positively to Allscripts future performance. Because of this and their Q3 earnings, they have increased their non-GAAP revenue for the year to be in the range of $1.455 to $1.46 billion versus a prior range of approximately $1.44 to $1.45 billion. MDRX management slightly adjusted their operating income from $303 to $307 million. They estimate their net income to be in the range of $175 to $179 million, equating to a new EPS range of $0.91 to $0.93 per diluted share. Since their 3Q bookings performance did not reflect any international bookings, they expect their domestic bookings in the 4Q to be up substantially. Furthermore, they anticipate 90% of the balance with South Australian Public Health System to close in the 4Q, contributing to their estimate of 17% to 18% bookings growth for the year.

-Deven Gould, Health Care Sector Head
-Jorge Perez, Junior Health Care Analyst

Thursday, November 10, 2011

Hartford (HIG) Q3 Earnings

Hartford’s earnings continue to be a tale of two companies. Their wealth management and P&C divisions continued to deliver solid results, while their family of life insurance businesses struggled to generate positive results. For the quarter, GAAP net income was $0M or $(.02) EPS, which included a $516M after tax charge from a negative DAC unlock, $134M in after tax catastrophe losses, and the low yield environment. Management asserted that in a normalized environment the company would have earned $0.73 per share. Third quarter 2010, which was boosted by low catastrophe losses and solid yields, resulted in net income of $666 million, or $1.34 per diluted share.

In the conference call, management projected the life insurance segment to be self-sufficient but unable to contribute to the holding company’s statutory surplus in 2012. They think that by 2013 yields will surpass the assumptions embedded in old business, and the sale of newly introduced products will ramp up towards pre-2008 levels. Lastly, Hartford wants to wait until there is more clarity in Europe before deploying the $500M is has earmarked for buybacks, but has promised to be done by Q2 2012.

While it will still be a number of quarters before the Hartford can prove that they are moving in the right direction, a number of analysts have found the valuation compelling. Morgan Stanley recently joined JP Morgan, Credit Suisse, Sterne Agee and others by upgrading HIG to a buy with a target price in the mid 20s.


Sunday, November 6, 2011

Baxter International Q3 Results: Beat Estimates

For the Q3 Baxter International (BAX) recorded total revenue of $3.4 billion (up 8%). The total revenue was comprised of domestic revenue totaling at $1.4 billion (up 1%) and overseas revenue at $2 Billion (up 13%). BAX’s increase in total revenue for Q3 was driven by oversea sales, resulting in an overall EPS of $1.09 surpassing LY Q3 EPS of $1.01. These results matched BAX’s earlier estimations of Q3 EPS between $1.07-1.09.

BAX also reported net income of $578 million ($1.01 per share) for Q3 versus the $525 million ($.89 per share) in 2010. This continuation of revenue growth can be directly correlated to the success from the performance of their different subdivisions. On a segment basis, Bioscience revenues amounted to $1.5 billion (up 9% from Q3 2010) due to higher demand for Gammagard Liquid. Recombinants were recorded at $552 million (up 5%), Plasma Proteins at $372 million (up 8%), and Antibody Therapy at $380 million (up 13%). Medical Product sales were at $1.9 Billion (up 7%) due to growth in intravenous therapies and injectable drugs, anesthesia products in overseas markets, and peritoneal dialysis therapy while Renal was $646 million (up 2%), IV Therapies $453 million (up 3%), and Global Injectables at $494 million (same). However, even with these growths gross margin was recorded at $1.7 Billion (50.9%), down from 51.5%, displaying a .6% decrease. Decrease to gross margin was largely due to R&D spending accelerated by 15%. In addition, cash flow from operations also fell recorded at $922 million versus the $1 billion totaled during the previous quarter.

Moreover, Baxter had many positive announcements from the Q3. Baxter came to a definitive agreement to acquire Baxa Corporation for $380 million (Baxa is a privately held company that develops automated pharmacy compounding technologies that enhances the efficacy and safety of oral and IV dose preparation and delivery). Furthermore, they received FDA approval for GAMMAGARD LIQUID 10% SubQ and recently launched the therapy in the United States and reached Phase III trials in treatments for multifocal motor neuropathy and Alzheimer's disease. More importantly, Baxter is the only company with approval for the MMN (multifocal motor neuropathy) indication in Europe, and have also been granted Orphan Drug status for the therapy in the US. Furthermore, management repurchased nearly 6 million shares of common stock for $292 million. These are just some of the positive news Baxter released on Thursday.
For the fourth quarter, Baxter expects earnings per diluted share of $1.15 to $1.18 and sales growth, excluding the impact of foreign currency, of 2% to 3%. They expect reported sales to increase in the 1% to 2% range. $60 million related to the U.S. multi-source Generic Injectables business versus approximately $200 million in 2010. Management now forecasts annual earnings at $4.29 to $4.32 per diluted share, which is at the high end of their previous guidance range of $4.27 to $4.32 per diluted share. Annual gross margins for the company are projected to be 51% to 51.5%. Expect the full year average share count of approximately 575 million shares, which assumes approximately $1 billion in net share repurchases. Overall, another solid quarter of earnings for BAX.

Shawn Laljit- Junior Analyst
Deven Gould- Healthcare Sector Head

Saturday, November 5, 2011

Chesapeake Energy 3Q Results

Chesapeake Energy reported Thursday better than expected quarterly profit and, as a result, shares traded up nearly 7% in after-hours trading. The company reported revenues of $496 million and $0.72 on a per share basis. These results were up from 3rd quarter revenue last year of $478 million and an EPS of $0.70. Net income also increased substantially, up from $515 million to $879 million this year. (From $0.75 to $1.23 per share.)The $0.72 per share earnings beat analyst estimates of $0.66 per share and the street's estimate of $3.14 billion in revenues was toppled by a revenue of $3.98 billion, up from $2.58 billion last year. Chesapeake also reported an operating cash flow of $1.409 billion, with an EBITDA of $2.013 billion. The company told analysts that its daily natural gas production for the quarter averaged 3.329 bcfe(billions of cubic feet equivalent), which is an increase of about 9% from the same time last year. About 75% of this production was natural gas, while the remainder was oil and natural gas liquids. Average prices for natural gas were down this quarter, compared to the same time last year, and the company's natural gas and liquid hedging revenues were down as well.

Chesapeake has also announced a joint venture with an undisclosed energy company, which will generate an expected revenue to Chesapeake of approximately $3.4 billion. The joint venture partner will acquire an undivided 25% interest of a 650,000 acre area of the wet natural gas area of the Utica Shale play. The company has also just completed the sale of $500 million of perpetual preferred shares of its CHK Utica, LLC entity to EIG Global Energy Partners and expects to sell an additional $750 million to the energy corporation. These revenues help to cover the entire leasehold cost that Chesapeake pays for the Utica Shale Play and the company is well funded and prepared now going forward into the future. I feel that Chesapeake is strongly positioned within the industry and will continue to capitalize off of their enormous resource plays, keeping the company in an upward trend.


Wednesday, November 2, 2011

Fiserv Third Quarter 2011 Results (FISV)

Fiserv’s Q3 adjusted EPS was up 12% to $1.16, modestly beating consensus estimates of $1.14. GAAP revenue matched expectations of 1.06B, a 4% increase. The disparity between top and bottom line growth can be attributed to a diluted share count that was 5.5% smaller than a year ago. Management raised full year guidance to $4.54 – $4.60, surpassing current estimates of $4.53, on the belief that growth will accelerate into Q4 and the first half of 2012.

Of Fiserv’s two segments, Financial Institution Services’ operating income was exactly flat for the quarter and is up 1% on the year. Payments and Industry Products’ operating income was up 2% over the previous Q3, and 5% on the year. This trend is expected to continue, as banks and credit unions are more willing to spend on client facing technology (Payments) than internal account management (Services). In Q3 alone, Fiserv signed 114 new electronic bill pay and 48 debit clients, including Zions, a top 35 bank, which recently selected Fiserv to support its multichannel digital payment strategy for both retail and business customers.

While the trailing quarters have been difficult for businesses that depend on capital expenditures by financial institutions, Fiserv has used that time to develop or acquire leading solutions in online, mobile, and person-to-person platforms. As a result, management has become increasingly optimistic as they gain visibility into 2012. CEO Jeffery Yabuki commented, “Based on our sales results, which have been stellar, based on our pipeline, which is in fact up across all measures that are meaningful, we feel like we are in very good shape.”


Devon Energy's Q3-2011 Earnings Report

Although net earnings fell significantly, Devon Energy reported positive revenues for its third-quarter performance. Third-quarter 2011 net earnings of $1.0 billion, or $2.50 per diluted share represented a 50% decline to the company's bottom line from year-ago net earnings and per diluted shares result of $2.1 billion and $4.7 respectively.Devon’s third-quarter 2010 net earnings represented a one-time $1.5 billion gain in divestiture from sale of assets in Azerbaijan.

Revenues jumped 45% to 3.5 billion and operating margins expanded to 43.9% from 29.7%.
Overall, higher production and rising prices in oil and natural gas liquids reflected positively on sales. Total production of oil, natural gas and natural gas liquids averaged 661,000 oil-equivalent barrels per day (Boe), an 8% increase over year-ago quarter.

Respective to the balance sheet, Devon continued its share buy-back operations by repurchasing $697 million of common stocks. The company has purchased $3.2 billion of stocks till date since its announcement of a $3.5 billion repurchasing initiative.
Operating expenses, particularly lease operating expense (LOE) increased by 6% compared to lease operating expense from the third quarter of 2010.

The company’s decision on its recent divestiture gains is what many investors are anticipating going forward. Shares were up 3.59% on the news as of 1:00 PM today.

-Kelechi Nwokocha