Monday, January 30, 2012
From a Macro perspective Honeywell remains positive on the growth in the emerging markets of China, the Middle East, and India, after an increase in sales of 20%. Going forward the company predicts a 12-15% increase in the Specialty Material segment. This is driven by expected growth in demand for Para-xylene in the emerging markets.
McDonalds posted strong earnings on Tuesday and record-breaking revenue for fiscal 2011. In the fourth-quarter, revenue rose 10% to $6.82 billion from $6.21 billion. Fourth-quarter earnings were $1.33 per share, up from $1.16 per share a year earlier. Sales were driven by new menu items, longer operating hours, and effective marketing strategies.
The results failed to quell fears that 2012 margins could be negatively affected by exchange rates. In 2011, foreign exchange raised McDonalds earnings by 19 cents a share. Analysts predict that this will snap back in the coming year, as exchange rates work against the company. Also, higher taxes and increased spending on restaurant renovations will hurt margins in 2012.
McDonalds is hoping to steal some market share away from KFC (owned by YUM! Brands). On Tuesday, McDonalds unveiled Chicken McBites, almost identical to KFC’s Popcorn Chicken:
In Tuesday’s conference call, CEO Jim Skinner commented that a 5.5% rise in commodity prices are expected to hurt earnings as well. On Tuesday, the stock traded down 2% to $99. UASBIG estimates are currently under review.
Friday, January 27, 2012
Ford’s fourth-quarter net income jumped to $13.62bn or $3.40 per share from $190mn or $0.05 per share a year earlier. The financial services arm Ford Motor Credit Co. LLC or FMCC’s net income rose to $611mn from $367mn last year. Ford’s result for the quarter include a one-time, non-cash special item of $12.4bn for the elimination of a tax reserve, known as a valuation allowance, and $401mn related to the sale of Ford’s Russian operations to the newly created FordSollers joint venture.
Ford created the valuation allowance in 2006, reflecting large cumulative losses incurred and on the premise that the company may not return to profitability within a certain period of time. However, Ford has been profitable for three straight years now and no longer needed the reserve.
Excluding special items operating EPS fell to $797mn or $0.20 per share from $120bn or $0.30 per share last year. Operating EPS missed by $0.05 per share, consensus was looking for $0.25 per share.
F introduced 2012 guidance projecting higher yoy operating profit and margins - offset by a comparable yoy decline in pre-tax profit from FMCC. F generated strong operating cash flow of $700mn for the quarter. F also introduced 2012 Capex guidance of $5.5bn to $6bn, ahead of the mean analyst forecast of $5.3bn, not entirely surprising given the amount by which they under spent their original plan in 2011.
The largest shortfall to estimates came from North America which report 4Q11 pre-tax profit of $889mn vs. consensus of $1.2bn. While volume mix and price were ahead of estimates, and fixed costs increases in line, the segment saw yoy headwind of -$800mn from variable costs, higher than the -$400mn they anticipated. F lost $190mn in Europe, bringing F to a small loss of $27mn for the year, short of management’s guidance of “breakeven.” Asia-Pacific and South America results of -$83mn and $108mn also came in below expectations.
Looking forward, this was a weaker-than-expected result with steeper product cost inflation than expected in North America and a faster deteriorating European market. While this does not undo the strong product momentum that is a key part to the Ford story we expect to see shares under some pressure in the near term. We remain bullish on Ford and believe that given a better macro picture, Ford is well positioned to capture market share and drive profits.Shares of Ford reacted negatively to the EPS miss, closing Friday’s trading session down $0.53 or 4.16%.
Thursday, January 26, 2012
Joy Global expects to see spending rise 10-15% throughout the 2012 year, with their drivers for growth to be in Chinese and Australia, iron ore in South America and Africa, and also copper in South America. This combined with the strong signs of economic recovery in the United States and many projects which have carried over through the New Year, has analysts predicting a big 2012 for Joy Global, with its shareholders to benefit. With the many recent purchases and integrations, Joy Global claims that it may not be done, and could be looking to make more deals and expand to even further consolidate the mining industry.
Thursday, January 19, 2012
Chicago Bridge & Iron is following our initial thesis which was largely developed around the ability for the company to capture expansion projects in areas where they already had exposure. Although this may not be one of the considerable LNG projects, this represents the strength of CB&I and the confidence their consumer place in the company. In 2012, we are expecting CB&I to continue to capture expansion contracts and continue to grow their revenue. CB&I has traded +6.5% since the open on January 18th.
Wednesday, January 18, 2012
We are currently evaluating our position in this company.