Wednesday, August 29, 2012
Monday, August 20, 2012
Excluding one-time items, operating income was $326mm compared to $271mm, an increase of 20%. DVA continues to make strides in profitability, decreasing patient care costs as a percentage of sales by 200 bps, from 70% to 68%. The company reported EPS of $1.49, slightly above Street expectations of $1.47, and an increase of $0.32 over the same period a year ago.
Management raised guidance on FY 2012 operating income from $1,310mm to $1325mm. Going forward, we have strong conviction in DaVita. The company continues to improve financially, and has favorable long-term growth prospects. End Stage Renal Disease is expected to continue to grow due to demographic shifts and changes in living standards, and DaVita is poised to capture market share in the fragmented international markets.
Friday, August 17, 2012
Management attributes a Q2 U.S. Retail segment comparable-store sales increase of 3.1% to two main initiatives designed to boost sales, customer loyalty, and store traffic: the store remodel program and 5% REDcard Rewards. During Q2, operating margin was flat (7.2%) and SG&A expense as a percentage of sales decreased by 20 bps (21.1%).
In regard to our thesis, Target's store remodel program and REDcard Rewards have proven to be effective sales- and profit drivers, as the Company has experienced 11 consecutive quarters of comparable-store sales increases in its U.S. Retail segment. Target opened 5 net stores with an expanded food assortment in Q2, and management expects to have updated over 1,100 of its general merchandise stores by year-end. During July, three CityTarget stores were opened in Seattle, Los Angeles, and Chicago, and the initial reaction from customers in these cities has been positive. In regards to TGT's expansion into Canada, the Company has already begun converting 7 former Zellers stores, and expects to begin renovating 38 additional locations in Q3. At this rate, management believes the Company is on schedule to begin opening Target stores in Canada in spring of 2013.
For Q3, management expects GAAP EPS of $0.69 - $0.79 and adjusted EPS of $0.83 - $0.93. Guidance for FY2012 guidance was raised to $4.20 - $4.40 for unadjusted EPS and $4.65 - 4.85 for adjusted EPS.The market reacted favorably to TGT's Q2 results, as shares were +1.9% following the earnings announcement.
Thursday, August 16, 2012
The company introduced fiscal 2013 EPS guidance of $7.10-$7.90, while street consensus has come in at $7.89. This parker estimate has a midpoint of $7.50, which includes a $.35 pension headwind. The street remains positive in relation to management’s guidance due to Parker’s historical trend of being conservative in relation to giving guidance (Initial FY2012 guidance was $6.70-$7.50, while the true value was $7.50).
New orders for 4Q were down 1% year over year due to particularly weak results out of the Industrial International Segment, which fell 9% due to very strong downward pressure in Europe, where the company does have some level of exposure. This fall was partially offset by Industrial North America, which increased by 4%, Climate & Industrial Controls which increased by 1% and Aerospace which saw orders increase by 7%.
A global leader in the making of aerospace, building-control and safety products, Honeywell has received a total of 4 Strong Buys, 10 Buys, and 6 Holds according to CNBC. They have benefited from a steady increase in demand across all major segments. Their extensive work with Boeing generated an increase in their aerospace unit of 8%. We saw Honeywell sign a deal with satellite-operator Immarsat to manufacture equipment for airborne broadband connections, which will last 20 years, and could create up to $2.8 billion in revenues.
Saturday, August 11, 2012
Excluding divested businesses, the firm reported revenues of $1.8bn compared to $1.9bn a year ago. Revenues from Interventional Cardiology, the firm’s stent business, saw the largest drop of 13%, from $652mm to $549mm. The Cardiac Rhythm Management unit, the firm’s ICD and pacemaker unit and also the firm’s second largest division, also fell 8%, from $544mm to $488mm. The CRM division has slowed on decreased procedural volumes, driven by a study in the Journal of the American Medical Association and subsequent Department of Justice investigations into non-evidence based ICD implants. Despite disappointing performance from the business’ two largest segments, BSX continues to have positive growth in its smaller units, which are continually becoming more significant parts of the business. The Neuromodulation unit, which produces implantable electronic devices used to control chronic pain, continued its strong performance, growing from $84mm to $91mm, or 10% on a constant currency basis. The Endoscopy and Peripheral Interventions units also saw moderate growth of 7%, from $298mm to $311mm and $189mm to $196mm, respectively.
BSX continues to make strides in profitability. The firm increased gross margin by 322 bps, from 65% to 68%, as the firm continues its transition from the lower-margin Promus stent to the higher-margin Promus Element. After removing one-time items, EBITDA margin increased 22 bps despite increases in SG&A and R&D as percentages of sales, primarily driven by the increase in gross margin. On an absolute basis, SG&A grew by $6mm, while R&D fell by $10mm and EBITDA dropped $23mm. Boston Scientific continues to pay down debt and reduce interest expense, which has historically weighed on earnings since the firm took on $6.5bn in debt to acquire Guidant in 2006. The firm reported interest expense of $64mm compared to $73mm a year ago. After removing a $3.4bn non-cash goodwill impairment charge associated with the EMEA unit, BSX reported net income of $242mm or $0.17 a share. On a GAAP basis, the company reported a net loss of $3.4bn or $2.39 per share.
Going forward, we are bullish on Boston Scientific. The company has been trading based on revenue growth in the CRM and Interventional Cardiology units, but there is more than meets the eye. Despite contractions in the two main business segments, the company continues to have significant growth in the Neuromodulation and Endoscopy units, which are now becoming sizable portions of the company, and should begin to have a larger effect on the stock price. The company continues to make strides in profitability and unload the debt levels that have suppressed the stock over the past six years. Overall the company is stronger and more financially sound, but needs a catalyst in the IC or CRM units to reawaken the stock and allow investors to focus on improved financials. The PROMUS Element, which has been brought to market but is still in its infancy, may be the catalyst needed to bolster Interventional Cardiology revenues. Aside from the Element, there are very positive new developments in the Cardiac Rhythm Management unit, with the $150mm acquisition of Cameron Health and its subcutaneous S-ICD device. The S-ICD device has the potential to be a $750mm market, and BSX is the only company that has such a device. Considering the firm’s improved health, its strong operating cash flow generation of $407mm, and catalysts in the Element and S-ICD, we are bullish on BSX and believe 2013 will be particularly strong for the firm.
Thursday, August 9, 2012
Qualcomm released earnings results on July 19th, posting EPS of 86 cents, which was in-line with expectations. They also posted a 28% increase year over year in revenues at $4.63 billion. Company guidance for the fourth quarter EPS of 78-84 cents came in slightly below the consensus expectations of 89 cents, due to lower projections in smartphone sales. CEO Dr. Paul Jacobs states that their estimates in 3G/4G device shipments have changed as they expect demand “to be more back-end loaded as devices are launched for the holiday season.” They saw margins drop slightly over the quarter, gross margins coming in at 64.4% compared with 64.7% last year, and operating margins at 30.0% compared with 31.0% last year. Sales of their 3G and 3G/4G chipsets have been driving their revenue growth as countries all over the world continue to adopt mobile platforms. They shipped 141 million MSM chip units, up 18% from last year. The approximate selling price of each 3G/4G unit rose from $226 to $232. With the gradual adaptation of 4G LTE handsets in developed markets such as the U.S. and Japan, as well as the overwhelming demand of smartphones in emerging markets Qualcomm is in position to benefit from these macro trends. One factor that shouldn’t be overlooked is the decline in smartphone pricing, which could negatively affect Qualcomm’s margins.
Verizon announced earnings results on July 16th, they reported EPS of 64 cents, a 12.3% increase year over year, which met analysts’ expectations. They posted record highs in operating income margin at 30.8% and EBITDA margin of 49%. The wireless segment increased revenues 7.3% year over year, added 1.2 million retail customers; 888,000 of which were postpaid customers. The wireline segment saw increases of 2.5 percent in revenues, with 65% of revenues generated by Verizon FiOS. Verizon had a 3 percent increase in smartphone users, bringing in 50% of their postpaid revenues from smartphone customers. Verizon released its Share Everything plan on June 28th, offering customers unlimited calling, texting, and shareable data, increasing the amount of devices allowed from 5 to 10. The new plans offer cheaper pricing for customers with more devices, however slightly higher pricing for feature phone customers. They also had the release of the Samsung Galaxy S III which has been a top selling smartphone thus far, which will benefit Verizon’s margins if more customers choose to use that over the iPhone. Looking forward Verizon remains the leading competitor in the 4G LTE market, they have enabled customers to add multiple data devices such as tablets and broadband cards for very affordable rates, and their FiOS services continue to grow and penetrate into new markets. These key points will allow them to grow their business and continue to remain the market leader in mobile telecommunications.
Tuesday, August 7, 2012
Monday, August 6, 2012
Sunday, August 5, 2012
Wednesday, August 1, 2012
David H. Hannah, Chairman and CEO of Reliance, said, We were pleased with our 2012 second quarter results which were in line with our expectations, although general economic uncertainty in the marketplace along with declining costs for most all of our products negatively pressured both volumes and pricing. At the operating income level, our 2012 second quarter was up 1% over the 2012 first quarter, and up 12% compared to the 2011 second quarter. Underlying demand slowed slightly from the 2012 first quarter, but still represents solid improvement when compared to the 2011 periods. The declines in the costs of our products were supply, not demand, driven, as underlying cost inputs at the producer level decreased, imports were plentiful, and domestic overcapacity persisted.
We continue to see strength in energy (oil and gas), aerospace, farm and heavy equipment, and auto (through their toll processing business), and expect continued growth in these markets. Additionally, they grew further with our 2012 acquisitions of National Specialty Alloys, LLC (effective April 3, 2012) and McKey Perforating Co., Inc. (effective February 1, 2012) plus two strategic asset purchases. RS grew in specialty products and high value-added processing, as well as expanded into Australia, Hannah continued.
Effective April 3, 2012, the Company further extended its footprint in the energy market with the acquisition of National Specialty Alloys, LLC, a processor and distributor of premium stainless steel and nickel alloy bars and shapes based in Houston, Texas. Also in April, the assets of the Vonore, Tennessee Worthington Steel plant were purchased by the Companys Precision Strip, Inc. subsidiary, which expanded their toll processing network into that area.
Effective June 30, 2012, Reliance, through its newly-formed subsidiary Bralco Metals (Australia) Pty Ltd, acquired substantially all of the assets of Airport Metals (Australia) Pty Ltd, a subsidiary of Samuel Son & Co., Limited. Airport Metals (Australia), based in Melbourne, operates as a stocking distributor of aircraft materials and supplies. Terms were not disclosed.