Thursday, February 28, 2013

TGT Q4 Earnings

Target Corp. (TGT) announced earnings Wednesday and stated that its fiscal fourth-quarter sales rose 6.8% to $22.37 billion while credit-card revenue was up 1.8% to $356 million. Gross profit fell 2% to $961 million from $981 million the previous year. Per-share profit increased to $1.47 from $1.45 a year earlier after a 2.8% decrease in shares outstanding. Analysts, on average, expected earnings of $1.48 per share. Adjusted earnings per share, excluding items such as costs related to Canada, rose to $1.65 from $1.49 a year ago. Same-store sales were up 0.4% and missed analysts' average target of 0.8%.  
Full-year 2012 sales increased 5.1 percent to $72.0 billion from $68.5 billion in 2011 with credit card revenue decreasing 4.1% to about $1.4 billion. Gross profit for 2012 increased 2.4% when compared to 2011. Per-share profit increased to $4.52 from $4.28 in 2011, a 5.6% increase.
Full-year gross margin rate decreased to 29.7% in 2012, compared to the 30.1% rate in 2011. Fiscal fourth-quarter SG&A expenses increased 9.1% from the previous year and Cost of Sales increased 7.1%, both of which could explain why profits fell despite the increase in sales. Target had a more promotional holiday season than expected and was hurt by rising gas prices and a payroll tax increase.
Target has stated that it is going to have a transition year and plans to open 124 new stores in Canada, more openings than it has ever had in a single year. These Canada plans cut earnings by 48 cents per share in 2012 and should trim earnings by about 45 cents in 2013. Target expects sales to rise only about 2% this year.
CEO Gregg Steinhafel cited painfully slow growth in the US economy as to why Target’s growth declined. In first quarter 2013, TGT expects adjusted EPS anywhere between $1.10 and $1.20. Yearly, the company expects adjusted EPS of $4.85 to $5.05. Shares fell about 1% to $63.46 after shares dropped as low as 3.7% during yesterday’s session.
I am bullish on TGT going forward as the company continues to provide affordable products while economic growth remains slow. The aggressive expansion into Canada represents a key driver in the long-term growth of the company.

-JonMichael Shekian

Chicago Bridge & Iron Release 4Q2012 Earnings

     Chicago Bridge & Iron(Ticker: CBI) reported fourth quarter earnings on Wednesday, reporting Net Income of $89.6 million, $.91 a share. This was 27% increase over 4Q last year, when Net Income was $70.6 million, or $.70 a share. Revenue for the quarter was $1.5 billion with new awards of $2.9 billion. The revenue was a 22.2% increase over Q4 revenue last year, which was $1.26 billion. The EPS of $.91 a share beat the 13 analysts polled by Thomas Reuters by 9.6%, as their estimate was $.83 a share. The company announced a special dividend of $.05, representing a yield .36%, to be given on March 28, with an ex-dividend day of March 14.
     CEO Phillip Asherman said of the quarter, “I am extremely pleased that CB&I has delivered another year of strong new awards and outstanding performance, resulting in double-digit backlog growth and earnings per share exceeding the top end of our expectations for 2012.” The company is beginning to successfully integrate their purchase of The Shaw Group, which was initially seen as a negative by investor and lead to a 14 % decrease in the shares of the company. Since, the company is once again trading at 52 week highs, with investors realizing the synergies of the acquisition and the expansion of CBI’s product line. As of Thursday, CBI was trading at $55.04 a share, an increase of 3.77% a share on the earnings news.

MET Q4 Earnings

     MetLife (MET) released fourth quarter and full year earnings. During the 4th quarter MetLife reported net income of $96 million, or $0.09 per share over consensus. The increase in net income was fuelled by increases in Operating earnings which totaled $1.4 billion, or $1.25 per share which represents a 10% increase over fourth quarter earnings last year. The operating earnings beat consensus of 1.2 billion or ($1.17) per share.  Growth was driven by a 21% increase over earnings in the Americas and a 26% increase in their (EMEA) segments. In addition MetLife also suffered a 24% loss in earnings in Asia due to an annual review of actuarial assumptions.

     For the full year of 2012, MetLife reported earnings of $5.7 billion, or $5.28 per share, which represents a 22% increase over 2011. These earnings beat consensus of $5.5 billion in revenue or ($5.25) a share. The overall operating earnings for the Americas increased 21% to $1.3 billion driven by funding in Latin America. MetLife took a $70 million dollar hit in losses due to Super storm Sandy; this was above the company’s quarterly plan provision. To offset losses MetLife increased their premium and fee amounts which overall are up $9.9 billion or 18%. Due to the calm nature of the rest of the year MetLife was able to offset the losses and finished with a 5% increase in revenue for Americas.

     Although MetLife reported positively on both the quarter and the full year results, it still did not perform up to expectations. The stock dropped 2.5% following the earnings announcement however some of the drop was alleviated with news that MetLife is no longer a bank holding company. MetLife has been fighting for the past few years to drop its bank holding division and they were finally approved by the FDIC on Feb 14. MetLife sold off its main Bank’s depository business to General Electric Capital on January 11. The CEO of MetLife said they sold this segment so they could focus on insurance. The biggest weakness that MetLife currently faces is its large exposure to the weak European economy. Although many analysts are skeptical on the European market MetLife reported positively this past quarter and to offset some risk they are expanding into many different territories.

     By focusing on only insurance I believe there is a good opportunity for MetLife to focus on the segments it already owns and grow organically outward. MetLife is currently bidding on Citigroup’s United Kingdom Assurance division which would give them a dominate position in the United Kingdom insurance division. Although the results of the acquisition won’t come to light for a few more weeks, I believe this is a good indication that MetLife will be actively expanding. I believe because of this mix of expansion and organically growing its infrastructure we should expect a return on our investment in the near future.

-Logan Lyke

Friday, February 22, 2013

Actavis beat estimates; Future looks promising

Actavis (NYSE:ACT) posted Q4 earnings on Tuesday, February 19th 2012. Net revenues were $1.7B, with over $1.4B coming from Actavis Pharma, up from $1.5B and $1.2B, respectively, y/y. The inclusion of legacy Actavis was a large driver in creating this spread. Expenses were particularly high this quarter, with R&D growing 80% to $121.1M and SG&A growing 99% to $424.3M. Total operating expenses for Q4 grew 21.4% to $1.7B from $1.4B, driving margins down. Non-GAAP EPS was down 10.2% from $1.77 to $1.59; 4Q11 generated $0.64 in EPS from inclusion of LIPITOR, but dipped to $0.03 for 4Q12. Non-GAAP EPS beat Analyst estimates by $0.06.

Major pipeline drugs and marketed products have been added to the Actavis portfolio, primarily due to the acquisition of Uteron Pharma in January 2013, and the merger with Watson Pharmaceuticals in 2012. The Actavis pipeline is growing quick: “Our Actavis Pharma pipeline is among the strongest in the industry with over 185 Abbreviated New Drug Applications (ANDAs) on file with the US FDA, including 49 first-to-file opportunities, of which, 33 represent potential exclusive first-to-files.”

Going forward, there are many events that can either be a catalyst or a detriment to Actavis. Guidance projects net revenues to grow 37% to $8.1B. Non-GAAP EPS is expected to grow to $7.70 - $8.10, showing a potential upside between 28% - 35%. Many drugs are being pushed through the pipeline and we see them trying to break into new regions of the world. Analysts questioned when we could see their complex drugs get passed, and management stated they were unable to predict that because of the nature of the FDA process. Actavis is now trying to break into Australia, which they acknowledge would be tough because of top 5 competitors taking 97% market share. If they want to break in, they need a way to cut costs to effectively sell their products. Again, these events can either be a catalyst or a detriment, but for now we reaffirm our buy thesis.

Thursday, February 21, 2013

Life Technologies dips 8%

Life Technologies dropped 8 percent yesterday to $58.83 on news that potential buyout offers have disappeared because of the recent run up in the firm's market value. On Jan 18, Life Technologies released a press announcement confirming that the bank has hired bankers to conduct a "strategical review" of the company, fueling speculation that private equity firms and larger life sciences companies are looking to buy out the firm. That speculation led to the company reaching a new high of just below $65 a share. Due to the recent gain in stock price however, Thermo Fisher Scientific Inc has reportedly withdrawn their offer to buyout the company at current price levels. A potential deal with Thermo Fisher Scientific would compliment both companies' current portfolio of life sciences tools, although it is rumored that Thermo Fisher doubts their offer will be accepted by the Life Technologies' board at current price levels.

In more positive news yesterday, Life Technologies also released details of an expansion of their Ion Torrent systems. They announced about a dozen new products that the company expects to continue the push to become the market leader in bench top genome sequencers, already controlling about 60% of the market. There has been great demand for the company's sequencers, driving revenue growth in the fourth quarter.

Overall, the news is underwhelming and its disappointing to see that buyout talks have reportedly stalled between Life Technologies and its potential suitors. At its current price targets, the life sciences company is trading above average in both earnings and EV/EBITDA relative to its peers. We will be waiting to see how the stock performs today to decide whether to exclude it from the portfolio and will update if any decisions are made.

Wednesday, February 20, 2013

Anadarko Guidance

Today Anadarko released details of its 2013 capital program and guidance. 2013 is expected to be one of the best years in company history. Capital Expenditures are estimated to be within the range of $7.2-$7.6 billion and will focus on projects that are estimated to generate return rates between 30 and 100 percent. Sales volume is expected to increase 5 percent, with high margin oil sales justifying most of the increase. The increase in oil sales will be primarly driven by increased activity in the Wattenberg and Eagleford horizontal programs. Furthermore, Anadarko remains focused on creating value by advancing high margin international oil and deep water development mega projects in Mozambique, Ghana, and Algeria, as well as continuing a very active exploration program.

Anadarko closed at $80.37, down 4.47 percent primarily due to worries concerning the possibility of Quantitative Easing ending prematurely. Equities within the energy space suffered the most losses because they are primarily driven by prospects of future economic growth. An end to QE in addition to a possibility of the debt crisis going unsolved has sent investors fleeing.

Despite today's bear run I do not believe QE will end anytime soon because the Fed has not come close to reaching its goal of 6.5 percent unemployment. I do not believe the Fed will end QE before budget cuts are negotiated on the contrary, a new QE program might be necessary to absorb the impact they will have on the U.S. economy.

Sunday, February 17, 2013

VFC 4Q12 Earnings

V.F. Corporation released 4Q12 earnings pre-market on Friday, February 15 and the stock is up 3.3% since the release. VFC reported adjusted EPS of $3.07 for the quarter, up ~32% year-over-year and ahead of street expectations of $3.03. This was driven by strong top-line growth and improved margins. Sales missed estimates, however it grew 4% compared to 4Q11, to $3.003 billion. The sale of John Varvatos during the year had a 1% negative impact on revenues. Gross margin was up 220 basis points to 47.4% from 45.2% in 4Q11 while operating margin expanded 280bp to 15.1%.

The Outdoor and Sportswear segments saw year-over-year revenue gains of 6% and 15%, respectively. Jeanswear, Imagewear, International, and Direct-to-Consumer also saw gains during the quarter. Contemporary Brands' revenue was down 17% during the quarter due to the sale of John Varvatos, however, operating income surged 20% during the quarter.

The company expects 2013 revenues to grow 6% and margins to expand by ~100bp. The company also prides itself in its ability to generate cash and expects cash flow to reach a record $1.4 billion.

VFC was able to sustain top-line growth during a quarter when many competitors slumped. Their diverse portfolio of big-name brands helps to hedge against both fashion risk and weather fluctuations. The company is actively seeking new acquisition targets to strengthen the company and we remain very bullish on VFC in the long-term.

Friday, February 15, 2013

ALXN reports Q4 and 2012 earnings

On February 14th, Alexion Pharmaceuticals reported Q4  and 2012 full year results. For Q4 2012 net product sales of soliris increased 41 percent to $320.5 million, compared to $227.6 million in Q4 2011. This increase represents steady additions of new patients with PHN globally and new patients with aHUS. Q4 2012 non-GAAP net income increased 52 percent to $122.3million, or $0.60 per share, compared to Q4 2011 non-GAAP net income of $80.5 million, or $0.41 per share. Overall ALXN had steady increases for Q4 2012. For the year 2012 net product sales increased 45 percent to $1.134 billion, compared to $783.4 million in 2011. 2012 non-GAAP net income increased 60 percent to $425.2 million, or $2.13 per share, compared to 2011 non-GAAP net income of $266.1 million, or $1.38 per share.  As of December 31, 2012, the Company had $989.5 million in cash and cash equivalents compared to $540.9 million at December 31, 2011. Compared to 2011, Alexion has improved overall in 2012.  In 2013, worldwide net product sales are expected to be within a range of $1.490 to $1.505 billion. On a non-GAAP basis, R&D expenses are expected to be in the range of $285 to $295 million, and SG&A expenses in the range of $425 to $435million. Cost of sales is expected to be approximately 10 percent of net product sales. The non-GAAP effective tax rate ,reported on a cash tax liability basis, is expected to be in the range of 7 to 9 percent. Based on a forecast of approximately 205 million diluted shares outstanding, Alexion is providing guidance of $2.82 to $2.92 for non-GAAP earnings per share for the year. Alexion plans to continue to grow and expand their market in 2013 which will lead to further increases and improvements throughout the year.
DaVita healthcare Partners released their 4Q earning that ended December 31, 2012 and reported on February 14, 2013.  In this quarter DaVita completed the acquisition of HealthCare partners.  They reported earnings of $173.3 million, or $1.68 per share—excluding the transaction expenses associated with the acquisition costs of HealthCare partners—compared to $1.57 in the year earlier quarter.  This beat the streets expectation by $.25. Revenue rose 33.05 percent to 2.48 billion rom the year earlier quarter. Net income was 155.8 million, or $1.51 per share.  Operating cash flow was 1,101 million and free cash flow was 715 million.
Management noted in their earning conference call that as part of the fiscal cliff negotiations congress mandated a rebasement of part of the bundle (payments by Medicare and Medicaid) for 2014. Which could lead to headwinds for kidney care providers, such as DaVita, in 2014. Currently, the kidney care providers are losing money on Medicare and many of the dialysis centers in America “ are in a fragile financial state”.  However, management is confident that they will be able to reduce total cost while at the same time improving quality of care. Some of those costs will be actualized by the further vertical integration of Healthcare partners and the resulting greater efficiency.  Management also touched on the increasing risk of the often-discussed government investigations and private lawsuits. 
In the near-term outlook, management maintained 2013 OI guidance of $1.75 billion to $1.9 billion, and this includes, on the kidney care side, $1.35 billion to $1.45 billion; and on the HeathCare Partners side, $400 million to $450 million.
DaVita has continued to post solid financial gains despite the uncertainty that exists in the healthcare sector.  The company proven the ability to diversify and integrate vertically, with its acquisition of HealthCare Partners.  DaVita's emphasis on quality of care and their vast network of dialysis centers has given the company a great competitive advantage in the Kidney care provider sector.
It is noteworthy to mention that Berkshire Hathaway bought an additional $3,728,844 worth of DaVita shares bringing their ownership to nearly 15 percent of the company.

Wednesday, February 13, 2013

BlackRock Names New CFO

BlackRock announced Wednesday February 13, 2013 that Gary Shedlin has been selected to become the next CFO.  Ann Marie Petach, the company’s long existing CFO will be retiring from her position.

Gary Shedlin is known for being the dealmaker leading BlackRock’s massive acquisition of Barclay’s iShares Unit in 2009. Gary Shedlin is moving to BlackRock from Morgan Stanley. 

In response to speculation that BlackRock is beginning positioning it’s self for new acquisitions Robert Kapito, the President, spoke up against those claims. Mr. Kapito noted that the firm would continue to focus on small acquisitions to round off product lines. BLK shares up +1.44% intraday.
-Source: Reuters. 

Thursday, February 7, 2013

Neustar (NSR) 4Q12 Earnings

Neustar reported financial results for their fiscal year 2012 fourth quarter on February 5th after the close. Revenue for the quarter increased 23% to 214.2 million. For the full year, revenue increased 34% to 831.4 million - driven by the full year impact of TARGUSinfo and double digit increases in both Carrier and Enterprise Services. Management expects revenues to range from $895 to $915 million in 2013 representing a 8% - 10% increase over 2012. Diluted EPS for the quarter increased 47% to $0.75 while full year diluted EPS increased 43% to $3.04. EPS is expected to range from $3.28 to $3.43 in 2013.

Neustar continues to position for a successful NPAC contract renewal. While their non-NPAC business continues to grow, a successful NPAC contract renewal is crucial to the Neustar story. President and CEO Lisa Hook remains “…confident that our capabilities and demonstrated track record of innovation and outstanding service in this complex ecosystem position us a very strong competitor for the next contract that begins July 1, 2015”. To understand the breadth of the NPAC contract - it contains over 600 million telephone numbers, which is over 70% of all active phone numbers in the U.S. In 2012 Neustar processed over 1.2 million transactions, routed over 4 billion phone calls and 7 billion text messages; every phone call and every text message in North America every day. Neustar has been the NPAC administrator for the past 15 years building the world’s largest and most complex local number portability system.

The company repurchased 2.7 million shares in 2012 for $98 million in cash. Cash and investments increased by $74.7 million, to 343.9 million in 4Q12.

Shares of Neustar closed at $46.53, ~2% above our price target. Neustar has a strong and growing presence in the telecommunications, data analytics, Internet e-commerce, and media and advertising industry's which will allow for significant growth opportunities going forward. We remain bullish on the Neustar story seeing the next leg in shares coming from a successful NPAC renewal and continued strong financial performance. Our model calls for a revised price target of $54.41, representing an additional 16.9% upside.  

BEAV Q4 2012 Earnings

B/E Aerospace Reported their 4th Quarter results on Thursday. The company’s 2012 results where the best in company history. The year over year highlights are as follows: They had revenues of $3.085 billion, which was an increase of 23.4 percent. Operating earnings were $540.0 million, an increase of 26.2 percent, and operating margin of 17.5 percent, which increased 40 basis points. Net earnings and earnings per diluted share were $291.3 million and $2.83 per share, reflecting increases of 27.9 percent and 26.3 percent, respectively. The growth in operating earnings and operating margin were a result of operating leverage at the higher sales volume and ongoing operational efficiency initiatives. Their revenue growth continues to be driven by the robust new aircraft delivery cycle. Approximately 61 percent of fourth quarter and full year 2012 revenues was driven by demand for products for new-buy aircraft reflecting both robust new aircraft deliveries and weaker aftermarket demand. During the conference call, the CEO discussed guidance for 2013, “Our 2013 guidance of approximately $3.45 per diluted share or a 22 percent earnings per share growth is based primarily on our high quality backlog, the expectation of strong wide-body deliveries, a modest recovery in the aftermarket and significant continuing margin expansion.”

For 2013 the company expects continued strong bookings in 2013 driven by the robust wide-body aircraft delivery outlook, bookings from prior SFE awarded programs, and a modest recovery in aftermarket demand, and expects to end the year with a book-to-bill ratio in excess of 1 to 1. 2013 revenues are expected to be approximately $3.35 billion, and, based on scheduled program deliveries, are expected to be stronger in the second half of the year.

On the day BEAV released earnings, the stock closed up 2.5%. The investment thesis remains valid and the stock has performed extremely well since inception gaining around 16%.

-John Astarita