Target Corporation (TGT) Q1 Earnings

Wednesday, May 16:
Pre-market, Target Corporation (TGT) reported Q1 net earnings of $697 million, or $1.04 per diluted share, representing a 5.0% increase over the prior-year period and a $0.03 surprise against a $1.01 consensus estimate. Adjusted EPS, which omits expenses related to investment in the Canadian segment during the quarter, totaled $1.11, representing a 11.5% increase year-over-year.
A comparable-store sales increase of 5.3% was driven by warmer-than-normal weather coupled with a positive response by consumers to TGT's spring product assortment. Also during Q1, operating margin expanded by 50 bps (7.3%) and SG&A expense as a percentage of sales decreased by 50 bps (19.9%).
In regard to our thesis, TGT continued to develop its position within Canadian markets during Q1, as expenses related to IT and distribution infrastructure development contributed approximately $(0.08) to quarterly EPS. In Q2, Zellers will vacate several locations slated to serve as the first set of Canadian Target stores. Management expects to have 125 to 135 of these stores opened by 2014.
For Q2, management expects GAAP EPS of $0.94 - $1.04 and adjusted EPS of $1.04 - $1.14. Guidance for FY2012 was raised by $0.05, to $4.10 - $4.30 for unadjusted EPS and $4.60 - 4.80 for adjusted EPS.
The market reacted favorably to TGT's Q1 results, as shares were +3.3% following the earnings announcement.

NVIDIA's Q1FY2013 Results

For the quarter,NVIDIA  reported revenue of $924.9 million, down 3% sequentially and off 4% from a year ago, but ahead of the Street consensus at $916.2 million. GAAP profits of 10 cents a share matched Street estimates. Non-GAAP profits in the quarter were 16 cents a share.

 NVIDIA reported strong demand for its newly launched chips for desktop computers and contract wins for its Tegra smartphone chips but said revenue and profit is still being limited by supply constraints and macro economic issues.

 For FY Q2, the company sees revenue of $990 million to $1.05 billion, ahead of the Street at $976.2 million. The company sees GAAP gross margin of 51.2%, with non-GAAP gross margin of 51.5%; in the first quarter GAAP gross margin was 50.1%, and non-GAAP gross margin was 50.4%.

-Vlad

Steve Madden (SHOO) Q1 earnings report

Steven Madden reported earnings Thursday morning, reporting quarterly earnings that met analysts’ expectations, causing stock price to fall 1.45% by market’s close Thursday evening.  Sales reached $266 million, a 60.5% jump from last year, beating estimates of $250 million.  Net income increased 22.5% to $21.9 million.  First quarter EPS rose 19%, continuing 15 straight quarters of double digit EPS growth.  This was the fifth consecutive quarter of double digit sales growth for the company.   Sales growth was a result of expansion within the core Steve Madden   brand, expanding into to new categories, geographies, and channels.  Same stores sales increased 11.9%, proving overall development of the brands products and diversified categories. The wholesale business gross margin narrowed to 32.3% from 37.9% from the acquisition of shoemaker Topline.  Gross margins within the retail segment increased by 2% from 58.1% to 60.1%.   

Guidance was increased bringing EPS for 2012 to 2.62-2.72 from 2.60-2.70, with net sales expected to increase by 26%.  E-Commerce is continually growing for Steve Madden, up $24 million from the previous quarter.  The largest segment a growth came from Women’s wholesale footwear, which Steve Madden’s attests to its constant effort to be on trend, and the success of its “test and react” sales model.  Sales of Steve Madden handbags doubled from Q1 2011, and will be in Nordstrom stores this fall.  Steve Madden as a company is pleased with the consumer interest of their outlet store chain, recently adding a 7^th, as well as the consumer reaction to its newly opened flagship store in Manhattan.  The company expects future double digit sales growth through the development of the Steve Madden shoe and accessory line, as well as through all other Steve Madden owned brands, Betsey Johnson, Elizabeth and James, Madden Men, and Big Buddha.

Ford (F) 1Q 2012 Earnings

            On Friday, Ford reported a fall in quarterly profit that beat street expectations.  Since then, the stock price has slid about $1 on macroeconomic concerns: Europe debt worries & disappointing domestic GDP numbers. 

            In the first fiscal quarter of 2012, ford earned $1.4 billion.  This is a large drop from a year earlier--the first quarter of 2011 yielded $2.55 billion in earnings.  Ford incurred higher taxes in the most recent quarter, which dragged down profits with the help of losses in Europe and Asia.  CFO Bob Shanks said that Ford has lowered its guidance on European demand for the next five years and will lose about $500-600 million for this fiscal year.  Guidance for the Asia Pacific area was also lowered.  But, there is some form of a silver lining.  Increased productivity and product launches should still help profitability in the rest of the year.

            Ford showed strength in its domestic market, with an increase in $289 million in pre-tax profit year-over-year.  This is the highest quarterly profit in this division since 2000.  Its operating margins in this area increased 1.2% since 1Q2011 because they have been focusing on a smaller product line.  But, there is a caveat in this improvement.  Ford has lost market share in the U.S., dropping from 16% to 15.2%.

            On April 20^th, 2012, Ford announced a $5 billion investment in China.  New dealerships and factories should be completed by 2015. In the conference call, management reaffirmed that although there are some concerns about China’s future growth, middle class consumers’ demand in China is not fully saturated. 

Baxter International (BAX) Q1 Earnings Call

         Baxter International reported earnings for the 3 months ended, March 31^st, 2012, with better than anticipated results. First quarter revenue of $3.4 billion beat growth expectations by 2%. Overall, year-over-year revenue increased roughly 4% from $3.3 billion. Also, EPS increased by $0.06 to $1.04 from previously $0.98 in 2011, representing a 6% increase. Both revenue and EPS exceeded BAX’s previous guidance for the year, primarily due to their Bioscience division, which increased recombinant sales by 10%. The increase in this product line was a result of high demand for several hemophilia treatments and the revenue generated from the Synovis Life Technologies Inc. acquisition. Medical Products also grew to $1.9 billion, a 3% increase, driven by strong growth in anesthesia products and certain inject able and nutritional therapies. Unfortunately, the FDA delayed approval of HyQ, an investigational product or immune disorders. The new sent BAX shares down as much as 7%. However, CEO Bob Parkinson conveyed considered BAX’s extensive pipeline, he believes that the “reaction in the market is a total disconnect.” Nevertheless, BAX continued to expand its portfolio and pipeline through investments in R&D and pursuit of business development opportunities. For example, under the Hart-Scott-Rodino Antitrust Improvements Act, Baxter received clearance for its collaboration with Momenta to develop and commercialize follow-on biosimilars. In addition, the FDA approved TISSEL for an expanded indication for general homeostasis in surgery. Among other advancements, BAX has entered 2012 with strong momentum and is confident in their ability to continue their success. That being said, management forecasted even brighter projections for FY2012, including increased sales growth of 4-5% and earnings of $4.49-$4.57 per share.

- Shawn Laljit

Apple (AAPL) 2Q 2012 Earnings

            Last Tuesday, Apple’s stock recovered the previous week’s losses after ‘blowout’ second quarter earnings during late-day trading.  The stock gapped up 7%, driven by EPS of $12.30 (almost doubling year-over-year) versus the average estimate of $10.02.  Revenue came in at $39.19 billion (year-over-year growth of 59%) compared to Zack’s Consensus of $36.58 billion.  Gross margin increased 600 basis points to 47.4%.  iPhone sales increased 88% year-over-year to 35.1 million units, fueled by international demand for the iPhone 4S, notably in China.  International sales made up 64% of total revenue in the most recent quarter.  iPod sales fell 15%, as these sales were partially replaced by the hot-selling iPhone & iPad.  Although, CFO Peter Oppenheimer said that the iPod still holds about 70% of the market share of MP3 players.

            iPad sales were up 151% to 11.8 million units.  Although some of these sales cannibalized Mac sales, management insists that this is not a ‘zero-sum game’.  Education & enterprise are two promising markets for future growth.   For example, 94% of Fortune 500 companies have used/tested the iPad in their operations.   Sales to domestic K-12 grades outnumbered Macs by two to one this quarter, after iBooks 2 was introduced in January.  CEO Tim Cook said that the main reason for cutting the iPad 2 price to $399 was to ‘unlock some (price-sensitive) educational demand’.  The iPad occupies about 60% of the tablet market, followed by tablets supporting the Android operating system (32%). 

            China was a clear catalyst for international growth during this quarter.  The iPhone 4S debuted in China in mid-January, as the #3 wireless carrier (China Telecom) was brought into the mix.  This should continue to grow, when China Mobile (#1 carrier) eventually comes into play.  Analysts anticipate Apple to launch a new iPhone (5) this fall, followed by a TV (iPanel) in the winter.  The new iPhone is expected to support 4G service.  Management reiterated (pending board approval) a dividend of $2.65 to be paid out at the end of the next quarter.

            Revenue guidance was lowered for the next fiscal quarter (ending in June).  Production was more efficient than anticipated, so revenue that was anticipated for the next quarter (ending in June) may have been realized in the most recent quarter.  Also, management expects that a strengthening dollar will hurt revenue levels in the next fiscal quarter. 

CLF Q1 2012 Earnings

Cliff Natural Resources (CLF) reported its Q1 2012 earnings on April the 25^th. Revenues increased 7% over last year to $1.3 billion including a first quarter record output of 8 million tons of iron ore. CLF’s North American Coal segment returned to profitability and achieved record sales and production volume of 1.4 and 1.7 million tons respectively. Across the board, all segments realized record sales volume, as operational constraints from last year were significantly resolved. Sales volume of the U.S. segment increased 20% to 3.4 million tons from 2.8 million tons, while the East Canadian segment realized an increase of 160% to 1.9 million tons from 730,000 tons. The Asian Pacific region added to overall sales volume by recording a 25% increase to 2.8 million tons from 2.2 million tons in 2011. Despite increases seen in sales volume, pricing and cost conditions withheld expected earnings from materializing. Iron ore prices remained relatively low at $140 price per ton in comparison to last year’s Q1 price per ton of $180. Adding to price pressure was the lack of demand seen in Europe which hampered met coal prices during the quarter. Management expects iron ore prices to remain stable at $150 per ton throughout the remainder of the year. Apart from price conditions, CLF experienced a substantial increase in COGS as mining, maintenance, energy, and transportation cost squeezed earnings in Q1. Management highlights that continued aggressive capacity expansion and one time operational constraints also contributed to overall cost.

Net income depleted by 11% from $423 million in Q1 2011 to $376 million in Q1 2012.  Management maintains its sales volume outlook across all segments including an increase in the Asian Pacific segment of 11.4 million tons from 11 million. Although annual sales volume remains in line, CLF reduced its operational cash flow outlook from $1.9 billion to $1.7 billion, primarily driven by outlook adjustments in full year business segment. Currently, all capacity expansion plans are on schedule, including cost and expected annual output. The Chromite project is slated to advance from the pre-feasibility stage to feasibility this summer as CLF expects to spend $75 million this year. Overall, CapEx is expected to be $1 billion this year including $333 million in dividend payments. The remaining cash will cushion CLF’s liquidity stance as it plans to shore up cash after last year’s acquisition of Consolidated Thompson. In response, shares were down 5.5% after-hours on April the 25^th. 

-Kelechi B. Nwokocha