DaVita Rises 6% on Medicare Rates and Upgrades

     Shares of DaVita (DVA) traded up 6.1% on Tuesday, April 2nd on a Medicare announcement and subsequent analyst upgrades. Medicare announced that is not likely to cut payments for the Medicare Advantage program through 2013 and 2014. The Centers for Medicare and Medicaid Services previously had announced Medicare Advantage payments could fall by more than 2% by 2014, but it is now expecting to increase payments by 3%.

     Medicare Advantage payments are important to DaVita, as more than half of the recently-acquired Health Care Partners revenues are derived from Medicare Advantage Contracts. After the news, Piper Jaffray reiterated its BUY on DVA, with a price target of $134. Deutsche Bank subsequently upgrades the stock from HOLD to BUY, with a price target of $136, after recently downgrading the company over concerns about Medicare Advantage payments.

     UASBIG currently has a BUY rating on DVA, with a price target of $131. We view this news  as favorable and have a positive long-term outlook on the stock given the potential for HCP's geographic expansion and synergies between DVAs dialysis services and HCP's doctor network.

OZRK Announces Dividend

OZRK announced a quarterly dividend of $0.17 continuing their 2.5 year trend of increasing dividends, marking 13.3% growth over last quarter. Earnings set to be released Monday. The stock is up about 15.5% over the last month and 44% since we acquired it last year. I have high expectations for the upcoming release and will work towards an updated model and price target (foresee a continued hold rating) soon.

ACT Gains Rights To Sell Generic Pulmicort Respules

A prime example of “one man’s failure is another man’s success” was displayed for the world to follow today. Actavis (ACT) confirmed, after market close, April 1^st, 2012, that the District Court of New Jersey had ruled the patent guarding AstraZeneca’s Asthma treatment drug, Pulmicort Respules, invalid. Upon this news, ACT was happily greeted by bullish investors. Actavis stock price quickly soared to a new 52 week high at today’s market open – ACT opened 5.1% above the previous day close of $92.46 per share. Shortly after open, ACT again hit another new 52 week high at $98.37 before leveling off in a range of $96.50 – $96.70. ACT eventually finished the day at $96.68, a 4.6% increase since the previous days close.

After initially losing a lawsuit last month that hindered the growth of the firm within the generic Asthma universe, ACT has now been given the right to sell the generic drug Pulmicort Respules. With a new outlook on the market, ACT is looking to try and reap all the benefits of the nearly $16.0B market. Actavis stated that new revenue attributable to Pulmicort amounted to $1.2B. On top of all this already spectacular news, Morgan Stanley has increased their target price to $101.00 per share along with an overweight rating. We expect to see much growth in both the near and long-term future of Actavis. We look forward to seeing their next quarter statements (TBA) and a possible increase in management guidance.

Chicago Bridge and Iron Investor Day

Chicago Bridge and Iron (CBI) hosted Investor Day on Thursday March 28^th to discuss the outlook for the company post the acquisition of the Shaw Group that was finalized earlier this quarter. The company offered a revised revenue guidance of $10.7 billion-$11.2 billion, to be compared to the guidance of CBI on a stand-alone basis of $6.3-$6.7 billion that was given earlier this year. CBI forecasts new awards between $13 billion and $16 billion and earnings per share between $4 and $4.35. The stand-alone projection for new awards was $7 billion-$10 billion, while the EPS guidance was $3.35-$3.65. The current backlog of the combined company is $27 billion.

During the opening presentation CEO Philip K Asherman expressed his excitement for the company going forward:

“We are certainly in a position to provide integrated solutions to our customers as never before. And although engineering and construction is a majority of the backlog, around 70% of earnings from all the other groups, which is more predictable and less cyclical.”

The stock traded at $61.97, up about 5%, on this news mid-day Thursday. 

American Eagle Outfitters (AEO) reports 4Q12 Earnings

Today, American Eagle Outfitters (AEO) held its fourth quarter earnings conference call, reporting revenues of $1.12B, representing an increase of 9% from $1.03 billion last quarter which were directly in-line with analyst expectations. Revenue growth was driven by a 4% comp increase on top of an 11% increase last year and growing average unit sales (AURs). Comps broken down by business show American Eagle Outfitters comps increased a meager 1% and aerie comps declining 3% and e-Commerce growing 24%, showing consumers increasing shift to online sales. 

Gross profit for the quarter rose 27% to $461MM. Margins grew 600 bps to 41.2% driven by lower cotton costs and other operational leverage opportunities. SG&A expenses increased 21% to $253MM, due to increased marketing spending, among other incentive relative costs. Operating income for the quarter climbed 48% to $177MM with margins expanding 430 bps to 15.9%. The company achieved net income of $111MM. EPS increased 41% to $0.55 compared to $0.39 last year, missing analyst estimates of $0.56 by $0.01.

AEO ended the quarter with $631MM in cash on its balance sheet, and inventory levels of $332MM. Capital expenditure investments for the quarter totaled $94MM with slated out plans to boost spending in 2013 to support future growth initiatives. The company issued rather bleak earnings guidance for the first quarter citing unfavorable weather and macroeconomic factors, with EPS expected to fall within the range of $0.16 - $0.19 based on an expected consolidated comp in the negative mid-single-digit range.

 Robert Hanson, chief executive officer stated, “I’m extremely pleased with our progress in 2012 as the team delivered on our near-term priorities and exceeded our targeted financial metrics. In a competitive and volatile consumer environment, we drove a strong topline on leaner inventories, reduced markdowns and achieved cost leverage. We remain focused on our strategic plan aimed at fortifying our brands and processes and growing our business across North America. Concurrently, we are laying the ground work for transformational global expansion, while continuing to drive strong returns to our shareholders.” The company as of market close today is trading at $20.27, down 10.11% from its opening price and full holdings of the stock position have been sold.

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GB Shokunbi

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.