OZRK Earnings

First, I would like to apologize for my model being out of date on Dropbox- I went to update it after earnings were reported and noticed that my most recent update(s) did not make it onto the UASBIG dropbox nor onto my own personal one and were lost when my computer died the other week. I know I need to work on my FY2012 Statement of Cash Flows, but outside of that, my model is updated and back on our dropbox. I have a current 1-year price target of $49.49, representing a 22.67% upside from the most recent closing price. It'll be more accurate once the full 10Q comes out, but I am still confident in their ability to drive growth in their stock price.

Earnings were released last week. They came in at $0.56 EPS, beating estimates of $0.55. As per usual with this company over the past few years, it is difficult to talk about their achievements in the previous quarter in terms of the ones before it- since they closed Q4 2012 with $2.4 Million in gains from their acquisition of Genala Bank (which amounts to nearly 20% of their final net income available to shareholders), it is difficult when reading the reports to simply compare this quarter to the one before.

In general, OZRK outperformed Q1 2012 with Net Interest Income (after Provisions for Loan Loss, which was neither inappropriately small nor large) growing 1.6% and Non-Interest Income 18.6% (more than offsetting the increases in Non-Interest Expense), leading to an 11% increase in Net Income.

Considering they just completed their first traditional acquisition, the balance sheet looks pretty good- loan growth was perhaps a bit sluggish at just 3.5% over last year and a minor (less than .5%) decrease over last quarter, but cash going towards acquisitions means less cash to go towards loans. Deposits and other liabilities grew more slowly than loans, meaning that a portion of the loan growth over Q1 2012 came from Stockholder's Equity (Liabilities shrank more quickly than loans from Q4 2012 as well)

While it is beyond my skill level to model, the keystone of my thesis with Ozarks is their acquisition strategy. They are aggressive in their pursuit of banks to purchase yet conservative in their pricing, leading to acquisitions that are not only accretive in the long run, but also bring with them initial gains. This certainly may lead to some not entirely exciting quarters, but should be beneficial in the long run. That being said, this past quarter was certainly far from a bad one- especially when you consider that Q1 is generally more challenging than Q4 and their Q4 2012 has significant one-time gains.

As mentioned in my first paragraph, I maintain my hold position with a current price target of $49.49 and will fix the cash flows on the model soon.

New Patents and Coverage Help Propel Masimo 6.6%; Valuation Confirmed

Masimo Corporation got approval on their patent, filed Dec 7, 2007, for the Plethysmograph Variability Processor. This processor triggers blood flow to a given tissue site to calculate different variables and indicators to determine conditions of blood & blood flow, as well as seeing how efficient specific treatments are for these conditions. On another note, Janney Montgomery Scott initiated coverage on Masimo with a BUY rating and a target price of $26.00 a share, further solidifying the UASBIG BUY rating and 12M price target of $26.23.

The accumulation of good news, heightened with a strong market, helped Masimo rally up 1.9% at open to $19.40, opposed to a previous closing price of $19.04. It traded at a high today of $20.35, a gain of 6.9%. The rally eventually cooled down and the stock ended $20.29 a share, representing a daily gain of 6.6%, beating the S&P500 gain of 1.2%. 

Although Masimo is down YTD by 343 basis points, there is much more expected growth as more hospitals begin to implement their products. Within a span of only a couple weeks, three different hospitals have implemented new Masimo systems mainly because of the efficiency and cost effectiveness to both the patient and the provider. The most recent to implement Masimo devices is East Tennessee Children’s Hospital, one of only four hospitals in its state certified as a Comprehensive Regional Pediatric Center. East Tennessee Children’s Hospital has given insight on possibly expanding the Patient SafetyNet into different units of the hospital. With new accelerated acceptance of the Masimo product, our thesis is further affirmed for the long term growth of Masimo.

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