On Wednesday, UBS announced that it had reached an agreement with U.S., U.K., and Swiss regulators to pay a $1.5 billion fine to settle charges that the bank intentionally manipulated the London interbank offered rate. The fine, though massive, was not a surprise; rumors emerged last week that the bank was likely to face a fine of at least $1 billion. As we noted last week, we expect this settlement to have little long-term impact on UBS. First, we think that UBS, more than most global banks, is taking meaningful steps to put its past behind it and to operate…
Author: Daniel Curran
After previously releasing fourth-quarter and full-year sales, Carrefour CA provided more-detailed financial results that showed further but more modest consolidated operating margins declines, consistent with consensus estimates. As one of the world’s largest retailers, Carrefour’s scale warrants a narrow economic moat. Carrefour is investing heavily in price to stem recent domestic market share losses but we do not forecast like-for-like sales in the eurozone to normalize around 2% until 2014. Investors looking to build a position in the Carrefour turnaround story against the backdrop of prolonged government austerity measures in Europe should seek a high margin of safety and have…
Carnival’s seasonally small fourth-quarter results were better than anticipated, but a still-weak global consumer is keeping pricing power tepid for the company. The cautious spender continues to compress pricing by waiting it out for better deals, causing cruise companies to have more erratic control of pricing, with bookings occurring closer in to sail dates. The main risks to the industry now are twofold: first, that Europe remains in an economic predicament that has lasted more than two years and, second, that the fiscal cliff weighs heavily on the domestic consumer if the American politicians cannot resolve their differences imminently. During…
Third-quarter earnings at Munich Re MUV2 exceeded expectations as most of its insurance operating subsidiaries reported improved performance on a year-over-year basis. Life reinsurance surged 25% in the quarter from the comparative quarter last year due to demand driven by over solvency issues from primary insurers. Property-casualty reinsurance also increased premiums and held its combined ratio under 90% in the quarter, about the same as last year. Primary health insurance and Munich Health both reported increased profitability as did the primary property-casualty group. The lone disappointment was in primary life insurance, which recorded a loss. Investment income fell slightly from…
Generali has entered an agreement to purchase the remaining stake in GPH from PPF Group for EUR 2.5 billion. The deal will further strengthen Generali’s leadership position in Central and Eastern Europe, or CEE. The deal is a positive to the company. It removes the uncertainty over Generali’s development strategy in CEE and the resources required from the company to put it in place. The deal further demonstrates CEO Mario Greco’s determination to improve the company’s profitability through aggressive expansion in a high-rowth region. GPH was created between Generali and Amsterdam-based PPF Group in 2007 as a joint venture to…
On Monday, Swatch Group announced that it will acquire the Harry Winston brand and all activities related to jewelry and watches for $750 million plus up to $250 million in pro forma net debt. The transaction should close in four to five weeks. From a top-line perspective, Harry Winston fits nicely into the prestige segment of the Swatch portfolio, and with roughly 20 retail locations at this point, there is plenty of runway for steady, measured growth (both in volume and price). It’s still quite early in the strategic planning phase, but management believes that the new business has the…
ADT reported second-quarter results that reflected impressive traction with its interactive offering Pulse, but a continued slowing of key growth metrics and hints of competitive pressure. On the bright side, higher-priced Pulse continues to gain traction across all channels. The percentage of new customers in its direct channel (53% of new customer additions) and dealer channel (remaining 47%) rose to 33% and 11%, up 3 and 6 percentage points, respectively, from the December quarter. ADT has only begun to upsell to existing customers, and converted 13,000 existing customers to Pulse or 0.2% of all non-Pulse customers. The mix shift to…
Halliburton’s first-quarter reported results were quite strong. Given the seasonally strong demand for software last quarter, sequential comparisons were weak, but year-over-year comparisons were good. Revenue was $7.0 billion versus $6.9 billion last year, as international revenue increased 21% over the same time frame, easily besting Schlumberger’s and Baker Hughes’ performances. In particular, Middle East/Asia revenue increased 25% from last year’s levels, led by growth in the Australia, China, and Saudi Arabia markets. International growth in 2013 is expected to be in the low teens, which is again stronger than Schlumberger’s approximate 10%-11% guidance and Baker Hughes’ 7% growth. Halliburton’s…
Advanced Micro Devices reported first-quarter results that were affected by softness in the global PC market. For the quarter, revenue was $1.09 billion, down 6% sequentially, and a decline from sales of $1.59 billion a year ago. By segment, AMD’s main computer processor, or CPU, business saw revenue fall 9% sequentially, to $751 million. The weakness in global PC demand caused lower PC processor sales to computer manufacturers, though this was slightly offset by higher server processor revenue in the quarter. Although PC chips account for a much bigger portion of AMD’s CPU segment than server chips, we expect the…
Baker Hughes reported a respectable quarter during a difficult North American drilling environment while dealing with negative seasonal effects. Revenue was $5.23 billion, down 2% from the prior quarter and prior year. Operating profit of $455 million was up 3% from the prior quarter, yet down 27% from the prior year. Overall operating margin at 10% was similar to the last quarter, but down from 13% in 2012. On a positive note, the Middle East is now Baker Hughes’ largest international segment, and the firm recently added pressure pumping services to the region. However, on a negative note, profitability remains…
Accor, the fourth-largest hotel company in the world, announced weak first-quarter sales results that were in line with our expectation for a moderation in like-for-like sales because of weak economic conditions in Europe. Sales declined 1.2% to EUR 1.24 billion, with a 0.1% decline in like-for-like sales (like-for-like sales increased 1.1% adjusted for the impact of an extra day in February 2012). The adjusted 1.1% increase in like-for-like sales compared unfavorably with 2.5% like-for-like sales growth in the fourth quarter of 2012. The deterioration was driven by increased unemployment in the eurozone, which was at 12% for the first two…
Guess’ fiscal fourth-quarter sales results reflected ongoing weakness in its North American retail operations, though margins came in at the upper end of management’s range. Sales in the fourth quarter rose 5% to $815 million, as Asia growth increased 19% and Europe ticked up 3%, partially offsetting further weakness in North American comparable store sales (which were down 6.3%, despite lapping a negative 5% in the prior-year period). Reported operating margins slipped 280 basis points to 15%; this is still healthy, but the continued fixed-cost de-leverage is unsettling. Adjusted diluted EPS came in at $0.95, down from $1.05 in the…