Norfolk Southern delivered solid profitability despite a 17% drop in coal revenue, reaching its second-best first-quarter operating income and operating ratio (74.8%–last year’s 73.3% benefited from mild winter weather). Year-over- year 9% growth in inter-modal units and 10% greater chemical carloads helped buoy results. In fact, the rail increased overall volume 3%. Mix richer in inter-modal and weaker in coal drove down average yield 4.7%, and this reduced revenue 1.8%–still a first-quarter record high compared with all but last year. Excluding one-time property gains from this quarter (sale of a line to the state of Michigan), $1.23 in earnings per…
Author: Erik Witlen
Encana reported first-quarter results on Thursday that were in line with general expectations of low production growth and a large drop in realized prices as 2012 hedges expired. Despite higher natural gas prices so far in 2013, many of Encana’s plays are still realizing prices below their full-cycle break-even costs (at the company level), and the company will continue to limit capital spending to its best liquids-growth opportunities. Production levels were flat from the quarter prior, at just over 3.1 billion cubic feet of gas equivalent per day. Revenues were substantially down, however, falling 34% sequentially as the firm took…
Verizon Communications posted solid first-quarter results. The firm likely continued to take market share, adding 677,000 postpaid customers during the quarter, while also posting record margins. The fixed-line business also produced improved results within the consumer business. Internet and television customer additions bounced back from a weak stretch over much of 2012, and phone customer losses slowed to the slowest pace in recent memory. Verizon Wireless again posted accelerating revenue growth during the first quarter. Wireless services revenue increased 8.6% versus a year ago, the fastest pace since early 2012. The quarter’s revenue performance was largely the result of the…
America Movil posted an in-line first-quarter earnings result and made a subtle improvement from its dismal fourth quarter. Group revenue held steady (up only 0.2% year over year) at MXN 193 billion, or $15.8 billion, thanks to a 6.9% increase in the mobile subscriber base and a 9.5% jump in fixed-line revenue-generating units. The subscriber gains helped offset currency headwinds, which curtailed growth in the international segments. On average, the peso appreciated 2.8% versus the dollar, 16.2% versus the Brazilian real, 18.8% versus the Argentine peso, and 2.3% versus the Colombian peso. When we strip out those currency swings, the…
General Electric delivered operating earnings of $0.39 per share, which were ahead of expectations, though the industrial operations were notably weak, offset by strength in GE Capital and better corporate cost management. Industrial operating earnings were down 11% versus the first quarter of 2012, offset by corporate cost reductions, gains from the NBC Universal sale, and contributions from GE Capital. While management indicated that the power and water result was in line with their expectations, we had not anticipated a year-over-year decline in revenue of 26% and a 3.2% operating margin drop in our forecast. The company still expects profit…
CSX improved operating income 2% to a record firstquarter level despite continuing coal weakness. Management pushed out the 2015 target for achieving a 65% operating ratio. The rail conceived the prior margin improvement timeline a couple of years ago, before the full emergence of natural gas sufficiently cheap to displace material utility coal volume. Now weighing the latter with greater visibility, the firm targets a high 60s OR by 2015 and mid-60s longer term. We already projected performance resembling this revision (67.5% in 2015 and 66% long run), thus we maintain our fair value estimate. The rail’s attainment of record…
In the last quarter of the year, Spain’s Banco Popular Español lost EUR 2.7 billion, which pushed the full-year’s loss to EUR 2.5 billion. Despite having until 2013 to fully comply with government-imposed provisions against real estate losses in Spain, Popular chose to bring forward the remaining balance and booked it in the fourth quarter. Without this charge, 2012’s earnings would have been around half a billion euros. Although the heavy loss and Popular’s still-declining credit quality definitely merit attention, we find a couple of slightly bright spots in the firm’s results. During the year, the bank’s revenues–both from interest…
Largely in line with expectations, BCE Inc. announced the sale of Teletoon, Teletoon Retro (English and French), Cartoon Network, Historia and Séries+ to Corus and an ongoing auction for Family (including Disney Junior English), Disney XD, Disney Junior French, Musimax and Musiqueplus. BCE indicated that these properties along with the eight radio stations being auctioned represent roughly 23% of Astral’s EBITDA. The valuation on the properties sold to Corus was put at 10.4x EBITDA in line with the estimated 10.3x EBITDA valuation assigned to BCE’s offer for Astral. These moves respect the CRTC’s concerns over BCE’s interests on a national…
Lloyds reported a loss of GBP 136 million for the second half of 2012, bringing the full-year loss to GBP 570 million. The driving force behind the full-year loss was provisions of GBP 3,575 million for redress of mis-sold Payment Protection Insurance (PPI), GBP 1,500 million of which was incurred in the fourth quarter. On a management provided underlying basis, Lloyds earned a profit before tax of just GBP 2,607 million in 2012, which implies a pitiful after-tax return on equity of about 4%. Lloyds’ core profitability was better–the core division’s underlying return on risk-weighted assets was 2.56%, which implies…
Blackberry issued an announcement this week that “one of its established partners has placed an order for one million BlackBerry 10 smartphones.” The firm gave insight into neither the type of organization (corporation, government, or wireless carrier) that placed the order, nor the partner’s geographical location. Blackberry indicated that shipments are starting immediately, but our hunch is that it may take months for the order to be entirely fulfilled. Until there is more clarity about the partner, analysts are skeptical that any corporation would make such a large order. Thus, our best guess would be either a large government (likely…
On March 5, RWE announced it earned EUR 9.3 billion EBITDA and EUR 6.4 billion operating profit in 2012, both up 10% from 2011. Recurrent net income was EUR 2.5 billion, flat with 2011. All profit measures exceeded our expectations as a result of better-than-expected performance from German power generation and the U.K. operations. Management’s key announcement was the plan to exit the upstream oil and gas business and look for a way to sell all of its shares in RWE Dea, contributing to its EUR 7 billion divestment program. That unit produced 30.8 million barrels of oil equivalent in…
Among the retail sector, Costco is still a defensive pick, mainly due to the fact that its business model should keep driving market share growth in the longer terms. Therefore the company might be able to post double-digit EPS growth. In this way, Costco delivered EPS above the consensus estimates for the second quarter. The gross margins of the merchandise picked up to 10.6% in the second quarter, from 10.5% in the same period last year. The merchandise markup of the company is still around a half of its big-box competitors from the industry. In addition with the 15% growth…