After a long storm even the faintest flicker of light can be cause for optimism. Analysts think this is the case at Finnish forest products company Stora Enso STERV , where the secular decline in European publishing paper demand and low European construction demand have cast a shadow over the business during the last six years. The 9% surge in Stora shares after today’s first-quarter results were, largely driven by a relief that things weren’t getting any worse. For example, though European paper demand continues to drift lower on a year-over-year basis, it is declining at a slower pace (about…
Author: Ross Shultz
AutoNation reported strong first-quarter results Thursday including an all-time record for EPS from continuing operations of $0.68, up 21% from first quarter 2012. The company continues to execute well in all segments and we see no reason to change our valuation or moat rating. Revenue increased 12% year over year while same-store revenue rose 8.6%. The company’s same-store new vehicle unit volume increased 6.1%, which was roughly in line with the industry’s 6.4% increase. AutoNation still gained share, however, as total new vehicle retail sales outpaced the industry by increasing 9.2%. As is typical, the revenue increase enabled the company…
BB&T reported a 51% decline in first-quarter profits available to common investors, which dropped to $210 million, or 29 cents a diluted share, from $431 million, or 61 cents a diluted share, in 2012’s first quarter. The shortfall was caused by a higher tax rate (65%, as a result of a tax dispute, versus 30% a year earlier) that shaved 40 cents from earnings per share. Further, the latest quarter’s results reflected $30 million in preferred-stock dividends that were not present a year earlier. Income before taxes rose 16% to $737 million. Net interest income edged lower by 1% to…
Abbott Labs ABT reported decent first-quarter performance, with top-line results falling slightly short of our estimates but profitability improved, consistent with our expectations. We plan to leave our fair value estimate unchanged for now at $34 per share. As in past quarters, we saw strength in several key areas related to Abbott’s narrow moat, which includes its presence and infrastructure in the emerging markets. Nutritionals—one of the moatiest parts of Abbott, in our opinion–continues to post impressive growth in the high single digits, thanks to strong international demand, and a plethora of new product introductions. Abbott also saw decent performance…
IBM’s first-quarter results came in well below expectations, as the firm’s hardware and software results disappointed. Overall revenue declined 5% year-over-year to $23.4 billion, while free cash flow declined to $1.7 billion, versus $1.9 billion generated in last year’s first quarter. Hardware was particularly weak, falling 13% from the yearago quarter. Mainframe revenue did grow 7% year-overyear to approximately $650 million, but this is a poor result given IBM’s recent refresh of its System z portfolio. Management blamed the weakness in mainframe sales primarily on execution and deal push-outs, and we expect a stronger second-quarter. The rest of IBM’s hardware…
China Telecom increased revenue 15.5% to CNY 283 billion ($46 billion) in 2012, or 11.8% to CNY 258 billion excluding handset sales, driven by strong growth in mobile, Internet data, and broadband access businesses. EBITDA margins (post capacity leasing fees paid to the parent) narrowed more than 120 basis points because of heavy investments in advertising and handset subsidies to drive smartphone conversion and data usage. The higher leasing fees paid for the CDMA capacity owned by the parent also contributed to the margin contraction, although we expect China Telecom to see modest efficiency gains after it recently completed the…
Oracle reported financial results for its fiscal third quarter, revealing surprising weakness in new software license revenue and larger-than-expected declines in hardware revenue. Although prolonged weakness in new license growth may indicate that smaller competitors are encroaching onto Oracle’s turf, the company’s core markets are not being disrupted. On the software side, revenue from new licenses fell 1.8% versus last year, while software update and support revenue grew 7.1%. This particular revenue item provides strong evidence of Oracle’s wide economic moat. Software update and support revenue represents more than 45% of company revenue and 80% of overall profits. From a…
The Apollo Group beat the Street’s second quarter revenue and adjusted operating profit forecasts and approved a $250 million share repurchase program, which helped send shares up sharply in early trading. Still, analysts highly cautious about the for-profit education sector’s outlook and do not expect a significant change to Apollo’s $22 fair value estimate. Enrollment trends remain weak and have shown few signs of bottoming, so it is highly uncertain how much further revenue and margins will continue to decline. Fiscal second-quarter revenue fell 13% over the prior-year period to $834 million. Troublingly, after showing signs of stabilization in the…
With the businesses PPR intends to divest (Fnac and Redcats) now in discontinued operations, and agreements or plans in place to sell them, PPR’s full-year 2012 results reflect the company that management has been striving for since CEO Pinault took the reins from his father in 2005. PPR’s revenue growth and profitability reflect that of a luxury company, as 64% of revenue and 84% of operating income are generated from the segment (the remainder is derived from sport & lifestyle, primarily Puma). With these results, we expect to see PPR’s returns on invested capital to improve to just over 10%…
Wolters Kluwer’s revenue growth and margins continue to hold up nicely despite the difficult economic environment in Europe. For the full-year 2012, organic revenue growth was up 1%, but including acquisitions and the effect of currency, it was up 7% to EUR 3.6 billion. Profitability was up slightly, with ordinary EBITA margins of 21.8%, primarily due to the divestiture of the weaker pharma business. A portion of this segment that Wolters Kluwer intends to divest remains outstanding and is in discontinued operations, but management stated that the sale is progressing. Management presented reasonable 2013 targets given that it expects Europe…
Carnival has been afflicted by another spate of unfortunate accidents in 2013, just when investors expected the company would be out of the media limelight. With the trouble of the Truimph last month and the Dream yesterday receiving negative press, analysts remain concerned that near-term pricing could be uncertain because of negative press. Trading at 18 times the midpoint of management’s updated earnings guidance, shares look lofty today, and would caution investors on purchasing shares during the next quarter. First quarter yields were down 1.9% on a current currency basis, to $158 per available lower berth day (ALBD), lapping a…
BioMerieux reported full-year results that fell shy of expectations on Wednesday, as solid product sales were more than offset by increased expenses, a higher-than expected tax rate, and the impact of recent acquisitions. Our narrow moat rating remains intact but we plan to lower our fair value estimate modestly to reflect lower-thananticipated earnings potential over the next several years. Longer term, we remain confident that the company’s strong defensive business model, increasing exposure to high growth markets, and leading share in healthy end markets will pave the way for accelerated growth. However, intense competitive pressure and continued macroeconomic difficulties are…