Tag Archives: fundamental overview
General Electric Company (GE) is a diversified technology and financial services company and a leader in all markets in which it competes. GE is organized into four segments: technology infrastructure, energy infrastructure, home and business services, and capital services. By shedding its underperforming businesses and reducing its risks in GE Capital, GE is now focusing on the energy and power infrastructure market, which should support continued growth for GE.
On Dec. 26, 2012, as reported, GE’s global research has put together a team of researchers who have achieved a milestone in the price reduction of zero emission buses by using new Durathon battery of GE combined with a lithium battery and hydrogen fuel cell. The development will create a new way to manage the energy which buses consume and it could enrich their fuel acceptance and electrification, along with that of delivery trucks as well as other heavy-duty vehicles, making possible use of cleaner vehicle technology.
FedEx Corporation (FDX) started overnight delivery in 1973 and is now the world’s largest express delivery firm. The company generates two thirds of its revenue from its express division. With its massive international shipping network and rival DHL’s exit of the domestic U.S. parcel delivery market in 2009, FDX enjoys a narrow economic moat with a costly entry barrier. FDX continues to adjust its operations and trade networks to adapt to the post-recession trade trends. For 2013, the company is expected to generate higher revenue and EPS at a valuation which is below the industry average.
Q2, 2013 Earnings Beating Estimate and Analyst‘s Call
On December 19, 2012, FDX reported earnings of $1.39 per diluted share for the second quarter ended November 30, compared to $1.57 per share last year. Superstorm Sandy impacted the quarter’s result by $0.11 per diluted share due to reduced shipment volumes and incremental operating costs. By factoring out the Superstorm’s impact, FDX’s profit was $1.50, beating analysts’ estimate of $1.41 according to Thomson Reuters.
Apache Corporation (APA), based in Houston, Texas, is one of the largest independent energy companies, which explores for, develops, and produces natural gas, crude oil, and natural gas liquids in the world. The recent $18 billion acquisitions in past several quarters provide APA near-term exploitation opportunities and long-term exploration potentials to boost the Company’s production and reserves. APA is under-valued and is a solid investment target with its solid cash flow, strong growth, and profitable margins. APA’s sounding story is made even better with reduced country risks in Egypt.
On Nov 28, APA had priced $2 billion principal amount of a 2.625% note due in 2023 and $800 million principal amount of 4.25% notes due in 2044. The net proceeds from the offering are intended to repay outstanding commercial paper borrowings and for general corporate purposes.
The Boeing Company (BA) is an aerospace company, manufacturing commercial airplanes, providing defense equipment, and maintaining a small captive finance division. The sales are nearly split 50/50 between airplanes and defense segments. Following the acquisition of McDonnell Douglas in 1997, Boeing operates in duopoly with Airbus EAD. Boeing enjoys a narrow economic moat with its focus on innovation and its symbiotic relationship with key suppliers and customers.
On Dec. 19, 2012, BA announced the development of an advanced method to test wireless signals in airplane cabins, making it possible for passengers to enjoy more reliable connectivity when using networked personal electronic devices in the air. As reported, “once the new method was established, testing that previously took more than two weeks to conduct was reduced to 10 hours.”
On Dec. 17, 2012, BA announced a 10% increase in the company’s regular quarterly dividend to 48.5 cents per share and the resumption of its stock repurchase program with repurchases currently expected to total between $1.5 to $2.0 billion in 2013. As reported by Reuters, the number and timing of shares to be purchased will be based on the level of cash balances, general business conditions and other factors, including alternative investment opportunities.
Phillips 66 (PSX) is a holding company engaging in producing natural gas liquids, NGL, and petrochemicals. PSX operates 15 refineries with a total throughput capacity of 2,485 m/d. Its DCP midstream joint venture holds 61 natural gas processing facilities, 12 NGL fractionation plants, and a natural gas pipeline system with 62,000 miles of pipeline. Its CPChem chemical joint venture operates facilities in the United States and the Middle East, and primarily produces olefins and polyolefins. While PSX had attractive ventures in DCP midstream and CPChem, its main revenue is still from the refining and marketing segment, which is currently producing strong earnings in a healthy operating environment. By divesting underperforming assets on the East Coast and initiating improvement plans, PSX is expected to improve its overall competitive position and continue to generate strong cash flow.
With the latest announcement, PSX intends to redirect some of its transportation assets to form a master limited partnership, and it also unveiled a $3.7 billion capital program for next year, up 6% from 2012’s estimate. As reported by the Houston Business Journal, “the company expects to file a registration statement for the initial public offering in the second quarter of 2013 and sell a minority stake in the MLP in an IPO in the second half of the year. Phillips 66 estimates $300 million to $400 million will be raised in the IPO.” “We expect to use the master limited partnership as an efficient vehicle to fund growth investments in the transportation and midstream sectors,” said Chief Executive Greg Garland. However, it is still unknown which parts of PSX’s refining and marketing segments will be contributed to the MLP.
Read more HERE.
E. I. Du Pont De Nemours and Company (DD) is a diversified chemical company operating in more than 80 countries. The company’s segments include agriculture, electronics and communications, industrial bioscience, nutrition and health, performance chemicals, performance coatings, performance materials, safety and protection and pharmaceuticals. With DD’s continued product innovation, diversified product portfolio, and successful market penetration, DD’s earning power will be continued for a long time and will be a great long-term holding for cash flow investors. However, bullish investors need to be cautious before the U.S. fiscal cliff is settled while DuPont is cutting its spending.
As reported on Dec 12, 2012, DuPont’s CEO Ellen Kullman said in an interview that the Company will spend less on capital projects next year than initially planned due to uncertainty about the U.S. fiscal cliff. As stated by Kullman, “Consumers will hold back until the fiscal cliff is resolved. It’s not about politics anymore. It’s about the country. It’s about reducing our debt. It’s about making a viable economy long into the future.”
Read more HERE.
Gilead Sciences, Inc. (GILD) is a research-based biopharmaceutical company, which develops and markets therapies to treat life-treating infectious diseases with the core portfolio focuses on HIV and hepatitis B. The focuses were broadened to include pulmonary and cardiovascular diseases and cancer through the acquisitions of Corus Pharma, Myogen, CV Therapeutics, Arresto Biosciences, and Calistoga. With the recent acquisition of Pharmasset, GILD had strengthened its hepatitis C pipeline. Despite the expiration of HIV patents in 2018, GILD’s new HIV regimens offer enough of a safety benefit to older alternatives and the company should be able to extend its HIV-based profitability in the long-term. By further diversifying its product portfolio through acquisitions, GILD will continue to maintain its wide economic moat.
According to GBI Research’s publication, GILD’s combination drug Stribild (previously known as the “Quad pill”) is expected to bolster the HIV/AIDS therapeutics market as a number of significant medications go off-patent over the next few years. Forecasts from the new report indicate that the global HIV/AIDS therapeutics market will increase in value at a Compound Annual Growth Rate (CAGR) of 7% between the years 2011 and 2018, from $13.5 billion to $21.8 billion.
Read more HERE.
Seagate Technology (STX) is the provider of electronic data storage products, which are used in servers, PCs, laptops, and personal entertainment players. STX has 65-75% of revenue coming from OEM, original-equipment manufacturers, like Hewlett-Packard (HPQ), Dell (DELL), and EMC (EMC); the remaining sales come from reselling distributors and retail stores.
On December 19, 2011, STX completed its acquisition of Samsung Electronics Co.’s hard drive business. STX’s largest competitor, Western Digital Corp. (WDC), also completed its purchase of Toshiba Storage Device (Thailand) Co. Limited in May, 2012. While the battle between STX and WDC continues on after the market consolidation, STX’s solid fundamentals and robust cash flow should support its current dividend, with an annual yield of 5.36% currently.
Recent News and Earnings Estimate
On Nov. 29, 2012, STX announced that the Board of Directors had approved a quarterly cash dividend for its second fiscal quarter 2013 of $0.38 per share, which is payable December 28, 2012 to stockholders of record as of the December 14, 2012. Due to potential tax law changes, the February 2013 dividend payable date has been accelerated for this quarter only.
Read more HERE.
Corning Incorporated (GLW) is the global leading designer and manufacturer of glass and ceramic substrates found in liquid crystal displays, fiber-optic cables, automobiles, and laboratory products. While the firm has a diversified base of revenue, display still accounts for the majority of GLW’s net income and the focus will continue to be on its display technology business. Despite the sluggish economy, GLW is expected to grow in revenue and profit in 2013. Lastly, Corning’s new, exciting Gorilla Glass is yet to reach its growth potential.
On Nov. 27, 2012, GLW raised its fourth-quarter sales outlook for its specialty materials business amid stronger-than-anticipated demand for glass used in flat-panel TVs and special glass used in mobile devices GLW now expects the volume of LCD glass-market to increase in the low single digits on a percentage basis as compared to the prior view of decline in the low to mid-single digits.
Read more HERE.
Mondelez International Inc. (MDLZ), formerly Kraft Foods Inc., consists of the global snacking and food brands. MDLZ’s international portfolio includes Cadbury, Milka chocolate, Jacobs coffee, LU, Nabisco and Oreo biscuits, as well as Tang powered beverage and Trident gums. In October, 2012, the former Kraft (KFT) management group split the business into domestic grocery, Kraft Foods Group Inc. (KRFT), and global snacking, MDLZ. Mondelez is a Spanish word that can be loosely translated as “Delicious World.” Investors should put this new spin-off company onto their watch list as this Company is poised to grow internationally and will continue to lead the global confectionery market with 15% share of the chocolate market, 30% of the gum category, and 7% of the candy aisle worldwide, as well as 18% of biscuit category and 16% powdered beverage market. The market dominance and a diversified portfolio of well-known brands give MDLZ a wide economic moat. MDLZ is expected to grow 6.3% in the next 5 years as estimated by analysts.
Q3 Earnings and Analysts’ Calls
On Nov. 7, 2012, MDLZ reported its Q3, 2012 earnings with $0.37 EPS, beating the Thomson Reuters consensus estimate of $0.36 by $0.01. The revenue of $8.33 billion was lower than the consensus estimate of $8.64 billion and was down 5.1% on a year-over-year basis. The gross margin was 36.5%, operating margin was 13.2%, and net margin was 5.1%, where were 160, 40, and 190 basis points better than the prior-year quarter.
Read more HERE.