Friday, July 22, 2016

WAB, RAI, MO, VGR, DEO, GPN, MA, PX, & FB Earnings

This week we had a lot of companies report earnings and I decided to just hold off and put them all in one post til this morning. We also had a FOMC rate decision which came in at no change. I was a little surprised by the stronger language, and the subsequent decision to hold off. Either way each ensuing meeting raises the stakes for a rate hike. Here are the earnings reports for the week so far and my thoughts.

On Monday Wabtech(WAB) reported Q2 EPS of $1.00 on revenues $724 million. Both represented decreases from the year before, and missed estimates.  Also management didn't sound very upbeat about revenues as they expect a 10% decline for 2016 compared to 2015. Additionally new EPS guidance for 2016 comes in at $4.00-4.20/share vs $4.30-$4.50 The shares initially tanked Monday getting all the way down to $65.54, but rebounded Tuesday. It's not easy watching this one, but the company has done a great job at maintaining margins so far. The company is trading at a pretty decent valuation, and still looks somewhat oversold so if you've been watching for a long term entry maybe now is a time to consider whether a position is appropriate.   Here is the CEO statement.

Raymond T. Betler, Wabtec’s president and chief executive officer, said: “Our Transit business is performing well, with revenue growth, improved profitability and a strong backlog. Our Freight business, however, continues to be affected by overall rail industry conditions and the sluggish global economy. In this environment we are focused on controlling what we can by aggressively reducing costs, generating cash and investing in our growth opportunities, including acquisitions. As demonstrated by our first half operating margin of 18.4 percent and cash from operations at 14 percent of revenues, we are managing the business well in these market conditions.”

On Tuesday Reynolds America(RAI) reported Q2 EPS of $0.56 on revenues of $3.2 billion. The company announced another 9.5% dividend raise to $0.46 making that the second this year. Personally I would have liked for them to wait until next year, but I can't complain. The new yield works out to 3.7%. The shares have really taken it on the chin since their announcement, but I'm adding shares today. Here is the CEO statement.

“Strong market share gains across our operating companies’ premium cigarette portfolio, in combination with higher pricing in both cigarettes and moist snuff, drove excellent operating performance in the second quarter,” said Susan M. Cameron, president and chief executive officer of RAI. “The achievements by our operating companies through the first half of 2016 have significantly strengthened Reynolds American, and I’m pleased to announce further steps supporting our commitment to returning value to RAI’s shareholders.” 

Now onto Altria. MO reported Q2 EPS of $0.81 on revenues of $6.5 billion. The company increased it's guidance for the year and now expects EPS to come in between $3.01-3.07 compared to 2015's $2.80. I added shares of MO today.  Here is the CEO statement.

“Altria had strong 2016 second-quarter and first-half results, delivering excellent earnings per share growth for both periods despite comparisons to very strong 2015 results,” said Marty Barrington, Altria’s Chairman, Chief Executive Officer and President. “Our core tobacco companies performed extremely well behind solid performance from their leading premium brands. And we continued to reward our shareholders, including paying out more than $2.2 billion in dividends in the first six months.

Vector Group reported Q2 EPS of $.20 on revenues of $438 million. The company did not provide any updates to guidance,although they did announce revisions to results for Jan-June 2015. The company is not very exciting, but their real estate operations continue to provide increased revenue growth. I still like this as a dividend payer, but FB like growth this is not!

Diageo PLC(DEO) reported preliminary results for their fiscal year ended June 30 with EPS at 89.1 pence on sales of 10.4 billion(GBP). EPS and sales were down 6% and 3% respectively, but free cash flow was up 134 million compared to last year. The company announced a 5% dividend increase for the final payment bringing the full year dividend to 59.2 pence, which is an increase of 5% over 2015's. Solid operating performance here, however I'd like to see revenues coming in a little stronger. This is a name I added at the height of Brexit fears and it looks like a savvy buy. Shares have traded up to $117 today.

Global Payments Network(GPN) reported fiscal year end EPS of $0.26 on revenues of $747 million. For the year revenues were $2.9 billion and EPS total $2.04. I'm a little disappointed on operating margin coming down to 14.7%, and guidance for 2017 puts it at 15.4%. Fiscal 2017 EPS is forecast at $3.50-$3.60. The shares are trading heavy and maybe I'll see a price where I can add. I have very few concerns about the long term viability about this company. Here is the CEO statement.

“Fiscal 2016 was a transformative year for Global Payments. We are delighted with our performance as results exceeded our expectations, reflecting continued strong execution throughout the year,” said Jeff Sloan, Chief Executive Officer. “Our partnership with Heartland Payments is off to a strong start. Our combined senior management team is in place, we are executing initiatives to drive incremental revenue enhancements and we are realizing the integration synergies we previously outlined. We expect continued positive momentum in 2017.”

MasterCard(MA) reported  Q2 EPS of $0.89 on revenues of $983 million. The company continues to see good transaction processing growth as it increased 14% to 13.7 billion transactions. The shares are trading up abut 1% today.  Overall a decent quarter from a solid company. Here is the CEO statement.

“We carried solid momentum into the second quarter, delivering 14 percent revenue growth for the first half of the year, after adjusting for currency,” said Ajay Banga, president and CEO, MasterCard. “With last week’s VocaLink announcement, we will expand our capabilities beyond core card-based solutions into a broader set of transactions and payments. The collective technology and experience will provide consumers, businesses and governments more choice and value in how they pay and are paid.”

Praxair(PX) reported Q2 EPS of $1.39 on revenues of 2.6 billion. The company re-stated guidance for 2016 at $5.40-$5.55That gives the company a P/E right around 20 so it's fairly valued here. Honestly just another good quarter here from what I see. Currency is still having some affects, but the company is seeing good signs in a lot of it's end markets. Energy is still a drag. Here is the CEO statement.
Chairman and Chief Executive Officer Steve Angel said, “Praxair’s industrial gas businesses in Asia, Europe and South America grew volumes while benefiting from new on-site project start-ups. However, North America volumes experienced further declines due to weaker upstream energy and U.S. manufacturing activity. Globally, consumer-related end-markets remained healthy and we completed a synergistic European carbon dioxide acquisition that will further expand our food and beverage end-market exposure.“As we look to the remainder of the year, while currency translation appears to be less of a headwind at current foreign exchange rates, we do not anticipate significant underlying economic improvement in the second half. Project activity remains strong along the U.S. Gulf Coast, and we continue to expect to grow capital investments with new long-term customer supply contracts to further secure future growth. Praxair’s relentless focus on operational excellence and financial discipline will consistently deliver strong cash flow and earnings per share for our shareholders.”

So I'm sure everyone was waiting to see what Facebook would do and I saved it for last. Well they continue to crush it in all areas.  FB reported Q2 EPS of $0.71 on revenues of $6.4 billion. Earnings were up 184% from last year and revenues were up 63%.  Also the company is still seeing what I consider strong growth on monthly and daily active users up 15% & 17% respectively. The shares have popped to new all time highs today touching $130. Their ability to up revenues has just been amazing. Although with each quarter I'm starting to wonder if we are closer to a "disappointment".  Here is the CEO statement.

Our community and business had another good quarter," said Mark Zuckerberg, Facebook founder and CEO. "We're particularly pleased with our progress in video as we move towards a world where video is at the heart of all our services."

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