Wednesday, August 3, 2016

Earnings - BTI, EMR, PG, CMI

First of all I'd like to apologize for not including BTI in my recap last week. They reported July 28. My broker does not always get the earnings announcements for ADR's out correctly. My guess is some type of software glitch. I normally try to check the ADR's manually if I suspect a notice has not been sent, and that doesn't always mean I'll catch it in time. Either way here is the recap for companies that have reported so far.

British American Tobacco(BTI) reported half-year results EPS at 143.8(GBP) on revenues up 4.2% to 6.6 billion(GBP). The company is our only tobacco name that has reported higher volumes(3.4%). Additionally they are benefiting from the weaker British Pound, which is opposite the majority of our holdings which are USD based. The company also announced it's half year dividend which will be 51.3 pence up 4% from last years. The company highlighted their vaping business in the press release.

The global vapour products category continues to grow at a significant rate and, following the geographic expansion of Vype, we are now present in the biggest vapour markets outside of the US. Vype is performing extremely well - having reached 9% category retail share of market in the UK, as measured by AC Nielsen, and an estimated category retail share4 of 8% in Germany and 5% in France. It is now available in several innovative product formats, with new product launches and upgrades planned for this year. Further expansion to new markets are planned later in the year and into 2017.

Emerson Electric(EMR) reported Q3 results with EPS coming in at $0.74 on revenues $5.12 billion.  The company also announced the sale of it's Network Power business for $4 billion, and their Leroy-Somer and Control Techniques business for another $1.2 billion. If you are wondering why they sold the Network Power business it is actually the lowest margin business in the company. Ironically it also was the only one showing revenue gains this quarter.  Guidance continues to reflect a weak sales outlook, and EPS to be in a range of $2.37-$2.55. At this level shares have a price yield of 4.4%, but the dividend is still 3.4%.  I'd say that's fair value, and considering this is a dividend king it's one of the few places investors can get a decent yield. I'd put fellow portfolio holding PG in here as well, and I'll highlight that next.  I think EMR's CEO statement perfectly sums up the way things are in the world right now(the first sentence that is).

“We continue to operate in a market defined by a heightened level of uncertainty due to economic and political conditions around the world, making the efficient execution of our strategic plans even more critical,” said Farr. “With the majority of our restructuring programs complete, we remain keenly focused on the completion of our outstanding initiatives for 2016 while continuing to face these challenges head-on. The progress we've made on the restructuring programs and the strategic portfolio repositioning is further proof of Emerson's ability to remake itself in order to meet the evolving needs of our customers and to drive profitability and growth across our businesses.”.

Procter & Gamble reported their fiscal year results with EPS coming in at $0.69 on revenues of $16.1 billion.  For the full year the company reported EPS at $3.69 on revenues down 8% to $65.3 billion. The company is going through some sluggishness right now as increased competition in some segments has hurt sales, plus currency headwinds too.  Either way the company has increased dividends for 60 years, and currently yields 3.1%.  It's a little richly valued with an earnings yield of 4.2%, but consumer staples have long commanded a premium.  Their 2017 guidance for GAAP isn't so straightforward due to this years Venezulean adjustments so I'll take their "core" EPS projection of mid single digit growth to estimate 2017 GAAP EPS around $3.75-$3.80. Make no mistake the company is still a cash generating machine. Here is the CEO statement.

“The fourth quarter was another period of progress driving P&G’s results to a balance of strong top-line growth, bottom-line growth and cash generation,” said Chairman, President and Chief Executive Officer David Taylor. “We grew organic volume and sales in all reporting segments. We increased investments in innovation and advertising, funded by strong productivity improvement. Looking forward, we’re committed to continued productivity improvement and cost savings that provide the fuel for innovation and investments needed to accelerate and sustain faster top-line growth. We expect fiscal 2017 to mark another significant step toward our goal of balanced growth and value creation and total shareholder return in the top third of our competitive peer group.”

Next up is Cummins Inc(CMI) which reported Q2 EPS of $2.40 on revenues of $4.5 billion.  CMI hasn't been immune to sales and EPS falling either, but the company still turned in a solid quarter. The company is seeing more weakness than expected in North America.  However the company increased it's dividend 5.1% to $1.025 next quarter. The new yield is 3.3%. The company actually lowered full year revenue guidance 8-10%, but investors and traders seemed to have shrugged this off.  Here is the CEO statement.

“We made strong progress in our cost reduction initiatives in the second quarter, while continuing to invest in and launch new products that will drive profitable growth in the future,” said Tom Linebarger, Cummins Chairman and CEO. “Benefits from restructuring actions, material cost reduction initiatives, and improvements in product quality helped to mitigate the impact of weak demand in a number of our largest markets and will position the Company for stronger performance when markets improve. We have returned more than $1 billion to shareholders so far this year, through a combination of dividends and share repurchases. Our Board of Directors recently approved an increase in our quarterly dividend of 5.1 percent, consistent with our plans to return 75 percent of operating cash flow to shareholders in 2016,” concluded Linebarger.

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