Tuesday, February 7, 2017

Earnings - CHD, EMR, UVV, CTSH

Today we are receiving earnings from Church & Dwight(CHD), Emerson Electric(EMR), and later Universal Corp(UVV), and the 8th is Cognizant Technology Solutions(CTSH)

Church & Dwight(CHD) reported Q4 and FYE'16 results. Q4 EPS came in at $0.42 on revenues of $896 million.  FYE'16 results came in with EPS of $1.75 on revenus of $3.49 billion.  For the year the company increased operating cash by 8.1%, which got reflected in the 7% dividend increase to $0.19 share. Make no mistake about it they are a dividend machine as this marks the 21st consecutive year of dividend increases & 116 years of dividend payments. The company plans to continue targeting a 40% payout ratio. Shares are so far up over 2.5%

The company gave guidance for 2017 that included the following:
  • EPS - $1.72-$1.74 (affected mainly by pension settlement - $0.16-$0.18)
  • Organic sales growth of 3%
  • Gross margin expansion of 60bps
Here is the CEO's remarks:
Matthew Farrell, Chief Executive Officer, commented, “We again delivered top tier performance within the consumer packaged goods industry including full year organic sales growth of 3.2%, double digit international organic sales growth, adjusted gross margin expansion of 120 basis points and adjusted earnings growth of 9.3%. We overcame the year-long cyclical weakness in our Specialty Products business to deliver on our commitment to shareholders. Finally, we concluded the year with a strong fourth quarter.”

Emerson Electric(EMR) reported FY Q1'2017 results with EPS of $0.48 on revenues of $3.21 billion. The company is finally seeing some benefits to the restructuring the last two years. The companies Commercial and Residential Solutions is the big winner on the back of strength in it's HVAC business. Additionally the company increased it's outlook by increasing continuing operations EPS guidance to $2.47-$2.62. Shares are so far up over 5% to a new 52 week high. Here is the CEO's remarks

"Our strong first quarter results, which surpassed expectations, represent a solid start to the fiscal year and reflect an improving overall economic environment," said Chairman and Chief Executive Officer David N. Farr. "The benefits from our restructuring actions during the past two years played a critical role in our ability to deliver higher margins across many of our businesses. Considering the improving demand conditions during the quarter, particularly in the automation markets, we are increasing our 2017 full-year EPS guidance by 12 cents at both the top and bottom end of the range, including the 7 cent income tax benefit in the first quarter."

Universal Corp(UVV) reported it's Q3'17 results with EPS of $1.92 on revenues of $668 million(up 14.3%). On January 31 the company converted all preferred shares into common shares. Overall a solid report from the company. Considering the recent run in the stock I wouldn't be surprised if some profit taking materializes. The shares are flat in pre-market.  Here is the CEO's remarks.

Mr. Freeman stated, "We are pleased with the performance of our operations thus far this fiscal year, particularly in light of difficult supply conditions, including the weather-related crop reduction in Brazil. Despite these headwinds, we have been able to secure some additional sales which have helped to increase our volumes handled so far this fiscal year. In addition, our third fiscal quarter this year benefited from higher volumes mainly due to earlier shipping patterns than those of the prior year. We expect our volumes for the fourth quarter of fiscal year 2017 to be lower than those achieved in the fourth quarter of the prior year, given our reduced buying program in Brazil this fiscal year, and some earlier shipments from other origins. Last fiscal year's fourth quarter volumes were exceptionally strong for us and included significant volumes from Brazil. However, we now believe our total lamina volumes for fiscal year 2017 will be only modestly lower than those volumes in fiscal year 2016.....

...We continue to work to deliver value to our shareholders and maintain our strong capital structure, which had included 6.75% convertible preferred stock requiring dividend payments of about $15 million per annum. In December 2016, we received voluntary conversion requests for about half of the outstanding shares of preferred stock. We settled those requests by issuing approximately 2.5 million shares of common stock, which will be eligible for common dividends, for those shares of preferred stock. Subsequently, in our fourth fiscal quarter, we elected to exercise a mandatory conversion of the remaining outstanding shares of our preferred stock. This mandatory conversion was settled in cash rather than shares of common stock at a cost of approximately $178 million on January 31, 2017. By using cash on hand for the mandatory conversion instead of issuing shares of common stock, we believe that we increased the value of common shareholders' investment in our Company while maintaining the strength of our balance sheet."

Cognizant Technology Solutions(CTSH) reported it's Q4 and FYE'16 results this morning. Q4 EPS came in at $0.68 on revenues of $3.46 billion(up7.1%). For FYE'16 the company reported EPS of $2.55(down 10 cents from 2015) on revenues of $13.49 billion(up 8.6%). The company also announced they are forming a cooperation agreement with Elliott Management. The company is going to appoint three new directors to it's board, and form a 3 member Financial Policy Committee. If you recall Elliott Management wrote back in November 2016 they felt Cognizant is worth significantly more. Additionally the company has decided to initiate a $.15/share dividend, and a $1.5 billion accelerated share repurchase program in Q1.

The shares have been whipped around lately due to the 90 day travel ban imposed by the White House.  A lot of the company's staff hold's work visas so it's a concern.  The stock is up over 5% in pre-market trading.

The company also provided guidance for 2017:

First quarter 2017 revenue expected to be in the range of $3.51 billion to $3.55 billion.

First quarter 2017 non-GAAP diluted EPS2 expected to be at least $0.83.

Full year 2017 revenue expected to be in the range of $14.56 billion to $14.84 billion.

Full year 2017 non-GAAP diluted EPS expected to be at least $3.63.

Here is the CEO's remarks:

“As we enter 2017, the time is right for us to accelerate the shift to digital services and solutions to meet the growing demands from our clients to transform their business models in the face of the rapid business and technology shifts disrupting their industries,” said Francisco D’Souza, Chief Executive Officer. “To meet this opportunity, we are evolving our business model to focus on aggressively scaling our digital capabilities, driving efficiencies in our core business, and launching a robust capital return program. We believe these changes will enable us to deploy our world-class team to best serve our clients and enhance value for our shareholders.”

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