Thursday, July 27, 2017

Earnings - Wabtec, Hershey's, Paypal, Diageo, AB Inbev

The portfolio has seen a lot of companies report earnings the last few days, and I've been short on time in getting my summary out.  In total 11 of our picks will report this week.

I'll have an update tomorrow with earnings from Facebook, Procter & Gamble, MasterCard, Altria, Praxair, & Boston Beer.

I'll start with the biggest miss first.



Westinghouse Air & Brake(WAB) reported their Q2 results with EPS of $0.75 on revenues of $932 million.  Both numbers heavily missed analyst estimates of $0.94/share and revenues over $1 billion. Even more crazy is that revenues were actually up 29% due to the Faiveley acquisition. But the company has seen softening sales in it's freight group, and issued downside guidance for the year. Originally the company had projected full year EPS of $3.95-$4.15 on $4.1 billion in revenues, but now projects EPS of $3.55-$3.70 on revenues of $3.85 billion.  That's heavily disappointing.  It's no wonder the stock cratered 10% in trading on Wednesday.  Wabtec was such a great performer for many years, but it's definitely been in a tough spot the last couple. Here is what management had to say:

Raymond T. Betler, Wabtec’s president and chief executive officer, said: “We remain confident in our future growth opportunities, even as we manage aggressively through our short-term challenges. In transit, we have a record and growing backlog, with significant projects in all major markets around the world, and we are making meaningful progress in the Faiveley integration, with margins improving during the year. In freight, our backlog has now increased for three consecutive quarters, and demand appears to be stable in our key markets. Finally, we continue to invest in our balanced growth strategies, including new products and acquisitions, around the world.”


Hershey's(HSY) reported Q2 results with EPS of $0.95 on revenues of $1.66 billion.  The company had a great quarter which saw a 1.6% gain in market share during the important Easter season. The company did announce a sweet 6% dividend raise from $0.618 to $0.656 per share. That equates to an annualized dividend yield of 2.45% at $107/share. Overall a good quarter in what's basically a ho-hum industry. The company did update its outlook for the year. Hershey's now expects revenues to up 1% which is lower than previously forecast increases of 2-3%. Shares traded relatively flat on the announcement as the stock hovers around the $105-$107 area.

PayPal(PYPL) reported Q2 results that crushed it with EPS of $0.34(up 27%) on revenues of $3.13 billion(up 18%). The company had free cash flow of $747 million, they added 6.5 million accounts, and saw TPV of $106 billion up 23%. The company is also forming partnerships at a high clip including agreements with Baidu, Bank of America, Apple, & Google. The shares even hit a new all time high of $61.30 on strong volume. PayPal has been a big winner for us this year.   The company also raised it's EPS guidance for the year from $1.28-$1.33 to $1.32-$1.36. Here is what management had to say:

 “The accelerating and extensive scale of our two-sided global platform creates a strong foundation for PayPal’s growth, enabling consumers and merchants to transact in new contexts and across operating systems, technologies and platforms,” said Dan Schulman, President and CEO of PayPal. “Our strong results reflect PayPal’s transformation from a single product to a platform company, from a vendor to a strategic partner to both merchants and ecosystem players, and from a checkout option to an increasingly more central way for consumers to manage and move their money.”

Diageo PLC(DEO) reported the full fiscal year 2017 earnings with EPS of 106.0 pence on revenues up 15% to 12.05 billion(British Pounds).  The company also saw a big increase in free cash flow of 566 million. The company continues to execute well on its strategy which includes increasing margins by 100-175bps each year until 2019.  The company also announced a big 1.5 billion(GBP) share buyback.  Shares gapped up 5.5% while hitting a new 52 week high of $129.13Here is what management had to say:

“We delivered a strong set of results including broad based improvement in organic net sales and operating profit. Our performance demonstrates the effective delivery of our strategy through disciplined execution of our six priorities put in place four years ago. We have delivered consistent strong performance improvement across all regions and I am pleased with progress in our focus areas of US Spirits, scotch and India. 


AB Inbev(BUD) reported their Q2 results with EPS of $0.95 on revenues up 5% to $14.1 billion. The actual EPS figure dropped but the total net income for the company actually grew $145 million to $1.87 billion. The company is seeing extremely strong growth in it's Corona brand right now with a 16.6% increase. Additionally the company is forecasting an additional $335 million in cost synergies from it's SAB merger. Despite the company struggling with US sales of Budweiser & Bud Light the company has been doing a good job of increasing volumes through it's many other brands. Shares popped 6% to hit $124 at one point today.  Here is what management had to say:

Our growth accelerated in the second quarter. Revenue grew by 5.0%, driven by revenue management and premiumization in markets such as Western Europe and China as well as volume growth. Our continued focus on driving premiumization allows us to generate top-line growth in emerging as well as developed markets. Our global brands continued to deliver strong revenue growth with revenue up by 8.9% this quarter...

...While the second half of the year looks promising, our focus remains on growing the global beer category as well as generating top-line growth in a sustainable way to position ourselves for long term success.  

 I'll have an update tomorrow with earnings from Facebook, Procter & Gamble, MasterCard, Altria, Praxair, & Boston Beer.

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