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Viacom 11-15 03:06 GMT  
(Report with Analyst's Data Sheet) 
Viacom posted a 1.5% decline in revenue for its fiscal fourth quarter, which ended September 30th. That left full year revenue down only 1%. Nevertheless, it was...
Its Last Solo Act by Dave Novosel, CFA
AbbVie 11-15 02:54 GMT  
(Report with Analyst's Data Sheet) 
AbbVie took advantage of near perfect market conditions to issue $30 billion in bonds this week, financing nearly all of its cash requirements for its pending...
Go Big by Carol Levenson, CFA
Tullow Oil plc 11-15 02:33 GMT  
(Report with Analyst's Data Sheet) 
Tullow Oil Plc (TLWLN) posted a trading update in which the company cut its production guidance for this year and warned that its recent discoveries in...
Hit, But Not Sunk by Alexandre Dray
UnitedHealth Group 11-14 03:32 GMT  
(Report with Analyst's Data Sheet) 
UnitedHealth Group (UNH) saw its shares pop by 8% last month after it reported a better earnings report than the market had been expecting. We update...
Adaptable by Kathleen Shanley, CFA
Revlon 11-14 03:26 GMT  
(Report with Analyst's Data Sheet) 
Revlon (REV) advertising promotes its trendsetting color cosmetics, but from a financial perspective, the trend is not its friend. Results have been disappointing...
Trendsetter  by Kim Noland
Marfrig Global Foods SA 11-14 03:05 GMT  
(Report with Analyst's Data Sheet) 
A decline in volumes due to some technical effects and some higher prices in North America have helped Marfrig Global Foods S.A. (MRFGBZ)...
Healthy Mix by Cedric Rimaud, CFA
DXC Technology 11-13 17:50 GMT
(Comment)
DXC Technology recorded a 3.2% decline in revenue for its fiscal second quarter, which ended...
Earnings by Dave Novosel, CFA
DXC Technology recorded a 3.2% decline in revenue for its fiscal second quarter, which ended September 30th. That was better than the 7.4% decrease in the first quarter and the 4.5% decline reported for all of fiscal 2019. Adjusting for the currency impact, revenue fell just under 1%. Business Services (GBS) revenue rose more than 8%, reflecting the acquisition of Luxoft and other deals. But Infrastructure Services (GIS) revenue plunged almost 12%, attributable to declines in the traditional infrastructure business. Management lowered its guidance for full year revenue, reflecting delays in several large deals, lost deals, and execution problems. Similar to the last two quarters, operating margins were down sharply. GBS was hurt by investments to hire and train digitally-capable employees. GIS was constrained by a slowdown in delivery cost take-out actions. Management admitted that execution has not been up to speed with regards to customer deliveries. It plans to simplify the structure and place a greater emphasis on its core regions and industries. Free cash flow in the period was excellent at more than $1.3 billion, allowing DXC to reduce debt by more than $200 million. Given the debt incurred in the Luxoft transaction and the revised guidance, leverage has risen to 3.4x. DXC is considering strategic alternatives for three businesses that do not fit with its focused strategy - U.S. state and local health and human services, horizontal Business Process Services, and workplace and mobility. Possibilities include divestitures or spin-offs. These businesses comprise roughly 25% of total revenue. DXC expects to net proceeds of roughly $5 billion. $4.25 billion will be directed to share repurchases and dividends. However, the company also intends to reduce debt by $2.5 billion, presumably using free cash flow. That probably does not leave much room for acquisitions, but management noted that it will continue to pursue tuck-in deals. Management hopes to boost margins to 12% after these businesses are no longer included in its results.
Tyson Foods, Inc. 11-13 16:00 GMT
(Comment)
Tyson posted a 9% increase in sales for its fiscal fourth quarter, which ended September...
Earnings by Dave Novosel, CFA
Tyson posted a 9% increase in sales for its fiscal fourth quarter, which ended September 28th. It was the company's best performance since the first quarter of fiscal 2018. Pork sales rose 11%, reflecting increases in both volume and average selling price. Chicken sales also rose 11%, attributable mainly to recent acquisitions. But Beef sales fell 1% due to the temporary closure of a production facility stemming from a fire. Prepared Foods sales were up 3%, as a shift in mix and price increases more than offset the lower volume due to business divestitures. While the sales were impressive, margins were definitely not. Margins declined 280 basis points, with decreases in each segment except Beef. Pork was hurt by excess domestic availability of pork and export constraints. Chicken was depressed by increased operating costs and tougher pricing. Prepared Foods suffered from an increase in raw material costs and impairment costs related to a planned divestiture. Free cash flow was lower than in previous fourth quarters, but TSN did manage to reduce debt by more than $600 million. Leverage is up to 3x because of recent acquisitions, but should be cut rapidly given that debt reduction is the priority for its capital allocation. This is similar to what the company has done in the past.
AbbVie 11-13 15:53 GMT
(Comment)
AbbVie certainly has gotten a lot of attention with its mammoth $30 billion bond issue to fund its pending...
New Issue by Carol Levenson, CFA
AbbVie certainly has gotten a lot of attention with its mammoth $30 billion bond issue to fund its pending acquisition of Allergan and some degree of FOMO (fear of missing out). As is typical with these high profile deals, the "blowout" status meant the pricing was not overly generous. We would point out that despite the strong projected free cash flow of the combined companies and management's deleveraging targets, AbbVie does not have a track record of deleveraging after a deal of this magnitude. In addition, both companies have product concentration risk that could jeopardize those cash flows. A key indicator will be management's behavior with regard to share repurchases and preserving cash for debt reduction (so far it has already increased its dividend but has cut back dramatically on share repurchases). With the ten-year reportedly priced at T+130, we did not find the new issue pricing terribly compelling for what is best case a mid triple 'B' credit if it meets its deleveraging target. Therefore we reiterate our "underperform." We will have more in an upcoming full report.
CBS 11-13 13:54 GMT
(Comment)
CBS intends to close the merger with Viacom next month, and is hoping the results of the combined entity are...
Earnings by Dave Novosel, CFA
CBS intends to close the merger with Viacom next month, and is hoping the results of the combined entity are much better than its standalone performance. Revenue increased 1% in the third quarter, its weakest period in a couple of years. Entertainment revenue increased 4% because of hefty gains in affiliate and subscription fee revenue, which outweighed a rather large decline of 5% in advertising and the negative impact of a 19-day carriage dispute with AT&T. Cable Networks revenue rose 6%, reflecting growth in Showtime digital streaming and the acquisition of Pop. But Publishing revenue dropped 10%, while Local Media revenue declined 6.5% due to lower political advertising. Management is more optimistic about 2020 since roughly 50% of its retransmission footprint and about 30% of its reverse comp footprint are coming up for renewal next year. More disturbing than the light revenue was the almost 600 basis point decrease in operating margins. Entertainment margins fell due to increased investments in content and its direct-to-consumer offerings. Cable Networks margins plunged more than 1,000 bps, attributable to investments in programming, including new ShowTime series. Local Media margins suffered from the lack of higher margin political advertising. The increased investments in content led to negative free cash flow for the second consecutive quarter. Consequently, full year FCF is likely to be much less than last year. With the onset of the Streaming Wars (Apple and Disney+ just recently), this may happen again. Leverage is 3.3x. As an aside, shares of CBS have plummeted more than 20% since the VIA merger was announced in August.
Walt Disney Company, The 11-08 20:19 GMT
(Comment)
Reflecting the acquisition of the Fox assets earlier this year, fiscal fourth...
Earnings by Dave Novosel, CFA
Reflecting the acquisition of the Fox assets earlier this year, fiscal fourth quarter (ended September 28th) revenue soared more than 33% at Walt Disney. But even the Theme Parks segment, which was not directly affected by the deal, posted an 8.5% increase in revenue. However, operating margins plunged dramatically. The biggest culprit was the Direct-to-Consumer & International segment, which incurred a huge operating loss due to costs associated with the upcoming launch of Disney+, ongoing investments in ESPN+, and the impact of the consolidation of Hulu. Those costs will negatively affect Q1 results by about $800 million. Corporate and restructuring expenses were significantly higher too. Media Networks' margins fell mainly because of rate increases for NFL MLB, and college sports programming. In addition, ABC suffered from lower advertising revenue, an increase in programming and production costs, and higher marketing expenses. The Studio unit enjoyed a huge increase in margins, attributable to the theatrical success of The Lion King, Toy Story 4, and Aladdin this year. While the results were less than impressive, the focus is now on the launch of Disney+, which is slated for November 12th. Disney slashed debt by more than $11 billion in Q4, and leverage is down to 3x.
Teva Pharmaceuticals 11-08 19:40 GMT
(Comment)
Teva is often asked about its substantial bond maturities in 2021, including on...
Tender Offer by Carol Levenson, CFA
Teva is often asked about its substantial bond maturities in 2021, including on yesterday's earnings call. Its response has been vague. Today it disclosed a plan to deal with some of this. The company announced a tender offer for up to $1.5 billion of its over $4 billion in 2021 maturities. It also launched new bonds (including Euro-denominated paper) worth $1.5 billion to refinance these notes. With the announcement last month of a preliminary framework for a global settlement of its opioid litigation involving little cash and an extended payout, its bonds have rallied, making this a good time to refinance these maturities (despite the fact that one major rating agency has placed its ratings under review for a downgrade citing the long-term liability for the settlement). The tender offer including the early tender premium is somewhat above where the bonds were trading and a good exit point for bondholders who fear the challenges ahead for Teva. Naturally the refinancing will be at a dramatically higher cost to the company, given the low coupon of 2.2% on most of the bonds subject to the tender offer and a potential refinancing cost of over 8% (for the USD portion). Nevertheless extending these maturities well in advance is a prudent move. The company has not yet disclosed the potential financial impact of supplying up to $23 billion in addiction treatment drugs over the next ten years as part of the settlement, as there are many variables yet to be determined. In the third quarter it took a relatively modest litigation reserve addition of nearly $500 million, reflecting the low point on a spectrum of potential outcomes in accordance with accounting rule interpretations. We will have more in an upcoming full report.
Dish Network Corporation 11-08 17:37 GMT
(Comment)
It was a surprisingly good third quarter for Dish, as it added 214K Sling TV...
Earnings by Dave Novosel, CFA
It was a surprisingly good third quarter for Dish, as it added 214K Sling TV customers and lost only 66K Dish TV subs. The quarterly net adds of 148K were the best since the fourth quarter of 2017. What makes the number so impressive is that Dish no longer carries HBO because of a carriage dispute. Meanwhile, competition is not getting any easier, and in fact is likely to get more intense quickly. A decline in ARPU left revenue down almost 7%. The lower value streaming customers and higher subscriber acquisition costs resulted in a 200 basis point decline in EBITDA margins. SAC were higher because of increased hardware, advertising, and installation costs per activation. Dish generated more than $500 million of free cash flow in Q3 and we estimate that it will produce roughly $1.7 billion for the full year. Debt has been slashed by $1.3 billion year-to-date. Dish recently hired two next wireless executives and is assuming the T-Mobile/Sprint merger goes through. It indicated that it would not be involved in any renegotiation of terms between those two companies. Separately, Dish announced a $1 billion rights offering, part of its plan to raise funds for the buildout of its wireless network. But it is going to need substantially more than that. Unfortunately, it has very little financial flexibility to add more debt. Management insists that it can operate a 5G network at a much lower cost than the incumbents. Time will tell.
Expedia, Inc. 11-08 15:58 GMT
(Comment)
Shares of Expedia got slammed yesterday, with the price down 25% at one point. Evidently...
Earnings by Dave Novosel, CFA
Shares of Expedia got slammed yesterday, with the price down 25% at one point. Evidently investors were not happy with the weaker EPS reported, revenue that was less than expected, and the revised 2019 forecast for EBITDA. Revenue rose 9%, which is not all that shabby, but the increase was less than in Q2 and lower than last year. Growth at VRBO slowed, but was still robust at 14%. The only segment that did not perform well was trivago, where revenue fell 5%. Nevertheless, that was better than the 10% decline in Q2. Revenue was constrained by lower average daily rates, particularly in North America, and weakness in Search Engine Optimization (SEO) volumes. EBITDA margins dropped 200 basis points, mostly attributable to higher cloud expenses and acquisition-related costs. In addition, marketing expenses were higher because of a shift to higher cost marketing channels. Margins were down in each of the four segments. Since management expects some of the aforementioned issues to persist, guidance for full year EBITDA growth was cut to 5%-8%. Given the extensive use of working capital in Q3, free cash flow was a negative $1.2 billion. However, FCF is typically weak in Q3, and we still expect the company to generate more than $600 million for all of 2019. Leverage is well contained at 2.3x.
Discovery, Inc. 11-08 13:57 GMT
(Comment)
Discovery posted a 3.3% increase in revenue for the third quarter, or a 5% increase when...
Earnings by Dave Novosel, CFA
Discovery posted a 3.3% increase in revenue for the third quarter, or a 5% increase when adjusting for the currency impact. U.S. Networks revenue rose 3%, attributable to a 3% increase in advertising and a 6% rise in distribution. The advertising increase was due to higher pricing that outweighed the 4% decline in subscribers. Distribution was driven by contractual affiliate rate increases as well as additional carriage on streaming platforms. EBITDA margins expanded significantly, mainly because of content synergies from the Scripps deal. International Networks revenue was up 3.7%, or 9% when adjusting for currency. The improvement reflected a 5% increase in advertising from the consolidation of the UKTV Lifestyle business and a 2% gain in distribution arising from content licensing arrangements, price increases and new channel launched in the Latin America region. Unfortunately, margins dropped in this unit because of investments made to drive future growth. Management noted that it does not expect overall margins to improve in the next few quarters because of the significant spending on digital initiatives. DISCA produced nearly $850 million of free cash flow in Q3, and is on track to deliver well more than $2.5 billion for the full year. Debt was slashed by $1.1 billion in Q3. Leverage is down to 3.3x, and likely to move even lower in the near term. Nonetheless, as the company nears the low end of its goal for leverage, it is beginning to make share repurchases, including $221 million in Q3.
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Nov 6, 2019 | Bloomberg
DN on Frontier Fuels Speculation on Its Fate by Draining Credit Line -Q- "When you compare that figure to other types of bankruptcy situations over the past year, that's actually pretty good,"
Nov 5, 2019 | WSJ Pro
KN on Tempur Sealy: The Big Bounce
Oct 29, 2019 | WSJ Pro
EM on Steel Dynamics: Making the Grade
Oct 18, 2019 | Grant's Interest Rate Observer
CL On Teva bonds Q- "That judgment puts it in the good company of Carol Levenson, di¬rector of research and co-founder of GimmeCredit, who,with respect to the 2028 notes alone,likewise says "outperform."
Oct 14, 2019 | Pensions & Investments
CL on GE freezing pension plan-Q- "I'm glad GE is taking action to bolster its balance sheet and reduce its fixed obligations. But we don't really know the full financial implications yet, do we? "
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