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Bank of America 04-21 03:29 GMT  
(Report with Analyst's Data Sheet) 
Bank of America's (BAC) CEO Brian Moynihan sounded an optimistic tone when the company reported its first quarter earnings last week, citing evidence of...
Recovery Play by Kathleen Shanley, CFA
Levi Strauss 04-21 02:12 GMT  
(Report with Analyst's Data Sheet) 
Levi Strauss & Co. (LEVI) reported a good first fiscal quarter (ended February 28) although sales were down 13%. Comparisons were negative because the prior...
Denim Resurgence by Kim Noland
Nemak SAB de CV 04-21 01:50 GMT  
(Report with Analyst's Data Sheet) 
Since hitting a trough due to the COVID-19 crisis in Q2 2020, the price of aluminum, like many other commodities with a global traded price, has risen to...
Limited Impact From Aluminum  by Cedric Rimaud, CFA
Abbott Laboratories 04-21 00:01 GMT
(Comment)
Abbott reported a phenomenal first quarter, with COVID-19 testing related sales of $2.2...
Earnings by Carol Levenson, CFA
Abbott reported a phenomenal first quarter, with COVID-19 testing related sales of $2.2 billion out of a total of $10.5 billion in sales. Total organic sales growth was 32.9%, and in Diagnostics sales were up nearly 115%. (All sales comparisons are organic.) The base business excluding COVID-19 testing related sales was up 5.7%. The company just began shipping the first over-the-counter rapid COVID-19 test to retailers, available without a prescription and for people with and without symptoms, the BinaxNOW COVID-19 Ag Self Test. Abbott expects COVID-19 testing to move more towards rapid testing, where it is a leader, and for most of the demand to be sustainable. Diagnostics was the champ, but all four segments posted good growth. The Medical Devices segment saw sales recover as procedures ramped up, with sales up 8.8%, while Nutrition sales were up 6.4%. In Established Pharmaceuticals, sales rose 6.2%. The margin performance was extraordinary, with the adjusted pretax margin expanding by nine percentage points to 26.6%, driven primarily by sales leverage of operating expenses. Gross margin was only slightly higher. Abbott's adjusted earnings more than doubled, a growth rate one seldom if ever sees without the benefit of an acquisition. The company reaffirmed its full year guidance for a 35% increase in E.P.S. There was no information on cash flow or the balance sheet, but as of December debt/EBITDA was 2x, down from the prior year. We expect EBITDA growth this year to drive leverage down further.
Johnson & Johnson 04-20 18:06 GMT
(Comment)
JNJ's first quarter results set the tone for what should be an easy comparison for any...
Earnings by Carol Levenson, CFA
JNJ's first quarter results set the tone for what should be an easy comparison for any company affected negatively by the global pandemic in the prior year period but a tough comparison for those whose sales increased in the prior year period because of COVID-19 related pantry-loading. JNJ saw both effects. JNJ's sales on an organic basis rose 6.0% to $22.3 billion, with adjusted E.P.S. up 12.6%. (All sales comparisons are on an "adjusted operational" or organic basis.) Its Consumer Health sales were down 2.9% because of the pantry loading last year of over-the-counter and also a weak cough, cold, and flu season, while in Medical Devices sales were up 8.8% as deferred hospital procedures continue to recover. In the Pharmaceutical division sales rose 7.4%, above market growth. This mix produced a 210 basis point expansion in the adjusted pretax margin to 37.1%. JNJ generated strong cash flow in the quarter, and net debt was only $9 billion. Vaccine sales were only $100 million in revenue, reflecting a partial quarter since FDA approval. European regulators today decided to resume JNJ's vaccine shipments with a change to the warning label to reflect the rare risk of blood clots. JNJ raised its guidance for organic sales growth to 9.3% at the midpoint, but reaffirmed the midpoint of its adjusted E.P.S. guidance.
Xerox 04-20 15:05 GMT
(Comment)
Xerox reported an 8% decline in first quarter revenue, extending its streak to 13 consecutive periods of...
Earnings by Dave Novosel, CFA
Xerox reported an 8% decline in first quarter revenue, extending its streak to 13 consecutive periods of lower revenue. On a constant currency basis, revenue fell 10.4%. Equipment revenue soared 17%, coming off of a very weak Q1 last year. Services/maintenance revenue fell almost 15%, which was worse than last year. Supplies/paper revenue was down roughly 8%, better than the 13% decrease last year. Management reiterated its guidance for revenue of at least $7.2 billion in 2021. That implies year-over-year growth of less than 3%. It also suggests a decline of more than 20% versus 2019 levels. Gross margins plunged 260 basis points, reflecting the greater mix of equipment revenue, which tends to be less profitable. However, the company cut its SG&A spending dramatically, including bad debt expenses and non-service retirement related costs, allowing EBITDA margins to rise 240 basis points. XRX is on track to realize $375 million of savings from its Project Own It initiative. XRX generated $46 million of free cash flow in Q1 and used all of it plus cash on hand to slash debt by $95 million. Our outlook for considerably higher EBITDA and the lower debt should leave overall leverage at 4.6x, down from 6.7x at the beginning of the year. Core debt is 1.6x. Leverage could go lower if XRX decides to pay down more debt. It will have the FCF to do so. It has cash of $2.5 billion. Unfortunately, the company repurchased $162 million of its shares in Q1, money that could have gone to debt reduction. XRX intends to complete the stand up of XFS, Xerox Software and PARC innovation as separate businesses by the end of the year.
IBM 04-20 14:01 GMT
(Comment)
Following four straight periods of declines, IBM returned to the plus column with a 1% increase in first...
Earnings by Dave Novosel, CFA
Following four straight periods of declines, IBM returned to the plus column with a 1% increase in first quarter revenue. Total cloud revenue soared 21%. Cloud & Cognitive Software, the only segment to generate revenue growth in 2020, posted a 3.8% increase in revenue, led by its hybrid cloud platform. Global Business Services delivered a 2.4% increase in revenue, driven by consulting and global process services. Systems revenue, which had plunged at a double-digit pace the previous two quarters, rose 4.3%, led by IBM Z sales. Management expects to record positive revenue growth in 2021, but we expect it will be quite modest, likely around 1%. Operating margins were up versus a disastrous Q120 comparison. Margins were boosted by a shift to higher value offerings, enhanced productivity, and improving delivery capabilities. Unfortunately, Systems lost money again. IBM produced nearly $3 billion of free cash flow in Q1, which is typically its strongest period of the year. Debt was slashed by more than $4 billion. Considering our outlook for better EBITDA and the lower debt levels, we project leverage of 3.8x at year-end versus 4.8x at the end of 2020. Management is committed to the dividend, and believes IBM has sufficient FCF to invest in its growth initiatives. While Q1 was nice to see, we remind investors that IBM has appeared to turn the corner before, only to see sales erode in future periods. IBM still intends to separate its managed infrastructure services business by the end of the year.
Coca-Cola 04-20 12:25 GMT
(Comment)
After three consecutive periods of declines, Coca-Cola delivered a 6% increase in organic net...
Earnings by Dave Novosel, CFA
After three consecutive periods of declines, Coca-Cola delivered a 6% increase in organic net revenue in the first quarter. Concentrate shipment gains accounted for 5% of the increase while price/mix added another 1%. Better yet, March volumes returned to levels seen in March of 2019. Management noted that the emerging markets, particularly China and India were particularly strong, offsetting some pressure in developed markets, notably Western Europe. Despite the nice overall gain in net revenue, KO lost market share in the total nonalcoholic ready-to drink category because of continued weakness in the away-from-home channel. In terms of segments, Asia Pacific (+18%) and Bottling Investments (+17%) led the way. The only disappointment among the major segments was the 7% decline in Europe/Middle East/Africa. The vaccine rollout in Europe has been slower than expected, leading to more lockdowns. Management reiterated guidance for high single digit expansion for all of 2021. Q2 organic growth is likely to be superb considering the 26% decline last year. Increases in the latter half of the year should moderate. Reported revenue increases should be even better since the currency effect is likely to be positive. Operating margins expanded 250 basis points, attributable to effective cost management, which offset some currency headwinds. Management expects some upward pressure on inputs such as high fructose corn syrup, metals, and other packaging materials, but hopes to offset the increases with price adjustments. Considering our outlook for much better EBITDA in 2021, we project that leverage will drop to 3.7x at year-end versus 4.1x coming into the year. If the company used some of its free cash flow and existing cash of $8.8 billion to reduce debt, leverage would drop to 3.6x or possibly even lower. Free cash flow is benefiting from working capital improvements of more than $1 billion over the last two years. KO intends to list its African bottler as a publicly traded entity via an IPO.
PepsiCo 04-20 03:09 GMT  
(Report with Analyst's Data Sheet) 
First quarter organic net sales rose 2.4% at PepsiCo, the lowest increase over the past few years except for the second quarter of last year, when the coronavirus...
Growth At Home And Abroad by Dave Novosel, CFA
Alcoa Corporation 04-20 03:00 GMT  
(Report with Analyst's Data Sheet) 
Alcoa Corporation's (AA) first quarter adjusted EBITDA increased by a healthy double-digit pace on both a year over year and sequential basis due to...
Divestiture Program Complete by Evan Mann, CFA
Merck 04-20 02:53 GMT  
(Report with Analyst's Data Sheet) 
Merck recently issued bonds at its Organon unit, expected to be spun off later this quarter. The lining up of financing for the special dividend to Merck increases the...
Spinoff Imminent by Carol Levenson, CFA
PAO Severstal 04-20 02:44 GMT  
(Report with Analyst's Data Sheet) 
PAO Severstal (CHMFRU) released some good results for 1Q21. Steel prices remain well oriented as the idling of some steel capacities across international...
Riding High by Alexandre Dray
Thermo Fisher Scientific 04-15 17:55 GMT
(Comment)
As reported by the Wall Street Journal yesterday, TMO today announced the...
Acquisition by Carol Levenson, CFA
As reported by the Wall Street Journal yesterday, TMO today announced the acquisition of contract research organization PPD for $21 billion in cash and assumed debt. The premium paid seems reasonable at 24% (unaffected). Synergies are modest at $125 million after three years. Although PPD is a much weaker credit and a far less profitable business, its relatively small size means its impact on TMO's financials is fairly modest, depending upon how much additional debt TMO uses. We estimate after transactions already announced for 2021, TMO's cash on hand is roughly $7 billion, and the cash portion of the purchase price requires $17 billion. Assuming TMO borrows $12 billion, we estimate pro forma debt/EBITDA would increase meaningfully from 2.1x to 3.4x (note the company says leverage will be less than 3x at closing, expected by the end of this year). This is far less leverage than we had estimated for the canceled Quiagen acquisition, and TMO's ratings were affirmed for that one. The company generates extremely strong free cash flow and, especially if it halts share repurchases, it can reduce the acquisition debt in short order. Therefore, at first blush we view the acquisition as credit neutral to TMO. We will have more in an upcoming full report.
AbbVie 04-13 
Novelis 04-13 
CoreCivic 04-12 
Occidental Petroleum 04-09 
Huntsman 04-08 
Post Holdings 03-30 
Parkland Fuel 03-30 
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