Jobs Forecast, GDP Boost Dollar
By RIVA FROYMOVICHApril 30, 2008 9:20 a.m.
The dollar extended earlier gains against the yen and euro Wednesday morning in New York after the release of first-quarter U.S. gross domestic product.
Gross domestic product rose at a seasonally adjusted 0.6% annual rate January through March, the Commerce Department said Wednesday in the first estimate of first-quarter GDP, matching economists' expectations.
The dollar consequently rose to a fresh four-week high. The euro fell to $1.5517. The dollar also gained to 104.89 yen. The buck has since fallen back some from those highs, but remains elevated against its rivals.
Wednesday in New York, the euro bought $1.5548 from $1.5565 late Tuesday, while the dollar traded at 104.62 yen from 103.98 yen. The euro was at 162.58 yen from 161.85 yen, according to EBS. The U.K. pound was at $1.9675 from $1.9684, and the dollar was at 1.0399 Swiss francs from 1.0379 francs.
Earlier in the morning, the dollar gained after the release of a private-sector payrolls report from payrolls giant Automatic Data Processing Inc. and consultancy Macroeconomic Advisers. They reported that private sector employment increased by 10,000 in April. Economists expected a decline of 70,000.
The ADP report is seen as an indicator, although not always a reliable one, for the all-important non-farm payrolls report from the Labor Department to be released this Friday.
"The ADP report was better than expected before the GDP. The full reaction to the ADP didn't come through. The market was waiting for the GDP," said Mitul Kotecha, head of global foreign exchange research for Calyon in London.
"I think that the GDP wasn't worse than expected helped the dollar, and the dollar is benefitting from both these factors, the ADP and GDP," he said.
Wednesday, April 30, 2008
No Recession Yet
The financial gurus are wrong again as the economy posted a 0.6% growth rate. Slow growth but growth nonetheless. So all the chicken littles who were already predicting a recession have egg on their collective faces. When do we know we're in a recession? Not until we have two negative quarters of negative growth. (Tim)
The bruised economy limped through the first quarter of this year at a six-tenths of a percentage point growth rate as housing and credit problems forced people and businesses alike to hunker down.
The country's economic growth during January through March was the same as in the final three months of last year, the Commerce Department reported Wednesday -- but not the kind of statistic that economists define as a recession. Although the economy is stuck in a rut, it is still managing to keep growing -- however slightly.
The Commerce Department said on Wednesday that gross domestic product or GDP expanded at a 0.6 percent annual rate in the first quarter, matching the fourth quarter's advance.
GDP is the broadest measure of total economic activity within U.S. borders and are an initial measure of first-quarter performance and will be revised twice in coming months.
The report was issued just before Federal Reserve policy-makers began a second day of deliberations that is expected to result in a decision to trim official interest rates another quarter percentage point to try to keep expansion going.
A Fed announcement of its decision, which may include a signal that it will halt its rate reduction campaign, will be issued in early afternoon.
Consumer spending that fuels two-thirds of economic activity through consumption of goods and services, grew at the weakest rate since the second quarter of 2001, when the economy was last in recession.
It rose at a 1 percent rate after growing 2.3 percent in the fourth quarter.
The weakening in an already distressed housing sector was even more striking.
Spending on residential construction plunged at a 26.7 percent rate - a ninth straight quarterly decline and the biggest for any three months since the end of 1981.
The bruised economy limped through the first quarter of this year at a six-tenths of a percentage point growth rate as housing and credit problems forced people and businesses alike to hunker down.
The country's economic growth during January through March was the same as in the final three months of last year, the Commerce Department reported Wednesday -- but not the kind of statistic that economists define as a recession. Although the economy is stuck in a rut, it is still managing to keep growing -- however slightly.
The Commerce Department said on Wednesday that gross domestic product or GDP expanded at a 0.6 percent annual rate in the first quarter, matching the fourth quarter's advance.
GDP is the broadest measure of total economic activity within U.S. borders and are an initial measure of first-quarter performance and will be revised twice in coming months.
The report was issued just before Federal Reserve policy-makers began a second day of deliberations that is expected to result in a decision to trim official interest rates another quarter percentage point to try to keep expansion going.
A Fed announcement of its decision, which may include a signal that it will halt its rate reduction campaign, will be issued in early afternoon.
Consumer spending that fuels two-thirds of economic activity through consumption of goods and services, grew at the weakest rate since the second quarter of 2001, when the economy was last in recession.
It rose at a 1 percent rate after growing 2.3 percent in the fourth quarter.
The weakening in an already distressed housing sector was even more striking.
Spending on residential construction plunged at a 26.7 percent rate - a ninth straight quarterly decline and the biggest for any three months since the end of 1981.
Tuesday, April 29, 2008
Merck's Side Effects - Cordaptive
FOXBusiness
Pharmaceutical giant Merck saw its share price take a big hit on Tuesday after the Food and Drug Administration denied a key cholesterol drug.
The FDA denied Cordaptive, a cholesterol medicine that Merck had high expectations for, on Monday evening through a “not-approvable” letter. Neither the FDA nor Merck released an explanation for the denial, but the company did say it plans to submit additional information to the agency for further evaluation.
Merck attempted to quell shareholder anxiety by reiterating its 2008 earnings outlook and saying it still sees double-digit earnings growth through 2010.
"Merck's broad portfolio of medicines and vaccines, including eight productsin launch phase, enables us to weather challenges that come our way," Richard T. Clark, chairman, president and chief executive officer of Merck, said in a statement.
Still, the market was spooked by the Cordaptive news as shares of Merck plunged 10% on Tuesday. The stock has lost nearly 30% of its value year-to-date and was hit earlier this year with a setback for its Vytorin cholesterol drug. Merck is the worst-performing stock on the Dow in 2008.
Citing financial-services firm Raymond James, The Wall Street Journal reported Merck was relying on Cordaptive for $2 billion a year in revenue and hoped to package the drug with Zocor, another cholesterol drug.
An analyst at Lehman Brothers (LEH: 46.90, -0.62, -1.30%) lowered his price target to $53 from $58 on Merck on the FDA news. Still, that price target would represents a 28% increase from Merck’s closing price on Monday of $41.44. The analyst, Charles Butler, said the FDA rejection could stem from a low number of patients in clinical trials, meaning more research is needed on potential side effects of Cordaptive.
The Cordaptive developments have implications for other drug makers. Cowen & Co. said Schering-Plough (SGP: 18.82, +0.07, +0.37%) would likely benefit as its Vytorin could now face less competition but Eli Lilly (LLY: 48.22, -1.14, -2.30%) "could suffer" because its Effient drug could be viewed as having the same fate as Cordaptive.
According to Thomson Reuters, Credit Suisse (CS: 53.01, -2.90, -5.18%) raised its 2008 and 2009 forecast for Abbott Labs (ABT: 53.61, +2.00, +3.87%), predicting a larger market share for the drug maker's Niaspan and Simcor drugs
Pharmaceutical giant Merck saw its share price take a big hit on Tuesday after the Food and Drug Administration denied a key cholesterol drug.
The FDA denied Cordaptive, a cholesterol medicine that Merck had high expectations for, on Monday evening through a “not-approvable” letter. Neither the FDA nor Merck released an explanation for the denial, but the company did say it plans to submit additional information to the agency for further evaluation.
Merck attempted to quell shareholder anxiety by reiterating its 2008 earnings outlook and saying it still sees double-digit earnings growth through 2010.
"Merck's broad portfolio of medicines and vaccines, including eight productsin launch phase, enables us to weather challenges that come our way," Richard T. Clark, chairman, president and chief executive officer of Merck, said in a statement.
Still, the market was spooked by the Cordaptive news as shares of Merck plunged 10% on Tuesday. The stock has lost nearly 30% of its value year-to-date and was hit earlier this year with a setback for its Vytorin cholesterol drug. Merck is the worst-performing stock on the Dow in 2008.
Citing financial-services firm Raymond James, The Wall Street Journal reported Merck was relying on Cordaptive for $2 billion a year in revenue and hoped to package the drug with Zocor, another cholesterol drug.
An analyst at Lehman Brothers (LEH: 46.90, -0.62, -1.30%) lowered his price target to $53 from $58 on Merck on the FDA news. Still, that price target would represents a 28% increase from Merck’s closing price on Monday of $41.44. The analyst, Charles Butler, said the FDA rejection could stem from a low number of patients in clinical trials, meaning more research is needed on potential side effects of Cordaptive.
The Cordaptive developments have implications for other drug makers. Cowen & Co. said Schering-Plough (SGP: 18.82, +0.07, +0.37%) would likely benefit as its Vytorin could now face less competition but Eli Lilly (LLY: 48.22, -1.14, -2.30%) "could suffer" because its Effient drug could be viewed as having the same fate as Cordaptive.
According to Thomson Reuters, Credit Suisse (CS: 53.01, -2.90, -5.18%) raised its 2008 and 2009 forecast for Abbott Labs (ABT: 53.61, +2.00, +3.87%), predicting a larger market share for the drug maker's Niaspan and Simcor drugs
A Visa Moment - 2nd Qtr 2008 Earnings
Visa Inc. Reports Fiscal Second Quarter 2008 Earnings Results
GAAP net income of $314 million for the quarter -
Adjusted net income of $401 million for the quarter-
GAAP diluted class A common earnings per share of $0.39 for the quarter-
Adjusted diluted class A common earnings per share of $0.52 for the quarter-
Payment volume grew 19% over the prior year to $681 billion
SAN FRANCISCO, April 28 /PRNewswire-FirstCall/ -- Visa Inc. (NYSE: V) today announced financial results for our fiscal second quarter ended March 31, 2008. GAAP net income for the quarter was $314 million, or $0.39 per diluted class A common share. GAAP diluted class A common shares outstanding were 778 million. On an adjusted basis (reflective of a normalized tax rate and excluding litigation, restructuring and purchase amortization), net income for the quarter was $401 million, or $0.52 per diluted class A common share. Adjusted diluted class A common shares outstanding were 779 million.
Net operating revenue in the fiscal second quarter 2008 was $1.5 billion. Strong contributions were made by service fees, data processing fees, and international transaction fees as payment volumes and processed transactions rose across all regions worldwide.
Fiscal Second Quarter 2008 Financial Highlights:
Visa Inc. reports operational performance data on a trailing one quarter basis, based on information provided to the company from client financial institutions. This operational performance data, which includes payments volume for our clients, total volume, total payments transactions, and total cards carrying Visa brands, are in part the basis for financial results in the following quarter. For the period ending December 31, 2007, which impacts the March 2008 fiscal quarter, Visa's operational performance highlights include:
Visa Inc. reports operational performance data on a trailing one quarter basis, based on information provided to the company from client financial institutions. This operational performance data, which includes payments volume for our clients, total volume, total payments transactions, and total cards carrying Visa brands, are in part the basis for financial results in the following quarter. For the period ending December 31, 2007, which impacts the March 2008 fiscal quarter, Visa's operational performance highlights include:
-- Payments volume grew 19% over the prior year to $681 billion;-- Total volume, inclusive of cash volume was $1.1 trillion, an increase of 21% over the prior year;-- Total cards carrying the Visa brands rose 16% worldwide to 1.6 billion over the prior year; and-- Total payment transactions increased by 16% over the prior year to 11 billion.
Total processed transactions, which are based on current fiscal second quarter results on Visa's processing system, were 8.8 billion, a 15% increase over the prior year.
For the fiscal second quarter 2008, service fees were $792 million, up 29% over the prior year on a pro forma basis, and were recognized based on payment volume in the prior quarter. All other fee categories are recognized based on current quarter activity and are also compared on a pro forma basis. Data processing fees rose 34% over the prior year to $494 million. International transaction fees, which are driven by cross-border payments volume, grew 35% over the prior year to $379 million, as we continued to benefit from higher multi-currency payments volumes across all regions during the fiscal second quarter. Other revenue, which includes the Visa Europe licensing fee, was $126 million for the fiscal second quarter. Volume and incentive payments, which are contra revenue, were $338 million for the fiscal second quarter.
Total operating expenses were $1.1 billion for the fiscal second quarter, up 39% over the prior year on a pro forma basis. The increase in total operating expenses over the prior year was primarily driven by a $285 million provision for covered litigation. This amount is expected to be fully covered for Visa Inc. under the terms of the retrospective responsibility plan. Excluding this provision, operating expenses grew only 3% over the prior year on a pro forma basis.
Cash, cash equivalents, restricted cash, and available-for-sale investment securities were $8 billion at March 31, 2008, and includes $2.7 billion that we intend to use to redeem all of the series II and a portion of the series III class C shares in October 2008.
Financial Outlook:
Visa Inc.'s financial outlook over the next three years includes the following metrics:
Annual net revenue growth of 11% to 15%;--
Visa Inc.'s financial outlook over the next three years includes the following metrics:
Annual net revenue growth of 11% to 15%;--
Annual adjusted operating margin (adjusted earnings before interest and taxes) in the low 40% range;--
Annual adjusted diluted class A common earnings per share growth of 20% or greater; and-- Annual free cash flow (cash flow from operations plus cash reimbursements from litigation escrow less capital spending) in excess of $1 billion.
This outlook reflects an assumed 41% percent GAAP tax rate for fiscal year 2008. Our intent is to reduce this rate to a level around 35-36% over the next five years.
This outlook reflects an assumed 41% percent GAAP tax rate for fiscal year 2008. Our intent is to reduce this rate to a level around 35-36% over the next five years.
Monday, April 28, 2008
Visa Announces After The Bell
Visa Inc. To Announce Fiscal Second Quarter 2008 Financial Results on April 28, 2008
SAN FRANCISCO, April 8, 2008 /PRNewswire-FirstCall/ -- Visa Inc. (NYSE: V) will report its fiscal second quarter 2008 financial results on Monday, April 28, 2008. The results will be included in a press release, with accompanying financial information, that will be released after market close and posted on the Visa Investor Relations website.
Visa's executive management team will then host a live audio webcast beginning at 5:00 p.m. EDT (2:00 p.m. PDT) to discuss the financial results and business highlights.
All interested parties are invited to listen to the live webcast at http://investor.visa.com. A replay of the webcast will be available on the Visa Investor Relations website for 30 days.
About Visa: Visa Inc. operates the world's largest retail electronic payments network providing processing services and payment product platforms. This includes consumer credit, debit, prepaid and commercial payments, which are offered under the Visa, Visa Electron, Interlink and PLUS brands. Visa enjoys acceptance around the world, and Visa/PLUS is one of the world's largest global ATM networks, offering cash access in local currency in more than 170 countries.
SAN FRANCISCO, April 8, 2008 /PRNewswire-FirstCall/ -- Visa Inc. (NYSE: V) will report its fiscal second quarter 2008 financial results on Monday, April 28, 2008. The results will be included in a press release, with accompanying financial information, that will be released after market close and posted on the Visa Investor Relations website.
Visa's executive management team will then host a live audio webcast beginning at 5:00 p.m. EDT (2:00 p.m. PDT) to discuss the financial results and business highlights.
All interested parties are invited to listen to the live webcast at http://investor.visa.com. A replay of the webcast will be available on the Visa Investor Relations website for 30 days.
About Visa: Visa Inc. operates the world's largest retail electronic payments network providing processing services and payment product platforms. This includes consumer credit, debit, prepaid and commercial payments, which are offered under the Visa, Visa Electron, Interlink and PLUS brands. Visa enjoys acceptance around the world, and Visa/PLUS is one of the world's largest global ATM networks, offering cash access in local currency in more than 170 countries.
Harley On A Long Cruise
HARLEY-DAVIDSON PAINTED A GLUM PICTURE FOR 2008, after reporting weaker-than-expected first-quarter profits two weeks ago, and lowering guidance for 2008. The Milwaukee motorcycle maker (ticker: HOG) now sees earnings per share falling by 15% to 20% this year, to $3.00 to $3.18 a share, from last year's $3.74. The company previously had forecast an '08 increase of 4% to 7%.
Harley's troubles, which it blamed on economic weakness, aren't a surprise; as a purchase, a Harley is about as discretionary as it gets. But neither is the news as dour -- for the company and its shares -- as the numbers might suggest.
Barron's warned, in a positive piece late last year, that Harley's ride in the next 12 months would be rocky ("Bound for Hog Heaven," Nov. 26, 2007). But we also said that the shares, then around 46, would rebound once the market sensed that Harley's business had troughed. The stock is down about 20%, to 38 -- but time is on the company's side.
Harley's first-quarter revenue rose 11%, to $1.31 billion, but net income fell 2.5%, to $187.6 million. Diluted earnings per share rose to 79 cents from 74 cents a year ago, mostly because of a lower share count and a strike last year.
Steven Check, of Check Capital in Costa Mesa, Calif., says that posting flat earnings in a difficult environment is "relatively OK." Check isn't selling his Harley stake, as he thinks the company's iconic brand and international sales will help its stock rebound in the longer term. Applying a historic price/earnings multiple of 15 to his forecast for per-share earnings of $4 in the intermediate term, "a target [price] of around 55 in two years seems reasonable," he says.
While Harley's U.S. retail sales fell 13% in the quarter, international revenue, now about 33% of the total, revved up 17%. Begrudgingly acknowledging such bright spots, the shares tripped on the news, but then later turned up.
Harley's recovery may take longer than Barron's envisioned, but not much longer. The company still has a 30% return on equity, a clean balance sheet and ample cash flow, observes Harley investor H. Edward Shill II, the chief investment officer of QCI Asset Management in Pittsford, N.Y. "The time to buy Harley is when everyone hates it," he says.
From Barrons
Harley's troubles, which it blamed on economic weakness, aren't a surprise; as a purchase, a Harley is about as discretionary as it gets. But neither is the news as dour -- for the company and its shares -- as the numbers might suggest.
Barron's warned, in a positive piece late last year, that Harley's ride in the next 12 months would be rocky ("Bound for Hog Heaven," Nov. 26, 2007). But we also said that the shares, then around 46, would rebound once the market sensed that Harley's business had troughed. The stock is down about 20%, to 38 -- but time is on the company's side.
Harley's first-quarter revenue rose 11%, to $1.31 billion, but net income fell 2.5%, to $187.6 million. Diluted earnings per share rose to 79 cents from 74 cents a year ago, mostly because of a lower share count and a strike last year.
Steven Check, of Check Capital in Costa Mesa, Calif., says that posting flat earnings in a difficult environment is "relatively OK." Check isn't selling his Harley stake, as he thinks the company's iconic brand and international sales will help its stock rebound in the longer term. Applying a historic price/earnings multiple of 15 to his forecast for per-share earnings of $4 in the intermediate term, "a target [price] of around 55 in two years seems reasonable," he says.
While Harley's U.S. retail sales fell 13% in the quarter, international revenue, now about 33% of the total, revved up 17%. Begrudgingly acknowledging such bright spots, the shares tripped on the news, but then later turned up.
Harley's recovery may take longer than Barron's envisioned, but not much longer. The company still has a 30% return on equity, a clean balance sheet and ample cash flow, observes Harley investor H. Edward Shill II, the chief investment officer of QCI Asset Management in Pittsford, N.Y. "The time to buy Harley is when everyone hates it," he says.
From Barrons
Business Week's No. 12 - C.H. Robinson Worldwide
No. 12: C.H. Robinson Worldwide
Industry: Air Freight & Logistics
Sales: $7.3 billion
Net Income: $324.3 million
You may not know C.H. Robinson Worldwide (CHRW), but you see the result of its labor every day on the highway. The Eden Prairie (Minn.) company brokers transportation between shippers and truckers. Robinson, originally a produce hauler, doesn't own any trucks itself. With a nationwide network of 48,000 transporters, it plans efficient shipments for its clients—many of which are in the food and beverage industry, such as Anheuser-Busch and PepsiCo. At the start of a downturn, says CEO John Wiehoff, Robinson actually enjoys more pricing power, since truckers are eager to keep their trailers full.
Industry: Air Freight & Logistics
Sales: $7.3 billion
Net Income: $324.3 million
You may not know C.H. Robinson Worldwide (CHRW), but you see the result of its labor every day on the highway. The Eden Prairie (Minn.) company brokers transportation between shippers and truckers. Robinson, originally a produce hauler, doesn't own any trucks itself. With a nationwide network of 48,000 transporters, it plans efficient shipments for its clients—many of which are in the food and beverage industry, such as Anheuser-Busch and PepsiCo. At the start of a downturn, says CEO John Wiehoff, Robinson actually enjoys more pricing power, since truckers are eager to keep their trailers full.
News That Moves
Monday (28th) - the Census Bureau's 1st Qtr vacancy survey gives an indication of the U.S. housing market.
Tuesday (29th) - Exxon Mobil announces 1st Qtr earnings. Exxon is expected to post a 30% increase in EPS from a year ago, to $2.10.
Wednesday (30th) - the Federal Reserve announces possible rate cuts and guidance. The Commerce Department announces first read on 1st Qtr GDP. Recession or slow down?
Tuesday (29th) - Exxon Mobil announces 1st Qtr earnings. Exxon is expected to post a 30% increase in EPS from a year ago, to $2.10.
Wednesday (30th) - the Federal Reserve announces possible rate cuts and guidance. The Commerce Department announces first read on 1st Qtr GDP. Recession or slow down?
Saturday, April 26, 2008
Aetna 1st Qtr 2008 Earnings
Aetna Reports First-Quarter 2008 Results
Operating earnings were $0.92 per share, a 14 percent increase over the prior-year quarter, in line with the Thomson/First Call mean of $0.92 per share
Net income was $0.85 per share, a 5 percent increase over the prior-year quarter
Medical membership increased by 614,000 to 17.5 million
Commercial Medical Benefit Ratio was 79.8 percent
Guidance: Full-year 2008 operating earnings per share projected to be $4.00
Hartford, Conn., April 24, 2008 — Aetna (NYSE: AET) today announced first-quarter 2008 operating earnings of $0.92 per share, a 14 percent increase over the prior-year quarter. The increase in operating earnings per share reflects a 16 percent growth in total revenue, primarily from quarter-over-quarter membership growth and premium rate increases, as well as stable underwriting results. This improvement also reflects the benefit of share repurchases. First-quarter net income was $0.85 per share, an increase of 5 percent over the prior-year quarter. Operating earnings exclude net realized capital losses.
"Our focus remains on executing our strategy to drive profitable growth," said Joseph M. Zubretsky, executive vice president and CFO. "We demonstrated this in the first quarter in the following ways: strong top-line growth, resulting from solid membership increases and disciplined pricing actions; strong underwriting discipline and medical cost management that led to a Commercial Medical Benefit Ratio of 79.8 percent; and effective management of capital and its accretive deployment."Given these results, we feel confident in reaffirming our full-year 2008 operating earnings guidance of $4.00 per share," Zubretsky said. "In addition, we project medical membership growth to be in the range of 850,000 to 900,000 members, a 50,000 member increase over our prior guidance."
Health Care business resultsHealth Care, which provides a full range of insured and self-insured medical, pharmacy, dental and behavioral health products and services, reported:
Operating earnings of $461.6 million for the first quarter of 2008, compared with $422.7 million for the first quarter of 2007. The increase in operating earnings reflects a 20 percent increase in revenue primarily from membership growth, premium rate increases and acquisitions, as well as stable underwriting results and continued general and administrative expense efficiencies.
Net income of $447.6 million for the first quarter of 2008, compared with $420.4 million for the first quarter of 2007. Net income includes $18.6 million and $5.2 million of realized capital losses in the first quarter of 2008 and 2007, respectively, due to the accounting for certain fixed income investments which decreased in market value because of the increase in yields caused by the widening of credit spreads in 2008 and the increase in rates in 2007.
Our Medical Benefit Ratios by product for the first quarter 2008 and 2007 were as follows:
First quarter medical membership increased by 614,000 to 17.467 million, pharmacy membership increased by 219,000 to 10.951 million and dental membership increased by 334,000 to 14.166 million.
Total revenues for the first quarter of 2008 increased by 19 percent to $7.1 billion from $6.0 billion for the first quarter of 2007.
On Thursday, however, Hartford-based Aetna said its a mix of membership growth and higher premiums boosted revenue 16 percent. Though profit slipped, the results still met Wall Street forecasts.
"We were struck by Aetna's ability to convert its defensive positioning into an offense that is winning business and creating separation from its competitors," said Lehman Brothers analyst Joshua Raskin, in a note to investors Friday.
The company reaffirmed its outlook for 2008 adjusted earnings per share of $4, and raised its forecast for medical membership growth by 50,000, to a range of 850,000 to 900,000 members.
Raskin said Aetna stands almost alone in its ability to manage through the tough profit environment hampering its competitors.
Operating earnings were $0.92 per share, a 14 percent increase over the prior-year quarter, in line with the Thomson/First Call mean of $0.92 per share
Net income was $0.85 per share, a 5 percent increase over the prior-year quarter
Medical membership increased by 614,000 to 17.5 million
Commercial Medical Benefit Ratio was 79.8 percent
Guidance: Full-year 2008 operating earnings per share projected to be $4.00
Hartford, Conn., April 24, 2008 — Aetna (NYSE: AET) today announced first-quarter 2008 operating earnings of $0.92 per share, a 14 percent increase over the prior-year quarter. The increase in operating earnings per share reflects a 16 percent growth in total revenue, primarily from quarter-over-quarter membership growth and premium rate increases, as well as stable underwriting results. This improvement also reflects the benefit of share repurchases. First-quarter net income was $0.85 per share, an increase of 5 percent over the prior-year quarter. Operating earnings exclude net realized capital losses.
"Our focus remains on executing our strategy to drive profitable growth," said Joseph M. Zubretsky, executive vice president and CFO. "We demonstrated this in the first quarter in the following ways: strong top-line growth, resulting from solid membership increases and disciplined pricing actions; strong underwriting discipline and medical cost management that led to a Commercial Medical Benefit Ratio of 79.8 percent; and effective management of capital and its accretive deployment."Given these results, we feel confident in reaffirming our full-year 2008 operating earnings guidance of $4.00 per share," Zubretsky said. "In addition, we project medical membership growth to be in the range of 850,000 to 900,000 members, a 50,000 member increase over our prior guidance."
Health Care business resultsHealth Care, which provides a full range of insured and self-insured medical, pharmacy, dental and behavioral health products and services, reported:
Operating earnings of $461.6 million for the first quarter of 2008, compared with $422.7 million for the first quarter of 2007. The increase in operating earnings reflects a 20 percent increase in revenue primarily from membership growth, premium rate increases and acquisitions, as well as stable underwriting results and continued general and administrative expense efficiencies.
Net income of $447.6 million for the first quarter of 2008, compared with $420.4 million for the first quarter of 2007. Net income includes $18.6 million and $5.2 million of realized capital losses in the first quarter of 2008 and 2007, respectively, due to the accounting for certain fixed income investments which decreased in market value because of the increase in yields caused by the widening of credit spreads in 2008 and the increase in rates in 2007.
Our Medical Benefit Ratios by product for the first quarter 2008 and 2007 were as follows:
First quarter medical membership increased by 614,000 to 17.467 million, pharmacy membership increased by 219,000 to 10.951 million and dental membership increased by 334,000 to 14.166 million.Total revenues for the first quarter of 2008 increased by 19 percent to $7.1 billion from $6.0 billion for the first quarter of 2007.
On Thursday, however, Hartford-based Aetna said its a mix of membership growth and higher premiums boosted revenue 16 percent. Though profit slipped, the results still met Wall Street forecasts.
"We were struck by Aetna's ability to convert its defensive positioning into an offense that is winning business and creating separation from its competitors," said Lehman Brothers analyst Joshua Raskin, in a note to investors Friday.
The company reaffirmed its outlook for 2008 adjusted earnings per share of $4, and raised its forecast for medical membership growth by 50,000, to a range of 850,000 to 900,000 members.
Raskin said Aetna stands almost alone in its ability to manage through the tough profit environment hampering its competitors.
Merck 1st Qtr 2008 Earnings
WHITEHOUSE STATION, N.J., April 21, 2008 – Merck & Co., Inc. today announced financial
results for the first quarter of 2008.
Merck reported non-GAAP (generally accepted accounting principles) earnings per
share (EPS) of $0.89 for the first quarter of 2008, excluding a $1.4 billion net aftertax gain from
a distribution received from the AstraZeneca limited partnership and restructuring charges.
GAAP EPS for the first quarter were $1.52. Worldwide sales were $5.8 billion for the quarter,
an increase of 1 percent from the first quarter of 2007. Foreign exchange favorably affected
global sales performance by 4 percent for the quarter. Net income for the first quarter of 2008
was $3,302.6 million compared with $1,704.3 million in the first quarter of 2007.
Materials and production costs were $1.2 billion for the quarter, a decrease of 19 percent
from the first quarter of 2007. The first-quarter 2008 and first-quarter 2007 costs include $15
million and $118 million, respectively, for costs associated with the global restructuring
program. The gross margin was 78.7 percent for the first quarter of 2008 and
73.6 percent for the first quarter of 2007, reflecting 0.3 and 2.0 percentage point unfavorable
impacts, respectively, relating to the restructuring costs noted above.
Marketing and administrative expenses were $1.9 billion for the first quarter of 2008, an
increase of 3 percent from the first quarter of 2007. Included in marketing and administrative
expenses in the first quarter of 2008 are $40 million in reserves solely for future legal defense
costs for litigation related to FOSAMAX (alendronate sodium). Research and development expenses were $1.1 billion for the quarter, an increase of 5 percent from the first quarter of 2007.
results for the first quarter of 2008.
Merck reported non-GAAP (generally accepted accounting principles) earnings per
share (EPS) of $0.89 for the first quarter of 2008, excluding a $1.4 billion net aftertax gain from
a distribution received from the AstraZeneca limited partnership and restructuring charges.
GAAP EPS for the first quarter were $1.52. Worldwide sales were $5.8 billion for the quarter,
an increase of 1 percent from the first quarter of 2007. Foreign exchange favorably affected
global sales performance by 4 percent for the quarter. Net income for the first quarter of 2008
was $3,302.6 million compared with $1,704.3 million in the first quarter of 2007.
Materials and production costs were $1.2 billion for the quarter, a decrease of 19 percent
from the first quarter of 2007. The first-quarter 2008 and first-quarter 2007 costs include $15
million and $118 million, respectively, for costs associated with the global restructuring
program. The gross margin was 78.7 percent for the first quarter of 2008 and
73.6 percent for the first quarter of 2007, reflecting 0.3 and 2.0 percentage point unfavorable
impacts, respectively, relating to the restructuring costs noted above.
Marketing and administrative expenses were $1.9 billion for the first quarter of 2008, an
increase of 3 percent from the first quarter of 2007. Included in marketing and administrative
expenses in the first quarter of 2008 are $40 million in reserves solely for future legal defense
costs for litigation related to FOSAMAX (alendronate sodium). Research and development expenses were $1.1 billion for the quarter, an increase of 5 percent from the first quarter of 2007.
Restructuring costs, primarily representing employee separation costs associated with
the Company's global restructuring program, net of gains on the sales of facilities and related
assets, were $70 million for the first quarter of 2008. Total overall costs associated with the
Company's global restructuring program included in materials and production and restructuring
costs were $85 million and $186 million for the first quarter of 2008 and 2007, respectively,
primarily related to separations, accelerated depreciation and asset impairment costs.
Other (income) expense for the quarter includes a $249 million gain on Merck's
divestiture of its remaining worldwide rights to AGGRASTAT (tirofiban hydrochloride) to Iroko
Pharmaceuticals and a gain of $2.2 billion from a distribution received from the AstraZeneca
limited partnership in which Merck maintains an interest. Merck also recorded a $300 million
expense in the first quarter for a contribution to The Merck Company Foundation. The
contribution reinforces the Company's strong commitment to enhancing the health and wellbeing of people around the world. Other (income) expense also includes a $55 million charge in
connection with the anticipated resolution of a previously disclosed investigation by a group of
Attorneys General from 31 states and the District of Columbia into whether the Company
violated state consumer protection laws with respect to the sales and marketing of VIOXX
(rofecoxib). The resolution of these matters still is subject to execution of definitive agreements.
The first-quarter 2008 effective tax rate of 25.1 percent reflects the impacts of the gain
on distribution from the AstraZeneca limited partnership and restructuring charges. The
effective tax rate excluding the impact of these items was 14.5 percent, reflecting a first-quarter
benefit of approximately eight percentage points relating to the realization of foreign tax credits.
Financial Guidance
Merck anticipates a full-year 2008 non-GAAP EPS range of $3.28 to $3.38 that adjusts for
certain items and a 2008 GAAP EPS range of $3.84 to $4.00. The Company expects a generally
even distribution of non-GAAP EPS across the remaining quarters in 2008. Both the non-GAAP
and GAAP EPS ranges include a $700 million reduction in equity income guidance, attributable to the lower-than-anticipated contribution from the Merck/Schering-Plough joint venture, as well as updates to other guidance elements to reflect current business trends. The 2008 GAAP guidance
includes:
• A pretax charge of approximately $100 million to $300 million associated with the
Company's global restructuring program.
• The $2.2 billion gain from a distribution from the AstraZeneca limited partnership.
Whole Foods 1st Qtr Earnings
Whole Foods Market Reports First Quarter Results
Sales Increase 31%; Comparable Store Sales Increase 9.3%;
Company Reports Net income of $39.1 Million, Including an Estimated
$11.9 Million in Dilution from Wild Oats, and Diluted EPS of $0.28;
Company Reaffirms Comp Sales Growth Guidance of 7.5% to 9.5% for Fiscal Year 2008
February 19, 2008. Whole Foods Market, Inc. (NASDAQ: WFMI) today reported results for the 16-week first quarter ended January 20, 2008. Sales increased 31.4% to approximately $2.5 billion. Comparable store sales increased 9.3% on top of a 7.0% increase in the prior year. Identical store sales, excluding five relocated stores and three major expansions, increased 7.1% on top of a 6.2% increase in the prior year. Store contribution was approximately $182.2 million, and G&A expenses totaled approximately $87.4 million. Preopening and relocation costs were approximately $20.2 million, and interest expense, net of investment and other income, was approximately $8.8 million. Net income was approximately $39.1 million, and diluted earnings per share were $0.28. The Company estimates the negative impact on net income from Wild Oats was approximately $11.9 million, or $0.08 per diluted share, in the quarter.
Earnings before interest, taxes and non-cash expenses were approximately $167.5 million, or $1.19 per diluted share, compared to approximately $147.9 million, or $1.03 per diluted share, in the prior year. “We realize there are a lot of questions out there about how a slowing economy might impact our sales. Historically, our sales have been highly resilient during economic downturns. We attribute our strong sales to many factors, including our loyal core customers and their dedication to a natural and organic lifestyle, our high percentage of perishable product
sales, and our extensive selection of high-quality prepared foods that attracts customers trading down from restaurants,” said John Mackey, chairman, chief executive officer, and co-founder of Whole Foods Market. “In addition, we sell a high percentage of relatively small-ticket items, and we are better positioned today than we ever have been from a value perspective. Given our prior experience, strong year-to-date comps, easier year-over-year comparisons, and the increased number of new stores entering the comp base, we are confident in reaffirming our comp guidance of 7.5% to 9.5% for the fiscal year.”
The Company produced approximately $70 million in cash flow from operations and received approximately $7 million in proceeds from the exercise of stock options. Capital expenditures were approximately $162 million of which $102 million related to new stores and approximately $6 million related to Wild Oats.
In addition, the Company paid approximately $25 million in cash dividends to shareholders. At the end of the quarter, the Company had total debt of approximately $773 million, including $30 million drawn on its $250 million credit line. Currently, the Company has $50 million drawn on its line, leaving approximately $114 million available net of outstanding letters of credit. In addition, the credit agreement contains an accordion feature under which the Company can increase its credit line up to $350 million.
Sales Increase 31%; Comparable Store Sales Increase 9.3%;
Company Reports Net income of $39.1 Million, Including an Estimated
$11.9 Million in Dilution from Wild Oats, and Diluted EPS of $0.28;
Company Reaffirms Comp Sales Growth Guidance of 7.5% to 9.5% for Fiscal Year 2008
February 19, 2008. Whole Foods Market, Inc. (NASDAQ: WFMI) today reported results for the 16-week first quarter ended January 20, 2008. Sales increased 31.4% to approximately $2.5 billion. Comparable store sales increased 9.3% on top of a 7.0% increase in the prior year. Identical store sales, excluding five relocated stores and three major expansions, increased 7.1% on top of a 6.2% increase in the prior year. Store contribution was approximately $182.2 million, and G&A expenses totaled approximately $87.4 million. Preopening and relocation costs were approximately $20.2 million, and interest expense, net of investment and other income, was approximately $8.8 million. Net income was approximately $39.1 million, and diluted earnings per share were $0.28. The Company estimates the negative impact on net income from Wild Oats was approximately $11.9 million, or $0.08 per diluted share, in the quarter.
Earnings before interest, taxes and non-cash expenses were approximately $167.5 million, or $1.19 per diluted share, compared to approximately $147.9 million, or $1.03 per diluted share, in the prior year. “We realize there are a lot of questions out there about how a slowing economy might impact our sales. Historically, our sales have been highly resilient during economic downturns. We attribute our strong sales to many factors, including our loyal core customers and their dedication to a natural and organic lifestyle, our high percentage of perishable product
sales, and our extensive selection of high-quality prepared foods that attracts customers trading down from restaurants,” said John Mackey, chairman, chief executive officer, and co-founder of Whole Foods Market. “In addition, we sell a high percentage of relatively small-ticket items, and we are better positioned today than we ever have been from a value perspective. Given our prior experience, strong year-to-date comps, easier year-over-year comparisons, and the increased number of new stores entering the comp base, we are confident in reaffirming our comp guidance of 7.5% to 9.5% for the fiscal year.”
The Company produced approximately $70 million in cash flow from operations and received approximately $7 million in proceeds from the exercise of stock options. Capital expenditures were approximately $162 million of which $102 million related to new stores and approximately $6 million related to Wild Oats.
In addition, the Company paid approximately $25 million in cash dividends to shareholders. At the end of the quarter, the Company had total debt of approximately $773 million, including $30 million drawn on its $250 million credit line. Currently, the Company has $50 million drawn on its line, leaving approximately $114 million available net of outstanding letters of credit. In addition, the credit agreement contains an accordion feature under which the Company can increase its credit line up to $350 million.
Friday, April 25, 2008
Business Week's No.11 - CB Richard Ellis Group
No. 11: CB Richard Ellis Group
Industry: Real Estate Management & Development
Sales: $6 billion
Net Income: $387.9 million
The start of a recession is not a great time to be the nation's largest commercial real estate broker. Los Angeles-based CB Richard Ellis (CBG) more than doubled in size during the recent boom. Last year it earned a record $388 million on sales of $6 billion. But CEO Brett White is reluctant to make earnings predictions for this year. Because of the credit crunch, sales of office buildings plunged at the end of 2007 and continue to be down. The company has been seeking new revenue sources. It now manages buildings for large companies such as Hertz, which recently chose CBRE to run its many offices.
Industry: Real Estate Management & Development
Sales: $6 billion
Net Income: $387.9 million
The start of a recession is not a great time to be the nation's largest commercial real estate broker. Los Angeles-based CB Richard Ellis (CBG) more than doubled in size during the recent boom. Last year it earned a record $388 million on sales of $6 billion. But CEO Brett White is reluctant to make earnings predictions for this year. Because of the credit crunch, sales of office buildings plunged at the end of 2007 and continue to be down. The company has been seeking new revenue sources. It now manages buildings for large companies such as Hertz, which recently chose CBRE to run its many offices.
LabCorp 1st Qtr 2008 Earnings
Laboratory Corporation Of America® Holdings Announces 2008 First Quarter Results
Burlington, NC, April, 24, 2008 - Laboratory Corporation of America® Holdings (LabCorp®) (NYSE: LH) today announced results for the quarter ended March 31, 2008.
First Quarter ResultsNet earnings increased to $130.3 million, compared to first quarter 2007 net earnings of $122.5 million. Earnings per diluted share (EPS) increased 16.3% to $1.14, compared to $0.98 in the first quarter of 2007. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $285.5 million for the quarter, or 25.9% of net sales.
Revenues for the quarter were $1,103.2 million, an increase of 10.5% compared to the same period in 2007. Compared to the first quarter of 2007, testing volume, measured by accessions, increased 8.6%, and price increased 1.9%. Excluding the consolidation of the Company's Ontario Canada joint venture, revenue increased 4.1% with volume increasing 1.6% and price increasing 2.5%.
Operating cash flow for the quarter was $176.5 million, net of $13.0 million in transition payments to UnitedHealthcare. The balance of cash and short-term investments at the end of the quarter was $50.1 million, and there was $20 million outstanding under the Company's revolving credit facility. During the quarter, the Company repurchased $55.7 million of stock, representing 0.7 million shares. As of March 31, 2008, approximately $370.1 million of repurchase authorization remained under the Company's approved repurchase plan.
"We are pleased with our first quarter results." said David P. King, Chief Executive Officer. "Through a combination of volume and price growth, along with disciplined expense control, we continued our consistent trend of growing both EBITDA and EPS."
Burlington, NC, April, 24, 2008 - Laboratory Corporation of America® Holdings (LabCorp®) (NYSE: LH) today announced results for the quarter ended March 31, 2008.
First Quarter ResultsNet earnings increased to $130.3 million, compared to first quarter 2007 net earnings of $122.5 million. Earnings per diluted share (EPS) increased 16.3% to $1.14, compared to $0.98 in the first quarter of 2007. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $285.5 million for the quarter, or 25.9% of net sales.
Revenues for the quarter were $1,103.2 million, an increase of 10.5% compared to the same period in 2007. Compared to the first quarter of 2007, testing volume, measured by accessions, increased 8.6%, and price increased 1.9%. Excluding the consolidation of the Company's Ontario Canada joint venture, revenue increased 4.1% with volume increasing 1.6% and price increasing 2.5%.
Operating cash flow for the quarter was $176.5 million, net of $13.0 million in transition payments to UnitedHealthcare. The balance of cash and short-term investments at the end of the quarter was $50.1 million, and there was $20 million outstanding under the Company's revolving credit facility. During the quarter, the Company repurchased $55.7 million of stock, representing 0.7 million shares. As of March 31, 2008, approximately $370.1 million of repurchase authorization remained under the Company's approved repurchase plan.
"We are pleased with our first quarter results." said David P. King, Chief Executive Officer. "Through a combination of volume and price growth, along with disciplined expense control, we continued our consistent trend of growing both EBITDA and EPS."
2008 Outlook
Paychex 3rd Qtr 2008 Earnings
THIRD QUARTER FISCAL 2008 HIGHLIGHTS
• Diluted earnings per share increased 18% to $0.39 per share.
• Net income increased 13% to $142.5 million.
• Total revenue increased 10% to $532.2 million.
• Payroll service revenue increased 8% to $374.2 million.
• Human Resource Services revenue increased 18% to $120.6 million.
• Operating income increased 22% to $210.4 million.
ROCHESTER, NY, March 26, 2008 -- Paychex, Inc. (“we,” “our,” or “us”) (NASDAQ:PAYX) today announced a 13% increase in its record net income to $142.5 million for the three months ended February 29, 2008 (the “third quarter”), as compared with net income of $126.6 million for the same period last year. Diluted earnings per share were $0.39, an increase of 18% over $0.33 per share for the same period last year. Total revenue was $532.2 million, a 10% increase over $485.3 million for the same period last year.
“Third quarter results met our expectations and we expect to achieve our eighteenth consecutive year of record revenue and net income for fiscal 2008,” commented Jonathan J. Judge, President and Chief Executive Officer of Paychex. “Our operating income, net of certain items, was very strong for the third quarter, increasing 17% over the same period last year. However, we are seeing signs of a weakening economy indicated by a more difficult than normal
third quarter selling season and increases in business failures. On a positive note, checks per client have not yet shown significant weakness.” Payroll service revenue increased 8% to $374.2 million for the third quarter from the same period last year. The increase was due to client base growth, higher check volume, and price increases.
Human Resource Services revenue increased 18% to $120.6 million for the third quarter from the same period last year. The growth was generated from the following: retirement services client base increased 10% to 47,000 clients; comprehensive human resource outsourcing services client employees increased 17% to 409,000 client employees served; and workers’ compensation insurance client base increased 19% to 70,000 clients. Additionally, the asset value of the retirement services client employees’ funds increased 19% to $9.1 billion.
• Diluted earnings per share increased 18% to $0.39 per share.
• Net income increased 13% to $142.5 million.
• Total revenue increased 10% to $532.2 million.
• Payroll service revenue increased 8% to $374.2 million.
• Human Resource Services revenue increased 18% to $120.6 million.
• Operating income increased 22% to $210.4 million.
ROCHESTER, NY, March 26, 2008 -- Paychex, Inc. (“we,” “our,” or “us”) (NASDAQ:PAYX) today announced a 13% increase in its record net income to $142.5 million for the three months ended February 29, 2008 (the “third quarter”), as compared with net income of $126.6 million for the same period last year. Diluted earnings per share were $0.39, an increase of 18% over $0.33 per share for the same period last year. Total revenue was $532.2 million, a 10% increase over $485.3 million for the same period last year.
“Third quarter results met our expectations and we expect to achieve our eighteenth consecutive year of record revenue and net income for fiscal 2008,” commented Jonathan J. Judge, President and Chief Executive Officer of Paychex. “Our operating income, net of certain items, was very strong for the third quarter, increasing 17% over the same period last year. However, we are seeing signs of a weakening economy indicated by a more difficult than normal
third quarter selling season and increases in business failures. On a positive note, checks per client have not yet shown significant weakness.” Payroll service revenue increased 8% to $374.2 million for the third quarter from the same period last year. The increase was due to client base growth, higher check volume, and price increases.
Human Resource Services revenue increased 18% to $120.6 million for the third quarter from the same period last year. The growth was generated from the following: retirement services client base increased 10% to 47,000 clients; comprehensive human resource outsourcing services client employees increased 17% to 409,000 client employees served; and workers’ compensation insurance client base increased 19% to 70,000 clients. Additionally, the asset value of the retirement services client employees’ funds increased 19% to $9.1 billion.
Total expenses increased 3% to $321.8 million for the third quarter from the same period last year as a result of increases in personnel and other costs related to selling and retaining clients, and promoting new services. Excluding a $13.0 million expense charge to increase the litigation reserve during the three months ended February 28, 2007, expenses would have increased 8%.
For the third quarter, our operating income was $210.4 million, an increase of 22% over the same period last year. Operating income, net of certain items (see Note 1) increased 17% to $173.0 million as compared to $148.3 million for the same period last year. As a percent of service revenues, operating income, net of certain items, improved to 35% from 33% for the same period last year.
Thursday, April 24, 2008
The Costco Way
Costco the anti-WalMart's formula for success that CEO Jim Sinegal has implemented at the nation’s fifth-largest retailer: Sell a limited number of items, keep costs down, rely on high volume, pay workers well, have customers buy memberships and aim for upscale shoppers, especially small-business owners. In addition, don’t advertise – that saves 2 percent a year in costs.
5 lessons revealed:
1. Take care of your employees.
Costco’s average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam’s Club. And Costco’s health plan makes those at many other retailers look Scroogish. One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco “it’s better to be an employee or a customer than a shareholder.”
Sinegal begs to differ. He rejects Wall Street’s assumption that to succeed in discount retailing, companies must pay poorly and skimp on benefits, or must ratchet up prices to meet Wall Street’s profit demands.
Good wages and benefits are why Costco has extremely low rates of turnover and theft by employees, he said. And Costco’s customers, who are more affluent than other warehouse store shoppers, stay loyal because they like that low prices do not come at the workers’ expense. “This is not altruistic,” he said. “This is good business.”
2. Keep prices low.
He also dismisses calls to increase Costco’s product markups. Mr. Sinegal, who has been in the retailing business for more than a half-century, said that heeding Wall Street’s advice to raise some prices would bring Costco’s downfall…
At Costco, one of Mr. Sinegal’s cardinal rules is that no branded item can be marked up by more than 14 percent, and no private-label item by more than 15 percent. In contrast, supermarkets generally mark up merchandise by 25 percent, and department stores by 50 percent or more.
“They could probably get more money for a lot of items they sell,” said Ed Weller, a retailing analyst at ThinkEquity.
But Mr. Sinegal warned that if Costco increased markups to 16 or 18 percent, the company might slip down a dangerous slope and lose discipline in minimizing costs and prices.
Mr. Sinegal, whose father was a coal miner and steelworker, gave a simple explanation. “On Wall Street, they’re in the business of making money between now and next Thursday,” he said. “I don’t say that with any bitterness, but we can’t take that view. We want to build a company that will still be here 50 and 60 years from now.”
3. Pay attention to the customer, not the competition.
But it is the customer, more than the competition, that keeps Mr. Sinegal’s attention. “We’re very good merchants, and we offer value,” he said. “The traditional retailer will say: ‘I’m selling this for $10. I wonder whether I can get $10.50 or $11.’ We say: ‘We’re selling it for $9. How do we get it down to $8?’ We understand that our members don’t come and shop with us because of the fancy window displays or the Santa Claus or the piano player. They come and shop with us because we offer great values.”
4. Focus on a few core options.
A typical Costco store stocks 4,000 types of items, including perhaps just four toothpaste brands, while a Wal-Mart typically stocks more than 100,000 types of items and may carry 60 sizes and brands of toothpastes. Narrowing the number of options increases the sales volume of each, allowing Costco to squeeze deeper and deeper bulk discounts from suppliers.
5. Use surprise to create excitement.
Mr. Sinegal, who is 69 but looks a decade younger, also delights in not tilting Costco too far into cheap merchandise, even at his warehouse stores. He loves the idea of the “treasure hunt” – occasional, temporary specials on exotic cheeses, Coach bags, plasma screen televisions, Waterford crystal, French wine and $5,000 necklaces – scattered among staples like toilet paper by the case and institutional-size jars of mayonnaise.
The treasure hunts, Mr. Sinegal says, create a sense of excitement and customer loyalty.
5 lessons revealed:
1. Take care of your employees.
Costco’s average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam’s Club. And Costco’s health plan makes those at many other retailers look Scroogish. One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco “it’s better to be an employee or a customer than a shareholder.”
Sinegal begs to differ. He rejects Wall Street’s assumption that to succeed in discount retailing, companies must pay poorly and skimp on benefits, or must ratchet up prices to meet Wall Street’s profit demands.
Good wages and benefits are why Costco has extremely low rates of turnover and theft by employees, he said. And Costco’s customers, who are more affluent than other warehouse store shoppers, stay loyal because they like that low prices do not come at the workers’ expense. “This is not altruistic,” he said. “This is good business.”
2. Keep prices low.
He also dismisses calls to increase Costco’s product markups. Mr. Sinegal, who has been in the retailing business for more than a half-century, said that heeding Wall Street’s advice to raise some prices would bring Costco’s downfall…
At Costco, one of Mr. Sinegal’s cardinal rules is that no branded item can be marked up by more than 14 percent, and no private-label item by more than 15 percent. In contrast, supermarkets generally mark up merchandise by 25 percent, and department stores by 50 percent or more.
“They could probably get more money for a lot of items they sell,” said Ed Weller, a retailing analyst at ThinkEquity.
But Mr. Sinegal warned that if Costco increased markups to 16 or 18 percent, the company might slip down a dangerous slope and lose discipline in minimizing costs and prices.
Mr. Sinegal, whose father was a coal miner and steelworker, gave a simple explanation. “On Wall Street, they’re in the business of making money between now and next Thursday,” he said. “I don’t say that with any bitterness, but we can’t take that view. We want to build a company that will still be here 50 and 60 years from now.”
3. Pay attention to the customer, not the competition.
But it is the customer, more than the competition, that keeps Mr. Sinegal’s attention. “We’re very good merchants, and we offer value,” he said. “The traditional retailer will say: ‘I’m selling this for $10. I wonder whether I can get $10.50 or $11.’ We say: ‘We’re selling it for $9. How do we get it down to $8?’ We understand that our members don’t come and shop with us because of the fancy window displays or the Santa Claus or the piano player. They come and shop with us because we offer great values.”
4. Focus on a few core options.
A typical Costco store stocks 4,000 types of items, including perhaps just four toothpaste brands, while a Wal-Mart typically stocks more than 100,000 types of items and may carry 60 sizes and brands of toothpastes. Narrowing the number of options increases the sales volume of each, allowing Costco to squeeze deeper and deeper bulk discounts from suppliers.
5. Use surprise to create excitement.
Mr. Sinegal, who is 69 but looks a decade younger, also delights in not tilting Costco too far into cheap merchandise, even at his warehouse stores. He loves the idea of the “treasure hunt” – occasional, temporary specials on exotic cheeses, Coach bags, plasma screen televisions, Waterford crystal, French wine and $5,000 necklaces – scattered among staples like toilet paper by the case and institutional-size jars of mayonnaise.
The treasure hunts, Mr. Sinegal says, create a sense of excitement and customer loyalty.
Hanesbrands 1st Qtr 2008 Earnings Report
Hanesbrands Inc. Reports First-Quarter 2008 Results
WINSTON-SALEM, N.C.--(BUSINESS WIRE)--April 21, 2008--Hanesbrands Inc. (NYSE: HBI), a leading marketer of innerwear, outerwear and hosiery apparel, today reported first-quarter 2008 results.
Earnings per diluted share in the quarter more than tripled to $0.38. Excluding actions, non-GAAP earnings per diluted share increased by 56 percent to $0.42, up $0.15 as a result of reduced long-term debt, lower base interest rates, and operating profit growth. Total net sales decreased by 5.0 percent to $987.8 million, reflective of conditions in the retail marketplace.
"We are very pleased with our profit results in a tough economic climate. Our strong profit growth was driven by continued cost-reduction initiatives and management of our debt structure in spite of a sales decline," Hanesbrands Chief Executive Officer Richard A. Noll said. "The key to our success is the continued execution of our business strategies of investing in our brands, driving cost reductions and globalizing our supply chain, and effectively investing our cash flow."
Noteworthy Financial Highlights
Selected highlights for the quarter ended March 29, 2008, compared with the year-ago quarter ended March 31, 2007, include:
Earnings per diluted share in the quarter increased 217 percent to $0.38, up from $0.12 a year ago. Non-GAAP diluted EPS, which excludes actions, increased 56 percent to $0.42 per share, up from $0.27 a share a year ago.
Non-GAAP net income, which excludes actions, increased by $14.2 million on the strength of cost reductions, supply chain initiatives, and lower interest expense. This net income improvement was a result of $4 million from higher operating profit, $6 million in lower interest expense due to lower long- term debt and implementing our accounts receivable securitization program, as well as $6 million in savings from lower LIBOR rates. Those improvements were partially offset by slightly higher income tax expense.
Operating profit in the quarter increased to $87.8 million, from $68.9 million a year ago.
Non-GAAP operating profit, which excludes actions, increased by 4.9 percent to $93.6 million for an operating margin on sales of 9.5 percent versus 8.6 percent a year ago.
Cost-reduction efforts resulted in an improved gross margin. As a percent of sales, selling, general and administrative costs were up, but the actual costs were flat, even though a timing shift resulted in higher media spending in the first quarter to support the launch of marketing initiatives for new Hanes products and the revitalization plan for Playtex.
Total net sales in the quarter decreased by $52 million to $987.8 million, from $1.04 billion in the year-ago quarter.
Sales decreased in the company's innerwear and outerwear segments, with declines in most product categories across most customers. The company's sales to retailers are consistent with broad-based macroeconomic point-of-sale trends. International segment sales increased by 15 percent, driven by favorable foreign currency exchange rates and growth.
Hanesbrands continued to have a strong cash position at the end of the quarter. The company repurchased $8.3 million in company stock in the quarter, or 334,980 shares at an average price of $24.69.
WINSTON-SALEM, N.C.--(BUSINESS WIRE)--April 21, 2008--Hanesbrands Inc. (NYSE: HBI), a leading marketer of innerwear, outerwear and hosiery apparel, today reported first-quarter 2008 results.
Earnings per diluted share in the quarter more than tripled to $0.38. Excluding actions, non-GAAP earnings per diluted share increased by 56 percent to $0.42, up $0.15 as a result of reduced long-term debt, lower base interest rates, and operating profit growth. Total net sales decreased by 5.0 percent to $987.8 million, reflective of conditions in the retail marketplace.
"We are very pleased with our profit results in a tough economic climate. Our strong profit growth was driven by continued cost-reduction initiatives and management of our debt structure in spite of a sales decline," Hanesbrands Chief Executive Officer Richard A. Noll said. "The key to our success is the continued execution of our business strategies of investing in our brands, driving cost reductions and globalizing our supply chain, and effectively investing our cash flow."
Noteworthy Financial Highlights
Selected highlights for the quarter ended March 29, 2008, compared with the year-ago quarter ended March 31, 2007, include:
Earnings per diluted share in the quarter increased 217 percent to $0.38, up from $0.12 a year ago. Non-GAAP diluted EPS, which excludes actions, increased 56 percent to $0.42 per share, up from $0.27 a share a year ago.
Non-GAAP net income, which excludes actions, increased by $14.2 million on the strength of cost reductions, supply chain initiatives, and lower interest expense. This net income improvement was a result of $4 million from higher operating profit, $6 million in lower interest expense due to lower long- term debt and implementing our accounts receivable securitization program, as well as $6 million in savings from lower LIBOR rates. Those improvements were partially offset by slightly higher income tax expense.
Operating profit in the quarter increased to $87.8 million, from $68.9 million a year ago.
Non-GAAP operating profit, which excludes actions, increased by 4.9 percent to $93.6 million for an operating margin on sales of 9.5 percent versus 8.6 percent a year ago.
Cost-reduction efforts resulted in an improved gross margin. As a percent of sales, selling, general and administrative costs were up, but the actual costs were flat, even though a timing shift resulted in higher media spending in the first quarter to support the launch of marketing initiatives for new Hanes products and the revitalization plan for Playtex.
Total net sales in the quarter decreased by $52 million to $987.8 million, from $1.04 billion in the year-ago quarter.
Sales decreased in the company's innerwear and outerwear segments, with declines in most product categories across most customers. The company's sales to retailers are consistent with broad-based macroeconomic point-of-sale trends. International segment sales increased by 15 percent, driven by favorable foreign currency exchange rates and growth.
Hanesbrands continued to have a strong cash position at the end of the quarter. The company repurchased $8.3 million in company stock in the quarter, or 334,980 shares at an average price of $24.69.
Costco March Sales
Costco Wholesale Corporation Reports March Sales Results
ISSAQUAH, WA, Apr 10, 2008 (MARKET WIRE via COMTEX News Network)
Costco Wholesale Corporation today reported net sales of $6.57 billion for the month of March, the five weeks ended April 6, 2008, an increase of 11 percent from $5.93 billion in the same five-week period last year.
For the first thirty-one weeks of its reporting period ended April 6, 2008, the Company reported net sales of $41.34 billion, an increase of 12 percent from $36.96 billion during the similar thirty-one-week period last year.
Comparable sales for the five-week and thirty-one-week periods ended April 6, 2008, were as follows:
-------------5 Weeks--31 Weeks
----------US---- 5%------- 5%
International ---17%------ 17%
Total Company --7%------- 7%
========= =========
The U.S. comparable sales figure includes, among other things, the effect of gasoline price inflation, with the average sales price per gallon of gasoline up 20% for the five-week month of March, as compared to the year-earlier March. Excluding gasoline price inflation, U.S. comparable sales would have been up 3%. In addition, foreign exchange rates, primarily in Canada, positively impacted international comparable sales results. On a local currency basis, international comparable sales increased 6% in March.
Costco currently operates 536 warehouses, including 392 in the United States and Puerto Rico, 75 in Canada, 19 in the United Kingdom, six in Korea, five in Taiwan, eight in Japan and 31 in Mexico. The Company also operates Costco Online, an electronic commerce web site, at www.costco.com and at www.costco.ca in Canada. The Company plans to open an additional 14 to 15 new warehouses (including the relocation of four to five warehouses to larger and better-located facilities) prior to the end of its 2008 fiscal year on August 31, 2008.
ISSAQUAH, WA, Apr 10, 2008 (MARKET WIRE via COMTEX News Network)
Costco Wholesale Corporation today reported net sales of $6.57 billion for the month of March, the five weeks ended April 6, 2008, an increase of 11 percent from $5.93 billion in the same five-week period last year.
For the first thirty-one weeks of its reporting period ended April 6, 2008, the Company reported net sales of $41.34 billion, an increase of 12 percent from $36.96 billion during the similar thirty-one-week period last year.
Comparable sales for the five-week and thirty-one-week periods ended April 6, 2008, were as follows:
-------------5 Weeks--31 Weeks
----------US---- 5%------- 5%
International ---17%------ 17%
Total Company --7%------- 7%
========= =========
The U.S. comparable sales figure includes, among other things, the effect of gasoline price inflation, with the average sales price per gallon of gasoline up 20% for the five-week month of March, as compared to the year-earlier March. Excluding gasoline price inflation, U.S. comparable sales would have been up 3%. In addition, foreign exchange rates, primarily in Canada, positively impacted international comparable sales results. On a local currency basis, international comparable sales increased 6% in March.
Costco currently operates 536 warehouses, including 392 in the United States and Puerto Rico, 75 in Canada, 19 in the United Kingdom, six in Korea, five in Taiwan, eight in Japan and 31 in Mexico. The Company also operates Costco Online, an electronic commerce web site, at www.costco.com and at www.costco.ca in Canada. The Company plans to open an additional 14 to 15 new warehouses (including the relocation of four to five warehouses to larger and better-located facilities) prior to the end of its 2008 fiscal year on August 31, 2008.
Business Week's No. 10 - MEMC Electronic Materials
No. 10: MEMC Electronic Materials
Industry: Semiconductor Equipment
Sales: $1.9 billion
Net Income: $826.2 million
You know all those chips going into computers, cell phones, iPods, and other consumer electronics? Dig way back down through the supply chain, and you'll find MEMC Electronic Materials (WFR). Based in St. Peters, Mo., and led by CEO Nabeel Gareeb, MEMC not only makes the silicon wafers from which chips are cut but also manufactures the raw material used to make the wafers themselves, called polysilicon. MEMC may be insulated from an expected slowdown in global electronics chip sales, thanks to its investments in the solar energy market. With oil and other energy prices continuing to rise sharply, solar cells are expected to account for 38% of wafer demand by 2010, up from 23% today.
Industry: Semiconductor Equipment
Sales: $1.9 billion
Net Income: $826.2 million
You know all those chips going into computers, cell phones, iPods, and other consumer electronics? Dig way back down through the supply chain, and you'll find MEMC Electronic Materials (WFR). Based in St. Peters, Mo., and led by CEO Nabeel Gareeb, MEMC not only makes the silicon wafers from which chips are cut but also manufactures the raw material used to make the wafers themselves, called polysilicon. MEMC may be insulated from an expected slowdown in global electronics chip sales, thanks to its investments in the solar energy market. With oil and other energy prices continuing to rise sharply, solar cells are expected to account for 38% of wafer demand by 2010, up from 23% today.
Wednesday, April 23, 2008
Boeing Takes Off
Boeing Reports Double-Digit First-Quarter Earnings Growth and Record Backlog
􀂄 First-quarter EPS grew 43 percent to $1.62 per share as net income rose 38
percent to $1.2 billion
􀂄 Operating margin expanded to 11.3 percent as revenue rose to $16.0 billion
􀂄 Operating cash flow more than doubled to $1.9 billion
􀂄 Backlog reached a record $346 billion
􀂄 2008 EPS guidance reaffirmed at between $5.70 and $5.85 per share
􀂄 2009 EPS expected to grow approximately 20 percent to between $6.80 and
$7.00 per share
􀂄 First-quarter EPS grew 43 percent to $1.62 per share as net income rose 38
percent to $1.2 billion
􀂄 Operating margin expanded to 11.3 percent as revenue rose to $16.0 billion
􀂄 Operating cash flow more than doubled to $1.9 billion
􀂄 Backlog reached a record $346 billion
􀂄 2008 EPS guidance reaffirmed at between $5.70 and $5.85 per share
􀂄 2009 EPS expected to grow approximately 20 percent to between $6.80 and
$7.00 per share
CHICAGO, April 23, 2008 – The Boeing Company’s [NYSE: BA] first-quarter 2008
earnings per share increased 43 percent to $1.62 as net income rose 38 percent to $1.2
billion and operating margin rose to 11.3 percent, driven by solid overall execution in both
its commercial airplane and defense businesses as well as lower unallocated costs (Table
1).
Boeing’s quarterly revenue rose 4 percent to $16.0 billion while its operating cash
flow more than doubled to $1.9 billion reflecting the strong operating earnings and higher
commercial airplane orders. Free cash flow* increased to $1.5 billion (Table 2).
Boeing reaffirmed its 2008 earnings per share guidance at between $5.70 and
$5.85. For 2009, Boeing expects EPS between $6.80 and $7.00 per share on strong
production program performance and decreases in R&D and pension expense.
Yummy Results From Yum
Yum! Brands Inc. Reports First-Quarter 2008 EPS of $0.50 per share, 19% Growth Excluding Special Items; Raises Full-Year EPS Growth Forecast to 11% from 10%, Excluding Special Items
LOUISVILLE, Ky., Apr 22, 2008 (BUSINESS WIRE) -- Yum! Brands Inc. (NYSE: YUM) today reported results for the first quarter ended March 22, 2008.
First-quarter Earnings Per Share (EPS) of $0.50 included the benefit of a one-time gain from the sale of our minority interest in KFC Japan, and charges related to our long-term plan for U.S. brands transformation, including refranchising losses and charges related to business restructuring. Excluding these special items, EPS was $0.42 or 19% growth, which the company believes is a better indication of the underlying first-quarter performance.
-- Very strong system-sales growth of +40% in mainland China and +15% in Yum! Restaurants International (YRI), fueled by same-store-sales growth, strong unit development, and favorable foreign currency translation
-- Worldwide same-store-sales growth of +4%, including +12% in mainland China, +5% in YRI, and +3% in the U.S. (all figures are system-wide)
-- Operating profit growth of +33% in China Division and +18% in YRI. Worldwide operating profit growth of +13% excluding the benefit of special items
-- A quarterly record of nearly $1 billion in share buybacks
FULL-YEAR OUTLOOK
The Company raised its full-year 2008 EPS forecast from $1.85 to $1.87 per share or 11% growth. This is prior to full-year net gains from special items of up to $0.06 per share as previously announced in the Company's full-year 2007 earnings release on February 4, 2008. Full-year EPS is expected to total up to $1.93, including all items.
David C. Novak, Chairman and CEO, said, "I am pleased to report a strong start to 2008 with first-quarter EPS growth of +19% excluding special items, led by outstanding operating-profit growth from our China and YRI businesses. The global growth we are achieving in China and YRI is among the best in the retail sector as we are driving robust same-store-sales growth, record-level new-unit development and excellent returns. In fact, we fully expect in 2008, for the eighth straight year, to open at least 1,000 new restaurants outside the U.S., reinforcing our position as the leading international retail developer. While our U.S. profits are being challenged by significant commodity pressure, we achieved 3% system same-store-sales growth, and we remain confident in the steps we are taking to position the U.S. brands for sustainable growth. Importantly, we continue to return significant cash to our shareholders. During the first quarter, we repurchased $1 billion of our shares at a price we believe created significant shareholder value. Overall, this quarter again highlighted the power of our global portfolio, and on the strength of our first-quarter results, we are raising our full-year EPS forecast to 11% growth, or $1.87 per share excluding special items.
"Shareholders should expect us to continue building consistent value by differentiating our portfolio of brands and driving profitable global expansion through our four key strategies that make us not your ordinary restaurant company: building leading brands in China in every significant category; driving aggressive international expansion and building strong brands everywhere; dramatically improving U.S. brand positions, consistency and returns; and driving industry-leading, long-term shareholder and franchisee value."
CHINA DIVISION COMMENTS
-- Mainland China delivered an outstanding same-store-sales growth of 12%, lapping a strong 9% last year.
-- We opened 88 new units in mainland China, exceeding last year's development pace and further strengthening our leadership position in China's rapidly growing restaurant category.
-- Restaurant margin percentage declined due primarily to high food cost inflation. Commodity costs increased by approximately $11 million versus last year.
-- Foreign currency conversion benefited operating profit by $8 million.
YRI DIVISION COMMENTS
-- YRI achieved same-store-sales growth of 5%, lapping 7% from 2007.
-- We opened 158 new restaurants in our YRI Division, 96% of which were opened by our franchise partners. YRI continues to build an enviable development track record.
-- Franchise fees, a key driver of our high-return business, grew by 20% and is expected to reach approximately $650 million for the full year.
-- The strength of foreign currencies versus the U.S. dollar benefited operating profit by $7 million.
-- The loss of a VAT exemption in our Mexico business adversely impacted restaurant margin percentage by approximately 1 percentage point and operating profit by $5 million during the first quarter. As previously communicated, this loss is expected to negatively impact restaurant margin percentage by 1.2 percentage points and operating profit by more than $30 million for the full-year 2008.
U.S. BUSINESS COMMENTS
-- The U.S. business delivered same-store-sales growth of 3%, reversing last year's negative trend.
-- Restaurant margin percentage and operating profit declined due largely to significant commodity inflation (cheese, wheat and chicken costs). Overall, commodity costs increased $25 million compared to prior year.
-- As part of our long-term plan to transform our U.S. business -- which includes building permanent sales layers, investing in brand repositioning, refranchising and restructuring -- we previously guided that we are expanding our refranchising of U.S. company-owned restaurants, with company ownership to potentially reach below 10% by year-end 2010. We remain confident in our ability to achieve this goal, and expect subsequent quarters' activity in 2008 to be higher than the relatively low rate during the first quarter.
SHAREHOLDER PAYOUTS
During the first quarter of 2008, we purchased 27.7 million shares at an average price of $35.39, or a total of $981 million, a quarterly record.
For 2008, we expect to return over $2 billion to shareholders through both dividends and significant share buybacks.
Q2 2008 UPDATE
-- We expect a special item loss in the range of $0.01 to $0.03 per share due to the continuation of our U.S. business transformation, including refranchising losses and restructuring charges.
-- Tax rate is likely to be significantly higher than the second-quarter 2007 tax rate of 21.5%
-- U.S. restaurant margin will be adversely impacted by continued higher commodity costs (at a level similar to first-quarter's inflation) and dramatically higher insurance expenses.
YUM! ONGOING EARNINGS GROWTH MODEL
-- China Division operating-profit growth of 20%. This growth is driven largely by new-unit development in mainland China. Our key metric for mainland China is system-sales growth with an annual target of +20% driven by at least 425 new-restaurant openings.
-- YRI Division operating-profit growth of 10%. This growth is driven mainly by new-unit development, measured by system-sales growth of at least 5% (3% to 4% unit growth and 2% to 3% same-store-sales growth) including 750 new-restaurant openings.
-- U.S. operating-profit growth of 5% with same-store-sales growth of 2% to 3% and leverage of the G&A infrastructure.
-- EPS growth of at least 10%. This reflects additional benefit from reduction in shares outstanding due to substantial share buybacks.
LOUISVILLE, Ky., Apr 22, 2008 (BUSINESS WIRE) -- Yum! Brands Inc. (NYSE: YUM) today reported results for the first quarter ended March 22, 2008.
First-quarter Earnings Per Share (EPS) of $0.50 included the benefit of a one-time gain from the sale of our minority interest in KFC Japan, and charges related to our long-term plan for U.S. brands transformation, including refranchising losses and charges related to business restructuring. Excluding these special items, EPS was $0.42 or 19% growth, which the company believes is a better indication of the underlying first-quarter performance.
-- Very strong system-sales growth of +40% in mainland China and +15% in Yum! Restaurants International (YRI), fueled by same-store-sales growth, strong unit development, and favorable foreign currency translation
-- Worldwide same-store-sales growth of +4%, including +12% in mainland China, +5% in YRI, and +3% in the U.S. (all figures are system-wide)
-- Operating profit growth of +33% in China Division and +18% in YRI. Worldwide operating profit growth of +13% excluding the benefit of special items
-- A quarterly record of nearly $1 billion in share buybacks
FULL-YEAR OUTLOOK
The Company raised its full-year 2008 EPS forecast from $1.85 to $1.87 per share or 11% growth. This is prior to full-year net gains from special items of up to $0.06 per share as previously announced in the Company's full-year 2007 earnings release on February 4, 2008. Full-year EPS is expected to total up to $1.93, including all items.
David C. Novak, Chairman and CEO, said, "I am pleased to report a strong start to 2008 with first-quarter EPS growth of +19% excluding special items, led by outstanding operating-profit growth from our China and YRI businesses. The global growth we are achieving in China and YRI is among the best in the retail sector as we are driving robust same-store-sales growth, record-level new-unit development and excellent returns. In fact, we fully expect in 2008, for the eighth straight year, to open at least 1,000 new restaurants outside the U.S., reinforcing our position as the leading international retail developer. While our U.S. profits are being challenged by significant commodity pressure, we achieved 3% system same-store-sales growth, and we remain confident in the steps we are taking to position the U.S. brands for sustainable growth. Importantly, we continue to return significant cash to our shareholders. During the first quarter, we repurchased $1 billion of our shares at a price we believe created significant shareholder value. Overall, this quarter again highlighted the power of our global portfolio, and on the strength of our first-quarter results, we are raising our full-year EPS forecast to 11% growth, or $1.87 per share excluding special items.
"Shareholders should expect us to continue building consistent value by differentiating our portfolio of brands and driving profitable global expansion through our four key strategies that make us not your ordinary restaurant company: building leading brands in China in every significant category; driving aggressive international expansion and building strong brands everywhere; dramatically improving U.S. brand positions, consistency and returns; and driving industry-leading, long-term shareholder and franchisee value."
CHINA DIVISION COMMENTS
-- Mainland China delivered an outstanding same-store-sales growth of 12%, lapping a strong 9% last year.
-- We opened 88 new units in mainland China, exceeding last year's development pace and further strengthening our leadership position in China's rapidly growing restaurant category.
-- Restaurant margin percentage declined due primarily to high food cost inflation. Commodity costs increased by approximately $11 million versus last year.
-- Foreign currency conversion benefited operating profit by $8 million.
YRI DIVISION COMMENTS
-- YRI achieved same-store-sales growth of 5%, lapping 7% from 2007.
-- We opened 158 new restaurants in our YRI Division, 96% of which were opened by our franchise partners. YRI continues to build an enviable development track record.
-- Franchise fees, a key driver of our high-return business, grew by 20% and is expected to reach approximately $650 million for the full year.
-- The strength of foreign currencies versus the U.S. dollar benefited operating profit by $7 million.
-- The loss of a VAT exemption in our Mexico business adversely impacted restaurant margin percentage by approximately 1 percentage point and operating profit by $5 million during the first quarter. As previously communicated, this loss is expected to negatively impact restaurant margin percentage by 1.2 percentage points and operating profit by more than $30 million for the full-year 2008.
U.S. BUSINESS COMMENTS
-- The U.S. business delivered same-store-sales growth of 3%, reversing last year's negative trend.
-- Restaurant margin percentage and operating profit declined due largely to significant commodity inflation (cheese, wheat and chicken costs). Overall, commodity costs increased $25 million compared to prior year.
-- As part of our long-term plan to transform our U.S. business -- which includes building permanent sales layers, investing in brand repositioning, refranchising and restructuring -- we previously guided that we are expanding our refranchising of U.S. company-owned restaurants, with company ownership to potentially reach below 10% by year-end 2010. We remain confident in our ability to achieve this goal, and expect subsequent quarters' activity in 2008 to be higher than the relatively low rate during the first quarter.
SHAREHOLDER PAYOUTS
During the first quarter of 2008, we purchased 27.7 million shares at an average price of $35.39, or a total of $981 million, a quarterly record.
For 2008, we expect to return over $2 billion to shareholders through both dividends and significant share buybacks.
Q2 2008 UPDATE
-- We expect a special item loss in the range of $0.01 to $0.03 per share due to the continuation of our U.S. business transformation, including refranchising losses and restructuring charges.
-- Tax rate is likely to be significantly higher than the second-quarter 2007 tax rate of 21.5%
-- U.S. restaurant margin will be adversely impacted by continued higher commodity costs (at a level similar to first-quarter's inflation) and dramatically higher insurance expenses.
YUM! ONGOING EARNINGS GROWTH MODEL
-- China Division operating-profit growth of 20%. This growth is driven largely by new-unit development in mainland China. Our key metric for mainland China is system-sales growth with an annual target of +20% driven by at least 425 new-restaurant openings.
-- YRI Division operating-profit growth of 10%. This growth is driven mainly by new-unit development, measured by system-sales growth of at least 5% (3% to 4% unit growth and 2% to 3% same-store-sales growth) including 750 new-restaurant openings.
-- U.S. operating-profit growth of 5% with same-store-sales growth of 2% to 3% and leverage of the G&A infrastructure.
-- EPS growth of at least 10%. This reflects additional benefit from reduction in shares outstanding due to substantial share buybacks.
Tuesday, April 22, 2008
Top 10 Sub-Sectors YTD
The ten leading market groups in the ten Dow Jones sectors for 2008 are:
1) Platinum and Precious Metals--81.16%
2) Transportation Services-------26.04%
3) Coal-------------------------22.03%
4) Railroads---------------------20.98%
5) Steel-------------------------19.90%
6) Home Construction------------18.03%
7) Oil Exploration&Production-----16.41%
8) Trucking----------------------14.12%
9) Specialty Chemicals------------12.31%
10) Oil Equipment&Services-------9.84%
1) Platinum and Precious Metals--81.16%
2) Transportation Services-------26.04%
3) Coal-------------------------22.03%
4) Railroads---------------------20.98%
5) Steel-------------------------19.90%
6) Home Construction------------18.03%
7) Oil Exploration&Production-----16.41%
8) Trucking----------------------14.12%
9) Specialty Chemicals------------12.31%
10) Oil Equipment&Services-------9.84%
AT&T Earnings
Top US phone company AT&T reported a rise in quarterly profit led by strong growth in its wireless business, although traditional phone subscriptions fell. Toby Jorrin / AP
AT&T's first-quarter profit rose to $3.46 billion, or 57 cents per share, from $2.85 billion, or 45 cents a share in the same quarter a year earlier. Profit before items, such as merger-related costs and severance charges for recently announced job cuts, totaled 74 cents, matching the average Wall Street estimate as compiled by Reuters Estimates.
Quarterly revenue rose 6.1 percent to $30.7 billion, compared with the Reuters estimate of $30.6 billion.
The company has been banking on mobile phones for growth as traditional home phone users decline. Primary retail consumer access lines fell 6.2 percent year-on-year.
It is also selling high-speed Internet and video services to retain customers and compete with cable service providers.
The company said high-speed Internet connections among its consumer and business customers rose 13.9 percent from a year earlier to 14.6 million.
Subscribers to its advanced, U-verse TV service rose to 379,000, a net gain of 148,000 for the quarter, and the company said it was on track to sign up more than 1 million by the end of 2008.
AT&T was formed through a series of mergers including SBC and BellSouth, and analysts have said savings from those mergers has also been boosting its earnings growth in the past few years
AT&T's first-quarter profit rose to $3.46 billion, or 57 cents per share, from $2.85 billion, or 45 cents a share in the same quarter a year earlier. Profit before items, such as merger-related costs and severance charges for recently announced job cuts, totaled 74 cents, matching the average Wall Street estimate as compiled by Reuters Estimates.
Quarterly revenue rose 6.1 percent to $30.7 billion, compared with the Reuters estimate of $30.6 billion.
The company has been banking on mobile phones for growth as traditional home phone users decline. Primary retail consumer access lines fell 6.2 percent year-on-year.
It is also selling high-speed Internet and video services to retain customers and compete with cable service providers.
The company said high-speed Internet connections among its consumer and business customers rose 13.9 percent from a year earlier to 14.6 million.
Subscribers to its advanced, U-verse TV service rose to 379,000, a net gain of 148,000 for the quarter, and the company said it was on track to sign up more than 1 million by the end of 2008.
AT&T was formed through a series of mergers including SBC and BellSouth, and analysts have said savings from those mergers has also been boosting its earnings growth in the past few years
Business Week's No. 9 - Abercrombie&Fitch
No. 9: Abercrombie & Fitch
Industry: Apparel Retail Sales: $3.7 billion
Net Income: $475.7 million
Teen fashions may be fickle, but Abercrombie & Fitch's (ANF) financial results are not. The New Albany (Ohio) retailer has posted 16 years of earnings increases, including a 9% gain in the fourth quarter of 2007. Now the challenge for CEO Michael Jeffries is, can he manage his growing stable of retail brands? Besides Abercrombie, there's lower-priced Hollister; Ruehl No. 925, aimed at post-college shoppers; and the newest entrant, Gilly Hicks lingerie stores. But rivals Limited and Gap have struggled with similar multi-brand strategies. Investors are waiting for results. Over the past year, shares have been flat.
Industry: Apparel Retail Sales: $3.7 billion
Net Income: $475.7 million
Teen fashions may be fickle, but Abercrombie & Fitch's (ANF) financial results are not. The New Albany (Ohio) retailer has posted 16 years of earnings increases, including a 9% gain in the fourth quarter of 2007. Now the challenge for CEO Michael Jeffries is, can he manage his growing stable of retail brands? Besides Abercrombie, there's lower-priced Hollister; Ruehl No. 925, aimed at post-college shoppers; and the newest entrant, Gilly Hicks lingerie stores. But rivals Limited and Gap have struggled with similar multi-brand strategies. Investors are waiting for results. Over the past year, shares have been flat.
Monday, April 21, 2008
UBS Says Yum Is Yummy
YUM-BRANDS
Buy -- Price 37.47 on April 14 by UBS Securities
We've trimmed our 1Q08 [estimated] and 2008E EPS by 1 cent each, due to unfavorable weather, ongoing commodity inflation [and] weakening consumer confidence (important for pizza segment) ... partly offset by greater-than-expected currency boost and solid momentum from Taco Bell versus easy "07 comps. Ongoing inflation and deteriorating consumer confidence could limit upside to our roughly 5% U.S. profit-growth estimate for "08... . We forecast 22% ... profit growth in China ... in 1Q (5% currency lift). We use 19.5 times our "09E EPS to get 43 target, implying 15% stock upside potential. Market cap: $22 billion.
Buy -- Price 37.47 on April 14 by UBS Securities
We've trimmed our 1Q08 [estimated] and 2008E EPS by 1 cent each, due to unfavorable weather, ongoing commodity inflation [and] weakening consumer confidence (important for pizza segment) ... partly offset by greater-than-expected currency boost and solid momentum from Taco Bell versus easy "07 comps. Ongoing inflation and deteriorating consumer confidence could limit upside to our roughly 5% U.S. profit-growth estimate for "08... . We forecast 22% ... profit growth in China ... in 1Q (5% currency lift). We use 19.5 times our "09E EPS to get 43 target, implying 15% stock upside potential. Market cap: $22 billion.
Business Week's No. 8 - BJ Services
No. 8: BJ Services
Industry: EnergySales: $4.9 billion
Net Income: $718.7 million
Oil and natural gas keep getting harder to find, and that's fine by this Houston firm. BJ Services (BJS) specializes in getting more crude out of tight rock formations and other unconventional spots. Its engineers and field workers use tricks such as pumping sand, chemicals, and cement into wells. Thanks to high oil and gas prices, the total number of working rigs in the U.S. has shot up from a low of 600 in 1999 to more than 1,700 today. BJ has seen profits gain fourfold over 2003 levels. Chief Executive J.W. Stewart, an industry vet, is taking advantage of the boom to up his investment in new equipment, spending $700 million in 2007.
Industry: EnergySales: $4.9 billion
Net Income: $718.7 million
Oil and natural gas keep getting harder to find, and that's fine by this Houston firm. BJ Services (BJS) specializes in getting more crude out of tight rock formations and other unconventional spots. Its engineers and field workers use tricks such as pumping sand, chemicals, and cement into wells. Thanks to high oil and gas prices, the total number of working rigs in the U.S. has shot up from a low of 600 in 1999 to more than 1,700 today. BJ has seen profits gain fourfold over 2003 levels. Chief Executive J.W. Stewart, an industry vet, is taking advantage of the boom to up his investment in new equipment, spending $700 million in 2007.
Big Earnings Week
This is a big earnings week and it will determine if the market goes up or down. A few of the companies reporting this week include:
Bank of America Apple
Merck Boeing
Eli Lilly UPS
AT&T Microsoft
McDonalds 3M
Wyeth Dow Chemical
Dupont Union Pacific
Bank of America Apple
Merck Boeing
Eli Lilly UPS
AT&T Microsoft
McDonalds 3M
Wyeth Dow Chemical
Dupont Union Pacific
Oil at $200 or $60
New 'super-spike' might mean $200 a barrel oil
Goldman's projections foretell persistent turbulence in energy prices
By Steve Gelsi, MarketWatch
Last update: 1:42 p.m. EST March 7, 2008
NEW YORK (MarketWatch) -- With $100-a-barrel here for now, Goldman Sachs says $200 a barrel could be a reality in the not-too-distant future in the case of a "major disruption."
Goldman on Friday also boosted by $10 the low end of its 2008-2012 projected range for crude to $60 a barrel -- significantly lower than current prices, to be sure, but a possible mark for oil if "normalized" trends return to the marketplace.
With the dollar's fall continuing and financial markets roiled by the credit crunch, commodities like oil have been drawing the fancy of increasing numbers of investors. Accordingly, Wall Street firms have been eager to adjust forecasts to incorporate fresh data on the global economy and energy supplies.
Goldman analysts Arjun Murti, Kevin Koh and Michele della Vigna said prices have advanced more quickly than Goldman had forecast back in 2005, when it predicted a range of $50 to $105 a barrel as part of its "super-spike" oil theory.
"We characterized the upper end of the band as more likely to be driven by geopolitical turmoil and that recession was a key risk to our view," the analysts said. "In fact, oil prices have reached $100 a barrel without extraordinary turmoil, and the U.S. currently appears to be in recession."
Tacking on $15 a barrel to all of its oil estimates, Goldman now sees average selling prices of $95 a barrel for 2008, $105 a barrel for 2009 and $110 a barrel for 2010. The high end of its range is now $135 a barrel -- but Goldman hinted that prices could be headed even higher.
"As the lack of supply growth and price-insulated non-OECD demand suggest a future rebound in U.S. gross domestic product growth or a major oil supply disruption could lead to $150-$200 a barrel oil prices," Goldman said.
While saying it has a bullish long-term outlook, Goldman acknowledged that oil prices could correct from recent highs.
Goldman also reiterated its view that oil prices could fall as normal market conditions return over the next four years.
"The core of our 'super-spike' view is that oil prices will keep rising until demand declines globally on a multiyear basis, resulting in the return of excess capacity and a lower cost structure," Goldman's analysts said. "Given this view, once excess capacity returns, we think prices can move sharply lower."
The analysts reiterated their "attractive" view on the European energy sector, but kept a neutral view on the Russian sector due to costs. It upgraded Transneft and Sibir Energy to neutral from sell after underperformance, and cut Imperial Energy to sell from neutral on capital-spending requirements
Goldman's projections foretell persistent turbulence in energy prices
By Steve Gelsi, MarketWatch
Last update: 1:42 p.m. EST March 7, 2008
NEW YORK (MarketWatch) -- With $100-a-barrel here for now, Goldman Sachs says $200 a barrel could be a reality in the not-too-distant future in the case of a "major disruption."
Goldman on Friday also boosted by $10 the low end of its 2008-2012 projected range for crude to $60 a barrel -- significantly lower than current prices, to be sure, but a possible mark for oil if "normalized" trends return to the marketplace.
With the dollar's fall continuing and financial markets roiled by the credit crunch, commodities like oil have been drawing the fancy of increasing numbers of investors. Accordingly, Wall Street firms have been eager to adjust forecasts to incorporate fresh data on the global economy and energy supplies.
Goldman analysts Arjun Murti, Kevin Koh and Michele della Vigna said prices have advanced more quickly than Goldman had forecast back in 2005, when it predicted a range of $50 to $105 a barrel as part of its "super-spike" oil theory.
"We characterized the upper end of the band as more likely to be driven by geopolitical turmoil and that recession was a key risk to our view," the analysts said. "In fact, oil prices have reached $100 a barrel without extraordinary turmoil, and the U.S. currently appears to be in recession."
Tacking on $15 a barrel to all of its oil estimates, Goldman now sees average selling prices of $95 a barrel for 2008, $105 a barrel for 2009 and $110 a barrel for 2010. The high end of its range is now $135 a barrel -- but Goldman hinted that prices could be headed even higher.
"As the lack of supply growth and price-insulated non-OECD demand suggest a future rebound in U.S. gross domestic product growth or a major oil supply disruption could lead to $150-$200 a barrel oil prices," Goldman said.
While saying it has a bullish long-term outlook, Goldman acknowledged that oil prices could correct from recent highs.
Goldman also reiterated its view that oil prices could fall as normal market conditions return over the next four years.
"The core of our 'super-spike' view is that oil prices will keep rising until demand declines globally on a multiyear basis, resulting in the return of excess capacity and a lower cost structure," Goldman's analysts said. "Given this view, once excess capacity returns, we think prices can move sharply lower."
The analysts reiterated their "attractive" view on the European energy sector, but kept a neutral view on the Russian sector due to costs. It upgraded Transneft and Sibir Energy to neutral from sell after underperformance, and cut Imperial Energy to sell from neutral on capital-spending requirements
Friday, April 18, 2008
The Big Citi
NEW YORK (MarketWatch) -- Citigroup Inc. reported Friday another oversized quarterly loss as the company wrote down about $12 billion of soured mortgage investments and other credit-related items while adding to reserves for further losses on consumer loans.
Citi had a net loss of $5.1 billion, or $1.02 a share, in the first quarter. This compares with a profit of $1.01 a share generated in the first three months of 2007.
It marked the second consecutive quarterly loss for Citi.
However, shares of the Dow Jones Industrial Average rose more than 5% in pre-open trading to $25.42 as the results were generally in line with the wide range of analyst setimates. Investors appeared to welcome the aggressive writedowns.
"Valuations of our subprime-related exposures in fixed-income markets and leveraged-finance assets have further declined and credit costs in our consumer-lending businesses have increased," CEO Vikram Pandit said in a press release.
Reiterating comments he made to the Financial Times newspaper on Thursday, Pandit promised analysts and investors in Friday's release that: "As we move into the second quarter and beyond, we will continue to divest non-strategic assets and allocate capital to the products and regions that will drive increased revenues, enhance the value of our franchise, and ultimately, maximize shareholder value."
Pre-tax write-downs and credit costs on subprime-related direct exposures totaled $6 billion.
Citigroup also announced write-downs of $3.1 billion on funded and unfunded highly leveraged finance commitments, a downward credit value adjustment of $1.5 billion related to exposure to monoline insurers, write-downs of $1.5 billion on auction-rate securities inventory, and a $3.1 billion increase in credit costs in its global consumer business.
First-quarter revenue fell 48%, to $13.22 billion. Analysts polled by Thomson First Call had expected a loss of 95 cents a share, on revenue of $12.8 billion.
Citigroup said it trimmed its credit exposure to direct subprime securities in the first quarter to a little more than $29.1 billion from $37.3 billion at the end of 2007.
At the end of the first quarter, Citigroup said it had $6.4 billion of gross lending and structuring exposures.
The bank's U.S. consumer buisness generated 3% revenue growth for the latest quarter, aided by gains from the sale of shares in MasterCard Inc., which rolled out a successful initial public offering recently.
Revenue grew 3% due to a 4% increase in average deposits, a 9% increase in average managed loans and a $349 million pre-tax gain on Visa shares, offset by lower securitization results in cards, Citigroup said.
Excluding the gain on Visa shares and a $161 million pre-tax gain on the sale of MasterCard shares in the first quarter of 2007, revenue was 1% higher. Expenses rose 6% at the unit, while credit costs increased by $2.3 billion.
Higher delinquencies
The bank cited higher delinquencies on mortgages, unsecured personal loans, credit cards and auto loans.
Meanwhile, Citigroup's alternative investments business posted a loss of $509 million in the first quarter, and had revenue of negative $358 million as proprietary trading tanked and management took mark-to-market losses on its structured investment vehicles.
"The net loss was driven by the lower revenues and a $202 million write-down of the multi-strategy hedge-fund intangible asset related to Old Lane," Citigroup said.
Greg Morcroft is MarketWatch's financial editor in New York.
Citi had a net loss of $5.1 billion, or $1.02 a share, in the first quarter. This compares with a profit of $1.01 a share generated in the first three months of 2007.
It marked the second consecutive quarterly loss for Citi.
However, shares of the Dow Jones Industrial Average rose more than 5% in pre-open trading to $25.42 as the results were generally in line with the wide range of analyst setimates. Investors appeared to welcome the aggressive writedowns.
"Valuations of our subprime-related exposures in fixed-income markets and leveraged-finance assets have further declined and credit costs in our consumer-lending businesses have increased," CEO Vikram Pandit said in a press release.
Reiterating comments he made to the Financial Times newspaper on Thursday, Pandit promised analysts and investors in Friday's release that: "As we move into the second quarter and beyond, we will continue to divest non-strategic assets and allocate capital to the products and regions that will drive increased revenues, enhance the value of our franchise, and ultimately, maximize shareholder value."
Pre-tax write-downs and credit costs on subprime-related direct exposures totaled $6 billion.
Citigroup also announced write-downs of $3.1 billion on funded and unfunded highly leveraged finance commitments, a downward credit value adjustment of $1.5 billion related to exposure to monoline insurers, write-downs of $1.5 billion on auction-rate securities inventory, and a $3.1 billion increase in credit costs in its global consumer business.
First-quarter revenue fell 48%, to $13.22 billion. Analysts polled by Thomson First Call had expected a loss of 95 cents a share, on revenue of $12.8 billion.
Citigroup said it trimmed its credit exposure to direct subprime securities in the first quarter to a little more than $29.1 billion from $37.3 billion at the end of 2007.
At the end of the first quarter, Citigroup said it had $6.4 billion of gross lending and structuring exposures.
The bank's U.S. consumer buisness generated 3% revenue growth for the latest quarter, aided by gains from the sale of shares in MasterCard Inc., which rolled out a successful initial public offering recently.
Revenue grew 3% due to a 4% increase in average deposits, a 9% increase in average managed loans and a $349 million pre-tax gain on Visa shares, offset by lower securitization results in cards, Citigroup said.
Excluding the gain on Visa shares and a $161 million pre-tax gain on the sale of MasterCard shares in the first quarter of 2007, revenue was 1% higher. Expenses rose 6% at the unit, while credit costs increased by $2.3 billion.
Higher delinquencies
The bank cited higher delinquencies on mortgages, unsecured personal loans, credit cards and auto loans.
Meanwhile, Citigroup's alternative investments business posted a loss of $509 million in the first quarter, and had revenue of negative $358 million as proprietary trading tanked and management took mark-to-market losses on its structured investment vehicles.
"The net loss was driven by the lower revenues and a $202 million write-down of the multi-strategy hedge-fund intangible asset related to Old Lane," Citigroup said.
Greg Morcroft is MarketWatch's financial editor in New York.
Thursday, April 17, 2008
Diluted Earnings Definition
From Investopedia
A performance metric used to gauge the quality of a company's earnings per share (EPS) if all convertible securities were exercised. Convertible securities refers to all outstanding convertible preferred shares, convertible debentures, stock options (primarily employee based) and warrants. Unless the company has no additional potential shares outstanding (a relatively rare circumstance) the diluted EPS will always be lower than the simple EPS.
Remember that earnings per share is calculated by dividing the company's profit by the number of shares outstanding. Warrants, stock options, convertible preferred shares, etc. all serve to increasing the number of shares outstanding. As a shareholder, this is a bad thing. If the denominator in the equation (shares outstanding) is larger, the earnings per share is reduced (the same profit figure is used in the numerator). This is a conservative metric because it indicates somewhat of a worst-case scenario. On one hand, everyone holding options, warrants, convertible preferred shares, etc. is unlikely convert their shares all at once. At the same time, if things go well, there is a good chance that all options and convertibles will be converted into common stock. A big difference in a company's EPS and diluted EPS can indicate high potential dilution for the company's shares, an attribute almost unanimously ostracized by analysts and investors alike.
A performance metric used to gauge the quality of a company's earnings per share (EPS) if all convertible securities were exercised. Convertible securities refers to all outstanding convertible preferred shares, convertible debentures, stock options (primarily employee based) and warrants. Unless the company has no additional potential shares outstanding (a relatively rare circumstance) the diluted EPS will always be lower than the simple EPS.
Remember that earnings per share is calculated by dividing the company's profit by the number of shares outstanding. Warrants, stock options, convertible preferred shares, etc. all serve to increasing the number of shares outstanding. As a shareholder, this is a bad thing. If the denominator in the equation (shares outstanding) is larger, the earnings per share is reduced (the same profit figure is used in the numerator). This is a conservative metric because it indicates somewhat of a worst-case scenario. On one hand, everyone holding options, warrants, convertible preferred shares, etc. is unlikely convert their shares all at once. At the same time, if things go well, there is a good chance that all options and convertibles will be converted into common stock. A big difference in a company's EPS and diluted EPS can indicate high potential dilution for the company's shares, an attribute almost unanimously ostracized by analysts and investors alike.
Harley The HOG Reports
Harley-Davidson reports first quarter results Milwaukee, Wis. (April 17, 2008) - Harley-Davidson, Inc. (NYSE: HOG) today announced its results for the first quarter ended March 30, 2008. Revenue for the quarter was $1.31 billion compared to $1.18 billion in the year-ago quarter, a 10.8 percent increase. Net income for the quarter was $187.6 million compared to $192.3 million, a decrease of 2.5 percent compared to the first quarter of 2007. First quarter diluted earnings per share (EPS) were $0.79, a 6.8 percent increase compared to last year’s $0.74.
“With growing weakness in the economy, U.S. retail sales of Harley-Davidson® motorcycles were down 12.8 percent in the first quarter. Although these retail results are disappointing, Harley-Davidson’s U.S. dealers outperformed the heavyweight motorcycle industry, which was down 14.0 percent,” said Jim Ziemer, Chief Executive Officer of Harley-Davidson, Inc.
“We’ve said on a number of occasions that we would closely monitor the retail environment and regularly assess our wholesale shipment plans, and we remain committed to shipping fewer Harley-Davidson motorcycles to our worldwide dealer network than we expect they will sell this year. In view of U.S. retail trends and uncertainty about the future of the economy, we now plan to ship 23,000 to 27,000 fewer Harley-Davidson motorcycles in 2008 than we shipped in 2007, resulting in total planned 2008 shipments between 303,500 and 307,500 units,” Ziemer said.
“We will achieve the shipment reduction through temporary plant shutdowns and adjustments to daily production rates. This will result in a decrease of about 370 unionized employees over the next several months. Our management group and union leaders will work together to implement this reduction.”
“The Company will also be reducing the non-production workforce by about 360 jobs. We believe these actions will better position the Company for a business environment that we expect to continue to be challenging,” Ziemer said.
“Harley-Davidson is fortunate to be dealing with the current economic environment from a position of financial strength. We are a great company with an exceptionally powerful brand. We are optimistic about our long term business prospects and we will continue to invest in marketing, product development and our international business to drive future growth.”
“For 2008, the Company now expects earnings per share to decrease between 15 and 20 percent compared to 2007 resulting in expected earnings per share of $3.00 to $3.18,” said Ziemer. This supersedes all previous guidance on earnings per share and other measures.
The Company expects to ship between 76,000 and 80,000 Harley-Davidson motorcycles in the second quarter of 2008.
Motorcycles and Related Products Segment – First Quarter Results Revenue from Harley-Davidson motorcycles was $1.02 billion, an increase of $125.7 million or 14.1 percent versus the same period last year. Shipments of Harley-Davidson motorcycles totaled 71,868 units, an increase of 4,107 units or 6.1 percent compared to last year’s first quarter. Shipments in the first quarter of 2007 were affected by a strike at Harley-Davidson’s production plants in York, Pa., that resulted in approximately four weeks of lost production at the facilities.
Revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $181.9 million, a decrease of $6.3 million or 3.3 percent versus the year-ago quarter. Revenue from General Merchandise, which consists of MotorClothes® apparel and collectibles, totaled $84.0 million, an increase of $7.9 million or 10.4 percent over the year-ago quarter.
Gross margin for the first quarter of 2008 was 36.4 percent of revenue compared to 35.9 percent for the first quarter last year. Operating margin remained unchanged at 20.0 percent in the first quarter of 2008 compared to the prior year.
Motorcycle Retail Sales Data - During the first quarter, worldwide retail sales of Harley-Davidson motorcycles decreased 5.6 percent compared to the prior year quarter. In the U.S., retail sales of Harley-Davidson motorcycles decreased 12.8 percent for the quarter while the heavyweight motorcycle industry in the U.S. decreased 14.0 percent.
Retail sales of Harley-Davidson motorcycles increased 16.8 percent in international markets during the first quarter of 2008 compared to the first quarter of 2007. First quarter retail sales increased 31.1 percent in Canada; the Europe Region was up 7.8 percent; the Asia Pacific Region was up 19.5 percent; and the Latin America Region was up 53.3 percent.
Data is listed in the accompanying tables.
Financial Services Segment - Harley-Davidson Financial Services (HDFS) reported first quarter operating income of $34.9 million, a decrease of $24.0 million or 40.8 percent compared to the year-ago quarter. The decrease is primarily due to a reduction in income from securitization.
Income Tax Rate - The Company's first quarter effective income tax rate was 36.0 percent compared to 35.5 percent in the same quarter last year. This increase was due to the expiration of the federal research and development tax credit as of December 31, 2007. Assuming the retroactive reinstatement of this tax credit, the Company expects its full year effective tax rate in 2008 will be 35.5 percent.
Cash Flow - Cash and marketable securities totaled $333.2 million as of March 30, 2008. Cash flow from operations was $146.8 million and capital expenditures were $43.2 million during the first quarter of 2008. For the full year of 2008, capital expenditures are now expected to be between $235 million and $250 million.
Stock Repurchase - The Company repurchased 2.6 million shares of its common stock at a cost of $100.1 million during the first quarter of 2008. On March 30, 2008, the Company had 236.5 million shares of common stock outstanding.
As of March 30, 2008, there were 20.5 million shares remaining on two board-approved share repurchase authorizations. An additional board-approved share repurchase authorization is in place to offset option exercises.
The silver lining in this report are the huge increase in international sales. (Tim)
“With growing weakness in the economy, U.S. retail sales of Harley-Davidson® motorcycles were down 12.8 percent in the first quarter. Although these retail results are disappointing, Harley-Davidson’s U.S. dealers outperformed the heavyweight motorcycle industry, which was down 14.0 percent,” said Jim Ziemer, Chief Executive Officer of Harley-Davidson, Inc.
“We’ve said on a number of occasions that we would closely monitor the retail environment and regularly assess our wholesale shipment plans, and we remain committed to shipping fewer Harley-Davidson motorcycles to our worldwide dealer network than we expect they will sell this year. In view of U.S. retail trends and uncertainty about the future of the economy, we now plan to ship 23,000 to 27,000 fewer Harley-Davidson motorcycles in 2008 than we shipped in 2007, resulting in total planned 2008 shipments between 303,500 and 307,500 units,” Ziemer said.
“We will achieve the shipment reduction through temporary plant shutdowns and adjustments to daily production rates. This will result in a decrease of about 370 unionized employees over the next several months. Our management group and union leaders will work together to implement this reduction.”
“The Company will also be reducing the non-production workforce by about 360 jobs. We believe these actions will better position the Company for a business environment that we expect to continue to be challenging,” Ziemer said.
“Harley-Davidson is fortunate to be dealing with the current economic environment from a position of financial strength. We are a great company with an exceptionally powerful brand. We are optimistic about our long term business prospects and we will continue to invest in marketing, product development and our international business to drive future growth.”
“For 2008, the Company now expects earnings per share to decrease between 15 and 20 percent compared to 2007 resulting in expected earnings per share of $3.00 to $3.18,” said Ziemer. This supersedes all previous guidance on earnings per share and other measures.
The Company expects to ship between 76,000 and 80,000 Harley-Davidson motorcycles in the second quarter of 2008.
Motorcycles and Related Products Segment – First Quarter Results Revenue from Harley-Davidson motorcycles was $1.02 billion, an increase of $125.7 million or 14.1 percent versus the same period last year. Shipments of Harley-Davidson motorcycles totaled 71,868 units, an increase of 4,107 units or 6.1 percent compared to last year’s first quarter. Shipments in the first quarter of 2007 were affected by a strike at Harley-Davidson’s production plants in York, Pa., that resulted in approximately four weeks of lost production at the facilities.
Revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $181.9 million, a decrease of $6.3 million or 3.3 percent versus the year-ago quarter. Revenue from General Merchandise, which consists of MotorClothes® apparel and collectibles, totaled $84.0 million, an increase of $7.9 million or 10.4 percent over the year-ago quarter.
Gross margin for the first quarter of 2008 was 36.4 percent of revenue compared to 35.9 percent for the first quarter last year. Operating margin remained unchanged at 20.0 percent in the first quarter of 2008 compared to the prior year.
Motorcycle Retail Sales Data - During the first quarter, worldwide retail sales of Harley-Davidson motorcycles decreased 5.6 percent compared to the prior year quarter. In the U.S., retail sales of Harley-Davidson motorcycles decreased 12.8 percent for the quarter while the heavyweight motorcycle industry in the U.S. decreased 14.0 percent.
Retail sales of Harley-Davidson motorcycles increased 16.8 percent in international markets during the first quarter of 2008 compared to the first quarter of 2007. First quarter retail sales increased 31.1 percent in Canada; the Europe Region was up 7.8 percent; the Asia Pacific Region was up 19.5 percent; and the Latin America Region was up 53.3 percent.
Data is listed in the accompanying tables.
Financial Services Segment - Harley-Davidson Financial Services (HDFS) reported first quarter operating income of $34.9 million, a decrease of $24.0 million or 40.8 percent compared to the year-ago quarter. The decrease is primarily due to a reduction in income from securitization.
Income Tax Rate - The Company's first quarter effective income tax rate was 36.0 percent compared to 35.5 percent in the same quarter last year. This increase was due to the expiration of the federal research and development tax credit as of December 31, 2007. Assuming the retroactive reinstatement of this tax credit, the Company expects its full year effective tax rate in 2008 will be 35.5 percent.
Cash Flow - Cash and marketable securities totaled $333.2 million as of March 30, 2008. Cash flow from operations was $146.8 million and capital expenditures were $43.2 million during the first quarter of 2008. For the full year of 2008, capital expenditures are now expected to be between $235 million and $250 million.
Stock Repurchase - The Company repurchased 2.6 million shares of its common stock at a cost of $100.1 million during the first quarter of 2008. On March 30, 2008, the Company had 236.5 million shares of common stock outstanding.
As of March 30, 2008, there were 20.5 million shares remaining on two board-approved share repurchase authorizations. An additional board-approved share repurchase authorization is in place to offset option exercises.
The silver lining in this report are the huge increase in international sales. (Tim)
Business Week's No. 7 - Colgate-Palmolive
No. 7: Colgate-Palmolive
Industry: Consumer StaplesSales: $13.8 billion
Net Income: $1.7 billion
Toothpaste and pet food have had a rough year, with counterfeit and contaminated products grabbing headlines in 2007. Yet Colgate-Palmolive (CL), the New York company whose goods were implicated in both fiascos, has flourished. The weak dollar helped growth overseas. New CEO Ian Cook deserves credit, too. In 2007, sales rose 12.5%, to $13.8 billion, with record market share in several categories. Colgate offset higher ingredient costs by cutting overhead and raising prices. Analysts warn that Cook needs to keep new products flowing as overseas markets mature.
Industry: Consumer StaplesSales: $13.8 billion
Net Income: $1.7 billion
Toothpaste and pet food have had a rough year, with counterfeit and contaminated products grabbing headlines in 2007. Yet Colgate-Palmolive (CL), the New York company whose goods were implicated in both fiascos, has flourished. The weak dollar helped growth overseas. New CEO Ian Cook deserves credit, too. In 2007, sales rose 12.5%, to $13.8 billion, with record market share in several categories. Colgate offset higher ingredient costs by cutting overhead and raising prices. Analysts warn that Cook needs to keep new products flowing as overseas markets mature.
The HOG Gets Trimmed
Hefty cutbacks at Harley-Davidson
A weak economy has Harley-Davidson (HOG) cutting back again. The Milwaukee-based motorcycle manufacturer said Thursday it will cut 730 jobs as it trims output to adjust for a downturn in demand. The company also slashed its 2008 earnings forecast, saying it expects to ship some 25,000 fewer bikes this year than it did last year.
“With growing weakness in the economy, U.S. retail sales of Harley-Davidson motorcycles were down 12.8% in the first quarter,” said CEO Jim Ziemer. “Although these retail results are disappointing, Harley-Davidson’s U.S. dealers outperformed the heavyweight motorcycle industry, which was down 14%.”
For the first quarter, Harley was able to weather the storm. Harley made $188 million, or 79 cents a share, for the quarter ended March 31, compared with the year-ago $192 million, or 74 cents a share. Revenue rose 11% from a year ago to $1.31 billion. Those numbers beat the expectations of Wall Street analysts, who were looking for a 77-cent profit on revenue of $1.23 billion.
But the company said it now expects earnings for 2008 to fall to $3 to $3.18 a share from last year’s $3.74 a share. Back in January, Harley had forecast 4% to 7% growth. Shares fell 50 cents to $36.29 in pre-market trading.
A weak economy has Harley-Davidson (HOG) cutting back again. The Milwaukee-based motorcycle manufacturer said Thursday it will cut 730 jobs as it trims output to adjust for a downturn in demand. The company also slashed its 2008 earnings forecast, saying it expects to ship some 25,000 fewer bikes this year than it did last year.
“With growing weakness in the economy, U.S. retail sales of Harley-Davidson motorcycles were down 12.8% in the first quarter,” said CEO Jim Ziemer. “Although these retail results are disappointing, Harley-Davidson’s U.S. dealers outperformed the heavyweight motorcycle industry, which was down 14%.”
For the first quarter, Harley was able to weather the storm. Harley made $188 million, or 79 cents a share, for the quarter ended March 31, compared with the year-ago $192 million, or 74 cents a share. Revenue rose 11% from a year ago to $1.31 billion. Those numbers beat the expectations of Wall Street analysts, who were looking for a 77-cent profit on revenue of $1.23 billion.
But the company said it now expects earnings for 2008 to fall to $3 to $3.18 a share from last year’s $3.74 a share. Back in January, Harley had forecast 4% to 7% growth. Shares fell 50 cents to $36.29 in pre-market trading.
Wednesday, April 16, 2008
Roth IRAs For For Seasoned Citizens
I recently continued to invest in Roth IRAs. Since I'm 59 years young I was able to invest $5,000.00 for tax year 2007 and $6,000.00 for tax year 2008. Money was invested in Morningstar 5* rated funds.
Contributions are made in after-tax dollars. No deductions allowed.
Withdrawals of contributions and earnings are income tax free if the account is held for 5 years and withdrawn due to:
attaining age 59 1/2
first time home purchase ($10,000 life time limit)
disability
death
Contributions may be withdrawn at anytime free of tax and penalty. Contribution limits for tax years 2009 and beyond will be adjusted according to inflation.
Tim
Contributions are made in after-tax dollars. No deductions allowed.
Withdrawals of contributions and earnings are income tax free if the account is held for 5 years and withdrawn due to:
attaining age 59 1/2
first time home purchase ($10,000 life time limit)
disability
death
Contributions may be withdrawn at anytime free of tax and penalty. Contribution limits for tax years 2009 and beyond will be adjusted according to inflation.
Tim
Roth IRA Strategies
Why You Need a Roth IRA
With this indispensable savings tool, your money grows tax-free, you can invest in almost anything and you get several cool perks.
By Erin Burt
March 9, 2006
This article was updated in 2008.
One of the smartest money moves a young person can make is to invest in a Roth IRA. Follow the rules and any money you put into one of these retirement-savings accounts grows absolutely tax free -- you won't owe Uncle Sam a dime as you let your savings accumulate, or when you cash it out in retirement. Plus, an IRA is more flexible than a 401(k) and other retirement plans because you can invest it in almost whatever you want, from stocks and mutual funds to bonds and real estate.
If you haven't yet opened this gift from Uncle Sam, do it now. You have until your tax return deadline to set up and make contributions for the previous tax year. The government sets a limit on how much you can contribute to a Roth. That limit was $4,000 in 2007, and it rose to $5,000 in 2008. That means if you act before April 15, you can invest $4,000 right now to count for last year, giving you a solid start to your savings. And you have until next year's tax deadline to kick in your $5,000 for 2008.
The idea of saving on your taxes may seem a tad obscure, but it really can pay off big. If a 25-year-old contributes $5,000 each year until she retires and makes an average annual return of 8% on her investment, she'll have $1.4 million saved by the time she retires at age 65. And the money is all hers -- she won't have to give the IRS a cent of it if she waits until retirement to cash out. (Use this calculator to see how far your savings can take you. Enter "0" in the tax rate boxes to simulate the tax-exempt status of a Roth IRA.)
If that same 25-year-old invested that same $5,000 a year in a regular taxable account earning the same 8% return, she'd only have about $1 million after 40 years if her earnings were taxed at 15% federal. That's more than one-fourth less money than if she'd gone with the Roth. If she owed state taxes on the money too, she'd be down even more.
Roth rules
As with any government gift, the Roth IRA comes with a few strings attached. First, you can contribute to a Roth only if you have earned income from a job. Say you're in school, you're not working and you have a little extra money left over from your student loan or your parents gave you money. You cannot put it in a Roth. Also, you cannot save more than you made. So if you worked a summer job and made only $3,000, the most you can contribute to a Roth is $3,000.
It's also possible to make too much. You can contribute the full $5,000 in 2008 as long as your income falls below $101,000 if you're single, and $159,000 if you're married filing a joint tax return. The contribution limit is then phased out incrementally if you make between $101,000 and $116,000 (single) or $159,000 and $169,000 (married-joint). Make more than those upper limits, and you don't have to cash out the account -- you simply cannot contribute any more money to a Roth IRA.
If you expect to exceed the Roth income limits at some point during your career, you should open a Roth now while you're young and your salary is low enough to get in. If a 25-year-old saved $5,000 a year for only five years, then didn't contribute another dime for the next 35 years because his income was too high, that money would continue to grow -- to nearly $481,000 by the time he turned 65. That alone certainly won't be enough to retire on, but it'll be a nice tax-free bonus to his other retirement savings.
With this indispensable savings tool, your money grows tax-free, you can invest in almost anything and you get several cool perks.
By Erin Burt
March 9, 2006
This article was updated in 2008.
One of the smartest money moves a young person can make is to invest in a Roth IRA. Follow the rules and any money you put into one of these retirement-savings accounts grows absolutely tax free -- you won't owe Uncle Sam a dime as you let your savings accumulate, or when you cash it out in retirement. Plus, an IRA is more flexible than a 401(k) and other retirement plans because you can invest it in almost whatever you want, from stocks and mutual funds to bonds and real estate.
If you haven't yet opened this gift from Uncle Sam, do it now. You have until your tax return deadline to set up and make contributions for the previous tax year. The government sets a limit on how much you can contribute to a Roth. That limit was $4,000 in 2007, and it rose to $5,000 in 2008. That means if you act before April 15, you can invest $4,000 right now to count for last year, giving you a solid start to your savings. And you have until next year's tax deadline to kick in your $5,000 for 2008.
The idea of saving on your taxes may seem a tad obscure, but it really can pay off big. If a 25-year-old contributes $5,000 each year until she retires and makes an average annual return of 8% on her investment, she'll have $1.4 million saved by the time she retires at age 65. And the money is all hers -- she won't have to give the IRS a cent of it if she waits until retirement to cash out. (Use this calculator to see how far your savings can take you. Enter "0" in the tax rate boxes to simulate the tax-exempt status of a Roth IRA.)
If that same 25-year-old invested that same $5,000 a year in a regular taxable account earning the same 8% return, she'd only have about $1 million after 40 years if her earnings were taxed at 15% federal. That's more than one-fourth less money than if she'd gone with the Roth. If she owed state taxes on the money too, she'd be down even more.
Roth rules
As with any government gift, the Roth IRA comes with a few strings attached. First, you can contribute to a Roth only if you have earned income from a job. Say you're in school, you're not working and you have a little extra money left over from your student loan or your parents gave you money. You cannot put it in a Roth. Also, you cannot save more than you made. So if you worked a summer job and made only $3,000, the most you can contribute to a Roth is $3,000.
It's also possible to make too much. You can contribute the full $5,000 in 2008 as long as your income falls below $101,000 if you're single, and $159,000 if you're married filing a joint tax return. The contribution limit is then phased out incrementally if you make between $101,000 and $116,000 (single) or $159,000 and $169,000 (married-joint). Make more than those upper limits, and you don't have to cash out the account -- you simply cannot contribute any more money to a Roth IRA.
If you expect to exceed the Roth income limits at some point during your career, you should open a Roth now while you're young and your salary is low enough to get in. If a 25-year-old saved $5,000 a year for only five years, then didn't contribute another dime for the next 35 years because his income was too high, that money would continue to grow -- to nearly $481,000 by the time he turned 65. That alone certainly won't be enough to retire on, but it'll be a nice tax-free bonus to his other retirement savings.
Bonus!
If the savings power, flexibility and tax-free status aren't enough to convince you of the Roth's virtues, Uncle Sam throws in a few extra perks, making the Roth an indispensable tool in a young adult's financial life.
- You can take money out in a pinch. Although the purpose of a Roth is to save for retirement, and your money can grow only if you leave it in the account, you can withdraw your contributions at any time, tax free and without penalty -- and you don't have to pay it back, like you do with a 401(k). Of course, it's best to leave your money in the account so you can earn more money, and you really should have a separate emergency savings account on standby, but it's nice to know the Roth is there for you if you need it. Notice we said you can take out your contributions at any time -- not your earnings. If you withdraw any of your earnings before age 59½, you'll trigger a tax bill on the money, plus you'll have to pay a 10% penalty. Ouch.
- You can tap your Roth to buy your first home. The IRS lets you cash out up to $10,000 from your Roth IRA tax- and penalty-free -- which can include earnings -- to help you achieve the American dream. However, the account must have been opened for five years. You could use tax-free money from your IRA to buy a house starting in January 2011. That $10,000 limit is per person, so couples could withdraw up to $20,000.
If you don't meet the five-year test, you still can take out the money for your home purchase, but you'll have to pay taxes on it. You won't have to pay the 10% early-withdrawal penalty, though. - You can use it to save for Junior's education. Many new parents don't know whether to save for retirement or the baby's college tuition. Hands down, retirement wins. There are loans to pay for college, but none to help fund your retirement. But starting a Roth is a great way to cover both bases, just in case. Focus on your retirement now, saving as much into a Roth as you can. And as your finances allow, consider opening a specific college-savings account for the new baby -- say, a Coverdell or 529 plan. Then, when the day comes for Junior to head off to school, you can assess whether you can afford to -- or need to -- sacrifice some of your retirement dollars to make it happen.
You can, of course, take out your contributions at any time to help pay the bill. If you dip into earnings, you'll owe taxes -- but you don't have to pay the 10% early-withdrawal penalty if you use the money for college. The Roth shouldn't be used as the sole savings vehicle for higher education, but it's nice to know you can use it if you need it.
IT Jobs Grow
Downturn Be Damned, Info Tech Jobs Surged Ahead Last Quarter
U.S. IT jobs are up 12% from a year ago, though concerns about a slowdown loom over the upbeat government data.
By Chris Murphy InformationWeek April 8, 2008 03:12 PM
U.S. information technology jobs have been growing at a steady pace for more than a year, and that continued in the first three months of this year, the latest quarterly report from the U.S. Bureau of Labor Statistics shows.
U.S. IT employment shot up more than 12% compared with one year ago, with companies adding about 376,000 IT jobs to hit 3.8 million employed. IT unemployment rose slightly to 2.6%, as the IT labor pool surged as well.
Two big surprises stand out from an analysis of the report. One, IT job growth continued, despite a growing belief that the U.S. economy's already in a recession. Second, IT unemployment rose despite the job growth -- hitting 2.6%, up from 2.1% a year ago -- as the U.S. IT labor pool grew to meet the rising demand. More than 380,000 people have joined the pool of available IT workers -- employed and unemployed -- in the past year.
These numbers are based on a quarterly report based on BLS surveys of U.S. households that breaks down employment by job categories. All the numbers cited above are averages of the past four quarters. Looking only at the most recent quarter's data, however, there's also no sign of slowdown. That shows U.S. IT employment edging past 4 million jobs for the first time. In the IT boom of 2000 and 2001, it never passed 3.5 million.
In the economy overall, the unemployment rate rose from 4.8% to 5.1% in March, and nonfarm jobs fell 232,000 in the first quarter, including a drop of 80,000 in March, the BLS reports. Construction, manufacturing, and employment services have fallen, while health care, food services, and mining added jobs, according to the BLS.
Where's the U.S. IT job growth coming from? By far the largest growth category has been computer support specialists, which leaped 41% the past year, adding 127,000 jobs. Next is network and data communication analysts (68,000 new jobs, 19% growth), computer scientists and system analysts (65,000 new jobs, 8% growth), and network/system administrators (51,000 new jobs, 31% growth). The economy also added 51,000 IT management jobs, growing 11%.
IT employment has been slowly clawing back from its low point in 2002, when employment fell below 3.3 million. This marks the fifth straight quarter that IT jobs have grown, according to the BLS surveys. IT jobs make up 7.4% of management, professional, and related occupations.
U.S. IT pros still have cause for concern. The financial services industry is one of the largest IT employers, and job losses from that sector could take a toll in the coming quarters. It's also notable that the largest job growth category -- computer support specialist -- also is among the lowest paid, with salaries around $50,000 compared with, for example, an ERP specialist's typical pay of about $90,000, according to InformationWeek's National Salary Survey.
Question - why aren't more students interested in the IT field? (Tim)
U.S. IT jobs are up 12% from a year ago, though concerns about a slowdown loom over the upbeat government data.
By Chris Murphy InformationWeek April 8, 2008 03:12 PM
U.S. information technology jobs have been growing at a steady pace for more than a year, and that continued in the first three months of this year, the latest quarterly report from the U.S. Bureau of Labor Statistics shows.
U.S. IT employment shot up more than 12% compared with one year ago, with companies adding about 376,000 IT jobs to hit 3.8 million employed. IT unemployment rose slightly to 2.6%, as the IT labor pool surged as well.
Two big surprises stand out from an analysis of the report. One, IT job growth continued, despite a growing belief that the U.S. economy's already in a recession. Second, IT unemployment rose despite the job growth -- hitting 2.6%, up from 2.1% a year ago -- as the U.S. IT labor pool grew to meet the rising demand. More than 380,000 people have joined the pool of available IT workers -- employed and unemployed -- in the past year.
These numbers are based on a quarterly report based on BLS surveys of U.S. households that breaks down employment by job categories. All the numbers cited above are averages of the past four quarters. Looking only at the most recent quarter's data, however, there's also no sign of slowdown. That shows U.S. IT employment edging past 4 million jobs for the first time. In the IT boom of 2000 and 2001, it never passed 3.5 million.
In the economy overall, the unemployment rate rose from 4.8% to 5.1% in March, and nonfarm jobs fell 232,000 in the first quarter, including a drop of 80,000 in March, the BLS reports. Construction, manufacturing, and employment services have fallen, while health care, food services, and mining added jobs, according to the BLS.
Where's the U.S. IT job growth coming from? By far the largest growth category has been computer support specialists, which leaped 41% the past year, adding 127,000 jobs. Next is network and data communication analysts (68,000 new jobs, 19% growth), computer scientists and system analysts (65,000 new jobs, 8% growth), and network/system administrators (51,000 new jobs, 31% growth). The economy also added 51,000 IT management jobs, growing 11%.
IT employment has been slowly clawing back from its low point in 2002, when employment fell below 3.3 million. This marks the fifth straight quarter that IT jobs have grown, according to the BLS surveys. IT jobs make up 7.4% of management, professional, and related occupations.
U.S. IT pros still have cause for concern. The financial services industry is one of the largest IT employers, and job losses from that sector could take a toll in the coming quarters. It's also notable that the largest job growth category -- computer support specialist -- also is among the lowest paid, with salaries around $50,000 compared with, for example, an ERP specialist's typical pay of about $90,000, according to InformationWeek's National Salary Survey.
Question - why aren't more students interested in the IT field? (Tim)
Rebate Checks Spending
The following chart shows where consumers have been spending their hard earned dollars. If this pattern continues it might indicate where consumers will spend the tax rebate that will start hitting the mail boxes inn the next few months.
If consumers continue spending on flat screen TVs then Best Buy probably would benefit from this trend. Other beneficiaries of consumer spending could be Apple, and Research In Motion. Even though spending is down on clothing I would expect a increase this summer as rebate checks hit and a new school looms. (Tim)
The Citi Comeback?
The Citi Won't Be Sleeping Forever
It's no surprise that Citigroup (C) (C) is in the doghouse with most investors. The credit crunch and subprime meltdown sank its stock to 18 in mid-March, down from 55 in May, 2007. A number of influential analysts put a "sell" on Citi, including Meredith Whitney of Oppenheimer (OPY), William Tanona of Goldman Sachs (GS), and Michael Mayo of Deutsche Bank's (DB). But quite a few equally important Street pros recommend a buy: JPMorgan Chase (JPM) Vivek Juneja, Punk Ziegel's Richard Bove, and Lehman Brothers' (LEH) Jason Goldberg. And Tom Sowanick, chief investment officer of Clearbrook Financial, which owns shares, says Citi, now up to 23.57, "should hit 45 in 12 to 24 months." True, even the bulls see more losses and writedowns ahead. "However, now is the time to snap up the depressed shares for the long term," says Sowanick. To pave the behemoth's way toward profit growth, he says, Citigroup CEO Vikram Pandit "has a free pass to focus on risk management and slash costs and clean up the balance sheet." (The bank is expected to sell $12 billion of leveraged loans and bonds to private equity groups.) JPMorgan's Juneja argues that although Citi is still under pressure for the near term and management's credibility "remains cloudy," it's attractive on its valuation and "much better footprint for long-term growth." He sees Citi (a client) earning $1.69 a share in 2008 and $3.50 in 2009, up from 71 cents in 2007.
Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
—By Gene Marcial
It's no surprise that Citigroup (C) (C) is in the doghouse with most investors. The credit crunch and subprime meltdown sank its stock to 18 in mid-March, down from 55 in May, 2007. A number of influential analysts put a "sell" on Citi, including Meredith Whitney of Oppenheimer (OPY), William Tanona of Goldman Sachs (GS), and Michael Mayo of Deutsche Bank's (DB). But quite a few equally important Street pros recommend a buy: JPMorgan Chase (JPM) Vivek Juneja, Punk Ziegel's Richard Bove, and Lehman Brothers' (LEH) Jason Goldberg. And Tom Sowanick, chief investment officer of Clearbrook Financial, which owns shares, says Citi, now up to 23.57, "should hit 45 in 12 to 24 months." True, even the bulls see more losses and writedowns ahead. "However, now is the time to snap up the depressed shares for the long term," says Sowanick. To pave the behemoth's way toward profit growth, he says, Citigroup CEO Vikram Pandit "has a free pass to focus on risk management and slash costs and clean up the balance sheet." (The bank is expected to sell $12 billion of leveraged loans and bonds to private equity groups.) JPMorgan's Juneja argues that although Citi is still under pressure for the near term and management's credibility "remains cloudy," it's attractive on its valuation and "much better footprint for long-term growth." He sees Citi (a client) earning $1.69 a share in 2008 and $3.50 in 2009, up from 71 cents in 2007.
Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
—By Gene Marcial
Tuesday, April 15, 2008
Johnson and Johnson Pops
First-Quarter 2008 Financial Results
Johnson & Johnson Reports 2008 First-Quarter Results: Sales of $16.2 Billion Increased 7.7% Versus a Year Ago; EPS was $1.26; Excluding 2007 Special Charges, 2008 First-Quarter EPS Increased 8.6%*
New Brunswick, NJ (April 15, 2008) – Johnson & Johnson today announced record sales of $16.2 billion for the first quarter of 2008, an increase of 7.7% as compared to the first quarter of 2007. Operational growth was 2.6% and currency contributed 5.1%. Domestic sales were up 2.8%, while international sales increased 13.7%, reflecting operational growth of 2.4% and a positive currency impact of 11.3%.
Net earnings and diluted earnings per share for the first quarter of 2008 were $3.6 billion and $1.26, respectively. The first quarter of 2007 included an after-tax in-process research and development charge of $807 million associated with the acquisition of Conor Medsystems, Inc. Excluding this charge, net earnings for the current quarter and diluted earnings per share represent increases of 6.4% and 8.6%, respectively, as compared to the same period in 2007.* The Company raised its earnings guidance for full-year 2008 to $4.40 – $4.45 per share, which does not include the impact of any in-process research and development charges or other special items.
“We achieved solid earnings in the first quarter which reflects our continued focus on profitable growth for Johnson & Johnson,” said William C. Weldon, Chairman and Chief Executive Officer. “Our strategy of being broadly based remains one of the keys to our consistent long-term performance.”
Worldwide Consumer sales of $4.1 billion for the first quarter represented a 16.2% increase over the prior year with operational growth of 9.9% and a positive impact from currency of 6.3%. Domestic sales increased 11.7%, while international sales increased 20.2% (8.3% from operations and 11.9% from currency).
Sales results reflect the strong performance of the U.S. launch of ZYRTEC®, an over-the-counter allergy treatment; LISTERINE® antiseptic mouthrinse and whitening products; Baby Care products; and the skin care lines of NEUTROGENA®, CLEAN & CLEAR®, and AVEENO®.
Worldwide Pharmaceutical sales of $6.4 billion for the first quarter represented an increase over the prior year of 3.3% with an operational decline of .6% and a positive impact from currency of 3.9%. Domestic sales increased .9%, while international sales increased 7.9%, which reflected an operational decline of 3.1% and a positive currency impact of 11.0%.
Sales growth reflects the strong performance of REMICADE®, a biologic approved for the treatment of a number of immune mediated inflammatory diseases; VELCADE®, a treatment for multiple myeloma; RISPERDAL® CONSTA® outside the U.S., an antipsychotic medication; and CONCERTA®, a treatment for attention deficit hyperactivity disorder.
Growth was negatively impacted by lower sales of PROCRIT®, a product for the treatment of anemia, due to a decline in the market. Generic competition in certain markets also impacted sales results for RISPERDAL® Oral, an antipsychotic medication, and DURAGESIC®, a transdermal patch for chronic pain. In addition, ACIPHEX®/PARIET®, a proton pump inhibitor for gastrointestinal disorders, was negatively impacted by generic launches of competitive products in this market.
During the quarter, the Company announced that it received an approvable letter from the U.S. Food and Drug Administration (FDA) regarding its New Drug Application for ceftobiprole for the treatment of complicated skin and skin structure infections, including diabetic foot infections.
The Company also submitted a New Drug Application to the FDA for tapentadol hydrochloride immediate release tablets, an investigational oral analgesic for the relief of moderate to severe acute pain. In addition, the Company submitted a Marketing Authorization Application to the European Medicines Agency requesting the approval of golimumab (CNTO 148) as a monthly subcutaneous treatment for adults with rheumatoid arthritis, psoriatic arthritis and ankylosing spondylitis.
Worldwide Medical Devices and Diagnostics sales of $5.7 billion for the first quarter represented a 7.2% increase over the prior year with operational growth of 1.4% and a positive impact from currency of 5.8%. Domestic sales increased .2%, while international sales increased 13.8% (2.6% from operations and 11.2% from currency).
Primary contributors to the operational growth included Vistakon’s disposable contact lenses; Ethicon Endo-Surgery’s minimally invasive products; LifeScan’s blood glucose monitoring and Animas’s insulin delivery products. Growth was negatively impacted by lower sales of drug-eluting stents in our Cordis franchise due to new competitive entries as well as a decline in the market versus the prior year.
During the quarter, the Company submitted a Premarket Approval application to the FDA for the SEDASYS™ System, the first computer-assisted personalized sedation system.
Johnson & Johnson Reports 2008 First-Quarter Results: Sales of $16.2 Billion Increased 7.7% Versus a Year Ago; EPS was $1.26; Excluding 2007 Special Charges, 2008 First-Quarter EPS Increased 8.6%*
New Brunswick, NJ (April 15, 2008) – Johnson & Johnson today announced record sales of $16.2 billion for the first quarter of 2008, an increase of 7.7% as compared to the first quarter of 2007. Operational growth was 2.6% and currency contributed 5.1%. Domestic sales were up 2.8%, while international sales increased 13.7%, reflecting operational growth of 2.4% and a positive currency impact of 11.3%.
Net earnings and diluted earnings per share for the first quarter of 2008 were $3.6 billion and $1.26, respectively. The first quarter of 2007 included an after-tax in-process research and development charge of $807 million associated with the acquisition of Conor Medsystems, Inc. Excluding this charge, net earnings for the current quarter and diluted earnings per share represent increases of 6.4% and 8.6%, respectively, as compared to the same period in 2007.* The Company raised its earnings guidance for full-year 2008 to $4.40 – $4.45 per share, which does not include the impact of any in-process research and development charges or other special items.
“We achieved solid earnings in the first quarter which reflects our continued focus on profitable growth for Johnson & Johnson,” said William C. Weldon, Chairman and Chief Executive Officer. “Our strategy of being broadly based remains one of the keys to our consistent long-term performance.”
Worldwide Consumer sales of $4.1 billion for the first quarter represented a 16.2% increase over the prior year with operational growth of 9.9% and a positive impact from currency of 6.3%. Domestic sales increased 11.7%, while international sales increased 20.2% (8.3% from operations and 11.9% from currency).
Sales results reflect the strong performance of the U.S. launch of ZYRTEC®, an over-the-counter allergy treatment; LISTERINE® antiseptic mouthrinse and whitening products; Baby Care products; and the skin care lines of NEUTROGENA®, CLEAN & CLEAR®, and AVEENO®.
Worldwide Pharmaceutical sales of $6.4 billion for the first quarter represented an increase over the prior year of 3.3% with an operational decline of .6% and a positive impact from currency of 3.9%. Domestic sales increased .9%, while international sales increased 7.9%, which reflected an operational decline of 3.1% and a positive currency impact of 11.0%.
Sales growth reflects the strong performance of REMICADE®, a biologic approved for the treatment of a number of immune mediated inflammatory diseases; VELCADE®, a treatment for multiple myeloma; RISPERDAL® CONSTA® outside the U.S., an antipsychotic medication; and CONCERTA®, a treatment for attention deficit hyperactivity disorder.
Growth was negatively impacted by lower sales of PROCRIT®, a product for the treatment of anemia, due to a decline in the market. Generic competition in certain markets also impacted sales results for RISPERDAL® Oral, an antipsychotic medication, and DURAGESIC®, a transdermal patch for chronic pain. In addition, ACIPHEX®/PARIET®, a proton pump inhibitor for gastrointestinal disorders, was negatively impacted by generic launches of competitive products in this market.
During the quarter, the Company announced that it received an approvable letter from the U.S. Food and Drug Administration (FDA) regarding its New Drug Application for ceftobiprole for the treatment of complicated skin and skin structure infections, including diabetic foot infections.
The Company also submitted a New Drug Application to the FDA for tapentadol hydrochloride immediate release tablets, an investigational oral analgesic for the relief of moderate to severe acute pain. In addition, the Company submitted a Marketing Authorization Application to the European Medicines Agency requesting the approval of golimumab (CNTO 148) as a monthly subcutaneous treatment for adults with rheumatoid arthritis, psoriatic arthritis and ankylosing spondylitis.
Worldwide Medical Devices and Diagnostics sales of $5.7 billion for the first quarter represented a 7.2% increase over the prior year with operational growth of 1.4% and a positive impact from currency of 5.8%. Domestic sales increased .2%, while international sales increased 13.8% (2.6% from operations and 11.2% from currency).
Primary contributors to the operational growth included Vistakon’s disposable contact lenses; Ethicon Endo-Surgery’s minimally invasive products; LifeScan’s blood glucose monitoring and Animas’s insulin delivery products. Growth was negatively impacted by lower sales of drug-eluting stents in our Cordis franchise due to new competitive entries as well as a decline in the market versus the prior year.
During the quarter, the Company submitted a Premarket Approval application to the FDA for the SEDASYS™ System, the first computer-assisted personalized sedation system.
Subscribe to:
Posts (Atom)
