This earnings season has been a busy one. Last week I gave you an idea of what to expect from some of the most notable companies reporting earnings. Here’s the epic conclusion for the majority of them:
5 Best Market-Moving Earnings Reports Analyzed in February in 2012 - Ford
Ford (NYSE:F)
reported a profit of $20.2 billion for 2011 — its third straight annual profit — but posted Q4 earnings of 20 cents a share, which was 5 cents below expectations and less than the 30 cents earned a year ago.
Earnings were hurt by higher materials prices, and, to a lesser extent, one-time costs associated with its new four-year agreement with the United Auto Workers that locked in U.S. labor costs for an extended period at favorable rates. Higher materials prices especially hurt Ford’s challenged European unit, where the operating net loss increased to $190 million from $51 million — despite sales increasing to $8.3 billion from $8.1 billion on improvements from volumes and revenue mix. The Asia Pacific segment lost $83 million on lower volume and fallout from flooding in Thailand.
North American operations fared better, earning $889 million — a nice bump up from $670 million a year ago with U.S. sales rising 11% for the year. Management expects higher automotive production in North America in 2012, estimating industry-wide production to be 13.5 million to 14.5 million units — up from 13 million units in 2011 and a similar forecast to the one given recently by rival
5 Best Market-Moving Earnings Reports Analyzed in February in 2012 -General Motors (NYSE:GM).
Guidance for 2012 was roughly in line with expectations. The company expects better automotive profit but also looks for a decline in European productions from 15.3 million units to 14.0 million — 15 million units. Ford believes its financial services segments will remain highly profitable, but less so than last year due to lower interest rates. The company is also projecting little change in net interest income and believes pretax operating profit in 2012 will be close to last year’s levels, so we’re likely to see 2012 earnings somewhere around 2011’s $1.51 a share.
One other note: Ford reported this week that North American vehicle sales in January increased 7%. Strength was well-balanced, with the small car Focus sales up 60%, accounting for 30% of the growth. Also strong was the F series — up 8% — helped by the addition of a more fuel efficient V-6 engine. The company did not change previous guidance of a 3% increase in North American production so, as expected, domestic operations are solid at Ford.
Shares hit a six-month high around $13 before the earnings report and then dipped briefly under $12. They’ve moved higher since and are still up almost 18% to start 2012. Despite the short-term disappointment, Ford is moving forward with aggressive goals for 2015 that portend further improvement — driven by growth in its Asia Pacific operations. I definitely would buy F on pullbacks.
5 Best Market-Moving Earnings Reports Analyzed in February in 2012 -ICU Medical
ICU Medical (NASDAQ:ICUI) had a mixed fourth quarter, beating earnings expectations but missing on revenue with sales of $76.5 million falling just shy of the expected $78.6 million, but still up 1.1% over a year ago. The revenue miss had been hinted at by management as a possibility at the end of its third quarter, so it wasn’t much of a surprise. Earnings per share of 70 cents (excluding an extraordinary gain of 56 cents on the sale of the company’s Orbit diabetes induction set business) came in well ahead of expectations of 62 cents.
As we’ve talked about before, it’s important to analyze ICUI on an annual basis rather than a quarterly one because sales can be erratic. For the whole year, revenues increased 6.2% to $302.2 million. Growth was driven by the company’s infusion therapy — where sales increased 5.3% to $198.9 million — and in the small but rapidly growing oncology unit — where sales increased 33% to $24.4 million.
Competition is continuing to impact the critical care unit, and sales declined 3.1% to $61.4 million for the year. Gross profit margin in 2011 increased 122 basis points to 47.1%. Earnings (excluding the extraordinary gain) increased to $2.59 from $2.23 in 2010.
Management was upbeat on the conference call about the year ahead — with more new products to be introduced than at any time in the company’s history. Revenues are expected to grow 5% to 9% ($318 million to $330 million) — with infusion therapy and oncology again leading the way. However, margins will be hurt by expenses related to a new plant in Slovakia, which is needed to service ICUI’s rapidly growing international operations that saw a 14% sales increase in 2011. Due to the higher expenses, management projected earnings of $2.45 to $2.70 per share.
The low end of that range is pretty far below current expectations of $2.68, so the stock initially sold off following the report on Jan. 30. But the stock quickly recovered the next day as investors realized the long-term growth story still is intact. ICUI is a good buy as it hovers just below $47.
Jacobs Engineering
Jacobs Engineering (NYSE:JEC) met expectations with earnings of 70 cents a share — up 35% from a year ago — in a fiscal first quarter that reinforced for investors how the company continues to benefit from the global economic recovery.
Revenues were up 11.7% to $2.633 billion, and margins expanded on higher sales volume and good cost controls. Pricing remains competitive, especially in government work. Management is hopeful pricing will improve in work outside the government, and believes their strong relationships with core clients will enable them to increase prices as the business environment improves.
It was good to see order activity was either steady or improving across most segments of the business, and JEC’s backlog rose to $14.5 billion — up more than 10%, from $13 billion, at the end of 2010. Demand remains strong in the mining and materials, chemicals and oil & gas segments.
Management maintained its guidance for 2012 earnings of $2.80 to $3.20, which was the main reason the stock fell after the report. The low end of that range ($2.80) would represent growth of only about 7.7% from 2011, and that seems too low to me — given the momentum JEC showed in the quarter and the very upbeat tone of management on the conference call. I think management is being overly cautious, and I expect 2012 earnings will come in closer to the high end of the range, especially with global economies still growing.
5 Best Market-Moving Earnings Reports Analyzed in February in 2012 -Jack Henry
Jack Henry (NASDAQ:JKHY) reported another strong quarter, posting increases of 5% in revenue, 4% in gross profit and 7% in net income during its fiscal second quarter. The tech solutions company also grew its order backlog and confirmed analysts’ estimates for its 2012 fiscal year.
As CEO Jack Prim pointed out, the quarter showed solid execution on all fronts. Revenues rose as the company’s core community bank customers continue to spend money on JKHY’s data processing services and the industry outlook brightened. The company also continues to watch costs and actually had lower operating expenses in the quarter, which allowed operating income to increase 10.5%. Management used its significant free cash flow to lower debt, leading to a decline in interest expenses, and pretax income rose 13.2%.
Bottom line results were limited by an increase in the effective tax rate to 35.2% — from 31.4% in the prior year — as the prior year accrual was a little bit lower than normal. Still, net income was up 7%, and earnings increased to 44 cents (from 42 cents).
Backlog stood at $378.8 million at year-end — up an impressive 11% from 2010 and 5% from the previous quarter. Management indicated it has seen a good amount of wins from competitors’ existing business. In addition, JKHY says it is seeing no significant headwinds from bank consolidation at this time. Management also endorsed current earnings estimates of $1.74 in the 2012 fiscal year — good for growth of 10%.
Given the company’s strong history and market share gains, I see more growth ahead.
5 Best Market-Moving Earnings Reports Analyzed in February in 2012 -Parexel
Parexel (NASDAQ:PRXL) jumped 18% Tuesday after reporting solid fiscal Q2 results and giving guidance that suggests the pharmaceutical research company’s earnings rebound is on track.
Adjusted earnings of 23 cents a share met the Street’s expectations, but revenues of $333.2 million fell about $1 million short. However, revenue rose in all three business segments, including a 9.5% jump in service revenues. This was helped by booking new business and lower-than-average cancellations. With backlog up 23.8% to $3.74 billion and a book-to-bill in the quarter of 1.50, I see more revenue gains ahead in the coming quarters. Profitability continues to be pressured by new hires to meet expected demand, but that’s a necessary part of running a growing business, and this will turn around as the demand comes online.
The operating margin on an adjusted basis was 7.1% in the quarter — down from 9.1% — due to the new hires. However, they improved sequentially from 4.8% in the third quarter on higher revenues and a recent restructuring designed to improve efficiency that will help earnings by an additional 5 cents a share in the third quarter. SG&A expenses were tightly controlled and remained flat compared to a year ago.
Management raised and tightened its guidance range for fiscal 2012, which ends in June. The company now expects earnings of $1.09 to $1.17 — up from previous guidance of 99 cents to $1.14. For calendar-year 2012, the company is projecting results of $1.33 to $1.47, which tells us earnings should continue to grow beyond the current fiscal year. Longer-term, further margin improvement could be in the works as PRXL believes it can get operating margins up to 10%. Meeting this goal would assure solid growth well into the future.
