For Immediate Release
Chicago, IL – January 27, 2010 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Apple Inc. (AAPL), Johnson & Johnson (JNJ), DuPont EI De Nemours & Co. (DD), United States Steel Corporation (X) and Texas Instruments (TXN).
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Here are highlights from Tuesday’s Analyst Blog:
Apple Beats on All Fronts
Apple Inc.’s (AAPL) first-quarter of 2010 earnings, margins and revenues were much better than expected. The results were a record in the company’s history and surpassed expectations on all fronts. Apple’s share price rose 2.69% and closed at $203.07 and increased 1% after hours. AAPL posted impressive results fueled by strong Mac and iPhone sales. We believe the company will continue to post solid results due to continued resurgence of its Mac computer line, increased sale of iPods and continued growth in iPhone sales.
Earnings in the quarter were $3.67 per share, beating the Zacks Consensus Estimate of $2.08 by $1.59 and surpassing the company’s own guidance of $1.70 to $1.78 per share. The earnings increased 46.8% from $2.50 per share reported in the year-ago period.
Strong earnings were due to higher sales in the quarter, which increased 32% to $15.68 billion, representing the highest revenue growth in the company’s history. The tremendous revenue growth was driven by increased Mac shipments and strong iPhone sales as the company rolled it out in new international markets such as China.
J&J Beats, Guidance Disappoints
Johnson & Johnson (JNJ) reported fourth quarter earnings of 79 cents, which was impacted by a restructuring charge. However, excluding extraordinary items, the company’s earnings per share came in at $1.02, surpassing the Zacks Consensus Estimate of 97 cents and 94 cents from the year-ago period.
The company reported revenues of $16.6 billion, an increase of 9% compared to the fourth quarter of 2008. Operational factors and foreign exchange movement contributed equally to the growth. Sales in domestic and international markets recorded an increase of 2.6% and 15.6% respectively.
For the full year of 2009, Johnson & Johnson recorded a 1.8% year-over-year increase in earnings per share to $4.63. However, revenues were $61.9 billion, a decline of 2.9% compared to the prior year period.
Johnson & Johnson’s diversified business model is helping it to navigate through tough situations. During the fourth quarter, the three business segments of the company – Consumer, Pharmaceuticals and Medical Devices & Diagnostics recorded a growth of 10.2%, 5.4% and 11.8%, respectively. For the third quarter in a row, the medical devices segment posted higher revenues than the pharmaceuticals segment.
For the full year, the pharmaceuticals segment’s revenue declined 8.3%, mainly due to operational factors (6.1%) and the negative impact of foreign exchange movement (2.2%). Both domestic and international sales declined 12.1% and 2.6%. While, drugs such as Topamax and Risperdal were negatively impacted by generic competition, products such as Remicade, Prezista and Velcade recorded strong operational growth.
While full-year revenues from medical devices recorded an increase of 1.9%, revenues would have been higher but for the negative currency impact of 2.3%. Domestic sales increased 4.5% with international sales declining by 0.2%.
Primary contributors to growth include Ethicon’s surgical care and aesthetics products; Ethicon Endo-Surgery’s minimally invasive products; DePuy’s orthopaedic joint reconstruction, spine, and sports medicine businesses; and Ortho-Clinical Diagnostics’ professional products, partially offset by lower sales in the Cordis franchise.
During the quarter, Johnson & Johnson decided to acquire a privately-held medical devices company, Acclarent, for approximately $785 million. Acclarent develops devices to treat abnormalities associated with ear, nose and throat (ENT), specializing in products used for sinus surgery. We believe there is huge potential for Acclarent’s business, as its balloon sinuplasty technology and other related products offer ENT patients a better alternative compared to currently available treatment options including conventional surgical approaches.
Johnson & Johnson’s guidance for 2010 is slightly disappointing with earnings per share expected in the range of $4.85 – $4.95. The current Zacks Consensus Estimate of $4.94 is already towards the upper end of this range. Shares were down 1% following the release of fourth quarter results. We are Neutral on the stock.
DuPont Swings to Profit
Chemical giant DuPont EI De Nemours & Co. (DD) reported fourth quarter 2009 earnings of 48 cents as opposed to a fourth quarter loss of 70 cents a year ago. Excluding non-recurring charges, DuPont earned 44 cents, beating the Zacks Consensus Estimate of 41 cents. Earnings were helped by significant cost cuts and lower raw material, energy and freight expenses.
Full-year 2009 earnings were $1.92 per share versus $2.20 in 2008. Excluding non-recurring charges, 2009 earnings were $2.03 per share versus $2.78 in the prior year.
Cost cuts have boosted DuPont’s fourth-quarter pre-tax earnings by about $294 million, which helped the company exceed its full-year cost reduction goal of $1 billion. Raw material, energy and freight costs were 20% lower than the previous-year levels.
However, revenues in the quarter were up 10% year over year to $6.4 billion, reflecting 10% higher volume and 3% lower local prices. Sales grew over 20% for titanium dioxide, electronic materials, performance polymers and seed products. Asia-Pacific sales exceeded pre-recession levels with volume up 34% from last year, reflecting very strong demand in China, Japan, Korea and India.
U.S. Steel Underperforms
Shares of United States Steel Corporation (X) tumbled more than 9% after the company recorded its fourth consecutive loss of $267 million or $1.86 per share in the fourth quarter of 2009. By contrast, the company had reported a net income of $2.90 million or $2.50 per share in the corresponding quarter of the previous year.
Excluding non-recurring charges, net loss totaled $1.65 per share, which was worse than the loss of $1.44 as per the Zacks Consensus Estimate. For the full year 2009, U.S. Steel losses totaled $1,401 million, or $10.42 per diluted share, compared with full year 2008 net income of $2,112 million, or $17.96 per diluted share.
Revenues plunged 25% to $2.9 billion, driven by a significant decline in total steel shipments. The company saw lower volumes and prices across all major segments on the back of a slump in the economy. Additionally, increasing competition from China and weak demand in major markets, especially Europe, resulted in lower capacity utilization and impacted results.
All the three business segments reported losses. However, the losses were lower sequentially at its European operations and North American Flat-rolled business.
TI Beats, Lead Times Stretch
Texas Instruments (TXN) reported fourth quarter results that beat the Zacks Consensus Estimate by 5 cents. Revenue was in line with the consensus, exceeding by 0.8%.
Revenue
Revenue of $3.01 billion was up 4.3% sequentially, up 20.6% year over year and at the high-end of the guided range of down 3.5% to up 4.9% sequentially. There have been no year-over-year revenue increases since the first quarter of 2008. The sequential trend is also encouraging, as the December quarter is usually a down quarter for the company. There seems to be no doubt that TI has exited the recession, given the growth in revenue, orders and backlog, as well as the lean inventories throughout the supply chain.
Segment Revenue
The three largest segments contributed to the revenue increase, while the other segment declined, impacted by the seasonal decline in calculator revenue. The Analog business increased 8.9%; Embedded Processing was up 4.8%, Wireless up 8.4% and Other down 8.9%.
The three major businesses within Analog—power management, high volume analog and logic (HVAL), and high-performance analog (HPA) all contributed to the increase. Power management revenue was particularly strong, with the company gaining share in the computing market and seeing very strong growth in battery management products, gauges and chargers used in LCD displays for TVs, notebooks and smart phones. HVAL products were driven by a pickup in automotive demand, while in HPA, the fastest growing products were low-power wireless devices.
Strength in Embedded Processing continues to be driven by catalog products, although automotive products also gained momentum in the last quarter.
The increased demand for application processors and connectivity products used in smart phones continued to drive Wireless sales. This portion of the business was up 18% sequentially and down 8% year over year. The baseband business remains strong. Basebands currently contribute around 15% of total TI revenue, although management is in the process of phasing this business out by 2012.
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