For Immediate Release
Chicago, IL – October 26, 2010 – Zacks.com Analyst Blog features:JetBlue Airways Corporation (JBLU), Biogen Idec Inc. (BIIB), Elan Corp. (ELN), Novartis (NVS) and Halliburton Company (HAL).
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Here are highlights from Monday’s Analyst Blog:
JetBlue Beats, Posts Record Revenue
JetBlue Airways Corporation (JBLU), one of the discounted airlines, reported its third quarter adjusted earnings of 18 cents per share surpassing the Zacks Consensus Estimate by a penny as well as the year-ago quarter’s earnings of 5 cents. The better-than-expected earnings were driven by higher fares, revenue maximization, cost control and network optimization.
Net income quadrupled in the reported quarter to $59 million from $15 million in the year-ago quarter. Total revenue climbed 20.5% year over year to a record $1 billion, primarily due to an increase in airline traffic, measured in revenue passenger miles (RPM). In the reported quarter, RPM increased 9.6% year over year on an 8.5% increase in capacity. Load factor (percentage of seats filled with passengers) rose 90 basis points year over year to 84.6%.
Yield per passenger mile leaped 11.4% compared with the year-ago quarter. On an annualized basis, passenger revenue per available seat mile (PRASM) grew 12.5% and operating revenue per available seat mile (RASM) improved 11.1%.
Total operating expenses increased 12.9% year over year. JetBlue’s operating unit cost or cost per available seat mile (CASM) upped 4.1% year over year. Excluding fuel, CASM rose 3.4% from the year-ago quarter.
Operating income in the reported quarter was $140 million compared with $66 million in the year-ago quarter. Operating margin rose 590 bps year over year to 13.6%.
Biogen Idec Earnings Preview
Biogen Idec Inc. (BIIB) is slated to announce its third quarter results on October 26. The Zacks Consensus Estimate is $1.20, well above the year-earlier earnings of $1.09.
Second Quarter Highlights
Biogen Idec Inc. reported second-quarter earnings per share of $1.27, well above the Zacks Consensus Estimate of $1.08 and the year-earlier figure of $0.73. Performance was boosted by higher revenues. Revenues increased 11% to $1.2 billion, with Tysabri and Rituxan being the primary growth drivers.
Second quarter Tysabri revenues came in at $219 million, up 17% from the prior period. Global in-market net sales of Tysabri, which is partnered with Elan Corp. (ELN), came in at $298 million (up 17%) in the second quarter of 2010. Despite carrying a black-box warning for the risk of progressive multifocal leukoencephalopathy (PML) and other cautionary language, Tysabri continued to see an increase in patients.
Meanwhile, Biogen’s lead multiple sclerosis (MS) product Avonex posted second quarter sales of $628 million (up 6%). Rituxan revenues increased 11% to $306 million. Revenues were boosted by price increases.
Following the release of strong second quarter results, Biogen revised its earnings guidance for fiscal 2010. Although the company still expects revenues to grow in the mid single digits, Biogen now expects earnings to exceed $4.70 per share. This was well above Biogen’s earlier expectations of delivering earnings above $4.55 per share. The Zacks Consensus Estimate for fiscal 2010 currently stands at $4.74.
Agreement of Estimate Revisions
For the third quarter of 2010, only 1 of the 7 analysts following Biogen has reduced his estimates over the last 7 days. Over the same period, 1 analyst has raised his estimates for the third quarter. Over the last 30 days, only 1 analyst increased his estimate, while 3 analysts moved in the opposite direction.
For fiscal 2010, a similar trend was observed with one of the 8 analysts covering the stock reducing his estimates over the past 7 days while 1 analyst raised his estimate over the same time-period. Over the past 30 days, 3 analysts have reduced their estimates with only 1 analyst moving in the opposite direction.
The downward revisions mainly reflect the impact of the entry of additional competition in the multiple sclerosis market in the form of Novartis’ (NVS) Gilenya. Being the first oral treatment to have gained US approval for the treatment of MS, Gilenya should see significant uptake.
Earnings Surprise
Biogen has usually delivered a positive earnings surprise over the past few quarters. While earnings in the third and fourth quarters of fiscal 2009 and second quarter of fiscal 2010 exceeded expectations, first quarter 2010 earnings came in below expectations. The average earnings surprise for the last four quarters was 7.41%. Third quarter 2010 earnings are expected to be in line with expectations at $1.20 per share.
Recommendation
We currently have a Neutral recommendation on Biogen, which is supported by a Zacks #3 Rank (short-term Hold rating). Key products, Avonex and Tysabri, should continue contributing significantly to sales. Meanwhile, Biogen is working on building its pipeline through acquisitions and in-licensing deals.
However, we remain concerned about an increase in the occurrence of PML in patients using Tysabri. Moreover, we are concerned about the recent approval of Novartis’ Gilenya which will compete directly with Avonex and Tysabri.
Halliburton Stays Neutral Post-3Q
We retain our Neutral recommendation on Halliburton Company (HAL), following the impressive third quarter 2010 results, driven by an increased activity in the unconventional oil and gas shale plays in North America that counterbalanced a flat international performance.
Third Quarter Recap
During the quarter, Halliburton reported earnings per share, excluding special items, of 58 cents, surpassing the Zacks Consensus Estimate of 56 cents and were comfortably ahead of the year-ago adjusted profit of 31 cents.
The company generated revenues of $4.7 billion, a year-over-year growth of 30.0%, attributed to increased sales across all business units. Revenues in the Completion and Production segment leaped 45.8% year over year to $2.7 billion, while Drilling and Evaluation business sales upped 13.8% year over year to $2.0 billion.
As of September 30, 2010, Halliburton had approximately $1.9 billion in cash and $4.6 billion in long-term debt (including current maturities), representing a debt-to-capitalization ratio of 31.7%.
Our Take
Texas-based Halliburton holds a market leading position in the global oilfield services industry, boosted by its broad and technologically-complex product and service offerings and a healthy financial profile. We expect the company’s widespread geographical presence along with the success in international arenas to expand its market share, going forward.
The company is enjoying the benefits of an active North American market along with higher activity in U.S. land drilling, U.K., and Southeast Asia. We expect Halliburton to continue to reap benefits from the U.S. land drilling trends, where activity is tracking above expectations.
However, our optimism for the stock is somewhat dampened by the new environmental regulations for hydraulic fracturing in the shale plays, which could adversely impact the company’s performance in the coming months.
Moreover, the intensely competitive nature of the oil and gas industry, depressed natural gas prices and the risks associated with international operations will continue to remain a overhang on the stock.
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