NVR reported second-quarter financial results that reflected a continued improving environment for all homebuilders. NVR reported a slight acceleration in yearover- year revenue growth this quarter, with 31% improvement versus 28% last quarter. New order units and backlog unit growth also accelerated to 26% (from 11%) and 31% from (27%). Homebuilding adjusted operating margins were a bit disappointing given the significant topline improvement, expanding by 30 basis points from yearago levels to 7.8%. It is unclear why margins did not expand further, but we believe it could be due to higher lumber and labor prices flowing through cost of goods…
Author: Sean Campbell
Maxim Integrated reported disappointing fiscal fourth-quarter results and gave an even gloomier outlook for the September quarter, due to sluggish demand for handsets from Maxim’s largest customer, Samsung. We will likely cut our fair value estimate by about 10% to $30 per share, but maintain our wide Morningstar Economic Moat Rating, as we view Maxim’s 25% operating margin in the soft June quarter as a strong indication of the firm’s ability to retain pricing power from its proprietary analog chip designs. Revenue was $608 million, flat sequentially but below the low end of the firm’s forecasted range of $610 million…
On Friday, the USDA released its updated view on estimated planted and harvested grain acreage for the current U.S. growing season. Analysts continue to expect mediumterm crop prices to suffer due to rebounding supply, and today’s report further indicates that 2013 could be the year to replenish the country’s corn and soybean stocks. Overall, there were few changes to the USDA’s prior (March) forecast, indicating the wet and cool Spring weather delayed, rather than prevented, most planned farm acreage. That said, as we’ve previously noted, the weather conditions over the coming summer months will drive the eventual yield more than…
In the fourth quarter and full fiscal year, FedEx ground growth and margins remained outstanding, but matching capacity to shifting demand continued to challenge express. Ground logged its 54th consecutive quarter of market share gains, and normalized ground margins tripled those of express. The latter’s troubles stem in part from stagnation in international priority volume (down 2% year over year) even as low-rate international economy demand expanded (up 11%). Because stuffing long international flights with the economy packages decreases margins, the firm continues to reduce its own airlift capacity and increase its use of third-party carriers (like passenger plane belly…
Danske Bank reported that it had received orders from the Danish Financial Supervisory Authority concerning its approach in capital adequacy and solvency need calculations. First, the orders outline specific elements to Danske’s method for calculating risk-weighted assets assigned to corporate clients in comparison with other financial institutions. The orders would increase 2013 riskweighted assets by DKK 100 million or 13% for Danske. This will reduce the likelihood of Danske paying dividends for this year and coming years. The remaining orders are related to Danske’s solvency need. In terms of the total solvency need as determined by the Basel transitional rules,…
While Geox shares still appear undervalued, lackluster fourth-quarter and full-year results do not install any more confidence in the firm’s ability to execute a substantial near-term sales and earnings turnaround. Wholesale is now rationalized and peripheral Europe has bottomed, hopefully, but risk remains. Cash flow is still solid and working capital well controlled, and while 2012 reported results were down significantly from 2011, cash flow improved. Total sales declined 9% for the year, with continued negative trends in wholesale, which are now (at least) countered by mild yet positive comparable-store sales results (up 3%) in directly operated stores. In 2013,…
Handelsbanken is still one of the best-performing banks in Europe, in an environment where many of its peers are taking a major hit. One of the possible reasons for the bank outrunning its peers from the industry, is that it has a very good position on its credit risk and costs, which means that Handelsbanken prefers reducing from its growth but keeping a stable credit risk, unlike its peers who seek to expand at all costs. The bank does not approve of a high credit risk, which is a strategy that dominates the company, despite its decentralized business model. This…
No-moat Aeroports de Paris ADP reported 2012 gross activity of EUR 2.7 billion, and an increase of 5.8% from 2011. The year proved to be busy for the company as it purchased a 38% stake in TAV Airports, the leading airport operator in Turkey, for EUR 668 million and an implied value of 5.3 times 2012 EBITDA. Aeroports de Paris completed significant capital projects during the year, and may not need further expansion at Charles de Gaulle until 2023. The company enjoys a monopoly position, but must discuss pricing and returns on capital with the French government, which has not…
Accenture reported first-quarter results on Thursday that were in line with analysts expectations. First-quarter revenue grew 5% year over year on a constant currency basis to $7.22 billion. The outsourcing business had another strong quarter, which helped shore up the firm’s overall performance. The consulting business continued its recent struggle, reporting flat year-over-year growth on a constant currency basis. Over the past three quarters, consulting growth languished at low-single-digit levels, and management’s comments indicate that this trend is likely to persist in the short term. However, given this segment’s strong bookings, we believe growth is likely to bounce back in…
Credit Agricole reported a huge EUR 2,852 million loss for the third quarter on a number of unusual items, most notably a EUR 1,017 million non-cash own-debt loss and a EUR 1,765 million loss on the soon-to-be disposed Emporiki. On a management-provided underlying basis, the bank earned EUR 716 million in the third quarter, implying an uninspiring 6.5% return on equity. While the bank built capital during the quarter and core Tier 1 rose 20 basis points sequentially to 9.8% on a pro forma basis after adjusting for the sale of Emporiki, its underlying tangible common equity ratio, already among…
Interpublic reported organic revenue growth of 2.3% in the first quarter, about on par with our expectations and a sequential improvement from 0.4% in the fourth quarter. The company is now at the tail end of lapping key client losses, mainly in the United States, so we view U.S. organic growth of 0.5% as a step in the right direction. We are maintaining our $14 fair value estimate and narrow economic moat rating. Still, Interpublic is battling in a tough macroeconomic environment, especially in Europe, so we expect 2%-3% growth in 2013. We view the shares as slightly undervalued, as…
Procter & Gamble’s third-quarter results arrived with little fanfare, as underlying sales rose modestly (up 3%, reflecting 2% higher volume and a 1% price increase) but profit expansion was more muted (underlying gross margins ticked up 20 basis points to 50.0%, and the core operating margin expanded just 10 basis points to 18.8%). While the firm’s $10 billion cost-cutting efforts to reduce overhead, improve material costs from product design and formulation efficiencies, and increase manufacturing and marketing productivity appear to be taking hold, a large portion of these savings is front-end loaded–reflecting plans to trim the employee base about 10%…