PFG reported earnings after yesterday’s close that were slightly better than expected with profit declining 59 percent from the year before. The results were primarily attributable to lower earnings from the company’s US. Asset Accumulation and Global Asset Management segments, which was partially offset by slightly higher earnings from its Life and Health Insurance segment and International Asset Management and Accumulation.
In the U.S. Asset Accumulation segment, assets under management (AUM) fell to $161 billion at the end of 3Q2008 from $179 billion in 3Q2007. PFG’s total AUM decreased 6 percent from a year ago to $287.4 billion. Strong net cash flows offset a substantial portion of the impact of equity market declines thanks to continued strong sales of each of their three key retirement and investment products during 3Q.
PFG is among life insurers that are trying to strengthen their capital position after investments they hold to pay claims declined in value. PFG cut its dividend in half on 10/13/2008. In addition, the company has been limiting the size of variable annuities with guaranteed living benefits. The decline in the value of securities cost $230.6 million before tax, including a total of $82 million in losses tied to Lehman Brothers and Washington Mutual.
PFG said last week it favors including life insurers in the U.S. Treasury Department’s $250 billion program to invest in financial companies. Although PFG did not directly confirm they would participate, a spokesperson said “we would certainly evaluate our options” if they were allowed to participate.
PFG has gained 40.72 percent in the last two days.
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Emerson Electric (EMR) +10.14%
EMR reported quarterly profit rose 10 percent, bolstered by cost cuts and overseas sales of its tools used in a range of industrial goods and household appliances. EMR also boosted its quarterly dividend 10 to 33 cents from 30 cents.
Net Sales for fiscal 2008 rose 12 percent to $24.8 billion as global demand pushed the company’s total sales from outside the U.S. to a record 54 percent of total sales. FY2008 operating cash flow was a record $3.3 billion, a 9 percent increase from 2007 and 13.3 percent of reported sales. In FY2008, EMR returned 63 percent of operating cash flows to shareholders through $940 million in dividends and $1.1 billion in share repurchases.
Free cash flow increased 10 percent to a record $2.6 billion. Free cash flow as a percentage of net earnings was 107 percent for 2008, the eighth consecutive year in excess of 100 percent. This is a sign of very high earnings quality.
EMR continues to be a well-managed, financially-sound company and their balance sheet is a testament to that. CEO David Farr said “the Company is well positioned for more challenging times ahead in 2009 and 2010, as we have spent $265 million in best cost restructuring actions in the last three years, of which $70 million was incurred in the last six months. We will continue to make smart growth investments in our businesses and maintain our focus on significant cash returns to shareholders.”
EMR reported quarterly profit rose 10 percent, bolstered by cost cuts and overseas sales of its tools used in a range of industrial goods and household appliances. EMR also boosted its quarterly dividend 10 to 33 cents from 30 cents.
Net Sales for fiscal 2008 rose 12 percent to $24.8 billion as global demand pushed the company’s total sales from outside the U.S. to a record 54 percent of total sales. FY2008 operating cash flow was a record $3.3 billion, a 9 percent increase from 2007 and 13.3 percent of reported sales. In FY2008, EMR returned 63 percent of operating cash flows to shareholders through $940 million in dividends and $1.1 billion in share repurchases.
Free cash flow increased 10 percent to a record $2.6 billion. Free cash flow as a percentage of net earnings was 107 percent for 2008, the eighth consecutive year in excess of 100 percent. This is a sign of very high earnings quality.
EMR continues to be a well-managed, financially-sound company and their balance sheet is a testament to that. CEO David Farr said “the Company is well positioned for more challenging times ahead in 2009 and 2010, as we have spent $265 million in best cost restructuring actions in the last three years, of which $70 million was incurred in the last six months. We will continue to make smart growth investments in our businesses and maintain our focus on significant cash returns to shareholders.”
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Jacob Engineering Group (JEC) +16.46%JEC reported 4Q earnings that increased 36.3 percent from a year ago on strong demand for its services. The company said that it expects to earn between $3.55 and $4.05 a share in 2009, which was lower than the consensus estimate. The outlook represents a growth range of 6 percent to 21 percent (midpoint of 13.5 percent). JEC’s guidance is normally conservative, but they normally forecast 15 percent growth and usually does better than that in stronger markets. At the end of the quarter, JEC’s order backlog totaled $16.7 billion compared to $13.6 billion in the previous year, representing a 23 percent increase year-over-year.
JEC attributes their success to their business model that depends less on transactional projects – which JEC defined as “big events, large jobs in far away places, or giant lump sum turnkey events around the world” – than their competitors. Instead they work on developing long-term customer relationships and its process-management capabilities. This improves visibility on contract flow, which helps reduce revenue volatility, and better contract terms, which provides some margin stability. Their business model also allows them to more effectively utilize its assets, which helps contribute to solid returns on invested capital. Competitors who focus on transactional projects, on the other hand, are constantly moving assets from one project to another, which leads to inefficiencies.
JEC’s business model and long track record of solid project execution and good management should help them remain a strong player in the industry.
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Cisco (CSCO) +6.57%
Shares of CSCO traded higher in anticipation of their earnings report tomorrow. The company’s outlook and thoughts on the technology spending environment are likely to determine the tech market’s moves tomorrow. Investors will be paying particularly close attention to CSCO’s international outlook since many larger companies derive a sizeable portion of their earnings overseas.
Shares of CSCO traded higher in anticipation of their earnings report tomorrow. The company’s outlook and thoughts on the technology spending environment are likely to determine the tech market’s moves tomorrow. Investors will be paying particularly close attention to CSCO’s international outlook since many larger companies derive a sizeable portion of their earnings overseas.
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General Electric (GE) +7.62%
GE traded higher on news that the U.S. Treasury may broaden the scope of its $700 billion rescue package and take equity stakes in bond insurers and specialty finance firms.
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Boeing (BA) +1.46%
BA will delay the first test flight of the new 787 Dreamliner beyond the fourth quarter because of the just-ended machinists strike, but did not speculate when the test flight might occur. The 787 had been already delayed three times and was 15 months late before an eight week long machinists’ strike. Earlier delays were due to parts shortages and problems with the new production process, which uses suppliers around the world to build large sections of the plane for assembly in Everett, Washington.
BA will delay the first test flight of the new 787 Dreamliner beyond the fourth quarter because of the just-ended machinists strike, but did not speculate when the test flight might occur. The 787 had been already delayed three times and was 15 months late before an eight week long machinists’ strike. Earlier delays were due to parts shortages and problems with the new production process, which uses suppliers around the world to build large sections of the plane for assembly in Everett, Washington.
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Amgen (AMGN) -1.59%This Bloomberg story examines AMGN’s potential to snatch up distressed biotechnology companies. While AMGN will be competing with other large drugmakers like Pfizer (PFE), their experience in biotechnology and massive cash position may give AMGN advantages in the acquisition arena. Here is another article covering the story.
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Peter Lazaroff, Junior Analyst
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