Cerner (CERN) -0.07%
I seemed to have missed Cerner’s earnings report last week. The company reported earnings that came in above estimates due to benefits from a large currency gain and lower tax rate.
However, despite the fact that revenues and bookings were at the bottom end of guidance, the results were solid in the midst of the really difficult backdrop. The current financial liquidity issues continue to affect hospitals’ access to the credit markets. This, in turn, is forcing some of Cerner’s clients to delay or cut back the scope of healthcare IT projects. Nonetheless, the company’s backlog and new engagements have been resilient.
Cerner is outperforming its peers, and should ultimately stand to benefit from the stimulus package, although magnitude and timing is highly uncertain. The stimulus package could have a negative effect in the near-term, however, as hospitals adopt a wait-and-see approach in light of expected government help. Cerner’s widened guidance seems to reflect this fact.
Wal-Mart Stores (WMT) +3.68%
Wal-Mart said fourth-quarter net income declined 7.4 percent, which was better than estimated, and projected first-quarter earnings in line with expectations.
Settlement costs from wage-lawsuits cut into profits. Wal-Mart is the biggest private employer in the U.S. with more than 1.4 million U.S. workers and over 2 million worldwide.
The stronger dollar hurt international sales, which slid 8.4 percent. In the past, Wal-Mart benefited from as stronger U.S. dollar since most of their internationally manufactured goods revenue were sold in the U.S. However, this backdoor dollar play is fading with the company’s focus on expanding international sales (especially in Brazil, China and Mexico) to fuel future earnings growth.
Same-store sales in the U.S. rose 2.8 percent, which shows that Wal-Mart is benefiting from the slumping sales at other retailers as consumers trade down and seek bargains.
At this point, the retail store industry is a bit of a mixed bag. It is no secret that weak consumer confidence has curbed spending habits, making winners out of stores with lower exposure to discretionary items and a higher focus on necessities. Wal-Mart’s grocery business, which generates over 40 percent of the company’s revenue, along with their growing health and wellness segment makes the company less susceptible to the conservative consumer.
Transocean Ltd (RIG) -7.15%
Transocean’s fourth-quarter results came in above expectations helped by higher day rates and the company announced plans to buyback $3 billion of shares.
Transocean’s rigs commanded an average rate of $251,500 a day during the final three months of 2008, up 12 percent from a year earlier. Rates for the company’s most-sophisticated deepwater vessels jumped 22 percent to an average of $423,600 a day.
Despite the 56 percent decline in oil futures during the fourth-quarter, demand for deepwater rigs remains strong. Deepwater ventures remain economically viable for energy companies because oil prices are expected to be higher five to ten years from now, which is the amount of time it takes to turn a subsea oil discovery into a producing field.
Transocean’s deepwater rigs, which account for about 40 percent of drilling revenues, are fully booked in 2009 and 90 percent booked in 2010 at high rates contracted during the commodity boom. Midwater and jackup fleets, however, will weigh on earnings in 2009 – and 2010 if oil prices don’t rebound – since they have fewer days under contract at the higher prices.
The deepwater market is positioned to expand substantially in coming years because of large deepwater discoveries, and Transocean has positioned itself as the prime beneficiary. The company’s $41 billion backlog (nearly three times its current market capitalization) and orders extending out to 2020 provide stability for the business and nice visibility into the future.
Genuine Parts Company (GPC) -4.49%
Genuine Parts’ fourth-quarter net income slipped 30 percent as weak consumer spending and a decline in industrial production hurt sales.
The results were disappointing since many expected the company to be insulated from the recession as consumers opt out of buying new cars and instead attend to vehicle maintenance concerns. The company’s boosted its dividend last month by 2.6 percent, which many took as a sign that business was good.
Genuine Parts did not give guidance, but CEO Thomas Gallagher said the company’s near-term outlook was more conservative than it might be in “more normal times.” He did, however, express optimism for each of the company’s four business lines longer term.
Teva Pharmaceutical Industries (TEVA) +4.02%
Teva reported fourth-quarter earnings that beat expectations and increased its dividend. Teva’s quarterly profit also got a boost from tax rate of just 6 percent – if they paid a normal tax rate of 11 percent, the company would have missed consensus estimates.
Net income came in higher than analysts’ anticipated, rising 11 percent on wider margins, particularly stemming from strong sales of flagship drug Copaxone (multiple sclerosis treatment).
Quick Hits
Peter Lazaroff, Junior Analyst
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