GE Healthcare (GEHC) 24Q1 Update

GEHC reported 24Q1 revenues of $4.65 billion, down 1.2% YOY and 4.1% below my estimate.  Excluding currency, revenue was flat.  Revenues declined in Imaging, Ultrasound and PCS, but PDx revenue increased 7.3%.  Sales in China fell 11%.  The company faced a tough prior year comparison, as 23Q1 revenues had gained from improved supply chain fulfillment and China’s regional stimulus program.

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Bristol-Myers Squibb (BMY) 24Q1 Update

Bristol-Myers Squibb (BMY) reported 24Q1 revenues of $11.9 billion, up 5% from 23Q1.  Its GAAP loss per share was $5.89 and non-GAAP loss $4.40, reversing last years earnings  of $1.07 GAAP and $2.05 non-GAAP.  24Q1’s revenues were $330 million or 3.6% above the consensus estimate and non-GAAP loss was two cents better than the consensus estimate.

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Recent Trends in the Economy and Fixed Income Markets

The Economy.  On balance, the economic data over the past few weeks point to slower growth ahead. According to the latest GDP Now report from FRB Atlanta, 24Q2 real GDP is expected to rise 3.3%.  That’s down from nearly 4.0% two weeks ago.  FRB New York’s Fed Now tracker pegs 24Q2 real GDP growth at 2.2% as of May 3, down from 2.7% as of April 26.  The consensus of Blue Chip forecasters (via the Atlanta Fed) projects 24Q2 GDP growth of 1.4% to 2.9%.

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Stocks Recover Quickly From April Lows

Stocks reversed course in April, with the S&P Composite 1500 declining 4.3%.  Among its components, the S&P 500 lost 4.1%; the Mid-Cap 400 fell 6.1% and the SmallCap 600 dropped 5.7%.

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AT&T (T) 24Q1 Update

AT&T reported 24Q1 GAAP EPS of $0.47, compared with last year’s loss of $0.57.  My estimate was $0.47.  Non-GAAP EPS was $0.55, below last year’s $0.50, but above my estimate of $0.53.  Free cash flow was $3.1 billion in the quarter, above 23Q1’s $1.0 billion and my estimate of $1.8 billion.

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Baker Hughes (BKR) 24Q1 Update

BKR reported 23Q4 GAAP diluted EPS of $0.45 vs. 23Q1’s $0.57 and my estimate of $0.34.  Non-GAAP EPS was $0.43 compared with $0.28 last year and my estimate of $0.35.  Revenues of $6.42 billion rose 12.3% vs. 23Q1, and matched my projections. Orders of $6.5 billion fell 14.3% YOY, due to declines across all segments.  Adjusted EBITDA was $943 million, up from $782 million in 23Q1.  Adjusted EBITDA margin improved by 100 bp to 14.7%.  Free cash flow was $498 million vs. $177 million in 23Q1.

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Citius Pharma Raises $15M in Registered Direct Equity Offering

Earlier today, Citius Pharmaceuticals Inc. (CTXR) announced that it had entered into definitive agreements for the issuance of 21.4 million shares of its common stock and accompanying warrants to purchase up to the same number of common shares at a purchase price of $0.70 per unit (consisting of one share of common stock and one warrant). The warrants have an exercise price of $0.75 per share, exercisable six months from the date of issuance, and expire in five years (presumably from the date of issuance). Closing of the offering is expected to occur on or about April 30, 2024.

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Initiating Coverage of Pfizer (PFE)

Buy Rating. Price Target of $30.

As the COVID-19 pandemic receded, Pfizer’s sales and profits fell sharply.  Combined sales and alliance revenues of COMIRNATY, the COVID vaccine, and PAXLOVID, the COVID oral antiviral, fell 78% to $12.5 billion in 2023.  Some of the declines were due to one-time inventory management issues associated with the transition from governmental emergency use authorization to commercial use.  Nevertheless, the sales drop had a big impact on Pfizer’s bottom line.  2023 GAAP diluted EPS was $0.37, down from $5.47 in 2022 and adjusted (non-GAAP) diluted EPS was $1.84, down from $6.58.

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AT&T (T) 23Q4 Update

AT&T reported 23Q4 GAAP EPS of $0.30, compared with last year’s loss of $3.20.  My estimate was $0.55.  The shortfall vs. my estimate was due to a $589 million impairment charge, lower gross margin, higher SG&A expense and a $1.7 billion actuarial loss on pensions.  These negative factors were partially offset by a lower than anticipated tax rate.  Non-GAAP EPS was $0.54, below last year’s and my estimate of $0.61.  Free cash flow was $6.4 billion in the quarter, topping my estimate of $6.2 billion.

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Notes and Analysis from EEI’s 2024 Wall Street Briefing

The Edison Electric Institute’s 2024 Wall Street Briefing was held on February 20, 2024.  The meeting came after the electric utility sector’s disappointing performance in 2023.  The EEI Index, a composite total return measure for all 39 EEI member companies, declined 8.7% in 2023, much worse than the total returns of 26.3% for the S&P 500 and 16.4% for the S&P Mid-Cap 400.  Utilities was the best performing S&P 500 sector in 2022 (even though it posted a low-single digit loss); but it was the worst performing by far in 2023.

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Baker Hughes (BKR) 23Q4 Update

BKR reported 23Q4 GAAP diluted EPS of $0.43 vs. 22Q4’s $0.18 and my estimate of $0.43.  Non-GAAP EPS was $0.51 compared with $0.18 last year and my estimate of $0.47.  Revenues of $6.84 billion rose 15.7% vs. 22Q4, in line with my projections. Orders of $6.9 billion fell 13.8% YOY, due to a 47% drop in Gas Technology Equipment (GTE) orders.  Free cash flow was $633 million vs. $657 million in 22Q4.

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Citius Pharmaceuticals 23Q4 Update

Citius Pharmaceuticals (CTXR) posted a 23Q4 loss of $11.1 million or $0.07 per share, $0.01 more than my estimate, mostly because of higher than expected stock-based compensation and $1.15 million for a deemed dividend associated with the one-year extension of the exercise period for certain outstanding warrants.  Both are non-cash charges.  R&D expense declined by about $1 million sequentially and YOY, but administrative expenses increased.  With the completion of the Mino-Lok Phase 3 trial, Citius’s expenses are shifting more to activities associated with the launches the LYMPHIR and Mino-Lok.

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Hewlett Packard Enterprise (HPE) 23Q4 Update

HPE reported 23Q4 GAAP diluted EPS of $0.49 vs. 22Q4’s loss of $0.23 and my estimate of $0.38.  Non-GAAP EPS of $0.52 was a nickel below last year and three cents above my estimate of $0.49.  Net revenue of $7.35 billion was down 6.6% from 22Q4 but down only 0.3% from my estimate of $7.38 billion.

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New Jersey Resources (NJR) 23Q4 Update

23Q4 GAAP EPS was $0.38 and net financial earnings per share (NFEPS), a non-GAAP measure, was $0.30 per basic share.  That compares with 22Q4 GAAP EPS of $0.56 and NFEPS of $0.50.  I had anticipated GAAP EPS of $0.30 and NFEPS of $0.31.  The consensus estimate was $0.35.

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Mistras Group (MG) 23Q3 Update

Mistras Group reported 23Q3 EPS of ($0.34) vs. 22Q3’s $0.14 and my estimate of $0.19.  The net loss was due to a $13.8 million goodwill impairment charge taken against its International business and $2.7 million of reorganization charges associated with Project Phoenix.  On an after-tax basis, these charges reduced EPS by $0.52.  Excluding the charges, Mistras’s adjusted EPS was $0.18.

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Campbell Soup (CPB) 24Q1 Update

Campbell Soup Company (CPB) reported 24Q1 diluted GAAP EPS of $0.78, below last year’s $0.99 and also below my estimate of $0.82.  Non-GAAP EPS was $0.91, below last year’s $1.02, but above my estimate of $0.85.  Net sales were $2.52 billion, 2.2% below 23Q1 and below my estimate.

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GE Healthcare Technologies (GEHC) 23Q3 Update Report

GEHC reported 23Q3 revenues of $4.82 billion, up 5.4% YOY.  Revenues increased 6% organically.  Organic orders increased 1%.  Product sales grew 5.8%; while services sales rose 4.6%.  All segments posted revenue gains, except for Ultrasound, which was up against a tough prior year comparison.

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Toll Brothers (TOL) 23Q4 Update Report

Toll Brothers’ 23Q4 EPS was $4.11, down 27% from 22Q4’s $5.63, but above my estimate of $3.51 (and the consensus of $3.72).  22Q4 included a $103 million ($0.91 per share) benefit from a litigation settlement.  Revenues fell 18.6% to $3.02 billion, also exceeding my estimate of $2.75 billion.  Deliveries of 2,755 units decreased 26.8% YOY.  The average sales price per unit rose 12.6% to $1.07 million.  Adjusted gross margin of 29.1% was 10 bp above 22Q4.  The SG&A expense ratio of 8.2% rose 50 bp.  New sales contracts surged 71.8% YOY to 2,038 units, exceeding my estimate of 1,939.  Ending backlog was down 18.8% in units and 21.7% in dollar value.  Based upon management’s guidance, I am projecting fiscal 2024 EPS of $12.03, down from 2023’s $12.36.  Management’s guidance on the SG&A expense ratio seems conservative, but projected unit deliveries assume a hefty increase in the backlog conversion ratio.

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Public Service Enterprise Group (PEG) 23Q3 Update

Public Service Enterprise Group (PEG) reported 23Q3 operating revenues of $2.46 billion, up 8.1% from $2.27 billion in 22Q3.  PSE&G’s operating revenues rose 2.4% to $1.99 billion.  PSEG Power & Other’s revenues increased 43.3% $0.5 billion, due to a decline in mark-to-market losses on derivative contracts.  23Q3 diluted GAAP EPS was $0.27 vs. $0.22 last year.  Non-GAAP operating EPS was $0.85 vs. $0.86.  23Q3 Non-GAAP EPS exceeded my estimate of $0.78.

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Merck (MRK) 23Q3 Update

23Q3 sales increased 3.0% to $16.0 billion.  Excluding currency and sales of Lagevrio, sales rose 8%.  The sales gain came from an increase of $0.9 billion in Keytruda and $290 million in Gardasil.

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Bristol-Myers Squibb (BMY) 23Q3 Update

23Q3 net revenue decreased 2.2% to $11.0 billion, as a 41% drop in Revlimid sales, due to LOE, was not entirely offset by growth across the rest of the portfolio.  Revenues from newly launched products rose 79% YOY and 19% sequentially, but the sales trajectories for Camzyos, Sotyktu and Abecma remain disappointing.  GAAP EPS of $0.93 was 25% above 22Q3 and better than my $0.85 estimate.  Non-GAAP EPS of $2.00 was a penny better than last year and above my estimate of $1.85. The consensus non-GAAP estimate was $1.77.

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AT&T (T) 23Q3 Update

AT&T reported 23Q3 GAAP EPS of $0.48, below last year’s $0.79 and also below my estimate of $0.55.  The primary cause of the shortfall vs. my estimate was a $604 million charge for impairments and restructuring that included a $450 million impairment charge against a satellite business in Latin America.  Excluding this and other specified items, non-GAAP EPS was $0.64, better than my estimate of $0.59.  Free cash flow was $5.2 billion in the quarter, slightly below my estimate of $5.3 billion.

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Organon (OGN) 23Q3 Update

23Q3 revenues were $1.52 billion, down 1.2% YOY and also down 1% at constant currency.  GAAP diluted EPS was $0.23, compared with 22Q3’s $0.90 and my estimate of $0.74.  Non-GAAP EPS of $0.87 was below last year’s $1.32 and my estimate of $1.09.  (The consensus estimate of $1.06.)

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American Water Works (AWK) 23Q3 Update

AWK reported 23Q3 EPS of $1.44, up from $1.63 in 22Q3 and my estimate of $1.61.  This quarter’s results included a $0.04 benefit from warm, dry weather.  22Q3’s weather benefit was $0.06.  Operating revenues increased 7.9% to $1.17 billion.  Billed water service volumes declined 2.5%.  The implied average price of water service rose 10.7%, mostly because of rate cases and infrastructure charges that became effective after Jan. 1.  Operating and maintenance expenses increased 3.7%, as the O&M cost ratio declined 100 bp to 32.6%.  Operating income rose 8.9% to $478 million, with a similar increase in net income.  As a result of the higher share count following March’s $1.7 billion equity issuance, EPS grew 1.5%.

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Baker Hughes (BKR) 23Q3 Update

BKR reported 23Q3 GAAP diluted EPS of $0.51 vs. a loss of $0.02 a year ago and my estimate of $0.35.  Non-GAAP EPS was $0.42 compared with $0.26 last year and my estimate of $0.35.  Revenues of $6.64 billion rose 23.7% vs. 22Q3, 3.3% better than my projections. Orders of $8.5 billion were up 13.9% sequentially and 40.4% YOY.  The excess in GAAP earnings vs. my projections was due mostly to an increase in operating income and fair value gains on investments.  BKR delivered $592 million of free cash flow in the quarter, compared with 22Q3’s $417 million.

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Campbell Soup (CPB) 23Q4 Update

23Q4 Results Exceed Expectations; Agrees to Acquire Sovos Brands; Maintaining Buy Rating; Lowering PT

Campbell Soup Company (CPB) reported 23Q4 diluted EPS of $0.56 above last year’s $0.32 and my estimate of $0.34.  Non-GAAP EPS was $0.50, below last year’s $0.57, but above my estimate of $0.47.  Net sales were $2.07 billion, 4.1% above 22Q4 and in line with my estimate.

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General Electric (GE) 23Q3 Update

GE reported 23Q3 revenues of $17.3 billion, up 19.9% year-over-year; GAAP EPS from continuing operations of $0.08, compared with 22Q3’s $0.29 loss; and non-GAAP EPS of $0.82 vs 22Q3’s ($0.17).  I had anticipated revenues of $15.4 billion, GAAP EPS of $0.49 and non-GAAP EPS of $0.60.

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A Quick Review of Economic Trends

Job Growth Rebounds; Wage Growth Slows.  The pace of job creation rebounded in September.  Payroll employment increased by 336,000, about twice the consensus estimate. Gains for August and July were both revised upward.  This was the largest monthly increase in payrolls since January.  Still, household employment rose by only 86,000, down from August’s 222,000 and the third straight month of smaller gains.   The unemployment rate held steady at 3.8%, as did the labor force participation rate at 62.8%.

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A Quick Review of Interest Rates and Inflation

The FOMC Pauses Again. At its September meeting, as expected, the FOMC held the target range for the Fed Funds rate steady at 5.25%-5.50%.  In the press release accompanying the statement, the Committee noted that while inflation remains elevated, tighter credit conditions for households and businesses will likely weigh on economic activity, hiring and inflation in the months ahead; but just how much is still uncertain.  The Committee also reaffirmed its commitment to maximum employment and 2% inflation over the long-run.

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A Quick Review of September’s Stock Market Trends

Stocks lost more ground in September, the second consecutive month of decline. The losses appear to be driven by the evolving sentiment that interest rates will remain higher for longer.  This caused valuation multiples to compress across almost all stocks.  For the month, both the S&P Composite 1500 and S&P 500 declined 4.9%; the Mid-Cap 400 lost 5.4% and the Small Cap 600 fell 6.2%.

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Hewlett Packard Enterprise (HPE) 23Q3 Update

HPE reported 23Q3 GAAP diluted EPS of $0.35 vs. 22Q2’s $0.31 and my estimate of $0.35.  Non-GAAP EPS of $0.49 was a penny above last year and two pennies above my estimate of $0.47.  Net revenue of $7.00 billion was up 0.7% over 22Q3 and 1.5% above my estimate.

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Diversified Healthcare Trust (DHC) 23Q2 Update

23Q2 GAAP loss was $0.30 per share and normalized FFO was $0.05 per share, an improvement over 22Q2’s loss of $0.46 and FFO of -$0.14.  The GAAP net loss was higher than the $0.24 loss that I projected, but normalized FFO was $0.02 better than my estimate of $0.03.  The Office Portfolio posted a decline in operating income both sequentially and YOY due to higher property operating expenses and declining rental income.  Senior Housing Operating Portfolio (SHOP) net operating income (NOI) was up sharply, due to gains in occupancy and rental rates.

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New Jersey Resources (NJR) 23Q3 Update

23Q3 GAAP EPS was $0.02 and net financial earnings per share (NFEPS), a non-GAAP measure, was $0.10 per basic share.  That compares with 22Q3 GAAP EPS of $0.14 and NFEPS of $0.04.  I had anticipated a GAAP loss of $0.07 and NFEPS of $0.07.  The consensus estimate was $0.05.  This was another solid quarter, according to management.

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Bluegreen Vacations Holding Corp. (BVH) 23Q2 Update

23Q2 net income attributable to BVH was $21.9 million or $1.07 per diluted share compared with 22Q2’s $17.8 million or $0.87.  Revenues grew 10.7% to $260.6 million, and costs and expenses rose 9.0% to $226.1 million.  SG&A expenses, a key focus of management, declined 0.7%.  Compared with my projections, revenues came in 0.8% lower, but costs and expenses were 5.1% lower, with SG&A expenses 12.1% below forecast.  BVH’s diluted EPS exceeded my estimate of $0.92 by 50%.

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Citius Pharmaceuticals (CTXR) 23Q3 Update

Citius Pharmaceuticals (CTXR) posted a 23Q3 loss of $8.5 million or $0.06 per share, $0.01 less than my estimate, mostly because of a $1.1 million decrease in R&D spending associated with all of its clinical programs (except for Halo-Lido, a proposed treatment for hemorrhoids, which was ramping up a Phase 2 clinical trial).  The decline in R&D expense was partially offset by a $0.7 million increase in general and administrative costs associated with pre-launch and market research activities for Lymphir, its oncology immunotherapy for the treatment of cutaneous T-cell lymphoma.  Interest income increased $0.2 million due to higher interest rates; but stock compensation expense rose by about the same amount.

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Organon & Co. (OGN) 23Q2 Update

23Q2 revenues were $1.61 billion, up 1.5% YOY and up 4% at constant currency.  GAAP diluted EPS was $0.95, better than 22Q2’s $0.92 and above my estimate of $0.87.  Non-GAAP EPS of $1.31 was higher than last year’s $1.25 and also above my estimate of $1.11 and the consensus estimate of $0.99.

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Mistras Group (MG) 23Q2 Update

Mistras Group reported 23Q2 EPS of $0.01, below 22Q2’s $0.15 and my estimate of $0.18.  Revenues of $176.0 million were down 1.7% vs. 22Q2’s $179.0 million and also below my estimate of $186.1 million.  The shortfall was attributed to a delay on a key defense contract.

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Public Service Enterprise Group (PEG) 23Q2 Update

Public Service Enterprise Group (PEG) reported 23Q2 operating revenues of $2.42 billion, up 16.6% from $2.08 billion in 22Q2.  PSE&G’s operating revenues were flat at $1.66 billion.  PSEG Power & Other’s revenues increased 40% $0.9 billion, due to a large positive swing in mark-to-market profits on derivative contracts, which more than offset declines in third-party and intercompany sales.

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Merck & Co. (MRK) 23Q2 Update

23Q2 sales increased 4.2% to $14.5 billion, but rose 11% excluding Lagevrio, a COVID-19 medicine.  The sales gain ex-Lagevrio was due to sales increases of $1 billion in Keytruda and $800 million in Gardasil.

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American Water Works 23Q2 Update

AWK reported 23Q2 EPS of $1.44, up from $1.20 in 22Q2 and my estimate of $1.18.  This quarter’s results included a $0.07 benefit from warm, dry weather.  Operating revenues increased 17.1% to $1.1 billion.  Billed water service volumes increased 3.7%, with gains of 6.0% in residential and 9.2% in public more than offsetting a 9.4% decline in industrial.  The implied average price of water service rose 10.5%, mostly because of $340 million in rate cases and infrastructure charges that became effective after Jan. 1.  Operating and maintenance expenses increased 11.4%, slower than revenues, due to continuing inflationary pressures. The O&M cost ratio therefore declined by 190 bp to 38.2%.  Operating income jumped 32.1% to $43 million, but a higher effective tax rate limited net income growth to a still strong 28.4%.  With a higher share count from March’s $1.7 billion equity issuance, EPS grew 20%.

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Bristol-Myers Squibb (BMY) 23Q2 Update

23Q2 net revenue dipped 5.6% to $11.2 billion, more than expected, mostly on a faster sales decline for Revlimid, which has lost exclusivity.  Opdivo sales rose at the slowest YOY pace since the early pandemic.  Revenues from newly launched products grew 79% YOY and 19% sequentially, but the sales trajectory for Camzyos and Sotyktu remains disappointing.  GAAP diluted EPS of $0.99, was up 49% over 22Q2 and in line with my estimate of $1.00; but non-GAAP EPS of $1.75 fell 9.5% YOY and was below my estimate of $2.04.

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GE Healthcare Technologies (GEHC) 23Q2 Update

GEHC reported 23Q2 revenues of $4.82 billion, up 7.4% YOY.  Revenues increased 9% organically.  Orders were also up 6% organically.  Equipment revenues grew 11%; while services rose 1%.  The strong growth in equipment augurs well for services revenue growth over time.  All segments posted revenue gains, led by Pharmaceutical Diagnostics (up 19%).  Patient Care Solutions’ revenues increased 8%, Imaging was up 7% and Ultrasound eked out a 1% gain (up 3% excluding currency).

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General Electric (GE) 23Q2 Update

GE reported 23Q2 revenues of $16.7 billion, up 18.2% year-over-year; GAAP EPS from continuing operations of $0.91, compared with 22Q2’s $1.09 loss; and non-GAAP EPS of $0.68 vs 22Q2’s $1.14.  I had anticipated GAAP EPS of $0.23 per share and non-GAAP EPS of $0.46.

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Baker Hughes (BKR) 23Q2 Update

BKR reported 23Q2 GAAP diluted EPS of $0.40 vs. a loss of $0.84 a year ago and my estimate of $0.27.  Non-GAAP EPS was $0.39 compared with $0.11 last year and my estimate of $0.33.  Revenues of $6.3 billion rose 25.1% vs. 22Q2, 1% better than my projections. Orders of $7.5 billion were down 2% sequentially but up 28% YOY.  The excess in GAAP earnings vs. my projections was due entirely to gains on equity investments, as the company wrote up the value of some of its New Energy investments.  BKR delivered $623 million of free cash flow in the quarter, compared with 22Q2’s $147 million.

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Initiating Coverage on AT&T (T)

AT&T reported 23Q2 results that slightly exceeded guidance and consensus estimates.  The results also raised confidence that the company can achieve its 2023 free cash flow target of $16 billion.

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Citius Pharmaceuticals (CTXR) 23Q2 Update Report

Citius Pharmaceuticals (CTXR) posted a 23Q2 loss of $0.07 per share, $0.02 more than I had anticipated, mostly because of higher R&D spending associated with the ongoing clinical trials of Mino-Lok and Halo-Lido and also due to pre-launch and market research costs associated with I/ONTAK.

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Bluegreen Vacations Holding Corp. (BVH) 23Q1 Update

23Q1 net income attributable to shareholders was $11.5 million or $0.71 per diluted share, compared with 22Q1’s $16.0 million or $0.76 per share.  Revenues grew 12.3% to $219.1 million, but operating expenses rose 17.4% to $199.2 million, with double-digit increases in all expense categories.  Interest expense more than doubled, due to additional debt taken on in the recent share tender and higher interest rates.  The decline in EPS occurred despite a 22.5% decline in average shares outstanding.

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GE Healthcare Technologies (GEHC) 23Q1 Update

GEHC reported 23Q1 revenues of $4.71 billion, up 8.4% YOY.  Excluding currency, revenue increased 12.4%.  Operating income rose 9.8% to $559 million.  Incremental interest expense from debt taken on in the spin-off plus an increase in the effective tax rate from 25% to 30% more than offset a big increase in non-operating benefit income.  Thus, net income declined 4.7% in the quarter to $372 million.

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Campbell Soup Co. (CPB) 23Q3 Update

Campbell Soup Company (CPB) reported 22Q3 EPS of $0.53 below last year’s $0.62 and my estimate of $0.61.  Net sales were $2.23 billion, 4.6% above 22Q3 and in line with my estimate.  Diluted Non-GAAP EPS was $0.68, down 3.1% YOY and a penny below my estimate of $0.69.

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Hewlett Packard Enterprise (HPE) 23Q2 Update

HPE reported 23Q2 GAAP diluted EPS of $0.32 vs. 22Q2’s $0.19 and my estimate of $0.31.  Non-GAAP EPS of $0.52 increased 18% over last year’s figure and my estimate of $0.45.  Net revenue of $6.97 billion was up 3.9% over 22Q2, but below the low end of $7.1 billion of management’s guidance.

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Toll Brothers (TOL) 23Q2 Update

Toll Brothers’ 23Q2 EPS was $2.85, up 54% from 22Q2’s $1.85 and above my estimate of $1.87.  Revenues increased 10.1% to $2.51 billion and exceeded my estimate of $2.17 billion.  Deliveries of 2,492 units increased 3.5% exceeding management’s guidance.  The average sales price rose 10.0% to $999,200, above my estimate of $990,000.  Adjusted gross margin of 28.3% was 130 bp above guidance and my estimate.  The SG&A expense ratio of 9.1% was down 160 bp from 22Q2.

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Mistras Group (MG) 23Q1 Update

Mistras Group reported a 23Q1 loss of $0.17, slightly better than 22Q1’s $0.18 loss, but wider than my estimate of a $0.08 loss.  Revenues of $168.0 million were 3.9% above 22Q1’s $161.7 million and also above my estimate of $166.0.  Excluding the impact of unfavorable foreign exchange, the YOY increase in revenue was 5.5%.

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New Jersey Resources (NJR) 23Q2 Update

NJR reported 23Q2 GAAP net income of $1.13 per diluted share and net financial earnings (NFE), a non-GAAP measure, of $1.16 per basic share.  That compares with 22Q2 GAAP net income of $1.00 per share and NFE per basic share (NFEPS) of $1.36.  I had anticipated GAAP EPS of $1.19 and NFEPS of $1.20.  The consensus NFEPS estimate was $1.19.  Management said that the company’s performance was “solid” and reaffirmed its fiscal 2023 NFE guidance of $2.62-$2.72.

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Organon & Co. 23Q1 Update

23Q1 revenues were $1.538 billion, down 1.9% year-over-year, but up 3% at constant currency.  GAAP diluted EPS was $0.69, below 22Q1’s $1.36 and below my estimate of $0.88.  Non-GAAP EPS of $1.08 was below last year’s $1.65 and also below my estimate of $1.15, which was in line with consensus.

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Merck (MRK) 23Q1 Update

23Q1 sales fell 9.8% to $14.5 billion, but rose 13.5% excluding Lagevrio, a COVID-19 medicine whose sales have fallen sharply as the pandemic has receded.  The sales gain ex-Lagevrio was due entirely to a $1 billion increase in Keytruda sales and a $500 million increase in Gardasil sales.

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General Electric (GE) 23Q1 Update

GE reported 23Q1 revenues of $14.5 billion, up 14.3% year-over-year; GAAP EPS from continuing operations of $5.61, compared with 22Q1’s $1.17 loss; and non-GAAP EPS of $0.27, reversing 22Q1’s $0.09 loss.  I had anticipated a GAAP loss of $0.14 per share and non-GAAP EPS of $0.14.

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Baker Hughes (BKR) 23Q1 Update Report

BKR reported 23Q1 GAAP EPS of $0.57 vs. $0.08 a year ago and my estimate of $0.19.  Non-GAAP EPS was $0.28 compared with $0.15 last year and my estimate of $0.29.  Revenues of $5.7 billion rose 18.2% vs. 22Q1, 4% better than my projections. Orders of $7.6 billion were down 5% sequentially but up 12% YOY.  The excess in GAAP earnings vs. my projections was due entirely to gains on equity investments, specifically strong recoveries in the fair values of its investments in C3.ai and ADNOC.  The company delivered $177 million of free cash flow in the quarter, compared with 22Q1’s free cash burn of $147 million (before acquisition expenditures).

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Public Service Enterprise Group (PEG) 23Q1 Update

Public Service Enterprise Group (PEG) reported 23Q1 operating revenues of $3.76 billion, up 62.3% from $2.31 billion in 22Q1.  The increase was due to a $1.64 billion surge in net mark-to-market gains on derivatives at PSEG Power, which more than offset modest declines in Power’s wholesale electricity sales volumes and capacity revenue.  PSE&G’s operating revenues rose 0.4% to $2.29 billion, as an 8.4% rise in transmission revenues was substantially offset by lower electric and gas distribution revenues.

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Citius Pharma (CTXR) Completes $15 Million Direct Registered Offering

Last night, Citius Pharmaceuticals (CTXR) reported that it had completed its 12.5 million share direct offering, issuing 12.5 million shares at $1.20 per share with attached warrants exercisable at $1.50 per share. In total, the offering generated gross proceeds of $15 million, with net proceeds to Citius of just under $14 million after the $1 million placement agent’s fee.

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Bristol-Myers Squibb (BMY) 23Q1 Update

23Q1 revenues declined 2.7% to $11.3 billion, less than 22Q4’s decline, but were 3% higher than projected.  Sales of Eliquis rose 27.3% sequentially and 6.6% YOY to $3.4 billion.  Revlimid sales fell 22.6% and 37.4%, respectively, due to patent expiry.  GAAP diluted EPS was $1.07, up 81.3% over 22Q1’s $0.59 and 11.5% above my estimate of $0.96.  Non-GAAP EPS was $2.05, up 4.3% over 22Q1’s $1.96 and three cents better than my estimate of $2.02.  The big jump in GAAP EPS was due mostly to a $1 billion positive swing in other income, most of which was classified as exceptional and therefore excluded from non-GAAP results.

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American Water Works (AWK) 23Q1 Update

AWK reported 23Q1 EPS of $0.91, compared with $0.87 in 22Q1 and my estimate of $0.83.  Operating revenues increased 11.4% to $938 million.  Billed water service volumes increased 0.4%, with gains among industrial and commercial customers more than offsetting a 1.0% decline in residential volume.  The implied average price of water service rose 8.4%, due mostly to $279 million in rate cases and infrastructure charges that became effective after Jan. 1.  Operating expenses increased 4.8% due primarily to inflationary pressures which raised the cost of fuel, power and chemicals.  Operating income increased 19.9% to $295 million, but that was partially offset be a 15% increase in interest expense, lower pension income and a 150 bp increase in the effective tax rate.  Net income rose 7.6% to $170 million, but a higher share count, due to the successful $1.7 billion equity offering in March, restricted the increase in diluted EPS to $5.3% or $0.91 per share.

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Hewlett Packard Enterprise (HPE) 23Q1 Update

HPE reported 23Q1 GAAP diluted EPS of $0.38 vs. 22Q1’s $0.39 and my estimate of $0.37.  Net revenue of $7.81 billion was up 12.2% over 22Q1’s $6.96 billion and my estimate of $7.33 billion.  All of HPE’s business segments recorded revenue gains in the quarter, with especially strong increases in High Performance Computing (up 28%) and Intelligent Edge (up 24.6%).  However, free cash flow (CFOA plus CFIA) was negative $1.5 billion, compared with negative $0.6 billion in the prior year period.

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Campbell Soup Company (CPB) 23Q2 Update

Campbell Soup Company (CPB) reported stronger than expected 23Q2 net sales and profits (vs. my estimates).  Net sales were $2.49 billion, 12.5% above 22Q1 and 7% above my estimate.  Diluted Non-GAAP EPS was $0.80, up 6% YOY and better than my $0.75 estimate.

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New Jersey Resources (NJR) 23Q1 Update

NJR reported 23Q1 GAAP net income of $1.19 per diluted share and net financial earnings (NFE), a non-GAAP measure, of $1.14 per basic share.  That compares with 22Q1 GAAP net income of $1.16 per share and NFE per basic share (NFEPS) of $0.68.  I had anticipated GAAP EPS of $0.88 and NFEPS of $0.89.  The consensus NFEPS estimate was $0.72.

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Toll Brothers (TOL) 23Q1 Update

Toll Brothers’ 23Q1 EPS was $1.70, up 38% from 22Q1’s $1.24 and above my estimate of $1.37.  Revenues decreased 0.6% to $1.78 billion, below my $1.80 billion.  Deliveries of 1,826 units fell 5.3%, but topped my estimate.  The average sales price rose 9.5% to $958,100, below my $960,000.  Adjusted gross margin of 27.5% was 50 bp above guidance and my estimate.  The SG&A expense ratio of 11.9% was down 90 bp from 22Q1 and my estimate.

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Mistras Group (MG) 22Q4 Update

Mistras Group reported 22Q4 EPS of $0.09, above 21Q4’s $0.00 and my estimate of $0.02.  Revenues of $168.2 million were 1.7% below 21Q4’s $171.2 million and also below my estimate of $171.4.  The results met management’s top line and exceeded its bottom-line guidance.

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Citius Pharmaceuticals (CTXR) 23Q1 Update

Citius Pharmaceuticals (CTXR) posted a 23Q1 loss of $0.02 per share, better than I had anticipated, mostly because of a $3.6 gain on the sale of net operating loss carryforwards (equivalent to $0.02 per share) from the State of New Jersey and also due to modestly lower-than-expected operating costs.  The lower level of operating costs is apparently expected to continue, as the company now says that it has sufficient cash to fund its operations until February 2024.  (Previously, it had indicated December 2023.)

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Organon & Co (OGN) 22Q4 Update

22Q4 revenues were $1.485 billion, down 7.4% year-over-year, but up 1% at constant currency.  GAAP diluted EPS was $0.43, below 21Q4’s $0.80 and below my estimate of $0.54.  Non-GAAP EPS of $0.82 was below last year’s $1.18 and a penny below my estimate of $0.83.

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Merck & Co., Inc. 22Q4 Update

22Q4 sales rose 2.2% to $13.8 billion, as a 19.6% gain in KEYTRUDA was mostly offset by declines in Gardasil, Lagevrio and Januvia/Janumet, among others.  GAAP diluted EPS declined 21.3% to $1.19 and non-GAAP diluted EPS declined 15.0% to $1.53.  The decline was due mostly to a 23% jump in R&D expense, which more than offset improvements in gross margin and the SG&A expense ratio.  Management said that the increase in operating costs was due to increased investment to support its portfolio and pipeline.  Merck’s revenues were 2.1% above my estimate; its GAAP EPS was $0.01 better; and non-GAAP EPS exceeded my $1.47 estimate by $0.15 and also beat consensus by $0.08.

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Bristol-Myers Squibb (BMY) 22Q4 Update

22Q4 revenue declined 4.8% to $11.4 billion, more than 22Q3’s decline, mostly because of a drop in Revlimid sales due to patent expiry.  GAAP diluted EPS was $0.95, down from $1.07 last year but ahead of my estimate of $0.67, due mostly to lower IPRD and intangibles amortization costs.  Non-GAAP EPS of $1.82 was slightly below 21Q4’s $1.84, but also above my estimate of $1.75.

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Housing Market Update – March 2023

Housing market data from the U.S. Commerce Dept. and others show sales and production leveled off and even recovered a bit in the final months of 2022 and first two months of 2023.  The seasonally-adjusted annualized rate (SAAR) of single-family housing starts has averaged 840,000 units since October, while single-family permits have averaged 770,000.  With housing construction still running high relative to the pace of starts, however, housing production could fall further in the months ahead (but probably after the spring selling season).

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American Water Works (AWK) 22Q4 Update

AWK reported 22Q4 EPS of $0.81, compared with $3.56 in 21Q4 (or $0.86 excluding a $2.70 gain for the sale of the Homeowner Services (HOS) business).  Operating revenues decreased 2.1% to $931 million.  Besides the sale of HOS, 22Q4’s lower revenues and earnings were due in part to the sale of New York American Water.  My 22Q4 estimate was $0.78.  An 18.6% increase in operating income was more than offset by higher net interest expense, a negative swing in other income (expense) and higher income tax expense (net of the HOS gain on sale).

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General Electric (GE) 22Q4 Update

GE announced 22Q4 revenues of $21.8 billion, up 7.3% year-over-year, GAAP EPS of $1.93, compared with 21Q4’s $3.26 loss, and non-GAAP EPS of $1.24, up 52% over 21Q4’s $0.82.  I had anticipated a GAAP EPS of $0.38 per share and non-GAAP EPS of $1.26.

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GE Healthcare Technologies (GEHC) 22Q4 Update

In its first earnings release since being spun off from General Electric, GEHC reported revenues of $4.9 billion, up 8% YOY (and up 13%, net of acquisitions and currency).  Net income from continuing operations was flat at $567 million.  GAAP EPS was $1.21 and adjusted EPS, excluding mostly restructuring costs and amortization of acquisition-related intangible assets, was $1.31.  I had projected revenues of $4.8 billion and GAAP EPS of $1.06.

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Baker Hughes (BKR) 22Q4 Update

On Jan. 23, BKR reported 22Q4 GAAP EPS of $0.18 vs. $0.32 a year ago and my estimate of $0.29.  Non-GAAP EPS was $0.38 compared with $0.25 last year and my estimate of $0.41.  Revenues of $5.9 billion increased 7.7% vs. 21Q4 and were in line with my estimates.

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Citius (CTXR) at Sidoti

I recently had the opportunity to view a presentation and ask questions of Leonard Mazur at the Sidoti MicroCap Conference on January 18.  Mr. Mazur helped fill in some of the gaps in my knowledge about company and its plans going forward.  Here is what I learned:

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2022 Large Cap Performance Analysis

Large cap stocks, as measured by the Lark Research Large Cap Index (the “Index”)[1] which mirrors the S&P 500, posted a decline of 19.5% in 2022.  As in previous years, most of the performance was driven by a handful of stocks.  In 2022, those stocks – Alphabet (GOOG, GOOGL), Apple (AAPL), Amazon (AMZN), Meta Systems (META), Microsoft (MSFT), NVIDIA (NVDA) and Tesla (TSLA) – registered a combined loss of 40.2%, dominating (or skewing) the performance of the entire Index.

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Citius Pharmaceuticals (CTXR) 22Q4 Update

In 2022, Citius Pharmaceuticals completed its Phase 3 trial for I/ONTAK, indicated for the treatment of persistent or recurrent cutaneous T-cell lymphoma (CTCL) and submitted its Biologics Licensing Application to the FDA.  It has a PDUFA target date of July 28, 2023.  It initiated a clinical collaboration with the University of Pittsburgh to evaluate I/ONTAK in combination with KEYTRUDA (pembrolizumab).   CTXR also advanced its Phase 3 trial for Mino-Lok (a treatment to salvage infected catheters), expanding enrollment toward the FDA’s requirement of observing 92 catheter failure events.  However, it said that the expansion will delay the completion of the clinical trial for some months.  It also initiated a Phase 2b trial for its hemorrhoid treatment candidate, Halo-Lido, and expects a data readout during 23H2.

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Toll Brothers (TOL) 22Q4 Update

Toll Brothers reported fiscal 22Q4 results that were much stronger than I anticipated.  22Q4 diluted earnings per share were $5.63 up 86% from $3.02 in 21Q4 and better than my estimate of $3.93.  Excluding a $140 million (estimated $0.94 per share) gain on a legal settlement, adjusted EPS of $4.69 was still well ahead of last year and my estimate.

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GE Healthcare Technologies (GEHC)

GE Healthcare Technologies (GEHC) will be spun-off from General Electric Company (GE) on January 4, 2023.  Under the terms of the spin-off, GE shareholders will receive one share of GEHC for every three shares of GE that they own.  In total, GE shareholders will receive an 80.1% equity stake in GEHC.  GE will retain the remaining 19.9% interest, which it plans to divest over time.

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Hewlett Packard Enterprise (HPE) 22Q4 Update

HPE reported a 22Q4 GAAP loss of $0.23 per diluted share vs. earnings of $0.31 in 21Q4.  My estimate called for earnings of $0.37.  All of the shortfall was due to a $905 million ($0.68 per share) goodwill impairment charge taken against its High Performance Computing and Artificial Intelligence (HPC & AI) and Software businesses.  Excluding this charge and other adjustments, its non-GAAP EPS was $0.57, vs. $0.50 last year and my estimate of $0.57.  Net revenue of $7.87 billion exceeded 21Q4’s $7.35 billion and my estimate of $7.57 billion.  Free cash flow of $2.0 billion, was up 5.3% YOY and also matched my estimate.

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Campbell Soup (CPB) 23Q1 Update

Campbell Soup Company (CPB) reported much stronger than expected 23Q1 net sales and profits (vs. my estimates).  Net sales were $2.58 billion, 15% above 22Q1 and 9% above my estimate.  Diluted Non-GAAP EPS was $1.02, up 14% YOY and better than my $0.69 estimate.

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November Housing Market Update

Housing market data from the U.S. Commerce Dept. and others show sales and production falling at a rapid rate.  The seasonally adjusted annualized rate (SAAR) of single-family housing starts and building permits has fallen for eight consecutive months by about 30%.  With housing construction still running high relative to the pace of starts, it seems likely that housing production will fall further in the months ahead.

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New Jersey Resources (NJR) 22Q4 Update

NJR reported 22Q4 GAAP net income of $0.56 per diluted share and net financial earnings (NFE), a non-GAAP measure, of $0.50 per basic share.  That compares with the 21Q4 GAAP loss of $0.01 per share and NFE per basic share (NFEPS) of $0.17.

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Mistras Group, Inc. (MG) 22Q3 Update

Mistras Group reported 22Q3 EPS of $0.14, above 21Q3’s $0.11 and my estimate of $0.23.  Revenues of $178.5 million were 2.2% above the year earlier period but also below my expectations.  My projections were in line with the company’s implied guidance.

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Bluegreen Vacations Holding Corp. (BVH) 22Q3 Update

22Q3 net income attributable to shareholders was $23.0 million or $1.19 per diluted share, compared with 21Q3’s $23.1 million or $01.06 per share.  Revenues grew 17.0% to $250.8 million, but operating expenses rose 19.8% to $152.9 million.  The increase in EPS was due to a 12.2% reduction in weighted average shares outstanding as a result of share buybacks completed this year.

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AlerisLife Inc. (ALR) 22Q3 Update

AlerisLife reported a 22Q3 net loss of $8.5 million or $0.27 per share, better than the 22Q2 loss of $8.8 million or $0.28 per share and the 21Q3 loss of $10.2 million or $0.32 per share.  I had estimated a loss of $7.5 million or $0.24 per share.

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Diversified Healthcare Trust (DHC) 22Q3 Update

22Q3 GAAP loss was $0.34 per share and normalized FFO was $0.06 per share, below my forecast of $0.23 and +$0.01, respectively.  The Office Portfolio met expectations, but Senior Housing Operating Portfolio (SHOP) results were disappointing as improved occupancy and higher rental rates were more than offset by significantly higher operating expenses.  Non-Segment results were also below expectations.

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Organon & Co. (OGN) 22Q3 Update

22Q3 revenues were $1.537 billion, down 3.9% year-over-year, but up 3% at constant currency.  GAAP diluted EPS was $0.92, below 21Q3’s $1.27, but above my estimate of $0.82.  Non-GAAP EPS of $1.36 was below last year’s $1.61, but also above my estimate of $1.08.

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Merck & Co (MRK) 22Q3 Update

22Q3 sales rose 13.7% to $15.0 billion with double-digit gains in KEYTRUDA and GARDASIL/GARDASIL 9.  GAAP diluted EPS fell 29.0% to $1.28; but non-GAAP diluted EPS rose 5.6% to $1.85.  The company recorded an $887 million ($0.27 per share) asset impairment charge related to ArQule, Inc., which was acquired in 2020.  It also recorded $690 million in upfront and option payments on three collaborations.  Merck’s revenues were 8.4% above my estimate of $13.8 billion. Its GAAP EPS was $0.07 below my estimate of $1.34; but non-GAAP EPS exceeded my $1.64 estimate by $0.21.

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American Water Works (AWK) 22Q3 Update

AWK reported 22Q3 EPS of $1.63, up 6.5% from $1.53 in 21Q3 and above my estimate of $1.52.  Operating revenues decreased 0.9% to $1.08 billion, as regulatory rate increases were more than offset by lost revenues from the sales of the Homeowner Services (HOS) and New York American Water (NYAM) businesses.

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Public Service Enterprise Group (PEG) 22Q3 Update

Public Service Enterprise Group (PEG) reported 22Q3 operating revenues of $2.27 billion, up 19.4% from 21Q3.  The increase in revenues was due mostly to higher gas supply sales to third parties at PEG Power and higher commodity revenues, including higher electric sales volumes and higher gas BGSS prices at PSE&G.  GAAP EPS was $0.22 vs. a loss of $3.10 a year ago.  Most of last year’s loss was due to an impairment charge associated with the sale of its fossil generating assets.  On a non-GAAP basis, operating earnings were $0.86, down from $0.98 in 21Q3.

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Bristol-Myers Squibb (BMY) 22Q3 Update

22Q3 revenue declined 3.5% to $11.2 billion, mostly because of a drop in Revlimid sales due to patent expiry.  GAAP EPS increased 8.5% to $0.75, but that was slightly below my estimate of $0.77, due mostly to a higher income tax provision.  Non-GAAP EPS of $1.99 was above 21Q3’s $1.93 and my estimate of $1.84, as more expense items were classified as specified and thus excluded in the calculation of Non-GAAP net income and EPS.

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General Electric (GE) 22Q3 Update

GE announced 22Q3 revenues of $19.5 billion, up 0.5% year-over-year, a GAAP loss per share of $0.14, compared with 21Q3’s $0.54 profit, and non-GAAP EPS of $0.35, below 21Q3’s $0.53.  I had anticipated a GAAP EPS of $0.44 per share and non-GAAP EPS of $0.75.

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Baker Hughes (BKR) 22Q3 Update

BKR reported a 22Q3 GAAP net loss of $0.02 per share vs. 21Q3’s profit of $0.01.  Non-GAAP adjusted EPS was $0.26 vs. $0.16.  I had anticipated 22Q3 GAAP EPS of $0.18 and Non-GAAP EPS of $0.30.  BKR’s 22Q3 non-GAAP EPS exceeded the consensus estimate by a penny.

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Initiating Coverage of New Jersey Resources Corp (NJR)

NJR reported 22Q3 GAAP net income of $0.14 per diluted share and a net financial loss (a non-GAAP measure) of $0.04.   That compares with the 21Q3 GAAP loss of $1.16, owing to an impairment charge on its investment in the proposed Penn East pipeline, and a net financial loss of $0.15.  The company increased its full year net financial earnings (NFE) guidance by $0.10 to $2.40-$2.50, the second such increase this year.

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September Housing Market Update

  • The average rate on the 30-year mortgage has risen above 6.00% in response to the latest hike in the Fed Funds target rate.  Freddie Mac’s Primary Mortgage Market Survey pegged the average rate at 6.29% this week.
  • The CME’s Fed Watch tool now shows a 73% probability of a 75 bp rate hike and a 27% probability of a 50 bp hike in November.  FOMC participants expect the Fed Funds target to rise to about 4.40% by year-end, which is a 125 bp increase from the current level.  That could be achieved with increases of 75 bp in November followed by 50 bp in December.  Incoming economic data will influence the Committee’s decisions.
  • After outperforming the broader market from early April to early August, homebuilding stocks have since underperformed.  Since the mid-August highs, my Index has fallen 17.5%, worse that the 13.7% decline in the S&P 500 and the 16.7% decline in the Russell 2000.  The Index is still holding at the “possible support” range, but just barely.  Like the broader market, homebuilding stocks have now fallen back to their June lows.  A break below this level could signal another consequential downward move.
  • In spite of the FOMC’s rate hike and the rise in mortgage rates, homebuilding stocks outperformed the broader market last week.  My Index declined 2.7%, less than the drops of 4.7% in the S&P 500 and 6.6% in the Russell 2000.  About half of the decrease in the Index was due to steeper drops in Beazer Homes USA (BZH) and Hovnanian Enterprises (HOV), both of which are more vulnerable to rising interest rates owing to their higher debt levels.  D.R. Horton (DHI) and Lennar Corp. (LEN) were up on the week.  NVR and PulteGroup (PHM) slipped about 0.5%.  This performance is encouraging but not definitive.
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Baker Hughes (BKR): Initiating Coverage

Five years after its merger with GE Oil & Gas, Baker Hughes Company (BKR) is adjusting to changes in its market environment, including the fallout from the war in Ukraine, supply chain disruptions, inflation and challenges and opportunities in the transition to a zero-carbon future.

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Campbell Soup (CPB) 22Q4 Update

Fiscal 22Q4 net sales of $2.0 billion increased 6.1% YOY.  GAAP diluted EPS was $0.32, below 21Q4’s $0.95.  Non-GAAP adjusted EPS of $0.56 exceeded 21Q4’s $0.52.  These results were generally in line with my expectations.

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Hewlett Packard Enterprise (HPE) 22Q3 Update

HPE’s 22Q3 GAAP diluted EPS was $0.31 vs. $0.29 in 21Q3 and better than my estimate of $0.26.  Non-GAAP EPS was $0.48, compared with $0.47 last year and my estimate of $0.46.  Net revenue of $6.95 billion exceeded 21Q3’s $6.90 billion, but was below my estimate.  Free cash flow of $587 million, was up 11.6% YOY and reversed 22Q2’s cash burn, but was also below my estimate.

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