Meritage Homes (MTH) 18Q1 Results

Meritage reported 18Q1 diluted EPS of $0.65 per share, down from $1.07 last year, but a penny ahead of consensus estimates.  Home closing revenue declined 4% to $698.7 million, as a 2% increase in unit closings was more than offset by a 6% decline in the average selling price to $396,000.  The decline in the average selling price was due mostly to a shift in mix to a higher proportion of entry level homes.

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AT&T (T) 18Q1 Results

AT&T reported diluted EPS of $0.56 per share, down from $0.75 a year ago.  Non-GAAP adjusted EPS of $0.86 per share was up slightly from $0.85 last year and in line with consensus estimates.   The difference between GAAP and non-GAAP EPS reflects amortization and integration costs associated with the Time Warner and other mergers and non-cash actuarial gains and losses on benefit plans.

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PulteGroup (PHM) 18Q1 Results

PulteGroup reported first quarter earnings of $166.8 million or $0.59 per share, even with a year ago, but still well ahead of the consensus estimate.  Revenues were just short of $2.0 billion, up 1.4% from the prior year.  Unit closings were essentially flat – 4,635 vs. 4,626 – but the average selling price increased 1.9% to $421,000.  Home sales revenues increased 2.0% to $1.95 billion, but land sales and other revenues and financial services revenues both declined.

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Arch Coal (ARCH) 18Q1 Results

Arch reported 18Q1 diluted EPS of $3.91, up from $2.75 in 17Q1 and well ahead of the consensus estimate of $2.71.  The gain in earnings came despite a 3.5% decline in revenues to $555.2 million, primarily because of lower expenses and ancillary items, including lower depreciation, an increase in the fair value of coal derivative contracts, lower amortization of acquired sales contract costs and lower selling and administrative expenses, partially offset by lower other operating income. Yet, Arch’s adjusted EBITDA (according to my definition) did improve from $101.7 million to $105.0 million, due entirely to cost management.

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Verizon (VZ) 18Q1 Results

Verizon reported 18Q1 GAAP earnings of $1.22 per share, better than last year’s $1.11.  Non-GAAP adjusted EPS of $1.20 were also up from $1.17 last year.  This year’s GAAP results benefited from a $0.02 gain on a pension adjustment related to the company’s voluntary termination program.  Last year’s results were hurt by $0.02 of acquisition-related costs and $0.04 of charges related to early debt retirement.  The $0.03 improvement in non-GAAP EPS was due to $0.07 in operational improvements partially offset by $0.04 of accounting-related costs from the implementation of new accounting standards on revenue recognition and lease accounting.

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Acme United Corp. (ACU) 18Q1 Results

The company reported diluted EPS of $0.24 per share, up from $0.21 a year ago.  Sales declined 1% to $31.4 million due mostly to a non-repeat of a large order from a distributor who was launching a first aid kit program in last year’s quarter.  On a constant currency basis, sales were flat.

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American Express 18Q1 Results: The Momentum Continues

Earnings of $1.80 per share included a $0.21 charge related to merchant fees litigation.  Excluding that charge, AXP’s 2019 first quarter EPS would have been $2.01, up from $1.86 a year ago and in line with market expectations.  Management reported solid growth in billings across all of its customer segments and geographies. Credit quality remained at “industry-leading” levels.

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Cloud Peak Energy: Valuable Assets But Little Income

On January 29, Cloud Peak Energy (“CPE”) announced that it had hired a team of professionals to help it review its capital structure and formulate restructuring alternatives. That followed its announcement last November that it was pursuing strategic alternatives, including possibly a sale of the company. These steps have been precipitated by the company’s weak financial performance and deteriorating liquidity, which prompted the disclosure in its 2018 annual financial statements of substantial doubt about its ability to continue as a going concern. On March 26, CPE’s shares were delisted from the NYSE because its share price had remained below the minimum $1 threshold for more than 30 consecutive days. (CPE shares now trade in the pink sheets under the symbol “CLDP.”)

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Back of the Envelope: The New Dow Chemical

DowDuPont, the chemical behemoth created in 2017 from the merger of The Dow Chemical Company and E.I. DuPont de Nemours and Company, is set to spin-off Dow Holdings (“New Dow” or DOW) on April 1.  This is the first of two planned steps to create three leading global publicly-traded companies:  New Dow will focus on material sciences; Corteva, which will be spun-off on June 1, on agriculture (seeds and crop protection); and the surviving company (“New DuPont”) on specialty products.

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Senior Housing Properties Trust Nears Restructuring/ Acquisition of Five Star

After reporting a 2018 fourth quarter loss of $23 million, negative EBITDA for the quarter of $12.5 million and a $51 million drawdown on its bank credit facility, it is clear that Five Star, SNH’s largest tenant, must obtain a significant rent concession if it is to continue as an independent company.  Additional asset sales could further delay a restructuring but only temporarily.

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