A key change at Brightcove since my last post has been the turnover at the top. In August 2017, after three consecutive quarters of earnings misses, Dave Mendels, who had served as CEO for more than four years, agreed with the Board to step down. Andrew Feinberg, Brightcove’s COO, stepped in as interim CEO.
Continue readingHomebuilder Stocks Fall as Optimism About Global Economic Growth Rises
Homebuilding stocks have been the best performing of the 150-odd sectors in the Dow Jones U.S. Total Market Index, up 44.4% over the past 12 months as of November 8. Last year, they declined sharply in the face of Federal Reserve rate increases; but they began to show signs of a bottom in late November, just ahead of the Fed’s decision to reverse course on interest rates.
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Posted in Consumer Discretionary, Housing, Real Estate
Tagged homebuilders, Homebuilding stocks, Toll Brothers
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Notes and Analysis from HPE’s 2019 Securities Analyst Meeting
At its 2019 Securities Analyst meeting (SAM) held in New York City on October 23, the senior management of Hewlett Packard Enterprise (HPE) said that the company was poised to enter the third phase of its evolution: pivoting to sustainable, profitable growth.
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Tagged Hewlett Packard Enterprise Company
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SNH Still Seems Behind Goal on Asset Sales
SNH has set a goal of $900 million in announced or closed asset sales in 2019. With more than nine months of the year gone, it has completed only $119.1 million in asset sales and has an estimated $125 million of pending sales. Thus, total announced or closed asset sales to date are roughly $244 million, which means that the Trust must announce another $654 million of asset sales in the remaining ten weeks of the year in order to reach its target. (If the $99 million in net proceeds that SNH received from the sale of RMR shares in July is counted toward the $900 million objective, it would have to sign up for $555 million of asset sales by the end of the year to reach its target.)
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Posted in DHC, Real Estate
Tagged Senior Housing Properties Trust
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Eliminating the RMR Discount
The five publicly-traded REITs that are managed by the RMR Group, Inc. (RMR), a Newton, Mass.-based property manager, have often traded at significant discounts to their peers. The discount has been attributed to the nature of the relationship between RMR and the REITs. RMR is an external REIT manager, which some claim raises potential conflicts of interest because the external manager can benefit at the expense of the managed REIT. For that reason, many analysts and investors prefer REITs that are internally managed, which they say better aligns the interests of management and shareholders.
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NYT Magazine Article on the Boeing 737 Max
The cover story in this week’s Sunday New York Times Magazine is “What Really Caused the Deadly Crashes of the Boeing 737 Max?“. While acknowledging that malfunctions caused the crashes, it also documents in detail the errors made by the crews of Indonesia’s Lion Air Flight 610 and Ethiopian Airlines Flight 302 that might have prevented them. It describes Lion Air’s dismal safety record and culture of corruption. It discusses the weaknesses and failures of the Maneuvering Characteristics Augmentation System (MCAS) that was incorporated in the Max to address certain design problems that can cause the aircraft to stall during takeoff. It also describes the global decline in “airmanship” – the ability of pilots to adjust intuitively to changes in aircraft performance and flight conditions – which was a contributing factor to these crashes.
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Posted in GE, Industrials
Tagged Boeing, General Electric
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A Review of the Markopolos Report on General Electric
On August 15, 2019, Harry Markopolos, who gained fame as the person who exposed the fraud perpetrated by Bernie Madoff, released a 175-page report entitled “General Electric, A Bigger Fraud Than Enron.” GE’s stock fell 11.3% on the day; but it has since regained all that it lost after GE, security analysts and the media criticized the analysis and conclusions of the report and questioned the motivations of Mr. Markopolos, who had entered into an agreement with an unnamed hedge fund to profit from a decline in GE’s share price. Although this tempest seems to have passed, I will offer some thoughts on the content of the Markopolos report and its potential implications for investors.
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Tagged Baker Hughes, General Electric, Markopolos
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A Reset for Senior Housing Properties Trust
In response to the financial difficulties of its primary tenant, Five Star Senior Living (FVE), Senior Housing Properties Trust (SNH) has been forced to negotiate a change in the structure of their business relationship. Specifically, SNH has agreed to cancel its five master leases with FVE and will instead have FVE manage the properties for a 5% annual fee. This move is a consequence of the nationwide building boom in senior housing communities over the past decade that has put downward pressure on occupancy rates. After providing some background on this issue, I will focus on the projected impact of this new business arrangement on SNH’s future financial performance. Complicating the analysis is SNH’s decision to sell $900 million of mostly non-core assets to upgrade its portfolio and reduce debt. SNH is among the earliest in its industry to address this problem and that should serve it well as others eventually are forced to come to grips with it.
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Posted in DHC, Real Estate
Tagged Five Star Senior Living, Senior Housing Properties Trust
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The Old and New Five Star
Five Star Senior Living (FVE) and its landlord Senior Housing Properties Trust (SNH) have previously announced a restructuring of their commercial arrangements whereby SNH will cancel the five master leases that cover 181 senior living and skilled nursing facilities currently operated by FVE. Under the new arrangement, FVE will manage those properties for SNH for a fee equal to 5% of gross property revenues and reimbursement of direct property operating costs. FVE will also have the opportunity to earn an annual incentive fee equal to 15% of the excess over targeted EBITDA for the properties up to a maximum of 1.5% of gross property revenues.
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Posted in ALR, Real Estate
Tagged Five Star Senior Living, Senior Housing Properties Trust
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A Solid First Half for Housing and the Builders
A typical analysis from policy makers, like the Federal Reserve, points out that activity in the housing market has declined so far this year; but that assertion focuses primarily on housing starts. A more complete picture from the national data shows that the housing market bounced back strongly in the 2019 first quarter from a steep 2018 fourth quarter slide. The housing market was also able to hold on to those gains in the 2019 second quarter.
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Posted in Consumer Discretionary, Housing, Real Estate
Tagged homebuilders, Homebuilding stocks
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Notes and Analysis from Merck’s Investor Day
On June 20, Merck held an investor day, its first in five years, to highlight its goals and objectives and provide a broad perspective on its five-year performance outlook. Although its blockbuster cancer treatment, KEYTRUDA (pembrolizumab), has been a spectacular success, investors have been concerned about whether the company has growth potential from other medicines in its pipeline, especially looking out to 2023 when the Januvia/Janumet franchise faces a steep slide in sales following patent expirations. During the presentation, management expressed confidence about the company’s growth prospects through 2023 and over the longer term.
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Tagged Merck, Pharmaceutical industry
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Bluegreen’s Share Price Plunges on Bass Pro Contract Cancellation
Shares of Bluegreen Vacations Corporation (BXG) received a double whammy in May from the parent company BBX Capital’s (BBX) decision to back out of its offer to buyback BXG’s public float – equal to 10% of outstanding shares – and by Bass Pro Shop’s decision to cancel its marketing arrangement with BXG. Since the May 22 close of trading, the day before BBX announced that it would not proceed with its plan to take BXG private, the stock has lost nearly 50% of its value.
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Posted in BVH, Real Estate
Tagged BBX Capital, Bluegreen Vacations
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A Solid 2019 First Quarter for New Home Sales
As anticipated, the market for new single-family houses rebounded from a steep 2018 fourth quarter slide to post modest gains in the 2019 first quarter against fairly strong 2018 first quarter levels. The primary driver of the housing rebound has been the decline in mortgage rates from the recent peak of 4.94% during the first week of November to 4.10% during the week of May 6, according to Freddie Mac. With unemployment low and consumer confidence high, many potential buyers do not want to lose the opportunity of homeownership (or trading up to a larger home). If economic conditions remain positive, the new homes market should see at least modest gains in 2019, especially as year-over-year comparisons become more favorable as the year progresses.
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The Outlook Begins to Improve (Gradually) for BHGE
The net income and EPS figures for the 2019 first quarter for Baker Hughes, a GE company, are confusing as presented. The company reported net income (before income or loss allocated to the non-controlling interest, which is GE) of $71 million, compared with a loss of $19 million in 18Q1.
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Posted in BKR, Energy, GE
Tagged Baker Hughes, General Electric
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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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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.
Continue readingAcme 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.
Continue readingAmerican 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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Tagged American Express
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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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Tagged Five Star Senior Living, Senior Housing Properties Trust
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Housing Market Update – February 2019
The outlook for housing (or more precisely, sentiment about the outlook for housing) has improved in recent weeks, primarily because of the decline in mortgage rates. The average rate on the 30-year mortgage has fallen by 57 basis points (bp) since mid-November from a peak of 4.94% to 4.37% last week (as of Feb. 14), according to Freddie Mac. That should bring more entry level buyers back into the market during the peak spring selling season which is just now getting underway. Improving sentiment can be seen in the latest reading of the NAHB/Wells Fargo Housing Market Index, which rose four points in February to 62, better than consensus expectations of 59. Since consumer confidence remains fairly high, there is a chance that house sales could bounce back sharply, if buyers rush to avoid missing out a second time.
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Posted in Consumer Discretionary, Housing, Market Commentary, Real Estate
Tagged Housing, Housing Market
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GE 18Q4 Results: Curb Your Enthusiasm
General Electric (GE) posted 2018 fourth quarter results that were viewed positively by the financial community primarily because there were no new major negative surprises. Although management gave an update on the company’s recent progress and certain aspects of its outlook, it declined to give specific guidance on 2019 earnings. It did not set a date for CEO Larry Culp’s presentation to the financial community. Mr. Culp said that 2019 should be viewed as more about the “how” than the “how much,” suggesting that the investment community should focus more in 2019 on the company’s achievements in addressing organizational, structural and execution issues and less on earnings. This is a clear indication that 2019 will be another “reset” year.
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Tagged General Electric
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American Water Works (AWK) 2019 Update
American Water Works Company (AWK) has delivered superior operating, financial and stock price performance over the past eight years. Its 2018 performance did not match the eight year average in either absolute or relative terms. However, management is confident in the company’s ability to achieve EPS growth “at the high end” of its 7%-10% guidance range over the next five years. While that seems like a bold assertion after eight years of superior earnings growth, the stock will likely continue to outperform peers, if management achieves its five-year targets. Outperformance vs. the broader market will depend upon other factors, such as interest rate and economic growth trends.
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Tagged American Water Works
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Acme United Battles the Headwinds
2018 was a rough year for investors in Acme United Corporation’s (ACU) stock, including CEO Walter Johnsen who owns 15% of the outstanding shares. ACU’s 2018 total return was -38%, worse than the Zack’s Micro Cap Index’s 17% decline. The significant underperformance was due to market-, macro- and company-specific factors.
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Tagged Acme United
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Despite Progress, HPE’s Shares Struggle
Hewlett Packard Enterprise Co. (HPE) has reported solid progress on its strategic initiatives, including streamlining its worldwide operations (under its HPE Next program), emphasizing value vs. volume and targeting high growth market segments, such as the intelligent edge and high performance computing. The company posted fiscal 2018 revenue growth of 6.9%, GAAP EPS of $1.23 (up nearly six-fold) and non-GAAP EPS of $1.56, up 10.6%. It also bought back $3.6 billion of its shares and raised its dividend by 50%.
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Tagged Hewlett Packard Enterprise Company
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SJI Outlines Its Vision
At its recent investor conference (held on Oct. 22), the management of South Jersey Industries outlined its vision for integrating its recent acquisitions of Elizabethtown Gas (ETG) and Elkton Gas (EGC), reducing the debt taken on in those acquisitions in part by selling non-core (non-regulated) assets and delivering additional value to shareholders by growing its earnings base in its core regulated businesses.
Continue readingFive Star Heads Toward a Restructuring
In an 8K filing dated October 23, Five Star Senior Living (FVE) reported that it had received a delisting notice from NASDAQ because its share price had remained below $1 for 30 consecutive days. On its 2018 third quarter conference call, Five Star disclosed that based upon its cash balance as of Sept. 30 and its expectations of future earnings and cash flows, there is now substantial doubt about its ability to continue as a going concern.
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Posted in ALR, DHC, Real Estate
Tagged Five Star Senior Living, Senior Housing Properties Trust
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The Pause that Refreshes the Homebuilders?
It has certainly been a rough year for homebuilding stocks, but not nearly so bad for the housing market. The Lark Research Homebuilder Stock Price Index, an equal weighted average of eleven publicly-traded homebuilder stocks, was down 29.2% year-to-date through December 7. By comparison, the S&P 500 has declined 1.5% and the Russell 2000 has declined 5.7%.
Continue readingBXG 2018 Third Quarter Update
Since floating the IPO in November 2017, Bluegreen Vacations Corporation’s (BXG) share price has come full circle. The stock opened its first day of trading at $13.55, rallied to a high of $25.91 in July and has since fallen back to $11.85 (as of 11/9). Although there are company-specific factors that precipitated the sell-off, the shares of nearly all publicly-traded timeshare companies have experienced similar losses so far in 2018. Continue reading
After Earnings, GE’s Stock Hits a 9-Year Low
General Electric (GE) reported 2018 third quarter results on Tuesday, October 30. This was the first conference call for newly-installed Chairman and CEO H. Lawrence (Larry) Culp, Jr. Continue reading
Posted in GE, Industrials
Tagged General Electric
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Thoughts and Observations on Campbell Soup’s Upcoming Proxy Fight.
On May 18, 2018, in conjunction with the release of fiscal 2018 third quarter earnings report, Campbell Soup Company (CPB) announced a “CEO transition.” Denise M. Morrison, who had served as Campbell’s President and CEO since August 2011, was retiring and Keith R. McLoughlin, a member of Campbell’s Board of Directors, was named Interim CEO. Continue reading
Posted in Consumer Staples, CPB
Tagged Campbell Soup, Third Point
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A Review of AT&T’s Prospects Following the Time Warner Acquisition
AT&T completed its acquisition of Time Warner on June 14, 2018. Under the merger agreement, Time Warner shareholders received $53.75 per share in cash and 1.437 shares of AT&T stock for each TWX share held. In total, Time Warner shareholders received 1.126 billion shares, equivalent to a 15.5% stake in AT&T. Together with the cash, Time Warner shareholders received $79.1 billion in total consideration. In addition to the consideration paid to Time Warner shareholders, AT&T assumed $50.6 billion of liabilities, including $22.8 billion of debt, bringing the total cost of the acquisition to $129.7 billion. AT&T ended the second quarter (June 30) with total assets (post-merger) of $534.7 billion. Continue reading
Posted in Communication Services, T, Telecommunications
Tagged AT&T
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A Process of Adjustment for the Homebuilders
2018 has been rough for homebuilding stocks. The Lark Research Homebuilder Stock Index, which is an equal-weighted measure of the price performance of ten publicly-traded homebuilders, was down 19.9% year-to-date through August 3rd, far worse than the gains of 6.2% in the S&P 500 and 9.0% in the Russell 2000.
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Posted in Consumer Discretionary, Housing
Tagged homebuilders
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GE Part 3: Contemplating GE Capital
Besides the recent weakness at Power and Oil & Gas, GE has been grappling with legacy issues at GE Capital. Although it has been downsizing for more than a decade now – reducing its assets from $660 billion at the end of 2008 to $136 billion at June 30, 2018 – GE Capital still represents 40% of GE’s consolidated assets and it has not reported a profit since 2014. Continue reading
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Tagged GE Capital, General Electric
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GE Part 2: Assessing GE’s Value
On June 26, General Electric (GE) announced the outcome of its strategic review. Besides divestiture actions already announced, the company said that it will spin-off its Healthcare business over the next 12-18 months and distribute its 62.5% stake in Baker Hughes, a GE company (BHGE) over the next two to three years. Those actions would leave GE with three core businesses – Aviation, Power and Renewable Energy. Continue reading
GE Part 1: 18Q2 Results
General Electric reported disappointing 2018 second quarter GAAP earnings attributable to shareholders of $736 million or $0.07 per share, down 30% from $1.03 billion or $0.10 per share last year. Adjusted (Non-GAAP) EPS, according to the company’s definition, was $0.19 per share, down 10% from $0.21. Non-GAAP EPS exceeded consensus estimates by a penny. Continue reading
Arch Coal (ARCH) 18Q1 Update
2018 First Quarter Results. On April 26, Arch Coal reported disappointing 2018 first quarter results. Adjusted EPS for the quarter was $2.95, up from $2.82 last year, but behind the consensus forecast of $4.22. Revenues declined 4.3% to $575.3 million, $20.4 million below consensus. Total tons sold declined 7.8% to 23.7 million. All three of Arch’s business segments – the Powder River Basin, Metallurgical and Other Thermal suffered volume declines. Continue reading
Posted in ARCH, Energy
Tagged Arch Coal, Coal, Coal Industry
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An Update on Senior Housing Properties Trust (SNH)
Pressure from Declining Occupancy; But SNH Has Sufficient Financial Flexibility to Cope for Next Two Years or More. Continue reading
Posted in DHC, Real Estate
Tagged healthcare, REITs, senior living
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Consolidated Water 18Q1 Update
CWCO reported first quarter net earnings attributable to stockholders $2.1 million or $0.14 cents per diluted share. That compares with 17Q1 net income of $2.6 million or $0.18 per diluted share. Revenues declined 2.2% to $15.7 million. Continue reading
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Tagged Consolidated Water Co.
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General Electric First Quarter Results
- GAAP loss of $1.18 billion or $0.14 per share vs. a 17Q1 loss of $0.12 billion or $0.01 per share.
- This quarter’s loss included a $1.55 billion ($0.17 per share) charge representing the estimated cost of settling potential FIRREA charges with the U.S. Dept. of Justice.
- GE’s 18Q1 adjusted industrial free cash flow was negative $1.68 billion, better than 17Q1’s negative $2.75 billion.
- Consolidated revenues increased 7% to $28.7 billion, due to the acquisition of Baker Hughes. Industrial organic revenues declined 4% to $23.8 billion.
- Segment profit fell 11% to $2.46 billion, due to declines at Oil & Gas, Power and GE Capital. However, after-tax earnings from continuing operations improved from $0.12 billion to $0.37 billion, due to lower corporate items and eliminations.
- CEO John Flannery said that GE made a step forward in executing on its 2018 plan, with signs of progress in its performance. The company is on track to exceed its 2018 cost reduction goal of $2 billion and is proceeding with its planned $20 billion of dispositions for 2018 and 2019.
- Under Mr. Flannery, GE may transition away from the conglomerate model toward becoming a federation of publicly-traded companies.
Update on General Electric (GE)
On Friday (4/13), General Electric (GE) filed an 8-K that quantified the impact of adopting new accounting standards (and certain voluntary changes in accounting policies) on its previously reported results for 2016 and 2017. In total, these changes reduce previously reported 2017 GAAP earnings by $2.79 billion or $0.32 per share and 2016 GAAP earnings by $1.23 billion or $0.15 per share. The changes also reduce year-end 2017 assets by $8.7 billion and shareholders’ equity by $8.5 billion or $0.98 per share. Continue reading
Posted in GE, Income Builder
Tagged Accounting Standards, General Electric
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GE Preannounces Insurance-Related and Other Charges
GE announced this morning that it will take an after-tax charge of $6.2 billion in the 2017 fourth quarter against the value of GE Capital’s run-off insurance portfolio, North American Life & Health (NALH). In addition, GE Capital will make $15 billion of statutory reserve contributions over the next seven years, including $3 billion in February and $2 billion annually from 2019 to 2024. Continue reading
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Tagged General Electric
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Notes on the 2017 Massachusetts Investor Conference (Part 2)
Affordable Housing. According to U.S. News and World Report, Massachusetts ranks as the best state in the nation in 2017, with top 5 scores in education, health care and economy. All around the state, there has been a resurgence in urban areas and revitalization of town centers. Massachusetts is a one of the most desirable places to live, but it is also one of the least affordable. Continue reading
Posted in Municipal Bonds
Tagged Massachusetts, Massachusetts economy, Massachusetts municipal bonds
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Notes on the 2017 Massachusetts Investor Conference (Part 1)
The Massachusetts economy is experiencing its most robust expansion since the late 1980s. Third quarter GDP growth was clocked at 5.9%, according to Mass Benchmarks. Leading indicators anticipate 2017 fourth quarter GDP growth of 3.3% and 2018 first quarter growth of 3.0%. Massachusetts’ unemployment rate was 3.9%, below the national average of 4.1%. Job creation has been strong and broad-based, except for manufacturing. Early in the recovery cycle, hiring was concentrated among white collar workers, but more recently, blue collar workers have been the primary beneficiaries of continued job growth. Continue reading
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Tagged Massachusetts, Massachusetts economy, Massachusetts municipal bonds
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Notes and Analysis From GE’s Investor Update
“You can’t grow long-term if you can’t eat short-term. Anybody can manage short. Anybody can manage long. Balancing those two things is what management is”
-Jack Welch
As everyone knows, this has been a tough year for GE shareholders. GE’s stock is down 40.8% year-to-date (thru 11/17) on a total return basis. By comparison, the S&P 500 has delivered a 17.3% positive total return. GE’s stark underperformance reflects both the decline in its earnings expectations – its 2017 operating EPS guidance (industrial operating + verticals) has been cut from $1.60-$1.70 at the beginning of the year to $1.05-$1.10 currently – and now the halving of the dividend. 2018 has been characterized as a “reset” year. Management currently anticipates 2018 adjusted EPS of $1.00-$1.07, which is roughly half of the previous target of $2.00. According to management, the change in performance and outlook reflects primarily sharply reduced expectations for GE’s Power business and continued weak performance in Oil & Gas and Transportation. Continue reading
Posted in GE, Industrials
Tagged General Electric
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Notes and Analysis from HPE’s Analyst Meeting
Key takeaways:
- Through its HPE Next transformation plan, HPE will spend $1.1 billion over the next two years to achieve annualized cost cuts of $1.5 billion by the end of 2020. It will reinvest about half of the savings to beef up global sales and marketing efforts. HPE Next will streamline the company and make it more responsive to customers.
- HPE’s key strategic emphasis is to accelerate growth by offering high margin services and solutions driven by its innovations in hybrid IT and the intelligent edge.
- Management offered pro forma non-GAAP EPS guidance of $1.00 for 2017 and $1.15-$1.25 for 2018.
- Longer term, HPE has set as targets 0%-1% annual revenue growth,4%-5% operating profit growth and 7%-9% EPS growth.
- At 14.3 times pro forma 2017 EPS and 12.0 times projected 2018 EPS, HPE is cheap to the market and its peer group.
Posted in HPE, Technology
Tagged Hewlett Packard Enterprise Company
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American Express (AXP) 2017 Third Quarter Results
- Ken Chennault announces retirement in February 2018 and Steve Squeri will become Chairman & CEO
- Third Quarter EPS of $1.50 vs. $1.20 last year and consensus of $1.48
- Management raised full year 2017 guidance from $5.40-$5.80 to $5.80-$5.90
- Earnings growth driven mostly by decline in tax rate and decline in share count. However, one-time impairment charges offset the increase in tax credits booked in the quarter. Continue reading
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Tagged American Express
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Potential Implications of GE’s Latest Management Transitions
On Friday (10/6), after the market close, General Electric (GE) announced that three of its senior executives, all Vice Chairs – John Rice, CEO of GE’s Global Growth Operations, Beth Comstock, CEO of GE’s Business Innovations and Jeff Bornstein, CFO – will retire from the company on December 31, 2017. Jamie Miller, currently the CEO of GE’s Transportation business was named CFO effective November 1, 2017. Continue reading
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Imperial Oil (IMO): The Poor Stepchild of Exxon Mobil
Imperial Oil (IMO), in which Exxon Mobil Corp. has a 69.6% stake, is the largest integrated oil company in Canada. Across the value chain, it is a leading producer of oil (primarily through its assets in the Athabasca oil sands), the largest refiner of crude oil, a leading marketer of petroleum products and a major producer of petrochemicals. Continue reading
Posted in Energy
Tagged energy stocks, Oil & Gas
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HPE’s Transformation Continues with The Seattle Spin-Off
Since it was spun off from Hewlett-Packard Company in November 2015, Hewlett Packard Enterprise Company (HPE) has made several important strategic moves to remake its business. Continue reading
Posted in HPE, Technology
Tagged Computer services, Hewlett Packard Enterprise Company, Micro Focus International
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Baker Hughes Will Likely Reinstate Its Dividend
Baker Hughes and General Electric completed their merger on July 3, 2017. Baker Hughes shareholders received $17.50 in cash and one share of new Baker Hughes stock (BHGE). Continue reading
Five Star Senior Living Struggles to Regain Profitability
Shares of Five Star Senior Living (FVE) have performed poorly over the past two years, even underperforming FVE’s peer group, which has significantly underperformed both the health care sector and the broader market. The industry is suffering from a slow but steady decline in occupancy due to the increasing supply of communities and slowing demand growth (for demographic, lifestyle and affordability reasons). Investors are also concerned about the long-term impact of proposed cuts to Medicaid funding under new federal health care legislation. FVE has struggled with declining occupancy and high lease costs under its contracts with its affiliate, Senior Housing Properties Trust (SNH). Although management is taking decisive steps to improve the company’s competitive position and boost revenues, it is unlikely that those efforts will be sufficient near-term to reverse FVE’s operating losses. Continue reading
Posted in ALR, Health Care
Tagged healthcare, senior living, SNH
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A Brief Update on Greece
Although the Greek economy looked like it was beginning to achieve liftoff in late 2014, its progress was set back in early 2015 by the newly-installed Tsipras administration’s effort to obtain major changes to the country’s bailout program. Greece’s compliance with the key provisions of that program was slipping even before the election, but the new administration reversed course on many reforms during renegotiations with its EU creditors. Continue reading
PSEG Dances to Stay Fit
Public Service Enterprise Group (PSEG) is a public utility holding company whose principal direct operating subsidiaries include Public Service Electric & Gas (PSE&G), which serves 2.2 million electric customers and 1.8 million gas customers along a northeast to southwest swath of the state of New Jersey. PSEG Power LLC (Power) is merchant power producer and wholesale marketer of electricity and natural gas. Continue reading
An Update on Arch Coal (ARCH)
Arch Coal emerged from bankruptcy on October 5, 2016 and recently filed its 2016 10-K which included its fourth quarter performance (Oct. 2 to Dec. 31) as a reorganized (i.e. successor) company. With its quick emergence from Chapter 11, substantial reduction in debt and strong liquidity position, the company is upbeat about its ability to both weather any further market weakness and seize upon future opportunities. Continue reading
UPS Investor Day: Invest. Grow. Deliver.
UPS held an investor day in New York City on February 22, three weeks after reporting disappointing fourth quarter results. Its stock fell sharply on the earnings news, giving back all of its Trump rally gains. So far this year, UPS is down 7.4%, much worse than the gains of 5.7% on the S&P 500 and 4.2% on the Dow Jones Transports, of which it is a member. Following management’s comprehensive strategy review and outlook, this is a good time to assess the company’s recent performance and consider the investment potential in its stock. Continue reading
Posted in Companies, Industrials, UPS
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2016 Mass Investor Conference (Part 3): the MWRA
The Massachusetts Water Resources Authority (MWRA) was created by the Massachusetts Water Resources Authority Act, Chapter 372 of the Acts of 1984 of the Commonwealth of Massachusetts. Its operating territory covers 61 communities (i.e. cities, towns and special purpose entities) in eastern and central Massachusetts. Within that territory, it serves 5,500 industrial businesses and 2.5 million people, more than 40% of total population of Massachusetts. 51 communities receive the Authority’s water service; while 43 communities connect their local sewer systems to the Authority’s regional sewer collectors and treatment facilities. The MWRA supplies 215 million gallons of water and treats 315 million gallons of sewage per day. Continue reading
Posted in Municipal Bonds
Tagged Massachusetts, MWRA
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2016 Mass Investor Conference (Part 2): the MBTA
The Massachusetts Bay Transportation Authority (MBTA or the Authority) is a body politic and corporate and a political subdivision of the Commonwealth of Massachusetts. It is also a component of the Massachusetts Department of Transportation. Created in 1964, it is the oldest and fifth largest transit system in the country. Its authority is derived from Massachusetts General Laws Chapter 161A (as restated by Section 151 of Chapter 127 of the Acts of 1999 and amended by the Control Board Act, Chapter 46 of the Acts of 2015) and also Section 35T of Chapter 10, which together are known as the “Enabling Act.” The Enabling Act does not provide for the Authority to be a debtor under the federal bankruptcy code. Continue reading
Posted in Municipal Bonds
Tagged Massachusetts, MBTA
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Notes and Analysis from the 2016 Mass. Investor Conference – Part 1
The Conference was held on December 7, 2016. Continue reading
Posted in Municipal Bonds
Tagged Massachusetts
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Update on Consolidated Water (CWCO)
Shares of Consolidated Water (CWCO) have struggled over the past several months, extending a period of underperformance vs. peers that stretches back for more than a year. Year-to-date (through 12/9), CWCO has posted a loss (including dividends) of 6.4%. That compares with the total return of 12.9% for the S&P 500 and an estimated total return of 18.0% on the Dow Jones U.S. Water Utility Index. Continue reading
Posted in CWCO, Utilities
Tagged Water utilities
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Arch Coal Post-Bankruptcy
On October 5, Arch Coal officially exited the bankruptcy process. The exit came just short of nine months after it had filed for bankruptcy on January 11, 2016. This was a remarkable achievement, given the company’s size, the large and diverse creditor group and the downturn in the coal industry, which under the plan required unsecured creditors to accept a 98% loss on their claims. Continue reading
Thoughts and Analysis from Tenaris’s Investor Day
Tenaris S.A. (TS) is one of the world’s leading manufacturers of seamless and welded steel casing and tubing, otherwise known as “oil country tubular goods.” Its products are used mostly in oil & gas drilling operations. Continue reading
Arch Coal Puts Its Bankruptcy Plan to a Vote
On July 6, the bankruptcy court approved Arch Coal’s Third Amended Bankruptcy Plan and Disclosure Statement. That set in motion the voting process which is scheduled to end on August 31. If there are no hitches and creditors vote in favor of the Plan, the court will hold a confirmation hearing on Sept. 13. That would set the stage for Arch to exit bankruptcy as early as September 30, less than nine months after it filed for bankruptcy. By most bankruptcy benchmarks, that would be a remarkable achievement. Continue reading
Posted in ARCH, Materials
Tagged Arch Coal, Coal, Coal Industry
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Coal Sector Update
The Dow Jones U.S. Coal Mining Sector Index has more than doubled so far this year, up 117.6% through July 15, obviously much better than the broader DJ US Total Market Index’s gain of 5.7%. Much of coal’s gains reflect “dead cat bounces” from stocks that trade in the pink sheets. Yet even the sector’s larger cap survivors are up big this year: Westmoreland Coal (WLB) is up 48%; Alliance Resource Partners (ARLP) is up 35%; Cloud Peak Energy (CLD) is up 35%; CONSOL Energy (CNX) is up 34% and CNX Coal Resources (CNXC) is up 22%. Continue reading
PayPal’s Business is On Target, But Its Stock is Ahead of Plan.
PayPal’s stock has underperformed the broader market since reaching a new high of $41.75 on March 22. The stock bottomed at $34.00 on June 27 and has since bounced back to close at $38.15 today. Year-to-date, the stock is up 5.4%, slightly behind the S&P 500’s 5.8% total return. Since being spun-off from eBay on July 2, 2015, PayPal is up 3.9%, about 1.4 percentage points behind the S&P. Continue reading
Posted in PYPL
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The Coal Industry Goes Bust
Very few industries have suffered a decline as steep as coal’s. In just five years, the coal industry has gone from relatively healthy to almost entirely bankrupt. Major coal producers – including Peabody Energy, Arch Coal, and Alpha Natural Resources – have filed for Chapter 11 protection over the past year. Continue reading
Arch Coal Goes Bust
Arch Coal, the second largest U.S. coal producer, is another casualty of the sharp decline in coal consumption. After a steady slide in its business that began in 2011 and accelerated when oil and natural gas prices plunged in 2014, the company filed for bankruptcy in January 2016. Continue reading
An Update on Merck (MRK)
Product Pipeline Successes. Merck has enjoyed a couple of notable successes in its product pipeline over the past year. The first and most important is Keytruda (pembrolizumab), the company’s anti-PD-1 (programmed death receptor-1) immunotherapy treatment for cancer. Keytruda has already been approved to treat melanoma and NSCLC (non-small cell lung cancer). It was awarded Breakthrough Therapy status by the FDA in the Continue reading
Posted in Health Care, MRK
Tagged Accounting, GAAP vs. Non-GAAP
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Notes and Analysis from AXP’s Analyst Day
Shareholders of the American Express Company have had a pretty rough ride over the past few years. Since 2013, when AXP’s stock earned nearly twice the S&P 500, the stock has underperformed the broader market significantly Continue reading
Greece Meets EU Ministers. Changes to GREK.
Greece’s quest to pass the next milestone on it bailout plan will get a hearing on Monday in Brussels at a meeting of EU finance ministers. Press reports suggest that the EU and IMF are still looking for about €9 billion in further austerity measures by 2018 to help plug a deficit. The Germans, however, appear willing to cut Greece some slack by delaying these measures for a few years to give Greece greater breathing room to deal with its refugee crisis. Continue reading
Notes from General Electric’s Annual Outlook Meeting
This has been an eventful year for General Electric (GE), one that brought about the most significant changes that the company has seen in its 127 year history. The company has repositioned its business mix, drastically reducing its profile in financial services and emphasizing its industrial core. It has also stepped up its drive to infuse its products with sophisticated technology (e.g. internet of things (IoT), additive manufacturing and advanced software) that can help its products run harder and longer and give customers greater insight into their utilization efficiency. Continue reading
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Tagged General Electric
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American Water Works (AWK) Update
2015 has been another strong year for the stock of American Water Works (AWK). Year-to-date (through Dec. 18), it is up 11.7% on price and has delivered a 14.5% total return. By comparison, the S&P 500 is down 2.6% on price and down 0.6% on total return. Meanwhile, the Dow Jones Utility Average, of which AWK is now a member, is down 8.1% on price. Continue reading
Posted in AWK, Utilities
Tagged American Water Works, Water utilities
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Investing in Greece: Notes from the 2015 Capital Link Conference
Although the recovery in the Eurozone is underway, Greece has so far been left behind. Europe is growing now at an overall rate of 2% per year. Even the other peripheral countries that had been experiencing difficulties– Ireland, Italy, Portugal and Spain – are now showing positive growth. Greece, meanwhile, will likely report that its economy contracted again in 2015, but probably only slightly. It is expected to return to growth in the second half of 2016. Continue reading
Notes from the 2015 Massachusetts Investor Conference
Author’s Note: Municipal bonds have been on my radar for some time, even though my focus has been on stocks and corporate bonds. I have attended the Massachusetts Investor Conference for the past four years, as a way to learn about state government, including financial reporting practices and recent financial performance. Continue reading
Posted in Municipal Bonds
Tagged Municipal Bonds
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Campbell Fiscal 2016 First Quarter Update
Campbell Soup (CPB) reported fiscal 2016 first quarter GAAP earnings of $0.62 per diluted share, compared with $0.78 in the comparable prior year period. Excluding special items, the company’s non-GAAP earnings were $0.95, compared with $0.78 last year. Continue reading
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Consolidated Water (CWCO) 2015 Third Quarter Update
Consolidated Water (CWCO) reported 2015 third quarter earnings of $0.12 per share, compared with $0.13 per share in the prior year comparable quarter. Revenues of $14.6 million, were down 14% from $17.0 million last year. Both earnings and revenues fell short of consensus views, but this was a quarter in which I had no expectations for any significant changes in the company’s performance, either up or down. Continue reading
Brightcove 2015 Third Quarter Update
The company reported a third quarter GAAP loss of $0.04 per share, much better than last year’s $0.12 loss. Adjusted (non-GAAP) EPS, which excludes (non-cash) stock-based compensation and merger-related costs was positive at $0.03, a reversal of last year’s $0.03 loss. I was anticipating a GAAP loss of $0.08 and a non-GAAP loss of $0.02, so the company’s performance exceeded my expectations (and also the Street’s, since my earnings projection was in line with the consensus estimate). Continue reading
Posted in BCOV
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Consolidated Water (CWCO) Update
Consolidated Water reported net income attributable to stockholders of $2.23 million or 15 cents per share for the 2015 second quarter ended June 30. This was below last year’s $2.76 million or $0.19 per share and also a penny short of the consensus estimate. Continue reading
Posted in CWCO
Tagged Consolidated Water Co., desalinated water, Water utilities
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