KG: Financial Gauge Analysis for the June 2010 Quarter

King Pharmaceuticals, Inc., (NYSE: KG) earned $0.07 per diluted share on a GAAP basis in 2010's second quarter, which ended 30 June.  Earnings per share were less than half the $0.15 King made in the same quarter of 2009.

A previous article examined King's Income Statement for the June quarter in some detail.  Reported GAAP earnings were $0.02 less than the $0.09 per share we had forecast.

We have now updated the various financial metrics we use to analyze Cash Management, Growth, Profitability and Value.  This post reports on the metrics for King Pharmaceuticals and the associated financial gauge scores.  The metrics were calculated using data from King's current and historical financial statements, including those in the latest 10-Q report.


Before getting into the details, we will take a step back to introduce the subject of today's analysis.

King Pharmaceuticals, headquartered in Bristol, TN, manufactures and sells various brand-name prescription pharmaceuticals and other products.  The acquisition of Alpharma, in a $1.6 billion deal completed in December 2008, added new painkilling medicines and animal health products.

In an important January 2009 decision, two King patents related to the muscle relaxant Skelaxin® (metaxalone) were invalidated by a U.S. District Court.  Skelaxin was one of the company's best-selling products at the time.  Generic versions of Skelaxin became available in the April 2010, and sales of King's branded product tumbled.

Pain-killing medications with features that deter abuse may be King's best hope for the future.  The company seems especially optimistic about EMBEDA®, which first became available commercially in September 2009.  King reported prescription growth of 15 percent for Embeda, an opioid for management of moderate to severe pain under certain conditions, during the month of June 2010.

King is also developing Acurox® product with Acura Pharmaceuticals (NASDAQ: ACUR), Remoxy® with Pain Therapeutics, Inc. (NASDAQ: PTIE), and the ALO-02 oxycodone/naltrexone product started by Alpharma.  King management expressed optimism that non-clinical data seen to date will support a Remoxy NDA resubmission by the end of this year.

Additional background information about King and the business environment in which it is currently operating can be found in the look-ahead.



Mergers and acquisitions, such as King's purchase of Alpharma, pose a challenge to us at GCFR because a major deal can lead to both temporary and longer term changes to the company's financial results.  Comparisons with the past, a key element of our approach, can be misleading.  Temporary changes include unusual revenue growth and large restructuring expenses.  In addition, it's not unusual for one transaction to be followed by others, such as asset divestitures that don't conform to the new organization's priorities. 

For these and other reasons, extra caution has to be taken when evaluating a company in the immediate aftermath of a merger or acquisition.   It is often prudent to "let the dust settle" before drawing any far-reaching conclusions.

With this caveat in mind, King's latest quarterly results produced the following changes to the gauge scores:

• Cash Management: 13 of 25 (down from 15 in March)
• Growth: 9 of 25 (down from 15)
• Profitability: 8 of 25 (unchanged)
• Value: 7 of 25 (up from 0)

• Overall: 34 of 100 (up from 28)

 

The current and historical values for the financial metrics that determine the gauge scores are listed below, with some brief commentary.  Readers are encouraged to verify these figures and calculate others as they see fit using the filings available at the SEC's web site and elsewhere.

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NOK: Look Ahead to the September 2010 Quarter

This post describes our model of Nokia's (NYSE: NOK and HEL:NOK1V) Income Statement for the third quarter, which will end on 30 September 2010.

The purpose of the model is to establish a baseline for identifying surprises, positive or negative, in the quarterly results the company will report.  Estimates for each line of the Income Statement are derived from management's guidance, the company's historical financial results, and other publicly available data.

We begin by reviewing background information about Nokia and the business environment in which it is currently operating.

A Finnish company with a rich history, Nokia Corporation has been the leading global producer of mobile phones since 1998.  The company also sells the network infrastructure that supports these phones. 

Nokia's sales, earnings, and share price have fallen precipitously in recent years.  Global economic weakness has certainly had a negative effect.  However, the most visible and far-reaching problem has been Nokia's inability to stem the success of Apple's (NASDAQ: AAPL) iPhone, which was first introduced in 2007.  The Blackberry product line sold by Research in Motion (NASDAQ: RIMM) and, more recently, smartphones based on the Android architecture promoted by Google (NASDAQ: GOOG) have also become popular at Nokia's expense. 

In the latest and most dramatic attempt to regain its competitive position, Nokia announced on 10 September 2010 that it would replace its Chief Executive Officer with Mr. Steven Elop, formerly of Microsoft. 

Among other things, the company hopes Mr. Elop, a Canadian citizen, will be able to resolve its long-standing difficulties in North America.  Only 3 percent of the mobile devices Nokia sold in 2009 and only 5 percent of Nokia's net sales in 2009 were in North America.

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WMT: Financial Gauge Analysis for the July 2010 Quarter

Wal-Mart Stores (NYSE: WMT) earned $0.97 per diluted share on a GAAP basis in fiscal 2011's second quarter, which ended on 31 July 2010.  Earnings per share were 9 percent more than the $0.89 Walmart made in the same quarter of the year earlier.

A previous article examined Walmart's Income Statement for the July quarter in some detail.  Reported Net Income of $3.596 billion exactly matched our estimate (a rarity!), but fewer shares outstanding allowed earnings per share to exceed by $0.01 the $0.96 we had forecast.

We have now updated the various financial metrics we use to analyze Cash Management, Growth, Profitability and Value.  This post reports on the metrics for Walmart and the associated financial gauge scores.  The metrics were calculated using data from Walmart's current and historical financial statements, including those in the latest 10-Q report.


Before getting into the details, we will take a step back to introduce the subject of today's analysis.

A retailing behemoth, Wal-Mart Stores, Inc., earned over $14 billion on net sales of $405 billion in the fiscal year that concluded last January.  The Revenue figure, along with a drop in energy prices, enabled Walmart to regain from Exxon Mobil (NYSE: XOM) the top position on the Fortune 500 list of America's largest corporations. 

Walmart has three reportable business segments: Walmart U.S., International and Sam’s Club.  At last count, Walmart operated 4304 stores in the U.S. (including Sam's Club) and 8416 in other countries.

Net sales by Walmart U.S. grew 1.1 percent last year, but comparable store sales declined 0.7 percent.  Concerned about slow sales at home, Walmart replaced the leader of Walmart U.S.

Additional background information about Walmart and the business environment in which it is currently operating can be found in the look-ahead.

In summary, Walmart's latest quarterly results produced the following changes to the gauge scores:

• Cash Management: 13 of 25 (unchanged from April)
• Growth: 12 of 25 (up from 8)
• Profitability: 11 of 25 (up from 10)
• Value: 10 of 25 (up from 7)

• Overall: 44 of 100 (up from 37)

The current and historical values for the financial metrics that determine the gauge scores are listed below, with some brief commentary.  Readers are encouraged to verify these figures and calculate others as they see fit using the filings available at the SEC's web site and elsewhere.

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PEP: Look Ahead to September 2010 Quarterly Results

This post describes our model of PepsiCo's (NYSE: PEP) Income Statement for fiscal 2010's 12-week third quarter, which ended on 5 September 2010.

The purpose of the model is to establish a baseline for identifying surprises, positive or negative, in the quarterly results the company will report.  Estimates for each line of the Income Statement are derived from management's guidance, the company's historical financial results, and other publicly available data.

We begin by reviewing background information about PepsiCo and the business environment in which it is currently operating.

PepsiCo, Inc., is a leading global purveyor of beverages and snacks.  The company, which has a market value of approximately $100 billion, is well regarded for good management, steady growth, and significant international exposure. 

Businesses, such as PepsiCo, that sell consumer staples are considered defensive investments because they are relatively less affected by economic slumps.  These firms also tend to pay generous dividends, and this is true for PepsiCo.  The company hiked its annual dividend this year by 7 percent, from $1.80 to $1.92 per share.

While famously locked in a battle with Coca-Cola (NYSE: KO) for the soft-drink market, it is important to recognize the importance of PepsiCo's other product lines.  Frito-Lay North America had Revenue in 2009 of $13.2 billion, which was 30.6 percent of PepsiCo's total revenue.

On 26 February 2010, PepsiCo completed acquisitions of Pepsi Bottling Group, Inc., and PepsiAmericas, Inc., for $7.8 billion in total.  These transactions give PepsiCo, according to statements made during a conference call, "one vertically integrated value chain [for beverages] just like [the] snacks business." PepsiCo will be "making decisions which benefit the total system without concern as to how the cost and benefits are shared between the brand and bottling operations."

The newly combined company would have earned $6.75 billion ($4.09 per diluted share) on a pro forma basis in fiscal 2009 on Revenue of $57.5 billion.  The pro forma results eliminate the transactions that occurred between the three entities.  The acquisitions effectively added $800 million (13.6 percent) to PepsiCo's annual Net Income and $14.2 billion (33 percent) to Revenue.

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INTC: Look Ahead to September 2010 Quarterly Results

This post describes our model of Intel Corporation's (NASDAQ: INTC) Income Statement for the quarter that will end on 25 September 2010.

The purpose of the model is to establish a baseline for identifying surprises, positive or negative, in the quarterly results the company will report.  Estimates for each line of the Income Statement are derived from management's guidance, the company's historical financial results, and other publicly available data.

We begin by reviewing background information about Intel and the business environment in which it is currently operating.

Intel is the foremost manufacturer of integrated circuits for computers, servers, hand-held devices, and communication products.  In fiscal 2009, Intel had Net Income of $4.37 billion ($0.77 per share), down 17 percent from $5.29 billion ($0.92 per share) in the previous year.  Revenue slipped 6.5 percent, from $37.6 billion to $35.1 billion.

Intel is included in the Dow Jones Industrial Average and the S&P 500.  It has a market capitalization of about $100 billion.

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WPI: Financial Gauge Analysis for the June 2010 Quarter

Watson Pharmaceuticals, Inc., (NYSE: WPI) earned $0.57 per diluted share on a GAAP basis in 2010's second quarter.  This result was 28 percent more profitable than Watson's earnings per share of $0.45 in the same quarter of 2009.

The acquisition of Arrow Group last December has given a boost to Watson's earnings in 2010.

A previous article examined Watson's Income Statement for the June quarter in some detail.  Reported earnings were $0.03 more than the $0.54 per share we had forecast.

We have now updated the various financial metrics we use to analyze Cash Management, Growth, Profitability and Value.  This post reports on the metrics for Watson Pharmaceuticals and the associated financial gauge scores.  The metrics were calculated using data from Watson's current and historical financial statements, including those in the latest 10-Q report.


Before getting into the details, we will take a step back to introduce the subject of today's analysis.

Watson Pharmaceuticals produces and distributes generic and, to a lesser extent, branded pharmaceuticals.  Watson earned $222 million in 2009, down from $238 million in 2009.  Revenue increased from $2.5 billion to $2.8 billion.  The company's current market capitalization is approximately $5.5 billion.

The Arrow Group acquisition augmented Watson's portfolio of generic drugs and expanded the company's access to international markets.  Arrow was not Watson's first large acquisition: it purchased Andrx in late 2006.  The company also obtained 15 drugs in 2008 from Teva Pharmaceutical (NASDAQ: TEVA).

Additional background information about Watson and the business environment in which it is currently operating can be found in the look-ahead.


Mergers and acquisitions pose a challenge to us at GCFR because a major deal can lead to both temporary and longer term changes to the company's financial results.  Comparisons with the past, a key element of our approach, can be misleading.  Temporary changes include unusual revenue growth and large restructuring expenses.  In addition, it's not unusual for one transaction to be followed by others, such as asset divestitures that don't conform to the new organization's priorities. 

For these and other reasons, extra caution has to be taken when evaluating a company in the immediate aftermath of a merger or acquisition.   It is often prudent to "let the dust settle" before drawing any far-reaching conclusions.

With this caveat in mind, Watson Pharmaceuticals' latest quarterly results produced the following changes to the gauge scores:

• Cash Management: 5 of 25 (down from 6 in March)
• Growth: 9 of 25 (up from 6)
• Profitability: 5 of 25 (up from 4)
• Value: 2 of 25 (up from 1

• Overall: 16 of 100 (up from 14)

The current and historical values for the financial metrics that determine the gauge scores are listed below, with some brief commentary.  Readers are encouraged to verify these figures and calculate others as they see fit using the filings available at the SEC's web site and elsewhere.

Read the rest of this article

TDW: Financial Gauge Analysis for the June 2010 Quarter

Tidewater (NYSE: TDW) earned $0.77 per diluted share on a GAAP basis in fiscal 2011's first quarter, which ended on 30 June 2010.  Earnings per share were 10.5 percent less than the $0.86 Tidewater made last year.  The decline would have been steeper, but the earlier period's results were depressed by a $0.93 per share special charge.

A previous article examined Tidewater's Income Statement for the June quarter in some detail.  Reported earnings were $0.07 less than the $0.84 per share we had forecast 

We have now updated the various financial metrics we use to analyze Cash Management, Growth, Profitability and Value.  This post reports on the metrics for Tidewater and the associated financial gauge scores.  The metrics were calculated using data from Tidewater's current and historical financial statements, including those in the latest 10-Q report.


Before getting into the details, we will take a step back to introduce the subject of today's analysis.

Tidewater owns the world's largest fleet of vessels serving the global offshore energy industry in exploration, field development, and production.  Headquartered in New Orleans for more than 50 years, Tidewater first serviced drillers in the Gulf of Mexico.

The Damon B. Bankston, a Tidewater vessel, was on the scene at the Deepwater Horizon when the rig failed with tragic and wide-reaching results.  The offshore drilling moratorium following the disaster could have long-term negative implications for energy-related activities in the Gulf of Mexico; however, this region has become a relatively small part of Tidewater's business.  In fiscal 2010, Tidewater's International operations provided 92 percent of total vessel revenues and 96 percent of vessel operating profit.

Additional background information about Tidewater and the business environment in which it is currently operating can be found in the look-ahead.

In summary, Tidewater's latest quarterly results produced the following changes to the gauge scores:

• Cash Management: 9 of 25 (unchanged in March)
• Growth: 0 of 25 (unchanged)
• Profitability: 1 of 25 (down from 4)
• Value: 5 of 25 (up from 2)

• Overall: 16 of 100 (up from 15)

The current and historical values for the financial metrics that determine the gauge scores are listed below, with some brief commentary.  Readers are encouraged to verify these figures and calculate others as they see fit using the filings available at the SEC's web site and elsewhere.

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NVDA: Financial Gauge Analysis for the July 2010 Quarter

NVIDIA (NASDAQ: NVDA) lost $0.25 per diluted share on a GAAP basis in fiscal 2011's second quarter, which ended on 1 August 2010.  In last year's comparable quarter, NVIDIA incurred a net loss of $0.19 per share.  Both periods included substantial charges due to product failures caused by the same "weak die/packaging material set."

Excluding special items in both periods, non-GAAP earnings per share rose from $0.02 to $0.03.

A previous article examined NVIDIA's Income Statement for the July quarter.  Our earnings estimate of $0.06 per share proved to be far too optimistic because we hadn't anticipated the loss-causing special charges.  Non-GAAP earnings were $0.03 below our earnings target.

We have now updated the various financial metrics we use to analyze Cash Management, Growth, Profitability and Value.  This post reports on the metrics for NVIDIA and the associated financial gauge scores.  The metrics were calculated using data from NVIDIA's current and historical financial statements, including those in the latest 10-Q.


Before getting into the details, we will take a step back to introduce the subject of today's analysis.

NVIDIA is best known for the powerful Graphics Processing Units that rapidly perform the huge numbers of calculations required to produce hyper-realistic images for computers and video games.

Prior to fiscal 2011 (the current year), NVIDIA's business was divided for reporting purposes into four segments: GPU, Professional Solutions, Media and Communications Processors, and Consumer Products.  The GPU and MCP segments have since been consolidated.  The GPU segment, which had Revenue of $1.7 billion in fiscal 2010 (53 percent of the total), sells products for desktop and notebook personal computers.

On 12 August 2010, NVIDIA reached a licensing agreement with Rambus (NASDAQ: RMBS) in which the latter grants NVIDIA "a non-exclusive, non-transferable, worldwide license for certain memory controllers."  This agreement comes after a fair amount of litigation between the two companies, and it does not necessarily settle all existing disputes.

Additional background information about NVIDIA and the business environment in which it is currently operating can be found in the look-ahead.


In summary, NVIDIA's latest quarterly results produced the following changes to the gauge scores:

• Cash Management: 19 of 25 (up from 18 in April)
• Growth: 15 of 25 (down from 20)
• Profitability: 20 of 25 (down from 22)
• Value: 12 of 25 (up from 3)

• Overall: 64 of 100 (up from 53)

The current and historical values for the financial metrics that determine the gauge scores are listed below, with some brief commentary.  Readers are encouraged to verify these figures and calculate others as they see fit using the filings available at the SEC's web site and elsewhere.

Read the rest of this article

ADP: Financial Gauge Analysis for the June 2010 Quarter

Automatic Data Processing (NASDAQ: ADP) earned $0.42 per share in fiscal 2010's fourth quarter, which ended 30 June 2010.  Earnings per share were 41 percent less than the $0.70 ADP made in the same quarter of 2009. 

The prior-year result was boosted by a tax benefit of $0.24 per share.  Excluding this one-time benefit, diluted quarterly earnings from continuing operations declined from $0.45 in June 2009 to $0.42 per share in June 2010.

A previous article examined ADP's Income Statement for the June quarter.  Reported earnings fell $0.01 short of the $0.43 per share we had forecast.

We have now updated the various financial metrics we use to analyze Cash Management, Growth, Profitability and Value.  This post reports on the metrics for ADP and the associated financial gauge scores.  The metrics were calculated using data from ADP's current and historical financial statements, including those in the 10-K for fiscal 2010.


Before getting into the details, we will take a step back to introduce the subject of today's analysis.

Automatic Data Processing performs payroll, human resource, data processing, and outsourcing Business Services for more than 500,000 clients, large and small, in the United States and other countries.  ADP pays one of every six private sector employees in the U.S.  The company is one of four remaining of U.S. firms with a AAA bond rating.  It is also an S&P 500 Dividend Aristocrat, having hiked its dividend for 35 consecutive years.

Fortune Magazine deemed ADP to be Most Admired in the Financial Data Services industry. 

Additional background information about ADP and the business environment in which it is currently operating can be found in the look-ahead.

In summary, ADP's latest quarterly results produced the following changes to the gauge scores:

• Cash Management: 9 of 25 (down from 10 in March)
• Growth: 5 of 25 (down from 7)
• Profitability: 14 of 25 (down from 15)
• Value: 5 of 25 (up from 4)

• Overall: 34 of 100 (down from 36)

The current and historical values for the financial metrics that determine the gauge scores are listed below, with some brief commentary.  Readers are encouraged to verify these figures and calculate others as they see fit using the filings available at the SEC's web site and elsewhere.

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PG: Financial Gauge Analysis for the June 2010 Quarter

Procter & Gamble (NYSE: PG) earned $0.71 per diluted share in fiscal 2010's fourth quarter, which ended 30 June.  Earnings per share decreased 11 percent when compared to the $0.80 P&G made in the same quarter of 2009.

Core EPS, a non-GAAP measure that excludes certain items, fell from $0.78 to $0.71.

A previous article examined P&G's Income Statement for the June quarter.  Reported earnings were $0.06 less than the $0.77 per share we had forecast.

We have now updated the various financial metrics we use to analyze Cash Management, Growth, Profitability and Value.  This post reports on the metrics for P&G and the associated financial gauge scores.  The metrics were calculated using data from P&G's current and historical financial statements, including those in the latest Annual Report.


Before getting into the details, we will take a step back to introduce the subject of today's analysis.

Procter & Gamble, which traces its roots back to 1837, creates and markets many well-known branded consumer staples to customers around the world.  P&G has three global business units:  Beauty and Grooming, Health and Well-Being, and Household Care. 

The company's market capitalization is currently around $175 billion, which makes P&G the sixth-most valuable U.S. corporation.  P&G, having raised its dividend for more than 50 consecutive years, is an S&P 500 Dividend Aristocrat.  P&G is also number 6 on Fortune Magazine's 2010 list of the World's Most Admired Companies. 

Additional background information about P&G and the business environment in which it is currently operating can be found in the look-ahead. 

In summary, P&G's latest quarterly results produced the following changes to the gauge scores:

• Cash Management: 18 of 25 (up from 15 in March)
• Growth: 13 of 25 (up from 7)
• Profitability: 11 of 25 (down from 13)
• Value: 11 of 25 (unchanged)

• Overall: 51 of 100 (up from 49)

The current and historical values for the financial metrics that determine the gauge scores are listed below, with some brief commentary.  Readers are encouraged to verify these figures and calculate others as they see fit using the filings available at the SEC's web site and elsewhere.

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COP: Financial Gauge Analysis for the June 2010 Quarter

ConocoPhillips (NYSE: COP) earned $2.77 per diluted share on a GAAP basis in the second quarter of 2010, which ended 30 June.  Earnings per share dwarfed the $0.57 ConocoPhillips made in the same quarter of 2009.

The sale of equity investments in Syncrude and CFJ Properties boosted earnings in the most recent quarter.  Adjusted earnings, which exclude several special items, were $1.67 per share.

A previous article examined Conoco's Income Statement for the June quarter.  Reported and adjusted earnings both surpassed our $1.54 estimate.

We have now updated the various financial metrics we use to analyze Cash Management, Growth, Profitability and Value.  This post reports on the metrics for ConocoPhillips and the associated financial gauge scores.  The metrics were calculated using data from the company's current and historical financial statements, including those in the latest 10-Q.


Before getting into the details, we will take a step back to introduce the subject of today's analysis.

ConocoPhillips is one of the ten biggest Integrated Oil and Gas companies, which produce, refine, transport, and market energy products.  The company's market capitalization is approximately $80 billion, and its revenue was almost $150 billion in 2009. 

ConocoPhillips was formed in 2002 when Conoco, Inc., merged with Phillips Petroleum.  It added Burlington Resources, which had extensive natural gas operations, in March 2006 (when gas prices were high).

In March 2010, Conoco announced it would sell half of its 20 percent stake in Russia's Lukoil (OTC: LUKOY).  This plan changed in July when Conoco decided to pursue the sale of its entire Lukoil investment by the end of 2011.

Additional background information about ConocoPhillips and the business environment in which it is currently operating can be found in the look-ahead.

In summary, Conoco's latest quarterly results produced the following changes to the gauge scores:

• Cash Management: 8 of 25 (down from 14 in March)
• Growth: 4 of 25 (unchanged)
• Profitability: 5 of 25 (up from 4)
• Value: 5 of 25 (up from 2)

• Overall: 22 of 100 (up from 21)

The current and historical values for the financial metrics that determine the gauge scores are listed below, with some brief commentary.  Readers are encouraged to verify these figures and calculate others as they see fit using the filings available at the SEC's web site and elsewhere.

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MSFT: Financial Gauge Analysis for the June 2010 Quarter

Microsoft (NASDAQ: MSFT) earned $0.51 per diluted share in fiscal 2010's fourth quarter, which ended on 30 June 2010.  Earnings per share increased a robust 50 percent when compared to the $0.34 Microsoft made in the same quarter of 2009.

A previous article examined Microsoft's Income Statement for the June quarter.  Reported earnings were $0.04 per share more than the $0.47 we had forecast for the quarter.

We have now updated the various financial metrics we use to analyze Cash Management, Growth, Profitability and Value.  This post reports on the metrics for Microsoft and the associated financial gauge scores.  The metrics were calculated using data from Microsoft's current and historical financial statements, including the 10-K for fiscal 2010.


Before getting into the details, we will take a step back to introduce the subject of today's analysis.

Microsoft develops and sells the operating system software that runs on more than 90 percent of personal computers, and it also has dominant application software and server software franchises.  In addition, the company provides various online services, such as the Bing search engine and online advertising.  Microsoft also sells video game consoles, entertainment devices, and computer peripherals. 

Additional background information about Microsoft and the business environment in which it is currently operating can be found in the look-ahead.

In summary, Microsoft's latest quarterly results produced the following changes to the gauge scores:

• Cash Management: 20 of 25 (up from 19 in March)
• Growth: 14 of 25 (up from 9)
• Profitability: 19 of 25 (up from 14)
• Value: 17 of 25 (up from 9)

• Overall: 72 of 100 (up from 50)

The current and historical values for the financial metrics that determine the gauge scores are listed below, with some brief commentary.  Readers are encouraged to verify these figures and calculate others as they see fit using the filings available at the SEC's web site and elsewhere.

Read the rest of this article