June quarter results: Boise Cascade (BCC), Invesco (IVZ), Johnson Controls (JCI), Legg Mason (LM), Total (TOT), Vertex Pharmaceuticals (VRTX) and XL Group (XL).
Highlights: Legg Mason and Total exceeded all analysts’ earnings per share (EPS) estimates and Invesco reached the highest analyst estimate. Boise Cascade fell short of the consensus estimate, although the stock broke out on the upside today.
We have a slew of great earnings results today. Thus far this earnings season, 13 of our portfolio companies reported June quarter results. Among those 13 companies, 10 reported EPS that exceeded analysts’ consensus estimates—five of which exceeded all analysts’ estimates—and two fell short of consensus estimates.
Boise Cascade (BCC) reported second-quarter EPS $0.57 this morning, when the market was expecting $0.60, with a range of $0.52 to $0.65. Quarterly revenue was $1.14 billion, meeting analysts’ expectations. Building materials distribution sales and EBITDA rose 15% and 18% vs. a year ago. Wood product sales and EBITDA were about flat to last year, although rising prices on engineered wood products (EWP) are expected to enhance that business segment’s profits in the second half of 2017. Increases in single-family housing starts and commodity prices are contributing to expectations of continued revenue and profit increases in the coming quarters. Investors may access the earnings press release here.
This aggressive growth stock remains significantly undervalued. As anticipated, the stock finally broke out past 31 today. Buy BCC now for the immediate run-up. Strong Buy.
Invesco Ltd. (IVZ – yield 3.3%) reported second-quarter adjusted earnings per share of $0.64 this morning, when the market was expecting $0.61, with a range of $0.59 to $0.64. Assets under management (AUM) rose to $858.3 billion, up 2.8% from the prior quarter, and up 10.1% vs. a year ago. Due to Invesco’s current purchase of Source, a leading provider of exchange-traded funds (ETFs) in Europe, Invesco did not repurchase any stock during 2017. The ex-dividend date will be August 15—noteworthy for investors who might sell their stock in August. Investors may access the earnings press release here.
IVZ is an undervalued growth & income stock in the asset management industry. IVZ is approaching upside price resistance at 38-39 where it last traded in March 2015. I will very likely issue a Sell recommendation soon, when IVZ surpasses 38, to avoid a prolonged sideways trading period. Traders who are contemplating buying on today’s downturn in the share price will probably be rewarded in the coming days. Hold.
Johnson Controls (JCI) reported third-quarter EPS of $0.71 and $7.7 billion revenue this morning, each on target with analysts’ consensus estimates (September year-end). The company guided fourth-quarter EPS to a range of $0.86 to $0.88, while analysts’ estimates had ranged from $0.86 to $0.91. In addition, full-year 2017 EPS were guided to a range of $2.60 to $2.62, while the analysts’ consensus estimate had been $2.63. The most recent analysts’ consensus EPS estimate for 2018 was $3.05, representing an increase of about 16% to 17% over 2017. Investors may access the earnings press release here.
Last year’s merger with Tyco International continues to provide cost synergies, which led to third-quarter margin expansion. The sale of Scott Safety to 3M Company (MMM) is expected to close in the company’s first fiscal quarter of 2018, and will yield approximately $1.8 billion, which is earmarked to repay debt. Johnson Controls repurchased $307 million of stock during the quarter.
Full-year revenue goals have fallen short, leading to the adjustment in the 2017 earnings outlook. The small change in earnings guidance led traders to punish the share price today. Today presents traders and investors with a buying opportunity. Strong Buy.
Legg Mason (LM – yield 2.8%) reported first-quarter operating earnings per diluted share of $0.52 yesterday afternoon, when the market was expecting $0.41, with a range of $0.36 to $0.45 (March year-end). Investors may read the earnings press release here, and access the webcast here. The company has an impressive number of fixed income and equity funds that are outperforming their Lipper category averages. Legg Mason is a global asset management firm with $741.2 billion in AUM as of June 30, 2017.
The share price is down a bit today, yet prospects remain strong for near-term capital gains. I plan to sell as the stock approaches long-term upside price resistance at 44, dating back to November 2015. Hold.
Total (TOT – yield varies) reported second-quarter earnings per share of $0.97 this morning, when the market was expecting $0.92, with a range of $0.88 to $0.94. TOT is an integrated oil & gas company based in Paris, France. Investors may access the earnings press release here.
The stock could reach 54 in the short-term. My plan is to keep TOT in the portfolio until it reaches three-year price resistance in the low 60s. Strong Buy.
Vertex Pharmaceuticals (VRTX) reported second-quarter earnings per share of $0.39 yesterday afternoon, when the market was expecting $0.35, with a range of $0.22 to $0.41. Quarterly revenue was $514.0 million, when analysts expected $487.5 million. Investors may access the earnings press release here. Vertex is the dominant purveyor of treatments for cystic fibrosis.
I continue to expect the stock to rest or decline in the near-term, subsequent to the recent price run-up. Hold.
XL Group (XL – yield 2.0%) reported second-quarter operating earnings per fully-diluted share of $0.96 yesterday afternoon, when the market was expecting $0.88, with a range of $0.75 to $0.99. XL Group is an aggressively growing insurer and reinsurer. Investors may access the earnings press release here.
Today’s drop in the share price is ridiculous; XL is extremely undervalued. I expect a quick rebound. Buy.