Lockheed estimated 2020 cash flow of $7.2bn, lower than its 2019 year-end estimate of $7.6bn, which disappointed investors.
That had sent the stock down about 3% in pre-market trading, but shares recovered those losses after the market opened and were up 0.8% at $377.16.
Lockheed raised its profit estimate for 2019 by 1.9% to $21.55 per share from $21.15, the high point of a previous guidance, amid improved performance in its aeronautics business.
The Bethesda, Maryland-based company said 2020 sales would climb 5% to $62bn from an estimated $59.1bn at the end of 2019.
The results were “impressive” and driven by better operations, while the guidance was “conservative, as expected,” Jefferies analyst Sheila Kahyaoglu said in a note to investors.
Business unit profit margins in 2020 were estimated to be between a range of 10.5% and 10.8%, lower than the 11.2% margin so far this year.
The Pentagon has said the US is spending between $500mn and $600mn in non-recurring engineering in order to shift the supply chain away from Turkey.
There were some operating segment wins for Lockheed during the quarter. Lockheed’s space unit was awarded a Nasa contract worth up to $4.6bn to build Orion astronaut capsules to help Nasa build a sustainable presence on the moon. Though sales at the unit were up 5%, the 11.5% profit margin at the space unit was unchanged from last year. The missiles and fire control unit, which makes missile defences like the Terminal High Altitude Area Defense (THAAD), was one of its best-performing units. Sales grew 14% to $2.6bn during the quarter.
The aeronautics division which makes the F-35 received some bad news last week when the Pentagon said it could delay its decision to move into a full-rate production of the F-35 jet by as many as 13 months, or until 2021, because of issues integrating the jet with its testing facilities. Lockheed’s net income rose to $1.61bn, or $5.66 per share, in the third quarter ended September 29, from $1.47bn, or $5.14 per share, a year earlier. Net sales rose to $15.17bn from $14.32bn.
Harley-Davidson
Harley-Davidson Inc beat expectations for profit yesterday and stuck to its full-year shipment forecast, allaying fears of another major hit from European import tariffs and a further slump in sales in its main US market.
Shares of the company rose as much as 8.8% to $40.36, as it posted the first rise in international sales in a year during the third quarter and a 3.6% dip in US retail motorcycle sales — the smallest decline in nearly three years.
Profits continued to sink — by 24% — but the results offered some hope that one of the biggest names in motorcycles was finally beginning to arrest a slide in global sales that it has been fighting for years. Sales in the world’s biggest motorcycle markets in Asia, which Harley has targeted with smaller bikes that go against its traditional profile, rose 8.7% in the quarter and are up about 1.6% this year overall.
The company plans to source half of its revenue from overseas by 2027 and international retail sales rose 2.7% to 23,619 motorcycle in the quarter.
While worldwide shipments fell 5.8% to 45,837 motorcycles, they topped analysts’ estimates by over 1,000 motorcycles, and the Milwaukee, Wisconsin-based company stuck to its 2019 shipment target of 212,000 to 217,000 bikes.
“As we look to the remainder of 2019, we are encouraged by the momentum of retail sales trends through the first nine months of this year but also recognize substantial headwinds that we continue to face,” chief financial officer John Olin said.
The company is also cutting spending and said it now expects 2019 capital expenses of $205mn to $225mn, about $20mn less than its previous estimates.
Excluding items, the company earned 70 cents per share, beating Wall Street expectations of 52 cents while revenue from motorcycles and related products overall fell 4.9% to $1.07bn.
The company, which has been criticised by President Donald Trump for its plan to shift some US production overseas, has also been battling the effects of trade tensions on its business globally.
Harley said on Tuesday retaliatory import duties imposed by the European Union and China on its bikes would cost the company about $105mn in 2019, up from its prior estimate of $100, with about $90mn of the hit coming from EU tariffs. Brussels in June raised import duties on US-manufactured Harley bikes to 31% from 6%, and the company said the impact from tariffs more than doubled in the third quarter from a year ago to $21.6mn.
Continental
Continental said yesterday that slower automobile production growth over the next five years had forced the car parts maker to book a €2.5bn ($2.8bn) impairment. The auto industry slowdown has already prompted profit warnings from various suppliers, including Continental, in the past few months.
“We do not anticipate that global production of passenger cars and light commercial vehicles will experience any material improvement in the next five years, so we have revised our assumptions for the medium-term market development accordingly,” chief financial officer Wolfgang Schaefer said in a statement.
A significant portion of the goodwill impairments stemmed from acquisitions made before 2008 with €724mn attributable to the Chassis & Safety business, €1.54bn from interiors and €244mn to the powertrain division.
Continental said non-cash impairments of goodwill and other intangible assets were booked in the third quarter of 2019.
There will also be a restructuring charge of €97mn and further restructuring charges are likely to follow in the fourth quarter.
The Hanover, Germany-based company reiterated it would book a loss before interest and taxes (EBIT) and net income in the third quarter and a negative net income for the full year.
Separately Continental said consolidated sales in the third quarter were about €11.1bn and its adjusted EBIT margin was about 5.6%. Sales in the Automotive Group were about €6.6bn, with an adjusted EBIT margin of about 1.6%. Continental also said it would no longer seek to raise capital via an initial public offering of Vitesco Technologies, but will continue with plans to split off and separately list the entire powertrain business, a step which would be submitted to a shareholder vote on April 30, 2020. A stand-alone Vitesco would have a freer hand to participate in consolidation of the powertrain sector as the auto industry slowly shifts from combustion engines toward battery-driven powertrains.
McDonald’s
McDonald’s Corporation missed Wall Street estimates for profit for the first time in two years yesterday as more investment to spruce up US restaurants and speed up delivery weighed on the world’s biggest fast food chain, sending its shares down 3%. The company has been battling competition in the United States as rival fast-food chains challenge its dominance with value meals and a range of new menu items.
McDonald’s has also come late to the game in looking at reintroducing chicken sandwiches and beginning to test plant-based burgers, missing out on some of the hype around launches by rivals Burger King and KFC.
“Our gut tells us that McDonald’s was outcompeted in the third quarter by Wendy’s and Burger King,” Cowen analyst Andrew Charles said. In a bid to reverse declining customer traffic and tackle competition, McDonald’s has been remodelling its 14,000 US restaurants to include digital ordering kiosks, mobile ordering as well as pay and pickup services, while partnering with app-based delivery services GrubHub, Uber Eats and DoorDash.
Those investment led to a 2% rise in operating costs to about $3bn, leading McDonald’s to post a smaller-than-expected profit of $2.11 per share.
Sales at US restaurants open for at least 13 months rose 4.8% in the third quarter ended September 30, below the 5.17% growth expected by analysts, according to IBES data from Refinitiv.
Globally, the company reported better-than-expected comparable sales growth of 5.9% on strong sales in markets such as the UK and France. Net income fell 2% to $1.61bn in the quarter from $1.64bn a year earlier. Total revenue, including both US and overseas operations, rose to $5.43bn, slightly below analysts’ expectations of $5.49bn.
United Parcel Service
United Parcel Service Inc’s e-commerce fuelled quarterly profit beat yesterday was overshadowed by news that Jim Barber, widely viewed as the world’s biggest parcel delivery firm’s next leader, would retire at year-end.
Shares in Atlanta-based UPS fell 5% to $112.59 on news of the departure of chief operating officer Barber, who oversees the company’s global small package, freight, supply chain, freight forwarding and engineering, and was instrumental in the company’s turnaround.
“Investors assumed he was going to be the next CEO and this caught us by surprise. Unfortunately the market does not like surprises,” Seaport Global analyst Kevin Sterling said.
UPS volume for Next Day Air delivery within the United States rose about 24% in the quarter ended September 30, benefiting from strong e-commerce demand and rival FedEx Corp’s breakup with online retailer Amazon.com Inc this summer.
“It’s Amazon, but it’s beyond Amazon,” chief executive David Abney said in a telephone interview with Reuters. “Companies are competing on time. UPS net income rose 16% to $1.75bn, or $2.01 per share, in the third quarter. Revenue rose 5% to $18.32bn. Excluding items, the company earned $2.07 per share. Analysts on average had estimated earnings of $2.06 per share, according to IBES data from Refinitiv.
Travelers
Insurer Travelers Cos Inc reported a lower-than-expected quarterly profit yesterday as it bolstered its reserves to cover asbestos-related and other claims, sending its shares down nearly 4% in trading before the bell.
The insurer said it set aside an additional $220mn for asbestos claims reserves in its business insurance unit, compared with a year earlier.
Travelers chief executive officer Alan Schnitzer flagged an “increasingly challenging tort environment” and “higher non-catastrophe weather-related losses” for weak results. Earned premiums rose 4.3% to $7.18bn, while combined ratio improved to 101.5% from 96.6%. A ratio below 100% means the insurer earns more in premiums than it pays out in claims.
Catastrophe losses, net of reinsurance, fell $23mn to $241mn from a year earlier, after wildfires and hurricanes hit its earnings last year. Net investment income fell about 4% to $622mn.
Insurers typically invest money they get from premiums into stocks and bonds to earn profits. The company posted an underwriting loss of $149mn, compared with a gain of $198mn a year earlier. Net income fell to $396mn, or $1.50 per share, in the third quarter ended September 30 from $709mn, or $2.62 per share, a year earlier. On an adjusted basis, the company earned $1.43 per share, while analysts were expecting $2.35 per share, according to IBES data from Refinitiv. The company’s total revenue rose about 4% to $8.01bn.
Procter & Gamble
Procter & Gamble reported a jump in quarterly earnings yesterday, benefiting from strong sales of premium toothpaste and other high-end products and price increases in other categories.
The consumer products giant, whose brands include Tide detergent and Old Spice deodorant, reported profits of $3.6bn in the first quarter of fiscal 2020, a jump of 12.3% from the year-ago period. Sales increased 6.6% to $18bn. Shares surged following the report, which topped analyst estimates and led P&G to boost full-year forecasts.
The company now forecasts sales growth of three to five % in fiscal 2020, a steep change from a few years ago when it struggled to lift sales.
P&G notched higher sales in most product divisions, with the biggest increases in health care and beauty.
The company cited strong sales of premium toothpaste and new toothbrush products, as well as of “super-premium” SK-II cosmetics and China Olay.
Several categories benefited from price increases, in some cases implemented after currency devaluations.
PulteGroup
US homebuilder PulteGroup Inc reported better-than-expected third-quarter profit and revenue yesterday, as lower mortgage rates boosted demand.
The housing market, the most sensitive sector to interest rates, has perked up in recent months as the Federal Reserve’s monetary policy easing has pushed down mortgage rates from last year’s multi-year highs.
Shares of the company firmed 3% pre-market as orders, an indicator of future revenue, rose 12.7% to 6,031 units in the quarter.
Pulte, which mainly sells single-family homes, said it sold 6,186 homes in the quarter, up from 6,031 a year ago, while the average home price fell marginally. “Improving demand dynamics continued throughout the quarter, as lower interest rates and improved affordability had a positive impact on buyer interest,” chief executive officer Ryan Marshall said in a statement.
The company’s net income fell to $273.1mn, or 99 cents per share, in the quarter ended September 30, from $289.5mn, or $1.01 per share, a year earlier. Total revenue rose 2.3% to $2.71bn.
Analysts’ on average had expected the homebuilder to post a profit of 92 cents per share on a revenue of $2.57bn, according to IBES data from Refinitiv.
Centene
Centene Corporation yesterday reported a quarterly profit that edged past Wall Street estimates, helped by higher sales in its Medicaid business which sells health plans for low-income Americans.
Membership in Medicaid health insurance plans, Centene’s biggest business, increased by 61,800 to more than 8.7mn since last year. The company, which is buying smaller rival WellCare Health Plans Inc for $15.27bn, hopes the deal will scale up its government-backed Medicare and Medicaid businesses, and limit its exposure to the Obamacare exchanges.
Centene’s health benefits ratio, the amount it spends on medical claims compared with its income from premiums, worsened to 88.2% in the quarter ended September 30 from 86.3% a year earlier.
Net earnings attributable to Centene rose to $95mn, or 23 cents per share, from $19mn, or 5 cents per share, a year earlier, when the company took a charge from an industry-wide fee. Excluding items, Centene brought in earnings of 96 cents per share, narrowly beating the consensus estimate of 95 cents.
Total revenue of the company rose 17% to $18.98bn, beating analysts’ estimates of $18.43bn.
Husqvarna
Husqvarna, the world’s biggest maker of gardening power tools, posted a smaller than expected third-quarter operating profit and said weakened demand in North America had hit sales.
The Swedish group swung to a 414mn crown ($43mn) profit from a year-ago loss of 124mn, helped by restructuring and efficiency measures to get back on track after a tough 2018 as well as higher prices.
Analysts had however forecast a 443mn crown profit in the seasonally weak quarter, according to a Refinitiv poll.
Husqvarna shares fell 3% at the opening in Stockholm.
“Going forward we will increase our focus on cost efficiencies,” chief executive Kai Warn said in the report.
The global no.1 company in robotic lawn mowers, garden watering systems and garden tractors, and no.2 in trimmers and chainsaws, does the bulk of its business towards the end of the first quarter and in the second — ahead of and during peak gardening season in the northern hemisphere.
The rival to Deere & Company, Black & Decker, Honda Motor and Fiskars said turnover measured in local currencies was flat in the quarter.
“Sales were negatively affected by weaker demand in North America, particularly for the wheeled segment, while they developed positively in Europe with good growth for robotic lawn mowers and battery products,” Warn said.
Wheeled products includes walk-behind mowers and trimmers.
The group did not say what slowed demand for the segment.
In the second quarter, sales shrank due to cool weather in Europe and North America, which restricted grass growth, so trade partners saw little need to restock lawn mowers.
While traditional petrol-engined products account for a large chunk of Husqvarna’s sales, the group is betting on strong growth in automatic mowers, as well as battery-driven handheld tools that are greener, less noisy and vibrate less.
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Pick n Pay Stores
South African supermarket retailer Pick n Pay Stores Ltd posted a 9.5% rise in first-half earnings yesterday, with strong growth in its core domestic operations outweighing challenges in Zambia and Zimbabwe.
Pick n Pay, which also sells clothes, said comparable headline earnings per share (HEPS) for the 26 weeks ended September 1 rose to 85.03 cents from a restated 77.67 cents a year earlier.
Reported HEPS, which includes the impact of hyperinflation accounting in Zimbabwe, rose 17.5%.
“At the core of our result is a very strong performance from our South Africa division,” group Chief Executive Richard Brasher said in a statement.
“In this environment, retailers have found it difficult to balance their two key objectives: delivering solid sales growth while maintaining profit margins.
I am very pleased that we have succeeded in growing both our sales and our profits. Pick n Pay, like its peers, has cut prices in order to attract highly cost-conscious shoppers and cope with the difficult trading conditions that have hit other retailers at home amid a sluggish economy.
Comparable group turnover grew 6%, with like-for-like sales growth of 2.9%. Trading profit rose 12.5% to 1.2bn rand ($81.4mn). In South Africa, where it has more than 1.600 stores, Pick n Pay delivered comparable sales growth of 6.5%, with like-for-like turnover growth of 3.5%. In the rest of Africa, reported earnings, which includes the hyperinflation accounting, were down 79.8% year-on-year, reflecting difficult conditions in Zimbabwe, it said.
“Economic conditions in Zimbabwe have been particularly difficult, with businesses and consumers grappling with political and social instability, high levels of inflation, currency devaluation and shortages of staple goods and services,” Pick n Pay said.
Randstad
Netherlands-based staffing company Randstad posted a 2% drop in its third-quarter core profit yesterday, but beat analysts’ expectations as European markets stabilised amid a global industrial slowdown.
Adjusted earnings before interest, taxation and amortization (EBITA) came in at €298mn ($332.4mn) in the three-month quarter ended September, while analysts polled by Randstad had on average forecast EBITA of €291mn.
Randstad’s organic revenue slipped 2.5% to just over €6bn ($6.69bn), largely due to a decline in the automotive sector, which is reeling under the impact of the Sino-US trade tensions and global political uncertainties, including Britain’s potential departure from the European Union.
The Netherlands-based company’s sales in Germany dropped 14%, roughly similar to the previous quarter, as Europe’s industrial powerhouse cooled.
“Germany is actually stabilising on a low level,” chief financial officer Henry Schirmer said in an interview.
“The entire minus of 2.5% top line is automotive,” he said.”In Germany, it is part of a wider industrial issue and in the coming two quarters we do not expect to see dramatic improvement.”
Schirmer said activity in the Benelux region of the Netherlands and Belgium has also slowed, resulting in a 5% decline in revenue, as the German industrial downturn tricked through. At the same time, Randstad saw its free cash flow more than double to €468mn in the three-month period.
“We are well-positioned at Randstad to end the year stronger.
We are working in a macro environment, which is more subdued than last year, but you will not see us cutting down on very important strategic investments.”
Whitbread
Hotel chain owner Whitbread Plc reported a lower first-half pretax profit yesterday, as the uncertainty surrounding Brexit kept companies from spending on business travel in the United Kingdom.
Early indications showed Whitbread’s shares trading about 2% lower.
Businesses inside the United Kingdom have been putting off travel this year as they wait for more clarity on what the terms of Britain’s divorce deal with the European Union will look like.
“Shorter-term trading conditions in the UK regional market have been difficult, particularly in the business segment where we have a higher proportion of our revenue,” Whitbread chief executive officer Alison Brittain said.
The dent in hotel demand has been felt especially in regional markets outside London where 80% of the Premier Inn hotels are located.
Whitbread said it was difficult to predict business confidence and its impact on demand for short stay and domestic travel during the second half of the year. The company, which also owns the Beefeater restaurant chain, said adjusted pretax profit fell 4.1% to £236mn for the six months ended August 29. Overall adjusted revenue dipped marginally to £1.08bn pounds.
UBS
Swiss bank UBS is axing high-paying investment banking staff after a disappointing performance at the division prompted a 16% slide in third-quarter net profit and put the group’s 2019 profit goals further out of reach.
Chief executive Sergio Ermotti, credited for rapidly turning UBS around after the financial crisis, announced a further $90mn in expected annual cost savings at the investment bank yesterday, following a prolonged performance dip which Ermotti described as unsatisfying even given a tough market.
An earnings beat in its core global wealth management unit helped offset a 59% adjusted profit decline in its investment bank, putting the group’s third-quarter net earnings of $1.05bn ahead of analyst expectations.
Ermotti is running up against a number of headwinds in UBS’s core markets, as wealthy clients hold back from trading, negative rates eat into margins and investment banking activity remains muted. The bank’s share price is down 16% over the past year, hitting a six-year low in August and edging back towards the level it was when Ermotti took charge in 2011.
In its investment bank a fall in M&A work meant its advisory revenue fell 21%, while equity and debt capital markets income were down 22% and 15% respectively. On the trading side equities revenue fell 7%, while foreign exchange, rates and credit revenue was steadier with just a 1% fall.
UBS said it expects to take restructuring expenses of around $100mn in the fourth quarter related to structural changes it is making to the business, run by co-heads Piero Novelli and Robert Karofsky.
Measures include streamlining and merging its securities and trading activities and reducing headcount.