Microsoft word - sci morning notes 8-6-12.docx
Main Number| 856-751-1331 Trading Desk | 800-486-1515 Web: www.sturdivant-co.com Email: [email protected]
THE ANALYST’S DESK
Kraft Foods (KFT-40.51, Not Rated, Yield 2.0%) Kraft reported that operating EPS was $0.68 versus
$0.62 in the second quarter of 2011, in line with estimates. Net revenue fell 4.3%, organic revenue
grew 8.3%. First half net revenues declined 0.3% to $13.3 billion, mainly due to a 5.0% headwind
from negative currency translation rates and a 2.7% decline related to the benefit of accounting
calendar changes in the prior year. Organic revenues grew 4.9%. Operating EPS for the first half
were $1.25. The company confirmed 2012 guidance of about 5.0% organic net revenue growth and at
least 9.0%operating EPS growth on a constant currency basis. Despite slightly better than expected
results, the forecast remains the same, mainly due to a plan to spend back any extra earnings
generated back into the business. The company plans to split into two major food companies on
October 1, 2012. The improvement in the business reflects strong growth in the Power brands,
favorable pricing, significant productivity gains and aggressive overhead cost management in each
Beth Ann Loewy, CFA, [email protected]
The first half results reflect the success of brand-building investments over the past few years. Volume/mix was a negative 0.6%, mainly due to a 1.2% from the shift of Easter-related shipments into the first quarter and by 0.5% from product pruning in North America. Operating income in the second quarter was $1.9 billion and operating income margin increased 110 basis points to 14.1%. Adjusted operating income, which excludes integration program costs, restructuring costs and spin-off costs grew 8.3% to $2.1 billion. Adjusted operating income margin rose 180 basis points to 15.8%. Power brands, new products and a favorable impact from carryover pricing actions drove solid organic net revenue growth in Kraft Foods North America. Adjusted segment operating income increased high single digits. Kraft Foods Europe drove strong underlying growth in an increasingly difficult environment by focusing on Power brands, driving productivity improvement and aggressive management of overheads. Net revenues declined 14.8%, including a negative currency impact of 8.4% and a 7.8% negative impact from accounting calendar shifts. Organic net revenue rose 1.4%, driven by pricing. In developing markets, net revenue in Q2 decreased 3.6%, including negative impacts of 8.7% from currency and 2.5% from accounting calendar changes. Organic net revenue grew 7.6%, driven by higher pricing and volume/mix. Power brands grew about 8.0%. The company intends to spin-off to its shareholders its North American grocery business, Kraft Foods Group, Inc. The spin-off is expected to occur at 5 PM on October 1, 2012. At the time of the spin-off, each of the company’s shareholders entitled to receive shares of Kraft Foods Group will receive one share of Kraft Foods Group for every three shares of Kraft Foods, Inc. The record date has not yet finalized, but is expected to be in mid-September. Management expects the common stock for both companies to begin to trade “when-issued” shortly before the record date. Beginning on October 2, 2012, The NASDAQ Global Select Market will trade the Kraft Foods Group under the symbol KRFT and Mondelez International, Inc. under the MDLZ symbol. The current ticker KFT will be retired. Both Kraft Foods Group and Modelez International plan to host investor events in early September in Boston.
Procter & Gamble (PG-$65.50, Not Rated, Yield 3.4%) Procter & Gamble reported that core net
earnings per share for the fourth quarter were $0.82 versus $0.82 a year ago, in line with forecasts.
Net sales were $20.2 billion, a decrease of 1.0% versus the prior year. Foreign currency reduced net
sales by 4.0%. Organic sales growth was 3.0%, driven by price increases, partially offset by
geographic mix. The $0.82 operating earnings reported were $0.03 ahead of the top-end of the
company’s guidance. Additionally, P & G completed the sale of the Snacks business in the quarter,
resulting in a net gain of $0.48 per share. Management is optimistic about fiscal 2013 results because
the company has strong developing market momentum, has strengthened plans for the core developed
markets and should benefit from a $10 billion cost saving program. The company is making
adjustment in pricing, introducing new products and expanding its distribution in developing
markets. Core EPS for FY 2013 are expected to be in the range of $3.80-$4.00 per share. Core EPS
estimates do not include $0.15 to $0.19 in restructuring charges. The company will repurchase $4
billion in P & G stock over the course of the year.
Beth Ann Loewy, CFA, [email protected]
Organic sales increased 3.0% with four of the five business segments increasing organic sales. Core
operating profit rose 4.0%. The benefits from cost savings and pricing were offset by the decrease in net
sales and higher commodity costs. Gross margin contracted 40 basis points due mainly to higher commodity
costs, unfavorable geographic and product mix and restructuring charges, which were partially offset by
positive pricing and cost savings. S.G. & A. expenses as a percentage of sales declined 10 basis points.
Operating cash flow was $4.0 billion and free cash flow was $2.7 billion. The company returned $1.6 billion
of cash to shareholders as dividends. Beauty care
net sales decreased 4.0% to $4.8 billion. Organic sales rose 1.0%. Unit volume decreased
1.0%. Price increases added 4.0%. Mix reduced net sales by 3.0% due to the disproportionate growth in
developing markets and in produce categories that have lower than segment average selling prices.
Unfavorable currency reduced net sales by 4.0%. Volume in hair care was in line with a year ago due to
mid-single growth in developing markets. Volume in developed markets decreased mid-single digits due to
competitive pressure in North America and Western Europe. Volume in Beauty decreased mid-single digits
due to market softness in the United States and China. Net earnings were in line with prior year. Grooming
net sales decreased 6.0% to $2.0 billion. Unit volume and organic sales were in line with a year
ago. Shave care volume was in line with the prior year. Low single-digit growth in developing regions was
offset by a low-single digit decrease in developed regions due to competitive activity and market contraction
in Western Europe. Volume in appliances increased mid-single digits with developed markets up double
digits primarily due to product innovation and in-store programs. Grooming profits were in line with last
year. Health care
net sales decreased 1.0% to $2.9 billion. Unit volume increased 1.0%. Organic net sales rose
3.0%. Oral care volumes decreased low-single digits due to competitive activity in developed markets and
pricing gaps in Greater China. Volume in fem care grew low-single digits due to market growth and product
innovation in developing markets. Personal Health Care volumes increased mid-single digits, with organic
volume decreasing low-single digits due to lower shipments of Metamucil in North America. Net earnings
decreased 2.0%. Fabric Care and Home Care
net sales decreased 1.0% to $6.6 billion. Unit volume decreased 1.0%.
Organic sales grew 3.0%. Pricing increased sales by 5.0%. Mix reduced sales by 1.0% due to unfavorable
geographic mix. Fabric care volume decreased low-single digits as growth in developing regions was more
than offset by a decrease in developed regions due to consumer value issues following price increases taken
in previous periods. Home Care volume increased low-single digits. Pet Care volume decreased high-single
digits. Batteries volume decreased low-single digits due to distribution losses in developed markets. Net
earnings increased 10.0%. Baby Care and Family Care
net sales increased 1.0% to $4.1 billion on unit growth of 1.0%. Organic sales
increased 5.0%. Baby Care volume increased mid-single digits behind double-digit growth in developing
markets and single-digit growth in developed markets due to promotional activity. Volume in Family Care
decreased high-single digits primarily behind a strong base year period from volume pull forward ahead of
price increases. Net earnings increased 13.0% primarily due to operating margin expansion. Fiscal 2013 Guidance
Net sales for fiscal 2013 are expected to be in line to down 2.0% versus the prior year, including a negative
4.0% impact from foreign currency. Organic sales are expected to increase 2.0-4.0%. Pricing is expected to
add 2.0%, and unfavorable product and geographic mix is expected to reduce sales by 1.0%. Diluted EPS
are expected to be in the range of $3.61-$3.85. Core EPS is expected to be in the range of $3.80 to $4.00.
Core EPS exclude non-core restructuring charges of $0.15 to $0.19 per share.
DISCLOSURES AND DEFINITIONS
Sturdivant & Co. and its employees, officers, and members deal as principal in transactions involving the securities referred to herein (or options or other
instruments related thereto), including in transactions which may be contrary to any recommendations contained herein.
This publication does not constitute an offer to sell or solicitation to buy of any transaction in any securities referred to herein. Any recommendation
contained herein may not be suitable for all investors. Although the information contained in the subject report (not including disclosures contained
herein) has been obtained from sources we believe to be reliable, the accuracy and completeness of such information and the opinions expressed
herein cannot be guaranteed. This publication and any recommendation contained herein speak only as of the date hereof and are subject to change
without notice. Sturdivant & Co. and its employees shall have no obligation to update or amend any information or opinion contained herein.
This publication is being furnished to you for informational purposes only and on the condition that it will not form the sole basis for any investment
decision. Each investor must make their own determination of the appropriateness of an investment in any securities referred to herein based on the
tax, or other considerations applicable to such investor and its own investment strategy. By virtue of this publication, neither Sturdivant & Co. nor any of
its employees shall be responsible for any investment decision. This report may not be reproduced, distributed, or published without the prior consent of
Sturdivant & Co. All rights reserved by Sturdivant & Co.
This report may discuss numerous securities, some of which may not be qualified for sale in certain states and may therefore not be offered to investors
in such states. This document should not be construed as providing investment services. Investing in non-U.S. securities including ADRs involves
significant risks such as fluctuation of exchange rates that may have adverse effects on the value or price of income derived from the security. Securities
of some foreign companies may be less liquid and prices more volatile than securities of U.S. companies. Securities of non-U.S. issuers may not be
registered with or subject to Securities and Exchange Commission reporting requirements; therefore, information regarding such issuers may be limited.
* Report was prepared by third party independent analysts unaffiliated with Sturdivant & Co., Inc., a FINRA registered broker (“Sturdivant”), or any of
Sturdivant’s affiliates, including Atlantic Equity Research, LLC (“Atlantic”), a New Jersey registered investment adviser. For a complete copy of the
report, please contact Sturdivant & Co. RATING SYSTEM DEFINITIONS
Sturdivant & Co.’s stock ratings system reflects the investment decisions our clients face every day, and is meant to assist clients in making these
decisions by recommending a specific action to take with each stock we cover. All of the ratings correspond to a specific investment action that we
recommend taking on the date the research is published. Thus, “Outperform” (equivalent to “Buy”) ratings are reserved only for stocks that we would be
actively buying at the time the research is published. “Marketperform” (equivalent to “Hold”) ratings are reserved for stocks that we believe are in line
with the market’s anticipated performance and we recommend holding. “Underperform” (equivalent to “Sell”) ratings are assigned to stocks where the
analyst anticipates stock price declines relative to the market. Please note also that the price expectations that determine the rating are in absolute dollar
terms, not in terms of relative performance to a sector or an index. Therefore, analysts will not use the “Outperform” rating for stocks that are expected to
perform well relative to their sector but only for stocks that are expected to appreciate in actual dollar returns.
Confidentiality Note: The information contained in this electronic message is intended only for the use of the individual or entity named above. If you are not the above-named intended recipient, you are hereby notified that any review, dissemination, copying or disclosure of this communication is strictly prohibited. If you have received this communication in error, please notify Sturdivant & Co. at (856) 751-1331 and delete this communication immediately without making any copy or distribution. MEMBER: FINRA & SIPC, Philadelphia Stock Exchange - Sturdivant & Co. reserves the right to monitor all e-mail communications through its network. All email sent to or from this address is subject to electronic storage and review by Sturdivant & Co. Although Sturdivant & Co. operates anti-virus programs, it does not accept responsibility for any damage whatsoever caused by viruses being passed.
On Einstein and the Axiom of Special Relativity Roger J.Anderton [email protected] Looking at articles by Claes Johnson on Special Relativity (SR) in the way that he treats the subject. Different people have had different perspectives on SR. He starts off : It is well known the Einstein did not do well in mathematics in school, and thus we may expect that Einstein is one
A near-collision attack on BLENDER-256 Vlastimil Klima, We will describe here a near-collision attack on hash function BLENDER with 256-bit output . This attack demonstrates only how to explore one weakness in the design of this hash function family. The weakness: When we choose the length of the message carefully, we minimize "padding, filling, parsing and appending" the me