WRK: Earnings Report for the Quarter Ending December 31, 2020

WestRock Company reported before the market opened on January 28, 2021, it earned $0.57 per diluted share in the quarter that ended on December 31, 2020, up 8 percent from earnings of $0.53 in the same 3 months of the previous year. These figures are the earnings determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP). 

Adjusted earnings, a non-GAAP figure, rose 5 percent to $0.61 per share from $0.58 one year earlier, a less robust change than the GAAP percentage. The exclusions responsible for the $0.04 per share difference in the latest quarter between the GAAP and Non-GAAP earnings were: COVID-19 relief payments [$0.06 per share], Restructuring and Loss on extinguishment of debt [$0.03 per share], and Gain on sale of investment [($0.05) per share].  Non-GAAP earnings, by excluding unusual and non-cash items that could obscure the results of a business's principal, ongoing operations, are intended to be cleaner measures of corporate profits.

This post compares the quarterly Income Statement published by WestRock to the estimates I made in a previous “Look Ahead” post.  My estimates were based on publicly available guidance provided by WestRock's management to financial analysts, news reports, and trends in the company's historical results.  Unless otherwise mentioned, all reported values mentioned below are GAAP figures.

First, a little background about the company:  WestRock is a leading, multinational manufacturer of corrugated packaging, packaging for consumer goods, and other paper products.  WestRock was formed in 2015 when RockTenn and MeadWestvaco merged.  The combined company spun off its specialty chemicals operations and Home, Health and Beauty (HH&B) business in order to acquire several other firms in the  paper and packaging business.  The largest acquisitions were KapStone Paper & Packaging for $4.9 billion (2018) and Multi Packaging Solutions for $1.35 billion (2017).  In May 2020, in response to COVID-19, WestRock announced steps to reduce its expenses and to conserve cash.  Cutting the common stock dividend was one such step. Later in 2020, WestRock recorded a $1.3 billion non-cash charge to lower the carrying value of Consumer Packaging assets.  In January 2021, some of WestRock's electronic systems were impacted by a ransomware attack.

The following table is a simplified version of WestRock's Income Statement for the quarter that ended in December 2020, with company-reported numbers along side my predictions.  Figures from the year-earlier quarter are also provided for comparative purposes.

Revenue in the December 2020 quarter totaled $4.4 billion, about the same as last year. The Corrugated Packaging business was responsible for 65 percent of overall revenue, and this unit's revenue percent fell by 1.5 percent compared to the year-earlier result. The Consumer Packaging business contributed 36 percent of revenue, and this unit's revenue increased by 3.8 percent.

I was expecting WestRock to report revenue of $4.3 billion for the December 2020 quarter.  The actual amount surpassed my estimate by $64.5 million (1.5 percent).

The Cost of Revenue (also known as Cost of Goods Sold) was $3.6 billion in the latest quarter, which translates into a Gross Margin of 17.1 percent of revenue. Since it was lower than the 18.3 percent Gross Margin achieved in the year-earlier quarter, it's a sign that WestRock sold its products and services at less profitable prices relative to production costs. I was expecting the Gross Margin to be 18.0 percent in the December 2020 quarter, and WestRock missed that prediction by 0.9 percent.

Sales, General, and Administrative expenses totaled $418 million in the December 2020 quarter, down 1.9 percent from one year ago.  SG&A expenses decreased from 9.6 percent to 9.5 percent of quarterly revenue, which shows WestRock spent less per dollar of sales on indirect operational costs, such as marketing. I had estimated that SG&A expenses would be 10.0 percent of revenue, and the actual percentage turned out to be lower than the prediction.

The last operating expense line on the Income Statement is where the sum of other operating income and charges, such as restructuring, may be listed.  For WestRock the amount listed on this line was a $102 million loss in the latest quarter.  I was expecting a net loss of $120 million.

WestRock's Operating Income was $233 million in the quarter, down 7.3 percent from the year-earlier period.  Operating Income exceeded my $226 million estimate by $7 million.

Interest and other non-operating items summed to a net expense of $30 million.  My estimate for non-operating items was $80 million.

The effective income tax rate fell by 0.2 percent to 24.8 percent, which had a positive effect on net income.  I expected the tax rate to be 23.3 percent.

Net income attributable to WestRock was $152 million, $0.57 per share in the quarter ending December 2020.  The figures for the year-earlier quarter were $139 million, $0.53/share. My earnings estimate for  the latest quarter was $112 million ($0.43/share), so WestRock Company earned $0.14 per share more than I had predicted.

In conclusion, the following list shows where the reported results differed from my expectations:

      – Better than expected:  SG&A/Revenue + Special operating items + Misc non-operating items 

      – Worse than expected:  Gross Margin + Interest + Income tax rate 

      – Near expectations:  Revenue growth + SG&A 

This post is not investment advice, and the accuracy of the information, tables, charts, and any commentary presented is not guaranteed.  Readers are encouraged to independently verify all data using information from original sources. The Income Statements discussed in these blog posts have not been audited and may differ in material respects from those published by the subject company.  These differences are intended to facilitate analysis and cross-company comparisons. Complete financial statements with notes can usually be found in the 10-Q and 10-K filings companies submit to the Securities and Exchange Commission (SEC).

 #westrock    #wrk    #gauges  #gcfr  #gcfr2 #QtrlyRpt   #nac_financialanalysis

FB: Earnings Report for the Quarter Ending December 31, 2020

Facebook reported after the market closed on January 27, 2021, it earned $3.88 per diluted share in the quarter that ended on December 31, 2020, up 52 percent from earnings of $2.56 in the same 3 months of the previous year. These figures are the earnings determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP). 

This post compares the quarterly Income Statement published by Facebook to the estimates I made in a previous “Look Ahead” post.  My estimates were based on publicly available guidance provided by Facebook's management to financial analysts, news reports, and trends in the company's historical results.  Unless otherwise mentioned, all reported values mentioned below are GAAP figures.

First, a little background about the company:  Facebook operates its eponymous and widely used social network, plus Instagram, WhatsApp, and Messenger. Advertising is responsible for almost all of the company's revenue.  COVID-19 accelerated a shift from offline to online commerce, and this increased demand for online advertising.  Facebook has been under fire for some time about how it protects (or doesn't) the privacy of its users, how it manages (or doesn't) inappropriate content, and whether it has abused its dominant position in the market.  In December 2020, the Federal Trade Commission sued Facebook, claiming the company's anticompetitive conduct helped it maintain a monopoly. In addition, changes that Apple is reportedly making to its mobile operating system to protect user privacy may have an adverse impact on Facebook.

The following table is a simplified version of Facebook's Income Statement for the quarter that ended in December 2020, with company-reported numbers along side my predictions.  Figures from the year-earlier quarter are also provided for comparative purposes.

Revenue in the December 2020 quarter totaled $28.1 billion, 33 percent more than last year's $21.1 billion. The Advertising business was responsible for 97 percent of overall revenue, and this revenue grew by 31.1 percent compared to the year-earlier result. Other revenue contributed 3 percent of revenue, up 155.8 percent.

I was expecting Facebook to report revenue of $26.1 billion for the December 2020 quarter.  The actual amount surpassed my estimate by $1.9 billion (7.4 percent).

The Cost of Revenue (also known as Cost of Goods Sold) was $5.2 billion in the latest quarter, which translates into a Gross Margin of 81.4 percent of revenue. Since it was lower than the 83.4 percent Gross Margin achieved in the year-earlier quarter, it's a sign that Facebook sold its products and services at less profitable prices relative to production costs. I was expecting the Gross Margin to be 82.0 percent in the December 2020 quarter, and Facebook missed that prediction by 0.6 percent.

Facebook spent $5.2 billion on Research and Development in the latest quarter, up from $3.9 billion one year ago. I had estimated that R&D expenses would be $5.6 billion.  R&D was 18.6 percent of Revenue.

Sales, General, and Administrative expenses totaled $4.9 billion in the December 2020 quarter, up 0.5 percent from one year ago.  SG&A expenses decreased from 23.0 percent to 17.4 percent of quarterly revenue, which shows Facebook spent less per dollar of sales on indirect operational costs, such as marketing. I had estimated that SG&A expenses would be 21.5 percent of revenue, and the actual percentage turned out to be lower than the prediction.

Facebook's Operating Income was $12.8 billion in the quarter, up 44.2 percent from the year-earlier period.  Operating Income exceeded my $10.2 billion estimate by $2.6 billion.

Interest and other non-operating items summed to a net  income of $280 million.  My estimate for non-operating items was $125 million.

The effective income tax rate fell by 5.8 percent to 14.1 percent, which had a positive effect on net income.  I expected the tax rate to be 16.0 percent.

Net income attributable to Facebook was $11.2 billion, $3.88 per share in the quarter ending December 2020.  The figures for the year-earlier quarter were $7.3 billion, $2.56/share. My earnings estimate for  the latest quarter was $8.7 billion ($3.00/share), so Facebook earned $0.88 per share more than I had predicted.

In summary, the figures in the reported results that were better than expected, worse than expected, and about the same as what I had expected are listed below:

      –Better than expected:  Revenue growth + R&D + SG&A + Interest income + Income tax rate 

      –Worse than expected:  Gross Margin 

      –Near expectations:

This post is not investment advice, and the accuracy of the information, tables, charts, and any commentary presented is not guaranteed.  Readers are encouraged to independently verify all data using information from original sources. The Income Statements discussed in these blog posts have not been audited and may differ in material respects from those published by the subject company.  These differences are intended to facilitate analysis and cross-company comparisons. Complete financial statements with notes can usually be found in the 10-Q and 10-K filings companies submit to the Securities and Exchange Commission (SEC).

 #facebook    #fb    #gauges  #gcfr  #gcfr2 #QtrlyRpt   #nac_financialanalysis

PSX: Earnings Report for the Quarter Ending December 31, 2020

Phillips 66 reported before the market opened on January 29, 2021, it lost $1.23 per diluted share in the quarter that ended on December 31, 2020, down from earnings of $1.64 in the same 3 months of the previous year. These figures are the earnings determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP). 

Adjusted earnings, a non-GAAP figure, fell to ($1.15) per share from $1.54 one year earlier. The principal exclusions contributing to the $0.08 per share difference in the latest quarter between the GAAP and Non-GAAP earnings were: Impairments [$0.22 per share], inventory adjustments [($0.06) per share], and Tax impacts [($0.12) per share].  Non-GAAP earnings, by excluding unusual and non-cash items that could obscure the results of a business's principal, ongoing operations, are intended to be cleaner measures of corporate profits.

This post compares the quarterly Income Statement published by Phillips to the estimates I made in a previous “Look Ahead” post.  My estimates were based on publicly available guidance provided by Phillips's management to financial analysts, news reports, and trends in the company's historical results.  Unless otherwise mentioned, all reported values mentioned below are GAAP figures.

First, a little background about the company:  Phillips 66 is an energy company with refining, midstream, downstream, and chemical operations. An independent for decades, Phillips Petroleum merged with Conoco in 2002 to form the giant ConocoPhillips. Phillips became independent again in 2012 -- this time with the iconic "Phillips 66" brand as the company name -- when it was spun off from ConocoPhillips.  Phillips 66 operates refineries for converting crude oil into gasoline and other fuels; the company's San Francisco refinery is being transformed to process renewable oils, instead of crude oil.  The company's products are sold by a large number of branded gas stations and other outlets.  Through the Phillips 66 Partners master limited partnership, Phillips 66 also owns pipelines and terminals for transporting energy products between processing plants and storage facilities.   The company's chemicals business is a 50 percent share of Chevron Phillips Chemicals Company.

The following table is a simplified version of Phillips's Income Statement for the quarter that ended in December 2020, with company-reported numbers along side my predictions.  Figures from the year-earlier quarter are also provided for comparative purposes.

VZ: Earnings Report for the Quarter Ending December 31, 2020

Verizon Communications reported before the market opened on January 26, 2021, it earned $1.11 per diluted share in the quarter that ended on December 31, 2020, down 10 percent from earnings of $1.23 in the same 3 months of the previous year. These figures are the earnings determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP). 

Adjusted earnings, a non-GAAP figure, rose 7 percent to $1.21 per share from $1.13 one year earlier, a much better change than the GAAP percentage. The principal exclusions contributing to the $0.10 per share difference in the latest quarter between the GAAP and Non-GAAP earnings were: Severance, pension and benefits charges [$0.08 per share], and Net loss on disposition of business [$0.03 per share].  Non-GAAP earnings, by excluding unusual and non-cash items that could obscure the results of a business's principal, ongoing operations, are intended to be cleaner measures of corporate profits.

This post compares the quarterly Income Statement published by Verizon to the estimates I made in a previous “Look Ahead” post.  My estimates were based on publicly available guidance provided by Verizon's management to financial analysts, news reports, and trends in the company's historical results.  Unless otherwise mentioned, all reported values mentioned below are GAAP figures.

First, a little background about the company:  Verizon Communications is a major provider of wired and wireless voice and data communications services to U.S. businesses and consumers. The company took its current form in 2000 when Bell Atlantic merged with GTE.  Verizon's wireless business is second only to AT&T in the U.S., and in September 2020, Verizon announced it would acquire Tracfone, the leading pre-paid and value mobile service provider.  The industry is now transitioning to 5G technology. 

The following table is a simplified version of Verizon's Income Statement for the quarter that ended in December 2020, with company-reported numbers along side my predictions.  Figures from the year-earlier quarter are also provided for comparative purposes.

Revenue in the December 2020 quarter totaled $34.7 billion, about the same as last year. The Consumer business was responsible for 69 percent of overall revenue, and this unit's revenue percent fell by 1.2 percent compared to the year-earlier result. The Business business contributed 23 percent of revenue, and this unit's revenue was essentially unchanged.

I was expecting Verizon to report revenue of $33.8 billion for the December 2020 quarter.  The actual amount surpassed my estimate by $917.0 million (2.7 percent).

The Cost of Revenue (also known as Cost of Goods Sold) was $14.8 billion in the latest quarter, which translates into a Gross Margin of 57.3 percent of revenue. Since it was higher than the 55.1 percent Gross Margin achieved in the year-earlier quarter, it signifies that Verizon sold its products and services at more profitable prices relative to production costs. I was expecting the Gross Margin to be 60.0 percent in the December 2020 quarter, and Verizon missed that prediction by 2.7 percent.

Sales, General, and Administrative expenses totaled $8.5 billion in the December 2020 quarter, up from $8.2 billion one year ago.  SG&A expenses increased from 23.6 percent to 24.5 percent of quarterly revenue, which shows Verizon spent more per dollar of sales on indirect operational costs, such as marketing. I had estimated that SG&A expenses would be 23.5 percent of revenue, and the actual percentage turned out to be higher than the prediction.

Verizon's Operating Income was $7.2 billion in the quarter, up 8.1 percent from the year-earlier period.  Operating Income fell short of my $7.7 billion estimate by $554 million.

Interest and other non-operating items summed to a net expense of $927 million.  My estimate for non-operating items was $1434 million.

The effective income tax rate rose to 24.5 percent, which had a negative effect on net income.  I expected the tax rate to be 23.0 percent.

Net income in the quarter attributable to Verizon was $4.6 billion, $1.11 per share.  The figures for the year-earlier quarter were $5.1 billion, $1.23/share. My earnings estimate for Verizon in this quarter was $4.7 billion ($1.14/share).

In summary, Verizon Communications earned in the December 2020 quarter much less than I had expected. The company had better-than-predicted Revenue growth, but the company did worse  than I had anticipated with Gross Margin, Operating Income growth, and the Income tax rate.

This post is not investment advice, and the accuracy of the information, tables, charts, and any commentary presented is not guaranteed.  Readers are encouraged to independently verify all data using information from original sources. The Income Statements discussed in these blog posts have not been audited and may differ in material respects from those published by the subject company.  These differences are intended to facilitate analysis and cross-company comparisons. Complete financial statements with notes can usually be found in the 10-Q and 10-K filings companies submit to the Securities and Exchange Commission (SEC).

 #verizon    #vz    #gauges  #gcfr  #gcfr2 #QtrlyRpt   #nac_financialanalysis

ADP: Earnings Report for the Quarter Ending December 31, 2020

Automatic Data Processing reported before the market opened on January 27, 2021, it earned $1.51 per diluted share in the quarter that ended on December 31, 2020, up 1 percent from earnings of $1.50 in the same 3 months of the previous year. These figures are the earnings determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP). 

Adjusted net earnings (non-GAAP) were unchanged from one year earlier at $1.52 per share. The exclusions responsible for the $0.01 per share difference in the latest quarter between the GAAP and non-GAAP earnings were: Transformation initiatives [$0.01 per share].  Non-GAAP earnings, by excluding unusual and non-cash items that could obscure the results of a business's principal, ongoing operations, are intended to be cleaner measures of corporate profits.

This post compares the quarterly Income Statement published by ADP to the estimates I made in a previous “Look Ahead” post.  My estimates were based on publicly available guidance provided by ADP's management to financial analysts, news reports, and trends in the company's historical results.  Unless otherwise mentioned, all reported values mentioned below are GAAP figures.

First, a little background about the company:  ADP provides "human capital management" and human resource outsourcing services, such as payroll, benefits, and personnel management, to numerous firms around the world.  These services are increasingly cloud-based.  In the company's most recent fiscal year, ADP "processed and delivered more than 69 million employee year-end tax statements, and moved more than $2.2 trillion in client funds."

The following table is a simplified version of ADP's Income Statement for the quarter that ended in December 2020, with company-reported numbers along side my predictions.  Figures from the year-earlier quarter are also provided for comparative purposes.

Revenue in the December 2020 quarter totaled $3.7 billion, 1 percent more than last year. The Employer Services business was responsible for 68 percent of overall revenue, and this unit's revenue percent fell by 1.1 percent compared to the year-earlier result. The PEO Services business contributed 32 percent of revenue, and this unit's revenue increased by 4.5 percent.

I was expecting ADP to report revenue of $3.7 billion for the December 2020 quarter.  The actual amount  fell short of my estimate by $4.3 million (0.1 percent).

The Cost of Revenue (also known as Cost of Goods Sold) was $1.8 billion in the latest quarter, which translates into a Gross Margin of 50.0 percent of revenue.  I was expecting the Gross Margin to be 49.0 percent in the December 2020 quarter, and ADP exceeded that prediction by 1.0 percent.

ADP spent $175 million on Research and Development in the latest quarter, up from $169 million one year ago. I had estimated that R&D expenses would be $174 million.  R&D was 4.7 percent of Revenue.

Sales, General, and Administrative expenses totaled $756 million in the December 2020 quarter, up from $754 million one year ago.  SG&A expenses decreased from 20.6 percent to 20.5 percent of quarterly revenue, which shows ADP spent less per dollar of sales on indirect operational costs, such as marketing. I had estimated that SG&A expenses would be 21.0 percent of revenue, and the reported data show that the actual percentage was lower than that prediction.

ADP's Operating Income was $818 million in the quarter, down 0.4 percent from the year-earlier period.  Operating Income exceeded my $762 million estimate by $56 million.

Interest and other non-operating items summed to a net  income of $15 million.  My estimate for non-operating items was $15 million.

The effective income tax rate rose by 0.2 percent to 22.2 percent, which had a negative effect on net income.  I expected the tax rate to be 23.0 percent.

Net income in the quarter attributable to ADP was $648 million, $1.51 per share.  The figures for the year-earlier quarter were $652 million, $1.50/share. My earnings estimate for ADP in this quarter was $598 million ($1.39/share).

In summary, Automatic Data Processing earned in the December 2020 quarter more than  I had expected. The company had better than predicted Gross Margin, Operating Income growth, and Income tax rate.  

This post is not investment advice, and the accuracy of the information, tables, charts, and any commentary presented is not guaranteed.  Readers are encouraged to independently verify all data using information from original sources. The Income Statements discussed in these blog posts have not been audited and may differ in material respects from those published by the subject company.  These differences are intended to facilitate analysis and cross-company comparisons. Complete financial statements with notes can usually be found in the 10-Q and 10-K filings companies submit to the Securities and Exchange Commission (SEC).

 #adp  #gauges  #gcfr  #gcfr2 #QtrlyRpt   #nac_financialanalysis 

AAPL: Earnings Report for the Quarter Ending December 26, 2020

Apple reported after the market closed on January 27, 2021 it earned $1.68 per diluted share in the quarter that ended on December 26, 2020, up 34 percent from earnings of $1.25 in the equivalent 13 weeks of the previous year. These figures are the earnings determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP). 

This post compares the quarterly Income Statement published by Apple to the estimates I made in a previous “Look Ahead” post.  My estimates were based on publicly available guidance provided by Apple's management to financial analysts, news reports, and trends in the company's historical results.  Unless otherwise mentioned, all reported values mentioned below are GAAP figures.

First, a little background about the company:  Apple became one of the world's most valuable companies by designing and selling stylish, easy-to-use computers, tablets, smartphones, music players, and watches, as well as software and media.  Services for these devices are also a lucrative and growing business for Apple, but selling iPhones is, by far, the company's largest single revenue source. The transition to 5G mobile technology may serve to boost iPhone sales even higher.  Apple is now selling laptops with fast, power-efficient processors it designed, replacing chips made by Intel, and they expectation is that other Apple-designed chips will be included in future products.  Apple's shares split 4-for-1 on 28 August 2020; they had split 7-for-1 just six years earlier.

The following table is a simplified version of Apple's Income Statement for the quarter that ended in December 2020, with company-reported numbers along side my predictions.  Figures from the year-earlier quarter are also provided for comparative purposes.

Revenue in the December 2020 quarter totaled $111.4 billion, 21 percent more than last year's $91.8 billion. The iPhone business was responsible for 59 percent of overall revenue, and this unit's revenue grew by 17.2 percent compared to the year-earlier result. The Services business contributed 14 percent of revenue, and this unit's revenue increased by 24.0 percent. The Mac unit supplied 8 percent of revenue, and this business's revenue rose by 21.2 percent.

I was expecting Apple to report revenue of $97.1 billion for the December 2020 quarter.  The actual amount surpassed my estimate by $14.3 billion (14.8 percent).

The Cost of Revenue (also known as Cost of Goods Sold) was $67.1 billion in the latest quarter, which translates into a Gross Margin of 39.8 percent of revenue. Since it was higher than the 38.4 percent Gross Margin achieved in the year-earlier quarter, it signifies that Apple sold its products and services at more profitable prices relative to production costs. I was expecting the Gross Margin to be 38.2 percent in the December 2020 quarter, and Apple exceeded that prediction by 1.6 percent.

Apple spent $5.2 billion on Research and Development in the latest quarter, up from $4.5 billion one year ago. I had estimated that R&D expenses would be $5.1 billion.  R&D was 4.6 percent of Revenue.

Sales, General, and Administrative expenses totaled $5.6 billion in the December 2020 quarter, up from $5.2 billion one year ago.  SG&A expenses decreased from 5.7 percent to 5.1 percent of quarterly revenue, which shows Apple spent less per dollar of sales on indirect operational costs, such as marketing.  I had estimated that SG&A expenses would be 5.8 percent of revenue, and Apple spent less than that percentage.

Apple's Operating Income was $33.5 billion in the quarter, up 31.2 percent from the year-earlier period.  Operating Income exceeded my $26.3 billion estimate by $7.2 billion.

Interest and other non-operating items summed to a net  income of $45 million.  My estimate was $50.0 million.

The effective income tax rate rose by 0.2 percent to 14.4 percent, which had a negative effect on net income.  I expected the tax rate to be 16.0 percent.

Net income in the quarter attributable to Apple was $28.8 billion, $1.68 per share.  The figures for the year-earlier quarter were $22.2 billion, $1.25/share. My earnings estimate for Apple in this quarter was $22.2 billion ($1.30/share).

In summary, Apple earned in the December 2020 quarter much more than I had expected. The company had better than predicted Revenue growth, Gross Margin, Operating Income growth, and Income tax rate. 

 

This post is not investment advice, and the accuracy of the information, tables, charts, and any commentary presented is not guaranteed.  Readers are encouraged to independently verify all data using information from original sources. The Income Statements discussed in these blog posts have not been audited and may differ in material respects from those published by the subject company.  These differences are intended to facilitate analysis and cross-company comparisons. Complete financial statements with notes can usually be found in the 10-Q and 10-K filings companies submit to the Securities and Exchange Commission (SEC).

 #apple    #aapl    #gauges  #gcfr  #gcfr2 #QtrlyRpt   #nac_financialanalysis

ADM: Earnings Report for the Quarter Ending December 31, 2020

Archer-Daniels-Midland reported before the market opened on January 26, 2021 it earned $1.22 per diluted share in the quarter that ended on December 31, 2020, up 36 percent from earnings of $0.90 in the same 3 months of the previous year. These figures are the earnings determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP). 

Adjusted earnings, a non-GAAP figure, fell 15 percent to $1.21 per share from $1.42 one year earlier, a much worse change than the GAAP percentage. The exclusions responsible for the $0.01 per share difference in the latest quarter between the GAAP and Non-GAAP earnings were: Impairment, restructuring, and settlement charges [$0.03 per share], Tax adjustments [($0.04) per share], and Acquisition and divestment  [$0.00 per share].  Non-GAAP earnings, by excluding unusual and non-cash items that could obscure the results of a business's principal, ongoing operations, are intended to be cleaner measures of corporate profits.

This post compares the quarterly Income Statement published by ADM to the estimates I made in a previous “Look Ahead” post.  My estimates were based on publicly available guidance provided by ADM's management to financial analysts, news reports, and trends in the company's historical results.  Unless otherwise mentioned, all reported values mentioned below are GAAP figures.

First, a little background about the company:  Chicago-based ADM is a global agribusiness that purchases, transports, stores, processes, and merchandises agricultural commodities (including oilseeds, corn, and wheat) and products (such as vegetable oils, flour, other food ingredients, livestock feed, and biofuels).  In the first quarter of 2019, ADM acquired Neovia and Florida Chemical Company as it seeks to become one of the world’s "leading nutrition companies."  Separately, ADM is creating an independent ethanol subsidiary that it may eventually sell or spin-off.

The following table is a simplified version of ADM's Income Statement for the December 2020 quarter, with company-reported along side my predictions.  Data from the year-earlier quarter are also provided.

Revenue in the December 2020 quarter totaled $18.0 billion, 10 percent more than last year's $16.3 billion. The Agricultural Services and Oilseeds business was responsible for 80 percent of overall revenue, and this unit's revenue grew by 16.3 percent compared to the year-earlier result. The Carbohydrate Solutions business contributed 12 percent of revenue, and this unit's revenue decreased by 16.1 percent. The Nutrition unit supplied 8 percent of revenue, and this business's revenue rose by 1.9 percent.

I was expecting ADM to report revenue of $16.3 billion for the December 2020 quarter.  The actual amount surpassed my estimate by $1.6 billion (10.0 percent).

The Cost of Revenue (also known as Cost of Goods Sold) was $16.6 billion in the latest quarter, which translates into a Gross Margin of 7.5 percent of revenue. Since it was higher than the 7.2 percent Gross Margin achieved in the year-earlier quarter, it signifies that ADM sold its products and services at more profitable prices relative to production costs. I was expecting the Gross Margin to be 6.7 percent in the December 2020 quarter, and ADM exceeded that prediction by 0.8 percent.

Sales, General, and Administrative expenses totaled $749 million in the December 2020 quarter, up from $654 million one year ago.  SG&A expenses increased from 4.0 percent to 4.2 percent of quarterly revenue, which shows ADM spent more per dollar of sales on indirect operational costs, such as marketing. I had estimated that SG&A expenses would be 4.2 percent of revenue, and ADM spent less than that percentage.

The last operating expense line on the Income Statement is for other operating income and expenses, such as restructuring.  This line amounted to a $19 million loss in the latest quarter.  I was expecting a net loss of $22 million.

ADM's Operating Income was $584 million in the quarter, up 41.7 percent from the year-earlier period.  Operating Income exceeded my $388 million estimate by $196 million.

Interest and other non-operating items summed to a net expense of $4 million.  My estimate was $72.0 million.

The effective income tax rate rose by 11.5 percent to 10.9 percent, which had a negative effect on net income.  I expected the tax rate to be 10.0 percent.

Net income in the quarter attributable to ADM was $687 million, $1.22 per share.  The figures for the year-earlier quarter were $504 million, $0.90/share. My earnings estimate for ADM in this quarter was $413 million ($0.73/share).

In summary, Archer-Daniels-Midland earned in the December 2020 quarter much more than I had expected. The company had better than predicted: Revenue growth, Gross Margin, Operating Income growth.  The company did worse with: Income tax rate.

This post is not investment advice, and the accuracy of the information, tables, charts, and any commentary presented is not guaranteed.  Readers are encouraged to independently verify all data using information from original sources. The Income Statements discussed in these blog posts have not been audited and may differ in material respects from those published by the subject company.  These differences are intended to facilitate analysis and cross-company comparisons. Complete financial statements with notes can usually be found in the 10-Q and 10-K filings companies submit to the Securities and Exchange Commission (SEC).

 #adm        #gauges  #gcfr  #gcfr2 #QtrlyRpt   #nac_financialanalysis

MSFT: Earnings Report for the Quarter Ending December 31, 2020

Microsoft reported after the market closed on January 26, 2021 it earned $2.03 per diluted share in the quarter that ended on December 31, 2020, up 33 percent from earnings of $1.53 in the same 3 months of the previous year. These figures are the earnings determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP). 

This post compares the quarterly Income Statement published by Microsoft to the estimates I made in a previous “Look Ahead” post.  My estimates were based on publicly available guidance provided by Microsoft's management to financial analysts, news reports, and trends in the company's historical results.  Unless otherwise mentioned, all reported values mentioned below are GAAP figures.

First, a little background about the company:  Microsoft develops and sells operating system and application software, software and cloud services, and hardware items, such as game consoles. Cloud computing has become a large and growing business for Microsoft, and the company competes with industry leader Amazon, Google, and others. Microsoft acquired LinkedIn in December 2016 for approximately $27 billion, and it acquired GitHub in October 2018 for $7.5 billion. In September 2020, Microsoft reached an agreement to acquire ZeniMax Media, the parent company of game-developer Bethesda Softworks, for $7.5 billion.

Revenue in the December 2020 quarter totaled $43.1 billion, 17 percent more than last year's $36.9 billion. The Productivity and Business Processes business was responsible for 31 percent of overall revenue, and this unit's revenue grew by 12.9 percent compared to the year-earlier result. The Intelligent Cloud business contributed 34 percent of revenue, and this unit's revenue increased by 23.0 percent. The More Personal Computing unit supplied 35 percent of revenue, and this business's revenue rose by 14.5 percent.

I was expecting Microsoft to report revenue of $40.0 billion for the December 2020 quarter.  The actual amount surpassed my estimate by $3076.0 million (7.7 percent).

The Cost of Revenue (also known as Cost of Goods Sold) was $14.2 billion in the latest quarter, which translates into a Gross Margin of 67.0 percent of revenue. Since it was higher than the 66.5 percent Gross Margin achieved in the year-earlier quarter, it signifies that Microsoft sold its products and services at more profitable prices relative to production costs. I was expecting the Gross Margin to be 65.4 percent in the December 2020 quarter, and Microsoft exceeded that prediction by 1.7 percent.

Microsoft spent $4.9 billion on Research and Development in the latest quarter, up from $4.6 billion one year ago. I had estimated that R&D expenses would be $5.0 billion.  R&D was 11.4 percent of Revenue.

Sales, General, and Administrative expenses totaled $6.1 billion in the December 2020 quarter, up from $6.1 billion one year ago.  SG&A expenses decreased from 16.4 percent to 14.1 percent of quarterly revenue, which shows Microsoft spent less per dollar of sales on indirect operational costs, such as marketing. I had estimated that SG&A expenses would be 16.1 percent of revenue, and Microsoft spent less than that percentage.

Operating Income was $17.9 billion in the quarter, up 28.8 percent from the year-earlier period.  Operating Income exceeded my $14.7 billion estimate by $3.2 billion.

Interest and other non-operating items summed to a net  income of $440 million.  My estimate was $0.0 million.

The effective income tax rate fell by 1.6 percent to 15.7 percent, which had a positive effect on net income.  I expected the tax rate to be 16.0 percent.

Net income in the quarter was $15.5 billion, $2.03 per share.  The figures for the year-earlier quarter were $11.6 billion, $1.53/share. My EPS estimate was $1.62.

In summary, Microsoft's earnings were much better than I expected.  The major factors that resulted in this achievement were: strong revenue growth, an improved Gross Margin, reduced R&D spending, lower SG&A/revenue ratio, and non-operating income.

The Cash Flow Statement for the quarter shows that Microsoft's operating activities generated $12.5 billion in cash during the last quarter, up 17.2 percent from $10.7 billion in the year-earlier period. The cash flow delta was, therefore, less robust the change in earnings. Notable uses for cash included $4.2 billion to pay dividends to shareholders, $415 million for corporate acquisitions,$6.5 billion to buy back the company's common shares, and $4.2 billion to acquire property, plant and capital equipment. 

Free cash flow over the last 12 months totaled $50.5 billion, or $6.63 per share using the latest share count. At the current market price per share of $232.33, this translates into a modest Free Cash Flow Yield of 2.9 percent.

This post is not investment advice, and the accuracy of the information, tables, charts, and any commentary presented is not guaranteed.  Readers are encouraged to independently verify all data using information from original sources. The Income Statements discussed in these blog posts have not been audited and may differ in material respects from those published by the subject company.  These differences are intended to facilitate analysis and cross-company comparisons. Complete financial statements with notes can usually be found in the 10-Q and 10-K filings companies submit to the Securities and Exchange Commission (SEC).

 #microsoft    #msft    #gauges  #gcfr  #gcfr2 #QtrlyRpt   #nac_financialanalysis

3M Company: Earnings Report for the Quarter Ending December 31, 2020

3M Company reported before the market opened on January 26, 2021 it earned $2.38 per diluted share in the quarter that ended on December 31, 2020, up 43 percent from earnings of $1.66 in the same 3 months of the previous year. These figures are the earnings determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP). 

Adjusted earnings, a non-GAAP figure, rose 23 percent to $2.38 per share from $1.94 one year earlier, a less robust change than the GAAP percentage. 

This post compares the quarterly Income Statement published by 3M to the estimates I made in a previous “Look Ahead” post.  My estimates were based on publicly available guidance provided by 3M's management to financial analysts, news reports, and trends in the company's historical results.  Unless otherwise mentioned, all reported values mentioned below are GAAP figures.

First, a little background about the company:  Formed more than a century ago as Minnesota Mining and Manufacturing, the 3M Company is now a conglomerate that sells a wide range of innovative products for Safety and Industrial, Transportation and Electronics, Health Care, and Consumer markets.  While many 3M products have been designed for demanding commercial and medical applications, consumers might be more familiar with the company's Scotch® tape and Post-It Notes®.  COVID-19 has affected 3M's businesses in different ways:  sales of N-95 masks and certain other health care and consumer products have grown, while sales of industrial products have fallen.  In December 2020, 3M announced it would be taking actions to eliminate redundancies and better leverage analytical data to become more efficient in both operations and marketing.

Revenue in the December 2020 quarter totaled $8.6 billion, 6 percent more than last year's $8.1 billion. The Safety and Industrial business was responsible for 37 percent of overall revenue, and this unit's revenue grew by 12.7 percent compared to the year-earlier result. The Transportation and Electronics business contributed 27 percent of revenue, and this unit's revenue increased by 2.3 percent. The Health Care unit supplied 26 percent of revenue, and this business's revenue rose by 5.4 percent.

I was expecting 3M to report revenue of $8.3 billion for the December 2020 quarter.  The actual amount surpassed my estimate by $283.0 million (3.4 percent).

The Cost of Revenue (also known as Cost of Goods Sold) was $4.4 billion in the latest quarter, which translates into a Gross Margin of 48.9 percent of revenue. Since it was higher than the 46.7 percent Gross Margin achieved in the year-earlier quarter, it signifies that 3M sold its products and services at more profitable prices relative to production costs. I was expecting the Gross Margin to be 48.0 percent in the December 2020 quarter, and 3M exceeded that prediction by 0.9 percent.

3M spent $0.46 billion on Research and Development in the latest quarter, down from $0.52 billion one year ago. I had estimated that R&D expenses would be $0.50 billion.  R&D was 5.3 percent of Revenue.

Sales, General, and Administrative expenses totaled $1.9 billion in the December 2020 quarter, down from $1.9 billion one year ago.  SG&A expenses decreased from 23.9 percent to 22.0 percent of quarterly revenue, which shows 3M spent less per dollar of sales on indirect operational costs, such as marketing. I had estimated that SG&A expenses would be 21.0 percent of revenue, and 3M spent more than that percentage.

The last operating expense line on the Income Statement is for other operating income and expenses, such as restructuring.  This line amounted to a $0.0 million loss in the latest quarter.  I was expecting a net loss of $150.0 million due to restructuring.  The charge must have been included in one of the other operating expense items.

Operating Income was $1.8 billion in the quarter, up 39.5 percent from the year-earlier period.  Operating Income exceeded my $1.6 billion estimate by $0.3 billion.

Interest and other non-operating items summed to a net expense of $139 million.  My estimate was $100.0 million.

The effective income tax rate fell by 1.5 percent to 18.5 percent, which had a positive effect on net income.  I expected the tax rate to be 21.0 percent.

Net income in the quarter was $1.4 billion, $2.38 per share.  The figures for the year-earlier quarter were $1.0 billion, $1.66/share. My EPS estimate was $2.02.

In summary, 3M's earnings were much better than I expected.  The major factors that resulted in this achievement were: strong revenue growth, an improved Gross Margin, reduced R&D spending, and a lower tax rate.

The Cash Flow Statement for the quarter shows that 3M's operating activities generated $2.5 billion in cash during the last quarter, up 7.6 percent from $2.3 billion in the year-earlier period. The cash flow delta was, therefore, less robust the change in earnings. Notable uses for cash included $848 million to pay dividends to shareholders, $2 million to buy back the company's common shares, and $422 million to acquire property, plant and capital equipment. 

Free cash flow over the last 12 months totaled $6.6 billion, or $11.32 per share using the latest share count. At the current market price per share of $170.40, this translates into a decent Free Cash Flow Yield of 6.6 percent.

This post is not investment advice, and the accuracy of the information, tables, charts, and any commentary presented is not guaranteed.  Readers are encouraged to independently verify all data using information from original sources. The Income Statements discussed in these blog posts have not been audited and may differ in material respects from those published by the subject company.  These differences are intended to facilitate analysis and cross-company comparisons. Complete financial statements with notes can usually be found in the 10-Q and 10-K filings companies submit to the Securities and Exchange Commission (SEC).

 #3m    #mmm    #gauges  #gcfr  #gcfr2 #QtrlyRpt   #nac_financialanalysis

BR: Look Ahead to December 2020 Quarterly Results

This "look-ahead" post discusses how I came up with an estimate for Broadridge Financial Services' earnings for fiscal 2021's second quarter, which ended on December 31, 2020, by predicting each element of its Income Statement, from top-line Revenue to bottom-line Earnings Per Share (EPS) and everything in between.

Once the company’s official results become available in February, I will compare the published Income Statement to the prediction and identify any surprises, positive or negative.  Examining these differences can identify what factors (e.g., profit margins, non-GAAP expenses, tax rates, share buybacks) are driving changes to a company's financial performance.

But, before getting into the details, let's take a step back and start with background information about Broadridge. 

Broadridge provides investor communications, securities processing and other financial services. Broadridge performs proxy voting services for more than half of all public companies and mutual funds globally, and in an average day it processes $8 trillion in fixed income and equity trades.  Broadridge was spun off from Automatic Data Processing in 2007.  In 2019, Broadridge completed four acquisitions: Rockall, a provider of securities-based lending and collateral management solutions; RPM, a provider of enterprise wealth management software solutions and services; retirement plan custody and trust assets from TD Ameritrade; and, Shadow Financial Systems, which had cryptocurrency and Exchange Traded Derivatives capabilities.  On December 31, 2019, Broadridge and IBM agreed that IBM will operate, manage and support the Broadridge Private Cloud for the next 10 years.

Shares of Broadridge now trade for about $149 each, giving the company a market value of $17 billion. These shares can be found in the Standard and Poors 500, New York Stock Exchange Composite, and Russell 1000 stock indices.

Broadridge recorded profits of $473 million on revenue of $5 billion during the last year. In the quarter that ended on September 30, 2020, Broadridge earned $2.15 per share (excluding certain items), which significantly beat the $0.63 Wall Street consensus forecast. 

Revenue in the September 2020 quarter totaled $1.4 billion, 12 percent more than last year's $1.2 billion. The Investor Communications business was responsible for 55 percent of overall revenue, and this unit's revenue grew by 7.2 percent compared to the year-earlier result. The Global Technology and Operations business contributed 22 percent of revenue, and this unit's revenue increased by 8.1 percent.

My starting point, if available, when estimating earnings is guidance provided by the company's management to financial analysts.  It's true that the company may downplay expectations somewhat to avoid disappointments, but the top managers ought to know better than anyone else how well their products and services are selling.  I also look for other information about the company in the news, and I take advantage of trends in the company's historical results.  While it makes my task a little more difficult, I also try to estimate earnings that conform to Generally Accepted Accounting Principles (GAAP).  Non-GAAP results, which most professionals focus on, are somewhat arbitrary and often exclude meaningful items.

Broadridge updated its guidance for fiscal year 2021, which ends next June, after the company last reported quarterly results.  The update (see the excerpts below) indicate that the company now expects revenues and earnings to be higher than it did when the fiscal year began.

Unfortunately for my purposes, Broadridge didn't provide any specific written guidance for the December quarter.  However, during a conference call, the company's management did voice the following statement shedding some light on expectations for the quarter.

We do expect second quarter earnings to be lower than in the first quarter and more in line with historical averages of 12% to 14% of our full year earnings. Embedded in that view are our expectations for event-driven revenues of approximately $40 million, a more normalized tax rate and the impact of the increased investment spend, I noted.

Broadridge expects its GAAP EPS in fiscal year 2021 to be 5 to 12 percent greater than the $3.95 per share it earned in fiscal year 2020.  The prediction range is, therefore, $4.15 to $4.42 per share.  As the company noted, about 13 percent of this annual EPS can be expected in the second quarter, so a reasonable EPS range for the quarter is $0.54 to $0.58.  

To come up with a revenue estimate for the December quarter, I confirmed that Broadridge normally records ~22 percent of fiscal year revenue in the second quarter.  If I assume revenue for the fiscal year will be 2.5 percent higher (the midpoint of the guidance range) than the previous year's $4.53 billion, the estimate for the latest quarter becomes:  0.22 * 1.025 * $4.53 billion = $1.02 billion.  

The GAAP operating income margin in fiscal 2020 was about 13.8 percent.  The company expects that to increase by 180 basis points, but margins in the December quarter are usually much lower than the yearly average.  If I assume an operating margin of 10 percent in the quarter, it would imply that the cost of goods sold + sales, general, and administrative expense would equal $1.02 billion * (1- 0.1) = $920 million.  In a typical quarter, the cost of goods sold is about 83 percent of operating expenses, or 0.83* $920 million = $764 million.  Sales, general, and administrative expenses would be $920 million - $764 million = $156 million.

Non-operating expenses can be variable, but an interest expense of $15 million per quarter is fairly typical.  

An income tax rate of 21 percent would yield net income of $67 million ($0.57 per share), which is consistent with the company's guidance.

The following Income Statement summarizes the estimates made as discussed above. 

This post is not investment advice, and the accuracy of the information, tables, charts, and any commentary presented is not guaranteed.  Readers are encouraged to independently verify all data using information from original sources. The Income Statements discussed in these blog posts have not been audited and may differ in material respects from those published by the subject company.  These differences are intended to facilitate analysis and cross-company comparisons. Complete financial statements with notes can usually be found in the 10-Q and 10-K filings companies submit to the Securities and Exchange Commission (SEC).

#broadridge  #br  #gauges #gcfr  #gcfr2 #lookahead #nac_financialanalysis