CSCO: Look Ahead to January 2021 Quarterly Results

This "look-ahead" post discusses how I came up with an estimate for Cisco's earnings for fiscal year 2021's second quarter, which ended on January 23, 2021, 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 on February 9, 2021, 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 Cisco Systems.

Founded in 1984, Cisco is a leading seller of products, such as routers and switches, and related services, for connecting devices via the Internet.  The company makes products related to the following technologies: software-defined wide area networks, cloud computing, 5G and WiFi-6, optical networking, next generation silicon, and artificial intelligence.  A frequent acquirer of other companies, Cisco expects it will soon complete the $4.5 billion acquisition of Acacia Communications, Inc., a company that sells high-speed coherent optical interconnect products.

Shares of Cisco now trade for about $48 each, giving the company a market value of $200 billion. These shares can be found in the Dow Jones Industrial Average, Standard and Poors 500, Standard and Poors 100, NASDAQ 100, and Russell 1000 stock indices.

Cisco recorded profits of $10 billion on revenue of $48 billion during the last year. In the quarter that ended on October 24, 2020, Cisco earned $0.76 per share (excluding certain items), which beat the $0.70 Wall Street consensus forecast. 

Revenue in the October 2020 quarter totaled $11.9 billion, 9 percent less than last year.  The Infrastructure Platforms business was responsible for 53 percent of overall revenue, and this unit's revenue percent fell by 16.0 percent compared to the year-earlier result.  The Applications business contributed 12 percent of revenue, and this unit's revenue decreased by 8.0 percent.  The Services unit supplied 28 percent of revenue, and this business's revenue rose by 2.0 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.

When Cisco reported its results for the October 2020 quarter, it also provided the following guidance the January 2021 period:

Guidance for Q2 FY 2021

Cisco expects to achieve the following results for the second quarter of fiscal 2021:

 

Q2 FY 2021
Revenue		0% - (2)% decline Y/Y
Non-GAAP gross margin rate		64% - 65%
Non-GAAP operating margin rate		32% - 33%
Non-GAAP tax provision rate		19%
Non-GAAP EPS		$0.74 - $0.76

Cisco estimates that GAAP EPS will be $0.55 to $0.60 in the second quarter of fiscal 2021.

Cisco reported Revenue of $12.0 billion in the quarter that ended January 25, 2020 (i.e., one year ago).  Assuming a minus-2 to 0 percent change, per the guidance, leads to a Revenue estimate for the January 2021 quarter between $11.75 billion and $12.0 billion.  I made $11.9 billion, just over the midpoint of this range, as my estimate.

For the Gross Margin, Cisco indicated that this ratio would be, on a GAAP basis, between 62 and 63 percent.  Using the 62.5 percent midpoint, the estimate for the Cost of Goods Sold = 37.5 percent of Revenue, or 0.375 * $11.9 billion = $4.5 billion

The Operating Margin listed in the guidance refers to operating income as a percentage of revenue.  A 25-percent GAAP margin with the $11.9 billion revenue estimate indicates that operating income should be about 0.25 * $11.9 billion = $3.0 billion and that operating costs would, therefore, total $11.9 billion - $3.0 billion = $8.9 billion.  This latter figure includes the Cost of Goods Sold, estimated at $4.5 billion, so there would be $8.9 billion - $4.5 billion = $4.4 billion to cover Research and Development (R&D), Sales, General, and Administrative (SG&A), and other operating expenses.  I've allocated this amount as $1.6 billion for R&D, $2.6 billion for SG&A, and $200 million for other.

For non-operating items, I've assumed a $20 million gain and $60 million net interest income.

The guidance indicates that an effective income tax rate of 19 percent is expected.

With these assumptions, my estimate for Net Income is $2.5 billion ($0.60 per share), which is at top end of the guidance range.

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).

#cisco  #csco  #gauges #gcfr  #gcfr2 #lookahead #nac_financialanalysis

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

Alphabet reported after the market closed on February 2, 2021, it earned $22.30 per diluted share in the quarter that ended on December 31, 2020, up 45 percent from earnings of $15.35 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 Alphabet to the estimates I made in a previous “Look Ahead” post.  My estimates were based on publicly available guidance provided by Alphabet'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:  Alphabet was formed in 2015 as the holding company for Google and various smaller businesses.  Google's products include Search, Maps, Gmail, Android, Chrome, Google Cloud, YouTube, and (recent acquisition) Fitbit.  Even though Alphabet also owns various additional businesses, which it refers to as "Other Bets" (e.g., Waymo), Alphabet's revenues are mostly entirely due to Google's ability to deliver online advertising.  Google (and, therefore, Alphabet) has been benefitting as commerce moves on line, and the COVID pandemic has accelerated this trend.  But, Google's strength can also be a concern.  In October 2020, the U.S. filed a civil antitrust lawsuit claiming that Google has abused its market position in the search and search advertising markets.  This follows a decision by the European Union in June 2018 to fine Google €4.34 billion ($5 billion) for abusing the dominance it has as the owner of the Android operating system.  One year earlier, the EU fined Google €2.42 billion ($2.74 billion) for violating European competition law in the way shopping search results and ads were displayed.

Alphabet has three classes of common shares, with Class B shares, which are primarily owned by Google's founders, having much greater voting rights than the Class A (ticker GOOGL) shares.  Class C shares (ticker GOOG) have no voting rights.

The following table is a simplified version of Alphabet'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 to facilitate comparisons.

Revenue in the December 2020 quarter totaled $56.9 billion, 23 percent more than last year.  The Google Services business was responsible for 93 percent of overall revenue, and this unit's revenue grew by 22.4 percent compared to the year-earlier result.  The Google Cloud business contributed 7 percent of revenue, and this unit's revenue increased by 46.6 percent.  The Other Bets unit supplied 0 percent of revenue, and this business's revenue rose by 14.0 percent.

I was expecting Alphabet to report revenue of $51.3 billion for the December 2020 quarter.  The actual amount surpassed my estimate by $5.6 billion (10.8 percent).

The Cost of Revenue (also known as Cost of Goods Sold) was $26.1 billion in the latest quarter, which translates into a Gross Margin of 54.2 percent of revenue. Since it was lower than the 54.4 percent Gross Margin achieved in the year-earlier quarter, it's a sign that Alphabet sold its products and services at (slightly) less profitable prices relative to production costs.  I was expecting the Gross Margin to be 54.5 percent in the December 2020 quarter, and Alphabet missed that prediction by 0.3 percent.

Alphabet spent $7.0 billion on Research and Development in the latest quarter, down from $7.2 billion one year ago. I had estimated that R&D expenses would be $7.4 billion.  R&D was 12.3 percent of Revenue.

Sales, General, and Administrative expenses totaled $8.1 billion in the December 2020 quarter, down 4.9 percent from one year ago.  SG&A expenses decreased from 18.6 percent to 14.3 percent of quarterly revenue, which shows Alphabet spent less per dollar of sales on indirect operational costs, such as marketing. I had estimated that SG&A expenses would be 17.5 percent of revenue, and the actual percentage turned out to be lower than the prediction.

Alphabet's Operating Income was $15.7 billion in the quarter, up 68.9 percent from the year-earlier period.  Operating Income exceeded my $11.6 billion estimate by $4.0 billion.

Interest and other non-operating items summed to a net income of $3.0 billion.  My estimate for non-operating items was $1.4 billion.

The effective income tax rate rose by 18.2 percent to 18.5 percent, which had a negative effect on net income.  I expected the tax rate to be 16.0 percent.

Net income attributable to Alphabet was $15.2 billion, $22.30 per share in the quarter ending December 2020.  The figures for the year-earlier quarter were $10.7 billion, $15.35/share. My earnings estimate for  the latest quarter was $10.9 billion ($15.88/share), so Alphabet earned $6.42 per share more than I had predicted.

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

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

      – Worse than expected:  Interest + Income tax rate 

      – Near expectations:  Gross Margin 

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).

 #alphabet  #goog  #googl  #gauges  #gcfr  #gcfr2 #QtrlyRpt   #nac_financialanalysis

QCOM: Earnings Report for the Quarter Ending December 27, 2020

Qualcomm reported after the market closed on February 3, 2021, it earned $2.12 per diluted share in the quarter that ended on December 27, 2020, up 165 percent from earnings of $0.80 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). 

Non-GAAP earnings rose 119 percent to $2.17 per share from $0.99 one year earlier, a not quite as robust change than the GAAP percentage. The principal exclusions contributing to the $0.05 per share difference in the latest quarter between the GAAP and Non-GAAP earnings were: Strategic initiatives [$0.13 per share], Share-based compensation [($0.20) per share], and Other items [$0.02 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 Qualcomm to the estimates I made in a previous “Look Ahead” post.  My estimates were based on publicly available guidance provided by Qualcomm'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:  Qualcomm makes chips and licenses mobile communications technologies that are used in many advanced wireless devices.  The transition to 5G mobile networks, which is just beginning, should benefit Qualcomm as the technology will motivate consumers to upgrade (again!) to newer, more capable phones.  Qualcomm's licensing business has been criticized on anti-trust grounds by government regulators in multiple countries and also by phone manufacturers.  This threat eased significantly when Qualcomm settled all litigation in April 2019 with Apple and Apple's contract manufacturers.  More progress was made in 2020 when Qualcomm and Huawei settled their disputes and reached a new long-term, global patent-license agreement.  Anti-trust concerns did end up scuttling the company's planned acquisition of NXP Semiconductors for $44 billion. 

The following table is a simplified version of Qualcomm'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 to facilitate comparisons.

Revenue in the December 2020 quarter totaled $8.2 billion, 62 percent more than last year. The CDMA Technologies business was responsible for 79 percent of overall revenue, and this unit's revenue grew by 80.6 percent compared to the year-earlier result. The Technology Licensing business contributed 20 percent of revenue, and this unit's revenue increased by 18.2 percent.

I was expecting Qualcomm to report revenue of $8.2 billion for the December 2020 quarter.  The actual amount surpassed my estimate by a mere $35.0 million (0.4 percent).

The Cost of Revenue (also known as Cost of Goods Sold) was $3.5 billion in the latest quarter, which translates into a Gross Margin of 57.6 percent of revenue. Since it was lower than the 58.4 percent Gross Margin achieved in the year-earlier quarter, it's a sign that Qualcomm sold its products and services at less profitable prices relative to production costs. I was expecting the Gross Margin to be 63.0 percent in the December 2020 quarter, and Qualcomm missed that prediction by 5.4 percent.

Qualcomm spent $1.7 billion on Research and Development in the latest quarter, up from $1.4 billion one year ago. I had estimated that R&D expenses would be $1.7 billion.  R&D was 20.1 percent of Revenue.

Sales, General, and Administrative expenses totaled $567 million in the December 2020 quarter, up 7.4 percent from one year ago.  SG&A expenses decreased from 10.4 percent to 6.9 percent of quarterly revenue, which shows Qualcomm spent less per dollar of sales on indirect operational costs, such as marketing. I had estimated that SG&A expenses would be 7.5 percent of revenue, and the actual percentage turned out to be lower than the prediction.

Qualcomm's Operating Income was $2.5 billion in the quarter, up 145.2 percent from the year-earlier period.  Operating Income fell short of my $2.9 billion estimate by $325 million.

Interest and other non-operating items summed to a net income of $78 million.  My estimate for non-operating items was $225 million.

The effective income tax rate rose by 3.4 percent to 5.7 percent, which had a negative effect on net income.  I expected the tax rate to be 16.0 percent.

Net income attributable to Qualcomm was $2.5 billion, $2.12 per share in the quarter ending December 2020.  The figures for the year-earlier quarter were $925 million, $0.80/share. My earnings estimate for  the latest quarter was $2.2 billion ($1.92/share), so Qualcomm earned $0.21 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 + SG&A/Revenue + Misc non-operating items + Income tax rate 

      – Worse than expected:  Gross Margin + Interest 

      – Near expectations:  Revenue growth + R&D 

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).

 #qualcomm    #qcom    #gauges  #gcfr  #gcfr2 #QtrlyRpt   #nac_financialanalysis

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

ConocoPhillips reported before the market opened on February 2, 2021, it lost $0.72 per diluted share in the quarter that ended on December 31, 2020, down from earnings of $0.65 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  percent to ($0.19) per share from $0.76 one year earlier. The exclusions responsible for the $0.53 per share difference in the latest quarter between the GAAP and Non-GAAP earnings were: Impairments [$0.81 per share], Exploration and other expenses [$0.13 per share], and Unrealized gain on CVE shares [($0.41) 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 ConocoPhillips to the estimates I made in a previous “Look Ahead” post.  My estimates were based on publicly available guidance provided by ConocoPhillips'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:  ConocoPhillips is the largest independent producer of oil and gas in the U.S.   The company assumed its current name when it merged with Phillips Petroleum in 2002.  A decade later, the midstream and downstream assets were spun off as "Phillips 66."  Earnings at ConocoPhillips (and most other energy companies) fell sharply in 2020 because the COVID-19 pandemic significantly reduced demand for energy products. The industry has been consolidating in response to these challenges, and ConocoPhillips has been no exception. In January 2021, ConocoPhillips completed the acquisition of Concho Resources, a top producer in the Permian basin, in an all-stock transaction. 

The following table is a simplified version of ConocoPhillips'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 to facilitate comparisons.

Revenue in the December 2020 quarter totaled $5.5 billion, 29 percent less than last year. I was expecting ConocoPhillips to report revenue of $5.4 billion for the quarter.  The actual amount surpassed my estimate by $91.0 million (1.7 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 34.3 percent of revenue. Since it was lower than the 47.0 percent Gross Margin achieved in the year-earlier quarter, it's a sign that ConocoPhillips sold its products and services at less profitable prices relative to production costs. I was expecting the Gross Margin to be 42.0 percent in the December 2020 quarter, and ConocoPhillips missed that prediction by 7.7 percent.

ConocoPhillips spent $1.0 billion on exploration in the latest quarter, up from $151 million one year ago. I had estimated that R&D expenses would be $150 million.  R&D was 19.1 percent of Revenue.

Sales, General, and Administrative expenses totaled $365 million in the December 2020 quarter, down 15.9 percent from one year ago.  SG&A expenses increased from 5.6 percent to 6.6 percent of quarterly revenue, which shows ConocoPhillips spent more per dollar of sales on indirect operational costs, such as marketing. I had estimated that SG&A expenses would be 5.6 percent of revenue, and the actual percentage turned out to be higher 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 ConocoPhillips the amount listed on this line was a $292 million loss in the latest quarter.  I was expecting a net loss of $100 million.

ConocoPhillips's Operating Income was ($1.4) billion in the quarter,   Operating Income fell short of my $318 million estimate by $1.7 billion.

Interest and other non-operating items summed to a net  income of $191 million.  My estimate for non-operating items was $100 million.

The effective income tax rate fell by 20.1 percent to 26.8 percent, which had a positive effect on net income.  I expected the tax rate to be 29.8 percent.

Net income attributable to ConocoPhillips was ($772) million, ($0.72) per share in the quarter ending December 2020.  The figures for the year-earlier quarter were $720 million, $0.65/share. My earnings estimate for  the latest quarter was $253 million ($0.23/share), so ConocoPhillips earned $0.95 per share less than I had expected.

Because ConocoPhillips has repurchased a significant quantity of its own shares, the average number of shares outstanding during the last quarter was 2.4 percent lower than one year ago. The smaller share count boosted earnings per share by $0.02.

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

      – Better than expected:  Misc non-operating items + Income tax rate 

      – Worse than expected:  Gross Margin + Depreciation + R&D + SG&A + SG&A/Revenue + Special operating items + Non-controlling interests 

      – Near expectations:  Revenue growth + Interest 

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).

 #conocophillips   #cop   #gauges  #gcfr  #gcfr2 #QtrlyRpt   #nac_financialanalysis

QCOM: Look Ahead to December 2020 Quarterly Results

This "look-ahead" post discusses how I came up with an estimate for Qualcomm's earnings for fiscal 2021's first quarter, which ended on December 27, 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, 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 Qualcomm.

Qualcomm makes chips and licenses mobile communications technologies that are used in many advanced wireless devices.  The transition to 5G mobile networks, which is just beginning, should benefit Qualcomm as the technology will motivate consumers to upgrade (again!) to newer, more capable phones.  Qualcomm's licensing business has been criticized on anti-trust grounds by government regulators in multiple countries and also by phone manufacturers.  This threat eased significantly when Qualcomm settled all litigation in April 2019 with Apple and Apple's contract manufacturers.  More progress was made in 2020 when Qualcomm and Huawei settled their disputes and reached a new long-term, global patent-license agreement.  Anti-trust concerns did end up scuttling the company's planned acquisition of NXP Semiconductors for $44 billion. 

Shares of Qualcomm now trade for about $162 each, giving the company a market value of $185 billion. These shares can be found in the Standard and Poors 500, Standard and Poors 100, NASDAQ 100, and Russell 1000 stock indices.

Qualcomm recorded profits of $5 billion on revenue of $24 billion during the last year. In the quarter that ended on September 27, 2020, Qualcomm earned $1.45 per share (excluding certain items), which significantly beat the $0.71 Wall Street consensus forecast.

Revenue in the September 2020 quarter totaled $8.3 billion, 73 percent more than last year.  The CDMA Technologies business was responsible for 60 percent of overall revenue, and this unit's revenue grew by 37.6 percent compared to the year-earlier result.  The Technology Licensing business contributed 18 percent of revenue, and this unit's revenue increased by 30.1 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.

Qualcomm provided guidance for the December 2020 quarter, which is the first quarter of fiscal year 2021, when the company last reported quarterly results. An excerpt is shown below.

Additional information was discussed during the conference call that took place after the quarterly results were published.

I'm using the midpoint of the Revenue guidance range, i.e., $8.2 billion, for my estimates.  This figure is an impressive 61.5 percent more than revenue in the December 2019 quarter, as Qualcomm benefits from the recent resolution of antitrust litigation.

While the Gross Margin was 58.4 percent in the year-earlier quarter, the additional revenue in the latest quarter will almost certainly have a significant positive effect on the Gross Margin.  I wouldn't be surprised to see the Gross Margin at, say, 65 percent, but I'm setting the target a little lower, at 63 percent.

Research and Development expenses were about $1.6 billion in September 2020 quarter.  I'm expecting the figure to increase to $1.7 billion as Qualcomm spends more to engineer a new generation of products.

The ratio of Sales, General, and Administrative costs to Revenue is more variable from quarter to quarter at Qualcomm than at other companies I analyze. It's averaged about 9 percent in the last year, but it should be lower now given the big increase in revenue.  7.5 percent of revenue seems like a reasonable estimate for SG&A in the December quarter.

Interest expenses should run to about $125 million per the company's guidance.  Other non-operating gains and losses are tough to forecast.  I assumed a $100 million charge.

These assumptions would lead to income before taxes of a little over $2.6 billion.

While the company indicated it expects a non-GAAP income tax rate of 14 percent, I'm upping that to 16 percent because I estimate GAAP earnings.  With these assumption, my estimate for Net Income would be $2.2 billion ($1.92 per share).  While this EPS is a little above the company's GAAP guidance range, I was so conservative with my assumptions, I wouldn't be comfortable with a lower figure.

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).

#qualcomm  #qcom  #gauges #gcfr  #gcfr2 #lookahead #nac_financialanalysis

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

Broadridge Financial Solutions reported before the market opened on February 2, 2021, it earned $0.48 per diluted share in the quarter that ended on December 31, 2020, up 433 percent from earnings of $0.09 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 38 percent to $0.73 per share from $0.53 one year earlier, a less robust change than the GAAP percentage. The exclusions responsible for the $0.25 per share difference in the latest quarter between the GAAP and Non-GAAP earnings were: Amortization of Acquired Intangibles and Purchased Intellectual Property [$0.28 per share], Real Estate Realignment and Covid-19 Related Expenses [$0.05 per share], and Tax impacts [($0.08) 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 Broadridge to the estimates I made in a previous “Look Ahead” post.  My estimates were based on publicly available guidance provided by Broadridge'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:  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.

The following table is a simplified version of Broadridge'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 to facilitate comparisons.

Revenue in the December 2020 quarter totaled $1.1 billion, 9 percent more than last year.  The Investor Communications business was responsible for 74 percent of overall revenue, and this unit's revenue grew by 9.5 percent compared to the year-earlier result.  The Global Technology and Operations business contributed 29 percent of revenue, and this unit's revenue increased by 7.6 percent.

I was expecting Broadridge to report revenue of $1.0 billion for the December 2020 quarter.  The actual amount surpassed my estimate by $34.9 million (3.4 percent).

The Cost of Revenue (also known as Cost of Goods Sold) was $807 million in the latest quarter, which translates into a Gross Margin of 23.5 percent of revenue. Since it was higher than the 19.4 percent Gross Margin achieved in the year-earlier quarter, it signifies that Broadridge sold its products and services at more profitable prices relative to production costs. I was expecting the Gross Margin to be 25.1 percent in the December 2020 quarter, and Broadridge missed that prediction by 1.6 percent.

Sales, General, and Administrative expenses totaled $169 million in the December 2020 quarter, up 4.9 percent from one year ago.  SG&A expenses decreased from 16.6 percent to 16.0 percent of quarterly revenue, which shows Broadridge spent less per dollar of sales on indirect operational costs, such as marketing. I had estimated that SG&A expenses would be 15.3 percent of revenue, and the actual percentage turned out to be higher than the prediction.

Broadridge's Operating Income was $80 million in the quarter, up 196.6 percent from the year-earlier period.  Operating Income fell short of my $100 million estimate by $20 million.

Interest and other non-operating items summed to a net expense of $10 million.  My estimate for non-operating items was $14 million.

The effective income tax rate rose by 15.1 percent to 18.9 percent, which had a negative effect on net income.  I expected the tax rate to be 20.9 percent.

Net income attributable to Broadridge was $56 million, $0.48 per share in the quarter ending December 2020.  The figures for the year-earlier quarter were $10 million, $0.09/share. My earnings estimate for  the latest quarter was $68 million ($0.58/share), so Broadridge Financial Solutions earned $0.10 per share less than I had expected.

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

      – Better than expected:  Interest + Income tax rate 

      – Worse than expected:  Gross Margin + SG&A 

      – Near expectations:  Revenue growth + SG&A/Revenue + Misc non-operating items 

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 #QtrlyRpt   #nac_financialanalysis

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

Caterpillar reported before the market opened on January 29, 2021, it earned $1.42 per diluted share in the quarter that ended on December 31, 2020, down 28 percent from earnings of $1.97 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 Profits, a non-GAAP figure, fell 22 percent to $2.12 per share from $2.71 one year earlier, a decline not as steep change than the GAAP percentage. The exclusions responsible for the $0.70 per share difference in the latest quarter between the GAAP and Non-GAAP earnings were: Pension mark-to-market  [$0.63 per share], and Restructuring costs [$0.07 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 Caterpillar to the estimates I made in a previous “Look Ahead” post.  My estimates were based on publicly available guidance provided by Caterpillar'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:  Caterpillar is a leading manufacturer and servicer of machinery for construction, mining, energy production, and transportation.  The company also has finance subsidiaries that help customers and dealers purchase and lease Caterpillar and certain other products.  Demand for Caterpillar's products tends to vary as economic conditions strengthen and weaken and commodity prices rise and fall.

The following table is a simplified version of Caterpillar'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 $11.2 billion, 15 percent less than last year. The Construction Industries business was responsible for 40 percent of overall revenue, and this unit's revenue percent fell by 10.2 percent compared to the year-earlier result. The Resource Industries business contributed 19 percent of revenue, and this unit's revenue decreased by 9.0 percent. The Energy & Transportation unit supplied 43 percent of revenue, and this business's revenue fell by 19.1 percent.

I was expecting Caterpillar to report revenue of $10.7 billion for the December 2020 quarter.  The actual amount surpassed my estimate by $535.0 million (5.0 percent).

The Cost of Revenue (also known as Cost of Goods Sold) was $7.8 billion in the latest quarter, which translates into a Gross Margin of 30.7 percent of revenue.  I was expecting the Gross Margin to be 30.3 percent in the December 2020 quarter, and Caterpillar exceeded that prediction by 0.5 percent.

Caterpillar spent $374 million on Research and Development in the latest quarter, down from $386 million one year ago. I had estimated that R&D expenses would be $374 million.  R&D was 3.3 percent of Revenue.

Sales, General, and Administrative expenses totaled $1.2 billion in the December 2020 quarter, down 5.2 percent from one year ago.  SG&A expenses increased from 9.8 percent to 10.8 percent of quarterly revenue, which shows Caterpillar spent more per dollar of sales on indirect operational costs, such as marketing. I had estimated that SG&A expenses would be 10.5 percent of revenue, and the actual percentage turned out to be higher 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 Caterpillar the amount listed on this line was a $481 million loss in the latest quarter.  I was expecting a net loss of $482 million.

Caterpillar's Operating Income was $1.4 billion in the quarter, down 25.4 percent from the year-earlier period.  Operating Income exceeded my $1.3 billion estimate by $123 million.

Interest and other non-operating items summed to a net expense of $439 million.  My estimate for non-operating items was $508 million.

The effective income tax rate fell by 2.5 percent to 17.7 percent, which had a positive effect on net income.  I expected the tax rate to be 25.2 percent.

Net income attributable to Caterpillar was $780 million, $1.42 per share in the quarter ending December 2020.  The figures for the year-earlier quarter were $1.1 billion, $1.97/share. My earnings estimate for  the latest quarter was $556 million ($1.02/share), so Caterpillar earned $0.40 per share more than I had predicted.

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

      – Better than expected:  Revenue growth + Misc non-operating items + Income tax rate + Non-controlling interests 

      – Worse than expected:  SG&A + Interest 

      – Near expectations:  Gross Margin + R&D + SG&A/Revenue + Special operating items 

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).

 #caterpillar    #cat    #gauges  #gcfr  #gcfr2 #QtrlyRpt   #nac_financialanalysis