Business

Q3 Preview: DD HOG MMM R RAI RF UPS UTX XRX AFL CIT WHR RSH PNRA COH

Today is a huge earnings day for a variety of companies. Most companies will be reporting their third quarter fiscal earnings. Several important companies report after the bell, however, below we are just covering the companies reporting before the opening bell. The companies we highlight in this report;  E. I. du Pont de Nemours and Co (NYSE:DD), Harley-Davidson, Inc. (NYSE:HOG), 3M Co (NYSE:MMM), Ryder System, Inc. (NYSE:R), Reynolds American, Inc. (NYSE:RAI), Regions Financial Corporation (NYSE:RF), United Parcel Service, Inc. (NYSE:UPS), United Technologies Corporation (NYSE:UTX), Xerox Corporation (NYSE:XRX), AFLAC Incorporated (NYSE:AFL), CIT Group Inc. (NYSE:CIT), Whirlpool Corporation (NYSE:WHR), RadioShack Corporation (NYSE:RSH), Panera Bread Co (NASDAQ:PNRA), and Coach, Inc. (NYSE:COH).

Q3 Preview: DD HOG MMM R RAI RF UPS UTX XRX AFL CIT WHR RSH PNRA COH

  • E. I. du Pont de Nemours and Co (NYSE:DD) is reporting earnings before the opening bell, on Wednesday October 23rd.  Yesterday, Morgan Stanley  lowed their 3Q12 PTOI and EPS estimates for E. I. du Pont de Nemours and Co (NYSE:DD) by 6% and 8% on an underlying basis. Their EPS estimate of $0.47 is inline with consensus. Leading indicators in Performance Chemicals and E. I. du Pont de Nemours and Co (NYSE:DD)s most macro-sensitive segments, Electronics & Communications and Performance Materials, tracked below their prior expectations. For the six months ended 30 June 2012, E I E. I. du Pont de Nemours and Co (NYSE:DD) revenues increased 10% to $22.54B. Net income applicable to common stockholders increased 1% to $2.66B. Revenues reflect Agriculture & Nutrition segment increase of 15% to $7.47B, Nutrition & Health segment increase from $810M to $1.69B, United States segment increase of 21% to $9.8B, Latin America segment increase of 21% to $2.3B.
  • Harley-Davidson, Inc. (NYSE:HOG) is announcing third quarter earnings before the market opens today. The street consensus is for Harley-Davidson, Inc. (NYSE:HOG) to report EPS of $0.16. Last week, Wells Fargo released a report where they state that the the company will likely meet the Street as consensus for revenue and EPS as Harley-Davidson, Inc. (NYSE:HOG) will likely ship near the mid-point of a 51-56k unit range. Key to the conference call in their view will be an update on SAP implementation at York (likely going well), as this has implications for timing of improved 2013 margin benefits and details of European retail sales.  For the six months ended 01 July 2012, Harley-Davidson, Inc. (NYSE:HOG) revenues increased 16% to $3.16B. Net income increased 35% to $419.3M. Revenues reflect Motorcycles and Related Products Operations segment increase of 18% to $2.85B. Net income benefited from Motorcycles and Related Products Operations segment income increase of 50% to $523.2M. Dividend per share increased from $0.23 to $0.31.
  • 3M Co (NYSE:MMM)  reports on October 23rd; conference call is at 9am. Morgan Stanley believes that 3M Co (NYSE:MMM) is one of few companies that can beat consensus expectations this quarter (they predict $0.03 ahead of street forecasts of $1.65), driven by accelerating price/cost benefits at the margin line vs. +160bps last quarter. They expect 3M Co (NYSE:MMM) to reiterate FY guidance of $6.35-6.50. For the six months ended 30 June 2012, 3M Co (NYSE:MMM) revenues increased less than 1% to $15.02B. Net income increased 2% to $2.29B. Revenues reflect Industrial & Transportation segment increase of 4% to $5.29B, Consumer and Office segment increase of 3% to $2.11B, Health Care segment increase of 2% to $2.56B, United States segment increase of 5% to $5.24B, Latin America/Canada segment increase of 4% to $1.76B.
  • Ryder System, Inc. (NYSE:R) is reporting third earnings this morning. The street is expecting Ryder System, Inc. (NYSE:R) to report Q3 EPS of $1.18. On a conference call in September  Art Garcia – Ryder System, Inc. (NYSE:R) – EVP and CFO, stated ‘we’ve been in that fairly low level economic growth environment in that 1.5% to 2.5% range, probably 2.5% earlier in the year. Now we’re in that 1.5%, 2% range kind of what we’re thinking as we look forward from a planning perspective. Thinking about our business, we do see rental demand is something tied to the economy. This year has been less than we had expected. When we started the year we were coming off a very strong fourth quarter and in light of that we made some calls about growing our rental fleet.’  For the six months ended 30 June 2012, Ryder System, Inc. (NYSE:R) revenues increased 5% to $3.1B. Net income before extraordinary items increased 22% to $81.6M. Revenues reflect Fleet Management Solutions segment increase of 5% to $1.96B, Supply Chain Solutions from external customers segment increase of 6% to $1.14B. Net income benefited from Gains on vehicle sales, net increase of 59% to $44.5M (income).
  • Reynolds American, Inc. (NYSE:RAI) is reporting third quarter earnings on October 23rd. 3Q12 EPS: $0.79 (Consensus range $0.76-$0.81 Barclays = $0.80). Barclays notes further, Reynolds American, Inc. (NYSE:RAI) will kick off the domestic tobacco earnings season tomorrow, giving us a much anticipated first look at the competitive landscape.  the pricing environment has been top of mind for investors, after a noticeable slowdown over the past several quarters, driven by promotional levels on new products and some market share defence by the category leader.  They continue to look for a somewhat drawn-out period of elevated promotional activity, producing more modest industry profit growth for the next few quarters.  In the intermediate term, we expect Reynolds American, Inc. (NYSE:RAI) to be a market share donor, especially as Altria Group, Inc. (NYSE:MO) ramps up the launch of Marlboro NXT, which is the only real direct competition for RAI’s successful Camel Crush brand and  Lorillard Inc. (NYSE:LO) ramps up price promotions behind the Newport brand.
  • Regions Financial Corporation (NYSE:RF) is reporting earnings before the opening bell today. Barclays notes that Regions Financial Corporation (NYSE:RF) has made significant progress in 2012 with its recent equity raise, TARP repayment and the recent upgrade in its credit rating by S&P to investment grade. Still, They continue to remain concerned by elevated credit metrics (albeit improving), particularly in its Investor R/E loan portfolio ($9.4bn, or 12% of total loans) where NPLs remain at 7.1%. They expect this book, albeit shrinking, to weigh on provisions and profitability. Results: Barclays expects Regions Financial Corporation (NYSE:RF) to report 3Q12 EPS of $0.24 versus consensus of $0.20. Now that Regions Financial Corporation (NYSE:RF) has exited the TARP program following its $900mn common equity raise, the focus will now turn to its ability to maintain its net interest margin, generate organic loan growth (led by C&I) and resolve lingering credit quality issues. With interest rates at a record low, investors will be looking at the company’s net interest margins (NIM). For the six months ended 30 June 2012, Regions Financial Corporation (NYSE:RF) interest income decreased 8% to $1.99B. Net interest income after loan loss provision increased 83% to $1.52B. Net income applicable to common stockholders excluding extraordinary items increased from $23M to $465M. Net interest income after loan loss provision reflects General Banking/Treasury segment increase of 84% to $1.5B.
  • United Parcel Service, Inc. (NYSE:UPS) is reporting third quarter earnings today. Yesterday, Deutsche Bank  lowered their 2012-13 EPS estimates to $4.55 and $4.90, respectively, from $4.62 and $5.20. They lowered $77 PT (from $80) based on a 16x multiple applied to their new 2013 EPS estimate of $4.90.  The street expects United Parcel Service, Inc. (NYSE:UPS) to report EPS of $0.57 for Q3. On  Friday (10/19), the European Commission issued its Statement of Objections (SO), which addresses the competitive effects of the intended merger. The objections will be defined at a later date. The SO is a confidential document that sets out the commission’s provisional position and does not prejudice the final outcome of the case. United Parcel Service, Inc. (NYSE:UPS) and TNT (AMS:TNT)  will respond within a few weeks. For the six months ended 30 June 2012, United Parcel Service, Inc. (NYSE:UPS) revenues increased 3% to $26.49B. Net income increased 4% to $2.09B. Revenues reflect U.S. Domestic Package segment increase of 5% to $16.06B. Net income benefited from U.S. Domestic Package segment income increase of 13% to $2.13B. Dividend per share increased from $1.04 to $1.14. Basic Earnings per Share excluding Extraordinary Items increased from $2.03 to $2.17.
  • United Technologies Corporation (NYSE:UTX) is reporting third quarter earnings on Wednesday October 23rd. Jefferies’ EPS estimates for United Technologies Corporation (NYSE:UTX) is $5.30, $6.20 and $7.20 for 2012, 2013, and 2014, respectively. The street expects United Technologies Corporation (NYSE:UTX) to report Q3 EPS of $1.18. For the six months ended 30 June 2012, United Technologies Corporation (NYSE:UTX) revenues decreased 3% to $26.22B. Net income before extraordinary items increased 17% to $2.66B. Revenues reflect UTC Fire and Security segment decrease of 9% to $8.68B, Sikorsky segment decrease of 12% to $2.97B, Otis segment decrease of 3% to $5.8B. Net income reflects UTC Fire and Security segment income increase of 17% to $1.33B.
  • Xerox Corporation (NYSE:XRX) is reporting Q3 earnings today.  BMO analysts think that aggressive share buybacks and cost management could drive EPS growth in FY13 for Xerox Corporation (NYSE:XRX), but they think that Street revenue estimates are too high.  On October 17th, they re raised their FY12 estimates to $1.10 from $1.07. For FY13, their new estimate is $1.20 versus $1.13 earlier. The street expects Xerox Corporation (NYSE:XRX) to report Q3 earnings per share of $0.25. For the six months ended 30 June 2012, Xerox Corporation (NYSE:XRX) revenues decreased less than 1% to $11.04B. Net income applicable to common stockholders decreased 4% to $566M. Revenues reflect Services segment increase of 7% to $5.63B, also reflect Technology segment decrease of 7% to $4.71B, Other segment decrease of 9% to $709M. Net income was partially offset by Technology segment income decrease of 9% to $513M.
  • AFLAC Incorporated (NYSE:AFL) is reporting third quarter earnings before the opening bell. Evecore Partners recently raised their 3Q12 and 2012 estimates for AFLAC Incorporated (NYSE:AFL) from $1.66 and $6.49 to $1.68 and $6.54, respectively. They also raised their 2013 estimates from $6.60 to $6.92 to reflect a  stronger expected yen and raised their 2014 estimate from $7.00 to 7.14. They note that risks to AFLAC Incorporated (NYSE:AFL) include,  high loss sharing on Euro financial investments, macro weakness derailing US sales recovery, margin expansion reversing in Japan, meaningfully weaker Yen, and a spike in Japan interest rates. Wall Street analysts expect AFLAC Incorporated (NYSE:AFL) to report Q3 earnings per share of $1.66. For the six months ended 30 June 2012, AFLAC Incorporated (NYSE:AFL) Incorporated revenues increased 19% to $12.14B. Net income increased 91% to $1.27B. Revenues reflect Aflac Japan segment increase of 12% to $9.8B. Net income benefited from Operating Expense Ratio-US decrease of 21% to 25.1%, Benefits and Claims-Japan increase of 3% to 61.3%. Dividend per share increased from $0.60 to $0.66. Basic Earnings per Share excluding Extraordinary Items increased from $1.42.
  • CIT Group Inc. (NYSE:CIT) is reporting Q3 earnings shortly. Citigroup notes that  in Q3, CIT Group Inc. (NYSE:CIT) refinanced the last portion of their expensive 7% Series C debt, which will boost the long-term ROE. However, due to FSA accounting, it creates a negative GAAP EPS impact. Stifel Nicholas’ GAAP estimate is a loss of $0.96 versus consensus at -$1.22. Excluding non-cash charges for debt repayment, their core EPS estimate is $0.74, up from $0.35 last quarter.  NIM has improved significantly but there are doubts about upside from here since CIT Group Inc. (NYSE:CIT) has largely completed its debt restructuring. For the six months ended 30 June 2012, CIT Group Inc. (NYSE:CIT) interest income decreased 34% to $820.9M. Net interest loss after loan loss provision increased from $473.1M to $949.5M. Net loss totaled $517.2M vs. income of $15.9M. Net interest income after loan loss provision reflects Net Interest Margin, Total -% decrease from 1.09 to -1.37%, Net Interest Spread, Total -% decrease from -0.38 to -3.62%, and interest and dividends on investments decrease of 7%.
  • Whirlpool Corporation (NYSE:WHR) is expected to report Q3 EPS of $1.56 today before the opening bell. Raymond James believes that Whirlpool Corporation (NYSE:WHR)’s expansion in North American unit demand and favorable price/mix, which first surfaced in 2Q12, has continued and the still-benign input costs are also supporting margins. Free cash flow generation ramps from here, and valuation is attractive. Their concerns include (1) a European macro that may be worsening; (2) Street expectations that may be overly optimistic for 3Q; and (3) the possibility that U.S. demand, while positive, may not sharply ramp higher over the intermediate term due to the carry-forward of demand from the heavily promotional period of mid-2009 through mid-2011. For the six months ended 30 June 2012, Whirlpool Corporation (NYSE:WHR) revenues decreased 3% to $8.86B. Net income increased from $8M to $205M. Revenues reflect Europe/Middle East/Africa segment decrease of 13% to $1.38B, Latin America segment decrease of 5% to $2.41B, Number of Units Sold-North America decrease of 5% to 11.6M. Net income reflects North America segment income increase from $135M to $386M.
  • RadioShack Corporation (NYSE:RSH) is reporting earnings before the market opens.  It’s been a tough couple of months for RadioShack Corporation (NYSE:RSH), as the executive departures continued, culminating in the latest departure of Jim Gooch (former CEO) on 9/26. Wall Street Analysts expect RadioShack Corporation (NYSE:RSH) to report Q3 EPS of $0.00. RBC analysts note a big concern is that if just ONE of their key vendors were to tighten or eliminate payment terms (and demand cash for delivery of inventory), it would likely snowball to other vendors. For the six months ended 30 June 2012, RadioShack Corporation (NYSE:RSH) revenues remained flat at $1.96B. Net loss before extraordinary items totaled $29M vs. income of $54.9M. Revenues reflect Other segment increase of 33% to $355.5M, also reflect RadioShack segment decrease of 5% to $1.61B, Retail Sales US RadioShack decrease of 5% to $1.61B. Net loss reflects RadioShack segment income decrease of 44% to $163.3M.
  • Panera Bread Co (NASDAQ:PNRA) is reporting third quarter earnings before the market open. Wall Street analysts expect Panera Bread Co (NASDAQ:PNRA) to report EPS of $1.19. Wells Fargo analysts expect Panera Bread Co (NASDAQ:PNRA) to deliver one of the strongest Q3 2012 SSS performances in the sector at 6.2% (Street at 5.3%), but note their outlook for decelerating SSS growth and relatively flat margins in 2013 will likely limit multiple expansion in coming quarters. Investors will focus on  (1) SSS trends through October, (2) EPS momentum (will Panera Bread Co (NASDAQ:PNRA) raise 2012 guidance for fourth consecutive quarter? we say yes) and (3) intro of 2013 EPS guidance. For the 26 weeks ended 26 June 2012, Panera Bread Co (NASDAQ:PNRA) revenues increased 18% to $1.03B. Net income increased 25% to $85.3M. Revenues reflect Company/Bakery-Cafe Store Operations segment increase of 19% to $907.9M, Comp. Store Sales-Company Owned increase of 90% to 7.3%. Net income benefited from Interest expense decrease of 2% to $412K (expense). Basic Earnings per Share excluding Extraordinary Items increased from $2.29 to $2.92.
  • Coach, Inc. (NYSE:COH) is expected to report $0.76 EPS for fiscal Q1 2013.  Jefferies anticipates in-line results from Coach, Inc. (NYSE:COH) for F’1Q13. They believe that the story is now very simple; it’s about how Coach, Inc. (NYSE:COH) performs in the context of heightened competition from peers like Michael Kors Holdings Ltd (NYSE:KORS). As long as Coach, Inc. (NYSE:COH) sales growth remains muted while Michael Kors Holdings Ltd (NYSE:KORS) strength continues/accelerates, they believe Coach, Inc. (NYSE:COH)’s stock performance and multiple will remain under constraint. Coach, Inc. (NYSE:COH) is a designer and retailer of handbags and accessories in North America and internationally and was founded in 1941. Its products are sold through company-operated retail and factory stores in North America, Japan, China, as well as its online store and catalogs. Products are also sold through department store locations in the U.S., internationally, and at specialty retailers. For the fiscal year ended 30 June 2012, Coach, Inc. (NYSE:COH) revenues increased 15% to $4.76B. Net income increased 18% to $1.04B. Revenues reflect Direct to Consumer segment increase of 16% to $4.23B, Wholesale segment increase of 4% to $531.5M, United States segment increase of 12% to $3.24B, International segment increase of 33% to $674.6M, Retail Sales increase of 16% to $4.23B. Net income benefited from Direct to Consumer segment income increase of 20% to $1.73B.