For Immediate Release
Chicago, IL – August 04, 2010 – Zacks.com Analyst Blog features:
The Dow Chemical Company (DOW), Baker Hughes Inc. (BHI), Archer Daniels Midland Co. (ADM), Parker Hannifin Corp. (PH) and Tenet Healthcare Corporation (THC ).
Here are highlights from Tuesday’s Analyst Blog:
Dow Misses Analyst Expectations
Chemical giant The Dow Chemical Company (DOW) missed the Zacks Consensus Estimate of 56 cents per share with net earnings of 54 cents in the second quarter of 2010. However, reported earnings were far ahead of last year’s income of 5 cents per share.
Including one-time charges related to temporary plants shut down, the company earned 50 cents against a loss of 47 cents in the year-ago quarter. Sequentially, earnings increased 22% from 41 cents per share.
Quarterly revenues climbed 26% year over year to $13.62 billion, but remained slightly below the Zacks Consensus Estimate of $13.69 billion. Pricing (19%) and volume (7%) gains across all business segments and geographical regions, particularly in America and Europe, Middle East and Africa (EMEA) yielded healthy revenue growth. A stronger top-line mitigated higher raw material and energy costs, translating into EBITDA of $1.9 billion, up 21% from the year-ago period.
Segment Review
Electronic and Specialty Materials: The segment was the star performer of the quarter. Sales jumped 19% year over year to $1.4 billion on a 20% rise in volumes. Prices, however, declined 1%. The electronic business saw higher volumes, particularly in Asia-Pacific where volumes grew by 25%.
Dow’s Semiconductor Technologies along with Display Technologies and Growth Technologies delivered strong growth, driven by higher end-market demand for televisions and computer monitors. Sales in the specialty material business were helped by double-digit growth in volumes, especially in Asia-Pacific and Latin America. Earnings nearly doubled to $112 million from last year’s $58 million.
Coatings and Infrastructure: Sales of $1.3 billion were up 16% year over year, primarily driven by pricing gains. Prices improved 11% while sales volumes inched up 5%. The coatings business benefited from higher sales of architectural and industrial coatings while the infrastructure business recorded a double-digit sales improvement, driven by volume gains despite continued weakness in residential and commercial construction end-markets.
Higher demand for insulation products under Dow’s STYROFOAM™ extruded polystyrene foam insulation franchise, especially in North America. EBITDA of $207 million was significantly higher than $25 million in the same period last year.
Health and Agricultural Sciences: This segment’s sales moved up 4% to $1.3 billion in the second quarter, with volume gains of 9% negating price decline of 5%. Production innovations such as pyroxsulam cereal herbicide in Northern Europe and the United States, and penoxsulam rice herbicide in Asia, largely drove the revenues. Higher demand for corn herbicides further added to higher revenues. Dow saw lower prices for its glyphosate in the agricultural chemicals business. EBITDA was $196 million, up from $140 million in the second quarter of 2009.
Performance Systems: Sales in this segment shot up 23% to $1.8 billion, as volume increased 13% and prices surged 10%. A strong rebound in the automotive market led to higher sales in the automotive systems business in North America and Asia-Pacific. Dow saw higher sales of polyurethane glass bonding adhesives and foams, while technology-differentiated products used in acoustics and body structure applications grew 25%. EBDITA, however, declined 14% to $208 million.
Performance Products: Sales soared 35% to $2.8 billion primarily on the basis of higher prices. Prices rose 23% while volumes were up 12%. Polyurethanes business remained strong with higher pricing. Strong demand in electrical laminates in Asia Pacific helped higher sales in the Epoxy business. Polyglycols, Surfactants and Fluids demand remained high across all regions. Adjusted EBITDA for the segment was $314 million, citing a negligible change from $307 million in the year-ago quarter.
Basic Plastics: Basic Plastics sales were up 26% to $3.0 billion. A 33% increase in prices negated volume decline of 7%. The segment benefited from higher polyethylene demand, especially in the packaging markets. However, production disruptions impacted sales in Latin America. The segment’s adjusted EBITDA of $686 million was up 69% from $406 million in the year-ago period.
Basic Chemicals: Sales in the segment went up 25% to $732 million on a 22% rise in prices and a 3% increase in volumes. The Chlor-Alkali/Chlor-Vinyl business contributed largely to the revenues on the back of a recovering alumina and the pulp and paper industries, which led to increased demand for caustic soda, especially in North America. Caustic soda prices continued to improve sequentially. EBITDA for the quarter was $100 million, versus a loss of $32 million in the year-ago period.
Baker Hughes Slips, Profits Up
Baker Hughes Inc. (BHI) reported second-quarter 2010 earnings of 41 cents per share, compared with the Zacks Consensus Estimate of 43 cents and year-ago earnings of 28 cents. We have adjusted reported earnings for costs associated with the BJ Services merger and increased depreciation and amortization expenses.
Baker Hughes completed its acquisition of BJ Services on April 28, 2010. The second quarter figures include results for BJ Services for the months of May and June.
The drilling moratorium in the Gulf of Mexico has negatively impacted Baker Hughes’ earnings in the quarter by 3 cents per share. The company said this could increase to 8–11 cents per quarter in the remaining two quarters of the year.
The increase in earnings were driven by the solid contribution from BJ Services’ operations and improved performances in the North America, Russia and Asia Pacific regions, partially offset by performances in Latin America and Africa.
Revenues in the reported quarter, including revenues for BJ Services in May and June 2010, were $3.37 billion, compared with $2.37 billion in the year-earlier quarter and the Zacks Consensus Estimate of $3.34 billion. Pre-tax operating profit margin increased to 10% from the year-earlier margin of 8%.
Sales revenues in the quarter increased more than 17% to $1.36 billion and Services and Rentals revenue increased 71% year over year, mainly due to the acquisition of BJ Services.
Archer Daniels Q4 Profit Surges
Archer Daniels Midland Co. (ADM) fiscal 2010 fourth-quarter earnings skyrocketed to $446 million or 69 cents per share from $58 million or 9 cents in the year-ago quarter. Quarterly earnings also surged past the Zacks Consensus Estimate of 50 cents per share.
The strong quarterly result was primarily driven by higher volumes and better margins in Oilseeds and Corn Processing. Shares of Archer Daniels rose more than 1.5% in pre-market trading on the New York Stock Exchange.
Archer Daniels’ quarterly net sales declined 5% year-over-year to $15.7 billion, missing the Zacks Consensus Estimate of $16.3 billion. The decrease was mainly caused by a 13.4% decline in Agricultural Services revenue to $5.7 billion, partially offset by a 7.0% growth in Corn Processing revenues to $2.0 billion. Oilseeds Processing recorded essentially flat performance, with revenues dipping 0.4% to $6.74 billion from $6.76 billion in the year-ago period.
Total segment operating profit for Archer Daniels soared nearly four times to $799 million from $208 million in the prior-year quarter. Operating profit for Oilseeds Processing segment grew 58.1% to $359 million from $227 million in the year-ago period reflecting better crushing volumes in South America and Europe, improved margins in soybean and softseed crushing and recent expansion of biodiesel facility in Brazil.
Parker Hannifin Beats Estimates
Parker Hannifin Corp. (PH)reported earnings per share from continuing operations of $1.35 for the fourth quarter of 2010, exceeding the Zacks Consensus Estimate of $1.08. Fiscal 2010 fourth-quarter revenue was $2.8 billion, an increase of 26.0% compared with the fourth quarter of fiscal 2009. This was higher than the Zacks Consensus revenue estimate of $2.72 billion.
Cash flow from operations in the quarter was $377.4 million, or 13.5% of sales. At the end of the quarter, cash and cash equivalents were $575 million with long-term debt at $1.4 billion and shareholders’ equity at $4.3 billion.
Segment Details
In the Industrial North America segment, fourth-quarter sales increased 33.1% to $1 billion and operating income increased 203% to $162.9 million, compared with the year-ago period.
In the Industrial International segment, fourth-quarter sales increased 30.4% to $1 billion and operating income increased to $140.3 million, compared with losses in the corresponding quarter of the prior year.
In the Aerospace segment, fourth-quarter sales grew 5.9% to $477.6 million and operating income increased 9.5% to $64.1 million, both on a year-over-year basis. Aerospace results were to an extent impacted by lower commercial MRO sales and continued weakness in the business and regional aircraft markets.
In the Climate & Industrial Controls segment, fourth-quarter sales increased 27% to $240.3 million and operating income increased to $20.5 million, compared to negligible profit in the similar period in 4Q09.
Tenet Ahead of Zacks Consensus
On August 3, 2010, Tenet Healthcare Corporation (THC ) reported its second-quarter income from continuing operations of $35 million or 7 cents per share, slightly ahead of the Zacks Consensus Estimate of 6 cents. This also compares favorably with income of $2 million in the year-ago quarter.
Despite a soft macroeconomic environment, Tenet’s improved results were attributable to growth in top-line and earnings before interest, taxes, depreciation and amortization (EBITDA) along with increasing cost efficiencies. Further, the decline in admissions was offset by the increased showing in the quarter.
Tenet’s net income was $25.0 million or 5 cents in the reported quarter as opposed to a loss of $15.0 million or 3 cents in the prior year quarter. The results include losses from discontinuing operations in both the quarters of $10.0 million or 2 cents and $17.0 million or 4 cents, respectively.
Behind the Headlines
Net operating revenues in the reported quarter climbed 3.3% year over year to $2.3 billion, primarily due to the 2.0% growth in commercial revenues, driven by higher commercial acuity, increased unit revenues, and improved commercial payer mix. This increase in revenues was net of unfavorable adjustments of $28 million for the estimated impact on the Medicare disproportionate share hospital payments of $20 million and the portion of bad debt of $8 million that will not be reimbursed by Medicare.
Commercial managed care admissions and outpatient visits declined by 7.2% and 5.4%, respectively, while total admissions and outpatient visits declined by 2.0% and 0.8%, respectively during the quarter. Total adjusted admissions declined 0.6%.
Tenet witnessed a year-over-year increase of 2% in the total controllable operating expenses in the reported quarter. This increase includes a 2.1% rise in salaries, wages and benefits. Supplies expense was unchanged during the quarter and other operating expense of Tenet jumped 5.5%.
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