Motorola Shows Signs of Revival - Analyst Blog

Motorola Inc. (MOT) today declared financial results for the third quarter 2009. Quarterly net income from continuing operations was $12 million or 1 cent per share, compared to a net loss of $397 million or 18 cents per share in the prior quarter. Third quarter adjusted (excluding special items) EPS was 2 cents, easily beating the Zacks Consensus Estimate of a break-even quarter.

Improvement in net income was primarily due to the huge reduction in operating expenditure. Quarterly total revenue was $5,453 million, down 27.1% year-over-year and also below the Zacks Consensus Estimates of $5,564 million.

Gross margin in the third quarter was 33.2% compared to 24.1% in the prior-year quarter and 31.1% in the previous quarter. Quarterly operating expenditure was $1.68 billion compared to a massive $2.26 billion in the year-ago quarter.

an approximate reduction of 8,000 in headcount. Management increased the cost reduction plan by another $100 million. Now the company is expected to save $1.9 billion during 2009 compared to the previous year.

During the quarter, Motorola generated a massive $616 million in cash from operations compared to $180 million in the prior-year quarter and $150 million in the previous quarter. Free cash flow (cash flow from operations less capital expenditure), in the same quarter was $564 million, compared to a mere $24 million in the year-ago quarter and $84 million in the previous quarter.

Cash, cash equivalents and marketable securities at the end of the third quarter was approximately $7.2 billion compared to $6.9 billion at the end of the year-ago quarter and $6.5 billion at the end of the previous quarter. Total debt was around $3.9 billion compared to $4.2 billion at the end of the prior-year quarter and $3.9 billion at the end of the previous quarter.

Mobile Devices Division

Quarterly revenue was $1.7 billion, down 46% year-over-year. Operating loss was $183 million, a significant reduction from an operating loss of $840 million in the year-ago quarter and a loss of $235 million in the previous quarter. During the reported quarter, Motorola shipped 13.6 million of mobile phones.

Home and Network Mobility Division

Quarterly revenue was $2 billion, down 15% year-over-year. Operating income was $199 million compared to an operating income of $263 million in the year-ago quarter. During the third quarter, Motorola conducted the world's first live 2.6GHz TD-LTE mobile demonstration for China Mobile Ltd. (CHL) and shipped 3.3 million digital entertainment devices.

Enterprise Mobility Solutions Division

Quarterly revenue was $1.77 billion, down 13% year-over-year. Operating income was $306 million compared to an operating income of $403 million in the year-ago quarter. During the third quarter, Motorola introduced its rugged mobile computer MC9500. The company will also provide 3.5G WAN with support for GSM-HSDPA and EVDO Rev A wireless broadband connectivity.

Future Financial Outlook

Management provided guidance that the company's GAAP EPS from continuing operations is expected to be in the range of 7 cents to 9 cents in the fourth quarter 2009, well above the Zacks Consensus Estimate of an EPS of 6 cents.

Procter & Gamble Reports In Line - Analyst Blog

The Procter & Gamble Company (PG) reported results for the first quarter of fiscal 2010 with earnings of 97 cents per share, in line with the Zacks Consensus Estimate but down 5.8% year-over-year.

Net sales for the quarter declined 5.6% year-over-year to $19.8 billion, as a 3% benefit from pricing and 1% benefit from product mix was fully offset by a 3% decline in unit volume -- a 7% unfavorable impact of foreign currency and a 1% impact of divestitures. However, successful product launches, supported by marketing initiatives, contributed to the top line. Organic sales grew 2% during the quarter driven by pricing and product mix.

All three Global Business Units (GBU) witnessed revenue declines during the quarter. The Beauty segment declined 5%, with the low single-digit growth in retail hair care volumes offset by the double-digit decline in Professional salon volume and mid-single-digit decline in female beauty volume. In addition, high single-digit declines in blades & razors impacted the Grooming division. Strong growth of Gillette and Fusion brands were offset by declines in Braun.

The Household Care segment sales contracted 5%. It was impacted by a low single-digit decline in Fabric Care and Home Care segments. The decline in Fabric Care was due to global market share contractions and trade inventory reductions in North America.

In the Baby Care division, volume increased low single-digits, which was partially offset by mid single-digit declines in the Family Care division, primarily attributable to trade inventory reductions and market share losses due to a shift in timing of merchandising activity.

The Health and Well Being segment declined 4%. The segment was impacted by low single-digit volume decline in the Feminine Care business. However, Oral Care volume was in line with the prior-year quarter.

The Snacks division witnessed decline in double-digits due to lower merchandising activity in North America. The Pet Care segment declined low-single-digits as a result of contraction in the premium nutrition category. This was partially offset by the continued success of new product initiatives.

Gross margin for the quarter expanded 287 basis points (bps) to 52.6% versus 49.7% in the comparable prior-year quarter. The increase was primarily driven by benefits of price increases, lower commodity costs and manufacturing cost savings. The operating margin for the quarter also expanded 156 bps to 22.5% from 20.9% in the prior-year quarter.

Operating cash flow for the quarter increased 32% to $4.6 billion, due to reductions in working capital. The company has a debt to capitalization ratio of 25%. Capital expenditures for the quarter were $555 million (2.8% of net sales).

The company is on track to complete the sale of its global pharmaceuticals business to Warner Chilcott, as stated by management earlier. The estimated financial impacts of the transaction are unchanged versus prior guidance.

Based on the performance in the first quarter, management raised its guidance for full fiscal 2010. Organic sales are now expected to grow 2% to 4% compared to 15 to 3% stated earlier. Net sales are expected to grow in the range of 3% to 6%.

Foreign exchange is expected to positively contribute 1% to 2% to net sales growth. Previous guidance was an adverse impact of 0% to 1%. Annual earnings are now expected to be in the range of $4.02 to $4.12. Core earnings are now expected to be in the range of $3.47 to $3.59. Management increased the low end of the guidance range by $0.03 per share.

For the second quarter, management expects organic sales growth of 2% to 5%. Foreign exchange is expected to add 1% to 2% to sales in the quarter. Net sales are expected to increase 3% to 7% versus the prior year. Core earnings are expected in the range of $0.91 to $1.00 per share.

Aetna Surpasses, Outlook Cautious - Analyst Blog

Aetna Inc. (AET) reported third quarter earnings per share of 69 cents, beating the Zacks Consensus Estimate of 66 cents. However, earnings declined 38% compared to $1.12 reported in the prior-year period due to a lower commercial underwriting margin, an increase in pension expenses partially offset by the lower number of shares outstanding year-over-year.

Revenues during the quarter increased 9% to $8.72 billion compared to $8 billion in the third quarter of 2008, driven by a 9% increase in premium revenues and a 5% increase in fees and other revenue.

Total medical membership rose 7.3% to 19 million at the end of the reported quarter compared to the year-ago period, but declined 25,000 sequentially. The same trend was witnessed in case of pharmacy and dental membership as well, both of which declined sequentially by 79,000 to 11.155 million and 386, 000 to 14.183 million, respectively.

The three business segments of Aetna – Health Care, Group Insurance and Large Case Pensions recorded robust revenue growth compared to the prior-year period. They recorded revenues of $8 billion (up 9.4%), $528.2 million (up 3.3%) and $138.4 million (up 11.6%), respectively.

The three sub-divisions of Health Care – Commercial, Medicare and Medicaid recorded an increase in premium by 6.5%, 18.5% and 57.6%, respectively. However, Health Care costs increased considerably during the quarter. Given the situation, medical benefit ratio (MBR) -- which measures the proportion of premiums received by the company that is used to pay patient medical claims -- increased by 470 basis points for the three groups taken together. Commercial MBR increased the most (530 basis points) year over year to 85.6%.

The huge increase in Commercial MBR was primarily due to greater-than-anticipated costs from the H1N1 flu and higher COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) participation. Under COBRA, people can continue their employer sponsored insurance coverage even after they lose their jobs.

Aetna projects full-year 2009 operating earnings per share of $2.75. Earlier, while announcing the second-quarter results, the company had expected operating earnings in the range of $2.75 to $2.90 per share. However, we believe increased medical costs have forced the company to project earnings at the lowest level of its previously issued guidance.

Kellogg Beats, Raises Guidance - Analyst Blog

Kellogg Company (K) reported strong third-quarter results with earnings of 94 cents per share.