Archive for 2011

  • The Millennium Thus Far
    , October 19th, 2011 at 9:36 pm

    Since December 31, 1999, the Dow has gained exactly 7.5 points.

    Not percent — points. On a percentage basis, that comes to 0.065% spread out over 11.8 years.

    Suddenly, T-bills don’t look so bad.

    (BTW, with dividends, the total return is 32.25%.)

  • Stryker Beats and Guides Higher
    , October 19th, 2011 at 5:44 pm

    First we had good news from Abbott Labs ($ABT). Now we have more good news from Stryker ($SYK). The company just reported Q3 earnings of 91 cents per share which was two cents better than estimates.

    The company also adjusted its full-year earnings range from $3.65 to $3.73 per share to $3.70 to $3.74 per share. That implies Q4 earnings of $1 to $1.04 per share. The CEO said, “We are on track to achieve double digit sales growth in 2011 and adjusted per share earnings at the high end of the range we targeted at the start of the year.”

    That’s nice to hear. Here are some more details:

    Revenue for the quarter rose 15 percent to $2.03 billion, in line with Wall Street expectations.

    Reconstructive products sales rose 8 percent to $901 million as demand for artificial hips and extremities implant systems helped offset a decline in knee replacement sales.

    “The recon (reconstructive) market continued the softness that began last year,” MacMillan told analysts on a conference call.

    MedSurg product revenue increased by 12 percent on higher sales of surgical, endoscopic and emergency equipment and demand for replacement hospital beds and stretchers.

    Neurotechnology and spine products sales jumped 46 percent to $363 million, primarily due to contributions from recent acquisitions.

    In last week’s CWS Market Review, I cautioned investors not to chase Stryker. This is a good earnings report although the stock is down slightly in the after-hours market. Stryker is a decent buy here but I’d like to see it a little cheaper before I called it an outstanding buy.

  • OMG! Apple Plunges!
    , October 19th, 2011 at 12:49 pm

    From the beginning of 2003 through yesterday, Apple ($AAPL) gained 5,600%; yet people are freaking out today because the stock is down 3.8%.

  • More on Abbott’s Plans
    , October 19th, 2011 at 12:09 pm

    Here’s some more info on the break-up plans for Abbott Labs ($ABT).

    Today Abbott announced that it plans to separate into two publicly traded companies, one in diversified medical products and the other in research-based pharmaceuticals. The diversified medical products company will consist of Abbott’s existing diversified medical products portfolio, including its branded generic pharmaceutical, devices, diagnostic and nutritional businesses, and will retain the Abbott name. The research-based pharmaceutical company will include Abbott’s current portfolio of proprietary pharmaceuticals and biologics and will be named later. Both companies will be global leaders in their respective industries.

    “Today’s news is a significant event for Abbott, and reflects another dynamic change in our company’s 123-year history, strengthening our outlook for strong and sustainable growth and shareholder returns,” said Miles D. White, chairman and chief executive officer, Abbott.

    Abbott’s proprietary pharmaceutical business has delivered market-leading performance with a sustainable mix of products and built a strong pipeline of proprietary medicines through internal discovery, in-licensing and collaboration efforts. Abbott also has leadership positions in its diversified businesses, including established pharmaceuticals, nutritionals, diagnostics, and vascular devices, where the company is now the global leader in interventional cardiology.

    Creating Two Dynamic Health Care Companies

    The research-based pharmaceutical company has nearly $18 billion in annual revenue today and will have a sustainable portfolio of market-leading brands, including Humira, Lupron, Synagis, Kaletra, Creon and Synthroid. An attractive pipeline of innovative R&D assets – in important specialty therapeutic areas such as Hepatitis C, immunology, chronic kidney disease, women’s health, oncology and neuroscience – will help drive future growth.

    The diversified medical products company has approximately $22 billion in annual revenue today and a durable mix of products balanced across four major businesses. It will continue to target double-digit ongoing earnings-per-share growth, with opportunities for geographic expansion, particularly in high-growth emerging markets. The company will have an extensive, broad-based pipeline of new products and technologies as well as opportunities for significant margin expansion.

    Mr. White will remain chairman and CEO of Abbott, the diversified medical products company. Richard A. Gonzalez, currently executive vice president, Global Pharmaceuticals, will become chairman and CEO of the research-based pharmaceutical company. Mr. Gonzalez is a more than 30-year Abbott veteran and was previously president and chief operating officer of Abbott.

    Profiles of the Two Companies

    The two companies have evolved into distinct investment and business opportunities:

    The research-based pharmaceutical company will focus on select specialty products with breakthrough innovation that serve patient needs in some of the most critical medical areas, such as immunology, Multiple Sclerosis, chronic kidney disease, Hepatitis C, women’s health and oncology. This company will continue to generate the majority of its revenue from developed markets. The company’s sustainable portfolio and advancing pipeline, including established biologics expertise, have the potential to deliver accelerating revenue growth in the coming years.

    The diversified medical products company will be one of the largest and fastest growing investment opportunities in medical products with strong sales and ongoing earnings-per-share growth and a large, broad mix of products addressing many essential areas of health care. It will generate nearly 40 percent of its sales in high-growth emerging markets, with further expansion expected in the coming years.

    “Abbott will be one of the largest and fastest-growing global diversified medical products companies, with a compelling portfolio of durable growth businesses in medical technology, branded generic pharmaceuticals and nutritionals,” said Mr. White. “We will continue to grow our product lines, market share and global presence, especially in emerging markets.”

    “The research-based pharmaceutical company will be a leader in its industry with a strong and sustainable portfolio of specialty medicines and a promising pipeline of future products,” said Mr. Gonzalez. “This business has been delivering market-leading performance and is well positioned for future success.”

    Following are brief profiles of the two companies as their businesses exist today:

    The Research-Based Pharmaceutical Company

    Annual Sales: Nearly $18 Billion (based on 2011 estimates)

    Portfolio: Numerous leading medicines, including: Humira, Lupron, Synagis, Zemplar, Kaletra, Creon, Duodopa, Synthroid, Androgel and others.

    Pipeline: Advancing pipeline of promising new specialty medicines and formulations, including more than 20 new compounds or indications in Phase 2 or 3 development across such disease states as immunology, chronic kidney disease, Hepatitis C, women’s health, oncology, and neuroscience, including Multiple Sclerosis and Parkinson’s and Alzheimer’s diseases.

    The Diversified Medical Products Company (Abbott)

    Annual Sales: Approximately $22 Billion (based on 2011 estimates)

    Portfolio: Market-leading positions in established pharmaceuticals (branded generics outside the U.S.), adult and pediatric nutritionals, core laboratory diagnostics, point of care and molecular diagnostics, and medical devices, including vascular devices, diabetes care and vision care. Abbott will have an extensive, broad-based pipeline of new technologies and products.

    Global and Emerging Markets Presence: Products in more than 130 countries with nearly 40 percent of sales in emerging markets today; Abbott is the leading pharmaceutical company in India and has a significant and growing presence in many other emerging markets.

    Transaction Details

    The transaction is intended to take the form of a tax-free distribution to Abbott shareholders of a new publicly traded stock for the new pharmaceutical company. The expected stock distribution ratio will be determined at a future date.

    It is expected that the two companies will each pay a dividend that, when combined, will equal the current Abbott dividend at the time of separation.

    This announcement will not impact Abbott’s ongoing earnings-per-share guidance for 2011. The transaction is expected to be completed by the end of next year, but is subject to final approval by the Abbott board of directors, receipt of a favorable ruling from the Internal Revenue Service on the tax-free nature of the transaction, and the effectiveness of a Form 10 registration statement that will be filed with the Securities and Exchange Commission that will include information about the distribution and related matters. Abbott expects to incur one-time charges related to the transaction during the periods preceding the separation, to be quantified at a later date.

  • Abbott Labs Plans to Split Into Two Companies
    , October 19th, 2011 at 11:48 am

    Big news today for Abbott Labs ($ABT). The company reported third-quarter earnings of $1.18 per share which was one penny better than estimates, and 13 cents more than last year’s third quarter.

    Worldwide sales increased 13.2% to $9.8 billion. The gross margin ratio was 60.4% which was higher than ABT’s guidance. Abbott also narrowed its full-year guidance to $4.64 – $4.66 per share which implies a Q4 range of $1.43 – $1.45 per share. The previous forecast was $4.58 – $4.68.

    But that wasn’t the big news. The big story is that Abbott is planning to split itself into two publicly traded companies, one in diversified medical products and the other in research-based pharmaceuticals.

    Abbott Laboratories, long known for selling a mix of drugs, medical implants and baby formula, said Wednesday it will spin off its branded drug business and become two separate companies with more distinct identities.

    The split-up, announced Wednesday marks a dramatic change in strategy for the 123-year old company, which sells a broad range of products from stents to arthritis drugs to contact lens solution. While many pharmaceutical companies weathered losses as the patents on their blockbuster drugs expired, Abbott has continued to post double-digit sales growth, chiefly because of its anti-inflammatory drug Humira. The injectable drug posted sales of $6.5 billion last year.

    But Abbott’s reliance on the drug has been a concern for investors, overshadowing the company’s performance across other businesses. Humira loses patent protection in 2016 and the company has largely been unsuccessful in developing new therapies to replace the drug.

    CEO Miles White suggested Wednesday the split is about crafting two companies with clearer messages for investors.

    “What happened here is the pharma piece got so big, and is so different, that these two investments make sense separately, and both are of a critical mass and size that they have great sustainability going forward as independent companies,” White told analyst on a teleconference call.

    I like this plan. You often get a great bargain when good companies split themselves up. Plus, this split makes a lot of sense.

    The plan is to have this as a tax-free distribution to shareholders. The company has said that it wants to do this by the end of next year.

  • Twenty-Four Years Ago Today
    , October 19th, 2011 at 7:06 am

    Twenty-four years ago today, the Dow lost 508 points. Since then, we’ve gained 9,839 points but only 80 have come since December 31, 1999.

  • Morning News: October 19, 2011
    , October 19th, 2011 at 5:37 am

    European Banks Vow $1 Trillion Shrinkage

    Spain Rating Cut for Third Time Since 2010

    Bunds Slip on EFSF Deal Report, Losses Seen Limited

    Greece Paralyzed By Two-Day Strike Ahead Of Vote

    Demand at Home Aids China Growth

    Japan Vows Tax Cuts for Foreign Firms to Spur Quake Rebound

    Crude Oil Up On Equities; Focus On Euro Debt

    Gloom Grips Consumers, and It May Be Home Prices

    Heavy Is the Head That Wears Crown

    Intel’s Third-Quarter Earnings Outpace Wall Street Forecasts

    Yahoo Profit Falls 26%, but Its Media Sites Draw More Views

    BSkyB Profit Rises 16 Percent on Web Demand

    Harley Weighed Down by Margin Worries

    SABMiller Gets Anadolu Stake After Exchange

    Goldman Loss Offers a Bad Omen for Wall Street

    Phil Pearlman: Apple, Intel and Post Earnings Announcement Drift

    Cullen Roche: QE2 Hurt The Economy?

    Be sure to follow me on Twitter.

  • Apple Misses?
    , October 18th, 2011 at 5:00 pm

    Yes, it’s true. Apple ($AAPL) just reported third-quarter earnings of $7.05 per share which was 17 cents below estimates.

    Of course, since Apple always beats the Street, investors were really expecting much more. There was even talk of Apple netting $8 or $8.50 per share. This is very surprising.

    For the full fiscal year, which ended in September, Apple earned $27.68 per share which was a huge increase over the $15.15 earned in the year before.

    Here’s a look at Apple and its EPS from a chart I made one month ago:

  • Earnings Season So Far
    , October 18th, 2011 at 2:40 pm

    It’s still early but we have some numbers on Q3 earnings.

    Of the 500 companies in the S&P 500, 60 have reported so far. Of the 60, 41 have beaten estimates, 13 have missed and six have come inline.

    Earnings are tracking for a result of $24.26 which is an increase of 7.4%. However, a few of the financial stocks have crowded the early part of the earnings season so the final figure should be much better. Wall Street expects earnings growth of 12.1% (that’s 14% when you exclude financials).

    The bottom line: Earnings are still healthy. For now.

  • J&J Beats By Three Cents
    , October 18th, 2011 at 11:00 am

    Good news for Johnson & Johnson ($JNJ). The company reported Q3 earnings this morning of $1.24 per share which was three cents more than Wall Street’s consensus.

    I said in the most recent CWS Market Review that I thought JNJ could deliver earnings of $1.25 per share, so I was off by one penny.

    For the first three quarters of 2011, the company has already earned $3.87 per share. I also said last week that JNJ could raise each end of its quarterly guidance by five cents per share (it was at $4.90 to $5 per share). Again I was close — they raised the low end to $4.95 per share.

    The WSJ has the 411:

    Sales rose 6.8% to $16 billion, just short of the Thomson estimate of $16.02 billion. Favorable currency rates contributed 4.2 percentage points of the growth. U.S. sales dropped 3.7%, while non-U.S. sales rose 16.4%.

    J&J’s biggest unit, medical devices and diagnostics, had sales of $6.3 billion, up 6% from a year earlier. Sales growth was helped by products for diabetes care, joint-replacement parts and surgical products. The cardiovascular care division continued to post sales decline due to diminished sales of drug-coated stent devices, a business J&J has decided to exit.

    J&J expects to close its planned acquisition of Synthes in the first half of 2012, Mr. Caruso said.

    J&J’s pharmaceutical unit sales increased 9% to $5.98 billion, with Remicade gaining 15%, HIV drug Prezista up 37% and cancer drug Velcade up 20%.

    Sales of antibiotic Levaquin plunged 91% due to generic competition. U.S. sales of cancer drug Doxil dropped 87% due to a shortage caused by production problems at a contract manufacturer.

    J&J’s consumer unit sales rose 5% to $3.74 billion, helped by baby-care, skin-care and oral-care products. Combined sales of over-the-counter medicines and nutritional products in the U.S. dropped 24% due to a series of recalls of OTC medicines stemming from manufacturing-quality lapses.

    J&J said it expects to ship a limited supply of certain recalled OTC products later this year, and to reintroduce products throughout 2012.

    The shares are down slightly so far but the stock currently yields close to 3.6%.