Month: October 2018

Key Takeaways:

Current Price: $44.8 Price Target: $51

Position Size: 1.56% 1-year Performance: -8.6%

Sanofi reported 3Q18 sales results 3& above expectations thanks to a strong rebound in vaccines (strong Flu shipments with $985M in sales +4% y/y, and recovery in Pediatric $511M in sales, +18% y/y) & in Emerging Markets. Regeneron added positively to its income, helping the 8% EPS beat vs. consensus. Sanofi raised its 2018 EPS outlook from 3-5% to 4-5%, as the strong momentum in Vaccines should continue in 4Q18, as guidance was raised to mid- to high-single-digit growth. Sales of Praluent (cholesterol drug) reflected the continued significant payer utilization restrictions in the US and limited market access in Europe. Sanofi’s Diabetes business continues to struggle (down 11% y/y – Lantus had $897M in sales, down 20% y/y), but the recent Bioverativ and Ablynx acquisitions should help drive growth going forward. Dupixent in Immunology is reaching an attractive level ($225M in sales, up 200%). Aubagio that treats multiple sclerosis, grew 12% ($426M in sales) and is the second biggest selling drug. Overall results were reassuring that Sanofi could return to top and bottom line growth after a couple years of disappointment.

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Current Price: $142 Price Target: $160

Position Size: 3.3% TTM Performance: 25%

Visa reported a mixed Q4 with revenue slightly below the street but better than expected EPS. For FY18 revenues were +12% and EPS was +32%. Tax reform added 10 points to EPS growth. For full year, currency added 1% to top line and 1.5% to EPS. Strengthening dollar meant Fx went from a 150bps tailwind in Q3 to a 50bps headwind in Q4. They issued solid 2019 guidance in line with street. Full year revenue growth guided to up low-double-digits and EPS up mid-teens. This time last year they guided to high-single-digit revenue growth – they ended up with +12%. So incrementally more positive on outlook going into 2019. Management pointed to the US consumer being stronger than they expected. Debit growth (which skews younger and lower income) has also been stronger.

Continue reading “Visa 4Q18 Earnings Update”

Key Takeaways:

Current Price: $47 Price Target: $61

Position Size: 1.26% 1-year Performance: -3%

Sensata (ST) reported strong 3Q18 earnings, with sales up +7.9% on an organic basis and adjusted EPS up +12.3%. The sales result is a clear testimony of Sensata’s secular content growth opportunity, and its ability to offset the well-publicized auto industry slowdown. The company raised its 2018 organic revenue growth guidance to 7% from 6%. EBIT margin should improve in 4Q as the recent quarters were impacted by new product launches, design and tariffs costs. The management team estimates that the recent Gigavac acquisition will help double the value of its content per electric vehicle. The company completed its $400M share repurchase program and initiated a new $250M authorization. This quarter reinforced our positive view on the name.

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Current Price: $66 Price Target: $101

Position Size: 2.5% TTM Performance: -11%

Cognizant reported mixed results for 3Q18 missing on revenue, beating on earnings and lowering their full-year revenue forecast. Similar to last quarter, lower than expected revenue was on weakness in their largest end market, financial services. A lower tax rate led to EPS that was ahead of consensus, $1.19 vs $1.13. Despite a revenue miss last quarter they maintained full year revenue guidance, but had to lower it with this report. The street is ahead of the high end of the new revenue guidance range. FY EPS guidance kept at least $4.50. Street is at $4.53.

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Key Takeaways:

Current Price: $73.30 Price Target: $87

Position Size: 2.09% 1-year performance: -1.4%

Fortive released 3Q18 results with sales +9.2%, of which organic growth was +3.2% (below expectations), acquisitions added +7.2% and FX removed 1.2%. Gross margins grew 40bps to 50.2% but SG&A expenses increased 410bps, leading Fortive’s core margin down 25bps (reaching 17.5%). Both tariffs and inflation of raw materials impacted gross margins, while hurricane Florence and unfavorable portfolio mix impacted operating margins. EPS grew +11.7% y/y. Free cash flow increased 23% y/y on better operating cash flow. 4Q18 revenue growth acceleration is expected as some hurricane-related backlog in 3Q will be fulfilled in 4Q. There were also some delays with defense contractors during the quarter that have since been reversed in October. We heard some positive comments on a new fast-charging station technology for electric vehicles that can be globalized with their large-scale network clients (gas stations for example). Their core Gilbarco business (card readers at gas stations) is seeing an acceleration as well. Pricing is increasing towards the end of the year. Even though this quarter saw some one-time items impacting revenue growth and margins, the thesis on this name remains intact.

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