Emergent BioSolutions - Emerge stronger in 2009
January 10, 2009
Ticker: EBS
Emergent BioSolutions Inc. is a biopharmaceutical company and focuses on the development, manufacture, and commercialization of immunobiotics primarily in the United States. Immunobiotics are pharmaceutical products, such as vaccines and immune globulins that assist the body's immune system to prevent diseases. The company operates in two segments, Biodefense and Commercial.
Its main product is BioThrax, which is a vaccine to treat Anthrax infection. It’s a little bizarre that 127 years after Louis Pasteur and co developed the world's first vaccine - for anthrax – Maryland based EBS makes the only U.S. approved one. It has sold 30 million doses of this vaccine in about a decade.
The company also has various products in development to treat typhoid, hepatitis and botulism. In addition to their existing product line, Emergent BioSolutions is developing a chlamydia vaccine and a meningitis B vaccine, which are in preclinical development. The company serves primarily the U.S. Department of Defense and the U.S. Department of Health and Human Services. It has collaboration agreements with U.K. Health Protection Agency for the development of a human botulinum immune globulin candidate; and with Sanofi Pasteur for the development of meningitis B vaccine candidate. The company, formerly known as BioPort Corporation, was founded in 1998 and is based in Rockville, Maryland. (Reuters)
In the News
Emergent Biosystems put out strong earnings in the third quarter of 2008 and reported that revenues were up 30% to $56.6 million (35 cents per share). The Company increased its full year guidance for 2008 from 70 cents to 83 cents per share. It recently renewed a contract with the Federal Government to supply millions of doses of the vaccine. The stock was up 416% in 2008.
EBS was named recently to Security magazine’s “Security 500: The Biggest and Best Security Organizations.” The publication cites U.S.-based companies in 16 sectors. Emergent BioSolutions was measured in the industrial and manufacturing sector. It is the first year Emergent has been recognized.
Earnings
The earnings date for Q4 2008 March 2, 2009 – which the analysts estimated to be $0.11. My money says EBS will beat that figure hands down. In general though, the earnings have been not been that consistent – here are some recent numbers –
Q3 2008 Actual (USD) 0.35 - Estimates (USD) 0.18 - Surprise 91%
Q2 2008 Actual (USD) 0.06 - Estimates (USD) 0.22 - Surprise -73.33%
Q1 2008 Actual (USD) 0.24 - Estimates (USD) 0.27 - Surprise -11.11%
Q4 2007 Actual (USD) 0.93 - Estimates (USD) 0.87 - Surprise 6.90%
Fundamentals
The Cash Flow per share (CPS) for Q3 2008 was at $0.65 - the current cash flow seems fairly healthy after strong earnings in Q3 2008.
EBS's P/E Ratio @ 15 is a little higher than other companies in the Biotechnology & Drugs industry (13.32). At the current price, EBS seems a little expensive with a PEG value of 1.5177, above the Biotechnology & Drugs industry median PEG of 0.99.
With that said, EBS's Gross Margin @ 80.75% is more than 83% of other companies in the Biotechnology & Drugs industry, which means it has more cash to spend on business operations as compared to its peers – something very important for a small growing company. EBS’s Operating Margin @ 31.07% indicates that it controls its costs and expenses better than 96% of its peers.
The Return on Equity for EBS @ 27.93% shows that it is able to reinvest its earnings more efficiently than 96% of its competitors in the Biotechnology & Drugs industry. Also, EBS's EPS Growth Rate is greater than 90% of its peers.
Analyst Research
EBS has been rated by Thomson Reuters to “Outperform”
EBS's consensus score is higher than 98.4% of the Jaywalk Universe
EBS's consensus score is higher than 98.9% of the Biotechnology Industry
EBS's consensus score is higher than 97.4% of the Healthcare Sector
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YUM! Scrumptious investing…
December 15, 2008
Ticker: YUM
So have you heard about Yum! Brands? No? You would be wrong if you have heard about any one of these - KFC, Pizza Hut, Taco Bell, Long John Silver’s, or A&W All-American Food Restaurants. The company operates all of these restaurant brands. Not everyone realizes that all of these chains are controlled by a company spun off from Pepsi over 11 years ago.
Yum! Brands – a Fortune 500 company - operates as a quick service restaurant company. It develops, operates, franchises, and licenses a system of restaurants, which prepare, package, and sell various priced food items. Its restaurants specialize in chicken, pizza, Mexican-style food, and quick-service seafood categories. The company operates over 35,000 restaurants in 100 countries and territories (For comparison, McDonald's (MCD) has over 31,000-plus restaurants, and Burger King (BKC) over 11,000). Founded in 1997 - it was formerly known as TRICON Global Restaurants and changed its name in 2002.
In the News
Recently the company unveiled its plans for the year 2009 – based on hopes that record international store expansion and a revitalized KFC brand in the United States can help overcome tighter consumer spending worldwide and unfavorable exchange rates in 2009.
The company outlined a number of initiatives to help reach an earnings growth of at least 10 percent next year, including - Adding 500 KFC stores in China, Trimming $60 million in operating costs by restructuring its U.S. business, Refranchising 500 locations toward its overall goal of reducing U.S. company ownership to below 10 percent in 2010 from 18 percent currently, Expanding the existing menu for Pizza Hut and KFC, and Promoting a national value menu at KFC.
The company also expects to save about $70 million next year due to its recent corporate restructuring that included a round of layoffs – eliminating several hundred jobs - at the company's headquarters in Louisville, KY.
Expected Profit Growth in 2009 – 15 to 20%
Reuters reported that Yum! Brands expects to report a profit growth of 15-20% in China in 2009. According to Rick Carucci – the company's CFO - it can achieve this figure even without unusually strong sales at established restaurants. In 2009, the company intends to build 500 restaurants in China. Yum! Brands expects sales growth at established China stores to slow down to an increase of 8% in 2008, compared to a rise of 12% in 2007. For 2009, the company is forecasting same-store sales growth of 5% for China.
Analysts Agree
Larry Miller, a restaurant analyst with RBC Capital Markets said "Overall, we're
more confident Yum can meet its 10 percent EPS growth target". John Ivankoe, an analyst with J.P. Morgan also agreed with Yum's prediction of a minimum of 10% EPS growth.
Not to miss, Jim Cramer has been very positive on this stock and last month hosted the company’s CEO - Doug Novak – on CNBC’s Mad Money – who pointed out that the stock was trading at only 14-times earnings.
Healthy Dividends
The company has regularly been paying quarterly dividends since 2004 – and the dividend amount has quadrupled since then. The current dividend yield for the company is at 2.7%. The company has an excellent history of rewarding shareholders with higher income through its share repurchase program and its quarterly dividend. It is a leader among global consumer companies in this key measure.
In 2007, the company returned almost $1.7 billion to shareholders, including over $1.4 billion in share repurchases and nearly $275 million in dividends. As of September 2008, Yum has already returned over $1.8 billion to shareholders this year through $1.5 billion of share repurchases and over $300 million in dividends.
Earnings
Q3 2008 Actual (USD) 0.58 - Estimates (USD) 0.54 - Surprise 7.41%
Q2 2008 Actual (USD) 0.45 - Estimates (USD) 0.42 - Surprise 7.91%
Q1 2008 Actual (USD) 0.42 - Estimates (USD) 0.39 - Surprise 6.06%
The company has exceeded analysts' earnings expectations in 17 out of the past 20 quarters (the last miss being in 2005). The EPS estimate for Q4 2008 is as $0.45. The cash flow appears to be healthy as well - YUM reported Q3 2008 Cash flow per share of $1.08 on 10/7/08.
Fundamentals
YUM's P/E Ratio @ 14.14 is comparable to other companies in the Restaurants industry. The PEG value is at 1.1939 - above the restaurants industry median PEG of 0.88. However, based on analyst ratings the company stands out in 3 important rankings – Liquidity, Profitability and Growth.
YUM's Gross Margin @ 24.83% is comparable with the restaurant industry. The Operating Margin @ 13.30% is better than 91% of its peers – a clear indicator that the management exercises a strong and effective control over costs and expenses – a trend that is expected to continue in 2009 based on the steps that have been taken in 2008.
YUM's Return on Equity @ 110.85% (NOT a misprint) is the BEST in the industry indicating its strong ability to reinvest its earnings efficiently. Also, YUM's EPS Growth Rate @ 18.7% is better than 68% of its peers.
Analyst Ratings
Reuters Company Research Performance Rating: Outperform.
Jaywalk Consensus: YUM's consensus score is higher than 94.3% of the Restaurants Industry; higher than 91.2% of the Services Sector; higher than 90.4% of the Jaywalk Universe.
Be Good, Get Rich.... Goodrich
December 11, 2008 Ticker: GR Goodrich Corporation - a Fortune 500 company - is a global supplier of systems and services to the aerospace, defense and homeland security markets. It employs more than 24,000 people worldwide across 16 countries. The Company's products and services are sold to customers in North America, Europe and Asia. It operates through three business segments: Actuation and Landing Systems; Nacelles and Interior Systems, and Electronic Systems. Goodrich's principal products include nacelles, actuation systems, landing gear, aircraft wheels and brakes, engine control systems, optical and space systems, sensor systems and power systems. In addition to manufacturing, they also provide a significant amount of aftermarket support for the entire life cycle of airplanes and defense programs by providing products and services to their customers to replace, repair, or overhaul their products. (More from Reuters) In the News It was recently reported that Goodrich Corporation has been selected by Airbus to supply wheels and carbon brakes for all variants of the A350 XWB family of aircraft. The selection is expected to generate more than $3 billion in revenue over the life of the program. The other major deal that the company bagged very recently is from the US Department of Defense - for the first operational satellite system in support of Operationally Responsive Space (ORS). The satellite, designated ORS Sat-1, is to be manufactured and integrated by Goodrich's ISR Systems team in Danbury, Conn. Goodrich has partnered with ATK Space Systems, based in Herndon, VA for the ORS Sat-1 project. Healthy Dividends The company has been paying quarterly dividends for over a decade and in October 2008 – Goodrich announced that its board approved an 11% increase in its quarterly dividend from $0.225 to $0.25 per common share. The current dividend yield for the company is at 2.9%. Earnings Actual (USD) Estimates (USD) Surprise Q3 2008 1.33 1.13 17.39% Q2 2008 1.44 1.08 33.21% Q1 2008 1.21 0.99 22.22% The strong earnings figures speak for themselves. The company has exceeded analysts' earnings expectations in 18 out of the past 20 quarters. Here's a link for GR's earnings history. The EPS estimate for Q4 2008 is as $1.03. Fundamentals GR's P/E Ratio @ 7.18 is relatively low for the Aerospace & Defense industry. The PEG value of 0.5058 suggests that GR is NOT expensive at the current trading price (Aerospace & Defense industry median PEG is 0.89). GR's Gross Margin @ 30.27% is more than 72% of its peers in the industry, indicating that it has more cash to spend on business operations as compared to its peers. The Operating Margin @ 15.45% is better than 87% of its peers in the Aerospace & Defense industry. GR's Return on Equity @ 24.3% Analyst Ratings GR's consensus score is higher than 91.4% of the Jaywalk Universe. It is higher than 89.8% of the Industrial Goods Sector. The current analyst recommendation for GR is "Buy" – which has also been the rating for over 120 days now.
is better than 89% of its competitors in the Aerospace & Defense industry – an indicator that it is able to reinvest its earnings more efficiently. Also, GR's EPS Growth Rate is greater than 69% of its peers.
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