3Macs Research Alerts

Ontario Imaging Cuts to Squeeze 2012 Margins - written by Troy Crandall

Mon, 14 May 2012 00:00:00 EDT

CML reported Q1 2012 results with revenue of $96.3 million, an increase of 5.1% Y/Y and above our estimate of $94.1 million. EBITDA of $31.1 million grew 2.8% Y/Y, slightly below our estimate of $32.0 million. A 5.3% increase in staffing and input costs over the previous year pressured Q1 EBITDA margin, coming in at 32.3%, down from 33.0% last year.

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Despite a �Lumpier� than Usual Quarter, Absolute Remains On Track - written by Troy Crandall

Fri, 11 May 2012 00:00:00 EDT

Absolute Software reported its strongest-ever Q3 of contract sales with sales rising 8.0% Y/Y to $18.9 million. This was modestly below both our forecast of $19.7 million and what we believe was the Street’s estimate of around $19.5 million.

While Q3 is typically Absolute’s seasonally weakest quarter, it can also be its most volatile. This held true again this year as international sales saw a 28% Y/Y decline. The decline comes off a very strong quarter for international in Q2, where sales grew 98% Y/Y, demonstrating the “lumpiness” that can occur on a Q/Q basis in the still relatively immature segment. Year-to-date, international sales are up 31%.

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Results Broadly In-line; Guidance Slightly Lower than Expected - written by Christy Barlow

Fri, 11 May 2012 00:00:00 EDT

Finning reported Q1 2012 results yesterday which were broadly in-line with expectations. Revenue of $1.47 billion was up 16% from Q1 2011, beating consensus estimates of $1.44. The revenue beat was in part helped by favourable currency exchange rates. EBIT was in-line with expectations, although the EBIT margin of 6.7% was slightly below consensus. EPS of $0.39 beat forecasts of $0.36, helped by a tax rate at the low end of their guidance range. Free cash flow in the quarter was a $223 million use of cash, a greater use of cash than expected by analysts due to higher inventories and receivables.

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Strong Wireless Results Partially Offset by Weakness in the Wireline Segment - written by Troy Crandall

Fri, 11 May 2012 00:00:00 EDT

Telus reported Q1 2012 results that were generally in-line to better than expected. Revenue grew 4.0% Y/Y to $2.63 billion (consensus: $2.65 billion), while adjusted EBITDA rose 4.1% Y/Y to $1.01 billion, beating consensus estimates of $979 million. Adjusting for tax gains, EPS of $1.04 was in-line with the Street and rose from $0.97 a year ago.

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Both Retail and Financial Services Performing Strongly - written by William J. Chisholm, CFA

Fri, 11 May 2012 00:00:00 EDT

Q1 2012: Solid retail sales in all banners and an exceptional performance in Financial Services produced a 22% gain in Q1 earnings. Diluted EPS rose to $0.87 from $0.71. This was well above expectations.

Retail Segment: Almost spring like weather in March throughout much of Canada provided a strong boost to quarterly sales in CTR Retail, Marks and FGL Sports (formerly Forzani). Same-store sales rose 3.8% in CTR Retail, 5.8% in Marks and 7.0% in FGL Sports. Nevertheless because of higher amortization charges associated with the Forzani acquisition last summer pre-tax earnings in this seasonally small quarter declined 23% to $24.5 million. Given the momentum these operations have in generating sales in the current economic setting and the benefits of the FGL acquisition, a positive earnings performance is expected by the Retail Segment for the balance of the year.

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U.S. Results Provide Boost for Q1 - written by P.Christopher Sears

Wed, 09 May 2012 00:00:00 EDT

Molson Coors Brewing Company reported a moderately solid Q1 with underlying EPS rising to $0.47 versus $0.44 last year (a 7% increase) on a basically flat revenue (up 0.1%) of $691.4 million. The EPS figure, which excludes $6.1 of expenses related to the recent StarBev acquisition, was ahead of Street expectations of $0.42, while the revenue figure slightly lagged (by less than 2%) the forecast of nearly $704 million. The strength in earnings came as a result of positive pricing achieved (which improved overall gross margins up to 37.9%, 10 basis points ahead of last year) as well as product mix and ongoing cost efficiencies and, on the per share level, stock repurchases in the second half of last year. Core brands and premium brands were also solid.

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�Turmoil? Yes. Value? Absolutely.� - written by P.Christopher Sears

Mon, 07 May 2012 00:00:00 EDT

SNC reported Q1 EPS of $0.44 versus $0.50 on a 9% increase in revenues to $1.8 billion. Revenues increased significantly in Services (+39%) and Infrastructure Concession Investments (ICI) (up 14%) but declined slightly at Packages (2.5%) and Operations & Maintenance (10.1%). The decline in net income was partially as a result of higher SG & A resulting from the inclusion of costs related to the investigation of wrongdoing by certain former employees and the departure package for the former CEO. Pre-tax income would have been in line with that of last year excluding these expenses. Note that margins at the Packages division were a difficult comparison as they rose to 13% in the previous quarter, ahead of the 7%-10% range with which the company is comfortable. They were 10% in the latest quarter.

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Holding the Line on Costs - written by Troy Crandall

Fri, 04 May 2012 00:00:00 EDT

BCE reported generally in-line Q1 2012 results with revenue of $4.91 billion (+9.9% Y/Y), slightly below consensus estimates of $4.95 billion, but EBITDA was in-line at $1.93 billion (+5.1% Y/Y). Excluding CTV, management estimates BCE’s revenue was flat Y/Y, while EBITDA grew 1.3% Y/Y. Adjusted EPS of $0.75 ($0.72 a year ago) was ahead of Street expectations of $0.72. Q1 EPS was boosted by lower depreciation and pension expenses, along with a lower than anticipated tax rate.

Acquisition & Guidance Update: Both the MLSE and the Astral Media (ACM.A-TSX) acquisitions remain on-track. The Competition Bureau has decided not to challenge the MLSE deal and management expects the deal close in mid-2012. The acquisition of Astral Media is expected to close in the latter part of 2012. Management maintained its 2012 guidance from early-February.

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Global Footprint and Strong Financial Position Support Continuing Growth - written by William J. Chisholm

Fri, 04 May 2012 00:00:00 EDT

Q1 2012: CCL began 2012 in a positive manner with sales and net earnings rising 8.8% and 14.8%, respectively in Q1. Adjusted earnings per share amounted to $0.91 up from $0.82. The large Label business was the main driver of the Q1 performance.

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Strong Q1 Results with Earnings Expected to Accelerate in 2H 2012 - written by Troy Crandall & Christy Barlow

Fri, 27 Apr 2012 00:00:00 EDT

Mylan reported Q1 2012 results with revenue of $1.58 billion (+9.0% Y/Y) and adjusted EBITDA of $411 million (+6.5% Y/Y), both in-line with Street expectations. Adjusted EPS of $0.52 (+18.2% Y/Y) beat Street estimates of $0.50. On an adjusted basis, gross margin was 48.1% versus 47.0% in Q1 2011.

Generic drug sales in North America (NA) increased 15.2% Y/Y while European (EMEA) sales were weak again this quarter, decreasing 10.0% on an operational basis. Asia/Pacific (APAC) sales grew 12.0% Y/Y, excluding currency effects.

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Competition and Subsidies Hit Rogers� Cable and Wireless Results - written by Troy Crandall

Thu, 26 Apr 2012 00:00:00 EDT

Rogers reported weaker than expected Q1 2012 results with consolidated revenue of $2.95 billion (-1.1% Y/Y), below Street expectations of $3.05 billion. EBITDA of $1.09 billion (-6.0% Y/Y) missed consensus forecasts of $1.15 billion and adjusted EPS of $0.68 (-10.5% Y/Y) fell short of Street estimates of $0.76.

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An Excellent Q1 - written by P. Christopher Sears

Wed, 25 Apr 2012 00:00:00 EDT

CN Rail reported adjusted Q1 EPS of $1.18 versus $0.90 (a 31% increase) on revenues of $2.35 billion versus $2.08 billion last year (12% higher). The EPS figure was significantly ahead of the Street forecast of $1.03 while the revenue figure exceeded expectations of $2.28 billion. Stellar execution combined with a milder than normal winter led to the strong results.

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Growth from China Helps Apple Hit another Grand Slam - written by Troy Crandall

Wed, 25 Apr 2012 00:00:00 EDT

Apple reported another very strong quarter with most metrics in-line to above Street estimates. Revenue of $39.2 billion grew 58.9% Y/Y, beating consensus estimates of $36.8 billion. EPS of $12.30 rose 92.2% Y/Y and was also widely ahead of Street forecasts of $10.02.

Gross margin of 47.4% significantly beat both Street estimates and management’s guidance. Apple’s impressive 600 bps Y/Y gross margin expansion resulted from a higher sales mix of iPhones, lower component and other input costs, slightly favourable FX impacts and other one-time items. Management expects the favourable component pricing environment to continue into Q3, although gross margin was guided lower Q/Q on a higher expected mix of iPad and Mac sales (NOTE: lower margins and a pop in Q2 R&D spend is a hint that a Mac refresh is likely coming in Q3) and some non-recurring items from Q2.

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Property Services to Temper 2012 Growth - written by William J. Chisholm, CFA

Tue, 24 Apr 2012 00:00:00 EDT

FirstService experienced a disappointing Q1 2012 with adjusted EPS falling from $0.14 in Q1 2011 to a loss of $0.10. While Q1 is a seasonally small quarter, normally accounting for less than 10% of annual earnings, it was a poor start to the year. The shortfall was in the Property Services division.

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With PC Growth Bouncing Back, Microsoft Benefits; Strong Q3 f2012 Results - written by Troy Crandall

Fri, 20 Apr 2012 00:00:00 EDT

Microsoft reported record third quarter results with revenue of $17.4 billion (+6.0% Y/Y), ahead of analysts’ consensus forecasts of $17.2 billion. Adjusted EPS of $0.60 (+7.1% Y/Y) also beat Street expectations by $0.03.

Gross margin was ahead of expectations, driven by a smaller mix of lower-margin Xbox console sales and stronger than expected sales of Windows and Office software. Another solid quarter of expense management helped raise the operating margin 180 bps Y/Y to 36.6%, ahead of Street forecasts of 34.1% and ultimately benefitted EPS. Management also offered improved f2012 operating expense guidance, which they now anticipate to be $28.3-$28.7 billion versus $28.5-$28.9 billion previously.

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Mixed Q1 2012 Results; Growth Trajectory to Improve in the Second Half of 2012 - written by Troy Crandall & Christy Barlow

Thu, 19 Apr 2012 00:00:00 EDT

JNJ reported mixed Q1 2012 results with revenue of $16.14 billion slightly below the Street’s forecast of $16.26 billion. While operational revenue increased 1.0% Y/Y, overall revenue declined 0.2% Y/Y on a negative FX impact of 1.2%. JNJ’s adjusted EPS of $1.37 (+1.5% Y/Y) beat analysts’ consensus estimates by $0.02. Reflecting a more positive view on exchange rates, management raised 2012 EPS guidance slightly to $5.07-$5.17, up from previous EPS guidance of $5.05-$5.15.

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Proposed European Acquisition a Transformational Event - written by William J. Chisholm, CFA

Thu, 19 Apr 2012 00:00:00 EDT

The proposed acquisition of the 2305 store downstream operations of Norway’s Statoil ASA company promises to be a transformational event for Couche-Tard. It will increase its annual revenues by almost 60% and 40% of its EBITDA will now be generated in Europe. It will be both immediately accretive to earnings and enhance its growth potential with a major footprint in Europe. Couche-Tard has agreed to pay US$2.8 billion in cash for the shares and assume US$860 million in debt for Statoil Fuel & Retail ASA (SFR). Statoil, which owns 54% of the shares of SFR, has agreed to the terms and an offer to the public shareholders is expected to commence next week. Couche-Tard hopes to close the deal in June.

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Solid Q4 Caps Strong Year - written by P. Christopher Sears

Tue, 27 Mar 2012 00:00:00 EDT

CUF.UN reported Q4 operating revenues of $78.0 million versus $71.3 million and recurring funds from operation (FFO) of $29.7 million versus $27.3 million, an increase of 8.7%. On a per unit basis, the FFO was flat at $0.42. On a 12-month basis, revenues rose 12.5% to $317.7 and FFO per unit was up nominally to $1.65. The pressure on the per unit growth came as a result of dilution from two unit offerings of 5.2 million and 6.6 million, respectively. Distributions remained steady at $0.36.

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A Solid Quarter to End the Year. More Growth in 2012 - written by P. Christopher Sears

Tue, 27 Mar 2012 00:00:00 EDT

RioCan reported Q4 operating FFO (funds from operation) of $100 million versus $83 million, an increase of 12%. On a per unit basis, the number was $0.36 versus $0.33, in line with expectations. For the 12-month period, the figure was $380 million versus $329 million, or $1.43 versus $1.33. The increase in FFO came from acquisition as well as from “same-store sales” growth and the completion of developments.

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Solid Industry Fundamentals will Drive Growth - written by P. Christopher Sears

Tue, 27 Mar 2012 00:00:00 EDT

Chartwell Seniors Housing REIT reported a solid fourth quarter and year with funds from operation (FFO) of $24.8 million (a 16.9% increase) or $0.17 versus $0.15 per unit and $965 million (an 8.1% increase) or $0.66 versus $0.67 per unit, respectively. Acquisitions, “same-store” sales and lower interest expense helped results in both the quarter and the year. The per unit figures were impacted by a 4.5% increase in units in the quarter and a 9.7% increase for the year.

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Solid Quarter and Strong Acquisition Pipeline - written by P. Christopher Sears

Tue, 27 Mar 2012 00:00:00 EDT

Dundee International REIT reported solid fourth quarter results with funds from operation (FFO) of $10.6 million or $0.20 per unit, in line with expectations. For the period from August 3 (date of IPO) to December 31, 2011, the FFO was $17.0 million or $0.33. Occupancy was solid and the REIT is poised to make acquisitions enabling further growth.

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Positive Signs Amid the Turmoil. Dividend Growth Streak Remains Intact - written by P. Christopher Sears

Tue, 27 Mar 2012 00:00:00 EDT

SNC reported Q4 EPS of $0.50 (in line with expectations) versus $0.87 on a 16% increase in revenues to $2.1 billion. Revenues increased in all of the company’s segments (Services, Packages, Maintenance and Infrastructure Concession Investments) while the net income figure was impacted by inclusion of a $22.4 million loss associated with a revised cost forecast at its Libyan infrastructure operations and a $35.0 million charge related to a payment to a project to which it did not relate. More on that later. For the year, EPS came in at $2.49 versus $2.83 last year as revenues rose more than 20% to $7.2 billion. The earnings, however, were secondary in today’s release.

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Reserves and Acquisitions are Adding Value - written by Rob Mark, CFA

Tue, 20 Mar 2012 00:00:00 EDT

Crescent Point reported very encouraging Q4 and year-end results setting records for production and CFPS. CFPS of $1.32 vs. $0.98 was in line with consensus on production of 81,201 boe/d (91% oil) up 16%. For the year, CFPS increased 26% to $4.65 and production increased 20% to 73,799 boe/d (90% oil) The Company’s payout ratio dropped from 75% to 59% and debt-cash flow dropped from 1.2x to 0.9x.

Profitability was impressive as pre-hedging, operating margins grew 26% on 19% higher commodity prices. This was due to excellent cost control. Netbacks (commodity price minus royalties, operating cost and transportation) were $54.33/boe, which is amongst the very best in our coverage universe.

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