Matter of Fact – w/e 24th April 2015

matteroffact

1.   AutoNation tops Q1 Earnings and Revenues

2.   Snap-on announces First Quarter 2015 Results

3.   O’Reilly Automotive Inc. reports First Quarter 2015 Results [click for full story]

4.   Travis Perkins 1Q Comparable Sales +5.1%

5.   General Consumer Discretionary News       

6.   Bird flu outbreak continues as flock of millions registers infection in Iowa

7.   Associated British Foods Reports 4% Fall in 1H Adjusted Pretax Profit

8.   Correction to Pernod Ricard profit From Recurring Operations Guidance Headline

9.   Dow profit beats estimates, operating EBITDA margin rises to 10-year high

10. Briggs & Stratton Corporation Reports Results For The Third Quarter

11. Pace shares Jump as It Agrees to $2.1B Takeover by Arris

12. Croda International Q1 Group Sales Rise 4.0%

13. Encore Wire beats by $0.20, beats on revenue

14. Elementis 1Q Revenue Negatively Impacted by Currency Movements

15. General Materials News

  

CONSUMER DISCRETIONARY

1. AutoNation (AN) Tops Q1 Earnings and Revenues [click for full story]

ZACKS – April 22nd, 2015

Company: AutoNation (AN US)

QMG product view: US50.1 Auto Retailers

Event: 1Q15 Results

Highlights:

  • Revenue: $4.94bn – up 13.3% yoy and +2.3% BETTER than consensus estimates (Bloomberg) and +10% yoy
  • EPS: $0.97 – is 9% BETTER than consensus estimates (Bloomberg) and +29% yoy

QMG Opinion

A record first quarter result from AN and results well ahead of consensus estimates. QMG data remains very positive on this product group. The strength of these results provides scope for consensus estimates to increase.

 

2. Snap-on Announces First Quarter 2015 Results [click for full story]

Seeking Alpha – April 23rd, 2015

Company: Snap-On Inc (SNA US)

QMG product view: US28.6 – Producers of cutlery, hand-tools & locks

Event: 1Q15 Results

Highlights:

  • 1Q Sales growth (underlying) +9.9%
  • Operating margin improvement +14.8% up 130bps from 13.5% last year

QMG Opinion

SNA 1Q results are much better than our data was indicating and better than consensus. 1Q sales growth (underlying) of +9.9% versus QMG data -11% and consensus view was flat. We note that our main product group for SNA relates it to Producers of cutlery, hand-tools & locks which we saw going negatively. However the instrumentation business is performing well. We do map SNA to Machine tools (US29.4) and this saw positive numbers on QMG data, Sales +4.88%; Margins +2.25%.

 

3. O’Reilly Automotive, Inc. Reports First Quarter 2015 Results [click for full story]

Seeking Alpha – April 22ND, 2015

Company: O’Reilly Automotive (ORLY US)

QMG product view: US50.3 – Auto Part Retailers

Event: 1Q15 Results

Highlights:

  • 1Q same store sales +7.2% is a big outlier vs. our very negative product level data
  • Record 1Q operating margin +18.4%
  • ORLY opened 67 new stores across 23 states in new and existing markets.
  • Key difference to their system compared with competitors are its 25 regionally deployed distribution service stores which allow 276 “Hub” stores to provide multiple daily deliveries to “Spoke” stores.

QMG Opinion

Data reported is a big outlier vs our very negative product level data. QMG Sales -3.39%, Margins -256bps. Volumes per US50.3 saw continual decline in March lending to our negative overall view. Despite the outperformance, our data still remains negative on other listed equities in this space.

 

4. Travis Perkins 1Q Comparable Sales +5.1% [click for full story]

Wall Street Journal  – April 22ND, 2015

Company: Travis Perkins

QMG product view: MULTIPLE (UK52.46 – DIY Retailers, Multiple building and construction product groups)

Event: 1Q15 Results

Highlights:

  • Q1 LFL sales up 5.1%
  • Shares 11% higher over past 12 months

QMG Opinion

Rise is sales is consistent with the read from our QMG data showing a sharp slowdown in growth. We also saw the Builders Merchant Federation (BMF) data for February where volumes were up 4.9% YoY.

 

5. General Consumer Discretionary News:  

Multiple articles

In the US a key market for European building stocks the US Architectural billings index (ABI) rose to 51.7 in March from 50.4. This is consistent with positive QMG data. Pricing remains very strong in US cement. It is worth noting that the US cement performance is in sharp contrast with the data out of France and Germany where weather has had a major negative impact on Q1 volumes.

In the UK house building sector we had Telford Homes and Taylor Wimpey showing continued positive trends despite the general uncertainty surrounding the election . Our data continues to show prices up 7.5% , volumes up 10.75% and costs rising 3.5%.Q1 LFL sales up 5.1%.

 

CONSUMER STAPLES

6. Bird flu outbreak continues as flock of millions registers infection in Iowa [click to view story]

Seeking Alpha – April 22ND, 2015

Company: Sanderson Farms (SAFM), Tyson Foods (TSN), Pilgrim Pride Corp (PPC)

QMG product view: US15.12 – Poultry Processors

Event: Environmental Factors

Highlights:

  • A lethal strain of bird flu has been discovered in a flock of millions of hens at an Iowa egg-laying facility
  • Iowa was already among the 12 US states to have detected bird flu infections since the beginning of the year.
  • National Guard authorised to help contain the disease

QMG Opinion

Despite a being a positive product group, we removed TSN and SAFM from our US focus list following the avian flu outbreak in March. While our data remains positive on US poultry producers, driven by strong pricing trends (+9% yoy), volumes are in decline (from +8.1% in January to +2.3% in March) – given the most recent outbreak, our data shows that one should remain cautious on this product group.

 

7. Associated British Foods Reports 4% Fall in 1H Adjusted Pretax Profit [click for full story]

Wall Street Journal  – April 22ND, 2015

Company: Associated British Foods (ABF LN)

QMG product view: MIXED (UK15.81 – Bakers of bread and pastries & UK15.83 – Processors of granulated & refined sugars)

Event: 1Q15 Results

Highlights:

  • 4% fall in adjusted pretax profits
  • Modest declines in EPS
  • Numbers cut by c5% over last quarter

QMG Opinion

While the value and growth story of Primark is a key driver of the share price we note that our most recent data shows a sharp fall in the price of granulated and refined sugar. Prices in our most recent data (UK15.83 – Processors of granulated & refined sugars) were down 7.3% offset slightly by volumes up 1.3% and costs down 2.9%.

 

8. Correction to Pernod Ricard Profit From Recurring Operations Guidance Headline [click for full story]

Wall Street Journal  – April 22ND, 2015

Company: Pernod Ricard SA (RI FP)

QMG product view: UK15.9 – Drinks Processers

Event: 3Q15 Results

Highlights:

  • Double digit rise in 3Q revenue – Sales increase 19%
  • Bolstered by effect of weak Euro

QMG Opinion

Results confirm this product groups data showing positive sales and strong margins.

 

INDUSTRIALS

9. Dow profit beats estimates, operating EBITDA margin rises to 10-year high [click for full story]

Seeking Alpha – April 22ND, 2015

Company: DOW Chemical (DOW US)

QMG product view: US24.1 – Producers of Industrial Chemicals

Event: 1Q15 Results

Highlights:

•           1Q results mixed – Sales -14%, this is 5% below consensus

•           1Q EBITDA margins +284bps

•           1Q chems sales – 8%

•           1Q ag sciences sales -12% and EBITDA -19%

QMG Opinion

QMG Sales -8.43% were in line with actual results and Margins we saw contracting at -9.85%, mainly driven by declining pricing. Overall QMG data was suggesting -800bps across industrial and chemical sectors. Margin outperformance is due to strong results from ‘performance plastics’ division (+558bps), ‘infrastructure solutions’ (+297bps) and ‘consumer solutions’ (+269bps).

 

10Briggs & Stratton Corporation Reports Results For The Third Quarter And First Nine Months Of Fiscal Year 2015; Increases Fiscal 2015 Earnings Outlook [click for full story]

Wall Street Journal – April 23rd, 2015

Company: Briggs and Stratton (BGG US)

QMG product view: US29.11 – Producers of engines & turbines excl. aircraft & vehicle engines 29.11

Event: 1Q15 Results

Highlights:

•           Consolidated net sales $619m, down 1.5% ($9.4m) compared to prior year

•           FQ3 EPS of $0.86 beats by $0.11

QMG Opinion

Results here underperformed QMG data expectations seeing sales for Product group growing at 18.58% in March (up from 17.99% February). The reported results were also above market expectations.

 

11. Pace Shares Jump as It Agrees to $2.1B Takeover by Arris [click for full story]

Wall Street Journal – April 23rd, 2015

Company: Pace PLC (PIC LN)

QMG product view: UK32 – Manufacturers of Electronic Equipment

Event: Takeover/Buyout

Highlights:

•           Bought by Arris Group Inc (ARRS) for $2,1bn in stock and cash

•           Deal to add between 45-55 cents to Arris’ per-share-earnings

•           Both companies will have approximately $8billion in pro forma revenues and 8,500 combined employees globally

•           Pace shares soared to 35% on this news

QMG Opinion

QMG data has reflected positively on this product group and the comments in the Pace trading statement confirm the reasons for this; ‘good start to the year’…’revenue higher than previous period and gross margins ahead’.  QMG data saw strong Sales driven by high volumes and Margin expansion thanks to improving cost management.

 

MATERIALS

12. Croda International Q1 Group Sales Rise 4.0%..[click for full story]

RTT News – April 22nd, 2015

Company: Croda International PLC

QMG product view: US24.6 Producers of Specialist Chemicals

Event: 1Q15 Results

Highlights:

  • Group Sales increasing 4.0%, (274.0m to 284.9m) – 2% ahead of consensus.
  • Growth across 3 core sectors; Personal Care, Life Sciences and Industrial Chemicals. Performance Technologies, slowed.
  • Slight growth in profit margins
  • After the company was perceived to have a growth issue for much of 2013/14, this is now the third straight beat on the top-line.
  • Management expects to ‘continue to deliver profitable growth through 2015’.

QMG Opinion

Producers of specialist chemicals (UK24.6) – Volumes continue to expand (+15.9% yoy) and with margins remaining positive (thanks to falling costs), remains a preferred product group. Sales growth continues to gain momentum, growing by +16.4% in March. QMG data remains positive for listed equities in the space such as Croda (CRDA LN) & Elementis (ELM LN).

 

13. Encore Wire beats by $0.20, beats on revenue [click for full story]

Seeking Alpha – April 23rd, 2015

Company: Encore Wire Corp (WIRE US)

QMG product view: US27.44 – Producers of copper products

Event: 1Q15 Results

Highlights:

  • Encore Wire (NASDAQ:WIRE): Q1 EPS of $0.52 beats by $0.20.
  • Revenue of $250.3M (-9.7% Y/Y) beats by $7.3M

QMG Opinion

Revenue decline is in line with QMG data expectations of -22.31% Sales growth. Our data sees a decline in volumes for the product group moving further south (-14.26% in March vs -13% in February), whilst pricing power also continues to decline (-8.04% in March vs -6.97% in February). Bloomberg notes that CFO has bought $391k worth of stock ahead of results. Stock trading at +3% on the day moving into results and +3.5% after.

 

14. Elementis: 1Q Revenue Negatively Impacted by Currency Movements [click for full story]

Wall Street Journal – April 22nd 2015

Company: Elementis PLC (ELM LN)

QMG product view: US24.6 – Producers of specialist chemicals

Event: 1Q15 Results

Highlights:

  • 1Q Revenue were negatively impacted by 5% due to currency movements.
  • FY results expected to be in line with stable earnings and cash flows.
  • Quarterly sales of the specialty product division grew 3% and volumes 7% lower due to lower demand.

QMG Opinion

Positive QMG data observations were not in line with actual results. QMG Sales sees growth improving month on month (10.77% Jan-15 to 16.39% Feb-15) thanks to stronger volumes (9.91% Jan-15 to 15.9% Feb-15). Positive momentum is expected going forward with strong results of similar companies like Croda (CRDA) also in this product group.

 

15. General Materials News

Multiple articles – April 24th 2015

Steel and Iron Ore have been very much in the news for negative reasons. This week has seen a bounce in the iron ore price. We continue to see weak data across our coverage with the exception of Japan. We are closely monitoring for signs of any inflection.

 

 

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