Wednesday, 22 July 2015

Earnings Wednesday catch-up: Boeing, Whirlpool, Tupperware

Lots of Q2 corporate earnings numbers out today.  Here are a few highlights from today's selection.

First Boeing.  I discussed United Technologies earnings squeeze down yesterday (link here) and given it is a business with some overlapping areas of interest with Boeing there were perhaps few surprises that the latter also trimmed their numbers:


But the reasons are a little different.  As noted below the charge associated with the military refueling aircraft the KC-46 (link here) had a material impact...but underneath all of that there was progress of a double digit nature on both the revenue and earnings line.

The other noteworthy aspect to the numbers was the cost operational cash flow generation as working capital turned around.  Interesting to see that the share buyback during the second quarter occurred at an average of just over US$142/share...

 ...which is a touch below where the shares are now.  Personally I am not blown away by Boeing at prevailing but at c. x12 EV/ebit with a solid cash flow generation capability (and via the 2.5% dividend yield a solid interest in returning it) something in the low US$130s would be noteworthy/worth another look.

I talked positive about the Swedish white goods company Electrolux last week (link here) and their US-listed peer Whirlpool is a share in demand today up over 7% at the time of writing:

What was most striking in the Whirlpool numbers was the anticipated H2 improvement derived from normal seasonality, price/mix and productivity raising initiatives (with FX issues a well-flagged drag): 

I like what I see with this stock and at just a little over x10 EV/ebit prospectively I think you embrace any volatility - a not dis-similar conclusion I had with the aforementioned Electrolux interestingly. 

And finally a loser today: Tupperware. It is not so clear from the multi-year chart below but currently they are trading in the US$58s i.e. a level not seen since 2012. 

So what went wrong?  Well whilst 'established markets' saw a small local currency sales decline, the company's emerging market exposure - now two-thirds of the business - was actually up. 

Now inevitably given emerging market FX volatility there will be translation negatives and this is shown below.  Nevertheless an underlying double digit increase in local currency does not sound terrible at all.  So where's the fire?

This chart may be more helpful.  Note the margin dip anticipated in Q3/FY.  The company may argue for a comparison against the 'pretax ROS (constant currency)' line...but this is a clear disappointment.

So what sort of valuation space is Tupperware now in?  x12s EV/ebit with a 2016 guidance coming later this year and net debt running a shade under x3 ebitda.  That feels like a watch territory...although I do not think I have come across such a potentially geared play to a fall in the dollar / improvement in perception towards the emerging markets in US consumer plays as Tupperware - which is worthwhile noting.

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