Portfolio Review

5/2/2011


March-quarter earnings

Altera ($47; ALTR) reported per-share earnings of $0.68 for the March quarter, up 36% and $0.03 above the consensus. Sales climbed 33% to $536 million. The semiconductor maker said it delivered double-digit sales growth in every geographic region and every business segment. For the June quarter, Altera sees revenue rising 14% to 20% from year-earlier levels, exceeding consensus expectations. Altera is a Focus List Buy and a Long-Term Buy.


Ameriprise Financial ($61; AMP) earned $1.35 per share in the March quarter, $0.03 above the consensus estimate. The results exclude one-time items, including a charge of $0.30 per share for legal expenses of troubled subsidiary Securities America, which Ameriprise now says it plans to sell. Revenue increased 17% to $2.65 billion. Advisor productivity reached record levels, and assets under management surged 50% to $693 billion because of the acquisition of Columbia Management, improving net inflows, and market appreciation. The company also boosted its quarterly dividend 28% to $0.23 per share, payable May 20. Ameriprise is a Buy and a Long-Term Buy.


In the March quarter, Bard ($103; BCR) grew per-share earnings 21% to $1.51 excluding special items, topping the consensus by a nickel. Bard, a maker of medical devices, said revenue advanced 8% to $700 million. Bard is a Buy and a Long-Term Buy.


Corning ($21; GLW) earned $0.47 per share in the March quarter, down 10% excluding special items but $0.03 above the consensus. Sales, up 24% to $1.92 billion, also exceeded analysts' forecasts. Corning said that component shortages from the Japan disaster are unlikely to cause a significant disruption. Corning, which bounced on the results, is a Buy and a Long-Term Buy.


Hess ($81; HES) said March-quarter earnings per share rose 22% to $1.82 excluding gains from asset sales, missing the consensus of $1.87. Revenue climbed 14%. The company benefited from 37% higher oil prices, offsetting 6% lower total production caused by the suspension of operations in Libya and asset sales in the North Sea. Hess said preliminary results from a well off the shore of Ghana are encouraging. Hess is a Focus List Buy and a Long-Term Buy.


Newmont Mining's ($58; NEM) March-quarter earnings per share rose 25% to $1.04 excluding special items, exceeding the consensus by $0.03. Revenue increased 10% to $2.47 billion. Gold production was roughly flat, while copper output declined 37%. Averaged realized prices surged 25% for gold and 20% for copper. Costs applicable to sales rose 17% for gold and 42% for copper, staying near the low end of the company's range. Newmont is a Buy and a Long-Term Buy.


In the March quarter, Rogers Communications ($37; RCI) grew per-share earnings 13% to C$0.76, excluding special items, topping the consensus. Revenue edged 4% higher to C$2.99 billion. The wireless and cable units both grew sales by 3%, while revenue from the media business jumped 17% on broad growth across all divisions. Within the wireless segment, Rogers added 35,000 net subscribers, up 22%, while average revenue per user slipped 3% to C$60. Rogers is a Long-Term Buy.


Travelers ($61; TRV) said its operating income jumped 55% to $1.89 per share in the March quarter, surpassing the consensus by $0.36. Net premiums rose 4% to $5.44 billion, while catastrophe losses plummeted 61% to $186 million. Travelers says it is "increasingly optimistic about the operating environment.” Management raised the quarterly dividend 14% to $0.41, payable June 30. Travelers, still reasonably valued at nine times expected 2011 earnings, is a Long-Term Buy.


Varian Medical Systems' ($70; VAR) per-share profits from continuing operations rose 18% to $0.86 for the March quarter, exceeding the consensus by a penny. Revenue climbed 11% to $648 million, while net orders jumped 15%. While Varian's earnings guidance for the June quarter fell slightly short of consensus expectations, the stock remains a Long-Term Buy.

Aflac weathers disaster

Aflac ($54; AFL) said per-share operating profits rose 16% to $1.63 for the March quarter, topping the consensus by $0.11. The results exclude realized investment losses of $0.79 per share, as Aflac dumped several high-risk holdings from its portfolio. Operating earnings rose 19% in Japan and 4% in the U.S. New sales showed encouraging growth in both markets. Aflac set aside a $37 million provision for claims related to the Japan disaster. The company reiterated its 2011 forecast for per-share profits of $6.09 to $6.34 for 2011, versus the $6.17 consensus. Aflac is a Focus List Buy and a Long-Term Buy.

Technology update

Looking ahead to the June quarter, Lam Research ($49; LRCX) guided per-share profits to a midpoint of $1.07, down 9% and below the consensus estimate. Lam also offered a revenue midpoint of $745 million, implying 7% growth but falling short of Wall Street's forecast. Shares have been under pressure following Lam's guidance and reports of customers delaying orders. But management said it anticipates higher orders in the second half of the calendar 2011 year. Lam Research, modestly valued at less than 10 times expected year-ahead earnings, remains a Focus List Buy.


IBM ($168; IBM) raised its dividend for the 16th consecutive year, boosting the quarterly payout 15% to $0.75 per share, payable June 10. The company also approved an additional $8 billion for share repurchases, on top of $4.7 billion remaining on a previous buyback plan. IBM, yielding 1.5%, is a Focus List Buy and a Long-Term Buy.

Takeover news

Johnson & Johnson ($65; JNJ) agreed to purchase Synthes, a maker of bone implants and surgical tools, for about $21.3 billion in cash and stock. The deal stands to be the largest in J&J's history, giving it a leading 28% share of the orthopedic-devices market. J&J is rated B (average).


For a second time this month, NYSE Euronext ($39; NYX) spurned the advances of NASDAQ OMX Group ($27; NDAQ) and IntercontinentalExchange ($122; ICE), yet again refusing to meet with the pair of potential suitors regarding their $11.2 billion takeover bid. NYSE asserted that the $9.9 billion offer from Deutsche Boerse promises an additional $146 million more in savings than previously thought. NYSE also hinted that Deutsche Boerse could sweeten the deal as the July date for the shareholder vote nears. NYSE holds its annual meeting on April 28, after our publishing deadline. NASDAQ is a Buy and a Long-Term Buy.

Top 15 Utility replacement

Duke Energy ($18; DUK) is being added to our Top 15 Utilities portfolio, replacing DPL ($30; DPL), which has agreed to be acquired. Duke operates regulated electric (75% of 2010 revenue) and natural gas (4%) utilities, in addition to nonregulated power generation and wholesale marketing activities. Duke is awaiting regulatory approval of its pending $13.7 billion stock deal to acquire Progress Energy ($47; PGN), an electric utility with 7.1 million customers. Duke yields 5.3% and earns a Quadrix Overall score of 61, with an 80 for Value. The stock also earns solid marks for our sector-specific scores, with an 88 for Reranked Overall and 96 for 12-Factor Sector score.

Rank Changes

No changes were made this week in Dow Theory Forecasts.


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