Showing posts with label dividend. Show all posts
Showing posts with label dividend. Show all posts

Wednesday, October 30, 2013

Air Canada (AC.B) Profitable ? Revenue Up At Chinese Banks, Earnings Dividends At Citigroup, HSBC

Air Canada (AC.B) is making more revenue per passenger and that's one of the reasons investors continue to reward this airline stock with record growth (+52% last month, +150% last 3-months).  In fact just yesterday, the stock touched a five year high of $5.80 up from $1.80 exactly one year ago (Oct. 30).  The company has had success charging passengers additional fees for meals, pillows, earphones and other conveniences previously taken for granted.  Also giving the company lift is its own new discount carrier Air Canada Rouge launched in July 2013.
For the first time in a long time, earnings are showing signs of breaking into positive territory !  Quarterly net loss now at $(23) million, down considerably from $(160) million last year.  Passenger revenue is up (+$86m for 2q13, +$89m 1h13),  First half operating profit was $174m up 176% from last year's $63m.
Lower fuel costs (-$57m quarter, -$76m half) not the main reason quarterly operating expenses are down (1.4)% (total increase in salaries + currency effects were +$60m)  : this proves that the company is getting its act together ! 
Despite currency effects weighing on results [1h13 $(114m) vs +$26m] and wages/salaries up bigtime (+9% quarter, +7% half), overall operating expenses declined (-1.4% quarter, -0.6% half).  Also a positive sign: cash equivalents up 4.8% to $790m after declining (6.6)% in the second half of last year.  Long term debt was lowered by $315m (half) vs $238m last year. 
Airline Stock October 30 2013 1-year 3-months 1-month
Air Canada (AC.B) 209% 150% 52%
Westjet (WGA) 54% 34% 8%


Air Canada benefits from more international travel particularly to and from China;  The last two census results show Canada's Chinese population is up 141,070 or +10.5% in five years; in 2010 Canada acquired Approved Destination Status which is key since it was one of the last major countries not to have it.  At the time, it was estimated that by 2014 Chinese travel to Canada would increase 50%.  Direct competitor Westjet (WGA) has also been reaping the benefits of increased air travel within Canada and to and from the country.  First half revenue up +6.5% ($1,810.93 million), earnings up +22.6% ($135.8m).

Among The World's Largest Banks China's Phenomenal Revenue Growth;  Earnings Dividends At Citigroup, HSBC Remain Healthy

  • TD Bank reported 18% growth in average loans (3q2013). 
  • JPMorgan Chase - 3rd quarter earnings take a hit :  down -$380m due to - $9.15 billion pretax expense; $7.20 billion after-tax (eps down 185c) for legal expense in Corporate, including reserves for litigation and regulatory proceeding. - $1.60 billion pretax benefit; $992 million after-tax (eps up 26c) from lower reserves in Consumer & Community. 
  • China Construction Bank - lending fee incomes climbed contributing to increased revenue.  earnings increases lagged analyst expectations of CNY57.69 billion.

 

Canadian Retailer Hudson's Bay Becomes Major Player In North America's Fashion Retail Industry

Just yesterday HBC's $2.9 billion takeover deal for Saks Inc received Saks shareholder approval.  The Toronto-based company will operate 320 stores in prime retail locations throughout North America.  After the merger, Hudson's Bay Company will have annual sales in excess of $7 billion.  Investors take note:  HBC growth plans for the company are synonymous with increasing shareholder value. 

Thursday, December 29, 2011

Planes Trains and Bombardier (competition)

   I talked about the jet segment before but what about trains, better known as Germany based Bombardier Transportation?

Yes, Bombardier is a top three player in the light jet segment with exactly 50% of its 2011 third quarter revenue (53% for nine month period) coming from the aerospace division ($2.3B up 27.8% from 2010) on net orders of 34 (up 48%) coupled with 68 final deliveries (up 33.3%) and a backlog of $22.3 billion (up 16%). The aerospace division relies sales of business aircraft which should be reassuring given that it's a global leader both in terms of revenue and units (43 business jets in the nine months up from 31 in 9M10). Business aircraft command relatively higher prices per unit and so that's also a key source of cash flow. By comparison, the leader in airplane deliveries, Boeing sold 127 planes (737's) for total sales of $17.7b (up 4%), earnings of $1.1b (up 31%); Only considering Bombardiers aerospace division, Boeing revenue was 7.7 times greater (profit 5 times greater) which is comparable to the market cap difference, however remember Bombardier only gets 50% of its business from planes, there's also the profitable train division from which it receives the other half of its revenue. In my opinion that makes Bombardier undervalued.
The Aerospace division is in the process of building its newest manufacturing plant in Morocco. The new plant will cost the company $200 million to build, be in construction mode for eight years but will begin manufacturing planes (and provide sub assembly capabilities) by 2013. By 2020 it will employ 850 workers.
In August 2011 Bombardier signed a deal (intent) with a major company in Russia for the sale of 10 midize CSeries aircraft for $660 million. The Russian deal may be a sign the company's larger aircraft business is about to take off or maybe I'm being too optimistic but keep in mind, the company's first 150-200 seater C919 series aircraft are on deck pending joint venture with China's Comac. January 19, 2012: PrivatAir SA becomes the eleventh company to order Bombardier's C Series planes after it entered into a contract for five 100 to 149 seater aircraft worth $309 million (and optioning another five for $327 million). The order, worth as much as $636 million brings the number of orders to 138 (262 including options) and first delivery of any of them hasn't even happened yet (end of 2012). Why are Bombardier's larger aircraft gaining popularity? Maybe it's the 20% improvement in fuel efficiency over existing planes. Lufthansa and Korean Air are two of the eleven companies with orders already placed. During Prime Minister Harper's trip to China in February 2012 it was revealed that Chinese private airline, Express Airlines is the Chinese company that purchased six 110-150 seater midsize CRJ900 NextGen planes back on October 29, 2011 for $254M. That company already uses 50 of Bombardiers older version of the model (CRJ200). The deal is significant since only about 80 Bombardier aircraft are currently in use in China. Depending on whether China Express picks up an additional five planes through an option agreement, the value of the deal could reach $491M.

Now let's look at the train segment dubbed Transportation. It is world's leading supplier in 7 of 11 product segments giving it a recognizable edge in the industry. As of October 31, 2011 the backlog is $33 billion (unchanged) or 50% more than Bombardier Aerospace not a great sign considering the difference was 75% at this time last year. Revenues of $2.3 billion in the quarter is steady with the previous period with any minor change attributable to currency effects (however in the nine month period revenue for the division is up 13%). Orders were down for the quarter and in the UK specifically, Bombardier Trains has contracted in size slightly, already beginning the process of cutting as much as half the workforce of 3,000, a plan conceived in July 2011 after failing to secure a key contract.
Part of the reason it struggled last quarter (orders down 57% in the third to $1.6 billion) is due to a controversial decision made by Britain's government in August to award a £1.4  billion contract to German company Siemens over Bombardier even though Bombardier would have built the trains at Britain's only remaining train factory in Derby (kind of ironic given that Bombardier Transportation is also based in Germany); that decision came only about two months after Germany chose Siemens over Bombardier for a £5bn contract. Another blow to the company happened the same month on July 25 when Bombardier made rail cars were involved in a massive bullet-train crash in Wenzhou that was ultimately blamed on design flaws. On the day of the crash, July 25 its stock fell 2.29% to 5.98; since then stock has fallen another 34.8% brining it down to 3.90 (by comparison Boeing stock is up 2.73% to 73.26, Embraer SA is down 15.0% to 24.95). I think investors overreacted to third quarter results, the company was banking on the contract and it wasn't really expecting to lose it given public opinion in the UK. Public opinion in Britain is continuing to pressure the government to support Bombardier's factory in Derby and really the only way for them to do that is to continue to award it key contracts which are also seen as job security for British workers. As recently as 2004 the company threatened to cut jobs at Derby but ended up not going through with it; it did however cut 7,000 jobs worldwide that year (since then the company's workforce has nearly doubled meaning the company is in a long term growth spurt).


The transportation division has strong support in India and America with new orders more recently coming from traditional customers in Chicago ($331 million order for 300 cars July 20), New Delhi ($120 million for 76 cars September 5) and Sao Paulo ($96 million order by mass transit September 21, 2011). Don't be fooled by third quarter results. During the nine month period the train division was the source of 53.1% of company revenue, $7.453 billion up 13.13% yoy with gross margin up 10.5% to $1.248 billion; That's 32.8% more than aerospace's $940 million.

Recent Good News
UK: December 28: Won a US$269 million contract to supply London South with as many as 130 Electrostar rail cars (adding to the 2,000 Electrostar models already in use there).
Germany: December 23 Receives new order worth US$648 million for 90 430 series electric trains to be used in Frankfurt. That's in addition to 87 others already ordered by DB Regio AG in 2011. The trains won't be delivered until sometime in 2014.

Over 100,000 rail vehicles presently in use around the globe, were built at a Bombardier Transportation factory. Bombardier rail equipment is designed and manufactured at 59 locations throughout the world however more than half of them are in Europe where 73% of its 35,000 employees work in 16 nations, with most residing in Germany (research is based in Switzerland). Outside of Europe, the company employs people in Canada (Ontario/Quebec), Australia, United States, and Mexico where Bombardier's newest Learjet plant was built. There's also India and China giving it a presence in Asia. In China the company has train and large commercial jet partnerships with local companies including newly formed Comac. For trains, Bombardier has three joint ventures and seven 100% enterprises in China, under which it manufactures propulsion equipment and signaling equipment. 13% of transportation 2011 fiscal revenue came from Asia. China is the focal point for Bombardier's future in the region which isn't a bad plan considering China plans to spend $434 billion on railway infrastructure between 2011 and 2015, that figure is the latest and is 41% higher than the previous one.

Bombarder remains a solid company in which to invest. It pays a dividend which has gone up every year for the past three years. The dividend has gone up from nothing in 2008 to 10 cents a share annualized in 2010 and is on track to reach 11.5 cents in 2011