Sprouts Farmers Market
Sprouts Farmers Market (SFM 35.90, -1.19) is trading lower by about 3.2% this morning following the company's Q4 results reported last night. The company saw a beat on the top and bottom lines, with earnings per share (EPS) of $0.12 on revenues of $734.6 million. SFM also issued mixed fiscal year 2015 guidance, and comparable same store sales guidance for Q1.
If you're not familiar, SFM is a healthy grocery store with organic foods. The company currently has more than 195 stores in twelve states and in 2011 partnered with Apollo Global Management (APO) by merging with Henry's Holdings and its Sun Harvest-brand stores.
In terms of the Q4 numbers, SFM reported net sales of $734.6 million, a 21% increase over the prior year's period. Comparable store sales were up 8.5% and two-year comparable store sales grew 22.3% citing strong performance in new stores opened.
Gross profit in the quarter increased 21% to $211.2 million, resulting in a gross profit margin of 28.8% of sales, up 20 basis points compared to last year's period.
In terms of guidance, SFM expects FY15 EPS in the range of $0.84-0.87, which is worse than expected. The company also expects revenues in FY15 to grow 20-22%, equating to about $3.56-3.62 billion, roughly in-line with what was expected.
SFM sees comparable same store sales in Q1 of 5-6% and two-year comparable store sales growth of 18-19% in Q1. In addition, SFM expects to open about 27 new stores in FY15, and sees Capital Expenditures in the range of $100-110 million.
In sum, the stock is seeing relative weakness following the Q4 results and FY15 guidance. So is the broader market, however, as the S&P 500 (2112.59, -1.27) trades down by 0.06% in early trading.
Gogo Inc. (GOGO), which provides in-flight Internet Wi-Fi services on airplanes, is up about 3% today (was up 8% earlier) after reporting better-than-expected Q4 results last night and providing solid revenue guidance for 2015.
In case you're not familiar, Gogo provides in-flight Internet, entertainment, text messaging, voice and a host of other related services to the commercial and business aviation markets. Gogo has more than 2,100 commercial aircraft equipped with its services and it has partnerships with 10 major airlines. More than 6,600 business aircraft are also flying using Gogo's service. In fact, Gogo is a factory option at every major business aircraft manufacturer. With approximately 9,000 aircraft online, representing approximately 20% of global aircraft, Gogo has the largest number of connected aircraft in the world. Furthermore, its record number of more than 1,000 commercial aircraft awarded but not yet installed demonstrates airlines' growing recognition of Gogo's service.
Turing to the Q4 results, Gogo reported a non-GAAP loss of $(0.28) per share, that was slightly worse than the $(0.26) loss reported in the year ago period but it was narrower than expectations. Revenue rose 17.9% year/year to $109.2 mln, which also was a bit better than expected. Gogo has two components to its revenue: service and equipment. Service is much higher margin and accounted for 79% of total revenue in 2014, up from 76% in 2013. In Q4, service revenue accounted for 82% of total revenue. Gogo says it was pleased with its financial and operating performance in Q4 and full year 2014, as the company continued to see strong demand across its business segments.
Breaking it down by segment a bit, its largest segment is Commercial Aviation - North America (CA-NA). Segment revenue rose 23% YoY to $68.3 mln as the company ended the quarter with 2,098 aircraft online, up 3% from 2,032 at year end 2013. Average monthly service revenue per aircraft online, or ARPA, increased to $10,914, up 22% YoY, driven by increases in connectivity, wireless entertainment services, and other service revenue. Segment profit margin was 12%. Its Business Aviation (BA) segment saw even better revenue growth, up 35% YoY to $20.3 mln. Service revenue exceeded equipment revenue for the first time ever.
Finally, its Commercial Aviation - Rest of World (CA-ROW) segment is very small and just getting started with Q4 revenue of just $1.3 mln (+8% YoY). Gogo says it made good progress in Q4. In December 2014, Gogo signed a definitive agreement with Virgin Atlantic Airlines to provide internet connectivity using Gogo's next generation global satellite platform, 2Ku. Also, Gogo received the final required Supplemental Type Certificate (STC) from the FAA to complete the installation of Ku-band satellite based connectivity on Delta's international fleet. Its Ku-band service is capable of providing peak speeds of up to 50 Mbps to an aircraft. Gogo added 50 aircraft to end the quarter with 85 aircraft online with Ku-band service. In 2015, the company expects to bring 125 additional aircraft online with Ku-band service.
Overall, it was a good quarter for Gogo. The stock has been mostly moving sideways over the past 10 months, mostly trading in a range of $14-19. From a technical basis, the stock would probably need to break above that range before it would look better technically. That would likely be needed to lay the foundation to make a sustained move higher.
Oil tanker Frontline Surges Following Quarterly Results
Oil tanker Frontline (FRO 2.77 +0.34) surges higher following earnings results, rises above $3/share.
The company reported a fourth quarter loss of $0.12 per share, which may not be comparable to expectations. Frontline reports a net loss attributable to the Company of $13.0 million for the fourth quarter of 2014.
Frontline reports a net loss attributable to the Company of $13.7 million for the fourth quarter of 2014, when excluding a non-cash gain of $40.3 million arising on the termination of the charter parties for Front Opalia, Front Comanche and Front Commerce, a non-cash gain of $1.5 million arising on the convertible bond buy back in October and a non-cash loss of $41.1 million arising on the convertible bond swaps in October and December, equivalent to a loss per share of $0.13.
The average daily time charter equivalents earned in the spot and period market in the fourth quarter by the Company's VLCCs and Suezmax tankers were $27,900 and $26,000 compared with $24,600 and $18,600 in the preceding quarter. The spot earnings for the Company's VLCCs and Suezmax vessels were $27,400 and $27,200 compared with $23,900 and $19,500 in the preceding quarter.
Strategy and Outlook:
Salesforce.com (CRM 69.93, +7.60, +11.2%) is trading x% higher after reporting Q4 (Jan) results in-line with estimates. The company reported EPS of $0.14 per share, also noting that revenues rose 26.1% year/year to $1.44 billion.
CRM provides enterprise cloud computing solutions to various businesses and industries worldwide. For the fourth quarter, its primary sources of revenue, subscription and professional services, rose 25% and 41% year/year, respectively. A 32% year/year growth in billings, and 70% growth in backlogs helped fuel the growth in revenue. During the company's conference call, the company added some additional color to these growth rates, noting that usage is soaring to nearly 3 billion transactions a day.
Guidance for the first quarter of 2016 and fiscal year 2016 were also given during the report. CRM issued Q1 EPS guidance of $0.13-0.14, versus the $0.15 estimate, and Q1 revenue guidance of $1.485-1.505 billion versus the $1.5 billion estimate. For the full year FY16, CRM guided EPS of $0.67-0.69, versus the $0.69 estimate, and raised FY16 revenues to $6.475-6.52 billion from $6.45-6.50 billion versus the $6.5 billion consensus.
Taking a look at international operations, the company mentioned that with the help of Merck (MRK), it is expanding further into Germany. Additionally, CRM noted sees global growth momentum, particularly in Asia.
Following the announcement, analysts were eager to increase price targets and update ratings on CRM. Analysts point to impressive top line growth and margin expansion, along with strong bookings as catalysts for the bullish commentary.
Transocean Higher Following Earnings Results
Transocean (RIG 16.73 +0.70) rallied about 9% in late trade yesterday following earnings results. The stock has since pulled back, remains over 4% higher.
RIG reported fourth quarter earnings of $0.95 per share, which easily topped expectations. On the top line, revenues fell 1.5% year/year to $2.24 billion, which modesty beat expectations.
The small decrease in revenue was due primarily to increased idle time on several rigs partly offset by higher revenue efficiency, lower out-of-service days, and the commencement of operations in the third quarter of the company's two newbuild ultra-deepwater drillships, Deepwater Asgard and Deepwater Invictus.
Cash flows from operating activities were $566 million, down sequentially from $882 million. Meanwhile, fleet revenue efficiency was 95.3%, up from 92.6% in the third quarter.
Revenue efficiency on ultra-deepwater rigs was 95.4%, up from 91.6% in the prior quarter Fleet utilization was 72%, versus 75% in the third quarter. Contract backlog was $21.2 billion as of the February 17, 2015.
General and administrative expenses increased $10 million from the prior quarter to $62 million. The increase was due primarily to costs associated with the company's cost reduction initiatives and, to a lesser extent, personnel costs associated with Transocean Partners.
AAC Holdings (AAC 37.33) is a provider of inpatient substance abuse treatment services for individuals with drug and alcohol addiction. In the wake of strong Q4 results, shares of AAC soared 12% yesterday on its way to a new all-time high.
Diving into the results, the company reported EPS of $0.15 per share, $0.06 better than estimates. Revenues for the quarter rose 32.5% year/year to $37.17 million which was also above consensus. The company attributes this impressive revenue growth to a 35% increase in client admissions and average daily census.
For some background on the company, AAC offers a tailored treatment program based on the individual needs of each client, many of whom require treatment for a co-occurring mental health disorder, such as depression, bipolar disorder and schizophrenia. Integrating treatment for both substance abuse and a co-occurring mental health disorder is believed to result in significantly better outcomes.
AAC has made substantial investments in its treatment facilities with a specific focus on providing aesthetically pleasing properties and grounds, numerous amenities, healthy food and a courteous and attentive staff to distinguish it from its competitors. Approximately 90% of AAC's revenue is reimbursable by commercial payors. The rest comes from clients. AAC currently does not receive any revenue from Medicare and Medicaid, which are typically subject to lower reimbursement rates.
Approximately 23.1 mln people aged 12 or older need treatment for a drug or alcohol use problem in the US. However, only about 10.8% of those needing treatment actually received treatment at a specialty facility. Annual spending on treatment for substance abuse in the US is expected to grow to $35 bln in 2014. AAC offers one of the largest for-profit fully licensed programs to treat drug and alcohol addiction.
During the fourth quarter, AAC expanded its operations both organically and through strategic acquistions, adding nearly 200 beds to its operations. Moreover, the company is realizing a 85-90% utilization rate on its current bed count, and expects this to continue throughout 2015. Looking ahead, the company plans to continue this aggressive growth strategy with additional construction plans scheduled through the end of 2016.
Kohl's Heating Up with Fourth Quarter Results
The fourth quarter and year end report from retailer Kohl's (KSS 70.90) this morning was a bit of a formality, yet that didn't make it any less encouraging.
Earlier this month, Kohl's announced that its comparable store sales were up 3.7% in the fourth quarter. Upon sharing that news, Kohl's also indicated that it expected FY14 earnings to be between $4.20 and $4.22 per diluted share. That was comfortably ahead of analysts' average expectation at the time, which was closer to $4.00 per diluted share.
What was learned today is that Kohl's earned $4.24 per diluted share in FY14, aided by a 17% increase in fourth quarter diluted earnings to $1.83 per share. The latter was also ahead of expectations.
Kohl's sounded very pleased with its fourth quarter performance and understandably so. It was a very promotional period for the retail space, yet Kohl's managed to hold the line pretty good on gross margins, which slipped just 10 basis points from the same period a year ago to 33.9%.
Importantly, Kohl's noted its fourth quarter comparable sales were driven both by transactions per store (a source of weakness in the past) and average transaction value. Total sales for the quarter rose 3.9% to $6.34 billion with all lines of business and all geographic regions reporting higher sales.
Looking at FY15, Kohl's is projecting earnings per diluted share of $4.40 to $4.60, up 4-9% from FY14. The guidance is predicated in part on total sales increasing 1.8% to 2.0%, comparable store sales growing 1.5% to 2.5%, gross margins increasing 0 to 20 basis points over 2014, and $1 billion in share repurchases at an average price of $70 per share.
In conjunction with the year end report, Kohl's also announced that its Board of Directors declared a 15% increase in the quarterly cash dividend to $0.45 per share. At the current stock price, that translates to a 2.54% dividend yield.
Shares of KSS are up 16.2% year-to-date and are closing in on their prior all-time high of 79.55 seen in April 2007.