Outerwall trades lower following mixed Q2; in-line FY15 guidance
Outerwall (OUTR 70.86, -10.96) is trading about 13.4% lower this afternoon following the company's mixed second quarter results. OUTR also guided for fiscal year 2015 earnings per share (EPS) and revenues, and concluded the earnings release with the announcement that Erik Prusch would be taking over as the new CEO.
If you are not familiar, OUTR is the owner of the Redbox DVD rental service, operates Coinstar machines and operates ecoATM kiosks for mobile phone recycling.
For Q2, OUTR reported EPS which was better than expected at $2.19. Revenues for the period were down slightly on a year-over-year basis and fell below expectations, ending the past three months at $545.4 million.
The company expects a strong box office in the fourth quarter and continued strength through the second half of the year. Specifally in this period, though, Redbox revenues were slightly down. Q2 produced Redbox revenues of $439.0 million versus $442.8 million last year. The decline was modest, though, when you compare it to the 13.1% decline in rentals, which as a result of recent price increases, did not weigh on revenues as much.
In the Coinstar segment, OUTR reported revenues of $80.3 million, a 0.5% increase versus last year. The U.S. volume was down slightly, but was offset by the U.K. business increased coin voucher product transaction fee, but the benefit was offset by the unfavorable exchange rate impact due to the strengthening of the US Dollar.
ecoATM revenues were the strongest performer in Q2, but at 4.8% of total revenues, the impact on the stock was skewed. Revenues for Q2 were $26.1 million, a 9.5% increase versus last year, primarily due to the increase in total kiosks.
By all accounts, OUTR's FY15 EPS and revenue guidance was tame. The company expects FY15 EPS in the range of $8.12-9.12 on revenues of $2.263-2.353 billion.
Finally, the company announced that Erik Prusch would take over as CEO effective July 31, 2015. Prusch had been serving as interim CEO since January 18, 2015 and replaced Nora Denzel, who remains as a Director on the OUTR Board.
In sum, OUTR is trading lower today following mixed Q2 results and in-line FY15 guidance. OUTR's largest segment reported weaker than prior year's numbers, and the only standout was the segment which represents less than 5% of total revenues.
Looking Ahead: August 3, 2015
The coming week will feature the July Employment Report on Friday. Before the market gets there, though, it will have to pass go on Monday with the ISM Index for July. We take a look at why the ISM Index is important for the market.
(1) The ISM Index for July (10:00 a.m. ET)
ArcelorMittal Reports, Reaffirms Its Outlook
Steel giant ArcelorMittal (MT) is trading higher this morning after reporting quarter results.
The company reported second quarter earnings of $0.10 per share, which easily topped expectations. On the top line, revenues rose 57.8% year/year to $16.89 billion, which fell in-line with expectations.
Steel shipments rose 3.4% year/year for the second quarter to 22.2Mt.
The company also reported 16.4Mt own iron ore production as compared to 16.6Mt in the second quarter in 2014; 10.8Mt shipped and reported at market prices, an increase of 2.7% as compared to 10.5Mt in the second quarter of 2014. LTIF rate of 0.68x in the second quarter 2015, lower as compared to 0.88x in the first quarter 2015 and 0.87x in the second quarter 2014.
Looking ahead, the company's guidance remains unchanged and continues to expect: 2015 EBITDA within the range of $6.0 - $7.0 billion; 2015 capital expenditures of approximately $3.0 billion; and 2015 net interest expense of approximately $1.4 billion The Company continues to expect positive free cash flow in 2015 and to achieve progress toward the medium term net debt target of $15 billion .
Separately, the company said, "Despite continued pressure on both steel and iron-ore prices, we have delivered a consistent set of operating results compared with the first quarter. Europe continues to be a bright spot, with EBITDA again improving by 10.5% compared with the first quarter of 2015. Mining has also performed robustly against the backdrop of a lower iron-ore price, with ArcelorMittal Mines Canada reporting record shipment levels and improved costs. We remain concerned by the high level of imports. Whilst we are somewhat encouraged by recent actions on potential trade defence measures from both the US and Europe, we are also taking action to adapt our own business. More positively, even against such a challenging backdrop, we have delivered a small net income for the second quarter, reduced net debt year on year and we still expect to be cash flow positive for the year."
In 2014, ArcelorMittal had revenues of $79.3 billion and crude steel production of 93.1 million tonnes, while own iron ore production reached 63.9 million tonnes.
Exxon Mobil Trades Lower As Weak Upstream Results Overwhelm Downstream Improvement
Exxon Mobil (XOM 79.81 -3.22) is selling off this morning after reporting its quarterly results. The stock just hit a new low for today just now and fell as low as $79.60/share. In current trade, the stock is sitting near that new low.
The company reported second quarter earnings of $1.00 per share, which fell short of expectations. On the top line, revenues fell 33.4% year/year to $74.11 billion, which also fell short of expectations.
To no surprise, upstream results suffered due to the recent collapse in oil prices, while downstream showed some benefit.
Downstream and Chemical segment earnings increased significantly from the second quarter of 2014, driven by higher margins, continued strong demand, and the quality of the company's product and asset mix.
However, higher Downstream and Chemical earnings were more than offset by the impact of weaker Upstream realizations and lower asset management gains.
On an oil-equivalent basis, production increased 3.6% from the second quarter of 2014. Liquids production totaled 2.3 million barrels per day, up 243,000 barrels per day, with project ramp-up and entitlement effects partly offset by field decline. Natural gas production was 10.1 billion cubic feet per day, down 622 million cubic feet per day from 2014 due to regulatory restrictions in the Netherlands. Project volumes and entitlement effects offset field decline.
Upstream earnings were $2 billion in the second quarter of 2015, down $5.9 billion from the second quarter of 2014.
Lower liquids and gas realizations decreased earnings by $4.5 billion, while volume effects increased earnings by $330 million driven by new developments. All other items decreased earnings by $1.7 billion, including the one-time $260 million deferred income tax impact related to the tax rate increase in Alberta, Canada, and the absence of prior year asset management gains.
Downstream earnings were $1.5 billion, up $795 million from the second quarter of 2014.
Stronger margins increased earnings by $1.1 billion. Volume and mix effects decreased earnings by $80 million. All other items, including higher maintenance expenses, decreased earnings by $230 million. Petroleum product sales of 5.7 million barrels per day were 104,000 barrels per day lower than the prior year's second quarter.
Fluor Cuts FY15 Guidance as Business Not Flourishing
Fluor (FLR 50.90) is an engineering and construction firm with global reach. After Thursday's close, it reported second quarter results that fell shy of analysts' expectations and cut its 2015 earnings per share guidance range, citing relatively low new awards and delays in the full release of major projects due to the volatility of oil prices and mined commodities.
Shares of FLR are trading 6.0% lower in pre-market action as the downtrodden outlook took the wind out of this week's rally effort.
FLR has risen 6.4% over the last three sessions, battling back with other beaten-down industrial names. Even so, at yesterday's close, FLR was still down 32% over the last 52 weeks.
It's been a tough road for shareholders and today will be bumpy with Fluor lowering its 2015 earnings guidance range from $4.40 to $5.00 per diluted share to $4.05 to $4.35 per diluted share. The company is still clearly profitable, yet the state of industry conditions is apparent in the fact that the midpoint of the guidance range is 6.3% below 2014 levels.
Fluor shared the guidance after reporting a second quarter profit of $1.00 per diluted share, which was down 2.0% from the same period a year ago. Revenues in the second quarter, meanwhile, dropped 9.0% to $4.8 billion.
The company did what it could to manage expenses in a tough climate. Its total cost and expenses declined 8.0%, helped mostly by a drop in the cost of its revenue. Total segment profit, however, still dropped 10% year-over-year to $281.8 billion with sizable declines in its Industrial & Infrastructure, Power, and Global Services segments more than offsetting a 21% increase in profit for its Oil & Gas segment.
Fluor registered $4.3 billion in new awards for the quarter and ended the period with a consolidated backlog of $41.6 billion, which was up from $40.3 billion a year ago.
Despite the bump in backlog, the volatility in oil prices and mined commodities, the company said, has tempered its expectations for the year. In the same vein, investors continue to temper their expectations for the stock.
Zeltiq Aesthetics (ZLTQ) reported better than expected Q2 results last night, and issued FY15 revenue guidance that was above expectations.
If you're not familiar with it, ZLTQ is medical technology company operating in the aesthetics industry. The company's flagship product is the CoolSculpting system, which ZLTQ markets as a non-invasive alternative to liposuction. The system works this way: a physician places the CoolSculpting applicator over the targeted area, and the system cools down that section of body fat to a specific temperature, which destroys the fat cells permanently. The product is currently FDA-approved to treat the abdomen, flanks, inner thigh, and outer thigh. Management hopes to get FDA approval for submentum (under the chin) treatments later this year, with a commercial launch in 4Q15.
CoolSculpting is marketed primarily to dermatologists and plastic surgeons. For these customers, one distinct positive with the system is that it's a hands-off procedure -- once the patient is set up, it doesn't require any staff time during treatment. For this reason, the percentage of sales to multi-unit practices continues to increase. This is great for ZLTQ, because utilization rates at multi-unit practices are three times that of single unit practices. Management says they're still underpenetrated as CoolSculpting is used in about 3,200 aesthetic practices worldwide out of a possible 30,000.
The company derives revenue from the sale of systems & consumables, with a current revenue split roughly 50% systems/50% consumables. This model lends itself to high gross margins, which currently stand near 70%. Following the January 29, 2015 announcement that the FDA approved the CoolSculpting procedure at lower temperatures (which will shorten treatment times and allow physicians to perform more procedures per day), the company should see a consumable upgrade cycle in 2015-16 as it incorporates the new lower temperature technology into its various applicators.
ZLTQ went public in October 2011, but after some early stumbles, a new management team was brought in during 4Q12. Since the new team took control, sales growth has accelerated into the mid- to high-double digits, and in its 2Q14 report ZLTQ turned its first-ever profit and went on to report a profit for the full year as well.
Turning to last night's Q2 results, sales rose +37% to $64.4 million -- a noticeable deceleration from the mid- to high-double digit sales growth rates reported in previous quarters -- while EPS declined -57% to $0.03. However, both of these numbers were comfortably above expectations. Gross margin ticked up to 71.9% from 71.0% in 2Q14, although EBITDA margin decreased to 8.2% versus the 12% seen in 2Q14 due to increased marketing expenditures. Management said the company continues to experience strong multi-system placements, with 36% of all systems sold in Q2 going to existing accounts with one or more systems already installed.
For 2015, the company raised its revenue guidance, seeing sales up +40% to $245-247 million, up from prior guidance of $235-238 million and comfortably above expectations. While management didn't provide EPS guidance, they see 2015 operating expenses in the range of 69-70% of total revenue, down from prior guidance of approximately 70%, and see Adjusted EBITDA margin in the range of 8-9% of total revenue, up from prior guidance of approximately 8%.
During the conference call, management said that: "Q2 was a record quarter for the company with strong performance across all aspects of our business; system placements, utilization, international, R&D, clinical and sales and marketing, and reflects the ongoing momentum that we are experiencing in the market."