Top 5 Diversified Bond Mutual Funds – Best of Funds
Fixed-income securities are the preferred choice of investors who are ready to forgo capital growth for a regular income flows. The expense involved in creating such a portfolio of bonds from different categories may be quite considerable. This is why most investors select mutual funds since they are a convenient and affordable method of investing in bonds. Diversified bond funds further reduce the risk involved by holding securities from different sectors. A downturn in any one sector therefore only has a partial effect on the fund’s fortunes.
Below we will share with you 5 top rated diversified bond mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all diversified bond funds, then click here.
Putnam Diversified Income A (PDINX) seeks current income and preservation of capital. The fund invests 15% to 65% of its assets in government securities and domestic and foreign corporate bonds. The fund primarily purchases corporate bonds which are rated investment grade. The diversified bond mutual fund returned 18.39% in the last one year period.
The diversified bond mutual fund has a minimum initial investment of $500 and an expense ratio of 1.09% compared to a category average of 1.13%.
Columbia Strategic Income A (COSIX) invests in three categories of debt securities. These include, U.S. government bonds and assets backed securities; foreign securities, including those issued from emerging markets and corporate debt rated below investment grade or unrated securities of similar quality. The diversified bond mutual fund has a three year annualized return of 7.09%.
Laura Ostrander is the fund manager and has managed this diversified bond mutual fund since 2000.
Baird Core Plus Bond (BCOSX) seeks an annual rate of total return which is higher than that of the Barclays Capital U.S. Universal Bond Index. The fund invests heavily in domestic securities issued by the government or corporate entities. The diversified bond mutual fund returned 12.46% over the last one year period.
As of September 2010, this diversified bond mutual fund held 392 issues, with 3.54% of its total assets invested in United States Treasury Bonds 6.25%.
Virtus Multi-Sector Fixed-Income A (NAMFX) utilizes at least 80% its assets to purchase a wide range of fixed income securities. It purchases U.S. government securities, investment-grade as well as high yield domestic debt securities. The diversified bond mutual fund has a five year annualized return of 6.43%.
The diversified bond mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.16% compared to a category average of 1.13%.
Oppenheimer Global Strategic Income A (OPSIX) seeks a high level of current income. It invests the majority of its assets in securities issued by the US government and high yield domestic and foreign securities. The diversified bond mutual fund has a ten year annualized return of 6.91%.
Arthur K. Steinmetz is the fund manager and has managed this diversified bond mutual fund since 1989.
To view the Zacks Rank and past performance of all diversified bond mutual funds, then click here.
About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at http://www.zacks.com/funds/mutualfund/
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DTE Energy In-line, Narrows Outlook – Analyst Blog
DTE Energy (DTE) reported third quarter 2010 earnings of 96 cents per share, in line with the Zacks Consensus estimate. Results were ahead of 92 cents reported in the prior-year quarter. Net income in the quarter was $163 million, up 8% from $151 million reported in the third quarter of 2009.
Revenue of DTE Energy in the quarter under review was $2.14 billion, an increase of 10% from $1.95 billion in the third quarter of 2009. Revenue, however, fell short of the Zacks Consensus estimate of $2.29 billion.
Operating expenses increased 8% year over year to $1.75 billion in the third quarter. Higher fuel, purchased power and gas costs and operation and maintenance costs pushed the increase in the quarter
DTE Energy’s Operating income in third quarter of 2010 was $386 million, up 16% from $332 million in the prior-year quarter.
Segment Update
Electric Utility: Segment earnings were $165 million or 97 cents per share, up from $149 million or 91 cents in the prior year quarter.
Gas Utility: The segment posted a loss of $6 million or 4 cents per share, which narrowed from a loss of $23 million or 14 cents in third quarter 2009. Revision in rate order in June helped to narrow down the loss in the quarter.
Gas Storage and Pipelines: Segment profit declined slightly to $12 million or 7 cents per share form $13 million or 8 cents in the year-ago quarter
Unconventional Gas Production: Segment loss increased to $4 million or 2 cents per share from a loss of $2 million or 1 cent in third quarter of 2009.
Power and Industrial Projects: The segment posted a profit of $26 million or 15 cents per share, up from $10 million or 5 cents in the year-ago period. Increased coke sales and steel industry fuels production tax credits in 2010 helped the segment report a huge profit.
Energy Trading: The segment posted a loss of $12 million or 7 cents, compared with a profit of $6 million or 4 cents per share in the prior year quarter due to weak economic performance.
Corporate and Other: Operating loss in the quarter was $18 million or 10 cents per share, compared with a loss of $2 million or 1 cent in the prior year quarter. The prior-year quarter benefited from one-time tax benefits.
Full-Year 2010 Guidance
DTE Energy revised its guidance for operating earnings to a range of $3.50 to $3.70 per share, from $3.45 to $3.80 guided previously.
We expect a growing utility business coupled with beneficial regulatory policies in Michigan and higher rates to help DTE Energy post solid results in the upcoming quarters.
We remain “Neutral” on DTE Energy over the long term. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.
DTE ENERGY CO (DTE): Free Stock Analysis Report
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Rockwell Collins Reports In Line – Analyst Blog
Rockwell Collins Inc. (COL) reported fourth-quarter 2010 earnings of 94 cents, in line with the Zacks Consensus Estimate. Results were 10 cents ahead of earnings reported in the prior-year quarter. Net income was $150 million, up 12% from $134 million in the prior-year quarter.
Revenue of Rockwell Collins was $1.28 billion, up 8% from $1.2 billion in the fourth quarter of 2009. Higher revenues at Government Systems as well as Commercial Systems drove the overall climb. Revenue was a trifle lower than the Zacks Consensus Estimate of $1.3 billion.
Total operating income improved 9% to total at $250 million in the quarter under review.
Fiscal 2010 Results
The company’s fiscal 2010 earnings of $3.52 per share were also in line with the Zacks Consensus Estimate. It, however, was lower than earnings of $3.73 per share reported in fiscal 2009. Net income declined 6% to $561 million from $594 million in the prior year.
Revenue of $4.7 billion increased 4% year over year. Higher revenues at Government Systems were partially offset by lower Commercial Systems revenue.
Total operating income was $899 million, down by 6% form the prior-year level.
Segment Update
Government Systems: Segment revenue increased 8% year over year to $798 million in the fourth quarter of 2010. Higher Airborne solutions sales as well as Surface solutions aided the improvement.
Operating income was $169 million, up 6% year over year. The improvement was largely driven by increased sales volume and lower company-funded research and development expenditures. However, higher employee incentive compensation and pension expenses muted the improvement partially.
Fiscal 2010 revenue increased 11% to $2.9 billion over the prior-year level. Operating income increased slightly by 0.8% year over year to $606 million.
Commercial Systems: Segment revenue was $484 million, up 8% over the prior-year quarter. An increase in original equipment as well as aftermarket sales largely contributed to the segment’s revenue increase.
Operating income increased 14% year over year to $81 million in the quarter. The increase was driven by sales volume growth, to some extent offset by higher employee incentive compensation and pension expenses.
Fiscal 2010 revenue decreased 5% year over year to $1.8 billion. Operating income declined by 17% to $293 million from fiscal 2009.
Financial Update
Rockwell Collins ended fiscal 2010 with cash and cash equivalent of $435 million, up 85% from the prior-year level of $235 million.
Long-term debt at quarter end totaled $525 million, lower than $532 million at the end of fiscal 2009.
Cash from operations in fiscal 2010 totaled $711 million, up 12% from $633 million in fiscal 2009. Lower payments for employee incentive compensation drove the increase in operating cash flows.
Capital expenditure in fiscal 2010 was $109 million, lower than $153 million in the prior year.
Share Repurchase and Dividend
Rockwell Collins spent $182 million to buy back 3.2 million shares in fiscal 2010.
During the fiscal fourth quarter of 2010, the board of directors increased the share repurchase authorization by $300 million. As of the 2010 fiscal year end, Rockwell Collins had $326 million remaining from the authorized share repurchases.
The company paid dividends of $151 million or 96 cents per share in fiscal 2010.
Fiscal-Year 2011 Guidance
Rockwell Collins guided total revenue to a range of $4.8–$5.0 billion.
Total segment operating margins is expected to be in the 19.5% to 20.5% range.
The company expects research & development costs to be in the range of $900 million to $950 million.
Rockwell Collins projects earnings to be in the range of $3.75 to $3.95 per share.
Cash flow from operations is expected to be $650 million to $750 million. The company expects capital expenditure to total $150 million.
Rockwell Collins is poised to deliver solid results going forward based on strong performance across the segments as well as balanced exposure to commercial and government sector. Its strong balance sheet, incremental dividend and an ongoing share repurchase program will add to the positives.
We remain “Neutral” on Rockwell Collins over the long term. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the shares over the near term.
ROCKWELL COLLIN (COL): Free Stock Analysis Report
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DPL Matches, Reaffirms Outlook – Analyst Blog
Diversified energy utility, DPL Inc. (DPL) reported third quarter 2010 earnings per share of 74 cents, matching the Zacks Consensus Estimate. The results of the company were higher than the 59 cents reported in the year-ago quarter.
The year-over-year increase was driven by warm weather, which boosted company retail sales. Favorable economic conditions also augured well for DPL to book earnings growth. The higher cost of inputs and operating and maintenance expenses had a marginal impact on earnings.
Revenues
Total revenue of DPL at the end of the third quarter was $516.9 million versus $407.3 million in the year-ago period, reflecting a growth of 26.9%. The growth in revenue was driven by higher Retail sales and RTO capacity revenues, somewhat offset by lower Wholesale sales volume.
Electricity volume sales rose 5.1% to 4.6 billion kWh from 4.4 billion kWh in the year-ago quarter, driven by improvements in the Retail sector, which improved 14.9%. The electricity volumes were somewhat hampered by lower Wholesale sector sales, which declined 31.7%.
Margins and Costs
Fuel costs increased 23.6% year over year to $104.3 million, mainly due to lower gains realized from coal and emission allowance sales and an increase in average fuel prices.
Purchased Power costs in the quarter increased 83% year over year. This increase was due to higher RTO charges and RTO capacity, along with an increase in average purchase price and higher purchased volumes.
Gross margin profit increased 13.8% to $293.6 million compared with $257.9 million in the year-ago quarter.
Interest charges during the quarter decreased by $2 million to $17.6 million from $19.6 million in the year-ago quarter due to interest savings related to the early payment in December 2009 of a portion of the $195 million 8.125% Notes.
Financial Position
DPL's cash and cash equivalents totaled $139.1 million as of September 30, 2010, compared with $74.9 million as of December 31, 2009.
Capital expenditures for the first nine months of 2010 were $113.7 million versus $134.6 million in the first nine months of 2009. The company is planning to invest another $66.3 million in the fourth quarter taking the total capital investment to $180 million in fiscal 2010.
DPL presently expects to invest $760 million during the 2010 to 2012 period, which reflects a growth of $150 million from the previous capital expenditure plan. The increase in costs is due to high investments in transmission and distribution projects.
The company reduced its long-term debt level through the first nine months of 2010 to $926.4 million versus $1,223.5 million as of December 31, 2009.
Dividend and Share Repurchase
On October 27, 2010, the board of directors of DPL approved a new share repurchase plan to acquire up to $200 million of DPL common stock. The repurchase is scheduled to continue till December 31, 2013. However, the company retains the right to modify or terminate the plan without prior notice.
On the same day, the DPL board declared a quarterly dividend of 30.25 cents per share. The dividend is payable on December 1, 2010, to shareholders of record on November 15, 2010.
Guidance
DPL maintained its fiscal 2010 earnings guidance of $2.35 – $2.55 per share and also provided 2011 earnings guidance of $2.30 to $2.55 per share.
Our View
We appreciate the move of the company to enhance shareholder value through dividend payments and share repurchases. The company has performed well in the last nine months and we expect this momentum to continue in the coming quarter as well.
DPL currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our log-term Neutral rating on the stock.
DPL INC (DPL): Free Stock Analysis Report
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Regis Mixed 1Q11 Results – Analyst Blog
Regis Corporation(RGS) reported first quarter fiscal 2011 adjusted earnings of 30 cents per share, in line with the Zacks Consensus Estimate as well as prior-year quarter. Results reflect the benefits of cost-containment measures and improved customer traffic.
During the quarter, the company reported GAAP net income of $18.3 million, or 30 cents per share, up from $7.8 million, or 14 cents per share in the year-ago quarter.
Quarter Performance
Regis’ total revenue plunged 4.5% year over year to $578.0 million due to lower footfall at its salons and a decline in total same-store sales. The company also missed the Zacks Consensus Estimate of $581.0 million.
Service revenues decreased 2.2% to $439.5 million; whereas product revenues fell 1.9% to $128.6 million and royalty and fee revenues were flat year over year at $10.1 million.
Consolidated same-store sales dropped 1.5%. However, same-store sales witnessed a gradual improvement in the quarter as the rate of decline was lower than the quarter’s drop of 4.5%.
Domestic sales were down 4.7% year over year while International sales decreased 9.6%. Hair Restoration sales were up 3.7% in the quarter.
Operating expenses were $544.8 million, down 5.6% year over year, reflecting the benefits of expense-control initiatives. As a result, operating margin expanded 110 basis points year over year to 5.8%.
During the quarter, Regis’ owned, franchised, or held ownership interest increased to 12,758 worldwide locations, as compared with 12,728 at the end of the fourth quarter of 2010.
Financial Position
At the end of first quarter 2011, the company increased its cash and cash equivalents to $194.8 million as compared with $151.9 million at the end of the fourth quarter of 2010. As of September 30, 2010, Regis reduced its long-term debt to $381.2 million versus $388.4 million as of June 30, 2010.
Outlook
In fiscal 2011, Regis will focus on its top-line growth and expects same-store sales to improve, with positive comps expected in the second half of the year. Management also highlighted that it is currently experiencing positive same-store sales for the month of October, thus indicating an improved customer traffic.
Our Take
The economic downturn has severely impacted the company’s earnings in the last few quarters, but finally we remain encouraged for the next quarter as the company pointed out that its second quarter has started on a positive note with same store sales picking up in the month of October. It appears that with economic recovery, customers are ready to spend; however, we have to wait and watch whether this trend will sustain till the end of the quarter or not. Thus, with satisfactory first quarter results and a positive tone for the coming quarter, estimates are expected to go up for the next quarter.
We have a Zacks #3 Rank (short-term Hold recommendation) on the shares. Our long-term recommendation for the stock also remains Neutral.
REGIS CORP/MN (RGS): Free Stock Analysis Report
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DPL Matches, Reaffirms Outlook – Analyst Blog
Diversified energy utility, DPL Inc. (DPL) reported third quarter 2010 earnings per share of 74 cents, matching the Zacks Consensus Estimate. The results of the company were higher than the 59 cents reported in the year-ago quarter.
The year-over-year increase was driven by warm weather, which boosted company retail sales. Favorable economic conditions also augured well for DPL to book earnings growth. The higher cost of inputs and operating and maintenance expenses had a marginal impact on earnings.
Revenues
Total revenue of DPL at the end of the third quarter was $516.9 million versus $407.3 million in the year-ago period, reflecting a growth of 26.9%. The growth in revenue was driven by higher Retail sales and RTO capacity revenues, somewhat offset by lower Wholesale sales volume.
Electricity volume sales rose 5.1% to 4.6 billion kWh from 4.4 billion kWh in the year-ago quarter, driven by improvements in the Retail sector, which improved 14.9%. The electricity volumes were somewhat hampered by lower Wholesale sector sales, which declined 31.7%.
Margins and Costs
Fuel costs increased 23.6% year over year to $104.3 million, mainly due to lower gains realized from coal and emission allowance sales and an increase in average fuel prices.
Purchased Power costs in the quarter increased 83% year over year. This increase was due to higher RTO charges and RTO capacity, along with an increase in average purchase price and higher purchased volumes.
Gross margin profit increased 13.8% to $293.6 million compared with $257.9 million in the year-ago quarter.
Interest charges during the quarter decreased by $2 million to $17.6 million from $19.6 million in the year-ago quarter due to interest savings related to the early payment in December 2009 of a portion of the $195 million 8.125% Notes.
Financial Position
DPL's cash and cash equivalents totaled $139.1 million as of September 30, 2010, compared with $74.9 million as of December 31, 2009.
Capital expenditures for the first nine months of 2010 were $113.7 million versus $134.6 million in the first nine months of 2009. The company is planning to invest another $66.3 million in the fourth quarter taking the total capital investment to $180 million in fiscal 2010.
DPL presently expects to invest $760 million during the 2010 to 2012 period, which reflects a growth of $150 million from the previous capital expenditure plan. The increase in costs is due to high investments in transmission and distribution projects.
The company reduced its long-term debt level through the first nine months of 2010 to $926.4 million versus $1,223.5 million as of December 31, 2009.
Dividend and Share Repurchase
On October 27, 2010, the board of directors of DPL approved a new share repurchase plan to acquire up to $200 million of DPL common stock. The repurchase is scheduled to continue till December 31, 2013. However, the company retains the right to modify or terminate the plan without prior notice.
On the same day, the DPL board declared a quarterly dividend of 30.25 cents per share. The dividend is payable on December 1, 2010, to shareholders of record on November 15, 2010.
Guidance
DPL maintained its fiscal 2010 earnings guidance of $2.35 – $2.55 per share and also provided 2011 earnings guidance of $2.30 to $2.55 per share.
Our View
We appreciate the move of the company to enhance shareholder value through dividend payments and share repurchases. The company has performed well in the last nine months and we expect this momentum to continue in the coming quarter as well.
DPL currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our log-term Neutral rating on the stock.
DPL INC (DPL): Free Stock Analysis Report
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NextEra Energy Beats Estimates – Analyst Blog
NextEra Energy Inc. (NEE) announced third-quarter 2010 operating earnings of $1.45 per share compared with $1.38 per share in the year-ago quarter. The results of the company outstripped the Zacks Consensus Estimate, as provided by 14 coverings analysts, by 2 cents.
NextEra Energy recorded GAAP earnings for the third quarter of 2010 of $1.74 per share compared with $1.31 per share in the year-ago period. The difference of 29 cents between operating and GAAP earnings, during the third quarter, was due to mark-to-market effects of non-qualifying hedges and other than temporary impairments on certain investments, both of which relate to NextEra Energy Resources.
Total Revenue
NextEra Energy's total operating revenue for third-quarter 2010 was $4.7 billion versus $4.4 billion reported in the year-ago period reflecting a growth of 4.9%. The year-over-year increase in total revenue was due to higher contribution from NextEra Energy Resources.
The actual results of the company surpassed the Zacks Consensus Estimate of $4.4 billion by $0.3 billion.
Segmental Results
FloridaPower & Light: Total segment revenue for third-quarter 2010 was $3.1 billion versus $3.3 billion in third-quarter 2009, reflecting a decline of 5.6%. Total energy sales during the current quarter were 31, 817 million kilowatt/hr (KWh) compared with 30,750 million KWh in third-quarter 2009.
Despite a year-over-year increase in power sales, the revenue contribution from this business declined due to the reduction in the average unit sales price. The average price per KWh sold in the third quarter of 2010 was slashed by 1.38 cents to 9.74 cents from the third-quarter 2009 level of 11.12 cents.
NextEra Energy Resources: Total revenue for third-quarter 2010 was $1,528 million versus $1,136 million in third-quarter 2009, reflecting a growth of 34.5%. The third quarter results were driven by the addition of new wind projects, improved performance of existing assets and gains from the gas infrastructure business.
Corporate and Other: Total revenue for third-quarter 2010 was $47 million versus $36 million in third-quarter 2009, increasing 30.6%.
Operational Update
Total operating expenses during the reported quarter eased by 1.6% year over year. The reduction in operating expenses was primarily owing to an 8% year-over-year decline in input costs.
At the end of the third quarter of 2010, interest expenses for NextEra declined by $37 million year over year to $91 million.
Financial Update
The company ended the quarter with a strong cash balance. Cash and cash equivalents as of September 30, 2010, were $791 million versus $164 million as of September 30, 2009.
Long-term debt of the company as of September 30, 2010, was $17.7 billion versus $16.3 billion as of December 31, 2009.
Outlook
NextEra Energy maintained its earnings guidance of $4.25 to $4.65 per share for 2010, but expects earnings to come in on the lower end. For 2011, adjusted earnings are expected to remain in the range of $4.25 to $4.55 per share. NextEra expects earnings to grow at an average rate of 5% to 7% from 2009 through 2014.
Our View
Counting among the positives, for the quarter, was Florida Power & Light Company's ability to increase the average customer level by 27,000, leading to an overall 3% spike in KW/h sales.
We also appreciate the gradual increase in green power assets of NextEra Energy. The company added 1,260 megawatt (MW) of new wind generation capacity to its portfolio over the last twelve months.
The company is expected to add between 700 to 1,000 MW of new wind generation in 2011 and also received necessary regulatory approval to go ahead with its 250 MW Genesis solar project.
NextEra Energy currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our long-term Neutral rating on the stock.
Based in Juno Beach, Florida, NextEra Energy Inc., through its subsidiaries, engages in the generation, transmission, distribution and sale of electric energy in Florida.
NEXTERA ENERGY (NEE): Free Stock Analysis Report
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Eastman Beats Consensus Handily – Analyst Blog
Eastman Chemical Company (EMN) earned $2.33 per share in the third quarter of 2010, outperforming the Zacks Consensus Estimate of $1.22. Year over year, earnings shot up 69% from $1.38 per share. A healthy top-line growth driven by higher volumes and prices led to the robust earnings.
Revenues
With sales improving across all product lines, quarterly revenues climbed 29% to $1.7 billion, outshining the Zacks Consensus Estimate of $1.6 billion. Volumes and pricing gains drove revenues in the quarter. Volumes were driven by higher demand in end-markets, particularly packaging, durable goods, and other markets. The increase in selling prices was attributed to higher raw material and energy costs.
Higher sales and lower unit costs (on the back of improved utilization rates) culminated into stronger operating profits. Operating earnings jumped 47% to $280 million.
Segment Results
Coatings, Adhesives, Specialty Polymers and Inks – Higher sales volumes (18%) on the back of improving demand from consumers, especially in Europe and US, coupled with stronger prices (10%) yielded a 20% increase in revenues to $406 million in the quarter. Operating earnings surged 8% to $91 million.
Fibers –Sales revenue shot up 17% to $301 million due to a 6% rise in sales volumes. Volumes were high, primarily in the acetate tow and acetate yarn product lines. Operating earnings increased 14% to $90 million with higher sales.
Performance Chemicals and Intermediates –Sales jumped 42% to $534 million primarily driven by higher sales volume (28%) in plasticizer product lines and a 23% spike in selling prices. The addition of new plasticizer product lines from the acquisition of Genovique Specialties Corporation, and rising demand in markets including industrial chemicals and processing, agriculture and health and wellness, contributed to the revenue growth. Higher revenues and lower costs more than doubled operating earnings to $77 million compared with $31 million in the year-earlier quarter.
Performance Polymers – A 34% rise in revenues to $222 million was attributable to a 27% increase in sales volume on the back of improved operations of the IntegRex™-based PET manufacturing facility and an 8% increase in prices. Operating earnings of $6 million in the third quarter reversed operating losses of $8 million in the year-ago quarter.
Specialty Plastics – Sales revenue spiked 33% to $266 million primarily on higher volumes, which grew 27% with higher demand for specialty packaging and consumer and durable goods. Prices inched up 1% year over year. Stronger sales in the core copolyesters and Eastman Tritan™ copolyester products also added to total revenue. Operating earnings of $31 million in the third quarter of 2010 was a two-fold increase from $13 million in the comparable quarter last year.
Liquidity
Stronger profits led to operating cash flows of $316 million. Eastman expects to generate free cash flow of above $300 million for full year 2010. The company plans to contribute $135 million to the U.S. defined benefit pension plan, of which $100 million is expected to be contributed in the fourth quarter.
Outlook
Eastman expects fourth-quarter 2010 earnings per share to be in the range of $1.40 and $1.50. The company anticipates strong volumes across all regions. As per the company, higher raw material and energy costs, particularly for paraxylene, could negatively affect its operating margins.
Eastman has a history of outperforming the Zacks Consensus Estimate. The company has outpaced the consensus estimate in all of the trialing four quarters, yielding a positive average surprise of 19.4%. This induces optimism on the stocks performance. Currently, Eastman has a short-term (1 to 3 months) Zacks #1 Rank (Strong Buy) and a long-term (6 months and higher) Outperform recommendation.
EASTMAN CHEM CO (EMN): Free Stock Analysis Report
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NiSource’s Mixed Qtr, Ups Guidance – Analyst Blog
Diversified utility NiSource Inc. (NI) posted net operating earnings of 4 cents per share in the third quarter of 2010, falling short of the Zacks Consensus Estimate of 6 cents and the year-ago quarter’s operating earnings of 7 cents. Benefits from electric industrial margins and off-system sales, as well as increased gas distribution revenues were offset by increases in operating expenses, taxes and depreciation, leading to the drop in earnings.
Revenues
Gross revenue improved 11% year over year to $1,004.5 million, outperforming the Zacks Consensus Estimate of $1.04 billion. Gross revenues increased at its three business segments – Electric Operations (highest year-over-year growth among the segments of 16%), Gas Transportation and Storage (12%) and Gas Distribution (7%). However, Corporate and Other Operations dropped 12%.
Total net revenues (gross revenues net of cost of sales) upped 4% to $708.4 million. On a net revenue basis, Electric Operations increased 9% and Gas Distribution upped 5%. However, Gas Transportation and Storage went down 2%.
Operational Update & Segment Performance
Total operating expenses went up 9% in the quarter to $602 million. Operating expenses excluding the impact of trackers went up 2% to $565.3 million. NiSource's adjusted operating income plunged 31% to $109.9 million in the quarter.
Gas Distribution Operations: Operating expenses, excluding trackers, increased 8% to $261 million due to higher employee and administration costs, including the impacts of the previously deferred 2009 pension costs by Columbia Gas of Ohio. The segment reported an operating loss of $40.7 million, which aggravated from the loss of $30 million in the year-ago quarter. Revenue increase was partially offset by a decrease in commercial and residential margins as well as a decrease in off-system sales in addition to an increase in operating expenses.
Gas Transmission and Storage Operations: Operating expenses, excluding trackers, upped 12% to $128.4 million reflecting increase in maintenance and other outside service costs and employee and administration expenses, including pension costs. Operating earnings declined 24% to $76.4 million driven by a decline in net revenues and increase in operating expenses.
Electric Operations: Operating expenses, excluding the impact of trackers, increased 5% due to increased employee and administration costs, higher electric generation costs and higher taxes. This was the only segment to post an increase in operating earnings, reaching $80.0 million from $69.6 million in the year-ago quarter.
Corporate and Other Operations: The segment posted an operating loss of $5.8 million in the quarter versus a loss of $5 million in the year-ago quarter.
Financial Position
As of September 30, 2010, NiSource had cash and cash equivalents of $10.9 million, up from $16.4 million as of December 31, 2009. For the nine months ended September 30, 2010, the company generated operating cash flows of $387.4 million, substantially down from $1.31 billion in the comparable year-ago period.
NiSource successfully executed a $400 million equity offering of common stock in September. This enhances its ability to invest in new infrastructure improvements and growth opportunities.
As of September 30, 2010, the company’s debt-to-capitalization ratio increased to 60% from 58% as of June 30, 2010.
Other Updates
Management also highlighted steady progress on NiSource's key business priorities, including the advancement of customer service, achievement of regulatory initiatives at Northern Indiana Public Service Company (NIPSCO), strategic investments in the Marcellus Shale region of Appalachia, and execution of its strategy of combining long-term infrastructure replacement programs with complementary regulatory initiatives in its Gas Distribution Operations.
Outlook
Based on NiSource's results in fiscal 2010 so far and signs of gradual economic recovery in some of its key markets, the company hiked its fiscal 2010 net operating earnings outlook to $1.20 to $1.25 per share from the previous outlook of $1.10 to $1.20. The company reiterated its target of achieving 3% to 5% earnings growth in the long term.
Our Take
We believe the company’s regulated operations should see significant growth, as they operate in an area that accounts for nearly 50% of the nation’s natural gas consumption and where over 40% of the population is based. The recent equity issue removes a key apprehension on the stock. The issue makes way for the company to reach its $1 billion investment target while comfortably meeting its long-term 3%-5% EPS growth target. NiSource’s strategy of divesting its non-core businesses and transforming into a pure play regulated company bodes well in our view.
However, the lack of near-term earnings growth opportunities, due to multiple regulatory overhangs, continues to be a concern. We currently have a Zacks #3 Rank (short-term Hold recommendation) on the stock.
Merrillville, Indiana based NiSource is an energy holding company whose subsidiaries provide natural gas, electricity and other products and services in the U.S. Its operating subsidiaries deliver energy to customers within the high-demand energy corridor stretching from the Gulf Coast through the Midwest to New England.
NISOURCE INC (NI): Free Stock Analysis Report
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Itron’s Record Quarter – Analyst Blog
Itron Inc. (ITRI) delivered record earnings per share (EPS) of $1.06 in its third quarter ended September 30, 2010, zooming past the Zacks Consensus Estimate by an impressive 21 cents, and more than doubling the EPS of 45 cents in the year-ago quarter. The year-over-year improvement was driven by robust sales in North America.
Adjusted EPS for both the reported and comparable quarters exclude amortization of intangible assets, amortization of debt placement fees, the amortization of convertible debt discount, and the non-cash net loss associated with the convertible debt-for-stock exchange. Including these items, EPS in the quarter was 71 cents compared with a loss per share of 7 cents a year ago.
Revenues
Revenues surged 41% year over year to a record $576 million, well above the Zacks Consensus Estimate of $525 million, mainly driven by a whopping 130% increase in revenues in North America, which was partially offset by a 4% decline in International revenues.
Cost & Margin Performance
Cost of revenues spiked 40% to $392 million in the quarter and, based on revenues; it dipped 30 basis points to 68%. Gross profit shot up 42% to $184.2 million and gross margin expanded 30 basis points to 32%.
Total operating expenses (which comprise sales and marketing, product development, general and administrative expenses excluding amortization of intangibles) went up 11% to $105.9 million mostly due to increased compensation expense resulting from the reinstatement of bonus and profit sharing plans. Based on revenues, operating expenses improved 500 basis points to 18.4%. Itron’s adjusted operating income more than doubled to $78.3 million from $34.1 million in the prior-year period. Adjusted operating margin soared 520 basis points to 13.6% in the quarter.
Segment Performance
Itron North America led the performance with a year-over-year growth of 130% to a record $315 million driven by higher shipments of Open Way meters (1.3 million) and modules. Open Way meters contributed 50% to the segment’s revenue. The segment’s gross margins soared 450 basis points to 35.5% driven by higher volumes and cost reduction efforts. The segment posted an operating profit of $64.6 million, reversing the loss of $1.2 million incurred in the year-earlier quarter.
Itron International revenues on the other hand dropped 4% to $260.6 million, affected by foreign exchange rates. Gross margins suffered a decline of 430 basis points to 27.85% due to increased warranty expense, facility consolidation and material costs. Operating income dropped to $7.6 million from $17.3 million. Operating margin was 3% compared with 6% in the year-earlier quarter.
Bookings and Backlog
As of September 30, 2010, Itron’s total backlog was $1.7 billion compared with $1.6 billion as of September 30, 2009. The twelve-month backlog was $958 million as of September 30, 2010, higher than $749 million as of September 30, 2009. Bookings in the quarter were $528 million compared with $400 million in the third quarter of 2009.
Financial Position
As of September 30, 2010, Itron had cash and cash equivalents of $148.1 million, up from $137.4 million as of June 30, 2010. During the quarter, the company generated operating cash flows of $50 million compared with $19.7 million in the year-ago quarter. Free cash flow generated during the quarter was $32.2 million, substantially higher than the year-ago free cash flow of $9.5 million.
As of September 30, 2010, the company paid back its debt, thus improving its debt-to-capitalization ratio to 32% from 34% as of June 30, 2010.
Our Take
The technology-based advanced metering infrastructures (AMI) and automated meter reading (AMR) markets have huge growth prospects in the years to come, providing Itron with ample scope for growth and expansion. Two driving forces facilitating AMI and AMR growth are the cost reduction strategies implemented by almost all the companies to deal with the economic recession and its subsequent slow recovery, necessitating efficient allocation of energy supply to meet the increasing demand.
Recently, Itron entered into a project contract with Cleveland Division of Water (Cleveland), the largest water provider in the United States. The contract enables the latter to deploy the former’s smart water metering solution in increasing the operational efficiency and providing upgraded services to its customers.
This contract is considered Itron’s largest water meter automation project in North America and is expected to bring long-term benefits. Another project of great value is with Severn Trent Water, one of the leading water and waste water providers in the U.K. We currently have a Zacks #2 Rank (short-term Buy recommendation) on the stock.
Itron is a leading technology provider to the global energy and water industries. It is the world's leading provider of intelligent metering, data collection and utility software solutions, with nearly 8,000 utilities worldwide relying on its technology to optimize the delivery and use of energy and water.
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