In today’s briefing:
- Graftech: Deleveraging Story Moves Out Even Further / Dead Money
- Still Expecting 4165-4200 on S&P 500 to Cap Upside; Buys Within Insurance and Steel/Metals
- The Interpublic Group of Companies Inc.: Major Drivers
- NCR Corporation: Major Drivers
- PTC Inc.: Major Drivers, Financial Forecasts, DCF & Comparables Valuation, ESG & Other Risks (03/23)
- Regeneron Pharmaceuticals Inc.: Major Drivers
- RingCentral Inc.: Major Drivers
- Southwest Airlines Co.: Major Drivers
- Steel Dynamics Inc.: Major Drivers
- The Williams Companies Inc.: Major Drivers
Graftech: Deleveraging Story Moves Out Even Further / Dead Money
- GrafTech International Ltd (EAF US) results for Q4 2022 were worse than expected, and guidance for volumes down 50% in H1 2023e was shocking.
- In summary, our intrinsic value was too aggressive, and there was a low margin of safety on the investment. Constant execution issues in a favorable environment didn’t help our cause.
- The stock isn’t as cheap when trading at 11.1x/9.5x FY23e/FY24e. The deleveraging story now gets pushed out to the end of FY25. The investment is dead money for two years.
Still Expecting 4165-4200 on S&P 500 to Cap Upside; Buys Within Insurance and Steel/Metals
- SPX is holding above its 200-day MA/3940 coinciding with its prior downtrend from 2022 near 3915; 3915-3940 remains critical support, and is the gateway to a much deeper pullback.
- Additionally, the Nasdaq 100 (QQQ) is breaking back above $297, another important line in the sand for us.
- The SPX holding at 3915-3940 could be the spark that allows another run toward YTD highs, but we continue to expect 4165-4200 to cap upside on the S&P 500.
The Interpublic Group of Companies Inc.: Major Drivers
- The Interpublic Group of Companies had a successful year and ended it on a positive note with an all-around beat.
- Its organic net revenue increase for the fourth quarter was 3.8%, bringing the three-year growth performance to 9.7%.
- IPG Mediabrands’ double-digit growth was the main driver of the 5% organic growth in Media, Data & Engagement Solutions.
NCR Corporation: Major Drivers
- NCR Corporation ended 2022 with a mixed result, surpassing the revenue expectations of Wall Street on account of a healthy business environment and robust demand.
- NCR achieved overall revenue growth of 13%.
- Besides that, they continue to see significant demand in the hotel sector from both their business and SMB clients.
PTC Inc.: Major Drivers, Financial Forecasts, DCF & Comparables Valuation, ESG & Other Risks (03/23)
- PTC produced a mixed set of results for the first quarter of fiscal 2023.
- The 14% organic ARR growth was followed by the additional point of inorganic growth from Codebeamer.
- They achieved this so rapidly by utilizing Windchill+’s out-of-the-box functionality, which PTC provided to the user as a secure preconfigured service.
Regeneron Pharmaceuticals Inc.: Major Drivers
- Regeneron Pharmaceuticals delivered impressive fourth-quarter results with revenues as well as earnings being well above analyst expectations.
- These initiatives position Regeneron for a potential U.S. launch in late August this year.
- We give Regeneron Pharmaceuticals a ‘Hold’ rating with a revised target price.
RingCentral Inc.: Major Drivers
- RingCentral delivered a mixed set of results and failed to meet the revenue expectations of analysts given the challenging macroeconomic backdrop.
- Given the importance of privacy and security to their consumers, management intends to keep investing in these areas to maintain their position.
- Furthermore, the company started a new collaboration with AWS to deliver technologies and ideas that enhance corporate communications for today’s hybrid workforce.
Southwest Airlines Co.: Major Drivers
- Southwest Airlines had a disastrous quarter and failed to meet the revenue expectations of Wall Street while continuing to face a variety of new difficulties.
- Also, consumer refunds and reimbursements continue to be a top priority as they remain laser-focused on their clients and future plans.
- Although disappointing, Southwest Airlines anticipates another loss in Q1 of this year due to a drag on revenue from the operational disruption.
Steel Dynamics Inc.: Major Drivers
- Steel Dynamics had a strong quarter, generating sales, earnings, and cash flow above market expectations.
- Sinton is demonstrating considerable operating improvement and has a clear path to profitability in the second quarter of 2023.
- While metal spreads continue to widen due to stable product pricing and decreased steel input costs, steel fabrication businesses had a solid quarterly operating income of $682 million.
The Williams Companies Inc.: Major Drivers
- Williams reported a solid quarter and managed an all-around beat driven by strong performance across its core businesses and JV upstream operations.
- Although operating and maintenance expenditures increased, primarily due to more frequent maintenance tasks, the company is still on track to meet its goals.
- This is an important step towards expanding the company’s core regulated utility business.
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