In this second in a series about these five sector leaders, I look at each company’s most recent earnings statement and review trends to see how each holds up to its peers.
E.I. du Pont de Nemours and Company Inc. (DD) – This chemical giant reported a 32 percent increase in total sales for the quarter ended Sept. 30. Net income for the quarter totaled $452 million, which is up 23.20 percent year over year from $367 million. Basic earnings per share for the quarter were up year over year to $0.48 from $0.40. Management attributes the increase to higher prices and favorable currency exchange rates. Costs were also up year over year, thanks to higher expenditures on selling its products, marketing/research and development, raw materials, energy and freight. Company officials raised expectations for the year to between $3.97 and $4.05 per share.
Trailing 12-month earnings per share were $3.68, and DD’s price-to-earnings ratio is 12.15. Industry average earnings per share were 2.44, and the average price-to-earnings ratio is 9.31.
Its copper mining peer Freeport McMoran (FCX) reported quarterly revenue of $5.195 billion, up very slightly year over year from $5.152 billion. Costs were also up across the board, and net income was down 10.5 percent year over year to $1.1 billion from $1.2 billion. Basic earnings per share for the third quarter were down year over year to $1.11 from $1.25. The company attributes the decline in total sales to lower copper sales in Indonesia, and South America, and labor strikes in Indonesia. Company officials estimate that without the strikes, sales from Grasberg would have exceeded forecasts.
Trailing 12-month earnings per share were $5.72, and the company’s price-to-earnings ratio is 6.28. Industry average earnings per share were not available, and the average price-to-earnings ratio is 10.23
Based on earnings, DD is in a much better position to sustain performance and returns for shareholder. Its price-to-earnings ratio signals quite a value. While FCX boasts interests in the most desirable areas in the world, these resources are concentrated in regions prone to certain risks, and its share price reflects this.
Exxon Mobile (XOM) - Total revenue and other income for this major integrated oil and gas company totaled $125.33 billion, up year over year from $95.3 billion. Costs were also up. Third-quarter earnings were up 41 percent year over year to $10.33 billion, thanks to higher crude oil and natural gas prices and improved refining margins. This boils down to quarterly earnings per share of $2.13, up 48 percent from $1.44 year over year.
XOM’s trailing 12-month earnings per share were $8.28, and its price-to-earnings ratio is 9.16. Industry averages are $2.42 and 11.12, consecutively, so XOM is faring well.
Schlumberger Ltd. (SLB) reported $10.23 billion in third-quarter revenue, which is up from $6.85 billion year over year. Income totaled $1.32 billion, which is up 12 percent year over year, and diluted earnings per share were $0.98, which is up from $0.70 for the same period last year. SLB’s trailing 12-month earnings per share of $3.38 is much higher than its industry average of $0.09. Its price-to-earnings ratio of 20.47, compared with the industry average of 14.29, indicates that it is trading at a premium.
XOM’s strong third quarter earnings results support a purchase, particularly by buy-and-hold and dividend investors. SLB is also a strong company, but it is higher priced relative to its peers and earnings.
Caterpillar Inc. (CAT) - Third quarter sales for this manufacturer of construction and mining equipment, engines, industrial gas turbines and locomotives reached $15.72 billion, which is an increase of 41 percent year over year. Earnings were up 44 percent to $1.141 billion from $792 million for the same period last year. Earnings per share were up 40 percent to $1.71 from $1.22. Earnings figures account for CAT’s recent purchase of Bucyrus International Inc. Company officials said the strong results are due to improved demand, primarily for new equipment, and managing costs, among other things. Costs were up, too, primarily due to increased production, higher incentive compensation, material, particularly steel and freight costs. Management revised its 2011 revenue outlook to $58 billion from a range of $56 to $58 billion.
CAT’s trailing 12-month earnings per share were $6.54, and its trailing 12-month price to earnings ratio is 13.98. This compares with the industry average of $4.32 and 8.92.
Its sector peer General Electric Company (GE) reported third-quarter revenue of $35.4 billion. Without the impact of its NBC subsidiary’s merger with Vivendi Universal Entertainment, it is an increase of 12 percent year over year. It is flat when including the merger. Costs were flat. Net earnings were up 48 perent year over year to $3.3 billion from $2.2 billion. Net earnings attributable to common shareholders totaled $2.343 billion, up 18 percent year over year from $1.98 billion. Earnings per share were $0.22.
GE’s trailing 12-month earnings per share were $1.31, which is slightly higher than the industry average of $1.18. Price-to-earnings ratio is 11.31, which is also slightly higher the industry average.
CAT clearly outperforms its industry peers in terms of earnings, and it makes a very attractive addition to long-term and dividend portfolios of conservative investors. GE is also an attractive company, though its most recent earnings results are not quite as strong.
Southern Company (SO) – Revenue for this southeastern U.S. electric utility totaled $5.43 billion, up 2 percent year over year from $5.32 billion. Management said kilowatt-hour retail sales decreased 3.3 percent while industrial sales increased 1.6 percent. Residential sales decreased 6.3 percent, and commercial sales fell 3.4 percent. Earnings increased to $916 million or $1.07 a share. This compares with $817 million or $0.98 a share for the same period last year.
SO’s trailing 12-month earnings per share were $2.45, and its price-to-earnings ratio is 17.44. This compares with its industry averages of $0.26 and 14.09.
Its Midwestern peer Wisconsin Energy Corp. (WEC) reported revenue of $1.053 billion for third-quarter 2011, up from $973.2 million for the same period last year. Net income was also up, totaling $129.8 million versus $112.3 million for the same quarter last year. Undiluted earnings per share were $0.55 compared with $0.47 for third-quarter 2010.
WEC’s trailing 12-month earnings per share were $227, which is much higher than its industry average of $0.40. Its price-to-earnings ratio is 14.10, which is slightly higher than the industry average of 13.91.
Both companies are trading at prices relative to earnings that are a higher than industry averages. They may not fire sale, but they are steady, low-risk performers.
Procter and Gamble (PG) – This consumer products manufacturer reported net sales of $21.92 billion for the first fiscal quarter ended Sept. 39, which shows a 9 percent increase from $20.122 billion year over year. Costs were up 14 percent. Net earnings for the first fiscal quarter came in at $3.024 billion, down 2 percent year over year from $3.081 billion. Basic net earnings for the first quarter were $1.08, and diluted net earnings were $1.03. This compares with $1.07 and $1.02 for the same quarter last year, a 1 percent increase. Company officials expect net sales to increase by 3 to 5 percent in the next quarter.
PG’s trailing 12-month earnings per share were $3.94, which is notably higher than the industry average of $1.33. PG’s price-to-earnings ratio of 15.81 is less than the industry average of 20.53.
Its sector peer Kraft Foods Inc. (KFT) reported an 11.5 percent increase in net revenue to $13.226 billion form $11.863 billion. Costs increased 14.2 percent. Net earnings increased 22 percent to $927 million from $760 million, which breaks down to earnings per share of $0.52 versus $0.43, or a 20.9 percent increase, year over year. Management attributed improved marketing and successful new products as forces driving the increase in net revenue. Because of the company’s positive results, officials upped its organic revenue estimate to at least a 6 percent, increase from a 5 percent increase and increased its operating earnings per share estimate $0.02 to $2.27.
KTF’s trailing 12-month earnings per share of $1.83 compares with the industry average of $0.71, and its price-to-earnings ratio of 19.03 is higher than the industry average of 14.73.
PG has struggled with the sluggish economy, but it remains a strong company that is trading at a value. KFT is also a very strong company, though it is trading at a premium to its earnings.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.