Important Earnings Announcements From Tuesday, June 19th

by: The Value Investor

Many corporations opened their books yesterday on June 19, and these included a couple of big names such as Adobe Systems, FedEx and Walgreen. The following is a brief review of the most important facts pertaining to their reports.

Adobe Systems (ADBE) reported its third quarter results yesterday. Revenues rose more than 10% to $1.12 billion with diluted earnings per share coming in at $0.45. The results were driven by the launch of "Creative Cloud" and "Creative Suite 6" and a strong growth at the company's Digital Marketing Suite business. Shares fell 4% in after hours trading, as the company guided for a weak third quarter. Revenues for the third quarter are expected to come in between $1.075 billion-$1.125 billion and GAAP earnings per share between $0.38-$0.43, suggesting a quarter-on-quarter decline in revenues and earnings. This guidance came as a negative surprise to investors.

Jabil Circuit (JBL), a provider of electronic manufacturing services, reported its third quarter results yesterday. The company reported third quarter revenues of $4.3 billion, up 2% on the year. GAAP net income fell 3% to $101 million, or $0.64 per diluted share. Jabil expects fourth quarter revenues of $4.1-$4.35 billion, with GAAP earnings per share coming in at $0.43-$0.55. Despite the disappointing outlook, which came in below expectations, shares rose more than 2% in after hours trading. This is as the company continues to "partner" with Research in Motion (RIMM), which is shrinking its supply chain base. Investors grew nervous that Jabil might lose the business of the Canadian troubled mobile phone maker.

Walgreen (WAG), a pharmacy chain, reported its third quarter results yesterday. Net income fell 11% to $537 million, with diluted earnings per share falling 5% to $0.62. Earnings were negatively impacted by $0.06 per share as a result of the fact that the company stepped out of the Express Scripts partnership. Sales fell 3.4% to $17.8 billion, driven by a 2.6% decline in traffic in its comparable stores. While the results were largely in line with expectations s,hares fell almost 6% in yesterday's trading session. The company announced it took a 45% equity stake in UK-based pharmacy chain Alliance Boots for a total consideration of $6.7 billion. Investors were not pleased that Walgreen expanded into Europe and they sold their shares, despite a 22% increase in quarterly dividends to $0.275 per share.

Discover Financial Services (DFS), a banking and payment services company, announced a second quarter profit of $537 million, or $1.00 per share, compared to $1.09 last year. Revenues rose 6% to $1.85 billion, driven by stronger net interest income. Profitability fell as the company boosted its legal reserves account by $90 million. Operational performance of the business was sound as the company reported a solid 9% growth in total loans, while credit card delinquencies fell to an historic low of 1.91%. The company which is heavily focused on its transaction business is diversifying its services. It recently announced its intention to originate $30 billion in mortgages per year and announced plans to expand into the student loans business. Shares in Discover Financial Services hardly moved in after hours trading, but have moved up significantly so far this year.

Barnes & Noble (BKS) reported its fourth quarter results yesterday. The company reported a 0.4% increase in revenues to $1.4 billion, while the net loss contracted 3% to $57.7 million, or $1.08 per share. For the full year of 2012, the company generated $7.1 billion in revenues on which it lost $69 million, or $1.41 per share. While the results came in better than expected, sales still fell 4% in yesterday's trading session, as investors were not happy that Microsoft announced the introduction of its own tablet "Surface". Investors were enthusiastic as Microsoft and Barnes & Noble announced a partnership for the latter's Nook tablet by the end of April. Ever since that point in time, shares in Barnes & Noble have fallen some 30%, with investors beginning to doubt Microsoft's commitment to the partnership.

FedEx (FDX) reported its fourth quarter results yesterday. The company earned $1.73 per share for the quarter compared to $1.75 last year. Earnings were impacted by a $0.26 impairment charge related to its aircraft fleet. Net income came in at $550 million on net revenues of $11.0 billion, which were up 4% on the year. Full year earnings came in at $2.03 billion, or $6.41 per diluted share. Shares in Fedex rose 2.8% in yesterday's trading session, despite the fact that the company is predicting headwinds for 2013. Pension expenses are expected to increase by $150 million due to historic low discount rates. A reduction in costs and improvement in efficiencies should improve margins however. For the full year of 2013, FedEx has guided for earnings per diluted share of $6.90-$7.40.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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