Cooper Industries Plc (CBE) reported earnings from continuing operations of 76 cents for the fourth quarter of 2009, exceeding the Zacks Consensus Estimate of 67 cents.
Fourth quarter 2009 revenues decreased 17.5% to $1.26 billion, compared with $1.52 billion for the same period last year. Core revenues were 19.8% lower than the comparable prior year with currency translation increasing reported revenue by 2.0% and acquisitions adding 0.3% for the quarter.
During 2009 Cooper generated $632.6 million in free cash flow (including a $90 million discretionary income tax deposit), compared with the record $761.2 million for 2008. Its total debt, net of cash and investments, totaled $552.8 million as of Dec 31, 2009, compared to $952.4 million at Dec 31, 2008. The balance sheet remains in great shape with net debt to total capitalization of 15.7% at the end of 2009, compared to 26.8% at the end of 2008.
Segment Results
Revenues for the Electrical Products segment decreased 18.8% in the fourth quarter of 2009 to $1.10 billion, compared with $1.36 billion in the fourth quarter 2008. Core revenues were 20.6% lower than the comparable prior year periods with currency translation increasing reported results by 1.5% and acquisitions adding 0.3% to reported revenues for the fourth quarter. Segment operating earnings, excluding the impact of restructuring and asset impairment charges, were $171.2 million, a decrease of 14% from the $198.1 million in the prior year's fourth quarter.
Revenues for the Tools segment were $153.5 million in the fourth quarter of 2009, down 7% from 2008 fourth quarter revenues of $165.1 million. Excluding the effects of currency translation, which increased reported revenues in the quarter by 6.2%, core revenues for the quarter were 13.2% lower than the 2008 fourth quarter. Segment operating earnings, excluding restructuring charges, were $12.7 million, compared to the fourth quarter 2008 earnings of $17.5 million. Segment operating margin for the fourth quarter 2009, excluding restructuring charges, was 8.3%, compared to 10.6% for the comparable prior-year period. Sequentially from the third quarter of 2009, the Tools segment revenues increased 10.3% with segment operating margins increasing 340 basis points, excluding unusual items.
Market Overview
The industrial market, the company's biggest end market with revenue contribution of 39% in 2009, has shown steady signs of recovery over the preceding two quarters. There are improving trends in MRO and OEM markets despite overall factory utilization still below 70%.
The commercial construction market, grossing 24% of 2009 revenues, continues to see difficult market conditions into 2010 with vacancy rates climbing, rents falling and continued restrictive lending practices. There is an increased demand for energy efficient products, and we expect related sales to remain strong throughout 2010.
In the utility markets, facilitating 22% of 2009 sales, there has been little or no improvement over the prior two quarters, with transformers and regulators down significantly while capacitors and smart grid solutions are growing.
The company's international markets were solid, essentially flat with the prior year. And finally, the residential or retail sales market, with 10% of 2009 sales, were flat for the second half of 2009 and down by a mid-teen percentage compared to the prior year, but are beginning to show signs of a modest recovery.
Earnings Estimate Revisions
For 2010 the company has initiated guidance for EPS from continuing operations of $2.70 to $2.90, excluding restructuring and unusual items, with revenue down 1% to up 4%, including currency translation and acquisition revenue of approximately 2%.
For the first quarter of 2010, Cooper expects earnings per share of 65 cents to 70 cents, excluding restructuring and unusual items, with revenue down 3% to up 2% compared to both the first quarter 2009 and sequentially with the fourth quarter 2009 results.
The current Zacks Consensus Estimate for the first quarter of 2010 stands at 69 cents, while the full year 2010 is at $2.90. Over the last 7 days, there were no upward revisions to the 1Q 2010 estimate. Ten out of 12 analysts have revised their estimates upwards in the last 30 days.
The stock has consistently beaten estimates over the trailing four quarters in a row. The average amount of earnings surprise has been 7.14%. The slow economic recovery has not translated to overall revenue growth across all of the company's products and services. Cooper's fourth quarter results demonstrate how well it is positioned to deliver strong earnings growth as its markets recover. This positive outlook has resulted in a Zacks #2 Rank for the stock, which implies a "Buy" recommendation in the short-term (between 1-3 months).
We currently have a long-term "Neutral" recommendation on CBE.
No comments:
Post a Comment