Science & Technology
Science and Technology
Science and Technology
Wed, October 27, 2010
Tue, October 26, 2010
Texas Instruments, Intel, United Continental Holdings, Delta Airlines and AMR
CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: Texas Instruments (NYSE: [ TXN ]), Intel (Nasdaq: [ INTC ]), United Continental Holdings Inc. (NYSE: [ UAL ]), Delta Airlines (NYSE: [ DAL ]) and AMR Corporation (NYSE: [ AMR ]).
"reflecting a combination of seasonal patterns, continued soft demand in computing and consumer markets, and slowing growth in the industrial market."
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Here are highlights from Mondaya™s Analyst Blog:
Texas Instruments Outperforms
Dallas-based Texas Instruments (NYSE: [ TXN ]) reported fiscal 3rd quarter earnings for 2010 after the closing bell Monday. Texas Instruments beat estimates on both the top and bottom lines: revenues came in at $3.74 billion for the quarter and EPS of 71 cents per share, topping the Zacks Consensus Estimates of $3.69 billion and 69 cents per share, respectively. Year over year EPS growth is up an impressive 69% from 42 cents per share in the 3rd quarter of 2009.
Although Texas Instruments had a relatively eventful quarter -- TXN sold its cable modem business to Intel (Nasdaq: [ INTC ]) in August, upped its dividend and announced the development of the first 0.9-volt microcontroller for electric toothbrushes, razors, etc. -- analysts had scarcely put a dent in their earnings estimates over the course of the quarter. The 69 cents per share estimate had not wavered over the past 90 days, and the full-year 2010 EPS consensus estimate of $2.47 is down just a penny from the start of the quarter.
Texas Instruments' CEO Rich Templeton cited growth in all company segments for the quarter, especially industrial market demand. Templeton conceded that consumer demand had cooled in the quarter. For the 4th quarter, Texas Instruments expects revenues between $3.36 and $3.64 billion, on EPS between 59 and 67 cents per share.
Regarding the lower estimates, Temple said this was "reflecting a combination of seasonal patterns, continued soft demand in computing and consumer markets, and slowing growth in the industrial market." The Zacks Consensus Estimates for next quarter are $3.49 billion in revenues and 63 cents per share.
The positive earnings surprise of 2.89% is a tad below the average of 5.26% over the previous four quarters, but an improvement of the earnings meet of 62 cents in TXN's fiscal 2nd quarter.
Texas Instruments expects to gain market share with its recently obtained manufacturing facilities in China and Japan. Currently, TXN shares carry a Zacks #3 Rank (Hold), which is supported by its longer-term Neutral recommendation.
Strong 3Q for United Continental
United Continental Holdings Inc. (NYSE: [ UAL ]), the holding company for both United Airlines and Continental Airlines, reported its individual third quarter earnings on October 21, 2010. The combined results will be produced by the company with its fourth quarter results.
United Continental Holdings has been newly formed by the merger of Continental Airlines with UAL Corp. on October 1, 2010. The merger has created the worlda™s largest airline, overtaking Delta Airlines (NYSE: [ DAL ]), which acquired Northwest Airlines in 2008.
United Airlines is on track for a profitable year after a long drought through its merger. The company is benefiting from the rebound in traffic, including an increase in business travel and premium service demand, as well as high fares.
Earnings
United Airlines: United Airlines reported adjusted earnings per share of $2.12 compared with net loss per share of 41 cents in the year-ago quarter.
Continental Airlines: Continental generated adjusted earnings of $2.24 per share compared with 2 cents in the year-ago quarter.
United and Continentala™s improvement in earnings were led by strong business and overseas travel demand.
Revenue
United Airlines: United Airlinesa™ total revenue climbed 21.7% year over year to $5.4 billion in the third quarter. Airline traffic is measured in billions of revenue passenger miles (RPMs), which is the revenue generated for every mile a passenger flies. Consolidated RPMs grew 3.9% while capacity or available seat miles increased 2.6% year over year, resulting in a load factor (percentage of seats filled by passengers) of 85.9%, up 100 bps year over year. Passenger revenue per available seat mile saw an 18.3% jump from the year-ago quarter.
On an annualized basis, Passenger revenue increased 21.4% while Other revenue rose 16.8%. Cargo revenue shot up 40% year over year owing to improvement in both volume and yields across all regions, particularly trans-Pacific markets, driven by the growing cargo demand.
Continental Airlines: Continental's total revenue was $4 billion, up 19.2% year over year during the reported quarter. Consolidated RPMs grew 1.6% while capacity increased by a modest 0.6% year over year, resulting in a load factor increment of 80 bps to 85.9%. Passenger revenue per available seat mile climbed 19.8% year over year.
On an annualized basis, Passenger revenue increased 20.6% while Other revenue inched up 1.8%. Cargo revenue shot up 25% year over year attributable to increased freight volume.
Operating Expenses
United Airlines: Total operating expenses, excluding special items, increased 10.7% year over year. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel and special items, upped 5.7% year over year, while CASM, including fuel, increased 7.9% year over year.
Continental Airlines: Total operating expenses, excluding special items, increased 8.1% year over year, primarily from higher fuel costs. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel and special items, upped 6.3% year over year, while CASM including fuel grew 7.5% year over year.
Liquidity
The combined company ended the quarter with cash equivalents including short-term investments of $9.1 billion. United Continental generated combined operating cash flow of approximately $750 million and spend approximately $185 million during the reported quarter.
Our Analysis
The newly formed company is expected to enjoy a favorable position in an increasingly competitive global and domestic aviation industry and perform better than any airline standing alone. The combined entity is expected to generate net annual synergies of $1 to $1.2 billion by 2013, with $800 to $900 million in additional revenue and $200 to $300 million in cost savings. However, United Continental expects the integration process to take 12 to 18 months.
United Continental will leapfrog Delta, Air France-KLM and American Airlines, a wholly owned subsidiary of AMR Corporation (NYSE: [ AMR ]). It will likely have one of the industry's best cash positions, industry-leading revenues and a competitive cost structure. The strong liquidity gives the new company a flexibility to pay down its debt.
We are currently maintaining our Neutral recommendation, supported by our Zacks #3 Rank (Hold).
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