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WDAY : NYSE : US$65.75
Workday provides enterprise-scale, cloud applications that deliver the core functions for global customers to manage the human capital and financial resources of an organization. Solutions include: HCM, Financial Management, Payroll, Time Tracking, Procurement, Employee Expense Management, etc. Workday was founded by the former founders of PeopleSoft in 2005 and is headquartered in Pleasanton, CA.
Workday delivered another of what we expect to be several more years of quarterly beat and raises. In a world of near-zero interest rates, a fast scaling firm like WDAY is likely to see its revenue growth exceed gradual multiple compression so that investors can logically expect 15%+ annual rates of return on the stock. Reiterate BUY and increasing price target to $75 (up $5).
Strong start to FY: another upside quarter. WDAY reported Q1/14 revenues of $91.6M, which was $4.1M ahead of our estimate and represented
normalized y-o-y growth of 75% (99% on the subscription line). Calculated billings of $107.3M were up 31% y-o-y and beat our estimate by $1.5M.
WDAY generated free cash flow of $15.3M (inclusive of several one-time gains), which was well ahead of our expectation for a material loss.
Business highlights: large enterprises continue to select WDAY. During the quarter Bristol Myers and Levi Strauss chose WDAY for HR as well as
University of Miami for the full WDAY applications suite. Notable go-lives in the quarter included Johnson & Johnson, London Stock Exchange, and Cornell University. WDAY ended the quarter with more than 450 customers, of which 290 are live (up from 265 at the end of last quarter).
Outlook: go-forward estimates inch nicely higher again. WDAY increased F2014 guidance by $5M and called for an operating loss that at mid-point was 250 bps better than last expected. We have increased our F2014 and F2015 revenue estimates by $8M and $10M, respectively, which are now 60% and 50% y-o-y revenue growth (and likely still a bit conservative
Posted by jackbassteam on May 24, 2013
ECL : NYSE : US$88.08
Based in St. Paul, Minnesota, Ecolab is a leading international provider of advanced technologies and services helping to optimize the use of resources such as water, energy, food and the environment
PRICE TARGET TO $100
We find Ecolab very well positioned to benefit from the convergence ofpopulation growth, resource volatility and rapid industrialization across
the world. The company’s recurring services model drives high visibility (even in an uncertain macro environment), while the energy platform
looks positioned for strong earnings growth post Champion. Maintain BUY.
We recently attended the National Restaurant Association (NRA) show in Chicago, including an impressive booth tour with CEO Doug Baker and presentation from Global F&B President Jill Wyant.
In short, from food and beverage “factories” all the way to the food court and fine dining, Ecolab offers a comprehensive portfolio of solutions to ensure food safety/regulatory compliance and optimize operational efficiency, among other benefits (environmental sustainability, etc.). Full details below.
The commitment to innovation is clear (including recent product introductions and healthy pipeline), while the outlook for Nalco cross-selling stays encouraging (3D TRASAR for clean-in-place, etc.).
Our 12 month target of $100 (from $93) equates to an EV/EBITDA multiple of ~11.8x from (~11.2x) our 2014 estimate.
Global macroeconomic conditions, seasonal sales patterns, commodity
costs, competition, regulatory dynamics and M&A integration
Posted by jackbassteam on May 22, 2013
English: Tournament Logo (Photo credit: Wikipedia)
DKS : NYSE : US$52.98
Dick’s Sporting Goods operates as a sporting goods retailer in the United States. It provides apparel, athletic shoes and accessories for sports. It also engages in ecommerce and catalog operations. Dick’s Sporting Goods was founded in 1948 and is headquartered in Pennsylvania.
When DKS reports Q1 results on Tuesday, May 21, we are anticipating an in-line quarter (48c on 0% comp), which in our opinion would be a
welcomed result given the challenges it faced during Q1. To no surprise, unfavorable weather likely muted any potential upside, particularly in
golf and team sports/baseball. That said, we believe there were pockets of strength (e.g., guns/ammo, footwear, and apparel) that mitigated the
weaker categories. Looking to the balance of the year, we believe the opportunity to drive outsized comps improves as weather normalizes
and compares ease, while the fundamental long-term growth thesis stays intact. We reiterate our BUY.
We are looking for GG comps to be down mid-teens with DKS store comps flat. Golf and baseball/team sports faced tough comparisons from last year’s perfect Q1 weather and the bat replacement cycle. That said, we believe guns/ammo experienced a significant increase that we estimate added 1% to comp. Also, the UA/NKE/adidas shopin- shops should continue to drive strong sales gains.
According to our industry checks, the competitive environment has remained rational as promotional activity has stayed in check. As such, we do not see risk to merchandise margins and commensurately we expect inventory levels to be clean.
Our $59 PT is an average of 18x 2014E EPS estimate/9x EBITDA
Posted by jackbassteam on May 17, 2013
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P : NYSE : US$16.57
Pandora radio is the market leader in personalized Internet-based radio listening in the US. The company uses its proprietary algorithms as part of the Music Genome Project to generate playlists for users that are personalized and cater to the tastes of individual users.
While competitive developments continue, we believe fundamentals at Pandora remain strong heading into Q1 earnings next week. Our proprietary analysis points to a growing audio ad load (driven by robust adoption of the STRATA integration) and higher quality of advertisers
(big national brands). In addition, the temporary 40-hour listener cap on mobile appears poised to dampen content costs. As such, several
positives are coming to a head at once. Given the timing, Q1 impact is hard to gauge but likely positive, while impact to Q2 and beyond should
be more positive. Our best estimate is that guidance should be somewhat bullish without being irresponsibly aggressive.
Our proprietary research (admittedly a small sample) indicates an audio ad load that has gone from 1.40 minutes per hour a month ago to 1.75 minutes currently. We believe this is being driven by sales force ramp, Triton measurement, and STRATA integration. This should drive higher RPMs.
We also believe subscription revenue and content costs could both show improvement in Q1 from the 40-hour mobile cap, with more impact in Q2 and beyond.
We believe Google’s newly announced $10/month “All Access” subscription service should have only a moderate competitive impact on Pandora’s listener base, which clearly likes free stuff.
Our $18 target is unchanged and is based on 32x our F2017 EPS estimate of $0.90, discounted to present at 12.1%.
Posted by jackbassteam on May 17, 2013
BrickArms BA-M5 and BA-M6 Prototypes (Photo credit: Dunechaser)
DDD : NYSE : US$43.85
3D Systems is a leading provider of rapid 3D printing, prototyping and manufacturing solutions used to create product concept models, precision and functional prototypes, master patterns for tooling, and end-use production parts for direct manufacturing. 3D Systems’ products allow complex three-dimensional objects to be manufactured directly from computer-aided design and manufacturing (CAD/CAM) software tools.
CONTINUED MULTIPLE EXPANSION
We are increasing our price target following healthy appreciation for DDD shares over the past month. While share count increases slightly on recent secondary, we believe DDD can deliver upside to consensus estimates driven by strong printer and services revenue. We also expect multiple expansion as the company moves into the commercialization phase for Bespoke (carpal tunnel braces) in H2 of this year. Reiterate BUY.
3D Systems completed a 7.5 million (includes 1.3 million insider shares) secondary share offering on Friday, May 10 before the open.
The secondary offering was priced at $40/share and DDD raised $300 million through the offering. DDD intends to use the proceeds to
finance further acquisitions and for general corporate purposes.
We are adjusting our model for the share dilution. Our C2013 EPS is revised down from $1.12 to $1.06 and our C2014 EPS is revised down from $1.62 to $1.52. Our revenue estimates remain unchanged.
DDD’s price target of $50 (was $45) is 33x our C2014 EPS estimate of $1.52, in line with Stratasys (SSYS : NASDAQ :$83.39 | BUY), which is
currently trading at 34x our C2014 EPS estimate. In the last two years on a NTM P/E basis, DDD has traded in the range of 16x to 43x compared to
SSYS at 16x to 47x.
Posted by jackbassteam on May 14, 2013
Mila (concept car division of Magna-Steyr) Alpin, 2008, seen at MOTOR SHOW ESSEN 2010 (Photo credit: Wikipedia)
MGA : NYSE : US$64.71
MG : TSX
Magna is a one of the world’s largest and most diversified Tier 1 automotive components suppliers, active in 25 countries. The company also provides
complete vehicle assembly services through its subsidiary, Magna Steyr.
Substantial Q1/13 upside surprise, guidance increased MGA reported EPS of $1.57, ahead of our $1.44 and the consensus mean $1.44. Positive surprises versus our forecast were on European sales and margins. 2013 guidance was also modestly increased.
We boosted our near-term forecast slightly given the guidance and boosted our mid-term forecast more significantly to model better European margins (but consistent with management’s goals). EPS was also boosted by our assumption that all of MGA’s current 12 million share buy back will be utilized, per management’s commentary.
Solid EPS growth expected
MGA produced 18% EPS growth in 2012 from strong North American sales and improved European margins. We forecast annual EPS growth
to slow to high single-digit to low double-digit rates through mid-decade from expectations of slowing industry growth in North America,
eventual gradual recovery in Europe, and modest margin expansion. Solid upside, with additional potential
We continue to recommend BUYing MGA for solid EPS growth, modest multiple expansion, and the potential for additional value creation from
cash deployment and/or business streamlining.
We expect EPS growth from forecast low- to mid-single-digit sales growth, based on booked business and gradual margin improvements in
Europe and Rest of World (ROW) segments.
We have boosted our valuation 0.5x to a 5.5x EV/NTM EBITDA multiple, as we think there is increasing investor interest in consumer growth
cyclical stocks like MGA. Our valuation and target is supported by our $77.61 DCF analysis.
Our target was boosted nicely (17%) this quarter based on the forecast increase, benefit from our usual one-quarter valuation period roll forward,
and the valuation boost.
Posted by jackbassteam on May 14, 2013
Dietary supplements, such as the vitamin B supplement show above, are typically sold in pill form. (Photo credit: Wikipedia)
NGVC : NYSE : US$25.20
Currently operating over 65 store locations, Natural Grocers by Vitamin Cottage is a retailer focused exclusively on natural and organic groceries (60% of sales), dietary supplements (30% of sales), and body/pet care products and health-minded books (collectively 10% of sales). Store locations span 13 states primarily across the Western US, with a particular geographic concentration in Colorado (31 stores) and Texas (10 stores).
We believe Natural Grocers is well positioned in a favorable industry with a growth equation that should drive high revenue and earnings growth. We anticipate high-single-digit comps and 20% unit growth should drive industry leading internal growth.
NGVC delivers $4.5 million of revenue upside vs. our forecast on a 10.6% comp. EPS was a penny above consensus while F2013 EPS guidance was unchanged.
F2013 guidance appears very achievable while increased unit growth (now 13 vs. 12) adds a penny to our F2014 EPS estimate to $0.61. F2013E EPS of $0.48 is unchanged.
New unit visibility is improved with all of F2013 leases signed, as well as 4 in F2014, while virtually all of the 2014 new locations have been identified.
The shares sport a premium valuation of 13x F2014E EBITDA reflecting the 20% unit growth and 10+% comps. Our $30 target (from $24) assumes 12.5x our preliminary C2015 EBITDA forecast in the $50+M range.
Posted by jackbassteam on May 13, 2013
Agriculture (Photo credit: thegreenpages)
AGU : NYSE : US$94.99
AGU : TSX
Agrium Inc. is a leading global producer and marketer of agricultural nutrients, industrial products, specialty fertilizers, and a major retail supplier of agricultural products and services in North America, South America and Australia.
All amounts in US$ unless otherwise noted.
Although the mid-point of Agrium’s guidance was below expectations, we don’t believe the market agreed with consensus given the spring planting delays to date and as a result, we see the guidance as a only a slight negative. The slow progress of the US spring planting has impacted the company’s outlook for the second quarter but not by as much as it could have been, as the weather has turned for the better.
Given Agrium’s earnings growth potential over the next few years, its relatively less volatile earnings profile and its exposure to a wide array of agricultural product offerings, we believe the overall demand across the agriculture input market will allow the stock to be a relative outperformer in the sector. Monsanto remains our top pick due to its earnings growth, market share increases and new product offerings. We continue to rank Agrium as our second preferred equity to own. We would then follow that with Mosaic and Potash Corp (in that order). We remain with our neutral view on the potash producers, as we believe the potash market lacks sufficient catalysts regarding an upside surprise in industry volumes or pricing in 2013. However, we believe Mosaic offers opportunities for a significant amount of cash to be returned to shareholders in the near term.
Agrium reported adjusted Q1/13 EPS of US$1.03 versus our and consensus estimate of US$1.08. Total gross margin was weaker than expected at US$716 million versus our expectation of US$791 million. Softer nitrogen gross profit (US$173 million versus our US$197 million) and a weaker retail segment (US$376 million versus US$413 million) were responsible for the discrepancy. Management guided Q2 EPS to a range of US$4.60-5.40. The company also announced an NCIB bid.
We continue to rate the shares of Agrium a BUY but have lowered our target price to US$118 from US$120, based upon a 12x multiple to our blended 2013E/2014E EPS.
Posted by jackbassteam on May 13, 2013
TITLE: Sod house. McKenzie County, North Dakota (Photo credit: Wikipedia)
EOG : NYSE : US$135.69
EAGLE FORD DRIVES FURTHER GAINS IN CAPITAL PRODUCTIVITY
We increased our target price $18 to $194 per share due to ~10% increase in capital productivity (underpinned by the Eagle Ford) and a
higher oil price realization. The Eagle Ford comprises almost 50% of EOG’s capital outlays this year. Simply put, EOG’s Eagle Ford leasehold
generates the highest returns of any large-scale NAM resource play.
Our liquids growth outlook of ~28% is toward the high end of guidance (16%-30%). The calibration of capital and production imply EOG’s
capital productivity is ~15% superior to industry (liquids-normalized).
Further improvement in Eagle Ford well performance: In the latest quarter, ~20 select wells in Gonzales/Karnes Counties (“east area”)
commenced production at over 4,000 Boepd (~90% liquids) suggesting recoveries of 2,000+ Mboe. Year-to-date, Eagle Ford wells have commenced production at ~1,200 Bopd the first 30 days, suggesting a recovery of ~850 Mbo for a cost of ~$6 million per well.
This represents a ~30% improvement in well performance versus last year. Wells in the “east area” average ~1,600 Boepd the first 30 days, suggesting recoveries of 1,000-1,100 Mboe and wells in the “west area” average ~800 Boepd the first 30 days, suggesting recoveries of 500-600 Mboe.
Strong initial Three Forks Second Bench test, continued robust 160- acre down spaced results in core Parshall field: Recent infill Bakken
tests in the Parshall field on 160-acre spacing have commenced production at an average 30-day rate of ~2,000 Bopd, suggesting recoveries of ~1,000 Mbo per well. In the Antelope area, southwest of the Parshall field in McKenzie County, a Three Forks Second Bench test commenced at 3,150 Bopd.
Posted by jackbassteam on May 9, 2013