US Third Biggest Non-Technology Corps 2012 Annual Earnings Up 8.6%

I found 140 US Non-Technology Corps and Partnerships filing with the SEC with Annual Non-GAAP Adjusted After-tax Net Income of between $300 mil and $500 mil in either the annual fiscal year end (FYE) 2012 or 2011.   For January 2013 FYE companies, I am including them with the 2012 annual earnings numbers below.

Non-GAAP Adjusted After-tax Net Income excludes special, unusual items and is generally used by the investment community to value common stocks.  It was used below when this amount was disclosed in the company's earnings release and also was significant in amount relative to Reported GAAP Net Income.

How did they do?

Well, just fine, with Total 2012 Annual Non-GAAP Adjusted After-tax Net Income of $50.4 bil, up a very solid 8.6% over 2011.  This 8.6% Total Earnings Growth of these 140 third top tier Non-Technology Corps and Partnerships with Earnings between $300 mil to $500 mil is very consistent with both the 8.8% Total Earnings Growth of the 237 top tier Corps and Partnerships with Earnings above $1 bil and the 8.4% Total Earnings Growth of the 136 second top tier Non-Technology Corps and Partnerships with Earnings between $500 mil and $1 bil.  

Below here are these annual earnings of these 140 Third Biggest Non-Technology Corps and Partnerships for both 2012 and 2011:

				Non-GAAP	Non-GAAP
		Annual	Annual	Adjusted	Adjusted
		2012	2011	Net	Net
		Non-GAAP	Non-GAAP	Income	Income
		Adjusted	Adjusted	Increase	Increase
		Net	Net	(Decrease)	(Decrease)
		Income	Income	Amount	%
Company	FYE	mils of $s	mils of $s	mils of $s
Non-Technology Corps
Newell Rubbermaid	Dec	500	471	29	6.2%
Constellation Brands	Feb	488	408	80	19.6%
PVH	Jan	486	397	89	22.4%
FMC	Dec	483	429	54	12.6%
Ball Corp	Dec	483	460	23	5.0%
Herbalife Ltd	Dec	477	413	64	15.5%
Darden Restaurants	May	477	479	(2)	-0.4%
Sigma Aldrich	Dec	470	462	8	1.7%
Perrigo	Jun	469	375	94	25.1%
Wyndham Worldwide	Dec	469	414	55	13.3%
Whole Foods Market	Sep	466	343	123	35.9%
Pioneer Natural Resources	Dec	462	459	3	0.7%
Ametek	Dec	459	385	74	19.2%
Timken	Dec	456	454	2	0.4%
Oil States Intl	Dec	449	322	127	39.4%
Assurant	Dec	449	438	11	2.5%
Flowserve	Dec	448	429	19	4.4%
Weatherford Intl	Dec	447	342	105	30.7%
CH Robinson	Dec	447	432	15	3.5%
Waters Corp	Dec	439	444	(5)	-1.1%
Owens Illinois	Dec	438	404	34	8.4%
Albemarle	Dec	436	446	(10)	-2.2%
Ingredion	Dec	435	366	69	18.9%
NASDAQ OMX Group	Dec	432	455	(23)	-5.1%
FMC Technologies	Dec	430	400	30	7.5%
Varian Medical System	Sep	427	409	18	4.4%
Alexion Pharmaceuticals	Dec	425	266	159	59.8%
Family Dollar Stores	Aug	422	388	34	8.8%
Fastenal	Dec	421	358	63	17.6%
Southwest Airlines	Dec	417	330	87	26.4%
Crown Holdings	Dec	417	433	(16)	-3.7%
Tiffany	Jan	416	465	(49)	-10.5%
Magellan Midstream Partners	Dec	414	436	(22)	-5.0%
CarMax	Feb	414	377	37	9.8%
ADT	Sep	411	393	18	4.6%
Enbridge Energy Partners	Dec	410	465	(55)	-11.8%
Universal Health Services	Dec	408	392	16	4.1%
Energizer Holdings	Sep	408	365	43	11.8%
McCormick	Nov	408	374	34	9.1%
Reliance Steel	Dec	404	344	60	17.4%
Warner Chilcott	Dec	403	171	232	135.7%
GameStop	Jan	403	405	(2)	-0.5%
Henry Schein	Dec	399	368	31	8.4%
Genworth Financial	Dec	399	148	251	169.6%
CBRE Group	Dec	399	335	64	19.1%
Legg Mason	Dec	397	439	(42)	-9.6%
American Capital Ltd	Dec	397	448	(51)	-11.4%
Whiting Petroleum	Dec	394	456	(62)	-13.6%
Cincinnati Financial	Dec	393	119	274	230.3%
CareFusion	Dec	390	379	11	2.9%
Petsmart	Jan	390	290	100	34.5%
Concho Resources	Dec	389	430	(41)	-9.5%
Advance Auto Parts	Dec	388	395	(7)	-1.8%
Westlake Chemical	Dec	386	259	127	49.0%
Beam	Dec	386	335	51	15.2%
Green Mountain Coffee Roasters	Sep	382	249	133	53.4%
Foot Locker	Jan	380	281	99	35.2%
Jacobs Engineering	Sep	379	331	48	14.5%
H&R Block	Dec	377	393	(16)	-4.1%
Kansas City Southern	Dec	377	329	48	14.6%
HCC Insurance	Dec	376	255	121	47.5%
Towers Watson	Jun	376	331	45	13.6%
Dana Holding	Dec	375	357	18	5.0%
WR Berkley	Dec	374	310	64	20.6%
Hasbro	Dec	371	374	(3)	-0.8%
Hologic	Sep	368	336	32	9.5%
Equifax	Dec	364	312	52	16.7%
OneOK	Dec	361	361	0	0.0%
Transdigm	Sep	360	239	121	50.6%
Sirius XM Radio	Dec	359	261	98	37.5%
Sensata Technologies	Dec	357	356	1	0.3%
MetroPCS	Dec	354	301	53	17.6%
BOK Financial	Dec	351	286	65	22.7%
Arch Capital Group Ltd	Dec	351	303	48	15.8%
Church & Dwight	Dec	350	310	40	12.9%
ITT Exelis	Dec	349	371	(22)	-5.9%
KKR Financial Holdings	Dec	348	318	30	9.4%
Fossil	Dec	343	295	48	16.3%
Hatteras Financial	Dec	342	284	58	20.4%
Monster Beverage	Dec	340	286	54	18.9%
Alaska Air	Dec	339	287	52	18.1%
RR Donnelley	Dec	338	357	(19)	-5.3%
Teradyne	Dec	338	285	53	18.6%
Alliance Resource Partners	Dec	336	389	(53)	-13.6%
Raymond James Financial	Dec	334	303	31	10.2%
Invesco Mortgage Partners	Dec	334	282	52	18.4%
Expeditors Intl	Dec	333	386	(53)	-13.7%
Pall Corp	July	330	286	44	15.4%
Xylem	Dec	330	358	(28)	-7.8%
Ultra Petroleum	Dec	329	389	(60)	-15.4%
Jarden	Dec	329	304	25	8.2%
International Flavors & Fragrances	Dec	328	306	22	7.2%
Rock-Tenn	Dec	324	279	45	16.1%
KBR	Dec	322	480	(158)	-32.9%
Airgas	Mar	322	286	36	12.6%
Community Health Systems	Dec	319	302	17	5.6%
Dentsply	Dec	319	291	28	9.6%
Dun & Bradstreet	Dec	319	308	11	3.6%
Edwards Lifesciences	Dec	318	241	77	32.0%
Dick's Sporting Goods	Jan	318	254	64	25.2%
AutoNation	Dec	317	284	33	11.6%
Weyerhaeuser	Dec	316	178	138	77.5%
American Financial Group	Dec	314	363	(49)	-13.5%
Kennametal	Jun	314	248	66	26.6%
Protective Life	Dec	313	284	29	10.2%
Pentair	Dec	313	241	72	29.9%
Equity Residential	Dec	312	58	254	437.9%
Polaris Industries	Dec	312	228	84	36.8%
Rockwood Holdings	Dec	311	321	(10)	-3.1%
Two Harbors Investment	Dec	311	154	157	101.9%
URS	Dec	311	274	37	13.5%
Valspar	Oct	310	250	60	24.0%
JB Hunt Transport	Dec	310	257	53	20.6%
Dillards	Jan	309	229	80	34.9%
Mettler-Toledo Intl	Dec	308	275	33	12.0%
Dolby Labs	Mar	307	340	(33)	-9.7%
Boardwalk Pipeline Partners	Dec	306	217	89	41.0%
Snap-On	Dec	306	265	41	15.5%
Ventas	Dec	305	136	169	124.3%
United Therapeutics	Dec	304	217	87	40.1%
WR Grace	Dec	303	297	6	2.0%
Jefferies Group	Dec	302	232	70	30.2%
CB&I	Dec	302	255	47	18.4%
International Game Technology	Sep	301	279	22	7.9%
Hubbell	Dec	300	268	32	11.9%
Patterson UTI	Dec	299	322	(23)	-7.1%
MFA Financial	Dec	299	308	(9)	-2.9%
Linn Energy	Dec	293	313	(20)	-6.4%
WABCO Holdings	Dec	292	326	(34)	-10.4%
Alliant Techsystems	Mar	291	335	(44)	-13.1%
Weight Watchers	Dec	253	305	(52)	-17.0%
Hudson City Bancorp	Dec	249	330	(81)	-24.5%
Nabors Industries	Dec	239	342	(103)	-30.1%
QEP Resources	Dec	228	316	(88)	-27.8%
EQT	Dec	224	329	(105)	-31.9%
Kronos Worldwide	Dec	219	321	(102)	-31.8%
DeVry	Jun	218	330	(112)	-33.9%
Goodyear Tire & Rubber	Dec	183	321	(138)	-43.0%
ITT Educational	Dec	140	308	(168)	-54.5%
Walter Energy	Dec	31	364	(333)	-91.5%
Total all 140		50,428	46,421	4,007	8.6%

It should be pointed out that the XM Sirius above earnings numbers were adjusted to exclude the change in the deferred tax valuation allowance impact on reported earnings as well as the loss on debt extinguishment, net of tax.

US Third Biggest Technology Corps 2012 Annual Earnings Down 9%

I found 26 US Technology Corps filing with the SEC with Annual Non-GAAP Adjusted After-tax Net Income of more than $200 mil but not more than $500 mil in either the annual fiscal year end (FYE) 2012 or 2011 and which have released their 2012 annual earnings.   For January 2013 FYE companies, I am including them with the 2012 annual earnings numbers below.

Non-GAAP Adjusted After-tax Net Income, which is generally used by the investment community to value common stocks, was used when this amount was disclosed in the company's earnings release, and it excludes Special, Unusual Items which are significant in amount relative to Reported GAAP Net Income. 

How did they do?

Well, not so good, with Total 2012 Annual Non-GAAP Adjusted After-tax Net Income of $7.6 bil, down 9% from 2011.

This poor performance was pretty consistent with the 16% earnings decline in 2012 of the 24 Second Biggest Technology Corp.

On the other hand, the 32 top tier US Technology Corps with Non-GAAP Adjusted After-tax Net Income above $1 bil had their Total 2012 Annual Non-GAAP Adjusted After-tax Net Income increase by 14% over 2011.

This huge bifurcation in 2012 earnings between the top tier US Technology companies doing so well while the second and third top tier US Technology companies doing so poorly is not a good sign for the US economy.  You want these second and third top tier technology companies to be doing great too.....this is what will make the US economy thrive robustly in the long run.  A broad-based thriving Technology sector has always been the key competitive advantage of the US.

In these challenging times, taking wise steps to bolster the second, third and below tiers of the US Technology sector is what the US Congress should be working on, rather than on austerity, which does just the opposite.

Below here are these annual earnings of these 26 Third Biggest Technology Corps for both 2012 and 2011:

				Non-GAAP	Non-GAAP
		Annual	Annual	Adjusted	Adjusted
		2012	2011	Net	Net
		Non-GAAP	Non-GAAP	Income	Income
		Adjusted	Adjusted	Increase	Increase
		Net	Net	(Decrease)	(Decrease)
		Income	Income	Amount	%
Company	FYE	mils of $s	mils of $s	mils of $s
Technology
Roper Industries	Dec	494	427	67	15.7%
Teradata	Dec	489	399	90	22.6%
Amdocs Ltd	Sep	460	435	25	5.7%
Autodesk	Jan	450	405	45	11.1%
Expedia	Dec	439	385	54	14.0%
Cerner	Dec	421	325	96	29.5%
Microchip Technology	Mar	384	462	(78)	-16.9%
Skyworks Solutions	Sep	366	360	6	1.7%
Verisk Analytics	Dec	361	304	57	18.8%
F5 Networks	Sep	349	308	41	13.3%
Akamai Technologies	Dec	329	285	44	15.4%
VeriSign	Dec	322	249	73	29.3%
Synopsys	Oct	316	270	46	17.0%
Ingram Micro	Dec	306	244	62	25.4%
Electronics Arts	Mar	284	233	51	21.9%
Unisys	Dec	282	256	26	10.2%
Ansys	Dec	277	239	38	15.9%
Lexmark	Dec	244	367	(123)	-33.5%
FLIR Systems	Dec	225	223	2	0.9%
TripAdvisor	Dec	219	199	20	10.1%
ON Semiconductor	Dec	213	395	(182)	-46.1%
Tech Data	Jan	189	226	(37)	-16.4%
Atmel	Dec	145	438	(293)	-66.9%
Vishay Intertechnology	Dec	111	246	(135)	-54.9%
Netflix	Dec	17	226	(209)	-92.5%
AMD	Dec	-114	374	(488)	-130.5%
Total all 26		7,578	8,280	(702)	-8.5%

Common Stock Buybacks: Main Cause Of US Stock Market Sharp Ascent in 2013

In a previous post, I showed that the 30 Dow Industrial companies generated Total Earnings Growth in 2012 of 4.3% and company-earnings-weighted Total Earnings Per Share (EPS) Growth in 2012 of a much higher 7.1%.  Thus the Add-on Earnings Growth of 2.8% in 2012 was due to very robust common stock buyback programs, which many of the Dow Industrials have.

http://wuerthwhilewilywakenings.blogspot.com/2013/03/dow-industrial-corps-2012-annual.html

The reason that this 2.8% Add-on to Earnings Growth is so high is because of the extremely low interest rate environment created by the US Fed.  Large Corporations are sitting on massive amounts of cash.  Thus, it is extremely attractive for them to use this cash to buy back their own common stock.

The way the math works is that in computing Earnings Per Share, the numerator gets reduced for the lower Net Income resulting from using this cash.  But since this cash is yielding such incredibly low interest, in essence the numerator is reduced by a very minor amount by using cash to buy back common shares.

And large companies that don’t have a sufficient amount of cash can borrow money very cheaply again due to the extremely low interest rate environment created by the US Fed.

On the other hand, the denominator in the EPS computation gets reduced by the number of common shares bought back by the large company.  The end result is a large Add-on increase in Earnings Per Share, which is what drives common stock prices.

Clearly, many companies have seen the light and have taken advantage of this very lucrative economic effect of buying back their own common shares.

And top executives want their companies to buy back their common shares because these top executives’ compensation is based predominantly on what happens with the market price of their companies’ common stock.

Common stock buybacks have been a common strategy for many years, as you can see from this post I made several years ago.

http://wuerthwhilewilywakenings.blogspot.com/2011/12/us-big-corp-stock-buybacks-propel-1-but.html

However, since the financial meltdown in late 2008, the economic consequences of common stock buybacks have been substantially enhanced due to the extremely low interest rate environment.

Let me illustrate with some examples.

Let’s assume a common stock trades for $75, which is 15 times 2012 earnings of $5.00 per share.

Then, let’s very conservatively assume that its 2013 core earnings grow 4.3%, with a 2.8% Add-on for common stock buybacks, thus its 2013 EPS grows by 7.1%.  And then let’s assume this same earnings growth over each of the next five years.

Assuming the common stock continues to sell for 15 times trailing year’s earnings, this stock would sell for 15 times 2017 EPS of $7.05, or $105.68, in five years, which is an appreciation of 41% from the current $75.00 price.

But there are two elements to this 41% stock price appreciation.  First, the stock price appreciation based on just the core Total Annual Earnings Growth of 4.3% is 23.4% and second, the stock price appreciation based on the Add-on to EPS due to common stock buybacks is another 17.4%.

If you change the assumption and assume the core annual Total Earnings Growth is 6.3% per year instead of 4.3%, and with the same 2.8% Add-on to EPS due to common stock buybacks, then the stock would sell for $115.93 in five years, with 55% total stock price appreciation.  19% of this 55% total stock price appreciation would be due to the common stock buybacks.

If you change the assumption and assume the core annual Total Earnings Growth is 8.3% per year instead of 4.3%, and with the same 2.8% Add-on to EPS due to common stock buybacks, then the stock would sell for $126.95 in five years, with 69% total stock price appreciation.  20% of this 69% total stock price appreciation would be due to the common stock buybacks.

And if you change the assumption and assume the core annual Total Earnings Growth is 10.3% per year instead of 4.3%, and with the same 2.8% Add-on to EPS due to common stock buybacks, then the stock would sell for $138.80 in five years, with 85% total stock price appreciation.  22% of this 85% total stock price appreciation would be due to the common stock buybacks.

And if you make the same assumptions over ten years, the stock price appreciation due to just common stock buybacks ranges from 46% assuming 4.3% core Total annual Earnings Growth to 76% assuming 10.3% core Total Annual Earnings Growth.

Given the incredibly lucrative impact on stock price appreciation due to just common stock buybacks, let me now assume that a company steps up its common stock buybacks by doubling its 2.8% Add-on EPS due to common stock buybacks to 5.6%.

In this case, the stock price appreciation in five years due just to the common stock buybacks ranges from 37% assuming a 4.3% core Annual Earnings Growth to 46% assuming a 10.3% core Annual Earnings Growth.  And the stock price appreciation in ten years due just to the common stock buybacks ranges from 105% assuming a 4.3% core Annual Earnings Growth to 171% assuming a 10.3% core Annual Earnings Growth.

So clearly the US Fed has done economic wonders for large corporations and their top executives here.

But are common stock buybacks fair to everyone?  Clearly not, since individuals and small businesses can’t take advantage of these incredibly lucrative common stock buyback opportunities.

And common stock buybacks do absolutely nothing to grow the US economy or to increase US jobs.

What they do is further expand substantially the economic gap between the wealthy and everyone else.

And large corporations are motivated not to hire people because of this incredibly lucrative low interest rate environment.  Why?  Because the US Fed has publicly stated that it will continue to create this extremely low interest rate environment until US unemployment drops to 6.5%.  In other words, this incredibly lucrative common stock buyback strategy becomes less lucrative to large corporations once US unemployment drops to 6.5%.

My hunch is that US unemployment will not drop to 6.5% for many years.  And when it finally drops to 6.5%, it will take many additional years for the US Fed to unwind its massive amounts of debt investments.  Thus, interest rates will remain very low for many, many years.

I think these extremely lucrative common stock buybacks are the main reason for the US stock market rising so robustly so far in 2013.  And given the stock price appreciation due to common stock buybacks in my various scenarios, I think the US stock market should be higher than it now is, even given how much it has already gone up so far in 2013.

Below here are the detailed computations of the various Stock Price Appreciation scenarios:

Stock Selling for $75, which is 15X trailing year's $5.00 EPS Earnings
	4.3%	7.1%		6.3%	9.1%		8.3%	11.1%		10.3%	13.1%
	Average	Average		Average	Average		Average	Average		Average	Average
	Annual	Annual		Annual	Annual		Annual	Annual		Annual	Annual
	EPS	EPS		EPS	EPS		EPS	EPS		EPS	EPS
	Growth	Growth		Growth	Growth		Growth	Growth		Growth	Growth
EPS in Year	Rate	Rate		Rate	Rate		Rate	Rate		Rate	Rate
2012	$5.00	$5.00		$5.00	$5.00		$5.00	$5.00		$5.00	$5.00
2013	$5.22	$5.36		$5.32	$5.46		$5.42	$5.56		$5.52	$5.66
2014	$5.44	$5.74		$5.65	$5.95		$5.86	$6.17		$6.08	$6.40
2015	$5.67	$6.14		$6.01	$6.49		$6.35	$6.86		$6.71	$7.23
2016	$5.92	$6.58		$6.38	$7.08		$6.88	$7.62		$7.40	$8.18
2017	$6.17	$7.05		$6.79	$7.73		$7.45	$8.46		$8.16	$9.25
2018	$6.44	$7.55		$7.21	$8.43		$8.07	$9.40		$9.00	$10.47
2019	$6.71	$8.08		$7.67	$9.20		$8.74	$10.45		$9.93	$11.84
2020	$7.00	$8.66		$8.15	$10.04		$9.46	$11.61		$10.95	$13.39
2021	$7.30	$9.27		$8.67	$10.95		$10.25	$12.89		$12.08	$15.14
2022	$7.62	$9.93		$9.21	$11.95		$11.10	$14.33		$13.33	$17.12
Stock Price in 5 Years	$92.57	$105.68		$101.80	$115.93		$111.74	$126.95		$122.44	$138.80
Stock Price Appreciation in 5 Years	23%	41%		36%	55%		49%	69%		63%	85%
Add On Stock Price Appreciation in 5 Years Due Stock Buybacks		17%			19%			20%			22%
Stock Price in 10 Years	$114.26	$148.92		$138.16	$179.19		$166.47	$214.88		$199.90	$256.85
Stock Price Appreciation in 10 Years	52%	99%		84%	139%		122%	187%		167%	242%
Add On Stock Price Appreciation in 10 Years Due to Stock Buybacks		46%			55%			65%			76%
Assume Double EPS Annual Growth Add-On For Common Stock Buybacks from 2.8% to 5.6%
	4.3%	9.9%		6.3%	11.9%		8.3%	13.9%		10.3%	15.9%
	Average	Average		Average	Average		Average	Average		Average	Average
	Annual	Annual		Annual	Annual		Annual	Annual		Annual	Annual
	EPS	EPS		EPS	EPS		EPS	EPS		EPS	EPS
	Growth	Growth		Growth	Growth		Growth	Growth		Growth	Growth
EPS in Year	Rate	Rate		Rate	Rate		Rate	Rate		Rate	Rate
2012	$5.00	$5.00		$5.00	$5.00		$5.00	$5.00		$5.00	$5.00
2013	$5.22	$5.50		$5.32	$5.60		$5.42	$5.70		$5.52	$5.80
2014	$5.44	$6.04		$5.65	$6.26		$5.86	$6.49		$6.08	$6.72
2015	$5.67	$6.64		$6.01	$7.01		$6.35	$7.39		$6.71	$7.78
2016	$5.92	$7.29		$6.38	$7.84		$6.88	$8.42		$7.40	$9.02
2017	$6.17	$8.02		$6.79	$8.77		$7.45	$9.58		$8.16	$10.46
2018	$6.44	$8.81		$7.21	$9.82		$8.07	$10.92		$9.00	$12.12
2019	$6.71	$9.68		$7.67	$10.98		$8.74	$12.43		$9.93	$14.05
2020	$7.00	$10.64		$8.15	$12.29		$9.46	$14.16		$10.95	$16.28
2021	$7.30	$11.69		$8.67	$13.75		$10.25	$16.13		$12.08	$18.87
2022	$7.62	$12.85		$9.21	$15.39		$11.10	$18.37		$13.33	$21.87
Stock Price in 5 Years	$92.57	$120.24		$101.80	$131.59		$111.74	$143.77		$122.44	$156.85
Stock Price Appreciation in 5 Years	23%	60%		36%	75%		49%	92%		63%	109%
Add-On Stock Price Appreciation in 5 Years Due to Stock Buybacks		37%			40%			43%			46%
Stock Price in 10 Years	$114.26	$192.77		$138.16	$230.87		$166.47	$275.61		$199.90	$328.02
Stock Price Appreciation in 10 Years	52%	157%		84%	208%		122%	267%		167%	337%
Add-On Stock Price Appreciation in 10 Years Due to Stock Buybacks		105%			124%			146%			171%