Q2-2020 Movers and Shakers

During the past three months, the S&P 500 index jumped 15% as second quarter financial results came in better than expected and on optimism over COVID-19 treatments and potential vaccines. The following stocks generated 16% or better gains during the same period.

APPLE - $194 BILLION IN CASH

Apple (AAPL) reported fiscal third quarter sales increased 11% to $59.7 billion with EPS increasing 18% to $2.58. Apple’s record June quarter was driven by double-digit growth in both Products and Services and growth in all geographic segments. Year-to-date, Apple returned over $65 billion to shareholders, including $10.6 billion in dividends and $55 billion through share repurchases. Apple also began a $6 billion accelerated share repurchase program in May.

Apple ended the quarter with $194 billion in cash plus marketable securities, $94 billion in debt and $72 billion in shareholders’ equity. During the past three months, Apple’s stock jumped 57%, contributing to its red delicious 1,302% total return over the last decade. Hold.

COGNIZANT’S 50% INCREASE IN DIGITAL BOOKINGS

Cognizant (CTSH) reported second quarter sales declined 3% to $4 billion with EPS dropping 26% to $0.67. Bookings increased 14%, powered by a 50% increase in digital bookings. During the quarter, the firm generated $886 million in free cash flow, up from $479 million last year. During the quarter, the company repurchased $40 million of its shares with $1.8 billion remaining authorized for future share buybacks.

Cognizant ended the quarter with $4.6 billion in cash. Cognizant Technology Solutions’ stock rose a strong 28% during the past three months. Hold.

MICROSOFT $137 BILLION IN CASH

For the full 2020 year, Microsoft (MSFT) reported sales increased 14% to $143 billion with net income increasing 13% to $44.3 billion. During fiscal 2020, Microsoft generated a stellar 37% return on shareholder equity and $45 billion in free cash flow, up 18% from last year. Microsoft returned $38 billion to shareholders during the fiscal year through dividends of $15 billion and share repurchases of $23 billion.

The company ended the fiscal year with nearly $137 billion in cash on its AAA-rated balance sheet. Over the past decade, Microsoft’s stock is up a mighty 750%. Hold.

ACCENTURE STRONG FREE CASH FLOW

Accenture (ACN) reported third quarter revenue declined 1% to $11.0 billion with EPS down 1.6% to $1.90. New bookings increased 4% to $11 billion. There was strong demand for Accenture’s digital, cloud and security services in a “remote everything” world. Accenture raised its strong free cash flow outlook to a range of $5.8 to $6.3 billion for the full 2020 year.

Over the last eight years, Accenture has provided a hefty 338% total return. Hold.

FASTENAL FREE CASH FLOW +91%

Fastenal (FAST) reported second quarter revenues rose 10% to $1.5 billion with net income and EPS each bolting 17% higher to $238.9 million and $.42, respectively. These results were driven by a surge in personal protective equipment sales. Free cash flow increased 91% during the first half of the year to $402 million.

Over the last 20 years, Fastenal’s stock is up a fine 1,893%. Hold.

MASTERCARD RESUMED SHARE BUYBACKS

Mastercard (MC) reported second quarter revenue dropped 19% to $3.3 billion with net income falling 31% to $1.4 billion. During the first half, Mastercard generated $3.1 billion in free cash flow. The company returned nearly $2.2 billion to shareholders year-to-date through dividend payments of $804 million and share repurchases of $1.4 billion. The company resumed share buybacks and has $5.9 billion remaining under the current buyback authorization.

Over the past six years, Mastercard has charged up a 387% total return. Hold.

BERKSHIRE HATHAWAY $6.7 BILLION SHARE BUYBACK

Berkshire’s (BRK-A) operating revenues declined 11% during the second quarter to $56.8 billion with operating earnings down 10% to $5.5 billion primarily due to the adverse impact of the pandemic on all operations except insurance. During the first half, Berkshire repurchased about $6.7 billion of its common stock, including a record $5.1 billion in the second quarter. Berkshire ended the second quarter with more than $142 billion in cash.

Over the last 20 years, Berkshire’s stock buffeted up a 696% gain. Buy.

T. ROWE PRICE CASH-RICH, DEBT-FREE

T. Rowe Price (TROW) reported second quarter revenues rose 1% to $1.4 billion with EPS jumping 19% to $2.55. The company had about $1.22 trillion in assets under management at the end of the quarter. The company’s balance sheet remains rock solid with more than $5.7 billion in cash and investments and no long term debt.

Over the last nine years, T. Rowe Price’s stock has appreciated 158% while also paying strong dividends. Hold.

ALPHABET $28 BILLION BUYBACK

Alphabet (GOOGL) reported second quarter revenue declined 2% to $38.3 billion with net income down 30% to $7.0 billion. Results were impacted by the pandemic as advertising spend correlates with the macro environment, although the company saw gradual improvement in the ads business during the quarter. Free cash flow increased 1% during the first half to $14 billion with the company repurchasing $15 billion of its common shares. The Board of Directors authorized the company to further expand the share repurchase program by an additional $28 billion.

Alphabet ended the quarter with a fortress balance sheet with $134 billion in cash and investments, $4 billion in long-term debt and shareholders’ equity of $207 billion. Hold.

MAXIMUS RAISED SALES AND EPS OUTLOOK

Maximus (MMS) reported third quarter sales rose 23% to $901.3 million with EPS up 7% to $1.04. Revenue growth was driven by the extension of the Census contract and new COVID-19 response work such as contact tracing and assistance with unemployment benefits. Year-to-date signed contract awards as of quarter end totaled $1.5 billion and contracts pending (awarded but unsigned) totaled $672 million.

Maximus increased its revenue and earnings guidance for fiscal 2020 with revenue expected to range between $3.375 billion and $3.425 billion and EPS between $3.20 and $3.30. Cash flows from operations are expected to range between $200 million and $220 million with free cash flow between $180 million and $200 million. Hold.

ORACLE $19.2 BILLION BUYBACK

Oracle reported revenues in fiscal 2020 dipped 1% to $39.1 billion with EPS up 4% to $3.08. Return on shareholders’ equity was 80%, driven by additional leverage as the company increased its debt by $20 billion in the fourth quarter to take advantage of lower interest rates. Free cash flow declined 10% during the year to $11.6 billion with the company paying $3.1 billion in dividends and repurchasing 361 million of its common stock for $19.2 billion at an average price of about $53.19 per share. Over the last decade, Oracle has reduced its shares outstanding by about 40%.

For the first fiscal 2021 quarter, revenue growth is expected to be down 1% to up 1% with non-GAAP EPS expected to increase 4% to 8% to a range of $.84 to $.88. Hold.

THE TJX COMPANIES $6.6 BILLION IN CASH

The TJX Companies (TJX) reported second quarter sales slumped 32% to $6.7 billion with the company reporting a loss of $214 million. These results were negatively impacted by the temporary closure of its stores for nearly one third of the quarter due to the impact of the COVID-19 global pandemic. By the end of the quarter, the company had reopened more than 4,500 stores worldwide. Both the top and bottom line well exceeded internal plans. This was due to strong customer response to the reopening of the stores, especially at HomeGoods with comparable store sales up a stellar 20%.

TJX maintains a solid financial position, ending the quarter with $6.6 billion of cash and $1.5 billion in borrowing capacity. Hold.

UNITEDHEALTH INCREASED DIVIDEND 16%

UnitedHealth Group (UNH) reported second quarter revenues rose 2.5% to $62.1 billion with net income and EPS both more than doubling to $6.6 billion and $6.91, respectively. These results were substantially higher than expected due to the unprecedented, temporary deferral of health care during the quarter especially among elective procedures. In March and April people avoided going to the doctor unless necessary as the pandemic advanced. The coronavirus has accelerated telemedicine with UnitedHealth arranging four million digital visits for patients which was more than 30 times the level in January. The resumption of healthcare began to recover in May and approached more typical levels by the end of June.

Free cash flow increased 48% to $12 billion during the first half of the year due to the higher earnings and deferral of tax payments until the third quarter. During the first half of the year, the company paid $2.2 billion in dividends and repurchased $1.7 billion of its common stock. The quarterly dividend was increased a healthy 16% to $1.25 per share. UnitedHealth maintained its full year earnings outlook of $15.45 to $15.75 per share.

Management expects high unemployment will continue well into 2021, and they are taking actions to help provide affordable healthcare to underserved communities. While virus outbreaks in the U.S. will likely continue to spike on a regional basis, UnitedHealth does not expect to see a broad-based shutdown of the economy as regions deal with the ebb and flow of the virus. Hold.