Quickies: Earnings good to tepid so far

We’re still recovering from hurricane Sandy here in New England. Schools are open as are most roads, but a lot of people are still without power and assessing damage. It could have been a lot worse, so we’re grateful. It’s interesting that the New York Stock Exchange is reopening today, even though most of New York’s transit system is still down and people are being urged not to drive unless absolutely necessary. I wonder how much of the trading is now done remotely and electronically — and, therefore, how much of the day’s trading is affected by the power outages still plaguing much of lower Manhattan. At any rate, earnings news has continued to roll, though some companies did postpone their announcements (none in our universe) because of the hurricane and/or Wall Street close. Today, Nemetschek announced that it “defies [the] negative market trends” of a weakening construction environment in Europe to report revenue of €43 million, up 11% from a year ago. The Design business continues to dominate Nemetschek’s results, with revenue for the first nine months of €103 million, up 9%, but with a slightly lower EBITDA than last year. In other words, the biggest part of Nemetschek’s business is growing but less profitable. Nemetschek has seen a management shakeup recently as CFO Tanja Tamara Dreilich was promoted to CEO to try to speed up profitable growth — apparently with some success, as Q3 revenue grew 3% faster than the first half of 2012. Nemetschek reconfirmed its earlier guidance, with revenue still expected to top €175 million. Hexagon echoes these sentiments around the business climate in Europe. Last week, the company announced that its net sales were up 11% as reported in Q3, to €578 million. On an organic/constant currency basis, revenue was up 5%. CEO Ola Rollén told investors that all regions, apart from Europe, performed well, with acceleration seen in South America and Asia. In fact, revenue from emerging regions grew at a blistering 17% and helped to offset the “slight” growth in mature markets. This has helped shift the overall sales mix away from Western Europe; 41% of total sales are now outside Western Europe and North America. By business unit, Mr. Rollén told investors that Geosystems saw growth in Q3, even though the division has the largest exposure to Europe, where the economy is slowing. Metrology reports growth despite a tough comparable with Q3 2011, and the weakening European automotive market. Intergraph’s SG&I division “turned around”, while Intergraph PP&M “continue to outgrow its underlying market”. In general, it sounds as though demand for Hexagon’s CAD and data management solutions remains strong. Mr. Rollén said that Intergraph PP&M grew in the “strong double digits”, Intergraph SG&I returned to growth, in the “single digits” in Q3 2012. Metrology saw a sequential slowdown “from unsustainable levels, to a more normal level”. “Geosystems is fighting the fact that 50% of its business is in Europe — I believe we’ll see a gradual recovery to single-digit growth”. Mr. Rollén wouldn’t be drawn into specifics but sounded cautiously upbeat — couching many comments with phrases like “with a bit of luck” and “we’re not ruling anything out, but it’s a very unstable environment in Western Europe.” By end-market, just about everything slowed in Western Europe; Mr. Rollén said that construction, automotive and general manufacturing are most effected. Power and energy as well as construction are picking up in China, but surveying is decreasing in Asia because of a decrease in mining activity in Australia. In all, a mixed picture for Hexagon, with more segments slowing than picking up speed as we go into Q4. Also last week, Geometric announced that its revenues was up  37% to Rs. 2616 million (roughly $48 million) for the period ended September 30, 2012. Geometric works with both PLM vendors and users, offering engineering services, custom software integration/development and commercial products like CAMWorks. Most telling is CEO Manu Parpia comment in the earnings release, “While the current environment continues to be volatile, going forward, we see strong long-term demand for engineering services.” Volatile is the strongest adjective we’ve seen so far this earnings season. Finally, Cybernet Systems Co. of Japan announced last week that revenue was 7,183 million Yen for the six months ended September 30, 2012. That’s slightly ahead of its earlier forecast of 7,100 million Yen, the result of “increased orders”. Cybernet is the parent company of Maplesoft and Noesis, but it’s difficult to tell how these companies are doing within the parent structure. More to come if I can figure it out. — Happy Halloween! Don’t forget to stock up for the little goblins that come to your door tonight.