SEABOARD Q1 Snapshot/Update
Seaboard released Q1 2020 earnings last night. Here’s an update and my views on how it went.
Q1 revenues increased 9% to 1.68B up from 1.54B in 2019 < very impressive given COVID
Net income was -$88.43 per share compared to $43.47 in 2019. The decline in net income is related to 236M in mark to market losses on investments. Mark to market losses are unrealized and are only because the underlying value of the investments has gone down. Since the -236M in losses is a non-cash, unrealized item, I don’t assign that much weight to it.
Last year their portfolio contained 1.4B in securities now it is closer to 1.1B. Think about how much the market has recovered since March – they’ll get that money back. Lean hog futures and alone are up 50% since March and both wheat and soybeans have been steady.
Cash and cash equivalents on hand was 1.2B down from 1.6B in Q1 2019. They have enough cash on hand to cover expenses for almost 3 years and I like that about them.
They bought back 4069 shares at the following prices
130 January 2020 $3,944
820 February 2020 $3,886
3119 March 2020 $3,035
As you can see, they spent a lot of money buying shares at $3035. I think that is demonstrative of that fact that they see the stock trading at .5 price/sales and .98 price/book value.
As I’ve mentioned, I like companies that retain earnings and buy back their own shares because it increases equity. In this case, there are only 249,000 total shares available for trading. So buying 4,000 is 1.7% of total shares that can be purchased. This is part of the reason the share price is so high. Management cares about the stock price because they own 910,600 shares or 78% of the company.
To wrap up, this company did exactly what I was hoping they would, remain fairly insulated from COVID and continue to grow cash flows. They increased both sales and profit margins in pork and commodity trading, their two largest segments. Commodity trading revenue was up to 914M for Q1 an increase of 85M (+10.25%) over 2019. Pork came in at 455M up from 403M in 2019 (+12.9%). These two segments combine for 78% of revenue so they are by far the most important.
Smaller segments like seaboard marine , turkey, power generation were also strong. Seaboard Marine for example had sales of 270M up from 254M in 2019. They were saying that shipping EBITDA has been down due to higher costs on containers,leasing and fuel. They are going to save a lot of money on fuel in that business and across the enterprise in the next few quarters so I’m hopeful they can squeeze some cash out of that segment.
Bottom line, Seaboard continues to grow cash flow and despite headwinds from COVID demonstrating the strength of its vertically integrated and diverse business model.
I remain an aggressive buyer at < $3000 and am long Seaboard
Q1 revenues increased 9% to 1.68B up from 1.54B in 2019 < very impressive given COVID
Net income was -$88.43 per share compared to $43.47 in 2019. The decline in net income is related to 236M in mark to market losses on investments. Mark to market losses are unrealized and are only because the underlying value of the investments has gone down. Since the -236M in losses is a non-cash, unrealized item, I don’t assign that much weight to it.
Last year their portfolio contained 1.4B in securities now it is closer to 1.1B. Think about how much the market has recovered since March – they’ll get that money back. Lean hog futures and alone are up 50% since March and both wheat and soybeans have been steady.
Cash and cash equivalents on hand was 1.2B down from 1.6B in Q1 2019. They have enough cash on hand to cover expenses for almost 3 years and I like that about them.
They bought back 4069 shares at the following prices
130 January 2020 $3,944
820 February 2020 $3,886
3119 March 2020 $3,035
As you can see, they spent a lot of money buying shares at $3035. I think that is demonstrative of that fact that they see the stock trading at .5 price/sales and .98 price/book value.
As I’ve mentioned, I like companies that retain earnings and buy back their own shares because it increases equity. In this case, there are only 249,000 total shares available for trading. So buying 4,000 is 1.7% of total shares that can be purchased. This is part of the reason the share price is so high. Management cares about the stock price because they own 910,600 shares or 78% of the company.
To wrap up, this company did exactly what I was hoping they would, remain fairly insulated from COVID and continue to grow cash flows. They increased both sales and profit margins in pork and commodity trading, their two largest segments. Commodity trading revenue was up to 914M for Q1 an increase of 85M (+10.25%) over 2019. Pork came in at 455M up from 403M in 2019 (+12.9%). These two segments combine for 78% of revenue so they are by far the most important.
Smaller segments like seaboard marine , turkey, power generation were also strong. Seaboard Marine for example had sales of 270M up from 254M in 2019. They were saying that shipping EBITDA has been down due to higher costs on containers,leasing and fuel. They are going to save a lot of money on fuel in that business and across the enterprise in the next few quarters so I’m hopeful they can squeeze some cash out of that segment.
Bottom line, Seaboard continues to grow cash flow and despite headwinds from COVID demonstrating the strength of its vertically integrated and diverse business model.
I remain an aggressive buyer at < $3000 and am long Seaboard
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