HSBC Holdings Plc (HBC)
HSBC Holdings Plc is one of the largest banking and financial services organizations in the world. HSBC Holdings has a market cap of $140.62 billion; its shares were traded at around $39.71 with and P/S ratio of 1.4. The dividend yield of HSBC Holdings Plc Ads stocks is 4.8%.
HSBC’s revenue has declined every year since 2007, though free cash flow leapt from $9.6 billion in 2009 to $57.6 billion in 2010. From 2009 to 2010, the company’s loan impairment charges to total operating income fell from 31.7% to 16.9%, return on average invested capital increased from 4.1% to 8.7%, return on shareholders’ equity increased from 5.1% to 9.5%, post-tax return on average total assets increased from .3% to .6%. The company also strengthened its core Tier 1 ratio, the ratio most favored by regulators as it comprises equity capital after regulatory adjustments and deductions, from 9.4% to 10.5%, largely due to profit retention.
Primary growth drivers for the first half of 2011 were growth in commercial banking, and higher sales of wealth management products. Revenue declines were seen in three main areas: credit rates within global banking and markets following uncertainty in the euro zone; the effect of higher write backs and legacy positions within structured credit last year; and from the continued run-off of consumer finance portfolios in North America.
The bank’s loan impairment charges fell 32% in the first half of 2011 over the first half of 2010, the lowest the bank has seen since the first half of 2006. The improvement was due largely to the U.S. un-off consumer finance portfolios which benefited from lower balances and lower delinquency.
In its mid-year presentation, Stuart Gulliver, group chief executive, said that the bank is “a long ways” from share buybacks, and when “we get into a situation where we had far too much retained earnings, we’d deal with it through dividends rather than share buybacks.”
Last month HSBC announced that it would cut 30,000 jobs worldwide by year-end 2013.
Toyota Motor Corp. ADS (TM)
Toyota Motor Corporation produces, sells, leases and repairs passenger cars, trucks, buses, boats, airplanes and other products in Japan and most foreign countries. Toyota Motor Corp. Ads has a market cap of $108.26 billion; its shares were traded at around $69.05 with a P/E ratio of 41.1 and P/S ratio of 0.5. The dividend yield of Toyota Motor Corp. Ads stocks is 1.6%.
Global motorvehicle production grew 26% from 2009 to 2010, after falling 13.5% from 2008 to 2009. Toyota was the top manufacturer in the world by volume over GM and Volkswagen. However, in a J.D. Power and Associates’ study of vehicle quality, it slipped from third place in 2009 to sixth place in 2010, and moved up a slot to fifth in 2011.
Though Toyota recovered from a $2.8 billion loss in 2009 to generate free cash flow of $17.7 billion in 2010, cash flow slipped 41% to $10.5 billion in 2011. The company has had several difficult quarters recently, due in large part to the March 11 earthquake. Net revenue for the quarter ended August 2, 2011, fell 29% and free cash flow fell to $1.8 billion, down from $5.3 billion the same quarter the previous year. The company sold 1,221,000 vehicles in the quarter, 599 fewer vehicles compared to the same period last fiscal year.
Further driving down the price of Toyota stocks and many other Asian stocks is investor fear that Greece could be nearing a default on its sovereign debt. The MSCI Asia Pacific Index fell 2.3% in Tokyo on Wednesday, near its lowest close since August 2010.
Total Fina SA ADS (TOT)
Total Fina SA engages in worldwide oil and gas production, other upstream, RM&T and an expanding multi-national specialty chemicals business. Total SA Ads has a market cap of $104.96 billion; its shares were traded at around $44.67 with a P/E ratio of 6.6 and P/S ratio of 0.5. The dividend yield of Total SA Ads stocks is 6%. Total SA Ads had an annual average earnings growth of 12.6% over the past 10 years. GuruFocus rated Total SA Ads the business predictability rank of 2.5-star.
Total Fina is based in France and sells about 70% of its oil to Europe. North America and Africa account for just over 7% each of sales, and smaller percentages go to the rest of the world. It has grown earnings by 12.6% over the last 10 years. Free cash flow also jumped from $905 million to $8.3 billion from 2009 to 2010, and second-quarter 2011 free cash flow grew to $15 billion, a 650% increase from $2 billion in the same quarter of 2010.
The company has made a major gas discovery in the Caspian Sea in offshore Azerbaijan with a potential of several trillion cubic feet of gas and associated condensates.
Total’s stock price is down primarily because of its connection to European banks and the euro zone, which are all plagued by the threat of default in Greece.
Petroleo Brasileiro SA Petrobras (PBR)
PETROBRAS-ADR C is an integrated company operating in exploration, production, refining, retailing and transportation of petroleum and its byproducts at home and abroad. Petrobras has a market cap of $98.2 billion; its shares were traded at around $26.39 with a P/E ratio of 6.4 and P/S ratio of 0.8. The dividend yield of Petrobras stocks is 0.6%. Petrobras had an annual average earnings growth of 20.2% over the past 10 years.
In the second quarter of 2011, Petrobras posted net income of R10.94 billion, a 32% increase from R$9.29 billion in the second quarter 2010. The Exploration & Production segment improved due to higher crude prices and increased production volume. High crude prices also caused a decline in the Refining, Transportation & Marketing segment (a loss of R$2.3 billion). The company financed R$32 billion investments – 46% to E&P and 38% to RT&M – largely with its cash flow.
The stock has fallen over the last several weeks mainly because of a Valor Economico newspaper report that Brazil’s government is studying increasing a special participation tax on oil production that may raise revenue by $1.85 billion. The increased tax would allow them to spread more oil profits around Brazilian states that do not produce oil.
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