Schindler Holding AG (SHLAF, Financial) (SHNDY, Financial) is arguably the best elevator manufacturer in the world. The company's elevators are found in the newest skyrises across the world. This Swiss stock has done well as sales and earnings have been growing for years.
Schindler has 68.1 million registered shares and 44.6 million participating shares. The market cap is CHF 18.6 billion ($18.6 billion). Currently the Swiss franc is almost at parity with the dollar and takes $1.01 to buy one franc so I will put all figures in dollars. Earnings in 2014 were $6.21 and the price to earnings ratio is 26.7. The dividend was $3.20 and the dividend yield 1.9%.
Growth has been strong. Sales were $8.2 billion in 2010 and grew to $9.2 billion in 2014. Operating profit grew from $950 million to $1.138 billion over that time frame. Earnings per share were $5.62 in 2010 and the dividend $3.00. Return on equity is 27.6%.
Europe accounts for 43% of sales, the Americas 28%, Asia Pacific and Africa 29%. I've never seen a company lump in Africa with Asia. Schindler's elevators are in 4 World Trade Center. Needless to say, they are arguably the best at what they do. Seven out of 10 elevators are sold in China, and the company has 100 offices there. Looking at the Annual Report, the company has a who's who of skyscrapers. A project in Hong Kong won Elevator of the Year. Like so many construction and building projects, elevators must be "green" and "energy efficient." Schindler puts a lot of money in research and development making sure it keeps up with the latest trends.
The balance sheet shows $2.7 billion in cash, $409 million in loans and $540 in debt. That's about as strong as it gets. I wonder if the MLPs would like to have a balance sheet that looks like that? Cash flow from operations was $902 million. They don't break down accounts receivable and payable, which I find annoying.
As many European companies do, there is an annoying dual share structure. Schindler has two –Â a participating share and registered share. The participating share has an equal claim on equity, earnings and dividends. However, owners of participating shares do not vote and cannot attend the annual meeting (according to the annual report). I wonder if Schindler would at least let participating shareholders have a croissant at the annual meeting? The founding families, the Schindlers and Bonnards, hold 47.6 million registered shares and hold 69.9% of the vote.
The participating shares and registered shares trade at almost parity. I can't imagine why you'd want to own the participating share. The one thing about having a family control a company is that they tend to buy back stock and keep executive compensation in line. Schindler seems to have done this.
For the first nine months, operating earnings were up 7.7% in the franc to CHF725 million ($725 million). Earnings were up 16.8% in local currencies. As you can see, the strong franc hurt results.
Schindler is a super high quality company. I wouldn't buy the stock as I'm not bullish on global building. The bull market has lasted too long and I'm afraid we're at the tail end. Rising interest rates don't help either. Having said that, if you were bullish on global construction, this blue chip would be a good place to be. A super strong balance sheet and share buybacks make the stock interesting. Get to know Schindler.
