The Best Companies of the First Half

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The end of summer stock market run-up pushed the S&P 500 index above 1,400, a 12% gain year-to-date. But are businesses better off in 2012 than in 2011? To find out, 24/7 Wall St. compared first half of S&P 500 companies with the same period last year, using S&P Capital IQ data. From this brief analysis, businesses indeed appear to be doing better in 2012, as sales and earnings per share have risen 5% in the first six months versus the comparable six months of 2011 among the S&P 500 companies.

While a 5% growth seems a reasonable amount considering the choppy economic conditions during this time frame, we wanted to discover the big companies that are leading the way. To do this, we ranked all of the 500 companies by their sales and earnings per share growth. We excluded companies whose earnings per share and sales growth received a significant boost through a major acquisition. We wanted to identify the largest corporate growth machines, so we limited annual revenue to at least $4 billion. After those exclusions, we took the 10 companies with the highest growth.

It should not be too surprising to find growth companies such as Apple, which is ranked first, or Google, which is ranked 10th, on this list. We also find that the retailers on the list are not the brick-and-mortar type. As the trend towards online shopping continues, eBay and Priceline.com are two of the fastest growing large companies in 2012. Perhaps most surprising on the list are manufacturers, such as heavy equipment, engine and truck makers Caterpillar and PACCAR. Only time will tell if they will maintain their growth rates throughout the year.

As of now, this is 24/7 Wall Street’s snapshot of the companies that demonstrated the best growth during the first half of 2012.

1. Apple Inc. (NASDAQ: AAPL)

> CEO: Timothy D. Cook
> Latest 12-months revenue: $149 billion
> Revenue growth, 1st half 2012 vs. 1st half 2011: 66%
> EPS growth, 1st half 2012 vs. 1st half 2011: 105%

It should not be too surprising that Apple shares have surged over 65% in 2012. Although Apple lost its spiritual leader Steve Jobs on October 5, 2011, new CEO Tim Cook has been keeping revenue growth at an extraordinary level. And rivals may find it even more difficult to compete with Apple after it won a $1 billion plus judgment over Samsung. The South Korean company will now have a harder time taking market share in the smartphone and tablet PC sectors. IPhones and iPads sales worldwide are driving the growth of the world’s largest company by market cap. The upcoming iPhone 5, rumored to be available in the U.S. by the end of September, will help maintain Apple’s torrid growth.

2. eBay Inc. (NASDAQ: EBAY)

> CEO: John J. Donahoe
> Latest 12-months revenue: $13 billion
> Revenue growth, 1st half 2012 vs. 1st half 2011: 26%
> EPS growth, 1st half 2012 vs. 1st half 2011: 66%

The world’s largest online marketplace, where practically anyone can buy and sell practically anything, is second on our list of fastest growing companies. The eBay marketplace and PayPal payment services both contributed to its growth. While commenting on the growth in merchandising volume, CEO John Donahoe said he now expects eBay and PayPal mobile to each transact $10 billion in volume in 2012, more than double 2011, a staggering surge in mobile shopping and payments on devices that did not exist just a few years ago. In addition to its auction site, the company operates several classified websites, including StubHub, Shopping.com and Half.com. GSI Commerce, which provides e-commerce and interactive marketing services, was acquired in 2011 and contributed to this year’s growth.

3. EOG Resources Inc. (NYSE: EOG)

> CEO: Mark G. Papa
> Latest 12-months revenue: $10 billion
> Revenue growth, 1st half 2012 vs. 1st half 2011: 27%
> EPS growth, 1st half 2012 vs. 1st half 2011: 64%

EOG Resources explores for, develops, produces and markets crude oil and natural gas with proved reserves in the U.S., Canada, Trinidad, the U.K. and China. EOG is the largest horizontal oil producer in the United States. The Houston-based EOG received a big surge in oil revenue when the South Texas Eagle Ford and the North Dakota Bakken turned out to be big producers. After second-quarter results were released, CEO Mark Papa increased EOG’s 2012 annual crude oil production growth target to 37%, based on the strength of drilling results for the first half of the year. Earnings per share benefited from a net gain on mark-to-market of financial commodity contracts.

4. PACCAR Inc. (NASDAQ: PCAR)

> CEO: Mark C. Pigott
> Latest 12-months revenue: $18 billion
> Revenue growth, 1st half 2012 vs. 1st half 2011: 27%
> EPS growth, 1st half 2012 vs. 1st half 2011: 48%

PACCAR designs and makes light, medium and heavy-duty trucks under the Kenworth, Peterbilt and DAF nameplates. It was the winner of the J.D. Power and Associates 2012 Heavy Duty Service Award. Higher truck unit sales in the U.S. and Canada were responsible for its first half gains. Revenue in Europe, on the other hand, were down 14% in the first half. The year may not close with the same robust growth, as demand in the industry is on the downtrend. Chairman and CEO Mark Pigott warned that the weak economic growth in the U.S., coupled with the ongoing uncertainty in the eurozone, could dampen truck orders for the remainder of 2012.

5. Aflac Inc. (NYSE: AFL)

> CEO: Daniel P. Amos
> Latest 12-months revenue: $24 billion
> Revenue growth, 1st half 2012 vs. 1st half 2011: 19%
> EPS growth, 1st half 2012 vs. 1st half 2011: 92%

In the U.S., Aflac is the leading provider of supplemental insurance but is perhaps best known for its Aflac duck commercials. It should be pointed out that insurance profits can vary from year to year for events out of the companies’ control. This is evident in Aflac’s first half of 2012. Aflac posted a 92% gain in earnings per share in the first half, however, revenue only rose 19%. The most important point about Aflac’s business is that a majority of its revenue comes from Aflac Japan, where it is the number one life insurance company in terms of individual policies in force. Further aiding its 2012 growth rate was that the exchange rates were 2.6 % stronger, in its favor during the first half of 2012.

6. National Oilwell Varco Inc. (NYSE: NOV)

> CEO: Merrill A. Miller
> Latest 12-months revenue: $17 billion
> Revenue growth, 1st half 2012 vs. 1st half 2011: 36%
> EPS growth, 1st half 2012 vs. 1st half 2011: 35%

National Oilwell Varco is a worldwide leader in the design, manufacture and sale of equipment and components used in oil and gas drilling and production, the provision of oilfield inspection and other services. As demand for oil changes, so does the sales activity at National Oilwell Varco. Drilling rebounded in the first half of 2012. The number of active rigs increased 7% versus the second quarter of 2011, which helped boost revenue and earnings for the oilfield service company. National Oilwell continues to enhance its growth with acquisitions, completing six of them in the second quarter. Not reflected in its growth figures are the results of Robbins & Myers, a supplier of engineered equipment and systems, which agreed to be purchased by National Oilwell Varco for $2.5 billion.

7. Priceline.com Inc. (NASDAQ: PCLN)

> CEO: Jeffery H. Boyd
> Latest 12-months revenue: $5 billion
> Revenue growth, 1st half 2012 vs. 1st half 2011: 24%
> EPS growth, 1st half 2012 vs. 1st half 2011: 47%

Priceline.com is the leading online travel company. Although it is currently showing excellent growth rates, the pace of this growth may slow down. The company expects third-quarter year-over-year revenue growth of between 9% to 15% and gross profit growth in the range of 15% to 25%, which reflects current operating trends and an assumption that economic conditions in Europe will further deteriorate. Meanwhile, competition is growing, including the widespread use of mobile devices, such as the iPhone and Android enabled smartphones, with improved web browsing functionality and the development of thousands of useful apps available on these devices, which is driving substantial traffic and commerce activity to mobile platforms. While Priceline.com has its own apps, the number of others devoted to travel has multiplied quickly.

8. Caterpillar Inc. (NYSE: CAT)

> CEO: Douglas R. Oberhelman
> Latest 12-months revenue: $66 billion
> Revenue growth, 1st half 2012 vs. 1st half 2011: 23%
> EPS growth, 1st half 2012 vs. 1st half 2011: 46%

Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The North American operations were the key driver to the company’s revenue gains in the first half of the year. Although worldwide construction activity is below prior peaks, it is an improvement from 2011. Despite the uncertain economic conditions, Caterpillar posted an all-time revenue high during the most recent quarter. However, previous sales expectations in China may have been too optimistic, and revenue from China has declined recently.

9. Starwood Hotels & Resorts Worldwide Inc.(NYSE: HOT)

> CEO: Frits D. van Paasschen
> Latest 12-months revenue: $6 billion
> Revenue growth, 1st half 2012 vs. 1st half 2011: 22%
> EPS growth, 1st half 2012 vs. 1st half 2011: 42%

The worldwide hotel company has such brands as Sheraton, St. Regis and W Hotels among its holdings. Revenue per available room increased 7% for Starwood and earnings increased at its vacation ownership and residential business. Along with an increase in management and franchise fees, revenue gained 22% during the first half of 2012. CEO Frits van Paasschen commented in the earnings release, “despite the uncertain global environment, we expect the trends we saw in our business for the past quarter to continue through the second half of the year.” Starwood’s shares have risen 19% during 2012, but rival Marriott International shares have been more favored, up 33%.

10. Google Inc. (NASDAQ: GOOG)

> CEO: Lawrence Page
> Latest 12-months revenue: $43 billion
> Revenue growth, 1st half 2012 vs. 1st half 2011: 30%
> EPS growth, 1st half 2012 vs. 1st half 2011: 30%

Google has experienced a rapid growth pace since the search engine was founded in 1998, and it now boasts a market value over $220 billion. Google still generates most of its revenue through its advertising platforms. Now, that could change. To boost its Android operating system, Google acquired Motorola Mobility in May, adding a manufacturing arm to its software prowess. This will boost the search engine giant’s future revenue growth. Despite this acquisition, we leave Google on our list, because its full impact has not yet materialized on Google’s results. Advertising revenue contributed to most of the company’s growth, rising 23% in the first half of 2012. Google’s most significant challenge remains its lack of market share in the mammoth Chinese, Indian and Russian markets where local search products are popular.

Financial data source: S&P Capital IQ

Brian Zajac and Douglas A. McIntyre

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