Johnson & Johnson Beats Estimates and Raises Guidance
July 21, 2020
Image Source: Johnson & Johnson – Second Quarter of 2020 IR Earnings Presentation By Callum Turcan On July 16, Johnson & Johnson (JNJ) reported second quarter 2020 earnings that beat both consensus top- and bottom-line estimates. Most importantly, Johnson & Johnson increased its full-year guidance for 2020 as the firm is well-prepared to ride out the ongoing coronavirus (‘COVID-19’) pandemic, in our view. We continue to like shares of JNJ in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios. As of this writing, shares of JNJ yield ~2.7%. Guidance Boost In the upcoming graphic down below, Johnson & Johnson provides a side-by-side comparison of the firm’s previous full-year guidance for 2020 as of April 2020 versus its current
Morgan Stanley Puts up a Tremendous Quarter
July 21, 2020
Morgan Stanley truly shined during this quarter of extreme volatility. While credit provisioning was higher year over year, Morgan Stanley simply does not have many of the credit exposures that are leading to huge multi-billion-dollar credit provisions at some of its money-center banking peers. Though its wealth management business’ net income (applicable to Morgan Stanley) was down 10% year over year, and Investment Management was up only 20%, it was the Institutional Securities stunning 95% advance in net income that made this quarter a (temporary) gem of notable brilliance. By Matthew Warren Morgan Stanley (MS) put up a tremendous quarter July 16, blowing away analyst consensus estimates on both the top and bottom lines. As you can see in the
Walgreens Targets Cost Cuts and In-Store Doctors’ Offices
July 20, 2020
Image Source: Walgreens Boots Alliance Inc – Third Quarter Fiscal 2020 IR Earnings Presentation By Callum Turcan On July 9, Walgreens Boots Alliance Inc (WBA) reported its third-quarter fiscal 2020 earnings (period ended May 31, 2020) and raised its dividend by ~2% on a sequential basis. Walgreens has increased its annual dividend over the past 45 consecutive years, earning it Dividend Aristocrat status, though we caution its net debt load weighs negatively on its forward-looking dividend coverage. Shares of WBA yield ~4.6% as of this writing. Walgreens suspended its share buyback program to preserve cash in the face of the ongoing coronavirus (‘COVID-19’) pandemic and additionally, management initiated full year guidance for Walgreens’ fiscal 2020 during its latest earnings report.
Bank of America is Working Through a Difficult Time
July 20, 2020
When putting all the puzzle pieces together, we see Bank of America facing the headwinds of low rates and sizable credit provisioning with relative ease thanks to its substantial pre-tax, pre-provision earnings power. As long as the economy doesn’t get drastically worse from here, long term investors will benefit from normalized valuations on more normalized earnings in the not-too-distant future. By Matthew Warren Bank of America (BAC) posted difficult second quarter results July 16, though it beat analyst consensus estimates on both the top and the bottom lines. As you can see in the upcoming graphic down below, total revenue was down 3% compared to last year while net income was down 52% thanks to substantial provisioning for future credit
Our Reports on Stocks in the Food Products (Small/Mid-Cap) Industry
July 18, 2020
Structure of the Food Products Industry The food products industry is composed of a number of firms with strong brand names. However, market supply/demand dynamics and intense competition still impact product prices, while fluctuations in commodity costs can make earnings quite volatile. Private-label competition, competitors’ promotional spending, and changing consumer preferences often drive demand trends. The group’s customers—such as supermarkets, warehouses, and food distributors—continue to consolidate, increasing buying power over constituents and hurting margins. Still, we’re generally neutral on the group. We’ve reallocated our resources to cover more recession-resistant stocks. See here.
Citigroup Navigating the Banking Downturn Fairly Well
July 16, 2020
All in all, we think Citigroup management is doing a decent job of navigating this economic downturn. The shares trade at a discount to tangible book value. We think a large part of the reason for this is that this is a very complex bank, operating across a wide variety of products and geographies. If the team can make it through this downcycle without any skeletons coming out of the closest, we think the stock has the potential to re-rate higher. By Matthew Warren On July 14, Citigroup (C) posted a difficult second-quarter set of results, though the firm did manage to beat analyst consensus estimates on both the top and bottom lines. Outsize revenue gains in investment banking and
Our Reports on Stocks in the Energy Equipment & Services (Large) Industry
July 16, 2020
Image Source: البصراويStructure of the Energy Equipment Industry The energy equipment industry is heavily tied to the exploration and production (upstream) expenditures of oil and gas producers across the globe. Many industry constituents participate in a number of different market segments to offer a complete range of products/services to customers. The fortunes of the group are levered to energy prices (crude/natural gas), as higher prices make drilling projects more attractive and increase the demand for oilfield equipment and services. However, falling prices have an opposite effect, creating long boom and bust cycles. We’re neutral on the structure of the group. We’ve reallocated our resources to optimize our energy coverage. See here.
JPMorgan Reports Second Quarter, Notes Peculiar Times
July 15, 2020
Image Shown: Overview of JPMorgan’s 2Q2020 earnings. Image Source: JPMorgan 2Q2020 Earnings Presentation There was a fair amount of discussion on JPMorgan’s conference call about how the company (and the rest of the banking industry) are taking large provisions now for charge offs that they expect to come in the future. The future and the timing and magnitude of the eventual write-offs are quite murky indeed, which helps explain the volatility of banking shares in general, and especially for those institutions that might fall over in an “adverse scenario.” JPMorgan is not one of those banks that is at risk. It stands on high ground in the industry thanks to its scale, diversification (a huge benefit this quarter), high quality
Our Reports on Stocks in the Diversified Mining Industry
July 15, 2020
Image Source: Peter Craven Structure of the Diversified Mining and Gold Mining Industries The diversified mining industry is highly cyclical and almost entirely commoditized, with little differentiation from one firm to the next. Rising input costs can only be passed on to consumers if industry-wide prices increase. Exploration and development require large capital investments, which could pressure cash flows during weak economic times. A miner’s position on the cost curve for each respective resource is a critical investment consideration, given the volatility of commodity prices. Though emerging market growth will be a key source of demand for years to come, we don’t like the structure of the group. Gold miners are tied to the world price of gold, which depends
Our Reports on the Retail REIT Industry
July 15, 2020
Structure of the REIT – Retail Industry The retail REIT space is competitive, and incremental supply from failing retailers could complicate the return profile of many constituents. That said, however, strip center supply additions are near the lowest levels on a historical basis, offering potential opportunities for income expansion via higher rents and lease rollovers. Access to the capital markets will remain critical for participants, and the issuance of additional common/preferred stock should be expected. Geographic and industry diversity, tenant credit strength, and occupancy rates should be monitored closely. We’re generally neutral on the group. For our REIT stock reports, please click here.
