Our Reports on Stocks in the Sporting Goods Industry
July 16, 2019
Image Source: Pool Corp. Structure of the Sporting Goods Industry The seasonal sporting goods industry is heavily tied to sporting trends and relies on large athletic partners to distribute their athletic goods and apparel. Exclusive licenses can help certain firms achieve competitive advantages, and while scale helps, small companies have been able to carve out favorable niches. Unlike other apparel industries, we have yet to see tremendous online competition emerge. Potential firearm regulation could negatively impact sales, but most companies are well diversified. We’re neutral on the space, but continued consolidation could ultimately benefit industrywide pricing and margins. We’ve dropped coverage of reports on stocks in the Sporting Goods industry: CLAR, ELY, JOUT, NLS, POOL.
Citigroup Still Has A Lot to Prove
July 15, 2019
Image Source: Citigroup Quarterly Presentation By Matthew Warren On July 15, Citigroup (C) reported Q2’19 revenues up 2% year over year to $18.8 billion and adjusted earnings (excluding a gain on its investment in Tradeweb) of $1.83, or 3 cents better than consensus estimates. Expenses in the quarter were down 2%, yielding the 11th consecutive quarter of positive operating leverage and improving efficiency ratios, which currently stands at 56% in the quarter. This has helped boost return on tangible common equity (RoTCE) to 11.9% in the quarter and the first half of the year, quite close to management’s commitment of 12% for the full year. Management has also stated a goal of reaching 13.5% for the same metric for
Herbalife Sees a Slow Recovery Ahead
July 15, 2019
Image Source: Herbalife Nutrition Limited – 2018 10-K By Callum Turcan Many of you may remember Herbalife Nutrition (HLF) from the “epic” duel between two very well-known titans in the financial world, Carl Icahn and Bill Ackman, which was held on CNBC in January 2013. The argument at the time fundamentally rested on whether multi-level marketing companies were viable commercial entities or pyramid schemes set to crumble on themselves, with Mr. Icahn backing Herbalife while Mr. Ackman took the other side of that trade. Herbalife is a multi-level marketing company that uses the direct selling business model to market and sell nutritional products to consumers all over the globe with a focus on energy, fitness, and sports. The company’s Formula
Reviewing PepsiCo’s Latest Earnings
July 13, 2019
Image Source: PepsiCo Inc – IR Presentation By Callum Turcan Maker of snacks and sugary beverages, PepsiCo Inc (PEP) posted second-quarter earnings for fiscal 2019 on July 9 that were positively received by the market. PepsiCo reaffirmed 2019 guidance calling for 4% annual organic revenue growth, a 1% decline in core constant EPS (3% decline when including an expected 200 basis point headwind from foreign currency movements) versus 2018 levels, and ~$4.5 billion in free cash flow generation. Shares of PEP yield 2.9% as of this writing and we like PepsiCo’s dividend coverage. However, please note that the company expects to spend $5.0 billion on dividends and $3.0 billion on share buybacks this year. Forecasted free cash flows will only
Broadcom Might Buy Symantec: Why Enterprise Valuation Matters
July 13, 2019
Image Source: Symantec Corporation – Fall 2018 IR Presentation By Callum Turcan Reportedly, semiconductor Broadcom Inc (AVGO) is getting close to acquiring Symantec Corporation (SYMC) in a deal that could be worth ~$22.0 billion when including debt. Symantec offers cybersecurity services to more than 350,000 organizations and 50 million individuals around the world, and would mark Broadcom’s second big foray into the software space after acquiring CA Technologies for $18.9 billion in cash last year. We would like to take this time to highlight the value of using enterprise cash flow analysis, particularly as it relates to the see-saw trading action in shares of Symantec, and why Broadcom has reportedly shown such interest in acquiring the company. Image Shown: Symantec
3M Dividend Still Strong for Now in the Face of Legal Troubles
July 12, 2019
Image Source: 3M Company – IR Presentation By Callum Turcan Maker of bathroom scrubbers, specialty adhesive products, personal protection systems, inks, medical supplies, and a whole host of other products under the Scotch, Scotch-Brite, Command, Post-it, and other brands, 3M Company (MMM) is fundamentally a science-based company that holds over 100,000 patents. Innovation forged 3M into the giant conglomerate we know today, but that same innovation has created a major liability which could pressure its financials. Shares of 3M yield 3.5% as of this writing and are not part of any newsletter portfolio. The Situation It comes down to per- and polyfluoroalkyl substances (“PFAS”), which can be used as effective water and grease repellents in anything from Teflon pans to
Dividend Increases/Decreases for the Week Ending July 12
July 12, 2019
Below we provide a list of firms that raised their dividends during the week ending July 12. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week Antero Midstream (AM): now $0.3075 per share quarterly dividend, was $0.3025. Bank of America Corporation Deposit Shs Perp Pfd Shs Series E (BAC.PE): now $0.2556 per share quarterly dividend, was $0.2472. BP Prudhoe Bay Royalty Trust (BPT): now $0.5510 per share quarterly dividend, was $0.3449. Clough Global Allocation Fund (GLV): now $0.1032 per share monthly dividend, was $0.1023. Cummins (CMI): now $1.311 per share quarterly dividend,
DXC Technology Looks Super Cheap
July 9, 2019
While DXC Technology is experiencing top-line pressure due to weakness at its legacy businesses, its digital growth trajectory continues to look promising. Very strong free cash flows and a modest dividend policy leave plenty of room for upside as it relates to future dividend increases, particularly if share buybacks are scaled back. By Callum Turcan DXC Technology Company (DXC) can be quickly defined as an end-to-end IT services company that offers anything from cloud application and management services, analytics, and IT security services to traditional application management and maintenance offerings. The company seeks to enable enterprises to not only transition to the digital age but scale up their capabilities with the help of DXC Technology, a process aided by such
We Just Increased Our Fair Value Estimate for United Rentals
July 8, 2019
Image Shown: We increased our fair value estimate for United Rentals in early July 2019. By Callum Turcan We recently increased our fair value estimate for United Rentals Inc (URI), the largest equipment rental company in the world. The company has been a key beneficiary from the secular shift away from customer ownership to the rental of construction and industrial equipment. United Rentals has a heavy presence in America and Canada, along with a limited footprint in Europe. Management is guiding for United Rentals to generate $1.3–$1.5 billion in free cash flow in 2019 before taking special items into account (particularly expenses incurred integrating recent acquisitions into company-wide operations). That should enable United Rentals to pursue both its deleveraging goals
Our Reports on Rental and Leasing Stocks
July 4, 2019
Structure of the Rental and Leasing Industry The highly fragmented and competitive US rental/leasing industry include entities that rent construction/industrial equipment, firms that lease household durable goods products, and companies that offer car/truck rental services. Equipment rental firms are tied to the cyclical construction/industrial markets, car rental revenue is levered to on-airport (air travel) demand, while lessors of household durables are tied to housing and consumer confidence trends. Some firms may gain advantages via large/diverse rental fleets and significant purchasing power, but we don’t like the structure of the group. We now cover stocks in the Rental and Leasing industry in the articles we write: CAR, PSA, R, UHAL, URI.
