Raising Our Fair Value Estimate for Bank of America
April 18, 2019
Image shown: Valuentum’s fair value estimates for its banks and money center coverage. We’ve raised our fair value estimate of Bank of America. The only thing not to like with Bank of America is that banks are cyclical and the economy is overdue for a downturn. Everything else is going right at Bank of America. We have raised our fair value estimate for Bank of America to $35 per share. By Matthew Warren Bank of America (BAC) reported first-quarter 2019 results April 16, with revenue stable at $ 23 billion, pre-tax income up 4% to $8.8 billion, and thanks to 7% fewer shares outstanding, earnings-per-share was up 13% versus last year’s first quarter. It was again the crown jewel consumer
J&J Beats Low Expectations, Revises Guidance Upward
April 17, 2019
Image Source: Johnson & Johnson Johnson & Johnson issued updated guidance for 2019 that called for stronger adjusted sales and EPS growth than previously expected, which along with earnings that beat low expectations was enough to send shares up over 1% on the day, April 16. By Callum Turcan Embattled medical giant Johnson & Johnson (JNJ) posted first quarter earnings for 2019, which the market clearly liked as shares of JNJ were bid up by 1.1% on April 16. We include the company in both the simulated Dividend Growth Newsletter portfolio and the simulated Best Ideas Newsletter portfolio. The medical giant is active in the pharmaceuticals, medical device, and packaged consumer goods segments of the healthcare world. As of this
Citigroup Remains a Sub-scale US Bank
April 17, 2019
Image Source: Matt Buck Even if Citigroup achieves improved return-on-capital targets, it would remain a sub-scale US bank from a nationwide perspective, and it remains overly reliant on Corporate and Investment banking, which is an overtraded and competitive field globally. By Matthew Warren Citigroup (C) reported middling first-quarter results April 15, with revenues down 2% versus last year, to $18.6 billion. Thanks to strong operating expense control (-3%), lower taxes, and a 9% lower share count, earnings per share advanced 11%, however. With a common equity tier 1 ratio of 11.9%, Citigroup was able to return over $5 billion to shareholders in the quarter. The bank reported a 11.9% return on tangible equity in the quarter, barely better than the
Latest Channel Checks at Malls…Scary
April 16, 2019
We know malls come and go, and location is everything, but our latest visit to a few malls in the Chicagoland area leave us scratching our heads in a big way. One was eerily empty. By Brian Nelson, CFA A small sample set is never one to extrapolate, but our latest checks of malls in the northwest Chicagoland area came up a little surprising. We’re not sounding the alarm bells just yet, but we think some caution is in order for the largest mall REITs, including Tanger Factory (SKT), Macerich (MAC), Simon Property (SPG) and Taubman (TCO). Something just wasn’t quite right on our latest visit, and we attribute it primarily to failing anchor department stores, namely Carson Pirie Scott
Disney Pushes Deeper into the Streaming Market While Cooling Off on Future Star Wars Movie Releases
April 16, 2019
Entertainment giant Disney has been milking the Star Wars franchise for all its worth since acquiring Lucasfilms back in 2012. Now fans are starting to shun the franchise’s blockbuster movie releases and that has management considering how to properly leverage this top tier asset going forward. By Callum Turcan Walt Disney (DIS) has long been a giant in the entertainment industry, a position further cemented by its $71.3 billion purchase of 21st Century Fox which only just closed in March. As of this writing, Disney yields 1.3% and has a great track record when it comes to dividend growth. Even better, we are very optimistic on Disney’s ability to keep growing its quarterly payout over the coming years as the firm
Wells Fargo’s Net Interest Income Guidance Disappoints
April 16, 2019
Wells has a solid franchise, which we expect to bounce back once these troubles are squarely in the rear-view mirror, but the timing and magnitude of decline and then ultimate improvement are anyone’s guess at this tender stage of regulatory reproach and perspective client disillusionment. Our fair value estimate remains $52 per share. By Matthew Warren Wells Fargo (WFC) reported first-quarter 2019 results that showed revenue falling $300 million from last year’s first quarter, to $21.6 billion this year. Net income was $5.9 billion or $1.20 per share, up from $5.1 billion and $0.96 per share last year, respectively. Wells posted a 12.7% return on equity and 15.2% return on tangible common equity in the quarter, better than the cost
J.P. Morgan Kicks Off Earnings of the Banks
April 15, 2019
J.P. Morgan has a major advantage when it comes to crown jewel consumer banking. The company is a powerhouse. By Matthew Warren J.P. Morgan (JPM) reported first quarter earnings of $2.65 per share, fully 30 cents per share ahead of Wall Street estimates, and well ahead of $2.37 in the strong year-ago quarter. Managed revenue was up $1.3 billion over last year’s first quarter to $29.9 billion. Return on equity was 16% in the quarter versus 15% last year and return on tangible common equity was 19%–just as in last year’s quarters. These return on capital metrics, if broadly sustainable, fully justify the firm’s shares trading at 1.5 times book and 1.9 times tangible book equity. Capital levels are very
Chevron Joins the Ranks of Exxon Mobil and Shell After Buying Anadarko
April 14, 2019
Image Source: Chevron Corporation – IR presentation Chevron is buying Anadarko. Chevron will have to show that the projected operational synergies and related capital intensity reductions actually materialize through this acquisition, as execution risk is very material in the oil & gas world. We will be monitoring the industry as further consolidation is possible with interest rates remaining low for the time being and in light of oil prices moving sharply higher since January. By Callum Turcan Energy stocks moved upwards last Friday, April 12, on the news that Chevron Corporation (CVX) is purchasing Anadarko Petroleum Corporation (APC) for $33.0 billion in a cash and stock deal, for a total enterprise value of $50.0 billion when taking debt into consideration.
Three Upstream Companies Contend with the Shale Treadmill
April 12, 2019
Image Source: Marathon Oil Corporation — Fourth-quarter IR presentation. Global oil prices are climbing back up again and that got us thinking about three of the biggest independent upstream players in America’s shale patch. By Callum Turcan Global oil prices are rising and that has gotten us thinking about upstream players EOG Resources Inc (EOG), Noble Energy Inc (NBL), and Marathon Oil Corporation (MRO). All three of these companies possess domestic and international producing operations, with unconventional upstream opportunities in America providing a key growth generator as market conditions allow. Stronger realizations will lead to improving financial performance on a sequential basis, but ultimately, valuations are based on price expectations over decades not quarters. This generally makes valuing upstream firms
