Campbell Soup Representative of Weakening Consumer Staples Equities
May 21, 2018
Image Source: Neil Conway When our team presented at the CFA Society of Houston in March 2017, we warned about the possible coming pressures on consumer staples stocks, and so far, our concerns have come to fruition. Not only have a number of high-profile players in the tobacco and beverage arena soured, but household consumer products and packaged foods players have felt the pain, too. Campbell Soup’s recent fallout has been among the worst. Shares have been halved since mid-2017. Download slide deck — March 8, 2017: Trust the Numbers, Not Just Management, CFA Society Houston, Kris Rosemann and Brian Nelson, CFA By Brian Nelson, CFA The consumer staples sector, as measured by the Consumer Staples Select SPDR ETF (XLP), has
Hanesbrands Continues to Battle Tough Operating Environment
May 21, 2018
Image source: HBI investor presentation Apparel maker Hanesbrands is working to change its fortunes with its “Sell More, Spend Less and Generate Cash” strategies, but its business is facing challenges that include a difficult US brick-and-mortar environment. By Kris Rosemann Former simulated Dividend Growth Newsletter portfolio idea Hanesbrands (HBI) is battling a challenging US brick-and-mortar retail environment and higher commodity costs as it works to transform its performance, and increased marketing spending is expected to weigh on bottom-line results in the near term. Recent acquisitions have helped boost top-line growth as the company turned in reported net sales growth of 7% from the year-ago period in its first quarter of 2018, results released May 1. Organic sales growth in constant
PayPal Grows Stronger
May 18, 2018
PayPal scooped up assets that will help it better compete against Square, and we think both entities have a bright future regardless of the increased competition. Brian Nelson, CFA It’s no secret that PayPal (PYPL) generates a considerable amount of free cash flow and boasts a very strong net cash position that allows it to scoop up assets that it deems worthy of the long-term picture. Many have been concerned about PayPal’s expected loss of its contract with eBay (EBAY) in 2023, and it was quite the blow, but the entire relationship merely amounts to a few months of organic growth at the payment-processing giant. We also view Bitcoin and other cryptocurrencies as more of an opportunity than a threat for
Dividend Increases/Decreases for the Week Ending May 18
May 18, 2018
Below we provide a list of firms that raised their dividends during the week ending May 18. 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 AAON (AAON): now $0.16 per share semi-annual dividend, was $0.13. Agree Realty (ADC): now $0.54 per share quarterly dividend, was $0.52. Chubb (CB): now $0.73 per share quarterly dividend, was $0.71. Hydro One (HRNNF): now CAD 0.23 per share quarterly dividend, was CAD 0.22. Independence Holding (IHC): now $0.15 per share semi-annual dividend, was $0.10. Janus Henderson (JHG): now $0.36 per share quarterly dividend, was $0.32.
Master Limited Partnership Simplifications on the Rise
May 17, 2018
With the announcement of three separate master limited partnership simplification transactions on May 17 alone, we must revisit our thesis that the business structure may not be in it for the long haul. By Kris Rosemann At Valuentum, we continue to believe the master limited partnership (MLP) business model is at risk over the long haul, and recent news from the space only seems to support the notion that the MLP model we once knew may be fading more quickly than some had expected. If there is nothing inherently wrong with the structure of MLPs, then the rate at which simplification transactions are occurring would certainly be an alarming development, but we continue to point to factors such as
Cisco’s Long Term Remains Bright; Not Worried
May 17, 2018
Image Source: Ashwin Kumar Cisco’s fiscal third quarter results came in mostly as expected, but shares faced selling pressure following the release as the company’s operating margin was squeezed in the quarter. We still like Cisco a lot and are not concerned about the market’s tunnel vision. The company’s free cash flow performance and a huge net cash position are hard not to like. We’re not worried. By Kris Rosemann Networking giant and simulated newsletter portfolio holding Cisco (CSCO) showed solid progress in its ongoing transformation towards a software and subscriptions focused business model in its fiscal third quarter report, results released May 16, but shares faced selling pressure following the release as its operating contracted due in part to heavy
Has Macy’s Found Its Winning Formula? J.C. Penney Might Be a $0
May 17, 2018
Shares of Macy’s surged following its fiscal first quarter report May 16 as the department store beat estimates and raised its full-year guidance. That said, we continue to be cautious on the long-term prospects of big box retailers and the department stores, in particular. You won’t see us adding any department store to the simulated newsletter portfolios. J.C. Penney might be a $0 during the next downturn, whenever that comes. By Kris Rosemann Management at Macy’s (M) is full of confidence following a strong fiscal 2018 first quarter report, results released May 16, and Chairman and CEO Jeff Gennette believes his team has found the winning formula for the company in “a healthy brick & mortar business, robust e-commerce and
Home Depot’s First-Quarter A Little Light; Long-term Still Bright
May 17, 2018
Home Depot’s fiscal 2018 first quarter results came in short of expectations largely due to adverse weather conditions in many parts of the country, but the company reiterated its full-year guidance in a vote of confidence from management. By Kris Rosemann Home improvement retailer Home Depot’s (HD) fiscal first quarter results, released May 15, were impacted by Mother Nature as many consumers delayed purchases of seasonal products. The slow start to the spring selling season resulted in a 1.3% drop in customer transactions in the quarter on a year-over-year basis, but the company was still able to realize comparable sales growth of 4.2% (US-only comps growth was 3.9%). The company expects to see a strong second quarter as consumers begin
Sports Betting Legalized; Churchill Downs Has Leg Up on Rivals
May 16, 2018
In a landmark decision, the US Supreme Court ruled that states could legalize sports betting. We expect this to be a positive catalyst for several gambling-related equities, and many are moving fast to capitalize on the development. We’re taking a long-term view on potential ramifications and are not jumping head-first into any potential opportunities…yet. By Brian Nelson, CFA On May 14, 2018, in a 6-to-3 ruling, the Supreme Court of the United States ruled in Murphy v. National Collegiate Athletic Association that states could legalize sports gambling. The decision overturns the Professional and Amateur Sports Protection Act, a previous 1992 decision. The implications on a state by state basis have yet to play out, but we’d expect many states, including
Disney’s Top Line Growing as It Leverages Film Successes
May 15, 2018
Image Source: David Holt Media giant Disney has been executing well of late as it leverages its successful content into a broader scope of entertainment, but competition may be heating up related to its pending acquisition of Twenty-First Century Fox’s media assets. By Kris Rosemann Worldwide entertainment company Walt Disney (DIS) operates in four business segments: ‘Media Networks’ (cable and broadcast television networks, including ABC, ESPN and the Disney Channel), ‘Parks and Resorts’ (resorts in Florida, California, Paris and more), ‘Studio Entertainment’ (films under the Walt Disney Pictures, Pixar, Marvel, Lucasfilm and Touchstone banners), and ‘Consumer Products & Interactive Media’ (the licensing of trade names, characters and literary properties). The company’s ‘Media Networks’ operation is the largest portion of its
