Apple’s Quarter Brings a Bushel of Positive News
May 2, 2018
Image Source: Aaron Yoo Apple’s strength was on full display in its second quarter of fiscal 2018 as it beat expectations on a number of quarterly measures and delivered a significant dividend increase. The company remains one of our favorites on the market today. Our fair value estimate currently sits at $201 per share. By Kris Rosemann What more can we say about Apple (AAPL) after a quarter in which it beat consensus expectations on revenue, earnings per share, iPhone and iPad shipments, and Services revenue, as well as had the ability to raise its quarterly dividend by 16% and authorize an additional $100 billion for share repurchases? We reiterated our positive long-term view on Apple on April 20, “Reiterating
McDonald’s Breakfast, Starbucks’ Afternoons
April 30, 2018
Two of the most well-known brands are focusing on two different dayparts, but will the end game be increased competition across the board? We like the prospects for both McDonald’s and Starbucks, as we continue to be amazed at the pace of same-store-expansion at the former. By Brian Nelson, CFA On April 30, McDonald’s (MCD) put up yet another fine quarter, its first-quarter 2018 results marking 11 consecutive quarters the company has registered positive same-store-sales growth, a streak that has been buoyed by menu simplification efforts and ongoing strength with its all-day breakfast initiative. People don’t just love McDonald’s breakfast; it seems like some can’t live without it, and it may not matter what time of day they get their fix.
M&A Roundup: Sprint and T-Mobile Finally Official, Marathon Petroleum to Become Nation’s Largest Refiner
April 30, 2018
Image Source: Mike Mozart A number of notable deals hit the wires over the weekend or Monday morning. Lets’ take a quick look. We expect to update our reports on the respective companies in the coming days. By Kris Rosemann Key Takeaways Sprint and T-Mobile are officially tying the knot. Though the deal faces regulatory scrutiny, we think T-Mobile shareholders are getting the best of the deal. If the transaction is consummated and synergies are achieved as planned, both sets of shareholders should be happy though. The wireless telecom industry will continue to be extremely debt and capital intensive, however. We think the Sprint-T-Mobile deal will ultimately get approved, but we are not particularly fond of betting on how regulatory
Portfolio Diversification Begins at Alexion; Shares Cheap
April 30, 2018
We view the acquisition of differentiated, late-stage molecules at an attractive rate as the optimal use of free cash flow for many in the biotech industry. The finite commercial life of a patented drug forces continued innovation as near-total revenue erosion is a certainty once patent protection has lapsed. Let’s review some of the recent events at Alexion to gain a further understanding of the underlying trends affecting the business. By Alexander J. Poulos Key Takeaways We have become incrementally more-positive in our outlook for Alexion. Our fair value estimate of $158 per share stands considerably higher than the company’s share price at the moment. Last year, Alexion’s shares had been punished by reports of questionable sales practices of Soliris,
Dividend Growth Ideas Microsoft and Intel Deliver Strong Free Cash Flow
April 27, 2018
Microsoft and Intel continue to deliver robust levels of free cash flow, which are core drivers of their respective dividend strength. By Kris Rosemann Microsoft’s Commercial Cloud Driving Growth Simulated Dividend Growth Newsletter portfolio idea Microsoft (MSFT) turned in a solid fiscal third quarter report April 26 as total revenue advanced 16% from the year-ago period, operating income advanced 23%, and diluted earnings per share jumped 36%. Commercial cloud revenue growth of 58% was a key driver of the strong top-line expansion with strong growth in the US, Western Europe, and the UK, and the quarter marked the 10th consecutive quarter in which Azure posted 90%+ revenue growth. The company’s operating margin expanded by two percentage points from the comparable
Amazon Surges; Fair Value Under Review
April 26, 2018
Amazon is no “online book store.” The company’s web services operation is a powerhouse, and its earnings potential is starting to show. We liked the company’s first-quarter 2018 results a lot. By Brian Nelson, CFA On April 26, Amazon (AMZN) reported fantastic first-quarter 2018 results after the market closed. During the period, net sales increased an incredible 43% from last year’s quarter, while operating income jumped more than 90%, to ~$1.9 billion, compared with ~$1 billion in the year-ago period. CEO Jeff Bezos continues to talk up Amazon Web Services, and the company is backing up his excitement with a surging top line and improved profitability. Operating cash flow increased 4%, to $18.2 billion, on a trailing 12-month basis,
Best Ideas: Reiterating ~$240 Fair Value on Facebook; Adding Chipotle
April 26, 2018
We couldn’t be more pleased with Facebook’s first-quarter 2018 results, and we are reiterating our ~$240 per-share fair value estimate on the company. We’re also adding Chipotle as an idea to the simulated Best Ideas Newsletter portfolio, and we’re putting three other speculative considerations on your radar. By Brian Nelson, CFA Facebook (FB) seems to be back in the driver’s seat. We never thought it was out of the race, but many may have thought the negative press would do its shares in … permanently. Not the case. Facebook’s first-quarter 2018 results were fantastic, adding to other strong reports from core simulated Best Ideas Newsletter portfolio ideas, “A Trifecta of Good Reports: Visa, Facebook, PayPal.” Shares of Facebook still look
What’s Working (or NOT Working) in Today’s Market?
April 26, 2018
Image shown: Crude oil continues to lead gainers while consumer staples, REITs, and energy MLPs continue to get shellacked. By Kris Rosemann The stock market during the first few months of 2018 has been marked by a meaningful return to volatility. Commodity prices from crude oil (USO) to aluminum have had their moments in the sun as material supply/demand imbalances of years past continue to sort themselves out, with the help of a few key players, of course (OPEC member nations in the case of crude oil, and Chinese pollution regulations and US trade policy changes in the aluminum example). Geopolitical uncertainty is keeping both world leaders and investors on their toes as the world continues to navigate multiple denuclearization
A Trifecta of Good Reports: Visa, Facebook, PayPal
April 25, 2018
We continue to like the long-term potential at Visa and absolutely love the level of its operating margins. Facebook is going to continue to get bad press, but fundamentally, we think the company is going to make it through to shine once again. PayPal had a nice first-quarter report, and while we would like to see more security with respect to its relationship with eBay, the company’s pace of growth suggests it could easily grow out of its early ties with the auction website. By Brian Nelson, CFA There were three notable reports after the close April 25: Visa (V), Facebook (FB), and PayPal (PYPL). We continue to be huge fans of Visa’s long-term potential, and its level of operating
The Transformation of Novartis Continues
April 25, 2018
Image Source: Taki Steve Leadership change can often bring a great deal of uncertainty especially when a new leader is replacing a successful CEO. In the case of Novartis, we are witnessing a focused effort to streamline the business: a deliberate attempt to shift focus from a sprawling healthcare enterprise towards a more pure-play pharma/biotech powerhouse with an innovative, cutting-edge product portfolio. By Alexander J. Poulos Key Takeaways We liked that Novartis divested its stake in its healthcare joint-venture with GlaxoSmithKline, and we were very pleased with the large sale price of $13 billion. The cash proceeds will offer increased financial flexibility at Novartis. We’re not completely against the company’s near-$9 billion deal for AveXis, though this, too, had a
