Reiterating Our Positive View on Apple
April 20, 2018
We continue to include Apple in both newsletter portfolios. Very few companies have the balance-sheet strength and free-cash-flow generation that Apple does. By Brian Nelson, CFA Sell-side analysts are getting nervous about Apple (AAPL), but we’re reiterating our long-term positive opinion on the iPhone maker. We expect a lot of “noise” through the course of 2018 as chatter regarding iPhone unit expectations intensifies and concerns about a US trade war with China ebb and flow. We expect traders to be product-cycle-focused, which may only magnify the inherent volatility of the equity, but we maintain our emphasis on core fundamental analysis, namely the health and sustainability of Apple’s future free cash flow generation, the composition of its balance sheet, and the
Procter & Gamble Pressured By Pricing
April 19, 2018
Image Source: Mr.TinDC Recently-transformed consumer staples giant Procter & Gamble’s fiscal 2018 third quarter report left a bit to be desired as pricing woes weighed on organic top-line performance. The company is also shifting its Consumer Health business as it has agreed to acquire Merck KGaA, Darmstadt, Germany’s Consumer Health business. By Kris Rosemann Shares of former simulated Dividend Growth Newsletter portfolio idea Procter & Gamble (PG) hit their lowest mark since early 2016 in the trading session April 19 following its fiscal 2018 third-quarter report. We believe the company may have made its transition to a more-focused entity too rapidly as it continues to navigate multiple difficult operating environments around the globe. Its strategy to focus only on its
Philip Morris Shocks the Tobacco Space But Why?
April 19, 2018
Image Source: Philip Morris Investors are overreacting to Philip Morris’ first-quarter 2018 report, and the company is dragging the entire tobacco industry down with it. By Brian Nelson, CFA The market seems like it has gone “mad,” with Philip Morris trading off nearly 20% following its first-quarter report April 19. The company beat on the bottom line, while revenue roughly came in-line for the period, and the cigarette maker raised its full-year diluted earnings per share forecast to be in a range of $5.25-$5.40, above consensus forecasts of $5.26 and representing ~35%-39% growth versus the $3.88 mark in 2017. The regulatory landscape in tobacco remains in influx, with the FDA looking to set maximum nicotine levels in cigarettes, new rules
American Express Charges Ahead, Discover’s Shares Look Cheap
April 19, 2018
Image Source: Philip Taylor By Kris Rosemann American Express delivered strong first quarter results as it begins to transition from its unique spend-centric business model. American Express’ (AXP) first quarter 2018 results, released after the close April 18, impressed investors, and shares moved higher immediately following the report. The strong quarter kicks off the beginning of a year in which management plans to adjust its strategy, which has historically placed more emphasis on charging merchant fees on transactions using its cards ahead of charging interest on credit card balances. The company plans to cut merchant fees by 5 to 6 basis points in 2018 in an attempt to grow acceptance and drive volumes, and it is also working to grow
Bank Earnings Pour In
April 18, 2018
The banking industry is on solid footing, and while Wells Fargo is creating negative headlines, the first quarter of 2018 was a good one for many financial institutions. Expanding revenue and net income, increased capital-return programs, solid returns on equity, and generally positive commentary, despite an increasingly competitive lending environment, were the norm. A narrowing of spreads on US Treasury instruments may pose a challenge to net interest margin expansion in the group, but there are other opportunities to capitalize on a surging LIBOR and the increasingly volatile equity market environment. All in, the performance in the first quarter of 2018 was “more good than bad” for the banks, and we continue to look for the right price to consider
IBM’s Free Cash Flow Short of Expected Annual Pace
April 17, 2018
Image Source: andrew cooke With other fantastic ideas in technology, we see no reason to be interested in IBM’s shares. By Brian Nelson, CFA Readers that are interested in bottom-fishing in IBM’s (IBM) shares may have a far greater risk appetite than we do. IBM is no longer the “Big Blue (Chip)” that it once was, and while its first-quarter results for fiscal year 2018 weren’t bad, its outlook wasn’t what the market had been expecting. The $0.06 quarterly beat on the bottom line during its first quarter of 2018 didn’t translate into raised guidance for 2018, with IBM reiterating its non-GAAP diluted earnings per share target of at least $13.80, with the GAAP-equivalent mark coming in at $11.58. Expectations
Johnson & Johnson Off to a Good Start in 2018
April 17, 2018
Image Source: J&J Johnson & Johnson has been the stalwart of our healthcare exposure within the newsletter portfolios, and the company is off to a fantastic start in 2018. By Brian Nelson, CFA On April 17, Johnson & Johnson (JNJ) issued a strong first-quarter 2018 report that showed sales increasing 12.6% thanks to a near-20% jump in international top-line performance. On an operational basis, excluding the net impact of acquisitions and divestitures, worldwide sales advanced 4.3% thanks again to an above-average international sales ramp. The company’s bottom line fared well during the period, too. Adjusted net earnings and adjusted earnings per share for the first quarter came in at $5.6 billion and $2.06, respectively, both up double digits on a
Netflix Keeps Speculators’ Hopes Alive
April 16, 2018
Image Source: NodStrum Tech Netflix’s results for the first quarter of 2018 showed the earnings leverage that we’ve been looking for. We’re raising our fair value estimate materially as a result. By Brian Nelson, CFA On April 16, streaming movie provider Netflix (NFLX) reported fantastic top-line and subscriber growth numbers during its first quarter of 2018, with the top line accelerating to 40%+ growth over the prior-year quarter and total memberships leaping to 125 million, up from ~117.6 million in the fourth quarter of 2017 and ~99 million in the first quarter of last year. Net additions to its US streaming business came in at 1.96 million, while net additions across its non-US operations leapt by 5.46 million, a slow
Dividend Increases/Decreases for the Week Ending April 13
April 13, 2018
Firms Raising Their Dividends This Week Aon (AON): now $0.40 per share quarterly dividend, was $0.36. Automatic Data Processing (ADP): now $0.69 per share quarterly dividend, was $0.63. Bed Bath & Beyond (BBBY): now $0.16 per share quarterly dividend, was $0.15. Carnival (CCL): now $0.50 per share quarterly dividend, was $0.45. Clough Global Equity Fund (GLQ): now $0.1257 per share monthly dividend, was $0.1226. Clough Global Opportunities Fund (GLO): now $0.1031 per share monthly dividend, was $0.1013. Enterprise Products Partners (EPD): now $0.4275 per share quarterly dividend, was $0.425. First Republic Bank (FRC): now $0.18 per share quarterly dividend, was $0.17. Genesis Energy (GEL): now $0.52 per share quarterly dividend, was $0.51. Gladstone Investment (GAIN): now $0.067 per share monthly
