A Review of Johnson and Johnson’s Pharmaceutical Division
July 31, 2017
Image Source: J&J Let’s take a deep dive into Johnson and Johnson’s pharmaceutical division Janssen Pharmaceuticals. Janssen traditionally serves as an area of clinical innovation adding an element of growth to the more stable product categories such as consumer health. However, there may be a few cracks in the Janssen revenue stream that could make growth at J&J harder to come by over the next few years. By Alexander J. Poulos Overview The venerable Johnson and Johnson (JNJ) has earned the sterling reputation that the firm has built over the countless decades of steady performance. J&J is a bedrock of the health care sector sporting a sterling credit rating along with the ability to seemingly consistently churn out revenue and
Amgen’s Pipeline Continues to Disappoint
July 31, 2017
Image Source: Amgen The ability to generate commercially-viable products via the clinical pipeline is crucial to grow profits and offset revenue declines from the loss of patent protection. We remain unimpressed with the progress shown thus far by biotech stalwart Amgen. Let’s review the clinical pipeline along with a consideration of the recently-released earnings report. By Alexander J. Poulos Clinical Pipeline We believe the three most promising molecules in Amgen’s (AMGN) pipeline in order of importance are Repatha, Evenity, and Erenumab. Amgen’s ability to develop and market these products will go a long way to shore up the top-line revenue as older products begin to face biosimilar challenges that continue to sap revenue and profits. Let’s examine each in further
Alphabet’s Financial Health Unfazed By European Commission Fine
July 31, 2017
Image Source: Open Grid Scheduler Alphabet’s second-quarter results revealed a one-time charge that made headlines, but the fine is a drop in the bucket when considering the size of Google’s balance sheet and free cash flow generation. By Brian Nelson, CFA Shares of Alphabet (GOOG, GOOGL), the company formerly known as Google, sold off following the release of its second-quarter report July 24. We’re not making much of the market’s negative reaction to a quarter that revealed 23% year-over-year revenue growth (on a constant-currency basis) and earnings per share north of $5, both the top line and bottom line coming in above Street consensus expectations. Adjusting for the widely-publicized European Commission (EC) fine of $2.7 billion*, which Alphabet accrued in the
Altria Keeps Smoking; Is Smokeless the Future for Big Tobacco?
July 28, 2017
Tobacco giant Altria reported another solid quarter thanks in large part to its pricing power, but big tobacco may be altering its strategy as it finds an unexpected ally. By Kris Roseman Newsletter portfolio holding and tobacco giant Altria (MO) reported a solid second quarter of 2017 with top- and bottom-line growth before the open July 27. Its quarterly strength was largely driven by pricing power, a line we’ve written many times over in recent years with respect to the tobacco industry. Cigarette volumes continue to decline–the decline was more pronounced in the second quarter of 2017 due to a large excise tax increase in California–as industry-wide volumes fell 4.5%, but Altria and its peers continue to grow the overall
PayPal, Facebook Post Strong Second-Quarter Results
July 27, 2017
Image shown: Facebook’s traditional free cash flow (CFO less capital expenditures), in millions. Two of our favorite holdings in the Best Ideas Newsletter portfolio put up strong second-quarter results. We continue to like their respective shares. By Brian Nelson, CFA Online payments processor PayPal (PYPL) and social media advertising giant Facebook (FB) are two of our favorite holdings in the portfolio of the Best Ideas Newsletter. Both forward-leaning, mobile-oriented companies reported second-quarter results after the market closed July 26, and both have traded higher following the release. PayPal’s revenue advanced 20% in the second quarter, after excluding effects from currency exchange, and the company leveraged that growth into an impressive 27% jump in GAAP and non-GAAP earnings per share, the
Hasbro Hit by Gross Margin, Timing Issues
July 27, 2017
Shares of Dividend Growth Newsletter portfolio holding Hasbro dropped after the company reported its second quarter earnings. By Kris Rosemann Dividend Growth Newsletter portfolio holding Hasbro (HAS) has been knocking the proverbial cover off the ball with returns (its stock has nearly tripled since being added to the Dividend Growth Newsletter portfolio) and the company has rival Mattel’s (MAT) back against the wall, but the toy giant’s shares recently hit a speed bump. In its second-quarter results, released July 24, Hasbro reported revenue growth of 11%, operating profit margin expansion of 60 basis points, and net earnings-per-diluted-share growth of nearly 30%, but shares faced significant pressure following the release. On the surface, it looks to be another strong quarterly report
General Motors May Offer an Incredible Opportunity
July 26, 2017
We continue to believe GM’s valuation and dividend profile may be too good to pass up. At the very least, it should receive a multiple on current-year earnings like that of the airlines, another cyclical boom-or-bust industry that has traditionally been associated with bankruptcy. By Brian Nelson, CFA On July 25, General Motors (GM) showed why we include shares in both the Dividend Growth Newsletter portfolio and Best Ideas Newsletter portfolio when it reported strong second-quarter results. There are three things that you must know about GM’s stock. One, GM’s annual dividend of $1.52 per share means the corporate is yielding ~4.2% at present levels, or roughly double that of the average S&P 500 company. For a corporate, this level of
Earnings Roundup: McDonald’s, 3M, IBM
July 25, 2017
Let’s recap a few big earnings announcements. By Brian Nelson, CFA McDonald’s (MCD) Stock Has Been Super Sized We expect to raise our fair value estimate of McDonald’s following second-quarter results, released July 25, that showed ongoing strength in comparable store sales and the operating income benefits of continued refranchising efforts. Incredibly, global comparable store sales at McDonald’s increased 6.6% in the second quarter, blowing by consensus estimates, and operating income advanced at a 24% clip on a year-over-year basis. Management noted that the second quarter marked the “strongest global comparable sales and guest count results in more than five years.” Nothing appears to be able to stop McDonald’s these days, and increased refranchising de-risks its business model from ongoing
Stocks in the News: Kinder Morgan, Union Pacific, Colgate-Palmolive
July 25, 2017
Let’s cover the quarterly reports from a few industry bellwethers. By Brian Nelson, CFA Kinder Morgan (KMI) Plans for Dividend Hikes Kinder Morgan appears to be back on track, something that it set the stage for in early 2016 when Barron’s wrote about Valuentum’s take, “Is Kinder Morgan on the Road to Recovery (January 2016).” The pipeline operator continues to trade near our fair value estimate of $20, so it’s hard to make the case that there is a tremendous valuation opportunity in shares, though its prospects for a return to dividend growth have improved. On July 19, Kinder Morgan announced that it expects to raise its dividend by 60% in 2018 and advance the payout at a 25% yearly
Stocks in the News: Visa, Microsoft, General Electric
July 21, 2017
Image source: Visa Let’s have a look at the quarterly reports from a few stocks in the news July 21. By Brian Nelson, CFA Visa’s (V) Margin Profile Remains Excellent Top-weighted position in the Best Ideas Newsletter portfolio is approaching the “century mark” after reporting solid fiscal third-quarter results July 20. Visa’s net operating revenue advanced 26% on a year-over-year basis in the quarter thanks in part to the inclusion of Visa Europe, and the company recorded GAAP net income of $2.1 billion, or $0.86 per share, better than consensus expectations. Visa CEO Alfred Kelly noted that performance reflected “strong growth in payments volume, cross-border volume, and processed transactions, which were powered by economic tailwinds in the US and globally.” We
