Altria Raises Lower End of 2014 Earnings Guidance Range
July 22, 2014
Tobacco giant Altria (MO) reported second-quarter results Tuesday. The firm is one of the most widely-followed stocks on our website and is included in both the Best Ideas portfolio and Dividend Growth portfolio. Though Altria’s revenue expanded modestly, net of excise taxes, in the quarter thanks to the firm’s tremendous pricing power, cigarette smoking continues its steady and expected decline in the US. The company’s second-quarter adjusted domestic shipment cigarette volume dropped ~4% in the period, though its core brand Marlboro continues to increase its retail share of the total cigarette category (up 0.3 retail share points in the second quarter). Altria’s smokeless products segment fared better, growing both the top-line and operating income at a faster clip than the
Still Not Worried about Hasbro
July 21, 2014
It was December 2011, and our team was considering adding either Mattel (MAT) or Hasbro (HAS) to the Dividend Growth portfolio. We could only add one due to diversification considerations (both are consumer discretionary physical toy makers), and both had strong dividends and were undervalued. Hasbro, however, had a slightly better Dividend Cushion score, and we opted to include its shares in the portfolio instead of Mattel’s. Though we discussed a great many different things about both of the companies, we’ve been very pleased with the selection of Hasbro into the portfolio, and we credit the Dividend Cushion methodology for providing the incremental relative insight into the stock-selection process. Since its addition, Hasbro has leapt more than 60%, excluding dividend
RE: Silly Rabbit, Dividends Do Matter…
July 21, 2014
From: Brian Nelson, CFADate: July 21, 2014 12:47 pmTo: Readers of ‘Silly Rabbit, Dividends Do Matter…’ and ‘Dividends Don’t Matter…’ — Seeking Alpha There is truth to both — that dividends do matter and that dividends don’t matter. For valuation experts, and in the context of a free cash flow to the firm (FCFF) model, the only thing that matters is what a firm generates in enterprise free cash flow (FCFF), not how that enterprise free cash flow leaves the business, per se (1). I’ll list the many different definitions of cash flow at the bottom of this memo. When calculating intrinsic value, dividends and/or distributions do not matter to valuation (other than when a dividend and/or distribution is paid, the
IBM Still Reporting Low-Quality Earnings
July 21, 2014
Warren Buffett doesn’t seem to care, as he owns 6% of the firm. But we think it’s worth pointing out that IBM’s (IBM) second-quarter results, released July 17, continue to fit the theme of low-quality earnings that we brought to light after its fourth-quarter 2013 performance (click here). Please don’t misunderstand–IBM is a fantastic company with significant competitive advantages. But that doesn’t make it immune to independent, objective financial analysis. Let’s have a look at the quarterly results. For earnings growth to be sustainable, the top line must be expanding, as cost cuts, by definition, are finite. In IBM’s second-quarter report, revenue dropped 2%, while its services backlog—a key indicator of future revenue performance—dropped 1%, after adjusting for its divested customer
Dividend Increases for the Week Ending July 18
July 20, 2014
Below we provide a list of firms that raised their dividends during the week ending July 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 Bassett Furniture (BSET): now $0.08 per share quarterly dividend, was $0.06. CIT Group (CIT): now $0.15 per share quarterly dividend, was $0.10. Education Realty Trust (EDR): now $0.12 per share quarterly dividend, was $0.11. Fidelity Southern (LION): now $0.09 per share quarterly dividend, was $0.08. Goodyear (GT): now $0.06 per share quarterly dividend, was $0.05. Greene County Bancorp (GCBC): now $0.18 per share quarterly dividend, was
GE’s and Honeywell’s Fundamentals Remain Strong
July 18, 2014
On Friday, General Electric (GE) and Honeywell (HON) posted solid results. GE is included in both the Best Ideas portfolio and Dividend Growth portfolio, while Honeywell is worthy of keeping a close eye on as its results shed light on the industrial sector as a whole. Our coverage universe allows us to comment on a wide variety of firms that are held outside the actively-managed portfolios. The analyst team spends most of their time evaluating the fundamentals and financials of these firms. Though we consider the best ideas to be in the portfolios, we also see the tremendous value in commenting on companies that are not directly included in the portfolios. We also provide extensive valuation and dividend analysis of
Google’s Net Cash Position Grows to $56 Billion
July 18, 2014
Google (GOOG, GOOGL) is trading just shy of a market capitalization of $387 billion at the time of this writing, one of the largest US-traded stocks out there. For a company this big to grow revenue 22% in its second quarter, which it reported Thursday, is quite the feat. The firm’s non-GAAP operating income came in at $5.14 billion, showcasing a 32% margin, up from $4.21 billion, matching the pace of growth on the top line. Non-GAAP earnings-per-share in the second quarter of 2014 was $6.08, compared to $4.96 in the second quarter of 2013, representing year-over-year growth just slightly higher than the 22% mark. Google is simply executing fantastically, and we continue to like shares in the Best Ideas
Microsoft to Slash 18,000 Jobs
July 17, 2014
Quick and agile – that’s what new Microsoft (MSFT) CEO Satya Nadella is looking to embed in the firm’s culture with a sweeping announcement that it will realign its workforce. In a memo to employees, the company revealed the largest layoffs in its corporate history, targeting the reduction of the size of its overall workforce by up to 18,000 jobs. The work toward synergies and strategic alignment on its recently-acquired Nokia (NOK) Devices and Services operations is expected to account for 12,500 job cuts, comprising both professional and factory workers. The vast majority of employees will get the pink slip over the next 6 months. Though it is never pleasing to hear that workers are losing their jobs, from an investment standpoint,
Abbott Ups Guidance; Takes Stake in Mylan
July 17, 2014
Abbott (ABT) has a track record that is unrivaled. The firm is more than 125 years old and remains aligned with favorable long-term healthcare trends in both developed and developing markets. We believe Abbott’s nutritionals segment is one of the most attractive businesses in all of the healthcare space, boasting such brand names as EAS, Myoplex, and ZonePerfect. Let’s take a look at the firm’s second-quarter results, which it reported Wednesday. Abbott’s sales in the quarter advanced 3% on an operational basis, while ongoing diluted earnings per share came in at $0.54, representing expansion of more than 17%. The bottom-line figure also came in above its previous guidance range of $0.50-$0.52 per share. The strong results prompted Abbott to raise
