Pandora’s October 2013 Audience Metrics Weren’t Bad
November 9, 2013
Pandora (P), the leading internet radio service, announced its October 2013 audience metrics Tuesday. Listener hours advanced 18%, share of total US radio listening jumped 145 basis points, while active listeners increased 20% for the month on a year-over-year basis. On a sequential monthly basis, listening hours advanced 8%, share of total US radio listening increased 29 basis points, while listeners fell modestly. Though Apple (AAPL) may be impacting listener expansion to a degree with its iTunes Radio product, the market share performance at Pandora was solid, and expectations regarding the demise of Pandora due to Apple’s entrance may be a bit overblown at present. Still, Apple is a considerable long-term threat, with near unlimited financial resources. Valuentum’s Take In
Disney Posts Solid 4Q Results; Sets Date for Star Wars Episode VII
November 8, 2013
On Thursday, Disney (DIS) released better-than-expected fourth-quarter results. Revenue for the period jumped 7%, while segment operating income advanced 6%. Disney’s quarterly performance was led by accelerated growth in the company’s ‘Consumer Products’ segment (up 14%), though revenue expansion in the firm’s ‘Media Networks’ segment slowed to 1% in the quarter versus a 5% pace for the fiscal year. Segment operating income in the company’s ‘Media Networks’ division was the only segment to experience a decline, though we note that profits at the rest of the firm’s business segments performed incredibly well. Adjusted for the recognition of previously-deferred ESPN affiliate fee revenues (a transitory factor), however, operating income would have advanced in the company’s ‘Media Networks’ segment as well. Disney’s net
Ladies and Gentlemen
November 8, 2013
What you are witnessing with the Valuentum Dividend Cushion is not a normal occurrence in finance. I personally have never seen a metric with such a high level of efficacy in predicting dividend cuts. Last week, the Valuentum Dividend Cushion not only added CONSOL Energy (CNX), but it also added Weight Watchers (WTW) to the growing list of firms that it highlighted the significant risk of a dividend cut before it happened. Weight Watchers suspended its quarterly cash dividend to generate annual cash savings of about $39 million October 30. Both CONSOL Energy and Weight Watchers were highlighted in the October 1 edition of our Dividend Growth Newsletter (on page 12) as yields to avoid (download pdf here). A Valuentum Dividend Cushion
Qualcomm’s Fiscal 4Q Results Not Bad; Light Fiscal 1Q Guidance
November 7, 2013
Qualcomm (QCOM), a leader in next-generation wireless technologies, reported decent fiscal fourth-quarter results Wednesday. Revenue leapt 33% on a year over year basis (4% sequentially in the period), and operating income advanced 29% from the same period last year. MSM chip shipments jumped 35% in the fourth quarter, to 190 million units (above expectations). Both net income and diluted earnings per share increased 18% from last year’s quarter. Cash generated from operating activities was phenomenal in the period at $2.52 billion, up 79% on a year-over-year basis (and 39% of revenue). Qualcomm’s capital-light, licensing business model converted almost all of the quarterly operating cash to free cash flow ($2.38 billion, or 37% of revenue). For all of fiscal 2013, free cash flow totaled
Twitter Prices at $45.10 Per Share, Up 70%+ From $26 IPO Price
November 7, 2013
<< Twitter’s Form S-1/A What Is Twitter? Adapted From Twitter’s S-1/A: “Twitter (TWTR) is a global platform for public self-expression and conversation in real time. By developing a fundamentally new way for people to create, distribute and discover content, the firm has democratized content creation and distribution, enabling any voice to echo around the world instantly and unfiltered. The firm’s platform is unique in its simplicity: Tweets are limited to 140 characters of text. This constraint makes it easy for anyone to quickly create, distribute and discover content that is consistent across its platform and optimized for mobile devices. As a result, Tweets drive a high velocity of information exchange that makes Twitter uniquely “live.” The firm aims to become
Whole Foods’ Fiscal 2014 Outlook Disappoints
November 7, 2013
Natural and organic foods grocer Whole Foods (WFM) reported lower-than-expected fiscal fourth-quarter results Wednesday. Total sales advanced 2% from the 13-week period last year and 10.8% on a comparative 12-week basis, but comparable store sales growth of 5.9% during the quarter came in below our estimates. The firm’s ‘two-year comps’ trend (shown in table below) has slowed from the previous sequential three quarters, and it looks as though the slowdown has continued into the first quarter of fiscal 2014. Image Sorce: Whole Foods The firm’s gross profit increased 37 basis points to 35.6% of sales in the quarter, and store contribution improved 43 basis points, to 10.3% of sales. Diluted earnings per share advanced 7% from the fourth quarter last
Surveying Two Potential Takeout Candidates in the Oil & Gas Space
November 7, 2013
Valuentum updates its comprehensive outlook for crude oil and natural gas prices on an annual basis, and the 2013 edition highlighted Continental Resources (CLR) and EOG Resources (EOG) as two of our favorite M&A candidates. Continental Resources is the largest leaseholder in the Bakken (1), while EOG Resources is the largest leaseholder in the Eagle Ford (EOG has a nice position in the Bakken as well). Both firms reported third-quarter results after the market close Wednesday. Let’s get an update on underlying performance. (1) The Bakken field of North Dakota and Montana is one of the premier crude oil resource plays in the United States. It has been described by the United States Geological Survey (“USGS”) as the largest continuous
SBA Communications: An $11.7 Billion Firm with No Accounting Profits
November 6, 2013
SBA Communications (SBAC) owns and operates wireless communications towers. The company’s primary business is leasing antenna space to wireless service providers on towers and other structures. This activity accounts for nearly all the firm’s operating profit. In the US and Canada, tenant leases are for an initial term of 5-10 years with five, 5-year renewal periods at the option of the tenant. The tenant leases have specific tenant rent escalators, which average 3%-4% per year. Before building a new tower, SBA Communications typically has at least one signed tenant lease, so new development risk is generally minimized. Sprint (S), AT&T (T), T-Mobil (TMUS), and Verizon Wireless (VZ) each account for more than 10% of revenues individually. The number of towers
Tesla Is Converging to Our Estimate of Its Intrinsic Value
November 6, 2013
On Wednesday, Tesla (TSLA) reported in-line third-quarter results that showed record levels of Model S production, deliveries, and vehicle gross margin in the calendar quarter. The freshly-minted electric automaker generated positive free cash flow in the period ($26 million) and put up its third consecutive quarter of non-GAAP net income. The firm is now producing 550 cars per week, and Tesla plans to continue to increase production over the next several quarters to keep up with demand expansion. Tesla’s non-GAAP automotive gross margin (excluding zero emission vehicle credits) rose to 21% from 14% last quarter, as the firm was able to extract cost reductions and improve average pricing thanks to a greater mix of highly-optioned European deliveries and ones with
Energy Transfer Partners’ Distribution Coverage Improves in 3Q
November 6, 2013
On Tuesday, energy pipeline operator and Dividend Growth portfolio holding Energy Transfer Partners (ETP) reported solid third-quarter results. Adjusted EBITDA totaled $942 million in the quarter, up $282 million from past year’s period, while distributable cash flow totaled $527 million, up $149 million from the year-ago quarter. Income from continuing operations in the third quarter also showed a nice increase of $185 million over the same period last year, to $391 million. Though strategic acquisitions in 2012 (including Sunoco) bolstered year-over-year comparisons, we were extremely impressed with ETP’s distribution coverage ratio of 1.14 in the quarter, which compares to 0.97 in the year-ago period (1). ETP recently increased its quarterly distribution to $0.905 per unit, but with coverage ratios as
