Dividend Growth Portfolio Holding Emerson Hikes Dividend!
November 5, 2013
We always love to share good news with respect to holdings in our Dividend Growth portfolio, and today gave us an opportunity. Not only did diversified industrial firm Emerson (EMR) register record operating cash flow of $3.65 billion and robust free cash flow of $3 billion during its fiscal 2013 (ending September) when it reported fiscal fourth-quarter results today–both above original expectations (shown in image below)–but the board also upped the firm’s quarterly dividend 5%, to $0.43 per quarter ($1.72 per share annualized). Image Source: Emerson, February 2013 Fiscal 2013 marked the 57th consecutive year the firm has increased dividends, and while the 5% dividend increase may not be something to write home about, significantly better-than-expected cash-flow performance suggests to
Third-Quarter Churn Rate at DirecTV’s US Business Is Best in 6 Years
November 5, 2013
DirecTV (DTV) reported better-than-expected third-quarter results Tuesday. The firm’s quarterly revenue of $7.9 billion advanced more than 6% on a year-over-year basis, while third-quarter earnings per share exceeded forecasts by more than $0.27, coming in at $1.28, an impressive bottom-line showing. The firm repurchased $1.3 billion of stock in the third quarter, which led to the significant bottom-line beat. With every share of stock that DirecTV purchases, management is generating economic profit for shareholders (see here). < What is economic profit? DirecTV US added 139,000 net new subscribers in the period as it achieved the lowest third-quarter churn rate in 6 years. DirecTV US ARPU (average revenue per user) growth was 6.2%, and DirecTV Latin American subscriber growth was strong
Heins Bails, Blackberry Fails
November 5, 2013
On Monday morning, beleaguered smartphone maker Blackberry (BBRY) announced the resignation of CEO Thorsten Heins, as well as a $1 billion private placement of convertible debentures. Heins’ departure comes as little surprise in the wake of weak performance from Blackberry 10 which coincided with a write-down of nearly $1 billion in inventory. As for raising capital, one might assume that a well-capitalized company like Blackberry wouldn’t need new capital; however, its current cash-burn suggests an interjection is necessary if the company wishes to attempt (another) fundamental turnaround. The New Leadership John S. Chen will replace Heins as interim CEO and chairman of the board of directors. Chen is best known for his reign atop Sybase where he was responsible for
Could IBM and Hewlett-Packard Be In a Bidding War for 3D Systems?
November 5, 2013
First, it was reported on October 23 that Hewlett-Packard (HPQ) CEO Meg Whitman revealed that her company has plans to enter the 3D printer market in the middle of 2014. Whitman’s commentary was striking given the conviction in her intentions, which leads us to believe she is looking for a potential target that may fit well within HP labs’ research trajectory. The snail’s pace of internal innovation at Hewlett-Packard in recent years leads us to believe that Whitman will inevitably look to acquire the technology. It remains unclear, however, whether the executive suite at Hewlett-Packard has finalized the make-or-buy decision. Potential targets such as 3D Systems (DDD), Stratasys (SSYS), and ExOne (XONE) traded off on this particular news, as market participants took the
Boston Beer Continues Its Phenomenal Run in 3Q; Shares Remain Overpriced
November 5, 2013
There’s only one word to describe Boston Beer’s third-quarter results, issued last Wednesday, and that is ‘impressive.’ Net revenue jumped 30% from the same period a year ago thanks to core shipment growth of 29% (993,000 barrels), while net income per diluted share from the period tallied $1.89, an increase of $0.36 per share from last year’s period. Third-quarter gross margins were at the midpoint of the company’s annual gross-margin target between 52%-54%, so cost pressures (increased brewery processing costs and higher ingredient expenses) were largely expected — the measure was roughly 3 percentage points lower than the year-ago mark. The growth of depletions—the total beer volume sold to retailers, excluding product loss due to breakage and samples—was 26% and
PPL Corp Reports Solid 3Q; Raises Midpoint of 2013 Earnings Forecast
November 5, 2013
Generally speaking, we like the utility industry. Utilities provide an essential service, generally operate in a near-monopoly position and benefit from significant barriers to entry due to the capital intensity of new projects and regulatory/environmental requirements. Regulatory frameworks differ across the grid, but most utilities benefit from an assured rate of return on capital investments through predetermined rate structures, where cost adjustments are made by authorities periodically. Most constituents also benefit from stable operations and generally lower debt financing, though we note credit ratings should be monitored closely. The strong industry backdrop was apparent in PPL Corp’s third-quarter earnings release, issued last Thursday. Though adjusted earnings from ongoing operations per share declined on a year-over-year basis during the period as
Phillips 66’s 3Q Reveals Difficult Refining Environment
November 5, 2013
Phillips 66’s third-quarter results, issued last Wednesday, revealed significantly weaker worldwide refining margins, as expected. The company’s third quarter earnings fell to $535 million, down from adjusted earnings of $1.9 billion in the third-quarter of 2012. Results in the company’s ‘Refining’ segment remain highly volatile. Phillips 66’s ‘Midstream’ segment generated earnings of $148 million compared with adjusted earnings of $88 million in last year’s period. Third-quarter earnings in Phillips 66’s ‘Chemicals’ segment came in at $262 million, down modestly from adjusted earnings of $275 million in the year-ago period. The company’s quarterly earnings for its ‘Marketing and Specialties’ segment totaled $240 million, up from $98 million in the same quarter last year. Corporate and other expenses were roughly flat during the
Kraft and Kellogg Struggle for Sales Expansion
November 5, 2013
Kraft (KRFT), best-known for its Macaroni & Cheese, Cool Whip, Planters peanuts, and Oscar Mayer brand, has struggled to grow the top line since spinning off Mondelez (MDLZ). Its third-quarter results, released Wednesday, showed further revenue weakness. Though management went to great lengths to explain how most of the organic net revenue decline was a result of the spin-off, the fact remains that organic net revenue growth was still poor (practically nil) after excluding the Mondelez impact. Earnings-per-share was lower than that of the prior-year period, after excluding a $0.18 per share benefit from market-based impacts to post-employment benefit plans; free cash flow is $745 million year-to-date (5.5% of sales), including the negative impact of more than $600 million in
Looking at the Video Game Makers’ Recent Results
November 5, 2013
In its second quarter, results released October 29, Take-Two (TTWO) exceeded non-GAAP revenue estimates, generating $1.3 billion in sales, $400 million more than expected and a sizable increase from $280 million in the comparable quarter. Non-GAAP earnings per share also exceeded consensus expectations by $0.84 per share, with the company earning $2.49 during the second quarter. Year-to-date, free cash flow totaled $120 million, but that figure simply does not tell the story. Because non-GAAP results include only sell-in numbers, the company hasn’t received cash just yet. However, accounts receivable now exceeds $1 billion, equal to over 60% of the current market cap. The vast majority of that figure will be converted to cash that Take-Two can allocate going forward. CEO
Clorox Faces Cash Flow Headwinds in Fiscal 1Q
November 4, 2013
Our general takeaway after surveying calendar third-quarter results from peers Hershey (HSY), Colgate-Palmolive (CL), and Unilever (UN) was that performance in the consumer staples space was mostly positive during the third quarter and that emerging-market performance remains robust (even though Unilever toned down expectations a bit). Clorox’s (CLX) better-than-expected fiscal first-quarter results, released Thursday, did not deviate from the mostly positive newsflow. Sales expanded 2% (3.5% excluding the negative impact from currency), and the company recorded pretax profit growth of 7%. Volume for the fiscal first quarter advanced 1% thanks to gains from Professional Products, Charcoal, Laundry and Burt’s Bees offset by declines in Home Care. Gross margins were flat as cost savings and price increases mitigated higher manufacturing and logistics
