Dividend Growth Gem Hasbro Boasts Excellent 3Q
October 21, 2013
Hasbro (HAS) posted solid third-quarter revenue and earnings Monday that exceeded consensus expectations. Revenue jumped 2%, while operating profit improved 3% thanks to modest improvement in the firm’s operating margin. Adjusted net earnings of $1.31 per diluted share in the third quarter compares to $1.24 per share generated in the prior-year period, or more than a 5% increase. We were very pleased with management’s comments that brand initiatives are resonating well with consumers and that it has increased its presence in faster-growing geographies. Though performance in the US and Canada continues to languish as a result of weakness in the ‘Boys’ and ‘Preschool’ categories, the firm’s ‘International’ and ‘Entertainment and Licensing’ segments performed wonderfully. Image Source: Hasbro Sales in Europe,
Third-Quarter Industrial Earnings Support Exposure in Best Ideas Portfolio
October 20, 2013
For starters, if you haven’t yet read through our piece on General Electric’s (GE) third-quarter earnings, it’s a must-read. The step-up in backlog and order trends at the industrial behemoth are quite remarkable, and we think GE’s performance bodes well for the sector as a whole. Still, let’s drill down on a few themes across the industrial space and how our Best Ideas portfolio is well-positioned to capture the strength of underlying trends. Danaher (DHR) Danaher reported third-quarter results Thursday that showed revenue expansion of 5.5% and diluted net earnings per share growth of 9%. The company generated 30 basis points of operating-margin improvement and generated more than $800 million in free cash flow, or about 17.8% of revenue (a very
General Electric Reveals Order Strength; Registers Record Backlog
October 18, 2013
General Electric (GE) put up a darling of an order number Friday with its third-quarter financial results. Though revenue and operating income faced pressure during the period due to asset reductions at GE Capital and foreign-exchange headwinds, the industrial conglomerate’s order performance was off the charts: US orders jumped 18%, Europe orders advanced 17%, and growth market orders leapt 22%. Needless to say, the global business environment improved significantly during the third quarter, and we’re not sure the threat of a US government shutdown (and by extension, the shutdown itself) did much to impede the business of global industrial conglomerates. GE’s backlog of equipment and services at the end of the quarter was its highest ever at $229 billion (up
Facebook: The New Internet?
October 18, 2013
First of all, we’d like to thank you for your ongoing support and wonderful emails about the performance of the dynamic duo today: Google (GOOG) and Baidu (BIDU), two holdings in the portfolio of our Best Ideas Newsletter. We very much appreciate your kind words. Though we (and hopefully all of our members) have profited greatly from these two behemoths in the ‘Internet Content & Services Group,’ we could have done a better job alerting you to Facebook’s recent meteoric rise. Today, we’ve raised our fair value estimate of Facebook (FB) to $76 per share (the high end of the fair value range is now $93 per share) as a result of more optimistic assumptions related to the firm’s opportunity in mobile and
Philip Morris’ Operating Income Growth Stalls in 3Q; Learn About Altria’s Hidden $21.6 Billion Potential Cash Load
October 18, 2013
On Thursday, Philip Morris International (PM) reported third-quarter results that showed the continuation of a very challenging cigarette volume environment. Reported net revenues held the line thanks to significant pricing strength, but adjusted ‘operating companies income’ (OCI) still fell 1.9% (shown below). We’re growing skeptical of the firm’s ability to control costs, as there should have been better performance on the operating line given that pricing completely replaced volume losses in the period (price falls straight to the bottom line). Profit margin improvement was surprisingly absent, with the company’s adjusted OCI margin falling 0.9 percentage points from the year-ago period. Image Source: Philip Morris Adjusted diluted earnings per share of $1.44 was 4.3% higher than the same period a year ago,
PPG Posts Record Third Quarter Results; Our Favorite Idea in the Chemicals Industry
October 18, 2013
Our favorite fundamental chemical idea PPG Industries (PPG) reported record third-quarter results Thursday. Net sales jumped 17% versus the prior year (about 4% organic expansion), and the firm posted record adjusted earnings per diluted share from continuing operations of $2.44, up an impressive 30%+ from the year-ago period (shown right). We liked the operating leverage inherent in performance as well as the firm’s ability to hit the ground running with impactful transactions. The company noted that aerospace and automotive OEM coatings, both up about 10%, were the key drivers behind PPG’s top-line expansion, though other business lines did contribute as well, including the company’s architectural coatings operations. Volume trends improved in all regions of the world, and the firm’s cost-reduction
Best Ideas Portfolio Alert: Google Up Huge After-hours!
October 17, 2013
“How poor are they that have not patience!” – William Shakespeare, Othello Dear Member: If you’ve been following firms that have recently scored a 10 on the Valuentum Buying Index, and by extension, monitoring the holdings of our Best Ideas portfolio, Google’s (GOOG) performance after-hours today is quite exciting. We like to use Google as an example of how we use our Valuentum Buying Index ratings in our portfolio management process. A read through our ‘FAQ on the topic’ hits on a number of important points we try to convey, but the Google example is perhaps the best one for a couple reasons. First, we received a number of membership cancelations to our service in October/November 2012 (last year) citing
Union Pacific Reports Best-Ever Quarterly Results; Thesis Remains Intact
October 17, 2013
Union Pacific (UNP) reported its “best-ever quarterly results” when it posted third-quarter performance Thursday. The quarterly results, in our opinion, were truly fantastic. The company’s operating ratio came in at a record 64.8% (the firm’s best ever—1.8 points better than the year-ago period), as the railroad offset lower coal and grain volumes with strong pricing and productivity improvements. Operating revenue advanced 4% thanks mainly to core pricing gains, which translated into 10% and 13% increases in operating income and diluted earnings per share, respectively. The strength came in spite of lost revenue and increased costs from the flooding in Colorado (which hurt operating income by roughly $10 million). Year-to-date, Union Pacific has hauled in $2.25 billion in free cash flow,
Verizon’s Investment Grade Credit Rating May Be Challenged
October 17, 2013
On Thursday, Verizon (VZ) reported better than expected top- and bottom-line performance in its third quarter, which showed impressive subscriber additions and healthy iPhone sales. We continue to evaluate Verizon for addition to the portfolio of our Dividend Growth Newsletter, though we note its pursuit of Verizon Wireless has complicated matters quite a bit (given the outsize debt load it will take on). We’d like to see how the financials shake-out post-transaction, as there are quite a few moving parts that will negatively impact the firm’s Valuentum Dividend Cushion score (and potentially challenge its investment-grade rating). Verizon added 1.1 million net retail wireless connections and 927,000 net retail postpaid connections in the period, leading to quarter-end marks of 101.2 million total
Kinder Morgan Energy Partners Increases Quarterly Distribution
October 17, 2013
On Wednesday, Dividend Growth portfolio holding Kinder Morgan Energy Partners (KMP) increased its quarterly cash distribution per common unit to $1.35 ($5.40 annualized). The increase represents a 7% jump over the payout during last year’s quarter and a three penny bump from the second quarter of this year. We continue to be huge fans of the consistency of distribution increases at Kinder Morgan Energy Partners, where existing management has increased the distribution 49 times since early 1997. We expect to update our dividend report on the pipeline transportation master limited partnership shortly and continue to believe Kinder Morgan Energy Partners represents a core position in the portfolio of our Dividend Growth Newsletter. Though we note that the MLP is significantly
