How We’re Prepared for the Debt Ceiling Deadline
October 14, 2013
Dr. Peter Venkman: This city is headed for a disaster of biblical proportions.Mayor: What do you mean, “biblical”? Dr Ray Stantz: What he means is Old Testament, Mr. Mayor, real wrath of God type stuff. Dr. Peter Venkman: Exactly.Dr Ray Stantz: Fire and brimstone coming down from the skies! Rivers and seas boiling!Dr. Egon Spengler: Forty years of darkness! Earthquakes, volcanoes… Winston Zeddemore: The dead rising from the grave! Dr. Peter Venkman: Human sacrifice, dogs and cats living together… mass hysteria!Mayor: All right, all right! I get the point!– Ghostbusters (1984) If you turned on the business channel today, you might have seen a certain network compare the potential repercussions of the ongoing debt-ceiling debate in Washington to a scene from
Safeway Misses But Will Sell Unprofitable Chicago Business
October 14, 2013
Thursday afternoon, grocery retailer Safeway (click ticker for report: ) posted lackluster third quarter results that were overshadowed by the firm’s decision to sell its unprofitable Chicago-area Dominick’s stores. Revenue increased just 1.1% year-over-year to $8.6 billion during the period, a touch better than consensus estimates. Operating earnings per share, net of Dominick’s, were $0.10, down 38% year-over-year and well short of consensus expectations. Still, free cash flow has nearly doubled year-to-date to $382 million, equal to 1.5% of total revenue. Goodbye Chicago Perhaps the most encouraging news from the third quarter came from the announcement that Safeway will exit its Chicagoland Dominick’s business by early 2014. The firm bought Dominick’s for $1.2 billion in 1998, but the acquisition hasn’t
PLG Brands Continues to Drive Wolverine Worldwide
October 14, 2013
Shoe seller Wolverine Worldwide (click ticker for report: ) posted strong third-quarter results driven largely by former Best Ideas Newsletter portfolio holding Collective Brands’ PLG brands. Revenue surged 9% year-over-year on a pro forma basis and more than doubled on a year-over-year reported basis, to $717 million (modestly exceeding consensus estimates). Earnings per share were even stronger, rising 61% year-over-year to $1.16 (excluding acquisition costs) and coming in handily above consensus expectations. Year-to-date, the company has generated $96.2 million in free cash flow, equal to 5% of total revenue. Image Source: Wolverine Worldwide Wolverine’s ‘Lifestyle’ and ‘Performance’ groups were the drivers behind revenue expansion during the quarter as the company continues to capitalize on the success of recently-acquired Sperry Top-Sider
Dividend Increases for the Week Ending October 11
October 11, 2013
Below we provide a list of firms that raised their dividends for the week ending October 11. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports, please click here (or use our ‘Symbol’ search box in our website header). Firms Raising Their Dividends This Week Genesis Energy, LP (GEL): now $0.5225 per share quarterly dividend, was $0.51. Hospitality Properties Trust (HPT): now $0.48 per share quarterly dividend, was $0.47. Johnson Outdoors (JOUT): now $0.075 per share quarterly dividend (first ever dividend). Questcor Pharmaceuticals (QCOR): now $0.30 per share quarterly dividend, was $0.25. RPM International (RPM): now $0.24 per share quarterly dividend, was $0.225. Select Income REIT (SIR): now $0.46
Yum! Brands’ Problems Extend Beyond China
October 10, 2013
Weak US same-store sales growth only makes matters worse at Yum! Brands.
What Baseball Taught Investors About Stock Valuation
October 10, 2013
By Brian Nelson, CFA It was October 1, 1961 – 34 years after Babe Ruth hit 60 homeruns in one season. Yankee Stadium was half-empty on the last game of the regular season. It was the fourth inning against the Red Sox, and Boston right-handed rookie pitcher, 24-year old Tracy Stallard, thus far had held the Bombers to a goose egg. Nineteen-year-old truck driver Sal Durante watched anxiously from the right field stands. [Roger Maris stepped to the plate. Stallard threw two pitches, hoping that the reigning American League Most Valuable Player would chase them. The bomber didn’t bite. The crowd booed, as only a long-ball would satisfy. And then it came – a waist high fastball – and Maris belted
An IPO That Doesn’t Look Delicious: Potbelly
October 9, 2013
After the extremely positive post-IPO fortune of fast food concept Noodles & Co (NDLS), the surging IPO of Potbelly (PBPB) caught our attention. Let’s take a look at the prospects of this Chicago-based sandwich chain. Background Potbelly is a Chicago-based sandwich chain famous for its toasted sub sandwiches, fresh milkshakes, and in-store musical entertainment. The concept began in Chicago’s Lincoln Park neighborhood as a toasted sub shop with eclectic decorations from the original owner’s antique shop. Current chairman and largest individual shareholder Bryant Keil purchased the original restaurant in 1996 and has since worked to turn it into a chain with 286 restaurants throughout the United States—280 owned by the company, and 6 owned by franchisees. The firm also has
Alcoa’s Third Quarter Results Reflect Focus on Cash Management
October 9, 2013
Leading aluminum and alumina producer Alcoa (click ticker for report: ) posted decent third-quarter results Tuesday afternoon. Revenue declined 1% year-over-year to $5.7 billion, modestly above consensus estimates. Earnings per share, adjusted for special items, surged to $0.11 from just $0.03 during the same period a year ago. Free cash flow during the quarter was negative $36 million, a $3 million improvement year-over-year. Focus on Cash Management Image Source: AA In our view, an owner’s earnings aren’t found on the income statement, but rather on the statement of cash flows. Alcoa agrees, and as such, the firm has focused extensively on improving its cash operations, targeting breakeven performance in seasonally-weak quarters. Thus far, Alcoa has achieved better-than-anticipated productivity gains while
Banks Pass Self-Administered Stress Tests
October 8, 2013
The cohort of “too big to fail” banks such as JP Morgan (click ticker for report: ), Bank of America (click ticker for report: ), Goldman Sachs (click ticker for report: ), Wells Fargo (click ticker for report: ) and Citi (click ticker for report: ) recently released self-administered “stress tests” to see if they could withstand turbulent economic conditions. According to the banks, they are all in great shape and can meet minimum capital requirements in the event of adverse economic conditions. These tests, self-administered, are secondary to the annual March stress test performed by the Federal Reserve. However, these tests have the similar assumptions to mimic how well the banks would hold up if economic conditions returned to
HCP’s Strange Management Shakeup: Our Take
October 8, 2013
Late last week, HCP (click ticker for report: ) terminated CEO, Chairman, and President Jay Flaherty III after 10 years of leadership. Flaherty led the firm admirably throughout the Great Recession, never reducing the dividend and achieving share appreciation of 112% versus 80% for the S&P 500 over the same time frame. Flaherty also raised the quarterly dividend from $0.415 per share to $0.515 (a 27% increase) during this tenure (dividend history). In short, HCP performed quite well through Flaherty’s reign. Image Source: Glassdoor Non-Executive Chairman Mike McKee noted that the firing had nothing to do with underlying financial performance or operational issues. Without much board transparency, it’s difficult to ascertain exactly what happened; however, employer review website Glassdoor
