Whole Foods Remains the Best Grocer
August 6, 2013
Last week, organic grocery store chain Whole Foods (click ticker for report: ) reported wonderful third quarter results, again outperforming its peers. Revenue surged 12% year-over-year to $3.1 billion, in-line with consensus estimates. Earnings per share rose 20% year-over-year to $0.38, also in-line with consensus expectations. Free cash flow totaled $115 million, equal to 4% of sales. How Did Whole Foods’ Peers Do? The grocery business certainly is not a bull market. Competitor SuperValu (click ticker for report: ) reported weak results for its fiscal year 2014 first quarter. Revenue from continuing operations declined 1.5% year-over-year to $5.2 billion, as retail food same-store sales declined 3% year-over-year while Save-A-Lot same-store sales declined 1.5% year-over-year. Continuing operations also posted a loss
A Content Standoff
August 5, 2013
After a few days of threats and warnings, cable distributor Time Warner Cable (click ticker for report: ) dropped CBS (click for report: ) programming from its content offering as the two failed to reach an agreement on retransmission fees. Retransmission fees are charged by basic cable station owners (think CBS, NBC, and ABC) to distributors that wish to carry the content. Time Warner released a statement to its customers blaming CBS for outrageous demands. Current retransmission fees per subscriber hover around $1 a month, but rumors have suggested CBS would like to double this price. Time Warner believes that allowing the fee to double would set an unhealthy precedent, especially when considering that CBS is free via antenna TV.
Dividend Increases for the Week Ending August 2 Included Illinois Tool Works and Union Pacific
August 5, 2013
Below we provide a list of firms that upped their dividends for the week ending August 2. 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. Arbor Realty Trust (ABR): $0.13 per share quarterly dividend, was $0.12. B&G Foods (BGS): now $0.32 per share quarterly dividend, was $0.29. Carlisle Companies (CSL): now $0.22 per share quarterly dividend, was $0.20. CBOE Holdings (CBOE): now $0.18 per share quarterly dividend, was $0.15. Chemed Corporation (CHE): now $0.20 per share quarterly dividend, was $0.18. Comfort Systems: (FIX): now $0.055 per share quarterly dividend, was $0.05. Energizer Holdings (ENR): now $0.50 per share quarterly dividend, was $0.40. Ethan Allen Interiors
From the Discussion Boards: Understanding Wall Street Analysts’ Moves
August 4, 2013
Scenario: Valuentum researches a firm and concludes that it fits their investment methodology, the Valuentum Buying Index, for inclusion into the Best Ideas portfolio. The Valuentum Team plans to present the idea at its next meeting for internal debate and discussion before sending out a transaction alert email to members. In the meantime, however, a Wall Street analyst cuts the investment rating on the stock from ‘Buy’ to ‘Hold’ and raises the price target. What is this Wall Street analyst doing, and how does this impact Valuentum’s thoughts? Which is the correct answer from below? A. The Wall Street analyst is playing a game. He/she lowered the investment rating to accommodate his/her value clients and raised the price target to
LinkedIn’s Powerful Network Drives Strong Results
August 3, 2013
Thursday after the market close, business networking power LinkedIn (click ticker for report: ) announced robust second quarter results. Total revenue surged 59% year-over-year to $364 million, easily exceeding consensus estimates. Non-GAAP earnings per share swelled 137% year-over-year to $0.38, smashing consensus expectations. Free cash flow totaled $31 million, equal to 9% of total revenue. Image Source: LNKD 2Q 2013 Investor Presentation Above all, membership growth continues to be the contributing factor to LinkedIn’s success, in our view. Membership surged 9% sequentially and 37% year-over-year to 238 million users. As a result of membership expansion, LinkedIn is experiencing strong growth in unique visitors and page views. The story is simple: as LinkedIn network swells in membership, we see more advertisers,
Procter & Gamble’s Fourth Quarter Reveals Lafley’s Strategy
August 3, 2013
Thursday morning, consumer products producer Procter & Gamble (click ticker for report: ) reported strong fourth quarter results. Revenue increased 2% (+4% excluding currency) year-over-year to $20.7 billion, exceeding consensus expectations. Core earnings per share fell 4% year-over-year to $0.79, which was still better than consensus estimates. For the full-year, the firm posted core earnings per share of $4.05 (up 5% year-over-year) and revenue of $84.2 billion (up 1% year-over-year). Free cash flow totaled $10.8 billion for fiscal year 2013, equal to 13% of total revenue and 17% higher than fiscal year 2012. Though fourth quarter results were decent, performance was not the most relevant story for P&G. New (and old) CEO A.G. Lafley took time to reveal his new strategy
DirecTV’s “Miss” Mostly a Currency Issue
August 2, 2013
Best Ideas Newsletter portfolio holding DirecTV (click ticker for report: ) reported strong second quarter results Thursday morning. Revenue increased 7% year-over-year to $7.7 billion, just a bit shy of consensus expectations. The disappointment in the period came from DirecTV Latin America, where revenue still advanced 12% year-over-year on a reported basis (constant currency revenue surged 26% year-over-year). Currency issues can be short-term headwinds, but we think the issues will even out in the long run. Earnings per share increased 8% year-over-year to $1.18, falling well short of consensus estimates. Again, we think this was largely due to currency issues. Free cash flow increased 15% year-over-year to $1.2 billion, equal to 15% of total revenues. In the US, revenue increased 5%
Teva Boasts a Several Billion Dollar NTE Opportunity
August 1, 2013
Leading generic pharma firm and Best Ideas Newsletter portfolio holding Teva Pharmaceuticals (click ticker for report: ) issued mediocre second-quarter results today. Net revenue was roughly flat on a year-over-year basis, as weakness in generic sales in the US and Europe was mostly offset by strength in Treanda, ProAir, and multiple-sclerosis drug Copaxone, the latter accounting for about 20% of revenue and half of profits. Teva continues to address ongoing hurdles associated with Copaxone, as CEO Jeremy Levin outlined on the firm’s second-quarter conference call: “The U.S Federal Court of Appeals confirmed validity of select COPAXONE patents through May 2014, but not others including one patent expiring September 2015. We are disappointed with this part of the Appeals Court decision
Regulatory Uncertainty Once Again Strikes Visa and MasterCard
August 1, 2013
The past few weeks had been very good for network processors Visa (click ticker for report: ) and MasterCard (click ticker for report: ). Visa kicked things off with strong revenue and even stronger earnings growth for its third quarter. MasterCard followed suit, easily beating consensus expectations on 15% revenue growth and a 23% surge in earnings per share. Then another bullet was fired in the war the US is fighting to regulate the amount of profit these firms can make. A US District Judge Richard Leon ruled that the Federal Reserve didn’t have the authority to cap debit card transactions at $0.21 based on the notion that the limit diverged from the original intent of Dodd-Frank’s Durbin amendment. For
Digging into Phillips 66’s Results: Earnings Decline Not Tragic
August 1, 2013
Dividend Growth Newsletter portfolio holding Phillips 66 (click ticker for report: ) announced slightly weaker than anticipated second quarter earnings Wednesday morning, which isn’t too surprising after the insight we received from peer Valero (click ticker for report: ). Revenue declined 8% year-over-year to $43.9 billion, which was actually above estimates but not materially important for Phillips 66. Earnings per share declined 33% to $1.50 per share, falling well short of consensus expectations. Free cash flow remained relatively strong at $597 million during the quarter, and year-to-date, it stands at $2.4 billion. Image Source: PSX 2Q 2013 Investor Presentation Where did Phillips 66 earnings weakness come from? Without question, it was the firm’s refining margin. Advantaged crude remained flat as
