Baidu Surges on Strong Results and Outlook
July 26, 2013
Chinese search giant Baidu (click ticker for report: ) reported fantastic second quarter results Wednesday afternoon. We recently identified Baidu as one of the cheapest stocks on the market, after making a bullish call on the name in early April. Revenue surged 39% year-over-year to $1.2 billion, easily exceeding consensus expectations. Earnings per share declined 3% year-over-year to $1.26 on a non-GAAP basis, which is several cents better than consensus estimates. Free cash flow was very solid at $433 million, equivalent to 36% of total revenue. Baidu’s core search business is growing at rates we saw from Best Idea Newsletter portfolio holding Google (click ticker for report: ) in its earlier days as Chinese internet usage continues to grow. Baidu
Caterpillar’s Second Quarter Performance Falls Short
July 26, 2013
Industrial bellwether Caterpillar (click ticker for report: ) reported relatively disappointing second-quarter results Wednesday, as both its top and bottom lines fell below consensus estimates. Revenue dropped 16% to $14.6 billion, as sales declined in all geographic regions, with the steepest reduction in Asia/Pacific (though we note sales in China increased). Profit per share plunged over 40% to $1.45 due to lower volumes, an unfavorable mix of products, and sales deleveraging (reduced cost absorption). Management acknowledged the difficult market environment by reducing inventories $1.2 billion in the quarter, trumping that of its dealer supply chain, which cut channel inventories by $1 billion (more than expected). It appears that neither Cat nor its dealer network, which plans to reduce inventories even
Facebook Mobile Advertising Performs Incredibly Well
July 25, 2013
Social network site Facebook (click ticker for report: ) reported tremendous second quarter results Wednesday after the market close. Revenue surged 53% year-over-year to $1.8 billion, easily exceeding consensus estimates. Earnings, excluding certain items, jumped 58% year-over-year to $0.58 per share. The firm generated a robust $1.05 billion in free cash flow during the second quarter, equal to 58% of revenue. Image Source: FB 2Q 2013 Earnings Slides The story for Facebook during the second quarter was the explosion in advertising growth, which surged 61% year-over-year to $1.6 billion. As we see from the above image, advertising growth was robust across all geographies, up 51% in the US & Canada, up 96% in Asia, up 53% in the struggling European
Best Idea Visa Blows Past Expectations
July 25, 2013
Wednesday after the market close, Best Ideas Newsletter portfolio holding Visa (click ticker for report: ) reported wonderful results for its fiscal year 2013 third quarter. Revenue surged 17% year-over-year to $3 billion, easily exceeding consensus estimates. Earnings-per-share growth was even better, jumping 20% year-over-year to $1.88, well above consensus expectations. Excluding accrued litigation expenses, free cash flow is running at about $5 billion year-to-date, equivalent to an amazing 57% of revenue. Few companies are able to match Visa in terms of converting revenue into cash for shareholders. Image Source: V 3Q FY2013 Investor Presentation Visa continues to ride the secular trend in credit payments to strong payment volume growth. Total payments processed increased 11% year-over-year to $1.09 trillion, driven
Best Ideas Newsletter Holding Ford Posts a Fantastic Second Quarter
July 25, 2013
Best Ideas Newsletter portfolio holding Ford (click ticker for report: ) continued to seize upon its positive momentum Wednesday morning, posting terrific second quarter results. Revenue surged 16% year-over-year to $36 billion, easily exceeding consensus estimates. Pre-tax profit surged to a record high level of $2.6 billion, which translates to operating income of $0.45 per share—50% higher than the same period a year ago and well above consensus estimates. Automotive-related operating cash flow registered $3.3 billion compared to $0.8 billion during the second quarter of 2012. Image Source: F 2Q 2013 Investor Slides Ford’s execution was superb across the board, particularly in China, where we’ve seen several new models hit showrooms. Strong results in China led to much stronger results
Altria Posts Second Quarter Results; Earnings Outlook Raised But Volume Declines Evident
July 25, 2013
On Tuesday, Best Ideas portfolio and Dividend Growth portfolio holding Altria (click ticker for report: ) reported solid second-quarter results. Though Altria’s revenue fell nearly 3% (down 1.2% net of excise taxes), the firm was able to drive operating earnings expansion of 6.6% thanks to a combination of strong pricing and cost-cutting initiatives. The cigarette maker’s second quarter adjusted diluted earnings per share advanced 5.1% to $0.62, as all three of the firms’ divisions drove ‘operating companies income’ and margin expansion during the period. Adjusted ‘operating companies income’ at its ‘Smokeable Products’ division nudged higher, but only because cigarette price increases stuck. Its total retail cigarette share grew during the quarter, but industrywide headwinds were massive as the firm’s domestic
Broadcom’s Outlook Falls Short
July 25, 2013
Telecom equipment maker Broadcom (click ticker for report: ) announced relatively decent second quarter results Tuesday afternoon, but its outlook left much to be desired. Revenue increased 6% year-over-year to $2.09 billion, slightly below consensus estimates. Earnings, excluding a sizeable impairment attributable to its NetLogic acquisition, grew 8% year-over-year to $0.70 per share, modestly exceeding consensus expectations. Free cash flow was decent at $267 million, or 13% of revenue. Broadcom acquired NetLogic for $3.7 billion in 2012, and as is often the case with acquisitions, it turns out Broadcom paid too much. NetLogic products help improve network performance for 3G and 4G devices, and at the time of the acquisition, Broadcom paid a 57% premium to acquire the firm. After
Boeing’s and United Technologies’ Second Quarters Reinforce Strength in Aerospace
July 24, 2013
On Wednesday, Boeing (click ticker for report: ) reported better-than-consensus top and bottom line results for its second quarter. Revenue advanced 9% thanks to higher deliveries of the 787 Dreamliner and the workhorse 737 platform, while backlog grew to a record $410 billion (nearly 5 times expected 2013 revenue), including $40 billion of net orders during the quarter. Core earnings per share jumped 13%, as operating cash flow (before pension contributions) more than doubled, to $3.5 billion. Free cash flow generation in the period was just over $3 billion, or nearly 14% of revenue. Management raised its 2013 revenue outlook to the range of $83-$86 billion thanks to improved performance in its ‘Defense, Space, & Security’ segment and upped its
AT&T Fends Off Intensified Competition in the Second Quarter
July 24, 2013
Tuesday afternoon, telecom giant AT&T (click ticker for report: ) reported solid second quarter results, fending off intensified competition from T-Mobile (TMUS). Revenue grew 1.6% year-over-year to $32.1 billion, slightly ahead of consensus estimates. Earnings per share excluding one-time items rose 2% year-over-year to $0.67, falling a penny shy of consensus estimates. Free cash flow was relatively strong at $4 billion, equal to 12% of revenue. Image Source: T 2Q2013 Investor Presentation Mobile data growth remained robust during the second quarter, surging 20% year-over-year to $5.4 billion. AT&T activated 6.8 million smartphones posting a record quarter for Android (click ticker for report: ) devices and LTE (35% of all smartphones). While we didn’t get specific commentary on Apple iPhone (click
Apple Proves It Isn’t Dead
July 24, 2013
On Tuesday, Best Ideas Newsletter portfolio holding Apple (click ticker for report: ) posted strong third quarter results and solidified our view that the iPhone is far from dead. Revenue increased 1% year-over-year to $35.3 billion, exceeding consensus estimates. Earnings per share were also better than the consensus had anticipated, falling 20% year-over-year to $7.47 per share. Year-to-date, free cash flow remains terrific at $37.5 billion or roughly 28% of total revenue. Image Source: AAPL 3Q FY13 Earnings Report Apple’s most important product, the iPhone, did phenomenally well as the firm sold 31.2 million units compared to the consensus estimate of 26.2 million. Remember how media pundits have claimed repeatedly that people only want Samsung Galaxies? We’ve made the argument
