Dividend Increases for the Week Included Realty Income and US Bancorp; Dividend Cuts Included a Number of Mortgage REITs
June 21, 2013
Below we provide a list of firms that increased or decreased their dividends for the week ending June 21. 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. Dividend Increases for the Week Ending June 21 CVB Financial (CVBF): now $0.10 per share quarterly dividend, was $0.085. Darden Restaurants (DRI): now $0.55 per share quarterly dividend, was $0.50. Fifth Third Bancorp (FITB): now $0.12 per share quarterly dividend, was $0.11. First Internet Bancorp (INBK): now $0.06 per share, was $0.04 (post-split). Host Hotels & Resorts (HST): now $0.11 per share quarterly dividend, was $0.10. John Wiley & Sons (JW.A): now $0.25 per share quarterly dividend, was
Oracle Posts a Weak Quarter to End Its Fiscal Year
June 21, 2013
Enterprise hardware and software maker Oracle (click ticker for report: ) ended its fourth quarter with the same lackluster revenue and earnings growth that it posted in the previous quarter. Revenue was flat year-over-year at $11 billion, falling short of consensus estimates. Earnings also fell short of consensus expectations, but grew 5% year-over-year to $0.87 per share on a non-GAAP basis. Earnings per share were helped by management repurchasing $2.8 billion worth of shares during the fourth quarter. Even though top- and bottom-line numbers were weak, Oracle remains a cash machine, generating $13.6 billion in free cash flow for fiscal year 2013—this is 36.6% of annual revenue of $37.2 billion! Yet again, the issue with Oracle remains its hardware and
Why Valuation Matters: The Homebuilders
June 21, 2013
Although the broader stock market sold off aggressively Thursday (the S&P 500 fell 2.5%), one industry was under particular pressure: the homebuilders. Shares of PulteGroup (click ticker for report: ), Lennar (click ticker for report: ), KB Home (click ticker for report: ), Toll Brothers (click ticker for report: ), DR Horton (click ticker for report: ), and Ryland (click ticker for report: ) all suffered declines of at least 5%. Homebuilding stocks have greatly benefitted from improving housing trends, but share prices had moved well ahead of the respective firms’ fundamentals. In our housing market industry overview released late May, we mentioned that homebuilding valuations looked particularly stretched. The group’s elevated prices coupled with the potential for the Federal
Finisar Rides the Cloud to Success
June 21, 2013
Fiber-optics maker Finisar (click ticker for report: ) reported stronger than anticipated fiscal fourth-quarter results Wednesday afternoon. Revenue rose 2% sequentially to $243 million, modestly exceeding expectations. Earnings per share increased 18% quarter-over-quarter to $0.20 per share on a non-GAAP basis (which excludes stock-based compensation and impairment charges), which was far better than expected. Surprisingly, telecom spending was not what drove the improved results at Finisar. This runs counter to what we heard from Ciena (click ticker for report: ) just a few weeks ago. In fact, telecom revenue declined 12% sequentially to $79.5 million. Management said the problem in telecom was twofold—sluggish carrier spending combined with lower telecom prices that it had in place a year ago. Though Finisar’s
FedEx Leaps Over a Low Bar
June 20, 2013
Shipping powerhouse FedEx (click ticker for report: ) reported better than anticipated fourth quarter results. Revenue grew 4% year-over-year to $11.4 billion, roughly in-line with consensus estimates. However, adjusted earnings per share climbed 7% year-over-year to $2.13, easily exceeding consensus expectations. This “beat” came after the company reduced its guidance in the preceding quarter, so we still do not believe results were that great. Still, the firm did an effective job of lowering capital spending, so full-year free cash flow increased 59% year-over-year to $1.3 billion. Volumes for the year were also light, with average daily shipments falling 1% year-over-year in the US and with international export volumes increasing only 3%. FedEx’s Express segment showed marginal sequential improvement during the
Mortgage REITs Are Still Hurting
June 19, 2013
With QE Infinity potentially ending in mid-2014 and American Capital Agency (AGNC) slashing its quarterly dividend today (now $1.05 per share, was $1.25), mortgage REITs are still hurting. Consistent with our thesis on the group, dividend payments at a variety of industry constituents are not sustainable. American Capital Mortgage (MTGE) also cut its dividend today, while Two Harbors (TWO) lowered its quarterly payout a couple weeks after our industry thesis hit the wires. Annaly (NLY), American Capital Agency, Armour Residential (ARR) and Western Asset Management (WMC) were all down more than 2% today. With Fed Chairmen Ben Bernanke announcing potential tapering in 2013 and a potential end to mortgage-backed security purchases in mid-2014, the 10-year Treasury yield has moved nearly
Pool Corp Remains Overvalued Despite Fall
June 19, 2013
Putting the majority of the blame on the weather, industry leader Pool Corporation (click ticker for report: ) reduced its full-year earnings outlook by 10 cents per share Wednesday morning. The company initially anticipated earnings per share of $2.13-$2.23, but it has reduced that figure to $2.03-$2.13 per share. We still believe shares are overvalued, despite the retracement today. Not surprisingly, the company blamed “cooler and wetter” weather in North America and Europe for delaying pool openings and purchases. Nevertheless, Pool Corp seemed confident in its revised full-year guidance despite the challenging macro situation. Surprisingly, the company has held up relatively well during the past five years. In fact, we’ve seen the firm do a tremendous job of growing sales
Growth in Asia Should Drive Ford to New Highs
June 19, 2013
Best Ideas Newsletter portfolio holding Ford’s (click ticker for report: ) CEO Alan Mulally recently revealed that the firm believes its Asia-Pacific segment will account for 40% of sales in four or five years. We think this is terrific news for the automaker, but we think the market doesn’t truly appreciate the implications of Mulally’s statement. Source: Ford 2012 10-K, Valuentum As shown above, Asia-Pacific currently represents a small portion of the company’s revenue mix, accounting for just 8% of sales in 2012. Ford was notoriously late to enter China, but we like the firm’s cautious approach and the popularity of the Lincoln brand in the burgeoning country. Ford is now making up for this late start. Year-to-date, wholesale unit
Hormel’s Guidance Cut Isn’t Drastic
June 18, 2013
Pork producer Hormel (click ticker for report: ) announced early Tuesday morning that the company has lowered its fiscal year 2013 earnings outlook to $1.88-$1.96 per share from $1.93-$2.03 per share. Shares are responding negatively to the news, but remain up 26% year-to-date. A 5-cent per share reduction in the annual earnings outlook will not have a material impact on our fair value estimate. While shares sold off aggressively Tuesday morning, we think it had less to do with a change in underlying fundamentals, and more to do with some profit taking. In fact, shares of the pork producer have traded at or above the high end of our fair value range for the past few months. The acquisition of
Best Ideas Newsletter Holding DirecTV is on the Verge of Acquiring Hulu
June 17, 2013
Key Takeaways: · Best Ideas Newsletter holding DirecTV could acquire Hulu in the ballpark of $1 billion. Though its earnings are undisclosed, we know Hulu posted $695 million in revenue in 2012, and people watched 24 billion minutes of entertainment on Hulu during the first quarter of 2012. · The acquisition keeps Hulu out of the hands of competitors. It also keeps Hulu out of the hands of companies that may want to enter the content distribution business. · The cord cutting trend is overblown, but we think Hulu is a nice hedge against cord cutting. We also think Hulu rounds out DirecTV’s TV Everywhere package. · Content costs could come down, and DirecTV is well positioned to benefit. We
