Could a Merger Be What Saks Needs?
May 24, 2013
Retailer Saks (click ticker for report: ) has been stealing headlines over the past week, but it has little to do with the company’s performance. In fact, its first quarter results weren’t great—though bottom line results were in-line with estimates and top line consensus expectations were exceeded. On Tuesday morning, the company posted 5% year-over-year revenue growth on a 5.9% same-store sales growth for total sales of $793 million. Adjusted earnings per share were flat year-over-year at $0.19. Even though sales growth is great to see, the company continues to recycle the excuse that 2013 will be a “transformational” year. In reality, gross margins were flat year-over-year at 44.4%, and pre-tax operating margins actually declined 120 basis points year-over-year to
HP Generates More Cash As Its Business Shrinks
May 24, 2013
Legacy hardware OEM Hewlett Packard (click ticker for report: ) reported strong cash flow for its second quarter Wednesday afternoon even though the business continues to shrink. Revenue declined 10% (9% ex-currency) year-over-year to $27.6 billion, falling short of consensus estimates. Non-GAAP earnings per share declined 11% year-over-year to $0.87, which was actually slightly better than previous guidance as well as consensus expectations. More impressively, operating cash flow was 44% higher compared to the year prior at $3.6 billion, driving free cash flow of $2.8 billion, which the company used to repurchase shares and to boost its quarterly dividend 10% sequentially (to 14.52 cents per share). Image Source: HPQ Although CEO Meg Whitman’s turnaround continues to progress at a solid
Taking a Look at Retail
May 24, 2013
The first quarter earnings season for retail has certainly been a bit of a mixed bag. Two of the largest retailers in the US, Wal-Mart (click ticker for report: ) and Target (click ticker for report: ) reported negative same-store sales revealing cautious spending patterns from American consumers. On the other hand, home improvement giant Home Depot (click ticker for report: ) registered wonderful sales gains as the firm continues to ride the housing recovery. Let’s take a look at the results of some retailers leveraged to discretionary income. Urban Outfitters Urban Outfitters (click ticker for report: ) posted a solid first quarter, even though its revenue was slightly lighter than expected. Revenue rose 14% year-over-year to $648 million, driving
Boeing Keeps Raking in Aircraft Orders
May 24, 2013
Boeing (click ticker for report: ) updated its ‘Orders and Deliveries‘ page on its website this week, and we were pleased to see a nice uptick in orders. We keep a close eye on commercial aircraft orders as the pace remains a key driver of sentiment within the aerospace industry, even though Boeing and Airbus are effectively “sold out” for at least the next 12 months. According to the disclosure, the plane-maker has booked roughly 428 net orders through May 21 of this year, which puts the aerospace giant well on its way to achieving a book-to-bill north of 1 (signaling backlog expansion). Though our positive thesis on the aerospace supply chain–AAR (AIR), Astronics (ATRO), Rockwell Collins (COL), HEICO (HEI), Hexcel Corp (HXL), Precision Castparts (PCP), Spirit AeroSystems (SPR),
More Retail Weaknessâ€â€This Time It’s Target
May 23, 2013
US retail powerhouse Target (click ticker for report: ) reported a mixed bag for its first quarter Wednesday morning, highlighting what seemed to be a difficult start to the calendar year for several retailers. Sales fell short of consensus estimates, growing just 1% year-over-year to $16.7 billion. Earnings per share, adjusted for several charges, were 5% lower than a year ago at $1.05, which was still slightly better than consensus expectations. Thanks to the sale of receivables, free cash flow totaled $2.3 billion. Consistent with what we saw from competitor Wal-Mart’s (click ticker for report: ) results, the core business in the US was relatively soft, with same-store sales falling 0.6% during the period. Overall sales were still 0.5% higher
Red Robin: Gradual Improvements in Core Operations
May 23, 2013
We like Red Robin’s business, but even after a solid first quarter, we aren’t interested in shares.
Microsoft Wants to Be the Apple of Your Living Room
May 22, 2013
Earlier today, Dividend Growth Newsletter holding Microsoft (click ticker for report: ) finally unveiled its next generation console, the Xbox One. It wasn’t hard to tell that something big was around the corner for the next generation console, as the company had made some new hires including former CBS executive Nancy Tellem to head the firm’s content development initiative. Let’s take a look at the revelations and how it might impact the company. Steven Speilberg produces a Halo TV show As we mentioned earlier, Xbox’s move into exclusive content was not at all a surprise. In fact, we assumed we might hear about an exclusive TV show or movie even earlier. However, we were a little stunned to see legendary
Best Buy’s Comps Are Soft; Risk/Reward Not Compelling
May 22, 2013
After shares nearly flirted with $10 in December, electronics retailer Best Buy (click ticker for report: ) has seen its stock more than double thanks to moderating sales declines and a store revamping strategy that displayed great promise. However, Best Buy’s first quarter fell short of consensus expectations as the Street got a bit ahead of itself in gauging the velocity of the turnaround. Revenue declined 10% year-over-year to $9.3 billion, which was well below consensus estimates. Adjusted earnings per share fell 58% compared to the prior year to $0.32 per share, which was a touch better than consensus expectations. Free cash flow swung to negative $179 million for the quarter, reflecting the firm’s inability to earn net income more
Dividend Growth Gem Medtronic Is a Cash Cow
May 22, 2013
Dividend Growth Newsletter holding Medtronic (click ticker for report: ) reported wonderful fourth quarter results. Revenue grew 4% on a reported basis (5% ex-currency) to $4.5 billion, easily exceeding consensus estimates. Earnings per share, excluding the impact of restructuring, were 11% higher than a year ago at $1.10 per share, largely exceeding consensus expectations. Free cash flow for the full-year was terrific, registering $4.4 billion. Spinal therapies have been a source of weakness in prior quarters, but revenue came in flat for the quarter, helping the firm’s regenerative therapies group increase sales 4% year-over-year for the quarter to $2.1 billion. Though the sales decline in spinal therapies moderated, the company posted 11% growth in its surgical technologies business, which continues
Housing Recovery Powers Home Depot
May 21, 2013
Home improvement giant Home Depot (click ticker for report: ) kicked off fiscal year 2013 with a strong start. Revenue rose 7% year-over-year to $19.1 billion, soaring past consensus expectations. Earnings also easily exceeded consensus estimates, growing 22% year-over-year to $0.83 per share. Free cash flow improved 7% compared to the prior year period to $2.4 billion. In spite of facing a difficult weather comparison, same-store sales were 4.3% higher on a comparable basis, with US same-store sales up 4.8%. The company received some benefit from ongoing demand from rebuilding efforts resulting from Hurricane Sandy, but we believe the broad based strength underscores the resiliency of the housing market in the US. Also helping to boost results was a shift
