Campbell Soup’s Solid Results Continue
May 21, 2013
Packaged food and beverage company Campbell Soup (click ticker for report: ) reported solid third quarter results Monday morning. Revenue, boosted by the acquisition of Bolthouse Farms, grew 15% year-over-year to $2.1 billion, modestly exceeding consensus estimates. Earnings per share were also a touch better than consensus expectations, increasing 11% year-over-year to $0.62 on an adjusted basis. Free cash flow year-to-date totaled $659 million, which is roughly equal to the tally during the same period a year ago. For a company in a mostly mature business, Campbell posted solid results in its US Simple Meals segment, where sales rose 11% year-over-year to $627 million. Of all things to drive the growth, it was soup, which posted a 14% jump in
National Oilwell Varco Doubles Its Dividend
May 21, 2013
Drilling component and equipment provider National Oilwell Varco (click ticker for report: ) announced that it will double its quarterly dividend to $0.26 per share. Shares yield 1.5% at current levels. We’re not surprised by the raise, as the firm registered excellent dividend growth potential and dividend safety on our scale (click here to learn more about our dividend methodology). We expect robust dividend expansion from National Oilwell Varco going forward.
Yahoo! Buys Tumblr: Instagram or Flickr?
May 20, 2013
Former web titan Yahoo! (click ticker for report: ) made headlines this morning after announcing it acquired social media/blog site Tumblr for $1.1 billion, mostly in cash. Even though Tumblr generates little revenue, Facebook (click ticker for report: ) did acquire Instagram for $1 billion (in cash/stock at the time) when the company didn’t post any revenue. Given the amount of venture capital readily flowing into Internet media companies, a valuation that seems ridiculous in any other industry has simply become the going rate in tech (right or wrong). Ultimately, if the present value of the future free cash flows generated by the acquired asset is greater than the price paid for the asset, we’d view an acquisition as value-creative.
We Don’t Envy Ullman’s Position
May 20, 2013
After firing controversial CEO Ron Johnson during the quarter, department store retailer JC Penney (click ticker for report: ) announced weak results yet again. Revenue fell 16% year-over-year to $2.6 billion, falling short of already low consensus expectations. The firm’s loss was also much deeper than consensus estimates, widening to a loss of $1.31 per share on a non-GAAP basis. Free cash flow was substantially worse as the company burned through even more cash than it did in the prior-year period, posting negative free cash flow of $966 million. The main culprit of JC Penney’s weakness seems to have been its change in price strategy. Same-store sales declined 16.6%, which is simply unacceptable for any retailer. The firm brought back
Let’s Take a Victory Lap: $1,000 Is in the Cards for Google
May 20, 2013
During the past six months, shares of Best Ideas Newsletter portfolio holding Google (click ticker for report: ) have performed exceptionally well, increasing over 40% compared to a 22% gain for the NASDAQ over the same time period. Given the tremendous fundamentals of Google’s core search business, continued mobile monetization, and a stable of potentially blockbuster products, we continue to believe shares have upside north of $1,000 per share. The main driver of our fair value estimate remains Google’s advertising business. The core search business saw paid clicks rise 20% year-over-year during the most recent quarter, driving Google Site Revenue 18% higher to $8.6 billion. Demand for online advertising shows no signs of slowing, but perhaps more importantly, Google has
Don’t Be Fooled by Kohl’s Earnings “Beat”
May 16, 2013
Shares of department store chain Kohl’s (click ticker for report: ) surged Thursday after the company reported better than anticipated earnings for its first quarter. Revenue at the retailer fell 1% year-over-year to $4.2 billion as same-store sales declined 1.9%. Earnings per share increased 5% year-over-year to $0.66, exceeding consensus estimates as the share count shrunk. Conversely, free cash flow declined 29% year-over-year to $170 million as the company did not increase its accounts payable as aggressively as it did in the first quarter of the prior year. We suspect some of the optimism surrounding Kohl’s first quarter centers around a slight improvement in gross margins, which increased 50 basis points year-over-year to 36.4%. Management pointed to lower sourcing costs
Wal-Mart’s Sales Decline Doesn’t Matter
May 16, 2013
Global retailing goliath Wal-Mart (click ticker for report: ) posted lackluster results for its fiscal 2014 first quarter earlier this morning. Total sales increased just 1% year-over-year to $114 billion, below consensus expectations, as US same-store sales dipped 1.4%. Earnings per share increased 5% year-over-year to $1.14, which was a penny below consensus estimates. Free cash flow for the quarter totaled $1.9 billion, lower than that of the prior-year period, which benefitted from a substantial amount of accrued income taxes. Wal-Mart’s management team provided several reasons for the decline in same-store sales, including the delay in the payroll tax, the negative impact of one less selling day and adverse weather. All factors are likely valid for a company as broad
Cisco Surges On Solid Revenue Growth
May 16, 2013
Network switch maker Cisco (click ticker for report: ) reported solid fiscal third quarter results Wednesday afternoon, marked by strong revenue growth. Revenue increased 5% year-over-year to $12.2 billion, exceeding consensus expectations. Earnings were also above consensus estimates, growing 6% year-over-year to $0.51 per share on a non-GAAP basis. Free cash flow rose to $8 billion, up significantly from the $7.5 billion the firm generated in the first 9 months of fiscal year 2012 (Image Source: Cisco). Performance was strong across all geographies, with the Americas region boasting 10% revenue growth and robust gross margins. For the first time in recent memory, the firm’s US public sector business grew at 5% thanks to strong demand from education and state/local governments. The firm’s
The One Thing You Never Knew About Warren Buffett And Others Don’t Want You To Know
May 15, 2013
Warren Buffett is one of the most talked about investors of our time, but he is also the most misunderstood. We hope that what you read in this article will open your eyes to new investment horizons and strategies. We hope it will help you cut through the marketing materials of others that you read so much. And at the very least, we hope it will help you learn more about the Oracle. As you’re reading, it will be very important to keep in mind that it is not Warren Buffett’s admission of his mistake in this article, but the idea that he would pursue an investment of this quality in the first place. We ask: If he can make
Reminder: The May Edition of Our Best Ideas Newsletter Will Be Released Friday, May 17
May 15, 2013
Newsletter Menu << View Current and Archived Newsletters << About Our Best Ideas Newsletter << About Our Dividend Growth Newsletter << Get to Know Newsletter Editor, Brian Nelson, CFA
