GE Pays Up For Fracking Exposure
April 8, 2013
Earlier this morning, The Wall Street Journal reported that GE (click ticker for report: ) will acquire oil pump manufacturer Lufkin Industries (click ticker for report: ) for a whopping $3.3 billion, or $88.50 per share in cash. Paramount to any acquisition is the price paid, and we think GE paid a hefty sum to gain exposure to the US hydraulic fracturing market, paying a 20% premium to the high-end of our fair value range and a price 38% higher than Lufkin’s closing price on Friday. We understand the attractiveness of the energy business, as well as the potential synergies from incorporating the business into GE’s existing portfolio, but paying over 25x 2013 earnings for a firm that hasn’t generated
March Auto Roundup
April 4, 2013
March was another strong month of auto sales in the United States. The SAAR for the month of March came in at 15.27 million units, up from 14.14 million units in March of 2012. Let’s take a look at the results by OEM. Ford Best Ideas Newsletter holding Ford (click ticker for report: ) posted unit sales growth of 6%, driven by utilities (up 14%) and trucks (up 6%). Car sales were flat during the month, though we saw a solid increase of 6% for the redesigned Fusion, and we saw Police Interceptor sales ramp significantly with sales coming in at just under 1,000 units. Consumers flocked away from crossovers, dumping the Edge (down 13%) and the Flex (down 35%),
Tesla’s Aggressive Financing: Revolutionary or Shortsighted?
April 3, 2013
Electric vehicle maker Tesla (click ticker for report: ) stole headlines over the past several days. The firm announced that it will be profitable on both a GAAP and non-GAAP basis as its first quarter sales exceeded expectations (4,750 units versus 4,500 units estimate). Tesla also cancelled its 40 kWh battery version, which is positive, in our view, because it will raise the firm’s average selling price, likely boosting margins. We were a bit surprised to see the company have software limit the driving range to 40kWh rather than force consumers to upgrade to 60kWh batteries, but we think the decision could positively impact brand perception. More importantly, Tesla revealed what it’s calling a “revolutionary” financing plan. Tesla has partnered with
McCormick Kicks Off 2013 With Strong Cash Flow
April 2, 2013
Spices and flavor giant McCormick (click ticker for report: ) started fiscal year 2013 with a solid first quarter. Revenue increased 3% year-over-year to $934 million, easily exceeding consensus estimates. Earnings per share rose 4% year-over-year to $0.57 per share, in-line with consensus expectations. We were pleased to see a strong surge in operating cash flow, which jumped 39% year-over-year to $32 million. McCormick’s first quarter showed a remarkable divergence between its consumer and industrial businesses. The consumer business segment saw sales jump 7% driven by a 14% sales increase in emerging markets, as well as continued strength in the US and Europe. We think McCormick’s spices provide consumers with a relatively inexpensive way to improve tastes, which is important to
The April Edition of Our Dividend Growth Newsletter!
April 2, 2013
S&P and Our Portfolio Hit All-Time Highs, Brian Nelson, CFA Our Dividend Growth Portfolio (see page 5) continues to post strong results, with several names hitting fresh all-time highs over the past few weeks. With our cash balance relatively high, we anticipate to capitalize on any material pullback by adding to existing positions or opening new ones. We’ve had our sights on a few names on our watchlist (page 12) that we believe could add some outperformance and diversification to our portfolio. Economic data throughout March was mostly positive, although the debacle in Cyprus, continued stagnation in Europe, and questionable growth in China may lead some to believe otherwise. Oddly, the headlines aren’t much different than they were a year
Firms Raising Their Dividends in the Week Ending March 29
March 29, 2013
Very few firms raised their dividend during the week ending March 29. To access our dividend reports, please click here. Firms Raising Their Dividends This Week: Camden National (CAC): now $0.27 per share quarterly dividend, was $0.25. City Holding Company (CHCO): now $0.37 per share quarterly dividend, was $0.35. The Female Health Company (FHCO): now $0.07 per share quarterly dividend, was $0.06. Shoe Carnival (SCVL): now $0.06 per share quarterly dividend, was $0.05. Signet Jewelers (SIG): now $0.15 per share quarterly dividend, was $0.12. Washington Federal (WAFD): now $0.09 per share quarterly dividend, was $0.08.
Why Finish Line Is Running After a Weak Fourth Quarter
March 28, 2013
Shares of athletic footwear retailer Finish Line (click ticker for report: ) are soaring today after the firm announced lackluster fourth quarter results. Revenue fell slightly on a reported basis, though when adjusted to reflect a comparable selling period, revenue ticked up 4% compared to a year ago—still slightly below expectations. Earnings per share fell 6% year-over-year to $0.76, but were up about 3% when excluding the extra week of fiscal year 2012’s fourth quarter. Same-store sales increased just 0.7% year-over-year, driven by a 21% increase in digital sales. We were disappointed in the huge divergence between Finish Line and rival Footlocker (click ticker for report: ), which posted same-store sales growth of 7.9% in its fourth quarter. Footlocker’s superior
Will T-Mobile’s iPhone 5 Deal Change the Wireless Industry?
March 27, 2013
Tuesday afternoon, wireless carrier T-Mobile finally relented and announced that it will begin carrying Apple’s (click ticker for report: ) iPhone. Bears can attack market share numbers all day, but we’ve shown plenty of evidence supporting why the iPhone is exceptionally popular. Commscore showed data giving Apple 37.8% market share in January, Verizon (click ticker for report: ) reported that iPhones accounted for 63% of smartphones during the fourth quarter, and AT&T (click ticker for report: ) had iPhones account for 84% of its smartphone mix during the same period. Demand for the product remains robust, in our view. Regardless, T-Mobile’s iPhone strategy is a stark departure from industry norms. T-Mobile will finance the phone, allowing consumers to purchase an
Best Ideas Newsletter Portfolio Holding Visa Hitting New All-Time Highs!
March 26, 2013
Whether it’s the possibility of purchasing Visa Europe or simply its strong technicals, Visa (click ticker for report: ) is hitting all-time highs today. We love the business, and we are fans of management’s prudent capital management since the firm went public in 2008. We continue to hold shares in the portfolio of our Best Ideas Newsletter.
Will Tiffany Shine in 2013?
March 26, 2013
Luxury jeweler Tiffany (click ticker for report: ) announced lackluster fourth quarter results late last week, but provided relatively upbeat guidance. Revenue grew 4% year-over-year to $1.2 billion, falling just a touch short of consensus estimates. Earnings per share rose 1% year-over-year to $1.40, a few cents higher than consensus expectations. For the full-year, revenue rose 4% to $3.8 billion while earnings per share dropped 5% to $3.25. During the fourth quarter, Asia-Pacific continued to be the company’s growth driver, with constant currency same-store sales growth of 6% driving total constant currency sales growth of 10%. Stores generated a sterling $4,500 in sales per square foot, and that number looks poised to grow in fiscal year 2013, even though the
