Intuitive Surgical’s Shares Are Slumping Today
March 15, 2013
Shares of Best Ideas Newsletter holding Intuitive Surgical (click ticker for report: ) are experiencing some relative weakness today after negative commentary from the American Congress of OB/GYN’s president questioned the cost effectiveness of robotic surgery. To read more, please click here. We identified this as the major risk for the company going forward, and we’ll be keeping a tight leash on the position going forward. Momentum is working against the company at this time, and the fundamental position could deteriorate. Still, we like the long-term trend at work for robotic surgery, even if there are some near-term headwinds.
Firms Raising Their Dividends In The Week Ending March 15
March 15, 2013
We saw a number of firms raise their dividends during the week ending March 15. To access our dividend reports, please click here. Firms Raising Their Dividends This Week: Alexandria Real Estate Equities (ARE): now $0.60 per share quarterly dividend, was $0.56. Avago Technologies (AVGO): now $0.19 per share quarterly dividend, was $0.17. Capital One Financial (COF): now $0.30 per share quarterly dividend, was $0.05. CapLease (LSE): now $0.0775 per share quarterly dividend, was $0.075. Capstead Mortgage Corporation (CMO): now $0.31 per share quarterly dividend, was $0.30. Cohen & Steers (CNS): now $0.20 per share quarterly dividend, was $0.18. Discover Financial Services (DFS): now $0.20 per share quarterly dividend, was $0.14. Equity LifeStyle (ELS): now $0.50 per share quarterly dividend, was $0.4375.
Ulta’s Fall Is Justified
March 14, 2013
Cosmetics retailer Ulta (click ticker for report: ) reported better than anticipated fourth-quarter results Thursday that were overshadowed by the company’s light guidance. Revenue growth remained stellar, growing 30% year-over-year to $759 million, exceeding consensus estimates. Earnings were also stronger than the consensus anticipated, growing 30% year-over-year to $0.95 per share (excluding the impact of the extra week). Same-store sales jumped 8% during the fourth quarter (on top of a same-store sales gain of 11.5% in 2011), suggesting how strong the momentum in the underlying business is. After its CEO mysteriously resigned to join Michael’s Arts and Crafts in February, the stock has been under pressure, and investors have been looking for any signs of weakness to dump shares. The most
RR Donnelley’s Dividend Isn’t Safe
March 14, 2013
Every month in our Dividend Growth Newsletter, we identify firms that may need to cut dividend payments in the future. Timing the dividend cut is difficult (and somewhat arbitrary) as companies can do a number of things to prop up dividends until cash flow situation becomes dire, as we’ve seen at firms like SuperValu (click ticker for report: ) and Roundy’s (click ticker for report: ). However, our forward-looking Valuentum Dividend Cushion has caught a number of dividend cuts during the past year, including JC Penney’s (click ticker for report: ), CenturyLink (click ticker for report: ), and Exelon (click ticker for report: ). We’re not sure RR Donnelley’s (click ticker for report: ) dividend will be the next to go, but
Casey’s General Is Almost Cheap
March 13, 2013
Convenience store chain Casey’s General (click ticker for report: ) has seen its share price take a small haircut after reporting third quarter results earlier this week. Revenue rose 5% year-over-year to $1.7 billion, falling a tad shy of consensus estimates. Earnings fell 7% year-over-year to $0.40 per share, falling well below consensus expectations. Because of its large amount of retail fuel sales, revenue itself isn’t the best metric to measure Casey’s performance, but the firm provides plenty of other useful data points. Same-store gasoline volumes rose 0.6% at an average margin 13.8 cents—just short of the firm’s targets of 1% and 14 cents, respectively. The margin was slightly ahead of last year’s pace. The price of gas went up
Best Idea Buffalo Wild Wings Making 2013 Highs
March 13, 2013
Although the company had its fourth quarter earnings squeezed due to higher chicken wing prices, Best Ideas Newsletter holding Buffalo Wild Wings (click ticker for report: ) is approaching new highs for 2013, trading north of $85 per share. Hedge fund Citadel recently upped its stake in the company to 5.15%, and we think the firm has a strong quarter ahead with March Madness, the NHL playoffs, and the NBA playoffs all quickly approaching. We think shares have some additional upside from current levels, so we’re holding steady in the portfolio of our Best Ideas Newsletter.
FAA Clears the Boeing Battery Solution; Supply-Chain Value Still Evident
March 13, 2013
Late yesterday afternoon, airplane manufacturer and designer Boeing (click ticker for report: ) received approval for the company’s plan to test and certify batteries for its 787 Dreamliner jet. Boeing’s lithium ion battery issues plagued several of its new jets, including many in Japan, which caused substantial weakness in shares even though orders remained strong, and several industry insiders indicated the problem wasn’t anything out of the ordinary. On January 17th, we called for the bottom in sentiment regarding the Boeing 787, and shares of the company have rallied 13% since. Although we did not believe the lithium ion battery would be a long-term headwind for Boeing, several market participants wondered if the company could develop a satisfactory solution, weighing
Costco Outperforms Wal-Mart and Target
March 12, 2013
Even as Wal-Mart (click ticker for report: ) remains challenged, wholesaler Costco (click ticker for report: ) continues to report strong results. Revenue increased 8% year-over-year to $24.8 billion, falling slightly short of consensus estimates. Earnings jumped 37% year-over-year to $1.24 per share, roughly in-line with consensus expectations. Earnings included a one-time $0.14 per share benefit, net of which earnings still grew 22% year-over-year. Although revenue growth was only 8%, membership revenue jumped 15% year-over-year to $528 million. Membership revenues are driven by fantastic renewal rates, which in the US and Canada totaled 93.9% for business memberships and 88.8% for Gold Star memberships. With renewals so strong, the company has been able to easily pass on price increases, saying: “Continued
Yum!’s China Recovery Begins
March 12, 2013
After warning that same-store sales could decline as much as 25% during the first quarter in the wake of a poultry supplier scandal that shook consumer confidence in China, Yum! (click ticker for report: ) reported a same-store sales decline of 20% in its China division. Same-store sales at KFC dropped 24%, while Pizza Hut’s sales fell just 2%. We gathered that after McDonald’s (click ticker for report: ) results in China were “strong,” KFC might show some signs of stabilization, and that appears to be the case. More importantly, Yum!’s China division reported same-store sales growth in February. Although aggregate same-store sales grew just 2%, same-store sales at Pizza Hut jumped 13%, and same-store sales were flat at KFC
Gross Margins Recovering But Still Down At Urban Outfitters
March 12, 2013
Apparel retailer Urban Outfitters (click ticker for report: ) reported strong sales for its fiscal year 2013 fourth quarter. Revenue jumped 17% year-over-year to $856 million, exceeding consensus estimates. Earnings per share fell a penny shy of consensus estimates, but were more than twice as high as the year prior at $0.56 per share. A quick look at metrics might suggest that the business is improving—it is—but the performance is still lagging what Urban achieved in fiscal year 2011. Gross margins improved 650 basis points year-over-year to 36.6% due to lower markdowns and an increase of 18% in regular priced comp sales. Still, the 36.6% gross margin remains 310 basis points lower than the fourth quarter of fiscal year 2011,
