Cisco’s Strong Performance Continues in the Second Quarter
February 14, 2013
After experiencing a revitalization in fiscal year 2012, tech giant Cisco (click ticker for report: ) reported terrific results for its fiscal year 2013 second quarter. Revenue jumped 5% year-over-year to $12.1 billion, slightly better than consensus estimates. Earnings, on a non-GAAP basis, increased 9% year-over-year to $0.51 per share (Image Source: CSCO). Cisco produced solid revenue growth across most segments, particularly wireless and data centers, which grew 27% and 65%, respectively. After admittedly being behind the curve for the first few years during the shift to wireless, the firm has focused on high-return internal investment and strategic acquisitions to help shift its position in the marketplace. We don’t see mobility slowing down anytime soon, and we anticipate that
Lorillard Boosts Dividend After Solid 2012
February 14, 2013
Strength in the cigarette space continued Wednesday morning when Newport’s parent company Lorillard (click ticker for report: ) reported solid fourth quarter results. Revenue jumped 5% year-over-year to $1.7 billion, smashing consensus estimates. Earnings also easily exceeded consensus expectations, jumping 8% year-over-year to $0.79 per share on an adjusted basis. Unlike competitor Altria (click ticker for report: ), which has focused on smokeless tobacco but not yet leaped into e-cigarettes, Lorillard acquired blu eCigs and has capitalized on the segment’s strong growth. Sales of electronic cigarettes jumped nearly 3-fold quarter-on-quarter thanks to increased distribution (and perceived health benefits compared to traditional cigarettes). We believe Lorillard will continue to scale the business using its existing infrastructure, and 2012 could be the early
Buffett Fires the Elephant Gun and Acquires Heinz
February 14, 2013
After sitting on cash and not making any major acquisitions since Lubrizol, Warren Buffett’s Berkshire Hathaway (BRK.A) teamed up with 3G Capital (former acquirers of Burger King) to purchase Heinz (HNZ) for a whopping $28 billion, or $72.50 per share—a 20% premium to the previous day’s closing price. The two firms will each own 50% of the venture, meaning Berkshire only invested $14 billion, so there’s plenty of cash left for more acquisitions. According to Buffett, 3G will run Heinz, while Berkshire will be an equal partner and finance part of the deal for 3G. Buffett had a fantastic quote to sum up the deal, saying: “I’ve got one word for you: ketchup.” Although organic attacks have come from every
Higher Wing Prices Hurt Earnings Expansion at Buffalo Wild Wings
February 14, 2013
Tuesday morning, Buffalo Wild Wings (click ticker for report: ) announced solid fourth quarter results. Revenue surged 38% year-over-year to $304 million, easily exceeding consensus estimates. Earnings, on the other hand, grew 22% year-over-year to $0.89 per share, falling short of consensus estimates by several cents. Revenue growth at company-owned restaurants totaled 39% year-over-year to $283 million, though same-store sales performance was somewhat modest (up 5.8% compared to the year-ago period). This compared unfavorably to franchise-owned stores, where same-store sales advanced 7.4% versus the fourth quarter of 2011. We think the divergence was a result of franchise-owned restaurants being comparatively younger stores than the more mature company-owned restaurants (we believe performance will eventually converge, however). We are a bit worried
Valuentum Dividend Cushion Catches Another: Cliffs Natural Resources!
February 13, 2013
After we predicted a dividend cut in November 2012, Cliffs Natural Resources (click ticker for report: ) finally cut its dividend after posting poor results for 2012. The firm slashed its quarterly payout 76% to $0.15 per share. Results for Cliffs were actually a bit better than consensus estimates on both the revenue and earnings side. Total revenue declined 4% year-over-year to $1.5 billion, while earnings dipped 59% year-over-year to $0.62 per share (after adjusting for a $1 billion goodwill impairment). Free cash flow for the year was incredibly weak, falling to a negative $613 million, explaining why the dividend needed to be cut. If we only took into account the payout ratio, Cliffs’ adjusted earnings per share of $3.45
Comcast Bets Big on NBCUniversal
February 13, 2013
Tuesday afternoon, cable provider Comcast (click ticker for report: ) announced that it will acquire the 49% stake of NBCUniversal that it doesn’t already own for $16.7 billion from General Electric (click ticker for report: ). The company will also acquire the famous 30 Rockefeller headquarters in Manhattan and CNBC’s Englewood Cliffs headquarters for $1.4 billion. The deal had long been anticipated to occur in the future, but it appears to have closed earlier because Comcast feared the price might rise. Rarely do deals seem like a “win-win” for both parties, but we like this deal for both Comcast and GE. GE now has largely purged itself of its diverse conglomerate past, leaving it more of an industrials and financials pure-play.
Omega Healthcare Posts a Solid Fourth Quarter
February 13, 2013
A few months prior, we profiled Omega Healthcare (click ticker for report: ) and found it to be one of the most attractive healthcare REITs in our coverage universe. Recent results do nothing to disconfirm our thesis, and in fact, the performance strengthens our conviction in the company. During its fourth quarter, Omega saw its adjusted funds from operations jump 16% year-over-year to $0.58 per share, easily exceeding estimates. Revenue was also slightly better than the consensus anticipated, jumping 25% year-over-year to $95 million thanks to the acquisition of several new properties throughout the year. For the full year, Omega earned $2.06 per share in funds from operations, up 22% compared to 2011. The firm made several investments in new
Coca-Cola’s Steady Growth Continues
February 12, 2013
Warren Buffett holding and dividend growth stalwart Coca-Cola (click ticker for report: ) reported solid fourth-quarter results Tuesday morning. Revenue increased 4% year-over-year to $11.4 billion, a touch below expectations (but this was the result of unfavorable swings in currency). Adjusted earnings rose 15% year-over-year to $0.45 per share, a penny north of consensus estimates. Coca-Cola did a fantastic job controlling expenses, with SG&A declining 120 basis points as a percentage of sales to 37.7%. The company has been laser-focused on delivering cost savings since 2008, and the firm anticipates generating annualized savings of $550-$600 million during the next four years. Such improved operational leverage could lead to the robust earnings expansion that shareholders have become accustomed to during the past
Regal Posts a Strong Quarter; Shares Look Undervalued
February 12, 2013
Movie theater owner/operator Regal (click ticker for report: ) announced strong fourth quarter results last week. Revenue jumped 18% year-over-year to $723 million, easily exceeding consensus estimates. Earnings were also stronger than consensus expectations, more than doubling compared to the year ago period to $0.28 per share (adjusted for certain items). The firm’s fourth quarter greatly benefitted from a favorable release slate, which tends to be one of the primary drivers of performance. In addition to more high-grossing films, management noted that the breadth of films also helped drive ticket sales during the quarter. Attendance grew 15% year-over-year, but average ticket prices were 2% higher and average concessions per patron jumped 3%. Regal’s price increases and large jumps in attendance
Dividend Growth Portfolio Holding Hasbro Boosts Dividend; Cash Flow Remains Fantastic
February 11, 2013
After pre-announcing weaker than anticipated fourth quarter results at the end of January, Dividend Growth Newsletter portfolio holding Hasbro (click ticker for report: ) updated investors with its final results. Revenues were down about 4% year-over-year to $1.28 billion, while earnings for the quarter were 13% higher year-over-year at $1.20 per share (net of restructuring charge). As a result, full-year earnings were $2.55 per share, down 10% compared to 2011. However, excluding restructuring charges and foreign exchange variations, earnings for the year were $2.91 per share—a slight increase on a year-over-year basis. As Valuentum members are well aware, Hasbro’s stock performance has been very strong as of late (and such equity performance doesn’t consider its hefty dividend payout). Although earnings were not amazing by
