Best Ideas Portfolio Holding Astronics Is Surging Today!
February 11, 2013
<< Our Best Ideas Portfolio Transaction Log << Our Reports on Aerospace & Defense Suppliers << Our Most Recent Note on Astronics (ATRO)
Philip Morris Capitalizes on Growth Markets
February 11, 2013
International cigarette maker Philip Morris (click ticker for report: ) announced strong fourth quarter results. Revenue, net of excise taxes, grew 2.8% year-over-year to $7.9 billion, falling slightly short of expectations, though that was mainly attributable to currency fluctuations. Adjusted earnings per share increased 13% year-over-year to $1.24, exceeding the consensus estimate by a few cents. On a company-wide level, shipments of cigarettes grew 2.9% year-over-year (excluding acquisitions) during the fourth quarter. Revenue and earnings, when accounting for currency fluctuations, also looked much more favorable, growing 6% and 16%, respectively. Philip Morris also used its strong cash flow generation to repurchase $2 billion of stock, while returning $0.85 per share (per quarter) to investors in the form of dividends. Shipment
Auto Parts Retailers Post Surprising Results
February 11, 2013
Last week, Advance Auto Parts (click ticker for report: ) and O’Reilly Automotive (click ticker for report: ) posted better than anticipated fourth quarter results. Revenue at Advance Auto Parts was roughly flat year-over-year at $1.3 billion, in line with consensus estimates. However, the firm’s bottom line surprised materially to the upside, with earnings in the quarter decreasing just 2.2% on a year-over-year basis to $0.88 per share. O’Reilly’s fourth quarter was even more impressive, with revenue jumping 7% year-over-year to $1.5 billion, a touch better than the consensus forecasted. Earnings for the quarter also exceeded consensus estimates, surging 21% year-over-year to $1.14 per share. Though both companies posted better-than-expected results, the means were completely different. Advance Auto Parts, which
Best Ideas Portfolio Holding eBay Flashed a VBI of 10 and Has Never Looked Back
February 10, 2013
Valuentum members have been blessed by the good fortunes of eBay (click ticker for report: ). The firm has been one of the best performers in the entire market after it registered the very top rating of 10 on the Valuentum Buying Index (VBI) in September 2011. Very few firms ever score a 10 on the VBI, so when a company does, members take close note. Google (click ticker for report: ) was the most recent firm to do so, and it has since rocketed to new all-time highs. In most cases, we tend to add firms to our Best Ideas portfolio when they register a 9 or 10 and remove them when they register a 1 or 2 on
Republic Posts Mixed Fourth Quarter; Debt Load Should Not Be Taken Lightly
February 10, 2013
Garbage hauler Republic Services (click ticker for report: ) reported mixed fourth-quarter results late last week. We’re huge fans of the cash-rich, steady-eddy business models of operators in the waste industry, though we note that Republic continues to work through what we’d describe as a transitional period. Our fair value estimate remains unchanged at this time. Republic’s revenue advanced modestly during the fourth quarter thanks to pricing improvements and fuel-recovery fees offset in part by a modest declines in waste volumes. Adjusted net income and adjusted EBITDA, however, continued to face pressure as labor and maintenance costs advanced considerably from the same period a year ago. Still, the firm’s adjusted EBITDA margins came in at an impressive 26.4%. We think
LinkedIn Surges on Terrific Revenue Growth
February 9, 2013
Online business networking giant LinkedIn (click ticker for report: ) reported fantastic growth for its fourth quarter late last week. Revenue surged 81% year-over-year to $304 million, easily exceeding consensus expectations. Earnings also easily surged past consensus estimates, growing nearly 200% year-over-year to $0.35 per share on an adjusted basis (Image Source: LinkedIn). Strength was broad based, as the firm’s human resources tools drove talent solutions revenue 90% higher on a year-over-year basis, to $161 million. With membership growth strong (up 39% during the year) and the network now having over 200 million users, LinkedIn has become the de facto market place for employers and job hunters alike. As a result, its talent solutions business becomes more valuable literally by
McDonald’s January Shows Consumers Aren’t Loving It
February 9, 2013
Friday morning, fast-food restaurant giant McDonald’s (click ticker for report: ) announced lackluster same-store sales results for the month of January. Global same-store sales fell 1.9%, while total sales increased 0.7% year-over-year. Results showed a fairly significant geographical bias. Same-store sales in the US grew 0.9% year-over-year thanks to the addition of the Grilled Onion Cheddar burger to the dollar menu. Total system-wide sales jumped 1.9% year-over-year, and we think the company will continue to struggle with the competitive landscape in the US. New product innovation such as the Egg Whites McMuffin may boost sales slightly, but we think 2013 could be a struggle. The firm also faces secular headwinds from higher input costs and a shift away from unhealthy
Valuentum Dividend Cushion Predicts Exelon’s Dividend Cut
February 8, 2013
In its fourth-quarter earnings presentation slide deck, Exelon (EXC) announced that it would slash its quarterly dividend payout to $0.31 per share (was $0.525 per share) beginning in the second quarter of 2013 (see image below). Valuentum members were well aware of the risks of the dividend cut long before it became apparent to the market. Our July 2012 dividend report on Exelon revealed a 0.3 Dividend Cushion score, and our October 2012 dividend report revealed a -0.1 Dividend Cushion score. Any Dividend Cushion score below 1 indicates that there is significant risk with respect to the long-term sustainability of a company’s dividend. Our article, Why Dividend Growth Investing Needs to Be Forward Looking, is a must read for income investors. We update
Why GameStop Looks Like a Value Trap
February 8, 2013
At Valuentum, we pride ourselves on a multi-faceted investment methodology, acknowledging that several market-movers view any given investment from different perspectives. That is precisely why we’re staying away from shares of GameStop (click ticker for report: ), which scores poorly on the Valuentum Buying Index (our stock-selection methodology). Let’s take a look at why we don’t like the company. Changing Dynamics of Gaming Culture One of the unique features of the video game market has been the relatively liquid buying and selling of games. Since the days of FuncoLand (which was eventually acquired by GameStop), consumers could purchase and sell games new or used, and the game shops would help facilitate this market. Have a copy of Nintendo’s Super Mario that
Nothing Can Stop Best Ideas Portfolio Holding Altria
February 7, 2013
Best Ideas Newsletter portfolio holding and Dividend Growth Newsletter portfolio holding Altria (click ticker for report: ) announced strong fourth quarter results, reflecting the firm’s resiliency in the face of a secular decline in its core product. Revenue increased 1.8% year-over-year to $6.2 billion, slightly above consensus estimates. Earnings were superb, growing 10% year-over-year to $0.55, excluding certain items (Image Source: Altria). Altria’s share gains at Marlboro drove smokeable products revenue higher during the fourth quarter. The firm’s market share increased one percentage point versus a year ago and was 0.6 percentage points higher by the end of 2012 versus the end of 2011. Such brand strength resulted in revenue expansion (net of excise taxes) of 3.6% to $3.8 billion (up 2.4% to
