Chipotle Surges on…Catering?
February 7, 2013
After providing investors with weak preliminary results at the ICR Conference in January, Chipotle (click ticker for report: ) announced final fourth quarter results, which were relatively in line with what we saw a month ago. Revenue grew 17% year-over-year to $699 million, in line with consensus expectations and prior guidance. Earnings per share were a penny below expectations, growing 8% year-over-year to $1.95 per share. Same-store sales for the quarter grew 3.8%, also equal to what the company provided us a month ago. Rising input costs continue to hurt profitability, as the cost of food and beverages was 130 basis points higher at 33.5% of revenue. We think the firm could easily cut costs, but its commitment to high-quality
Best Idea Portfolio Holding Visa Is Off to a Fantastic Start in 2013
February 7, 2013
Best Ideas Newsletter holding Visa (click ticker for report: ) announced stellar results for its fiscal year 2013 first quarter Wednesday afternoon. Revenue jumped 12% year-over-year to $2.8 billion, in line with consensus estimates. Earnings per share, net of a one-time tax benefit of $0.11, increased 22% year-over-year to $1.82 per share, a few cents higher than the consensus expected. Other than a litigation charge of $4.4 billion that the firm had to pay out during the first quarter, new CEO Charlie Scharf’s first quarter on the job went off without a hitch. Payments volume increased across all geographies, growing 3% year-over-year in the US to $544 billion, 13% (excluding currency) in Asia-Pacific to $313 billion, and 37% (excluding currency) in Central
As Anticipated, Emerson Sees Huge First Quarter Gains
February 6, 2013
After a modest fiscal year 2012, Emerson Electric (click ticker for report: ) kicked off fiscal year 2013 with a solid first quarter. Revenue for the quarter ticked up 5% year-over-year to $5.6 billion, modestly higher than consensus estimates. Earnings per share jumped 24% year-over-year to $0.62, reflecting stronger net income and a lower share count (but it still was in line with consensus predictions). Cash flow at Emerson was fantastic, with operating cash flow increasing 66% year-over-year to $554 million, resulting in free cash flow growth of 115% year-over-year to $439 million. Though we wouldn’t expect this breakneck pace to continue through the entire year, increases in cash flow will give the firm more flexibility with respect to capital
Panera Caps Off 2012 with a Fantastic Fourth Quarter
February 6, 2013
Fast casual food seller Panera (click ticker for report: ) announced solid fourth quarter results to cap off an excellent 2012 Tuesday after the market close. Revenue jumped 15% year-over-year to $572 million, roughly in line with consensus expectations. Earnings growth was also strong, with earnings per share increasing 34% year-over-year to $1.75 per share, exceeding consensus expectations. This caps off a year in which sales at Panera jumped 17% and earnings per share increased 29%. Major metrics at Panera were incredibly positive during the fourth quarter. Company-owned same-store sales increased 5.1% year-over-year, though 5.4 percentage points of the increase was a result of higher average checks as traffic declined 0.3 percentage points year-over-year. Although we’re never happy to see traffic declining, we’re not
Astronics’ Fourth Quarter Is Another Mixed Bag
February 6, 2013
Aerospace supplier Astronics (click ticker for report: ) reported mixed fourth quarter results Tuesday morning. Revenue grew 10% year-over-year to $67 million, falling about $3 million short of consensus expectations. Earnings were also on the light side, growing 9% year-over-year to $0.37, which was disappointing, in our view. Much like in the third quarter, Astronics was harmed by increased warranty and inventory reserves, as well as higher engineering and development (E&D) costs. Altogether, gross margins slipped 240 basis points year-over-year to 26%. However, CEO Peter Gundermann noted on the firm’s conference call that a few million dollars of sales were pushed into the first quarter of 2013, so we think both margins and revenue growth could improve going forward. SG&A
Star Wars Getting ‘The Avengers’ Treatment from Disney
February 6, 2013
Entertainment giant Disney (click ticker for report: ) announced solid fiscal first quarter results Tuesday after the market closed. Revenues jumped 5% year-over-year to $11.3 billion, exceeding consensus estimates. Earnings fell 4% year-over-year to $0.77 per share, higher than consensus predictions. Disney’s results were solid, but we thought the most important takeaway came from CEO Bob Iger during an interview with CNBC. Iger confirmed that the firm will be making Star Wars movies that deviate from the story’s sequence of events. We believe this implies movies driven around certain characters and their respective origins or backstories. This is essentially what the company successfully accomplished with The Avengers, and we think the results could be even better, given the immense popularity
January Auto Sales Roundup
February 6, 2013
Auto sales were off to a brisk start in 2013, posting a SAAR for the month of 15.3 million units—maintaining the strong pace we saw near the end of 2012 and up 14% year-over-year. Let’s take a look at how the major US auto OEMs performed. Ford Best Ideas Newsletter holding and standout performer Ford (click ticker for report: ) announced fantastic sales figures for January. Total unit sales jumped 22% year-over-year to 166,501 vehicles, and retail sales jumped 24% year-over-year. Brand strength was pretty broad based, with unit sales of the F-series up 22%, the Fusion up 65%, and the Explorer up 45%. Company-wide car sales jumped 34%, outpacing utility vehicles and trucks, which increased 23% and 11%, respectively. Unfortunately, the
Sysco’s Second Quarter Stalls
February 5, 2013
Food distributor Sysco (click ticker for report: ) reported lackluster second quarter results Monday morning. Revenue grew 5% year-over-year to $10.8 billion, a touch better than consensus forecasts. Earnings, although in line with consensus estimates, were down 7% year-over-year to an adjusted $0.40 per share (Image Source: SYY 2Q Earnings Presentation). Gross margins (shown above) at Sysco were down 26 basis points year-over-year to 17.8%, driven mostly by food cost inflation, which was 2.5% during the quarter. For a retailer that that consistently posts 50%+ gross margins, a 30 basis-point swing is largely immaterial. However, Sysco runs on rather thin net margins, so any cost increases have a disproportionate effect on the bottom line. Although it appears inflation is trending
Poultry Problems Plague Yum!
February 5, 2013
Fast food giant Yum! Brands (click ticker for report: ) announced solid fourth quarter results Monday afternoon, though the company warned investors that problems lie ahead. Revenue during the fourth quarter increased 1% (5% on a comparable basis) to $4.2 billion, in line with consensus estimates. Earnings were slightly better than expected, growing 10% year-over-year on an adjusted basis to $0.83 per share during the period. For the full year, YUM! earned $3.25 per share—better than the firm anticipated. However, these results were completely overshadowed by incredibly negative news coming out of China. Not only did same-store sales fall 6% year-over-year, with operating margins declining 190 basis points to 13.9%, but the company is experiencing a terrible reaction to a
Could the FCC Hurt Carriers’ Profits?
February 4, 2013
Reports have surfaced that the FCC wishes to create a free, nation-wide WiFi network in order to facilitate web and cellular traffic. Though plans are only in the initial stages (and we are not jumping to any conclusions), the government could provide the US with a high-speed network at no cost, helping to put the nation on par with the Internet service achieved in several other countries. The news does not alter our fair value estimates for companies in our coverage universe, pending new details regarding probability and timing of implementation. Understandably, the companies that currently own spectrum and experience fantastic returns on networks are a bit upset about the possibility. The high margins achieved by wireless operators Verizon (click
