Best Ideas Portfolio Holding Intuitive Surgical Is Surging Today
January 23, 2013
After reports from short sellers claimed growth was slowing at Intuitive Surgical (click ticker for report: ), the company’s fourth quarter performance provided evidence to the contrary. Revenue advanced 23% year-over-year to $609 million, handily exceeding consensus expectations. Earnings were also better than anticipated, growing 13% year-over-year to $4.25 per share. Earnings trailed revenue growth due to a substantial increase in the firm’s tax rate. Gross margins fell during the quarter, down approximately 110 basis points year-over-year and 60 basis points quarter-over-quarter to 71.9%, but it’s hard to complain about the decline when gross margins are so strong. Some of the margin compression resulted in a revenue shift to lower-margin services (a benign mix shift), as well as older da
Best Ideas Newsletter Portfolio Holding Google Rebounds with a Strong Fourth Quarter
January 23, 2013
Search giant and Best Ideas Newsletter portfolio holding Google (click ticker for report: ) reported better than expected fourth quarter results Tuesday afternoon. Revenue, excluding traffic acquisition costs (TAC), grew 39% year-over-year to $11.3 billion, a tad short of expectations. Earnings, adjusted for extraordinary items, were up 12% year-over-year to $10.65 per share, exceeding consensus estimates. We still like the company’s current valuation. Google’s core business continued its strong performance during the fourth quarter. Total revenue at the core business soared 22% year-over-year to $12.9 billion. Google-owned sites and Google network sites experienced strong growth of 18% and 19%, respectively. Traffic acquisition costs grew a little faster than revenue, up 25% year-over-year, a trend we will continue to monitor closely,
Agriculture Stands Out During DuPont’s Fourth Quarter
January 23, 2013
Industrial bellwether DuPont (click ticker for report: ) reported somewhat weak fourth-quarter results Tuesday morning, but the firm’s previously announced strong outlook trumped the report. Revenue during the quarter was flat year-over-year at $7.3 billion, roughly as the consensus anticipated, though full-year revenue grew 3% to $34.8 billion. Earnings from continuing operations were slightly better than expected, down 58% compared to a year ago at $0.11 per share. DuPont’s agricultural segment posted improved results, with revenue jumping 18% year-over-year to $1.5 billion. Although the fourth quarter generally includes losses in the segment, performance continues to improve, as shown below (Image Source: Q4 2012 DD Earnings Presentation). The strength in agriculture doesn’t surprise us, as the demand for food continues to grow
Johnson & Johnson’s Long-term Tailwinds Are Intact
January 22, 2013
Diversified medical and consumer products firm Johnson & Johnson (click ticker for report: ) reported solid fourth-quarter results Tuesday morning. Sales jumped 8% year-over-year to $17.6 billion, roughly in-line with consensus expectations. Earnings were slightly better than anticipated, growing 5.3% year-over-year to $1.19 per share—after adjusting for several special items. Johnson & Johnson’s international expansion outpaced its domestic growth, with international sales jumping 8.9% on a reported basis (11.2% excluding currency) while its domestic business grew 6.8%. The acquisition of Synthes was the big needle-mover in the period, as it was responsible for 5.6 percentage points of the total sales increase. For the year, the growth rate of the firm’s Medical Devices and Diagnostics’ segment exceeded that of other segments, though pharmaceutical results
Verizon Continues to Outpace the Wireless Carriers
January 22, 2013
Tuesday morning, wireless giant Verizon (click ticker for report: ) reported decent fourth quarter results. Verizon’s revenue during the fourth quarter was slightly better than consensus estimates, growing 5.7% year-over-year to $30 billion. Earnings, adjusted for special items including a $1.55 per share pension charge, fell 27% year-over-year to $0.38 per share, which was worse than anticipated, even after netting out a $0.07 per share impact attributable to Hurricane Sandy. Verizon’s wireless segment led the way, with service revenues jumping 8.5% year-over-year, to $16 billion, and total segment sales growing 9.5% year-over-year, to $20 billion. Customers continue to migrate to smartphone plans which carry higher prices and superior margins. Retail postpaid ARPA (average revenue per account) jumped 6.6% compared to the
General Electric Issues Strong Fourth-Quarter Results; Posts Largest Backlog in History
January 21, 2013
On Friday, General Electric (click ticker for report: ) reported solid fourth-quarter results across the board. Total revenue advanced 4% as industrial organic expansion increased at a similar rate. Adjusted orders jumped 7% in the quarter, and the company’s backlog swelled to $210 billion, a new record (Image Source: GE 4Q Earnings Presentation). GE’s operating margins increased 120 basis points during the period, and fourth-quarter operating earnings per share expanded 13% from the same quarter a year ago. All of its industrial segments experienced earnings growth, with five of the seven industrial segments putting up double-digit bottom-line expansion. GE Capital posted $1.8 billion in earnings during the quarter, and its Tier I common ratio came in at a healthy 10.2%.
Channel Checks at Apple Store Speak to Continued Strength
January 21, 2013
This weekend (on the evening of January 19, 2013), we took a trip to a local Apple (click ticker for report: AAPL) store to assess traffic trends and gauge the level of ongoing interest in the iPad maker’s products (post-holiday season). We didn’t see any slowdown in traffic, and the location we visited was very well attended. Though the Schaumburg, IL (Woodfield) locale is one of a large number of Apple stores in the US, we have no reason to believe that it is not indicative of traffic trends and general interest in Apple products at other retail Apple stores across the country. We’ve also included a snapshot of an adjacent, neighboring (and vacant) Radio Shack (click ticker for report: RSH) located just a few feet from the pictured Apple store
The Art of Hitting a Triple: The Path of EDAC Technologies
January 18, 2013
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Intel Punished for Investing in the Future
January 18, 2013
Thursday afternoon, semiconductor giant Intel (click ticker for report: ) reported better than expected fourth quarter results. Revenue declined 3% year-over-year to $13.5 billion, roughly in-line with consensus expectations. Earnings easily exceeded modest estimates, falling 25% year-over-year to $0.48 per share. Due to the weak PC market and the firm’s desire to clear inventories, gross margins were down significantly in the fourth quarter, falling 650 basis points year-over-year to 58%. Gross margin declines were the primary driver behind the lapse in profitability, but research & development costs increased $300 million compared to the same period of 2011 to 19.5% of sales (up 290 bps Y/Y). On a segment basis, the PC Client Group, not surprisingly, drove the majority of revenue
Is Genworth a Gem Worth Looking At?
January 18, 2013
While we at Valuentum tend to prioritize independent thinking over following the herd, we believe investors large and small can benefit from ideas generated outside of their own portfolios—we don’t think anyone would be disappointed piggy-backing Warren Buffett into shares of Berkshire Hathaway 25 years ago, for example. We wanted to profile a stock owned by prominent investors Seth Klarman and David Einhorn. Genworth Financial (click ticker for report: ) is a financial services company engaged in international and domestic mortgage insurance, as well as wealth management. When the US housing market collapsed, Genworth flirted with bankruptcy and since has experienced volatile price performance. Based on a price-to-book ratio of less than 0.25, a price-to-tangible-book ratio of approximately 0.30, and our fair
