Chipotle’s Growth Moderates
October 19, 2012
Burrito chain Chipotle (click ticker for report: ) reported solid, but slowing, third quarter results Thursday afternoon. Revenue increased 18.5% year-over-year to $700.5 million, while earnings grew 19.5% year-over-year to $2.27, both slightly below consensus expectations. Though both growth rates are still impressive, the sequential slowdown in same-store sales indicates that the excitement surrounding new food offerings (Doritos tacos, its Cantina Bell menu) at Taco Bell (click ticker for report: ) are stealing the moment. Same-store sales grew 4.8% during the quarter, compared to 8% during the second quarter, and 12% during the first quarter. The firm doesn’t see things getting much better, forecasting mid-single-digit same-store sales growth during the fourth quarter, and flat-to-low single digits expansion during 2013. Management
A Follow Up on Google’s Third Quarter Results
October 19, 2012
Please click here to read our initial thoughts on Google’s premature quarterly release. In spite of a hoarse voice, CEO Larry Page sounded excited about several initiatives going forward, including expanding mobile ad spend by advertisers. The firm continues to make incremental improvements to search, which may save market share, but the changes haven’t been able to slow the shift to mobile search. Google continues to spend hundreds of millions of dollars on research & development on projects like Google Fiber and self-driving cars which may drive growth in the future, but has weighed on near-term profitability. CEO Larry Page hit on some other positive notes, like YouTube’s increase in ad effectiveness relative to traditional TV, as well as the
Microsoft’s First Quarter Was Mixed But We See Strength Ahead
October 19, 2012
Microsoft’s quarter wasn’t as bad as the headlines suggest, but guidance for the Surface and Windows 8 left something to be desired.
Google Accidentally Reports Weaker Than Anticipated Third Quarter Earnings
October 18, 2012
Tech giant Google (click ticker for report: GOOG) accidentally reported weaker than expected third quarter earnings today. Printing firm RR Donnelly (click ticker for report: RRD) mistakenly filed Google’s third quarter earnings just after noon eastern time, leading to some erratic trading in shares of the search giant. Regardless, the report revealed that revenue surged 45% year-over-year to $14.1 billion, boosted by the firm’s acquisition of Motorola Mobility (a bit lighter than anticipated). Earnings per share fell 7% year-over-year to $9.03, much worse than consensus expectations. Paid clicks surged 33% year-over-year and 6% sequentially, driven by increasing mobile ad share, in our view. However, cost-per-click fell significantly, down 15% year-over-year, while traffic acquisition costs grew to 26% of revenue from
PepsiCo Reports Mixed Results But International Business Remains Strong
October 18, 2012
Food and beverage giant PepsiCo (click ticker for report: ) reported mixed third-quarter results Wednesday morning. Revenue fell 5% year-over-year to $16.7 billion, which was a bit worse than consensus expectations. However, earnings on an adjusted basis fell only 4% to $1.20, which was a few cents better than consensus estimates. After excluding some divestitures and refranchising agreements, organic revenue increased 5% year-over-year, driven by 1% volume growth and 4% pricing growth. The company’s ability to generate cash continues to impress, as operating cash flow year-to-date registered $5.1 billion. We were also excited to see broad-based strength across its portfolio, especially internationally. For one, Latin American Foods revenues surged 13% on the back of strong pricing and volume gains. Though operating profit
eBay Reports Solid Third-Quarter Results; Active Marketplaces User Growth Reaches Best Pace Since 2007
October 18, 2012
On Wednesday, global commerce and payments company eBay (click ticker for report: ) reported solid third quarter performance that showed accelerated growth in both Marketplaces and PayPal. We continue to like the company and hold shares in the portfolio of our Best Ideas Newsletter. Revenue for the third quarter increased 15%, while GAAP and non-GAAP net income jumped 22% and 14%, respectively. The firm’s consolidated operating margin advanced 150 basis points from the same period last year (100 basis points on a non-GAAP basis), as segment margin in each of its three business segments expanded on a year-over-year basis. Cash flow was robust, with eBay pulling in $1.2 billion in operating cash flow and $792 million in free cash flow
Kinder Morgan Posts Strong Results and Raises Distribution
October 18, 2012
Dividend Growth Newsletter portfolio holding Kinder Morgan Partners (click ticker for report: ) reported excellent third quarter results Wednesday after the market close. Revenue grew 10% year-over-year to $2.3 billion, which was slightly better than consensus expectations. Net income per unit, when excluding special items, surged 30% year-over-year to $0.57, roughly in-line with consensus estimates. More importantly, distributable cash flow per unit grew nearly 8% year-over-year to $1.28, and the firm subsequently raised its distribution for the quarter to $1.26. Year-to-date, the firm has accumulated $3.72 per unit versus a payout of $3.69, leaving the company with $8 million of distribution coverage year-to-date. We plan to update our dividend report on the firm soon. The Natural Gas Pipelines segment performed particularly
IBM Reports Terrible Third Quarter Results
October 17, 2012
On Tuesday, IBM (click ticker for report: ) reported disappointing third-quarter results. Though we plan to take a closer look at our valuation assumptions, we don’t expect any change to our fair value estimate to be material. During the period, revenue fell over 5% (down 2% after adjusting for currency), as the tech giant experienced weakness across the board. Revenue in its largest segment, Global Technology Services, fell nearly 4%. Revenue in its next three largest segments—Software, Global Business Services, and Systems & Technology—fell 0.9%, 6%, and 13%, respectively. In fact, not one of its major business segments experienced revenue expansion during the period. Geographically speaking, third-quarter revenue from the Americas fell 4% (down 3% after adjusting for currency), while
Intuitive Surgical Posts Strong Results
October 17, 2012
Medical device maker Intuitive Surgical (click ticker for report: ) reported strong third quarter results Tuesday after the market close. Revenue surged 20% year-over-year to $538 million, roughly in-line with consensus expectations. Earnings surged 46% year-over-year to $4.46 per share, but after adjusting for a one-time tax benefit, they grew about 16% to $3.54 per share—still slightly better than expected. The firm’s performance was consistently strong across all segments, with Instruments and Accessories growing 24% year-over-year to $218 million. Procedure growth during the quarter was 22% thanks primarily to an increased number of gynecological procedures performed in the US. However, the pace was negatively impacted by a decline in US prostatectomy procedures and slowing growth in Europe. The pressure in
CSX Reports Mixed Third Quarter Results; Coal Remains Drag
October 17, 2012
The biggest eastern railroad in the US, CSX (click ticker for report: ) reported mixed third-quarter results Tuesday, with earnings coming in slightly better than expected but revenue falling below consensus. We don’t expect to make a change to our fair value estimate. CSX’s revenue declined 2% as lower volume, reduced fuel recovery and an unfavorable mix hindered expansion. The company’s operating ratio held steady at 70.5% on productivity/resource efficiency, but operating income still declined 3%, to $854 million. Third-quarter net earnings fell 2%, to $455 million, though earnings per share increased modestly due to share buybacks. The firm noted changing global coal market conditions, as the primary reason for disappointing consolidated same store sales pricing gains. Specifically, higher thermal
