EDAC Tech Reports Fantastic Fourth-Quarter Results; We Expect an Even Better 2012
March 8, 2012
Best idea EDAC Technologies (EDAC) reported fantastic fiscal fourth-quarter results Wednesday that showed significant earnings improvement and backlog growth. We are increasing our fair value estimate for the aerospace component supplier to $15 per share (from $10) on the basis of stronger profitability over the intermediate term than previously expected. The firm’s fourth-quarter sales jumped 27% from the same period a year ago, while net income per share came in at $0.21 per share versus roughly break-even in last year’s quarter. Sales for its AERO product line advanced 30%, while revenue for its Machine Tool product line increased at a similar pace. We continue to anticipate increased levels of sales in coming years thanks to an acceleration of commercial deliveries at
Pandora Disappoints in a Big Way; We’d Continue to Steer Clear of the New Issue’s Shares
March 7, 2012
One of the more hyped initial public offerings recently, Pandora (P) reported its fiscal fourth-quarter 2012 results after the close Tuesday that disappointed investors on many fronts. The Internet radio pioneer’s outlook was even more of a let-down, and we remain on the sidelines with respect to the firm’s shares, which are off more than 20% today. The performance of Pandora is yet another reminder for the retail investor to be cautious of new issues shortly after their initial open. Fiscal fourth-quarter revenue grew more than 70% from the same period a year ago, but the pace was less than its full-year growth rate, suggesting that expansion slowed during the period. Advertising revenue advanced 74%, while subscription and other revenue jumped a
We Prefer Nike to Under Armour
March 7, 2012
When it comes to iconic American brands, Nike (NKE) stands side-by-side with Coca-Cola (KO), McDonald’s (MCD) and Apple (AAPL). Like other iconic American brands, Nike has rebounded strongly from its 2009 lows, with shares up over 11% this year alone. Though we think shares are fairly valued, we still like Nike much more than Under Armour (UA) on a fundamental basis. Surprisingly, Nike is taking share in apparel. Under Armour might pride itself on its innovation and first-mover advantage in the compression and weather-appropriate layer materials. However, we think Nike is taking share thanks to a more fashionable and affordable line up. Our channel checks at Dick’s Sporting Goods (DKS), which just reported a spectacular quarter, suggest that not only are Nike racks emptier
Merck Weighed Down by Currency But Reaffirms Full-Year 2012 Outlook
March 6, 2012
Merck (MRK) provided guidance for the first quarter of 2012, and while its outlook came in below consensus expectations, the main driver behind the weakness was currency, a non-operating event. Specifically, the drug maker expects foreign exchange to impact sales 1% to 2% in its first quarter, with non-GAAP earnings per share expected to come in between $0.95 and $0.98 per share for the period (consensus was at $1.01). Despite the negative currency impact, Merck re-confirmed its guidance for full-year 2012 non-GAAP earnings per share to be between $3.75 and $3.85 per share. Though the news today suggests that some analysts were too optimistic about Merck’s bottom-line numbers, we think the company’s long-term trajectory remains in line with our forecasts.
Qualcomm Hikes Dividend, Announces Share Buyback Program
March 6, 2012
On Tuesday, Qualcomm (QCOM), a leader in 3G and next-generation mobile technologies, announced that it would hike its dividend 16% to an annualized payout of $1 per share and implement a $4 billion share buyback program. The dividend increase was modestly higher than our expectations for roughly a 12% jump, but we still remain on the sidelines with respect to the firm’s shares in the portfolio of our Dividend Growth Newsletter. Its annual dividend yield of 1.4% remains too low for us to get excited, despite the company’s tremendous opportunity via global smart phone growth. And with Qualcomm trading roughly in line with our estimate of its intrinsic value, we think its share buyback is a net-neutral event on its
Yahoo to Announce Major Restructuring; We Expect More Downside
March 5, 2012
<< Yahoo’s New CEO Preps Major Restructuring, Including Significant Layoffs, All Things D
First Solar Misses Yet Again; We Expect Further Valuation Downside
February 29, 2012
After the market closed Tuesday, First Solar (FSLR) reported poor results yet again. The company posted a surprise loss of $4.78 per share in the fourth quarter due to a $393 million non-cash impairment charge, $164 million in excess warranty costs, and $60 million labeled as restructuring expenses. We think that all three of these items are red flags for long-term holders of the firm. Specifically, the first of these events signals that the firm overpaid for previous acquisitions and the third represents the possible need for a new strategy. We continue to expect the firm’s shares to trade lower. The second item, the $164 million worth of warranty charges, bothers us the most. We think such charges translate into the view that
Collective Brands Surprises in Fourth Quarter
February 29, 2012
Though much of the recent rise in the share price of Collective Brands (PSS) can be attributed to takeover speculation, shares jumped over 4% in after-hours trading Tuesday thanks to a better-than-expected quarterly report. The company’s fourth-quarter loss came in at a steep $0.69 per share, but that result was materially better than consensus expectations. We are sticking with our above-market fair value estimate for Collective Brands at this time. Consolidated revenue grew 5.4% thanks to strong PLG Wholesale results (up 21%) and PLG retail lapping a difficult fourth quarter in the year-ago period, with sales increasing 13.5%. PLG Wholesale continues to shine through as the crown jewel of the business, and we suspect that most potential buyers of the firm
