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
AutoZone Puts Up Solid Fiscal Second-Quarter 2011 Results; We Prefer Ford
February 28, 2012
AutoZone (AZO) reported strong fiscal second-quarter 2012 results Tuesday that showed solid same-store-sales increases and bottom-line expansion. We’ll be tuning in to the firm’s conference call, but we don’t expect to make a change to our fair value estimate for the auto-parts retailer at this time. AutoZone’s fourth-quarter revenue advanced 8.6% during the period thanks to nearly a 6% increase in same-store-sales. Gross margin increased 40 basis points, to 51.3%, in the quarter, but such improved profitability was more than offset by higher self-insurance costs. The company’s net income jumped nearly 13% in the quarter, while diluted earnings per share of $4.15 increased over 24% from the same period a year ago thanks to share buybacks. Consensus was at $4.04
Priceline.com Reports Strong Fourth-Quarter Results
February 28, 2012
Priceline.com (PCLN) reported strong fourth-quarter results that showed continued momentum with respect to bookings growth. Though we will be revisiting our valuation on the online travel provider, we don’t expect to make a material change to it. The company’s revenue advanced 35.5% during the period, as international operations increased nearly 63% from last year’s quarter. During the period, fourth-quarter gross travel bookings, increased nearly 52%. Gross profit performed even better than firmwide top-line expansion, jumping over 50% in the quarter. Further, Priceline.com was able to leverage its cost structure such that operating income expansion exceeded both revenue and gross profit increases at a nearly 61% jump. The firm’s GAAP net income for the fourth quarter came in at $4.41 per
EDAC Tech Approaches $11 Per Share; Valuentum Subscribers Have Been Well Rewarded
February 27, 2012
Please click on a desired link in the ‘Related Articles’ section below to uncover our long-term fundamental take on EDAC Technologies (EDAC).
