Best Idea Intel Rockets to Over $27 Per Share; We Expect Further Valuation Upside
February 27, 2012
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Key Takeaways From Berkshire’s 2011 Annual Report
February 27, 2012
Warren Buffett’s Berkshire Hathaway (BRK-A, BRK-B) posted its 2011 annual report to shareholders on its website over the weekend. Investors near and far wait all year to read the latest musings of the Oracle of Omaha. This year’s letter to shareholders was filled with Buffett’s candor, as usual, where he outlined much of where he went wrong during the year. Though the return on Berkshire’s book value still outpaced the return achieved on the S&P 500 in 2011, it advanced less than 5% during the year, a feeble showing given the collection of its businesses. Over the past 47 years, however, book value has grown from $19 to $99,860, a rate of roughly 20% compounded annually – an incredible
Salesforce.com Expects a GAAP Loss in Fiscal 2013; Cash Flow Generation Remains Robust
February 24, 2012
Salesforce.com (CRM), the enterprise cloud-computing company, reported strong fiscal fourth-quarter 2012 results Thursday that showed tremendous cash-flow generation. Quarterly revenue jumped 38%, and deferred revenue (a gauge of future sales growth potential) advanced almost 50%. Though we were impressed with the pace of deferred revenue growth in the period, we caution investors that such a pace was driven more by changes in invoice practices than internal expansion. Salesforce.com’s fourth-quarter GAAP net loss was $0.03, but after excluding stock-based compensation and certain other items, non-GAAP earnings per share was $0.43. For the full-year, Salesforce.com’s GAAP net loss per share was $0.09. Nonetheless, the company’s quarterly operating cash flow came in at $240 million, up 45% year-over-year, and free cash flow (cash flow from operations
Target Rounds Out 2011 with the Strongest Annual Comp Growth Since 2007
February 23, 2012
Target (TGT) reported fourth-quarter results Thursday and rounded off a strong 2011 that showed the best annual comparable-store sales growth since 2007. We’re sticking with our fair value estimate for Target. Target’s sales advanced 3% in the fourth quarter thanks to a 2.2% increase in US retail comparable-store sales offset by a nearly 9% reduction in credit card revenues. For the quarter, the company experienced a 0.4 percentage-point increase in the number of transactions and a 1.8 percentage-point increase in the average transaction amount. The pace of comparable-store sales, however, lagged the 2.4% increase achieved during the same period a year ago. Management noted that such performance was below internal expectations, as well, due to higher promotional activity during the
Hewlett-Packard’s Turnaround Still Many Quarters Away
February 23, 2012
Hewlett-Packard (HPQ) reported disappointing fiscal first-quarter 2012 results as the company continues to struggle to right the ship. Though the turnaround is still many a quarter away, we are sticking with our fair value estimate for the world’s No. 3 personal computer maker at this time. Hewlett-Packard’s fiscal first-quarter revenue fell 7% (8% after adjusting for currency) from the same period a year ago, while the company’s GAAP diluted earnings per share dropped nearly 40%, to $0.73. Though this came in better than the firm’s previously-provided bottom-line outlook of $0.61 to $0.64 per share, we think expectations had been lowered to the point where an earnings beat had been completely expected. On a non-GAAP basis, earnings per share came in
Dell Posts Weak Fiscal Fourth-Quarter Results
February 22, 2012
Dell (DELL) reported disappointing fiscal fourth-quarter results Tuesday after the close. Though we will be revisiting our fair value estimate for the personal-computer maker, we don’t expect to make a material change to it. Revenue for the quarter advanced only 2%, to $16 billion, as a 6% jump in services revenue offset roughly flat product revenue. The firm continues to expand its mix of revenue and earnings, and services revenue growth outpaced products revenue advancement in the quarter, which we view positively. Non-GAAP operating income fell 11% in the period, while non-GAAP net income dropped 10% as the company faced higher disk drive costs due to the well-known supply constraints from the recent flooding in Thailand. Share buybacks, however, mitigated
Kraft’s Pricing Power Is Unmatched By Peers in Fourth Quarter; Waiting Patiently for the Break Up
February 21, 2012
Kraft (KFT) posted solid fourth-quarter results Tuesday that continued to show the firm’s pricing power. Though we liked the quarter, we remain on the sidelines with respect to Kraft’s shares until after the company separates the firm into two entities later this year: a global-snacks company and a North American grocery products firm. At that time, we’ll be better able to evaluate the investment merits of each separate entity to optimally allocate our capital to the one with the most promise, if such an opportunity presents itself. Kraft’s fourth-quarter revenue jumped 6.6% thanks to a 6.1% jump in organic net revenues, as strong pricing offset declines in volume. However, cost of sales still outpaced revenue expansion, as gross profit growth was
Home Depot Issues Fantastic Fourth-Quarter Results; Another Positive Sign for US Housing
February 21, 2012
Home Depot (HD) reported solid fiscal fourth-quarter results Tuesday that revealed strong comparable store sales and signs that the US housing market continues to strengthen. However, we think the firm’s shares are getting a bit expensive following its price move after earnings, and our $38 per share fair value estimate for the world’s largest home-improvement retailer remains unchanged. Home Depot’s revenue advanced 5.9% in the fourth quarter from the same period a year ago thanks to a 5.7% jump in comparable store sales (6.1% in the US). The number of customer transactions increased 3.6%, while the average ticket expanded 2.4%. Unseasonally warmer weather and an improving housing market buoyed results and stimulated home-improvement demand in the period. We continue to
Walmart’s Fiscal Fourth-Quarter Results and Outlook Disappoint; US Comparable Sales Performance Continues to Improve
February 21, 2012
Walmart (WMT) reported disappointing fiscal fourth-quarter results Tuesday that showed improving domestic traffic trends but modest bottom-line expansion. Though the firm’s outlook fell a bit lower than what we were expecting, we don’t expect to make a material change to our fair value estimate for the world’s largest retailer. Consolidated net sales for its fiscal fourth quarter increased 5.8% from the same period a year ago, with 4.5 percentage points of the increase coming from organic means. Walmart International led the charge in sales growth, advancing 13.1% in the period (8.5% organic), while revenue at Sam’s Club expanded 6.8% (5.4% excluding fuel). Both of these increases, however, lagged the full-year growth pace in the respective segments, suggesting decelerating fourth-quarter revenue
Aruba Networks Dives More Than 10%; We Expect Further Downside
February 17, 2012
<< Aruba Networks Reports Record Fiscal Second Quarter 2012 Financial Results
