General Mills Cuts 2012 Outlook; We Remain on the Sidelines
February 17, 2012
On Friday, General Mills (GIS) said that weakness in volumes across US retail food categories in December and January will negatively impact its fiscal third-quarter results (ending in February). As we outlined in our note on the firm’s fiscal second quarter, we were less-than-impressed with the company’s performance at the time, and we suspect most of the current weakness is coming from continued reduced demand for flour, dessert mixes, canned and frozen vegetables, and yogurt. Specifically, General Mills lowered its fiscal 2012 adjusted diluted earnings per share guidance to the range of $2.53 to $2.55 (was $2.59 to $2.61 previously). We also expect the firm’s fiscal 2012 results to be negatively impacted by higher input costs and a negative mix shift
Ancestry.com Beats Bottom-Line Consensus Estimates in 4Q But Street Doesn’t Care
February 16, 2012
This article appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/373111-ancestry-com-beats-bottom-line-estimates-wall-street-shrugs One of the most difficult things to do as an investor is to accept that, despite one’s thesis playing out, a company’s shares may have a difficult time coming to reflect the estimate of its intrinsic value for any number of reasons (management, ongoing short-selling pressure, etc.). And while we have been quite forgiving of Ancestry.com’s (ACOM) management in the past and have been very open to the “short” thesis on the company, the firm’s investment in DNA has turned us off to the stock. We will be looking to trim our position in Ancestry.com in the portfolio of our Best Ideas Newsletter in coming trading sessions. Our primary thesis on Ancestry.com (ACOM) is that
Deere Raises 2012 Earnings Outlook on Strong Equipment Demand
February 15, 2012
Deere & Co. (DE) issued record fiscal first-quarter earnings Wednesday as the firm continues to capitalize on the world’s growing need for food, shelter and infrastructure. We’re comfortable with our long-term projections for the farm-equipment maker and are sticking with our fair value estimate. Worldwide net sales advanced 11% during its fiscal first quarter buoyed by pricing increases of 4%. The company’s Agriculture & Turf segment sales increased 8%, while its Construction & Forestry segment’s revenue climbed 22%. Strength came mostly from outside the US and Canada, as net sales jumped 21% in that geographic category during the period. Net sales in the US and Canada were up a modest 5% for the quarter. The tractor-maker continues to benefit
Zynga’s Quarterly Results a Non-Event; Steer Clear of the Firm’s Stock
February 15, 2012
Zynga (ZNGA), a leading provider of social gaming services and probably best known for Farmville on Facebook, reported its first-ever quarterly results after going public in December. Though its results showed tremendous top-line expansion, we have long-term concerns with owning Zynga at these levels and view its near-term results as inconsequential to its intrinsic value. First of all, we urge investors to keep their heads as the social-networking bubble heats up in the coming months, leading up to and following the well-publicized IPO of Facebook. We’ve already witnessed what we’d describe as “sympathy buying” of firms like Zynga and LinkedIn (LNKD) and think the best way to play the group is to stay as far away as possible or
Reiterating Our Below-Market Fair Value Estimate on Yahoo; Asian Asset Sale Talks Off
February 14, 2012
<< Yahoo Asia Deal Talks Off for Now, All Things D << Yahoo Mulls Asian Asset Swap; Risk Remains to the Downside
Dividend Growth Portfolio Holding PPL Hikes Dividend to $1.44 Per Share
February 10, 2012
On Friday, electric utility PPL Corp (PPL), one of the larger holdings in the portfolio of our Dividend Growth Newsletter, issued better-than-expected fourth-quarter results. The firm’s outlook for its 2012 earnings, however, was in line with what most analysts were expecting. Specifically, the company expects 2012 earnings per share to come in the range of $2.15 and $2.45 (consensus estimates were at $2.42 per share). PPL projects that 70% of this year’s earnings will come from its regulated business, which continues to drive earnings strength. Though PPL noted that it expects lower profitability in its competitive-market supply segment due to higher-value hedge contracts, we think the upper end of firm’s guided earnings range is achievable. Importantly, the company also announced an
LinkedIn Posts Fourth-Quarter Results; Steer Clear of the Firm’s Shares
February 10, 2012
LinkedIn (LNKD) reported fourth-quarter results that, to a large extent, are a non-event as it relates to the firm’s valuation. The company is reflecting substantial revenue and earnings growth long into the future, and while its current trajectory remains strong, it will only hold its lofty price if it can continue to deliver on such expectations quarter after quarter. We maintain the firm will not be able to deliver on the long-term expectations that are embedded in its stock price, but it may take some time for the market to realize our view. Revenue for its fourth-quarter roughly doubled from the same period a year ago, while net income came in at just under $7 million ($0.06 per share) during
Best Idea Visa Posts Another Strong Quarter
February 9, 2012
Best-idea Visa (V) posted another strong quarter Wednesday, exceeding even some of the bullish estimates. The company earned $1.49 per share for the quarter, and raised its full-year earnings-per-share growth guidance to the high-teens. Revenue increased 14%, to $2.5 billion during the period, with strong growth in service fees (up nearly 15%) and in international processing fees (up about 19%). As a result of lower future marketing expenses, a shrinking share count and a strong outlook, we continue to believe that Visa should fetch a price in the high $120s. CEO Joe Saunders reassured investors that the company has fully accounted for the impact of the Durbin Amendment, which has further strengthened our conviction in the stock. Furthermore, the company expects to generate over $4
Cisco’s Fiscal Second-Quarter Results Show Turnaround Gaining Traction
February 9, 2012
Networking-giant Cisco (CSCO) reported decent fiscal second-quarter earnings Wednesday that showed its turnaround efforts are bearing fruit. Though we will be revisiting our valuation on the company, we don’t expect to make a material change to our fair value estimate. Fourth-quarter net sales advanced 11% from the same period a year ago, while earnings per share came in at $0.47 on a non-GAAP basis, ahead of expectations. The company’s widely-watched adjusted gross margin expanded modestly to 62.4% during the quarter from 62.35% in the same period a year-ago. Non-GAAP net income advanced by over 23% from last year’s quarter, while cash from operations was $3.1 billion—better than levels achieved on both a sequential and year-over-year quarterly basis. The company continues
