And…It’s Another Great Year for McDonald’s But the Shares Look Fairly Valued
January 25, 2012
Earlier this week, McDonald’s (MCD) reported an excellent fourth quarter and very strong year. With earnings and revenue in-line with our estimates, we’re sticking with our $88 per share fair value estimate. Earnings for the year grew 15% to $5.27 a share, while same store sales accelerated to a 5.6% pace compared to last year. However, we were most surprised by the performance in Europe—same store sales grew by 7.3% in the fourth quarter, even as the Eurozone deals with a fiscal crisis and a possible recession. We think this highlights the outstanding value proposition McDonald’s offers customers in spite of challenging economic conditions. Margins did fall slightly in the quarter, and though we do not see much room for improvement in the mid-term, operating
Coach Reports Strong Fiscal Second-Quarter Results, Highlights Opportunities in China
January 25, 2012
In contrast to the profit warning from Tiffany (TIF) a couple weeks ago, Coach (COH), best known for its luxurious handbags, posted solid second-quarter results Wednesday and provided a very optimistic tone about its brand’s potential in China. We’ll be re-evaluating our long-term expectations for Coach, but we don’t expect to make a material change to our fair value estimate at this time. Coach’s sales expanded 15% in the quarter, while earnings per diluted share advanced 18%, to $1.18 per share (versus consensus expectations of $1.15 per share). Direct-to-consumer sales increased 17%, as North American comparable store sales rose 8.8% (above our mid-single-digit estimate). The firm remains optimistic about its Men’s business, which it expects to double during fiscal year
Johnson & Johnson Posts Fourth-Quarter Results; We Like JNJ’s Dividend Growth Profile
January 25, 2012
Johnson & Johnson (JNJ) reported mixed fourth-quarter results Tuesday. Though we weren’t exactly enthralled by the firm’s performance, we believe JNJ to be a key holding in the portfolio of our Dividend Growth Newsletter. Our fair value estimate for JNJ is unchanged at this time. The company’s fourth-quarter and full-year 2011 sales increased 3.9% and 5.6%, respectively, from the same period last year. Revenue increased in all three segments–consumer, pharmaceuticals, and medical devices/diagnostics–led by strong international growth. Drugs such as Stelara and Remicade continue to garner high demand, while new applications for Xarelto may contribute to expansion in coming quarters. Though the top-line expansion was decent, recalls and related charges–including litigation and product liability–continued to plague JNJ’s bottom line, amounting
Best Idea Apple Exemplifies Valuentum’s Methodology: Is it a Value or Growth Stock? Both…It’s a Valuentum Stock
January 25, 2012
On Tuesday, Apple (AAPL) posted excellent first-quarter results by almost every measure. The iPad-maker had its highest quarterly revenue and earnings ever and set all-time records for iPhone, iPad, and Mac sales. The performance also relieved some concerns regarding the leadership transition to new Apple CEO Tim Cook following the passing of legendary innovator Steve Jobs. Though we continue to hold the firm in the portfolio of our Best Ideas Newsletter, we may look to trim our position and take some profits in coming weeks. Our above-market fair value estimate for Apple remains unchanged. The company blew by consensus expectations pretty much across the board: revenue ($46.33 billion), gross margin (44.7%), and earnings per share ($13.87). Apple sold a whopping
Harley-Davidson Swings to Fourth-Quarter Profit; Sees More Motorcycle Sales in 2012
January 24, 2012
Harley-Davidson (HOG) reported strong fourth-quarter sales that showed a solid uptick in motorcycle sales. We think the motorcycle-maker’s results bode well for the US economic environment. Harley’s revenue jumped nearly 12% on the heels of a 10.9% increase in unit motorcycle sales worldwide (unit motorcycle sales jumped almost 12% in the US). On an international basis, dealers experienced a 9.7% increase in unit sales. With global motorcycle sales increasing less than 6% for the entire year, the fourth quarter indicates that we are in the midst of accelerated demand for motorcycles on the basis of increased consumer confidence. Harley-Davidson’s income from continuing operations swung to a gain of $54.6 million ($0.24 per share) versus a loss of over
Texas Instruments Calls Bottom in Chip Demand Despite Poor Fourth-Quarter Results; We Prefer Intel
January 24, 2012
Texas Instruments (TXN) reported messy fourth-quarter results after the close Monday that were littered with one-time charges, making year-over-year comparisons difficult. We’ll be taking a close look at our forecasts for Texas Instruments, but we do not expect to make a change to our fair value estimate at this time. At face value, the performance was subpar. Texas Instruments’ revenue fell 3%, operating profit dropped 70%, while earnings per share tumbled 68%. Analog revenue, which includes high volume analog & logic, power management, etc., advanced 12% in the quarter, while the remaining segments (Embedded Processing, Wireless—OMAP application processors) experienced sharp revenue declines. Operating profit fell across all major revenue categories, with the steepest fall coming from its Embedded Processesing unit,
Best Idea Collective Brands Showing Solid Relative Performance on Private Equity Rumors
January 24, 2012
<< View the Bloomberg Story on Collective Brands (PSS) << View Our Best Ideas Newsletter Archive
Will Microsoft’s Mobile Strategy Lead to its Revival?
January 24, 2012
A ten-year chart of Microsoft (MSFT) is not a pretty site. Excluding dividends, shares are down a little over 10%, and the PE has contracted from above 40 to, at times, below 10. In the same time period, Microsoft has gone from a Wall Street tech darling that dominated computing to a dinosaur, legacy tech-company. Regardless of how accurate such a description may be, investors have in droves fled to Apple (AAPL), which makes innovative consumer devices that have impressed the masses. During this same time period, Microsoft has had a few wins, including Windows 7, continued excellence with its Office products, Xbox, and Kinect. Throughout the same period we’ve also seen the Zune, unsuccessful tablets, a weak mobile strategy,
Hasbro Could Be In For a Big Year; Its Hefty Yield Makes it Even More Attractive
January 23, 2012
With the invention of intuitive iPads and the interactive Xbox Kinect, you would think children would be ready for technology to take over their childhoods. And that may be correct. iBook 2 might result in learning taking place exclusively in the digital world. In the meantime, kids are still kids, and they still enjoy playing with toys. Though it’s unreasonable to expect toys to absolutely explode in popularity, they’ve been around for hundreds of years, and they won’t go completely out of fashion tomorrow. We think the digital age has beaten down shares of Hasbro (HAS) to an attractive valuation. The stock currently trades at around 11x our 2012 earnings forecast, with a dividend yield of almost 3.7%. With a
GE’s Industrial Backlog Hits New Highs in Fourth Quarter; GE Capital Continues to Improve
January 22, 2012
General Electric (GE) reported fourth-quarter results Friday that showed strong organic revenue growth, a surge in infrastructure orders, and continued improvement at GE Capital. We continue to watch GE’s industrial backlog closely, and its continued growth to record levels suggests to us that the global economy is healthier than most pundits believe. GE’s total revenue expanded 4% (excluding NBCU) in the quarter, and the firm’s industrial revenue growth came in at 10% on the heels of organic expansion of 5%. Infrastructure orders jumped 15% (organic orders increased 9%) during the quarter, with equipment orders up 23% and services up 7%. Notably, industrial segment emerging market orders increased a whopping 26% from the same period a year ago. GE had
