Best Idea Intel Reports Fourth-Quarter Results; Expects Solid Sales Expansion in 2012
January 20, 2012
Intel (INTC) reported better-than-expected fourth-quarter results Thursday that relieved some concerns about the PC market following the chipmaker’s negative pre-announcement several weeks ago. We are maintaining our above-market fair value estimate for Intel and continue to hold the firm in our Best Ideas Newsletter and Dividend Growth Newsletter. “$54 billion in annual (GAAP) revenue, up 24%, $2.39 in annual (GAAP) EPS up 19%, and $18 billion in dividends…” Reading the above headlines, 2011 was truly an excellent and record-breaking year for Intel, and we believe 2012 will continue to be a good one for investors. For example, the firm’s product and technology pipeline includes opportunities presented by Ultrabook systems, data center and security needs, as well as Intel-powered smartphones and
Microsoft Posts Fiscal Second-Quarter Results; Shares Remain Cheap
January 20, 2012
Microsoft (MSFT), one of the larger holdings in the portfolio of our Dividend Growth Newsletter, reported solid fiscal second-quarter results Thursday on the heels of strong corporate demand and holiday sales. We continue to be pleased with Microsoft’s performance and maintain our view that the shares continue to have valuation upside potential. The firm’s revenue advanced 5% from the prior-year period thanks primarily to expansion in its Server/Tools and Entertainment/Devices segments, which advanced 11% and 14.5%, respectively. The Business Division, its largest segment, increased 3% from the prior-year period, and the firm noted that it has sold nearly 200 million licenses of Office 2010 (in the 18 months since launch). Revenue in the firm’s Windows division fell 6%, and management
IBM Posts Solid Fourth-Quarter Results; Software Continues to Drive Performance
January 20, 2012
IBM (IBM) reported fourth-quarter results Wednesday that capped off a year of record earnings per share, revenue, profit and free cash flow. We continue to like IBM, but we are waiting for an entry point that captures an appropriate margin of safety before adding it to either our Best Ideas Newsletter or Dividend Growth Newsletter. The firm’s revenue jumped a modest 2% (1% adjusting for currency) as an 8% decline in sales from Systems and Technology–due to the timing of product launches, namely the System z mainframe server–weighed down strong performance in Software, which advanced 9% due to strength in its middleware product suite (WebSpere, Tivoli, etc.). Geographically, sales in the Americas’ region increased 3%, while revenues from Europe/Middle East/Africa advanced 1%.
Google’s Fourth-Quarter Misses on European Weakness, Ad Pricing Declines
January 20, 2012
On Wednesday, Google announced weak fourth-quarter results that showed relatively disappointing earnings growth, declining cost per clicks (money paid to the firm for its ads) and slowing international revenue expansion. Though we’ll be re-evaluating our intermediate-term projections on the internet giant, we don’t expect to make a change to our fair value estimate at this time. Google’s revenue advanced 25% in the fourth-quarter from the same period a year ago thanks to a 29% increase in ‘Google Sites Revenues’ and a 15% increase in ‘Google Network Revenues.’ Paid clicks jumped 34% in the fourth quarter from the same period a year ago, but average cost-per-click declined 8%. Though there was some currency impact and management blamed “format changes”, we had been
Best-Idea eBay Reports Fantastic Fourth-Quarter Results; Outlook Tempered, as Expected
January 19, 2012
Best-idea eBay (EBAY) reported strong fourth-quarter results and provided conservative forward guidance. We are maintaining our above-market fair value estimate of the online auction and payment processor. eBay’s revenue for its fourth quarter jumped 35% from the same period a year ago. The firm’s PayPal business continued to perform well, ending the quarter with 106.3 million active registered accounts (up 13% from the same period a year ago). Revenue from PayPal jumped an impressive 28% thanks to continued merchant and consumer adoption and increased penetration on eBay. PayPal’s net total payment volume (TPV) grew 24%, and the firm noted that its international markets exceeded revenue from the US for the first time, reflecting its global footprint. Its Marketplaces business also
Lack of Winter Weather Hits Dick’s Sporting Goods and Big 5; We’re Not Fans of Either
January 18, 2012
Dick’s Sporting Goods (DKS) and Big 5 (BGFV) recently pre-announced dismal guidance for the fourth quarter of 2011. Though both companies cited a lack of winter weather as the main driver of poor same store sales growth, we think the stories at each company are quite different. Dick’s remains a steadily growing, well-run business focused on driving high returns on invested capital, whereas Big 5 is an inferior player focused on smaller markets that’s struggled to find its way. However, as with any investment, getting the right price remains key to our decision-making process, even for firms that may not be best-in-breed. Risk/reward at Dick’s Sporting Goods isn’t very compelling right now. With our fair value of Dick’s at $31 per share, and
JP Morgan Posts Fourth-Quarter Results; Sees Improving Loan Demand and Credit Quality
January 13, 2012
JP Morgan (JPM), the largest bank in the US by assets, reported fourth-quarter results Friday that showed declining profits but solid loan growth, credit-quality improvement, and continued strength in its fortress balance sheet. We continue to hold positions in the Financial Select Sector SPDR ETF (XLF) and the SPDR S&P Bank ETF (KBE) in the portfolio of our Best Ideas Newsletter, but not any bank specifically as we seek to dodge firm-specific risk within the banking sector at this time. However, we think the US banks will have a nice year during 2012 as unemployment (now 8.5%) and housing trends improve (new order growth). JP Morgan’s fourth-quarter net profit fell to $3.7 billion ($0.90 per share) from $4.8 billion ($1.12 per
Lennar’s Order and Backlog Growth Impressive; Housing Market on the Mend
January 11, 2012
On Wednesday, homebuilder Lennar (LEN) reported decent fourth-quarter results that showed strength in new orders and solid advancement in backlog. Though we remain unexcited about the homebuilding group in general, Lennar’s results today suggest that we may finally be past the bottom in housing (both with respect to unit growth and pricing). Our fair value estimate for Lennar is unchanged. The homebuilder’s revenue jumped 11% thanks to a 9% growth in deliveries (3,375 homes) and a 2% increase in the average sales price of homes delivered. Lennar experienced new order growth of 20% (3,027 homes), and while this number fell below deliveries—indicating a book-to-bill below 1—we were encouraged at the pace of growth. The homebuilider’s backlog advanced an impressive
Lululemon Raises Guidance; Our Valuation Remains Unchanged
January 11, 2012
Not surprisingly, Lululemon’s (LULU) weak fourth-quarter guidance, issued previously, was revised upwards Monday, sending shares higher. The company hinted that same store sales would come in the low- to- mid 20%’s (20%+) and that revenue would be be in the range of $358 to $363 million (from $327 to $332 million). Both are staggering increases, and the company also guided earnings to a range of $0.47-$0.49 per share (from $0.40-$0.42). Since the increased ranges aren’t much different from what we had expected, our fair value remains unchanged at $68 per share. We think the increased revenue range reflects the increased likelihood that inventory grew sufficiently to meet burgeoning demand, whereas it had been chasing it all year. Additionally, seasonally-warm weather in the Midwest and Northeast may have helped boost sales of Lululemon
Life Technologies Unveils One-Day Genome Sequencer Product; Shares Jump 8% to Our $47 Fair Value Estimate
January 10, 2012
Please click on the link below to access our 16-page report on Life Tech (LIFE): /20110928_1 Supplemental Information: << Bloomberg’s News Report << About the Ion Proton Sequencer
