Joy Global Issues Fourth-Quarter Results; Warns of Slower Growth in Demand for Mining Equipment
December 14, 2011
Mining-equipment maker Joy Global (JOY) reported mixed fourth-quarter results Wednesday, and its outlook for mining equipment demand and commodity prices, in general, left investors in a selling mood. We are sticking with our fair value estimate for Joy Global, however. Fourth-quarter organic revenue jumped about 18%, core operating income increased about 24%, and organic bookings advanced 22% from the same period a year ago. Adjusted income from continuing operations per diluted share came in at $1.82, below consensus expectations of $1.86 per share but up about 32% from last year’s quarter. Orders for surface mining equipment jumped nearly 50% from the same period a year ago, while purchases of underground mining machinery advanced 2.5% from the year-ago quarter. Strength was evident both for original equipment
Best Buy’s Fiscal Third-Quarter Results Disappoint; Excessive Promotions and Weakness in Europe to Blame
December 13, 2011
On Tuesday, Best Buy (BBY) reported poor fiscal third-quarter results that showed modest comparable store sales growth but material operating-income deterioration. Though results of the world’s largest electronics chain came in lower than our expectations during the quarter, Best Buy reaffirmed its adjusted diluted earnings per share guidance range of $3.35 to $3.65 for the year. Nevertheless, we are placing our fair value estimate for Best Buy under review while we re-evaluate the implications of its aggressive pricing actions on long-term profitability. We expect to lower our fair value estimate for the retailer materially. Best Buy’s total revenue increased 1.7% during the period thanks to modest domestic same store sales expansion led by its online channel, offset by international performance
Intel Reduces Fourth-Quarter Revenue Forecast on Supply Chain Disruptions
December 12, 2011
On Monday, Intel (INTC) followed the path of other chipmakers like Texas Instruments (TXN), Altera (ALTR), and Lattice Semi (LSCC) and lowered its fourth-quarter revenue and gross margin outlook, blaming hard disk drive supply shortages from the recent flooding in Thailand. We are maintaining our fair value estimate for Intel (INTC), as our estimate of its intrinsic value is based on the company’s long-term cash-flow projections, which we think are still readily achievable. Plus, flooding in Thailand should only be a temporary supply chain issue, and we believe the rebuilding of inventories after the first quarter of next year will be a positive catalyst for Intel’s shares. Intel said it now expects fourth-quarter revenue to be about $13.7 billion (+/-
As We Predicted, Ford Reinstates a Quarterly Dividend
December 12, 2011
It came as no surprise last week when one of our best ideas, Ford (F) reinstated its quarterly dividend. Though the dividend payable is only 5 cents a share, it amounts to a yield just shy of 2%. In total, the dividend should cost about $800 million in 2012, with plenty of room to grow in the future. However, the dividend does not affect our fair value estimate of the company, which we still assume to be at least $20. A 2% dividend yield isn’t necessarily a reason to jump into any stock, but in the case of Ford, a 2% yield is great income for a stock that we think is worth almost double. Given the company’s inconsistent cash-flow
Do Not Take DuPont’s Downward Revision Lightly; Signals Fourth-Quarter Earnings Season May Disappoint
December 9, 2011
DuPont (DD) lowered its 2011 full-year earnings outlook Friday, noting slower growth in certain segments during the fourth quarter as a result of global economic uncertainty. Since our fair value estimates are based on a firm’s long-term projections to arrive at its intrinsic value, we are sticking with our fair value estimate for DuPont at this time. In short, we think DuPont still remains on track to achieve our long-term projections, despite the downward revision to this year’s earnings today. In DuPont’s release, management indicated the earnings slowdown reflects: “destocking across polymers and certain industrial supply chains than accelerated during the fourth quarter. Consumer electronics demand has further softened, and housing and construction markets remain weak.” We’re taking this news,
Chipmakers Face Weaker Demand; Texas Instruments, Lattice Semi, and Altera Cut Fourth-Quarter Guidance
December 9, 2011
On Thursday, Texas Instruments (TXN) updated its business outlook for the fourth quarter of 2011, and the revisions weren’t good. The chip maker reduced its top-line revenue guidance to $3.19 – $3.33 billion compared with the previous range of $3.26 – $3.54 billion and cut its EPS guidance for the quarter to $0.21 – $0.25 from $0.28 – $0.36 per share. Despite the reduced expectations in the quarter, we are sticking with our fair value estimate for Texas Instruments, as we believe such a disappointment will only be temporary. Texas Instruments noted that its revisions were prompted by broadly lower demand across a wide range of markets, customers and products, except for wireless applications processors—particularly its OMAP 4 processor, which
Fusion-iO May Have the Technology of the Future But Expectations Are Incredible
December 8, 2011
Fusion-iO (FIO) just came public a few months ago, without much fanfare. The company isn’t a sexy social media darling alas LinkedIn (LNKD) or Facebook, but it does help fuel the profitability behind them. When cloud computing as a sector heated up, the stock rallied to over $40. However, after the end of its lock-up period and another secondary offering, shares have fallen back below $30. While we like the technology behind the company, we think the stock is priced for perfection. There’s a great possibility that tremendous profitability lies ahead, especially with a growth in the amount of data received and used in analytics that will continue for years, if not decades to come. Nevertheless, given the risks associated
Dollar General Posts Excellent Fiscal Third-Quarter Results; Holiday Sales Expected to Remain Strong
December 5, 2011
On Monday, Dollar General (DG) reported solid fiscal third-quarter results and raised its fiscal 2011 earnings guidance range. Though we liked the performance, we think the firm’s shares remain fairly valued at this time. The firm’s total revenue increased 11.5% on the heels of same-store sales expansion of 6.3%, which represented its third consecutive quarter of accelerated growth (and up 2.1 percentage points from the year-ago period). The company noted strength in lower-margin consumable sales, with particular expansion in candy and snacks, perishables, packaged foods, health and pet supplies. Total merchandise inventories, at cost, only increased 5% on a per-store basis, reflecting decent inventory management. Dollar General’s operating profit jumped 13% as its operating margin nudged up modestly in the
Lululemon’s Third Quarter Shows Continued Brand Strength
December 5, 2011
After a large sell off before the open following its report, investors would assume that Lululemon (LULU) really choked and completely missed the quarter. However, as we all know, the market isn’t always rational, and after taking some time to digest the news, it realized the third quarter wasn’t that bad at all. In fact, the stock is right where it was at Wednesday’s close, after the shares rallied around 12% the same day they got hammered. Revenue “miss” and margin compression caused immediate dump, but there were some positives The headline came out Thursday morning, and it wasn’t exactly what we all expected. For a company that continually crushes estimates, Lululemon’s near meaningless $5 million miss caused panic, in addition to gross margins that
