Chipotle Hits All-Time High, Microsoft Doesn’t Disappoint in Calendar First-Quarter 2023
April 26, 2023
Image: Ideas in the Best Ideas Newsletter portfolio are doing great! Shares of Chipotle are up ~45% so far in 2023, while shares of large cap growth giant Microsoft (orange) are up more than 20% year-to-date. By Brian Nelson, CFA The UK Competition and Markets Authority (CMA) has decided to block Microsoft’s (MSFT) deal with Activision (ATVI). The CMA noted that the combination would “result in the most powerful operator in the fast-developing market for cloud gaming, with a current market share of 60%-70%, acquiring a portfolio of world-leading games with the incentive to withhold those games from competitors and substantially weaken competition in this important growing market.” Microsoft has been willing to work with regulators to get the deal done,
Brief Take: Best Idea PepsiCo Hits All-Time High! Beautiful Breakout!
April 25, 2023
Image: PepsiCo, an idea in the Best Ideas Newsletter portfolio, has broken out to all-time highs. We continue to like the name. By Brian Nelson, CFA We added PepsiCo (PEP) to the Best Ideas Newsletter portfolio in October 2022, and shares are breaking out to new all-time highs! On April 25, the beverage and snacks giant reported strong first-quarter 2023 results and raised its guidance for fiscal 2023, now expecting to deliver 8% organic revenue growth (up from 6% previously) and 9% core constant currency earnings per share growth (up from 8% previously). PepsiCo now expects core earnings per share to advance to $7.27 in the fiscal year, too, a 7% increase (up from 6% previously). As in the case
Small Cell Deployments a Growth Avenue for Tower Operator Crown Castle
April 25, 2023
Image: Crown Castle has grown its dividend payout at a compound annual growth rate of ~9% during the past several years. Image Source: Crown Castle By Brian Nelson, CFA Cell towers and self-storage. That’s the way we like it when it comes to REITs. In the self-storage space, Extra Space Storage (EXR) is expected to tie the knot with Life Storage (LSI), while cell tower operators continue to benefit from robust demand for the increased connectivity and the rollout of 5G. Tower operator Crown Castle (CCI) reported first-quarter 2023 results April 19 that showed site rental revenues advance 3% on a year-over-year basis in the quarter, while adjusted funds from operations per share bumped 2% higher during the period. The
Extra Space Storage Pursues the Winner’s Curse; LSI Shareholders Should Take the Money and Run
April 21, 2023
Image Source: Extra Space Storage By Brian Nelson, CFA It would seem that Life Storage (LSI) wants nothing to do with Public Storage (PSA), first refusing to negotiate with Public Storage regarding its proposal to merge, then rolling out a revised severance package for its CEO, CFO and COO on March 17, and now most recently announcing that it would tie the knot with Extra Space Storage (EXR) on April 3. We walked through the background of Public Storage’s overture to merge with Life Storage in the March edition (pdf) of the High Yield Dividend Newsletter, and frankly, we’re a bit puzzled by LSI’s behavior. We’re not sure what Public Storage’s next move will be at this point – whether
Dividend Increases/Decreases for the Week of April 21
April 21, 2023
Below we provide a list of firms that raised their dividends during the week ending April 21. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week Bar Harbor Bankshares (BHB): now $0.28 per share quarterly dividend, was $0.26. Builders Capital Mortgage (BCF:CA): now $0.3945 per share quarterly dividend, was $0.1972. CapStar Financial (CSTR): now $0.11 per share quarterly dividend, was $0.10. Costco (COST): now $1.02 per share quarterly dividend, was $0.90. Cross Timbers Royalty Trust (CRT): now $0.2446 per share monthly dividend, was $0.1792. Discover Financial Services (DFS): now $0.70
Philip Morris’ First-Quarter 2023 Results Just Okay
April 20, 2023
By Brian Nelson, CFA On April 20, Philip Morris International Inc. (PM) reported first-quarter 2023 results that were about in-line with expectations. On a pro forma basis, including Swedish Match, the company’s adjusted net revenue growth came in at 3.8%, excluding currency movements, thanks largely to smoke-free product sales expansion and strong pricing growth across its legacy combustible tobacco business. We’re not making any changes to our $105 per-share fair value estimate as a result of the quarterly performance. The cigarette maker noted that it continues to integrate Swedish Match successfully and that it continues to make progress toward its smoke-free goals. Smoke-free revenue was up 3.4 percentage points of total revenue on a year-over-year basis in the first quarter
AT&T Disappoints Again
April 20, 2023
Image: AT&T is back in the doghouse, as free cash flow generation came in worse than expected during its first-quarter 2023 results. Image Source: AT&T By Brian Nelson, CFA It’s unbelievable. As soon as we started to warm up to AT&T (T) in October of last year, noting that its free cash flow generation was looking a lot better, the company falls off the tracks again. During the first quarter of 2023, AT&T’s cash flow from operations dropped more than $950 million on a year-over-year basis, while capital spending and cash paid for vendor financing soared. Non-GAAP free cash flow came in at $1.0 billion (missing expectations), while the company shelled out $2 billion in dividends during the period. Excluding
1Q 2023 Earnings Coming in Better Than Feared Thus Far
April 19, 2023
By Brian Nelson, CFA We’ve been receiving questions about the companies that we are looking to add to the Best Ideas Newsletter to replace the ones we recently removed, and I can say that we’re strongly considering adding Booking Holding (BKNG) and adding to the existing “position” in Chipotle (CMG) following their first-quarter 2023 results. We recently raised our fair value estimate for Booking Holding significantly (now $3,091; was $2,147 per share), and we expect a huge fair value increase at Chipotle in the coming weeks. Booking Holding will report its first-quarter 2023 earnings in early May, while Chipotle will report first-quarter 2023 results on April 25. We have several other ideas in mind to add to the Best Ideas
Brief Take: Chart of Best Ideas Newsletter Portfolio Idea Chipotle Looks Beautiful!
April 18, 2023
Image: Chipotle’s shares have surged to a 52-week high. We continue to like the company’s long-term market opportunity. Brian Nelson, CFA Chipotle’s (CMG) shares have broken out to a 52-week high, and its chart looks beautiful. We attribute the recent strength in shares to greater conviction by the market in the company’s long-term restaurant growth potential. The company expects to open 255-288 new restaurants in 2023, a number that includes roughly a dozen or so restaurants that will be relocated to accommodate a Chipotlane drive-through. Adding more Chipotlanes, an initiative that grew out of meeting the needs of consumers during the worst of the COVID-19 pandemic, is key to our long-term thesis on the name. The pace of restaurant growth
