Apple’s Second-Quarter Fiscal 2023 Results Were Good Enough
May 5, 2023
Image Source: Valuentum By Brian Nelson, CFA On May 4, Apple (AAPL) reported second-quarter results for its fiscal 2023 for the period ending April 1, 2023, that were slightly better than consensus forecast, but we’re viewing the report as mixed. Revenue dropped 2.5% in the quarter on a year-over-year basis as better-than-expected resilience in iPhone sales could not offset weakness in Mac and iPad performance, and its quarterly EPS of $1.52 was unchanged from last year’s mark. Revenue in the company’s Services business jumped 5.4%, and the iPhone maker announced a $90 billion buyback program as it upped its quarterly dividend by more than 4%, to $0.24 per quarter. We plan to make a few tweaks to our valuation model
Paramount Global Cuts Payout, Dividend Cushion Ratio Caught Another!
May 4, 2023
Image Source: Paramount Global By Brian Nelson, CFA The Dividend Cushion ratio is not a perfect predictor of dividend health and the risks of a dividend cut, but it’s a pretty darn good one. On May 4, Paramount Global (PARA) missed expectations for its first-quarter 2023 results on both the top and bottom line and cut its quarterly dividend to $0.05 per quarter (was $0.24). The company’s Dividend Cushion ratio, which considers its balance sheet as well as future expectations of free cash flow relative to future expected cash dividends paid, was -2.5 (negative 2.5). Any ratio below 1 indicates growing risk to the health of the dividend, while any materially negative (below 0) ratio indicates severe risk of a
Honeywell Raises Outlook for 2023; Backlog Remains Strong
May 1, 2023
By Brian Nelson, CFA On April 27, Honeywell International (HON) reported better-than-expected first-quarter 2023 results. In the period, revenue advanced 5.7%, while non-GAAP earnings per share exceeded the consensus forecast. Honeywell also raised its outlook for 2023 across the board, now expecting organic revenue growth in the range of 3%-6% (was 2%-5%) and adjusted earnings per share in the range of $9.00-$9.25 (was $8.60-$9.20). Though Honeywell didn’t raise its operating cash flow or free cash flow target guidance range for 2023, it’s still relatively early in the year, and we like the company’s top-line and earnings momentum supported by a backlog that advanced 6% on a year-over-year basis. Image: Honeywell continues to experience strong fundamental momentum across the board. Image
The Energy Sector Has Had a Great Run
April 28, 2023
Image: The energy sector was the top-performing sector during 2022. Exxon Mobil’s and Chevron’s first-quarter 2023 results were strong but as expected. By Brian Nelson, CFA 2022 could have been a very painful year for many if they had ignored the energy sector. In fact, the only sector in the green last year was energy, which advanced ~59% during the year, according to data from S&P Global (SPGI). The next best-performing sector during 2022 was the utilities sector, which fell 1.44%. Even the consumer staples sector experienced a 3.17% decline during 2022. Quite simply, if you didn’t have energy exposure during 2022, one likely had a very painful year and a reduced chance of outperforming the S&P 500. Heading into
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
