Brian Nelson

Unicredit Struggles to Demonstrate Earnings Power

by

When one looks at individual bank interests and also the national champion nature of many banks that are closely tied to their home countries, it becomes difficult to picture how the overtraded European banking landscape will resolve itself. One scenario is perhaps by smaller banks coming together, though that might not really move the needle that much. We generally dislike the banking industry due to the arbitrary nature of its cash flows, weak economic returns, and highly-regulated nature, and we think Unicredit may be one to avoid, in particular. By Matthew Warren Unicredit (UNCRY) put up another measly quarter, results released August 6, this time with small positive underlying net profits of EUR 0.5 billion. Revenues were down 7.7% compared … Read more

Lloyds Banking Group Is Struggling Against the Tide

by

Lloyds Banking Group’s business model focused on being a “digitized, simple low risk, customer focused, U.K. financial services provider” sounds good on the surface, but uncertainty surrounding the U.K’s recovery makes this bank much more risky than some of its U.S. counterparts, in our view. Investors should take note the inherent leverage and riskiness of any banking business model, and Lloyds is no exception. By Matthew Warren and Brian Nelson, CFA On July 30, Lloyds Banking Group (LYG) reported a dismal set of results for the first half of 2020. Net income was down 16% and statutory profit after tax was only GBP 19 million. Revenues came under pressure due to lower rates and lesser customer activity, while the provision … Read more

BNP Paribas is One of the Stronger Banks in an Overtraded European Landscape

by

While some of the stronger global banks like BNP Paribas are showing that they can take the economic fallout from COVID-19 on the chin while maintaining some degree of earnings power and protecting strong capital levels, other banks with lesser earnings power and balance sheets are falling prey to this cycle with losses and lower capital levels. From our perspective, it is simply easier to find non-bank operating companies with strong moats, sound balance sheets, and visible free cash flow growth into the future. Be careful investing in banks! By Matthew Warren On July 31, BNP Paribas (BNPQF) put up a reasonable set of results in the second quarter, considering the global pandemic’s substantial impact on the economy. As you … Read more

Dividend Increases/Decreases for the Week August 14

by

Below we provide a list of firms that raised their dividends during the week ending August 14. 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 Barrick Gold (GOLD): now $0.08 per share quarterly dividend, was $0.07. Broadridge Financial Solutions (BR): now $0.575 per share quarterly dividend, was $0.540. Cboe Global Markets (CBOE): now $0.42 per share quarterly dividend, was $0.36. Diversified Gas & Oil PLC (DGOCF): now $0.0375 per share quarterly dividend, was $0.0350. DHT Holdings (DHT): now $0.48 per share quarterly dividend, was $0.35. Evolution Mining (CAHPF): now A$ 0.09 … Read more

Cisco Responds to Near-Term Headwinds with Large Cost Cuts

by

Image Shown: Cisco Systems Inc’s financial performance held up well, relatively speaking, during the initial stages of the pandemic. Image Source: Cisco Systems Inc – Fourth Quarter of Fiscal 2020 IR Earnings Presentation By Callum Turcan On August 12, Cisco Systems Inc (CSCO) reported fourth quarter fiscal 2020 earnings (period ended July 25, 2020) that beat consensus estimates on both the top- and bottom-lines. However, Cisco’s outlook for the current fiscal quarter was weaker than expected which weighed on shares of CSCO during normal trading hours on August 13. Cisco’s near-term performance is facing headwinds due to the ongoing coronavirus (‘COVID-19’) pandemic as many of its customers are delaying projects until after the storm has passed. With that in mind, … Read more

Berkshire Hathaway Recovering Lost Ground

by

Image Shown: Shares of Berkshire Hathaway Inc Class B started to recover some of their lost ground in early-July, and the company’s second quarter earnings report has kept the momentum going in the right direction. By Callum Turcan On August 8, Berkshire Hathaway Inc (BRK.A) (BRK.B) reported second quarter 2020 earnings that beat consensus top- and bottom-line estimates. Due to the impressive recovery in US equity markets (SPY) since bottoming in late-March, Berkshire Hathaway’s investment portfolio put up tremendous performance last quarter, though its first quarter performance was harrowing. We include Berkshire Hathaway Class B (ticker BRK.B) as a holding in our Best Ideas Newsletter portfolio. Earnings Overview Unrealized gains on investments offset a large impairment charge relating to Berkshire … Read more

Amazon Secures Big Win in the Online Grocery Market

by

Image Shown: Shares of Amazon have surged over the past year. Compared to their March 2020 lows, shares of AMZN have almost doubled as of this writing on August 10, 2020. By Callum Turcan On July 30, Amazon (AMZN) reported second-quarter earnings for 2020 that beat consensus top- and bottom-line estimates by a mile. As of this writing, shares of AMZN have almost doubled since hitting their March 2020 lows as Amazon’s lines of business were well-prepared to ride out the storm created by the ongoing coronavirus (‘COVID-19’) pandemic, assisted by the firm’s pristine balance sheet. Earnings Overview Amazon grew its GAAP net revenues by 40% year-over-year in the second quarter of 2020, which hit $88.9 billion on the back … Read more

Santander Working Its Way Through the Pandemic

by

The underlying first-half results from Banco Santander are quite reasonable. We are impressed by how well the South American, Corporate & Investment Banking, and Wealth Management & Insurance segments are holding up in such a tough environment. In its large European operations, pressures that come from the whole continent being overbanked were evident, however. By Matthew Warren On July 29, Banco Santander (SAN) reported first-half 2020 results. The bank is working its way through the pandemic, with total income down 8% in the first half and underlying attributable profit down 53%. While it took massive goodwill write downs in the quarter, these do not affect its capital levels, which are healthy and growing since last quarter end. As one can … Read more

Consumer Staples Sector Surprisingly Hasn’t Done Much, Net Debt Positions Have Kept Us on the Sidelines

by

The consumer staples sector (XLP) hasn’t done much relative to the broad market index (SPY) this year. Many might find this surprising given the pantry stuffing and perhaps changed consumer purchasing behavior. However, many names continue to be saddled with hefty net debt positions, an anchor to cash-based intrinsic value calculations, keeping them down while net cash and free-cash-flow giants continue to soar in this market. We’re still keeping a watchful eye on the sector. By Brian Nelson, CFA Church & Dwight Church & Dwight (CHD) tends to fall under the radar for many seeking consumer-staples exposure, but the company is one of the best, with shares advancing a cool 35% this year. During its second quarter, report released July … Read more

Digital Realty Boosts Guidance, Extends Growth Runway

by

Image Shown: An overview of Digital Realty Trust Inc’s asset base. Image Source: Digital Realty Trust Inc – Second Quarter of 2020 IR Earnings Presentation By Callum Turcan Data center real estate investment trusts (‘REITs’) are well-positioned to ride out the storm created by the ongoing coronavirus (‘COVID-19’) pandemic due to surging demand for cloud computing services, which in turn is driving up demand for data centers. In short, data centers are primarily facilities that house server farms along with vast amounts of fiber-optic cables that interconnect with existing networks. These facilities form the backbone of modern IT infrastructure. We include Digital Realty Trust Inc (DLR) as a holding in both our Dividend Growth Newsletter and High Yield Dividend Newsletter … Read more