Brian Nelson

General Electric Gets a Boost; Honeywell Hikes Guidance

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Image Source: Jeff Turner General Electric continues to struggle, but its first quarter earnings report came in better than expected as demand across many of its business was positive. We still have no interest in shares. Meanwhile, Honeywell continues to power ahead as it raised its top- and bottom-line guidance for the full year 2018, reflecting a similarly positive demand profile. By Kris Rosemann General Electric Gets a Boost Embattled industry giant General Electric (GE) continues to work to change its fortunes, and strong demand in a number of its businesses helped the company to beat lowered expectations in the first quarter of 2018, results released April 20. Shares received a nice boost on the news, too, but expectations have … Read more

Reiterating Our Positive View on Apple

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We continue to include Apple in both newsletter portfolios. Very few companies have the balance-sheet strength and free-cash-flow generation that Apple does. By Brian Nelson, CFA Sell-side analysts are getting nervous about Apple (AAPL), but we’re reiterating our long-term positive opinion on the iPhone maker. We expect a lot of “noise” through the course of 2018 as chatter regarding iPhone unit expectations intensifies and concerns about a US trade war with China ebb and flow. We expect traders to be product-cycle-focused, which may only magnify the inherent volatility of the equity, but we maintain our emphasis on core fundamental analysis, namely the health and sustainability of Apple’s future free cash flow generation, the composition of its balance sheet, and the … Read more

Procter & Gamble Pressured By Pricing

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Image Source: Mr.TinDC Recently-transformed consumer staples giant Procter & Gamble’s fiscal 2018 third quarter report left a bit to be desired as pricing woes weighed on organic top-line performance. The company is also shifting its Consumer Health business as it has agreed to acquire Merck KGaA, Darmstadt, Germany’s Consumer Health business. By Kris Rosemann Shares of former simulated Dividend Growth Newsletter portfolio idea Procter & Gamble (PG) hit their lowest mark since early 2016 in the trading session April 19 following its fiscal 2018 third-quarter report. We believe the company may have made its transition to a more-focused entity too rapidly as it continues to navigate multiple difficult operating environments around the globe. Its strategy to focus only on its … Read more

Philip Morris Shocks the Tobacco Space But Why?

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Image Source: Philip Morris Investors are overreacting to Philip Morris’ first-quarter 2018 report, and the company is dragging the entire tobacco industry down with it. By Brian Nelson, CFA The market seems like it has gone “mad,” with Philip Morris trading off nearly 20% following its first-quarter report April 19. The company beat on the bottom line, while revenue roughly came in-line for the period, and the cigarette maker raised its full-year diluted earnings per share forecast to be in a range of $5.25-$5.40, above consensus forecasts of $5.26 and representing ~35%-39% growth versus the $3.88 mark in 2017. The regulatory landscape in tobacco remains in influx, with the FDA looking to set maximum nicotine levels in cigarettes, new rules … Read more

American Express Charges Ahead, Discover’s Shares Look Cheap

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Image Source: Philip Taylor By Kris Rosemann American Express delivered strong first quarter results as it begins to transition from its unique spend-centric business model. American Express’ (AXP) first quarter 2018 results, released after the close April 18, impressed investors, and shares moved higher immediately following the report. The strong quarter kicks off the beginning of a year in which management plans to adjust its strategy, which has historically placed more emphasis on charging merchant fees on transactions using its cards ahead of charging interest on credit card balances. The company plans to cut merchant fees by 5 to 6 basis points in 2018 in an attempt to grow acceptance and drive volumes, and it is also working to grow … Read more

ICYMI: Valuentum’s Improved Stock and ETF Web Pages

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Valuentum has rolled out improved stock and ETF web pages on its website valuentum.com/. Now, subscribers can access key proprietary information on the stock and ETF web pages in addition to the customary stock and ETF reports. Dear reader, We have some exciting news that we can’t wait to share with you! At valuentum.com/, we have rolled out new stock and ETF pages that conveniently include a variety of our proprietary metrics from the Dividend Cushion ratio to the Economic Castle rating and beyond! There’s even mouseover functionality so you can learn about how we define the key metrics across our stock-selection and dividend growth methodologies. You’ll still have access to the stock and dividend reports on the landing pages, … Read more

Bank Earnings Pour In

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The banking industry is on solid footing, and while Wells Fargo is creating negative headlines, the first quarter of 2018 was a good one for many financial institutions. Expanding revenue and net income, increased capital-return programs, solid returns on equity, and generally positive commentary, despite an increasingly competitive lending environment, were the norm. A narrowing of spreads on US Treasury instruments may pose a challenge to net interest margin expansion in the group, but there are other opportunities to capitalize on a surging LIBOR and the increasingly volatile equity market environment. All in, the performance in the first quarter of 2018 was “more good than bad” for the banks, and we continue to look for the right price to consider … Read more

IBM’s Free Cash Flow Short of Expected Annual Pace

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Image Source: andrew cooke With other fantastic ideas in technology, we see no reason to be interested in IBM’s shares. By Brian Nelson, CFA Readers that are interested in bottom-fishing in IBM’s (IBM) shares may have a far greater risk appetite than we do. IBM is no longer the “Big Blue (Chip)” that it once was, and while its first-quarter results for fiscal year 2018 weren’t bad, its outlook wasn’t what the market had been expecting. The $0.06 quarterly beat on the bottom line during its first quarter of 2018 didn’t translate into raised guidance for 2018, with IBM reiterating its non-GAAP diluted earnings per share target of at least $13.80, with the GAAP-equivalent mark coming in at $11.58. Expectations … Read more

Johnson & Johnson Off to a Good Start in 2018

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Image Source: J&J Johnson & Johnson has been the stalwart of our healthcare exposure within the newsletter portfolios, and the company is off to a fantastic start in 2018. By Brian Nelson, CFA On April 17, Johnson & Johnson (JNJ) issued a strong first-quarter 2018 report that showed sales increasing 12.6% thanks to a near-20% jump in international top-line performance. On an operational basis, excluding the net impact of acquisitions and divestitures, worldwide sales advanced 4.3% thanks again to an above-average international sales ramp. The company’s bottom line fared well during the period, too. Adjusted net earnings and adjusted earnings per share for the first quarter came in at $5.6 billion and $2.06, respectively, both up double digits on a … Read more

Netflix Keeps Speculators’ Hopes Alive

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Image Source: NodStrum Tech Netflix’s results for the first quarter of 2018 showed the earnings leverage that we’ve been looking for. We’re raising our fair value estimate materially as a result. By Brian Nelson, CFA On April 16, streaming movie provider Netflix (NFLX) reported fantastic top-line and subscriber growth numbers during its first quarter of 2018, with the top line accelerating to 40%+ growth over the prior-year quarter and total memberships leaping to 125 million, up from ~117.6 million in the fourth quarter of 2017 and ~99 million in the first quarter of last year. Net additions to its US streaming business came in at 1.96 million, while net additions across its non-US operations leapt by 5.46 million, a slow … Read more