Brian Nelson

Walmart Raises Its Fiscal 2025 Outlook

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Image Source: Walmart By Brian Nelson, CFA On August 15, Walmart (WMT) reported better than expected second quarter results with both revenue and non-GAAP earnings per share coming in higher than the consensus forecast. Consolidated revenue advanced 4.8% in the quarter led by Walmart U.S. comp sales up 4.2% and Sam’s Club comp sales up 5.2%, both measures excluding fuel. The company’s consolidated gross margin expanded 43 basis points thanks to strength in Walmart U.S. and Walmart International. Walmart’s adjusted operating income increased 7.2% in the quarter “due to higher gross margins and growth in membership income.” Global ecommerce and global advertising advanced 21% and 26%, respectively, in the period. Adjusted earnings per share increased 9.8%, to $0.67 per share, … Read more

Cisco’s Fiscal Fourth Quarter Results Exceed Expectations

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Image Source: Cisco By Brian Nelson, CFA On August 14, Cisco Systems (CSCO) reported better than expected fiscal fourth quarter results with both revenue and non-GAAP earnings per share coming in higher than the consensus forecasts. Revenue fell 10% on a year-over-year basis, while non-GAAP earnings per share dropped 24% from the same period last year. Fiscal fourth quarter non-GAAP gross margin was 67.9%, and the company now has total annualized recurring revenue of $29.6 billion, up 22% year-over-year inclusive of its acquisition of Splunk. The company’s product order growth was 14% in the quarter. Management’s commentary in the press release was positive: We delivered a strong close to fiscal 2024. In our fourth quarter, we saw steady customer demand … Read more

Home Depot’s Results Show Weaker Spending on Home Improvement Projects

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Image: Home Depot’s shares have been choppy the past few years. By Brian Nelson, CFA On August 13, Home Depot (HD) reported better-than-expected second quarter results with both its top line and non-GAAP earnings per share coming in higher than the consensus forecast. Comparable sales for the second quarter of fiscal 2024 fell 3.3%, while U.S. comparable sales slid 3.6%, however. Adjusted operating income for the second quarter was roughly flat with the year-ago period, while adjusted operating margin contracted approximately 20 basis points, to 15.3%. Adjusted net earnings nudged slightly lower in the second quarter, to $4.67 from $4.68 in the same period last year. Management’s commentary in the press release was cautious: The underlying long-term fundamentals supporting home … Read more

Procter & Gamble’s Organic Growth Fails to Impress

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By Brian Nelson, CFA Procter & Gamble (PG) recently reported fiscal fourth quarter results that showed a miss on the top line, but non-GAAP earnings per share coming in better than expectations. The company reported flat sales performance during the June quarter as modest volume and higher pricing were offset by two percentage points of unfavorable foreign exchange impacts. Organic sales growth was 2% in the quarter. Core net earnings per share also increased 2%, to $1.40. Currency-neutral core EPS increased 6% versus the prior-year quarter. Management had a lot to say in the press release: Fiscal year 2024 was another year of strong results for P&G. The team met or exceeded our going-in plans for organic sales growth, core … Read more

Starbucks’ Mixed Results Speak to Cautious Consumer Environment

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By Brian Nelson, CFA Starbucks (SBUX) recently reported mixed fiscal third quarter results with non-GAAP earnings per share coming in line with the consensus estimate, while revenue came up short. Global comparable store sales declined 3% in the 13-week period ended June 30, 2024, as comparable transactions declined 5%, while average ticket advanced 2%. Non-GAAP earnings per share of $0.93 fell 7% over the prior-year quarter (down 6% on a constant currency basis). Though Starbucks’ fiscal third quarter was mixed, we’re sticking with our $85 per-share fair value estimate for shares. Starbucks experienced weakness across both its North America stores and its International stores. North America comparable store sales fell 2% as a 3% increase in average ticket failed to … Read more

Eli Lilly Puts Up Strong Second Quarter Results, Raises Outlook

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Image: Shares of Eli Lilly have been strong the past few years. By Brian Nelson, CFA Eli Lilly (LLY) reported better than expected second quarter results on August 8 with both revenue and non-GAAP earnings per share coming in better than the consensus forecast. Revenue jumped 36% in the quarter on a year-over-year basis thanks to strength in Mounjaro, Zepbound, and Verzenio. Volume increased 27%, while the company experienced a 10% increase in realized prices, offset by a 1% headwind with respect to foreign exchange. Non-GAAP net income and earnings per share both increased 86% in what was a blockbuster report from the pharma giant. Management had the following to say about the strong performance: Mounjaro, Zepbound and Verzenio led … Read more

Paper: Value and Momentum Within Stocks, Too

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Please select the image below to download, “Value and Momentum Within Stocks, Too:” Abstract: This paper strives to advance the field of finance in four ways: 1) it extends the theory of the “The Arithmetic of Active Management” to the investor level; 2) it addresses certain data problems of factor-based methods, namely with respect to value and book-to-market ratios, while introducing price-to-fair-value ratios in a factor-based approach; 3) it may lay the foundation for academic literature regarding the Valuentum, the value-timing, and ultra-momentum factors; and 4) it walks through the potential relative outperformance that may be harvested at the intersection of relevant, unique and compensated factors within individual stocks. To download the full report, please click here (pdf). ———- Actual results … Read more

Disney Achieves Profitability Across Combined Streaming Businesses

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Image: Disney’s shares are under pressure despite marked improvement in earnings. By Brian Nelson, CFA On August 7, The Walt Disney Company (DIS) reported better than expected fiscal third quarter results with both revenue and non-GAAP earnings per share exceeding the consensus forecasts. Revenue advanced to $23.2 billion from $22.3 billion in the same quarter last year, while adjusted diluted earnings per share increased to $1.39 from $1.03 in the prior-year quarter. Revenue increased 4% in its Entertainment division, 5% in its Sports segment and 2% in its Experiences division. Segment operating income surged in its Entertainment division, while segment operating income faced pressure at Sports and Experiences. Management had the following to say about the quarter: Our performance in … Read more

Amazon’s Second Quarter Results Were Mixed But Free Cash Flow Improved Significantly

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Image: Amazon traded aggressively lower following its second-quarter results. By Brian Nelson, CFA On August 1, Amazon (AMZN) reported mixed second quarter results for the period ended June 30, 2024, with revenue coming up short but GAAP earnings per share beating consensus. Adjusting for foreign currency, net sales advanced 11% led by 19% growth in AWS segment sales, which came in higher than expectations of 17.6% growth. Operating income advanced to $14.7 billion in the second quarter, up from $7.7 billion in the same period a year ago. AWS segment operating income increased more than 70% on a year-over-year basis. Net income increased to $13.5 billion in the second quarter compared to $6.7 billion in the second quarter of 2023. … Read more

What to Do During This Market Selloff

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By Brian Nelson, CFA In short, nothing. The U.S. stock market (SPY) was chugging along nicely until what was interpreted as a very favorable Consumer Price Index (CPI) print on July 11 that sent a rotation out of large cap growth and big cap tech into the beaten down areas of smaller cap stocks, prompting a broader market sell-off. The reasoning goes that, with inflation largely under control, smaller companies will benefit more from future rate cuts via reduced interest expense relative to larger companies. Though this is true, to varying degrees, the magnitude of the rotation was somewhat surprising, as rate cuts should benefit large cap growth (SCHG) and big cap tech (XLK), too, but we’ve seen this rotation … Read more