Brian Nelson

Apple Beats Expectations, Remains a Free Cash Flow Cow

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Image: Apple’s shares have done quite well since the beginning of 2022. By Brian Nelson, CFA Apple (AAPL) reported calendar second quarter (fiscal third quarter) results on August 1 that beat the consensus estimate for both revenue and GAAP earnings per share. The iPhone maker put up June quarter records for both revenue and earnings per share while its Services revenue hit a new all-time high. Quarterly revenue was up 5% year-over-year, while quarterly earnings per diluted share came in at $1.40, up 11% on a year-over-year basis. Apple’s quarterly commentary was positive: During the quarter, we were excited to announce incredible updates to our software platforms at our Worldwide Developers Conference, including Apple Intelligence, a breakthrough personal intelligence system … Read more

In the News: MO, META, QCOM, PSA, ALB

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By Brian Nelson, CFA Altria Group’s (MO) Performance to Be Weighted to the Second Half of the Year On July 31, Altria Group reported second-quarter results that came in lower than expectations. Revenue net of excise taxes declined 3% to $5.3 billion as the firm experienced lower net revenue in its smokeable product segment, which was not completely offset by higher net revenue in its oral tobacco products segment. Adjusted diluted earnings per share came in unchanged at $1.31, as lower other operating companies income was offset by a lower share count. The company narrowed its full-year 2024 earnings per share guidance to the range of $5.07-$5.15, representing an adjusted diluted earnings per share growth rate of 2.5%-4.0%. Altria Group … Read more

Microsoft’s Cash Flow Generation Robust, Azure Expected to Accelerate

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Image Source: Microsoft By Brian Nelson, CFA On July 30, Microsoft reported better-than-expected calendar second quarter (fiscal fourth quarter) results with revenue and GAAP earnings per share beating the consensus forecasts. Revenue jumped 15% (16% in constant currency), while operating income advanced at a similar year-over-year pace. Net income of $22 billion increased 10% (11% in constant currency) on a year-over-year basis. Diluted earnings per share also increased 10% (11% in constant currency). Management was upbeat in the press release: Our strong performance this fiscal year speaks both to our innovation and to the trust customers continue to place in Microsoft. As a platform company, we are focused on meeting the mission-critical needs of our customers across our at-scale platforms … Read more

Dividend Aristocrat Enterprise Products Partners Showcases Strong Earnings Growth in Second Quarter

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Image Source: 2Q 2024 Enterprise Products Partners Earnings Slides By Brian Nelson, CFA On July 30, Enterprise Products Partners (EPD) reported decent second quarter results. During the quarter, the midstream energy company generated net income attributable to common unitholders of $1.4 billion, or $0.64 per unit on a fully diluted basis, a 12% increase from the same period a year ago. Distributable cash flow [DCF] came in at $1.8 billion, up from $1.7 billion in last year’s quarter and covered its distribution 1.6 times. Enterprise increased its distribution 5% in the second quarter, to $2.10 per common unit on an annualized basis, marking the 26th consecutive year it has raised its payout. Management commented on the second quarter performance: Enterprise … Read more

Phillips 66 Records Strong Free Cash Flow in Second Quarter

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Image Source: Phillips 66 Investor Update By Brian Nelson, CFA Phillips 66 (PSX) reported strong second quarter results July 30, with the firm generating second-quarter earnings of $1.0 billion or $2.38 per share. Adjusted earnings were $984 million or $2.31 per share. The company experienced record midstream NGL pipeline and fractional volumes and noted that synergy capture is driving lower costs. The company recorded strong refining operations with 98% crude utilization and 86% clean product yield. Management commented on the strong quarter: We are systematically executing on our strategic priorities, which is reflected in our second-quarter results. Refining crude utilization was our highest in five years and we lowered our costs by nearly a dollar per barrel, reflecting the success … Read more

McDonald’s Speaks of Cautious Consumer But Traction with $5 Meal Deal

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By Brian Nelson, CFA McDonald’s (MCD) reported results July 29 that showed both revenue and non-GAAP earnings per share coming in lower than the consensus forecast. Consolidated sales were flat (up 1% in constant currencies), while systemwide sales fell 1% (up 1% in constant currencies). Global comparable store sales fell 1% in the quarter, lower than the consensus forecast, with negative comparable store sales across all of its segments. U.S. comps fell 0.7%, International Operated Markets [IOM] comps fell 1.1%, while International Developmental Licensed Markets [IDLM] comps dropped 1.3%. Performance wasn’t as bad as the decline in comps would suggest given the 11.7% comp McDonald’s lapped from the same quarter of 2023. U.S. comps were impacted by negative comparable guest … Read more

3M Looks to a Brighter Future, Shares Rally 20%+

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Image Source: 3M’s second quarter results were better than feared. By Brian Nelson, CFA On July 26, 3M (MMM) reported better-than-expected second quarter results with both revenue and non-GAAP earnings per share coming in higher than the consensus forecast. Though reported sales dropped 0.5%, adjusted organic sales advanced 1.2% on a year-over-year basis. Its adjusted operating income margin expanded 4.4 percentage points from the same period a year ago, to 21.6%. Adjusted earnings per share from continuing operations came in at $1.93, up 39% on a year-over-year basis. New CEO William Brown was upbeat on the results: We delivered another strong quarter with adjusted earnings growth up double-digits and robust cash generation. I want to thank 3M employees for their … Read more

Honeywell Adjusts Full Year 2024 Guidance on Margin Pressures

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Image: Honeywell’s shares have traded sideways for the past 12-18 months. By Brian Nelson, CFA On July 25, Honeywell (HON) reported better than expected second quarter results with revenue and non-GAAP earnings per share coming in higher than the consensus forecast. Reported sales advanced 5% thanks to organic revenue growth of 4%, hitting the high end of its previous guidance. Adjusted earnings per share of $2.49 was above the high end of its previous guidance. Thanks to strength in its ‘Building Automation’ and ‘Energy and Sustainability Solutions’ divisions, orders were up 4%. During the second quarter, ‘Aerospace Technologies’ sales advanced an impressive 16% on an organic basis from last year’s quarter, marking the eighth consecutive quarter of double-digit organic expansion. … Read more

IBM’s Free Cash Flow Generation on the Up and Up

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Image: IBM’s shares have staged a nice recovery since the beginning of 2023. By Brian Nelson, CFA On July 24, IBM (IBM) reported solid second quarter results with both revenue and GAAP earnings per share coming in better than expectations. Total revenue was up 2% on a year-over-year basis (up 4% in constant currency) thanks to strength in its software revenue, which advanced 7.1% (8.4% in constant currency). Consulting revenue and infrastructure revenue were up marginally on a constant currency basis in the quarter. IBM’s margins also fared well in the quarter. Its gross profit margin increased 190 basis points on an operating (non-GAAP) basis, while its pretax income margin expanded 220 basis points on an operating (non-GAAP) basis. Cash … Read more

Republic Services Showcases Pricing Strength, Raises Dividend

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Image: Republic Services’ stock has been consistently strong since the beginning of 2023. By Brian Nelson, CFA On July 24, Republic Services (RSG) reported better than expected second quarter results with both revenue and non-GAAP earnings per share exceeding the consensus forecast. Second quarter total revenue growth was 8.6% consisting of 5.6% organic expansion and 3% growth from acquisitions. Though volumes faced some pressure in the quarter, Republic Services continues to display pricing power, with average yield and total price increasing 5.5% in the three months ended June 30. Republic’s second quarter adjusted EBITDA came in at $1.26 billion, with its adjusted EBITDA margin expanding 110 basis points on a year-over-year basis, to 31.1% of total revenue. On an adjusted … Read more