Brian Nelson

Johnson & Johnson Registers Strong Fourth Quarter Performance; 2014 Outlook Conservative

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Johnson & Johnson (JNJ) has built one of the most comprehensive bases of health care businesses and generates an impressive 70% of revenue from top positions in the respective markets in which it operates. The health care and consumer giant remains focused on innovation and generating incremental revenue from new products as it broadens its geographic presence. Johnson & Johnson’s fourth-quarter performance, released Tuesday, showed that it continues to execute at a very high level. The company’s sales advanced 4.5% in the fourth quarter (6.3% excluding currency) thanks to strong top-line performance in its pharmaceutical division, which witnessed revenue expand more than 13%, excluding the impact from currency. Domestic sales leapt 7.4%, while international sales increased 2.4% (5.6% excluding currency). … Read more

GE’s Fourth Quarter Results Were Excellent

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On Friday, GE (GE) reported excellent fourth-quarter results that showed robust order and backlog growth. The company’s revenue nudged 3% higher in the period as industrial sales advanced 6% (5% organic) offset in part by an expected decline in revenue from its finance arm, GE Capital. Industrial segment profit jumped 12%, with six of seven segments growing earnings. The conglomerate’s industrial segment margins during the period advanced an impressive 100 basis points, to 18.3%. Fourth-quarter operating earnings per share leapt 20%, to $0.53. GE’s cash flow performance continues to be top-notch, with full-year cash from GE operating activities (CFOA) coming in at $17.4 billion. GE’s infrastructure orders for the fourth quarter leapt 8%, ‘growth market’ orders increased 13%, and expansion … Read more

Surveying Fourth Quarter Performance at the Money Center Banks

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Let’s examine a number of reasons why we don’t prefer banking entities and take a look at recent performance from industry constituents. A challenging rate environment and declining mortgage originations offer key headwinds.

Intuitive Surgical Surges Back to Life

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The maker of the da Vinci Surgical System, Intuitive Surgical (ISRG) has been under a tremendous amount of equity pricing pressure following a short attack and controversial comments from the American Congress of OB/GYN (ACOG) president James T. Breeden. We think Intuitive Surgical has managed well in what we’d describe to be a “perfect storm of negativity.” On Tuesday, Intuitive Surgical revealed a sense of resiliency when it issued preliminary fourth quarter and full-year 2013 results. The company noted that it expects revenue for the fourth quarter to fall just 5% from the fourth quarter of 2012, a huge win for a company that has been pummeled from almost every direction. For the full year, the company expects total revenue to advance 4%. Intuitive … Read more

M&A Heating Up

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When money is cheap (i.e. when interest rates are low) and equity price euphoria is running wild, deals will happen. Last Wednesday, activist hedge fund Elliot Management launched an opportunistic bid to acquire all of the outstanding shares of Riverbed (RVBD) for $19 per share in cash. We think the offer is too low on the basis of our fair value estimate, and we don’t think Riverbed will accept terms as they currently stand (the board is still evaluating); it remains uncertain whether a higher offer from Elliot is an eventuality. We think a fair price for Riverbed is $22 per share (our fair value), and we’re reiterating this opinion. Before the bid, we believed Riverbed was undervalued on both a … Read more

Chevron Releases Fourth Quarter Update

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The fundamentals of a commodity-producing business are cutthroat. Not only are the prices of the relevant commodity extremely volatile, but a focus on the cost structure associated with extracting and producing the commodity is first and foremost on executives’ minds. Excessive financial leverage (a hefty debt load) doesn’t mix well with the uncertainty of a commodity-producing company’s operations, increasing the risk of financial distress during the depths of the economic and/or commodity pricing cycle. The latter consideration is why we prefer Chevron (CVX) as one of our top dividend growth ideas in the energy sector; unlike its major energy peers, the company has negligible net debt, offering significant financial flexibility to scoop up undervalued assets or to advance its lofty dividend. … Read more

Target’s Credit/Debit Card Nightmare Continues But Retailer Will Recover

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The situation has deteriorated at Target. On Friday, the retailer announced an update to its investigation of the recent credit/debit card data breach, first made public December 19. The firm has learned that not only has the payment card data of individuals been stolen, but also certain guest information including names, mailing addresses, phone numbers or email addresses for up to 70 million individuals (was 40 million). Target is doing what it can to keep customers happy, including guaranteeing zero liability for the cost of any fraudulent chargers arising from the breach and offering one year of free credit monitoring and identity theft protection to all guests that shopped at US stores. Still, the good faith efforts by Target haven’t … Read more

Investor Alert! Marijuana Stock Scams

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Update: In early January 2014, new laws regarding the legalization of marijuana for medical and recreational purposes went into effect in a number of states. At the same time, media coverage of the issue increased, as did investor interest in shares of marijuana-related companies. In some cases, volumes for the stock of otherwise thinly traded, marijuana-related companies increased dramatically—and prices became quite volatile. We are reissuing this alert to warn investors not only about the potential for fraud in this arena, but also to reiterate the risks of investing in thinly traded companies about which little is known. Regardless of industry sector, any so-called “hot” stock can burn your portfolio. Rather than getting swept away, take time before you invest … Read more