Brian Nelson

Qualcomm’s Fiscal 4Q Results Not Bad; Light Fiscal 1Q Guidance

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Qualcomm (QCOM), a leader in next-generation wireless technologies, reported decent fiscal fourth-quarter results Wednesday. Revenue leapt 33% on a year over year basis (4% sequentially in the period), and operating income advanced 29% from the same period last year. MSM chip shipments jumped 35% in the fourth quarter, to 190 million units (above expectations). Both net income and diluted earnings per share increased 18% from last year’s quarter. Cash generated from operating activities was phenomenal in the period at $2.52 billion, up 79% on a year-over-year basis (and 39% of revenue). Qualcomm’s capital-light, licensing business model converted almost all of the quarterly operating cash to free cash flow ($2.38 billion, or 37% of revenue). For all of fiscal 2013, free cash flow totaled … Read more

Twitter Prices at $45.10 Per Share, Up 70%+ From $26 IPO Price

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<< Twitter’s Form S-1/A What Is Twitter? Adapted From Twitter’s S-1/A: “Twitter (TWTR) is a global platform for public self-expression and conversation in real time. By developing a fundamentally new way for people to create, distribute and discover content, the firm has democratized content creation and distribution, enabling any voice to echo around the world instantly and unfiltered. The firm’s platform is unique in its simplicity: Tweets are limited to 140 characters of text. This constraint makes it easy for anyone to quickly create, distribute and discover content that is consistent across its platform and optimized for mobile devices. As a result, Tweets drive a high velocity of information exchange that makes Twitter uniquely “live.” The firm aims to become … Read more

Whole Foods’ Fiscal 2014 Outlook Disappoints

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Natural and organic foods grocer Whole Foods (WFM) reported lower-than-expected fiscal fourth-quarter results Wednesday. Total sales advanced 2% from the 13-week period last year and 10.8% on a comparative 12-week basis, but comparable store sales growth of 5.9% during the quarter came in below our estimates. The firm’s ‘two-year comps’ trend (shown in table below) has slowed from the previous sequential three quarters, and it looks as though the slowdown has continued into the first quarter of fiscal 2014. Image Sorce: Whole Foods The firm’s gross profit increased 37 basis points to 35.6% of sales in the quarter, and store contribution improved 43 basis points, to 10.3% of sales. Diluted earnings per share advanced 7% from the fourth quarter last … Read more

Surveying Two Potential Takeout Candidates in the Oil & Gas Space

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Valuentum updates its comprehensive outlook for crude oil and natural gas prices on an annual basis, and the 2013 edition highlighted Continental Resources (CLR) and EOG Resources (EOG) as two of our favorite M&A candidates. Continental Resources is the largest leaseholder in the Bakken (1), while EOG Resources is the largest leaseholder in the Eagle Ford (EOG has a nice position in the Bakken as well). Both firms reported third-quarter results after the market close Wednesday. Let’s get an update on underlying performance. (1) The Bakken field of North Dakota and Montana is one of the premier crude oil resource plays in the United States. It has been described by the United States Geological Survey (“USGS”) as the largest continuous … Read more

SBA Communications: An $11.7 Billion Firm with No Accounting Profits

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SBA Communications (SBAC) owns and operates wireless communications towers. The company’s primary business is leasing antenna space to wireless service providers on towers and other structures. This activity accounts for nearly all the firm’s operating profit. In the US and Canada, tenant leases are for an initial term of 5-10 years with five, 5-year renewal periods at the option of the tenant. The tenant leases have specific tenant rent escalators, which average 3%-4% per year. Before building a new tower, SBA Communications typically has at least one signed tenant lease, so new development risk is generally minimized. Sprint (S), AT&T (T), T-Mobil (TMUS), and Verizon Wireless (VZ) each account for more than 10% of revenues individually. The number of towers … Read more

Tesla Is Converging to Our Estimate of Its Intrinsic Value

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On Wednesday, Tesla (TSLA) reported in-line third-quarter results that showed record levels of Model S production, deliveries, and vehicle gross margin in the calendar quarter. The freshly-minted electric automaker generated positive free cash flow in the period ($26 million) and put up its third consecutive quarter of non-GAAP net income. The firm is now producing 550 cars per week, and Tesla plans to continue to increase production over the next several quarters to keep up with demand expansion. Tesla’s non-GAAP automotive gross margin (excluding zero emission vehicle credits) rose to 21% from 14% last quarter, as the firm was able to extract cost reductions and improve average pricing thanks to a greater mix of highly-optioned European deliveries and ones with … Read more

Energy Transfer Partners’ Distribution Coverage Improves in 3Q

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On Tuesday, energy pipeline operator and Dividend Growth portfolio holding Energy Transfer Partners (ETP) reported solid third-quarter results. Adjusted EBITDA totaled $942 million in the quarter, up $282 million from past year’s period, while distributable cash flow totaled $527 million, up $149 million from the year-ago quarter. Income from continuing operations in the third quarter also showed a nice increase of $185 million over the same period last year, to $391 million. Though strategic acquisitions in 2012 (including Sunoco) bolstered year-over-year comparisons, we were extremely impressed with ETP’s distribution coverage ratio of 1.14 in the quarter, which compares to 0.97 in the year-ago period (1). ETP recently increased its quarterly distribution to $0.905 per unit, but with coverage ratios as … Read more

Dividend Growth Portfolio Holding Emerson Hikes Dividend!

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We always love to share good news with respect to holdings in our Dividend Growth portfolio, and today gave us an opportunity. Not only did diversified industrial firm Emerson (EMR) register record operating cash flow of $3.65 billion and robust free cash flow of $3 billion during its fiscal 2013 (ending September) when it reported fiscal fourth-quarter results today–both above original expectations (shown in image below)–but the board also upped the firm’s quarterly dividend 5%, to $0.43 per quarter ($1.72 per share annualized). Image Source: Emerson, February 2013 Fiscal 2013 marked the 57th consecutive year the firm has increased dividends, and while the 5% dividend increase may not be something to write home about, significantly better-than-expected cash-flow performance suggests to … Read more

Third-Quarter Churn Rate at DirecTV’s US Business Is Best in 6 Years

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DirecTV (DTV) reported better-than-expected third-quarter results Tuesday. The firm’s quarterly revenue of $7.9 billion advanced more than 6% on a year-over-year basis, while third-quarter earnings per share exceeded forecasts by more than $0.27, coming in at $1.28, an impressive bottom-line showing. The firm repurchased $1.3 billion of stock in the third quarter, which led to the significant bottom-line beat. With every share of stock that DirecTV purchases, management is generating economic profit for shareholders (see here). < What is economic profit? DirecTV US added 139,000 net new subscribers in the period as it achieved the lowest third-quarter churn rate in 6 years. DirecTV US ARPU (average revenue per user) growth was 6.2%, and DirecTV Latin American subscriber growth was strong … Read more

Heins Bails, Blackberry Fails

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On Monday morning, beleaguered smartphone maker Blackberry (BBRY) announced the resignation of CEO Thorsten Heins, as well as a $1 billion private placement of convertible debentures. Heins’ departure comes as little surprise in the wake of weak performance from Blackberry 10 which coincided with a write-down of nearly $1 billion in inventory. As for raising capital, one might assume that a well-capitalized company like Blackberry wouldn’t need new capital; however, its current cash-burn suggests an interjection is necessary if the company wishes to attempt (another) fundamental turnaround. The New Leadership John S. Chen will replace Heins as interim CEO and chairman of the board of directors. Chen is best known for his reign atop Sybase where he was responsible for … Read more