Brian Nelson

Third-Quarter Results Strengthen Our Confidence in Facebook

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Best Ideas Newsletter portfolio option position Facebook (FB) once again flexed its advertising muscle when it reported fantastic third-quarter results Wednesday. Revenue swelled 60% year-over-year to $2 billion, soaring past consensus estimates, while non-GAAP earnings per share rose 108% year-over-year to $0.25, also above consensus estimates. Year-to-date, free cash flow is phenomenal at $2.1 billion, equal to 40% of total revenue. The Words that Clouded the Quarter “Our best synopsis on youth engagement in the U.S. reveals that usage of Facebook among U.S. teens overall was stable from Q2 to Q3. So we did see a decrease in daily users specifically among younger teens.”           –      CFO David Ebersman   In spite of overwhelmingly positive financial results and a few … Read more

LinkedIn’s Growth Doesn’t Disappoint But Its Valuation Is Absurd

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Professional social networking giant LinkedIn (LNKD) posted another strong quarter Tuesday night after the market close. Revenue exceeded consensus estimates as it soared 56% year-over-year to $393 million. The bottom line followed suit, as non-GAAP earnings per share jumped 77% year-over-year to $0.39. LinkedIn also revealed decent free cash flow, which stands at $133 million year-to-date, equal to 12% of total revenue. However, Mr. Market was none too pleased with LinkedIn’s guidance, but we’ll get into that later.  Engagement Remains Strong Image Source: LNKD 3Q13 Slides Though down slightly sequentially, LinkedIn continues to take steps with respect to engagement. According to comScore (shown above), LinkedIn had 142 million unique visitors during its third quarter, an increase of 29% on a year-over-year … Read more

The Valuentum Dividend Cushion Predicts CONSOL’s Dividend Cut

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Coal and natural gas firm CONSOL (CNX) became the latest company whose dividend cut Monday had been successfully predicted by the Valuentum Dividend Cushion. With a Valuentum Dividend Cushion score of -3.5 before the board’s decision to conserve cash and slash the payout, it appeared to us that the move was inevitable (a measure below 1 is suspicious, while a measure that is negative is highly concerning). Out of our 1,000+ company coverage universe, CONSOL’s dividend was assessed by us to be among the 10 weakest. We make available the most-visited ‘Dividend Yields to Avoid’ article on the left column of our home page under ‘Stock Screens,’ and we update the list of firms that receive the dubious honor periodically. … Read more

Looking for Alpha? It’s In Our Best Ideas Newsletter

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Best Ideas portfolio holdings Buffalo Wild Wings (BWLD) and Baidu (BIDU) reported fantastic third-quarter results after the close yesterday, sending both of their shares higher in Wednesday trading! Buffalo Wild Wings closed at $141.22 per share, up over 9% on the trading session, while Baidu closed at $164.93 per share, up nearly 3.5% for the day. Baidu was added to our Best Ideas portfolio August 1, 2013 at $133.60 per share (click here for Best Ideas portfolio transaction log). If you didn’t receive that email, contact us immediately at info@valuentum.com. A 23% gain in just a couple months isn’t too bad, and we’re expecting further upside to shares. Buffalo Wild Wings has been a holding in our Best Ideas portfolio … Read more

Lack of New Container Supply Helps TAL International Maintain Growth

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Intermodal freight lessor TAL International () posted modest third quarter results, as the market for global shipping remains weak. Revenue increased 6.4% year-over-year to $143.9 million, short of consensus expectations, while adjusted net income per share fell short of consensus estimates at $1.03 (up 8.4% year-over-year). Adjusted EBITDA grew only 1.3% year-over-year to $142.8 million. Still, TAL increased its quarterly dividend to $0.70 per share, an increase of 2.9%.  Utilization: Strong But Declining Image Source: Company Filings, Valuentum In spite of what TAL identified as a relatively weak market, utilization rates were above 97% compared to the industry average of the low-to mid-90% range. However, management noted that current utilization rates are hovering at 96.9%, which means that rates are … Read more

Evaluating AT&T’s 3Q Performance

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A Few Words from CFO John Stephens Telecom giant AT&T (T) announced strong third quarter results October 23. Revenue increased 2.2% year-over-year to $32.2 billion, just below consensus expectations. Earnings per share, excluding one-time items, increased 6.5% year-over-year to $0.66, a penny above consensus estimates. However, due to an increase in capital expenditures, free cash flow has fallen more than $3 billion year-to-date to $11.1 billion, equal to 11.6% of revenue.  Smartphone Takeover Image Source: T 3Q13 Slides  As has become the norm, wireless revenue drove AT&T’s top-line growth, expanding 5.1% year-over-year to $17.1 billion. The strong performance was driven by an increase in wireless data revenue of 17.6%, as a higher percentage of consumers opt for higher ARPU plans. During the third quarter, … Read more

Apple’s Products and Free Cash Flow Are Amazing

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Best Ideas Newsletter and Dividend Growth Newsletter portfolio holding Apple (AAPL) posted decent fiscal fourth quarter results Monday, finishing off a tremendously profitable 2013 fiscal year. Revenue increased 4% year-over-year during the fourth quarter to $37.5 billion, easily exceeding consensus estimates. For the full-year, the iPad maker’s revenue grew 14% to $170.9 billion—more revenue than Chipotle, Netflix, Tesla, and Facebook combined. Earnings per share easily exceeded consensus estimates but fell 4.7% year-over-year to $8.26. For the full-year, earnings per share declined 10% to $39.75. However, Apple generated $45.5 billion in free cash flow for fiscal 2013, up about $3 billion year-over-year and equal to 27% of revenue. iPhone Refresh a Success   Apple sold 33.8 million iPhones during the quarter, an … Read more

Pfizer’s and Merck’s 3Q Performance

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Whereas revenue advanced in Bristol-Myers’ (BMY), Eli Lilly’s (LLY), and AbbVie’s (ABBV) respective calendar third-quarter results, the same cannot be said about the performance of Pfizer (PFE) and Merck (MRK) during the equivalent period. Pfizer’s third-quarter report, released Tuesday, showed that net revenue dropped 2% as strength in its smallest segment, ‘Oncology’, failed to offset weakness at the rest of the firm. Pfizer continues to deal with the impact of product losses of exclusivity (Lipitor) and the expiration of its Spiriva collaboration in certain countries, which overwhelmed growth in its blockbuster Lyrica (up 11%), Celebrex (up 13%), Inlyta (up 186%), and Xalkori (up 92%). Sales of Pristiq advanced 15%. Emerging market expansion tallied 5% in the period. The US basis … Read more

American Capital Agency Disappoints Again; Armour Residential Follows

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We’re still getting praises from our call on the mREIT industry that shocked the investment world and literally put our research firm on the map (click here for that). We outlined how other research firms were so wrong in this piece (link), and interestingly, we’re adding BAML today to the list of investment shops that led their advisor communities astray. Frankly, we’re honored to serve you, and we’re proud to have delivered on the correct research perspective. We’re not here to point out the pitfalls of others, but by pointing out this well-documented example, our goal is to continue to build your trust in us as a firm. Let’s take a look at the ongoing troubles the mREIT industry continues … Read more

Industrial and Consumer Packaging Drive Results at International Paper

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On Thursday morning, International Paper (IP) posted record third quarter operating earnings driven by solid margin expansion. Revenue increased 5% year-over-year to $7.4 billion, slightly below consensus expectations. Operating earnings per share of $1.05 per share were in-line with consensus estimates and 30% higher than the year ago period. Year-to-date, free cash flow stands at $1.2 billion, down slightly compared to the same period a year ago, but still equal to 5.6% of total revenue. Robust Industrial Packaging Image Source: IP 3Q13 Slides North American Industrial Packaging was a standout performer for International Paper during the third quarter. As shown in the above chart, the segment’s EBITDA margins easily eclipse peers and increased 510 basis points year-over-year to 24.4%. Although wood … Read more