Brian Nelson

Homebuilders Report Nice 3Q; We’re Not Putting New Money to Work in Them

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We’ve seen the recent hike in interest rates put a moderate dent in the upward trajectory of performance at Lennar (LEN) and KB Home (KBH) in their respective third quarters. This was also the case in PulteGroup’s (PHM) and M/I Homes’ (MHO) third quarter performance, which we will outline in this piece. However, recent trends in the average 30-year fixed rate, which hit a four-month low last week, may make fourth-quarter performance a bit better for the group than originally anticipated. Still, we’re not putting new money to work in the industry at this time on the basis of valuation. PulteGroup On Thursday, PulteGroup reported decent third-quarter results that showed strong revenue, growth, home selling-price expansion, and solid margin performance. … Read more

Microsoft Sets Six-Year Price High; You Knew It Was Going to Happen

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Microsoft (MSFT) continues to be a no-brainer. The firm has robust free cash flow, a rock-solid balance sheet, and significant revenue and earnings growth potential. As we continued to pound the table on shares for much of the past two years—the company is one of the LARGEST weightings in the portfolio of our Dividend Growth Newsletter—others said Microsoft was “dead money” and would continue to be. The firm’s share price hit a six-year high Friday. Thursday after the close, the software giant exceeded top- and bottom-line expectations in its fiscal first quarter by a significant margin. Revenue jumped 15.8%, while diluted earnings per share leapt nearly 17%. These are staggering growth figures for a firm that is supposed to be … Read more

Surveying 3Q Performance from Big Pharma: Bristol-Myers, Eli Lilly, and AbbVie

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Bristol-Myers On Wednesday, Bristol-Myers (BMY) showcased the strength of its key marketed products in its third-quarter report. The firm experienced a 9% increase in net sales and a 12% jump in non-GAAP diluted earnings per share. Bristol-Myers also confirmed its 2013 non-GAAP earnings per share range of $1.70 to $1.78 per share. Looking at its current marketed portfolio, Abilify, its largest revenue generator, faced a 16% decline, though this was offset by strength in Yervoy, which grew 33%, Orencia, which grew 22%, and Sprycel, which grew 20%. Yervoy doesn’t lose exclusivity in key markets until after 2020 (2023 in the US), Orencia loses exclusivity in Japan, the EU, and the US between years 2017 and 2019, and Sprycel doesn’t lose … Read more

Dividend Increases for the Week Ending October 25

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Below we provide a list of firms that raised their dividends during the week ending October 25. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports, please click here (or use our ‘Symbol’ search box in our website header). Firms Raising Their Dividends This Week American Midstream Partners, LP (AMID): now $0.4525 per share declares quarterly distribution, was $0.4325. Associated Banc-Corp (ASBC): now $0.09 per share quarterly dividend, was $0.08. Bar Harbor Bankshares (BHB): now $0.32 per share quarterly dividend, was $0.315. Cape Bancorp (CBNJ): now $0.06 per share quarterly dividend, was $0.05. Cintas Corporation (CTAS): now $0.77 per share annual dividend, was $0.64. Columbia Banking System … Read more

Surveying a Few Consumer Staples: Hershey, Colgate-Palmolive, and Unilever

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<< Definition of ‘Consumer Staples’ Hershey (HSY) “We (Hershey) expect 2014 net sales growth to be within our 5 to 7 percent long-term target, including the impact of foreign currency exchange rates. As has been the case for many years, Hershey is a gross margin focused company. We have solid productivity and cost savings initiatives in place and, while early in the planning cycle, we expect adjusted gross margin expansion next year that will drive 2014 growth in adjusted earnings per share-diluted in the 9 to 11 percent range, in line with our revised long-term target.” 3Q13 press release Colgate-Palmolive (CL) “As we (Colgate-Palmolive) look ahead to 2014, while our global budget process is in its initial stages, based on … Read more

The Tale of Three Valuentum Buying Index Ratings of 9

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Just like a sell-side analyst isn’t required to reiterate his or her buy/sell/hold recommendations every day (despite immaterial week-to-week pricing changes), we don’t reiterate our Valuentum Buying Index ratings every day either. However, as with sell-side recommendations, our Valuentum Buying Index ratings still represent our current opinion. It should be assumed that, if a firm’s report (one that’s dated September 2013, for example) states that the firm’s VBI rating is a 9, the company’s current VBI rating is a 9. Just like in the case of when a sell-side analyst issues a ‘Buy’ recommendation in September 2013, the sell-side analyst would still have a ‘Buy’ recommendation on the stock today (until the recommendation is changed). This dynamic is the only way that our system is … Read more

Green Letter Day for Industrial Best Ideas Portfolio Holdings; Record Results for Ford and Precision Castparts

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I guess you can say a ‘Red Letter Day’ for our Best Ideas portfolio can be more appropriately called a ‘Green Letter Day,’ as stock-market advances are typically colored in green. Today is such a day for two holdings in our Best Ideas portfolio: Ford (F) and Precision Castparts (PCP). These are two companies that we have pounded the table on repeatedly during the past couple years. Ford Posts Record 3Q Pre-Tax Profit On Thursday, Ford (F) posted excellent third-quarter results that showed fantastic top and bottom-line performance. Total company revenue advanced an impressive 12% thanks to wholesale volume expansion of 16% and year-over-year share gains in all regions. The auto maker also posted record third-quarter pre-tax profit of $2.59 … Read more

Caterpillar Misses on Both Top and Bottom Lines

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Caterpillar (CAT) has yet to breach the low end of our fair value estimate range, despite releasing a dismal third-quarter report Wednesday. Revenue dropped 18% on a year-over-year basis, while earnings per share tumbled more than 40% (both below consensus expectations). The firm also issued a revised 2013 outlook and now expects sales to be about $55 billion (was $56-$58 billion) with profit per share of $5.50 (was $6.50 per share in the middle of the range). As we outlined after the firm’s second-quarter report, released July 25: It appears that neither Cat nor its dealer network, which plans to reduce inventories even further, expects a robust recovery in demand anytime soon. Though cleaning out channel inventories by under-selling end-user … Read more

Surveying 3Q Performance from the Large Defense Contractors

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Northrop Grumman Executes Nicely in 3Q But Reveals Declining Backlog On Wednesday, Northrop Grumman (NOC) reported strong third-quarter results considering the competing budget priorities in Washington and the subsequent difficult revenue environment. The defense contractor’s revenue dropped 2.6%, as expected, but its segment operating income increased 4.5% thanks to roughly 90 basis points of segment operating margin improvement. Third-quarter diluted earnings per share leapt 17.6%, and free cash flow swelled to $860 million (14.1% of sales), up from $748 million (11.9% of sales). We very much liked the profitability improvements and its increased free-cash-flow conversion during the period, but the firm’s backlog performance in the quarter wasn’t stellar: As of September 30, 2013, total backlog was $37.5 billion compared with … Read more

Evaluating 3Q Results at Panera and Chipotle

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High-flying restaurant peers, Panera (PNRA) and Chipotle (CMG), reported divergent performance in their respective third-quarter results. Though one is a bakery and the other a high-end burrito maker, their comparable growth trajectories make them relevant peers for discussion. Panera’s third-quarter report, released Tuesday, showed relatively strong top-line and bottom-line expansion of 8% and 17%, respectively, but the real issue was with the firm’s fourth-quarter outlook. For starters, the bakery-café cut its fourth-quarter comparable sales growth expectations for company-owned restaurants to the range of flat-to-up-2% versus 3-5% previously. Panera also cut its fourth-quarter earnings-per-share guidance to $1.91-$1.97 per share from $2.05-$2.11 previously on expected margin contraction of more than 100 basis points on a year-over-year basis. Though the new bottom-line outlook … Read more