Brian Nelson

Niaspan Generic Could Boost Teva

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On Friday, Best Ideas Newsletter portfolio holding Teva Pharma (click ticker for report: ) announced that its generic version of AbbVie’s (click ticker for report: ) Niaspan would hit the US market this week. The news is particularly noteworthy because Teva was the first-to-file, making the product eligible for 180 days of marketing exclusivity (a large windfall for the company). To learn more about the generic industry and the significant benefits of marketing exclusivity, please consult our initiation report on the generics industry here.   Niaspan is a cholesterol drug used to reduce elevated TC, LDL-C (bad cholesterol), Apo B and TG levels, and to raise HDL-C cholesterol (the good variety). Niaspan had annual sales of more than $1.1 billion … Read more

FedEx Ships More Packages as Economy Strengthens

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Wednesday morning, shipping goliath FedEx (click ticker for report: ) announced better-than-anticipated fiscal first quarter results. Revenue rose 2% year-over-year to $11 billion, slightly above consensus expectations. Earnings per share increased 5.5% year-over-year to $1.53 per share, also slightly above consensus estimates. Free cash flow was decent at $357 million, equal to 3.2% of total revenue. FedEx Express Express revenue was roughly flat year-over-year at $6.61 billion, but segment operating income jumped 14% year-over-year to $236 million as the firm benefitted from 50 basis points of operating margin expansion. Management cited lower pension expenses and lower maintenance costs as the main drivers of earnings expansion in the face of flat top-line performance. This ends two consecutive quarters of top-line growth, … Read more

TJ Maxx Goes (Back) Online

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After an 8-year hiatus, TJX Companies (click ticker for report: ) re-launched tjmaxx.com, reestablishing the firm’s e-commerce presence. The firm tried to become an online presence back in 2004, but given the nature of the TJX’s opportunistic and odd purchasing, product allocation was sloppy and too much time and money was spent updating inventory. What do we expect from tjmaxx.com now? Although we do love TJX’s business model of buying lots of designer goods at favorable prices, we admit the model does not really lend itself to online sales. In fact, that’s one of the reasons why we think TJX, fundamentally, is one of the best stories in retail. It is simply extremely hard to replicate the in-store experience online, … Read more

McDonald’s Modest Dividend Growth

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Wednesday afternoon, global fast food giant McDonald’s (click ticker for report: ) announced that it will increase its quarterly cash dividend 5% to $0.81 per share—an annual run-rate of $3.24 per share. This is in-line with our prediction that McDonald’s next dividend increase would be 5% to $3.24 per annum (see dividend report ). Interestingly, this will be the second consecutive year that McDonald’s increased its dividend at a single-digit pace. Why is the dividend growth so depressed? McDonald’s only grew revenue 2% year-over-year during its most recent quarter while earnings per share were 5% higher than the year-ago period. McDonald’s is relatively conservative in terms of capital allocation, so we aren’t surprised the company has opted to increase its … Read more

Oracle Guides Lightly While Ellison Sails

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Enterprise tech giant Oracle (click ticker for report: ) posted modest results for its fiscal year 2014 first quarter Wednesday that were mostly in-line with the company’s prior guidance. Revenue increased 2% year-over-year to $8.4 billion, a touch below consensus estimates. Earnings-per-share on a non-GAAP basis was 12% higher than the year-ago period at $0.59. Free cash flow for the quarter was phenomenal at $6.1 billion, equal to 73% of revenue. CEO Larry Ellison was notably absent from the conference call as he sails in the America’s Cup. Software Drives Revenue Expansion Hardware revenue was weak, with product sales falling 14% year-over-year to $669 million (hardware systems support revenue, however, advanced a modest 3% year-over-year to $592 million). President Mark … Read more

The Fed Won’t Taper

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Wednesday afternoon, Federal Reserve Chairman Ben Bernanke stunned the consensus and announced the continuation of quantitative easing. Nearly every major investment bank expected the Fed to taper bond purchases in September, so Bernanke’s surprise announcement ignited a rally in both the stock market and Treasury bonds. Why not taper? According to the Fed, the economy has not performed up to expectations over the past year, and more importantly, the Fed reduced its growth outlook for 2014. However, in our view, the real reason is that the Fed is concerned about another bout of incompetence from Congress stalling economic progress. The following words came from Bernanke during his post-policy announcement press conference: “A government shutdown, and perhaps even more so a failure … Read more

Packaging Corporation of America Bets Big on Boise

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Monday morning, Packaging Corporation of America (click ticker for report: ) announced that it will pay $12.55 per share in cash to acquire paper company Boise (BZ) for a total deal value of $1.995 billion. The deal increases PCA’s containerboard presence by 42% to 3.7 million tons, while also giving PCA a presence in the Pacific Northwest—an area previously underrepresented. Source: BZ 2012 10-K Though Boise has struggled with large amounts of excess capacity in its newsprint segment, we’ve seen the firm move capacity closer to production over the past two years, leading to stabilized profitability. Nevertheless, the small, Idaho-based player was unable to truly compete with national competitors. Further, Boise had a large net-debt position, leaving the company fairly … Read more

Biglari Wants to Create More Value at Cracker Barrel

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Country-style restaurant and retailer Cracker Barrel (click ticker for report: ) posted decent fourth-quarter results Wednesday morning that were overshadowed by a wide guidance range and a letter from its largest shareholder, Sardar Biglari. With the firm lapping a 53-week fiscal year, total revenue declined 4% year-over-year to $674 million, modestly exceeding consensus expectations. Earnings per share, adjusted to reflect comparable time periods, increased 19% year-over-year to $1.43. For the full-year, the firm earned $4.90 per share, an increase of 11%. Cracker Barrel generated roughly $135 million in free cash flow, equal to 5% of total revenue. Comps are Modest Source: Company Filings, Valuentum Biglari Wants a Big Dividend Sardar Biglari, CEO of Biglari Holdings (BH), which is Cracker Barrel’s … Read more

They Like It. They Really Like It! Reviews Praise New iPhone

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Following shares of portfolio holding Apple (click ticker for report: ) has been an interesting task during the past week. Shares dropped 8% following the announcement of the iPhone 5S and 5c and the lack of a statement about a final deal with China Mobile. We continue to believe the China Mobile announcement will eventually occur, but for now, let’s look at what some top reviewers are saying about the iPhone 5S. The New York Times: “The best part is that it actually works — every single time, in my tests. It’s nothing like the balky, infuriating fingerprint-reader efforts of earlier cellphones. It’s genuinely awesome; the haters can go jump off a pier… The iPhone’s ecosystem is a deal-sweetening perk — the best apps; … Read more

Creative Cloud Drives Adobe

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Software maker Adobe (click ticker for report: ) announced fiscal third quarter results Tuesday afternoon. Results were a tad shy of expectations on both the top and bottom lines, as revenue declined 8% year-over-year to $995 million and earnings per share slipped 45% year-over-year to $0.32 as the firm moves to a subscription-based business model. Free cash flow remained strong during the third quarter at $169 million, equal to 17% of total revenue. Creative Cloud Success Image Source: ADBE Q3 FY13 Slides The story of Adobe’s third quarter was the continued success of the Creative Cloud product suite. Paid subscriptions surpassed the 1 million mark driving Digital Media ‘Annualized Recurring Revenue’ (ARR) to $655 million. ARR is a wonderful business … Read more