Brian Nelson

What’s Going on in the Time Warner-CBS Battle?

by

A few weeks ago, CBS (click ticker for report: ) and Time Warner Cable (click ticker for report: ) took their disagreement over carriage fees to another level, as both firms’ existing carriage fee agreement expired, effectively blacking out Time Warner subscribers from viewing the network. Since then, we’ve seen really no signs of the companies coming to any sort of agreement. The Federal Communications Commission (FCC) warned on August 9 that, if the two firms didn’t reach an agreement, the government could get involved and force a resolution. Such an event would be an incremental negative to CBS because we doubt the FCC would see a reason why consumers should be forced to pay more for a network they … Read more

Eli Lilly Might Have a Blockbuster Cancer Drug

by

Pharmaceutical giant Eli Lilly (click ticker for report: ) saw its shares pop during Tuesday’s trading session after revealing positive data about one of the lung cancer drugs in its oncological pipeline. The company issued a press release on the treatment (necitumumab), saying: “SQUIRE, a recently completed Phase III study, met its primary endpoint, finding that patients with stage IV metastatic squamous non-small cell lung cancer (NSCLC) experienced increased overall survival (OS) when administered necitumumab (IMC-11F8) in combination with gemcitabine and cisplatin as a first-line treatment, as compared to chemotherapy alone.” While some have brushed off the news, this is very positive data for Eli Lilly. For one, the treatment met its primary endpoint, implying the efficacy of the drug … Read more

National Oilwell Varco Posts Record Second Quarter Results

by

National Oilwell Varco (Click ticker for report: ) posted phenomenal second quarter results July 30. Revenue surged 18% year-over-year to $5.6 billion, smashing consensus estimates. Earnings-per-share was also strong, growing 14% year-over-year to $1.33 (excluding one-time events), in-line with consensus expectations. The firm generated $212 million in free cash flow during the quarter, equal to 6% of revenue. The ‘Rig Technology’ segment performed exceptionally well during the quarter with revenue up 18% year-over-year to $2.8 billion, with an operating margin of 20.7%. Although drilling can take several forms (deepwater, shale, etc.), the company continues to have nice exposure to the major trends in the oil drilling space. CEO Clay Williams reinforced this idea on the conference call, noting: “…4 big macro … Read more

Baidu Might Buy China’s Groupon

by

Reports are circulating that Best Ideas Newsletter portfolio holding Baidu (click ticker for report: ) is interested in taking a controlling stake in Renren’s (RENN) daily deal site Nuomi.com, as well as Ding Ding Maps (a map service). Both potential deals could make Baidu look a little more like another Best Ideas portfolio holding, Google (click ticker for report: ). Numoi.com is a daily deals site similar to Groupon (click ticker for report: ) and Amazon’s Living Social (click ticker for report: ), as well as Google’s own Daily Offers. Deals change on geographic location, and the service seems to cover most major cities in China. Without question Baidu could probably start its own daily deals service, but that strategy … Read more

Ackman Leaves the JC Penney Board

by

Tuesday morning, activist shareholder and hedge fund manager Bill Ackman resigned from the JC Penney (click ticker for report: ) board of directors. In a press release issued by the company, Ackman noted that during his entire board tenure, he’s always done what is best for the company, and he believes the best move at the moment is for him to step away from the board. Image Source: Valuentum, Company Filings Based on the stock’s initial reaction, we’re not sure if the market knows how to digest Ackman’s departure. On one hand, CEO Mike Ullman and Chairman Thomas Engibous no longer have to battle with Ackman over saving their jobs, but rather they can focus on engineering what continues to … Read more

China Still Plagues Yum! Brands

by

In an 8-K filed Monday afternoon, fast food giant Yum! Brands (click ticker for report: ) announced terrible July results in its Chinese division. Same-store sales declined 13% compared to the prior year, with same-store sales down 16% year-over-year at KFC, partially offset by 3% same-store sales growth at Pizza Hut. This implies that sales declines accelerated through the course of July, reversing the improving trend management mentioned on the second quarter conference call. Same-store sales declines had moderated in June to 10%, and it appears the firm’s sales in China could be decelerating even more dramatically (heading into August). Image Source: Valuentum, Company Filings As we can see in the above chart, same-store sales declines in the first half of 2013 … Read more

Blackberry: Strategic Alternatives Signal Failure

by

After the launch of its new phone and operating system came and went without much fanfare, smartphone maker Blackberry (click ticker for report: ) announced that it is exploring strategic alternatives for the company. Although most tend to associate strategic alternatives with selling the company, Blackberry is also open to partnerships and joint-ventures. Let’s start with the obvious inference out of this news: Blackberry 10 didn’t save the company. If this wasn’t clear enough when Blackberry reported weak results for its fiscal year 2014 first quarter, we think the situation is obvious now. Consumers, particularly of the high-end smartphone variety, simply do not want Blackberry products. The app world is far inferior to competitors Apple (click ticker for report: ) … Read more

Priceline Approaches $1,000

by

Online travel broker Priceline (click ticker for report: ) reported stellar second quarter results Thursday afternoon. Revenue surged 27% year-over-year to $1.7 billion, slightly above consensus estimates. Non-GAAP earnings per share jumped 24% year-over-year to $9.70, far ahead of consensus expectations. Free cash flow year-to-date totaled $740 million, an impressive 25% of total revenue. Our Fair Value Estimates Are Forward-Looking After finishing its acquisition of Kayak in May, Priceline posted gross bookings (total amount spent on travel/rental cars/etc.) of $10.1 billion, 38% higher than the same period a year ago. International bookings drove the lion’s share of the growth, surging 44% year-over-year to $8.6 billion. Image Source: PCLN 2Q 2013 With such robust growth, we think a few trends are … Read more

Rio Tinto Improves Cash Flow in Weak Mining Environment

by

Key Takeaways ·         Cost cuts helped Rio Tinto stomach weak commodity end markets. ·         Production increases buffered weak iron ore prices. ·         China remains a key driver of growth. Country data flow continues to contradict. ·         We continue to hold Rio Tinto in our Best Ideas Newsletter portfolio…but we think it could be a wild ride. Best Ideas Newsletter portfolio holding Rio Tinto (click ticker for report: ) announced weak, but better-than-expected, financial performance for the first half of 2013 Thursday. Earnings per share declined 71% year-over-year to $0.93, though revenue declined only 3% year-over-year to $24.5 billion as production increases were able to partially offset commodity price weakness. Underlying earnings per share, which is adjusted for one-time charges, exchange rates, and write-downs, … Read more

Monster Beverage Takes Market Share

by

Health concerns and broader category demand headwinds couldn’t stop Monster Beverage (click ticker for report: ) from posting decent second quarter growth. Net sales increased 6.5% year-over-year to $631 million, slightly below consensus estimates, but still a solid number in our view. Earnings per share increased 4.6% year-over-year to $0.62, again falling slightly short of consensus estimates, but by no means terrible given some of the legal issues surrounding the company. Demand for Monster products isn’t experiencing the same robust growth as is it did years ago, but we are seeing the company outperform many of its peers. According to the data that management from Nielsen on the conference call, Monster’s comparable sales jumped 16.4% year-over-year during July at convenience … Read more