Brian Nelson

American Eagle and the Difficulty of Investing in Teen Retailers

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Monday after the market close, teen retailer American Eagle (click ticker for report: ) reduced its second quarter earnings outlook. After a relatively weak first quarter, the firm was generally optimistic about its prospects heading into the second quarter, predicting flat same-store sales and earnings per share of $0.19-$0.21. However, earlier this week the firm said earnings per share will now be closer to $0.10 for the second quarter, a decline of 50% compared to the same period a year ago. Same-store sales that were predicted to be flat will actually be down 7% year-over-year (compared to 8% growth in the same period a year ago). Thus, same-store sales are only about 1% higher than they were two years ago.   … Read more

Gorilla Glass Continues to Drive Success at Corning

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Last week, glass maker Corning (click ticker for report: ) reported strong second quarter results. Revenue jumped 11% year-over-year to $2 billion, easily exceeding consensus estimates. Core earnings per share increased 23% year-over-year to $0.32, also ahead of consensus expectations. Free cash flow was up slightly from a year ago at $151 million, equal to 8% of total revenue. Corning’s ‘Display Technologies’ business (think screens) drove the lion’s share of growth as sales surged 21% year-over-year to $670 million, with earnings up 11% year-over-year. The lack of earnings leverage in the ‘Display Technologies’ comes from the presence of cheap foreign competition, which has led to market price declines. With further industry price declines imminent, controlling costs will be essential to … Read more

Buffett Proves Berkshire Is More Than an Index

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For years, skeptics have labeled the company essentially an index, but Warren Buffett’s Berkshire Hathaway (BRK.A) reported fantastic second-quarter results Friday afternoon. Revenue jumped 16% year-over-year to $44.7 billion, easily exceeding consensus expectations. Operating earnings were also strong, growing 5% year-over-year to $2,384 per share, also better than consensus estimates. The Oracle’s favorite metric, book value per share, is up 7.6% year-to-date to $122,900. Insurance On a segment basis, insurance underwriting profits were a tad weaker than the year prior, down 14% year-over-year to $530 million. Of course, underwriting is a notoriously volatile business because the timing of catastrophic events is inherently unpredictable. The year-to-date trend is positive, as profits have more than doubled. Still, the long-term trend remains the … Read more

Exxon Misses, ConocoPhillips Raises Production, and Shell Writes Down North American Shale Assets

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As Valuentum members are aware, we think the oil majors each have their own respective strengths and weaknesses. Exxon Mobil (XOM) has consistently earned the best economic returns (ROCE) among peers, but its stock price is rich, trading at the high end of our fair value estimate range (at the time of this writing). ConocoPhillips (COP) continues to raise its production forecasts and is the second-best value-creator (ROCE) in the group. However, Chevron (CVX) has the strongest balance sheet among peers (it has the only net cash position), and by extension, is better-positioned to raise its dividend during the troughs of future energy-price cycles. Meanwhile, BP (BP) continues to deal with the aftermath of its well-publicized 2010 oil spill in … Read more

Whole Foods Remains the Best Grocer

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Last week, organic grocery store chain Whole Foods (click ticker for report: ) reported wonderful third quarter results, again outperforming its peers. Revenue surged 12% year-over-year to $3.1 billion, in-line with consensus estimates. Earnings per share rose 20% year-over-year to $0.38, also in-line with consensus expectations. Free cash flow totaled $115 million, equal to 4% of sales. How Did Whole Foods’ Peers Do? The grocery business certainly is not a bull market. Competitor SuperValu (click ticker for report: ) reported weak results for its fiscal year 2014 first quarter. Revenue from continuing operations declined 1.5% year-over-year to $5.2 billion, as retail food same-store sales declined 3% year-over-year while Save-A-Lot same-store sales declined 1.5% year-over-year. Continuing operations also posted a loss … Read more

A Content Standoff

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After a few days of threats and warnings, cable distributor Time Warner Cable (click ticker for report: ) dropped CBS (click for report: ) programming from its content offering as the two failed to reach an agreement on retransmission fees. Retransmission fees are charged by basic cable station owners (think CBS, NBC, and ABC) to distributors that wish to carry the content. Time Warner released a statement to its customers blaming CBS for outrageous demands. Current retransmission fees per subscriber hover around $1 a month, but rumors have suggested CBS would like to double this price. Time Warner believes that allowing the fee to double would set an unhealthy precedent, especially when considering that CBS is free via antenna TV.   … Read more

Dividend Increases for the Week Ending August 2 Included Illinois Tool Works and Union Pacific

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Below we provide a list of firms that upped their dividends for the week ending August 2. 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. Arbor Realty Trust (ABR): $0.13 per share quarterly dividend, was $0.12. B&G Foods (BGS): now $0.32 per share quarterly dividend, was $0.29. Carlisle Companies (CSL): now $0.22 per share quarterly dividend, was $0.20. CBOE Holdings (CBOE): now $0.18 per share quarterly dividend, was $0.15. Chemed Corporation (CHE): now $0.20 per share quarterly dividend, was $0.18. Comfort Systems: (FIX): now $0.055 per share quarterly dividend, was $0.05. Energizer Holdings (ENR): now $0.50 per share quarterly dividend, was $0.40. Ethan Allen Interiors … Read more

From the Discussion Boards: Understanding Wall Street Analysts’ Moves

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Scenario: Valuentum researches a firm and concludes that it fits their investment methodology, the Valuentum Buying Index, for inclusion into the Best Ideas portfolio. The Valuentum Team plans to present the idea at its next meeting for internal debate and discussion before sending out a transaction alert email to members. In the meantime, however, a Wall Street analyst cuts the investment rating on the stock from ‘Buy’ to ‘Hold’ and raises the price target. What is this Wall Street analyst doing, and how does this impact Valuentum’s thoughts? Which is the correct answer from below? A.    The Wall Street analyst is playing a game. He/she lowered the investment rating to accommodate his/her value clients and raised the price target to … Read more

LinkedIn’s Powerful Network Drives Strong Results

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Thursday after the market close, business networking power LinkedIn (click ticker for report: ) announced robust second quarter results. Total revenue surged 59% year-over-year to $364 million, easily exceeding consensus estimates. Non-GAAP earnings per share swelled 137% year-over-year to $0.38, smashing consensus expectations. Free cash flow totaled $31 million, equal to 9% of total revenue. Image Source: LNKD 2Q 2013 Investor Presentation Above all, membership growth continues to be the contributing factor to LinkedIn’s success, in our view. Membership surged 9% sequentially and 37% year-over-year to 238 million users. As a result of membership expansion, LinkedIn is experiencing strong growth in unique visitors and page views. The story is simple: as LinkedIn network swells in membership, we see more advertisers, … Read more

Procter & Gamble’s Fourth Quarter Reveals Lafley’s Strategy

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Thursday morning, consumer products producer Procter & Gamble (click ticker for report: ) reported strong fourth quarter results. Revenue increased 2% (+4% excluding currency) year-over-year to $20.7 billion, exceeding consensus expectations. Core earnings per share fell 4% year-over-year to $0.79, which was still better than consensus estimates. For the full-year, the firm posted core earnings per share of $4.05 (up 5% year-over-year) and revenue of $84.2 billion (up 1% year-over-year). Free cash flow totaled $10.8 billion for fiscal year 2013, equal to 13% of total revenue and 17% higher than fiscal year 2012. Though fourth quarter results were decent, performance was not the most relevant story for P&G. New (and old) CEO A.G. Lafley took time to reveal his new strategy … Read more