Brian Nelson

Utilization Drives Record Profit at TAL International

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Intermodal container lessor TAL International (click ticker for report: ) posted strong second quarter results last week thanks to high utilization rates and favorable container scrapping revenues. Revenue jumped 15% year-over-year to $172 million, easily exceeding consensus estimates. Earnings per share increased 7% year-over-year to $1.07 per share, roughly in-line with consensus expectations. TAL International greatly benefitted from strong utilization rates in the second quarter, which averaged 97.5%. Though this figure was down slightly compared to the first quarter figure of 97.7%, TAL’s long-term leasing strategy has minimized downside risk in the currently difficult intermodal environment. CEO Brian Sondey detailed the strategy on the second quarter conference call, saying: “…we’ve always had a leasing strategy of really seeking long duration … Read more

Buffalo Wild Wings’ Second Quarter Was Fantastic

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Best Ideas Newsletter portfolio holding Buffalo Wild Wings (click ticker for report: ) announced solid second quarter results Tuesday afternoon. Revenue jumped 28% year-over-year to $305 million, a touch better than consensus estimates. Earnings per share surged 42% year-over-year to $0.88, far better than consensus expectations. Free cash flow year-to-date totals $13 million, equal to just 2% of total revenue. Free cash flow is temporarily depressed as the firm continues to expand its domestic and global footprints. Eleven franchise-owned restaurants were opened during the quarter, as well as 10 owned by Buffalo Wild Wings. Same-store sales during the quarter grew 3.8% year-over-year at company-owned restaurants and 4.1% year-over-year at franchise-owned restaurant. Relative to most of the restaurant space, these numbers … Read more

With North America Saturated, Coach Needs International Growth

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As has become the norm for Coach (click ticker for report: ), shares of the handbag and fashion accessory maker experienced heightened volatility after it reported lackluster results for its fiscal year 2013 fourth quarter Tuesday. Revenue increased 6% year-over-year to $1.2 billion, slightly below consensus estimates. Earnings per share advanced just 3% compared to the same period last year, coming in at $0.89 (after adjusting for one-off items). Free cash flow for the fiscal year was strong at $1.2 billion, an increase of 20% compared to the prior year and equal to 24% of total revenue. One thing is certain at Coach—the core North American business likely won’t be the same growth driver it has been in years past.  … Read more

Uralkali Backs Out of Belarusian Potash Company; Industry to Change

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Early this morning, Russian fertilizer Uralkali announced it will leave the Belarusian Potash Company in order to grab market share. CEO Vladislav Baumgertner asserted that BPC partner Belaruskali had been making potash exports outside of the pre-arranged agreement, rendering the BPC useless. Until now, the potash industry had been a relatively stable cartel allowing industry participants to generate robust amounts of free cash flow as spot prices rested well above the cost of production. On a conference call following the announcement, Baumgertner mentioned that the price of potash could fall by over $100/tonne as Uralkali will boost production nearly 25% and look to steal market share. Uralkali is the largest single potash producer in the world and likely has the … Read more

American Capital Agency Loses $2.37 Per Share in Second Quarter

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As we have encouraged readers since the peak in September 2012, the mortgage real estate investment trust (REIT) industry has myriad risks, and the marketing pitches indicating that their principal and interest payments are guaranteed by a US government sponsored entity (GSE) should not make investors feel safe. This dynamic has little bearing on the underlying trajectory of fundamentals and a mortgage REIT’s book value, the key valuation driver and the major impetus behind share price movements in the space. During the second quarter (results released Monday), American Capital Agency (AGNC) failed at its principal objective to preserve net asset value, as book value plunged to $25.51 per share from $28.93 per share in the previous sequential quarter (a $3.42 move). … Read more

Colgate-Palmolive’s Second Quarter Impacted By Currency; Core Revenue Expansion Not Bad

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While some consumer staples companies continue to struggle as the consumer trades down, Colgate-Palmolive (click ticker for report: ) posted decent second quarter results late last week. Revenue advanced 2% year-over-year to $4.3 billion, slightly below consensus estimates as a result of the negative impact of currency. But net of the negative impact of currency, revenue rose 5.5% year-over-year. Earnings per share grew 5% year-over-year to $0.70 when adjusted for the one-off impact of restructuring charges. Free cash flow generation was solid, totaling $1.1 billion year-to-date or 12% of revenue. On the cost side, we saw some modest profitability expansion as its gross margin rose 70 basis points year-over-year, to 58.6%. The firm’s focus on expanding its gross margin via productivity … Read more

International Paper Issues a Strong Second Quarter Report; Expects Free Cash Flow to Improve

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International Paper (click ticker for report: ) reported strong second quarter results Thursday that showed impressive core operating-income improvement. Revenue advanced 3.6% during the period thanks to strong performance in its ‘Industrial Packaging’ and ‘Consumer Packaging’ segments, both of which jumped 9.6%. ‘Industrial Packaging’ was bolstered by higher selling prices for boxes and containerboard (and increased containerboard volumes), while the strength in ‘Consumer Packaging’ was primarily a result of higher volumes (namely from Asian coated paperboard). ‘Distribution’ revenues fell, while sales in its ‘Printing Papers’ division edged up 2%. On the whole, revenue performance was solid. International Paper’s segment operating profit surged more than 40%, to $601 million, though a number of large special items in the prior-year period made … Read more

Potash Corp Struggles with Weak Nutrient Prices

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Nutrient fertilizer producer Potash Corp (click ticker for report: ) posted weak second quarter results Thursday morning. Revenue declined 11% year-over-year to $2.1 billion, worse than consensus estimates had anticipated. Earnings per share, adjusted for one-time items, declined 26% year-over-year to $0.73 per share, which was also worse than consensus expectations. Free cash flow remained terrific at $848 million, equal to 40% of revenue. Image Source: POT 2Q 2013 Investor Slides Potash’s issue during the second quarter was the material decline in potash (the mineral) gross margins. Prices declined significantly, falling 18% year-over-year to $356 per tonne as robust North American farmer demand (up 28% year-over-year) was more than offset by lower realized prices shipped via Canpotex. Price is paramount … Read more

3M Posts Poor Second Quarter Results; Operating Income Declines

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On July 25, industrial conglomerate 3M (click ticker for report: ) reported relatively lackluster second quarter results. Organic local-currency sales grew 2.3% and earnings per share of $1.71 advanced 3% versus the same period a year ago, but operating income slipped due to material cost pressures. We also note the earnings-per-share growth was enhanced by a lower tax rate and share buybacks, revealing lower quality expansion (we prefer operating income growth—not just earnings-per-share growth). Still, free cash flow of $1.28 billion generated during the period exceeded net income and accounted for roughly 16.6% of sales. 3M’s ‘Health Care’ division led the charge, with organic local-currency revenue advancing 5.7% in the period. The firm’s ‘Industrial’, ‘Consumer’, and ‘Safety & Graphics’ segments … Read more

AbbVie’s Humira Continues to Drive Strong Performance; Pipeline Advances

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On Friday, AbbVie (click ticker for report: ) reported better-than-expected second quarter results and revealed a number of advancements to its strong and growing pipeline. During the period, revenue advanced 4.4% (5.1% excluding currency) as the firm benefited from Humira’s global sales growth of 12% (16% growth in the US) and double-digit expansion from several other products including Synthroid, Creon, Zemplar and Duodopa. Excluding the decline in TriCor/Trilipix sales due to loss of exclusivity, sales would have jumped 10.3% in the period. Second-quarter adjusted earnings per share of $0.82 beat the consensus estimate by a couple pennies. The global biopharmaceutical firm noted significant advancements in its pipeline. AbbVie has received Breakthrough Therapy designation from the FDA for its genotype 1 … Read more