Brian Nelson

GM Rides North America to Success

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US automaker General Motors (click ticker for report: ) announced solid second quarter results Thursday morning, echoing the strength we saw from competitor and Best Idea portfolio holding Ford (click ticker for report: ). Revenue increased 4% year-over-year to $39.1 billion, modestly exceeding consensus estimates. Earnings-per-share was also strong, though down 7% year-over-year to $0.84 on an adjusted basis. Automotive free cash flow was $2.6 billion, approximately 7% of total revenue. Image Source: GM 2Q 2013 Charts As with Ford, North America drove profitability as revenue increased 9% year-over-year to $23.5 billion, and segment EBIT increased 5% year-over-year to $2 billion. Even as the broader auto market recovery has advanced, we can see from the above chart that GM hasn’t … Read more

Precision Castparts Reports Record Fiscal First Quarter Results

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On Thursday, Best Ideas Newsletter portfolio holding Precision Castparts (click ticker for report: ) issued decent first quarter fiscal 2014 results. Though performance fell below consensus estimates, the aerospace engine casting provider achieved record diluted earnings per share, record consolidated segment operating margins (27.2%), and strong cash generation in the period. We’re expecting significant earnings expansion in coming years as a result of its recent acquisition of Titanium Metals (TIMET) coupled with the current high-level of commercial aircraft deliveries. Revenue expanded 20% in the period thanks to elevated aircraft build rates and acquisitive activity, while consolidated segment operating income jumped 25%. The operating margin in its ‘Investment Cast Products’ segment advanced 140 basis points, to 34.6%, despite relatively flat segment … Read more

Productivity on the Rise at Starbucks

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Global coffee shop powerhouse Starbucks (click ticker for report: ) posted strong third quarter results Thursday afternoon. Total revenue increased 13% year-over-year to $3.7 billion, roughly in-line with consensus estimates. Earnings per share jumped 28% year-over-year to $0.55, a few pennies above consensus expectations. Increased store productivity continues to be the major driver behind Starbucks’ fantastic revenue growth. Global same-store sales advanced 8% year-over-year on traffic that was 7% higher than that in the year-ago period. Same-store sales increased across all geographies, but the US was particularly strong, with comp growth of 9% year-over-year. Only a few years ago did the market wonder if Starbucks’ premium coffee products were simply too expensive to keep consumers coming back. We think that … Read more

Amazon Fails to Turn a Profit

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Thursday afternoon, e-commerce heavyweight Amazon (click ticker for report: ) reported mediocre second quarter results. Revenue increased 22% year-over-year to $15.7 billion, falling short of consensus estimates. Earnings per share swung to a loss of $0.02, which was also worse than consensus expectations. Free cash flow for the quarter was surprisingly positive at $25 million, equal to less than 1% of revenue. Amazon remains firmly entrenched in “investment” mode, as the firm spent well over $800 million on internal investments during the second quarter. The company specifically cites spending on fulfillment centers and server infrastructure as well as continued investment in the Amazon Prime Instant stream. Within the not-so-distant future, we can envision an Amazon where same-day shipping is the … Read more

Pepsi Profits from Strong Gross Margins

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Beverage and snack giant Pepsi (click ticker for report: ) reported strong second quarter earnings improvement Wednesday morning. Core earnings per share increased 17% year-over-year to $1.31, easily exceeding consensus estimates. Organic revenue rose 4% year-over-year, but reported revenue increased just 2% year-over-year to $16.8 billion, still slightly ahead of consensus. Free cash flow year-to-date stands at $2.1 billion, equal to 7% of total revenues. The headline for the second quarter at Pepsi was gross margin improvement. “Core” gross margins increased 120 basis points year-over-year, and reported gross margins improved 110 basis points year-over-year to 53%. The firm benefitted from lower input costs, so the improvement mostly came from external factors rather than internal improvements. Even though Pepsi ramped up … Read more

Firms Raising Their Dividend In the Week Ending July 26 Included Hershey and Republic Services

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Below we provide a list of firms that increased/decreased their dividends for the week ending July 26. 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. Increases Atlas Energy (ATLS): now $0.44 per share quarterly dividend, was $0.31. Bar Harbor Bankshares(BHB): now $0.315 per share quarterly dividend, was $0.31. Barnes Group (B): now $0.11 per share quarterly dividend, was $0.10. BBCN Bancorp (BBCN): now $0.075 per share quarterly dividend, was $0.05. Celanese Corporation (CE): now $0.18 per share quarterly dividend, was $0.09. Crane Co (CR): now $0.30 per share quarterly dividend, was $0.28. Fidelity Southern Corporation (LION): now $0.02 per share quarterly dividend, was $0.01. First … Read more

Qualcomm Rises on Strong Revenue Growth

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Chipmaker Qualcomm (click ticker for report: ) reported fantastic third quarter results Wednesday afternoon. Revenue surged 35% year-over-year to $6.2 billion, handily exceeding consensus estimates. Non-GAAP earnings per share jumped 21% year-over-year to $1.03, roughly in-line with consensus estimates. Free cash flow was fantastic at $1.85 billion, equivalent to 30% of revenue. Image Source: QCOM 3Q FY13 Presentation It’s interesting to see average selling prices (ASPs) for 3G/4G devices increase $13 sequentially to $230 during the March quarter, indicating a shift towards higher-end devices. Qualcomm also forecasts ASPs to range from $223-$229 for fiscal year 2013, an increase of 2-5% year-over-year. Clearly, pricing growth is not as robust in the smartphone space as it once was, but the market still … Read more

Baidu Surges on Strong Results and Outlook

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Chinese search giant Baidu (click ticker for report: ) reported fantastic second quarter results Wednesday afternoon. We recently identified Baidu as one of the cheapest stocks on the market, after making a bullish call on the name in early April. Revenue surged 39% year-over-year to $1.2 billion, easily exceeding consensus expectations. Earnings per share declined 3% year-over-year to $1.26 on a non-GAAP basis, which is several cents better than consensus estimates. Free cash flow was very solid at $433 million, equivalent to 36% of total revenue. Baidu’s core search business is growing at rates we saw from Best Idea Newsletter portfolio holding Google (click ticker for report: ) in its earlier days as Chinese internet usage continues to grow. Baidu … Read more

Caterpillar’s Second Quarter Performance Falls Short

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Industrial bellwether Caterpillar (click ticker for report: ) reported relatively disappointing second-quarter results Wednesday, as both its top and bottom lines fell below consensus estimates. Revenue dropped 16% to $14.6 billion, as sales declined in all geographic regions, with the steepest reduction in Asia/Pacific (though we note sales in China increased). Profit per share plunged over 40% to $1.45 due to lower volumes, an unfavorable mix of products, and sales deleveraging (reduced cost absorption). Management acknowledged the difficult market environment by reducing inventories $1.2 billion in the quarter, trumping that of its dealer supply chain, which cut channel inventories by $1 billion (more than expected). It appears that neither Cat nor its dealer network, which plans to reduce inventories even … Read more

Facebook Mobile Advertising Performs Incredibly Well

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Social network site Facebook (click ticker for report: ) reported tremendous second quarter results Wednesday after the market close. Revenue surged 53% year-over-year to $1.8 billion, easily exceeding consensus estimates. Earnings, excluding certain items, jumped 58% year-over-year to $0.58 per share. The firm generated a robust $1.05 billion in free cash flow during the second quarter, equal to 58% of revenue. Image Source: FB 2Q 2013 Earnings Slides The story for Facebook during the second quarter was the explosion in advertising growth, which surged 61% year-over-year to $1.6 billion. As we see from the above image, advertising growth was robust across all geographies, up 51% in the US & Canada, up 96% in Asia, up 53% in the struggling European … Read more