Brian Nelson

The Danaher Business System Continues to Drive Strong Free Cash Flow Conversion

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Diversified industrial firm Danaher (click ticker for report: ) reported better than expected second quarter results Thursday. Revenue advanced 4% to $4.7 billion (organic revenue growth was 2.5%), which led to nearly a 4% increase in operating income. The firm’s gross margin improved 100 basis points, and core operating margin grew 95 basis points. Adjusted diluted earnings per share increased 7.5% to $0.87 (which beat consensus estimates of $0.85). Year-to-date, free cash flow has fallen nearly 10%, though it still represents 13.9% of revenue, which is a very healthy number. Revenue growth across Danaher’s segments was modest, with the exception of its ‘Test & Measurement’ segment, which was roughly flat during the period. The company experienced sequential improvement in Brazil … Read more

Verizon Shows Off Cash-Flow Generating Prowess in Second Quarter

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Thursday morning, Verizon (click ticker for report: ) reported in-line but strong second quarter results and raised its capital spending guidance for 2013, casting a positive light on the telecom equipment makers. We continue to pay very close attention to Verizon’s operating performance, as we consider the firm one of our top contenders for addition to our Dividend Growth portfolio. Verizon’s revenue performance during the quarter was solid (up more than 4% on a consolidated basis), with wireless service revenues and wireless retail service revenues both up about 8%. The company posted 941,000 retail postpaid net additions (up 6% year-over-year), driving total retail postpaid connections to 94.3 million (retail postpaid churn was 0.93% in the second quarter). Apple’s (click ticker … Read more

Philip Morris’ Second Quarter Reveals Volume Pressures

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Philip Morris (click ticker for report: ) issued lower-than-expected revenue and earnings in its second quarter Thursday. Net revenues, excluding excise taxes and currency, rose modestly (0.5%) thanks to improvements in ‘Latin America and Canada,’ while operating income, excluding unfavorable currency movements, fell more than 3% (led by more than a 9% slide in operating income in its ‘Asia’ division). Adjusted diluted earnings per share nudged up a penny, to $1.37, and we note that such improvement was augmented by its share repurchase program. Philip Morris’ cigarette shipment volume of 228.9 billion units fell nearly 4%. Though the pace of the volume decline slowed from the first quarter of the year, performance was clearly subdued, and volumes in the ‘Eastern … Read more

Chipotle Surprises to the Upside

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Thursday afternoon, restaurant chain Chipotle (click ticker for report: ) posted solid second quarter results. Revenue jumped 18% year-over-year to $817 million, easily exceeding consensus estimates. Earnings per share were also above the Street’s consensus, growing 10% year-over-year to $2.82. Thus far in 2013, the firm has generated $187 million in free cash flow, equal to 15% of total revenue. Outperformance in Chipotle’s second quarter results was largely driven by a 5.5% same-store sales growth rate. Co-CEO Steve Ells explained that all the company needed to bolster comparable store sales relative to consensus was a little marketing. On the conference call, he elaborated on this point, saying: “In addition to our Cultivate Festivals, we are now well into our skillfully … Read more

Google’s Cash Pile Grows

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Search superpower Google (click ticker for report: ) reported decent second quarter results Thursday after the closing bell. Revenue increased 19% year-over-year during the quarter to $14.1 billion, falling slightly below consensus expectations. Non-GAAP earnings per share fell 6% year-over-year to $9.56, over $1 per share below consensus estimates. Google’s earnings per share can move around considerably during different quarters, but free cash flow remained robust at $3.1 billion, approximately 22% of revenues. This figure is down slightly from the same period a year ago, but it is still a very healthy number, in our view. Image Source: GOOG Q2 FY2013 Earnings Presentation Advertising remains the core of Google’s business, but key metrics were decidedly mixed during the second quarter. … Read more

Microsoft: The Surface Bust and Windows Slump

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Leading technology company Microsoft (click ticker for report: ) reported much weaker than anticipated fourth quarter results Thursday afternoon. Revenue performance was disappointing, expanding only 3% year-over-year on a non-GAAP basis to $19.1 billion, falling short of consensus estimates by several hundred million dollars. Earnings per share fell 10% year-over-year to $0.66, which excludes the impact of an inventory charge for the Surface RT tablet. Not surprisingly, this number was below consensus expectations. Though down substantially from the prior year’s quarter, free cash flow during the fourth quarter was $4.1 billion—equal to approximately 22% of revenue. For the full-year, free cash flow came in at $24.6 billion, which equates to 31% of revenue (an excellent showing). One of the material … Read more

General Electric and Honeywell Post Strong Second Quarter Results

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On Friday, industrial conglomerates General Electric (click ticker for report: ) and Honeywell (click ticker for report: ) reported strong respective second-quarter results (GE’s press release; Honeywell’s press release). Though we liked that Honeywell raised the low end of its 2013 earnings per share guidance range, the most important takeaway from their respective second-quarter performances, in our view, was the significant growth in GE’s backlog of equipment and services, which advanced to $223 billion at the end of the quarter. We think such expansion bodes well for many firms across the industrial/energy space, from oil/gas to commercial aviation. Image Source: GE GE’s second-quarter revenue missed consensus expectations, but the firm’s bottom line came in slightly better than what the Street … Read more

Firms Raising Their Dividend In the Week Ending July 19 Included Kinder Morgan and Omega Healthcare

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Below we provide a list of firms that increased/decreased their dividends for the week ending July 19. 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 Amphenol (APH): now $0.20 per share quarterly dividend, was $0.105. Bassett Furniture (BSET): now $0.06 per share quarterly dividend, was $0.05. CARBO Ceramics (CRR): now $0.30 per share quarterly dividend, was $0.27. Education Realty (EDR): now $0.11 per share quarterly dividend, was $0.10. El Paso Pipeline Partners (EPB): now 0.63 per share quarterly distribution, was $0.62. First Community Corporation (FCCO): now $0.06 per share quarterly dividend, was $0.05. Home Loan Servicing Solutions (HLSS) declares quarterly dividend of $0.15 per … Read more

eBay’s “Weak” Guidance Doesn’t Change the Phenomenal Story

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E-commerce giant and Best Ideas Newsletter portfolio holding eBay (click ticker for report: ) announced solid second quarter results after the closing bell Wednesday. Revenue jumped 14% year-over-year to $3.9 billion, roughly in-line with consensus expectations. Earnings were also in-line with consensus estimates, growing 13% year-over-year to $0.63 per share on a non-GAAP basis. Free cash flow for the quarter was wonderful at $658 million, approximately 17% of revenue. Enabled commerce volume, a metric specific to eBay, registered $51 billion, a 21% increase over the same period a year ago. Image Source: EBAY Q2 FY2013 Earnings Presentation PayPal continued to be a stellar performer for eBay, with payments revenue surging 21% year-over-year to $1.475 billion, driven largely by international growth, … Read more

Intel’s Second Quarter: Soft But Not Panic-Worthy

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Best Ideas and Dividend Growth Newsletter portfolio holding Intel (click ticker for report: ) reported lackluster second quarter results Wednesday afternoon. Revenue declined 5% year-over-year to $12.8 billion, falling short of consensus estimates. Earnings-per-share also came in below consensus expectations, falling 28% year-over-year to $0.39. Even though earnings dropped, the firm still generated $2 billion in free cash flow, equal to about 16% of revenue. Intel’s personal computer (PC) revenue declined 7% year-over-year to $8.1 billion and remains the firm’s largest segment by a wide margin. We think the issue in PCs is secular rather than company specific, but there are signs that suggest the PC market may finally be bottoming. Though international PC shipments fell 11% year-over-year during the … Read more