Brian Nelson

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

IBM Reports Second Quarter; Raises Operating Outlook for 2013

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On Wednesday, IBM (click ticker for report: ) reported second quarter results that were roughly in line with our expectations. Operating non-GAAP diluted earnings per share (excluding workforce rebalancing charges) advanced 8%, to $3.91, despite revenue declines of 3%, which were led by a 12% drop in ‘Systems and Technology’ sales and a 4% fall off in ‘Services’ revenue. Adjusting for currency, key branded middleware (WebSphere, Tivoli, Social Workforce Solutions—Lotus), z mainframe revenue, business analytics, ‘Smarter Planet’, and cloud revenue were up 10%, 11%, 11%, 25% (during the first half of the year), and 70% (during the first half of the year), respectively. The firm’s operating non-GAAP gross margin advanced 110 basis points in the period, to 48.7%. On a … Read more

Abbott’s Nutrition Business Leads the Charge in Its Second Quarter

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On Wednesday, global healthcare company Abbott Labs (click ticker for report: ) issued decent second quarter results that revealed the strength of the firm’s international portfolio. Excluding changes in foreign exchange rates, worldwide sales advanced 4.2% thanks primarily to expansion in its international ‘Nutrition’ segment, which advanced over 18% on an operational basis (excluding currency) during the period. Growth in emerging markets, which now represent more than 40% of Abbott’s total sales, was impressive, jumping more than 13% from the same period a year ago. Second-quarter adjusted gross margins of 55% and adjusted diluted earnings per share of $0.46 both came in ahead of internal projections. Year-over-year comparisons were difficult given the spin-off of AbbVie (click ticker for report: ) … Read more

Strong Second Quarter Results at Johnson & Johnson

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Tuesday morning, pharmaceutical and personal care giant Johnson & Johnson (click ticker for report: ) reported fantastic second quarter results. Revenue surged 9% year-over-year to $17.9 billion, easily exceeding consensus expectations. Excluding the impact of one-time events, earnings per share also came in ahead of consensus estimates, growing 14% year-over-year to $1.48. Free cash flow year-to-date is roughly $6 billion, equal to approximately 17% of revenues. Johnson & Johnson grew at a solid clip in both the US and abroad, with revenue expansion in the US of 8% year-over-year and international currency-neutral revenue growth of 12%. Importantly, the firm is experiencing tremendous growth in BRIC (Brazil, Russia, India, China) nations, as shown below.   Image Source: JNJ Q2 FY2013 Investor presentation … Read more

Weak Volume Growth Weighs on Coca-Cola

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Leading soft drink maker Coca-Cola (click ticker for report: ) posted lackluster second quarter results Tuesday morning. Revenue declined 3% (+2% excluding currency) year-over-year to $12.8 billion, falling short of consensus estimates. Comparable earnings per share (a non-GAAP figure) increased 4% year-over-year to $0.63, in-line with consensus expectations. With lower capital expenditures than in the year prior, free cash flow is roughly flat year-to-date at $2.8 billion, approximately 12% of revenue. Image Source: Coca-Cola Eurasia and Africa outperformed the rest of the company as volumes surged 9% year-over-year, annualizing 10% expansion in the same period a year ago. Currency headwinds weighed on net revenue growth, which totaled 5% (11% excluding currency). The markets in Eurasia and Africa have consumption rates … Read more

Yahoo’s Turnaround Not Progressing As Planned

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On Tuesday, Yahoo (click ticker for report: ) reported lackluster second-quarter results that showed its turnaround is not progressing as planned. The firm’s revenue (excluding traffic acquisition costs—TAC) dropped modestly from the same period a year ago, while non-GAAP income from operations fell 13% (adjusted EBITDA decreased 7%). Earnings in equity interests, which include its 24% stake in China-based Alibaba Group and 35% ownership in Yahoo Japan, advanced nearly 25% (representing one of the few bright spots in the quarter). Non-GAAP net earnings per share jumped 19%, to $0.35, better than the consensus estimate, but the performance was bolstered primarily by a reduced share count. The quarter was a low-quality beat, in our view, and we’re particularly discouraged by Yahoo’s core … Read more

Legal Costs Cloud Citigroup’s Earnings Potential

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International banking power Citigroup (click ticker for report: ) reported solid second quarter results Monday morning. Revenue increased 7% year-over-year to $20 billion, exceeding consensus expectations. Earnings were even better, growing 25% year-over-year on a non-GAAP basis to $1.25 per share, handily exceeding consensus estimates. Still, return on equity (ROE) was well below that of Wells Fargo (click ticker for report: ) and JP Morgan (click ticker for report: ), both of which reported late last week, coming in at 8.8%. Wells Fargo’s ROE was 14% while JP Morgan’s ROE was 17% in their most recent quarters. On a capital adequacy basis, Citi looks relatively strong, with its Basel I Tier 1 common ratio currently sitting at 12.2% (above the … Read more

AT&T Tries Again…This Time: Leap Wireless

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Through the course of the past two years, we’ve seen a trend toward consolidation in the US wireless industry. AT&T (click ticker for report: ) failed to purchase T-Mobile (TMUS) in late 2011, but the firm has taken another stab at gobbling up spectrum and customers, announcing its intention to acquire Leap Wireless (LEAP) Friday for $1.2 billion plus the assumption of Leap’s net debt of approximately $2.8 billion. The deal works out to $15 per share, but AT&T will sell Leap’s Chicago spectrum with the proceeds going to Leap shareholders, which investors are pegging at $2+ per share of additional value. After regulators squashed AT&T’s purchase of T-Mobile, T-Mobile USA merged with MetroPCS. Not long after, Sprint (click ticker … Read more

UPS Cuts Outlook

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Shipping giant UPS (click ticker for report: ) announced weaker than anticipated second quarter earnings Friday morning, blaming a weak global economic outlook and global freight overcapacity. Second quarter earnings per share will be $1.13, well below the Street’s consensus estimate of $1.18 per share. The firm also cut its full-year earnings outlook to $4.65-$4.85 per share compared to previous guidance of $4.80-$5.06 per share, but we suspect further downside is likely. UPS’ primary competitor, FedEx (click ticker for report: ) cut its guidance several times during its 2013 fiscal year, and its recent fourth quarter results weren’t great, so UPS’ decision to cut its earnings outlook isn’t shocking. Both companies are dealing with the same basic issue: customers are … Read more