Brian Nelson

Soft Sales Growth at McDonald’s Is No Surprise

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Fast food heavyweight McDonald’s (click ticker for report: ) reported an uneventful second quarter Monday morning. Revenue increased 2% year-over-year to $7.1 billion, in-line with consensus estimates. Earnings per share fell a few cents short of consensus estimates, growing 5% year-over-year to $1.38 per share. CEO Don Thompson tends to cite the macroeconomic environment as the main driver of persistent weakness at McDonald’s. This argument certainly holds weight in Europe, in our view, but we do not believe the soft 1% same-store sales growth rate in the US was macro-related. Rather, we think the company’s premium product offerings aren’t packing the same punch as new products did in previous years. McDonald’s performed relatively well during the Great Recession thanks to … Read more

Disney Contract Extension Outshines Weak Revenue Growth at Hasbro

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Monday morning, Dividend Growth Newsletter portfolio holding Hasbro (click ticker for report: ) reported slightly weaker than anticipated second quarter results. Revenue declined 6% year-over-year to $766 million, well below consensus estimates. Earnings per share, adjusted for a one-time charge, also came in below consensus expectations, falling 12% year-over-year to $0.29. Year-to-date, free cash flow is up to 66% to $245 million, which equates to 17% of revenues (an excellent number). Though headline numbers weren’t quite as strong as anticipated, the market is focused on the contract extension Hasbro inked with Disney (click ticker for report: ) to keep Marvel and Star Wars products exclusive to Hasbro. We’re not surprised by the deal extension, but some market participants may have … Read more

Intuitive Surgical Reduces Its Outlook Amid Regulatory Concern

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Thursday afternoon, medical device maker Intuitive Surgical (click ticker for report: ) reported weak second quarter results and reduced its full-year outlook. Revenue jumped 8% year-over-year to $579 million, falling short of consensus expectations. Earnings per share increased 4% year-over-year to $3.90, below consensus estimates. Of course, these headlines are no surprise after the company pre-announced weak results earlier this month. We’ve of the firm but are sticking with our small position in the portfolio of our Best Ideas Newsletter. The big news in the press release was the extremely bearish revenue guidance given by management. After announcing first-quarter results, the firm provided a revenue growth outlook of 16%-19% for fiscal year 2013. With the market for da Vinci systems … Read more

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