Brian Nelson

Mortgage Originations Heading Lower at JP Morgan and Wells Fargo

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Banking giant JP Morgan Chase (click ticker for report: ) posted strong second-quarter results Friday morning. Revenue exceeded consensus expectations at $25.2 billion, 14% higher than the year-ago period. Earnings per share climbed 32% year-over-year to $1.60, also better than consensus estimates. Return on tangible common equity increased 200 basis points year-over-year to 17%. Mortgage king Wells Fargo (click ticker for report: ) also reported solid second-quarter results Friday morning. Revenue was up approximately $89 million year-over-year to $21.4 billion, a touch better than consensus expectations. Earnings per share surged 20% year-over-year to $0.98, several cents better than consensus estimates. Pre-tax pre-provision profit increased 3%, to $9.1 billion. Return on equity advanced 116 basis points year-over-year to 14%. Capital levels … Read more

RadioShack: Cigar Butt, Valuentum Won’t Puff

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Famed investor Benjamin Graham, author of Security Analysis and the Intelligent Investor, made a fortune out of what he liked to call “cigar butts.” These stocks were often poor operating businesses selling for less than liquidation value. Graham would purchase said stocks with the hope that there was one last “puff” of profit left. Not all of them worked out positively, but Graham would bet on dozens of stocks trading at less than book value and hope for the best. RadioShack (click ticker for report: ) looks like a cigar butt. The firm’s core operating business is rapidly deteriorating, the firm is generating negative free cash flow, and recent rumors suggest the company is hiring advisors to help shore up … Read more

Market Overreacts to Heat Damage on Boeing’s 787 at Heathrow

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Boeing’s (click ticker for report: ) shares tumbled a few percentage points Friday after reports of a fire in the upper part of the rear fuselage of one of Ethiopian Airlines’ 787 Dreamliners that was parked on the tarmac at London Heathrow Airport. Preliminary results of the investigation reveal that the fire (heat damage) was not caused by the plane’s lithium-ion battery (location of batteries shown here), which had been the trigger of previous fire-related incidents on the aircraft. Interestingly, the plane had been parked for as many as eight hours and was unoccupied, leaving the cause of the blaze unidentified (unwitnessed) and somewhat peculiar. We expect the aft fuselage on this 787 to be a total loss, given our assessment … Read more

Valero Will Miss Big in the Second Quarter

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Refiner Valero (click ticker for report: ) preannounced weak second-quarter results Thursday afternoon. Including a $0.05 per share charge for spinoff-related expenses and other charges related to environmental and legal matters, the company plans to earn between $0.80 and $0.90 per share during the second quarter of 2013, nowhere near the consensus estimate calling for earnings of $1.27 per share and well short of last year’s $1.50 per share. The firm’s interim-update release was very brief, but Valero blamed “lower discounts for heavy sour crude oil, higher natural gas costs, higher costs to comply with the Renewable Fuels Standard, and turnaround and maintenance activity at the Quebec City, McKee, Meraux, and Port Arthur refineries.” Discounts for heavy sour crude oil … Read more

Firms Increasing Their Dividends During the Week Ending July 12 Included Paychex and Fastenal

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Below we provide a list of firms that upped their dividends for the week ending July 12. 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. Firms Raising Their Dividends This Week ConocoPhillips (COP): now $0.69 per share quarterly dividend, was $0.66. Paychex (PAYX): now $0.35 per share quarterly dividend, was $0.33. Fastenal Company (FAST): now $0.25 per share quarterly dividend, was $0.20. KLA-Tencor (KLAC): now $0.45 per share quarterly dividend, was $0.40. << Last Week’s Dividend Increases Ever wonder why we use the Valuentum Dividend Cushion score as a key component of our dividend analysis? Click here.

What Does a Reorganization Mean for Microsoft?

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Thursday morning, software goliath Microsoft (click ticker for report: ) announced that its long-rumored reorganization plan has been finished, and the details are now available to the public (via an internal email from CEO Steve Ballmer). Some companies seem to go through countless ‘reorgs’ and the actual impact of such changes can often become obfuscated without ample evaluation and monitoring. The new Microsoft will have 4 engineering organizations, included within a total of 12 business functions. First of all, we think the premise of Microsoft’s reorg is spot on. The company is dividing into a dozen teams, but the logic behind the new teams looks sound. Perhaps the most obvious takeaway from the reorg is that individual devices such the … Read more

Weakness at Yum! Extends Beyond China

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Global fast food player Yum! Brands (click ticker for report: ), owner of KFC, Taco Bell, and Pizza Hut, reported weak second quarter results Wednesday afternoon as the Chinese poultry scandal and an outbreak of avian flu weighed on the firm’s sales in China. The company’s revenue fell short of consensus expectations, declining 8% year-over-year to $2.9 billion. Earnings-per-share was even weaker, falling 16% year-over-year to $0.56 per share on an adjusted basis—slightly above consensus estimates. Year-to-date, free cash flow has totaled $257 million or 18% of revenue—a relatively strong number, in our view. The most obvious problem at Yum! Brands remains its China division, specifically KFC. If a tainted poultry scandal weren’t enough, the outbreak of avian flu in … Read more

Family Dollar’s “Upside” Surprise Wasn’t Great

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Off-priced retailer Family Dollar (click ticker for report: ) reported stronger-than-anticipated third quarter results Wednesday morning, led by strong sales of consumables. Revenue at the discount chain increased 9% year-over-year to $2.6 billion, roughly in-line with consensus expectations. Earnings per share actually declined a penny to $1.05, but that figure was better than the consensus estimates which called for a steeper decline. Free cash flow stands at a negative $275 million year-to-date as the company invests heavily in expanding and renovating its store base. The company has engaged in numerous sale-leaseback transactions, so the increase in capital spending has not materially drained the firm’s coffers. Taking a closer look at the numbers, we can see that the quarter was not … Read more

Helen of Troy’s Solid Run Continues

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Consumer products company Helen of Troy (click ticker for report: ) reported strong results for the first quarter of its 2014 fiscal year Tuesday evening. Revenue increased 1.4% year-over-year to $304.5 million, exceeding consensus estimates. Earnings per share advanced at a greater clip, growing 11% year-over-year to $0.82 per share on a non-GAAP basis, easily exceeding consensus expectations. Helen of Troy is one of the few names in the household products arena that trades at a discount to our fair value estimate, and the firm recently scored a rare 9 on the Valuentum Buying Index. On the cost side of the equation, Helen of Troy surrendered to a competitive retail environment, as gross margins declined 90 basis points year-over-year to … Read more

China Exports Suffer in June

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Yet another bearish story came out of China Wednesday morning, this time dealing with negative trade data (shown right). Exports for the month of June dropped 3.1% year-over-year versus a consensus expectation of 4% growth. This compares to anemic 1% growth in May. Imports also fell 0.7% year-over-year compared to a consensus expectation of 8%. Without question, we think it’s safe to say growth slowed in China during May and June. (Image Source: The Wall Street Journal). Though these figures were decidedly bearish regarding the health of economic activity in China, Alcoa (click ticker for report: ) provided bullish commentary on the region just yesterday. In fact, management at Alcoa believes China will drive the lion’s share of global growth … Read more