Brian Nelson

Microsoft Wants to Be the Apple of Your Living Room

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Earlier today, Dividend Growth Newsletter holding Microsoft (click ticker for report: ) finally unveiled its next generation console, the Xbox One. It wasn’t hard to tell that something big was around the corner for the next generation console, as the company had made some new hires including former CBS executive Nancy Tellem to head the firm’s content development initiative. Let’s take a look at the revelations and how it might impact the company. Steven Speilberg produces a Halo TV show As we mentioned earlier, Xbox’s move into exclusive content was not at all a surprise. In fact, we assumed we might hear about an exclusive TV show or movie even earlier. However, we were a little stunned to see legendary … Read more

Best Buy’s Comps Are Soft; Risk/Reward Not Compelling

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After shares nearly flirted with $10 in December, electronics retailer Best Buy (click ticker for report: ) has seen its stock more than double thanks to moderating sales declines and a store revamping strategy that displayed great promise. However, Best Buy’s first quarter fell short of consensus expectations as the Street got a bit ahead of itself in gauging the velocity of the turnaround. Revenue declined 10% year-over-year to $9.3 billion, which was well below consensus estimates. Adjusted earnings per share fell 58% compared to the prior year to $0.32 per share, which was a touch better than consensus expectations. Free cash flow swung to negative $179 million for the quarter, reflecting the firm’s inability to earn net income more … Read more

Dividend Growth Gem Medtronic Is a Cash Cow

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Dividend Growth Newsletter holding Medtronic (click ticker for report: ) reported wonderful fourth quarter results. Revenue grew 4% on a reported basis (5% ex-currency) to $4.5 billion, easily exceeding consensus estimates. Earnings per share, excluding the impact of restructuring, were 11% higher than a year ago at $1.10 per share, largely exceeding consensus expectations. Free cash flow for the full-year was terrific, registering $4.4 billion. Spinal therapies have been a source of weakness in prior quarters, but revenue came in flat for the quarter, helping the firm’s regenerative therapies group increase sales 4% year-over-year for the quarter to $2.1 billion. Though the sales decline in spinal therapies moderated, the company posted 11% growth in its surgical technologies business, which continues … Read more

Housing Recovery Powers Home Depot

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Home improvement giant Home Depot (click ticker for report: ) kicked off fiscal year 2013 with a strong start. Revenue rose 7% year-over-year to $19.1 billion, soaring past consensus expectations. Earnings also easily exceeded consensus estimates, growing 22% year-over-year to $0.83 per share. Free cash flow improved 7% compared to the prior year period to $2.4 billion. In spite of facing a difficult weather comparison, same-store sales were 4.3% higher on a comparable basis, with US same-store sales up 4.8%. The company received some benefit from ongoing demand from rebuilding efforts resulting from Hurricane Sandy, but we believe the broad based strength underscores the resiliency of the housing market in the US. Also helping to boost results was a shift … Read more

Campbell Soup’s Solid Results Continue

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Packaged food and beverage company Campbell Soup (click ticker for report: ) reported solid third quarter results Monday morning. Revenue, boosted by the acquisition of Bolthouse Farms, grew 15% year-over-year to $2.1 billion, modestly exceeding consensus estimates. Earnings per share were also a touch better than consensus expectations, increasing 11% year-over-year to $0.62 on an adjusted basis. Free cash flow year-to-date totaled $659 million, which is roughly equal to the tally during the same period a year ago. For a company in a mostly mature business, Campbell posted solid results in its US Simple Meals segment, where sales rose 11% year-over-year to $627 million. Of all things to drive the growth, it was soup, which posted a 14% jump in … Read more

National Oilwell Varco Doubles Its Dividend

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Drilling component and equipment provider National Oilwell Varco (click ticker for report: ) announced that it will double its quarterly dividend to $0.26 per share. Shares yield 1.5% at current levels. We’re not surprised by the raise, as the firm registered excellent dividend growth potential and dividend safety on our scale (click here to learn more about our dividend methodology). We expect robust dividend expansion from National Oilwell Varco going forward.

Yahoo! Buys Tumblr: Instagram or Flickr?

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Former web titan Yahoo! (click ticker for report: ) made headlines this morning after announcing it acquired social media/blog site Tumblr for $1.1 billion, mostly in cash. Even though Tumblr generates little revenue, Facebook (click ticker for report: ) did acquire Instagram for $1 billion (in cash/stock at the time) when the company didn’t post any revenue. Given the amount of venture capital readily flowing into Internet media companies, a valuation that seems ridiculous in any other industry has simply become the going rate in tech (right or wrong). Ultimately, if the present value of the future free cash flows generated by the acquired asset is greater than the price paid for the asset, we’d view an acquisition as value-creative. … Read more

We Don’t Envy Ullman’s Position

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After firing controversial CEO Ron Johnson during the quarter, department store retailer JC Penney (click ticker for report: ) announced weak results yet again. Revenue fell 16% year-over-year to $2.6 billion, falling short of already low consensus expectations. The firm’s loss was also much deeper than consensus estimates, widening to a loss of $1.31 per share on a non-GAAP basis. Free cash flow was substantially worse as the company burned through even more cash than it did in the prior-year period, posting negative free cash flow of $966 million. The main culprit of JC Penney’s weakness seems to have been its change in price strategy. Same-store sales declined 16.6%, which is simply unacceptable for any retailer. The firm brought back … Read more

Let’s Take a Victory Lap: $1,000 Is in the Cards for Google

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During the past six months, shares of Best Ideas Newsletter portfolio holding Google (click ticker for report: ) have performed exceptionally well, increasing over 40% compared to a 22% gain for the NASDAQ over the same time period. Given the tremendous fundamentals of Google’s core search business, continued mobile monetization, and a stable of potentially blockbuster products, we continue to believe shares have upside north of $1,000 per share. The main driver of our fair value estimate remains Google’s advertising business. The core search business saw paid clicks rise 20% year-over-year during the most recent quarter, driving Google Site Revenue 18% higher to $8.6 billion. Demand for online advertising shows no signs of slowing, but perhaps more importantly, Google has … Read more

Don’t Be Fooled by Kohl’s Earnings “Beat”

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Shares of department store chain Kohl’s (click ticker for report: ) surged Thursday after the company reported better than anticipated earnings for its first quarter. Revenue at the retailer fell 1% year-over-year to $4.2 billion as same-store sales declined 1.9%. Earnings per share increased 5% year-over-year to $0.66, exceeding consensus estimates as the share count shrunk. Conversely, free cash flow declined 29% year-over-year to $170 million as the company did not increase its accounts payable as aggressively as it did in the first quarter of the prior year. We suspect some of the optimism surrounding Kohl’s first quarter centers around a slight improvement in gross margins, which increased 50 basis points year-over-year to 36.4%. Management pointed to lower sourcing costs … Read more