Brian Nelson

Tiffany Leaps A Low Hurdle

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Aspirational retailer Tiffany (click ticker for report: ) announced better-than-expected results for the first quarter of fiscal year 2014 fiscal year Tuesday morning. Global sales increased 9% year-over-year (13% ex-currency) to $895 million, exceeding consensus estimates. Earnings per share were also better than anticipated after Tiffany tempered first quarter expectations, as earnings were 10% higher year-over-year at $0.70 per share on a non-GAAP basis. While the firm didn’t give out free cash flow during the quarter, it did give full-year free cash flow guidance of $300 million. The company’s previous fears of margin deterioration did come true, as gross margins declined 110 basis points year-over-year to 56.2%. Management cited product mix as the major driver behind the weakness as consumers … Read more

Mortgage REITs Feeling the Pain

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We published our extensive bear thesis on the mortgage REIT industry Monday–‘The Mortgage REIT Business Doesn’t Work…‘–, and when the markets opened for trading Tuesday, the entire mREIT group came under intense selling pressure, with American Capital Agency (AGNC) leading the charge lower. Key moves: American Capital Agency (-4.73%), Annaly (NLY -3.47%), Two Harbors (TWO -2.87%), Anworth (ANH -2.08%), Western Asset (WMC -3.75%), Apollo Residential (AMTG -5.43%), Invesco (IVR -4.22%), MFA Financial (MFA -2.2%). The 10-year Treasury added another 14 basis points today (2.15%), while the 30-year Treasury added 13 basis points (3.31%)–source. The primary driver behind our negative thesis on the mortgage REITs rests on the continuation of higher interest rates, and the eroding of the group’s net asset value via net unrealized losses (negative OCI) … Read more

The Mortgage REIT Business Doesn’t Work…

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Key Takeaways: ·         The good times are over for mortgage REITs. o       Mortgage market dynamics are inherently difficult to predict. o       A flatter yield curve has negatively impacted net interest rate spread income across the entire mortgage REIT universe. We’re already seeing deteriorating gross ROE’s from some of the largest industry constituents. o       The Fed has only caused a marginal tightening in mortgage spreads, and in our view, a marginal widening due to reduced Fed activity (if/when it happens) is perhaps the best-case scenario as it relates to spread income for the group. A continuation of spread tightening is likely the base-case scenario, which is negative for the group. o       Net interest rate spread income and gross ROE’s will only be materially enhanced … Read more

Meet the New Boss; Same as the Old Boss

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Any time a major company completes a management change, a new business strategy or changes in operations tend to follow. After undergoing an aggressive cost-cutting campaign during the past year, Procter & Gamble (click ticker for report: ) CEO and Chairman Bob McDonald seemed secure in his job. Thus, we were shocked to see McDonald announce his retirement, and even more surprised to see that his replacement would be the man he replaced, A.G. Lafley. Other than JC Penney rehiring Mike Ullman, we haven’t seen many companies bring back the old CEO, unless he or she was the founder. Recent examples like Phil Knight, Howard Schulze, Michael Dell, and Steve Jobs were all founders that were passionate about returning their … Read more

Dividend Increases for the Week Ending May 24

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This week was packed with companies raising their cash dividends. Below we provide a list of firms that upped their dividends for the week ending May 24. 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 AAON (AAON): now semi-annual dividend of $0.10 per share, was $0.08. American States Water Company (AWR): now $0.405 per share quarterly dividend, was $0.355. Bristow Group (BRS): now $0.25 per share quarterly dividend, was $0.20. Bunge Limited (BG): now $0.30 per share quarterly dividend, was $0.27. Center Bancorp (CNBC): now $0.075 per share quarterly dividend, was $0.055. Donaldson (DCI): now $0.13 per share … Read more

Could a Merger Be What Saks Needs?

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Retailer Saks (click ticker for report: ) has been stealing headlines over the past week, but it has little to do with the company’s performance. In fact, its first quarter results weren’t great—though bottom line results were in-line with estimates and top line consensus expectations were exceeded. On Tuesday morning, the company posted 5% year-over-year revenue growth on a 5.9% same-store sales growth for total sales of $793 million. Adjusted earnings per share were flat year-over-year at $0.19. Even though sales growth is great to see, the company continues to recycle the excuse that 2013 will be a “transformational” year. In reality, gross margins were flat year-over-year at 44.4%, and pre-tax operating margins actually declined 120 basis points year-over-year to … Read more

HP Generates More Cash As Its Business Shrinks

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Legacy hardware OEM Hewlett Packard (click ticker for report: ) reported strong cash flow for its second quarter Wednesday afternoon even though the business continues to shrink. Revenue declined 10% (9% ex-currency) year-over-year to $27.6 billion, falling short of consensus estimates. Non-GAAP earnings per share declined 11% year-over-year to $0.87, which was actually slightly better than previous guidance as well as consensus expectations. More impressively, operating cash flow was 44% higher compared to the year prior at $3.6 billion, driving free cash flow of $2.8 billion, which the company used to repurchase shares and to boost its quarterly dividend 10% sequentially (to 14.52 cents per share). Image Source: HPQ Although CEO Meg Whitman’s turnaround continues to progress at a solid … Read more

Taking a Look at Retail

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The first quarter earnings season for retail has certainly been a bit of a mixed bag. Two of the largest retailers in the US, Wal-Mart (click ticker for report: ) and Target (click ticker for report: ) reported negative same-store sales revealing cautious spending patterns from American consumers. On the other hand, home improvement giant Home Depot (click ticker for report: ) registered wonderful sales gains as the firm continues to ride the housing recovery. Let’s take a look at the results of some retailers leveraged to discretionary income. Urban Outfitters                                                Urban Outfitters (click ticker for report: ) posted a solid first quarter, even though its revenue was slightly lighter than expected. Revenue rose 14% year-over-year to $648 million, driving … Read more

Boeing Keeps Raking in Aircraft Orders

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Boeing (click ticker for report: ) updated its ‘Orders and Deliveries‘ page on its website this week, and we were pleased to see a nice uptick in orders. We keep a close eye on commercial aircraft orders as the pace remains a key driver of sentiment within the aerospace industry, even though Boeing and Airbus are effectively “sold out” for at least the next 12 months. According to the disclosure, the plane-maker has booked roughly 428 net orders through May 21 of this year, which puts the aerospace giant well on its way to achieving a book-to-bill north of 1 (signaling backlog expansion). Though our positive thesis on the aerospace supply chain–AAR (AIR), Astronics (ATRO), Rockwell Collins (COL), HEICO (HEI), Hexcel Corp (HXL), Precision Castparts (PCP), Spirit AeroSystems (SPR), … Read more