Brian Nelson

Oracle’s Third Quarter Wasn’t That Bad

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Enterprise software giant Oracle (click ticker for report: ) announced results for the third quarter of its 2013 fiscal year. Revenue fell 1% year-over-year to $9 billion, falling short of consensus estimates. Earnings per share rose 5% year-over-year to $0.65, just a penny shy of consensus expectations. Given the amount of noise in sales and earnings per share, our favorite metric to evaluate is free cash flow, which remained fantastic at $9.2 billion year-to-date. Oracle’s cash balance now sits at $34.2 billion, giving the company tremendous flexibility to make acquisitions or return cash shareholders. The firm’s non-GAAP operating margin totaled 47%, an increase of 17 basis points compared to the same period a year ago. On the segment side, Oracle … Read more

Adobe Kicks Off 2013 With a Solid First Quarter

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Software developer Adobe (click ticker for reported: ) kicked off its 2013 fiscal year with solid first quarter results driven by strong Creative Cloud membership growth. Revenue declined 4% year-over-year to $1 billion, which was expected as the company transitions to a subscription model. Revenue marginally exceeded consensus estimates. Earnings per share fell nearly 40% to $0.35 on a non-GAAP basis, a few cents above consensus expectations. Like revenue, net income was expected to fall, but we are a bit disappointed by $0.17 per share in stock-based compensation. More important for tech companies like Adobe is free cash flow, which was strong at $261 million and essentially equal to the year-ago period. We remain impressed by the company’s ability to … Read more

The E-Commerce War Between eBay and Amazon Heats Up

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In order to help drive more sellers on to its platform, Best Ideas Newsletter holding eBay (click ticker for report: ) announced new, less complicated fee structures. The firm already charged lower fees than Amazon (click ticker for report: ), but the new structure gives greater transparency to sellers. The move is very positive, in our view, as we think it can help drive a stronger network of fixed price sellers to eBay. After becoming associated with auctions since its inception, eBay is in the process of becoming a destination for buyers of everything, much like Amazon has done successfully over the past several years. While Amazon may look slightly more attractive in the near-term because more buyers are on … Read more

DSW’s Fall Doesn’t Provide an Entry Point

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Footwear and accessories discounter DSW (click ticker for report: ) announced solid fourth quarter results Tuesday morning. Revenue jumped 16% year-over-year to $594 million, just a touch shy of consensus estimates. Earnings also fell short of consensus estimates, growing 35% year-over-year to $0.69 per share. Like we’ve seen from other retailers during the fourth quarter, guidance stole the show. For the first 6 weeks of its 2013 fiscal year, DSW’s same-store sales have declined 5% with weakness spread equally across geographies and categories. Naturally, weather took some of the blame, since the 2013 winter has been substantially colder than 2012. Management tried to avoid blaming the weather, but failed, saying on the conference call: “…we haven’t had enough good weather … Read more

The Quick-Serve Restaurant Space Could Be Poised for a Rebound

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Wendy’s Every time we look at the restaurant space, we are surprised to see at how small Wendy’s (click ticker for report: ) market capitalization is. Shares have been stuck in neutral for the past year, even though we think the company is in a much better competitive position. Unlike McDonald’s (click ticker for report: ), which has distinctly made itself the preeminent value chain, Wendy’s has mostly held the line on pricing. Wendy’s “Right Price, Right Size” menu has helped, but overall the company has lost traffic. If economic conditions improve, we think Wendy’s could be a beneficiary versus its peers because it has maintained its quality reputation. While the levels of price differences in the burger space (Wendy’s/McDonald’s/Burger … Read more

A Dish/DirecTV Merger Would Be Golden

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After a potential acquisition target of DirecTV (click ticker for report: ) was taken off the market, chatter of a DirecTV-Dish Network (click ticker for report: ) merger has escalated. The big obstacle, in our view, would be anti-trust hurdles, and given recent trends in US anti-trust regulation, that could be difficult to defeat. However, let’s take a look at what could happen if regulators allow it. Increased Leverage Over Content Creators One of the consistent themes we’ve been hitting on over the past year in the media space has been the rising cost of content. Netflix (click ticker for report: ), Coinstar (click ticker for report: ), Amazon (click ticker for report: ), Hulu, cable, and satellite are all … Read more

EDAC Tech Offered $17.75 Per Share To Go Private

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Shares of Best Ideas Newsletter holding EDAC (click ticker for report: ) are hitting a new all-time high after the firm entered into a merger agreement with Greenbriar Equity Group. Details of the deal can be found here. We’re a little surprised by the deal, especially since the future outlook continues to look wonderful. However, management and the Board of Directors readily tendered its 18.2% of the company, so perhaps the $17.75 per share bid, which is in-line with the low-end of our fair value range, exceeded the level of share appreciation the firm thought possible in the near-term. The terms of this deal also beg the question of whether EDAC’s recent share price surge was composed of Greenbriar building … Read more

Intuitive Surgical’s Shares Are Slumping Today

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Shares of Best Ideas Newsletter holding Intuitive Surgical (click ticker for report: ) are experiencing some relative weakness today after negative commentary from the American Congress of OB/GYN’s president questioned the cost effectiveness of robotic surgery. To read more, please click here. We identified this as the major risk for the company going forward, and we’ll be keeping a tight leash on the position going forward. Momentum is working against the company at this time, and the fundamental position could deteriorate. Still, we like the long-term trend at work for robotic surgery, even if there are some near-term headwinds.

Firms Raising Their Dividends In The Week Ending March 15

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We saw a number of firms raise their dividends during the week ending March 15. To access our dividend reports, please click here. Firms Raising Their Dividends This Week: Alexandria Real Estate Equities (ARE): now $0.60 per share quarterly dividend, was $0.56. Avago Technologies (AVGO): now $0.19 per share quarterly dividend, was $0.17. Capital One Financial (COF): now $0.30 per share quarterly dividend, was $0.05. CapLease (LSE): now $0.0775 per share quarterly dividend, was $0.075. Capstead Mortgage Corporation (CMO): now $0.31 per share quarterly dividend, was $0.30. Cohen & Steers (CNS): now $0.20 per share quarterly dividend, was $0.18. Discover Financial Services (DFS): now $0.20 per share quarterly dividend, was $0.14. Equity LifeStyle (ELS): now $0.50 per share quarterly dividend, was $0.4375. … Read more

Ulta’s Fall Is Justified

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Cosmetics retailer Ulta (click ticker for report: ) reported better than anticipated fourth-quarter results Thursday that were overshadowed by the company’s light guidance. Revenue growth remained stellar, growing 30% year-over-year to $759 million, exceeding consensus estimates. Earnings were also stronger than the consensus anticipated, growing 30% year-over-year to $0.95 per share (excluding the impact of the extra week). Same-store sales jumped 8% during the fourth quarter (on top of a same-store sales gain of 11.5% in 2011), suggesting how strong the momentum in the underlying business is. After its CEO mysteriously resigned to join Michael’s Arts and Crafts in February, the stock has been under pressure, and investors have been looking for any signs of weakness to dump shares. The most … Read more