Brian Nelson

GM’s Fourth Quarter Narrowly Misses the Mark

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Automaker General Motors (click ticker for report: ) announced solid fourth quarter results Thursday morning. Revenue rose 3% year-over-year to $39.3 billion, slightly exceeding consensus estimates. Earnings jumped 23% year-over-year to $0.48 (adjusted) per share, slightly below consensus expectations (Image Source: GM). Unlike competitor Ford (click ticker for report: ), GM continues to struggle with respect to profitability in North America. Sales grew 5% year-over-year to $24.2 billion, but operating margins declined 70 basis points to 5.8%, resulting in lower quarterly EBIT on a year-over-year basis. We’re not surprised, and we’ve speculated that the company might be putting too much inventory into dealer channels. GM reconciled the results (shown below), but it’s important to note that in the US, GM … Read more

2012 Was a Tough Year for Rio Tinto But the Future Looks Brighter

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Best Ideas Newsletter holding Rio Tinto (click ticker for report: ) announced full year results for 2012 that were down substantially compared to 2011. Revenue tumbled 16% year-over-year to $50.9 billion, while earnings for the year were negative $1.61 per share, down substantially from earnings of $3.01 per share a year ago. However, most other operating metrics were much more positive, including the company’s decision to boost its dividend 15% to $1.67 per share—an annual yield of 2.9% at current levels. Valuentum subscribers know that Rio’s dividend is in good shape, even though operating results remained challenged (Image Source: RIO). Rio Tinto only swung to a loss due to an asset impairment charge, but underlying earnings and operating cash flow … Read more

Valuentum’s February Edition of Its Best Ideas Newsletter! New Heights Reached!

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New Heights Reached Yet Again, by Brian Nelson, CFA We simply couldn’t wait to share all the good news with you in our weekly recap email (click here) today, so our intro article has been shortened. Our Best Ideas portfolio (see page 8) continues to reach new heights, but we think it is prudent to point out the size of our cash balance (nearly 30% of the portfolio). The Dow Jones is now roughly 200 points from its all-time high, and we’re expecting a near-term market pullback in the coming weeks. The threats of automatic government spending cuts (sequester) set to begin March 1 (and Congressional bickering), the ongoing convergence of S&P 500 firms’ current forward P/E ratio (13.4) to … Read more

Dividend Growth Holding PPL Boosts Dividend

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After Exelon (click ticker for report: ) slashed its dividend (as we predicted), utility investors may be looking for a more stable dividend growth idea, and that is Dividend Growth Newsletter portfolio holding PPL (click ticker for report: ), in our view. PPL posted strong fourth quarter results Thursday morning, with revenue (net of a one-time hedging gain) jumping 6% year-over-year to $3.2 billion, exceeding consensus expectations. Earnings were a few cents better than consensus estimates, falling 31% year-over-year to $0.49 per share on an adjusted basis. Of course, this figure includes the spectacular gain from the prior year’s hedging activities, as well as a higher share count from the firm’s acquisition of the Midlands UK business in 2011. Most … Read more

Cisco’s Strong Performance Continues in the Second Quarter

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After experiencing a revitalization in fiscal year 2012, tech giant Cisco (click ticker for report: ) reported terrific results for its fiscal year 2013 second quarter. Revenue jumped 5% year-over-year to $12.1 billion, slightly better than consensus estimates. Earnings, on a non-GAAP basis, increased 9% year-over-year to $0.51 per share (Image Source: CSCO).   Cisco produced solid revenue growth across most segments, particularly wireless and data centers, which grew 27% and 65%, respectively. After admittedly being behind the curve for the first few years during the shift to wireless, the firm has focused on high-return internal investment and strategic acquisitions to help shift its position in the marketplace. We don’t see mobility slowing down anytime soon, and we anticipate that … Read more

Lorillard Boosts Dividend After Solid 2012

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Strength in the cigarette space continued Wednesday morning when Newport’s parent company Lorillard (click ticker for report: ) reported solid fourth quarter results. Revenue jumped 5% year-over-year to $1.7 billion, smashing consensus estimates. Earnings also easily exceeded consensus expectations, jumping 8% year-over-year to $0.79 per share on an adjusted basis. Unlike competitor Altria (click ticker for report: ), which has focused on smokeless tobacco but not yet leaped into e-cigarettes, Lorillard acquired blu eCigs and has capitalized on the segment’s strong growth. Sales of electronic cigarettes jumped nearly 3-fold quarter-on-quarter thanks to increased distribution (and perceived health benefits compared to traditional cigarettes). We believe Lorillard will continue to scale the business using its existing infrastructure, and 2012 could be the early … Read more

Buffett Fires the Elephant Gun and Acquires Heinz

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After sitting on cash and not making any major acquisitions since Lubrizol, Warren Buffett’s Berkshire Hathaway (BRK.A) teamed up with 3G Capital (former acquirers of Burger King) to purchase Heinz (HNZ) for a whopping $28 billion, or $72.50 per share—a 20% premium to the previous day’s closing price. The two firms will each own 50% of the venture, meaning Berkshire only invested $14 billion, so there’s plenty of cash left for more acquisitions. According to Buffett, 3G will run Heinz, while Berkshire will be an equal partner and finance part of the deal for 3G. Buffett had a fantastic quote to sum up the deal, saying: “I’ve got one word for you: ketchup.” Although organic attacks have come from every … Read more

Higher Wing Prices Hurt Earnings Expansion at Buffalo Wild Wings

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Tuesday morning, Buffalo Wild Wings (click ticker for report: ) announced solid fourth quarter results. Revenue surged 38% year-over-year to $304 million, easily exceeding consensus estimates. Earnings, on the other hand, grew 22% year-over-year to $0.89 per share, falling short of consensus estimates by several cents. Revenue growth at company-owned restaurants totaled 39% year-over-year to $283 million, though same-store sales performance was somewhat modest (up 5.8% compared to the year-ago period). This compared unfavorably to franchise-owned stores, where same-store sales advanced 7.4% versus the fourth quarter of 2011. We think the divergence was a result of franchise-owned restaurants being comparatively younger stores than the more mature company-owned restaurants (we believe performance will eventually converge, however). We are a bit worried … Read more

Valuentum Dividend Cushion Catches Another: Cliffs Natural Resources!

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After we predicted a dividend cut in November 2012, Cliffs Natural Resources (click ticker for report: ) finally cut its dividend after posting poor results for 2012. The firm slashed its quarterly payout 76% to $0.15 per share. Results for Cliffs were actually a bit better than consensus estimates on both the revenue and earnings side. Total revenue declined 4% year-over-year to $1.5 billion, while earnings dipped 59% year-over-year to $0.62 per share (after adjusting for a $1 billion goodwill impairment). Free cash flow for the year was incredibly weak, falling to a negative $613 million, explaining why the dividend needed to be cut. If we only took into account the payout ratio, Cliffs’ adjusted earnings per share of $3.45 … Read more

Comcast Bets Big on NBCUniversal

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Tuesday afternoon, cable provider Comcast (click ticker for report: ) announced that it will acquire the 49% stake of NBCUniversal that it doesn’t already own for $16.7 billion from General Electric (click ticker for report: ). The company will also acquire the famous 30 Rockefeller headquarters in Manhattan and CNBC’s Englewood Cliffs headquarters for $1.4 billion. The deal had long been anticipated to occur in the future, but it appears to have closed earlier because Comcast feared the price might rise. Rarely do deals seem like a “win-win” for both parties, but we like this deal for both Comcast and GE. GE now has largely purged itself of its diverse conglomerate past, leaving it more of an industrials and financials pure-play. … Read more