Brian Nelson

Dividend Growth Portfolio Holding Medtronic Posts Solid Third Quarter

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Dividend Growth Newsletter holding Medtronic (click ticker for report: ) announced solid third quarter results Tuesday morning. Revenue grew 3% (4% excluding currency) year-over-year to $4 billion, roughly in line with consensus estimates. Earnings exceeded consensus expectations by a few cents, growing 11% year-over-year to $0.93 per share on an adjusted basis. International revenue growth outpaced that of the US, growing 5% (7% excluding currency) to $1.9 billion, driven by 20% growth in emerging markets (which now accounts for 12% of revenue). We’re huge fans of this long-term trend, and we believe that growing wealth in emerging markets will provide a powerful tailwind to the core business for years to come. US revenue was roughly flat, but we (once again) … Read more

Michael Kors’ Third Quarter Reveals Strength

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On February 12, fast-growing retailer Michael Kors (KORS) announced spectacular fiscal year 2013 third quarter results. Revenue surged 70% year-over-year to $637 million, exceeding consensus expectations. Earnings were also fantastic, jumping 220% year-over-year to $0.64 per share, considerably above consensus estimates. Strength at the aspirational luxury brand hasn’t slowed yet, with same-store sales jumping 41% year-over-year, even as the company added 66 net new stores—a stark departure from competitor Coach (click ticker for report: ), which has struggled to compete with Michael Kors. Gross margins, while still well below those at Coach, jumped 80 basis points to 60.4%, reflecting the firm’s increase in its store base (as well as fewer discounts and a favorable shift in product mix). Though we … Read more

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