Brian Nelson

Republic Posts Mixed Fourth Quarter; Debt Load Should Not Be Taken Lightly

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Garbage hauler Republic Services (click ticker for report: ) reported mixed fourth-quarter results late last week. We’re huge fans of the cash-rich, steady-eddy business models of operators in the waste industry, though we note that Republic continues to work through what we’d describe as a transitional period. Our fair value estimate remains unchanged at this time. Republic’s revenue advanced modestly during the fourth quarter thanks to pricing improvements and fuel-recovery fees offset in part by a modest declines in waste volumes. Adjusted net income and adjusted EBITDA, however, continued to face pressure as labor and maintenance costs advanced considerably from the same period a year ago. Still, the firm’s adjusted EBITDA margins came in at an impressive 26.4%. We think … Read more

LinkedIn Surges on Terrific Revenue Growth

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Online business networking giant LinkedIn (click ticker for report: ) reported fantastic growth for its fourth quarter late last week. Revenue surged 81% year-over-year to $304 million, easily exceeding consensus expectations. Earnings also easily surged past consensus estimates, growing nearly 200% year-over-year to $0.35 per share on an adjusted basis (Image Source: LinkedIn). Strength was broad based, as the firm’s human resources tools drove talent solutions revenue 90% higher on a year-over-year basis, to $161 million. With membership growth strong (up 39% during the year) and the network now having over 200 million users, LinkedIn has become the de facto market place for employers and job hunters alike. As a result, its talent solutions business becomes more valuable literally by … Read more

McDonald’s January Shows Consumers Aren’t Loving It

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Friday morning, fast-food restaurant giant McDonald’s (click ticker for report: ) announced lackluster same-store sales results for the month of January. Global same-store sales fell 1.9%, while total sales increased 0.7% year-over-year. Results showed a fairly significant geographical bias. Same-store sales in the US grew 0.9% year-over-year thanks to the addition of the Grilled Onion Cheddar burger to the dollar menu. Total system-wide sales jumped 1.9% year-over-year, and we think the company will continue to struggle with the competitive landscape in the US. New product innovation such as the Egg Whites McMuffin may boost sales slightly, but we think 2013 could be a struggle. The firm also faces secular headwinds from higher input costs and a shift away from unhealthy … Read more

Valuentum Dividend Cushion Predicts Exelon’s Dividend Cut

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In its fourth-quarter earnings presentation slide deck, Exelon (EXC) announced that it would slash its quarterly dividend payout to $0.31 per share (was $0.525 per share) beginning in the second quarter of 2013 (see image below). Valuentum members were well aware of the risks of the dividend cut long before it became apparent to the market. Our July 2012 dividend report on Exelon revealed a 0.3 Dividend Cushion score, and our October 2012 dividend report revealed a -0.1 Dividend Cushion score. Any Dividend Cushion score below 1 indicates that there is significant risk with respect to the long-term sustainability of a company’s dividend. Our article, Why Dividend Growth Investing Needs to Be Forward Looking, is a must read for income investors. We update … Read more

Why GameStop Looks Like a Value Trap

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At Valuentum, we pride ourselves on a multi-faceted investment methodology, acknowledging that several market-movers view any given investment from different perspectives. That is precisely why we’re staying away from shares of GameStop (click ticker for report: ), which scores poorly on the Valuentum Buying Index (our stock-selection methodology). Let’s take a look at why we don’t like the company. Changing Dynamics of Gaming Culture One of the unique features of the video game market has been the relatively liquid buying and selling of games. Since the days of FuncoLand (which was eventually acquired by GameStop), consumers could purchase and sell games new or used, and the game shops would help facilitate this market. Have a copy of Nintendo’s Super Mario that … Read more

Nothing Can Stop Best Ideas Portfolio Holding Altria

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Best Ideas Newsletter portfolio holding and Dividend Growth Newsletter portfolio holding Altria (click ticker for report: ) announced strong fourth quarter results, reflecting the firm’s resiliency in the face of a secular decline in its core product. Revenue increased 1.8% year-over-year to $6.2 billion, slightly above consensus estimates. Earnings were superb, growing 10% year-over-year to $0.55, excluding certain items (Image Source: Altria). Altria’s share gains at Marlboro drove smokeable products revenue higher during the fourth quarter. The firm’s market share increased one percentage point versus a year ago and was 0.6 percentage points higher by the end of 2012 versus the end of 2011. Such brand strength resulted in revenue expansion (net of excise taxes) of 3.6% to $3.8 billion (up 2.4% to … Read more

Chipotle Surges on…Catering?

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After providing investors with weak preliminary results at the ICR Conference in January, Chipotle (click ticker for report: ) announced final fourth quarter results, which were relatively in line with what we saw a month ago. Revenue grew 17% year-over-year to $699 million, in line with consensus expectations and prior guidance. Earnings per share were a penny below expectations, growing 8% year-over-year to $1.95 per share. Same-store sales for the quarter grew 3.8%, also equal to what the company provided us a month ago. Rising input costs continue to hurt profitability, as the cost of food and beverages was 130 basis points higher at 33.5% of revenue. We think the firm could easily cut costs, but its commitment to high-quality … Read more

Best Idea Portfolio Holding Visa Is Off to a Fantastic Start in 2013

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Best Ideas Newsletter holding Visa (click ticker for report: ) announced stellar results for its fiscal year 2013 first quarter Wednesday afternoon. Revenue jumped 12% year-over-year to $2.8 billion, in line with consensus estimates. Earnings per share, net of a one-time tax benefit of $0.11, increased 22% year-over-year to $1.82 per share, a few cents higher than the consensus expected. Other than a litigation charge of $4.4 billion that the firm had to pay out during the first quarter, new CEO Charlie Scharf’s first quarter on the job went off without a hitch. Payments volume increased across all geographies, growing 3% year-over-year in the US to $544 billion, 13% (excluding currency) in Asia-Pacific to $313 billion, and 37% (excluding currency) in Central … Read more

As Anticipated, Emerson Sees Huge First Quarter Gains

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After a modest fiscal year 2012, Emerson Electric (click ticker for report: ) kicked off fiscal year 2013 with a solid first quarter. Revenue for the quarter ticked up 5% year-over-year to $5.6 billion, modestly higher than consensus estimates. Earnings per share jumped 24% year-over-year to $0.62, reflecting stronger net income and a lower share count (but it still was in line with consensus predictions). Cash flow at Emerson was fantastic, with operating cash flow increasing 66% year-over-year to $554 million, resulting in free cash flow growth of 115% year-over-year to $439 million. Though we wouldn’t expect this breakneck pace to continue through the entire year, increases in cash flow will give the firm more flexibility with respect to capital … Read more

Panera Caps Off 2012 with a Fantastic Fourth Quarter

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Fast casual food seller Panera (click ticker for report: ) announced solid fourth quarter results to cap off an excellent 2012 Tuesday after the market close. Revenue jumped 15% year-over-year to $572 million, roughly in line with consensus expectations. Earnings growth was also strong, with earnings per share increasing 34% year-over-year to $1.75 per share, exceeding consensus expectations. This caps off a year in which sales at Panera jumped 17% and earnings per share increased 29%. Major metrics at Panera were incredibly positive during the fourth quarter. Company-owned same-store sales increased 5.1% year-over-year, though 5.4 percentage points of the increase was a result of higher average checks as traffic declined 0.3 percentage points year-over-year. Although we’re never happy to see traffic declining, we’re not … Read more