Brian Nelson

Delays from Asia Pressure Earnings at Potash

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Agricultural nutrient provider Potash (click ticker for report: ) announced relatively weak fourth quarter results Thursday morning. Revenue tumbled 12% year-over-year to $1.6 billion, falling below consensus estimates. Earnings also missed the mark, dropping 38% year-over-year to $0.48 per share. Company-wide gross margins sank 1,200 basis points year-over-year to 35.7% Potash, generally the company’s namesake nutrient, was weak everywhere outside of North America. Total potash volumes declined 17% year-over-year to 1.3 million tonnes, even though North American volumes were 39% above the comparable period of 2011. Going into 2013, management thinks demand for potash will remain strong in North America, mentioning on the conference call: “In North America, dry conditions persist in certain areas, but many of our customers say; … Read more

US Housing Recovery Has Yet to Hit Whirlpool

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Appliance maker Whirlpool (click ticker for report: ) reported strong fourth quarter earnings Thursday morning. Improving operating margins helped drive earnings growth of well over 600% to $2.29 per share on an adjusted basis, easily exceeding expectations. Revenue fell 2% on a reported basis, to $4.8 billion, but was up 2% in constant currency. Perhaps the most impressive part of Whirlpool’s results (shown below) was that the firm significantly expanded operating margins (profitability), despite the weakness in its largest market, North America. Sales fell 3% year-over-year to $2.5 billion. However, ongoing business operating margins more than doubled to 9.3%, and the firm saw a total profitability increase of 121% (please see image below). The firm has lowered its cost structure to the … Read more

Qualcomm’s First Quarter was Fantastic

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Chipmaker Qualcomm (click ticker for report: ) posted a fantastic first quarter, continuing its momentum from fiscal year 2012 into 2013. Revenue surged 28% year-over-year to $6 billion, easily exceeding the consensus estimate. Non-GAAP earnings were also better than the consensus anticipated, growing 30% year-over-year to $1.26 per share (Image Source: QCOM Earnings Presentation). If there’s any beneficiary of the smartphone revolution, it is most certainly Qualcomm. Aside from perhaps the phone carriers themselves, Qualcomm is the most OEM agnostic way to play massive smartphone growth. As the above chart shows, average selling prices continue to grow, and shipments look to exceed 1 billion units in Qualcomm’s 2013 fiscal year (shown above). While there’s no doubt Qualcomm benefited from spectacular … Read more

ConocoPhillips Posts Decent Fourth Quarter Results

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Oil giant ConocoPhillips (click ticker for report: ) reported decent fourth quarter results Wednesday night. Earnings, adjusted for certain items and to reflect the divestiture of Phillips 66 (click ticker for report: ), declined 8% year-over-year to $1.43 per share, which was a penny better than the Street expected. Production was up modestly compared to the same period a year ago, growing 1.8% to 1,607 MBOE (MBOE = one thousand barrels of oil equivalents), with production hitting record numbers in the Eagle Ford and Bakken shales. The firm also had solid growth in reserve replacements, which totaled 156% for the year at 8.6 million BOE. The majority of reserves came from oil sands in Canada, as well as increased provable … Read more

Facebook’s Mobile Ads Remain Strong

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Social networking giant Facebook (click ticker for report: ) announced solid fourth-quarter earnings Thursday afternoon. Revenue surged 40% year-over-year to $1.6 billion, easily exceeding consensus expectations. Earnings were also better than anticipated, jumping 13% year-over-year to $0.17 per share. Advertising revenues grew 41% year-over-year to $1.3 billion, driven mostly by mobile. Payments revenue increased 8% sequentially, but was flat year-over-year when adjusted for accounting changes. We believe this segment will be less material to the firm’s overall revenue mix going forward, so we aren’t too worried about this segment’s performance. The real story of the quarter was mobile (shown below). Mobile monthly average users (MAUs) surged 57% year over year and 13% sequentially—and the daily active users (DAU) for mobile … Read more

Refining Stocks Are Shaping Up to Have a Strong 2013

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A number of refiners recently reported strong results in their respective fourth quarters. We had been watching the group’s tremendous performance via Phillips 66 (PSX), a holding in our Dividend Growth portfolio, but let’s dig into the firm’s peers to highlight a few industry trends. Valero On Tuesday, Valero (click ticker for report: ) announced a “blowout” fourth quarter, with earnings growing to $1.82 from $0.08 per share, trouncing the consensus estimate. Revenue was roughly flat, so what drove such substantial earnings growth? CEO Bill Klesse said it best: “Also in the fourth quarter of 2012, we replaced all imported light foreign crude oils with cheaper domestic crude oils at our Gulf Coast and Memphis refineries. Since we expect U.S. … Read more

Boeing’s Fourth Quarter Supports Our Thesis on Aerospace

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On Wednesday, aerospace giant Boeing (click ticker for report: ) reported strong fourth-quarter results. We’re holding steady with our fair value estimate, despite the constant flow of negative news about the 787 Dreamliner. Boeing’s total revenue advanced 14% in the period, though modest operating margin contraction led to a slightly lower pace of core operating earnings growth, which came in at 9% (on a non-GAAP basis). Operating cash flow surged 42% as the company continues to better handle inventories related to the 787 Dreamliner. However, the firm’s revolutionary plane currently remains grounded due to a series of battery problems, and its decision not to slow production could begin to pressure cash flow again to a degree. Still, we remain confident … Read more

Dividend Growth Portfolio Holding Phillips 66 Caps Off 2012 with an Outstanding Fourth Quarter

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Dividend Growth Newsletter portfolio holding Phillips 66 (click ticker for report: ) announced another fantastic quarter Wednesday morning. The company has been one of the biggest winners in the portfolio of our Dividend Growth Newsletter. We expect to update our dividend report on the firm soon. Adjusted earnings per share jumped over 240% year-over-year to $2.06, smashing consensus estimates. Earnings for the year jumped 50% to $8.46, highlighting the considerable operating leverage inherent to the refinery business. Shares are now up over 90% since being spun off from ConocoPhillips (click ticker for report: ) in 2012. Cash flow generation was superb, as the firm raked in $1.3 billion in operating cash flow. $1 billion was used to reduce debt, leaving the … Read more

Amazon Reports Strong Sales Growth

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Online retail kingpin Amazon (click ticker for report: ) reported strong sales growth during its fourth quarter. Revenue jumped 22% year-over-year to $21.3 billion, slightly below expectations, but still strong. Earnings, as is the norm for Amazon, missed the mark, falling nearly 50% year-over-year to $0.21 per share. Although classic value investors and growth investors alike remain baffled by Amazon’s current price-to-earnings multiple (the firm posted a net loss for 2012), we do not think multiple analysis really tells the story at Amazon. Nor does near-term free cash flow, which was 81% lower on 7% higher operating cash flow during the period. Amazon is investing for the future, and given its current sales pace, we think the market is pricing in a dramatic rise in … Read more

Pfizer and Eli Lilly Report Strong Performance; Drug Pipelines Continue to Advance

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Pfizer (click ticker for report: ) and Eli Lilly (click ticker for report: ) reported their respective fourth-quarter results Tuesday, and we were pleased with the performance. Pfizer’s $15.1 billion in revenue (down 7%) and $0.47 in adjusted earnings per share (down 4%) topped estimates, while Eli Lilly’s $5.96 billion in revenue (down 1%) and $0.85 in earnings per share (down 2%) also surprised the Street to the upside. Both companies are dealing with patent expiration on blockbuster drugs—Pfizer’s cholesterol-fighter Lipitor and Lilly’s schizophrenia drug Zyprexa. Pfizer expects to stem the losses from Lipitor with new drugs such as Xeljanz for rheumatoid arthritis and Eliquis, an anti-clotting drug that helps prevent stroke and systemic embolism in patients with nonvalvular atrial … Read more