Brian Nelson

Menu Innovation Helps Drive Strong Growth at Starbucks

by

Coffee retailer Starbucks (click ticker for report: ) reported solid results for the first quarter of its 2013 fiscal year. Sales surged 11% year-over-year to $3.8 billion, roughly in-line with consensus estimates. Earnings were also solid, growing 14% year-over-year to $0.57 per share, also equal to the consensus expectations. Although most food and beverage retailers are looking to grow internationally, Starbucks posted great results in its Americas segment, where revenue jumped 10% on same-store sales growth of 7%. At the firm’s annual meeting, it explained the need to open more locations in the US, and strong results suggest management is correct. The firm’s operating margin declined 50 basis points year-over-year to 20.8% due to litigation and Hurricane Sandy, though we … Read more

3M Delivers Fantastic Fourth Quarter; Feels Optimistic About China

by

On Thursday, 3M (click ticker for report: ) reported fantastic fourth-quarter results that showed significant improvement from relatively disappointing third-quarter performance, released in October. The firm’s sales during the quarter expanded 4.2% (its best in 2012), to $7.4 billion, an all-time fourth-quarter record. Organic sales increased at a slightly faster pace thanks to solid performance in its consumer/office, display/graphics, and healthcare segments, where organic local-currency sales growth came in at 8.7%, 8.3% and 5.9%, respectively. Only its safety, security, and protection services segment declined organically. Revenue in the US jumped more than 5%, while sales generated from Europe, Middle East, and Africa (EMEA) fell a modest 1%–not bad considering the negative news flow from the Eurozone. And most importantly, China … Read more

Making Another Call on Precision Castparts; Raising Our Fair Value Estimate Materially

by

Best Ideas Newsletter portfolio holding Precision Castparts (click ticker for report: ) reported solid fiscal third-quarter results Thursday that showed strong top-line and operating-income expansion and left us feeling quite optimistic about its recently-announced acquisition of Titanium Metals (TIE). We’re raising our fair value estimate for Precision Castparts to $246 per share (was $200) on the basis of better future margin forecasts associated with the deal. The metal-bender’s sales advanced 13% from the year-ago period, while consolidated segment operating income jumped at the same pace. Though the firm’s 25.5% operating margin was flat from the year-ago quarter, the most recently-reported period included $18 million in higher corporate and financing expense from its acquisitive activity. For investors in micro-cap peer (and … Read more

AT&T Sells Just a Couple of iPhones…8.6 Million!

by

Wireless carrier and cable provider AT&T (click ticker for report: ) announced satisfactory fourth-quarter results Thursday afternoon. Revenue grew just 0.2% year-over-year to $32.6 billion, which was stronger than the consensus had anticipated. Earnings, adjusted for significant expenses, jumped 10% year-over-year to $0.44 per share, slightly below consensus expectations. Perhaps the most significant read-through from the quarter came from AT&T’s iPhone (click ticker for report: ) activations. The company activated approximately 10.2 million smartphones during the fourth quarter. Out of those 10.2 million phones, 8.6 million were iPhones, or 84.3% of total smartphones. The activations might suggest the iPhone is gaining popularity in the US. Contrary to the mainstream spin, Apple is doing quite well in the smartphone space. Solid … Read more

P&G Delivers Fantastic Results

by

After sputtering along for the past few years, consumer product giant Procter & Gamble (click ticker for report: ) has returned to solid growth, reporting strong second-quarter results for its 2013 fiscal year Friday. Revenue rose 3% year-over-year to $22.2 billion, handily beating consensus expectations. Earnings growth was also fantastic, with core earnings per share jumping 12% compared to the year-ago period to $1.22, a stark advance from its prior lackluster growth (Image Source: P&G Earnings Presentation). The firm’s gross margin in the quarter expanded 80 basis points year-over-year to 50.9% as the company benefits from relatively flat cost inflation and incremental price increases. SG&A grew about 2% year-over-year, but the cost item remained flat as a percentage of sales. … Read more

Microsoft Remains a Terrific Company

by

Dividend Growth Newsletter portfolio holding Microsoft (click ticker for report: ) reported solid second-quarter fiscal 2013 results Thursday afternoon. Revenue jumped 3% year-over-year (5% non-GAAP) to $21.5 billion, roughly in line with consensus figures. Earnings per share declined 3% year-over-year (+4% non-GAAP) to $0.76 per share, a penny better than the consensus estimate. The performance from the Windows Division was relatively strong, in our view. 60 million Windows 8 licenses sold is a pretty solid number (as the image below shows), though we think the company (and the industry) would have liked to see the new operating system perform better (Image Source: Microsoft 2Q Earnings Presentation). We place a lot of the blame on the OEMs such as Dell (click ticker for … Read more

Tales from the Rails

by

Since rails are heavily tied to weakening coal shipments, there was a great deal of skepticism about the industry’s strength during the back half of 2012. However, we saw evidence (AAR data) that indicated an altering freight mix (auto sales, intermodal, petroleum shipments, crushed stone, gravel and sand) could compensate for coal shipment weakness. Let’s dig into how the group is performing now that fourth-quarter results for a few of them have come in. On Thursday, Union Pacific’s (click ticker for report: ) fourth-quarter report revealed that its performance during the period was solid. Despite the weak coal shipments, revenue grew 3% year-over-year to $5.3 billion, roughly in line with consensus expectations. Earnings were better than anticipated, growing 10% year-over-year, to $2.19 a share. … Read more

Bristol-Myers Squibb Beats Estimates

by

Despite facing a steep patent cliff, pharmaceutical firm Bristol-Myers Squibb (click ticker for report: ) posted decent fourth-quarter results Thursday morning. Revenue declined 23% year-over-year to $4.2 billion, slightly better than the consensus prediction. Operating earnings per share declined 11% year-over-year to $0.47, which was also better than consensus estimates. 2012 was expected to be a tough year for the company, as it had US patents expire on Plavix and Avapro/Avalide, and total sales fell 23% for the quarter. However, strong international growth of 6% allowed the company to achieve 12% revenue expansion, excluding the aforementioned drugs. Costs were also reduced substantially, as the firm cut advertising and product-promotion spending 26% year-over-year to $212 million and slashed SG&A spending 6% … Read more

Revenue Upside at Defense Contractors May Now Be Capped

by

On Thursday, defense contractors Lockheed Martin (click ticker for report: ) and Raytheon (click ticker for report: ) reported mixed fourth-quarter results. Though both ended the year with strong backlogs, we think cautious commentary regarding sequestration risk may put a cap on future revenue upside (relative to expectations). Lockheed Martin’s bottom-line missed the mark during the fourth quarter, but revenue came in slightly better than expected. The defense contractor issued 2013 guidance of $44.5-$46 billion in sales and $8.80-$9.10 in earnings per share, both ranges higher than consensus estimates. The firm ended 2012 with a record backlog of $82.3 billion (implying a book-to-bill ratio of 1.03 for the year), representing roughly 1.75 times expected 2013 revenue (Image Source: LMT 4Q Earnings … Read more

Netflix Surges on Strong Subscriber Growth

by

Wednesday afternoon, DVD rental and video streaming service Netflix (click ticker for report: ) reported much better than anticipated fourth-quarter results. Revenue increased 13% year-over-year to $945 million, easily exceeding consensus expectations. Earnings surprised materially to the upside, coming in at a positive $0.13 per share compared to a projected loss of $0.12. The big shock during the quarter was the sequential acceleration in the streaming business, both internationally and domestically. Domestic subscriber additions during the quarter jumped 77% sequentially, to 2.05 million. Given the breadth and depth of its TV lineup, this shouldn’t be the surprise that it turned out to be. Netflix is quickly becoming a relatively strong substitute for cable due to its incredible amount of content, … Read more