Brian Nelson

Microsoft’s Balance Sheet and Cash Flow Generation Make It a Strong Consideration

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Image: Microsoft’s cloud business continues to showcase strong growth momentum. By Brian Nelson, CFA On April 25, Microsoft (MSFT) reported fantastic third-quarter results for fiscal 2024 that showed continued fundamental momentum at the tech giant. Revenue increased 17% in the quarter, while operating income surged 23%. Both net income and diluted earnings per share advanced 20% in the quarter on a year-over-year basis. The big standout in the quarter was Azure and other cloud services revenue, which increased a better-than-expected 31% in the period. Management spoke to continued opportunities in artificial intelligence [AI] and cloud revenue: Microsoft Copilot and Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry. This quarter … Read more

We Remain Fans of Honeywell’s Shares

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Image: Honeywell’s shares have traded sideways for some time, but we still remain fans of its stock. By Brian Nelson, CFA On April 25, Honeywell (HON) reported better-than-expected first quarter results. The company’s reported and organic sales increased 3% thanks to strength in ‘Aerospace Technologies’ and ‘Energy and Sustainability Solutions,’ while its operating margin advanced 130 basis points, to 20.4%. Its segment margin expanded 20 basis points, to 22.2%, as its ‘Aerospace Technologies’ division performed well. On an adjusted basis, earnings per share in the quarter came in at $2.25, which was above the high end of its previously released guidance. Honeywell ended the quarter with $32 billion in backlog, a tally that is up 6% on a year-over-year basis. … Read more

Altria Reaffirms Full Year 2024 Earnings Outlook

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Image: Shares of Altria have faced pressure during the past couple years, but its dividend yield is too hard to pass up, in our view. By Brian Nelson, CFA On April 25, Altria (MO) reported mixed first-quarter results. Net revenue fell 2.5% as a result of weak performance across its smokeable products segment, which was only partially mitigated by expansion in its oral tobacco products segment. Adjusted diluted earnings per share fell 2.5%, to $1.15 per share, which was in-line with expectations. Shipment volume of NJOY consumables was 10.9 million units, while shipment volume of NJOY devices was 1.0 million units. Management had the following to say in its update in the quarterly release: We made meaningful progress in pursuit … Read more

Chipotle’s Same Restaurant Sales Growth Continues to Shine

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Image Source: Valuentum By Brian Nelson, CFA On April 24, Chipotle (CMG) reported excellent first-quarter 2024 results. Total revenue increased 14.1% thanks to comparable restaurant sales growth of 7%, higher transactions and an increase in the average check. Its operating margin came in at 16.3%, which was a nice bump from the 15.5% from last year’s quarter. Chipotle’s restaurant level operating margin also improved nicely by 190 basis points, to 27.5%. Adjusted diluted earnings per share came in at $13.37, which was an increase from the $10.50 mark it achieved in the same period a year ago. During the quarter, it opened 47 new restaurants with 43 of them including a Chipotlane drive thru. Management had the following to say about … Read more

Visa Benefiting from “Stable Consumer Spending”

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By Brian Nelson, CFA On April 23, Visa (V) reported fantastic second-quarter results for its fiscal 2024. Both net revenue and GAAP net income increased 10%, while GAAP earnings per share advanced 12%. On a non-GAAP basis, net income advanced 17%, while earnings per share leapt 20%. Payments volume increased 8% in its fiscal second quarter, while total cross-border volume increased 16% on a constant-dollar basis and processed transactions advanced 11%. We liked the quarter and commentary from management:  Visa delivered strong results in the second quarter, with net revenue up 10%, GAAP EPS up 12%, and non-GAAP EPS up 20%. Overall payments volume grew 8% and cross-border volume grew 16%, driven by stable consumer spending. As we head into … Read more

Lackluster Electric Vehicle Adoption Rates Impacting Tesla

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Image Source: Tesla By Brian Nelson, CFA On April 23, Tesla (TSLA) reported lower-than-expected first-quarter 2024 results as reduced vehicle prices weighed on performance. Total automotive revenues fell 13% on a year-over-year basis, while total revenues, in aggregate, fell 9%. Its total gross profit fell 18%, while income from operations dropped by more than half. The first quarter was negatively impacted by the Red Sea conflict and an arson attack at Gigafactory Berlin. Management summed up the quarter with the following: Global EV sales continue to be under pressure as many carmakers prioritize hybrids over EVs. While positive for our regulatory credits business, we prefer the industry to continue pushing EV adoption, which is in-line with our mission. To support … Read more

Philip Morris Targeting Strong Adjusted Diluted EPS Growth

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Image: Philip Morris’ stock has traded sideways for more than a year now. By Brian Nelson, CFA On April 23, Philip Morris (PM) reported solid first-quarter results that beat expectations on both the top and bottom lines. Net revenues increased 9.7% in the first quarter, while operating income advanced 11.5%. The company’s adjusted operating income increased 11.3% thanks to a 0.9 percentage point increase in its adjusted operating income margin, to 38.2%. Adjusted diluted earnings per share grew to $1.70, up 23.2% excluding currency. The company continues to work toward becoming a smoke-free company, with its smoke-free business now accounting for roughly 39% of its total net revenues. Management had the following to say about the quarter: The strength of … Read more

PepsiCo Has Raised Dividends in Each of the Past 50+ Years

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Image: Pepsi’s shares continue to be choppy, but we like its consecutive annual dividend growth streak. By Brian Nelson, CFA On April 23, PepsiCo (PEP) reported solid first-quarter 2024 results that showed a beat on both the top and bottom lines. On an organic basis, revenue grew 2.7% on a year-over-year basis, while core earnings per share of $1.61 beat the consensus number. Core constant currency earnings per share growth was 7% in the period. Management had a lot to say about the quarter and outlook in the press release: During the first quarter, our businesses remained agile and performed well, with a strong performance from our International business. We delivered a sequential improvement in our volume trends, and year-over-year … Read more

Lockheed Martin’s Robust Backlog Speaks of Sustainable Strength

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Image: Shares of Lockheed have been choppy, but its fundamentals remain strong. By Brian Nelson, CFA On April 23, Lockheed Martin (LMT) reported better-than-expected first quarter 2024 results. Revenue advanced ~13.7% in the quarter on a year-over-year basis, while net earnings in the first quarter came in at $1.5 billion, or $6.39 per share, versus the $1.7 billion mark, or $6.61 per share, it put up in the first quarter of 2023. Cash from operations advanced to ~$1.64 billion, up from $1.56 billion in the year-ago quarter, but higher capital spending drove free cash flow slightly lower in the first period of 2024 than what it achieved in last year’s quarter. Management had a lot to say about the quarterly … Read more

Verizon Is a Cash-Generating Machine But Its Debt Load Is Worth Watching

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Image Source: Verizon By Brian Nelson, CFA On April 22, Verizon (VZ) reported mixed first-quarter results. During the period, total operating revenue grew a modest 0.2% thanks in part to pricing actions, to $33 billion, while consolidated net income fell to $4.7 billion from $5 billion in the year-ago period. Adjusted earnings per share came in at $1.15, which compares to $1.20 in last year’s quarter. However, consolidated adjusted EBITDA came in at $12.1 billion, which was up from the $11.9 billion mark it registered in the year-ago period. Total wireless service revenue increased 3.3% thanks in part to pricing actions and a higher mix of premium pricing plans, while total broadband net additions totaled 389,000, revealing continued momentum in … Read more