Brian Nelson

More Special Dividends

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As we previously mentioned, special dividends are “in” this holiday season, as a few more firms declared one-time dividends. Louisiana-based bank Teche Holding Company (TSH) announced that it will pay out its regular quarterly dividend of $0.365 per share with an additional payment of the same amount. However, the firm intends to skip its dividend in the first quarter of 2013, and it was careful not to commit to resuming its dividend in the second quarter, though it says it is likely to resume. Teche is a pretty obscure bank with a market capitalization under $100 million, but the situation underscores the uncertainty felt by so many firms at the current juncture. Retailer Stein Mart (SMRT) followed suit, declaring a … Read more

JoS A. Bank Struggles to Maintain Margins

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Wednesday morning, men’s suit retailer JoS A. Bank (click ticker for report: ) reported weaker than expected earnings for its third quarter. Sales increased 11% year-over-year to $233 million, roughly in-line with consensus expectations. Earnings per share fell 13% year-over-year to $0.47, which was worse than expected. In a highly promotional low-end suit environment, the firm had to run several special sales to compete with the likes of Macy’s (click ticker for report: ), which was also quite promotional (and has the advantage of a stable of brand names). Same-store sales increased 4.8%, with online/direct marketing sales up 26% year-over-year, though the company acknowledged November sales trended downward (thanks in part to Sandy). Gross margins tumbled from 62.6% to 57%, … Read more

Special Dividends: A Fantastic Idea…Fiscal Cliff Has Started a Trend

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Throughout 2012, we’ve seen a huge surge in special dividends, with 59 companies in the Russell 3000 declaring special dividends from September to November compared to just 15 during the same period last year. The impetus is obvious: the impending fiscal cliff has left both companies and investors wondering what to do with the mountains of cash sitting on pristine balance sheets and low return prospects. As a result, companies across different sectors are declaring special one-time dividends. Costco (click ticker for report: ) will pay a one-time special dividend of $7 per share (amounting to $3 billion) as a reward to shareholders, while Tyson Foods (click ticker for report: ) declared a special one-time payment of $0.20 per share. … Read more

Green Mountain Posts Strong Revenue Growth

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The much maligned Green Mountain (click ticker for report: ) reported better than anticipated fourth quarter results Tuesday afternoon. Revenue surged 33% year-over-year to $946.7 million, which was better than expected, though boosted by an additional selling week. Earnings, helped by a 3.1 million-share stock-buyback, grew 36% year-over-year to a better-than-expected $0.64 per share, on a non-GAAP basis. One of the firm’s largest concerns, inventories, grew 14% year-over-year, which was much slower than the sales rate. Considering the SEC inquiry into the company’s accounting practices, we’ve been particularly focused on the firm’s financial statements. Accounts payable increased only 5% year-over-year, though we did see meaningful spikes in accrued expenses (up 44% year-over-year) and current income tax payable (up 204% year-over-year). … Read more

Solid Cyber Monday

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According to IBM Digital Analytics, Cyber Monday sales surged 26.6% year-over-year and are expected to total $1.5 billion. These results were consistent with our previous belief that the online channel would continue to become a more important retail destination, though we’re a bit surprised that growth was so strong on one day (since we’ve seen retailers run a variety of sales all week long). Two of the big winners yesterday appear to be Amazon (click ticker for report: ) and eBay (click ticker for report: ), where sales volumes increased 52% and 57%, respectively. Sources cite the percentage of retailers participating in Cyber Monday sales at 97%, or almost every company that sells products on the Internet. It’s not easy to … Read more

Ralcorp Accepts Buyout From ConAgra…Finally

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Early Tuesday morning, ConAgra (click ticker for report: ) announced that it will acquire Ralcorp for $5 billion, or $90 per share in cash, a cool 28.2% premium from yesterday’s closing price. This deal is slightly surprising, given that Ralcorp rebuffed the firm’s previous $94 per share offer in 2011, as it opted to spin-off its Post Cereal (POST) business instead. However, given Post’s share performance, and the $90 per share buyout offer, we think Ralcorp shareholders came out slightly ahead. If we use Ralcorp’s fiscal year 2012 adjusted earnings per share from continuing operations ($2.97), the deal certainly doesn’t look cheap at 30 times this year’s earnings. Even when that figure is adjusted for acquisition-related amortization, the company paid 24 … Read more

Cliffs Natural Resources Dividend Cut on the Horizon

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On Friday, BMO Capital cut its dividend outlook for Cliffs Natural Resources (click ticker for report: ). The iron and coal producer currently yields in excess of 8% at current levels, but we’ve long thought its yield was unsustainable. In our 16-page report on the firm, our investment highlights section includes (see image to the right) that the firm’s dividend doesn’t score very well on the Valuentum Dividend Cushion. We encourage readers that are focused on dividend income to use the Valuentum Dividend Cushion to better safeguard their income portfolio against a potentially devastating dividend cut. Unfortunately, accidental high yielders always seem like a great bargain, but we’ve seen that’s rarely the case. The Valuentum Dividend Cushion has recently predicted cuts at Roundy’s (click … Read more

Who Wins in the Move to Online Retail?

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Over the weekend, turkey took a backseat to consumer spending with respect to the financial markets. According to ShopperTrak, total Black Friday sales dipped 1.8% year-over-year to $11.2 billion; however, online sales jumped 26% year-over-year to over $1 billion (ComScore). Due to the hyper-competiveness of the retail cohort during the holiday season, Black Friday (and Cyber Monday) has become more of an all-week promotional event. We expect online sales to continue be a driver of revenue expansion going forward, and we’ve identified a few names that we think will particularly benefit. Visa/Mastercard Although we prefer Visa (click ticker for report: ) from a valuation and brand strength perspective, it and Mastercard (click ticker for report: ) will be major beneficiaries of the … Read more

Deere Posts Decent Sales Growth, But Profitability Disappoints

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Agricultural equipment giant Deere (click ticker for report: ) reported mixed fourth quarter results Wednesday morning. Revenue increased strongly, growing 14% year-over-year to $9.8 billion, better than consensus estimates. Earnings grew just 8% year-over-year to $1.75 per share, which was well below consensus expectations. Gross margins remained roughly flat, falling just 20 basis points year-over-year to 25.4%. Both research and development costs, as well as SG&A soared during the quarter, jumping 16% and 10%, respectively, and negatively impacting profitability. In fact, when adjusting for healthy share repurchases, net income per share grew only 3% year-over-year. Though it’s probable these investments could yield solid long-term results, we never like to see companies ramp SG&A expenses unless they are able to leverage … Read more

Best Buy’s Performance Continues to Tumble

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Electronics retailer Best Buy (click ticker for report: ) announced weak third quarter results Tuesday morning. Revenue dipped 3.5% year-over-year to $10.8 billion, roughly in-line with consensus estimates. Earnings, adjusted to reflect continuing operations, dropped 94% year-over-year to $0.03 per share, which was worse than consensus expectations. Perhaps the most encouraging parts of the report came from the headline and CEO Hubert Joly’s remarks. The company showed its sense of frankness with the headline, “Best Buy Confirms Significant Decline in Fiscal Third Quarter 2013 earnings.” Further, Joly stated: “In line with trends experienced over the last three years, Best Buy’s third quarter financial performance was clearly unsatisfactory. On November 13, we shared our candid assessment of Best Buy’s situation and … Read more