Brian Nelson

Astronics Stuck in Neutral After Profitability Stalls

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Tuesday morning, aerospace supplier Astronics (click ticker for report: ) reported mixed third quarter results. Revenue surged 22% year-over-year to $68.9 million, roughly in-line with consensus estimates. However, earnings were a bit weaker than expected, falling 27% year-over-year to $0.33 per share. Unfortunately, all cost metrics for Astronics ticked up, leading to a 100 basis point year-over-year decline in gross margins to 24.3%, and a 190 basis point increase in SG&A expenses to 13.2% of revenue. Management cited a one-time issue—an increase in warranty reserves—as the main reason for the year-over-year decline. When we back out the number, gross margins were roughly flat. Assuming CEO Peter Gundermann was correct, we don’t view the issue as much of a problem. SG&A, … Read more

Wireless Industry Consolidation Continues

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According to The Wall Street Journal, Sprint (click ticker for report: ) will acquire spectrum and wireless operations from Midwest-provider US Cellular (USM) for approximately $480 million. Sprint will acquire key markets, including Chicago and St. Louis, and the deal includes approximately 585,000 customers. We don’t see any material impact on our fair value estimate for Sprint. The deal isn’t incredibly material for Sprint, but we think it certainly acquired these assets on the cheap. US Cellular has struggled to maintain market share in large markets due to the competition from larger providers with stronger smartphone offerings. We believe giving existing US Cellular customers the option of the iPhone, as well as other high-end Android phones, will help reduce churn. … Read more

Toyota’s North American Success Translates to a Strong Second Quarter

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Global automaker Toyota (click ticker for report: ) reported strong second quarter results Monday morning. Revenues surged 18% year-over-year to ¥5.4 trillion, relatively strong given the considerable weakness in sales to China during September and October. Operating income increased over three-fold to a better-than-expected ¥257.9 billion. The company lapped smaller numbers in the second quarter due to weakness in the supply chain during the first half of fiscal year 2012. Still, Toyota continues to sell more products and outpace competitors, particularly in North America. Operating income in the region jumped 350% year-over-year. Europe remains a smaller portion of the overall business mix than Japan and North America, but we think the company is well positioned to gain market share as … Read more

Berkshire Hathaway’s Headline Looks Great But Operating Earnings Down

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Legendary investor Warren Buffett’s insurance and investment giant Berkshire Hathaway (BRK.A) reported a strong headline number Friday afternoon. Revenue jumped 22% year-over-year to $41 billion, greater than the consensus estimate. Reported earnings surged 72% year-over-year to $3.9 billion, which also exceeded consensus estimates. Buffett’s favorite metric, book value, is up 11.9% year-to-date to $111,718 per Class A share. Operating earnings weren’t quite as strong, dragged down 9% year-over-year to $5.5 billion when excluding non-cash items. Insurance underwriting gains significantly swayed profitability, as Berkshire Reinsurance swung to a $100 million loss from a $1.375 billion profit during the same quarter last year. Geico’s underwriting income nearly tripled, but its $435 million profit was not nearly enough to overcome the weakness from … Read more

Emerson Beats Estimates But the Firm Issues Cautious Guidance

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Dividend growth gem Emerson Electric (click ticker for report: ) reported better than expected earnings for its fiscal fourth quarter Tuesday morning. Adjusted earnings per share jumped 7% year-over-year to $1.11 per share, which was much higher than consensus estimates. Revenue growth remained subdued, ticking up just 2% year-over-year to $6.7 billion. We don’t expect to make a change to our fair value estimate. The firm’s process management segment continues to be a standout component, with sales growing 18% year-over-year on a reported basis (21% ex-currency) to $2.4 billion. Every geographic region performed well, with the US growing 16%, Asia up 24%, and Europe up 11%. Improvements in the supply chain, as well as cost control initiatives, helped operating margins … Read more

Revenue Growth at LinkedIn Remains Strong But Shares Are Expensive

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Business networking leader LinkedIn (click ticker for report: ) reported relatively strong third quarter results last Thursday afternoon. Revenue growth continued its robust path, surging 81% year-over-year to a consensus beating $252 million. Excluding several items, earnings accelerated 267% year-over-year to $0.22 per share—more than double the consensus estimate. Unlike most firms’ non-GAAP items, which exclude “one-time” expenses, LinkedIn’s earnings exclude very real costs like stock-based compensation and amortization of intangible asset acquisitions—perhaps non-cash, but still material, in our view. Regardless, the company’s third quarter results reflected relatively strong performance. Talent (Hiring) Solutions revenue increased 95% year-over-year to $138.4 million. The segment continues to steal market share away the old line of online hiring solutions, including Monster Worldwide (click ticker … Read more

Valuentum’s DCF Valuation Model Template for Individual Investors

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Have you ever wanted to model a company just like a stock analyst? As part of Valuentum’s mission to serve the individual investor, we’ve developed a discounted cash-flow model that you can use to estimate the value of any operating firm that you wish. The model, built by Brian Nelson, who has developed valuation models and has trained hundreds of financial analysts for such large organizations as Morningstar, offers individual investors the opportunity to truly peer into the analytics of this process and learn the in’s and out’s of valuation. What’s more, we’ve made it easy for you. In just 30 minutes of your time, you can build a full income statement, balance sheet, and cash flow statement, including both historical data and your very own forecasts. Plus, you can see … Read more

AIG Beats Estimates; Shares Remain Attractive

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Thursday afternoon, insurance giant AIG (click ticker for report: ) reported it swung to a profit for its third quarter. The company earned after-tax operating income of $1.00 per share, compared to a loss of $1.58 per share during the third quarter of 2011 and consensus estimates of $0.86 per share. Equally impressive, book value increased 10% sequentially to $61.49 per share. However, the US Treasury’s 15.9% stake in the company continues to weigh on the firm’s stock price performance, as the timing of share sales remains uncertain. Regardless, AIG’s operating performance is far more important to the company’s long-term return outlook than US Treasury sales, in our view. Performance, though relatively strong based on headlines numbers, was a mixed … Read more