Brian Nelson

Linn Energy Continues to Capture Cash Flow

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Linn Energy (click ticker for report: ) and newly-formed entity LinnCo (LNCO) reported solid third quarter results Thursday morning. Net of non-cash derivative losses, the firm earned $0.45 per unit during the quarter, up a penny from last year, and significantly higher than consensus estimates. More importantly, the firm achieved $1.01 in distributable cash flow per share, achieving a coverage ratio of 1.40x. Perhaps the most meaningful event during the quarter was the IPO of LinnCo, an entity formed to exclusively own shares of Linn Energy. The one caveat is that LinnCo is a traditional corporation, while Linn Energy receives K-1 tax treatment, which can be a long and convoluted process. As a result, Linn hopes to spur institutional and … Read more

Solid Long-term Fundamentals Remain Intact at Potash

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Near-term headwinds persist at fertilizer giant Potash (click ticker for report: ), which reported a mixed bag in its third quarter results Thursday morning. The Canadian firm saw revenue fall 8% year-over-year to $2.1 billion, slightly better than consensus expectations. Earnings per share slid 22% year-over-year to $0.74, which was worse than consensus estimates. Potash (the product) sales tumbled 10% year-over-year to $887 million, the result of declining prices and slumping orders from India and China. Total tonnage sales in North America increased 25% year-over-year to 1.0 million tonnes, as farmers have continued to invest in fertilizer to compensate for lower yields resulting from poor growing conditions in the US. Sales in Latin America also remained brisk, growing year-over-year driven … Read more

ConocoPhillips’ Free Cash Flow Is Disappointing to Us in Third Quarter

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ConocoPhillips (click ticker for report: ) reported its first full quarter as an independent E&P (exploration and production) company Thursday. It spun off its refining arm Phillips 66 (click ticker for report: ) earlier this year. Though we hold ConocoPhillips in the portfolio of our Dividend Growth Newsletter, we’re taking a hard look at whether we want to keep it, as we’ve been disappointed with some of the cash-flow trends recently (particularly after considering that future performance is largely determined by volatile oil and gas prices). We’re considering swapping it for other dividend-growth opportunities available on the market today, which we provide in the following table: “Stocks With High VBI Ratings and Strong Dividend Growth Prospects.” ConocoPhillips reported adjusted earnings … Read more

AstraZeneca Is Not Immune to Patent Cliff

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On Thursday, AstraZeneca (click ticker for report: ) posted difficult third-quarter results as the loss of exclusivity on several brands (namely Seroquel IR) and a couple divestitures drove revenue 15% lower. Core earnings per share declined 8%, while reported earnings per share dropped 50%. Still, management reiterated its full-year 2012 financial targets for earnings per share between $6.00 and $6.30 per share, and we don’t expect to make a material change to our fair value estimate at this time. The headline numbers were poor. US revenues dropped 19% in the third quarter, as a result of the loss of exclusivity of Seroquel IR, while revenue in the rest of the world (ROW) fell 12% during the period. The company noted … Read more

New York Times Experiences Advertising Weakness in Third Quarter

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On Thursday, the New York Times (click ticker for report: ) reported terrible third-quarter results that showed weakness in both print and digital advertising revenue. New York Times’ total revenue fell 0.6% as advertising revenue dropped nearly 9% during the period. The lower revenue was compounded by a 2.3% increase in operating costs during the period, as operating profit tumbled nearly 60% to $8.5 million from $21 million in the year-ago quarter. Print and digital advertising sales fell 10.9% and 2.2%, respectively, during the quarter and overwhelmed the 7.4% increase in circulation revenue. We’ve seen advertising weakness from other online-based consumer subscription firms such as Morningstar (click ticker for report: ), and we credit this trend to the growing digital … Read more

International Paper Making Good on Cost Savings Promises

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Paper and containerboard producer International Paper (click ticker for report: ) reported solid third quarter results Thursday morning. Sales increased 6% year-over-year to $7 billion, a tad short of consensus estimates. Earnings, adjusted for one-time impacts, fell 7% year-over-year to $0.75 per share. Industrial packaging performed well, falling just 7% year-over-year after divesting three containerboard mills. The segment benefited from lower input costs and decreased maintenance outages, though these were partially offset by lower sales volumes. Industrial packaging is also benefiting from better than expected synergies from the firm’s Temple Island acquisition, which could be $100 million greater than initially predicted. Image Source: International Paper Earnings Presentation Printing Papers performance was also strong, with earnings growing 90% year-over-year to $206 … Read more

Apple Reports a Strong Fourth Quarter and Sandbags Guidance

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Best Ideas Newsletter holding Apple (click ticker for report: ) reported another fantastic quarter Thursday afternoon. The tech giant saw revenues surge 27% year-over-year to $35.9 billion, a touch higher than consensus estimates. Earnings increased 23% year-over-year to $8.67 per share, a few cents weaker than consensus expectations, but negatively impacted by a $50 million loss from other income versus a forecasted gain of $150 million. Apple generated $50 billion in operating cash flow during the fiscal year. Guidance, not surprisingly, was lackluster. The firm establishes notoriously low expectations and is assuming earnings of $11.75 per share on $52 billion in revenue during its first quarter in fiscal 2013. Margins are expected to be lower thanks to the introduction of … Read more

Procter & Gamble Posts a Strong First Quarter

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Consumer staples stalwart Procter & Gamble (click ticker for report: ) reported stronger than expected first quarter results Thursday morning. Sales declined 4% year-over-year to $20.7 billion, slightly worse than expected and negatively impacted by 6% due to currency headwinds. Earnings, adjusted for one-time items, increased 5% year-over-year to $1.06 per share, a few cents better than consensus estimates. We see no material impact on our fair value estimate at this time. After feeling the pressure from activist shareholder Bill Ackman, the company has refocused on the cost side of the equation, which has helped boost margins. Manufacturing savings and higher price-points boosted gross margins 80 basis points year-over-year to 50.6%. SG&A remained flat at 30% of sales on a … Read more

Under Armour’s Third Quarter Lacked Usual Guidance Upside

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Athletic apparel retailer Under Armour (click ticker for report: ) reported solid-third quarter performance Thursday morning. Revenue grew 24% year-over-year to $575 million, in-line with consensus estimates. Earnings increased 23% year-over-year to $0.54 per share, a few cents better than consensus expectations. Gross-margin pressured eased, as margins increased 30 basis points year-over-year to 48.7%. Inventory builds finally alleviated, falling 2% year-over-year to $312 million. Though CEO Kevin Plank cited sourcing issues and “outgrowing” suppliers, we think the company is cleaning up its balance sheet and realized it had far too much inventory on the books. The firm knows how reliant it is upon weather for winter quarter sales, so we like its cautious stance going into winter this year to … Read more