Brian Nelson

Altria Posts a Strong Third Quarter

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US tobacco giant Altria (click ticker for report: ) reported strong third quarter results Thursday morning. Revenue grew 2.2% year-over-year to $6.2 billion, which was considerably stronger than consensus expectations. When adjusted for one-time items, earnings increased 3.2% to $0.58 per share, roughly in-line with consensus estimates. The firm took a hefty charge of $874 million to account for early debt extinguishment, and it subsequently took advantage of cheap interest rates, issuing $1.9 billion worth of 2.85% unsecured notes due in 2022 and $900 million in 4.25% unsecured notes due in 2042. We think the new capital can be used to repurchase shares, as the company authorized an additional $500 million in its share repurchase program. Even though we believe … Read more

AT&T Continues to Be a Cash Machine But Dividend Cushion Still Not Robust

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Telecommunications provider AT&T (click ticker for report: ) reported decent third quarter results Wednesday morning. Revenue was flat year-over-year at $31.5 billion, slightly shy of consensus estimates. Adjusted earnings per share grew 5% year-over-year to $0.62, which was a few pennies better than consensus expectations. Highlights of the quarter included free cash flow, a record $6.5 billion, and share repurchases, which totaled $3.8 billion. Wireless revenues grew 6.5%, driven by ARPU growth of 2.4% as consumers flock to smartphones, particularly the iPhone (click ticker for report: ) which accounted for 77% of smartphone activations (4.7 million units). Though smartphone activations were strong, net postpaid subscriber adds totaled just 151 thousand—well short of the consensus estimate calling for upward of 350 … Read more

Buffalo Wild Wings Suffers as Inflation Hurts the Bottom Line

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Fast growing restaurant chain Buffalo Wild Wings (click ticker for report: ) announced weak third quarter results Tuesday afternoon. Revenue grew 25% year-over-year to $247 million, but that figure was a bit lower than consensus estimates. Earnings fell 7% to $0.57 per share, a few cents lower than consensus expectations. The big drag on profitability has been wing prices, which are 70% higher than a year ago at $1.97 per pound. As a result, cost of sales jumped 270 basis points to 31.2%. Management noted that wing prices have remained high throughout the beginning of the fourth quarter, and profitability is expected to increase 15% year-over-year in 2013. CEO Sally Smith noted that non-alcoholic beverage sales are down—something we heard … Read more

Dow Chemical and DuPont Slash Jobs

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Chemical products firms Dow Chemical (click ticker for report: ) and DuPont (click ticker for report: ) announced significant job cuts after both reported terrible third-quarter results this week. Dow plans to cut roughly 2,400 positions, or about 5% of its workforce, and shut down about 20 manufacturing plants, while DuPont’s restructuring will eliminate 1,500 jobs globally in the next 12 to 18 months. The headline performance of both firms’ quarterly reports was appalling. Dow’s net profit tumbled 35% as pricing declines overwhelmed a modest increase in volume, while DuPont’s net income tumbled to just $10 million from $452 million in the prior-year period. Though DuPont boasts a higher Valuentum Dividend Cushion score than that of Dow Chemical, we’re not anxious to … Read more

3M Lowers 2012 Revenue and Earnings Outlook

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On Tuesday, 3M (click ticker for report: ) reported mixed third-quarter results and lowered its revenue and earnings per share outlook for 2012. Though we plan to make a few slight changes to our valuation model, we don’t expect a material change to our fair value estimate. 3M’s revenue dropped 0.4% from the same period a year ago, though organic local-currency revenue advanced 2.2%. On an organic local-currency basis, revenue increased 4.3% in its health care business, 3.3% in its industrial/transportation segment, 1.4% in its consumer/office segment, 1.3% in its display/graphics segment, 0.7% in its safety/securities segment, and 0.1% in its electro/communications segment. However, with the exception of its display/graphics segment and electro/communications segment, performance decelerated from the pace of expansion … Read more

Netflix Subscriber Growth Slows While Profitability Shrinks

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Maligned DVD rental and video content streaming service Netflix (click ticker for report: ) reported third quarter results that were a little better than expected, but overall, not incredibly strong. Revenue grew 10% year-over-year to $905 million, roughly in-line with consensus estimates. Earnings tumbled, falling 89% year-over-year to $0.13 per share—significantly higher than consensus estimates but still not a great number, in our view. While we enjoyed CEO Reed Hastings candid letter to shareholders with regards to the business outlook, he pointed out several weaknesses. Domestic streaming subscriber additions are estimated to be 4.7 million-5.4 million, much lighter than the firm’s previous guidance of 7 million. Hastings pointed to several metrics, including 30%+ growth in per-member viewing that suggests consumers … Read more

Boeing Reports Solid Third Quarter; Commercial Aerospace Backlog Remains Strong

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On Wednesday, aerospace giant Boeing (click ticker for report: ) reported excellent third-quarter results that showed solid backlog trends and improving cash flow. We continue to think aerospace is one the strongest sectors in the global economy, boasting significant visibility as a result of the tremendous backlogs of the airframe makers. We do not expect to make a change to our fair value estimate of Boeing at this time. Boeing’s revenue advanced 13% during the period thanks to commercial airplane sales, which jumped 28% on higher delivery volume. Operating earnings rose roughly 6% in its commercial business, while defense earnings were roughly flat from the year-ago period. Excluding pension expense, earnings per share advanced 5% during the quarter. We continue … Read more

Investors Can Dislike Facebook But Third Quarter Results Were Strong

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Social networking kingpin Facebook (click ticker for report: ) reported strong third quarter results Tuesday afternoon as the company navigates the shift towards mobile computing. Revenue surged 32% year-over-year to $1.2 billion, while earnings were flat at $0.12 per share as operating margins fell. However, both numbers exceeded consensus estimates and were surprisingly strong given the weakness we saw last week from Google (click ticker for report: ). Facebook continues to win eyeballs as usage and users continue to surge. Monthly active users increased 26% year-over-year to 1.01 billion, daily active users grew 28% year-over-year to 584 million, and mobile active users grew 61% year-over-year to 604 million. Facebook remains the number one application for both Android and iOS. Despite … Read more

United Technologies’ Third Quarter Results Left Much to Be Desired

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On Tuesday, United Technologies (click ticker for report: ) reported weak third-quarter results. Sales advanced 6%, but earnings dropped by a similar amount, excluding restructuring costs. Organic sales fell 2% as negative foreign currency fluctuations adversely impacted expansion by 3 percentage points. The company’s operating margin also fell 100 basis points from the prior-year period, after adjusting for restructuring costs and net one-time items. Though the results weren’t as strong as we would have liked, we don’t expect any change to our fair value estimate to be material. New equipment orders were solid at Otis and in its North American residential HVAC business, but commercial aerospace spares orders dropped over 20% at Pratt & Whitney and 6% at UTC Aerospace … Read more

Coach Returns to Growth after a Weak Fourth Quarter

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Aspirational luxury brand Coach (click ticker for report: ) reported strong earnings for its fiscal year 2013 first quarter Tuesday morning. Revenue and earnings were roughly in-line with expectations, with revenue growing 11% year-over-year to $1.16 billion and earnings expanding 5% year-over-year to $0.78 per share. The company also announced a $1.5 billion share buyback program. After a rough fourth quarter, North American same-store sales rebounded, growing 5.5% year-over-year, driving total sales up 8% to $784 million. This compares to the firm’s anemic 1.7% same-store sales growth during its previous quarter. Department store sales in North America were flat, though the stores ordered fewer inventories than a year ago. Coach’s Legacy collection, which CEO Lew Frankfort highlighted in the press … Read more