Brian Nelson

PepsiCo Reports Mixed Results But International Business Remains Strong

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Food and beverage giant PepsiCo (click ticker for report: ) reported mixed third-quarter results Wednesday morning. Revenue fell 5% year-over-year to $16.7 billion, which was a bit worse than consensus expectations. However, earnings on an adjusted basis fell only 4% to $1.20, which was a few cents better than consensus estimates. After excluding some divestitures and refranchising agreements, organic revenue increased 5% year-over-year, driven by 1% volume growth and 4% pricing growth. The company’s ability to generate cash continues to impress, as operating cash flow year-to-date registered $5.1 billion. We were also excited to see broad-based strength across its portfolio, especially internationally. For one, Latin American Foods revenues surged 13% on the back of strong pricing and volume gains. Though operating profit … Read more

eBay Reports Solid Third-Quarter Results; Active Marketplaces User Growth Reaches Best Pace Since 2007

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On Wednesday, global commerce and payments company eBay (click ticker for report: ) reported solid third quarter performance that showed accelerated growth in both Marketplaces and PayPal. We continue to like the company and hold shares in the portfolio of our Best Ideas Newsletter. Revenue for the third quarter increased 15%, while GAAP and non-GAAP net income jumped 22% and 14%, respectively. The firm’s consolidated operating margin advanced 150 basis points from the same period last year (100 basis points on a non-GAAP basis), as segment margin in each of its three business segments expanded on a year-over-year basis. Cash flow was robust, with eBay pulling in $1.2 billion in operating cash flow and $792 million in free cash flow … Read more

Kinder Morgan Posts Strong Results and Raises Distribution

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Dividend Growth Newsletter portfolio holding Kinder Morgan Partners (click ticker for report: ) reported excellent third quarter results Wednesday after the market close. Revenue grew 10% year-over-year to $2.3 billion, which was slightly better than consensus expectations. Net income per unit, when excluding special items, surged 30% year-over-year to $0.57, roughly in-line with consensus estimates. More importantly, distributable cash flow per unit grew nearly 8% year-over-year to $1.28, and the firm subsequently raised its distribution for the quarter to $1.26. Year-to-date, the firm has accumulated $3.72 per unit versus a payout of $3.69, leaving the company with $8 million of distribution coverage year-to-date. We plan to update our dividend report on the firm soon. The Natural Gas Pipelines segment performed particularly … Read more

IBM Reports Terrible Third Quarter Results

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On Tuesday, IBM (click ticker for report: ) reported disappointing third-quarter results. Though we plan to take a closer look at our valuation assumptions, we don’t expect any change to our fair value estimate to be material. During the period, revenue fell over 5% (down 2% after adjusting for currency), as the tech giant experienced weakness across the board. Revenue in its largest segment, Global Technology Services, fell nearly 4%. Revenue in its next three largest segments—Software, Global Business Services, and Systems & Technology—fell 0.9%, 6%, and 13%, respectively. In fact, not one of its major business segments experienced revenue expansion during the period. Geographically speaking, third-quarter revenue from the Americas fell 4% (down 3% after adjusting for currency), while … Read more

Intuitive Surgical Posts Strong Results

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Medical device maker Intuitive Surgical (click ticker for report: ) reported strong third quarter results Tuesday after the market close. Revenue surged 20% year-over-year to $538 million, roughly in-line with consensus expectations. Earnings surged 46% year-over-year to $4.46 per share, but after adjusting for a one-time tax benefit, they grew about 16% to $3.54 per share—still slightly better than expected. The firm’s performance was consistently strong across all segments, with Instruments and Accessories growing 24% year-over-year to $218 million. Procedure growth during the quarter was 22% thanks primarily to an increased number of gynecological procedures performed in the US. However, the pace was negatively impacted by a decline in US prostatectomy procedures and slowing growth in Europe. The pressure in … Read more

CSX Reports Mixed Third Quarter Results; Coal Remains Drag

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The biggest eastern railroad in the US, CSX (click ticker for report: ) reported mixed third-quarter results Tuesday, with earnings coming in slightly better than expected but revenue falling below consensus. We don’t expect to make a change to our fair value estimate. CSX’s revenue declined 2% as lower volume, reduced fuel recovery and an unfavorable mix hindered expansion. The company’s operating ratio held steady at 70.5% on productivity/resource efficiency, but operating income still declined 3%, to $854 million. Third-quarter net earnings fell 2%, to $455 million, though earnings per share increased modestly due to share buybacks. The firm noted changing global coal market conditions, as the primary reason for disappointing consolidated same store sales pricing gains. Specifically, higher thermal … Read more

Intel Maintains Margins While PC Business Stalls

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Chip-maker Intel (click ticker for report: ) reported better than expected, though still weak, third quarter results Tuesday afternoon. The tech giant saw revenue fall 5% year-over-year to $13.5 billion, which was better than consensus expectations. Earnings per share fell 11% year-over-year to $0.58 per share, which was meaningfully better than the consensus estimate of $0.49 per share. Gross margins remained flat quarter-over-quarter at 63.3%, enabling the company to beat estimates and maintain profitability. Revenue in every region except Europe was down slightly from the previous quarter. Not surprisingly, most of Intel’s weakness came in the PC Client Group, where sales tumbled 8% year-over-year to $8.6 billion, as average selling prices fell 4% and volumes fell 4%. Production remains muted … Read more

Johnson & Johnson Posts Strong Results

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Dividend growth gem Johnson & Johnson (click ticker for report: ) posted strong results Tuesday morning. Revenue grew 6.5% (10.8% ex-currency) year-over-year to $17.1 billion, slightly better than consensus estimates. Earnings, net of a non-cash charge of $553 million, increased 0.8% year-over-year to $1.25 per share, a few cents better than consensus expectations. We like the company, and we hold shares in our Dividend Growth Newsletter portfolio. Domestic growth outpaced the rest of the world, with sales surging 13.4% year-over-year to $7.8 billion. The acquisition of Synthes materially boosted medical device sales, which grew 18.3% domestically and 14.4% internationally (excluding currency). Pharmaceutical sales growth was also strong, with the segment expanding 7% (11.3% excluding currency) year-over-year to $6.4 billion, driven … Read more

Coca-Cola Continues to Grow Steadily

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Global beverage giant Coca-Cola (click ticker for report: ) reported solid third-quarter results Tuesday morning. The soda giant saw revenues increase 1% (6% currency neutral) year-over-year to $12.3 billion, roughly in-line with consensus expectations. Comparable earnings fell 2% year-over-year to $0.51 per share, also in-line with consensus estimates. Not surprisingly, North America remained relatively strong, with volumes growing 2% year-over-year during the quarter and revenues up 5% year-over-year. With obesity backlash en vogue, the segment leaders included Coke Zero (up 9%), Seagram (up 11%), juices (up 6%), and Powerade, which grew 9%. We expect these trends to continue, and we wouldn’t be too shocked to see Coke Zero eventually become one of Coca-Cola’s top North American products, in the realm … Read more

Vikram Pandit and John Havens Step Down at Citigroup after Third Quarter Results

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Citigroup (click ticker for report: ) CEO Vikram Pandit and COO John Havens shockingly stepped down this morning after Citi reported decent third quarter results. Revenues and earnings were both strong, with earnings per share coming in several cents better than consensus estimates. The firm took a large write down on the sale of SmithBarney to Morgan Stanley (click ticker for report: ), but operations were relatively strong. Citi, the “too big to fail” bank with arguably the most promising international business, experienced surging revenues and earnings in Latin America, which grew 8% and 30% year-over-year, respectively. This growth was driven by spectacular performance in Latin American Securities and Banking, which saw profitability surge 75% year-over-year on the back of … Read more