Brian Nelson

PVH’s Weak Guidance Sends Shares Tumbling

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By Brian Nelson, CFA On April 1, PVH Corp. (PVH) reported better than expected fourth quarter results, but the company’s cautious outlook sent the stock tumbling. Fourth quarter revenue fell 1% on a constant currency basis, better than the company’s guidance calling for a decline of 3%-4%. On a non-GAAP basis, PVH earned $3.72 per share, which compared to guidance calling for ~$3.45 per share. The company noted that the macro environment in Europe remains challenging, which negatively impacted its wholesale business. The executive team of the maker of Tommy Hilfiger and Calvin Klein brands had a lot to say about the quarterly report: We delivered a strong fourth quarter and fiscal 2023, generating high single-digit direct-to-consumer growth, with growth … Read more

Best Buy’s Free Cash Flow Comes Up Short in Covering Dividend

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Image Source: Mike Mozart By Brian Nelson, CFA Back in late February, Best Buy (BBY) reported better than expected fourth quarter fiscal 2024 results, despite revenue pressures. Enterprise comparable store sales fell 4.8%, but the drop was lower than what consensus had been expecting and represented a marked improvement over the same 13-week period last year. Though Best Buy is not immune to the challenges in retail these days, the company continues to hold its own, despite a heated competitive environment. Domestic revenue fell 0.9% due to a decline in comparable store sales, with management pointing to weakness in home theater, appliances, mobile phones and tablets, but strength in gaming-related revenue. Though revenue was under pressure in the period, the … Read more

RTX Ends Year with Record Backlog, Shares Yield ~2.4%

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By Brian Nelson, CFA Back in late January, RTX (RTX), formerly Raytheon Technologies, reported solid fourth-quarter results, beating on both the top and bottom lines. Adjusted sales advanced 10% from the prior year, while adjusted earnings per share edged 2% higher, to $1.29. For the fourth quarter, the company hauled in $4.7 billion in operating cash flow and generated $3.9 billion in free cash flow. RTX ended the year with record company backlog of $196 billion, with $118 billion attributable to commercial and the balance to defense. Image Source: RTX Management noted the firm is off to a good start in 2024 in the press release: RTX reported solid full-year results, delivering 11 percent organic sales growth and $5.5 billion in … Read more

Colgate-Palmolive Strong Pricing Expansion to Drive Base Business Earnings Expansion

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Image Source: Colgate-Palmolive By Brian Nelson, CFA Colgate-Palmolive (CL) put together a solid quarter when it reported fourth-quarter results in late January. During its fourth quarter, net sales and organic growth both came in at 7% thanks to strong pricing expansion, with the company’s base business earnings per share up 13%, to $0.87. Impressively, both the company’s GAAP gross margin and base business gross margin advanced 400 basis points, to 59.6%. The firm continues to dominate the toothpaste and manual toothbrush markets, with a global market share of 41.1% and 31.5%, respectively, year-to-date. Management had a lot to say about the quarterly results and outlook: We are pleased to have finished the year with another quarter of strong top and … Read more

Mondelez Expects Organic Growth to Slow in 2024

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Image Source: Mondelez By Brian Nelson, CFA Back in late January, Mondelez International (MDLZ) reported better than expected fourth-quarter results. Net revenue advanced 7.1% in the quarter thanks to strong organic net revenue growth of 9.8% offset in part by weaker volume/mix. Gross margin increased 190 basis points in the quarter as the company pushed through meaningful price increases across its regional portfolio led by particular strength in Latin America. Adjusted diluted earnings per share increased 23.5% on a constant-currency basis. Management was upbeat on the performance in the press release: Our 2023 results underscore the strength of our execution, the importance of our investments and the resiliency of our portfolio, footprint, categories, and brands. We delivered double-digit top-line and earnings … Read more

Toll Brothers Notes Strong Start to Spring Selling Season

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By Brian Nelson, CFA Back on February 20, luxury homebuilder Toll Brothers (TOL) released first-quarter results for fiscal 2024. Both revenue and GAAP earnings per share came in better than expected. Home sales revenue increased 10% in the quarter from the year-ago period, while delivered homes advanced 6%. Impressively, net signed contract value was up 42% from last year’s quarter, while the number of contracted homes increased 40%. Its backlog fell 18%, to $7.08 billion, however, but the company continues to benefit from higher home sales gross margins. Management’s commentary on the quarter was upbeat in the press release: We are very pleased with our strong first quarter results. We delivered 1,927 homes at an average price of approximately $1.0 … Read more

Broadcom a Key Beneficiary of AI Investment

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By Brian Nelson, CFA On March 7, Broadcom (AVGO) reported better than expected first-quarter results for fiscal 2024. Revenue advanced 34% from the same period a year ago, while adjusted EBITDA increased 26% on a year-over-year basis. On a non-GAAP basis, net income increased to ~$5.3 billion, up from ~$4.5 billion in the same period a year ago. Non-GAAP adjusted earnings per share increased to $10.99 from $10.33 in the year-ago period. Shares yield ~1.6% at the time of this writing, and the company continues to push through meaningful dividend increases. Management was upbeat when it came to artificial intelligence [AI] in its press release: We are pleased to have two strong drivers of revenue growth for Broadcom in the … Read more

General Mills Doing a Lot of Things Right, Shares Yield ~3.4%

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Image Source: General Mills By Brian Nelson, CFA On March 20, General Mills (GIS) reported better-than-expected third quarter results for its fiscal 2024. Though net sales fell 1% in the period, the company’s adjusted operating profit advanced 14% in constant currency. On a two-year compound growth basis, the firm’s organic net sales increased 7%, so while there was some pressure on revenue in the quarter, most of it can be attributed to difficult comparisons. Our fair value estimate for General Mills stands at $60, with the company trading at a modest premium to those levels at the time of this writing. General Mills continues to focus on its Accelerate strategy, which breaks down into four pillars: boldly building brands, relentlessly … Read more

In the News: Inflation, Walgreens, SPACs/IPOs, and Marine Insured Losses

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By Brian Nelson, CFA Inflation Remains Subdued Based on Latest PCE Reading On March 29, the Fed’s preferred metric with respect to its inflation assessment, the personal consumption expenditure (PCE) price index, was released and came in at a 2.8% year-over-year increase, excluding food and energy, for the month of February, roughly in line with expectations. The Fed’s aggressive rate-hiking cycle during 2022 seems to have been enough to get inflation back to reasonable levels, in our view, and we view the reading as a positive one as the Fed continues to work to get inflation back to 2.0%. The Fed is also aware that it doesn’t want to overshoot inflation to the downside (below 2.0%), so the reading for … Read more

Micron Issues Strong Outlook, Points to Multi-Year Opportunity in AI

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Image Source: Micron By Brian Nelson, CFA On March 20, Micron (MU) reported better than expected second quarter fiscal 2024 results that showed considerable revenue growth and a nice beat with respect to non-GAAP earnings per share. Revenue advanced to $5.82 billion versus $3.69 billion in the same period last year, while non-GAAP net income swung into positive territory at $0.42 per share, up from a loss of $1.91 during the second quarter of fiscal 2023. Operating cash flow surged to $1.22 billion in the quarter from $343 million in the same period a year ago. Here’s what management had to say about the performance in the quarterly press release: Micron delivered fiscal Q2 results with revenue, gross margin and … Read more