Brian Nelson

Williams-Sonoma Beats in Fourth Quarter, Raises Dividend 26%

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Image: Williams-Sonoma is facing revenue pressure, but free cash flow trends are robust. Image Source: Williams-Sonoma By Brian Nelson, CFA On March 13, Williams-Sonoma (WSM) surprised the Street to the upside with better-than-expected fourth quarter results, a huge dividend increase, and the launch of an incremental $1 billion in share repurchases. We expect to raise our fair value estimate as a result of the good news. Though the firm’s sales continue to face pressure due to a weakened housing market, its cash-based sources of intrinsic value are robust, and shares yield 1.6% on a forward estimated basis. The omni-channel specialty retailer for home goods that sports brands such as the Pottery Barn, West Elm as well as its namesake faced … Read more

Oracle Hits Optimistic Note in Fiscal Third Quarter

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Image Source: Peter Kaminski By Brian Nelson, CFA On March 11, Oracle (ORCL) reported strong third-quarter fiscal 2024 results that showed total revenue advancing 7% on both a GAAP and constant-currency basis, roughly in-line with expectations, and non-GAAP earnings per share increasing 16%, to $1.41, beating the consensus forecast. Revenue growth rates were strong across the board, and the company’s total Remaining Performance Obligations soared 29%, to $80 billion at the end of the period. Though the quarter was solid, what the Street liked the most was management’s commentary in the press release: Large new cloud infrastructure contracts signed in Q3 drove Oracle’s total Remaining Performance Obligations up 29% to over $80 billion—an all-time record. We expect to continue receiving … Read more

How Some Members Use Valuentum’s Investment Services

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By Brian Nelson, CFA Thank you for your membership to Valuentum. We serve a wide variety of investors, including dividend growth investors, value investors, and pure Valuentum investors, among others. Many different types of investors and professionals use our research and financial analysis in a whole host of applications from individual stock-selection to the evaluation of closed-end funds to an overlay in a money-management setting and beyond. We wanted to make sure that you know that, if you’re a dividend growth or income investor, that there are others that use our website to utilize the Valuentum process, fair value estimates and other metrics. Similarly, if you’re a practitioner of the Valuentum system, I wanted to make sure that you are … Read more

You Already Own Whatever Your Investment Will Pay You in Dividends

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“Business owners across the world know that their business is not more or less valuable because they paid themselves a higher distribution this quarter.” – Brian Nelson, CFA Image Source: Images Money Stocks are generally valued on the present value of all their future free cash flows, which already include future dividend payments. A company’s dividend policy may impact an investor’s eagerness to pay a higher price for shares on the basis of a higher yield, but the dividend is a symptom of future free cash flows (and therefore intrinsic value), not a driver behind it. where A (t) is an Enterprise Free Cash Flow (1) at year t,                 B (0) is a Total Debt at time 0,                 … Read more

Costco’s Shares Have Surged Over the Past Year!

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Image: Costco’s shares have run past the high end of our fair value estimate range. Shares look pricey at the moment. By Brian Nelson, CFA Shares of market darling Costco (COST) have had a mighty run over the past year, advancing more than 65%. The company is a social media favorite and operates at the center of the mindset of consumers, providing both convenience and bulk savings to the shopper. The high end of our fair value estimate range for the big box retailer stands at ~$749, so we can’t say shares, which closed March 7 at ~$786 per share, are a bargain. However, Costco has rewarded patient investors considerably over the past several years and beyond. For the quarter … Read more

ESG Matters: KMB, ADM, CC

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Image: Chemours stock has been pummeled recently over an accounting probe. By Brian Nelson, CFA A lawsuit was filed against Kimberly-Clark (KMB) on February 28, 2024, alleging that the company used per- and polyfluoroalkyl substances, commonly known as “PFAS” or forever chemicals, in a facility in Connecticut where it makes Kleenex tissues. The lawsuit claims that the chemicals could have been released into the air and seeped into groundwater as paper waste was disposed of at a local landfill. The hazards of PFAS, which do not easily break down in nature, gained significant prominence in the media of late given recent lawsuits targeting 3M (MMM). Though the outcome of any lawsuit remains uncertain, Kimberly-Clark maintains the allegations are “unfounded.” Regardless, … Read more

Alphabet or Microsoft in Artificial Intelligence with Respect to Search? We Like Both

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Image Source: SEO By Brian Nelson, CFA The race to capture the next-generation opportunity in web search technology is fast-developing. OpenAI took the world by storm when it released ChatGPT in December 2022, sparking the proliferation of ChatGPT rivals, the list of a dozen of which can be found here. In this article, we provide a timeline of our take as it relates to large language models with respect to web search technology, and why we view playing both Alphabet (GOOG) (GOOGL) and Microsoft (MSFT) as it relates to search and AI technology may be the best way to approach new developments in this area, which are still in their very early stages. It’s very likely that, if Google search … Read more

Merger Mania

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Image Source: Glenn Beltz By Brian Nelson, CFA Mergers and acquisition [M&A] activity continues as the market sets new highs. Elevated borrowing costs as a result of the Fed’s aggressive rate hiking cycle in 2022 are pushing many entities to pursue all-stock transactions. We’ve previously discussed our thoughts on the Cisco (CSCO)/Splunk (SPLK) tie-up in this article here, which was an all-cash deal, but several other rather large acquisitions have been announced that are worth bringing to members attention. On February 19, Capital One (COF) announced that it would acquire Discover Financial (DFS) in an all-stock $35.3 billion deal that would represent a 26.6% premium over Discover’s price as of February 16. The deal is expected to generate $2.7 billion … Read more

3 Catalysts for Apple’s Stock

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Image: Apple’s shares have done quite well since the beginning of 2023. By Brian Nelson, CFA When Apple (AAPL) reported calendar fourth quarter results (its first quarter fiscal 2024 results), concerns over sales in China and the momentum behind its Services business cast a cloud over results. Sales from Greater China came in at $20.8 billion in the quarter, but this was much lower than the $23.5 billion that analysts had been expecting. The company’s Services business performed well, but it also came in a bit lower than expectations, despite segment revenue and its installed base of active devices hitting all-time highs. Revenue for its iPhone came in better than expectations in the quarter, so while there was some profit … Read more

Republic Services Issues Solid Guidance for 2024

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Image Source: Republic Services By Brian Nelson, CFA On February 27, trash taker Republic Services (RSG) reported excellent fourth-quarter results that showed beats on both the top and bottom lines. Total revenue advanced 8.6% in the quarter, consisting of 5.7 percentage points of organic growth and 2.9 percentage points coming from acquisitions. The firm’s pricing initiatives continue to bear fruit, with core price on total revenue increasing 7.2% in the quarter. Volume increased revenue by 0.3% in the period. Thanks in part to its pricing strength, the firm’s adjusted EBITDA margin increased 260 basis points from last year’s quarter. Adjusted earnings per share advanced 24.8% in the quarter, a very strong showing. Republic Services is one of our favorite industrial … Read more