Brian Nelson

Microsoft’s Third-Quarter Results Point to Resilience in the Economy

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Microsoft () reported fiscal-year 2012 third-quarter results Thursday that support our thesis on the company and the broader economy. Revenue was up 6% compared to the same quarter last year, and operating income grew by 12%. Though 6% revenue growth may not sound impressive, it was not only better than expected, but it was also driven by upside surprises in unexpected segments. The business division saw revenue increase 9% from the same period last year, which isn’t typical for the unit so far into the Microsoft Office release cycle. Additionally, Windows revenue was up 4%, even in the face of the well-documented global hard drive support shortage. Windows 7 enterprise penetration reached 40% globally, which is far more impressive than the adoption of Vista. Servers … Read more

Chipotle Issues Strong First-Quarter Performance; Shares are Extremely Expensive

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Chipotle () reported strong results after the close Thursday. Though the firm continues to post solid same-store-sales growth and has a nice earnings trajectory, we think the burrito-maker is one of the most overvalued companies on the market today. We continue to steer clear of the shares and may open a put position on the company in the portfolio of our Best Ideas Newsletter in coming periods. However, we’re waiting for the firm’s upward momentum to slow before betting on a price fall. In its first quarter, revenue advanced over 25% thanks to a better-than-expected 12.7% jump in comparable restaurant sales, which were bolstered by higher traffic and menu price increases implemented last year. The upscale burrito chain’s restaurant level … Read more

Yum! Brands Posts Solid First-Quarter Results; China Growth Strong, US Performance Improving

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Yum! Brands () issued strong first-quarter results after the close Wednesday that showed improving domestic performance but cost pressures in its fastest-growing markets. We still believe Yum! Brands is the best way to play restaurant expansion in emerging markets (namely China), but the firm’s shares already reflect this opportunity, in our opinion. We are sticking with our fair value estimate ($55 at the high end of our estimated range). Worldwide systems sales of the owner of Pizza Hut, Taco Bell and KFC Chains grew 7% (before currency) during the quarter, propelled largely by 28% growth in China (growth in the US was meager at just 1%). On a reported basis, total revenues advanced 13%. However, the domestic top-line performance was … Read more

Best Idea eBay Releases Fantastic First-Quarter Results; Raises 2012 Guidance

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Best Idea eBay () reported fantastic first-quarter results after the close Wednesday. Both revenue and net income expanded at a nice double-digit pace, as PayPal continues to drive strong performance. In after-hours trading, the shares are up 6%+ (to over $38 per share) on the report. We are strongly considering adding to our existing position in the portfolio of our Best Ideas Newsletter, as we think the shares are conservatively worth $46 each (with upside to the high $50’s based on the upper end of our fair value range). << View Our Newsletter Archives In the first quarter, the global commerce platform and payments leader’s revenue advanced an impressive 29% from the same period a year ago. Net income on a … Read more

Intuitive Surgical Posts Strong First-Quarter Results

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Intuitive Surgical (), one of the more well-known momentum firms on the market today, reported excellent first-quarter earnings after the close Tuesday. We don’t view the firm as yet a ‘Valuentum’ stock (a style of investing that we ascribe to) as it has yet to reach a valuation that we find attractive. We’re sticking with our fair value estimate for Intuitive Surgical at this time. << More on ‘Valuentum’ Investing The robotic medical-equipment firm, best known for its da Vinci Surgical System (click here), reported first-quarter 2012 revenue of $495 million, which advanced an impressive 28% from the same period a year ago (consensus was at $477 million). The key drivers continue to be higher robotic procedure adoption and higher … Read more

Best Idea Intel Continues to Deliver Solid Results and Return Cash to Shareholders

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Best Idea Intel () reported another strong quarter Tuesday. Some of the financial highlights include a strong gross margin of 64% (65.1% non-GAAP), earnings per share of $0.53 (versus consensus expectations of $0.50 per share), and $3 billion in cash flow generated from operations. Additionally, during its first quarter, the company bought back $1.5 billion in stock and paid out $1 billion in dividends. Management still has the authorization for an additional $8.6 billion in share buybacks (which are value-creating at these price levels), and we think the company’s excellent dividend payout (0.84 per share; 3% annual yield) could increase meaningfully in coming years. Our fair value estimate remains unchanged. Though revenue only advanced modestly on a year-over-year basis thanks to inventory … Read more

IBM Raises Full-Year Earnings Guidance; 1Q Beat Due to Lower Quality Drivers; Services Backlog Falls

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International Business Machines () posted mixed first-quarter results after the close Tuesday. Though the firm showed material bottom-line expansion, the firm’s top-line growth was relatively modest and its services backlog fell before adjusting for a favorable impact from currency. We are sticking with our fair value estimate for the company. Revenue was essentially flat from the same period a year ago as software, services and a doubling of cloud-based revenue helped offset a stiff decline in hardware sales. We were pleased to see the strength in software revenue (up 5%), but we’re slightly disappointed in the company’s services business, where revenue edged up just 1% and services backlog declined 2% before adjusting for currency. We’ll be keeping this important, “yellow flag” data … Read more