Brian Nelson

We’re Impressed with Under Armour’s First-Quarter Results; Raising Our Fair Value

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Under Armour (UA) reported strong first-quarter results that were in-line with our expectations. On the heels of the strong report, we’ve reassessed our discounted cash-flow model and are now forecasting more optimistic future assumptions. The high end of our fair value range is now $78 per share, as we expect the firm to raise prices on its core segment products and leverage marketing expenses better than we had previously assumed. We initially extrapolated Nike’s (NKE) slightly slower apparel growth into the view that Under Armour might struggle disproportionately in the first quarter of 2012, given the unseasonably mild weather across much of the US. However, to our surprise, sales increased 23% versus the first quarter a year ago, and net … Read more

McDonald’s Menu Items and Value Proposition Drive Same-Store-Sales Growth; We’re Raising Our Fair Value

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On Friday, McDonald’s (MCD) reported first-quarter results that were yet again superb, reaffirming the company’s position as the premier restaurant in the fast-food space. Due to the excellent operating results and upward revisions in our earnings projections in the out-years, we are raising our fair value to $95 per share, with $114 per share now being the high end of our fair value range. << Our 16-page Equity Report on McDonald’s (MCD) — login required McDonald’s drove global same store sales growth of 7.1% compared to the same quarter a year ago, highlighted by an 8.9% increase in same store sales in the US. By any measure, McDonald’s is about as saturated as possible in the US, but new products such … Read more

Kellogg’s Dividend Hike Less than Impressive; In Line with Our Expectations

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On Friday, Kellogg () announced that it plans to hike its dividend 2%, in line with our projections. Though the firm boasts an outsize yield (3.26% annual yield), our Valuentum Dividend Cushion, which assesses a firm’s capital structure and future cash flow generation in comparison to its future dividend payments, indicates that future growth in its dividend will continue to be lackluster. << About Our Valuentum Dividend Cushion — GlobeNewswire (Friday, April 20) “Kellogg Company today announced that its Board of Directors declared a dividend of $0.43 per share on the common stock of the Company, payable on June 15, 2012, to shareowners of record at the close of business on June 1, 2012. The ex-dividend date is May 30, 2012. … Read more

Honeywell and General Electric Reveal Industrial Strength

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On Friday, General Electric (GE) and Honeywell (HON) set the tone for industrial earnings in the first quarter. We continue to believe aerospace will be a bright spot and are expecting strong performance from our three aerospace holdings when each reports results in coming trading sessions: Precision Castparts (PCP), Astronics (ATRO), and EDAC Tech (EDAC). General Electric’s industrial performance was nothing short of excellent, in our opinion. For starters, industrial segment revenue jumped 14% on impressive double-digit organic growth (11%). Importantly, orders followed suit. Infrastructure orders, for example, advanced 20%, with equipment orders up nearly 30% and services up 11%. On an organic basis, orders increased 14%, outpacing organic top-line expansion. Industrial segment orders from growth markets also did quite well, jumping 21% in the … Read more

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