Brian Nelson

We Can’t Rule Out That Best Buy Won’t Eventually Go the Way of Circuit City; VBI Score: 3

by

Big-box electronics retailer Best Buy (BBY), on Thursday, issued fiscal fourth-quarter 2012 results that beat expectations on the bottom line but fell short of consensus forecasts on the top line. The beleaguered retailer also outlined a new transformational strategy that we view to be fraught with implementation and execution risk. We expect to take a closer look at our valuation model on Best Buy, but our fair value estimate range for the firm is unchanged at this time.   Best Buy’s revenue advanced 3% in its fiscal fourth quarter, despite comparable store sales falling 2.4% in the period (compared to a decline of 4.7% for the prior-year quarter). Gross profit advanced at a similar pace, though overhead increases did put … Read more

McDonald’s Transition Could Provide an Entry Point for Dividend Growth Investors

by

Last week, McDonald’s (MCD) CEO Jim Skinner announced that he will be retiring from the company on June 30, 2012, after more than four decades on the job. His replacement will be current chief operating officer and President Don Thompson. Skinner led McDonald’s during its post “Supersize Me” revival and has done a tremendous job integrating new products (McCafe comes to mind), re-modeling dreary stores and increasing both earnings and revenue. His rise from assistant store manager to CEO without a college degree seems nearly impossible to replicate, and his understanding of the day-to-day business and McDonald’s customer is unparalleled.That being said, Don Thompson is no slouch either. He started his career at McDonald’s 22 years ago, and has quickly … Read more

Lennar Records Strongest First-Quarter Homebuilding Operating Margin in Six Years

by

The nation’s third-largest homebuilder Lennar (LEN) reported strong first-quarter results Tuesday that revealed strong order growth, which largely eased concerns brought about by KB Home’s (KBH) recent disappointing order performance. Though we think the housing market will show continued stabilization and improvement during 2012, we’re not enthused by any of the valuations presented by homebuilding stocks at this time. We remain on the sidelines with respect to Lennar and its peers.   Lennar’s revenue increased 30% in the quarter, as deliveries expanded at a similar pace (29%) and the firm experienced positive pricing. New orders advanced 33%, to 3,022 homes, while the firm’s backlog increased to 2,711, up 39%. The firm’s cancellation rate came in at 18% during the period. The homebuilder’s … Read more

SuperValu’s Dividend Might Not Last Long At Current Levels

by

When evaluating dividend-paying stocks for addition to the portfolio of our Dividend Growth Newsletter, we like to assess the long-term safety of a company’s dividend via our Valuentum Dividend Cushion™. SuperValu (SVU) registers a -12.5 score (negative 12.5) on our Dividend Cushion measure, which suggests to us the company will have some trouble covering its dividend payments going forward (on the basis of both its future cash flow stream and capital structure). Such a poor score (among the worst in our coverage universe) also suggests that the company could eventually cut the dividend meaningfully, as the firm has done in the past two years. We don’t think the dividend is sustainable at the current payout rate, and we think these levels … Read more

Framing Our Thoughts on the “Earnings Game” and the Equity Markets

by

<< About Our Valuentum Buying Index At Valuentum, we take a different view on stocks than what may be widely held in the investment community. As many “play” the earnings game–anticipating whether a firm will beat or miss revenue/earnings estimates or guide above or below consensus for forward periods–we, on the other hand, like to view stocks as businesses. Over time, the best, value-creating (RONIC-WACC) businesses (purchased at the largest discount to their true intrinsic values) will ultimately see the most equity value appreciation in the future, in our opinion, regardless of what analyst expectations are on the stock in any given quarter. After all, should investors really care if a company misses earnings by a penny or two (or … Read more