Brian Nelson

Nike Continues to Innovate and Create Value for Shareholders

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We may sound like a broken record, but Nike (NKE) reported another strong quarter Thursday. In its fiscal third quarter, sales grew 15% to $5.8 billion from $5 billion, and earnings per share grew 11% to $1.20 from $1.08 in the year-ago quarter. Both the top line and bottom line came in better than consensus estimates, even with the firm’s gross margin falling 200 basis points from a year ago. All things considered, performance was about what we had expected, and our fair value estimate for Nike remains unchanged. North American Future Orders were up 22% As Nike Brand president Charlie Denson said on its fiscal third-quarter conference call, “If I hadn’t been working here for the last 33 years, … Read more

FedEx Posts Strong Fiscal Third-Quarter Results, But Outlook Disappoints

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FedEx (FDX) reported strong fiscal third-quarter earnings growth Thursday thanks to improving yields, record holiday package shipping and solid performance at FedEx Ground. Though we liked the quarter, its outlook was disappointing. Though we plan to revisit our valuation of the firm, we’re sticking with our fair value estimate for the package deliverer.In its third quarter, FedEx’s revenue advanced 9%, while operating income more than doubled thanks to a 3.6 percentage point increase in the firm’s operating margin. In its Express segment, US domestic revenue per package grew 9%, while average daily volume declined 4% from the same period a year ago. However, its Express segment did much better, with revenue jumping 14%, as average daily package volume increased 5% … Read more

Placing Green Mountain’s Fair Value Under Review

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There are stocks with bull and bear arguments, and then there’s Green Mountain Coffee Roasters (GMCR). A lot of shorts recently became interested in the stock when hedge-fund manager David Einhorn released a presentation detailing his bearish argument against the firm. The company’s shares went into a large slide, losing over 50% of its value from that time. That was, until it reported a first quarter earnings beat, fueled by a divestiture of its “Filterfresh” brand and Green Mountain rallied back to $70 per share. Oh, and then of course, Starbucks (SBUX) recently announced the creation of its own single-serve espresso machine, which is an adjacent product of the Keurig single-serve coffee machine, sending Green Mountain’s shares tumbling back towards … Read more

General Mills’ Fiscal 2012 Third-Quarter Earnings Weren’t So Hot

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General Mills (GIS) posted disappointing fiscal 2012 third-quarter earnings Wednesday that showed an inability to pursue higher pricing to offset increased input costs. Though we weren’t pleased with the results, we are sticking with our $39 per share fair value estimate. The firm’s net sales advanced 13% in the quarter, though most of this growth was driven by its International Yoplait acquisition. General Mills’ gross margin fell 260 basis points in the period, while the company’s segment operating profit rose a meager 1% as significantly higher input costs year-over-year (10%-11%) and more aggressive advertising initiatives weighed on performance. On a corporate level, operating profit fell over 2%, as its operating margin contracted 170 basis points from last year’s quarter. Adjusted … Read more

Don’t Speculate on Earnings and Especially on Lululemon’s

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At Valuentum, the primary and initial focus of our methodology is centered on calculating the long-term intrinsic value of firms based on a robust discounted cash-flow analysis (click here for a narrated, in-depth presentation on our process). We’ve written in the past about how we’re not fans of speculating on earnings releases, and we think doing so is nothing more than gambling. Lululemon (LULU) reports earnings on Thursday, and its past post-earnings moves have been drastic. After reporting in-line earnings and modest guidance in its last report, the stock fell from $49.70 at the previous close to open at $41.94 after reporting earnings. The stock then proceeded to rally back-up to close at $47.17. That’s a lot of volatility for … Read more

Oracle Posts Better-Than-Expected Fiscal 2012 Third-Quarter Results

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Oracle (ORCL) posted better-than-expected fiscal 2012 third-quarter results after the close Tuesday. We continue to believe the shares have valuation upside and are sticking with our $38 per share fair value estimate. Total revenues advanced 3% thanks to roughly a 7% increase in new software license revenues and an 8% jump in software license updates and product support sales. Hardware systems products revenue fell 16%, however. Non-GAAP operating income advanced 8% to $4.2 billion, while non-GAAP net income jumped 13% from the same period a year ago. Non-GAAP earnings per share increased 15%, to $0.62, blowing by consensus expectations of $0.56 per share. On its conference call, Oracle said that it thinks non-GAAP, constant-currency revenue for the current quarter will … Read more

Adobe Issues Poor Outlook But Cash Flow Generation Remains Very Strong

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Adobe (ADBE) reported poor fiscal first-quarter 2012 results after the close Monday that disappointed most investors. Though we plan to update our valuation model on the firm, we don’t expect to make a material change to Adobe’s fair value at this time. The company’s revenue advanced a modest 1.7% in its fiscal first quarter as subscription and services-and-support sales expansion offset weakness in its products segment, which fell over 4% from the same period a year ago. Adobe’s gross margin, however, improved to 89.6% from 89.5% in last year’s quarter. Operating income fell 4.4% from the year-ago quarter, as sales and marketing expenses surged. There was nothing concerning in the firm’s below-the-line items, though the company did suffer from a … Read more

Though Ugg’s Probably Aren’t Dead, Deckers’ Shares Have Only Limited Upside

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The news for Deckers (DECK) hasn’t been great over the past several months. The slide in its share price began when the Street became more cautious on its fundamentals in December, and it recently culminated with flat earnings growth guidance for its fiscal year 2012 due primarily to higher input costs. Though the raw expense of boot materials (sheepskin) may weigh on the company’s fundamentals in the near term, we think the market has generally overreacted to the these headwinds. Regardless of how fashionable men think the company’s flagship Ugg boots are (often nicknamed “Ugg-ly), we think they’re among the most dominant women’s winter footwear brands, along with Sorel (COLM) and North Face (VFC). And why wouldn’t they be? Other … Read more