Brian Nelson

AutoZone Puts Up Solid Fiscal Second-Quarter 2011 Results; We Prefer Ford

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AutoZone (AZO) reported strong fiscal second-quarter 2012 results Tuesday that showed solid same-store-sales increases and bottom-line expansion. We’ll be tuning in to the firm’s conference call, but we don’t expect to make a change to our fair value estimate for the auto-parts retailer at this time. AutoZone’s fourth-quarter revenue advanced 8.6% during the period thanks to nearly a 6% increase in same-store-sales. Gross margin increased 40 basis points, to 51.3%, in the quarter, but such improved profitability was more than offset by higher self-insurance costs. The company’s net income jumped nearly 13% in the quarter, while diluted earnings per share of $4.15 increased over 24% from the same period a year ago thanks to share buybacks. Consensus was at $4.04 … Read more

Priceline.com Reports Strong Fourth-Quarter Results

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Priceline.com (PCLN) reported strong fourth-quarter results that showed continued momentum with respect to bookings growth. Though we will be revisiting our valuation on the online travel provider, we don’t expect to make a material change to it. The company’s revenue advanced 35.5% during the period, as international operations increased nearly 63% from last year’s quarter. During the period, fourth-quarter gross travel bookings, increased nearly 52%. Gross profit performed even better than firmwide top-line expansion, jumping over 50% in the quarter. Further, Priceline.com was able to leverage its cost structure such that operating income expansion exceeded both revenue and gross profit increases at a nearly 61% jump. The firm’s GAAP net income for the fourth quarter came in at $4.41 per … Read more

Key Takeaways From Berkshire’s 2011 Annual Report

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Warren Buffett’s Berkshire Hathaway (BRK-A, BRK-B) posted its 2011 annual report to shareholders on its website over the weekend. Investors near and far wait all year to read the latest musings of the Oracle of Omaha. This year’s letter to shareholders was filled with Buffett’s candor, as usual, where he outlined much of where he went wrong during the year.   Though the return on Berkshire’s book value still outpaced the return achieved on the S&P 500 in 2011, it advanced less than 5% during the year, a feeble showing given the collection of its businesses. Over the past 47 years, however, book value has grown from $19 to $99,860, a rate of roughly 20% compounded annually – an incredible … Read more

Salesforce.com Expects a GAAP Loss in Fiscal 2013; Cash Flow Generation Remains Robust

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Salesforce.com (CRM), the enterprise cloud-computing company, reported strong fiscal fourth-quarter 2012 results Thursday that showed tremendous cash-flow generation. Quarterly revenue jumped 38%, and deferred revenue (a gauge of future sales growth potential) advanced almost 50%. Though we were impressed with the pace of deferred revenue growth in the period, we caution investors that such a pace was driven more by changes in invoice practices than internal expansion. Salesforce.com’s fourth-quarter GAAP net loss was $0.03, but after excluding stock-based compensation and certain other items, non-GAAP earnings per share was $0.43. For the full-year, Salesforce.com’s GAAP net loss per share was $0.09. Nonetheless, the company’s quarterly operating cash flow came in at $240 million, up 45% year-over-year, and free cash flow (cash flow from operations … Read more

Target Rounds Out 2011 with the Strongest Annual Comp Growth Since 2007

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Target (TGT) reported fourth-quarter results Thursday and rounded off a strong 2011 that showed the best annual comparable-store sales growth since 2007. We’re sticking with our fair value estimate for Target. Target’s sales advanced 3% in the fourth quarter thanks to a 2.2% increase in US retail comparable-store sales offset by a nearly 9% reduction in credit card revenues. For the quarter, the company experienced a 0.4 percentage-point increase in the number of transactions and a 1.8 percentage-point increase in the average transaction amount. The pace of comparable-store sales, however, lagged the 2.4% increase achieved during the same period a year ago. Management noted that such performance was below internal expectations, as well, due to higher promotional activity during the … Read more

Hewlett-Packard’s Turnaround Still Many Quarters Away

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Hewlett-Packard (HPQ) reported disappointing fiscal first-quarter 2012 results as the company continues to struggle to right the ship. Though the turnaround is still many a quarter away, we are sticking with our fair value estimate for the world’s No. 3 personal computer maker at this time. Hewlett-Packard’s fiscal first-quarter revenue fell 7% (8% after adjusting for currency) from the same period a year ago, while the company’s GAAP diluted earnings per share dropped nearly 40%, to $0.73. Though this came in better than the firm’s previously-provided bottom-line outlook of $0.61 to $0.64 per share, we think expectations had been lowered to the point where an earnings beat had been completely expected. On a non-GAAP basis, earnings per share came in … Read more

Dell Posts Weak Fiscal Fourth-Quarter Results

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Dell (DELL) reported disappointing fiscal fourth-quarter results Tuesday after the close. Though we will be revisiting our fair value estimate for the personal-computer maker, we don’t expect to make a material change to it. Revenue for the quarter advanced only 2%, to $16 billion, as a 6% jump in services revenue offset roughly flat product revenue. The firm continues to expand its mix of revenue and earnings, and services revenue growth outpaced products revenue advancement in the quarter, which we view positively. Non-GAAP operating income fell 11% in the period, while non-GAAP net income dropped 10% as the company faced higher disk drive costs due to the well-known supply constraints from the recent flooding in Thailand. Share buybacks, however, mitigated … Read more

Kraft’s Pricing Power Is Unmatched By Peers in Fourth Quarter; Waiting Patiently for the Break Up

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Kraft (KFT) posted solid fourth-quarter results Tuesday that continued to show the firm’s pricing power. Though we liked the quarter, we remain on the sidelines with respect to Kraft’s shares until after the company separates the firm into two entities later this year: a global-snacks company and a North American grocery products firm. At that time, we’ll be better able to evaluate the investment merits of each separate entity to optimally allocate our capital to the one with the most promise, if such an opportunity presents itself. Kraft’s fourth-quarter revenue jumped 6.6% thanks to a 6.1% jump in organic net revenues, as strong pricing offset declines in volume. However, cost of sales still outpaced revenue expansion, as gross profit growth was … Read more