Brian Nelson

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

Home Depot Issues Fantastic Fourth-Quarter Results; Another Positive Sign for US Housing

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Home Depot (HD) reported solid fiscal fourth-quarter results Tuesday that revealed strong comparable store sales and signs that the US housing market continues to strengthen. However, we think the firm’s shares are getting a bit expensive following its price move after earnings, and our $38 per share fair value estimate for the world’s largest home-improvement retailer remains unchanged. Home Depot’s revenue advanced 5.9% in the fourth quarter from the same period a year ago thanks to a 5.7% jump in comparable store sales (6.1% in the US). The number of customer transactions increased 3.6%, while the average ticket expanded 2.4%. Unseasonally warmer weather and an improving housing market buoyed results and stimulated home-improvement demand in the period. We continue to … Read more

Walmart’s Fiscal Fourth-Quarter Results and Outlook Disappoint; US Comparable Sales Performance Continues to Improve

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Walmart (WMT) reported disappointing fiscal fourth-quarter results Tuesday that showed improving domestic traffic trends but modest bottom-line expansion. Though the firm’s outlook fell a bit lower than what we were expecting, we don’t expect to make a material change to our fair value estimate for the world’s largest retailer. Consolidated net sales for its fiscal fourth quarter increased 5.8% from the same period a year ago, with 4.5 percentage points of the increase coming from organic means. Walmart International led the charge in sales growth, advancing 13.1% in the period (8.5% organic), while revenue at Sam’s Club expanded 6.8% (5.4% excluding fuel). Both of these increases, however, lagged the full-year growth pace in the respective segments, suggesting decelerating fourth-quarter revenue … Read more

General Mills Cuts 2012 Outlook; We Remain on the Sidelines

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On Friday, General Mills (GIS) said that weakness in volumes across US retail food categories in December and January will negatively impact its fiscal third-quarter results (ending in February). As we outlined in our note on the firm’s fiscal second quarter, we were less-than-impressed with the company’s performance at the time, and we suspect most of the current weakness is coming from continued reduced demand for flour, dessert mixes, canned and frozen vegetables, and yogurt. Specifically, General Mills lowered its fiscal 2012 adjusted diluted earnings per share guidance to the range of $2.53 to $2.55 (was $2.59 to $2.61 previously). We also expect the firm’s fiscal 2012 results to be negatively impacted by higher input costs and a negative mix shift … Read more

Ancestry.com Beats Bottom-Line Consensus Estimates in 4Q But Street Doesn’t Care

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This article appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/373111-ancestry-com-beats-bottom-line-estimates-wall-street-shrugs One of the most difficult things to do as an investor is to accept that, despite one’s thesis playing out, a company’s shares may have a difficult time coming to reflect the estimate of its intrinsic value for any number of reasons (management, ongoing short-selling pressure, etc.). And while we have been quite forgiving of Ancestry.com’s (ACOM) management in the past and have been very open to the “short” thesis on the company, the firm’s investment in DNA has turned us off to the stock. We will be looking to trim our position in Ancestry.com in the portfolio of our Best Ideas Newsletter in coming trading sessions.   Our primary thesis on Ancestry.com (ACOM) is that … Read more

Deere Raises 2012 Earnings Outlook on Strong Equipment Demand

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Deere & Co. (DE) issued record fiscal first-quarter earnings Wednesday as the firm continues to capitalize on the world’s growing need for food, shelter and infrastructure. We’re comfortable with our long-term projections for the farm-equipment maker and are sticking with our fair value estimate.   Worldwide net sales advanced 11% during its fiscal first quarter buoyed by pricing increases of 4%. The company’s Agriculture & Turf segment sales increased 8%, while its Construction & Forestry segment’s revenue climbed 22%. Strength came mostly from outside the US and Canada, as net sales jumped 21% in that geographic category during the period. Net sales in the US and Canada were up a modest 5% for the quarter. The tractor-maker continues to benefit … Read more