Brian Nelson

Zynga’s Quarterly Results a Non-Event; Steer Clear of the Firm’s Stock

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Zynga (ZNGA), a leading provider of social gaming services and probably best known for Farmville on Facebook, reported its first-ever quarterly results after going public in December. Though its results showed tremendous top-line expansion, we have long-term concerns with owning Zynga at these levels and view its near-term results as inconsequential to its intrinsic value.   First of all, we urge investors to keep their heads as the social-networking bubble heats up in the coming months, leading up to and following the well-publicized IPO of Facebook. We’ve already witnessed what we’d describe as “sympathy buying” of firms like Zynga and LinkedIn (LNKD) and think the best way to play the group is to stay as far away as possible or … Read more

Dividend Growth Portfolio Holding PPL Hikes Dividend to $1.44 Per Share

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On Friday, electric utility PPL Corp (PPL), one of the larger holdings in the portfolio of our Dividend Growth Newsletter, issued better-than-expected fourth-quarter results. The firm’s outlook for its 2012 earnings, however, was in line with what most analysts were expecting. Specifically, the company expects 2012 earnings per share to come in the range of $2.15 and $2.45 (consensus estimates were at $2.42 per share). PPL projects that 70% of this year’s earnings will come from its regulated business, which continues to drive earnings strength. Though PPL noted that it expects lower profitability in its competitive-market supply segment due to higher-value hedge contracts, we think the upper end of firm’s guided earnings range is achievable. Importantly, the company also announced an … Read more

LinkedIn Posts Fourth-Quarter Results; Steer Clear of the Firm’s Shares

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LinkedIn (LNKD) reported fourth-quarter results that, to a large extent, are a non-event as it relates to the firm’s valuation. The company is reflecting substantial revenue and earnings growth long into the future, and while its current trajectory remains strong, it will only hold its lofty price if it can continue to deliver on such expectations quarter after quarter. We maintain the firm will not be able to deliver on the long-term expectations that are embedded in its stock price, but it may take some time for the market to realize our view. Revenue for its fourth-quarter roughly doubled from the same period a year ago, while net income came in at just under $7 million ($0.06 per share) during … Read more

Best Idea Visa Posts Another Strong Quarter

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Best-idea Visa (V) posted another strong quarter Wednesday, exceeding even some of the bullish estimates. The company earned $1.49 per share for the quarter, and raised its full-year earnings-per-share growth guidance to the high-teens. Revenue increased 14%, to $2.5 billion during the period, with strong growth in service fees (up nearly 15%) and in international processing fees (up about 19%). As a result of lower future marketing expenses, a shrinking share count and a strong outlook, we continue to believe that Visa should fetch a price in the high $120s. CEO Joe Saunders reassured investors that the company has fully accounted for the impact of the Durbin Amendment, which has further strengthened our conviction in the stock. Furthermore, the company expects to generate over $4 … Read more

Cisco’s Fiscal Second-Quarter Results Show Turnaround Gaining Traction

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Networking-giant Cisco (CSCO) reported decent fiscal second-quarter earnings Wednesday that showed its turnaround efforts are bearing fruit. Though we will be revisiting our valuation on the company, we don’t expect to make a material change to our fair value estimate. Fourth-quarter net sales advanced 11% from the same period a year ago, while earnings per share came in at $0.47 on a non-GAAP basis, ahead of expectations. The company’s widely-watched adjusted gross margin expanded modestly to 62.4% during the quarter from 62.35% in the same period a year-ago. Non-GAAP net income advanced by over 23% from last year’s quarter, while cash from operations was $3.1 billion—better than levels achieved on both a sequential and year-over-year quarterly basis. The company continues … Read more

Disney Posts Mixed Fiscal First-Quarter Results; Consumers Still Spending at Parks and Resorts

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Disney’s fiscal first-quarter results, issued Tuesday, were mixed. Revenues missed expectations, advancing modestly from the same period last year, while diluted earnings per share grew 18% to $0.80, beating consensus forecasts of $0.75 per share. The top-line growth and operating-income expansion in the period was led by its Media Networks and Parks and Resorts segments. Revenue in its Studio Entertainment segment fell 16%, though operating income in the division still advanced 10% despite having fewer Disney branded titles in wide theatrical release during the quarter. Consumer Products revenue jumped 3%, and segment operating income held essentially flat. The company noted particular strength at ESPN, generally lower political advertising revenues, and increased guest spending (higher ticket prices and food and beverage … Read more