Brian Nelson

Honeywell Expects Strong 2012 Despite Downturn in Europe During First Half

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Honeywell (HON) posted solid results Friday that showed strong organic growth, impressive cash-flow generation, and margin expansion across all of its business segments. Our above-market fair value estimate remains unchanged. The industrial conglomerate’s fourth-quarter sales advanced 8% (7% organic) reflecting ongoing expansion in most of its end markets, new product introductions, and geographic expansion on key process initiatives. Honeywell experienced particular strength from its aerospace end market thanks to 20% growth in commercial original equipment and aftermarket volumes. Though we are reducing our aerospace exposure in the portfolio of our Best Ideas Newsletter to lock in some of our big gains of the previous few months, we continue to expect strength from this industry as commercial production rates at Boeing … Read more

Altria Posts Decent Fourth-Quarter Results; Dividend Yield Still Attractive

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Altria (MO) posted fourth-quarter results Friday that showed strength in its smokeless product volume and higher pricing in its cigarette segment. We continue to like the firm’s exceptional dividend yield at today’s prices and think Altria remains a key component of both our Best Ideas and Dividend Growth portfolios. Our fair value estimate for Altria remains unchanged. Altria’s total fourth-quarter net revenues advanced 3.4% due to increased performance across all of its reportable segments. The company’s cigarette segment’s net revenue advanced about 3% thanks to higher list prices, offset in part by lower volume. Revenue in the company’s smokeless products’ segment increased 6.6% thanks to both higher volume and pricing. Total combined shipment volume for its Copenhagen and Skoal products … Read more

Best-Idea Ford Hits Profit Snag in Fourth Quarter; 2012 Pre-Tax Operating Profit to Hold Flat

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Ford (F) posted fourth-quarter results that showed excellent top-line performance but weak underlying profitability that disappointed most investors. We continue to believe that Ford has substantial valuation upside and believe the firm to be a long-term holding in the portfolio of our Best Ideas Newsletter. We’re not playing the “quarterly earnings game” with the automaker’s shares and may add to our position in our Best Ideas Newsletter upon significant market weakness. Total revenue of $34.6 billion in the fourth quarter came in better than consensus expectations and represented a 2.1% increase from the same period a year ago. Fourth-quarter pre-tax operating profit came in at $1.1 billion, or $0.20 per share, down from $0.30 in last year’s quarter and below … Read more

P&G Reduces 2012 Outlook; Expects Dividend Increase This Year

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Proctor & Gamble (PG) reported fiscal second-quarter results Friday that were weighed down by higher commodity costs. The company reduced its 2012 outlook due to non-operating items (currency, taxes), but we think there may be more to the revision than management is leading investors to believe. Nonetheless, we are maintaining our fair value estimate range, which we think adequately captures such risks, and continue to hold the company in the portfolio of our Dividend Growth Newsletter. P&G’s revenue advanced 4% in its fiscal second quarter—all of it organic—thanks to growth in all six of the firm’s business segments. Volume contributed one percentage point to the increase, while broad-based price increases accounted for the balance. The firm’s core operating margin fell 160 … Read more

Starbucks is Firing on All Cylinders But Shares Are Expensive

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Starbucks (SBUX) reported excellent fiscal first-quarter results Thursday but its outlook fell below optimistic consensus forecasts. We don’t expect to make a material change to our $38 per share fair value estimate. Total revenue in the quarter expanded 16% to a record $3.4 billion on the heels of strong global comparable same-store-sales growth of 9% (7% increase in traffic and a 2% increase in the average ticket price). Same-store-sales growth was also 9% in the Americas region during the period, while it was only 2% in EMEA (Europe, Middle East, Russia, and Africa) as a result of softness in Europe. During the quarter, the company opened 241 net new stores globally and has now reached 500 stores in mainline China and Latin … Read more

Under Armour’s Fourth Quarter Hurt by Poor Weather

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Under Armour (UA) posted fiscal fourth-quarter results Thursday that weren’t as impressive as previous quarters. Though revenue grew 34% from the same period a year ago, the growth rate represents a modest slowdown from the previous quarter’s pace of 41.7% and the 35.7% rate recorded in the fiscal fourth quarter of last year. Under Armour cited the unseasonably warm weather as the main culprit in the slowing growth, and while we wouldn’t exactly call this revenue expansion subpar, several of our concerns regarding the firm are starting to come to fruition. For one, gross margins continue to fall. Granted, the 10-basis-point decline isn’t substantial, but profit margins aren’t growing, and we don’t expect them to expand anytime soon. Earnings per share, however, … Read more

Precision Castparts Issues Fiscal Third-Quarter Results

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Metal-bender Precision Castparts (PCP) reported strong fiscal third-quarter results but failed to live up to consensus expectations on the top and bottom line. We continue to believe that Precision Castparts has valuation upside from these levels, but we are more inclined to continue to take profits in the jet-engine castings maker in the portfolio of our Best Ideas Newsletter. Our fair value estimate is unchanged. Revenue jumped 14% in Precision’s fiscal third-quarter thanks to strength across all of its product lines. Sales of its investment cast products jumped 8%, as aerospace demand continued at a nice pace. We’ll be looking for even stronger performance from its Investment Cast Products segment once production for the Boeing 787 ramps up considerably, likely … Read more

3M Issues Fourth-Quarter Results; Reaffirms 2012 Guidance

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3M (MMM) reported modest fourth-quarter earnings expansion Thursday and offered an outlook for 2012 that was consistent with our expectations. We’re sticking with our $88 per share fair value estimate at this time. Total sales advanced 5.7% on the heels of organic local-currency sales growth of 3.3% (1.3 percentage points coming from volume and the balance of the organic expansion from pricing). The company noted that revenue expansion was strongest in its Industrial and Transportation segment (abrasives, aerospace, industrial adhesives and tapes, etc.), which increased 14.3% during the period. Safety, Security, and Protection Services (SSPS), Consumer and Office (stationery products, office supplies, etc.), and Health Care (infection prevention, skin and wound care, etc.) experienced advances in revenue during the period, … Read more