Brian Nelson

Mixed Bag Yet Again in Collective Brands’ Third Quarter

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One of Valuentum’s best ideas, Collective Brands (PSS) reported quarterly results on Monday after the close. Results, as has been the case for the last several quarters, were mixed. Payless domestic continued to shut down less profitable stores, which helped contribute to the segment’s 5% sales skid. Same store sales also fell 4.5% domestically, reflecting the slow economic recovery and Payless’ ties to low-end consumers. Internationally sales weren’t very good either. Sales only increased by 1.1%, and same stores sales actually fell in Canada. Operating profit in the segment fell by 55%. At the same time, it’s good to see sales growth at any Payless location. PLG Wholesale Blowing Away Expectations While the Payless business remains challenged, or frankly, bad, … Read more

LinkedIn’s Shares Hit Five-Month Low

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We provide the theses behind our valuation calls on LinkedIn (LNKD) and Netflix (NFLX), the latter falling significantly in recent months, as predicted by our July note below (when Netflix was trading above $250 per share; it’s now under $70). We expect LinkedIn’s shares to continue to converge to our $55 fair value estimate in coming months (it’s trading around $70 per share). << LinkedIn Valuation: Completely Absurd, Significantly Overvalued << Netflix Valuation: Completely Absurd, Significantly Overvalued

Hewlett-Packard Reports Fiscal Fourth-Quarter Results; Outlook Well Below Expectations

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Hewlett-Packard (HPQ) reported better-than-expected fiscal fourth quarter results after the close Monday but its outlook fell well below our forecasts for fiscal 2012. We are placing our fair value estimate for HP under review as we continue to evaluate the future direction of the firm (the future of its PC business, its strategy in Europe, and how it will compete in tablets).   The firm’s non-GAAP net revenue fell 3% in the quarter (6% adjusted for currency), while non-GAAP net earnings dropped 23% as the firm faced 2.3 percentage points of non-GAAP operating margin pressure (non-GAAP operating margin was 9.7% in the quarter). Despite the reduced numbers, the results came in better than consensus estimates on both the top and … Read more

*New Book Review* The Smartest Money Book You’ll Ever Read: Everything You Need to Know about Growing, Spending, and Enjoying Your Money

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Valuentum’s subscriber base enjoys reading the latest and greatest investing books. As a result, Valuentum requests and receives business and investing books before they are officially released. Our editorial staff took a look at the following book, and here’s what we thought after reading it: The Smartest Money Book You’ll Ever Read: Everything You Need to Know about Growing, Spending, and Enjoying Your Money By Daniel Solin. Perigee Trade, 2011. 304 p. ISBN 978-03995-3721-9. Book Release Date: December 27, 2011   The Smartest series by Solin includes The Smartest Portfolio You’ll Ever Own: a Do-it-Yourself Breakthrough Strategy, The Smartest Retirement Book You’ll Ever Read, The Smartest Investment Book You’ll Ever Read: The Simple, Stress-Free Way to Reach Your Investment Goals, … Read more

Salesforce.com Posts Mixed Third-Quarter Results; We’re Not Impressed with Profitless Growth

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Salesforce.com reported mixed third-quarter fiscal 2012 results Thursday that showed excellent top-line expansion but very weak levels of profitability. We are maintaining our $120 fair value estimate. The firm achieved record quarterly revenue in the period, up 36% on a year-over-year basis. Deferred revenue growth, or sales to be recognized in the future, was a bit lower than top-line expansion in the period and came in at 32%. This suggests that revenue growth in the future may slow a bit from the current pace. Salesforce.com’s subscription and support revenues jumped 36%, while professional services and other revenues advanced 34%. On the bottom line, the results were less than impressive. On a GAAP basis, Salesforce.com registered a third-quarter net loss of $0.03 … Read more

Target Posts Excellent Third-Quarter Results; Highest Quarterly Comp Growth Since Mid-2007

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Target (TGT) reported strong third-quarter results Wednesday that showed strength in its US retail stores and improved bad debt expense at its credit card operations. We liked the quarter and are maintaining our high $50s fair value estimate. The firm’s US retail sales jumped 5.4% thanks to a 4.3% increase in comparable-store sales with the balance of the increase coming from new store expansion. The same-store sales increase was Target’s best showing since the second quarter of 2007. Segment earnings (EBIT) jumped over 14% thanks to a 0.4 percentage point improvement in segment operating margins, almost entirely driven by reduced SG&A expenses (as a percentage of sales). Though we liked the firm’s US retail performance, we were equally pleased with the company’s … Read more

Strong Third Quarter for Dick’s Sporting Goods; Maintaining Our Fair Value

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By all accounts, Dick’s Sporting Goods (DKS) reported a strong third quarter. Same store sales were up 4.1%, earnings increased to $0.33 a share on a GAAP basis, up nearly 170% year-over-year. Additionally, management raised guidance to $2.01-$2.03 per share from $1.94-$1.96, although we don’t think the guidance raise is very surprising. Gross margins were also up about 125 basis points, which is likely to continue into the fourth quarter. We are maintaining our $30 fair value estimate. Dick’s continues to ride tailwinds in footwear and athletic apparel to higher revenue growth. The company also opened 19 new stores and posted strong comps in its burgeoning e-commerce business (16.8%). However, Golf Galaxy continues to post lackluster results as it reported … Read more

Home Depot Reports Strong Third-Quarter Results on Storm-Related Demand, Raises Dividend

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On Tuesday, Home Depot (HD) reported solid third-quarter results, increased its 2011 guidance, and lifted its dividend 16%. We continue to feel that Home Depot is better positioned that peer Lowe’s (LOW) and are maintaining our $35 fair value estimate on the home-improvement retailer. The firm’s revenue jumped 4.4% from the third quarter led by comparable store sales of 4.2% (total transactions were up 1.2%, while average ticket price accounted for the balance of the increase). Comp sales for US stores were also strong at 3.8%.  Storm-related sales—Hurricane Irene—bolstered results, and the firm noted positive comps in all but 5 of its top 40 markets (New Jersey and South Atlantic regions were particularly strong). Though these two regions benefited from storm-related demand … Read more

Wal-Mart’s Third-Quarter Earnings Decline, But US Comps Reverse; Low-End Consumers Increase Spending

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Wal-Mart (WMT) announced mixed third-quarter fiscal 2012 results Tuesday that came in roughly in line with the mid-point of its previously-issued earnings guidance. Though we were disappointed by weak traffic trends in the quarter, we’re holding the line with our fair value estimate for Wal-Mart. Net sales increased 8.2% (6.8% constant currency) from the same period a year ago, as comparable sales in the US and Sam’s Club jumped 1.3% and 5.7%, respectively – the latter excluding fuel. This compares to a negative US comp and 2.4% for Sam’s Club in last year’s quarter. The major driver behind the positive reversal in US comps (they had been negative for the previous nine quarters) was an increase in the average ticket, … Read more