Brian Nelson

Tanger’s External Growth Activity Looks Encouraging

by

Image Source: Tanger Inc. By Brian Nelson, CFA Tanger Inc. (SKT) is an owner and operator of outlet and open-air retail shopping destinations, and the REIT has done a great job of late, with shares advancing more than 50% during the past year. While traditional real estate equities have languished, Tanger has managed to keep moving in the right direction. The REIT reported better than expected fourth-quarter results February 15, and its ~3.6% dividend yield isn’t too shabby. For investors looking to take a leap into retail REITs, Tanger may be among the top considerations. Tanger’s net income came in at $0.22 per share in the fourth quarter, up from $0.17 per share in the same period a year ago, … Read more

Digital Realty Trust Has Bucked Broader REIT Sector Weakness

by

Image: Digital Realty Trust has outperformed the broader REIT sector by quite the margin since the beginning of 2023. By Brian Nelson, CFA Real estate investors have had a difficult time the past year, with shares of the Vanguard Real Estate Index ETF (VNQ) falling roughly 6% versus a 22%+ return on the S&P 500 (SPY), both measured on a price-only basis. Data center REIT Digital Realty (DLR), however, has bucked the trend of the broader real estate sector’s weakness advancing 20% over the same time period on a price only basis. Digital Realty’s fourth-quarter results and guidance for 2024, released February 15, weren’t great, but the company is much better positioned than other REITs, in our view. Shares yield … Read more

Cisco Looks Cheap at 13x Forward Non-GAAP Earnings But Fundamentals Are Deteriorating

by

Image: Cisco has ratcheted down expectations during the past couple quarters, and its shares have been choppy for the better part of a year now. By Brian Nelson, CFA On February 14, Cisco Systems, Inc. (CSCO) reported mixed second-quarter fiscal 2024 results that showed beats on both the top and bottom lines compared to previously lowered expectations, but overall lower revenue growth and weaker cash flow trends. The company is experiencing slow demand for networking equipment as it continues to work toward completion of its deal for cybersecurity firm Splunk. Though we didn’t like Cisco’s revised outlook for fiscal 2024, the firm is trading at just ~13x forward non-GAAP earnings per share. Cisco increased its dividend payout modestly and currently … Read more

Coca Cola’s Pricing Strength Continues to Power Results

by

Image: Coca-Cola’s pace of price/mix expansion continues to drive strong performance. By Brian Nelson, CFA On February 13, Coca-Cola (KO) reported strong fourth quarter results that exceeded expectations on both the top and bottom lines. The standout metric in the quarter was organic revenue growth, which advanced an impressive 12% in the quarter thanks to a solid 9 percentage-point increase in price/mix and 3 percentage-point expansion in concentrate sales. The company’s outlook for 2024 was strong as well, with the company targeting organic revenue expansion of 6%-7% for the year, and we like the momentum behind Coca-Cola’s performance. The Dividend King continues to deliver for investors, and while shares are trading above our fair value estimate, investors can do a … Read more

Waste Management’s Pricing Power Is Fantastic, Sustainability Initiatives Are Noble

by

Image Source: TheInvertedFan By Brian Nelson, CFA Industry economics in the municipal solid waste industry are generally easy to understand. Industry pricing power essentially emanates from disposal operations. Waste generated, for example, must end up somewhere, and therefore whichever entity has the disposal operations has the power to set the bar with respect to pricing, directly or indirectly, from transfer facilities all the way through collections within certain regions. After all, garbage pick-up operators won’t be in business for long if they have to pay more to dispose of waste than they charge to pick it up. It may not be a glamourous business, but it is a very good one, and those with disposal operations tend to rule the … Read more

Eli Lilly’s Shares Have More Than Doubled During the Past 52 Weeks

by

Image: Eli Lilly’s shares have been on a tear these past few years. By Brian Nelson, CFA On February 6, Eli Lilly (LLY) reported excellent fourth-quarter results that showed revenue and non-GAAP earnings per share coming in better than expectations. The company’s fourth-quarter results were bolstered by sales of diabetes and weight-loss drug Mounjaro, which saw sales in the quarter leap to ~$2.2 billion from ~$279 million in the year ago period. We continue to be in awe of the sales momentum behind GLP-1 receptor agonists, and the opportunity continues to be robust, despite already rapid sales acceleration. Though Eli Lilly trades at a premium to the high end of our fair value estimate range, we may be low in … Read more

Earnings Roundup: PEP, DIS, ARM, PM

by

By Brian Nelson, CFA Dividend Aristocrat Pepsi (PEP) Raises Dividend for 52nd Consecutive Year On February 9, Best Ideas Newsletter portfolio holding Pepsi reported mixed fourth quarter results that showed revenue pressures but a modest beat with respect to non-GAAP earnings per share. Organic revenue growth was 4.5% in the period, lower than the consensus forecast calling for 5.9% expansion, while core constant currency earnings per share increased 9%. The company experienced organic volume declines across the board in its operating divisions, with the greatest weakness coming from its Quaker Foods North America segment, where volumes fell 8%. Management seemed cautious in the quarterly press release noting that it “navigated another year of elevated levels of inflation, macroeconomic volatility, geopolitical … Read more

Chipotle Rallies, Long-term Outlook Remains Promising

by

Image Source: Valuentum  By Brian Nelson, CFA Burrito maker Chipotle (CMG) reported excellent fourth-quarter results February 6 that beat on both the top and bottom lines. Total revenue advanced 15.4% in the quarter, while comparable store restaurant sales increased 8.4% thanks primarily to higher transactions and to a lesser extent an increase in average check. The company’s restaurant operating margin expanded 140 basis points, to 25.4%. Adjusted diluted earnings per share came in at $10.36 per share in the quarter, up 25% on a year-over-year basis. Chipotle opened 121 new restaurants in the fourth quarter, with 110 of them coming with a Chipotlane drive thru. Though the firm has considerable operating lease liabilities, free cash flow came in at $1.22 billion … Read more

Palantir’s Fourth-Quarter Results Showcase Strong Trends in Artificial Intelligence

by

Image: Palantir’s revenue continues to march higher, and the company’s performance continues to showcase the growing strength in artificial intelligence. Source: Palantir By Brian Nelson, CFA Palantir Technologies (PLTR) has three core software platforms called Gotham, Foundry, and Apollo that “provide the critical infrastructure needed to integrate (its) customers’ data and operations and run their software in virtually any environment (Form 10-K).” On February 5, the firm reported solid fourth-quarter results that showed revenue growing 20% on a year-over-year basis and GAAP net income coming in at $93 million, representing the fifth consecutive quarter that the firm has driven positive GAAP profits. We liked Palantir’s quarterly results, but we wanted to bring to members’ attention the commentary surrounding artificial intelligence [AI]: … Read more

McDonald’s Facing Macro Challenges, Impacts from the War in the Middle East

by

Image Source: Mike Mozart By Brian Nelson, CFA On February 5, McDonald’s Corp (MCD) reported decent fourth-quarter results with strong revenue growth coming roughly in-line with consensus estimates and non-GAAP earnings per share exceeding the Street’s forecast. Though the firm noted that it is experiencing some macro challenges and that its operations continue to be impacted by the war in the Middle East, we like having McDonald’s as a core restaurant holding in the Best Ideas Newsletter portfolio in part because of its mostly franchised business model that handles inflationary pressures well and its strong and world-renowned brand name. The high end of our fair value estimate range of McDonald’s stands at $345 per share, and the company yields ~2.25% … Read more