Brian Nelson

Pfizer Reports Decent Third-Quarter Results; Loss of Exclusivity on Blockbuster Drug Lipitor Concerning

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Pfizer (PFE) reported strong third-quarter results Tuesday that showed decent top-line growth thanks to favorable foreign exchange and solid income expansion due to excellent cost controls, which offset product losses of exclusivity. We are maintaining our fair value estimate. Pfizer’s top line jumped 7%, which was driven almost entirely by favorable foreign exchange (international revenue growth was 15%; 4% operational with the balance forex). US revenues continue to decline and also fall as a percentage of total revenue (now 40%, was 44%). Operationally, Pfizer experienced the strongest growth in nutrition, animal health (due to the addition of legacy King products), and consumer healthcare.  Revenue from its largest segment, Primary Care, was essentially flat, while sales from its second-largest segment, Specialty … Read more

Republic Services Puts Up Nice Third Quarter; Best Organic Revenue Growth Since 2008

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Garbage-hauler Republic Services (RSG) posted nice third-quarter results that showed the best organic top-line expansion in years and double-digit operating-income and earnings-per-share increases. We are retaining our position in our Best Ideas portfolio and see no reason to change our fair value estimate at this time. The firm’s core pricing advanced 0.7% in the period (slightly lower than management’s expectations), while fuel surcharges and commodities pricing added another 1.2% and 1.7%, respectively, to top-line growth. Republic’s municipal solid waste landfill prices increased 3%, which improved sequentially. Core volume also nudged up slightly in the period, excluding the San Mateo and Toronto contract losses–the ninth consecutive quarter of volume improvement. Importantly, the volume increase compares to a 2.5% decrease in the year-ago … Read more

Precision Castparts Reports Strong Fiscal Second Quarter; Aerospace Growth Remains Impressive

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Precision Castparts (PCP) reported solid fiscal second-quarter results Thursday that showed strong sales and profit expansion. Though we liked the firm’s results, we’ll be looking to trim our position in our Best Ideas portfolio in the coming weeks, solely as a means of rebalancing our porfolio. Our fair value estimate remains unchanged. The metal casting-maker’s third-quarter revenue advanced 19% from the same period a year ago on the heels of strong growth from its Investment Cast Products, Forged Products, and Fastener Products segments, the latter jumping 27%. The company’s top-line was driven by accelerated commercial production rates, market share gains, and a number of acquisitions that closed in the quarter, the latter bolstering its exposure to the oil and gas … Read more

Visa Provides Investors with Underrated Growth Prospects

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Although the Durbin Amendment had yet to go in effect, Visa (V) reported a terrific fourth quarter, which has made us even more bullish about the firm’s near-term and long-term prospects. Due to a better than expected outlook for 2012, and a favorable ruling by the Fed regarding the Durbin Amendment, we think Visa is now worth $126 per share, roughly a 25% premium to where the stock currently trades. Management focused on returning cash to shareholders What really sticks out about Visa’s fiscal 2011 performance is the dedication to return cash to shareholders. In addition to increasing the quarterly dividend by 47% to 22 cents, Visa bought back over $2 billion worth of shares. And on top of that, the firm announced … Read more

Boeing Investors Need to Focus on Earnings Quality; Cash Flow Remains Weak

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On Wednesday, Boeing reported strong third-quarter results that revealed earnings expansion and continued commercial backlog expansion. We’re sticking with our fair value estimate. The commercial jet maker’s revenue jumped 4% led by a 9% increase in commercial airplane sales, and the firm leveraged that top-line expansion into 24% earnings from operations. Boeing’s net income and earnings per share increased by more than 30% each thanks to roughly 1.5 percentage points of operating-margin growth. The aerospace giant’s free cash flow, however, was less than impressive, falling to practically nil from the same period a year ago—meaning earnings quality is still far from sound (largely due to the flexibility of program accounting). We’d be more comfortable in Boeing’s bottom-line (the guidance of … Read more

Investors in Ancestry.com Look to Seasonally Strong First Quarter, Release of 1940 Census

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Ancestry.com (ACOM) reported disappointing third-quarter results Wednesday that showed management was a bit too optimistic in its subscriber growth forecasts for this year. However, we still like the story – and 30%+ revenue growth is nothing to sneeze at. We maintain the firm is significantly undervalued and expect some short covering in the weeks ahead, as the Street begins to look at 2012 numbers and anticipates the release of the 1940 US Federal Census in April. We’re holding strong with the position in the portfolio of our Best Ideas Newsletter.  Ancestry.com’s revenue advanced 30% thanks to strong subscriber growth, with the firm eclipsing the 1.7 million mark, representing 24% growth from the third-quarter of 2010. Churn edged up a bit … Read more

An Update on One of Our Best Ideas, Ford

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Best idea portfolio member Ford Motor (F) has been on a tear lately. After bottoming at $9, shares have rallied up to over $12, until they pulled back modestly. In addition to third-quarter earnings, which were reported Wednesday, a few material events have happened, resulting in the shares rallying. Though none of them change our fair value estimate, they do strengthen our conviction in the idea. Third-quarter results, so-so Let’s get the bad news out of the way. The third quarter for Ford wasn’t a disaster, but it wasn’t great either. Improving sales trends continued, with volumes up 14% for the quarter and retail market share coming in at 13.9%. Additionally, the automotive business threw off $400 million in cash flow from … Read more

Best-Idea EDAC Tech Reported Strong Third-Quarter Performance

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Best-idea EDAC Tech (EDAC) reported excellent third-quarter results that exceeded our expectations. We are sticking with our conservative $10 per share fair value estimate and retaining our allocation in our Best Ideas portfolio. As followers of Valuentum know, EDAC Tech has been one of the biggest generators of alpha in our portfolio and continues to be one of our largest positions (at about 10%)—our cost basis is just over $4 per share. We were particularly pleased with its third-quarter results, as management mentioned the quarter would be slightly weaker, on average, on its second-quarter conference call. However, the third quarter was far from that. The firm’s top-line expanded an impressive 18%, while earnings per share came in at $0.19, which was … Read more

Under Armour Posts Strong Third Quarter; Shares Remain Overvalued

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Under Armour (UA) posted terrific third-quarter results Wednesday. Sales were up nearly 42%, with net income up 32%. As a result, we are raising our optimistic case fair value to $53 per share, implying a 24x 2012 earnings multiple, and another year of 30%+ revenue growth. Higher price mixes, higher costs One of the most positive takeaways from the quarter was Under Armour’s ability to sell higher price-point apparel. CEO Kevin Plank mentioned the success in the hooded sweatshirt market, which consumers generally purchase in the $20-25 range, selling for upwards of $70. Additionally, Plank cited continued success with their charged cotton t-shirts and storm fleece hoodies. However, these higher price-points were tempered by the large rollout of footwear and higher … Read more

Netflix Takes a Dive, Down 35%!

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Click below to view our “absurdly overvalued” call on Netflix when the stock was trading around $250 per share: http://seekingalpha.com/article/281777-netflix-s-valuation-completely-absurd-significantly-overvalued << Learn More About Our DCF Valuation Model Template