Brian Nelson

CBS Issues Strong Second Quarter Results, Content Licensing and Distribution a Key Driver

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CBS Corp. (CBS) reported strong second-quarter results Tuesday that showed excellent performance pretty much across the board. Revenue jumped 8% from the same quarter last year thanks to solid performance in content licensing and distribution, while operating income before depreciation and amortization (OIBDA) jumped over 50% thanks to strong growth in every segment and a seven percentage point improvement in its OIBDA margin. Net income more than doubled, and free cash flow was also strong, with the latter advancing 32% from the same period a year ago. We think increased use of CBS’ library in deals like the one inked with Netflix (which allows the company to generate revenue from old shows at little incremental cost) and Amazon (AMZN) will … Read more

Emerson: “Washington is arranging the chairs on the Titanic”

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Emerson Electric (EMR), a diversified industrial manufacturing company, posted decent fiscal third-quarter results Tuesday, but management’s comments regarding the ongoing debt problems in Europe and the US suggest the firm is less than satisfied with internal performance, and we agree. There are better plays in the industrial sector than Emerson, in our opinion. Net sales advanced 16% (10% organic) in the period thanks to solid international performance, while net earnings jumped 17% from the year-ago quarter. Emerson’s operating profit margin was essentially flat, falling 30 basis points from the same period a year ago due to acquisition-related costs. The firm noted that the pace and momentum of the industrial-led recovery has slowed, but we view this as a temporary phenomenon and … Read more

AMR’s Equity Still Practically Worthless, Merger Will Not Save Airline

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This article appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/284200-amrs-equity-still-practically-worthless-merger-will-not-save-airline Since we published our bearish piece on AMR (AMR), the parent of American Airlines, titled, “Is AMR’s Equity Practically Worthless,” the stock has fallen nearly by half. At Valuentum, we place considerable emphasis on a firm’s competitive advantages, how their competitive position fits into industry structure, and a valuation assessment based on a rigorous discounted cash-flow process. Our take on AMR across all of these fronts remains decidedly negative, and due to the repeated questions we’ve received, we are reiterating our somewhat controversial call that AMR’s equity is practically worthless – only option value remains. There have been talks recently about AMR potentially merging with International Group, the owner of British … Read more

Could Lululemon Have Further Upside? We Think So

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Lululemon: we think shares still have some upside remaining Lululemon (LULU) has been one of the top performing momentum stocks of 2011, with shares already up nearly 80%. Many analysts seem to think LULU is a lemon in itself, and rightfully so. Not many can relate to paying $98 for a pair of yoga pants that look, to the untrained eye, identical to something one could pick up at Target (TGT) for $15. However, while many on the street wait for Lululemon to come crashing down, we think with continued operational excellence and carefully planned growth, shares are worth $68 on a discounted cash flow basis. Like Charlie Munger, Warren Buffett’s legendary partner in crime believes, sometimes you have to … Read more

Abbott’s Shares Look Cheap

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As part of our process, we employ a discounted cash-flow model to arrive at a fair value estimate for every company within our equity coverage universe. In Abbott’s (ABT) case, we think the shares look undervalued at today’s prices. Our fair value estimate for Abbott is $63 per share, over 25% higher than where it is currently trading. In the spirit of transparency, our DCF model valuation template can be found here. We make this template available to investors, and it can be re-used to value any other operating firm. Valuation Summary We assume annual average top-line growth will average in the mid-single-digits over the next five years. We also assume that Abbott will grow earnings at a mid-teens pace … Read more

Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers

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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:Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers By Ellen Schultz. Portfolio Hardcover, 2011. 256 p. ISBN 978-1-5918-4333-7.Book Release Date: September 15, 2011 The demise of pension funds and other retiree benefits has been blamed in recent years on a “perfect storm” of rising costs, accelerating retirements, and the global economic crisis. However, Schultz (investigative reporter for the Wall Street Journal) provides a scathing exposé that reveals the tactics companies … Read more

Visa Remains a Growth Story, Shares Have Upside

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If you’ve been watching Visa (V) and Mastercard (MA) over the last two years, both were highflying stocks with tremendous room for revenue and earnings growth. However, in a seemingly random act, Senator Dick Durbin decided to identify service revenues from the debit card duopoly as detrimental to the consumer. Since the famed “Durbin Amendment” was added to Dodd-Frank, the shares of Visa have dipped as low as $66 when the Federal Reserve announced an 11 cent processing limit on debit cards, to as high as $90 after news broke that the Federal Reserve doubled the limit to 22 cents. Although we think the company is more valuable without price ceilings, on a discounted-cash flow basis, shares of Visa are worth $107 … Read more

Best Idea Ancestry.com Raises Full-Year Guidance

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Best idea, Ancestry.com (ACOM) reported solid second-quarter results Thursday that showed nice subscriber growth and impressive EBITDA margins. The firm raised its outlook for revenue and adjusted EBITDA in 2011, but held the line with its previous subscriber guidance, a move we think is conservative given the huge influx of subscribers in its first quarter. We think the firm has tremendous upside and are retaining our current position in our Best Ideas portfolio.   Subscriber growth of 28% from the same period a year ago fueled a 36% increase in the company’s top line during the quarter. We were particularly impressed with the level of average monthly revenue per subscriber, which continues to move steadily upward. Churn did increase a … Read more

Precision Castparts Posts Strong Fiscal First Quarter Results

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Metal-bender and best idea, Precision Castparts (PCP) reported excellent fiscal first-quarter results Thursday that showed continued strength in the commercial aerospace end market and additional traction in industrial gas turbines (sales were up 15%) and its seamless pipe business (sales were up 28%). We think the name is still worthy of a position in our Best Ideas portfolio.   Precision’s sales jumped 16% in the quarter, and the firm was able to leverage that growth into a 19% year-over-year improvement in operating income. The company’s consolidated segment operating margin jumped to 25% from 24.3% in the year-ago period. We continue to believe Precision Castparts is a prime beneficiary of the strengthening build rates of commercial airplanes during the next few … Read more