Brian Nelson

AMR’s Big Order to Pressure Cash Flow, Boeing in Precarious Position

by

This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/277628-amrs-big-order-to-pressure-cash-flow-boeing-in-precarious-position Shortly after we released our analysis of the fleets of the largest domestic carriers, The Wall Street Journal reported that AMR Corp. (AMR) is interested in ordering as many as 250 planes from either Boeing (BA) or Airbus (EADSY.PK). Our analysis, the summary graph of which we provide below, indicated that AMR is roughly on par with Delta (DAL) for having the oldest fleet (read fuel-inefficient) among the Big 4 domestic majors, so we view this move as inevitable. (Click chart to expand) The Wall Street Journal also indicated that the order value could be as high as $15 billion (comprising about 250 planes), and we suspect the new aircraft being evaluated will … Read more

How Profitable is Boeing’s 787 Dreamliner? Not Very.

by

This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/277504-how-profitable-is-boeings-787-dreamliner-not-very With Boeing’s (BA) 787 Dreamliner in the final stages of testing, we thought it would be helpful to clarify the profitability of this program (or perhaps more appropriate, the lack thereof), at least in its early stages. The growth potential of this program has been well-documented, but the 787 platform’s profitability will be nowhere near what management had expected before it experienced the first of many delays of its Dreamliner.  We think investors should be made aware of just how much leeway Boeing has in determining earnings, and why Boeing is one of the more difficult firms for the analyst community to get their arms around due to the lack of transparency. We believe Boeing will set the initial 787 accounting … Read more

Big 5 Sporting Goods Looks Extremely Undervalued, But Proceed With Caution

by

This article appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/277117-big-5-sporting-goods-looks-extremely-undervalued-but-proceed-with-caution If you read nothing else, consider these 3 points: Big 5 is disproportionately affected by unemployment in its key home states The company continues to grow slowly and conservatively Big 5 finds homes in niche markets that Dick’s (DKS) and The Sports Authority aren’t interested in What Big 5 does Big 5 is a small sporting goods retailer with 396 stores in 12 western states. The vast majority of its shops are concentrated in California and Nevada. They sell shoes, apparel, athletic gear, and accessories. For shoppers in bigger cities, one might find The Sports Authority or Dick’s Sporting Goods, as Big 5’s stores operate on a much smaller scale. The … Read more

Stumbles in Europe, Footwear, and Rising Input Costs Could Keep Shares of Under Armour at Bay

by

This article appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/277905-under-armour-solid-company-but-shares-are-significantly-overvalued  We wanted to provide subscribers with our thoughts on Under Armour (UA). Although we expect the company to follow Nike’s excellent results and post solid performance in its second quarter, the shares look significantly overvalued to us in the $75-$80 range. The risk-reward balance is not in investors’ favor at these levels. Apparel Remains Strong… If we can gather anything pertinent about Under Armour from Nike’s (NKE) earnings released Monday, we can see that athletic apparel, specifically in North America, is on fire. Year-to-date, Nike’s North American apparel sales are up 21%, including a second-quarter surge of 28%. This is consistent with the apparel growth we’ve seen at Adidas (ADDYY.PK) and Lululemon (LULU). Under Armour, with a smaller base than Nike, … Read more

Altria’s Dividend Yield is Quite Tempting

by

Some readers may be surprised that (Altria) is a top performer for investors in the face of the onslaught of government restrictions and legal actions that have cost the firm tens of billions of dollars and threaten the cigarette manufacturer with bankruptcy. But in the capital markets, bad news for the firm often is transformed into good news for investors. Many shun the stock in the company and fear that its legal liability for producing a dangerous product–cigarettes–will eventually crush the firm. This aversion to the firm pushes down the price of (Altria’s) shares and raises the return to investors who stick with the stock. As long as the firm survives and continues to be very profitable, paying out a … Read more

28 Business Thinkers Who Changed the World

by

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: 28 Business Thinkers Who Changed the World: the Management Gurus and Mavericks Who Changed the Way We Think about Business By Rhymer Rigby. Kogan Page, 2011. 232 p. ISBN 978-0-7494-6239-0.Book Release Date: June 28, 2011 British journalist Rhymer Rigby tackles the lives of the most influential business thinkers in his latest work. Rigby (freelance journalist and contributor for the Financial Times) takes a journalistic approach, reporting on the lives and businesses of these 28 gurus without offering … Read more

Lorillard’s Valuation Leaves Something to Be Desired

by

This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/276520-lorillards-valuation-leaves-something-to-be-desired  The FDA recently ruled that beginning in the fall of next year, all cigarette packaging and advertisements in the U.S. must reveal prominent and perhaps gory health warning labels. These new and larger cigarette warnings, which include an image of a man smoking through a hole in his throat and an image of a parent holding a baby as smoke drifts toward them, represent a huge step by the current administration to curb new smokers from picking up the habit, while encouraging others to quit. But should investors of Lorillard (LO), Altria Group (MO) and Reynolds American (RAI) be concerned? Regulation has long been a part of the tobacco industry and while … Read more

Our Case for Precision Castparts — Upside to $200 Per Share

by

Precision Castparts has long been a favorite of ours. The firm’s investment cast products segment (about 34% of sales) makes the structural castings (metal blocks) and the rotating airfoils (blades) that form aircraft jet engines. Though a structural casting has a longer useful life, a jet engine’s airfoil components frequently need to be replaced upon maintenance (think razor, razor-blade model). The firm’s forged products (about 41% of sales) are used in landing gear, bulkheads, and other airframe components, while its fasteners (about 25% of sales) are used in such critical applications as wing-to-fuselage and engine-to-wing connections. Precision’s components are crucial to flight safety, particularly its metal castings, which preserve engine integrity during intense thermal conditions. Plus, and perhaps most important, Precision … Read more

Airbus Has Boeing’s Back Against the Wall, Seek Opportunities in Supply Chain

by

This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/276439-airbus-has-boeings-back-against-the-wall-seek-opportunities-in-supply-chain Last week in anticipation of the Paris Air Show–a huge event for the aviation industry–we outlined our forecasts for market share in the narrowbody aircraft segment, which showed Airbus’ A320 gaining a clear lead during the next few decades.  So far during the show, Airbus has received a plethora of orders for its A320neo (new engine option), a re-engining of its popular A320, which competes with Boeing’s 737NG [and within a few years, entrants from around the globe: Comac’s C919 from China, Bombardier’s (BDRBF.PK) CSeries, and the Irkut/UAC MS-21 from Russia]. Orders for the A320neo are coming from around the globe, with Airbus garnering wins from India’s Indigo, Chile’s LAN Airlines (LFL), and domestic carrier Republic (RJET). We’re currently watching for any major shifts within the discount airline … Read more

Waste Management Looks Undervalued, Boasts Attractive Yield

by

This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/275873-waste-management-looks-undervalued-boasts-attractive-yield At Valuentum, we employ a discounted cash-flow model to arrive at a fair value estimate for every company within our equity coverage universe. In the waste industry, using a discounted cash-flow model is the best tool for valuation, given the robust cash-flow characteristics of participants. We outline below our forecasts and fair value estimate for Waste Management and offer up our model template to investors if they are interested in using it to value any operating (non-financial) company they wish. This model template can be found at the following location: DCF Valuation Model. But before we dive into the numbers on Waste Management, we’d like to invite investors to take a read of a waste-industry primer, which goes into … Read more