Member Articles

Alphabet’s Operating Margin Shrinks in Third Quarter; Free Cash Flow Still Robust

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The company formerly known as Google continues to invest for long-term growth, which is impacting its operating margin and free cash flow, but the two measures remain solid, particularly the latter of the two. The company retains a level of financial flexibility that is matched by few other firms.  By Kris Rosemann Simulated Best Ideas Newsletter portfolio idea Alphabet (GOOG, GOOGL) continues to pour resources back into its long-term growth opportunities while generating robust levels of free cash flow, but the market was disappointed with its top-line growth in the third quarter of 2018, results released October 25, despite the figure coming in at 21% on year-over-year basis. The company’s revenue growth was strong across all geographies, and mobile search … Read more

Our Reports on Stocks in the Solar Industry

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Structure of the Solar Industry The solar industry is extremely competitive and continually evolving as constituents strive to differentiate themselves to better compete within the broader electric power industry. Significant price reductions (per watt), reduced margins, and drastic market share shifts have become commonplace for participants. Profitability can be negatively impacted from government subsidies and sovereign capital that allow firms to operate unprofitably for extended periods of time. Production overcapacity is another major concern and will likely persist for some time. We think the structure of the solar industry is very poor. We have dropped coverage of stocks in the Solar industry. First Solar (FSLR) has been reassigned to the Broadline Semiconductors industry.

Dividend Increases/Decreases for the Week Ending November 9

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Below we provide a list of firms that raised their dividends during the week ending November 9. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week Aaron’s (AAN): now $0.035 per share quarterly dividend, was $0.03. Air Lease (AL): now $0.13 per share quarterly dividend, was $0.10. AmerisourceBergen (ABC): now $0.40 per share quarterly dividend, was $0.38. Assurant (AIZ): now $0.60 per share quarterly dividend, was $0.56. Atmos Energy (ATO): now $0.525 per share quarterly dividend, was $0.485. Atlantica Yield (AY): now $0.36 per share quarterly dividend, was $0.34. Black Hills (BKH): … Read more

Comps Accelerate and Margins Expand in Chipotle’s Third Quarter

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Image Source: Mike Mozart The once beaten down fast casual restaurant chain Chipotle is back to delivering solid comparable restaurant sales growth thanks to menu price increases, and restaurant level operating margin expanded significantly as lower marketing and promotional spending was required to appease cautious consumers. By Kris Rosemann Simulated Best Ideas Newsletter portfolio idea Chipotle (CMG) reported 8.6% year-over-year revenue growth in the third quarter of 2018, results released October 25, driven by new store openings and a 4.4% increase in comparable restaurant sales. Average check moved higher from the year-ago period due in part to a 3.8% effective menu price increase but was partially offset by a 1.1% decline in comparable restaurant transactions. This weakness in traffic was … Read more

Visa’s Free Cash Flow Charges Forward

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Image Source: Visa Payment processing giant and simulated Best Ideas Newsletter portfolio holding Visa turned in an impressive level of free cash flow generation in its fiscal year 2018, and the company continues to grow at a double-digit rate while boasting robust operating margins. By Kris Rosemann Simulated Best Ideas Newsletter portfolio idea Visa (V) reported a solid finish to its fiscal year 2018, results released October 24, and management’s fiscal 2019 outlook remains solid despite a number of risks facing the company, including exchange rate shifts, the potential for a hard Brexit, economic disturbances in select markets as seen in Turkey in Argentina, and geopolitical uncertainty such as trade disputes. Visa remains a tremendous free cash flow generator, and … Read more

Booking Holdings Delivers Solid Results in Seasonally Busy Third Quarter

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Image Source: Luca Conti Simulated Best Ideas Newsletter portfolio idea Booking Holdings delivered results ahead of expectations in a number of measures in the third quarter, which is a seasonally busy quarter for the company. By Kris Rosemann Shares of simulated Best Ideas Newsletter portfolio idea Booking Holdings (BKNG) received a nice boost from the release of its third quarter report November 6, which followed a second quarter report that drove shares lower as a result of disappointing guidance issued. In its third-quarter earnings call, management stated that the lower third-quarter guidance was a result of it being in a period of relatively high uncertainty due to the impact of the World Cup and unusual weather in Europe during the … Read more

PayPal Person-to-Person Volume Growing Rapidly

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Image Source: PayPal third-quarter earnings presentation PayPal continues to benefit from secular trends away from cash and towards mobile, and its free cash flow generation and balance sheet strength remain impressive. Person-to-Person volume growth has been robust. By Kris Rosemann Simulated Best Ideas Newsletter portfolio idea PayPal (PYPL) continues to ride the secular trend away from cash, and nothing may be more exemplary of this than its continued rise in Person-to-Person volume, which advanced 50% in the third quarter from the year-ago period to roughly 25% of its total payment volume (TPV). PayPal’s third quarter report, released October 18, also revealed a 15% increase in active accounts added in the period on a year-over-year basis, and the 9.1 million active … Read more

Apple Turns in Solid Quarter; Will Stop Reporting Unit Sales Figures

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Image Source: John Jones  Apple’s fiscal fourth quarter report was one of ongoing momentum in many areas, but the investing community has taken great issue with its decision to stop reporting quarterly updates on unit sales of iPhones, iPads, and Macs. By Kris Rosemann Simulated newsletter portfolio holding Apple’s (AAPL) fiscal fourth quarter report, released November 1, has been a subject of even greater attention than usual for the largest company by market cap after it announced it would no longer disclose quarterly unit sales data for the iPhone, iPad, and Mac. We can’t say that we are fans of transparency levels declining, but we will not be joining the masses in blasting Apple for the move. Nevertheless, investors are … Read more

Adding Xilinx to the Dividend Growth Newsletter Portfolio

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We’re adding Xilinx to the simulated Dividend Growth Newsletter portfolio. The company generates a hefty Dividend Cushion ratio of 3.3! By Brian Nelson, CFA Xilinx (XLNX) rewrites the book when it comes to free cash flow efficiency! The company makes programmable logic devices (PLDs), including programable System on Chips (SoCs) and three-dimensional integrated circuits (3D ICs), and its intellectual property is a key component of its value proposition. During the three fiscal years ending 2018, for example, Xilinx’s operating cash flow averaged over $830 million, while its entire cash bill for capital spending, including growth and maintenance, averaged just over $50 million, meaning all capital spending represented, on average, approximately 6% of operating cash flow. This is simply incredible. During … Read more

General Motors Overcomes Challenges in Strong Third Quarter; Ford Backs Off 2020 Targets

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Image Source: GM third-quarter earnings presentation Despite challenges in its cost structure and the Chinese market, simulated newsletter portfolio idea General Motors turned in a strong third quarter report, and shares reacted favorably after several months of selling pressure. Rival Ford also reported a solid third quarter report, but it no longer expects to hit its 2020 EBIT margin and ROIC targets. By Kris Rosemann Shares of simulated newsletter portfolio idea General Motors (GM) leapt during the October 31 trading session after the company released a strong earnings report before the open that included record third-quarter adjusted diluted earnings per share and record third-quarter equity performance from GM China. Net revenue in the period advanced 6.4% on a year-over-year basis to … Read more