Member Articles

Omega’s First-Quarter Results Not Terrible; Dividend Still Intact

by

Image Source: Omega Healthcare, March 2018 Investor Presentation Omega Healthcare is a healthcare real estate investment trust (REIT) that has been battling concerns within its customer base regarding rent payments. Just how healthy its customer line-up truly is will likely play out in coming years, but for now, management is leaving the dividend intact. Shares yield 9%+ at the time of this writing. By Brian Nelson, CFA We’ve been concerned about the healthcare REIT arena ever since healthcare REIT HCP (HCP) slashed its payout in late 2016, “Dividend Aristocrat No More: HCP Cuts Its Payout,” leaving behind its long-term track record of consecutive annual dividend increases and the coveted Dividend Aristocrat nameplate. Omega Healthcare (OHI) has been one that we … Read more

Soft Guidance Weighs on Booking Holdings Despite Solid First Quarter

by

Image Source: Luca Conti You may have read this sentiment before: shares of Booking Holdings, formerly Priceline, are facing pressure following a solid quarterly report as management continued its habit of issuing conservative quarterly guidance. By Kris Rosemann Shares of simulated Best Ideas Newsletter idea Booking Holdings (BKNG) faced selling pressure following its first quarter report, which came after the close May 9, as Mr. Market was disappointed once again by management’s second quarter guidance, a dynamic that has played out multiple times in recent years for the company formerly known as Priceline. Nevertheless, Booking Holdings turned in solid first quarter results as room nights booked grew 13% from the year-ago period, and gross bookings advanced 21%. Consolidated revenue climbed … Read more

Generic Drug Deflation Continues to Hamper Cardinal Health and AmerisourceBergen

by

A severe case of rampant generic drug deflation continues to hamper the share prices of Cardinal Health and AmerisourceBergen. We are monitoring the drug deflation numbers posted by the drug wholesalers as a key gauge of the investment merits of the group. By Alexander J. Poulos Key Takeaways Our interest in the drug-distribution industry centers on the group’s highly-predictive revenue model and the strong competitive positions of many underlying participants, emanating from their difficult-to-replicate distribution networks. The drug distribution industry is currently an oligopoly with McKesson, Cardinal Health and AmerisourceBergen controlling over 90% of the business. Generic drug price deflation continues to have a noticeable impact on the drug distribution industry as witnessed by the poor performance during the past … Read more

Realty Income Occupancy Highest in More Than a Decade

by

Image source: Realty Income Simulated Dividend Growth Newsletter portfolio idea Realty Income delivered a solid first quarter 2018 report that included impressive occupancy rates, steady adjusted funds from operations growth, and ongoing dividend expansion. By Kris Rosemann As concerns over what the long-term outlook for retail truly is weigh on many retail REITs, Realty Income (O) is not slowing down. Instead, the company is focused on finding the right tenants in the highest quality spaces, and it may just pay off for the REIT as it ended the first quarter of 2018 with its highest quarter-end occupancy rate in more than ten years at 98.6%. To put some context behind that figure, a mere 75 of its 5,326 properties were … Read more

Gilead Sciences at the Crossroads; HIV and Oncology Franchises Promising

by

Image Source: Gilead Sciences’ first-quarter 2018 results The loss of a key revenue-generating molecule is a tough, yet oftentimes manageable, portion of a pharma entity’s overall life cycle. Gilead Sciences is in the midst of a key turnaround as the loss of revenue from its Hepatitis C franchise is beginning to abate, while new novel treatments embark on the early stages of their respective revenue cycles. That said, we’d like to see traction in its HIV and oncology franchises, and perhaps the addition of a new franchise to the portfolio, or we will sour on the stock long-term. By Alexander J. Poulos Key Takeaways We are not at all surprised by the continued decline in revenue posted by Gilead’s HCV … Read more

Oil Majors Benefit from Higher Energy Resource Prices

by

Exxon Mobil, ConocoPhillips, and Chevron reported improved earnings and cash flow during the first quarter of 2018, thanks largely to higher realized energy resource pricing. The group may be better positioned for further bottom-line expansion moving forward as volume growth is expected to continue over the course of the year. By Kris Rosemann Key Takeaways Crude oil markets continue to improve, and higher realized prices are benefitting major oil producers, but geopolitical uncertainty and strong growth in US production continue to cast shadows over the space. The unpredictable nature of commodity prices, and the geopolitical uncertainty that sometimes drives them, will never go away. Exxon Mobil’s earnings and free cash flow generation improved thanks to higher realized prices, and its … Read more

Growth Continues at Bristol-Myers; Eliquis Fantastic

by

Image Source: Bristol-Myers Bristol-Myers Squibb continues to put up nice revenue growth as demand for Eliquis is coming in better than expectations. The company’s hopes to win first-line therapy in combination therapy for non-small cell lung cancer have been dealt a severe blow, however. We haven’t liked Bristol-Myers’ share-price performance of late and remain on the sidelines. However, we are watching its equity closely for addition to the simulated newsletter portfolios. By Alexander J. Poulos Key Takeaways We remain astounded by the stellar growth of Eliquis as the product remains a runaway blockbuster for Bristol-Myers. The growth of Eliquis has surpassed our most optimistic expectations as it is now the market leader. We believe the growth in Opdivo is far … Read more

Waste Industry Collecting Cash

by

Pressures in the recycling business didn’t negate revenue growth across the municipal solid waste space during the first quarter of 2018, and the pace of operating-income and free-cash-flow expansion remains solid. Valuations could be more attractive, but dividends look strong, even though we’d like to see lower levels of financial leverage. By Brian Nelson, CFA Waste Management (WM) kicked off first-quarter earnings season for the big three garbage haulers in the municipal waste space April 20. Though recycling revenue faced pressure during the period, Waste Management’s first-quarter results had everything we’d be looking for. Core price advanced 4.9%, and traditional solid waste internal revenue growth from volume was 3%, helping to drive total reported revenue higher by 2.1%. The solid … Read more

Apple’s Quarter Brings a Bushel of Positive News

by

Image Source: Aaron Yoo Apple’s strength was on full display in its second quarter of fiscal 2018 as it beat expectations on a number of quarterly measures and delivered a significant dividend increase. The company remains one of our favorites on the market today. Our fair value estimate currently sits at $201 per share. By Kris Rosemann What more can we say about Apple (AAPL) after a quarter in which it beat consensus expectations on revenue, earnings per share, iPhone and iPad shipments, and Services revenue, as well as had the ability to raise its quarterly dividend by 16% and authorize an additional $100 billion for share repurchases? We reiterated our positive long-term view on Apple on April 20, “Reiterating … Read more

McDonald’s Breakfast, Starbucks’ Afternoons

by

Two of the most well-known brands are focusing on two different dayparts, but will the end game be increased competition across the board? We like the prospects for both McDonald’s and Starbucks, as we continue to be amazed at the pace of same-store-expansion at the former. By Brian Nelson, CFA On April 30, McDonald’s (MCD) put up yet another fine quarter, its first-quarter 2018 results marking 11 consecutive quarters the company has registered positive same-store-sales growth, a streak that has been buoyed by menu simplification efforts and ongoing strength with its all-day breakfast initiative. People don’t just love McDonald’s breakfast; it seems like some can’t live without it, and it may not matter what time of day they get their fix. … Read more