Member Articles

Altria Keeps Smoking; Is Smokeless the Future for Big Tobacco?

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Tobacco giant Altria reported another solid quarter thanks in large part to its pricing power, but big tobacco may be altering its strategy as it finds an unexpected ally. By Kris Roseman Newsletter portfolio holding and tobacco giant Altria (MO) reported a solid second quarter of 2017 with top- and bottom-line growth before the open July 27. Its quarterly strength was largely driven by pricing power, a line we’ve written many times over in recent years with respect to the tobacco industry. Cigarette volumes continue to decline–the decline was more pronounced in the second quarter of 2017 due to a large excise tax increase in California–as industry-wide volumes fell 4.5%, but Altria and its peers continue to grow the overall … Read more

PayPal, Facebook Post Strong Second-Quarter Results

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Image shown: Facebook’s traditional free cash flow (CFO less capital expenditures), in millions. Two of our favorite holdings in the Best Ideas Newsletter portfolio put up strong second-quarter results. We continue to like their respective shares. By Brian Nelson, CFA Online payments processor PayPal (PYPL) and social media advertising giant Facebook (FB) are two of our favorite holdings in the portfolio of the Best Ideas Newsletter. Both forward-leaning, mobile-oriented companies reported second-quarter results after the market closed July 26, and both have traded higher following the release. PayPal’s revenue advanced 20% in the second quarter, after excluding effects from currency exchange, and the company leveraged that growth into an impressive 27% jump in GAAP and non-GAAP earnings per share, the … Read more

Hasbro Hit by Gross Margin, Timing Issues

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Shares of Dividend Growth Newsletter portfolio holding Hasbro dropped after the company reported its second quarter earnings. By Kris Rosemann Dividend Growth Newsletter portfolio holding Hasbro (HAS) has been knocking the proverbial cover off the ball with returns (its stock has nearly tripled since being added to the Dividend Growth Newsletter portfolio) and the company has rival Mattel’s (MAT) back against the wall, but the toy giant’s shares recently hit a speed bump. In its second-quarter results, released July 24, Hasbro reported revenue growth of 11%, operating profit margin expansion of 60 basis points, and net earnings-per-diluted-share growth of nearly 30%, but shares faced significant pressure following the release. On the surface, it looks to be another strong quarterly report … Read more

General Motors May Offer an Incredible Opportunity

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We continue to believe GM’s valuation and dividend profile may be too good to pass up. At the very least, it should receive a multiple on current-year earnings like that of the airlines, another cyclical boom-or-bust industry that has traditionally been associated with bankruptcy. By Brian Nelson, CFA On July 25, General Motors (GM) showed why we include shares in both the Dividend Growth Newsletter portfolio and Best Ideas Newsletter portfolio when it reported strong second-quarter results. There are three things that you must know about GM’s stock. One, GM’s annual dividend of $1.52 per share means the corporate is yielding ~4.2% at present levels, or roughly double that of the average S&P 500 company. For a corporate, this level of … Read more

Earnings Roundup: McDonald’s, 3M, IBM

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Let’s recap a few big earnings announcements. By Brian Nelson, CFA McDonald’s (MCD) Stock Has Been Super Sized We expect to raise our fair value estimate of McDonald’s following second-quarter results, released July 25, that showed ongoing strength in comparable store sales and the operating income benefits of continued refranchising efforts. Incredibly, global comparable store sales at McDonald’s increased 6.6% in the second quarter, blowing by consensus estimates, and operating income advanced at a 24% clip on a year-over-year basis. Management noted that the second quarter marked the “strongest global comparable sales and guest count results in more than five years.” Nothing appears to be able to stop McDonald’s these days, and increased refranchising de-risks its business model from ongoing … Read more

Stocks in the News: Kinder Morgan, Union Pacific, Colgate-Palmolive

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Let’s cover the quarterly reports from a few industry bellwethers. By Brian Nelson, CFA Kinder Morgan (KMI) Plans for Dividend Hikes Kinder Morgan appears to be back on track, something that it set the stage for in early 2016 when Barron’s wrote about Valuentum’s take, “Is Kinder Morgan on the Road to Recovery (January 2016).” The pipeline operator continues to trade near our fair value estimate of $20, so it’s hard to make the case that there is a tremendous valuation opportunity in shares, though its prospects for a return to dividend growth have improved. On July 19, Kinder Morgan announced that it expects to raise its dividend by 60% in 2018 and advance the payout at a 25% yearly … Read more

Stocks in the News: Visa, Microsoft, General Electric

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Image source: Visa Let’s have a look at the quarterly reports from a few stocks in the news July 21. By Brian Nelson, CFA Visa’s (V) Margin Profile Remains Excellent Top-weighted position in the Best Ideas Newsletter portfolio is approaching the “century mark” after reporting solid fiscal third-quarter results July 20. Visa’s net operating revenue advanced 26% on a year-over-year basis in the quarter thanks in part to the inclusion of Visa Europe, and the company recorded GAAP net income of $2.1 billion, or $0.86 per share, better than consensus expectations. Visa CEO Alfred Kelly noted that performance reflected “strong growth in payments volume, cross-border volume, and processed transactions, which were powered by economic tailwinds in the US and globally.” We … Read more

Novartis’ Clinical Pipeline Continues to Innovate

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We continue to be impressed with the depth of Novartis’ clinical pipeline, which should aid in the company’s acceleration from the revenue cliff experienced as a result of the patent loss of top-selling product Gleevec. We are adding Novartis to the portfolio of the Dividend Growth Newsletter. By Alexander J. Poulos Overview Novartis’ (NVS) primary strength, in our view, remains the company’s diverse revenue stream. Thus far, for example, Novartis has capably handled the revenue cliff from the loss of patent protection of its top-selling product Gleevec admirably, with only a 1% drop in sales during the first half of 2016. Though such a dynamic can change in coming periods, we have found the relative predictability of Novartis’ revenue stream … Read more

Stocks in the News: Harley-Davidson, Johnson & Johnson, Netflix

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Earnings season is picking up. Let’s evaluate a few quarterly reports from some bellwethers. By Brian Nelson, CFA Harley-Davidson (HOG) Not Revving Like It Used To We plan to update our report and fair value estimate of Harley-Davidson following its weak second-quarter report, released July 18. Both revenue and net income faced pressure on a year-over-year basis in the period, with earnings per share falling 4.5%. Management spoke of “challenging market conditions,” and the executive team is right about that: Harley-Davidson worldwide retail motorcycle sales fell 6.7% in the quarter, while Harley-Davidson retail motorcycle sales in the US were down more than 9%. The company’s US market share is holding up (~48.5%), but we are starting to worry about more … Read more