Member Articles

Republic Services Pricing Strength Continues to be Evident

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Image Source: Republic Services By Brian Nelson, CFA Republic Services (RSG) reported mixed third quarter results October 29, with revenue coming in a bit light relative to the consensus forecast, while non-GAAP earnings per share outpaced what the Street had been looking for. The trash taker posted 6.5% revenue growth with 4.2 percentage points coming from organic means, while 2.3 percentage points came from acquisitions. Adjusted earnings per share came in at $1.81, beating consensus expectations by $0.20. Management had the following to say about the quarter: Our strong performance during the third quarter is a direct result of executing our strategic priorities. By pricing ahead of cost inflation and effective cost management, we delivered double-digit growth in adjusted EBITDA and … Read more

Chipotle Targets 7,000 Restaurants in North America

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By Brian Nelson, CFA Chipotle (CMG) reported mixed third quarter results October 29 with revenue coming in a bit light relative to expectations and non-GAAP earnings per share outpacing the consensus forecast. Total revenue increased 13% in the quarter thanks to a 6% increase in comparable restaurant sales and new restaurant openings. Comparable restaurant sales missed the consensus estimate calling for 6.4% growth. Still, Chipotle’s comparable restaurant sales growth consisted of higher transactions of 3.3% and a 2.7% increase in average check, a combination we view positively. The burrito-maker’s operating margin was 16.9% in the quarter (consensus was at 15.7%), up from 16%, while adjusted diluted earnings per share came in at $0.27, up from $0.23 in the prior-year period. … Read more

Visa Reports Strong Fiscal Fourth Quarter Results

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Image: Visa’s shares look poised to break out to new all-time highs. By Brian Nelson, CFA Visa (V) reported better than expected fiscal fourth quarter results on October 29 with both revenue and non-GAAP earnings per share outpacing the consensus forecast. Net revenue increased 12% on a year-over-year basis, while non-GAAP net income increased 13%. During the fiscal fourth quarter, on a constant currency basis, payments volume increased 8%, while cross-border volume increased 13% and processed transactions advanced 10%. Non-GAAP earnings per share advanced 16% in the quarter, to $2.71, beating the consensus forecast by $0.13. Management was upbeat in the press release: Visa had a robust fourth quarter to finish a very strong fiscal year. I am proud of … Read more

Momentum Across Alphabet’s Business Is “Extraordinary”

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Image: Shares of Alphabet look poised to break out to all-time highs. By Brian Nelson, CFA Alphabet (GOOG) (GOOGL) reported fantastic third quarter results October 29 that showed a beat on both the top- and bottom lines. Consolidated revenue increased 15% in the quarter (16% on a constant-currency basis), to $88.3 billion, versus consensus of $86.2 billion, with Google Services, total, revenue increasing 13% and Google Cloud revenue increasing 35%. ‘Google Search & other’ revenue and ‘YouTube ads’ revenue both increased 12.2% in the quarter, very healthy growth rates. Revenue for Google Network dipped modestly on a year-over-year basis, while Google subscriptions, platforms and devices revenue advanced 28%. Total operating income increased 34% in the quarter, with its operating margin … Read more

Enterprise Product Partners’ DCF Covered Its Distributions 1.7x in Third Quarter

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Image: Enterprise Products Partners’ units have done well the past couple years. By Brian Nelson, CFA On October 29, Enterprise Products Partners (EPD) reported third quarter results that came in slightly lower than expected. The midstream energy company reported net income attributable to common unitholders of $1.43 billion, or $0.65 per diluted unit, reflecting an 8% increase versus the $1.35 billion ($0.60 per diluted unit) it recorded in the third quarter of last year. Management had the following to say about the quarter: Enterprise reported another strong quarter as recently completed organic growth assets generated new sources of earnings and cash flow. Operationally, we set 5 volumetric records including 7.5 billion cubic feet per day of inlet natural gas processing … Read more

Phillips 66’s Dividend Well Covered with Free Cash Flow

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Image Source: Phillips 66 By Brian Nelson, CFA Phillips 66 (PSX) reported third quarter earnings October 29. Adjusted EBITDA came in at $2 billion, down from $2.18 billion in the year-ago period. Adjusted earnings were $859 million versus $984 million in the same period last year. Adjusted earnings per share came in at $2.04 versus $2.31 in last year’s quarter. Cash flow from operations was $1.13 billion versus $2.1 billion in the year-ago period. Capital expenditures and investments were $358 million, down from $367 million in the same period a year ago. During the quarter, the company bought back $800 million of stock and returned $477 million in dividends to shareholders. Phillips 66 ended the quarter with $1.6 billion in … Read more

In the News: Newmont, McDonald’s, the Election

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By Brian Nelson, CFA Newmont’s Costs Balloon in the Wake of Higher Gold Prices, Roughly Flat Production Expected in 2025 Newmont (NEM) reported lower than expected third quarter results October 23, with revenue and non-GAAP earnings per share missing the consensus forecast. Revenue advanced 84.7% in the quarter, while non-GAAP earnings per share came in at $0.81. We liked the revenue growth in the quarter, propelled by an average realized gold price of $2,518, but all-in sustaining costs (per ounce) also increased to $1,611, up materially from $1,426 recorded in the same period a year ago. Newmont, nonetheless, generated operating cash flow of $1.64 billion and free cash flow of $760 million in the quarter, up materially from the third … Read more

UPS Returns to Revenue and Profit Growth

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Image: UPS’ shares have been under pressure the past couple years. By Brian Nelson, CFA UPS (UPS) reported better than expected results October 24 with both revenue and non-GAAP earnings per share coming in higher than the consensus forecast. Consolidated revenue of $22.2 billion in the quarter reflected a 5.6% increase from the same period last year. Consolidated operating profit of $2.0 billion was up 47.8% compared to the third quarter of last year, while the measure advanced 22.8% on a non-GAAP adjusted basis. Diluted earnings per share was $1.80 for the quarter, while non-GAAP adjusted diluted earnings per share came in at $1.76, a 12.1% increase from the same period a year ago and above the consensus forecast of … Read more

IBM Targeting $12+ Billion in 2024 Free Cash Flow

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Image: Shares of IBM are flirting with record highs. By Brian Nelson, CFA IBM (IBM) reported mixed third quarter results October 23 with revenue coming in lower than expectations, while non-GAAP earnings per share topped the consensus forecast. Revenue advanced 1% (2% on a constant currency basis) in the period, with software revenue up 9.6%, consulting revenue down 0.5%, and infrastructure revenue down 7%. In the third quarter, operating gross profit came in at $8.6 billion, up 5% from the same period a year ago thanks in part to 2.1 percentage points of operating gross profit margin improvement. Operating pre-tax income came in at $2.5 billion, up 8%, thanks to a 1 percentage point improvement in operating pre-tax income margin. … Read more

Coca-Cola’s Organic Growth Shines in Third Quarter

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Image: Coca-Cola’s shares have done quite well the past couple years. By Brian Nelson, CFA Coca-Cola (KO) reported better than expected third quarter results October 23. Net revenue fell 1% in the quarter, but organic sales on a non-GAAP basis grew 9%. Comparable currency neutral operating income grew 14% in the quarter, as its comparable non-GAAP operating margin advanced 1 percentage point, to 30.7%. Reported earnings per share declined 7%, but comparable non-GAAP earnings per share increased 5%, to $0.77. On a consolidated basis, concentrate sales dropped 2%, while the company benefited from a 10% gain in price/mix in the third quarter. Organic revenue was particularly strong in Latin America (+24%) and North America (+12%) in the quarter, and the … Read more