Member Articles

PepsiCo Experiencing Subdued Growth, Business Disruptions Due to Geopolitical Tensions

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Image: PepsiCo has traded sideways for most of the past couple years. By Brian Nelson, CFA On October 8, PepsiCo (PEP) reported mixed third-quarter results with revenue coming up a bit short of consensus and non-GAAP earnings per share beating the Street’s forecast. The headline numbers weren’t great with net revenue falling 0.6% and earnings per share falling 5%. Organic revenue growth was 1.3% in the third quarter (consensus was for 3% growth), with core earnings per share coming in at $2.31, with core constant currency operating profit up 6% and core constant currency earnings per share up 5%. On an organic revenue basis, Frito-Lay North America experienced a 1% decline, while Quaker Foods North America fell 13%. PepsiCo Beverages … Read more

Dividend Increases/Decreases for the Week of October 4

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Below we provide a list of firms that raised their dividends during the week ending October 4. 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                          Almacenes Exito S.A. American Depositary Share, each representing eight (8) Common Shares (EXTO): now $0.0369 per share quarterly dividend, was $0.0116. Alphamin Resources Corp. (AFM:CA): now CAD 0.06 per share interim dividend, was CAD 0.03. American Financial (AFG): now $0.80 per share quarterly dividend, was $0.71. Arrow Financial (AROW): now $0.28 per share quarterly dividend, was $0.27. Bank OZK (OZK): now $0.41 per share … Read more

Nike In the Midst of a CEO Transition, Withdraws Full Year Guidance

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Image: Nike’s shares have been under pressure as the firm continues to underperform. By Brian Nelson, CFA On October 1, Nike (NKE) reported mixed first-quarter fiscal 2025 results, with revenue coming up short relative to the consensus estimate, while GAAP earnings per share came in ahead of what the Street was looking for. The headline numbers for Nike weren’t great. First quarter revenue fell 10% on a reported basis, while Nike Brand and Nike Direct revenues dropped 10% and 13% on a reported basis, respectively. Wholesale revenues fell 8% on a reported basis, Converse sales fell 15% on a reported basis, while diluted earnings per share of $0.70 was down 26% year-over-year. Nike is in the midst of a management … Read more

Carnival Corp. Experiencing Strong Demand

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Image: Carnival’s shares have traded sideways since the beginning of 2024. By Brian Nelson, CFA On September 30, Carnival (CCL) reported better than expected third quarter results for its fiscal 2024. Third quarter revenue reached an all-time high of $7.9 billion, which was $1 billion better than the year-ago period. The company posted record operating income and adjusted EBITDA in the quarter. Third-quarter net income came in at $1.7 billion, which was 60% better than what it recorded in the same period last year. Management commentary was positive in the press release, particularly as it relates to visibility into future revenue: We delivered a phenomenal third quarter, breaking operational records and outperforming across the board. Our strong improvements were led … Read more

DOJ Antitrust Lawsuits Targeting Our Top Two Ideas: V and GOOG

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   Image: Alphabet’s and Visa’s shares have performed remarkably well since the beginning of 2023. By Brian Nelson, CFA We received a number of questions regarding the DOJ’s investigation into anticompetitive practices for two of the top ideas in the Best Ideas Newsletter portfolio. Antitrust news with respect to Alphabet’s (GOOG) ad search business and Visa’s (V) debit card business is nothing surprising, but it speaks to the positives and dominance behind their business models, something we like quite a bit. Any outcome of an antitrust lawsuit is uncertain and could result in a settlement and potential other action, including divestitures. That said, as it relates to Alphabet, the potential for divestitures in its business reinforces a sum-of-the-parts value analysis … Read more

Costco’s Shares Remain Pricey

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Image Source: Costco By Brian Nelson, CFA Costco Wholesale (COST) reported fiscal fourth-quarter results on September 26 where revenue came up a bit short relative to forecasts, while the company beat on the bottom line. For the 16-week fourth quarter, Costco reported a net sales increase of 1% compared to the 17-week fourth quarter of last fiscal year. Total company adjusted comparable store sales were 6.9% in the 16-week period, better than the consensus estimate of 6.4%. E-commerce adjusted comparable store sales were 19.5% in the quarter. Net income for the 16-week period was $5.29 per diluted share, compared with $4.86 per diluted share in the 17-week fourth-quarter period of a year ago. Management spoke of its international opportunity on … Read more

An Important Measure of Leverage for Dividend-Growth and Income-Oriented Shareholders, One That Is Dividend-Adjusted

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As more and more investors rely on company dividends for income, dividends, in our view, have become more debt-like commitments in nature, especially from the perspective of dividend-growth or income-oriented shareholders. Years ago, we rolled out a measure of financial leverage that considers both the company’s debt and the present value of its future expected cash dividend obligations, which, in the eyes of die-hard dividend-growth or income-oriented shareholders, may be implicitly assumed to be debt-like commitments in substance. We think this leverage ratio can be used in conjunction with the Dividend Cushion ratio to gain additional insight into the dividend-paying financial health of an entity. Note: There is often great confusion with respect to published measures of financial leverage, and … Read more

GE Vernova Is a Great Clean Energy Idea

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Image: GE Vernova has performed well since it was spun out of GE. By Brian Nelson, CFA Clean energy giant GE Vernova (GEV) recently reported second quarter financial results with total revenue advancing 1% (up 2% organically) thanks to strong performance in services, which grew 7% (up 9% on an organic basis). Total orders came in at $11.8 billion in the quarter, exceeding revenue by 1.4x. Adjusted EBITDA came in at $0.5 billion, with an adjusted EBITDA margin of 6.4%, which was up 320 basis points on an organic basis. Management’s commentary was upbeat in the press release: GE Vernova delivered another strong quarter with EBITDA margin expansion across all segments and substantial cash improvement. Global electrification and decarbonization trends … Read more

Incentives Pressuring Lennar’s Homebuilding Gross Margin

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Image: Lennar’s shares have done quite well the past several years. By Brian Nelson, CFA Lennar (LEN) reported better than expected fiscal third quarter 2024 results on September 19 with revenue and GAAP earnings per share coming in ahead of the Street’s forecast. Total revenue advanced 7.9% in the quarter, while net earnings per diluted share increased 10%, to $4.26, up from $3.87 per diluted share in the same period a year ago. Deliveries increased 16% in the quarter, new orders increased 5%, while its backlog stood at 16,944 homes with a dollar value of $7.7 billion at the end of the period. Lennar’s homebuilding gross margin was 22.5% in the quarter, lower than expectations, however. Management commentary was upbeat … Read more

FedEx Reduces Fiscal 2025 Outlook

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Image: FedEx’s shares have bounced back from the October 2022 lows, but its fiscal 2025 outlook disappointed the Street. By Brian Nelson, CFA FedEx (FDX) reported disappointing fiscal first quarter 2025 results on September 19 with both revenue and non-GAAP earnings per share coming in below the consensus forecast. Adjusted revenue fell to $21.6 billion from $21.7 billion in the year-ago period, while adjusted operating income fell to $1.21 billion from $1.59 billion in the same period last year. Our fair value estimate stands at $284 per share. FedEx’s adjusted operating margin contracted 170 basis points in the quarter on a year-over-year basis, while adjusted net income came in at $0.89 billion, down from $1.16 billion in last year’s quarter. … Read more