Member Articles

The Most Important Tactic in Money Management: Don’t Overreact – The Path of Republic Services

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Let’s dig into the path of Republic Services (RSG), a holding in both the portfolio of our Best Ideas Newsletter and Dividend Growth Newsletter. The trash taker’s past several months have been quite volatile due to some negative newsflow, but the company has now fully recovered and is breaking out to a new 52-week high today! Though we had plans to trim our position in both of our actively-managed portfolios following its weak performance in early November of last year, we didn’t move an inch as we awaited for a tactical exit. In fact, in our Dividend Growth portfolio (cost basis: $27.55 per share), we still hold a full position, and we’re now sitting on profits in our Best Ideas portfolio — even before considering … Read more

Halliburton Sets New Revenue Record

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Late last week, oil services firm Halliburton (click ticker for report: ) reported fantastic fourth-quarter results. Revenue jumped 3% year-over-year to $7.3 billion, easily exceeding consensus estimates and the best quarterly result in the company’s history. Adjusted income from continuing operations was $0.63 per share, a few pennies higher than expected, but down significantly from a year ago. Margins in the Completion & Production (C&P) segment improved sequentially, but declined well over 1,000 basis points year-over-year to 13.9%. International results were excellent, with operating income growing 43% sequentially in Latin America, 22% in Europe/Africa, and 55% in Middle East/Asia. However, operating income in North America, Halliburton’s largest segment, fell 26% sequentially due to seasonal factors, as well as pricing and … Read more

Weak Holiday Sales from Hasbro Are a Surprise

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After NPD reported solid toy sales during December, we thought the holiday season might be relatively strong for the major toymakers—including Lego, Hasbro (click ticker for report: ), and Mattel (click ticker for report: ). However, Hasbro announced last week that its fourth quarter revenue will be approximately $1.3 billion, below the consensus expectation of $1.4 billion. Earnings, net of restructuring charges, will be $2.73-$2.75 per share, well below the consensus estimate of $2.85 per share. We won’t know until the firm announces its results in February what caused the weakness, but we like the firm’s decision to reduce annual operating expenses by $100 million over the next three years. Since December seemed like a relatively strong month for the … Read more

Menu Innovation Helps Drive Strong Growth at Starbucks

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Coffee retailer Starbucks (click ticker for report: ) reported solid results for the first quarter of its 2013 fiscal year. Sales surged 11% year-over-year to $3.8 billion, roughly in-line with consensus estimates. Earnings were also solid, growing 14% year-over-year to $0.57 per share, also equal to the consensus expectations. Although most food and beverage retailers are looking to grow internationally, Starbucks posted great results in its Americas segment, where revenue jumped 10% on same-store sales growth of 7%. At the firm’s annual meeting, it explained the need to open more locations in the US, and strong results suggest management is correct. The firm’s operating margin declined 50 basis points year-over-year to 20.8% due to litigation and Hurricane Sandy, though we … Read more

3M Delivers Fantastic Fourth Quarter; Feels Optimistic About China

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On Thursday, 3M (click ticker for report: ) reported fantastic fourth-quarter results that showed significant improvement from relatively disappointing third-quarter performance, released in October. The firm’s sales during the quarter expanded 4.2% (its best in 2012), to $7.4 billion, an all-time fourth-quarter record. Organic sales increased at a slightly faster pace thanks to solid performance in its consumer/office, display/graphics, and healthcare segments, where organic local-currency sales growth came in at 8.7%, 8.3% and 5.9%, respectively. Only its safety, security, and protection services segment declined organically. Revenue in the US jumped more than 5%, while sales generated from Europe, Middle East, and Africa (EMEA) fell a modest 1%–not bad considering the negative news flow from the Eurozone. And most importantly, China … Read more

Making Another Call on Precision Castparts; Raising Our Fair Value Estimate Materially

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Best Ideas Newsletter portfolio holding Precision Castparts (click ticker for report: ) reported solid fiscal third-quarter results Thursday that showed strong top-line and operating-income expansion and left us feeling quite optimistic about its recently-announced acquisition of Titanium Metals (TIE). We’re raising our fair value estimate for Precision Castparts to $246 per share (was $200) on the basis of better future margin forecasts associated with the deal. The metal-bender’s sales advanced 13% from the year-ago period, while consolidated segment operating income jumped at the same pace. Though the firm’s 25.5% operating margin was flat from the year-ago quarter, the most recently-reported period included $18 million in higher corporate and financing expense from its acquisitive activity. For investors in micro-cap peer (and … Read more

AT&T Sells Just a Couple of iPhones…8.6 Million!

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Wireless carrier and cable provider AT&T (click ticker for report: ) announced satisfactory fourth-quarter results Thursday afternoon. Revenue grew just 0.2% year-over-year to $32.6 billion, which was stronger than the consensus had anticipated. Earnings, adjusted for significant expenses, jumped 10% year-over-year to $0.44 per share, slightly below consensus expectations. Perhaps the most significant read-through from the quarter came from AT&T’s iPhone (click ticker for report: ) activations. The company activated approximately 10.2 million smartphones during the fourth quarter. Out of those 10.2 million phones, 8.6 million were iPhones, or 84.3% of total smartphones. The activations might suggest the iPhone is gaining popularity in the US. Contrary to the mainstream spin, Apple is doing quite well in the smartphone space. Solid … Read more

P&G Delivers Fantastic Results

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After sputtering along for the past few years, consumer product giant Procter & Gamble (click ticker for report: ) has returned to solid growth, reporting strong second-quarter results for its 2013 fiscal year Friday. Revenue rose 3% year-over-year to $22.2 billion, handily beating consensus expectations. Earnings growth was also fantastic, with core earnings per share jumping 12% compared to the year-ago period to $1.22, a stark advance from its prior lackluster growth (Image Source: P&G Earnings Presentation). The firm’s gross margin in the quarter expanded 80 basis points year-over-year to 50.9% as the company benefits from relatively flat cost inflation and incremental price increases. SG&A grew about 2% year-over-year, but the cost item remained flat as a percentage of sales. … Read more

Microsoft Remains a Terrific Company

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Dividend Growth Newsletter portfolio holding Microsoft (click ticker for report: ) reported solid second-quarter fiscal 2013 results Thursday afternoon. Revenue jumped 3% year-over-year (5% non-GAAP) to $21.5 billion, roughly in line with consensus figures. Earnings per share declined 3% year-over-year (+4% non-GAAP) to $0.76 per share, a penny better than the consensus estimate. The performance from the Windows Division was relatively strong, in our view. 60 million Windows 8 licenses sold is a pretty solid number (as the image below shows), though we think the company (and the industry) would have liked to see the new operating system perform better (Image Source: Microsoft 2Q Earnings Presentation). We place a lot of the blame on the OEMs such as Dell (click ticker for … Read more

Tales from the Rails

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Since rails are heavily tied to weakening coal shipments, there was a great deal of skepticism about the industry’s strength during the back half of 2012. However, we saw evidence (AAR data) that indicated an altering freight mix (auto sales, intermodal, petroleum shipments, crushed stone, gravel and sand) could compensate for coal shipment weakness. Let’s dig into how the group is performing now that fourth-quarter results for a few of them have come in. On Thursday, Union Pacific’s (click ticker for report: ) fourth-quarter report revealed that its performance during the period was solid. Despite the weak coal shipments, revenue grew 3% year-over-year to $5.3 billion, roughly in line with consensus expectations. Earnings were better than anticipated, growing 10% year-over-year, to $2.19 a share. … Read more