Member Articles

Johnson & Johnson’s Long-term Tailwinds Are Intact

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Diversified medical and consumer products firm Johnson & Johnson (click ticker for report: ) reported solid fourth-quarter results Tuesday morning. Sales jumped 8% year-over-year to $17.6 billion, roughly in-line with consensus expectations. Earnings were slightly better than anticipated, growing 5.3% year-over-year to $1.19 per share—after adjusting for several special items. Johnson & Johnson’s international expansion outpaced its domestic growth, with international sales jumping 8.9% on a reported basis (11.2% excluding currency) while its domestic business grew 6.8%. The acquisition of Synthes was the big needle-mover in the period, as it was responsible for 5.6 percentage points of the total sales increase. For the year, the growth rate of the firm’s Medical Devices and Diagnostics’ segment exceeded that of other segments, though pharmaceutical results … Read more

Verizon Continues to Outpace the Wireless Carriers

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Tuesday morning, wireless giant Verizon (click ticker for report: ) reported decent fourth quarter results. Verizon’s revenue during the fourth quarter was slightly better than consensus estimates, growing 5.7% year-over-year to $30 billion. Earnings, adjusted for special items including a $1.55 per share pension charge, fell 27% year-over-year to $0.38 per share, which was worse than anticipated, even after netting out a $0.07 per share impact attributable to Hurricane Sandy. Verizon’s wireless segment led the way, with service revenues jumping 8.5% year-over-year, to $16 billion, and total segment sales growing 9.5% year-over-year, to $20 billion. Customers continue to migrate to smartphone plans which carry higher prices and superior margins. Retail postpaid ARPA (average revenue per account) jumped 6.6% compared to the … Read more

General Electric Issues Strong Fourth-Quarter Results; Posts Largest Backlog in History

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On Friday, General Electric (click ticker for report: ) reported solid fourth-quarter results across the board. Total revenue advanced 4% as industrial organic expansion increased at a similar rate. Adjusted orders jumped 7% in the quarter, and the company’s backlog swelled to $210 billion, a new record (Image Source: GE 4Q Earnings Presentation). GE’s operating margins increased 120 basis points during the period, and fourth-quarter operating earnings per share expanded 13% from the same quarter a year ago. All of its industrial segments experienced earnings growth, with five of the seven industrial segments putting up double-digit bottom-line expansion. GE Capital posted $1.8 billion in earnings during the quarter, and its Tier I common ratio came in at a healthy 10.2%. … Read more

Channel Checks at Apple Store Speak to Continued Strength

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This weekend (on the evening of January 19, 2013), we took a trip to a local Apple (click ticker for report: AAPL) store to assess traffic trends and gauge the level of ongoing interest in the iPad maker’s products (post-holiday season). We didn’t see any slowdown in traffic, and the location we visited was very well attended. Though the Schaumburg, IL (Woodfield) locale is one of a large number of Apple stores in the US, we have no reason to believe that it is not indicative of traffic trends and general interest in Apple products at other retail Apple stores across the country. We’ve also included a snapshot of an adjacent, neighboring (and vacant) Radio Shack (click ticker for report: RSH) located just a few feet from the pictured Apple store … Read more

Intel Punished for Investing in the Future

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Thursday afternoon, semiconductor giant Intel (click ticker for report: ) reported better than expected fourth quarter results. Revenue declined 3% year-over-year to $13.5 billion, roughly in-line with consensus expectations. Earnings easily exceeded modest estimates, falling 25% year-over-year to $0.48 per share. Due to the weak PC market and the firm’s desire to clear inventories, gross margins were down significantly in the fourth quarter, falling 650 basis points year-over-year to 58%. Gross margin declines were the primary driver behind the lapse in profitability, but research & development costs increased $300 million compared to the same period of 2011 to 19.5% of sales (up 290 bps Y/Y). On a segment basis, the PC Client Group, not surprisingly, drove the majority of revenue … Read more

Is Genworth a Gem Worth Looking At?

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While we at Valuentum tend to prioritize independent thinking over following the herd, we believe investors large and small can benefit from ideas generated outside of their own portfolios—we don’t think anyone would be disappointed piggy-backing Warren Buffett into shares of Berkshire Hathaway 25 years ago, for example. We wanted to profile a stock owned by prominent investors Seth Klarman and David Einhorn. Genworth Financial (click ticker for report: ) is a financial services company engaged in international and domestic mortgage insurance, as well as wealth management. When the US housing market collapsed, Genworth flirted with bankruptcy and since has experienced volatile price performance. Based on a price-to-book ratio of less than 0.25, a price-to-tangible-book ratio of approximately 0.30, and our fair … Read more

Strong Holiday Sales Boost Toy Makers

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Between the rise of video games and the popularity of cell phones and tablets among children, one might expect the US toy industry to be experiencing a robust decline. However, according to NPD, holiday sales were strong enough to propel the toy market to $16.5 billion in sales during 2012, down just $100 million compared to 2011. The report claims dollar sales and unit sales surged 18% and 10%, respectively, during the final two weeks of December, driving sales 1.3% higher year-over-year for the busiest month of the year. Leapfrog (LF), which focuses primarily on educational toys, topped the ‘best-selling toy list’ with 4 out of the 10 best sellers as well as 3 out of the top 4 (including the … Read more

Kinder Morgan Grows Capacity; Raises Distribution

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Pipeline master limited partnership Kinder Morgan (click ticker for report: ) reported strong fourth-quarter results Wednesday afternoon. Revenue surged 31% year-over-year to $2.5 billion, exceeding consensus estimates. Operating earnings per share grew 74% year-over-year to $0.61, also ahead of expectations. Distributable cash flow per share increased 6% year-over-year, to $1.35, more than covering the firm’s payout during the fourth quarter. This led the company to raise its fourth quarter distribution to $1.29 per share (payable February 14, 2013), three cents higher than the previous payout. The firm’s full-year distributable cash flow of $5.07 per share was significantly higher than in 2011, but more importantly, it easily covered distribution payments of $4.98 per share. Aside from solid earnings, we think the company’s … Read more

Bottom in Sentiment Has Been Reached in Boeing’s 787; Orders for Planes Surge at the Airframe Makers

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What a wild ride it has been for Boeing (click ticker for report: ) in the past few years. In a move widely applauded for choosing to build the incredibly efficient, mostly-composite, revolutionary 787 Dreamliner (instead of a gargantuan super-jumbo like the double-decker Airbus A380), the engineering, development, and production of the plane has been filled with more than its share of costly problems. Not only was the plane delayed at least a half dozen times during the engineering and development of the aircraft to first flight, but the company is dealing with highly-publicized “teething” pains now that the plane is in service. This morning, Europe, Japan and India have joined the US Federal Aviation Administration (FAA) in grounding the … Read more