Member Articles

Broadcom a Key Beneficiary of AI Investment

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By Brian Nelson, CFA On March 7, Broadcom (AVGO) reported better than expected first-quarter results for fiscal 2024. Revenue advanced 34% from the same period a year ago, while adjusted EBITDA increased 26% on a year-over-year basis. On a non-GAAP basis, net income increased to ~$5.3 billion, up from ~$4.5 billion in the same period a year ago. Non-GAAP adjusted earnings per share increased to $10.99 from $10.33 in the year-ago period. Shares yield ~1.6% at the time of this writing, and the company continues to push through meaningful dividend increases. Management was upbeat when it came to artificial intelligence [AI] in its press release: We are pleased to have two strong drivers of revenue growth for Broadcom in the … Read more

General Mills Doing a Lot of Things Right, Shares Yield ~3.4%

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Image Source: General Mills By Brian Nelson, CFA On March 20, General Mills (GIS) reported better-than-expected third quarter results for its fiscal 2024. Though net sales fell 1% in the period, the company’s adjusted operating profit advanced 14% in constant currency. On a two-year compound growth basis, the firm’s organic net sales increased 7%, so while there was some pressure on revenue in the quarter, most of it can be attributed to difficult comparisons. Our fair value estimate for General Mills stands at $60, with the company trading at a modest premium to those levels at the time of this writing. General Mills continues to focus on its Accelerate strategy, which breaks down into four pillars: boldly building brands, relentlessly … Read more

In the News: Inflation, Walgreens, SPACs/IPOs, and Marine Insured Losses

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By Brian Nelson, CFA Inflation Remains Subdued Based on Latest PCE Reading On March 29, the Fed’s preferred metric with respect to its inflation assessment, the personal consumption expenditure (PCE) price index, was released and came in at a 2.8% year-over-year increase, excluding food and energy, for the month of February, roughly in line with expectations. The Fed’s aggressive rate-hiking cycle during 2022 seems to have been enough to get inflation back to reasonable levels, in our view, and we view the reading as a positive one as the Fed continues to work to get inflation back to 2.0%. The Fed is also aware that it doesn’t want to overshoot inflation to the downside (below 2.0%), so the reading for … Read more

Micron Issues Strong Outlook, Points to Multi-Year Opportunity in AI

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Image Source: Micron By Brian Nelson, CFA On March 20, Micron (MU) reported better than expected second quarter fiscal 2024 results that showed considerable revenue growth and a nice beat with respect to non-GAAP earnings per share. Revenue advanced to $5.82 billion versus $3.69 billion in the same period last year, while non-GAAP net income swung into positive territory at $0.42 per share, up from a loss of $1.91 during the second quarter of fiscal 2023. Operating cash flow surged to $1.22 billion in the quarter from $343 million in the same period a year ago. Here’s what management had to say about the performance in the quarterly press release: Micron delivered fiscal Q2 results with revenue, gross margin and … Read more

Boeing Shakes Up Executive Team

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  Image Source: Kanesue  By Brian Nelson, CFA On March 25, Boeing (BA) announced that CEO Dave Calhoun will step down as CEO at the end of 2024. The move comes weeks after an incident on an Alaska Airlines (ALK) flight where part of the fuselage blew out. The company’s Independent Board Chair Larry Kellner also announced that he would not stand for reelection at the next annual meeting. New Independent Board Chair Steve Mollenkopf will succeed Kellner and lead efforts to select Boeing’s next CEO. Mollenkopf has been on the board since 2020 and previously served as CEO of Qualcomm (QCOM). Further, Boeing Commercial Airplanes President and CEO Stan Deal will retire from Boeing effective immediately and be replaced … Read more

McCormick Targeting Strong Adjusted Earnings Growth in Fiscal 2024

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Image Source: McCormick By Brian Nelson, CFA On March 26, spice maker McCormick & Company (MKC) reported solid first quarter fiscal 2024 results for the period ended February 29. The company’s sales advanced 2% on a constant-currency basis, while adjusted operating income increased 4% on a constant-currency basis. Adjusted earnings per share came in at $0.63 compared to $0.59 in the same period last year, showcasing a 7% year-over-year increase. The results were good enough to send the stock meaningfully higher following the report. McCormick’s top line in the quarter was bolstered by a 3% increase in pricing, which was offset in part by a 1% decline in volume due primarily to mix and the company’s decision to exit lower … Read more

Ameresco’s Shares Under Pressure Despite Record Backlog and Asset Pipeline Metrics

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Image Source: Ameresco’s backlog of opportunities remains robust. By Valuentum Analysts The rise of ESG investing and the political shift towards encouraging developments within the realm of green energy–from renewable energy projects to efforts to reduce water consumption and much more–has created numerous opportunities for investors. Ameresco Inc (AMRC) offers energy efficiency solutions, infrastructure upgrades, and renewable energy solutions to its customers. The company also operates some of the renewable energy facilities it helps develop such as solar farms and biogas plants. Ameresco provides its services all over the globe though the U.S. remains its most important market (and the source of over 90% of its revenues). In the U.S., Ameresco will often help its clients secure the financing needed … Read more

Nike’s Revenue to Face Pressure During First Half of Fiscal 2025

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Image: Nike’s shares have faced considerable pressure from the beginning of 2022, and its outlook for the first half of fiscal 2025 wasn’t great. By Brian Nelson, CFA On March 21, Nike (NKE) reported better-than-expected third quarter fiscal 2024 results. Revenue during the quarter advanced modestly on a reported and currency-neutral basis as revenue from its Nike brand rose 2%, while sales for Converse fell 19% on a reported basis. Nike showcased its pricing strength in the period, with the company’s gross margin advancing 150 basis points, to 44.8%, despite higher input expenses and restructuring charges. Net income fell 5% in the fiscal third quarter, while diluted earnings per share dropped 3% in the period. Nike ended the quarter ending … Read more

Understanding Stock Splits

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By Brian Nelson, CFA There are few financial topics more misunderstood, in my opinion, than stock splits. Some investors believe that a stock split is a value-creating endeavor brought about by “market forces” that have blessed their company’s stock for one reason or another. They believe that they will get more shares of the company at the same price, thereby doubling their investment value as a result. Unfortunately, this is not correct. In reality, a stock split is a move made at the complete discretion of the company’s board to reduce the nominal price of the company’s shares such that more individual investors can “afford” to buy more of the stock (increasing its ownership base). The primary reason stems from the common belief … Read more

Pfizer 6% Dividend Yield Speaks of Considerable Risk, Free Cash Flow Coming Up Short

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Image: Pfizer’s shares have been under considerable pressure the past few years. By Brian Nelson, CFA  Pfizer’s (PFE) revenue has faced pressure of late from expected declines in COVID-related sales from Comirnaty and Paxlovid, as the pharma giant navigates a post-COVID-19 world. However, excluding weakness from COVID-19 related revenue, the company’s underlying revenue grew 7% during 2023. Pfizer is working to build a strong oncology portfolio as it strives to realize billions in annualized cost savings to get to the other side of its troubles.   Image: Pfizer’s 2024 financial guidance. For the full-year 2024, Pfizer is targeting revenue in the range of $58.5-$61.5 billion (was $58.5 billion in 2023) and adjusted diluted earnings per share in the range of … Read more