Member Articles

Ingersoll Rand’s Earnings Warning Just the Beginning for Industrial Names; Stick With Aerospace

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On Friday, Ingersoll Rand (IR) cut its third-quarter revenue and earnings-per-share outlook to the range of $3.9 billion to $3.95 billion (was $4.05 billion to $4.15 billion) and $0.77 to $0.80 (was $0.85 to $0.95), respectively. Perhaps unsurprisingly, the cause was due to its consumer-related business (residential HVAC, golf and residential security) and poor commercial security activity. Though it noted that transport, industrial and commercial HVAC revenues remained strong, such strength offers little consolation to investors, given the magnitude of the outlook revision. Further, Ingersoll noted that third-quarter operating income was hurt by the lower volumes and an unfavorable product mix in the residential and security segments. And topping things off, the firm indicated the strengthening of the dollar against … Read more

Chinese Stocks Take a Pounding

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The DOJ is stepping in to investigate accounting irregularities at US-listed Chinese firms. Though we fall short of concluding that any wrongdoing has occurred across our Chinese equity coverage universe, we think such negative news adds a layer of uncertainty to the group that won’t be assuaged anytime soon. The Guardian reported: “There are parts of the Justice Department that are actively engaged in this area,” said Robert Khuzami, director of enforcement at the U.S. Securities and Exchange Commission. “I think that you will see greater (Department of Justice) involvement as time goes on,” said Khuzami, a former federal prosecutor himself, when asked why no criminal charges have yet been filed in the massive Chinese accounting scandal. “Not having proper accounting … Read more

AMD Slashes Outlook on Supply Disruptions, Not PC Weakness; Maintaining Our Fair Value

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Advanced Micro Devices (AMD), on Wednesday, slashed its revenue growth outlook for its third quarter to an increase of 4% to 6% from the range of 8% to 12% previously. The chip maker also cut its expected gross margin for the period to 44% to 45% from 47% before. The company noted some problems regarding yield and manufacturing issues at one of its German foundry partners (Globalfoundries Inc.). Given that most of the issues arose from complexities related to the use of common tools, we’re not sure that we can take such an explanation at face value. It’s likely that this pre-announcement by AMD may be setting up for a further disappointment in the back half of this year, particularly … Read more

Sprint: A Bet on Clearwire and Lightsquared as Much as the Actual Company

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Sprint (S) shareholders have been on an absolute rollercoaster this year. For a brief period of time, a strong first quarter propelled shares to over $6, but the broader market sell-off and a lack of profitability brought shares down to the $3 range where they hover now. There was a small pop when the rumor broke that they would begin carrying Apple’s (AAPL) i-Phone 5 in mid-October, but shares came tumbling back down. Ultimately, Sprint is the smallest of the three major national carriers, both by number of customers and actual service coverage. With the ATT (T) – T-Mobile deal still in limbo, Sprint could end up being the only low-cost provider of nationwide service. Or, they won’t be. Either way, … Read more

Walgreens’ Strong Fourth-Quarter Report Overshadowed By Fall Out with Express Scripts

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Walgreens (WAG) reported strong fiscal fourth-quarter results Tuesday that showed solid revenue and earnings expansion. However, the lack of progress on key contract negotiations with pharmacy benefit manager, Express Scripts (ESRX) left us a bit disappointed overall, to say the least. Nonetheless, our $34 fair value estimate for Walgreens remains unchanged at this time. Walgreens’ fourth-quarter sales advanced 6.5% thanks to a 4.4% increase in comps (stores open for more than a year), while earnings per share increased over 16%, excluding an after-tax gain associated with the sale of its pharmacy benefits management business (adjusted net earnings increased 10.1% during the period). Prescription sales (nearly two thirds of revenue) jumped 5.7% during the quarter, as the number of prescriptions filled … Read more

We Stand By Our Call on Ancestry.com

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This article appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/295916-in-defense-of-ancestry-coms-stock-price-slide Over the past few weeks, Ancestry.com has continued to take some major hits as short sellers look for confirming evidence of their thesis. We noted the bias of the investment community against the online geneological research provider in one of our previous posts here. Frankly, short sellers often take at face value a small portion of the company’s business metrics, in this case churn, and build up a case against the entire firm. We don’t think this is justified and maintain the firm is worth north of $60 per share. For starters, we outlined our discussion regarding the short thesis in a previous note here, and welcome interested readers to take … Read more

The 5 Levels of Leadership: Proven Steps to Maximize Your Potential

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Valuentum’s subscriber base enjoys reading the latest and greatest investing books. As a result, Valuentum requests and receives business and investing books before they are officially released. Our editorial staff took a look at the following book, and here’s what we thought after reading it: The 5 Levels of Leadership: Proven Steps to Maximize Your Potential By John C. Maxwell. Center Street, 2011. 304 p. ISBN 978-1-5999-5365-6. Book Release Date: October 4, 2011   Maxwell (leadership expert and New York Times bestselling author) further explores his leadership principles in this latest book. Maxwell’s belief is that leadership is about influence, and that “if people can increase their influence with others, they can lead more effectively.” Taking this into consideration, Maxwell … Read more

Nike Just Does It Again, Raising Our Fair Value

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Nike (NKE) reported an absolutely spectacular first quarter that beat what we thought were aggressive estimates. Due to increased expectations, we’ve upped our fair value estimate to $97 per share (was $95 previously). North American results: a huge upside surprise Considering many pundits seem to think the United States is in/heading into/might head into a recession, Nike posted wonderful North American results. Apparel was up 23%, reinforcing our thesis that sports apparel is a tailwind industry. This “mature” industry was up 15% currency neutral, which was even greater than 9% currency neutral growth in China. As CEO Mark Parker said at Nike’s Analyst Day, “Nike is a growth company.” Though commentary was limited, Nike also seems very excited about its upcoming NFL license. With … Read more

Is First Solar Really That Bad?

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After the failure of the federally-supported company, Solyndra, shares of First Solar (FSLR) have been beaten down harshly. By now, you’ve probably heard that Solyndra received over half a billion dollars in federal loans, and thereafter went bankrupt. It looks possible that First Solar, which is scheduled to possibly receive government loan assistance for its next major projects, could have their funding stripped away by a reactionary Congress. Management has noted this would “materially affect earnings.” So why is the market so negative on the solar industry? It hasn’t been a sudden change, but only recently has the trend come to like. There are a few things to like about the solar industry. For one, it’s growing rapidly. According to … Read more

Oracle’s Fiscal First-Quarter Results Reveal Strength in Software Sales, Europe

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Oracle (ORCL) posted strong fiscal first-quarter results Tuesday that showed significant growth in new software licenses and product support (about two thirds of revenue) and some weakness in hardware systems products revenues (about 20% of its top line). Services revenue, accounting for the balance, increased nicely and remained steady at about 14% of sales. We are maintaining our $38 fair value estimate and make available our 16-page report here. Oracle’s top-line advanced at a low double-digit pace, while the firm’s GAAP operating income increased an impressive 40%, translating to a 36% increase in net income and a 46% jump in operating cash flow. The significant profitability expansion was driven by a refocus on its high-end server business – Exadata, Exalogic, … Read more