Valuentum Exclusive Analysis for the Discerning Investor

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Jul 24, 2024

Alphabet’s Free Cash Flow Faces Pressure in Second Quarter
Image: Alphabet’s shares have performed well so far in 2024. Alphabet reported solid second quarter results with strong performance across its operating segments. In the quarter, Google Cloud revenue came in better than expectations, while YouTube ads missed only slightly. Alphabet now pays a dividend, and it continues to aggressively buy back stock. The company’s free cash flow faced pressure in the quarter due to investments to drive innovation, and while this may pressure ROICs in the coming periods, we still like Alphabet as an idea in the Best Ideas Newsletter portfolio.

Jul 23, 2024

Coca-Cola’s Organic Growth Surprises to the Upside
Image: Coca-Cola’s shares are trading near all-time highs. Coca-Cola reported solid second quarter results on July 23, with net revenues up 3% and organic non-GAAP revenues advancing an impressive and better-than-expected 15% thanks to a 9% increase in price/mix and 6% growth in concentrate sales. Looking to the full year 2024, Coca-Cola expects to generate organic non-GAAP revenue growth in the range of 9%-10%. For 2024, management is targeting comparable non-GAAP earnings per share growth of 5%-6% relative to $2.69 per share in 2023, while it expects to deliver comparable currency-neutral non-GAAP earnings per share growth of 13%-15% on the year. Free cash flow is expected to be $9.2 billion for the year. Shares of Coca-Cola yield 3% at the time of this writing.

Jul 23, 2024

Lockheed Martin Issues Strong Second Quarter Results, Raises Outlook
Image: Lockheed Martin’s shares have recovered nicely since their October 2023 bottom. Performance across Lockheed Martin’s Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space divisions continue to move in the right direction, with all four segments showcasing improved revenue and operating profit performance during the second quarter and for the first half of the year. We like that Lockheed Martin’s free cash flow covers its dividend nicely, and while the company has a net debt position, we’re not worried about the company meeting its obligations. We continue to like Lockheed Martin as a dividend growth idea, with shares yielding ~2.6% at the time of this writing.

Jul 23, 2024

Philip Morris Puts Up Excellent Second Quarter Results, Raises 2024 Guidance
Image: Philip Morris’ stock has done quite well over the past few months. Philip Morris put up excellent second quarter results showcasing strong organic performance across key financial measures. The company continues to have traction with its nicotine pouch product ZYN, with impressive growth rates attained despite supply constraints. The company raised its 2024 guidance for revenue, adjusted operating income and adjusted earnings, and we continue to like the firm’s transition to becoming a smoke-free company. Shares of Philip Morris yield 4.9% at the time of this writing.

Jul 22, 2024

Verizon’s First Half 2024 Operating Cash Flow Declines, Adjusted Earnings Fall
Image Source: Verizon. On July 22, Verizon reported mixed second-quarter results with revenue missing the consensus expectation but non-GAAP earnings per share coming in line. Earnings per share, excluding special items, was $1.15 in the quarter, worse than the $1.21 mark in the second quarter a year ago. Cash flow from operations during the first half of 2024 was $16.6 billion, down from $18 billion in the same period a year ago. Free cash flow did improve to $8.5 billion in the first half of 2024 versus $8 billion in the first half of last year, but the improvement came in the form of lower capital expenditures, which were $8.1 billion in the first half versus $10.1 billion in the same period a year ago. Dividends paid for the first half of 2024 totaled $5.6 billion, so Verizon is doing a good job covering dividends with free cash flow, despite pressure on operating cash flow. Verizon ended the quarter with total debt of $149.3 billion and an unsecured debt to consolidated adjusted EBITDA ratio of 2.5x. Shares of Verizon yield ~6.4% at the time of this writing.

Jul 19, 2024

Netflix Still Has a Long Runway of Growth Ahead of It
Image Source: Netflix. Netflix reported solid second quarter results and raised its forward-looking guidance for the full year 2024. The company is winning the streaming wars and has a long runway of future membership growth given the 80% of TV time it and Youtube don’t already own. Its nascent ads business continues to gain traction, too. Netflix still expects to haul in free cash flow of $6 billion in 2024, as it continues to buy back stock. The company ended the quarter with $14 billion in gross debt versus cash and cash equivalents of $6.7 billion. We think Netflix is performing well, but we're already quite tech heavy in the newsletter portfolios and won't be adding shares to any portfolio at this time.

Jul 19, 2024

Dividend Increases/Decreases for the Week of July 19
Let's take a look at firms raising/lowering their dividends this week.

Jul 18, 2024

Crown Castle’s AFFO In Excess of Cash Dividends Paid
Image: Crown Castle’s shares look to be bottoming, and the firm’s AFFO is expected to remain well above cash dividends paid during 2024. Crown Castle reiterated its outlook for 2024 that it issued on June 11. It expects site rental billings of $5.74-$5.78 billion, site rental revenues in the range of $6.317-$6.362 billion, adjusted EBITDA between $4.143-$4.193 billion, and AFFO per share in the range of $6.91-$7.02. Though Crown Castle’s full year performance reveals pressure, the company’s AFFO remains in excess of its annual dividend rate of $6.26, and with a dividend yield of ~5.9%, we think it makes the cut for inclusion to the High Yield Dividend Newsletter portfolio.

Jul 18, 2024

Domino’s Suspends Long-term Global Net Store Growth Guidance
Image: Domino’s shares have done well since the beginning of 2023, but visibility into its long-term global net store growth has become murky given problems at one of its master franchisees. Domino’s quarterly results and free cash flow performance weren’t poor by any stretch, but the firm disappointed investors with respect to its updated global net store growth forecast. The company noted that it will come up 175-275 stores short of its international store growth target in 2024, and it temporarily suspended its guidance that previously called for 1,100+ global net stores annually over the period 2024-2028. It now expects 825-925 net new stores in 2024. We didn’t like the news, but we remain fans of Domino’s long-term story and are keeping the idea as a holding in the Best Ideas Newsletter portfolio.

Jul 18, 2024

Taiwan Semiconductor Impresses in Second Quarter, Gives Strong Outlook
Image: Taiwan Semiconductor reported better-than-expected second quarter results. Though Taiwan Semiconductor is exposed to geopolitical uncertainty, perhaps exacerbated by former President Donald Trump’s latest comments about how Taiwan should pay the U.S. for national defense, the company’s outlook remains robust, in our view. Taiwan Semiconductor remains one of our favorite ideas in the ESG Newsletter portfolio.