DIS

Disney Expects Strong Adjusted EPS Growth, Free Cash Flow

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Image: Disney’s shares have struggled, but management is working hard to get back on track. By Brian Nelson, CFA Disney (DIS) reported mixed second quarter results for fiscal 2024 on May 7 that showed revenue coming in a bit lighter than expectations, but non-GAAP earnings per share beating the consensus forecast. The company continues to recover from recent missteps, with the firm generating double-digit percentage growth in adjusted earnings per share in the period. Management had a lot of positive things to say about the quarter: Our strong performance in Q2, with adjusted EPS up 30% compared to the prior year, demonstrates we are delivering on our strategic priorities and building for the future. Our results were driven in large … Read more

Netflix to Stop Reporting Membership Numbers Starting Next Year

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Image: Netflix still has a lot of room for growth. By Brian Nelson, CFA On April 18, Netflix (NFLX) reported better than expected first quarter 2024 results. In the quarter on a year-over-year basis, the company’s revenue advanced ~15%, its operating income jumped ~54%, and its operating margin registered a roughly seven-percentage point increase, to 28%. Netflix’s top line was driven both by membership growth and pricing, and operating income benefited in part from higher-than-expected revenue performance and the timing of its content spending. Earnings per share came in at $5.28 in the quarter versus management’s $4.49 forecast. Netflix generated free cash flow of ~$2.14 billion in the quarter. Netflix continues to focus on building out its member base, while … Read more

We Remain Bullish; Is This 1995 – The Beginning of a Huge Stock Market Run?

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Image: Large cap growth stocks have trounced the performance of the S&P 500, REITs, and bonds since the beginning of 2023. We expect continued outperformance in this area of the market. By Brian Nelson, CFA We’re now roughly four years past the depths of the COVID-19 meltdown, where equities collapsed in February and March of 2020. As the markets began to recover through 2020, our long-term conviction in equities only grew stronger. We think the biggest risk for long-term investors remains staying out of the market on the basis of what could be considered stretched valuation multiples. As we outlined heavily in the book Value Trap, valuation multiples hardly tell the complete story about a company and often omit key … Read more

Earnings Roundup: PEP, DIS, ARM, PM

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By Brian Nelson, CFA Dividend Aristocrat Pepsi (PEP) Raises Dividend for 52nd Consecutive Year On February 9, Best Ideas Newsletter portfolio holding Pepsi reported mixed fourth quarter results that showed revenue pressures but a modest beat with respect to non-GAAP earnings per share. Organic revenue growth was 4.5% in the period, lower than the consensus forecast calling for 5.9% expansion, while core constant currency earnings per share increased 9%. The company experienced organic volume declines across the board in its operating divisions, with the greatest weakness coming from its Quaker Foods North America segment, where volumes fell 8%. Management seemed cautious in the quarterly press release noting that it “navigated another year of elevated levels of inflation, macroeconomic volatility, geopolitical … Read more

Earnings Roundup: NFLX, ASML, T, ABT

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By Brian Nelson, CFA Netflix (NFLX) Lands WWE Raw and Puts Up Huge Streaming Paid Member Number Image: Netflix’s substantially improved free cash flow has made it a clear winner in the streaming wars. Image Source: Netflix. On January 23, Netflix reported mixed fourth-quarter results that showed a beat on the top line, but a bottom-line miss. The mixed performance, however, was overshadowed by a huge growth number in new global streaming paid memberships of 13.12 million during the quarter and a landmark $5 billion deal with TKO Group (TKO) to begin streaming WWE Raw exclusively on Netflix beginning in January 2025. 2023 was a banner year for Netflix. The company grew revenue 12% (up from 6% last year), pushed … Read more

12 Reasons to Stay Aggressive in 2024

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By Brian Nelson, CFA 1. The Fed has signaled that rate cuts could start with inflation at a 2 handle (2 point something) and not at exactly 2.0%. That means that the Fed may become anticipatory to prevent overshooting to the downside with inflation. We see this as positive for long-duration equities, particularly those whose free cash flow generation is robust in the out-years, inclusive of big cap tech and the stylistic area of large cap growth. 2. Unemployment is at structural lows of 3.7%. Employers are working hard to keep talent on board, and with each paycheck, employees are pumping more and more money into the stock market via retirement accounts. This tailwind remains a stiff one and will … Read more

Disney’s Free Cash Flow Is Expected to Surge But A Strong Recovery Is Already Priced In

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  Image Source: Valuentum By Brian Nelson, CFA On November 8, Disney (DIS) reported improved fourth-quarter results for its fiscal 2023. Revenue advanced 5% on a year-over-year basis in the quarter, and the firm drove non-GAAP diluted earnings per share to $0.82 from $0.30 in the prior year period. The company’s Disney+ streaming service added 7 million core customers in the quarter, and its commentary that its streaming business would reach profitability in the fourth quarter of next fiscal year was welcome. Cost savings will be key, and the executive team expects free cash flow to grow significantly in fiscal 2024 versus the most recently reported year. All of this was great news, but a massive recovery in free cash flow … Read more

ICYMI: Questions for Valuentum’s Brian Nelson

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Valuentum’s President Brian Nelson, CFA, answers your questions. Q: What Is Valuentum? A: In short, it is a strategy that combines the concepts of value and momentum within individual stocks. We measure value through the cash-based sources of intrinsic value – net cash on the balance sheet and future expected free cash flow. We measure momentum rather simply, generally via relative strength or other technical and momentum indicators. We like stocks with strong net cash positions on the balance sheet, ones that are generating tremendous free cash flow, and have strong secular growth prospects such that the prospect for expectations of free cash flow can continue to be ratcheted higher. Today, most Valuentum stocks are included in the stylistic area … Read more

Stock Report Updates

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In our 16-page equity research reports, we offer a fair value estimate for each company based on a rigorous and transparent discounted cash flow process, assess the attractiveness of a stock based on a firm-specific margin of safety, and provide a relative valuation comparison in the context of the company’s industry and peers. Each report includes detailed pro forma financial statements, explicit fundamental forecasts, and scenario analysis. A cross section of the ValueCreation and ValueRisk ratings provides a financial assessment of a company’s business quality (competitive position), while the ValueTrend and Economic Castle ratings offer insight into the trajectory of a firm’s economic profit creation (ROIC versus WACC). Included in each 16-page report is a company’s rating on the Valuentum Buying Index (VBI), a methodology that combines rigorous financial and valuation analysis with … Read more

Subscribe to the Valuentum ESG Newsletter!

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*BONUS* Included in the ESG Newsletter is an ESG-focused simulated newsletter portfolio! Subscribe today. ESG Newsletter $1,000.00 Pay now “The investing landscape has changed dramatically over the past decade and part of that transformation has involved US households placing a much greater emphasis on “ethical” and “sustainable” investing strategies. A decade ago, funds managed with Environmental, Social, and Governance (‘ESG’) standards in mind were a small part of the investing universe at-large, but that is no longer the case. Data from Morningstar notes that US funds considered “sustainable” reported $21.5 billion in net inflows during the first quarter of 2021, up from $20.5 billion in net inflows in the fourth quarter of 2020 and roughly five times greater than the … Read more