EADSY

Honeywell’s Aerospace Division Its Crown Jewel

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We’re huge fans of Honeywell. The company’s Aero operations are its crown jewel, and while Boeing is facing some troubles these days, we don’t expect much impact on Honeywell at all. In fact, we expect commercial aerospace to remain strong, even in the face of broader industrial weakness. The risks to the company’s HBT business could be starting to mount given some concerns in commercial real estate, but management isn’t really seeing any signs of yet, pointing to only moderating growth in 2020. The SPS division, while a headwind, probably won’t be a factor next year, but it could bounce back as inventories are cleared from the channel. By Brian Nelson, CFA Honeywell (HON) has facilitated a number of changes … Read more

Fair Value Estimates Matter – Case Study: Boeing

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Image Source: Boeing’s share price converged to our estimate of intrinsic value in the summer of 2019. The plane maker continues to navigate tumultuous skies with its 737 MAX. By Brian Nelson, CFA Dow Jones Industrial Average component Boeing (BA) continues to dominate news headlines, and not for good reason. Let’s revisit our March 2019 article for some background: The news for Boeing hasn’t been this bad since the doldrums of the 787 Dreamliner build some years ago now. The 737 narrowbody, the line-up all over the news of late, is the workhorse of the industry, and Boeing’s next generation 737 MAX has been the fastest-selling plane in the aerospace giant’s history. Most countries around the globe, including the US, … Read more

Economic Commentary: Apple $225+, Brokers Tumble, Auto Sales Look Tired

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“Though all signs point to increased volatility, we maintain our view that we’re well-positioned in the newsletter portfolios, and the ideas highlighted in the Exclusive publication consider the backdrop economic conditions we closely monitor.” — Brian Nelson, CFA There has been plenty of news in the markets this week, with the Dow Jones Industrial Average (DIA) experiencing significant declines only to bounce back a bit. From where we stand, the markets look vulnerable technically, but that doesn’t mean we’re looking to change anything in the newsletter portfolios. We have some dry powder in the form of a ~10% cash weighting in the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio. The disappointing September ADP jobs report added to lower-than-expected ISM (Institute … Read more

Economic Commentary: US-Listed Chinese Names, 60-40 Stock-Bond Allocation and More

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There’s an interesting saying that I came across recently…that hits at the most important component of any fiduciary approach: capital preservation. The saying was “Friends don’t let friends buy and hold.” We’ve always employed the Valuentum strategy, which we believe is much more promising than a traditional buy and hold strategy. – Brian Nelson, CFA The US-China trade war continues with reports indicating that the White House is considering delisting Chinese (FXI, MCHI, KWEB) companies on US exchanges. Let’s get more of the Valuentum’s team’s thoughts on these developments as well as other topics that have come to the fore. The latest alert to members is a great prompt to get the conversation started. The Valuentum Team: If we had … Read more

FedEx Bemoans Trade Wars and Issues Weak Guidance, Shares Get Crushed

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Image Source: FedEx Corporation – IR Presentation By Callum Turcan Global logistics and shipping giant FedEx Corp (FDX) reported first quarter earnings for its fiscal 2020 (ended August 31) on September 17 that underwhelmed, sending shares sharply lower (down almost 13%) on September 18. FedEx reduced its fiscal 2020 guidance and management made sure to call out what the company sees as its main problem, trade wars and the dynamic effect that is having on global shipping volumes. Here’s what management had to say (emphasis added): “FedEx is lowering its fiscal 2020 earnings forecast as the company’s revenue outlook has been reduced due to increased trade tensions and additional weakening of global economic conditions since the company’s initial fiscal 2020 … Read more

The United Technologies-Raytheon Merger Will Create a Defense and Commercial Aerospace Giant

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Image Source: United Technologies Corporation – IR Presentation By Callum Turcan On June 9, United Technologies Corporation (UTX) and Raytheon Company (RTN) agreed to a merger of equals that if approved, will create a new giant in the aerospace & defense world. The combined company will sell anything from Patriot surface-to-air missile systems to national governments to power generation and cyber protection products for commercial aircraft. United Technologies and Raytheon hope that as a combined entity, the new company will have the scale required to be truly competitive in the commercial aerospace industry while maintaining the status of a reliable defense contractor. Both CEO’s went on CBNC together to defend the deal and explained it as “complementary” to highlight the … Read more

Earnings Roundup: Amazon, Facebook, Honeywell, PayPal, Visa

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Let’s talk about our views on Amazon, Facebook, Honeywell, PayPal, and Visa. We think Facebook’s equity offers the biggest bargain, but Visa remains our top idea, as it has been for some time. By Brian Nelson, CFA Amazon’s Shares Are Trading Below Our Fair Value Estimate But Sensitivity to Assumptions Is Great Image shown: The probability distribution of our fair value estimate range for Amazon. The company is trading below our fair value estimate of ~$2,000, but above the low end of the fair value estimate range of ~$1,500. We think shares are fairly valued if they are trading on the yellow line. Amazon’s fair value estimate is very sensitive to its operating margin. Here are the three things that … Read more

In the News: Brexit, Unilever Simplification, and Geopolitical Uncertainty

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Uncertainty related to Brexit continues to loom over the outlooks of multinational companies operating in Europe, and other geopolitical issues are making their presence known on global markets as well. By Kris Rosemann The British pound hit five-week highs against the dollar on the morning of September 11 as EU chief negotiator Michel Barnier said it was “realistic” to think the United Kingdom and European Union will reach a Brexit (EWU) deal within two months. The UK is scheduled to leave the EU on March 29, 2019, and Barnier’s comments have helped ease some concerns that the UK would leave the bloc without a formal trading agreement. President Trump’s silence regarding tariffs on the region has also fostered some cautious optimism, but … Read more

Boeing’s Massive Backlog Still Growing, Near-Term Margin Concerns Crop Up

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Image Source: Robert Sullivan Commercial aerospace giant Boeing continues to ride a wave of strong demand as its massive backlog continues to grow, but a write down related to the troubled KC-46 tanker appears to have investors thinking twice about its near-term margin performance. By Kris Rosemann Shares of former simulated Dividend Growth Newsletter portfolio idea Boeing (BA) faced a bit of selling pressure in the July 25 trading session following its second quarter earnings release as a write down related to additional costs in the troubled KC-46 tanker program helped caused a margin guidance reduction in its ‘Defense, Space & Security’ segment. Delivery of the first aircraft in the program is expected in October 2018, more than two years … Read more

Boeing’s Long-Term Strength Intact; Embraer Deal Nearing?

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Image Source: Robert Sullivan Boeing’s first-quarter report was highlighted by stable top-line growth, impressive bottom-line expansion, and increased full-year guidance. The long-term health of its business is supported by its massive backlog of unfulfilled deliveries. By Kris Rosemann Former simulated Dividend Growth Newsletter idea Boeing (BA) turned in a solid first quarter report April 25, and the drivers of its long-term strength remain fully intact as it continues to generate impressive levels of free cash flow and pursue a deal with Embraer’s (ERJ) commercial aviation operations. Revenue in the first quarter grew 6% on a year-over-year basis thanks to higher commercial deliveries, defense contract volume and services growth. The company’s GAAP operating margin in the period expanded more than 2 … Read more