HON

We Remain Fans of Honeywell’s Shares

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Image: Honeywell’s shares have traded sideways for some time, but we still remain fans of its stock. By Brian Nelson, CFA On April 25, Honeywell (HON) reported better-than-expected first quarter results. The company’s reported and organic sales increased 3% thanks to strength in ‘Aerospace Technologies’ and ‘Energy and Sustainability Solutions,’ while its operating margin advanced 130 basis points, to 20.4%. Its segment margin expanded 20 basis points, to 22.2%, as its ‘Aerospace Technologies’ division performed well. On an adjusted basis, earnings per share in the quarter came in at $2.25, which was above the high end of its previously released guidance. Honeywell ended the quarter with $32 billion in backlog, a tally that is up 6% on a year-over-year basis. … Read more

RTX Ends Year with Record Backlog, Shares Yield ~2.4%

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By Brian Nelson, CFA Back in late January, RTX (RTX), formerly Raytheon Technologies, reported solid fourth-quarter results, beating on both the top and bottom lines. Adjusted sales advanced 10% from the prior year, while adjusted earnings per share edged 2% higher, to $1.29. For the fourth quarter, the company hauled in $4.7 billion in operating cash flow and generated $3.9 billion in free cash flow. RTX ended the year with record company backlog of $196 billion, with $118 billion attributable to commercial and the balance to defense. Image Source: RTX Management noted the firm is off to a good start in 2024 in the press release: RTX reported solid full-year results, delivering 11 percent organic sales growth and $5.5 billion in … 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

Merger Mania

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Image Source: Glenn Beltz By Brian Nelson, CFA Mergers and acquisition [M&A] activity continues as the market sets new highs. Elevated borrowing costs as a result of the Fed’s aggressive rate hiking cycle in 2022 are pushing many entities to pursue all-stock transactions. We’ve previously discussed our thoughts on the Cisco (CSCO)/Splunk (SPLK) tie-up in this article here, which was an all-cash deal, but several other rather large acquisitions have been announced that are worth bringing to members attention. On February 19, Capital One (COF) announced that it would acquire Discover Financial (DFS) in an all-stock $35.3 billion deal that would represent a 26.6% premium over Discover’s price as of February 16. The deal is expected to generate $2.7 billion … 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: MO, EPD, SBUX, CLX, HON

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By Brian Nelson, CFA Altria’s (MO) Dividend Growth Outlook Through 2028 Looks Solid On February 1, Altria Group, which is yielding ~9.5% at the time of this writing, reported mixed fourth-quarter results that showed revenue missing on the top line, but the company’s non-GAAP earnings per share coming in-line with the consensus forecast. For the fourth quarter, net revenue dropped 2.2% as a result of lower sales in its smokeable products portfolio, which was only partially offset by strength in its oral tobacco segment. Adjusted diluted earnings per share was roughly flat thanks in part to both a lower share count and lower tax rate, both of which helped offset modest weakness in its operating companies income (OCI). Altria’s fourth-quarter … Read more

Boeing In Negative Headlines Again; Part of 737 Max Fuselage Blows Out During Commercial Flight

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  Image: Boeing’s shares have been quite volatile the past couple years. By Brian Nelson, CFA On January 6, Boeing (BA) received some more bad news. Part of a fuselage installed on one of its new eight-week old 737 Max 9 aircraft blew out on an Alaska Airlines (ALK) flight. There were no reported injuries because of the mishap, but understandably passengers were undoubtedly shaken up. Some posted videos of the experience. Boeing had been working hard to get back on track with customer perception of the safety of its 737 MAX line-up, and we view the incident as yet another hiccup in the firm’s relations with the public. Key Boeing supplier Spirit AeroSystems (SPR) installed the part on the … 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

The Dividend Growth Newsletter Portfolio’s Outperformance

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The Dividend Cushion ratio is one of the most powerful financial tools an income or dividend growth investor can use in conjunction with qualitative dividend analysis. The ratio is one-of-a-kind in that it is both free-cash-flow based and forward looking. Since its creation in 2012, the Dividend Cushion ratio has forewarned readers of approximately 50 dividend cuts. We estimate its efficacy at ~90%. Note: This article corrects the degree of outperformance of the simulated Dividend Growth Newsletter portfolio, as of the date of the calculation (~3.6% –> ~9.4%). By Brian Nelson, CFA Excluding dividends, we estimate that the simulated Dividend Growth Newsletter portfolio is down roughly 4.9% through the interim session October 30 from the beginning of 2022, beating the … Read more

There Will Be Volatility

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By Brian Nelson, CFA Last year, 2022, was a big test for equity investors, and the downside volatility that we witnessed during the year wasn’t comfortable, to say the least. Following the COVID-19 crash and rebound during 2020, and then the market surge in 2021, it wouldn’t be a stretch to say many investors’ heads are probably still spinning from all the volatility witnessed to start this decade. That said, part of what we’ve been warning about the past few years with respect to the equity market, especially in Value Trap, is that the proliferation of price-agnostic trading (e.g. quant, machine/algorithmic trading, etc.) will only lead to more and more market volatility, so while we were somewhat surprised by last … Read more