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Merger Chatter Heating Up for the New Year

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With corporate news slow as the New Year’s week unfolds, merger chatter has heated up to fill the void. On Monday, StreetInsider reported that the New York Times (NYT) may be catching the eye of a suitor. Chen Guangbiao, chairman of China Huangpu Renewable Resources Utilization Group Co, is reported to be interested in making a bid for the firm. The likelihood and the terms of an announcement, however, remain extremely vague, and we point to only one source. Newspaper outlets have certainly been of significant interest as of late, and the well-documented declines in newsprint circulation have done nothing to discourage buyers. For one, Amazon CEO Jeff Bezos recently acquired the Washington Post’s namesake earlier this year in what … Read more

Three Reasons Why Dividend Growth Investors Are Quite Savvy

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A version of this article appeared on our website on October 1, 2013. There are many different approaches to investing, but we think dividend growth investors are quite savvy, especially when they combine a rigorous dividend growth process in the form of the Valuentum Dividend Cushion ratio with the valuation rigors behind the Valuentum Buying Index. Let’s examine the three reasons why we think dividend growth investors are a smart group in the age of ultra-low interest rates. #1. Fool Me Once, Shame on You…Fool Me Twice, Shame on Me Today’s dividend growth crowd has seen enough. First, they witnessed the dot-com bubble (1997-2000), a period in stock market history where firms’ stock prices soared in some cases as a result … Read more

Portion Packs Still in Strong Demand at Green Mountain; Free Cash Flow Surges in Fiscal 2013

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On Thursday, Green Mountain (GMCR) reported excellent fiscal fourth-quarter results. Fourth-quarter revenue advanced 22% from the same period a year ago (52-to-52 weeks) thanks to robust brewer sales and portion pack revenue growth (up 11% and 21%, respectively, as adjusted). The 21% increase in portion packs revenue was driven by a 26% increase in unit volume offset by pricing and mix. Portion packs revenue accounted for 74.2% of total net sales in the fiscal fourth quarter. The company’s gross margin expanded 240 basis points during the quarter, to 36%, thanks primarily to favorable green coffee costs and lower labor and overhead manufacturing costs. Non-GAAP operating income advanced to 18.2% of sales in the period from 16.4% in last year’s quarter. … Read more

Clorox Faces Cash Flow Headwinds in Fiscal 1Q

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Our general takeaway after surveying calendar third-quarter results from peers Hershey (HSY), Colgate-Palmolive (CL), and Unilever (UN) was that performance in the consumer staples space was mostly positive during the third quarter and that emerging-market performance remains robust (even though Unilever toned down expectations a bit). Clorox’s (CLX) better-than-expected fiscal first-quarter results, released Thursday, did not deviate from the mostly positive newsflow. Sales expanded 2% (3.5% excluding the negative impact from currency), and the company recorded pretax profit growth of 7%. Volume for the fiscal first quarter advanced 1% thanks to gains from Professional Products, Charcoal, Laundry and Burt’s Bees offset by declines in Home Care. Gross margins were flat as cost savings and price increases mitigated higher manufacturing and logistics … Read more

Surveying the Cola Companies’ Third-Quarter Results

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Coca-Cola (KO) On Tuesday, Coca-Cola (click ticker for report: ) announced decent third-quarter results that showed global volume expansion and share gains in North America for both the sparkling and still-beverage categories. Though reported revenue declined 3% in the period, revenue – adjusted for structural changes and currency – advanced 4% in the quarter. Likewise, comparable currency-neutral operating income jumped 8%, driving comparable earnings per share growth of 4%. Free cash flow generation of $6.1 billion year-to-date represents 17% of sales. Coca-Cola Americas grew volume 1% in both the quarter and year to date, with North America volume up 2% and Latin America volume even in the quarter. Coca-Cola International grew volume 3% in both the quarter and year to … Read more

Weak Volume Growth Weighs on Coca-Cola

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Leading soft drink maker Coca-Cola (click ticker for report: ) posted lackluster second quarter results Tuesday morning. Revenue declined 3% (+2% excluding currency) year-over-year to $12.8 billion, falling short of consensus estimates. Comparable earnings per share (a non-GAAP figure) increased 4% year-over-year to $0.63, in-line with consensus expectations. With lower capital expenditures than in the year prior, free cash flow is roughly flat year-to-date at $2.8 billion, approximately 12% of revenue. Image Source: Coca-Cola Eurasia and Africa outperformed the rest of the company as volumes surged 9% year-over-year, annualizing 10% expansion in the same period a year ago. Currency headwinds weighed on net revenue growth, which totaled 5% (11% excluding currency). The markets in Eurasia and Africa have consumption rates … Read more

Amazon’s Expansion Knows No Bounds

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On Tuesday, we received a variety of information about Amazon’s (click ticker for report: ) expansion into different product lines. The company is looking to expand its AmazonFresh same-day grocery delivery service and could enter as many as 40 markets this year. Additionally, the firm entered into the highest streaming content contract ever, purchasing the rights to stream over 4,000 episodes of Viacom (click ticker for report: ) TV shows. Let’s dig into the details. AmazonFresh For years, people have speculated that the end-game for Amazon was to build so many warehouses that it could effectively offer same-day shipping on any product and compete with brick-and-mortar shops on the basis of time. Thus, the expansion of AmazonFresh comes as little … Read more

Lack of Cost Control and Demand Risk: The Story of Monster Beverage

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Earlier this week, energy drink producer Monster Beverage (click ticker for report: ) reported lackluster first quarter results due to lower sales growth and a lack of cost containment. Revenue was well below consensus expectations, growing just 7% year-over-year to $484 million compared to the last several quarters of double-digit revenue growth. Earnings fell 10% year-over-year to $0.37 per share, which failed to come close to the consensus estimate. According to Monster’s management, the entire energy drink industry experienced weak sales growth during the first quarter relative to the powerful double digit growth rates the industry has become accustomed to. What’s driving the weakness? It appears to be largely related to health issues. The FDA provides a report describing the negative … Read more

Coca-Cola Grows Earnings And Restructures

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Warren Buffet favorite Coca-Cola (click ticker for report: ) reported solid first-quarter earnings Tuesday morning. Reported revenues fell 1% year-over-year to $11 billion, falling a touch short of consensus estimates. Comparable earnings per share grew 5% year-over-year to $0.46 per share, a penny above consensus expectations. Total product volumes increased 4% compared to the year prior. In spite of reporting decent results, Coca-Cola announced a restructuring in the United States that stole the show. The firm will allow five of its largest bottlers to expand their territories, effectively undoing the bottler rollup of year’s past. CEO Muhtar Kent expanded on the announcement on the company’s conference call, stating: “In the coming months, we will be collaborating with five of our … Read more

Coca-Cola’s Steady Growth Continues

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Warren Buffett holding and dividend growth stalwart Coca-Cola (click ticker for report: ) reported solid fourth-quarter results Tuesday morning. Revenue increased 4% year-over-year to $11.4 billion, a touch below expectations (but this was the result of unfavorable swings in currency). Adjusted earnings rose 15% year-over-year to $0.45 per share, a penny north of consensus estimates. Coca-Cola did a fantastic job controlling expenses, with SG&A declining 120 basis points as a percentage of sales to 37.7%. The company has been laser-focused on delivering cost savings since 2008, and the firm anticipates generating annualized savings of $550-$600 million during the next four years. Such improved operational leverage could lead to the robust earnings expansion that shareholders have become accustomed to during the past … Read more