LMT

Aerospace and Automotive Demand Powering Most Industrials

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Air travel growth and pent-up demand from delayed auto sales due to the Great Recession have provided a boom in spending within the commercial aerospace and automotive industries in recent years, respectively. The ever-increasing global population continues to be a driving force behind the expansion and adaptation of power end markets, and innovative solutions to meet growing global energy demand will continue to be a source of growth for industrials despite fluctuations in the energy-price markets. Such drivers in part have propelled the underlying performance of industrial giants GE (GE) and Honeywell (HON), among others. Winners and Losers Are Developing in Commercial Aerospace We expect commercial aircraft production and deliveries to continue to increase for at least the next three … Read more

The Global Pandemic of Cybercrime, Cyber Espionage and Cyber Warfare

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“The new generation of cyber-attacks on organizations, including large and small enterprises and governments worldwide, is characterized by an unprecedented escalation in the complexity and scale of advanced malware created by criminal organizations and nation-states. These modern attacks are built on dynamic, stealthy and targeted malware that penetrates defenses in multiple stages and through multiple entry points of an IT network. These highly targeted, “single-use” cyber-attacks easily circumvent legacy security solutions that rely on pattern-matching detection technologies. Additionally, because legacy solutions reference outdated signatures of past threats, they also generate a high number of false-positive alerts.” – Fireeye Annual Report, 2014 The statistics are striking. According to a 2011 survey of ~580 US IT experts by research center Ponemon Institute, … Read more

There’s More Rough Sledding Ahead; Removing Half of Microsoft from DG Portfolio

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Reverberations of the collapse in commodity prices have influenced much more than the commodity producers themselves. The slide has impacted business in a variety of sectors, almost across the board, as suppliers and customers seemed to pause to assess the damage and opportunities. The strengthening dollar is also having an unprecedented impact on the growth of global entities. If the disappointments yesterday (see here) didn’t signal an inflection point in the markets, then today surely has. It was just yesterday that we reiterated our view that Peabody Energy’s (BTU) dividend was at risk, and almost on cue, the firm announced today that it would slash its payout more than 97%, to $0.085 per share on a quarterly basis. The Dividend … Read more

Dividend Increases/Decreases for the Week Ending September 26

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Below we provide a list of firms that raised/lowered their dividends during the week ending September 26. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week CSB Bancorp (CSBB): now $0.19 per share quarterly dividend, was $0.18. Hersha Hospitality Trust (HT): now $0.07 per share quarterly dividend, was $0.06. Hingham Institution for Savings (HIFS): now $0.28 per share quarterly dividend, was $0.27. International Bancshares (IBOC): now $0.27 per share semi-annual dividend, was $0.25. Lockheed Martin (LMT): now $1.50 per share quarter dividend, was $1.33. OGE Energy (OGE): now $0.25 per share quarterly … Read more

Defense Industry Round Up

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The ongoing conflict in Ukraine, Israel’s offensive in the West Bank, North Korea calling a US movie an act of war, the latest in Iran, and US troops going back to Iraq suggest there may finally be upside to a defense budget that has experienced nothing but pressure since peak spending at $691 billion in 2010 (see grey bar in image below, from left to right). Image Source: US DoD Fiscal Year 2015 Budget Request With the markets making new highs seemingly every week, bargains have become more difficult to find. We point members to ideas in the Best Ideas portfolio and Dividend Growth portfolio, but an increasingly more uncertain geopolitical backdrop–where defense spending upside is growing more and more … Read more

Valuentum Economic Castleâ„¢ Rating Update

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Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

Evaluating the Outlook for Defense Stocks

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The defense industry is home to a number of large defense contractors—General Dynamics (GD), Lockheed Martin (LMT), Northrop Grumman (NOC) and Raytheon (RTN)—that have significant project/intellectual know-how, long-term customer/government ties, and widespread integration expertise that cannot be easily replicated by many smaller contractors. This gives established, large defense contractors a leg up on bidding for new government contracts and optimizing the margin profile for many through cost cutting and productivity enhancements. Still, competing budget priorities within the overall US budget and within the US defense budget itself will pose both challenges and opportunities for much of the group. However, long-term cybersecurity and national security risks aren’t going away, and this will ensure that the group has a steady share of … Read more

Boeing’s Fourth-Quarter Results Were Disappointing But We’re Not Worried about the Strength of Commercial Aerospace

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On Wednesday, aerospace and defense bellwether Boeing (BA) reported relatively disappointing fourth-quarter results. Revenue advanced 7% in the period, but core operating earnings were flat versus the prior-year quarter due to a 50 basis-point headwind in its core operating margin. Our experience with Boeing is that the firm tends to face share-price pressure when financing or emerging-market scares become prominent, the latter taking center stage in recent days—the Argentine peso collapsed and the South African rand continues to face pressure due to an unexpected rate hike. News about China—including a slowdown in manufacturing, banking concerns, and a sizzling (but more vulnerable) real estate market—isn’t helping either. Boeing is more exposed to these “news” items than most companies, particularly given the … 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

Surveying 3Q Performance from the Large Defense Contractors

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Northrop Grumman Executes Nicely in 3Q But Reveals Declining Backlog On Wednesday, Northrop Grumman (NOC) reported strong third-quarter results considering the competing budget priorities in Washington and the subsequent difficult revenue environment. The defense contractor’s revenue dropped 2.6%, as expected, but its segment operating income increased 4.5% thanks to roughly 90 basis points of segment operating margin improvement. Third-quarter diluted earnings per share leapt 17.6%, and free cash flow swelled to $860 million (14.1% of sales), up from $748 million (11.9% of sales). We very much liked the profitability improvements and its increased free-cash-flow conversion during the period, but the firm’s backlog performance in the quarter wasn’t stellar: As of September 30, 2013, total backlog was $37.5 billion compared with … Read more