Resultados trimestrales

[ruindog]

Caterpillar Hikes Its Dividend & Sets New Financial Targets

This morning, Caterpillar (CAT) published a press release containing various important pieces of information for self-directed investors. The announcements included:

• A 20% increase to its quarterly dividend

• The expectation to double Machine, Energy & Transportation sales to $28 billion by 2026 and deliver higher adjusted operating margins through the cycles of three to six percentage points above historical performance.

• The plan to “ return substantially all Machine, Energy & Transportation free cash flow to shareholders through continued dividend growth and more consistent share repurchases.”

We view this announcement as quite positive for Caterpillar’s shareholders.

The company appears capable of delivering low double-digit returns from its current price and earns a buy recommendation from Sure Dividend today.

AmerisourceBergen: Pharma Distributor On Pace For All-Time Earnings-Per- Share Highs

AmerisourceBergen (ABC) is one of the 3 large pharmaceutical distributors in the U.S. that together have ~90% market share.

AmerisourceBergen reported its fiscal 2019 second quarter results this morning. Highlights from the release are below:

• Revenue up 5.6% versus the same quarter last year
• Adjusted earnings-per-share up 8.8% versus the same quarter last year

Revenue was very slightly below analyst expectations. Adjusted earnings-per-share came in 7.7% higher than analyst expectations.

The company also raised its guidance from a range of $6.65 - $6.85 to a range of $$6.70 - $6.90; a 2.1% increase.

Steve Collins, AmerisourceBergen’s president, chairman, and CEO said the following about the companies results:

“AmerisourceBergen continues to execute and deliver strong performance with good growth in customer volumes, double-digit Specialty distribution growth and overall strong execution across both the Pharmaceutical Distribution Services and Global Commercialization Services & Animal Health groups this quarter. As we move into the second half of the year, our fiscal 2019 outlook remains strong. AmerisourceBergen continues to be well positioned for long-term growth and we have the utmost confidence that our differentiated strategy and focus on providing innovative services and solutions for our partners will continue to drive sustainable value for all of our stakeholders.”

We continue to be bullish on AmerisourceBergen. The company’s stock looks undervalued as it is trading at just 10.8 times expected 2019 earnings. We believe a fair P/E ratio for the stock is around 15.

And, the company is on pace to hit all-time earnings-per-share highs this year. Overall, we expect earnings-per-share growth of around 8% annually from AmerisourceBergen. Finally, the security offers investors a dividend yield of 2.2% which is slightly higher than the S&P 500’s yield.

We view AmerisourceBergen as a compelling buy at current prices. The company’s newest earnings only further reinforce our buy recommendation.

S&P Global: Slightly Misses Expectations

S&P Global (SPGI), the provider of credit ratings and financial data, reported first quarter financial results this morning before the market opened. The company’s performance was slightly worse than expected but still relatively solid.

Here’s what the figures look like. Revenue of $1.6 billion was essentially unchanged compared to the same period a year ago.

Excluding acquisitions, divestitures, and the impact of foreign exchange, S&P Global’s revenue would have increased 1% over the first quarter of fiscal 2018.

On the bottom line, adjusted diluted earnings-per-share of $2.11 increased by 5% year-on-year.

Here’s what the company’s President and Chief Executive Officer, Douglas Peterson, had to say about the company’s performance in the quarter:

“The markets have come a long way since the depths of December as they began to stabilize in the second week of January. We don’t let market disruptions interfere with our business plans. During the quarter we continued to execute on our strategic investments – fueling new product launches, technology projects, and improved productivity across the Company as we continue to Power the Markets of the Future.”

S&P Global also reaffirmed its 2019 financial guidance with the publication of its first quarter earnings release. The company continues to expect to generate adjusted diluted earnings-per-share between $8.95 and $9.15 in the full fiscal year. At the midpoint, this implies growth of 6.5% over fiscal 2018’s comparable figure.

S&P Global’s performance in the first quarter was worse than both analyst estimates and our long-run expectations for the company. With mid-single-digit total return potential at current prices, the company’s common equity earns a hold recommendation from Sure Dividend at current prices.

Kellogg: Earnings Beat & CFO Change

Kellogg (K) had two newsworthy press releases this morning.

First, the company reported its fiscal 2019 first quarter results. Highlights from the quarter are below:

• Organic net sales grew 0.3% year-over-year
• Adjusted earnings-per-share fell 15.4%

Despite weak results, the company actually reported adjusted earnings-per-share 6.3% higher than what analysts were expecting. Still, we find a 15.4% decline in adjusted earnings-per-share to be somewhat troubling. The earnings-per-share decline was due to:

• Higher tax rate
• Negative currency effects
• Higher interest expenses
• Lower returns on pension assets

All of the above are not central to Kellogg’s core business, which actually saw revenue grow slightly in the quarter.

Also, Kellogg is in the process of divesting its Keebler cookie and related brands to Ferrero for $1.3 billion. The transaction is expected to close in July. The move is being made to help Kellogg focus on its “core brands” to spur growth.

The divestiture will reduce adjusted earnings-per-share this year. As a result, management has lowered its guidance and expects adjusted earnings-per-share to fall 10% to 11% this year.

And finally, Kellogg announced that current CFO Fareed Khan is stepping down and being replaced by Amit Banati, who is currently Kellogg’s president of AMEA (Asia, Middle East, Africa) operations.

The change was unexpected, but we are happy to see someone who has been with Kellogg for an extended period of time take the role of CFO. Fareed Khan joined Kellogg in February of 2017, while Amit Banati joined the company in 2012.

We view Kellogg as undervalued by 10% to 15% at current pre-market open prices (the stock is down 5% to ~$56/share as of this writing). We expect Kellogg to return to growth of around 5% annually over the long run after this year. This growth plus the company’s robust dividend yield of nearly 4% makes the company a buy at current prices.

[ruindog]

Newell Brands: The Turnaround Shows Signs Of Progress

Newell Brands (NWL) posted better-than-expected first quarter 2019 earnings results this morning.

The company generated $0.14 in adjusted earnings-per-share. Analysts were expecting $0.06 in adjusted earnings-per-share. Newell more than doubled analyst expectations for adjusted earnings-per-share. Revenue was very slightly ahead of expectations as well.

Newell stock was up over 3% in pre-market trading as a result. The company’s President and CEO Michael Polk said the following about quarterly results:

“We have had a good start to the year and are encouraged by the improvement in results in the first quarter. Sales were at the higher-end of our expectations, operating margins increased as a result of disciplined cost management, normalized EPS was well ahead of our expectations, and operating cash flow was significantly improved versus last year. We have taken decisive action to strengthen performance and those actions are beginning to yield results. As expected, U.S. retailer headwinds associated with the Toys ‘R’ Us bankruptcy and the Writing industry retailer landscape have begun to moderate as we exit the first quarter, setting up what we believe will be a more constructive environment for the balance of 2019.”

While Newell did show improvement this quarter versus expectations, the company is still going through a difficult period as it offloads “non-core” brands and focuses on its best opportunities.

Sales fell 5.5%, with core sales (currency adjusted) declining 2.4%. And while adjusted earnings-per-share beat estimates, they were down to $0.14 from $0.28 a year ago.

But with that said, the company did generate $200 million in operating cash flow versus negate $402 million in the same quarter a year ago. Strong operating cash flows bode well for the company going forward.

And with revenue down somewhat, the strong earnings beat was due primarily to reducing overhead . With Newell able to materially reduce its operating expenses. Selling, general, and administrative expense declined 17.3% versus the same quarter a year ago for savings of $108.4 million in the quarter alone.

Newell reaffirmed its guidance for fiscal 2019. Details for the company’s guidance are below:

• Net sales of $8.2 billion to $8.4 billion
• Core sales: low single digit decline
• 20 to 60 basis point improvement in normalized operating margin
• $1.50 to $1.65 in normalized earnings-per-share
• $300 million to $500 million in operating cash flows

Newell shares are currently for around $15. This means they are trading for around 10x expected adjusted earnings-per-share this year. And this is off a lower earnings base; earnings-per-share are likely to improve significantly in the years ahead as Newell cotninues to streamlline its operations.

We view Newell as a buy at current prices. The company’s earnings beat and significant cost reductions show that management is executing its plan to improve shareholder value.

3M Goes Shopping: Industrial Conglomerate Buys Acelity For $6.7 Billion

On May 2nd, 3M Company (MMM) announced that it is acquiring Acelity Inc. and its KCI subsidiaries from its current owners – a consortium comprised of Apax Partners, the Canadian Pension Plan Investment Board, and the Public Sector Pension Investment Board. The purchase price is an enterprise value of approximately $6.7 billion, including the assumption of debt and subject to closing and other adjustments.

This purchase price is difficult to evaluate without understanding the earnings power of the Acelity business. Fortunately, 3M provided some color on this topic in the acquisition announcement. The acquired company generated revenue of $1.5 billion in 2018 and the purchase price implies an EB/EBITDA multiple of approximately 11 after including “expected run rate cost synergies.” For context, 3M is trading at a current EV/EBITDA multiple of approximately 13.3.

Here’s what 3M’s Chief Executive Officer, Mike Roman, stated about the transaction in the company’s press release:

“Acelity is a recognized leading provider of advanced wound care technologies and solutions and an excellent complement to our Health Care business. This acquisition bolsters our Medical Solutions business and supports our growth strategy to offer comprehensive advanced and surgical wound care solutions to improve outcomes and enhance the patient and provider experience. We are excited to bring Acelity’s technologies and dedicated employees to our team. Together, we will apply 3M science to bring differentiated offerings to key wound and operative care solutions worldwide.”

The company’s press release also included some important information about the impact of this acquisition on the company’s near-term financial results.

More specifically, 3M stated that the acquisition should subtract $0.35 from GAAP earnings-per-share in the next twelve months. On an adjusted basis, the impact will be much more positive. The acquisition is expected to add $0.25 to earnings-per-share after excluding purchase accounting adjustments and anticipated one-time expenses related to acquisition and integration.

For context, we previously expected 3M to generate earnings-per-share of around $9.50 in fiscal 2019.

Lastly, 3M reduced its share repurchase guidance as a result of this transaction. The company now expects 2019 stock buybacks to be in the range of $1.0 billion to $1.5 billion versus $2.0 billion to $4.0 billion previously.

Overall, this acquisition looks to be a modestly positive event for 3M’s shareholders. The company’s stock continues to trade above our fair value estimate and earns a hold recommendation from Sure Dividend at current prices.

Shell: Earnings Beat Despite Lower Oil Prices

Yesterday, Royal Dutch Shell PLC (RDS.B) reported financial results for the first quarter of fiscal 2019. The company beat expectations despite persistently lower oil prices thanks to strong performance from its trading segment and higher prices in the liquid natural gas (LNG) market.

Shell’s income attributable to common shareholders increased by 2% in the quarter. However, the company prefers to measure its performance on a “current cost of supplies” (CCS) basis, which it describes as: “ the earnings measure used by the Chief Executive Officer for the purposes of making decisions about allocating resources and assessing performance. On this basis, the purchase price of volumes sold during the period is based on the current cost of supplies during the same period after making allowance for the tax effect. CCS earnings therefore exclude the effect of changes in the oil price on inventory carrying amounts. Sales between segments are based on prices generally equivalent to commercially available prices.”

On a CCS basis, Shell’s adjusted earnings decreased by 2% year-on-year. GAAP earnings-per-share increased by 4%, while CCS adjusted earnings-per-share declined by 6%. The company’s performance by segment (measured using CCS earnings) is listed below:

• Integrated Gas: 5.3% growth

• Upstream: 11.2% growth

• Downstream: 3.2% growth

• Corporate: Net loss increased by 192%
  (These are likely unallocated expenses with no associated revenue)

Shell’s interim dividend was maintained at $0.47 per share.

Here’s what Shell’s CEO, Ben van Beurdan, had to say about the company’s performance in the quarter:

“Shell has made a strong start to 2019, with the first quarter financial performance demonstrating the strength of our strategy and the quality of our portfolio of assets. The power of our brand, serving millions of customers every day, continues to be a differentiator. Our integrated value chain enabled our Downstream business to deliver robust results despite challenging market conditions. The consistent financial performance across all our businesses provides confidence in meeting our 2020 outlook.”

Shell’s first quarter was much better than the markets anticipated. Moreover, the company’s stock appears capable of delivering excellent returns from current prices, and shares earn a buy recommendation from Sure Dividend.

[ruindog]

Emerson Electric: Lowered Guidance Causes The Stock To Drop

This morning, industrial conglomerate Emerson Electric (EMR) reported financial results for the second quarter of fiscal 2019. The company met earnings expectations, missed revenue expectations, and lowered its guidance range, which caused the company’s stock to dip in this morning’s premarket trading.

Here are what the numbers look like. Emerson Electric generated revenue of $4.57 billion, which fell short of consensus analyst expectations by $70 million. Still, Emerson Electric’s revenue improved meaningfully over last years period. GAAP net sales increased by 8% while underlying net sales increased 4% (which excludes unfavorable currency translations of 2% and a positive impact from acquisitions of 6%).

Moving down the income statement, Emerson Electric’s gross profit margin of 42.1% contracted by 70 basis points while operating profit margin of 15.8% contracted by 50 basis pints and pretax margin of 14.8% contracted by 70 basis points.

Margins contracted due to a combination of unfavorable product mix, cost inflation from recent acquisitions and a $7 million charge related to the acquisition of General Electric’s Intelligent Platforms business.

On the bottom line, GAAP earnings-per-share of $0.84 increased by 11% versus the same period a year ago – a strong showing, to be sure.

However, Emerson Electric’s guidance dampened any strength from to its performance in the most recent quarter. The company reduced its GAAP earnings-per-share guidance to $3.60 to $3.70, down slightly on the top end from previous guidance of $3.60 to $3.75.

Emerson Electric scores extremely well on our two proprietary safety scores. With that said, the company appears priced to deliver mid-single-digit returns moving forward. Accordingly, Emerson Electric earns a hold recommendation from Sure Dividend at current prices.

Anheuser-Busch Inbev Falls On Earnings Miss

Anheuser-Busch recently reported financial results for the first quarter of fiscal 2019. The company’s results disappointed the market and shares have fallen in this morning’s pre-market trading.

With that said, the company’s financial results were strong in some respects. Anheuser-Busch reported volume growth of 1.3%, revenue growth of 5.9%, and EBITDA growth of 8.2% with EBITDA margin expanding by 86 basis points in the quarter.

Brazil was a source of strength for the company, as the country experienced double-digit volume growth in both the beer and non-beer businesses (which outperformed the regional industry in both categories). In addition, the company’s “Global Brands” – Budweiser, Stella Artois, and Corona – grew by 8.5% globally and 14.0% outside of their home markets.

On the bottom line, results were weaker. Adjusted earnings of $1.572 billion decreased by 6.7% from the $1.685 billion of earnings generated last year. Adjusted earnings-per-share of $0.79 also decreased by 7.1% over the $0.85 generated last year. The company attributes its earnings weakness to foreign exchange impacts, stating “ our strong performance was more than offset by the negative impact of unfavorable currency translation effects.”

Lastly, Anheuser-Busch provided an update on its outlook for fiscal 2019. The company expects to deliver “strong” growth in revenue and EBITDA, while maintaining its $3.2 billion cost synergy target related to the acquisition of SAB in 2016. The company did not provide earnings-per-share guidance.

Anheuser-Busch appears positioned to deliver mid-single-digit expected returns moving forward. In addition, the company recently cut its dividend and continues to score poorly on our safety scores. Accordingly, the company earns a sell recommendation from Sure Dividend at current prices.

[ruindog]

Omega Healthcare Investors Shows Signs Of A Turnaround

Yesterday evening, Omega Healthcare Investors (OHI) – a past recommendation of the Sure Retirement Newsletter – reported financial results for the first quarter of fiscal 2019.

In the quarter, the company generated funds from operations of $0.67 per share, representing a decrease of 5.6% year-on-year, and adjusted funds from operations per share of $0.76, which represents a decline of 2.6%. Omega’s AFFO per share beat consensus analyst expectations, which called for AFFO of $0.73 per share.

Perhaps more importantly, Omega Healthcare Investors’ management team included some statements in the earnings release that indicate that the company’s operating environment should improve moving forward. More specifically, the trust’s Chief Executive Officer, Taylor Pickett, said:

“While our operators continue to battle a challenging operating environment, a number of positive factors lead us to believe this environment will improve in the near future. The implementation of the Patient Driven Payment Model (“PDPM”) and the recently announced 2.5% increase in Medicare reimbursement, both starting in October, will augment the improving census driven by a multi-decade demographic tailwind.”

Omega also made progress a number of troubling tenant issues. More specifically, in the first quarter the trust resolved the sale and transition of its legacy Orianna assets (recall that Orianna is a tenant of Omega Healthcare that defaulted on its lease obligations).

Omega Healthcare also said that it “ began to see our general and administrative expenses tick down as legal costs began to moderate.”

Lastly, Omega Healthcare Investors announced that it had provided one of its operators, Daybreak, near-team liquidity relief in the form of a $2.5 million rent deferral in each of the first two quarters of 2019.

Looking ahead, Omega Healthcare Investors reaffirmed its 2019 guidance for AFFO. The trust expects to generate AFFO per diluted share between $3.00 and $3.12 in the twelve-month reporting period. For context, Omega Healthcare Investors currently pays a quarterly dividend of $0.66, which implies a full-year payout ratio of 88% using the bottom of management’s guidance band.

Omega Healthcare Investors currently earns D and B ratings for Dividend Risk and Retirement Suitability. With that said, the company seems capable of delivering mid-teens total returns if management can execute and resolve all current tenant issues. With that in mind, the company earns a buy recommendation from Sure Dividend, but only for investors that can stomach this risk tolerance.

Western Union: Divestitures, Repurchases, & Growth Difficulties

Western Union (WU) – a past recommendation of the Sure Retirement Newsletter – announced its first quarter results yesterday. The security was down more than 3% in pre-market trading today as the market did not respond favorably to the company’s results.

The company reported EPS of $0.39, which missed analyst estimates of $0.43 by $0.04. Revenue of $1.34 billion also missed analyst estimates, which called for $1.36 billion in revenue on the quarter.

Revenue did increase 2% on an adjusted constant-currency basis. And the $0.39 in EPS were 13.3% lower than adjusted EPS in the same quarter a year ago. Poor EPS results were due to lower revenues, an increase in acquisition and divestiture expense, and a higher tax rate.

On the bright side, Western Union spent $175 million om share repurchases during the quarter, around 2% of the company’s market cap at current prices.

In more big news for Western Union, the company expects to divest its Speedpay business this month for $750 million. The bulk of proceeds will go to more share repurchases and paying down the company’s sizeable ~$3 billion debt load. This divestiture (and the much smaller Paymap divestiture) is expected to reduce EPS by $0.10 this fiscal year and next fiscal year, but will focus the company further on cross border transactions.

The company’s guidance calls for a low single-digit increase in adjusted constant-currency revenue. Western Union’s EPS guidance, excluding proceeds from the aforementioned divestitures was reduced from a range of $1.83 to $1.95 to a new range of $1.82 to $1.92.

The company expects to spend $500 to $600 million on share repurchases in each of the next 2 fiscal years. These repurchases will decrease the company’s share count by ~10% from now through 2020 if done near current prices.

We expect total returns nearing 10% annually for Western Union, largely because we see the security as undervalued. But there are certainly risks here. Namely, the company existing in an extremely competitive space which is reflected in Western Union’s difficulty in achieving meaningful growth. We rate the company as a hold at current prices.

[ruindog]

Cardinal Health’s “Earnings Beat” Is Surprisingly Disappointing

This morning, Dividend Aristocrats Cardinal Health (CAH) reported financial results for the third quarter of fiscal year 2019. The company “beat” expectations on both the top and bottom lines. With that said, the company’s core performance was not nearly as strong as financial media would suggest.

On the top line, Cardinal Health generated revenues of $35.2 billion, which represents an increase of 5% from the same period a year ago. Further down the income statement, the company reported adjusted earnings-per-share of $1.59, growth of 14% year-on-year. The company’s Chief Executive Officer, Mike Kaufmann, made the following statement on the company’s performance in the quarter:

“We are pleased that Cardinal Health again delivered overall operating results that were consistent with our expectations for the quarter. Solid progress on our strategic initiatives, the recent renewal of our largest customer and our ability to navigate evolving market dynamics give us confidence over the long term.”

Despite these strong headline figures, Cardinal Health’s operating performance was not as robust. The company’s GAAP operating earnings decreased by 21% in the quarter while adjusted operating earnings fell by 15%.

What caused the tremendous difference between Cardinal Health’s operating earnings and earnings-per-share?

While share repurchases played a role (diluted shares outstanding declined from 315 last year to 299 this year, a drop of 5.1%), the more important factor was a reduction in the company’s tax rate. Cardinal Health’s GAAP tax rate fell from 45.1% last year to 20.0% this year, while its adjusted tax rate fell from 37.5% last year to 21.6% this year.

To understand how the company’s tax rate was so high last year, consider the following statement made by CEO Mike Kaufmann in last year’s third quarter earnings release:

“Our non-GAAP operating earnings came in largely as expected this quarter. However, our non-GAAP EPS was adversely affected by a significant negative change in our effective tax rate primarily associated with our Cordis business. Our team is moving aggressively to address our operational and supply chain issues at Cordis. Under the leadership of our new Medical Segment CEO, Jon Giacomin, we are implementing a series of initiatives to improve those operations and drive greater efficiencies. While these initiatives will take some time, we remain confident in the potential of this business and the value it provides to cardiovascular patients.”

Unfortunately, we believe that Cardinal Health’s “earnings beat” announced this morning was largely a result of a terrible quarter last year, not strong performance this year. The company’s revenue continues to grow at a mid-single-digit pace, yet costs are a problem: gross profit declined by 8% and operating performance declined by 21% in the quarter. Net income increased solely because of a significant, one-time decrease in its tax rate.

Despite Cardinal Health’s margin troubles, the company saw fit to increase its guidance with the publication of its third quarter earnings release. Cardinal Health now expects to generate adjusted earnings-per-share between $5.02 and $5.17 in fiscal 2019. The company generated $5.00 of adjusted earnings-per-share in fiscal 2018.

Overall, we were disappointed by Cardinal Health’s declining operating profits in the most recent quarter, particularly after media outlets began labeling the release as an “earnings beat” immediately after publication. With that said, the company remains tremendously undervalued (a price-to-earnings ratio below 10) and has a long history of steadily increasing dividend payments. Accordingly, Cardinal Health continues to earn a buy recommendation from Sure Dividend at current prices. Any material amount of good news from this company has the potential to cause the valuation to re-rate meaningfully higher.

Disney Beats Expectations Thanks To Parks, Fox, & Direct-To-Consumer

The Walt Disney Company (DIS) reported financial results for the second quarter of fiscal 2019 yesterday after the market closed. It was a strong report overall and shares are slightly higher in this morning’s pre-market trading.

On the top line, Disney’s revenue of $14.9 billion increased by 3% year-on-year, while operating income declined by 10% and adjusted earnings-per-share declined by 13%.

The disparity between Disney’s revenue growth and its profit growth was driven by a mix of factors. While Disney’s revenue actually grew year-on-year, this included a decline in high-margin Studio Entertainment revenue (which saw sales fall due to the strong performance of Black Panther and Star Wars: The Last Jedi in the year-ago quarter) and a large increase in the Direct-to-Consumer & International segment, which is currently unprofitable.

While the company’s profitability declined from last year’s comparable quarter, the company beat analyst expectations on both the top and bottom lines. Disney’s Chairman and Chief Executive Officer, Robert A. Iger, made the following statement in conjunction with the earnings release:

“We’re very pleased with our Q2 results and thrilled with the record-breaking success of Avengers: Endgame, which is now the second-highest grossing film of all time and will stream exclusively on Disney+ starting December 11th. The positive response to our direct-to-consumer strategy has been gratifying, and the integration of the businesses we acquired from 21st Century Fox only increases our confidence in our ability to leverage decades of iconic storytelling and the powerful creative engines across the entire company to deliver an extraordinary value proposition to consumers.”

In the quarter, Disney also benefited from 11 days of contribution from Twenty-First Century Fox, which was acquired on March 20th, 2019 for cash as well as the issuance of 307 million common shares. This added $373 million of revenue and $25 million of operating income to Disney’s consolidated financial results.

Overall, Disney’s performance in the second quarter was better than expected. With that said, shares trade modestly above our fair value estimate, so Disney earns a hold recommendation from Sure Dividend at current prices.

Energy Transfer: Excellent Results In Q1 2019

Yesterday after the market closed, Energy Transfer LP (ET) reported financial results for the first quarter of fiscal 2019.

Results were better than expected and it was a record quarter for the master limited partnership. Key statistics from the quarter are below:

• Revenue increased by 10.4% to $13.1 billion.

• Adjusted EBITDA of $2.80 billion increased by 40% from the first quarter of 2018.

• Distributable cash flow of $1.66 billion increased by 39% from the first quarter of 2018.

• Energy Transfer operated with a distribution coverage ratio of 2.07x, yielding excess coverage of $856 million of distributable cash flow, equivalent to a payout ratio of 48% using distributable cash flow as the denominator.

• Energy Transfer reaffirmed its 2019 outlook for Adjusted EBITDA, which calls for full-year Adjusted EBITDA of about $10.7 billion and capital expenditures of approximately $5 billion.

And most importantly, the company’s distributable cash flow per unit surged 34.1% to $0.63 versus $0.47 in the same quarter a year ago.

Energy Transfer’s strong results were driven by gains in all five of its operating segments. The partnership is performing better than expected.

Looking ahead, Energy Transfer seems capable of delivering mid-teens total returns from its current price. Accordingly, Energy Transfer earns a buy recommendation from Sure Dividend today.

[polin]

Telefónica (TEF)

Resultados trimestrales Lo más significativo [image] Reducción de deuda [image] Previsiones [image]

[miguel_angel_sanz]

Resultados Enbridge

https://seekingalpha.com/pr/17508077-enbridge-inc-reports-strong-first-quarter-2019-results

[fran]

Muy buenos resultados, mejorando las previsiones y los resultados del año pasado.
Mantienen el guidance para este año

[miguel_angel_sanz]

Mantienen incremento del 10% del dividendo en 2020 despues de subirlo este 2019 otro 10%.

[ruindog]

Enbridge Beats Earnings Expectations

This morning, midstream energy conglomerate Enbridge reported financial results for the first quarter of fiscal 2019. The company’s performance soundly beat analyst expectations and Enbridge set an all-time company high for adjusted EBITDA.

Key figures from the report are below:

• Enbridge’s adjusted EBITDA increased by 10.7% to $3.8 billion.

• Adjusted earnings-per-share declined by a penny to $0.81, due entirely to an increase in the number of shares outstanding, which increased by 19.6% year-on-year.

• Distributable cash flow increased by 19.3% to $2.8 billion.

Enbridge’s CEO, Al Monaco, made the following statement in conjunction with the earnings release:

“It was another strong quarter for Enbridge across all of the business units. We’re pleased with the operational and financial performance, and we’ll continue to advance our key strategic priorities throughout the balance of the year, with an enhanced focus on capital allocation, growth and return on investment to maximize shareholder value.”

Importantly, Enbridge reaffirmed its guidance for full-year distributable cash flow, which is expected to be in the range of $4.30 to $4.60 per share. The company currently pays a quarterly dividend of $0.738 per share, which implies a DCF payout ratio of 66% using the midpoint of Enbridge’s financial guidance.

Enbridge’s high dividend yield and robust growth prospects make it attractive for investors at current prices. The midstream energy company earns a buy recommendation from Sure Dividend at current prices.

Buckeye Partners To Be Acquired For A 27.5% Premium

We expected a ‘business as usual’ earnings release from past Sure Retirement Newsletter recommendation Buckeye Partners (BPL) this morning…

But the big announcement the company made was that it will be acquired by IFM Investors for $41.50 per unit. This is a 27.5% premium to yesterday’s closing price of $32.55.

The all cash transaction values Buckeye Partners at a $10.3 billion enterprise value and $6.5 billion equity value. The deal was unanimously approved by Buckeye’s board of directors. It will close after a majority of Buckeye shareholders approve the deal, and other customary closing requirements are completed.

Separately, the company announced fairly weak quarterly earnings this morning. Distributable cash flow per unit declined 17.4% from $1.13 in the same quarter a year ago to $0.94 this quarter.

Also, the partnership announced another $0.75 distribution payable on May 28th to shareholders of record as of May 20th.

We view fair value for Buckeye Partners at around $39/share before today’s weak earnings. The IFM acquisition is for a bit above our expected fair value of Buckeye Partners. As a result, we recommend investors sell Buckeye Partners if it trades near its acquisition price and reinvest the proceeds elsewhere.

Investors tempted to hold out for the final distribution on May 28th should note that the company’s stock should fall by approximately the amount of the distribution on May 20th (the ex-dividend date).

[ruindog]

Walmart Delivers Impressive U.S. Comparable Sales Growth

Earlier this morning, retail giant Walmart (WMT) reported financial results for the first quarter of fiscal 2020. The company exceeded consensus estimates on both the top and bottom lines, sending the stock up modestly in today’s premarket trading.

Walmart generated revenues of $123.9 billion, which represents an increase of 1.0% from last year’s comparable quarter. Excluding foreign exchange movements, revenue increased by 2.5% year-on-year.

The U.S. segment was particularly strong. Walmart U.S. generated comparable store sales growth of 3.4%, which was the best first quarter comp number in 9 years and represents the fourth consecutive quarter with U.S. comp growth above 3%.

Other segments of Walmart’s domestic business also improved nicely. Sam’s Club sales increased by 0.3% while eCommerce sales grew 28%.

On the bottom line, Walmart generated GAAP earnings-per-share of $1.33, which surged by a remarkable 85% over last year’s period. However, some investigation reveals that this $1.33 figure includes $0.20 from an unrealized gain on the company’s equity investment in JD.com. Excluding this, the company’s adjusted earnings were $1.13, down a penny from last year’s $1.14.

Overall, Walmart’s first quarter earnings release impressed the markets, largely due to its better-than-expected comparable store sales growth here in the United States.

With that said, the company trades well above our fair value estimates and seems unlikely to deliver adequate returns moving forward.

Accordingly, Walmart earns a sell recommendation from Sure Dividend at current prices.

Cisco Delivers A Double Earnings Beat With Adjusted EPS Up 18%

Yesterday, Cisco (CSCO) reported financial results for the third quarter of fiscal 2019. The company beat expectations for both revenue and earnings amid broad product revenues growth and double-digit growth in both operating income and earnings-per-share.

On the top line, Cisco’s revenue (excluding the impact of divestitures) increased by 6% year-on-year while operating income rose 12%. On the bottom line, net income increased by 13% while adjusted earnings-per-share increased by 18%.

Cisco continues to be a remarkably shareholder-friendly allocator of capital. The company returned $7.5 billion of capital to shareholders in the first quarter, composed of $1.5 billion of dividend payments and $6.0 billion of share repurchases.

The company also provided guidance for the fourth quarter of fiscal 2018 with the publication of its third quarter earnings release. Revenues are expected to increased by 4.5%-6.5% while adjusted earnings-per-share growth is estimated to be 14.3%-17.1%.

Cisco’s third quarter earnings release was better than the market expected and shares are up about 3.5% in this morning’s premarket trading.

Looking ahead, the company seems capable of delivering mid-single-digit total returns from its current prices. Cisco earns a hold recommendation from Sure Dividend today.

Flowers Foods: Another Earnings Beat From This Blue Chip Dividend Stock

Flowers Foods (FLO) is the third company discussed in today’s newsletter that beat earnings expectations. The company reported earnings for the first quarter of fiscal 2019 yesterday and exceeded consensus estimates for both earnings and revenues.

Flowers Foods saw sales increased by 4.8% to $1.264 billion (or 3.0% growth excluding the acquisition of Canyon Bakehouse ) while adjusted diluted earnings-per-share increased by 6.7% to $0.32.

Here’s what Flowers Foods’ President and Chief Executive Officer, Allen Shiver, said about the company’s performance in the quarter:

“We achieved record sales in the first quarter and are proud of the solid start to the year. In our core business, we benefited from pricing actions taken to mitigate inflationary headwinds as well as continued growth from key brands including Dave’s Killer Bread, Nature’s Own, and Wonder. The recently acquired Canyon Bakehouse also drove top-line growth, and we remain on-track with the rollout of the brand across our distribution network.

While we are pleased with the results of our growth initiatives and pricing actions to date, inflationary headwinds from commodities, labor, and transportation continue to pressure margins. Therefore, in addition to improving price realizations, the team is focused on our supply chain optimization initiatives, which are intended to drive productivity and reduce fixed costs.”

Mr. Shiver is retiring next week after 41 years with the company. His replacement is Ryals McMullian Jr., who is Flowers’ Chief Operating Officer.

Flowers Foods provided updated guidance with the publication of its first quarter earnings release. The company expects to generated sales growth of 2.0% to 4.0% for the full fiscal year, with adjusted earnings-per-share in the range of $0.94 to $1.02 (which represents growth of zero to 8.5%).

We were delighted to see such strong performance from Flowers Foods in the most recent quarter. With that said, the company trades slightly above our fair value estimate today. Flowers Foods earns a hold recommendation from Sure Dividend at current prices.

[ruindog]

• Realty Income raises $845 million in stock offering to repay credit line debt
• Lockheed Martin’s Sikorsky line wins a $1.1 billion Navy contract
• The U .S. & Canada are eliminating steel tariffs between each other
• Johnson & Johnson is recalling some of its surgical staplers
• AbbVie’s glioblastoma treatment fails late-stage study
• JPMorgan Chase will acquire medical payment company InstaMed for more than $500 million

[ruindog]

Home Depot Tops Earnings Expectations

This morning before the markets opened, Home Depot (HD) reported quarterly results that beat the market’s expectations for both earnings and revenues.

Here are what the numbers look like:

• Home Depot generated sales of $26.4 billion in the first quarter of fiscal 2019, which represents a 5.7% increase from the same period a year ago.

• Comparable sales increased by 2.5% while comparable sales in the U.S. increased by 3.0%.

• On the bottom line, net earnings were $2.5 billion, which represents growth of 4.2% year-on-year.

• Diluted earnings-per-share of $2.27 increased by 9.1% over the same period a year ago.

Note that the remainder of the company’s revenue growth outside of comparable sales was due to this year containing 53 weeks of sales (rather than the normal 52 weeks), which shifted the reporting period to a higher period of sales within the calendar year.

Here’s what Home Depot’s Chairman and Chief Executive Officer, Craig Menear, said about the company’s performance in the quarter:

“We were pleased with the underlying performance of the core business despite unfavorable weather in February and significant deflation in lumber prices compared to a year ago. Looking ahead, we remain excited about the momentum we are seeing with our strategic investments. As a result of these initiatives, and the current macroeconomic and housing backdrop, today we are reaffirming our sales and earnings guidance for fiscal 2019. I would like to thank our associates for their hard work and continued dedication to our customers.”

Home Depot also reaffirmed its 2019 financial guidance with the publication of its first quarter earnings release. The company continues to expect sales to grow by about 3.3% and comparable sales to be up approximately 5.0%. On the bottom line, Home Depot expects to generate diluted earnings-per-share growth of approximately 3.1% in fiscal 2019.

Home Depot is a high-quality business and the stock appears positioned to deliver excellent returns moving forward. The company earns a buy recommendation from Sure Dividend at current prices.

Kohl’s Plunges 10% After A Rough Earnings Report

Kohl’s (KSS) reported financial results for the first quarter this morning. Results were much worse than expected. The company’s stock plunged by approximately 10% in this morning’s premarket trading.

Indeed, there was not much to like about Kohl’s performance in the quarter. Comparable sales declined by 3.4%, gross margins contracted by 10 basis points, selling, general, and administrative expenses rose by 1.2%, and net income declined by 17%. Diluted earnings-per-share declined by 16%, partially offset by the positive impact of share repurchases.

Kohl’s adjusted figures were slightly better. The company reported adjusted net income growth of negative 8% and adjusted diluted earnings-per-share growth of negative 5%.

Michele Gass, Kohl’s Chief Executive Officer, made the following statement in conjunction with the earnings release:

“The year has started off slower than we’d like, with our first quarter sales coming in below our expectation. We are actively addressing the opportunities that impacted our first quarter sales and we have strong initiatives that will enhance our sales performance in the second half. We are incredibly excited about our nationwide rollout of the Amazon returns program as well as several important brand launches and program expansions. Operationally, the team reacted appropriately throughout the quarter by managing expenses in line with our expectations. While we are planning the year more conservatively, we continue to invest in our business and operate with a view on our long-term success.”

To make matters worse, Kohl’s dramatically reduced its financial guidance with the publication of its quarterly earnings release. The company now expects to generate adjusted earnings-per-share of $5.15 to $5.45 in fiscal 2019, down significantly from prior guidance of $5.80 to $6.15.

We previously had a buy rating outstanding on Kohl’s Corporation, but this may be revised when our analyst covering the company can take a closer look at the company’s earnings. We advise subscribers to wait for our next Sure Analysis report on the company (due later this week) before taking any action in their investment portfolios.

AutoZone Prints An Excellent Earnings Release

AutoZone, the nation’s leading retailer and distributor of automotive parts and accessories, reported earnings for the third quarter of fiscal 2018 this morning. The company’s report was very strong and shares are up by nearly 3% in this morning’s premarket trading.

AutoZone’s strength began with its top line figures. Net sales of $2.8 billion increased by 4.6% over the same period a year ago, while same store sales increased by 3.9%.

Gross profit margin expanded to 53.6% from 53.5% last year, which was attributable to the sale of two lower-margin business units over the last year and partially offset by lower merchandise margins caused by a shift in sales mix.

Operating expenses rose to 33.9% of sales from 33.0% of sales last year due to increased payroll expenses.

On the bottom line, AutoZone’s net income increased by 10.7% while diluted earnings-per-share of $15.99 increased by 19.2%. Remarkably, shares repurchases added 8.5% of growth to the company’s earnings-per-share as AutoZone spent $1.3 billion on share repurchases through the first three quarters of its current fiscal year.

Looking back over a longer time horizon, AutoZone’s share repurchase history is nothing short of amazing. The company has repurchased 146,236 shares for cancellation since 1998, and has just 24,611 shares outstanding today. This is a track record that is essentially unmatched among the universe of public companies today.

The company has repurchased over 85% of its outstanding shares since 1998. This means even if the company hadn’t grown since 1998, shares would be nearly 7x as valuable today as in 1998 due to share buybacks.

Looking ahead, we continue to believe that Autozone has excellent growth prospects moving forward. With that said, the company trades above our fair value estimate today. Because of this, AutoZone earns a hold recommendation from Sure Dividend at current prices.

[ruindog]

Target Beats Expectations, Up 7% Premarket

Target Corporation (TGT) announced first-quarter financial results this morning that beat analyst expectations. As a result, the stock is up nearly 7% in this morning’s premarket trading.

Target’s earnings beat started with its top line results. The company generated comparable sales growth of 4.8%, driven primarily by traffic growth of 4.3%, with the remainder coming from price increases.

Comparable digital sales contributed 2.1% to Target’s overall comparable sales growth. The company’s first quarter digital sales growth was very impressive, coming in at 42 percent. Same-day fulfillment services drove “well over half” of the company’s digital sales growth.

Further down the income statement, operating income increased by 9.0% year-on-year while adjusted earnings-per-share increased by 15.9%.

Importantly, Target expects this momentum to continue. The company expects low-to-mid-single digit growth in its comparable sales in the second quarter, while its second quarter earnings-per-share guidance implies high-single-digit growth compared to last year’s comparable quarter.

For the full fiscal year, Target expects to generate a low-to-mid-single-digit increase in comparable sales and both GAAP and adjusted earnings-per-share between $5.75 and $6.05. For context, Target generated earnings-per-share of $5.39 last year, so the midpoint of this financial guidance implies growth of 9.5% over last year’s comparable period.

Overall, it was a solid quarter from Target Corporation. The company presents an excellent mix of solid returns and low risk today and earns a buy recommendation from Sure Dividend at current prices.

Lowe’s Stock Is Down ~8% On Lower Guidance

Lowe’s (LOW) reported first quarter fiscal 2019 earnings this morning. Highlights from the home improvement retail giant’s report are below:

• Comparable store sales up 3.5%, with U.S. comparable store sales up 4.2%

• Sales growth of 2.2%

• Adjusted earnings-per-share grew 2.5% to $1.22 per share

Lowe’s management team had previously announced its intent to sell its Mexico operations. After more market research, the company decided to sell the assets of its Mexico operations instead. This resulted in an $82 million tax benefit in the quarter (which made GAAP earnings-per-share $1.31 versus $1.22 in adjusted earnings-per-share), partially offset by $12 million in operating costs from Mexico operations.

The company’s president and CEO had the following to say about Lowe’s first quarter results:

"Our first quarter comparable sales performance is a clear indication that the consumer is healthy and our focus on retail fundamentals is gaining traction. Our commitment to improving in-stocks and customer service coupled with our focus on winning with the pro customer were integral to driving improved sales. However, the unanticipated impact of the convergence of cost pressure, significant transition in our merchandising organization, and ineffective legacy pricing tools and processes led to gross margin contraction in the quarter which impacted earnings. We are taking the necessary actions to more systematically analyze and implement retail price changes to mitigate cost pressure. Our recent acquisition of the Retail Analytics platform from Boomerang Commerce will also assist in modernizing and digitizing our approach to pricing. We are still in the early stages of our transformation, and with the changes we are putting in place, we expect to deliver improved gross margin performance over the balance of the year. "

Weaker than expected margins caused Lowe’s to reduce its fiscal 2019 guidance as well. The company’s expected adjusted earnings-per-share for fiscal 2019 were reduced from $6.05 at the median to $5.55 at the median.

Lowe’s stock was down 7.8% in pre-market trading due to weaker guidance. Overall, we believe the security is trading near a buy price. Lowe’s is a high quality Dividend King, but we believe it remains just a touch overvalued at current prices. It will be a confirmed buy when trading at or below our fair value price-to-earnings ratio of 17.5, which equates to a price of ~$97 using the new lower expected fiscal 2019 adjusted earnings-per-share guidance.

Eaton Vance Blows Buy Earnings Expectations

Eaton Vance (EV), an asset management firm headquartered in Boston, reported second quarter earnings yesterday that were significantly better than what the market anticipated. Shares rose 7.6% yesterday as a result.

On the top line, Eaton Vance generated revenues of $411.9 million, which actually declined slightly from the $412.7 million that it generated in the same period a year ago. With that said, Eaton Vance’s revenue figure was still slightly better than the market was anticipating.

It was on the bottom line where the company’s financial results truly shined. Eaton Vance generated adjusted earnings-per-share of $0.89 in the second quarter of fiscal 2019, which increased by 16% from the same period a year ago and 22% from the first quarter of 2019.

Eaton Vance’s Chairman and Chief Executive Officer, Thomas E. Faust, made the following statement in conjunction with the earnings release:

“Strong market returns and continued net inflows combined to drive Eaton Vance’s consolidated assets under management to record levels in the second quarter of fiscal 2019. While improved from the prior quarter, the Company’s operating income continues to be adversely affected by declines in managed assets of certain higher-fee strategies and spending in support of business growth.”

We continue to view Eaton Vance as a very attractive investment opportunity today. The company earns A ratings for both Dividend Risk and Retirement Suitability and we expect double-digit returns moving forward for today’s investors.

Accordingly, Eaton Vance continues to earn a buy recommendation from Sure Dividend at current prices. Eaton Vance is a holding in the Real Money Portfolio of The Sure Dividend Newsletter.

[ruindog]

L Brands Crushes Earnings Expectations

Yesterday, L Brands reported first quarter earnings results that were significantly better than the market expected. The stock rose 14% in aftermarket trading after the press release was published.

On the top line, L Brands’ revenues of $2.63 billion were flat year-on-year but beat consensus expectations by $70 million. Comparable store sales were flat for the consolidated company, but declined 5% in the Victoria’s Secret segment and increased 13% at Bath & Body Works.

On the bottom line, earnings-per-share of $0.14 declined from $0.17 in the same period a year ago but exceeded the company’s guidance of “about breakeven” earnings. The company’s performance was above its guidance range thanks to record results at Bath & Body Works.

L Brands also updated its 2019 financial guidance with the publication of its first quarter earnings release. The company expects to generate full-year earnings-per-share between $2.30 and $2.60. This guidance’s bottom line is noticeably better than the company’s previous guidance of earnings-per-share between $2.20 and $2.60.

L Brands’ first quarter earnings results were unquestionably strong. We had a buy recommendation outstanding on the stock prior to the earnings release, but this rating may be revised downward if the stock rises enough in the days following its earnings release.

Medtronic’s Growth Continues

Medtronic (MDT) reported its 4th quarter and fiscal 2019 results this morning. The healthcare Dividend Aristocrat posted strong results; quarterly result highlights are below:

• 3.6% Constant currency revenue growth (flat on an actual basis)
• 8% Adjusted earnings-per-share growth

The company’s CEO Omar Ishrak had the following to say about the earnings release:

“Q4 was a solid finish to a strong fiscal year for Medtronic. In fiscal year 2019, we executed and delivered revenue growth, EPS, and free cash flow all above the guidance we set at the beginning of the year. Our organization overcame challenges and relied upon the diversification of our business to deliver another quarter of solid top- and bottom-line results, with excellent free cash flow generation.”

Indeed, free cash flow generation in fiscal 2019 was excellent. For fiscal 2019, free cash flow came in at $5.87 billion versus $3.61 billion the prior year for growth of 62%.

Medtronic also released its guidance for fiscal 2020, calling for:

• Constant-currency revenue growth of 4%
• Adjusted earnings-per-share of $5.44 to $5.50

The company’s adjusted earnings-per-share guidance calls for rather pedestrian earnings-per-share growth of just 4.8% in fiscal 2020.

Overall, the market was happy with Medtronic’s results. Shares are up over 2% in pre-market trading this morning at the time of this writing.

We view Medtronic as a hold at current prices. The security appears somewhat overvalued at this time. If it were trading at or below fair value it would become more appealing as a buy due to its stability and long history of rising dividends.

Hormel Drops Premarket Following Guidance Reduction

Hormel Foods Corporation (HRL) reported second-quarter earnings results this morning. The company’s stock is down slightly in today’s premarket trading following a guidance reduction included in the press release.

First, let’s discuss the company’s actual financial performance. In many ways, the company’s performance was actually quite strong.

Volume of 1.2 billion pounds rose 1%, while net sales of $2.3 billion also rose 1%.

Hormel Foods generate pretax earnings of $318 million, up 7%, while diluted earnings-per-share of $0.52 rose by 18% over the same period a year ago.

The company’s strong bottom line figure was due to revenue growth, margin expansion (operating margin expanded by 40 basis points in the quarter) and a lower effective tax rate.

With that said, the component of Hormel’s press release that many investors will focus on is its reduced guidance. The company’s fiscal 2019 earnings guidance is now $1.71 to $1.85, down from $1.77 to $1.91 previously.

Hormel’s President and Chief Executive Officer, Jim Snee, made the following comments regarding the company’s reduced guidance number:

“In spite of record sales, second quarter earnings did not meet our expectations. African swine fever in China started to impact global hog and pork markets this quarter, which led to rapidly increasing input costs. In response, we have announced pricing action across our branded value-added portfolio in the Grocery Products, Refrigerated Foods and International segments.

Jennie-O Turkey Store profits declined due to a combination of plant startup costs and lower retail sales. We made a large investment to automate our whole-bird facility in Melrose, Minn., and the startup was more difficult than anticipated. We made excellent progress through the quarter and are now on track to deliver the production efficiencies we expected. Retail sales declined for the quarter, but we are reactivating promotional activity and advertising in order to regain distribution.”

Hormel’s guidance reduction and its difficulties with the African swine fever in China are unfortunate for the company’s investors.

Prior to the earnings release, we had a sell recommendation outstanding on the company. We are reaffirming our sell recommendation after analyzing the company’s most recent quarterly results this morning.

[ruindog]

Footlocker: Guidance Doublespeak & Earnings Miss

Foot Locker (FL) reported its first quarter results for fiscal 2019 this morning. Actual results for the quarter were solid:

• Adjusted EPS growth of 5.5%
• Comparable store sales up 4.6%
• Gross margin up from 32.9% to 33.2%

The company’s CEO Richard Johnson had the following to say about quarterly results:

“We started the year with great energy, innovative products, and exciting customer events, leading to solid top-line growth in the first quarter with strong performance across our regions, banners, channels, and categories. Based on the momentum we have underway, we feel confident that the updated strategic imperatives we introduced at our Investor Day in March position us to deliver on our long-term goals.”

Foot Locker also issued a statement that can only be described as doublespeak. The company’s press release from today says that “The company is on track with its previously stated full year guidance” , but also that “earnings per share are now expected to be up high-single digits based on share repurchase activity to date” . Previously, the company had called for “double digit” earnings-per-share growth in fiscal 2019.

Foot Locker’s share price is likely down significantly because the company’s adjusted earnings-per-share of $1.53 in the quarter missed analyst estimates of $1.60 by 4.4%, and because the company lowered its guidance (while also somehow restating its guidance).

Despite the confusing guidance statement, we continue to rate Foot Locker as a buy. The company is performing well, management is returning cash to shareholders through share buybacks and dividends, and the security appears undervalued at current prices.

Royal Bank of Canada & Toronto Dominion Face Off In Battle Of Canadian Banks

Both the Royal Bank of Canada (RY) and the Toronto-Dominion Bank (TD) reported second quarter financial results yesterday.

Let’s start by discussing RBC’s financial results. The larger of the two banks generated net income of $3.2 billion in the second quarter, which represents growth of 6% from the prior year, while diluted earnings-per-share of $2.20 increase by 7% year-on-year.

RBC operated with a return on equity of 17.5% in the quarter and reported a common equity tier 1 ratio of 11.8%.

Through the first six months of the fiscal year, RBC’s net income is up 5% and its diluted earnings-per-share has increased by 7%.

TD’s results were quite similar. The company generated adjusted net income growth of 6.7% while adjusted diluted earnings-per-share rose by 8.0%.

TD finished the quarter with a common equity tier 1 capital ratio of 12.0%, which represents a 16 basis point expansion over the same period a year ago. The bank’s strongest business unit was its U.S. Retail segment, which saw net income increase by 23% over the same period a year ago.

Overall, TD and RBC both had quarters that were in-line with our expectations. Each bank seems positioned to deliver low double-digit returns from their current prices, which qualifies them to both earn buy recommendations from Sure Dividend today.

Ross Stores Continues To Perform Well

Ross Stores (ROST) reported its first quarter earnings for fiscal 2020 yesterday. Highlights from the report are below:

• Earnings-per-share growth of 3.6%
• Comparable store sales growth of 2%
• Sales growth of 6%

The company’s CEO Barbara Rentler had the following to say about the company’s results:

“For the first quarter, we delivered sales gains at the high end of our guidance as well as better-than-expected earnings per share growth despite continued underperformance in Ladies apparel. While operating margin of 14.1% was down from the prior year, it was above plan mainly due to higher merchandise margin. As expected, this improvement was more than offset by increases in freight and wage costs and the timing of packaway-related expenses that benefited the prior year period. During the first quarter of fiscal 2019, we repurchased 3.4 million shares of common stock for an aggregate price of $320 million. As planned, we remain on track to buy back a total of $1.275 billion in common stock during fiscal 2019.”

Ross Stores share repurchase plan is helping to lift earnings-per-share. Share repurchases of $1.275 billion equate to 3.7% of the company’s market cap at current prices.

The company also slightly increased its guidance for fiscal 2020. Earnings-per-share guidance increased from a range of $4.30-$4.50 to a range of $4.38-$4.52; a 1.1% hike at the median. The new earnings-per-share guidance range represents 4.5% earnings-per-share growth versus fiscal 2019. The company did not change its guidance for 1% to 2% comparable store sales growth.

Overall, Ross Stores had a solid-if-unspectacular quarter. The company beat analyst expectations for earnings-per-share by $0.01. The guidance increase – while small – is a positive sign as well.

We rate Ross Stores as a hold at current prices. The company has a long streak of rising dividends and will likely continue growing earnings-per-share ahead. Unfortunately, the security appears somewhat overvalued at current prices, so now is not the time to initiate a position.

[ruindog]

Costco Beats On Earnings, Misses On Membership Expectations

Yesterday after the market closed, Costco Wholesale Corporation (COST) reported financial results for the third quarter of fiscal 2019.

The company’s earnings beat expectations, but membership revenue came in slightly lower than expected, causing Costco’s stock to decline slightly in after-hours trading. Overall, we believe the company’s quarterly results illustrated the strength of its warehouse retail business model.

On the top line, net sales for the quarter increased by 7.4%, while net sales through the first three quarters of fiscal 2019 increased by 8.3%.

Costco’s robust sales growth was driven primarily by comparable store sales growth. At locations open longer than one year, the company’s quarter sales growth was as follows:

• United States: 5.5%
• Canada: 5.1%
• Other International: 6.9%

Through the first nine months of the fiscal year, Costco’s comparable sales were similarly strong, with same store sales in the U.S., Canada, and Other International segments rising 6.9%, 5.5%, and 5.8%, respectively.

Note: these figures exclude the impacts of gasoline prices, foreign exchange, and a previously disclosed accounting change.

On the bottom line, Costco’s results were even stronger. Net income surged 20.8% to $906 million while diluted earnings-per-per-share rose by 20.6% to $2.05. Through the first nine months of the year, net income increased by 22.4% and diluted earnings-per-share increased by 22.2%.

While Costco’s core metrics were strong, one number that many analysts focus on is membership fees. This number came in at $776 million in the most recent quarter while the consensus estimate was for membership fees of $782 million. Because of this, Costco’s stock fell modestly in yesterday’s aftermarket trading.

Looking ahead, Costco is type of high-quality business that most investors would be delighted to own. However, the company is trading significantly above our fair value estimate. Accordingly, Costco earns a hold recommendation from Sure Dividend at current prices.

Williams-Sonoma Crushes Earnings Expectations

Yesterday after the markets closed, kitchenware and home furnishings retailer Williams-Sonoma (WSM) reported financial results for the first quarter of fiscal 2019. The company’s earnings exceeded even the highest estimate published by sell-side analysts, and Williams-Sonoma’s stock surged by 11% in after-hours trading as a result.

On the top line, Williams-Sonoma’s revenue increased by 3.2% to $1.241 billion while comparable brand revenue growth increased by 3.5%, including “double-digit comparable growth for West Elm.”

Further down the income statement, adjusted operating margin expanded 70 basis points to 7.0%, while adjusted earnings-per-share of $0.81 increased by 21% year-on-year.

Williams-Sonoma’s President and Chief Executive Officer, Laura Alber, made the following statement in conjunction with the earnings release:

“We have had a strong start to 2019 with comparable revenue growth of 3.5%, operating margin expansion and significant EPS growth. Customer acquisition and engagement continued to grow as we delivered more compelling and differentiated experiences to our customers. We also reached a significant milestone for our company as we were named, for the first time, to the Fortune 500 largest companies in the U.S. This accomplishment speaks to the hard work and dedication of all our associates, the ongoing support of our loyal customers and the power of our highly differentiated platform in driving long-term, profitable growth.”

Williams-Sonoma also revised its full-year financial guidance with the publication of its first quarter earnings release. The company now expects the following:

• Total Net Revenues: $5.670 billion - $5.840 billion
• Comparable Brand Revenue Growth: 2% - 5%
• Non-GAAP Operating Margin: In-line with FY 18
• Non-GAAP Diluted EPS: $4.55 - $4.75
• Non-GAAP Income Tax Rate: 23% - 24%
• Depreciation and Amortization: $185 million - $195 million
• Net 30 store closures for a total store count of 595 by the end of FY19
• Capital Spending: $200 million - $220 million
• Return to Shareholders: quarterly cash dividend of $0.48 per share and incremental share buybacks under multi-year share repurchase authorization of approximately $678 million.

The company’s long-term financial targets also remained unchanged:

• Total Net Revenues growth of mid to high single digits
• Non-GAAP Operating Income growth in-line with revenue growth, driving Operating Margin stability
• Above-industry average ROIC

Overall, it was an excellent quarter from Williams-Sonoma. Prior to the company’s earnings release, we had a buy recommendation on its stock; however, this may be revised to a hold if the company’s stock price increases enough over the next several trading days.

[ruindog]

Cracker Barrel Surges 4% After Strong Earnings & Special Dividend Announcement

Yesterday, Cracker Barrel (CBRL) reported third quarter financial results. The company’s performance was better than expected, which, along with other announcements (including a dividend hike, a special dividend, and a new share repurchase plan) caused Cracker Barrel’s stock to surge by 4% in yesterday’s trading.

First, let’s discuss the company’s actual financial results. Cracker Barrel’s revenue increased by 2.5% in the third quarter of fiscal 2019, driven by comparable store sales growth of 1.3% (3.1% ticket growth and a 1.8% decrease in traffic) and store openings.

Further down the income statement, Cracker Barrel’s operating income of $65.1 million increased by 2.8%, with operating profit margin staying flat year-on-year.

On the bottom line, diluted earnings-per-share of $2.09 increased by 3.0%.

Here’s what Cracker Barrel’s President and Chief Executive Officer, Sandra B. Cochran, said about the company’s performance in the quarter:

“I am pleased that we again delivered positive comparable store restaurant sales growth and outperformed the casual dining industry. Our teams continued to make progress on key initiatives, and I am encouraged by our performance, in particular with the early results of our new Signature Fried Chicken initiative.”

As mentioned, Cracker Barrel announced new capital allocation policies with the publication of its third quarter earnings results.

The company has increased its regular quarterly dividend to $1.30, which represents 4.0% growth over he prior $1.25 payment. In addition, Cracker Barrel’s Board of Directors has declared a $3.00 special dividend. The special dividend will be payable on August 2nd, 2019 to shareholders of record on July 19th, 2019.

To conclude its new capital return program, Cracker Barrel’s board authorized a $50 million share repurchase program, which amounts to about 1.25% of the company’s current market capitalization.

Lastly, Cracker Barrel reaffirmed its 2019 financial guidance, which includes the following:

• Revenue of approximately $3.05 billion
• The opening of eight new Cracker Barrel stores
• Comparable store restaurant sales growth of approximately 2%
• Comparable store retails sales growth of “flat to slightly negative”
• Operating income margin in the range of 9.0% to 9.3%
• Diluted earnings-per-share between $8.95 and $9.10

Overall, it was a solid quarter from Cracker Barrel, and we are delighted to see the company take such a shareholder-friendly approach to capital allocation. However, the company continues to trade above our fair value estimate, so Cracker Barrel earns a hold recommendation from Sure Dividend at current prices.

Campbell Soup Jumps After Earnings Beat

Early this morning, Campbell Soup (CPB) reported financial results for the third quarter of fiscal 2019. The company’s adjusted earnings-per-share came in materially higher than expected, and shares are trading about 4% higher in this morning’s premarket trading.

Let’s dig in to the company’s results. Campbell’s net sales from continuing operations (totaling $2.2 billion) increased by 16% year-on-year, while net sales from discontinued operations (totaling $210 million) decreased by 15%. On a combined basis, overall net sales increased by 12%, while adjusted earnings before interest and taxes (EBIT) increased by 5% and adjusted diluted earnings-per-share decreased by 20% to $0.56.

There are a number of complicated factors that have impacted the presentation of Campbell’s results in the quarter, making them more difficult to analyze than a typical quarterly earnings release. First and foremost, sales from continuing operations increased by 16%, which is more than entirely due to a 17% benefit from the March 2018 acquisition of Snyder’s-Lance and partially offset by a 1% negative impact by foreign exchange fluctuations.

On the discontinuing operations side of the income statement, sales decreased by 15% “ driven primarily by declines in refrigerated soup reflecting the previously announced plans of certain major private label customers to insource production starting in 2019.”

Because of these major changes, what matters more than Campbell’s actual results is how they compared to market expectations. Importantly, Campbell’s adjusted earnings-per-share of $0.56 was much better than the $0.47 expected by the consensus sell-side estimate. While revenue came in slightly weaker than expected, the company’s earnings beat has been enough to drive the stock higher in premarket trading.

Overall, it was a solid quarter from Campbell Soup. While the company has an above-average yield and a cheap valuation, its total return profile is rather modest, which causes it to earn a hold recommendation from Sure Dividend at current prices.

[ruindog]

J.M. Smucker Beats Earnings Expectations

This morning before the markets opened, J.M. Smucker (SJM) announced financial results for the fourth quarter of fiscal 2019. Despite weaker-than-expected revenues, the company earnings came in significantly higher than expected.

Here are what the numbers look like. J.M. Smucker reported that net sales increased 7%, driven by the addition of Ainsworth as well as strong performance from the company’s growth brands.

On the bottom line, adjusted earnings-per-share of $2.08 increased by 8% year-on-year.

Full-year results were similar, with revenue increasing by 7% and adjusted earnings-per-share growing by 4%.

Here’s what the company’s Chief Executive Officer, Mark T. Smucker, said about the company’s performance in the quarter:

“We are pleased with the progress that we made during the year towards executing against our strategic plan, which supported fourth quarter adjusted earnings growth of 8 percent and full-year adjusted earnings growth of 4 percent. We successfully integrated Ainsworth, extending our leadership in pet foods, while our key growth brands delivered double-digit sales growth, demonstrating the power of our brands when supported by ongoing product innovation, including 1850® coffee and Jif Power Ups®. We continued to focus on productivity, allowing us to deliver on our cost reduction targets for the year, providing fuel for investment in future growth.”

J.M. Smucker also provided an outlook for the current fiscal year. The company expects net sales to grow by 1% to 2% while adjusted earnings-per-share are anticipated to be $8.45 to $8.65. This earnings guidance represents growth of 1.9% to 4.3% over this year’s comparable figure.

Overall, it was a solid quarter from J.M. Smucker. With that said, the company trades significantly above our fair value estimate, so J.M. Smucker earns a sell recommendation from Sure Dividend at current prices .

Brown-Forman Pours Out An Earnings Beat

Yesterday, Brown-Forman (BF.B) reported financial results for the fourth quarter of fiscal 2019. Like J.M Smucker, the company beat earnings expectations on weaker-than-expected revenue figures.

On the top line, Brown-Forman generated net sales of $744 million, which represented 1% growth on a GAAP basis and 5% growth on a constant-currency basis. The company also estimated that net sales were negatively impacted by one percent due to tariff-related higher prices.

Moving down the income statement, operating income grew 9% in the quarter, with earnings-per-share increasing much faster than that due to a number of one-time accounting charges.

Brown-Forman’s full-year results were similar. Net sales increased by 2% while operating income increased by 9% and diluted earnings-per-share increased by 17%.

Here’s what Brown-Forman’s President and Chief Executive Officer, Lawson Whiting, said about the company’s performance in the quarter:

“We delivered solid underlying net sales growth of 6% after considering the one point drag due to tariff-related price reductions. This growth rate is in-line with fiscal 2018, as well as our expectations for fiscal 2020, demonstrating the consistency of our revenue delivery. We believe that delivering sustained, compounding growth is the best way to create value for shareholders over the long term.”

Brown-Forman’s fourth quarter earnings release was slightly better than we expected. Unfortunately, the company trades well above our fair value estimate, so Brown-Forman earns a sell recommendation from Sure Dividend at current prices.

[ruindog]

Oracle Beats On Earnings, Performance Driven By Strong Cloud Revenue

Yesterday after the market closed, Oracle Corporation (ORCL) reported financial results for the fourth quarter and full year of fiscal 2019. The company beat consensus expectations on both the top and bottom line, and shares rose by 6% in last night’s after hours trading.

On the top line, total quarterly revenues were $11.1 billion, which increased by 1% on a reported basis and 4% in constant currency. Cloud Services and License Support Revenues were $6.8 billion, while Cloud License and On-Premise License revenues were $2.5 billion.

Results further down the income statement were similar. GAAP operating income increased by 2% while GAAP operating margin came in at 38%. Excluding one-time accounting charges and the impact of foreign exchange fluctuations, adjusted operating income increased by 4% while adjusted operating margin was 47%.

On the bottom line, GAAP net income increased by 14% to $3.7 billion while adjusted net income increased 3% to $4.1 billion. GAAP earnings-per-share of $1.07 increased by 6% year-on-year while adjusted earnings-per-share of $1.16 increased by 23%.

Full-year results were similar for Oracle Corporation. The company’s total revenues of $39.5 billion were ‘slightly higher’ on a reported basis and increased 3% on a constant-currency basis, while adjusted net income was $13.1 billion and adjusted earnings-per-share of $3.52 increased by 16% year-on-year.

Oracle Co-CEO Safra Catz said the following about the company’s performance in the quarter:

“In Q4, our non-GAAP operating income grew 7% in constant currency—which drove EPS well above the high end of my guidance. Our high-margin Fusion and NetSuite cloud applications businesses are growing rapidly, while we downsize our low-margin legacy hardware business. The net result of this shift away from commodity hardware to cloud applications was a Q4 non-GAAP operating margin of 47%, the highest we’ve seen in five years.”

Oracle’s other co-CEO, Mark Hurd, made the following statement as well:

"Our Fusion ERP and HCM cloud applications suite revenues grew 32% in FY19. Our NetSuite ERP cloud applications revenues also grew 32% this year. These strong results extend Oracle’s already commanding lead in worldwide Cloud ERP. Our cloud applications businesses are growing faster than our competitors.”

Overall, it was a strong quarter from Oracle Corporation. The company has solid growth prospects but trades above our fair value estimate today. Accordingly, the company earns a hold recommendation from Sure Dividend at current prices.

Kroger Beats On Earnings, Shares +5% Pre-Market

This morning before the markets opened, the Kroger Company (KR) reported financial results for the first quarter of fiscal 2019. The company’s results beat analyst expectations and shares rose by ~5% in today’s premarket trading as a result.

Total sales of $37.3 billion actually declined slightly from the $37.7 billion reported last year, but this was due to the sale of Kroger’s convenience store business last year. Excluding that transaction and the impact of fluctuating fuel prices, Kroger’s sales increased by 2.0% year-on-year.

Further down the income statement, gross margin of 22.2% contracted by 40 basis points due to “industry-wide lower gross margin rates in pharmacy”. On the bottom line, GAAP earnings-per-share were $0.95, compared to $2.37 last year.

Both figures are marred by non-recurring accounting charges, so it is more meaningful to look at the company’s adjusted numbers. In the quarter, adjusted earnings-per-share of $0.72 declined by a penny from the $0.73 of adjusted earnings-per-share in last year’s quarter. Analysts were estimating $0.71 of adjusted earnings-per-share, so Kroger beat expectations by a penny.

Kroger also provided updated financial guidance for the full fiscal year. The company now expects to generated adjusted earnings-per-share between $2.15 and $2.25 in the twelve-month reporting period. The midpoint of this guidance band represents 4.3% growth year-on-year.

Overall, it was a solid quarter from Kroger. The company appears undervalued, has reasonable growth prospects, and pays a steadily rising dividend, which are all factors that allow the company to earn a buy recommendation from Sure Dividend today.

Carnival Corporation Beats On Earnings, But Sharply Reduces Full-Year Guidance

This morning before the markets opened, Carnival Corporation reported financial results for the second quarter of fiscal 2019 (which ended May 31st, 2019). The company’s actual financial results were strong, but the cruise line significantly reduced its full-year guidance, sending the stock plummeting as a result.

First, let’s discuss Carnival’s actual results. Total revenues of $4.8 billion increased by 9.1%. Adjusted net income of $457 million, or $0.66 per diluted share, declined slightly from the $489 million (or $0.68 per diluted share) reported in last year’s comparable period but still beat expectations for adjusted earnings-per-share of $0.59. Profits declined primarily due to increased fuel costs and headwinds associated with foreign exchange fluctuations.

Carnival’s President and Chief Executive Officer, Arnold Donald, made the following statement about the company’s performance in the quarter:

“Second quarter earnings included revenue growth from higher capacity and improved onboard spending, more than offset by a drag from fuel and currency compared to the prior year. Second quarter adjusted earnings were better than March guidance by $0.08 per share substantially due to the timing of expenses between quarters.”

As mentioned, Carnival’s strong performance was more than offset by weak guidance published by the company.

The company now expects full year adjusted earnings-per-share to be in the range of $4.25 to $4.35, which represents a decline from March’s guidance of earnings-per-share between $4.35 and $4.55. At the midpoint, this guidance is a decrease of 3.4%.

The company cited a number of factors that caused it to reduce guidance, including:

• Voyage disruptions related to Carnival Vista
• The U.S. government’s policy change on travel to Cuba
• Lower net revenue yields in the second half of the year
• Partially offset by lower fuel consumption and beneficial changes in fuel prices

While this guidance reduction is disappointing, we do not believe it has changed Carnival’s long-term investment thesis. The company continues to earn a buy recommendation from Sure Dividend today