Resultados trimestrales

Resultados Enbridge

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

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

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

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).

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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.

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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.

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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.

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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.

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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.

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.

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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.

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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.

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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

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PepsiCo Announces Lackluster Q2 2019 Results

PepsiCo (PEP) reported its second quarter results for fiscal 2019 this morning. Highlights from the release are below:

  • 4.5% Constant-currency revenue growth versus the same quarter a year ago

  • -2.0% Constant-currency core EPS growth versus the same quarter a year ago

PepsiCo’s CEO Ramon Laguarta had the following to say about the company’s results:

“We are pleased with our results for the second quarter. While adverse foreign exchange translation negatively impacted our reported net revenue performance, our organic revenue growth was 4.5% in the quarter. We are also pleased with the progress on our priorities to make PepsiCo a faster, stronger and better company by building new capabilities, strengthening our brands, adding capacity to grow and transforming our culture. Our performance for the first half and the progress we are making on our strategic priorities give us increased confidence in achieving the 2019 financial targets we communicated earlier this year.”

The company’s guidance for fiscal 2019 is below:

image

Source: [PepsiCo’s Q2 2019 Earnings Release]

While PepsiCo’s CEO is “pleased”, we are less optimistic. As an established corporation in a mature industry, PepsiCo’s rapid growth days are far behind it. The company’s 4.5% constant-currency revenue growth is healthy in our view.

The company’s -2.0% constant-currency adjusted EPS growth is what gives us pause, along with the expected slight decline in adjusted EPS for fiscal 2019. We expect PepsiCo to deliver growth during times of global prosperity.

We currently have PepsiCo rated as a hold. It is near sell territories as we expect weak total returns ahead due to the company’s sluggish growth and high valuation relative to its history, partially offset by its generous dividend.

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MSC Industrial Boosts Dividend 19%, Releases Q3 Fiscal 2019 Results

MSC Industrial Supply (MSM) hereafter MSC reported its 3rd quarter fiscal 2019 results this morning. Highlights from the earnings release are below:

  • Quarterly revenue up 4.6% year-over-year
  • Quarterly EPS up 3.6% year-over-year
  • Declared quarterly dividend of $0.75/share, up 19%

The revenue number above is decent. Quarterly EPS growth of just 3.6% leaves much to be desired. But the significant dividend boost is positive news for investors and puts MSC’s dividend yield at 4.1%. The ex-dividend date is July 22nd.

The company’s CEO Erik Gershwind had the following to say about the recent quarterly results:

“Our fiscal third quarter performance leaves us disappointed. We have seen a step-down in demand since April, while the pricing environment remains uncertain due to the overhang of tariffs and trade. In response to near-term trends, we have implemented a three-part action plan to 1) improve field sales execution and accelerate new account implementation; 2) increase profitability of our supplier programs; and 3) drive increased expense control and productivity.”

The company’s guidance for the 4th quarter calls for sales growth of 2.2% and EPS of $1.21 to $1.27. The midpoint of 4th quarter EPS guidance is 3.9% lower than the company’s EPS in the 4th quarter of fiscal 2018

MSC has had EPS decline in several years since 2009 (2013, 2015, 2016), yet managed to compound its EPS at 11.0% annually from 2009 through 2018. Fiscal 2019 is shaping up to be a year of positive but weak EPS growth (expected EPS of $5.23 versus $5.10 in 2018 for 2.5% expected growth).

We expect growth of around 6% annually over the long-run, well below the company’s history over the last decade, but better then current results.

The stock is currently trading for a price-to-earnings ratio of 13.8 using expected 2019 EPS of $5.23 and the current share price of $72.27. This is well below the security’s historical average price-to-earnings ratio over the last decade of ~19. We believe a fair price-to-earnings ratio for MSC is around 18. If the company returned to its fair value price-to-earnings ratio over the next 5 years, this would add 5.4% to annual returns.

Putting it all together, MSC just announced a significant dividend increase, has a long history of dividend increases, and has a solid “B” Dividend Risk score Additionally, the stock is offering investors total returns of 15.5% at current prices based on our 6% estimated long-term EPS growth rate, 5.4% from valuation multiple expansion, and 4.1% from the recently increased dividend. As a result, we rate MSC as a strong buy at current prices.

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Resultados de J&J

https://seekingalpha.com/pr/17572176-johnson-and-johnson-reports-2019-second-quarter-results

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J&J

  • EPS of $2.08 increased 43.4%; adjusted EPS of $2.58 increased 22.9%*; includes gain from sale of Advanced Sterilization Products (ASP) business
  • Operational sales guidance increased due to strength of business; EPS guidance range maintained
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Johnson & Johnson Reports Second Quarter Earnings

Johnson & Johnson reported its second quarter financial results this morning. Many news outlets are currently reporting that the company beat earnings expectations and increased its revenue guidance, but some investigation reveals that the company’s earnings beat may be due entirely to non-recurring events.

On the top line, revenues of $20.6 billion declined by 1.3% on a GAAP basis, while adjusted operational revenue growth (which includes the impact of April’s [Advanced Sterilization Products (ASP) business sale increased by 3.7%.

On the bottom line, results were heavily skewed by the aforementioned ASP business sale, which resulted in a pretax gain of approximately $2.0 billion in the quarter. Including this gain, GAAP earnings-per-share increased by 43.4% while adjusted earnings-per-share increased by 22.9%. However, more than all of Johnson & Johnson’s earnings growth came from this divestiture .

Here are what the numbers look like. Johnson & Johnson’s adjusted net earnings increased by $1.2 billion while the acquisition contributed $2.0 billion (pretax). If we apply Johnson & Johnson’s Q2 effective tax rate of 19.3% to the $2.0 billion pretax gain, then we arrive at after-tax proceeds of $1.6 billion.

Taking the difference between Johnson & Johnson’s adjusted earnings growth ($1.2 billion) and the acquisition-related earnings growth ($1.6 billion), and it looks like the company’s earnings would have actually declined by around $400 million without the acquisition.

Because of this, Johnson & Johnson’s “earnings beat” announced this morning may not be cause for celebration after all. With that said, the company’s earnings release included very little information on the divestiture with the promise to discuss it in more detail on today’s conference call. We will be reading the conference call transcript closely and may provide an additional update on Johnson & Johnson’s second quarter financial performance in tomorrow’s edition of the Morning Dividend.

Separately, Johnson & Johnson’s management team bolstered its outlook for the rest of the fiscal year. The company increased its guidance for adjusted operational sales growth to 3.2%-3.7%, from 2.5%-3.5% previously. The company’s adjusted earnings-per-share guidance was maintained at $8.73-$8.83, which represents year-over-year growth of 6.7%-7.9%.

Looking ahead, Johnson & Johnson pairs reasonable expected returns (around 8% from its current price according to our methodology) with one of the most conservative risk profiles of any public business. Accordingly, the company earns a hold recommendation from Sure Dividend today.

J.P. Morgan Reports Revenue Growth of 3.6% and Earnings-Per-Share Growth of 23.1%

J.P. Morgan (JPM) reported second quarter financial results this morning. The company’s results were much better than expected, yet shares are down slightly in this morning’s premarket trading because the bank’s GAAP financial results were boosted by a one-time income tax benefit.

Here are what the numbers look like. In the second quarter, J.P. Morgan generated revenue of $28.8 billion, which represents growth of 3.6% over the $27.8 billion generated in the second quarter of fiscal 2018. Interestingly, J.P. Morgan’s revenue actually declined slightly from the $29.1 billion generated in the first quarter of the fiscal year.

Like many banks, J.P. Morgan’s revenue trends were stratified by operating segment. Each segment’s year-on-year second quarter revenue growth is listed below:

  • Consumer & Community Banking: 11%
  • Corporate & Investment Bank: -3%
  • Commercial Banking: -5%
  • Asset & Wealth Management: Flat

As you can see, J.P. Morgan’s Consumer & Community Banking segment – its largest segment – provided all of its revenue growth in the second quarter.

Further down the income statement, results were better. Net income of $9.7 billion increased by 16.0% over the $8.3 billion reported last year.

Part of this gain is one-time in nature. More specifically, J.P. Morgan benefited from income tax benefits of $768 million related to the resolution of certain tax audits. Excluding this charge, the company’s net earnings would have still grown by 6.8%.

On the bottom line, J.P. Morgan’s earnings-per-share of $2.82 increased by 23.1% year-on-year. Again, this figure is artificially boosted by the aforementioned $768 million income tax benefit, which increased earnings-per-share by $0.23. Excluding this charge, adjusted earnings-per-share would have increased by 13.1%. Using another metric, book value per share increased by 7% while tangible book value per share increase by 8%.

J.P. Morgan’s per-share results were aided by the company’s shareholder-friendly capital allocation practices. More specifically, the company distributed $7.5 billion of capital to shareholders in the second quarter, including $5.0 billion of net share repurchases and $2.5 billion of dividend payments.

Overall, J.P. Morgan’s results were strong, but not as strong as headline results would suggest due to the company’s $768 million of firm-wide income tax benefits. We believe J.P. Morgan currently has mid-to-high single-digit total return potential, which results in a hold recommendation from Sure Dividend today.

Goldman Sachs Beats Expectations With Revenue Down 2% and Earnings Down 3%

Goldman Sachs (GS) joined J.P Morgan (JPM), Wells Fargo (WFC) and Citigroup © as the fourth large financial institution to recently report financial results. While the company’s fundamentals deteriorated slightly, it beat consensus expectations and shares are up slightly in this morning’s premarket trading.

On the top line, Goldman Sachs generated net revenues of $9.46 billion in the second quarter of fiscal 2019, which represents -2% growth from the same period a year ago but 7% growth from the first quarter of the year. The revenue decline was driven by higher net revenues in its Investing & Lending segment, more than offset by lower net revenues in the Investment Management and Investment Banking segments.

Goldman Sachs’ bottom line results were similar. The company generated $5.81 of diluted earnings-per-share in the second quarter of 2019, which represents a decline of 2.8% year-on-year. Through the first six months of fiscal 2019, Goldman generated earnings-per-share of $11.52, down 10.9% from the $12.93 generated in the first half of 2018.

On a net worth basis, Goldman Sachs saw both book value per common share ($214.10) and tangible book value per common share ($203.05) increased by 2.4% compared to the end of the first quarter of 2019.

Goldman Sachs has recently been bolstering its capital return program, a trend which is reverberating throughout the domestic banking sector. Yesterday, the bank’s Board of Directors increased its quarterly dividend to $1.25 from $0.85 previously (an increase of 47%) while the firm also repurchased $1.25 billion of stock in the most recent quarter.

Overall, Goldman Sachs’ second quarter financial results were significantly better than the markets expected (it beat earnings expectations by $0.72). Looking ahead, the company seems to have low double-digit total return expectations, so it earns a buy recommendation from Sure Dividend at current prices.

We do note that the company’s criminal case related to the 1Malaysia Development Berhad (1MDB) political scandal may increase the tail risk associated with the company, so investors should monitor that situation closely if they own Goldman stock

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