Stocks

McRally – McDonald’s Posts Excellent Results with no Slowing in Europe

October 21, 2011
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McRally – McDonald’s Posts Excellent Results with no Slowing in Europe

McDonald’s posted an excellent set of results this morning and the quality of the reported earnings was very high because it came at an abnormally high tax rate. McDonald’s global same store sales came in at 5.0%. The results continue to confound many analysts and investors who fear that McDonald’s growth is not sustainable – in short it is sustainable. McDonald’s posted 4.9% same store sales in Europe and also indicated that September comp sales in Europe were up 6.9%. This strength of McDonald’s business is in Europe is rather stunning given all that is going on in the world. Perhaps the French are trading down from the brasserie and the German’s from the schnitzel and sausage houses (but I believe there is more to it than this). McDonald’s...

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Intel (INTC) – Strong Results Driven By Emerging Market PC Adoption

October 19, 2011
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Intel (INTC) – Strong Results Driven By Emerging Market PC Adoption

Intel is a polarizing stock that most technology investors have a strongly positive or strongly negative opinion on. Taking a step back, Intel was clearly a premier growth stock of the 1980’s and 1990’s. An investment in Intel in 1986 at a price of $0.40 (not a typo) appreciated 100x by the end of 1999. Intel experienced a fleeting rally from $40 to $75 during the technology craze in 2000 and subsequently crashed during “tech wreck” down to about $20. The shares have remained around $20 for the next 11 years. For perspective on the de-rating Intel experienced, shares earned $0.46 in 2002 while estimates are now around $2.50 for next year. While the Street gravitated towards the bearish case that nothing at Intel is sustainable (the growth rate...

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Big Blue (IBM) Posts Solid Q3 Results – Adamant That Macro Isn’t Slowing Meaningfully

October 18, 2011
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Big Blue (IBM) Posts Solid Q3 Results – Adamant That Macro Isn’t Slowing Meaningfully

IBM posted a solid third quarter result that exhibited 16% earnings per share growth and enabled the company to slightly raise full year guidance (from $13.25 to $13.35). IBM has been beating quarterly consensus results by some 2-4% in consistent fashion. The 1.8% beat for the third quarter is likely causing most of the sell-off in the after-market (shares down 4.5% from yesterday’s close). I watch IBM closely because its tentacles stretch deeply into the global economy and the stock is one of the largest weights in the Dow Jones, a price weighted index. IBM’s quarter saw solid constant currency sales growth in both major markets (developed) and growth markets (emerging). Developed markets grew 1% in constant currency but emerging markets grew 13% at constant FX. This was the...

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Google Q3 Earnings Surge – Demonstrates The Power of Innovation and Focused Investment

October 14, 2011
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Google Q3 Earnings Surge – Demonstrates The Power of Innovation and Focused Investment

Q3 earnings were reported after the close of market as earnings seasons kicks off. Google’s stock price has been volatile based on market fluctuations, Department of Justice concerns, fears about losing focus after the announced deal to acquire Motorola, and fear that a recession would slow search and display revenues. The above fears failed to materialize and Google continues to excel in terms of internet related innovation and vision. Wall Street estimates were much too low for the current quarter and Google beat pro-forma EPS by about $1 or 10%. The Q3 earnings conference call is worth a listen for all investors. The shares closed at $559 but quickly traded up to $595 in after-hours trading. Starting with the top line revenues, Google reported the strongest revenue growth rate in...

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Ruby Tuesday – Highlights Value in the Restaurant Space

October 12, 2011
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Ruby Tuesday – Highlights Value in the Restaurant Space

Ruby Tuesday (RT) is one of the largest players in the US bar and grill segment. The restaurant chain consists of 841 restaurants with the vast majority of the restaurants company operated and 95 franchised. The secular trends have been working against the bar and grill segment based on healthy lifestyle trends and consumers moving away from burgers and fries towards lower fat options. Moreover the bar and grill space boomed in the 1990s and became over stored. Some bar and grill chains went bankrupt during the financial crisis and some chains have converted to other concepts. Despite the negative headwinds, Ruby Tuesday remains standing with decent operating metrics but with limited ability to grow from here. The result has been a company run largely for cash flow. The...

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Yum! Brands – Results Indicate Strong China Consumption Growth Continues

October 5, 2011
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Yum! Brands – Results Indicate Strong China Consumption Growth Continues

Yum! Brands (YUM) released results after the close of market yesterday. Yum is the world’s second largest quick service (fast food) restaurant after McDonald’s and operates the KFC, Taco Bell, Pizza Hut, Long John Silver, and A&W Restaurant franchises. Yum is an important company I follow because of the exceptionally strong gearing to China. This year, over 45% of the company operating profits will come from China. The positioning that Yum has in China is the result of decades of investment, brand building, and restaurant openings. There are 4,187 company-owned restaurant units in China amounting to over half of the company owned store base. Yum chooses to own the restaurants units, as opposed to franchise, because the restaurant profitability is so high. Yum makes more money on KFC and...

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Nike’s Strong Results Indicative of Solid Global Consumption

September 23, 2011
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Nike’s Strong Results Indicative of Solid Global Consumption

Nike (NKE) reported an excellent set of results after the close last night. Headline earnings were $1.36 vs a street consensus of $1.21 (12.4% beat). I listened to the Nike earnings conference call and was really impressed with the strong business trends relative to the obvious dislocations we are seeing in the market and talk of global recession. Nike is one of the world’s strongest global brands and has a diversified business across both developed and emerging markets, across product categories such as footwear, apparel, and equipment, and across income demographics. If there was a global slowdown taking place right now it would be something that should impact Nike’s business. Basketball and running sneakers are mature categories in most countries. Nike’s earnings were driven by strong sales trends around...

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Target – Missoni is a Home Run!

September 16, 2011
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Target – Missoni is a Home Run!

A number of news reports have been out regarding the new exclusive apparel and home line designed by Missoni for Target (TGT). The Italian designer is very well regarded in the fashion world and Target getting an exclusive launch of this magnitude speaks to the credibility of the merchandising team and the power of the Target brand. Target experienced a website crash while the product line launched due to high demand (perhaps the site was intentionally crashed?). This has created enormous buzz and an air of exclusivity. There have been reports of lines at the door before stores open across the country. When you invest in Target you get one of retail’s best merchandising and branding teams in the nation. The success of the Missoni line has the potential...

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Google Acquires Zagat & Early Signs of a Strong Q3

September 9, 2011
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Google Acquires Zagat & Early Signs of a Strong Q3

Google announced on its Google Blog, that they have finalized a deal to acquire restaurant reviewing company Zagat. The company was founded in 1979, and grew over time as more cities and restaurants have been added to the network. Zagat has also been adding venues such as hotels, bars, shopping centers and others in recent years. Zagat was purchased by private equity buyers for $31M in 2000. A few years ago, Zagat hired Goldman Sachs to put the company up for sale, reportedly for over $200M. Assuming that Zagat has continued to grow I would estimate this was between a $400-$600M deal for Google. While the terms of the acquisition were undisclosed, I look favorably on Google’s expansion into the local arena. Integrating Zagat will fit nicely with Google...

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Guess (GES) – Q2 Results Fine, Exceptional Opportunity

August 25, 2011
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Guess (GES) – Q2 Results Fine, Exceptional Opportunity

Guess – Q2 Earnings  8/25/11 Guess (GES) reported Q2 earnings last night after the close with results at the higher-end of the company plan coming into the quarter. The knee jerk reaction in the after-hours was a selloff in the shares. Guess is one of the consumer sector’s best positioned companies and any weakness in the shares can be bought. In other words, my “Focus List” buy recommendation at $37, is well, even a better buy here and now. Analysts often get things wrong and simply claim that timing was off etc…..I’ll go out on a limb and state that the analysis per Guess posted on 8/1/11 remains valid and investors with time horizon and perspective are presented with an opportunity. Here is s link to the Q2 conference...

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Google (GOOG) – A Focused Internet Giant

August 23, 2011
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Google (GOOG) – A Focused Internet Giant

Google (GOOG) was highlighted in a post we did after the announcement to acquire Motorola on 8/15/11. In actuality, Google has the opportunity to produce 20-30% stock price returns for a number of years as investors today are buying into the stock at the ex-financial crisis low valuation. We break down Google into the following 5 drivers: 1) Google Search – own the business that redefined the internet 2) Google Display Networks – the emerging beast 3) Mobile Dominance – Android many moves ahead on the chess board 4) International Growth – under-appreciated gem 5) Social and Relevance of Google+ – other irons in the fire As opposed to more formulaic Wall Street thesis, we’ll present the Google investment thematic and keep things big picture. Towards the end of...

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Google (GOOG) to acquire Motorola – Investment Analysis

August 15, 2011
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Google (GOOG) to acquire Motorola – Investment Analysis

Google announced an agreement to acquire Motorola Solutions (MMI) as it continues a push into mobile internet and mobile hardware. The deal was announced for $12.5B and shareholders of Motorola Solutions will receive $40 per share in cash. This is a cool 63.5% for shareholders of MMI relative to Friday’s closing prices. Larry Page and Patrick Pichette (Google’s CFO) did a quick conference call explaining the deal this morning. You can listen to the call over at Google’s investor relations site. The call didn’t say too much other than point out that the deal will be accretive (ex amortization of intangibles) immediately from the time it closes. This is because Google is funding the transaction with excess cash sitting on the balance sheet earning very low yields. For perspective,...

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