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Showing posts from 2018

Earnings Analysis: Apple (AAPL)

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On November 1, Apple announced it's fourth quarter results for fiscal year 2018.  Revenue rose twenty percent to $62.9B and earnings rose forty-one percent to $2.91.  Most important in the transforming Apple story is the continued growth of the services sector, which grew twenty-seven percent YoY.  This is important, because it's this services story which I believe will change how the stock is looked at and valued more as a consumer products company than a tech provider.  Services provides an ongoing revenue stream even if phone sales are choppy or peaking out.  That said, phone sales are still looking good on the revenue front as the company reported a 29% increase YoY and per-unit prices were higher than expected at $793, meaning the higher end phones were wildly sought after.  All of these numbers beat analyst expectations, but the headline numbers aren't what has driven the stock's action since the announcement.

Forward guidance was pretty much in line with expectat…

Earnings Analysis: Cedar Fair (FUN)

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Back on Tuesday, Cedar Fair announced the results of their third quarter operations.  Results were pleasantly pleasing as revenues came in at $664M, which is about 1% better YoY.  Earnings came in at $3.76 which was well in excess of analyst expectations of $3.25.  Results were bolstered by an increase of both attendance and spend coupled with cost management within the organization.  July was seen as a volatile month for the company, weather-wise, resulting in lower than expected visitation during a key portion of the year.  However, in the following two months of the quarter, attendance and spending rebounded and exceeded expectations as season pass holders returned to the facilities with better overall weather patterns.  This trend continues into October with the various Fall festivals which they hold and 2019 season pass purchases are off to a strong start - to show ongoing strength for the next year.  As a result of these patterns and how it fits into management's view of the…

Earnings Analysis: Raytheon (RTN)

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Back on October 25, Raytheon announced strong operational results for their third quarter of 2018.  Sales were up 8.3% YoY and earnings were up 14.2%.  These results were stronger than wall street expected with revenues of $6.81B beating estimates of $6.69B and earnings of $2.25 killing expectations of $1.97 per share.  Backlogs also grew to new record levels of $41.6B, increasing by almost $5B YoY.  This resulted in a guidance update for 2018 bookings to increase by $1B.  Additionally, the company provided a preview to 2019 guidance.  Within this guidance, the book to bill ratio is expected to be over 1 (more orders than output), which is bullish.  They also guided sales growth of 6%-8%, operating margins to be in line with 2018 results, a tax rate of 17%-19%, and operating cash flow of $3.8B-$4.0B.

Looking for negatives to note, operating margin results were down some and guided down some on the year mainly due to Missiles, which is seeing a number of new development programs which h…

Trade: Canopy Growth Company (CGC)

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After watching the stock drop to the low 30s and start jumping back up with what appears to be a turn in the overall market, I have decided to purchase one ninth of a position of Canopy at a price of $36.50.  This is a very small position to take advantage of prices significanctly below my cost basis while also leaving me room for the stock to go back down further - given that I am making this purchase at a time the stock is up over 8% on the day.  I continue to belive that Canopy is the best - potentially the only direct pot play and I play it as a speculation for long-term gains as the company continues to gain footing and take market share of failed companies in countries where cannabis is legal as well as being a leader into the next countries that legalize it.  Additionally, I am not convinced the stock is done going down.  I still believe prices in the 20s are possible, and as such this is why I'm taking a more concerted effort to buy smaller positions.  I wish to make sure …

Earnings Analysis: Honeywell (HON)

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On October 19, Honeywell announced their third quarter earnings results and they were fantastic.  Earnings came in at $2.03, beating out the $1.99 estimates while revenues came in at $10.76B which just edged expectations of $10.75B.  Organic sales came in at 7% which was the very high end of the anticipated range while margin expansion exceeded their range by 20 basis points on a 50 basis point high end.  On top of that, the company exceeded the guided amount of capital returned to shareholders via buybacks by $1.5B on a $3B guidance.  Hopefully, the company was buying back shares towards the end of the quarter when the stock was getting hit its hardest, but if it was, we certainly haven't seen it in the stock prices since - outside of the fact that they may not be in a window in which they can buy back shares now, resulting in less of a floor of protection for the stock.  

All segments performed well for the company with SPS and Aero leading the way with double-digit organic sales…

Trade: Rezidio (REZI)

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Yesterday, I received a small number of shares of Honeywell spinoff Rezidio as a part of the spin-off process.  I have decided to sell the entire position at a price of $25.51.  While I expect the company to perform well long-term, in the short-term this is a declining sector given the slowdown we've seen in home building and company investments.  I anticipate the company to have to deal with this pressure over the next several quarters as a result and do not expect the stock to perform well.  One thing that I do see as an interesting opportunity for this company is what happens with the United Technologies/Rockwell Collins merger.  Should China decide to let this deal happen, United Technologies will likely split itself into 3 companies which will also include a home/HVAC space that I can see merging or being bought by Rezidio in the future.  That said, I don't think the homework effort is worth the small number of shares I will have in the company as well as the stomach to d…

Earnings Analysis: Citigroup (C)

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On October 12, Citigroup announced third quarter 2018 earnings results and they were rather strong.  Earnings came in at $1.73, above estimates of $1.69.  Revenues came in at $18.38B, which was slightly below consensus for $18.45.  75 million common shares were repurchased as a part of the $6.4B in returned capital to shareholders over the quarter.  The Tangible Book Value also increased to $61.91.  

Loan growth was up 3% from the same quarter a year ago and deposits were up 4%.  Revenues from investing were also up nicely as the company took advantage of the volatile markets we've been experiencing since February.  The fact that about half of the company's business comes from overseas also seemed to be a benefit, as there was less impact to their operations compared its peers who are mostly US based.  Despite the fact that revenues missed expectations, it's not as bad as it may seem, given there was a sale of a Mexican Asset Management company during the quarter which had …

Trade: Canopy Growth Compan (CGC), Disney (DIS)

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On October 19 I filled another third of my expected position of Canopy Growth Company at $48.50.  At the time I placed the order, the stock was showing a strong floor in the $45 - $48 range and was really struggling to get below $48.  Given the stock had recently run up to the mid-50s and Canada's prohibition ended two days earlier.  I felt the amount the stock pulled back seemed reasonable on the sell the news situation and dove in.  We now know that choice was rather early, given the stock is now in the 38s after having hit as low as the 36s.  Given the current market conditions and overall chart health, I'll be sitting back for a bit to see when/where this stock stabilizes before I think about filling my position.  $35 is certainly a price area of interest, but I've also read that the stock could get down into the 20s.  It's important to remember that a huge portion of this company's value is in cash from investment from Constellation Brands.  That money will go…

Trade: Cedar Fair (FUN)

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Yesterday I sold approximately one third of my position in Cedar Fair (FUN) at a price of $55.25.  This price represented a net loss of around 11.1% (tax harvested).  As I stated in my Disney initation here, I wasn't pleased with the results I've been seeing from the amusement park industry and noticed there seems to be something larger than just weather driving the lower than expected results (not to mention I've taken way too long to react to what I was seeing).  As such, I'm shifting away from Cedar Fair in favor of Disney for a more broadly diversified holding that doesn't rely on just amusement parks, but entertainment more broadly.  Third quarter results are coming up towards the end of the month and should they provide solid results, I may get a price pop I can take advantage of and maybe even get a small profit from.  In the meantime, I wanted to sell this position to pay for the Disney shares I grabbed.  I am waiting for my next DIS purchase opportunity, h…

Trade Initiation: Disney (DIS)

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On Thursday, I purchased approximately one third of a full position in Walt Disney Corporation (DIS), otherwise known as Disney.  This expands my portfolio into the entertainment space, given I currently hold shares of Cedar Fair (FUN).  The purpose of this purchase is to begin a transition away from Cedar Fair.  The company and the stock has not been performing up to expectations as of late.  Despite the strong dividend of over 5%, the company lost all of the capital gains I had in it and then some.  This was poor management on my part.  Regardless of what I did or didn't do right with Cedar Fair, I still have faith in the Entertainment industry.  However, I felt it would be more appropriate to diversify myself outside of just amusement parks.  I feel the timing of this switch is ideal too.  Besides the theme parks which Disney has and are doing well, they have TV via ABC channels and ESPN, which is starting to turn itself around with it's ESPN+ app and get itself repositione…

Earnings Analysis: Pepsico (PEP)

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On October 2, Pepsico announced their third quarter earnings results while saying goodbye to their CEO.  This was the last day and last earnings call to be led by Indra Nooyi, a venerable champion in the business with her strong leadership pointed towards a strong future for the company by making sure they stayed in front of and fully involved in snack and beverage trends.  I'll get more into the company's future as I close this up, though.  As for the earnings results themselves, the company generated non-GAAP earnings of $1.59 which beat consensus by two cents and delivered organic revenue growth of 4.9%.  Core constant currency growth was 9%.  This included a 2% impact from currency conversion, given the recent strength of the US Dollar.  They also guided up on their expectation for organic growth from less than 3% to at least 3%, a sign of confidence that their final quarter looks bright.  

While profit was down for the North American Beverages segment, Revenues again conti…

Trade Initiation: Canopy Growth Corporation (CGC)

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Last week I bought an initial position in Canopy Growth Corporation at a share price of $50.  This company is an early entrant to the Canadian Pot industry as a producer of both medical and recreational marijuana, a new market that opens up the first of October, now that the country has legalized it. Pot stock have been hot - really really hot.  There's no doubt that many of them, Canopy probably included, are over valued right now.  While I was looking to speculate there's a lot of publicity in this area right now.  I would say that I felt Canopy was one of the better stocks, though we all know there's another out there that has been surging in astronomical proportions due to shortage of stock availability.  The nice thing about Canopy is that they're adequately capitalized and won't likely look to raise cash through offering more shares.  However, there are a lot of other companies out there that will need to and even more that will be looking to go public and ca…

Trade: IONIS Pharmaceuticals (IONS)

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Today was a wild day for Ionis.  After FDA results for a competing drug failed to show signs that it was effective enough to prevent competition for FCS in the mix, IONS was up over 10% at varying points during the day.  I was contemplating selling some, given I was finally back in the green on the stock.  However, there was a PDUFA meeting coming on Thursday for the approval on Volanasorsen on the radar and I didn't want to try to sell out and hope to get back in to maximize gains (typically after a big jump, the stock sells off for a couple days).  Then after the bell, the stock was halted as the FDA issued a Complete Response Letter (CRL) notifiying their holding company Akcea that they have rejected their drug Walivra on serious concerns on safety with antisense oligonucleotide drugs.  This puts the upcoming PDUFA in some jeapordy and the future PDUFA for Inotersen in serious jeapordy (due to the fact it suffered a death related to platelet issues), significantly reducing the …

Trade: Citigroup (C)

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In preparation of the second portion of the CCAR results that will be announced tomorrow, I refilled my position in Citigroup today, purchasing shares at $66.  Unfortunately, I didn't get shares purchased yesterday when the stock was in the $64s and then I pulled the trigger a little too early today, as the market started making a massive swing to the down side around the time of my purchase.  My reasoning for purchasing the stock was that it was near the price target area I've been hoping for since I sold up in the $72 range and we now have a catalyst which I believe will charge all bank stocks in the second half of the year. 


The CCAR results have been an inflection point for bank stocks, historically, as they are then allowed to start to distribute their excess capital as per agreement with the Fed.  I believe that Citi's captial distribution plan will be well received by the Fed, enabling them to distribute approximately $20B in dividends and stock buybacks over the ye…

Stock Initiation: Raytheon (RTN)

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After much contemplation, I decided it was time to move into a new position today and purchased half of my position in Raytheon at $188.50.  Raytheon is a defense company primarily known for the production of Patriot Missiles - a surface to air anti-missle defense system.  However, they also produce other items, play in cyber security and deep analytical analysis as well.  My theory is related to the fact that the US is looking to bolster their own military capabilities, to which Trump's declaration for a space force added to, but also the fact that the US is no longer spending as much of its money to protect its allies.  This means they need to increase their own purchases and Trump is using defense as something he's trying to push in all of his trade discussions.  These situations, I believe, spell out a strong runway towards ongoing profits in what is generally a robust global economy right now.  It is true that the Trade war pressures has the potential to strain some of th…

Earnings Analysis: Pepsico (PEP)

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Back on April 30 (yeah, I'm way behind), Pepsico announced their first quarter financial earnings for 2018.  Earnings came in at $0.96, beating consensus by three cents and sales were $12.56B also ahead of analyst expectations of $12.35B.  Finally, organic growth came in line with company guidance at 2.3%.  In all, the quarter was solid.  Maybe not perfect, but definitely solid.

As has been the case for a couple quarters already, North American Beverages (NAB) under performed the overall company.  There were operating and raw material inflation costs as well as some one-time bonus impacts.  That said, NAB did improve performance quarter over quarter for the third quarter in a row.  Guidance has been that this is the path they're on and that it will continue, so I see that as a positive at this point.  There are worries among the analyst community about competition and pricing wars, particularly in the sports drink section, but management seems to have the facts to back up their…

Trade: Pepsico (PEP)

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Today I increased my position in Pepsico by 25% at a price of $97.25.  While I haven't had a chance to complete my homework and post my review on the company's first quarter results, I do know the company beat expectations and provided a solid set of results for the quarter.  The one thing that I noted to like, in particular, was the fact that North American Beverages (NAB) didn't do as bad as analysts expected.  While there is some concern on all of the China and Tariff talks impacting the stock and the fact that the company is seeing more competition against the 10-year treasury, we've now seen the stock drop roughly 21% from its 52 week highs.  This selloff is getting to be over done and any good news could sent the stock higher.  If the stock drops to $92.75 we'll see the stock yielding 4% and that's far from typical for this consistent player.  I do have more room in my position and cash levels to take advantage of more down side - and I do see potential f…

Earnings Analysis: Honeywell (HON)

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Back on April 20, Honeywell announced the results of their first quarter operations.  Results were strong, with earnings coming in a $1.95 and sales coming in at $10.4B - both of which were beats against expectations of $1.90 and $10.02B respectively.  Organic sales also beat guidance of 2% - 4%, by resulting in 5% along with 40 basis points of margin expansion and $1B of cash flow.  Additionally, the company spent $1.4B in share repurchases ($950M) and dividends since there weren't ideal investment opportunities to go after.  Growth was led by the aerospace division with 8% organic growth along with 6% organic growth from the Safety and Productivity solutions division.  Home and Business Technologies and Performance Materials and Technologies grew 2% and 3% organically, respectively.  

Results were strong enough that the company raised EPS guidance to a range of $7.85 - $8.05, raising both the lower and upper ends.  They anticipate organic growth of 3%-5% and the sales of the busi…

Weekly Portfolio Summary

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Oh how the times change so easily.  It's become apparent that the stock market of 2017 is gone and what has taken its place is one filled with uncertainty and volatility.  Repeatedly over the last number of weeks we face wild swings as our President tweets, aids calm fears, and new complications arise.  It's important to note that for the last month and a half, we've truly been in the grips of a macro environment where everything from Presidential Tweets, Fed statements, Jobs reports, and other extraneous political and macroeconomic news controls the markets.  The one thing that could potentially put some calm to the market - earnings season - only started on Friday and despite what was a strong showing out of our biggest banks, what started as strong gains were wiped out and met with losses as people got prepared for a weekend which included fears of us dropping missiles on Syria (it happened Friday night and then called a "complete success"), as well as fears t…