Wednesday, December 17, 2014

Is UPS a Buy?

When you decide to buy or sell stock in a company like United Parcel Service, Inc.  (NYSE: UPS  ) , there are two key questions you should ask yourself. The first is whether its earnings projections and financial numbers make the stock a good value. The second is whether you believe in the company's ability to hit the numbers. This article will deal with these considerations in turn so you can better decide whether UPS stock is a buy for you.

UPS Forecasts and historical numbers

UPS recently hosted an investor conference in which it laid out its long-term financial targets. For now, let's look at what management expects from the business in the 2015-2019 time frame.


Saturday, December 13, 2014

Chinese Dating Site (DATE) Earnings Analysis

China's largest online dating platform, International Ltd (NASDAQ: DATE  ) , is very much a company in transition and its latest earnings report reflects the changes afoot. Essentially, the company is in the process of redesigning and relaunching its mobile offering in December, and the company is looking forward to increasing the monetization of its mobile platform. Unfortunately, this shift has somewhat skewed the key metrics at the company. Here is a look at its third-quarter results, reported this morning.

Before going into detail, readers should note that Jiayuan is a Chinese company and primarily reports in RMB. All the numbers in this article will be quoted and calculated in RMB, unless otherwise stated.


Thursday, December 11, 2014

The Bearish Case for Johnson Controls Inc Stock (JCI)

Johnson Controls  (NYSE: JCI  ) investors will be buoyed by the stock's recent strong run, but can it continue? Management has ample reason to believe it can improve revenue and margin growth across its segments in 2015. I've already examined the bullish case for the stock in a previous article; now it's time to look at the bearish case.

3 bearish factors for Johnson Controls

Before going into detail, I should note that I'm positive on management's restructuring efforts and internal execution. However, the company's valuation and the potential for deterioration in China's economy -- and ultimately car sales -- suggest there may be better ways to play the other positive end-market trends the company is seeing. (More on that in a future article.)

The company's segmental income in fiscal 2014 was a roughly three-way split among the building efficiency (heating, ventilation, and air conditioning), power solutions (car batteries), and automotive experience (car seating and interiors) businesses. Two of the three risks the company faces relate specifically to the auto experience segment.


Sunday, December 7, 2014

The Bullish Case for Johnson Controls (JCI) Stock

Johnson Controls (NYSE: JCI  ) investors have watched their stock put in a strong recovery in the last month, and the share price is only down a few percentage points on the year, as I write. About a month ago, Fools looked at just why the stock had slumped in 2014, and more recently at the five things management hopes will improve company performance. Now, it's time to look at things from another perspective and ask: What are the three things that could take the stock higher?


Wednesday, December 3, 2014

United Parcel Service (UPS) Investor Conference Review

Until last week, it had been three years since United Parcel Service (NYSE: UPS  ) last had an investor conference, and much had changed with its end-market conditions in the interim. At the recent conference, management updated UPS investors on its long-term outlook and on how it is adjusting to these changes. With this in mind, it's time to look at what is new with UPS and what it might mean to the shipping and logistics company's investors.

United Parcel Service's end-market trends

 Before getting into details, here is a chart of UPS' trailing-four-quarters segmental income so Fools can see the relative importance of each business.

Source: United Parcel Service Presentations.

Since 2011, there have been three separate and somewhat unexpected changes in end markets for UPS and its main rival, FedEx (NYSE: FDX  )


Monday, December 1, 2014

Emerson Electric Earnings Call

With its recent fourth-quarter results, dividend investor favorite Emerson Electric (NYSE: EMR  ) showed that it's been performing well in the face of mixed end markets. You may have already read the details of the earnings report, but now it's time to look at what management wants you to know about the company's future direction.

Global growth and dividends

There are two key things to understand about the company. First, it's largely a play on global macroeconomic conditions, with an added growth kicker from emerging-market spending on infrastructure projects. Second, it's a Dividend Aristocrat -- a company that has increased its dividend for 25 years or more. Moreover, the underlying evidence suggests that it has the potential, and management the will, to continue rewarding income-seeking investors well into the future. Let's look at five key takeaways from the earnings call in the context of these two points.


Sunday, November 30, 2014

Palo Alto Networks, Fortinet, and Check Point Software: Which Stock to Buy?

ector, but the decision over buying or selling the stock isn't as easy as you might think. Investors often buy or sell stocks based on their relative valuation within their peer group, but with the network security sector it isn't quite so easy. Why is this so? Furthermore, is Palo Alto Networks a buy or sell?

You say value, I say growth

It's tricky to compare valuations in the network security sector, because the leading players are at different stages of their development, and this makes them attractive to a different type of investor. For example, a value investor might look at a mature, highly cash generative, stock like Check Point Software (NASDAQ: CHKP  ) at conclude that it's the best in class. Meanwhile, growth at reasonable price,or GARP, investor will like the look of Fortinet's (NASDAQ: FTNT  ) mix of mid-teens revenue growth and solid free-cash flow generation, while a growth investor will favor Palo Alto's 30% plus growth rates, even if its free-cash flow yield is low.

I'm going to graphically introduce some of these ideas for you, and then get into the numbers. First, a quick look at revenue growth for these three companies in the last four years and the analyst forecast for the fifth year, reveals that they really are at different stages of development.


Friday, November 28, 2014

Johnson Controls Earnings Call

The market liked Johnson Controls' (NYSE: JCI  ) fourth-quarter results and marked the stock up more than 3% when earnings were released on Oct. 30. The stock certainly needed the boost, because up to that point it was down nearly 13% on the year. Johnson Controls investors will be looking for the earnings to spark a recovery in the stock price. Here are the five things that management hopes will take the stock higher.

Building efficiency segment set to improve

Johnson Controls is trying to expand its building efficiency segment sales in an attempt to reduce its reliance on the automobile sector -- an industry known for its cyclicality. The building efficiency segment sells heating, ventilation, and air conditioning, or HVAC, solutions. Unfortunately, this year has proven to be tougher than management expected, but the good news is that the segment's fortunes look set to improve.

On the recent conference call, CEO Alex Molinaroli first highlighted the improvement in the institutional component (the company's core HVAC market) of the Architecture Billings Index -- a key industry measure of construction growth. A reading above 50 indicates expansion.


Tuesday, November 25, 2014

The Bearish Case for United Parcel Service, Inc

United Parcel Service's (NYSE: UPS  ) latest results indicated a return to form for the company. We've already covered the bullish case for the stock with the five key things management hopes will turn the stock around; now let's examine the bearish case.

Source: United Parcel Service.

All about e-commerce for United Parcel Service

I should admit that I'm bullish on the stock, without believing it's a screamingly good value. But every stock comes with some risk, and in the case of UPS and rival FedEx (NYSE: FDX  ) , the key risks comes from the same place as their biggest opportunity -- the burgeoning growth in business-to-consumer, or B2C, e-commerce.


Emerson Electric: A Dividend Stock

Emerson Electric's (NYSE: EMR  ) fourth-quarter results did two things that will interest investors. First, they gave a good reading on trends in the global economy -- something all investors should be watching. Second, they confirmed just why the company remains a dividend favorite. Putting these things together, is the stock worth buying?

Emerson Electric: Performing well amid some global challenges

Earlier in the year, Fools saw how buying stock in Emerson Electric was largely a play on economic trends in the global economy. With this in mind, it's a good idea to track how its geographic performance fared relative to management's expectations at the start of the year.

Here is a look at full-year underlying sales (excluding acquisitions and divestitures) versus what was planned in early 2014:

 Segment Plan    Actual 
USA   3%-5%  4%
Europe   0%-2%  1%
China  6%-8%  7%
Other Asia  6%-8%  1%
Latin America   6%-8%  2%
Middle East & Africa   8%-10%  (1%)
Underlying   3%-5%  3%

Source: Emerson Electric presentations.

With underlying sales at the bottom end of its projected range for the full year, it's clear that its end markets didn't work out as planned. Of course, Emerson Electric isn't alone in seeing significant changes occur in the mix of global growth. Indeed, fellow industrial bellwether 3M also reported a similar story of the U.S. strengthening, with certain emerging markets (particularly Latin America) weakening notably.


Saturday, November 22, 2014

The bullish case for United Parcel Service

United Parcel Service (NYSE: UPS  ) investors will have been pleased to see the stock rising after a solid set of results. I've already covered the key points on the third-quarter earnings, and then looked at the five things that management wants you to know about the company's prospects. Now it's time to look at the company purely from the perspective of an investor looking to buy the stock. In doing so, I'll outline the three reasons the stock could start to play catch-up with its rival FedEx (NYSE: FDX  ) and the market in 2014.

UPS Chart

UPS data by YCharts.

E-commerce brings challenges and opportunities

The reasons for the underperformance of UPS relative to FedEx have already been discussed in more detail. Simply put, UPS was harder hit than FedEx by the severe winter weather last year. However, one development that affects both companies is the burgeoning development of e-commerce deliveries, and in particular, from business to consumer, or B2C, channels.


Friday, November 21, 2014

Johnson Controls Earnings Analysis

It's been a difficult year for Johnson Controls (NYSE: JCI  ) investors, as they have watched their stock underperform the market. The market was looking for some signs of improvement in its fourth-quarter results. In the end, the company delivered a solid quarter with the headline numbers pretty much in line with expectations.

It's time to look at what happened in the fourth quarter, and to look for any indications of where the company is headed next.

Source: Johnson Controls.

Johnson Controls fourth-quarter results

A quick look at the headline numbers:

  • Fourth-quarter revenue of $11 billion versus analyst estimates of $11.2 billion
  • Fourth-quarter adjusted diluted EPS of $1.04 versus analyst estimates of $1.01 and internal guidance of $1-$1.02
  • First-quarter 2015 EPS guidance of $0.74-$0.77 versus analyst estimates of $0.77

Fourth-quarter EPS is ahead of estimates, but the guidance for the first quarter is a little light compared to analyst estimates. In short, it was a mixed set of earnings, with sales up 3% and gross profit up 2%.


MSC Industrial Earnings Analysis

MSC Industrial (NYSE: MSM  ) reported a mixed set of results for its fourth quarter. Revenue came in better than analyst expectations, but in common with rival industrial supply company Fastenal, MSC Industrial is seeing ongoing margin pressures. Moreover, its guidance for the first quarter of fiscal 2015 was lighter than analyst expectations.

MSC Industrial meets earnings expectations, but guidance disappoints

A quick look at the highlights of its fourth-quarter earnings:

  • Fourth-quarter sales of $726.6 million versus internal guidance of $718 million-$730 million and analyst estimate of $724.8 million
  • Gross margin of 45.6% versus internal guidance of 45.7%-46.1%
  • Operating expenses of $231 million versus internal guidance of $230 million
  • Tax rate of 37.7% versus internal guidance of 36.7%
  • Adjusted non-generally accepted accounting principles EPS of $1.02 versus internal guidance of $0.98-$1.02 and analyst estimate of $1.01

Sales came in ahead of analyst estimates (and above the midrange of company guidance) and EPS topped internal guidance. So why was the stock marked down initially after the report?

3 considerations

There are three things to consider about these results, and investors should watch them closely, because the industrial equipment wholesale industry is always a useful bellwether of the economy.


Wednesday, November 19, 2014

Danaher Corporation's Business Strategy

The market greeted industrial conglomerate Danaher's (NYSE: DHR  ) latest quarterly results with a nice pop on the day of the earnings release. This was the first set of company earnings presided over by new CEO Tom Joyce. Naturally, investors were keen to find out just what kind of message the new chief executive was looking to give out. His predecessor,Larry Culp, was closely associated with the company's success over the years, and Joyce has large boots to fill. So, in that context, we'll look at five key takeaways from the company's quarterly conference call. Is Joyce taking the company in the right direction?

Business as usual at Danaher?

In a previous article, Fools looked at the earnings in more detail. The company is known for acquiring businesses and then applying its Danaher Business System, or DBS, to them. Simply put, it's a management strategy that emphasizes lean manufacturing processes that can be applied across all segments of the company. While the current results will still be a product of Culp's management, the question is does Joyce plan to change its business strategy?

DBS Explained Source: Danaher Website


Tuesday, November 18, 2014

Middleby Corporation Equity Analysis

Stock in food equipment company Middleby Corporation (NASDAQ: MIDD  ) is in line with the S&P 500 index so far this year -- it's recorded a 5.1% increase as of this writing. However, this is definitely not a case of a company simply tracking the market.In reality, it's been a volatile year, with the stock trading at $100 in March, and then some 28% lower, at $72, in August, only to increase 21% to the price of around $85 as of this writing. Why has the stock been so volatile this year?

MIDD Chart

MIDD data by YCharts.

Future earnings for Middleby Corporation

As the following chart demonstrates, Middleby's current valuation has little to do with its current earnings -- it's the market's view on its future earnings that counts.


Monday, November 17, 2014

UPS Earnings Call Review

It's been a difficult year for United Parcel Service  (NYSE: UPS  ) investors, as they have watched their stock underperform key rival FedEx (NYSE: FDX  ) and the S&P 500. However, the third-quarter results saw a return to form, and investors have cause to believe that the stock can go do well going forward. Here is a look at what management wants you to know about the business, and why UPS could be a stock to buy.

What you need to know about UPS in 2014

Essentially, UPS has had a difficult year for two main reasons. First, a combination of bad weather and unexpected spikes in demand during last year's holiday season hurt its profitability in its first quarter. Moreover, UPS had to reduce its 2014 earnings forecast in July due to increasing its investment plans in order to ensure it will meet peak demand spikes in future.

Second, the relatively stronger growth in its e-commerce business-to-consumer, or B2C, packages is pressuring margins downward. B2C packages tend to be lighter and lower-yielding deliveries. In addition, UPS and FedEx are having to deal with burgeoning e-commerce delivery growth by expanding capacity -- something else to pressure margins.

The following five points from UPS' earnings call address these two issues.


Sunday, November 16, 2014

Precision CastParts Equity Analysis

Precision Castparts Corp.'s  (NYSE: PCP  ) earnings came in a little lighter than expected, but investors might not want to panic just yet. Any company involved in the production of heavy capital goods is likely to see some lumpiness in its revenue and earnings from quarter to quarter -- and so it was with Precision Castparts' second quarter.

Source: Precision Castparts.

Earnings highlights

A brief recap:

  • Q2 revenue of $2.52 billion versus analyst estimates of $2.52 billion
  • Q2 earnings per share of $3.24 versus analyst estimates of $3.32

So it's an earnings "miss," and the market did what the market usually does in such cases: It promptly marked the stock down yesterday, on an otherwise strong day for the S&P 500.

However, as noted above, Precision Castparts is always going to be a business with a degree of uncertainty around the level of its earnings from quarter to quarter. Indeed, CEO Mark Donegan further alluded to this fact in his commentary on the outlook for the upcoming third quarter.


Saturday, November 15, 2014

Check Point Software Earnings Analysis

he information-technology network security sector is unusual in the sense that its leading companies offer markedly different maturity levels. If FireEye and Palto Alto Networks (NYSE: PANW  ) are the new kids on the block, and Fortinet (NASDAQ: FTNT  ) is the maturing teenager, then Check Point Software (NASDAQ: CHKP  ) is very much the mature old uncle. With that said, Fools shouldn't dismiss the stock as unexciting. On the contrary, there was a lot to like about Check Point's recent third-quarter earnings, and the numbers confirm that the company's business strategy is working. Time for a look.

Check Point Software's third-quarter results

Highlights of its earnings and guidance for the upcoming fourth quarter:

  • Third-quarter revenue of $370.4 million vs. analyst estimate of $367.1 million
  • Third-quarter earnings per share of $0.93 vs. analyst estimates of $0.91
  • Fourth-quarter revenue guidance of $395 million-$430 million vs. analyst estimate of $410.3 million
  • Fourth-quarter EPS guidance of $0.99-$1.09 vs. analyst estimate of $1.03

In summary, revenue and EPS beat analyst expectations and guidance was ahead of what the market projected. This is obviously good news, particularly because Check Point's management is known for giving conservative guidance.


Polycom Earnings Analysis

Video conferencing company Polycom's (NASDAQ: PLCM  ) earnings are always likely to cause some fireworks because of the company's high-risk, high-reward nature. Some investors will balk at the mention of high risk, while others will warm to the idea of high reward. With Polycom's third-quarter results just in, it's clear that the optimists have won this round -- but not by much.

Polycom wants you to collaborate. Source: Polycom.

Polycom beats estimates; guidance was a bit light

A quick recap of the third-quarter earnings and fourth-quarter guidance:

  • Third-quarter revenue came in flat at $335.7 million, versus analyst estimates of $334.9 million.
  • Third-quarter Non-GAAP diluted EPS came in at $0.22, versus analyst estimates of $0.20.
  • Fourth-quarter revenue guidance of $342 million to $352 million straddled analyst estimates of $349 million.
  • Fourth-quarter non-GAAP EPS guidance of $0.21 to $0.23 also straddled analyst estimates of $0.22.

Third-quarter revenue and EPS beat estimates, but Fools should note that the midpoint of fourth-quarter revenue guidance is below the market consensus. In addition, management gave fourth-quarter guidance of non-GAAP gross margins of 59% to 59.2%, implying a decline from the 59.4% level he company achieved in the third quarter.

What Polycom is trying to achieve with its earnings

Essentially, Polycom is competing against the unified communications operations of two giant tech companies: Cisco Systems (NASDAQ: CSCO  ) and China's Huawei. It also faces a number of small competitors offering cheaper, less sophisticated solutions and even Google's (NASDAQ: GOOG  ) Chromebox at the low end.


Tuesday, November 11, 2014

Robert Half International Earnings Review

Staffing services company Robert Half International (NYSE: RHI  ) beat analyst estimates for the third quarter and delivered guidance ahead of the Wall Street consensus for the fourth quarter. In an act of almost prescient behavior, the market took the stock more than 5% higher before the results. However, all of these short-term movements shouldn't trouble long-term investors unduly, as the positive drivers behind the stock remain in place. Robert Half is set for continued growth, but what about its valuation?

Robert Half International tops estimates
A quick look at the earnings and guidance versus consensus analyst estimates confirms tht the underlying trends in the business remain strong:

  • Third-quarter revenue of $1.22 billion, versus estimates of $1.2 billion.
  • Third-quarter EPS of $0.63, versus estimates of $0.58.
  • Fourth-quarter revenue guidance of $1.175 billion to $1.225 billion, versus estimates of $1.2 billion.
  • Fourth-quarter EPS guidance of $0.57-$0.62, versus estimates of $0.58.

Moreover, commentary on the trends in the third quarter and the first few weeks of the fourth were positive. The following table summarizes what management disclosed on the conference call.