Monday, November 23, 2009
I changed my income statement using a 2010 gold price of $1,100 instead of the $1,000 that was in my model. My valuation changed to $15.59 to get me at a new price target of $16, which is 17% upside from the closing price of $13.63 today. (11/23/09)
Going forward, we bought half a position in EGO at $12.91 and are up 5.5% already with another 17% upside for 22% total upside. The gold price may fall during this 4th quarter and EGO may fall with it. If this happens, we can turn EGO into a full position if we get in cheap enough. If the gold rally continues, EGO should hit my price target. For the time being, I think EGO is a hold.
Thursday, November 12, 2009
Boeing has successfully addressed and fixed a structural flaw on their first 787 Dreamliner. Scott Francher, who is the vice president and general manager of the 787 program, had this to say, "Completing this work is a significant step toward first flight. We continue to be pleased with the progress of the team and remain confident the first flight of the 787 Dreamliner will occur before the end of the year."
Precision Castparts is heavily involved with the 787 program with a dollar content of $5.5 million per 787 Dreamliner built. There are currently 850 outstanding orders for Boeing 787's that are expected to begin passenger flight towards the end of 2010. Due to various reasons the Boeing 787 project has been delayed, however this positive news from Boeing only reinforces my stance on Precision Castparts Corp.
Net sales rose 1.1% from last years 3Q to 98.667B and on a constant currency basis, would have been higher, but due to unfavorable currency rates, there was a 2.617B loss.
Wal-Mart US operating income rose 6.8%, due to productivity initiatives and efficient inventory management, compared to a sales increase of 1.2%. Customer traffice rose 1.5%, however there was a comparable store sales down .4% due to decreased purchases per customer. Management still believes that continuous gains in market share will underscore the underlying strength of the company.
Sams Club posted higher than expected membership income which was driven by its eValues program. Sales for sams club was 5.6% higher than last years 3Q. Gross and operating margins increased as well as expense reductions.
International stores sales increased 12.1% percent and operating income increased 9.2% percent. Wal-marts recent aquisition of Distribucion y Servicio (D&S), Chile's largest grocery store chain, has had an enormous positive impact for Wal-marts sales. As long as Wal-mart can further prove its price leadership and strong performance in international markets, it will continue to gain market share and further successfully expand its operations.
Going foward, there is speculation to believe as we are moving out of the 'recession', consumers may start to change their spending habits shifting people away from Wal-mart. However, if unemployment rates stay at 10.2%, Wal-mart sales are not seen to be diminishing anytime soon.
For the upcoming qaurter, the holiday season does not look as promising as retailers would have hoped. Wal-mart has fourth qaurter EPS estimates from 1.08-1.12, which raises FY 2010 EPS guidance. Wal-mart has further pushed their prices down to where almost competitors cannot compete. "We believe Walmart is positioned better than any other retailer to succeed with customers this holiday season" says Mike Duke, CEO.
Tuesday, November 10, 2009
Wednesday, November 4, 2009
Chesapeake Energy Corp. reported revenues in the third quarter of $1.81 billion, down from $7.49 billion a year ago. Net income for the third quarter was $186 million, down significantly from the $3.3 billion for the same period (primarily due to lower demand and lower natural gas prices) last year but still beating analysts’ expectations of $0.65 per share by 5 cents.
The company increased production by only 1 percent from the second quarter but by 7 percent from 3Q08. Natural gas still accounts for 92 percent of the company’s total production, but executives recently said the company would be open to growing its oil business. The company expects annual production growth of between 5 percent and 6 percent for 2009, and at least 8 percent and 12 percent in 2010 and 2011, respectively.
If you compare CHK's 7.50% projected EPS growth rate for the next five years with the projected EPS growth rate of 6.68% for the Independent Oil & Gas industry as a whole during that same time frame, you can see that analysts expect CHK to outperform the industry in the future, which is a good sign for the stock.
I feel Chesapeake is currently undervalued and is poised for solid gains for the rest of 2009 and into 2010. As natural gas prices remain high and the overall economy continues to improve, Chesapeake should see increased overall demand and profit. Management remains confident in their ability to combat poor market conditions and the fluctuations in the price of natural gas if they should arise. Currently, Chesapeake remains a Hold.
Tuesday, November 3, 2009
We are currently amid Q3 earnings season right now. A major pharmaceutical company that I have been following Novartis (NVS) reported their earnings on 10/22/09. They reported .89 given the street estimates of .84. The stock currently is sitting at $52. Catalysts for the better than expected earning include: large profits from break through drugs Diovan, Tekturna, and Gleevec, expansion in Japan and Singapore, and continued revenue growth from their OTC and generic branding products which were up a total of 6% from Q2. Both these divisions account for 32% of sales. Overall, Profits were up 1% and sales were up 3%. A major event to look for will be the sales and distribution of H1N1 vaccines in both the U.S and Europe. Management has projected Q4 sales to increase from a projection of $400 million to $700 million. Keep your eyes out on this stock as it has been slowly breaking down resistance of it's 52-week high.