Saturday, September 19, 2015

ORCL Q1 2016 Earnings

This past Wednesday September 16th Oracle Corp. released Q1 2016 earnings report. Earnings per share (EPS) beat the street’s expectations by a cent and revenue missed expectations. Total revenue was down about 1.7% YoY as the company continues to transition much of their product offerings into the cloud-space. New software licenses were down about 16% YoY as expected with the product transitions. Cloud SaaS increased 33% YoY beating growth expectations; additionally cloud infrastructure was up about 16% YoY. All of the other revenue line items were relatively flat YoY. ORCL continue to be plagued with the issue of currency headwinds associated with the strong USD, on a constant currency basis ORCL’s revenue was up 7% YoY. Additionally the fact that EPS beat expectations and that total revenues missed expectations indicates that ORCL is succeeding in consolidating operating expenses as they transition their major product offerings. Growth prospects for ORCL remain strong in the Cloud SaaS and PaaS industries, as they appear to be making the transition into cloud services with more success than many of their competitors like SAP, and IBM. The earnings report was released on Wednesday after the market close, immediately following the mixed earnings release ORCL was trading up. The following day (same day as FED announcement on interest rates) ORCL traded down about 3% and continued to close the week on Friday at $36.38. The ORCL model has been updated and consists of a new price target of $53.48 representing a 47% upside off of the current price and a 27% upside off of our purchase price of $42.25

Jeff Sherman

Wednesday, September 16, 2015

Union Pacific - 9/15/15 Update

Stock of Union Pacific has stabilized near $87.  The current price stood at $87.98 as the markets closed today.  Share prices have changed very little during the past week.  However, the past month marks a 5% decline in share prices, almost certainly due to panic in the Chinese economy, a significant end-point for the goods shipped by Union Pacific.  

With nearly two months passed since third quarter earnings,--one in which EPS, but not revenue, beat analyst estimates—some of the factors that beleaguered top-line numbers still stand.  Foremost, the declining demand for coal continues.  Coal accounts for 18% of Union Pacific's revenue, and declined by 18% year-over-year this past quarter.  The White House aims to cut carbon emissions in the power generation industry, the primary coal market, by 32% within 15 years.  Management expects coal revenue, as a percent of total revenue, to decline from its previous 18%.  Stronger automotive and general freight has improved the shortfall.  

Expectations for Union Pacific remain positive.  A few major institutions, including Bank of America, Cowen and Company, and Topeka Capital Markets, have upgraded stock of UNP.  Price targets are lower than in the past, but all exceed $100.  In addition, Morningstar recently upgraded Union Pacific debt to a ranking of 'A,' citing reliable cash flows and return on equity.  Accordingly, we remain convicted in this position.  

Tuesday, September 15, 2015

Spectrum Brand Holdings (SPB) September 15th

Spectrum Brand Holdings (SPB) began the month of September trading at $95.99 as the volatile market of late August did affect the stock negatively. A more stable market in September provided for a steady recovery of the stock which now sits at $97.31. A minor catalyst for the stock is occurring in Texas as the state has experienced extreme flood waters. Nuisance insect numbers typically spike in the aftermath of flooding. This will positively impact SPB’s insecticide business segment, hopefully enough to mitigate market headwinds. With no other news indicating otherwise, SPB remains on track to meet company guidance given during its last earnings call on August 5th. 

PSX blog

PSX- Trading at as low as $70.92 from the mid august crash Phillips 66 has rebounded nicely. Coming back off some good news deriving all the way from Warren Buffet taking a multi-billion dollar stake in the name to gains coming from plans to strengthen a joint venture. Phillips is trading right around $79.00/$80.00 today with majority of analysts ratings sitting at holds to buys.

On 9/9/15 PSX was up to $81.96 after the oil refinery company and Spectra Energy (SE) announced plans to strengthen their 50/50 joint venture DCP Midstream Partners (DPM). The transaction is expected to close in the fourth quarter ojf 2015. "DCP Midstream is a valuable portion of our NGL value chain and part of our plans to grow" said PSX Chairman and CEO Greg Garland.

I think a lot of the growth in this name will be derived from not its role as a refiner, which it just so happens to do very well, not in the rebound of oil which no one has a concrete timeline on, but on its diversification as its position to become an extremely large and profitable Pipeline and chemical company. A rebound in oil is viewed as just a bonus for this name in my eyes. I am more interested in its other business segments to carry the weight for growth.

Google Bi-Weekly Blog

Google Bi-Weekly Blog

Google (GOOGL) began September trading at $629. The stock has since then climbed to trade relatively flat in the $650 range. A healthy price range to sit in considering the stock tends to pick up come earnings week. Google has continued to be one of the biggest contributors to the portfolio and I believe still has some upside. I believe so because of the increased focus in revenue drivers specific to Google's core while separating expenses from other lines of business from its income statement. I believe after next quarter's earnings report might prove to be a prime time to sell our position with Google.

Google's price at the time of the blog - $662.82 reflecting a daily gain of 2.20%

PNC Financial Services September 15th Update

Since the global sell-off in late August, PNC Financial Services (NYSE: PNC) has been slowly recovering. Before market slides, PNC was trading at nearly $100.00 per share, just below our price target of ~$106.00. Despite dropping to as low as $85.85 per share, the stock has appreciated to $91.94 in the first half of September. Out investment thesis remains intact, with no major news being reported in the first half of September. PNC continues to maintain a very positive outlook from the Street as well, with an average analyst price target of $99.89 per share.

Citigroup (C) September 15th Update

Citigroup (NYSE: C) has hovered between $50.94 and $52.10 per share for the first half of September with no major news to be reported. Similarly to PNC, the decrease from a high of $57.77 in August was due to overreaction by the markets. Despite the Financial Sector being hit the hardest by the fall-out in late August, Wall Street anticipates a strong Citigroup recovery, with the median analyst price target being $65.00 per share. This is very similar to our current price target of $65.77 per share. Citigroup will report third quarter earnings on October 15th.

VMW Bi-weekly

VMWare Bi-Weekly Blog

VMWare has traded relatively poorly as compared to previous performance. The stock opened the month at $79 and has traded in that range for the current month of September. The price range for the month is the same range as the stock's 52 week low of $78. A cause for concern considering the stock was trading at above $90 for sometime during August. Despite the stock's poor performance, equity research company has upgraded the stock to a buy citing double digit organic sales growth as well as VMWare's success in fending off competition in many of the company's markets. I am confident the stock is currently undervalued and with M&A talks dying down with parent company EMC the stock should pick up again.

Price of VMWare at the time of the blog - $80.46 reflecting a daily gain of 0.60%.

Cigna September 15th

From September 1st through September 15th Cigna’s stock price has risen by $1.76, or 1.02% to 140.76.  There has been no major news regarding Cigna’s acquisition by Anthem.  There are still many antitrust laws that they must battle to complete the merger.  Many articles are now focusing on the lack of public benefits that would stem from the merger, this had led to some recent volatility, overall the stock price continues to hover around $140.  

Las Vegas Sands

Through the first half of September, LVS has risen 2.8% from 45.83 to $47.20. This increase is simply the market correcting itself after a sever overreaction due to China devaluing the Yuan in late August. There has been no new relevant news for LVS during the past two weeks. Lastly the ex-dividend date for our quarterly $0.65 per share is this Friday the 18th.