Valuentum Exclusive Analysis for the Discerning Investor

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Oct 28, 2024

In the News: Newmont, McDonald’s, the Election
Newmont is facing cost pressures, while its gold production is expected to be flattish in 2025. McDonald's has worked fast to put the recent E. coli outbreak behind it. We don't expect the situation to damage McDonald's brand or impact the trajectory of its business in the long run. The U.S. Presidential election is on November 5, and while there are differences between the agendas of former President Donald Trump and Vice President Kamala Harris, we're not making changes to the newsletter portfolios on account of political risk and uncertainty.

Oct 25, 2024

UPS Returns to Revenue and Profit Growth
Image: UPS’ shares have been under pressure the past couple years. For the first nine months of the year, UPS hauled in $6.8 billion in operating cash flow and generated free cash flow of $4 billion. For full year 2024, UPS is targeting consolidated revenue of approximately $91.1 billion (was $93 billion), while it now expects its consolidated non-GAAP adjusted operating margin to be roughly 9.6% (was 9.4%). For the year, capital expenditures are targeted at $4 billion, while dividend payments are expected to be around $5.4 billion. Shares yield 4.7% at the time of this writing.

Oct 25, 2024

IBM Targeting $12+ Billion in 2024 Free Cash Flow
Image: Shares of IBM are flirting with record highs. IBM continues to expect to generate more than $12 billion in free cash flow for 2024 and for fourth-quarter constant currency revenue growth to be consistent with its most recently reported third quarter. IBM ended the third quarter with $13.7 billion in cash and marketable securities versus debt, including financing debt, of $56.6 billion. Though IBM has a large net debt position, we’re generally positive on its dividend given free cash flow coverage. Shares yield 3% at the time of this writing.

Oct 24, 2024

Honeywell Adjusts Full Year 2024 Guidance
Image: Honeywell’s shares have traded sideways the past couple years. Honeywell has a lot of moving parts these days. The company closed its $1.9 billion acquisition of CAES Systems and $1.8 billion acquisition of Air Products’ LNG business, while it plans to spin off its Advanced Materials business and exit its PPE business. We’re big fans of Honeywell’s aerospace division, which recorded its ninth consecutive quarter of double-digit organic growth thanks to strong commercial original equipment and solid growth in commercial aftermarket. Though the firm reduced its revenue and free cash flow outlook for 2024, we like the long-term story at Honeywell, and the company remains a core holding in the Dividend Growth Newsletter portfolio. Our fair value estimate stands at $216 per share.

Oct 24, 2024

Clean Energy Idea GE Vernova Reaffirms 2024 Guidance
Image: GE Vernova shares have powered higher as of late. GE Vernova reaffirmed its 2024 financial guidance, with revenue now trending towards the higher end of the range of $34-$35 billion, adjusted EBITDA margin of 5%-7%, and free cash flow of $1.3-$1.7 billion, also now trending towards the higher end of the free cash flow range. In Power, the company expects mid-single-digit organic revenue growth and 150-200 basis points of organic segment EBITDA margin expansion. In Wind, the company expects flat organic growth, and it expects material segment EBITDA improvement. In Electrification, the company now expects high teens organic revenue growth, up from prior guidance of mid-to-high teens.

Oct 23, 2024

Tesla’s Margins, Free Cash Flow Swell in Third Quarter
Image: Tesla has returned to a free cash flow rich entity. Tesla reported solid third quarter results that showed a business that is getting back on track. Not only did production and deliveries increase nicely on a year-over-year basis, but the firm’s margin improvement is a sight to see and comes in the wake of lowered vehicle selling prices. Tesla also showcased its cash generation capacity in the quarter, with free cash flow more than tripling. We like Tesla’s net-cash-rich balance sheet, its free cash flow generation, and its ability to drive growth, but we fall short of including shares in any newsletter portfolio.

Oct 23, 2024

NextEra Energy Reaffirms Outlook
Image: NextEra Energy’s shares have bounced back nicely from their October 2023 lows. NextEra Energy reaffirmed its outlook, which we like quite a bit. This year, NextEra Energy continues to expect adjusted earnings per share in the range of $3.23-$3.43. For 2025, 2026, and 2027, the company expects adjusted earnings per share in the ranges of $3.45-$3.70, $3.63-$4.00 and $3.85-$4.32, respectively. NextEra Energy also continues to expect to grow its dividends per share at roughly a 10% rate per year through at least 2026, off a 2024 base. We like NextEra Energy as a core holding in the ESG Newsletter portfolio.

Oct 23, 2024

Boeing Burning Through Cash
Image: Boeing’s shares have seen better days. The big red flag with Boeing is its cash flow performance. The aerospace giant burned through $1.3 billion in operating cash flow in the third quarter due to lower commercial widebody deliveries and unfavorable working capital timing, and after factoring in capital spending of $611 million in the period, cash burn in terms of negative free cash flow was roughly $2 billion in the quarter. Through the first nine months of the year, Boeing has burned through over $10.2 billion in free cash flow. Boeing’s balance sheet isn’t as strong as it once was either, with $10.5 billion in cash and marketable securities versus consolidated debt of $57.7 billion. Inventories swelled to $83.3 billion at the end of its September quarter versus $79.7 billion at the end of last year. The company does have $20 billion undrawn on its credit facilities, however. We don’t think Boeing is a top idea for investors, but we do like its total company backlog of $510.5 billion, which includes over 5,400 commercial airplanes. We prefer Honeywell as our top aerospace idea and Lockheed Martin as our top defense play.

Oct 23, 2024

Starbucks Posts Lower Than Expected Performance, Turnaround “Will Take Time”
Image: Starbucks’ shares have been volatile the past couple years. Starbucks suspended its guidance for the full year 2025, given new CEO Brian Niccol and “the current state of the business.” That said, the company increased its quarterly cash dividend to $0.61 per share from $0.57 per share, which equates to a 2.5% forward estimated dividend yield, pointing to optimism regarding the long term. We’re cautious on Starbucks’ shares, as even the executive team noted that a turnaround “will take time.” Our fair value estimate stands at $85 per share, below where shares are trading at the time of this writing.

Oct 23, 2024

Lockheed Martin Raises 2024 Guidance, F-35 Program in Focus
Image: Lockheed Martin’s shares have done well of late. We liked Lockheed Martin’s guidance revisions for 2024, but we’re keeping a watchful eye on its F-35 program revenues, which experienced lower sales in the quarter due to delays in receiving additional contractual authorization and funding under its Lots 18-19 contract. The company’s Missiles and Fire Control (MFC) segment and Rotary and Mission Systems (RMS) segment experienced sales increases of 8% and 6%, respectively, in the quarter. Operating profit growth was most pronounced in its MFC division. The high end of our fair value estimate range stands at $649 per share, and we continue to like shares as an idea in the Dividend Growth Newsletter portfolio.