Valuentum Exclusive Analysis for the Discerning Investor

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Home Depot Shows the Home Has Never Been More Important
Image Source: Home Depot. On Tuesday, February 23, Home Depot reported fiscal fourth-quarter 2021 results (period ending January 31, 2021) that came in better than consensus estimates across the board. Not only did the top- and bottom- lines beat, but comparable store sales growth of 24.5% exceeded even some of the most optimistic forecasts for the home improvement retailer during the period. The average ticket price and the number of transactions advanced, while both professional (“Pro”) and Do-It-Yourself (“DIY”) customer revenue increased at a double-digit pace in the quarter. Home Depot also raised its dividend 10% and now yields ~2.5% on a forward-looking basis ($6.60 per-share dividend on an annualized basis). We continue to like the home improvement retailer as a holding in the Dividend Growth Newsletter portfolio.

Korn Ferry Leaps Higher Toward Our Fair Value Estimate
Image Shown: Korn Ferry's stock has surged since it registered a 9 on the Valuentum Buying Index. The company is also included as a holding in the Best Ideas Newsletter portfolio. On December 11, 2020, we raised our fair value estimate of Korn Ferry to $66 per share and assigned it a 9 on the Valuentum Buying Index, one of the highest ratings on our system. Shares at the time were trading at ~$41 each. The company’s equity has surged in the past few weeks, with shares now changing hands at $60+ each. We still believe Korn Ferry’s stock has room to run higher, and the company will remain a holding in the Best Ideas Newsletter portfolio.

Johnson & Johnson’s COVID-19 Vaccine Candidate Nears the Finish Line
Image Source: Johnson & Johnson – Fourth Quarter of Fiscal 2020 IR Earnings Presentation. We appreciate all the hard work Johnson & Johnson and its partners have put towards developing a safe and viable COVID-19 vaccine candidate. Johnson & Johnson issued favorable guidance for fiscal 2021 when it reported its latest earnings aided by expectations that its medical devices business will recover this fiscal year along with sustained strength in its core pharmaceutical sales according to management commentary given during the related earnings call. We continue to like exposure to Johnson & Johnson in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios.

Two High-Quality REITs Report Earnings: Crown Castle and Digital Realty
Image Shown: Crown Castle International Corp. forecasts that its core financial metrics will continue to grow in 2021. Image Source: Crown Castle International Corp. – Fourth Quarter of 2020 IR Earnings Presentation. To avoid many of the risks inherent when seeking out high-yielding income generating opportunities, we focus on locating firms with resilient business models that can churn out meaningful cash flows in almost any environment. Crown Castle and Digital Realty Trust are two high-quality REITs with nice yields and promising outlooks. We continue to like exposure to both CCI and DLR in the High Yield Dividend Newsletter portfolio.

Xpel Is an Intriguing Play on the Auto Industry
Image Shown: Most of Xpel Inc’s business is built around its paint protection film products for automobiles. Image Source: Xpel Inc - November 2020 IR Presentation. Xpel has a pristine balance sheet (nice net cash position), strong cash flow profile, ample growth opportunities, and a plan to boost its margins. The company primarily sells paint protection film products for automobiles, and its outlook appears quite promising as the firm is moving into adjacent areas while putting up rock-solid performance of late. We are highlighting Xpel given its potential for additional capital appreciation upside, though we caution shares of XPEL are up almost four-fold over the past year as of the middle of February 2021.

Newmont Approves Another Massive Dividend Increase
Image Shown: An overview of Newmont Corporation’s resource base, which is heavily weighted towards gold with its producing mines primarily located in the Americas and Australia. The company also has some exposure to copper and silver along with other raw materials. Image Source: Newmont Corporation – Fourth Quarter of 2020 IR Earnings Presentation. On February 18, gold miner Newmont Corp reported fourth quarter earnings for 2020 that beat consensus bottom-line estimates but missed consensus top-line estimates. We appreciated the major improvements in Newmont’s balance sheet last year (i.e., sharp reductions in its net debt load), the resilience of its operations in the face of the coronavirus (‘COVID-19’) pandemic, and the company’s ability to continue churning out sizable free cash flows in almost any environment. On February 17, Newmont increased its dividend by ~38% on a sequential basis, which we will cover later in this article. We continue to like exposure to Newmont in the Dividend Growth Newsletter portfolio.

Earnings from Our Two Favorite Midstream MLPs: EPD and MMP
Image Source: Enterprise Products Partners L.P. – Fourth Quarter of 2020 IR Earnings Presentation. The distribution yields on the units of both Enterprise Products and Magellan Midstream are quite lofty, and while we caution that these midstream MLP’s have hefty net debt positions, they may be best-in-class. Still, both entities need to retain constant access to capital markets to refinance their debt burdens, ideally at attractive rates. Declining capital expenditures and rising utilization rates, if realized, should go a long way in improving both firm’s abilities to generate free cash flows this year and beyond. In our view, we see Enterprise Products and Magellan Midstream being able to maintain their hefty payout obligations going forward. We continue to like exposure to both Enterprise Products and Magellan Midstream in the High Yield Dividend Newsletter portfolio.

Earnings Roundup: DIS, GM, PEP, TWTR, UA
Image Shown: A look at the 2022 GM HUMMER EV pickup truck that is due to launch by the end of this year. Image Source: General Motors Company – Fourth Quarter of 2020 IR Earnings Presentation. Earnings season is roaring along, and we cover the reports of five more companies across different sectors in this article (Disney, General Motors, Pepsi, Twitter, and Under Armour). The coronavirus (‘COVID-19’) pandemic continues to loom large, though we are encouraged by reports from Moderna that its existing COVID-19 vaccine approved for emergency use is at least somewhat effective at treating variants of the virus according to initial clinical trials (a lot more work needs to be done on the subject). Global health authorities are working to put an end to the public health crisis, though COVID-19 virus variants have created additional obstacles on that front. However, we still expect the COVID-19 pandemic will be brought under control sooner than many expect as global vaccine distribution efforts become more widespread and efficient. A common theme across earnings reports is that (most) of the companies in this article view their outlooks favorably, though serious short-term headwinds remain in some instances. Video streaming services continue to be in high demand, major automakers are stepping up their EV investments, demand for consumer staples products remains healthy, the digital advertising market is resilient, and retailers are leaning heavily on their omni-channel selling capabilities to ride out the storm caused by the COVID-19 pandemic.

Philip Morris International Issues Favorable Guidance
Image Shown: Philip Morris International Inc’s growth outlook rests heavily on its ability to grow its non-traditional cigarette sales volumes, and so far, the tobacco giant has put up tremendous performance on this front. Additionally, pricing power at its conventional cigarette business is also key, as that helps offset headwinds arising from secular declines in its annual cigarette shipment volumes. Image Source: Philip Morris International Inc – 2021 Investor Day Presentation. Philip Morris International did a solid job navigating major exogenous headwinds during 2020 and was still able to churn out gobs of free cash flow. We appreciate management’s promising guidance and continue to like exposure to Philip Morris International and its lofty yield in the High Yield Dividend Newsletter portfolio.

Dividend Increases/Decreases for the Week February 12
Let's take a look at companies that raised/lowered their dividend this week.