Valuentum Exclusive Analysis for the Discerning Investor

Symbol Keyword

Jan 15, 2025

Bank Earnings Roundup: C, WFC, GS, JPM
Image Source: Hakan Dahlstrom. Citigroup launches a new, multi-year program to repurchase $20 billion in stock, Wells Fargo puts up strong earnings growth in the fourth quarter, Goldman Sachs issued a blockbuster fourth quarter report, while JPMorgan CEO Jamie Dimon warns of inflation and geopolitical risks.

Jan 14, 2025

KB Home’s Outlook for 2025 Better Than Expected
Image: KB Home’s shares have done well since the beginning of 2023. Looking to fiscal 2025, KB Home's housing revenue is expected in the range of $7.00-$7.5 billion, compared to the consensus forecast of $6.89 billion, with the average selling price in the range of $488,000-$498,000. Homebuilding operating income as a percentage of revenues is targeted at roughly 10.7%, which assumes no inventory-related charges. For the year, housing gross profit margin is targeted in the range of 20.0%-21.0% and assumes no inventory-related charges. Selling, general, and administrative expenses as a percentage of housing revenues is expected in the range of 9.6%-10.0%. We liked KB Home’s fourth quarter results and outlook for fiscal 2025 and what they imply with respect to the health of the housing market. KB Home doesn’t make the cut for any newsletter portfolio, however.

Jan 13, 2025

Walgreens Reports Better Than Feared Results, Shares Yield 8.5%
Image Source: Walgreens. Looking to 2025, Walgreens maintained its adjusted earnings per share guidance of $1.40-$1.80 (consensus was at $1.53), noting “growth in U.S. Healthcare and International segments more than offset by a decline in U.S. Retail Pharmacy, a higher adjusted effective tax rate, and lower contributions from sale-leaseback and Cencora earnings.” Shares of Walgreens are trading at just 7.4x current fiscal year earnings, while boasting a yield of 8.5% at the time of this writing. Though improving, free cash flow continues to be negative at Walgreens, however, and while its dividend is far from safe after its dividend cut, the company is working aggressively to get things back on track.

Jan 11, 2025

Delta Delivers Most Profitable December Quarter in Its History
Image Source: Colin Brown. We liked Delta’s fourth quarter results and outlook for 2025, but we’re not interested in adding any airline to the newsletter portfolios. Airline economics are notoriously difficult to forecast, and their operating results are heavily levered to volatile jet fuel prices. Swings in the economic environment can also have a large impact on performance given the operating leverage inherent to their business models. Delta is currently riding an upswing in demand, but we remain cautious on shares given the volatility innate to an airline’s business model. We remain on the sidelines.

Jan 8, 2025

Dividend Aristocrat Caterpillar’s Dividend on Solid Ground
Image Source: Caterpillar. Though Caterpillar’s top line is under pressure “due to the impact of lower-than-expected sales to users in its Construction Industries segment and the timing of deliveries in its Resource Industries and Energy & Transportation segment,” Caterpillar’s lucrative services business and backlog remain healthy, and it covers its dividend nicely with ME&T free cash flow. Shares yield 1.6% at the time of this writing.

Jan 8, 2025

Lowe’s Experiences Softness in Bigger Ticket Discretionary Demand
Image: Lowe’s shares have rallied nicely since the beginning of 2023. Buoyed in part by anticipated modest storm-related demand in the fourth quarter, management expects total sales for the full year 2024 of $83.0-$83.5 billion (was $82.7-$83.2 billion)—consensus was $82.99 billion--and comparable sales to be between -3.0% to -3.5% (was -3.5% to -4.0%). Its adjusted operating margin for the year is now targeted in the range of 12.3%-12.4% (was 12.4%-12.5%), while adjusted diluted earnings per share is expected in the range of $11.80-$11.90 (was $11.70-$11.90), the midpoint above consensus of $11.81. Our fair value estimate of $242 for Lowe’s shares is roughly in-line with where the firm’s equity is trading, and while its recently raised guidance was well-received, we remain on the sidelines with respect to the company in the newsletter portfolios. Shares yield 1.9%.

Jan 6, 2025

Target Expects Ho Hum Holiday Results
Image Source: Target. For the holiday fourth quarter, Target expects 1.5% comparable sales growth with GAAP and adjusted earnings per share in the range of $1.85-$2.45 (versus $2.64 consensus), translating to a full year expected GAAP and adjusted earnings per share range of $8.30-$8.90. The midpoint of the guidance range was down compared to its prior outlook in the range of $9.00-$9.70 and the consensus mark of $9.52. Target appears to be losing share against Walmart, Amazon and Costco, and there is no clear path to regaining it. Target’s shares yield 3.3% at the time of this writing.

Jan 6, 2025

HP Inc. Sets Q1'25 Expectations Below Consensus, Dividend Looks Healthy
Image Source: HP Inc. For fiscal 2025, HP Inc. expects non-GAAP diluted net earnings per share to be in the range of $3.45-$3.75, the midpoint in-line with the consensus forecast of $3.60. Free cash flow is targeted in the range of $3.2-$3.6 billion on the year, the midpoint up from $3.3 billion last fiscal year and well in excess of the company’s annual run-rate dividends of ~$1.1 billion. During fiscal 2024, the company returned $2.1 billion via share repurchases. HP ended the quarter with $3.3 billion in cash and cash equivalents and $9.7 billion in short-and long-term debt. HP is set to benefit from an AI PC refresh, and even though expectations weren’t set as high as what the market was looking for in the first quarter of fiscal 2025, HP Inc. remains a strong dividend payer. Shares yield 3.5% at the time of this writing.

Jan 5, 2025

Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating
Image shown: An examination of the problem that might arise by focusing exclusively on companies that have economic moats, or sustainable and durable competitive advantages.Without an economic castle, an economic moat doesn’t matter. Let's examine Valuentum's Economic Castle™ rating.

Jan 1, 2025

FedEx Lowers Fiscal 2025 Guidance Again, Plans to Separate FedEx Freight
Image: FedEx’s shares have come roaring back since its bottom in the back half of 2022. Looking to fiscal 2025, FedEx revised its revenue and earnings forecasts lower again. Revenue is now expected to be “approximately flat” year over year compared to the prior forecast calling for a low single-digit percentage increase. Diluted earnings per share before mark-to-market retirement plans accounting adjustments is now targeted in the range of $16.45-$17.45 compared to its prior forecast of $17.90-$18.90. Also excluding costs related to its business optimization initiatives, management is targeting diluted earnings per share of $19.00-$20.00 per share, down from $20.00-$21.00 per share previously. FedEx announced it will separate FedEx Freight as a new publicly-traded company, hoping to garner a higher multiple placed on the spinoff, but we’re not interested in shares of the company or its spinoff at this time. Shares yield 2%. Our favorite ideas remain in the newsletter portfolios.