Valuentum Exclusive Analysis for the Discerning Investor

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Feb 21, 2024

Lithium Prices Remain Volatile; Albemarle Adjusts Long-term Demand Forecast
Image: Albemarle’s shares have faced significant pressure as a result of depressed lithium prices. Albemarle’s shares have been under significant pressure of late due to volatile lithium prices, and the firm’s cash flows have faced weakness as a result. Operating cash flow dropped to ~$1.325 billion in 2023 from ~$1.91 billion in 2022, as capital spending soared. Unless lithium prices start to better reflect the underlying demand profile ahead of it, Albemarle will likely be free cash flow negative in 2024 as well. Right now, Albemarle is facing a tough road ahead with its fundamentals largely tied to lithium prices, but the firm is positioned well for a potential lithium-price rebound. Regardless, we view Albemarle as a speculative stock and one only for the most aggressive, risk-seeking investors.

Feb 21, 2024

Walmart’s Free Cash Flow Remains Robust, Buys Vizio to Boost Advertising Business
Image: Walmart’s free cash flow generation during fiscal 2024 was superb and comfortably covers its cash dividends paid. Walmart is doing a fantastic job executing on its value proposition, and the company is in a sweet spot with respect to consumer trends given the step change in prices the past few years that is causing consumers to trade down to value offerings. The firm’s comp sales are coming in better than expected, and its free cash flow generation remains well in excess of its cash dividends paid, providing ample support for further dividend hikes. Walmart will execute a 3-for-1 stock split on February 23 and will begin trading on a post-split basis February 26. Though Walmart retains a massive net debt position, perhaps its only drawback from a financial standpoint, the company is a fantastic dividend grower and perhaps one of the best considerations within the retail space these days. Shares yield ~1.4% at the time of this writing.

Feb 16, 2024

Dividend Increases/Decreases for the Week of February 16
Let's take a look at firms raising/lowering their dividends this week.

Feb 15, 2024

Cisco Looks Cheap at 13x Forward Non-GAAP Earnings But Fundamentals Are Deteriorating
Image: Cisco has ratcheted down expectations during the past couple quarters, and its shares have been choppy for the better part of a year now. We’re not liking what we’re seeing from Cisco Systems these days, and this is a change from our generally more upbeat view during the past several months. Revenue is under pressure, guidance continues to come in lower than expectations, its balance sheet will weaken as a result of its pending deal for Splunk, and free cash flow trends haven’t been as strong as they used to be. The company is adjusting its cost structure with layoffs as it continues to work to transform its business model to be more recurring, but the near term will likely continue to be challenging for the company. If free cash flow does not meaningfully improve in the next couple quarters, we’ll look to remove Cisco from the newsletter portfolios, despite its attractive ~13x forward non-GAAP earnings multiple.

Feb 11, 2024

Eli Lilly’s Shares Have More Than Doubled During the Past 52 Weeks
Image: Eli Lilly’s shares have been on a tear these past few years. On February 6, Eli Lilly reported excellent fourth-quarter results that showed revenue and non-GAAP earnings per share coming in better than expectations. The company’s fourth-quarter results were bolstered by sales of diabetes and weight-loss drug Mounjaro, which saw sales in the quarter leap to ~$2.2 billion from ~$279 million in the year ago period. We continue to be in awe of the sales momentum behind GLP-1 receptor agonists, and the opportunity continues to be robust, despite already rapid sales acceleration. Though Eli Lilly trades at a premium to the high end of our fair value estimate range, we may be low in our expectations of the company’s ability to tap this lucrative market in the longer run, and shares may still be attractive to the risk-seeking aggressive growth investor.

Feb 7, 2024

Chipotle Rallies, Long-term Outlook Remains Promising
Image Source: Valuentum. We’re huge fans of Chipotle’s long-term growth runway, and we think the continued rollout of Chipotlanes offers the firm the ability to expand into the valuable breakfast daypart, which we think will come eventually. Its digital initiatives continue to work out well, too, with digital sales accounting for 36.1% of its total food and beverage revenue in the fourth quarter. Looking out to all of 2024, Chipotle expects full-year comparable restaurant sales growth in the mid-single-digit range and to add 285-315 new restaurants. The high end of our fair value estimate of Chipotle stands at $3,022 per share, and we continue to like shares in the Best Ideas Newsletter portfolio.

Feb 5, 2024

McDonald’s Facing Macro Challenges, Impacts from the War in the Middle East
Image Source: Mike Mozart. On February 5, McDonald’s Corp reported decent fourth-quarter results with strong revenue growth coming roughly in-line with consensus estimates and non-GAAP earnings per share exceeding the Street’s forecast. Though the firm noted that it is experiencing some macro challenges and that its operations continue to be impacted by the war in the Middle East, we like having McDonald’s as a core restaurant holding in the Best Ideas Newsletter portfolio in part because of its mostly franchised business model that handles inflationary pressures well and its strong and world-renowned brand name. The high end of our fair value estimate range of McDonald’s stands at $345 per share, and the company yields ~2.25% at the time of this writing.

Feb 4, 2024

Earnings Roundup: MO, EPD, SBUX, CLX, HON
Image: Starbucks’ international store growth potential remains robust. Image Source: Starbucks. High-yielding tobacco giant Altria offered an outlook through 2028 that spoke to continued robust earnings and dividend-per-share expansion. Enterprise Products Partners, now a Dividend Aristocrat, is handling record volumes through its pipeline network, and the firm is investing heavily to drive improved long-term cash flow trends. Starbucks recently disappointed on a number of metrics, but the company's margin and earnings performance remains excellent, as is its international store growth opportunities. Clorox has recovered nicely from a recent cyberattack, and the firm is now forecasting adjusted earnings per share growth in fiscal 2024. We're monitoring its cash flow trends closely, however. Honeywell is targeting tremendous free cash flow growth in 2024 thanks to continued strength in its commercial aerospace operations.

Feb 2, 2024

Earnings Roundup: ABBV, CVX, NYCB, XOM
Image: Unrealized losses continue to mount for banking entities due to the Fed's rate-hiking cycle. "Unrealized losses on securities totaled $683.9 billion in third quarter, up $125.5 billion (22.5 percent) from the prior quarter, primarily due to an increase in mortgage rates that reduced the value of mortgagebacked securities. Unrealized losses on held-to-maturity securities totaled $390.5 billion in the third quarter, while unrealized losses on available-for-sale securities totaled $293.5 billion." -- Image Source: FDIC Quarterly.AbbVie is facing pressure from declining sales of Humira, but the company's long-term outlook looks fine to us bolstered by promising growth of Skyrizi and Rinvoq. Chevron put up mixed fourth-quarter 2023 results, but its free cash flow easily covers its dividend payout. We've grown cautious on Chevron due to its deal making, however. New York Community Bancorp is provisioning for greater credit losses, while its net interest margin is under pressure. The bank recently slashed its payout, and we continue to reiterate why we don't like the dividends of banking firms. Exxon Mobil put up an excellent 2023, and while the firm's dividend is in great shape, we no longer are pursuing new energy-related ideas in the newsletter portfolios at this time.

Jan 26, 2024

Dividend Increases/Decreases for the Week of January 26
Let's take a look at firms raising/lowering their dividends this week.