Valuentum Exclusive Analysis for the Discerning Investor

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Mar 25, 2024

Fedex Bolstered By Cost Savings from Its DRIVE Program
Image: FedEx continues to extract cost savings from its DRIVE initiatives. FedEx is doing a lot of things right as it drives cost savings from its DRIVE program in the face of a challenging revenue environment. Shares of FedEx bounced nicely following the release of its fiscal third quarter report, and while they aren’t trading at bargain basement prices on the basis of our fair value estimate, we think shares could have upside to north of $300 based on the high end of our fair value estimate range. Shares yield ~1.8% at the time of this writing.

Mar 10, 2024

Abercrombie & Fitch’s Mighty Comeback!
Image Source: Abercrombie & Fitch. Abercrombie & Fitch is experiencing a resurgence as the company reconnects with its target market, and the traction it has regained with its customers is quite something. The firm noted that it continues to experience strong momentum across its brand portfolio, and its long-term target is to achieve $5 billion in global sales (its sales were $4.3 billion in its most recent fiscal year). For 2024, it expects net sales to expand 4%-6%, and for its operating margin to be ~12%, up 60 basis points from the mark it reached last year. Abercrombie swung to being significantly free cash flow positive in its most recently completed fiscal year, and it ended the period with a net cash position. The company’s comeback has been nothing short of remarkable. Fickle fashion trends make the stock difficult to consider for long-term investors, however.

Mar 8, 2024

Costco’s Shares Have Surged Over the Past Year!
Image: Costco’s shares have run past the high end of our fair value estimate range. Shares look pricey at the moment. Shares of market darling Costco have had a mighty run over the past year, advancing more than 65%. The company is a social media favorite and operates at the center of the mindset of consumers, providing both convenience and bulk savings to the shopper. The high end of our fair value estimate range for the big box retailer stands at ~$749, so we can’t say shares, which closed March 7 at ~$786 per share, are a bargain. However, Costco has rewarded patient investors considerably over the past several years and beyond.

Feb 23, 2024

Dividend Increases/Decreases for the Week of February 23
Let's take a look at firms raising/lowering their dividends this week.

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.

Jan 19, 2024

Stock Reports on 25 Dividend Kings to Pad Your Dividend Growth Portfolio
Image Source: Jason Train. Investors love dividends! After all, research has shown that companies that have paid an ever-increasing dividend for a long time do quite well in the stock market. In this note, you can download the stock reports of 25 Dividend Kings, or stocks that have raised their dividends in each of the past 50 years!

Dec 11, 2023

Oracle’s “Business Is Good and Getting Better”
Image Source: Peter Kaminski. On December 11, Oracle reported mixed second-quarter results for its fiscal 2024 that showed total revenue advancing 5% on a year-over-year basis (4% in constant currency), slightly lower than expectations, and non-GAAP earnings per share of $1.34 that came in slightly ahead of what the market was looking for. The company’s non-GAAP operating margin of 43% in the quarter helped to drive non-GAAP net income 14% higher than the same period a year ago (11% in constant currency). We’re not letting the slight miss on the top line sway us from our constructive stance on shares. Our fair value estimate stands at $108 per share, about in-line with where shares are currently trading.

Dec 10, 2023

First Gene-Editing Therapy Coming to Market; Reiterating Our Positive Stance on Vertex Pharma
Credit: Darryl Leja, NHGRI. On December 8, 2023, the U.S. Food and Drug Administration announced that it had approved Vertex Pharma’s and CRISPR Therapeutics’ novel gene-editing therapy (“Casgevy” – exa-cel) for sickle cell disease [SCD] in patients that are 12 years of age or older. This is the first such approval of its kind in U.S. history and will likely open the door for more gene-editing therapies for other rare diseases in the future. Estimates indicate that roughly 16,000 people will be eligible for the treatment at an estimated cost of around $2.2 million each, according to Reuters. The one-time market size of roughly $35.2 billion is a needle-mover, but the pace and timing of adoption of the therapy among the eligible population is difficult to estimate at this time. Note also that the therapy is of one-time application, meaning the therapy is a functional cure and will not be a source of recurring revenue from each patient. Nevertheless, it is an exciting development for medical science.

Nov 16, 2023

Concerns Over Walmart’s Outlook Overblown
Image: Walmart’s free cash flow generation during the first nine months of its fiscal year has shown a nice jump. On November 16, Walmart reported third quarter results for fiscal 2024 that showed revenue growth of 5.2% and adjusted operating income expansion of 3%. Adjusted earnings per share nudged up 2% in the quarter on a year-over-year basis. Operating cash flow during the first nine months of the year came in at $19 billion (up $3.3 billion from the year ago period), while free cash flow came in at $4.3 billion (up $0.7 billion on a year-over-year basis). The big box retailer ended the period with a ~$43.2 billion net debt position and has bought back 8.7 million shares of stock on a year-to-date basis. Walmart raised its outlook for the remainder of fiscal 2024, but its targets came in a bit shy of expectations. With shares trading down following the report, we think the market is overreacting. We won’t be making any changes to our $160 per share fair value estimate.

Nov 3, 2023

People Love Their Starbucks
Image: Starbucks remains a strong free cash flow generator. Operational efficiencies, sales leverage and pricing strength helped drive Starbucks' GAAP operating income growth of 42.7% and non-GAAP earnings per share to $1.06 in the quarter, up 31% on a year-over-year basis. Starbucks ended its fourth quarter of fiscal 2023 with ~$3.95 billion in cash and short-term investments and short- and long-term debt of ~$15.4 billion, resulting in a net debt position on the books. Free cash flow generation remains robust at Starbucks, however, with the measure coming in at ~$3.7 billion for the fiscal year ending October 1, 2023. We’re reiterating the high end of our fair value estimate range of $120 for Starbucks’ shares.