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Recent Articles
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Concerns Over Walmart’s Outlook Overblown
Nov 16, 2023
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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.
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Cisco Puts Up Record Q1 FY 2024 Results, Outlook Hindered By Order Slowdown
Nov 15, 2023
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Image Source: Cisco.
On November 15, Cisco Systems reported strong first quarter results for its fiscal 2024, but the company surprisingly lowered its outlook for the remainder of its fiscal year on a slowdown in new orders. We’re not rushing to judgement of the company, but the revision was rather sizable, and we’ll be taking a close look at our valuation model following the report. We continue to be fans of Cisco’s intent to purchase Splunk, and there may have been some hiccups in the sales cycle as the firm works to close this strategic deal. For now, we’re giving the firm the benefit of the doubt that things will improve in the back half of its fiscal 2024. Cisco remains an idea in both the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio.
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Cash Cow Republic Services’ ESG Initiatives Bearing Fruit
Nov 14, 2023
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Image Source: Gabriel Langton.
Republic Services remains our favorite garbage hauler. The company is a cash cow, and it continues to drive dividend growth as it buys back shares. When it reported third-quarter results on October 26, the firm showed strong adjusted earnings per share expansion, to $1.54, up from $1.34 in last year’s period. For the first nine months of the year, the firm grew cash flow from operations to ~$2.7 billion, up from ~$2.38 billion during the same period last year, driving strong adjusted free cash flow generation of ~$1.8 billion, materially higher than the ~$470 million in cash dividends it paid over the same period. The board authorized $3 billion for share repurchases, and its equity yields a very healthy ~1.4% at the time of this writing.
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The Home Depot Delivers in Third-Quarter Fiscal 2023 Results
Nov 14, 2023
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Image Source: Mike Mozart.
On November 14, Home Depot reported third-quarter results for the period ending October 29, 2023, that were largely in-line with expectations. Though the housing market remains stagnant due to increased mortgage rates and limited supply, Home Depot continues to navigate the market well, in our view. The firm’s comparable store sales faced pressure in its fiscal third quarter, and while big-ticket, discretionary purchases may be experiencing some pressure, management noted that it continues to see strong activity with customers pursuing smaller projects. We like Home Depot as a derivative play on the housing market, and the high end of our fair value estimate stands at $344 per share.
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