Seeking Alpha

Stephen Simpson, CFA

 
View as an RSS Feed
View Stephen Simpson, CFA's Articles BY TICKER:
A, AAOI, AAUKY, AB, ABB, ABT, ACE, ACGL, ACHN, ACI, ADES, ADI, ADM, ADTN, AEIS, AEO, AEP, AER, AES, AET, AEZS, AFRVY, AGCO, AGII, AGRO, AGXXF, AHCHY, AHL, AIMC, ALB, ALCO, ALGN, ALIAF, ALK, ALKS, ALLRF, ALNY, ALPMY, ALSN, ALTR, ALU, ALXN, AME, AMED, AMGN, AMRN, AMSG, AMX, ANFI, ANGO, ANR, ANTM, API, APNHY, AQPTY, ARAY, ARC, ARCB, ARCO, ARIA, ARNA, ARQL, ARUN, ARWR, ASOMY, ATHN, ATK, ATLKY, ATML, ATRC, ATSG, ATU, AUDC, AUXL, AV, AVD, AVEO, AVGO, AWH, AXAHF, AXAHY, AXAS, AXLL, AZN, AZPN, AZSEY, BA, BABY, BAC, BAK, BAM, BAP, BAS, BASFY, BAX, BBG, BBT, BBVA, BCEI, BCR, BDX, BEBE, BELLY, BIIB, BIO, BIOD, BIP, BLERF, BLUE, BMRN, BMTI, BMY, BP, BPMUF, BPOP, BRCD, BRCM, BRFS, BRK.B, BRKR, BRSS, BSFT, BSMX, BSX, BTE, BTU, BWA, C, CA, CACI, CAM, CAT, CAVM, CBD, CBI, CBSH, CBST, CBWBF, CCDBF, CCLAY, CDGXY, CDXC, CELG, CEO, CFN, CFX, CHEUY, CHKP, CIEN, CIG, CJES, CLD, CLDX, CLLDY, CLQMF, CLVS, CMA, CMI, CNAT, CNH, CODI, COG, COO, COP, CORE, COV, CPA, CPHD, CPN, CPPMF, CR, CRESY, CRHKY, CRS, CRWS, CSCD, CSCO, CSFL, CSII, CSUAY, CVGI, CVGW, CVV, CVX, CX, CYBX, CYCC, CYNI, CZZ, DAN, DBSDY, DCIN, DCM, DD, DE, DGI, DHR, DIIBF, DIS, DNDN, DNR, DNSKY, DOV, DRC, DRQ, DUSA, DVN, DVR, E, EAC, ECTE, EEFT, EEP, EEQ, EGBN, ELGX, ELN, ELP, EMN, EMR, ENDP, ENH, ENOC, ENSG, ENTG, EONGY, ESPGY, ESSX, ET, ETE, ETN, ETP, ETRM, EVAC, EW, EXAS, EXEL, EZPW, FARM, FAST, FCE.A, FCE.B, FCFS, FCX, FDML, FEIC, FET, FF, FFIV, FHN, FHNIY, FIRE, FITB, FLIDY, FLOW, FLY, FMC, FMX, FNERF, FNSR, FNV, FOLD, FORM, FQVLF, FRAN, FRCOY, FRX, FSII, FSM, FST, FSUGY, FTNT, FUL, GBX, GCTAY, GDOT, GE, GELYY, GGB, GHM, GILD, GLAD, GLDD, GLEKY, GLF, GLNCY, GLPW, GLT, GLW, GMAN, GMED, GMELY, GNKOQ, GNMK, GNNDY, GNRC, GNW, GPN, GRC, GRCLF, GRH, GSIT, GSK, GTLS, GTOMY, GTXI, HAL, HBHC, HBI, HBM, HDS, HELE, HIG, HII, HKMPY, HLF, HLUYY, HLX, HMRTY, HNZ, HOCPY, HOGS, HOLI, HOLX, HON, HP, HPY, HRC, HRL, HSBC, HSC, HSP, HTWR, HURC, HUWHY, HW, HXGBY, HXM, HYPMY, IART, IBKC, ICPT, ICUI, IDIX, IIIN, IIVI, ILMN, IMGN, IMKTA, IMPUY, IMPV, ING, INGIY, IOSP, IPGLF, IPGP, IPSEY, IR, ISRG, ITMN, ITOCY, ITRI, ITUB, ITW, IVNYY, JCI, JNJ, JOY, JPM, JRCCQ, K, KDN, KEG, KEX, KGC, KLAC, KMG, KMTUY, KNDI, KOG, KOP, KPELY, KRA, KRFT, KUKAY, LABL, LAWS, LAYN, LBTSF, LECO, LH, LHCG, LHUAY, LIFE, LIOX, LLTC, LLY, LMIA, LMNR, LMNX, LNCR, LND, LNVGY, LPDX, LPX, LSI, LSTMF, LUKOY, LXRX, LYSDY, LZAGY, MAKO, MAOIF, MASC, MASI, MCD, MCHP, MDCA, MDCI, MDLZ, MDRX, MDT, MDVN, MEAS, MED, MET, MGJCL, MIC, MIDD, MIICF, MKC, MLKKF, MLNX, MLR, MMM, MMP, MMSI, MNK, MNTX, MOCO, MON, MOS, MR, MRK, MRLN, MRVL, MSCC, MSFT, MSM, MT, MTB, MTGRF, MTL, MTNOY, MTRN, MTRX, MTSC, MTSN, MTW, MWA, MXIM, MXWL, MYL, NAV, NBHGY, NBIX, NBL, NCFT, NCR, NCS, NEOG, NFX, NGVC, NKTR, NOK, NP, NPO, NPSP, NRG, NRP, NSLP, NTAP, NTCT, NTP, NUACF, NUAN, NUE, NUVA, NVDQ, NVEC, NVO, NVS, NWFFF, NYRSY, OAS, OCIR, ODFL, OGZPY, OII, OKS, OMAB, OMER, OMG, OMI, OMVKY, ONNN, ORAN, ORB, OSK, OSUR, OVTI, OXY, OZRK, PAA, PAAS, PAC, PACB, PALAY, PANW, PAY, PB, PBF, PBR, PCL, PCTI, PCXCQ, PDCE, PDCO, PDMDF, PEP, PF, PFE, PG, PGEM, PH, PHG, PHMD, PICO, PKD, PKX, PLL, PLOW, PMCS, PMTI, PNC, POL, POOL, POST, POT, POWR, PPCYY, PRAA, PRIM, PRTA, PRX, PTCT, PTR, PVA, PVD, PWAV, PXGYF, QBCRF, QSFT, RAVN, RCPT, RDWR, RE, RES, RFMD, RGLD, RHHBY, RIG, RIGL, RIO, RKT, RNR, ROC, ROCM, ROP, RPM, RRC, RSTI, RTOXY, RVBD, RXN, RYN, SAN, SANW, SASR, SBMRY, SCGLY, SEIGF, SEPJY, SFL, SGEN, SGYP, SHG, SHPG, SHS, SID, SIEGY, SKH, SKM, SLAB, SLCJY, SLG, SLGN, SLNCF, SLTM, SLW, SLXP, SNCR, SNHY, SNMX, SNV, SNY, SPB, SPLK, SPN, SPNC, SPW, SSH, SSI, ST, STAR, STB, STCK, STJ, STLD, STO, STWRY, SULZF, SUMR, SURG, SWI, SWK, SWN, SYK, SYRG, TAM, TBNGY, TC, TCB, TCK, TDW, TEAR, TECH, TEN, TEVA, TEX, TFX, TGB, TIBX, TIS, TITN, TKC, TKMR, TKPPY, TLM, TLP, TMK, TMOAY, TNGO, TOT, TPLM, TQNT, TRGT, TRIB, TRNX, TRUMY, TSM, TTM, TTNDY, TUWOY, TWGP, TWI, TWIN, TX, TYEKF, TYPE, UFPI, UMPQ, UNCFF, UNFI, UNH, UNT, UPI, UPL, URG, USAP, USB, UTEK, UTMD, UTX, V, VALE, VDNRF, VE, VEGPF, VHI, VICL, VIVHY, VIVO, VLEEY, VMW, VOCS, VOLC, VPRT, VRX, VVUS, WAB, WCC, WEX, WFT, WIBC, WLFC, WLL, WMB, WMGI, WRB, WY, X, XCRA, XL, XLNX, XNPT, XOM, XPO, XRAY, XYL, YAMHF, YARIY, YRCW, YZC, ZION, ZIOP, ZMH, ZOLL
  • Cavium Networks - Beat, Raise, Repeat
       • Fri, Aug. 1 CAVM 1 Comment

    Summary

    • Cavium adds yet another earnings beat to its impressive run of success.
    • New product launches, including Octeon III, LiquidIO, and ThunderX should support ongoing growth in 2H'14 and into 2015.
    • Cavium can support a $50 fair value, but growth expectations are high and any near-term shortfalls or stumbles will be severely penalized.
  • Ongoing Challenges Pressuring Glatfelter
       • Thu, Jul. 31 GLT Comment!

    Summary

    • Glatfelter missed the sell-side earnings estimate for the fourth straight quarter, hurt in part by the conflict between Russia and Ukraine.
    • Staying ahead of obsolescence is a constant fight, but Glatfelter continues to have multiple value-added opportunities with growth rates ahead of industry norms.
    • With a fair value in the high $20's, Glatfelter shares are getting to a more interesting place with respect to value, but stopping the earnings misses would help a lot.
  • Headwaters Continues To Build Out A Niche Materials Business
       • Thu, Jul. 31 HW 1 Comment

    Summary

    • Headwaters meets revenue and EBITDA expectations, but earnings quality and guidance may have left some investors a little disappointed.
    • The housing recovery continues at a slow pace, while Headwaters' management continues to acquire niche materials businesses where it can hold meaningful share and grow overall utilization.
    • At less than 10x forward EBITDA, Headwaters looks more than 20% undervalued today.
  • NuVasive Running On Renewed MIS Vigor
       • Thu, Jul. 31 NUVA Comment!

    Summary

    • NuVasive left its larger rivals in the dust, as mid teens growth was well above the low single-digit growth rates of other large players in the spine market.
    • A strong suite of minimally invasive products, ongoing share gains for MIS procedures, and ample operating leverage potential make NuVasive an attractive potential target.
    • NuVasive doesn't jump out as cheap on a DCF basis, but ongoing share gains, margin improvements, and takeover speculation could fuel a run into the $40s.
  • Cloud Peak Energy Still Generating Cash In A Tough Market
       • Thu, Jul. 31 CLD 1 Comment

    Summary

    • Cloud Peak stayed more or less on target in the second quarter, even though serious rail congestion issues are making life difficult.
    • Cloud Peak has the advantage of the lowest-cost asset base in the most economically viable coal basin in the U.S., leaving good upside if prices can get back to $14/ton.
    • A $20 NAV is reason to consider the shares, but it may take some time for that $20 price to come into play.
  • The Wait At Plum Creek Timber Stretches On
       • Thu, Jul. 31 PCL 2 Comments

    Summary

    • Plum Creek guides down expectations on a reduced harvest and higher basis for land sales.
    • Private timberland transactions continue to indicate that Plum Creek shares are undervalued, but the Southern sawlog market appears oversupplied in the near term as demand has yet to really recover.
    • A long-term NAV estimate suggests fair value in the high $40s, but the "hurry up and wait" nature of the story makes it harder to remain patient.
  • FEMSA Seeing A Slower Rebound
       • Tue, Jul. 29 FMX Comment!

    Summary

    • FEMSA's OXXO same-store sales have yet to show the hoped-for recovery in 2014, but results continue to reflect a leading franchise.
    • Management has numerous choices at hand for growth, including expanding its pharmacy and QSR operations and entering new Coca-Cola bottling markets.
    • Double-digit FCF growth and the Heineken stake support a fair value over $100, but FEMSA is not the cheapest play on Mexico's recovery.
  • Statoil Results Show The Price Of Value
       • Tue, Jul. 29 STO 4 Comments

    Summary

    • Statoil missed analyst profit expectations as management chose to curtail production in the face of lower prices.
    • A goodwill impairment charge for the U.S. unconventional assets doesn't help the asset quality argument, but high-impact exploration results later this year could change the tone.
    • Statoil continues to trade at a low relative multiple, but even a 3.0x multiple to 12-month EBITDA supports a $32 stock and execution should lead to a multiple re-rating.
  • Volatile Pacific Biosciences Continues To Make Progress
       • Tue, Jul. 29 PACB 5 Comments

    Summary

    • PacBio shares sold off sharply on a disappointing order total for the second quarter.
    • Oxford Nanotechnologies is getting more attention, but PacBio continues to do well with improving read lengths and accuracy and has plans for further improvements underway.
    • Fair value is very sensitive to even modest changes in future assumptions, but the shares look undervalued if the company can achieve long-term market share of 10% in next-gen sequencing.
  • Lonza Targeting Significant Internal Improvements
       • Mon, Jul. 28 LZAGY Comment!

    Summary

    • Lonza is delivering better than expected results and focusing on significant improvements in asset utilization and operating efficiency.
    • Immuno-oncology could lead to growing demand for advanced outsourced pharmaceutical manufacturing services, while a shift towards more biotechnicals could boost Specialty Ingredient margins and returns.
    • Lonza doesn't look cheap, but a recent run of outperformance could lead to further upward revisions in estimates and price targets.
  • Is This A 'Buy The Dip' Opportunity At Maxim Integrated Products?
       • Sun, Jul. 27 MXIM 7 Comments

    Summary

    • A weak outlook for high-end Samsung phones, as well as declines in Industrial sales, leads to a double-digit downward revision to the next quarter's revenue target.
    • Maxim may be too ambitious in its addressable market growth estimates for mobile, industrial, and autos, but the company isn't starting from zero.
    • Both discounted cash flow and margin-based EV/revenue support a fair value target of $32.50 today.
  • Decent Earnings Not The Real Story At Turkcell
       • Sat, Jul. 26 TKC 2 Comments

    Summary

    • Turkcell's earnings were a little complicated, with forced rate cuts pressuring revenue and fines hitting income, but better than expected underlying profitability.
    • An announcement from the U.K. Privy Council suggests that Cukurova has raised the money it needed and it has reached an accord with Altimo to repay its debt.
    • If the Cukurova-Altimo affair is finally over, significant dividends could be on the way, but the shares have already reacted pretty favorably and it may be time to take profits.
  • Operating In Obscurity, Microsemi Continues To Execute
       • Sat, Jul. 26 MSCC Comment!

    Summary

    • Microsemi delivers a solid fiscal third quarter and guides to a slightly better fourth quarter as markets like aerospace, defense, and medical seem to be picking up.
    • Microsemi's underrated FPGA business outgrew the market this quarter.
    • I estimate a fair value of $32 for Microsemi, making it one of the cheapest non-distressed chip stocks out there.
  • Carpenter Technology Ready For Demand And Free Cash Flow Growth
       • Sat, Jul. 26 CRS Comment!

    Summary

    • Carpenter's new Athens facility is close to meaningful contributions and should expand the company's revenue, margin, and FCF potential.
    • A destocking cycle in aircraft engines and fasteners appears to be ending and accelerating build rates and rising nickel prices should be good for sales and margins.
    • At 10x EBITDA, Carpenter has worthwhile upside, but I would expect the multiple to decline to historical norms as cyclical market demand picks up.
  • iStar Financial Still Worth The Hassle
       • Fri, Jul. 25 STAR 1 Comment

    Summary

    • iStar has made steady progress in reducing its cost of capital and cleaning up problem assets.
    • Management is looking to deploy capital into an expanding real estate lending and net lease portfolio, while opportunistically looking to upgrade the value of the operated properties and land portfolio.
    • Estimating the net economic value of iStar's various portfolios to common shareholders, I come up with a fair value of $18.50 today.
  • Cameron Showing Some Much-Anticipated Margin Progress
       • Fri, Jul. 25 CAM 1 Comment

    Summary

    • Cameron still has a lot to do to improve margins in the core DPS business segment, but capacity additions are largely complete and Q2 results showed progress.
    • Orders were underwhelming, but Cameron has some attractive mid-term opportunities particularly as the venture with Schlumberger picks up momentum.
    • Between 9x and 10x EBITDA Cameron is either roughly fairly valued or modestly undervalued, though there is still rerating potential from better margins and improving demand fundamentals.
  • Can Linear Technology Match Quality With Growth?
       • Fri, Jul. 25 LLTC 3 Comments

    Summary

    • Linear comes through again with a solid quarter, but the market wanted more bullish guidance.
    • Linear has exciting opportunities in electric/hybrid vehicle battery management and machine-to-machine communication, but margin leverage may be tapped out.
    • Between overvalued on DCF and undervalued on margins and ROE, Linear is probably fairly valued absent more cash going back to shareholders.
  • Iron's Free Fall Has Rusted Fortescue Metals
       • Thu, Jul. 24 FSUGY 3 Comments

    Summary

    • A significant drop in benchmark iron ore prices and wider spreads for lower-quality ore has walloped Fortescue's realized prices and pinched its profits and free cash flow generation.
    • Fortescue should stay free cash flow positive with realized prices at or above $70/mt, but there's a substantial value-per-share difference between surviving and thriving.
    • A 5.5x multiple to lowered FY2015 expectations suggests a fair value above $10.50, but Fortescue is really only appropriate for aggressive risk-tolerant investors looking to play a rally in iron.
  • Orders A Bright Spot, But ABB Has A Lot Of Work To Do
       • Thu, Jul. 24 ABB 3 Comments

    Summary

    • ABB reports another big earnings miss, as ongoing problems in the Power Systems segment overshadow more widespread general weakness.
    • Double-digit order growth was nice to see, but management needs to fix the Power operations and shore up margins in automation to really excite investors again.
    • ABB management has a chance to change the tone on the shares at the September analyst day, and the shares look undervalued below $26 but significant execution risks remain.
  • Peabody Energy Still Waiting For Better Days
       • Wed, Jul. 23 BTU 9 Comments

    Summary

    • Even without some one-time events, Peabody beat expectations on higher pricing and respectable cost-containment.
    • A thermal recovery in the U.S. could be limited by rail issues and weather, if El Nino leads to a milder summer.
    • Peabody has no meaningful liquidity issues and will likely be cash flow-positive in 2015. The shares still look like a good play on a coal recovery below $20.
  • With Aerospace Squared Away, Will United Technologies Go Back To Big Deals?
       • Wed, Jul. 23 UTX 1 Comment

    Summary

    • Sluggish orders undermine a pretty solid quarter at United Technologies in terms of revenue and margin progression.
    • Building BIS through acquisitions would make a lot of sense, and I expect UTX to target large European companies (or companies headquartered in Europe).
    • Mid-single digit revenue growth and high single digit FCF growth don't project a lot of upside, but that is the norm in industrials today.
  • Amidst Ongoing Doubts, Exact Sciences Still Offers Opportunity
       • Wed, Jul. 23 EXAS 29 Comments

    Summary

    • Exact Sciences continues to wait for two critical gating events - FDA approval of the Cologuard test and CMS reimbursement for the test.
    • Exact Sciences is implementing a business strategy that will cost more in the short term but generate significant profits and cash flows if/when the expected volume emerges.
    • Discounting back my projected cash flows leads to a fair value of $20.
  • Improving Results, Markets, And Operations For Steel Dynamics
       • Wed, Jul. 23 STLD Comment!

    Summary

    • Steel Dynamics' second quarter earnings support the idea that the North American steel market is seeing meaningful improvement.
    • Acquiring Severstal's Columbus mill is a major coup for the company, significantly expanding overall capacity, diversifying the geographical asset base, and adding higher-margin product capabilities.
    • Steel Dynamics looks fairly priced on 12-month EBITDA, but looking out just a bit further suggests more meaningful upside potential.
  • The Green Dot Roller Coaster Rolls On
       • Wed, Jul. 23 GDOT 2 Comments

    Summary

    • AmEx, Western Union, and Total Systems Services are stepping up their competitive efforts in the prepaid debit card space, threatening GDOT's margins and market share.
    • The Walmart deal expires next year and Walmart has a history of playing rough with its partners, putting more than half of the company's revenue at risk.
    • Low double-digit FCF margins and mid-to-high single-digit revenue growth can support a fair value around $22, but the fate of the Walmart deal will be a major value-changer.
  • Weak Core Results At BB&T Driven By Expenses
       • Tue, Jul. 22 BBT 3 Comments

    Summary

    • Lackluster fee performance and higher expenses drive a rare meaningful miss from BB&T.
    • Net interest margin was fine and credit quality remains good, but loan growth seemed a little soft compared to other peers, particularly in the Southeast.
    • BB&T looks undervalued below $41/share, but management must deliver on the projected expense improvements and perhaps should consider ways to maximize the value of the insurance operations.
  • Itochu May Pause, But Has A Good Long-Term Model
       • Tue, Jul. 22 ITOCY Comment!

    Summary

    • As other companies get more proactive with share buybacks and return improvements, Itochu has lost some of its comparative luster.
    • This fiscal year is looking less impressive, but Itochu is still likely to hold the top spot for returns on equity and capital and is the best-positioned in China.
    • Fair value for the shares appears to be between $29 and $32, though a lack of yoy earnings momentum could weigh on the shares.
  • Is Renaissance Re Still A Safe Haven Among Reinsurance Companies?
       • Tue, Jul. 22 RNR Comment!

    Summary

    • Property catastrophe reinsurance, RenRe's core market, is seeing serious price erosion as there is way too much capital chasing business and pricing discipline is flagging.
    • RenRe is expecting strong growth in Lloyds and specialty lines, but that doesn't appear to be enough to maintain attractive underwriting profit growth.
    • I believe RenRe shares are worth about $110 on the basis of long-term ROE potential, but that doesn't leave much upside at today's price.
  • Alpha Natural Resources Can Most Likely Survive, But Can It Thrive?
       • Tue, Jul. 22 ANR 10 Comments

    Summary

    • Alpha Natural has good liquidity, with most of its debt maturing in 2018 or later and substantial room to do more secured borrowing if needed.
    • Met coal prices remain in the dumps and Alpha Natural likely needs prices around $170 to $180 to reach positive free cash flow.
    • Assigning a 10x multiple to 2016 EBITDA and discounting it back doesn't lead to a compelling fair value, but Alpha is a leveraged play to a met coal recovery.
  • After A Transformative Deal, Can AerCap Holdings Climb Higher?
       • Sat, Jul. 19 AER 1 Comment

    Summary

    • AerCap management has meaningful SG&A synergy and receivables collection opportunities with the ILFC deal.
    • Acquiring ILFC from AerCap has more than quadrupled AerCap's fleet, further diversified the business mix, and brought in more than $2 billion of embedded value in the order book.
    • AerCap has taken on significant debt in the deal, but the potential of mid-teens ROE in 2015 can support a 1.25x multiple to book value, or a FV of $50.
  • Ultratech Sliding To The Right... Again
       • Fri, Jul. 18 UTEK 3 Comments

    Summary

    • Ultratech once again misses estimates and lowers guidance, as FinFET-related LSA tool orders are slow to develop.
    • Advanced packaging and high-brightness LEDs remain attractive opportunities for Ultratech, but LSA tool demand will decide the stock's fate over the next two-to-three years.
    • Ultratech can trade over $30 on good order flow, but the certainty of those orders coming in is still low.
  • Heartland Payment Offers Increasingly Diversified Growth
       • Fri, Jul. 18 HPY Comment!

    Summary

    • Non-card revenue continues to be a growth driver for this top-10 merchant acquirer and payment processor.
    • Integrated payment services are becoming increasingly important to maintaining competitive standing in the acquiring/processing world, but Heartland has already established good share in newer growth opportunities like school-based card services.
    • Neither discounted cash flow nor EV/EBITDA suggest that the Street is undervaluing the low-teens FCF growth potential at Heartland.
  • U.S. Bancorp Seeing Stable Credit And Early Signs Of Loan Growth
       • Fri, Jul. 18 USB 3 Comments

    Summary

    • U.S. Bancorp was on target with second quarter results, but did deliver surprisingly strong double-digit commercial lending and mortgage growth.
    • Net interest margin pressure could intensify in the short term due to higher wholesale lending levels and the end of checking advance products.
    • Both excess return modeling and RoTE-based P/TBV support a fair value of $43 today and U.S. Bancorp's modest interest rate sensitivity reduces near-term upside from higher rates.