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M&T Bank - A Neutral Stance After Weighing The Pros And Cons
- M&T Bank delivers solid results with revenues being pressured by compression in net interest margins.
- The company anticipates some headwinds on this front in 2015, as pending deal uncertainty creates additional headwinds.
- This is offset by strong historical growth and solid operational loan growth, which is already applauded by a premium valuation.
- Weighing the pros and cons, I am fairly neutral on the prospects for the shares.
Hexcel: Long-Term Guidance Offers Support And Appeal
- Hexcel's shares rise to new highs following solid results, and a promising multi-year outlook.
- I like the shares given the high visibility of the business and significant anticipated earnings improvements.
- This makes shares worthwhile at dips despite a premium valuation on current earnings.
Alaska Airlines - Momentum Run Continues, But I Am Cautious
- Alaska Airlines ends 2014 on a strong note.
- Solid growth, high earnings and moderate multiples appear to create a nice opportunity.
- The shares have already reflected a great deal of good news in recent months and years.
- Little competition and low oil prices create fat margins now, something which I do not anticipate will be sustainable.
- While I am very optimistic about the long-term potential of the company, I am only a buyer on significant dips following the momentum run seen already.
Huntington Bancshares - After A Relatively Strong Quarter, The Bank Is Fairly Valued
- Huntington shows relatively strong growth, with past growth being aided by dealmaking.
- Shares have recovered in recent years, now trading at a premium to their book value on hopes for strong returns on equity.
- While this appears attractive, I am not too impressed with the bank. Long-term shareholders have still suffered a lot following disastrous dilution during the financial crisis.
- Given the fairly aggressive strategy of the bank to grow the business I am worried about the performance of the bank in a future recession.
Kansas City Southern - Great Growth And Potential, Wait For A Better Entry Level
- Kansas City Southern reports relatively soft fourth quarter results.
- The railroad has grown revenues and earnings at an aggressive pace in recent years.
- While the prospects for future growth remain great, a lot of good news has already been priced into the shares.
- For these reasons I am only a buyer on significant dips going forwards.
Rockwell Collins: Great Long-Term Investment; Wait For A Pullback
- Rockwell Collins reports solid first-quarter results.
- The company benefits from the retro-active extension of R&D tax credits.
- Shares offer long-term appeal. Despite this, I would be cautious to buy shares at current levels.
- Recent momentum amidst a strengthening dollar is the main reason for the caution.
BB&T - Despite Solid Deals Appeal Is Limited Unless Interest Rates Start To Rise
- BB&T reports solid results, driven by cost savings and modest compression in net interest margins.
- The bank is focusing on growth again after it made a few important deals in 2014.
- Shares trade at a modest premium now, raising expectations.
- I feel appeal only becomes apparent in case net interest margins start to increase again.
Kimberly-Clark - Lots Of Headwinds, Dividend Provides Support
- Kimberly-Clark reports soft results, and issues a disappointing 2015 outlook.
- The strong dollar hurts the business a great deal, while Huggies faces a lot of pressure at home.
- While the valuation is very high, I continue to believe shares will be supported by the world-class dividend.
- The 3.0% dividend yield, with a further dividend hikes anticipated in 2015, looks attractive given the low interest rates.
SanDisk - More Weakness Ahead, Don't Pull The Buy Trigger Yet
- SanDisk reports very soft fourth quarter results, as has been pre-announced.
- The weakness is now seen for the current quarter and for 2015 as well.
- Investors therefore took another hit, after shares have lost 25% of their value in just a month's time.
- With more pain anticipated in the coming year, I think it is still too early to buy into the shares now.
eBay - Mixed Results And News Show, Shareholder Value Creation Is Uncertain
- eBay's results were solid, as the outlook is weak driven by the headwinds resulting from dollar strength and weakness at the marketplace business.
- PayPal continues to perform well, as the company is cutting costs and aiming to sell the enterprise business unit.
- I like the orientation on shareholder value creation, although I am uncertain how much value can really be created for shareholders.
Fifth Third Bancorp - Little Long-Term Appeal, Even At Book Value
- Fifth Third Bank suffers like the rest of the sector from narrowing interest margins.
- Unlike many competitors the cost of deposits is creeping up, so are loan loss provisions.
- The average performance and poor track record in risk management, makes me cautious despite the fact that shares trade at their book value.
U.S. Bancorp - Best-Of-Breed, Long-Term Value Creator
- U.S. Bancorp has reported solid earnings, as net interest margin compression was not as bad as was feared.
- The bank is an excellent operator and a great risk manager.
- This values shares at a big premium compared to the book value, unlike the vast majority of its peers.
- Given the strong performance and cash flows returned to investors, I would prefer the bank over any peer.
- That said, the shares are no screaming buy at all, although they could still be held in the long run.
Baker Hughes - Strong Quarter, Reconfirms Solid Risk/Reward Opportunity
- Baker Hughes ends 2014 on a very strong note.
- 2015 looks to become a difficult year, with US rig count expected to drop 15% on a sequential basis.
- The strong execution, pro-active job cuts and potential huge break-up fee limit the downside in case the Halliburton deal falls apart, while upside remains.
Cree - Optimistic Undertone Is Supportive For The Shares
- Cree reported a small earnings beat on low expectations.
- A cautious optimistic undertone, somewhat comforting outlook and share buybacks create enthusiasm among investors.
- A long term investment can pay off given the industry growth; just realize that an investment carries above-average risks.
Jarden: Premium Valuation And Leverage Limits Appeal
- Jarden reports strong preliminary results for the final quarter of 2014.
- While the strong historical growth is attractive, the acquisition trajectory has resulted in high leverage.
- Given the premium valuation following the multi-year run up, the leverage and lack of dividends, I would not touch shares at these levels.
Lennar - Another Homebuilder To Warn About The Housing Recovery In 2015
- Lennar posts solid results for the fourth quarter of 2014.
- These results were aided by higher purchase incentives, as the company warns for its gross margins in 2015 after competitor KB Home did the same thing.
- Following aggressive inventory lots built up, the company has essentially used its balance sheet to bet on the housing recovery.
- Given the leverage employed and dire consequences of a housing downturn, I continue to shun investing in the housing sector and Lennar.
Comerica - Worries About Texas And Long Interest Exposure Creates Long Term Opportunities
- Comerica reports fourth quarter results which are in line with expectations.
- The bank which has significant operations in Texas does not see a big impact from falling oil prices, reassuring investors.
- A return to higher net interest margins and higher dividend payouts could improve the valuation of the stock which only trades at its book value.
- Don't expect a quick rebound amidst narrowing net interest margins and still low dividend payouts.
Smith & Wesson: A Large Jump Following A Modest Guidance Hike
- Smith & Wesson surprises the market by raising its full year guidance.
- The raise in the guidance mostly reflects on the current third quarter, with the fourth quarter guidance being relatively untouched.
- Given the big jump in the shares, the fair valuation multiples and high usage of debt, I am cautious and will stay neutral at current levels.
Goldman Sachs - Transformation Efforts Should Be Awarded In The Long Run
- Goldman's revenues take a hit across the board.
- The strong cost control and shareholder returns limit the fall in earnings per share.
- The bank becomes less risky, focusing on less volatile and less capital intensive businesses.
- This could result in a re-rating of the stock in the long term as the market starts to award this shift.
SunTrust Banks - Solid Results, Few Triggers Ahead
- SunTrust reports solid earnings results, driven by strong cost control.
- Narrowing net interest margins are offset by loan growth, resulting in flattish revenues.
- Despite fair multiples, I am neutral on the shares as I see few triggers ahead.
PPG Industries: Caution As All The Good News Has Already Been Priced In
- PPG continues to show solid growth, partially masked by a stronger dollar.
- Lower oil prices and a focused strategy allows for higher margins going forwards.
- Shares have already priced in all the good news, and some more.
Mohawk Industries - Words Of Caution After A Great Run
- Mohawk announces the acquisition of IVC Group, in a fair deal.
- Shareholders like the deal given the anticipated accretion and a stronger market position.
- Following a big momentum run shares trade at elevated multiples, as the company has quite some debt outstanding.
- Given these observations and cyclical margins over time, I would not buy into the shares at current levels.
Fastenal - Great Growth And Dividends Come At A Steep Price
- Fastenal ends 2014 on a strong note, with sales growth accelerating in the end of the year.
- The company's business model, pro-active attitude and past performance is great.
- High cash flow conversion allows for quick growth and high dividend payouts as well.
- A premium valuation is warranted. I am a buyer at a 3% dividend yield, which translates into a targeted entry level at $37 per share.
Dana - Anticipating A Re-Rating Of The Stock If 2016 Targets Can Be Met
- Dana issues a relatively solid guidance for 2015, as sales are pressured by dollar strength.
- Shares trade at just 10 times projected earnings, a discounted multiple given the troubled past of the company.
- If the company can deliver on its fairly aggressive 2016 targets, I believe a re-rating of the stock might take place.
- With earnings power forecasted at over $2.50 per share in 2016, shares could trade at $30 if the company can deliver on its targets.
- Even if Dana misses on its 2016 targets, current profitability levels should provide sufficient support to justify the current valuation.
Precision Castparts - Stock For Sale, Take The Opportunity
- Precision Castparts issues a big profit warning for the current quarter.
- PCP's end markets have been soft, while customers have been destocking as well.
- This is message is actually comforting as it indicates execution issues are not the main driver behind the revenue and earnings shortfall.
- The strong track record, solid balance sheet, stable margins and appealing valuation offer a great entry point.
Schlumberger - Adjusting The Cost Structure, As Shares Have Held Up Relatively Well
- Schlumberger reports solid results for the quarter but takes drastic steps as a result of plunging oil prices.
- As the company fires 9,000 workers it is hiking its dividend payout at the same time, potentially creating some public backlash.
- Given the relative limited fall in the shares versus the oil prices and the expectations for a very difficult year ahead, I remain very cautious.
BlackRock - Fair Valuation, Steady Operator, High Shareholder Payouts
- BlackRock's fourth quarter results are solid, with strong inflows resulting in higher assets under management.
- Revenues were flat despite growth in assets under management, partially the result of lower performance fees.
- Shares offer appeal given the fair dividend yield, share repurchases and high cash flow conversion at fair valuation multiples.
Clarcor: Steady Business Worth Acquiring On Dips
- Clarcor reports fourth quarter results in line with expectations, as the 2015 outlook is disappointing.
- While the company has some short-term headwinds, long-term trends remain favorable, including its stable revenue base and margin profile.
- This stability should be awarded with premium valuation multiples, as the company's forward multiples start to fall toward those of the general market.
- Consequently I am a buyer on dips which value the company at average forward multiples.
Stryker - Small Dollar Headwinds As Shares Become Attractive At Market-Equivalent Multiples
- Stryker updates the market with fourth quarter earnings and sales missing expectations as a result of the strong dollar.
- The company has an excellent track record in terms of organic growth and dealmaking in attractive end-markets which are supported by long term tailwinds.
- While I worry about the discrepancy between GAAP and non-GAAP earnings, I am willing to pay market-equivalent multiples based on the strong growth profile.
- This makes me a buyer if share re-test levels in the mid-eighties.
Genesee & Wyoming: Premium Valuation Vs. Peers Is Compressing, Creating Relative Appeal
- Genesee & Wyoming reports healthy December traffic numbers, although monthly numbers tend to be volatile.
- The company has grown aggressively over the past decade by focusing on deals to expand its network.
- The multi-year momentum run results in premium multiples and left investors with disappointing returns over the past year or two, while the peer group continued to show healthy returns.
- Consequently the premium versus the peers has been coming down rapidly, creating relative appeal at current levels.
Chuy's - Lower Oil Prices Provide A Benefit, At Least For Now
- Chuy's updates the market, reporting stronger comparable sales growth than expected.
- Lower discretionary income has aided the company outweighing the impact of potential job losses in ¨home¨ state Texas.
- Growth, margin expansion and low sales multiples can result in a better year ahead despite poor current margins and premium earnings multiples.
Valmont Industries - Troubles Continue, As I Am Waiting To Pull The Buy Trigger
- Valmont Industries has disappointed investors early into 2015 after a difficult and disappointing 2014.
- Part of the disappointment is outside of the company's control, although some problems are self-inflected.
- Reflecting for the new earnings reality, I am only buying at market equivalent multiples, being a buyer on further dips.