Monday, February 1, 2016

Earnings Recap Week Ending Jan 29

It's was a busy week for many of the companies in the portfolio as companies report the final portions of 2015 and for some their 2016 Q1. I've included the CEO statement, FY2016 guidance if applicable, and comments on any developments. I figured with everything being so volatile it would be nice to get a quick summary on the holdings and this week is a good one for that.

Altria (MO) -

“In 2015, Altria delivered yet another year of excellent business results and outstanding shareholder returns,” said Marty Barrington, Altria’s Chairman, Chief Executive Officer and President. “We grew full-year adjusted diluted EPS by 8.9%, in line with our long-term EPS growth objective. Altria paid nearly $4.2 billion in dividends to shareholders, consistent with our goal of paying out approximately 80% of adjusted diluted EPS. And Altria’s total return to shareholders of 23.1% far outpaced the S&P 500 and the S&P Food, Beverage and Tobacco Index, marking the third consecutive year that total shareholder return has exceeded 20%.”

The company guided 2016 EPS at $3-$3.05. Also the company will get 10.5% equity in the new SAB Miller/ABInbev company(previously announced). Volumes declined but that's been an industry trend for so long it doesn't matter. Interestingly the company has found ways to increase its productivity in house and as a result will be announcing some layoffs the next 2 years. Usually unnoticed is the companies wine operations. Volumes grew by 6.2% and sales by 7.7% from 2014, not bad.

Procter & Gamble (PG) -

We are encouraged by our return to organic sales growth in the quarter,” said President and Chief Executive Officer David Taylor. “With the top-line improvement and continued cost reduction, we delivered solid core operating income and EPS growth in the face of significant macro-economic and geopolitical headwinds.”

The company doesn't give exactly clear cut guidance but we can expect between $3.60-3.80 for FY2016. I expect the company to continue figuring out ways to deliver more dividends and buybacks this year.

Facebook (FB) -

"2015 was a great year for Facebook. Our community continued to grow and our business is thriving," said Mark Zuckerberg, Facebook founder and CEO. "We continue to invest in better serving our community, building our business, and connecting the world."

The company does not give specific EPS guidance, but guides on other aspects of the company.  I must say their results were impressive evident by the massive jump in the stock price. The company continues to execute well. My only issue is valuation(especially GAAP) as its the most expensive in the portfolio. I'd like to add more, but I'm hesitant based on that alone as I've been burned in the past. I think if an individual wanted to buy 100 shares I'd put maybe 20-30% of the funds in as long as shares could be bought for under $110. Before earnings it would have been much better to buy as I even felt the shares offered a somewhat decent opportunity around $95. I'm still waiting for a better long term price, sigh. I read an article over at and the author stated he felt FB did not have a wide moat. I stated my disagreement and I think I'll put up a post regarding the issue. This is a powerful company and it should be recognized.

Paypal (PYPL) -

"We exited 2015 with great momentum, said Dan Schulman, President and CEO of PayPal. Our strong results reflect PayPals progress in delivering on our strategy to drive the digital payments revolution. In the face of a slow global economy and foreign exchange headwinds, PayPal exceeded its full year revenue, earnings, and free cash flow commitments to shareholders. As money becomes digital and the world goes mobile, we see tremendous opportunity ahead to expand our leadership, transform the way people move and manage their money and deliver increased value to shareholders."

The company guided 2016 GAAP earnings at 1.09-1.14 and non GAAP at 1.45-1.50. The company executed well and really saw spectacular results across the entire board. Additionally the company will buy back approximately 5% of shares for $2 billion. I wish they could have found a better way to use the cash, but these are the times we live in right now.  I'm going to try and buy more shares of this company.

Diageo (DEO) -
 “Diageo has become a stronger, more competitive business. We have delivered volume growth, a stronger top line, improved the performance of our key brands, driven cost productivity and continued to generate strong cash flow. While trading conditions remain challenging in some markets, Diageo’s brands, capabilities in marketing and innovation and our route to consumer have proved resilient. I am confident that Diageo can deliver improved, sustained performance.

The company did not offer any additional interim 2016 guidance, although the dividend was raised 5%. Management is expecting to focus on margins and cash conversion while trying to navigate the currency headwinds.

McCormick (MKC) -

"Our 2015 results demonstrated the effectiveness of our strategies and the engagement and efforts of McCormick employees around the world.  McCormick's products are on-trend with today's consumer and their increased interest in bolder flavors, focus on wellness and fresh ingredients, and demand for convenience."

The company provided guidance for FY 2016 at 3.62-3.69. Another strong note was the 17% increase in operating cash generation to $590 million with expected big gains for next year too. Overall solid results. Judging by the response to earnings everyone forgot that downgrade earlier by JPM. I still think it was so JPM could buy shares cheaper, and it looks like I might not get another change to buy below $75 which is upsetting. This is a well run company.  

Visa (V) -

We continue to be pleased with our financial performance given the uneven global economy and the ongoing negative effects of the strong U.S. dollar. While we continue to see relatively strong payments volume growth, these factors have meaningfully reduced our cross-border volume and revenue growth. While these headwinds do not appear to be abating in the short-term as we had hoped, the fundamentals of our business remain strong and our long-term growth trajectory remains intact as we navigate through this uncertain environment, said Charlie Scharf, Chief Executive Officer of Visa Inc.

The company did provide adjusted EPS guidance previously but with Visa Europe closing this year it's not applicable in my opinion. Although I'm expecting at a bare minimum 9% EPS growth and another dividend raise for 2016. The stock had sold off originally and I was hoping it would go lower to buy more shares. Instead it reversed and ended up 7% higher. I'll look to add shares if the price comes back a bit.

MasterCard (MA) -

“Despite a challenging economy, we were able to deliver solid results for the quarter and the full year in 2015,” said Ajay Banga, president and CEO, MasterCard. “Entering 2016, while uncertainty in the global economy persists, the fundamentals of our business and our approach remain unchanged. We continue to be laser focused on our strategy to lead payment innovation in an increasingly digital world with solutions such as MasterPass, while growing the use of electronic payments through our products, partnerships and increased acceptance at the point-of-sale.”

The company did provide EPS guidance on a non-GAAP basis for approximately 13-15% increase. I'm going to expect rougly the same as Visa for about 10% minimum(GAAP) and a dividend raise next December. Same as Visa the shares had opened lower and then headed higher all day. I really should have bought both, but it is what it is. Both companies are running well and from what I see a lot of big money moved back into the payment space this week.  

I'm expecting the picks to do better than the indexes this year(of course!). Hopefully I can be disciplined in my buying too. I was a little early on a couple of buys so far. CMI, SAM, and HAIN come to mind. And maybe just a little late on others. PYPL, V, MA come to mind here. I think PM and EMR buys were at good prices. Also I did add to HCP during the week. I'm not going to post an analysis or anything else. Simply put the dividend I believe is safe, and it provides some extra defensive security for the rest of the year. I think the portfolio has a decent mix of defensive oriented, tech, and growth. Something you don't always find in a long term conservative, or DGI portfolios. 

For the short term I expect we bounce a bit as evident Friday. Not sure how much upside is in the tank, but I'm not fully convinced we are out of the woods yet. I still think it's possible for the S&P to hit 1700. 

Enjoy the weekend!

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