HI Financial Services Commentary 05-01-2018
You Tube Link: https://youtu.be/4ZgL3Qsr6N8
What I want to talk about today?
AAPL – Earnings were so-so
$2.73 vs est $2.67 EPS
61.1B vs est 60.82
Guidance 51.5 to 53.5B vs est 51.61
100B new Buyback because they already have returned to shareholds 275 of the 300 B they’ve committed
Increase in dividends 16% to $0.73 per share267.2B cash reserve
52.2M iPhone vs est 52.54M
Income 13.82B vs from y/y 11.03
Service 9.19 vs est 8.39
9.10m ipads sold vs est 9.17m
4.08 Macs sold vs est 4.14
Home pod revenue 3.9B vs est 3.7B
Wearables up 50%
Iphone average selling price 728 vs est 742
Slight margin compression
Earnings moves the markets
What happening this week and why?
Construction spending -1.7 vs est 0.5
ISM Index 57.3 vs est 58.3
Auto 3.90 vs est 4.10
Truck 9.28m vs 9.64m
Where will our markets end this week?
SPX – Bearish
COMP – Bearish
Where Will the SPX end May 2018?
Tues: AET, CMI, EMR, GRUB, JCI, LLL, MRK, PFE, DENN, DUN, GNW, JNPR, SNAP, TMUS, UAA, AAPL,
Wed: CHK, EL, GRMN, HUM, MA, TAP, SODA, YUM, DDD, BZH, FEYE, SPOT, SQ
Thur: BALL, ARRN, CAH, DUDP, K, S, CBS, TACO, P, TSRO
Fri: LNG, CELG, VFC
Tues: Construction Spending, ISM Index, Auto, Truck
Wed: MBA, ADP Employment, FOMC Rate
Thur: Initial, Continuing Claims, Unit Labor Costs, Productivity, Trade Balance, ISM Services, Factory orders
Fri: Average Workweek, Non-Farm Payroll, Private Payroll, Hourly Earnings, Unemployment Rate
Tues – CN: PMI Manufacturing Index
How am I looking to trade?
Build my earnings list a couple of weeks before AA Reports
AAPL – 05/01 AMC
DIS – 05/08 AMC
UAA – 05/01 BMO
www.myhurleyinvestment.com = Blogsite
‘Avengers: Infinity War’ shatters box office record, hauls in $630M worldwide, even without China
- “Avengers: Infinity War” kicked off the summer box office race by hauling in $250 million in domestic receipts
- Marvel Studios superhero smorgasbord bested the previous record set by “The Force Awakens,” and has yet to open in China.
Published 4:58 PM ET Sun, 29 April 2018 Updated 17 Hours Ago
A few dozen superheroes lifted “Avengers: Infinity War” to a record $250 million in ticket sales over the weekend, narrowly surpassing “Star Wars: The Force Awakens” for the highest opening weekend of all-time.
According to Disney’s estimates Sunday, the Marvel Studios superhero smorgasbord bested the previous record set by “The Force Awakens.” Accounting for inflation, the “Star Wars” reboot would still reign with about $260 million in 2018 dollars.
“Infinity War” also set a new global opening record with $630 million, even though it’s yet to open in China, the world’s second-largest movie market. It opens there May 11. “The Fate of the Furious” previously held the worldwide mark with $541.9 million.
In a very distant second place was John Krasinski’s “A Quiet Place” with $10.7 million.
Visa: Next Stop $135
Apr. 27, 2018 3:44 PM ET
Visa posted incredible numbers once again with a little extra boost from international transactions.
Key fundamentals remain bullish as transaction volume once again reaches double digits.
I am increasing my fair value to $135.
Shares of payment processing giant Visa (NYSE:V) rallied nearly 5% after crushing consensus estimates of revenue and earnings. With revenue growth accelerating, earnings growth and, most importantly, free cash flow were absolutely spectacular. Let’s take a look at Visa’s Q2 results, why I am increasing my fair value estimate, and why Visa allocates capital better than almost any company on earth.
Financial Results: Strong Revenue Lifts All
Visa’s Q2 revenue grew a whopping 13% y/y to $5.1 billion – not too shabby for such a mature company. Growth in the underlying business continues to benefit from the same secular trends that have powered the company for years, including the shift to e-commerce and society’s general movement away from cash in favor of electronic payments.
That said, Visa got an extra boost from international transaction revenues, which jumped a robust 19% y/y to $1.75 billion. Visa doubly benefitted from the weakening dollar as well as strengthening European currencies, which lifted demand for travel and thus cross border transactions.
In addition to the higher priced international transactions driving growth, payment volumes continue to soar. On a constant currency basis, total volume dollars grew 11% y/y to a whisper shy of $2 trillion. Transactions jumped a whopping 10% y/y to 43.2 billion, further demonstrated the power of the secular tailwinds that Visa continues to ride.
Operating margin dipped slightly, down to 66% from 67% driven by a large surge in marketing spend reflective of the 2018 Winter Olympics and in preparation for the 2018 FIFA World Cup. Marketing spending will also be elevated in Q3, but I would expect this to moderate, if not decline, in fiscal year 2019. The slightly elevated marketing spend isn’t ideal, but it is also not permanently committed and would theoretically be easy to flex if dynamics dictated such a move.
Personnel costs were also up sharply, growing 17% y/y to $824 million. From management’s commentary on the call, I believe this was mostly the result of a slight increase in hiring, but more importantly, sharing in tax savings with employees by increasing incentive compensation and increasing 401k matching.
Net-net, operating margin may be down slightly, but after-tax income grew at a much faster rate. Thus, I am not worried about slight operating margin deleverage.
Speaking of after-tax income, adjusted EPS surged 30% y/y to $1.11 per share, driven by the increase in total operating income and boosted even further by tax reform in the US. I don’t think 30% EPS growth is going to be the norm, but I do think 10-15% EPS growth for the next several years looks achievable.
Strategically, Visa did not provide too many updates. Visa renewed several of its long-term contracts, and won some new business, which is positive at the margin. Visa did announce that it is working with Mastercard’s (NYSE:MA) EMVCo Secure Remote Commerce infrastructure to create a single pay button for e-commerce. This is a long-time coming, and though it is utilized by the likes of Amazon (NASDAQ:AMZN), it seems like drastically underpenetrated technology that would really improve online shopping and online shopping conversion.
In addition, I expect Visa to reduce marketing investment in its Visa Checkoutapplication that was meant to help facilitate this process. Though I use the product because I am a Visa shareholder, I have never once heard someone mention it, and I suspect it receives minimal usage. Overall, the combination of tokenization and the EMVCo infrastructure should be a better use of time and capital.
Unbeatable Capital Allocation
The most impressive aspect of Visa’s performance continues to be the ridiculous cash it generates. YTD, Visa has generated over $5.2 billion of free cash flow. Visa was able to use this cash to buy back $3.85 billion worth of stock while also retiring $1.75 billion worth of debt, further deleveraging its balance sheet after its Visa Europe acquisition.
Visa’s buybacks are a truly amazing use of capital. The company buys back stock that is almost perpetually undervalued by the nature of Visa’s growing intrinsic value, making it a consistently great investment for shareholders.
In addition, Visa raised its dividend to $0.21 from $0.195 during Q1 of the 2018 fiscal year. I’m less excited about dividends, but the dividend does underscore management’s dedication to returning cash to shareholders.
Upgrading Fair Value to $135
I believe I underestimated Visa’s FY18 revenue growth; therefore, I am increasing my revenue forecast, which increased by fair value estimate to about $135 from $130. As always, Visa’s intrinsic value continues to compound at a high single/low double-digit rate per year, making the stock an incredible investment. Visa is already by far my largest position, so I am not adding as a function of risk control, even though I think the stock will continue to tread higher.
Disclosure: I am/we are long V, AMZN.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
The best athletes share 4 traits. They have nothing to do with sports
11:45 PM ET Thu, 26 April 2018
When it comes to success, few physically embody that state better than sports stars.
Yet, while precision, strength and unwavering stamina are vital to athletic careers, what sets the winners apart from the losers comes down to a handful of underlying values — and they go far beyond sporting acumen.
That’s according to motivational speaker and New York Times bestselling author Don Yaeger, who built a career studying some of the world’s greatest athletes.
He’s met more than his fair share of winners in his decades spent as a Sports Illustrated journalist, from legendary American football star Walter Payton to renowned basketball coach John Wooden, and he said the best among them all exhibited the same four traits.
1. They have humility
First off, the best athletes manage to stay humble, no matter how successful they become. That means they can make critical, honest assessments of themselves and seek self-improvement.
“That ability to see themselves allows them to stay humble, reminding themselves — regularly — that they have much to learn.”
2. They seek feedback daily
Secondly, the most successful athletes get feedback on a daily basis to see how they can become better, both professionally and personally.
That’s lucky: Their high profiles mean they face constant critiques from their coaches and the public, whether they like it or not.
“Feedback is the breakfast of champions, and true champions eat breakfast,” said Yaeger, joking that the notion has become something of an office motto for him.
3. They start every day at zero
Thirdly, the nature of professional sports means that players must start each day from the same base and complete their training routines from scratch.
Having that mindset positions them well for competitions, when every player enters the game at zero.
“The truly great ones believe that what they achieved yesterday means little today,” said Yaeger.
4. They have an insatiable appetite for learning
Finally, whether it’s training to run a bit faster, or figuring out the best strategy to outsmart the competition, successful sports stars challenge themselves to learn new things on a daily basis.
“The best ones have questions, they don’t have answers,” explained Yaeger. “They know they need the ability to recognize the needs they have to be better every day.”
“THESE LESSONS ARE FROM SPORTS, BUT NONE HAVE ANYTHING TO DO WITH SPORTS.”-Don Yaeger, motivational speaker
Yaeger acknowledged that the parallels between sports and business are often considered trite.
But he insisted that lessons can be learned from successful winners, regardless of their field of expertise, and they’re worthy of study — whether or not we aspire to be them.
“These lessons are from sports, but none have anything to do with sports,” noted Yaeger.
“They don’t have anything to do with physically imposing your will on other people. These are about how you drive the best from yourself,” he continued. “These aren’t sports conversations, these are about how you win.”
“Will you be more successful in business if you are humble, if you seek feedback, if you’re an insatiable learner? In the words of Joe Namath: ‘I guarantee it.'”