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Turnaround Letter
Out-of-Favor Stocks with Real Value

April 26, 2024

Xerox (XRX) reported significant year-on-year decreases in both revenue and earnings on Tuesday, showing a net loss of -$113M (versus estimates of +$49.5M) on revenue of $1.5B, down 12.4% from last year’s 1Q. Despite the disappointing results, CEO Steve Bandrowczak remains optimistic about the company’s restructuring strategy, which aims to align Xerox more closely with market demands and improve operational efficiency.

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Xerox (XRX) reported significant year-on-year decreases in both revenue and earnings on Tuesday, showing a net loss of -$113M (versus estimates of +$49.5M) on revenue of $1.5B, down 12.4% from last year’s 1Q. Despite the disappointing results, CEO Steve Bandrowczak remains optimistic about the company’s restructuring strategy, which aims to align Xerox more closely with market demands and improve operational efficiency.

Mattel (MAT) reported 1Q 2024 results on Wednesday, missing on revenue but beating on earnings, reporting an adjusted loss of $0.05/share, slightly narrower than consensus expected at -$0.12/share. Retail results tend to be very lumpy around 2Q (spring/summer sales) and 4Q (holiday sales), so it wasn’t exactly a surprise that management continued to guide net sales to flat year-on-year, and gross margins steady around 49%.

Western Union (WU) also reported on Wednesday, coming in spot-on with estimates, reflecting a 5% year-on-year rise in earnings. Western Union’s performance this quarter was driven by a 6% growth in Consumer Money Transfer transactions and a 13% increase in Branded Digital transactions. The Branded Digital segment itself saw a 9% rise in revenue on both reported and adjusted bases, which underscores Western Union’s successful adaptation to an evolving financial services landscape.

Polaris (PII) posted a disappointing quarter missing on both the top and bottom lines with revenue down 21% year on year. CEO Michael T. Speetzen called out stress within the dealer network as the primary culprit but held full-year guidance and noted that operational cost savings this year should be on the order of $150M.

Mohawk Industries (MHK) reported yesterday, beating just slightly on revenue but surpassing earnings expectations by nearly 10%. CEO Jeff Lorberbaum noted, “Though economic headwinds are impacting industry sales, margins and mix, our first quarter results reflected the positive effect of actions we are taking to enhance our performance. Our earnings per share rose year over year as a result of restructuring, productivity initiatives and benefits from lower cost raw materials and energy, partially offset by weaker pricing and mix.”

Newer holding Barnes Group (B) reported a 28% increase in revenue year-on-year, but underperformed relative to earnings expectations, posting GAAP EPS of $0.04 versus expectations of $0.36. CEO Thomas J. Hook highlighted the company’s ongoing business transformation strategy, which recently sold the Associated Spring and Hanggi businesses, and is now focused more on the aerospace sector.

Western Digital (WDC) 3Q results today crushed estimates, with revenue up 23% year-on-year and EPS of $0.63/share versus expectations of 1/3 of that amount. All of the company’s major product verticals (cloud/client/consumer) were up at least 17%+ with flash memory and HDD revenues both up close to 30%.

Capital One Financial (COF) reported first-quarter earnings of $3.21 per share, just under consensus four cents higher. CEO Richard Fairbank noted that “First quarter results continue to show top-line growth, stabilizing consumer credit, and balance sheet strength,” and pointed to their acquisition of Discover as “a singular opportunity that creates a consumer banking and global payments platform with the capabilities, technology, brands, and customer franchise to create significant value for merchants, consumers, small businesses and shareholders.”

Agnico Eagle Mines (AEM) beat on both the top and bottom lines as it reported record free cash flow on a record average realized price ($2,062 per oz.) versus an All-in Sustaining Cost (AISC) of $1,190/ per oz. Production guidance was held at 3.35-3.55 million ounces of gold, with AISC expected to creep up slightly with inflation over the course of the year.

Friday, April 26, 2024, Subscribers-Only Podcast:

Covering recent news and analysis for our portfolio companies and other topics relevant to value/contrarian investors.

Today’s podcast is about 13 minutes long and covers:

  • Initial note
    • Introduction – a quick look at the nine (!!!) CTL companies that reported this week.
  • Comments on recommended companies
    • Ammo, Inc. (POWW) announced the acquisition of a tooling manufacturer that provides key resources toward the production of ammunition in its Manitowoc, Wisc. factory. The company expects that this acquisition will result in annualized cost savings of over $1 million as they can now better streamline operations.
    • Adient plc (ADNT) announced they are restructuring the Europe business by cutting jobs and transferring work to countries with lower labor expenses, in a bid to cut costs. Demand on the Continent remains soft due to higher borrowing costs that discourage car purchases, fierce competition from Chinese rivals, and higher input costs squeezing margins.
    • First Quantum Minerals (FM.TO) believes it will be able to take the already-mined 121,000 tonnes of copper concentrate out of its disputed mine in Panama after the national elections there in May. Our newest addition is up roughly 7% on the week as copper prices continue to perform well.

Please know that while I don’t yet personally own shares of all Cabot Turnaround Letter recommended stocks – including the stocks mentioned in this note – that will materially change over time.


Market CapRecommendationSymbolRec. IssuePrice at Rec.Current Price *Current YieldRating and Price Target
Small capGannett CompanyGCIAug 20179.22 2.56 -Buy (9)
Small capDuluth HoldingsDLTHFeb 20208.68 4.31 -Buy (20)
Small capDril-QuipDRQMay 202128.28 19.79 -Buy (44)
Small capKopin CorpKOPNAug 20232.03 0.84 -Buy (5)
Small capAmmo, Inc.POWWOct 20231.99 2.57 -Buy (3.50)
Mid capMattelMATMay 201528.43 18.42 -Buy (38)
Mid capAdient plcADNTOct 201839.77 30.13 -Buy (55)
Mid capXerox HoldingsXRXDec 202021.91 14.266.1%Buy (33)
Mid capViatrisVTRSFeb 202117.43 11.554.3%Buy (26)
Mid capTreeHouse FoodsTHSOct 202139.43 36.01 -Buy (60)
Mid capThe Western Union Co.WUDec 202116.40 13.477.3%Buy (25)
Mid capBrookfield ReBNREJan 202261.32 40.550.8%Buy (93)
Mid capPolarisPIIFeb 2022105.78 84.463.0%Buy (160)
Mid capGoodyear Tire & RubberGTMar 202216.01 11.91 -Buy (24.50)
Mid capJanus Henderson GroupJHGJun 202227.17 31.555.1%Buy (67)
Mid capSix Flags EntertainmentSIXDec 202222.60 23.79 -Buy (35)
Mid capKohl’s CorporationKSSMar 202332.43 24.538.7%Buy (50)
Mid capFrontier Group HoldingsULCCApr 20239.49 6.12 -Buy (15)
Mid capAdvance Auto PartsAAPSep 202364.08 75.141.3%Buy (98)
Mid capMohawk IndustriesMHKJan 2024103.11 114.64 -Buy (165)
Mid capVF CorporationVFCMar 202416.24 12.922.8%Buy (25)
Mid capBarnes GroupBApr 202436.55 33.64 -Buy (55)
Mid capFirst Quantum MineralsFM.TOMay 202415.9316.67 -Buy (40)
Large capGeneral ElectricGEJul 2007304.96 148.820.2%Buy (160)
Large capNokia CorporationNOKMar 20158.02 3.543.4%Buy (12)
Large capMacy’sMJul 201633.61 18.843.7%Buy (25)
Large capNewell BrandsNWLJun 201824.78 6.794.1%Buy (39)
Large capVodafone Group plcVODDec 201821.24 67.001.5%Buy (32)
Large capBerkshire HathawayBRK.BApr 2020183.18 402.66 -HOLD
Large capWells Fargo & CompanyWFCJun 202027.22 60.622.3%HOLD
Large capWestern Digital CorporationWDCOct 202038.47 66.12 -Buy (78)
Large capElanco Animal HealthELANApr 202127.85 13.01 -Buy (44)
Large capWalgreens Boots AllianceWBAAug 202146.53 17.925.6%Buy (70)
Large capVolkswagen AGVWAGYAug 202219.76 15.006.1%Buy (70)
Large capWarner Bros DiscoveryWBDSep 202213.13 8.34 -Buy (20)
Large capCapital One FinancialCOFNov 202296.25 143.921.7%HOLD
Large capBayer AGBAYRYFeb 202315.41 7.077.6%Buy (24)
Large capTyson FoodsTSNJun 202352.01 59.743.3%Buy (78)
Large capAgnico Eagle MinesAEMNov 202349.80 87.671.8%Buy (75)
Large capFidelity Natl Info ServicesFISDec 202355.50 71.192.0%Buy (85)
Large capBaxter InternationalBAXFeb 202438.79 39.612.9%Buy (60)

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Matthew Warder is Cabot Wealth Network’s Chief Analyst of Cabot Turnaround Letter