Sell Scripps Networks (SNI) – see below for details.
Second-quarter earnings season is more than half over, and 60% of Cabot Value Model and Cabot Enterprising Model Buy and Hold stocks have reported. The reports thus far reveal that sales increased an average of 9% while earnings per share advanced 17%. Sales were 2% better that forecast, whereas EPS beat estimates by 4%.
Best quarterly results were recorded by:
Facebook (FB)
Western Digital (WDC)
FleetCor Technologies (FLT)
Alphabet (GOOG)
Blackstone Group LP (BX)
Price (T.Rowe) Group (TROW)
Celgene (CELG)
Companies that recorded weak results and I will now watch closely include:
Triumph Group (TGI)
General Motors (GM)
Arris International plc (ARRS)
Biogen (BIIB)
GNC Holdings (GNC)
In this Weekly Update, I summarize the latest news for 12 companies. Max Buy and Min Sell Prices are the recent price targets appearing in the Cabot Value Model Issue 277V, for which you received the link on August 3. Results are for the quarter ended June 30. Prices appearing after each stock symbol in this Update are the closing prices on Thursday, August 3, 2017.
Also in this Update, I present two indexes which list companies featured in the Cabot Value Model or in the Cabot Enterprising Model during the most recent four months so you can quickly find my recent write-ups for stocks appearing in the models.
My schedule for the next six weeks will be:
Thursday, August 10: Cabot Enterprising Model issue 277E
Friday, August 11: Weekly Update
Wednesday, August 16: Wall Street’s Best Daily
Friday, August 18: Weekly Update
Thursday, August 24: Wall Street’s Best Daily
Friday, August 25: Weekly Update
Thursday, August 31: Cabot Value Model issue 278V
Friday, September 1: Weekly Update
Thursday, September 7: Cabot Enterprising Model issue 278E
Friday, September 8: Weekly Update
Wednesday-Friday, September 13–15: Cabot Wealth Summit, Salem
Company Reports
Allergan (AGN 250.36) reported strong second-quarter sales and earnings. Sales surged 9% and EPS jumped 20% after increasing 5% and 10% in the prior quarter. Growth was driven by Botox cosmetic aids and new drug launches. The company reported good progress in advancing research studies of promising new drug treatments. Management raised its sales and earnings forecast for the remainder of 2017, despite lagging sales in eye care products, including Restasis. Buy at 256.19 or below.
Alliance Resource Partners L.P. (ARLP 19.05) recorded solid results. Sales fell 9% and EPS climbed 13% after increasing 12% and 206% in the previous quarter. A rise in coal volumes sold were offset by a decline in coal prices received. On July 19, Alliance purchased preferred interests in oil and gas pipelines. These new purchases are expected to produce profits in the current quarter and beyond.
Alliance’s board of directors increased the quarterly distribution to $0.50 from $0.4375. The resulting $2.00 annual dividend and 10.5% yield is very well covered by Alliance’s annual cash flow of $7.00. Buy at 21.98 or below.
Apple (AAPL 155.57) surprised investors with stellar growth in the quarter ended July 1. Sales rose 7% and EPS advanced 18% after increasing 5% and 11% in the prior quarter. iPhone sales remained steady ahead of the company’s new phone launch this fall. Surprisingly, iPad and Mac sales perked up after several quarters of lackluster growth.
Revenue from Apple services: the App Store, iTunes, Apple Pay and iCloud soared 22% during the quarter, and are poised to post rapid growth in future quarters. Apple’s much anticipated new iPhones could provide an additional boost to sales and earnings after launching in September. Hold.
Arris International (ARRS 29.51) produced better than expected results. Sales fell 4% and EPS dropped 25% after declining 8% and 15% in the prior quarter. Growing demand for high-quality internet video bolstered Arris’s broadband equipment sales. Management forecast improving sales and earnings during the third and fourth quarter. Also, the company will acquire Ruckus Networks in the fourth quarter which will add sales and earnings in 2018. Hold.
Cognizant Technology (CTSH 69.95) exceeded analysts’ forecasts. Sales rose 9% and EPS climbed 7% after increasing 11% and 5% in the previous quarter. The company’s focus on digital services and solutions is producing solid growth as more companies digitize their entire operations. Management provided guidance for the remainder of 2017 which met Wall Street analysts’ estimates. Hold.
FleetCor Technologies (FLT 154.18) easily beat estimates. Sales popped 30% and EPS jumped 28% after increasing 26% and 28% in the prior quarter. Management raised its sales and earnings guidance for the remainder of 2017 based on the exceptional second-quarter results.
FleetCor will sell its Nextraq business, acquire Cambridge Global payments for $20 billion, and step up its share repurchases. These moves will have a neutral impact on rest of year sales and earnings, but enhance growth in 2018. Buy at 158.78 or below.
IntercontinentalExchange (ICE 65.15) increased revenue for the 17th straight quarter. Revenue rose 4% and EPS advanced 9% after revenue increased 1% and EPS were flat in the previous quarter. ICE’s New York Stock Exchange launched 49 initial public offerings (IPOs) in the 2017 first half, capturing 88% of the U.S. market for IPOs this year. Earnings growth will likely accelerate during the next several quarters. Buy at 66.86 or below.
MSCI, Inc. (MSCI 111.71) recorded excellent second-quarter results. Revenue climbed 9% and EPS jumped 29% after increasing 8% and 33% in the prior quarter. Index fees based on assets soared 35%, and ETF assets under management skyrocketed 42%. MSCI’s board of directors raised the quarterly dividend to $0.38 from $0.28. The stock’s yield is now 1.4%. Hold.
Scripps Networks (SNI 88.05) will be acquired by Discovery Communications. SNI shareholders will receive $90 per share in the form of $63 cash plus $27 in Discovery Communications common stock. Scripps was first recommended in June 2015 at 67.58. The company was featured in the Cabot Value Model using the Modern Value analysis. SNI has advanced 29.6% in the past 26 months compared to a gain of 18.9 % for the Standard & Poor’s 500 Index during the same time period. Scripps has not quite reached its Min Sell Price of 89.80, but I recommend selling now because SNI shares will likely stay near its current price (89.55) until the merger is finalized. Sell.
Spectra Energy Partners L.P. (SEP 45.72) produced solid sales and earnings. Sales climbed 12% and EPS improved 18% after sales increased 12% and EPS declined 15% in the previous quarter. In early July, Spectra placed a new oil and gas pipeline project into service as part of Spectra’s expansion program. Spectra raised its quarterly dividend for the 39th consecutive quarter to $0.714 from $0.701. The resulting yield is now 6.2%. Hold.
Stifel Financial (SF 49.71) reported excellent results. Revenue rose 8% and EPS jumped 30% after increasing 9% and 37% in the previous quarter. Investment banking revenue soared 39% and asset management fees advanced 20% from a year ago. Management forecast continued success for the remainder of 2017. Buy at 50.20 or below.
WestJet Airlines (WJA.TO 25.63 Toronto Exchange; WJAFF 20.24 U.S. Over-the Counter) beat estimates by a wide margin. Sales grew 11% and EPS soared 37% after sales increased 8% and EPS dropped 42% in the prior quarter. WestJet’s load factor increased to 82.8% from 80.8% in the prior quarter. Load factor measures airline seats occupied per mile (or kilometer) compared to available seats per mile (or kilometer). The pickup in Canada’s economy will help WestJet to post noticeably better results during the next several quarters. Hold.
Index of Latest Summaries – Recommendations featured in recent issues.
