Category Archives: Sectors
Debt Refinancing Eliminates Risk of Default; But Diversified Healthcare Trust Will Need to Raise Equity Eventually
Diversified Healthcare Trust (DHC) reported 2020 second quarter normalized funds from operations (FFO) (according to my definition) of $52.8 million or $0.22 per share, down 33% from $81.1 million or $0.33 per share in the prior year quarter. The decline … Continue reading
Five Star’s Strong Stock Performance Could Signal Quicker Turnaround
Five Star Senior Living continues to cope with the effects of the COVID-19 pandemic on its operations. During the 2020 second quarter, it experienced a 3.8% decline in occupancy from 82.5% to 78.7% across its owned and managed senior living … Continue reading
After the Quick Rebound, Investors Should Approach Homebuilding Stocks with Caution
Homebuilding stocks have been on a wild ride in 2020. They boomed from the start of the year, rising 19.1% (according to my index of 11 publicly-traded builders) to February 21, handily beating the 3.0% gain on the S&P 500 … Continue reading
DHC Cuts Distribution As It Copes with COVID-19 Fallout
DHC’s share price closed on Thursday (4/9) at $3.51, down 58.4% year-to-date, worse than the peer group average of down 24.7%, but the stock is up from its bottom of $2.00. Most of the losses for DHC occurred during March. … Continue reading
Deep Dive on GE: Sum-of-the-Parts Valuation
As noted in a previous post, it is most appropriate to value GE as a single, stand-alone enterprise. Several unifying investment themes support this view:
Deep Dive on GE: GE Capital
In April 2015, partially in response to the regulatory restrictions that accompanied GE Capital’s designation as a systemically important financial institution by the Financial Stability Oversight Council, GE adopted the GE Capital Exit Plan, under which it planned to reduce … Continue reading
Deep Dive on GE: Consolidated Enterprise Valuation
In my view, the most appropriate way to look at GE’s stock valuation is to consider the company as a single enterprise. In this analysis, I compare its current valuation to peers. My calculations for GE’S enterprise value-to-EBITDA multiple at … Continue reading
Deep Dive on GE: Projected 2020 Consolidated Results
Based upon management’s guidance given at General Electric’s 2020 Outlook meeting on March 4th, I project 2020 Industrial Leverage EBITDA of $11.6 billion, up roughly 3% from 2019. Industrial Leverage EBITDA was given in the appendix to the company’s 2020 … Continue reading
Deep Dive on GE: The 2020 Outlook for its Businesses
Given the complexity of its business mix and financial structure, valuing GE is not an easy exercise even under benign economic conditions. The task is made even more difficult when there is considerable uncertainty about prospects for the global economy.
Though It Might Be Delayed, GE’s BioPharma Sale is Set to Close
GE’s stock has been battered during this sell-off, falling much more than the broader market as a whole. Since reaching an intra-day peak of $13.26 on February 12 (roughly one month ago), the stock has fallen 40.8% to its March … Continue reading
A Strong Start for Housing
2019 was a solid year for U.S. housing. While still subject to modest revisions, government figures show that new residential sales increased 10.4% from an estimated 617,000 units in 2018 to 681,000 units in 2019. Single-family housing starts advanced 1.4% … Continue reading
NJR Adjusts to Meet Its Challenges and Opportunities
Under new CEO Steve Westhoven, the business portfolio of New Jersey Resources (NJR) has evolved as it typically does in response to changes in its operating environment. Its regulated utility operations, New Jersey Natural Gas (NJNG) and its Midstream segment, … Continue reading
Brightcove’s Prospects Look Brighter
A key change at Brightcove since my last post has been the turnover at the top. In August 2017, after three consecutive quarters of earnings misses, Dave Mendels, who had served as CEO for more than four years, agreed with … Continue reading
Homebuilder Stocks Fall as Optimism About Global Economic Growth Rises
Homebuilding stocks have been the best performing of the 150-odd sectors in the Dow Jones U.S. Total Market Index, up 44.4% over the past 12 months as of November 8. Last year, they declined sharply in the face of Federal … Continue reading
Notes and Analysis from HPE’s 2019 Securities Analyst Meeting
At its 2019 Securities Analyst meeting (SAM) held in New York City on October 23, the senior management of Hewlett Packard Enterprise (HPE) said that the company was poised to enter the third phase of its evolution: pivoting to sustainable, … Continue reading
SNH Still Seems Behind Goal on Asset Sales
SNH has set a goal of $900 million in announced or closed asset sales in 2019. With more than nine months of the year gone, it has completed only $119.1 million in asset sales and has an estimated $125 million … Continue reading
Eliminating the RMR Discount
The five publicly-traded REITs that are managed by the RMR Group, Inc. (RMR), a Newton, Mass.-based property manager, have often traded at significant discounts to their peers. The discount has been attributed to the nature of the relationship between RMR … Continue reading
NYT Magazine Article on the Boeing 737 Max
The cover story in this week’s Sunday New York Times Magazine is “What Really Caused the Deadly Crashes of the Boeing 737 Max?“. While acknowledging that malfunctions caused the crashes, it also documents in detail the errors made by the … Continue reading
A Review of the Markopolos Report on General Electric
On August 15, 2019, Harry Markopolos, who gained fame as the person who exposed the fraud perpetrated by Bernie Madoff, released a 175-page report entitled “General Electric, A Bigger Fraud Than Enron.” GE’s stock fell 11.3% on the day; but … Continue reading
A Reset for Senior Housing Properties Trust
In response to the financial difficulties of its primary tenant, Five Star Senior Living (FVE), Senior Housing Properties Trust (SNH) has been forced to negotiate a change in the structure of their business relationship. Specifically, SNH has agreed to cancel … Continue reading
The Old and New Five Star
Five Star Senior Living (FVE) and its landlord Senior Housing Properties Trust (SNH) have previously announced a restructuring of their commercial arrangements whereby SNH will cancel the five master leases that cover 181 senior living and skilled nursing facilities currently … Continue reading
A Solid First Half for Housing and the Builders
A typical analysis from policy makers, like the Federal Reserve, points out that activity in the housing market has declined so far this year; but that assertion focuses primarily on housing starts. A more complete picture from the national data … Continue reading
Notes and Analysis from Merck’s Investor Day
On June 20, Merck held an investor day, its first in five years, to highlight its goals and objectives and provide a broad perspective on its five-year performance outlook. Although its blockbuster cancer treatment, KEYTRUDA (pembrolizumab), has been a spectacular … Continue reading
Bluegreen’s Share Price Plunges on Bass Pro Contract Cancellation
Shares of Bluegreen Vacations Corporation (BXG) received a double whammy in May from the parent company BBX Capital’s (BBX) decision to back out of its offer to buyback BXG’s public float – equal to 10% of outstanding shares – and … Continue reading
A Solid 2019 First Quarter for New Home Sales
As anticipated, the market for new single-family houses rebounded from a steep 2018 fourth quarter slide to post modest gains in the 2019 first quarter against fairly strong 2018 first quarter levels. The primary driver of the housing rebound has … Continue reading
The Outlook Begins to Improve (Gradually) for BHGE
The net income and EPS figures for the 2019 first quarter for Baker Hughes, a GE company, are confusing as presented. The company reported net income (before income or loss allocated to the non-controlling interest, which is GE) of $71 … Continue reading
AT&T (T) 18Q1 Results
AT&T reported diluted EPS of $0.56 per share, down from $0.75 a year ago. Non-GAAP adjusted EPS of $0.86 per share was up slightly from $0.85 last year and in line with consensus estimates. The difference between GAAP and non-GAAP … Continue reading
Arch Coal (ARCH) 18Q1 Results
Arch reported 18Q1 diluted EPS of $3.91, up from $2.75 in 17Q1 and well ahead of the consensus estimate of $2.71. The gain in earnings came despite a 3.5% decline in revenues to $555.2 million, primarily because of lower expenses … Continue reading
Acme United Corp. (ACU) 18Q1 Results
The company reported diluted EPS of $0.24 per share, up from $0.21 a year ago. Sales declined 1% to $31.4 million due mostly to a non-repeat of a large order from a distributor who was launching a first aid kit … Continue reading
American Express 18Q1 Results: The Momentum Continues
Earnings of $1.80 per share included a $0.21 charge related to merchant fees litigation. Excluding that charge, AXP’s 2019 first quarter EPS would have been $2.01, up from $1.86 a year ago and in line with market expectations. Management reported … Continue reading
Senior Housing Properties Trust Nears Restructuring/ Acquisition of Five Star
After reporting a 2018 fourth quarter loss of $23 million, negative EBITDA for the quarter of $12.5 million and a $51 million drawdown on its bank credit facility, it is clear that Five Star, SNH’s largest tenant, must obtain a … Continue reading
Housing Market Update – February 2019
The outlook for housing (or more precisely, sentiment about the outlook for housing) has improved in recent weeks, primarily because of the decline in mortgage rates. The average rate on the 30-year mortgage has fallen by 57 basis points (bp) … Continue reading
GE 18Q4 Results: Curb Your Enthusiasm
General Electric (GE) posted 2018 fourth quarter results that were viewed positively by the financial community primarily because there were no new major negative surprises. Although management gave an update on the company’s recent progress and certain aspects of its … Continue reading
American Water Works (AWK) 2019 Update
American Water Works Company (AWK) has delivered superior operating, financial and stock price performance over the past eight years. Its 2018 performance did not match the eight year average in either absolute or relative terms. However, management is confident in … Continue reading
Acme United Battles the Headwinds
2018 was a rough year for investors in Acme United Corporation’s (ACU) stock, including CEO Walter Johnsen who owns 15% of the outstanding shares. ACU’s 2018 total return was -38%, worse than the Zack’s Micro Cap Index’s 17% decline. The … Continue reading
Despite Progress, HPE’s Shares Struggle
Despite progress recorded in both its restructuring and its financial performance, HPE’s shares underperformed the market. Several factors contributed to the underperformance; but the shares should have upside if the company can deliver on its guidance. Continue reading
SJI Outlines Its Vision
SJI’s stock has underperformed peers due in part to disappointing guidance for 2018 given at its recent analyst meeting. However, if management is able to deliver on its 2019 guidance, the stock should have reasonable upside, especially since it is trading at a discount to its peer group. Continue reading
Five Star Heads Toward a Restructuring
As a result of recent operating losses, Five Star Senior Living faces a restructuring with its landlord, Senior Housing Properties Trust. Continue reading
The Pause that Refreshes the Homebuilders?
It has certainly been a rough year for homebuilding stocks, but not nearly so bad for the housing market. The Lark Research Homebuilder Stock Price Index, an equal weighted average of eleven publicly-traded homebuilder stocks, was down 29.2% year-to-date through December 7. By comparison, the S&P 500 has declined 1.5% and the Russell 2000 has declined 5.7%. Continue reading
BXG 2018 Third Quarter Update
Since floating the IPO in November 2017, Bluegreen Vacations Corporation’s (BXG) share price has come full circle. The stock opened its first day of trading at $13.55, rallied to a high of $25.91 in July and has since fallen back … Continue reading
After Earnings, GE’s Stock Hits a 9-Year Low
General Electric (GE) reported 2018 third quarter results on Tuesday, October 30. This was the first conference call for newly-installed Chairman and CEO H. Lawrence (Larry) Culp, Jr.
Thoughts and Observations on Campbell Soup’s Upcoming Proxy Fight.
On May 18, 2018, in conjunction with the release of fiscal 2018 third quarter earnings report, Campbell Soup Company (CPB) announced a “CEO transition.” Denise M. Morrison, who had served as Campbell’s President and CEO since August 2011, was retiring … Continue reading
A Review of AT&T’s Prospects Following the Time Warner Acquisition
AT&T completed its acquisition of Time Warner on June 14, 2018. Under the merger agreement, Time Warner shareholders received $53.75 per share in cash and 1.437 shares of AT&T stock for each TWX share held. In total, Time Warner shareholders … Continue reading
A Process of Adjustment for the Homebuilders
2018 has been rough for homebuilding stocks. The Lark Research Homebuilder Stock Index, which is an equal-weighted measure of the price performance of ten publicly-traded homebuilders, was down 19.9% year-to-date through August 3rd, far worse than the gains of 6.2% … Continue reading
GE Part 3: Contemplating GE Capital
Besides the recent weakness at Power and Oil & Gas, GE has been grappling with legacy issues at GE Capital. Although it has been downsizing for more than a decade now – reducing its assets from $660 billion at the … Continue reading
GE Part 2: Assessing GE’s Value
On June 26, General Electric (GE) announced the outcome of its strategic review. Besides divestiture actions already announced, the company said that it will spin-off its Healthcare business over the next 12-18 months and distribute its 62.5% stake in Baker … Continue reading
GE Part 1: 18Q2 Results
General Electric reported disappointing 2018 second quarter GAAP earnings attributable to shareholders of $736 million or $0.07 per share, down 30% from $1.03 billion or $0.10 per share last year. Adjusted (Non-GAAP) EPS, according to the company’s definition, was $0.19 … Continue reading
Arch Coal (ARCH) 18Q1 Update
2018 First Quarter Results. On April 26, Arch Coal reported disappointing 2018 first quarter results. Adjusted EPS for the quarter was $2.95, up from $2.82 last year, but behind the consensus forecast of $4.22. Revenues declined 4.3% to $575.3 million, … Continue reading
An Update on Senior Housing Properties Trust (SNH)
Pressure from Declining Occupancy; But SNH Has Sufficient Financial Flexibility to Cope for Next Two Years or More.
Consolidated Water 18Q1 Update
CWCO reported first quarter net earnings attributable to stockholders $2.1 million or $0.14 cents per diluted share. That compares with 17Q1 net income of $2.6 million or $0.18 per diluted share. Revenues declined 2.2% to $15.7 million.
Notes and Analysis From GE’s Investor Update
“You can’t grow long-term if you can’t eat short-term. Anybody can manage short. Anybody can manage long. Balancing those two things is what management is” -Jack Welch As everyone knows, this has been a tough year for GE shareholders. … Continue reading
Notes and Analysis from HPE’s Analyst Meeting
Key takeaways: Through its HPE Next transformation plan, HPE will spend $1.1 billion over the next two years to achieve annualized cost cuts of $1.5 billion by the end of 2020. It will reinvest about half of the savings to … Continue reading
American Express (AXP) 2017 Third Quarter Results
Ken Chennault announces retirement in February 2018 and Steve Squeri will become Chairman & CEO Third Quarter EPS of $1.50 vs. $1.20 last year and consensus of $1.48 Management raised full year 2017 guidance from $5.40-$5.80 to $5.80-$5.90 Earnings growth … Continue reading
Potential Implications of GE’s Latest Management Transitions
On Friday (10/6), after the market close, General Electric (GE) announced that three of its senior executives, all Vice Chairs – John Rice, CEO of GE’s Global Growth Operations, Beth Comstock, CEO of GE’s Business Innovations and Jeff Bornstein, CFO … Continue reading
Imperial Oil (IMO): The Poor Stepchild of Exxon Mobil
Imperial Oil (IMO), in which Exxon Mobil Corp. has a 69.6% stake, is the largest integrated oil company in Canada. Across the value chain, it is a leading producer of oil (primarily through its assets in the Athabasca oil sands), … Continue reading
HPE’s Transformation Continues with The Seattle Spin-Off
Since it was spun off from Hewlett-Packard Company in November 2015, Hewlett Packard Enterprise Company (HPE) has made several important strategic moves to remake its business.
Baker Hughes Will Likely Reinstate Its Dividend
Baker Hughes and General Electric completed their merger on July 3, 2017. Baker Hughes shareholders received $17.50 in cash and one share of new Baker Hughes stock (BHGE).
Five Star Senior Living Struggles to Regain Profitability
Shares of Five Star Senior Living (FVE) have performed poorly over the past two years, even underperforming FVE’s peer group, which has significantly underperformed both the health care sector and the broader market. The industry is suffering from a slow … Continue reading
PSEG Dances to Stay Fit
Public Service Enterprise Group (PSEG) is a public utility holding company whose principal direct operating subsidiaries include Public Service Electric & Gas (PSE&G), which serves 2.2 million electric customers and 1.8 million gas customers along a northeast to southwest swath … Continue reading
An Update on Arch Coal (ARCH)
Arch Coal emerged from bankruptcy on October 5, 2016 and recently filed its 2016 10-K which included its fourth quarter performance (Oct. 2 to Dec. 31) as a reorganized (i.e. successor) company. With its quick emergence from Chapter 11, substantial … Continue reading
UPS Investor Day: Invest. Grow. Deliver.
UPS held an investor day in New York City on February 22, three weeks after reporting disappointing fourth quarter results. Its stock fell sharply on the earnings news, giving back all of its Trump rally gains. So far this year, … Continue reading
Update on Consolidated Water (CWCO)
Shares of Consolidated Water (CWCO) have struggled over the past several months, extending a period of underperformance vs. peers that stretches back for more than a year. Year-to-date (through 12/9), CWCO has posted a loss (including dividends) of 6.4%. That … Continue reading
Arch Coal Post-Bankruptcy
On October 5, Arch Coal officially exited the bankruptcy process. The exit came just short of nine months after it had filed for bankruptcy on January 11, 2016. This was a remarkable achievement, given the company’s size, the large and … Continue reading
Thoughts and Analysis from Tenaris’s Investor Day
Tenaris S.A. (TS) is one of the world’s leading manufacturers of seamless and welded steel casing and tubing, otherwise known as “oil country tubular goods.” Its products are used mostly in oil & gas drilling operations.
Arch Coal Puts Its Bankruptcy Plan to a Vote
On July 6, the bankruptcy court approved Arch Coal’s Third Amended Bankruptcy Plan and Disclosure Statement. That set in motion the voting process which is scheduled to end on August 31. If there are no hitches and creditors vote in … Continue reading
Coal Sector Update
The Dow Jones U.S. Coal Mining Sector Index has more than doubled so far this year, up 117.6% through July 15, obviously much better than the broader DJ US Total Market Index’s gain of 5.7%. Much of coal’s gains reflect “dead … Continue reading
The Coal Industry Goes Bust
Very few industries have suffered a decline as steep as coal’s. In just five years, the coal industry has gone from relatively healthy to almost entirely bankrupt. Major coal producers – including Peabody Energy, Arch Coal, and Alpha Natural Resources … Continue reading
An Update on Merck (MRK)
Product Pipeline Successes. Merck has enjoyed a couple of notable successes in its product pipeline over the past year. The first and most important is Keytruda (pembrolizumab), the company’s anti-PD-1 (programmed death receptor-1) immunotherapy treatment for cancer. Keytruda has already … Continue reading
Notes and Analysis from AXP’s Analyst Day
Shareholders of the American Express Company have had a pretty rough ride over the past few years. Since 2013, when AXP’s stock earned nearly twice the S&P 500, the stock has underperformed the broader market significantly
American Water Works (AWK) Update
2015 has been another strong year for the stock of American Water Works (AWK). Year-to-date (through Dec. 18), it is up 11.7% on price and has delivered a 14.5% total return. By comparison, the S&P 500 is down 2.6% on … Continue reading
Consolidated Water (CWCO) 2015 Third Quarter Update
Consolidated Water (CWCO) reported 2015 third quarter earnings of $0.12 per share, compared with $0.13 per share in the prior year comparable quarter. Revenues of $14.6 million, were down 14% from $17.0 million last year. Both earnings and revenues fell … Continue reading