Tag Archives: cash flow

PepsiCo: $6.4 Billion Is Rewarding For Investors But At What Cost? [Seeking Alpha]

With the market trading at a multi-year high, it may be a good time for smart investors to review their holdings and perhaps take some profits. It is also a good time to review stocks with low beta and strong cash flow to reduce the volatility. PepsiCo (PEP) surfaces when it comes to strong cash flow and low beta. However, taking a deeper look, PepsiCo’s cash flow may not be cheap with current valuation.

Management Update

For 2012, PepsiCo delivered EPS directly on target. The capital spending was 4% of net revenue for 2012, below our target of 4.5%, a 20% reduction from 2011 CapEx investment level. Inventory days had decreased, and payables days had increased. Overall, the company had a healthy cash flow for 2012.

Increasing Operating Cash Flow

Excluding the pension and restructuring cash outflows, the management operating cash flow increased 20% or by more than $1.2B compared to 2011. This cash flow performance enabled the company to return $6.5B to PepsiCo shareholders through a combination of share repurchase and dividends, a 16% increase from 2011.

Enhancing Productivity

As for the productivity commitment, the management executed a comprehensive restructuring program and accelerated the company’s productivity efforts across the value chain. The organization is de-layered, and the efficiency is improved by reducing headcounts and rationalizing the supply chains to reduce costs and investment in fixed assets. As a result of these efforts, the company delivered in excess of $1B in productivity in 2012.

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Zara

Wells Fargo And JPMorgan Chase: Buying For Solid Fundamentals And Inexpensive Cash Flow [Seeking Alpha]

Wells Fargo & Co (WFC) and JPMorgan Chase & Co. (JPM) are two large-cap bank stocks with strong cash flow, which comes at an attractive price (P/CF below 8). Both stocks also have stronger ROE and lower P/E compared with peers. WFC and JPM will be reviewed fundamentally and technically in this article. Investing strategies will also be presented.

Wells Fargo & Co

WFC was up 0.24% and closed at $37.30 on March 26, 2013. WFC had been trading in the range of $29.80-$38.20 in the past 52 weeks. WFC has a market cap of $196.60B with a beta of 1.36. WFC remains a great long-term buy with its solid fundamentals and inexpensive cash flow.

Analysts Calls and Estimates

On March 13, 2013, BMO Capital initiated coverage on WFC with a market perform rating and a price target of $40.00. Analysts currently have a mean target price of $39.51 for WFC, suggesting 5.92% upside potential. Analysts, on average, are estimating an EPS of $0.88 with revenue of $21.58B for the current quarter ending in March, 2013. For 2013, analysts are projecting an EPS of $3.64 with revenue of $85.61B, which is 0.60% lower than 2012. However, for 2014, analysts are predicting an EPS of $3.89 with revenue of $86.43B, which is 1.00% higher than 2013.

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EMC And Activision Blizzard: Buy For Cheap Cash Flow [Seeking Alpha]

EMC Corporation (EMC) and Activision Blizzard, Inc. (ATVI) are two solid technology companies, both with high margins and inexpensive cash flow, as well as healthy balance sheets. Both stocks are currently trading below analysts’ target prices and received positive updates from analysts recently. EMC and ATVI will be analyzed fundamentally and technically in this article. Investing strategies will also be presented.

EMC Corporation

EMC is a leading provider for hardware, software and services for enterprise network storage. EMC holds 80% ownership of outstanding shares in VMWare (VMW), the largest global vendor providing virtualization software for server operating systems. EMC was down 1.70% and closed at $23.74 on March 25, 2013. EMC had been trading in the range of $22.75-$30.00 in the past 52 weeks. EMC has a market cap of $49.96B with a beta of 1.02. EMC remains a great long-term buy for its attractive cash flow despite the short-term pullback.

On March 11, 2013, Longbow Research initiated coverage on EMC with a buy rating and a target price of $30.00. Analysts currently have a mean target price of $29.47 and a median target price of $30.00, suggesting 24.14%-26.37% upside potential. Analysts, on average, are estimating an EPS of $0.39 with revenue of $5.42B for the current quarter ending in March, 2013. For 2013, analysts are projecting an EPS of $1.86 with revenue of $23.47B, which is 8.10% higher than 2012.

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2 Coca-Cola Upgrades: More Cash Pours In [Seeking Alpha]

The Coca-Cola Company (KO) and Coca Cola Hellenic Bottling Co (CCH), both with strong cash flow and steady growth, had received positive upgrades from analysts recently. Both stocks will be analyzed fundamentally and technically in this article. Investing strategies will also be presented.

The Coca-Cola Company

The Coca-Cola Company is the world’s largest beverage company and is the leading producer and marketer of soft drinks. KO was up 1.11% and closed at $39.02 on March 14, 2013. KO had been trading in the range of $34.89-$40.67 in the past 52 weeks. KO has a market cap of $173.90B with a very low beta of 0.51.

On March 14, 2013, Credit Agricole upgraded KO from underperform to outperform with a price target of $43.00 (from $40.00), and Bank of America had reaffirmed its current buy rating with a price target of $41 on KO. On March 13, 2013, Wells Fargo maintained an outperform rating on KO and raised its price target to $42.00-$44.00 (from $41.00-$43.00). Analyst Bonnie Herzog thinks the stock deserves a higher premium relative to peers. As quoted from Bonnie Herzog,

Based on KO’s current valuation, we believe the market is underestimating KO’s long-term growth opportunities and the power of its global bottling network. Therefore, we believe KO’s current valuation premium of only ~10% to its peers is too narrow and presents a good entry point for long-term investors.

Analysts currently have a mean target price of $42.23 and a median target price of $42.00 for KO. Analysts are estimating an EPS of $0.45 with revenue of $11.05B for the current quarter ending in March, 2013. For 2013, analysts are projecting an EPS of $2.14 with revenue of $49.02B, which is 2.10% higher than 2012.

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Monster Beverage And Potash: Improving Signs, High Margins And Steady Cash Flow [Seeking Alpha]

Monster Beverage Corp (MNST) and Potash Corp. (POT), both with higher-than-industry-average margins and solid cash flow, received positive updates from analysts recently. Both stocks will be analyzed fundamentally and technically in this article. Investing strategies will also be presented.

Monster Beverage Corp

MNST was down 0.86% and closed at $47.34 on March 8, 2013. MNST had been trading in the range of $39.99-$83.96 in the past 52 weeks. MNST has a market cap of $7.85B with a low beta of 0.30.

On March 8, 2013, Nielsen convenience store data showed that the energy drink category was up 6% for the four weeks ended February 16, 2013 while MNST outpaced the group at +7.4% and resumed its share gains. Goldman Sachs has a buy rating and price target of $61.00 on MNST. The analyst stated,

Given the negative commentary on overall c-store traffic from our industry contacts, the tough compares for MNST, and lackluster persons at work data for the construction/natural resource sector, we are somewhat encouraged by this +7.4% number as MNST sales in AOC+C-store are now up 7.3% quarter to date vs. our +8% estimate for 1Q13 US DSD sales for the company.

Analysts currently have a mean target price of $60.00 and a median target price of $61.00 for MNST. Analysts, on average, are estimating an EPS of $0.47 with revenue of $504.24M for the current quarter ending in March, 2013. For 2013, analysts are projecting an EPS of $2.26 with revenue of $2.33B, which is 13.10% higher than 2012.

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2 Growing Cash Cow Stocks To Fight Market Volatility [Seeking Alpha]

Altria Group (MO) and The Procter & Gamble (PG) are two companies that offer strong cash flow with low betas. Both companies have a healthy balance sheet with steady sales growth and have been increasing their dividend consistently since 2009. Both stocks will be analyzed fundamentally in this article. Investing strategies will also be reviewed.

Altria Group Inc.

MO was up 0.12% and closed at $34.00 on March 8, 2013. MO had been trading in the range of $29.76-$36.29 in the past 52 weeks. MO has a $68.86B market cap with a very low beta of 0.47.

Analysts currently have a mean target price of $36.82 and a median target price of $36.00 for MO. Analysts, on average, are estimating an EPS of $0.53 with revenue of $4.04B for the current quarter ending in March, 2013. For 2013, analysts are projecting an EPS of $2.39 with revenue of $17.65B, which is 0.90% higher than 2012.

MO is currently offering an annual dividend yield of 5.18%. Since mid-2009, MO had been increasing its dividend consistently. The dividend yield had been stabilizing around 5% since 2012, as seen from the chart below.

(click to enlarge)

 

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3 Large-Cap Stocks With Revenue Growth And Strong Free Cash Flow [Seeking Alpha]

The markets have been in a rally mode since the beginning of 2013. The S&P 500 closed above 1,500 for the first time in more than five years on January 25, 2013, as strong earnings continued to boost the index. Investors’ sentiment is very bullish, and the market is driven by extreme greed. Nonetheless, intelligent investors know that too much optimism may not be a good thing, as quoted from Warren Buffett, “Be fearful when everyone is greedy. Be greedy when everyone is fearful.” The central theme of this article is not to predict the market direction, but to review a list of high quality large-cap stocks that generate strong free cash flow while continuing to grow its revenue. So, when the tide turns, investors can still count on steady cash flows from these stocks with solid fundamentals.

Company Name (Ticker) Revenue, ttm Quarterly
Revenue Growth, ttm (yoy)
Levered Free Cash Flow, ttm Diluted
EPS
Forward Annual
Dividend Yield
Cisco Systems, Inc. (CSCO) $46.68B 5.50% $9.27B $1.55 2.60%
China Mobile Ltd. (CHL) $86.83B 6.60% $5.26B $4.97 3.50%
The Coca-Cola Company (KO) $47.60B 0.80% $6.42B $1.91 2.80%

Source: Yahoo Finance

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