Tuesday, 21 October 2014

Financial Orbit wrap 21/10/14

Five sentences or graphics which sum up the Financial Orbit output over the last 24 hours across the website, twitter account and anything else thought about...

1. Coca-Cola may have retained its medium-term vision but short-term earnings pressures and an enhanced need for cost cuts caused a sharp fall in the share price.

2. I am pretty unimpressed by McDonald's...

3.  ...but the number from United Technologies were solid even if for next year remains uncertain:

4. Well what a market bounce...I liked this chart from @andrewunknown:

5. Interesting energy sector chart in Canada:

A couple more US earnings: United Technologies and Verizon

Some good elements in the United Technologies numbers today although inevitably I focused on the 2015 outlook.  I like the way that the area with the greatest number of constituents is '?'.  

Given a fair wind United Technologies could be a US$10bn operating profit company in a year or so which would put it on x10.7 forward EV/ebit today.  Interesting that I just bought a troubled/'recovering' Rolls Royce share (a rough peer listed in the UK) for just below x10 EV/ebit after a big fall.  United Technologies is not bad value at all despite the uncertainty.

Different sort of profile for Verizon with their steady wireline (fixed) business...

...and small growth (despite some underlying 4G/ARPU good growth) in wireless as investment/competition mounts.

x6.9 forward EV/ebitda?  I observed before that annuity-like telecoms businesses tend to trade around x6 but Verizon has a little growth...and also not too many competitors.  I also note however the company's lack of debt repayment...as the c. 4.6% free cash flow yield matches the dividend payment.  

And if it sounds like an annuity...it trades like one too.  Fine for the explicit income chasers but not for me.  

What's the price to buy some McDonald's shares?

I actually popped into a McDonald's yesterday.  The queue was a little longer than usual despite the best efforts of the staff.  Still within a couple of minutes I had my cheeseburger and life was good.

Life is less good for a McDonald's shareholder today.  The shares look set to open around the US$90 level where they have not sustainably been for a couple of years now:

Now you can understand why.  Just look how the company opens up its latest quarterly numbers:

"McDonald's third quarter results reflect a significant decline versus a year ago, with our business and financial performance pressured by a variety of factors - from a higher effective tax rate, to unusual events in the operating environments in APMEA and Europe, to under-performance in the U.S., our largest geographic segment," 

That's not good.  And neither are some of the leading statistics around the numbers: 

'Global comparable sales decrease of 3.3...Consolidated operating income decrease of 14%...Diluted earnings per share of $1.09, a decrease of 28%'.  At least US$4.5bn worth of shares (5% of market cap) has been bought back this year plus you get a dividend yield of around 3.5%.  

So US$8bn of operating profit today with lots of issues...and of course lots of initiatives ('A flatter, more nimble organization...A revamped marketing approach that links national messaging around our food quality, brand transparency and people initiatives...A simplified menu that showcases the Company's core products') too.  

A single digit EV/ebit would be over 20% down from here.  Hold for yield if you wish, hold for persistence and franchise value maybe too but holding for belief in the growth profile is still a big stretch.  I am still not at the price where I am reaching to buy McDonald's shares.  

Now their food products on the other hand...!

"Coca-Cola: pricing and brand is not everything"

My latest post as a Yahoo Finance Contributor titled 'Coca-Cola: pricing and brand is not everything'
 can be found here.


Monday, 20 October 2014

Financial Orbit wrap 20/10/14

Five sentences or graphics which sum up the Financial Orbit output over the last 24 hours across the website, twitter account and anything else thought about...

1. Potentially interesting news from Japan on the country's core pension fund allocation...potentially accentuating the fall of the yen

'Japan’s $1.2 trillion retirement fund will increase its allocation target for shares to about 25 percent from 12 percent, the Nikkei newspaper reported without attribution.

The Government Pension Investment Fund will also boost its holdings of foreign bonds and stocks to about a combined 30 percent from 23 percent, while reducing domestic notes to the 40 percent level from 60 percent, the Nikkei reported on Oct. 18'

2. Staying indirectly with Japan...good demographic chart from today's Financial Times.  Look at the differences in the graph curves. for different regions.  

3. For my latest Yahoo Finance Contributors article I muse on this chart...

4. ...and this one too:
5. Corporate results today were a bit of a mixed bag...not so great from IBM, SAP and Philips.  Better from some other European names.  Many, many more to come this week...

"Europe: record outflows no reason to panic"

My latest post as a Yahoo Finance Contributor titled 'Europe: record outflows no reason to panic'
 can be found here.


Charts today - global worries, oil, equity outflows, demographics, robots

A few charts today of interest.

Interesting to see the differences in what people are worried about around the world:

Is oil going to bounce here?

Fascinating spread chart via The Daily Shot about the energy sector / leveraged loans in the space.  This is what happens if you get a move like the above:

Biggest European equity outflow in 5+ years...good or bad timing?

Good demographic chart from today's Financial Times.  Look at the differences in the graph curves. for different regions.   

And the country with the most robots worth in the world are...