Tuesday, 3 November 2015

A few US earnings today: Kellogg's, Mosaic, ADM, Sprint

Another busy earnings day in the US.  Here are a few observations on companies reporting today.

Kellogg's - 
I have struggled with the company historically (see here for example where I noted liking their cereals but noting that the company was struggling to grow). This has continued with numbers reiterated but in earnings progression terms year-on-year, slightly down (FYe EPS 0- -2% range).  On Twitter I observed:

's anticipating FY16 growth after dodgy last 2 yrs but got be takeout believer to chase the stock IMO

Despite US morning foods again showing a bit of form, I would prefer a low teens EV/ebit near US$60 share price to get more excited (on a cash flow/related basis).  The current share price as I write is in the US$67s down around 4% on the day. 

Mosaic - 
I have written plenty of times about the potash/fertiliser specialist - usually whilst citing one of their excellent/informative presentation slides.  However not as much luck on the latter today as I noted earlier on Twitter:

usually has a couple killer charts in its doc. Downbeat affair today. Share near '08 lows doesn't help

Downbeat affair or not the share has shown a little bit of form during October as the more commodity-centric world has bounced:

As I wrote at length in September (link here) this (as is much of the commodity-facing space) is all about working out medium-term value.  I don't own Mosaic but do own many other commodity-facing names for that rationale.  Amazed by the short-term correlation with the seasonality chart (i originally cited this at the September link above):

Sticking with agricultural-facing opportunities brings us to Archer-Daniels-Midland whose numbers today were badly received:

Why was this?  A difficult ethanol market, challenging emerging market conditions and FX issues back into dollars all had an impact.  I also noted on Twitter:

Which chart do you prefer from the presentation deck? Well share -8% tells you the market's preference.

The ROIC/WACC chart above is hardly compelling...although US$2.3bn of capital return equals around 9% of market cap.  On balance the fact that the stock has fallen through the US$44 level I cited in a previous report here strikes me as interesting.  More work on this one. 

Finally, Sprint - 
A simple observation here:

value is fine...

...just don't forget to make some proper (not adjusted) profits too

The share may be bouncing around the lows for the year...

...but at a sub US$20bn market and an over US$50bn EV...one for the experts!

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