Buffalo wild wings analysis (3-6-2011)

BWLD has PE over 20 and viewed as a growth stock. The restaurant looks really sporty and as their own words put it: wings, beer, & sports. I hope they can eventually adopt the healthy idea of organic chickens:). Well, you know, Chipotle does it and investors are really buying into it. But I'm not worried about Buffalo wings not being too healthy as I assume the value proposition leans on sports environment more than just wings.

The restaurant just released their latest quarterly and 2010 yearly results.
 http://phx.corporate-ir.net/phoenix.zhtml?c=146403&p=irol-newsArticle&ID=1526559&highlight=
The numbers are pretty good and the recent Super bowl does help the outlook of the chain. And it plans to open 100 new stores in 2011 (both owned and franchised). The historical data shows that they own 35% of stores and franchise 65%. The royalty fee is about 5% of the franchise sales. I'm graphing the number of stores and the new open for the past few years.

The table in the graph just listed the Same Store Sales (also called comps). Retail industry view this measure as very important. It essentially tells you how a store's sales performed compared with last same period (A store has to be opened for over a year to be counted)

BWLD's comps are trending down although most of time in the positive territory which is a good thing: growth is still there. Considering the recession impact their performance looks good. And if you believe in the consumer confidence's coming back the comp sales should start to go north. 

Now let's look at the financial summary.

Most of the number looks good and top line growth is consistent there. There are two type of sales growth: same store sales growth and addition of new stores. 2010's growth is mainly the new stores they added. And the growth strategy is intact. If there is one thing investors should be concerned I would say the chicken price as you see the food price inflates all over the world now. Increase of chick cost would depress BWLD's margin for sure. Then the counter argument depends on the consumer's spending capability to see if the restaurant can pass on the cost to consumers. I say they can but we'll see.

The stock price spikes after the earning report but then start to pull back (see graph below). The short ratio is pretty high on the stock ~16.4% (from Yahoo Finance) and institution holding is around 87%. So it looks like there are many believers but also quite some disbelievers being short on it. 

I'm still bullish on it in the long term based on what the numbers are telling me. So I'll hold my long position. However if you take BWLD as trading stock, swing trade seems works pretty well. (Just personal opinions/observations, as always, your money your decision:)

Amazon.com earning release 1-27-2011

On 1/28/2011, Amazon's stock price dropped more than 7% to 171 after a concerning earning report. I'm surprised to see Amazon didn't do well comparing with same quarter last year since the weather from holiday season till now favors online shopping. How did the company do anyway? It did well in general except for the efficiency which is really important for companies like Amazon.com and Walmart.

Amazon's sales has a great seasonal pattern so you have to compare within same quarters for different years as you look at ratios. If you look at Asset turnover for 4th quarters you'll find 0.79 vs 0.84, this year vs last year. 

Similarly if you look at the inventory turnover ratios for the quarterly results you should find this year's number is not as good as last year. I believe these efficiency numbers are the main driver worrying investors, sending the stock 7% lower. Well, of course, the general market condition is in the correction mood which also encouraged some taking profit. 

Now let's take a look at Amazon's earning surprises and market reactions. 

It has been the 3rd quarters since Amazon hasn't delivered nice surprises. And the stock price is actually still pretty close to its all time high. If the market goes down from here I would expect Amazon will go down further. However, I personally like the company and I believe it will become more dominant in the future so I'll definitely load its stock when bargain price comes along. When I get more time I'll do a more thorough research on Amazon. It should be worth my time investment:).

Netflix subscriber-1-26-2010

Alright, another blow-out earning for Netflix. Subscriber's growth is superb, although it's still defined in my linear line shown underneath.

I don't think this quarter changes my thesis:

http://mzexcel.blogspot.com/2010/11/netflix-analysis.html

Latest earning: 

http://files.shareholder.com/downloads/NFLX/1145258571x0x437075/925e81c4-3d5d-44b6-ae5e-a70c91251131/Q410%20Letter%20to%20shareholders.pdf

Updated subscriber, acquisition cost, churn, average revenue etc. 

Quarterly earning release stats

Over 100 companies have reported earnings for the most recent quarter. Here are some stats which might be interesting.

Apple's latest quarter earnings

A busy week. Heavy weight tech firms had their leadership shakeup and investors are also busy valuating which banks are better. Apple has a great earning release but Jobs is on sick leave again. Google wants to get the star-up feel back as Eric moves aside to deals, government, and customers duties. HP changes some of board members as the discontent of shareholders towards the handling of Mark Hurd mounts. These board/executive changes can be good or bad but I definitely think loss of Jobs will be a changing point for Apple. Business week has a good article talking about the issue: http://www.businessweek.com/magazine/content/11_05/b4213006664366.htm

“Only Steve Jobs could have had the visionary spirit—and risk tolerance—to turn Apple into a mobile phone company” I totally agree. World’s second large company’s leader bears great pressure and I would be surprised to see Apple without Jobs keeps up with continuous meaningful innovations. Tim Cook is an operations genius which only guarantees profitable operations but probably not the long term super high growth some investors were imagining while holding the company’s stock.

Whatever happens next Apple’s staggering performance should be able to hold for a while I think. Here are some stats on this latest quarter’s earning. 

You might think I'm going too academic here.:) but after I read some journal articles about SUE (standardized unexpected earnings) I think it's useful somehow. Google it if you're interested.

an awesome quarter.

Intel's Earning Release 1-13-2011

New quarterly/annual reports start as Alcoa kicked off another round of earning releases on 1/10/2011.Intel reported on Thursday with great quarterly and annual results. However, the market reactions was not as great: 1% drop on the share price on Friday (Price is at 21.08).

Intel share price rose ~7.6% since last earning report while S&P500 gained ~10% and Nasdaq gained ~11%. It's sort of funny while investors all look at Intel for the signal of tech sector but just waiting to decide what else they should invest. People could still say it's still good to have INTC as part of portfolio to minimize risk and get dividend. So see if you belong to that group.

I like Intel's thoughts on security issues, plans for cloud computing and mobile computing but I would like to see those things payoff before I start to put it into my growth stock list:).

Now, let's take a look at the financials after Intel's latest report.

Sales growth and margins are all very good.

I guess it's pretty safe to say recession is really over by looking at Intel's EPS trend:). Again, great earnings (some upside surprise as well) but market didn't react well. I would say Intel won't beat the S&P500 by next quarter.

Previous quarterly report analysis on Intel:

http://mzexcel.blogspot.com/2010/10/intels-er.html

Walgreen's latest earning release

Walgreen (WAG) had a good report today and market reacts positively (5.5%). I'll just list the ratios and some stats first for whoever might be interested in it. I might visit it later for further analysis since I think it may become a good dividend candidate (so far dividend yield: 1.8%) for retirement portfolio.

WAG's recent quarters have good performance despite of down trend of annual results (such as profit margins). I expect next annual report should reverse that trend. 

stock performance since earnings review 12/21/2010

I compared average daily returns for the stocks listed with S&P500's average daily returns. You should be able to tell the outperformed ones from underperformed from the highlight. 

Research in Motion, Oracle earning releases

Good earnings came out after-hour today. 2% and 4% up for RIMM and ORCL, respectively. I expect them to continue to outperform the market following the earing reports. 

RIMM's international expansion might work out for the company despite of Iphone's erosion of RIMM's market share.

Oracle's stats

summary of latest quarter EPS and Revenue growth by industry

https://spreadsheets.google.com/pub?key=0AvIjckAaik-SdDlxc3RjYi1NdDE1c2k0b003UWRsemc&hl=en&gid=0

Based on briefing.com's latest quarter earning data, I summarize the earning and revenue growth by industry. It should become more useful if more quarter's data are included since a trend analysis can be performed. I'll try to update this data set once a month.

Cisco's latest earning report

A not bad earning but very bad outlook. As Cisco beat both revenue and earnings their guidance for next quarter is far below expectations. http://www.reuters.com/finance/stocks/keyDevelopments?rpc=66&symbol=CSCO.O&timestamp=20101111023000

“Cisco Systems, Inc. announced that for fiscal 2011, it expects annual revenue to grow in the range of 9% to 12% on a year-over-year basis. For the second quarter of 2011, it expects revenue to be in the range of 3% to 5% on a year-over-year basis and earnings-per-share (EPS) to be in the range of $0.32-$0.35 per share and GAAP EPS to be in the range of $0.08-$0.10 per share lower than the non-GAAP EPS. The Company reported revenues of $40.040 billion in fiscal 2010; revenues of $9.815 billion in the second quarter of 2010. According to Reuters Estimates, analysts were expecting the Company to report EPS of $0.42 on revenues of $11.083 billion for the second quarter of 2011; revenues of $45.279 billion for fiscal 2011. “

So there you have it, ~17% drop after the ER day. Has the fundamental changed? Probably not, Cisco is just getting large and hard to grow fast. Acquisition helps growth but as you might know the cost of acquisition is also usually high. Many times so called synergy never materialize. I believe it won’t be an exception for Cisco.  

For people don’t know Cisco, here is short intro from Google finance:

Description

Cisco Systems, Inc. designs, manufactures, and sells Internet protocol (IP)-based networking and other products related to the communications and information technology (IT) industry and provide services associated with these products and their use. The Company provides a line of products for transporting data, voice, and video within buildings, across campuses, and around the world. Its products are designed to transform how people connect, communicate, and collaborate. Its products are installed at enterprise businesses, public institutions, telecommunications companies, commercial businesses, and personal residences. The Company has five segments: United States and Canada, European Markets, Emerging Markets, Asia Pacific, and Japan. The Emerging Markets theater consists of Eastern Europe, Latin America, the Middle East and Africa, and Russia and the Commonwealth of Independent States. In September 2010, the Company acquired Arch Rock Corporation.

I really like the telecom concept and have been enjoying the Skype and such products. Communication is supposed to be easy. The trend as I see is on mobile communication: facetime etc.

 In theory, IT spending should pick up as economy slowly recover. But Cisco’s guidance told a different story. Let’s hope it’s a localized issue.

Now let’s take a look at how analyst view Cisco: pretty bearish lately.

How is the stock perform on earning report day? Not exciting at all.

Non-GAAP earnings: not good growth sign. (compare it with Amazon you’ll see what I mean sign of growth).

The stock of the company seems really stuck into a range if you look back five years. I don’t blame investors since I don’t think I want to own their stock even after 19% drop.

The quarterly financial key data is listed in next table.

A few points: bad margin trend, bad sale growth trend, and would be worse considering the guidance for next quarter. 

Liz Claiborne Inc.(LIZ) earning report

I didn't know this stock until a friend mentioned. It reported earning this morning and had a great run so far. Here is the release. http://www.lizclaiborneinc.com/web/guest/pressreleases Liz Claiborne, Inc., incorporated in January 1976, designs and markets a global portfolio of retail-based brands, including JUICY COUTURE, KATE SPADE, LUCKY BRAND and MEXX. It is apparently a financially stressed company and the trading on this stock is volatile. 

Looks like investors (maybe I should say traders) like the narrowed lost. Based on the release you can see the adjusted loss is around -0.04 (Non-GAAP measure again) which is indeed much less than before.( see from the ER EPS graph). Even from the GAAP number you still can tell the profitability improvement (quarterly earning summary). The sales is picking up as well which shows the reversing downward trend. Investors certainly hope that continues. Well, considering the holiday season, they might get what they want on LIZ.

Quarterly earning summary

Financial ratio analysis (Margin looks good, efficiency is alright, but the liquidity and leverage ratios are still bad)

However, LIZ's equity keeps shrinking as it lost money for past two years. I would assume they will have higher borrowing cost which will negatively impact the profit. In order to dig deeper on the stock, some sort of monthly retail report might be worth the money.

Blackboard Inc.(BBBB) earning report

http://www.blackboard.com/Company/Media-Center/Press-Releases.aspx?releaseid=1491354

BBBB is a good business but current economic situation could keep negatively impact its business. Most of universities are cutting budget so the growth won't be high for a while. Currently the stock is priced as a high growth stock if you simply look at its PE ratio (67). A great company like Amazon just has that level of PE but with a much bigger potential as I see it.

The new quarter report is just alright since everything is inline with forecast. No wonder there is not much action in after-hours. Here are analysts' opinion and key ratio trend summary for those of you interested in BBBB.

Skilled Healthcare Group, Inc. (SKH), latest earning report -- Stats & Financial ratios

ER stats for SKH. It seems the momentum is still going today. Be careful. I'm not recommending stock here because I believe people should make their own decisions based on their own analysis. In addition, to invest in low price stocks you have to be ready to take big loss and you have to watch the fundamentals very closely.

Analysts' view (EPS & Revenue beat, and better management outlook guidance)

 ratio analysis: note here the data is GAAP standard.

Notice here both the analyst estimate and actual EPS results are in Non-GAAP term. What does that mean? GAAP is US standard for financial statement reporting so US firms (To be exact, firms listed in US) have to report GAAP data. Some firms want to show something else not reflected/disguised in GAAP so they will report Non-GAAP data. SKH is doing this to demonstrate their core operating results without the legal charges (non-recurring) etc. If you believe the company’s fundamentals are not influenced by the non-recurring items you should be fine to judge the performance by NON-GAAP numbers. Similarly in the report, EBIDA and such (management’s performance metrics here) are mentioned and explained. You might want to read that. It's a good measure for free cash flow of a company. All else being equal, good free cash flow is definitely a good thing.  

Skilled Healthcare Group, Inc. (SKH), latest earning report

Release is here: http://finance.yahoo.com/news/Skilled-Healthcare-Group-prnews-1535240150.html?x=0&.v=1. It has 21% run today after the better number and outlook.

You probably never heard of this one before. It’s in the healthcare sector, long term care industry. This is one stock I’m having for a long shot. Right now it’s in the low price category (<$5) and it’s really volatile. The reason I picked this one is due to the dramatic sell-off a while ago. I wished I had picked it up right after the sell-off. 

The sell-off is due to lawsuit payment: over 600 million which was eventually reduced to ~54 million. What is the lawsuit about? Simply put, SKH didn’t have enough nurses to take care of the patients/residents they accommodate. It’s actually an industry norm as I see since I had some first hand experience with nursing home companies. There are always not enough personnel as facility managers have to watch their labor cost very closely. They will let nurses go home early if resident census goes down. This is happening on a daily basis. Most of the nurses are working on hourly salary and they don’t get paid as well as those in hospitals; then the turnover ratios are scarily high—over 70%. For a nurse to stay in a nursing home facility he/she does have to gain pride in what he/she does. Good management is the key.

It is a challenging industry but also rewarding one. Most of time, Medicare, Medicaid, etc get the patients covered and the money is from Government. As long as the company has experts who know the regulation well and evaluate patients/residents well the revenue is guaranteed. Normally for a well-managed nursing home the cash flow is great. Think about the baby boomers in the States and people do get old and ill. In 20 or 30 years, the demand for nursing home service could explode.

As you read the Skilled Healthcare Group’s report, there are a few points you might want to pay special attention: medicare mix, skilled mix, occupancy rate, and also the revenue per patient day by type. These factors normally tell the health of the company. You know, you want high revenue potential patients so people on medicare is better than Medicaid. You want all the beds be filled so high occupancy rate is desirable. Skilled nursing care brings more revenue than other non-acute services so high skilled mix is good for the company. And so on. These are true for other long-term care firms too. I'll post SKH's earning stats and ratios tomorrow. 

Ebay's latest earning report

I didn’t expect Ebay performing so well. 6% on the ER day and 10% after 5 days of ER, good momentum. Apparently, investors like what they hear despite lukewarm analyst reaction. Some information for you on Reuters: http://www.reuters.com/finance/stocks/keyDevelopments?rpc=66&symbol=EBAY.O&timestamp=20101020201500 (eBay Inc. Issues Q4 2010 Guidance; EPS Guidance Above Analysts' Estimates; Raises FY 2010 Guidance)

Remember, outlook is always the most important factor on ER stock price action. Revenue beat is the second, EPS beat is the third in my opinion. (it may depends on the firm characteristic or pre-ER expectations, etc)

 As I look through the quarterly financial performance of Ebay as a whole I really didn’t see anything that upbeat (hope you can agree with me after viewing the table) Although, investors definitely like the growth in Paypal and I agree with them. It’s indeed convenient. As far as online commerce, I actually prefer Amazon. And I’m afraid there are many people just like me. However, one shining point is enough for the stock to run for a while. In addition, probably the weaken dollar is also helping too since more than 50% of revenue is from international (the reporting currency is in US dollar and the number will be bigger as dollar depreciates). Short term bullish at least. If Ebay manages Paypal well, I’ll be long term bullish. As you might notice that some credit card companies start to have concerns on Paypal as competition, good sign for Ebay. 

Ebay's annual finanical performance does show a good trend on profitabilities. Let's see how they do when next annual report gets out (based on the guidance it will do well as I guess.)

Analysts' opinion stay lukewarm till now.

Microsoft latest ER

Today MSFT has released a good quarterly results and it trades up 3% after hour. The release is here: http://www.microsoft.com/presspass/press/2010/oct10/10-28fy11Q1earnings.mspx. People watching it are really having hard time to decide if they want to have microsoft in their portoflio. What is the problem? the future growth. Miscrosoft apparently doesn't want to label itself as a low growth stock which should have given out tons of dividends by now based on its cash level. However, the growth opportunity just doesn't seem so bright unfortunately.

Let's think about what's hot for Microsoft. It has Office, Window 7, Win 7 mobile, Xbox, and Bing. What I really like is its office since it's really powerful and it's also trying online version. As to rest of it, I sort of like win 7 mobile but I have to see what's the consumer's response to it when it is out in November (North america). Microsoft has to face it: it was never a really innovation driven company. Instead it had a good strategy and implementation on copying others' good stuff or buying them. Watch "Pirate in silicon valley" if you don't know what I mean.

Now it's getting too big and the management seems just don't know how to allocate capital anymore. They are late in almost all the revolutions going on such as cloud computing and mobile etc. How can you catch up if you are always two steps behind? Acquisition is the only way, I think. Well, who should it buy? I don't know but I do think cloud computing and mobile security will have good future.

Alright, enough of bashing MSFT. Let's see how it trumps this quarter.

Revenue and EPS both beat as always. Analysts are somehow bullish and I guess tomorrow there will be upgrade showing up. Well the main reason is that the stock were just at a low price level, nothing fundamentally changes.

This is yearly summary for Microsoft. The business is definitely sound. 2009 is bad year just like any other company. 2010 starts the recovery.

what's good about this quarter? Gross margin, profit margin are all good and part of reason is from decreasing SG&A. Efficiency is not the best level but at a good level still. No need to worry about the liquidities since it has tons of cash/short term investment. ROA is pretty good: 6.1% next to the best 8.1% of the quarter in the end of 2009.

So investors should be short term bullish on Microsoft. Again, as I mentioned in other posts, the market is at a high uncertainty stage I would wait after Feds' decision on QE2 and midterm election to build long position. If you consider a long term position on Microsoft, I would say wait to see how people like their mobile platform and how they plan to use their cash.

Equinix, Inc (EQIX)'s latest earning release

Previously I mentioned the big price drop of EQIX (-33%) at http://mzexcel.blogspot.com/2010/10/eqix.html
I believed it will bounce back up and it did. Today EQIX just released Q3's results and in the after-hour trading price goes as high as $82 (8% increase). As I'm writing this post 5% is gain. If tomorrow it can stablize around $80 then the return for 20 calendar days will be (80-70)/70= 14%. Stock market is a game of expectations. After the bad guidance was out, investors will sell first then calculate. This is why we always have overreactions. Sometimes it's large enough to be used sometimes it's not.EQIX's 30+% is definitely large enough for contrarian to make money.

Revenue is in line with estimate but EPS missed by 2 cents. Market still reacts positively though.

Financial ratio analysis gives rather not ideal scenario. Costs are getting higher and higher for past two quarters while efficiency ratios are trending downwards. Be careful if you are considering it as investment opportunity. I will rather look at other stocks for cloud computing industry.