Attached is a piece put out by Eaton Vance that looks at the effects of the tax cuts enacted at the end of 2017 as it pertains to 2019. Specifically, it looks at what individuals and corporations filing their 2019 tax returns should be aware of.
[Category Market Themes}
Peter Malone, CFA
Research Analyst
Direct: 617.226.0030
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109
LISIX – Q4 2018 Commentary
Along with nearly all global equity markets in Q4, international developed sold off significantly. During the period, the Lazard Strategic International Equity portfolio did outperform its EAFE benchmark, which is to be expected in periods of extreme volatility. The team is monitoring geopolitical concerns in Europe and Asia but believes that softening policy in the U.S. and the start of Chinese stimulus should help global equity markets.
Key Takeaways:
Current price: $62.8 Price target: $67
Position size: 1.8% 1 year performance: -18.7%
Colgate released its 4Q18 and 2019 initial guidance today. While 4Q18 sales results were slightly better than expected, margins and the initial 2019 guidance were below. Organic sales were sequentially accelerating reaching +2%. Emerging markets are improving, even with China’s continued de-stocking. Two markets had specific issues this past quarter though:
· France: yellow vest impact on consumption -40bps on growth
· US: shift of major promotional activity from 2018 to 2019. This had a 120bps impact on organic growth pushed from 4Q18 into 1Q19
Gross margins declined 100bps and expenses increased, causing a 220bps operating margin contraction. In 2019, the company is planning to reinvest behind its brands to push organic sales growth. As the management team recognizes prior errors (mostly thinking its portfolio was good enough to win), we can now expect portfolio evolution, as well as a push towards different distribution channels. We think expectations have been lowered enough now and are attainable. Continue reading “Colgate 4Q18 earnings summary”
Last week, Wells Fargo (WFC) reported Q4 EPS of $1.21 roughly in-line with estimates. Earnings were pulled down a bit by the market’s Q4 weakness as was the case for peers. In the call, management pushed back the expected asset cap release date from mid-2019 to end of 2019. On the plus side, Wells continues to improve its culture and is aggressively buying shares, having reduced shares by 3% in the past quarter.
Current Price: $50.29 Price Target: $56
Position Size: 2.8% Trailing 12-month return: -20.7%
Highlights:
· Wells is a return of capital story with over $20b in excess capital.
o Dividend yield of 3.7% ~ 50 bips above peers
o Last quarter purchased 3% of shares spending $6.8B
o For 2018, WFC has a shareholder yield of 9.7% (3.2% dividend and 6.5% share buyback)
WFC Thesis
($WFC.US)
John R. Ingram CFA
Managing Director
Asset Allocation and Research
Direct: 617.226.0021
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109
Key Takeaways:
Current price: $117 (pre-market) Price target: $109
Position size: 3% 1-year performance: +15%
Resmed released its 2Q19 earnings last night. The company missed on sales by 3% vs. consensus mostly in its Rest-of-World devices segment. They beat on the EPS line helped by better margins (+90bps GM expansion due to increasing production in Singapore and product mix) and taxes. We think devices sales will soften a bit, phasing out of the #2 and #4 markets (Japan & France) reimbursement changes that boosted their sales last quarter. However their core US business performance (masks and flow generators) is still strong with sales growth +9% y/y and EBIT +15%, taking shares from competitors. Their SaaS investment through the Brightree acquisition in early 2016 is being questioned this quarter as sales are slowing down. Due to the end customers in home/durable equipment consolidating, there is currently some pricing pressure in this SaaS business category. If this trend continues, we think Resmed could be forced to recognize goodwill impairment on this acquisition. We had highlighted last quarter that the shares appeared fully valued, so we are not surprised by today’s stock reaction following a sales miss. However the long-term thesis is still intact, and we believe the stock will recover over time. Continue reading “RMD 2Q19 results summary”
Crown Castle International Corp. (CCI) had another strong quarter, finishing off a successful 2018. While FFO was lower than expected by the market, site rental revenues came in higher than firm and street estimates. CCI slightly increased its 2019 estiamtes for site rental revenues and adjusted EBITDA, leaving AFFO estimates unchanged. Growth in the towers space continues to be driven by consumer demand for data which leads to investment by mobile carriers. Within the space, CCI is best positioned to take care of carrier needs across towers and small cell/fiber. CCI’s investment in small cells and fiber are performing better than expected and the company’s margins should continue to improve as they increase colocation on their newly developed small cells.
Current Price: $112 TTM Return: 2.2%
Target Price: $125 Position Size: 2%
Continue reading “Crown Castle International ($CCI.US) Q4 2018: Finishing off strong 2018”
Key Takeaways:
Current Price: $123.8 Price Target: $129 NEW (from $131 in September)
Position size: 2.96% 1-Year Performance: +23.7%
McCormick released its 4Q18 results and 2019 guidance that are both disappointing vs. consensus. 4Q18 sales ended up 3% below expectations as they were impacted by two events causing a 3% hit to sales in its Consumer Americas business: 1/ some key customers reduced their inventory levels during the quarter, an odd timing per McCormick as the Holiday season usually sees good demand; 2/ a large customer had a change in its internal store replenishment system that caused re-ordering issues. On the positive side, the management team insisted during the call that consumption trends are still strong. Operating margins declined 70bps, were below as well impacted by lower sales and higher raw material costs. Free cash flow was favorably impacted by better working capital management (see chart below) and lower capex.
We are updating our price target slightly down to $129 after including the new 2019 guidance numbers in our model. Our long-term view on MKC is unchanged and we maintain it as a core holding in our consumer staples portfolio. Continue reading “MKC 4Q18 earnings summary: long-term thesis intact, 4Q impacted by one-time event”
Attached is today’s consumer sectors presentation.
[category Presentation]
Julie S. Praline
Director, Equity Analyst
Direct: 617.226.0025
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109
Good Morning,
Attached is the most recent Uncommon Sense piece from Mike Arone at SSGA. Mr. Arone explains what he believes will be three market surprises in 2019:
1.) Repeat of U.S. Fiscal Policy
2.) Financials will outperform the broader market
3.) Junk bonds will fail to rebound
As we start the year, investors will read hundreds, even thousands, of different market predictions for the year ahead. Even the smartest market prognosticators with the best track records get these types of things wrong, so Mike’s “surprises” provide an interesting take on forward looking projections.
Thank You,
Pete
Peter Malone, CFA
Research Analyst
Direct: 617.226.0030
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109
Good Morning,
Attached is the updated holdings piece that provides a snapshot of our ETF and mutual fund investments. Each slide discusses the investment process, performance history, and why we like each product.
If anybody has specific questions please let me know.
Thank You,
Pete
Peter Malone, CFA
Research Analyst
Direct: 617.226.0030
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109
