Issues
Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the April 2022 issue.
All companies are collections of assets. When companies are struggling, a new CEO can redirect how those assets are utilized – a valuable catalyst for a turnaround. We highlight three recent CEO changes and how they might help drive up the value of their companies.
While we have been slow and perhaps reluctant to consider cannabis companies, we find that the time has arrived to look more closely. We summarize our deep-dive into this emerging industry and its major participants, and suggest six companies with impressive growth yet trade at surprisingly low valuations.
Our featured recommendation this month is ZimVie (ZIMV), a company that was recently spun off from medical technology giant Zimmer Biomet. Its shares have been summarily sold by the market, creating what we believe is an attractive turnaround situation.
We note our second price target increase for Marathon Oil (MRO) and our move to sell shares of Baker Hughes (BKR).
All companies are collections of assets. When companies are struggling, a new CEO can redirect how those assets are utilized – a valuable catalyst for a turnaround. We highlight three recent CEO changes and how they might help drive up the value of their companies.
While we have been slow and perhaps reluctant to consider cannabis companies, we find that the time has arrived to look more closely. We summarize our deep-dive into this emerging industry and its major participants, and suggest six companies with impressive growth yet trade at surprisingly low valuations.
Our featured recommendation this month is ZimVie (ZIMV), a company that was recently spun off from medical technology giant Zimmer Biomet. Its shares have been summarily sold by the market, creating what we believe is an attractive turnaround situation.
We note our second price target increase for Marathon Oil (MRO) and our move to sell shares of Baker Hughes (BKR).
Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the March 2022 issue.
In what could be a low-return market over the coming decade, stocks of relatively boring companies have a better chance to shine. We highlight five companies with grind-it-out growth, low share valuations and often-generous dividends that could produce significant market-beating returns.
We also discuss six appealing stocks we found by trolling through the 13F/D filings of like-minded institutional investors.
Our featured recommendation this month is Goodyear Tire & Rubber Company (GT). An investment in Goodyear is an opportunistic purchase of an average company whose shares have fallen sharply out of favor for what look like short-term reasons.
We note our recent price target increases for Wells Fargo (WFC), Marathon Oil (MRO) and Shell plc (SHEL).
In what could be a low-return market over the coming decade, stocks of relatively boring companies have a better chance to shine. We highlight five companies with grind-it-out growth, low share valuations and often-generous dividends that could produce significant market-beating returns.
We also discuss six appealing stocks we found by trolling through the 13F/D filings of like-minded institutional investors.
Our featured recommendation this month is Goodyear Tire & Rubber Company (GT). An investment in Goodyear is an opportunistic purchase of an average company whose shares have fallen sharply out of favor for what look like short-term reasons.
We note our recent price target increases for Wells Fargo (WFC), Marathon Oil (MRO) and Shell plc (SHEL).
Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the February 2022 issue.
The market seems to be ignoring small- cap stocks. We highlight four high-quality small- cap companies with beaten down share prices. And, amidst the rubble of initial public offerings, we found three worthwhile companies whose shares trade below their IPO price. We also briefly comment on the market’s recent sell-down, and provide an update on the performance of our group of recommended stocks, which have held their value so far this year.
Our featured recommendation this month is Polaris (PII), the leading North American manufacturer of powersports equipment including off-road vehicles, snowmobiles, motorcycles and boats. Investors are overly -discounting near-term issues, leaving the shares significantly undervalued.
We note our recent price target increase for Baker Hughes Company (BKR), from 26 to 31.
The market seems to be ignoring small- cap stocks. We highlight four high-quality small- cap companies with beaten down share prices. And, amidst the rubble of initial public offerings, we found three worthwhile companies whose shares trade below their IPO price. We also briefly comment on the market’s recent sell-down, and provide an update on the performance of our group of recommended stocks, which have held their value so far this year.
Our featured recommendation this month is Polaris (PII), the leading North American manufacturer of powersports equipment including off-road vehicles, snowmobiles, motorcycles and boats. Investors are overly -discounting near-term issues, leaving the shares significantly undervalued.
We note our recent price target increase for Baker Hughes Company (BKR), from 26 to 31.
Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the January 2022 issue.
This issue includes our Top Five Stocks for 2022, our annual market review and outlook for 2022, as well as our update on the bankruptcy and high-yield bond markets.
Our featured recommendation this month is Brookfield Asset Management Reinsurance Partners Ltd (BAMR). This recent spin-off has received little market attention yet offers considerable long term potential.
We note our recent ratings change that moved shares of GCP Applied Technologies (GCP) to a Sell with a +77% total return.
Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
This issue includes our Top Five Stocks for 2022, our annual market review and outlook for 2022, as well as our update on the bankruptcy and high-yield bond markets.
Our featured recommendation this month is Brookfield Asset Management Reinsurance Partners Ltd (BAMR). This recent spin-off has received little market attention yet offers considerable long term potential.
We note our recent ratings change that moved shares of GCP Applied Technologies (GCP) to a Sell with a +77% total return.
Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the December 2021 issue.
For most of the year, we have an intense focus on long-term business fundamentals and underlying valuations. However, as year-end approaches, artificial selling pressure can create large enough short-term bargains that even we find worthwhile. We discuss several sources of selling pressure that can turn others’ losses into your gains, and list six stocks that look most promising.
Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
For most of the year, we have an intense focus on long-term business fundamentals and underlying valuations. However, as year-end approaches, artificial selling pressure can create large enough short-term bargains that even we find worthwhile. We discuss several sources of selling pressure that can turn others’ losses into your gains, and list six stocks that look most promising.
Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the November 2021 issue.
Consumer staples stocks were pandemic beneficiaries, but now that the worst has passed, many of these stocks have been sold off fairly hard, even as the stock market continues to reach record highs. While investor concerns regarding negative year-over-year sales, tighter margins due to inflation, and the degree to which companies can raise prices have merit, we make our case for four stocks that have been discarded and now look like bargains.
Bank stocks have been strong performers following the pandemic stock market trough, including those we highlighted in late April 2020. Yet, not all have fully participated. We found four that have good fundamentals yet trade at price/earnings multiples below 10x, considerably lower than the peer average of 14.5x.
Consumer staples stocks were pandemic beneficiaries, but now that the worst has passed, many of these stocks have been sold off fairly hard, even as the stock market continues to reach record highs. While investor concerns regarding negative year-over-year sales, tighter margins due to inflation, and the degree to which companies can raise prices have merit, we make our case for four stocks that have been discarded and now look like bargains.
Bank stocks have been strong performers following the pandemic stock market trough, including those we highlighted in late April 2020. Yet, not all have fully participated. We found four that have good fundamentals yet trade at price/earnings multiples below 10x, considerably lower than the peer average of 14.5x.
Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the October 2021 issue.
Most investors, and the general public, seem to regard the transportation industry as somewhat dull. But transportation is a fundamental component of human existence, and companies must constantly strive for relevance, and must now navigate a secular shift in fuel sources. We discuss five transportation companies that are updating their strategic playbooks with hopes of turning around their prospects.
The market has a bias against stocks that trade at low prices, making this a go-to source of contrarian investment ideas. We make our case for five such stocks.
Most investors, and the general public, seem to regard the transportation industry as somewhat dull. But transportation is a fundamental component of human existence, and companies must constantly strive for relevance, and must now navigate a secular shift in fuel sources. We discuss five transportation companies that are updating their strategic playbooks with hopes of turning around their prospects.
The market has a bias against stocks that trade at low prices, making this a go-to source of contrarian investment ideas. We make our case for five such stocks.
Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the September 2021 issue.
While the stock market continues to set new record highs, oil and gas exploration and production (E&P) companies have been left behind. Yet, at current commodity prices, which we believe are sustainable, several companies have shares that trade at surprisingly high free cash flow yields, some as high as 24%. We make our case for five stocks.
Related to this, our featured recommendation is Marathon Oil Company (MRO), a mid-cap oil-focused E&P company. Its strong fundamentals, including a high-quality asset base, strong free cash flow and a solid balance sheet, make it particularly attractive.
We highlight three former Cabot Turnaround Letter winners whose shares have retreated since our exit. These now look interesting once again.
In this issue we also discuss three one-off contrarian ideas that have considerable appeal.
During the month, we had a few ratings changes: we moved Berkshire Hathaway (BRK/B) to a Hold, and moved Albertsons (ACI) and Oaktree Specialty Lending (OCSL) from Buy to Sell.
Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
While the stock market continues to set new record highs, oil and gas exploration and production (E&P) companies have been left behind. Yet, at current commodity prices, which we believe are sustainable, several companies have shares that trade at surprisingly high free cash flow yields, some as high as 24%. We make our case for five stocks.
Related to this, our featured recommendation is Marathon Oil Company (MRO), a mid-cap oil-focused E&P company. Its strong fundamentals, including a high-quality asset base, strong free cash flow and a solid balance sheet, make it particularly attractive.
We highlight three former Cabot Turnaround Letter winners whose shares have retreated since our exit. These now look interesting once again.
In this issue we also discuss three one-off contrarian ideas that have considerable appeal.
During the month, we had a few ratings changes: we moved Berkshire Hathaway (BRK/B) to a Hold, and moved Albertsons (ACI) and Oaktree Specialty Lending (OCSL) from Buy to Sell.
Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the August 2021 issue.
With the stock market’s remarkable strength over the past five and ten years, most stocks have produced at least reasonable gains, such that even out-of-favor stocks aren’t down-n-out stocks. We look at attractive turnarounds among stocks with flat to negative five-year returns.
SPACs, or special purpose acquisition companies, are all the rage. While the group has rightfully earned the disdain of value investors, there are some post-SPAC companies worth a closer look. We highlight five.
Our featured Buy recommendation, Walgreens Boots Alliance (WBA), is viewed as a broken growth company. While its challenges are clear, its shares now trade at a bargain valuation, yet the company has sturdy finances and a new outsider CEO. This combination, combined with a sustainable (and growing) 4.1% dividend yield that pays investors to wait, makes it an attractive turnaround candidate.
During the month, we moved Macys (M) to a Hold and raised our price target on Duluth Holdings (DLTH) from 17.50 to 20.
Please join us for the our 9th Annual Smarter Investing, Greater Profits Online Conference, held on Tuesday, August 17 through Thursday, August 19. You can see presentations by all of our analysts, which will include updates in their areas of expertise and discussions of their best picks.
Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
With the stock market’s remarkable strength over the past five and ten years, most stocks have produced at least reasonable gains, such that even out-of-favor stocks aren’t down-n-out stocks. We look at attractive turnarounds among stocks with flat to negative five-year returns.
SPACs, or special purpose acquisition companies, are all the rage. While the group has rightfully earned the disdain of value investors, there are some post-SPAC companies worth a closer look. We highlight five.
Our featured Buy recommendation, Walgreens Boots Alliance (WBA), is viewed as a broken growth company. While its challenges are clear, its shares now trade at a bargain valuation, yet the company has sturdy finances and a new outsider CEO. This combination, combined with a sustainable (and growing) 4.1% dividend yield that pays investors to wait, makes it an attractive turnaround candidate.
During the month, we moved Macys (M) to a Hold and raised our price target on Duluth Holdings (DLTH) from 17.50 to 20.
Please join us for the our 9th Annual Smarter Investing, Greater Profits Online Conference, held on Tuesday, August 17 through Thursday, August 19. You can see presentations by all of our analysts, which will include updates in their areas of expertise and discussions of their best picks.
Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the July 2021 issue.
This month we look into major pharmaceutical stocks, which are selling at their widest discount to the market in decades. We discuss some reasons behind the market’s pessimism and why, for value investors with patience, the shares of five companies offer considerable appeal.
We also include our mid-year stock market update and mid-year bankruptcy review. Stocks have been remarkably strong so far this year and appear poised for more gains, yet we encourage value investors to remain selective and patient amidst the exuberance while keeping the long-term horizon in view.
Easy financial market conditions have helped shrink the number and size of bankruptcies to a fraction of their long-term average. We discuss this phenomenon and why investors in distressed securities should wait for conditions to become favorable again.
Our feature Buy recommendation, Organon & Company (OGN), is a recent spin-off from Merck. Investors have discarded the shares due to revenue concerns, but the bargain valuation and our more optimistic outlook make the shares appealing.
It was a busy month in the portfolio. We raised our price targets on Signet Jewelers (SIG), Molson Coors Beverage Company (TAP) and General Motors (GM), and moved four stocks to Sell: Biogen (BIIB), BorgWarner (BWA), The Mosaic Company (MOS) and Jeld-Wen Holdings (JELD).
Please join us for the our 9th Annual Smarter Investing, Greater Profits Online Conference, held on Tuesday, August 17 through Thursday, August 19. You can see presentations by all of our analysts, which will include updates in their areas of expertise and discussions of their best picks.
Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
This month we look into major pharmaceutical stocks, which are selling at their widest discount to the market in decades. We discuss some reasons behind the market’s pessimism and why, for value investors with patience, the shares of five companies offer considerable appeal.
We also include our mid-year stock market update and mid-year bankruptcy review. Stocks have been remarkably strong so far this year and appear poised for more gains, yet we encourage value investors to remain selective and patient amidst the exuberance while keeping the long-term horizon in view.
Easy financial market conditions have helped shrink the number and size of bankruptcies to a fraction of their long-term average. We discuss this phenomenon and why investors in distressed securities should wait for conditions to become favorable again.
Our feature Buy recommendation, Organon & Company (OGN), is a recent spin-off from Merck. Investors have discarded the shares due to revenue concerns, but the bargain valuation and our more optimistic outlook make the shares appealing.
It was a busy month in the portfolio. We raised our price targets on Signet Jewelers (SIG), Molson Coors Beverage Company (TAP) and General Motors (GM), and moved four stocks to Sell: Biogen (BIIB), BorgWarner (BWA), The Mosaic Company (MOS) and Jeld-Wen Holdings (JELD).
Please join us for the our 9th Annual Smarter Investing, Greater Profits Online Conference, held on Tuesday, August 17 through Thursday, August 19. You can see presentations by all of our analysts, which will include updates in their areas of expertise and discussions of their best picks.
Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the June 2021 issue.
Good investing ideas can come from anywhere. One useful source is to borrow ideas from some of the best value-oriented investors. Their holdings can be found in the 13F and 13D regulatory filings which are required every quarter. In the letter, we briefly describe these filings, how we use them, and six stocks that look attractive from the many holdings we analyzed.
A slightly shocking source of turnaround ideas can come from the electric utility industry – about the last place that contrarians might look these days. We discuss three with interesting stories and strong upside potential.
Our feature Buy recommendation, Vistra Corporation (VST), comes from this illuminating search through the utility sector. Vistra is the nation’s largest independent power producer with an emerging retail business. Its shares were jolted by the winter storms yet look like an attractive turnaround situation.
We also mention our May 12th move from Buy to Sell on shares of Mohawk Industries (MHK).
Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
Good investing ideas can come from anywhere. One useful source is to borrow ideas from some of the best value-oriented investors. Their holdings can be found in the 13F and 13D regulatory filings which are required every quarter. In the letter, we briefly describe these filings, how we use them, and six stocks that look attractive from the many holdings we analyzed.
A slightly shocking source of turnaround ideas can come from the electric utility industry – about the last place that contrarians might look these days. We discuss three with interesting stories and strong upside potential.
Our feature Buy recommendation, Vistra Corporation (VST), comes from this illuminating search through the utility sector. Vistra is the nation’s largest independent power producer with an emerging retail business. Its shares were jolted by the winter storms yet look like an attractive turnaround situation.
We also mention our May 12th move from Buy to Sell on shares of Mohawk Industries (MHK).
Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the May 2021 issue.
With the stock market continuing to reach record highs, and with most stocks either participating in the rally or facing structural, fundamental challenges that they won’t likely overcome, finding new ideas can be a challenge. As contrarians, we want to look for stocks in places which others find too unconventional or uncomfortable, as bargains may be found there. One such place is in stocks with low share prices, generally under $10. We discuss five interesting turnarounds among this group.
Real estate investment trusts, or REITs, have surged since Pfizer announced on November 9, 2020 that they had developed an effective Covid vaccine. Yet some REITs haven’t fully participated. We review six laggards that have quite favorable risk/return traits.
Our feature recommendation is Dril-Quip (DRQ). This company manufactures highly-engineered drilling and production equipment for offshore oil and natural gas projects. The shares are heavily out-of-favor yet offer considerable upside, backed by a solid company with a large cash hoard and zero debt.
We mention our April 1st price target increase for Mohawk Industries (MHK) from 180 to 220. As several companies continue to show strong fundamental improvements, we are raising our price targets on Adient (ADNT), Western Digital (WDC) and Wells Fargo (WFC), while moving Jeld-Wen (JELD) to a HOLD. Also, we update our article from last month on high yield bonds.
Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
With the stock market continuing to reach record highs, and with most stocks either participating in the rally or facing structural, fundamental challenges that they won’t likely overcome, finding new ideas can be a challenge. As contrarians, we want to look for stocks in places which others find too unconventional or uncomfortable, as bargains may be found there. One such place is in stocks with low share prices, generally under $10. We discuss five interesting turnarounds among this group.
Real estate investment trusts, or REITs, have surged since Pfizer announced on November 9, 2020 that they had developed an effective Covid vaccine. Yet some REITs haven’t fully participated. We review six laggards that have quite favorable risk/return traits.
Our feature recommendation is Dril-Quip (DRQ). This company manufactures highly-engineered drilling and production equipment for offshore oil and natural gas projects. The shares are heavily out-of-favor yet offer considerable upside, backed by a solid company with a large cash hoard and zero debt.
We mention our April 1st price target increase for Mohawk Industries (MHK) from 180 to 220. As several companies continue to show strong fundamental improvements, we are raising our price targets on Adient (ADNT), Western Digital (WDC) and Wells Fargo (WFC), while moving Jeld-Wen (JELD) to a HOLD. Also, we update our article from last month on high yield bonds.
Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
Updates
V.F. Corporation (VFC) announced the sale of Supreme, the famed streetwear brand, to EssilorLuxottica, the owner of Ray-Ban, for $1.5 billion, leading to a 13.6% surge in VFC’s shares on Wednesday. Supreme, a New York City skate shop turned global fashion icon since 1994, became renowned for its exclusive collaborations with luxury brands like Louis Vuitton and Nike. VFC acquired Supreme in 2020 for $2.1B, hoping to leverage its trendy image to boost its portfolio. However, the huge debt load and miserable margins took their toll, and by last year the company had written down two-thirds of Supreme’s value.
Wells Fargo (WFC) kicked off the Cabot Turnaround Letter earnings season today, showing solid EPS of $1.33/share, which exceeded estimates by 4 cents. WFC also beat revenue estimates by $410M, coming in at $20.69B, but the stock is trading lower this morning as the company posted a 9% YoY decline in net interest. We moved this one to HOLD back in the May 27 issue at 60, and it just hasn’t quite been able to clear that prior high. Given that we have a 119% overall gain on this stock in the rear-view mirror, and that interest rates – and therefore WFC earnings – are only likely to go lower from here, we’re moving this one to SELL.
Earnings season is over, so there were no companies that reported earnings this past week. However, the next earnings season is just around the corner, starting with Mattel (MAT) on July 23rd.
Walgreens Boots Alliance (WBA) acknowledged disappointing quarterly results on Thursday, cutting its full-year financial guidance to a range of $2.80 a share to $2.95 a share, down from previous expectations of $3.20 a share to $3.35, and well off analyst estimates of $3.21. CEO Tim Wentworth discussed plans that could lead to the closure of thousands of its U.S. pharmacies as the company’s retail business continues to struggle. “We are at a point where the current pharmacy model is not sustainable, and the challenges in our operating environment require we approach the market differently,” Wentworth said, also noting that a quarter of the stores are not contributing to operating income. While there were positives – a well-performing international business and a growing U.S. healthcare segment for instance – future performance will heavily rely on the company’s shift toward greater efficiency.
Earnings season is over, so there were no companies that reported earnings this past week. However, we do have at one last company on a slightly different fiscal schedule reporting next week – Walgreens Boots Alliance (WBA), who will announce results on the 27th.
Ammo Inc (POWW) beat on revenue of $40.42M but its EPS of $0.01 per share missed expectations by $0.03. The company experienced sequential revenue growth in the ammunition segment and maintained robust margins in the GunBroker marketplace, but total revenues and gross profit margin were both down year-on-year, influenced by a shift in sales mix and macroeconomic pressures. The year ended with substantial operational cash flow and an improved net working capital position including $55.6M in cash, positioning the company for future growth.
Earnings season is largely over, so there were no companies that reported earnings this past week. However, we do have at least one company reporting next week – Ammo, Inc. (POWW). And the next earnings season is frankly just around the corner, with Walgreens Boots Alliance (WBA) announcing they’ll release their next round of results the last week of the month.
Duluth Holdings Inc. (DLTH) reported its fiscal first-quarter 2024 results, with revenues of $116.68 million, missing estimates by 2.52% and down from $123.76 million a year ago. The company posted a net loss of $7.9 million and Adjusted EBITDA of $1.8 million. Despite sales challenges, CEO Sam Sato highlighted improved inventory management and successful customer engagement campaigns. The company ended the quarter with $6.8 million in cash and updated its fiscal 2024 outlook to net sales of $640 million and Adjusted EBITDA of $39 million.
V.F. Corporation (VFC) reported a 13% revenue decline to $2.4 billion, missing expectations. Sales were down across the company’s brands, with North Face sales down 5%, Vans 26%, Timberland 14%, and Dickies 15%, with all regions seeing declines, led by a 22% drop in the Americas. Adjusted operating margin fell to -2.1%, with EPS at -$0.32 vs. $0.17 a year ago. On a slightly better note, inventory fell $382 million from Q4, and net debt is down to $5.3 billion. While CEO Bracken Darrell emphasized ongoing turnaround plans and leadership rebuilding, analysts downgraded the stock as the company’s $1.7B in debt maturities could lead to potential asset sales and dividend cuts.
In today’s note, we discuss the recent earnings reports from Kopin Corporation (KOPN), Adient (ADNT), and Bayer (BAYRY).
Our note also includes the monthly Catalyst Report, which we encourage you to look through. This report is a listing of a few companies that have reported a catalyst in the past month. These catalysts include new CEOs, activist activity, spin-offs, cyclical turnarounds and other possible game-changers. We source many of our feature recommendations from this list. You will find it nowhere else on Wall Street.
Our note also includes the monthly Catalyst Report, which we encourage you to look through. This report is a listing of a few companies that have reported a catalyst in the past month. These catalysts include new CEOs, activist activity, spin-offs, cyclical turnarounds and other possible game-changers. We source many of our feature recommendations from this list. You will find it nowhere else on Wall Street.
Viatris (VTRS) reported 1Q 2024 results yesterday, narrowly missing on revenue but coming in line with earnings expectations at 67 cents per share. Sales of older drugs Lipitor and Norvasc declined, with the branded drugs unit’s revenue dropping 4.5% to $2.31 billion. The company has completed its women’s healthcare business divestiture and expects its API unit sale to close soon. Despite the challenges, Viatris reaffirmed its financial guidance for the year, projecting total revenue between $15.5 billion and $16.0 billion, with adjusted EBITDA estimated at $5.0 billion to $5.4 billion. The company remains focused on debt reduction, having paid down $546 million during the quarter.
Gannett (GCI) reported after the bell yesterday, beating on revenue but missing earnings expectations by 21%. The company posted an $84M loss on $635M in income but reiterated guidance to 10% growth in its digital division, keeping overall revenue declines to the low to mid-single digits. CEO Michael Reed reiterated the focus on digital transformation, with revenues from that side of the business likely to comprise 50% of Gannett’s income by 2025.
Alerts
Oaktree reported a reasonably strong quarter, with net investment income (adjusted for the merger with Oaktree Strategic Income) of $0.19/share, sharply higher than $0.12 a year ago and the consensus estimate for $0.14. Net asset value, or NAV, increased 2% from the prior quarter and 19% from a year ago (despite paying out roughly 8% of its NAV in dividends during this period).
The company is executing on its turnaround, led by the relatively new CEO. However, after our more detailed review of the company’s future prospects, the shares appear to fully discount a robust profit recovery and are trading at our price target. Their Investor Day was uninspiring – while the company is operating much better and has at least a temporary cyclical tailwind, the management is talking about pursuing their growth ambitions, going so far as to outline as much as $4 billion in buying power over the next several years. For perspective, $4 billion in cash flow compares to the company’s current $2.7 billion market cap.
The company’s turnaround from its modest difficulties yet overly-depressed stock appears complete
With the shares continuing to surge past our recently raised 65 price target and now being priced at a premium to even our upgraded valuation metrics
We are raising our price target on ViacomCBS (VIAC) from 54 to 65 and moving to HOLD.
We are raising our price target on General Motors (GM), following our review as the shares have surged through our 49 price target, to the mid-50s.
We are raising our price target on Mohawk Industries (MHK).
Several of our stocks have reached/exceeded our price targets, so we are making changes to several of our ratings: