PFE, SBUX, WY, and DD On the Move in Our Portfolio This Week
While there are still plenty of reports to go before the dust settles on this earnings reporting season, Ultimate Income members are taking advantage of high volatility from earnings-powered price swings to pocket quick income, like our recent put trade on Textron (TXT) – and our trade on Starbucks (SBUX) from earlier this week. More on that later.
Elsewhere in the Ultimate Income portfolio, Pfizer (PFE), Weyerhaeuser (WY), and DuPont de Nemours (DD) have all had shakeups over the last week – bringing new opportunities for trades and new details to consider – along with Starbucks, which reported earnings Tuesday night. Let's dig into it.
Pfizer Enters the Post-COVID World
Pfizer (PFE) says it's revitalized and ready to take on a post-pandemic world with a "clean slate," per CEO Albert Bourla.
Early Tuesday morning, Pfizer shocked analysts with positive earnings per share (EPS) of $0.10, when analysts had expected a $0.18 loss per share for the quarter. Revenue did slightly miss expectations at $14.25 billion, just shy of the expected $14.40 billion due to declines in COVID-related revenues.
It's the pig-in-the-python effect of Pfizer's pandemic-era successes, which the company continues to manage well. The news sent PFE shares higher in pre-market trading, though the stock lost the gain – and then some – by the end of the full trading day.
Pfizer completed its acquisition of pharmaceutical developer Seagen, which is expected to contribute $3.1 billion in revenues this year. Paired with an ongoing project to cut $4 billion in costs by the end of the year, the company is well-positioned to bounce back to its fair value.
Pfizer maintained its 2024 guidance, expecting full-year 2024 revenues of $58.5 billion to $61.5 billion, and adjusted EPS of $2.05 to $2.25 for the year. The numbers look achievable – and I'm happy to have PFE shares in the Ultimate Income portfolio.
Starbucks Rewards its Java-Drinking Loyalists
After the market close Tuesday, Red Zone sleeperStarbucks (SBUX) released earnings. Starbucks missed estimates by pennies – at $0.90 vs. estimates of $0.93 – but investor expectations were already low coming into the report, as was the stock price. Shares initially gapped higher on the results, before settling back by the close. Starbucks global sales were up 5%, with international segment revenues up 10% year-over-year as well – so things are working out on that front, despite the stumbles!
Best of all, Starbucks gift card loads hit a record high of $3.6 billion over the last quarter. This deferred revenue amounts to roughly one third of Starbucks' sales over the last quarter.
This loyalty annuity will pay off in bigger profits in in coming quarters. Not to mention that active loyalty program members were already up 13% year-over-year in the past quarter.
Unfortunately, those pains didn't pass Weyerhaeuser entirely, as the company's fourth-quarter earnings were mixed.
Earnings-per-share (EPS) of $0.16 beat analyst expectations by a solid 14%, but are down year-over-year from an EPS of $0.24 last year. Earnings from its timberland holdings held steady, bringing in $143 million in revenue.
Overall revenue was a bit shy of expectations: $1.77 billion versus the $1.8 billion estimate. Wood products sales fell much more than expected, to $159 million from $328 million in the year-ago quarter. The company noted that the drop was due to shifts in the housing market and falling lumber prices – but these factors impacted revenue more than analysts expected. While WY prices fell on the initial news, the stock has recovered in the days since.
In better news, the company announced a special supplemental dividend of $0.14 per share, to be distributed on Feb. 27. While it's not a massive amount, we'll be snapping it up for Ultimate Income in the coming weeks.
Dupont Drops on Early Announcement
As I mentioned in Monday's trade alert, DuPont (DD) pre-announced downbeat quarterly results late last week.
Management expects sequential sales and profit declines in the first quarter due to inventory overhangs and weak demand from China.
DD is due to report full results next Tuesday, but now sees EPS of $0.85 to $0.87, compared to consensus estimates of $0.85, so not too far off the mark. Sales should be $2.9, slightly below expectations of $3 billion.
Unfortunately, the stock dropped 14% on the negative news and is now in the health indicator yellow zone. With our Feb. 2, 2024, $73 puts in the money, members will be put the stock at expiration Friday. In fact, some folks have written in to say they have been assigned early and already put the stock.
We will hold this quality stock for now (BQS = 82 and 88 Strong Bullish rating) and look for opportunities to start writing covered call options to earn income and reduce our cost basis. That's one of the biggest strengths of our Ultimate Income strategy: we constantly earn repeat income on our positions, no matter which direction the stocks move.
Keep an eye out for more details on DD in a later trade alert, and more alerts and updates to come.
Good investing,
Mike Burnick Senior Analyst, Ultimate Income
P.S. If you have any questions or concerns, please reach out to me at emailmikeburnick@tradesmith.com and include "Ultimate Income" in the subject line.
Tidak ada komentar:
Posting Komentar