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Gilead Sciences Drops Jaws With a 209% Increase in Q1 Net Income

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Infectious disease-focused biopharmaceutical company Gilead Sciences did nothing short of dazzle Wall Street after the closing bell by reporting impressive top- and bottom-line growth in the first quarter.

Total revenue for the quarter increased by 98%, to $5 billion, with product sales more than doubling, to $4.87 billion, with U.S. product sales up 159%. The primary reason for the boost was recently approved hepatitis C therapy Sovaldi -- the first oral hepatitis C medication that can be given to genotype 2 and 3 patients without the need for interferon -- which was launched in December. Most Wall Street expectations had called for sales of around $1 billion. Sovaldi, in its first quarter, rocketed to $2.27 billion in sales, becoming the quickest drug in history to reach blockbuster status (greater than $1 billion in annual sales)... by a mile!

The remainder of Gilead's infectious disease pipeline was also strong with four-in-one HIV-1 therapy Stribild seeing sales rise 134%, to $215.3 million, as well as a 69% improvement in Complera/Eviplera sales to $250.7 million. The only disappointment was an 11% reduction in Atripla sales, but this is merely because physicians are switching patients to Stribild instead; so this is a win-win for Gilead, which supplies all four compounds in Stribild as opposed to splitting revenue three ways with Atripla.


Gilead's significantly smaller cardiovascular products segment also demonstrated improvement, with sales up 9%, to $234.5 million.

Profit for the quarter absolutely skyrocketed 209%, to $2.23 billion from $722.2 million in the year-ago quarter. Ultimately, this translated into $1.48 in adjusted EPS, light years ahead of Wall Street's expectations, which had called for a $0.90 profit.

Looking ahead, Gilead Sciences reaffirmed its full-year guidance, calling for $11.3 billion-$11.5 billion in revenue, and product gross margin of 75%-77%.

The article Gilead Sciences Drops Jaws With a 209% Increase in Q1 Net Income originally appeared on Fool.com.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool recommends Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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iRobot Trounces Wall Street on Strong Earnings

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iRobot reported fiscal 2014 first-quarter earnings after the market closed today that beat Wall Street's expectations. For the period ended March 29, iRobot generated a profit of $0.18 per share, which was $0.02 better than analyst estimates for the period. First-quarter revenue also came in ahead of forecasts, with iRobot generating revenue of $114.2 million, up from just $106.2 million in the year-ago period. That topped Wall Street's estimate for quarterly revenue of $112 million.

Source: The Motley Fool

These results were driven by strong sales in its consumer-robots business, which grew 17% year over year. The robotics company also launched new home bots during the quarter, including its new Roomba 880 and Scooba 450 device. "We kicked off 2014 with an excellent quarter," said Colin Angle, iRobot's chief executive. "The results and outlook for our Home Robot business are excellent."

Looking ahead, management says the company is on track to achieve full-year revenue in the range of $560 to $570 million, and earnings per share of between $1.00 to $1.15. Shares of iRobot have gained nearly 12% year to date, and currently trade around $39.

The article iRobot Trounces Wall Street on Strong Earnings originally appeared on Fool.com.

Tamara Rutter owns shares of iRobot. The Motley Fool recommends iRobot. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Why GW Pharmaceuticals, Revance Therapeutics, and Allergan Are Today's 3 Best Stocks

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The health-care sector may have been a major crutch for the broad-based S&P 500 during the past two months, but today it was its greatest savior, with merger and acquisition activity galore driving the index to the upside.

Also helping out was the fact that housing data wasn't a death knell for the markets today. Existing home sales for March dipped fractionally to an annual rate of 4.59 million units. This is down from an annual rate of 4.6 million homes in February, but right in line with economists' expectations. With 30-year mortgage rates still at attractive levels despite $30 billion having been reduced from QE3, there is clear optimism from investors that the complete removal of QE3 won't shoot lending rates higher and cripple homebuilders.

The big news, though, was the big M&A activity within the big pharma sector. Novartis was a big component to that with it announcing the purchase of GlaxoSmithKline's oncology drug division for up to $16 billion, as well as the disposition of its animal health division to Eli Lilly for $5.4 billion, and the sale of its vaccine division to Glaxo for just more than $7 billion. M&A activity demonstrates big pharma's willingness to take on risk and stay innovative, which is generally viewed as positive news by investors.


By day's end, the S&P 500 had risen for its sixth-consecutive session, gaining 7.66 points (0.41%), to close at 1,879.55.

Source: GW Pharmaceuticals.

Topping the charts and "flying high" per se is GW Pharmaceuticals , a biopharmaceutical company that discovers cannabinoid compounds from cannabis plants and utilizes them to alter biologic pathways in patients. Shares gained 32.1% on the day after Morgan Stanley initiated coverage on the company with an "overweight" rating and $103 price target, implying upside of more than 100% based on yesterday's closing price. In addition, CNBC talk-show host Jim Cramer also vouched his support for the company as the top choice to play the marijuana craze. While I do agree that GW Pharmaceuticals is more than just a play on science as it does have Sativex approved in a number of EU countries, the drug itself hasn't sold well since coming to market, and it remains to be seen whether or not the company can have any success in the U.S. Until I see a dramatic reduction in losses, I would suggest keeping your distance.

Pulling up a close second was clinical-stage biopharmaceutical company Revance Therapeutics , which advanced 25.8% after reporting positive results from its phase 1/2 study involving RT002 as a treatment for the reduction of frown lines. According to the results from its study, 94% of the 48 patients with moderate to severe frown lines prior to treatment had either "none" or "mild" frown lines at maximum frown four weeks after treatment. Furthermore, the therapy showed an impressive duration of treatment at 29.4 weeks, or a little more than seven months, in the fourth patient cohort. While I do believe that Revance is parked in a hotbed of growth in terms of aesthetic pharmacologic products, I'm a bit worried by its current $600 million-plus valuation considering it has no FDA-approved therapies. Like GW Pharmaceuticals, I would consider taking a step back here and waiting for more concrete results.

Finally, shares of global pharmaceutical and medical device giant Allergan soared 15.3% after it received an unsolicited buyout offer from rival Valeant Pharmaceuticals . Valeant's offer is for 0.83 shares of Valeant stock and $48.30 in cash for each share of Allergan, valuing Allergan at close to $161 per share. Although Allergan suggested that shareholders do nothing at the moment while it carefully reviews the offer, I would suggest shareholders consider this an early Christmas present and head for the exits. While Allergan has demonstrated top-line growth on the heels of dry-eye therapy Restasis, there have been a number of miscues, including its purchase of MAP Pharmaceuticals, which hasn't yielded an approval for Levadex as of yet, and disappointing results for DARPin, its experimental vision-loss therapy. Simply put, Allergan is expensive here given its growth potential, and the possibility that this deal could fall through would give me (if I were a shareholder) all the more reason to cash in my chips.

These three health-care stocks may have soared today, but they may not be able to hold a candle to this top stock by the end of the year
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The article Why GW Pharmaceuticals, Revance Therapeutics, and Allergan Are Today's 3 Best Stocks originally appeared on Fool.com.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of, and recommends Valeant Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Coca-Cola's First-Quarter Conference Call Reveals 2014 Could Be the Year It Restarts Growth

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Coca-Cola recently announced results for what turned out to be a better-than-expected quarter. Although one cannot characterize the first quarter as a great one for Coca-Cola, the company clearly did less bad than expected, as evidenced by the 5% increase in its stock price since the release.


Coca-Cola outperformed PepsiCo (NYSE: PEP) in 2013 by growing global volume 2% compared to PepsiCo's 1% beverage volume growth. However, Coca-Cola's first-quarter performance was not much better than its smaller rival's. The soft drink consumption decline is clearly having an effect on Coca-Cola's ability to outperform. Fortunately, there is reason to believe its fortunes could reverse this year.

Where things are already rolling
Coca-Cola reported 2% global volume growth led by 8% growth in still beverages. Still beverages include juices, ready-to-drink teas, packaged water, sports drinks, and energy drinks. Going forward, Coca-Cola has the opportunity to capitalize on individual outperformers like Simply Orange.

Source: The Coca-Cola Company

Simply Orange is advertised as a 100% juice blend with a fresh taste, implying something that approximates a natural beverage. This may be why Simply Orange sales increased an impressive 8% in the difficult North American market, where consumers are increasingly concerned about unnatural beverage ingredients. By comparison, Coca-Cola's entire juice portfolio grew just 3% worldwide. If Coca-Cola can capitalize on Simply Orange and its other non-soda brands, it can more than offset U.S. soft- drink declines.

Where momentum needs to be restored
Coca-Cola's developed nation soft-drink volumes are hampering overall volume growth. In the first quarter, the company's global soft-drink volume declined for the first time since 1999. It was dragged down by a double-digit soda decline in Great Britain, where the company switched to smaller bottles but maintained pricing; and North America concentrate sales declined 1%, likely dragged down by diet soda.

Source: The Coca-Cola Company

Overall U.S. diet soda sales declined 7% in the first quarter. Health concerns about artificial sweeteners and the bitter aftertaste associated with Stevia have caused a sharp falloff in diet soda volumes. The rise of energy drinks may also be putting pressure on diet soda sales. 

Coca-Cola had been outperforming PepsiCo by a noticeable margin; the No. 1 soft-drink company picked up 40 basis points of carbonated-soft-drink market share in 2013, while the No. 2 company shed 40 basis points. However, PepsiCo's North American and Latin American carbonated-beverage volume declined 1% in the first quarter, while Coca-Cola's North American sparkling volume also declined 1%.

Coca-Cola can be excused for merely matching its biggest rival in Q1; Americans drink twice as much Diet Coke as they do Diet Pepsi. Diet Coke is Coca-Cola's second-best selling soft drink in the U.S.; Diet Pepsi is PepsiCo's third-best seller. As a result, Diet Coke has a bigger impact on Coca-Cola's overall volume -- and diet drinks are falling hard.

How Coca-Cola can restore momentum
Despite the strong current running against Coca-Cola, the company may be able to spark forward momentum as early as this year. Coca-Cola's Chief Financial Officer Gary Fayard tells U.S. News that he expects full-year global soda volume to increase over 2013. Even after starting off the year down 1%, management believes that the company can spring forward in the quarters ahead.

Although CEO Muhtar Kent outlined initiatives to spark momentum across its entire portfolio, the company's plans to restart its sparkling-beverage growth are the most important. Roughly 60% of Coca-Cola's U.S. revenue is derived from carbonated soft drinks, making it critical that the category turns around.

Kent says Coca-Cola will increase its marketing budget by $400 million to more than $4 billion for 2014. In the three years from 2010 through 2012, global volume grew 5%, 5%http://www.sec.gov/Archives/edgar/data/21344/000110465912007148/a12-4374_1ex99d1.htm ", and 4%, respectively. However, North America volume created a huge drag on results; Coca-Cola's North American volume grew just 2% in 2010 and 1% in 2011 and 2012. For 2013, North American volume was flat while overall volume grew just 2%. These results suggest that (1) Coca-Cola needs to turnaround its North America growth trajectory and (2) it is easier to grow international volume than domestic volume. Coca-Cola's increased advertising will likely focus on international markets and a select few brands in the U.S. market.

Massive advertising spending helped grow international markets in Q1, with 7% sparkling-volume growth in Russia following the Coca-Cola-sponsored Sochi Olympics. It will have the same opportunity to promote its brand to a worldwide audience during this summer's World Cup in Brazil. In addition, the company is seeing sparkling growth all across Asia, including 6% in China and 3% in Japan. Aside from Brazil, none of these countries consumes more than the worldwide average Coca-Cola beverage consumption per capita. As a result, all are ripe for increased advertising to promote a higher consumption of all of Coca-Cola's beverages.

The North American market -- particularly in the U.S. -- will be trickier to turn around. Coca-Cola's ready-to-drink tea, bottled water, and juice lines are all doing relatively well compared to sparkling beverages. Product innovation and targeted advertising may boost the latter's volume. In particular, Coca-Cola Life, a sugar-and-stevia mid-calorie soft drink has done well in its Latin American test markets and may be used to boost consumption by Latinos in the U.S. Clever advertising could weave Coca-Cola Life into the lives of millions of Latinos just like it made Coke an important part of many American lives in the 20th century.

Moreover, there is probably a base level of American consumers that will continue drinking Coca-Cola no matter what the health ramifications. Targeting its most loyal customers for increased consumption could help boost Coca-Cola's flagging volume.

Bottom line
Coca-Cola's stock price may have shot up 5%, but the best you can say about this quarter is that it was not as bad as expected. Global soft-drink volume declined for the first time in 15 years. The company is responding by ramping up advertising -- one of its few, but most effective, options. Coca-Cola's unparalleled portfolio of sparkling brands positions it to gain market share, even if the U.S. sparkling market continues to shrink. As a result, investors should not be surprised to see a resurgence in sparkling volumes in the back-half of 2014.

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The article Coca-Cola's First-Quarter Conference Call Reveals 2014 Could Be the Year It Restarts Growth originally appeared on Fool.com.

Ted Cooper owns shares of Coca-Cola. The Motley Fool recommends Coca-Cola and PepsiCo. The Motley Fool owns shares of Coca-Cola and PepsiCo and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Aaron's Uses Acquisition to Thwart Takeover

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Source: Wikimedia Commons.

Enough is enough. Rent-to-own leader Aaron's achieved its goal of getting private equity firm Vintage Capital to back off from its proposed $2.3 billion takeover offer, but in the process may have damaged the value of the company to investors.


After three previous attempts at acquiring Aaron's failed because management simply ignored the overtures, Vintage went public with the latest effort, valued at $30.50 per share, in hopes of generating some pushback from investors to get management to consider its bid. While Aaron's did form a "transaction committee" to review the offer, it saw no need to meet with the PE firm and chose instead to adopt new corporate governance practices hostile to shareholder interests.

Earlier this week, however, the rent-to-own center sued Vintage for "trying to obtain control of Aaron's through an illusory proposal," and then followed that up with an announcement it was acquiring Web-based lease-to-own financing shop Progressive Finance Holdings for $700 million. After it rejected Vintage's offer, this proved to be the last straw for Vintage, which declared it was withdrawing its bid, believing Aaron's "grossly" overpaid.

Like Aaron's, the Web-based lender serves those who cannot obtain traditional financing for consumer purchases like furniture or electronics and are turned away by traditional banks when they come in seeking loans, or by retail establishments themselves that fear the risk associated with extending credit. Progressive has said that where retail stores turn away up to 60% of customers because they don't qualify for credit, it approves 80% of those customers.

Progressive maintains relationships with some of the largest U.S. retailers that will add about 15,000 new sources of revenue and is a large part of why Aaron's sees the acquisition as "transformative" for the retailer, since it will be able to add 18% gains to its cash earnings per share this year and 26% next year. It did find it necessary to reduce first-quarter guidance because of bad weather, but taking on $426 million in new debt to finance the transaction -- $126 million in a new senior debt facility and $300 million in private placement notes -- will substantially increase its debt load while it's experiencing falling traffic.

Although Aaron's target customers are those most in need of financial alternatives, they're also the ones being ground down by the moribund economy, which doesn't bode well for bolstering sales. Progressive Finance may bring in more opportunities, but Vintage says it needs to revalue the rent-to-own specialist, particularly in light of the new debt, and that leaves me thinking investors may have had enough as well.

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Editor's note: A previous version of this article incorrectly stated that Progressive uses data mining of applicants' social media contacts to judge borrowing risk. The Fool regrets the error.

The article Aaron's Uses Acquisition to Thwart Takeover originally appeared on Fool.com.

Rich Duprey has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Why NASDAQ OMX Group, Inc. Will Fly Above $40

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While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of NASDAQ OMX Group  gained 3% today after Credit Suisse upgraded the stock exchange operator from neutral to outperform.

So what: Along with the upgrade, analyst Ashley Serrao raised her price target to $42 (from $40), representing about 18% worth of upside to yesterday's close. So while momentum traders might be turned off by NASDAQ's share-price pullback in recent weeks, Serrao's call could reflect a growing sense on Wall Street that its growth prospects are becoming too cheap to pass up.


Now what: According to Credit Suisse, NASDAQ's risk/reward trade-off is rather attractive at this point. "We view recent share price weakness from concerns around regulation as a buying opportunity for a cash flow rich franchise (9% FCF Yield)," said Serrao. "We believe the regulatory overhang on NDAQ will gradually be lifted and investor focus will return to the 10%+ EPS growth over the next two years from share buybacks, technology solutions revenue growth and operating leverage from modestly higher volumes." When you couple that upbeat outlook with NASDAQ's cheapish forward P/E of 11, it's tough to disagree with Credit Suisse's bullishness. 

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The article Why NASDAQ OMX Group, Inc. Will Fly Above $40 originally appeared on Fool.com.

Brian Pacampara has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Why Tesla Motors Inc. Stock Raced Ahead Today

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of electric-car company Tesla Motors kicked up the voltage today, rising over 7% following a double dose of positive news.

So what: First, at a conference in China, CEO Elon Musk forecasted that the company actually will begin producing vehicles in China within the next three to four years. Musk said, "China is very important to the future of Tesla. We're going to make a big investment in China in terms of charging infrastructure." He vowed to invest hundreds of millions of dollars building out the charging network.


Second, Musk stated, "What we see right now is pretty strong demand. I think probably more demand than we can fulfill this year." That sounds like music to most investors' ears.

Now what: The first piece of news suggests, of course, that orders and demand continue to be robust in China. Helping this is the fact that Tesla will avoid charging the 25% tariff on imports, which will make its vehicles more affordable for Chinese consumers -- the cars will be offered at prices similar to those charged in America. What's more, demand will be robust for the foreseeable future. Every car Tesla produces is as good as sold before it even leaves the factory.

Tesla spent 2013 telling investors and the media that demand continued to outstrip production despite the company not spending a single penny on advertising. It looks like the company is on pace for an encore in 2014, even as the company increases production.

As it stands, production schedules will tell the tale for 2014. Tesla will report earnings on May 7, which will be followed by a conference call. Musk's positive comments this close to the report suggest that it should be upbeat as usual along with strong guidance. With the company's last report, Tesla guided for 7,400 vehicles of production, or nearly 600 per week for the first quarter. It also guided for that amount to rise to 1,000 per week by the end of the year. It will be interesting to see if the company produced more than expected and is on pace to hit the 1,000 per week goal earlier than hoped.

The article Why Tesla Motors Inc. Stock Raced Ahead Today originally appeared on Fool.com.

Nickey Friedman has no position in any stocks mentioned. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Why Harley-Davidson, Inc. Stock Hit Full Throttle After Its Earnings Report

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Shares of Harley-Davidson, Inc. surged in early Tuesday trading, racing ahead from $67.54 to $72.86 at last quote. The surge was in response to a Q1 earnings report that showed the company had grown retail sales 6%, shipments 7%, and revenues 10% over the past three months.


Source: Harley Davidson

Running down the quarter's highlights:

  • Sales increased 10% to $1.73 billion, about $200 million more than analysts had predicted.
  • Profits surged 22%, to $1.21 per share -- also ahead of estimates.
  • Operating cash flow hit $203.6 million (versus negative cash flow in the year-ago quarter).
  • Subtracting capital expenditures of $25.9 million, free cash flow was $177.7 million, about 67% of reported net income.

Dealer sales to consumers are growing. Shipments portending future sales are growing even faster. And revenues are growing fastest of all, showing that the Harley brand retains significant pricing power.

What's behind the success? According to CEO Keith Wandell, "Project RUSHMORE motorcycles were in high demand in the quarter and we began shipping the Harley-Davidson Street 750 and 500 into select markets."

The first part of that boast, Project RUSHMORE, refers to Harley's wholesale revamp of how it develops and sells its bikes, aiming to boost production capacity, and cut the time from when a new motorcycle is first envisioned to when it hits the market nearly in half -- from a five and a half year development cycle down to just three years. The second part refers to Harley's nearly as ambitious plan to revamp its image as a builder of bikes for "wealthy, middle-aged American white men," and open new markets for smaller bikes, affordable to less affluent buyers around the world, with the ultimate aim of getting 40% of its global revenues from outside U.S. borders.

That latter initiative seems to be working out especially well, with international sales up 8% in Europe, 9% in Latin America, and an astounding 20% in Asia in the fiscal first quarter. For context, unit sales in the U.S. increased only 3%.

Even in the U.S., the news wasn't so bad. Sales growth of 3% in the middle of a cold, cold winter, after all, is nothing to (ahem) sneeze at. And it's especially gratifying to hear that IHS Automotive data is saying that last year Harley retained its No. 1 market share not only among "Caucasian men age 35-plus," but among the company's new target market, "young adults age 18-34, women, African-Americans and Hispanics" -- a demographic Harley clearly labels its "outreach" customers. Says Harley, "Retail sales... to U.S. outreach customers grew at more than twice the rate of sales growth to core customers in 2013." 

Valuation
Final point: Harley's business is going full out, but what about its stock? How does that look to investors?

Well, at just over 20 times earnings today, paying a 1.7% dividend yield, and projected to grow at 16%, I'd have to say the stock's looking not too shabby. When you consider further that Harley's trailing results show the company to be generating significantly more free cash flow ($1.1 billion) over the past year than it reported as net income ($776 million) -- and that, as a result, the stock is selling for less than 15 times free cash flow even after this morning's jump in stock price -- the stock looks even more attractive.

Long story short, investors who bid up Harley shares in reaction to today's news are right on the money.  

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The article Why Harley-Davidson, Inc. Stock Hit Full Throttle After Its Earnings Report originally appeared on Fool.com.

Rich Smith has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Yum! Brands Serves Up Sweet-and-Sour Earnings

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Yum! Brands reported fiscal 2014 first-quarter earnings after the bell today that beat on the bottom line, but missed analysts' revenue targets. Yum! Brands is the parent company of popular fast-food joints including Pizza Hut, Taco Bell, and KFC. The company has struggled with declining sales in China in the prior quarters.

Source: The Motley Fool.

For the period ended March 22, Yum! Brands posted a profit of $0.87 per share, up from earnings of $0.70 during the same quarter a year ago. This was $0.02 better than analysts had expected. However, revenue of $2.7 billion came up slightly short in the first quarter. Wall Street was looking for earnings per share of $0.85 on revenue of $2.8 billion in the period.

Nevertheless, sales in China were a bright spot for the company, as sales in Yum! Brands China division increased 17% during the quarter. This was underscored by same-store sales growth of 9%.


"Given the strength at both KFC and Pizza Hut, we expect to open at least 700 new restaurants in China this year as we further capitalize on our leading position in the number-one retail opportunity in the world," said David Novak, CEO of Yum! Brands. Shares of Yum! Brands were trading higher by more than 3% as of 5:30 p.m. on this news.

The article Yum! Brands Serves Up Sweet-and-Sour Earnings originally appeared on Fool.com.

Tamara Rutter has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Fool's Gold Report: Will a Newmont-Barrick Merger Really Happen?

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Gold continues to languish, with gold investors seeing few reasons to get optimistic about the yellow metal's prospects. As the stock market has risen, interest in gold has waned, and a lack of any important new developments out of Ukraine, or other contentious areas of the world, has made investors more interested in what they see as higher-returning investments elsewhere. With little interest in the bullion side of the market, investors are focused on possible merger talks between Newmont Mining and Barrick Gold that could result in a huge gold-mining giant. Does a merger between Barrick Gold and Newmont Mining make sense? Let's take a closer look.


Newmont Mining's Boddington gold mine. Source: Newmont Mining.

Getting it together
With the Osisko Mining deal getting so much attention lately, it's somewhat surprising to see merger talks between Barrick Gold and Newmont Mining get relatively little play. The first hint that many investors got of a potential deal came last Friday when the markets were closed, as reports surfaced that the two companies had been in merger talks, but that they had broken down. Although the parties identified about $1 billion in potential cost savings annually due to synergies and other positive elements of a deal, and with those savings equating to around $85 per ounce of gold production, the merger would undoubtedly produce an attractive boost to margins. Yet, the intricacies of which assets would remain in a combined Newmont-Barrick entity, and which would be spun off into separately traded companies, was apparently a sticking point between the two mining giants, and so as of yesterday, many investors had already written off the idea of a merger shortly after learning about it in the first place. Newmont Mining shares soared yesterday, and it was somewhat unclear whether the move came because of the initial merger interest, or because of its apparent failure.

Source: Barrick Gold.


Today, though, The Wall Street Journal said that even though talks had stalled, Newmont Mining and Barrick Gold were still interested in the concept of a merger. For the two companies, a combination could lead to a new critical look at new development prospects, with more realistic assessments of profitability in light of lower gold prices. Some bullish gold investors argue that the result would be positive for the entire gold market, as reining in unprofitable production opportunities would reduce gold supply and lead to a new equilibrium in the gold market that would support higher prices. In addition, by integrating strategic moves like hedging and sales decisions, Barrick Gold and Newmont Mining might bring greater confidence to the entire gold-mining industry.

Obviously, getting a deal of this size done involves substantial complications. But with some benefits to the move, it's still a possibility -- and Barrick Gold shares rose 1.5% today, in part because of that possibility, as well as an analyst upgrade that took the possibility into account.

How metals moved today
June gold futures fell $7.40 per ounce Monday, settling at $1,281.10. May silver futures managed to pick up $0.01 on the session, climbing to $19.36 per ounce. Platinum-group metals were mixed, with palladium rising even as platinum gave back ground Tuesday.

Metal

Today's Spot Price and Change From Previous Day

Gold

$1,284, down $6

Silver

$19.42, down $0.02

Platinum

$1,396, down $2

Palladium

$782, up $6

Source: Kitco. As of 5 p.m. EDT.

Unfortunately, it's likely to take either a stock market decline or a geopolitical event to reverse the negative sentiment toward gold. With so much attention focused on the mining-company arena, bullion could continue to ease lower if current trends in other markets continue.

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The article Fool's Gold Report: Will a Newmont-Barrick Merger Really Happen? originally appeared on Fool.com.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Is It Game Over for Chipotle?

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Source: Chipotle

After shares of Chipotle Mexican Grill dropped 6% on April 17, investors might be thinking that the stock has finally run out of steam . The fall in the company's share price follows its first-quarter earnings release and points to a picture that some analysts see as very bearish for the business.


However, this is unlikely to be the case. If anything, the situation at Chipotle looks to be better than even Mr. Market anticipated, which could extend the company's lead over Panera Bread  and Yum! Brands .

Chipotle posted strong growth, but terrible price movements hurt!
For the quarter, Chipotle reported revenue of $904.2 million. This represented a 24% gain compared to the $726.8 million reported in the year-ago quarter and was more than 3% above the $873.8 million investors hoped to see.

According to the company's earnings release, the jump in sales was driven by a variety of factors. Chief among these was the 13.4% increase in comparable-store sales the business reported compared to the first quarter of 2013. This was due, for the most part, to increased traffic but was also favorably affected by an increase in average ticket.

Source: Chipotle

Another significant driver behind the company's growth compared to last year was an increase in restaurant count. During the quarter, the company added 44 new restaurants and -- over the past year -- increased its number of locations in operation by 12% from 1,458 to 1,637.

From a revenue perspective, it's hard to deny that Chipotle's growth has been anything short of stupendous. Unfortunately, the same cannot be said for the company's rise in profits. For the quarter, management reported that earnings per share came in at $2.64. Although this was 8% higher than the $2.45 the business reported in the year-ago quarter, it fell a good level shy of the $2.87 Mr. Market anticipated.

Despite benefiting from higher revenue, Chipotle's bottom line failed to keep up primarily due to rising in costs. The main contributor to the company's lackluster profits was its cost of food, which rose from 33% of sales to 34.5% mostly because of soaring beef, cheese, and avocado prices. In response to this, management stated that the prices it charges customers will rise by summer, probably in the range of 3% to 5%.

Is Chipotle out cold?
Out of fear that price increases will cause Chipotle's customer base to feel disenfranchised, investors pushed the company's stock price down. If the company had been experiencing poor revenue growth or small profits over an extended period of time, it's probable that this decision by management could indeed harm the business. However, the company's long-term performance seems to indicate that Chipotle is quite healthy.

Source: Chipotle

Over the past few years, Chipotle has been a true growth machine. Between 2009 and 2013, the company saw its revenue skyrocket 112% from $1.5 billion to $3.2 billion. Panera, one of Chipotle's biggest rivals, saw its top line increase only 76% from $1.4 billion to $2.4 billion during that same time frame; Yum!, the parent of Taco Bell, saw its revenue climb just 21% from $10.8 billion to $13.1 billion.

In its annual report, Chipotle attributes its sales jump to a nice mix between higher store count and comparable-store sales. During this time period, the company's number of locations in operation increased 71% from 956 to 1,637, while its aggregate comparable-store sales rose 41%.

CMG Revenue (Annual) Chart

Chipotle revenue (annual) data by YCharts

Both of these metrics far outpaced Panera's performance over the same period of time. During the past five years, Panera's revenue grew because of a 29% increase in store count from 1,380 to 1,777. However, the aggregate 29% rise in comparable-store sales has helped the business immensely as well.

Meanwhile, Yum! has been unable to compete with fast-casual competitors, particularly in the U.S. Between 2009 and 2013, the company's U.S. comparable- store sales have been nearly flat. However, management has seen some positive results coming from China, India, and most of its remaining international operations. This, combined with the 9% improvement in store count from 37,080 locations to 40,311 the company enjoyed, helped push its revenue up a bit.

Foolish takeaway
Based on the data provided, it's easy to see why investors are concerned about Chipotle's ability to grow earnings as quickly as it grows revenue. However, with strong revenue growth over an extended period of time, it's unlikely that the business will be adversely affected. Yes, there is a chance that its comparable-store sales growth might slow if prices rise too high. But with a strong and growing presence in America's dining industry, the company's future probably hasn't looked brighter.

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The article Is It Game Over for Chipotle? originally appeared on Fool.com.

Daniel Jones has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and Panera Bread. The Motley Fool owns shares of Chipotle Mexican Grill and Panera Bread. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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7 Reasons to Be Bullish on Herbalife

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Over the past couple of years, Herbalife  has faced attacks from many different groups, and its share price has fallen significantly as a result.

  • May 2012: Shares of Herbalife collapse after David Einhorn asks critical questions of the company during its conference call.
  • December 2012: Shares fall to new lows after hedge fund manager Bill Ackman announces his billion-dollar short position in the company, releases a 342-page presentation attacking the company, and gives the stock a price target of $0.
  • January 2014: Senator Markey calls on the FTC to investigate Herbalife. 
  • March 2014: Shares fall even further after the FTC announces they are investigating the company. 
  • NY Attorney General begins investigating Herbalife. 
  • Presently: The company is one of the most hated stocks on Wall Street, with shares down by over $25 from their highs, a short interest of over 20%, and a Motley Fool CAPS rating of 1/5 stars.

In spite of all the pessimism, however, I remain extremely bullish on the stock.


Here are seven reasons I believe the stock will go up over the next few years in spite of the pressures being placed against it.

1. The worst-case scenario is unlikely
It's unlikely the FTC will be able to shut down Herbalife entirely. Case precedent is in favor of Herbalife, with the FTC having gone after, and losing to, Amway over similar issues in 1975.  

Additionally, one of the main requirements for a company to be considered a pyramid scheme is that a significant percentage of profit needs to come from recruiting new members rather than from the sale of product. Because many distributors use Herbalife's products personally, it is difficult to distinguish between revenues from new distributors joining the company, and revenues from distributors purchasing the product for their own consumption. Herbalife claims that 73% of the people who become distributors do so in order to receive discounts on products they personally consume.

The problem the FTC has is that this is an extremely difficult thing to disprove. Even if this percentage is wrong, the burden of proof lies with the FTC to show that the majority of Herbalife's distributors are loading up on inventory rather than personally using it, or selling it to others who will use it.

Shutting down Herbalife is an uphill battle that Bill Ackman and the FTC will likely lose if they attempt it.

2. The U.S. represents only 18% of the company's sales
Even if new regulation is enacted in the U.S., it shouldn't affect the company's sales in other countries. Herbalife makes 82% of its sales outside of the U.S., so unless you believe the FTC will shut down the company altogether, then the maximum damage to revenue should be 18%, assuming margins are relatively constant between countries. In reality it will probably be less than this; The U.S. only represents 15.45% of the companies total contribution margin.  

Assuming that Herbalife's earnings do decrease by 18% the company should still have forward earnings of well over $4.00 per share. With a P/E of 14.5, the company would still be relatively cheap.

3. Cheap valuation 
At $56 a share, the company is trading at just 11.4 times trailing-12-month earnings, and less than 9.3 times forward earnings. This is significantly cheaper than the S&P's current average multiple of 18 times ttm earnings.

When you factor in the company's strong growth rate of 21.2% net income growth over the past five years, the company begins to look like an absolute bargain.

More important perhaps even than Herbalife's growth in earnings is what the company has done with its excess cash: Dividends and share buybacks.

4. Dividends and share buybacks
The company currently pays $0.30 quarterly for a yield of 2.26%.

In 2013, Herbalife bought back $300 million worth of shares. The board is currently authorized to spend an additional $1.5 billion on share repurchases going forward.

Herbalife's share buybacks have not been new. The company has been repurchasing shares since 2007, and over this time has been able to reduce its share count from 145.4 million to 107.4 (diluted and adjusting for stock split).

These share buybacks have helped accelerate HLF's earnings growth and given shareholders a larger percentage of the company over the past seven years.

5. Icahn
Whether your views on Icahn are positive or negative, the fact that he is a large investor in the company may help the stock.

The activist investor acts as a counterforce to Bill Ackman and may help Herbalife in the regulatory fight.

Additionally, Carl Icahn is likely to advocate more aggressive actions to boost the company's share price, including greater share repurchases and increases in dividends. Earlier this year, Icahn had pushed for Apple (NASDAQ: AAPL) to increase its share repurchase program by $50 billion.

While Apple does have significantly more cash on hand then Herbalife does, the comparison is not that outrageous. Both Apple and Herbalife have strong free cash flow that it could use to increase dividends or share repurchases.

Additionally, because Herbalife's cash flow has been so stable, it may make sense for the company to increase its debt load to repurchase shares while interest rates are low and the company's stock is cheap.

Icahn wants to see shares of HLF rise both for the immediate gain he could realize and in order to try to squeeze out short-sellers such as Bill Ackman. Share repurchases and dividends are one of the easiest tools available to accomplish this goal.

6. China: Limited risk with huge potential upside
In addition to the U.S., regulators in China are also looking into the legitimacy of multi-level marketing.

Last January, the Chinese government announced it was investigating multi-level marketing company Nu Skin for its business practices.

In March, the company announced it was forced to pay a relatively small sum of $524,000 for having not obtained proper licensing. This was a far less severe punishment than many had expected.

While the investigation is not over yet, the news looks positive for companies like Herbalife, as it may signal that the Chinese government won't go after the multi-level marketing industry.

Unlike Nu Skin, however, Herbalife is not significantly tied to China. The company does just 11% of its business in China, compared with 43% for Nu Skin. If China decides to go after the multi-level marketing industry in the future, Herbalife will not be affected as much as other similar companies such as Nu Skin. Additionally if new regulations in China are not enacted, then China could present a huge growth opportunity in the future.

7. The stock is hated

Perhaps one of the greatest benefits of being a Herbalife bull is the negativity surrounding the stock.

Herbalife has been a very headline-driven stock over the past couple of years as the company has faced attacks from hedge funds, legislatures, and the FTC, as well as support from various people such as Carl Icahn. Any positive news, especially the FTC dropping their investigation, could lead to a sudden and rapid increase in share price as short-sellers cover their positions. 

Additionally, any negative news the company receives may push shares lower, offering investors the chance to buy into the company at an even cheaper valuation. Herbalife remains one of the most undervalued companies already, and investors should consider taking advantage of the opportunity by buying on any dips.

Boost your 2014 returns with The Motley Fool's top stock
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The article 7 Reasons to Be Bullish on Herbalife originally appeared on Fool.com.

Kyle Farrah owns shares of Herbalife. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and has the following options: long January 2016 $57 calls on Herbalife. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Burrito Alert? Why Concerns Over a Planned Price Hike Are Obscuring an Otherwise Great Quarter for C

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Chipotle's move to raise prices dominated the news coming out of its first-quarter earnings report. BusinessWeek's headline called for a "Burrito Alert: Chipotle Is Raising Prices." NBC announced: "Holy Guacamole! Chipotle to Raise Prices as Costs Soar," while Quartz seemed to imply that customers are already paying a high premium, with a headline, "Your precious Chipotle burrito is about to get more expensive."

This will be Chipotle's first price hike in three years, and the company has become a lot more popular over that time, so it's reasonable that news outlets played it up. But with the stock dropping to nearly 17% off its recent highs, concern over the pending hike seems to be obscuring what was otherwise a very solid quarter for the country's favorite burrito maker. Besides, the price hike may not be as big a deal as it seems. More on that later.


Source: Chipotle.com

On the downside, the first-quarter call brought word of the price hike, lots of talk about increasing food costs, and a weaker-than-expected earnings number. (Think those three things may have anything to do with each other?) But there was also plenty of good news for investors to chew on, and still more evidence of just why Chipotle continues to outperform larger fast-food rivals Yum! Brands and McDonald's in the U.S.

Blowing away rivals
Same-store sales growth for Chipotle was phenomenal, up 13.4% over the first quarter of 2013, an acceleration over the impressive 9% comps number in the prior quarter. That helped drive overall revenue for the chain up 24.4%, to $904 million.

Both Yum! and McDonald's have seen same-stores sales growth in the U.S. come to a halt. Yum!'s numbers for 2013 were flat with 2012. At Taco Bell specifically, same-store sales growth crept along at 1% in the quarter reported in February, down from about 5% a year earlier. Taco Bell generates two-thirds of Yum!'s U.S. profits., so slowing growth there can really hurt the company's efforts in the U.S.

McDonald's has been experiencing shrinking same-store sales in the U.S., with the company reporting slower sales for the third straight month in March. Bloomberg attributed the slowdown to both fierce competition in fast food, and to "declining consumer sentiment."

The market message
Chipotle, meanwhile, has been able to rise above that fierce competition. Credit that to rising consumer sentiment in its brand and the decline of sentiment in brands like McDonald's. The company's marketing efforts have focused around building awareness about food quality and sourcing.

"Ultimately, it's our belief that the more people know about their food and how it was raised and where it comes from, the more likely they will be to eat at Chipotle," Chairman and Co-CEO Steve Ells said.

It's trying to win customers over with the idea that they should be eating food that's healthful, natural, sourced from quality ingredients that are not from factory farms, and prepared right in front of you. It's fast food as anti-fast food.

More pricing power than it needs
The message is resonating, and it's a big reason why Chipotle is in a good position to raise prices. Food costs - especially those for beef, avocados, and cheese - are rising faster than expected. They now make up 34.5% of Chipotle's costs, and if the chain does nothing, that will rise to 36% later this year, management says. So, a price hike is prudent to offset those increasing costs.

Chipotle plans a hike in the mid-single digits. So, somewhere around $0.50 on your average $10 check. It believes it could enact an even bigger price hike, but as CFO Jack Hartung says, the company would like to keep some of its pricing power "in the bank."

The reason why management believes it has even more pricing power than it needs has everything to do with the "Food With Integrity" message resonating with customers. If diners truly believe they are getting both a more healthful and better-tasting meal at Chipotle than other available options, those extra two quarters at the register won't seem like much more to pay.

The Foolish bottom line
Rising food prices are a concern, and we can't know for sure how Chipotle's customers will respond to the first price hike in three years until they respond. But if there's one restaurant that's positioned itself well for a price hike in 2014, it's Chipotle. Investors may want to use the market's knee-jerk reaction as an opportunity to open or add to a position in the company.

Boost your 2014 returns with The Motley Fool's top stock
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The article Burrito Alert? Why Concerns Over a Planned Price Hike Are Obscuring an Otherwise Great Quarter for Chipotle originally appeared on Fool.com.

John-Erik Koslosky owns shares of Chipotle Mexican Grill. The Motley Fool recommends Chipotle Mexican Grill and McDonald's. The Motley Fool owns shares of Chipotle Mexican Grill and McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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A New Yahoo! TV Strategy Could Pay Off Nicely

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Yahoo! is entering the crowded market for original online programming. Will the strategy pay off? Fool contributor Tim Beyers examines the prospects for a more expansive Yahoo! TV effort in the following video.

According to The Wall Street Journal, Yahoo! is aiming to produce a series of 10-episode half-hour sitcoms. That could be a great move, Tim says, especially when you consider that Netflix, HBO, and AMC Networks have spent so much producing award-winning dramas. Yahoo! could be catering to an underserved genre.

The timing is also interesting. CEO Marissa Mayer touted Yahoo!'s TV partnerships in her January keynote speech at CES, including an exclusive deal for online SNL clips. AMC, meanwhile, has only just begun to fund scripted comedy, while Netflix has high hopes, but no confirmed plans, for future seasons of Arrested Development. HBO's Veep and Silicon Valley stand out as the most likely rivals for new Yahoo! comedy programming, though Sony's Crackle has dipped its toe in the genre with Jerry Seinfeld's Comedians in Cars Getting Coffee.


Regardless of how the landscape evolves, what should matter to investors is that Yahoo! is expanding its footprint without playing the copycat. Tim says that should yield benefits.

Now it's your turn to weigh in. What do you think of Yahoo!'s TV strategy? Will you be tuning in when the network launches new programs? Please watch the video to get the full story, and then leave a comment to let us know your take, including whether you would buy, sell, or short Yahoo! stock at current prices.

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The article A New Yahoo! TV Strategy Could Pay Off Nicely originally appeared on Fool.com.

Tim Beyers is a member of the  Motley Fool Rule Breakers  stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Netflix at the time of publication. Check out Tim's Web home and portfolio holdings, or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.The Motley Fool recommends AMC Networks, Netflix, and Yahoo! and owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.The Motley Fool recommends AMC Networks, Netflix, and Yahoo!. The Motley Fool owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Intuitive Surgical's Q1 Net Income Drops 77% on Weaker da Vinci Sales

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Innovative robotic surgical-system developer Intuitive Surgical reported less-than-stellar first-quarter results after the closing bell this evening, highlighting what has been a difficult sales environment for higher-priced medical equipment with the rollout of the Affordable Care Act.

For the quarter, Intuitive Surgical delivered $464.7 million in revenue, in line with its previously guided estimate from two weeks ago, and down 24% from the $611.4 million it recorded in the year-ago period.

The main culprit pushing sales lower were weaker system sales. Its da Vinci surgical systems cost upwards of $1.5 million, so a boost or reduction in sales can have a material impact on Intuitive's top-line results. During the quarter Intuitive Surgical sold just 87 systems compared to 164 in the same period last year. The end result was a reduction in systems revenue to $106 million from $256 million, and a service revenue dip of 10%, to $104 million. Completing the disappointment was a tamer 2% drop in accessories-and-instrument revenue to $255 million for the quarter.


Intuitive Surgical placed the blame in systems revenue weakness squarely on lower procedure growth, but this was also the first time we saw the company mention hospitals' capital-spending priorities directly as they relate to the Affordable Care Act as a reason why sales were down.

Adjusted profits for the quarter sank 77%, to just $44 million, or $1.13 per share, compared to the $189 million, or $4.56 per share, in reported in the year-ago quarter. As noted in its press release, it also dealt with a 70 basis point higher income-tax rate during the quarter relative to last year.

Intuitive Surgical declined to provide any revenue or EPS guidance moving forward.

The article Intuitive Surgical's Q1 Net Income Drops 77% on Weaker da Vinci Sales originally appeared on Fool.com.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of, and recommends Intuitive Surgical. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Will Alan Mulally's Departure Shake Up Ford Motor Company?

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Ford's top brass posed with the all-new 2015 F-150 in Detroit in January. CEO Alan Mulally, at left, is set to depart soon, according to reports. He'll be replaced by Chief Operating Officer Mark Fields, third from left. Photo credit: Ford Motor Co.

It looks like Ford is going to be getting a new CEO soon. 


Bloomberg reported on Monday (and several other news organizations subsequently confirmed) that Ford will soon announce the departure date of CEO Alan Mulally. Set to replace him: longtime Ford executive Mark Fields, currently the company's chief operating officer.

Ford stock barely budged on the news, mainly because it wasn't much of a surprise: Mulally is 68, Ford has been hinting that 2014 would likely be his last year as CEO, and Fields has been seen as his likely successor for over a year now. 

It's likely to be a low-drama transition, and I'm sure that's just what Ford's board of directors wants. But Mulally's departure will nonetheless be a huge moment for Ford.

A historic tenure as CEO of an iconic American company
Mulally's tenure at Ford will be discussed in business-school seminars for decades. A genial, charismatic, consensus-building leader with serious engineering cred, Mulally is widely credited with saving Ford from imminent ruin by simultaneously overhauling the company's cost structure, product line, and internal culture. 

That last one is especially important. I've watched Ford for years and I've talked to plenty of people inside the company (including Mulally himself). It's my view that Mulally deserves every bit of the credit he is routinely given for Ford's remarkable recovery -- which was rooted in a huge shift in Ford's culture.

Mulally often says that one of the keys to successful leadership is to make everyone in the organization feel both accountable and included, in a positive way. That's not just talk: Nearly everyone I've talked to from Ford's middle ranks has a happy story about how Mulally connected with them in some direct way, recognizing a contribution or encouraging a good effort. You can see the results in Ford's latest vehicles, or on its bottom line.

Mulally changed Ford's culture by modeling -- and expecting his colleagues to model -- a way of behaving that reflects the best aspects of teamwork. That approach was a stark contrast to the infighting, blame-shifting culture that had riddled Ford before he arrived. But that old culture had left the company close to ruin, and employees knew it: Most were ready to try something new, and the ones that weren't were encouraged to leave. 

(In fact, Mulally had his approach boiled down to a list of "expected behaviors" that are printed on little cards for Ford employees, alongside the key points of the "One Ford" plan that is Ford's global operating blueprint. You can see it here in PDF form.)

Mark Fields is a strong choice to follow Mulally
Mulally would be the first to say that he had plenty of help with the effort of turning Ford around. Fields, his apparent successor, was one of Mulally's biggest helpers. 

Before Mulally's arrival, Fields had gained a reputation as a sharp executive, but also a sharp-edged one, someone who had thrived amid the infighting that was standard at Ford back then.

But Fields bought into Mulally's approach early on. He was a chief architect of the "Way Forward" plan that served as the blueprint for Ford's North American turnaround. 

Ford Chief Operating Officer Mark Fields has increasingly been the public face of Ford in recent months. He presented the refreshed Ford Focus sedan at the New York International Auto Show last week. Photo credit: Ford Motor Co.

Fields had put together an early version of his plan after taking over Ford's North American operations in 2005, before Mulally's arrival. Fields had been a rising star at Ford for years: Before becoming president of Ford's North and South American regions, Fields had run Ford's European region, its global luxury-car business (which at the time, included the Jaguar, Land Rover, Volvo, and Aston Martin brands, along with Lincoln), and Japanese automaker Mazda, which Ford controlled for several years. 

I've met Fields on a couple of occasions. He's extremely bright, a very likable leader, and he's clearly committed to those "expected behaviors" just as Mulally has been. Time will tell, but he looks to be an excellent choice to succeed the iconic Mulally.

Ford's next CEO will have plenty of work to do
Unlike Mulally, who joined Ford at a moment of grave crisis, Fields will take over a healthy and profitable Ford that is on an upswing around the world.

But Fields will face challenges. Ford South America has been struggling with the ongoing economic turmoil in Venezuela, its Asian division is in the midst of Ford's most aggressive expansion in decades, and while Ford's turnaround plan for its money-losing Europe region appears to be on track, making sustainable profits in Europe on an ongoing basis won't be simple.

There are challenges here in North America, too. The all-new version of Ford's F-150 pickup, set to launch later this year, requires new production techniques to manufacture and assemble its aluminum body panels -- a big gamble with Ford's most profitable product.

I'm sure that Fields is also mindful of how quickly a company can go from being on an upswing to a serious crisis. Old rival General Motors also looked to be on an upswing when Mary Barra took over as CEO back in January, but it has since become mired in a recall crisis that, at best, will be an expensive burden for GM for several quarters to come.

But Mulally will leave Fields with a deep executive team, and a healthy company that is on track for significant growth in coming years. As CEO transitions go, Ford's should be pretty smooth.

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The article Will Alan Mulally's Departure Shake Up Ford Motor Company? originally appeared on Fool.com.

John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Hawaiian Holdings Climbs the Ranks of the Best Airlines

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Hawaiian Airlines is moving up in the annual airline quality rankings. Source: Wikimedia Commons.

The list of the nation's best airlines is out, and no carrier improved its quality ranking more last year than did Hawaiian Holdings subsidiary Hawaiian Airlines. Fool contributor Tim Beyers says it may be time for investors to give the stock a second look.


Specifically, Hawaiian moved up from fifth in 2012 to third last year, according to data compiled by researchers at Embry-Riddle Aeronautical University and Wichita State University's W. Frank Barton School of Business. Carriers are measured on the basis of 12 different customer complaint categories, as well as common failings such as on-time performance, bumped flights, and the like.

In the following video, Tim says the gains should impress investors since they come as Hawaiian is juggling capacity. Recent changes include ending service to Manila, Thailand, and Fukuoka, Japan, while opening new routes to Beijing.

The bad news? Service gains haven't led to improved financial results. Passenger revenue per available seat mile, or PRASM, fell 3.8% last year. Executives expect to reverse that trend in the first quarter with a gain of 4%-7% in PRASM.

Will they deliver?  Revenue passenger miles were up 0.7% year to date through March. Available seat miles were up 1.8% over the same period, though load factor -- which measures the percentage of available seats sold -- fell one percentage point to 80%. Hawaiian needs to improve the first two metrics while holding steady on the third in order to deliver on investors' hopes for sustained growth.

Now it's your turn to weigh in. Do you expect Hawaiian to continue ranking among the best airlines? If so, do you foresee corresponding financial gains? Please watch the video to get the full story and then leave a comment to let us know your take, including whether you would buy, sell, or short Hawaiian Holdings stock at current prices.

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The article Hawaiian Holdings Climbs the Ranks of the Best Airlines originally appeared on Fool.com.

Tim Beyers is a member of the  Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Will the Downside Continue for Noble Corp?

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This year will be a tough one for offshore drilling companies, and Noble Corp  is no exception. The rig market remains oversupplied; Noble itself acknowledges this fact, stating that excessive supply exists in most rig categories.

Meanwhile, large oil companies have been selective in investing their capital, which led to lower rig day rates. As supply continues to outweigh demand, there's little hope for major upside in the near term. 


Older rig fleet
Noble has an older rig fleet than its more aggressive peers like Seadrill . However, Seadrill's intensive rig-building activity has been bad for the market and pushed day rates down. The situation is worse for older rigs, as they have to compete with a plethora of new ones.

The company decided to address this issue by spinning off several older rigs to Paragon Offshore. Noble plans to launch an initial public offering of about 20% of the company and distribute the remaining 80% of Paragon Offshore shares to Noble shareholders. This move will make Noble's rig fleet younger, but, in fact, Noble shareholders will continue to be exposed to Paragon Offshore's rigs.

Although day rates for Noble's newest rigs are higher than average, I do believe that the industry needs even higher rates and more contracts to shrug off the pressure on drilling stocks. The Noble Houston Colbert jackup will commence operations for Total at a day rate of $247,000 per day. Noble Sam Croft, an ultra-deepwater drill ship, will start working for Freeport-McMoRan Copper & Gold's  Gulf of Mexico operations at a rate of $610,000 per day. Freeport-McMoRan was very active during the Central Gulf of Mexico Oil and Gas Lease Sale back in March and is ready to expand its oil and gas operations that were acquired last year. This activity is yet to translate into a flood of contracts, as 14% of newest rigs are out of work, according to Rigzone.

Bound to build more rigs
During its recent earnings call, Noble stated that it was reluctant to consider ordering new premium rigs in the near term without a firm customer commitment. Building rigs without contracts for them has been a major problem for the market. Those rigs must be marketed heavily as they arrive from the shipyard. Typically, drilling companies have to make pricing for those rigs more attractive, further pushing market day rates lower.

Noble also stated that it could order rigs without a contract sometime in the future should the market environment improve. From a strategic perspective, the company has to continue renewing its fleet. The market clearly favors new rigs. Noble's latest fleet-status reports reveal that rates for several of the company's old jackups are less than $100,000 per day. Older drill ships are also experiencing significant pricing pressure with day rates closer to $300,000.

As such, companies with older fleets are bound to build more new rigs. Those rigs are entering a market that is already tough. For example, Noble stated that it was searching for work for four of its rigs.

Bottom line
Noble reported solid first-quarter results that beat analysts' expectations, but strategic challenges remain. The current market situation is not favorable for offshore drilling companies. There are too many rigs competing for a limited number of projects. In such circumstances, companies with older fleets are at a disadvantage. Noble decided to spin off its older fleet to a new entity, but this does not solve the overall problem of low day rates.

That said, it's worth mentioning that Noble has gotten cheap and trades at less than eight times its future earnings. This fact, together with a dividend that yields almost 5%, should provide support for the company's shares.

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The article Will the Downside Continue for Noble Corp? originally appeared on Fool.com.

Vladimir Zernov has no position in any stocks mentioned. The Motley Fool recommends Seadrill. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold and Seadrill. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Why You Should Do More to Secure Your Smartphone

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Most Americans don't secure their smartphones
Lintao Zhang/Getty Images
By Herb Weisbaum | @TheConsumerman

If your cellphone were lost or stolen, you'd probably freak out, right?

Just think of all the sensitive personal information that's on your mobile device: contacts, passwords and PINS, maybe credit card or bank account numbers. And what about all of those personal pictures and texts -- maybe a bit too personal, that are stored on that device. Would you want someone else to see them?

And yet, most people don't take even the basic steps to secure their mobile device. A new nationwide survey by Consumer Reports found that 34 percent of all smartphone owners do absolutely nothing, not even a simple code to lock the screen.

"This is one of the reasons why so many people's accounts get hacked when their mobile phone is lost or stolen," said security expert Robert Siciliano with BestIDTheftCompanys.com. "When the device is not password protected, anyone who finds or steals it has direct access to all of your accounts that automatically log-in as soon as an application is launched."

Consumer Reports found that only 36 percent of the smartphone users have set a 4-digit PIN to lock their phone.

"Four digits are better than nothing, but the strongest passcodes have at least eight digits in them and have a mix of letters, numbers and symbols," said Mike Gikas, a senior electronics editor at the magazine.

Even fewer people take more aggressive measures to protect the data on their phone, such as:
  • Install software that can find the phone if it's lost: 22 percent
  • Install an antivirus app: 14 percent
  • Use a PIN longer than 4 digits, a password or unlock pattern: 11 percent
  • Install software that can erase the data on the phone: 8 percent
  • Use security features other than screen lock, such as encryption: 7 percent
"I'm not surprised by these low numbers," said Timo Hirvonen, a senior researcher at the global security firm F-Secure. "Most people don't see the need for security on their mobile devices. This is very short-sighted considering the kinds of information people have on them and access with them."

The world is going mobile -- and so are criminals.
That smartphone you carry around with you all day long is now a lucrative target for cyber-thieves who want to gain access to your personal information.

"That smartphone is a computer, like any other, and there's just as much risk of being a victim if you don't take the proper security precautions," said Alphonse Pascual, a senior analyst for security, risk and fraud at Javelin Strategy & Research. "Criminals are targeting those devices and people need to understand that."

Malware is a very real threat, especially for Android devices. The same type of viruses and other malicious software that can infect your desktop or laptop -- and spy on everything you do - are now being launched at mobile devices.

"They can record your user names and passwords, the websites you visit, the text messages or emails you send and receive -- it's pretty scary," Siciliano said. "You need to protect your mobile devices with antivirus, anti-spyware and other security software."

Here are some other things you can do:
  • Set the phone to lock after one minute or less.
  • Does your phone have a setting that will erase all the data if there are too many -- typically more than 10 -- unsuccessful attempts to enter the password? If so, enable it.
  • Update the operating systems, apps and programs as soon as you are notified. These updates often contain security enhancements and patches for vulnerabilities.
  • Use a "find my phone" app that lets you locate the phone if it's lost or stolen and erase all the data remotely.
  • Stick with trusted app stores. This won't guarantee "clean" software, but it will greatly reduce the risk.
  • Don't click links in an email, text or social network on your mobile device. It could lead you down a rat hole.
Consumer Reports estimates that more than 4 million smartphones were stolen or lost (and never recovered) last year. Should this happen to you, change the passwords and PINs on all of your accounts. If you use your mobile device to shop or bank, contact your financial institution and credit card companies. You should also file a police report. You may need this to dispute fraudulent charges on your credit or debit card account.

The editors at Consumer Reports have just published 5 Steps to Protect Your Smartphone from Theft or Loss.


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How Simple Math and a Nike Cultural Imperative Might Have Killed Fuelband

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This story originally written by David Stern at CITEworld. Sign up for our free newsletter here.

It's nice to be right once in a while.

In December, I had the distinct pleasure of speaking on a panel at the Wearables Technology Expo, alongside Intel's Rob Rueckert and LumoBack's Monisha Perkash. When the moderator asked the panel for some closing thoughts on wearables, I said that if you were an entrepreneur developing activity tracking hardware for the wrist, you should immediately stop. Though unpopular at the time -- the comment elicited one or more "boos" from the audience -- my comments were grounded around three solid axes:

  1. Anyone wanting to compete with , Apple, or the hordes of Android-enabled devices to come would have to have $100 million annual marketing budgets.
  2. Any wrist-worn device needed to either win on fashion, or go far beyond common motion detection into accurately capturing deep biosignals to be differentiated enough to win on three fronts: consumer, health care, and venture capital
  3. Even if you had massive budgets and a differentiated product for the wrist, you had to be prepared to lose hundreds of millions of dollars annually to play in the space, and even a company like Nike might not be ready for this.

And so it was no surprise that on Friday Nike admitted that it might be getting out of the Fuelband business. (Or something like that.) Heck, I even predicted it again the day before it was announced. Blind squirrel, meet acorn!

Related: Microsoft unveils a cloud for the Internet of Things

In my opinion, it's pretty simple math combined with a company cultural demand that killed the Fuelband.

To put some context around the math, although it doesn't break out its financials in this fashion, Nike probably sells $3 billion of athletic socks, with substantial profit margins, every year. SOCKS!

And although they also don't release these figures, if you extrapolate from Target and Best Buy's weekly sales data on overall wrist-worn device sales, my guess is that Nike's top line Fuelband revenue is no more than $150 million to $200 million. And that is just top line. On the bottom line -- you know, the one that counts with Wall Street -- this was a money pit.

Nobody takes back socks. They don't break. Their USB dongles don't lose contact points. Their firmware isn't faulty. And they don't fail when they get wet. Bottom line -- and I mean both actual bottom line and metaphorical bottom line -- this has been a major sinkhole for Nike, just as it will be for someone, foolishly, trying to do anything around the wrist without taking into consideration the warnings above.

But there is another less obvious reason why Fuelband might have been killed, one that is rooted deep within the bowels and history of Nike. Over the years, Nike has explored many products that have been discontinued, products that from the outside seem like they have a ton of tailwind behind them -- in-line skates, snow boards, helmets, hockey equipment, and cycling gear, to name a few. In fact, previous incarnations of the Fuelband were shut down a few times before.  

Nike has always shown an incredible amount of financial discipline around these tough decisions. Nike isn't wired to sustain massive losses for profits on the come in areas that it doesn't and can't own as the dominant player, and clearly it wasn't going to own the wearables. So why does this happen beyond the bottom line math?

The article How Simple Math and a Nike Cultural Imperative Might Have Killed Fuelband originally appeared on Fool.com.

David Stern is a managing director of Motion Technology Partners, a co-creation studio and investment vehicle for wearables companies. He frequently blogs at Inside Activity Tracking, where this post was first published. You can reach the author at  editor@citeworld.com The Motley Fool recommends Apple and Nike. The Motley Fool owns shares of Apple and Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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