J.M. Smucker Stock Analysis – Covered Call Profit Skim

Summary

  • SJM recently reported Q2 results reflecting a marginal deterioration in adjusted gross profit margin and adjusted operating income margin relative to Q2 2017.
  • Adjusted EPS revised downward for the second time subsequent to the release of FY adjusted EPS in June 2017 but FCF forecast remains consistent at $0.775B.
  • SJM has a 4 pronged strategy in which it intends to generate sustainable, long-term sales and earnings growth.
  • Competitive pressures persist but SJM has strong brand recognition. Underperformance is largely due to temporary factors.
  • SJM will likely trade in a tight range over the next several months thus providing an opportunity to skim some profit through the use of covered calls.

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Nike Stock Analysis – Great Long-Term Upside Potential

Summary

  • NKE recently held its Investor Day in which it presented its strategy to improve results.
  • Game changing innovation is expected to contribute to improved margins.
  • Unlike many other companies, NKE is not using a significant amount of debt to financially engineer its stock price and EPS.
  • NKE is suitable for a risk averse investor seeking long-term growth and who is prepared to accept a low dividend yield.

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Home Depot – Share Price and Dividends Boosted Through Significant Use of Debt

Summary

  • This Home Depot Stock Analysis is based on Q3 results reported November 14, 2017 which includes increased diluted EPS guidance to $7.36 which is growth of approximately ~14% from fiscal 2016.
  • It is one of a handful of companies with monster share buyback programs. A $15B share buyback program was authorized in early 2017.
  • HD has reduced the number of outstanding shares by ~490 Million since early 2008 and long-term debt has increased by ~$11B.
  • Strong free cash flow should enable HD to service/retire its debt obligations when due but HD can’t continue in perpetuity to boost its dividend and share price through the use of debt.

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Paychex Stock Analysis – Looking for a Re-Entry Price in the Low $50s

Summary

  • This Paychex stock analysis is based on Q1 2018 result as at August 31, 2017.
  • Paychex is a leading provider of payroll processing, human resources and benefits services.
  • It is expensive at current the current price of ~$64.50.
  • A price in the low $50s or below is more reasonable and is not totally out of the realm of possibility.

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Praxair and Air Products Stock Analysis – Buy Both When Fairly Valued

Summary

  • Praxair reported strong Q3 2017 results on October 26, 2017 and provided an update on its proposed merger with Linde.
  • The successful completion of the Praxair Linde merger in the 2nd half of 2018 will make the combined entity the largest player in the industry.
  • Air Products reported strong Q4 and FY2017 results from continuing operations. With its strong balance sheet management expects to invest over $8B over the next three years.
  • In FY2017, Air Products divested non-core assets through the spin-off of Versum Materials and the sale of Performance Materials.
  • Both companies are expensive at current levels. I will monitor both companies with the intent of eventually acquiring shares in both companies when they are more attractively valued.

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Cintas Corporation Stock Analysis – I’m Interested But Not At Current Price

Summary

  • This Cintas Corporation stock analysis is based on Q1 2018 results released September 26, 2017.
  • Cintas completed the transformative acquisition of one of its largest competitors (G&K Services, Inc.) earlier this year and integration is proceeding as planned.
  • Valuation is stretched with a forward PE of ~27 versus the historical ~20 – 21 level.
  • The dividend is paid annually. Unless you are a shareholder of record as at November 10, 2017, you should not expect to receive a dividend until December 2018.

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Emerson Electric Stock Analysis – Wait For A Dip To Low/Mid $50s

Summary

  • This Emerson Electric stock analysis is based on Q4 and FY2017 results released November 7, 2017.
  • FY2017 marks the 3rd year of EMR’s multi-year transformation.
  • EMR has continuously increased its annual dividend for ~60 consecutive years. A $0.02 annual dividend increase announced November 7th marks the 3rd consecutive year with a ~1% increase.
  • A recent proposal to Rockwell Automation to combine with EMR was rebuffed. I expect EMR to continue to hunt for potential acquisitions.
  • EMR appears to be somewhat expensive at ~$63. In my opinion, a~$51 – $54 price range is more appropriate.

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