Quarterly Movers & Shakers

During the past three months, the S&P 500 Index rose 3.8% as concerns over slowing growth and rising rates abated. The following high-quality stocks all generated double-digit gains during the same period. 

FACEBOOK NEW $9 BILLION BUYBACK

Facebook (FB) reported 2018 revenue increased 37% to $55.8 billion with net income up 39% to $22.1 billion and EPS up 40% to $7.57. Return on shareholders’ equity for the year was a likable 26%. During the year, Facebook posted $15.4 billion in free cash flow, down 12%, as the company invested $13.9 billion in capital expenditures to build out its data centers, servers, network infrastructure and office facilities. The company repurchased $12.9 billion of its shares during the year,and the Board approved an additional $9 billion repurchase program. In the past three months, Facebook’s stock rebounded a friendly 23% as investors realized that users and advertisers had not abandoned the company due to security and privacy issues which management is addressing. Buy.

NIKE DOUBLE-DIGIT GROWTH

Nike (NKE) reported strong second quarter results with sales and earnings each jumping 10% to $9.4 billion and $847 million, respectively.Sales grew in nearly every key category led by Sportswear with double-digit growth across footwear and apparel globally. During the second quarter, Nike repurchased 16.1 million shares for about $1.3 billion at an average price of $80.74 per share. Nike raised their financial outlook with sales in fiscal 2019 expected to increase at a high single-digit rate to low double-digit rate on a constant- currency basis. In the pas two years, Nike has raced higher, providing a 52% total return. Hold.

MASTERCARD INCREASED DIVIDEND 32%

In 2018, Mastercard (MA) reported revenues increased 20% to $15 billion. Excluding the impact of U.S. tax reform and other one-time items, adjusted net earnings charged 38% higher to $6.8 billion. During 2018, the company generated $5.9 billion in free cash flow, up 10% from last year, and returned nearly $6 billion to shareholders through dividends of $1 billion and share repurchases of $4.9 billion at an average cost per share of $187.02. Mastercard recently increased the dividend 32% and approved a new $6.5 billion share repurchase program. For 2019, management expects revenue growth in the low-teens with operating expenses in the high-single digits and an effective tax rate of 19% to 20%. Over the past five years, Mastercard has delivered a masterful 200% total return. Hold.

MAXIMUS CASH FLOW UP 57%

Maximus (MMS) reported first quarter revenues rose 7% to $664.6 million with net income down 5% to $55.9 million. During the quarter, operating cash flow increased 57% to $59.3 million. Maximus was not significantly impacted by the government shutdown as work for the Federal government was either in areas with approved funding or were considered essential operations. Maximus started the year off strongly with nearly $1 billion in new contract awards in the first quarter. Management reaffirmed guidance for 2019 with revenue of $2.925 to $3.0 billion expected. Earnings per share are projected in the range of $3.55 to $3.75 for the fiscal 2019 year. Maximus constructed a 13% gain over the last three months. Hold. 

STRYKER INCREASED DIVIDEND 11%

In 2018, Stryker (SYK) reported a healthy 9% increase in sales to $13.6 billion. Excluding the impact of U.S. tax reform and other items, net earnings rose nearly 13% to $2.8 billion. During 2018, Stryker generated $2.0 billion in free cash flow and returned more than $1 billion to shareholders through dividends of $703 million and share repurchases of $300 million. Stryker increased its dividend 11% for 2019. Over the past decade, Stryker has provided a striking 524% total return. Hold.

CISCO SYSTEMS INCREASED DIVIDEND 6%

Cisco Systems (CSCO) reported second quarter revenues rose 5% to $12.4 billion with adjusted EPS up 16%. As part of its commitment to return cash to shareholders, Cisco Systems announced a 6% increase in its dividend and the authorization of an additional $15 billion for share repurchases, bringing the total authorization to $24 billion. Management’s outlook for the third quarter is for 4%-6% revenue growth and EPS in the range of $.63 to $.68. Over the last 22 years, Cisco has routed up an impressive 874% total return. Hold.

PAYCHEX $1.2 BILLION ACQUISITION

Paychex (PAYX) is acquiring Oasis Outsourcing, an industry leader in providing human resources (HR) outsourcing services. Paychex will now serve more than 1.4 million worksite employees through its HR outsourcing services. Oasis serves more than 8,400 clients across all 50 states. The total cash purchase price is $1.2 billion which will be financed with cash on hand and new debt. Paychex has provided a nice paycheck over the last eight years with a 217% total return. Hold.

Quarterly Rating Change From Hold To Buy

BERKSHIRE HATHAWAY $173 BILLIONIN EQUITIES

Berkshire Hathaway (BRK-A, BRK-B) reported its book value has compounded at an impressive 18.7% annual rate since 1965 compared to the 9.7% annual rate from the S&P 500 index with dividends reinvested over the same time period. During 2018, Berkshire purchased $43 billion of marketable securities while selling only $19 billion and ended the year with nearly $173 billion invested in equity securities. These purchases included a significant stake in Apple (AAPL) which was valued at $40.3 billion at year end and represented Berkshire’s largest equity investment. Buy.

PEPSICO INCREASED DIVIDEND 3%

In 2018, PepsiCo’s (PEP) revenues rose 1.8% with core constant currency EPS growth of 9% to $5.66. During the year, PepsiCo paid $4.9 billion in dividends and repurchased $2 billion of its common stock. PepsiCo announced a 3% increase in its 2019 dividend to $3.82 per share, marking the 47th consecutive annual dividend increase. For fiscal 2019, PepsiCo expects to pay dividends of $5 billion and repurchase $3 billion of its common stock. Buy.

WALGREENS $3 BILLION BUYBACK

Walgreens Boots Alliance’s (WBA) fiscal first quarter sales rang up a 10% gain to $33.8 billion with net income increasing 37% to $1.1 billion. Walgreens returned $1.3 billion to shareholders during the quarter through share repurchases of $912 million and dividends of $422 million. Management confirmed expected fiscal 2019 adjusted EPS constant currency growth of 7% to 12%. The company expects store and labor investments of about $150 million and share repurchases of $3 billion during fiscal 2019. Buy. 

Quarterly Rating Change From Buy To Hold

3M INCREASED DIVIDEND 6%

The 3M (MMM) Board of Directors declared a dividend on the company’s common stock of $1.44 per share for the first quarter of 2019, a 6% increase over the quarterly dividend paid in 2018. "The strength of our business model enables 3M to consistently generate premium margins and strong cash flow, and to build on the company’s long history of returning cash to our shareholders," said Mike Roman, 3M chief executive officer. 3M has increased its dividend for 61 consecutive years and paid dividends to its shareholders without interruption for more than 100 years. Hold.

GENUINE PARTS INCREASED DIVIDEND 6%

Genuine Parts (GPC) sales increased 15% to $18.7 billion with net income up 31% to $810 million. During 2018, the company generated a solid 23.3% return on shareholders’ equity. Genuine Parts announced a 6% dividend increase for 2019. The company has paid a cash dividend every year since going public in 1948 and 2019 marks the 63rd consecutive year of increased dividends paid to Genuine Parts’ shareholders. In 2019, management expects sales to increase 3% to 4% with EPS of $5.75 to $5.90. Hold.

ORACLE $12 BILLION BUYBACK

Oracle (ORCL) paid $1.5 billion in dividends and repurchased $19.9 billion of its common stock during the first half of fiscal 2019, including 203 million shares repurchased in the second quarter at an average price of $49.26 per share. During the last 12 months, Oracle has reduced its shares outstanding by 12%. Oracle announced a new $12 billion share repurchase program. Hold.

FASTENAL INCREASED DIVIDEND 7.5%

Fastenal (FAST) reported 2018 revenues rose 13% to $5 billion with net income up 30% to $751.9 million. Return on shareholders’ equity improved to a strong 32.7% for the year. Fastenal also announced a 7.5% increase in its first quarter 2019 dividend to $.43 per share with the dividend yielding a solid 2.8%. Over the past decade, Fastenal has paid out $2.9 billion in dividends and repurchased 14 million of its shares for $600 million at an average price of $42.86 per share. Hold.

GENTEX 24% RETURN ON EQUITY

In 2018, Gentex (GNTX) reported sales increased 2% to $1.8 billion with EPS up 15% to $1.62. During 2018, Gentex recorded an impressive 24% return on shareholders’ equity and generated $466.4 million in free cash flow, up 18% from 2017. Gentex repurchased 26.4 million shares during 2018 at an average price of $22.37 per share. Hold.

WALT DISNEY INCREASED DIVIDEND 5%

Walt Disney (DIS) increased its semi-annual dividend 5% to $.88. “Given our record financial performance in fiscal 2018, we are pleased to increase our dividend to shareholders, while continuing to invest for future growth with our pending acquisition of 21st Century Fox and the ongoing development of our direct-to-consumer business,” said Robert A. Iger, Chairman and Chief Executive Officer. Disney reported flat first quarter 2019 sales at $15.3 billion with net income declining 37% to $2.8 billion and EPS dropping 36% to $1.86. These results were impacted by a net tax benefit in the prior year period. On an adjusted basis, EPS declined 3% during the quarter. Hold.