Quarterly Movers & Shakers
During the past three months, the S&P 500 Index rose 2.1% despite renewed concerns over a trade war and slowing global growth. The following high-quality stocks all generated solid 9% or better gains during the same period. 

STARBUCKS BREWING STRONG RESULTS
Starbucks (SBUX) reported fiscal third quarter sales perked 8% higher to $6.8 billion with net income jumping a jolting 61% to $1.4 billion. Global same store sales increased 6% with a 3% increase in average ticket and transactions. During the quarter, Starbucks repurchased 6.8 million shares and paid a cash quarterly dividend of $0.36 per share, up 20% from last year. For the full fiscal 2019 year, Starbucks expects global revenue growth of 7% on comparable store sales growth of 4% with EPS expected in the range of $2.86 to $2.88. The company expects to open about 2,000 net new Starbucks stores for the full fiscal 2019 year.

Over the past five years, Starbucks has brewed up strong results with the stock more than doubling. Hold.

UPS BEST QUARTER IN HISTORY
UPS (UPS) reported second quarter revenues rose 3% to $18.0 billion with net income trucking 14% higher to $1.7 billion. This was the best quarterly performance in the company’s history. Rising demand for next-day services led to these strong financial results as U.S. daily volume grew over 7% with next-day air volume soaring over 30%, the best performance in a decade. During the first half, UPS paid $1.7 billion in dividends and repurchased 4.8 million shares for $500 million. 

For the full 2019 year, UPS expects adjusted EPS between $7.45 to $7.75.During the past quarter, UPS’ stock ascended 17%. Buy.

STRYKER STRIKING TOTAL RETURN
Stryker (SYK) reported second quarter sales increased a healthy 10% to $3.7 billion with net income increasing 6% to $480 million. During the first half of the year, Stryker generated $540 million in free cash flow. Stryker ended the quarter with $1.8 billion in cash (including 40% held outside the U.S.), $8 billion in debt and $12 billion in shareholders’ equity. Acquisitions remain the number one priority for cash as Stryker continues building its robust product pipeline. For the full 2019 year, organic net sales growth is expected in the range of 7.5% to 8% with adjusted EPS expected in the range of $8.15 to $8.25.

Over the past decade, Stryker has provided a striking 632% total return. Hold. 

APPLE $103 BILLION IN NET CASH
Apple (AAPL) reported fiscal third quarter revenues increased 1% to $53.8 billion with net income down 13% to $10 billion. The company set an all-time record for Services with revenues of $11.5 billion, an increase of 13% over the prior year period. Apple has over 420 million paid subscribers to its services, an increase of 30 million in the last quarter alone. Thanks to strong growth of Apple watches and Airpods, Apple also set a new record for Wearables, Home and Accessories with revenues of $5.5 billion, an increase of 48%. Year to-date, Apple has paid $10.6 billion in dividends and repurchased $49.5 billion of its shares. Apple ended the quarter with $211 billion of cash and marketable securities on its fruitful balance sheet and $108 billion in long-term debt.

Over the past nine years, Apple has provided a juicy 512% total return. Hold.

BOOKING HOLDINGS $5.5 BILLION SHARE BUYBACK
Booking Holdings (BKNG) reported second quarter revenues rose 9%, or 14% on a constant currency basis, to $3.9 billion with EPS traveling 11% higher to $22.44. The company significantly reduced its shares outstanding through a substantial share buyback program, including $5.5 billion of its common shares repurchased during the first half of the year. Booking Holdings ended the quarter with $11.4 billion in cash and investments, $7.7 billion in long-term debt and $5.3 billion in shareholders’ equity. For the full 2019 year, Booking Holdings expects low double-digit EPS growth as the company continues to gain market share.

Over the past seven years, Booking Holdings’ stock has soared by more than tripling in price. Buy.

MASTERCARD $3.2 BILLION ACQUISITION
Mastercard (MA) reported strong second quarter results with revenues up 12%, or 15% on a constant currency basis, to $4.1 billion and net income charging 31% higher to $2.0 billion with EPS ringing up 33% growth. Free cash flow increased 14% during the first half of the year to $2.7 billion with the company paying dividends of $677 million and repurchasing $3.7 billion of its shares outstanding. For the full 2019 year, Mastercard expects to report revenue growth in the low teens with operating expenses up in the high single-digits, implying further profit margin expansion. Subsequent to quarter end, Mastercard announced it has entered into an agreement to acquire the majority of the Corporate Services businesses of Nets, a leading European PayTech company, for approximately $3.2 billion. Stay tuned for how this acquisition pays off for investors.

Over the past five years, Mastercard has charged up a hefty 273% total return. Hold. 

Quarterly Rating Change From Hold To Buy
The good news is that several of our high-quality companies have come back into buying territory thanks to more attractive valuations based on the outlook for 2020 earnings.

CANADIAN NATIONAL DOUBLE-DIGIT EPS GROWTH
Canadian National Railway (CNI) reported second quarter revenues chugged ahead by 9% to a record C$4.0 billion with net income up 4% to C$1.4 billion and EPS up 6% to C$1.88. The increase in revenues was mainly due to the TransX acquisition, the positive translation impact of a weaker Canadian dollar, freight rate increases and higher petroleum crude and grain volumes that were partly offset by lower volumes of frac sand, lumber and potash. 
 
Operating expenses for the second quarter increased by 8% to C$2.3 billion, driven by the inclusion of TransX and higher costs resulting from increased volumes of traffic. During the quarter, the company generated C$533 million in free cash flow, down 37% from last year, mainly due to upfront delivery of locomotives and TransX investing activities. Canadian National Railway returned C$832 million to shareholders during the quarter through dividend payments of C$387 million and share repurchases of C$445 million.  
 
For 2019, management expects to deliver earnings per share growth in the low double-digit range. Dividends are expected to rise 18% over last year with a targeted 35% payout ratio as dividends grow in line with earnings growth. Financial targets for 2020 through 2022 for Canadian National Railway include low double-digit annualized earnings per share growth.

Return on invested capital is expected in the 15% to 17% range with free cash flow growing faster than earnings. Buy.

FASTENAL DIVIDEND YIELDS 3.0%
Fastenal (FAST) reported second quarter sales increased 8% to $1.4 billion with net income and EPS each down 3% to $204.6 million and$.36, respectively. Adjusting for a one-time tax gain in 2018, adjusted EPS would have been up 1.5%. While manufacturing daily sales were up 9% in the second quarter, weakness in heavy machinery was a bit more pronounced and the oil and gas industry remains challenging for customers. Non-residential construction daily sales were up 7% with smaller construction customers weaker than large ones. During the first half, Fastenal paid $246.1 million in dividends, a 16% increase over last year.

Subsequent to quarter end, Fastenal announced a two percent additional increase in the quarterly dividend to $.22 per share with the dividend currently yielding 3.0%. Buy.

JOHNSON & JOHNSON 57 YEARS OF DIVIDEND HIKES
Johnson & Johnson (JNJ) reported revenues declined 1% to $20.6 billion in the second quarter with EPS up a healthy 43% to $2.08. Excluding the overall impact of acquisitions, divestitures and currency, adjusted operational sales growth increased 4% with adjusted EPS up 23%. During the quarter, JNJ paid $2.5 billion in dividends, which have increased each year for the last 57 years, and repurchased $2.0 billion of JNJ’s common stock. Due to the strength in the business, management raised their sales outlook for the full 2019 year with reported sales expected in the range of $80.8 billion to $81.6 billion.

Adjusted operational sales are expected to increase 3.2% to 3.7% for the year with adjusted operational EPS expected in the range of $8.73 to $8.83. Buy.

ROSS STORES OPENING 100 NEW STORES
Ross Stores (ROST) rang up a 6% increase in first fiscal quarter sales to $3.8 billion with EPS up 4% to $1.15. Comparable store sales increased 2% due to an increase in the average basket. The company is on track to meet the goal of opening 100 new stores during fiscal 2019, including 75 new Ross Stores and 25 new dd’s DISCOUNTS. During the quarter, Ross Stores generated $413 million in free cash flow, up 5% from last year, with the company returning nearly $413 million to shareholders through dividend payments of $94 million and share repurchases of $320 million at an average cost of $94.12 per share. Ross Stores ended the quarter with $1.4 billion in cash and $2.8 billion in long-term debt on its balance sheet.

Ross Stores projects EPS for the 52 weeks ending February 1, 2020, to be in the range of $4.38 to $4.52, up from $4.26 last year, which included a $.07 per share benefit in the fourth quarter from the favorable resolution of a tax matter. Buy.

ULTA BEAUTY RAISED EPS OUTLOOK
Ulta Beauty (ULTA) rang up a stylish 13% increase in first fiscal quarter sales to $1.7 billion with EPS up 21% to $3.26. Comparable sales increased 7%, driven by 4.3% transaction growth and 2.7% growth in average ticket. During the quarter, the company generated nearly $200 million in free cash flow and repurchased $107 million of its shares. Full fiscal year sales growth is expected in the low double-digit percentage range on same stores growth of 6%-7%, including ecommerce growth of 20%-30%. Ulta raised its EPS guidance to between $12.83-$13.03 from $12.65-$12.85.

This new guidance assumes $700 million in share repurchases during the fiscal year. Buy.