Quarterly Movers And Shakers

During the past three months, the S&P 500 index pulled back 6.7% due to inflation and geopolitical concerns. The following high-quality stocks generated strong double-digit gains during the same time period.

Berkshire Hathaway (BRK-B) $27 Billion Share Buyback

Berkshire Hathaway reported 2021 revenues increased 12% to $276 billion with net income more than doubling to $89.8 billion. Excluding significant investment gains of $62.3 billion, operating earnings jumped a strong 25% during the year to $27.5 billion.

In the annual report, Warren Buffett discussed the three ways Berkshire Hathaway increases shareholder value. The primary way is to increase the long-term earnings power of Berkshire’s controlled businesses through internal growth or by making acquisitions. The second way is to buy stakes in publicly traded great businesses, like Berkshire’s 5.55% stake in Apple. The final path to value creation is to repurchase Berkshire shares when the price/value equation is right, which is the path Berkshire followed in 2021 given the dearth of attractive opportunities among the first two routes. 

During the fourth quarter, Berkshire repurchased approximately $6.9 billion of the company’s stock bringing the total for the year to approximately $27 billion. During the past two years, Berkshire has repurchased 9% of the shares that were outstanding at year-end 2019 for $51.7 billion. This has enabled continuing shareholders to own about 10% more of all Berkshire Hathaway’s great businesses, including GEICO, Burlington Northern and Berkshire Hathaway Energy. Over the last 22 years, Berkshire Hathaway’s stock is up more than 11-fold. (Hold). 

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Check Point Software (CHKP) New $2 Billion Buyback

Check Point Software reported 2021 revenues rose 5% to $2.17 billion with EPS up 2% to $6.08. Return on shareholders’ equity for the year was a strong 25%. During the year, Check Point repurchased 10.9 million shares of its common stock for $1.3 billion at an average price of about $119 per share. Check Point announced a $2 billion expansion to the share repurchase program with an authorization to repurchase up to $325 million each quarter. Check Point ended the year with an excellent balance sheet with nearly $3.8 billion of cash and investments, no long-term debt and shareholders’ equity of $3.3 billion. In fiscal 2022, revenues are expected to increase to a range of $2.2 billion to $2.4 billion with EPS expected in a range of $6.90 to $7.50. During the past three months, Check Point’s stock jumped 22% as cybersecurity stocks came into focus given geopolitical events. Hold. 

Hormel Foods (HRL) Increased Dividend 6%

Hormel Foods reported 2021 revenues rose 19% to $11.4 billion. Hormel increased its dividend 6% to an annual dividend of $1.04, representing the 56th consecutive year of dividend increases. In 2022, Hormel expects continued strong demand across all its business segments with improved production and pricing actions driving growth in all segments. In fiscal 2022, Hormel expects net sales in the range of $11.7 billion to $12.5 billion, representing 3% to 10% growth, with EPS expected in the range of $1.87 to $2.03, representing 13% to 22% growth. Hormel has provided an 862% total return over the last 21 years. Buy. 

General Dynamics (GD) PAID $1.3 Billion In Dividends

General Dynamics reported 2021 revenues increased 1.4% to $38.5 billion with EPS moving 5% higher to $11.55. The defense segments collectively delivered record revenue and operating earnings for the year that were the highest in the company’s history. Return on shareholders’ equity for the year was a solid 18.4%. Free cash flow increased 17% to $3.4 billion with the company paying $1.3 billion in dividends and repurchasing approximately 10 million shares during the year for $1.8 billion at an average cost of $179 per share. Company-wide backlog ended the year at $87.6 billion. For fiscal 2022, General Dynamics expects revenues in the range of $39.2 billion to $39.45 billion with EPS in the range of $12.00-$12.15. Given the Russia and Ukraine conflict, defense stocks rose with General Dynamics’ stock marching 16% higher during the past three months. Hold. 

Raytheon (RTX) New $6 Billion Buyback

Raytheon Technologies reported 2021 revenues increased 14% to $64.4 billion with net income of $3.9 billion or $2.58 per share. Free cash flow increased 97% during the year to $5 billion with the company paying $3.0 billion in dividends and repurchasing $2.3 billion of its common stock. Backlog at the end of the year was $156 billion.

Management’s outlook for 2022 is for sales of $68.5 billion to $69.5 billion with adjusted EPS of $4.60-$4.80. In addition, free cash flow in 2022 is expected to be approximately $6 billion, and the company expects to repurchase at least $2.5 billion of RTX shares as part of its new $6 billion buyback program. Raytheon’s stock rose 15% during the last three months. Hold. 

Quarterly Rating Change From Hold To Buy Automatic Data Processing (ADP)

(ADP) SHOULD STAND FOR AUTOMATIC DIVIDEND PAYER

Automatic Data Processing (ADP) reported fiscal second quarter revenues increased 9% to $4 billion with EPS also increasing 9% to $1.65. During the first six months of fiscal 2022, ADP made dividend payments of $787 million and share repurchases of $990 million. After increasing its dividend for 47 straight years, ADP should stand for automatic dividend payer. ADP increased its fiscal 2022 outlook with revenues expected to increase 8% to 9% and EPS expected to grow 11% to 13% as profit margins expand. Buy. 

Canadian National (CNI) Increased Dividend 19%

For fiscal 2022, Canadian National Railway is targeting to deliver approximately 20% EPS growth and free cash flow of C$4.0 billion. Demonstrating confidence in the financial health of the company, the Board of Directors announced a 19% increase in the dividend, which marks the 26th consecutive year of dividend increases. In addition, the company also approved a new C$5 billion share repurchase program over the next 12 months. Buy. 

Genuine Parts (GPC) 66 Years Of Dividend Hikes

Genuine Parts announced a 10% increase in its dividend for 2022 to an annual rate of $3.58 per share, marking the 66th consecutive year of increased dividends. The company has paid a dividend every year since going public in 1948 with the dividend currently yielding a solid 2.9%. Genuine Parts expects 2022 sales growth of 9% to 11% with earnings per share in the range of $7.45 to $7.60. Cash flow from operations in 2022 is expected in the range of $1.5 billion to $1.7 billion. Buy. 

Meta Platforms (FB) Free Cash Flow Up 66%

Meta Platforms reported free cash flow increased 66% during 2021 to $39 billion. Meta repurchased $44.5 billion of its stock during the year and has $38.8 billion authorized for future share repurchases. Meta ended the year with $48 billion in cash and investments, no long-term debt and $124.9 billion in shareholders’ equity on its fortress balance sheet. Buy.

Nike (NKE) $15 Billion Buyback

During the second quarter, NIKE paid dividends of $437 million to shareholders, up 14% from the prior year. Nike repurchased $968 million of its common stock, retiring six million shares as part of the four year, $15 billion buyback program approved in 2018. Buy.

Oracle Buying (ORCL) Cerner For $28.3 Billion

Oracle plans to acquire Cerner through an all-cash tender offer for $95.00 per share or approximately $28.3 billion. Cerner is a leading provider of digital information systems used within hospitals and health systems to enable medical professionals to deliver better healthcare to individual patients and communities. Buy. 

Pepsi (PEP) 50 Years Of Dividend Pops

PepsiCo reported 2021 revenue rose 13% to $79.4 billion with operating profit up 11% to $11.1 billion. PepsiCo generated a tasty 48% return on equity in 2021. PepsiCo announced a 7% increase in its annualized dividend to $4.60, representing the 50th consecutive year of dividend increases. PepsiCo also announced a new $10 billion share repurchase program. Buy. 

T. Rowe Price (TROW) Increased Dividend 11%

T. Rowe Price announced that its Board of Directors increased its dividend 11.1%, marking the 36th consecutive year since the firm's initial public offering that the company will have increased its regular annual dividend. Buy. 

Tractor Supply (TSCO) Increased Dividend 77% 

Reflecting confidence in the business and its bumper crop of cash flows, Tractor Supply increased the quarterly dividend in 2022 by a hefty 77% and expanded its share repurchase program by $2 billion. Tractor Supply’s long-term growth rate targets for fiscal 2022 to fiscal 2026 are for annual sales growth of 6% to 7+% and EPS growth of 8% to 11+%. Buy. 

Ulta Beauty (ULTA) Free Cash Flow Doubled 

Ulta Beauty’s free cash flow during the first nine months of fiscal 2021 more than doubled to $306 million. The company ended the fiscal third quarter with $605 million in cash on its glamorous and debt-free balance sheet after repurchasing $126 million of its common stock. Buy. 

UPS (UPS) Dividend Increased 49%

During 2021, UPS generated $10.8 billion in free cash flow with the company returning $3.9 billion to shareholders through dividend payments. UPS announced a historic 49% increase in the quarterly dividend. The dividend currently yields a generous 2.9%. With strong cash flows expected in 2022, UPS plans to return $5.2 billion to shareholders through dividend payments and at least $1 billion through share repurchases. Buy.