Wednesday, March 30, 2011
Wal-Mart Stores, Inc: $WMT files annual report form 10-K
$WMT form 10-K (Sec.gov, 10-K Interactive Data)
Tuesday, March 29, 2011
Johnson & Johnson: $JNJ Announces Voluntary Recall of Certain OTC Products
March 29, 2011 - Fort Washington, PA - McNeil Consumer Healthcare, Division of McNEIL-PPC, Inc., is recalling one product lot of TYLENOL® 8 Hour Extended Release Caplets 150 count bottles distributed in the United States. McNeil is taking this action as part of our ongoing surveillance and monitoring efforts that identified a small number of complaints of a musty or moldy odor. The uncharacteristic odor is thought to be caused by the presence of trace amounts of chemicals called 2,4,6-tribromoanisole (TBA) and 2,4,6-trichloroanisole (TCA). This voluntary action is being taken as a precaution and the risk of adverse medical events is remote. The product was manufactured at the McNeil Consumer Healthcare plant in Fort Washington, PA prior to the company's voluntary closure of the facility in April 2010.
The lot number for the recalled product can be found on the side of the bottle label.
Source:
JNJ.com - press release
The lot number for the recalled product can be found on the side of the bottle label.
Source:
JNJ.com - press release
H. J. Heinz Company: $HNZ presentation for CAGE
H. J. Heinz Company’s presentation made at the annual conference of the Consumer Analyst Group of Europe (CAGE) in London, England on March 28, 2011. (Sec.gov - 8K filing)
Cisco Systems Inc: $CSCO Announces Intent to Acquire newScale
SAN JOSE, Calif. – March 29, 2011 – Cisco today announced its intent to acquire privately-held newScale Inc., a leading provider of software that delivers a service catalog and self-service portal for IT organizations to select and quickly deploy cloud services within their businesses. Based in San Mateo, Calif., newScale allows commercial and enterprise customers to initiate the provisioning of their own systems and infrastructure on an as-needed basis.
Source
Cisco.com - press release
Source
Cisco.com - press release
Friday, March 25, 2011
Intel Corporation: $INTC cash flow valuation
Current Price: ~ $20/share
Projected Yield: ~ 3.57%
Intel is the largest chipmaker in the world. It develops and manufactures microprocessors and platform solutions for the global personal computer market. Intel pioneered the x86 architecture for microprocessors.
I estimated the firm's WACC today at 12.51% using the Capital Asset Pricing Model and the company's recent SEC filings.
Sources
Projected Yield: ~ 3.57%
Intel is the largest chipmaker in the world. It develops and manufactures microprocessors and platform solutions for the global personal computer market. Intel pioneered the x86 architecture for microprocessors.
I estimated the firm's WACC today at 12.51% using the Capital Asset Pricing Model and the company's recent SEC filings.
Recent free cash flows and noted growth rates:
Year | FCF $Millions |
2001 | 1345 |
2002 | 4426 |
2003 | 7859 |
2004 | 9276 |
2005 | 9005 |
2006 | 4841 |
2007 | 7625 |
2008 | 5729 |
2009 | 6655 |
2010 | 11485 |
Average Annual Growth FCF: approx. 44%
CAGR FCF: approx. 27%
Consensus Forecast Industry 5-Year Growth: approx. 17% per yearConsensus Forecast Company 5-Year Growth: approx. 12% per year
Scenario 1
Assuming the company achieves a 5-year growth rate in FCF of 12% per year, and assuming that after the next five years, the company achieves no growth in FCF or 0% growth per year forever:
Discounted Cash Flow Valuation
| Year | FCF $Millions |
| 0 | 11485 |
| 1 | 12863 |
| 2 | 14407 |
| 3 | 16136 |
| 4 | 18072 |
| 5 | 20240 |
| Terminal Value | 181212 |
The firm's future cash flows, discounted at a WACC of 12.51%, give a present value for the entire firm (Debt + Equity) of $157,165 million. If the firm's fair value of debt is estimated at $4000 million, then the fair value of the firm's equity could be $153,165 million. $153,165 million / 5490 million outstanding shares is approximately $28 per share and a 20% margin of safety is $22/share.
Scenario 2
According to Intel, 2010 was a banner year:
2010 was a record year for us. Strong market growth in the business and consumer PC market segments as well as the continued build-out of the data center, the leadership of our product portfolio, and improvements to our cost structure all contributed to the most profitable year in our history. Revenue increased 24% in 2010 compared to 2009. Our 2010 gross margin percentage of 65.3% increased by 9.6 percentage points from 2009, primarily driven by lower factory underutilization charges, higher microprocessor average selling prices, lower platform (microprocessor and chipset) unit cost, and higher platform unit sales. We expect continued strength in emerging markets coupled with the build-out of the cloud computing infrastructure to contribute toward a 2011 revenue growth percentage in the mid- to high-teens. This expectation is also inclusive of the recently completed acquisition of the WLS business of Infineon and the expected acquisition of McAfee in the first quarter of 2011.
Intel's 2010 Free Cash Flow was ~ $11.5B; a YOY increase of ~ 73%.
- Assume Intel achieved $9B in FCF for 2010 instead of $11.5B
- Assume the company achieves a 5-year growth rate in FCF of 12% per year and that after the next five years, the company achieves no growth in FCF or 0% growth per year forever:
Discounted Cash Flow Valuation
Year | FCF $Millions |
0 | 9000 |
1 | 10080 |
2 | 11290 |
3 | 12644 |
4 | 14162 |
5 | 15861 |
Terminal Value | 142004 |
The firm's future cash flows, discounted at a WACC of 12.51%, give a present value for the entire firm (Debt + Equity) of $123,159 million. If the firm's fair value of debt is estimated at $4000 million, then the fair value of the firm's equity could be $119,159 million. $119,159 million / 5490 million outstanding shares is approximately $22 per share and a 20% margin of safety is $17/share.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Thursday, March 24, 2011
Cisco Systems, Inc: $CSCO cash flow valuation
Current Price: ~ $17/share
Projected Yield: ~ 1.37%
I believe Cisco Systems, Inc. ($CSCO) is fairly valued at $19/share on a cash flow valuation basis.
Cisco Systems is the world's leading supplier of data networking equipment and software. Its products include routers, switches, access equipment, and network-management software that allow data communication among dispersed computer networks. The firm has also entered newer markets, such as video conferencing, web-based collaboration, and data center servers.
I estimated the firm's WACC today at 12.52% using the Capital Asset Pricing Model and the company's recent SEC filings.
The firm's future cash flows, discounted at a WACC of 12.52%, give a present value for the entire firm (Debt + Equity) of $119,865 million. If the firm's fair value of debt is estimated at $17,000 million, then the fair value of the firm's equity could be $102,865 million. $102,865 million / 5530 million outstanding shares is approximately $19 per share and a 20% margin of safety is $15/share.
Sources
Projected Yield: ~ 1.37%
I believe Cisco Systems, Inc. ($CSCO) is fairly valued at $19/share on a cash flow valuation basis.
Cisco Systems is the world's leading supplier of data networking equipment and software. Its products include routers, switches, access equipment, and network-management software that allow data communication among dispersed computer networks. The firm has also entered newer markets, such as video conferencing, web-based collaboration, and data center servers.
I estimated the firm's WACC today at 12.52% using the Capital Asset Pricing Model and the company's recent SEC filings.
Recent free cash flows and noted growth rates:
| Year | FCF $Millions |
| 2001 | 4121 |
| 2002 | 3946 |
| 2003 | 4523 |
| 2004 | 6508 |
| 2005 | 6876 |
| 2006 | 7127 |
| 2007 | 8853 |
| 2008 | 10821 |
| 2009 | 8892 |
| 2010 | 9165 |
Average Annual Growth FCF: approx. 11%
CAGR FCF: approx. 9%
Consensus Forecast Industry 5-Year Growth: approx. 18% per yearConsensus Forecast Company 5-Year Growth: approx. 11% per year
Assuming the company achieves a 5-year growth rate in FCF of 11% per year, and assuming that after the next five years, the company achieves no growth in FCF or 0% growth per year forever:
Discounted Cash Flow Valuation
| Year | FCF $Millions |
| 0 | 9165 |
| 1 | 10173 |
| 2 | 11292 |
| 3 | 12534 |
| 4 | 13913 |
| 5 | 15444 |
| Terminal Value | 136869 |
The firm's future cash flows, discounted at a WACC of 12.52%, give a present value for the entire firm (Debt + Equity) of $119,865 million. If the firm's fair value of debt is estimated at $17,000 million, then the fair value of the firm's equity could be $102,865 million. $102,865 million / 5530 million outstanding shares is approximately $19 per share and a 20% margin of safety is $15/share.
Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
McDonald's Corporation: $MCD cash flow valuation update
Current Price: ~ $75/share
Projected Yield: ~ 3.27%
I believe McDonald's Corporation ($MCD) is fairly valued at $82/share on a cash flow valuation basis.
McDonald's generates revenue through company-owned restaurants, franchise royalties, and licensing pacts. Restaurants offer a uniform value-priced menu, with some regional variations. As of December 2010, there were 32,700 locations in 117 countries, including 26,300 operated by franchisees/affiliates and 6,400 company units.
I estimated the firm's WACC today at 7.16% using the Capital Asset Pricing Model and the company's recent SEC filings.
The firm's future cash flows, discounted at a WACC of 7.16%, give a present value for the entire firm (Debt + Equity) of $96,410 million. If the firm's fair value of debt is estimated at $11,505 million, then the fair value of the firm's equity could be $84,905 million. $84,905 million / 1040 million outstanding shares is approximately $82 per share and a 20% margin of safety is $66/share.
Sources
Projected Yield: ~ 3.27%
I believe McDonald's Corporation ($MCD) is fairly valued at $82/share on a cash flow valuation basis.
McDonald's generates revenue through company-owned restaurants, franchise royalties, and licensing pacts. Restaurants offer a uniform value-priced menu, with some regional variations. As of December 2010, there were 32,700 locations in 117 countries, including 26,300 operated by franchisees/affiliates and 6,400 company units.
I estimated the firm's WACC today at 7.16% using the Capital Asset Pricing Model and the company's recent SEC filings.
Recent free cash flows and noted growth rates:
| Year | FCF $Millions |
| 2001 | 451 |
| 2002 | 338 |
| 2003 | 1586 |
| 2004 | 2335 |
| 2005 | 2730 |
| 2006 | 2600 |
| 2007 | 2930 |
| 2008 | 3782 |
| 2009 | 3799 |
| 2010 | 4206 |
Average Annual Growth FCF: approx. 51%
CAGR FCF: approx. 28%
Consensus Forecast Industry 5-Year Growth: approx. 15% per yearConsensus Forecast Company 5-Year Growth: approx. 10% per year
Assuming the company achieves a 5-year growth rate in FCF of 10% per year, and assuming that after the next five years, the company achieves no growth in FCF or 0% growth per year forever:
Discounted Cash Flow Valuation
| Year | FCF $Millions |
| 0 | 4206 |
| 1 | 4627 |
| 2 | 5089 |
| 3 | 5598 |
| 4 | 6158 |
| 5 | 6774 |
| Terminal Value | 104068 |
The firm's future cash flows, discounted at a WACC of 7.16%, give a present value for the entire firm (Debt + Equity) of $96,410 million. If the firm's fair value of debt is estimated at $11,505 million, then the fair value of the firm's equity could be $84,905 million. $84,905 million / 1040 million outstanding shares is approximately $82 per share and a 20% margin of safety is $66/share.
Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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