In today’s briefing:
- Iberdrola/PNM Resources: One to Watch
- The Coca-Cola Co: Major Drivers
- The Commodity Report #75
- NTGR: Retail Headwinds Is Not the Story
- AXTI: Inventory Balloon Pop
- Visa Inc: Collaboration With FTX & Other Drivers
- 3M Co: Acquisition of Treo Solutions & Other Drivers
- Kraft Heinz Inc: New Plant-Based Offerings & Other Drivers
- ISSB Affirms Scope 3 Emissions Reporting Requirements and Investor-Centric Focus
- Otis Worldwide Corp: New Contracts For Gen 2 & Other Drivers
Iberdrola/PNM Resources: One to Watch
- Iberdrola SA has not abandoned its strategic plan in the United States, which includes the acquisition of PNM Resources through its American subsidiary Avangrid Inc.
- Iberdrola is convinced that the transaction will be unblocked in the coming weeks, either because the appeal prospers or because of changes in the regulator.
- I retain my TP of $50.3 cash takeout price (consideration offered by Avangrid/Iberdrola) vs. my $49.8/share median implied valuation. My TP represents 8.5% upside plus a 2.9% dividend yield.
The Coca-Cola Co: Major Drivers
- Despite a macroeconomic environment that remained difficult in the third quarter, Coca-Cola managed to deliver yet another all-around beat.
- Utilizing their customer-centric marketing strategy, they are rapidly connecting consumption occasions with passion points through digital engagement.
- Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.
The Commodity Report #75
- With the beginning of this week’s newsletter, I probably won’t make any new friends in my home country.
- What makes me sad is that literally nobody is speaking about the untapped natural gas reserves we have underground in Germany that are indeed accessible.
- A short calculation: In 2021 Russia delivered 55 billion cubic meters to Germany or 55% of the total German gas consumption.
NTGR: Retail Headwinds Is Not the Story
- NTGR reported third quarter results showcasing continued growth in its SMB and service provider product lines while the retail channel remained challenged.
- NTGR has been transitioning away from the lower end of the Wi-Fi router market, but a contracting market has extended out the timeframe of depleting channel inventory
- NTGR’s growth driver are primarily its Pro AV switches and 5G hotspots, which continue to outperform our expectations
AXTI: Inventory Balloon Pop
- AXTI slightly beat its downward adjusted third quarter guidance but issued fourth quarter forecast showing further deterioration in the business
- During the third quarter AXTI experienced a significant delay in orders from customers causing revenue to decline by approximately 11 percent sequentially
- The spill over of weakness into the fourth quarter should not be a surprise given the pace of decline in revenue in the third quarter
Visa Inc: Collaboration With FTX & Other Drivers
- Despite the uncertainty brought on by the pandemic, the timing of the cross-border travel rebound, inflation, the Ukraine crisis, and potential recession, Visa’s performance in 2022 has been quite solid.
- The company delivered yet another all-around beat as it established over 400 business collaborations with fintechs worldwide this year, ranging from start-ups to established businesses.
- Cross-border volumes in Q4 increased by 7 points from Q3 and were up 49% year over year and 130% compared to three years earlier, excluding intra-Europe.
3M Co: Acquisition of Treo Solutions & Other Drivers
- 3M delivered a mixed set of results for the last quarter as it failed to meet revenue expectations of Wall Street but managed an earnings beat.
- Every business segment produced margins higher than 21%, with noteworthy margin growth in the safety, industrial, transportation, and electronics sectors.
- This is what helped them deliver an earnings beat.
Kraft Heinz Inc: New Plant-Based Offerings & Other Drivers
- Kraft Heinz has had another strong quarter and the company delivered yet another all-around beat.
- Despite the challenges of the supply chain, the company managed to have a strong customer demand that resulted in a greater-than-expected profitability and cash flow in this quarter.
- Kraft Heinz has not only succeeded in meeting the market demand but also gained market share in many key categories during the third quarter.
ISSB Affirms Scope 3 Emissions Reporting Requirements and Investor-Centric Focus
- The International Sustainability Standards Board (ISSB) recently confirmed important aspects of its proposed sustainability reporting standards. One step closer to a unified standard.
- Particularly noteworthy is confirmation that disclosures of Scope 3 emissions will be required. Scope 3 emissions are largely unreported, but account for the majority of total emissions.
- Scope 3 disclosure could have repercussions for ESG ratings, ESG indices based on ESG ratings, and potentially (though too soon to tell) reconstutions of exchange-traded funds.
Otis Worldwide Corp: New Contracts For Gen 2 & Other Drivers
- Otis delivered a mixed set of results for the last quarter.
- The company saw a good growth in organic sales but failed to meet the revenue expectations of Wall Street.
- Its expansion in margins did result in the company delivering an earnings beat.
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