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While Wall Street tried to hang on to recent gains on Tuesday, we got some positive news on two Club holdings that are seeing big moves to the upside: Danaher ( DHR ) and Constellation Brands ( STZ ). DHR 1Y mountain Danaher’s 1-year stock performance Danaher will be presented at the JPMorgan Healthcare conference on Tuesday afternoon. However, ahead of the event, on Monday evening, the life science and medical diagnostics company released its own slide. In addition to providing an overview of what the company will look like after the separation of environmental and utility solutions, it included an upward revision of fourth quarter guidance. Shares jumped 4% on the positive revision. Some investors were worried that management would predict bad profits in advance. Now management sees underlying sales growth in the high single digits. The increase was largely attributable to better-than-expected performance at molecular diagnostics company Cepheid, which generated more than $1 billion in respiratory testing revenue in the quarter, compared with previous guidance for about $375 million in sales in the area. Last month, as part of its better-than-expected third-quarter results, Danaher said fourth-quarter underlying sales would fall in the low single digits on a percentage basis. Guidance for core business revenue growth, which excludes sales related to Covid testing and includes sales of products supporting Covid-related vaccines and therapeutics, was unchanged, with expectations for a high single-digit increase. In addition to the underlying revenue growth revision, management is now taking into account no growth due to Covid-related testing. Expectations called for a high single- to low-double-digit increase. The better-than-expected performance of Cepheid, along with a downward revision of the expected testing impact on Covid, may indicate a faster-than-expected transition from Covid-only tests to Cepheid’s best-in-class 4-in-1 respiratory test for Covid, Influenza A, Influenza B and RSV (respiratory syncytial virus). The real concern for investors, and what we’ll be listening closely to when the company presents later Tuesday, is on the bioprocessing front. Recall that Credit Suisse analysts downgraded DHR shares last week, believing that “exposure to inventory reductions and bioprocessing diagnostics could put pressure on [Danaher’s] We also highlighted this concern among investors in our analysis of the company’s third-quarter operating results, although we noted that any elevated inventory levels are ultimately a short-term issue that will eventually resolve themselves. Management said they are now working even more closely with customers than in the past to better understand production plans and reduce the risk of overstocking and avoid double ordering STZ 1Y mountain Constellation Brands 1-year inventory performance; Shares of Constellation Brands rose 2% on Tuesday analysts at Goldman Sachs reiterated their buy rating and said they “continue to believe that concerns about the health of the Modelo brand are overblown. Nielsen EQ range for Modelo Especial was in the latest Nielsen data under pressure (albeit improved on a 2-week vs. 4-week basis), but this was broadly expected given the level of prices recently put on the market across the value chain (from STZ to and including traders retail).” As a reminder, management also highlighted these price/demand dynamics on the earnings conference call, noting that “the impact of our declines has been compounded by additional price actions across the value chain. However, we expect the impact to gradual pricing will moderate in the coming months, as we have seen in previous similar circumstances.” Put another way, it looks like demand will fall when prices go up because everyone is buying cases and building inventory in anticipation of the price going up; then it takes some time to pull it forward. Eventually, things settle down and, historically, Constellation’s growth is back on track after a few months. This is expected to be the case this time too, although it may take a bit longer because the price hike has been seen across the value chain, meaning the price for the end customer has gone slightly higher than would normally be the case. California, a key state for Modelo, and Constellation’s Mexican beer portfolio, which also includes Corona and Pacifica, is one example where this influence has been particularly noticeable; also in Texas. But as management pointed out on the call last week, California is already making a comeback. Excluding the price impact, Goldman analysts say Modelo continues to take market share, according to the scanner. It is difficult to argue that there is a substitute for cheaper brands. Analysts are also encouraged by the continued “positive feedback from our Beverage Bytes beer industry retailer contacts, indicating that Modelo Especial continues to perform well as sales remain strong and grow.” Ultimately, we agree with analysts that concerns about Model are overblown — and as noted in Tuesday’s “morning briefing,” we believe investors need to consider the company’s strong cash flow and be aware that the company has yet to launch Victoria Beer, one of the most popular brands in Mexico, to the US market, which represents a positive catalyst in the future. (Jim Cramer’s charitable trust is long DHR, STZ. See here for a full list of stocks.) As a CNBC Investing Club with Jim Cramer subscriber, you will receive a trade alert before Jim closes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charity’s portfolio. If Jim talked about a stock on CNBC, he waits 72 hours after the trade alert is issued before he executes the trade. THE ABOVE INFORMATION IN THE INVESTING CLUB IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY TOGETHER WITH OUR DISCLAIMER. NO FIDUCIARY OBLIGATION OR DUTY SHALL EXIST OR BE CREATED BY YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO PARTICULAR RESULT OR PROFIT IS GUARANTEED.
A trader works on the trading floor of the New York Stock Exchange (NYSE), January 5, 2023.
Andrew Kelly | Reuters
While Wall Street tried to hang on to recent gains on Tuesday, we got some positive news on two of Club’s holdings that are seeing outsized moves to the upside: Danaher (DHR) and Constellation Brands (STZ).
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MY NUMBER 1 RECOMMENDATION TO LOSE WEIGHT: CLICK HERE
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