George Soros Fund Management Stock Pick

When a legendary investor like George Soros takes a large position in a stock like electrical products manufacturer Hubbell Incorporated (NYSE: HUB-B  ) , it's usually a good idea to take notice. So why is George Soros buying stock in Hubbell Incorporated, and should you be buying too?

Soros Fund Management buys Hubbell Incorporated stock

A look at SEC filings from Soros Fund Management reveals that his investment firm had picked up 306,371 shares by the end of June, and another 311,985 shares by the end of September. At the current price of around $107, the position is worth around $66 million -- a pretty significant position.

Introducing Hubbell Incorporated

 Hubbell generates more than 80% of its sales from the US and has two operating segments:


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Deere & Company (DE) Earnings Call

Deere & Company (NYSE: DE  ) recently beat fourth-quarter estimates, but served notice that 2015 is likely to be a tough year. It's hardly surprising given the price weakness in key crops like corn, wheat, soybeans, and cotton. Ultimately the company's fortunes will be tied to the cyclicality of the farming sector, and investors should follow events closely because a potential turnaround in crop prices will likely lead to the stock moving higher. However, before you rush to take a view, here are five things management thinks you should know.

DE data by YCharts

Deere & Company guidance disappoints; farmers' cash receipts seen as key

In a nutshell, management guided toward a decline in net sales of 15% mainly due to a forecast 20% net sales decline in its agriculture and turf segment.


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Is Johnson Controls a Buy?

Johnson Controls  (NYSE: JCI  ) investors must be disappointed this year as they have watched their stock underperform the S&P 500 by nearly 14% to date in 2014, at the time of this writing. However, the poor stock price performance largely has resulted from end-market conditions rather than anything the company has done. On the contrary, the multi-industrial company's management has made a host of exciting initiatives that could propel earnings higher in the future. With these initiatives in place, and some of its end markets starting to look better, is now the time to buy into Johnson Controls?


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Is UPS a Buy?

When you decide to buy or sell stock in a company like United Parcel Service, Inc.  (NYSE: UPS  ) , there are two key questions you should ask yourself. The first is whether its earnings projections and financial numbers make the stock a good value. The second is whether you believe in the company's ability to hit the numbers. This article will deal with these considerations in turn so you can better decide whether UPS stock is a buy for you.

UPS Forecasts and historical numbers

UPS recently hosted an investor conference in which it laid out its long-term financial targets. For now, let's look at what management expects from the business in the 2015-2019 time frame.


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Chinese Dating Site Jiayuan.com (DATE) Earnings Analysis

China's largest online dating platform, Jiayuan.com International Ltd (NASDAQ: DATE  ) , is very much a company in transition and its latest earnings report reflects the changes afoot. Essentially, the company is in the process of redesigning and relaunching its mobile offering in December, and the company is looking forward to increasing the monetization of its mobile platform. Unfortunately, this shift has somewhat skewed the key metrics at the company. Here is a look at its third-quarter results, reported this morning.




Before going into detail, readers should note that Jiayuan is a Chinese company and primarily reports in RMB. All the numbers in this article will be quoted and calculated in RMB, unless otherwise stated.




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The Bearish Case for Johnson Controls Inc Stock (JCI)

Johnson Controls  (NYSE: JCI  ) investors will be buoyed by the stock's recent strong run, but can it continue? Management has ample reason to believe it can improve revenue and margin growth across its segments in 2015. I've already examined the bullish case for the stock in a previous article; now it's time to look at the bearish case.

3 bearish factors for Johnson Controls

Before going into detail, I should note that I'm positive on management's restructuring efforts and internal execution. However, the company's valuation and the potential for deterioration in China's economy -- and ultimately car sales -- suggest there may be better ways to play the other positive end-market trends the company is seeing. (More on that in a future article.)


The company's segmental income in fiscal 2014 was a roughly three-way split among the building efficiency (heating, ventilation, and air conditioning), power solutions (car batteries), and automotive experience (car seating and interiors) businesses. Two of the three risks the company faces relate specifically to the auto experience segment.


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The Bullish Case for Johnson Controls (JCI) Stock

Johnson Controls (NYSE: JCI  ) investors have watched their stock put in a strong recovery in the last month, and the share price is only down a few percentage points on the year, as I write. About a month ago, Fools looked at just why the stock had slumped in 2014, and more recently at the five things management hopes will improve company performance. Now, it's time to look at things from another perspective and ask: What are the three things that could take the stock higher?


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United Parcel Service (UPS) Investor Conference Review

Until last week, it had been three years since United Parcel Service (NYSE: UPS  ) last had an investor conference, and much had changed with its end-market conditions in the interim. At the recent conference, management updated UPS investors on its long-term outlook and on how it is adjusting to these changes. With this in mind, it's time to look at what is new with UPS and what it might mean to the shipping and logistics company's investors.



United Parcel Service's end-market trends

 Before getting into details, here is a chart of UPS' trailing-four-quarters segmental income so Fools can see the relative importance of each business.

Source: United Parcel Service Presentations.

Since 2011, there have been three separate and somewhat unexpected changes in end markets for UPS and its main rival, FedEx (NYSE: FDX  )


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Emerson Electric Earnings Call

With its recent fourth-quarter results, dividend investor favorite Emerson Electric (NYSE: EMR  ) showed that it's been performing well in the face of mixed end markets. You may have already read the details of the earnings report, but now it's time to look at what management wants you to know about the company's future direction.

Global growth and dividends

There are two key things to understand about the company. First, it's largely a play on global macroeconomic conditions, with an added growth kicker from emerging-market spending on infrastructure projects. Second, it's a Dividend Aristocrat -- a company that has increased its dividend for 25 years or more. Moreover, the underlying evidence suggests that it has the potential, and management the will, to continue rewarding income-seeking investors well into the future. Let's look at five key takeaways from the earnings call in the context of these two points.


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Palo Alto Networks, Fortinet, and Check Point Software: Which Stock to Buy?

ector, but the decision over buying or selling the stock isn't as easy as you might think. Investors often buy or sell stocks based on their relative valuation within their peer group, but with the network security sector it isn't quite so easy. Why is this so? Furthermore, is Palo Alto Networks a buy or sell?

You say value, I say growth

It's tricky to compare valuations in the network security sector, because the leading players are at different stages of their development, and this makes them attractive to a different type of investor. For example, a value investor might look at a mature, highly cash generative, stock like Check Point Software (NASDAQ: CHKP  ) at conclude that it's the best in class. Meanwhile, growth at reasonable price,or GARP, investor will like the look of Fortinet's (NASDAQ: FTNT  ) mix of mid-teens revenue growth and solid free-cash flow generation, while a growth investor will favor Palo Alto's 30% plus growth rates, even if its free-cash flow yield is low.



I'm going to graphically introduce some of these ideas for you, and then get into the numbers. First, a quick look at revenue growth for these three companies in the last four years and the analyst forecast for the fifth year, reveals that they really are at different stages of development.


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Johnson Controls Earnings Call

The market liked Johnson Controls' (NYSE: JCI  ) fourth-quarter results and marked the stock up more than 3% when earnings were released on Oct. 30. The stock certainly needed the boost, because up to that point it was down nearly 13% on the year. Johnson Controls investors will be looking for the earnings to spark a recovery in the stock price. Here are the five things that management hopes will take the stock higher.

Building efficiency segment set to improve

Johnson Controls is trying to expand its building efficiency segment sales in an attempt to reduce its reliance on the automobile sector -- an industry known for its cyclicality. The building efficiency segment sells heating, ventilation, and air conditioning, or HVAC, solutions. Unfortunately, this year has proven to be tougher than management expected, but the good news is that the segment's fortunes look set to improve.



On the recent conference call, CEO Alex Molinaroli first highlighted the improvement in the institutional component (the company's core HVAC market) of the Architecture Billings Index -- a key industry measure of construction growth. A reading above 50 indicates expansion.


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The Bearish Case for United Parcel Service, Inc

United Parcel Service's (NYSE: UPS  ) latest results indicated a return to form for the company. We've already covered the bullish case for the stock with the five key things management hopes will turn the stock around; now let's examine the bearish case.

Source: United Parcel Service.

All about e-commerce for United Parcel Service

 I should admit that I'm bullish on the stock, without believing it's a screamingly good value. But every stock comes with some risk, and in the case of UPS and rival FedEx (NYSE: FDX  ) , the key risks comes from the same place as their biggest opportunity -- the burgeoning growth in business-to-consumer, or B2C, e-commerce.


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Emerson Electric: A Dividend Stock

Emerson Electric's (NYSE: EMR  ) fourth-quarter results did two things that will interest investors. First, they gave a good reading on trends in the global economy -- something all investors should be watching. Second, they confirmed just why the company remains a dividend favorite. Putting these things together, is the stock worth buying?

Emerson Electric: Performing well amid some global challenges

Earlier in the year, Fools saw how buying stock in Emerson Electric was largely a play on economic trends in the global economy. With this in mind, it's a good idea to track how its geographic performance fared relative to management's expectations at the start of the year.

Here is a look at full-year underlying sales (excluding acquisitions and divestitures) versus what was planned in early 2014:

Segment	Plan	Actual
USA	3%-5%	4%
Europe	0%-2%	1%
China	6%-8%	7%
Other Asia	6%-8%	1%
Latin America	6%-8%	2%
Middle East & Africa	8%-10%	(1%)
Underlying	3%-5%	3%

Source: Emerson Electric presentations.

With underlying sales at the bottom end of its projected range for the full year, it's clear that its end markets didn't work out as planned. Of course, Emerson Electric isn't alone in seeing significant changes occur in the mix of global growth. Indeed, fellow industrial bellwether 3M also reported a similar story of the U.S. strengthening, with certain emerging markets (particularly Latin America) weakening notably.


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The bullish case for United Parcel Service

United Parcel Service (NYSE: UPS  ) investors will have been pleased to see the stock rising after a solid set of results. I've already covered the key points on the third-quarter earnings, and then looked at the five things that management wants you to know about the company's prospects. Now it's time to look at the company purely from the perspective of an investor looking to buy the stock. In doing so, I'll outline the three reasons the stock could start to play catch-up with its rival FedEx (NYSE: FDX  ) and the market in 2014.

UPS data by YCharts.

E-commerce brings challenges and opportunities

The reasons for the underperformance of UPS relative to FedEx have already been discussed in more detail. Simply put, UPS was harder hit than FedEx by the severe winter weather last year. However, one development that affects both companies is the burgeoning development of e-commerce deliveries, and in particular, from business to consumer, or B2C, channels.


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Johnson Controls Earnings Analysis

It's been a difficult year for Johnson Controls (NYSE: JCI  ) investors, as they have watched their stock underperform the market. The market was looking for some signs of improvement in its fourth-quarter results. In the end, the company delivered a solid quarter with the headline numbers pretty much in line with expectations.

It's time to look at what happened in the fourth quarter, and to look for any indications of where the company is headed next.

Source: Johnson Controls.

Johnson Controls fourth-quarter results

A quick look at the headline numbers:

• Fourth-quarter revenue of $11 billion versus analyst estimates of $11.2 billion
  
• Fourth-quarter adjusted diluted EPS of $1.04 versus analyst estimates of $1.01 and internal guidance of $1-$1.02
  
• First-quarter 2015 EPS guidance of $0.74-$0.77 versus analyst estimates of $0.77
  

Fourth-quarter EPS is ahead of estimates, but the guidance for the first quarter is a little light compared to analyst estimates. In short, it was a mixed set of earnings, with sales up 3% and gross profit up 2%.


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MSC Industrial Earnings Analysis

MSC Industrial (NYSE: MSM  ) reported a mixed set of results for its fourth quarter. Revenue came in better than analyst expectations, but in common with rival industrial supply company Fastenal, MSC Industrial is seeing ongoing margin pressures. Moreover, its guidance for the first quarter of fiscal 2015 was lighter than analyst expectations.

MSC Industrial meets earnings expectations, but guidance disappoints

A quick look at the highlights of its fourth-quarter earnings:

• Fourth-quarter sales of $726.6 million versus internal guidance of $718 million-$730 million and analyst estimate of $724.8 million
  
• Gross margin of 45.6% versus internal guidance of 45.7%-46.1%
  
• Operating expenses of $231 million versus internal guidance of $230 million
  
• Tax rate of 37.7% versus internal guidance of 36.7%
  
• Adjusted non-generally accepted accounting principles EPS of $1.02 versus internal guidance of $0.98-$1.02 and analyst estimate of $1.01
  

Sales came in ahead of analyst estimates (and above the midrange of company guidance) and EPS topped internal guidance. So why was the stock marked down initially after the report?

3 considerations

There are three things to consider about these results, and investors should watch them closely, because the industrial equipment wholesale industry is always a useful bellwether of the economy.


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Danaher Corporation's Business Strategy

The market greeted industrial conglomerate Danaher's (NYSE: DHR  ) latest quarterly results with a nice pop on the day of the earnings release. This was the first set of company earnings presided over by new CEO Tom Joyce. Naturally, investors were keen to find out just what kind of message the new chief executive was looking to give out. His predecessor,Larry Culp, was closely associated with the company's success over the years, and Joyce has large boots to fill. So, in that context, we'll look at five key takeaways from the company's quarterly conference call. Is Joyce taking the company in the right direction?

Business as usual at Danaher?

In a previous article, Fools looked at the earnings in more detail. The company is known for acquiring businesses and then applying its Danaher Business System, or DBS, to them. Simply put, it's a management strategy that emphasizes lean manufacturing processes that can be applied across all segments of the company. While the current results will still be a product of Culp's management, the question is does Joyce plan to change its business strategy?

DBS Explained Source: Danaher Website

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Middleby Corporation Equity Analysis

Stock in food equipment company Middleby Corporation (NASDAQ: MIDD  ) is in line with the S&P 500 index so far this year -- it's recorded a 5.1% increase as of this writing. However, this is definitely not a case of a company simply tracking the market.In reality, it's been a volatile year, with the stock trading at $100 in March, and then some 28% lower, at $72, in August, only to increase 21% to the price of around $85 as of this writing. Why has the stock been so volatile this year?

MIDD data by YCharts.

Future earnings for Middleby Corporation

As the following chart demonstrates, Middleby's current valuation has little to do with its current earnings -- it's the market's view on its future earnings that counts.


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UPS Earnings Call Review

It's been a difficult year for United Parcel Service  (NYSE: UPS  ) investors, as they have watched their stock underperform key rival FedEx (NYSE: FDX  ) and the S&P 500. However, the third-quarter results saw a return to form, and investors have cause to believe that the stock can go do well going forward. Here is a look at what management wants you to know about the business, and why UPS could be a stock to buy.

What you need to know about UPS in 2014

Essentially, UPS has had a difficult year for two main reasons. First, a combination of bad weather and unexpected spikes in demand during last year's holiday season hurt its profitability in its first quarter. Moreover, UPS had to reduce its 2014 earnings forecast in July due to increasing its investment plans in order to ensure it will meet peak demand spikes in future.



Second, the relatively stronger growth in its e-commerce business-to-consumer, or B2C, packages is pressuring margins downward. B2C packages tend to be lighter and lower-yielding deliveries. In addition, UPS and FedEx are having to deal with burgeoning e-commerce delivery growth by expanding capacity -- something else to pressure margins.



The following five points from UPS' earnings call address these two issues.


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Precision CastParts Equity Analysis

Precision Castparts Corp.'s  (NYSE: PCP  ) earnings came in a little lighter than expected, but investors might not want to panic just yet. Any company involved in the production of heavy capital goods is likely to see some lumpiness in its revenue and earnings from quarter to quarter -- and so it was with Precision Castparts' second quarter.

Source: Precision Castparts.

Earnings highlights

A brief recap:

• Q2 revenue of $2.52 billion versus analyst estimates of $2.52 billion
  
• Q2 earnings per share of $3.24 versus analyst estimates of $3.32
  

So it's an earnings "miss," and the market did what the market usually does in such cases: It promptly marked the stock down yesterday, on an otherwise strong day for the S&P 500.

However, as noted above, Precision Castparts is always going to be a business with a degree of uncertainty around the level of its earnings from quarter to quarter. Indeed, CEO Mark Donegan further alluded to this fact in his commentary on the outlook for the upcoming third quarter.


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Check Point Software Earnings Analysis

he information-technology network security sector is unusual in the sense that its leading companies offer markedly different maturity levels. If FireEye and Palto Alto Networks (NYSE: PANW  ) are the new kids on the block, and Fortinet (NASDAQ: FTNT  ) is the maturing teenager, then Check Point Software (NASDAQ: CHKP  ) is very much the mature old uncle. With that said, Fools shouldn't dismiss the stock as unexciting. On the contrary, there was a lot to like about Check Point's recent third-quarter earnings, and the numbers confirm that the company's business strategy is working. Time for a look.

Check Point Software's third-quarter results

Highlights of its earnings and guidance for the upcoming fourth quarter:

• Third-quarter revenue of $370.4 million vs. analyst estimate of $367.1 million
  
• Third-quarter earnings per share of $0.93 vs. analyst estimates of $0.91
  
• Fourth-quarter revenue guidance of $395 million-$430 million vs. analyst estimate of $410.3 million
  
• Fourth-quarter EPS guidance of $0.99-$1.09 vs. analyst estimate of $1.03
  

In summary, revenue and EPS beat analyst expectations and guidance was ahead of what the market projected. This is obviously good news, particularly because Check Point's management is known for giving conservative guidance.


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Polycom Earnings Analysis

Video conferencing company Polycom's (NASDAQ: PLCM  ) earnings are always likely to cause some fireworks because of the company's high-risk, high-reward nature. Some investors will balk at the mention of high risk, while others will warm to the idea of high reward. With Polycom's third-quarter results just in, it's clear that the optimists have won this round -- but not by much.

Polycom wants you to collaborate. Source: Polycom.

Polycom beats estimates; guidance was a bit light

A quick recap of the third-quarter earnings and fourth-quarter guidance:

• Third-quarter revenue came in flat at $335.7 million, versus analyst estimates of $334.9 million.
• Third-quarter Non-GAAP diluted EPS came in at $0.22, versus analyst estimates of $0.20.
• Fourth-quarter revenue guidance of $342 million to $352 million straddled analyst estimates of $349 million.
• Fourth-quarter non-GAAP EPS guidance of $0.21 to $0.23 also straddled analyst estimates of $0.22.

Third-quarter revenue and EPS beat estimates, but Fools should note that the midpoint of fourth-quarter revenue guidance is below the market consensus. In addition, management gave fourth-quarter guidance of non-GAAP gross margins of 59% to 59.2%, implying a decline from the 59.4% level he company achieved in the third quarter.

What Polycom is trying to achieve with its earnings

Essentially, Polycom is competing against the unified communications operations of two giant tech companies: Cisco Systems (NASDAQ: CSCO  ) and China's Huawei. It also faces a number of small competitors offering cheaper, less sophisticated solutions and even Google's (NASDAQ: GOOG  ) Chromebox at the low end.


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Robert Half International Earnings Review

Staffing services company Robert Half International (NYSE: RHI  ) beat analyst estimates for the third quarter and delivered guidance ahead of the Wall Street consensus for the fourth quarter. In an act of almost prescient behavior, the market took the stock more than 5% higher before the results. However, all of these short-term movements shouldn't trouble long-term investors unduly, as the positive drivers behind the stock remain in place. Robert Half is set for continued growth, but what about its valuation?



Robert Half International tops estimates
A quick look at the earnings and guidance versus consensus analyst estimates confirms tht the underlying trends in the business remain strong:

• Third-quarter revenue of $1.22 billion, versus estimates of $1.2 billion.
• Third-quarter EPS of $0.63, versus estimates of $0.58.
• Fourth-quarter revenue guidance of $1.175 billion to $1.225 billion, versus estimates of $1.2 billion.
• Fourth-quarter EPS guidance of $0.57-$0.62, versus estimates of $0.58.

Moreover, commentary on the trends in the third quarter and the first few weeks of the fourth were positive. The following table summarizes what management disclosed on the conference call.


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Cognex Earnings Review

Cognex Corporation (NASDAQ: CGNX  ) did pretty much what it had said it would do in its bumper third quarter. However, on closer inspection, there is one number that suggests its full-year earnings growth is going to be stronger than many think. It's time to look in more detail at the earnings, and the commentary on the earnings call.



Cognex reports record earnings Readers should note that there is an earnings preview of Cognex on the Motley Fool website that outlines the key things for investors to look for. Now to the numbers:

• Third-quarter revenue of $169.4 million vs. analyst expectations of $168.2 million, and internal guidance of $165 million-$170 million.
  
• Third-quarter non-GAAP adjusted diluted EPS of $0.59 vs. analyst expectations of $0.56.
  
• Gross margin of 74% vs. internal expectations of a mid-70% range.
  
• Effective tax rate of 19% vs. internal expectation of 19%.
  
• Fourth-quarter revenue guidance of $111 million-$114 million vs. analyst expectations of $113 million.
  
• Fourth-quarter gross margin guidance as being similar to the third quarter, at 74%.
  

The revenue is at the top of the internal range and above analyst estimates, while EPS is clearly ahead. Gross margin and the tax rate were in line, and the revenue guidance for the fourth quarter is pretty much in line with analyst expectations. So where is the upside that I mentioned in the lead?


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Cognex Earnings Preview

Machine vision company Cognex Corporation (NASDAQ: CGNX  ) is one of the most compelling growth stocks in the industrial sector. It's also one of the most expensive, trading at 28 times forecast earnings for 2014. That's a heady mix that ensures that investors will closely follow its upcoming third-quarter earnings report. Let's see what those investors might expect.



Cognex: the numbers
Cognex investors will remember the company's fourth-quarter results from February, when the company beat earnings estimates and promptly fell more than 8%, only to rise 7% the next day. While it's always interesting to follow such events, long-term investors will want to look at its earnings in the context of the development of the business.

Before delving into a qualitative discussion, here is what Cognex's management forecasted for the third quarter at the time of the second-quarter earnings call.


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Is PPG Industries a Dividend Stock to Buy?

The nice thing about paintings and coatings company PPG Industries (NYSE: PPG  ) is that the stock offers something for growth- and income-seeking investors alike. One one hand, analysts expect the stock to grow its earnings in the mid-teens for the next couple of years. On the other, the company is a Dividend Aristocrat, having raised its payout for 42 years in a row. If you're an income investor, is now the time to buy into PPG Industries? Let's take a closer look.

A Dividend Aristocrat, but also a cyclical stock

The key to growing a dividend is a combination of generating good return on equity, or ROE, and having the earnings and free cash flow to reinvest in the business. In other words, companies need to generate good ROE (net income from shareholder equity) and then use whatever earnings are left over, after dividends have been paid, to reinvest so as to generate growth.


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Why Jacobs Engineering Group Slumped in 2014

Shares in engineering consultant Jacobs Engineering Group (NYSE: JEC  ) have declined more than 26% this year, as of this writing. Such a result is hardly surprising, given that EPS guidance has been significantly lowered this year. At the start of the year, analysts were predicting 2014 EPS to reach $3.66, but today that forecast stands at $3.29. What happened to the company this year, and will this be an ongoing problem?

Jacobs needs customers to increase spending on processing. Source: Jacobs Engineering.

Restructuring costs and tougher end-markets than previously expected

The company has been wrestling with two main issues this year:


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Danaher Corporation Earnings Analysis

The market gave Danaher's  (NYSE: DHR  ) third-quarter earnings results the thumbs-up and sent the stock up more than 3% on the day of their release, last Thursday. The numbers weren't fantastic, but they reassured Danaher investors that management is dealing well with an uncertain macroenvironment. But did we learn anything new about Danaher's prospects?

Danaher's earnings beat cautious guidance

Danaher declared that third-quarter earnings per share of $0.95 were above expectations, but management arguably had given cautious guidance the last time around. At the time of its second-quarter earnings, management had forecast that core revenue growth would be 2%-4% for the full year, and discussed ongoing weakness in two of its higher-margin businesses: communications testing (test and measurement segment) and U.S. dental consumables (dental).



In truth, nothing really changed from an end-market perspective in the third quarter. Core revenue growth came in at 3%, and the two specific product lines remained weak. However, there was some positive news on the weak product areas. Earlier in the week, Danaher announced the merger of its communications unit with NetScout Systems. Plus, strong growth in other parts of the dental segment more than offset ongoing sluggishness with U.S. dental consumables.



The end result was core operating margin growth in four of its five segments -- note the return to form in dental -- and action has been taken on its ailing communications (test and measurement) product line. The following chart is measured in basis points, in which 100 basis points is equivalent to 1%:

Source: Danaher Presentations.

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Is Pentair a Dividend Stock to Buy?

Pentair PLC (NYSE: PNR  ) is one of the lesser known Dividend Aristocrats -- stocks that have raised their dividend for 25 consecutive years or more -- but that doesn't mean it lacks attention from certain quarters. The company specializes in water flow technology (valves, controls, and process technologies) and often gets attention from investors looking for a thematic way to play the increasing need for the management of water resources. Are these two factors -- water and a dividend -- enough to make the stock a long-term buy for income seekers?

More cyclical than you might think

The theory is as simple as it is attractive. Long-term population growth, particularly in emerging markets, will lead to a 25% increase in freshwater demand by 2030. Moreover, we live in a world where, according to the UN CEO Water Mandate, one-third of the population already lives in "water-stressed countries." Given the strains that an increasing population will put on water infrastructure, for agriculture and industry as well as human consumption, the need for investment is substantial.
So is Pentair's long-term demand assured, and should you go ahead and buy this Dividend Aristocrat?
Investing is rarely that simple, of course, and the reality is that Pentair's prospects turn out to be quite cyclical in nature. The following chart demonstrates the significant declines in its revenue and operating income in the last recession. Don't be fooled by the dramatic increases from 2012 onward; that's due to a $5 billion acquisition of the valve and flow control operations of Tyco. (More on that later.)

Source: Morningstar.

Guidance cut

Moreover, earlier this year, Pentair was forced to reduce its earnings estimates for 2014 and 2015 for a couple of cyclically related reasons. The range of its 2014 EPS guidance was reduced from $3.85-$4 to $3.65-$3.70 -- a $0.25 reduction at the midpoint. Its 2015 EPS guidance was likewise reduced from $5 to $4.50. There were two main reasons for the decline, and both are cyclically related.


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Why 3M Company Has Underperformed

It's been a frustrating year for shareholders in 3M Company (NYSE: MMM  ) . The company hasn't really done anything wrong, yet the stock has underperformed the S&P 500 by more than 7% this year, as of this writing. The relative weakness is somewhat surprising for such a highly regarded company. Why has the company underperformed, and what can it do about it from here on?

Source: 3M Company.

Global growth weakening; North America fine
As always in investing, there's no clear picture; however, there are three related reasons that 3M is underperforming. First, the diversified industrial sector has been weak in the market this year. A quick look at 3M's share price performance alongside peers Dover Corp. (NYSE: DOV  ) , Illinois Tool Works (NYSE: ITW  ) , and Danaher (NYSE: DHR  )  shows that the whole sector has found it tough going this year.


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Dividend Investing Stocks: Emerson Electric

Emerson Electric is a Dividend Aristocrat, one of a select band of companies that have increased their payouts annually for at least 25 years. Income-seeking investors love such stocks, but they also love shares that appreciate over time. With that said, what are the prospects for Emerson Electric to remain a Dividend Aristocrat, and is it time for dividend-seeking investors to buy this company?

A mature dividend playEmerson Electric is a mature company, providing manufacturing and technology for a number of markets, with a relatively high dividend of roughly 2.8%.
Naturally, the stock will attract income seekers, given a yield almost 0.5% above that of the U.S. 10-year Treasury note. However, its relatively high payout ratio -- about 37% of last year's earnings were paid out to shareholders in dividends -- means that its ability to grow its dividend aggressively in future years is somewhat constrained.


To explain this idea quantitatively...


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Why Has Johnson Controls Slumped This Year?

Investors in Johnson Controls  have watched their stock decline by nearly 14% this year, even as the company has outperformed expectations in one of its three segments (automotive experience) and made a host of initiatives to improve productivity. With that said, you might be wondering just why the company has declined in 2014. Let's take a look.

Source: Johnson Controls

Great Expectations
No, not a treatise on Charles Dickens, but a lead-in to what has happened this year with the company. Simply put, at the start of the year, investors had expected positive things from its three segments:

• Power solutions (automotive batteries) was expected to have a strong winter thanks to severe cold weather in North America.
• The building efficiency (heating, ventilation, and air-conditioning, or HVAC) segment was expected to see a pickup in demand from a long-anticipated improvement in North American construction activity.
• Automotive experience (car seating and interiors) looked set to have a good year as North America and China automotive sales and production looked likely to remain in growth mode.

Fast-forward to what actually happened, and it's a mixed story.


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Is Sonic Automotive a Stock to Buy?

Why does Wall Street hate car dealer Sonic Automotive? It's a cheap stock -- its price-to-earnings over earnings-per-share growth, or PEG, ratio is less than 1 -- yet analysts have a consensus hold/sell recommendation on it. Given that Warren Buffett recently bought the largest privately owned car dealership in the U.S., the Van Tuyl Group, is Wall Street missing something with Sonic Automotive?

Car dealerships are about to change

The Internet has changed many aspects of business, and the car retail industry is not immune from its effects. Indeed, Elon Musk is doing everything he can to disrupt the traditional dealer-franchise model by selling Tesla Motors cars directly to customers. Moreover, consumers are increasingly getting used to using pricing information from online sources in order to make more efficient purchasing decisions -- it beats haggling with a salesperson on a car lot.



With these kinds of pressures building on the industry, it's essential that car dealerships adjust to new realities, and the good news is that Sonic Automotive is doing just that. The bad news is that Wall Street doesn't like the uncertainty that comes with change, and there is a lot of it coming at Sonic Automotive.


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Why Are Insiders Buying Advance Auto Parts Stock?

It's always useful to keep an eye on insiders buying stock in their own companies. It's particularly intriguing when management is doing it while integrating a major acquisition. With that in mind, Fools should keep a close look out for stock in auto parts retailer Advance Auto Parts (NYSE: AAP  ) .



Earlier this year, the company completed the purchase of General Parts International -- owner of Carquest and Worldpac stores -- for just more than $2 billion. If the insider buying is a good tell, then the integration plan is working out just fine. It's time to take a closer look.

What the deal means for Advance Auto Parts
The market certainly likes the deal, because Advance Auto has noticeably outperformed its peers Autozone (NYSE: AZO  ) , Genuine Parts Company (NYSE: GPC  ) , and O'Reilly Automotive (NASDAQ: ORLY  ) in the year since it was announced.


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United Technologies or Honeywell: Which is the Better Stock to Buy?

When long-term investors compare the investment case for industrial conglomerates such as United Technologies Corporation (NYSE: UTX  ) and Honeywell International Inc. (NYSE: HON  ) , they often focus on a metric called return on equity, or ROE. In a nutshell, ROE measures the net income a company produces from shareholder equity.

Today I'm going to break down why ROE is such an important measure for valuation purposes and how it determines a company's ability to grow its dividend. Moreover, I'll carry out a DuPont analysis, a method of garnering more detail on why one company is outperforming another, so that readers can best decide what to do with their money.

Why return on equity matters
One of the simplest and most commonly used valuation methods for stocks is the Dividend Discount Method, also known as the Gordon Growth Model. Simply put, it's a way of valuing a stock based on the potential for future dividend growth. Don't be alarmed by the equations; it's simple stuff.


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Will UPS Deliver This Holiday Season?

Shoppers and part-time workers received a boost recently on news that United Parcel Service   plans to hire 90,000 to 95,000 seasonal workers for the holidays. The hiring is in line with its plans to better deal with the anticipated surge in holiday demand coming from e-commerce.

One thing's for sure: The company can't afford a repeat of last Christmas, when delayed deliveries from both UPS and FedEx   disappointed shoppers who then focused their ire toward online retailers.

It's imperative that UPS gets it right this Christmas, and signs suggest it will. UPS' management has taken note of the lessons of unexpected peak demand, and has invested accordingly in a series of initiatives to manage peak demand and improve operational efficiencies.



Last year's perfect stormInvestors and shoppers need to appreciate that the environment last holiday season was highly unusual for a number of reasons:




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Baggage Fees and The Airline Industry

Ancillary revenue has become a major part of airline industry revenue, but few realize just how important it is to airlines. In a previous article, Fools learned about how ancillary, or add-on, revenue is defined and which airlines are the biggest revenue generators. Unsurprisingly, the budget/discount airlines rely on ancillary revenue the most, but traditional airlines such as United Airlines (NYSE: UAL  ) are increasingly relying on it, too. Let's take a look at some industrywide figures that help explain the importance of this revenue to airline profitability, and at who is doing what.

Source: Motley Fool Flickr account.

Growth of ancillary revenue
It's hard to put an exact figure on industrywide profitability from ancillary revenue, because not all airlines disclose the data and/or break out profits generated from ancillary revenue. However, it's safe to assume that activities like baggage checking, seat allocation, booking fees, and on-board entertainment are high-margin activities. With this in mind, here is a comparison of industrywide ancillary revenue, garnered from The CarTrawler Yearbook of Ancillary Revenue by IdeaWorksCompany, versus estimates for airline profitability.


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Johnson Controls: a Stock to Buy?

t's easy to dismiss Johnson Controls (NYSE: JCI  ) as just another play on global growth, but there is a lot more to investing in the company than you might first think. Its mix of automotive and construction end markets looks favorably set for growth, and the company is taking action to restructure two of its three segments. With that said, is Johnson Controls a buy?

Source: Johnson Controls.

Restructuring the automotive experience and building efficiency segments

Before reading more about Johnson Controls, you might want to check out a review of the key takeaways from the company's last earnings report, as well as a rundown of the bullish and bearish cases for the stock.


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Why UPS has Underperformed FedEx This Year

The theory goes a bit like this: United Parcel Service (NYSE: UPS  ) and FedEx (NYSE: FDX  ) are both stocks whose revenue growth correlates with economic growth, the stock market, and, ultimately, each other. Unfortunately, the theory is wrong -- at least it has been in 2014. UPS has managed to decline 4.4% in 2014, while the S&P 500 is up 7.4% and FedEx has risen more than 16% in the same period. Why is this so, and what do investors need to know about UPS going forward?

4 reasons UPS has underperformedThe first three reasons are matters that also relate to FedEx, while the last reason talks about UPS' position relative to FedEx:


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The top 10 Airlines That Make Money From Non-Ticket Fees

Did you ever wonder about how those non-ticket airline fees always seem to creep up year after year? Well if you did, then the following data will confirm your worst fears. Airlines are making more and more money from non-ticket,or ancillary fees, and it's now become an integral part of their business model—for budget airlines and traditional airlines alike. It's time to look more closely at which airline is making what from ancillary fees.

Source: Motley Fool Flickr Account

What is ancillary revenue?
Ancillary revenue is defined in the CarTrawler Yearbook of Ancillary Revenue by IdeaWorksCompany as coming from four main revenue streams:

• A la carte features such as onboard food and beverage sales, baggage and checking in fees, seat assignment fees, onboard entertainment, and priority services
• Frequent Flier Programs comprising of sales of miles/points to program partners and/or members
• Commission-based products, for example, commissions earned for travel insurance, hotel accommodation or car rentals
• Advertising sales, typically involving things like in-flight magazine advertising, and signage and airports

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Why Has Danaher Stock Underperformed the Market in 2014?

Long-term investors in Danaher Corp. (NYSE: DHR  ) have grown used to watching their stock outperform the index in rising markets, with the stock price gaining around 200% over the past 10 years versus an 81% gain for the S&P 500. However, this year's underperformance of nearly 6% versus the S&P 500 must have them wondering whether the company has lost its touch. Why has Danaher started to underperform, and is it likely to continue?


Why Danaher Corp. has underperformed
In a nutshell, there are three reasons the stock has underperformed this year:

• There are questions about the company's ability or opportunity to make suitable acquisitions -- a key part of its business strategy
• CEO Larry Culp, whose 11-year tenure is partly responsible for the recent outperformance, announced in April that he would be leaving the company. 
• Two of the company's higher-margin businesses -- communications (test and measurement) and dental consumables -- have underperformed expectations.

Danaher Corp.'s existential angst
Companies' reputations define how investors look at them. In Danaher's case, the company has long been seen as an excellently run conglomerate that uses its substantive cash flow generation to make earnings-enhancing acquisitions.


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Time to Buy UPS Stock?

Investors in United Parcel Service (NYSE: UPS  ) could be forgiven for wondering what has happened to their stock. The company, alongside key rival FedEx (NYSE: FDX  ) , has long been known for being a play on global growth, but many of the underlying assumptions behind this view have changed in recent years. In short, UPS faces challenges and opportunities that make it a different investment proposition than you might think. It's time to look at the pros and cons of buying stock in UPS.

Source: United Parcel Service.

United Parcel Service faces changes

Recently, I've taken a look at the key fundamentals from UPS' earnings report and conference call, as well as the bullish and bearish cases for the stock. My key argument in this series is that, since 2008, the investment proposition behind buying UPS, and FedEx, has changed relative to previous recoveries. The three reasons are as follows


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Why Johnson Controls Could Fall-Equity Analysis and Research

It always make sense to take a balanced viewpoint in investing, and while there are plenty of positive things happening at Johnson Controls Inc. (NYSE: JCI  ) , there are also some negatives. The three things that investors need to worry about are its reliance on certain customer programs, the effects of weather, and the possibility of an unfavorable long-term trend with car usage. It's time to look a little closer at the bearish case for the stock.


Auto experience customers may disappointBefore getting into the nitty-gritty, readers should note that this article is part of a series. The things that management wants you to know are outlined here, and the bullish case for Johnson Controls is here.


Focusing on the bearish case, investors should start by appreciating that the automotive experience segment, consisting of automotive seating and interiors, has outperformed most expectations this year. Going into the year, management had talked about 1%-2% revenue growth for the full year, but with 9% growth for the first nine months, it's likely to come in far in excess of expectations. Essentially, its customers' car sales have outperformed the marketplace, particularly in Europe. Indeed, CFO Bruce McDonald noted on the latest conference call that "we are able to exceed the market production levels in all three of the main regions."


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Time to Buy Emerson Electric Stock?

Emerson Electric's (NYSE: EMR  )  stock is down 7.6% year to date, as I write. With that said, there are signs the company could finish 2014 on a strong note. The global economy is set for a better second half, and management is actively restructuring the business in order to generate earnings growth. Does the dip in the share price create a buying opportunity for investors?



The story of 2014
Readers looking for some background material on this manufacturing and technology company can read a recap of its last conference call here, along with the bull and bear cases for the stock.

In a nutshell, management has been doing a pretty good job in raising its operating margin to a record level, and the company's cash flow conversion remains strong. However, a combination of geopolitical uncertainty and weaker than expected global growth has slowed customer spending. As such, Emerson's sales growth is trending toward the low end of its full-year target for 3%-5% growth.


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Why Johnson Controls Could Rise

Despite having declined nearly 9% year to date as of this writing, Johnson Controls' (NYSE: JCI  ) stock price has the potential to do much better for the rest of 2014. The three reasons I'll highlight include a specific end-market improvement, company restructuring, and exposure to an overall pickup in the economy. Altogether, it makes a powerful case for why Johnson Controls can rise from here.

Building-efficiency improvement

As I discussed in my previous article, which outlines management's latest quarterly conference call, Johnson Controls is investing in acquisitions in order to expand its exposure to the heating, ventilation, and air conditioning, or HVAC, market via its building-efficiency segment. The company's other two segments are focused on the automotive industry. As such, building efficiency generated 29% of segmental income in the first nine months. However, investors can expect it to contribute more in the future following the $1.6 billion acquisition of HVAC-focused Air Distribution Technology, or ADT, and the announcement of a joint venture with Hitachi.


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Why UPS Stock Could Fall

United Parcel Service (NYSE: UPS  ) investors have watched their stock decline nearly 6% this year. Essentially, a poor performance during the winter (primarily due to the harsh weather and stronger-than-expected peak demand in the holiday season) has been followed by the need for increased investment. As such, the latest results saw the company lowering full-year earnings expectations. All of which raises some questions as to the future growth rate of UPS. Let's take a look at the bearish case for the company and discuss some issues management needs to deal with.

Demand shifting toward lower-yield packages?

As I've discussed in previous articles, UPS is seeing two significant shifts in end demand. As with rival package deliverer FedEx, its customers are shifting toward slower and less expensive ground-based services, while the continued strong growth of e-commerce means UPS is delivering proportionately more lighter-weight packages. Both shifts are not good news for the company's yield per package.


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How to Make Money in the Housing Market

There is no doubt that the housing recovery has slowed this year, but the evidence suggests that it's more of a temporary adjustment than the start of a decline. With that said, investors should be paying attention to which homebuilders are building the most in the marketplace today. Read on to find out why.




Which company is building the most homes these days?


The U.S. homebuilding market remains fragmented, with the top 10 companies contributing around a quarter of all new-home sales in 2013. However, there have been some pretty significant shifts within the top 10 in terms of homes sold. The following table shows market share and the percentage increase in homes sold from 2010-2013. The total increase in homes sold in the period is 33%, so any homebuilder that grew sales below that figure has obviously lost market share, and vice versa.


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Why Emerson Electric Could Fall Further

Industrial equipment manufacturer Emerson Electric's (NYSE: EMR  ) stock price is down more than 8% year to date, and investors must be wondering when the company will join the broader market rally. By management's own admission, sales growth has been lower than hoped for this year. Moreover, there are a number of reasons the company could continue to disappoint investors in the near term. Let's look at three of them.

Emerson Electric needs more spending on energy infrastructure Source: Motley Fool Flickr.

An uncertain geopolitical situationIf there is one thing that has affected the company this year, it's geopolitical concerns. Essentially, sales have grown slower than orders as customers continue to display cautiousness on current spending due to global tensions. Unfortunately, there are no shortages of issues to worry about, including conflicts in the Middle East and Ukraine, the debt default situation in Argentina, and emerging market growth coming in lower than expected. Caution is not an uncommon situation in the industrial equipment sector right now.


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