Family Dollar is Worth a Look for Value Investors

The times they are still a-changin' at Family Dollar Stores. While growth is also slowing at competitors Dollar Tree Stores and Dollar General, and the market fears future competition from Wal-Mart, many of Family Dollar's problems are of its own making.

This is bad news, because no one likes an underperforming company. However, it could also be good news, because it means that Family Dollar could see some upside purely due to internal execution rather than needing to rely on the market.

Family Dollar rings up the changes
The following chart reveals how much the market has fallen out of love with Family Dollar. Over the last year, the company's valuation has fallen relative to Dollar Tree and Dollar General:

 

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What Alcoa's Results Mean to Paccar, Cummins and Ingersoll-Rand

Alcoa's  results and guidance always serve as a useful indicator for what sectors of the industrial economy are going to do well in the coming quarters. With regard to its latest results, the upgrade to its full-year end demand for the North American heavy truck and trailer market is obviously good news for truck maker Paccar   and engine manufacturer Cummins. In addition, Alcoa gave a positive outlook for the U.S. construction market; this should interest shareholders in Ingersoll-Rand. Despite the recent market sell-off, there is some good news out there.

Alcoa updates the market
The following table provides an update on Alcoa's end market guidance for 2014 vs. 2013. The sections in green are where guidance was upgraded from the previous quarter.

 

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Emerson Electric, a Nice Stock for Dividend Hungry Investors

Emerson Electric Co. ( is one of those large-cap industrial stocks whose prospects are always likely to follow the direction of the economy. Of course, this isn't a bad thing, but Foolish investors will wonder if there is a reason to buy the stock rather than one of its peers like General Electric Company, Rockwell Automation  , or Ingersoll-Rand ?

What Emerson Electric Co. offers investors
Given its $47 billion market cap and sprawling set of industrial businesses, the company's fortunes will inevitable rise and fall with the global industrial economy. Having said that, the stock is still attractive for a lot for investors. Emerson Electric is a relatively mature business that has tended to convert around 13.5% of its revenue into operating cash flow over the last three years. Moreover, its management promises to pay back between 50%-60% of cash flow to investors this year, so you can quickly understand the investment proposition Emerson Electric offers.

 

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Alcoa Earnings Analysis

The new earnings season got its symbolic start when Alcoa  released its results after the market closed on Tuesday. As ever, investors will want to know what its outlook says for the global economy. Alcoa management always gives good industry-specific guidance, as the aluminum producer has a privileged viewpoint on early stage order patterns in long-cycle industries. In this article, I will focus on the aerospace and automotive sectors, the strongest parts of the industrial economy over the last year.

Alcoa updates its industry outlook
A graphic depiction of Alcoa's end demand forecast for 2014 versus 2013 reveals much about trends in the global economy. The green coloring refers to areas in which Alcoa raised guidance from its previous quarter.

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RPM International Equity Research

The paintings and coatings sector has notably outperformed the market in recent years, as companies such as PPG Industries, Valspar , and Sherwin-Williams  have all delivered handsome returns to shareholders. RPM International   has done the same, but it has notably underperformed the rest. However, its recent performance has been relatively and absolutely strong in recent months, and despite its hefty valuation, the stock is one of the most interesting industrial plays out there.

Peer group dynamics
As ever with investing, the important thing is to look at the future rather than the past, and this observation carries some weight when looking RPM International. Foolish investors already know about RPM International's growth prospects in 2014, and it's time to update investors on how it's executing. A share-price graph of the company relative to its peers reveals that it's starting to outperform.

 

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Verint Systems Beats Estimates

Investors looking for a hot sector of IT spending should look no further than data analytics. IT companies like IBM   and Oracle   managed to generate growth with their analytics solutions. In addition, there is also a burgeoning opportunity for companies like Verint Systems  and NICE Systems to add analytics solutions to their core customer interaction capture solutions. Verint gave results recently, and there was much to suggest that the company's prospects have a lot further to run in 2014.

Verint Systems tops guidance
Verint and fellow Israeli company NICE Systems are world leaders in developing hardware to capture customer interactions. However, it's not just about product sales; both companies are developing the capability to offer software that analyzes that captured data. The idea is that customers will appreciate the opportunity to buy a total solution from one vendor, rather than a plethora of sellers across multi-platforms. It's a compelling story, at least from the look of Verint's latest results.

 

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ConAgra Foods has Much to do

Investors in food company ConAgra Foods must have breathed a sigh of relief over the company's latest earnings results. They weren't particularly good, but the company has had a series of issues over the past year. In other words, any results that don't indicate any more deterioration will immediately switch investors' focus to how cheap the stock is compared to peers like General Mills and Kraft Foods. Is it now time to see ConAgra as the value play in the sector?

ConAgra's problems
Going into its third-quarter results, ConAgra was reeling from a number of issues, covered in detail in a recent article. Unfortunately, ConAgra had difficulties in all three of its segments (consumer foods, commercial foods, and private brands), while its acquisition of Ralcorp has also disappointed, and the regulatory review process overshadowed the creation of its Ardent Mills joint venture with Cargill and CHS.

 

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Rockwell Automation Equity Research

Most industrial companies tend to say a similar thing with regard to end market conditions in their specific industry or geographic exposure. In other words, when a bellwether like General Electric Company  gives word on its various industry exposures, the commentary from most of its peers like Siemens  tends to follow in step. Interestingly, this wasn't the case with Rockwell Automation Inc. whose first-quarter results and guidance seemed somewhat out of sync with the market. What is going on? Furthermore, what does it mean for Rockwell Automation?

Summarizing Rockwell Automation's first quarter
The key takeaways from its recent earnings report and commentary:

 

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Which is Better Value, Ingersoll-Rand or Johnson Controls?

Anyone who believes the winter weather caused unnatural weakness in U.S. construction, and that activity will subsequently rebound, will be interested in Ingersoll-Rand. Along with Johnson Controls, which has a large building efficiency segment, Ingersoll-Rand has possibly given conservative guidance because of the weather. Is this enough of an argument to make the stock a buy? And what does it mean for Johnson Controls?

Ingersoll-Rand's earnings drivers
The key to answering this question is to appreciate how the company makes its money. Following the spin-off of its commercial and residential security businesses, called Allegion, Ingersoll-Rand's focus is on climate control and industrial solutions, with around 67% of segmental income coming from the former. Overall revenue growth is forecast to come in at 3%-4% for 2014, with the split between segments as follows:

 

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Should Aerospace Investors be Worried by AAR Corp's Results?

The aerospace industry is highly cyclical. It always has been and always will be, which is why Fools need to keep an eye out for any early warning signs of a downturn. Given that aviation services company AAR Corp recently reduced its full year guidance, are conditions are about to worsen for Boeing , and its aviation suppliers?

What happened to AAR Corp?
Essentially, the key takeaway from AAR Corp's results is that its problems in the quarter were more stock specific than emblematic of any kind of trend change in the industry. However, the devil is in the details, and there are a few things for aerospace investors to look out for. AAR Corp is a long-term Boeing supplier, so its commentary on the marketplace matters.

 

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More Trouble for Rackspace

Life just got a bit harder for cloud computing services company Rackspace Hosting. Google  aggressively reduced prices across its range of cloud services recently, while deep-pocketed competitors like Amazon, Microsoft, and Oracle are committed to offering infrastructure as a service, or IaaS, at highly competitive rates. In addition, Cisco Systems is planning to invest heavily in offering IaaS. While much of this is known to investors, it's sometimes easy to lose site of the fundamental reasons why these companies are doing this and why competition is only going to get more intense.

Why companies are investing in IaaSSimply put, it works. The companies that have transitioned to offering their services and applications on a software as a service, or SaaS, basis have seen a transformational improvement in their prospects. The three leading examples of this change are Adobe, Autodesk, and Intuit. Investing Fools already know how and why these companies are outperforming the markets.

 

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A Buying Opportunity with FedEx?

As Albert Einstein might have said, it's all relative isn't it? This thought comes to mind when considering the performance of FedEx  and United Parcel Service  over the winter period. An unusual confluence of events came together to hit both companies over the period, and investors should not be quick to superficially judge their future prospects based on an untypical quarter.

FedEx and UPS take multiple hits
While most attention has been focused on the disruptions caused by the extreme winter weather in the U.S., there were three other factors involved as well.

 

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3 Reasons to buy Danaher Corporation

There is no shortage of stock ideas for investors in what can loosely be called the diversified industrial sector. But not all conglomerates were made equally. For example, in the case of Danaher  , it's very hard to find a direct comparison. Instead, the company competes across a number of sectors with smaller companies like DENTSPLY, Ametek, Sigma-Aldrich Corporation, Agilent Technologies, and Waters  Corporation. The stock is one of the most attractive of the industrial conglomerates and here is why.

3 reasons why Danaher stands out
First, the company has a well-deserved reputation for acquiring smaller businesses and then extracting every last piece of profitability it can out of them. It's been highly rewarding for shareholders (the stock is up threefold in the last 10 years), and it's also left them holding a company containing some pretty diversified businesses. In other words, Danaher has the kind of diversification that can generate growth through the business cycle.

 

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VF Corp Looks the Best Value in the Sportswear Sector

Investors are always encouraged to look at valuation and potential returns, but often ignore risk assessments. In the case of the sports-apparel sector, VF Corp  presents a compelling risk-reward proposition, particularly when compared with Nike , lululemon athletica, and Columbia Sportswear. Why is this so, and what can investors expect from VF in 2014?

Risk matters
A quick look at the relative valuations of the stocks mentioned above reveals that VF is actually the second most expensive of the four.

 

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Why Oracle is Still Good Value

When a technology company misses analyst estimates and disappoints based on its own guidance, the stock usually gets punished severely. However, in the case of Oracle  the market was much more forgiving, with the stock down barely a percentage point on the day. Investors' reaction to the news is telling you a lot of what you need to know about the stock: Oracle remains one of the most attractive investing ideas in technology.

Oracle disappoints, again
First things first, aside from its hardware product sales, it wasn't a great set of results:

 

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Dresser-Rand Equity Research

By now, most investors in Dresser-Rand Group, Inc. , will have realized that the company recently gave disappointing earnings and guidance. While, some of its problems are stock specific, it was also subject to some industry wide issues that will also affect key competitors like General Electric Company. In addition, Dresser Rand's guidance for 2014 is significantly behind the long-term targets set by the management in 2010.  So, why is the company missing its long-term objectives, and what does it mean for the rest of the industry?

Dresser Rand's stock and sector specific problems
Revenue and operating income for 2013 came in at $3 billion and $321 million, respectively, when previous internal guidance was for $3.6 billion and $490 million. In addition, at its investor day in 2010, management had outlined its aim to reach $4 billion in revenue and $700 million in operating income in 2014. Given, that its recent guidance for 2014 is for revenue of $2.9 billion-$3.1 billion, and operating income of $377 million-$396 million, it's clear that growth hasn't quite worked out according to plan.

 

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NCI Building Systems Equity Research

A lot of hopes are being pinned on the non-residential construction market in 2014, and major companies such as Johnson Controls, and Caterpillar Inc. are hoping for broad-based strength in the sector. In this regard, it's fascinating to look at a company like NCI Building Systems   and see what its outlook means for the sector.

Why NCI Building Systems matters
It's interesting to contrast Johnson Controls and Caterpillar, because the former gave a cautious outlook for its heating, ventilation and air conditioning, or HVAC, markets in 2014, while the latter predicted its construction machinery sales would rise 5%. Johnson Controls may be conservative with its guidance, because current conditions are affected by the weather, and because HVAC solutions are relatively late stage in a construction project.In other words demand tends to kick in later in the cycle. However, Caterpillar's construction machinery is likely to have a longer-cycle demand and be utilized more in early stage work (excavation, earth moving, and the like). Perhaps this explains the difference in outlook?

 

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What ConAgra Needs to do to Convince Investors

Investors in ConAgra Foods  must wonder what on earth will come next. The company's update in February outlined a litany of problems that ran though its existing operations, through its acquired businesses, and even to the future formation of a joint venture. Value-seeking investors may ask whether these problems mark the trough of ConAgra's difficulties, and if the stock offers good value.

ConAgra's list of problems
Many of the company's problems don't indicate anything new, rather they show a failure to rectify ongoing issues. For example, in a previous article in July, readers learned of the three big risks associated with the stock. In short, ConAgra struggled to generate sales growth in its consumer-foods division. Moreover, its acquisition of private-label manufacturer Ralcorp produced results that came in below expectations. Finally, it lost a major customer from its Lamb Weston (potato operations) unit within its commercial-foods segment.

Fast forward to the recent February update and the company faces these issues:

 

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Pall Corp Earnings Research

Filtration and separation company Pall Corporation is not often discussed by the investment community, but that doesn't mean that Fools should ignore it. On the contrary, it's one of the most interesting stocks in the industrial sector, as its outlook usually contains a useful read across many industries. In addition, it competes with the units of some giant conglomerates, such as General Electric and 3M Company, as well as smaller companies like Donaldson Company, Inc.   and Entegris, Inc.  , so its commentary is relevant to them as well.

Pall Corporation's recent second-quarter results
The company's sales were evenly split between life sciences and industrial segments in 2013. The two segments provide Pall Corporation with a nice mix of health care stability and cyclical industrial growth, while its razor-and-blade model means that it can generate long-term sales from consumables (87% of its sales in 2013) provided it expands its installed systems sales.

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Is Wal-Mart Taking Aim at the Dollar Stores?

If you had a dollar for every time an analyst speculated over what would happen if Wal-Mart   decided to target a certain market, then you would have enough money to buy a Family Dollar store outright instead of fretting over encroaching competition. The dollar stores do look like they could see Wal-Mart muscling in, so investors looking for another way to play the value segment of retail might consider Ross Stores or TJX Companies  instead.

Wal-Mart targets the dollar stores, or does it?
By now, most investors will be aware of Wal-Mart's recent announcement in which the company states that it intends to double its planned small-store expansion to 270-300 stores, from an initial target of 120-150. Essentially, this is seen as Wal-Mart taking direct aim at the dollar stores, especially given Wal-Mart's undoubted purchasing power and reach.

 

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