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Valens Research

Valens Equity Insights and Inflections - 2018 04 18

DOOR currently trades below recent averages relative to UAFRS-based (Uniform) Earnings, with a 13.8x Uniform P/E. At these levels, the market is pricing in expectations for Uniform ROA to fall to 10% levels through 2022, accompanied by 1% Uniform Asset growth going forward. However, analysts have more bullish expectations, projecting Uniform ROA to expand to 15% through 2019, accompanied by 3% Uniform Asset growth. Given positive analyst outlook and management's confidence in their acquisitions, productivity, and sales, market expectations appear too bearish. Should DOOR succeed in their growth strategy and improve profitability from current levels, equity upside would be warranted.

LOW Q4 2017 Embedded Expectations Analysis – Market expectations are for Uniform ROA to expand past cycle-highs, but management has concerns about their sales, initiatives, and supply chain

NOC Q4 2017 Embedded Expectations Analysis – Market expectations are for all-time high Uniform ROA, but management has concerns about margins, income, and sales

ROST Q4 2017 Embedded Expectations Analysis – Market expectations are for record high Uniform ROA, but management has concerns about costs and guidance

AER, AMKR, BAS:DEU, BAYN:DEU, BNS:CAN, CRM, FDX, FOXF, JNJ, NEP, PANW, TSLA, UVV, WBA, XOM
Underlyings
AerCap Holdings NV

Aercap Holdings is an integrated global aviation company engaged in aircraft leasing. Co. acquires aviation assets at attractive prices, lease the assets to suitable lessees, and manage the funding and other lease related costs efficiently. Co. also provides aircraft management services. Co. operates its business on a global basis, providing aircraft to customers in every major geographical region. As of Dec 31 2017, Co. owned 980 aircraft and managed 113 aircraft.

Amkor Technology Inc.

Amkor Technology is a provider of outsourced semiconductor packaging and test services, which include semiconductor wafer bump, wafer probe, wafer back-grind, package design, packaging, system-level and final test and drop shipment services. The company's Advanced Products include flip chip chip scale packages, wafer-level packages and flip chip ball grid array packages, while its Mainstream Products include leadframe packages, substrate-based wirebond packages and micro-electro-mechanical systems packages. The company provides its services to integrated device manufacturers, fabless semiconductor companies and contract foundries.

Bank of Nova Scotia

Scotiabank is a financial services provider in North America, Latin America, the Caribbean and Central America, and parts of Asia. Through its three operating segments: Canadian Banking, International Banking, and Global Banking and Markets, Co. provides a range of advice, products and services, including personal and commercial banking, wealth management and private banking, corporate and investment banking, and capital markets. As of Oct 31 2017, Co. had total assets of C$915,273 million and total deposits of C$625,367 million.

BASF SE

BASF is a chemical company based in Germany. Co. conducts its operations through five reportable segments: Chemicals, which comprises the Petrochemicals, Monomers and Intermediates divisions; Performance Products, which consists of the Dispersions & Pigments, Care Chemicals, Nutrition & Health and Performance Chemicals divisions; Functional Materials & Solutions, which comprises the Catalysts, Construction Chemicals, Coatings and Performance Materials divisions; Agricultural Solutions, which comprises the Crop Protection division; and Oil & Gas, which is composed of the Oil & Gas division.

Bayer AG

Bayer is a life sciences group based in Germany. Co.'s operations are organized along three divisions: Pharmaceuticals (engaged in prescription pharmaceuticals for cardiology and women's healthcare); Consumer Health (engaged in non-prescription products in dermatology, dietary supplement, analgesic, gastrointestinal, allergy, cold and flu, foot care, sun protection and cardiovascular risk prevention categories); and CropScience (engaged in the development of seeds and plant traits; crop protection; and for gardens, the green industry and non-agricultural pest control). Co. also maintains an Animal Health business unit engaged in the development of products for farm and companion animals.

Exxon Mobil Corporation

Exxon Mobil operates or markets products in United States and other countries through its divisions and affiliated companies. The company's business involves exploration for, and production of, crude oil and natural gas and manufacture, trade, transport and sale of crude oil, natural gas, petroleum products, petrochemicals and other products. In United States, the company's development activities are focused on the onshore United States, in the Permian Basin of West Texas and New Mexico and the Bakken oil play in North Dakota. Gas development activities are also focused on the Marcellus Shale of Pennsylvania and West Virginia, the Utica Shale of Ohio and the Haynesville Shale of East Texas and Louisiana.

FedEx Corporation

FedEx provides transportation, e-commerce and business services through companies under the FedEx brand. These companies are included in the following segments: Federal Express Corporation, including TNT Express B.V., is an express transportation company; FedEx Ground Package System, Inc., which is a provider of small-package ground delivery services; FedEx Freight Corporation, which is a provider of less-than-truckload freight services; and FedEx Corporate Services, Inc., which provides sales, marketing, information technology, communications, customer service, technical support, billing and collections services, and certain back-office functions.

Johnson & Johnson

Johnson & Johnson is a holding company engaged in the research and development, manufacture and sale of a range of products in the health care field. The company has three business segments: Consumer, which includes a range of products focused on personal healthcare used in the beauty, over-the-counter pharmaceutical, baby care, oral care, women's health and wound care markets; Pharmaceutical, which is focused on six therapeutic areas: immunology, infectious diseases, neuroscience, oncology, cardiovascular and metabolism and pulmonary hypertension; and Medical Devices, which includes products used in the orthopaedic, surgery, interventional solutions, and eye health fields.

Lowe's Companies Inc.

Lowe's Companies is a home improvement retailer. The company provides home improvement products in lumber and building materials, appliances, seasonal and outdoor living, tools and hardware, fashion fixtures, rough plumbing and electrical, paint, millwork, lawn and garden, flooring, and kitchens categories. The company provides installation services through independent contractors in product categories, including appliances, flooring, kitchens, lumber and building materials, and millwork. The company also provides extended protection plans for various products within the appliances, kitchens, fashion fixtures, millwork, rough plumbing and electrical, seasonal and outdoor living, and tools and hardware categories.

Masonite International Corp.

Masonite International designs, manufactures and distributes interior and exterior doors for the new construction and repair, renovation and remodeling sectors of the residential and non-residential building construction markets. Co. manufactures a line of interior doors, including residential molded, flush, stile and rail, louver and commercial and architectural doors; door components for internal use and sale to other door manufacturers; and exterior residential steel, fiberglass and wood doors and entry systems. Co.'s portfolio of brands include Masonite®, Marshfield®, Premdor®, Mohawk®, Megantic®, Algoma®, Birchwood Best®, Lemieux®, Door-Stop™, Harring Doors™ and National Hickman™ .

NextEra Energy Partners LP

Northrop Grumman Corporation

Northrop Grumman is a security company. The company's segments include: Aerospace Systems, which is engaged in the design, development, integration and production of manned aircraft, autonomous systems, spacecraft, high-energy laser systems, microelectronics and other systems and subsystems; Innovation Systems, which is engaged in the design, development, integration and production of flight, armament and space systems; Mission Systems, which is engaged in end-to-end mission solutions and multifunction systems; and Technology Services, which is engaged in delivering solutions and services in support of mission-critical networks and systems.

Palo Alto Networks Inc.

Palo Alto Networks provides a platform that allows enterprises, service providers, and government entities to secure their organizations. The company's platform uses a traffic classification engine that identifies network traffic by application, user, and content and provides security across the network, endpoint, and cloud. The company's product, subscription, and support offerings include: firewall appliances and software; and Panorama, which is a centralized security management solution for global control of various firewall appliances and software deployed on an end-customer's network as well as in their instances in public or private cloud environments as a virtual appliance or a physical appliance.

Ross Stores Inc.

Ross Stores and its subsidiaries operate two brands of off-price retail apparel and home fashion stores, which are Ross Dress for Less? (Ross) and dd's DISCOUNTS?. Ross provides name brand and designer apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 60% off department and specialty store regular prices every day. dd's DISCOUNTS provides name brand apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 70% off moderate department and discount store regular prices every day. Both of the company's Ross and dd's DISCOUNTS brands target women and men between the ages of 18 and 54.

Salesforce.com inc.

Salesforce.Com is engaged in customer relationship management technology. The company's Customer 360 is an integrated platform that unites sales, service, marketing, commerce, integration, analytics and more to give companies a single, shared view of their customers. Through its platform and other developer tools, the company also enables third parties to develop additional functionality and applications, or apps, that run on its platform, which are sold separately from or in conjunction with the company's service offerings. The company's cloud service offerings include sales cloud, service cloud, marketing and commerce cloud, and salesforce platform and other.

Tesla Inc

Tesla designs, develops, manufactures, sells and leases electric vehicles and energy generation and storage systems, and provides services related to its products. The company operates as two reportable segments: automotive, which includes the design, development, manufacturing, sales, and leasing of electric vehicles as well as sales of automotive regulatory credits; and energy generation and storage, which includes the design, manufacture, installation, sales, and leasing of solar energy generation and energy storage products, services related to such products, and sales of solar energy system incentives.

Universal Corp

Universal is a holding company. Through its subsidiary, the company is engaged in supplying leaf tobacco. The company has the following segments: North America, South America, Africa, Europe, Asia, which are involved in flue-cured and burley leaf tobacco operations for supply to cigarette manufacturers; Dark Air-Cured, which supplies dark air-cured tobacco to manufacturers of cigars, pipe tobacco, and smokeless tobacco products; Oriental, which supplies oriental tobacco to cigarette manufacturers; and Special Services, which provides laboratory services, including physical and chemical product testing, electronic nicotine delivery system and e-liquid testing, and smoke testing for customers.

Walgreens Boots Alliance Inc

Walgreens Boots Alliance is a holding company. Through its subsidiaries, the company is engaged in retail and wholesale pharmacy. The company's operations are organized into three divisions, which are also its reportable segments: Retail Pharmacy USA; Retail Pharmacy International; and Pharmaceutical Wholesale. The Retail Pharmacy USA division has pharmacy-led health and beauty retail offerings. The Retail Pharmacy International division has pharmacy-led health and beauty retail businesses. The Pharmaceutical Wholesale division, which mainly operates under the Alliance Healthcare brand, supplies medicines, other healthcare products and related services to pharmacies, doctors, health centers and hospitals.

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