In this podcast, Motley Fool analysts Jason Moser and Andy Cross discuss investor sentiment as well as:
- Alphabet (GOOG +0.41%) (GOOGL +0.66%) striking an App Store deal with Spotify (SPOT 2.25%).
- Uber (UBER 1.67%) teaming up with New York City taxis.
- Reports that Apple (AAPL +2.08%) is developing a hardware subscription service.
- Darden Restaurants (DRI +0.54%) seeing improvement in its fine-dining segment.
- The latest from Berkshire Hathaway (BRK.A +0.16%) (BRK.B +0.18%), Adobe (ADBE 1.31%), and Nike (NKE 0.61%).
Corporate governance expert Nell Minow analyzes how public companies are doing with their communications related to Russia and why she's unimpressed with how Starbucks' Board of Directors handled the latest CEO change. Then she puts on her film critic hat to offer a preview of the Academy Awards. Jason and Andy discuss Pepsi's latest limited-run flavor and share two stocks on their radar: McCormick and KB Home.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
This video was recorded on March 25, 2022.
Chris Hill: Dearly beloved, we are gathered here today to get through this thing called the stock market. Don't look now, but things may actually be getting better. Motley Fool Money starts now.
MALE_1: Everybody needs money. That's why they call it money.
Chris Hill: From Fool global headquarters, this is Motley Fool Money. It's Motley Fool Money radio show. I'm Chris Hill and I am joined by Motley Fool senior analysts Jason Moser and Andy Cross. Good to see you both.
Jason Moser: Hey.
Andy Cross: Hey, Chris.
Chris Hill: We've got the latest headlines from Wall Street. Nell Minow is our guest and as always, we've got a couple of stocks on our radar. But we begin with the market in general for the second week in a row, the S&P 500 and Nasdaq, we're poised to finish higher. Andy, it seems like the narrative for investors is starting to shift to the positive. If you go back a month, six weeks, a lot of fear out there. Now, part of what we're hearing from members at The Motley Fool, part of what I'm seeing out there in the financial media seems to be a lot more investors taking the attitude of it seems like we've weathered the worst of the storm that we saw earlier in the year. Now we're looking for stocks to buy.
Andy Cross: Chris, I think actually it's the individual investor actually weathered it quite well. If you look at some of the fund-flow data and look at some of the trading activity, individual investors were actually in there and if they weren't buying, they were hanging out there. I think it was mostly institutions that were really jumping the gun and looking to as they often are, trying to time the ins and outs and they got out when the news was really pessimistic around the Russian invasion in Ukraine and some of the inflation numbers. Now with the Federal Reserve's announcement that they are going to increase the interest rates by quarter basis point, not a 50 basis increase that was perhaps feared a little bit. Also, understanding that while we do have some of the variant strains of Omicron creeping out there that, the COVID situation has really, we passed the two-year mark now since the pandemic really started. There's just a little bit more optimism I think you're seeing in the markets and that's reflecting in the stock price. But I think the individual investor out there to credit to all of those who are individual investors. I think mostly we were holding the course and I think there's a lot of institutions that were jumping around and now they're looking at the US market, Chris, and saying, listen, look at global markets. They're really an even more disarray than what's in the US market. We saw valuations come back down in the US market and stocks is the place to be. Finally, Chris, because we know bonds is not really the place to be, although bonds are far less volatile than US stocks. With interest rates increasing the value of those bonds, it's going to be a really tough sled for the rest of the year. I think looking at the US stocks, they look to be the most reasonably valued with the drop this year.
Chris Hill: Let's get to some of the companies that are making news this week. Spotify has reached an agreement with Google that says, an updated version of Spotify's app will allow users to pay Spotify directly for a subscription to big concession from the Google Play Store. The news since shares of Spotify higher and Jason, nice ripple effect as well for companies like Match Group and Bumble.
Jason Moser: Yeah, this really does feel like the big platform operators are starting to maybe try to see around that corner, so to speak, regarding their stranglehold on their respective app stores, and showing a willingness to work together because maybe they see that where things are headed anyway. Developers like Spotify, they have complaints for years, you have Google Play, Apple's App Store, they don't allow direct payments. They require those payments to go through those app stores. They take a hefty processing fee from it all. For the developers, it seems to be all in the name of choice. I'm sure there's probably a little financial incentive there as well, Chris, so let's not just think Spotify is doing out of the goodness of it's heart, but certainly giving consumers more choice. Giving Spotify a little bit more in the way of control over their app experience and data of what their users are actually doing. They've certainly been advocating for this for a long time. We don't really have an idea as far as the commission that it will pay to Google as a part of this test, but they'll clearly be paying something. Again, it's worth noting, this is a test. It's going to roll out slowly. Ultimately though, I think they'll glean enough from it to help this ball keep moving in this direction.
Chris Hill: Do you think this puts pressure on Apple's App Store?
Jason Moser: I think it certainly keeps the conversation going. I think it does. You need just more and more developers to keep on pushing this narrative. Over time, I think that could ultimately have an impact on a company like Apple, but that remains to be seen.
Chris Hill: Uber is a business that was born out of the idea that it's difficult to hail a taxi, which is why heads were being scratched on Thursday when Uber announced it has reached an agreement to list every taxi in New York City on it's app. Andy, is this a smart move or a desperate move? Because I honestly can't tell.
Andy Cross: Chris, I guess if you can't beat them, join them, or maybe partner with them. Actually, Uber has not been shy about their interest in building out more taxi relationships. Uber Taxi exist in 27 countries. They have a goal to get all of the taxis around the globe onto their app at some point. Uber already has 400 million in taxi bookings last year and sees that growth they announcement in the last Investor Day going up to as much as three billion in 2024. Considering New York taxis is the biggest market, certainly in the US have, not here in the world. Partnering with the taxis and putting them onto the app it's a continuing push, I think, to make the Uber app one of those super apps. If you look at what they have already, it's ride and food, vaccine, reservations, Chris, rentals, groceries. A real quest to make that app really one of those super apps. This will help ease some of the driver shortage. Although, Uber did say that New York City drivers are backup to the highest level since the pandemic. There's just this need to be able to partner and look at markets that are really key. New York being one of them and just the supply shortage of drivers overall and the demand to be able to continue to drive their business in a way that is healthy for not just their clients who need. I'm actually excited about this because it puts it all one spot when I'm back in New York as opposed to using the Curb Mobility or the Aero App, you can actually just use the Uber app. Lyft has not announced that they're doing this yet. I think overall it's a pretty good move by Uber, Chris.
Chris Hill: Can we get some universal parking app as well? [LAUGHTER] Because I was up in Boston earlier this week and went to park somewhere and I thought, wait, do I have to download a whole new app just so I can park? I did what I think is the responsible thing. I just parked illegally. [LAUGHTER] This week after six years, Warren Buffett finally found a business he wanted to buy at a price that he liked. Berkshire Hathaway is buying insurance company Alleghany for just over $11 and a half billion. It is an all-cash deal, and Jason Berkshire made it very clear in the announcement. Yes, even though we have all this cash on the balance sheet, we are not overpaying. This is a fair price.
Jason Moser: No, you're right, it is a fair price and we'll get to that in a second. This is, to my mind, is a very safe acquisition that fits very nicely with Berkshire's overall business. It's not one that really lights the world on fire. It's not that elephant gun acquisition, but if you take Buffett at his word, I don't see why we wouldn't, he's acquired a business and a leadership team that he's admired for a while. If you look at the connection, the CEO of Alleghany, Joseph Brandon, actually led General Reinsurance from 2001 to 2008 and was considered a possible Buffett successor at one point. Buffett described him as a longtime friend. It makes sense from that perspective. Alleghany is geared mostly toward reinsurance of all of their premiums written in 2021, 75 percent of that was dedicated to reinsurance, 25 percent to insurance. In regard to the valuation for a company that historically has traded around one time book value or in that range, is getting this company for 1.25 times book value. A little bit of a premium there, certainly a fair price and I'm sure there will be very well as a member of the Berkshire family.
Chris Hill: Any indication of whether they're going to rebrand it under the Berkshire name, because they've done that with some of the businesses in their portfolio. Although, maybe Alleghany has got a strong enough brand that they just keep it on their own.
Jason Moser: My understanding is that they are going to be able to operate as they always have been just under the Berkshire Hathaway umbrella. But you never know, there's a lot of value in that Berkshire brand as well, so maybe that changes.
Chris Hill: Is Apple about to get into a new line of business? We'll discuss that right after the break. Stay right here. You're listening to Motley Fool Money. [MUSIC] Welcome back to Motley Fool Money. Chris Hill here with Jason Moser and Andy Cross. Bloomberg News just reporting that Apple is working on a subscription service that would allow people to buy iPhones and other hardware products for a monthly fee. The project is reportedly still in development and has yet to be confirmed by Apple itself. But Andy for the sake of this conversation, let's go with this. I'm an Apple shareholder. Should I be excited about this?
Andy Cross: Well I think, Chris, if you think about your iPhones, mini Apple devices are probably the most used device we carry around with us or use every day. I mean, far more than probably our cable subscription or our Netflix subscription. So when you think about trying to make the iPhone, which is fairly expensive, more accessible and by the way, it could be iPhone, it could also be other Apple hardware products, and the real determination for Apple to be able to continue to drive their services business, which has been so successful that things like Music, Apple TV Plus, Apple Fitness news, those kind of subscription offerings, it makes sense that Apple is starting to think about this just because of different ways to make more and more people accessible to the iPhone. Chris, I'm thinking it's like maybe an auto leasing or maybe even running your modem or your router from Comcast if you do that. They're still trying to figure out what this looks like. It wouldn't be just a payment plan spread out 24 months, but with a monthly fee for access to the hardware. Considering that iPhone is more than half of Apple's sales, again, to be able to continue to make them more accessible, I think it makes sense. It also would tie it together I guess with your Apple ID, so it'd all be in one spot. You can see it all just like you see all of your other, like if you're AppleCare or Apple One subscriptions. Just the interest to be able to continue to drive their subscription business, which has been a growing part of the Apple ecosystem, is interesting.
Chris Hill: Although presumably they would have to navigate the relationship that they have with the major phone carriers. But maybe they look at that and say, look, we're Apple, we're going to do what we want.
Andy Cross: I think so too, and they've certainly navigated a lot of these areas before as they continue to see ongoing, as Apple continues to expand their business. But for a $3 trillion company with gosh, almost $400 billion in sales they're obviously, a very large gorilla to be able to make a move like this.
Chris Hill: From hardware to software, Adobe's first-quarter profits and revenue came in higher than expected, but shares down a little bit this week. In part because Adobe is expecting a hit to its existing business in Russia and Belarus. Jason, this probably isn't going to be the only company we hear this from.
Jason Moser: No, I would imagine not. I would think geopolitical concerns aside, I mean, to me, Adobe feels like a very easy one to justify owning in today's economy. When you think of everything moving digital and Adobe's capabilities from content to document management, it's just so powerful. It's just such a really strong business, particularly in this volatile environment there. Their earnings calls always remind me of Amazon's earnings releases, and that they just list off this litany of new offerings and services. You can't keep track with everything that they're doing. It's just very impressive. It translates into very strong numbers. Revenue, $4.26 billion. That was up nine percent from a year ago and it's actually 17 percent accounting for an extra week in the quarter a year-ago in currency effects, but ultimately, non-GAAP operating income, just under $2 billion and earnings per share of $3.37. The digital media business continues to just really, as Ron would say, fire on all cylinders. You saw the Creative Cloud and Document Cloud businesses together bring in $3.11 billion in revenue. The Document Cloud side of the business continues to perform. Now $562 million in revenue for the quarter and as you noted, the impact from the war in Ukraine, it's going to be fairly minimal in regard to Adobe's business. It bumps down their annualized recurring revenue by around $87 million for the year. We'll have an expected revenue impact of $75 million for the full-year. In the context of the entire business, it's not anything for investors to be concerned about, but like you said, I think that's going to be a point we're going to continue to see in earnings calls as long as this conflict plays out.
Chris Hill: Nike's third-quarter results were fueled by sales in North America. Shares up a bit this week, even though Nike suspended guidance due to ongoing supply chain issues, Russia's invasion of Ukraine and uncertainty around inflation, Andy.
Andy Cross: Well, Nike celebrates its 50th birthday this May, well I guess I am over 50. I was going to say if I look this good when I was 50, [LAUGHTER] continues to do really well. Revenues were up five percent and up eight percent. Chris, on a currency neutral basis, both that beat estimates. Their EPS beat estimates as well too. Up 87 cents versus 71 cents for the analyst estimates, that was down a little bit from the prior quarter. But overall, the Nike brand continues to thrive in really positive ways. Nike Direct sales were up 15 percent and 17 percent. If you back out, some of the currency effects. The Nike Brand, Digital increased 19 percent or 22 percent if you back out some of those currencies with 33 percent growth in North America. The Nike mobile app, Chris, I find this really interesting, was up 50 percent and is now larger than Nike.com sales on mobile devices. The Nike owned digital is now more than a quarter of Nike total brand sales. The gross margin increased 100 basis points at 46 percent. That was mostly direct, to Nike Direct business. They paid $484 million in dividends, Chris, and bought back $1.2 billion worth of stock. Again, the financial picture of Nike continues to be strong. China continues to be a struggle Chris. It was down again. It's improving, but it was down. Ukraine and Russia, they announced is less than one percent of sales. That's not a huge impact and wasn't a big part of the business. The guidance for the rest of the year sales up to mid-single-digits, gross margins up a little bit. Supply constraints, as you mentioned, continued to be the big challenge as they try to navigate through this, especially over in China. But overall, a really positive estimate beating by their own expectations quarter for Nike.
Chris Hill: Not a great third quarter for Darden Restaurants, the parent company of Olive Garden and Longhorn Steakhouse lowered guidance after profits came in lower-than-expected. Fine dining segment was the lone bright spot. But Jason, that is a small part of their business.
Jason Moser: It's a small part, you are right. It's a bit of a tough start to the year for Darden, but I mean, all things considered, it really wasn't bad quarter. I think it's just really challenging for a company like this with such a heavy focus on dining in. But here's a fun fact for you. On valentine's day, Olive Garden served more than 1 million guests with approximately 35 percent off-premise sales. Even though this is a company that's very focused on that dine-in population, they're still figuring out ways to get it done. It was interesting. The language in the call management noted it was a quarter stark contrast. This was a reference to January and how Omicron hurt traffic there. They saw the trends coming back in February and March. Ultimately sales up 41.3 percent from a year ago to $2.45 billion. That was driven primarily by same-store restaurant sales growth of 38.1 percent. They did open a handful of these stores there, 33 new restaurants. Earnings per share, $1.93. That was up considerably from a year-ago, but basically flat when you compare to 2020. Now, as you mentioned, Olive Garden really is the biggest footprint versus something like a fine dining. Maybe at just under 900 stores with Olive Garden, Longhorn being a relatively distant second, but making up a large portion of the base there as well. But they're dealing with all of the challenges that every restaurant out there is dealing with. Staffing, inflation, supply chain concerns. It's not the most compelling investment idea, but hats off to management for operating in a very difficult environment.
Chris Hill: [MUSIC] Guys, we'll see you later in the show. How are companies doing with their operations in Russia. We'll get a report card from Nell Minow after the break. Stay right here. This is Motley Fool Money. [MUSIC] Welcome back to Motley Fool Money. I'm Chris Hill. By day, Nell Minow is Vice-Chair of ValueEdge Advisors. By night, she is a film critic, so essentially she's batman, and she joins me now. Thanks for being here. [LAUGHTER]
Nell Minow: Thank you. Maybe cat woman. [LAUGHTER]
Chris Hill: There you go. Before we get to the movie industry, I want to get your thoughts on what's happening between Russia and Ukraine. ValueEdge Advisors works with institutional investors to help them engage with the companies and their portfolios and lately, a lot of public companies have had to make decisions about their operations in Russia, how they communicate their decisions to investors, all that thing. What are you seeing? What have you been observing over the past month as these events unfold?
Nell Minow: Well, my go-to on this is the amazing updated daily database put together by Professor Jeffrey Seinfeld at Yale, who has got four categories. Investors know which companies have gotten out completely, which have suspended operations, and which are ignoring it and he's done a great job with that. That in and of itself has put a lot of pressure on companies, I think more effectively even than the investors have. It's tricky though. I think I like what McDonald's did, they are continuing to pay all their employees even though they acted very quickly and shut down their operations there. You want to be careful about the employees. As for the pharma companies, I think it's important for them and some of the other providers of essential services to be very clear with their investors. We're doing humanitarian work, we are cutting down anything that is not in that category. But certainly every company has to respond. If you want to see a bad response, the worst one I've seen so far has come from Korn Ferry just over the last weekend, which was basically kumbaya [LAUGHTER] and I think they said, "We're just going to have a lot of empathy," that's not what shareholders want to hear.
Chris Hill: How likely is it that companies with a global footprint, when this whole situation is resolved, are going to say either we're not going back to Russia or we're going to take our time? I'm wondering both in terms of the Russian economy but also in terms of Russia's attractiveness for companies with global footprints.
Nell Minow: Definitely and certainly McDonald's has got a big footprint there and has been very successful there. That was all the more impressive when they made their announcement. A lot of it depends on how it ends, not when it ends, but how it ends. If it ends with Putin out and a commitment to a new GLOSS and more respect for American companies, then I think you will see companies come back. But anybody who's ever gone into business in Russia or in China, or in many other countries has always known that there was some risk.
Chris Hill: I was thinking of you recently when the news broke about Starbucks, that Kevin Johnson, the CEO, is going to step down in early April. Depending on how you want to interpret what was said, it appears as though the Board of Directors knew about this a year ago and decided not to have someone in place. They decided to bring back Howard Schultz to be interim CEO. It's his third go-round if you're scoring at home and sometime this fall they expect to have a new CEO. As all of that was playing out, what was your reaction?
Nell Minow: Well, to go back to Jeffrey Seinfeld, who is the world's leading expert on CEO succession planning, that is catastrophically bad. Every board has to have two envelopes at all-times. One is, what if something happens tomorrow? What if our CEO gets named to be Secretary of State? What are we going to do? Then the longer-term, what are we looking for for the future? How are we cultivating insiders as possible successors? This board has failed terribly and you just cannot keep going back to the same CEO as your safety net. A very disappointing performance by that board.
Chris Hill: Let's go to the economy awards. The awards are later in the year than normal and every year the studios behind the nominees campaign for the awards. Do you think the additional time helped some performances get more attention?
Nell Minow: I think it did. The studios campaign very hard. They send our gift baskets, they make meet-and-greets available. But overall, I think it's a mistake because there's just awards exhaustion. We now speak of award season. We should to just speak of the Oscars. But now we've got this big buildup with the Golden Globes, the Critic's Choice Awards, the SAG Awards, the DGA, the PGA, and so I think everybody is just tired of it all right now. We're talking about movies that came out three months ago, five months ago, six months ago. I think it is contributed to a lack of interest in the Oscars.
Chris Hill: Although there is some interest in the broadcast this year because some changes have been made in terms of which awards are going to be presented, I'm baffled at the fact that the award show apparently is not going to be streamed anywhere, which seems like a big mistake for a network that is allegedly attempting to bring in younger viewers, many of whom have cut the cord. Based on what you've heard, what are your expectations for the broadcast this year?
Nell Minow: I'm terribly disappointed and I know that the industry is as well. They're cutting out of the broadcast so many of the essential awards that we really only get to understand and see at the Oscars telecast. For Best Editing, we want to see those people who oftentimes those are the most touching acceptance speeches and I think it's a real industry. It's an insult to the industry to cut them out. I hope they will not make that mistake again. I can guarantee we will be hearing jokes about that from Amy Schumer and Wanda Sykes at the beginning of the broadcast.
Chris Hill: Before we get to the three biggest awards, you've voted for movie awards in the past. What has been your approach, because every year it seems like you hear about in a given category sometimes someone's been nominated and they've never won in the past? This is their fifth nomination, that thing.
Nell Minow: We're speaking of Leonardo DiCaprio in The Revenant when he should have won for about four different performances before that?
Chris Hill: Yeah. Is that something that factors into the mindset of a voter like you or do you try and shut out the past and just say "No, I'm tacking this performance against the other performances?"
Nell Minow: Well, the difference between a voter like me and the people who vote for the Oscars is they tend to only look at the movies that are being supported by the studios. Whereas in the critics groups like the ones I vote for, we actually have seen everything. I think we're less susceptible to those concerns. With the Oscars, and we're going to talk about some of the predictions, sometimes they don't give the award for the Best Acting, they give it for the Most Acting. Somebody who loses a lot of weight, gains a lot of weight, or does something very, very big, they will go for that. There's often a lot of sentimentality involved as well. I compare it often to a high school popularity contest. This is the industry voting for their own insiders.
Chris Hill: All right. Let's get to the three biggest awards. As we do every year, you tell me who you think should win and who you think will win. Last year in the Best Actor category, we had a bit of an upset. Many people were expecting Chadwick Boseman to win posthumously. Anthony Hopkins won. This year Will Smith appears to be a heavy favorite for King Richard. Do you think he wins or is there going to be another upset?
Nell Minow: I would love to see him win. First of all, that's going to be a heck of an acceptance speech. The movie King Richard with Labor of Love by Venus and Serena Williams and their sister Aisha about their father, and Will Smith gave a totally committed, beautiful performance. We all know that Will Smith, who's got all energy and charisma, he really tamped that down. He did a great job. I think he should win and I think he will win.
Chris Hill: The Best Actress category is completely stacked. Jessica Chastain, Olivia Colman, Penelope Cruz, Nicole Kidman, Kristen Stewart, this is such a strong group of actresses. Is the award itself up for grabs or is there a favorite?
Nell Minow: I think the favorite looks like from all the other preliminary awards, which are leading indicators, to use your language, is looks like Jessica Chastain and that's a classic example of the Most Acting, not necessarily the Best Acting. Also Jessica Chastain falls into the other category. You just mentioned she's been nominated a lot of times, she certainly had deserved it. This was a passion project for her, she put this movie together. I think she is a very, very good bet. If it were me, I might go with Olivia Colman but she just one recently, so let's spread it around.
Chris Hill: Ten Pictures nominated for Best Picture. It seems, however, like the two strongest contenders are very different films. One is CODA, one is the Power of the Dog. You've got this heartwarming family movie and this picture as Western. Is there a dark horse or do you think it comes down to one of those two?
Nell Minow: I think it does come down to one of those two, and I would've said for sure Power of the Dog, which I did not love, but I would've said that that's my bet, until last weekend when the producers guild picked CODA. That really puts it up at the front again because that's a very good predictor. CODA of the ten films nominated, CODA is the crowd-pleaser. CODA is the one your grandmother will love it, your grandchild will love it, everybody will love CODA. Looking for Troy Kotsur from CODA to make history as the first deaf actor to win an Oscar. But I still think Power of the Dog is a likely win. That's still where I'm betting. If it were up to me, I would go for Belfast, I think.
Chris Hill: Last thing. Please fill in the blank with respect to the academy awards. Don't be surprised if?
Nell Minow: Disney always takes Best Animated. This year it just might go to The Mitchells versus the Machines.
Chris Hill: One of the best reasons to be on Twitter, so you can follow Nell Minow. Its movies, it corporate governance, it's a lot more. Now always great talking to you. Enjoy the broadcast.
Nell Minow: Thank you.
Chris Hill: As always, people on the program may have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool Money. Chris Hill here with Jason Moser and Andy Cross.
Guys, couple of quick things in keeping with the business of movies. We've got a fun episode of The Motley Fool Money Podcasts coming on Saturday, where we take a closer look at the streaming wars, bidder rivalries in the entertainment business, and some of the unexpected business and investing lessons from the big screen. You remember, you can always follow Motley Fool Money wherever you get your podcasts, Apple, Spotify, and please leave us a review, and include a pitch. As I mentioned last week, post a review of the show on Apple. Pitch us a stock you want to talk about, pitch us a topic for the show. We'd love to get ideas. Go ahead and review, and pitch us an idea. Speaking of pitching stocks, I mentioned earlier in the week, I was up in Boston visiting family, I spoke to a class at Boston College, and I also had the chance to meet up with some of the student leaders of the Boston College investment fund. These are students who are helping to manage more than one million dollars of the schools endowment. I got to say guys, I was so impressed with the students who are learning about investing. They're smart, they're curious. Just want to say thank you to Luke and Jack and Anabelle for meeting up over coffee. Go eagles. Jason, I know you've had the chance to speak at your alma mater. It's one of those things that just gives me hope. I walk away [LAUGHTER] from talking with students, and I just feel so much more optimistic about the investing future.
Jason Moser: Oh, I feel like the world is in a way greater hands than when I was in school. There's no question there. It is exciting to see that. I'm sure we all see this. This is why you see this in our very own kids growing up. It's just amazing to see how far things have come along in such a short period of time.
Chris Hill: Last week, we told you about Walmart's launch of limited edition ice cream flavors. This week, Pepsi unveiled, in collaboration with IHOP, Pepsi Maple-syrup cola. [LAUGHTER] Andy, this is not going to be in stores, and it's not going to be sold at IHOP locations, but it's a social media campaign. There'll be two thousand winners, maybe if I were more active on things like Instagram or even at all, active on it [LAUGHTER] I don't even have an Instagram account, maybe I will be doing this, but I don't know. Pepsi keeps doing this. It must be working for them.
Andy Cross: Chris, you had me until you mentioned social media. Because now I probably will not get this. I'm sad to say. But it does go along with what Pepsi is been doing more recently; Pepsi Apple Pie, Cracker Jack flavor. Obviously from a business side, I imagine is very cheap to be able to add these flavors in, and maybe usually their promotional or drive sales, Pepsi's a business that over the long-term, probably grows in the four, five percent revenue lines. Any little thing they can do that drives both revenues and profits, and gets a lot of scale in there, it can be a very profitable move. But in this case, I think it's all branding. I got to say, I like Maple Syrup, so [LAUGHTER] I'd be interested to give it a go, Chris, but it just depends on how sweet it is. I can imagine it being a little too sweet.
Chris Hill: I feel like the Cracker Jack one might be a little bit better, because I can actually imagine eating Cracker Jack and washing down with the Pepsi, but I don't know. Let's go to our man behind the glass, Steve Broido. Before we get to the radar stocks, Steve, earlier we were talking about Darden Restaurants, long time listeners know of your affinity for Olive garden, did you happen to partake in the Valentine's Day promotions that Jason had mentioned?
Steve Broido: I cannot say that I did. I will say this, that the pandemic has been a crushing blow for my relationship with our Olive garden. I have not been as often. I have eaten there a few times, but it's just not the same. I'd love being in that store. The vibe there is really nice. All the servers are great. It's a grand old time. When there's a pandemic flying around, it's a whole lot less fun.
Chris Hill: Let's get to the stocks on our radar. Jason Moser, you're up first, what are you looking at this week?
Jason Moser: Well, hey, let's see, we're talking about flavors. I mean, we've got one of my favorite companies out there, McCormick, ticker MKC. They've got earnings coming up next week on March 29th. We'll get a better idea of what this coming year for them is going to look like. We talked a lot about pricing power lately. Companies that can exercise it. McCormick seems to be able to do that to a degree, they are calling for sales growth at the midpoint of five percent for the coming year. They are going to be exercising some price increases there. That would be the majority of the driver of that growth. But they are witnessing tremendous benefits from the recent acquisitions of Cholula and FONA. They've exceeded all their expectations that they noticed. Their focus for now is to digest no pun intended those deals, but they are always paying attention to new acquisitions. I would not be surprised to see them continue to make acquisitions in order to continue to grow. But guiding for around $3.20 in earnings-per-share for the year, values these shares today at around 30 times full-year estimates. I don't think that's out of balance for a dividend aristocrat with a proven track record.
Chris Hill: Steve, question about McCormick?
Steve Broido: Should they make a huge push to check the expiration date on your spices? Because I bet you if that was an entire marketing movie, check the expiration date, you'd be like, oh, my goodness, I have 68 spice [LAUGHTER] that expired 10 years ago.
Jason Moser: It feels like that could prompt some new sales, and I would like in that. There's something like Netflix clamping down on sharing passwords. But who knows, maybe they're just trying to exercise some goodwill to those consumers at the face of those price hikes that are coming Steve.
Chris Hill: Andy Cross, what are you looking at it this week?
Andy Cross: Chris, the US housing market is one of the most unbalanced spots in just year. I'm looking at KB Home as part of just overall housing at three billion dollar market cap company. Sixty-five year old US Home-builder focuses in the built-to-order homes, not building them before hand. Really ordering them focuses on new home buyers. More than 60 percent of their sales driven from new home buyers. They focus on the West coast, Southwest, Colorado, Texas, Florida, North Carolina. Average selling price about $450,000. At that end, almost all the revenues come from purely home building. Has 10,000 homes in production that was up 46 percent and the backlog valued at 5.7 billion, Chris. But the interesting thing is, you have a stock that's priced at five times earnings, three times this year earnings, now less than one-times book value. The valuation looks exceptionally cheap in housing market that just a little disarray. Yet we have interest rates moving higher. We have concerns about supply constraints and inflation, so will people continue to look to buy new homes as we come out of the pandemic with these costs increasing; home prices and inflation. Something to watch. It's a radar stock for me in the market that looks very cheap valuation, but is that a value trap or not? That's what I'm looking at.
Chris Hill: Steve, question about KB Home?
Steve Broido: Yes or no. Should investors think about real estate as a regional investment? They'd be thinking about real estate regionally as opposed to nationally.
Andy Cross: They can, but if it's a home company like KB Home, not so much, but regional investing from the real estate side, sure, yeah. You can do that.
Chris Hill: What do you want to add to your watch list Steve?
Steve Broido: Algo spices and let's do it.
Chris Hill: Andy Cross, Jason Moser, guys, thanks for being here.
Andy Cross: Thanks Chris.
Chris Hill: That's going to do it for this week's Motley Fool Money radio show. Show's mixed by Steve Broido. I'm Chris Hill. Thanks for listening. We'll see you next time.
