Motley Fool Money - Amazon's Wild Growth

Episode Date: April 29, 2016

Amazon reports its most profitable quarter in history. Facebook connects. Apple slips. And Comcast makes a big buy. Plus, Thomson Reuters transportation editor Joe White kicks the tires on driverless cars.     Learn more about your ad choices. Visit megaphone.fm/adchoices

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in the app, which makes it so much easier to stay on track. And you can get unlimited expert help at no extra cost, even on nights and weekends during tax season. Visit turbotax.com to get matched with an expert today, only available with TurboTax full service experts. Everybody needs money. That's why they call it money. The best thing they'll life on, but you can get them to the press. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money Radio show. I'm Chris Hill, and joining me in studio this week from Million Dollar Portfolio. Matt Argusinger from Motley Fool Pro and Options, Jeff Fisher, and from Motley Fool Deep Value, Ron Gross.

Good to see you, as always, gentlemen. Hey, hey, hey, hey. How you doing? Earningsalo rolls on. We will get to the latest results from Wall Street. we will dig into the automotive industry with Joe White from Thompson Reuters. And as always, we'll give you an inside look at the stocks on our radar. But we begin with the retailer that's only getting bigger. Amazon's first quarter revenue up 28 percent, as the company posted its most profitable

quarter ever, Maddie. This was a really big quarter. I don't even know where to begin. But let's start with that revenue number up 28%. I look back. That is the fastest year-over-year growth for Amazon since 2012. So, over four years and a much, much larger company, they're getting their fastest growth rate year over year in a long time.

And if you get into the details, it's even more impressive. Of course, Amazon Web Services is getting all the headlines, deservedly so. Revenue there was up 64%. Operating profits up over 200 percent to 600 million. But there were two things that really stood out to me that aren't getting a lot of press. And that is, you know, if you look at the international side segment for Amazon, sales there were up 24 percent. In just recent quarters, Amazon's really reported no growth in that segment.

And here they are up 24%. And then we talk a lot about Amazon video, all the digital things the company is doing, Amazon Web Services. But if you just look at the, if we get to the meat and potatoes of this business and you look at selling stuff. Selling stuff. Lot of stuff. The electronics and general merchandise is how they break it out.

Normal everyday stuff, up 32% in North America, 31% internationally. And that right there to me is clear evidence that Amazon continues to steal. massive share from domestic retailers. Did they turn off the spending spigot here a bit to juice those earnings? Are they just spending as much as they always have? No, spending didn't drop off that much at all. So I think they're just getting, I mean, Amazon Web Services is higher margin, more cash is dropping to the bottom line there, but it's so impressive. Amazon Web Services is on pace right now to do about $10 billion in revenue in one year.

There are some analysts out there who say, if you just break out this business on its own, It's a $100 billion business. Jeff, it's a $300 billion company. Is Amazon Web Services really worth one-third of this overall company? I get that it's valuable. That just seems a little pricey. Well, it's exciting right now, Chris, because it's growing so rapidly, and it's reportedly a high-margin business. But over time, there will be more competition. The growth rate will, of course, slow. The prices will probably come down. So I wouldn't put an excessive amount of waiting to this business. When I look at Amazon as a whole, I think in the long run, the retail business will be the majority of the value there.

Right. And I would say, with Amazon Web Services, we don't really know to what extent they're going to get pricing power, Jeff, over time, as you said, or how sticky that's really going to be if there's so many competitors getting into that space. But I think it's all to them. For Amazon, it's really about prime. So we can, you know, we assign all these really, really high growth rates or high valuations to Amazon, but really it turns, you know, it comes down to how many primaries the members can they get, because I think that's where the business is the most sticky. When you look at the stock price, it's not at an all-time high, but up about 10 percent

this week. Pretty close, though, Chris. It's closing in on it. How pricey does it look to you right now, Matt? It always looks pricey. But here, if you look, I mean, if you just look at the consensus estimates, five years out, 2020, less than five years out, they're guiding for almost, or the estimates are guiding for almost $30 per share in earnings.

Whether or not Amazon actually delivers that on the bottom line, but if they think that kind of earnings powers there for Amazon. You apply a 30 multiple of that or even a higher multiple of that. It doesn't look that expensive today. There were a lot of numbers in Facebook's first quarter report, and all of them, Jeff, appeared to be up. Revenue, profits, monthly active users. This was another monster quarter for the social network. Share count up as well. Anyway, Chris, like with Amazon, year-over-year growth rates accelerated at Facebook to the highest rate since late 2014. So, you know, they had a really

strong 2015 as well, but they're now growing more quickly than they were last year, at least in this quarter. Margins also went higher. And it still believes that they only have about 12% market share, according to e-marketer, of the total digital marketing ad spend right now, which is about nearly a $200 billion market alphabet, in contrast, has about 30% market share. So 12% market share, and yet they have the most traffic and the most engaged audience. And so they're going to keep getting more and more of that advertising market share. The thing to keep in mind is consumers have really driven everything onto mobile platforms and businesses are well behind. They're still catching up and learning how to monetize all that audience.

You mentioned the share count. Yeah, they also announced a new class of shares, C shares with no voting rights. So just in case anyone... Just in case anyone was wondering whether or not this is Mark Zuckerberg's company, it is. Yeah. Who votes anyway? Well, not to be blasé about it. It's... It makes more sense in this case than it may have with Google or Under Armour in that Mark and his wife, Priscilla, want to give away 99% of their shares over their lifetimes. But as they give away shares year by year, they want to maintain control of the company. And so you can look at this positively or negatively

or be neutral on it. I kind of fall neutral. So you can do it all through. Yeah, you could. So what a universe. All these variations you can take. I view it as neutral. As long as the business is growing, and I agree with the direction they're taking it. I'll be a shareholder. And that's where I can get tricky. If it starts to not go well or people start to not like what he's doing, then you can't get an activist investor coming in. You can't vote him out because he maintains control. So while everything's great, that structure is fine. Yeah, you vote with your feet if it isn't great and you sell. Exactly. Well, it went public four years ago, and today it's the fifth largest public

company in the world. So you're saying it's going well. So far it appears to be going well. Yeah, Chris, I'll add that margins at Facebook are higher than Google's were when it was this size in 2008, and much higher than Google's right now, Alphabet, I should say. And 3 million businesses advertise on Facebook, but there are more than 50 million businesses with an active Facebook page, so much more room to grow there. And like Amazon, the PE is in the mid-30s on estimated earnings a year out. The company's growing much more quickly than that, so the price still looks reasonable.

Apple sold 51 million iPhones in the second quarter, and that was not nearly enough. Shares down 11 percent. Where do I get the bad company? I mean, was it really the best company ever that had a bad week? Was it really that bad or is this an overreaction? They're up against tough comparisons because last year was so strong, but there is no denying that this is the first time Apple reported declining revenue in 13 years. First quarter with declining iPhone sales since they were introduced in 2007.

So there is fear going on about slowing growth, negative growth. China is a big part of that. Carl Icahn has exited his entire position, mostly out of fear of China, I believe. Although he did make comments that he still thought it was a great business and probably undervalued. What a chicken. So he tucked that of both sides. But all those things are true.

And again, I always say we're not cheerleaders, we're analysts. So you have to look at all the good and the bad. Even with these results, they've still put up $11.6 billion of operating cash flow during the quarter and return $10 billion to shareholders via dividends and buybacks. have increased, once again, their buyback program, have increased their dividend rate, so they continue to return so much money to shareholders. The stock's only 10 and a half times earnings. Now, if there are a company that has declining revenue into the future, well, I guess that makes sense. But if the iPhone 7 is strong and then it continue to be an innovative

company, that signals, to me, that says that's an awfully cheap stock. One number though, 233 billion. That's cash. Long. term securities. Now, I know a lot of that's overseas and they're going to pay a hefty tax bill if they bring it back. But I mean, there can't. I mean, I could have said this a month ago and I'd been dead wrong. I just can't believe there's any downside to this business, given their dominant position and given the balance sheet. But, hey, I've been wrong so far. Yeah. Ron really hit it on the head, though, when he said the iPhone 7 has to be a hit,

of course, and then the 8, the rumored 8, which has many advances, supposedly, including virtual reality to some extent. Those both have to do really well. But really, it's the iPhone 7 this fall, it has to do well enough because this next quarter they forecast to be even weaker than the last one with quite a drop in iPhone sales again. One concern I have is Apple's put out so many different phone models lately, which they kind of have to. They have such a giant consumer base. But it does kind of dilute the message of what they're selling. Shares of Comcast up earlier this week after a strong first quarter report, but the stock

gave back those gains and more after the company agreed to buy DreamWorks animation for 3.8 billion. I don't know, Matt. First of all, they got the money, and it seems like a pretty smart bet for them. It might be, but it just, there's a hint of desperation here with this deal, I think. And I think that's what the market's saying. I mean, if you look at $3.8 billion for Dreamworks, that's almost the same that Disney paid, they, Disney paid $4 billion for Marvel, each for Marvel and Lucasfilm. Now, I don't know. Kung Fu Panda versus Star Wars or the Avengers, I don't know, I just feel like the intellectual property with Marvel and Lucasfilm much stronger. So I think

this is a, you know, Comcast's best bet to try to really kind of go after that kind of really bolster to their film slate. To me, it's just a bigger signal about the overall entertainment space. I think we're going to see a lot of consolidation there. Lionsgate for is another one that's kind of been the target of other larger companies. And so there's a big grab, I think, for franchises that have timeless qualities. Kung Fu Panda, Shrek, How to Train Your Dragon. I don't know if those are really ones with timeless qualities, but they're certainly valuable properties. Nice week for DreamWorks shareholders, though. Very nice. Coming up, a reminder that just because you're giving away money doesn't

mean people are going to buy your stock. Stay right here. This is Motley Fool Money. Welcome back to Motley Full Money, Chris Hill here in studio with Matt Argusinger, Jeff Fisher, and Ron Gross. Gilead Sciences increased its quarterly dividend, and that was pretty much the only positive news in its first quarter report. Their revenue was light, Jeff. They're profits were down? How much pressure is there on this company right now? A lot of pressure. Gilead is like the Apple of the biotech industry. It had such a big hit in its hepatitis C drugs just a couple years ago that drove billions of dollars in new revenue. And now that revenue has flattened out, and this quarter it actually declined a bit, just

like the iPhone. So investors are wondering, how do you grow from here? You've done so well, what's next. They had more hepatitis C patients this past quarter, and yet revenue from the drug went down because there's more competition and they're giving price concessions, discounts. They also had, though, a positive note, a really good thing, of course. More government buying of hepatitis C drug, veterans affairs treating veterans. So it's good. 700,000 people approximately have been cured of hepatitis C in this country alone, thanks to Gilead's drugs. And they maintain 90-ish percent market share across most markets, but they are cutting prices to maintain that share, and that hit the bottom line. I think the stock's sell-off,

which was big on Friday, is overdone. Shares look really cheap, seven, eight times earnings, especially because management said they stand by their guidance for the full year that they gave last quarter. They did not lower guidance despite a kind of soft quarter. LinkedIn's first quarter profits came in higher than expected. The company also raised guidance for the full fiscal year. Normally, that's what we like to see, Rod. There really wasn't a big reaction with the stock, though? They revised the guidance upwards less than people thought they would based on the strength of this quarter, which indicates perhaps some slowing growth later on in the year. But they did put up a good quarter, so you got to give it to them

35 percent sales growth and a 39 percent growth in EBITDA. Now, the stock has been decimated. It's down 50 percent over the last year or so. They needed to put up some exciting numbers. They stand 433 million members at last count. That's good. They're big. biggest business unit, the Talent Solutions Division was up 41%. So they did put up a nice quarter and they should be applauded for it. When you look at the stock, we're around 40 times 2016 guidance, and that's if you don't count stock compensation expense as an expense, which I think you should. Once you factor that in, then valuation really goes out the door and there's really even no way to think about it unless you just believe in the future and

believe that they'll continue to put up strong growth. So this was a quarterly report that they need to repeat in three months and then three months after that. Yes, but based on that guidance going forward, I think they signal to the market that it's not going to be as strong as this quarter. Chipotle reported its first quarterly loss ever as same store sales fell nearly 30%. I mean, I guess that's to be expected, Maddie. We knew it was going to be an ugly quarter.

That 30 percent number, it's bad. It's not as bad as the number. might suggest. If you look at transactions, so essentially people coming in and actually getting food, I mean, that was down 21%. So it's still bad, but obviously much better than the 30% number because a lot of people, including me, are using those free coupons to get free burritos and tacos. The silver lining, April is showing a lot of improvement. Coms so far this month are down 20%, which is a big improvement from the down 36% we saw in January. So hopefully that trend continues. The real story here, though, is if you look at the food and labor costs,

as a percentage of sales, pretty much the highest they've ever been, much higher, obviously, with all the new safety procedures they're putting in and training employees to handle the food differently. The question is, do those lower margins stick around? Can they get some of those expenses lowered over time and get back closer to historical levels? That is the big question to me. So you really want to watch Chipotle's margins. I expect this time next year we'll be talking about pretty good comps. Obviously, the comparisons will be a lot easier. Traffic will be back, But how profitable is every store now going forward? That's the big question.

You know what another restaurant company has done to make their stores more profitable all day breakfast? And I'm wondering if Chipotle needs to look at what McDonald's is doing, which seems in some ways absurd to suggest, given that for years people are like, oh, McDonald's should try and be more like Chipotle. I don't know. I look at the success they're having. And I think, why aren't they serving breakfast at Chipotle?

I love a good breakfast burrito like anyone else. Yes. The question is, it must be, to me, it must be an operational thing. They just, adding that tweak to the menu, whether they do it all day or at certain periods in the morning, is probably something that's going to add a lot of costs and they haven't figured out a smart way to do it. McDonald's is the company I would point to have hope for Chipotle again, because if McDonald's can turn it around to become a vibrant brand or at least business again,

then certainly Chipotle can, I would think. Last question, Maddie. Any color from the management regarding the other brand? in the Chipotle portfolio in terms of expanding shophouse, pizzerilio, Cali. Any plans to speed that up? Very little. They just keep saying these are sort of the aspirational new big franchises for us and growth is slow. We're being very experimental with new markets, but not obviously very nascent still. Since Chipotle has a black eye right now, they could just take down those signs and switch them over to a different store. Make the meatcha pizza place.

I'm not a lawyer, but that sounds illegal. First quarter of profits for Panera bread up 26%. The company also raised guidance. This is kind of like LinkedIn. This is a good quarter. They're raising like LinkedIn. But yet so different. Well, just in terms of like the basic results, the raising of guidance. That's like comparing iPhones to have C drugs, which I did successfully, I think. And yet no love for the stock. What's going on? No. Well, the stock has had a lot of love, though, Chris, lately in the past year or so.

done pretty well, and the past five years, too. The past three years have been a little rocky because in 2014, they were going through some troubles, and they announced Panera 2.0 almost exactly two years ago to the day. The Mosh Pit comment from CEO Longshake. That's one we'll be talking about indefinitely, I think. So 2.0 to improve the throughput of customers, to go digital, to amp up their catering services and their dining options. And it's really working. So same store sales were up strongly. Revenue is growing again. Earnings per share grew strong double digits.

And they believe they're setting up a business that will be able to deliver these higher-than-average earnings per share growth numbers for a long time to come. They've only turned about 200, I'm sorry, 400 of their 900 or so locations into Panera 2.0 so far. So plenty of room to keep improving. I don't know, Maddie. Based on the ones that we've seen close to our office, they look pretty promising. Totally, the experience of the Panera now at these stores is much better than it has been in the past. It's easy. It's seamless. Great. The rapid pickup is just priceless.

It is. It's great. Let's bring in our man, Steve Brodo, in from the other side of the glass. Steve, it's no Olive Garden, of course. But have you tried out the Panera 2.0 across the street from our office? I have. I did not realize that eating was a digital experience, but it now is for me. I'm embracing it. But the ordering process, the fact that you can just order on your laptop, walk over, pick it up, not have to interact with him?

I'm going to tell you. I still go over there and I just pay with a credit card. Do you? I do. It's just a lot. It's just go across the street that people in line, I just, I'm just there and I buy what I eat them. You like the human touch? I do. You're missing out on, do you want a cookie? Would you like a beverage? True. You know what? Sometimes Steve wants a cookie and he deserves it. I love, I feel like I'm ripping the place off when I just walk in there, pick up my bag of food and walk out. I have to look around, make sure it's... I feel great when I do that. I don't know. All right, guys, we'll see you later in the show. Up next, we're heading to the Motor City to talk to Joe White.

This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. A lot going on in the automotive industry and here to help us make sense of it all is Joe White, transportation editor for Thompson Reuters. He joins me now from Detroit. Joe, thanks for being here. Sure.

Last time we talked, it was in the wake of the Volkswagen emissions scandal, and I wanted to bring listeners up to speed on that. At the time, they had set aside around $7 billion to, to deal with the damages. They have now upped that to around $17 billion. And in the annual report, Volkswagen said it could face further significant financial liabilities and that they may need to sell some assets. It's the biggest automaker in the world.

In concrete terms, what do you think that looks like if they start selling assets? Well, that's what's not clear. I mean, they did say that. And then again, they said, well, they kind of list a whole bunch of things that aren't going to be for sale, such as their various of their brands. It could be that they have other assets to sell, be in real estate or supposedly, truck brands, so the commercial truck brands that they have, Mon and Skania, it's just not clear what they're going to do.

But $18 billion, roughly is what they had to set aside. And it's not all clear that that's the end of it. and they have to keep their options open. This is going to be, it's a huge financial drag, even for a company's biggest Volkswagen, and they're going to have to dig deep, and they're going to have to be deep to deal with this, and not just one time, but probably many times

because they have problems elsewhere, including specifically in Europe, where there have millions of cars that didn't comply with the local regulations there, and they're going to have to deal with that problem. I don't know, to what extent, if any, the automakers in Detroit are engaging in Schadenfreude. The people that you talk to, are they quietly gleeful about this, or are they just thinking, you know what, there, but for the grace

of God, go I? A little bit more, I would say a little bit more at the latter, but for the grace of God go I mean, first of all, I mean, first of all, most close-suggester rivals are, you know, have said that they didn't engage in this kind of behavior. But then again, in the last few days, particularly in Europe, authorities over there have said, well, wait a minute, a number of companies have vehicles that, when you test them in the field, emit much more than allowed under our rules, and much more than they admitted when they were up on the test bench. Daimler or Mercedes-Benz has admitted has said that the Justice Department in the United States is looking into whether its vehicles don't comply with U.S. laws, its diesel vehicles.

So to the extent that, sure, I think there is some Schadenfreude, but really what I think the wiser response to the Volkswagen problem is there but for the grace of God go we, and what's the future? Because if regulators are no longer going to let car companies have a pass on these emission standards, but instead more rigorously enforce the emission standards, that means everybody's going to have to tighten up and tightening up in this sheer cost money. So we'll just have to see how that plays out and how the companies respond to that and whether there's certain kinds of vehicles

such as diesel vehicles, diesel SUVs and diesel cars can survive in the United States. All right, let's move away from emissions and that'll take us to Tesla Motors, which recently unveiled the Model 3. What's been the reaction in Detroit to Tesla's attempt to move downstream to a less expensive vehicle? Well, first of all, it's not going to be,

the Model 3 is not going to be an inexpensive vehicle, and Tesla has made that fairly clear that this is a vehicle that's likely, it's got a starting price of around $35,000. It's likely to sell for more like $40,000 to maybe even $50,000. That makes it a competitor is something like a BMW 3 series or an out of for a Cadillac ATS or CTS. That said, the enthusiasm that's been shown for the Model 3, hundreds of thousands, I think we're up close to 400,000 now reservations,

according to Tesla, have been taken for the Model 3. That's a lot of enthusiasm, and I think that all the Detroit companies are going to need to look at their electric vehicle strategies and ask the question, is that what we ought to be as well, bringing out a vehicle that can go 200 plus miles on a charge, which the Chevrolet bolt, for instance, is supposed to be able to do, but which also looks like a near luxury or an entry-level luxury car, which the bolt does not. The bolt looks like a very practical kind of city car. I think Elon Musk has proven beyond reasonable doubt that if you want to sell an electric car, you need to make the thing look hot and offering practicals or pod cars

and city cars like a BMW I3 doesn't do it. You just wrote something recently entitled how Google is shaping the rules of the driverless road. And we've talked before about Google's technology, but it sounds like they're doing a decent amount of good old-fashioned political lobbying as well. Well, yeah. And in fact, yes, we did.

We did do that at Reuters. We had a big report by several of my colleagues on that. What's interesting is that earlier this week, Google and several other companies announced that they are basically forming a lobbying group to advocate, among other things, for federal standards as opposed to state-by-state standards to govern autonomous cars. So, yeah, it's interesting to see Google and other companies really start to step up the pace, not just a technology development. but of trying to set the rules of the road. And you have to have rules so you can design the cars and design the software and the system and know what you have to do.

So it seems to me pretty clear that the car companies, Ford, Daimler, Audi, Volkswagen Audi, other companies, General Motors, are all moving into a phase where the questions aren't, can we do this? the questions are what standards do we have to meet in order to market services or market vehicles that depend on cars that can drive themselves? And that's, we're in a new world now. And what Google's been doing just kind of brings that very much to light. What should we be looking

for in terms of significant events or almost markers of a sort to know that autonomous cars are about to go mainstream. Is it legislation from the federal government? Is it that they start showing up on the lot? Well, I think before you see fully autonomous cars being sold on lots, my guess, and this is a guess that I've formed from talking to people about possibilities. The first thing is the federal government, for sure, and state governments perhaps as well,

we're going to have to come up with a clear set of rules to govern a lot of different variables, including what kinds of redundant or fail-safe systems do the cars need to have. For instance, Google has suggested pretty clearly that if it was their preferences, an autonomous car would have no steering wheel. Well, is that going to be okay or not? I think Google would like to know the answer. who gets sued if an autonomous car hits something, I think there's going to be a desire by the industry

to have a clear guidelines for the answer to that question. Once that's in place, and that might take a little while, but I think the work on that is underway, then the question will be, do autonomous vehicles first appear, not as the car that you go down and buy on the lot, but as a service that you access

when you go to, say, Mountview, California or Austin, Texas, or Ann Arbor, Michigan. You can, and there's a lot of discussion around offering fleets of autonomous cars within kind of defined areas. It can be easily mapped and basically offered us a service replacing, say, a taxi cab. And if I had to bet $20, I would go with that bet. We'll see them that way first. There's a fleet that the car companies can control and monitor and watch.

and then who knows where it goes from there. Knowing what you know about autonomous cars, how safe would you feel getting in one right now? It's funny. I was thinking about that just yesterday because I took a very, very long drive from Detroit to New York City, and I've done that drive a lot.

And I thought to myself, because, you know, a lot of time to think, I thought to myself, how comfortable would I be going 70, 75 miles an hour on a freeway in a car with my hands off the wheel. Would I be comfortable enough to sleep? Would I be comfortable enough to take my eyes off the road for a long period of time? Would that be disorienting to me? Would I get motion sickness or whatever?

Because I'm not, I'm just disconnected from the vehicle and yet traveling very rapidly over open road. And I've got to tell you, I'm not sure. I couldn't answer that question easily. I'm not sure how ready I am for that experience. Maybe my kids are ready for it, but I'm not sure how ready I am just physically and emotionally for that experience of zipping along a highway without actually being in control.

I think it's going to take a little more work than maybe some people think. You touched on the car-sharing industry, and I want to ask you about that because you've got Zipcar, certainly you've got taxi cabs, you've got Uber, and now BMW launching a car sharing service in Seattle. How serious is BMW about this? I think all the major car companies are serious about it, and they have a good reason to be serious about it.

Because as you look at big, big cities in San Francisco certainly qualifies one. Beijing and Shanghai absolutely would qualify. the possibility that either by because consumers want it or because government regulators demand it, that access to center cities in personal cars will be limited is high. There's a high possibility of that. I mean, it's already happening to some European cities and elsewhere. So if you're going to participate in the business of giving people rides and then moving on to the next ride,

you have to start now. In fact, you could probably argue that car companies are late because obviously Uber and Lyft are already there. But the chance that giving rides and offering ride sharing will be a very big business, maybe even bigger than someday than selling cars in transactions, traditional transactions, is pretty high. And I think the car companies are realizing they need to get into this game. They need to hedge their bets. We need to understand the business and see how they fit in.

All right, last question, then I'll let you go. You mentioned driving from Detroit to New York City. What are you driving these days? I'm driving a 2014 Ford Escape. Nothing very exotic. It suited my needs, and I'll tell you, I mean, just quickly I'll say that there's a reason why, at least in the United States, sport utility vehicles, particularly compact sport utility vehicles like that one, are so popular. They're kind of Swiss Army knives.

You know, if you go to Home Depot, you carry stuff around, you go camping the way, we do sometimes. Boy, it's kind of nice having that space, but you don't need it in a giant package. And a compact SUV will basically do the job for a lot of people. And there's a reason why that segment is booming in sales. And there you have it. They're super practical and flexible and be just about every need.

He's the transportation editor for Thompson Reuters. You can read him online. Follow him on Twitter. Joe White. Thank you so much for being here. Anytime, thank you. Coming up next, we'll give me an insight. said, look at the stocks on our radar. This is Motley Fool Money.

I need the dollar, dollar. That's what I need. 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 yourself stocks based solely on what you hear. Welcome back to Motley Fool Money. I'm Chris Hill, joined in studio once again by Matt Argusinger, Jeff Fisher, and Ron Gross. We've got a little bit of time before we get to the stocks on our radar. So let's hit one more earning story. Coaches in the middle of a turnaround. Looks like it's going pretty well, Ron. Third quarter reports showed profit growth for the first time in three years.

Are you telling me, Coach, had sales increase of 13 percent excluding currency? How about that? Really? You're right. Turn around continues. Redivating stores, improving the brand, refreshing designs. North America, which has been a disaster, seems to have stabilized. International continues to be the bright spot. EPS, earnings per share up 25 percent, includes the Stewart-Whiteman acquisition. which helps. But still, things definitely seem to be turning. They're going to try to cut another $65 to $80 million of cost to get their operating margins up to 20 percent, currently

stand at 13 percent. So that's a pretty lofty goal. If I was thinking about this stock, I'm not sure I'd give them credit for that entire move, but you'll probably will see some widening margins. 12 times EBITDA right now. If you believe the turnaround continues, probably not a terrible entry point. For me, I would continue to watch. Any sense of how they're going to cut those costs? Is it closing stores? Cuting jobs? It's staffing to a large extent. Good turnaround, but tough or much easier comparisons, yes? Absolutely. So that'll help Chipotle next year, too. So if your company's not doing well, just remember, there's always next year.

It's always a bright line. Brito's and handbags. Another app comparison. A couple of housekeeping notes before we get to the stocks on our radar. I'd like to welcome a brand-new station, Knews, 107.3 FM in Reno, Nevada. This is our first station in Nevada. Oh, no kidding. Nice. They're going to have an NFL team maybe next year. There you go.

All the more reason to hit the road. Also, if you're interested in past episodes of Motley Fool Money or any of our shows here at the Motley Fool, check out our brand spanking new podcast center. Go to Podcast.fool.com. Any of our podcasts, including a recent episode of Motley Fool Answers, one of our weekly podcast hosted by Alison Southwick and Robert Brokamp. The guest star of that episode, one Steve Broido. Steve, what hell.

There we go. I mean, for us, you're the man behind the glass, but on a recent episode of Motley Fool answers, you're here in the studio. How was it? It was weird. I don't know how you guys do it. It's so quiet in there and peaceful and calm and there's nothing blinking. It's great. All right. Let's get to the stocks on our radar. And Steve will hit you with a question. Ron Gross, you're up first. What are you looking at? All right, Steve. I got Amco, Pittsburgh, ticker symbol AP, a little tiny company,

228 million market cap. They make forged, hardened steel rolls. I know you know what that is. So let me explain. They're large rolling pins that are used to form steel into different shapes. The stock's up 83 percent this year. We hold it in the deep value portfolio, but we've actually had it on hold because the steel business is a mess right now. So the new CEO is diversifying through acquisition, cutting costs, trying to turn this business. If he continues to do it successfully, stocks is cheap from here. But it's by no means a guarantee. That's why we've had it on hold, I'm taking another luck to see if we want to increase our position after the nice turnaround so far. Steve, question about Amco Pittsburgh?

How would an investor like me find a company, like even just find this company? Where would I go to even learn about this? Is it a search? Am I searching for numbers? What am I looking for? You would probably be searching for small, we call the microcap companies, companies under 500 million, plenty of different ways to search for companies, screening tools out there. And these are often companies that are just underfollowed, unloved. And some of the companies that are just underfollowed, Sometimes, if you're careful, you can find a bargain. Or you could subscribe to a mountain full service.

Oh, there we go. What a night think of that? Matt Argusinger, what are you looking at? Going with a company that's on our watch list in a million dollar portfolio. It's called Illumina, ticker I-L-M-N. Leads the market for genomic sequencing machines, which are vital for biotech companies, cancer research, large hospitals. It's got a very compelling razor, razor-blade business model.

Stocks down about 40 percent from its high. It really is a dominant in its markets. It's a company we're taking a very close look at. I think it's a great way to play biotex without actually investing in biotex. Steve, question about Illumina? Will genomic sequencing cure cancer in the next 50 years? In the next 50? Absolutely will. I think that could happen in 10 years the way the technology's improving. Jeff Fisher, what are you looking at? Well, I was going to go with Cabellas because Bass, it appears that Bass Pro Shops is trying

to buy them out. I keep trying to talk about companies that are possibly being acquired here. I just got a text from my brother that my sister-in-law is in labor. So I'm going to do an about face in honor of that. And I'll go with Carter's, ticker is CRI. Carter, of course, makes clothing apparel for babies and young children in the U.S. It's U.S.-based-only. And it's been a great stock the past five years and longer. It's a Motley Fool recommendation as well.

What size company is that? Sorry, Steve. It's a $5 billion market value. Wow. Steve, question about Carter's? the always on sale thing, I've bought Stop at Carter's for my kids, it seems like there's always this great sale going on. Does that help them or hurt them? It appears to be helping. You're shopping there. So, I mean, it's... Good point. I am definitely shopping there because of the

sales. Isn't everything always on sale now, everywhere? A coupon or a discount or... Unless we're talking about Tiffany's, which really has just made a lot of hay out of the... Nope, we're never going down market. I find it interesting that Carter's is a standalone company. To me, it sounds like a brand that would be part of a larger consumer brand. Like a steel company? Yeah, like Amco Pittsburgh, for example. That could make sense, Ron. Carter's and Ashgosh, both good brands that could be rolled into some larger apparel

company. You heard it here first. There you go. Steve, three very different businesses. Aluminah, Carters, Amco, Pittsburgh. Any one of those three you feel like adding to your watch list? I'd like to look at Aluminah. That sounds very interesting to me.

There you go, Steve O. Fixed. Really? All the money you're, I was going to say, all the money you're spending at Carter. They are growing. Cancer. I mean, cancer or Steve's kids, cancer? All right. Ron Gross, Matt Argusinger, Jeff Fisher, guys. Thanks so much for being here. Thanks, gross. Thank you to Joe White from Thompson Reuters, our guest this week. Go to podcast.com to check out past episodes of Motleyful Money. Our engineer is Steve Reuters. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.