Weekly Wrap: 2 Stocks That Still Look Cheap After Earnings

Jeremy Glaser: A look at GM results from the Chicago Auto Show; are ESPN worries at Disney justified; and Tiffany loses a CEO. This time on the Morningstar Weekly Wrap.

GM reported better than expected results this week, Morningstar's Dave Whiston thinks there's even more room for improvement at GM and thinks that investors should consider the shares today.

Dave Whiston: So GM reported fourth-quarter earnings this week. They're actually quite good, easily beating consensus. They've had four very strong quarters throughout 2016. Very good quality earnings here too with the free cash flow generation.

Unfortunately stock did fall 5%, which is quite frustrating, I know, for a lot of investors. Probably one of the main reasons is that there's certainly fears of peak auto. I think there were some concerns to about Trump's tax policies, and that's still TBD, frankly. Although we did get some information that GM doesn't use quite as much foreign content as maybe some thought. But also there was a lot of increase in expenses for electric vehicles and autonomous vehicles and that's going to be true going forward in 2017.

So the stock did sell off, but remember you've got a dividend now yielding over 4% and there's $6 billion into a $14 billion buyback program. I think for the long-term investor there's still reasons to be very excited about the new GM. I do not think they are done improving themselves and realizing all the economies of scale, that a company that sells 10 million vehicles a year should do.

Glaser: The headline coming out of Disney's earnings was weakness at ESPN, furthering worries about the sports network. But our analyst, Neil Macker, thinks that investors should take a closer look. He sees the timing of the college football playoffs, as well as higher sports costs, as weighing on ESPN in the quarter, but he also points to strong affiliate feed growth of 4% as a sign that paid TV is not completely dead. He sees Disney shares as attractively priced today.

Tiffany's CEO unexpectedly departed this week after trailing peers for some time. Our analyst, however, doesn't see any major changes in strategy coming, but she's concerned amount of executive turnover that there's been recently.

Jelena Sokolva: On Feb. 5 Tiffany announced the immediate departure of its CEO after less than two years in the role. Although the board sides with his strategic direction, they were disappointed by the execution and poor recent financial results. This comes on top of a change in creative leadership earlier this year. We don't expect disruption, as the CEO position will be temporarily filled by the chairman of the board and former longtime CEO.

We acknowledge that Tiffany's growth in the past two years has trailed some of its European peers, however, some of the weakness is explained by currency movements and resulting changes in destination for traveling consumers, which are outside of management control. On top of frequent CFO changes, we still regard high management turnover as somewhat disturbing, and are concerned that the shorting of executives is affecting management ability to focus on the long term. Following the CEO departure we are not adjusting our moat rating or fair value estimate for Tiffany.

Glaser: And in case you missed it this week on Morningstar.com, Christine Benz took a look at what potential changes to the DOL's fiduciary rule could mean for investors.