Apple (AAPL): AAPL reported inline results for the company’s 2Q25.  Management noted little impact from tariffs, which is no surprise given the bulk of the tariff challenges emanate from the April 2^nd announcement.  In 2Q25, revenue grew 5%, operating income grew 6%, and EPS grew 8%.  These modest growth rates are where AAPL sits now given its massive size and large market share.  The company has not grown revenue at double digits since the end of 2021.  However, growth has returned after a stretch of four in five quarters from the end of 2022 through early 2024 where revenues fell on a year-over-year basis.  Growth is currently being driven mostly by the company’s services business.  The company continues to sell new services to the massive installed base of global iPhone users at very high profit margins.  Growth in hardware products is modest with iPhones awaiting an upgrade cycle for an increasingly old installed base.  The hope for lift from Apple Intelligence appears delayed as the company is not satisfied with the quality of the service.  AAPL faces challenges from regulation, court cases, and tariffs.  Court cases could slow the growth in fees from the App Store and end the huge payments Google makes for the default search position in Safari.  Tariffs are beginning to bite in the current quarter.  Management noted a cost of about $900 million based on current tariffs.  This is equal to about a nickel per share or 3% of EPS.  On the conference call, management spoke to the likelihood that tariff costs are likely to head higher.  The company was not specific on what steps it was taking to mitigate higher costs, including possibly raising prices.  Hardware gross margins were down from a year ago and forecast to be down again in 3Q25.  Services margins rose to records, helping overall margins hit guidance.  On the demand side, iPhone, iPad, and Mac grew in 2Q25 and are forecast to grow 3-4% in the June quarter.  No sign of softer consumer demand or buying ahead of tariffs so far.  The concerns we have outlined caused AAPL shares to drop by about 4% after earnings were released.  However, the shares remain up about 15% from the lows immediately following the Liberation Day tariffs.  Overall, we think AAPL’s best days are in the rear-view mirror.  However, the stock still has a lot of positive attributes due to the powerful cash flow profile.  The shares profile looks a lot like a consumer staple such as Coca Cola or Procter and Gamble but with a stronger competitive position and more long-term growth upside.  Staples companies trade at premium valuations near where AAPL trades today.  We plan to hold the shares and risk downside volatility from tariffs and court rulings.  We may reduce overweight positions, however.

Disney (DIS): DIS reported another strong quarter and raised guidance for 2025.  Since Bob Iger returned to DIS at the end of 2022, the company has mostly reported good results.  The trend has been more pronounced since Hugh Johnston came aboard as CFO a year later.  While a portion of the improved results is due to improved communication of conservative expectations, we think DIS is performing better on a fundamental level.  Iger has also outlined clear strategic priorities for each business.  The stock has struggled despite what we see as improved results.  Even after rebounding to $105 from $90 after the last earnings, DIS trades at about the same price as when Iger returned.  The company has faced a lot of secular challenges as consumption of movies and TV has changed.  The theme parks also have had to navigate a tricky environment related to macroeconomic factors and competition.  The latest report is the second consecutive quarter where each business segment – theme parks, film and TV studio and streaming, and linear TV networks – each beat estimates.  The company raised its 2025 outlook materially, with EPS now forecast at $5.75 per share, up about 10% from the prior forecast.  Investor confidence improved further when DIS noted that the theme park business was holding up well, with bookings for the summer and fall positive.  Theme parks were guided to the top end of the 6-8% forecast.  With Comcast opening a very well received brand new theme park in Orlando, there has been concern that Disneyworld would suffer.  Theme parks represent half of the company’s operating income and more than half of the stock’s enterprise value.  Northlake has been patient with DIS as we still see the company as a leading American blue chip with growth prospects and brand value.  We think the recent string of positive earnings surprises should allow the P-E multiple to expand from the current 18X back to a premium to the market in the low 20s.  This leaves substantial additional upside in the shares, especially looking ahead to 2026 when EPS could approach $7.

Nexstar Media Group (NXST): NXST reported in-line results in a challenging quarter.  Management does not update guidance during the year but indicated that everything is on track with the outlook they offered three months ago.  This is impressive given the loss of political advertising this year and the sensitivity of advertising to macroeconomic conditions that have slowed due to tariff implementation and uncertainty.  On the conference call, management took time to outline the modest sensitivity that NXST has to tariffs.  Over half of revenue comes from payments from cable, satellite, and streaming services that carry NXST’s local broadcast TV affiliates.  Most of the advertising the company carries relates to local services like hospitals, lawyers, and casinos that are not directly impacted by tariffs.  Another chunk of advertising comes from the websites each station maintains.  We noticed an interesting wrinkle when the conference call began with an overview of the company from CEO Perry Sook.  Usually, Mr. Sook comments on recent trends in the business.  We believe that due to deregulation efforts coming from the new FCC there is growing interest in local broadcasting stocks.  NXST is the dominant player with the best track record, the best management, and the best balance sheet.  With deregulation of the industry coming later this year, NXST has an opportunity to enhance shareholder value through accretive acquisitions to expand the company’s reach nationally and increase its depth locally.  The company’s M&A track record is superb.  We have been happy to see NXST use its significant free cash flow to buy back stock, increase dividends, and keep debt levels low.  Given secular concerns about the long-term outlook for local TV, this capital allocation policy makes sense.  Thankfully, management noted it would not make acquisitions unless the return exceeded the return earned by buying its own stock.  We take this to create a hurdle rate north of 20% for acquisitions, a level that suggests a high degree of discipline will be used in evaluating deals.  Deregulation of local TV is overdue.  The government has viewed local TV as a distinct market, limiting options for local TV companies to compete against national and global media companies and technology platforms.  Given the collapse of the newspaper and radio industries, investors have concern about the terminal value of local TV.  When the FCC deregulates the business, terminal value concerns should decline and stock valuations should expand, especially for the undisputed industry leader. We could see the stock moving above all-time highs over $200 reached in 2023.

Sony (SONY): SONY reported upside vs. consensus estimates for the company’s 4Q24.  The upside was centered in the company’s entertainment businesses including video games, music, and film and TV production.  Video games had the most upside even though sales of PlayStation consoles were below expectations.  Video game software sales drove the beat.  This is particularly important to the SONY investment thesis because software has higher margins.  Furthermore, better-than-expected software sales when console sales fell short of target suggests that management’s focus on engagement and the PlayStation network is paying off.  More evidence of the shift came from video game segment 2025 guidance which exceeded street estimates even after the release of blockbuster title GTA6 was pushed to the company’s 2026 fiscal year.  In the company’s other operating segments there are no material surprises.  Guidance for 2026 profits at least matches analyst estimates after adding back management’s projection of tariff costs and foreign currency.  Tarriff costs are based on 145% China level rather than recent level of 30%.  Our SONY investment thesis also revolves around improved capital allocation.  There was good news on this front as well.  Management finalized plans to spin off the company’s Financial Services division this fall.  The segment will no longer be included in financial reporting starting this year.  The spin off should provide value by distributing shares as a dividend, simplifying financial reporting, and focusing the company on the growing entertainment businesses.  Management also announced another share buyback program.  The company did not support recent market rumors that semiconductor business would be spun off to shareholders in the next couple of years.  SONY shares continue to trade a discount compared to standalone peers in video games, music, and film and TV.  A conglomerate discount will exist long-term, but we see the discount continuing to narrow as the company focuses on its best growth, highest margin, least cyclical business and continues to return cash to shareholders.  The shares are trading near multiyear highs.  We think they have further upside of at least 20%.

Walmart (WMT): WMT reported better than expected results amid investor concern over the impact of tariffs and economic uncertainty.  The core retail store business enjoyed a 12^th straight quarter of comps above 4%.  Grocery led the way with a slight decline in general merchandise.  Ticket size and traffic both contributed to the better-than-expected comp sales.  Proft margins improved and operating income again grew faster than sales.  WMT’s advertising business grew profits by 50% and the membership business grew 15%.  These two areas now comprise 25% of operating income.  Ecommerce and international continue to grow faster than the core store business as well.  Both are moving into profitability and will add another leg to WMT’s “second income statement.”  Management addressed the impact of tariffs noting that prices will increase in certain categories and inventory accounting will create volatility in operating income over the next few quarters.  The company reiterated guidance for 2025 based on current tariffs levels of 30% for China and 10% elsewhere.  No guidance was issued for 2Q25 due to the accounting for tariff impacted inventory.  Overall, this was another quarter where WMT supported Northlake’s offense and defense investment thesis.  The core business continues to gain market share through superb execution and ever-widening price discounts.  WMT’s plays defense with its low-price strategy when the economic outlook softens.  The second income statement composed of advertising, membership, ecommerce, and international continues to grow rapidly and provide the offense.  WMT remains a well-rounded team, stretching its lead vs. peers.  The main pushback to the story would be valuation but with the rising contribution of the growth businesses, the comparison set is moving toward technology platforms and Costco.  We see a little more upside for the shares based on a 30+ P-E and like WMT as a core holding.

Home Depot (HD): HD reported a mostly inline quarter to begin 2025.  Comp store sales were barely down with US only sales barely up.  As usual, margins drew a lot of attention and were a little below estimates.  Mix shift toward the recently acquired SRS business, loss of leverage on operating expenses with sales not growing, and higher interest expense pressured gross, operating and net margins, leading to a small miss in EPS.  Overall, this was another quarter when HD performed about as well as can be expected while it waits for a pickup in existing home sales and large project repair and remodeling.  These things could occur if interest rates fall or if pent up demand leads consumers to accept current mortgage rates that have been near 7% for a couple of years.  Management believes that these factors could unlock $50 billion in spending of which about $8 billion could accrue to HD at current market share.  This would be enough to accelerate revenues toward mid-single–digit growth, boost gross margins, and provide leverage on operating expense.  While waiting on the macro-driven improvement, HD continues to increase its addressable market by investing in pro customers via expanded verticals (roofing, landscaping, and pools), larger distribution centers, and trade credit.  Management is particularly optimistic about trade credit which came with SRS acquisition.  SRS focus on large professional contractors.  HD believes it has ten thousand or more smaller contractors that could qualify for trade credit.  Offering purchase on credit would allow HD to sell more to these contractors and gain market share.  Northlake continues to be patient with HD due to the quality of management, the company’s financial strength, and what we expect will be large payoff once revenue growth accelerates.  The company has shown it can manage a downturn well, reducing risk should the economy decelerate amid current macro uncertainty.

AAPL, DIS, NXST, SONY, WMT, and HD are widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts.  Steve is the sole proprietor of Northlake, a registered investment advisor.  Northlake’s regulatory filings can be found at www.sec.gov.