Archive for April, 2012

• Morning News: April 25, 2012
  Eddy Elfenbein, April 25th, 2012 at 5:41 am

  Britain Plunges Into First Double-Dip Recession Since the 1970s

  Rising Euro Yields Keep Banks on Life Support

  Merkel Pushes Back Against Hollande Call to End Austerity Drive

  South Korea Halts Customs Clearance of U.S. Beef

  ECB’s Draghi Wary of Both Crisis Action And Exit Strategy

  Gold Perched At $1,641 On Equities, All Eyes on Fed

  SEC Says Egan-Jones Made False Claims in Regulatory Filings

  Apple Profit Rises on Higher iPhone and iPad Sales

  High-End TV Sales Help LG Electronics Triple Q1 Profit

  Credit Suisse Scrapes Q1 Profit on Cost Cuts, Fixed Income

  China Unicom First-Quarter Profit Trails Estimates on 3G

  SAP Backs Outlook as Profit Rises

  Siemens Cuts Full-Year Profit Forecast on Wind Power Char

  Ericsson Profit Hit by Operator Caution

  ABB Gains From North American Growth As Profit Rises

  Credit Writedowns: Graphite: Time to Invest, or Flavor of the Day?

  Jeff Carter: Does Spot Drive Price Discovery, or Is Spot a Derivative of Futures Price Discovery?

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• Bard Offers Q2 Guidance of $1.61 to $1.65 Per Share
  Eddy Elfenbein, April 25th, 2012 at 12:58 am

  On the earnings call, CR Bard ($BCR) offered second-quarter earnings guidance of $1.61 to $1.65 per share. Wall Street had been expecting $1.65.

  Bard added that it’s sticking with the full-year earnings forecast they gave in December which was for growth of 3% to 4%. They earned $6.40 per share in 2011 so that translates to 2012 earnings of $6.59 to $6.66 per share. I think that’s probably too conservative. At $98, the stock is a good value.

• CR Bard Earns $1.61 Per Share for Q1
  Eddy Elfenbein, April 24th, 2012 at 6:16 pm

  We’ve had more good earnings news for our Buy List. This time, it came from CR Bard ($BCR). The company had told us to expect Q1 earnings to range between $1.53 and $1.57 per share. As it turns out, they netted $1.61 per share which was four cents more than Wall Street’s consensus.

  Sales came in at $730 million which is a 4% increase over last year. Interestingly, sales outside the U.S. were up by 10% while inside the U.S. they were up by just 2%.

  Bard’s CEO said, “The results this quarter reflect a good start to the year. While we haven’t seen much change in the U.S. environment, our increased focus and investments in international markets have provided rapid returns and strengthened our growth profile. We remain focused on daily execution of our product leadership strategy to take advantage of current opportunities while positioning ourselves for stronger growth in the future.”

  The stock has tried to break $100 per share in the past month but hasn’t been able to. Perhaps today’s earnings report will be the catalyst. This is an excellent stock. I rate it a buy anytime the price is below $102 per share.

• AFLAC Earns $1.74 Per Share for Q1
  Eddy Elfenbein, April 24th, 2012 at 5:20 pm

  In last week’s CWS Market Review, I said that Wall Street’s consensus for AFLAC’s figure of $1.65 per share was “almost certainly too low.” I said that results would probably be close to $1.70 per share. Even an AFLAC bull like me was too low.

  AFLAC ($AFL) just reported Q1 operating earnings of $1.74 per share. (Remember that with insurance companies we always want to look at operating earnings.) That’s up from $1.62 per share one year ago. The yen/dollar exchange rate increased earnings by four cents per share.

  CEO Dan Amos said, “We are pleased with our overall results in the first quarter of 2012. Aflac Japan gets high marks for another great quarter. The tremendous sales momentum they again generated this quarter was largely propelled by success in selling through banks. Aflac Japan’s first quarter production set an all-time new annualized premium sales record for the third quarter in a row. More importantly, we believe the first quarter has positioned us for another strong year of sales activities in Japan. As a result, we now expect Aflac Japan’s full year sales to increase 10%, compared with our previous expectation of a sales decline.”

  AFLAC also reiterated its full-year earnings forecast of $6.46 to $6.65 per share. The stock is up to $44 per share in the after-hours market.

• Energy Versus Technology
  Eddy Elfenbein, April 24th, 2012 at 11:11 am

  As I always say, stock-picking is important. Since July 1, 2008 the S&P 500 Tech Sector is up 33% while the Energy Sector is down 21%.

  

  By the way, Apple makes up roughly 21% of the S&P 500 Tech Index.

• Fitch Upgrades Ford
  Eddy Elfenbein, April 24th, 2012 at 10:49 am

  More good news for Ford ($F):

  Fitch Ratings upgraded Ford Motor Co to investment grade on Tuesday, marking a key step that brings the second-largest U.S. automaker closer to reclaiming its Blue Oval trademark.

  Fitch upgraded Ford and its captive finance arm to “BBB-” from “BB+” to reflect the improvement in Ford’s finances since its near collapse in 2006. Ford has lowered its break-even point since the last recession and improved its vehicle lineup.

  Still, the agency said Ford also faced the risk of slower-than-expected global demand for vehicles, particularly in Europe.

  “Fitch believes that the work that has been accomplished has put the company in a solid position to withstand the significant cyclical and secular pressures faced by the global auto industry,” the credit ratings agency said in a release.

  Earnings are due out on Friday.

• Reynolds American Earns 63 Cents Per Share
  Eddy Elfenbein, April 24th, 2012 at 10:00 am

  Reynolds American ($RAI) reported first-quarter earnings of 63 cents per share, which was two cents below estimates. Quarterly revenues fell 2.9% to $1.93 billion which was below the revenue estimate of $1.97 billion.

  I said in CWS Market Review:

  I’m not so concerned if the company beats or misses by a few pennies per share. The important thing to watch for is any change in the full-year forecast of $2.91 to $3.01 per share. If Reynolds stays on track to meet its forecast, I think we can expect the tobacco company to bump up the quarterly dividend from 56 cents to 60 cents per share.

  Reynolds reiterated its full-year guidance of $2.91 to $3.01 which is the most important thing.

• Morning News: April 24, 2012
  Eddy Elfenbein, April 24th, 2012 at 5:49 am

  In a Change, Mexico Reins In Its Oil Monopoly

  Spain and EU Deficit Calculations Add Up

  In an Unlikely Corner of Asia, Strong Promise of Growth

  Gold May Decline on Concern Over Slack Physical Demand

  Aging workforce Strains Social Security, Medicare

  Wal-Mart Stock Falls Nearly 5%

  Facebook Reveals Revenue, Profit Slide Ahead of IPO

  Netflix Spooks Street With Sputtering User Growth

  Barnes & Noble Gains as Activist Investor Discloses Stake

  LG Display Optimistic Despite Loss

  Shell Agrees to Buy Cove After Raising Bid to $1.8 Billion

  Lamborghini, BMW Expect Car Sales Growth in China to Slow

  Novartis Quarterly Profit Drops as Diovan, OTC Sales Slump

  MetLife to Pay $500 Million to Settle Death-Benefit Probe

  Dumb Money: A Few Brief Thoughts On Coke. Er, Hold, Not a Buy

  Howard Lindzon: The Stocktwits Social Heatmap – Finding Signal Inside Stocktwits

  Roger Nusbaum: Message From the Yield Curve

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• S&P 500 Earnings By Sector
  Eddy Elfenbein, April 23rd, 2012 at 10:44 am

  SECTOR	REPORTED	BEAT	MISSED	MET
  Energy	5	4	0	1
  Materials	8	7	1	0
  Industrials	16	13	1	2
  Consumer Discretionary	18	15	1	2
  Consumer Staples	10	9	0	1
  Health Care	11	10	0	1
  Financials	29	22	4	3
  Technology	22	16	3	3
  Telecommunication	1	1	0	0
  Utilities	1	0	0	1
  S&P 500	121	97	10	14

• Investor Quiz: What’s the Only Commodity Banned from Futures Trading?
  Eddy Elfenbein, April 23rd, 2012 at 9:33 am

  Onions.

  No, really.

  The Onion Futures Act (7 U.S.C Chapter 1 § 13-1) is a United States law banning the trading of futures contracts on onions. In 1955 two onion traders, Sam Seigel and Vincent Kosuga, cornered the onion futures market on the Chicago Mercantile Exchange. The resulting regulatory actions led to the passing of the act on August 28, 1958. It remains in effect as of 2012.

  (…)

  In the fall of 1955, Seigel and Kosuga bought enough onions and onion futures so that they controlled 98 percent of the available onions in Chicago. Millions of pounds of onions were shipped to Chicago to cover their purchases. By late 1955, they had stored 30,000,000 pounds (14,000,000 kg) of onions in Chicago. They soon changed course and convinced onion growers to begin purchasing their inventory by threatening to flood the market with onions if they did not. Seigel and Kosuga told the growers that they would hold the rest of their inventory in order to support the price of onions.

  As the growers began buying onions, Seigel and Kosuga purchased short positions on a large amount of onion contracts. They also arranged to have their stores of onions reconditioned because they had started to spoil. They shipped them outside of Chicago to have them cleaned and then repackaged and re-shipped back to Chicago. The new shipments of onions caused many futures traders to think that there was an excess of onions and further drove down onion prices in Chicago. By the end of the onion season in March 1956, Seigel and Kosuga had flooded the markets with their onions and driven the price of 50 pounds (23 kg) of onions down to 10 cents a bag. In August 1955, the same quantity of onions had been priced at $2.75 a bag. So many onions were shipped to Chicago in order to depress prices that there were onion shortages in other parts of the United States.

  Seigel and Kosuga made millions of dollars on the transaction due to their short position on onion futures. At one point, however, 50 pounds (23 kg) of onions were selling in Chicago for less than the bags that held them. This drove many onion farmers into bankruptcy. A public outcry ensued among onion farmers who were left with large amounts of worthless inventory. Many of the farmers had to pay to dispose of the large amounts of onions that they had purchased and grown.