Archive for July, 2012

  • Raven Industries Splits 2-for-1
    , July 26th, 2012 at 10:39 am

    I’ve called Raven Industries ($RAVN) “the best stock you’ve never heard of.” Here’s a description from Hoovers:

    Quoth the Raven, “Balloons (and more) evermore!” Raven Industries’ Aerostar division does sell high-altitude, research balloons, as well as parachutes and protective wear used by US agencies. Its Engineered Films Division makes reinforced plastic sheeting for various applications. The Applied Technology Division manufactures high-tech agricultural aids, from global positioning system (GPS)-based steering devices and chemical spray equipment to field computers. The Electronic Systems Division offers electronic manufacturing services and supports the other divisions. Goodrich is a major customer.

    Not too sexy, is it? But consider that the stock is up more than 23,000% in the last 30 years (not including dividends) and that Raven is nearly completely ignored by Wall Street.

  • Morning News: July 26, 2012
    , July 26th, 2012 at 6:45 am

    Europe Needs A Bigger Crisis Firewall

    Europe’s Crisis Hits Profits

    Citigroup Sees 90% Chance That Greece Leaves Euro

    Santander Profit Plunges 93% on Property Provisions

    Nomura Holdings: CEO Watanabe To Step Down Effective July 31

    Philippines Cuts Rates as Korean Growth Slows on Europe

    Severe Drought Seen as Driving Cost of Food Up

    A Global Steel Giant Scales Back

    Weill, Father Of Too-Big-To-Fail, Disowns It

    Retailers’ Idea: Think Smaller in Urban Push

    The News Isn’t Good for Zynga, Maker of FarmVille

    Caterpillar Echoing Wall Street Rebuts Gross’s U.S. Pessimism

    Hyundai Q2 Net Up 10%  As European Sales Surge

    Siemens Cautions on Outlook as Earnings Fall Short

    Credit Writedowns: The Euro as the SDR of Europe

    Roger Nusbaum: Innovative Ideas For Portfolio Construction

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  • Highlights from AFLAC’s Earnings Call
    , July 25th, 2012 at 6:56 pm

    Seeking Alpha has the transcript for AFLAC’s earnings call. If you read the whole thing, you clearly get a sense that the company is doing well. Here are some highlights:

    As you know, we have made significant progress into proactively derisking our portfolio over the last 3 years to enhance the strength of our balance sheet. In the process, we’ve been reducing our exposure to riskier asset classes including perpetual [indiscernible] and financials especially in Europe. You’ve heard us say many times before that we expect to see volatility in Europe, and that’s exactly what we’ve seen in the second quarter. Our second quarter net after-tax realized investment losses were $272 million. These losses are primarily attributable to the decision to impair 2 Spanish holdings. In addition, we experienced further declines in the value of several securities we’ve previously impaired in the fourth quarter of 2011 related to the intent to sell.

    Although our total realized losses in the second quarter were higher than the first quarter of this year, they are significantly lower than the second quarter of last year. We still view Europe as an area of potential risk. And always, we closely monitor and reevaluate our portfolio with the eye for credit issues that may emerge. However, I believe our portfolio is better positioned now to accommodate market volatility.

    (…)

    We increased our cash dividend to shareholders in 2011 for the 29th consecutive year. Our objective is to grow the dividend at the rate in line with the earnings per share growth before the impact of the yen. I believe dividends are an important component for the value we provide investors. I am confident that the fourth quarter, we will extend the consecutive annual dividend increases to 30 years.

    (…)

    I want to affirm that even with the historically low interest rates, excluding currency, we expect to achieve our 2012 operating earnings per share of a 3% to 6% increase although toward the end of the low range. We believe it is reasonable.

    Looking ahead, I also want to reaffirm 2013 target we gave you at the analyst meeting. We expect operating per diluted share to increase 4% to 7% in 2013 on a currency-neutral basis.

  • CR Bard Earns $1.62 Per Share
    , July 25th, 2012 at 6:14 pm

    After the closing bell, CR Bard ($BCR) reported second-quarter earnings of $1.62 per share. The market isn’t pleased as the stock is down about 5% after hours, but I think it’s a decent number. The company had given a range of $1.61 to $1.65 per share and Wall Street was expecting $1.64 per share, so Bard was in the ballpark.

    As with other companies this earnings season, Bard is running its business well. The problem is the economy in other parts of the world, especially Europe. Bard’s CEO said:

    The economic climate remains challenging, especially in the United States and Europe. Navigating the short term while positioning for the long term is how we have remained strong and successful for over a century. As we have said, we believe the medical device companies who thrive in the future will provide clinically effective products at a value that benefits the entire healthcare system. Our teams are well positioned to identify unmet needs and provide successful solutions for our customers, and we see significant long-term opportunity as we continue to execute on our strategy.

    I didn’t see any change in the forecast for this year, or any guidance for Q3. The company had previously said that it sees earnings growing by 3% to 4% for this year. That works out to a range of $6.59 to $6.66 per share for this year. For the first half of the year, Bard has earned $3.23 per share so they’re basically on track to hit those numbers.

  • Weill: Breakup Up the Big Banks
    , July 25th, 2012 at 12:20 pm

    Sandy Weill, the man who grouped Citigroup ($C), made news today by calling for the breakup of large banks.

    Former Citigroup chairman Sandy Weill — who engineered a series of corporate takeovers and lobbying efforts to create Citigroup — explained during an interview on CNBC why he now thinks a firewall between commercial and investment banks is needed.

    “What we should probably do is go and split up investment banking from banking,” Weill said. “Have banks do something that’s not going to risk the taxpayer dollars, that’s not too big to fail.”

    Weill’s call to break up the nation’s largest banks comes a little more than a decade after he helped orchestrate the merger of Travelers Group and Citicorp, a deal that created what was the world’s largest financial services company.

    Sorry, Sandy, but you’re a little late. I called for Citi to be broken up by management seven years ago:

    I think that the real problem is that “Citi” as it’s now constructed doesn’t work. Big doesn’t mean better. Commerce (CBH) is so much stronger than Citi right now even though it’s around 1/40th the size. With Sandy out of the way, Prince & Co. should break up the company. The Travelers Life & Annuity sale should be the first of many more sales. A breakup will be better for shareholders, customers and employees.

    Citigroup is a good example of a stock that looks cheap, but really isn’t. The firm is still on the Federal Reserve’s Double Secret Probation. Citigroup is barred from making any more acquisitions. Now that it looks like any new Fed chair will be raising rates next year, I’d stay far away from Citigroup.

    At the time I wrote that, shares of Citi were at $44 — which is now equivalent to $440 due to the 1-for-10 reverse split. The stock is currently at $25 per share.

    By the way, Commerce was later bought out almost exactly at the market peak by TD Bank Financial Group for $8.5 billion.

    Josh Brown adds his thoughts about Sandy: “One wonders whether or not he is sincere or if there is some angle. Or perhaps this is about burnishing his legacy. Or maybe he means it.”

  • Ford Earns 30 Cents Per Share
    , July 25th, 2012 at 11:17 am

    Ford Motor‘s ($F) earnings are out. We knew they were going to be bad; the only question was how bad. The answer: not as bad as feared. For Q2, Ford earned 30 cents per share which was two cents more than Wall Street’s forecast. Obviously, the big problem is Europe where Ford is bleeding red ink. In North America, however, business is going pretty well.

    Ford said it earned $1 billion in the quarter compared to $2.4 billion in the same period last year. While its core North American business continued to perform well, it reported a loss of $404 million in Europe.

    The automaker now expects to lose more than $1 billion in Europe this year, as increasingly worse sales there drag down what is otherwise a turnaround.

    “The magnitude of this loss will be affected by a number of factors, including the overall economic environment, competitive actions, and Ford’s response to those developments,” the company said in a statement.

    European car sales have fallen to their lowest level in a decade, and most automakers are struggling with overcapacity there. Ford said the region’s problems are “more structural than cyclical” and would not improve any time soon.

    Ford’s chief financial officer, Robert Shanks, called the deteriorating market conditions in Europe “very, very serious.”

    The problem here isn’t the operations of the company; it’s the weak growth in Europe. The reason I’m not terribly worried about Ford is that this is a problem not endemic to Ford. I continue to believe this is a very cheap stock. The market, however, isn’t yet convinced. Once Ford is able to put together some profitable quarters from overseas, I think the stock will respond.

  • Hudson City Beats By One Penny
    , July 25th, 2012 at 11:02 am

    This morning, Hudson City Bancorp ($HCBK) reported Q2 earnings of 15 cents per share which was one penny more than Wall Street’s consensus.

    The good news is that the bank is still profitable and they’re continuing their quarterly dividend payout of eight cents per share. The bad news is that they’re getting squeezed by ultra-low interest rates. The acting CEO said:

    Over the past several quarters, we have discussed the challenges facing our traditional residential portfolio lending model. The extraordinarily low market interest rates combined with the GSEs participation in the mortgage market persist and make it difficult for us to profitably grow our business in the same manner as we have in the past. It is apparent that these market conditions are likely to continue for the foreseeable future. Accordingly, we have been developing a variety of strategies to help us adapt to the new environment in which we operate.

  • Morning News: July 25, 2012
    , July 25th, 2012 at 6:40 am

    EU Rushes to Make ECB Single Bank Watchdog in Race to Save Spain

    Libor Probe Expands to Bank Traders

    Japan Flags Yen-Sales Impact as BOJ Eyes More Easing

    China Slowdown to Weigh On Results, Outlook Of Nissan, Rivals

    Companies Say 3 Million Unfilled Positions in Skill Crisis

    New York Fed Faces Questions Over Policing Wall Street

    Fed Leaning Closer to New Stimulus if No Growth Is Seen

    Softer Sales of iPhones Hurt Apple

    Apple’s Reality-Check Quarter In Charts

    AT&T Posts Higher Profit and Holds On to Its Subscribers

    Wal-Mart Lines Up Against Credit-Card Fee Settlement

    Netflix Struggles to Win Subscribers, Profit Falls 91%

    Peugeot Defends Job Cut Plan After Slumping to H1 Loss

    PPR Finds Bolt No Match for Champagne in Race with LVMH

    Pragmatic Capitalism: Goldman Sachs: US Growth Decline Has Hit a Bottom

    Howard Lindzon: Snacking on Apple…and the Power of a Stocktwits Stream of People

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  • Possible Action from the Fed
    , July 25th, 2012 at 12:30 am

    So far, I’ve said that the Federal Reserve isn’t likely to start a third round of quantitative easing. In the past, the central bank has been pretty clear about its intentions. Until now, we haven’t seen any indications. Today that changed.

    Late on Tuesday, Jon Hilsenrath of the WSJ reported that the Fed is indeed considering more action. This strikes me as mostly PR, and the story is quite vague. Still, they wouldn’t say it unless they meant something.

    The GDP report this week won’t be pretty. I think it will be difficult for the Fed to do much of anything just before an election.

  • Negative Yield on 20-Year TIPs
    , July 24th, 2012 at 11:42 pm

    Dear lord. You can loan Uncle Sam money for the next 20 years and lock in a real return of 0.09% a year.

    Here’s the TIPs yield curve: