Archive for January, 2013

• Applocalypse
  Eddy Elfenbein, January 24th, 2013 at 9:47 am

  Shares of Apple ($AAPL) are getting slammed today after a poor earnings report. The stock is currently down $60 per share. Every $9.50 in Apple’s share price is worth one point in the S&P 500.

  The S&P 500, in contrast, continues to close in on 1,500. The high this morning has so far been 1,496.16.

  Netflix ($NFLX) is up 43% today. The company is now worth $7 billion after it reported earnings of $8 million.

  Our Buy List is doing well today. Stryker ($SYK) is responding well to its earnings. Bed Bath & Beyond ($BBBY) is up on an upgrade. Ross Stores ($ROST) is also doing well and Microsoft ($MSFT) is up ahead of its earnings after the close.

• Morning News: January 24, 2013
  Eddy Elfenbein, January 24th, 2013 at 6:44 am

  Japan Logs Record Trade Gap In 2012, Yen Impact Yet To Show

  Spanish Jobless Rate Hits Record After Rajoy’s First Year

  I.M.F. Forecasts Modest Global Economic Growth

  Bernanke Seen Pressing On With Stimulus Amid Debate on QE

  Sizing Up the Default ‘Nightmare’

  Heady Returns, but Apple Finds Its Stock Falling

  General Dynamics Forecasts 2013 Profit Short of Estimates

  Netflix Soars as New Subscribers Lead to Surprise Quarter Profit

  McDonald’s Profit Rises as Dollar Menu Drives U.S. Sales

  Hyundai Compensation Payment Hits Profit

  US Airways Doubles Quarterly Profit

  Baker Hughes 4th-Quarter Net Falls 32%

  Barclays Asia Division Hit With Layoffs

  Nokia to Omit Dividend for First Time in 143 Years

  Jeff Miller: Do You Understand Ceteris Paribus?

  Phil Pearlman: Throw Your Hands Up In The Air & Buy ‘em Higher Like You Just Don’t Care

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• Stryker Beats By Two Cents Per Share
  Eddy Elfenbein, January 23rd, 2013 at 11:06 pm

  After the closing bell today, Stryker ($SYK) reported fiscal fourth-quarter earnings. If you recall, two weeks ago, the company told us that the numbers were going to be good, and the stock has rallied ever since.

  Today Stryker said that it earned $1.14 per share in Q4 which was two cents ahead of expectations. For the entire year, Stryker earned $4.06 per share. That’s an increase from $3.72 per share in 2011.

  Overall sales rose 5.5 percent in the quarter from a year ago, rebounding from the third-quarter’s sluggish 1 percent growth rate that resulted from soft pricing, the company said. Demand for orthopedic devices has slumped in the weak economy as patients deferred procedures due to lack of insurance or higher out-of-pocket expenses.

  Stryker executives said they were encouraged by sales momentum for hip and knee products going into 2013.

  “At the very least, the market is stable to maybe modestly improved in the fourth quarter,” Stryker Vice President Katherine Owen said on a conference call with analysts.

  The most important news, in my opinion, is that Stryker sees 2013 earnings ranging between $4.25 and $4.40 per share. The stock has now rallied for 13 of the last 16 days, and one day was unchanged. I suspect that the 2013 figure is a bit too low, although it’s too early to know for sure.

  

• CA Technologies Rallies 3.6%
  Eddy Elfenbein, January 23rd, 2013 at 11:18 am

  Yesterday, the Russell 2000, Dow Transports, S&P Mid-Cap 400 and S&P Small-Cap 600 made all-time high closes. Also, the S&P 500 Healthcare and Consumer Discretionary Sectors made all-time highs.

  The market is about flat today. Earnings reports continue to pour in. Two standouts were IBM ($IBM) and Google ($GOOG), and both stocks are doing well today. Due to its high price, IBM has the largest weighting of any Dow stock (about 11%), so the Dow is ahead of the broader indexes today.

  CA Technologies ($CA) is also doing well thanks to yesterday’s good earnings report. The shares have been as high as $25.57 today. Right now, the stock is up 90 cents or about 3.6%. For the year, CA is a 15.5%. Not bad for a dull stock.

  We’re going to get Stryker’s ($SYK) earnings after the close, but the company already told us to expect good news so most of the pop is gone.

  The strength from tech earnings has helped push Oracle ($ORCL) to a new 52-week high. The stock got as high as $35.20 today. It had a lot of trouble breaking through $35.

  Our Buy List now has four stocks (ORCL, CA, MOG-A, SYK) that are up double-digits on the year. Ross Stores and Ford aren’t far behind.

• Morning News: January 23, 2013
  Eddy Elfenbein, January 23rd, 2013 at 6:37 am

  Banks Too Big to Manage Find Davos Vows Too Hard to Win

  Global Economy Set for ‘Slow Recovery’

  Yen Strengthens as Japan Delays Stimulus; U.S. Futures Decline

  Europe’s Odd Couple, France and Germany, 50 Years Later

  Can Britain Forge Looser Ties to Europe Without Losing Influence?

  Google Still in a Struggle With Mobile

  Microsoft Risks Strain to PC Partnerships With Dell Investment

  Jamie Dimon Laments Too-Big-to-Fail? Give Me a Break

  Delta Confirms Return To US Profitability

  Allergan to Buy MAP Pharmaceuticals for $958 Million

  WellPoint Quarterly Profit Rises; Membership Increases

  Peregrine Financial Fraud Loss Tops $215 Million, U.S. Says

  The Great Rotation: A Flight To Equities In 2013

  Edward Harrison: Grexit

  Howard Lindzon: Howie’s Stock Market Investing Lessons…

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• CA Technologies Earns 63 Cents Per Share
  Eddy Elfenbein, January 22nd, 2013 at 7:24 pm

  One of our more boring Buy List stocks, CA Technologies ($CA), is having a very good year so far. Through Tuesday’s trading the stock is up 11.69% on the year. After the close, the company reported better-than-expected earnings and reiterated its full-year forecast.

  For the three months ending in December, CA Technologies earned 63 cents per share which was two cents better than the Street’s consensus. Quarterly revenue came in at $1.2 billion which was also ahead of the Street at $1.17 billion.

  “I am very pleased to be a part of the CA Technologies team,” said CA Technologies CEO Mike Gregoire. “While we are encouraged by improvements we saw in the business during our third quarter, including increased demand for our Nimsoft, Infrastructure Management and Service Virtualization offerings, we know that we need to do more to accelerate innovation, gain market share and better differentiate our solutions in the marketplace.

  “We also know there is room for improvement in our cost of sales and in the speed and intensity with which we pursue our objectives,” he continued. “Over the next few months we will perform a detailed diagnostic of where we are, and lay out a plan on how to achieve our strategic and financial goals.”

  CA Technologies is currently sitting on a cash horde of just over $2.5 billion, which is more than $5.50 per share. The company reaffirmed its fiscal-year earnings-per-share forecast of $2.36 to $2.44. CA’s fiscal year ends in March.

  The stock is up 25 cents in the after-hours market.

• Wells Fargo Raises Dividend By 14%
  Eddy Elfenbein, January 22nd, 2013 at 4:26 pm

  After the close, Wells Fargo ($WFC) announced that it’s raising its quarterly dividend from 22 cents to 25 cents per share. The bank will now pay out $1 for the whole year. Going by today’s close, that’s a yield of 2.85%.

  Wells Fargo & Company (WFC) today announced a quarterly common stock dividend of $.25 per share, an increase of three cents, or 14 percent, per share from the prior quarter. The dividend is payable March 1, 2013, to stockholders of record on February 1, 2013, as approved today by the Wells Fargo board of directors. Wells Fargo has approximately 5.3 billion shares outstanding.

  This dividend increase for the first quarter of 2013 was part of the company’s 2012 Capital Plan that the Federal Reserve did not object to in March, 2012. Wells Fargo submitted its 2013 Capital Plan on January 4, 2013, and it is currently under review by the Federal Reserve.

  “The dividend increase approved by our board today was included in our 2012 Capital Plan and reflected the confidence we have in our company’s performance,” Chairman and CEO John Stumpf said. “We remain committed to returning more capital to our shareholders. We requested an increase in capital distributions in our 2013 Capital Plan as compared to our 2012 plan, subject to review and non-objection by the Federal Reserve Board.”

  The Fed still needs to sign off on these dividend increases for many banks. Wells will have no trouble covering this dividend. If the earnings projections for this year are correct, Wells is passing on just 27% of its profits in the form of dividends.

• Apple In Terms of Google
  Eddy Elfenbein, January 22nd, 2013 at 1:26 pm

  I admit this chart doesn’t mean much of anything but I was just curious to see it. This chart shows the price of Apple divided by the share price of Google. In other words, Apple in terms of Google.

  

  Apple has about three times as many shares outstanding as Google.

• Earnings Season Numbers
  Eddy Elfenbein, January 22nd, 2013 at 12:46 pm

  It’s still early but here are some numbers about this earnings season. The current consensus is for the the S&P 500 to earn $25.18 which is an increase of 6.1% over the Q4 from 2011.

  For all of 2012, the S&P 500 is expected to earn $98.85. That’s only a slight increase over the $96.44 from 2011. For 2013, the current consensus is for the index to earn $112.49.

  The current divisor for the S&P 500 is about 8.93 billion, so just multiply that to any of the figures I’ve given above and you can see the total dollar amount.

• How Closely Tied Are Stocks and the Economy?
  Eddy Elfenbein, January 22nd, 2013 at 11:33 am

  Not as much as you’d think.

  Here’s a look at the annual nominal change in GDP (running along the bottom) with the change in the S&P 500 (running vertically).

  

  I didn’t run a regression, but just by eyeballing the results, the correlation looks pretty weak. This shouldn’t be too surprising. For one, the stock market is concerned with corporate profits, not the overall economy. Secondly, the stock market usually runs about six to nine months ahead of the economy. Finally, of course we know that the market can simply leave the realm of fair value entirely.