Archive for February, 2013

• Ross Stores Hikes Dividend 21%
  Eddy Elfenbein, February 7th, 2013 at 9:57 am

  Good news this morning from Ross Stores ($ROST). The company reported blowout sales for January. Thanks to the rush of business, the company sees Q4 earnings coming in at $1.06 to $1.07 per share, and that’s $3.52 to $3.53 per share for the entire year. (Note that like a lot of retailers, Ross ends their fiscal year at the end of January.) The earnings report should be out in mid-March.

  Best of all, Ross is raising the quarterly dividend from 14 cents to 17 cents per share. That’s a 21% hike. Ross pays out a very small amount of their profits as dividends to shareholders (about 20%). Based on yesterday’s close, Ross yields 1.15%. That’s obviously not a very high yield but the dividend increase and strong sales news is a good omen for Ross Stores.

• Morning News: February 7, 2013
  Eddy Elfenbein, February 7th, 2013 at 7:31 am

  Euro Gains on Speculation Draghi to Signal Optimism; Pound Rises

  Carney Backs Flexible Inflation Targeting in BOE Testimony

  Ireland Increasingly Hopeful of ECB Agreement

  Royal Bank of Scotland Settles Case on Rigging

  Harvard’s Gopinath Helps France Beat Euro Straitjacket

  Trying to Stem Losses, Post Office Seeks to End Saturday Letter Delivery

  Credit Suisse Posts Quarterly Profit, Raises Cost-Cutting Goal

  Liberty’s Bid for Virgin Media Pushes the Envelope on Debt

  Platinum Advances to 16-Month High on Supply Woes; Gold Climbs

  Google To Buy ICG Group Unit For $125 Million

  TransCanada Looks East Amid Keystone Pipeline Delay

  Vodafone Misses Estimates As Sales In Europe Drop

  Alcatel-Lucent Chief Resigns as Company Posts Loss

  Cullen Roche: Some Brief Thoughts on the CBO’s New Budget Projections

  Jeff Carter: The Trusted Network

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• AFLAC’s 2013 Outlook
  Eddy Elfenbein, February 6th, 2013 at 1:31 pm

  From the earnings call, here’s AFLAC‘s ($AFL) outlook for this year (I think Seeking Alpha’s transcription is rather muffled, but you can follow what they’re saying):

  Lastly, let me comment on the earnings outlook for 2013. As you’ve heard Dan say, we’ve affirmed our guidance for 2013 of 4% to 7% increase in operating earnings per diluted share, excluding the impact of the yen. To understand the significant our 2013 EPS objective over 2012 actual results winning to this perspective for you.

  In 2012, we received tax benefit from our tax exempt for the years 2008 and 2009, and we’ve made a revision for the full year impact of tax effective tax rate. The unusual benefits received in 2012 totaled approximately $38 or $0.08 per share. We also recovered a previously written-off coupon as part of the sales transaction executed during the year that resulted in a one-time benefit to operating earnings of $23 million, or $0.05 per share. If you exclude the impact of these benefits from the 2012 operating earnings note, operating earnings per diluted share in sale would have been $6.47.

  This year we estimate that a one yen move on the average annual exchange rate will equal approximately $4.3 for diluted share. Considering the weakening of the yen in recent months, if we achieve our objective of 4% to 7% increase in operating earnings per diluted share for the year at yen averages 90 for the full year, we would expect operating EPS to be in the range of $6.37 to $6.57 per diluted share.

  The yen is currently at 93.345 to the dollar.

• Morgan Housel’s Startling Facts About the Economy
  Eddy Elfenbein, February 6th, 2013 at 12:36 pm

  Morgan Housel of the Motley Fool comprised a great list of “100 Startling Facts About the Economy.” I’m tempted to list them all, but I’ve culled some of my favorites:

  14. Including dividends, the S&P 500 gained 135% from March 2009 through January 2013, during what people remember as the “Great Recession.” It gained the exact same amount from 1996 to 2000, during what people remember as the “greatest bull market in history.”

  19. From 2006 to 2011, Hewlett-Packard ($HPQ) spent $51 billion on share repurchases at an average price of $40.80 per share. Shares currently trade at $16.50.

  21. Despite the overall population doubling, more babies were born in the U.S. in 1956 than were born in 2009, 2010, or 2011.

  27. According to Bloomberg, “The 50 stocks in the S&P 500 with the lowest analyst ratings at the end of 2011 posted an average return of 23 percent [in 2012], outperforming the index by 7 percentage points.”

  29. Thanks in large part to cellphone cameras, “Ten percent of all of the photographs made in the entire history of photography were made last year,” according to Time.

  32. Fortune magazine published an article titled “10 Stocks To Last the Decade” in August, 2000. By December 2012, the portfolio had lost 74.3% of its value, according to analyst Barry Ritholtz.

  44. According to California Common Sense, “Over the last 30 years, the number of people California incarcerates grew more than eight times faster than the general population.”

  45. One in seven crimes committed in New York City now involves an Apple product being stolen, according to NYPD records cited by ABC News.

  49. According to the Center for Economic and Policy Research, 44% of those working for minimum wage in 2010 had attended at least some college, up from 25% in 1979.

  60. The International Energy Agency predicts that the U.S. will become the world’s largest oil-producer by 2020, overtaking Saudi Arabia.

  62. According to BetterInvesting, the number of investment clubs has declined by 90% since 1998 from 400,000 to 39,000.

  67. During the Federal Reserve’s June 2007 policy meeting, the word “recession” was used three times; the word “strong” was used 61 times. The economy entered recession six months later.

  68. Last year, Franklin Templeton asked 1,000 investors whether the S&P 500 went up or down in 2009 and 2010. Sixty-six percent thought it went down in 2009, while 48% said it declined in 2010. In reality, the index gained 26.5% in 2009 and 15.1% in 2010.

  71. According to a survey by Paola Sapienza and Luigi Zingales, effectively all economists agreed that stock prices are hard to predict. Only 59% of average Americans felt the same way.

  79. Related: 84% of actively managed U.S. stock funds underperformed the S&P 500 in 2011.

  80. According to The Wall Street Journal, 49.1% of Americans live in a household “where at least one member received some type of government benefit in the first quarter of 2011.”

  85. The U.S. birthrate declined 8% from 2007 to 2010, according to Pew. At 63.2 per 1,000 women of childbearing age, the 2011 U.S. birthrate was the lowest since records began in 1920.

  86. According to Wired magazine, “In a 2006 survey, 30 percent of people without a high school degree said that playing the lottery was a wealth-building strategy…On average, households that make less than $12,400 a year spend 5 percent of their income on lotteries.”

  88. We are used to hearing how much faster the earnings of the top 1% grow compared with everyone else’s, but we often forget that it used to be the other way around. From 1943 to 1980, the annual incomes of the bottom 90% of Americans doubled in real terms, while the average income of the top 1% grew just 23%, according to Robert Frank.

  92. Federal nondefense discretionary spending — all spending minus defense and entitlements — is on track to hit its lowest level as a share of GDP in more than 50 years, according to data from the Congressional Budget Office.

  94. According to The Economist, “Over the past ten years, hedge-fund managers have underperformed not just the stock market, but inflation as well.”

  95. According to Bloomberg, “Americans have missed out on almost $200 billion of stock gains as they drained money from the market in the past four years, haunted by the financial crisis.

  98. “More than 50 million Americans couldn’t afford to buy food at some point in 2011,” writes CNNMoney, citing U.S. Department of Agriculture data. In June 2012, 46.7 million Americans received food stamps.

• Fiserv’s Guidance for 2013
  Eddy Elfenbein, February 6th, 2013 at 10:23 am

  Seeking Alpha has posted the transcript of yesterday’s earnings call for Fiserv ($FISV). Here’s a key part on the company’s outlook for this year.

  We expect 2013 adjusted revenue to increase by more than 10%, and that adjusted internal revenue growth will be in a range of 3% to 4%. These numbers include approximately $50 million in lost revenue, more than 100 basis points of internal growth this year due to the unusual migration of an account processing client that transitioned to its parent’s account processing platform and the impact of the 10-year Bank of America renewal.

  We expect 2013 adjusted earnings per share growth of 15% to 18% or a range of $5.88 to $6.07 over 2012. We estimate free cash flow per share will be more than $6.60 per share, an increase of at least 18% over 2012. We expect adjusted operating margin to expand in a range of 10 to 50 basis points. This estimate includes the approximately 60-basis-point negative impact from the revenue headwind and also margin dilution associated with the Open acquisition.

  For modeling purposes, we anticipate that our revenue and earnings growth will be sequentially stronger each quarter as we move through the year. A number of our larger recurring revenue client conversions are planned for the second and third quarters of 2013, and the impact of the negative headwinds are also more pronounced in the first half of the year. We also expect the Open Solutions results to increase during the year, consistent with their normal business model, the cumulative effect of integration benefits and the pay-off of the higher cost debt.

  We’re in the process of realigning the specific annual targets for our operational effectiveness and integrated sales targets to consider the Open Solutions acquisition. Accordingly, we are now prepared to communicate annual targets for 2013. However, you can be sure we are very focused on these initiatives and we’ll provide you with an update at the end of the quarter — sorry, at the end of the first quarter.

  In summary, 2012 was a good year. We made strategic progress, grew recurring revenue, achieved our earnings targets and closed a number of significant sales, all which we believe will accelerate our internal revenue growth, earnings and cash flow. We are starting to see measurable impact from some of our investments and innovation, and are delivering more value to clients. We are also focused on the integration of Open Solutions, which should allow us to deliver new and enhanced value to their more than 3,300 clients. That, combined with the commitment of our more than 20,000 associates, is creating momentum, which should lead to strong results in 2013, and has lifted our confidence for 2014 and beyond.

  This was a good quarter for Fiserv. The stock is currently down about 0.6% today.

• WEX Inc. Drops on Weak Guidance
  Eddy Elfenbein, February 6th, 2013 at 10:06 am

  Before the opening bell, WEX Inc. ($WXS) reported fourth-quarter earnings of $1.07 per share. That was a penny below consensus. Quarterly revenue rose 20.9% to $169 million.

  But the stock is getting smacked around this morning due to the company’s weak guidance. For Q1, WXS expects earnings to range between 89 cents and 96 cents per share. The Street had been expecting $1.08 per share. For all of 2013, WXS sees earnings between $4.30 and $4.50 per share. The Street was expecting $4.88 per share. For all of 2012, WXS made $4.06 per share which was a nice increase from $3.64 per share on 2011.

• Morning News: February 6, 2013
  Eddy Elfenbein, February 6th, 2013 at 6:33 am

  RBS Said to Face Up to $783 Million Libor Manipulation Fine

  Dollar Rises vs. Yen on BOJ Governor’s Early Exit

  Fed Confirms Hackers’ Breach of Website, Reuters Reports

  Obama Urges Congress to Act to Stave Off Cuts

  S&P Misled Investors On Bonds’ Risks, Suit Says

  S&P Analyst Joked of Bringing Down the House Before Crash

  Lenovo’s Diplomatic Response to Dell Buyout

  Virgin Media Chief Attracts $16 Billion Buyout as Final Act

  4 Reasons To Be Skeptical Of Zynga

  UBS Owes Brazil $1.2 Billion Taxes For 2006-09

  Google Said in Talks to Invest $50 Million in Vevo Site

  Corporate Forces Endangered the Twinkie, but May Save It

  Health Insurance Companies Get in Shape for 2014

  Joshua Brown: T.I.N.A. (or the Seller’s Dilemma)

  Edward Harrison: China’s Huge Demographic Challenges Have Already Begun

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• AFLAC Earned $1.48 Per Share for Q4
  Eddy Elfenbein, February 5th, 2013 at 7:24 pm

  After the closing bell, AFLAC ($AFL) reported Q4 operating earnings of $1.48 per share which matched Wall Street’s estimate. Three months ago, the company told us to expect earnings to range between $1.46 and $1.51 per share, so they were squarely in the ballpark.

  A lot of people are concerned about the impact of the weaker yen on AFLAC’s bottom line. It turns out the yen dinged their earnings by four cents per share last quarter. It hurts, but it’s not that bad. On a currency neutral basis, earnings rose by 4.8% from a year ago.

  For the full-year, operating earnings came in at $6.60 per share. The full-year earnings were actually boosted by a penny per share thanks to the yen/dollar rate. Earnings for the year rose by 5.1%.

  As far as this year is concerned, CEO Daniel P. Amos said:

  I want to reiterate that our objective for 2013 has not changed: To increase operating earnings per diluted share 4% to 7%, or approximately $6.86 to $7.06 per share, on a currency neutral basis. Therefore, if the yen/dollar exchange rate averages 90 yen for the full year, it’s likely operating earnings per diluted share will be $6.37 to $6.57 for 2013. I would point out that 2013 earnings comparisons to 2012 will be more difficult because earnings in 2012 were significantly better than we originally anticipated.

  In the after-hours market, the stock is off about 1.6%.

  Here’s a look at how much the yen has plunged over the last four months.

  

• Fiserv Earned $1.39 Per Share for Q4
  Eddy Elfenbein, February 5th, 2013 at 4:14 pm

  For Q4, Fiserv ($FISV) earned $1.39 per share which matched Wall Street’s forecast.

  Fiserv, Inc., a leading global provider of financial services technology solutions, today reported financial results for the fourth quarter and full year 2012.

  GAAP revenue was $1.16 billion and adjusted revenue was $1.08 billion in the fourth quarter, both consistent with the fourth quarter of 2011. For the full year, GAAP revenue was $4.48 billion compared with $4.34 billion in 2011. Adjusted revenue was $4.20 billion compared with $4.07 billion in 2011, an increase of 3 percent.

  GAAP earnings per share from continuing operations for the fourth quarter was $1.18 compared with $1.07 in 2011. GAAP earnings per share from continuing operations for the full year was $4.34 compared with $3.40, which included a loss from early debt extinguishment of $0.37 per share, in 2011.

  Adjusted earnings per share from continuing operations in the fourth quarter increased 9 percent to $1.39 compared with $1.27 in the fourth quarter of 2011. Adjusted earnings per share from continuing operations for the year grew 12 percent to $5.13 compared with $4.58 in 2011.

  “Our 2012 results were highlighted by our 27th consecutive year of double-digit adjusted earnings per share growth and meaningful strategic progress,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “We capped off a strong sales year with exceptional performance in the fourth quarter.”

  This basically matches what Fiserv told us to expect three weeks ago. Fiserv earned $5.13 per share for the entire year. They expect growth of 15% to 18% for this year, and specified an earnings range of $5.88 to $6.07 per share. If that’s correct, then FISV is going for less than 14 times this year’s earnings.

• Total Return to Dividends
  Eddy Elfenbein, February 5th, 2013 at 2:43 pm

  Here’s an interesting chart. This shows the S&P 500 Total Return Index divided by the S&P 500. In other words, this shows an investor’s return solely from dividends.

  

  There seems to be a surge every three months (mid-May, mid-August, mid-November, and less so in February), when the bulk of dividends are paid out. You can also see that the fourth quarter was especially good for dividends as companies rushed to beat the taxman.

  I think investors too often ignore dividends. Not only do you get money, but dividends are a good way to gauge a company’s health. It’s not fool-proof, but when a company raises its quarterly dividend, it’s often a sign of confidence that business is going well.