Archive for September, 2013

• Oracle CEO Mark Hurd at Oracle World
  Eddy Elfenbein, September 26th, 2013 at 2:01 pm

• BBBY Soars to All-Time High
  Eddy Elfenbein, September 26th, 2013 at 11:09 am

  Bed Bath & Beyond ($BBBY) is having an outstanding day today. The shares gapped as high as $78.88 this morning. The stock has moved into second place on our Best Performers list this year.

  

• Q2 GDP Unchanged at 2.5%
  Eddy Elfenbein, September 26th, 2013 at 10:20 am

  The government reported today that Q2 GDP grew by 2.5% which was unchanged from its report in August. This is tepid growth. One positive aspect is that growth has accelerated the last two quarters. This is a trend I’d like to see continue.

  

• Kristen Bell LOVES Bed Bath & Beyond
  Eddy Elfenbein, September 26th, 2013 at 10:01 am

• Morning News: September 26, 2013
  Eddy Elfenbein, September 26th, 2013 at 6:59 am

  Japan defends PM Shinzo Abe’s ‘Gordon Gekko speech’ on Wall Street

  Tokyo Stocks Jump on Talk of Corporate Tax Cut

  Pursuing Graft at Higer Levels, Chinese Leader Risks Unsettling Elites

  Pimco Sees Buffett’s India Dream Cut to Junk as Vote Looms

  Lew Pressures Congress on Debt Limit With Deadline

  JPMorgan in Talks to Settle Government Cases for $11 Billion, Source Says

  Lixil to Buy Grohe in $4 Billion Landmark Deal

  Wal-Mart Cutting Orders as Unsold Merchandise Piles Up

  Alibaba U.S. Listing Would Be New Battle for Exchanges

  Fund to Let Investors Bet on Price of Bitcoins

  New Era as Brussels Tightens its Grip on Budget Miscreants

  Barclays To Shut Wealth Management Services In 130 Countries

  Richard Koo: Forget Hyperinflation — The Fed Is Now Facing The True Cost Of Quantitative Easing

  Joshua Brown: Cliff Asness: Pure Alpha is Still Worth It

  Credit Writedowns: BOJ’s Aggressive QE Has Brought JGBs to Negative Real Yields

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• Yes, But Does Google Have an America’s Cup?
  Eddy Elfenbein, September 25th, 2013 at 6:51 pm

  

  Congratulations to Larry Ellison and Oracle Team USA on winning the America’s Cup:

  Capping the greatest comeback in America’s Cup history, Oracle Team USA trailed at the start of the race but sailed away from Emirates Team New Zealand on Wednesday to retain the Cup in a winner-take-all decider.

  After falling behind 8-1, the American team under never-say-die skipper Jimmy Spithill captured eight consecutive races to win 9-8 in the first-to-nine-wins series. Oracle won 11 races but was hit with a two-race penalty for cheating in a warm-up race with smaller boats.

  The deciding race didn’t start well for Oracle. The Kiwis took advantage of their port position at the start and maintained an early seven-second lead at Mark 1 as Oracle plunged its two bows into the water while making the turn. But after three lead changes in the third upwind leg – once the Americans’ weakness – Oracle sailed away with a 44-second victory.

  On Monday, shares of ORCL hit a three-month high. As always, correlation doesn’t imply causation.

• Bed Bath & Beyond Earns $1.16 Per Share
  Eddy Elfenbein, September 25th, 2013 at 4:20 pm

  Bed Bath & Beyond‘s ($BBBY) earnings report is out. The company earned $1.16 per share for fiscal Q2 which was at the top of their range.

  I like how BBBY really buys back shares in an effort to reduce share count. Consider this: BBBY’s net income is up 37% from Q2 three years ago, but EPS is up 66%. That’s how real buybacks work. Not phony ones that mask executive compensation.

  For Q3, they see earnings ranging between $1.11 to $1.16 per share (which is exactly what they said for Q2).

  For the year, BBBY sees earnings coming in between $4.88 to $5.01 per share.

  Bed Bath & Beyond Inc. today reported net earnings of $1.16 per diluted share ($249.3 million) in the fiscal second quarter ended August 31, 2013, an increase of approximately 18.4% versus net earnings of $0.98 per diluted share ($224.3 million) in the same quarter a year ago. Net sales for the fiscal second quarter of 2013 were approximately $2.824 billion, an increase of approximately 8.9% from net sales of approximately $2.593 billion reported in the fiscal second quarter of 2012. Comparable store sales in the fiscal second quarter of 2013 increased by approximately 3.7%, compared with an increase of approximately 3.5% in last year’s fiscal second quarter.

  During the fiscal second quarter of 2013, the Company repurchased approximately $257 million of its common stock, representing approximately 3.5 million shares. As of August 31, 2013, the remaining balance of the existing share repurchase program authorized in December 2012 was approximately $1.8 billion.

  For the fiscal first half ended August 31, 2013, the Company reported net earnings of $2.09 per diluted share ($451.8 million), an increase of approximately 11.8% over net earnings of $1.87 per diluted share ($431.2 million) in the corresponding period a year ago. Net sales for the fiscal first half of 2013 were approximately $5.436 billion, an increase of approximately 13.0% from net sales of approximately $4.811 billion in the corresponding period a year ago. Comparable store sales for the fiscal first half of 2013 increased by approximately 3.5%, compared with an increase of approximately 3.3% in last year’s fiscal first half.

  The Company is modeling net earnings per diluted share in 2013 to be approximately $1.11 to $1.16 for the fiscal third quarter, $1.70 to $1.77 for the fiscal fourth quarter, and to be approximately $4.88 to $5.01 for the full year, which will include Cost Plus, Inc. (“World Market”) and Linen Holdings for all of fiscal 2013.

  Here are the sales and earnings figures for the past few quarters:

  Quarter	Sales	Gross Profit	Operating Profit	Net Profit	EPS
  May-99	$356,633	$146,214	$28,015	$17,883	$0.06
  Aug-99	$451,715	$185,570	$53,580	$33,247	$0.12
  Nov-00	$480,145	$196,784	$50,607	$31,707	$0.11
  Feb-00	$569,012	$238,233	$77,138	$48,392	$0.17
  May-00	$459,163	$187,293	$36,339	$23,364	$0.08
  Aug-00	$589,381	$241,284	$70,009	$43,578	$0.15
  Nov-01	$602,004	$246,080	$64,592	$40,665	$0.14
  Feb-01	$746,107	$311,802	$101,898	$64,315	$0.22
  May-01	$575,833	$234,959	$45,602	$30,007	$0.10
  Aug-01	$713,636	$291,342	$84,672	$53,954	$0.18
  Nov-02	$759,438	$311,030	$83,749	$52,964	$0.18
  Feb-02	$879,055	$370,235	$132,077	$82,674	$0.28
  May-02	$776,798	$318,362	$72,701	$46,299	$0.15
  Aug-02	$903,044	$370,335	$119,687	$75,459	$0.25
  Nov-03	$936,030	$386,224	$119,228	$75,112	$0.25
  Feb-03	$1,049,292	$443,626	$168,441	$105,309	$0.35
  May-03	$893,868	$367,180	$90,450	$57,508	$0.19
  Aug-03	$1,111,445	$459,145	$155,867	$97,208	$0.32
  Nov-04	$1,174,740	$486,987	$161,459	$100,506	$0.33
  Feb-04	$1,297,928	$563,352	$231,567	$144,248	$0.47
  May-04	$1,100,917	$456,774	$128,707	$82,049	$0.27
  Aug-04	$1,273,960	$530,829	$189,108	$120,008	$0.39
  Nov-05	$1,305,155	$548,152	$190,978	$121,927	$0.40
  Feb-05	$1,467,646	$650,546	$283,621	$180,980	$0.59
  May-05	$1,244,421	$520,781	$150,884	$98,903	$0.33
  Aug-05	$1,431,182	$601,784	$217,877	$141,402	$0.47
  Nov-06	$1,448,680	$615,363	$205,493	$134,620	$0.45
  Feb-06	$1,685,279	$747,820	$304,917	$197,922	$0.67
  May-06	$1,395,963	$590,098	$148,750	$100,431	$0.35
  Aug-06	$1,607,239	$678,249	$219,622	$145,535	$0.51
  Nov-07	$1,619,240	$704,073	$211,134	$142,436	$0.50
  Feb-07	$1,994,987	$862,982	$309,895	$205,842	$0.72
  May-07	$1,553,293	$646,109	$154,391	$104,647	$0.38
  Aug-07	$1,767,716	$732,158	$211,037	$147,008	$0.55
  Nov-08	$1,794,747	$747,866	$203,152	$138,232	$0.52
  Feb-08	$1,933,186	$799,098	$259,442	$172,921	$0.66
  May-08	$1,648,491	$656,000	$118,819	$76,777	$0.30
  Aug-08	$1,853,892	$739,321	$187,421	$119,268	$0.46
  Nov-08	$1,782,683	$692,857	$136,374	$87,700	$0.34
  Feb-09	$1,923,274	$785,058	$231,282	$141,378	$0.55
  May-09	$1,694,340	$666,818	$142,304	$87,172	$0.34
  Aug-09	$1,914,909	$773,393	$222,031	$135,531	$0.52
  Nov-09	$1,975,465	$812,412	$245,611	$151,288	$0.58
  Feb-10	$2,244,079	$955,496	$370,741	$226,042	$0.86
  May-10	$1,923,051	$775,036	$225,394	$137,553	$0.52
  Aug-10	$2,136,730	$874,918	$296,902	$181,755	$0.70
  Nov-10	$2,193,755	$896,508	$305,110	$188,574	$0.74
  Feb-11	$2,504,967	$1,076,467	$461,052	$283,451	$1.12
  May-11	$2,109,951	$857,572	$288,948	$180,578	$0.72
  Aug-11	$2,314,064	$950,999	$371,636	$229,372	$0.93
  Nov-11	$2,343,561	$958,693	$357,020	$228,544	$0.95
  Feb-12	$2,732,314	$1,163,669	$550,765	$351,043	$1.48
  May-12	$2,218,292	$887,199	$313,398	$206,836	$0.89
  Aug-12	$2,593,015	$1,032,669	$365,137	$224,330	$0.98
  Nov-12	$2,701,801	$1,074,010	$361,649	$232,750	$1.03
  Feb-13	$3,401,477	$1,394,877	$598,034	$373,872	$1.68
  May-13	$2,612,140	$1,032,971	$323,101	$202,490	$0.93
  Aug-13	$2,823,672	$1,113,484	$389,766	$249,304	$1.16

• New Home Sales and Durable Goods Order
  Eddy Elfenbein, September 25th, 2013 at 11:15 am

  We had two economic reports today. The first said that sales of new homes rose 7.9% last month. This was nice to see because sales had dropped sharply in July. Since mortgage rates have risen, analysts have been looking for evidence of weakness in the housing sector. While there have been some bumps, there’s no evidence yet of a broad downturn in housing. Homebuilder confidence is at an eight-year high. In the past year, sales of new homes are up 12.6%.

  The number of new homes available for sale rose 3.6 percent from July to 175,000. That’s still relatively lean — at the August sales’ pace it would take five months to exhaust the supply.

  The median price of a new home sold in August fell 0.7 percent from July to $254,600.

  Sales rose in all but one region of the country in August, increasing 19.6 percent in the Midwest, 15.3 percent in the South and 8.8 percent in the Northeast. Sales plunged 14.6 percent in the West, the second straight month of double-digit declines.

  The Commerce Department reported that durable goods (items expected to last at least three years) rose 0.1% in August. Like new home sales, this was a turnaround from a drop in July when durable goods fell 8.1%. Much of that drop was due to a fall in aircraft orders.

  The August orders were held back by a decline in demand for defense aircraft and other military goods. That could be related to steep government spending cuts that took effect in March. Excluding defense spending, orders rose 0.5%.

  Auto factories reported a 2.4% increase in orders, the biggest in six months.

  And orders for so-called core capital goods rose 1.5%, after falling 3.3% the previous month. Core capital goods are a good measure of businesses’ confidence in the economy and include items that point to expansion, such as machinery and computers.

  Durable goods shipments rose 0.9% in August, after two months of declines. The shipments figures are used to calculate economic growth.

• Stryker Buys MAKO for $1.65 Billion
  Eddy Elfenbein, September 25th, 2013 at 10:29 am

  One of our medical device companies, Stryker ($SYK), said this morning that it’s buying MAKO Surgical ($MAKO) for $1.65 billion. That’s $30 per share which is an 86% premium based on yesterday’s close. Stryker clearly wanted MAKO bad.

  MAKO is involved in robotic-assisted surgery. While the company isn’t yet profitable, Wall Street places a high premium on stocks in this field. MAKO is expected to generate revenue of $126 million this year, so Stryker is paying 13 times that. That’s a hefty price tag.

  I’m usually not a fan of major acquisitions. While this is a large deal, it’s still worth about 6% of Stryker’s market value. Shares of SYK are down about 2.4% which usually happens to the acquirer. I’m inclined to give Stryker the benefit of the doubt. Afterall, the company has grown its profits nicely for several years so someone there knows what they’re doing.

  I was glad to see Wells Fargo reaffirm their Outperform rating for SYK. A few other firms had recently raised their ratings on Stryker before the deal. RBC Capital just raised their price target from $74 to $81. Deutsche Bank went from $75 to $79. Earlier this month, Credit Suisse went Neutral to Outperform.

• Morning News: September 25, 2013
  Eddy Elfenbein, September 25th, 2013 at 7:03 am

  Sweden Raises $3.4 Billion After Selling Remaining Nordea Stake

  Tokyo Electron Takeover Could be a Mold-breaker for Japan

  Big Banks Cut Basel III Shortfall by $112 Billion at End of 2012

  The Remarkable Strength of the Euro

  Obama’s Health-Law Premiums Test Limits of Affordability

  Rate Of Home Price Growth ‘May Have Peaked,’ Says Case-Shiller

  Poker-Faced Marchionne Is Playing A Dangerous Game With Chrysler IPO

  Alibaba Said to Shift Target from Hong Kong to U.S. for I.P.O.

  SAC Is Said to Negotiate Settlement of Charges

  VietJet Said to Plan $10 Billion Airbus Order to Expand

  Samsung Dazzles Phablet Followers With More Girth, Size

  Amazon Unveils Faster Kindle Fires to Take On Apple

  The End of Poverty, Soon

  Roger Nusbaum: Ideological Battle and 2 Million Page Views

  Howard Lindzon: Two Idiots Log Into a CrowdFunding Site…and Crowds Are Not Idiots, Just a Little More Dangerous!

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