Archive for February, 2014

• Morning News: February 7, 2014
  Eddy Elfenbein, February 7th, 2014 at 6:20 am

  German Court Warns There Are ‘Important Reasons to Assume’ ECB Bond-Buying is Illegal

  Skating Close to the Edge, Again, on the Debt Ceiling

  Ethanol Evangelist Shrugs Off Volatility to Build Powerhouse

  Apple Repurchases $14 Billion of Own Shares In Two Weeks

  Twitter Must Move Faster to Counter Fears of Plateau

  After Selling His First Startup For $51 Million In 2012, Eduardo Vivas Sold His Second, Bright.com, To LinkedIn For $120 Million (LNKD)

  GM Profit Misses Estimates on European Restructuring, Taxes

  ArcelorMittal Sees 2014 Profit Rise as Europe Revives

  Semiconductor Sales a Vital Part of IBM’s Strategy Realignment

  Lehman Brothers Maybe Sold Warren Buffett a Rainbow

  Sony CEO’s Big Battle: Turning Around TV Business

  Legal Troubles Barely Subdue a Bitcoin Evangelist’s Sermons

  Clinical Trial Data At Heart Of Landmark Wall Street Insider Trading Scandal

  Jeff Carter: Why Matter Matters

  John Hempton: Jerry Seinfeld on Jos. A. Bank and Men’s Wearhouse

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• Light Posting Today
  Eddy Elfenbein, February 6th, 2014 at 4:28 pm

  My apologies for the lack of posting today. I spoke at the Motley Fool Investing Conference in Alexandria today. It was a lot of fun. I followed some person named Malcolm Gladwell (who??). I want to thank Morgan Housel and the team at the Motley Fool for their hospitality.

• Morning News: February 6, 2014
  Eddy Elfenbein, February 6th, 2014 at 6:45 am

  Macro Horizons: Prospect of ECB Easing Buoys European Stocks

  UK Interest Rates Remain on Hold

  Canada, U.S. Reach Tax Deal

  Currency Market Roiled by Trader Exits as Lawsky Probes Banks

  Twitter Stock Dips on User Growth Worries

  CVS Caremark, No. 2 Drugstore Chain, Will End All Tobacco Sales

  Coca-Cola to Buy 10% Stake in Green Mountain for $1.25 Billion

  Sony Forecasts $1.1 Billion Loss as Hirai Sells PC Unit

  Credit Suisse Misses Profit Forecast After Legal Charges

  Volvo to Double Job Cuts as Truck Markets Seen Unlikely to Grow

  Daimler Targets Significant Profit Gain on Revamped C-Class

  Sanofi Says Diabetes, Emerging Markets to Lift Profit

  Franchises Boost Disney’s Quarterly Earnings

  Cullen Roche: The “Fat Pitch” Myth

  Marc Chandler: ECB Preview: SMP Sterilization Versus Reserve Requirement Changes

  Epicurean Dealmaker: A Foolish Consistency

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• Fiserv Misses By a Penny
  Eddy Elfenbein, February 5th, 2014 at 6:57 pm

  After the closing bell, Fiserv ($FISV) reported Q4 earnings of 79 cents per share which was one penny below expectations. Quarterly revenues rose 10.3% to $1.26 billion which matched forecasts.

  Now on to the important stuff which is their guidance for 2014. Fiserv sees EPS this year ranging between $3.28 and $3.37 per share. That’s a pretty good range. I had thought it might be a little lower. The Street had been expecting $3.34. For all of 2013, Fiserv made $2.99 per share compared with $2.54 in 2012.

  “Our fourth quarter performance capped off a strong year of delivering on our financial commitments including our 28th consecutive year of double digit adjusted earnings per share growth,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “We enter 2014 with important market momentum and a focus on driving exceptional client value.”

• AFLAC’s Outlook
  Eddy Elfenbein, February 5th, 2014 at 3:17 pm

  I wanted to pass this along from AFLAC‘s ($AFL) earnings call:

  Lastly, let me comment and reiterate some of the statements that Dan’s already made. We have reaffirmed our objective for 2014 in the 2% to 5% increase in operating earnings per diluted share excluding the impact of the yen. This year, we estimate that 1 yen move on the average annual exchange rate will equal approximately $0.03 to $0.0325 per diluted share.

  Assuming the yen dollar exchange rate remains at the 2013 full year average rate of 97.54, we would then expect 2014 objective of a 2% to 5% growth to be in the range of $6.31 per diluted share to $6.49 per diluted share.

• Cognizant Reports Inline
  Eddy Elfenbein, February 5th, 2014 at 10:24 am

  The good news is that Cognizant Technology Solutions ($CTSH) reported very good earnings for their fourth quarter of $1.06 per share. That met expectations. The bad news is that Wall Street expected them to beat their expectations, which rather confuses what the definition of expectations is.

  Revenues for Q4 rose 20.9% to $2.36 billion which again hit expectations on the nose. For Q1, CTSH sees earnings of $1.18 per share on revenue of $2.42 billion. Both numbers matched expectations. They earned 93 cents per share in last year’s Q1.

  For all of 2014, CTSH forecasts earnings of at least $5.02 per share and revenues of at least $10.3 billion. This is where we have our “miss.” Wall Street had been expecting 2014 earnings of $5.08 per share on revenue of $10.39 billion. CTSH earned $4.38 per share last year compared with $3.74 in 2012.

  The company also announced a 2-for-1 stock split that will take effect next month. The shares are down about 4.5% but I’m not at all concerned.

• Morning News: February 5, 2014
  Eddy Elfenbein, February 5th, 2014 at 6:39 am

  Europe’s Investment Bankers Mark Worst January in Decade

  Eurozone Businesses Log Best Month in 2-1/2 Years in January

  China’s Oil Pipeline Through Myanmar Brings Both Energy and Resentment

  Indonesian Economy Grows 5.78% in 2013, Slowest in 4 Years

  Debt Limits Create Chaos, But What’s The Alternative?

  US Factory Orders Down 1.5% in December

  Everything You Need To Know About the Emerging Market Currency Collapse

  Monitoring, Vigilance Keys to Reacting to Data Breaches

  Sony In Talks to Sell PC Operations

  Bill Gates Quits as Microsoft Chairman and Satya Nadella is Named Chief Executive

  Morgan Stanley Reaches $1.25 Billion Mortgage Settlement

  JPMorgan to Pay $614 Million in U.S. Mortgage Fraud Case

  Time Warner Revenue Beats Estimates

  Joshua Brown: Chart o’ the Day: Leadership Evaporates

  Roger Nusbaum: Bear Markets: Different Ingredients, Same Market Behaviors

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• AFLAC Earns $1.40 per Share
  Eddy Elfenbein, February 4th, 2014 at 4:13 pm

  AFLAC ($AFL) just reported fourth-quarter earnings of $1.40 per share which was one penny better than Wall Street’s estimate. The weaker yen took a big bite out of earnings — 18 cents per share. That stings. In October, AFLAC gave a range of $1.38 to $1.43 per share.

  For all of 2013, AFLAC earned $6.18 per share. The yen had a terrible 2013; it fell 18.2%. For the year, AFLAC lost 76 cents per share due to the weak yen. Considering the massive headwind, I think AFLAC did very well.

  Now, on to their outlook for 2014:

  Commenting on the company’s fourth quarter and full year results, Chairman and Chief Executive Officer Daniel P. Amos stated: “We are very pleased with Aflac’s financial performance for both the quarter and year. As the year progressed, operating earnings per diluted share were better than expected, and we finished the year slightly ahead of our expectation for operating earnings to increase 5%, excluding the impact of the yen.

  “Aflac Japan produced solid results for both the quarter and the year. Sales of our third sector products were at the high end of our sales target range in 2013, primarily reflecting a positive response to our EVER medical product and the advertising we created to promote it. Consistent with our expectations, Aflac Japan’s new annualized premium sales in the fourth quarter and for the year were down significantly following the repricing of first sector products in April. However, we remain pleased with our expanded distribution system. Our agreement with Japan Post Holdings, which was announced in July 2013, further demonstrates the overall strength of the Aflac brand, our reputation for quality customer service, and the value our products provide.

  “From a financial perspective, Aflac U.S. continued to perform well for the quarter and for the full year. However, we remain disappointed with sales growth in the United States. With more than 90% of our accounts coming through the small business market, continued low levels of optimism have prompted small employers to remain guarded in their hiring outlook, which limits our universe of potential new policyholders. Additionally, ongoing uncertainties around health care reform implementation have prompted many businesses and consumers to defer decisions related to health care coverage. However, we believe the need for our products remains very strong and we continue to work on helping our distribution reach more employers, both small and large. At the same time, we seek opportunities to leverage our strong brand and relevant product portfolio in the evolving health care environment.

  “Overall, we were pleased with our investment results in 2013, especially in light of the low-yield environment in both Japan and the U.S. We position ourselves first to ensure we meet our policyholder obligations. We then seek to achieve a high degree of confidence in allocating capital to our shareholders while also pursuing investment strategies that enhance our overall income growth. As anticipated, our decision to allocate more of our investment portfolio to JGBs in the second half of 2013 suppressed our new money yields. However, our average new money yield of 2.47% was slightly higher than our 2012 results. Based on our current capital position and market outlook, we have resumed purchasing U.S. dollar securities for Aflac Japan’s portfolio within ranges consistent with our strategic asset allocation plans and product needs. We will continue to evaluate the allocation strategy based on investment market dynamics and capital, making tactical changes consistent with our outlook.

  “We remain committed to maintaining strong capital ratios on behalf of our policyholders and bondholders. We had conveyed that our goal was to end 2013 with a risk-based capital (RBC) ratio in the range of 500% to 600%. Although we have not yet finalized our statutory financial statements, we estimate our 2013 RBC ratio will exceed 750%. Additionally, we expect that Aflac Japan’s estimated solvency margin ratio (SMR) at year-end also exceeded 750%, which is an improvement over the SMR at September 30, 2013, of 732% and is well above our objective for 2013.

  “As we have said for many years, when it comes to deploying capital, we still believe that growing the cash dividend and repurchasing our shares are the most attractive means, and those are avenues we will continue to pursue. In 2013, we repurchased $800 million, or 13.2 million of our shares, which is consistent with what we had communicated. Additionally, as we indicated last quarter, we increased the cash dividend 5.7%, effective with the fourth quarter. This marks the 31st consecutive year in which we’ve increased the cash dividend.

  “As we look ahead to 2014 sales opportunities, we expect Aflac U.S. sales to be flat to up 5%. We expect Aflac Japan sales of third sector cancer and medical products to be up 2% to 7%.

  “I want to reiterate that our primary financial objective for 2014 is to increase operating earnings per diluted share 2% to 5% on a currency neutral basis. As we communicated last quarter, our 2014 EPS will benefit significantly from increased share repurchase activities, but will also be challenged by several headwinds. Those include a difficult low-interest-rate environment in Japan, sizeable expenditures in both Japan and the U.S. to enhance our operational infrastructure, and an increase in Japan’s consumption tax, rising from 5% to 8% starting in April 2014. It is important to note that absent certain headwinds and tailwinds, our 2014 EPS growth rate objective would have been comparable with our 2013 EPS growth rate. As we look to the future, we anticipate the headwinds we face in 2014 will diminish significantly in 2015. We continue to believe we are well-positioned in the two best insurance markets in the world.”

  The good and important news is that AFLAC reiterated their 2014 guidance of growing operating earnings by 2% to 5%. That’s on a currency neutral basis. In October, they gave a full-year range of $6.28 to $6.52 per share. I’m honestly not sure if that range is still applicable. If we apply 2% to 5% growth off 2013’s earnings, that gives us a range of $6.30 to $6.49 per share (again currency neutral). Wall Street had been expecting earnings of $6.17 per share for 2014.

• Morning News: February 4, 2014
  Eddy Elfenbein, February 4th, 2014 at 6:50 am

  European Banks Have $3 Trillion of Exposure to Emerging Markets

  UBS CEO Says Emerging-Markets Selloff Overdone as Investors Exit

  Crude Prices Move Closer Again

  Toyota Motor Corp Executive: US Auto Market Continues on Mild Recovery Track

  Storms Cost U.S. Airlines $150 Million in January

  Hotel Management Firm Warns of Credit Breach

  BP Profits Fall on Weakness in Refining Business

  UBS Profit Beats Estimates on Lower Litigation Costs, Tax Gain

  ARM Royalty Growth Slows as Cheap Smartphones Take Over

  Southwest Sees Low-Fare Challenge to American’s Dallas Home

  Yum Profit Tops Estimates as International Sales Increase

  Debt Ceiling Drama: Will You Get Your Tax Refund on Time?

  Young Bankers Seek ‘Good Yield’ With Their Own Nonprofits

  Jeff Carter: Bitcoin and Money Transfers: Which Is More Efficient?

  Howard Lindzon: What if Today Was The Last Great Day to Sell Stocks?

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• Worst Day Since June
  Eddy Elfenbein, February 3rd, 2014 at 4:17 pm

  What an ugly market day! The S&P 500 dropped 40.70 points to close at 1,741.89.

  This was our worst day for the index since June 20th. It was our lowest close since October 17th.

  

  We’re still above the 200-day moving average, but we’re getting close.