Archive for July, 2014

• DirecTV Earned $1.59 per Share
  Eddy Elfenbein, July 31st, 2014 at 10:30 am

  DirecTV ($DTV) reported another solid quarter. The satellite TV operator earned $1.59 per share for Q2 which was six cents better than esimtates.

  Net subscriber disconnections in DirecTV’s U.S. business totaled 34,000, compared with 84,000 disconnections a year earlier. The total subscriber base was about 20.2 million at the end of the quarter. Revenue in the region rose 5.5% to $6.27 billion.

  A sharp increase in subscribers in Latin America, however, helped drive better results. The company added net 543,000 subscribers in Latin America, more than three times the 165,000 subscribers added a year earlier. The company had a total of 12.5 million subscribers in the region and revenue rose 6.1% to $1.79 billion.

  The stock isn’t doing much today, and I don’t expect it to move a whole lot. As long as the AT&T merger is expected to go through, DTV will gradually drift higher to the $95 deal price.

• Morning News: July 31, 2014
  Eddy Elfenbein, July 31st, 2014 at 7:23 am

  Eurozone Inflation Falls to 0.4% in July

  What Would a Default Change for Argentina?

  Blame It On The World Cup

  Bouncing Back, Economy Grew 4% for Quarter

  Fed Tunes Into Yellen Still Playing Labor-Market Blues

  Shell Says Russian Sanctions Minimize Restraints on Gas

  Twitter Takes Off, Lifts Fortunes Of Co-Founders Dorsey, Williams

  Samsung’s Mobile Chief Feels Pressure Over Sales

  Sony Warns Smartphone Weakness will Brake profit Progress After Q1 Surge

  Bank of America Raises Its Settlement Offer

  Siemens CEO Says to Focus on Restructuring, Not M&A

  AB InBev Scores with World Cup Beer Sales

  As Sales Flag Abroad, Coke Refocuses on Home Turf

  Jeff Carter: Where Bitcoin Could Get Traction

  Edward Harrison: Europe: A Plan to Boost Economy by Cutting Taxes

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• Today’s Fed Statement
  Eddy Elfenbein, July 30th, 2014 at 3:16 pm

  Here’s today’s FOMC statement:

  Information received since the Federal Open Market Committee met in June indicates that growth in economic activity rebounded in the second quarter. Labor market conditions improved, with the unemployment rate declining further. However, a range of labor market indicators suggests that there remains significant underutilization of labor resources. Household spending appears to be rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has moved somewhat closer to the Committee’s longer-run objective. Longer-term inflation expectations have remained stable.

  Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators and inflation moving toward levels the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced and judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat.

  The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions since the inception of the current asset purchase program, the Committee decided to make a further measured reduction in the pace of its asset purchases. Beginning in August, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $10 billion per month rather than $15 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $15 billion per month rather than $20 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee’s sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee’s dual mandate.

  The Committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. If incoming information broadly supports the Committee’s expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings. However, asset purchases are not on a preset course, and the Committee’s decisions about their pace will remain contingent on the Committee’s outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases.

  To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy remains appropriate. In determining how long to maintain the current 0 to 1/4 percent target range for the federal funds rate, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored.

  When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.

  Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Stanley Fischer; Richard W. Fisher; Narayana Kocherlakota; Loretta J. Mester; Jerome H. Powell; and Daniel K. Tarullo. Voting against was Charles I. Plosser who objected to the guidance indicating that it likely will be appropriate to maintain the current target range for the federal funds rate for “a considerable time after the asset purchase program ends,” because such language is time dependent and does not reflect the considerable economic progress that has been made toward the Committee’s goals.

• Q2 GDP Grew By 4%
  Eddy Elfenbein, July 30th, 2014 at 11:27 am

  Good news for the economy. The government reported that the economy expanded by 4% during the second three months of the year. The terrible number for Q1 was revised up from -2.9% to 2.1%. Still bad, but not quite as bad.

  The GDP figure was aided by inventory rebuilding. The opposite effect caused much of the damage for Q1.

  Over the past year, the economy grew 2.4%—slightly ahead of the 2.3% average annual gain from recovery’s start until the end of 2013, before an unusually cold winter socked the economy.

  The first-quarter “was an anomaly and growth will be much stronger through the rest of this year,” said PNC Financial Services Group economist Stuart Hoffman. “Consumers are spending thanks to job and income gains, and with borrowing costs still low businesses are investing to meet stronger demand.”

  Annual revisions, also released Wednesday, showed the economy expanded at a 4% pace in the second half of 2013, the best six-month stretch in 10 years. But figures over the past five years, including new revisions back to 2011, continue to tell a familiar tale. Unable to string together several quarters of steady growth, the recovery that began in 2009 is still the weakest since World War II.

  Wednesday’s report showed household spending advanced at a 2.5% rate last quarter, an increase from the first quarter’s modest 1.2% gain. Spending on total goods accounted for its highest contribution to GDP since late 2010, and spending on long-lasting durable goods was near a five-year high, led by a big jump in auto sales.

  Gold and stocks are down, while bonds are up.

• Morning News: July 30, 2014
  Eddy Elfenbein, July 30th, 2014 at 6:53 am

  U.N. Agency to Form Airline Safety Task Force After Ukraine Crash

  Spain’s Economy Grows Faster Than Expected, But CPI Flags Deflation Threat

  Home Prices Rise, But More Slowly

  Liberals Love the ‘One Percent’

  Barclays Returns to Quarterly Profit as Impairments Fall

  Ed Balls Backs Tougher Bank Regulation

  UBS and Deutsche Bank Embroiled in Dark Pool Probe

  McDonald’s Ruling Sets Ominous Tone for Franchisers

  Twitter’s User Growth Picks Up

  Topix Gains for Fourth Day Amid Earnings as Honda Jumps

  Why Flipkart Looks Set to Fail Against Amazon

  Total Leads European Shares Lower on Russia Worries

  Amazon Says Lower Ebook Prices Benefit Authors, Publishers

  Joshua Brown: The Death of Twitter Had Been Greatly Exaggerated

  Howard Lindzon: Congrats Tubemogul ….Citibank Blows (Bank of America Too) …and Why Do We Need Banks for IPO’s in 2014

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• More Buy List Earnings
  Eddy Elfenbein, July 29th, 2014 at 5:18 pm

  After the closing bell, we got three more earnings reports for our Buy List.

  Fiserv ($FISV) reported Q2 earnings of 81 cents per share which beat expectations by one penny per share. The company also raised the low-end of its full-year forecast by three cents per share. Fiserv now expects full-year earnings of $3.31 to $3.37 per share.

  Express Scripts ($ESRX) reported Q2 earnings of $1.23 per share. That was also a penny higher than expectations. ESRX also slightly narrowed their full-year range. The previous range was $4.82 to $4.94 per share. Now it’s $4.84 to $4.92 per share. The shares were up 2.1% today.

  AFLAC ($AFL) had Q2 operating earnings of $1.66 per share. They had been expecting operating earnings to range between $1.54 and $1.68 per share. The yen knocked off three cents per share. Wall Street’s consensus was for $1.59 per share.

  As for guidance, CEO Dan Amos said, “If the yen averages 100 to 105 to the dollar for the third quarter, we would expect earnings in the third quarter to be approximately $1.38 to $1.47 per diluted share. Using that same exchange rate assumption for the remainder of 2014, we would expect full-year reported operating earnings to be about $6.16 to $6.30 per diluted share.”

• Morning News: July 29, 2014
  Eddy Elfenbein, July 29th, 2014 at 6:48 am

  EU Finalizes Russian Sanctions as BP Warns of Impact on Business

  UK Mortgage Approvals Turn Around, Jump 8% in June

  Medicare, Social Security Disability Fund Headed in Different Directions

  Tech Companies Reel as NSA’s Spying Tarnishes Reputations

  Deutsche Bank Revenue From Debt Trading Beats U.S. Peers

  Zillow Deal to Buy Trulia Creates Real Estate Digital Ad Juggernaut

  FAA Seeks $12 Million Fine Against Southwest

  Honda Projects Record Profit on Yen, Emerging Markets

  UBS Profit Rises 15% as It Grapples With Legal Matters

  Aetna Posts Higher Q2 Profit, Lifts Full-Year Outlook

  The Bear Case For Uber (Yes, There Is One)

  Orange Accelerates Cost Cuts to Halt Earnings Drop

  35% in US Facing Debt Collectors

  John Hempton: The Herbalife Miss

  Roger Nusbaum: Should You Invest in Farm Land?

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• Light Posting this Week
  Eddy Elfenbein, July 28th, 2014 at 11:18 pm

  I’m taking a little time off this week to enjoy summer. I’ll still post but it will be lighter than normal.

  I thought Lu Wang at Bloomberg had an interesting article on the persistence of buying the dips. Here are some choice nuggets:

  Declines in the benchmark gauge for American equity are lasting an average of 1.5 days in 2014, the shortest since at least 2009, according to data compiled by Bloomberg. Starting last year, returns on days after the index fell have averaged 0.13 percent, the highest since they were 0.38 percent in 2009.

  (…)

  Losing streaks in the U.S. equity market are getting shorter. The S&P 500 has posted no declines that lasted more than three days in 2014, compared with an average of nine a year since March 2009, data compiled by Bloomberg show.

  Drops this quarter have lasted 1.2 days, down from 1.5 days in the previous three months and about half the length in 2012. The number of losses has stayed roughly the same as in the past. There have been 59 down days this year, compared with an average of 61 during the same time period since 2011.

  (…)

  About $190 billion has been added to equity mutual funds and exchange-traded funds since the start of 2013, data compiled by the Investment Company Institute and Bloomberg show. That’s a reversal from the five years through 2012, when $300 billion was withdrawn.

  (…)

  The S&P 500 has gone without a 10 percent loss for 33 months, the third-longest stretch since 1990. On average, corrections have occurred every 18 months since 1946, according to a study by Sam Stovall, chief equity strategist at S&P Capital IQ.

• Morning News: July 28, 2014
  Eddy Elfenbein, July 28th, 2014 at 6:43 am

  Reckitt Helps Keep Britain’s FTSE Afloat After Solid Update

  Bank of Communications Mulls Plan to Reform Ownership Structure

  Court Orders Russia to Pay $50 Billion to Yukos Shareholders

  Lew Can Use Tax Rule to Slow Inversions, Ex-Official Says

  NYC Pension Funds Report 17.4% Gain as U.S. Stocks Soar

  Dollar Tree to Buy Family Dollar for About $8.5 BIllion

  Rumored Danone Medical Food Sale To Hospira Would End Ambition

  No Burgers at Some China McDonald’s Over Food Scare

  Nissan First-quarter Profit Rises, Exceeds Consensus as U.S. Sales Improve

  Amazon Faces Threat of Losing Investors’ Trust Amid Low Profits

  Tyson Foods to Sell Mexico and Brazilian Poultry Businesses

  Ryanair Lifts Forecast as Quarterly Profit Soars

  Can Reddit Grow Up?

  Epicurean Dealmaker: Improve Yourself

  Howard Lindzon: Zillow is Hungry and Just Ate Trulia… & The Future of Financial Tech

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• Moog Earns $1.08 per Share
  Eddy Elfenbein, July 25th, 2014 at 10:42 am

  This morning, Moog ($MOG-A) reported fiscal Q3 earnings of $1.08 per share. Sales were up 2% to $684 million.

  “This was a very good quarter for our company with increased sales, record earnings and very strong cash flow,” said John Scannell, Chairman and CEO. “We are on track for fiscal ’14, which will be a great year for Moog. As we look to fiscal ’15, we should see further improvement. We’re forecasting very modest sales growth but a 16% increase in earnings per share. Company operating margins in fiscal ’15 will expand by 50 basis points, despite some margin challenges in our Aircraft segment. We also expect another year of strong cash flow. Overall, if fiscal ’15 turns out as we expect, it will be another record year for the company.”

  Moog raised its 2014 full-year guidance to $3.65 per share. Wall Street had been expecting $3.74 per share. Since they’ve already earned $2.59 per share for the first three quarters, that means they expect $1.06 per share for fiscal Q4. For 2015, Moog expects sales of $2.69 billion and EPS of $4.25. Wall Street had been expecting $4.56 per share.