Archive for April, 2015
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The Voltari Surge
Eddy Elfenbein, April 22nd, 2015 at 11:43 amAn obscure mobile-advertising company named Voltari (VLTC) has soared dramatically in the last few days. It was as low as 72 cents per share on March 26, Today it’s been as high as $21.75.
What’s causing the rally? Carl Icahn.
Icahn and his funds purchased 4.06 million shares, or about 95 percent of the stock that the New York-based company sold. The holding cost $5.5 million, according to a regulatory filing, and was valued at $65.7 million as of yesterday. The purchase brought his stake to 4.74 million shares.
The gain on Voltari would be even larger if Icahn’s holdings of other equity securities were included. He and his funds owned 1.15 million preferred shares and warrants to buy 969,603 common shares, according to the filing.
Icahn’s involvement with Voltari began in February 2007, when he invested $50 million. The company was called Motricity Inc. back then and was closely held. It made an initial public offering in June 2010. The shares peaked less than five months later and then plunged as much as 99.8 percent, to 63 cents.
Voltari was a unit of Motricity, and became the parent company in an April 2013 reorganization designed to preserve loss-related tax credits. The company had net losses totaling $367.5 million from 2007 through last year, according to data compiled by Bloomberg.
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Wabtec Beats and Raises Guidance
Eddy Elfenbein, April 22nd, 2015 at 9:02 amMore earnings. This morning, Wabtec (WAB) reported Q1 earnings of 99 cents per share which was four cents better than estimates. The company also raised its full-year guidance from $4.05 to $4.10 per share.
Raymond T. Betler, Wabtec’s president and chief executive officer, said: “With a strong first quarter, we’re off to a good start for the year. We will continue to face challenges during the year, including global economic uncertainty and foreign currency exchange headwinds, but we expect to benefit from our strong backlog, and from ongoing investment in freight rail and passenger transit projects around the world. We’re also pleased with our long-term growth prospects, which are driven by our diversified business model, balanced strategies and rigorous application of the Wabtec Performance System.”
Details from the quarter:
First quarter sales were $819 million, 18 percent higher than the year-ago quarter, due to growth in the Freight Group.
Income from operations was a record $148 million, or 18.1 percent of sales, compared to 17.5 percent in the year-ago quarter.
Earnings per diluted share were a record 99 cents, which was 19 percent higher than the year-ago quarter.
At March 31, 2015, the company had cash of $249 million and debt of $421 million.
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Morning News: April 22, 2015
Eddy Elfenbein, April 22nd, 2015 at 7:17 amGreek Cash Seen Lasting Into June, No EU Deal Imminent
EU Opens Antitrust Case Against Gazprom
Bank of England Policymakers Unanimous on Holding Rates
Mystery Trader Armed With Algorithms Rewrites Flash Crash
Is Cheap Gas Pulling the Plug on Electric Cars?
Rolls-Royce Names East CEO as Rishton Goes Amid Investor Ire
Comcast’s Track Record in Past Deals May Be Hitch for Merger With Time Warner Cable
Amazon’s New Travel Service Enters Lucrative Online Travel Market
Coca-Cola Profit Tops Estimates as Price Increases Boost Sales
EMC Falls Short of Analysts’ Estimates on Weak Storage Demand
Richemont Warns of Profit Drop on Derivative Losses
British Regulator Fines Merrill Lynch $19.8 Million for Reporting Failures
Frances Coppola: Rediscovering Old Economic Models
Joshua Brown: Savita Subramanian: The Cycle Is Not Peaking
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Stryker Earns $1.11 per Share
Eddy Elfenbein, April 21st, 2015 at 4:17 pmStryker (SYK) reported Q1 earnings of $1.11 per share. That was three cents better than estimates. The company also raised the low end of their full-year forecast by five cents per share. The new range is $4.95 to $5.10 per share. Net sales rose by 3.2% to $2.4 billion, or 7.4% in constant currency.
“We are pleased with our first quarter results, with another strong quarter of nearly 6% organic sales growth and disciplined expense management,” said Kevin A. Lobo, Chairman and Chief Executive Officer. “We expect this momentum, which is balanced across segments and regions, to continue and are raising the low end of full year sales and earnings guidance.”
(…)
We expect 2015 constant currency sales growth in the range of 6.0% to 7.0%, including organic sales growth in the range of 5.0% to 6.0%. Based on current foreign currency exchange rates we expect adjusted diluted net earnings per share to be in the range of $1.15-$1.20 and $4.95-$5.10 in the second quarter and the full year, respectively. If foreign currency exchange rates hold near current levels, we expect sales in the second quarter and full year of 2015 to be negatively impacted by approximately 3.5% to 4.5% and adjusted diluted net earnings per share to be negatively impacted by approximately $0.25 to $0.30 in the full year, approximately half of which will be in the first half of the year.
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Signature Bank Earns $1.64
Eddy Elfenbein, April 21st, 2015 at 9:49 amSignature Bank (SBNY) reported Q1 earnings of $1.64 per share, five cents better than estimates.
Net income for the 2015 first quarter reached a record $83.4 million, or $1.64 diluted earnings per share, versus $66.0 million, or $1.37 diluted earnings per share, for the 2014 first quarter. The record net income for the 2015 first quarter, versus the comparable quarter last year, is primarily due to an increase in net interest income, fueled by strong deposit growth and record loan growth. These factors were partially offset by an increase in non-interest expense.
Net interest income for the 2015 first quarter reached $222.5 million, up $36.0 million, or 19.3 percent, when compared with the 2014 first quarter. This increase is primarily due to growth in average interest-earning assets. Total assets reached $28.59 billion at March 31, 2015, an increase of $5.48 billion, or 23.7 percent, from $23.10 billion at March 31, 2014. Average assets for the 2015 first quarter reached $27.98 billion, an increase of $5.28 billion, or 23.3 percent, compared with the 2014 first quarter.
Deposits for the 2015 first quarter rose $1.41 billion, or 6.2 percent, to $24.03 billion at March 31, 2015. When compared with deposits at March 31, 2014, overall deposit growth for the last twelve months was 31.2 percent, or $5.72 billion. Excluding short-term escrow and brokered deposits of $3.38 billion at the end of the 2015 first quarter and $3.08 billion at year-end 2014, core deposits increased $1.11 billion for the quarter. Average deposits for the 2015 first quarter reached $23.38 billion, an increase of $1.24 billion, or 5.6 percent.
“2015 is off to an outstanding start as we again set records in both earnings and loan growth while also delivering very strong deposit growth,” stated Joseph J. DePaolo, President and Chief Executive Officer.
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Morning News: April 21, 2015
Eddy Elfenbein, April 21st, 2015 at 5:46 amGreece Makes It Expensive to Hedge European Stocks
ECB Is Studying Curbs on Greek Bank Support
Europe Is Expected to Bring Antitrust Charges Against Gazprom
Iran Wants OPEC to Pave Way For Its Extra Oil Production When Sanctions Lifted
The Fed Still Wants Easy Money
Goldman Sachs and Morgan Stanley Find Different Paths to Profits
Credit Suisse Says Quarterly Profit Up 23% Courtesy of Healthy Trading
IBM First-Quarter Earnings Top Wall St. Expectations
Halliburton Beats Estimates, Boosts Job Cuts After Oil Crash
Boutique Banks to Suffer Most If Comcast-Time Warner Cable Deal Vetoed
SAP Quarterly Revenue Exceeds Estimates on Currency Boost
Sky Profits From Surge in U.K. and Europe Customer Numbers
Sun Pharma Slumps Most in Near Six Years on Daiichi’s Share Sale
Roger Nusbaum: A Bloomberg Outage Caused The Market to Fall? Really?
Jeff Carter: How To Make Great Leaps Forward In Civilization
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Hormel on Avian Flu
Eddy Elfenbein, April 20th, 2015 at 5:30 pmHormel Foods (HRL) just issued a press release on the Avian Flu. Short version: It’s impacted their turkey business but they expect the impact to wane as the year goes on. Hormel is keeping their full-year guidance at $2.50 to $2.60 per share. That’s no change.
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Risks that Investors Face
Eddy Elfenbein, April 20th, 2015 at 3:05 pmI love this quote from Benjamin Graham:
The risk of paying too high a price for good-quality stocks – while a real one – is not the chief hazard confronting the average buyer of securities. Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions. The purchasers view the current good earnings as equivalent to “earning power” and assume that prosperity is synonymous with safety.
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The Long End of the Treasury Curve
Eddy Elfenbein, April 20th, 2015 at 12:07 pmIn the summer of 2012, the bond market reached incredible heights. On July 24, 2012, the yield on the 10-year Treasury fell to 1.39%. That was the lowest in the history of the republic. (That appears to be the case; these facts aren’t so easy to nail down.)
At the time, I thought that was at the end of the bond market’s amazing 31-year run. The 10-year had gotten to 15.84% on September 30, 1981, also the highest in the history of the republic. Now I’m not so sure the rally is over.
During 2013, Treasury yields bounced higher and the 10-year yield broke above 3%. But then something unexpected happened, the bond market began to rally again. By this past February, the 10-year got as low as 1.65%. That’s still above the July 2012 mark but the 20- and 30-year yields both reached new lows.
On January 30, 2015, the 30-year got down to 2.23% which was 22 basis points below its July 2012 low. The 20-year got to 2.04%, seven basis points below its July 2012 low.
So the longer-date parts of the yield curve have moved lower while the shorter part hasn’t. This means the spread between the two has narrowed. Is it worthwhile looking at the spreads of such long term bonds?
Generally, the higher longer-term bonds yield more than shorter-term bonds, the better the outlook for the economy. When the spread is low or even negative, that’s not so good for the economy. My preference is to look at the difference between the 2- and 10-year yields. The two-year note is short enough without being overly influenced by the Fed Funds rate.
I don’t think the long-end spreads are as important but it’s interesting to note that the spread between the 30- and 10-year bonds has been falling almost consistently for two years. The spread between the 20- and 30-year doesn’t strike me as particularly important.
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Back Above 2,100
Eddy Elfenbein, April 20th, 2015 at 10:12 amThe S&P 500 is back over 2,100. Still, the 2,040 to 2,120 trading range continues.
This is a very big week for earnings. For some reason, there aren’t as many earnings reports on Monday and Friday. But one big earnings report came from Morgan Stanley (MS) this morning. The bank had a very strong quarter; profits soared 60%. They earned 85 cents per share which was seven cents better than expectations. The stock is currently up about 0.5%.
I’m not a fan of MS until they start paying a more reasonable dividend. Given their profits, they should be paying out something like 25 cents per share. Instead, they pay out 10 cents per share. As an investor, I want to see more of a cushion (unless there’s a very good reason).
The Dow is leading the rest of the market thanks to a strong day from IBM (IBM). Since the Dow is price weighted, the higher-priced stocks have greater say. The 10-year yield is currently holding at 1.87%. The yield is very close to a 10-week low. In February, the 10-year yield got as low as 1.65% which was the lowest since May 2013.
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