Archive for October, 2015

• Earnings from Snap-on and Wabtec
  Eddy Elfenbein, October 22nd, 2015 at 12:01 pm

  The S&P 500 is up to a new two-month high today. The index has now recouped everything it lost from the August 21 to 24 plunge. This morning, we’ve been as high as 2,046.42.

  Thanks to its surprising earnings report, eBay (EBAY) is having a very good day. The shares are currently up close to 13%.

  We have five earnings reports today, and two of them were this morning. Snap-on (SNA) reported Q3 earnings of $1.98 per share which was four cents better than estimates.

  “We believe our third quarter results continue to confirm Snap-on’s capabilities in serving serious professionals performing critical tasks in workplaces of consequence around the world,” said Nick Pinchuk, Snap-on chairman and chief executive officer. “These results, which include 7.3% organic sales growth and a 12.5% increase in diluted earnings per share, demonstrate continued progress along our defined runways for coherent growth while overcoming headwinds in certain end markets and geographies. The 130 basis point improvement in operating margin before financial services also reflects contributions from our Snap-on Value Creation Processes, which drive ongoing improvements in safety, quality, customer connection, innovation and rapid continuous improvement.

  This was a solid quarter. The stock is currently up 2.5% today.

  Our big loser today is Wabtec (WAB). The company reported Q3 earnings of $1.02 per share. Wall Street had been looking for $1.04 per share. Revenues rose 1.5% to $809.5 million, which missed estimates of $846.35 million.

  For the full-year, Wabtec sees earnings of $4.10 per share (which implies Q4 earnings of $1.05 per share). That’s below the consensus of $4.13 per share. Wabtec also sees full-year revenue growth of 9% which comes to $3.32 billion. That’s below the consensus of $3.37 billion.

  The stock gapped downward sharply at the open. At one point, WAB was down 10% on the day. It’s coming back some and is currently down 4%.

• Morning News: October 22, 2015
  Eddy Elfenbein, October 22nd, 2015 at 7:16 am

  European Central Bank Keeps Interest Rates Unchanged

  German Bond Yields Are Higher Now Than Before ECB Announced QE

  China Plans 2020 Deadline for Dismantling Capital

  Bitcoin Currency Trades ‘Should Be Exempt From VAT’

  Apple To Raise China Solar Investment Fivefold with Climate Bid

  Microsoft’s Rule-Breaking Vision of a Future With Countless Devices

  Dow Chemical Makes Moves to Revamp Business

  Eli Lilly’s 3Q Profit Beats Street Estimates as Costs Fall

  Dunkin’ Brands Results Top Views Despite U.S. Weakness

  EBay’s Profit Beat Shows There’s Life After PayPal

  Daimler Expects Strong Earnings Growth This Year After Robust Third Quarter

  Lego Forecasts Christmas Shortage, and Everything Is Panic

  Raytheon Boosts Sales Forecast With Gain From Patriot Missiles

  Joshua Brown: Biff Could’ve Just Bought Stocks

  Howard Lindzon: Stocktoberfest 2015…Man on The Street

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• eBay Earns 43 Cents per Share
  Eddy Elfenbein, October 21st, 2015 at 4:18 pm

  No one was expecting much from eBay (EBAY) but the online auction house earned 43 cents per share for Q3 compared with the Street’s consensus of 40 cents per share. This is their first earnings report without PayPal.

  eBay Inc., a global commerce leader, today reported that gross merchandise volume (GMV) for the quarter ended September 30, 2015, increased 6% on a foreign exchange (FX) neutral basis, in-line with the prior quarter. Revenue for the quarter was $2.1 billion, driving non-GAAP net income from continuing operations of $529 million or $0.43 per diluted share, and GAAP net income from continuing operations of $545 million, or $0.45 per diluted share. The company repurchased $599 million of its common stock in the quarter, underscoring management’s confidence in the long-term value of the business.

  “We drove solid results in the quarter in which we completed a complex separation,” said eBay Inc. President and CEO Devin Wenig. “We also marked eBay’s 20th anniversary and made progress on executing our strategy to reposition the company to deliver stable and profitable long-term growth.”

  eBay Inc.’s commerce platforms continued to increase the role they play in global commerce, with an Active Buyer base that grew 5% year over year, to 159 million. GMV in the quarter was $19.6 billion, a 6% increase on an FX-Neutral basis and a 2% decline on an as-reported basis, reflecting the continued impact of a strong U.S. dollar. In the U.S., GMV grew 3%, a one point acceleration versus the prior quarter, and International GMV increased 7% on an FX-Neutral basis, while it was down 5% on an as-reported basis. Total revenue in the quarter of $2.1 billion was up 5% on an FX-Neutral basis and down 2% on an as-reported basis.

  For Q4, eBay expects revenues “between $2,275 million to $2,325 million, representing FX-Neutral growth of 3% – 5%.” They see Q4 earnings ranging between 47 and 49 cents per share. For the entire year, eBay sees currency neutral revenue growth of 3% to 5%, and earnings ranging between $1.80 and $1.82 per share.

  The shares have been up as much as 10% after hours.

• The Dollar’s Impact on Your Investments
  Eddy Elfenbein, October 21st, 2015 at 1:55 pm

  Simon Constable has an article at U.S. News & World Report on the dollar’s impact on the stock market.

  The greenback is looking strong, but there’s no reason to believe that it can’t get even stronger. If it does, then it will have an impact on your investments. Here’s why it matters and some key things you need to know.

  “It’s the kind of thing that Americans don’t think about much unless they travel overseas,” says Eddy Elfenbein, a Washington, D.C.-based private investor and author of the influential Crossing Wall Street blog. But when the dollar is strong, it does change the way various types of investments perform. “It’s like putting a magnet near a compass,” he says.

  Read the whole thing.

• Morning News: October 21, 2015
  Eddy Elfenbein, October 21st, 2015 at 7:09 am

  Saudis Risk Draining Financial Assets in 5 Years, IMF Says

  Japan’s Export Growth Slows as China Stumbles

  Netherlands and Luxembourg Ordered to Recover Taxes From Starbucks and Fiat

  Demand for Rental Apartments Boosts U.S. Housing Starts

  Credit Suisse to Launch $6.3 Billion Capital Increase

  Fiat Chrysler Shares Ease After Ferrari IPO Priced

  Michael Dell Dishes on Meg Whitman, the PC Biz and on EMC

  Lam to Buy KLA-Tencor in $10.6 Billion Chip Machinery Deal

  Chipotle Profit Misses, as Sales Growth Slows

  Uber CEO Says Public Offering `Years Away’ as Company Matures

  Intel to Convert Processor Chip Factory in China to Make Memory Chips

  Consumer Reports Stops Recommending the Tesla

  The 401(k) Crisis Is Getting Worse

  Cullen Roche: Creating Demand Out Of Thin Air

  Jeff Carter: The Reason The Fed Needs to Move Interest Rates Higher Now

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• Signature Bank Beats Earnings
  Eddy Elfenbein, October 20th, 2015 at 11:36 am

  This morning, Signature Bank (SBNY) reported Q3 earnings of $1.88 per share which was six cents better than estimates.

  Signature Bank (Nasdaq: SBNY), a New York-based full-service commercial bank, today announced results for its third quarter ended September 30, 2015. Net income for the 2015 third quarter reached a record $96.2 million, or $1.88 diluted earnings per share, versus $76.8 million, or $1.52 diluted earnings per share, for the 2014 third quarter. The record net income for the 2015 third quarter, versus the comparable quarter last year, is primarily due to an increase in net interest income, fueled by record deposit growth and record loan growth. These factors were partially offset by an increase in non-interest expenses.

  Net interest income for the 2015 third quarter reached $250.0 million, up $44.7 million, or 21.8 percent, when compared with the 2014 third quarter. This increase is primarily due to growth in average interest-earning assets. Total assets reached $31.92 billion at September 30, 2015, an increase of $5.97 billion, or 23.0 percent, from $25.95 billion at September 30, 2014. Average assets for the 2015 third quarter reached $31.19 billion, an increase of $5.82 billion, or 22.9 percent, compared with the 2014 third quarter.

  Deposits for the 2015 third quarter rose a record $2.16 billion, or 8.8 percent, to $26.61 billion at September 30, 2015. When compared with deposits at September 30, 2014, overall deposit growth for the last twelve months was 24.8 percent, or $5.29 billion. Excluding short-term escrow and brokered deposits of $4.40 billion at the end of the 2015 third quarter and $3.40 billion at the end of the 2015 second quarter, core deposits increased $1.15 billion for the quarter. Average deposits for the 2015 third quarter reached $26.10 billion, an increase of $1.54 billion, or 6.3 percent.

  The shares have been as high as $146.39 today. From the July 21 high to the September 2 low, SBNY had fallen from $155.84 to $126.49.

• Morning News: October 20, 2015
  Eddy Elfenbein, October 20th, 2015 at 7:08 am

  Eurozone Banks Take Advantage of QE, Lend on Easier Terms, ECB Survey Finds

  Here’s Why Japanese Investors Have Gone Ga-ga Over That Leveraged ETF

  The Man Accused of Spoofing Some of the World’s Biggest Futures Exchanges

  Hedge Funds are Bringing Back Everyone’s Least Favorite Toxic Investment

  Drug Makers Sidestep Barriers on Pricing

  Anheuser-Busch InBev Aims Its Tax-Trimming Skills at SABMiller

  With United Airlines’ Chief in the Hospital, General Counsel Will Fill In

  Yum Brands Plans to Separate China Business

  Apple CEO Defends Encryption, Opposes Government Back Door

  United Tech Profit Falls on Currency Swings; Plans $12 Billion Share Buyback

  BNY Mellon Profit Down 23% on Year-Ago Gains, Cuts Expenses

  Citigroup Accused of Improperly Avoiding $800 Million in New York State Taxes

  How Emojis Find Their Way to Phones

  Joshua Brown: The Ballad of the Breakaway Broker

  Roger Nusbaum: Market Stasis

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• Ford’s Move to Aluminum is Paying Off
  Eddy Elfenbein, October 19th, 2015 at 1:44 pm

  Ford Motor (F) took a big gamble in changing their F-150 pick-up bodies to aluminum. After some initial mis-steps, the strategy seems to be paying off.

  It’s not like the old F-Series was broken. In 2014, U.S. drivers bought one every 42 seconds or so. A full-frontal switch to aluminum was a massive gamble, and an expensive one. Ford essentially rebuilt two of its biggest factories to crank out the new trucks, shuttering them for 13 weeks at the opportunity cost of all the F-150s it could have made in that time—more than 90,000 vehicles in all.

  The change, however, is palpable. At Ford, they call it “the 50-foot test”—you can tell in 50 feet of driving the difference all that aluminum makes. Specifically, the 2015 trucks are about 700 pounds lighter, which makes them far more peppy and eager. Even with the smallest of the four engines Ford offers, the F-150 will go from a dead stop to 60 miles per hour faster than the Ford Fusion, its little cousin. “Just 10 years ago, that would have been complete science fiction,” Levine said.

  Cruising in a pickup is a bit like crawling in a Lamborghini; it’s possible, but not natural. That’s not the case with Ford’s new moneymaker. A long haul on an interstate isn’t a low-gear grind.
  Then there’s the heavy lifting. Every version of Ford’s pickup will tow a few hundred pounds more than previous iterations, with a max load of 12,200 pounds. Smaller, faster, and stronger, it’s like a linebacker, a mountain of muscle that can run the 40 in less than 5 seconds.

  A lot of truck fans don’t really care about those things. They buy a pickup because it feels like riding around in your living room, with bigger windows and more places to put a drink. Ford didn’t mess with that experience.

  The F-Series still has a center console capable of holding a bag of groceries, and its cabin is layered with enough trays and bins to store a family’s worth of iPhones and beef jerky. Meanwhile, Ford’s engineers lowered the window frames by two inches to provide even more visibility. It’s one of the most thoughtful touches, in addition to a snug, hand-size space at the bottom of the steering wheel that presents a perfect handle on long, straight roads. The one place Ford left some steel is in the wall behind the engine, sealing a cabin as quiet as a church.

  Earnings are due out a week from tomorrow, and I’m expecting good results. Ford made 24 cents per share for last year’s Q3. The consensus for this year is 47 cents per share.

• Three Booming Sectors.
  Eddy Elfenbein, October 19th, 2015 at 11:08 am

  It’s still early in Q3 earnings season but 71% of the reports so far have beaten expectations. Some industries are doing quite well. Alex Rosenberg of CNBC notes that we’re seeing 50% earnings growth in automobiles, airlines and construction materials.

  “Those are the sectors not tied to commodities, and they also benefit from low rates. That’s the sweet spot right now,” commented Eddy Elfenbein, editor of the “Crossing Wall Street” blog.

  And perhaps in the spirit of finding a phoenix amid the ashes, Elfenbein says that the fact that these companies are making it happen is actually good news.

  “All in all, this bodes well for the economy, since these are the early cyclicals,” Elfenbein told CNBC in an email, adding: “Yes, six years after the recession ended, the early cyclicals are moving.”

  The hope, of course, is that strength in these consumer-reliant sectors points to positive news ahead for the economy and stocks alike, as the “cycle” blooms.

• Morning News: October 19, 2015
  Eddy Elfenbein, October 19th, 2015 at 7:07 am

  Iran Urges OPEC to Cut Oil Output to Raise Prices to $70-$80

  China’s Growth Slows to 6.9%

  How Not to Fix Fannie and Freddie

  Quite A Roller-Coaster Ride For China’s Youku Tudou And VCs With Latest Alibaba Bid

  Providers of Fixed-Income ETFs Aim To Make Them Easier to Use

  Morgan Stanley Misses Estimates on Drop in Bond Trading Revenue

  Valeant Results Boosted By Recent Buys

  Microsemi Offers $2.4 Billion for PMC-Sierra to Top Skyworks

  The Great Ball of China Money Rolls into Bonds

  Zephyrs Of Hope Within The Zafgen Storm

  Turbulent Times At United

  Netflix Faces Challengers In Its Push to Expand Globally

  Halliburton Profit Beats As Costs Fall

  Cullen Roche: When Venture Capitalists are Heroes and Bankers are Zeroes

  Jeff Miller: Can Strong Housing Data Give An “All Clear” Signal For The U.S. Economy?

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