Archive for February, 2016

• Wabtec Earned $1.05 per Share
  Eddy Elfenbein, February 18th, 2016 at 11:15 am

  This morning, we had our final earnings report for Q4. Wabtec (WAB) reported earnings of $1.05 per share which matched Wall Street’s consensus. Quarterly revenue increased 1.5% to $833 million which was a bit below consensus. For the year, Wabtec made $4.10 per share.

  Raymond T. Betler, Wabtec’s president and chief executive officer, said: “We finished 2015 with a strong performance and are positioned for record results again in 2016, even as we face challenges in some of our key markets. We have responded to these challenges by accelerating our cost and efficiency improvement programs. At the same time, we continue to invest in our growth strategies and remain optimistic about our long-term prospects, thanks to continued investment in freight rail and passenger transit projects around the world. As always, we expect to benefit from our diversified business model, balanced growth strategies and rigorous application of the Wabtec Performance System.”

  Wabtec also offered guidance for 2016. They see earnings ranging between $4.30 and $4.50 per share. Wall Street had been expecting $4.36 per share. Wabtec added, “The company expects 2016 quarterly results to improve sequentially during the year as it realizes the benefits of ongoing cost reduction initiatives and as projects already in backlog begin to ramp up.”

  The stock gapped up at today’s open. At one point, WAB was up more than 10% today. Gradually, however, the sellers returned and WAB is now down 2% on the day.

• Morning News: February 18, 2016
  Eddy Elfenbein, February 18th, 2016 at 6:09 am

  Russia Sees Oil Output Slump in Worst Case Amid OPEC Talks

  The One Shock Russia Dodged Is Now Catching Up With Putin

  Japan’s Exports Drop Most Since 2009 as Sales to China Fall

  Debt, Demographics and Disinflation: Japan’s 3-D Lessons for Asia

  Bank Indonesia Cuts Rates as Emerging-Market Appetite Perks Up

  Ringgit Leads Emerging-Market Gains as Oil, GDP Boost Sentiment

  Police Arrest Five After Raid at China Bank ICBC’s Madrid Office

  AmEx Investors Seek Revenue Boost as Firm Cuts Costs, Reshuffles

  HSBC Snubs China: A Warning for Beijing

  Tianjin Tianhai to Purchase Ingram Micro for $6 billion

  NetApp To Slash 12 Percent Of Workforce

  Should You Follow The Smart Money Into Kinder Morgan?

  Nestlé Profit Declines as It Misses Sales Forecast

  Cullen Roche: Say It With Me Now: Interest on Reserves isn’t Sterilization!

  Joshua Brown: Earning Investor Loyalty Is Not an Event, It’s a Process

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• Industrial Production +0.9%
  Eddy Elfenbein, February 17th, 2016 at 8:09 pm

  We got a surprisingly good piece of economic data today. The government reported that industrial production rose 0.9% last month. That’s more than twice what Wall Street had been expecting. This is important because IP has been pretty flat for the past year. November and December were especially poor.

  The boost reflected a surge in electricity generation due to last month’s cold weather, as well as higher manufacturing output to meet strong demand for new cars. But overall output has been declining over the past year, and it isn’t clear whether last month’s surge was a blip or the start of a broader rebound.

  “January was just a good month in a long string of weak or mediocre months, with no assurances that the January performance has any staying power or will not be offset by a weak February,” IHS Global Insight economist Michael Montgomery said in a note to clients.

  This suggests that the U.S. economy could be experiencing internal rolling recessions. So while the broader economy never fell into a recession, the manufacturing sector may have.

• Earnings from Cerner and Express Scripts
  Eddy Elfenbein, February 17th, 2016 at 9:00 am

  After yesterday’s close, we got earnings reports from Cerner and Express Scripts.

  Cerner (CERN) reported Q4 earnings of 61 cents per share which beat Wall Street’s expectation by four cents per share. Quarterly revenue rose 27% to $1.175 billion. For the year, the healthcare IT firm earned $2.11 per share which was an increase from $1.65 per share in 2014. While that’s impressive growth, there are some signs of trouble. Bookings rose 16% last quarter, below Cerner’s forecast, and backlog is up by just 2% from Q3.

  For Q1, Cerner expects revenue between $1.15 billion and $1.2 billion, and EPS between 52 and 54 cents. Wall Street had been expecting 54 cents per share. For the year, Cerner sees revenue ranging between 4.9 billion and 5.1 billion. They see full-year EPS between $2.30 and $2.40. The Street had been expecting $2.36 per share.

  In yesterday’s after-hour market, Cerner was down as much as 17%. The stock is currently down about 8% in today’s trading.

  Express Scripts (ESRX) reported Q4 earnings of $1.56 per share which matched Wall Street’s consensus. Earnings for the pharmacy benefits management company weren’t much of a surprise since they already told us to expect earnings to range between $1.54 and $1.58 per share.

  “Our business model of alignment, developed 30 years ago, has never been more relevant than it is today,” said George Paz, Chairman and CEO. “Our job is to continue to take advantage of the opportunities and uniquely help clients withstand the constant challenges in the healthcare marketplace by taking bold actions to effectively balance pharmacy cost and care. Our focused alignment continues to control client costs, improve patient care and drive long term value to our shareholders.”

  Express raised, ever so slightly, their guidance for 2016. Initially, they expected earnings of $6.08 to $6.28 per share. Now they expect $6.10 to $6.28 per share. True, that’s not the most earth-shattering revision, but it’s better than nothing. The new guidance implies earnings growth of 10% to 14%. For Q1, they expect earnings of $1.18 to $1.22 per share. Wall Street had been expecting $1.28 per share.

• Morning News: February 17, 2016
  Eddy Elfenbein, February 17th, 2016 at 7:03 am

  Japan Economy Minister: Need More Data to Measure Impact of Negative Rates

  Iran, Iraq Under Pressure to Cap Oil Output

  Bush Bailout Chief Channels Bernie Sanders’ Call To Break Up Big Banks

  Why $100 Bills and €500 Notes May Soon Be Killed Off

  Spain’s Bailed-Out Bankia to Pay Back Small Shareholders

  Credit Agricole Jumps as Bank Sees Cash Dividend on Stake Sales

  Bombardier Plans to Cut 7,000 Jobs as Profit Misses Estimate

  Northrop Bomber Award Upheld After Lockheed-Boeing Protest

  Program Accounting, Boeing’s Common Practice… But What Is Different This Time?

  Akzo Nobel to Buy BASF Industrial Coatings Unit For 475 Million Euros

  What Alibaba Can Learn From Groupon

  Forget Spam — Hormel Is Focused on the Refrigerated-Food Aisle

  Goldman Sachs Backs Social Media Management Software

  Roger Nusbaum: Abundant Volatility

  Joshua Brown: The Riskalyze Report: Advisors Embrace the Fear Trade

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• ADT Being Bought for 56% Premium
  Eddy Elfenbein, February 16th, 2016 at 12:35 pm

  One big finance story today is that ADT (ADT) is being bought out by Apollo Global Management for $7 billion. That’s a cool 56% premium. You may recall that ADT was spun-off from Tyco a little over three years ago.

  There’s an interesting backstory to ADT. In 1863, Edward A. Calahan was working for the American Telegraph Company. He noticed that Wall Street employed boys as “runners,” kids who would dash around with the latest stock price news.

  Calahan’s idea was to use a telegraph machine to do the same job, and presto, the stock ticker was born. The small paper used by the ticker machine was called ticker tape, and that was used for New York’s famous ticker tape parades. (Thomas Edison didn’t invent the stock ticker, but he pioneered an early version.)

  Calahan formed the Gold and Stock Telegraph Company. Now I’ll turn it over to Wikipedia:

  Three years later, the president of Gold and Stock Telegraph Company woke up to a burglar in his home, which inspired him to create a telegraph-based alert system. This system eventually connected 50 of his neighbors to a central station where all the alert boxes were monitored. There were many small telegraph delivery companies in the United States in the 19th century. In 1874, 57 district telegraph delivery companies affiliated and became “American District Telegraph”.

  

• Hormel Foods Earns 43 Cents per Share
  Eddy Elfenbein, February 16th, 2016 at 12:18 pm

  This morning, Hormel Foods (HRL) reported fiscal Q1 earnings of 43 cents per share. That’s for November, December and January. Hormel’s earnings were six cents better than estimates. Revenues fell 4.3% to $2.29 billion which was a bit below consensus.

  The good news is that Hormel raised their full-year 2016 forecast. The original range was $1.43 to $1.48 per share. Now it’s $1.50 to $1.56 per share. In other words, that largely seems to incorporate the six-cent earnings beat.

  “We are pleased to report a double-digit earnings increase for the quarter, with four of our five segments posting earnings growth,” said Jeffrey M. Ettinger, chairman of the board and chief executive officer. “This marks our eleventh consecutive quarter of achieving record earnings results.”

  “Our commitment to investing in the sustained growth of the business is evident in our results. Our business performance continues to be influenced by our company-wide spirit of innovation, increased brand support, prudent capital investment, and portfolio-expanding acquisitions,” commented Ettinger. “While sales were muted this quarter by turkey supply constraints and lower pricing due to declining pork markets, we enjoyed strong performance from many great products across our portfolio, such as HORMEL GATHERINGS® party trays, APPLEGATE® natural breakfast sausage, HORMEL® FIRE BRAISEDTM meats, MUSCLE MILK®PRO SERIES protein beverages, and WHOLLY GUACAMOLE® refrigerated dips.”

  (…)

  “Our strong earnings performance in the first quarter, led by Refrigerated Foods, Grocery Products, and Specialty Foods, along with the positive momentum at Jennie-O Turkey Store, has given us confidence to raise our fiscal 2016 earnings guidance range from $1.43 to $1.48 per share to $1.50 to $1.56 per share,” stated James P. Snee, President and Chief Operating Officer.

  “We expect favorable input costs to continue for Refrigerated Foods, Grocery Products, and Specialty Foods, while we look for pork operating margins to moderate as the year progresses,” commented Snee. “Our turkey production is on pace to return to normalized levels by the end of the second quarter, positioning Jennie-O Turkey Store for strong growth in the back half of fiscal 2016 with our on-trend portfolio of JENNIE-O® turkey products. We expect International to achieve improved results with increased sales of our SKIPPY® peanut butter and SPAM® family of products.”

  “As part of our efforts to drive revenue growth, we are currently investing in our brands through impactful new advertising campaigns for innovations such as our SKIPPY® PB BITES, and core items including HORMEL® pepperoni and MUSCLE MILK® protein products, ” added Snee.

  This was a very good earnings report and the market gods are pleased. HRL shares are currently up 6.6% today. At one point this morning, the stock was up more than 10% on the day. Bloomberg notes that this is Hormel’s largest intra-day move in over 10 years.

• Morning News: February 16, 2016
  Eddy Elfenbein, February 16th, 2016 at 7:08 am

  Putin’s Reward for Doing a Deal With OPEC Overshadowed by Risks

  BOJ Launches Negative Rates, Already Dubbed a Failure By Markets

  China Turns on Taps and Loosens Screws in Bid to Support Growth

  Swiss Won’t Rethink 1,000-Franc Note as Draghi Hails Crime Fight

  German Investor Confidence Falls Amid Equity and China Woes

  At Puerto Rico’s Power Company, a Recipe for Toxic Air, and Debt

  Goldman Channels FDR’s `Nothing to Fear’ With Sell Gold Call

  Anglo CEO Sees $1 Billion Brazil Niobium Sale Within Two Months

  Paragon Offshore’s Restructuring Agreement Trades Some Short-Term Gain For More Potential Long-Term Pain

  SoftBank Announces $4.4 Billion Share Buyback

  A French Lesson For Li Ka-Shing

  Apollo Global Management Nears Acquisition Deal for ADT

  Anadarko Anoints `Brand Ambassadors’ to Fight Off Drilling Bans

  Jeff Carter: The Flow; How Do You Get In The Zone?

  Cullen Roche: What Have We NOT Learned Since 2008?

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• Morning News: February 15, 2016
  Eddy Elfenbein, February 15th, 2016 at 5:44 am

  Japan’s Nikkei Jumps 7.2 Percent, Leads World Stocks Higher

  Severe Contraction and Falling Prices in Japan Signal Tough Test for Abenomics

  Japan’s Banks Unready for Negative Rates Mean Cash Seen at Zero

  Chinese Start to Lose Confidence in Their Currency

  OPEC Members Increasingly Keen to End Oil Glut: Nigeria Oil Minister

  Oil Trades Near $30 as Iran Loads for Europe, China Imports Fall

  HSBC Keeps London Base in Victory Over Asia; Shares Gain

  SoftBank Announces $4.4 Billion Share Buyback

  Airbus, Boeing Count on China as Southeast Asia Slows Down

  Greens Say Ikea Avoided at Least $1.1 Billion in Taxes to EU

  Freeport Agrees $1 Billion Mine Stake Sale With Sumitomo

  Don’t Blindly Follow Jamie Dimon, Deutsche Bank Says

  Trial Illuminates Porches’ Rise to Power at Volkswagen

  Jeff Miller: What Is The Biggest Market Worry?

  Jeff Carter: The Real Reason Losing A Judge Like Antonin Scalia Hurts

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• Talking Stocks on Bloomberg
  Eddy Elfenbein, February 12th, 2016 at 9:55 pm

  I had a chance to discuss this hectic market on Bloomberg today with Scarlet Fu and Alix Steel: