Archive for April, 2016

  • CR Bard Beats Earnings
    , April 27th, 2016 at 4:29 pm

    CR Bard (BCR) reported Q1 earnings of $2.34 per share. That’s 17 cents better than Wall Street’s forecast. Sales rose 7% to $873.5 million. Adjusting for currency, sales were up 8%.

    Timothy M. Ring, chairman and chief executive officer, commented, “Our strong results in the first quarter reflect continued momentum from the returns we have seen from our strategic investment plan. We continue to be in investment mode as we focus on shifting the mix of the portfolio to faster growth areas, including product and technology platforms, delivery platforms and increasing our presence in emerging markets.”

    Bard is also raising their full-year guidance. They now see sales rising between 6% and 8%. Adjusting for currency, that’s an increase of 7% and 8.5%.

    The old EPS range was $9.90 to $10.05. The new range is $10.05 to $10.18. That represents growth of 11% to 12% over last year.

    This was another solid quarter for Bard. The shares made another new high today, and they’re up again in after hours-trading.

  • Today’s Fed Policy Statement
    , April 27th, 2016 at 2:01 pm

    No rate increase. Here’s today’s policy statement:

    Information received since the Federal Open Market Committee met in March indicates that labor market conditions have improved further even as growth in economic activity appears to have slowed. Growth in household spending has moderated, although households’ real income has risen at a solid rate and consumer sentiment remains high. Since the beginning of the year, the housing sector has improved further but business fixed investment and net exports have been soft. A range of recent indicators, including strong job gains, points to additional strengthening of the labor market. Inflation has continued to run below the Committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and falling prices of non-energy imports. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

    Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

    Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.

    In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to 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 and international developments. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

    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, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

    Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo. Voting against the action was Esther L. George, who preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent.

    This is almost a perfect copy of the last statement.

  • Is there still a reason to own Apple?
    , April 27th, 2016 at 12:49 pm

  • Apple Could Buy Every Team in the NFL, NBA, NHL and MLB
    , April 27th, 2016 at 12:23 pm

    Yesterday, I tweeted.

    To be clear, when we say “Apple’s cash,” that’s really an accounting reality. They don’t have the cash sitting in a bank account.

    For one, almost all of the cash is held outside the U.S. and would be taxable if Apple brought it home.

    Also, a large part of Apple’s cash is held as “long-term marketable securities.”

    Apple also has a growing debt position. It’s easier for them to go to the bond market to fund their payments to shareholders, both dividends and buybacks.

  • IBD Profiles HEICO
    , April 27th, 2016 at 12:13 pm

    HEICO (HEI) joined our Buy List this year. As long-time readers know, I have a soft spot for seemingly dull companies that churn out a healthy profit year after year. That’s HEICO.

    Unfortunately, HEICO not an easy company to write about. They make airplane parts and they do it well.

    The good news is that Investor’s Business Daily recently featured the company. Here’s a sample:

    When commercial and military aircraft parts wear down, Heico (HEI) is often the go-to supplier for replacements — and lately more of those parts have been showing their age.

    It’s for a good reason, though. They’re getting used more, thanks in part to lower oil prices.

    “With lower oil prices, airlines are continuing to fly the older aircraft more; they’ve slowed down their rate of retirement substantially,” Kenneth Herbert, an analyst at Canaccord Genuity, told IBD. “Older planes are much less fuel-efficient than new ones, but with oil at $40 a barrel rather than $100 a barrel, the higher cost of operating older aircraft is not nearly as bad.”

    That’s just one of the reasons Heico is doing barrel rolls right now. Heico is drawing revenue from a number of sources, and sales are expected to accelerate from single-digit growth last year to double-digits this year.

    Part of that will come from an acquisition of a parts supplier to military helicopters, but in Heico’s first fiscal quarter, which ended Jan. 31, the higher growth rate had already started showing up. Revenue grew 14% over the prior year to $306.2 million. Adjusted earnings rose 20% to 49 cents a share.

    The company raised its 2016 forecast on revenue and now expects growth of 14% to 15% vs. 8% to 10% previously, equating to $1.35 billion-$1.38 billion. It also raised its forecast for net income growth to 10% to 13% from 8% to 10%. Analysts expect total revenue to climb 15% this year to $1.37 billion, while per-share earnings are seen rising 16% to $2.28 a share, according to Thomson Reuters.

    Heico has the benefit of drawing business from both the commercial and military side of aerospace. So if there is a reduction in military spending, its commercial side can pick up some of the slack. But that’s not the case right now.

    “The U.S. defense budget is rising again,” Victor Mendelson, Heico’s co-president, told IBD, adding that foreign military budgets in the Middle East and among some other U.S. allies such as South Korea and Japan are also rising. “NATO countries are involved in Syria and other hot spots. If these places heat up, there is a need for things we make.”

    I liked this line:

    Heico is a bit like a generic-drug maker. It provides low-cost copies of original products, which are regulated by the Federal Aviation Administration.

    You can see the entire article here.

  • AFLAC Jumps to All-Time High
    , April 27th, 2016 at 11:53 am

    Here are a few notes to pass along ahead of today’s Fed policy announcement which is due at 2 pm.

    Shares of AFLAC (AFL) gapped up to an all-time high this morning. They finally took out the old high from eight years ago. The stock is currently above $69 per share.

    Wabtec (WAB) is having another good day post-earnings. Sometimes there seems to be an odd delayed reaction to earnings news. The shares are now up 20% on the year for us making WAB our best position YTD.

    A similar delayed reaction is happening for Express Scripts (ESRX). It’s up 2% today. Also, Reuters reports, “Express Scripts CEO aims to keep Anthem as a customer.”

    Earnings from CR Bard (BCR) are due after today’s close.

  • Morning News: April 27, 2016
    , April 27th, 2016 at 7:28 am

    Debt-to-Equity Swaps Could Help China But Firms Must Restructure: IMF

    UK Economy Slows as Global Slowdown And Brexit Uncertainty Weighs

    Falling Output and Weaker Dollar Push Oil to 2016 High

    U.S. Steel Files Trade Complaint Against China

    Mitsubishi Motors Sees Orders in Japan Tumble After Scandal

    Comcast Profit Tops Estimates

    Comcast in Talks to Buy DreamWorks Animation for More Than $3 Billion

    How Stephen Curry’s Big Season Is — And Isn’t — Reshaping The Sneaker Wars

    Barclays Revenue Tops Estimates as Its Traders Weather Turmoil

    Boeing Short Sales Rise 1.4% to 27.4 Million Shares

    Boston Scientific Profit Beats as Heart Stent Sales Rise

    Apple’s Increased Dividend And Buyback Is In-line With Expectations

    Anthem Earnings Top Expectations

    Josh Brown: Sentiment Is The New Fundamentals

    Roger Nusbaum: Earnings Recession Is Here, Does It Matter?

    Be sure to follow me on Twitter.

  • AFLAC Earned $1.73 per Share
    , April 26th, 2016 at 4:35 pm

    AFLAC (AFL) just reported Q1 operating earnings of $1.73 per share which was 10 cents more than Wall Street had been expecting. For the first time in a long time, the yen/dollar exchange rate helped earnings. Forex added three cents per share.

    The average yen/dollar exchange rate in the first quarter of 2016 was 115.35, or 3.3% stronger than the average rate of 119.16 in the first quarter of 2015. Operating earnings in the first quarter were $726 million, compared with $678 million in the first quarter of 2015. Operating earnings per diluted share in the quarter increased by 12.3% from a year ago to $1.73. Included in first quarter operating earnings is an adjustment of $8 million after-tax, or $.02 per diluted share, accelerating the recognition of stock compensation expense associated with retirement-eligible employees. The stronger yen/dollar exchange rate increased operating earnings per diluted share by $.03 for the first quarter. Excluding the impact from the stronger yen, operating earnings per diluted share increased 10.4%.

    The company reiterated its full-year guidance of $6.17 to $6.41 per share. That’s based on the yen at 120.99 (and it’s not even close to that). For Q2, they see earnings ranging between $1.55 and $1.82 per share. That’s assuming the yen trades between 105 and 115. The Street consensus was for $1.64 per share.

    Here’s CEO Dan Amos:

    “I want to reiterate that our annual objective is to produce operating earnings per diluted share of $6.17 to $6.41, assuming the 2015 average exchange rate of 120.99 yen to the dollar. If the yen averages ¥105 to ¥115 to the dollar for the second quarter, we would expect earnings in the second quarter to be approximately $1.55 to $1.82 per diluted share. I would remind you that with interest rates at significantly depressed levels and a return to market volatility, it is difficult to invest cash flows at attractive yields while maintaining a prudent risk tolerance. Additionally, we expect 2016 benefit ratios will continue to be strong in both the U.S. and Japan, recognizing that the first quarter is typically more favorable than the rest of the year. We are well-positioned in the two best insurance markets in the world and are working very hard to achieve our earnings-per-share objective while also ensuring we deliver on our promise to policyholders.”

  • Wells Fargo Raises Dividend by a Ha’penny
    , April 26th, 2016 at 4:26 pm

    Wells Fargo (WFC) announced they’re raising their quarterly dividend from 37.5 cents per share to 38 cents per share. That’s right. That’s an increase of 0.5 cents.

    The dividend is payable June 1, 2016, to stockholders of record on May 6, 2016, as approved today by the Wells Fargo board of directors. Wells Fargo has approximately 5.1 billion shares outstanding.

    This dividend increase for the second quarter of 2016 was part of the company’s 2015 Capital Plan. The Federal Reserve advised Wells Fargo in March 2015 that it had no objection to its 2015 Capital Plan which covers the quarters through the end of June 30, 2016. Wells Fargo submitted its 2016 Capital Plan on April 4, 2016, and it is currently under review by the Federal Reserve.

    Going by today’s close, the new dividend gives them a yield of 2.99%.

  • S&P cuts Exxon credit rating
    , April 26th, 2016 at 4:00 pm

    Today, S&P cut its credit rating on ExxonMobil (XOM) from AAA to AA+. The company had been one of only three companies with the highest rating. Now only two are left, Microsoft and Johnson & Johnson.

    XOM had a AAA rating since 1949. In the last few years, the company has increased its debt load, plus lower oil prices have hurt their sales and earnings. On CNBC today, I talked about the outlook for big energy stocks.