Archive for August, 2016

• Watching Emerging Markets
  Eddy Elfenbein, August 3rd, 2016 at 3:59 pm

• Earnings Are Set to Fall. Again.
  Eddy Elfenbein, August 3rd, 2016 at 10:29 am

  Earnings season is about two-thirds over and it looks to be another one for falling earnings. Earnings for the energy sector are expected to fall by 87%. Even without energy, earnings for the S&P 500 are expected to rise by 1.8%.

  With just over two-thirds of S&P 500 companies reporting results, adjusted earnings—which exclude various items deemed unusual—are expected to fall for the fourth straight quarter, down 2.6% from the same period last year, according to Thomson Reuters. Revenues are also forecast to slip 0.4%, the sixth straight quarterly decline.

  The pain is broad-based: Only the consumer-discretionary, health-care and utilities sectors are expected to see profits grow by more than 5%. Quarterly earnings are forecast to decline by 87% for energy companies, 3.6% for financial firms and 1.4% for telecommunications companies, according to Thomson Reuters.

  Energy companies have been suffering for more than a year, with oil prices collapsing from around $115 a barrel in mid-2014 to a low of $27 in January. But profit declines are slowing as prices have somewhat rebounded to around $40 a barrel, and many analysts expect results to keep improving in the third and fourth quarters.

  Excluding the hard-hit energy sector, second-quarter earnings are expected to rise by a still-slow 1.8%, while revenues are likely to increase about 2.6%, Thomson Reuters said.

  Analysts polled by Thomson Reuters now forecast that the third quarter will barely show profit growth, predicting an average increase of 0.3% for companies in the S&P 500 compared with expectations of 2% growth a month ago. Earnings forecasts often become less optimistic as a quarter progresses.

• Morning News: August 3, 2016
  Eddy Elfenbein, August 3rd, 2016 at 6:59 am

  China July Service Sector Growth Eases, Employment Falls for First Time in Four Months: Caixin PMI

  China, Not Silicon Valley, Is Cutting Edge in Mobile Tech

  Oil Options Echo Citi-to-Merrill View of a Brief Bear Market

  Why The World’s Third-Richest Person is Attacking Donald Trump

  Germans Deliver a Lesson to Amazon

  Ford Motor: House of Pain

  HSBC Profit Down 40% in ‘Difficult’ Environment

  P&G Says It Sees Hopeful Signs in Very Challenging China Market

  Bitcoin Plunges After Hacking of Exchange in Hong Kong

  Grab, an Uber Rival in Southeast Asia, Is Set to Raise $1 Billion

  Abenomics Gives Gold a Boost, Extending Best Rally in Six Weeks

  Rio Tinto Earnings Suffer 47% Drop Despite Upturn in Minerals Prices

  Etsy Posts 39% Revenue Growth, Boosts Guidance

  Jeff Carter: There Is No Venture Capital Bubble

  Cullen Roche: Do Savers Deserve a Risk Free Return?

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• Biogen Soars on Takeover Rumors
  Eddy Elfenbein, August 2nd, 2016 at 11:47 pm

  Shares of Biogen (BIIB) soared 9.37% today on news that the biotech firm might be bought by a larger rival. It was a dramatic day of trading for Biogen. The WSJ reported the takeover at 2:42 pm, and the shares quickly jumped from around $300 to near $330. Trading in the stock was halted for a brief period.

  

  Specifically, the news is that both Merck and Allergan are interested in buying Biogen. BIIB has struggled since its peak at $480 in March 2015. That’s one of the reasons why I added it to this year’s Buy List. Allergan wanted to hook up with Pfizer earlier this year, but the government blocked a possible inversion.

  Whether there is a deal or not, the interest in Biogen shows the hunger big pharmaceutical companies have for new sources of growth.

  After years in which their pipelines were depleted, new-drug approvals are up. But the companies have become so large that adding a new blockbuster drug in many cases isn’t enough to increase growth substantially—especially given the pricing pressures that they face. Merck had a market value of $162 billion; Allergan’s was $101 billion.

  Biogen had sales of $10.8 billion last year, up 11%. The company, based in Cambridge, Mass., dominates the lucrative market for multiple-sclerosis drugs, now worth nearly $20 billion a year. Its Tecfidera treatment for the condition had one of the best new-drug launches after its 2013 approval, and Biogen stock has roughly doubled since the beginning of that year, even after a sharp recent drop.

  One analyst at RBC Capital said Biogen could fetch between $375 and $475 per share. After the market closed, CNBC reported that Allergan is unlikely to pursue a deal.

• Earnings from Fiserv and Cerner
  Eddy Elfenbein, August 2nd, 2016 at 5:02 pm

  After the closing bell, we got two more Buy List earnings reports. Fiserv (FISV), the financial services firm, reported Q2 earnings of $1.08 per share which beat estimates by one penny. That’s an increase of 14% over last year’s Q2. So far, Fiserv has earned $2.14 per share for the first two quarters of this year.

  Overall, this was a solid quarter from Fiserv:

  “Our second quarter results were highlighted by strong growth in the Payments segment leading to double-digit gains in adjusted EPS,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “Strong sales results in the quarter should add to our momentum in the second half of the year.”

  Fiserv is confident enough to raise its full-year range. The old range was $4.32 to $4.44 per share. The new range is $4.38 to $4.45 per share. To add context, Fiserv earned $3.87 per share last year.

  Cerner (CERN) reported Q2 earnings of 58 cents per share which was also a penny better than expectations. The company had given guidance of 56 to 59 cents per share. Quarterly revenues rose 8.0% to $1.22 billion which narrowly beat estimates.

  “Cerner’s strong second quarter results reflect good execution and competitiveness in the U.S. and abroad,” said Zane Burke, Cerner President. “We continued to gain share in what remains an active Electronic Health Record replacement market, while also having strong sales of revenue cycle and population health solutions that help our clients navigate the rapidly evolving reimbursement landscape.”

  For Q3, Cerner sees earnings ranging between 59 and 61 cents per share. The Street had been expecting 61 cents per share. The company reiterated its full-year guidance of $2.30 to $2.40 per share, but they lowered their full-year revenue guidance to $4.9 billion to $5.0 billion. The previous range was $4.9 billion to $5.1 billion.

• Morning News: August 2, 2016
  Eddy Elfenbein, August 2nd, 2016 at 7:05 am

  Brexit Imperils Britain’s £405 Billion Infrastructure Boom

  With Economy Still Struggling, Japan Tries More Stimulus

  Kuroda Sees No Slowdown in Stimulus After Policy BOJ Review

  South Korea Bars Volkswagen From Selling 80 Models in Country

  Crude Oil Weakness Not A Surprise

  The Road to the Uber-Didi Deal

  European Shares Extend Losses as Commerzbank Slumps to Record Low

  CEO Marissa Mayer Treated Yahoo Like A Think Tank, Not A Sinking Ship

  Salesforce Just Spent $750 Million to Thumb Its Nose at Microsoft

  Aetna Tops Views, Stops ACA Expansion Plans

  Happier Meal? McDonald’s Nixing Some Unpalatable Ingredients

  Lufthansa Attempts to Reassure Investors After Recent Terror Attacks

  Honda Q1 Profit Beats Forecasts as Sales Boost Offsets FX Impact

  Josh Brown: Rules-Based Tactical vs. Wizardry and Witchcraft

  Roger Nusbaum: There Is No Playbook

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• Morning News: August 1, 2016
  Eddy Elfenbein, August 1st, 2016 at 7:06 am

  Eurozone Manufacturing Growth Slows After Brexit Vote

  Brazil’s Plan for Deadbeat Taxpayers: Pawn Them Off to Investors

  Dollar Funding Costs Drop After BOJ Doubles Up Scheme to Support Japanese Banks

  Dollar ‘Vulnerable’ as Fed Rate Pause Seen Until September 2017

  Growing Oil Glut Shows Investors There’s Nowhere to Go But Down

  The Fragile U.S. Economy Now Facing a Slowdown in Building Boom

  Why Monthly Auto Sales Numbers May Not Be What They Seem

  Uber to Sell China Business to Rival Didi After Losing Billions

  GSK and Google Parent Forge $715 Million Bioelectronic Medicines Firm

  Heineken Sales Slow in Africa as Low Oil Prices Curb Demand

  Chinese Group to Pay $4.4 Billion for Caesars’ Mobile Games

  For Oracle, Money’s Not the Problem; It’s Coping With the Cloud

  Daimler Doubles Down On Regulator-Friendly Ride-Booking Services

  Jeff Carter: The Micro VC Game

  Howard Lindzon: Sell Everything? … Buy Mattresses and Kitchen Sinks!

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