Archive for August, 2017

• Morning News: August 25, 2017
  Eddy Elfenbein, August 25th, 2017 at 7:06 am

  Draghi Has Reason to Temper the Drama in Jackson Hole Sequel

  Wall Street Banks Are Sending Warning Signals

  Samsung Heir Gets 5 Years for Scandal That Toppled a President

  Samsung’s Next Chief Hides in Plain Sight

  Amazon’s Price Cuts on Food Leave Rivals Bracing for Impact

  Qantas Hands Investors More Cash as Profit Beats Estimates

  The World’s Longest Flight Is Coming

  Challenges Ahead as Nilekani Takes on Second Innings at Infosys

  Apple Gets $208 Million in Tax Breaks to Build Iowa Data Center

  SoftBank and Fund to Invest $4.4 Billion in WeWork

  Disney, Ditching Netflix, Grabs a New Key To The Kingdom

  Russian Tanker Completes Arctic Passage Without Aid of Icebreakers

  Without Insurance, Some Vendors Balk at Stocking Sears’ Shelves

  Ben Carlson: When To Sell Your Investments

  Jeff Carter: Some Common Sense Economics

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• Earnings from Hormel and Smucker
  Eddy Elfenbein, August 24th, 2017 at 11:17 am

  This morning, we got two more Buy List earnings report. These will be the last reports for quite some time.

  Hormel Foods (HRL) said they made 34 cents per share for their fiscal Q3 (ending July 31). That was three cents below Wall Street’s estimate. Sales fell 4.4% to $2.2 billion. For comparison, Hormel made 36 cents per share in last year’s Q3.

  So what caused the earnings miss? The major problem is that there’s been a surge in demand for bacon. Normally, that’s a good thing, but Hormel hasn’t been able to catch up with the cost change. Their CEO said that since April, pork belly prices have doubled. Hormel said they probably will not be able to raise prices until October. As a result, the company’s profit margins got squeezed last quarter.

  Hormel also had a poor quarter from their Muscle Milk unit which they’ve spent heavily on. Plus, their turkey unit continues to see poor sales. The good news is that Hormel’s grocery store biz, including items like Skippy Peanut Butter, is doing well.

  Hormel has also been busy on the M&A front. Last week, the company announced the acquisition of Fontanini Italian Meats and Sausages. This week, they spent $104 million to buy Cidade do Sol, a Brazilian meat company.

  Now for guidance. Hormel is lowering their full-year guidance range to $1.54 to $1.58 per share, from the previous range of $1.65 to $1.71 per share. For the first three quarters, Hormel has made $1.17 per share so their guidance means a Q4 range of 37 to 41 cents per share. Wall Street had been expecting 46 cents per share. The shares are currently down 6.6% today.

  For their fiscal Q1, JM Smucker (SJM) earned $1.51 per share. That was ten cents below estimates.

  The main culprit was SJM’s Folger’s coffee unit. Sales at Folger dropped by 8% while operating profits plunged 29%. The company raised coffee prices earlier this year but then lowered them in July. Smucker’s biggest business, which is pet food, had a sluggish quarter. Sales rose by just 0.5%.

  “While our first quarter results fell slightly short of our projections, primarily driven by lower than anticipated volume for Folgers® roast and ground coffee, we have taken actions to improve our competitive positioning for Folgers®. As a result, volume trends are improving. In addition, we remain pleased with the performance of the remainder of our coffee portfolio and look forward to the launch of new coffee products later this fiscal year,” said Mark Smucker, Chief Executive Officer. “We are also pleased with the progress on our cost management programs, as we continue to deliver on our synergy and cost savings targets. Across all our businesses, we are executing on our strategic plan that provides a clear path to sustainable, long-term growth by delivering on current consumer and retail trends.”

  Smucker also lowered their full-year forecast. The initial guidance was for $7.85 to $8.05 per share. Now Smucker sees FY 2018 earnings of $7.75 to $7.95 per share.

• Morning News: August 24, 2017
  Eddy Elfenbein, August 24th, 2017 at 7:07 am

  Thinking Two Moves Ahead in Central Bank Chess

  Germany Repatriates $31 Billion in Gold from Paris and New York

  New Home Sales Plunge 9.4% in July, Falling to 7-Month Low

  How Wall Street Learned to Stop Worrying About the Debt and Love Tax Cuts

  Uber Reports 2Q Loss of $645 Million; Ride Bookings Grow

  What Exxon Mobil Didn’t Say About Climate Change

  Google and Walmart Partner With Eye on Amazon

  Wilbur Ross Got One Thing Right – There Are No Antitrust Issues In Amazon’s Buying Whole Foods

  Infosys: What Now After Shock CEO Departure?

  U.S. Air Force Picks Raytheon, Lockheed For Next-Gen Cruise Missile

  Mastermind or Naïf? Samsung Heir’s Fate Hinges on the Question

  Sears Posts 2Q Loss on Fewer Store Visits

  The New Off-Court Play for NBA Stars Is Startup Equity

  Michael Batnick: This Time Really Is Different

  Roger Nusbaum: Using Sectorology in Portfolio Construction

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• HEICO Reports Q3 Earnings of 53 Cents per Share
  Eddy Elfenbein, August 23rd, 2017 at 4:57 pm

  After the closing bell on Wednesday, HEICO (HEI) reported fiscal Q3 earnings of 53 cents per share. That was inline with Wall Street’s consensus. The company’s operating margin was 19.4%. The company earned 49 cents per share in the third quarter of last year. Quarterly net sales rose 10% to $391.5 million.

  Laurans A. Mendelson, HEICO’s Chairman and CEO, commented on the Company’s third quarter and year-to-date results stating, “HEICO’s operating segments have continued to execute at a high level of profitable performance and I am very pleased with the record financial results. These outstanding results reflect record net sales and operating income for the first nine months of fiscal 2017 within both the Flight Support Group and Electronic Technologies Group, achieved through increased demand for the majority of our products. Additionally, our subsidiaries continue to deliver strong cash flows in support of our overall corporate strategy of high cash flow generation.

  We recently announced our largest acquisition in history when we entered into an agreement to acquire AeroAntenna Technology, Inc., (“AAT”). Closing, which is subject to governmental approval and standard closing conditions, is expected to occur during the fourth quarter of fiscal 2017 and we expect the acquisition to be accretive to our earnings per share within the first twelve months following closing. We plan to fund our acquisition of AAT through our existing credit facility and available cash.

  HEICO also raised their guidance for full-year earnings. They previously expected full-year net income growth of 12% to 14%. They now expect net income growth of 14% to 16%. Last year, HEICO made $1.86 per share. Shares count is up 1.8% this year, so factoring that, the guidance implies $2.08 to $2.12 per share. HEICO has already made $1.53 per share through the first three quarters, so that implies Q4 earnings of 55 to 59 cents per share.

  Wall Street had been expecting 55 cents for Q3 and $2.09 for the entire year. The stock is down about 1.4% in after-hours trading.

• No 1% Up Days for the Dow
  Eddy Elfenbein, August 23rd, 2017 at 3:48 pm

  Today will be the 84th consecutive trading session in which the Dow has failed to rise by more than 1%. This is the longest such streak since early 2007.

• Shares of Stryker Drop on Recall News
  Eddy Elfenbein, August 23rd, 2017 at 2:43 pm

  This morning, Stryker (SYK) said that it’s doing a voluntary recall of “specific lots of Oral Care products sold through the company`s Sage Products business unit.” The problem seems to have come from a third-party provider. Fortunately, Stryker said that it’s not aware of any serious adverse effects.

  Earlier Stryker gave full-year guidance of $6.45 to $6.55 per share. Now the company expects to come in at the low end of that range. For Q3, Stryker again expects to be at the low end of the previously announced range of $1.50 to $1.55 per share.

  The shares are currently down about 4.5%.

• New Homes Sales Fall
  Eddy Elfenbein, August 23rd, 2017 at 11:25 am

  This morning, the Census Bureau said that 571,000 new homes were sold in July. That’s an annualized number. That’s down 8.9% from a year ago.

  This is an ugly report but I wouldn’t call it problematic just yet. This series can be very volatile. Here’s a look at new home sales going back to 1963.

  You can see just how out-of-whack the last bubble was. Even after several years, we’re still not back to normal. The report for July was still below nearly every report from 1992 to 2007.

  The other news we got today was that Lowe’s (LOW) bombed its earnings report. This is interesting because Lowe’s is strongly tied to the housing market.

  The company also lowered its full-year earnings report to $4.20 to $4.30 per share. Wall Street had been expecting $4.62 per share.

• Morning News: August 23, 2017
  Eddy Elfenbein, August 23rd, 2017 at 7:03 am

  Draghi: ECB Faces Gaps in Understanding New Realities

  Euro Zone August Business Growth Keeps Up Solid Pace

  The Lowflation Demon That Vexes Central Banks

  Bumpy Times in Brazil, But Hedge Funds Boom

  Wall Street Banks Warn Winter Is Coming as Business Cycle Peaks

  Lowe’s Misses Street 2Q Forecast

  WPP Faces Worst Year in a Decade as Advertisers Cut Spending

  Chevron CEO John Watson to Step Down

  Uber Adds New Features That Let Drivers Work on Their Own Terms

  Why Uber’s Latest Fight Could Get All Sides Hurt

  Why Jeep Ought to Be For Keeps

  Google and Walmart are Joining Forces to Take on Amazon

  Toshiba Prioritizes Talks With Western Digital on Chips Business Sale

  Howard Lindzon: We Live in a Marketing Economy

  Cullen Roche: Let’s Talk About Bond Fund Redemptions

  Josh Brown: Hot Links: How to Get RIch

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• ICE Can Benefit from Regulatory Environment
  Eddy Elfenbein, August 22nd, 2017 at 4:04 pm

  Barron’s highlights a research note from Dan Fannon at Jefferies who thinks Intercontinental Exchange (ICE) will benefit from a more favorable regulatory environment.

  While ICE’s core futures customer base has historically been more skewed toward commercial vs financial, they will still benefit from greater trading activity from banks. From an oversight perspective, a more “approachable” SEC would allow for greater efficiencies across market structure generally and potentially spur greater listings activity.

• Morning News: August 22, 2017
  Eddy Elfenbein, August 22nd, 2017 at 7:04 am

  Euro’s Hot Streak May Survive Any Draghi Jackson Hole Jawboning

  The Unintended Consequences of Quantitative Easing

  Coal Mining Health Study Halted by Interior Department

  Amazon: Why A Waterfall Decline Might Be Underway

  BHP to Quit U.S. Shale Business as Annual Profit Surges

  Oil Major Total’s Shares Rise As Analysts Welcome Maersk Oil Deal

  Great Wall Motor of China Sets Its Sights on Jeep

  Ford Offers U.K. Drivers Cash to Scrap Dirty Diesel Engines

  Ford, China’s Zotye Auto Plan JV to Build Electric Vehicles

  Pratt’s $10 Billion Jet Engine Lags GE by 10-to-1 on New Orders

  Identity Thieves Hijack Cell Phone Accounts to Go After Virtual Currency

  J&J Ordered to Pay $417 Million In Trial Over Talc Cancer Risks

  Jeff Miller: Is a Market-Friendly Policy Agenda in Peril?

  Ben Carlson: Managing Sequence of Return Risk

  Cullen Roche: Are Individual Bonds Safer Than Bond Funds?

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