Archive for April, 2018

• Morning News: April 26, 2018
  Eddy Elfenbein, April 26th, 2018 at 7:15 am

  ECB Expected to Take Confident Tone Despite Slowing Economy

  The Consumer Complaints Database That Could Disappear From View

  FTC Sues LendingClub for Allegedly Misleading Consumers

  Deutsche Bank Profit Tumbles 79% Amid Big Overhaul

  Huawei Probe Adds to U.S.-China Trade Tension Ahead of Talks

  Facebook Surges After Sending Upbeat Message to Wall Street

  Ford Plans $11.5 Billion in Extra Cuts, Killing Most U.S. Cars

  Qualcomm’s Profit Tumbles as Royalty Disputes Continue

  Tesla’s Autopilot Hit With More Turmoil as Leader Departs for Intel

  Bulls Vs. Bears: Who’s Right About Twitter?

  Amazon Is Trading At More Than 200 Times Its Earnings — Here’s Why That’s Not As Crazy As It Sounds

  When Investor Psychology Turns Dark, All News Is Bad News

  Joshua Brown: Cash Flow

  Roger Nusbaum: Spotting A Rollover

  Jeff Carter: There Already Was A Way to Manage Risk

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• AFLAC Earns $1.05 per Share for Q1
  Eddy Elfenbein, April 25th, 2018 at 4:32 pm

  Aflac (AFL) just reported Q1 operating earnings of $1.05 per share. Favorable forex boosted that figure by three cents per share. Wall Street had been expecting 97 cents per share.

  AFLAC is standing by its earnings forecast for full-year earnings of $3.72 to $3.88 per share (remember, the stock recently split 2:1). For Q1, AFLAC expects earnings to range between 91 cents and $1.05 per share. That assumes the yen averages 100 and 110 to the dollar. Wall Street had been expecting 99 cents per share.

  Commenting on the company’s results, Chairman and Chief Executive Officer Daniel P. Amos stated: “We are pleased with the company’s overall performance for the first quarter. With respect to Aflac Japan’s conversion to a subsidiary, I am very pleased that we completed this transaction on time and that it remains within budget. This new corporate structure aligns Aflac with global regulatory frameworks and enhances our financial and business flexibility, while remaining consistent with our current financial strength ratings and enterprise risk management framework.

  This is basically what I expected. The shares are close to a new all-time high.

• Check Point Software Earns $1.30 per Share
  Eddy Elfenbein, April 25th, 2018 at 9:19 am

  This morning, Check Point Software (CHKP) had a decent earnings report, but they lowered guidance so the stock is taking a hit. The details aren’t quite as bad as the stock action suggests.

  Let’s dig into the numbers. For Q1, Check Point reported earnings of $1.30 per share. That was two cents better than estimates. Revenue rose 4% to $452 million, and cash flow from operations increased by 18% to $419 million. They had previously given Q1 guidance for earnings between $1.25 and $1.30 per share and revenues of $440 to $460 million.

  Those numbers are pretty good, and this is what the company had to say:

  “First quarter revenues were above the midpoint of our projections while EPS reached the top of our guidance range.” Said Gil Shwed, Founder and CEO of Check Point Software Technologies. “The global cyber threat landscape is becoming increasingly sophisticated. Attacks are now in their 5th generation, while 97 percent of enterprises are not prepared for these attacks and remain primarily focused on protections for 2nd or 3rd generation attacks. During the first quarter we introduced the Infinity Total Protection Gen V prevention solution, along with its CloudGuard family of security products, and both solutions generated nice wins in the quarter.” Shwed Continued.

  Now we get to the disappointing news, which is the weak guidance. For Q2, Check Point expects revenue to range between $445 and $475 million. Wall Street had been expecting $477 million. For Q2 EPS, their range is $1.25 to $1.35. Wall Street had been expecting $1.35 per share.

  Check Point also cut their full-year earnings range. The previous guidance was $5.50 to $5.90 per share. The new range is $5.45 to $5.75 per share. They also lowered their full-year revenue forecast from $1.9 billion – $2 billion to $1.85 billion – $1.93 billion.

• Morning News: April 25, 2018
  Eddy Elfenbein, April 25th, 2018 at 7:09 am

  The Logical Next Step for Europe’s Integration

  A China-U.S. Trade War Would See Malaysia, Taiwan, South Korea And Brazil Suffer

  Mulvaney, Watchdog Bureau’s Leader, Advises Bankers on Ways to Curtail Agency

  Thoughts On Tuesday’s Sell-Off: ‘CATcalls’

  Why High-Flying U.S. Home Prices Are About to Get Another Jolt

  FDA Seeks Documents From Maker of Juul E-Cigarettes, Popular With Teens

  Comcast Formalizes Bid for Sky in Challenge to Murdoch’s Foxt

  Sky Withdraws Recommendation For Fox Offer After Comcast Bid

  Shire Bid Marks Takeda’s Latest – And Biggest – Push for Global Status

  To Catch Bad Actors, Winklevosses’ Crypto Exchange Teams Up With Nasdaq

  The Hissy Fit In Tech: Right Or Wrong?

  Bitcoin Is Greatest Scam Ever – Bill Harris

  Lawrence Hamtil: The Enduring Appeal of Tobacco Stocks

  Cullen Roche: The Fed Is In A Pickle

  Ben Carlson: Who Benefits From Rising Interest Rates?

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• Carriage Services Earns 59 Cents per Share
  Eddy Elfenbein, April 24th, 2018 at 5:10 pm

  Carriage Services (CSV) just posted Q1 earnings of 59 cents per share. CEO Mel Payne said, “We got off to a good start in 2018 by setting numerous historical first quarter performance records.”

  Revenue rose 7.7% to $73.4 million, and EBITDA was up 5.8%. The downside is that they’re lowering their guidance. They gave three reasons for the lower guidance; an acquisition that didn’t close in Q4 as expected, rising interest costs on their floating rate debt, and a higher share count related to convertible debt and recent increase in share price.

  For the rolling four quarters ending in March 2019, Carriage expects revenue of $274 to $277 million and earnings of $1.80 to $1.85 per share. That’s a decrease of 20 cents per share at both ends. The decrease in the midpoint of the revenue range is just 2.5%.

• Earnings from Wabtec and Sherwin-Williams
  Eddy Elfenbein, April 24th, 2018 at 11:13 am

  We have three Buy List earnings reports scheduled for today. Wabtec (WAB) and Sherwin-Williams (SHW) were this morning, and Carriage Services (CSV) will be after the close.

  Wabtec reported Q1 earnings of 92 cents per share. That was a two-cent beat.

  The best news is that Wabtec reaffirmed their full-year guidance. They expect revenue of $4.1 billion and earnings of “about” $3.80 per share, excluding restructuring costs.

  The CEO said:

  Our first-quarter results exceeded our expectations slightly and represent a solid start to the year. With a record backlog and the positive indicators we’re seeing in our core markets, we are well positioned to meet our financial targets in 2018. Our transit business delivered improved margins in the quarter and maintained a record backlog. In freight, we are seeing a meaningful pick-up in the aftermarket. We continue to make progress on the integration of Faiveley Transport and remain ahead of our synergy targets. As we focus on short-term performance, we are investing in our long-term growth strategies and are confident we can deliver improved earnings, margins and cash flow in the future.

  The shares are up about 3.4% this morning, and they touched a nine-month high. It’s now an open secret on Wall Street that GE is looking to sell their transportation business to WAB. Expect more details soon.

  The earnings report from Sherwin-Williams is a bit complicated. The company had Q1 earnings of $3.57 per share, but there are some accounting issues related to the Valspar acquisition.

  The $3.57 figure includes 24 cents per share in transaction costs and 71 cents per share in “accounting impact” costs. On the plus side, Valspar added $1.08 per share in net income. The net debt charge from Valspar was 40 cents per share.

  For earnings, the $3.57 per share is the number to go with, and that beat Wall Street’s consensus of $3.16 per share. That’s good news and the CEO said he expects Sherwin to increase core net sales by “mid-to-high single digits” compared with last year.

  Sherwin now expects 2018 earnings of $14.95 to $15.45 per share, but that includes $3.40 to $3.50 per share related to Valspar. So without that, Sherwin see full-year EPS of $18.35 to $18.95. But this new figure includes 40 cents per share “related to an expanded customer agreement primarily impacting Valspar operations.” Wall Street had been expecting $19.14 per share.

  So they beat earnings but lowered full-year guidance by 40 cents per share. The shares are currently off by about 3%.

• The 10-Year Breaks 3%
  Eddy Elfenbein, April 24th, 2018 at 11:00 am

  For the first time since 2014, the 10-year broke above 3%. For some context, on July 5, 2016, the 10-year yielded 1.37%. Some folks in Europe might find this news amusing. In Germany, their 10-year is going for 0.647%.

  

  The big phrase today is “first time since 2014,” which I just used as well. But there’s a little more to it. Back then, the 10-year barely made it to 3%. The 10-year closed on or above 3% six times in very late 2013 or very early 2014. The highest yield was 3.04%. Before that, we have to go back to July 2011.

  So if we get a little more, then we can say that the yield reached a six-plus year high.

• Morning News: April 24, 2018
  Eddy Elfenbein, April 24th, 2018 at 7:42 am

  Xi Ready to Respond as China Rattled by Trade, Debt Risks

  The Chinese Car Invasion Is Coming to America

  Oil Breaches $75 on Risk to Iran Deal

  In Brexit, Economic Reality Competes With Nostalgia For Bygone Days

  After Weeks of Chaos, U.S. Throws Aluminum Industry Lifeline

  Net Neutrality Is All But Officially Dead. Now What?

  Google Beat Revenue Targets But Didn’t Ease Wall Street’s Biggest Worries

  Chinese Ride-Hailing Giant Didi Hits Accelerator on Talks for IPO

  Sears CEO Offers to Buy Kenmore, Other Units

  United Airlines CEO to Skip Bonus, Chairman Will Step Aside

  Sing It From the Mountains, the iPhone Supercycle Is Dead

  This Start-Up Says It Wants To Fight Poverty. A Food-Stamp Giant Is Blocking It

  Nick Maggiulli: Be Careful What You Choose

  Roger Nusbaum: Markets Don’t Close 4/20 On a High

  Howard Lindzon: The Best Time To Invest…NOW!

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• Aceto Plunges
  Eddy Elfenbein, April 23rd, 2018 at 11:55 am

  Aceto (ACET), a New York-based chemical company, was a big winner for many years, but the stock has collapsed in the last three years.

  

  The details of Aceto’s demise are unpleasant but it’s a good reminder of an old lesson: even the strongest companies can be undone. The market changes quickly and it can be unforgiving. ACET has dropped from $30 to $2 in three years.

• The Narrowing Yield Curve
  Eddy Elfenbein, April 23rd, 2018 at 8:28 am

  On Friday, the one-, two- and three-year treasuries all closed at their highest yields since August 2008.

  The six-month yield did the same but it came on Thursday, and the three-month’s came on Monday. The one-month yield’s long-term high came last month.

  Here’s a look at the two-year yield since August 2008:

  

  None of this is a big surprise. The early part of the yield curve is rising, and that’s what higher rates from the Fed is all about. But what about the long end? Earlier this year, the 10-year yield looked like it was about to bust through 3%…but it never could.

  The 10-year recently fell below 2.75% but has now made another run at 3%. On Friday, the 10-year closed at 2.96%. The 3% line has been very difficult for the 10-year to break. The highest yield for the 10-year since mid-2011 is 3.04%. In other words, we’re very close to a multi-year high.

  This week, the 2/10 spread got as low at 41 basis points. That got a lot of attention. As readers know, I’ve been a fan of the 2/10 spread for a long time, so it’s odd for me to see it get so much attention recently.

  

  That’s why I feel like I have to remind investors that the 2/10 spread is still a long way from indicating danger. Put it this way: in the last cycle, the 2/10 spread hit 41 basis points in May 2005. That was 2-1/2 years before the recession started. Remember, a negative 2/10 is not a tripwire. It’s a warning signal.