Archive for April, 2018

• Morning News: April 23, 2018
  Eddy Elfenbein, April 23rd, 2018 at 7:05 am

  The SEC Wants Wall Street to Treat Clients Better. What’s at Stake?

  Stocks Stumble as U.S. Yields Near the 3% Barrier

  Oil Holds Near $68 as Rising U.S. Drilling Counters OPEC Curbs

  How Windmills as Wide as Jumbo Jets Are Making Clean Energy Mainstream

  Zelle, the Banks’ Answer to Venmo, Proves Vulnerable to Fraud

  Tencent Music Plans IPO; Valuation Could Exceed $25 Billion

  Facebook Faces Defamation Charges Over Fake Ads

  Walmart Closes In On India’s Flipkart

  Akorn Slumps After Fresenius Abandons $4.3 Billion Takeover Bid

  China’s Tech Stocks Struggle Under ZTE Ban, IPhone Sales

  Hasbro Blames Toys ‘R’ Us as Sales Sink

  Korean Air Chairman Fires Two Daughters Over Rage Incidents

  Joshua Brown: The Best and Worst State Economies

  Jeff Miller: The Costly Quest for Fresh Fears

  Jeff Carter: Innovation Theatre

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• CWS Market Review – April 20, 2018
  Eddy Elfenbein, April 20th, 2018 at 7:08 am

  “To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.” – Benjamin Graham

  Earnings season is upon us, and so far, things are looking good. We’ve had five Buy List earnings reports this week, and all five beat Wall Street’s consensus. You can always check out our latest Earnings Calendar.

  In this issue, I’ll run though all of our reports. I’ll also profile seven more earnings reports coming our way next week. Remember, things can get much more volatile for individual stocks after their earnings reports, so don’t be scared by a little more action.

  

  Fortunately, the stock market has been more buoyant recently. At one point, the S&P 500 rallied eight times in 11 sessions, and on Wednesday, the index closed at a four-week high. But don’t be complacent. I still think there’s a good chance the market will test the lows.

  If you’re into numbers, I can remind you that the closing low from February 8 was 2,581.00, and the one from April 2 was 2,581.88. That’s how close we came to a new low. This tells me that the bears haven’t been scared off. More on that later. For now, let’s look at some earnings.

  This Week’s Five Buy List Earnings Reports

  We had five of our Buy List stocks report earnings this week. I’m happy to say that all five beat estimates. However, not all five got a lift from the news. Let’s run through the reports.

  Torchmark (TMK) led off earnings season for us after the bell on Wednesday. The insurance company reported Q1 earnings of $1.47 per share. That was two cents more than estimates. For last year’s Q1, Torchmark made $1.15 per share. This one is as steady as they come.

  One of the key stats for Torchmark is Return on Equity that excludes unrealized gains on fixed income. That’s kind of a mouthful, but it’s one of the best ways to measure the company’s performance. For Q1, this metric came in at 14.6%, which is quite good. The company is experiencing healthy growth across its different business units.

  In the earnings release, Torchmark said they see 2018 EPS coming in between $5.93 and $6.07 per share. That’s probably a tad low. I think TMK can hit $6.10 per share, but I won’t quibble with their guidance; we’re still early in the year. The guidance implies the stock is going for a decent valuation. Shares of TMK gained 1.8% in Thursday’s trading. I’m pleased with this news, and I’m raising our Buy Below on Torchmark to $91 per share.

  On Thursday morning, we got four more Buy List earnings reports. I had been a little nervous coming into the earnings report for Alliance Data Systems (ADS). The stock has plunged since the last earnings report. Alliance reported Q1 core earnings of $4.44 per share. The good news is that that easily topped Wall Street’s estimate of $4.23 per share. The bad news is that the estimate had been severely pared back over the last several weeks. Not too long ago, the Street had been expecting over $5.10 per share for Q1. Quarterly revenue rose to $1.88 billion which was a little bit below forecasts.

  Alliance’s CEO, Ed Heffernan, said, “This quarter’s pro-forma revenue growth of 4 percent and core EPS growth of 13 percent should reflect our softest quarter of the year. Specifically, higher reserve levels required to cover the transitory impacts of the internal recovery investment was an approximate $0.60 hit to core EPS for the first quarter. Moving forward, recovery rates should move in our favor.”

  ADS reiterated its full-year guidance of $22.50 to $23 per share with revenue of $8.35 billion. I was pleased to see that. Still, the shares dropped 4.5% at Thursday’s open, but then they regained their composure later in the day and only closed off by 0.9%. Just to be safe, I’m dropping my Buy Below down to $232 per share.

  Danaher (DHR) had a very good report for Q1. The company made 99 cents per share. If you recall, they initially provided Q1 guidance of 90 to 93 cents per share. DHR later said they’ll beat that thanks to strong results from their Life Sciences and Diagnostics platforms, “specifically at Cepheid.”

  

  For Q2, Danaher sees earnings of $1.07 to $1.10 per share. Wall Street had been expecting $1.08 per share. The best news is that Danaher raised its full-year guidance. The old range was $4.25 to $4.35 per share. The new range is $4.38 to $4.45. Last year, DHR made $4.03 per share. Danaher remains a buy up to $105 per share.

  Also on Thursday, Signature Bank (SBNY) reported Q1 earnings of $2.69 per share. That was two cents better than estimates. Signature’s results for Q1 are a bit distorted because they took a big write-down for their taxi medallion loans.

  Let’s look at some metrics. Deposits rose 4.1% to $34.82 billion. Net interest margin was 3.01%. Thanks to the medallion loans, Signature’s efficiency ratio rose to 42.2%. This measures a bank’s net interest expense as a share of its total income. The lower, the better.

  Excluding the medallion loans, Signature is doing just fine. The problem for the last few quarters was that that’s a hard thing to exclude. Fortunately, SBNY is moving beyond that. I still think SBNY can earn $11 per share this year. The shares lost 3.1% on Thursday. I still like SBNY. This week, I’m dropping my Buy Below to $142 per share.

  Our big winner this week is Snap-on (SNA). On Thursday, the company reported Q1 earnings of $2.79 per share. I’ve been concerned by weakness in their tool group, and that’s still an issue. For Q1, organic sales rose by just 0.8%. The good news is that their other business units are picking up the slack.

  I think this is a case of Wall Street expecting the worst. When the worst didn’t come, the stock rallied. By the closing bell, shares of SNA had gained 6.2%. It was the second-best performer in the S&P 500 for the day. I’m keeping our Buy Below at $167 per share. Now let’s take a look at some of next week’s reports.

  Seven Buy List Earnings Reports Next Week

  Next week is going to be another crowded week for earnings. Here’s a rundown.

  On Tuesday, April 24, three Buy List stocks are ready to report. Carriage Services (CSV) may be a dark-horse winner for us this year. The stock is already our third-best performer so far. The funeral-home company had a rough year in 2017, but things seem to have turned the corner. The last earnings report was a good one. Carriage also increased its earnings guidance.

  Only two analysts on Wall Street follow the stock, so I really can’t say there’s an earnings consensus. I’m expecting Q1 earnings around 50 to 52 cents per share. The stock is going for an attractive valuation.

  For Q4, Sherwin-Williams (SHW) gave us an earnings dud. I’m hoping this won’t become a habit. The problem is that they’re still adjusting to their big merger with Valspar. Some headaches are to be expected. In the long run, this deal should pay off. For 2018, Sherwin expects earnings in the range of $16.05 to $16.45 per share. Wall Street is looking for $3.16 per share for Q1.

  Wabtec (WAB) had a strange time during its last earnings report. The shares dropped when the company released preliminary results, but then they snapped back just before the actual results. For Q1, Wabtec said they’re expecting similar results as Q4. Since they made 90 cents per share for Q4, I’m assuming 90 cents or so for Q1. For all of 2018, Wabtec is looking for earnings of “about” $3.80 per share. The stock has been acting better in recent weeks.

  On Wednesday, AFLAC (AFL) is due to report Q1 earnings. I’m a big fan of the duck stock. Check out this 34-year log chart of AFLAC.

  

  For 2018, AFLAC is looking for earnings to range between $3.73 and $3.88 per share ($7.45 and $7.75 pre-split). That assumes a yen/dollar rate of 112.16 which was the average for 2017. For Q1, Wall Street is looking for earnings of 97 cents per share.

  Also on Wednesday, Check Point Software (CHKP) is due to report. The company had a very good report three months ago. For Q1, Check Point sees earnings between $1.25 and $1.30 per share on revenues of $440 to $460 million. For the full year, they see EPS of $5.50 to $5.90 on revenue of $1.9 to $2.0 billion.

  On Thursday, Stryker (SYK) will report earnings. They previously said they expect Q1 earnings between $1.57 and $1.62 per share. For the full year, Stryker expects earnings of $7.07 to $7.17 per share. The stock has been holding up well. SYK is within 3% of its all-time high. The company has raised its dividend every year since 1993.

  Moody’s (MCO) is set to report on Friday, April 27. The credit-ratings agency is our second-best performer this year with a gain of 12.3%. I like this company a lot. They’re looking for 2018 earnings of $7.65 to $7.85 per share. They made $6.07 per share in 2017. For Q1, Wall Street expects earnings of $1.80 per share.

  That’s all for now. Still more earnings reports are to come next week. We’ll also get a few key economic reports. On Monday will be existing-home sales. Then on Tuesday, we’ll see new-home sales. On Friday, we’ll get our first look at Q1 GDP. The last three quarters have been close to 3% growth. Let’s see if that trend continues. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

  – Eddy

  Syndication Partners

  I’ve teamed up with Investors Alley to feature some of their content. I think they have really good stuff. Check it out!

  3 Stocks for Profits from People Playing Video Games All Day

  According to PricewaterhouseCooper (PwC), the global e-sports market was worth $327 million in 2016. One reason for its smallish size compared to say the NFL is that e-sports is a collection of different game titles across different game genres, with different intellectual property holders that, to date, have not bargained together for TV (and streaming) rights and sponsorship deals.

  But now e-sports is moving into the ‘major league’ of sports. They will be added as a medal event in the 2022 Asian Games. That’s not surprising considering that South Korea is the hot spot for these sports, with other Asian countries also joining in. The backers of e-sports are pushing too for it to be added as an official event in future Olympics too.

  Any future Olympics boost will only add to the growth already occurring. PwC estimates that the e-sports market will expand at a compound annual growth rate (CAGR) of 21.7% through 2021 into an $874 million market. Other forecasts are even more bullish. For example, the Dutch research firm Newzoo says e-sports will be a $1.6 billion industry by 2021.

  Whatever forecast you believe, the bottom line is that the e-sports industry is growing in leaps and bounds. Here are three to stocks to buy from companies profiting off people playing video games all day.

  Buy These 2 Stocks Benefitting from Trump’s Tax Reform Law

  With this year’s tax filing deadline date just past, it’s a good as time as any to take a look at a few special situations whose stock prices were hit because of recent changes in tax policies.

  The first company I want to tell you about is one that has become a real life example of the law of unintended consequences…

  Congress changed the way American corporations are taxed on their overseas earnings. Previously, firms were taxed at the 35% rate. But most companies avoided that by booking their income overseas and then keeping the money there.

  So Congress came up with GILTI (Global Intangible Low-Taxed Income), which was set at 10.5%. Its main target was the tech and pharma companies that transferred their trademarks and patents overseas to avoid paying tax on them.

  But this new tax intended to tax overseas income earned by U.S. technology and pharmaceutical firms and their trademarks and patents has hit closer to home. Click here to see which stocks are impacted.

• Morning News: April 20, 2018
  Eddy Elfenbein, April 20th, 2018 at 7:04 am

  Crude Set for Weekly Gain as Saudis Flag Need for More Spending

  U.S. Sorghum Armada U-turns At Sea After China Tariffs

  Trade Wars Don’t Faze This U.S.-China Investor

  Hedge Fund Titans Pull Money From Funds to Pay Massive Tax Bills

  American Hustle: ZTE’s Surprise U.S. Success, Now Under Threat

  Wells Fargo Dropped by Teachers Union Over Ties to Gun Industry

  What General Electric Shareholders Should Do Now

  AT&T Chief Hits Foes of Time Warner Deal

  Chipmakers’ Rout Widens After TSMC Ignites Smartphone Fears

  In Vietnam, A Mega Casino Rises With the Help of a Macau Junket Company

  ‘Fearless Girl’ Will Be Moving to NYSE After Spending a Year Staring Down ‘Charging Bull’

  Barclays Chief Executive Staley Fined Over Whistle-Blower Scandal

  Blue Harbinger: How Do You Filter Out Noisy Trade Signals?

  Ben Carlson: The Tyranny of Benchmarking

  Michael Batnick: This Tells You Nothing

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• “MARGIN CALL FOR PHILIP MORRIS!!!!”
  Eddy Elfenbein, April 19th, 2018 at 11:38 am

  Tobacco stocks are getting smoked today. Philip Morris is down about 16%, but this comes after years of creaming the market.

  Here’s the Dow Jones U.S. Tobacco Index in black. It’s been so strong that the S&P 500, the blue line, looks flat in comparison.

  

• Four Buy List Earnings Reports This Morning
  Eddy Elfenbein, April 19th, 2018 at 8:58 am

  This is a very busy morning for us. We’ve had four of our Buy List stocks report earnings. Let’s go through them.

  Alliance Data Systems (ADS) had adjusted earnings of $4.44 per share. That beat expectations of $4.23 per share. Revenue came in a bit light at $1.88 billion. Analysts were expecting $1.92 billion. The company reiterated their full-year guidance of $22.50 to $23 per share with revenue of $8.35 billion.

  Danaher (DHR) had a very good report. For Q1, they made 99 cents per share. They also raised their guidance. The old range was $4.25 to $4.35 per share. The new range is $4.38 to $4.45.

  Snap-on (SNA) earned $2.79 per share. The stock looks to gap up over 5% this morning.

  Signature Bank (SBNY) earned $2.48 per share for Q1. But excluding the company’s loss on medallion loans, they made $2.69 per share which was two cents more than estimates.

• Morning News: April 19, 2018
  Eddy Elfenbein, April 19th, 2018 at 7:06 am

  China’s Big Bang

  An Oil Deal Between Saudi and Russia Worked. Now What?

  NY Attorney General Seeks Power to Bypass Presidential Pardons

  VIX Rigging Talk Erupts on Wall Street After Another Wild Swing

  Amazon’s Bezos Says Company Topped 100 Million Prime Members

  P&G to Acquire Merck KGaA’s Consumer-Health Unit

  Qualcomm Might Be Collateral Damage in a U.S.-China Trade War

  China Wary of Qualcomm’s $44 Billion NXP Deal Amid Tensions With U.S.

  Fox Rejected Higher Comcast Bid Due to Antitrust Concerns

  Bye-Bye, Bon-Ton: Liquidation Is Coming

  SunPower Buys U.S. Rival SolarWorld to Head Off Trump Tariffs

  Can Training Eliminate Biases? Starbucks Will Test the Theory

  Cullen Roche: These Are Not Good Indexing Criticisms

  Jeff Carter: Transparency Is Good

  Howard Lindzon: A Market of Stocks is Not For Everyone and Jeff Bezos Annual Letter

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• Torchmark Earned $1.47 per Share
  Eddy Elfenbein, April 18th, 2018 at 4:15 pm

  After the closing bell, Torchmark (TMK) reported Q1 net operating earnings of $1.47 per share. That’s up from $1.15 per share one year ago. Wall Street had been expecting $1.45 per share. Here are some highlights:

  Net income as an ROE(1) was 11.5%. Net operating income as an ROE excluding net unrealized gains on fixed maturities(1) was 14.6%.
  Life underwriting margins increased over the year-ago quarter by 7% and health underwriting margins increased over the year-ago quarter by 9%.
  Life premiums increased over the year-ago quarter by 9% at American Income and health premiums increased by 8% at Family Heritage.
  Net health sales increased over the year-ago quarter by 11%.
  Average producing agent counts increased over the year-ago quarter by 15% at Liberty National and 11% at Family Heritage.
  1.0 million shares of common stock were repurchased during the quarter.
  (1) Includes the impact of the change in the corporate income tax rate from 35% to 21% due to the recent tax reform. See further discussion of the tax reform on page 2.

  The company sees full-year net operating income ranging between $5.93 and $6.07. Wall Street had been expecting $6.03 per share.

• A Bounce for Energy
  Eddy Elfenbein, April 18th, 2018 at 12:56 pm

  Here’s a look at one of the more remarkable stock charts of the last 20 years. This shows the relative strength of the energy sector.

  

  Energy stocks outpaced the market by a good margin until 2008. The peak came on Jul 1, 2008. Since then, energy stocks have badly lagged the market.

  But in the last month, energy stocks have gapped up strongly. It’s hard to say if this rally is for real when so many other bounces were false rallies.

  

  Even after the recent bump, some big energy stocks, like XOM and CVX, yield close to 4%.

• Morning News: April 18, 2018
  Eddy Elfenbein, April 18th, 2018 at 7:09 am

  U.S. Moves to Block Sales by Chinese Telecom Equipment Makers

  Taxpayers Get an Extra Day to File After IRS Computers Fail

  Facebook to Follow Privacy Rules in Europe, Then Everywhere Else

  IBM Margin Slump Hits Stock as Investors Lose Patience With Big Blue Turnaround

  Toys ‘R’ Us Rejects Rescue Offer From Little Tikes’ Larian

  Bon-Ton Assets Snapped Up by Liquidation Firms, Bondholders

  Electric Scooters Are Giving U.S. Cities Uber Déjà Vu

  Supreme Court Weighs Internet Sales-Tax Case

  Alesia Haas Is Leaving Och-Ziff to Become Coinbase’s CFO

  Goldman Profit Surges but Investors Lament Buyback Pause

  Down $1 Trillion, World’s Worst Stocks Near Make-or-Break Level

  Ben Carlson: Why It Makes No Sense to Compare Dividend Yields to Bond Yields

  Michael Batnick: At First Glance & Animal Spirits: Some Things We Learned

  Joshua Brown: The Most Hated Tax Cut Ever?

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• Morning News: April 17, 2018
  Eddy Elfenbein, April 17th, 2018 at 7:11 am

  China to Allow Full Foreign Ownership in Auto Industry

  VW to Tesla Set to Win From China Move to Remove Ownership Caps

  In New Sign of Trade Battle, China Slaps U.S. Sorgum Producers With 179% Deposit

  U.S. Ban Risks Leaving China’s Rising Tech Star ‘Half Dead’

  Trump Picks Monetary Expert For No. 2 Job at the Fed

  Washington Would Be Crazy to Break Up Amazon

  What Would a Paid Facebook Look Like?

  Will You Soon Have To Pay Sales Tax On Every Online Purchase?

  Johnson & Johnson: Is Zytiga Patent Loss Priced In?

  Netflix Subscriber Gains Keep the Cash-Hungry Machine Humming

  UnitedHealth Increases Guidance For the Year

  Elon Musk Just Poured More Than $100 Million Into The Boring Company

  Michael Batnick: The What-Ifs

  Joshua Brown: Instant Fact Check

  Nick Maggiulli: In the Land of the Lost

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