Archive for January, 2019

  • Morning News: January 18, 2019
    , January 18th, 2019 at 7:02 am

    Shutdown Clouds Outlook for Consumer-Driven U.S. Economic Growth

    Why I’m Holding Cash And Gold: Worsening Bond/Debt Outlook

    Consumer Giants Spurn Risks to Chase Online Subscribers

    Tesla Slumps After Eliminating 7% of Staff, Sees ‘Very Difficult’ Road Ahead

    CVS Wins Back Walmart in Pharmacy Deal, Sending Shares Higher

    Netflix’s Strategy Is Growth, So It Can’t Have Growing Pains

    Why Jeff Bezos’ Divorce Should Worry Amazon Investors

    Microsoft’s Leap Into Housing Illuminates Government’s Retreat

    Malaysia Could Drop Goldman’s 1MDB Charges for $7.5 Billion

    Jack Bogle’s Lasting (and Compounding) Gift

    The Things John Bogle Taught Us: Humility, Ethics and Simplicity

    Joshua Brown: Stay the Course & Getting Bogle’s Back

    Howard Lindzon: The Attention War

    Ben Carlson: What I Learned From Jack Bogle

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  • Becton, Dickinson Releases Preliminary Earnings
    , January 17th, 2019 at 2:26 pm

    Becton, Dickinson (BDX) won’t officially release its earnings report until February 5, but the company released preliminary results today.

    BDX said they made $2.70 per share for Q1. Wall Street had been expecting $2.61 per share. That’s up from $2.48 per share one year ago.

    BDX also reaffirmed its guidance for this fiscal year:

    Full fiscal year 2019 revenues are expected to increase 8.5 to 9.5 percent, primarily due to the C. R. Bard acquisition. Revenues are expected to increase 5.0 to 6.0 percent on a comparable, currency-neutral basis that includes the revenues of C. R. Bard in fiscal 2019 as well as the full 2018 fiscal year.

    The company continues to expect full fiscal year 2019 adjusted diluted earnings per share to be between $12.05 and $12.15, which represents growth of approximately 10.0 percent over the prior-year.

    The stock is up 2.1% today.

  • Signature Bank Earned $2.94 per Share
    , January 17th, 2019 at 9:14 am

    Signature Bank (SBNY), a New York-based full-service commercial bank, today announced results for its fourth quarter and year ended December 31, 2018.

    Net income for the 2018 fourth quarter was $160.8 million, or $2.94 diluted earnings per share, compared with $114.9 million, or $2.11 diluted earnings per share, for the 2017 fourth quarter. The increase in net income for the 2018 fourth quarter, when compared with the same period last year, is primarily the result of an increase in net interest income, fueled by strong average deposit and loan growth as well as an increase in prepayment penalty income, and a decrease in the provision for loan losses attributable to taxi medallion loan write-downs. These factors were partially offset by an increase in non-interest expenses.

    Net interest income for the 2018 fourth quarter rose $15.3 million, or 4.8 percent, to $335.0 million, compared with the fourth quarter of 2017. This increase is primarily due to growth in average interest-earning assets and an increase in prepayment penalty income. Total assets reached $47.36 billion at December 31, 2018, expanding $4.24 billion, or 9.8 percent, from $43.12 billion at December 31, 2017. Average assets for the 2018 fourth quarter reached $46.60 billion, an increase of $4.45 billion, or 10.6 percent, versus the comparable period a year ago.

    Deposits for the 2018 fourth quarter increased $287.5 million, or 0.8 percent, to $36.38 billion at December 31, 2018, while non-interest bearing deposits decreased $142.5 million and represent 33.0 percent of total deposits. Overall deposit growth in 2018 was 8.8 percent, or $2.94 billion, when compared with deposits at the end of 2017. Average total deposits for 2018 were $35.14 billion, growing $1.98 billion, or 6.0 percent, versus average total deposits of $33.16 billion for 2017.

    “Throughout 2018, Signature Bank continued to execute its core strategy. We expanded our network with the addition of eight Private Client Banking teams while growing across all key metrics, including core deposits, loans and earnings. We bolstered our West Coast operations and added a Funds Banking Division catering to private equity firms, which are heavily emphasized on both coasts. This will allow us to further transform the balance sheet to increase floating rate assets. Additionally, we continued to reinvest in our infrastructure with the implementation of a new loan operating system, buildouts of a new loan approval system and foreign exchange platform as well as the reorganization of our Cash Management and Product Management groups. Lastly, on January 1, 2019, we innovated when we launched SignetTM, a new proprietary, blockchain-based digital payments platform, allowing our commercial clients to interact in a real-time and transparent manner,” explained Joseph J. DePaolo, President and Chief Executive Officer.

    “This past year has been a volatile time for the banking industry, driven by a variety of external factors. However, we continued to perform by keeping with our founding mission and sustaining our leadership position in serving privately held businesses. Our focus, initiatives and proven capabilities should differentiate us from the pack, and we are prepared to address any challenges that may lie ahead,” DePaolo concluded.

    Scott A. Shay, Chairman of the Board, said: “We are ever-mindful of the fact that technology is reshaping banking. We could not have founded Signature Bank in 2001 as a full-service commercial bank with a new single point of contact model without the technological advancements of the 1990s. We continuously examine the needs of our business clients to set our technology agenda, and strive to save them money and keep it safe, while allowing them to focus on their own business — and not banking. It is from this fundamental perspective Signet was born. By launching Signet, we are empowering our clients to make instantaneous USD payments in real time (24/7/365) at no cost per transaction. With Signet, we are playing a key role in the revolutionizing of commercial digital payments.

    “The client response to Signet has been uniformly positive. Clients are already evaluating their business practices to determine how they might bring their ecosystems onto the Signet platform. There are no other platforms that offer transparency and convenience commercially at this time. We are working with clients across specific industries to tailor the system as we strive for continuous improvement. We recognize banking will be vastly different five years from now, and we aim to be among the leaders.”

  • Morning News: January 17, 2019
    , January 17th, 2019 at 7:13 am

    Government Contractors to Lose Out on Shutdown Pay, Dragging Down Economy

    Huawei Targeted in U.S. Criminal Probe for Alleged Theft of Trade Secrets

    Gundlach Is Right About Junk Bonds And Stocks

    Jack Bogle Was Proud He Wasn’t a Billionaire

    JPMorgan Had a Record 2018. Jamie Dimon Worries About 2019.

    Here’s What Eddie Lampert Should Do With Sears Now

    The New Technology Coming to a Car Near You, and How to Invest In It

    PG&E’s Pending Bankruptcy: Opportunity Knocks

    What Snap’s Latest C-Suite Departure Says About the Company

    Larry Fink Calls on Businesses to Lead, Not Just Live, With Purpose

    Paramount Was Hollywood’s ‘Mountain.’ Now It’s a Molehill.

    Lawrence Hamtil: An Update on Equal-Weight Valuations

    Michael Batnick: Animal Spirits: The Richest 50%

    Jeff Carter: A Pitch By Pipit

    Blue Harbinger: Stock Exchange: Bear Market Relief Rally?

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  • RIP: John C. Bogle
    , January 16th, 2019 at 9:46 pm

    From the WSJ:

    Born in Montclair, N.J., on May 8, 1929, Mr. Bogle and his twin brother David arrived five months before the Great Crash that began that October wiped out much of their family’s wealth. Mr. Bogle delivered papers and worked as a waiter growing up.

    At Blair Academy and Princeton University, Mr. Bogle said he initially struggled with the subject of economics. An article about the mutual-fund industry in the December 1949 issue of Fortune magazine inspired his 1951 senior thesis, titled “The Economic Role of the Investment Company.” He graduated from Princeton magna cum laude in economics.

    Mr. Bogle’s first job in the investment world was as a clerk to Walter L. Morgan, who founded the first-ever balanced mutual fund at Wellington Management.

    Despite his eventual advocacy for index funds, Mr. Bogle was contemptuous early in his career of the idea that trying to beat the market was a waste of money.

    In 1960, under the pen name John B. Armstrong, he wrote a lengthy article for the Financial Analysts Journal in which he ridiculed the very idea “that the mutual fund itself should buy the market average,” or settle for a return no better than that of a benchmark like the Dow Jones Industrial Average or the S&P 500 index. In 1973, he gave a speech insisting that “the average individual is getting ‘above-index’ results in mutual funds” and that “neither compensation of salesmen, nor profitability of broker-dealers and underwriters, is excessive.”

    Only after he was fired as Wellington’s president in 1974 by his partners and launched Vanguard as an independent company the following year did Mr. Bogle challenge the industry’s prevailing orthodoxy that price was a signal of quality and embrace low-cost investing.

    Mr. Bogle chose to organize Vanguard as a mutual company, an idea he said he had unsuccessfully pitched to his Wellington colleagues years earlier. Along the lines of a consumer cooperative, the firm would be—and still is—owned not by private shareholders who seek to maximize their own profits but rather by its fund investors, who earn higher returns as Vanguard drives costs lower. In 1977, Vanguard also went “no-load,” eliminating the sales commissions and all middlemen on its funds.

    Mr. Bogle’s insistence on integrity, which often struck many of his competitors as sanctimonious, steered Vanguard clear of the scandals that periodically swept through the mutual-fund industry. Still, when it came to corporate governance, Mr. Bogle became a greater proponent of index and other funds harnessing their power on shareholder votes after his tenure at Vanguard than he was during it.

    At Vanguard, Mr. Bogle paid himself well but not lavishly, though he and other firm executives have never publicly disclosed those figures. Mr. Bogle frowned on ostentation, driving a Volvo station wagon, vacationing in Lake Placid, N.Y., flying economy class and haggling for discounts at hotels.

    Vanguard continues to take a similarly thrifty approach to its business at its Malvern campus, whose plain brick buildings bear the names of warships. Mr. Bogle, a fan of British Adm. Horatio Nelson, named the firm Vanguard after Adm. Nelson’s ship in the 1798 Battle of the Nile and referred to employees as “crew.”

    Despite Mr. Bogle’s age and lengthy career, he had chronic coronary failure and suffered at least seven heart attacks—the first at age 31. He endured a malfunctioning pacemaker before finally receiving a heart transplant in 1996.

    “I didn’t think about [dying],” he told an interviewer in 2007. “I just got on with what needed to be done.”

  • Eagle Bancorp Earns $1.17 per Share
    , January 16th, 2019 at 4:23 pm

    Our first Buy List earnings report is out! Eagle Bancorp (EGBN) reported Q4 earnings of $1.17 per share. That beat estimates by three cents per share. For the year, Eagle made $4.42 per share. That’s up from $3.35 per share in 2018.

    Long discussion from the CEO:

    “We are very pleased to report a continued trend of balanced and consistently strong financial performance,” noted Ronald D. Paul, Chairman and Chief Executive Officer of Eagle Bancorp, Inc. “Our net income in the fourth quarter represents ten years of quarterly increases in operating earnings dating back to the first quarter of 2009, a record of consistency rarely seen in public company financial performance. Our strong financial performance has resulted from a combination of steady average balance sheet growth, revenue growth, and very favorable operating leverage. Additionally, we have maintained solid asset quality over an extended period through disciplined risk management practices. These factors have combined to achieve a return on average assets of 1.90% for the fourth quarter of 2018, a return on average common equity of 14.82%, and a return on average tangible common equity ratio of 16.43%, while sustaining very strong capital levels.”

    Mr. Paul added, “For the fourth quarter of 2018, we experienced very strong average deposit growth which was invested at lower market interest rates, resulting in above average liquidity. This liquidity, which was invested at short term market rates, contributed to a decline in the net interest margin to 3.97% for the fourth quarter from 4.14% in the third quarter of 2018. Average deposit balances increased 7.2% for the fourth quarter 2018 over the third quarter 2018. We attribute the significant average increase to seasonality, market conditions and our well developed customer relationships leading to success in gathering core deposits. Steady growth in loan balances continued, increasing 3.8% on average for the fourth quarter of 2018 over the third quarter of 2018. Period end to period end, loan balances increased 2.1%, for the fourth quarter 2018 while deposit balances increased a very strong 9.4%. The higher liquidity position in the fourth quarter resulted in an average loan to deposit ratio of 99% as compared to 102% for both the third quarter of 2018 and the fourth quarter of 2017.” Mr. Paul added, “We consider average balances more indicative of our growth performance, since maintaining favorable averages translates to improved revenue. Growth in our average balance sheet combined with a continuing favorable net interest margin contributed to revenue growth increases of 3.5% in the fourth quarter 2018 over the fourth quarter of 2017 and by 1.0% over the third quarter of 2018. Also contributing to the decreased net interest margin for the fourth quarter was a 9 basis point decline in the yield on the loan portfolio to 5.60% versus 5.69% for the third quarter, as the quarter saw substantial payoffs of higher yielding loans. Fourth quarter loan payoffs were the highest of any quarter in 2018, and were due substantially to above average sales of condominium units financed by the bank. These are projects that are performing well resulting in more rapid pay-downs of construction loans. Notwithstanding the payoff of higher yielding loans, the Company’s loan portfolio yield continues to benefit from both higher general market interest rates and disciplined loan pricing and we believe that the yield on our loan portfolio continues to be superior to peer bank returns. Importantly, our credit quality remained very strong in the fourth quarter as the level of nonperforming assets was just 0.21% of total assets at December 31, 2018 and the annualized level of net credit losses to average loans was 0.05%.” Mr. Paul added, “The Company’s operating efficiency, another key driver of our financial performance, remained favorable.” For the fourth quarter in 2018, the efficiency ratio was 36.1%, as compared to 36.4% in the third quarter of 2018, and was 37.3% for the full year 2018.

    For the full year 2018 over 2017, average deposit growth was 11%, average loan growth was 12%, revenue growth was 8.4% and noninterest expense growth was 6.9%. The net interest margin for 2018 was 4.10% as compared to 4.15% for the year 2017, well above peer banking companies. Period end to period end, loan growth in 2018 was 9% and deposit growth was 19%.

    Comparing asset yields and cost of funds for the full year of 2018 to the full year 2017, loan yields were up 37 basis points (from 5.17% to 5.54%), yields on earning assets were up 36 basis points (from 4.73% to 5.09%) and the composite cost of funds was up 41 basis points (from 0.58% to 0.99%). Importantly, our funding costs, while up in 2018 over 2017, continue to benefit from the substantial level of average noninterest deposits as a percentage of average total deposits of 33.4% in 2018. Additionally, the significant portion of the loan portfolio being variable and adjustable rate in a rising rate environment tends to mitigate the effects of higher cost of funds. Mr. Paul added, “Given the more competitive interest rate environment in 2018 for both loan rates and funding costs, coupled with a flatter yield curve and the Federal Open Market Committee’s (“FOMC”) four short term rate increases, the Company believes management of the net interest margin has been disciplined and effective.

  • Huge Deal: Fiserv Is Buying First Data
    , January 16th, 2019 at 9:16 am

    Fiserv (FISV) said it’s buying First Data (FDC) for $22 billion in an all-stock deal.

    Folks who own First Data will get 0.303 shares of Fiserv for each share of FDC they own. That values FDC at $22.74. This is a 22% premium to First Data’s closing price.

    Fiserv shareholders will own 57.5 percent of the combined company and First Data shareholders will own 42.5 percent. Fiserv offered 0.303 of its shares for each First Data share.

    Fiserv Chief Executive Officer Jeffery Yabuki will become CEO and chairman of the combined company.

    After the deal closes in the second half of 2019, the combined company’s adjusted earnings per share is expected increase by more than 20 percent in the first full year, the companies said.

    Fiserv looks to open down 6% today. From the WSJ:

    Fiserv, based outside of Milwaukee, sells systems to banks, credit unions and other financial institutions, including those related to electronic payment transactions. Atlanta-based First Data’s offerings include point-of-sale products for retailers, like credit-card machines and point-of-sales devices.

    The combined company plans to invest $500 million over five years, targeting risk management, merchant solutions and payment technologies. It would also generate significant incremental revenue, related to adding new value to bank merchant services, credit processing and other products, the companies said.

    The combined company would be able to trim $900 million in expenses over five years, driven by the elimination of duplicative corporate structures, streamlining technology infrastructure, operational efficiencies and other changes, Fiserv and First Data said.

    Fiserv also said they expect to report Q4 earnings on February 7. They look to report earnings of 84 to 85 cents per share. For the entire year, that’s earnings of $3.10 to $3.11 per share. For 2019, Fiserv expects to earn between $3.39 and $3.52 per share.

  • Morning News: January 16, 2019
    , January 16th, 2019 at 7:15 am

    The Supreme Court Just Handed a Big, Unanimous Victory to Workers. Wait, What?

    Bigger Gold Companies Still Aren’t Glitterati

    Goldman Says Rich People Will Drag Down the U.S. Economy by Spending Less

    Netflix Raises Prices on All of Its Subscription Plans

    What Wall Street Didn’t Like About Wells Fargo’s Earnings

    BofA Beats Profit Estimates on Higher Interest Income, Loan Growth

    Walmart Could Leave CVS Caremark Pharmacy Networks Amid Dispute

    Microsoft and Walgreens Team Up to Fight a Common Rival: Amazon

    Sears Chairman Prevails in Bankruptcy Auction for Retailer With $5.2 Billion Bid

    Snap Finance Chief Joins Executive Exodus

    Expecting a Huge Payout, Investment Banker Loses His New Job Instead

    How to Make Money Trading: Hack Into SEC, Peek at 157 Secret Earnings Reports

    Ben Carlson: Diversification is (Almost) Undefeated

    Nick Maggiulli: Beware the Gatekeeper

    Roger Nusbaum: If You Haven’t Done These 75 Things By 5am, You’re Not Doing It Right

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  • Sherwin-Williams Warns on Q4
    , January 15th, 2019 at 9:37 am

    We got a Buy List earnings warning this morning. Sherwin-Williams (SHW) said their Q4 earnings won’t be so hot. They had been expecting a sales increase in the mid-single digits. Now they say it will be 2%.

    Sherwin now expects full-year earnings of $18.53 per share (that excludes merger-related costs). That’s below their previous guidance of $19.05 to $19.20 per share.

    Commenting on the preliminary results, Chairman, President and Chief Executive Officer John G. Morikis said, “Our performance in the fourth quarter was disappointing across the board relative to our outlook back in October. Consolidated revenue growth for the fourth quarter fell well short of our previous expectation, due in large part to weak sales growth by our North American stores in October and November. Store sales rebounded somewhat in December, but not enough to bring in the quarter. Sales for our Consumer Brands and Performance Coatings Groups also fell short of expectations. The revenue shortfall was the primary driver of the significant earnings per share miss in the quarter. Given the lower preliminary results for our fourth quarter, our full year preliminary adjusted net income per share is $18.53 per share, or about 3% below the midpoint of our previous guidance range. This full year 2018 adjusted earnings per share is an increase of approximately 23% over full year 2017 on a comparable basis.”

    At a quarterly rate, Sherwin now expects Q4 EPS of $3.55 which is down from the earlier forecast of $4.07 to $4.22. Shares of SHW are down about 5% this morning.

    Earnings are due out on January 31.

  • Morning News: January 15, 2019
    , January 15th, 2019 at 7:11 am

    China Is Losing The Trade War In Nearly Every Way

    German Growth Is Weakest in Five Years, in Latest Sign of Global Slowdown

    May Faces Worst Government Defeat in 95 Years in Brexit Vote

    German Court Throws Out Qualcomm’s Latest Patent Case Against Apple

    U.S. Steel Companies Face Downturn Despite Trump Claims of Revival

    U.S. Now Says All Online Gambling Illegal, Not Just Sports Bets

    Volkswagen, Ford to Announce Automotive Alliance

    How Fiat Chrysler Sped From Laggard to Leader in Detroit

    Is General Motors Ready to Take on Tesla?

    Market Turmoil Hurt Citi’s Revenue as ’18 Ended, Signaling Possible Trouble

    JPMorgan Misses Profit Estimates as Bond Trading Slumps

    PG&E Bankruptcy Tests Who Will Pay for California Wildfires

    In a Month You’ll Wish the Shutdown Were Only as Bad as Today

    Joshua Brown: What Are Your Thoughts: 45% in Twelve Days?

    Michael Batnick: These Are the Goods

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