Archive for July, 2019

• Morning News: July 26, 2019
  Eddy Elfenbein, July 26th, 2019 at 7:03 am

  China Needs New Places to Sell Its Mountain of Stuff

  New Auto Safety Technology Leaves Insurers in the Dark

  Here’s Why Puerto Rico’s Next Governor Will Inherit a Financial Mess

  T-Mobile Poised to Win U.S. Approval for Sprint Deal

  Twitter Rises After Adding 5 Million Users, Beating Estimates

  Chris Hughes Worked to Create Facebook. Now, He Is Working to Break It Up.

  Spending a $108 Billion Checkbook Can Be Hard Work

  In Roundup Case, U.S. Judge Cuts $2 Billion Verdict Against Bayer to $86 Million

  Starbucks Boosts Sales With Help From New Drinks, Store Upgrades

  Alphabet Earnings: Profits Triple and Slump Worries Ease

  Apple Confirms $1 Billion Deal for Intel’s Smartphone-Modem Business

  Tesla Tech Chief’s Exit Is Latest High-Profile Departure

  Roger Nusbaum: Selling Without Selling

  Ben Carlson: Animal Spirits: Broke & Overweight & $10,000

  Nick Maggiulli: How Do You Plan For This?

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• Earnings After the Bell
  Eddy Elfenbein, July 25th, 2019 at 4:11 pm

  After the bell, Fiserv (FISV) reported earnings of 82 cents per share. That was a penny better than expectations.

  “We delivered stronger than expected second quarter results across all financial measures including double-digit sales growth,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “At the same time, we continue to advance our integration planning efforts for our pending First Data acquisition which we expect to close on July 29.”

  For 2019, Fiserv expects EPS to range between $3.39 and $3.52. That’s growth of 10% to 14%. Fiserv’s CEO has said that Q2 will be the “low watermark” for earnings growth.

  Stryker (SYK) reported Q2 earnings of $1.98 per share which was four cents better than expectations. That’s up 12.5% from a year ago. Previously, the company had given us earnings guidance of $1.90 to $1.95 per share. For Q2, organic net sales rose by 8.5%, and operating margin expanded to 25.9%. That’s quite good.

  I was also pleased to see Stryker raise its guidance for 2019. The company now expects full-year organic net sales to rise by 7.5% to 8.0%. The company expects earnings to range between $8.15 and $8.25 per share. The previous range was $8.05 to $8.20 per share.

  AFLAC (AFL) said it made $1.14 per share for Q2. Forex knocked off one penny per share.

  The CEO commented:

  “We remain committed to maintaining strong capital ratios on behalf of our policyholders and balancing our financial strength with reinvesting in our business, increasing the dividend, and repurchasing shares. Our dividend track record is supported by the strength of our capital and cash flows. We continue to anticipate that we’ll repurchase in the range of $1.3 to $1.7 billion of our shares in 2019, with the range allowing us to be more tactical in our deployment strategy. As is always the case, this assumes stable capital conditions and the absence of compelling alternatives. At the same time, we recognize that prudent investment in our platform is critical to our growth strategy and driving efficiencies that will impact the bottom line for the long term.

  “I want to reiterate our 2019 earnings guidance. Our consistent, solid results in the first half of the year benefited from timing of expenses and a modestly favorable effective tax rate in the period, which puts us on track to produce adjusted earnings per diluted share toward the higher end of the range of $4.10 to $4.30, assuming the 2018 weighted-average exchange rate of 110.39 yen to the dollar. As always, we are working very hard to achieve our earnings-per-share objective while also ensuring we deliver on our promise to policyholders.”

• Earnings from Raytheon and Hershey
  Eddy Elfenbein, July 25th, 2019 at 10:27 am

  This is a big day for earnings. We had two Buy List reports this morning, and three more are due later today.

  Let’s start with Raytheon (RTN). The defense contractor had a very good second quarter. For Q2, Raytheon earned $2.92 per share. That easily beat Wall Street’s consensus of $2.64 per share.

  “The company had very strong second quarter operating results, with our bookings, sales, operating margin, EPS, and cash flow all exceeding our expectations,” said Thomas A. Kennedy, Raytheon Chairman and CEO. “We begin the second half with continued confidence in our growth outlook given our innovative technologies, breadth of franchises, and record backlog.

  “Integration planning for the merger with United Technologies is progressing well, with the integration team developing detailed execution plans to capture revenue and cost synergies rapidly and ensure seamless operations post close. We continue to expect the transaction to close in the first half of 2020.”

  Raytheon also boosted its full-year guidance. Their sales guidance rises from $28.6 billion – $29.1 billion to $28.8 billion – $29.3 billion. The earnings range increases from $11.40 – $11.60 per share to $11.50 – $11.70 per share.

  Raytheon will also be helped by the big defense spending bill recently passed by Congress.

  Hershey (HSY) had a very good quarter but guidance wasn’t that great. For Q2, the chocolate company earned $1.31 per share. That beat the Street by 14 cents per share. So with that kind of earnings beat, you’d expect a big increase to guidance. Well, we didn’t get it.

  On the plus side, I like that adjusted gross margin was 46.5% in Q2. That’s up from 44.5% in last year’s Q2.

  Here are some numbers for Q2:

  • Consolidated net sales of $1,767.2 million, an increase of 0.9%.
  • Organic constant currency net sales increased 1.8%.
  • The net impact of acquisitions and divestitures was a 0.6 point headwind, and foreign currency exchange was a 0.3 point headwind.
  • Reported net income of $312.8 million, or $1.48 per share-diluted, an increase of 37%.
  • Adjusted earnings per share-diluted of $1.31, an increase of 14.9%.

  And here’s a look at what to expect this year:

  • Full-year reported net sales are expected to increase around 2%, the mid-point of the previous 1-3% range.

  • The net impact of acquisitions and divestitures is estimated to be approximately a 0.5 point benefit.

  • The impact of foreign currency exchange is anticipated to be negligible based on current exchange rates.
  • Full-year reported earnings per share-diluted are expected to be in the $5.54 to $5.66 range, relatively flat with prior year.
  • Full-year adjusted earnings per share-diluted are expected to increase 6% to 7%, the upper half of the previous 5% to 7% range.

  For adjusted EPS, the key number, Hershey now expects earnings of $5.68 to $5.74 per share. That’s an increase of five cents to the low. This is after a 14-cent earnings beat.

• Morning News: July 25, 2019
  Eddy Elfenbein, July 25th, 2019 at 7:23 am

  Strange Economics of Mideast Oil Shield Trump From Iran’s Bite

  U.S. Economic Growth Seen Stumbling as Trade Weighs on Business

  The Logic Behind the Bonds that Eat Your Money

  Facebook Antitrust Inquiry Shows Big Tech’s Freewheeling Era Is Past

  Ad Tool Facebook Built to Fight Disinformation Doesn’t Work as Advertised

  Nissan to Cut 12,500 Jobs as It Struggles After Ghosn’s Arrest

  Tesla Breaks Records But Doesn’t Break Even

  The Little Hybrid That Could, and Still Can

  DoorDash Changes Tipping Model After Uproar From Customers

  What’s Meat Got to Do With It?

  Comcast Second-Quarter Profit Beats Wall Street, Misses on Revenue

  Warren Buffett Charity Lunch in Limbo After Crypto Promoter Issues Apology

  Lawrence Hamtil: Is Risk A Function of Sector or Size? Part II

  Cullen Roche: Congrats on Your Debt Ceiling Increase

  Jeff Carter: Expounding on Product Market FitBe sure to follow me on Twitter.

• Earnings from Cerner and Torchmark
  Eddy Elfenbein, July 24th, 2019 at 4:16 pm

  After the close, Cerner (CERN) announced Q2 earnings of 66 cents per share. That beat the Street by two cents per share. The company said that bookings came in at $1.432 billion which was the high end of their range. Revenue rose 5% to $1.431 billion. That was in line with Cerner’s expectations.

  “I am pleased with our financial results, which were in line with our expectations,” said Brent Shafer, Chairman and CEO, Cerner. “In addition to delivering solid quarterly operating results, we made good progress on the early stages of our transformation and positioning Cerner for long-term profitable growth. Cerner has played a key role in digitizing health care, and we believe our next era of growth will be driven by the tremendous opportunity related to helping our clients drive a higher order of benefits from this digitization.”

  Now for guidance. For Q3, Cerner expects revenue between $1.405 billion and $1.455 billion, and full-year revenue between $5.650 billion and $5.850 billion.

  For Q2, Cerner expects earnings between 65 and 67 cents per share. Wall Street had been expecting 69 cents per share. Cerner sees full-year earnings between $2.64 and $2.72 per share. That’s the same as the previous guidance. The Street was at $2.67 per share.

  Regarding Torchmark (TMK), first, the big news: the company is changing its name to Globe Life Inc. effective August 8, 2019. The new symbol will be GL.

  The name change is part of a brand alignment strategy which will enhance the Company’s ability to build name recognition with potential customers and agent recruits through use of a single brand. The underwriting companies owned by the Parent Company will continue to exist as legal entities, but over a period of time will go to market under the Globe Life name to leverage branding initiatives implemented at Globe Life And Accident Insurance Company in recent years.

  For Q2, Torchmark reported earnings of $1.67 per share. That was two cents per share above the Street.

  Here are some highlights from the quarter:

  Net income as an ROE was 12.3%. Net operating income as an ROE excluding net unrealized gains on fixed maturities was 14.6%.

  Life underwriting margin at American Income Exclusive Agency and Globe Life Direct Response both increased over the year-ago quarter by 9%.

  Health underwriting margin at Family Heritage Exclusive Agency increased over the year-ago quarter by 14%.

  Life premiums increased over the year-ago quarter by 7% at American Income Exclusive Agency and health premiums increased over the year-ago quarter by 8% at Family Heritage Exclusive Agency.

  Net health sales increased over the year-ago quarter by 14%.

  979,215 shares of common stock were repurchased during the quarter.

  For the year, Torchmark projects net operating income per share will be between $6.67 to $6.77.

• Check Point Beats by a Penny
  Eddy Elfenbein, July 24th, 2019 at 10:33 am

  We have three earnings reports today. Cerner (CERN) and Torchmark (TMK) report after the close, but Check Point Software (CHKP) reported this morning. For Q2, the cyber-security firm earned $1.38 per share. That beat Wall Street’s consensus by one penny per share. Revenues rose 4% to $488 million which matched expectations.

  “Second quarter results were driven by 13 percent growth in our security subscriptions revenues, which included our advanced threat prevention and our CloudGuard family of products,” said Gil Shwed, Founder and CEO of Check Point Software Technologies. “We continued to expand our product offerings during the second quarter with the introduction of new technologies which included Malware DNA, a new artificial intelligence-based engine that accelerates zero-day threat prevention, and CloudGuard Log.ic, providing threat protection and context-rich security intelligence.”

  Now for guidance. For Q3, Check Point sees EPS ranging between $1.36 and $1.44 on revenue of $480 to $500 million. For the entire year, CHKP projected earnings between $5.85 and $6.25 per share, and revenue between $1.94 and $2.04 billion.

• Morning News: July 24, 2019
  Eddy Elfenbein, July 24th, 2019 at 7:18 am

  The Old Rules for Building Wealth Are Obsolete

  Justice Department to Open Broad, New Antitrust Review of Big Tech Companies

  ‘We’re Full,’ Car Dealers Say as Auto Sales Slow After a Long Boom

  Nissan to Report 90% Plunge in Profit & Nissan to Cut Over 10,000 Jobs Globally

  More Proof That Ford Will Eat Tesla’s Lunch in the Next Two Years

  Deutsche Bank Sinks to $3.5 Billion Loss as Overhaul Costs Hurt

  Coca-Cola Hits All-Time High as New Products Shine

  Visa Reports Earnings Results Above Expectations

  Snap Back?

  Amazon Is Teaming Up With a Real Estate Broker. How Scared Should Zillow Be?

  Dish Agrees to $5 Billion Deal for Wireless Assets

  Equifax’s $700 Million Settlement: How to Get Your Share

  Nick Maggiulli: Eating Your Own Cooking

  Michael Batnick: Auto-Correct

  Ben Carlson: You May Have Longer Than You Think to Invest For Retirement

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• Smucker Raises Dividend
  Eddy Elfenbein, July 23rd, 2019 at 6:46 pm

  Press release:

  The J. M. Smucker Company (SJM) today announced that the Board of Directors has approved an increase in the quarterly dividend from $0.85 to $0.88 per common share, an increase of four percent. The dividend will be paid on Tuesday, September 3, 2019, to shareholders of record at the close of business on Friday, August 16, 2019. This represents the Company’s eighteenth consecutive year of dividend growth.

• Sherwin-Williams Rises on Good Earnings
  Eddy Elfenbein, July 23rd, 2019 at 11:00 am

  Shares of Sherwin-Williams (SHW) are up nicely this morning. The company reported Q2 earnings of $6.57 per share. That was 20 cents higher than expectations.

  For the quarter, consolidated net sales rose 2.2% to $4.88 billion. Net sales in stores open more than a year rose by 4.3%. Sherwin stood by its full-year EPS guidance of $20.40 to $21.40 per share.

  Commenting on the second quarter, John G. Morikis, Chairman and Chief Executive Officer, said, “Sherwin-Williams delivered record results in net sales, EBITDA, profit before taxes and net operating cash in the second quarter, overcoming uneven demand in end markets outside the U.S. and persistently challenging selling conditions in North American architectural paint markets. Gallon growth in our North American paint stores and continued progress on our pricing initiatives in all segments combined to drive consolidated adjusted gross margin to 44.9% and support our continued investments in solutions for our customers. We also continued to effectively manage costs, which combined with the gross margin improvement, drove a 15% year-over-year increase in adjusted earnings per share. We expect gross margins to continue to improve in the second half of the year, driven by continued volume growth and lower projected year-over-year raw material pricing.

  “All three of our segments increased profit and margin year-over-year. In The Americas Group, we generated sales growth in all end markets in our North American paint stores, led by high single digit growth in residential repaint. We leveraged the sales growth to expand segment margin by 50 basis points to 22.2%. We’ve opened 20 net new stores year to date, and our professional painting contractor customers continue to report solid backlogs and project pipelines going forward. In our Consumer Brands Group, our growth initiatives with our largest partners in North America are performing well and more than offset softer demand in some international markets. Adjusted segment margin improved 490 basis points to 20.3%, driven by sales growth and good cost control. Performance Coatings Group sales declined in the quarter mainly related to softer demand in some end markets in Asia and Europe. Despite the sales decline, adjusted segment margin increased 150 basis points to 15.5% – evidence of our good cost control and that our recent pricing actions are gaining traction to offset raw material inflation.

  “For the third quarter, we anticipate our consolidated net sales will increase by a low single digit percentage compared to last year’s third quarter. For the full year 2019, we expect our consolidated net sales will increase two to four percent compared to the full year 2018. We are updating our full year 2019 diluted net income per share guidance to be in the range of $16.14 to $17.14 per share as a result of the $.79 per share charge related to the tax credit investment loss. Diluted net income per share in 2018 was $11.67 per share, including a charge of $4.15 per share for acquisition-related costs and charges for non-operating expenses of $2.71 per share. We are reaffirming our full year 2019 adjusted diluted net income per share guidance to be in the range of $20.40 to $21.40 per share, excluding acquisition-related costs and charges for non-operating expenses, compared to $18.53 per share for the full year 2018 on a comparable basis.”

• Morning News: July 23, 2019
  Eddy Elfenbein, July 23rd, 2019 at 7:16 am

  Globalization Isn’t Dying, It’s Just Evolving

  UBS CEO Warns of ‘Dangerous’ Bubbles Spurred by Central Banks

  Cash Is King When It Comes to Credit Card Rewards

  Did the FTC Go Soft on Facebook?

  What the Equifax Data-Breach Settlement Means for You

  Beijing Auto Buys Stake in Daimler, Deepening Their Alliance

  AB InBev Brews Up Elderflower Ale and Canned Cocktails for Growth

  Bird Is Said to Raise New Funding at $2.5 Billion Valuation

  Alibaba Welcomes U.S. Small Businesses to Sell Globally on Its Platform

  Huawei First-Half Revenue Up About 30% Despite U.S. Ban

  Microsoft’s $1 Billion Investment in AI Startup Is Good News for Nvidia

  Microsoft Will Pay Out $26 Million in Settlement Over Hungarian Bribery Scheme

  Lawrence Hamtil: Compendium of Low Volatility Articles

  Jeff Carter: Wait Or Go

  Jeff Miller: Stock Exchange: Models Gone Wild

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