Archive for July, 2020

• AFLAC Earns $1.28 per Share
  Eddy Elfenbein, July 28th, 2020 at 5:29 pm

  After the closing bell, Aflac (AFL) reported Q2 earnings of $1.28 per share. Total revenues were $5.4 billion which was down a bit from the $5.5 billion of one year ago.

  Net income was $805 million or $1.12 per share. That’s up from $1.09 per share for last year’s Q2. With insurance companies, we always want to look at the adjusted earnings because investment gains and losses can have a big impact on net income. Adjusting for that, brings us to $1.28 per share. Wall Street had been expecting $1.07 per share.

  During Q2, the yen/dollar exchange rate average 107.65. That was 2.1% stronger than the average rate from last year’s Q2. That knocked off a penny per share in earnings so adjusted for currency, AFLAC’s earnings rose 12.4% to $1.27 per share.

  AFLAC is usually pretty good at giving guidance. This time, however, is much more difficult.

  Here’s the CEO:

  “We expect full-year sales results in both countries to be significantly affected, but we also see potential for a modest sales recovery in the second half of the year, contingent upon the pace of economic recovery. At the same time, we are seeing a temporary decline in the benefit ratio in the U.S. as consumers defer treatment, which led to favorable results in this quarter. However, economic conditions and claims activity within this environment remain uncertain in both the Japan and the U.S. as both countries address the pandemic.

  “As always, we are committed to prudent liquidity and capital management. This includes maintaining strong capital ratios on behalf of our policyholders in both the U.S. and Japan and a tactical approach to capital allocation. In addition, we remain committed to defending and extending our 37-year track record of annual dividend increases and remain in the market repurchasing shares. At the same time, we are focused on integrating the growth investments we have made in our platform. By doing so, we look to emerge from this period in a continued position of strength and leadership.”

• Sherwin-Williams Beats and Raises Guidance
  Eddy Elfenbein, July 28th, 2020 at 8:54 am

  The Federal Reserve begins its two-day meeting today. The policy statement will come out tomorrow afternoon. We have two Buy List earnings reports today. AFLAC (AFL) reports after the closing bell and Sherwin-Williams reported earlier today.

  For Q2, Sherwin-Williams (SHW) earned $7.10 per share. That easily beat Wall Street’s estimate of $5.85 per share. Sales fell 5.6% to $4.60 billion.

  For Q2, diluted net income increased to $6.48 per share. That’s up from $5.03 per share a year ago. However, there’s also 62 cents for “acquisition-related amortization expense.” That brings us up to $7.10 per share.

  CEO John G. Morikis said:

  While sales were down by a mid-single digit percentage overall, favorable customer and product mix, lower input costs and strong spending controls enabled us to deliver significantly improved performance compared to last year’s second quarter. Gross margin expanded 330 basis points to 48%, and adjusted earnings per share increased 8.1% to $7.10 per share. Adjusted EBITDA grew 6.2% to $979.0 million, or 21.3% of sales, compared to 18.9% in second quarter last year.

  The best news is that Sherwin is increasing its full-year range to $19.21 – $20.71 per share which includes $2.54 per share in acquisition-related amortization expense. That previous range was $16.46 per share to $18.46 per share, including $2.54 per share acquisition-related amortization expense. For Q3, the company sees net sales up or down in the low single digits.

• Morning News: July 28, 2020
  Eddy Elfenbein, July 28th, 2020 at 7:04 am

  End Game for Oil? OPEC Prepares For an Age of Dwindling Demand

  As Gold Smashes Records, Forecasters Ask Whether Peak Is Near

  In Summer of Turmoil, Subdued ‘Fear’ Gauges Make Markets Uneasy

  Amazon, Apple, Facebook and Google Prepare for Their ‘Big Tobacco Moment’ & Jeff Bezos Cast in a Role He Never Wanted: Amazon’s D.C. Defender

  McDonald’s Global Sales Suffer As COVID-19 Lockdowns Limit Operations

  Virginia Chick-fil-A Offering Free Food In Exchange For Coins Amid Shortage

  Hotels Are Promoting the Nostalgia of the Family Road Trip & Longer, Slower, Farther: Savoring the Prospects of Future Travels

  One of America’s Oldest Gun Makers Files for Bankruptcy for 2nd Time

  Where to Invest $1 Million Right Now

  Boaz Weinstein Piles Up 90% Gain in Hamptons, Bets on More Chaos

  Malaysia Ex-PM Najib Razak Sentenced to 12 Years in Jail in 1MDB Unit Case

  The Hunt for the Next Blockbuster Manga

  Joshua Brown: Sad Old Man Rocks Making New High

  Jeff Carter: Follow the Money

  Ben Carlson: Patience Is A Virtue No One Has Time For Anymore

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• Durable Goods Jump 7.3%
  Eddy Elfenbein, July 27th, 2020 at 10:05 am

  It seems each day on Wall Street, the mood is determined by the Big Five. Today, the major tech companies are leading the market strongly. The rest of the market is largely flat.

  The price for gold has surged to an all-time high. This finally snapped gold’s previous high from 11 years ago. Adjusted for inflation, gold is still below its high from 1980.

  This morning’s durable goods report for June showed an increase of 7.3% for June. That beat expectations by 0.1%. Durable goods were up 15.1% the month before.

  Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, jumped 3.3% last month, the Commerce Department said on Monday. These so-called core capital goods orders rose 1.6% in May and remained below their pre-pandemic level. Orders last month were boosted by strong demand for machinery, fabricated metals, primary metals and electrical equipment, appliances, and components.

  Economists polled by Reuters had forecast core capital goods orders advancing 2.3% in June. Core capital goods orders fell 2.3% on a year-on-year basis in June.

  On Thursday, we’ll get the Q2 GDP report. It may be the worst one on record.

  

• RPM Beats Earnings, Rises to All-Time High
  Eddy Elfenbein, July 27th, 2020 at 9:41 am

  This morning, RPM International (RPM) reported fiscal Q4 earnings. This is for the quarter that ended on May 31. As I expected, due to Covid-19, the company had a tough quarter. Sales fell 8.9% but the breakdown was interesting. Sales were flat in the U.S. but down 25% internationally. While RPM withdrew its guidance, the company did say that it expected Q4 sales to fall 10% to 15%, so they beat that forecast.

  Net income fell to 84 cents per share from $1.02 per share last year. However, once you exclude charges and investment losses, then quarterly income fell 8.9% to $1.13 per share. Even though results were down, it was still the second-best quarter in the company’s history. Wall Street had been expecting earnings of $1.01 per share.

  RPM has a strong balance sheet and plenty of liquidity, so I’m hardly worried about their survival.

  For the full year, RPM made $3.07 per share. That’s an increase of 13.3% over last year. Before the virus hit, RPM had been expecting full-year earnings to range between $3.30 and $3.42 per share.

  For fiscal Q1, which ends next month, RPM expects net sales growth “in low single digits and adjusted EBIT growth of 20% or more.” RPM isn’t providing any full-year guidance yet.

  RPM is a world leader in specialty coatings, sealants and building materials. The company has raised its dividend every year since 1973.

  The shares are up nicely this morning and they hit a new all-time high.

• Morning News: July 27, 2020
  Eddy Elfenbein, July 27th, 2020 at 7:07 am

  Gold Rips Up Record Book as $2,000 Test Looms in Hunt for Haven

  The Message Behind Gold’s Rally: The World Economy Is in Trouble

  Once A Source of U.S.-China Tension, Trade Emerges as an Area of Calm

  Fed Meeting Expected To Leave U.S. Bond-Stock Relationship Out Of Whack

  Hedge Fund Fees in Free Fall Is the New Reality For a Humbled Industry

  Virus Relief Was a ‘Bridge to Nowhere’ for Sports Apparel Maker

  How Remote Work Will Create Economic Winners and Losers

  Big Tech Funds a Think Tank Pushing for Fewer Rules. For Big Tech.

  AstraZeneca, Daiichi Sankyo In $6 Billion Oncology Deal

  Tech CEOs Deserve An Apology

  Jeff Miller: Weighing the Week Ahead: Time for A Look Under the Hood of the Economic Engine

  Jeff Carter: Lotsa Pie

  Howard Lindzon: Momentum Monday – Big Week for Technology Company Earnings

  Ben Carlson: A Roth IRA For Every Baby in America & How Much Should You Spend On An Engagement Ring?

  Joshua Brown: This Is The Best Word I Could Come Up With To Describe Investors Today & Prepare for the Air Pocket

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• CWS Market Review – July 24, 2020
  Eddy Elfenbein, July 24th, 2020 at 7:08 am

  “The stock market is a giant distraction to the business of investing.” – Jack Bogle

  Before I begin, I’d like to announce I’m going to host a post-market webinar on Tuesday, July 28 at 4 pm ET. National security expert John Schindler will be joining us. The webinar is free. You can register here.

  Now on to stocks. This has been a busy week for earnings reports. Seven of our Buy List stocks report earnings on Wednesday and Thursday. I’m pleased to say that all seven beat estimates, and some beat them by quite a lot. I’ll go over them all in a bit.

  It’s not over. We have eight more reports coming next week. In this week’s CWS Market Review, I’ll preview them all. There’s a lot to get to, so let’s jump into our recent earnings news.

  Seven Buy List Earnings Reports

  Here’s our updated Earnings Calendar:

  Company	Ticker	Date	Estimate	Result
  Check Point Software	CHKP	22-Jul	$1.44	$1.58
  Eagle Bancorp	EGBN	22-Jul	$0.74	$0.90
  Globe Life	GL	22-Jul	$1.53	$1.65
  Silgan	SLGN	22-Jul	$0.65	$0.85
  Stepan	SCL	22-Jul	$1.20	$1.65
  Danaher	DHR	23-Jul	$1.08	$1.44
  Hershey	HSY	23-Jul	$1.13	$1.31
  RPM International	RPM	27-Jul	$1.01
  AFLAC	AFL	28-Jul	$1.07
  Sherwin-Williams	SHW	28-Jul	$5.85
  Cerner	CERN	29-Jul	$0.61
  Intercontinental Exchange	ICE	30-Jul	$1.04
  Moody’s	MCO	30-Jul	$2.19
  Stryker	SYK	30-Jul	$0.55
  Church & Dwight	CHD	31-Jul	$0.63
  Trex	TREX	3-Aug	$0.65
  Disney	DIS	4-Aug	-$0.61
  Ansys	ANSS	5-Aug	$1.16
  Fiserv	FISV	5-Aug	$0.93
  Middleby	MIDD	5-Aug	$0.41
  Becton, Dickinson	BDX	6-Aug	$2.04
  Broadridge Financial Solutions	BR	11-Aug	$2.08

  Let’s start with Check Point Software (CHKP). On Wednesday morning, the Israeli cyber-security firm said that its Q2 earnings rose by 15% to $1.58 per share. That beat expectations of $1.44 per share.

  The numbers were pretty good. Quarterly revenue rose 4% to $506 million. Wall Street had been expecting $488 million. Cash flow from operations increased by 8% to $252 million. During Q2, Check Point bought back 3.1 million shares for a total cost of $325 million. The company continues to have a solid balance sheet, which is something I like to see.

  Interestingly, Check Point said that cyber-attacks have increased during the pandemic. In May, the company documented 192,000 coronavirus-related cyber-attacks a week. On Wednesday morning, the shares gapped up as much as 5%, but they later settled back down.

  I’m very impressed with Check Point’s business performance. This was a good quarter for them. This week, I’m raising our Buy Below on Check Point to $133 per share.

  Stepan (SCL), the chemical company, reported Q2 adjusted net income of $1.65 per share. That’s up from $1.50 per share a year ago. Expectations were for $1.20 per share. Currency translation pinged them for 11 cents per share.

  Stepan has three operating units. Surfactants made $48.5 million in Q2. Volume was up 10% thanks to increased demand for cleaning and disinfection products. Polymers made $15.5 million, and Specialty products made $3.2 million.

  On Thursday, the shares broke out to a new all-time high. I’m lifting our Buy Below on Stepan to $117 per share.

  

  Silgan Holdings (SLGN) is turning into a nice winner for us. Last week I told you I was expecting good news from them, and we got it. The metal-container firm earned 85 cents per share for the second quarter. That beat expectations of 65 cents per share. This was the strongest quarter in the company’s history. Net sales were up by 7.6% to $1.18 billion.

  Silgan also did something very rare these days. The company increased guidance. Silgan now sees full-year earnings of $2.70 to $2.85 per share. Silgan also increased its free-cash-flow estimate for this year from $275 million to $330 million. At the current share price, that works out to a free-cash-flow yield of nearly 8.5%.

  Shares of Silgan gained 7.8% on Wednesday. I’m raising our Buy Below to $42 per share.

  Two of our financial stocks reported on Wednesday afternoon. Both have been poor performers this year, but both had good quarterly results.

  Let’s start with Globe Life (GL). The insurance company reported fiscal Q2 operating earnings of $1.65 per share. That beat expectations of $1.53 per share.

  The company narrowed its operating income guidance for this year. The previous range was $6.65 to $7.25 per share. Now Globe Life sees earnings ranging from $6.80 to $7.04 per share.

  The stock gapped up 6.1% on Thursday, but it’s still down over 23% for the year. Don’t give up on GL. I’m raising our Buy Below to $84 per share. One more note. Later today, the Texas Rangers will be hosting the Colorado Rockies at the new Globe Life Field.

  We also got earnings from Eagle Bancorp (EGBN). I was particularly curious to hear what Eagle had to say. Our thesis is that the bank is operating just fine but it’s been weighed down by unresolved legal issues.

  The results confirmed our view. For Q2, Eagle made 90 cents per share which beat estimates of 74 cents per share. The bank now has $9.8 billion in assets. That’s up 13% over the last year.

  The bank said that legal, accounting and professional fees increased by $1.2 million compared with the same quarter one year ago. That’s not so bad. It works out to about three cents per share. I think the market is starting to realize that we’re right. Shares of Eagle rallied 6.8% on Thursday. Eagle Bancorp remains a buy up to $34 per share.

  We had two more Buy List earnings reports on Thursday. Danaher (DHR) said that quarterly earnings rose 32% to $1.44 per share. That’s a big beat. Wall Street had been expecting $1.09 per share. Revenue increased 19% to $5.3 billion.

  For Q3, Danaher sees revenue growth “in the mid- to high-single digit range.” CEO Thomas P. Joyce, Jr., said, “We are very pleased with our second-quarter results—especially in such a challenging environment. Our solid revenue growth, strong cash-flow generation and more than 30% adjusted EPS growth are a testament to our team’s commitment to the Danaher Business System and the outstanding portfolio of businesses that comprise Danaher today.”

  On Thursday, shares of Danaher got to another new high. We have a 30% profit with DHR this year. I’m raising our Buy Below to $212 per share.

  

  Lastly, Hershey (HSY) said that quarterly sales fell 3.4% to $1.71 billion. The chocolatier had Q2 adjusted earnings of $1.31 per share. That beat Wall Street’s estimate of $1.13 per share. Hershey said it’s not providing any financial guidance at this time.

  The company does expect accelerated sales growth in the second half of the year based on momentum exiting the second quarter, assuming no significant disruption to current consumer trends. The company also expects pricing and cost management to drive margin expansion in the second half of the year. We remain confident that our healthy balance sheet and strong cash flow will enable us to meet current business needs, invest for the future and return cash to stockholders.

  Shares of HSY gained 5.7% on Thursday. Hershey remains a buy up to $150 per share.

  Eight More Earnings Reports Next Week

  Next week is going to be busy. We have eight Buy List stocks due to report.

  RPM International (RPM) is scheduled for Monday. This is for the quarter that ended on May 31, which is their fiscal Q4. Companies are allowed a little more time to report their fiscal Q4. That’s why RPM reports in the middle of the normal earnings season.

  In April, RPM reported Q3 earnings of 23 cents per share which was two cents better than expectations. Due to the coronavirus, RPM has decided to suspend its guidance. They also canceled any share buybacks. The good news is that RPM has a strong balance sheet and plenty of liquidity, so I’m hardly worried about their survival.

  The now-canceled full-year guidance was for earnings between $3.30 and $3.42 per share. For Q4, RPM said it expects to see a sales drop of 10% to 15%. Wall Street expects earnings of $1.01 per share. The stock has been holding up fairly well. RPM has raised its dividend every year since 1973.

  AFLAC (AFL) will report on Tuesday. The duck stock has struggled for us this year. AFLAC also withdrew its guidance, although the last earnings report was quite good. I was surprised to see AFLAC was trading below $35 per share not too long ago. That’s quite cheap. For Q2, Wall Street expects $1.07 per share. The duck should be able to beat that.

  Shares of Sherwin-Williams (SHW) got to another high on Thursday. Its Q2 earnings are due out on Tuesday. Previously, the company lowered its full-year range to $16.46 – $18.46 per share with acquisition-related costs of $2.54 per share.

  Sherwin recently increased its sales guidance for Q2. Sherwin now expects sales to decrease “by a mid-single-digit percentage” compared with last year. That may not sound so great, but the guidance before that was for sales to decrease “by a low- to mid-teens percentage.”

  Many companies have withdrawn their guidance, which is certainly understandable, so I appreciate any background we can get. Wall Street expects Q2 earnings of $5.85 per share.

  Cerner (CERN) will report on Wednesday. For Q2, the company sees revenue between $1.34 billion and $1.39 billion. For all of 2020, Cerner expects revenue between $5.55 billion and $5.70 billion. For earnings, Cerner expects EPS of 60 to 64 cents for Q2 and $2.78 to $2.90 for the full year.

  Three more reports are scheduled for Thursday. For its Q1, Intercontinental Exchange (ICE) made $1.28 per share, which beat the Street by four cents. ICE had operating cash flow of $520 million, and free cash flow was $434 million.

  CFO Scott A. Hill said, “In the first quarter we generated record revenues, record operating income and double-digit earnings-per-share growth, which enabled us to return over $850 million to stockholders through our dividend- and stock-buyback program.”

  ICE gave several guidance metrics for Q2 and 2020, but none was EPS. I’ll highlight that ICE expects data revenue to be in a range of $565 million to $570 million. Wall Street is looking for earnings of $1.04 per share.

  Moody’s (MCO) had a blow-out Q1. The ratings agency beat by 51 cents per share. Moody’s Investors Service had revenue growth of 19%, and Moody’s Analytics was up 5%.

  For all of 2020, Moody’s sees earnings ranging between $7.25 and $7.85 per share. The shares are up 75% from their March low and are just below a new high. For Q2, analysts expect earnings of $2.19 per share.

  Stryker (SYK) is one of those companies that’s so steady, you tend to forget how good it is. For Q1, Stryker beat by 15 cents per share. The company said that earnings were “significantly negatively impacted” by the coronavirus. Stryker has decided to forgo any guidance for this year. The Street’s consensus is for Q2 earnings of 55 cents per share.

  Church & Dwight (CHD) made another new high for us on Thursday. This has been a steady winner for us. Unfortunately, C&D withdrew its guidance, but Wall Street expects Q2 earnings of 63 cents per share. Church & Dwight actually benefited from the coronavirus outbreak, especially brands like Arm & Hammer and some hygiene products.

  

  This issue has been all about earnings, but I wanted to add a note on Becton, Dickinson (BDX). The company just got a massive order for 177 million syringes and needles for COVID-19 vaccination programs. Becton said it will start distributing the devices by the end of the year. Stay tuned for BDX’s earnings on August 5.

  That’s all for now. We’re going to have more earnings reports next week. The Federal Reserve also gets together for another meeting on Tuesday and Wednesday. The policy statement will come out Wednesday afternoon, followed by a press conference by Fed Chairman Jerome Powell. On Thursday, we’ll get our first report on Q2 GDP, and it will be terrible. Wall Street is expecting a decline of 33%. I’m too scared to even make a guess. 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

  P.S. Don’t forget to register for Tuesday’s webinar.

• Morning News: July 24, 2020
  Eddy Elfenbein, July 24th, 2020 at 7:02 am

  Panic Selling Grips Chinese Stocks After U.S. Tensions Worsen

  A Russian Gas Pipeline Increases Tension Between the U.S. and Europe

  U.S. Economic Recovery Is Stalling and It May Get Even Worse

  Here’s How Congress Might Replace the Extra $600 Weekly Jobless Benefit

  A Hedge Fund Bailout Highlights How Regulators Ignored Big Risks

  Fed Hoped To Skirt A Second Virus Wave. Small Businesses May Sink In It

  New York City Reopening Splits Along Lines of Wealth and Race

  Airbus Offers Subsidy Concession to End U.S. Tariffs

  5 Big Numbers That Show Amazon’s Explosive Growth During The Coronavirus Pandemic

  Mall Owner Simon Teams Up On Bid For Bankrupt Brooks Brothers

  Goldman, Malaysia Reach $3.9 Billion Settlement Over 1MDB

  Carlyle Co-CEO’s Abrupt Exit Caps a Long, Awkward Power Struggle

  Cullen Roche: Three Things I Think I Think – Bad Tweets Edition

  Joshua Brown: What Every Worker Needs To Know About Stock Based Compensation & Euro Snaps Ten Year Downtrend vs US Dollar

  Michael Batnick: Why Everyone’s Trading & Animal Spirits: Edly ISA’s; Invest in Student Achievement

  Ben Carlson: How Millennials Can Close the Generational Wealth Gap

  Be sure to follow me on Twitter.

• Two More Earnings Beats
  Eddy Elfenbein, July 23rd, 2020 at 8:57 am

  We had two more Buy List earnings reports this morning. Danaher (DHR) said that quarterly earnings rose 32% to $1.44 per share. That’s a big beat. Wall Street had been expecting $1.09 per share. Revenue increased 19% to $5.3 billion.

  For Q3, Danaher sees revenue growth “in the mid- to high-single digit range.” CEO Thomas P. Joyce, Jr., said, “We are very pleased with our second quarter results—especially in such a challenging environment. Our solid revenue growth, strong cash flow generation and more than 30% adjusted EPS growth are a testament to our team’s commitment to the Danaher Business System and the outstanding portfolio of businesses that comprise Danaher today.”

  Hershey (HSY) said that quarterly sales fell 3.4% to $1.71 billion. The company had Q2 adjusted earnings of $1.31 per share. That beat Wall Street’s estimate of $1.13 per share. Hershey said it’s not providing any financial guidance at this time.

  The company does expect accelerated sales growth in the second half of the year based on momentum exiting the second quarter, assuming no significant disruption to current consumer trends. The company also expects pricing and cost management to drive margin expansion in the second half of the year. We remain confident that our healthy balance sheet and strong cash flow will enable us to meet current business needs, invest for the future and return cash to stockholders.

  The other news this morning is that jobless claims rose for the first time since March. Initial claims increased by 109,000 to 1,416,000 (chart below). Continuing claims were 16,197,000.

  

• Morning News: July 23, 2020
  Eddy Elfenbein, July 23rd, 2020 at 7:06 am

  South Korea Falls Into Recession As Exports Slump

  Bounceback in U.S. Shale Oil Output is Unlikely to Last the Summer

  Stimulus Bets Buoy Futures Ahead of Jobless Claims

  Fannie-Freddie Risk Bonds Threaten Big Losses for Fund Managers

  Private Equity’s Biggest Critic Sounds Off With His Final Warning

  Big Tech CEOs Ready Defenses For U.S. Congress Hearing Into Their Growing Power

  The Amazon Critic Who Saw Its Power From the Inside

  Tesla Turns a Profit in a Pandemic-Squeezed Quarter & ‘Please Mine More Nickel,’ Musk Urges As Tesla Boosts Production

  Luxury Cars Are Embracing ‘Drop’ Model Favored By Supreme, Nike

  Surge In Eating At Home Cushions Virus Hit For Unilever

  Escape From New York Pushes Hamptons Home Prices to 13-Year High

  Landlords Jump the Gun As Eviction Moratorium Wanes

  Joshua Brown: Oh. My. God.

  Michael Batnick: The Light of History

  Ben Carlson: Animal Spirits: 10,000 Day Traders

  Be sure to follow me on Twitter.