Archive for August, 2020

• July Jobs Report
  Eddy Elfenbein, August 7th, 2020 at 8:34 am

  The July jobs report is out. The U.S. economy created 1.763 million jobs last month. Expectations were for 1.48 million.

  The number of unemployed fell by 1.4 million to 16.3 million.

  The unemployment rate fell to 10.2%.

  The labor force participation rate was 61.4%.

  Average hourly earnings rose 0.2%.

  From CNBC:

  However, there were wide variations around the estimates as the pandemic’s resurgence dented plans to get the shuttered U.S. economy back online. Forecasts ranged from a decline of half a million jobs to a rise of 3 million. May and June saw a combined increase of more than 7.5 million, the fastest two-month rise in U.S. history.

  The reason for those big gains, though, was the return of displaced workers who were laid off as the nation sought to stave off the Covid-19 spread.

  Even with a three-month gain of 9.3 million workers either newly hired or back to their jobs, the total employment level remained 12.9 million below its February level. The May and June counts were revised up by a total 17,000.

  Here’s nonfarm payrolls:

  

  Here’s the unemployment rate:

  

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

  “I can calculate the motion of heavenly bodies, but not the madness of people.”
  – Isaac Newton

  On Thursday, the S&P 500 rallied for the fifth day in a row. The index is a little over 1% from a new all-time high. The Nasdaq is already at a new high. How’s this for action? Two months ago, the Nasdaq first broke 10,000. On Thursday, it closed over 11,100.

  

  This was another busy week for our Buy List earnings. I have to say that we’ve had a very good earnings season. All of our stocks except one beat Wall Street’s estimates, and that one exception met expectations.

  On Thursday, our Buy List closed at a new all-time high. I’ve been very impressed with our stocks. Middleby, for example, beat estimates, and the stuck jumped 16% in one day. Disney was expected to report a loss. Instead, the entertainment giant reported a profit, and the shares rallied 9% the next day.

  Ansys just hit a new high. So did Church & Dwight. Trex, our best stock this year, beat earnings, guided above the Street and hit a new all-time high; and if that weren’t enough, the deck company also announced a 2-for-1 stock split. I’ll have all the details in a bit.

  We had six Buy List earnings reports, plus one more from last Friday. There’s a lot to get to, so let’s jump right in.

  Seven Buy List Earnings Reports

  Here’s an updated look at our 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	$1.09	$1.44
  Hershey	HSY	23-Jul	$1.13	$1.31
  RPM International	RPM	27-Jul	$1.01	$1.13
  AFLAC	AFL	28-Jul	$1.07	$1.28
  Sherwin-Williams	SHW	28-Jul	$5.85	$7.10
  Cerner	CERN	29-Jul	$0.61	$0.63
  Intercontinental Exchange	ICE	30-Jul	$1.04	$1.07
  Moody’s	MCO	30-Jul	$2.23	$2.81
  Stryker	SYK	30-Jul	$0.55	$0.64
  Church & Dwight	CHD	31-Jul	$0.63	$0.77
  Trex	TREX	3-Aug	$0.65	$0.81
  Disney	DIS	4-Aug	-$0.64	$0.08
  Ansys	ANSS	5-Aug	$1.16	$1.55
  Fiserv	FISV	5-Aug	$0.93	$0.93
  Middleby	MIDD	5-Aug	$0.41	$0.55
  Becton, Dickinson	BDX	6-Aug	$2.04	$2.20
  Broadridge Financial Solutions	BR	11-Aug	$2.09

  Let’s start with Church & Dwight (CHD). On Friday morning, the company reported very good earnings. For its fiscal Q2, the household-products company made 77 cents per share. That beat the Street by 14 cents per share. Quarterly sales grew by 10.6% to $1,194.3 million.

  C&D now expects full-year sales growth of 9% to 10%. The initial outlook had been for 6.5% growth. The company also expects EPS to grow by 13%. That’s up from the initial range of 7% to 9%.

  The CEO said this was an “extraordinarily strong quarter,” and I have to agree. The stock jumped 7% on Friday to reach a new all-time high. We’re now up 35% with CHD. This week, I’m raising my Buy Below on Church & Dwight to $100 per share.

  

  While Church & Dwight is our #2 performer this year, Trex (TREX) is still in the #1 spot. The deck company had an outstanding quarter. For Q2, Trex reported earnings of 81 cents per share. That beat the Street by 16 cents per share.

  Quarterly sales rose 7% to $221 million. Not bad for an economic lockdown. The company also had nice increases to its gross and EBITDA margins.

  Now let’s look at guidance. For Q3, the company expects sales between $215 million and $225 million. The midpoint is a 13% increase over last year’s Q3. Wall Street had been expecting quarterly sales of $193.94 million.

  Trex also announced a 2-for-1 stock split. This means that investors will get twice as many shares and the share price will fall in half. The split will happen on September 14. (The split will take effect the following day.)

  On Monday, the shares reached a new high of $144.96. We now have a 54% gain with Trex YTD. This week, I’m raising our Buy Below on Trex to $150 per share. Once the split happens, that will fall to $75 per share.

  Disney (DIS) was another surprise winner this week. It was pretty much assumed that the Mouse House was going to report a big loss for Q2. Instead, Disney surprised us with a small profit.

  Earlier I said that if went into a lab and tried to design a company that had been more adversely impacted by the lockdown, it would be hard to top what Disney actually is. The company is movies, parks and sports. On top of that, it has a cruise line.

  After the bell on Tuesday, Disney said it made a profit of eight cents per share for Q2. Wall Street had been expecting a loss of 64 cents per share.

  The weak spot was revenue. For the quarter, Disney had $11.78 billion in revenue. That was below estimates for $12.37 billion. The only parts of Disney’s business that saw an increase in revenue were the direct-to-consumer and international businesses sectors.

  The big success story is Disney’s streaming service. I guess it helps that everyone is stuck at home! If you add up all the subscription services, Disney now has over 100 million paid subscribers. Disney+ is up to 57.4 million.

  Revenue for their Parks, Experiences and Products business was down a staggering 85%. Disney’s Media Networks was only down 2%. As a result of the lockdown, Disney took a $3.5 billion hit to its operating income.

  The shares rallied 9% on Wednesday. I’m raising our Buy Below on Disney to $140 per share.

  Middleby (MIDD) is our star this earnings season. On Wednesday, the company reported earnings of 55 cents per share. That was well above estimates for 41 cents per share. Net sales fell 38%.

  CEO Tim Fitzgerald said, “Our solid financial performance was a result of successfully reducing our cost structure and maintaining strong levels of profitability across all three of our business segments, despite revenue decreases.”

  I expect more improvement from Middleby. Fitzgerald also said, “As we progressed through the month of July, business activity across all of our foodservice segments demonstrated continual improvement. In particular, we have seen strong demand from quick-serve and pizza restaurants, as well as in the healthcare, convenience stores, and retail categories.”

  The shares rallied 16.3% on Wednesday. The stock is up 139% from its March low. I’m raising my Buy Below to $106 per share.

  We had two more reports after the close on Wednesday. First up is Ansys (ANSS). For Q2, the company reported revenue of $389.7 million and earnings of $1.55 per share. That crushed Wall Street’s estimate of $1.16 per share.

  Ajei Gopal, the president and CEO, said, “Q2 was a very strong quarter for Ansys, with revenue, operating margins and earnings exceeding the high end of our financial guidance. I’m excited that during the quarter we closed both the largest deal in our 50-year history as well as our largest sales agreement for new business. These results demonstrate the strength and resilience of our business and give us confidence for the future.”

  Ansys now has a backlog of $846 million. That’s up 18% from a year ago.

  For Q3, Ansys expects earnings of $1.10 to $1.34 per share on revenue between $347 million and $377 million. Wall Street had been expecting $1.41 per share on revenue of $376.4 million.

  For the full year, Ansys sees earnings ranging between $5.75 and $6.35 per share on revenue of $1.570 billion to $1.645 billion. That’s an increase from the previous range of $5.61 to $6.23 per share. Wall Street had been expecting $5.93 per share on revenue of $1.59 billion.

  Ansys gained 3% on Thursday and broke out to another new high. We now have a 22.5% gain with Ansys this year. I’m lifting our Buy Below to $325 per share.

  

  Fiserv (FISV) reported Q2 earnings of 93 cents per share. That matched Wall Street’s view. It’s a drop of 4% compared with a year ago. Fiserv’s earnings report is a little complicated because of the recent merger with First Data. Adjusted revenue fell 12% to $3.22 billion.

  During the quarter, Fiserv bought back 5.7 million shares of stock for $550 million. Fiserv said it expects EPS to grow by at least 10% this year. For context, Fiserv made $4.00 per share last year. This would be Fiserv’s 35th year in a row of double-digit adjusted earnings growth.

  Fiserv is down 11.5% for us this year. It remains a buy up to $107 per share.

  Finally, we have Becton, Dickinson (BDX). On Thursday, the company said it made $2.20 per share for its fiscal Q3. Even though that’s a drop of 28%, it’s still well above Wall Street’s consensus of $2.04 per share.

  Becton also said it expects earnings for this year to come in between $9.80 and $10.00 per share. Since Becton has already made $7.41 for the first nine months of this fiscal year, the new range implies earnings of $2.39 to $2.59 per share for the current quarter. Wall Street had been expecting $3.08 per share.

  I’m not pleased with this guidance. The shares dropped over 8% in Thursday’s trading. For now, I’m keeping our Buy Below at $265.

  Earnings Preview for Broadridge Financial

  We have one more earnings report left this earnings season. Broadridge Financial Solutions (BR) is scheduled to report its fiscal Q4 earnings on Tuesday, August 11 before the market opens.

  Broadridge’s last earnings report wasn’t so hot, and the one before that was terrible. For this fiscal year, which ended on June 30, Broadridge expects overall revenue growth to be at the low end of its range of 3% to 6%. For EPS, BR expects growth of 5% to 7%.

  Let’s do some math. Last year, the company made $4.66 per share, so the current earnings range means they expect full-year earnings between $4.89 and $4.99 per share. Since BR has already made $2.88 per share in the first nine months of this fiscal year, that implies Q4 earnings of $2.01 to $2.11 per share. Wall Street expects $2.09 per share.

  Broadridge is up 10% for us this year.

  That’s all for now. Second-quarter earnings season is basically over for us, but we also have some important economic reports scheduled for next week. On Wednesday, the consumer-inflation report comes out. So far, inflation has been well contained. Let’s hope that continues. On Thursday, the jobless-claims report comes out. Then on Friday, we’ll get the next report on retail sales. The report for June was pretty good. 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. Join me for a webinar on Friday, August 7 at 4 pm ET. Eric Falkenstein will be joining me. We’ll talk all things market. It should be a good discussion. You can register here.

• Morning News: August 7, 2020
  Eddy Elfenbein, August 7th, 2020 at 7:03 am

  World Stocks End Four-Day Winning Streak As U.S.-China Tensions Grow

  Trump Preps Bans on WeChat, TikTok, Stoking Tension With Beijing

  Trump Reinstates Tariff on Canadian Aluminum

  Picking Pennies: Dollar Slump Lifts U.S. Bond Returns For Foreigners

  Signs Are Pointing to a Far Less Rosy U.S. Jobs Report for July

  New Unemployment Claims Decline, But Remain ‘Alarmingly High’

  The Robinhood Craze Is Now Moving Stocks Everywhere

  Berkshire Hathaway Showing Signs of an Appetite Ahead of Earnings Report

  Facebook’s Dilemma: How To Police Claims About Unproven COVID-19 Vaccines

  Mother and Son Had $35 Billion Fortune, Then Things Unraveled

  Joshua Brown: The Coming Inflation Shock And Why Gold Could Be Headed To $3,000

  Howard Lindzon: Apple – Thanks For The Trillions

  Jeff Miller: Employment Report Preview: Interpret With Care

  Ben Carlson: Balancing Confidence With Humility: Life Lessons From Cameron Crowe & Philip Seymour Hoffman

  Michael Batnick: Expect the Unexpected

  Be sure to follow me on Twitter.

• Becton Beats But Guidance Disappoints
  Eddy Elfenbein, August 6th, 2020 at 10:02 am

  Still more earnings. This morning, Becton, Dickinson (BDX) said it made $2.20 per share. That’s a drop of more than 28%. This was for their fiscal third quarter. Wall Street had been expecting $2.04 per share.

  Tom Polen, Becton’s president and CEO, said:

  “We enter the fourth quarter with encouraging trends in health care procedures in June and July. We have continued strong demand for our products that support the global COVID-19 response, including the recent launch of our COVID-19 rapid point-of-care antigen test and our partnerships with governments around the world to help prepare for national vaccination programs. BD is playing an essential role enabling the world’s response to COVID-19, and I’m confident the steps we are taking now will put BD in the best possible position for the long term.”

  Becton also said it expects earnings for this year to come in between $9.80 and $10.00 per share. Since Becton has already made $7.41 for the first nine months of this fiscal year, the new range implies earning of $2.39 to $2.59 per share for the current quarter.

  Traders are not pleased. Wall Street had been expecting $3.08 per share. The shares are down about 7% this morning.

• Morning News: August 6, 2020
  Eddy Elfenbein, August 6th, 2020 at 7:03 am

  India’s Central Bank Keeps Key Lending Rate Unchanged

  Bank of England Holds Rates Steady But Warns Of A Slower Economic Recovery

  A Shattered Beirut Leaves Lebanese Asking If They Have a Future

  Japan’s Locked Borders Shake the Trust of Its Foreign Workers

  German Banks Push Back as American Investors Seek More Influence

  Goldman Says Covid-19 Vaccine Approval Could Upend Markets

  Liability Shield Is a Stumbling Block as Lawmakers Debate Relief

  Interest Rates Are Low, but Loans Are Harder to Get. Here’s Why.

  Airbus and Boeing Will Keep Making Jets That Airlines Can’t Buy

  Life and Debt at a Private Equity Hospital

  Uber Pulls Latin American U-Turn By Joining Taxi Ranks

  Slippers to Work? Health Kick, Home Office Help Adidas

  Pool Sales Skyrocket As Consumers Splash Out On Coronavirus Cocoons

  Nick Maggiulli: The Most Important Number in Personal Finance

  Howard Lindzon: The Apple, Nikola and Tik-Tok Show…

  Joshua Brown: It’s Directional

  Ben Carlson: Animal Spirits: S&P 5

  Be sure to follow me on Twitter.

• Earnings from Ansys and Fiserv
  Eddy Elfenbein, August 5th, 2020 at 4:41 pm

  We had two more Buy List earnings reports after the closing bell. First up is Ansys (ANSS). For Q2, the company reported revenue of $389.7 million and earnings of $1.55 per share. Wall Street had been expecting $1.16 per share. That’s down from $1.61 per share one year ago.

  Ajei Gopal, the president and CEO said, “Q2 was a very strong quarter for Ansys, with revenue, operating margins and earnings exceeding the high end of our financial guidance. I’m excited that during the quarter we closed both the largest deal in our 50-year history as well as our largest sales agreement for new business. These results demonstrate the strength and resilience of our business and give us confidence for the future.”

  Ansys now has a backlog of $846 million. That’s up 18% from a year ago.

  For Q3, Ansys expects earnings of $1.10 to $1.34 per share on revenue between $347 million and $377 million. Wall Street had been expecting $1.41 per share on revenue of $376.4 million.

  For the full year, Ansys sees earnings ranging between $5.75 and $6.35 per share on revenue of $1.570 billion to $1.645 billion. That’s an increase from the previous range of $5.61 to $6.23 per share. Wall Street had been expecting $5.93 per share on revenue of $1.59 billion.

  Fiserv (FISV) reported Q2 earnings of 93 cents per share. That matched Wall Street’s view. It’s a drop of 4% compared with a year ago. Fiserv’s earnings report is a little complicated because of the recent merger with First Data. Adjusted revenue fell 12% to $3.22 billion.

  “We demonstrated the strength and resilience of our business model during the quarter, producing significant free cash flow while delivering value for our clients. Our results also included excellent sales performance which provides strong market momentum entering the second half of the year,” said Frank Bisignano, President and Chief Executive Officer of Fiserv. “Most important, we are incredibly proud of our people who have displayed unwavering stamina, commitment and courage as we navigate the uncharted waters of a rapidly changing world.”

  During the quarter, Fiserv bought back 5.7 million shares of stock for $550 million.

  Fiserv said it expects EPS to grow by at least 10% this year. For context, Fiserv made $4.00 per share last year. This would be Fiserv’s 35th year in a row or double digit adjusted earnings growth.

• Middleby Earns 55 Cents per Share
  Eddy Elfenbein, August 5th, 2020 at 9:56 am

  The big jobs report is due out on Friday, but we got a preview today with the ADP payroll report. According to ADP, private payrolls rose by 167,000 last month. That was well below economists’ expectation for one million. On the bright side, the number for June was revised higher from 2.4 million to 4.3 million.

  Middleby (MIDD) said that its adjusted earnings were 55 cents per share last quarter. That was well above estimates for 41 cents per share. Net sales fell 38%.

  CEO Tim Fitzgerald said, “Our solid financial performance was a result of successfully reducing our cost structure and maintaining strong levels of profitability across all three of our business segments, despite revenue decreases.”

  The stock has been up as much as 10% this morning. Earnings from Fiserv and Ansys are due out after the close.

• Morning News: August 5, 2020
  Eddy Elfenbein, August 5th, 2020 at 7:04 am

  Older Investors Go for Gold, Younger Ones Bitcoin, JPMorgan Says

  U.S. Job Losses Set to Mount With Small Businesses Running on Fumes

  Trump’s Bid to Force TikTok Sale Follows Well-Trod Legal Path

  More Bailout Cash Won’t Stop Wave of Credit Card Defaults

  Business Interrupted by the Pandemic? Your Insurance Is No Good

  Disney, Staggered by Pandemic, Sees a Streaming Boom

  BMW Losses Almost $800 Million As Sales Slide During Lockdowns

  Virgin Atlantic Files for Bankruptcy in the US to Secure Its Rescue Deal

  McClatchy, Family-Run News Chain, Goes to Hedge Fund in Bankruptcy Sale

  Forget Spas and Bars. Hotels Tout Housekeeping to Lure Back Travelers.

  Kodak’s $765M Federal Loan Disclosure For Drug Venture Under SEC Investigation

  U.S. Pursues Nearly $13 Billion of Claims in Purdue Pharma Opioid Probes

  Star Technologist Who Crossed Google Sentenced to 18 Months in Prison

  Michael Batnick: Where’d All The Stocks Go?

  Ben Carlson: Concentrated Performance in the Stock Market

  Be sure to follow me on Twitter.

• Disney Makes Surprise Profit
  Eddy Elfenbein, August 4th, 2020 at 4:16 pm

  

  After the closing bell, Disney (DIS) reported a surprise Q2 profit of eight cents per share. I say surprise because Wall Street had been expecting a loss of 64 cents per share. That’s a huge beat.

  The weak spot was revenue. For the quarter, Disney has $11.78 billion in revenue. That was below estimates for $12.37 billion. The only parts of Disney’s business that saw an increase in revenue were the direct-to-consumer and international businesses.

  The big success story is Disney’s streaming service. I guess it helps that everyone is stuck at home! If you add up all the subscription services, Disney now has over 100 million paid subscribers. Disney+ is up to 57.4 million.

  Revenue for their Parks, Experiences and Products business was down a staggering 85%. Disney’s Media Networks was only down 2%. As a result of the lockdown, Disney took a $3.5 billion hit to its operating income.

  The shares are up 4.74% in after-hours trading.

• Morning News: August 4, 2020
  Eddy Elfenbein, August 4th, 2020 at 7:07 am

  London Traders Hit $500 Million Jackpot When Oil Went Negative

  U.S. Oil Production Dropped Massively In May, And Recovery Not In Sight

  Gold ETF Holdings Are Booming and Only the U.S. Government Holds More

  Lobbying For Russian Pipeline Spikes In Washington

  TikTok, Trump and an Impulse to Act as C.E.O. to Corporate America, ByteDance Founder Defends TikTok’s U.S. Strategy In Staff Letter & Microsoft’s Rescue Attempt Of TikTok Endears Old Company To New Generation

  Google Cloud Prepares For Black Friday ‘Peak On Top Of Peak’

  The Caribbean Dilemma

  Summer Recreation? It’s Backordered

  Killer Mike Wants to Save America’s Disappearing Black Banks

  Number Fever: The Pepsi Contest That Became A Deadly Fiasco

  Ben Carlson: Why Housing Could Be One of the Best-Performing Asset Classes of the 2020s

  Michael Batnick: The Most Lopsided Days

  Howard Lindzon: Disruption Is Good! …Nasdaq 20,000…The Seeds Are Being Planted At An Accelerating Pace.

  Joshua Brown: The 50 Fastest Growing RIAs, Valuation Since The Late 1990’s – Win Any Argument With Your Friends! & Monthly Candles Are Out! S&P 500, Treasury Yields, US Dollar, Bitcoin, Market Breadth & More

  Be sure to follow me on Twitter.