Archive for July, 2021

  • Earnings from Cerner and Church & Dwight
    , July 30th, 2021 at 7:39 am

    We had two more earnings reports this morning. For Q2, Cerner (CERN) said it made 80 cents per share. That was four cents more than Wall Street’s (and the company’s own) estimate. Q2 revenue rose 10% to $1.457 billion. Cerner’s adjusted operating margin increased to 20.6% and free cash flow rose 153% to $162 million.

    “I am very pleased with Cerner’s top and bottom-line execution in the second quarter, with our results reflecting good progress on our transformation initiatives and a strengthening market presence,” said Brent Shafer, Chairman and CEO. “We delivered good revenue growth, expanded Adjusted Operating Margin and increased Adjusted Diluted EPS (non-GAAP) during the quarter while continuing to accelerate innovation and drive client value.”

    “During the second quarter we took a series of actions which we believe will strengthen our business in the years ahead. Namely, as part of recently implemented productivity measures and a comprehensive review of our business, we performed a sizable reduction in force, took specific measures to shrink our physical (office space) footprint and made some important product rationalization decisions to improve the return on our nearly $800 million annual R&D investment,” said Mark Erceg, Executive Vice President and Chief Financial Officer. “We also spent $400 million on share repurchases, which brings our year-to-date purchases to $750 million, because we continue to believe that Cerner stock, at current trading levels, represents a good return on investment for our shareholders.”

    Now let’s look at guidance. For Q3, Cerner expects revenue growth of 6%. For all of 2021, Cerner sees revenue growth “in the mid-single digits.” For earnings, Cerner expects Q3 growth of 12% to 15%. For last year’s Q3, Cerner made 72 cents per share, so the guidance translates to Q3 earnings of roughly 81 to 83 cents per share. Wall Street had been expecting 82 cents per share.

    The best news is that Cerner increased its full-year earnings guidance. Before, they had expected earnings of at least $3.20 per share. Now they see earnings of at least $3.25 per share.

    Our other earnings report came from Church & Dwight (CHD). For Q2, the consumer products company said it made 76 cents per share. That beat Wall Street’s estimate of 70 cents per share. For their part, C&D was expecting 69 cents per share. Net sales grew 6.4% to $1,271.1 million.

    Matthew Farrell, Chief Executive Officer, commented, “Our brands once again drove strong consumption in Q2. Organic sales growth of 4.5% is on top of 8.4% organic growth in Q2 2020. In the U.S., we grew consumption in 13 of the 16 categories in which we compete. Our brands experienced double-digit consumption growth in 9 of those 16 categories, including gummy vitamins, cat litter, dry shampoo, and water flossers. Our personal care categories are benefitting from increased consumer mobility. Consumption is far outpacing shipments as supply chain disruptions continue and fill levels are below normal. Our International business, despite many countries still experiencing lockdowns, delivered broad-based organic sales growth of 10.4%. Global online sales grew 7.2% (on top of 77% growth in Q2 2020) and as a percentage of total sales has expanded to 14.2% in Q2.”

    For Q3, Church & Dwight expects earnings of 70 cents per share on sales growth of 3%. Wall Street had been expecting 83 cents per share. The company said that it is “temporarily constrained by supply.”

    For all of 2021, C&D now expects earnings to be at the “lower end” of its EPS growth range of 6% to 8%. That works out to about $2.99 to $3.05 per share. Wall Street had been expecting $3.03 per share.

  • Morning News: July 30, 2021
    , July 30th, 2021 at 7:03 am

    Chinese Stocks’ Crash Offers a Harsh Tutorial

    Economy Recovers Pandemic Losses, but Faces New Test

    Fed’s Powell Bets Economy Will Navigate New Coronavirus Surge

    How Biden Got the Infrastructure Deal Trump Couldn’t

    ‘Buy Now, Pay Later’ Installment Plans Are Having a Moment Again

    The Financial Revolution Will Be Tokenized: Exploring the Crypto Frontier

    Big Tech Has Outgrown This Planet

    U.S. Regulator Freezes Chinese Company IPOs Over Risk Disclosures

    Robinhood’s Shares Fall 8.4% in Public Trading Debut

    Robinhood Gets Cathie Wood’s Backing Despite Miserable First Day

    Disney Knows Better Than to Battle a Superhero

    Amazon Earnings Show a Sharp Slowdown in E-Commerce. The Stock Is Falling.

    Nooses, Anger and No Answers: Inside the Uproar Over a Future Amazon Site

    Procter & Gamble Names Jon Moeller As New CEO, Will Replace Current Chief David Taylor in November

    Restaurant Brands Revenue Beats Estimates on Burger King Sales Boost

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  • GDP and Jobless Claims
    , July 29th, 2021 at 1:20 pm

    We had two more important economic reports this morning. The government said that real GDP grew at a 6.5% annualized rate during the second quarter. That’s a big number but it was still below expectations of 8.5%. This is the initial report. It will be updated two more times.

    Gross private domestic investment fell 3.5% as declines in private inventory and residential investment held back gains. Rising imports and a 5% decline in the rate of federal government spending, despite the ballooning budget deficit, also were factors, the Bureau of Economic Analysis report said.

    The overall increase came thanks to increasing personal expenditures, which rose 11.8% as consumers accounted for 69% of all activity. Nonresidential fixed investment, exports and state and local government spending also helped boost output.

    Over the last year, real GDP is up by 12.2% and nominal GDP is up by 16.7%. In real terms, the U.S. is finally larger than it was during Q4 of 2019. Here’s real annualized GDP growth per capita by decade:

    1950s: 2.53%
    1960s: 3.06%
    1970s: 2.19%
    1980s: 2.14%
    1990s: 2.10%
    2000s: 0.83%
    2010s: 1.58%
    2020s: 0.13% (so far)

    Here’s the growth of real GDP. I’m not sure what letter, if any, that looks like:

    The other report was on jobless claims. That hit 400,000 on the nose. That’s down from 424,000 for last week. We’re still above the pandemic low of 368,000. We hit that level twice, two weeks ago and four weeks ago.

    Continuing claims edged higher to 3.27 million, according to data that runs a week behind the headline number. The total of those receiving benefits rose by nearly 600,000 to 13.16 million, according to data through July 10.

  • Earnings from Hershey and ICE
    , July 29th, 2021 at 10:28 am

    We had two more earnings reports this morning. First up, Hershey (HSY) said it made $1.47 per share for Q2. That’s an increase of 12.2% over last year’s Q2. It beat Wall Street’s consensus by three cents per share. Consolidated net sales were up 16.5% to $1.9894 billion in Q2.

    CEO Michele Buck said, “This strong consumer demand, coupled with our executional excellence, healthy balance sheet and relentless focus on delivering against our strategic initiatives in the quarter enabled us to support and expand our portfolio, invest in our people and deliver strong shareholder returns. As trends continue to fluctuate, we are confident in our ability to adapt with our consumers and retailers and continue meeting their needs in the future.”

    Hershey raised its full-year sales growth forecast to a range of 6% to 8%. That’s up from the previous range of 4% to 6%. The problem is that a lot of that will be eaten up by higher supply chain costs. As a result, Hershey is reiterating its previous full-year earnings range of $6.79 to $6.92 per share. That’s an increase of 8% to 10% over 2020.

    The shares are up about 0.7% this morning.

    Also this morning, Intercontinental Exchange (ICE) reported Q2 earnings of $1.16 per share. That was one penny below expectations.

    CFO Warren Gardiner said, “In the second quarter, we once again grew revenues, operating income, earnings and cash flow. Our performance is a testament to the power of our diverse business model, which, through an array of macroeconomic environments, continues to deliver consistent and compounding growth for our stockholders.”

    Don’t let the earnings miss fool you – ICE is doing very well. Q2 revenues were up 22% to $1.7 billion. Adjusted operating margin is running at 56%. The Ellie Mae deal seems to be paying off quite nicely. In April, ICE sold its stake in Coinbase for more than $1.2 billion.

    ICE provides financial guidance for just about everything except EPS:

    ICE’s third quarter 2021 total recurring revenues are expected to be in a range of $870 million to $885 million.

    ICE’s third quarter 2021 GAAP operating expenses are expected to be in a range of $930 million to $940 million and adjusted operating expenses are expected to be in a range of $770 million to $780 million and include $55 million related to Bakkt.

    ICE’s full year 2021 GAAP operating expenses are expected to be in a range of $3.610 billion to $3.640 billion and adjusted operating expenses are expected to be in a range of $2.950 billion to $2.980 billion to include third quarter Bakkt expense of $55 million.

    ICE’s third quarter 2021 GAAP non-operating expense is expected to be in the range of $110 million to $115 million and adjusted non-operating expense is expected to be in the range of $100 million to $105 million.

    ICE’s full year 2021 capital expenditures are expected to be in a range of $430 million to $450 million.

    ICE’s diluted share count for the third quarter is expected to be in the range of 563 million to 569 million weighted average shares outstanding.

  • Morning News: July 29, 2021
    , July 29th, 2021 at 7:02 am

    China Stocks Rally as Beijing Intensifies Effort to Calm Market

    Money Rolls In For Europe Inc As Companies Banish Pandemic Blues

    Once the World’s Busiest Port, London Aims to Revive Its River Trade Roots

    Federal Reserve Keeps Rates Unchanged but Cites ‘Progress’ Toward Goals

    How Biden Can Keep Jerome Powell and Make Progressives Happy

    As Fed Tiptoes Around Tapering, Investors Look to Jackson Hole Meeting for Clarity

    A Look at What the Bipartisan Infrastructure Deal Would Do

    The Four Biggest Ways That Robinhood Changed Investing

    Tencent Is World’s Worst Stock Bet With $170 Billion Wipeout

    Why Turkey’s Regulators Became Such a Problem for Google

    Retailers Revisit Mask Debate After New C.D.C. Guidelines

    Didi Global Considers Going Private to Placate China and Compensate Investors

    Ford Earnings Contained a Big Surprise — the Chip Shortage Is Easing

    Facebook Earnings Call: Into the Metaverse, For Better or Worse

    Credit Suisse Finds Incompetence But No Criminal Conduct in Archegos Debacle

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  • AFLAC Earns $1.59 per Share
    , July 28th, 2021 at 4:16 pm

    After the closing bell, AFLAC (AFL) reported Q2 operating earnings of $1.59 per share. That’s an increase of 24.2% and it beat the Street’s consensus of $1.27 per share. The weaker yen/dollar exchange rate impacted earnings by one penny per share. Total revenues for the quarter increased from $5.4 billion to $5.6 billion. For the first six months of this year, AFLAC has made $3.10 per share.

    Here are some highlights:

    Shareholders’ equity was $33.7 billion, or $50.20 per share, at June 30, 2021, compared with $29.4 billion, or $41.21 per share, at June 30, 2020.

    Adjusted earnings in the second quarter were $1.1 billion, compared with $921 million in the second quarter of 2020, reflecting an increase of 17.3% driven by lower-than-expected benefit ratios and higher net investment income, primarily in Japan, and a favorable effective tax rate.

    Shareholders’ equity excluding AOCI (or adjusted book value*) was $25.7 billion, or $38.27 per share at June 30, 2021, compared with $22.7 billion, or $31.75 per share, at June 30, 2020. The annualized adjusted return on equity excluding foreign currency impact in the second quarter was 17.0%.

    Commenting on the company’s results, Chairman and Chief Executive Officer Daniel P. Amos stated: “The company generated strong earnings for the first six months, largely supported by low benefit ratios associated with pandemic conditions and better-than-expected returns from alternative investments. With respect to second quarter sales results in the United States and Japan, we continued to see improvement and expect a stronger second half of the year in both countries. We remain cautiously optimistic and vigilant as vaccination efforts continue in the face of uncertainty associated with emerging variants.

    “Looking at our operations in Japan, second quarter sales improved year over year, continuing to reflect a boost from the first quarter launch of our new medical product. We continue to navigate evolving pandemic conditions in Japan, including the continued state of emergency in Tokyo and select prefectures. We are pleased with the continued strengthening of our strategic alliance with Japan Post Holdings, which includes initiatives to foster digital transformation and innovation. In addition, Japan Post Group’s resumption of proactive sales paves the way for gradual improvement in Aflac cancer insurance sales in the second half of the year.

    “In the U.S., small businesses are still in recovery mode, which we expect to continue through 2021. At the same time, larger businesses remain focused on returning employees to the worksite, rather than modifying the benefits for their employees. We continue to work toward reinforcing our position and generating stronger sales in the second half of 2021.

    “As always, we remain committed to prudent liquidity and capital management. We continue to maintain strong capital ratios on behalf of our policyholders in both the U.S. and Japan. We treasure our 38-year track record of dividend growth and remain committed to extending it, supported by the strength of our capital and cash flows. At the same time, we will continue to tactically repurchase shares, 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.”

  • Today’s Fed’s Policy Statement
    , July 28th, 2021 at 2:00 pm

    Here’s today’s statement:

    The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.

    With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen. The sectors most adversely affected by the pandemic have shown improvement but have not fully recovered. Inflation has risen, largely reflecting transitory factors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.

    The path of the economy continues to depend on the course of the virus. Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain.

    The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation having run persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer‑term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. Last December, the Committee indicated that it would continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward its maximum employment and price stability goals. Since then, the economy has made progress toward these goals, and the Committee will continue to assess progress in coming meetings. These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.

    In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

    Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Raphael W. Bostic; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary C. Daly; Charles L. Evans; Randal K. Quarles; and Christopher J. Waller.

  • Four More Earnings Reports This Morning
    , July 28th, 2021 at 10:41 am

    We had four morning earnings reports this morning.

    Let’s start with Moody’s (MCO). The credit-ratings agency earned $3.22 per share for Q2. That’s up 15% from last year. Expectations were for $2.74 per share.

    Total revenue was up 8% to $1.6 billion. Breaking that down, Moody’s Investors Service was up 4% to $980 million. Moody’s Analytics was up 15% to $573 million. Moody’s adjusted operating margin was 55.4%.

    Now for the best news. Moody’s raised its full-year guidance. They now see full-year earnings between $11.55 and $11.85 per share. The old range was $11.00 to $11.30 per share. This is its second increase in guidance. The original range was $10.30 to $10.70 per share.

    “Moody’s impressive second quarter 2021 results reflect the strong demand for our increasingly comprehensive suite of risk assessment offerings as we help our customers make better decisions about a wider range of risks,” said Rob Fauber, President and Chief Executive Officer of Moody’s. “This quarter, Moody’s Investors Service revenue grew in the mid-single-digit percent range, benefitting from economic tailwinds that supported increased leveraged finance and CLO activity. In Moody’s Analytics, continued demand for KYC and compliance solutions, as well as research and data feeds, drove mid-teens revenue growth.”

    For the first half of this year, Moody’s has made $7.28 per share. That’s up 31% over last year.

    Silgan (SLGN) earned 85 cents per share for Q2. That was the top-end of their guidance which was 75 cents to 85 cents per share.

    Silgan had record segment income for Dispensing and Specialty Closures and Custom Containers. Volume increased 10% over last year’s record volume.

    Silgan is keeping its full-year range unchanged at $3.30 and $3.45 per share. The company is increasing its free cash flow guidance to $400 million. For Q3, Silgan sees earnings of 95 cents to $1.10 per share. Wall Street had been expecting $1.09 per share.

    Stepan (SCL) reported Q2 earnings of $1.81 per share. The was two cents below expectations.

    Looking at Stepan’s three divisions, Surfactant operating income was $45.9 million. That’s down from $48.5 million last year. Polymer operating income was $23.0 million compared with $15.5 million last year. The increase was largely due to a 44% increase in global sales volume. Specialty Product had operating income of $7.0 million versus $3.2 million last year.

    Forex helped the bottom line by six cents per share.

    “The Company had a solid first half of 2021 and delivered record year-to-date results. Both adjusted net income and adjusted EPS were up 35% versus the first half of 2020 which was negatively impact by the Millsdale plant outage,” said F. Quinn Stepan, Jr., Chairman and Chief Executive Officer. “For the quarter, Surfactant operating income was down 5% largely due to higher North American supply chain costs driven by inflationary pressures and higher planned maintenance. A 6% decline in global Surfactant sales volume, mostly related to our consumer product business, was more than offset by improved margins, product and customer mix. Our Polymer operating income was up 48% on the strength of 44% global sales volume growth. The Polymer growth was driven by both the INVISTA acquisition and organic market growth. Our Specialty Product business results were up due to higher volume and improved margins.”

    During Q2, Stepan paid out nearly $7 million in dividends and bought back close to $10 million in shares.

    Thermo Fisher Scientific (TMO) said that its Q2 earnings rose 44% to $5.60 per share. That beat the Street by 11 cents per share. Quarterly revenue grew 34% to $9.27 billion. Adjusted operating margin was 29.0%, compared with 27.0% in the second quarter of 2020.

    Thermo is raising its revenue guidance for this year by $300 million to $35.90 billion. That’s a growth rate of 11%. Thermo is also raising its earnings guidance by 10 cents to $22.07 per share. That translates to growth of 13%.

  • Morning News: July 28, 2021
    , July 28th, 2021 at 7:08 am

    China Bond Bulls Unfazed as Growing Crackdowns Spook Markets

    Will the Delta Variant Wreck the Recovery?

    Fed to Stress Patience on Scaling Back as Virus Threat Lurks & Blip or Bad Moon Rising?

    Jumping Prices and the Ghost of 2013’s Market Meltdown Loom Over the Fed

    Credit Suisse Probe Finds Severe Due Diligence Failings in $5.5 Billion Archegos Capital Losses

    Spiraling Debt Crisis Confronts Evergrande Billionaire — and Xi

    Japan’s Olympic Medal Haul Lifts a Group of Unusual Stocks

    Google’s Profits Soar As Revenue Rises 62%

    Microsoft Had Its Most Profitable Quarter

    Apple’s Profits Nearly Doubled in the Latest Quarter

    Deutsche Bank Smashes Estimates for the Second Quarter Despite Slide in Trading Revenues

    Walmart Announces a Commercial Alliance With Adobe

    Walmart to Pay College, Book Costs for Full and Part-Time Staff

    Unilever Disavows BDS; Ben & Jerry’s Board Chair: ‘I Am Not Antisemitic’

    DOJ Seized the Gilgamesh Dream Tablet – A Portion of the Epic of Gilgamesh – from Hobby Lobby

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  • Sherwin-Williams Misses but Raises Guidance
    , July 27th, 2021 at 10:55 am

    Sherwin-Williams (SHW) said it made $2.65 per share for Q2. That was just below expectations of $2.67 per share. Despite the miss, it was a decent quarter for the paint people. Sales rose 16.9% to $5.38 billion. EBITDA was 19.5% of sales.

    Sherwin raised its full-year earnings range to $9.15 to $9.45 per share. The old range was $8.80 to $9.07 per share.

    “We delivered solid performance in the second quarter driven by robust architectural paint demand in The Americas Group and strong demand across our industrial end markets, which more than offset the return to more normal DIY end market demand levels,” said Chairman, President and Chief Executive Officer, John G. Morikis. “Along with the strong demand, we also implemented pricing actions to offset the significant, sustained raw material inflation that pressured our gross margin in the quarter. Despite the near-term gross margin compression, we delivered 11.8% adjusted diluted net income per share growth and 7.4% EBITDA growth in the quarter. Our cash generation remained strong, which enabled us to continue investing in long-term strategic growth initiatives, repurchase 3.1 million shares in the second quarter, and open 25 new stores.

    “In The Americas Group, sales in all of our end markets, except DIY, were up double-digit percentages in the quarter, led by residential repaint. As expected, sales to our DIY customers were down double-digits, driven by difficult comparisons to the prior year as consumer demand returned to more normal levels. These lower North America DIY demand trends also impacted our Consumer Brands Group in the quarter. Supply chain constraints in the quarter impacted our architectural businesses similarly in The Americas and Consumer Brands Groups. In Performance Coatings Group, all divisions delivered strong double-digit growth, led by industrial wood and general industrial.”