Author Archive

• Morning News: February 1, 2012
  Eddy Elfenbein, February 1st, 2012 at 5:38 am

  Worst Earnings Since 2006 Fail to Dent European Stock Rally

  In Talks on Greek Bailout, Eyes Turn to Central Bank

  Greek Bondholders May Get GDP Sweetener in Deal

  EU Vetoes Deutsche Boerse-NYSE Euronext Merger

  U.K. Manufacturing Expanded in January

  China PMI Tops Forecast, Hard Landing Fears Ease

  Malaysian Rare Earth Metal Refinery Nears Approval

  Stocks Best Start Since ’94 Tops Commodities

  Freddie Mac Halts Use of Derivatives Tied to High Interest Rates

  Personal Data’s Value? Facebook Is Set to Find Out

  Amazon’s Revenues Disappoint

  UPS Profit Forecast for Year Tops Estimates as Shipping Demand Increases

  Roche Sees High Single-Digit 2012 Profit Growth on New Drugs

  After a Delay, MF Global’s Missing Money Is Traced

  Jeff Miller: Investors: De-mystifying the Central Bank Balance Sheets

  James Altucher: Self-Publishing Your Own Book is the New Business Card

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• After the Close: CR Bard Beats Earnings, AFLAC Misses But Guides Higher for 2013
  Eddy Elfenbein, January 31st, 2012 at 6:09 pm

  The S&P 500 just closed out its best January in 15 years. The 55-point gain was the largest for January on record.

  After the bell today, we had two more earnings reports. CR Bard ($BCR) reported fourth-quarter earnings of $1.70 per share which was two cents better than expectations.

  Revenues rose 4.9% to $751.9 million. For the year, Bard earned $6.40 per share. That’s a 14% increase over the $5.60 Bard earned in 2010. Based on today’s close, Bard is going for 14.45 times trailing earnings.

  Timothy M. Ring, chairman and chief executive officer, commented, “Fourth quarter constant currency net sales growth of 5% was at the top end of our guidance and allowed us to exceed adjusted EPS guidance for the quarter and for the year. Our revenue growth is being driven by a combination of geographic investments, external acquisitions and internal research and development. By combining top-line growth with disciplined expense management and share-repurchase programs, we have been able to meet our short-term commitments to shareholders while positioning the company for healthy long-term growth.”

  AFLAC ($AFL) reported fourth-quarter operating earnings of $1.48 per share which was four cents below expectations. Three months ago, AFLAC said it expected to earn $1.45 to $1.52 per share for the fourth quarter. This is a slight disappointment to me because I had been expecting AFLAC to beat expectations by a few pennies per share.

  AFLAC reiterated their earnings forecast for this year of growth of 2% to 5%. For the year, AFLAC had operating earnings of $6.33 per share. That means the company sees earnings for 2012 ranging between $6.46 per share and $6.65 per share.

  The best news, however, is that AFLAC said it expects the rate of earnings growth in 2013 to exceed that of 2012. That’s excellent news. If we take the mid-point of AFLAC’s range for this year’s growth (3.5%) and assume 4% growth for 2013, that translates to earnings of $6.81 per share.

  Daniel P. Amos stated: “Aflac had another strong year. Growth of operating earnings per diluted share was in line with our goal of an 8% increase before the impact of foreign currency. That result was also consistent with guidance we provided when we released third quarter results. We had conveyed in the third quarter that following nine months of restrained expenditures, we planned to increase spending on IT and marketing initiatives in the fourth quarter to strengthen our business, and that’s exactly what we did. I am pleased that 2011 marked the 22nd consecutive year in which we achieved our earnings objective.

  “Aflac Japan gets high marks for another great quarter and year. The tremendous sales momentum they generated this quarter, largely propelled by success in selling through banks, significantly exceeded our expectations for the year and especially for the quarter. In fact, Aflac Japan’s fourth quarter production set an all-time quarterly record, which is especially remarkable considering 2011 was the year Japan was hit with the most devastating natural disaster in its history.

  “We are also pleased with Aflac U.S. results for the quarter and year. It has been, and continues to be, the longstanding goal and vision of Aflac U.S. to be the leading provider of voluntary insurance in the United States, and our sales results in 2011 build on that vision. Through our efforts, we continue to expand Aflac’s potential to connect with employees at more companies, large and small, across the United States.

  The 2009 addition of group products to our existing portfolio has allowed us to leverage our strong brand and provide more options for customers of both our traditional and broker distribution channels. In 2011, product marketing efforts geared toward existing accounts contributed to strong sales for our veteran agents. Additionally, you’ll recall that we have been establishing and developing relationships with brokers that handle the larger-case market. While this broker initiative is still in its infancy, we are excited about the opportunity this channel presents for future growth.

  “The strength of our capital ratios demonstrates our commitment to maintain financial strength on behalf of our policyholders and bondholders. As we have communicated over the past several years, sustaining a strong risk-based capital, or RBC ratio, remains a priority for us. We had conveyed that our goal was to end 2011 with an RBC ratio in the range of 400% to 500% with a target of 450%. Although we have not yet finalized our statutory financial statements, we estimate our 2011 RBC ratio will be between 480% and 520%. Additionally, we are comfortable with our solvency margin ratio and continue to apply rigorous stress testing under extreme scenarios.

  “As we look ahead to 2012 sales opportunities in the United States, we expect Aflac U.S. sales to increase 3% to 8%. Following Aflac Japan’s outstanding sales growth of 18.6% last year, I think it’s reasonable to expect Aflac Japan sales will decrease within the range of down 2% to down 5% for the year.

  “Looking ahead, I want to reiterate that our objective for 2012 is to increase operating earnings per diluted share 2% to 5% on a currency neutral basis. This range reflects the impact of portfolio derisking and investing significant cash flows at low interest rates. We expect the rate of earnings growth in 2013 to improve over 2012.”

• The Golden Cross
  Eddy Elfenbein, January 31st, 2012 at 11:25 am

  Technical analysts are atwitter this week as the S&P 500 just passed a “Golden Cross.” This is when the 50-day moving average breaks above the 200-day moving average.

  This is supposed to be good for the market. Personally, I’m rather skeptical of these technical milestones. After all, the S&P 500 has already soared a good deal off its October low. It seems strange to say after a very solid rally that now is the time when things looks good.

  I do pay a little attention to where the market is versus its 50- and 200-DMA. This is not for any trading guidelines but because historically the market is a trend-sensitive data set. Momentum does exist and it’s a powerful anomaly to current theory.

  

• The Onion Was First
  Eddy Elfenbein, January 31st, 2012 at 10:54 am

  From April 23, 2007:

  Even CEO Can’t Figure Out How RadioShack Still In Business

  FORT WORTH, TX—Despite having been on the job for nine months, RadioShack CEO Julian Day said Monday that he still has “no idea” how the home electronics store manages to stay open.

  “There must be some sort of business model that enables this company to make money, but I’ll be damned if I know what it is,” Day said. “You wouldn’t think that people still buy enough strobe lights and extension cords to support an entire nationwide chain, but I guess they must, or I wouldn’t have this desk to sit behind all day.”

  The retail outlet boasts more than 6,000 locations in the United States, and is known best for its wall-sized displays of obscure-looking analog electronics components and its notoriously desperate, high-pressure sales staff. Nevertheless, it ranks as a Fortune 500 company, with gross revenues of over $4.5 billion and fiscal quarter earnings averaging tens of millions of dollars.

  “Have you even been inside of a RadioShack recently?” Day asked. “Just walking into the place makes you feel vaguely depressed and alienated. Maybe our customers are at the mall anyway and don’t feel like driving to Best Buy? I suppose that’s possible, but still, it’s just…weird.”

  From January 31, 2012:

  RadioShack shares drop 30% after forecast

  NEW YORK (MarketWatch) – Shares of RadioShack Corp RSH -29.13% plunged 30%, or $3.03, to $7.20 on Tuesday, a day after the electronics retailer said its fourth-quarter quarter earnings per share would be 11 cents to 13 cents, versus the expected 36 cents by analysts surveyed by FactSet. Janney Capital Markets downgraded the shares to neutral from buy and gave a fair value estimate at $7. Analysts at Janney said it was unclear when gross margin will bottom out and cited concerns over the firm’s weak performance around post-paid business with Sprint S -1.16%, its biggest carrier partner. In the fourth quarter, RadioShack’s gross margin narrowed to 35% from 41% a year ago.

• Harris Beats By Three Cents
  Eddy Elfenbein, January 31st, 2012 at 10:47 am

  Today is a big earnings day for us. AFLAC ($AFL) and CR Bard ($BCR) report after the close. This morning, Harris Corp ($HRS) reported earnings of $1.22 per share which was three cents better than estimates. The December quarter is the second quarter of Harris’ fiscal year.

  “Harris posted solid second quarter results with earnings per share in line with the prior year, despite orders and revenue being dampened by the constrained government spending environment,” said William M. Brown, president and chief executive officer. “The sequential increase in operating income for the company, driven by operating margin improvement in all of our segments, was encouraging. Cash flow from operations increased significantly compared to the previous quarter and the prior year, supporting expectations for strong cash flow again this year.”

  This is a good earnings report from Harris. The only sour note, and it’s not a biggie, was the company’s revenue guidance for the entire year. Harris now sees revenues ranging between $6 billion and $6.2 billion. Wall Street had been expecting slightly more, $6.15 billion to $6.3 billion.

  On the plus side, Harris sees full-year EPS ranging between $5.10 and $5.30. That’s not bad at all. The Street had been expecting $5.07 per share. The stock is up nicely today. It’s currently over $40 per share which is still less than eight times this year’s earnings.

• Morning News: January 31, 2012
  Eddy Elfenbein, January 31st, 2012 at 5:40 am

  EU Nears Confrontation Over Greek Rescue

  European Leaders Agree to New Budget Discipline Measures

  Profit Plummets at Spain’s Biggest Bank

  Trade Protest Is Planned on Eve of a Chinese Leader’s Visit

  Oil Rises From One-Week Low as Japanese Industrial Output Climbs

  F.T.C. Fines a Collector of Debt $2.5 Million

  Treasury Investigates Freddie Mac Investment

  Toshiba Swings Into the Red

  Honda Profit Slumps on Thai Floods, Strong Yen

  J&J Shakes Up McNeil Unit Again

  Apple Names Browett to Lead Retail Business Amid Global Push

  Pep Boys to Be Sold in $791 Million Buyout

  New Fund Hopes to Prove Thesis of Outspoken Analyst

  After a Year of Delays, the First Starbucks Is to Open in Tea-Loving India This Fall

  RIM Committee Stresses Importance of Independent Chair

  Cullen Roche: The Most Destructive Monetary Myth in the USA…

  Roger Nusbaum: More on “Just Don’t Lose It”

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• 5-Year Treasury Yield Drops to 0.73%
  Eddy Elfenbein, January 30th, 2012 at 1:34 pm

  The yield on the five-year Treasury has plunged to another all-time low. The yield is currently 0.73%.

  Here’s some perspective. Despite being 20 times longer, the total cash flow on the 5-year bond is less than the total cash flow from a 3-month T-bill at its peak rate in 1981 when it yielded 17%.

• Interview with Medtronic’s CEO
  Eddy Elfenbein, January 30th, 2012 at 10:34 am

  Fox Business News talks with Omar Ishrak in Davos, Switzerland.

• Morning News: January 30, 2012
  Eddy Elfenbein, January 30th, 2012 at 5:44 am

  Greek Coalition Is Said to Back More Austerity

  Greek Debt Talks Risk Derailing EU Summit Plan

  Davos Tells Euro Leaders to Fix Crisis for Good After Two Years of Failure

  Spain Economy Shrinks, Taking It to Edge of Second Recession

  China’s Wen: Government Debt Risk “Controllable,” Sets Reforms

  U.S. Banks Tally Their Exposure to Europe’s Debt Maelstrom

  Oil Dips Below $111, EU and Iran Eyed

  Cattle Herd Shrinks to Smallest in 60 Years

  Small Business Hiring Slows, Wages Dip in January

  Philips Swings to Net Loss

  Exxon Mobil to Sell Its Japanese Arm for $3.9 Billion

  Eastman Chemical to Buy Solutia for $3.4 Billion

  Switzerland’s ABB to Buy Electrical Parts Maker

  BlackBerry Under Siege in Europe

  Canon President Steps Down as Forecast Misses

  Credit Writedowns: Banking Wasn’t Meant to Be Like This

  Epicurean Dealmaker: The Rape of Persephone

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• Facebook Could File for IPO Next Week
  Eddy Elfenbein, January 27th, 2012 at 2:45 pm

  From WSJ:

  Facebook Inc. could file papers for an initial public offering as early as next week and is close to picking Morgan Stanley as the lead underwriter for its IPO, said people familiar with the matter.

  Facebook could file papers for the IPO as early as this coming Wednesday, but that timing is still being discussed, said a person familiar with the matter. The company is currently looking at a valuation of $75 billion to $100 billion, this person said.

  Morgan Stanley, people familiar said, is the strong frontrunner for the much-coveted “lead left” position on Facebook’s IPO documents to be filed with the Securities and Exchange Commission.

  Facebook’s IPO, which people familiar with the matter earlier said could raise as much as $10 billion, has been hotly anticipated as a defining moment for the latest Web investing boom. The Menlo Park, Calif. social-networking company, which has more than 800 million members, has changed the way people interact with each other and share information on the Internet.

  A Facebook spokesman declined to comment. A Morgan Stanley spokesman also declined to comment.