Author Archive

• Reynolds American Earns 70 Cents Per Share
  Eddy Elfenbein, October 25th, 2011 at 8:09 am

  Reynolds American ($RAI) just posted Q3 earnings of 70 cents per share which was three cents below estimates. The company also narrowed its full-year EPS range to $2.63 – $2.68 per share which impies a Q4 range of 67 – 72 cents per share.

  Reynolds has also raised its quarterly dividend from 53 cents per share to 56 cents per share. That makes the annual dividend $2.24 per share which comes to a yield of 5.69% based on yesterday’s close.

  “Reynolds American continues to deliver solid financial results in this challenging environment, while our transformation strategy shapes the business for long-term success,” said Daniel M. Delen, RAI’s president and chief executive officer. “This performance once again demonstrates our ability to overcome near-term challenges while continuing to position our business for future growth.”

  RAI’s board of directors has also approved a 5.7 percent increase in the company’s dividend, demonstrating confidence in the operating companies’ businesses going forward, and the company’s commitment to returning value to shareholders.

  Third-quarter results benefited from growth-brand gains at R.J. Reynolds, and strong volume and share growth at American Snuff. In addition, Santa Fe Natural Tobacco Company, Inc. again delivered excellent results, with higher volumes, share and earnings.

  “Even with a difficult economic and competitive environment, RAI and its operating companies remain focused on delivering sustainable growth, while driving innovations throughout our businesses,” Delen said. “As we continue to focus on key-brand equity building and identifying additional opportunities for growth, we believe our transformation strategy will sustain the company well into the future.

• Morning News: October 25, 2011
  Eddy Elfenbein, October 25th, 2011 at 6:29 am

  Spain Slipping on Deficit Increases Chances of Contagion

  EU Signals Fund Leverage Needs More Talks

  Trichet Urges Euro Finance Ministry

  Vatican Calls for Oversight of the World’s Finances

  Oil Rises to 12-Week High as Demand Signals Spur Bull Market

  In Cautious Times, Banks Flooded With Cash

  BP’s Profit More Than Doubles

  Deutsche Bank Beats Estimates on Consumer Banking

  UBS Reports 39% Drop in Quarterly Profit After Trading Loss

  Netflix’s Quarterly Loss of Subscribers Worse Than Forecast; Shares Plunge

  Texas Instruments Profit Falls as Demand Slumps

  Car Carriers Profit on Record Demand

  Cigna Agrees to Buy Healthspring to Expand Medicare Business

  The Divergent Fortunes of Saab and Volvo

  Joshua Brown: Jeff Benjamin on the Absolute Return Scam

  Paul Kedrosky: Today in Not Being Bullish Enough

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• S&P 500 = 1,253
  Eddy Elfenbein, October 24th, 2011 at 3:11 pm

  This is turning into a very good day for the market. The S&P 500 has been as high as 1,256.55 which is another post-August 3rd high. The index’s 200-DMA is well within sight.

  The cyclicals are leading today’s rally. I think the good news from Caterpillar ($CAT) helped the entire sector. The Morgan Stanley Cyclical Index ($CYC) is up more than 2.8% bringing it back over 900. The Consumer Index ($CMR), by contrast, is barely positive.

  Smaller stocks tend to be more weighted with cyclicals and we’re seeing the small-stock indexes doing much better than their larger-cap cousins today. The Russell 2000 ($RUT) is up more than 3.28% while the Russell 1000 ($RUI) is up just 1.61%.

  Our Buy List is now in positive territory for the year. Bed Bath & Beyond ($BBBY) hit another 52-week high. Deluxe ($DLX) and Wright Express ($WXS) have also been very strong. The only weak spots are Abbott Labs ($ABT) whose position is probably due its strength from last week, and Reynolds American ($RAI) which is losing ground after competitors delivered some disappointing earnings reports.

  Notice how strong small-caps have been (the black line is the Russell 2000) compared with the large-caps (Russell 1000 in gold) since the middle of the day on Thursday:

  

• Best Months for the Dow of the Last 50 Years
  Eddy Elfenbein, October 24th, 2011 at 10:06 am

  We still have a week to go in October but this is shaping up to be the best month for the Dow in ten years, and one of the best in the last 50 years:

  Jan-76 14.41%
  Jan-75 14.19%
  Jan-87 13.82%
  Aug-82 11.47%
  Oct-82 10.65%
  Oct-02 10.60%
  Apr-78 10.56%
  Apr-99 10.25%
  Nov-62 10.09%
  Aug-84 9.78%
  Oct-98 9.56%
  Oct-74 9.48%
  Dec-91 9.47%
  Jul-89 9.04%
  Feb-86 8.79%
  Apr-01 8.67%
  Jul-09 8.58%
  Nov-01 8.56%
  Oct-11 8.55%
  Apr-68 8.51%

• Oracle Buys RightNow for $1.43 Billion
  Eddy Elfenbein, October 24th, 2011 at 9:40 am

  Here’s interesting news from Oracle ($ORCL). The company is making a move into the cloud computing market by buying RightNow for $1.43 billion.

  The deal calls for Oracle to pay RightNow ($RNOW) shareholders $43 per share. This is interesting because not that long ago, Larry Ellison dismissed cloud. This is Oracle biggest acquisition since picking up Sun Micro more than two years ago.

  So what does RightNow do?

  RightNow’s primary product is its CX Suite, a platform that allows companies to engage with their customers through the Web, social media and contact centers. For instance, with its “cloud monitor,” businesses can track and manage conversations on Twitter, YouTube and Facebook related to their brand. RightNow, based in Bozeman, Mont., has nearly 2,000 clients.

• Morning News: October 24, 2011
  Eddy Elfenbein, October 24th, 2011 at 5:42 am

  Greek Bank Stocks Plunge 13% on Haircut Fears

  Sarkozy Yields on ECB Crisis Role, Pressure on Italy

  EU Ramps Up Pressure On Italy To Push Reform Agenda

  UBS, Deutsche Bank May Speed Cuts as Earnings Prospects Dim

  China Flash PMI Rebounds to Ease Hard-Landing Fears

  Currency Market Braces for Japanese Intervention: Japan’s Minister Promises ‘Action’

  Japanese Stocks Rise Most in Two Weeks as Commodity Traders Advance

  Swiss Banks Said Ready to Pay Billions to U.S.

  Rio Tinto: Fall in Iron Ore Prices Accelerating Shorter Pricing Methods

  Jobs Plan Stalled, Obama to Try New Economic Drive

  TomTom Shares Rally as Profits Surge

  Volkswagen May Beat Toyota to Top Spot

  Jim Beam Inviting $11 Billion Liquor Takeover

  2 Japanese Bankers at Heart of Olympus Fee Inquiry

  Marc Chandler: France Appears to Have Conceded to German-ECB Position on Bailout Fund

  Jeff Miller: Weighing the Week Ahead: Real Progress in Europe?

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• Reynolds American Earnings Preview
  Eddy Elfenbein, October 22nd, 2011 at 1:59 pm

  From the AP:

  Reynolds American Inc., the second-biggest U.S. cigarette company and the maker of Camel brand products, is expected to report rising profit despite lower revenue when it releases its third-quarter results before the stock markets open Thursday.

  Americans are continuing to buy fewer cigarettes as they face rising taxes and greater smoking bans, health concerns and social stigma.

  WHAT TO WATCH FOR: Investors will be looking for signs that growth in Reynolds American’s Pall Mall brand will continue.

  The company, based in Winston-Salem, N.C., has promoted Pall Mall as a longer-lasting and more affordable cigarette. It says half the people who try the brand continue using it as they weather the weak economy and high unemployment. Most tobacco companies have raised prices and cut costs to bolster profits as declining demand cuts into cigarette sales.

  Pall Mall’s second-quarter volume grew 15 percent, and its share of the U.S. market increased 1.5 percentage points to 8.5 percent. Camel volume fell 3 percent during the quarter, and its share of the cigarette market remained stable 7.8 percent. But the company’s other brands are dragging down overall volume, which fell 4.4 percent in the third quarter.

  Complicating cigarette shipments, the nation’s largest tobacco companies also cautioned last quarter that third-quarter cigarette volume comparisons will be hurt because wholesalers stocked up more than usual in that period last year.

  Reynolds American also sells Natural American Spirit cigarettes, and Kodiak and Grizzly smokeless tobacco.

  Analysts pay close attention to the company’s smokeless tobacco products — a segment of the tobacco industry that’s growing and becoming increasingly competitive as companies fight the decline in cigarette sales. Reynolds’ smokeless volumes grew 3.6 percent last quarter, and its market share grew 1.5 points to 31.3 percent of the U.S. market.

  WHY IT MATTERS: Reynolds American’s results will help reveal key tobacco industry trends in the U.S.

  Continued strength from Pall Mall could mean smokers are still switching to cheaper brands to save money, and those who tried the brand during the recession are remaining loyal. But if volumes of premium brands like Camel are rebounding, that could signal consumers are adjusting to higher prices on cigarettes following federal and state tax hikes.

  WHAT’S EXPECTED: Analysts expect Reynolds American to report earnings of 73 cents per share on revenue of $2.16 billion, according to FactSet.

  LAST YEAR’S QUARTER: Reynolds American reported earnings of 65 cents per share. Its revenue was $2.24 billion, excluding excise taxes.

• Wicked Cool
  Eddy Elfenbein, October 21st, 2011 at 7:02 pm

• S&P Upgrades Ford
  Eddy Elfenbein, October 21st, 2011 at 6:43 pm

  Thanks to the deal Ford recently reached with its unions, Standard & Poor’s raised their credit rating two notches. It’s now only one away from investment grade. The company’s debt has been in junk land since 2005.

  Standard & Poor’s Ratings Services raised Ford two levels to “BB+” from “BB-,” saying the agreement will allow its North American operations to remain profitable.

  Ford Motor Co. shares rose 48 cents, or 4 percent, to $12.19 in early afternoon trading.

  The agency said strong performance in North America has helped Ford generate global profits in the past two years. The new 4-year contract with the United Auto Workers “will allow for continued profitability and cash generation in North America,” it said.

  The union, which represents 41,000 Ford employees, approved the contract Wednesday. It includes signing bonuses but no annual pay increases, and it will let Ford hire more workers at lower wages.

  Ford executives said it will raise labor costs by less than 1 percent each year — $280 million this year and $80 million a year after that. Fitch Ratings upgraded Ford on Thursday, also to within one level of investment-grade status.

  Moody’s Investor Service has also said it’s reviewing its below-investment grade ratings for the automaker.

• Dollar Hits Record Low Against the Yen
  Eddy Elfenbein, October 21st, 2011 at 12:08 pm

  In 1971, one yen was worth a measly 0.3 cents. Since then, it’s done very well.

  By 1978, the yen got to half a penny. In 1987, it reached three-quarters of a cent. In 1994, we finally broke the penny mark.

  Today the yen got as high as 1.32 cents.