Posts Tagged ‘afl’

  • Highlights from AFLAC’s Earnings Call
    , July 25th, 2012 at 6:56 pm

    Seeking Alpha has the transcript for AFLAC’s earnings call. If you read the whole thing, you clearly get a sense that the company is doing well. Here are some highlights:

    As you know, we have made significant progress into proactively derisking our portfolio over the last 3 years to enhance the strength of our balance sheet. In the process, we’ve been reducing our exposure to riskier asset classes including perpetual [indiscernible] and financials especially in Europe. You’ve heard us say many times before that we expect to see volatility in Europe, and that’s exactly what we’ve seen in the second quarter. Our second quarter net after-tax realized investment losses were $272 million. These losses are primarily attributable to the decision to impair 2 Spanish holdings. In addition, we experienced further declines in the value of several securities we’ve previously impaired in the fourth quarter of 2011 related to the intent to sell.

    Although our total realized losses in the second quarter were higher than the first quarter of this year, they are significantly lower than the second quarter of last year. We still view Europe as an area of potential risk. And always, we closely monitor and reevaluate our portfolio with the eye for credit issues that may emerge. However, I believe our portfolio is better positioned now to accommodate market volatility.

    (…)

    We increased our cash dividend to shareholders in 2011 for the 29th consecutive year. Our objective is to grow the dividend at the rate in line with the earnings per share growth before the impact of the yen. I believe dividends are an important component for the value we provide investors. I am confident that the fourth quarter, we will extend the consecutive annual dividend increases to 30 years.

    (…)

    I want to affirm that even with the historically low interest rates, excluding currency, we expect to achieve our 2012 operating earnings per share of a 3% to 6% increase although toward the end of the low range. We believe it is reasonable.

    Looking ahead, I also want to reaffirm 2013 target we gave you at the analyst meeting. We expect operating per diluted share to increase 4% to 7% in 2013 on a currency-neutral basis.

  • AFLAC Earns $1.61 Per Share for Q2
    , July 24th, 2012 at 4:32 pm

    Three months ago, AFLAC ($AFL) said it expected Q2 earnings of $1.53 to $1.59 per share if the yen averaged 80 to 85. The exchange rate was mostly in the range during Q2, but fell to 78 recently. Today we learned that AFLAC made $1.61 per share for the second quarter which matched Wall Street’s forecast. The company said the exchange rate added a penny per share to the bottom line. For the first half of the year, AFLAC earned $3.35 per share. Currency exchange added six cents per share.

    The bad news is that AFLAC took a bath on some Spanish investments gone very bad:

    After-tax realized investment losses from impairments in the quarter were $223 million, or $.48 per diluted share. These losses primarily resulted from impairments taken on securities issued by Bankia and Generalitat de Catalunya.

    The good news is that AFLAC said that it expects third-quarter earnings to range between $1.64 and $1.69 per share. The Street had been expecting $1.63 per share. AFLAC also narrowed its full-year guidance from $6.46 – $6.65 per share to $6.45 – $6.52 per share (assuming an average exchange rate of 80).

    Operating earnings in the second quarter were $755 million, compared with $727 million in the second quarter of 2011. Operating earnings per diluted share rose 3.9% to $1.61 in the quarter, compared with $1.55 a year ago.

    The stronger yen/dollar exchange rate increased operating earnings per diluted share by $.01 during the quarter. Excluding the impact from the stronger yen, operating earnings per share increased 3.2%.

    Results for the first six months of 2012 also benefited from a stronger yen. Total revenues were up 19.0% to $12.1 billion, compared with $10.2 billion in the first half of 2011. Net earnings were $1.3 billion, or $2.71 per diluted share, compared with $663 million, or $1.41 per diluted share, for the first six months of 2011. Operating earnings for the first half of 2012 were $1.6 billion, or $3.35 per diluted share, compared with $1.5 billion, or $3.17 per diluted share, in 2011. Excluding the benefit of $.06 per share from the stronger yen, operating earnings per diluted share rose 3.8% for the first six months of 2012.

    Reflecting the benefit from a stronger yen/dollar exchange rate, total investments and cash at the end of June 2012 were $109.3 billion, compared with $103.1 billion at March 31, 2012.

    Shareholders’ equity was $14.2 billion at June 30, 2012, compared with $13.6 billion at March 31, 2012. Shareholders’ equity at the end of the second quarter included a net unrealized gain on investment securities and derivatives of $1.5 billion, compared with a net unrealized gain of $1.4 billion at the end of March 2012. Shareholders’ equity per share was $30.37 at June 30, 2012, compared with $29.19 per share at March 31, 2012. The annualized return on average shareholders’ equity in the second quarter was 13.9%. On an operating basis (excluding realized investment losses and the impact of derivative gains/losses on net earnings, and unrealized investment and derivative gains/losses in shareholders’ equity), the annualized return on average shareholders’ equity was 24.0% for the second quarter.

    …

    “I want to reaffirm that in 2012, we expect operating earnings per diluted share to increase in the range of 3% to 6%, excluding the impact of foreign currency. If the yen averages 80 for the full year it’s likely operating earnings per diluted share will be $6.45 to $6.52 for the year, which is toward the lower end of the range, due to the continued low level of investment yields. Using that same exchange rate assumption, we would expect third quarter operating earnings to be $1.64 to $1.69 per diluted share. We believe that is reasonable and achievable. As I conveyed at our analyst meeting in May, for 2013, our target is to achieve growth in operating earnings per diluted share of 4% to 7%, excluding currency. This earnings objective assumes no significant impact on investment income from losses and no further meaningful decline in interest rates.

  • The Yen’s Impact on AFLAC’s Earnings
    , May 7th, 2012 at 1:11 pm

    I’ve been watching AFLAC‘s ($AFL) investor presentation. Since so much of AFLAC’s business is generated in Japan, the yen-to-dollar exchange rate can add or detract to the company’s bottom line.

    To their benefit, AFLAC prefers to gauge their performance before the impact of currencies. Here’s how it works: The stronger the yen, the more it helps AFLAC. Last quarter, the exchange rate added four cents to AFLAC’s earnings.

    The average exchange rate last year was 79.75. If that holds true for 2012, AFL sees full-year earnings between $6.46 and $6.65.

    If the exchange rate is 70, AFLAC estimates that will add 60 cents per share to 2012’s bottom line. If it’s 75, that will add 27 cents per share. At 80, it’s minus one penny. At 75, it’s minus 25 cents per share.

    The latest exchange rate is 79.9460. I don’t anticipate this being a major issue for AFLAC this year, but I wanted investors to know the dynamics because this can have a big impact on their business.

    On May 15th and 16th, the company will have more to say about guidance for 2013.

  • AFLAC’s Earnings Call
    , April 25th, 2012 at 6:19 pm

    From Seeking Alpha, here’s a key part of AFLAC’s ($AFL) earnings call. I highlight this because it hasn’t received much attention, but AFLAC actually raised its earnings guidance slightly for next year:

    We increased our cash dividend to shareholders in 2011 for the 29th consecutive year. Our objective is to grow the dividend at the rate in line with our earnings per share before the impact of the yen. I believe dividends are an important component of the value we provide the investors. We will again evaluate a dividend increase as the year progresses, but I am confident we will extend our consecutive annual dividend increases to 30 years.

    As we have indicated, given our capital structure, our ability to repurchase shares is largely tied to profit repatriation. We mentioned on our fourth quarter call, we estimated 2012 profit repatriation to be about JPY 25 billion, assuming no additional material investment losses through Aflac Japan’s FSA fiscal year end. We still believe that’s a reasonable estimate. We will make a decision about the amount of money we will transfer from Japan to the U.S. around mid-year. And thinking of that decision, we’ll be taking into consideration the needs of our stakeholders in Japan, including our policyholders, but we will continue to be cautious about deploying that capital. If we do purchase any shares this year, it would be late in the fourth quarter. Keep in mind there are many factors involved in this decision and we’ll closely monitor our options. Importantly, we don’t need to repurchase shares to make our 2012 earnings. Furthermore, assuming we incur no material investment losses between now and mid-2013, we would expect to maintain a strong solvency margin ratio and significant capacity for profit repatriation and share repurchase.

    You’ll recall, we previously shared that our 2012 operating earnings objective was 2% to 5% growth before currency. We expect the new accounting for DAC to lower earnings per share by approximately $0.05 this year. However, we believe we can cover that impact and still achieve our original target of $6.46 to $6.65 per diluted share before the currency. That means our range for this year increased actually to 3% to 6% over the restated 2011 numbers. We will give you details about 2013 outlook at the analyst meeting next month, as we do each year. But I can say that we still expect the rate of earnings growth in 2013 to improve over 2012. I’m very excited about the opportunities ahead for Aflac.

    Because of some accounting changes, AFLAC’s earnings for last year will be restated slightly lower. However, AFLAC says that its earnings-per-share target of $6.46 to $6.65 is still on. Previously, AFLAC had said that it sees earnings growing by 2% to 5% this year. Now that becomes 3% to 6%.

    But here’s the key: AFLAC has said that earnings growth in 2013 will be better than 2012, and they reiterated that again today. So let’s say that AFLAC earns $6.60 per share this year. Considering they just beat earnings by a lot, I think it’s reasonable to assume they’ll be at the high end of the range. That translates to 5% growth for this year. If AFLAC accelerated to, say, 6% growth next year, that comes to earnings of $7 per share.

  • AFLAC Earns $1.74 Per Share for Q1
    , April 24th, 2012 at 5:20 pm

    In last week’s CWS Market Review, I said that Wall Street’s consensus for AFLAC’s figure of $1.65 per share was “almost certainly too low.” I said that results would probably be close to $1.70 per share. Even an AFLAC bull like me was too low.

    AFLAC ($AFL) just reported Q1 operating earnings of $1.74 per share. (Remember that with insurance companies we always want to look at operating earnings.) That’s up from $1.62 per share one year ago. The yen/dollar exchange rate increased earnings by four cents per share.

    CEO Dan Amos said, “We are pleased with our overall results in the first quarter of 2012. Aflac Japan gets high marks for another great quarter. The tremendous sales momentum they again generated this quarter was largely propelled by success in selling through banks. Aflac Japan’s first quarter production set an all-time new annualized premium sales record for the third quarter in a row. More importantly, we believe the first quarter has positioned us for another strong year of sales activities in Japan. As a result, we now expect Aflac Japan’s full year sales to increase 10%, compared with our previous expectation of a sales decline.”

    AFLAC also reiterated its full-year earnings forecast of $6.46 to $6.65 per share. The stock is up to $44 per share in the after-hours market.

  • CWS Market Review – April 20, 2012
    , April 20th, 2012 at 5:16 am

    We’re entering the high tide of the first-quarter earnings season, and so far earnings have been quite good. Of course, expectations had been ratcheted down over the past several months, but there have still been fears on Wall Street that even the lowered expectations were too high.

    According to the latest figures, 103 companies in the S&P 500 have reported earnings and 82% have beaten Wall Street’s expectations. That’s very good. If this “beat rate” keeps up, it will be the best earnings season in at least ten years.

    Earnings for our Buy List stocks are doing especially well. JPMorgan Chase, Johnson & Johnson and Stryker all beat expectations. Plus, J&J did something I always love to see: raise their full-year forecast.

    Next week is going to be another busy earnings week for us; we have five Buy List stocks scheduled to report earnings. In this week’s issue, I’ll cover the earnings outlook for our Buy List. I’m expecting more great results from our stocks. I’ll also let you know what some of the best opportunities are right now (I doubt AFLAC will stay below $43 much longer.) But before I get to that, let’s take a closer look at our recent earnings reports.

    Three Earnings Beats in a Row

    In last week’s CWS Market Review, I said that I expected JPMorgan Chase ($JPM) to slightly beat Wall Street’s consensus of $1.14 per share. As it turned out, the House of Dimon did even better than I thought. On Friday, the bank reported earnings of $1.31 per share. Interestingly, JPM’s earnings declined slightly from a year ago, but thanks to stock repurchases, earnings-per-share rose a bit.

    The stock reacted poorly to JPM’s earnings—traders knocked the stock down from $45 to under $43—but I’m not too worried. The bank had a very good quarter and Jamie Dimon has them on a solid footing. Last quarter was better than Q4 and this continues to be one of the strongest banks on Wall Street. (If you want more details, here’s the CFO discussing JPM’s earnings.) Don’t be scared off; this is a very good stock to own and all the trends are going in the right direction. I rate JPMorgan Chase a “strong buy” anytime the shares are less than $50.

    On Tuesday, Stryker ($SYK) reported Q1 earnings of 99 cents per share which matched Wall Street’s forecast. Last week, I said that 99 cents “sounds about right.” I was pleased to see that revenues came in above expectations and that gross margins improved. That’s often a good sign that business is doing well.

    Stryker’s best news was that it reiterated its forecast for “double-digit” earnings growth for this year. I always tell investors to pay attention when a company reiterates a previous growth forecast. I think too many investors tend to ignore a reiteration as “nothing new,” but it’s good to hear from a company that its business plan is still on track. I suspect that Stryker will raise its full-year forecast later this year. Stryker is an excellent buy up to $60.

    Last week, I said that Johnson & Johnson ($JNJ) usually beats Wall Street’s consensus by “about three cents per share.” This time they beat by two cents which is probably more of a testament to how well the company controls Wall Street’s expectations. For Q1, J&J earned $1.37 per share. I’ve looked at the numbers and this was a decent quarter for them.

    For the first time in a while, I’m excited about the stock. A new CEO is about to take over, and the company will most likely announce their 50th-consecutive dividend increase. The company also won EU approval for its Synthes acquisition. But the best news is that the healthcare giant raised its full-year guidance by two cents per share. The new EPS range is $5.07 to $5.17. Johnson and Johnson is a good stock to own up to $70 per share.

    Focusing on Next Week’s Earnings Slate

    Now let’s take a look at next week. Tuesday, April 24th will be a busy day for us as AFLAC ($AFL), Reynolds American ($RAI) and CR Bard ($BCR) are all due to report. Then on Wednesday, Hudson City ($HCBK) reports and on Friday, one of our quieter but always reliable stocks, Moog ($MOG-A), will report earnings.

    Let’s start with AFLAC ($AFL) since that continues to be one of my favorite stocks and because it has slumped in recent weeks. AFLAC has said that earnings-per-share for this year will grow by 2% to 5% and that growth next year will be even better. Considering that the insurance company made $6.33 per share last year, that means they can make as much as $6.65 this year and close to $7 next year.

    So why are the shares near $42 which is less than seven times earnings? I really don’t know. AFLAC has made it clear that they shed their lousy investments in Europe. Wall Street’s consensus for Q1 earnings is $1.65 per share which is almost certainly too low. I think results will be closer to $1.70 per share but I’ll be very curious to hear any change in AFLAC’s full-year forecast. Going by Thursday’s close, AFLAC now yields more than 3.1% which is a good margin of safety. AFLAC continues to be an excellent buy up to $53 per share.

    I’ve been waiting and waiting for CR Bard ($BCR) to break $100. The medical equipment stock has gotten close but hasn’t been able to do it just yet. Maybe next week’s earnings report will be the catalyst. Three months ago, Bard said to expect Q1 earnings to range between $1.53 and $1.57. That sounds about right. I like this stock a lot. Bard has raised its dividend every year for the last 40 years. It’s a strong buy up to $102.

    With Reynolds American ($RAI), I’m not so concerned if the company beats or misses by a few pennies per share. The important thing to watch for is any change in the full-year forecast of $2.91 to $3.01 per share. If Reynolds stays on track to meet its forecast, I think we can expect the tobacco company to bump up the quarterly dividend from 56 cents to 60 cents per share.

    Reynolds American has been a bit of a laggard this year. It’s not due to anything they’ve done. It’s more of a result of the theme I’ve talked about for the past few weeks: investors leaving behind super-safe assets for a little more risk. It’s important to distinguish if a stock isn’t doing well due to poor fundamentals or due to changing market sentiment. Reynolds is still a very solid buy. The shares currently yield 5.4%.

    Hudson City Bancorp ($HCBK) raced out to a big gain for this year, but it’s given a lot back in the past month. The last earnings report was a dud, but the bank is still in the midst of a recovery. Some patience here is needed. Wall Street’s consensus for Q1 is for 15 cents per share. I really don’t know if that’s in the ballpark or not, but what’s more important to me is the larger trend. Hudson City is cheap and a lot of folks would say there’s a good reason. I think the risk/reward here is very favorable. At the current price, Hudson City yields 4.8%. The shares are a good buy up to $7.50.

    As I mentioned before, Moog ($MOG-A) is one of our most reliable stocks. The company has delivered a string of impressive earnings reports. Moog has said that it sees earnings for this year of $3.31 per share (note that their fiscal year ends in September). That gives the stock a price/earnings ratio of 12.2. I think Moog can be a $50 stock before the year is done.

    There are three Buy List stocks due to report soon but the companies haven’t told us when: Ford ($F), DirecTV ($DTV) and Nicholas Financial ($NICK). Ford and Nicholas are currently going for very good prices. They usually report right about now, so the earnings report may pop up any day now. I think both stocks are at least 30% undervalued.

    That’s all for now. Next week will be a busy week for earnings. We’re also going to have a Fed meeting plus the government will release its first estimate for Q1 GDP growth. 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

  • CWS Market Review – April 13, 2012
    , April 13th, 2012 at 8:20 am

    That money talks, I’ll not deny, I heard it once: It said, ‘Goodbye’.
    -Richard Armour

    After sliding for five days in a row, the stock market has started to right itself. On the first trading day of April, the S&P 500 closed at a 46-month high but promptly broke up like a North Korean rocket and shed 4.26% in a week. That’s not a major pullback, but it’s one of the biggest slumps we’ve seen in months. Thanks to rallies on Wednesday and Thursday, the market has already made back half of what it lost (in fact, the traceback has been almost exactly 50%).

    What’s most surprising about the market so far in April is the recrudescence of volatility on extremely low volume. Consider this: In the first 64 trading days of 2012, the S&P 500 suffered just one daily drop of more than 1%. In 2011, that happened 48 times. Then suddenly, we had three 1% drops in four days. Yet average daily trading volume last month was the lowest since December 2007. What gives?

    In this issue of CWS Market Review I want to look at why the market has gotten so jittery all of a sudden. But more importantly, I want to take a look at the first-quarter earnings season. Over the next month, 16 of our Buy List companies are due to report earnings. As always, earnings season is the equivalent of Judgment Day for Wall Street. I’m expecting good news for our stocks, but the outlook may not be so sunny for the rest of Wall Street.

    Sorry, Folks. QE3 Is Not Coming

    Part of the reason why the stock market got a sudden case of the worries is what I mentioned in the previous two editions of CWS Market Review. Wall Street has been focused on the March jobs report and first-quarter earnings season. The jobs report wasn’t so hot and the market took its pound of flesh. Earnings season is the next hurdle.

    Interestingly, the stocks that dropped the most during the five-day selloff were often the ones that rallied the most on Wednesday and Thursday. These tended to be cyclical stocks and financials. It’s also interesting to note that the Morgan Stanley Cyclical Index (^CYC) had peaked on March 19th, two weeks before the rest of the market. This means, the cyclicals had already started to erode before the jobs report pullback.

    The stock market was given a boost on Thursday when two Fed officials, Janet Yellen and William Dudley, said that rates will have to stay low for a while longer. That‘s not a big surprise. Let me add a quick note on QE3. Some folks think the weak jobs report will cause Bernanke and his buddies at the Fed to jump in with a third round quantitative easing. Do not believe any of this. We often forget that the C in FOMC stands for “committee” and it’s obvious that the policy-makers are very far from a consensus on this issue. The media has been searching for any hint, no matter how trivial, that QE3 is on the way. It’s not. Plus, the jobs report was hardly a harbinger of a new recession. For now, the talk of QE3 is pure nonsense.

    Although the selloff was initially triggered by the jobs report, it was kept alive by bad news from Europe and China. The yield spreads in Europe (specifically, between any country and Germany) have been inching upward, particularly in Spain. I think it’s somewhat amusing that Monsieur Sarkozy is using the example of Spain to scare French voters from supporting the socialist opposition in next month’s election.

    The wider spreads signal some nervousness from investors but it’s important to note that we’re a long way from the frenzy we had last year. I want to urge investors not to be carried away by these renewed concerns from Europe. The fears of Spain not being able to pay her bills are greatly overblown. Europe will not sink the U.S. stock market.

    Q1 Earnings: The Story Is About Margins

    Last earnings season was disappointing. This time around, investors don’t expect much. The numbers vary but the consensus is that first-quarter earnings will be about the same as they were last year. In other words, zero profit growth. How times have changed. Not that long ago, analysts were expecting double-digit earnings growth for Q1.

    One of the problems facing many companies is that higher fuel costs are cutting into profits. All 10 sectors of the S&P 500 will see higher sales numbers, but at least seven of those sectors will have a hard time turning those top-line dollars into bottom-line profits.

    The story here isn’t that a slowdown is upon us. Rather, it’s that business costs are rising after being held back for so long. Part of this is the cost for new employees, which is a good thing. As I’ve said before, the story here is about margins, not a weakening economy. Even with as much as earnings growth estimates have fallen, the stock market hasn’t responded in kind. That’s because Wall Street correctly sees this as a temporary issue. In fact, the current view is that earnings growth will reaccelerate later this year as Europe comes back online.

    The important point for us is that even with little earnings growth, the stock market is still a very good value compared with the competition. Bond yields have climbed, but they’re still way too low. As long as the migration away from super-safe assets continues, our Buy List will thrive.

    Now I want to focus on some upcoming earnings reports for our Buy List stocks (you can see an earnings calendar here). Unfortunately, not all of our companies have said when earnings will come out yet.

    Expect an Earnings Beat at JPMorgan

    On Friday, JPMorgan Chase ($JPM) will be our first Buy List stock to report earnings. With a 34.86% year-to-date gain, the bank is our top-performing stock this year. That’s not bad for a little over three months’ work. (It’s always a surprise to me who the #1 stock will be.) What’s remarkable is that even with as well as the stock has done, the shares are still going for less than 10 times this year’s earnings estimate.

    Wall Street currently expects JPM to report earnings of $1.14 per share for Q1. That’s down a little from one year ago. That estimate, however, has been climbing in recent weeks while estimates for many other companies have been pared back. I’ve looked at the numbers and I expect a small earnings beat from JPM. But I’ll be curious to hear what CEO Jamie Dimon has to say about the bank’s business.

    Not only is JPM a big report for us, but it’s also a bellwether for the entire financial sector. Jamie Dimon likes to see himself as the unofficial spokesman for the banking world and a lot of investors want to hear what he has to say. JPM even moved up their earnings call so Jamie could hit the stage before Wells Fargo ($WFC).

    I agree with Dimon’s assessment that the last earnings report was “modestly disappointing.” One of the concerns this time around is investment banking, but Jamie has been clear that the division will rebound. For Q1, trading profits will probably be down from a year ago but better than Q4. This is a solid bank and I was particularly impressed by the 20% dividend increase. Bottom line: I’m sticking with Jamie, and I’m raising my buy price on JPMorgan Chase from $45 to $50 per share.

    Johnson & Johnson: 50 Straight Years of Dividend Increases

    Next Tuesday, we’ll get two more earnings reports—Johnson & Johnson ($JNJ) and Stryker ($SYK). I’m afraid that J&J has been a weak performer this year. In January, the healthcare giant said that earnings-per-share for 2012 will range between $5.05 and $5.15. Wall Street had been expecting $5.21.

    J&J has been dogged by a series of quality control problems, and the stock has lagged. Later this month, Alex Gorsky will take over as the new CEO. I think that’s a good choice particularly since he helped the company tackle its internal problems. Wall Street’s consensus for Q1 is for $1.35 per share which is exactly what Johnson & Johnson made one year ago. The stock usually beats by about three cents per share, but I’m not going to get worked up by a result that’s within a few pennies of $1.35. What I want to see is solid proof of a turnaround, although I realize it may take some time.

    The best part about J&J is the rich dividend. Going by Thursday’s close, the stock yields 3.55%. But the yield to investors is probably even higher. Later this month, I expect the company to announce its 50th-straight dividend increase. But coming after January’s lower guidance, the quarterly dividend will probably rise from 57 cents to 60 cents per share. If that’s right, J&J now yields 3.74%. I’m keeping my buy price at $70.

    Stryker Is a Good Buy Up to $60

    Shares of Stryker ($SYK) haven’t done much for the past several weeks which is puzzling because the business has been strong. Stryker has said that it sees “double digit” earnings growth for 2012. I doubt they’ll have trouble hitting that forecast. In fact Stryker is probably low-balling us, but that’s understandable since the year is still so young.

    For Q1, the Street expects earnings of 99 cents per share which sounds about right. Stryker rallied last earnings season after they met expectations. The business tends to be very stable. I think the stock is a good value here and I’m raising my buy price to $60 per share.

    Before I go, I want to highlight some other good values on the Buy List. Among the financials, AFLAC ($AFL), Nicholas Financial ($NICK) and Hudson City ($HCBK) are all going for a good price. I also think that Ford ($F) has drifted down to bargain territory as well.

    That’s all for now. 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

  • Finally, Some Volatility
    , March 6th, 2012 at 11:31 am

    This may come as a shock, people, but we actually have some volatility today. Unfortunately, it’s the bad kind. The market is again worried about concerns from Europe. (Will 2011 ever end?)

    The S&P 500 is currently down 17 points or 1.3%. If that holds up, it will be the biggest fall all year and it will be nearly twice as big as the second-biggest fall this year.

    There’s also a major divide in this market and it closely resembles the opposite of what we’ve seen most of this year. (Today is the opposite of what’s been happening this year which was the opposite of what happened late last year. So today resembles much of last year.)

    So far, 2012 has been characterized by low volatility, rising stocks prices led by cyclicals and small-caps. Today, cyclicals, small-caps, financials and gold are getting hit the hardest. Financials are the worst-performing sector. AFLAC ($AFL) is down about 4%.

    The only areas that are doing well are the defensive stocks. This means staples, utilities and many dividend stocks. On our Buy List, Reynolds American ($RAI) is slightly up while Sysco ($SYY) is slightly down.

  • The WSJ Misleads on AFLAC’s Earnings
    , February 1st, 2012 at 12:44 pm

    The WSJ reports:

    Aflac lost 1.2% after the insurance provider reported fourth-quarter earnings that fell short of expectations, even as revenue beat, and provided a downbeat outlook for 2012 earnings.

    Downbeat? AFLAC gave the exact same forecast for 2012, and they increased it for 2013. This is what AFLAC wrote yesterday:

    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.

  • After the Close: CR Bard Beats Earnings, AFLAC Misses But Guides Higher for 2013
    , 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.”