Posts Tagged ‘f’

  • Ford May Bring Back Dividend
    , October 25th, 2011 at 10:09 am

    Ford Motor ($F) progressively cut its quarterly dividend from 30 cents per share to 10 cents to 5 cents, and it finally ditched it all together five years ago.

    Thanks to the recent credit upgrades and union deal, the dividend may make a comeback. In my opinion the dividend isn’t why the stock is a good value, but it reflects the company’s remarkable turnaround.

    My guess is that any dividend will start out pretty modest, perhaps eight or ten cents per share. Brian Johnson at Barclay’s Capital thinks it could be eight cents per share.

    “Ford is doing all the right things and they sure haven’t gotten any credit for it from the Street,” said Gary Bradshaw, a fund manager at Hodges Capital Management in Dallas, who recently purchased 50,000 shares below $10 to increase his Ford holding to 250,000 shares. “That’s ridiculously cheap for a company whose outlook is improving.”

  • CWS Market Review – October 21, 2011
    , October 21st, 2011 at 8:15 am

    The stock market continues to improve albeit in a hesitating manner. Last week, the S&P 500 broke above its 50-day moving average and this past Tuesday, the index closed at its highest level in two-and-a half months.

    So has the bear finally left us alone? Unfortunately, it’s too early to say. The market is stronger than it was but there are still plenty of hidden—and not-so-hidden—risks out there. The problems in Europe are still bad but at least the authorities finally realize that they can no longer drag their lederhosen. For now though, all eyes are on the third-quarter earnings season which is now in full swing.

    In this issue of CWS Market Review, we’ll take a closer look at earnings season. So far, all four of our Buy List stocks that have reported have topped expectations. I’m happy to report that our Buy List is leading the rebound. In the last 13 trading days, our Buy List has gained more than 11.3%. If this keeps up, 2011 will be our fifth-straight year of beating the overall market. As usual, prudence and patience have served us well.

    Now let’s look at the most exciting news this week which was the break-up announcement of Abbott Labs ($ABT). The company stunned Wall Street on Wednesday when they said that they’re breaking themselves into two separate companies: a drug business and a medical devices business. I’ve long been a fan of ABT. This company throws off tons of cash and has a solid balance sheet.

    The problem for Abbott (and what attracted me to it) is that the market is clearly wary of giving their drug business a decent valuation. Humira, Abbott’s blockbuster rheumatoid arthritis drug, will rack $6.5 billion in sales this year. But there are fears that competitors will move into that space and knock the legs out from under Humira.

    Due to these worries, the entire company’s valuation has suffered. But as I’ve noted before, Abbott is much more than Humira. They have a strong business in medical devices which hadn’t been getting the market love it deserves. So Abbott did the logical step and announced the break-up. Interestingly, it’s the medical devices business that will keep the Abbott name. That probably tells you where the priorities lie.

    The spin-off will happen sometime next year so it won’t impact this year’s Buy List. As a general rule I like spin-offs, especially when good companies do them. What often happens is that a highly profitable division feels that it has to “carry the weight” of a larger organization. Once the division is unmoored from its parent company, it’s able to be more flexible and find new areas of growth.

    Also on Wednesday, Abbott reported third-quarter earnings of $1.18 per share which was a penny more than estimates. Abbott narrowed their full-year guidance from $4.58 – $4.68 per share to $4.64 – $4.66 per share. That means the stock is going for 11.6 times this year’s earnings which is less than the overall market. The full-year range implies a Q4 range of $1.43 to $1.45 per share which is a nice jump over the $1.30 per share from last year’s Q4.

    Shares of Abbott responded positively to the break-up news and the stock currently yields a healthy 3.55%. For the year, Abbott is a 12.82% winner for us which is a lot better than the market’s loss of 3.36%. I congratulate Abbott on their bold move and I rate the stock a strong buy up to $58 per share.

    Two other healthcare companies of ours reported earnings this past week. On Tuesday, Johnson and Johnson ($JNJ) reported earnings of $1.24 per share. This beat Wall Street’s consensus by three cents per share but was a penny less than my forecast. The bottom line is that this was another solid quarter for J&J.

    In last week’s CWS Market Review, I said that JNJ could raise both ends of their full-year forecast by five cents per share. Well, I was half right. The company raised the low end of its forecast by a nickel per share. The new EPS range for 2011 is $4.95 – $5.00 per share which implies a Q4 range of $1.08 – $1.13.

    The share price dropped a bit on the news but not too badly. JNJ continues to do well. This is a very well-run firm; Johnson & Johnson is a good buy up to $67 per share.

    The other healthcare stock to report was Stryker ($SYK). After the close on Wednesday, the company reported earnings of 91 cents per share which was two cents better than estimates; plus Stryker raised their full-year guidance. The new guidance is $3.70 – $3.74 per share which is up from $3.65 – $3.73 per share. That implies a Q4 range of $1 – $1.04 per share.

    Last week, I wrote that I like Stryker but that it would be better at a cheaper price. Sure enough, the stock dropped on the good earnings report. Stryker closed Thursday at $48.28 which is a decent price (less than 13 times this year’s earnings). However, if you’re able to get Stryker below $45, you’ve gotten a very good deal.

    The upcoming week will be a very busy week for us; we have five Buy List stocks reporting earnings. On Tuesday, Reynolds American ($RAI) reports. Then on Wednesday, AFLAC ($AFL) and Ford ($F) are due to report. Finally on Thursday, Deluxe ($DLX) and Gilead Sciences ($GILD) will report.

    The one I’ll be watching most eagerly is AFLAC ($AFL). Simply put, the selling of AFLAC shares reached ridiculous levels over the last several weeks. At one point, the stock was trading at $31.25 though the company has told us repeatedly that it expects to earn between $6.09 and $6.34 per share in operating earnings this year.

    Well, Wednesday will be the time of reckoning. In the last earnings report, AFLAC said that it expects Q3 operating earnings to range between $1.54 and $1.60 per share. My numbers say that’s too low. I think AFLAC can easily make $1.64 per share. They may also have good things to say about next year as well. I’m going to raise my buy price for AFLAC to $43 per share.

    Three months ago, Reynolds upset Wall Street when it missed earnings by four cents per share (which I suspected would happen). That was pretty unusual for Reynolds but the stock has recovered very nicely. The current estimate for Q3 is for 73 cents per share which seems about right.

    The other earnings report to watch will be from Ford. The company is fundamentally very sound despite the stock’s poor performance this year. I’m also pleased to see that the latest union contract has been approved. Wall Street currently expects Ford’s third-quarter earnings to come in at 45 cents per share which is below the 48 cents per share from the year before. I think there’s a good chance here for a large earnings beat.

    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

  • Bed Bath & Beyond Hits New 52-Week High
    , October 17th, 2011 at 10:07 am

    The stock market is down a bit this morning but we’re still holding on to most of the gains we made from Friday’s big push. The S&P 500 is currently down about 5.5 points.

    The market is being helped by Citigroup’s ($C) earnings report which was quite good. The bank earned 84 cents per share which was two cents better than estimates.

    Citi’s losses from bad loans fell 41 percent during the quarter to $4.5 billion as defaults fell from its credit card loans for Citi-branded cards. That allowed Citi to add $1.4 billion to its earnings from credit reserves it set aside for deeper losses.

    The bank’s international consumer business increased 10 percent due to growth in Asia and Latin America. Its North American consumer business fell 9 percent from a year ago due mainly to lower average balances on its credit cards. Revenue in the card business also fell due to regulations that limit the ways banks can increase interest rates and fees.

    Citi said its stock and bond trading business was hurt by uncertainty in financial markets due to the debt crisis in Europe and a downgrade of the U.S. government’s credit rating in August.

    It could have been a lot worse. A lot. The shares are currently up about $1.

    I was very impressed by the recent fall in the $VIX and I suspect that to continue. Earlier this year, the $VIX had dropped below 15 and I think that will happen again over the next few months.

    On our Buy List, Bed Bath & Beyond ($BBBY) just broke out to another new 52-week high. The stock has been as high as $61.69 today.

    The other good news is that the UAW rank-and-file seem to favor the recent deal with Ford Motor ($F).

    UAW members at Ford went from voting 53 percent against the proposed contract on the morning of Oct. 14 to 62 percent in favor by yesterday at 8:30 p.m. New York time. The union said 14,845 members at Ford had cast ballots in favor of the labor deal while 9,076 voted against. Ford’s 40,600 U.S. hourly workers will conclude balloting tomorrow.

    If the deal wasn’t approved, there was a chance that Ford could have faced its first nationwide strike in 35 years. One analyst said the strike would have cost Ford $71 million per day.

  • Ford Continues to Thrive
    , October 12th, 2011 at 11:55 am

    I want to say a few words about Ford Motor ($F). I was very optimistic for this stock at the beginning of the year. However, a number of problems have hindered the company and the stock has plunged.

    As a result, Ford has been near the top of my list for stocks to ditch for next year’s Buy List. But Ford is now so cheap that it’s a good bargain. The selling has been very overdone.

    Also, there’s been some good news at Ford recently. Moody’s said that it’s considering raising the company’s credit rating which is currently in the toilet. The catalyst is the recent deal agreed to by Ford and the UAW. Obviously labor costs are a major issue for the company to remain competitive. (Ford and the union aren’t quite there since one of the locals just rejected the deal.)

    Ford borrowed a ton of money before the financial crises. The company has worked to pay off their debt but there’s still a long way to go. An improved credit rating will help alleviate some of their interest costs.

    The company also had a strong sales month for September. It was their best September since 2004. The company’s car sales aren’t strong but the trucks and utility models are doing very well.

    The Dearborn, Mich.-based auto maker said its total U.S. sales increased 8.9% last month to 175,199 units. Ford-brand sales leaped 14.4% to 168,181, while its struggling Lincoln unit suffered a 6.6% decline to 7,018 vehicles.

    Ford’s growth was highlighted by a 41% jump in Escape sales and a 204% surge in Explorer sales.

    The company also sold 15% more trucks, including its best month of F-Series sales of the year at 54,410 units sold.

    SUV sales climbed 35%, posting their best month at Ford since 2004. Ford’s hot-selling Escape vehicle has set internal monthly sales records seven out of nine months and is up 32% to 187,850 year-to-date.

    “Ford continues to deliver strong sales results in a dynamic marketplace with a broad portfolio of fuel-efficient, high-quality products,” Ken Czubay, vice president for U.S. marketing sales and service, said in a statement. “This is further proof that Ford is offering the vehicles – with the fuel economy and technologies – that people truly want and value.”

    Last week, the stock dropped to $9.05 which is 4.7 times this year’s earnings. Ford has been as high as $11.77 today.

  • The S&P 500 Breaks 1,190
    , October 10th, 2011 at 10:48 am

    The stock market is getting another bump this morning. The S&P 500 has been as high as 1,190.15 so far which is an 8.27% rally from last Monday’s close.

    The cyclicals are in charge today as the Energy, Financial and Materials sectors are doing the best. On Thursday of this week, JPMorgan Chase ($JPM) will be the first of the major banks to report earnings. The shares got as low as $27.85 last week. Today it’s the top-performing stock on our Buy List. This earnings report will probably tell us a lot about where banks earnings stand for this earnings season. I’m pleased to see that both AFLAC ($AFL) and Ford ($F) are strong today.

    Bloomberg sums up the good news:

    German Chancellor Angela Merkel and French President Nicolas Sarkozy said yesterday they will deliver a plan to recapitalize European banks and address the Greek debt crisis by the Nov. 3 Group of 20 summit. Belgium said today it will buy part of Dexia SA and provide security for depositors as part of a plan to rescue the lender.

  • CWS Market Review – October 7, 2011
    , October 7th, 2011 at 9:27 am

    On Monday, the S&P 500 finally broke out of its 100-point trading range. For 41 sessions in a row, the index had closed between 1,119 and 1,219. But on Monday, the S&P 500 dropped down to close at 1,099.23. That was our first close below 1,100 in over a year.

    Since then, the market has raced higher. On Thursday, the S&P 500 closed at 1,167.97 which is a 5.98% surge in just three days. Naturally, we shouldn’t get too excited by this recent uptick. For the last several weeks, the stock market has bounced up and down in high-volatility spikes, but ultimately, we haven’t moved very far. However, with earnings season upon us, this time could be different.

    As usual, the hurdle has been Europe, and more specifically, Greece. For a few months now, investors have been jerked around as we wait to hear something (anything!) promising from the Old World. Unfortunately, European officials seem firmly committed to doing a series of half-steps—and after each one, they seem puzzled that things aren’t getting any better. The good news is that it appears as if some folks in Europe are starting to understand what needs to be done.

    In this issue of CWS Market Review, I want to give you a preview of the third-quarter earnings season. While the overall market continues to spin its wheels, I think several of our Buy List stocks are poised to surge higher. In fact a few of our stocks, like Deluxe ($DLX) and Ford ($F), have already started to turn the corner.

    I’m writing you in the wee hours of Friday morning. Later today, we’ll get the crucial jobs report for September. Wall Street has been dreading this report for several days now, and it’s easy to understand why. Frankly, nearly every jobs report for the last few years has been dismal. I’m afraid I’m not expecting much better for September’s report. Wall Street is expecting a gain of 60,000 nonfarm payroll jobs, and as low as that estimate is, it might be too high.

    If the news is better than expected, it may take some of the pressure off the Federal Reserve to get the economy going again. But bear in mind that the economy needs to create, on average, 200,000 net new jobs every month for a few years to get back to anywhere near normal. Truthfully, I think many of our economic problems are beyond the scope of the Fed’s repair kit, but I’ll save that for another time. If Friday’s jobs report is worse than expected, well…we’re already down so much that it may not hurt equities (although the political fallout could be dramatic).

    The truth is that the U.S. economy isn’t doing nearly as badly as is generally perceived. Of course, I’m not saying that the economy is humming along. I’m just saying that its performance is far better than the febrile commentary I see every day. Consider that earlier this week Bespoke Investment Group noted that 17 of the last 21 economic reports have come in better than expected. Just this week, the ISM Manufacturing index topped expectations. The ADP jobs report beat consensus and the construction spending report was surprisingly strong. On October 27th, the government will release its first estimate of Q3 GDP growth and I think it’s possible that growth will come in over 2%. That’s not great, but it’s a far cry from a Double Dip.

    Another promising note is that bond yields are finally beginning to creep higher. This is an early signal that investors may be willing to take on more risk. What’s interesting is how orderly the increase in risk is turning out to be. Yields for the one-, two- and three-year Treasuries all bottomed out on September 19th. Three days later, the yields for the five-, seven-, ten-, twenty- and thirty-year Treasuries hit their lows. Since then, the yield on the ten-year note has jumped 29 basis points. The five-year yield just closed above 1% for the first time in six weeks. The takeaway is that this orderly exodus out of low-risk investments may provide fuel for a sustained stock rally. Capital always goes where it’s treated best. If Friday’s jobs report comes in strong, Treasuries will continue to fall.

    I’m pleased to see that many of our Buy List stocks continue to do well. In the last two weeks, the Buy List has gained 2.11% while the S&P 500 is down by 0.15%. On Thursday, shares of AFLAC ($AFL) got as high as $38.40. That’s the highest price since mid-August and it’s a 22% bounce off the low from two weeks ago. I’ve been flabbergasted by AFLAC’s recent plunge. The company is clearly doing well. I expect to see another strong earnings report on October 26th. I also wouldn’t be surprised to see another upward revision to next year’s earnings guidance. Still, investors seem convinced that AFLAC is taking a bath on its European investments. They’re not. AFLAC is well protected. The stock is a very good buy up to $40 per share.

    Another big gainer recently has been JPMorgan Chase ($JPM). Over the last three days, the shares have gapped up by 14%. Next Thursday, JPM is due to report its third-quarter earnings. This will be the first of our stocks to report this season. Due to the problems in Europe and in our economy, Wall Street has been ratcheting down estimates for JPM. The Street currently expects JPM to report 98 cents per share which is 23 cents less than what they were expecting just one month ago.

    I have to admit that I don’t have a good feel for what JPM should report next week. In previous quarters, I had a pretty good idea but there are too many unknowns to give you a precise forecast. However, I wouldn’t be surprised to see JPM miss estimates this time around; but I’ll be far more interested to hear what they have to say about their business. JPM continues to be the healthiest of the major banks. Thanks to the lower share price, the stock currently yields 3.2%. I also expect that the bank will bump up that dividend early next year. In fact, they could easily raise the dividend by 30% to 50%. If next week’s earnings report is positive, JPM would be a good buy up to $34 per share.

    I’ve been very frustrated by the performance of Ford ($F) but I have to admit that the stock is well below a reasonable valuation for the company. Ford has turned itself around very impressively. I don’t like many cyclical stocks but Ford looks very good here. Sales continue to do well. The shares are currently going for about one-third of its sales. If you’re able to get shares of Ford below $11, you’ve gotten a very good deal.

    There are a few other stocks I want to highlight. Over the last three sessions, shares of Deluxe ($DLX) are up nearly 18%. Even after that rally, the shares still yield 4.7%. Jos. A Bank Clothiers ($JOSB) is up over 10% since Monday and Wright Express ($WXS) has tacked on 13%. Last week, I highlighted Moog ($MOG-A), one of our quieter buys, and the stock has rallied nicely since then.

    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

  • Ford Earns 65 Cents Per Share
    , July 26th, 2011 at 8:47 am

    Today is a huge day for earnings for our Buy List. Ford ($F) kicked things off by reporting adjusted earnings of 65 cents per share. Wall Street was expecting 60 cents per share although I thought it could have been as high as 70 cents per share.

    Ford also said it is spending more to increase production because of rising post-recession demand. U.S. consumers are expected to buy nearly 2 million more cars this year than they did last year. Dealers say they are selling some Ford Focus sedans hours after they hit the lot. Earlier this month, Ford held a lottery to fill 1,800 jobs at its Louisville Assembly Plant after nearly 17,000 people applied.

    Ford projects that annual U.S. sales will be in the lower end of its 13 million to 13.5 million forecast.

    U.S. auto sales stumbled in the quarter, losing the momentum they had before the March 11 earthquake in Japan. Some buyers turned to Ford and other brands when Japanese cars were in short supply. But others seem determined to wait until later this year, when Japanese supplies will be replenished and prices are expected to fall.

    Ford was able to command higher prices for its cars and trucks in the U.S., partly because of tight supplies of vehicles after the earthquake.

    For the second quarter, revenue rose 13 percent to $35.5 billion. Analysts polled by FactSet had forecast revenue of $32.15 billion.

    Ford paid off $2.6 billion in debt during the quarter. The company now has $14 billion in debt, down from $16.6 billion in the same quarter a year ago, a legacy of its 2006 decision to borrow $23 billion to restructure the business. Ford hopes its steady reduction in debt will convince ratings agencies to return the company to investment-grade status, which would make it cheaper to borrow money.

    Booth said ratings agencies aren’t expected to act until after the company completes contract talks with the United Auto Workers union. Ford and the UAW are expected to kick off negotiations on a new contract this Friday.

    The stock looks to open higher this morning.

  • Citi Upgrades Ford
    , May 16th, 2011 at 8:12 am

    I see that Citigroup has upgraded Ford ($F) from a Hold to a Buy. That’s good to hear and it’s about time someone highlighted how good Ford is. The stock may get a little boost after today’s open.

    Let’s remember that Ford fell short of earnings by 18 cents per share for Q4 but beat earnings by 12 cents per share in Q1. However, the stock still reflects the earnings miss, even though the earnings beat made up for two-thirds of the shortfall.

    Wall Street currently expects Ford to earn $1.92 per share for this year and $2.01 for next year. That means the Ford is going for less than eight times this year’s earnings estimate.

    Shares were up 12 cents, or 0.8 percent, to $15.20 in premarket trading Monday. Michaeli maintained his $18 one-year price target and wrote that the stock was still a high risk.

    Michaeli also wrote that Ford has made impressive gains in cash flow and liability management, and an upgrade to investment grade status appears likely late this year or early next year. That should be a catalyst for the stock, he wrote. “A return to investment grade would open a few doors for the equity story including providing a path to refinance secured debt, shed covenants and eventually restore a dividend,” he wrote.

    Ford also should benefit from model shortages expected this summer by Japan-based automakers due to parts shortages caused by the March 11 earthquake and tsunami, Michaeli wrote.

    He maintained his forecast that U.S. sales would be 13.4 million this year, despite a Citi survey showing that fewer people are expecting to add vehicles in their households in the next two years. But he lowered his 2012 forecast to 13.9 million from 14.6 million based on the survey. For 2013, he also reduced the forecast to 14.5 million vehicles from 15 million.