Posts Tagged ‘fisv’

• CWS Market Review – October 31, 2014
  Eddy Elfenbein, October 31st, 2014 at 7:08 am

  “Sometimes the hardest thing to do is to do nothing.” – David Tepper

  I’m happy to report that my favorite investment strategy, doing absolutely nothing, has been very successful of late. The S&P 500 has rallied on nine of the last 11 trading days. On Thursday, the index closed at 1,994.65, which is a dramatic turnaround from the intra-day low of 1,820.66 which we hit just two weeks ago.

  The stock market has regained nearly everything it lost during the mini-panic of early October. On Thursday afternoon, the S&P 500 came within 0.6 points of touching 2,000 for the first time in more than a month. Several of our Buy List stocks, like CR Bard, Stryker and Medtronic, recently broke out to new 52-week highs. The sudden reversal clearly upset a lot of market bears. I’m often surprised by how many people are disappointed that the world didn’t end.

  

  The big economic news this week was that the Federal Reserve announced that Quantitative Easing will finally come to an end. This has been a hugely misunderstood policy. I’ll tell you what this means for the market and our portfolios. We also had some very good Buy List earnings this week. AFLAC not only beat earnings, but it raised its dividend as well. Fiserv beat earnings, raised guidance and broke out to a new 52-week high. Later on, I’ll preview our remaining Buy List earnings reports. But first, let’s look at what Janet Yellen and her friends at the Fed had to say this week.

  QE Finally Comes to an End

  The Federal Reserve met earlier this week, and as expected, the central bank announced the end of Quantitative Easing. This was hardly a surprise since the Fed has been gradually tapering its asset purchases for nearly a year.

  Let’s take a step back and review what QE was all about. Since the economy was in such poor shape, the Fed responded to the financial crisis by lowering interest rates. The problem was that rates were already near 0%, and they couldn’t go any lower, yet the economy needed more help. Several models indicated that interest rates need to be negative by a few percentage points.

  The Fed then decided that the best way to simulate negative rates would be by buying bonds. Lots and lots of bonds. The Fed had tried bond-buying twice before but had exited both efforts. Then in September 2012, Ben Bernanke embarked on round three, but this one was different. The Fed said it would buy tons of bonds, and it wouldn’t stop until things got better. No timeline. That was a strong message the market needed to hear. The Fed’s plan was that each month, it would buy $45 billion worth of Treasuries and $40 billion worth of mortgage-backed securities.

  The goal of QE was to lower interest rates and thereby help the housing market. Economists are divided on the efficacy of all this bond-buying. Of course, economists are divided on nearly everything. Personally, I’m a pragmatist. I don’t know if QE helped, did nothing or even caused more pain, but I can’t help noticing that the stock market liked QE a lot. Any pro-QE announcement (or rumor) could send shares soaring, while any hint that it would end would cause a rash of sell orders. That’s all the evidence I need.

  In addition to helping the stock market, I think QE also gave a boost to riskier assets at the expense of more secure ones. Or at least, those that are perceived as being more secure. Gold, for example, has not done well over the third round of QE. The yellow metal rallied to over $1,920 per ounce three years ago, and it’s been a painful ride ever since. On Thursday, gold closed below $1,200 per ounce.

  We’re in an unusual situation for the market and the economy. For the last few years, the market has done well while the economy has experienced a very tepid recovery. Now it looks as if the economy is poised to do better, but the market probably won’t be able to repeat such stellar gains.

  On Thursday, the government announced that the economy grew by 3.5% in the third quarter. That’s a good number, but some of the details were pretty mediocre. Personal consumption only grew by 1.8%. Frankly, that’s kinda blah. Here’s what’s happening: At first, the economic recovery was held back by the dead weight of the housing market. Then it was held back by austerity by state and local governments. Fortunately, we’re now past both those hurdles, so I expect to see better economic growth in the months ahead.

  In fact, the economic growth rate of the last two quarters was the best for back-to-back quarters in more than a decade. It doesn’t end there. On Tuesday, we learned that Consumer Confidence jumped to a seven-year high. The initial jobless claims reports are still quite good. The only bump this week was a lousy report on Durable Goods.

  I’m even going to say something that might be blasphemous on Wall Street, and that’s that the monthly jobs reports aren’t so important anymore. (GASP!) Of course, they’re important in the sense that people are getting more jobs, and we can see that companies are expanding. But don’t expect to see any dramatic inflexion points soon. The jobs-growth trend has been established, and that’s what the Fed wants to see.

  The next question for the market and the Fed is, “When will the central bank finally raise interest rates?” That’s a tough one. So far, every forecast (mine included) has been far too premature. Initially, Janet Yellen said that the first rate hike would be about six months after the conclusion of QE. That was a rookie mistake, and she’s disavowed those comments ever since.

  The futures market currently sees the first rate hike coming in August 2015. I’m a doubter, but I can’t say I have a strong conviction either way. The problem is that the Strong Dollar Trade, which I’ve discussed in recent issues, has held back inflation and economic growth. That gives the Fed a little more breathing room. As a result, that could put off a rate increase for a few more months. I wouldn’t be surprised if the first rate hike doesn’t come until 2016.

  What does this all mean? The overall climate remains the same. As long as rates are low, stocks are the place to be. It’s just that simple. This earnings season has been a good one for the market. The latest numbers show that nearly 72% of the stocks in the S&P 500 have topped earnings expectations, while 53.7% have beaten on sales. I should add that these are reduced expectations compared with a few weeks ago. The earnings growth rate is currently tracking at 6.5%. That’s not great, but it sure beats anything you’d see in the bond market.

  Until interest rates become competitive with stocks, stocks are the best place to be. I encourage investors to keep focusing on high-quality stocks like you see on our Buy List. Now let’s turn to our recent earnings reports.

  Ford Motor Is Still a Buy

  First, though, let me mention Ford Motor ($F) which reported Q3 earnings shortly after I sent you last week’s CWS Market Review. The automaker reported earnings of 24 cents per share which topped estimates by five cents per share.

  Despite the earnings beat, Wall Street was not pleased with Ford. The company has been plagued by costly recalls and the impact of the strong greenback. For the first time since 2010, Ford had negative quarterly cash flow. The stock dropped 4.3% last Friday. Ford’s stock already got beat up a month ago when they said they wouldn’t meet their profit goals for this year.

  I feel bad for Ford because a lot of this isn’t their fault. The automaker has been squeezed by the strong dollar, higher operating costs and weaker economies overseas. I also think investors are nervous that former CEO Alan Mulally is no longer running things.

  Still, the big issue facing Ford is the new F-150 with an aluminum body. This is a ballsy move by Ford; the truck is their biggest moneymaker. To get ready for the new production, Ford had to convert some factories and that costs money. Right now, the success of the F-150 is a giant question mark that’s weighing on the shares. For its part, Ford has made it clear that they’re going ahead with their plans. In fact, they just started with mass production of the truck.

  I’m sticking with Ford. The shares currently yield over 3.5%. I admire companies that are trying to change things up.

  Strong Earnings from AFLAC, Fiserv and Express Scripts

  On Tuesday, AFLAC ($AFL) reported Q3 operating earnings of $1.51 per share. That was eight cents more than estimates. That was even better than the guidance they gave us three months ago, $1.38 to $1.47 per share. Operationally, AFLAC is doing well. The problem has been the weak yen. Fortunately, forex only cost them four cents per share last quarter.

  For Q4, AFLAC expects operating earnings to range between $1.28 and $1.37 per share. That assumes the yen stays between 105 and 110 to the dollar. It’s currently at 109.29. That brings the full-year earnings estimate to $6.14 to $6.23 per share. For 2015, AFLAC aims to increase their operating earnings by 2% to 7% on a currency-neutral basis.

  But the best news was that AFLAC’s board decided to raise the quarterly dividend from 37 to 39 cents per share (I had been expecting a one-cent increase). This is the 32nd year in a row that AFLAC has increased its dividend. On Thursday, the shares closed over $60 for the first time in more than seven weeks. AFLAC remains a solid buy up to $63 per share.

  Fiserv ($FISV) reported Q3 earnings of 86 cents per share, which was two cents better than expectations. The company also raised expectations. Fiserv now expects 2014 earnings per share between $3.34 and $3.38. The old range was $3.31 to $3.37. For 2013, Fiserv earned $2.99 per share. The new guidance implies Q4 earnings between 86 and 90 cents per share. The Street had been expecting 89 cents per share.

  The stock came close to breaking $70 on Wednesday. Fiserv has been on our Buy List all nine years. In the last three years, the stock is up 133%. This week, I’m raising my Buy Below on Fiserv to $72 per share.

  

  Express Scripts ($ESRX) posted earnings of $1.29 per share, which matched expectations. The pharmacy-benefits manager also narrowed their full-year range to $4.86 to $4.90 per share. The previous range was $4.84 to $4.92 per share. The new full-year guidance means that the guidance for Q4 is $1.36 to $1.40 per share. The Street had been expecting $1.38 per share. Basically, the company delivered what was expected, and I’m fine with that. Express Scripts is a buy up to $77 per share.

  Moog ($MOG-A) is due to report earnings later this morning. I’ll have details on the blog. The consensus on Wall Street is for earnings of $1.08 per share. The stock reached an all-time high on Wednesday.

  Earnings Next Week from Qualcomm, Cognizant and DirecTV

  Earnings season is almost over, but we have a few more to go. Next Wednesday, November 5, Cognizant Technology Solutions and Qualcomm are due to report.

  Cognizant ($CTSH) was our big dud last earnings season. The stock dropped more than 12% after its earnings report. As is often the case, the earnings were quite good: 66 cents per share versus estimates of 62 cents. No, what troubled traders was the guidance. In fact, it wasn’t even the earnings guidance, but rather the sales. Cognizant said they see Q3 earnings of at least 63 cents per share, and sales between $2.55 billion and $2.58 billion. Wall Street had been expecting sales of $2.66 billion. Basically, CTSH lowered their full-year sales growth from 16.5% to 14%. That’s still very strong growth. Cognizant isn’t one to worry about.

  Qualcomm ($QCOM) is in an unusual spot. Three months ago, the company crushed earnings. They beat by 22 cents per share. The problem was news out of China. The company is involved in a nasty anti-trust suit with the Chinese government, and they’re simply not going to win. Why is the PRC doing this? Because they can.

  The company wisely wants to put this dispute behind them, but it’s going to be costly. As a result, Qualcomm had rather weak guidance for the September quarter (their fiscal Q4). Qualcomm said it expects earnings between $1.20 and $1.35 per share. That’s less than I had been expecting. Time is on Qualcomm’s side, and the shares have perked up recently. Look for an earnings beat here.

  DirecTV ($DTV) is due to report on Thursday, November 6. The satellite-TV company has been doing just fine lately. The problem hasn’t been with them but with their merger partner, AT&T ($T). Shares of T recently fell below the lower bound of $34.90. That, in turns, lowers the merger price for DTV. Fortunately, shares of AT&T have rebounded and may soon go back into the safe range, which would once again value DTV at $95 per share. For the time being, these two stocks are joined at the hip.

  That’s all for now. The big news next week will be the mid-term elections. Control of the Senate may change hands. On Monday, the ISM report comes out. On Thursday, we’ll get a look at the productivity report for Q3. Then on Friday is the big jobs report for September. This is still the biggest economic report, but as I said before, its importance has greatly diminished. We also have many more earnings reports. 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

• Fiserv Earns $1.56 Per Share
  Eddy Elfenbein, October 29th, 2013 at 4:31 pm

  Fiserv ($FISV) just reported third-quarter earnings of $1.56 per share which was five cents more than Wall Street’s consensus.

  From the CEO:

  “Results for the quarter were solid across the board and in-line with our performance expectations for the full year,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “Strength in our payments businesses along with continued strong sales is compelling evidence of the market-leading differentiation and value embedded in our solutions.”

  More highlights from the quarter:

  Adjusted earnings per share increased 24 percent in the quarter to $1.56 and increased 18 percent in the first nine months of 2013 to $4.39, as compared with the prior year periods.

  Free cash flow grew 21 percent in the first nine months of 2013 to $598 million compared with $496 million in the prior year period.

  Adjusted operating margin was 30.5 percent in the quarter, an increase of 60 basis points compared with the third quarter of 2012, and increased 50 basis points to 29.8 percent in the first nine months of 2013, compared with the prior year period.

  Now the important stuff — forward guidance:

  Fiserv expects its full year 2013 adjusted earnings per share from continuing operations to be in a range of $5.94 to $6.02, or growth of 17 to 19 percent over 2012. The company expects full year adjusted revenue growth of approximately 10 percent, and adjusted internal revenue growth of approximately 3 percent.

  “We remain on track to achieve our 2013 financial objectives and have meaningful momentum as we head into 2014,” said Yabuki.

  That’s an increase of ten cents per share to the low-end of their range. Fiserv has already made $4.39 per share for the first three quarters, so that implies a range of $1.55 to $1.63 per share for Q4. The shares are up a bit after hours.

• CWS Market Review – August 2, 2013
  Eddy Elfenbein, August 2nd, 2013 at 7:43 am

  “More money has been lost reaching for yield
  than at the point of a gun.” – Raymond DeVoe

  This has been one of our best earnings seasons in memory. In the last 27 trading days, our Buy List has soared 10.43%. Not bad! For the year, we’re up 24.25%, which means we currently lead the S&P 500 by more than 4.5%. This should be our seventh market-beating year in a row!

  On Thursday, the S&P 500 broke 1,700 for the first time ever. For the day, the index closed at 1,706.87. This has been an amazing time for equity investors, and it has a very good chance of lasting. The Fed this week gave investors more encouraging signals on monetary policy. Not only that, but we had a very strong ISM report, and initial jobless claims reached a five-year low.

  

  In this week’s CWS Market Review, we’ll review the recent slate of outstanding earnings reports. Stocks like Fiserv and Harris continued the trend of Buy List stocks smashing estimates and gapping up to new highs. Fiserv stock rallied 4% after its report and nearly hit $100 this week. Harris beat its estimates by an amazing 26 cents per share, and the stock surged 8% on Tuesday. Both AFLAC and WEX Inc. rallied to new highs on earnings beats as well.

  We had one disappointment this week with DirecTV, but it’s been a very good stock for us. I also want to preview the remaining earnings that are due next week. But first, let’s look at this week’s earnings news.

  Moog Is a Buy up to $57

  We have a lot of earnings to run through, so let’s start with last Friday, when quiet little Moog ($MOG-A), the maker of flight-control systems, reported earnings of 90 cents per share. That topped Wall Street’s view by six cents per share. Quarterly sales rose 10% to $671 million.

  I was pleased with Moog’s forward guidance. For the full year, Moog sees earnings coming in at $3.25 per share, but that includes two 15-cent charges. Note that Moog’s fiscal year ends in September, so the June quarter was their fiscal third. For next year (September 2013 to September 2014), Moog sees earnings ranging between $3.90 and $4.10 per share.

  That’s a very optimistic outlook. The Street’s consensus for next year had been for $3.90 per share. With a 38.31% gain, Moog is our number-one performer this year. Moog continues to be a very good buy up to $57 per share.

  Harris Crushes Earnings and Soars

  Then on Tuesday, Harris Corp. ($HRS) absolutely demolished Wall Street’s forecast. For their fiscal fourth quarter, the communications-equipment company pulled in $1.41 per share, which was 26 cents better than consensus! The stock surged 8% on Tuesday and continued to close higher on Wednesday and Thursday as well.

  Harris also had very good guidance for next year. For fiscal 2014, which ends next June, Harris sees earnings ranging between $4.65 and $4.85 per share on revenue of $4.95 to $5.05 billion. The Street had been expecting earnings of $4.62 per share on revenue of $5.03 billion.

  The success we’re seeing now at Harris is the result of restructuring efforts undertaken earlier this year. Harris had actually been one of our poorer-performing stocks this year, but as is often the case, high-quality stocks eventually deliver the goods. I’m raising my Buy Below on Harris to $62 per share. This is a very solid stock.

  I’m Raising my Buy Below on Fiserv to $103

  After the bell on Tuesday, Fiserv ($FISV), which had been rallying pretty well going into earnings, had a great earnings report. For the second quarter, Fiserv earned $1.50 per share, which was six cents better than Wall Street’s estimate. Quarterly revenues rose 11.8% to $1.14 billion, which was a bit short of consensus.

  Fiserv reiterated its full-year guidance of earnings ranging between $5.84 and $6.03 per share. Always take notice when a good company reiterates guidance. Too many investors see that as being “no news.” Not me. I like to hear that our stocks are still on track for the year. Looking at the numbers, I don’t think Fiserv will have any trouble hitting that range. For the first six months of 2013, Fiserv has earned $2.83 per share. Earnings are up 16% so far this year, and cash flow is up 22%.

  Shares of FISV jumped 4% on Wednesday. At one point, the stock came within 12 cents of hitting $100 per share. I’m raising my Buy Below to $103 per share. Fiserv is an excellent buy.

  AFLAC Surges Past $63 on Strong Earnings

  Our beloved AFLAC ($AFL) reported Q2 operating earnings of $1.62 per share, which was 11 cents better than estimates. I liked that, and so did traders. AFLAC rallied 4.3% over the following two days and reached a new 52-week high.

  Let’s dig into the details. Remember that with insurance companies, it’s more important to focus on their operating earnings. Three months ago, AFLAC gave us a range for Q2 of $1.41 to $1.56 per share, so business is going much better than expected. The problem, of course, is the yen/dollar exchange rate, which wound up knocking 22 cents per share off earnings last quarter. Ouch, that stings. But adjusting for that, AFL’s operating earnings rose 14.3%.

  For Q3, AFLAC sees operating earnings ranging between $1.41 and $1.51 per share. That’s less than the $1.56 per share Wall Street had been expecting. For the full-year guidance, AFLAC lowered the low end of their range. The previous range was $5.99 to $6.37 per share. Now it’s $5.83 to $6.37 per share. That seems very conservative to me. Even after the rally, AFL is still going for less than 10 times the high end of their forecast.

  Can you believe AFLAC was going for $43 a year ago? This has been such an impressive stock. This week, I’m raising my Buy Below on AFLAC to $67 per share. Excellent stock.

  WEX Inc. Is a Buy up to $93

  On Wednesday, WEX Inc. ($WEX) reported Q2 earnings of $1.05 per share, which was one penny better than expectations. For Q3, they see earnings between $1.16 and $1.23 per share. Wall Street had been expecting $1.18 per share. For all of 2013, WEX now sees earnings ranging between $4.27 and $4.37. The Street’s consensus was at $4.31 per share.

  Traders liked the earnings news a lot. On Thursday, WEX got as high as $91.84. That’s nearly a 40% run in three months. In fact, my Buy Below prices are having trouble keeping up. This week, I’m raising WEX to $93 per share. Let’s hope I have to raise it again soon.

  DirecTV Was Our Big Miss This Week

  We had one disappointment this week with DirecTV ($DTV). For the second quarter, DTV earned $1.18 per share, which was 16 cents below expectations. Revenues rose 6.6% to $7.7 billion, which was slightly below forecasts. It’s actually not as bad as it sounds.

  The big problem for the satellite-TV company was Latin America. Analysts were expecting Latam subscriber count to rise by more than 420,000. Instead, it rose by just 165,000. To put this into context, last year, DTV added 645,000 new subscribers in the region. DirecTV said that macroeconomic conditions were partly to blame, especially in Brazil. In the U.S., subscriber count fell by 84,000.

  The stock pulled back 3% after the earnings report, which isn’t so bad. While the Q2 report wasn’t what I was expecting, I still like DirecTV. DTV is a good buy up to $67 per share.

  Earnings Next Week from NICK and Cognizant Technology

  I still don’t know when Nicholas Financial ($NICK) will report, but it will probably be soon. I’m expecting earnings around 40 cents per share. To me, what’s more important will be any dividend increase announced at their annual meeting later this month. I said last week that I think NICK can raise their quarterly payout to 15 cents per share, which is a 25% increase. Nicholas Financial remains a very good buy up to $16 per share.

  Next Tuesday, Cognizant Technology Solutions ($CTSH) is due to report its second-quarter earnings. CTSH beat impressively for Q1 and guided higher for Q2. The company projected earnings of $1.06 per share for Q2. For all of 2013, they foresee earnings of $4.31 per share. CTSH is a good buy up to $76 per share.

  That’s all for now. We’re finally heading into the back end of earnings season. Except for earnings, next week should be a fairly light week for news. I suspect traders will be digesting the news from Friday’s big jobs report. With the dearth of news, I wouldn’t be surprised to see the Volatility Index ($VIX) drop to a multi-year low next week. 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

• Strong Earnings from Fiserv and AFLAC
  Eddy Elfenbein, July 30th, 2013 at 9:23 pm

  Thanks to a very good earnings report from Harris Corp. ($HRS), our Buy List had another market-beating day. Shares of HRS eventually closed at $56.97 which is a gain of 7.84% for the day. While the broader indexes are just shy of their all-time highs, the Nasdaq closed today at its highest level since September 29, 2000.

  The market was also excited that Facebook ($FB) climbed all the way back its IPO price. So IPO investors are back up to…nothing!

  After the closing bell, we had two more Buy List earnings reports; Fiserv ($FISV) and AFLAC ($AFL). For the second quarter, Fiserv earned $1.50 per share which was six cents better than Wall Street’s consensus. That’s a very good number. Quarterly revenues rose 11.8% to $1.14 billion which was a bit short of consensus.

  Fiserv said:

  Our strong second quarter results included revenue and earnings acceleration in-line with our full-year expectations,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “Performance was led by 7 percent adjusted internal revenue growth in our Payments segment, solid sales and excellent free cash flow.

  Fiserv reiterated its full-year guidance of earnings ranging between $5.84 and $6.03 per share. For the first six months of 2013, Fiserv had earned $2.83 per share so I think they’re well on their way to hitting that guidance. Earnings are up 16% so far this year, and cash flow is up 22%. This company is clearly doing well. The stock is up 3.55% in the after-hours market.

  AFLAC reported Q2 operating earnings of $1.62 per share which was 11 cents better than estimates. Three months ago, the company gave us a range of $1.41 to $1.56 per share, so business is going better-than-expected. Plus, we have to consider that the yen/dollar exchange rate knocked 22 cents off earnings. Without that, operating earnings rose by 14.3%.

  For Q3, AFLAC sees operating earnings ranging between $1.41 and $1.51 per share. That’s less than the $1.56 per share Wall Street had been expecting. For the full-year guidance, AFLAC lowered the low-end of their range. The previous range was $5.99 to $6.37 per share. Now it’s $5.83 to $6.37 per share.

  Dan Amos, the CEO, said:

  Our objective for 2013 is to increase operating earnings per diluted share 4% to 7%, excluding the impact of the yen. Although we are above that range for the first half of the year, we plan on increasing spending in the second half of 2013. In Japan, we will increase expenditures on advertising and promotion for our new product launch in August. In the United States, we anticipate increased costs associated with initiatives related to health care reform. As such, we expect operating earnings to increase approximately 5% for the full year, before the impact of foreign currency. We will face a difficult comparison in the third quarter due to the tax benefit of $.10 per diluted share recognized in the same period last year. If the yen averages 95 to 105 to the dollar for the third quarter, we would expect earnings in the third quarter to be approximately $1.41 to $1.51 per diluted share. Using that same exchange rate assumption, we would expect full-year reported operating earnings to be about $5.83 to $6.37 per diluted share.

• Fiserv Earned $1.33 per Share for Q1
  Eddy Elfenbein, April 30th, 2013 at 4:31 pm

  Fiserv just reported first-quarter earnings of $1.33 per share which was one penny below consensus. For Q1 last year, the company made $1.15 per share. Fiserv’s CEO, Jeffery Yabuki, said the company is “on-track to achieve our targeted results for the year.”

  For the entire year, Fiserv expects adjusted revenue growth in excess of 10%, and earnings-per-share are expected to rise between 15% and 19% to a range of $5.84 to $6.03. The Street had been expecting $5.97 per share.

  The stock is down a bit in after-hours trading but there’s nothing surprising in this report. This is exactly what we expect of Fiserv.

• CWS Market Review – February 8, 2013
  Eddy Elfenbein, February 8th, 2013 at 8:12 am

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

  Last Friday, the Dow pierced 14,000 for the first time in five years. But as I suspected, investors got a case of the jitters, and the Dow hasn’t been able to hold 14,000. We even had a small uptick in volatility as the S&P 500 had three straight moves of greater than 1%. One money manager said, “We’ve moved so far so fast that the market’s just looking for any kind of sign to take something off the table.” I think that’s exactly right.

  

  Wall Street is still focused on earnings. While fourth-quarter earnings season has been good (not great), I’m starting to have concerns that Wall Street’s earnings outlook is too optimistic. According to the Street, earnings growth will accelerate, meaning the pace of growth itself will increase, throughout 2013. That’s certainly possible, but I see that as a best-case scenario. More likely, earnings growth will flat-line or grow rather modestly.

  That’s not necessarily awful news. Corporate America has been raking it in lately. The companies in the S&P 500 will probably net a cool $1 trillion this year. But we have to face the fact that the easy money in this bull market has already been made. Stocks have more than doubled in less than four years. The next four years won’t be so fortunate.

  That’s why I urge all investors to focus on high-quality stocks for the long term like the stocks on our Buy List. We had more good news this week, including a 21% dividend increase from Ross Stores ($ROST), and JPMorgan ($JPM) reached yet another 52-week high. Now let’s look at some of our earnings reports this week.

  AFLAC Is a Buy up to $54 per Share

  After the close on Tuesday, AFLAC ($AFL) reported fourth-quarter earnings of $1.48 per share. Make no mistake: this was a solid quarter for the duck stock, and it was squarely in line with what they told us to expect. Three months ago, AFLAC said Q4 EPS should range between $1.46 and $1.51.

  But here’s the issue for us: Since most of AFLAC’s business comes from Japan, their bottom line can be adversely impacted (or helped) by fluctuations in the yen/dollar exchange rate. Lately, the government in Japan has aggressively stated its intention of pursuing a pro-inflation policy. That’s caused the yen to tank against the dollar. In response, the Nikkei Index has soared.

  As I said, AFLAC as a business is fine and dandy and as strong as it’s ever been. I want to make it clear that I’m not overly worried about the exchange rate, but I have to say that it’s an issue for investors. AFLAC said the falling yen cost dinged their Q4 by four cents per share. Not fun, but not a disaster either. Bear in mind that AFLAC’s full-year earnings for 2012 were actually helped by one penny per share, thanks to the exchange rate. So it works in both directions.

  For all of 2012, AFLAC made $6.60 per share in operating earnings. The company said it sees operating earnings growth of 4% to 7% for this year. On a currency-neutral basis, that means operating earnings of $6.86 to $7.06 per share.

  Now here’s the tricky part (warning: math ahead). Each move in the exchange rate of one yen from 78.5 will cost AFLAC 4.3 cents per share for the year. So if the exchange rate averages 90 for the entire year, that will cost AFLAC 49.45 cents per share (11.5 times 4.3). That stings, but it’s roughly 50 cents per share out of $7 of earnings. It’s not enough for me to change my opinion that AFLAC is a very solid stock to own. And of course, I have no idea what the exchange rate will do this year. However, I suspect that most of the damage to the yen has already been done.

  Shares of AFL pulled back after the earnings report, but the stock is basically where it was three months ago. AFLAC remains an excellent company. Due to the recent pullback, I’m going to lower my Buy Below to $54 per share.

  Good News from FISV and CTSH, Bad News from WXS

  Also on Tuesday, Fiserv ($FISV) reported Q4 earnings of $1.39 per share, which exactly matched Wall Street’s forecast. The company already told us that this was going to be a good quarter. Remarkably, this is Fiserv’s 27th-straight year of double-digit earnings growth. There aren’t many companies that can boost a record like that.

  For 2012, Fiserv earned $5.13 per share, which is a very nice increase over the $4.58 per share they made in 2011. Fiserv said that they expect growth of 15% to 18% for this year, and they specified an earnings range of $5.88 to $6.07 per share. If that’s correct, FISV is going for less than 14 times this year’s earnings. This is a solid stock. Fiserv is a buy up to $88 per share.

  We had a great earnings report from Cognizant Technology Solutions ($CTSH) on Thursday. The company reported Q4 earnings of 99 cents per share, which is up from 84 cents for Q4 of 2011. That’s eight cents more than the Street had been expecting. Quarterly revenue rose 17.1% to $1.95 billion. For all of 2012, revenue rose 20% to $7.35 billion, and earnings-per-share increased from $3.07 in 2011 to $3.70 for 2012. This is clearly a rapidly-growing outfit.

  Cognizant also offered very impressive guidance for Q1 and all of 2013. The company sees Q1 revenue rising by 20% to “at least” $2 billion and expects earnings-per-share to hit $1.01. Wall Street had been expecting 93 cents per share. For the whole year, CTSH sees revenue climbing to “at least” $8.6 billion. That’s an increase of 17%. Cognizant also sees earnings-per-share of at least $4.31. That’s a big increase over Wall Street’s expectation of $4.00 per share. CTSH is an excellent buy anytime you see it below $81.

  Our dud this week came from WEX Inc. ($WXS). The company reported fourth-quarter earnings of $1.07 per share, which was a penny below consensus. Quarterly revenue rose 20.9% to $169 million.

  But the earnings weren’t the bad part; it was the guidance. For Q1, WXS expects earnings to range between 89 cents and 96 cents per share. The Street had been expecting $1.08 per share. For all of 2013, WXS sees earnings between $4.30 and $4.50 per share. The Street was expecting $4.88 per share. For all of 2012, WXS made $4.06 per share which was a nice increase from $3.64 per share on 2011.

  Frankly, this guidance is very disappointing news. I’m not ready to toss in the towel with WXS; the stock has been a huge winner for us over the last eight months. But for now, I’m going to lower the Buy Below price to $72.

  Ross Stores Is a Buy up to $62

  Ross Stores ($ROST) gave us great news this week. The retailer reported blowout sales for January, and thanks to the rush of business, Ross sees Q4 earnings coming in at $1.06 to $1.07 per share, and $3.52 to $3.53 per share for the entire year. (Note that like a lot of retailers, Ross ends their fiscal year at the end of January.) The earnings report should be out in mid-March.

  But the best news is that Ross raised their quarterly dividend from 14 cents to 17 cents per share. That’s a 21% hike. Ross pays out a very small amount of their profits as dividends to shareholders (about 20%). Based on Thursday’s closing price, Ross yields 1.13%. That’s obviously not a very high yield, but the dividend increase and strong sales news are a good omen for Ross Stores. ROST remains a very good buy up to $62.

  Before I go, I want to highlight two Buy List stocks that look especially attractive. Again, Microsoft ($MSFT) looks very good here. The pullback in Harris ($HRS) seems about done. Shares of HRS got hit hard for a modest decrease in guidance.

  That’s all for now. Next week, we get important reports on retail sales and industrial production. Our final earnings report of this cycle will be from DirecTV ($DTV) on Wednesday, February 13th. Wall Street expects $1.13 per share. 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

• Fiserv’s Guidance for 2013
  Eddy Elfenbein, February 6th, 2013 at 10:23 am

  Seeking Alpha has posted the transcript of yesterday’s earnings call for Fiserv ($FISV). Here’s a key part on the company’s outlook for this year.

  We expect 2013 adjusted revenue to increase by more than 10%, and that adjusted internal revenue growth will be in a range of 3% to 4%. These numbers include approximately $50 million in lost revenue, more than 100 basis points of internal growth this year due to the unusual migration of an account processing client that transitioned to its parent’s account processing platform and the impact of the 10-year Bank of America renewal.

  We expect 2013 adjusted earnings per share growth of 15% to 18% or a range of $5.88 to $6.07 over 2012. We estimate free cash flow per share will be more than $6.60 per share, an increase of at least 18% over 2012. We expect adjusted operating margin to expand in a range of 10 to 50 basis points. This estimate includes the approximately 60-basis-point negative impact from the revenue headwind and also margin dilution associated with the Open acquisition.

  For modeling purposes, we anticipate that our revenue and earnings growth will be sequentially stronger each quarter as we move through the year. A number of our larger recurring revenue client conversions are planned for the second and third quarters of 2013, and the impact of the negative headwinds are also more pronounced in the first half of the year. We also expect the Open Solutions results to increase during the year, consistent with their normal business model, the cumulative effect of integration benefits and the pay-off of the higher cost debt.

  We’re in the process of realigning the specific annual targets for our operational effectiveness and integrated sales targets to consider the Open Solutions acquisition. Accordingly, we are now prepared to communicate annual targets for 2013. However, you can be sure we are very focused on these initiatives and we’ll provide you with an update at the end of the quarter — sorry, at the end of the first quarter.

  In summary, 2012 was a good year. We made strategic progress, grew recurring revenue, achieved our earnings targets and closed a number of significant sales, all which we believe will accelerate our internal revenue growth, earnings and cash flow. We are starting to see measurable impact from some of our investments and innovation, and are delivering more value to clients. We are also focused on the integration of Open Solutions, which should allow us to deliver new and enhanced value to their more than 3,300 clients. That, combined with the commitment of our more than 20,000 associates, is creating momentum, which should lead to strong results in 2013, and has lifted our confidence for 2014 and beyond.

  This was a good quarter for Fiserv. The stock is currently down about 0.6% today.

• Fiserv Earned $1.39 Per Share for Q4
  Eddy Elfenbein, February 5th, 2013 at 4:14 pm

  For Q4, Fiserv ($FISV) earned $1.39 per share which matched Wall Street’s forecast.

  Fiserv, Inc., a leading global provider of financial services technology solutions, today reported financial results for the fourth quarter and full year 2012.

  GAAP revenue was $1.16 billion and adjusted revenue was $1.08 billion in the fourth quarter, both consistent with the fourth quarter of 2011. For the full year, GAAP revenue was $4.48 billion compared with $4.34 billion in 2011. Adjusted revenue was $4.20 billion compared with $4.07 billion in 2011, an increase of 3 percent.

  GAAP earnings per share from continuing operations for the fourth quarter was $1.18 compared with $1.07 in 2011. GAAP earnings per share from continuing operations for the full year was $4.34 compared with $3.40, which included a loss from early debt extinguishment of $0.37 per share, in 2011.

  Adjusted earnings per share from continuing operations in the fourth quarter increased 9 percent to $1.39 compared with $1.27 in the fourth quarter of 2011. Adjusted earnings per share from continuing operations for the year grew 12 percent to $5.13 compared with $4.58 in 2011.

  “Our 2012 results were highlighted by our 27th consecutive year of double-digit adjusted earnings per share growth and meaningful strategic progress,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “We capped off a strong sales year with exceptional performance in the fourth quarter.”

  This basically matches what Fiserv told us to expect three weeks ago. Fiserv earned $5.13 per share for the entire year. They expect growth of 15% to 18% for this year, and specified an earnings range of $5.88 to $6.07 per share. If that’s correct, then FISV is going for less than 14 times this year’s earnings.

• CWS Market Review – January 18, 2013
  Eddy Elfenbein, January 18th, 2013 at 8:18 am

  “Good investing is boring.” – George Soros

  Last week, I told you how fear was slowly melting away from this market. That trend continued into this week. Major stock indexes hit five-year highs. The small- and mid-cap indexes made all-time highs. Volatility dropped to a five-year low. So did initial unemployment claims. Poor home construction and industrial production; they only made four-and-a-half year highs.

  Here’s what investors need to understand: The denouement of the Fed’s Quantitative Easing policy is the market’s embracing of riskier assets. That’s helped our Buy List tremendously, and it’s precisely why I wrote in the CWS Market Review from five weeks ago, “(t)he risk right now is finding yourself getting left behind.” Our Buy List is already up 5.1% on the year, and we’re barely halfway through January.

  Of course, as patient investors, we know that the stock market can quickly take back what’s it’s given us, so that’s why we’re focused on the long-term. I urge all investors to pay close attention to our Buy Below prices. Too often, a bull market makes investors lazy. Mr. Soros is right: “good investing is boring.”

  

  In this week’s CWS Market Review, I want to focus on the strong earnings report from JPMorgan Chase ($JPM). Last week, I told you to expect an earnings beat, and that’s exactly what happened. We also had record earnings from Wells Fargo ($WFC) last Friday. Next week, we have three earnings reports on tap: CA Technologies ($CA), Stryker ($SYK) and Microsoft ($MSFT). I’ll get to those in a bit. But first, let’s look at what’s happening at the legendary House of Morgan.

  Buy JPMorgan Chase up to $50

  I wish I could take massive amounts of credit for predicting JPMorgan’s ($JPM) earnings beat earlier this week, but honestly, it wasn’t hard to see. Anyone paying attention could see how their business was improving.

  For the fourth quarter, JPM earned $1.39 per share, which was up from 90 cents per share in the fourth quarter of 2011. It was also well above Wall Street’s consensus of $1.20 per share. This was a strong quarter across the board. CEO Jamie Dimon said, “The firm’s results reflected strong underlying performance across virtually all our businesses for the fourth quarter and the full year, with strong lending and deposit growth,”

  Breaking down the numbers, quarterly revenue jumped 10% to $21.5 billion. For the year, JPM made a profit of $21.3 billion from revenue of $97 billion. This bank is absolutely enormous. It’s more than 1,000 times larger than our beloved Nicholas Financial ($NICK). I’m showing you these numbers because much of the true story about JPMorgan gets lost in the headlines.

  Let me explain. Earlier this year, the bank took a $6 billion bath thanks to bone-headed trading out of its London office from the infamous “London Whale.” Yes, that was a terrible, terrible episode, and heads should roll. The point I tried to make last year is that even a gigantic loss like that is still manageable for a titan like JPM.

  But when the London Whale news broke, investors panicked and rushed for the exits. In just five weeks, the shares plunged from $44 to $31 (see the chart above). Bear in mind that this was only a few weeks after the company quintupled its dividend. Fortunately, we held on and JPM has been a big winner for us. As well as it’s done for us, I still think the stock is a bargain.

  Digging deeper in the earnings report, I was particularly impressed by JPM’s strength in the mortgage sector. Fees from their mortgage business climbed from $723 billion in Q4 of 2011 to just over $2 billion in Q4 of 2012. Bernanke and Co. are clearly making a difference. JPM set aside a smaller amount for mortgage loan losses than Wall Street had expected. This line in the income statement always seems to drive some folks batty, but making provisions for loan losses is what banks do. They can either do too much or too little. They’re never going to be exactly right. I’m going to give a bank that didn’t report a single quarterly loss during the financial crisis the benefit of the doubt.

  I also noticed that in JPM’s credit-card business, loans delinquent over 30 days fell from 2.81% a year ago to 2.1% now. That’s a very good sign. On the negative side, the bank took a big $700 million charge in Q4 for the mortgage-abuse settlement that was announced recently.

  Here’s how I see JPMorgan. It’s a solid bank. The stock is cheap. Business is doing well, and profits are growing. The problem is that the bank has a poor reputation, and not all of that is unfair. Jamie Dimon is a talented leader, but he’s a loudmouth. He was a good leader during a crisis, but now I think Jamie should depart so JPM can work on rebuilding its image. He can still be on the board, but the bank needs a new public face. Preferably one that’s a little boring.

  On Thursday, shares of JPM got as high as $46.87, which is the highest level since April 13, 2011. Due to this strong earnings report, I’m raising my Buy Below on JPM to $50. This is an excellent stock. One more thing: Expect to see a dividend increase in a few weeks.

  Fiserv Raises Full-Year Earnings Guidance

  There was some rather bizarre news surrounding Fiserv ($FISV) this week. The company announced that it was buying Open Solutions for $850 million. That’s not the odd part. The same day, Fiserv was downgraded by an analyst due to the Open Solutions deal, although an analyst at Oppenheimer upped his price target to $89.

  In the very same press release announcing the Open Solutions deal, Fiserv guided higher for all of 2013. Specifically, the company sees 12% earnings growth for 2012, and another 15% to 18% growth for 2013. Since Fiserv earned $4.58 per share in 2011, their guidance translates to earnings of $5.13 per share for 2012, and $5.90 to $6.05 per share for 2013. The Street had been expecting $5.78 for 2013.

  The 2012 forecast works out to $1.38 per share for Q4 (which is the only missing piece), and this is four cents below the Street. That, combined with the analyst downgrade, was enough to cause a 3% drop in Fiserv’s stock on Tuesday. Yet the company raised guidance! That’s just silly. Fiserv remains an excellent buy any time you see it below $88 per share.

  Three Buy List Earnings Reports Next Week

  Next week, three of our Buy List stocks are reporting earnings. The most important will be Microsoft ($MSFT), which Wall Street has turned against recently. MSFT’s last earnings report was a complete dud, and the stock took another hit in November, when the head of Windows abruptly left.

  For the upcoming earnings report, Wall Street expects 75 cents per share, which would be a decrease of three cents from one year ago. Unlike the situation with JPM, I can’t so easily say that MSFT will beat earnings. The lower share value, however, has taken a lot of the risk out of owning the stock. Microsoft below $28 has the potential to be a big winner for us, but it’s not in the bag just yet. Let’s be conservative here and rate it a good buy up to $30 per share.

  The other reports next week are from Stryker ($SYK) and CA Technologies ($CA). Interestingly, Stryker is our #1 performer for 2013, with a 10.6% gain. If you recall, the company recently raised the low end of its 2012 guidance by a penny per share, and reiterated its full-year forecast of $4.25 to $4.40 per share. I like this stock a lot. Stryker remains a good buy up to $62.

  CA Technologies is our second-best performer for 2013, +10.2%. After a horrible slide late last year, CA has impressively recovered lost ground. Wall Street currently expects earnings of 57 cents per share. I think CA should be able to beat that. I’m raising my Buy Below on CA Technologies to $27.

  In addition to raising JPM to $50 and CA to $27, I’m also bumping up Cognizant Technology (CTSH) to $81 and Medtronic ($MDT) to $48.

  That’s all for now. Remember that the stock market will be closed on Monday in honor of Dr. Martin Luther King’s birthday. We’ll also have a few more earnings reports next week. 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

• Fiserv Offers Earnings Guidance for 2013
  Eddy Elfenbein, January 15th, 2013 at 1:11 pm

  Fiserv ($FISV) is in the news today. The company said that it’s buying Open Solutions for $850 million. Fiserv also offered some earnings guidance:

  Based on preliminary information, the company anticipates its 2012 adjusted earnings per share to increase approximately 12 percent over 2011. The company also anticipates its 2012 adjusted internal revenue growth to be at 2 percent for the full year.

  On a preliminary basis for 2013, the company expects adjusted internal revenue growth of 3 to 4 percent, and 15 to 18 percent adjusted earnings per share growth over 2012.

  The company will supply its actual results for 2012, and formal guidance for 2013, in its year end conference call on February 5, 2013.

  Let’s run the numbers. In 2011, Fiserv earned $4.58 per share. So 12% earnings growth comes to $5.13 per share for 2012. For the first three quarters of this year they’ve earned $3.75 per share, so working it out, Fiserv expects $1.38 per share for Q4. That’s below Wall Street’s forecast of $1.42 per share.

  For 2013, Fiserv’s growth targets translate to earnings of $5.90 to $6.05 per share. The Street had been expecting $5.78 per share. Despite the poor guidance in the short-term, Fiserv has guided Wall Street significantly higher for this year. Still, the stock is currently down about 2.3% in today’s trading. I like this stock a lot and it’s hardly too expensive at less than 14 times this year’s earnings.