Posts Tagged ‘syk’

• CWS Market Review – October 17, 2014
  Eddy Elfenbein, October 17th, 2014 at 7:09 am

  Our job is to find a few intelligent things to do, not to keep
  up with every damn thing in the world.” – Charlie Munger

  Good advice, Charlie. Unfortunately, every damn thing in the world and then some has been on Wall Street’s mind lately. This has been the most dramatic week for the stock market all year. On Monday, the S&P 500 broke below its 200-day moving average for the first time in nearly two years. That gave the bears a lot more confidence to do more damage.

  On Wednesday, the market dropped sharply at the open, then bounced back, then fell even lower, and then rallied even stronger. Remember how laid back and peaceful everything was this summer? Well, not anymore. I guess weird things happen on Wall Street in October. In just one week, the Volatility Index (VIX) doubled. At one point on Wednesday, the S&P 500 got as low as 1,820.66, and the Dow fell below 16,000.

  

  As febrile as the stock market was, the bond market was even crazier. The yield on the ten-year Treasury fell below 2% this week. At one point on Wednesday, it dipped below 1.9%. At the start of the year, the ten-year was yielding 3%. (Note that this will eventually be a big help for the slumbering housing market.)

  What’s causing the market to be such a drama queen? That’s simple. It’s the three E’s—earnings, Europe and Ebola. Some are real concerns (like Europe), and some are not (like Ebola). I think traders saw an opportunity to panic since everything had been so calm for so long. It was probably the dramatic impact of the strong dollar that first unnerved traders. Then once Ebola came into the news, they had their chance to panic, and they took it. Beware: Bearish sentiment can be spread through the air—or even by casual contact.

  As usual, we don’t pay attention to the madding crowd. Instead, we focus on facts, and that means earnings. This week, we got three decent earnings reports from our Buy List stocks, although the guidance was fairly tepid. I’ll run through the details in a bit. I’ll also preview six Buy List earnings reports coming our way next week. We’re heading right into the heart of earnings season. But first, let’s take a closer look at the three E’s.

  Riding out the October Storm

  I’m not a close follower of chart patterns or technical analysis, but I do like to keep an eye on the stock market’s 200-day moving average. This is simply the average of the S&P 500 over the last 200 trading days (roughly ten months).

  I’ve crunched the numbers, and it’s true: the S&P 500 does much better when it’s above its 200-DMA than when it’s below it. Since 1933, the S&P 500 has averaged an 11% annualized gain when it’s sitting above its 200-DMA, compared with a 1% annualized loss when it’s below.

  Why does the 200-DMA seem to work? I think it’s a good example of a dumb rule that works well for complex reasons. The stock market tends to be very sensitive to trends. Once it gets going in one direction, it tends to stay there. The hard part, of course, is picking the turning points. These can be sharp and unexpected. The 200-DMA seems to capture the sweet spot in that it’s long enough to identify the trend, yet short enough to capture turning points.

  You can see how going below the 200-DMA changed sentiment by looking at what happened on Thursday. We got the best initial jobless claims report in 14 years. It was the second-best report in 40 years. Yet traders continued to panic over the Ebola news. I’m certainly no expert in public health, but those who are continuing to maintain this hysteria are absurd.

  As we know, the market likes to sell first and ask questions later. For example, airline stocks have plunged in response to Ebola. Shares of Southwest Airlines (LUV) dropped 20% in less than a month. Clorox (CLX) said that sales of disinfectants are up 28% in the last month.

  I think the market’s panic reached a peak on Wednesday when the Volatility Index hit 31. I expect to see this slide downward next week. This may sound contradictory, but the stock market’s most manic phase usually comes before the lowest share prices are reached. For example, Wall Street’s volatility peaked in the fall of 2008, even though stocks continued to meander lower for another six months. Despite the lower share prices, by March 2009, other market measures such as the VIX or the TED Spread had calmed down dramatically. This pattern is very typical.

  
  I wouldn’t be surprised to see the S&P 500 fall to near 1,800 soon, but I strongly suspect that most of the damage has already been done. That’s one of the characteristics of a selloff: Once you realize what’s happening, most of it has already passed. The economy’s fundamentals are quite solid. Q3 Earnings season is still young, but analysts expect earnings growth of 4.8% and sales growth of 4.2%. That’s not blistering, but it’s far from a recession.

  The strong dollar continues to make its presence felt. The price of oil dropped below $80 per barrel this week. It seems that Saudi Arabia is perfectly willing to let the price fall. They have no intention of cutting back production. Perhaps it’s a challenge to Russia. Perhaps they want to show American shale producers who’s boss. Perhaps they have no choice, since Europe is weak. Whatever the reason, the price of oil is down and may go even lower. That’s good for consumers, but not so good for domestic producers. Americans aren’t used to thinking of themselves as big-time energy producers.

  The strong dollar is also putting the squeeze on inflation. James Bullard, the head of the St. Louis Fed, said this week that the Federal Reserve ought to reconsider ending its bond-buying program. Even though the labor market appears to be getting better, workers aren’t getting higher wages. Also, inflation expectations have fallen, and getting inflation up to 2% is the Fed’s target.

  Inflation expectations, as measured by the five-year “breakeven” rate, have dropped substantially. Three months ago, the bond market expected inflation to be 1.96% over the coming five years. Now that’s down to 1.37%. I see Bullard’s point, but I don’t think there’s anything like a majority within the Fed to keep buying bonds. But I think it’s very possible that the Fed will hold off on any rate increase until late 2015, or even 2016. The yield on the two-year Treasury is down 20 basis points in the last two weeks. That’s probably the maturity that’s most sensitive to changes in the Fed’s outlook. We’re living in a low-rate world.

  Investors shouldn’t get rattled by this latest selling. Although the market is down, the relative performance of our Buy List has improved a great deal this month. That’s because investors flock towards high-quality stocks when things get scary. With Ebola, I urge calm. With Europe, I urge patience. And with earnings, I urge you to focus on quality. Now let’s take a look at our recent earnings reports.

  Wells Fargo Earns $1.02 per Share

  Wells Fargo (WFC) kicked off earnings season for our Buy List. The big bank reported Q3 earnings of $1.02 per share, which matched expectations. Digging in the details, the bank was helped out by a gain in venture capital and lower-than-expected taxes. Without that, they would have missed earnings. But on the plus side, WFC’s quarterly revenue rose to $21.21 billion, which topped expectations.

  Frankly, this is a difficult time for the banking sector, since mortgage activity has dried up. Make no mistake, Wells is doing just fine. They’re the best-run big bank in America. I’m also pleased to see that WFC’s “underperforming” loans are getting smaller. They’re well capitalized and can weather any storm.

  Unfortunately, one thing Wells isn’t protected against is a rash of selling. WFC dropped below $46 on Wednesday, which is a very attractive price. The stock is currently going for less than 12 times this year’s earnings. That’s a bargain, but it will take a calmer market for Wells to rally. This is a keeper. Wells Fargo is a buy up to $54 per share.

  eBay Drops below $48 per Share

  After the bell on Wednesday, eBay (EBAY) reported Q3 earnings of 68 cents per share. That was one penny more than expectations. Three months ago, the online auction house gave us a range of 65 to 67 cents per share, so they’re running ahead of their own guidance. Quarterly revenue rose 12% to $4.4 billion, which was slightly better than expectations.

  From the press release:

  “Rapidly changing competitive environments in commerce and payments underscore the opportunities for eBay and PayPal and highlight how each business will benefit from the focus and agility of being an independent company,” said eBay Inc. President and CEO John Donahoe. “PayPal had another strong quarter, and its mobile-payments leadership and momentum continued, with mobile volume up 72 percent to $12 billion. PayPal is on track to process 1 billion mobile transactions in 2014. And eBay continues to focus on enhancing its competitive position, improving the experience for buyers and sellers and investing in consumer engagement. As we prepare to separate eBay and PayPal in 2015, our teams are focused on strong execution to ensure each business is set up for long-term success.”

  Guidance was blah (to use a technical term). For Q4, eBay expects earnings to come in between 88 and 91 cents per share. Wall Street had been expecting 91 cents per share. The company expects Q4 revenue of $4.85 billion to $4.95 billion. That raised an eyebrow. Wall Street had $5.16 billion.

  eBay lowered their full-year revenue guidance to $17.85 billion to $17.95 billion. The old guidance was $18.0 billion to $18.3 billion. They made no comment about full-year earnings guidance, so I’m assuming the previous guidance of $2.95 to $3.00 per share still holds. The stock got sacked for a 4.7% loss on Thursday. That hardly seems commensurate for a company that hasn’t altered its earnings forecast. Stick with this one; eBay is a buy up to $55 per share.

  Stryker Is a Buy up to $87

  On Thursday, Stryker (SYK) reported Q3 earnings of $1.15 per share, which was a penny ahead of expectations. They had said to expect earnings between $1.12 and $1.16 per share. Like so many other companies, Stryker has felt the impact of the strong U.S. dollar. Unfortunately, Stryker said they expect full-year earnings to be at the low end of their previous guidance, which was $4.75 to $4.80 per share.

  That’s still a healthy profit. I don’t get too worried about issues of exchange rates because that can happen to anyone. The good news is that Stryker continues to see organic sales rising by 5% to 6%. For the quarter, revenue rose 11% to 2.39 billion, which beat expectations by $70 million. Stryker is an ideal buy-and-hold stock. SYK is a buy up to $87 per share.

  Six Buy List Earnings Reports Next Week

  Next week, we have six Buy List earnings reports coming out. Here’s a rundown:

  IBM (IBM) is due to report on Monday. Frankly, the company’s business has been rather lackluster of late, but large-scale buybacks have greatly aided Big Blue’s earnings-per-share. Wall Street currently expects Q3 earnings of $4.32 per share. That may be a bit too high, but I want to see how their business units are faring under the stronger dollar.

  McDonald’s (MCD) is due to report on Tuesday. The burger giant is working to turn itself around, and that’s taking longer than I had anticipated. On Thursday, the shares hit a fresh 52-week low. Thanks to the lower share price, the yield on MCD is up to 3.78%. The stock is cheap here, but I want to see concrete evidence that things are getting better.

  On Wednesday, CA Technologies (CA) is due to report. The company was one of the bright spots last earnings season. Shares of CA jumped after they beat earnings by five cents per share, but the stock hasn’t done well since then. They also touched a 52-week low on Thursday, and yield is now close to 4%. I’m not sure what more the market expects from them.

  CR Bard (BCR) will report on Wednesday, and like CA, Bard also had an impressive earnings beat this summer. They raised their full-year guidance by five cents per share at each end. Bard now expects full-year earnings of $8.25 to $8.35 per share. For Q3, they expect earnings to range between $2.07 and 2.11 per share. Bard has raised its dividend every year since 1972. Look for more good news from them next week.

  On Thursday, it’s Microsoft’s (MSFT) turn. This will be for their fiscal fourth quarter. Last month, the software giant gave shareholders a gift by raising their dividend by 11%. That shows confidence in their future. MSFT’s last earnings report was a little confusing, since they missed expectations by five cents per share. One problem for Microsoft is that Nokia’s handset business is a money-loser. They need to do something about that. On the plus side, Microsoft’s cloud business is doing very well. Wall Street currently expects quarterly earnings of 49 cents per share. This is our second-best performer on the year.

  I’m very curious about Ford’s (F) earnings report, which comes out next Friday. I can tell you right now that the results won’t be very strong, but that’s for operational reasons. Lots of folks are holding off buying new Fords since the company is getting ready to roll out their new aluminum-bodied trucks. The automaker also lowered expectations for this year, but they’ve kept an optimistic outlook for 2015. If Ford is right about next year, the stock is very cheap here. On Wednesday, Ford went as low as $13.28 per share. The stock is currently going for about 8.5 times next year’s estimate. This could be a home run for us, but I want to hear more specifics in the earnings report.

  That’s all for now. Stay tuned for lots more earnings reports. You can see our complete Earnings Calendar. Next week, we’ll also get important reports on consumer inflation, plus new and existing home sales. The housing market continues to weigh on the overall economy, but lower mortgages rates may help it turn the corner. 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 – June 6, 2014
  Eddy Elfenbein, June 6th, 2014 at 7:12 am

  “I don’t expect the consensus to be right. I’m just surprised by how wrong it has been.” – Jim Bianco

  This has been a remarkably efficient stock market. I say that because it’s effortlessly made fools of everyone.

  Remember all that talk about “a bubble” and that we’re “due for a correction”? Well, apparently Mr. Market wasn’t cc’d on that. On Thursday, the S&P 500 rallied for the 14th time in the last 19 sessions. The index hit yet another all-time high. (I was particularly impressed when it blew past the historically significant 1,929 marker.)

  

  As we look at this rally, we have to keep in mind all the negative news that could have tripped us up—like the lousy Q1 GDP report, or the ongoing tensions in Ukraine. None of that seems to matter. Everyone, it seemed, was expecting a mass rotation out of bonds. Didn’t happen. Instead, bond yields have plummeted this year.

  Despite the market’s resiliency, what’s truly been remarkable is how little trading volume there’s been. In less-technical terms, where the heck did everybody go? Trading volume has plunged, and the bull just doesn’t care. In this week’s CWS Market Review, we’ll take a look at what this low-volume, low-volatility rally means for us and our Buy List.

  I’ll also highlight some of the recent economic news. We had some interesting drama on our Buy List recently. Shares of Stryker spiked after the company denied a report that they were looking to buy Smith & Nephew. Then another one of our Buy List stocks, Medtronic, had the same rumor hit them! What’s going on? I’ll untangle it all in a bit. But first, let’s look at where the economy stands.

  Finally, an All-Time High for Jobs

  On the first business day of each month, the Institute for Supply Management releases its Manufacturing Index. I like to keep a close eye on the ISM report for a few reasons. One is that it comes out so quickly. A lot of economic reports come weeks after the fact. It’s also one of the econ reports that’s not endlessly revised.

  The ISM also has a good track record of lining up with recessions and expansions. Here’s how it works: Any number above 50 means that the manufacturing sector is expanding, while readings below 50 mean it’s contracting. When the index is below 45, it usually corresponds to a recession. The ISM Index has been 49.0 or better for the last 59 months in a row, which lines up exactly with the current expansion.

  On Monday, ISM had some problems. They had to revise their May report not once, but twice. It’s embarrassing, but they finally settled on a figure of 55.4, which was only 0.1 below what Wall Street had been expecting. That’s a decent number, and it suggests that the manufacturing sector is still healthy. For now, I don’t believe there’s a risk of an imminent recession.

  On Monday, we also learned that construction spending rose by 0.2% in April. Frankly, that was a bit weak. Economists had been expecting an increase of 0.7%. Also on Monday, we learned that housing inventory is up 10.5% from a year ago. This is very important, since there was so much overbuilding during the expansion. All that excess inventory had to be burned off. Inventory is still quite low, and prices have been rising. Housing isn’t the biggest part of the economy, but it’s probably the biggest part in determining the direction of the economy.

  Then on Tuesday, carmakers reported good sales for the month of May. Sales for GM rose 13%, and sales for Chrysler rose 17%. Sales at Ford ($F) rose only 3%, but that’s actually a decent performance. Ford’s been cutting back on its incentives in an attempt to manage its inventory. This was the best May for Ford in ten years. On Thursday, shares of Ford got as high as $16.89, which is a six-month high. I like this stock a lot. Ford remains a solid buy up to $18 per share.

  Now about the jobs report. As usual, I’m writing this newsletter to you early on Friday morning, and the big jobs report will come out later this morning. In fact, it’s probably out by the time you’re reading this (check the blog for updates). It’s always a hazard guessing how many new jobs were created. The government is very clear that their estimates have a very wide error range (the standard deviation has been 236,000), but that doesn’t stop Wall Street from playing the guessing game. What’s more important to me, however, is the general trend of new jobs. Fortunately, that’s been rather good lately. Of course, there are still lots of unemployed folks out there, especially long-term unemployed.

  On Wednesday, ADP, the private-payroll folks, said that 179,000 private-sector jobs were created last month. That was below expectations, but I should caution you that ADP doesn’t have a great track record as a bellwether for the government’s report. On Thursday, the Labor Department said that unemployment claims rose to 312,000 last week. That’s a good number. Since this number bounces around a lot, economists like to focus on the four-week moving average, which is now at a seven-year low.

  It’s very likely that Friday’s jobs report will show that we finally surpassed the peak employment set in January 2008. In other words, it’s taken us six and a half years to create a few thousand jobs. As rough as that sounds, the economy lost 8.7 million jobs in 25 months. It then took another 51 months, more than twice as long, to make them all back. Wall Street has high expectations for this report. The current consensus is for 213,000 jobs. The economy added 288,000 jobs in April.

  Also on Thursday, the Federal Reserve released the big “Flow of Funds” report. This is always an interesting report to see. According to the Fed, U.S. household net worth rose to $81.8 trillion at the end of Q1. In the last five years, our net wealth has risen by more than $26 trillion.

  Overall, the broad economy appears to be doing well. More folks on the Street expect GDP for Q2 to be over 3%. It could be as high as 4%. One of the better economist reports is the Fed’s Beige Book. It’s a bit on the wonky side, but it has some good tidbits. The most recent Beige Book reported growth in all 12 of the Fed’s regions.

  Another one of my favorite economic indicators is the yield spread between the two- and ten-year Treasuries. While the 10-year has rallied this year, it still yields 219 basis points more than the two-year. That’s a big gap. Whenever that spread turns negative, you can be sure the economy will soon hit a rough patch. The 2-10 spread has a much better track record than a lot of highly paid folks on Wall Street. The 2-10 has been over 200 basis points every day for nearly a year.

  Hey, Where Did Everybody Go?

  On Thursday, the S&P 500 closed at 1,940.46, which is another all-time high. But what’s interesting is that the market has rallied on very low volatility and low volume. The trading volume has declined remarkably. On Wednesday, trading in the S&P 500 ETF ($SPY) hit a new low for the year.

  Last month, an average of 1.8 billion shares were traded in the S&P 500 companies. That’s the lowest volume in six years. During May, an average of $26 billion was traded each day in S&P 500 companies. That’s down from $32 billion in April.

  Also, the market’s breadth continues to narrow. On May 23, the S&P 500 made a new high, but only 24 stocks in the index made a new 52-week high. I’ll warn you that these are traditionally negative signs; the problem is that you never know when the trouble will begin.

  Earlier this week, the Volatility Index ($VIX) dropped down to 11.29, which is the lowest level in more than a year. (Warning: math stuff ahead.) If you’ve ever wondered what the VIX is, it’s the market’s estimate of the S&P 500’s standard deviation over the next month. The hitch is that it’s expressed in annualized terms. To turn it into a monthly figure, just divide the VIX by the square root of 12, which is 3.46. So the current VIX of 11.68 means that traders think the S&P 500 will move up or down by 3.37%, or about 65 points, over the coming month.

  Only two years ago, the European bond market was ready to sink into the Adriatic. Now bond yields in the Old World are at their lowest point since the Battle of Waterloo. Mario Draghi just dropped the deposit rate from 0% to -0.1%. The European Central Bank is now the first major central bank in the world to go to negative interest rates. So much of the European economy is still in shambles. In 1914, Lord Grey famously said, “the lamps are going out all over Europe.” This time, it’s not a metaphor.

  On this side of the pond, the market still seems reasonably priced despite the rally. Analysts on Wall Street currently expect earnings this year for the S&P 500 of $119.82. The estimate for next year is $137.38, but that’s probably too high. As long as yields stay low, the spreads are wide, and the economy is generating more than 150,000 new jobs each month, then the bull case is intact.

  As always, investors should focus on high-quality stocks like the ones on our Buy List. As long as they’re below my Buy Below price, I think they’re good buys. Right now, I especially like AFLAC ($AFL), Bed Bath & Beyond ($BBBY), Ford ($F), Oracle ($ORCL) and Wells Fargo ($WFC).

  Smith & Nephew & Stryker & Medtronic

  Here’s a bit of an odd story. Last week, the Financial Times reported that Stryker ($SYK) was looking to bid on Smith & Nephew ($SNN), a British orthopedics company. But Stryker was all, “um…no, we’re not planning any bid.”

  Here it gets a little confusing. Stryker had been interested in SNN, but they were only in the evaluating stage. Now that Stryker has said they’re not going to make a bid, according to British law, they can’t bid for six months. But SNN is allowed to go to them.

  Once Stryker pulled itself out of the running, shares of SYK shot up. I mentioned this in last week’s issue, and I raised our Buy Below. Stryker has continued to rally, and it recently broke $86 per share. Stryker continues to be a good buy up to $87 per share.

  This week, another of our Buy List companies is rumored to be very interested in Smith & Nephew, and this time it’s Medtronic ($MDT). But Medtronic is much more serious about a deal than Stryker ever was. With the implementation of the Affordable Care Act, everyone is looking to cut costs. This is driving pressure for medical-device makers to merge. Everyone wants to have “scale.” With a merger, Medtronic could also lower its tax bill by moving its HQ overseas. (That’s right, Her Majesty’s corporate tax is lower than Uncle Sam’s. Someone alert George III.)

  So far, Medtronic has not commented, but I think a deal is a very real possibility. Usually, the acquiring firm sees its share price drop, but when the news broke yesterday, shares of Medtronic gapped up about $3 per share. The stock pulled back on Thursday, but it’s still higher than when the news broke.

  I can’t say I’m a big fan of this deal, but I recognize that this, or something very similar, will have to happen. Medtronic remains a good buy up to $65 per share.

  Buy List Update

  Our Buy List has been uncharacteristically sluggish lately. For the year, the S&P 500 is up 4.98%, while our Buy List is up 2.67% (not including dividends). Of course, that’s not a huge deficit, and I think we can make it up by the year’s end, but it’s not how our Buy List usually behaves.

  I don’t shy away from highlighting underperformance, but I don’t get rattled by it, either. The problem has mostly been very recent. Since May 12, the S&P 500 is up by 2.31%, while the Buy List has barely budged, up 0.19%. A lot of this reflects the changing character of the rally. As we’ve discussed before, fewer and fewer stocks are leading the market higher.

  What’s interesting is that 11 of our 20 Buy List stocks are actually leading the market this year. The problem is that a small number of big losers like Bed Bath & Beyond and CA Technologies have weighed heavily on our gains.

  Before I go, I want to tighten up two of our Buy Below prices. I’m dropping CA Technologies ($CA) down to $31 per share, and I’m also lowering eBay ($EBAY) to $55 per share. I still like both stocks, but I want our Buy Belows to more closely reflect the current prices.

  That’s all for now. Next week is a slow week for the market. The only big economic report will be Thursday’s report on retail sales. The earnings reports for companies with quarters ending in May will start to come in. We have two of those of our Buy List: Bed Bath & Beyond and Oracle. Both are due to report later this month. I also expect to hear dividend news soon from CR Bard and Medtronic. 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 – July 12, 2013
  Eddy Elfenbein, July 12th, 2013 at 7:06 am

  “I guess I should warn you, if I turn out to be particularly clear,
  you’ve probably misunderstood what I’ve said.” – Alan Greenspan

  What a difference six days make. The S&P 500 has rallied for the last six days in a row, and on Thursday, the index reached an all-time high close, although we’re still a bit short of the all-time intra-day high. The small-cap Russell 2000 is at an all-time high and the Nasdaq Composite is at its highest point in 13 years. Check out how poorly the S&P 500 has performed compared with the Russell 2000.

  

  What’s the cause for the about-face? It all comes down to the Federal Reserve—or more specifically, people’s expectation of what the Fed is thinking. After throwing a minor temper tantrum, Wall Street has apparently reconciled itself to the fact that the Fed will start tapering its bond purchases in September.

  In this week’s CWS Market Review, we’ll take a closer look at what this means and how it impacts our portfolios. We’ll also take a look at some upcoming earnings reports for our Buy List. Speaking of which, our Buy List has been en fuego lately. Just look at Cognizant Technology ($CTSH). Two weeks ago, I spotlighted CTSH as an especially good buy, and the stock is up 13% since then. I’m raising my Buy Below for Cognizant to $76 per share. Thanks to the rally, I have several more updated Buy Below prices. Before we get to those, let’s look at why the markets are so happy this week.

  Bernanke Calms the Market’s Panic Attack—Which He Created

  In last week’s CWS Market Review, I said traders were on the lookout for this week’s release of the minutes from the Fed’s June meeting. It was in June that Ben Bernanke’s post-meeting press conference sent the stock market into a quick dizzy spell.

  Traders read far too much into the Fed’s caution that their bond buying program will, at some point, slowly wind down. Ever since that press conference, the central bank has been hard at work trying to calm the market down. Ben and Friends want to make it absolutely clear that they’re not going to pull the rug out from the economy.

  One piece of encouraging news came last Friday when the government reported that the economy created 195,000 new jobs in June. That was 30,000 more than expected. How’s this for consistency: According to the government, 199,000 jobs were created in April, and 195,000 were created in May. These are decent numbers, though there’s a lot of room for improvement. Still, we had a seven-month run last year where every report was less than 170,000.

  An improving labor market is important for several reasons. It obviously means more folks drawing paychecks who are eager to buy more things. While Corporate America has done a great job cutting back on expenses, you can’t improve profit margins forever. At some point, you need more bodies in the door.

  Mr. Bernanke has often pointed out that helping the jobs market is part of the Fed’s mandate, and he’s pledged to add monetary stimulus until there’s substantial improvement in the economy. In a Q&A on Wednesday, Bernanke said that the current unemployment rate probably understates the strength of the jobs market due to low workforce participation. In English, that means we don’t really know how bad things are, because a lot of folks have simply stopped looking for work.

  Bernanke also did something interesting in those remarks. He made it clear that short-term interest rates will remain low for a long time after any bond buying starts to taper off. I think he sees rates staying low into 2015, and perhaps beyond. Of course, this will be long after he’s left D.C. The important thing is that QE is not the same as holding down short-term rates, and the Fed sees these as two distinct policies.

  A lot of market watchers have been concerned about the rapid run-up in long- and intermediate-term interest rates. The five-year Treasury jumped 95 basis points in two months. In effect, the economy is tightening credit on itself. Bernanke is clearly concerned about this, but any concerns that the housing market is about to be slammed shut are very premature (although there have been some big cracks in a number of mortgage finance stocks).

  The odd thing is that a lot of investors have reacted as if the Fed has suddenly changed its game plan. That’s not the case at all. Looking at the details, the central bank has been pretty consistent. The market’s reaction, however, has been wildly inconsistent. While the stock market has made back all of its losses, the five-year Treasury has fallen only 20 basis points from its 95-point surge.

  Looking at the makeup of the market also gives us some clues. For example, the Consumer Discretionary Sector ($XLY) has now risen for 12 days in a row. That’s exactly what we would expect to see when knowing that the Fed is on the side of the stock market. The Discretionaries include companies like Bed Bath & Beyond ($BBBY) and Ford Motor ($F). Basically, it’s stuff that people would like to buy, not what they have to buy. This is important because strength here points to broader optimism.

  The message from Bernanke is crystal clear even though some folks are desperate to hear something different. The Federal Reserve will continue to be on the side of stocks and not bonds. Bernanke just watched a big drop in bonds and did nothing to stop it. What does that tell you? Keep focusing on our Buy List names, and ignore any market hiccups. That’s just part of being an investor. This will be another good earnings season for us. Now let’s look at our Buy List.

  Our Buy List Is up 21.27% for the Year

  Our Buy List has been punching like champ lately. We’re now up 21.27% for the year, and it’s not even the All-Star Break yet. I want to run down some of our big winners and give you some new Buy Below prices. Our #1 performer this year is quiet little Moog ($MOG-A), which is inches away from being our first 40% winner for the year. Of our 20 stocks on the Buy List, 13 are up more than 20% this year, including six that are up more than 30%. This week, I’m raising my Buy Below on Moog to $57.

  Several of our stocks have been hitting new highs lately, like Ford Motor ($F). On Thursday, shares of F came within one penny of hitting $17 per share. The upcoming earnings report could be a home run. Ford continues to be a great buy up to $18 per share.

  It seems like it was only a week ago that I raised my Buy Below on WEX Inc. ($WEX) and Bed, Bath & Beyond ($BBBY). Actually, it was only a week ago, but both stocks have powered right through to new highs. This week, I’m raising WEX to $86, and BBBY to $79.

  AFLAC ($AFL) continues to do well for us. On Thursday, the stock got as high as $59.38, which is the highest price in more than two years. AFL is still going for less than 10 times this year’s earnings estimate. I’m looking forward to another good earnings report at the end of this month. I’m raising AFL’s Buy Below to $63 per share.

  Last month, traders panicked due to our FactSet’s ($FDS) terrible, awful, horrible earnings. In other words, FactSet merely met the Street’s earnings forecast. At the time, I said FDS “is doing just fine.” Sure enough, the stock has since made back everything it lost and broken out to another new high. (If it weren’t for panicky traders, we wouldn’t have any traders at all.) I’m raising our Buy Below on FactSet to $112 per share.

  I have three more Buy Below changes: I’m raising CA Technologies ($CA) to $31 per share, Harris ($HRS) to $53 and CR Bard ($BCR) to $115. Earnings for all three will be coming soon.

  I also want to mention that DirecTV ($DTV) is bidding to buy Hulu, which is an online video service. This is a pretty high-profile bidding war for Hulu. I don’t have any new info, but I’ll add that DTV tends to be pretty conservative in these matters, and I know they’re not afraid to walk away from a deal if it’s not a good fit.

  I’ll warn you that the bidding war may cause some near-term volatility for DTV. If they lose, which is probable, the stock will probably rally. Incidentally, DTV got a nice bump on Thursday when Liberty Media’s Chairman John Malone said that DISH and DTV should merge. I really don’t see that happening. Either way, DirecTV remains an excellent buy up to $67 per share.

  Upcoming Earnings from Microsoft and Stryker

  Before we get to the next week’s earnings, I have to make a correction. Last week, I said that JPMorgan ($JPM) and Wells Fargo ($WFC) were due to report earnings on Thursday, July 11th. That’s incorrect. Both banks will report on Friday, the 12th, which is just after the deadline for this week’s issue. No need to worry. I’ll cover the earnings report in next week’s CWS Market Review. Also, I previewed the earnings in last week’s issue, which you can see here. My apologies for any confusion.

  Assuming my calendar is right, this Thursday, July 18th, Microsoft ($MSFT) and Stryker ($SYK) are due to report Q2 earnings. For Microsoft, the June quarter is the fourth quarter of their fiscal year. Both have been excellent stocks for us this year.

  In April, Microsoft had a very good earnings report, and this news came at a time when a lot of big-name firms were disappointing Wall Street. The software giant earned 72 cents per share, which was four cents more than estimates.

  It’s true that MSFT is being hurt by slower PC sales, and Windows 8 didn’t blow people away. But lots of other areas are going well for them. Microsoft’s corporate business is picking up, and Xbox biz looks quite good. The company generates an astounding cash flow.

  On Thursday, Microsoft announced a major reorganization. They’re revamping their eight divisions into four. The new structure is designed to offer more collaboration and diminish rivalries. Steve Ballmer has said he wants Microsoft to be known as a “devices and services” firm.

  I tend to be a bit skeptical about high-profile reorganizations. They can be done, but reorgs are usually more difficult than originally assumed. On Thursday, MSFT came within one penny of a new 52-week high. Wall Street currently expects 75 cents per share for next week’s earnings report. That’s almost certainly too low. I’m going to bump up my Buy Below price to $38 per share. Microsoft remains a very good buy.

  Stryker exploded out of the gate for us this year. SYK was up 16% before the end of January. The medical-devices company has said that it expects $4.25 to $4.40 per share this year. It’s still early, but I think SYK should easily clear $4.30 per share this year. Stryker earned $1.03 per share for Q1, and their result for Q2 is usually very close to what they earned in Q1. Sure enough, Wall Street’s consensus for Q2 is for $1.03. Stryker remains a very good buy up to $71 per share.

  That’s all for now. Earnings season rolls on next week. We’ll get reports from Microsoft and Stryker. There will also be several key economic reports. Retail sales is on Monday; on Tuesday, we’ll get a look at consumer inflation; and industrial production is on Wednesday. Then housing starts on Thursday. 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 – January 25, 2013
  Eddy Elfenbein, January 25th, 2013 at 8:18 am

  “Most investors want to do today what they should have done yesterday.”
  – Larry Summers

  In the CWS Market Review from two months ago, I wrote: “But with the election behind us, the clouds have cleared, and I see a strong year-end rally ahead of us. In fact, I think the S&P 500 can break 1,500 by the early part of 2013.” Well, it took the index just 24 days into 2013 to vindicate our prediction.

  On Thursday, the S&P 500 indeed broke through the 1,500 barrier for the first time since December 12, 2007. The index has now risen for seven days in a row, which is its longest winning streak since 2006. The Dow is off to its best start in more than a quarter of a century.

  

  In this week’s CWS Market Review, I want to focus on the Q4 earnings parade which continues to help our Buy List beat the market. Through Thursday, we’re up 6.62% for the year, which is 1.81% ahead of the S&P 500. All 20 of our stocks are up for the year, and five have already logged double-digit gains.

  But I have to warn you: I think the market’s rally is starting to look a bit tired in the near-term. I don’t see any major problems on the horizon, but I don’t want investors thinking the last few weeks are “normal.” They’re not. There’s still a lot of trouble out there for stocks that can’t deliver. An example would be Apple’s $250 plunge since September. Our Buy List is doing well, and it’s not due to luck: it’s due to quality.

  Buy CA Technologies up to $27 per Share

  Last week, I said that CA Technologies ($CA) should be able to beat Wall Street’s earnings forecast, and that’s exactly what happened. On Tuesday, CA reported fiscal Q3 earnings of 63 cents per share, which was two cents better than Wall Street’s forecast. Quarterly revenue came in at $1.2 billion, which was also ahead of the Street at $1.17 billion.

  This is considered to be a rather dull company, and some people think it’s behind the times. But I see a good value. The day after the earnings report, the shares responded by rallying as high as $25.57 before pulling back some. If you recall from last week’s issue, I raised the Buy Below price from $24 to $27. This is a solid stock, and it pays a generous dividend, but I don’t want you chasing it if it continues to rally. I’m keeping my Buy Below price where it is. CA Technologies remains a good buy up to $27 per share.

  We got more good news on Tuesday when Wells Fargo ($WFC) announced that it’s increasing its dividend by 14% (I also saw this coming). The bank is raising the quarterly payout from 22 cents to 25 cents per share. Bear in mind that the Federal Reserve still has many of these banks on double-secret probation, so any dividend increase must be approved by Bernanke and Friends. Earlier this month, Wells reported record quarterly earnings, and it beat Wall Street’s forecast. Wells Fargo currently yields 2.84% and is a solid buy up to $37.

  Stryker ($SYK), the orthopedic implant maker, reported very good quarterly earnings on Wednesday. To be fair, the company had already told us to expect good news, yet the market continues to reward shares of SYK. With a 15.74% YTD gain, it’s the #1-performing stock on our Buy List. Consider this fact: Shares of Stryker have lost ground only twice in the last 17 trading days.

  For Q4, Stryker earned $1.14 per share, which was two cents more than Wall Street’s estimate. For all of 2012, the company made $4.06 per share, which is a healthy increase over the $3.72 per share from 2011. That’s very good growth for a sluggish economy.

  I was particularly impressed that Stryker reiterated its full-year forecast for earnings to range between $4.25 and $4.40 per share. Frankly, that’s probably too conservative, but it’s smart to play it safe so early on in the year. Don’t be surprised to see higher guidance from Stryker later this year.

  Two weeks ago, I raised my Buy Below on Stryker to $62 per share. Even though the stock has run beyond that, I’m going to hold my Buy Below here. Again, I don’t want investors to chase after good stocks. As always, our investment strategy involves discipline.

  Microsoft Isn’t the Disaster Everyone Thinks

  After the closing bell on Thursday, Microsoft ($MSFT) reported fiscal Q2 earnings of 76 cents per share, which was a penny ahead of expectations. I think these results were decent despite widespread claims that Windows 8 has been a bust.

  For the quarter, Microsoft’s profits dropped by 4% compared with last year. Quarterly revenue rose 3% to $21.46 billion, which was just shy of Wall Street’s forecast of $21.53 billion. The Windows division makes up about one-quarter of Microsoft’s overall business, and sales there rose by 11%. However, the company is getting slammed in its entertainment and office divisions.

  To be sure, Microsoft has its share of problems. The online division is a financial black hole, and Xbox revenue is falling rapidly. On the plus side, Microsoft is doing better with business customers. That’s often been a tough nut for MSFT to crack. They were able to sign up more customers to long-term contracts, which bodes well for future business.

  The problems Microsoft is having are plaguing the entire PC sector, and that’s one of the reasons why the company has joined a possible deal to take Dell ($DELL) private. I think one analyst summed it up well when he said, “Microsoft is evolving really into an enterprise software company.”

  The bottom line is that Microsoft is a company with a lot of problems. But the share price is well beneath the fair value. The stock is currently going for less than 10 times this fiscal year’s earnings. Microsoft remains a good buy up to $30.

  More Buy List Earnings Next Week

  We had some more good news this week from other Buy List stocks. I was pleased to see Bed Bath & Beyond ($BBBY) get a 4.4% lift on Thursday thanks to an upgrade from Oppenheimer. BBBY is still a good buy up to $60 per share.

  Ross Stores ($ROST) got a 3.5% boost on Thursday after it was upgraded to outperform by Credit Suisse. They raised their price target on ROST from $60 to $68. Ross Stores is an excellent buy up to $62.

  I’m writing this early Friday, and later today Moog ($MOG-A) will report earnings. In the CWS Market Review from November 16, when Moog was going for $34, I said it could “be a $45 stock within a year.” Try within ten weeks. Moog just broke $45, but don’t chase it if it crosses $46.

  Next week, we get earnings reports from Ford ($F), Harris ($HRS) and CR Bard ($BCR). I’m especially looking forward to strong results from Ford. The consensus on Wall Street is for earnings of 26 cents per share, and Ford should beat that by a lot. I haven’t heard details yet from Nicholas Financial ($NICK), but it’s very likely they’ll also report next week.

  That’s all for now. Earnings season continues next week. The government will also give us a first look at Q4 GDP report. Next Friday will be the important jobs report. The jobless claims reports have been quite good recently, so that may be a harbinger of a strong jobs number. 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

• Stryker Beats By Two Cents Per Share
  Eddy Elfenbein, January 23rd, 2013 at 11:06 pm

  After the closing bell today, Stryker ($SYK) reported fiscal fourth-quarter earnings. If you recall, two weeks ago, the company told us that the numbers were going to be good, and the stock has rallied ever since.

  Today Stryker said that it earned $1.14 per share in Q4 which was two cents ahead of expectations. For the entire year, Stryker earned $4.06 per share. That’s an increase from $3.72 per share in 2011.

  Overall sales rose 5.5 percent in the quarter from a year ago, rebounding from the third-quarter’s sluggish 1 percent growth rate that resulted from soft pricing, the company said. Demand for orthopedic devices has slumped in the weak economy as patients deferred procedures due to lack of insurance or higher out-of-pocket expenses.

  Stryker executives said they were encouraged by sales momentum for hip and knee products going into 2013.

  “At the very least, the market is stable to maybe modestly improved in the fourth quarter,” Stryker Vice President Katherine Owen said on a conference call with analysts.

  The most important news, in my opinion, is that Stryker sees 2013 earnings ranging between $4.25 and $4.40 per share. The stock has now rallied for 13 of the last 16 days, and one day was unchanged. I suspect that the 2013 figure is a bit too low, although it’s too early to know for sure.

  

• CWS Market Review – January 11, 2013
  Eddy Elfenbein, January 11th, 2013 at 7:42 am

  “The key to making money in stocks is not to get scared out of them.” – Peter Lynch

  I’ll sum up this market up in four words: Fear is melting away. Wall Street continues to rally as the fear that gripped the market so intensely slowly fades away. This has been great news for the broader market—and especially for our new Buy List.

  On Thursday, the S&P 500 closed at its highest level in more than five years. What’s even more impressive is that the Volatility Index ($VIX), also known as the Fear Index, recently dropped to its lowest level in five-and-a-half years. After seven days of trading, our Buy List is already up 4.34% for the year, which is 1.12% ahead of the S&P 500.

  Earnings season is about to start, and we’ve had a flurry of good news this week. Both Stryker ($SYK) and Medtronic ($MDT) raised the low end of their full-year guidance. DirecTV ($DTV) rallied after the company said it had added 100,000 new subscribers in Q4.

  How about Nicholas Financial ($NICK)? The little powerhouse came close to breaking through $14 per share. On Thursday, Oracle ($ORCL), Fiserv ($FISV) and Stryker ($SYK) all made fresh 52-week highs. (Is it me, or didn’t Oracle just break $30 a few weeks ago—and it’s already closing on $35?)

  Perhaps the best news of all came from Ford ($F). The automaker said it’s doubling its dividend. In the CWS Market Review from a month ago, I said it is possible Ford could sweeten its dividend, but honestly, I was expecting something minor. Not doubling! This is an excellent sign of confidence from Ford. The stock got as high as $13.94 on Thursday, which is an 18-month high.

  The End of the Fear Trade

  Before we get too carried away, I want to warn you that this is a tricky market. Last week, I mentioned that we’re witnessing a “high-beta rally,” which means that a lot of bad stuff is getting pulled along with the good stuff. Fortunately, we have the good stuff.

  What’s interesting is that the most-hated stocks on Wall Street, meaning those that are “shorted” the most, have been doing the best. The folks who have been short this market have been getting squeezed. This means they have to cover their shorts, and that’s propelling those hated stocks even higher.

  I’ll explain what’s going on with a simple example. Let’s say you have two stocks that are perfectly equal in every way. Same industry, same finances, same logos, you name it, they’re exactly alike. Both are expected to earn $1 per share this year. However, there’s one difference. Stock A is expected to earn $1 per share, plus or minus two cents per share, while Stock B is expect to earn $1 per share, plus or minus 30 cents per share.

  So which stock is going to be worth more? The answer is that in most cases Stock A will be worth more. It’s not entirely logical, but investors are more scared of the downside than they are optimistic for the upside.

  But here’s the important part investors need to understand: While Stock A will usually be worth more than Stock B, that gap will fluctuate a lot. Sometimes, the crowd turns fearful and the A/B gap will open wide. But other times, when folks are more confident, that gap will narrow. The A/B gap will move according to the crowd’s fear level.

  Now let’s bring our thought exercise back to the real world. What happened over the past few years is that the whole world got terrified. The A/B gap opened to ridiculous levels. Any investment that wasn’t a surefire guarantee got dumped. It wasn’t just stocks: we saw it in bonds as well. High-grade corporates lagged Treasuries, and junk bonds lagged high-grades.

  As the fear is slinking away, the fear gap is closing up. As a result, the Stock Bs of the world are outperforming the Stock As. Meaning that anything that’s seen as carrying higher risk has been doing well. In the real world, we can see that in the fact that small-cap indexes like the Russell 2000 ($RUT) and S&P Small-Cap 600 (^SML) have recently hit all-time highs, even though the S&P 500 still has a way to go to match its all-time high. Even the Mid-Cap 400 (^MID) is at a new high. Last week, I showed you how well the High-Beta ETF ($SPHB) has performed.

  This chart shows you that since mid-November, small-caps have done the best, followed by the mids, followed by large. Performance has been perfectly ordered by size (or risk, B to A).
  

  Let me caution investors not to be too impressed by some of the stocks that they’ll see rally. Facebook ($FB), for example, is back over $30. FB is horribly overpriced, and there are lots of stocks rallying that are even worse. Don’t chase them. Instead, investors should stick with high-quality stocks like the names you’ll find on our Buy List. Now let’s look at some of the recent good news from our stocks.

  Stryker and Medtronic Raise Guidance

  Even though earnings season hasn’t begun yet for our Buy List, two of our stocks got ahead of the game by raising their full-year guidance forecasts. I should add that I like stocks that provide full-year forecasts. Companies aren’t required to do this, so it’s nice to see firms give more information to the public.

  On Monday, Medtronic ($MDT) raised its full-year forecast to a range of $3.66 to $3.70 per share. That’s an increase of four cents per share to the low end. Medtronic has stuck by its original forecast since May, which is commendable. The increase is due to a research tax credit.

  Note that Medtronic’s fiscal year ends in April, so Q3 earnings are due in about six weeks. For the first six months of this fiscal year, Medtronic earned $1.73 per share. That means we can expect $1.93 to $1.97 for the back end. Medtronic earned $3.46 per share last year. Medtronic remains a good buy up to $44 per share.

  On Wednesday, Stryker ($SYK) raised the low end of their full-year guidance by one penny per share. The company now sees full-year earnings ranging between $4.05 and $4.07 per share. Stryker also said that sales for Q4 rose by 5.5%, while the Street had been expecting an increase of 2%. For 2013, Stryker reiterated its full-year forecast for earnings of $4.25 to $4.40 per share. Wall Street is expecting $4.30 per share. Earnings are due out on January 22nd. The shares closed Thursday at $58.84, which is a new 52-week high. I’m raising my Buy-Below on Stryker to $62.

  Ford Doubles Dividend

  After the South Sea Bubble went ka-blamo in the early 18th century, Sir Isaac Newton famously said, “I can predict the movement of heavenly bodies, but not the madness of crowds.” Ike, my man, I feel you.

  Long-term readers of CWS Market Review know how much I like Ford ($F). When the stock dropped below $9 last summer, I thought either Wall Street or I had lost our marbles. Possibly both.

  The numbers said Ford was cheap, and we stuck to our guns. Today, suddenly Ford is one of the hottest stocks on Wall Street. The stock got another big boost this week when the automaker said that it’s doubling its quarterly dividend from five cents to ten cents per share. The dividend hasn’t been this high in seven years. Going by Thursday’s close, Ford yields 2.89%. The stock jumped to an 18-month high. I rate Ford an excellent buy up to $15.

  New Buy Below Prices

  Thanks to our Buy List’s strong performance, I want to adjust several of our Buy Below prices. Remember, these aren’t price targets; they’re guidance for what’s a good entry point. This week, I’m raising Oracle’s ($ORCL) Buy Below by $2 to $37 per share. As I mentioned earlier, I’m raising Stryker ($SYK) to $62. I’m also raising Fiserv ($FISV) to $88 and WEX ($WXS) to $82. Quiet, unassuming Moog ($MOG-A) is our third-best performer this year, with a 7.24% YTD gain. Moog’s new Buy Below is $46. I’m raising CR Bard ($BCR) to $108.

  JPMorgan Chase ($JPM) is due to report earnings next Wednesday, January 16th. The Street currently expects earnings of $1.20 per share. My numbers say that’s too low. For now, I’ll raise my Buy Below to $47 per share, which is just above the current price. Let’s see how the earnings shake out before we make a larger move.

  That’s all for now. Earnings season starts to heat up next week. Remember JPM reports on Wednesday. We’ll also get important reports on inflation and industrial production. 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

• Stryker Raises Guidance
  Eddy Elfenbein, January 9th, 2013 at 11:07 am

  Even though none of our Buy List stocks has reported earnings yet, a second stock of ours raised its guidance today. Well, it was only by a penny, but still, we’ll take it. This morning, Stryker ($SYK) said that it expects to earn $4.05 to $4.07 per share for all of 2012. That’s an increase of one penny to the low end.

  Stryker also said full-year sales rose 4.2% to $8.7 billion, compared with its October forecast for 4% to 5.5% sales growth.

  Sales for the fourth quarter climbed 5.5% to $2.3 billion, while analysts surveyed by Thomson Reuters were expecting a 2% increase to $2.27 billion.

  Stryker also said it will book an estimated fourth-quarter charge of $133 million, or 35 cents a share, for its previously disclosed voluntary recall of Rejuvenate and ABG II modular-neck hip stems.

  For 2013, Stryker expects current foreign currency exchange rates to reduce sales by as much as 1% in both the first quarter and full year. On a constant currency basis, the company predicts 3% to 5.5% sales growth.

  For 2013, Stryker reiterated its full-year forecast for earnings of $4.25 to $4.40 per share. Wall Street had been expecting $4.30 per share. The stock is up 2.3% this morning.

• Stryker Raises Dividend 25%
  Eddy Elfenbein, December 6th, 2012 at 1:42 am

  In last week’s CWS Market Review, I said I expected Stryker ($SYK) to raise its quarterly dividend soon.

  I expected Stryker to increase its payout from 21.25 cents per share to around 23 cents per share. Well, I wasn’t optimistic enough. The company just announced that the dividend will rise 25% to 26.5 cents per share. That brings the annual dividend to $1.06 per share. At Wednesday’s close, Stryker now yields 1.95%.

  Stryker’s board also approved a $405 million increase in the share buyback program which brings the total to $1 billion.

  “Given the considerable strength of our balance sheet and strong cash flow generation, we are well positioned to pursue a capital allocation strategy that includes highly focused M&A, an increasingly robust dividend and share buybacks,” said Kevin A. Lobo, President and Chief Executive Officer of Stryker. “We are committed to a strategy that will help drive our sales and earnings growth while simultaneously returning capital to shareholders at meaningful and consistent levels.”

  Stryker has raised its dividend every year since 1995.

• Stryker Earns 98 Cents Per Share
  Eddy Elfenbein, July 18th, 2012 at 4:33 pm

  After the bell, Stryker ($SYK) reported Q2 earnings of 98 cents per share which was one penny below Street expectations. Most importantly, they reiterated their full-year guidance for “double-digit” earnings growth.

  Stryker Corporation reported operating results for the second quarter of 2012 with net sales of $2.1 billion, up 2.9% and adjusted diluted net earnings per share(1) of $0.98, an increase of 8.9%.

  “Leveraging the strength of our broad based product offering, our Q2 revenues increased 3% as reported and 5% in constant currency. Through solid sales growth coupled with margin expansion we delivered adjusted per share earnings growth of 9%,” commented Curt R. Hartman, Interim Chief Executive Officer and Vice President and Chief Financial Officer. “We remain on track to deliver on our financial commitments for 2012 which include 2% to 5% growth excluding the impact of acquisitions and currency and double-digit adjusted per share earnings growth.”

  Stryker has earned $1.97 for the first half of 2012. Double-digit earnings growth translates to earnings of at least $4.09 per share. The stock is down some after hours, but Stryker is clearly still on track for this year.

• 10-Year Yield Hits All-Time Low
  Eddy Elfenbein, July 16th, 2012 at 11:59 am

  The stock market dropped early on in today’s trading, but we regrouped and have made back everything we lost. Right now, the S&P 500 is holding on to a small gain.

  Both Johnson & Johnson ($JNJ) and Reynolds American ($RAI) got to new 52-week highs this morning. Tomorrow we’re going to receive earnings reports from JNJ and Stryker ($SYK). It will be interesting to hear what they have to say.

  The yield on the 10-year Treasury dropped to an all-time low today. The yield got to 1.442%.