• 2011 S&P 500 Earnings Estimate
    Posted by on April 12th, 2010 at 10:41 am

    Howard Silverblatt, the top numbers guy at Standard & Poor’s, has pegged 2011 consensus earnings estimates for the S&P 500 at $93.55. Some have the consensus even higher. If that’s correct, then this market is still on the inexpensive side.
    One major caveat is that we shouldn’t a great deal of faith in an earnings projection so far away. In March of 2009, Goldman said that the S&P 500 would earn just $40 for the entire year. Instead, it was $57.

  • Upcoming Earnings Dates
    Posted by on April 12th, 2010 at 10:28 am

    Here are some upcoming earnings dates and EPS estimates for stocks on the Buy List:

    Intel INTC 13-Apr $0.38
    Eli Lilly LLY 19-Apr $1.10
    Gilead GILD 20-Apr $0.95
    Johnson & Johnson JNJ 20-Apr $1.28
    Stryker SYK 20-Apr $0.78
    Baxter BAX 22-Apr $0.93
    Reynolds American RAI 22-Apr $1.06
    Aflac AFL 27-Apr $1.32
    Becton Dickinson BDX 29-Apr $1.23
    Fiserv FISV 29-Apr $0.97

  • Merger Monday
    Posted by on April 12th, 2010 at 10:05 am

    One of the signs of a good market is the willingness of mergers and acquisitions. This often means that there’s plenty of money out there and stocks are still cheap. Today’s merger news is the probably the catalyst that has pushed the Dow over 11,000 this morning.
    For example, the California Pizza Kitchen (CPKI) said that its board has authorized a “strategic review.” That’s a fancy way of saying “the bidding starts…NOW.” Personally, I don’t quite understand many of these theme restaurants but they seem pretty popular so what do I know?
    The other news is that Cerberus Capital Management LP is buyingDynCorp International (DCP) for $1.5 billion. The deal represents a 49% premium for DynCorp’s stock. Not bad.
    The biggest news is the marriage proposal between Mirant (MIR) and RRI (RRI). The new company will have the hideously ugly name GenOn Energy. I’m going to factor in a 10% price discount based on the name alone. Still, I expect to see more mergers in this space.

  • Bernanke Warns
    Posted by on April 8th, 2010 at 8:10 am

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    Bernanke warns of U.S. debt
    Ben Bernanke Warns of Deficit
    Bernanke warns US economy still faces ailing housing and employment
    Bernanke warns on homes, jobs
    Bernanke warns Congress – Hands off the Fed!
    Bernanke warns of need for monetary tightening
    Bernanke Warns Against Narrowing Fed Focus
    Bernanke Warns Deficits Threaten Financial Stability
    Bernanke warns about creating new bubbles
    Bernanke warns growth is fragile
    Bernanke Warns of “Formidable Headwinds”
    Freak Power Outage Puts Alan Greenspan in the Dark
    Here’s more and more and more and more.

  • Tax Day Is Coming
    Posted by on April 7th, 2010 at 11:16 pm

    But nearly half the country pays no Federal income tax:

    The result is a tax system that exempts almost half the country from paying for programs that benefit everyone, including national defense, public safety, infrastructure and education. It is a system in which the top 10 percent of earners — households making an average of $366,400 in 2006 — paid about 73 percent of the income taxes collected by the federal government.
    The bottom 40 percent, on average, make a profit from the federal income tax, meaning they get more money in tax credits than they would otherwise owe in taxes. For those people, the government sends them a payment.
    “We have 50 percent of people who are getting something for nothing,” said Curtis Dubay, senior tax policy analyst at the Heritage Foundation.

  • Bed Bath & Beyond Earns 86 Cents a Share
    Posted by on April 7th, 2010 at 7:41 pm

    Holey Moley! Bed Bath & Beyond (BBBY) creamed even my high expectations. For their Q4, they earned 86 cents per share. In January, BBBY gave a range of 67 cents to 71 cents a share. Kinda low, no?
    For the entire year (this was FY 2010 that just ended in February), BBBY earned $2.30 a share. For FY 2011, the company said it expects earnings growth of 10% to 15%. In other words, forward earnings of $2.53 to $2.64 a share. That’s much better than I was expecting. For Q1, BBBY sees earnings ranging between 44 and 48 cents per share. I have no idea what to expect now.
    I had said that I was concerned that BBBY was becoming fully priced. Not anymore. This is still an excellent buy. (The earnings table is updated below.)
    As with the broader economy, BBBY’s resurgence is a margin story. They’ve held the line on costs and no longer have to undercut anyone (RIP: Linens N Things). Here’s a look at BBBY’s trailing four-quarter operating and net margin.
    image924.png
    That upspike is key. Retailing is a margins game. When you increase your margins, you’re King of the World, or at least the King of the Mall. Think of it this way: A margin increase of 6% to 8% turns a 10% sales increase into a 47% increase in profits. When the opposite happens, well, that’s not good.
    Where BBBY is different than the broader economy is that their sales are growing. Nominal GDP growth has been pretty flat but BBBY increased its sales by 16.7% over last year.
    Here’s the earnings call transcript from Seeking Alpha. Unfortunately, they never take any questions.

  • Looking Ahead to Bed Bath & Beyond’s Earnings
    Posted by on April 7th, 2010 at 12:28 pm

    Bed Bath & Beyond (BBBY) is due to report its earnings today, probably after the close. This will be an interesting report because the last earnings report was WAY above expectations. The Street was expecting 43 cents a share and BBBY earned 58 cents a share. The stock has been in a happy mood ever since (new 52-week high on Monday, thank you very much).
    With the last earnings report, BBBY said that this earnings report should range between 67 cents and 71 cents per share. That was above the Street’s estimate of 63 cents. Wall Street seems to think the company is low-balling and I agree. The Street’s consensus is for 73 cents a share. This is for the company’s fourth-quarter (December, January and February) making BBBY one of the last companies to report their results for the holiday season.
    I’m expecting another beat, say 75 cents a share, but I’m not sure if the stock will respond so well this time. What I’d like to see is strong guidance going forward. I’d also like to see a full-year earnings forecast. The stock is getting pricey but a forecast of $2.50 a share for FY 2011 would help out a lot.
    Here are the earnings results going back a few years:

    Quarter Sales Gross Profit Operating Profit Net Profit EPS
    May-99 $356,633 $146,214 $28,015 $17,883 $0.06
    Aug-99 $451,715 $185,570 $53,580 $33,247 $0.12
    Nov-99 $480,145 $196,784 $50,607 $31,707 $0.11
    Feb-00 $569,012 $238,233 $77,138 $48,392 $0.17
    May-00 $459,163 $187,293 $36,339 $23,364 $0.08
    Aug-00 $589,381 $241,284 $70,009 $43,578 $0.15
    Nov-00 $602,004 $246,080 $64,592 $40,665 $0.14
    Feb-01 $746,107 $311,802 $101,898 $64,315 $0.22
    May-01 $575,833 $234,959 $45,602 $30,007 $0.10
    Aug-01 $713,636 $291,342 $84,672 $53,954 $0.18
    Nov-01 $759,438 $311,030 $83,749 $52,964 $0.18
    Feb-02 $879,055 $370,235 $132,077 $82,674 $0.28
    May-02 $776,798 $318,362 $72,701 $46,299 $0.15
    Aug-02 $903,044 $370,335 $119,687 $75,459 $0.25
    Nov-02 $936,030 $386,224 $119,228 $75,112 $0.25
    Feb-03 $1,049,292 $443,626 $168,441 $105,309 $0.35
    May-03 $893,868 $367,180 $90,450 $57,508 $0.19
    Aug-03 $1,111,445 $459,145 $155,867 $97,208 $0.32
    Nov-03 $1,174,740 $486,987 $161,459 $100,506 $0.33
    Feb-04 $1,297,928 $563,352 $231,567 $144,248 $0.47
    May-04 $1,100,917 $456,774 $128,707 $82,049 $0.27
    Aug-04 $1,273,960 $530,829 $189,108 $120,008 $0.39
    Nov-04 $1,305,155 $548,152 $190,978 $121,927 $0.40
    Feb-05 $1,467,646 $650,546 $283,621 $180,980 $0.59
    May-05 $1,244,421 $520,781 $150,884 $98,903 $0.33
    Aug-05 $1,431,182 $601,784 $217,877 $141,402 $0.47
    Nov-05 $1,448,680 $615,363 $205,493 $134,620 $0.45
    Feb-06 $1,685,279 $747,820 $304,917 $197,922 $0.67
    May-06 $1,395,963 $590,098 $148,750 $100,431 $0.35
    Aug-06 $1,607,239 $678,249 $219,622 $145,535 $0.51
    Nov-06 $1,619,240 $704,073 $211,134 $142,436 $0.50
    Feb-07 $1,994,987 $862,982 $309,895 $205,842 $0.72
    May-07 $1,553,293 $646,109 $154,391 $104,647 $0.38
    Aug-07 $1,767,716 $732,158 $211,037 $147,008 $0.55
    Nov-07 $1,794,747 $747,866 $203,152 $138,232 $0.52
    Feb-08 $1,933,186 $799,098 $259,442 $172,921 $0.66
    May-08 $1,648,491 $656,000 $118,819 $76,777 $0.30
    Aug-08 $1,853,892 $739,321 $187,421 $119,268 $0.46
    Nov-08 $1,782,683 $692,857 $136,374 $87,700 $0.34
    Feb-09 $1,923,274 $785,058 $231,282 $141,378 $0.55
    May-09 $1,694,340 $666,818 $142,304 $87,172 $0.34
    Aug-09 $1,914,909 $773,393 $222,031 $135,531 $0.52
    Nov-09 $1,975,465 $812,412 $245,611 $151,288 $0.58
    Feb-10 $2,244,079 $955,496 $370,741 $226,042 $0.86

  • Is This the News?
    Posted by on April 7th, 2010 at 11:26 am

    Here’s NICK’s press release released a few minutes ago:

    CLEARWATER, Fla., April 7, 2010 (GLOBE NEWSWIRE) — Nicholas Financial, Inc. (Nasdaq:NICK – News) today announced the opening of two (2) new branch offices located in Nashville, Tennessee and Grand Rapids, Michigan. The new offices expand Nicholas Financial’s branch network to fifty-two (52) locations. The company expects to open its 5th branch in the greater Atlanta, Georgia metro area during the current quarter, bringing the total number of Nicholas Financial branch offices to 53 in 12 states. The Company will continue to evaluate potential branch locations in both new and existing markets and intends to add 3 to 5 new branches during its 2011 fiscal year which began April 1, 2010.

    Yeah…big deal. We already knew NICK is opening offices. It’s odd how a stock can be a screaming buy and yet no one will pay attention. Then suddenly, everyone has to own it.

  • Nicholas Financial Breaks Out
    Posted by on April 7th, 2010 at 10:44 am

    Shares of Nicholas Financial (NICK) seem to be breaking out today. It’s still early but the trading looks very good. As I write this, NICK is at $7.98. The stock hasn’t been over $8 since 2007.
    Today’s volume is over 23,000 which is very high. This is unusual for not being near earnings. NICK usually trades around 2,000 to 5,000 shares. The spread has narrowed to just four cents.
    I guess someone is buying!

  • Johnson & Johnson’s Dividend Streak
    Posted by on April 6th, 2010 at 3:41 pm

    Sometime later this month Johnson & Johnson (JNJ) will announce its 48th consecutive annual dividend increase. This dividend hike probably won’t make much news but I urge all serious investors to take notice. Half a century of rising dividends is a remarkable achievement.
    JNJ’s current quarterly dividend is 49 cents a share which works out to a yield of about 3%. Last year’s increase was fairly small, just 7.7%. Alan Brochstein speculates that this year’s increase will be 10%, which brings the dividend to 54 cents a share. That sounds about right to me. If that’s the case, then JNJ currently yield about 3.3%.
    If you want to see how important dividends are for long-term investing, consider that a person who bought JNJ 25 years ago may soon be getting close 100% a year just in dividends.