• Trex Earned 53 Cents per Share
    Posted by on August 2nd, 2021 at 4:26 pm

    After the closing bell, Trex (TREX) reported fiscal Q2 earnings of 53 cents per share. That’s up 29% from last year and it matched Wall Street’s consensus.

    Net sales rose 41% to $312 million. Trex had been expecting sales of $295 million to $305 million.

    EBITDA rose 36% to $92 million. Trex’s Residential sales increased by 43% to $299 million. This includes a price increase that took effect on January 1.

    “Our strong second quarter revenue growth was driven by sustained broad-based demand across all Trex Residential product lines and market share gains from wood. The completion of our $200 million capacity expansion program in May enabled Trex Residential to convert significant customer demand into an impressive 43% increase in sales. Additionally, we are pleased with the success of our tiered product strategy, which supports consumer decision-making by providing a range of product aesthetics, features and price points that have broad appeal and distinct competitive advantages over wood. With the largest part of our capacity expansion behind us, we will now pivot to cost reduction projects and continuous improvement opportunities. These efforts will be focused on automation, modernization, energy efficiency and raw material processing.

    “As expected, higher raw material costs and logistic expenses pressured second quarter gross margin. Together with the start-up expenses related to our capacity expansion program, these additional costs reduced gross margin by approximately 400 basis points compared to second quarter 2020. This negative impact was partially offset by robust sales growth in the Residential segment, which resulted in EBITDA growth of 36%. The previously announced price increase that was effective August 1, along with the continued benefits of greater-than-projected productivity experienced in our new Virginia facility, will serve to manage a portion of the inflationary pressures that we have experienced in the first half of this year,” said Bryan Fairbanks, President and CEO.

    For Q3, Trex expects sales to range between $320 million and $330 million. The midpoint is 40% growth over last year. Wall Street had been expecting $323.31 million.

  • The Stock Market Starts August on a Good Note
    Posted by on August 2nd, 2021 at 10:46 am

    It’s the first trading day of the month and that means the ISM Manufacturing report comes out. I like this report because it comes out quickly. Compare that with the GDP reports that come out weeks after the quarter ends.

    The ISM report for July fell to 59.5. That’s down 1.1 from June. Any reading above 50 means the factory sector is expanding.

    The stock market is up nicely so far this morning, but that comes after declines in three of the last four days. The S&P 500 was briefly above 4,420 this morning.

    The S&P 500 gained 2.27% in July. With dividends, it was up 2.38%. For the year, it’s up 17.02% and with dividends, it’s up 17.99%.

    We have one earnings report today. Trex (TREX) will report after the close today. The estimate is for 53 cents per share.

  • Morning News: August 2, 2021
    Posted by on August 2nd, 2021 at 7:12 am

    Chinese Stocks Jump as Beijing Signals More Economic Support

    Xi Jinping’s Capitalist Smackdown Sparks a $1 Trillion Reckoning

    Volatility Warnings Signal Virus May Bring Another Rough August

    World’s Biggest Pension Fund Cuts U.S. Bond Weighting by Record

    Home Prices Are Soaring. Is That the Fed’s Problem?

    Can the Mad Rush to Deliver Your Groceries in 10 Minutes Be Profitable?

    Payments App Square to Acquire Australian Company Afterpay

    HSBC Doubles Profit, Hints At Share Buybacks As Bad Loan Fears Ease

    Pfizer and Moderna Raise Prices for COVID-19 Vaccines in EU

    Smart Buildings: Cohesion CEO on the Office of the Future

    Half Full or Half Empty? Heineken Doubles Profit, Warns on Costs

    Zoom Agrees to Settle Lawsuit Over ‘Zoombombing’

    Sunken ‘Jungle Cruise’ Sales Reflect Hollywood’s Delta Variant Troubles

    40% of Americans Fear Retirement More Than Death — Here’s Why

    Priceless? Even Olympic Medals Can Be Had for the Right Price

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  • Earnings from Cerner and Church & Dwight
    Posted by on July 30th, 2021 at 7:39 am

    We had two more earnings reports this morning. For Q2, Cerner (CERN) said it made 80 cents per share. That was four cents more than Wall Street’s (and the company’s own) estimate. Q2 revenue rose 10% to $1.457 billion. Cerner’s adjusted operating margin increased to 20.6% and free cash flow rose 153% to $162 million.

    “I am very pleased with Cerner’s top and bottom-line execution in the second quarter, with our results reflecting good progress on our transformation initiatives and a strengthening market presence,” said Brent Shafer, Chairman and CEO. “We delivered good revenue growth, expanded Adjusted Operating Margin and increased Adjusted Diluted EPS (non-GAAP) during the quarter while continuing to accelerate innovation and drive client value.”

    “During the second quarter we took a series of actions which we believe will strengthen our business in the years ahead. Namely, as part of recently implemented productivity measures and a comprehensive review of our business, we performed a sizable reduction in force, took specific measures to shrink our physical (office space) footprint and made some important product rationalization decisions to improve the return on our nearly $800 million annual R&D investment,” said Mark Erceg, Executive Vice President and Chief Financial Officer. “We also spent $400 million on share repurchases, which brings our year-to-date purchases to $750 million, because we continue to believe that Cerner stock, at current trading levels, represents a good return on investment for our shareholders.”

    Now let’s look at guidance. For Q3, Cerner expects revenue growth of 6%. For all of 2021, Cerner sees revenue growth “in the mid-single digits.” For earnings, Cerner expects Q3 growth of 12% to 15%. For last year’s Q3, Cerner made 72 cents per share, so the guidance translates to Q3 earnings of roughly 81 to 83 cents per share. Wall Street had been expecting 82 cents per share.

    The best news is that Cerner increased its full-year earnings guidance. Before, they had expected earnings of at least $3.20 per share. Now they see earnings of at least $3.25 per share.

    Our other earnings report came from Church & Dwight (CHD). For Q2, the consumer products company said it made 76 cents per share. That beat Wall Street’s estimate of 70 cents per share. For their part, C&D was expecting 69 cents per share. Net sales grew 6.4% to $1,271.1 million.

    Matthew Farrell, Chief Executive Officer, commented, “Our brands once again drove strong consumption in Q2. Organic sales growth of 4.5% is on top of 8.4% organic growth in Q2 2020. In the U.S., we grew consumption in 13 of the 16 categories in which we compete. Our brands experienced double-digit consumption growth in 9 of those 16 categories, including gummy vitamins, cat litter, dry shampoo, and water flossers. Our personal care categories are benefitting from increased consumer mobility. Consumption is far outpacing shipments as supply chain disruptions continue and fill levels are below normal. Our International business, despite many countries still experiencing lockdowns, delivered broad-based organic sales growth of 10.4%. Global online sales grew 7.2% (on top of 77% growth in Q2 2020) and as a percentage of total sales has expanded to 14.2% in Q2.”

    For Q3, Church & Dwight expects earnings of 70 cents per share on sales growth of 3%. Wall Street had been expecting 83 cents per share. The company said that it is “temporarily constrained by supply.”

    For all of 2021, C&D now expects earnings to be at the “lower end” of its EPS growth range of 6% to 8%. That works out to about $2.99 to $3.05 per share. Wall Street had been expecting $3.03 per share.

  • Morning News: July 30, 2021
    Posted by on July 30th, 2021 at 7:03 am

    Chinese Stocks’ Crash Offers a Harsh Tutorial

    Economy Recovers Pandemic Losses, but Faces New Test

    Fed’s Powell Bets Economy Will Navigate New Coronavirus Surge

    How Biden Got the Infrastructure Deal Trump Couldn’t

    ‘Buy Now, Pay Later’ Installment Plans Are Having a Moment Again

    The Financial Revolution Will Be Tokenized: Exploring the Crypto Frontier

    Big Tech Has Outgrown This Planet

    U.S. Regulator Freezes Chinese Company IPOs Over Risk Disclosures

    Robinhood’s Shares Fall 8.4% in Public Trading Debut

    Robinhood Gets Cathie Wood’s Backing Despite Miserable First Day

    Disney Knows Better Than to Battle a Superhero

    Amazon Earnings Show a Sharp Slowdown in E-Commerce. The Stock Is Falling.

    Nooses, Anger and No Answers: Inside the Uproar Over a Future Amazon Site

    Procter & Gamble Names Jon Moeller As New CEO, Will Replace Current Chief David Taylor in November

    Restaurant Brands Revenue Beats Estimates on Burger King Sales Boost

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  • GDP and Jobless Claims
    Posted by on July 29th, 2021 at 1:20 pm

    We had two more important economic reports this morning. The government said that real GDP grew at a 6.5% annualized rate during the second quarter. That’s a big number but it was still below expectations of 8.5%. This is the initial report. It will be updated two more times.

    Gross private domestic investment fell 3.5% as declines in private inventory and residential investment held back gains. Rising imports and a 5% decline in the rate of federal government spending, despite the ballooning budget deficit, also were factors, the Bureau of Economic Analysis report said.

    The overall increase came thanks to increasing personal expenditures, which rose 11.8% as consumers accounted for 69% of all activity. Nonresidential fixed investment, exports and state and local government spending also helped boost output.

    Over the last year, real GDP is up by 12.2% and nominal GDP is up by 16.7%. In real terms, the U.S. is finally larger than it was during Q4 of 2019. Here’s real annualized GDP growth per capita by decade:

    1950s: 2.53%
    1960s: 3.06%
    1970s: 2.19%
    1980s: 2.14%
    1990s: 2.10%
    2000s: 0.83%
    2010s: 1.58%
    2020s: 0.13% (so far)

    Here’s the growth of real GDP. I’m not sure what letter, if any, that looks like:

    The other report was on jobless claims. That hit 400,000 on the nose. That’s down from 424,000 for last week. We’re still above the pandemic low of 368,000. We hit that level twice, two weeks ago and four weeks ago.

    Continuing claims edged higher to 3.27 million, according to data that runs a week behind the headline number. The total of those receiving benefits rose by nearly 600,000 to 13.16 million, according to data through July 10.

  • Earnings from Hershey and ICE
    Posted by on July 29th, 2021 at 10:28 am

    We had two more earnings reports this morning. First up, Hershey (HSY) said it made $1.47 per share for Q2. That’s an increase of 12.2% over last year’s Q2. It beat Wall Street’s consensus by three cents per share. Consolidated net sales were up 16.5% to $1.9894 billion in Q2.

    CEO Michele Buck said, “This strong consumer demand, coupled with our executional excellence, healthy balance sheet and relentless focus on delivering against our strategic initiatives in the quarter enabled us to support and expand our portfolio, invest in our people and deliver strong shareholder returns. As trends continue to fluctuate, we are confident in our ability to adapt with our consumers and retailers and continue meeting their needs in the future.”

    Hershey raised its full-year sales growth forecast to a range of 6% to 8%. That’s up from the previous range of 4% to 6%. The problem is that a lot of that will be eaten up by higher supply chain costs. As a result, Hershey is reiterating its previous full-year earnings range of $6.79 to $6.92 per share. That’s an increase of 8% to 10% over 2020.

    The shares are up about 0.7% this morning.

    Also this morning, Intercontinental Exchange (ICE) reported Q2 earnings of $1.16 per share. That was one penny below expectations.

    CFO Warren Gardiner said, “In the second quarter, we once again grew revenues, operating income, earnings and cash flow. Our performance is a testament to the power of our diverse business model, which, through an array of macroeconomic environments, continues to deliver consistent and compounding growth for our stockholders.”

    Don’t let the earnings miss fool you – ICE is doing very well. Q2 revenues were up 22% to $1.7 billion. Adjusted operating margin is running at 56%. The Ellie Mae deal seems to be paying off quite nicely. In April, ICE sold its stake in Coinbase for more than $1.2 billion.

    ICE provides financial guidance for just about everything except EPS:

    ICE’s third quarter 2021 total recurring revenues are expected to be in a range of $870 million to $885 million.

    ICE’s third quarter 2021 GAAP operating expenses are expected to be in a range of $930 million to $940 million and adjusted operating expenses are expected to be in a range of $770 million to $780 million and include $55 million related to Bakkt.

    ICE’s full year 2021 GAAP operating expenses are expected to be in a range of $3.610 billion to $3.640 billion and adjusted operating expenses are expected to be in a range of $2.950 billion to $2.980 billion to include third quarter Bakkt expense of $55 million.

    ICE’s third quarter 2021 GAAP non-operating expense is expected to be in the range of $110 million to $115 million and adjusted non-operating expense is expected to be in the range of $100 million to $105 million.

    ICE’s full year 2021 capital expenditures are expected to be in a range of $430 million to $450 million.

    ICE’s diluted share count for the third quarter is expected to be in the range of 563 million to 569 million weighted average shares outstanding.

  • Morning News: July 29, 2021
    Posted by on July 29th, 2021 at 7:02 am

    China Stocks Rally as Beijing Intensifies Effort to Calm Market

    Money Rolls In For Europe Inc As Companies Banish Pandemic Blues

    Once the World’s Busiest Port, London Aims to Revive Its River Trade Roots

    Federal Reserve Keeps Rates Unchanged but Cites ‘Progress’ Toward Goals

    How Biden Can Keep Jerome Powell and Make Progressives Happy

    As Fed Tiptoes Around Tapering, Investors Look to Jackson Hole Meeting for Clarity

    A Look at What the Bipartisan Infrastructure Deal Would Do

    The Four Biggest Ways That Robinhood Changed Investing

    Tencent Is World’s Worst Stock Bet With $170 Billion Wipeout

    Why Turkey’s Regulators Became Such a Problem for Google

    Retailers Revisit Mask Debate After New C.D.C. Guidelines

    Didi Global Considers Going Private to Placate China and Compensate Investors

    Ford Earnings Contained a Big Surprise — the Chip Shortage Is Easing

    Facebook Earnings Call: Into the Metaverse, For Better or Worse

    Credit Suisse Finds Incompetence But No Criminal Conduct in Archegos Debacle

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  • AFLAC Earns $1.59 per Share
    Posted by on July 28th, 2021 at 4:16 pm

    After the closing bell, AFLAC (AFL) reported Q2 operating earnings of $1.59 per share. That’s an increase of 24.2% and it beat the Street’s consensus of $1.27 per share. The weaker yen/dollar exchange rate impacted earnings by one penny per share. Total revenues for the quarter increased from $5.4 billion to $5.6 billion. For the first six months of this year, AFLAC has made $3.10 per share.

    Here are some highlights:

    Shareholders’ equity was $33.7 billion, or $50.20 per share, at June 30, 2021, compared with $29.4 billion, or $41.21 per share, at June 30, 2020.

    Adjusted earnings in the second quarter were $1.1 billion, compared with $921 million in the second quarter of 2020, reflecting an increase of 17.3% driven by lower-than-expected benefit ratios and higher net investment income, primarily in Japan, and a favorable effective tax rate.

    Shareholders’ equity excluding AOCI (or adjusted book value*) was $25.7 billion, or $38.27 per share at June 30, 2021, compared with $22.7 billion, or $31.75 per share, at June 30, 2020. The annualized adjusted return on equity excluding foreign currency impact in the second quarter was 17.0%.

    Commenting on the company’s results, Chairman and Chief Executive Officer Daniel P. Amos stated: “The company generated strong earnings for the first six months, largely supported by low benefit ratios associated with pandemic conditions and better-than-expected returns from alternative investments. With respect to second quarter sales results in the United States and Japan, we continued to see improvement and expect a stronger second half of the year in both countries. We remain cautiously optimistic and vigilant as vaccination efforts continue in the face of uncertainty associated with emerging variants.

    “Looking at our operations in Japan, second quarter sales improved year over year, continuing to reflect a boost from the first quarter launch of our new medical product. We continue to navigate evolving pandemic conditions in Japan, including the continued state of emergency in Tokyo and select prefectures. We are pleased with the continued strengthening of our strategic alliance with Japan Post Holdings, which includes initiatives to foster digital transformation and innovation. In addition, Japan Post Group’s resumption of proactive sales paves the way for gradual improvement in Aflac cancer insurance sales in the second half of the year.

    “In the U.S., small businesses are still in recovery mode, which we expect to continue through 2021. At the same time, larger businesses remain focused on returning employees to the worksite, rather than modifying the benefits for their employees. We continue to work toward reinforcing our position and generating stronger sales in the second half of 2021.

    “As always, we remain committed to prudent liquidity and capital management. We continue to maintain strong capital ratios on behalf of our policyholders in both the U.S. and Japan. We treasure our 38-year track record of dividend growth and remain committed to extending it, supported by the strength of our capital and cash flows. At the same time, we will continue to tactically repurchase shares, focused on integrating the growth investments we have made in our platform. By doing so, we look to emerge from this period in a continued position of strength and leadership.”

  • Today’s Fed’s Policy Statement
    Posted by on July 28th, 2021 at 2:00 pm

    Here’s today’s statement:

    The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.

    With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen. The sectors most adversely affected by the pandemic have shown improvement but have not fully recovered. Inflation has risen, largely reflecting transitory factors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.

    The path of the economy continues to depend on the course of the virus. Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain.

    The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation having run persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer‑term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. Last December, the Committee indicated that it would continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward its maximum employment and price stability goals. Since then, the economy has made progress toward these goals, and the Committee will continue to assess progress in coming meetings. These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.

    In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

    Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Raphael W. Bostic; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary C. Daly; Charles L. Evans; Randal K. Quarles; and Christopher J. Waller.