• April ISM Disappoints
    Posted by on May 3rd, 2021 at 10:23 am

    April is on the books and the S&P 500 gained 5.24% last month. With dividends, the index was up 5.34%. That’s the third monthly gain in a row, and 10th of the last 13.

    This is the first week of the month and that means we get several important economic reports, concluding on Friday with the jobs report. This morning, the ISM Manufacturing came in at 60.7. That’s a good number but it was below expectations of 65.

    Construction spending rose by 0.2%. Wall Street had been expecting 1.8%. The stock market is up so far this morning and it’s not far from a fresh all-time high.

    This is an outstanding earnings season. Right now, 87% of companies are beating expectations. That’s the highest ever recorded since they started keeping track in 1994. The historical average is 65%. (That’s right, you’re expected to beat expectations.)

    Going back to 1994, companies have beat earnings estimates by an average of 3.6%, according to Refinitiv. But this earnings season, companies have posted profits that have been 22.8% above expectations.

  • Morning News: May 3, 2021
    Posted by on May 3rd, 2021 at 7:09 am

    Ethereum Breaks Past $3,000 to Quadruple in Value in 2021

    U.S. Household Income Surged by Record 21.1% in March

    Biden’s Proposals Aim to Give Sturdier Support to the Middle Class

    Biden’s Tax-and-Spend Plans Are Big, But Wealth Gaps Are Bigger

    Fourth Stimulus Check? Billionaires’ Pandemic Profits Could Easily Fund Two More Payments

    Albuquerque Is Winning the Streaming Wars

    Verizon Near Deal to Sell Yahoo and AOL

    Dell Reaches Deal to Sell Boomi to TPG, Francisco Partners

    Tesla, Under Scrutiny in China, Steps Up Engagement With Regulators

    Berkshire Hathaway Faces Headwinds As Shareholders Look To Its Future

    Warren Buffett Says Greg Abel Is Likely Successor at Berkshire

    Has Online Retail’s Biggest Bully Returned?

    LSD, Cargo Shorts and the Fall of a High-Flying Tech CEO

    Ben Carlson: Owning a Car vs. Leasing a Car & The U.S. Stock Market SHOULD Be In a Bubble

    Michael Batnick: Animal Spirits: The Sports Memorabilia Boom & They Said What?

    Howard Lindzon: Smart People With Bad Takes…Bitcoin, Robinhood and Price Pays

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  • Sherwin-Williams as Inflation Hedge
    Posted by on May 1st, 2021 at 5:05 pm

    From Barron’s:

    Either way, prices are going higher—and Sherwin-Williams (SHW) should benefit. The paint manufacturer’s stock was little changed this past week after reporting a profit of $2.06 a share, well above forecasts for $1.64, on sales of $4.66 billion, topping expectations for $4.51 billion. But it was its comments on pricing that really caught investors’ attention.

    “Our previously announced 3% to 4% price increase to U.S. and Canadian customers became effective Feb. 1, before the supply-chain disruption the industry began experiencing later in the quarter,” Sherwin-Williams CEO John George Morikis said on the company’s conference call this past Tuesday. “We likely will need to take further pricing actions if raw material costs remain at these elevated levels.”

    Baird analyst Ghansham Panjabi, who rates Sherwin-Williams a Buy, notes that it is likely waiting to see just how much its costs rise so it doesn’t have to raise prices more than once more this year. If the company can raise prices without hurting sales, it can keep growing its profit margin even as input prices rise. Panjabi raised his price target on the stock to $300, up about 10% from Friday’s close of $273.87, calling it “the ultimate hedge toward inflation.”

  • Morning News: April 30, 2021
    Posted by on April 30th, 2021 at 7:05 am

    Europe’s Green Revolution? Italy’s Spending Plans Raise Doubts

    U.S. Economy’s Strong Start Signals a Stellar Year

    FDA Moves to Ban Menthol Cigarettes and Flavored Cigars

    What Financial Advisers Are Telling Rich Clients About Biden’s Tax Hike

    In Opposing Climate and Diversity Proposals, Buffett Risks Looking Out of Step

    Apple’s App Store Draws E.U. Antitrust Charge

    GM to Invest $1 billion in Mexico for Electric Vehicle Production, Angering UAW Members

    The Googleplex of the Future Has Privacy Robots, Meeting Tents and Your Very Own Balloon Wall

    CDC Says US Cruises Can Resume in Mid-July, Sending Shares Higher

    Affluent Americans Rush to Retire in New ‘Life-Is-Short’ Mindset

    A Brawl Between Billionaire Founders at Apollo Sidelines One of Its Own

    Ben Carlson: Stock Market Returns Are Anything But Average

    Michael Batnick: A Random Walk

    Joshua Brown: Days of Future Past

    Howard Lindzon: Gregg Spiridellis, Co-founder of JibJab Media Inc. and HiHo, Joins Me on Panic with Friends to Discuss the Past, Present, and Future of the Internet

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  • Two Economic Reports This Morning
    Posted by on April 29th, 2021 at 8:34 am

    Today’s Jobless Claims report was 553,000. Last week’s report was revised higher which made this week’s report another Covid low.

    The Q1 GDP report was 6.4%. That was 0.1% below expectations. Consumer spending was up 10.7%.

    Economic activity boomed to start 2021, as widespread vaccinations and more fuel from government spending helped get the U.S. closer to where it was before the Covid-19 pandemic struck.

    Gross domestic product, the sum of all goods and services produced in the U.S. economy, jumped 6.4% for the first three months of the year on an annualized basis. Outside of the reopening-fueled third-quarter surge last year, it was the best period for GDP since the third quarter of 2003.

    Economists surveyed by Dow Jones had been looking for a 6.5% increase. Q4 of 2020 accelerated at a 4.3% pace.

    The boost in GDP came across a spectrum of areas, including increased personal consumption, fixed residential and nonresidential investment and government spending. Declines in inventories and exports as well as an increase in imports subtracted from the gain.

    The latest numbers reflect an economy that has made major strides since the 2020 lockdown that sent more than 22 million American workers to the unemployment line and saw GDP plunge an unprecedented 31.4% in Q2 of 2020.

    That was followed by a rebound of 33.4% in Q3. However, the Bureau of Economic Research still has not declared an end to the recession as GDP in total dollars has not passed its previous peak.

    While about 14 million have returned to their jobs since then, the Federal Reserve estimates that some 8.4 million fewer hold jobs now than prior to the pandemic. The unemployment rate has tumbled from its high of 14.7% down to 6%, but that’s still well above the 3.5% in February 2020.

  • Four Earnings Reports Today
    Posted by on April 29th, 2021 at 7:10 am

    This morning, Thermo Fisher Scientific (TMO) reported Q1 earnings of $7.21 per share. Wall Street had been expecting $6.65 per share. The company said it will provide guidance on its earnings call.

    Hershey (HSY) beat and raised guidance. The chocolatier said it made $1.92 per share for Q1. Wall Street had been expecting $1.80 per share. For 2021, Hershey expects earnings of $6.79 to $6.86 per share. That’s an increase of 8% to 10%. The previous range was 6% to 8%.

    Church & Dwight (CHD) earned 83 cents per share. That was a two-cent beat. CHD sees earnings this year ranging between $3.00 and $3.06 per share. That’s a reiteration of its prior forecast. CEO Matthew Farrell said, “We now expect full year 2021 reported sales growth to be 5-6% (initial outlook of approximately 4.5%) and organic sales growth to be 4-5% (initial outlook of approximately 3%).”

    Intercontinental Exchange (ICE) said it made $1.34 per share for Q1. That was four cents higher than Wall Street’s consensus. ICE didn’t provide earnings guidance but the company expects Q2 recurring revenues between $844 million and $859 million.

  • Morning News: April 29, 2021
    Posted by on April 29th, 2021 at 7:06 am

    Europe’s Oil Majors Leave Pandemic Blues Behind

    Class of COVID-19: Next Generation of Bankers Fear For Future

    ‘Dog Biting Dog’: China’s Online Fight Could Further Empower Beijing

    Biden Offers a Can-Do Unity Vision With Rich Paying ‘Fair Share’

    Why Wall Street’s Favorite Tax Break Is Biden Target

    NAIRU’s Dead

    Fed Chair Powell In Response To GameStop, Dogecoin Mania Says He Sees ‘Froth In Equity Markets’

    Global Chip Drought Hits Apple, BMW, Ford as Crisis Worsens

    Facebook Earnings Just Obliterated Expectations

    Apple Sales Crush Estimates on Surging Device Demand

    The Exxon of Green Power: A Spanish Company and Its Boss Set Sky-High Goals

    Tesla’s Latest Solar Stumble: Big Price Increases

    Diapers, Cereal and, Yes, Toilet Paper Are Going to Get More Expensive

    The Declaration of Independence is the Next Hot IPO

    Ben Carlson: Animal Spirits: The YOLO Economy

    Michael Batnick: Apple Is On Fire

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  • AFLAC Earned $1.53 per Share for Q1
    Posted by on April 28th, 2021 at 4:09 pm

    Aflac (AFL) today reported its first quarter results:

    Total revenues were $5.9 billion in the first quarter of 2021 compared with $5.2 billion in the first quarter of 2020. Net earnings were $1.3 billion, or $1.87 per diluted share, compared with $566 million, or $0.78 per diluted share a year ago, driven by higher net investment gains.

    Net earnings in the first quarter of 2021 included pretax adjusted net investment gains* of $304 million, or $0.44 per diluted share, compared with pretax adjusted net investment losses of $448 million, or $0.62 per diluted share a year ago, which are excluded from adjusted earnings. The adjusted net investment gains were driven by net gains from certain derivatives and foreign currency activities of $361 million and a decrease in the allowances associated with the company’s estimate of current expected credit gains (CECL) of $22 million, offset by a decrease in the fair value of equity securities of $68 million and net losses of $11 million from sales and redemptions.

    The average yen/dollar exchange rate* in the first quarter of 2021 was 105.88, or 2.8% stronger than the average rate of 108.84 in the first quarter of 2020.

    Total investments and cash at the end of March 2021 were $143.3 billion, compared with $137.0 billion at March 31, 2020. In the first quarter, Aflac Incorporated repurchased $650 million, or 13.4 million of its common shares. At the end of March 2021, the company had 85.7 million remaining shares authorized for repurchase.

    Shareholders’ equity was $32.1 billion, or $47.16 per share, at March 31, 2021, compared with $26.4 billion, or $36.75 per share, at March 31, 2020. Shareholders’ equity at the end of the first quarter included a net unrealized gain on investment securities and derivatives of $8.8 billion, compared with a net unrealized gain of $6.0 billion at March 31, 2020. Shareholders’ equity at the end of the first quarter also included an unrealized foreign currency translation loss of $1.7 billion, compared with an unrealized foreign currency translation loss of $1.5 billion at March 31, 2020. The annualized return on average shareholders’ equity in the first quarter was 15.8%.

    Adjusted earnings* in the first quarter were $1.1 billion, compared with $882 million in the first quarter of 2020, reflecting an increase of 20.0% driven by lower-than-expected benefit ratios in the United States and favorable effective tax rates. Adjusted earnings included pretax variable investment income of $34 million on alternative investments, which was $25 million above long-term return expectations. Adjusted earnings per diluted share* increased 26.4% to $1.53 in the quarter. The stronger yen/dollar exchange rate impacted adjusted earnings per diluted share by $0.02.

    Shareholders’ equity excluding AOCI* was $25.3 billion, or $37.16 per share at March 31, 2021, compared with $22.2 billion, or $30.92 per share, at March 31, 2020. The annualized adjusted return on equity excluding foreign currency impact* in the first quarter was 16.7%.

    OUTLOOK

    Commenting on the company’s results, Chairman and Chief Executive Officer Daniel P. Amos stated: “While earnings are off to a strong start for the year, they are largely supported by low benefit ratios associated with pandemic conditions. In addition, pandemic conditions in the first quarter continued to impact our sales results both in the United States and Japan, as well as earned premium and revenues. We continue to expect these pandemic conditions to remain with us through the first half of 2021, but look for improvement in the second half of the year as communities and businesses open up, allowing more face-to-face interactions. We are encouraged by the production and distribution of COVID-19 vaccines, but we also recognize that vaccination efforts are still in the early stages around the world. In the interim, we are cautiously optimistic and remain vigilant, and our thoughts and prayers are with everyone affected.

    “Looking at our operations in Japan, sales were essentially flat for the first quarter with the launch of our new medical product, offset by continued pandemic conditions. While we continue to navigate evolving pandemic conditions in Japan, we expect continued strength in medical sales. In addition, Japan Post Group’s announcement to resume proactive sales in April 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, and we expect that they will be for most of 2021. At the same time, larger businesses remain focused on returning employees to the worksite, rather than modifying the benefits for their employees. As a result, we continue to work toward reinforcing our position and a recovery in U.S. sales in the second half of 2021.”

  • Today’s Fed Statement
    Posted by on April 28th, 2021 at 3:09 pm

    Here’s the 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.

    The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened. The sectors most adversely affected by the pandemic remain weak but have shown improvement. 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 will depend significantly on the course of the virus, including progress on vaccinations. The ongoing public health crisis continues to weigh on the economy, and 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 running 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. In addition, the Federal Reserve will 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 the Committee’s maximum employment and price stability goals. 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.

  • Earnings from Moody’s and Silgan
    Posted by on April 28th, 2021 at 9:10 am

    We had two earnings reports this morning. First up, Moody’s (MCO) said it made $4.06 per share. That’s up 49% over last year’s Q1. Wall Street had been expecting $2.82 per share.

    Sales were up 24% to $1.6 billion. Breaking that down, Moody’s Investors Service was up 30% to $1 billion while Moody’s Analytics was up 14% to $564 million.

    Moody’s also raised its full-year earnings range to $11.00 to $11.30 per share. The previous range was $10.30 to $10.70 per share.

    “Moody’s performance this quarter demonstrates the increased demand for our integrated risk assessment solutions and insights,” said Rob Fauber, President and Chief Executive Officer of Moody’s. “Strong execution and robust activity, particularly in the leveraged loan and speculative grade bond markets, drove Moody’s Investors Service’s top-line growth. Moody’s Analytics’ performance reflects its strong position in high-growth risk markets, further supported by elevated retention rates, renewable products and an expanding solutions suite. Following our strong results in the first quarter, we are increasing our revenue outlook to high-single-digit percent growth, and raising and narrowing our full year 2021 adjusted diluted EPS guidance range to $11.00 to $11.30.”

    Silgan Holdings (SLGN) earned 75 cents per share which was five cents more than estimates. Q1 net sales rose 20.2% to $1.24 billion.

    “We are very pleased to report continued record financial performance in the first quarter of 2021, with a 20% increase in sales and a 32% increase in adjusted earnings per diluted share over the previous record first quarter of 2020,” said Tony Allott, Chairman and CEO. “Our businesses exceeded a very strong prior year quarter that had been positively impacted by the initial pantry stocking in response to the global Covid-19 outbreak, and earnings grew solidly despite power and supply chain disruptions associated with winter storms across the southern U.S. and unparalleled increases in resin costs,” continued Mr. Allott.

    For Q2, Silgan sees earnings of 75 to 85 cents per share. Wall Street had been expecting 87 cents per share. For all of 2021, the company reiterated its earlier guidance of $3.30 to $3.45 per share. The midpoint is a 10.3% increase over 2020.