Stryker Soars on Earnings News
Posted by Eddy Elfenbein on January 30th, 2019 at 1:02 pm

Shares of Stryker (SYK) are doing very well today. At one point, SYK was up over 12% from yesterday’s close. Check Point (CHKP) is down a little bit after its earnings report.

Two other items to note.

The ADP payroll report came in at 213,000. That’s a good number but it’s not always a reliable indicator of the official government report which is due out on Friday.

Ross Stores (ROST) is set to become a dividend aristocrat. That’s a stock with 25 straight years of dividend growth. The other four that are soon to make it are Albemarle (ALB), Essex Property Trust (ESS), Expeditors International of Washington (EXPD) and Realty Income (O).

Check Point Software Earns $1.68 per Share
Posted by Eddy Elfenbein on January 30th, 2019 at 7:20 am

Check Point Software (CHKP) reported Q4 earnings of $1.68 per share. That’s an increase of 6% and it beat Wall Street’s estimate by five cents per share. Revenue rose 4% to $526 million. During Q4, CHKP bought 2.8 million shares for $305 million.

For the year, Check Point earned $5.71 per share. That’s an increase of 7% over 2017. Revenue fell 3% to $1.916 billion.

“We finished the year with record results. Our revenues were toward the top of our projections and non-GAAP EPS exceeded. Our Security Subscriptions Business continued to increase, driven by cloud, mobile and zero-day advanced threat prevention technologies. We expanded our cloud security offering with the delivery of CloudGuard SaaS solution, and the acquisition of Dome9 and ForceNock,” said Gil Shwed, Founder and CEO of Check Point Software Technologies. “We started 2019 with many new innovations including two new threat prevention optimized security appliances and the new Maestro product line that provides Cloud-type HyperScale technology to reach unprecedented levels of security.” Shwed concluded.

Over the course of the year, the company bought back 10.3 million shares for $1.104 billion.

Morning News: January 30, 2019
Posted by Eddy Elfenbein on January 30th, 2019 at 7:09 am

U.S., China Face Deep Trade, IP Differences in High-Level Talks

Venezuela Has 20 Tons of Gold Ready to Ship. Address Unknown

Trump Says the Economy Is Unstoppable. Most Economists Say Otherwise.

Why Trump’s Tariffs Didn’t Help Create More Steel Jobs

Apple Relief Boosts Futures Ahead of Fed Decision

Apple Earnings: The Next IBM

The Very High Costs of Climate Risk

A Tesla Stock Bear Turns Gloomier

Verizon’s Profit Stung by Oath Restructuring

GameStop Stock Is Plunging After The Company Fails To Find A Buyer

Where’s Nvidia Going?

Ghosn Says Nissan Executives Used ‘Plot and Treason’ to Halt Renault Integration

Nick Maggiulli: One Big Thing

Ben Carlson: Planning For The Predictable & The Unpredictable

Roger Nusbaum: Success Is Driven From Behaviors

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Stryker Made $2.18 per Share
Posted by Eddy Elfenbein on January 29th, 2019 at 4:28 pm

Stryker (SYK) just reported Q4 earnings of $2.18 per share. That’s an increase of 11.2% and it’s three cents better than expectations. Stryker had given us a range of $2.13 to $2.18 per share, so they’re hitting the top end of that. For the quarter, net sales rose 9.4% to $3.8 billion. Organic sales were up 8.6% and operating margin rose to 27.5%.

For the year, Stryker made $7.31 per share. That’s an increase of 12.6% of the $6.49 per they made last year.

“We had an excellent finish to 2018 with the best organic sales growth in a decade, and strong adjusted earnings performance,” said Kevin A. Lobo, Chairman and Chief Executive Officer. “Our multi-year momentum reflects the strength of our diversified model, progress on globalization and outstanding people and culture. We are well positioned to deliver for our customers, employees and shareholders in 2019 and beyond.”

For Q1, Stryker says it expects earnings to range between $1.80 and $1.85. Wall Street was at $1.84, which I thought might be too high. For the year, Stryker sees earnings between $8 and $8.20 per share. Wall Street was expecting $8.01.

The shares are up 5% in the after-hours market.

Danaher Earns $1.28 per Share
Posted by Eddy Elfenbein on January 29th, 2019 at 9:57 am

This morning, Danaher (DHR) reported Q4 earnings of $1.28 per share. That beat the Street by a penny. Their previous guidance had been for $1.25 to $1.28 per share. For the year, Danaher made $4.52 per share.

For Q1, DHR expects $1 to $1.03 per share. Wall Street had expected $1.03 per share. For all of 2019, the company sees earnings between $4.75 and $4.85 per share. I said I expected them to say $4.75 to $4.80 per share. Wall Street had been expecting $4.82 per share.

This is from the press release:

Danaher Corporation (DHR) today announced results for the fourth quarter and full year 2018. For the quarter ended December 31, 2018, net earnings were $746.8 million, or $1.05 per diluted share, representing a 13.0% year-over-year decrease.

Non-GAAP adjusted diluted net earnings per share for the quarter ended December 31, 2018 were $1.28. This represents a 7.5% increase over the comparable 2017 period. For the fourth quarter 2018, revenues increased 5.5% year-over-year to $5.4 billion, with non-GAAP core revenue growth of 5.5%.

For the full year 2018, net earnings were $2.7 billion, or $3.74 per diluted share, representing a 7.0% year-over-year increase. Non-GAAP adjusted diluted net earnings per share for 2018 was $4.52 per share, which represents a 12.0% increase over the comparable 2017 amount. Revenues for the full year 2018 increased 8.5% to $19.9 billion, with non-GAAP core revenue growth of 6.0%. The Company generated operating cash flow of $4.0 billion for the full year 2018, which represents a 15.5% year-over-year increase.

For the first quarter of 2019, the Company anticipates that diluted net earnings per share will be in the range of $0.78 to $0.81 and non-GAAP adjusted diluted net earnings per share will be in the range of $1.00 to $1.03.

For the full year 2019, the Company anticipates that diluted net earnings per share will be in the range of $3.85 to $3.95. The Company continues to expect its 2019 non-GAAP adjusted diluted net earnings per share to be in the range of $4.75 to $4.85.

Thomas P. Joyce, Jr., President and Chief Executive Officer, stated, “We are very pleased with our fourth quarter results which wrapped up a tremendous 2018. During the year, we delivered strong revenue growth and operating margin expansion, leading to double-digit adjusted earnings per share and free cash flow growth. We believe we gained share in many of our businesses, driven by a combination of new product innovation and enhanced commercial execution. In addition, we closed over $2 billion in strategic acquisitions, and we believe we are well positioned for significant capital deployment in our attractive end-markets.”

Joyce continued, “Over the past several years, through a combination of organic and inorganic initiatives, we have transformed Danaher into a higher growth, higher margin, and higher recurring revenue company with strong footholds in attractive, fast-growing end-markets. Our portfolio today — combined with the power of the Danaher Business System — positions us well as we focus on delivering long-term shareholder value in 2019 and beyond.”

Morning News: January 29, 2019
Posted by Eddy Elfenbein on January 29th, 2019 at 7:08 am

Gold Reaches Seven-Month High as Stocks, Dollar Struggle

U.S. Sanctions Venezuela State Oil Firm, Escalating Pressure on Maduro

PDVSA’s Angry Creditors Are Prowling the Caribbean for Oil to Seize

Trump’s Shutdown Surrender Adds Pressure to Secure China Trade Win

Government Shutdown Cost U.S. Economy $11 Billion, C.B.O. Says

Powell Faces Early Reckoning on Fed’s $4-Trillion Question

The Bond Market Proves the Doubters Wrong. Again.

PG&E Files for Bankruptcy With More Than $50 Billion in Debt

Tesla Has Just 4 Weeks to Rally 21% or Pay $920 Million on Bonds

FaceTime Bug Lets iPhone Users Eavesdrop, in a Stumble for Apple

Boeing’s Decision of the Decade: Does It Build the 797?

Huawei Lawyer Says CFO Meng a ‘Hostage’ After U.S. Presses Charges

Woodbridge Group Must Pay $1 Billion for Defrauding Thousands of Elderly People in a Ponzi Scheme

Michael Batnick: The Single Greatest Error

Joshua Brown: Blue Magic

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Update on Wabtec/GE
Posted by Eddy Elfenbein on January 28th, 2019 at 2:52 pm

At the beginning of the year, we took Wabtec (WAB) off our Buy List.

The company had plans to merge with GE’s transportation business. On Friday, they altered the terms of the agreement. GE will spin off some of their transport business to GE shareholders. What’s left over will be merged with Wabtec.

A prominent analyst at JP Morgan, who’s been a GE bear, did not like the latest news. Both stocks are down today. At one point, WAB was down 5%.

Morning News: January 28, 2019
Posted by Eddy Elfenbein on January 28th, 2019 at 7:17 am

The World Economy Just Can’t Escape Its Low-Growth Low-Inflation Rut

China’s Banks Are Desperate for Capital

Long Winter’s Nap? Global Slowdown, Market Fears Could Extend Fed Pause

U.S. Treasury Set to Borrow $1 Trillion for a Second Year to Finance the Deficit

$1.5 Trillion U.S. Tax Cut Has No Major Impact on Business Capex Plans

In 5G Race With China, U.S. Pushes Allies to Fight Huawei

Chipmaker Xilinx’s 5G Orders Kick Off Race to Cash In On New Networks

Bridgewater, RenTech Make $13 Billion in a Grim Year for Hedge Funds

Mailing Just Got More Expensive: Forever Stamps See Biggest Price Increase Ever

U.S. Pension Insurer Slams Lampert Bid for Sears

Vale’s Board Suspends Dividends After Deadly Dam Disaster

SEC Investigates Nissan Over Carlos Ghosn’s Pay Disclosures

Howard Lindzon: Momentum Monday…Some Stocks are Perking

Ben Carlson: Who Owns All the Stocks & Bonds?

Roger Nusbaum: When Momentum Isn’t

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Breaking Down Signature’s Q4
Posted by Eddy Elfenbein on January 27th, 2019 at 12:34 pm

Writing at Seeking Alpha, Stephen Simpson has good things to say about Signature Bank‘s (SBNY) fourth quarter.

Signature had a strong-looking fourth quarter report, with revenue 3% better than expected and both pre-provision income and core EPS about 5% better than the sell-side expected. The “but” is that about half of the upside was driven by higher than expected prepayment income. Even so, an earnings beat of 2% – 3% isn’t bad in a quarter where more than a third of banks have missed.

Revenue rose 4% yoy as reported, with net interest income up 5%. As a liability-sensitive bank, Signature Bank has been taking a bruising as rates have headed higher, and the company saw an 18bp yoy/5bp decline in core NIM (adjusted for the pre-payments), partly offsetting the double-digit yoy growth in average earning assets. Fee income declined 27% yoy (and rose 27% qoq), but is presently a trivially small part of the business.

Operating expenses rose 8% yoy and the efficiency ratio worsened on both an annual (140bp) and sequential (70bp) basis, as Signature continues to invest in these growth opportunities and continues to hire private banking teams, including eight teams hired in 2018. Relative to expectations, though, the efficiency ratio was nearly a point better than expected, as these growth-oriented spending plans had been well-communicated to the Street. Pre-provision income growth was modest (up 2%), but still better than expected, and tangible book value per share rose about 9%.

Signature showed some exciting momentum in its lending. Period-end loan balances rose almost 12% yoy and 4% qoq, modestly exceeding expectations and accelerating from the growth rates seen in the last two quarters. Multifamily lending is still far and away the dominant lending line here (Signature has meaningful share in the NYC multifamily market), but C&I lending pipped multifamily and CRE loan growth on a qoq basis by 30bp, the first time C&I lending has outgrown CRE lending in a long time. I believe this reflects Signature’s commitment (and some early progress/success) in diversifying the business away from such an intense real estate focus in the future.

Deposit growth couldn’t keep pace, rising about 9% yoy and 1% qoq, but Signature’s non-interest-bearing deposit balances improved startingly well, with 11% year-over-year growth in average balances, which is far and away better than anything else I’ve seen so far. That helped keep a lid on deposit costs, which rose 40bp yoy and 15bp qoq, and Signature did see its quarterly deposit beta decline to 40%, a level only slightly above mid-cap norms in the mid-30%’s.

Simpson thinks Signature has a fair value of $140 per share.

The Story of Spam
Posted by Eddy Elfenbein on January 27th, 2019 at 12:39 am

How did Spam become the word for unwanted email?

Hormel Foods Corp. first rolled out Spam in 1937, though the origins of the brand name are a bit obscure. According to the corporate history on the official Spam website, Ken Daigneau, the brother of a Hormel Foods vice president, won a contest with a prize of $100 for coming up with the name.

Hormel is cagey about the name’s meaning, though. “One popular belief says it’s derived from the words ‘spiced ham,’” their website says. “The real answer is known by only a small circle of former Hormel Foods executives. And probably Nostradamus.” The “spiced ham” theory is supported by a 1937 publication from the U.S. Patent Office reporting the trademark: “For Canned Meats—Namely, Spiced Ham.” But the main ingredient of Spam has historically been pork shoulder, with ham added in.

Spam was originally marketed as a “miracle meat” perfect for any occasion. But it developed a checkered reputation from its use as a stand-in when no fresh meat was available, especially in food shortages during and after World War II. Famously, Monty Python’s Flying Circus turned the postwar ubiquity of Spam into a surreal punchline in a 1970 television sketch. A waitress at a greasy spoon reciting such delicacies as “Spam, egg, Spam, Spam, bacon and Spam” incongruously leads to a chorus of Vikings loudly singing about “wonderful Spam.”

Monty Python’s Spam sketch was a favorite of tech nerds of the 1980s, who playfully applied the term to the world of computing. As early as 1984, “spam” showed up alongside the nonsensical monosyllables “foo” and “bar” as a placeholder term for variables in discussions of computer programming. (“Spam” would become a standard variable name in the programming language Python, which owes its name to Monty Python fandom.)

On bulletin-board systems of the ’80s, repeating the text “spam” over and over again could be used as a way to flood a message board to keep other users from posting. By 1990, “spam” became a verb referring to this type of flooding, especially when done to overflow the buffer of a program running a system in order to crash it. It became particularly popular among those playing a type of online game known as a Multi-User Dungeon, or MUD, and early examples come from MUD discussion groups. As one participant put it, “it has been generalized to mean sending lots of crap to servers as well as people you want to annoy the hell out of.”

“Spamming” soon became a headache in the Usenet newsgroups of the early ’90s, with multiple posts flooding the zone for mere mischief or for commercial purposes. The commercial type of spam then reared its head on email servers, requiring the creation of “spam filters” and other anti-spam measures.