Cerner Earns 58 Cents per Share
Posted by Eddy Elfenbein on May 2nd, 2018 at 4:08 pm

Cerner (CERN) today announced results for the 2018 first quarter that ended March 31, 2018.

Bookings in the first quarter of 2018 were $1.398 billion, an increase of 12 percent compared to $1.250 billion in the first quarter of 2017.

First quarter revenue was $1.293 billion, an increase of 3 percent compared to $1.260 billion in the first quarter of 2017.

On a U.S. Generally Accepted Accounting Principles (GAAP) basis, first quarter 2018 net earnings were $160.0 million and diluted earnings per share were $0.48. First quarter 2017 GAAP net earnings were $173.2 million and diluted earnings per share were $0.52.

Adjusted Net Earnings for first quarter 2018 were $193.9 million, compared to $197.8 million of Adjusted Net Earnings in the first quarter of 2017. Adjusted Diluted Earnings Per Share (EPS) were $0.58 in the first quarter of 2018 compared to $0.59 of Adjusted Diluted EPS in the year-ago quarter. Analysts’ consensus estimate for first quarter 2018 Adjusted Diluted EPS was $0.58.

Adjusted Net Earnings and Adjusted Diluted Earnings Per Share are not recognized terms under GAAP. These non-GAAP financial measures should not be substituted for GAAP net earnings or GAAP diluted earnings per share, respectively, as measures of Cerner’s performance, but instead should be utilized as supplemental measures of financial performance in evaluating our business. Please see the accompanying schedule, titled “Reconciliation of GAAP Results to Non-GAAP Results,” where our non-GAAP financial measures are defined and reconciled to the most comparable GAAP measures.

Other Highlights:

First quarter operating cash flow of $409.0 million.

First quarter Free Cash Flow of $255.7 million. Free Cash Flow is a non-GAAP financial measure defined as GAAP cash flows from operating activities less capital purchases and capitalized software development costs. Please see the accompanying schedule, titled “Reconciliation of GAAP Results to Non-GAAP Results.”

First quarter days sales outstanding of 73 days, up from 71 days in the year-ago period.

Total backlog of $14.63 billion. Backlog reflects the adoption of the new revenue recognition guidance effective for this quarter, which will be further discussed in Cerner’s Form 10-Q. Certain provisions within such guidance impact how we calculate backlog. Backlog amounts disclosed in prior periods have not been adjusted to reflect the adoption of the new revenue recognition guidance, and are not comparable to, the current period presentation.

“Our results in the first quarter included strong bookings and cash flow and in-line earnings, but our revenue was below expected levels,” said Zane Burke, President. “Our mixed results and revised outlook reflect the delay of a large contract and a less predictable end market. However, we remain optimistic about our long-term growth opportunities due to our strong market position and portfolio of solutions and tech-enabled services that align with the pressures health care stakeholders are facing.”

Future Period Guidance

Cerner currently expects:

Second quarter 2018 revenue between $1.310 billion and $1.360 billion.

Full year 2018 revenue between $5.325 billion and $5.450 billion, down from a range of $5.450 billion to $5.650 billion.

Second quarter 2018 Adjusted Diluted Earnings Per Share between $0.59 and $0.61.

Full year 2018 Adjusted Diluted Earnings Per Share between $2.45 and $2.55, down from a range of $2.57 to $2.73.

Second quarter 2018 new business bookings between $1.350 billion and $1.550 billion.

The Fed’s Policy Statement
Posted by Eddy Elfenbein on May 2nd, 2018 at 2:02 pm

No rate change as expected. The WSJ highlights the changes compared to the last statement.

Information received since the Federal Open Market Committee met in March indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderate rate. Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Recent data suggest that growth of household spending moderated from its strong fourth-quarter pace, while business fixed investment continued to grow strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with further gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace in the medium term and labor market conditions will remain strong. Inflation on a 12-month basis is expected to run near the Committee’s symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced.

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

Voting for the FOMC monetary policy action were Jerome H. Powell, Chairman; William C. Dudley, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Loretta J. Mester; Randal K. Quarles; and John C. Williams.

Futures market update:
June meeting: 100% chance of a rate hike
August meeting: 10.4% for another hike
September meeting: 77.1% for another hike
November meeting: 13% for a third hike
December meeting: 47.1% for a third hike

Sagging Staples
Posted by Eddy Elfenbein on May 2nd, 2018 at 11:38 am

I’m usually a fan of Consumer Staples stocks. The reason is that they tend to have very stable financials. With sectors like homebuilders, even the best ones can see their profits and revenues soar from one year to the next. The Staples, by contrast, are far less hectic.

That’s why it’s such a surprise to me to see how weak Staples have been for the last two years. Check out this chart of the Staples divided by the S&P 500.

Notice how Staples led when the economy was falling apart. That’s the usual pattern. Staples lag when the economy is good, and they lead when things are bad. Apparently, things are good. Still, I’m surprised by how constant the trend has been.

Colgate, General Mills, Hershey, Kellogg, Kraft-Heinz, Pepsi and P&G are all at new 52-week lows today. These aren’t just ordinary stocks – these are some of the soundest names on Wall Street.

Morning News: May 2, 2018
Posted by Eddy Elfenbein on May 2nd, 2018 at 7:07 am

Fed Likely on Hold, But Rising Inflation to Be in Focus

Banks Expect Oil Prices to Remain High

Milk Is Risky Business. Got Futures?

Apple Allays iPhone Worries, Adds $100 Billion to Buyback Plans

Xerox CEO Quits in Win for Carl Icahn

Snap’s Slowdown Stirs Doubt on Redesign, Triggering Share Plunge

Sprint and T-Mobile C.E.O.s Are in Washington to Sell Their Merger. Here’s What They’ll Confront.

Under Armour Still Under Siege in the US

Federal Government Sends Warning To Vaping Companies

Warren Buffett’s Chinese Car Bet Has Plunged $9 Billion

3 Lessons All Leaders Should Learn From The Letter to Shareholders By Amazon CEO Jeff Bezos

Tesla Sued For More Than $2 Billion, Accused of Copying Design of Nikola Hydrogen Trucks

Nick Maggiulli: The Process Matters

Lawrence Hamtil: Industry Factors Matter More Than You Think

Roger Nusbaum: “A Compensation Scheme Masquerading As An Asset Class”

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Fiserv Earns 76 Cents per Share
Posted by Eddy Elfenbein on May 1st, 2018 at 4:07 pm

After the bell, Fiserv (FISV) reported Q1 earnings of 76 cents per share. That’s an increase of 23% over last year. Wall Street had been expecting 73 cents per share.

“Our first quarter performance is consistent with our expectations for the full year,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “Results in the quarter were punctuated by a 23 percent increase in adjusted earnings per share and double-digit sales growth.”

Quarterly revenue rose 4% to $1.37 billion. Their operating margin was 32.5%. That’s very good. During the quarter, Fiserv bought back 5.7 million shares of stock for $398 million. They have another 15.8 million shares left in the current authorization.

Fiserv reiterated its full EPS forecast of $3.02 to $3.15 per share. That’s an increase of 22% to 27% over last year. The previous guidance was a pre-split level of $6.05 to $6.30 per share. Fiserv also expects internal revenue growth of at least 4.5% this year.

The stock closed today at $71.63 per share. The 52-week high came on March 16, when FISV hit $74.46 per share.

Morning News: May 1, 2018
Posted by Eddy Elfenbein on May 1st, 2018 at 7:04 am

Trump Delays Tariff Decisions for E.U., Canada and Mexico

This Summer Is Expected To Have Highest Gas Prices We’ve Seen In Years

BP Profit Beats Estimates Even as Oil-Spill Fines Boost Debt

Marathon to Become Top U.S. Refiner With $23 Billion Andeavor Buy

Tesla Doesn’t Burn Fuel, It Burns Cash

Murder On The Disoriented Express?

HNA Scuttles Deal for Scaramucci’s SkyBridge

Twitter Spikes Following New Live Content And Advertising Deal With Disney

Scotland Ends Cheap Booze as Minimum Price Starts

Letting Sprint and T-Mobile Merge Is a Terrible Idea

The Jeff Bezos Approach to Handling Criticism Is A Good Rule Everyone Should Follow

U.S. Jury Convicts Former Autonomy CFO of Fraud in H-P Deal

Cullen Roche: Three Things I Think I Think – Marx, Value Stocks & Bitcoin

Ben Carlson: Schrodinger’s Portfolio

Howard Lindzon: Momentum Monday…and Big Changes to My 8 to 80 List

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Is Value No Longer Value?
Posted by Eddy Elfenbein on April 30th, 2018 at 1:33 pm

This weekend’s Barron’s had an interesting article touting the turn for value. They may be right, but it’s been a rough time for value. The Russell 1000 Value Index peaked against the regular Russell 1000 in August 2006. In other words, Value has been lagging the market for nearly 12 years.

What’s interesting is that Value tends to lead when short-term rates are rising. But since the Fed started hiking rates, Value has continued to trail. Check out the last part of this chart:

What’s going on? Is Value about to catch up, or is the relationship broken. In finance, whenever I see a relationship diverge, I try to not blame the market. Instead, it’s likely that whatever drove the previous relationship has broken down.

Personal Income and Spending for March
Posted by Eddy Elfenbein on April 30th, 2018 at 10:12 am

This morning, we got reports on personal income and spending for March. Personal spending rose by 0.4% which matched estimates. Personal income rose by 0.4% which was 0.1% below estimates.

Here are both series for the last 15 years:

Does Sell in May Really Work?
Posted by Eddy Elfenbein on April 30th, 2018 at 10:03 am

There’s an old saying on Wall Street to “sell in May and go away.” And to be very formal, one can add, “don’t come back till St. Leger day.”

So…is this true? The answer is “historically, yes.”

I took all the numbers of the Dow Jones Industrial Average from its first day of trading in 1896 until the end of 2017. Here’s how it works out. From May 6 through October 29, the DJIA has had an average gain of 0.49%. The rest of the year, the index has averaged 7.11%. (Note that these numbers don’t include dividends.)

In other words, for half the year, the Dow has been flat, and the entire historic gain has come during the other half of the year.

But what does this mean for investors? The answer is nothing. It’s interesting how market returns have worked out over a very long period, but it tells us nothing about a coherent investing strategy. To go in and out of the market will bring up fees and taxes, among other headaches.

Ryan Detrick noted that if you sold in May during the past six years, you lost out on five up Mays. The average gain was 4.8%. The one down year was just 0.3%.

Morning News: April 30, 2018
Posted by Eddy Elfenbein on April 30th, 2018 at 7:07 am

U.S. Allies Brace for Trade War as Tariff Negotiations Stall

China Prepares a Hard-Line Stance on Trump’s Trade Demands

SoftBank’s Prodigal Son Makes a Costly Flip-Flop

T-Mobile Agrees to Buy Sprint in $26 Billion Deal

Marathon to Buy Andeavor in $23.3 Billion Oil-Refining Deal

In Age of Amazon, a Warehouse Powerhouse Is Getting Even Bigger

Netflix And Amazon Join The Battle Against Kodi Pirates

Walmart Sheds Grow-Everywhere Plan in Refining Global Strategy

Apple Results to Show iPhone Growth Problem and Cook’s Plan to Fix It

AT&T Court Fight With U.S. Justice Department Heads Into Closing Arguments

Top Performing Global Junk Bond Fund Is Moving Out of Junk

4 Mistakes That’ll Slash Your Social Security Benefits

Jeff Miller: Will Strong Economic Data Send Interest Rates Higher?

Joshua Brown: World’s First AI-Driven Finance Columnist Proves Its Mettle

Howard Lindzon: Buy in May Go Away

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