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Morning News: August 24, 2017
Posted by Eddy Elfenbein on August 24th, 2017 at 7:07 amThinking Two Moves Ahead in Central Bank Chess
Germany Repatriates $31 Billion in Gold from Paris and New York
New Home Sales Plunge 9.4% in July, Falling to 7-Month Low
How Wall Street Learned to Stop Worrying About the Debt and Love Tax Cuts
Uber Reports 2Q Loss of $645 Million; Ride Bookings Grow
What Exxon Mobil Didn’t Say About Climate Change
Google and Walmart Partner With Eye on Amazon
Wilbur Ross Got One Thing Right – There Are No Antitrust Issues In Amazon’s Buying Whole Foods
Infosys: What Now After Shock CEO Departure?
U.S. Air Force Picks Raytheon, Lockheed For Next-Gen Cruise Missile
Mastermind or Naïf? Samsung Heir’s Fate Hinges on the Question
Sears Posts 2Q Loss on Fewer Store Visits
The New Off-Court Play for NBA Stars Is Startup Equity
Michael Batnick: This Time Really Is Different
Roger Nusbaum: Using Sectorology in Portfolio Construction
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HEICO Reports Q3 Earnings of 53 Cents per Share
Posted by Eddy Elfenbein on August 23rd, 2017 at 4:57 pmAfter the closing bell on Wednesday, HEICO (HEI) reported fiscal Q3 earnings of 53 cents per share. That was inline with Wall Street’s consensus. The company’s operating margin was 19.4%. The company earned 49 cents per share in the third quarter of last year. Quarterly net sales rose 10% to $391.5 million.
Laurans A. Mendelson, HEICO’s Chairman and CEO, commented on the Company’s third quarter and year-to-date results stating, “HEICO’s operating segments have continued to execute at a high level of profitable performance and I am very pleased with the record financial results. These outstanding results reflect record net sales and operating income for the first nine months of fiscal 2017 within both the Flight Support Group and Electronic Technologies Group, achieved through increased demand for the majority of our products. Additionally, our subsidiaries continue to deliver strong cash flows in support of our overall corporate strategy of high cash flow generation.
We recently announced our largest acquisition in history when we entered into an agreement to acquire AeroAntenna Technology, Inc., (“AAT”). Closing, which is subject to governmental approval and standard closing conditions, is expected to occur during the fourth quarter of fiscal 2017 and we expect the acquisition to be accretive to our earnings per share within the first twelve months following closing. We plan to fund our acquisition of AAT through our existing credit facility and available cash.
HEICO also raised their guidance for full-year earnings. They previously expected full-year net income growth of 12% to 14%. They now expect net income growth of 14% to 16%. Last year, HEICO made $1.86 per share. Shares count is up 1.8% this year, so factoring that, the guidance implies $2.08 to $2.12 per share. HEICO has already made $1.53 per share through the first three quarters, so that implies Q4 earnings of 55 to 59 cents per share.
Wall Street had been expecting 55 cents for Q3 and $2.09 for the entire year. The stock is down about 1.4% in after-hours trading.
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No 1% Up Days for the Dow
Posted by Eddy Elfenbein on August 23rd, 2017 at 3:48 pmToday will be the 84th consecutive trading session in which the Dow has failed to rise by more than 1%. This is the longest such streak since early 2007.
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Shares of Stryker Drop on Recall News
Posted by Eddy Elfenbein on August 23rd, 2017 at 2:43 pmThis morning, Stryker (SYK) said that it’s doing a voluntary recall of “specific lots of Oral Care products sold through the company`s Sage Products business unit.” The problem seems to have come from a third-party provider. Fortunately, Stryker said that it’s not aware of any serious adverse effects.
Earlier Stryker gave full-year guidance of $6.45 to $6.55 per share. Now the company expects to come in at the low end of that range. For Q3, Stryker again expects to be at the low end of the previously announced range of $1.50 to $1.55 per share.
The shares are currently down about 4.5%.
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New Homes Sales Fall
Posted by Eddy Elfenbein on August 23rd, 2017 at 11:25 amThis morning, the Census Bureau said that 571,000 new homes were sold in July. That’s an annualized number. That’s down 8.9% from a year ago.
This is an ugly report but I wouldn’t call it problematic just yet. This series can be very volatile. Here’s a look at new home sales going back to 1963.
You can see just how out-of-whack the last bubble was. Even after several years, we’re still not back to normal. The report for July was still below nearly every report from 1992 to 2007.
The other news we got today was that Lowe’s (LOW) bombed its earnings report. This is interesting because Lowe’s is strongly tied to the housing market.
The company also lowered its full-year earnings report to $4.20 to $4.30 per share. Wall Street had been expecting $4.62 per share.
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Morning News: August 23, 2017
Posted by Eddy Elfenbein on August 23rd, 2017 at 7:03 amDraghi: ECB Faces Gaps in Understanding New Realities
Euro Zone August Business Growth Keeps Up Solid Pace
The Lowflation Demon That Vexes Central Banks
Bumpy Times in Brazil, But Hedge Funds Boom
Wall Street Banks Warn Winter Is Coming as Business Cycle Peaks
Lowe’s Misses Street 2Q Forecast
WPP Faces Worst Year in a Decade as Advertisers Cut Spending
Chevron CEO John Watson to Step Down
Uber Adds New Features That Let Drivers Work on Their Own Terms
Why Uber’s Latest Fight Could Get All Sides Hurt
Why Jeep Ought to Be For Keeps
Google and Walmart are Joining Forces to Take on Amazon
Toshiba Prioritizes Talks With Western Digital on Chips Business Sale
Howard Lindzon: We Live in a Marketing Economy
Cullen Roche: Let’s Talk About Bond Fund Redemptions
Josh Brown: Hot Links: How to Get RIch
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ICE Can Benefit from Regulatory Environment
Posted by Eddy Elfenbein on August 22nd, 2017 at 4:04 pmBarron’s highlights a research note from Dan Fannon at Jefferies who thinks Intercontinental Exchange (ICE) will benefit from a more favorable regulatory environment.
While ICE’s core futures customer base has historically been more skewed toward commercial vs financial, they will still benefit from greater trading activity from banks. From an oversight perspective, a more “approachable” SEC would allow for greater efficiencies across market structure generally and potentially spur greater listings activity.
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Morning News: August 22, 2017
Posted by Eddy Elfenbein on August 22nd, 2017 at 7:04 amEuro’s Hot Streak May Survive Any Draghi Jackson Hole Jawboning
The Unintended Consequences of Quantitative Easing
Coal Mining Health Study Halted by Interior Department
Amazon: Why A Waterfall Decline Might Be Underway
BHP to Quit U.S. Shale Business as Annual Profit Surges
Oil Major Total’s Shares Rise As Analysts Welcome Maersk Oil Deal
Great Wall Motor of China Sets Its Sights on Jeep
Ford Offers U.K. Drivers Cash to Scrap Dirty Diesel Engines
Ford, China’s Zotye Auto Plan JV to Build Electric Vehicles
Pratt’s $10 Billion Jet Engine Lags GE by 10-to-1 on New Orders
Identity Thieves Hijack Cell Phone Accounts to Go After Virtual Currency
J&J Ordered to Pay $417 Million In Trial Over Talc Cancer Risks
Jeff Miller: Is a Market-Friendly Policy Agenda in Peril?
Ben Carlson: Managing Sequence of Return Risk
Cullen Roche: Are Individual Bonds Safer Than Bond Funds?
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The Puzzling Slowdown of the U.S. Economy
Posted by Eddy Elfenbein on August 21st, 2017 at 3:41 pmOne of the most important economic facts of today is that the rate of growth for the U.S. economy has slowed down dramatically. I don’t know why this is and I’m sure economists will be debating it for a long time. The change started with the onset of an unusually deep recession ten years ago. On top of that, the recovery has been the weakest on record.
Political partisans of various stripes get very upset with these facts, but the facts are stubbornly unswayed. Mind you, the U.S. economy is still growing. It’s just that the rate of growth is much lower.
Even if we look at GDP adjusted for inflation and population, we still see a slowdown. (You can see the data here.)
Here’s what I find fascinating: For 40 years, beginning in the mid-1960s, real U.S. GDP per capita tended to grow at an annualized rate of about 2.1%. Sure, during recessions, it would deviate from 2.1%—but not by much. The recoveries tended to bring it right back in line.
Annualized Growth in Real GDP Per Capita
1953-1966: 2.1%
1966-1985: 2.1%
1985-2007: 2.1%
Since 2007: 0.7%Source: https://t.co/VxyeJD392E
— Eddy Elfenbein (@EddyElfenbein) August 21, 2017
With the tweet above, there’s some cherry-picking, but only slightly. The figures are right for the first period (1953 to 1966), but that includes a slow-growth period until 1960 and a fast-growth period after. Outside that, the 2.1% trend holds up pretty well.
Here’s another way to make the same point. The chart below is real GDP per capita in black. The red line is a simple trend line growing at 2.1% per year.
Notice how closely the two lines track each other for 40 years — and how sharply they’ve parted ways recently.
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Foot Locker Plunges
Posted by Eddy Elfenbein on August 21st, 2017 at 12:32 pmA few times I’ve come close to adding Foot Locker (FL) to our Buy List. Each time, I held off. Now I’m glad I did. The shares crashed 28% on Friday, and they’re down again today.
Foot Locker had an absolutely terrible earnings report. The company made 62 cents per share instead of the 90 cents Wall Street had been expecting. The Street had been expecting a 1% increase in same-store sales. Instead, they fell by 6%.
Not only that, but the stock had been plunging going into earnings season as well. The company said it will close 130 stores this year. If that weren’t enough, earlier this year, Nike said they plan to sell through Amazon.
This is more evidence that the retail landscape is changing. Amazon is eating up most everything, and the big box stores are taking the rest.
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