The Decline in Daily Volatility
Posted by Eddy Elfenbein on August 3rd, 2017 at 12:53 pm

It’s hard to show what what a decline in the market’s volatility looks like. Here’s a chart showing the S&P 500’s daily changes over the last two years. You can see how the number of big moves (over 2%, up or down) has really dropped off.

Three More Earnings Reports this Morning
Posted by Eddy Elfenbein on August 3rd, 2017 at 11:16 am

This morning Intercontinental Exchange (ICE) reported Q2 earnings of 75 cents per share. Although this was one penny below estimates, it was ICE’s 17th-straight quarter of revenue growth. EPS was up 9% over last year.

The company offered Q3 guidance, but not for EPS:

• ICE’s third quarter 2017 GAAP operating expenses are expected to be in a range of $545 million to $555 million and adjusted operating expenses are expected to be in a range of $480 million to $490 million.
• ICE’s interest expense is expected to be $47 million in the third quarter and $49 million in the fourth quarter, including the effect of refinancing ICE’s October bond maturity.
• ICE’s adjusted effective tax rate is expected to be approximately 31% for the third quarter.
• ICE’s diluted share count for the third quarter is expected to be in the range of 590 million to 595 million weighted average shares outstanding.

The shares are currently down about 3% this morning.

Cognizant Technology Solutions (CTSH) earned $0.93 for Q2. That was two cents above the Street’s consensus. Previously, the company said to expect earnings of at least 89 cents per share. Quarterly revenue rose 8.9% to $3.67 billion. Cognizant had said to expect revenue between $3.63 and $3.68 billion.

“Cognizant delivered strong second-quarter results, which reflect our continued progress in helping clients achieve the value of digitizing their entire enterprises, or what we call being digital at scale,” said Francisco D’Souza, Chief Executive Officer. “We remain dedicated to accelerating our shift to digital services and solutions as we continue to invest in our core business and execute our margin improvement and capital return programs.”

Cognizant also raised their sales and earnings guidance for this year. The company expects Q3 earnings of at least 94 cents per share. They also upped their full-year guidance by three cents. They now see 2017 earnings of at least $3.67 per share.

CTSH expects Q3 revenue between $3.73 billion and $3.78 billion and full-year revenue between $14.70 billion and $14.84 billion. Previously, Cognizant expected 2017 revenue to range between $14.56 billion and $14.84 billion.

“Our second quarter results and improved full year outlook demonstrate solid execution in our plan to drive sustainable revenue growth while increasing margins,” said Karen McLoughlin, Chief Financial Officer. “Our strong balance sheet and cash flows continue to support both our capital return program and our investments in the business to drive future growth.”

Axalta Coating Systems (AXTA) reported adjusted Q2 earnings of 31 cents per share which was below the Street’s view of 39 cents per share. Net sales rose 2.3% to $1.09 billion. Part of the reason for the miss was a drop in paint prices.

The miss also seems to have been caused by the mess in Venezuela.

The deconsolidation of our Venezuelan operations came as a result of a lack of exchangeability between the Venezuelan bolivar and the U.S. dollar coupled with our financial outlook for the foreseeable future. This lack of exchangeability restricted our Venezuelan subsidiary’s ability to pay dividends or settle intercompany obligations, which limited our ability to realize the benefits of our Venezuelan operations. In accordance with the applicable accounting guidance, we have deconsolidated our Venezuela operations and will account for our investment at cost going forward. Our cost investment is now valued at $0 at June 30, 2017 which has resulted in a pre-tax charge of $70.9 million for the three months ended June 30, 2017. We will no longer report the consolidated results of our Venezuelan operations.

For 2017, Axalta now expects:

• Net sales growth of 7-8% as-reported; 8-9% ex-FX, including acquisition contribution of 6-7%
• Adjusted EBITDA of $940-970 million
• Interest expense of ~$150 million
• Income tax rate, as adjusted, of 22-24%
• Free cash flow of $440-480 million
• Capital expenditures of ~$130 million
• Depreciation and amortization of ~$350 million
• Diluted shares outstanding of 246-249 million

Continental Building Products (CBPX) will report after the close.

Morning News: August 3, 2017
Posted by Eddy Elfenbein on August 3rd, 2017 at 7:10 am

What’s Behind the Dow’s Stunning Rise to 22,000

Global Shares Fall as Apple’s Glossy Earnings Effect Fades

BOE Cuts Growth, Wage Forecasts as Key Rate Kept at Record Low

As Venezuela Spirals, U.S. Oil Confronts a $10 Billion Threat

Elon Musk Reassures Investors as Tesla Ramps Up Model 3 Output

Germany to Take on Tesla With Gigafactory Rival

Fitbit Tops Sales Estimates on Renewed Demand for Fitness Bands

Snack Giant Modelez, Facing Changing Tastes, Names a New C.E.O.

Oclaro Surges 7%: FYQ4 Beats, Redeems Optical Despite China Woes

Dish Misses Profit Expectations But Limits Subscriber Losses

For Krispy Kreme, the Reese’s Peanut Butter Doughnut Tastes Like Money

Wells Fargo Insurance Scandal Draws New York Subpoenas

Racially Charged Nissan Vote Is a Test for U.A.W. in the South

Jeff Miller: Ben Carlson Wins Silver Bullet: Great Article on Market Leaders

Michael Batnick: A Millennial’s Rebuttal

Be sure to follow me on Twitter.

Cinemark Falls After AMC Bombs
Posted by Eddy Elfenbein on August 2nd, 2017 at 10:47 am

Shares of Cinemark (CNK) are down sharply today but it’s not because of anything they did. It was AMC, a competitor, who bombed their earnings report.

Technically, it was a preview of the earnings report but the details are downright ugly. Still, I don’t see why AMC’s troubles will spillover to Cinemark. Wall Street likes to think that if one ball-bearing company has a problem, all ball-bearing companies must have the same problem. Cinemark reports earnings on Friday. Wall Street expects 45 cents per share.

This morning’s ADP report said the economy created 178,000 payroll jobs last month. That was a tiny bit below expectations. The government’s jobs report will come out Friday morning.

The Dow cracked 22,000 this morning thanks to an impressive earnings report from Apple. Last week on CNBC, I said that Apple would beat earnings expectations. I was right, but I was more cautious on the stock.

I thought investors should steer clear of Apple until there’s a better understanding of the impact of the new iPhone. I realize this runs the chance of missing out on big profits if the iPhone is a hit, but I think it’s the safer move.

Apple has been as high as $159.75 per share this morning. That gives them a market cap of $832 billion. The market value will crack $1 trillion when the stock gets near $192 per share.

Apple now has more than $261 billion in cash. Of course, much of this rests outside the United States. Yesterday, I tweeted a fact to put it in perspective, and it seems to have caught on.

Apple has a cash balance of $261.5 billion. That's enough to buy every single team in the NFL, NBA, NHL and MLB.

— Eddy Elfenbein (@EddyElfenbein) August 1, 2017

Morning News: August 2, 2017
Posted by Eddy Elfenbein on August 2nd, 2017 at 6:59 am

Counterfacting the Future

India Cuts Rates as RBI Sees `Urgent Need’ to Boost Investment

The Dow and the Dollar Diverge, and Investors Are Exuberant

U.S. May Buy 747s Once Set for Russia to Cut Air Force One Costs

Apple Shares Sail to Record High on Healthy iPhone Sales

Joining Apple, Amazon’s China Cloud Service Bows to Censors

Auto Sales Contract as Demand Stalls for Trucks and SUVs

Why It Seems Like Open Season on Car Companies: QuickTake Q&A

Bitcoin ‘Mining’ Goes From Enthusiasts to Giant Enterprises As Digital Currencies Surge

SoftBank Said to Have $65 Billion in Funds for Charter Deal

Under Armour Suffers From Market Forces, Lack of Focus, Analysts Say

How the World’s Biggest Buyout Deal Crashed and Burned

Why the Hatchet Men of 3G Spent $10 Million on a Better Oscar Mayer Weiner

Jeff Carter: This Law Is Going to Change

Cullen Roche: The Best Investment Writing

Roger Nusbaum: VIX Below 9?

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Fiserv Earned $1.19 per Share for Q2
Posted by Eddy Elfenbein on August 1st, 2017 at 4:08 pm

For Q2, Fiserv (FISV) reported earnings of $1.19 per share. That was four cents below Wall Street’s estimate. The company didn’t give guidance for Q2, but their full-year guidance is unchanged at $5.03 to $5.17 per share. Quarterly revenue rose 2% to $1.39 billion.

“We delivered solid financial results in the quarter consistent with our expectations,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “Our focus on client success continues to drive market momentum.”

More details:

Adjusted earnings per share increased 10 percent in the second quarter to $1.19 and increased 14 percent in the first six months of 2017 to $2.43 compared to the prior year periods.

Adjusted operating margin increased 10 basis points to 32.0 percent in the second quarter and expanded 40 basis points to 32.3 percent in the first six months of 2017 compared to the prior year periods.

Free cash flow increased 26 percent to $555 million in the first six months of 2017 compared to the prior year period. A cash distribution from StoneRiver of $31 million related to the sale of a business has been excluded from the company’s free cash flow results for the first six months of 2017.

The company repurchased 2.5 million shares of common stock for $295 million in the second quarter and 5.9 million shares of common stock for $684 million in the first six months of 2017. As of June 30, 2017, the company had 14.6 million remaining shares authorized for repurchase.

In June 2017, the company made a recommended cash offer to acquire Monitise plc for approximately £70 million ($89 million). The transaction is subject to certain conditions including Monitise shareholder approval (full details of the offer can be found on our website, Fiserv.com).

Fiserv reiterated their 2017 guidance of $5.03 to $5.17 per share. That’s an increase of 14% to 17% over last year’s total of $4.43.

“We remain on-track to achieve our full-year financial objectives which anticipate stronger results in the second half of the year,” said Yabuki.

This is a rare earnings miss for Fiserv, but the important thing is that their guidance is the same.

Mixed Economic News this Morning
Posted by Eddy Elfenbein on August 1st, 2017 at 11:40 am

We had some key economic reports this morning.

The government said that consumer spending rose 0.1% in June. They also revised the number for May up to 0.2%. Personal income in June was unchanged. Here’s how the two series have grown over the last 20 years.

The ISM Manufacturing index for July was 56.3. That’s a pretty good number. Any number above 50 means the factor sector is expanding.

The weak spot this morning was that construction spending fell 1.3% in June. Wall Street had been expecting growth of 0.4%.

The big report this week will be Friday’s July jobs report. What’s interesting is that long-term bond yields have gradually worked their way lower all year.

Ingredion Earns $1.89 per Share
Posted by Eddy Elfenbein on August 1st, 2017 at 8:38 am

This morning, Ingredion (INGR) reported Q2 earnings of $1.89 per share. Wall Street had been expecting $1.85 per share. They earned $1.73 per share in last year’s Q2.

“We continue to deliver shareholder value with another strong quarter, including solid operating income and earnings per share growth. Good operating efficiency, the impact of acquisitions, and higher specialty volumes more than offset headwinds in South America,” said Ilene Gordon, chairman, president and chief executive officer. “Operating income in North America reached record levels, but was lower in South America due to macroeconomic headwinds and the temporary interruption of manufacturing activities in Argentina associated with the implementation of a new labor agreement.”

“As in the past, our growth strategy and continuous improvement programs drove margin expansion. The integrations of TIC Gums, Shandong Huanong Specialty Corn, and the Sun Flour Industry rice business are progressing as planned. We have completed an important organizational restructuring of our Argentina business and we will continue our disciplined approach to cost management. As we continue to execute our strategy, we expect another strong year and reiterate our anticipated 2017 adjusted EPS guidance in the range of $7.50 to $7.80,” Gordon added.

Ingredion reiterated their full-year guidance of $7.50 to $7.80 per share. For the first half of this year, the company has made $3.77 per share. The shares gapped down at the open but are now down about 2%.

Morning News: August 1, 2017
Posted by Eddy Elfenbein on August 1st, 2017 at 7:03 am

Indonesia Lifts Threat to Ban Encrypted App Telegram

U.S. Nuclear Comeback Stalls as Two Reactors Are Abandoned

No Bubble in Stocks But Look Out When Bonds Pop, Greenspan Says

Discovery to Buy Scripps, Owner of Food Network, in $11.9 Billion Deal

BP Breaks Even in `Tough Environment’ After Debt Hits Record

Honda Posts Strong First Quarter, Sees Higher Annual Profit on Favorable Forex

Coinbase Faces Backlash, Legal Risk Over Bitcoin Cash

Apple, Google Drop Trading Apps After Australian Intervention

Gilead’s Unique Philanthropic Act Will Pay Off

Lessons From An Altria Flash Crash

Debt-Ridden Chinese Giant Now a Shadow of Its Former Size

Amid His Most Important Tesla Milestone, Elon Musk Says He May Be Bipolar

Howard Lindzon: Momentum Monday – Let Ideas Come to You

Ben Carlson: When Risk Is Not Rewarded

Joshua Brown: Chart o’ the Day: August Sucks Sometimes

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Pending Home Sales Rise 5%
Posted by Eddy Elfenbein on July 31st, 2017 at 11:14 am

The National Association of Realtors reports that pending home sales rose 1.5% in June.

After falling throughout the usually busy spring season, a monthly index of signed contracts to purchase existing homes increased 1.5 percent in June compared with May, and May’s figure was revised slightly higher, according to the National Association of Realtors.

The index was 0.5 percent higher compared with June 2016, the first annual increase since March. So-called pending home sales are a forward indicator of closed sales two to three months later.

“The first half of 2017 ended with a nearly identical number of contract signings as one year ago, even as the economy added 2.2 million net new jobs,” said Lawrence Yun, chief economist for the Realtors. “Market conditions in many areas continue to be fast paced, with few properties to choose from, which is forcing buyers to act almost immediately on an available home that fits their criteria.”

Here’s my preview from CNBC:

This one report out on Monday is a key indicator for the economy from CNBC.