Morning News: July 21, 2017
Posted by Eddy Elfenbein on July 21st, 2017 at 7:02 am

Beijing Wants A.I. to Be Made in China by 2030

Seeking a Positive Spin, Beijing Says Sino-U.S. Talks Tackled Excess Steel Production

Easy Money Saved This Italian City. Soon, It Will Run Out.

Siemens Halts Deliveries to Russian Firms Over Crimea Case

Bank Profits Near Pre-Crisis Peak in U.S. Despite All the Rules

Microsoft Profit Beats Expectations on Strong Cloud Demand

FTC Probing Allegations of Amazon’s Deceptive Discounting

Elon Musk Says He Has ‘Verbal Govt Approval’ for D.C.-to-New York Hyperloop

Sears Is Giving Shoppers Even Fewer Reasons to Go to Its Stores

Visa’s Third-Quarter Profit Beats Expectations

Bitcoin Community Cheers as Miners Back New Scaling Framework

Exxon Mobil Fined For Violating Sanctions on Russia

2 Leading Online Black Markets Are Shut Down By Authorities

Michael Batnick: When Something Is Obvious

Jeff Miller: Sizzling Summer Picks in Discretionary Spending

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Four Buy List Earnings Reports this Morning
Posted by Eddy Elfenbein on July 20th, 2017 at 11:25 am

It’s been a busy morning for us; we had four Buy List stocks report their earnings.

First up is Danaher (DHR). The diversified manufacturer said they made 99 cents per share for Q2. Danaher previously told us to expect earnings to range between 95 and 98 cents per share.

Thomas P. Joyce, Jr., President and Chief Executive Officer, stated, “During the second quarter, we delivered double-digit adjusted earnings per share growth, generated strong cash flow, and our two most recent large acquisitions – Pall and Cepheid – continued to perform very well.”

Joyce continued, “As we look to the second half of the year, we expect our core growth rate to accelerate compared to first half levels off of improving order trends and as recent acquisitions become part of our core revenue. We believe that the power of the Danaher Business System, significant opportunities across our portfolio, and a strengthening balance sheet position us well for the remainder of 2017 and beyond.”

Now for guidance. For Q3, Danaher said to expect earnings between 92 and 96 cents per share. Wall Street had been expecting 97 cents per share. Danaher also raised their full-year range. The old range was $3.85 to $3.95 per share. The new range is $3.90 to $3.97 per share.

The shares dropped at today’s open. I’m not sure why. This is a fine report. The shares are basically back to where they were during much of last week.

Snap-on (SNA) said they made $2.60 per share for Q2. That was five cents better than expectations. Net sales rose 5.6% to $921.4 million. Diluted EPS rose by 10.2% over last year’s Q2.

The CEO said, “Our year-over-year improvement in operating margin before financial services reflects ongoing progress through our Snap-on Value Creation Processes. At the same time, these results also demonstrate continued advancement along our strategic runways for growth, as indicated by the notable increase in activity in the quarter. Despite some sales headwinds in the quarter for the Snap-on Tools Group, we believe the vehicle repair markets in which we operate remain robust and afford significant ongoing opportunity. Furthermore, our acquisition of Norbar Torque Tools in the second quarter adds to our expanding product offering to customers in critical industries. Finally, these results would not have been possible without the dedication and capability of our franchisees and associates worldwide; I thank them for their extraordinary commitment and ongoing contributions.”

Shares of SNA initially gapped up but then fell back down.

Alliance Data Systems (ADS), the loyalty solutions people, said they pulled in $3.84 per share for Q2. That was 11 cents more than expectations. Quarterly revenue rose 4% to $1.8 billion.

However, the big news is that ADS is lowering their full-year guidance from $18.50 to $18.10 per share. ADS said their BrandLoyalty business “produced soft results.” But ADS is actually bumping up their revenue guidance from $7.7 billion to $7.8 billion.

The company also said they’re “comfortable” in giving initial 2018 guidance of $21.50 per share in core earnings. Still, Wall Street was not pleased with today’s report. The shares are currently off by about 10%.

Sherwin-Williams (SHW) had a big earnings miss. The company only made $3.80 per share last quarter. Wall Street had been expecting $4.57 per share. The reason for the earnings shortfall was costs assoicated with the recent merger with Valspar.

Sherwin said they see Q3 earnings coming in between $3.70 and $4.10 per share. That includes a charge of $1.10 per share related to the acquisition. Wall Street had been expecting Q3 earnings of $4.91 per share.

For all of 2017, Sherwin now expects earnings to range between $12.30 and $12.70 per share. That will include $2.50 in charges related to the acquisition. Wall Street had been expecting $14.76 per share.

Shares of SHW got clobbered early Thursday.

Microsoft‘s (MSFT) report will come out after the close.

Morning News: July 20, 2017
Posted by Eddy Elfenbein on July 20th, 2017 at 7:05 am

Oil Steady After Drop in Fuel Stocks Stokes Demand Hopes

When Will the ECB Pull Its Trillions From the Markets?

U.K. Retail Sales Rebound as Heat Wave Boosts Clothing Demand

U.S., China Fail to Agree on Trade Issues, Casting Doubt on Other Issues

China’s Buying Spree Ends Badly

Facebook Is Pursuing a Subscription Tool for News Outlets on Its Site

T-Mobile Raises Subscriber Forecast as Price War Rages On

Kinder Morgan’s Trans Mountain to See Little Major Work This Year

Now the Cloud Over Ackman’s Head Says ‘Chipotle’

The Company Trump `Saved’ Lays Off 338 Workers As He Celebrates Six Months in Office

Qualcomm’s Profit Tanks 40% As Legal Fight With Apple Drags On

American Express: Winning the Battle, Losing the War?

Media Consolidation Is In The Air, and John Malone Is Fanning It

Jeff Carter: Tough Lessons

Josh Brown: Brokers Go Bye Bye

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Smucker Raises Dividend by 4%
Posted by Eddy Elfenbein on July 19th, 2017 at 7:34 pm

Good news for Smucker (SJM). The jelly people raised their dividend by 4%, from 75 to 78 cents per share. This is their sixteenth annual dividend increase. The new dividend will be paid on Friday, September 1 to shareholders of record at the close of business on Friday, August 11.

Signature Bank Earns $2.21 per Share
Posted by Eddy Elfenbein on July 19th, 2017 at 1:47 pm

This morning, Signature Bank (SBNY) kicked off the second-quarter earnings season for our Buy List stocks. The bank reported quarterly earnings of $2.21 per share which matched Wall Street’s consensus.

But there’s a big caveat to that number. It doesn’t include Signature’s “provision expense and write-downs for the taxi medallion portfolio.” As we’ve known, SBNY took at bath on those medallion loans. Uber and others have knocked that entire industry. But as I’ve said, this is a known problem and SBNY has been working on it.

“We did not, nor did any others, foresee the dramatic decline in taxi medallion values caused by a combination of rapid radical disruption by app-based hailing systems and inaction by governmental authorities. We did, however, see the disruption coming in time to set an upper limit on loan amounts and to stop our lending earlier than most,” said Scott A. Shay, Chairman of the Board.

Net interest margin, the key metric for any bank, was 3.11% during Q2. That’s pretty good. Overall, this was an OK quarter for Signature. It’s largely what I expected. The shares dropped sharply at the open, but recovered some ground. SBNY is currently down about 1.5%.

Morning News: July 19, 2017
Posted by Eddy Elfenbein on July 19th, 2017 at 7:07 am

How Trump Could Puncture the Equity Bubble

Net Neutrality Or Continued Innovation? Can’t We Have Both?

Mustard at a Price That Makes Your Eyes Water

Frontier Airlines is Doubling in Size

Netflix Says Its Cash Burn Could Reach $2.5 Billion for 2017, and That It’s An ‘Indicator of Enormous Success’

Discovery, Viacom Said to Have Held Talks to Acquire Scripps

Volvo Profit Jumps on 22% Rise in Truck Orders

Shareholders Weigh British American, Reynolds Tobacco Merger

Harley-Davidson Spirals Down, Announces U.S. Layoffs, Builds Factory In Thailand

Daimler Will Recall 3 Million Diesel Cars Across Europe to Fix Emissions

Investors Spooked By Sick Chipotle Customers

AMC Tries to Steer Clear of Chinese Owner’s Debt Worries

Ben Carlson: What’s Your Track Record?

Cullen Roche: Are ETFs and Index Funds More Dangerous in a Bear Market?

Roger Nusbaum: Is a Minsky-esque Moment Coming?

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How Broker Rebates Work
Posted by Eddy Elfenbein on July 18th, 2017 at 11:40 am

In today’s NYT, Jonathan Macey and David Swensen write on the pernicious practice of broker rebates. Brokers are supposed to get the best trades for their clients:

But that’s not what is happening. Instead, brokers routinely take kickbacks, euphemistically referred to as “rebates,” for routing orders to a particular exchange. As a result, the brokers produce worse outcomes for their institutional investor clients — and therefore, for individual pension beneficiaries, mutual fund investors and insurance policy holders — and ill-gotten gains for the brokers.

Although the harm suffered on each trade is minuscule — fractions of a cent per share — the aggregate kickbacks amount to billions of dollars a year. The diffuse harm to individuals and the concentrated benefit to Wall Street create yet another way in which the system is rigged, justifiably eroding public confidence in the fairness of the financial system.

Blue Apron Blues
Posted by Eddy Elfenbein on July 18th, 2017 at 9:55 am

The Blue Apron IPO has been a disaster. The pricing had to be chopped ahead of the IPO, and the shares have dropped even lower since then.

APRN got to $6.36 per share this morning, a new low. The IPO priced at $10 per share.

Reply to Barron’s
Posted by Eddy Elfenbein on July 18th, 2017 at 8:25 am

This weekend, Barron’s profiled my actively managed ETF. I felt the profile was unusually hostile and that it missed several key points about our ETF.

You can read my response here.

Morning News: July 18, 2017
Posted by Eddy Elfenbein on July 18th, 2017 at 6:58 am

U.K. Inflation Rate’s Unexpected Drop Takes Pressure Off BOE

Trump Failure on Healthcare Sends Dollar to 10-Month Low

Microsoft, Google Back Strong Net Neutrality Rules

2 Safe High-Yield REITs With Excellent Growth Prospects Trading At Fire Sale Prices

Netflix Shares Set to Skyrocket to Highest Price Ever

Novartis Tops Q2 Earnings Estimate, Boosts Alcon Full Year Sales Guidance

Why Nelson Peltz Wants P&G to See Him as a `Constructivist’

Hampton Creek’s Entire Board Leaves Except for CEO

Tesla: More Musk Double Talk

Disney Looking to Alleviate ESPN Woes in Altice Contract Talks

Ericsson Plans More Cost Cuts as Shares Plunge After Poor Q2

Wells Fargo Poised to Sell More Businesses As It Streamlines Following Accounts Scandal

Jeff Carter: Blockchain Will Disrupt Everything

Michael Batnick: These Are The Goods

Howard Lindzon: Momentum Monday and Billionaires Bitching

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