Axalta Earns 26 Cents per Share
Posted by Eddy Elfenbein on April 26th, 2017 at 9:11 am

Nice earnings report from Axalta Coating Systems (AXTA). The company made 26 cents per share for Q1 which is two cents more than estimates. Revenues rose 5.5% to $1.01 billion, $20 million more than estimates. They reaffirmed full-year guidance for EBITDA of $930 to $980 million.

Fiserv comes out later today.

Morning News: April 26, 2017
Posted by Eddy Elfenbein on April 26th, 2017 at 5:48 am

Lumber Tariff Adds Wrinkle to Nafta Talks

Trump to Propose Large Increase in Deductions Americans Can Claim On Their Taxes

Washington’s Busy Agenda is Getting More So With Bill To Roll Back Dodd-Frank

Internet Firms Winding Up For a Fight on ‘Net Neutrality’

Santander’s Brazil Patience Pays off as Rebound Lifts Profit

Can Facebook Fix Its Own Worst Bug?

AT&T Revenue Misses Estimates as Customers Keep Phones Longer

Chipotle Says Its Payments System Was Hacked

Credit Suisse Will Raise $4 Billion and Scrap I.P.O. of Swiss Unit

BMW Is Trying to Scare Staff Into Loving Electric Cars

Toshiba Plans to Replace Auditor PwC After Earnings Impasse

Wells Fargo Shareholders Tepidly Re-elect Bank’s Directors

Palantir Settles U.S. Lawsuit Charging Bias Against Asians

Ben Carlson: When Holding Is The Hardest Part

Roger Nusbaum: Don’t Fall For The Fallacy of Explanation

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Second-Highest All-Time Close
Posted by Eddy Elfenbein on April 25th, 2017 at 5:53 pm

The market had another good day today. The S&P 500 rose by 0.61% and reached its second-highest all-time close.

Our Buy List was able to eke out a gain despite the bad news from Express Scripts (ESRX). For the day, ESRX lost 10.8% but our Buy List gained 0.05%. We were helped by a 2.7% gain from Wabtec (WAB).

We had new highs today from AFL, FISV, MSFT, MCO, SHW and SYK.

Stryker Earned $1.48 per Share for Q1
Posted by Eddy Elfenbein on April 25th, 2017 at 5:28 pm

Stryker (SYK) reported Q1 earnings after the closing bell. For Q1, the company earned $1.48 per share. Previously they told us to expect a range between $1.40 and $1.45 per share. Wall Street had been expecting $1.43 per share.

“Our positive momentum continued in the first quarter, as we demonstrated our ongoing commitment to deliver organic sales growth at the high end of med-tech and leveraged earnings gains,” said Kevin A. Lobo, Chairman and Chief Executive Officer. “Our results were well-balanced across business segments and geographies, and position us well for another strong year in 2017.”

For Q2, Stryker expects EPS between $1.48 and $1.52. Wall Street had been expecting $1.51 per share. Stryker also maintained their full-year forecast of $6.35 to $6.45 per share.

The Skewedness of Stock Returns
Posted by Eddy Elfenbein on April 25th, 2017 at 1:39 pm

I recently read the paper, “Do Stocks Outperform Treasury Bills?” by Hendrik Bessembinder (thanks to a pointer from Michael Batnick), which takes a fascinating look at how skewed stock returns are. When we say that the market returns, say, 10% per year, that’s superficially correct. But as Bessembinder points out, the large majority of stocks don’t do much of anything, and a tiny portion of homerun stocks make up for the entire gain. The numbers are pretty extraordinary.

Bessembinder looked at 25,782 stocks that traded between 1926 and 2015. That comes to 3.5 million one-month time periods. The average stock gained 1.13% compared with the one-month T-bill rate of 0.38%.

But that average is very misleading since most stocks didn’t make money for that month, and even more lost to the T-bill. Although, when we weight its market size, the results get a little better.

After a decade, the “skew” is even more pronounced. The average stock gains 118% while the median stock gains just 14%. Only 37% of individual stocks out perform the market after a decade. Over the course of their lifetime, just 42% of stocks beat the one-month T-bill.

When we talk about total dollars made, just 0.33% of stocks make up for half of the wealth created by the stock market. Less than 4% accounts for the entire market’s gain. The other 96% combined match Treasury bills.

Wabtec Earned 84 Cents per Share
Posted by Eddy Elfenbein on April 25th, 2017 at 11:34 am

Two more earnings reports today. Stryker (SYK) will report after the close and Wabtec (WAB) reported this morning. For Q1, the company earnings 84 cents per share. That beat Wall Street’s estimates by two cents. This is a nice rebound from the awful quarter they had for Q4. I should add that during the quarter, Wabtec completed its acquisition of Faiveley.

Wabtec also reiterated its full-year guidance numbers. They expect revenue of about $4.1 billion, and EPS between $3.95 and $4.15.

Raymond T. Betler, Wabtec’s president and chief executive officer, said: “Our first quarter adjusted earnings were in line with expectations, and we expect improvement during the year. As we work to integrate Faiveley and our other recent acquisitions, we are managing our costs aggressively based on market conditions. We continue to invest in our balanced growth strategies and expect to benefit from our diversified business model and rigorous application of the Wabtec Excellence Program.”

The stock is up about 2.7% in today’s trading.

Morning News: April 25, 2017
Posted by Eddy Elfenbein on April 25th, 2017 at 5:14 am

OPEC Cuts Make North Sea Oil Most Alluring in Asia for 7 Years

ECB Meeting Comes at a Precarious Time for Markets

Trump Slaps Duty on Canada Lumber, Intensifying Trade Fight

Trump Seeks 15% Corporate Tax Rate, Even If It Swells The National Debt

Partisan Divide Over Economic Outlook Worries Ben Bernanke

FCC’s Pai To Describe Net Neutrality Plans This Week

Supreme Court Rebuffs G.M.’s Bid to Limit Ignition Switch Lawsuits

T-Mobile Open To Merger Talks, New Subscribers Top Estimates

Wells Fargo Shareholders Get Their Chance to Mete Out Punishment

Novartis Moves M&A Search to Early-Stage Drugs on Price Gain

Waymo Testing Self-Driving Car Ride Service in Arizona

Marissa Mayer Will Make $186 Million on Yahoo’s Sale to Verizon

Not An Inside Job: How Two Analysts Became SEC Whistleblowers

Cullen Roche: Let’s Talk About Shrinkage and The Most Dangerous Narratives are Usually the Smartest

Howard Lindzon: All-Time Highs for Nasdaq 100, Poison Pays and The ReBirth of Active Investing

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Express Scripts CEO on Anthem
Posted by Eddy Elfenbein on April 24th, 2017 at 5:27 pm

Express Scripts Earns $1.33 per Share
Posted by Eddy Elfenbein on April 24th, 2017 at 4:41 pm

For Q1, Express Scripts (ESRX) reported earnings of $1.33 per share. Wall Street had been expecting $1.32. Express had previously given a range of $1.30 to $1.34 per share.

The company is also raising its full-year guidance. The previous range was $6.82 to $7.02 per share. The new range is $6.90 to $7.04 per share.

For Q2, they’re looking for $1.70 to $1.74 per share. Wall Street was at $1.68 per share.

Express also updated their status with Anthem. It looks like the two may part ways at the end of 2019.

The Company’s current long-term PBM contract with Anthem expires on December 31, 2019, and Anthem is currently engaged in a Request for Proposal (RFP) process for a PBM service provider following the end of its contract with Express Scripts. While the Company has not formally participated in the RFP process, in recent months, management for the Company and Anthem have had several conversations in which the Company proposed providing as much as $1 billion in annual value ($3 billion in the aggregate) in the form of price concessions for 2017-2019 in connection with a negotiated contract extension for the period beyond 2019 at prevailing market rates. Although conversations have been ongoing, the Company was recently told by Anthem management that Anthem intends to move its business when the Company’s current contract with Anthem expires on December 31, 2019, and that Anthem is not interested in continuing discussions regarding pricing concessions for 2017-2019 or in receiving the Company’s proposed pricing for the period beyond 2019. As a result, today Express Scripts has elected to provide information as to its financial performance with and without Anthem, without any obligation to do so, in order to demonstrate that the Company’s core PBM business, excluding Anthem, is well positioned for future growth. See Appendix A for additional details regarding the Company’s relationship with Anthem and the history of the agreement between the parties.

“It is difficult for us to understand why Anthem has not recognized the potential value which could be brought forth by engaging in meaningful discussions regarding a mutually beneficial pricing arrangement for the remaining term of our contract and beyond,” said Tim Wentworth, President and CEO of Express Scripts.

The shares are down about 11% in the after-hours market.

Some Numbers on Today’s Market
Posted by Eddy Elfenbein on April 24th, 2017 at 4:21 pm

A very good day for us. Here are some numbers.

The S&P 500 rose 1.08% to close at 2,374.15.

Our Buy List today gained 1.83%, thanks to a 19.50% gain for CR Bard. Without BCR, the rest of the Buy List was up 1.05% which was basically inline with the market. By the way, Becton, Dickinson (BDX) fell 4.44% today.

For the year, our Buy List is now up 8.75% compared with 6.04% for the S&P 500. That doesn’t include dividends.

We hit new highs today in AFL, ADS, BCR, FISV, MSFT, MCO, SHW and SYK.

The broader market saw new highs for the Nasdaq. It’s not far from breaking 6,000. Among S&P 500 sectors, we had new highs in Industrials, Consumer Discretionary and Tech. Among S&P 500 stocks, new highs beat new lows 78 to 2.