Archive for April, 2012

  • Morning News: April 27, 2012
    , April 27th, 2012 at 6:26 am

    Downgrade Hits Spanish Bonds

    SNB Is Ready to Act as Franc Poses Challenges, Jordan Says

    Yuan Exceeds Previous Band For First Time Since Widening

    Italian Borrowing Costs Jump at $7.9 Billion Auction

    Goldman Insider Probe Grows

    Cooling Job Market Takes Toll on U.S. Confidence

    Chesapeake’s Outlook Dims as Board Switches Course on CEO Loans

    Trouble With the Top Man

    Starbucks Sells Off Big As High Coffee Costs Pressure Profits

    Sales Drive Daimler Profit

    BASF’s Oil Unit Offsets Flagging Chemicals Profits

    Honda Profit Jumps

    Sharp Posts Record Loss, Expects To Stay In Red

    Samsung Ends Nokia’s 14-Year Run as Biggest Handset Maker

    Cullen Roche: CSX: The Economy Is Slowly Improving

    Joshua Brown: Quick Take on Today’s Jeffrey Gundlach Presentation in NYC

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  • Q1 Earnings Summary So Far
    , April 26th, 2012 at 12:19 pm

    So far 267 companies in the S&P 500 have reported earnings. Of that, 190 have beaten earnings, 45 have missed, and 32 have been inline. Earnings growth is tracking at 8% and without financials, it’s at 7.2%.

  • Johnson & Johnson Raises Dividend
    , April 26th, 2012 at 11:37 am

    For the 50th year in a row, Johnson & Johnson ($JNJ) raised its dividend. The company boosted its quarterly dividend from 57 cents to 61 cents per share. At the current price, the yield works out to 3.77%.

  • Morning News: April 26, 2012
    , April 26th, 2012 at 5:32 am

    Rand Rises to Three-Week High as Bonds Gain on Fed Statement

    Deutsche Bank Profit Drops on Debt Crisis

    Santander Profit Falls As Loan-Loss Provisions Jump

    Anti-Euro Le Pen Gain Spooks Overseas Investors in French Stocks

    Fed Cuts U.S. Growth Forecast for 2013 and 2014

    White House Announces Intention to Encourage Biological Manufacturing Methods

    Chasing Fees, Banks Court Low-Income Customers

    Nasdaq-100 Has Biggest Advance in 2012 as Apple Jumps

    For Apple, China Is Middle Kingdom

    Shell Profit Beats Estimates as Asset Sales Target Raised

    Barclays Profit Rises on Rebounding Investment Bank

    Caterpillar Revenue Misses Estimates as China Sales Slow

    Chrysler Reports Best Quarter Since Fiat Alliance

    Alcatel-Lucent Cautions on Europe, U.S.

    AstraZeneca’s Brennan to Retire; Forecast Cut

    Jeff Miller: Don’t Like the Real Data? Just Pretend!

    James Altucher: Note to Facebook Shareholders: What to Do After You Make a Zillion Dollars

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  • Guy Rang Closing Bell 90 Seconds Too Early
    , April 25th, 2012 at 9:57 pm


  • AFLAC’s Earnings Call
    , April 25th, 2012 at 6:19 pm

    From Seeking Alpha, here’s a key part of AFLAC’s ($AFL) earnings call. I highlight this because it hasn’t received much attention, but AFLAC actually raised its earnings guidance slightly for next year:

    We increased our cash dividend to shareholders in 2011 for the 29th consecutive year. Our objective is to grow the dividend at the rate in line with our earnings per share before the impact of the yen. I believe dividends are an important component of the value we provide the investors. We will again evaluate a dividend increase as the year progresses, but I am confident we will extend our consecutive annual dividend increases to 30 years.

    As we have indicated, given our capital structure, our ability to repurchase shares is largely tied to profit repatriation. We mentioned on our fourth quarter call, we estimated 2012 profit repatriation to be about JPY 25 billion, assuming no additional material investment losses through Aflac Japan’s FSA fiscal year end. We still believe that’s a reasonable estimate. We will make a decision about the amount of money we will transfer from Japan to the U.S. around mid-year. And thinking of that decision, we’ll be taking into consideration the needs of our stakeholders in Japan, including our policyholders, but we will continue to be cautious about deploying that capital. If we do purchase any shares this year, it would be late in the fourth quarter. Keep in mind there are many factors involved in this decision and we’ll closely monitor our options. Importantly, we don’t need to repurchase shares to make our 2012 earnings. Furthermore, assuming we incur no material investment losses between now and mid-2013, we would expect to maintain a strong solvency margin ratio and significant capacity for profit repatriation and share repurchase.

    You’ll recall, we previously shared that our 2012 operating earnings objective was 2% to 5% growth before currency. We expect the new accounting for DAC to lower earnings per share by approximately $0.05 this year. However, we believe we can cover that impact and still achieve our original target of $6.46 to $6.65 per diluted share before the currency. That means our range for this year increased actually to 3% to 6% over the restated 2011 numbers. We will give you details about 2013 outlook at the analyst meeting next month, as we do each year. But I can say that we still expect the rate of earnings growth in 2013 to improve over 2012. I’m very excited about the opportunities ahead for Aflac.

    Because of some accounting changes, AFLAC’s earnings for last year will be restated slightly lower. However, AFLAC says that its earnings-per-share target of $6.46 to $6.65 is still on. Previously, AFLAC had said that it sees earnings growing by 2% to 5% this year. Now that becomes 3% to 6%.

    But here’s the key: AFLAC has said that earnings growth in 2013 will be better than 2012, and they reiterated that again today. So let’s say that AFLAC earns $6.60 per share this year. Considering they just beat earnings by a lot, I think it’s reasonable to assume they’ll be at the high end of the range. That translates to 5% growth for this year. If AFLAC accelerated to, say, 6% growth next year, that comes to earnings of $7 per share.

  • Is the Market Up or Down?
    , April 25th, 2012 at 3:58 pm

    I’m not a big fan of price-weighted indexes like the Dow Jones Industrial Average. The S&P 500 is far better and that’s what I almost always refer to when I look at the market.

    Here’s a good example of how off indexes can be. Since March 24, 2000 — the peak of the market — the Dow is up 17.8% while the S&P 500 is down 8.9%. That’s a huge spread.

  • Today’s Fed Statement
    , April 25th, 2012 at 12:34 pm

    Hot off the presses:

    Information received since the Federal Open Market Committee met in March suggests that the economy has been expanding moderately. Labor market conditions have improved in recent months; the unemployment rate has declined but remains elevated. Household spending and business fixed investment have continued to advance. Despite some signs of improvement, the housing sector remains depressed. Inflation has picked up somewhat, mainly reflecting higher prices of crude oil and gasoline. However, longer-term inflation expectations have remained stable.

    Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth to remain moderate over coming quarters and then to pick up gradually. Consequently, the Committee anticipates that the unemployment rate will decline gradually toward levels that it judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The increase in oil and gasoline prices earlier this year is expected to affect inflation only temporarily, and the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate.

    To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

    The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.

    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who does not anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate through late 2014.

  • Hudson City Earns 15 Cents Per Share for Q1
    , April 25th, 2012 at 11:28 am

    Hudson City ($HCBK) just reported first-quarter earnings of 15 cents per share which was inline with forecasts.

    Hudson City Bancorp Inc posted a first-quarter profit as the lender kept aside less money to cover soured loans.

    The holding company for Hudson City Savings Bank reported net income of $73 million, or 15 cents per share, compared with a net loss of $555.7 million, or $1.13 per share, a year ago.

    Provision for loan loss for the quarter fell about 38 percent to $25 million as fewer borrowers are defaulting on loans, helping the bank set aside less capital to make up for those losses.

    Net interest margin – the difference between what the bank earns on loans and pays out on deposits – increased to 2.15 percent from 1.72 percent, a year ago.

    The company expects margins to be pressurized in 2012 as interest rates are expected to remain low.

  • Looking at Apple’s Value
    , April 25th, 2012 at 10:42 am

    If you haven’t heard yet, Apple ($AAPL), which I believe is some sort of fruit company, reported outstanding earnings yesterday. For the last nine years, the shares have gained an average of 1% each week. When looking at this company’s numbers, words really do fail me.

    What you can’t do with words you can do with a chart, so below I’ve made a chart of Apple’s stock along with its earnings-per-share. What’s incredible to me is that the stock is still going for a fairly decent price.

    The blue line is Apple’s stock and the red line is Apple’s earnings-per-share. The black line is Wall Street’s earnings forecast (I’ll have more on the black line in a moment.) The blue line follows the left scale and the red line follows the right scale.

    The two lines are scaled at a ratio of 16 to 1 which means that whenever the lines cross, Apple’s P/E Ratio is exactly 16. I don’t mean to suggest that’s the appropriate multiple for Apple. I used 16 simply because it makes the chart more readable.

    About the black line. Apple’s earnings yesterday not only exceeded Wall Street’s forecast but also beat the forecast for the same quarter one year from now. As a result, it appears that Wall Street expects an earnings slowdown. Of course, this isn’t true because analysts will most certainly revise their estimates much, much higher.

    For now, I think the best way to view Wall Street’s forecast is to imagine the black line extending from $41 currently to roughly $57 by the end of next fiscal year (September 2013).

    With trailing earnings of $41 per share, an earnings multiple of 16 translates to a price of $656. If Apple can earn $57 next fiscal year, then 16 times that comes to $912. I’m not saying Apple will do this, but I believe these are very reasonable assumptions.

    Actually, this may understate Apple’s P/E ratio due to the company’s giant pile of cash. The company has an astounding $110 billion in cash. That’s roughly $116 per share. That $116 is probably contributing almost nothing to Apple’s bottom. I mean…have you seen short-term interest rates lately? The only info I have is from the earnings report which lists “other income” of $148 million. Annualized, that’s about 0.5% of Apple’s cash horde.

    So to properly look at Apple’s value, we need to apply a multiple to an earnings forecast and then add $116 to that. By the way, Apple will soon start paying a quarterly dividend of $2.65 per share which comes to $10.60 for the year.

    Addendum: Here’s the same chart but with a log scale. I apologize but I don’t know how to make a readable log chart excel chart, so you’ll have to do with seeing the log value on the y-axis. It gets the point across since you can see the earnings line climbing at a consistent rate.

    Notice how slightly the recession impacted Apple. You can also see how conservative the earnings estimates are compared with Apple’s earnings trend.

    (Instead of a ratio of 16 to 1, this chart has a log spread of 1.2 which comes to a ratio of 15.85 to 1, so it’s nearly the exact same.)