Posts Tagged ‘josb’
JoS. A Bank Warns
Eddy Elfenbein, January 28th, 2013 at 7:14 am
At the end of last year, I decided to take JoS. A Bank Clothiers ($JOSB) off our Buy List. It wasn’t too much of a surprise for long-term readers of our humble blog. The company had not one, but two awful, terrible earnings reports last year.
As I often point out, business problems aren’t like a sports team in a slump. You can’t just shake them off. If there’s a problem, there’s usually something important driving it and the problem will most likely get worse before its resolved.
This past Friday evening at 8 pm, JOSB issued a press release. Without knowing too much about PR, you can be pretty sure that anything in a press release going out at that time isn’t going to be good news. And in this case, you would be correct.
Joey Banks said that net income for FY 2012 would be “approximately 20%” lower than the year before. The silk tie has hit the fan. Neal Black, the CEO, said:
The fourth quarter started out slowly, as the first two weeks of fiscal November were negatively impacted by the aftermath of Hurricane Sandy, the distractions created by the presidential election and the uncertainty of the fiscal cliff. Going into the critical holiday selling season, starting on Black Friday, we believed we had a strong marketing and promotional strategy for the period. However, many of the promotional items and a large part of our holiday assortment were items that sell best in cold weather and the weather was unseasonably warm.
Oh dear lord. This is a cartoonish example of someone refusing to take responsibility; Hurricane Sandy, the fiscal cliff, the election and unseasonably warm weather. You gotta be kidding me. I hate to inform Mr. Black that presidential elections aren’t what we call unforeseen events.
Let’s run some math. Last year, JOSB earned $3.49 per share, so a 20% decline would be earnings to $2.79 per share. For the first three quarters of this fiscal year (which ends at the end of the month), JOSB earned $1.83 per share. So that translates to Q4 earnings of 96 cents per share. How bad is that? Wall Street had been expecting $1.76 per share. In other words, this is a massive shortfall.
I’m glad we got this dog off the Buy List. Monday’s opening trade will not be pretty.
CWS Market Review – November 30, 2012
Eddy Elfenbein, November 30th, 2012 at 8:43 am
Time is your friend, impulse is your enemy. – Jack Bogle
After a short downturn following the election, the bulls have once again taken control. This is exactly what I expected would happen, and I continue to believe we’re in the midst of a nice year-end rally.
On Thursday, the S&P 500 touched a three-week high, and the NASDAQ Composite broke 3,000. The bulls were helped this week by a spate of positive economic news. For example, we learned that consumer confidence is now at a four-and-a-half-year high, and pending home sales are at a five-year high. And, as hard as it may be to believe, there was even good news out of Greece.
This is more evidence that the Double Dip crowd once again got way ahead of themselves. For the time being, there’s no immediate threat of a recession. Since November 15th, the S&P 500 has rallied 4.6%. The index is now only 0.5% away from breaking its 50-day moving average, and we’re only 3.5% away from our highest close since 2007.
Of course, you probably wouldn’t know this by watching much of the financial media. The gloom-and-doomers have gotten far more attention than they deserve. Consider that 14 months ago, Intrade believed there was a 65% chance that the U.S. would enter a recession in 2012. Today that figure stands at 1%.
In this week’s CWS Market Review, we’ll take a closer look at why the Fiscal Cliff is nothing but hype. The media is largely inventing new worries for us. We’ll also discuss the terrible, rotten earnings report from JoS. A Bank Clothiers ($JOSB). Here’s a sneak preview: I’m not pleased with JOSB. More on that later.
Despite some unpleasantness, our Buy List continues to thrive. Our strategy of discipline and patience is working out very well. AFLAC ($AFL), for example, is at an 18-month high. Only a few months ago, it was below $40 (see chart below). Plus, stocks like Ford ($F) and Oracle ($ORCL) have been particularly strong lately. Ford finished the day on Thursday at its highest close in seven months. But first, I want to tell you why you should ignore the ridiculous hype surrounding the Fiscal Cliff.
Don’t Fall for the Fiscal Cliff Hype
Wall Street’s fortunes seem to be beholden to the Fiscal Cliff (a registered trademark of CNBC). Late in the day on Tuesday, some rather casual remarks by Senator Harry Reid were enough to knock a few points off the S&P 500. The same thing happened again on Thursday, but this time, the remarks came from House Speaker John Boehner. Then, as word of progress leaked out, well…the market started to gain traction.
Let me be clear: The threat from the Fiscal Cliff is greatly, hugely and fantastically exaggerated. It’s almost reached comical levels. The behavior at CNBC in particular has been reprehensible. The network is simultaneously over-hyping the threat while presenting themselves as the saviors. Folks, there’s nothing to worry about.
Of course, if we really were to go over the cliff, that would be bad news—and that’s precisely why it won’t happen. In the meantime, both sides need to prove to their respective bases that they’re not backing down. It’s for show, like you see in a nature program about silver-backed gorillas fighting for dominance.
But let’s get some facts. For one, the threat is easily avoidable. The White House and Congress have too much to lose by not reaching a deal. In fact, a recent article at Politico suggests that, despite the rhetoric we hear in public, the framework of a deal is starting to take shape. Neither side will get everything it wants, but they’ll both get enough to walk away with some pride. Also, remember that this deal is being made with the lame-duck Congress. That means there are a few folks who won’t even be members of Congress in a few weeks. In fact, a deal may even be reached some time in the new year. In a few months, no one will be talking about this.
The market has resigned itself to the fact that taxes will go up. That’s no surprise. In response, dozens of companies like Costco ($COST) and Las Vegas Sands ($LVS) have announced special dividends. Other companies like Walmart ($WMT) have moved up their dividend dates in order to avoid the taxman. An analyst at Deutsche Bank suggested that Bed, Bath & Beyond ($BBBY), one of our Buy List stocks, could pay a special dividend. I’m a doubter, but I will note that the home-furnishings company is sitting on $4 per share in cash.
One good way of putting the Fiscal Cliff threat into perspective is by looking at how well defense and aerospace stocks are doing. Needless to say, any sequester would be very bad news for these companies. The Defense Sector ETF ($ITA) badly lagged the market for most of this year. Its relative performance reached a low point in late September, but then, except for a brief period in mid-November, the ITA has been leading the market ever since. This tells me that that no one has the motive for a prolonged fight. Furthermore, the Volatility Index ($VIX) has remained subdued, and the stock market has largely avoided wild daily swings in the past few weeks. There’s only been one daily swing of more than 2% in the last two months, and that was the big sell-off on the day after the election. This has been a calm market.
The Math Still Favors Stocks
Due to market leadership from the Industrials and Consumer Discretionary sectors, I suspected that the sell-off would be short-lived. That’s not the script that sell-offs usually follow. Since June 5th, the Consumer Discretionary ETF ($XLY) is up by 12.2%. In simpler terms, the homebuilders and shoppers are waking up from their slumber. Even some crummy tech names have been doing well. Thanks to a jump in shares of Facebook ($FB), Mark Zuckerberg has made a cool $4 billion in the last three weeks.
The good news about pending home sales, combined with a positive report on home prices, suggests that the housing recovery (such as it is) is propping up consumers. Mind you, there are still weak spots out there. Tiffany ($TIF), for example, just lowered guidance. But these are special cases rather than general rules.
Probably the best news for investors this week was largely ignored. Charles Evans of the Federal Reserve said that the Fed needs to extend its bond-buying programs until the economy can consistently add 200,000 jobs per month. Until now, the Fed has been reticent in giving a specific economic target as to when they need to take their foot off the gas. I don’t know if Evans will get his way, but we now know there are some voices inside the Fed willing to pursue these policies.
The bottom line is that there’s no possible solution to the Fiscal Cliff that alters the value spread between stocks and bonds. With the Fed gobbling Treasuries like Santa eating cookies, yields are low and will likely remain so. In fact, the austerity that would result from a Fiscal Cliff deal would add even more pressure.
Let’s look at some numbers. Analysts now expect 2012 earnings for the S&P 500 of $99.76, and $113.40 for 2013. In June 2011, analysts expected the S&P 500 to earn $111.82 for 2012. So that’s a big change in outlook, yet the market rallied. The reason we rallied is that the market had dramatically overreacted to fears from Europe. Over the last 14 months, earnings estimates for Q4 have come down, on average, about 1% per month. Yet even these lowered numbers represent an acceleration of earnings growth. Prudent investors are in excellent shape right now. The indexes are up, and dividends are having a banner year. I think the S&P 500 can hit 1,500 by March.
JoS. A Bank Clothiers Bombs
One aspect of being a good investor is being upfront about our mistakes. After all, that’s how we learn. One big mistake we made this year was having JoS. A Bank Clothiers ($JOSB) on our Buy List. For the second time this year, Joey B badly missed earnings. I understand it happening once, but two times tells me there are some serious problems.
On Wednesday, JOSB reported fiscal Q3 earnings of 47 cents per share, which was nine cents below estimates. Sales actually did pretty well, both total and comparable-store. But profits tanked. This tells us that JOSB is probably overstocked, and they’re dumping inventory at any price—hence all the buy-one-suit-get-78-free commercials.
What’s even worse is that JOSB warned that comparable-store sales were down in November, and the company is “cautious” about Q4. That’s not good. Let’s just say that JOSB probably won’t be on next year’s Buy List.
Oracle Is a Buy Up to $35
We have earnings reports due soon from Oracle ($ORCL) and Bed Bath & Beyond ($BBBY). In our last issue, I highlighted Oracle as a good buy, and the shares rose to a two-month high. Oracle looks ready to break out with a new 52-week high. The company is due to release its next earnings report in about two weeks. I’m expecting another strong report. Oracle remains a strong buy any time it’s below $35 per share.
One quick word about Stryker ($SYK). I expect SYK will soon raise its quarterly dividend. The company currently pays out 21.25 cents per quarter. I think they’ll bump it to around 23 cents per share in the next week or so. This is a solid company. They’ve raised their dividend every year since 1995. Stryker is a good buy up to $57.
That’s all for now. On Monday, we’ll get the ISM report for November. All eyes on Wall Street will be focused on Friday’s big employment report. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!
JoS. A. Bank Earns 47 Cents Per Share
Eddy Elfenbein, November 28th, 2012 at 8:11 am
For its fiscal Q3, JoS. A. Bank Clothiers ($JOSB) reported earnings of 47 cents per share. That’s nine cents per share below Wall Street’s forecast. I expect the stock to have a rough day today.
JOSB’s top-line growth was pretty decent. Total sales rose by 11.1% and comparable store sales rose by 4.8%.
So what went wrong? Joe Bank’s profit margins got squeezed and the company also blamed Hurricane Sandy:
“We are pleased that we were able to deliver comparable store sales growth and Direct Marketing segment sales growth during the third quarter of fiscal year 2012. However, we are disappointed that our net income declined versus the same period a year ago. We had a decline in our operating income margin due to additional markdowns and promotional activity which were needed to drive these sales. Also, Hurricane Sandy, which hit along the East Coast where the majority of our largest volume regions are located, negatively impacted third quarter sales, particularly when we ran a big promotion right at the end of the quarter,” stated R. Neal Black, President and CEO of JoS. A. Bank Clothiers, Inc. “The hurricane, along with the distractions of the national election, continued to have a negative impact in the first weeks of November. In November, for the start of the fourth quarter, comparable store sales were down. With the critical month of December still ahead of us, and continued pressure on margins, we remain cautious for the outcome of the fourth quarter,” continued Mr. Black.
CWS Market Review – August 31, 2012
Eddy Elfenbein, August 31st, 2012 at 8:02 am
“The investor’s chief problem—and even his worst enemy—is likely to be himself.” – Benjamin Graham
Even though the stock market is still in its late-summer doldrums, our Buy List stocks made some very impressive headlines this week. First, Hudson City ($HCBK) jumped 15% in one day after it announced a $3.7 billion merger agreement with M&T Bank ($MTB). Then JoS. A. Bank Clothiers ($JOSB) soared 14% thanks to a very strong earnings report. Looking at the numbers, our Buy List has had a very good August. In the last four weeks, the Buy List gained 5.9%, which is more than double the gains of the S&P 500.
As Churchill said on V-E Day, “We may allow ourselves a brief period of rejoicing.” While this month was great for our Buy List, let’s not get overconfident. This is a tough market, and there are many stocks, such as Amazon.com ($AMZN), that are extremely dangerous to own. The bond market looks shaky as well. As always, patience and discipline are our keys to success.
In this week’s CWS Market Review, I’ll bring you up to speed on the latest developments. Plus, I’ll tell you the best way to position yourself in the weeks ahead. We also had a pleasant 12.1% dividend increase from Harris Corp. ($HRS). This quiet little stock just had a remarkable run, rallying on 18 out of 21 days—and it’s still going for less than 10 times earnings. Now let’s take a closer look at the news from Hudson City and Joey Bank.
Hudson City Agrees to Merge with M&T
At the start of the week, Hudson City Bancorp said it had agreed to merge with M&T Bank ($MTB) in a deal worth $3.7 billion. Shares of HCBK jumped 15.7% on Monday.
I have to confess some embarrassment, since I had actually been down on HCBK and recently lowered the stock to a “hold.” The board members at M&T apparently aren’t subscribers to CWS Market Review. The merger between MTB and HCBK is interesting for several reasons. One is that this is the largest bank merger since Dodd-Frank came into effect. I think banks have been understandably reluctant to do any large deals since the financial crisis. Regulators certainly will be paying extra-close attention to any merger.
The merger agreement allows shareholders of Hudson City to take cash or 0.08403 shares of MTB for each share of HCBK they own. Given where MTB closed last Friday, that values HCBK at $7.22 per share. Here’s another interesting twist. The acquisitor in any large deal normally sees its stock drop. But this time, shares of MTB rallied 4.6% on Monday. That really caught Wall Street’s attention. Plus, when MTB rises, it values HCBK even more. M&T closed the day on Thursday at $87 per share, which translates to $7.31 for HCBK (note that HCBK is slightly discounted relative to the merger ratio). If MTB can get to $95, which is a very fair valuation (12.4 times next year’s earnings estimate), then that would value HCBK just shy of $8. I’m not saying it will happen, but it’s a very plausible scenario.
The merger agreement calls for the total payment from MTB to be 60% in stock and 40% in cash, so individual shareholders may not get the exact allocation they want. It all depends on what the balance of HCBK shareholders say (here’s a transcript of the conference call).
My recommendation for HCBK holders is to take shares of MTB. That’s what we’re going to do on the Buy List. M&T is a good bank, and it pays a decent dividend. M&T hasn’t had a losing quarter in 36 years. They were also one of the very few large banks to maintain their dividend through the financial crisis.
Bear in mind that we’re not in any hurry to exchange our shares. According to the conference call, the banks are looking to wrap up the deal by the second quarter of next year. That’s between seven and ten months away. I should remind you that any deal, no matter how solid it looks, does have a chance of falling apart. It’s certainly not likely, but the odds aren’t zero either. On the conference call, management said they hope to maintain Hudson’s dividend, but they need to hear from the regulators. For now, I rate Hudson City a good buy any time the shares are below $7.50.
Joey Bank Soars on Strong Earnings
On Wednesday, JoS. A. Bank Clothiers stunned everybody, including me, by reporting very strong earnings. The stock vaulted 14% that day, which came on the heels of a 3.5% rally on Tuesday. If you recall from last week’s CWS Market Review, I was rather skeptical of this earnings report.
For JOSB’s fiscal second quarter, they earned 83 cents per share, which was 10 cents more than Wall Street’s consensus. At one point on Wednesday, JOSB was up close to 19%. If you recall, the last earnings report was a dud. While the recent rally is impressive, JOSB is really taking back a lot of the ground it lost during the spring. It appears that short-sellers were ganging up on JOSB, and once the strong earnings came out, they got routed. The shorts then had to cover their positions and that drove the stock even higher, which in turn caused more shorts to scramble for the exits. That’s not a fun game to play.
Looking at the numbers in the earnings report, JOSB did quite well. Total sales rose by 12.9% to $260.3 million. That was almost $10 million more than Wall Street had been expecting. Sales at JOSB’s direct marketing segment, which includes internet sales, rose over 39%. The important metric in retailing, same-store sales, saw an impressive rise of 6.1%.
I was pleased to hear that JoS. A. Bank has very ambitious plans for the future. The company hopes to open 45 to 50 stores this fiscal year and next year as well. I’m going to raise my buy price on JOSB to $50. I also want to warn you to expect a bit of volatility from this stock. If that unnerves you, it may be best to stay away.
Harris Corp. Is a Buy up to $50
One of the biggest surprises this year has been the performance of Harris Corp. ($HRS). The company, which makes communication equipment, was a new addition to this year’s Buy List, but I don’t think I could have imagined that it would be our best-performing stock so far this year. Through Thursday’s trading, Harris is up 30.7% since the start of the year for us.
On Wednesday, Harris announced that it’s raising its quarterly dividend by 12.1%. This is their second dividend increase this year. Six months ago, Harris raised its dividend from 28 cents to 33 cents per share. Now it’s rising to 37 cents per share. That makes the current yield 3.1%, which is more than a 30-year Treasury.
Some Buy-List Bargains
As I said last week, I’m expecting a minor pullback over the next few weeks. Nothing big, but we may shed a few points here and there. In fact, the S&P 500 closed just below 1,400 on Thursday. There are good buys out there. I want to highlight a few stocks on our Buy List that look especially good right now.
Oracle’s ($ORCL) earnings, for example, are only a few weeks away. I’m expecting more good news. Ford ($F) and Moog ($MOG-A) are pretty cheap here. If volatility doesn’t bother you, then JPMorgan Chase ($JPM) is a strong buy.
That’s all for now. The stock market will be closed on Monday for Labor Day. Next week, we’ll get some important economic reports, such as the ISM and productivity reports, and the big jobs report comes next Friday. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!
JoS A Bank Soars on Strong Earnings
Eddy Elfenbein, August 29th, 2012 at 3:35 pm
For the second time this week, one of our Buy List stocks is soaring. And for the second time, it was one of the stocks I had been down on.
This morning, JoS. A. Bank Clothiers ($JOSB) reported quarterly earnings of 83 cents per share for its fiscal second quarter. That was 10 cents per share more than Wall Street had been expecting. The metric is that same-store sales were up 6.1%. The company did especially well with its online sales.
JoS A Bank, which competes with Men’s Wearhouse Inc, has set up Amazon.com Inc and eBay Inc stores, aiming for a bigger slice of shoppers’ wallets by catering to different consumers than the ones who come to their own websites and physical stores.
Sales at its direct marketing segment, which comprises the Internet and catalog call centers, rose 39.3 percent for the second quarter. The segment recorded higher sales in August compared to last year, the company said.
Direct marketing, driven primarily by Internet sales, accounted for about 10 percent of total sales last year.
Several retailers are looking to grow into the online market place by setting up storefronts on Amazon and eBay.
JoS A Bank also signed up for PayPal’s in-store service in May that allows shoppers to pay through their mobile phones, making purchases at brick-and-mortar stores easier.
Comparable store sales increased 6.1 percent for three months ended July 28. Total sales rose 12.9 percent to $260.3 million.
In last week’s CWS Market Review, I expressed my frustration with JoS. A. Bank. I even said that adding it to this year’s Buy List was a mistake. This is why I don’t try to time the market. Though in my defense I did say that the stock wasn’t unreasonably priced at $41.
At one point today, the stock was up 18.76%, and that doesn’t include the stock’s 3.51% rally yesterday. JOSB has settled down some and it’s currently up just over 14%. Of course, much of today’s gain is merely walking back losses from earlier in the year. As of now, JOSB is down just over 2% for the year.
CWS Market Review – June 1, 2012
Eddy Elfenbein, June 1st, 2012 at 9:18 am
This morning, the government reported that the U.S. economy created just 69,000 jobs in May. This was well below expectations, and last month’s numbers were revised downward as well. The national employment rate ticked up from 8.1% to 8.2%. That’s just lousy, and it’s yet more data in a run of below-average economic news.
Before anyone gets too worked up over the jobs numbers, let me remind you that these are very imprecise estimates. The media breathlessly reports these figures as if they were handed down from Mount Sinai, but as Jeff Miller notes, the margin of error for these reports is exceedingly wide. The numbers are also subject to large revisions in the coming months.
Still, we have to adjust ourselves to the reality that the economy isn’t doing as well as most folks believed a few weeks ago. The jobs gains simply aren’t there. The other negative economic news this week included a sharp drop in consumer confidence, a rise in first-time claims for unemployment insurance and a negative revision to first-quarter GDP. The last one is old news since we’re already into the back-end of the second quarter.
Treasury Yields Hit an All-Time Low
I can’t say that I find the sluggish economic news surprising. In the CWS Market Review from two weeks ago, I wrote that economically sensitive cyclical stocks had been badly lagging the market. This is an important lesson for investors because by following the relative strength of different market sectors, we can almost see coded messages the market is sending us. In this case, investors were bailing out of cyclical stocks while the overall market wasn’t harmed nearly as much. Now we see why.
Since February 3rd, the S&P 500 is down by 2.6%, but the Morgan Stanley Cyclical Index (^CYC) is off by more than 11%. Looking at the numbers more closely, we can see that the Energy and Materials sectors have been sustaining the most damage. ExxonMobil ($XOM), for example, lost over $30 billion in market cap in May. The price for oil slid 17% for the month thanks to weak demand from Europe. Interestingly, the Industrials had been getting pummeled, but they’ve started to stabilize a bit in the past few weeks.
Tied to the downturn in cyclical stocks is the amazing strength of Treasury bonds. On Thursday, the yield on the 10-year Treasury bond got as low as 1.54% which is the lowest yield in the history of the United States. The previous low came in November 1945, and that’s when the government worked to keep interest rates artificially low. A little over one year ago, the 10-year yield was over 3.5%. Some analysts are now saying the yield could soon fall under 1%.
Don’t blame the Federal Reserve for the current plunge in yields. While the Fed is currently engaged in its Operation Twist where it sells short-term notes and buys long-term bonds, that program is far too small to have such a large impact on Treasury rates. The current Treasury rally is due to concerns about our economy and the desire from investors in Europe to find a safe haven for their cash. I strongly urge investors to stay away from U.S. Treasuries. There’s simply no reward for you there. Consider that the real return is negative for TIPs that come due 15 years from now. Meanwhile, the S&P 500 is going for 11 times next year’s earnings estimate. That translates to an earnings yield of 9%.
The latest swing in opinion seems to believe that Greece will give staying in the euro another shot. It’s hard to say what will happen since we have new elections in two weeks. Still, I think the country will at least try to keep the euro. The reason is that Greece’s economy is very small compared to the rest of Europe. If it leaves the euro, the headaches involved will be too much to bother with.
The real issue confronting Europe is Spain’s trouble which can’t so easily be swept under the rug. Their banking system is a mess. Think of us as reliving 2008 with Greece being Lehman Brothers and Spain being AIG. The major difference with this analogy is that Europe may not be able to bail out Spain even if it wanted to. So far, the Spanish government is putting up a brave front and is strongly resisting any form of a bailout. The politicians there obviously see how well that played out with public opinion in Greece.
In Germany, the two-year yield just turned negative (ours is still positive by 27 basis points). While much of Europe is in recession (unemployment in the eurozone is currently 11%), and China’s juggernaut is slowing down (this year may be the slowest growth rate since 1999), there’s still little evidence that the U.S. economy is close to receding. We’re just growing very, very slowly.
The stock market performed terribly in May. The Dow only rose five times for the month which is the fewest up days in a month since January 1968. The S&P 500 had its worst month since last April. But we need to remember that the U.S. dollar was very strong last month. It’s probably more correct to say that the dollar is less weak than everybody else, but that still translates to high prices for dollars. So in terms of other currencies, the U.S. equity market didn’t do so poorly.
Jos. A. Bank Clothiers Disappoints
We had one Buy List earnings report this past week: Jos. A. Bank Clothiers ($JOSB). The company had already told us that the quarter was running slow, so that muted my expectations. For their fiscal Q1, Joey Bank earned 53 cents per share which missed Wall Street’s consensus by nine cents per share. Quarterly revenue rose by 4.2% to $208.91 million. But the important metric to watch is comparable stores sales, and that fell by 1%. That’s not good.
Shares of JOSB dropped on Wednesday and stabilized some on Thursday. I’m not happy with how this company is performing and it’s near the top of my list for names to purge from the Buy List for next year. Still, I won’t act rashly. The company has said that this quarter is off to a good start: “So far the second quarter has started out much better than the first quarter. For May, both our comparable store sales and Direct Marketing sales are up compared to the same period last year, continuing the positive trend established in the last five weeks of the first quarter. However, Father’s Day, the most important selling period of the quarter, is still ahead of us.” I’m lowering my buy price from $52 to $48 per share.
Shares of Bed Bath & Beyond ($BBBY) broke out to a new all-time high this past week. On Tuesday, the stock got as high as $74.67. It’s our #1 performer for year and is up nearly 25% YTD. The stock is an excellent buy below $75 per share, but I won’t move the buy price until I see the next earnings report which is due out on June 20th.
Two other Buy List stocks I like right now are Ford ($F) and Oracle ($ORCL). Ford has been doing so well that it’s actually having a hard time keeping up with demand. I’m expecting a strong earnings report from Oracle later this month. The May quarter, which is their fiscal fourth, is traditionally their strong quarter. Oracle is an excellent buy under $30 per share.
Before I go, let me say a quick word about Facebook ($FB). In last week’s CWS Market Review, I told you to stay away from the stock, and I was right as the shares have continued to fall. The stock got as low as $26.83 on Thursday. I don’t think Facebook is an attractive stock to own until it reaches $17 to $20 per share. Until then, keep your distance!
That’s all for now. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!
Joey Bank Bombs
Eddy Elfenbein, May 30th, 2012 at 9:51 am
Jos. A. Bank Clothiers ($JOSB) just reported horrible earnings for its first quarter. The company earned 53 cents per share which was nine cents worse than expectations. To be fair, the company had told us that this quarter looked weak but we didn’t know exactly how weak until now. Quarterly revenue rose 4.2% to $208.91 million, although comparable stores sales dropped by 1%.
The stock is getting nicked this morning but this is cause for optimism. JOSB has said that this quarter is off to a good start: “So far the second quarter has started out much better than the first quarter. For May, both our comparable store sales and Direct Marketing sales are up compared to the same period last year, continuing the positive trend established in the last five weeks of the first quarter. However, Father’s Day, the most important selling period of the quarter, is still ahead of us.”
Joey Bank Drops After Earnings Report
Eddy Elfenbein, March 28th, 2012 at 10:12 am
Shares of Jos. A. Bank Clothiers ($JOSB) are down sharply today after the company reported fiscal Q4 earnings of $1.78 per share. The stock has been down as much as 10% today. Despite the sharp drop in the stock, the earnings were inline with Wall Street’s forecast.
In the earnings report, the CEO warned:
The first quarter of 2012 has started out more slowly than we had planned with declines in both comparable store sales and Direct Marketing sales for the first 8 weeks of the quarter. The declines are primarily due to weaker than expected traffic and also due to the warmer winter weather which is resulting in significantly lower sales of outerwear and cold weather merchandise. We are making marketing changes to address the sales trend. We believe that these changes will be effective and appealing to our customers; however we remain cautious about the outcome of the first quarter of 2012.
The company just wrapped up a very strong year. Sales rose 14.2% to nearly $1 billion. The key metric for the industry is comparable store sales, and that rose by 7.6% last year. That’s very good. Net income increased by 13.6% to 97.5 million, and earnings-per-share rose from $3.08 to $3.49.
I’d urge shareholders not to be too worried about today’s sell-off. The stock often gets knocked around after earnings — good or bad — and eventually recovers. Last June, shares of JOSB dropped 13.3% after the company missed earnings by two cents per share. Yet by October, the stock had nearly made up all the lost ground. (The next two earnings reports beat by six cents and by two cents.)
I’m going to lower my buy price from $54 to $52 per share.
Jos. A. Bank Beats By Three Cents
Eddy Elfenbein, November 30th, 2011 at 9:28 am
Another great quarter from Jos. A. Bank Clothiers ($JOSB). The company just reported fiscal Q3 earnings of 54 cents per share which was three cents more than the Street was expecting.
Revenues rose 20.9% to $209.6 million. That’s more than $14 million more than the consensus. Comparable store sales rose by an impressive 14.6%.
JOSB has now grown earnings for 40 of the last 41 quarters including the last 22 in a row. The company also offered a warning about the start of the fourth quarter. Here’s what they had to say:
JoS. A. Bank Clothiers, Inc. announces that net income for the third quarter of fiscal year 2011 increased 19.3% to $15.0 million as compared with net income of $12.6 million for the third quarter of fiscal year 2010. Earnings per share for the third quarter of fiscal year 2011 increased 20.0% to $0.54 per share as compared with earnings per share of $0.45 for the third quarter of fiscal year 2010. The third quarter of fiscal year 2011 ended October 29, 2011; the third quarter of fiscal year 2010 ended October 30, 2010.
Total sales for the third quarter of fiscal year 2011 increased 21.0% to $209.6 million from $173.3 million in the third quarter of fiscal year 2010, while comparable store sales increased 14.6% and Direct Marketing sales increased 28.6%.
Comparing the first nine months of fiscal year 2011 with the first nine months of fiscal year 2010, net income increased 18.9% to $53.3 million as compared to $44.9 million and earnings per share increased 18.6% to $1.91 per share as compared to $1.61 per share. Total sales for the first nine months of fiscal year 2011 increased 17.4% to $633.6 million from $539.8 million for the first nine months of fiscal year 2010, while comparable store sales increased 9.9% and Direct Marketing sales increased 26.1%.
“We are pleased to report another solid sales and earnings performance for the third quarter of fiscal year 2011 with sales growth of 21.0% and earnings growth of 19.3%. With this quarter’s results, we have achieved earnings growth in 40 of the past 41 quarters when compared to the respective prior year periods, including 22 quarters in a row,” stated R. Neal Black, President and CEO of JoS. A. Bank Clothiers, Inc. “The fourth quarter, compared to a very strong performance last year, has started out more slowly than we had planned. November comparable store sales declined, while our direct segment sales increased, compared to the same period last year. As a result, we have adjusted our December merchandising and marketing plans for stores. We believe our efforts will be effective and appealing to our customers. Therefore we remain cautiously optimistic for the outcome of this year’s fourth quarter,” continued Mr. Black.
Update: The shares are down today due to the warning mentioned above.
CWS Market Review – October 7, 2011
Eddy Elfenbein, October 7th, 2011 at 9:27 am
On Monday, the S&P 500 finally broke out of its 100-point trading range. For 41 sessions in a row, the index had closed between 1,119 and 1,219. But on Monday, the S&P 500 dropped down to close at 1,099.23. That was our first close below 1,100 in over a year.
Since then, the market has raced higher. On Thursday, the S&P 500 closed at 1,167.97 which is a 5.98% surge in just three days. Naturally, we shouldn’t get too excited by this recent uptick. For the last several weeks, the stock market has bounced up and down in high-volatility spikes, but ultimately, we haven’t moved very far. However, with earnings season upon us, this time could be different.
As usual, the hurdle has been Europe, and more specifically, Greece. For a few months now, investors have been jerked around as we wait to hear something (anything!) promising from the Old World. Unfortunately, European officials seem firmly committed to doing a series of half-steps—and after each one, they seem puzzled that things aren’t getting any better. The good news is that it appears as if some folks in Europe are starting to understand what needs to be done.
In this issue of CWS Market Review, I want to give you a preview of the third-quarter earnings season. While the overall market continues to spin its wheels, I think several of our Buy List stocks are poised to surge higher. In fact a few of our stocks, like Deluxe ($DLX) and Ford ($F), have already started to turn the corner.
I’m writing you in the wee hours of Friday morning. Later today, we’ll get the crucial jobs report for September. Wall Street has been dreading this report for several days now, and it’s easy to understand why. Frankly, nearly every jobs report for the last few years has been dismal. I’m afraid I’m not expecting much better for September’s report. Wall Street is expecting a gain of 60,000 nonfarm payroll jobs, and as low as that estimate is, it might be too high.
If the news is better than expected, it may take some of the pressure off the Federal Reserve to get the economy going again. But bear in mind that the economy needs to create, on average, 200,000 net new jobs every month for a few years to get back to anywhere near normal. Truthfully, I think many of our economic problems are beyond the scope of the Fed’s repair kit, but I’ll save that for another time. If Friday’s jobs report is worse than expected, well…we’re already down so much that it may not hurt equities (although the political fallout could be dramatic).
The truth is that the U.S. economy isn’t doing nearly as badly as is generally perceived. Of course, I’m not saying that the economy is humming along. I’m just saying that its performance is far better than the febrile commentary I see every day. Consider that earlier this week Bespoke Investment Group noted that 17 of the last 21 economic reports have come in better than expected. Just this week, the ISM Manufacturing index topped expectations. The ADP jobs report beat consensus and the construction spending report was surprisingly strong. On October 27th, the government will release its first estimate of Q3 GDP growth and I think it’s possible that growth will come in over 2%. That’s not great, but it’s a far cry from a Double Dip.
Another promising note is that bond yields are finally beginning to creep higher. This is an early signal that investors may be willing to take on more risk. What’s interesting is how orderly the increase in risk is turning out to be. Yields for the one-, two- and three-year Treasuries all bottomed out on September 19th. Three days later, the yields for the five-, seven-, ten-, twenty- and thirty-year Treasuries hit their lows. Since then, the yield on the ten-year note has jumped 29 basis points. The five-year yield just closed above 1% for the first time in six weeks. The takeaway is that this orderly exodus out of low-risk investments may provide fuel for a sustained stock rally. Capital always goes where it’s treated best. If Friday’s jobs report comes in strong, Treasuries will continue to fall.
I’m pleased to see that many of our Buy List stocks continue to do well. In the last two weeks, the Buy List has gained 2.11% while the S&P 500 is down by 0.15%. On Thursday, shares of AFLAC ($AFL) got as high as $38.40. That’s the highest price since mid-August and it’s a 22% bounce off the low from two weeks ago. I’ve been flabbergasted by AFLAC’s recent plunge. The company is clearly doing well. I expect to see another strong earnings report on October 26th. I also wouldn’t be surprised to see another upward revision to next year’s earnings guidance. Still, investors seem convinced that AFLAC is taking a bath on its European investments. They’re not. AFLAC is well protected. The stock is a very good buy up to $40 per share.
Another big gainer recently has been JPMorgan Chase ($JPM). Over the last three days, the shares have gapped up by 14%. Next Thursday, JPM is due to report its third-quarter earnings. This will be the first of our stocks to report this season. Due to the problems in Europe and in our economy, Wall Street has been ratcheting down estimates for JPM. The Street currently expects JPM to report 98 cents per share which is 23 cents less than what they were expecting just one month ago.
I have to admit that I don’t have a good feel for what JPM should report next week. In previous quarters, I had a pretty good idea but there are too many unknowns to give you a precise forecast. However, I wouldn’t be surprised to see JPM miss estimates this time around; but I’ll be far more interested to hear what they have to say about their business. JPM continues to be the healthiest of the major banks. Thanks to the lower share price, the stock currently yields 3.2%. I also expect that the bank will bump up that dividend early next year. In fact, they could easily raise the dividend by 30% to 50%. If next week’s earnings report is positive, JPM would be a good buy up to $34 per share.
I’ve been very frustrated by the performance of Ford ($F) but I have to admit that the stock is well below a reasonable valuation for the company. Ford has turned itself around very impressively. I don’t like many cyclical stocks but Ford looks very good here. Sales continue to do well. The shares are currently going for about one-third of its sales. If you’re able to get shares of Ford below $11, you’ve gotten a very good deal.
There are a few other stocks I want to highlight. Over the last three sessions, shares of Deluxe ($DLX) are up nearly 18%. Even after that rally, the shares still yield 4.7%. Jos. A Bank Clothiers ($JOSB) is up over 10% since Monday and Wright Express ($WXS) has tacked on 13%. Last week, I highlighted Moog ($MOG-A), one of our quieter buys, and the stock has rallied nicely since then.
That’s all for now. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!
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