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RECENT ENTRIES NICK Earns 29 Cents a Share Becton, Dickinson Kills It $837 Billion in Cash What Really Moves the Markets Fiserv Beats By Four Cents, Reaffirms Full-Year Guidance Dividends Are In AFLAC Beat By Two Cents But Why? Credit Cards -- Robin Hood In Reverse Jersey Shore Rings the Opening Bell SYNDICATE THIS SITE

Earnings just came out and they're outstanding:

Nicholas Financial, Inc. (Nasdaq:NICK - News) announced that for the three months ended June 30, 2010, net earnings, excluding change in fair value of interest rate swaps, increased 65% to $3,426,000 as compared to $2,081,000 for the three months ended June 30, 2009. Per share diluted net earnings, excluding change in fair value of interest rate swaps, increased 61% to $0.29 as compared to $0.18 for the three months ended June 30, 2009. See reconciliations of the Non-GAAP measures on page 2. Revenue increased 9% to $14,952,000 for the three months ended June 30, 2010 as compared to $13,694,000 for the three months ended June 30, 2009.

According to Peter L. Vosotas, Chairman and CEO, "We are pleased to report record 1st quarter revenue and earnings. Our results were primarily impacted by an increase in revenues, a reduction in the net charge-off rate and an increase in the cost of borrowed funds. During the first quarter we have added four branch offices to our 12 state branch network, bringing the total to 54 locations. The Company continues to evaluate additional markets for future branch locations and subject to market conditions, could open additional branch locations during the year. The Company remains open to acquisitions should an opportunity present itself."

I knew NICK was doing well but these results are even better than what I expected. Here are the estimates I made earlier:

Receivables: $235 million to $240 million
Gross yield: 24% to 25%
Interest Expense: 3% to 4%
Provision for Credit Losses: 4%, maybe less
Pre-Tax Yield: 9%

And here are the results:

Receivables: $238.3 million
Gross yield: 25.08%
Interest Expense: 2.58%
Provision for Credit Losses: 2.68%
Pre-Tax Yield: 9.43%

A few months ago, I said that NICK could earn $1.10 a share this calendar year (the fiscal year ends in March, I used calendar year simply for market comparison).

That must have seemed wildly optimistic but now it seems easy. NICK has made 57 cents a share for the first six months of this year. The stock's book value is up to $8.57.

Posted by Eddy at 10:34 AM | Permalink

Becton, Dickinson (BDX) had a great earnings report this morning. They earned $1.29 per share for the quarter which was five cents more than estimates.

“We are pleased with our results this quarter, with each of our three segments contributing to our growth. We delivered earnings per share from continuing operations of $1.29, which is in line with the Company’s expectations,” said Edward J. Ludwig, Chairman and Chief Executive Officer. "Despite the challenging global economy, we expect to deliver bottom-line growth of approximately 9 percent foreign-currency neutral, which is in line with our previously communicated range of 8 to 10 percent for the full fiscal year 2010. Profits and cash flows continue to improve as a result of operational efficiencies. We are also pleased to announce that we are increasing our share repurchases to $700 million from $550 million, which supports our ongoing commitment to return value to shareholders."

They also raised full-year EPS guidance to $5.10 to $5.15. The stock is higher in this morning's trading.

Posted by Eddy at 9:35 AM | Permalink

That's how much cash that non-financial companies in the S&P 500 are currently sitting on. That's worth about 10% of their market value which is much higher than normal.

The odd thing about this gigantic cash pile is that these companies are barely being paid any interest by keeping this money in cash. It shows you just how scared they are.

Matt Krantz points out that the amount of cash is up 26% in the last year. By contrast, dividends are only up 5.9% and M&A spending is down -9.5%. If the economy can avoid a double dip, then there might be enough fuel already to power a rally.

Posted by Eddy at 9:19 AM | Permalink

Posted by Eddy at 7:18 PM | Permalink

This is good news. Fiserv (FISV) made $1.00 a share last quarter. They see full-year earnings ranging between $3.96 and 4.07 per share.

Posted by Eddy at 5:22 PM | Permalink

So far this year, 142 stocks in the S&P 500 have increased their dividends while just one stock has lowered it.

Last year at this time, 93 stocks had raised their dividends while 61 had lowered them.

Ten stocks have initiated dividends compared with just one at this time last year.

Posted by Eddy at 5:09 PM | Permalink

AFLAC earns $1.35.

Operating earnings in the second quarter were $639 million, compared with $562 million in the second quarter of 2009. Operating earnings per diluted share rose 12.5% to $1.35 in the quarter, compared with $1.20 a year ago. The stronger yen/dollar exchange rate increased operating earnings per diluted share by $.02 during the second quarter. Excluding the impact from the stronger yen, operating earnings per share increased 10.8%.

And going forward:

"With half of the year complete, we believe we are in a very good position to meet our earnings objectives and extend our record of growth. Our objective for 2010 is to increase operating earnings per diluted share by 9% to 12%, excluding the impact of the yen. Within that range, we expect operating earnings to increase approximately 10% for the full year to $5.34 per diluted share before the impact of foreign currency. If the yen averages 90 to the dollar for the remainder of the year, we would expect full-year reported earnings to be about $5.44 per diluted share. Using that same exchange rate assumption, we expect third quarter operating earnings of $1.35 to $1.38 per diluted share. Our objective for 2011 of increasing operating earnings by 8% to 12% before the impact of foreign currency also remains unchanged."

Posted by Eddy at 4:14 PM | Permalink

Ladies and gentleman, it is with deep regret that I inform you that Nassim Nicholas Taleb has blocked me from his Twitter feed.

Therefore, I will no longer be privy to insights such as:

Giving businessreaders my book: like giving vintage Bordeaux to drinkers of Diet Coke and listening to their comments about it

Posted by Eddy at 2:51 PM | Permalink

The Federal Reserve Bank of Boston found that credit card fees and reward programs have the net effect of transferring wealth from the poor to the rich:

U.S. consumer finance data shows that people on a low income are less likely to have a credit card, and those who do, spend less a month on average, than higher earners. High-income consumers are also 20 percentage points more likely to receive credit card rewards -- be they frequent flier miles, cash back or other enticements.

"What most consumers do not know is that their decision to pay by credit card involves merchant fees, retail price increases, a nontrivial transfer of income from cash to card payers, and consequently a transfer from low-income to high-income consumers," Scott Schuh, Oz Shy and Joanna Stavins wrote.

They found that about 83 percent of banks' revenue from credit card fees is obtained from cash payers "and disproportionately from low-income cash payers."

After accounting for rewards paid by banks, households who earn more than $150,000 annually receive a subsidy of $756 on average every year, while the households earning $20,000 or less pay $23.

Posted by Eddy at 2:23 PM | Permalink

Visit msnbc.com for breaking news, world news, and news about the economy

Posted by Eddy at 1:57 PM | Permalink

On Thursday morning Nicholas Financial (NICK) will release its fiscal first-quarter earnings. My view is that NICK will do pretty much what it’s been doing, only more so.

My ballpark estimates are as follows:

Receivables: $235 million to $240 million
Gross yield: 24% to 25%
Interest Expense: 3% to 4%
Provision for Credit Losses: 4%, maybe less
Pre-Tax Yield: 9%

None of these numbers is a surprise. For the bottom line, I think NICK should make 25 cents a share for the quarter. But a precise estimate really doesn’t matter much. Even if they earn, say 22 cents a share or 24 cents a share, it still confirms the reason why I like Nicholas.

Here’s how I see it: NICK’s earnings report only needs to confirm two things—one, that’s it’s a thriving business and two, that it’s in zero danger of financial distress. In my opinion, these two points are unarguably true. I’d also add that they’re pretty obvious to anyone who has looked at the company. NICK’s portfolio is clearly improving and the company is pulling in a decent amount of money. It’s almost like a 13% bond that’s selling for less than par.

Still, the stock market doesn’t seem to agree. NICK is still trading below its book value, and by my estimate, it’s going for about seven to eight times forward earnings. That’s not just, it’s almost absurdly cheap.

Bear in mind how panicked the market can be. Just 16 months ago, NICK got down to $1.80 a share. I expect NICK to earn about $1.10 a share for this calendar year (note that their fiscal year ends on March 31). So the stock was trading at a forward P/E Ratio of less than two.

I’m confident that NICK will deliver the goods. The major concern I have is how the market will react. On this subject, well...you just never know. I’d like to think the market can see the facts right in front of its face. We’ll know more on Thursday.

Posted by Eddy at 12:03 PM | Permalink

This morning, Wright Express (WXS) came out with a nice earnings report. The company earned 68 cents a share which was three cents more than estimates. For Q3, they see earnings between 65 cents and 70 cents per share. For all of 2010, Wright sees earnings-per-share ranging between $2.47 and $2.57.

That’s pretty good news. Three months ago, Wright said to expect Q2 EPS between 61 cents and 66 cents, and full-year between $2.39 and $2.54. The previous full-year range was $2.26 to $2.46. In other words, the high end of the old range is now below the low end of the current range.

There’s just one problem. The stock is taking a hit today. Currently, the shares are off by about 4.5%. I think a little pullback can be expected since WXS rallied over 22% in the previous three weeks. Wright Express is still an excellent stock.

Posted by Eddy at 10:41 AM | Permalink

The NYT hosts a fascinating debate on the market for textbooks. On July 1, a new set of federal rules come into effect in an effort to lower prices for textbooks. As an investor, I always take notice when the government enters a market because prices and profits can soon get very screwy.

By any standard, the market for textbooks is dysfunctional. James V. Kock writes:

The textbook market is like the pharmaceutical market: the people who have the most influence over what is purchased (doctors and professors) don’t have to pay for their choices. Students do.

Further, several studies indicate that most professors don’t even know the cost of the textbooks they recommend, or that this is a minor factor in their choices. This makes the demand for textbooks “price inelastic” -- student buyers are insensitive to price increases.

Posted by Eddy at 10:26 AM | Permalink

Here's a look at Wall Street's earnings estimates for the S&P 500 and its sectors from the end of the first quarter, the end of the second quarter and last week.

As you can see, the estimates for the S&P 500 have climbed higher.

At $82.15, that means the market is going for about 13.5 times this year's earnings.

Posted by Eddy at 3:04 PM | Permalink

From Scientific American:

Four separate studies published in the August issue of the Journal of Consumer Research provide some scientific evidence along these lines. Nearly 60 to 120 subjects were placed in various situations where they witnessed inter-employee rudeness as well as employee incompetence. And the researchers found that employee rudeness had a significantly greater impact on subjects' overall opinion of the company than bad service.

In one study an employee reprimands his colleague who is gossiping on the phone with this: “Get off the phone you idiot!” Even such customer-oriented salespeople were found to lose all respect from customers for having barked at a co-worker.

The studies confirm that witnessing an uncivil argument between two employees leaves a bad taste that goes well beyond the individual incident. Customers tend to generalize their newfound negative opinion to the entire organization, its employees and any future interactions with it. So serve it with a smile, please, for those in front of the counter and behind it.

Posted by Eddy at 12:46 PM | Permalink

Thanks to Barron’s article, AFLAC (AFL) has been as high as $51.26 this morning. We’ll know a lot more after tomorrow’s close when the company reports Q2 earnings. Fiserv (FISV) and Wright Express (WXS) also report tomorrow.

Fiserv, by the way, is a great example of a company that delivers consistently higher earnings. Here’s a look at their reported earnings in blue along with Wall Street’s projections in red.

As an investor that's exactly what I like to see. I like to take the guesswork out of investing. That's why I often refer to the full-year earnings projections that a company provides. Many companies don't do that.

Fiserv has said to expect an EPS increase for this year of 8% to 11%. Last year, they made $3.66 per share so that works out to range of $3.96 to $4.07 for 2010.

Nicholas Financial (NICK) is due to report its earnings on Thursday morning at 10am. I’m also very curious to see the government’s first report on second-quarter GDP which comes out on Friday. I’m afraid it won’t be very good.

Lastly, let me add that I was pleased to see Amazon (AMZN) open down a lot on Friday. Well, I spoke too soon. The stock had one of the most impressive intra-day rallies I’ve ever seen. The shares opened at $115.93, down over $14, and closed just shy of $119.

Posted by Eddy at 10:35 AM | Permalink

Over the weekend, Barron’s had a nice profile of AFLAC (AFL). Here’s a sample:

With Wall Street focused on the company's investment portfolio, little attention has been paid to estimates of 8% to 12% growth in 2011 in Aflac's operating earnings, excluding currency translation. Shares trade for only eight times 2011 projected profits, when a multiple of 12 times earnings is more appropriate, says Scott Chapman, another Lateef manager. Based on the 2011 consensus earnings estimate of $5.96 a share, that multiple would result in a stock price of 71. (Woo hoo!)

Aflac will report second-quarter earnings Tuesday. Analysts have penciled in $1.33 a share for the period, and $2.6 billion, or $5.45 a share, for the full year, on revenue of $20.4 billion. The company garners 73% of its premiums, and 78% of operating profit, from sales of supplemental policies in Japan; the remainder is generated in the U.S. Aflac is a market leader in Japan, but has had a tougher time domestically, particularly in recent years, as high unemployment has reduced the ranks of those who purchase policies through employers.

Like all insurers, Aflac invests the money it collects from policyholders, and tries to generate more income from its investments than it will have to pay out in claims. Despite today's low interest rates, the company has been able to turn a profit on its investment portfolio.

I don’t have an estimate for AFLAC’s Q2 earnings. In April, they gave a range of $1.33 to $1.38 per share. The company will probably beat $1.33 per share but that’s not the reason why I like the stock. My case for AFLAC is that everyone else seems to think the company is in dire straits and they’re clearly not.

If Tuesday’s earnings report comes in good, I think Wall Street will soon expect AFLAC to earn over $6 a share for 2011.

Posted by Eddy at 9:51 PM | Permalink

You never know when the CEO will respond.

Posted by Eddy at 12:02 PM | Permalink

You can also follow my ramblings on Twitter.

Posted by Eddy at 3:10 PM | Permalink

I’m often asked how I go about screening for stocks. The answer is, I don’t. I simply follow several very-high-quality stocks. If one dips down to a reasonable price, then I consider adding it to my Buy List.

One very high-quality stock that’s been catching my eye lately is Eaton Corp. (ETN) of Cleveland, OH. Like a lot of good companies, Eaton is fairly dull. The company is a “power management” company. I know, SNORE. They have 70,000 employees and a market cap of $13 billion, yet they seem to be totally unknown to most individual investors.

Investors should understand that Eaton is a cyclical stock. This means that its business is strongly correlated to the broader economy. When the economy does well, stocks like Eaton outperform. During recessions, they often fare much worse.

That pretty much describes what happened last year after Eaton sales and profits had climbed for several years. Their year-over-year earnings peak in the third quarter of 2008, then declined for the next four quarters. Importantly, only one quarter saw a net loss (Q1 ’09). Since then earnings have been on the rise, and the last three quarters have seen huge earnings surprises.

On Wednesday, Eaton posted outstanding results. They earned $1.36 a share which was 19 cents more than expectations. Eaton also gave very strong guidance:

Eaton now expects third-quarter income per share of $1.25 to $1.35, with the Wall Street forecast $1.19. For the year, Eaton expects earnings of $4.75 to $4.95 per share, above the recent Wall Street forecast of $4.57.

As impressive as that is, it's probably a bit on the low side. I think Eaton can swing $5 a share this year. Maybe more.

The company also raised its quarterly dividend from 50 cents a share to 58 cents a share which translates to a yield of 3%. This is a great company but at the current price, I wouldn’t call it a screaming buy. This is a good one to follow. If you ever seen it go into a downtrend, there might be a great opportunity at hand.

Posted by Eddy at 2:11 PM | Permalink