Archive for 2013

• Fiserv’s Guidance for 2013
  Eddy Elfenbein, February 6th, 2013 at 10:23 am

  Seeking Alpha has posted the transcript of yesterday’s earnings call for Fiserv ($FISV). Here’s a key part on the company’s outlook for this year.

  We expect 2013 adjusted revenue to increase by more than 10%, and that adjusted internal revenue growth will be in a range of 3% to 4%. These numbers include approximately $50 million in lost revenue, more than 100 basis points of internal growth this year due to the unusual migration of an account processing client that transitioned to its parent’s account processing platform and the impact of the 10-year Bank of America renewal.

  We expect 2013 adjusted earnings per share growth of 15% to 18% or a range of $5.88 to $6.07 over 2012. We estimate free cash flow per share will be more than $6.60 per share, an increase of at least 18% over 2012. We expect adjusted operating margin to expand in a range of 10 to 50 basis points. This estimate includes the approximately 60-basis-point negative impact from the revenue headwind and also margin dilution associated with the Open acquisition.

  For modeling purposes, we anticipate that our revenue and earnings growth will be sequentially stronger each quarter as we move through the year. A number of our larger recurring revenue client conversions are planned for the second and third quarters of 2013, and the impact of the negative headwinds are also more pronounced in the first half of the year. We also expect the Open Solutions results to increase during the year, consistent with their normal business model, the cumulative effect of integration benefits and the pay-off of the higher cost debt.

  We’re in the process of realigning the specific annual targets for our operational effectiveness and integrated sales targets to consider the Open Solutions acquisition. Accordingly, we are now prepared to communicate annual targets for 2013. However, you can be sure we are very focused on these initiatives and we’ll provide you with an update at the end of the quarter — sorry, at the end of the first quarter.

  In summary, 2012 was a good year. We made strategic progress, grew recurring revenue, achieved our earnings targets and closed a number of significant sales, all which we believe will accelerate our internal revenue growth, earnings and cash flow. We are starting to see measurable impact from some of our investments and innovation, and are delivering more value to clients. We are also focused on the integration of Open Solutions, which should allow us to deliver new and enhanced value to their more than 3,300 clients. That, combined with the commitment of our more than 20,000 associates, is creating momentum, which should lead to strong results in 2013, and has lifted our confidence for 2014 and beyond.

  This was a good quarter for Fiserv. The stock is currently down about 0.6% today.

• WEX Inc. Drops on Weak Guidance
  Eddy Elfenbein, February 6th, 2013 at 10:06 am

  Before the opening bell, WEX Inc. ($WXS) reported fourth-quarter earnings of $1.07 per share. That was a penny below consensus. Quarterly revenue rose 20.9% to $169 million.

  But the stock is getting smacked around this morning due to the company’s weak guidance. For Q1, WXS expects earnings to range between 89 cents and 96 cents per share. The Street had been expecting $1.08 per share. For all of 2013, WXS sees earnings between $4.30 and $4.50 per share. The Street was expecting $4.88 per share. For all of 2012, WXS made $4.06 per share which was a nice increase from $3.64 per share on 2011.

• Morning News: February 6, 2013
  Eddy Elfenbein, February 6th, 2013 at 6:33 am

  RBS Said to Face Up to $783 Million Libor Manipulation Fine

  Dollar Rises vs. Yen on BOJ Governor’s Early Exit

  Fed Confirms Hackers’ Breach of Website, Reuters Reports

  Obama Urges Congress to Act to Stave Off Cuts

  S&P Misled Investors On Bonds’ Risks, Suit Says

  S&P Analyst Joked of Bringing Down the House Before Crash

  Lenovo’s Diplomatic Response to Dell Buyout

  Virgin Media Chief Attracts $16 Billion Buyout as Final Act

  4 Reasons To Be Skeptical Of Zynga

  UBS Owes Brazil $1.2 Billion Taxes For 2006-09

  Google Said in Talks to Invest $50 Million in Vevo Site

  Corporate Forces Endangered the Twinkie, but May Save It

  Health Insurance Companies Get in Shape for 2014

  Joshua Brown: T.I.N.A. (or the Seller’s Dilemma)

  Edward Harrison: China’s Huge Demographic Challenges Have Already Begun

  Be sure to follow me on Twitter.

• AFLAC Earned $1.48 Per Share for Q4
  Eddy Elfenbein, February 5th, 2013 at 7:24 pm

  After the closing bell, AFLAC ($AFL) reported Q4 operating earnings of $1.48 per share which matched Wall Street’s estimate. Three months ago, the company told us to expect earnings to range between $1.46 and $1.51 per share, so they were squarely in the ballpark.

  A lot of people are concerned about the impact of the weaker yen on AFLAC’s bottom line. It turns out the yen dinged their earnings by four cents per share last quarter. It hurts, but it’s not that bad. On a currency neutral basis, earnings rose by 4.8% from a year ago.

  For the full-year, operating earnings came in at $6.60 per share. The full-year earnings were actually boosted by a penny per share thanks to the yen/dollar rate. Earnings for the year rose by 5.1%.

  As far as this year is concerned, CEO Daniel P. Amos said:

  I want to reiterate that our objective for 2013 has not changed: To increase operating earnings per diluted share 4% to 7%, or approximately $6.86 to $7.06 per share, on a currency neutral basis. Therefore, if the yen/dollar exchange rate averages 90 yen for the full year, it’s likely operating earnings per diluted share will be $6.37 to $6.57 for 2013. I would point out that 2013 earnings comparisons to 2012 will be more difficult because earnings in 2012 were significantly better than we originally anticipated.

  In the after-hours market, the stock is off about 1.6%.

  Here’s a look at how much the yen has plunged over the last four months.

  

• Fiserv Earned $1.39 Per Share for Q4
  Eddy Elfenbein, February 5th, 2013 at 4:14 pm

  For Q4, Fiserv ($FISV) earned $1.39 per share which matched Wall Street’s forecast.

  Fiserv, Inc., a leading global provider of financial services technology solutions, today reported financial results for the fourth quarter and full year 2012.

  GAAP revenue was $1.16 billion and adjusted revenue was $1.08 billion in the fourth quarter, both consistent with the fourth quarter of 2011. For the full year, GAAP revenue was $4.48 billion compared with $4.34 billion in 2011. Adjusted revenue was $4.20 billion compared with $4.07 billion in 2011, an increase of 3 percent.

  GAAP earnings per share from continuing operations for the fourth quarter was $1.18 compared with $1.07 in 2011. GAAP earnings per share from continuing operations for the full year was $4.34 compared with $3.40, which included a loss from early debt extinguishment of $0.37 per share, in 2011.

  Adjusted earnings per share from continuing operations in the fourth quarter increased 9 percent to $1.39 compared with $1.27 in the fourth quarter of 2011. Adjusted earnings per share from continuing operations for the year grew 12 percent to $5.13 compared with $4.58 in 2011.

  “Our 2012 results were highlighted by our 27th consecutive year of double-digit adjusted earnings per share growth and meaningful strategic progress,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “We capped off a strong sales year with exceptional performance in the fourth quarter.”

  This basically matches what Fiserv told us to expect three weeks ago. Fiserv earned $5.13 per share for the entire year. They expect growth of 15% to 18% for this year, and specified an earnings range of $5.88 to $6.07 per share. If that’s correct, then FISV is going for less than 14 times this year’s earnings.

• Total Return to Dividends
  Eddy Elfenbein, February 5th, 2013 at 2:43 pm

  Here’s an interesting chart. This shows the S&P 500 Total Return Index divided by the S&P 500. In other words, this shows an investor’s return solely from dividends.

  

  There seems to be a surge every three months (mid-May, mid-August, mid-November, and less so in February), when the bulk of dividends are paid out. You can also see that the fourth quarter was especially good for dividends as companies rushed to beat the taxman.

  I think investors too often ignore dividends. Not only do you get money, but dividends are a good way to gauge a company’s health. It’s not fool-proof, but when a company raises its quarterly dividend, it’s often a sign of confidence that business is going well.

• Walgreen Breaks $41
  Eddy Elfenbein, February 5th, 2013 at 1:35 pm

  Last March, I tweeted:

  $WAG is looking like a good value. Earnings are next week. Anyone else think it can be a $40 stock? $$

  At the time, shares of Walgreen ($WAG) were at $33.56. This morning, the company reported strong sales for January thanks to flu season. The stock has been as high as $41.61 today which is a new 52-week high. The stock has done about three times better than the S&P 500.

  

• Canada Fires Its Penny
  Eddy Elfenbein, February 5th, 2013 at 12:33 pm

  From the Chicago Tribune

  The Canadian government has begun to phase out the penny, saying it’s too expensive to produce the coin.

  Besides its “excessive” production value, Canada has long cited the significant handling costs for the nation’s retailers and environmental considerations that lessen the penny’s worth. The country, which produced its last pennies on Monday, estimates the move will save taxpayers about $11 million a year.

  The potential savings have enticed U.S. officials to consider the possibility as well.

  Cash transactions in Canada will now be rounded to the nearest 5-cent mark. The penny’s retirement will have no effect on payments made by checks or credit cards.

  For example, if the total price of coffee and a sandwich is $4.92, a customer that was paying in cash would owe $4.90, according to the Royal Canadian Mint. But those using another method of payment would pay $4.92, and the pennies would be tallied electronically.

  The cost of the metal that goes into a penny has surged in recent years, making the coin’s production more expensive than its face value.

  In the U.S., it now cost 2.41 cents to make every penny, which is made mostly of zinc. The penny has cost more than its face value since 2006.

  Although the U.S. has conducted significant research into alternatives for the penny, the U.S. Mint says it still needs more research before it can make a decision to either change its composition or do away with it altogether.

  Any new materials for the penny would need to simulate the current look and durability of the nation’s most circulated coin.

• Dell to Go Private at $13.65
  Eddy Elfenbein, February 5th, 2013 at 9:59 am

  It’s official. Dell is going to be taken private. A group of investors led by Michael Dell will buy the entire firm for $13.65 per share. Interestingly, Microsoft will lend the buyout syndicate $2 billion for the deal.

  Let’s look at some numbers: Dell’s IPO was on June 22, 1988 at $8.50. Since then, the stock has split 96-for-1 so that initial price works out to 8.85 cents per share. The buyout price is 154 times the IPO price. At one point in the late-1990s, shares of Dell split 2-for-1 three separate times in less than one year. At one point, Dell split 2-for-1 six times in just over 40 months.

  Dell was actually not a screaming success as an IPO. The shares did indeed rally from the IPO price of $8.50 to a high of $12.50 by October 25, 1988 (or 13 cents adjusted for splits). But after that, Dell plunged to an all-time low of $4-5/8 by early 1990 (or 4.8 cents).

  Then Dell put on one of the most remarkable runs in the history of capitalism. The shares skyrocketed to an all-time high close of $58.13 on March 22, 2000 ($59.69 intraday). During the decade of the 1990s, Dell advanced 890-fold which works out to 97% per year. Today’s buyout price is 77% below Dell’s high reached 13 years ago.

  

• Legacy of Benjamin Graham
  Eddy Elfenbein, February 5th, 2013 at 9:37 am