Archive for July, 2018

  • Carriage Services Earns 22 Cents per Share
    , July 31st, 2018 at 4:41 pm

    Very poor earnings from Carriage Services (CSV). The funeral home company made just 22 cents per share in Q2.

    The reasons were twofold, i.e. broadly lower volumes and average revenue due to a spike in cremation rates in both our Same Store and Acquisition Funeral Portfolios, and higher interest costs and an increase in outstanding common shares after our recent balance sheet recapitalization.

    We view the disappointing second quarter as a temporary performance aberration related to challenging revenue and margin vagaries in our funeral portfolio which is not historically symptomatic of long term operating trends. Over the last eighteen months we have made substantial organizational changes within our operations leadership (Regional Partners and Directors of Support) designed to position the company for higher and sustainable operating and financial performance from both our funeral and cemetery portfolios over the next five years.

    We have complete confidence that our operating leadership is effectively dealing with the revenue and margin challenges in our funeral portfolio and that we will experience broadly higher performance during the latter part of the second half of the year compared to our second quarter. In other words, we fully expect to head into next year with our operating trends again being our friend. We have also made great strides in our Cemetery Portfolio by employing and upgrading strong sales leadership in most of our larger parks which has led to improved operating and financial performance through the first half of the year, which is reflected in an increase of 5.7% in Cemetery Revenue and a 13% increase in Cemetery Field EBITDA. We expect the cemetery performance improvements to continue if not accelerate into next year.

    Carriage said they expect $1.35 to $1.40 for the coming four quarters.

  • Fiserv Earns 75 Cents per Share
    , July 31st, 2018 at 4:26 pm

    Fiserv (FISV) just reported Q2 earnings of 75 cents per share. That was one penny per share better than estimates. The financial services firm also reiterated its full-year guidance of $3.02 to $3.15 per share, on internal revenue growth of at least 4.5%.

    Fiserv’s CEO, Jeffery Yabuki, said, “Our first-half performance has set us up for strong full-year results and additional momentum as we look into 2019.”

    “Our second quarter results were excellent and have us well-positioned to achieve our full-year objectives,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “We continue to focus on service quality, innovation and integration which is reflected in both our current results and sales pipeline entering the second half of the year.”

    Here are some highlights of Q2:

    Adjusted revenue increased 2 percent to $1.35 billion in the second quarter and 3 percent to $2.72 billion in the first six months of 2018 compared to the prior year periods.

    Internal revenue growth for the company was 6 percent in the second quarter, with 5 percent growth in the Payments segment and 7 percent growth in the Financial segment.

    Internal revenue growth for the company was 5 percent in the first six months of 2018, with 5 percent growth in the Payments segment and 4 percent growth in the Financial segment.

    Adjusted earnings per share increased 32 percent to $0.75 in the second quarter and 27 percent to $1.51 in the first six months of 2018 compared to the prior year periods.

    Adjusted operating margin increased 40 basis points to 32.4 percent in the second quarter and increased 20 basis points to 32.5 percent in the first six months of 2018 compared to the prior year periods.

    Free cash flow was $491 million in the first six months of 2018 compared to $555 million in the prior year period.

    Sales results were up 6 percent in the quarter and 9 percent in the first six months of 2018 compared to the prior year periods.

    The company repurchased 5.4 million and 11.0 million shares of common stock for $390 million and $789 million in the second quarter and first half of 2018, respectively. The company had 10.4 million remaining shares authorized for repurchase as of June 30, 2018.

    This means the company expects $1.51 to $1.64 per share for the second half of this year.

  • That’s Now How It Works
    , July 31st, 2018 at 10:37 am

    In this morning’s Wall Street Journal, Kevin Kingsbury makes the case that Apple could already have a market value of $1 trillion, if not for dividends and share buybacks.

    The article begins:

    All else being equal, every dollar a company spends on shareholder dividends or stock buybacks cuts a firm’s market cap by a buck.

    That’s incorrect. A dividend payment would reduce the market value of a firm. It’s effectively spinning off some of its bank account. But a share buyback should make no difference in a firm’s market value.

    Think of it this way. What would happen if you were to undo the share buyback? The firm would just sell shares on the open market for cash. The nature of the firm’s assets change, but the value doesn’t change.

  • Morning News: July 31, 2018
    , July 31st, 2018 at 7:30 am

    How Companies Are Making Customers Pay for Trump’s Trade War

    How to Gauge the Fed’s Reaction to Trump’s Tweet

    Correction Worse Than February Is Looming, Morgan Stanley Says

    FAANG Funk

    Smartphone Slowdown Hits Profits at Samsung Electronics

    Sony’s Profit Soars on PlayStation Strength

    BP Earnings Boosted by Higher Oil Prices

    Nokia, T-Mobile US Agree $3.5 Billion Deal, World’s First Big 5G Award

    Credit Suisse Returns on Horizon as Thiam Overhaul Nears End

    Harley-Davidson Beats the Street But Is Still Losing in the Marketplace

    Uber Shuts Down Its Self-Driving Truck Unit

    Vivendi to Explore Selling Up to 50% of Universal Music Group

    Michael Batnick: Contrarian Indicators

    Ben Carlson: Mean Reversion & The Placebo Effect

    Roger Nusbaum: Less Forgiving Backdrop For Individual Stocks

    Be sure to follow me on Twitter.

  • CNN: “Why Amazon Can’t Touch Ross and TJMaxx”
    , July 30th, 2018 at 10:20 pm

    CNN echoes a point we’ve made a few times before. Ross is not being sunk by Amazon:

    Ross (ROST), a clothing and home decor chain, recently opened 30 stores and plans to add 70 more this year. It’s aiming for 2,500 stores eventually, up from about 1,500 today.


    Ross, which doesn’t have a digital shop, relies on a flexible purchasing strategy to offer top brands at bargain prices, enticing shoppers to head to stores to find clothes they can’t buy online.

    The average item is only $10, and 98% of the stuff in its store is under $30.

    “The place that Ross and TJX occupy is a place that’s tough to do online,” said Simeon Siegel, a retail analyst at Nomura Group. “I believe Ross is winning because it doesn’t have e-commerce, not in spite of it.”

    Capitalizing on brand miscues

    Ross racked up more than $14 billion in sales last year, second only to TJX in its category. It has recorded 13 consecutive years of growth at stores open at least a year, outpacing Macy’s (M), JCPenney (JCP), and Nordstrom (JWN).

    Ross stores offer a mix of name-brand and designer apparel and home fashion for 20% to 60% less than department and specialty stores.

    When brands produce too many clothes or department stores cancel orders, Ross and other discounters step in and buy the leftover inventory.

    Ross calls them “opportunistic purchases.” It can either quickly ship the product to shelves to meet in-season looks or pack the products away in warehouses to sell later. Both methods help the company constantly rotate through a wide assortment of styles and fashions.


    Discounters like Ross have much shorter lead times — often late in the season when fashion trends have already been well established.

    “They can be more nimble reacting to what customers want,” said Moody’s senior retail analyst Christina Boni. The business model “reduces fashion and markdown risks that other apparel retailers face.”

    ‘Treasure hunt’

    Brands and retail stores are expanding online and focusing on improving in-store amenities. By contrast, Ross offers a “treasure-hunt shopping experience that cannot be replicated online,” said Betty Chen, Ross’ director of investor and media relations.

    Stores are a single floor, laid out neatly and predictably, to make it easy for shoppers to identify sections and find their sizes.


    The average household income for Ross customers is $63,000 a year, according to an off-price sector report set to be released by retail think tank Coresight Research in early August. Amazon shoppers’ average household income is $85,000.

    The off-price sector has shown strength during recessions, when consumers look to trade down for purchases, and also during growth periods.

    Despite a healthy economy and a recovery in many Americans’ discretionary income since the 2008 recession, widening inequality has created a base of Ross’ low and middle-income core shoppers, said John Mercer, a senior analyst at Coresight.


    Siegel argued Ross is also protected against Amazon because two-thirds of the business is handled with cash or debit.

    Ross has argued that the high costs of online shipping and frequent return rates mean it doesn’t make sense for Amazon to attack heavy-discount apparel sellers.

    “The economics just don’t work,” Ross’ president and chief operating officer, Michael O’Sullivan, told Goldman Sachs analysts last year. “If I was Amazon, I don’t think I’d be looking at the off-price space as my big opportunity.”

    Amazon may have reached a similar conclusion. Analysts see the company operating in clothing as more of a traditional department store rather than an off-pricer.

    “Amazon looks to be shifting its focus away from cut-price, third-party-branded offerings with the launch of many more private labels and stronger relationships with brands,” Coresight’s Mercer said.

  • The Tech Crack-Up
    , July 30th, 2018 at 2:57 pm

    The tech sector has been getting hit hard over the last few days. Here’s a look at the intra-day chart of Facebook (black), Netflix (gold) and Twitter (blue):

    Bloomberg says that the tech correction is close to $300 billion.

    What’s interesting is that Facebook is the biggest loser today in the S&P 100. At least it was the last time I looked. After that come some semi-related stocks: MasterCard, Amex, Visa, PayPal, Priceline and Amazon.

  • Clarifying the Record
    , July 30th, 2018 at 2:25 pm

    I will never understand what makes a tweet go viral. Last night, I tweeted:

    Currently, it’s been liked over 18,000 times. I had no idea it would take off like this. To set the record straight, I got the joke from Reddit. I cleaned up the original and corrected some of the grammar. I found versions of this joke going back even further.

  • New High for AFLAC
    , July 30th, 2018 at 11:36 am

    Shares of AFLAC (AFL) had a rough June, but the recent strong earnings report combined with higher guidance has pushed the duck stock to a new all-time high.

  • Alliance Data Announces $500 million Buyback
    , July 30th, 2018 at 10:03 am

    This morning, Alliance Data Systems (ADS) announced a new $500 million share buyback program.

    Alliance Data Systems Corporation (NYSE: ADS), a leading global provider of data-driven marketing and loyalty solutions, today announced that its board of directors has approved a new $500 million share repurchase program beginning August 1, 2018 to replace the current program that expires July 31, 2018.

    Repurchases will be financed primarily through free cash flow. The Company expects to maintain moderate levels of debt over the course of the repurchase program, providing flexibility to pursue tuck-in acquisitions or portfolio purchases.

    “This repurchase agreement demonstrates the Board’s confidence in our business model, our financial performance, and our commitment to delivering value to our stakeholders,” said Charles Horn, chief financial officer of Alliance Data. “We will opportunistically repurchase our stock, while maintaining ample liquidity to have the flexibility to support our growth, as well as the continuation of a quarterly dividend.”

  • Morning News: July 30, 2018
    , July 30th, 2018 at 6:53 am

    Mark Carney Is Preparing for Brexit and the Next Crisis

    Oil Rises After Fourth Weekly Decline as Supply Risks Persist

    Debt Is the Easy Way for Aramco

    The U.S. Is Still The Global Natural Gas King

    Powell to Duck Trump Jabs and Let Economy Justify Fed Rate Pause

    BMW is Hiking the Prices of American-Made SUVs in China

    Coca-Cola Raises Prices On Trump’s Favorite Drink Over Tariffs

    The FAANG-Nary In The Coal Mine

    Have a Cryptocurrency Company? Bermuda, Malta or Gibraltar Wants You

    The Big Mac at 50: McDonald’s CEO on ‘MacCoin,’ the Big Mac Index, and Why There Will Probably Never Be a Veggie Big Mac

    SoftBank-Owned ARM Is Said to Agree to Buy Treasure Data

    3 Reasons a $1 Million Nest Egg Won’t Cut It in Retirement

    Cullen Roche: Three Things I Think I Think – GDP, Housing and Bad Narratives & The Best Investment Writing – Volume 2

    Michael Batnick: These Are the Goods

    Howard Lindzon: Keep An Eye On Homebuilders and Some Good Reads

    Be sure to follow me on Twitter.