Archive for October, 2020

  • Broadridge Earns 98 Cents per Share
    , October 30th, 2020 at 11:00 am

    This morning, Broadridge Financial Solutions (BR) reported fiscal Q1 earnings of 98 cents per share. That’s a huge beat. Wall Street had been expecting 63 cents per share.

    “Broadridge reported strong first quarter results including 8% Recurring revenue growth and record first quarter earnings,” said Tim Gokey, Broadridge’s Chief Executive Officer. “Our continued growth highlights the long-term trends driving our business and the strength of our recurring revenue business model. In addition, our strong cost actions helped drive significant margin expansion. This positive start to the fiscal year gives us additional confidence in our full year guidance and enables us to increase our level of investment in our people, platforms, and technology.

    “We have updated our outlook to reflect our increased confidence in our full year results. Our updated guidance now calls for Recurring revenue growth of 3-6% and Adjusted EPS growth of 6-10%,” Mr. Gokey added. “By investing now, we will be even better positioned to address our clients’ accelerating need for next-generation mutualization, resiliency, and digital transformation.”

    Broadridge now expects earnings growth this year of 6% to 10%. The previous range was 4% to 10%. The shares are currently up about 1% while the market is down 1%.

  • CWS Market Review – October 30, 2020
    , October 30th, 2020 at 7:08 am

    “The best profits in the stock market are made by people who get long or short at extremes and stay for months or years before they take their profit.” – Charles Dow

    This is certainly an eventful time on Wall Street. On Wednesday, the S&P 500 took its biggest plunge in four months. The drop that started in early September may not have gone away although we got a nice rebound on Thursday.

    Right now, we’re right in the heart of earnings season. We had eight Buy List stocks report earnings this week, and the ninth will come later today. We’ve had some impressive results so far. Sherwin-Williams beat estimates by 54 cents per share. The paint folks also raised full-year expectations. (I love it when that happens.)

    Moody’s absolutely crushed Wall Street’s forecast (as I predicted in last week’s issue) and raised guidance as well. Stryker, the bone people, also blew past earnings.

    So far, all of our stocks except one have beaten expectations. The sole exception, Globe Life, merely met expectations. In this week’s issue, I’ll go over all of this week’s earnings reports. I’ll also highlight the five more we have coming next week.

    Before I get to that, I want to briefly mention Thursday’s historic GDP report.

    Strongest GDP Report on Record

    On Thursday, the government said that the U.S. economy grew in the third quarter at an annualized rate of 33.1%. That’s not merely the best on record (the data goes back more than seven decades), but it’s twice as strong as the second-best quarter.

    Of course, it’s not the case that the economy is buzzing along. Far from it. Rather, this is the economy snapping back from being shut down during the second quarter. For the second quarter, the economy shrank at an annualized rate of 31.4%.

    So just as the stock market did in March and April, we’re bouncing off a sharp low. The good news is that we’ve gained back some lost ground. The bad news is that there’s still a long way to go.

    We did get some good news on Thursday when the initial-jobless claims report came in at 751,000. That’s better than I had expected. Wall Street had been expecting 778,000. The trend of lower claims reports seemed to have stalled out, but that could be over. This week’s report is a good sign.

    Eight Buy List Earnings Reports

    Now let’s get to earnings because there are a lot. Here’s an updated look at our Earnings Calendar:

    Stock Ticker Date Estimate Result
    Eagle Bancorp EGBN 21-Oct $0.81 $1.28
    Globe Life GL 21-Oct $1.75 $1.75
    Silgan SLGN 21-Oct $0.95 $1.04
    Stepan SCL 21-Oct $1.40 $1.56
    Check Point Software CHKP 22-Oct $1.53 $1.64
    Danaher DHR 22-Oct $1.36 $1.72
    AFLAC AFL 27-Oct $1.13 $1.39
    Fiserv FISV 27-Oct $1.16 $1.20
    Sherwin-Williams SHW 27-Oct $7.75 $8.29
    Cerner CERN 28-Oct $0.71 $0.72
    Church & Dwight CHD 29-Oct $0.67 $0.70
    Intercontinental Exchange ICE 29-Oct $0.99 $1.03
    Moody’s MCO 29-Oct $2.10 $2.69
    Stryker SYK 29-Oct $1.40 $2.14
    Broadridge Financial Sol BR 30-Oct $0.63
    Trex TREX 2-Nov $0.38
    Ansys ANSS 4-Nov $1.26
    Becton, Dickinson BDX 5-Nov $2.52
    Middleby MIDD 5-Nov $1.04
    Hershey HSY 6-Nov $1.71
    Disney DIS 12-Nov -$0.68

    On Monday, Sherwin-Williams (SHW) reported third-quarter earnings of $8.29 per share. That easily beat Wall Street’s forecast of $7.75 per share. Sales rose 5.2% to $5.12 billion.

    CEO John G. Morikis said, “Continued and unprecedented strength in our DIY business, solid demand across our residential repaint and new residential segments and improving demand in our industrial coatings businesses and regions drove our strong third quarter results.”

    Let’s look at the breakdown by each business segment. Net sales in The Americas Group increased by 2.8% to $2.98 billion. Consumer Brands Group increased its sales by 23.5% to $838.1 million, and Performance Coatings Group’s net sales increased 1.2% to $1.31 billion. All in all, this was a solid quarter. Sherwin generated $2.56 billion so far this year. That’s up 54% over last year.

    This is a classic example of a stock rallying strongly on anticipation of good news, then shrugging when the good news is finally announced. Sherwin-Williams is a good buy up to $720 per share.

    After the bell on Tuesday, we got earnings reports from AFLAC and Fiserv.

    In last week’s issue, I told you that AFLAC (AFL) should be able to beat Wall Street’s forecast, and I was right. For Q3, AFLAC’s earnings rose 19.8% to $1.39 per share. Wall Street had been expecting $1.13 per share. Interestingly, the yen/dollar exchange rate didn’t impact earnings.

    The duck stock is managing itself well during a challenging time. AFLAC is usually pretty good at giving earnings guidance. For obvious reasons, they can’t now. The stock dropped after the earnings report, but I’m pleased with what I saw. Given the soggy stock, I’m dropping our Buy Below price to $37 per share. Don’t give up on the duck!

    Fiserv (FISV) said it had Q3 earnings of $1.20 per share. That’s a 19% increase over last year. Wall Street had been expecting $1.16 per share.

    For the quarter, free cash flow rose by 12%, and it’s up 13% for the year. Operating margin increased 3.1% to 32.9%. In terms of operations, Fiserv is having a good year, but the stock has been in a funk.

    Fiserv now expects to see its earnings rise by 11% over last year. This will be their 35th year in a row of double-digit earnings growth. Let’s get mathy. Last year, Fiserv earned $4.00 per share, so an 11% earnings increase translates to full-year earnings of $4.44 per share.

    For the first nine months of this year, the company made $3.12 per share. That implies Q4 guidance of $1.32 per share which matches Wall Street’s forecast. Fiserv remains a buy up to $107 per share.

    After the closing bell on Wednesday, Cerner (CERN) reported Q3 earnings of 72 cents per share. Previously, Cerner said that it expected earnings of 70 to 74 cents per share, so they’re hitting that range.

    Cerner had a good quarter. Operating cash flow was $382 million and free cash flow was $237 million. Total backlog now stands at $13.01 billion.

    For Q4, Cerner expects revenue between $1.365 billion and $1.415 billion and earnings between 76 and 80 cents per share. That implies full-year earnings of $2.82 to $2.86 per share which is a narrowing of the previous forecast which was $2.80 to $2.88 per share. Wall Street had been expecting Q4 earnings of 78 cents per share. The bottom line is that Cerner is delivering as expected. Cerner is a buy up to $75 per share.

    Thursday was another busy day with four Buy List earnings reports. Let’s start with Church & Dwight (CHD). The household products company reported Q3 earnings of 70 cents per share. That beat estimates by three cents per share. You really can’t go wrong with condoms and baking soda.

    C&D’s results were pretty good considering the environment. Q3 net sales grew 13.9% to $1,241.0 million. Covid has actually helped some of C&D’s business.

    The company was able to increase its full-year guidance. Before, they saw reported sales rising by 9% to 10%, now they see it up 11%. Not a big increase, but it’s good to see. Most importantly, C&D sees full-year earnings of $2.79 to $2.81 per share. That’s a slight increase over the previous guidance.

    The problem is that Church & Dwight beat earnings by more than the increase to guidance so that implies a softer Q4 than originally believed. I don’t think it will turn out that way, but the shares were soft in Thursday’s trading. Church & Dwight remains a buy up to $100 per share.

    Intercontinental Exchange (ICE) has been doing great business lately. The exchange operator recently bought Ellie Mae, and the unit already added to the bottom line during Q3. For the quarter, ICE earned $1.03 which beat estimates by four cents per share.

    Financial data revenue rose 6% to $589 million. That’s above their forecast of $575 million to $580 million. ICE’s operating margin runs at 57% which is amazing.

    For guidance, the company covers lots of metrics except EPS. The key I like to watch is their forecast for data revenue. For Q4, ICE sees that as ranging between $590 million and $595 million. This is a good company. Intercontinental Exchange is a buy up to $110 per share.

    In last week’s issue, I wrote “For Q3, Wall Street expects Moody’s to earn $2.10 per share. I think it will be a lot more.” I was right but even I was floored by Moody’s (MCO) quarter.

    For Q3, the ratings agency earned $2.69 per share which creamed estimates by 59 cents per share. Wow. Moody’s Analytics, which is a key business for them, saw a revenue increase of 7% to $531 million.

    Moody’s raised its full-year guidance range from $8.80 to $9.20 per share to $9.95 to $10.15 per share. I hope to have more details about Moody’s in upcoming issues. For now, I can say that all is well. Moody’s remains a buy up to $290 per share.

    After the bell on Thursday, Stryker (SYK) reported very good numbers. For Q3, the orthopedics company earned $2.14 per share. That was up 12% over last year. Wall Street had been expecting earnings of $1.41 per share. That’s a very big earnings beat. Still, Stryker is down a bit on the year for us.

    For the quarter, reported net sales rose by 4.2% to $3.7 billion. Orthopaedics sales rose 4.4% to $1.3 billion. MedSurg sales were up 3.2% to $1.6 billion. Neurotechnology and Spine sales increased 6% to $0.8 billion.

    Due to the pandemic, Stryker can’t offer guidance for Q4. Stryker remains a buy up to $220 per share.

    Broadridge Financial Solutions (BR) reports later today. For the new fiscal year, which began on June 30, Broadridge expects earnings growth of 4% to 10%. Since the company made $5.03 per share last year, that implies earnings this year between $5.23 and $5.53 per share.

    Broadridge also recently hiked its dividend for the 14th year in a row.

    Five Buy List Earnings Reports Next Week

    Trex (TREX) is our #1 performer this year. Through Thursday, it’s up 59% this year for us. Trex also gave us a stock split a few weeks ago. The deck company is due to report earnings on Monday, November 2.

    For Q3, Trex expects sales between $215 million and $225 million. The midpoint is a 13% increase over last year’s Q3. For earnings, Wall Street expects 38 cents per share.

    Ansys (ANSS) id due to report on Wednesday, November 4. The company expects Q3 earnings of $1.10 to $1.34 per share on revenue between $347 million and $377 million. For the full year, Ansys sees earnings ranging between $5.75 and $6.35 per share on revenue of $1.570 billion to $1.645 billion. Ansys now has a backlog of $846 million. That’s up 18% from a year ago. We have a 20% gain this year with Ansys.

    I haven’t been happy with Becton, Dickinson (BDX) this year. The company’s fiscal year ended in September so the coming earnings report is for their fiscal Q4. Becton will report on Thursday, November 5. A few weeks ago, Becton’s 15-minute coronavirus test got the green light in Europe.

    Becton said it expects earnings for this year to come in between $9.80 and $10.00 per share. Since the company has already made $7.41 for the first nine months of this fiscal year, the guidance implies Q4 earnings of $2.39 to $2.59 per share.

    Middleby (MIDD) had a terrible plunge earlier this year, but the stock is now up more than 140% from its low. After Middleby’s last earnings report, the stock jumped 16% on one day. The CEO said he saw more improvments in their business this summer. Interestingly, there’s strong demand from quick-serve and pizza restaurants. Such is the new world of Covid. Middleby also reports on Thursday. Wall Street expects $1.04 per share.

    Tomorrow is Halloween which is a big time of year for Hershey (HSY). The chocolatier is due to report earnings next Friday. Three months ago, Hershey had a strong earnings report and the shares gapped higher.

    The shares have been in an ugly mood lately. HSY has declined nine times in the last ten days. Thanks to the selloff, HSY yields over 2.5%. That beats a lot of fixed income. Wall Street expects Q3 earnings of $1.71 per share.

    That’s all for now. The big news next week will obviously be the election. Don’t get too wrapped up in market movements based on the results. The talking heads are almost always wrong. The ISM report is due out on Monday. The ADP report comes out on Wednesday. Then on Friday, we’ll get the official October jobs 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!

    – Eddy

  • Morning News: October 30, 2020
    , October 30th, 2020 at 7:05 am

    France Says Second Lockdown Will Cut Economic Output by 15%

    Biggest & Best GDP in American History? Here Are The Facts

    Economy’s Big Rebound Leaves a Shortfall as Progress Slows

    Why Blue Places Have Been Hit Harder Economically Than Red Ones Have

    Trump’s China Scorecard Shows Many Defeats, and One Big Change

    Big Tech Continues Its Surge Ahead of the Rest of the Economy

    Jack Ma’s Ant IPO Lures $3 Trillion of Bids

    Kyle Bass’s Texas Feud Spotlights Short-Selling Tactics

    Coronavirus, Consolidation Taking Toll On Energy Jobs & Chevron Posts Profit On Deep Cost Cuts, Improved Oil Prices

    Netflix Is Raising Its Prices Again

    Walmart Pulls Guns Off Shelves As A Precaution Ahead of Election

    Ben Carlson: The Fine Line Between Persistence and Insanity in the Markets

    Michael Batnick: Animal Spirits: Stacker ETFs

    Joshua Brown: God From the Machine

    Be sure to follow me on Twitter.

  • Q3 2020 GDP Growth +33.1%
    , October 29th, 2020 at 12:18 pm

    This morning’s Q3 GDP growth report was one for the record books. According to the government’s data, the U.S. economy grew at a 33.1% rate for the third quarter. Wall Street had been expecting 32%.

    That’s not just the best number in the current data series, which goes back over 70 years, but it’s nearly double the next-best quarter.

    A few notes about today’s report. That’s an annualized figure. It’s also adjusted for inflation.

    The reason for the strong growth is obviously due to the snap back of the economy being re-opened after the lockdown in Q2. The economy shrank at a 31.4% rate in Q2. We also fell 5.0% in Q1, which was only partially impacted by the lockdown.

    (Some folks at Twitter got very, very angry at me for passing along this number. As always, don’t let your politics interfere with your analysis.)

    The simple takeaway is that we’ve come a long way from the low, but we still have a long way to go to get to where we were.

    This morning’s initial claims report came in at 751,000. That’s a little better than I had been expecting. Wall Street had been expecting 778,000. The claims reports seemed to have stalled a few weeks ago, but now we’re seeing some improvement.

    Thursday’s data brought the four-week moving average for initial claims down to 787,750 from 812,250, the Labor Department said. Continuing jobless claims, which include those receiving unemployment benefits for at least two straight weeks, dropped by 709,000 to 7.75 million for during the week of Oct. 17. Data on continuing jobless claims is delayed by one week.

  • Church & Dwight Earns 70 Cents per Share
    , October 29th, 2020 at 9:33 am

    More earnings today.

    This morning, Church & Dwight (CHD) reported Q3 earnings of 70 cents per share. That beat estimates by three cents per share.

    Third quarter net sales grew 13.9% to $1,241.0 million. The Company continued to experience a significant increase in consumer demand for many of its products, primarily in response to the COVID-19 pandemic. Organic sales grew 9.9% driven by a volume increase of 10.2%, partially offset by 0.3% from unfavorable product mix and pricing in support of new products. Volume growth was driven by higher consumption and restocking of retailer inventories.

    Here’s the updated full-year outlook:

    2020 Full Year Outlook

    Reported Sales growth raised to 11% (previously 9-10%)

    Organic Sales growth raised to 9% (previously 7-8%)

    Adjusted EPS growth raised to 13%-14% 1, including investments

    Cash from Operations raised to $975MM (previously $960MM)

  • Morning News: October 29, 2020
    , October 29th, 2020 at 7:08 am

    Social Security Seemed Like a Future Problem. The Virus Changed That.

    Democrats Prefer ‘Scalpel’ Over ‘Jackhammer’ To Reform Key U.S. Internet Law

    An Avalanche of Fraud Buried a Small-Business Relief Program

    You Can’t Just Game C19 Away: Do the Disease Eradicators Make an Elementary Logical Mistake?

    Inside Operation Warp Speed’s $18 Billion Sprint for a Vaccine

    U.S. Drugmakers, Bracing For Price Cuts, Shift Election Support Toward Democrats

    Nokia Profit Up, New CEO Pledges to Boost 5G Investments

    The Best 5G Pure-Play Investment Is In Cellphone-Tower Operators

    WeWork’s New CEO Is Eyeing an IPO Again — After He Turns Profit

    World Series Champion Dodgers Lost Nearly $125 Million This Season

    When One Car Has More Horsepower Than Churchill Downs

    The Economic Answer for Tomorrow: Progressive Taxation

    Joshua Brown: Welcome to Hell & Worst Case Scenarios

    Cullen Roche: Three Things I Think I Think – Grossly Rich Edition

    Howard Lindzon: SPAC SPAC SPAC – Chamath Palihapitiya Joins My Zoom Show ‘Investing For Profit and Joy’

    Be sure to follow me on Twitter.

  • Cerner Earns 72 Cents per Share
    , October 28th, 2020 at 4:17 pm

    After the close, Cerner (CERN) reported Q3 earnings of 72 cents per share. Previously, Cerner said that it expected earnings of 70 to 74 cents per share.

    For Q4, Cerner expects revenue between $1.365 billion and $1.415 billion and earnings between 76 and 80 cents per share. That implies full-year earnings of $2.82 to $2.86 per share which is a narrowing of the previous forecast which was $2.80 to $2.88 per share. Wall Street had been expecting Q4 earnings of 78 cents per share.

    Some highlights:

    Third quarter operating cash flow of $382 million and Free Cash Flow of $237 million.

    Third quarter days sales outstanding of 81 days, flat quarter over quarter and up from 74 days in the year-ago quarter.

    Total backlog of $13.01 billion.

    For Q4, Cerner expects:

    Revenue between $1.365 billion and $1.415 billion.

    EPS between $0.76 and $0.80.

    New business bookings between $1.550 billion and $1.750 billion.

  • S&P 500 -3%
    , October 28th, 2020 at 11:29 am

    The stock market is down sharply today. I suspect that Wall Street is unnerved by the latest coronavirus numbers. The S&P 500 is now down over 3%. Some tech names like Google, Facebook and Microsoft are down even more. The big loser today is Energy but that seems to happen every day.

    Our Buy List is holding up much better than the market. At least, for now. Fiserv is one of the few names that’s actually up. The company had a good earnings report yesterday. Cerner reports after today’s closing bell.

    The S&P 500 is now back below its 50-day moving average. From the market’s high two weeks ago to this morning’s low, the S&P 500 has lost 7%.

  • Morning News: October 28, 2020
    , October 28th, 2020 at 7:08 am

    Why the Best G.D.P. Report Ever Won’t Mean the Economy Has Healed & Record GDP Surge to Mask Moderation in U.S. Economic Rebound

    Interest Rates Near Zero Are A Big Gift — For Biden or Trump

    U.S. Businesses Splurge On Insurance to Protect Against Post-Election Chaos

    Hedge Funds That Planned for U.S. Election Chaos See a Blue Wave

    No One Fights QAnon Like the Global Army of K-Pop Superfans

    California Tax Revolt Faces a Retreat, 40 Years Later

    Whoop Valued at $1.2 Billion With IVP, SoftBank, Eli Manning Backing

    Deutsche Bank Swings to Profit, Lowers Bad-Loan Provisions

    Harley-Davidson is Getting Into the Electric Bicycle Business

    Uber Adds Grocery Delivery To Its Expanding List of Businesses

    Ben Carlson: What’s Going to Happen to All the Underfunded Pensions?

    Nick Maggiulli: Why You Shouldn’t Max Out Your 401(k)

    Michael Batnick: Bearish Billionaires & Animal Spirits: The Worst Chart in Finance

    Joshua Brown: Investopedia 100 Top Financial Advisors of 2020

    Howard Lindzon: Product Leader and Greylock Partners Board Partner Josh Elman Joins Me On Panic With Friends to Talk Working at the Early Stages of Some of the Biggest Names in Social

    Be sure to follow me on Twitter.

  • Earnings from AFLAC and Fiserv
    , October 27th, 2020 at 9:36 pm

    After the bell, we got earnings from AFLAC and Fiserv.

    For Q3, AFLAC’s (AFL) earnings rose 19.8% to $1.39 per share. The yen/dollar exchange rate didn’t impact earnings. Wall Street had been expecting $1.13 per share. AFLAC is usually pretty good at giving earnings guidance. For obvious reasons, they can’t now. The stock rose a bit in the after-hours market.

    Fiserv (FISV) said it had Q3 earnings of $1.20 per share. That’s a 19% increase over last year. Wall Street was expecting $1.16 per share.

    Fiserv now expects to see its earnings rise by 11% over last year. This will be their 35th year in a row of double-digit earnings growth.

    Last year, Fiserv earned $4 per share. An 11% earnings increase translates to full-year earnings of $4.44 per share.

    For the first nine months of this year, the company made $3.12 per share. That means the Q4 earnings should be $1.32 per share. That matches Wall Street’s forecast. The shares traded 3% higher in the after-hours market.