Author Archive

  • AFLAC Earned $1.54 per Share
    , April 28th, 2015 at 5:02 pm

    AFLAC (AFL) just reported Q1 operating earnings of $1.54 per share. That also matched Wall Street’s estimate. The strong dollar knocked 13 cents per share off earnings.

    “I want to reiterate that our objective for 2015 is to increase operating earnings per diluted share 2% to 7% on a currency neutral basis. If the yen averages 120 to 125 to the dollar for the second quarter, we would expect earnings in the second quarter to be approximately $1.46 to $1.57 per diluted share. Using that same exchange rate assumption, we would expect full-year reported operating earnings to be about $5.74 to $6.15 per diluted share. In April, we executed a make-whole transaction to enhance our consolidated capital position. As a result of this transaction, we will incur a non-operating charge of approximately $.34 in the second quarter of 2015. However, operating earnings per diluted share for the remainder of 2015 will benefit by approximately $.07 due to a net reduction in interest expense. Challenging financial markets and significantly depressed interest rates make it difficult to invest cash flows at attractive yields. Therefore, we will remain very disciplined in selling first sector products in Japan, which will reduce investable cash flows. As always, we are working very hard to achieve our earnings-per-share objective while also delivering on our promise to policyholders.”

  • Express Scripts Earned $1.10 per Share
    , April 28th, 2015 at 4:15 pm

    After the bell, Express Scripts (ESRX) reported Q1 earnings of $1.10 per share. That matched Wall Street’s consensus. Overall, it was a good quarter.

    “As our industry evolves, and plan sponsors have more business models to choose from, it is increasingly clear that Express Scripts is the best choice to manage America’s pharmacy benefits,” stated George Paz, Chairman and Chief Executive Officer. “At every turn, we add value to healthcare by combining a superior model of patient care with aggressive payer advocacy. Our unique combination of scale, client alignment and unmatched will, consistently creates greater value for patients and payers, while delivering solid results for our shareholders.”

    “Client retention starts with a simple concept: patient care,” said Tim Wentworth, President. “Our model, which surrounds patients with clinically-rooted, data-driven specialized care, is embedded in our innovative solutions that are clearly differentiated and in high demand.”

    Express Scripts also narrowed their full-year guidance by two cents per share at both ends. The old range was $5.35 to $5.49 per share. The new range is $5.37 to 5.47 per share. The new range translates to a growth rate of 10% to 12%. For Q2, which ends on June 30, ESRX expects earnings of $1.39 to $1.43 per share. That’s better than the $1.37 Wall Street had been expecting. The stock is up 3.1% after hours.

  • eBay’s CEO on the Spinoff
    , April 28th, 2015 at 11:49 am

  • A September Rate Increase
    , April 28th, 2015 at 9:22 am

    The Federal Reserve begins its two-day meeting today. We already had an earnings report from Ford Motor (F). AFLAC (AFL) and Express Scripts (ESRX) follow after the ball. Plus, we get GDP tomorrow morning.

    Economists aren’t expecting much from Q1 GDP. It looks like there’s an emerging consensus that the Fed will raise rates in September.

    Policy makers meeting on Tuesday and Wednesday in Washington will assess the impact of a harsh winter and a stronger dollar, which may have helped reduce the pace of economic growth to the lowest in a year, economists said. A hiring slowdown last month is adding to caution inside the Federal Open Market Committee, said Thomas Costerg at Standard Chartered Bank in New York.

    “They would like to see more signs of a rebound in the second quarter,” said Costerg, the New York-based senior U.S. economist. “There are some fears that the headwinds from the strong dollar and the drop in oil investment may persist.”

    Seventy-three percent of 59 economists said the first rate increase since June 2006 will come in September, according to a Bloomberg survey conducted April 22-24. That’s up from 37 percent in a March survey, when a majority of economists predicted an increase in June or July.

    Economic growth may have slowed to a 1 percent annual pace in the first three months of 2015 from 2.2 percent in the prior quarter, according to a separate survey. Among the reasons: a decline in energy-related investments caused by a slump in oil prices. The GDP report will be released at 8:30 a.m. on Wednesday in Washington.

    The Fed last month dropped an assurance that it will be “patient” in raising rates. Instead, officials said they want to see further labor-market gains and be “reasonably confident” inflation will move back up toward their 2 percent goal before tightening policy.

  • American Manufacturing Is Back?
    , April 28th, 2015 at 9:14 am

    From James Surowiecki in the New Yorker:

    Meanwhile, the outlook for industry is better than it’s been in a long time. American manufacturing was decimated during the first decade of this century, with six million jobs gone, and it was easy to believe that manufacturing was a lost cause. Yet it still accounts for more than two trillion dollars in output, and American factories are still among the most productive in the world. What’s more, energy costs here are falling, and labor costs abroad are rising. Suddenly, the U.S. seems like a reasonably affordable place to make high-end products, like G.E.’s jet engines and gas and wind turbines. There’s a growing market for such products, too. As developing countries get richer, they’re spending more on power, transportation infrastructure, and health care. The energy sector, even with the recent drop in oil prices, has a voracious appetite for exploration and drilling. These are all industries that G.E. specializes in.

    This kind of manufacturing, with its automated, high-tech factories, doesn’t create as many jobs as old-fashioned heavy industry, but the gains are still significant. In the past six years, G.E. has opened more than twenty new plants and added more than sixteen thousand new workers in the U.S. “We’re not talking about some nostalgic, morally attractive American folkway,” Muro said. “Advanced manufacturing is a major driver of innovative activity, exports, and economic growth. So it’s good to see a hallmark company refocussing on it.” After twenty-five years of the financial tail wagging the industrial dog, it’s time to try something new.

  • Ford Earned 23 Cents per Share
    , April 28th, 2015 at 7:44 am

    Our earnings winning streak has come to an end. This morning, Ford Motor (F) reported Q1 earnings of 23 cents per share. That’s three cents below estimates. Fortunately, Ford is sticking with its full-year guidance.

    From the WSJ:

    Ford Motor Co. reported net income was down 7% in the first quarter as profitability in North America and Asia was offset by losses in Europe and South America.

    The Dearborn, Mich., auto maker said it earned $924 million, or 23 cents a share, in net profit for the just-ended quarter, about flat with the $989 million, or 24 cents a share, booked in the same year-ago period when the company had to spend more to recall and fix defective vehicles.

    Revenue totaled $33.9 billion for the quarter, down 6% from a year earlier. Profits before taxes were $1.4 million, about flat from a year earlier.

    Ford’s results missed analysts’ expectations of 26 cents a share, signaling a slow start to a year that Chief Executive Mark Fields has pledged would be more profitable than the last. Ford attributed the miss to analysts factoring in a lower tax rate than the actual rate for the quarter, a difference of about 2 cents.

    Ford’s stock has budged little in the past year, down less than a percentage point through close Monday.

    Ford looks to open a little higher today.

  • Morning News: April 28, 2015
    , April 28th, 2015 at 7:05 am

    Tsipras Says Greek People May Have to Rule on Final Deal

    Japan’s Amari Plays Down Expectations on U.S. Trade Deal Progress

    2% Inflation Rate Target Is Questioned as Fed Policy Panel Prepares to Meet

    Apple Adds Yet Another Title: Largest Dividend Payer in S&P 500

    Google Teams Up With European Media to Boost Online Journalism

    Amazon Business Aims for $1 Trillion Corporate-Spending Market

    Ford Profit Down on International Markets

    Honda’s Annual Profit Fell 8.9% After Recalls Costs Soared

    Daimler Profit Jumps as Mercedes Sales Rise

    Don’t Believe Everything You Read: Lower Fuel Prices Aren’t Why U.S. Airlines Are Earning Big Profits

    Aetna Raises Forecast as Earnings Rise on Insurance Enrollment

    Philips Health-Care Profitability Drops in Prelude to Split

    Trans-Pacific Partnership Puts Harvard Law School Rivals on Opposite Sides, Again

    Jeff Carter: Greeks Centralize All Currency

    Cullen Roche: What If There Are No Reliable Factors?

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  • Apple Facts
    , April 27th, 2015 at 7:22 pm

    After the bell Apple (AAPL) reported blow-out earnings.

    Net income totaled $13.57 billion in its fiscal second quarter ended March 28, versus $10.22 billion in the year-ago period. Earnings per share rose more sharply, to $2.33, from a split-adjusted $1.66, because the company’s stock-repurchase program reduced the share count.

    Revenue rose 27% to $58.01 billion from $45.65 billion in the year-ago period.

    Analysts polled by Thomson Reuters estimated that Apple would post earnings of $2.16 a share on revenue of $56.1 billion.

    The company also raised its quarterly dividend from 47 to 52 cents per share. Apple’s annual dividend is now greater than its share price from 11 years ago.

    Apple’s market value is $0.8 trillion. If (when) it gets to $171.68 per share, Apple will become the world’s first trillion-dollar company. Apple is worth about 90 points in the S&P 500. That’s where the whole index was in 1978.

    Apple had $5,200 in iPhone sales. Every second.

    Apple has enough cash in the bank ($194 billion) to buy every single team in the NFL, NBA, NHL and major league baseball.

    If that cash reserve were stacked on the floor of the Grand Canyon, it would be like…whoa look at all that money!

  • The Earnings Notch
    , April 27th, 2015 at 10:58 am

    Here’s an updated look at the S&P 500 and its earnings. The S&P 500 is the blue line and it follows the left scale. The earnings is the gold line and it follows the right scale. The two lines are scaled at a ratio of 16-to-1 which means the P/E Ratio is exactly 16 whenever the lines cross.

    image1470

    The important takeaway from this graph is that right now we’re going through an “earnings notch.” As you can see, the gold is temporarily declining (modestly) for a few quarters.

    The future part of the gold line is based on Wall Street’s estimate. The “earnings recession” is expected to last one full year; the last quarter of 2014 and the first three quarters of 2015. We’re in the middle of it right now.

    By Q4 2015, the earnings line is expected to resume climbing higher. An earnings notch isn’t unprecedented. We went through a similar espisode, though not as severe, during the last half of 2012 and the first half of 2013. Once it passed, earnings growth returned.

    The valuation of the S&P 500 appears to be elevated given the flat earnings. However, if expectations for 2016 and beyond are correct, then the index is still reasonably valued. (By the way, I don’t mean to imply that 16 times earnings is fair value for the S&P 500. It’s simply a reference point.)

  • Morning News: April 27, 2015
    , April 27th, 2015 at 7:13 am

    Greeks Add Pressure on Tsipras to Compromise as Talks Resume

    Sure, Greece Can Default Without Leaving The Euro; But Will It Be Allowed to?

    Spain to Lift 2015 Growth Target

    Fitch Downgrades Japan, Joins Moody’s in Warning on Fiscal Policy

    Billionaire’s Daughter Turning CEO Shows What Japan Lacks

    Deflation? Oil’s 45% Rebound Could Be Markets’ Next Headache

    White House Takes Cybersecurity Pitch to Silicon Valley

    Applied Materials, Tokyo Electron Ditch $10 Billion Merger Over Regulatory Snag

    Comcast-Time Warner Cable Deal’s Collapse Leaves Frustrated Customers Out in the Cold

    Deutsche Bank to Streamline Operations to Improve Profit

    Cap Gemini to Buy Igate for $4 Billion to Challenge Accenture

    China Inc. Finds Cure to Debt Hangover in Stock-Market Boom

    Airbus A380 Haunted by Feeble Orders Marks Decade in Skies

    Roger Nusbaum: Social Security & Portfolio Withdrawals; It’s Complicated

    Jeff Miller: Weighing the Week Ahead: Time for an Upside Breakout?

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