Author Archive

  • Morning News: October 28, 2011
    , October 28th, 2011 at 5:04 am

    Calling Bankers’ Bluff, Merkel Got Europe a Debt Plan

    EU Bank Debt Plan May Struggle to Thaw Funding Market

    Greek Prime Minister Praises European Debt Deal

    Gauging the Fallout of Another Rescue

    Europe Looks to IMF, China for Rescue-Fund Cash

    U.S. Economy Picks Up Pace, Averting a Stall

    Oil Drops on Japan Output, Pares Biggest Weekly Gain Since March

    Oil Industry Hums as Higher Prices Bolster Quarterly Profits at Exxon and Shell

    PetroChina Gains Top Sinopec as Crude Counters Refining Loss

    Samsung Overtakes Apple in Smartphone Sales

    HP Ditches Costly PC Unit Spin-off

    Potash Third-Quarter Profit More Than Doubles on Higher Fertilizer Prices

    Some MF Global Clients Move Money Away as Troubles Grow

    Advertising Giant WPP Predicts Full-Year Revenue Growth to Slow

    Disney Channel to Be Introduced in Russia

    Roger Nusbaum: Now That Would Be A Disclaimer

    Jeff Carter: Occupy Wall Street and Entrepreneur Investment

    Be sure to follow me on Twitter.

  • The S&P 500 Breaks Above Its 200-DMA
    , October 27th, 2011 at 12:51 pm

    The S&P 500 just dipped above its 200-day moving average. If we close above 1,274.19, it will be the first time since August 1st that we’ve closed above the 200-DMA.

    The index’s high today was 1,279.27 which is a gain of 3.0008%.

  • Dan Amos on AFLAC’s Earnings
    , October 27th, 2011 at 12:43 pm

  • Deluxe Earns 78 Cents Per Share
    , October 27th, 2011 at 11:57 am

    The earnings parade continues! Deluxe ($DLX) just reported Q3 earnings of 78 cents per share which was three cents more than estimates. Revenue came in at $355.1 million which was just shy of consensus.

    Deluxe is one of our quieter stocks but it’s still doing well. I really like the stock’s high dividend yield. For Q4, Deluxe sees earnings ranging between 77 cents and 84 cents per share on revenue between $359 million and $369 million. Wall Street had been expecting 82 cents per share on revenue of $362.84 million so there’s no surprise here.

    The stock initially dropped this morning which is an odd reaction to today’s report, but the shares have since rallied. At the current price, DLX yields 4.13%. I probably won’t have Deluxe on next year’s Buy List but I think the shares are a good buy at this price.

    Here are some details on the recent quarter:

    “Deluxe delivered another solid quarter despite the ongoing sluggish economy,” said Lee Schram, CEO of Deluxe. “Excluding the impact of last year’s $25 million contract settlement and the recent PsPrint acquisition we grew revenue and delivered on our cost reduction initiatives. We also delivered strong operating cash flow and repurchased additional shares. With three quarters complete, we are confident in our ability to deliver the full year revenue and EPS objectives established in January despite added challenges from the economy.”

    Third Quarter 2011 Highlights:

    * Revenue for the quarter was $355.1 million compared to $367.6 million during the third quarter of 2010. Revenue in 2010 included a contract settlement of $24.6 million. Excluding the contract settlement, revenue increased 3.5% compared to 2010, with growth in Small Business Services more than offsetting declines in the personal check businesses.

    * Gross margin was 65.5 percent of revenue compared to 67.0 percent in 2010. The contract settlement in 2010 had a favorable impact of 2.4 percentage points on 2010 gross margin. Favorable impacts from price increases and the Company’s continued cost reduction initiatives more than offset increased material costs and delivery rates in 2011.

    * Selling, general and administrative (SG&A) expense increased $5.0 million in the quarter compared to 2010. Increased SG&A expense associated with acquisitions and investments in revenue generating initiatives was partially offset by benefits from continued execution against cost reduction initiatives.

    * Operating income in 2011 was $65.6 million compared to $88.5 million in the third quarter of 2010. The decrease was driven primarily by the $24.6 million contract settlement in 2010. Restructuring and transaction-related costs were $5.1 million in 2011 versus $0.1 million in 2010. The 2011 costs were primarily attributable to the Company’s on-going cost reduction initiatives and the July acquisition of PsPrint. Operating income was 18.5 percent of revenue compared to 24.1 percent in the prior year driven primarily by the 2010 contract settlement.

    * Reported diluted EPS decreased $0.27 from the prior year driven by the 2010 contract settlement of $0.31 per share, offset by improved operating performance and a lower effective tax rate primarily from actions taken to restore a portion of the deferred tax asset related to Medicare Part D subsidies.

  • Nicholas Financial Earns 46 Cents Per Share
    , October 27th, 2011 at 10:45 am

    NICK just reported great fiscal Q2 earnings of 46 cents per share which was at the top of the range I gave yesterday. That’s a 39% increase over last year. For the first half of their fiscal year, NICK has made 90 cents per share. The company also said that it will pay another 10-cent dividend.

    My earlier forecast was that NICK could make as much as $1.70 per share for this calendar year. That must have seemed very optimistic when I made it but now it looks very doable. In fact, I think NICK can make $1.75 per share.

    This was an outstanding quarter. Let’s dig through some of the important numbers. Total receivables are up to $272.8 million which is a little lighter than I expected.

    The gross yield came in at 25.21% which is the highest in a year. The two bites we take out of gross yield are interest expense which was just 1.81%, the lowest on my records, and provision for credit losses which was a measly 0.26%. That line can be the earnings killer. This means that NICK’s portfolio is doing well.

    After those two are subtracted, the end result is the net yield which came in at 23.14%. That’s an increase of nearly 10% from three years ago. Out of that, we take 9.85% for costs and that gives us a pre-tax yield of 13.29%. That’s very, very good.

    Here’s a NICKs Stats with some of the performance stats for the past several quarters.

    Nicholas Financial, Inc. that for the three months ended September 30, 2011 net earnings increased 39% to $5,520,000 as compared to $3,982,000 for the three months ended September 30, 2010. Per share diluted net earnings increased 35% to $0.46 as compared to $0.34 for the three months ended September 30, 2010. Revenue increased 9% to $17,211,000 for the three months ended September 30, 2011 as compared to $15,732,000 for the three months ended September 30, 2010.

    For the six months ended September 30, 2011 net earnings increased 43% to $10,823,000 as compared to $7,558,000 for the six months ended September 30, 2010. Per share diluted net earnings increased 41% to $0.90 as compared to $0.64 for the six months ended September 30, 2010. Revenue increased 10% to $33,845,000 for the six months ended September 30, 2011 as compared to $30,684,000 for the six months ended September 30, 2010.

    “Our strong growth in earnings per share for the three and six months ended September 30, 2011 were primarily the results of an increase in the average finance receivables and a reduction in the net charge-off rate,” stated Peter L. Vosotas, Chairman and CEO. We also recently opened our 58th branch location in Huntsville, AL and continue to develop additional markets. We expect to open between 2-4 new branch locations during the remainder of our current fiscal year, which ends March 31, 2012.

    As a result of our continued earnings growth and stable capital position, the Board of Directors has voted to continue issuing a quarterly dividend equal to $.10 per common share, to be paid on December 20th to shareholders of record as of December 13th.

  • Q3 Real GDP Growth = 2.5%
    , October 27th, 2011 at 10:30 am

    The initial report for third-quarter came out this morning and it showed that the U.S. economy grew by 2.5% in real terms. That’s okay but still not close to what we need. Still, it’s the best growth in a year.

    We’ve finally passed the peak from the fourth quarter of 2007. In those 15 quarters, the economy has grown by a grand total of 0.2%.

    Here’s a stat that sums it up: The U.S. economy has grown less in the last 11 years than in the four years before that.

    Here’s a look at real GDP since 2005. (I’ve given up trying to find a letter to describe this…N? U? V?)

  • Huge Opening
    , October 27th, 2011 at 10:06 am

    Wow! This is one of the best openings I’ve seen in a long time. Everything that was being held back by Europe is up.

    AFLAC ($AFL) has been as high as $47.98 which is an 11.5% jump.

    JPMorgan Chase ($JPM) is also very strong. At one point, up nearly 10%.

    Nicholas Financial‘s ($NICK) earnings are due shortly.

  • Futures Point to Strong Open
    , October 27th, 2011 at 6:53 am

    Thanks to the deal in Europe, the stock market looks to open much higher today. The futures for the S&P 500 are currently at 1,263.10. The index could hit the highest levels in nearly three months.

  • Amazon Way Overpriced
    , October 27th, 2011 at 6:20 am

    Shares of Amazon.com ($AMZN) got body slammed yesterday for a 12.7% loss after the company reported terrible earnings. For the third quarter, Amazon earned just 14 cents per share which was 10 cents below Wall Street’s forecast. For comparison, Amazon netted 51 cents per share in the same quarter one year ago.

    I think this is just the beginning of Amazon’s sell-off. Even after the big drop, the stock is very richly priced. Three months ago, Wall Street thought Amazon could earn $2.40 per share for this year. Now they’ll be lucky if they can earn $1.80 per share. Similarly, Wall Street had been expecting the company to earn $3.80 per share next year. I think those estimates will soon be pared back to less than $3 per share.

    The stock closed yesterday at $198.40 which is down from the high of $246.71 from just two weeks ago. Amazon is currently going for 62 times forward earnings, which is an elevated multiple for an estimate that’s plunging.

    My advice is to steer clear of Amazon.com.

    Here’s a chart of Amazon’s stock (in blue, left scale) and its earnings-per-share (black line, right scale). The two lines are scaled at a ratio of 50-to-1 which means that the P/E Ratio is exactly 50 when the lines cross. The red line represents Wall Street’s forecast.

  • Europe Agrees to Agree on Plan to Rescue the Euro
    , October 27th, 2011 at 5:55 am

    The stock market is poised to soar on the news:

    European leaders, in a significant step toward resolving the euro zone financial crisis, early Thursday morning obtained an agreement from banks to take a 50 percent loss on the face value of their Greek debt.

    The agreement on Greek debt was crucial to assembling a comprehensive package to protect the euro, which has been keeping jittery markets on edge.

    The accord was reached just before 4 a.m. after difficult bargaining. The severe reduction would bring Greek debt down by 2020 to 120 percent of that nation’s gross domestic product, a figure still enormous but more sustainable for an economy driven into recession by austerity measures.

    The leaders agreed on Wednesday on a plan to force the Continent’s banks to raise new capital to insulate them from potential sovereign debt defaults. But there was little detail on how the Europeans would enlarge their bailout fund to achieve their goal of $1.4 trillion to better protect Italy and Spain.

    After all the buildup to this summit meeting, failure here would have been a disaster. While the plan to require banks to raise new capital was generally approved without difficulty — banks will be forced to raise about $150 billion to protect themselves against losses on loans to shaky countries like Greece and Portugal — the negotiations over the Greek debt were difficult.

    “The results will be a source of huge relief to the world at large, which was waiting for a decision,” President Nicolas Sarkozy of France said.

    Chancellor Angela Merkel of Germany said: “I believe we were able to live up to expectations, that we did the right thing for the euro zone, and this brings us one step farther along the road to a good and sensible solution.”