Posts Tagged ‘BCR’

  • CWS Market Review – April 20, 2012
    , April 20th, 2012 at 5:16 am

    We’re entering the high tide of the first-quarter earnings season, and so far earnings have been quite good. Of course, expectations had been ratcheted down over the past several months, but there have still been fears on Wall Street that even the lowered expectations were too high.

    According to the latest figures, 103 companies in the S&P 500 have reported earnings and 82% have beaten Wall Street’s expectations. That’s very good. If this “beat rate” keeps up, it will be the best earnings season in at least ten years.

    Earnings for our Buy List stocks are doing especially well. JPMorgan Chase, Johnson & Johnson and Stryker all beat expectations. Plus, J&J did something I always love to see: raise their full-year forecast.

    Next week is going to be another busy earnings week for us; we have five Buy List stocks scheduled to report earnings. In this week’s issue, I’ll cover the earnings outlook for our Buy List. I’m expecting more great results from our stocks. I’ll also let you know what some of the best opportunities are right now (I doubt AFLAC will stay below $43 much longer.) But before I get to that, let’s take a closer look at our recent earnings reports.

    Three Earnings Beats in a Row

    In last week’s CWS Market Review, I said that I expected JPMorgan Chase ($JPM) to slightly beat Wall Street’s consensus of $1.14 per share. As it turned out, the House of Dimon did even better than I thought. On Friday, the bank reported earnings of $1.31 per share. Interestingly, JPM’s earnings declined slightly from a year ago, but thanks to stock repurchases, earnings-per-share rose a bit.

    The stock reacted poorly to JPM’s earnings—traders knocked the stock down from $45 to under $43—but I’m not too worried. The bank had a very good quarter and Jamie Dimon has them on a solid footing. Last quarter was better than Q4 and this continues to be one of the strongest banks on Wall Street. (If you want more details, here’s the CFO discussing JPM’s earnings.) Don’t be scared off; this is a very good stock to own and all the trends are going in the right direction. I rate JPMorgan Chase a “strong buy” anytime the shares are less than $50.

    On Tuesday, Stryker ($SYK) reported Q1 earnings of 99 cents per share which matched Wall Street’s forecast. Last week, I said that 99 cents “sounds about right.” I was pleased to see that revenues came in above expectations and that gross margins improved. That’s often a good sign that business is doing well.

    Stryker’s best news was that it reiterated its forecast for “double-digit” earnings growth for this year. I always tell investors to pay attention when a company reiterates a previous growth forecast. I think too many investors tend to ignore a reiteration as “nothing new,” but it’s good to hear from a company that its business plan is still on track. I suspect that Stryker will raise its full-year forecast later this year. Stryker is an excellent buy up to $60.

    Last week, I said that Johnson & Johnson ($JNJ) usually beats Wall Street’s consensus by “about three cents per share.” This time they beat by two cents which is probably more of a testament to how well the company controls Wall Street’s expectations. For Q1, J&J earned $1.37 per share. I’ve looked at the numbers and this was a decent quarter for them.

    For the first time in a while, I’m excited about the stock. A new CEO is about to take over, and the company will most likely announce their 50th-consecutive dividend increase. The company also won EU approval for its Synthes acquisition. But the best news is that the healthcare giant raised its full-year guidance by two cents per share. The new EPS range is $5.07 to $5.17. Johnson and Johnson is a good stock to own up to $70 per share.

    Focusing on Next Week’s Earnings Slate

    Now let’s take a look at next week. Tuesday, April 24th will be a busy day for us as AFLAC ($AFL), Reynolds American ($RAI) and CR Bard ($BCR) are all due to report. Then on Wednesday, Hudson City ($HCBK) reports and on Friday, one of our quieter but always reliable stocks, Moog ($MOG-A), will report earnings.

    Let’s start with AFLAC ($AFL) since that continues to be one of my favorite stocks and because it has slumped in recent weeks. AFLAC has said that earnings-per-share for this year will grow by 2% to 5% and that growth next year will be even better. Considering that the insurance company made $6.33 per share last year, that means they can make as much as $6.65 this year and close to $7 next year.

    So why are the shares near $42 which is less than seven times earnings? I really don’t know. AFLAC has made it clear that they shed their lousy investments in Europe. Wall Street’s consensus for Q1 earnings is $1.65 per share which is almost certainly too low. I think results will be closer to $1.70 per share but I’ll be very curious to hear any change in AFLAC’s full-year forecast. Going by Thursday’s close, AFLAC now yields more than 3.1% which is a good margin of safety. AFLAC continues to be an excellent buy up to $53 per share.

    I’ve been waiting and waiting for CR Bard ($BCR) to break $100. The medical equipment stock has gotten close but hasn’t been able to do it just yet. Maybe next week’s earnings report will be the catalyst. Three months ago, Bard said to expect Q1 earnings to range between $1.53 and $1.57. That sounds about right. I like this stock a lot. Bard has raised its dividend every year for the last 40 years. It’s a strong buy up to $102.

    With Reynolds American ($RAI), I’m not so concerned if the company beats or misses by a few pennies per share. The important thing to watch for is any change in the full-year forecast of $2.91 to $3.01 per share. If Reynolds stays on track to meet its forecast, I think we can expect the tobacco company to bump up the quarterly dividend from 56 cents to 60 cents per share.

    Reynolds American has been a bit of a laggard this year. It’s not due to anything they’ve done. It’s more of a result of the theme I’ve talked about for the past few weeks: investors leaving behind super-safe assets for a little more risk. It’s important to distinguish if a stock isn’t doing well due to poor fundamentals or due to changing market sentiment. Reynolds is still a very solid buy. The shares currently yield 5.4%.

    Hudson City Bancorp ($HCBK) raced out to a big gain for this year, but it’s given a lot back in the past month. The last earnings report was a dud, but the bank is still in the midst of a recovery. Some patience here is needed. Wall Street’s consensus for Q1 is for 15 cents per share. I really don’t know if that’s in the ballpark or not, but what’s more important to me is the larger trend. Hudson City is cheap and a lot of folks would say there’s a good reason. I think the risk/reward here is very favorable. At the current price, Hudson City yields 4.8%. The shares are a good buy up to $7.50.

    As I mentioned before, Moog ($MOG-A) is one of our most reliable stocks. The company has delivered a string of impressive earnings reports. Moog has said that it sees earnings for this year of $3.31 per share (note that their fiscal year ends in September). That gives the stock a price/earnings ratio of 12.2. I think Moog can be a $50 stock before the year is done.

    There are three Buy List stocks due to report soon but the companies haven’t told us when: Ford ($F), DirecTV ($DTV) and Nicholas Financial ($NICK). Ford and Nicholas are currently going for very good prices. They usually report right about now, so the earnings report may pop up any day now. I think both stocks are at least 30% undervalued.

    That’s all for now. Next week will be a busy week for earnings. We’re also going to have a Fed meeting plus the government will release its first estimate for Q1 GDP growth. 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

  • After the Close: CR Bard Beats Earnings, AFLAC Misses But Guides Higher for 2013
    , January 31st, 2012 at 6:09 pm

    The S&P 500 just closed out its best January in 15 years. The 55-point gain was the largest for January on record.

    After the bell today, we had two more earnings reports. CR Bard ($BCR) reported fourth-quarter earnings of $1.70 per share which was two cents better than expectations.

    Revenues rose 4.9% to $751.9 million. For the year, Bard earned $6.40 per share. That’s a 14% increase over the $5.60 Bard earned in 2010. Based on today’s close, Bard is going for 14.45 times trailing earnings.

    Timothy M. Ring, chairman and chief executive officer, commented, “Fourth quarter constant currency net sales growth of 5% was at the top end of our guidance and allowed us to exceed adjusted EPS guidance for the quarter and for the year. Our revenue growth is being driven by a combination of geographic investments, external acquisitions and internal research and development. By combining top-line growth with disciplined expense management and share-repurchase programs, we have been able to meet our short-term commitments to shareholders while positioning the company for healthy long-term growth.”

    AFLAC ($AFL) reported fourth-quarter operating earnings of $1.48 per share which was four cents below expectations. Three months ago, AFLAC said it expected to earn $1.45 to $1.52 per share for the fourth quarter. This is a slight disappointment to me because I had been expecting AFLAC to beat expectations by a few pennies per share.

    AFLAC reiterated their earnings forecast for this year of growth of 2% to 5%. For the year, AFLAC had operating earnings of $6.33 per share. That means the company sees earnings for 2012 ranging between $6.46 per share and $6.65 per share.

    The best news, however, is that AFLAC said it expects the rate of earnings growth in 2013 to exceed that of 2012. That’s excellent news. If we take the mid-point of AFLAC’s range for this year’s growth (3.5%) and assume 4% growth for 2013, that translates to earnings of $6.81 per share.

    Daniel P. Amos stated: “Aflac had another strong year. Growth of operating earnings per diluted share was in line with our goal of an 8% increase before the impact of foreign currency. That result was also consistent with guidance we provided when we released third quarter results. We had conveyed in the third quarter that following nine months of restrained expenditures, we planned to increase spending on IT and marketing initiatives in the fourth quarter to strengthen our business, and that’s exactly what we did. I am pleased that 2011 marked the 22nd consecutive year in which we achieved our earnings objective.

    “Aflac Japan gets high marks for another great quarter and year. The tremendous sales momentum they generated this quarter, largely propelled by success in selling through banks, significantly exceeded our expectations for the year and especially for the quarter. In fact, Aflac Japan’s fourth quarter production set an all-time quarterly record, which is especially remarkable considering 2011 was the year Japan was hit with the most devastating natural disaster in its history.

    “We are also pleased with Aflac U.S. results for the quarter and year. It has been, and continues to be, the longstanding goal and vision of Aflac U.S. to be the leading provider of voluntary insurance in the United States, and our sales results in 2011 build on that vision. Through our efforts, we continue to expand Aflac’s potential to connect with employees at more companies, large and small, across the United States.

    The 2009 addition of group products to our existing portfolio has allowed us to leverage our strong brand and provide more options for customers of both our traditional and broker distribution channels. In 2011, product marketing efforts geared toward existing accounts contributed to strong sales for our veteran agents. Additionally, you’ll recall that we have been establishing and developing relationships with brokers that handle the larger-case market. While this broker initiative is still in its infancy, we are excited about the opportunity this channel presents for future growth.

    “The strength of our capital ratios demonstrates our commitment to maintain financial strength on behalf of our policyholders and bondholders. As we have communicated over the past several years, sustaining a strong risk-based capital, or RBC ratio, remains a priority for us. We had conveyed that our goal was to end 2011 with an RBC ratio in the range of 400% to 500% with a target of 450%. Although we have not yet finalized our statutory financial statements, we estimate our 2011 RBC ratio will be between 480% and 520%. Additionally, we are comfortable with our solvency margin ratio and continue to apply rigorous stress testing under extreme scenarios.

    “As we look ahead to 2012 sales opportunities in the United States, we expect Aflac U.S. sales to increase 3% to 8%. Following Aflac Japan’s outstanding sales growth of 18.6% last year, I think it’s reasonable to expect Aflac Japan sales will decrease within the range of down 2% to down 5% for the year.

    “Looking ahead, I want to reiterate that our objective for 2012 is to increase operating earnings per diluted share 2% to 5% on a currency neutral basis. This range reflects the impact of portfolio derisking and investing significant cash flows at low interest rates. We expect the rate of earnings growth in 2013 to improve over 2012.”

  • Oracle and CR Bard
    , December 21st, 2011 at 10:03 am

    The market is down about 0.5% this morning but there’s some rough news for our Buy List.

    Oracle‘s ($ORCL) earnings report wasn’t what I expected and it also fell short of what the company told us. That’s a very bad move on their part. Their shares are getting hacked this morning. Oracle has been as low as $25 per share this morning which is a 14% haircut.

    As disappointed as I am in Oracle, I think a three-penny miss shouldn’t translate into a 400-penny sell-off. Today’s selling is very overblown but this is what you get when you mislead the Street.

    The other news is for one of our new stocks for 2012, CR Bard ($BCR). In the company’s analyst call yesterday, they lowered their forecast for 2012 due to the impact of buying Lutonix:

    Without the impact of Lutonix our guidance would have been 7% to 8% adjusted EPS growth. As our press release noted today’s transaction will dilute the 2012 adjusted EPS by about $0.25 or 400 basis points of growth. So our 2012 all-in guidance is for between 3% and 4% EPS growth excluding items that affect comparability. I would also note that the lack of the R&D tax credit in 2012 cost us about a point of EPS growth.

    Bard should earn about $6.38 per share for 2011. So today’s news means that they should earn between $6.57 to $6.63 per share.