Posts Tagged ‘rai’

  • Reynolds American Earns 72 Cents Per Share
    , February 8th, 2012 at 10:40 am

    Our tobacco stock, Reynolds American ($RAI), released strong fourth-quarter earnings today of 72 cents per share which was four cents better than Wall Street’s estimates. That’s a 12.5% increase over the fourth quarter of 2010. For the full year, Reynolds earned $2.81 per share. One year ago, Reynolds issued guidance for 2011 of $2.60 to $2.70 per share.

    Reynolds also offered earnings guidance for this year of $2.91 to $3.01 per share. Now let’s focus on the most important part of owning Reynolds: the dividend. According to company policy, they aim to pay 75% to 80% of their earnings to shareholders as dividends. So if Reynolds were to pay 80% of $3 per share, that would be a quarterly dividend of 60 cents per share. The dividend is currently 56 cents per share (it was raised twice last year).

    Here are some details from Market Watch:

    R.J. Reynolds Tobacco, the company’s cigarette unit, saw its revenue slip 0.4% to $1.76 billion as domestic volume fell 7.2%. Accounting for the elimination of private-label brands, volume dropped 7.1%. Total market share, excluding private label brands, fell 1.1 percentage points to 27%. Meanwhile, growth brands–which include Camel and Pall Mall–gained 0.3 percentage points of market share to hold 16.5% of the market.

    At American Snuff, the smokeless tobacco unit that makes Grizzly and Kodiak moist snuff, total volume increased 6.1%, though revenue declined 14%.

    Larger rival Altria last month reported its fourth-quarter earnings slid 9% due to several charges, though the tobacco company’s revenue rose 3.4% on strong volume growth for smokeless products and a modest increase in volume for cigarettes.

    Going by yesterday’s close, Reynolds yields 5.58%. That’s a good deal. Reynolds benefitted last year as investors rushed to buy high-yield stocks as bond yields evaporated. The stock probably won’t see a capital gains surge this year like it did in 2011.

  • Reynolds American Announces $2.5 Billion Share Buyback
    , November 15th, 2011 at 11:43 am

    I sometimes think these announcements are done specifically to annoy me. Reynolds American ($RAI) just announced a $2.5 billion share repurchase plan. To be more specific, the plan is “up to” $2.5 billion so that includes other numbers…such as $0. Also, this isn’t all at once. The program will last for two-and-half years.

    Basically, this news is released so the company can claim that it’s releasing good news.

    I really like RAI a lot and I especially like the dividend. A little over a year ago, RAI raised its quarterly dividend from 45 cents per share to 49 cents per share. Then in February, they raised it again — this time to 53 cents per share.

    A $2.5 billion share buyback program works out to $4.30 per share which is 11% of the current stock price. I think RAI shareholders would much rather have that in cash than the hope that it will boost the share price that much.

    The company is also making an accounting change that will alter their reported earnings.

    Reynolds American generally analyzes its pension and post-retirement plan performance annually as of the end of the year. Under the change, any actuarial gains or losses outside a 10 percent range will be recognized during the fourth quarter as a mark-to-market adjustment included in pension and post-retirement expenses.

    The accounting change will be applied retrospectively to prior periods.

    As a result of the change, Reynolds American expects adjusted full-year earnings of $2.77 to $2.82 per share. Using the company’s previous accounting methodology, Reynolds American had expected $2.63 to $2.68 a share. Analysts surveyed by FactSet had expected $2.64 per share, on average.

  • Reynolds American Earns 70 Cents Per Share
    , October 25th, 2011 at 8:09 am

    Reynolds American ($RAI) just posted Q3 earnings of 70 cents per share which was three cents below estimates. The company also narrowed its full-year EPS range to $2.63 – $2.68 per share which impies a Q4 range of 67 – 72 cents per share.

    Reynolds has also raised its quarterly dividend from 53 cents per share to 56 cents per share. That makes the annual dividend $2.24 per share which comes to a yield of 5.69% based on yesterday’s close.

    “Reynolds American continues to deliver solid financial results in this challenging environment, while our transformation strategy shapes the business for long-term success,” said Daniel M. Delen, RAI’s president and chief executive officer. “This performance once again demonstrates our ability to overcome near-term challenges while continuing to position our business for future growth.”

    RAI’s board of directors has also approved a 5.7 percent increase in the company’s dividend, demonstrating confidence in the operating companies’ businesses going forward, and the company’s commitment to returning value to shareholders.

    Third-quarter results benefited from growth-brand gains at R.J. Reynolds, and strong volume and share growth at American Snuff. In addition, Santa Fe Natural Tobacco Company, Inc. again delivered excellent results, with higher volumes, share and earnings.

    “Even with a difficult economic and competitive environment, RAI and its operating companies remain focused on delivering sustainable growth, while driving innovations throughout our businesses,” Delen said. “As we continue to focus on key-brand equity building and identifying additional opportunities for growth, we believe our transformation strategy will sustain the company well into the future.

  • S&P 500 = 1,253
    , October 24th, 2011 at 3:11 pm

    This is turning into a very good day for the market. The S&P 500 has been as high as 1,256.55 which is another post-August 3rd high. The index’s 200-DMA is well within sight.

    The cyclicals are leading today’s rally. I think the good news from Caterpillar ($CAT) helped the entire sector. The Morgan Stanley Cyclical Index ($CYC) is up more than 2.8% bringing it back over 900. The Consumer Index ($CMR), by contrast, is barely positive.

    Smaller stocks tend to be more weighted with cyclicals and we’re seeing the small-stock indexes doing much better than their larger-cap cousins today. The Russell 2000 ($RUT) is up more than 3.28% while the Russell 1000 ($RUI) is up just 1.61%.

    Our Buy List is now in positive territory for the year. Bed Bath & Beyond ($BBBY) hit another 52-week high. Deluxe ($DLX) and Wright Express ($WXS) have also been very strong. The only weak spots are Abbott Labs ($ABT) whose position is probably due its strength from last week, and Reynolds American ($RAI) which is losing ground after competitors delivered some disappointing earnings reports.

    Notice how strong small-caps have been (the black line is the Russell 2000) compared with the large-caps (Russell 1000 in gold) since the middle of the day on Thursday:

  • Reynolds American Earnings Preview
    , October 22nd, 2011 at 1:59 pm

    From the AP:

    Reynolds American Inc., the second-biggest U.S. cigarette company and the maker of Camel brand products, is expected to report rising profit despite lower revenue when it releases its third-quarter results before the stock markets open Thursday.

    Americans are continuing to buy fewer cigarettes as they face rising taxes and greater smoking bans, health concerns and social stigma.

    WHAT TO WATCH FOR: Investors will be looking for signs that growth in Reynolds American’s Pall Mall brand will continue.

    The company, based in Winston-Salem, N.C., has promoted Pall Mall as a longer-lasting and more affordable cigarette. It says half the people who try the brand continue using it as they weather the weak economy and high unemployment. Most tobacco companies have raised prices and cut costs to bolster profits as declining demand cuts into cigarette sales.

    Pall Mall’s second-quarter volume grew 15 percent, and its share of the U.S. market increased 1.5 percentage points to 8.5 percent. Camel volume fell 3 percent during the quarter, and its share of the cigarette market remained stable 7.8 percent. But the company’s other brands are dragging down overall volume, which fell 4.4 percent in the third quarter.

    Complicating cigarette shipments, the nation’s largest tobacco companies also cautioned last quarter that third-quarter cigarette volume comparisons will be hurt because wholesalers stocked up more than usual in that period last year.

    Reynolds American also sells Natural American Spirit cigarettes, and Kodiak and Grizzly smokeless tobacco.

    Analysts pay close attention to the company’s smokeless tobacco products — a segment of the tobacco industry that’s growing and becoming increasingly competitive as companies fight the decline in cigarette sales. Reynolds’ smokeless volumes grew 3.6 percent last quarter, and its market share grew 1.5 points to 31.3 percent of the U.S. market.

    WHY IT MATTERS: Reynolds American’s results will help reveal key tobacco industry trends in the U.S.

    Continued strength from Pall Mall could mean smokers are still switching to cheaper brands to save money, and those who tried the brand during the recession are remaining loyal. But if volumes of premium brands like Camel are rebounding, that could signal consumers are adjusting to higher prices on cigarettes following federal and state tax hikes.

    WHAT’S EXPECTED: Analysts expect Reynolds American to report earnings of 73 cents per share on revenue of $2.16 billion, according to FactSet.

    LAST YEAR’S QUARTER: Reynolds American reported earnings of 65 cents per share. Its revenue was $2.24 billion, excluding excise taxes.

  • CWS Market Review – October 21, 2011
    , October 21st, 2011 at 8:15 am

    The stock market continues to improve albeit in a hesitating manner. Last week, the S&P 500 broke above its 50-day moving average and this past Tuesday, the index closed at its highest level in two-and-a half months.

    So has the bear finally left us alone? Unfortunately, it’s too early to say. The market is stronger than it was but there are still plenty of hidden—and not-so-hidden—risks out there. The problems in Europe are still bad but at least the authorities finally realize that they can no longer drag their lederhosen. For now though, all eyes are on the third-quarter earnings season which is now in full swing.

    In this issue of CWS Market Review, we’ll take a closer look at earnings season. So far, all four of our Buy List stocks that have reported have topped expectations. I’m happy to report that our Buy List is leading the rebound. In the last 13 trading days, our Buy List has gained more than 11.3%. If this keeps up, 2011 will be our fifth-straight year of beating the overall market. As usual, prudence and patience have served us well.

    Now let’s look at the most exciting news this week which was the break-up announcement of Abbott Labs ($ABT). The company stunned Wall Street on Wednesday when they said that they’re breaking themselves into two separate companies: a drug business and a medical devices business. I’ve long been a fan of ABT. This company throws off tons of cash and has a solid balance sheet.

    The problem for Abbott (and what attracted me to it) is that the market is clearly wary of giving their drug business a decent valuation. Humira, Abbott’s blockbuster rheumatoid arthritis drug, will rack $6.5 billion in sales this year. But there are fears that competitors will move into that space and knock the legs out from under Humira.

    Due to these worries, the entire company’s valuation has suffered. But as I’ve noted before, Abbott is much more than Humira. They have a strong business in medical devices which hadn’t been getting the market love it deserves. So Abbott did the logical step and announced the break-up. Interestingly, it’s the medical devices business that will keep the Abbott name. That probably tells you where the priorities lie.

    The spin-off will happen sometime next year so it won’t impact this year’s Buy List. As a general rule I like spin-offs, especially when good companies do them. What often happens is that a highly profitable division feels that it has to “carry the weight” of a larger organization. Once the division is unmoored from its parent company, it’s able to be more flexible and find new areas of growth.

    Also on Wednesday, Abbott reported third-quarter earnings of $1.18 per share which was a penny more than estimates. Abbott narrowed their full-year guidance from $4.58 – $4.68 per share to $4.64 – $4.66 per share. That means the stock is going for 11.6 times this year’s earnings which is less than the overall market. The full-year range implies a Q4 range of $1.43 to $1.45 per share which is a nice jump over the $1.30 per share from last year’s Q4.

    Shares of Abbott responded positively to the break-up news and the stock currently yields a healthy 3.55%. For the year, Abbott is a 12.82% winner for us which is a lot better than the market’s loss of 3.36%. I congratulate Abbott on their bold move and I rate the stock a strong buy up to $58 per share.

    Two other healthcare companies of ours reported earnings this past week. On Tuesday, Johnson and Johnson ($JNJ) reported earnings of $1.24 per share. This beat Wall Street’s consensus by three cents per share but was a penny less than my forecast. The bottom line is that this was another solid quarter for J&J.

    In last week’s CWS Market Review, I said that JNJ could raise both ends of their full-year forecast by five cents per share. Well, I was half right. The company raised the low end of its forecast by a nickel per share. The new EPS range for 2011 is $4.95 – $5.00 per share which implies a Q4 range of $1.08 – $1.13.

    The share price dropped a bit on the news but not too badly. JNJ continues to do well. This is a very well-run firm; Johnson & Johnson is a good buy up to $67 per share.

    The other healthcare stock to report was Stryker ($SYK). After the close on Wednesday, the company reported earnings of 91 cents per share which was two cents better than estimates; plus Stryker raised their full-year guidance. The new guidance is $3.70 – $3.74 per share which is up from $3.65 – $3.73 per share. That implies a Q4 range of $1 – $1.04 per share.

    Last week, I wrote that I like Stryker but that it would be better at a cheaper price. Sure enough, the stock dropped on the good earnings report. Stryker closed Thursday at $48.28 which is a decent price (less than 13 times this year’s earnings). However, if you’re able to get Stryker below $45, you’ve gotten a very good deal.

    The upcoming week will be a very busy week for us; we have five Buy List stocks reporting earnings. On Tuesday, Reynolds American ($RAI) reports. Then on Wednesday, AFLAC ($AFL) and Ford ($F) are due to report. Finally on Thursday, Deluxe ($DLX) and Gilead Sciences ($GILD) will report.

    The one I’ll be watching most eagerly is AFLAC ($AFL). Simply put, the selling of AFLAC shares reached ridiculous levels over the last several weeks. At one point, the stock was trading at $31.25 though the company has told us repeatedly that it expects to earn between $6.09 and $6.34 per share in operating earnings this year.

    Well, Wednesday will be the time of reckoning. In the last earnings report, AFLAC said that it expects Q3 operating earnings to range between $1.54 and $1.60 per share. My numbers say that’s too low. I think AFLAC can easily make $1.64 per share. They may also have good things to say about next year as well. I’m going to raise my buy price for AFLAC to $43 per share.

    Three months ago, Reynolds upset Wall Street when it missed earnings by four cents per share (which I suspected would happen). That was pretty unusual for Reynolds but the stock has recovered very nicely. The current estimate for Q3 is for 73 cents per share which seems about right.

    The other earnings report to watch will be from Ford. The company is fundamentally very sound despite the stock’s poor performance this year. I’m also pleased to see that the latest union contract has been approved. Wall Street currently expects Ford’s third-quarter earnings to come in at 45 cents per share which is below the 48 cents per share from the year before. I think there’s a good chance here for a large earnings beat.

    That’s all for now. 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

  • Reynolds American Earns 67 Cents Per Share
    , July 22nd, 2011 at 10:15 am

    In this week’s CWS Market Review, I said that Wall Street’s earnings estimate for Reynolds American ($RAI) was probably too high. The company just reported second-quarter earnings of 67 cents per share, four cents below estimates.

    Cigarette maker Reynolds American says its second-quarter profit fell more than 10 percent on charges related to a legal case and costs related to plant closings.

    Excluding those charges, the nation’s second-biggest tobacco company said its profit rose 2 percent as higher prices and smokeless tobacco gains offset cigarette volume declines.

    The maker of Camel, Pall Mall and Natural American Spirit brand cigarettes says its net income fell to $304 million, or 52 cents per share, for the period ended June 30. That’s down from $341 million, or 58 cents per share, a year ago.

    Adjusted earnings were 67 cents per share. Analysts expected 71 cents per share.

    Revenue excluding excise taxes rose less than 1 percent to $2.27 billion, beating analyst estimates for the Winston-Salem, N.C., company.

    The stock gapped down this morning which brought the yield close to 6%, but it’s starting to recover.

  • CWS Market Review – July 22, 2011
    , July 22nd, 2011 at 8:03 am

    Get ready! Earnings season is stepping into high gear and so far, Wall Street likes what it sees. Truthfully, this shouldn’t be much of a surprise but traders have been so overwhelmed by reasons to be fearful this summer.

    The financial media bears much of the blame. Every day we’ve been bombarded with panicked headlines: “Debt Ceiling! Greece! Default! Spain! Ireland!” Meanwhile, I’ve been quietly counseling investors to focus on the most important word, “Earnings!” So far, the earnings have been quite good. It’s still early but earnings growth for this quarter is running at 17%, and 86% of the companies have topped Wall Street’s estimates. As I said in last week’s CWS Market Review, this earnings season may be an all-time record.

    So much of successful investing is nothing more than tuning out the short-term noise and concentrating on fundamentals. Remember, it was only a month ago that Oracle ($ORCL), one of the stocks on our Buy List, dropped 4% on a good earnings report. Since then, the stock has rallied and is higher now than before the earnings report (as of Thursday’s close). Jos. A. Bank Clothiers ($JOSB) has also gained back much of what it lost after it missed Wall Street’s estimate by the frightening amount of one penny per share.

    I’m very pleased to see renewed strength in the financial sector. On Thursday, the financials had their best day of the year. Since JPMorgan Chase ($JPM) reported earnings earlier this month, the stock is up nearly 7%. I’m also happy to see AFLAC ($AFL) showing a little life. Their earnings are due out this Wednesday and I’m expecting very good news. I’ll have more on that in a bit.

    Between Tuesday and Thursday of this week, the S&P 500 rallied nearly 3%. We’re now within striking distance of our April 29th high of 1,363.61. If we were to break that, we would set a new three-year high for the stock market. The fact is that the metrics continue to lean heavily towards equities. Bloomberg noted that return-on-equity for the S&P 500 is running at 24% while borrowing costs are running at 3.61%. That’s stunning. This wide spread will probably lead to more M&A activity and you can be sure that that will help the small-stock and value sectors.

    Let’s recap some of our recent earnings reports from our Buy List.

    First up is Stryker ($SYK). After the close on Tuesday, the company reported earnings of 90 cents per share which matched Wall Street’s forecast. Stryker also reaffirmed its full-year forecast of $3.65 to $3.73 per share. Despite what I thought were good numbers, traders brought down the stock by 3.8%. The problem is that sales of orthopedics weren’t as strong as analysts predicted. This is to be expected since these are pricey procedures and the recession is still hurting many folks. However, I’m not at all concerned. Stryker continues to be a very compelling buy.

    On Wednesday morning, Abbott Labs ($ABT) reported quarterly earnings of $1.12 per share. That makes for seven quarters in a row that Abbott has beaten Wall Street’s forecast by a penny per share. The best news is that the company raised its full-year earnings forecast. The previous EPS range was $4.54 to $4.64, and the new range is $4.58 to $4.68. True, it’s not a huge increase but it’s still good to see. The CEO said, “Abbott is well-positioned for a strong second half of the year as we remain on track for double-digit EPS growth in 2011.”

    Shares of Abbott initially sold off on Wednesday morning, but they eventually gained much of it back. In fact, ABT isn’t too far from making a new 52-week high. Going by Thursday’s close, the stock yields 3.62%, which is pretty impressive considering that the dividend has grown by 128% over the past decade. This is another solid stock and I’m keeping my buy price at $54.

    On Tuesday, Johnson & Johnson ($JNJ) reported Q2 earnings of $1.28 per share. Wall Street had been expecting $1.24 per share, and I thought it could have been as high as $1.30. The results were hampered somewhat by the sluggish economy and by generic rivals. JNJ also reiterated its full-year EPS forecast of $4.90 to $5. I would have liked to see the company raise guidance as ABT had. Even though they didn’t, I think they’ll have little trouble hitting their guidance. The shares have been pretty steady lately. Based on Thursday’s close, the stock yields 3.43%. JNJ is about as blue chip as you can get.

    The coming week is going to be very busy for our Buy List. Reynolds American ($RAI) reports on Friday. Then on Tuesday, Ford ($F), Fiserv ($FSV) and Gilead Sciences ($GILD) report. AFLAC ($AFL) follows on Wednesday, and Deluxe ($DLX) reports on Thursday.

    I’ll only make some brief comments here but you can check the blog for more details. Reynolds is expected to earn 71 cents per share which may be slightly too high. Still, they should show an earnings increase. The company has already said to expect full-year earnings between $2.60 and $2.70 per share and that seems very doable. Reynolds is already an 18% winner on the year for us. The stock currently yields 5.5% which makes it a very good buy.

    Three months ago, AFLAC said to expect second-quarter operating earnings to range between $1.51 and $1.57 per share. Despite the problems in Japan and Europe, AFLAC should report very good numbers. My analysis shows earnings coming in between $1.60 and $1.65 per share. The company has been benefiting from favorable exchange rates. For the full-year year, the company sees earnings between $6.09 and $6.34 per share. That means AFLAC is currently going for less than eight times earnings. I don’t see why AFLAC isn’t at least $10 higher.

    I’ll be very curious to see what Fiserv and Gilead have to say. Fiserv missed earnings last quarter, but they kept their full-year forecast unchanged. Gilead is an odd case because the last earnings report was a complete dud. The stock, however, has been doing very well lately and it just broke out to a new 52-week high. Even though Gilead’s earnings were poor, the stock was so cheap that it apparently limited our downside. Ford has had a lot of trouble this year, but the company seems to have righted itself. Wall Street currently expects Q2 earnings of 60 cents per share. My numbers say Ford can hit 70 cents per share.

    That’s all for now. Be sure to keep visiting the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

  • CWS Market Review – May 20, 2011
    , May 20th, 2011 at 8:59 am

    For several weeks now, I’ve warned investors that cyclical stocks are due to underperform the broader market. My favorite cyclical gauge, the Morgan Stanley Cyclical Index ($CYC), reached its peak against the S&P 500 in mid-February, but only recently has it started to lag the market badly.

    To give you an example of how the market’s mood has changed, on Tuesday the S&P 500 lost just 0.04% while the CYC dropped 1.51%. Investors are clearly flocking out of cyclical names for safe shelter in defensive stocks. Don’t weep for cyclical stocks—they’ve had an amazing two-year run. If the Dow Jones had kept pace with the CYC since its March 2009 low, it would be over 25,000 today.

    I strongly encourage investors to tilt their portfolios away from cyclical stocks. I think we’re in for a multi-year period of cyclical underperformance. That’s how these cycles usually work. Outside of a small number of cyclical stocks like Ford ($F), your portfolios will be best served by quality stocks in defensive sectors like healthcare and consumer staples.

    Fortunately, our Buy List is already light on cyclicals and our defensive issues have been helping us outpace the market. In fact, we’ve nearly doubled the market so far this year. We’re on pace toward beating the S&P 500 for the fifth year in a row. Through Thursday, our Buy List is up 12.14% for 2011 compared with just 6.84% for the S&P 500.

    Healthcare is the single-largest component of our Buy List, and it’s the top-performing market sector this year. Several of our healthcare stocks, like Abbott Labs ($ABT), Becton Dickinson ($BDX), Johnson & Johnson ($JNJ) and Medtronic ($MDT), have hit new 52-week highs in recent days—and Stryker ($SYK) looks to hit a new high any day now. Also, many of our consumer stocks look very strong. Reynolds American ($RAI) is a 21% winner on the year and Jos. A. Banks ($JOSB) is up over 40% for us.

    I should point out that we’re starting to see some signs of the bull maturing. An obvious example is the huge post-IPO surge for LinkedIn ($LNKD). The stock soared 109% on its first day of trading which reminds me of the kind of investor frenzy we saw during the Tech Bubble. We’re also seeing analysts on Wall Street analysts paring back their earnings estimates for this year and next. It’s not a lot so far but it may signal that most of the easy gains are already gone.

    What I find amazing is that investors still craze short-term bond maturities. I can’t decide which is more detached from reality—investors paying several hundred times earnings for LinkedIn or that the yield on the two-year Treasury note is now down to just 0.55%.

    There’s still plenty of good news for patient investors. Q1 earnings season was a good one for the market although the earnings “beat rate” was down a lot from previous quarters. I was pleased to see that sales growth for the S&P 500 topped 10% for the first time in five years. There are also some positive technical signs. For example, the put-to-call ratio is at a two-month high.

    After breaking 1,370 on May 2nd, the stock market has been in a slight down trend for most of this month. This past Tuesday, the S&P 500 dropped below 1,320 for the first time in one month. Recently, however, the bulls have started to reassert themselves. On Wednesday, the S&P 500 had its biggest rally in three weeks. The market rallied again on Thursday thanks to the jobless claims report beating expectations.

    I still believe this is a market that will be friendly towards investors in high-quality stocks like our Buy List. The yield curve is very wide and that’s historically bullish for stocks. Plus, yields on many of our Buy List stocks are very competitive with what’s being offered in the bond market. Abbott Labs ($ABT) currently yields 3.34%, Deluxe ($DLX) yields 3.75% and Sysco ($SYY) is at 3.12%. Even a blue chip like J&J ($JNJ) yields 3.25%.

    I also wanted to comment on AFLAC ($AFL) since I’ve recommended it so highly this year. The stock got hit for a 6.31% loss on Wednesday and I want you to know exactly what’s happening. Most importantly, I still like this stock a lot and I don’t see any reason to sell.

    What happened is that AFLAC held a meeting with some Wall Street analysts. Most of what they had to say was good news. The company is “de-risking” its portfolio and they reiterated their earnings guidance for this year. But what everyone focused on was Dan Amos’ comments that AFLAC will grow its earnings by 0% to 5% next year.

    That’s not great news, but it’s hardly awful news. First off, 2012 is still a long way away and this forecast strikes me as overly conservative. But even if it’s not, AFLAC is still a solid company going for a very attractive price.

    Let’s puts our emotions aside and look at the facts. AFLAC has already said that it expects operating earnings-per-share for this year to range between $6.09 and $6.34. Some of this will obviously depend on the exchange and that’s been working in our favor recently.

    The current yen/dollar exchange rate puts AFLAC on track to earn $6.28 per share for all of 2011. Bear in mind that this isn’t my forecast or Wall Street’s. This is coming straight from AFLAC itself, and we know their guidance has been very reliable (and usually conservative).

    Thursday’s closing price is almost exactly eight times this year’s earnings estimate. Even if they show 0% growth next, AFLAC is still a bargain. Furthermore, the shares currently yield 2.38% and AFLAC said they’re aiming to raise the dividend by as much as 10% this year and next. The company has raised its dividend for the last 28 years in a row.

    The other good news is that AFLAC is ditching some of their assets held in problem spots around the world like Ireland. They had already dumped much of their Greek investments. This has obviously been freaking out a lot of investors.

    The bottom line is that the 2012 forecast wasn’t good news and I don’t want to pretend otherwise. But considering AFLAC’s overall high-quality, recent earnings trend, decline risk and depressed valuation, the stock is still a very compelling buy.

    That’s all for now. 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!