Morning News: May 2, 2011
Posted by Eddy Elfenbein on May 2nd, 2011 at 7:41 am

Greece Requests Another Bailout Loan Extension, As Restructuring Chatter Continues

Schaeuble Says New German Bundesbank Head Must Further Reduce Costs

China Advisor: QE2’s End Won’t Ease Inflation Soon

Silver Futures Drop 13% on Investor Sales as CME Boosts Margins

S&P 500 Futures Jump on Bin Laden’s Death

Dollar Gives Up Earlier Gains

U.S. Treasury Bonds Fall as Bin Laden Death Triggers Profit Taking

Dish Network Q1 Profit Up on Strong Subscriber Additions

2 Years After a Bankruptcy, Chrysler Posts a Profit

Danisco Board Backs $6.6 Billion DuPont Bid

Commerzbank First-Quarter Profit Climbs 40% to Record as Provisions Fall

PPR to Buy Sportswear Company Volcom

Buffett Extols Berkshire’s CEO Candidates, Faults Sokol’s Trades

Needed: A Clearer Crystal Ball

Where To Live To Avoid A Natural Disaster

Howard Lindzon: Never Buy Stocks…Long Live Trading…Momentum Rules

Joshua Brown: Welcome Back, Retail Stock Investors

Bin Laden Dead
Posted by Eddy Elfenbein on May 2nd, 2011 at 12:01 am

Not much else to say. The markets should be happy tomorrow.

Congratulations to U.S. Special Forces.

J&J Raises Dividend 5.6%
Posted by Eddy Elfenbein on April 29th, 2011 at 3:17 pm

This is JNJ’s 49th-straight yearly increase. The dividend will increase from 54 cents per share to 57 cents per share. I predicted an increase of two or three cents per share. Based on yesterday’s close, JNJ now yields 3.49%.

If you had bought JNJ 20 years ago, you’d currently be yielding over 19%.

CWS Market Review – April 29, 2011
Posted by Eddy Elfenbein on April 29th, 2011 at 8:37 am

The market continues to surge higher and our stocks are leading the way. Through Thursday, our Buy List is up 11.44% for the year. That’s not bad for less than four months’ work. On Thursday, the S&P 500 closed at its highest level since June 9, 2008.

The first thing I want to talk about today is AFLAC ($AFL). I feel like I’ve been screaming into the wind with this one. The company clearly and consistently told us that they were doing well, yet the market repeatedly doubted them.

This is what I wrote in last week’s e-letter:

For AFLAC, simply put, the stock is very inexpensive. The earthquake and tsunami in Japan scared Wall Street in a major way. The company has made it abundantly clear that it’s still doing well. Make no mistake: AFLAC is a very well-run ship. Next week, we’ll see the proof.

Indeed we did. AFLAC reported operating earnings of $1.63 which was 11 cents better than Wall Street’s estimate. The only way AFLAC misled us is that they weren’t optimistic enough. It was only six weeks ago that shares of AFLAC bounced off $48! On Thursday, AFL closed at $57. This was the highest close since before the earthquake and tsunami.

I was also happy to see that AFLAC reaffirmed their guidance for all of 2011. They expect full-year earnings to range between $6.09 and $6.34 per share. That’s a lot for a $57 stock. I’ll repeat my claim from earlier this year that AFL will make a run at $60. This is a very good stock.

I also wrote in last week’s e-letter:

Deluxe already told us to expect earnings to range between 69 cents and 73 cents per share. Look for an earnings surprise here. My numbers say to expect at least 75 cents per share.

Sometimes I’m so good, it’s scary. Deluxe ($DLX) earned 75 cents per share on the nose. For Q2, they said to expect 66 cents to 71 cents per share. For the full year, they see earnings ranging between $2.90 and $3.10. Deluxe has been a surprise winner for this year. I still like DLX (especially that rich dividend). DLX is a good buy up to $30.

I also want to touch on Nicholas Financial ($NICK) which has seen some crazy volume lately. I wrote on the blog that the time has passed and that there probably won’t be a deal to buy NICK. Suddenly this week, trading volume in NICK soared and the stock popped to $13.61 per share. I can freely admit that I have no idea what was going on.

The company came out with a statement saying that any deal is off the table. Well, that should have been obvious to anyone. On Thursday, the stock plunged as low as $11.55 before it closed the day at $12.49. You can’t make much sense of that action. Personally, I’m happy that NICK was willing to shoot down an offer.

Here’s all you need to know: Earnings are coming next week and they’re going to be very good. I think NICK can earn as much as 40 cents per share. Honestly, I don’t know why NICK isn’t a $17 stock, but I don’t make the rules around here. WallStreetistan can be a very strange place.

We had an earnings miss this week with Fiserv ($FISV) but I don’t think it’s anything to be majorly concerned about. The company earned $1.02 per share which was two cents below expectations. Fiserv actually missed by a penny last earnings season but that didn’t hold back the price.

Fiserv’s stock dropped 4.53% on Thursday but the most important news is that they reiterated their full-year guidance. For 2011, FISV sees earnings in a range of $4.42 to $4.54 per share. That means the stock is going for 13.5 to 13.9 times this year’s earnings. That’s not a bad deal at all. Fiserv is a solid stock.

The last earnings report came from Becton, Dickinson & Co. ($BDX) and it was very strong. BDX earned $1.38 per share which was eight cents more than expectations. What was even better is that they raised their full-year EPS guidance from the earlier range of $5.45 to $5.55 to a new range of $5.55 to $5.65. (Side note: Their fiscal year ends in September.)

I thought the earnings report was great so I was baffled by BDX’s crazy reaction on Wednesday, especially in the morning. Fortunately, the stock got its act together on Thursday and got to a new 52-week high of $85.93. BDX hasn’t been one of our stronger stocks this year but I think that may change soon.

Stay tuned for earnings reports from Wright Express ($WXS) and Nicholas Financial ($NICK) next week. Wright just hit a new 52-week high. We’ll also get the ISM report on Monday and the big jobs report will come next Friday.

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

Morning News: April 29, 2011
Posted by Eddy Elfenbein on April 29th, 2011 at 7:47 am

Europe Inflation Quickens on Oil; Business Confidence Drops

Goldman Sachs, JPMorgan Among Banks Probed by EU Over CDS

Yuan Breaks Through 6.5 Per Dollar for First Time Since 1993

Gold, Silver Ease Down In Thin Asian Trade

Dollar Extends Decline as Rate Differentials Weigh

US Stock Futures Narrowly Mixed Before Heavy Earnings, Economic Data

U.S. Economic Growth Slows to 1.8% Rate in Quarter

Microsoft Profit Falls Below Apple’s After IPad Eats Into Windows Revenue

Exxon Profit Surges as Consumers and Lawmakers Fume Over Gasoline Prices

RIM Plunges as Analysts See Lost Credibility With Forecast Cut

Daimler Reiterates Outlook As Net Profit Almost Doubles

French Oil Giant Total Bids $1.4 Billion for Control of American SunPower

Economics of Illegal Drugs

Underwear Sales Are Rising. You Know What That Means

Joshua Brown: Bill Ackman: I’m Not a Raider I Just Crush a Lot

Paul Kedrosky: Adventures in Domain Names: Follow the Typos

No Duh! NICK’s Not Being Bought Out
Posted by Eddy Elfenbein on April 28th, 2011 at 10:33 am

Just as I said in my eletter, Nicholas Financial ($NICK) isn’t being bought out. The company made the news official this morning with a press release. The stock is down, but honestly, today’s news shouldn’t be a surprise to anyone.

In my mind, this is really good news. The company is willing to turn down an unacceptable offer. Good for them and good for us.

Here’s the statement:

Nicholas Financial, Inc. today announced the completion of its previously announced exploration of possible strategic alternatives for the Company. The Company’s strategic alternatives review was conducted under the supervision of the Company’s Board of Directors with the assistance of an independent financial advisor, Hyde Park Capital Advisors, LLC. After careful consideration of alternatives, the Company has determined that its shareholders’ interests will be best served by continuing to operate as a stand-alone entity.

As previously announced, the review process involved, among other things, a consideration of the possible sale of the Company. With the assistance of Hyde Park Capital Advisors, LLC, a broad universe of domestic and international industry participants and private equity sources were solicited. The Company received several indications of interest related to the sale of the Company. After a deliberate and careful process, the Board has determined that the proposals received were not in the Company’s and its shareholders’ best interests and that the Company would likely generate more long-term value with its current stand-alone strategy.

The Company also previously announced that its Board of Directors would review potential buy-side alternative opportunities. While the Company has not to date identified a buy-side opportunity it intends to pursue, the Company will continue to evaluate such opportunities as they arise, despite the conclusion of this previously announced review process.

Throughout its review of strategic alternatives, the Company has continued to implement its stand-alone strategy, including the continued evaluation of opportunities to open additional, or expand existing, branch offices.

Deluxe Earns 75 Cents Per Share
Posted by Eddy Elfenbein on April 28th, 2011 at 8:42 am

More good earnings news: Deluxe ($DLX) just reported Q1 earnings of 75 cents per share. The company had said to expect Q1 earnings of 68 cents to 73 cents per share. The Street was at 73 cents per share.

Deluxe Corporation reported first quarter revenue of $349.8 million, up 4% compared to the prior year and at the high end of the Company’s previous outlook. Adjusted diluted earnings per share (EPS) from continuing operations of $0.75 exceeded outlook and compared favorably to $0.73 in the prior year. Adjusted diluted EPS for 2011 excludes losses on debt repurchases related to the retirement of a portion of the Company’s long-term debt due in 2012 and 2014. Adjusted diluted EPS for both periods excludes restructuring costs related to cost reduction initiatives. Adjusted diluted EPS for 2010 also excludes the impact of transaction-related costs associated with acquisitions. Earnings were better than the Company’s previous outlook for the current period due primarily to favorable product mix.

Reported diluted EPS was $0.63 on net income of $32.6 million in the first quarter of 2011 and was $0.65 on net income of $33.4 million in the first quarter of 2010. Results for 2011 include pre-tax losses of $8.3 million, or $0.10 per diluted share, related to debt repurchases and $1.5 million, or $0.02 per diluted share, of restructuring-related costs associated primarily with infrastructure consolidations. Results for 2010 included restructuring and transaction-related costs of $0.6 million.

“We delivered another strong quarter and are off to a solid start to the year,” said Lee Schram, CEO of Deluxe. “Both Small Business Services and Direct Checks grew over last year, while Financial Services was flat sequentially from the fourth quarter. Checks and forms both performed well against our expectations and services revenue grew 19 percent over the prior year. In addition, we took advantage of a favorable high yield bond market and strengthened our capital structure by refinancing a portion of our long-term debt.”

And here’s their guidance:

The Company stated that for the second quarter of 2011, revenue is expected to be between $340 and $348 million. Adjusted diluted EPS is expected to be between $0.66 and $0.71, including an estimated $0.02 per diluted share of higher interest expense primarily associated with the new 2019 senior unsecured notes. The second quarter outlook excludes $0.03 related to restructuring and transaction costs. For the full year, revenue is expected to be between $1.385 and $1.420 billion, and adjusted diluted EPS is expected to be between $2.90 and $3.10, including an estimated $0.05 per diluted share of higher interest expense primarily associated with the new 2019 senior unsecured notes. The full year outlook excludes $0.17 related to losses on long-term debt repurchases and restructuring and transaction-related costs. The Company also stated that it expects operating cash flow to be between $215 million and $230 million in 2011. Capital expenditures are expected to be approximately $35 million.

First-Quarter GDP Growth = 1.8%
Posted by Eddy Elfenbein on April 28th, 2011 at 8:32 am

The government reported that Q1 GDP growth was 1.8%. That’s pretty bad. Yesterday, Ben Bernanke discussed the economy and why it was weak last quarter. He said that it will probably improve later this year and that some of the problems right now are “transient.”

Not that long ago, folks were expecting growth for Q1 of 4%; then it was 3%. Now it is just 1.8%.

Household purchases, which account for about 70 percent of the economy, rose at a 2.7 percent pace last quarter after a 4 percent gain in the final three months of 2010.

The increase in consumer spending from January through March compared with a 2 percent median forecast in the Bloomberg survey. Purchases added 1.91 percentage points to growth.

Government purchases fell at a 5.2 percent annual rate after a 1.7 percent decrease in the fourth quarter. National defense spending dropped at an 11.7 percent pace, the most since 2005. Federal government spending declined the most in 11 years.

Morning News: April 28, 2011
Posted by Eddy Elfenbein on April 28th, 2011 at 7:34 am

NYSE Euronext Keen on Deutsche Börse Merger

German Unemployment Falls Below 3 Million to 19-Year Low

Bank of Japan Rejects Easing Proposal, Shirakawa Wants To See Effects Of Previous Step

Gold Strikes Record as Dollar Wilts

Bernanke Starts Dialogue With Public, Pledges to Keep Stimulus

DAX Index Rises; Deutsche Bank, BASF, Bayer Lead Stock Gainers on Earnings

Why Johnson & Johnson Is Using Stock to Buy Synthes

Dow Chemical Earnings Top Analyst Estimates as Prices Gain

Shell Outshines Rival With Big Jump in Profit

ConocoPhillips Profit Misses on Libya, Refinery Maintenance

Exelon Is Said to Be Near $7.7 Billion Stock Deal for Constellation Energy

CenturyLink Set to Acquire Savvis for $2.5 Billion

Sanofi-Aventis Profit Slips As Generic Competition Weighs

The Biggest US Economic Story Of The Year: The Federal Government Vs. Boeing

Joshua Brown: Media: The Natural Gas Revolution Lives

James Altucher: 10 Reasons Why I would Never Donate to a Major Charity (or, How to be a Superhero, Part 2).

Fiserv Increases Revenue But Misses Earnings
Posted by Eddy Elfenbein on April 27th, 2011 at 6:12 pm

Fiserv (FISV) released their first-quarter earnings after the market’s close today. Their Q1 revenue was up 4% at $1.04 billion, but they missed Wall Street’s expected profit of $1.04 per share by two cents per share, earning $1.02 per share. Fiserv explained the miss by citing higher expenses. The good news is that they reiterated their full-year earnings forecast of $4.42-$4.54 per share.

From their press release:

“Our first quarter revenue growth is kicking off a good start to the year led by strong performance in our Payments segment,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “We are enhancing our sustainable revenue growth profile through a strong business model, market leading technologies and solid sales execution.”

…

Fiserv continues to expect 2011 adjusted internal revenue growth to be in a range of 2 to 4 percent. The company also expects 2011 adjusted earnings per share to be in a range of $4.42 to $4.54, which represents growth of 9 to 12 percent compared with $4.05 in 2010.

“Given our results in the quarter and visibility into the remainder of the year, we are on-track to achieve our 2011 guidance,” said Yabuki.

This is slightly disappointing but the important news is that their full-year guidance is unchanged.