Sysco’s Earnings Fall
Posted by Eddy Elfenbein on May 4th, 2009 at 10:55 am

While the rest of the market is higher today, Sysco (SYY) is down modestly on its earnings report. Earnings were in line at 38 cents a share, down from 40 cents a year ago. Revenue declined 4.5% to $8.7 billion.
Overall, I like Sysco a lot. This is one of the most stable companies on the market. I recently pointed out that the stock has been an amazing performer after a Citigroup exec looked down on Sysco’s employees.

Weekend Poll
Posted by Eddy Elfenbein on May 1st, 2009 at 8:24 pm

Fiserv’s Earnings Still Growing
Posted by Eddy Elfenbein on May 1st, 2009 at 3:37 pm

Pretty good.

Fiserv Inc. said its earnings from continuing operations increased in the first quarter, reflecting improved operating margins from the growth in sales of more profitable services.
The Brookfield-based provider of services and technology to the financial services industry reported income from continuing operations of $102 million, or 65 cents per share, compared with $99 million, or 60 cents per share, for the same period a year ago.
Continuing operations excludes the results of the firm’s 51-percent investment in the insurance business, which Fiserv (NASDAQ: FISV) sold in July 2008.
Revenue declined in the quarter to $1.04 billion from $1.31 billion. The decline in revenue was attributed in part to declines in the home equity processing business.
“Our results showcase the strength of our business model as we continue to deliver highly valued products and services across the financial services market,” said Jeffery Yabuki, president and CEO of Fiserv. “In spite of the expected revenue weakness in the quarter, we managed the business to optimize margins and grew adjusted earnings per share 10 percent.”
Fiserv continues to expect full-year 2009 adjusted earnings per share from continuing operations to be within a range of $3.61 to $3.75, which represents growth of 10 to 14 percent compared with $3.29 in 2008.

Fiserv (FISV) is a good stock going for a good price. The shares got punished way too much during September and October.
Here’s the earnings call from Seeking Alpha.

Strangest Graph You’ll See All Day
Posted by Eddy Elfenbein on May 1st, 2009 at 2:59 pm

Bear with me on this one. The long-term evidence suggests that the stock market’s total return outperforms inflation by about 7% a year (or doubling in real terms every ten years). That’s of course an average—the stock market has been dead flat against inflation for 12 years now.
Here’s a look at the stock market’s real total return, meaning with dividends and adjusted for inflation, divided by a line rising at 7% a year. In other words, a flat line is a real increase of 7% a year.
Just to make things even weirder, I used a log scale. The idea is to get the purest measure of the stock market’s performance.

Since earnings growth tends to be fairly consistent, this line is surprisingly similar to a graph of price/earnings ratios. Of course, there’s no guarantee that stocks will continue to outperform inflation by 7% a year.
What I find interesting is that the peaks and valleys seem to line up well. Warning: It’s dangerous to see relationships where none may exist. Still, it’s kind of interesting. I think it’s also interesting to see that there are very long periods of out-performance and under-performance. Stock investing is hardly a game for all seasons.

The Geography of Jobs
Posted by Eddy Elfenbein on April 30th, 2009 at 12:20 pm

Cool graphic on jobs.

S&P 500 Heads for Best Month in 17 Years
Posted by Eddy Elfenbein on April 30th, 2009 at 11:07 am

Since the March 9th closing low of 676.53, the S&P 500 has tacked on 29% through yesterday and we’ll probably make it to 31% with today’s gain. (BTW, the intra-day low was 666! AH AH AH AH AH!)
This will probably be the best month of the S&P 500 since December 1991. The index is still underwater for the year, but our Buy List is up 8.5% for the year and we’re now running 10% ahead of the market.
Boo-yah!

AFLAC’s Earnings Jump 20%
Posted by Eddy Elfenbein on April 30th, 2009 at 9:59 am

It’s been a tough year for Aflac’s (AFL) stock, but the company is still delivering on earnings. At one point, the stock was going for about two times this year’s estimate. Now that’s a scared market!
Now we have some results to look at. First-quarter net came in at $1.22 a share, six cents more than consensus. For last year’s Q1, AFL earned 98 cents. So they’re growing, there’s no doubt about that. With Aflac’s cash flow, there’s no need for them to dump any holdings at whatever price they can get.
Wall Street got itself freaked out because Aflac had investments in these “hybrid securities” in a lot of bum European banks. The company has said there’s nothing to worry about. Wall Street, however, is still very clearly worried.

Shareholders equity, a measure of assets minus liabilities, fell 21 percent to $5.2 billion as of March 31 from $6.6 billion at the end of 2008 on the declining value of holdings. The net unrealized loss on investments widened to $3 billion compared with $1.2 billion three months earlier. Unrealized losses, which don’t count against earnings, are monitored by ratings firms, regulators and investors as a measure of financial strength.
North American insurers posted more than $190 billion of writedowns and unrealized losses tied to the collapse of the mortgage market since the beginning of 2007, with Aflac accounting for $3.6 billion through the end of last year.
Aflac, whose policies supplement work and government- sponsored health-insurance plans, holds hybrid securities in 38 issuers spread across 15 countries across Europe and in Japan and Australia, Aflac said in February. About 20 percent of the portfolio is in the U.K., Aflac said.
In Japan, Aflac’s biggest market, the company sold new policies worth 27.5 billion yen ($293 million) falling from $264 million in the same period a year earlier. Premium income rose to $3 billion in the quarter from $2.6 billion as the yen strengthened against the dollar a year earlier.
U.S. sales of new policies fell to $351 million from $353 million first quarter of 2008, Aflac said in its statement.

As far as future guidance, the company expects 2009 operating EPS to grow at the low end of their 13% to 15% target, which translates to about $4.51 a share. That means the stock is trading at 6.6 times forward earnings. Of course, movements in the yen can affect things a lot. For Q2, Aflac sees operating EPS ranging for $1.11 to $1.14. At the current price, the stock yields 4.1%. As today’s report shows, Aflac is an excellent stock to own.

Today’s Fed Statement
Posted by Eddy Elfenbein on April 29th, 2009 at 2:20 pm

Just released:

Information received since the Federal Open Market Committee met in March indicates that the economy has continued to contract, though the pace of contraction appears to be somewhat slower. Household spending has shown signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Weak sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories, fixed investment, and staffing. Although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time. Nonetheless, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.
In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.
In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is facilitating the extension of credit to households and businesses and supporting the functioning of financial markets through a range of liquidity programs. The Committee will continue to carefully monitor the size and composition of the Federal Reserve’s balance sheet in light of financial and economic developments.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

S&P 500 and Earnings
Posted by Eddy Elfenbein on April 28th, 2009 at 3:28 pm

Here’s a look at the S&P 500 (black line, left scale) over the last few years with its earnings (gold line, right scale).

The two lines are scaled at 16 to 1, meaning when the lines cross the market’s P/E ratio is 16. I used 16 because it seems that the market has tracked that fairly well for the past few years. This market top wasn’t marked by outrageous earnings multiples. The values were fine it was the fundamentals that were shaky.
Two points to note. I used to operating earnings. That seems to get some people bent out of shape but it’s a much better tool for looking at the market as a whole. Also, AIG’s massive loss took out $5.13 from earnings in Q4, so that distorts the picture a little.

Poll Update
Posted by Eddy Elfenbein on April 28th, 2009 at 1:44 pm

Thanks to everyone who participated in our last poll.
With over 200 votes cast, the median seems to be squarely in the 20% to 25% bracket. There’s almost exactly the same number of votes above as there is below.
I realize that the “framing” of brackets answers probably violates every law of polling. Still, I was curious to see what my readers thought.
I’m surprised by how high the result is. A rate of 22% or 23% is fairly high compared with current law. I would have assumed CWS readers were a strong anti-lot.