FactSet Raises Dividend
Posted by Eddy Elfenbein on May 5th, 2020 at 10:06 am

Good news from FactSet (FDS). The company has increased its quarterly dividend from 72 to 77 cents per share. This is the 15th consecutive year the company has raised its dividend.

The dividend will be paid on June 18 to shareholders of record on May 29.

Morning News: May 5, 2020
Posted by Eddy Elfenbein on May 5th, 2020 at 7:11 am

German Court Says the European Central Bank Now Needs to Prove Its Bond Buying is Needed

Oil Spurt Lifts Stocks Out Of Three-Day Losing Streak

Wall Street’s Elite Bond Club Is Cracking at the Worst Possible Time

Alphabet’s Verily Struggles to Live Up to Trump’s Hype on Covid Testing

U.S. Death Toll Could Double as More States Reopen

Facebook’s Oculus Developing Smaller, Lighter Quest VR Headset

Victoria’s Secret Sale to Private Equity Firm Falls Apart

This Drug May Cause Birth Defects. Japan’s Pushing It for Coronavirus.

Microsoft to Invest $1 Billion in Polish Cloud Project

Hugo Boss Expects 50% Sales Drop Next Quarter as Crisis Impact Worsens

The Twitter Response to J.Crew Filing For Bankruptcy Has Been Savage — But It Has A Point

Roger Nusbaum: Did The World In Fact Change?

Jeff Miller: Are You Ready for Some High-Stakes Gambling?

Howard Lindzon: Soul In The Game and Who Are You Trying To Beat?

Joshua Brown: This Version of Warren Buffett

Be sure to follow me on Twitter.

Trex Earned 73 Cents per Share
Posted by Eddy Elfenbein on May 4th, 2020 at 4:51 pm

Trex (TREX) just reported Q1 earnings of 73 cents per share. That easily beat Wall Street’s forecast of 61 cents per share. Quarterly sales rose 12% to $200 million. Gross margin rose 620 basis points to 44.8%. For last year’s Q1, Trex made 54 cents per share.

“First quarter 2020 results reflected continued robust demand for Trex residential decking and railing products. We reported strong year-over-year and sequential increases in gross margin due to continuing production improvements and the non-recurrence of prior year new product startup expenses. Additionally, as Trex Residential’s gross margin returned to more normalized levels, Trex Commercial’s gross margin improved considerably, due primarily to the roll-off of prior year lower margin contracts, favorable mix and improved execution.

“Production efficiencies, stable raw material costs and spending controls drove strong operating leverage, resulting in EBITDA growth of 39% and a 35% increase in earnings per diluted share.

“We took immediate measures early in March to respond to the COVID-19 health crisis and prioritize the safety and well-being of our people and the communities in which we operate. Thanks to the efforts of all our employees, we immediately implemented strict sanitary and physical distancing procedures that adhered to or exceeded CDC guidelines. We also implemented emergency response plans at each manufacturing location and have been able to continue production in a safe and effective manner,” said Bryan Fairbanks, President and Chief Executive Officer.

Trex said it expects Q2 sales between $180 million and $190 million, although the company withdrew its full-year guidance. They’ve also stopped share repurchases.

At this time, we have no significant sourcing issues and maintain inventories of materials sourced from diversified geographies and vendors, allowing us to better tolerate short-term supply chain disruptions, should they occur. Production and sales volumes for April were in-line with our internal plans, but for May we are experiencing lower demand from areas where construction has been deemed non-essential and channel partners are closed.

The shares rose 8.73% today to close at $99.91. That’s a two-month high.

Could This Be The Retest?
Posted by Eddy Elfenbein on May 4th, 2020 at 10:42 am

The stock market is down again today. This could be our third daily loss in a row. That hasn’t happened since early March.

Is this the beginning of the retest? Perhaps. The S&P 500 isn’t far from falling below its 50-day moving average which is a key technical indicator.

Outside of earnings, the big news this week will be the April jobs report due out on Friday. The numbers will be terrible. The airline sector is taking a tumble today after Warren Buffett said he sold his airline stocks.

We have one earnings due after the close, from Trex (TREX). Wall Street expects 61 cents per share.

Morning News: May 4, 2020
Posted by Eddy Elfenbein on May 4th, 2020 at 7:15 am

China Trade Deal Turns From Key Trump Asset to an Albatross

Donald Trump And The Fed Could Be About To Destroy The U.S. Banking System

Trump Presses to Reopen U.S. With Risk of Promising Too Much

Buffett’s Chance for a Blockbuster Deal Faded When Fed Stepped In

Some Small Businesses That Got Aid Fear the Rules Too Much to Spend It

J. Crew Files For Bankruptcy As Preppy Retailer Succumbs to COVID-19 Fallout

Disney, Hit Hard By Coronavirus, to Face Wall Street Questions on Impact on Company

How a New Breed of Union Activists Is Changing the Rules (and Newsrooms)

Citizens May Have To Nominate 10 Friends To Isolate With Mid-Lockdown, Causing A Potential Social ‘Nightmare’

Michael R. Bloomberg and Gina McCarthy: How Trump’s EPA Is Making Covid-19 More Deadly

Cullen Roche: What the Hell is the Stock Market Doing?

Howard Lindzon: The Great Rehiring and Moshe Ben Ari (Ari Soho) Joins Me On ‘Panic With Friends’

Ben Carlson: How Will the Crisis Impact Housing Prices? & It’s Just Another Manic Market

Michael Batnick: Animal Spirits: A Noob Whale Picker’s Market & What Happens When the Parts Are Bigger than the Whole?

Jeff Carter: Learning How to Trade

Be sure to follow me on Twitter.

CWS Market Review – May 1, 2020
Posted by Eddy Elfenbein on May 1st, 2020 at 7:08 am

“The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world.” – This Week’s Fed policy statement

After a terrible March, April turned out to be the best month for the S&P 500 in more than 33 years. The index added $2.8 trillion in market value. On Wednesday, the S&P 500 closed at a seven-week high.

Here’s one for data fans. On Thursday, the S&P 500 closed at 2,912.43. That’s a retracement of 59.96% between the market’s recent intra-day high and intra-day low.

Despite the resurgent market, the economic pain continues. This week we learned that the U.S. economy shrank by 4.8% in Q1, only part of which was affected by the stay-at-home orders. Digging into the numbers shows, not surprisingly, that the consumer was the big drag. In a few weeks, we’ll get the Q2 GDP report, and it may show a decline of 30% or 40%. Maybe more.

This week’s consumer-confidence report showed the biggest drop in over 45 years. On Thursday, the jobless-claims report came in at 3.839 million. That’s terrible, and it’s the fourth weekly decline in a row. In the last six weeks, the combined figure is 30 million.

The economic response has been unprecedented. The Federal Reserve’s balance now stands at $6.7 trillion. In the post-war era, the Federal Government has borrowed, on average, 2.1% of its GDP each year. This year, Uncle Sam will borrow 20.6% of GDP—ten times the average.

(Well, I’m Mr. Happy Sunshine this issue, aren’t I?)

I do have some good news for us. In this week’s issue, we’ll look at earnings. We had eight Buy List stocks report earnings this week, and I’m happy to say that all eight of them beat Wall Street’s forecast. Later on, I’ll preview seven more Buy List earnings reports that are on tap for next week. After that, I promise the earnings reports will cool off. Let’s jump right into the earnings parade.

Eight Buy List Earnings Reports

Here’s the updated earnings calendar:

Let’s start with Check Point Software (CHKP), which reported on Monday. The cyber-security firm reported Q1 earnings of $1.42 per share. That beat the Street by four cents per share. It’s also up from $1.32 per share one year ago. Revenue rose 3% to $486 million.

This has been a busy time for cyber-security. Check Point has seen a “dramatic rise” in the number of cyber-attacks related to the coronavirus. Check Point said, “On average, over 14,000 coronavirus-related cyber-attacks occur each day with a daily 20,000 peak in April. Since January 2020, 68,000 coronavirus-related domain names were registered, and we identified malicious domains at double the rate of others.”

What kind of lowlife would use this crisis as an excuse to scam people? I’m glad there are folks like Check Point out there. I’m keeping our Buy Below on CHKP at $110 per share.

After the closing bell on Tuesday, Cerner (CERN) reported Q1 earnings of 71 cents per share. The company told us to expect 69 to 71 cents per share.

Quarterly revenues rose 2% to $1.41 billion. That was slightly below the company’s expectations. Cerner cited travel restrictions implemented by the company in response to the pandemic.

This is a really solid company. For Q1, Cerner had operating cash flow of $284 million and free cash flow of $160 million. Cerner has a total backlog of $13.47 billion.

Now for guidance.

For Q2, Cerner sees revenue between $1.34 billion and $1.39 billion. For all of 2020, Cerner expects revenue between $5.55 billion and $5.70 billion. That’s down from the prior range of $5.725 billion to $5.975 billion.

Cerner expects EPS of 60 to 64 cents per share for Q2 and $2.78 to $2.90 for the full year. The latter forecast is down from a range of $3.09 to $3.19.

It’s not as strong as I like, but it’s completely understandable in this environment. I’m keeping our Buy Below at $70 per share.

On Wednesday, Sherwin-Williams (SHW) reported Q1 earnings of $4.08 per share. That beat estimates of $3.94 per share. Sales rose 2.6% to $4.15 billion.

The company lowered its full-year range to $16.46 – $18.46 per share with acquisition-related costs of $2.54 per share. The previous guidance was $19.91 to $20.71 per share with acquisition costs of $2.79 per share. I’m hesitant to complain about lowered guidance. At least Sherwin is giving us guidance. Many others have withdrawn theirs completely.

Shares of SHW gained about 6% on Wednesday. Sherwin remains a solid buy up to $590 per share.

Also on Wednesday, AFLAC (AFL) reported Q1 earnings of $1.21 per share. Forex dinged them for a penny per share. Wall Street had been expecting $1.10 per share.

The duck stock has decided to withdraw earnings guidance for this year. The CEO added, “we will continue to provide color on the drivers of our earnings and any trends that we see for the remainder of the year.”

I was particularly curious to see AFLAC’s earnings because the stock had been punished so severely during March. Frankly, the business simply isn’t that volatile. Fortunately, shares of AFLAC are on the upswing. The stock is now up 60% from its low of six weeks ago. AFLAC remains a buy up to $42 per share.

On Thursday, Moody’s (MCO) earned $2.73 per share. That beat expectations by 51 cents per share. This was a great quarter for MCO. Drilling down some, I see that Moody’s Investors Service had revenue growth of 19% and Moody’s Analytics was up 5%.

Moody’s pared back its full-year EPS guidance. Previously, they had expected EPS between $7.80 and $8.40. Now they see it ranging between $7.25 and $7.85. Moody’s is up 2.7% this year for us, which is quite good in this market. I’m lowering our Buy Below on Moody’s to $263 per share.

Also on Thursday, Church & Dwight (CHD) said it made 83 cents per share for Q1. That beat by six cents. Previously, the company had told us to expect 73 cents per share, so they’re running ahead of their own plans. Q1 sales grew 11.5% to $1.17 billion.

Church & Dwight actually benefited from the coronavirus outbreak, especially brands like Arm & Hammer and some hygiene products. Like many others, CHD withdrew its full-year forecast. I’m lowering my Buy Below to $76 per share.

Intercontinental Exchange (ICE) made $1.28 per share. That beat by four cents. For Q1, ICE had operating cash flow of $520 million, and free cash flow was $434 million.

CFO Scott A. Hill said, “In the first quarter we generated record revenues, record operating income and double-digit earnings per share growth, which enabled us to return over $850 million to stockholders through our dividend- and stock-buyback program.”

ICE gave several guidance metrics for Q2 and 2020, but none was EPS. I’ll highlight that ICE expects data revenue to be in a range of $565 million to $570 million. ICE remains a buy up to $100 per share.

Stryker (SYK) reported adjusted earnings of $1.84 per share. That beat estimates by 15 cents per share. Net sales rose 2% to $3.6 billion. Stryker said that earnings were “significantly negatively impacted” by the coronavirus. The company has decided to forgo any guidance for this year. Stryker remains a buy up to $200 per share.

Seven More Buy List Earnings Reports Next Week

We’re heading into the back end of earnings season. We have seven of our stocks due to report next week.

Trex (TREX) is scheduled for Monday. Trex has become our third-best performer this year. In February, the deck-maker beat earnings by 10 cents per share, and the underlying numbers were very strong.

In March, Trex assured investors that it has plenty of cash to ride out the storm, and it doesn’t have any supply-chain issues. The shares have bounced 70% off their March low.

For 2020, Trex expects “strong double-digit sales growth.” They expect sales of $200 million for Q1 which is an 11% increase over last year. The analyst consensus is for Q1 earnings of 61 cents per share. Look for a good report.

Disney (DIS) reports on Tuesday. This will be an interesting report because the travel industry hasn’t merely slowed down: it’s come to a standstill. On the other hand, Disney’s new streaming service has been doing quite well. The current consensus is for earnings of 88 cents per share. Disney is a terrific company.

Three months ago, Ansys (ANSS) reported Q4 earnings of $2.24 per share. Wall Street had been expecting $1.98 per share. The company makes simulation software for engineers. Whenever you see a designer working with a 3-D model on a computer screen, there’s a good chance they’re using Ansys software.

For Q1, Ansys sees revenues ranging between $300 million and $320 million and earnings between 75 and 88 cents per share. For the year, Ansys sees revenues between $1.64 billion and $1.70 billion and EPS between $6.19 and $6.71. We have a small profit in Ansys this year.

Becton, Dickinson (BDX) had a dud earnings report for the December quarter. Actually, the earnings were good. It was guidance that was a problem. Previously, BDX gave EPS guidance for this year of $12.50 to $12.65. The company now expects EPS between $11.90 and $12.10 per share.

What happened? Apparently, it will take the company longer to resolve the issues surrounding its Alaris infusion pump. Becton said it will coordinate with the FDA and existing customers to work on a remediation plan.

Despite the lowered guidance, the shares have held up reasonably well. Analysts expect quarterly earnings of $2.36 per share.

Danaher (DHR) is our second-best performing stock this year. It’s amazing how consistent this stock has been. The company withdrew its financial guidance, but it did say that it expects revenue growth of 3% for Q1. The now-canceled guidance was for earnings of $1.06 to $1.09 per share.

Danaher’s CEO said, “While we had a good start to the year, we saw a meaningful slowdown in demand toward the end of the quarter, particularly in our more instrument-oriented businesses, as the Covid-19 pandemic spread worldwide.” Analyst consensus is for $1.02 per share.

Like Danaher, Fiserv (FISV) has been an outstanding stock for us over the years. Last year, the company made $4 per share. In March, Fiserv said it expects to have greater synergies from its First Data acquisition. The company also stood by its previous guidance of 6% to 8% internal revenue growth and adjusted EPS growth of 23% to 27%.

CEO Jeffery Yabuki said, “We remain comfortable with our outlook for the full year based on the diversity and resilience of our business along with our current view of the market.” By the way, Yabuki has taken a 100% pay cut to his base salary. Wall Street expects Q1 earnings of 99 cents per share.

Broadridge Financial Solutions (BR) was our best-performing stock for April. BR gained over 22% for us last month. The company is scheduled to report on Friday, May 8. The last earnings report was a big miss. Broadridge earned 53 cents per share which was 18 cents below estimates.

The CEO said, “Event-driven activity came in significantly below our expectations, leading to a 5% decline in adjusted EPS in a seasonally small quarter. We now expect a lower level of event-driven activity to persist into the second half of fiscal 2020.”

Broadridge stood by its forecast for this fiscal year (ending in June) for EPS growth of 8% to 12%, although now they confess it will be “at the low end.” That range had worked out to $5.03 – $5.22 per share. Now let’s say it’s $5.03 to $5.10 per share.

I told you I had a lot of earnings this week.

That’s all for now. Next week will have more earnings news, but on Friday, we’ll also get a look at the jobs report for April, and it will be an ugly one. Unemployment may shoot as high as 12% or 13%. We’ll get a preview of the jobs report on Wednesday when ADP releases its payroll report. There will be another jobless-claims report on Thursday. 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: May 1, 2020
Posted by Eddy Elfenbein on May 1st, 2020 at 7:05 am

Investors’ Confidence Lifts U.S. Stocks to Best Month Since 1987

Stocks Fall Further After Trump’s China Tariff Threat

Fed Faces Risky, Inflationary Divorce From Treasury Post Covid

Amazon Says It Will Risk Loss to Cover Jump in Pandemic Spending

‘This Feels Very Different’

Gilead Caught Between Making a Profit and Treating the World

What Happens If You Don’t Get Full PPP Loan Forgiveness

SUVs Get Parked in the Sea, Revealing Scope of U.S. Auto Market Glut

Once a Cash Cow, Disney’s Theme Parks Now Weigh on Profit

#CancelRent Is New Rallying Cry for Tenants. Landlords Are Alarmed.

Joshua Brown: How to Write About Remdesivir & Median vs Average Net Worth in America

Ben Carlson: Why Value Died

Michael Batnick: What’s The Catalyst?

Roger Nusbaum: You Know Nothing, Jon Snow

Jeff Miller: Boost Your Cardinal Health Dividend Yield

Be sure to follow me on Twitter.

More Bad Jobs Numbers
Posted by Eddy Elfenbein on April 30th, 2020 at 10:49 am

Yesterday, the S&P 500 closed at its highest level since March 6. This month looks to go down as the best month for stocks in over 45 years.

This morning we learned that 3.84 million Americans filed for jobless claims. We also learned that in March, personal income fell by 2.0% while consumer spending dropped by 7.5%.

We had three earnings reports this morning, and they all beat Wall Street’s expectations. Moody’s (MCO) earned $2.73 per share. That beat expectations by 51 cents per share. Church & Dwight (CHD) made 83 cents per share. That beat by six cents. Intercontinental Exchange (ICE) made $1.28 per share. That beat by three cents.

Morning News: April 30, 2020
Posted by Eddy Elfenbein on April 30th, 2020 at 7:04 am

Trump Makes Crucial 2020 Bet on States Reopening With His Advice

Fed Suggests Tough Road Ahead As It Pledges to Help Insulate Economy

‘W-Shaped’ Recovery May Be Too Optimistic, Fed’s Powell Suggests

The Bad News Won’t Stop, But Markets Keep Rising

Scram Big Banks: Small Lenders Take Over SBA Lending Program (For A Night)

Trump’s Tariffs Add to Pandemic-Induced Turmoil of U.S. Manufacturers

Powerful Meat Industry Holds More Sway After Trump’s Order

The Devil’s In the Detail for Junk Debt Investors Facing Coronavirus Defaults

Exxon’s Humbling Fall From Oil Juggernaut to Mediocre Company

Royal Dutch Shell Cuts Dividend for First Time Since World War Two

States Made It Harder to Get Unemployment Benefits. Now That’s Hard to Undo.

Michael Batnick: Animal Spirits: Capitalism As We Know It

Jeff Carter: Inflation? I Think Higher Threat is Deflation

Roger Nusbaum: What If Your Retirement Plan Fails?

Joshua Brown: The IA 25: VIPs for Very Uncertain Times, Worse Than Expected GDP, Stocks Rally, Student Loans Have Not Stopped Millennial Home Buying

Be sure to follow me on Twitter.

AFLAC Earns $1.21 per Share
Posted by Eddy Elfenbein on April 29th, 2020 at 5:01 pm

AFLAC (AFL) just reported Q1 earnings of $1.21 per share. Forex dinged them for a penny per share. Wall Street had been expecting $1.10 per share.

The duck stock has decided to withdraw earnings guidance for this year. The CEO added, “we will continue to provide color on the drivers of our earnings and any trends that we see for the remainder of the year.”

“With this in mind, we also remain committed to prudent liquidity and capital management. We are understandably taking a tactical approach to capital allocation, leaving all of our options open for deployment and defense. In terms of repurchase guidance, we remain in the market at reduced levels, and are being tactical in our approach to repurchasing our stock. This will provide us additional flexibility to maintain strong capital ratios on behalf of our policyholders in both the U.S. and Japan. We remain committed to defending and extending our 37-year track record of annual dividend increases. We will also continue to invest opportunistically in our platform and strengthen our franchise through growth investments such as our recent definitive agreement to acquire Zurich North America’s U.S. Corporate Life and Pensions (Group Benefits) business. By doing so, we look to emerge from this period in a continued position of strength and leadership.”

Today was the highest close since March 10 for AFLAC. The stock is up 70% from its low of six weeks ago.