Today’s Fed Policy Statement
Posted by Eddy Elfenbein on April 29th, 2020 at 2:07 pm

Here’s today’s policy statement:

The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.

The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world. The virus and the measures taken to protect public health are inducing sharp declines in economic activity and a surge in job losses. Weaker demand and significantly lower oil prices are holding down consumer price inflation. The disruptions to economic activity here and abroad have significantly affected financial conditions and have impaired the flow of credit to U.S. households and businesses.

The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 0 to 1/4 percent. The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.

The Committee will continue to monitor the implications of incoming information for the economic outlook, including information related to public health, as well as global developments and muted inflation pressures, and will use its tools and act as appropriate to support the economy. In determining the timing and size of future adjustments to the stance of monetary policy, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

To support the flow of credit to households and businesses, the Federal Reserve will continue to purchase Treasury securities and agency residential and commercial mortgage-backed securities in the amounts needed to support smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor market conditions and is prepared to adjust its plans as appropriate.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Patrick Harker; Robert S. Kaplan; Neel Kashkari; Loretta J. Mester; and Randal K. Quarles.

Sherwin-Williams Earns $4.08 per Share for Q1
Posted by Eddy Elfenbein on April 29th, 2020 at 9:51 am

This morning, 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.

“We anticipate that the rapid deterioration of the U.S. and global economies experienced late in the first quarter due to the COVID-19 pandemic will most likely continue through the second quarter. We see no immediate, meaningful improvement ahead in most end markets we serve, and we are unable to predict when any noticeable improvement will occur. Given the trends and indicators we see at this time, we anticipate second quarter 2020 consolidated net sales will decrease by a low-to-mid-teens percentage versus the second quarter of 2019.

“For the full year 2020, we are revising our sales guidance to reflect uncertainties in the timing and pace of improvement in the U.S. and global operating environment. If economic conditions begin returning to normal in the third quarter 2020 and continue improving through the fourth quarter 2020, we anticipate full year consolidated net sales to be flat to down a low single digit percentage. If economic conditions do not materially improve until the first quarter 2021, we anticipate full year 2020 consolidated net sales to decrease by a mid-to-high single digit percentage. This is compared to our previous full year 2020 sales guidance of an increase of 2% to 4%. Considering our revised range of potential sales, we are revising our diluted net income per share guidance for 2020 to be in the range of $16.46 to $18.46 per share compared to our previous guidance of $19.91 to $20.71 per share and compared to $16.49 per share earned in 2019. Full year 2020 earnings per share includes acquisition-related amortization expense of approximately $2.54 per share, respectively. Full year 2019 earnings per share includes acquisition-related costs of $3.21 per share and other adjustments of $1.42 per share.”

The stock is up about 6% this morning. Earnings from AFLAC (AFL) are due out after today’s close.

Q1 GDP = -4.8%
Posted by Eddy Elfenbein on April 29th, 2020 at 9:38 am

This morning, we got our first look at Q1 GDP. Bear in mind that the first quarter was almost perfectly divided between the coronavirus and pre-coronavirus.

The government said that the economy shrank by 4.8% for the first three months of the year.

Economist surveyed by Dow Jones had expected the first estimate of GDP to show a 3.5% contraction.

This marked the first negative GDP reading since the 1.1% decline in the first quarter of 2014 and the lowest level since the 8.4% plunge in Q4 of 2008 during the worst of the financial crisis.

The biggest drags on the economy were consumer spending, nonresidential fixed investment, exports and inventories. Residential fixed investment, which jumped 21%, along with spending from both the federal and state governments helped offset some of the damage.

Consumer expenditures, which comprise 67% of total GDP, plunged 7.6% in the quarter as all nonessential stores were closed and the cornerstone of the U.S. economy was taken almost completely out of commission. Durable goods spending tumbled 16.1% while expenditures on services were down 10.2%.

Exports dropped 8.7% while imports fell 15.3%, including a 30% drop in services.

The S&P 500 is up over 2,900 this morning.

Morning News: April 29, 2020
Posted by Eddy Elfenbein on April 29th, 2020 at 7:10 am

Stock Markets Edge Higher as U.S. Data Looms

Coronavirus Likely Hammered U.S. Economy in First Quarter

Businesses Seek Sweeping Shield From Pandemic Liability Before They Reopen

The U.S. Plans to Lend $500 Billion to Large Companies. It Won’t Require Them to Preserve Jobs or Limit Executive Pay.

World’s Richest Are Waiting for New Dip in Stocks Before Buying

The Pandemic Will Reduce Inequality—or Make It Worse

Tyson Foods Helped Create the Meat Crisis It Now Warns Against

Amazon Turns to Chinese Firm on U.S. Blacklist to Meet Thermal Camera Needs

Obstacles and Opportunities for the Aviation Industry

Legal Jargon on Cruise Tickets May Foil Virus Class-Action Suits

Nick Maggiulli: Talk Is Cheap

Ben Carlson: Occam’s Razor on Interest Rates and the Stock Market

Michael Batnick: Small Mean Reversion

Howard Lindzon: I Need a Joint – A Panic With Friends With Paul Rosen – Marijuana Entrepreneur

Joshua Brown: You Can’t Invest in GDP

Be sure to follow me on Twitter.

Cerner Earns 71 Cents per Share
Posted by Eddy Elfenbein on April 28th, 2020 at 4:16 pm

After the closing bell, Cerner (CERN) reported Q1 earnings of 71 cents per share. Wall Street had been expecting 70 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.

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.

“I am pleased with our solid first quarter results despite the initial impact of the COVID-19 pandemic,” said Brent Shafer, Chairman and CEO. “More importantly, I am proud of the efforts of Cerner associates as they quickly adapted to the challenges presented by the pandemic while maintaining an unwavering focus on supporting our clients on the frontlines. While we expect the pandemic to continue affecting our results, we currently believe that the largest impact will occur in second quarter 2020 and expect resiliency in our future financial performance.”

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 $3.09 to $3.19.

The shares are down about 1% after hours.

April Could Be the Market’s Best Month In Several Years
Posted by Eddy Elfenbein on April 28th, 2020 at 12:37 pm

The S&P 500 got off to a nice start this morning but is now about flat for the day. At one point, the index got as high as 2,921.15.

This month looks to go down as one of the best months for stocks in decades. The price of oil continues to sink. One barrel is now going for less than $12. Also, the Fed’s meeting starts today.

The Buy List is still holding up well following yesterday’s very strong gain. Cerner (CERN) is due to report after today’s close. In six days, Eagle Bank (EGBN) has climbed 22%.

Morning News: April 28, 2020
Posted by Eddy Elfenbein on April 28th, 2020 at 7:04 am

Oil Plunges Again After Sudden Index Shift Prompts Firesale

With Virus War Still Raging, Fed Peers Out of the Foxhole

Job or Health? Restarting the Economy Threatens to Worsen Economic Inequality

Bankers Rebuke S.B.A. as Loan System Crashes in Flood of Applications

Start-Ups Pursue ‘Free Money’ With Relief Funds, Prompting Backlash

Mortgage Chaos Threatens to Worsen Once It’s Time for Repayments

New York AG Raises Concerns About Amazon’s Pandemic Safety Practices

BP Hikes Debt, Keeps Dividend as Coronavirus Hammers Profits

For a Glimpse at What Reopening Looks Like, Head to Waffle House

Howard Lindzon: Momentum Monday – Clouds over Crude and Life over Death

Roger Nusbaum: Creating Resiliency

Jeff Carter: Emails During Corona

Michael Batnick: Unintended Consequences

Ben Carlson: More Thoughts on the Worst Case Scenarios for Diversified Portfolios

Joshua Brown: Nothing Matters Till the Playoffs, No Surprise & What’s Happening with Amazon and the Big Box Retailers Now

Be sure to follow me on Twitter.

Great Day for the Buy List
Posted by Eddy Elfenbein on April 27th, 2020 at 8:32 pm

Today was a very good day for the Buy List. I shouldn’t brag about this since we’re focused on the long term around here, but it’s nice to have a big day.

The Buy List gained 2.97% while the S&P 500 gained 1.47%. That’s an unusually large gap in our favor.

Eighteen of our 25 stocks beat the market today. Both Danaher (DHR) and Silgan (SLGN) made new 52-week highs today.

Here’s a rundown of how we did:

June Oil Could Also Go Negative
Posted by Eddy Elfenbein on April 27th, 2020 at 11:01 am

The stock market is up nicely this morning. In fact, the index isn’t too far from a fresh six-week high. (The high from the Friday before last was particularly high.)

This week will be all about earnings. The Federal Reserve meets this week on Tuesday and Wednesday. The policy statement will be out on Wednesday afternoon.

This morning, General Motors (GM) said it will suspend its dividend and all share buybacks. I can’t say I’m surprised.

The price for oil is down again today. The price for the May futures contract famously went negative. There’s a chance that June might do the same. Storage is still a big issue.

Eagle Bank (EGBN) has been hot for us lately (there’s something I don’t write often!). EGBN is up for the fifth day in a row. It’s up 14% over that time.

Check Point Software Earns $1.42 per Share
Posted by Eddy Elfenbein on April 27th, 2020 at 7:07 am

This morning, Check Point Software (CHKP) 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.”

“The first quarter success is a testament to our commitment to customers, partners and our employees during these unprecedented times. Despite the COVID-19 pandemic, we sustained elevated business activity levels and delivered results in the upper half of our guidance with strength coming from the Americas,” said Gil Shwed, Founder and CEO of Check Point Software Technologies. “We saw an increased demand for network security gateways in order to support higher capacities and expand the use of our remote access VPN solutions. We continued to provide the highest level of security to our customers to allow them to run their business.”

“During the quarter our work environment changed completely. We managed through lack of components in the supply chain and closure of some of our logistics centers. We transitioned almost exclusively to work from home and created new environments that allowed our R&D and technical services to work remotely. Our sales team is also operating from home with no physical meetings with customers, which previously was the primary method of our sales engagements. We also shifted to virtual marketing activities. We managed through these challenges smoothly, yet it’s hard to predict what effect this changing environment will have on the future. I would like to thank our customers, partners and employees for their engagement, dedication and for making this possible,” concluded Shwed.