Broadridge Financial Earns $1.67 per Share
Posted by Eddy Elfenbein on May 8th, 2020 at 11:02 am

We got our final earnings report this morning when Broadridge Financial Solutions (BR) said it made $1.67 per share for its fiscal Q3. That was below Wall Street’s view of $1.72 per share.

“Our financial performance during the Third Quarter and our outlook for Fiscal Year 2020 underscores the resilience of Broadridge’s business model. Third Quarter Recurring revenues rose 9% and Adjusted EPS rose 5% even in the face of significantly lower event-driven activity and proxy timing shift. While tempered by lower event-driven activity, our updated guidance calls for continued growth in the fourth quarter, reflecting the essential nature of our work and the dedication of our associates,” Mr. Gokey added.

Here’s their guidance:

The stock is basically flat for the day.

Q1 2020 Earnings Calendar
Posted by Eddy Elfenbein on May 8th, 2020 at 10:03 am

Twenty-one of our 25 Buy List stocks are reporting their Q1 earnings during this earnings season. Here’s a list of reporting dates, Wall Street’s consensus estimates and actual reported results.

CWS Market Review – May 8, 2020
Posted by Eddy Elfenbein on May 8th, 2020 at 7:08 am

“Fear is an emotion, not a stock indicator.” – Coreen T. Sol

I’m sending you this week’s newsletter early on Friday, a few hours ahead of the April jobs report. I don’t know exactly what the report will say except that it will be bad. I mean, historically bad.

Ever since the economy shut down, millions of Americans have lost their jobs—as have many millions across the world. We recently got the Q1 GDP report, and it showed a drop of 4.8%. That was the economy’s worst performance in years. As bad as that was, the Q2 report will be far worse.

On Wednesday, ADP, the private payroll company, said that the U.S. economy lost 20,236,000 private sector jobs last month. That’s 24 times the previous record. In other words, we nearly averaged the previous monthly record each day!

On Thursday, the jobless-claims report showed that another three million Americans applied for unemployment benefits. As bad as that is, it was actually the fifth weekly improvement in a row. The seven-week total is 33.5 million.

As unpleasant as the economic news has been, the market continues to hold up well. In fact, the Nasdaq Composite is up slightly for the year (very slightly). For some context, a few weeks ago, the index was down 23% for the year. It’s made it all back.

This will be another issue focused on earnings. We had seven more reports this week, plus another that will come out on Friday. Of the seven reports, five beat the street, one matched and one came in below (looking at you Mickey). We also had good news this week from FactSet. The company raised its dividend by 7%. This is its 15th consecutive annual dividend hike.

But first, let’s run through this week’s Buy List earnings reports.

Seven Buy List Earnings Reports

Here’s the updated earnings calendar:

Let’s start with Trex (TREX), which reported on Monday. For Q1, the deck-maker earned 73 cents per share. That easily beat Wall Street’s estimates of 63 cents per share.

Quarterly sales rose 12% to $200 million, and gross margin increased by 620 basis points to 44.8%. For last year’s Q1, Trex made 54 cents per share.

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. I completely understand. Trex said it has “no significant sourcing issues,” and that it’s in good shape to ride out the lockdown. Sales for April were in line with their plans, but they expect a soft May.

This was a very good report, and the shares responded. The stock jumped 8.7% on Monday and another 9.3% on Tuesday. Trex is now our top-performing stock this year. Through Thursday, it’s up 22.75% for us. This week, I’m raising our Buy Below to $120 per share.

On Tuesday, Disney (DIS) reported Q1 earnings of 60 cents per share. That was well below expectations of 88 cents per share. I have to wonder what Wall Street really had been expecting, because the shares rallied a bit after the earnings “miss.”

Disney had a rough quarter. We all knew it was coming. Disney is almost perfectly designed to be hurt by the stay-at-home policies. The company is a combination of movies, parks and pro sports. The parks are shut. Pro sports are on lock down. If that’s not enough, Disney also has a cruise business.

Disney estimates that its parks division lost $1 billion in revenue last quarter. Company-wide, they pegged the damage at $1.4 billion. Operating income for parks and cruises dropped by 58%.

Disney decided to forgo its normal semi-annual dividend. The last dividend was for 88 cents per share, so that will save the company a nice chunk of change. Despite it all, I’m still a Disney fan. The company will prosper when the economy reopens. Disney remains a buy up to $107 per share.

We had two earnings reports on Wednesday. First up, Danaher (DHR) said it had Q1 earnings of $1.05 per share. That beat the Street by four cents per share.

The big news for Danaher last quarter is that it closed on its deal to buy GE’s biopharma business which is now called Cytiva. Danaher also said that Executive VP Rainer M. Blair will take over as CEO later this year when current CEO Thomas P. Joyce Jr. retires. Joyce has done a great job leading Danaher.

The shares dropped after the company said it will raise $2.5 billion in a share offering of common and convertible stock. There’s nothing to worry about. Danaher remains a great company. We have a 6.5% gain in DHR this year. I’m lifting my Buy Below on Danaher to $175 per share.

Also on Wednesday, Ansys (ANSS) reported Q1 earnings of 83 cents per share on revenue of $308.9 million. That was three cents more than estimates.

For Q2, Ansys expects earnings between $1.01 and $1.33 per share. For all of 2020, they see earnings between $5.61 and $6.23 per share. Wall Street had been expecting $1.43 for Q2 and $6.26 for the whole year.

Last quarter, Ansys had operating cash flow of $147.4 million and deferred revenue and backlog of $835 million. That’s up 24% from a year ago.

I’m lifting my Buy Below on Ansys to $275 per share.

We made three more earnings reports on Thursday. I was most pleased by Middleby’s (MIDD) report. The company said it made $1.46 per share which was ten cents better than expectations. This stock has been trashed this year.

It was a tough quarter for Middleby, but they’re hanging in there. The company makes equipment for the food service industry. Interestingly, the company said that restaurants are seeing week-over-week increases in business. I couldn’t help noticing this nugget in the earnings report: “Sales of certain food items, such as hot dogs and other meat products in our core equipment markets, have experienced recent increased demand.” Makes sense.

Middleby is a good example of people expecting the worst, and it didn’t come. It’s tough for them, but they’ll make it through. The shares gained 8% on Thursday. Middleby remains a buy up to $72 per share.

Becton, Dickinson (BDX) made $2.55 per share for Q1. That was 19 cents better than expectations. Quarterly revenue came in at $4.253 billion which topped the Street’s consensus of $4.13 billion. Their Life Sciences unit fared especially well last quarter.

Becton withdrew its 2020 guidance. The shares gapped up nearly 3% on Thursday but gradually lost ground as the day wore on. I’m keeping our Buy Below at $265 per share.

After the closing bell on Thursday, Fiserv (FISV) said it made 99 cents per share for Q1. That matched Wall Street’s estimate on the nose.

CEO Jeffery Yabuki said, “Fiserv delivered solid financial results despite a significant impact from the COVID-19 pandemic on our business late in the quarter.” Looking through the numbers, I see many reasons to be pleased. Fiserv’s adjusted revenue increased slightly to $3.48 billion. Free cash flow rose 3% to $760 million. Operating margin increased 10 basis points to 27.8%.

Fiserv has also withdrawn its guidance. The company said that Frank Bisignano will succeed Jeffery Yabuki as CEO on July 1. Yabuki has done a great job for shareholders. As I mentioned last week, Yabuki has taken a 100% pay cut to his base salary. Fiserv is a buy up to $107 per share.

We have one more earnings report this earnings season, and that’s from Broadridge Financial Solutions (BR). The company is due to report later today. I’ll have details in next week’s issue. Broadridge was our best-performing stock for April. It gained over 22% for us last month.

That’s it for this earnings season. We have two off-cycle reports coming up later this month. Ross Stores (ROSS) is due to report earnings on May 21. Hormel Foods (HRL) usually reports around the same time as Ross, but they haven’t said exactly when yet.

Buy List Updates

It wasn’t all earnings news this week. We had some 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. Six weeks ago, FactSet had a good earnings report and reassuring guidance.

RPM International (RPM) released a statement saying that sales for its fiscal Q4, which ends on May 31, should be within the range it previously gave us. That’s good to hear.

In early April, RPM said it expects sales to drop 10% to 15% for this quarter. The Q4 report will probably come out in mid-July. The shares are up 57.5% from their March low.

That’s all for now. Outside of earnings, there will be a few key economic reports coming next week. On Tuesday, we’ll see the inflation report for April. We saw actual deflation for March and we may see it again for April. Also on Tuesday, the Feds will also update the budget figures. We’re swimming in red ink. More jobless-claims numbers on Thursday. Then on Friday, we’ll get the retail-sales report along with the industrial-production report. 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 8, 2020
Posted by Eddy Elfenbein on May 8th, 2020 at 7:04 am

Worst Postwar U.S. Jobs Report Is On Tap

Why Friday’s U.S. Jobless Figures Won’t Capture the True State of the Coronavirus Economy

It’s JPMorgan vs. Citi as Wall Street Splits on Market Direction

The Results Are In for the Sharing Economy. They Are Ugly.

Where the Small-Business Relief Loans Have Gone

Mortgage Lenders Tighten Screws on U.S. Credit in Echo of 2008

Green Hydrogen’s Time Has Come, Say Advocates Eying Post-Pandemic World

Neiman Marcus, a Symbol of Luxury, Files for Bankruptcy

Teen Hacker and Crew of ‘Evil Geniuses’ Accused of $24 Million Crypto Theft

Nick Maggiulli: Which Portfolio is Right for You?

Ben Carlson: Can Millennials Count on Social Security In Financial Planning?

Michael Batnick: The Rise and the Fall

Jeff Carter: If You Are Rich, Or Have A Knowledge Job You Don’t Feel The Pain

Jeff Miller: Close Reading: Will the Market “Tumble Back to its Coronavirus Lows in March?”

Joshua Brown: You Don’t Even Know What Risk Is, “Code Red” Revisited & Financial Advice on CNBC

Be sure to follow me on Twitter.

Fiserv Earns 99 Cents per Share
Posted by Eddy Elfenbein on May 7th, 2020 at 4:27 pm

Fiserv‘s (FISV) earnings are out. This is an unusual one since the company has integrated itself with First Data.

For Q1, Fiserv made 99 cents per share which matched expectations. The company, like so many others, withdrew its full-year earnings guidance.

“Fiserv delivered solid financial results despite a significant impact from the COVID-19 pandemic on our business late in the quarter,” said Jeffery Yabuki, Chairman and Chief Executive Officer of Fiserv. “Our number one priority is the safety and well-being of our associates, clients and partners. We took swift action to protect our teams and to ensure business continuity and service excellence as we navigate these unchartered waters.”

3.2 Million Jobless Claims
Posted by Eddy Elfenbein on May 7th, 2020 at 12:09 pm

Another Thursday and another jobless claims report. This week, 3.169 million Americans filed for jobless claims. This is the fifth-straight decline. Still, the seven-week running total is now 33.5 million.

Tomorrow we’ll get the official jobs report from the Department of Labor. I have no idea what it will be, but it will be bad.

The stock market is doing well this morning, and the Nasdaq is now positive for the year.

Ansys (ANSS) and Danaher (DHR) are down a bit today after their earnings reports yesterday afternoon. Danaher is planning a $2.5 billion stock offering.

We had two earnings reports this morning. Middleby (MIDD) said it made $1.46 per share which was ten cents better than expectations. The stock is up about 3% today. This stock has gotten beaten up far more than it deserves.

Becton, Dickinson (BDX) made $2.55 per share. That was 19 cents better than expectations. The stock is up a small bit.

Morning News: May 7, 2020
Posted by Eddy Elfenbein on May 7th, 2020 at 7:08 am

The Glut Drowning the Oil Market

E.U. Is Facing Its Worst Recession Ever.

Bank of England Projects Worst UK Economic Slump Since 1706

China Says Exports Rose 3.5% in April, Crushing Expectations for a Decline of 15.7%

Coronavirus Casts Deep Chill Over US-China Relations

U.S. Unemployment Rolls Seen Swelling as Coronavirus Restrictions Bite

Job Losses By Size of Company – Who Lost the Jobs

Disney’s Still Shining Bright

Will Gilead Price Its Coronavirus Drug For Public Good Or For Profit?

Never Been More Bullish Even As Warren Buffett Dumps Airlines

Sinclair Broadcast Group To Pay Record-Setting $48 Million FCC Fine

If Norwegian Cruise Line Goes Down, Carnival and Royal Caribbean Will Pay The Price

Software Company Sues U.S. to Avoid Repaying $750,000 PPP Loan

Ben Carlson: What Happens When Distressed Markets Don’t Give You Distressed Prices?

Michael Batnick: Animal Spirits: Whatever It Takes Squared & Off the Charts

Joshua Brown: And Now…We Nest!

Be sure to follow me on Twitter.

Ansys Earned 83 Cents per Share
Posted by Eddy Elfenbein on May 6th, 2020 at 4:46 pm

Ansys (ANSS) reported Q1 earnings of 83 cents per share on revenue of $308.9 million.

For Q2, Ansys expects earnings between $1.01 and $1.33 per share. For all of 2020, they see earnings between $5.61 and $6.23 per share. Wall Street had been expecting $1.43 for Q2 and $6.26 for the whole year.

Ajei Gopal, Ansys President & CEO, stated, “I am very proud that the Ansys team has come together, despite working remotely, to close deals and to continue providing outstanding support to our customers. That effort, in the face of uncertain global economic conditions, has led to Ansys delivering financial results near the midpoint of our guidance. We have also continued to drive innovation across our multiphysics portfolio through organic product development seen in Ansys 2020 Release 1 as well as through acquisitions.

Despite the market uncertainties, we believe that our strategy of making simulation pervasive across the product lifecycle remains more relevant than ever. That strategy accelerates customers’ key research and development initiatives – which are often less impacted by economic slowdowns – including emerging areas like electrification, autonomy, 5G, and the industrial internet of things. These companies understand the need for continued investment to maintain, or even build upon, their competitive advantage. So we will continue to focus on executing this strategy while prudently investing in growth opportunities that put us in a stronger position for the long term.”

Danaher Earns $1.05 per Share
Posted by Eddy Elfenbein on May 6th, 2020 at 4:29 pm

Danaher (DHR) reported Q1 earnings of $1.05 per share. That beat by four cents per share.

For the first quarter 2020, net earnings were $595.1 million, or $0.81 per diluted common share. Non-GAAP adjusted diluted net earnings per common share were $1.05.

Revenues increased 3.0% year-over-year to $4.3 billion, with non-GAAP core revenue growth of 4.5%.

Starting with the second quarter of 2020, the Company intends to present core revenue growth including Cytiva. For the second quarter 2020 the Company anticipates that non-GAAP core revenue growth including Cytiva will be in the range of approximately flat to down 10%.

Thomas P. Joyce, Jr., President and Chief Executive Officer, stated, “We are pleased with our first quarter performance during such an unprecedented time. We delivered 4.5% core revenue growth driven by positive results in each of our three reporting segments, with particular strength in our Cepheid, Radiometer, Pall, and ChemTreat businesses. We were also excited to close our acquisition of the GE Biopharma business, now called Cytiva, on March 31.”

Joyce continued, “We are incredibly proud of our team’s response to the challenges presented by the COVID-19 pandemic. We are providing much-needed diagnostic testing capabilities today and supporting our customers’ pursuit of new treatments and vaccines for the future. Looking ahead, we feel well-positioned to navigate through this uncertain environment. We believe that the combination of our strong portfolio, exceptional team, and disciplined execution driven by the Danaher Business System will continue to differentiate Danaher in 2020 and beyond.”

The shares are down about 10% after hours.

20 Million Jobs Lost
Posted by Eddy Elfenbein on May 6th, 2020 at 10:38 am

The first Friday of each month is typically when the jobs report comes out. This month, it will actually be the second Friday since the first Friday was May 1.

There are two key events ahead of the jobs report. On Wednesday, ADP, the private payroll company, releases its report. Of course, this is unofficial, but it gives some PR to the company.

This morning, ADP said the U.S. economy lost 20,236,000 private sector jobs last month. That’s 24 times the previous record. In other words, we nearly averaged the previous monthly record each day.

The second key event is the jobless claims report which comes out each Thursday. I’m expecting more bad news.

Despite its poor earnings report, shares of Disney (DIS) are higher today. I suppose expectations were for less than expectations.