Or Maybe Not….
Posted by Eddy Elfenbein on February 4th, 2020 at 10:59 pm

At 8:09 p.m. ET, ICE sent out a press release to clarify things:

Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, is sharing the following statement in response to news reports published today:

ICE approached eBay to explore a range of potential opportunities that might create value for the shareholders of both companies. eBay has not engaged in a meaningful way. We are not in negotiations regarding the sale of all or part of eBay.

Over ICE’s 20-year history, the company’s track record of creating shareholder value, both through organic growth and acquisitions, speaks for itself. ICE does look to explore potential opportunities that it expects will deliver enhanced shareholder value, and will continue to do so in the future.

Five More Earnings Reports
Posted by Eddy Elfenbein on February 4th, 2020 at 5:10 pm

Lots of earnings. Let’s start with Fiserv (FISV). For Q4, the company made $1.13 per share. That was a penny below expectations.

“2019 was a year of leadership and growth in which we took steps to transform an industry to better enable long-term, differentiated value for clients, associates and shareholders,” said Jeffery Yabuki, Chairman and Chief Executive Officer of Fiserv. “We delivered strong financial results including our 34th consecutive year of double digit adjusted earnings per share growth.”

Fiserv earned $4.00 for 2019. The company sees 2020 earnings of $4.86 to $5.02 per share.

Cerner (CERN) made 75 cents per share for Q4. That beat by a penny. Cerner earned $2.68 per share for the year. For Q1, Cerner sees earnings of 69 to 71 cents per share. For 2020, they see $3.09 to $3.19 per share.

Disney (DIS) had another blow-out quarter. The company has signed up 26.5 million Disney+ subscribers. For Q4, Disney made $1.53 per share. That was nine cents more than expectations.

Intercontinental Exchange (ICE) doesn’t report until Thursday, but the shares dropped 7.5% today on news that it made an offer to buy eBay. The Wall Street Journal said the offer was worth more than $30 billion. As of now, there’s no deal.

AFLAC (AFL) earned $1.03 per share which beat estimates by one penny. Currency exchange added two cents per share. AFLAC also increased its quarterly dividend from 27 cents to 28 cents per share. This is their 37th annual dividend increase in a row.

For 2020, AFLAC is looking for earnings of $4.32 to $4.52 per share. That assumes an exchange rate of 109.07 yen to the dollar (which was the average for 2019).

Globe Life (GL) had Q4 operating income of $1.70 per share. That was two cents below estimates. For 2020, GL expects operating earnings of $7.03 to $7.23 per share. Wall Street had been expecting $7.18 per share. The stock made a new 52-week high today.

Morning News: February 4, 2020
Posted by Eddy Elfenbein on February 4th, 2020 at 7:19 am

Macau Shuts Casinos; Global Cases Rise to 20,600

$9 Cabbages, Emergency Pork: Coronavirus Tests China on Food

China’s Airlines Told Not to Axe Global Flights As Thousands Cut

China, Desperate to Stop Coronavirus, Turns Neighbor Against Neighbor

Electric Future: Britain to Ban New Petrol and Hybrid Cars From 2035

BP Boosts Dividend As Profit Tops Forecast and CEO Bows Out

IBM, Marriott and Mickey Mouse Take On Tech’s Favorite Law

Visa Is Planning the Biggest Changes to Swipe Fees in a Decade

Google Faces Privacy Probe in EU Over Location Tracking

The Market Is Betting That Competitors Won’t Catch Up to Tesla

Getting Americans Into Train Travel, With Leather Seats and Billions of Dollars

Tropical Breezes, Pristine Beaches and a Domain Name to Die For

Joshua Brown: “25-year-olds should not pay a 31.3x Shiller PE to buy their grandparent’s equities.”

Jeff Carter: The Artificial Intelligence

Ben Carlson: Talking Financial Fraud on The Compound

Be sure to follow me on Twitter.

A June Rate Cut Is on the Table
Posted by Eddy Elfenbein on February 3rd, 2020 at 1:05 pm

How things have changed! Thanks to the coronavirus, a June Fed rate is a definite possibility.

The U.S. stock market opened higher this morning, but the story in China was very different. The Chinese market got absolutely clobbered.

Because of the lunar break, this was the first trading day in China in nearly two weeks. It was one of the worst losses in years. Nearly every stock fell, and more than 3,000 stocks fell by the daily maximum.

Here in the U.S., things look better today. The markets are currently up after Friday’s 600-point drop in the Dow. We had a surprising economic report this morning. The ISM Manufacturing Report for January came in at 50.9. That’s much better than expected.

Check Point Beat Earnings
Posted by Eddy Elfenbein on February 3rd, 2020 at 9:34 am

This morning, Check Point Software Technologies (CHKP) reported Q4 earnings of $2.02 per share. That’s up from $1.68 one year ago. Check Point also beat estimates for $1.99 per share. Revenue rose 3% to $544 million, which beat estimates of $542.5 million.

“We closed out the last decade with nearly two billion dollars in annual revenues and over one billion dollars in non-GAAP operating income. Over the last decade we introduced our security-as-a-service subscription model, which delivers the most advanced technologies in cyber. In 2019, subscription reached over six hundred million dollars in revenues and was driven by cloud, mobile and zero-day advanced threat prevention technologies,” said Gil Shwed, Founder and CEO of Check Point Software Technologies. “We began the new decade with the introduction of Infinity NEXT, the industry’s most comprehensive cyber security platform with over 60 security technologies that support over 50 types of assets including operating systems, cloud workloads, IoT devices, mobile devices and network of any type,” Shwed concluded.

During Q4, Check Point bought back 2.9 million shares for $325 million. The company announced a $2 billion extension to the share buyback program. Check Point didn’t provide any guidance for 2020.

Morning News: February 3, 2020
Posted by Eddy Elfenbein on February 3rd, 2020 at 7:05 am

China’s Worst Rout in Years Has 3,257 Stocks Falling by Daily Limit

SARS Stung the Global Economy. The Coronavirus Is a Greater Menace.

Gilead Gains; Drug Gets Human Trial in China for Coronavirus

Oil Wavers as Coronavirus Hits Demand and OPEC+ Considers Deeper Cuts

Super Bowl Ads Hyped Electric Cars. But Will Anyone Buy Them?

Would Your Wages Rise Under ‘Medicare for All’?

Boeing’s Woes Create Headwinds for U.S. Economy

WeWork Names Real Estate Veteran Sandeep Mathrani As New CEO

3 Reasons Amazon’s Market Cap Soared Above $1 Trillion After Its Blowout Quarter

Behind Amazon’s HQ2 Fiasco: Jeff Bezos Was Jealous of Elon Musk

Jeff Miller: Coronavirus – Cause for Analysis or Paralysis?

Roger Nusbaum: The Coronavirus & Investment Process

Howard Lindzon: Momentum Monday…Pass the Masks and Do Not Cough Anywhere Near Me

Michael Batnick: “I’ll Never Sell”

Ben Carlson: The 5 Types of Retirement Savers & When Does the Federal Deficit Matter?

Be sure to follow me on Twitter.

Lesson in Diversification
Posted by Eddy Elfenbein on January 31st, 2020 at 4:35 pm

The final numbers are in and our Buy List lost -1.79% today, just two basis points worse than the S&P 500.

That’s pretty good considering the anchor of Broadridge (BR), which fell about 8% today.

All told, BR was a 26-basis-point weight on the Buy List today. Thanks to having many other good stocks, we absorbed the bad day from BR rather smoothly.

Mind you, I’m not happy with losing to the market today but as investors we understand that in a 25-stock portfolio, some stock is going to be the dud.

A well-diversified portfolio can be a big help when one of your stocks falls afoul of Wall Street’s judgement.

Earnings from Church & Dwight and Broadridge
Posted by Eddy Elfenbein on January 31st, 2020 at 2:49 pm

Today is another rough day for the market. The S&P 500 is down about as much as it was on Monday.

We had two earnings reports this morning, one good and one bad. Let’s start with the good. Church & Dwight (CHD) earned 55 cents per share for Q4 which matched Wall Street’s estimate. CHD also bumped up its quarterly dividend from 22.75 cents to 24 cents per share. This is their 24th annual dividend increase in a row.

For Q1, C&D expects earnings of 73 cents per share. For all of 2020, the company is looking for earnings of $2.64 to $2.69 per share. That’s an increase of 7% to 9% over 2019. CHD is one of the few stocks in the green today. I saw it was the 7th best-performing stock in the S&P 500 today.

Now for the bad. Broadridge Financial Solutions (BR) reported earnings of 53 cents per share. That was 18 cents below estimates.

What happened? On the earnings call, 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.”

The company 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 to $5.22 per share. Now let’s say it’s $5.03 to $5.10 per share.

Shares of BR dropped as much as 11% today but they’ve made up some lost ground.

As I write this, our Buy List is trailing the S&P 500 by 0.09% today. Except for Broadridge, we’d be leading the index by about 0.20%.

CWS Market Review – January 31, 2020
Posted by Eddy Elfenbein on January 31st, 2020 at 7:08 am

“I made my money by selling too soon.” – Bernard Baruch

On Monday, the S&P 500 snapped its 74-day streak of not having a 1% down day. Perhaps fears of the coronavirus weighed on the market. Or maybe it was fears over earnings. In any event, the market had a very small stumble this week.

Because things had been so calm, the volatility probably seems greater than it truly is. After all, drops of 1% aren’t that uncommon. The good news for us is that our Buy List has held up much better than the overall market. Our Buy List was already leading the market this year by 1.22%. When folks get scared, they flock towards quality, and those are the kind of stocks we like.

We had several Buy List earnings reports this week. Hershey led the way with a very good report. Danaher and Stryker also did well. In fact, Danaher is already our second 10% winner this year. On the downside, Sherwin-Williams came in below Wall Street’s estimate.

In this week’s issue, I’ll review all our Buy List earnings reports from this week. I’ll also preview several more that are coming next week. We’re going to have several Buy List stocks report on Tuesday, including Disney. But first, let’s run down this week’s earnings news.

Stryker Beats Earnings and Offers Good Guidance

After the closing bell on Tuesday, Stryker (SYK) reported Q4 earnings of $2.49 per share. That beat Wall Street’s estimates by three cents per share. Stryker’s own range was $2.43 to $2.48 per share.

Quarterly sales rose by 8.8% to $4.1 billion. For all of 2019, Stryker earned $8.26 per share.

From the earnings report:

“We had an excellent finish to 2019, achieving 8.1% full-year organic sales growth and 13% adjusted EPS gains. This marks our seventh consecutive year of accelerating organic sales growth and is a testament to our talent, culture and durable operating model,” said Kevin Lobo, Chairman and Chief Executive Officer. “The performance was balanced across businesses and geographies and positions us well for continued success.”

Now to guidance. For Q1, Stryker expects earnings of $2.05 to $2.10 per share. Wall Street had been expecting $2.05 per share. For all of 2020, Stryker sees earnings of $9.00 to $9.20 per share. The Street has been expecting $9.03 per share.

This is a solid report. Last month, Stryker increased its dividend by 11%. That was their 27th annual dividend hike in a row. Stryker remains a buy up to $223 per share.

Silgan Holdings Matches the Street

Also after the bell Tuesday, Silgan Holdings (SLGN) reported Q4 earnings of 38 cents per share. That pinged Wall Street’s forecast on the nose. Silgan had said they expected earnings between 34 to 39 cents per share, which seems like a wide range.

As I mentioned last week, Silgan didn’t have a great 2019, so these results are fairly mediocre. However, I see a lot of promise for Silgan going forward.

For 2020, Silgan sees earnings ranging between $2.28 and $2.38 per share. Wall Street had been expecting earnings of $2.30 per share. This was a good report, and it means Silgan is going for about 13.5 times next year’s earnings. Silgan is a buy up to $34 per share.

Thursday Earnings from Hershey, Danaher and Sherwin-Williams

We had three more Buy List earnings reports on Thursday morning. Two were good. One was not so good.

Let’s start with the good news.

Hershey (HSY) reported Q4 earnings of $1.28 per share. That was four cents better than estimates. The company had been expecting $1.18 to $1.24 per share. For the year, Hershey made $5.78 per share. This was a good year for them.

For 2020, Hershey sees earnings between $6.13 and $6.24 per share. I like that guidance. Wall Street had been expecting $6.16 per share. The shares rallied 4.6% on the news. Hershey is a buy up to $162 per share.

Also on Thursday, Danaher (DHR) reported Q4 earnings of $1.28 per share. Wall Street had been expecting $1.25 per share. This is such a good company.

For Q1, Danaher said they expect earnings of $1.06 to $1.09 per share. That’s pretty good. Wall Street was expecting $1.04 per share. For all of 2020, Danaher expects earnings of $4.80 to $4.90 per share (note that that doesn’t include the impact from the GE Biopharma acquisition). Remember, the company also recently IPO’d its dental business.

The stock rallied 2.3% on the earnings news. DHR is already a 10% winner for us this year. I’m lifting my Buy Below on Danaher by $25 to $180 per share.

Now for the bad one. (Okay, it wasn’t that bad.) Sherwin-Williams (SHW) reported Q4 earnings of $4.27 per share. That was 12 cents below estimates. Sherwin’s earnings report is a bit complicated because there are a few charges and adjustments. The CEO noted “softness in certain industrial end markets and choppiness in our international businesses.”

For 2020, Sherwin-Williams expects earnings to range between $22.70 and $23.50 per share. Wall Street had been expecting $24.26 per share. I want to see better numbers here. The stock lost 3.6% on Thursday, although it had been down close to 6% earlier in the day. I’m keeping my Buy Below price for SHW at $590 per share.

Several More Buy List Earnings Next Week

Here’s the updated Earnings Calendar:

Next week will be another busy one for us.

On Monday, Check Point Software (CHKP) is due to report. The Israeli cybersecurity firm is wrapping up another good year.

For Q4, Check Point sees earnings ranging between $1.93 and $2.04 and revenue between $527 million and $557 million. The company reiterated its 2019 full-year guidance of earnings between $5.85 per share and $6.25 per share and revenue between $1.94 million and $2.04 billion.

I hope Check Point offers some guidance on 2020. I think CHKP can hit $6.20 to $6.40 per share. The shares have struggled over the past year.

Get ready for a very busy day on Tuesday when we’ll have five Buy List earnings reports.

Let’s start with AFLAC (AFL). In October, the duck stock raised its full-year guidance to a range of $4.35 to $4.45 per share. That was a big increase over the old guidance of $4.10 to $4.30 per share. The range is based on the 2018 exchange rate of 110.39 yen to the dollar. The guidance implies a Q4 range of 94 cents to $1.04 per share. AFLAC is going for less than 13 times earnings. Expect conservative 2020 guidance.

For Q4, Cerner (CERN) expects earnings between 73 and 75 cents per share on revenue of $1.41 billion to $1.46 billion. The healthcare-IT firm sees new-business bookings ranging between $1.45 and $1.65 billion.

The Q4 earnings guidance is effectively a narrowing of their previous full-year guidance. Previously, Cerner had expected 2019 earnings of $2.64 to $2.72 per share. With new Q4 guidance, that works out to $2.66 to $2.68 per share.

Last year, Cerner reached an agreement with Starboard Value to start paying a dividend and increase its buyback authorization by $1.5 billion. That’s been exhausted, and Cerner raised the authorization by another $1.5 billion. If they offer 2020 guidance, I’m expecting a range near $3 per share.

Disney (DIS) makes a lot of money. On Tuesday, we’ll hear how much. The stock has been somewhat weak lately. This is probably due to travel fears from the coronavirus. If you don’t own Disney, this is a good window. The share price is actually lower than where it was nine months ago. Wall Street expects earnings of $1.46 per share.

In November, Fiserv (FISV) raised its guidance. The company now sees 2019 earnings of $3.98 to $4.02 per share which implies Q4 earnings of $1.11 to $1.15 per share. The previous 2019 guidance was $3.39 to $3.52 per share. That was a big increase. Business is going well for them. I’ll also be curious to hear guidance for 2020. Fiserv will probably be conservative.

Globe Life (GL) had been quiet for some time until this week when it was one of our best-performing stocks. Globe Life is a classic defensive stock. When people get nervous, they seek out GL.

By the way, the Texas Rangers baseball team will open its new ballpark, Globe Life Field, in March. For Q4, Wall Street expects $1.72 per share.

On Thursday, Becton, Dickinson (BDX) will be ready to report. This will actually be for its fiscal Q1. The medical-instruments firm already offered EPS guidance this year of $12.50 to $12.65. Wall Street wasn’t exactly thrilled with those numbers. Analysts had been expecting more.

I suspect BDX is trying to lower expectations. Last month, Becton bumped up its dividend for the 48th year in a row. The quarterly payout increased from 77 cents to 79 cents per share. For fiscal Q1, Wall Street expects $1.64 per share.

Intercontinental Exchange (ICE) is one of six Buy List stocks that’s up more than 8% this year. ICE has a great business, but one troubling spot is that the government isn’t pleased with the pricing power that exchanges have for their data services. That’s a big money maker for them. I don’t think this issue can be solved easily or quickly, and it will probably get settled by the courts.

ICE provides guidance for several metrics except EPS. But if we use a little math, the numbers they gave for Q4 should work out to earnings of about 95 cents per share, give or take. For Q4, ICE expects data revenue to be between $555 million and $560 million.

That’s all for now. Broadridge and Church & Dwight will report later today. On Monday, we’ll get the ISM Manufacturing report. The recent numbers here have been sluggish. On Wednesday, we’ll get the ADP payroll report, plus the ISM Non-Manufacturing report. Friday will be the big December jobs report. I’ll be particularly interested to see if there’s an increase in wages. 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

P.S. I’m going to be at the Money Show next week in Orlando. I’ll be speaking on Friday at 5:30 p.m. ET and again on Saturday at 2 p.m. ET. If you’re around, come on by and say hi.

Morning News: January 31, 2020
Posted by Eddy Elfenbein on January 31st, 2020 at 7:05 am

Shares Struggle for Footing After Virus-Battered Week

Pilots, Flight Attendants Demand Flights to China Stop As Virus Fear Mounts Worldwide

German Banks Are Hoarding So Many Euros They Need More Vaults

Trump Called Powell an ‘Enemy.’ ‘Ugh’ Was a Response Inside the Fed.

The Fed’s Dilemma: Fighting A Battle They Cannot Win

Swiping Their Way Higher: Visa, Mastercard Could Be the Next $1 Trillion Companies

Amazon Holiday Sales Jump as One-Day Shipping Pays Dividends, Stock Up 13%

Ginni Rometty to Step Down as C.E.O. of IBM

How Private Equity Buried Payless

Caterpillar’s 2020 Outlook Adds More Gloom to Virus-Shaken Markets

Zuckerberg Says He Doesn’t Need Facebook to Be Liked. That’s New

Ben Carlson: Putting the Next Market Downturn into Perspective

Michael Batnick: Untouchable Amounts of Wealth

Cullen Roche: Sorry, but Your ESG Funds Probably Suck

Joshua Brown: They’re Going to Invert the Yield Curve Again

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