Morning News: August 1, 2019
Posted by Eddy Elfenbein on August 1st, 2019 at 7:26 am

Powell Suggests Fed Embarking on 1990s-Style Mini Easing Cycle

BOE Says Brexit Uncertainty Skews Forecasts, Keeps Rate on Hold

Factory Pain Spreads Through Asia, Europe; Stimulus Expected

Lower Rates Already Hit Housing. They’re Not Helping Much.

Skip Cash for Equifax Breach and Get Credit Monitoring, F.T.C. Tells Victims

A Paradox at the Heart of the Newspaper Crisis

Britain’s LSE Lands ‘Defining’ $27 Billion Refinitiv Deal in Data Drive

Thomson Reuters Raises Outlook, Grows Fastest Since Financial Crisis

A $1 Trillion Valuation Stays Out of Reach for Apple

General Electric CEO Larry Culp Speaks Out on the Turnaround, China, and Boeing

Investments in Cleaner Vehicles Hit BMW Profits

NYT: Are You Rich? This Income Rank Quiz Might Change How You See Yourself

Ben Carlson: A Short History of Fed Rate Cuts & Rush to the Exits

Jeff Carter: How Should Economics Shape Public Policy?

Roger Nusbaum: Stress & Negativity Leading To Bad Decisions

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Cognizant Earned 94 Cents per Share
Posted by Eddy Elfenbein on July 31st, 2019 at 4:21 pm

Quarterly revenue rose to $4.14 billion, up 3.4% (4.7% in constant currency1) from the year-ago quarter.

Quarterly Adjusted Diluted EPS was $0.94, compared to $1.05 in the year-ago quarter.

“We are taking the necessary steps to position Cognizant for improved commercial and financial performance,” said Brian Humphries, Chief Executive Officer. “While there is lots of work ahead, I am encouraged by what I have seen to date and am optimistic on our future.”

The Company is providing the following guidance:

Third quarter 2019 year-over-year revenue growth in the range of 3.8-4.8% in constant currency.

Full year 2019 year-over-year revenue growth in the range of 3.9-4.9% in constant currency.

Full year 2019 Adjusted Operating Margin expected to be approximately 17.0%.

Full year 2019 Adjusted Diluted EPS expected to be in the range of $3.92-$3.98.

“Second quarter results were in-line with our guidance and position us to achieve our full-year outlook,” said Karen McLoughlin, Chief Financial Officer. “We are implementing actions in the second half of the year that we expect will lower our existing cost structure and allow for greater investment in growth, talent, and digital solutions. Using our strong balance sheet we returned over $1.1 billion to shareholders in the second quarter.”

The shares are up about 4% after hours.

The Fed Cuts 25
Posted by Eddy Elfenbein on July 31st, 2019 at 2:00 pm

The Fed cut by 25 basis points. The new range for Fed funds is 2.00% to 2.25%. The vote was 8 to 2.

Information received since the Federal Open Market Committee met in June indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although growth of household spending has picked up from earlier in the year, growth of business fixed investment has been soft. On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 2 to 2-1/4 percent. This action supports the Committee’s view that sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective are the most likely outcomes, but uncertainties about this outlook remain. As the Committee contemplates the future path of the target range for the federal funds rate, it will continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.

In determining the timing and size of future adjustments to the target range for the federal funds rate, 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.

The Committee will conclude the reduction of its aggregate securities holdings in the System Open Market Account in August, two months earlier than previously indicated.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; James Bullard; Richard H. Clarida; Charles L. Evans; and Randal K. Quarles. Voting against the action were Esther L. George and Eric S. Rosengren, who preferred at this meeting to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent.

Church & Dwight Earned 57 Cents per Share
Posted by Eddy Elfenbein on July 31st, 2019 at 11:14 am

This morning, Church & Dwight (CHD) reported Q2 earnings of 57 cents per share. That’s up 16.3% over last year. Wall Street had been expecting 52 cents per share.

Gross margins rose to 44.6% and organic sales rose by 4.9% (9.1% internationally).

Matthew Farrell, Chief Executive Officer, commented, “Q2 organic sales growth of 4.9% was exceptionally strong and exceeded our 3.5% outlook. Q2 was the fifth consecutive quarter of greater than 4% organic growth and the fourth consecutive quarter of positive price and product mix (+4.8%). Our categories continue to grow, our market shares are healthy, and we’ve introduced new products in many of our categories. Thirteen of our 15 domestic categories grew during the quarter and more than half have grown for at least 7 consecutive quarters. In the domestic business, 9 out of 12 power brands met or exceeded category growth in the second quarter. The international business continues to perform strongly with reported sales growth of 6.0% and organic growth of 9.1%.”

The company now sees full-year earnings of $2.47 per share, and 60 cents per share for Q3. The previous EPS guidance was for $2.43 to $2.47.

Mr. Farrell stated, “We have delivered a strong first half. As a result, we now expect full year 2019 sales growth to be approximately 6% (previously 5 – 6%) and organic sales growth to be approximately 4% (previously 3.5%). We now expect full year gross margin to expand 80 basis points (previously 50 basis points) reflecting a lower inflationary outlook and the impact of acquisitions. We continue to expect marketing dollars to increase year over year and now expect marketing as a percentage of sales to be flat versus prior year (previously down 20 basis points). We continue to expect adjusted operating profit expansion to be in-line with our evergreen model of +50 basis points. We expect to achieve $2.47 per share or 9% adjusted EPS growth (previously 7-9%). To the extent we over-deliver on organic sales growth or gross margin expansion, we expect to spend back on long-term brand building activities, research and development, and new product investments. Our strong full year performance is expected to exceed our evergreen model.”

“For Q3, we expect year over year reported sales growth of approximately 6%, organic sales growth of approximately 3%, higher marketing expense, and higher SG&A associated with the FLAWLESS acquisition. We expect adjusted EPS to be $0.60 per share, a 3% increase over last year’s Q3 EPS excluding the earn-out adjustment from our acquisition of the FLAWLESS business.”

The shares are up about 1% today.

Busy Day
Posted by Eddy Elfenbein on July 31st, 2019 at 11:07 am

There’s a lot going on today. Several earnings reports are coming out. Of course, the big news is the Fed meeting at 2 pm. Expect to see a rate cut.

The big jobs report is this Friday. This morning, ADP said that 156,000 private payroll jobs were created last month. Economists had been expecting 150,000.

Morning News: July 31, 2019
Posted by Eddy Elfenbein on July 31st, 2019 at 7:13 am

Brexit and Boris Johnson Send the British Pound on a Slide

Some Very Hungry Cows May Rescue India From a Giant Sugar Glut

With Fed Sure to Cut Rates, Powell on Hook to Flag Next Steps

For Big Banks, It’s an Endless Fight With Hackers

Apple’s Services, Wearables Shore Up Results as iPhone Drops Below Half of Sales

Getting Under the Hood of Amazon’s Auto Ambitions

GE Raises Outlook for Earnings and Cash Flow; Shares Gain

Brexit and Subsidy Row Cloud Strong Airbus Profits

Carlyle’s Founders Give Outsiders More Power

EssilorLuxottica Sets Sights on Retail Dominance with $8 Billion GrandVision Deal

Under Armour Is Warning Of More Trouble Ahead In North America

German Prosecutors Charge Ex-Audi Boss Stadler Over Emissions Cheating

Michael Batnick: The State of the Financial Services Industry

Joshua Brown: “Deceleration”

Jeff Miller: Stock Exchange: What’s On Your Pre-Trade Risk Checklist?

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Morning News: July 30, 2019
Posted by Eddy Elfenbein on July 30th, 2019 at 8:48 am

China Says Hong Kong Protest Violence ‘Is Creation of U.S.’

Trump Lashes Out at China as Trade Talks Resume; Stocks Fall

Your Next iPhone Might Be Made in Vietnam. Thank the Trade War.

Tipster’s Email Led to Arrest in Massive Capital One Data Breach

Huawei’s Sales Jump Despite Trump’s Blacklisting

Texas Shale Pioneers Struggle to Appease Investors

Fortnite Is Here to Stay. Just Ask Its Fans.

Amazon Wants to Rule the Grocery Aisles, and Not Just at Whole Foods

P&G Rises After Posting Best Sales Growth in at Least a Decade

Beyond Meat Acts Rationally, Upsets Investors

Why We Should Fear Easy Money

A Plan to Take on the `Sociopaths’ in the Boardroom

Ben Carlson: Investing Proceeds From the Sale of a Business

Jeff Carter: Financial Literacy

Roger Nusbaum: Undersaved, Overspent and Overfed

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It’s Official
Posted by Eddy Elfenbein on July 29th, 2019 at 10:54 am

Fiserv and First Data are now one. First Data shareholders received 0.303 shares of Fiserv for each share of First Data they owned. First Data no longer trades.

Fiserv, Inc., a leading global provider of financial services technology solutions, today announced that it has completed its acquisition of First Data Corporation. With the transaction complete, Fiserv is one of the world’s leading payments and financial technology providers with the ability to deliver unique value to financial institutions, corporate and merchant clients, and consumers.

“The completion of this transformative combination is a major milestone in the evolution of our companies,” said Jeffery Yabuki, Chairman and Chief Executive Officer, Fiserv. “We have continued to identify ways in which we can deliver differentiated value to clients, associates and shareholders, and are excited to work together on fulfilling the promise of the combination. We are confident that our people are the best in the industry and will push the boundaries of excellence and innovation for the benefit of all of our stakeholders.”

As a global leader in technology and payments that enables commerce, banking and the safe and secure movement of money, Fiserv has the breadth of capabilities and depth of expertise to deliver unmatched value to clients. As a result of the combination, clients will have access to a more comprehensive set of solutions and innovations, an extensive range of end-to-end capabilities and integrated delivery, which enable differentiated value for their customers.

“As a newly combined company, we will leverage our technology expertise and integrate our solutions to serve client needs in ways no one else can match,” said Frank Bisignano, President and Chief Operating Officer, Fiserv. “We are focused on innovating to enable our clients to better serve their customers and end users so they can succeed in a rapidly changing world.”

As previously announced, First Data shareholders will receive 0.303 of a Fiserv share for each share of First Data common stock they own prior to market open as of July 29, 2019. The all-stock transaction is intended to be tax-free to First Data shareholders. The combined company will carry the Fiserv brand and will continue to trade on The Nasdaq Global Select Market under the ticker symbol FISV. As of July 29, 2019, First Data common stock is no longer listed for trading on the New York Stock Exchange.

Morning News: July 29, 2019
Posted by Eddy Elfenbein on July 29th, 2019 at 7:05 am

From Belarus to Bahrain, the Small States Going Big on Cryptocurrency

Don’t Bet on the Trade War Ending Quickly

Fed Poised to Cut Rates for First Time Since Financial Crisis, Ending an Era

A Recession Is Coming (Eventually). Here’s Where You’ll See It First.

The Elite Club That Rules the Diamond World Is Starting to Crack

Pfizer’s Dealmaker CEO Sharpens Cancer Focus With Mylan Plan

JPMorgan, UBS Among Banks Facing $1 Billion FX-Rigging Suit

Why Whole Foods Hasn’t Satisfied Amazon’s Grocery Appetite

Did Facebook CEO Mark Zuckerberg Intend To Deceive?

Exact Sciences to Buy Genomic Health for $2.8 Billion

Ex-Corporate Lawyer’s Idea: Rein In ‘Sociopaths’ in the Boardroom

37-Year-Old Former School Teacher Is India’s Newest Billionaire

Jeff Miller: Weighing the Week Ahead: Four Risky Hurdles

Cullen Roche: Three Things I Think I Think – Negative Rates and Stuff

Howard Lindzon: The Beginning Of The Melt-Up or The Height Of Insanity?, Privacy & Information Is Food

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Q2 GDP Growth = 2.1%
Posted by Eddy Elfenbein on July 26th, 2019 at 8:39 am

The GDP report is out. The government said that GDP grew by 2.1% during the second three months of the year. That was 0.1% better than expectations.

This report is a big relief. I know a lot of folks who were scared that the economy was about to run off a cliff. For now, the economy is doing fine.

I will point out that the rate of growth has been very low for an expansion.

Businesses investment declined in the second quarter for the first time since early 2016, according to the report. Nonresidential fixed investment-which reflects spending on software, research and development, equipment and structures-fell at a 0.6% rate, compared with a 4.4% rise in the first quarter.

Shoppers picked up the slack however. Consumer spending, which accounts for more than two-thirds of the economy, rose at an inflation-adjusted, annualized rate of 4.3% in the second quarter, accelerating from the first quarter when it rose 1.1% and marking the strongest pace of growth since late 2017. Americans boosted spending on big-ticket items like cars as well as everyday goods like food and clothing. Government expenditures also boosted growth, rising at a 5.0% annual rate in the second quarter.

I don’t think this report will alter the Fed’s plans. It looks like the Fed will cut interest rates next week by 0.25%.