Morning News: July 19, 2019
Posted by Eddy Elfenbein on July 19th, 2019 at 7:04 am

Fed Officials Shake Markets With Rate Cut Comments

Wall Street Trading Costs to Surge as New Rules Hit Derivatives

Central Banks’ Gold-Buying Spree Is Far From Over

Trump to Nominate Eugene Scalia for Labor Secretary Job

As ‘Superstar’ Cities Keep Winning, Worrisome U.S. Divide Widens

Amazon Prime Day Inks Another Record, But That’s Not The Big Takeaway

Microsoft Earnings: Sales Jump 12 Percent, Fueled by Cloud

Boeing Takes $4.9 Billion Charge for Prolonged Grounding of 737 MAX Planes

PepsiCo to Buy South Africa’s Pioneer Food for $1.7 Billion

Netflix’s Indian Ambitions Face a Wall of Cheaper Rivals

The Corvette Gets Radical Makeover as Stick Shift Makes Way for Touchscreen

When Corporate Lobbies Started to Look Like Museum Galleries

Ben Carlson: Why History Gets Stuff Wrong All the Time

Michael Batnick: Come Do A Podcast

Jeff Miller: You Can’t Have All the Answers

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Earnings from Signature Bank and Danaher
Posted by Eddy Elfenbein on July 18th, 2019 at 7:21 am

Press release from Signature Bank:

Net Income for the 2019 Second Quarter Was $147.9 Million, or $2.72 Diluted Earnings Per Share, Versus $154.6 Million, or $2.83 Diluted Earnings Per Share, Reported in the 2018 Second Quarter

The Bank Declared a Cash Dividend of $0.56 Per Share, Payable on or After August 15, 2019 to Common Stockholders of Record at the Close of Business on August 1, 2019

During the 2019 Second Quarter, the Bank Repurchased 412,977 Shares of Common Stock For a Total of $50.0 Million. Thus Far, the Bank Has Repurchased $114.7 Million of Common Stock From Its $500 Million Authorization

Total Deposits in the Second Quarter Grew $917.9 Million to $37.54 Billion; Total Deposits Have Grown $2.55 Billion, or 7.3 Percent, Since the End of the 2018 Second Quarter. Average Deposits Increased $456.0 Million in the 2019 Second Quarter

For the 2019 Second Quarter, Loans Increased $466.5 Million, or 1.2 Percent, to $37.93 Billion. Since the End of the 2018 Second Quarter, Loans Have Increased 11.1 Percent, or $3.78 Billion. During the 2019 Second Quarter, the Bank Sold $46.4 Million of Taxi Medallion Loans and Sold a $91.8 Million Portfolio of Signature Financial Equipment Loans. Excluding These Sales, Loans Would Have Increased $604.7 Million

Non-Accrual Loans Were $41.3 Million, or 0.11 Percent of Total Loans, at June 30, 2019, Versus $94.7 Million, or 0.25 Percent, at the End of the 2019 First Quarter and $158.1 Million, or 0.46 Percent, at the End of the 2018 Second Quarter. Excluding Taxi Medallion Loans, Non-Accrual Loans Were $22.5 Million, or Six Basis Points of Total Loans

Net Interest Margin on a Tax-Equivalent Basis was 2.74 Percent, Compared with 2.75 Percent for the 2019 First Quarter and 2.94 Percent for the 2018 Second Quarter. Core Net Interest Margin on a Tax-Equivalent Basis Excluding Loan Prepayment Penalty Income Decreased Two Basis Points to 2.71 Percent, Compared with 2.73 Percent for the 2019 First Quarter

Tier 1 Leverage, Common Equity Tier 1 Risk-Based, Tier 1 Risk-Based, and Total Risk-Based Capital Ratios were 9.70 Percent, 11.59 Percent, 11.59 Percent, and 12.82 Percent, Respectively, at June 30, 2019. Signature Bank Remains Significantly Above FDIC “Well Capitalized” Standards. Tangible Common Equity Ratio was 9.46 Percent

In the 2019 Second Quarter, the Bank Appointed Two Private Client Banking Teams. Thus Far in 2019, Four Teams have Joined the Bank, Including the 28 Person Venture Banking Group and the Eight Person Kanno-Wood Team Which Specializes in Banking to Mortgage Servicing Clients

Signature Bank (SBNY), a New York-based full service commercial bank, today announced results for its second quarter ended June 30, 2019.

Net income for the 2019 second quarter was $147.9 million, or $2.72 diluted earnings per share, versus $154.6 million, or $2.83 diluted earnings per share, for the 2018 second quarter. The decrease in net income for the 2019 second quarter, versus the comparable quarter last year, is due to an increase of $19.3 million in non-interest expenses mostly due to the significant hiring of private client banking teams, including nearly 50 employees added for the Fund Banking Division, Venture Banking Group and the Kanno-Wood Team.

Net interest income for the 2019 second quarter reached $326.3 million, up $5.3 million, or 1.6 percent, when compared with the 2018 second quarter. This increase is primarily due to growth in average interest-earning assets. Total assets reached $48.88 billion at June 30, 2019, an increase of $3.66 billion, or 8.1 percent, from $45.22 billion at June 30, 2018. Average assets for the 2019 second quarter reached $48.78 billion, an increase of $4.20 billion, or 9.4 percent, compared with the 2018 second quarter.

Deposits for the 2019 second quarter rose $917.9 million to $37.54 billion at June 30, 2019. When compared with deposits at June 30, 2018, overall deposit growth for the last twelve months was 7.3 percent, or $2.55 billion. Average deposits for the 2019 second quarter reached $36.93 billion, an increase of $456.0 million.

“During the past several years, and particularly over the last twelve months, Signature Bank has been focused on expanding our franchise and securing a larger presence throughout the national banking landscape. To reflect, we began diversifying our revenue streams with the launch of Signature Financial, our specialty finance subsidiary. We continued the diversification and expansion of the Bank with the addition of the Digital Banking Team and the Fund Banking Division, which have both already made meaningful contributions. Moreover, we recently added the Venture Banking Group as well as the Kanno-Wood team, which will provide treasury management products and services to residential and commercial mortgage servicers. We also launched Signet, our 24/7 payments platform, which today continues to be the only such platform offered by an FDIC-insured institution. All these banking teams, which are national in scope, have raised Signature Bank’s profile and offerings and are contributing to a more diversified credit and asset liability position over the short and long term,” explained Joseph J. DePaolo, President and Chief Executive Officer.

“Signature Bank is establishing a banking presence across the country. We have always grown this institution prudently and methodically, utilizing our strong reputation and solid capital position to attract the best bankers available in their industry and keeping the needs of our clients and their depositor safety at the forefront of all we do,” DePaolo concluded.

“In spite of a challenging deposit environment, we once again delivered solid deposit and loan growth leading to strong earnings. Also, we further reduced our risk in the Taxi Medallion portfolio with the sale of $46.4 million in NYC taxi loans on 375 medallions. Additionally, we have put in place several major new initiatives, which will provide significant benefit to our institution over the coming years. Personally, I have never been more positive on our future growth prospects. Our model of doing business remains robust, and we will continue to build value for our long-term investors,” explained Scott A. Shay, Chairman of the Board.

From Danaher:

Danaher Corporation today announced results for the second quarter 2019. For the quarter ended June 28, 2019, net earnings were $731.3 million, or $0.97 per diluted share which represents a 2.0% year-over-year increase from the comparable 2018 period.

Non-GAAP adjusted diluted net earnings per share were $1.19 which represents a 3.5% increase over the comparable 2018 period. For the second quarter 2019, revenues increased 3.5% year-over-year to $5.2 billion, with non-GAAP core revenue growth of 5.5%.

Operating cash flow for the second quarter 2019 was $1.2 billion and non-GAAP free cash flow was $1.0 billion.

For the third quarter 2019, the Company anticipates that diluted net earnings per share will be in the range of $0.86 to $0.89 and non-GAAP adjusted diluted net earnings per share will be in the range of $1.12 to $1.15.

For the full year 2019, the Company now anticipates that diluted net earnings per share will be in the range of $3.38 to $3.43 versus previous guidance of $3.34 to $3.42. The Company is raising its 2019 non-GAAP adjusted diluted net earnings per share guidance to $4.75 to $4.80 versus previous guidance of $4.72 to $4.80.

Thomas P. Joyce, Jr., President and Chief Executive Officer, stated, “We are very pleased by our strong start to 2019, with our team’s execution driving another quarter of 5.5% core revenue growth. We believe that recent investments in innovation and commercial initiatives contributed to share gains in many of our businesses. Combined with solid operating margin expansion and cash flow generation, the strength of our results is a testament to our team and the power of the Danaher Business System.”

Joyce added, “We continue to make progress on our anticipated acquisition of GE Biopharma and the planned initial public offering of our Dental business, which will be called Envista. Both transactions remain on track relative to our previously indicated expectations. We are excited about the opportunities ahead, and we believe the combination of our differentiated portfolio and our team’s DBS-driven execution positions us well to continue our strong performance through 2019 and beyond.”

Morning News: July 18, 2019
Posted by Eddy Elfenbein on July 18th, 2019 at 7:05 am

Sanctions on Russia and North Korea Put Tiny Latvia in U.S. Cross Hairs

U.S. Targeting of Chinese Scientists Fuels a Brain Drain

Big Banks Are Earning Billions of Dollars. Trump’s Tax Cuts Are a Big Reason.

Bond Markets Once Felled Governments. Now Negative Yields Rule

Netflix Plunges After Biggest Stumble in Streaming Era

Verizon Resurrects Media Business as Safe Haven on the Internet

Trump’s Tariffs Trip Up the All-American RV Industry

Amazon’s Most Ambitious Research Project Is a Convenience Store

The S.U.V.s That Conquered Suburbia

Alexandria Ocasio-Cortez’s Exchange with Facebook’s Crypto Boss Exposed a Big Problem About Who Actually Controls the Libra Currency

Amazon Prime Day was Bigger than its Black Friday and Cyber Monday — Combined

Mellody Hobson of Ariel Investments: ‘Capitalism Needs to Work for Everyone’

Roger Nusbaum: Avoiding Dogma Part Gajillion

Jeff Carter: You Can’t Have All the Answers

Michael Batnick: Opposite of Conventional Wisdom & Animal Spirits: Shielded Alpha

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Eagle Bancorp Earned $1.08 per Share for Q2
Posted by Eddy Elfenbein on July 17th, 2019 at 4:20 pm

Eagle Bancorp (EGBN), the parent company of EagleBank, today announced quarterly net income of $37.2 million for the three months ended June 30, 2019, as compared to $37.3 million net income for the three months ended June 30, 2018.

Net income per basic common share for the three months ended June 30, 2019 was $1.08 compared to $1.09 for the same period in 2018. Net income per diluted common share was $1.08 for both the three months ended June 30, 2019 and June 30, 2018.

For the six months ended June 30, 2019, the Company’s net income was $71.0 million, a 3% decrease from the $73.0 million of net income for the same period in 2018.

Net income per basic common share for the six months ended June 30, 2019 was $2.06 compared to $2.13 for the same period in 2018, a 3% decrease.

Net income per diluted common share for the six months ended June 30, 2019 was $2.05 compared to $2.12 for the same period in 2018, a 3% decrease.

“While we experienced a challenging interest rate environment in the second quarter of 2019, we are pleased to report another quarter of overall favorable earnings, supported by continued loan and balance sheet growth, solid asset quality and favorable operating leverage,” noted Susan G. Riel, President and Chief Executive Officer of Eagle Bancorp, Inc. Ms. Riel continued, “The Company’s assets ended the quarter at $8.7 billion, representing 10% growth over the second quarter of 2018. Second quarter 2019 earnings resulted in a return on average assets (“ROAA”) of 1.74%, return on average common equity (“ROACE”) of 12.81%, and a return on average tangible common equity (“ROATCE”) of 14.08%.”

The Company’s performance in the second quarter of 2019 as compared to the second quarter of 2018 was highlighted by growth in average total loans of 11%, growth in average total deposits of 10%, a net interest margin of 3.91%, 5% growth in total revenue to $87.7 million, and a 3% increase in noninterest expenses, further improving our operating leverage and resulting in an improved efficiency ratio of 38.04% versus 38.55% for the second quarter of 2018. Additionally, annualized net charge-offs to average loans was 0.08%.

Ms. Riel noted, “The Company continues to focus more on growth of average balances year over year and quarter over quarter since that measure more directly impacts income statement results.”

Comparing average balances in the second quarter of 2019 versus the first quarter of 2019, average loan growth was 3% while average deposits declined by 1%. As average U.S. Treasury rates in the two to five year area declined by about 35 basis points in the second quarter 2019 and the average yield curve remained fairly flat, we experienced 11 basis points of net interest margin compression as compared to the first quarter of 2019, as our cost of funds increased 11 basis points while the yield on earning assets was unchanged. The yield on our substantial level of variable rate assets was negatively impacted by the lower interest rate environment in the second quarter of 2019, including a decline in the average one month LIBOR rate, while our cost of funds was impacted by our goal of funding solid new loan opportunities. In spite of the margin compression, we continue to believe that our net interest margin remains superior to other banking companies.

Ms. Riel added, “In the second quarter of 2019, period end total loan growth was 3.1% over March 31, 2019, while total deposits increased 4.0% over March 31, 2019. New loans settled in the second quarter of 2019 were substantially greater than those closed in the first quarter of 2019, which had a 2.6% growth rate. The total of unfunded loan commitments has remained stable over the last six quarters at approximately $2.4 billion. The Company continues to emphasize achieving core deposit growth. The mix of noninterest deposits to total deposits averaged 31% in the second quarter of 2019 as compared to 33% in both the second quarter of 2018 and the first quarter of 2019.

The net interest margin was 3.91% for the second quarter of 2019, down 24 basis points from the second quarter of 2018. Ms. Riel noted, “There has been a lesser focus on higher risk and higher yielding construction lending and more attention towards strong commercial real estate credits secured by stabilized income producing properties. The yield on the loan portfolio was 5.61% for the second quarter of 2019 as compared to 5.53% for the second quarter of 2018 and 5.62% for the first quarter of 2019. The cost of funds was 1.30% for the second quarter of 2019 as compared to 0.96% for the second quarter of 2018 and 1.19% for the first quarter of 2019. We continue to see well structured new loan opportunities and are having to pay higher rates to fund that growth. Even considering the decline in the net interest margin, the Company’s net interest income increased 4% in the second quarter of 2019 over 2018 as the Company has continued its emphasis on disciplined pricing for both new loans and funding sources in the face of competitive pressures.”

Transports on a Roller-Coaster
Posted by Eddy Elfenbein on July 17th, 2019 at 10:45 am

I like to watch the relative strength of transportation stocks. Yesterday, the transports had one of their best days versus the broader market in years. Today, they’re giving back all that gain.

Here’s the chart:

Transports are a classic cyclical play. If the sector is strong, that’s probably a good sign for the economy. I would be concerned if we saw the transports start to lag the market significantly.

Morning News: July 17, 2019
Posted by Eddy Elfenbein on July 17th, 2019 at 7:21 am

EU Says It Will Investigate Amazon Over Possible Anti-Competitive Business Practices

How Lithium-Rich Chile Botched a Plan to Attract Battery Makers

U.S. Justice Department Asks Appeals Court to Pause Antitrust Ruling Against Qualcomm

A $51 Billion Manager Says Markets Are Wrong to Cheer Fed Cuts

Technology Supplier to U.S. Police Agencies Bans Chinese Drones

‘I Don’t Trust You Guys’: Lawmakers Unite to Take Aim at Big Tech

Making Sense of Chaos? Algos Scour Social Media for Clues to Crypto Moves

Despite High Hopes, Self-Driving Cars Are ‘Way in the Future’

Elon Musk’s Neuralink Says It’s Ready for Brain Surgery

Amazon in EU Antitrust Spotlight Over Use of Merchant Data

Bitcoin Loses Almost a Third of Its Value as Libra Hype Fades

Bill Gates Loses His Spot as World’s Second-Richest Man

Nick Maggiulli: Losing Dollars vs. Losing Percentages

Ben Carlson: A Lesson in Portfolio Correlations

Joshua Brown: How I Invest My Own Money

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FactSet Downgraded By Morgan Stanley
Posted by Eddy Elfenbein on July 16th, 2019 at 2:17 pm

From Benzinga:

The Analyst

Morgan Stanley’s Toni Kaplan downgraded FactSet Research Systems from Equal-Weight to Underweight, while reducing the price target from $264 to $263.

The Thesis

FactSet Research Systems’ stock has appreciated around 47% year to date, outperforming Morgan Stanley’s Analytics coverage average and the S&P 500, Kaplan said in the downgrade note.

Most of the share price rally has been driven by multiple expansion, with investors seeking high quality stocks, the analyst mentioned. He expressed concern, however, regarding the company’s earnings growth prospects.

Kaplan mentioned that FactSet’s EPS growth in 2020 may fall to the lowest that the company has generated in the last four years. This is expected due to moderating annual subscription value (ASV), along with lower margin expansion.

While ASV growth at Research, which accounted for 46% of 2018 ASV, could turn negative, pricing pressure is expected to intensify with growing competition, the analyst said.

Following the share price rally, FactSet’s stock now trades at a premium to many Analytics stocks that have better growth prospects.

The stock has been down as much as 4.9% today.

Retail Sales and Industrial Production
Posted by Eddy Elfenbein on July 16th, 2019 at 11:51 am

This morning, we got two economic reports. The retail sales report for June was quite good. The Commerce Department said retail sales rose 0.4% last month. The numbers for May were revised down to 0.4% from 0.5% growth. Excluding automobiles, gasoline, building materials and food services, retail sales jumped 0.7% last month.

June’s strong gain in core retail sales, coming on the heels of solid increases in April and May, suggested a sharp acceleration in consumer spending in the second quarter.

Consumer spending grew at its slowest pace in a year in the first quarter. Spending is being supported by a tight labor market, even as the broader economy is slowing as weaker business investment, an inventory overhang, a trade war between the United States and China, and softening global growth pressure the manufacturing sector.

The data probably will have little impact on market expectations that the Federal Reserve will cut interest rates this month for the first time in a decade. But signs of strong consumer spending and rising core inflation suggest the U.S. central bank is unlikely to cut rates by 50 basis points at its July 30-31 policy meeting as markets had initially anticipated.

The industrial production report for June was flat. Economists were expecting an increase of 0.2%. Production for manufacturing and mining increased but that was erased by the decline in utilities.

Capacity utilization, which reflects how much industries are producing compared with what they could potentially produce, slipped by 0.2 percentage point to 77.9% in June. Economists had expected 78.1%.

Industrial production has struggled this year, due in part to trade-related headwinds. For the second quarter as a whole, industrial production declined at a 1.2% annual rate, dropping for the second quarter in a row.

Broader economic growth was strong in the first quarter and the labor market has continued to add jobs.

Morning News: July 16, 2019
Posted by Eddy Elfenbein on July 16th, 2019 at 7:07 am

Christine Lagarde Faces a New Challenge in Europe

China Says Trump ‘Misleading’ People Linking Trade Deal, Slowing Economy

Tariffs on China Don’t Cover the Costs of Trump’s Trade War

Powell Concession on Too-Tight Fed Underlines Shift Toward Cuts

Wall Street Finds Blockchain Hard to Tame After Early Euphoria

Why (Almost) Everybody Hates Facebook’s Cryptocurrency Libra

Citigroup and Other Banks Are Buying Back Their Stocks and That’s Good for Earnings

Amazon Prime Day Brings Sales, and Risks, for Retailers

Tesla Drops Cheapest Model X, S Variants, Cuts Prices to Simplify Lineup

Boeing Max Crisis Hits 2020 Airline Growth as Ryanair Pares Plan

Nestle Creates New Chocolate—With No Added Sugar

Arby’s Has an Answer to Plant-Based Meat: A Meat-Based Carrot

Cullen Roche: My View On: ESG Investing

Michael Batnick: Animal Spirits, Talk Your Book: Agricultural Commodities

Joshua Brown: Everyone Deserves Good Financial Advice. Everyone.

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Morning News: July 15, 2019
Posted by Eddy Elfenbein on July 15th, 2019 at 7:06 am

Japan, Taking a Page From Trump, Uses Trade Against South Korea

China’s Economic Growth Hits 27-Year Low as Trade War Stings

U.S. Firms May Get Nod to Restart Huawei Sales In Two-Four Weeks

Philippine Stocks Propelled Into Bull Market

Peter Thiel Urges U.S. Probe of Google’s ‘Seemingly Treasonous’ Acts

S&P 3,300 – The Bull Vs. Bear Case

‘The Town Hall of Hollywood.’ Welcome to the Netflix Lobby.

Why Budweiser and Bankers Failed to Sell the King of IPOs

More to Come: FTC Fine Doesn’t Spell Closure for Facebook

Gilead to Boost Stake in Belgian Biotech Galapagos as Part of $5.1 Billion Deal

America’s Youth Think They Can Save the World and Get Rich

The Wealthiest 1% Can Be Good for Everybody

Jeff Miller: Weighing the Week Ahead: How Much Has Economic Weakness Hurt Corporate Earnings?

Jeff Carter: The Creative Class

Ben Carlson: Lessons From the 10 Best Years in Stock Market History & What’s in the box!? (The 7 Deadly Sins of Investing)

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