CWS Market Review – April 26, 2019
Posted by Eddy Elfenbein on April 26th, 2019 at 7:08 am

“Every day, I assume every position I have is wrong.” – Paul Tudor Jones

Now that earnings season is in full swing, Wall Street is in its happy place. Truthfully, earnings really aren’t that great this season, but they’re better than they could have been. At least traders are happy. On Tuesday, the S&P 500 closed at a fresh all-time high. This means that we made back everything we lost in a nasty correction that lasted from late September to late December.

We had lots of Buy List earnings reports this week. Moody’s jumped 3% on a very good report. It’s now a 38% winner on the year for us. Hershey beat estimates and gapped 5% to a new high. Cerner raised guidance. Stryker beat and raised guidance. Raytheon creamed estimates, and AFLAC beat as well. Sherwin-Williams shook off a tepid earnings report. I’ll go over all our earnings reports from this week. I’ll also preview a slew of Buy List earnings reports headed our way next week.

Here’s our updated Earnings Calendar:

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

There’s a lot to get to this week, so let’s jump right in.

Earnings from Stryker and Sherwin-Williams

We had two earnings reports on Tuesday. Before the opening bell, Sherwin-Williams (SHW) reported Q1 earnings of $3.60 per share. That was below estimates of $3.69 per share. Sales rose 1.9% to $4.04 billion.

Here’s the important fact for investors: The company didn’t alter its full-year outlook of $20.40 to $21.40 per share (that excludes acquisition costs). That compares with $18.53 per share a year ago. For Q2, Sherwin expects sales to rise by 2% to 5%. For the full year, they expect sales to rise by 4% to 7%. This isn’t terrible news.

Here’s what the CEO had to say:

Commenting on the first quarter, John G. Morikis, Chairman and Chief Executive Officer, said, “We made good progress on our pricing initiatives across all segments during the quarter and effectively managed SG&A spending, but volumes fell short of expectations due to a slower start to the architectural painting season in North America and continued challenging conditions in many end markets outside North America. Despite the volume shortfall and higher year-over-year raw material costs, consolidated Company adjusted gross margin, which excludes acquisition-related costs, improved sequentially and was flat year-over-year. We expect the positive trend in gross margin and operating expense control to continue as the year progresses, and volume growth should also improve over the balance of the year, particularly in the back half.

“Looking at our performance by segment, in The Americas Group, despite a strong backlog and project pipeline reported by many of our professional customers, volume growth in the quarter was slower than expected. We continued to invest by opening 15 net new store locations in The Americas Group during the quarter. In our Consumer Brands Group, most of the softness in demand in the quarter was in markets outside North America. Consumer Brands Group adjusted segment operating margin in the first quarter expanded sequentially and year-over-year, and we are very well positioned across all North American retail channels heading into the important spring selling season. Performance Coatings Group achieved modest sales growth and increased adjusted segment operating margin in the quarter against year-over-year raw material pressure.”

Sherwin is fundamentally sound. I think the weakness they had in Q4 is behind them. Reaffirming guidance is a key move. I’m lifting my Buy Below on Sherwin to $460 per share.

Last week, I told you Stryker (SYK) had a good shot at beating expectations, and I was right. The company reported Q1 earnings of $1.88 per share, which beat the Street by four cents per share. That’s an increase of 11.9% over last year. Net sales rose 8.5% to $3.5 billion, and organic net sales increased by 7.3%. For the quarter, Stryker’s adjusted operating margin was 25.1%.

Now for guidance. For Q2, Stryker expects earnings between $1.90 and $1.95 per share. Wall Street had been expecting $1.96 per share. For the full year, Stryker sees earnings between $8.05 and $8.20 per share. That’s an increase of five cents per share to the low end. Wall Street was at $8.13 per share.

This is a really good stock. Stryker remains a buy up to $192 per share.

Moody’s Is a Buy Up to $200 per Share

On Wednesday, Moody’s (MCO) released a very good earnings report. The credit-ratings agency reported Q1 earnings of $2.07 per share. That beat estimates by 14 cents per share. The stock gapped up 3% on Wednesday.

Revenue at Moody’s Analytics rose 16%. The company stood by its full-year forecast of $7.85 to $8.10 per share. Moody’s is our top-performing stock this year with a YTD gain of 38%. I’m lifting my Buy Below on Moody’s to $200 per share.

Earnings from AFLAC, Hershey, Cerner and Raytheon

On Thursday, we had four more Buy List earnings reports. Let’s start with AFLAC (AFL). The duck stock had another good quarter. For Q1, AFLAC had adjusted operating earnings, not including currency, of $1.13 per share. That beat estimates by seven cents per share.

The supplemental insurer expects to buy back between $1.3 billion and $1.7 billion in shares this year. AFLAC recently raised its dividend for the 36th year in a row. For 2019, AFLAC is standing by its previous guidance for earnings of $4.10 to $4.30 per share. That assumes the yen trades at ¥110.39 to the dollar.

This means AFLAC is currently going for about 12 times this year’s earnings. Buy up to $50 per share.

Last quarter, Cerner (CERN) did what I pretty much expected. The healthcare-IT folks earned 61 cents per share. That was in the center of their guidance. Sales rose 8% to $1.39 billion.

For Q1, Cerner had operating cash flow of $317.1 million and free cash flow of $123.5 million. For Q2, Cerner expects earnings of 63 to 65 cents per share on revenue of $1.41 to $1.46 billion.

For all of 2019, Cerner sees earnings of $2.64 to $2.72 per share. That’s up from the previous guidance of $2.57 to $2.67 per share. Cerner recently said it had reached an agreement with Starboard Value to start paying a dividend and increase its buyback authorization by $1.5 billion. Cerner is a solid stock. Buy up to $66 per share.

Hershey (HSY) rebounded well after the disappointment from Q4. For Q1, the chocolatier had adjusted Q1 earnings of $1.59 per share. That’s an increase of 12.8% over last year. It also beat Wall Street’s consensus by 13 cents per share.

Hershey reiterated its full-year guidance of $5.63 to $5.74 per share. The shares jumped 4.6% on Thursday and broke out to a new 52-week high. Notice how good companies always bounce back. I’m raising my Buy Below on Hershey to $126 per share.

Raytheon (RTN) shot a tomahawk missile at its earnings estimates. For Q1, the company made $2.77 per share which was 30 cents more than expectations. Wow! Raytheon made $2.20 per share for last year’s Q1.

The company is doing especially well with cyber-security and its intelligence and information unit. Despite the impressive earnings beat, Raytheon didn’t change its full-year earnings guidance of $11.40 to $11.60 per share and sales guidance of $28.6 billion to $29.1 billion. I think that disconcerted some traders, and the shares pulled back 4.4% on Thursday.

Last month, Raytheon hiked its dividend by 8.6%. That was its 15th annual dividend increase in a row. Raytheon remains a buy up to $190 per share.

Five Buy List Earnings Reports Next Week

We have five more Buy List earnings reports next week. Let’s start with Fiserv (FISV), which reports on April 30. Three months ago, the company had an uncharacteristically underwhelming earnings report. They missed the Street by two cents per share, and earnings came in at the low end of their guidance.

Am I worried? Not at all. Despite the earnings miss, Fiserv had Q4 earnings growth of 24%, and operating margin came in at 33.4%. For the year, Fiserv made $3.10 per share. This was their 33rd year in a row of double-digit earnings growth. On top of that, Fortune named Fiserv to their list of most-admired companies for the sixth year in a row.

For 2019, Fiserv expects earnings to range between $3.39 and $3.52 per share. They’ll need to get above $3.41 to extend their double-digit streak. Fiserv also said they expect the First Data deal to close in the second half of 2019. For Q1, Wall Street expects 82 cents per share.

We have four more earnings reports on May 2.

Three months ago, Church & Dwight (CHD) missed Q4 estimates by a penny per share. The stock got clobbered, but I wasn’t too worried. The CEO noted that they were hitting 2019 “with momentum,” and that they have price increases on the way. Wall Street expects Q1 earnings of 66 cents per share.

The big news at Cognizant Technology Solutions (CTSH) is that Brian Humphries has taken over as CEO on April 1 from Francisco D’Souza, who has been CEO since 2007. D’Souza has done a great job, and he’ll remain a member of the board.

For 2019, Cognizant sees earnings of at least $4.40 per share. Wall Street had been expecting $4.45 per share. The company didn’t provide EPS guidance for Q1, but they said sales growth should be between 7.5% and 8.5%. Wall Street expects $1.04 per share, which sounds about right.

Continental Building Products (CBPX) may be our most dramatic stock. In February, the wallboard company soared 8% after its Q4 earnings report matched expectations. Of course, that makes you wonder what expectations really were. I suspect Wall Street has been secretly expecting much worse.

Yet after the initial surge, Continental turned around and gave it all back. The company gives guidance on several metrics but not EPS. For 2019, Continental sees SG&A of $40 million to $42 million and capital expenditures of $28 million to $32 million. Cost-of-goods-sold inflation per unit compared with 2018 is expected to be 4.5% to 6.5%. For Q1, Wall Street expects 34 cents per share.

Last year was Intercontinental Exchange (ICE)’s 13th straight year of record revenues. I think they have a good chance of making this year number 14. For 2018, ICE made $3.59 per share. That’s up 21% over 2017. ICE’s operating margin was an impressive 58%. ICE provides guidance for several metrics except EPS. For Q1, Wall Street expects 90 cents per share, which should be beatable.

That’s all for now. Next week will have it all—more earnings, the April jobs report, the new ISM report, and if that’s not enough, there’s a Fed meeting as well. On Monday, we get personal income. The Federal Reserve meets on Tuesday and Wednesday. The policy statement will come out on Wednesday at 2 pm. Don’t expect any change on rates. Then on Friday, the government releases the April jobs 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: April 26, 2019
Posted by Eddy Elfenbein on April 26th, 2019 at 7:01 am

In China Stocks, a $2.3 Trillion Rebound Is Giving Way to Gloom

China Retools Vast Global Building Push Criticized as Bloated and Predatory

Exports, Inventories Seen Boosting U.S. First-Quarter Growth

Regulators Around the World are Circling Facebook

Microsoft Touches $1 Trillion Value, Signaling Big Tech’s Stock Market Comeback

Uber Aims to Top $80 Billion Valuation in Year’s Largest IPO

Falling Mercedes Sales Hits Daimler

Germany’s Troubled Banking Giants Decide Against a Merger

PepsiCo is Suing Farmers in India for Growing the Potatoes it Uses in Lays Chips

Renault to Propose Joint Holding Company with Nissan

Joshua Brown: Three Reasons You’re Never Satisfied & Is a Volatility Tsunami Imminent?

Cullen Roche: Having a Printing Press Doesn’t Mean Money is Infinite

Roger Nusbaum: Beware The Bitcoin Charlatans & Asset Allocation Don’ts

Ben Carlson: How Hard is it to Become a 401(k) Millionaire? & The 3 Levels of Wealth

Be sure to follow me on Twitter.

Morning News: April 25, 2019
Posted by Eddy Elfenbein on April 25th, 2019 at 7:06 am

China Seeks to Allay Fears Over Belt and Road Debt Risks

Venezuela’s Trade Scheme With Turkey Is Enriching a Mysterious Maduro Crony

Souvenirs From Europe You Can’t Sneak Through Customs

Facebook Expects to Be Fined Up to $5 Billion by F.T.C. Over Privacy Issues

Deutsche Bank, Commerzbank Merger Talks Hit Stumbling Blocks

Occidental Seeks to Buy Anadarko for $38 Billion, Topping Chevron’s Offer

Amazon’s Spending Is Key as Investors Fixate on Profits

Tesla Posts Big Quarterly Loss as Its Electric-Car Sales Lag

Boeing Reports Slide in Earnings and Admits Future Is Hazy

Nissan Warns Investors of a 45 Percent Drop in Profit

Comcast First Quarter Profit Beats Wall Street, Misses on Revenue

Unsold Luxury Homes Are Piling Up in the Hamptons

Jeff Miller: Do You Make Up False Market Narratives?

Michael Batnick: Being Wrong and Changing Your Mind

Jeff Carter: There Is No Quick Easy Money; Unless It’s A Bad Deal or a Scam

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Moody’s Earned $2.07 per Share
Posted by Eddy Elfenbein on April 24th, 2019 at 7:19 am

1Q19 revenue of $1.1 billion up 1% from 1Q18
1Q19 diluted EPS of $1.93 up 1%; adjusted diluted EPS of $2.07 up 2% from 1Q181; both aided by a lower effective tax rate
Record 1Q19 Moody’s Analytics revenue of $472.0 million up 16%, with double-digit growth across all business lines
Affirming FY 2019 diluted EPS and adjusted diluted EPS guidance ranges of $7.30 to $7.55 and $7.85 to $8.10, respectively

Moody’s Corporation (MCO) today announced results for the first quarter of 2019, as well as provided its current outlook for full year 2019.

“Moody’s first quarter revenue reflected robust performance in Moody’s Analytics across all business lines. This strength was largely offset by an expected decline in Moody’s Investors Service’s revenue as the business faced challenging year-over-year debt issuance comparisons,” said Raymond McDaniel, President and Chief Executive Officer of Moody’s. “We are affirming our full year 2019 guidance of $7.30 to $7.55 for diluted EPS and $7.85 to $8.10 for adjusted diluted EPS.”

MCO FIRST QUARTER REVENUE UP 1%

Moody’s Corporation reported revenue of $1.1 billion for the three months ended March 31, 2019, up 1% from the prior-year period.

U.S. revenue was $612.1 million, up 2%, and non-U.S. revenue was $530.0 million, approximately flat to the prior-year period. Revenue generated outside the U.S. constituted 46% of total revenue, down from 47% in the prior-year period. Foreign currency translation unfavorably impacted Moody’s revenue by 2%.

Moody’s Investors Service (MIS) First Quarter Revenue Down 7%

Revenue for MIS for the first quarter of 2019 was $670.1 million, down 7% from the prior-year period, compared to a 14% decline in issuance activity2. U.S. revenue was $411.2 million, down 5%, and non-U.S. revenue was $258.9 million, down 10%. Foreign currency translation unfavorably impacted MIS revenue by 2%. The MIS adjusted operating margin was 54.9%.

Corporate finance revenue was $355.4 million, down 9% from the prior-year period. This result was primarily driven by a decline in global bank loan issuance, partially offset by increased U.S. and EMEA investment grade bond activity. U.S. and non-U.S. corporate finance revenues were down 6% and 15%, respectively.

Structured finance revenue was $100.7 million, down 15% from the prior-year period. This result primarily reflected lower U.S. and EMEA collateralized loan obligation (CLO) refinancing activity. U.S. and non-U.S. structured finance revenues were down 16% and 12%, respectively.

Financial institutions revenue was $115.8 million, up 1% from the prior-year period. U.S. financial institutions revenue was down 5%, while non-U.S. revenue was up 6%.

Public, project and infrastructure finance revenue was $92.7 million, down 1% from the prior-year period. This result reflected a slow start to the year in non-U.S. infrastructure finance issuance, principally in EMEA, largely offset by higher U.S. municipal issuance against a low prior-year comparable. U.S. public, project and infrastructure finance revenue was up 13%, while non-U.S. revenue was down 18%.

Moody’s Analytics (MA) First Quarter Revenue Up 16%

Revenue for MA for the first quarter of 2019 was $472.0 million, up 16% from the prior-year period. U.S. revenue was $200.9 million, up 22%, and non-U.S. revenue was $271.1 million, up 12%. Foreign currency translation unfavorably impacted MA revenue by 3%. Organic MA revenue for the first quarter of 2019, which excluded Reis and Omega Performance revenues, was $460.6 million, up 13% from the prior-year period. The MA adjusted operating margin was 28.1%.

Research, data and analytics (RD&A) revenue was $307.7 million, up 15% from the prior-year period. U.S. and non-U.S. RD&A revenues were up 20% and 12%, respectively. Organic RD&A revenue, which excluded Reis revenue, was $298.8 million, up 12%, driven by strong sales growth at Bureau van Dijk in the second half of 2018, as well as sales of credit research and ratings data feeds.

Enterprise risk solutions (ERS) revenue was $121.9 million, up 19% from the prior-year period. This result reflected growth in fourth quarter 2018 and first quarter 2019 subscription sales, and the business continued to successfully execute on the transition toward a software-as-a-service model. U.S. and non-U.S. ERS revenues were up 26% and 15%, respectively.

Professional services revenue was $42.4 million, up 13% from the prior-year period. U.S. and non-U.S. professional services revenues were up 34% and 2%, respectively. Organic professional services revenue, which excluded Omega Performance revenue, was $39.9 million, up 6% from the prior-year period.

Morning News: April 24, 2019
Posted by Eddy Elfenbein on April 24th, 2019 at 7:02 am

Europe Not Feeling Much Pain From Trump Tariffs, Central Bank Says

SoftBank Bets $1 Billion on Battered Payments Firm Wirecard

Blockbuster Battle Between Steven Spielberg and Netflix Fizzles

Behind Airbnb’s Bet on Show Business to Hook Travelers

Adding to Ghosn Woes, Nissan Slashes Profit Outlook to Near-Decade Low

Samsung Plans $116 Billion Investment in Non-Memory Chips to Challenge TSMC, Qualcomm

Want to Make Millions and Pay No Taxes? Try Real Estate

John McAfee Vows to Unmask Bitcoin’s Satoshi Nakamoto

Made in China, Exported to the World: The Surveillance State

Verizon Beats on Earnings as Wireless Sales Hit $22.7 Billion

Mario Batali’s Former Empire Is Thriving—as Long as He Stays Away

Walgreens Raises Tobacco-Buying Age to 21, Strengthening a Consensus

Nick Maggiulli: The Problem With Most Financial Advice

Lawrence Hamtil: The Low Volatility – Momentum Barbell: S&P vs MSCI Indices

Cullen Roche: Was the GFC a Once-in-a-Lifetime Event?

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Earnings from Sherwin-Williams and Stryker
Posted by Eddy Elfenbein on April 23rd, 2019 at 6:13 pm

We had two earnings reports today. Before the opening bell, Sherwin-Williams (SHW) reported Q1 earnings of $3.60 per share. That was below estimates of $3.69 per share. Sales rose 1.9% to $4.04 billion. Importantly, the company didn’t alter its full-year outlook of $20.40 to $21.40, which excludes acquisition costs. That compares with $18.53 per share a year ago. For Q2, Sherwin expects sales to rise by 2% to 5%. For the full year, they expect sales to rise by 4% to 7%.

Commenting on the first quarter, John G. Morikis, Chairman and Chief Executive Officer, said, “We made good progress on our pricing initiatives across all segments during the quarter and effectively managed SG&A spending, but volumes fell short of expectations due to a slower start to the architectural painting season in North America and continued challenging conditions in many end markets outside North America. Despite the volume shortfall and higher year-over-year raw material costs, consolidated Company adjusted gross margin, which excludes acquisition-related costs, improved sequentially and was flat year-over-year. We expect the positive trend in gross margin and operating expense control to continue as the year progresses, and volume growth should also improve over the balance of the year, particularly in the back half.

“Looking at our performance by segment, in The Americas Group, despite a strong backlog and project pipeline reported by many of our professional customers, volume growth in the quarter was slower than expected. We continued to invest by opening 15 net new store locations in The Americas Group during the quarter. In our Consumer Brands Group, most of the softness in demand in the quarter was in markets outside North America. Consumer Brands Group adjusted segment operating margin in the first quarter expanded sequentially and year-over-year, and we are very well positioned across all North American retail channels heading into the important spring selling season. Performance Coatings Group achieved modest sales growth and increased adjusted segment operating margin in the quarter against year-over-year raw material pressure.

Shares of SHW looked like they were going to drop on Tuesday, but the shares closed higher by 1.9% on the day.

Stryker (SYK) reported Q1 earnings of $1.88 per share, which beat the Street by four cents per share. That’s an increase of 11.9% over last year. Net sales rose 8.5% to $3.5 billion, and organic net sales increased by 7.3%. For the quarter, Stryker’s adjusted operating margin was 25.1%.

Based on our first quarter performance we now expect 2019 organic net sales growth to be in the range of 6.8% to 7.5% and expect adjusted net earnings per diluted share to be in the range of $8.05 to $8.20.

For the second quarter we expect adjusted net earnings per diluted share to be in the range of $1.90 to $1.95.

If foreign currency exchange rates hold near current levels, we expect net sales in the second quarter will be negatively impacted by approximately 1.5% and full year will be negatively impacted by approximately 1.0%, and net earnings per diluted share will be negatively impacted by $0.01 to $0.03 in the second quarter and negatively impacted by $0.05 to $0.10 in the full year.

Stryker raised the low end of 2019 guidance by five cents per share. Wall Street had been expecting $1.96 per share for Q2, and $8.13 per share for the entire year.

Morning News: April 23, 2019
Posted by Eddy Elfenbein on April 23rd, 2019 at 7:05 am

A Vicious, Untreatable Killer Leaves China Guessing

Oil Climbs Toward $75 in London After Trump Tightens Screws on Iran

Fed Seems Resigned to Bubble Risk in Effort to Extend Expansion

After the Bust, Are Bitcoins More Like Tulip Mania or the Internet?

China’s Starbucks Challenger Files for U.S. IPO

Elon Musk Predicts Tesla Driverless Taxi Fleet Next Year

Lyft Underwriters Hail Promising Future as Uber Looms

This Estonian Start-Up Has Become a Thorn in Uber’s Side

China’s Bytedance Says India TikTok Ban Causing $500,000 Daily Loss, Risks Jobs

Beyond Meat Details Plans for Initial Public Offering

Cell Tower REITs: 5G’s True Killer App

Samsung Retrieving All Galaxy Fold Samples After Defect Reports

Ben Carlson: A Bad Year in the Bond Market is a Bad Day in the Stock Market

Joshua Brown: The Crucible

Howard Lindzon: India and The Internet…

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Morning News: April 22, 2019
Posted by Eddy Elfenbein on April 22nd, 2019 at 7:04 am

U.S. Ending Iran Waivers Could Affect Oil Markets and Beyond

Free Speech Puts U.S. on ‘a Collision Course’ With Global Limits on Big Tech

Financial Market ‘Pause Party’ Makes Fed Rate Cut Less Likely

Trump’s Washing Machine Tariffs Stung Consumers While Lifting Corporate Profits

The Fed Is in Worse Shape Than the Economy as Post-Crisis Expansion Reaches a Decade

Uber, Lyft IPOs May Lead to Higher Fares

Huawei First-Quarter Revenue Grows 39% to $27 Billion Amid Heightened U.S. Pressure

Qualcomm: Why The Success Story Just Begins

Clorox and Unilever Want the Booming Bacteria Business to Thrive

Tesla Investigates Video of Parked Model S Exploding in Shanghai

America’s Elderly Are Twice as Likely to Work Now Than in 1985

Japanese Prosecutors Bring New Charges Against Carlos Ghosn

Joshua Brown: Investing in the Real World – Not a Backtest!

Roger Nusbaum: A New Tool For Considering Life Expectancy In Retirement Planning? & Healthspan & Financialspan

Michael Batnick: How to Stay Out of Debt & Why Didn’t You…

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CWS Market Review – April 19, 2019
Posted by Eddy Elfenbein on April 19th, 2019 at 7:08 am

“Selling your winners and holding your losers is like cutting the flowers and watering the weeds.” – Peter Lynch

First-quarter earnings season is here, and we’re getting a good idea of what the first three months of the year were like. As with any earnings season, some stocks are soaring (like Qualcomm) and others falling on hard times (Bank of New York).

We’ve already had the first of our stock reports. Some companies have done well. Others, not so well. In this week’s issue of CWS Market Review, I’ll run down all of our Buy List earnings reports.

Next week will be even busier as seven of our Buy List stocks are due to report. On top of that, we’ll also get our first look at the Q1 GDP report. Before I get to this week’s earnings news, let’s look at the big jump we got from Disney.

Disney Soars to an All-Time High

I have to apologize for only briefly discussing Disney (DIS) last week. I don’t believe I gave their investor presentation the coverage it was due. Please forgive me. I hope the 11.5% price surge helped ease some of the pain.

Disney had a great rollout of its streaming service. I think the news on Disney has been so negative for so long that anything positive can help propel the shares. This week, the stock touched a new all-time high.

The company is serious about taking Netflix on, and they have an impressive service in Disney+. It’s also very competitive price-wise: $7 per month or $70 per year. Not only did Disney’s stock surge, but it held on to its gains and even pushed a little higher.

I supposed investor sentiment has been negative on Disney for years since it’s hard for some people to look positively on Disney. Even Disney critics have been impressed with Iger’s strategy. Content really is king, and it will be hard to compete against the Mouse House. This week, I’m raising my Buy Below on Disney to $135 per share. The next earnings report is due on May 8.

This Week’s Buy List Earnings Reports

Here’s a look at our Q1 Earnings Calendar so far.

Now let’s dive in. Signature Bank (SBNY) kicked off earnings season for us on Wednesday morning when the New York-based bank reported Q1 earnings of $2.65 per share. That was 12 cents below Wall Street’s consensus. Traders were not pleased. The shares fell 5.9% during Wednesday’s trading.

For the quarter, net interest margin was 2.75%. That’s down 11 basis points from a year ago. Total assets now stand at $48.55 billion. That’s an increase of 9.3% over last year’s Q1. Last quarter, the bank was hurt by a $9.4 million decline in pre-payment penalty income. Overall, this was a weak quarter for SBNY.

During the quarter, Signature bought back 173,193 shares for $22.9 million. While I’m not happy with Signature’s results last quarter, I’m still willing to stick by them. The stock slid about 5% on Wednesday, but we’re still doing well with SBNY this year (+22.9%). Signature Bank remains a buy up to $140 per share.

After the close on Wednesday, Eagle Bancorp (EGBN) reported adjusted earnings of $1.11 per share. That was one penny below estimates. That’s up from $1.04 per share one year ago.

Eagle is currently going through a transition after the former CEO, Ron Paul, announced his retirement. Susan G. Riel is the interim President and CEO. About the Q1 results, she noted, “The Company’s assets ended the quarter at $8.39 billion, representing 9% growth over the first quarter of 2018. First-quarter 2019 earnings resulted in a return on average assets of 1.62% (1.85% excluding nonrecurring costs as defined above) and a return-on-average tangible common equity of 13.38% (15.26% excluding nonrecurring costs as defined above).”

The shares pulled back some in Thursday’s trading, but nothing too severe. Eagle is a buy up to $55 per share.

I never would have guessed that Torchmark (TMK) would be an earnings standout, but here we are. Also after the bell on Wednesday, the life-insurance company reported Q1 earnings of $1.65 per share.

The key figure is net operating income which came in at $1.64 per diluted common share. That beat estimates by five cents per share compared with $1.47 per diluted common share from a year ago. The details look pretty good. Net income as an ROE was 12.9%. Net operating income as an ROE, excluding net unrealized gains on fixed maturities, was 14.7%.

Last quarter, Torchmark bought back 1.1 million shares. This quiet stock is now a 19% winner for us this year. Buy up to $91 per share.

Check Point Software (CHKP) had a decent earnings report, but poor guidance caused traders to knock 7.4% off the share price on Thursday. For Q1, the cyber-security firm earned $1.32 per share. That beat estimates by one penny per share. CEO Gil Shwed said, “We had good results in the first quarter with 13 percent growth in our security subscriptions including advanced solutions for Cloud and Mobile as well as SandBlast Zero day threat prevention.”

For the current quarter, Check Point said it sees revenues coming in between $474 million and $500 million. The consensus on the Street was for $486 million. But for earnings, CHKP sees EPS ranging between $1.32 and $1.40. Wall Street had been expecting $1.38 per share. I know the price drop is painful, but don’t be rattled. This is a good company. Buy up to $130 per share.

On Thursday, Danaher (DHR) reported Q1 earnings of $1.07 per share. That beat the street by six cents per share. Previously, the company had given us a range of $1 to $1.03 per share. This is an important time for Danaher. The company recently announced that it’s buying GE’s biopharma unit for $21.4 billion. The company also plans to spin off its dental business later this year.

For Q2, Danaher expects earnings to range between $1.13 and $1.16 per share. Danaher lowered its full-year guidance from $4.75 – $4.85 per share to $4.72 – $4.80 per share. There’s nothing wrong. This reflects the share dilution to buy GE Biopharma. The deal should close sometime in Q4.

Danaher’s CEO said, “During the first quarter, we achieved 5.5% core-revenue growth and believe we expanded our market-leading positions across a number of our businesses. Combined with high-single-digit adjusted-earnings-per -growth and good cash-flow generation, our performance is a testament to our team’s focused execution and the power of the Danaher Business System.”

The shares rallied 1.5% after the earnings report. Danaher is a buy up to $136 per share.

Next Week’s Earnings Reports

We have several earnings reports coming our way next week. On Tuesday, Sherwin-Williams and Stryker are due to report.

A few months ago, Sherwin-Williams (SHW) warned us that they weren’t going to have a good Q4, and they were right. The good news is that sales improved in December, but not by enough to make up the difference.

For 2019, Sherwin sees net sales rising 4% to 7% and earnings coming in between $20.40 and $21.40 per share. That’s a pretty good forecast, and it tells me the issues they had in Q4 may be over. Wall Street’s consensus for Q1 is for $3.69 per share.

For Q1, Stryker (SYK) sees earnings coming in between $1.80 and $1.85 per share. I think there’s a good chance for an earnings beat. Last earnings season, the orthopedics company beat earnings by three cents per share, and the stock jumped 11%. The company noted that they had the best organic growth in a decade. Stryker’s operating margins rose to 27.5%. That’s quite good. For the full year, they see earnings between $8 and $8.20 per share.

Moody’s (MCO) is our #1 performer this year, with a 35% gain. The credit-ratings agency reports earnings on Wednesday. The Q4 report wasn’t especially good, but it wrapped up a solid 2018 for Moody’s.

For 2019, Moody’s sees earnings of $7.85 to $8.10 per share. Wall Street had been expecting $7.94 per share. In February, the company bumped up its dividend by 14% to 50 cents per share. The company also announced that a $500 million accelerated share-repurchase program is expected to be completed during Q2. The consensus for Q1 is for $1.93 per share.

We have four Buy List stocks due to report next Thursday.

The last AFLAC (AFL) earnings report was quite good. The duck stock beat expectations and raised its dividend. That was its 36th consecutive annual dividend hike.

For 2019, AFLAC is looking for earnings of $4.10 to $4.30 per share. That assumes the yen trades at ¥110.39 to the dollar. AFLAC didn’t provide Q1 guidance, but Wall Street expects $1.06 per share.

I’m still enjoying the nice 10% pop we got from Cerner (CERN) last week. The company announced that it had reached an agreement with Starboard Value. As part of the agreement, Cerner will start paying a dividend. The company also increased its buyback authorization by $1.5 billion.

For Q1, Cerner expects earnings between 60 and 62 cents per share on revenue of $1.365 billion to $1.415 billion. For all of 2019, the company is looking for earnings between $2.57 and $2.67 per share on revenue of $5.65 billion to $5.85 billion.

Hershey’s (HSY) last earnings report wasn’t so sweet. Comparable-sales growth was flat. In North America, comparable sales fell 0.3%. Earnings came in at $1.26 per share, which was a penny below estimates. For the moment, the problem is pricing pressure. Quarterly sales rose 2.5% to $1.99 billion.

For 2019, Hershey sees earnings ranging between $5.63 and $5.74 per share. The consensus for Q1 is $1.46 per share.

Also on Thursday will be Raytheon (RTN). The CEO noted that Raytheon ended last year with record bookings and backlog which positions them “well for 2019 and beyond.”

For 2019, Raytheon expects EPS of $11.40 to $11.60 on sales of $28.6 to $29.1 billion. That’s a little light; I had been expecting $11.50 to $12 per share. Still, business is going well. For Q1, the consensus on Wall Street is for earnings of $2.47 per share.

That’s all for now. The news next week will again be dominated by earnings. Also, there will be some economic news. On Monday, the existing-home sales report comes out. That’s followed on Tuesday by the new-home sales report. Thursday is jobless claims and durable goods. Then on Friday, we get the first look at Q1 GDP. I’m expecting a number close to 2%. 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: April 19, 2019
Posted by Eddy Elfenbein on April 19th, 2019 at 7:05 am

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