• ICE Beats Earnings and Raises Dividend
    Posted by on February 7th, 2018 at 1:48 pm

    Intercontinental Exchange (ICE) reported Q4 earnings of 73 cents per share, one penny more than expectations.

    “We are pleased to deliver our twelfth consecutive year of record revenue,” said ICE Chairman and CEO Jeffrey C. Sprecher. “We achieved this by executing on our strategy to deliver best-in-class trading, clearing, listings and information services while continuing to expand our range of content and distribution solutions to meet the evolving needs of the market. As we look to 2018 and beyond, we are focused on innovation and growth to serve our customers and build shareholder value.”

    Scott A. Hill, ICE CFO, added: “In addition to investing in growth, we returned more capital to shareholders in 2017 than any year in our history enabled by another year of record revenue, disciplined expense management and strong cash flow. We remain committed to creating long-term value for our shareholders through operational execution and strategic investments to build on our track record of growth.”

    ICE also boosted its quarterly dividend by 20%. The payout will rise from 20 cents to 24 cents per share. The stock is down a bit today.

  • Cognizant Technology Earns $1.03 per Share in Q4
    Posted by on February 7th, 2018 at 12:58 pm

    Cognizant Technology Solutions (CTSH) reported Q4 earnings of $1.03 per share. That beat expectations by six cents per share.

    “Consistent and solid execution throughout 2017, along with continued investments to further accelerate the shift to digital during the year, gives us confidence that we can deliver a strong 2018,” said Francisco D’Souza, Chief Executive Officer. “As companies that are already leaders in their industries integrate their domain knowledge with today’s tremendously powerful technologies like artificial intelligence, analytics and cloud, we see a new generation of digital heavyweights emerging. Cognizant is resolved to be the go-to partner to these digital-industrial leaders and also to our fast-growing digital-native clients.”

    For Q1, they expect earnings of at least $1.04 per share. For all of 2018, they’re looking for earnings of at least $4.53. Wall Street had been expecting $1.01 for Q1, and $4.35 for the year. They also raised their quarterly dividend by 33% to 20 cents per share.

    CTSH is up around 6% today.

  • Morning News: February 7, 2018
    Posted by on February 7th, 2018 at 7:08 am

    RBI, in Careful Balancing Act, Keeps Repo Rate Unchanged

    For Korea Inc., Money and Politics Make an Awkward Olympics

    Bitcoin Snaps Slide as Crypto Markets Dodge Push for Regulation

    With Yellen Out of the Picture, Get Ready for Trump vs. Powell

    Inside Wall Street’s $8 Billion VIX Time Bomb

    Tax Changes Mean a Loss for General Motors Despite Great Results

    Snapchat Overhaul Convinces Investors It Can Fight Instagram

    Disney Earnings: Future-Proofing TV…Or Trying To

    Wells Fargo and the Future of Corporate Responsibility

    Musk’s Big Questions: Can Tesla Make Model 3s and Burn Less Cash?

    Tronc Is Near Sale of L.A. Times to Local Billionaire

    Wynn’s Wake-Up Call

    Cullen Roche: Make Investing Simple Again

    Michael Batnick: Your True Risk Tolerance

    Ben Carlson: It’s Not Too Late

    Be sure to follow me on Twitter.

  • The Bulls Strike Back
    Posted by on February 6th, 2018 at 4:48 pm

    Things are moving so fast on Wall Street that it’s nearly pointless to try and update you. Today was the first time in history that the Dow went from a 500 point loss to a 500 point gain.

    Today, the Dow gained back 2.33% or 567.02 points. That’s almost exactly half of yesterday’s loss.

    The S&P 500 gained 46.20 points or 1.74%. The index is back to where it was at the end of the first trading day of this year.

    Today was an uneven rally. The S&P 500 High Beta index rose 2.04% while the Low Vol Index was up just 0.32%. That’s a pretty big spread. S&P 500 Growth rose 2.20% and Value was up 1.25%. The Russell 2000 was up just 1.08%.

    The VIX fell 20% to 29.98.

  • Cerner Earns 58 Cents per Share
    Posted by on February 6th, 2018 at 4:12 pm

    After the closing bell, Cerner (CERN) reported Q4 earnings of 58 cents per share. That’s three cents below estimates. For the full year, Cerner made $2.38 per share.

    Here are some highlights:

    Fourth quarter operating cash flow of $348.9 million and full-year of $1.308 billion.

    Fourth quarter Free Cash Flow of $185.1 million. For the full year, Free Cash Flow was $671.4 million. Free Cash Flow is a non-GAAP financial measure defined as GAAP cash flows from operating activities less capital purchases and capitalized software development costs. Please see the accompanying schedule, titled “Reconciliation of GAAP Results to Non-GAAP Results.”

    Fourth quarter days sales outstanding of 72 days, up from 69 days in the year-ago period.

    Total backlog of $17.55 billion, up 10 percent over the year-ago quarter.

    “We finished the year on a mostly positive note, with record bookings and all other key metrics except for earnings in line with our expectations,” said Zane Burke, President. “Our bookings were at record levels across several key areas, including population health, Cerner ITWorksSM, and revenue cycle, and also included strong contributions from outside of the U.S. We believe the strong bookings in the fourth quarter combined with our robust pipeline and strong competitive position sets us up for solid growth in 2018 and beyond.”

    Cerner currently expects Q1 earnings of 57 to 59 cents per share and 2018 earnings of $2.57 to $2.73 per share. The stock is down about 2.3% in the after-hours market.

  • Becton, Dickinson Earns $2.48 per Share
    Posted by on February 6th, 2018 at 7:22 am

    This morning, Becton, Dickinson (BDX) reported Q4 earnings of $2.48 per share. That beat the Street by seven cents per share.

    “We are proud of our performance in our final stand-alone quarter, as we continued to deliver solid, consistent results,” said Vincent A. Forlenza, Chairman and CEO. “We look forward to the future with confidence as we welcome C.R. Bard to BD. Together, through our combined capabilities and the impact we can have on our customers and their patients, we have a tremendous opportunity to advance the world of health.”

    Revenues for the full fiscal year 2018, including the accretion from the acquisition of C.R. Bard, are expected to increase approximately 30.0 to 31.0 percent on a reported basis. On a comparable, currency-neutral basis that includes the revenues of C.R. Bard in the current and prior year, revenues are expected to grow 4.5 to 5.5 percent. This includes an estimated 50 basis point adverse impact from the change in the U.S. dispensing business model and the estimated sales impact from Hurricane Maria in Puerto Rico on Bard’s business during BD’s first fiscal quarter.

    The Company expects full fiscal year 2018 adjusted diluted earnings per share, including the accretion from the C.R. Bard acquisition, to be between $10.85 and $11.00, which represents growth of approximately 15.0 to 16.0 percent, or approximately 12.0 percent on a currency-neutral basis.

  • Morning News: February 6, 2018
    Posted by on February 6th, 2018 at 7:05 am

    Asian Stocks Took Their Cues From the U.S, Wiping Out 2018 Gains

    European Markets Continue Slide Following Asia and U.S. Sell-Offs

    Investors Suffer Heavy Losses on Bets Against Volatility

    Over $550 Billion Wiped Off Cryptocurrencies Since Record High Just Under a Month Ago

    Cryptocurrency Rules From Congress Sought by U.S. Market Cops

    Banks, Retailers, China Have All Turned On Bitcoin

    Democrats Lash Out at Consumer Watchdog Amid Reports the Agency is Dropping Equifax Investigation

    Broadcom Raises Its Qualcomm Offer to $121 Billion

    Arby’s, Buffalo Wild Wings Merge to Compete in Fast-Changing Industry

    Why Are Lady Doritos Such a Big Deal?

    Best Buy Is Pulling CDs From Its Stores – And People Are Freaking Out

    Cullen Roche: Why the Stock Market Falls (Sometimes)

    Joshua Brown: What Investors Should Be Thinking Right Now

    Howard Lindzon: I Was Struck by a Black Swan and of Course Markets in Turmoil

    Roger Nusbaum: The Ides of…February?

    Be sure to follow me on Twitter.

  • “The Buffett Effect”
    Posted by on February 6th, 2018 at 1:34 am

    From the WSJ:

    One underappreciated factor adding to the selling in global markets is the Federal Reserve’s action against Wells Fargo last week, which helped erase $29 billion from its market value.

    With Warren Buffett controlling 9.4% of the bank through Berkshire Hathaway, the fact that retail investors aren’t safe from a bear market is probably dawning, says Eddy Elfenbein, a Washington-based portfolio manager and editor of the blog Crossing Wall Street.

    “Look, if Grandpa Capitalist is not safe here then where are we?” he said retail investors seem to be asking themselves.

    Mr. Elfenbein had a doctor’s appointment on Monday afternoon, but skipped it and remained glued to his Twitter feed and laptop once the market started dropping. The only time he could pull himself away from his computer was later in the evening when he grabbed a sandwich, he said.

  • CWS Market Review – February 5, 2018
    Posted by on February 5th, 2018 at 10:47 pm

    Well, today was certainly an eventful day on Wall Street. That’s why I wanted to send you an update to fill you in on today’s action.

    Let’s start with the important news—there’s no reason to make any change to our strategy. There’s no reason to get scared and sell. Our Buy List is just fine. In fact, we outperformed the market by a good margin today (meaning, we were down less than everybody else).

    One of our Buy List stocks, Church & Dwight (CHD), had a good earnings report this morning, plus they raised their dividend. CHD was one of only two stocks in the entire S&P 500 that closed higher today. Seventeen of our 25 stocks beat the S&P 500 today. When folks get scared, they seek out quality and that’s what we have.

    Now let’s look at some of today’s damage. It ain’t pretty. The Dow Jones Industrial Average plunged 1,175 points—its greatest single-day point loss in history.

    It was a slow build. By 2 pm, the Dow had lost about 330 points, which was making for a bad day, but it was nothing too serious. After that, things got very rough. Over the next hour, the Dow shed an additional 470 points, but that was only the beginning. In the next 10 minutes, the Dow dropped another 700 points.

    At its lowest, the Dow was down 1,597.08 points. The previous record point loss was 777 points, so we were more than twice that (I’m talking about points, not percent). The NYSE employs a “circuit breaker” where trading shuts down for 15 minutes if the Dow loses 7%. That would have been about 1,800 points today, so we didn’t hit it.

    By the closing bell, the Dow had lost 1,175.21 for a loss of 4.60%. That was more than the entire Dow was worth in 1984. The S&P 500 lost 113.19, also its greatest point loss ever, for a drop of 4.10%. (Note the unusually wide spread between the two indexes. That was due to a bad day for Boeing. Personally, I prefer the S&P 500.) The S&P 500 also easily dropped below its 50-day moving average. The index hasn’t traded below its 50-DMA since August.

    I’ve been talking about points, but was this the worst day in percentage terms? Please—not even close! In the last decade, this was the S&P 500’s 25th worst day. To be precise, today wasn’t the weird thing. The truly weird thing was the ultra-low-volatility rally that preceded today. Today isn’t unprecedented. The couple of months leading up to today were.

    In the last several newsletters, I’ve passed along several stats of us going so many days without a 1% drop or consecutive days closing within 3% or 5% of an all-time high. All those stats reflected one thing: our low-vol rally. Now, normal market behavior is returning. The VIX rose 115% today. That’s something you don’t see every day!

    Let’s add some context. Even with today’s loss, the S&P 500 is still up 7% since Labor Day. For the year, the S&P 500 is down a little less than 1%.

    The natural reaction is to ask, “what happened today?” It’s frustrating to say this, but this is what markets do. Every so often, things just freak the hell out. We think, X happened, therefore, what caused X? Sometimes, X just is.

    There are a few items I can point to, but who knows how large a role they played. For example, this was Jay Powell’s first day as Fed chair. Greenspan started on the job a few weeks before the 1987 crash. It’s not rational but markets aren’t wild about change.

    I was particularly struck by some activity in the Fed funds futures market. The futures started to signal that a fourth rate hike could be possible this year. That’s surprising. I believe the odds got up to about 26%, so possible but not probable. Either way, that’s unexpected and that could have helped freak the market out. The very strong ISM Non-Manufacturing report this morning may have given the rate hawks more confidence.

    Our Buy List was down today but by a lot less than the S&P 500. For the day, our Buy List fell 3.44% which means we outperformed by 66 basis points. Church & Dwight (CHD) had a very good earnings report, plus they raised their dividend. CHD was one of only two stocks in the S&P 500 that closed higher today.

    There’s not much more to say right now. Expect more volatility. We have a bunch more earnings reports coming this week. Cerner (CERN) and Becton, Dickinson (BDX) report tomorrow. I’ll have more in this week’s newsletter. I usually open with a quote, but this time I’ll close with one of my favorites from Peter Lynch: “The real key to making money in stocks is not to get scared out of them.”

    – Eddy

  • Earnings Does Not Equal the Market
    Posted by on February 5th, 2018 at 2:17 pm

    Some interesting stats via Bloomberg:

    “Based on the past 90 years, the S&P 500 is actually slightly more likely to have a down year when EPS grows by over 10 percent than when it grows by less than 10 percent,” write a team led by senior equity and quantitative strategist Dan Suzuki. “In fact, of the 29 down years for the S&P 500, EPS growth was positive almost 70 percent of the time and up double-digits close to 50 percent of the time.”

    This really isn’t much of a paradox. The market moves ahead of time. By the time the thing happens, it’s usually too late.