• Stryker Earns $1.96 per Share
    Posted by on January 30th, 2018 at 4:38 pm

    After the bell, Stryker (SYK) reported Q4 earnings of $1.96 per share. That was one penny more than expectations. For the year, Stryker earned $6.49 per share.

    Consolidated net sales of $3.5 billion and $12.4 billion increased 10.0% and 9.9% as reported in the quarter and full year and 8.7% and 9.8% in constant currency, as foreign currency exchange rates positively impacted net sales by 1.2% and 0.1%. Excluding the 0.7% and 2.7% impact of acquisitions, net sales increased 8.1% and 7.1% in constant currency, including 9.1% and 8.2% from increased unit volumes partially offset by 1.0% and 1.1% in lower prices.

    Orthopaedics net sales of $1.3 billion and $4.7 billion increased 8.1% and 6.6% as reported in the quarter and full year and 6.8% and 6.5% in constant currency, as foreign currency exchange rates positively impacted net sales by 1.3% and 0.1%. There was no impact of acquisitions in the quarter and 0.3% impact of acquisitions in the full year. Net sales increased 6.8% and 6.2% excluding acquisitions and in constant currency, including 9.3% and 8.6% from increased unit volumes partially offset by 2.5% and 2.4% in lower prices.

    MedSurg net sales of $1.6 billion and $5.6 billion increased 10.9% and 13.6% as reported in the quarter and full year and 9.8% and 13.4% in constant currency, as foreign currency exchange rates positively impacted net sales by 1.1% and 0.2%. Excluding the 1.3% and 5.6% impact of acquisitions, net sales increased 8.5% and 7.8% in constant currency, including 8.0% and 7.5% from increased unit volumes and 0.5% and 0.2% from higher prices.

    Neurotechnology and Spine net sales of $0.6 billion and $2.2 billion increased 11.5% and 8.2% as reported in the quarter and full year and 10.3% and 8.3% in constant currency, as foreign currency exchange rates positively impacted net sales by 1.2% in the quarter and nominally for the full year. Excluding the 0.4% and 0.7% impact of acquisitions, net sales increased 10.0% and 7.6% in constant currency, including 11.7% and 9.1% from increased unit volumes partially offset by 1.7% and 1.5% in lower prices.

    Here’s their outlook for 2018:

    We expect 2018 organic sales growth to be in the range of 6.0% to 6.5%. For 2018, we will adopt ASU 2014-09 Revenue from Contracts with Customers, which impacts the timing of revenue recognition and requires the presentation of certain costs previously reported as selling expenses as a reduction of revenue, both of which are not anticipated to be material. The reclassification of selling costs will result in a reduction of net sales, but has no impact on operating income or net earnings. We expect adjusted net earnings per diluted share(3) to be in the range of $1.57 to $1.62 in the first quarter and $7.07 to $7.17 in the full year. If foreign currency exchange rates hold near current levels, we expect net sales to be favorably impacted by approximately 1.0% for the full year. When considered along with our hedging program, we expect modest favorability in net earnings per diluted share in the first quarter and full year.

  • Janet Yellen’s Fed Chair Tenure in Charts
    Posted by on January 30th, 2018 at 12:33 pm

    The Federal Reserve begins its meeting today and this will be the final one with Janet Yellen as Fed chair. Let’s look at some charts detailing the last four years.

    First up, the S&P 500. Not bad.

    Here’s the 10-year Treasury yield:

    90-day yield. This one gets interesting:

    The VIX:

    Gold:

    Dollar/Euro

    Unemployment:

    Nonfarm payrolls:

    Headline CPI:

    Core CPI:

    Oil:

    Fed’s balance sheet:

    2-10 Spread:

    Dollar Index:

    Real GDP:

    Real Fed funds based on core CPI:

  • The Super Bowl Indicator Has Failed Recently
    Posted by on January 30th, 2018 at 10:10 am

    From Gary Alexander at Navellier Market Mail:

    Whether you favor the AFC’s New England Patriots or the NFC’s Philadelphia Eagles in Super Bowl LII, most investors are aware of the Super Bowl Indicator, which basically says that the market will go down in a year in which the AFC team wins, and it will go up if an “old-line NFL” team wins the Super Bowl.

    Like any artificial retro-fit coincidental indicator, the Super Bowl Indicator worked pretty well for a very long time. From 1968 to 1982, the market mostly declined at a time when the AFC won most Super Bowls. Then, from 1983 to 1997, when the market mostly rose, the NFC won most of the Super Bowls.

    The Super Bowl Indicator worked for 30 of the first 31 Super Bowls, missing the mark only in 1990. So: If a coin flip comes up heads 30 of 31 times, what are the chances it will come up heads the next time? The correct answer is 50%, but some will bet the trend (heads) while others will say, “Tails is overdue.” A whole industry (gaming) is built on the war between casinos filled with trend-followers vs. contrarians.

    The Denver Broncos ended the Super Bowl Indicator’s 31-year 97% winning streak. In both 1998 and 1999, Denver won the Super Bowl, but the bull market of the late 1990s just kept charging higher. Then, in 2000, the St. Louis Rams (NFC) won, and the market fell. Then, in 2001, the Baltimore Ravens (an old-line NFL team) won, but the market kept on falling. In 2008, the NFC New York Giants won the Super Bowl, but 2008 turned into the worst market year since the 1930s. The Indicator had flipped!

    One of the big problems with the Super Bowl Indicator is the slippery definition of “old-line NFL.” Some recent Super Bowl winners are currently aligned with the AFC, but they are also old-line NFL teams: The Indianapolis Colts (2007 winners) were once the Baltimore Colts, while the Baltimore Ravens (the 2013 champs) were once the Cleveland Browns. The AFC Pittsburgh Steelers (2006 and 2012 winners) are also from the old-line NFL. The market went up in all four of these years, but are these teams AFC or NFL?

    I’m sure that much of this Super Bowl lore is pure entertainment. I’m not sure if anyone ever believed it, but some newspapers are desperate to fill their news pages in winter, so the Super Bowl Indicator was first offered (perhaps in jest) in 1978 by a New York Times sports reporter named Leonard Koppett, who mocked some other silly sports statistics in his Sporting News article, “Carrying Statistics to Extremes.”

    For the next two decades, several more tongue-in-cheek articles came out, saying that NFC teams (like Washington or San Francisco) “saved investors” by pulling out last minute wins in the Super Bowl. In 1989, the staid Financial Analysts Journal stooped to ask: “Did Joe Montana Save the Stock Market?”

    The secret of the original Super Bowl correlation is that the stock market goes up more than it goes down and NFL teams won more often than AFC teams. Since Super Bowl #1 in 1967, the Dow has risen in 37 of 51 years. In the first 51 Super Bowls, old-line NFL teams won 34 times, so there was a lot of overlap.

    The reason that these two historical theories worked for a time, then didn’t work, is that retro-fit theories are manufactured to fit historical data, while the future is random. You can apply this lesson to the length of bull markets, the length of recoveries, the trading range of stocks, and many other market variables. Just because something happened in the past, there is no logical reason the same thing will repeat in the future.

  • Three Charts for this Morning
    Posted by on January 30th, 2018 at 10:07 am

    Here are some charts I wanted to pass along.

    The S&P 500 fell 0.67% yesterday. That was its biggest drop since September 5, which was the Tuesday following Labor Day.

    It looks like we may pass that today.

    This shows the S&P 500’s dividend yield in black, being surpassed by both the 10-year (blue) and 2-year Treasury yields (red).

    Yesterday, the VIX rose by 25%. It’s up again today.

  • Danaher Earns $1.19 per Share for Q4
    Posted by on January 30th, 2018 at 9:57 am

    Dananher (DHR) had a very good quarter for Q4. The company earned $1.19 per share. They had given us a guidance range of $1.12 to $1.16. Later, the CEO said earnings would be in the upper end of that range. What Danaher called “non-GAAP core revenue” rose by 5.5%.

    For the whole year, Danaher made $4.03 per share. That’s up 11.5% over 2016. Non-GAAP core revenues grew by 3.5%. Danaher had operating cash flow of $3.5 billion.

    The Company generated strong operating cash flow of $3.5 billion for the full year 2017.

    Thomas P. Joyce, Jr., President and Chief Executive Officer, stated, “We are very pleased with our strong fourth quarter results. The team delivered 5.5% core revenue growth, solid margin expansion, and double-digit adjusted earnings per share growth. As we reflect back, 2017 was a year of accelerating revenue growth, solid margin improvement, continued growth investment, and great performance at our more recently acquired larger businesses. In addition, mid-teens growth in free cash flow helps position us for more significant capital deployment in 2018.”

    Joyce continued, “As we look ahead, we believe that the strength of our portfolio, combined with the power of the Danaher Business System, provide us with the foundation for long-term shareholder value creation.”

    For Q1, Danaher sees earnings range between 90 and 93 cents per share. For all of 2018, they’re projecting $4.25 to $4.35 per share. Wall Street had been expecting 93 cents and $4.35 per share.

  • Morning News: January 30, 2018
    Posted by on January 30th, 2018 at 6:59 am

    China Could Target U.S. Firms If Trump Levies Tarriff

    Federal 5G Network Proposal Is Panned by F.C.C. and Industry

    U.S. Regulator, DOJ Settle ‘Spoofing’ Charges Against European Banks

    Market Euphoria May Turn to Despair If 10-Year Yield Jumps to 3%

    Why It’s a Bad Idea to Measure Cryptocurrencies By Their Market Caps

    Dell’s Problem: Bigger Not Always Better

    Waymo Buys ‘Thousands’ More Chrysler Vans for Driverless Service

    Elon Musk Is Selling Flamethrowers

    Blackstone in Talks to Buy Thomson Reuters’ Financial Unit

    JPMorgan Names Daniel Pinto, Gordon Smith as Co-Presidents, COO

    Buy Now, Pay Later Helps JAB Billionaires Build Beverage Empire

    Tyson Foods Has Invested in a Startup That Aims to Eradicate Meat from Live Animals

    Ben Carlson: All-Time Highs, Risk & Consequences

    Michael Batnick: Markets Can Never Be Perfectly Efficient

    Joshua Brown: The Robots are Getting Owned

    Be sure to follow me on Twitter.

  • The 10-Year Breaks Above 2.7%
    Posted by on January 29th, 2018 at 10:41 am

    For the first time since 2014, the 10-year is trading north of 2.7%.

    This means the economy is improving while investors are leaving safe assets for riskier ones. Over the last 18 months, the yield on the 10-year has nearly doubled.

  • Savings Rate Falls to 12-Year Low
    Posted by on January 29th, 2018 at 10:10 am

    This morning, we learned that personal income rose 0.4% in December. That was 0.1% better than consensus. For the year, personal income increased by 3.1%. That’s up from growth of 2.4% in 2016.

    Personal spending rose by 0.4% last month which matched expectations. The number for November was revised upward to 0.8%. The savings rate fell to 2.4% which is a 12-year low.

  • Morning News: January 29, 2018
    Posted by on January 29th, 2018 at 7:09 am

    How to Launder $500 Million in Digital Currency

    Tech Giants Brace for Europe’s New Data Privacy Rules

    London’s Bankers Haven’t Been This Gloomy Since 2008

    India Does Not Rule Out Fiscal Consolidation Pause This Year

    U.S. Considers Building 5G Network Amid China Concerns

    Oil Boom Gives the U.S. a New Edge in Energy and Diplomacy

    Tanker Carrying LNG from Russian Arctic Arrives in Boston

    Born From Frozen Camel Blood, Ablynx Is $4.8 Billion Prize

    Shares in Prince Alwaleed’s Firm Soar, But Banks Remain Cautious

    ‘Jackpotting’ Targets U.S. ATMs to Make Them Spit Out Cash

    VW Customers Don’t Give a Monkey’s About Diesel Cheating

    Jeff Carter: Risks For Audit Are Too High

    Roger Nusbaum: What The Hell Is Going On With Asset Prices? & Can 80/20 Replace 60/40?

    Cullen Roche: 3 Things I Think I Think – Wrong!

    Be sure to follow me on Twitter.

  • Give It Time…
    Posted by on January 26th, 2018 at 6:29 pm

    The S&P 500 had a big day today and the index closed at another all-time high. I was impressed that AFLAC and Alliance Data Systems both rebounded off their drops.

    AFLAC was at $91.69 before the article came out. It got as low as $83.70. Today, AFL closed at $90.99.

    At one point yesterday, shares of ADS were down 5.6% on what I thought were good earnings. So much for my opinion. ADS rallied later yesterday and continued to rally today. Now the stock is up 0.87% from Wednesday’s close.

    Here’s a nice report on Danaher.

    We had new Buy List highs today from INGR, SYK, FISV, FDS, TMK, DHR, ROST, BDX and MCO.