• Fiserv Earned $1.19 per Share for Q2
    Posted by on August 1st, 2017 at 4:08 pm

    For Q2, Fiserv (FISV) reported earnings of $1.19 per share. That was four cents below Wall Street’s estimate. The company didn’t give guidance for Q2, but their full-year guidance is unchanged at $5.03 to $5.17 per share. Quarterly revenue rose 2% to $1.39 billion.

    “We delivered solid financial results in the quarter consistent with our expectations,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “Our focus on client success continues to drive market momentum.”

    More details:

    Adjusted earnings per share increased 10 percent in the second quarter to $1.19 and increased 14 percent in the first six months of 2017 to $2.43 compared to the prior year periods.

    Adjusted operating margin increased 10 basis points to 32.0 percent in the second quarter and expanded 40 basis points to 32.3 percent in the first six months of 2017 compared to the prior year periods.

    Free cash flow increased 26 percent to $555 million in the first six months of 2017 compared to the prior year period. A cash distribution from StoneRiver of $31 million related to the sale of a business has been excluded from the company’s free cash flow results for the first six months of 2017.

    The company repurchased 2.5 million shares of common stock for $295 million in the second quarter and 5.9 million shares of common stock for $684 million in the first six months of 2017. As of June 30, 2017, the company had 14.6 million remaining shares authorized for repurchase.

    In June 2017, the company made a recommended cash offer to acquire Monitise plc for approximately £70 million ($89 million). The transaction is subject to certain conditions including Monitise shareholder approval (full details of the offer can be found on our website, Fiserv.com).

    Fiserv reiterated their 2017 guidance of $5.03 to $5.17 per share. That’s an increase of 14% to 17% over last year’s total of $4.43.

    “We remain on-track to achieve our full-year financial objectives which anticipate stronger results in the second half of the year,” said Yabuki.

    This is a rare earnings miss for Fiserv, but the important thing is that their guidance is the same.

  • Mixed Economic News this Morning
    Posted by on August 1st, 2017 at 11:40 am

    We had some key economic reports this morning.

    The government said that consumer spending rose 0.1% in June. They also revised the number for May up to 0.2%. Personal income in June was unchanged. Here’s how the two series have grown over the last 20 years.

    The ISM Manufacturing index for July was 56.3. That’s a pretty good number. Any number above 50 means the factor sector is expanding.

    The weak spot this morning was that construction spending fell 1.3% in June. Wall Street had been expecting growth of 0.4%.

    The big report this week will be Friday’s July jobs report. What’s interesting is that long-term bond yields have gradually worked their way lower all year.

  • Ingredion Earns $1.89 per Share
    Posted by on August 1st, 2017 at 8:38 am

    This morning, Ingredion (INGR) reported Q2 earnings of $1.89 per share. Wall Street had been expecting $1.85 per share. They earned $1.73 per share in last year’s Q2.

    “We continue to deliver shareholder value with another strong quarter, including solid operating income and earnings per share growth. Good operating efficiency, the impact of acquisitions, and higher specialty volumes more than offset headwinds in South America,” said Ilene Gordon, chairman, president and chief executive officer. “Operating income in North America reached record levels, but was lower in South America due to macroeconomic headwinds and the temporary interruption of manufacturing activities in Argentina associated with the implementation of a new labor agreement.”

    “As in the past, our growth strategy and continuous improvement programs drove margin expansion. The integrations of TIC Gums, Shandong Huanong Specialty Corn, and the Sun Flour Industry rice business are progressing as planned. We have completed an important organizational restructuring of our Argentina business and we will continue our disciplined approach to cost management. As we continue to execute our strategy, we expect another strong year and reiterate our anticipated 2017 adjusted EPS guidance in the range of $7.50 to $7.80,” Gordon added.

    Ingredion reiterated their full-year guidance of $7.50 to $7.80 per share. For the first half of this year, the company has made $3.77 per share. The shares gapped down at the open but are now down about 2%.

  • Morning News: August 1, 2017
    Posted by on August 1st, 2017 at 7:03 am

    Indonesia Lifts Threat to Ban Encrypted App Telegram

    U.S. Nuclear Comeback Stalls as Two Reactors Are Abandoned

    No Bubble in Stocks But Look Out When Bonds Pop, Greenspan Says

    Discovery to Buy Scripps, Owner of Food Network, in $11.9 Billion Deal

    BP Breaks Even in `Tough Environment’ After Debt Hits Record

    Honda Posts Strong First Quarter, Sees Higher Annual Profit on Favorable Forex

    Coinbase Faces Backlash, Legal Risk Over Bitcoin Cash

    Apple, Google Drop Trading Apps After Australian Intervention

    Gilead’s Unique Philanthropic Act Will Pay Off

    Lessons From An Altria Flash Crash

    Debt-Ridden Chinese Giant Now a Shadow of Its Former Size

    Amid His Most Important Tesla Milestone, Elon Musk Says He May Be Bipolar

    Howard Lindzon: Momentum Monday – Let Ideas Come to You

    Ben Carlson: When Risk Is Not Rewarded

    Joshua Brown: Chart o’ the Day: August Sucks Sometimes

    Be sure to follow me on Twitter.

  • Pending Home Sales Rise 5%
    Posted by on July 31st, 2017 at 11:14 am

    The National Association of Realtors reports that pending home sales rose 1.5% in June.

    After falling throughout the usually busy spring season, a monthly index of signed contracts to purchase existing homes increased 1.5 percent in June compared with May, and May’s figure was revised slightly higher, according to the National Association of Realtors.

    The index was 0.5 percent higher compared with June 2016, the first annual increase since March. So-called pending home sales are a forward indicator of closed sales two to three months later.

    “The first half of 2017 ended with a nearly identical number of contract signings as one year ago, even as the economy added 2.2 million net new jobs,” said Lawrence Yun, chief economist for the Realtors. “Market conditions in many areas continue to be fast paced, with few properties to choose from, which is forcing buyers to act almost immediately on an available home that fits their criteria.”

    Here’s my preview from CNBC:

    This one report out on Monday is a key indicator for the economy from CNBC.

  • Morning News: July 31, 2017
    Posted by on July 31st, 2017 at 6:58 am

    OPEC’s Existential Sucker Punch

    Inflation Hits Low Bar Draghi Set as Stimulus Debate Gets Closer

    Spain’s Long Economic Nightmare Is Finally Over

    The Biggest Worry for British Bankers Isn’t Brexit

    China July Factory Growth Cools But Construction Boom Fortifies Economy

    Alphabet Wants to Fix Renewable Energy’s Storage Problem — With Salt

    Model 3’s Buzz Belies U.S. Market Barely Getting a Lift From EVs

    HSBC to Buy Back Up to $2 Billion in Shares

    Discovery Communications To Acquire Scripps Networks Interactive For $14.6 Billion

    SoftBank Is Said to Plan Making Direct Offer for Charter

    Raytheon’s Troubled GPS III Ground Control Network Slips Again

    Uber’s Search for New C.E.O. Hampered by Deep Split on Board

    Jeff Carter: Decentralization Vs. Centralization

    Jeff Miller: Weighing the Week Ahead: A Congressional Vacation?

    Cullen Roche: Indexing Isn’t Just For Quitters and Three Things I Think I Think – Weekend Edition

    Be sure to follow me on Twitter.

  • Update: Wabtec Misses Earnings and Guides Lower
    Posted by on July 29th, 2017 at 1:14 pm

    I neglected to update you on Wabtec (WAB) in Friday’s newsletter. My apologies for the delay.

    On Tuesday, the freight services company released a disappointing earnings report. For Q2, WAB earned 75 cents per share. That includes a charge of five cents per share due to “net effect of the restructuring and transaction expenses and the interest expense benefit.” Wall Street had been expecting Q2 earnings of 94 cents per share. Not good.

    Wabtec had quarterly revenue of $932.3 million, which was also below Wall Street’s estimate of $1 billion. For all of 2017, Wabtec now expects sales of $3.85 billion and EPS between $3.55 and $3.70. That’s a reduction from their April forecast of $3.95 to $4.15 per share.

    This is the fourth time in the last five earnings reports where Wabtec has missed Wall Street’s consensus. So what went wrong? Basically, the environment for their business is pretty bad right now. Wabtec said there was $250 million in sales, which they had expected during Q2, but it never showed. It’s important for us to distinguish what’s bad due to them from what’s bad for everyone in the sector. This is more of a lousy environment story.

    On the positive side, Wabtec said their backlog is up 10%. They also just completed the merger with Faiveley.

    This is Raymond T. Betler, the CEO, on the earnings call:

    The main reason for our shortfall in the second quarter and our reduction in full year guidance is that we’ve seen about $250 million of revenues, roughly 5% of our full year total pushed out due mainly to revised timing of sales and projects already in the backlog, and to the market conditions, which we’ve discussed previously rebounding slower than we anticipated.

    These factors are more than offsetting the expected ramp up of synergies from the Faiveley integration during the year. Some of the revenue slippage occurred in the second quarter, including projects for signal, design and construction work, locomotive overhauls, which both have — did not materialize, so we removed them from our 2017 forecast.

    Also, we are not yet seeing the expected recovery in the freight aftermarket spending, and the OEM freight markets remained sluggish. As a result, we revised our 2017 guidance as follows: Compared to the first 2 quarters of the year, we expect some modest improvement in our third quarter results due to seasonality, with the strong fourth quarter and an adjusted operating margin target in the fourth quarter of about 15%. With more of our revenues coming from Europe, the seasonality in the third quarter will be more of a factor than it’s been in the past.

    The shares dropped nearly 10% on Tuesday, plus another 6% on Wednesday. The stock eventually bottomed at an 11-month low on Thursday. The shares are now going for 20 to 21 times this year’s guidance range. That’s a rich valuation but it may be quite reasonable based on an expected pickup in 2018. We’ll have to see.

    I don’t like these numbers but I’m willing to give WAB more time to show us some improvement. For now, I’m lowering my Buy Below price on WAB to $81 per share.

  • These 5 Stocks Could See Big Moves
    Posted by on July 28th, 2017 at 6:43 pm

  • Buy Apple Ahead of Earnings?
    Posted by on July 28th, 2017 at 4:12 pm

  • Q2 GDP +2.6
    Posted by on July 28th, 2017 at 11:22 am

    The government gave its first report on second-quarter GDP this morning. The U.S. economy grew, in real annualized terms, by 2.6% during April, May and June.

    This is slightly above the trend of the expansion. The economy has grown roughly at a 2.1% to 2.2% rate over the last eight years. While the expansion has been long, it’s been unusually weak.

    The government will update this figure next month and again in September. In fact, the government will probably update these figures several years from now. This morning, they updated all the GDP figures over the past three years. The old is in blue, the new is in red (real annualized and in trillions).