Morning News: April 27, 2017
Posted by Eddy Elfenbein on April 27th, 2017 at 6:50 am

BOJ Most Upbeat On Economy In Nine Years, But Warns Stimulus Exit Distant

Trump Says No Plan to Pull Out of NAFTA ‘At This Time’

White House Unveils Dramatic Plan to Overhaul Tax Code in Major Test for Trump

Trump Just Launched a Probe Into Whether Aluminum Imports Threatened National Security

Samsung Shares Soar as It Posts Stronger Earnings From Chips and Galaxy S8

Exxon Mobil’s Dividend Will Remain Safe… For Now

Deutsche Bank’s Return to Growth Delayed as Trading Trails

United to Pay Oversold Fliers Up to $10,000 After Dragging Furor

Merkel Warns Against U.K. ‘Illusions’ in Hard-Line Brexit Speech

Why Instagram Is Becoming Facebook’s Next Facebook

Shares in Japan’s Takata Suspended After Report on Bankruptcy Plan

A Struggling ESPN Lays Off Many On-Air Figures

Judge Says Exxon Owes $19.95 Million for Texas Refinery Pollution

Jeff Miller: Stock Valuation and Occam’s Razor

Michael Batnick: How Social Changed Our World

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Rallying ‘Trump stock’ craters on earnings
Posted by Eddy Elfenbein on April 26th, 2017 at 7:44 pm

Trading the Trump tax plan
Posted by Eddy Elfenbein on April 26th, 2017 at 4:50 pm

Fiserv Earns $1.25 per Share
Posted by Eddy Elfenbein on April 26th, 2017 at 4:11 pm

Fiserv (FISV) reported Q1 earnings of $1.25 per share, six cents more than Wall Street’s consensus.

GAAP operating margin was 26.2 percent in the first quarter, increasing 70 basis points compared to the first quarter of 2016.

Net cash provided by operating activities was $463 million in the first quarter of 2017 compared with $509 million in the prior year period, a decrease of 9 percent. Net cash provided by operating activities included cash distributions from StoneRiver of $31 million and $140 million in the first quarter of 2017 and 2016, respectively.

“We are off to a good start to the year producing strong financial results across the company,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “Our business model continues to deliver revenue acceleration, strong sales growth and excellent free cash flow.”

Fiserv reiterated their full-year outlook for $5.03 to $5.17 per share. That represents a growth rate of 14% to 17% over last year.

Axalta Earns 26 Cents per Share
Posted by Eddy Elfenbein on April 26th, 2017 at 9:11 am

Nice earnings report from Axalta Coating Systems (AXTA). The company made 26 cents per share for Q1 which is two cents more than estimates. Revenues rose 5.5% to $1.01 billion, $20 million more than estimates. They reaffirmed full-year guidance for EBITDA of $930 to $980 million.

Fiserv comes out later today.

Morning News: April 26, 2017
Posted by Eddy Elfenbein on April 26th, 2017 at 5:48 am

Lumber Tariff Adds Wrinkle to Nafta Talks

Trump to Propose Large Increase in Deductions Americans Can Claim On Their Taxes

Washington’s Busy Agenda is Getting More So With Bill To Roll Back Dodd-Frank

Internet Firms Winding Up For a Fight on ‘Net Neutrality’

Santander’s Brazil Patience Pays off as Rebound Lifts Profit

Can Facebook Fix Its Own Worst Bug?

AT&T Revenue Misses Estimates as Customers Keep Phones Longer

Chipotle Says Its Payments System Was Hacked

Credit Suisse Will Raise $4 Billion and Scrap I.P.O. of Swiss Unit

BMW Is Trying to Scare Staff Into Loving Electric Cars

Toshiba Plans to Replace Auditor PwC After Earnings Impasse

Wells Fargo Shareholders Tepidly Re-elect Bank’s Directors

Palantir Settles U.S. Lawsuit Charging Bias Against Asians

Ben Carlson: When Holding Is The Hardest Part

Roger Nusbaum: Don’t Fall For The Fallacy of Explanation

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Second-Highest All-Time Close
Posted by Eddy Elfenbein on April 25th, 2017 at 5:53 pm

The market had another good day today. The S&P 500 rose by 0.61% and reached its second-highest all-time close.

Our Buy List was able to eke out a gain despite the bad news from Express Scripts (ESRX). For the day, ESRX lost 10.8% but our Buy List gained 0.05%. We were helped by a 2.7% gain from Wabtec (WAB).

We had new highs today from AFL, FISV, MSFT, MCO, SHW and SYK.

Stryker Earned $1.48 per Share for Q1
Posted by Eddy Elfenbein on April 25th, 2017 at 5:28 pm

Stryker (SYK) reported Q1 earnings after the closing bell. For Q1, the company earned $1.48 per share. Previously they told us to expect a range between $1.40 and $1.45 per share. Wall Street had been expecting $1.43 per share.

“Our positive momentum continued in the first quarter, as we demonstrated our ongoing commitment to deliver organic sales growth at the high end of med-tech and leveraged earnings gains,” said Kevin A. Lobo, Chairman and Chief Executive Officer. “Our results were well-balanced across business segments and geographies, and position us well for another strong year in 2017.”

For Q2, Stryker expects EPS between $1.48 and $1.52. Wall Street had been expecting $1.51 per share. Stryker also maintained their full-year forecast of $6.35 to $6.45 per share.

The Skewedness of Stock Returns
Posted by Eddy Elfenbein on April 25th, 2017 at 1:39 pm

I recently read the paper, “Do Stocks Outperform Treasury Bills?” by Hendrik Bessembinder (thanks to a pointer from Michael Batnick), which takes a fascinating look at how skewed stock returns are. When we say that the market returns, say, 10% per year, that’s superficially correct. But as Bessembinder points out, the large majority of stocks don’t do much of anything, and a tiny portion of homerun stocks make up for the entire gain. The numbers are pretty extraordinary.

Bessembinder looked at 25,782 stocks that traded between 1926 and 2015. That comes to 3.5 million one-month time periods. The average stock gained 1.13% compared with the one-month T-bill rate of 0.38%.

But that average is very misleading since most stocks didn’t make money for that month, and even more lost to the T-bill. Although, when we weight its market size, the results get a little better.

After a decade, the “skew” is even more pronounced. The average stock gains 118% while the median stock gains just 14%. Only 37% of individual stocks out perform the market after a decade. Over the course of their lifetime, just 42% of stocks beat the one-month T-bill.

When we talk about total dollars made, just 0.33% of stocks make up for half of the wealth created by the stock market. Less than 4% accounts for the entire market’s gain. The other 96% combined match Treasury bills.

Wabtec Earned 84 Cents per Share
Posted by Eddy Elfenbein on April 25th, 2017 at 11:34 am

Two more earnings reports today. Stryker (SYK) will report after the close and Wabtec (WAB) reported this morning. For Q1, the company earnings 84 cents per share. That beat Wall Street’s estimates by two cents. This is a nice rebound from the awful quarter they had for Q4. I should add that during the quarter, Wabtec completed its acquisition of Faiveley.

Wabtec also reiterated its full-year guidance numbers. They expect revenue of about $4.1 billion, and EPS between $3.95 and $4.15.

Raymond T. Betler, Wabtec’s president and chief executive officer, said: “Our first quarter adjusted earnings were in line with expectations, and we expect improvement during the year. As we work to integrate Faiveley and our other recent acquisitions, we are managing our costs aggressively based on market conditions. We continue to invest in our balanced growth strategies and expect to benefit from our diversified business model and rigorous application of the Wabtec Excellence Program.”

The stock is up about 2.7% in today’s trading.