AFLAC Jumps to All-Time High
Posted by Eddy Elfenbein on April 27th, 2016 at 11:53 am

Here are a few notes to pass along ahead of today’s Fed policy announcement which is due at 2 pm.

Shares of AFLAC (AFL) gapped up to an all-time high this morning. They finally took out the old high from eight years ago. The stock is currently above $69 per share.

Wabtec (WAB) is having another good day post-earnings. Sometimes there seems to be an odd delayed reaction to earnings news. The shares are now up 20% on the year for us making WAB our best position YTD.

A similar delayed reaction is happening for Express Scripts (ESRX). It’s up 2% today. Also, Reuters reports, “Express Scripts CEO aims to keep Anthem as a customer.”

Earnings from CR Bard (BCR) are due after today’s close.

Morning News: April 27, 2016
Posted by Eddy Elfenbein on April 27th, 2016 at 7:28 am

Debt-to-Equity Swaps Could Help China But Firms Must Restructure: IMF

UK Economy Slows as Global Slowdown And Brexit Uncertainty Weighs

Falling Output and Weaker Dollar Push Oil to 2016 High

U.S. Steel Files Trade Complaint Against China

Mitsubishi Motors Sees Orders in Japan Tumble After Scandal

Comcast Profit Tops Estimates

Comcast in Talks to Buy DreamWorks Animation for More Than $3 Billion

How Stephen Curry’s Big Season Is — And Isn’t — Reshaping The Sneaker Wars

Barclays Revenue Tops Estimates as Its Traders Weather Turmoil

Boeing Short Sales Rise 1.4% to 27.4 Million Shares

Boston Scientific Profit Beats as Heart Stent Sales Rise

Apple’s Increased Dividend And Buyback Is In-line With Expectations

Anthem Earnings Top Expectations

Josh Brown: Sentiment Is The New Fundamentals

Roger Nusbaum: Earnings Recession Is Here, Does It Matter?

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AFLAC Earned $1.73 per Share
Posted by Eddy Elfenbein on April 26th, 2016 at 4:35 pm

AFLAC (AFL) just reported Q1 operating earnings of $1.73 per share which was 10 cents more than Wall Street had been expecting. For the first time in a long time, the yen/dollar exchange rate helped earnings. Forex added three cents per share.

The average yen/dollar exchange rate in the first quarter of 2016 was 115.35, or 3.3% stronger than the average rate of 119.16 in the first quarter of 2015. Operating earnings in the first quarter were $726 million, compared with $678 million in the first quarter of 2015. Operating earnings per diluted share in the quarter increased by 12.3% from a year ago to $1.73. Included in first quarter operating earnings is an adjustment of $8 million after-tax, or $.02 per diluted share, accelerating the recognition of stock compensation expense associated with retirement-eligible employees. The stronger yen/dollar exchange rate increased operating earnings per diluted share by $.03 for the first quarter. Excluding the impact from the stronger yen, operating earnings per diluted share increased 10.4%.

The company reiterated its full-year guidance of $6.17 to $6.41 per share. That’s based on the yen at 120.99 (and it’s not even close to that). For Q2, they see earnings ranging between $1.55 and $1.82 per share. That’s assuming the yen trades between 105 and 115. The Street consensus was for $1.64 per share.

Here’s CEO Dan Amos:

“I want to reiterate that our annual objective is to produce operating earnings per diluted share of $6.17 to $6.41, assuming the 2015 average exchange rate of 120.99 yen to the dollar. If the yen averages ¥105 to ¥115 to the dollar for the second quarter, we would expect earnings in the second quarter to be approximately $1.55 to $1.82 per diluted share. I would remind you that with interest rates at significantly depressed levels and a return to market volatility, it is difficult to invest cash flows at attractive yields while maintaining a prudent risk tolerance. Additionally, we expect 2016 benefit ratios will continue to be strong in both the U.S. and Japan, recognizing that the first quarter is typically more favorable than the rest of the year. We are well-positioned in the two best insurance markets in the world and are working very hard to achieve our earnings-per-share objective while also ensuring we deliver on our promise to policyholders.”

Wells Fargo Raises Dividend by a Ha’penny
Posted by Eddy Elfenbein on April 26th, 2016 at 4:26 pm

Wells Fargo (WFC) announced they’re raising their quarterly dividend from 37.5 cents per share to 38 cents per share. That’s right. That’s an increase of 0.5 cents.

The dividend is payable June 1, 2016, to stockholders of record on May 6, 2016, as approved today by the Wells Fargo board of directors. Wells Fargo has approximately 5.1 billion shares outstanding.

This dividend increase for the second quarter of 2016 was part of the company’s 2015 Capital Plan. The Federal Reserve advised Wells Fargo in March 2015 that it had no objection to its 2015 Capital Plan which covers the quarters through the end of June 30, 2016. Wells Fargo submitted its 2016 Capital Plan on April 4, 2016, and it is currently under review by the Federal Reserve.

Going by today’s close, the new dividend gives them a yield of 2.99%.

S&P cuts Exxon credit rating
Posted by Eddy Elfenbein on April 26th, 2016 at 4:00 pm

Today, S&P cut its credit rating on ExxonMobil (XOM) from AAA to AA+. The company had been one of only three companies with the highest rating. Now only two are left, Microsoft and Johnson & Johnson.

XOM had a AAA rating since 1949. In the last few years, the company has increased its debt load, plus lower oil prices have hurt their sales and earnings. On CNBC today, I talked about the outlook for big energy stocks.

Weak Rebound in Durable Goods
Posted by Eddy Elfenbein on April 26th, 2016 at 11:50 am

The Fed is meeting today and tomorrow, and we’ll get our first look at Q1 GDP on Thursday. Ahead of that, today we learned that durable goods rebounded last month, but not by much.

Orders for long-lasting U.S. manufactured goods rebounded less than expected in March as demand for automobiles, computers and electrical goods slumped, suggesting the downturn in the factory sector was far from over.

The Commerce Department said on Tuesday that orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, increased 0.8 percent last month after declining 3.1 percent in February.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, were unchanged after a downwardly revised 2.7 percent decrease in the prior month. These so-called core capital goods orders were previously reported to have decreased 2.5 percent in February.

Economists polled by Reuters had forecast durable goods orders advancing 1.8 percent last month and orders for manufactured capital goods increasing 0.8 percent.

Wabtec Earns $1.05 per Share
Posted by Eddy Elfenbein on April 26th, 2016 at 8:46 am

This morning, Wabtec (WAB) reported Q1 earnings of $1.05 per share. That was five cents better than Wall Street’s estimates. Quarterly revenues fell 5.7% to $772.03 million. That was below the consensus of $798.86 million.

Raymond T. Betler, Wabtec’s president and chief executive officer, said: “We continue to expect another record earnings year, even as we face challenges in some of our key markets. We are responding to these challenges with aggressive cost- and efficiency-improvement programs, while continuing to invest in growth opportunities around the world. We remain optimistic about our long-term prospects and expect to continue to benefit from our diversified business model, balanced growth strategies and rigorous application of the Wabtec Performance System.”

Wabtec reaffirmed their 2016 guidance of $4.30 to $4.50 per share.

Morning News: April 26, 2016
Posted by Eddy Elfenbein on April 26th, 2016 at 7:12 am

Germany’s Yield Gap Over Japan at Most in 2016 Before BOJ Meets

Japan Consortium Misses Out on $38.5 Billion Australian Submarine Deal

Saudi Reform Plan Pleases Markets, Doesn’t Reassure Skeptics

Fed Statement Could Offer Clues Toward June Rate Decision

Taxpayer Subsidies to Companies Fall 70% as U.S. States Pull Back

Big Bank Shareholders Face a Crucible This Week at Annual Meetings

Tribune Plays Coy as Gannett Makes a Bid

Charter Poised to Win Regulatory Approval for Time Warner Cable Deal

Low Oil Price Pushes BP to $485 Million Loss

Nokia to Acquire French Connected Health Start-Up Withings

Standard Chartered Surges on Surprise Drop in Impairments

Buffett Makes It Easier to Be Sure He Hasn’t Drifted Away at 85

Mitsubishi Motors’ Improper Mileage Tests Date Back to 1991

Cullen Roche: There Are No Good Gold Analysts

Jeff Carter: A Moral Case for Breaking the Law

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Express Scripts Earns $1.22 per Share
Posted by Eddy Elfenbein on April 25th, 2016 at 4:15 pm

Express Scripts (ESRX) just reported Q1 earnings of $1.22 per share which matched Wall Street’s expectations.

The following compares first quarter 2016 and 2015 operating results:

Adjusted claims of 323.5 million, up 5% – See Table 1

EBITDA of $1,460.0 million, down 3% from 2015 adjusted EBITDA – See Table 3

EBITDA per adjusted claim of $4.51, down 8% from 2015 adjusted EBITDA per adjusted claim – See Table 3

GAAP net income of $526.1 million, up 19%

Adjusted net income of $791.4 million, down 2% – See Tables 5 and 5A

GAAP diluted earnings per share of $0.81, up 35%

Adjusted diluted earnings per share of $1.22, up 11% – See Table 4

Net cash flow provided by operating activities of $751.2 million, up 167%

ESRX also raised guidance:

The Company increased 2016 adjusted earnings per diluted share guidance from a range of $6.10 to $6.28 to a range of $6.31 to $6.43. The guidance range represents growth of 14% to 16% over 2015. Consistent with 2015, the Company expects revenues related to a large client contract will be realized in the second quarter due to the structure of the contract. Additional details on this guidance can be found in Table 6 including items excluded from this range.

For Q2, Express expects earnings to range between $1.55 and $1.59. Wall Street had been expecting $1.57 per share.

Dividends Are Hot
Posted by Eddy Elfenbein on April 25th, 2016 at 12:58 pm

Bloomberg notes an interesting development in the market—there’s been a rush towards safety. Since September, the Low Vol ETF (SPLV) is up more than 50%. In fact, over the last month, the SPLV has been more volatile than the rest of the market. As a result, dividend-paying stocks are going for some pretty pricey valuations.

Whatever’s happening, it’s pushed dividend paying stocks to a record price-earnings ratio, 9.4 percent above the four-year average. The 20.4 P/E of these otherwise slow-growing companies make them look more like technology stocks, which at 19.1 times earnings are now trading at a lower valuation.

The demand for yield stocks has been enhanced by a dovish Federal Reserve. The S&P 500 Dividends Aristocrats index has gained 7.1 percent this year and reached a record on Tuesday. The S&P 500 has posted a 2.3 percent gain over the same period. The iShares High Dividend ETF also reached its highest net asset value on Tuesday.