• Morning News: October 30, 2015
    Posted by on October 30th, 2015 at 7:03 am

    Russia Holds Benchmark Rate for Second Month on Inflation

    RBS Reports Drop in Third-Quarter Profit, Missing Estimates

    The Long Shadow of Europe’s Big Banks

    U.S. Avoids Debt Default as Congress Passes Fiscal Plan

    Are You About to Lose $50,000 in Future Social Security Benefits?

    Valeant Says It’s Cutting Ties With Troubled Pharmacy Philidor

    KeyCorp Agrees to Buy First Niagara in $4.1 Billion Deal

    Pfizer, Allergan Drug Merger Talks Raise Tax Hackles in U.S.

    Time Warner Cable and Charter Chiefs Expect Delay in Merger

    AB InBev Net Profit Hit by Currencies; Underlying Revenue Up

    China Signs $17 Billion Deal to Buy 130 Airbus Planes

    Baidu Profit Falls 27% as Costs Surge

    LinkedIn Beats Estimates And Raises Forecast; Shares Soar

    Joshua Brown: It’s What the Fed Didn’t Say That Counts

    Roger Nusbaum: Back to Bodie and the 10/90 Portfolio?

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  • Ball Corp Earned $1.10 per Share
    Posted by on October 29th, 2015 at 3:16 pm

    Before the opening bell, Ball Corp. (BLL) reported Q3 earnings of $1.10 per share. That topped estimates by 15 cents per share. Revenues, however, fell 6.3% to $2.1 billion.

    “Results from operations and global metal packaging volumes were in line with our expectations for the quarter. Foreign currency translation headwinds and project start-up costs both continued, the impact of which totaled 11 cents in the third quarter and 45 cents year-to-date, including net aluminum premium impacts and director retirement costs,” said John A. Hayes, chairman, president and chief executive officer.

    (…)

    “Our third quarter was largely consistent with our expectations given anticipated currency translation and start-up cost headwinds. The difficult year-over-year volume comparisons and aluminum premiums headwinds are behind us and existing growth capital projects will provide momentum as we move into 2016,” Hayes said.

    Importantly, Ball said the merger with Rexam is going as expected. They hope to close the deal in the first half of next year. The shares are down about 1% today.

  • Q2 GDP = +1.5%
    Posted by on October 29th, 2015 at 1:44 pm

    This morning, the government reported on economic growth for the third quarter, and it was a mediocre 1.5%. That was slightly below expectations.

    Q2 had impressive GDP growth of 3.9%. I’ve mentioned before that we’ve had individual quarters that were good, but we haven’t been able to get a run of two or three good quarters in a row. So Q2’s good number was followed by a blah one for Q3. One bright spot is that personal consumption expenditures rose by 3.2%.

    Q3 was also the end of the government’s fiscal year. We now know that GDP for the fiscal year was $17.803 trillion (this will be revised again and again).

    We also have the budget numbers as a percentage of GDP. Last fiscal year, Uncle Sam’s outlays came to 20.71% of GDP. Revenues were 18.25% and the deficit was 2.47%. The deficit as a percentage of GDP is the lowest since 2007. Revenues are the highest since 2001. Spending rose last year after falling for five straight years.

    As of September 30, federal debt held by the public as a percentage of GDP fell to 72.76%. That number has basically stabilized since Q1 2013. After 2018, the debt and deficits are projected to start rising.

  • Morning News: October 29, 2015
    Posted by on October 29th, 2015 at 7:11 am

    Li Floats New China Five-Year Growth Minimum of Around 6.5%

    Yen Strengthens as Hopes for BOJ Easing Dim

    America’s Merchandise Trade Gap Shrinks to Seven-Month Low

    Luxury Market Seen Heading for Weakest Year Since Lehman Crash

    Deutsche Bank to Shrink Workforce by About 26,000 in Revamp

    Sony Returns Profit in Second Quarter as Revival Takes Hold

    Low Oil Prices Take a Toll on Royal Dutch Shell

    Time Warner Cable Profit Tops Estimates on Internet Additions

    Walgreens Store Sales Seen as Hurdle for Rite Aid Deal Approval

    U.A.W. Leaders Approve Proposed G.M. Contract

    Alibaba Mirrors the Fits and Starts Rise of China’s New Economy

    Pfizer and Allergan Begin Merger Talks

    Nokia to Return $4.4 Billion to Shareholders

    Howard Lindzon: Alibaba and the Forty CNBC Talking Heads …and Self Regulation

    Cullen Roche: The Fed is Navigating Global Uncertainty Well (So Far)

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  • PayPal’s Q3 = 31 Cents per Share
    Posted by on October 28th, 2015 at 4:20 pm

    After the bell, PayPal (PYPL) reported Q3 earnings of 31 cents per share. This is the first report detached from eBay (EBAY).

    “PayPal is entirely focused on digital payments and transforming money for people around the world. This clear focus and our strong value proposition allowed us to deliver strong financial results in the third quarter,” said Dan Schulman, President and CEO of PayPal. “We are operating in a time when change is sweeping through the financial services industry driven by the rise of mobile technology and the acceleration of money becoming digital. These two massive trends play directly to our strengths and we are leveraging this transformation to extend and accelerate our lead.”

    For the full-year, PYPL expects earnings to range between $1.23 and $1.27 per share. Wall Street had been expecting $1.25 per share. In the after-hours session, the shares went from being +4% to -5%.

  • Today’s Fed Statement
    Posted by on October 28th, 2015 at 2:40 pm

    As expected, the Fed didn’t raise interest rates. We’re still near 0%. The Fed noted, correctly, that the economy has been slightly weaker recently.

    But the big news from today’s statement is that the Fed addressed the topic for the next meeting, which is in December, and what would lead them to raise rates then.

    Basically, the Fed is saying that it’s ready to raise rates but it wants to see “some further improvement” in the jobs market. See the third paragraph below.

    We’ll get two more jobs reports before the Fed’s next meeting. The October jobs report is due out on November 6. The November report will be out at the beginning of December.

    The market is interpreting this as a hawkish statement so we’re seeing all the typical action one would expect. The dollar and bank stocks are up, commodities are down. Utility stocks and emerging markets are down as well.

    The S&P 500 had been as high as 2,084.52 just before the statement. We’re currently at 2,071. Here’s the Fed’s statement:

    Information received since the Federal Open Market Committee met in September suggests that economic activity has been expanding at a moderate pace. Household spending and business fixed investment have been increasing at solid rates in recent months, and the housing sector has improved further; however, net exports have been soft. The pace of job gains slowed and the unemployment rate held steady. Nonetheless, labor market indicators, on balance, show that underutilization of labor resources has diminished since early this year. Inflation has continued to run below the Committee’s longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation moved slightly lower; survey-based measures of longer-term inflation expectations have remained stable.

    Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced but is monitoring global economic and financial developments. Inflation is anticipated to remain near its recent low level in the near term but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.

    To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

    The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

    When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.

    Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams. Voting against the action was Jeffrey M. Lacker, who preferred to raise the target range for the federal funds rate by 25 basis points at this meeting.

  • Fiserv Jumps to New High
    Posted by on October 28th, 2015 at 12:49 pm

    Fiserv (FISV) has been such a great performer for us for so long, I sometimes forget how much it’s helped us. Thanks to another great earnings report, the stock is at another new high. Fiserv has been on our Buy List all ten years.

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  • Morning News: October 28, 2015
    Posted by on October 28th, 2015 at 7:04 am

    U.K. Economy Slows in the Third Quarter

    Global Slowdown Weighs on Durable-Goods Orders

    House Votes Overwhelmingly to Reopen the Ex-Im Bank

    China Steel Head Says Demand Slumping at Unprecedented Speed

    Walgreens, Rite Aid Unite to Create Drugstore Giant

    Volkswagen, Hit by Emissions Scandal, Posts Its First Loss in Years

    Demand for iPhone Drives Apple Profit, but Outlook Is Muted

    Lloyds Hit by Mis-Selling Charge, Weaker Third Quarter

    Heineken Prepares for Megabrew With Estimate-Beating Sales

    Toshiba Agrees to Sell Image Sensor Unit to Sony

    Hilton Profit Soars on High Demand

    T-Mobile Profit Misses Estimates on High Cost of User Growth

    Chocolate Maker Hershey Posts 31% Drop in Profit

    Joshua Brown: The Riskalyze Report: Advisors Get Concentrated

    Jeff Carter: Tech Talent and Chicago

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  • AFLAC Beats and Raises Dividend
    Posted by on October 27th, 2015 at 6:29 pm

    AFLAC (AFL) is our fourth stock to report Q3 earnings today. For Q3, the duck stock earned $1.56 per share in operating earnings. Remember that for insurance companies, it’s better to look at operating earnings rather than net earnings. Currency exchange continues to be an issue for AFLAC. The weak yen knocked off 13 cents per share.

    Quarterly revenue dropped 12.1% to $5 billion. Compared with last year’s Q3, operating earnings fell from $685 million to $672 million. But thanks to share buybacks, operating earnings per share rose by 3.3%. Ignoring the yen, operating earnings per share increased by 11.9%. During Q3, the average exchange rate for the yen was down 14.9% from last year.

    For the first nine months of the year, operating earnings came to $4.60 per share, but AFLAC lost 40 cents due to the yen. Excluding that, operating earnings were up 2.9%.

    So far this year, AFLAC has repurchased 17.4 million shares for $1.1 billion. They still have 52.1 million shares left under the current plan.

    The board approved raising the quarterly dividend from 39 to 41 cents per share. That comes to $1.64 per share for the year, or 2.6% based on today’s closing price.

    Now for guidance. AFLAC said that if the yen stays between 120 and 125 on the dollar, then they expect operating earnings to range between $1.36 and $1.56 per share. That translates to a full-year range of $5.96 to $6.16 per share.

  • Fiserv and Express Scripts Beat and Raised
    Posted by on October 27th, 2015 at 4:14 pm

    Fiserv (FISV) just reported third-quarter earnings of $1.03 per share. That beat estimates by six cents per share. That’s up from 86 cents per share in last year’s third quarter.

    “Strong performance in the quarter was highlighted by revenue growth acceleration and a 20 percent increase in adjusted EPS,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “Our focus on delivering innovative, high-value client services should drive differentiated client experiences and continued growth.”

    For the first nine months of the year, Fiserv has made $2.86 per share. That’s up from $2.48 per share last year.

    The company has also raised its full-year guidance. The old range was $3.73 to $3.83 per share. The new range is $3.84 to $3.87 per share. Fiserv earned $3.37 per share last year. The new range implies Q4 earnings of 98 cents to $1.01 per share.

    Express Scripts (ESRX) reported third-quarter earnings of $1.45 per share, which was one penny better than estimates. They also narrowed their full-range. Previously, it was $5.46 to $5.54 per share. Now it’s $5.51 to $5.55 per share. Last year, they made $4.88 per share.

    “With the rising cost of prescription drugs, we are continuing our mission to make medicine more affordable and accessible for clients and patients,” said George Paz, Chairman and CEO. “Our innovative solutions, focused scale, specialized care and unmatched leadership manages cost more favorably for payers while improving health outcomes of our patients. Effective pharmacy benefit management has never been more critical to ensuring a cost-effective healthcare system in our country, and Express Scripts uniquely delivers.”

    “We are confident in the upper range of our expected retention rate, a reflection of the trust clients have in Express Scripts,” said Tim Wentworth, President. “Our core capabilities are differentiated and are in greater demand in the marketplace. Accredo, our specialty pharmacy, is one of our leading differentiators providing the best, most convenient care for patients with complex diseases. Our pharma services organization continues to provide differentiated value to manufacturers who want to bring innovative drugs to market in the safest way possible. It is clear that our unique collection of cost-saving solutions and our business model of client alignment position us well for continued growth.”

    Since ESRX has already earned $3.97 per share for the first three quarters of this year (up from $3.50 per share last year), the new guidance implies Q4 earnings of $1.54 to $1.58 per share.