Morning News: May 8, 2014
Posted by Eddy Elfenbein on May 8th, 2014 at 7:01 am

New Draghi Era Seen on Hold at ECB as Euro Area Recovers

China Trade Surplus Rises to $18.45 Billion in April

China, Vietnam, Philippines Collide Amid Escalating South China Sea Tensions

Barclays to Shrink Investment Bank and Create an Internal ‘Bad Bank’

Toyota Chalks up Record Profit, Vehicle Sales

’Fast Money’ Recap: Valuation Matters for Tesla

StanChart Says Weak First-Quarter Continued in April and May

21st Century Fox Profit Tops Projections Thanks to Super Bowl Ad Sales

Bayer’s $14.2 Billion Merck Buy Shows OTC Strategy Split

Alibaba Bets on a Growing Chinese Economy and New Consumers

Disney Is Winning Over The Youngest Viewers To Build Lifelong Fans

Apple Gives ex-Burberry CEO Potential $67 Million Signing Bonus as She Takes Reins as Retail Boss

Glencore Names ex-BP Boss Tony Hayward as Chairman

Cullen Roche: Yes, Inflation Really is Low

Roger Nusbaum: Hire Someone Or Go It Alone? Yes!

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DirecTV Is In Play
Posted by Eddy Elfenbein on May 7th, 2014 at 5:02 pm

Fasten your seat belts, DirecTV ($DTV) is in play.

Reuters:

DirecTV working with advisers on possible AT&T merger

DirecTV is working with advisers including Goldman Sachs to weigh a possible merger with AT&T , according to Dow Jones, which cited sources.

The two companies have been in talks since AT&T approached the satellite TV company about a deal, the sources said.

If you squint real hard, you can just barely make up when the story broke.

If you can’t see it, the news broke about 10 minutes before the close.

Update: The WSJ has more.

A deal for DirecTV would bolster AT&T’s ability to distribute movies and television shows at a time when it increasingly sees video as central to its future. The telecom company is pursuing a dual approach, expanding its U-verse pay TV service while also building so-called over-the-top services to deliver video content over broadband and wireless connections.

The combined company would have annual revenue of about $160 billion and may be better positioned to negotiate for the needed rights to TV shows and movies.

In addition, a deal for DirecTV could deliver significant financial benefits for AT&T at a time when Wall Street is concerned about the amount of cash needed to fund AT&T’s dividend. UBS analyst John Hodulik said in a recent research note that the deal would provide AT&T the free cash flow needed to pay its dividend for the next decade.

Moog Fights Back
Posted by Eddy Elfenbein on May 7th, 2014 at 2:25 pm

After getting creamed earlier this year, shares of Moog ($MOG-A) have slowly fought back. The stock has been as high as $67.78 today which is the highest in more than three months. The all-time high is $69.97 from December.

Is Twitter Cheap? I Have No Idea
Posted by Eddy Elfenbein on May 7th, 2014 at 12:24 pm

Shares of Twitter ($TWTR) have been getting clocked lately. This is part of the broader smash-up in momentum stocks that we’ve seen. The lock-up period for Twitter has just expired so insiders are now allowed to sell their shares. Even though a number of insiders said they wouldn’t jump ship, the market ain’t waiting around. The stock dropped 18% yesterday, and it’s down another 4% today.

So is Twitter cheap? Honestly, I have no idea. Twitter is one of those stocks that’s outside the realm of fundamental analysis. By any reasonable measure, the shares are vastly overpriced, but so are many stocks in embryonic sectors. If I can’t make it add up, then I stay away.

The Street expects to make four cents per share this year. That ain’t much for a $30 stock. It’s actually an increase from zero just a few weeks ago. For Q1, Twitter made a grand total of $183,000. That’s not per-share but the whole thing. That’s around what a successful restaurant makes. On a per-share basis, that works out to one-thirtieth of a penny.

The question now before the market is: “Will a momentum crack-up turn into a broader sell-off?” It’s too early to say for sure, but I’m inclined to think it won’t. The yield curve is still wide, and outside the momentum names, valuations are hardly excessive. Remember that a stock like McDonald’s, which is far more representative of the U.S. economy than many tech stocks, still yields close to 3.2%. That’s not far from the 30-year Treasury.

Cognizant Down 6% Despite Earnings Beat
Posted by Eddy Elfenbein on May 7th, 2014 at 10:49 am

Shares of Cognizant Technology Solutions ($CTSH) are down about 6% this morning after the IT provider’s earnings report. For Q1, CTSH earned 62 cents per share which was seven cents better than estimates. That’s up from 51 cents per share a year ago. Quarterly revenue rose 19.9% to $2.42 billion.

For Q2, the company sees revenues between $2.50 billion and $2.53 billion, and EPS of 62 cents. The Street had been expecting 63 cents per share. For all of 2014, they project revenues of at least $10.3 billion and earnings of $2.54 per share. Three months ago, CTSH had disappointed investors when they projected 2014 earnings of at last $2.51 per share (that’s post-split), while the Street had expected $2.54 per share.

“Cognizant continues to be well positioned to help clients as they face the secular shifts impacting their businesses,” said Francisco D’Souza, Chief Executive Officer. “Our broad set of capabilities and our compelling value proposition enable Cognizant to help clients simultaneously ‘run better’ and ‘run different,’ by not only driving efficiency in their current operations, but also helping them to re-imagine and re-design their business models.”

“We remain confident in the overall demand environment and in our ability to deliver our previously stated revenue guidance of at least $10.3 billion for 2014, up at least 16.5% over 2013,” said Gordon Coburn, President. “Our strategy of re-investing in our business to build strength across all of our growth horizons is clearly paying off. As the impact of digital technologies increasingly becomes a CEO level agenda item, Cognizant is well positioned to capitalize on this trend.”

These numbers look pretty good, and there’s not much surprising here. I don’t see what can justify today’s sell-off, but I’ve never understood short-term moves.

Morning News: May 7, 2014
Posted by Eddy Elfenbein on May 7th, 2014 at 6:36 am

Repsol’s $1.26 Billion YPF Stake Sale Ends Argentine Entanglement

SocGen Posts Surprise Profit Decline on Russia Writedown

Treasuries Gain Amid Speculation Yellen Will Say Growth Gradual

Yahoo’s Alibaba Windfall Means Firepower to Chase Google

Japan’s SoftBank Says Won’t Sell Alibaba Shares in Listing

Twitter Shares Plummet With Sell-Off

Fiat Chrysler Reveals Plans to Grow Sales by 2018

Park Your Tesla Shares Ahead of Earnings

Jim Cramer: Here’s Why Apple Broke $600 A Share

Walt Disney Co. Earnings Surge 27% on Strength of Film Studio

HSBC Posts Fall in First-Quarter Profit

Freeport-McMoRan Announces Agreement to Sell Eagle Ford Interests for $3.1 Billion

Commerzbank Profit Misses Forecast as Battles to Turn Round

Edward Harrison: Charts of the Day: Jobless Claims as a Real-Time Economic Indicator

Jeff Carter: Innovation Does Create Jobs-Software Doesn’t Eat The World

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Big Earnings Beat for DTV
Posted by Eddy Elfenbein on May 6th, 2014 at 7:55 am

DirecTV ($DTV) just reported Q1 earnings of $1.63 per share. That’s 15 cents per share better than expectations. Quarterly revenue rose 4% to $7.86 billion.

“Our first quarter results continue to demonstrate the strong execution of our operations,” said Mike White, president and CEO of DIRECTV. “In the U.S., operating profit before depreciation and amortization margin expanded year-over-year for the third consecutive quarter, highlighting our commitment to profitably grow our businesses through significantly improving the customer service experience, disciplined expense management and productivity initiatives. In Latin America, despite challenging macroeconomic headwinds, we continue to profitably expand our share of the growing pay TV market while delivering adjusted OPBDA margin of 30%. In addition, by leveraging the achievements of both DIRECTV U.S. and DIRECTV Latin America with the strength and stability of our cash flow, we continue to return cash to shareholders through stock repurchases at an industry leading clip.”

Morning News: May 6, 2014
Posted by Eddy Elfenbein on May 6th, 2014 at 6:34 am

French Services Activity Grows at Weaker Pace in April

OECD Warns Government Against Harsh Budget

GE Offer for Alstom Is Not Acceptable, Hollande Says

UK’s Financial Research Group Markit Reveals Plans For US Float

Feds Wrestle With ‘Too Big to Jail’

UBS Profit Beats Forecasts as Unveils Restructuring

Bayer to Pay $14.2 Billion for Merck’s Consumer Care Division

Target’s Decision to Remove CEO Rattles Investors

Tyson Profit Surges, But Hog Virus Mutes Guidance

Google and Amazon Launch Same-Day Delivery in L.A. Area

AIG Profit Falls 27%

Coke Just Stopped Using A Chemical That’s Also A Flame Retardant — But That’s Not The Worst Thing That’s In Its Drinks

Three Bankers Bolster Blankfein as Goldman Trading Sinks

Howard Lindzon: The Pressure of This Boom….Revisited

John Hempton: Just How Weak Are Bill Ackman’s Examples?

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Sharp Turn Towards Energy Stocks
Posted by Eddy Elfenbein on May 5th, 2014 at 5:20 pm

For the first time in a long time, the energy sector has been popular. Since March 20, the Energy Sector ETF ($XLE) has been beating the S&P 500.

Bonds Are Holding Up
Posted by Eddy Elfenbein on May 5th, 2014 at 10:24 am

The 10-year yield is down to a six-month low today. Here’s a look at the S&P 500 compared with the Long-Term Bond ETF ($TLT). After getting kicked around for a long time, bonds are in the lead this year. Interestingly, the yields for the 10-year and S&P 500 are pretty close.