Morning News: October 24, 2013
Posted by Eddy Elfenbein on October 24th, 2013 at 6:06 am

China’s Manufacturing Strengthens in Boost to Recovery

Euro Hedging Jumps as Europe Exporters Bemoan Gains

SEC Crowdfunding Plan Wins Fans

Jury Finds Bank of America Liable in Mortgage Case

Caterpillar Races to Cut Back

McKesson Agrees to Buy Celesio for $5.4 Billion

Pinterest Raises $225 Million, as Valuation Jumps to $3.8 Billion

Daimler Profit Beats Estimates as CLA Boosts Car Sales

Unilever Pinched by Slowdown in Emerging Markets

AT&T 3rd-Quarter Net Rises 4.9% as Subscriber Count Grows

LG Electronics’ Third Quarter Hurt By Handset Competition

Hyundai Motor Posts First Profit Gain This Year On China, Brazil Sales

Starbucks Opens Its First Tea Bar As CEO Schultz Bets On $90 Billion Market

Jeff Miller: What Happened to the Part-time Employment Story?

Joshua Brown: Beta Managers, This is Your New Benchmark

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The 10-Years Falls Below 2.5%
Posted by Eddy Elfenbein on October 23rd, 2013 at 12:12 pm

The bond market was rocked earlier this year as the yield on the 10-year Treasury jumped from 1.6% in early May to nearly 3% by September. How things have changed. The yield has gradually drifted lower over the past few weeks, and the yield finally dipped below 2.5% today.

If the yield falls to 2.46%, that will match a four-month low.

CR Bard’s Q4 Guidance
Posted by Eddy Elfenbein on October 23rd, 2013 at 11:14 am

Shares of CR Bard ($BCR) are rallying in the wake of yesterday’s good earnings report. BCR has been as high as $137 today which is a 7.9% gain from yesterday’s close.

Here’s a look at what Bard had to say about guidance on their conference call (courtesy of Seeking Alpha):

Now moving to financial guidance. For Q4, we are expecting constant currency sales growth between 1% and 3%. This includes the impact of the Q4 acquisitions and the divestiture of EP, which essentially offset each other in the quarter.

Although our Q3 organic revenue growth was a bit stronger than that, we remain cautious about the sales environment, particularly in the U.S. We have seen the same survey data that you have that suggests no reliable improvement in physician office visits or hospital admissions, and we have some tough comps in Q4, specifically in biopsy and soft tissue repair. Of course, recognizing the Gore royalty as revenue now looks like a 2014 event.

From an EPS standpoint, excluding items affecting comparability, our 2013 guidance after our acquisition call on September 4, including the $0.10 of dilution from EP and the acquisitions and excluding Gore, was between $5.55 and $5.60. On the back of the Q3 beat, we are raising the full year 2013 adjusted EPS guidance to between $5.70 and $5.75 a share, which puts Q4 between $1.34 and $1.39 per share.

Q4 is obviously a little muddy with EP moving out of the P&L and the adjustments we are making around that, while at the same time integrating the new businesses and the start-up costs associated with those transactions. We’re very pleased that with all of these moving parts, excluding the Gore royalty, we’re on track to bring the year in where we said we would from both the sales and profitability perspectives.

The Sensational Success of Small-Cap Stocks
Posted by Eddy Elfenbein on October 23rd, 2013 at 11:12 am

Roben Farzad writes on the amazing success of small-cap stocks:

Zero in, for example, on the Russell 2000. It’s up 30 percent this year and has delivered a total return of 242 percent since the market hit its crisis low in March 2009, smartly ahead of the 183 percent total gain provided by the S&P 500. From 1926 through 2012, small-cap stocks averaged an annual return of 11.9 percent, compared with 9.8 percent for large caps, according to Morningstar (MORN) Ibbotson data—turning an original $10,000 investment into $158 million, compared with $31 million in large companies.

Morning News: October 23, 2013
Posted by Eddy Elfenbein on October 23rd, 2013 at 6:14 am

ECB Sets Tougher Bank Health Tests

Spain Exits Recession, Inches Back to Growth in Third Quarter: Bank of Spain

U.K. Gilts Rise a Second Day as BOE Says Lower Rates Aid Growth

Oil Prices Fall On Weak US Jobs and Likely High Stockpiles

Jobs Report Tells Us the U.S. Economy Still in Desperate Need of Electroshock

Weak Job Gains May Cause Delay in Action by Fed

U.S. Stocks Rise as S&P 500 Annual Gain Nears Biggest Since 2003

Twitter Secures $1 Billion Credit Line Ahead of IPO

JPMorgan Nears $6 Billion Settlement With Investors

Heineken Cuts Profit Outlook as Central European Sales Slide

Broadcom Third-Quarter Profit Rises 44%; Shares Off on Outlook

Carl Icahn Cuts Netflix Stake, Pockets $800 Million Profit

Amazon Raises Free Shipping Minimum to $35

Jeff Carter: Anecdotes for The Bears

Cullen Roche: Warren Buffett on the Role of Luck

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CR Bard Earns $1.50 Per Share
Posted by Eddy Elfenbein on October 22nd, 2013 at 4:35 pm

For Q3, CR Bard ($BCR) reports earnings of $1.50 per share which is 10 cents more than consensus.

C. R. Bard, Inc. today reported 2013 third quarter financial results. Third quarter 2013 net sales were $758.0 million, an increase of 5 percent over the prior-year period on a reported basis. Excluding the impact of foreign exchange, third quarter 2013 net sales increased 4 percent over the prior-year period.

For the third quarter 2013, net sales in the U.S. were $500.3 million, an increase of 3 percent over the prior-year period. Net sales outside the U.S. were $257.7 million, an increase of 8 percent over the prior-year period on a reported basis. Excluding the impact of foreign exchange, third quarter 2013 net sales outside the U.S. increased 6 percent over the prior-year period.

For the third quarter 2013, net income was $93.2 million and diluted earnings per share were $1.15, a decrease of 28 percent and 23 percent, respectively, as compared to third quarter 2012 results. Adjusting for items that affect comparability of results between periods as detailed in the tables below, third quarter 2013 net income was $122.3 million and diluted earnings per share were $1.50, a decrease of 14 percent and 9 percent, respectively, as compared to third quarter 2012 results.

Timothy M. Ring, chairman and chief executive officer, commented, “We are pleased with the results this quarter, exceeding expectations on both the top and bottom line. Consistent with our plan, we continue to focus on shifting the mix of the portfolio to faster revenue growth through targeted investments and acquisitions. Our business development activities, together with the results this quarter and other recent events, represent important steps in helping us improve the growth profile of the business going forward.”

The shares are up 2.4% in the after hours market.

The Success of Colgate-Palmolive (CL)
Posted by Eddy Elfenbein on October 22nd, 2013 at 10:57 am

One of my pet peeves about the financial media is the intense concentration on popular stocks while boring stocks are widely ignored. Right now, the investment world is going nuts for the earnings report from Netflix ($NFLX). You realize there are lots of stocks out there?

Study after study has shown that boring stocks, ones that are less volatile, do better in the long run. Yet investors always seem uninterested in the boring issues. The simple fact is that there’s a lot of money to be made in the duller areas of the economy.

I think a great example is Colgate-Palmolive ($CL). The company is in the exciting business of soap, toothpaste, deodorant and other household products. Sure, they’re not inventing the new cellphone or electric car, but they make stuff everyone uses every day. Check out the long-term stock chart. CL has been an astounding performer and it’s crushed the S&P 500.

Over the last 33 years, Colgate is up an amazing 12,500% while the S&P 500 is up 1,220%. That means that CL has lapped the market nearly 10 times.

But what’s particularly impressive about Colgate’s run is the steadiness of the gains. There are a lot of stocks that have done very well but it’s because they were market darlings for a year or two. Colgate, however, has continually churned out the gains for many years. An investor in CL would have creamed the vast majority of hedge funds.

Here’s CL divided by the S&P 500. I’ve added a 6.5% trend line. You can see that CL has consistently beaten the market for many years.

Colgate will report its earnings tomorrow. Unfortunately, I think the stock is overpriced here. But if the stock were to come down a lot, this is one I’d love to add to our Buy List.

The S&P 500 Hits 1,757
Posted by Eddy Elfenbein on October 22nd, 2013 at 10:28 am

The market is having a very good reaction to today’s jobs news. The S&P 500 is up to 1,757 which is another all-time high. Shares of Medtronic ($MDT) are up to 56.80 which is the highest in six years.

AFLAC ($AFL) is at a five-year high, and it’s not far from a new all-time high. Fiserv ($FISV), Ross Stores ($ROST), Harris ($HRS) and Stryker ($SYK) are also at new highs today.

September NFP = +148,000
Posted by Eddy Elfenbein on October 22nd, 2013 at 9:55 am

As a result of the government shutdown, September’s jobs report was delayed until today. This delay is particularly frustrating because these reports are very important in determining the Federal Reserve’s policies.

The Labor Department reported that the economy created 148,000 jobs last month which was well below Wall Street’s estimate of 180,000. The unemployment rate ticked down to 7.2% which is the lowest in nearly five years.

How can the unemployment rate fall despite sluggish jobs growth? The answer is that the labor force participation rate is very low. Simply put, fewer Americans are looking for work. For September, only 63.2% of Americans were in the jobs market. That matches the lowest rate in 35 years.

We’re in an odd situation with the jobs report because bad news from that actually points towards good news for stocks. The market is currently up this morning—the S&P 500 just broke through 1,750. Traders are guessing that the sluggish jobs numbers will cause the Fed to delay any taper ideas until next year. Of course, that’s when Janet Yellen will be at the helm.

In his press conference from last month, Ben Bernanke was very clear that the Fed isn’t following any calendar time table or some magic number that will trigger a taper. Instead, they’re looking at the broad trends in the economy. The Fed meets again next week.

Morning News: October 22, 2013
Posted by Eddy Elfenbein on October 22nd, 2013 at 6:10 am

Europe Breakup Forces Mount as Union Relevance Fades

China September Home Price Growth at Near Three-year High

Beautiful China Tourism Pitch Misfires Amid Smog

China Inc. Battles Big Oil for Century’s Biggest Find

An Odd Alliance in Patagonia

Efficiency, Natural Gas Keep Pushing U.S. Carbon Emissions Down

Holder Demand for JPMorgan Plea Signals Hard-Line Shift

Famous Morgan Stanley Strategist Returns, And He Has A Big Warning To The Investment Community About Inequality

Netflix Soars as Hastings Seeks to Damp ‘Euphoria’

McDonald’s Forecasts Tough Fourth Quarter

Texas Instruments Reports 20% Profit Decline

Reckitt Benckiser Reviews Pharma Unit, Could Sell It

J.C. Penney Scales Back Martha Stewart Partnership

Howard Lindzon: The Year 2014 – MegaDeals…$35 Smartphones….and $35 Sandwiches

Marc Chandler: The Investment Climate in Six Points

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