• Bed Bath & Beyond Earns $1.16 Per Share
    Posted by on September 25th, 2013 at 4:20 pm

    Bed Bath & Beyond‘s ($BBBY) earnings report is out. The company earned $1.16 per share for fiscal Q2 which was at the top of their range.

    I like how BBBY really buys back shares in an effort to reduce share count. Consider this: BBBY’s net income is up 37% from Q2 three years ago, but EPS is up 66%. That’s how real buybacks work. Not phony ones that mask executive compensation.

    For Q3, they see earnings ranging between $1.11 to $1.16 per share (which is exactly what they said for Q2).

    For the year, BBBY sees earnings coming in between $4.88 to $5.01 per share.

    Bed Bath & Beyond Inc. today reported net earnings of $1.16 per diluted share ($249.3 million) in the fiscal second quarter ended August 31, 2013, an increase of approximately 18.4% versus net earnings of $0.98 per diluted share ($224.3 million) in the same quarter a year ago. Net sales for the fiscal second quarter of 2013 were approximately $2.824 billion, an increase of approximately 8.9% from net sales of approximately $2.593 billion reported in the fiscal second quarter of 2012. Comparable store sales in the fiscal second quarter of 2013 increased by approximately 3.7%, compared with an increase of approximately 3.5% in last year’s fiscal second quarter.

    During the fiscal second quarter of 2013, the Company repurchased approximately $257 million of its common stock, representing approximately 3.5 million shares. As of August 31, 2013, the remaining balance of the existing share repurchase program authorized in December 2012 was approximately $1.8 billion.

    For the fiscal first half ended August 31, 2013, the Company reported net earnings of $2.09 per diluted share ($451.8 million), an increase of approximately 11.8% over net earnings of $1.87 per diluted share ($431.2 million) in the corresponding period a year ago. Net sales for the fiscal first half of 2013 were approximately $5.436 billion, an increase of approximately 13.0% from net sales of approximately $4.811 billion in the corresponding period a year ago. Comparable store sales for the fiscal first half of 2013 increased by approximately 3.5%, compared with an increase of approximately 3.3% in last year’s fiscal first half.

    The Company is modeling net earnings per diluted share in 2013 to be approximately $1.11 to $1.16 for the fiscal third quarter, $1.70 to $1.77 for the fiscal fourth quarter, and to be approximately $4.88 to $5.01 for the full year, which will include Cost Plus, Inc. (“World Market”) and Linen Holdings for all of fiscal 2013.

    Here are the sales and earnings figures for the past few quarters:

    Quarter Sales Gross Profit Operating Profit Net Profit EPS
    May-99 $356,633 $146,214 $28,015 $17,883 $0.06
    Aug-99 $451,715 $185,570 $53,580 $33,247 $0.12
    Nov-00 $480,145 $196,784 $50,607 $31,707 $0.11
    Feb-00 $569,012 $238,233 $77,138 $48,392 $0.17
    May-00 $459,163 $187,293 $36,339 $23,364 $0.08
    Aug-00 $589,381 $241,284 $70,009 $43,578 $0.15
    Nov-01 $602,004 $246,080 $64,592 $40,665 $0.14
    Feb-01 $746,107 $311,802 $101,898 $64,315 $0.22
    May-01 $575,833 $234,959 $45,602 $30,007 $0.10
    Aug-01 $713,636 $291,342 $84,672 $53,954 $0.18
    Nov-02 $759,438 $311,030 $83,749 $52,964 $0.18
    Feb-02 $879,055 $370,235 $132,077 $82,674 $0.28
    May-02 $776,798 $318,362 $72,701 $46,299 $0.15
    Aug-02 $903,044 $370,335 $119,687 $75,459 $0.25
    Nov-03 $936,030 $386,224 $119,228 $75,112 $0.25
    Feb-03 $1,049,292 $443,626 $168,441 $105,309 $0.35
    May-03 $893,868 $367,180 $90,450 $57,508 $0.19
    Aug-03 $1,111,445 $459,145 $155,867 $97,208 $0.32
    Nov-04 $1,174,740 $486,987 $161,459 $100,506 $0.33
    Feb-04 $1,297,928 $563,352 $231,567 $144,248 $0.47
    May-04 $1,100,917 $456,774 $128,707 $82,049 $0.27
    Aug-04 $1,273,960 $530,829 $189,108 $120,008 $0.39
    Nov-05 $1,305,155 $548,152 $190,978 $121,927 $0.40
    Feb-05 $1,467,646 $650,546 $283,621 $180,980 $0.59
    May-05 $1,244,421 $520,781 $150,884 $98,903 $0.33
    Aug-05 $1,431,182 $601,784 $217,877 $141,402 $0.47
    Nov-06 $1,448,680 $615,363 $205,493 $134,620 $0.45
    Feb-06 $1,685,279 $747,820 $304,917 $197,922 $0.67
    May-06 $1,395,963 $590,098 $148,750 $100,431 $0.35
    Aug-06 $1,607,239 $678,249 $219,622 $145,535 $0.51
    Nov-07 $1,619,240 $704,073 $211,134 $142,436 $0.50
    Feb-07 $1,994,987 $862,982 $309,895 $205,842 $0.72
    May-07 $1,553,293 $646,109 $154,391 $104,647 $0.38
    Aug-07 $1,767,716 $732,158 $211,037 $147,008 $0.55
    Nov-08 $1,794,747 $747,866 $203,152 $138,232 $0.52
    Feb-08 $1,933,186 $799,098 $259,442 $172,921 $0.66
    May-08 $1,648,491 $656,000 $118,819 $76,777 $0.30
    Aug-08 $1,853,892 $739,321 $187,421 $119,268 $0.46
    Nov-08 $1,782,683 $692,857 $136,374 $87,700 $0.34
    Feb-09 $1,923,274 $785,058 $231,282 $141,378 $0.55
    May-09 $1,694,340 $666,818 $142,304 $87,172 $0.34
    Aug-09 $1,914,909 $773,393 $222,031 $135,531 $0.52
    Nov-09 $1,975,465 $812,412 $245,611 $151,288 $0.58
    Feb-10 $2,244,079 $955,496 $370,741 $226,042 $0.86
    May-10 $1,923,051 $775,036 $225,394 $137,553 $0.52
    Aug-10 $2,136,730 $874,918 $296,902 $181,755 $0.70
    Nov-10 $2,193,755 $896,508 $305,110 $188,574 $0.74
    Feb-11 $2,504,967 $1,076,467 $461,052 $283,451 $1.12
    May-11 $2,109,951 $857,572 $288,948 $180,578 $0.72
    Aug-11 $2,314,064 $950,999 $371,636 $229,372 $0.93
    Nov-11 $2,343,561 $958,693 $357,020 $228,544 $0.95
    Feb-12 $2,732,314 $1,163,669 $550,765 $351,043 $1.48
    May-12 $2,218,292 $887,199 $313,398 $206,836 $0.89
    Aug-12 $2,593,015 $1,032,669 $365,137 $224,330 $0.98
    Nov-12 $2,701,801 $1,074,010 $361,649 $232,750 $1.03
    Feb-13 $3,401,477 $1,394,877 $598,034 $373,872 $1.68
    May-13 $2,612,140 $1,032,971 $323,101 $202,490 $0.93
    Aug-13 $2,823,672 $1,113,484 $389,766 $249,304 $1.16

  • New Home Sales and Durable Goods Order
    Posted by on September 25th, 2013 at 11:15 am

    We had two economic reports today. The first said that sales of new homes rose 7.9% last month. This was nice to see because sales had dropped sharply in July. Since mortgage rates have risen, analysts have been looking for evidence of weakness in the housing sector. While there have been some bumps, there’s no evidence yet of a broad downturn in housing. Homebuilder confidence is at an eight-year high. In the past year, sales of new homes are up 12.6%.

    The number of new homes available for sale rose 3.6 percent from July to 175,000. That’s still relatively lean — at the August sales’ pace it would take five months to exhaust the supply.

    The median price of a new home sold in August fell 0.7 percent from July to $254,600.

    Sales rose in all but one region of the country in August, increasing 19.6 percent in the Midwest, 15.3 percent in the South and 8.8 percent in the Northeast. Sales plunged 14.6 percent in the West, the second straight month of double-digit declines.

    The Commerce Department reported that durable goods (items expected to last at least three years) rose 0.1% in August. Like new home sales, this was a turnaround from a drop in July when durable goods fell 8.1%. Much of that drop was due to a fall in aircraft orders.

    The August orders were held back by a decline in demand for defense aircraft and other military goods. That could be related to steep government spending cuts that took effect in March. Excluding defense spending, orders rose 0.5%.

    Auto factories reported a 2.4% increase in orders, the biggest in six months.

    And orders for so-called core capital goods rose 1.5%, after falling 3.3% the previous month. Core capital goods are a good measure of businesses’ confidence in the economy and include items that point to expansion, such as machinery and computers.

    Durable goods shipments rose 0.9% in August, after two months of declines. The shipments figures are used to calculate economic growth.

  • Stryker Buys MAKO for $1.65 Billion
    Posted by on September 25th, 2013 at 10:29 am

    One of our medical device companies, Stryker ($SYK), said this morning that it’s buying MAKO Surgical ($MAKO) for $1.65 billion. That’s $30 per share which is an 86% premium based on yesterday’s close. Stryker clearly wanted MAKO bad.

    MAKO is involved in robotic-assisted surgery. While the company isn’t yet profitable, Wall Street places a high premium on stocks in this field. MAKO is expected to generate revenue of $126 million this year, so Stryker is paying 13 times that. That’s a hefty price tag.

    I’m usually not a fan of major acquisitions. While this is a large deal, it’s still worth about 6% of Stryker’s market value. Shares of SYK are down about 2.4% which usually happens to the acquirer. I’m inclined to give Stryker the benefit of the doubt. Afterall, the company has grown its profits nicely for several years so someone there knows what they’re doing.

    I was glad to see Wells Fargo reaffirm their Outperform rating for SYK. A few other firms had recently raised their ratings on Stryker before the deal. RBC Capital just raised their price target from $74 to $81. Deutsche Bank went from $75 to $79. Earlier this month, Credit Suisse went Neutral to Outperform.

  • Morning News: September 25, 2013
    Posted by on September 25th, 2013 at 7:03 am

    Sweden Raises $3.4 Billion After Selling Remaining Nordea Stake

    Tokyo Electron Takeover Could be a Mold-breaker for Japan

    Big Banks Cut Basel III Shortfall by $112 Billion at End of 2012

    The Remarkable Strength of the Euro

    Obama’s Health-Law Premiums Test Limits of Affordability

    Rate Of Home Price Growth ‘May Have Peaked,’ Says Case-Shiller

    Poker-Faced Marchionne Is Playing A Dangerous Game With Chrysler IPO

    Alibaba Said to Shift Target from Hong Kong to U.S. for I.P.O.

    SAC Is Said to Negotiate Settlement of Charges

    VietJet Said to Plan $10 Billion Airbus Order to Expand

    Samsung Dazzles Phablet Followers With More Girth, Size

    Amazon Unveils Faster Kindle Fires to Take On Apple

    The End of Poverty, Soon

    Roger Nusbaum: Ideological Battle and 2 Million Page Views

    Howard Lindzon: Two Idiots Log Into a CrowdFunding Site…and Crowds Are Not Idiots, Just a Little More Dangerous!

    Be sure to follow me on Twitter.

  • Two Year Rally for Small-Caps and Cyclicals
    Posted by on September 24th, 2013 at 1:28 pm

    We’re coming up on the second anniversary of the big low from October 2011. The stock market has been red hot ever since.

    The two big areas of outperformance have been cyclical stocks and small-cap stocks. Understand that small-cap indexes tend to have a strong cyclical bias. The large-cap indexes have many of the very large multinationals, while the small-cap indexes have domestic industrial companies.

    You can really see the effect by looking at this chart.

    big.chart09242013a

    The black line is the Russell 2000 which is a small-cap index. The blue line is the Morgan Stanley Cyclical Index. The two lines follow each other very closely.

    The lower two lines are the orange for the S&P 500 and red for the S&P 100. Even though the S&P 100 contains 20% as many stocks, due to price weighting, it mirrors the S&P 500 very closely.

  • The Three-Day Losing Streak May End
    Posted by on September 24th, 2013 at 11:50 am

    It’s a fairly quiet morning on Wall Street. The S&P 500 was negative and has since turned positive. This may end a three-day losing skid for the index. The cyclicals are leading the way today with the Industrials and Consumer Discretionaries up the most. Small-cap indexes are doing especially well.

    Today’s Case-Shiller report on home prices showed that the growth in prices may be slowing. Home prices rose 1.8% in July which was down from 2.2% growth in June. This could be evidence that higher mortgage costs are finally being felt by home buyers.

    fredgraph09242013

    With the Fed’s taper/no taper decision, the five-year Treasury has become the most interesting security to watch. In May, the five-year yielded 0.65%. By September 5th, it had jumped to 1.85%. Last week, it dropped back to 1.42% and may go even lower today. The five-year is currently at 1.43%.

    On our Buy List, Bed Bath & Beyond ($BBBY) is due to report tomorrow. Three months ago, BBBY gave us a range of $1.11 to $1.16 per share. I like this stock a lot. Moog ($MOGA) made it to another 52-week high.

    Finally, I noticed that Tyler Technologies ($TYL) is at $87.59 today. You could have picked up one share of TYL in 2001 for $1.

  • Morning News: September 24, 2013
    Posted by on September 24th, 2013 at 6:02 am

    China to Lift Ban on Facebook, Twitter in Shanghai Free Trade Zone

    Speedy Trains Transform China

    India’s Cabinet Likely to Consider Shale-Gas Policy Tuesday

    Bangladesh Garment Factories Close as Wage Protests Turn Violent

    South Korea Rejects Boeing In $7.7 Billion Fighter Jet Deal

    Fed in ‘Monetary Roach Motel,’ Won’t Taper: Schiff

    Goldman: We Expect Janet Yellen to Get the Fed Chair Nomination Next Week

    Loans Challenge Big Money’s Leasing Model For U.S. Rooftop Solar

    BlackBerry’s Descent Begets Cheapest Tech Deal

    Marchionne Files for Chrysler IPO to Push Stalled Merger

    On JP Morgan and What Makes a Criminal Case

    There Have Been Some Pretty Harsh Changes at Heinz Since Warren Buffett Bought the Company

    How Austerity Wrecked the American Economy

    Joshua Brown: Don’t Feel Bad, The Pros Can’t Pick Managers, Either

    Cullen Roche: More Thoughts on the Inherent Risk of Stock Market Focused Policy

    Be sure to follow me on Twitter.

  • The Big Picture Investment Conference
    Posted by on September 23rd, 2013 at 7:58 pm

    If you’re going to be in New York City in two weeks, I highly recommend you check out The Big Picture Investment Conference hosted by Barry Ritholtz. The conference will be on Tuesday, October 8th at the McGraw-Hill Auditorium (1221 Ave. of the Americas).

    Barry has an all-star line-up for this year’s conference. Of course, Barry will be a speaker, and I’m looking forward to his insights. Plus Josh Brown, aka indomitable Reformed Broker, will speak. Josh, by the way, is also Barry’s partner at the new investment firm Ritholtz Wealth Management.

    I’m also looking forward to hearing Art Cashin, who’s one of the true legends on Wall Street, James O’Shaughnessy, author of the investing classic What Works On Wall Street, Mike Santoli, a very insightful writer at Yahoo Finance and Michael Mauboussin, who’s one the most original thinkers on Wall Street these days.

    You can register for the conference here.

  • Morning News: September 23, 2013
    Posted by on September 23rd, 2013 at 6:11 am

    Euro-Area Services Strengthen as Demand Improves

    Bailed-Out Nations Get Another Four Years of Merkel

    Monte Paschi Freezes Coupon Payments on Hybrid Debt

    China Manufacturing Gauge Increases to Six-Month High

    Chinese Titan Takes Aim at Hollywood

    Yellen Would Bring Tougher Tone to Fed

    BlackBerry Makes Risky Bet on Services

    Ad Tech Provider Rocket Fuel Shares Nearly Double In Debut

    When Trying to Follow Rules Isn’t Enough

    Larry Ellison: Oracle’s New Products Make Data Fly Around ‘At Ungodly Speeds.’

    Why $100,000 Salary May Yield Retirement Flipping Burgers

    Collectors of Royalties for Music Publishers May See Better Results

    Proof That The Fingerprint Sensor On The iPhone 5S Isn’t Just A Gimmick

    Jeff Miller: Weighing the Week Ahead: Will Washington Gridlock Scuttle Stocks?

    Howard Lindzon: Attacking the Markets…Keep it Simple and BEWARE of the Octopus (Not the Vampire Squid)

    Be sure to follow me on Twitter.

  • Barclay’s Upgrades Cognizant
    Posted by on September 21st, 2013 at 8:33 pm

    Via Barron’s. Barclays raises their target on Cognizant ($CTSH) from $80 to $97.

    Over the past two quarters, Cognizant has demonstrated solid fundamentals, and we see accelerating trends in 1) Europe, with both consulting and outsourcing showing a pickup; 2) health care, which we expect to improve on stronger payer trends; and 3) financial services, with sustainable growth in upper teens. In addition, with what now appears to be a delay in the U.S. immigration bill, Cognizant [which receives a large number of H-1B temporary worker visas to bring tech workers into the U.S.] should see its overhang of legislative uncertainty subside. Combining that with solid fundamentals trends, near-term catalysts on the horizon, and attractive valuation, we are upgrading CTSH shares from Equal Weight to Overweight.

    With the shares up ~10% year to date, versus the Standard & Poor’s 500 (up ~20%), and trading at only a ~2 times price/earnings premium over the S&P, versus a two-year average premium of ~five times, we believe CTSH remains undervalued, despite the recent increase from the mid-60s to ~$80. Applying a ~17-times multiplier to our 2015 estimate, we raise our price target from $80 to $97.