Morning News: July 24, 2013
Posted by Eddy Elfenbein on July 24th, 2013 at 6:48 am

China Manufacturing Weakens Further as Slowdown Deepens

Weak Yen Not Enough for Japan Exporters as China Slows

CFTC Skips Votes, Bitcoin Ponzi, SAC E-Mail

Defense Firms Weathering Budget Cuts More Easily Than Expected

Apple Plots Return to Growth After Coping With Aging Lineup

Ford Motor Company on a Big Roller Coaster

LG Electronics Profit Falls 8%

Discover Financial’s Profit Jumps 13% in 2Q

Cisco Acquires Sourcefire for $2.7 Billion

PacWest to Acquire CapitalSource in $2.3 Billion L.A. Bank Merger

Volvo Shares Rise as Truck Orders Top Forecasts

Panera Bread Earnings Miss Wall Street Estimates

Crimingal Indictment is Expected for SAC Capital Advisors

Joshua Brown: And Then Everyone’s Models Were Trashed in One Month

Cullen Roche: Interest On Excess Reserves isn’t Keeping Inflation Low

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CR Bard’s Outlook for Q3
Posted by Eddy Elfenbein on July 23rd, 2013 at 10:11 pm

From today’s earnings call:

Now moving to financial guidance. For Q3, we are expecting constant currency sales growth between 1% and 3%, excluding any royalties from Gore. Our original sales guidance for the year was 0% to 3% growth, excluding the Gore royalties, and we expect to be squarely within that range. With respect to the Gore timing, as Tim said, we still expect cash in hand prior to the end of 2013.

From an EPS standpoint, excluding items affecting comparability, we see the third quarter in the range of $1.37 to $1.41 per share. To be clear, this guidance reflects the fact that we don’t expect to have final resolution of the Gore matter this month. And as we previously discussed, that reduces adjusted EPS by about $0.30 per share for the quarter.

With respect to full year EPS guidance, we’ll be in a better position to update you once we have seen the rulings from the District Court. Also, I’ll just finish by reminding you that in conjunction with the announcement of the divestiture of our EP business, we told you that would be about $0.05 dilutive to 2013 EPS assuming a late Q3 close.

CR Bard Earned $1.42 Per Share for Q2
Posted by Eddy Elfenbein on July 23rd, 2013 at 4:18 pm

Here come the earnings. CR Bard ($BCR) just announced Q2 earnings of $1.42 per share for Q2. That’s four cents more than expectations. Revenues rose 2.3% to $759.9 million which beat expectations by $9.8 million.

Timothy M. Ring, chairman and chief executive officer, commented, “Our operating results this quarter exceeded our expectations. We continue to focus on the execution of our investment plan, which we believe will shift the mix of our portfolio to faster growing products and geographies and contribute to long-term sustainable leadership positions in our markets.”

Two Stories to Highlight
Posted by Eddy Elfenbein on July 23rd, 2013 at 11:43 am

We’re coming up on noon, and the stock market opened just a tad higher, but we’re currently just a tad lower on the day. Volatility has really dropped lately. This morning, the $VIX was at its lowest level since April 12.

I have two small stories that I want to highlight. One is that Ford ($F) has announced it will hire 3,000 salaried employees which includes 800 white-collar jobs at HQ; “Global employment is up to 175K from a recession-low of 158K.”

The other is that Wells Fargo ($WFC) is crushing it in mortgage lending.

When a Wells Fargo stagecoach rolled through lower Manhattan two years ago to mark the rebranding of former Wachovia Corp. bank branches, some New Yorkers laughed. Rival bankers weren’t among them.

The San Francisco-based bank has become the dominant U.S. mortgage lender, grabbing an unprecedented 28.8% share of all home loans issued nationwide last year, up from 11.2% in 2007, the year before it bought Wachovia. Its home-loan production hit $524 billion last year, the largest annual total ever for one lender and greater than the output of the next five largest lenders combined, according to the publication Inside Mortgage Finance.

In the lucrative Manhattan market, Wells issued almost 20% of new home loans—almost equal to the volume of its two biggest competitors together, according to real-estate research firm CoreLogic Inc. In San Francisco, it made 21% of new loans, in Los Angeles, 12%, and in Dallas, 9%.

“They are dominating the retail space because they are huge, and because there is so little competition from other big banks that have pulled back,” says Alan Rosenbaum, chief executive of GuardHill Financial Corp., a New York-based mortgage bank.

Tech Has Badly Lagged
Posted by Eddy Elfenbein on July 23rd, 2013 at 9:33 am

Since April 2012, the tech sector has badly lagged the rest of the market. Here’s the Tech Sector ETF ($XLK) compared with the S&P 500.

Half Expecting Tapering in September
Posted by Eddy Elfenbein on July 23rd, 2013 at 9:11 am

The U.S. stock market looks to rise again today thanks to news from China that authorities there are looking to help their economy avoid a hard landing. Media in China is reporting that the government will increase investment in railroad projects to offset slowdowns in important industrial sectors. Of course, by a slowdown in China, they mean 7% growth instead of 10%.

The big news today on Wall Street is that investors are on the edge of their seats waiting for Apple ($AAPL) to report earnings. It’s no surprise that a lot of folks love seeing Apple fail. Over the last few quarters, Apple’s growth rate has slowed down dramatically.

So far, 113 companies have reported earnings this season. Of that, 73% have beaten on earnings and 52% have beaten on sales. That’s pretty good. The only major outlier has been tech where earnings have been pretty bad. Tech has badly lagged the market for the last year.

Netflix ($NFLX) looks to open lower this morning by about 3.4% after a disappointing earnings report yesterday. I honestly don’t get NFLX. As I look at it, the stock is vastly overpriced.
According to a recent Bloomberg poll, half of economists expect the Fed to pare its bond purchases in September down to $65 billion per month from the current rate of $85 billion. Also, half of economists (not sure if it’s the same half) think the Fed will wrap up its bond buying by the middle of next year.

Fifteen percent said tapering will start in October and 28% said it will be December. Interestingly, the yield on the 10-year bond has fallen lately. The yield had gotten as high as 2.72% two weeks ago. Yesterday, the bond closed at 2.49%.

I think one of Bernanke’s goals has to been to hammer away at the idea that bond purchases are a completely separate policy from interest rates. It’s taken Wall Street some time to get the message, but it’s come through.

Morning News: July 23, 2013
Posted by Eddy Elfenbein on July 23rd, 2013 at 6:35 am

Japan is Slipping

BRIC Bust Seen in Emerging Market Discontent With Growth

Mandela’s Wealth-Sharing Dream Fades in South Africa

Home Sales Take A Breather, But Prices Hit Five-Year High

New Powers Invoked to Curb a High-Speed Trading Feint

Telefónica to Buy E-Plus of Germany From KPN

UBS Reports Higher Profit, U.S. Mortgage Bond Settlement

Vivendi in Talks to Sell Maroc Telecom Stake to Etisalat

Strong Quarter for Netflix, but Investors Hit Pause

McDonald’s Grilled by Investors

DuPont Says May Sell Or Spin Off Paint Pigments Business

A Towering Fine for Naught, as the S.E.C. Tracks Cohen

Grants, Scholarships Now Play Leading Role In Paying For College, Topping Mom And Dad

Jeff Carter: What Would You Do To Improve Business TV?

John Hempton: It Was the Night Before Christmas…Falsifying Bill Ackman’s Herbalife Thesis

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AFLAC Breaks $60
Posted by Eddy Elfenbein on July 22nd, 2013 at 12:24 pm

In early 2011, shares of AFLAC ($AFL) got above $59 but were never able to crack $60. Today, they finally did.

AFLAC has been as high as $60.15 today. The last time the stock was over $60 was September 2008.

The Dow Is Just 6% from a 10,000-Point Rally
Posted by Eddy Elfenbein on July 22nd, 2013 at 9:27 am

I’m back in the office after a nice, relaxing week off. The stock market continued to rally while I was away, and the S&P 500 currently isn’t far from 1,700.

There’s going to be a lot more earnings news this week. So far, the overall earnings report has been pretty good although there have been some high-profile blunders. Microsoft ($MSFT), of course, is one. The stock got shellacked for an 11.4% loss on Friday. Fortunately, the other 19 stocks on our Buy List had outperformed the broader market on Friday. This is why I stress holding a diversified portfolio. You never know when one of your stocks will cause problems in the short term.

The Dow needs just another 6% for this to become a 10,000-point rally. We also crossed an interesting milestone last week. The S&P 500 now has $100 in earnings over the trailing 12 months. At the 1982 low, the whole index was going for $102. The S&P 500 first closed above $100 in in June 1968.

According to the latest numbers from S&P, the index is on track to earn $26.54 for Q2. That’s growth of just over 4% from last year’s Q2, but I think this will gradually be revised higher as earnings season grinds on. Wall Street currently expects the S&P 500 to earn about $109 this year and $123 next year. Again, the stock market is still reasonably valued going by most valuation metrics, and—this is a big “and”—assuming the future earnings projections are accurate. The S&P 500 raked in $97 last year. The earnings slowdown was very real but it seems to have ended last year. The only quarters with negative earnings growth were the third and fourth quarters of 2012.

One positive story for our Buy List is that Goldman has shifted Cognizant ($CTSH) from “neutral” to “buy.” I’m not exactly a fan of these upgrades and downgrades, but it’s nice to see that someone else agrees with you.

Morning News: July 22, 2013
Posted by Eddy Elfenbein on July 22nd, 2013 at 6:33 am

Global Shares Eye Five-Year High After Abe Win, Yen Choppy

China’s Rate Reform May Serve To Shield Indebted State Firms

GSK Says Senior China Staff May Have Breached Law

Chinese Police Visit Astrazeneca, Question One Employee

Germany, Estonia Only Euro Zone Countries Cutting Debt In First Quarter

As WTI And Brent Reunite, Gulf Of Mexico Faces Squeeze, Not Glut

Gold Rush Trash Is Information Age Treasure

UBS Reports Higher Profit, U.S. Mortgage Bond Settlement

Philips Profit Jumps as Health-Care Orders Recover in the U.S.

Dell, Silver Lake Said to Disagree on Breakup Fee If LBO Fails

High-End Smartphone Boom Ending as Price Drop Hits Apple

For a Developing World, A Streamlined Facebook

A Bizarre Goldman Sachs Aluminum Moving Scheme Has Allegedly Cost US Consumers $5 Billion In The Past 3 Years

Howard Lindzon: In Awe of the Mobil Global Warming Boom

Jeff Miller: Weighing the Week Ahead: It’s All About Earnings

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