• The Government Revises All GDP Data
    Posted by on July 31st, 2013 at 12:37 pm

    Do you feel wealthier today? According to the government, the economy is about 3% larger than originally reported. The reason is that the number collectors are now looking at intangibles in the economy. The Bureau of Economic Analysis revised the entire NIPA data series today.

    Here’s a look at real GDP growth since 1947 (in trillions of dollars). The Old Series is based on 2005 prices. The new one is based on 2009 prices.

    image1346

    It turns out that the recent recession wasn’t as severe as originally believed. From Q4 2007 to Q2 of 2009, the economy shrank by -4.26% instead of the original -4.69%. The recovery was a bit stronger as well. Interestingly, the first-quarter of 2011 previously had shown very meager growth. It turns out, the economy slightly receded.

    Here’s a comparison between the two data series. The increase in the adjustment has been pretty continuous over the last 65 years. Note that 2005 is used for the old series and 2009 is for the new, so the chart below is not a 1-to-1 comparison. There’s a difference of about 9% due to inflation between the data series.

    image1347

  • Fiserv Jumps 5% in Early Trading
    Posted by on July 31st, 2013 at 9:54 am

    Big market day today. The S&P 500 is above 1,692 this morning. The big winner on our Buy List is Fiserv ($FISV) which is currently up 5.44% thanks to its strong earnings report. While AFLAC’s ($AFL) earnings were above expectations, that guidance was below the Street. Still, the reasons are understandable and the shares are only down 64 cents which is about 1%.

    Reuters ran the numbers and found that Ford Motor ($F) could close its pension gap by the end of next year. That was unthinkable not that long ago.

    The government reported that the U.S. economy grew by 1.7% last quarter. That was actually faster than expected. Economists were expecting an increase of less than 1%. Growth for Q1 was revised downward from 1.8% to 1.1%.

    ADP, the private payroll firm, said that the economy created 200,000 new jobs last month. That’s right inline with what the economy has done for the last three months. On Friday, we get the official report from the Feds.

  • Dan Amos on CNBC
    Posted by on July 31st, 2013 at 9:28 am

    Here’s AFLAC’s CEO on CNBC:

  • Morning News: July 31, 2013
    Posted by on July 31st, 2013 at 6:50 am

    German Unemployment Rises to 6.8% in July

    Beijing Offers Growth Assurance In Its Economic Balancing Act

    Following Bernanke Means Using Precedent of Unprecedented Policy

    Obama Offers New Deal on Corporate Taxes, Jobs

    Consumer Confidence Dips a Bit

    Schneider Electric to Buy Invensys for $5.2 Billion

    BNP Paribas Quarterly Net Falls 4.7% on Loan Provisions

    Panasonic’s Quarterly Profit Soars to $1.1 Billion

    Tough Times for the ‘Biggest Victim’ in Smartphone War

    Potash Sector Rocked as Russia’s Uralkali Quits Cartel

    AB InBev Profits From Premium Lagers, Price Hikes

    Bill Ackman’s Herbalife Nightmare Gets 100 Percent Worse

    JPMorgan Top Exec Blythe Masters Dodges Penalty As Bank Settles Energy Manipulation Charges For $410 Million

    Credit Writedowns: House Price Inflation Causing Problems for Many in the U.S.

    Cullen Roche: Why Didn’t QE Cause High Inflation?

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  • Strong Earnings from Fiserv and AFLAC
    Posted by on July 30th, 2013 at 9:23 pm

    Thanks to a very good earnings report from Harris Corp. ($HRS), our Buy List had another market-beating day. Shares of HRS eventually closed at $56.97 which is a gain of 7.84% for the day. While the broader indexes are just shy of their all-time highs, the Nasdaq closed today at its highest level since September 29, 2000.

    The market was also excited that Facebook ($FB) climbed all the way back its IPO price. So IPO investors are back up to…nothing!

    After the closing bell, we had two more Buy List earnings reports; Fiserv ($FISV) and AFLAC ($AFL). For the second quarter, Fiserv earned $1.50 per share which was six cents better than Wall Street’s consensus. That’s a very good number. Quarterly revenues rose 11.8% to $1.14 billion which was a bit short of consensus.

    Fiserv said:

    Our strong second quarter results included revenue and earnings acceleration in-line with our full-year expectations,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “Performance was led by 7 percent adjusted internal revenue growth in our Payments segment, solid sales and excellent free cash flow.

    Fiserv reiterated its full-year guidance of earnings ranging between $5.84 and $6.03 per share. For the first six months of 2013, Fiserv had earned $2.83 per share so I think they’re well on their way to hitting that guidance. Earnings are up 16% so far this year, and cash flow is up 22%. This company is clearly doing well. The stock is up 3.55% in the after-hours market.

    AFLAC reported Q2 operating earnings of $1.62 per share which was 11 cents better than estimates. Three months ago, the company gave us a range of $1.41 to $1.56 per share, so business is going better-than-expected. Plus, we have to consider that the yen/dollar exchange rate knocked 22 cents off earnings. Without that, operating earnings rose by 14.3%.

    For Q3, AFLAC sees operating earnings ranging between $1.41 and $1.51 per share. That’s less than the $1.56 per share Wall Street had been expecting. For the full-year guidance, AFLAC lowered the low-end of their range. The previous range was $5.99 to $6.37 per share. Now it’s $5.83 to $6.37 per share.

    Dan Amos, the CEO, said:

    Our objective for 2013 is to increase operating earnings per diluted share 4% to 7%, excluding the impact of the yen. Although we are above that range for the first half of the year, we plan on increasing spending in the second half of 2013. In Japan, we will increase expenditures on advertising and promotion for our new product launch in August. In the United States, we anticipate increased costs associated with initiatives related to health care reform. As such, we expect operating earnings to increase approximately 5% for the full year, before the impact of foreign currency. We will face a difficult comparison in the third quarter due to the tax benefit of $.10 per diluted share recognized in the same period last year. If the yen averages 95 to 105 to the dollar for the third quarter, we would expect earnings in the third quarter to be approximately $1.41 to $1.51 per diluted share. Using that same exchange rate assumption, we would expect full-year reported operating earnings to be about $5.83 to $6.37 per diluted share.

  • Harris Jumps Nearly 8%
    Posted by on July 30th, 2013 at 10:04 am

    The S&P 500 broke above 1,693 this morning. Thanks to its great earnings report, Harris Corp. ($HRS) has jumped to $56.95 which is a 7.8% gain. After the close, we’ll get earnings reports from AFLAC ($AFL) and Fiserv ($FISV).

    big.chart07302013

    Second-quarter earnings season is going well so far. Exactly 300 of the 500 stocks in the S&P 500 have reported, and 73% have beaten on sales while 55% have beaten on earnings. Of course, expectations for Q2 had been falling for more than a year.

    Today is the first day of the Fed’s two-day meeting. The policy statement will come out tomorrow. This is interesting because this meeting isn’t expected to be very important but the following meeting, in September, is expected to be very important. A growing number of Fed watchers think the central bank will announce its first tapering of its bond buying program. There may be some hints in tomorrow’s statement, but I doubt it will contain much.

    In March, I noted that Coach ($COH) had dropped to $48.43 per share which was cheap on a valuation basis, but there were good reasons for the low valuation. Since then, the stock has rallied to $60 per share. Today, however, the shares are getting slammed thanks to poor results in North America. Profits for the quarter fell 12%. Shares of COH are currently down $5 or 8.7%. I don’t think the problems are close to being fixed.

  • Harris Reports Great Earnings
    Posted by on July 30th, 2013 at 9:05 am

    This morning, Harris Corp. ($HRS) reported fiscal fourth-quarter earnings of $1.41 per share which was 26 cents better than expectations. That’s a huge beat. Quarterly revenue dropped 5.3% to $1.36 billion which still topped estimates of $1.31 billion.

    Harris also had very good guidance for next year. For fiscal 2014, which ends in June of 2014, Harris sees earnings ranging between $4.65 to $4.85 per share on revenues of $4.95 to $5.05 billion. The Street had been expecting earnings of $4.62 per share on revenues of $5.03 billion. For the year, Harris earned $4.90 per share compared with $5.20 per share last year. Much of the decline was due to the government sequester.

    Fourth quarter results were solid in a tough government spending environment,” said William M. Brown, president and chief executive officer. “Performance benefited from our commitment to operational excellence and ongoing cost-reduction efforts, including restructuring actions announced in April that were executed faster than expected and generated fourth quarter cost savings. As we enter fiscal 2014, we now expect that restructuring and other actions will generate net annualized cost savings of approximately $60 million.”

    “We were particularly encouraged by the strong new orders momentum in the international tactical radio market. With a tactical book-to-bill of 1.49 and greater than one in both international and U.S. markets, tactical backlog increased substantially in the fourth quarter.”

    Harris is another good example of a high-quality stock delivering results after sluggish performance of its stock. Shares of Harris are only up 8% YTD which makes it one of the poorer performers on our Buy List. But what hasn’t changed is that it’s still a very well-run outfit.

  • Morning News: July 30, 2013
    Posted by on July 30th, 2013 at 6:59 am

    We Don’t Know Where Larry Summers Stands On The Most Important Issue Facing The Fed

    Legal Costs Hit Deutsche Bank

    Barclays to Raise $12 Billion in New Capital

    Fiat Profit Rises as Spending Cuts Narrow European Losses

    JPMorgan Accused of Gaming Energy Bids as FERC Deal Looms

    Sony Earnings Face Setback as Loeb Criticizes Movie Unit

    BP Profit Misses Estimates as Gulf Spill Estimate Raised

    UBS Profit Rose 32% in Second Quarter

    Alcatel Posts Strong Second-Quarter, Signs Qualcomm Partnership

    Pfizer Earnings Beat Forecasts As Drugmaker Plans Split

    Hudson’s Bay Buying Saks for About $2.4 Billion

    7-Eleven Adds Bento Rigor to Slurpee Appeal in U.S. Push

    Icahn Rips Apart Dell’s Push For Deal Changes In Open Letter

    Jeff Carter: Who Raises Their Standard of Living in the Sharing Economy?

    Joshua Brown: Remember When Sequestration Was Going To Crush The Defense Stocks?

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  • The NIPA Revisions
    Posted by on July 29th, 2013 at 1:03 pm

    This week, the government will revise the entire NIPA dataset which includes GDP. The GDP figures will be revised about 3% higher. Of course, it’s just on paper but it reflects how we think about the economy.

    Matthew Yglesias explains:

    Good news, Americans—you’re about to get richer.

    Well, not you, personally. But you in your capacity as a citizen of the mightiest economic empire the world has ever known. The Commerce Department’s Bureau of Economic Analysis is prepared to announce that America’s gross domestic product is 3 percent larger than previously estimated—about $1,500 extra worth of goods and services per person. What did we do to get so lucky?

    Nothing. We did nothing. But we’re getting richer anyway. As Robin Harding first reported over the weekend, we’re getting richer on paper because the BEA is changing how it calculates the national income and product accounts (NIPA) to bring it into line with recommendations promulgated by the United Nations back in 2008. The main idea is that in an economy that increasingly depends on the production of intangible goods, we need to recognize that the production of ideas is an important form of investment. So in the future, the BEA is going to count a company’s research and development as a form of investment just like the purchase of a new office building. And the creation of a durable work of art—a film, a season of television—that can be sold year after year will, likewise, be treated as a capital investment. These new calculations will also be applied retroactively, and thus, like magic, we’ll all be richer. Or, at a minimum, learn that we’ve been richer all along.

  • Banks Are Powering Earnings Growth
    Posted by on July 29th, 2013 at 10:41 am

    The stock market is down slightly in early trading this week. There isn’t much movement on the Buy List so far, except that Nicholas Financial ($NICK) has given back a big chunk of its Friday surge. NICK closed last week at $15.94. Interestingly, that was on very heavy volume. There’s only been 800 shares today, but the last trade went off at $15.29.

    On Thursday, Ford Motor ($F) lost a big part of its Wednesday rally. But the stock is currently back above $17 per share. We have a bunch more earnings this week, plus a Fed meeting and a jobs report. The government will also revised the entire set of its NIPA data. This means we will have entirely new numbers for the GDP data series. There’s nothing so surprising as the past.

    The latest numbers show that 265 companies in the S&P 500 have reported Q2 earnings so far. Of that, 73% have beaten on earnings and 56% have beaten on sales. That’s not bad. Of course, banks have been doing the heavy lifting:

    Earnings for companies in the S&P 500 are projected to climb 3.3 percent, led by a 27 percent increase in bank profits, based on more than 11,000 analyst projections compiled by Bloomberg. Without the financial industry, S&P 500 income would contract 1.2 percent.

    The National Association of Realtors said that pending home sales fell 1% in June. This is interesting to watch because rising mortgage rates have impacted the housing market, but I don’t think the damage will be long-lasting.