Morning News: February 8, 2013
Posted by Eddy Elfenbein on February 8th, 2013 at 7:10 am

China Trade Growth Hints At Strong 2013

European Leaders Struggle to Bridge Budget Gaps

Aso Says Pace of Yen Decline Too Fast With G-20 Set to Meet

Draghi’s Powerful Weapon Is Words as Euro Heeds His Voice

German Exports Rose in December to Cap Trillion-Euro Year

4 Years After Crisis, Ireland Strikes Deal to Ease a Huge Debt Load

Gold Sideways in Asia as Outlook Unclear; Precious Metals Lower

Worker Productivity in U.S. Declines, Pushing Up Labor Costs

Business and Labor Unite to Try to Alter Immigration Laws

Apple With $137 Billion in Cash Considers Preferred Stock

Hewlett Directs Its Suppliers in China to Limit Student Labor

BMW Posts Record Group Sales In January, Up 9.9 Percent

Google Suit Against IRS Planned Over Domestic Tax Dispute

Jeff Miller: Dumb Money?

Roger Nusbaum: Position Management

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FedEx +4,147%
Posted by Eddy Elfenbein on February 7th, 2013 at 1:37 pm

The U.S. Post Office just announced major cutting measures including the ending of Saturday service. Last year, the USPS lost $15.9 billion.

As a comparison, I think it’s interesting that FedEx ($FDX) just hit a new five-year high today. From May 6, 1980 to yesterday’s close, shares of FDX are up 4,147%. That would turn a $25,000 investment into over $1 million.

Cognizant Guides Higher for 2013
Posted by Eddy Elfenbein on February 7th, 2013 at 10:49 am

Before the opening bell, Cognizant Technology Solutions ($CTSH) reported Q4 earnings of 99 cents per share which is up from 84 cents for Q4 of 2011. That’s eight cents more than the Street had been expecting. Quarterly revenue rose 17.1% to $1.95 billion. For all of 2012, revenue rose 20% to $7.35 billion, and earnings-per-share increased from $3.07 in 2011 to $3.70 for 2012. As you can see, this is a rapidly-growing outfit.

Cognizant also offered very strong guidance for Q1 and all of 2013. The company sees Q1 revenue rising by 20% to “at least” $2 billion and earnings-per-share hitting $1.01. Wall Street had been expecting 93 cents per share. For the whole year, CTSH sees revenue climbing to “at least” $8.6 billion. That’s an increase of 17%. Cognizant also sees earnings-per-share of at least $4.31. The Street had been expecting $4.00 per share.

Ross Stores Hikes Dividend 21%
Posted by Eddy Elfenbein on February 7th, 2013 at 9:57 am

Good news this morning from Ross Stores ($ROST). The company reported blowout sales for January. Thanks to the rush of business, the company sees Q4 earnings coming in at $1.06 to $1.07 per share, and that’s $3.52 to $3.53 per share for the entire year. (Note that like a lot of retailers, Ross ends their fiscal year at the end of January.) The earnings report should be out in mid-March.

Best of all, Ross is raising the quarterly dividend from 14 cents to 17 cents per share. That’s a 21% hike. Ross pays out a very small amount of their profits as dividends to shareholders (about 20%). Based on yesterday’s close, Ross yields 1.15%. That’s obviously not a very high yield but the dividend increase and strong sales news is a good omen for Ross Stores.

Morning News: February 7, 2013
Posted by Eddy Elfenbein on February 7th, 2013 at 7:31 am

Euro Gains on Speculation Draghi to Signal Optimism; Pound Rises

Carney Backs Flexible Inflation Targeting in BOE Testimony

Ireland Increasingly Hopeful of ECB Agreement

Royal Bank of Scotland Settles Case on Rigging

Harvard’s Gopinath Helps France Beat Euro Straitjacket

Trying to Stem Losses, Post Office Seeks to End Saturday Letter Delivery

Credit Suisse Posts Quarterly Profit, Raises Cost-Cutting Goal

Liberty’s Bid for Virgin Media Pushes the Envelope on Debt

Platinum Advances to 16-Month High on Supply Woes; Gold Climbs

Google To Buy ICG Group Unit For $125 Million

TransCanada Looks East Amid Keystone Pipeline Delay

Vodafone Misses Estimates As Sales In Europe Drop

Alcatel-Lucent Chief Resigns as Company Posts Loss

Cullen Roche: Some Brief Thoughts on the CBO’s New Budget Projections

Jeff Carter: The Trusted Network

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AFLAC’s 2013 Outlook
Posted by Eddy Elfenbein on February 6th, 2013 at 1:31 pm

From the earnings call, here’s AFLAC‘s ($AFL) outlook for this year (I think Seeking Alpha’s transcription is rather muffled, but you can follow what they’re saying):

Lastly, let me comment on the earnings outlook for 2013. As you’ve heard Dan say, we’ve affirmed our guidance for 2013 of 4% to 7% increase in operating earnings per diluted share, excluding the impact of the yen. To understand the significant our 2013 EPS objective over 2012 actual results winning to this perspective for you.

In 2012, we received tax benefit from our tax exempt for the years 2008 and 2009, and we’ve made a revision for the full year impact of tax effective tax rate. The unusual benefits received in 2012 totaled approximately $38 or $0.08 per share. We also recovered a previously written-off coupon as part of the sales transaction executed during the year that resulted in a one-time benefit to operating earnings of $23 million, or $0.05 per share. If you exclude the impact of these benefits from the 2012 operating earnings note, operating earnings per diluted share in sale would have been $6.47.

This year we estimate that a one yen move on the average annual exchange rate will equal approximately $4.3 for diluted share. Considering the weakening of the yen in recent months, if we achieve our objective of 4% to 7% increase in operating earnings per diluted share for the year at yen averages 90 for the full year, we would expect operating EPS to be in the range of $6.37 to $6.57 per diluted share.

The yen is currently at 93.345 to the dollar.

Morgan Housel’s Startling Facts About the Economy
Posted by Eddy Elfenbein on February 6th, 2013 at 12:36 pm

Morgan Housel of the Motley Fool comprised a great list of “100 Startling Facts About the Economy.” I’m tempted to list them all, but I’ve culled some of my favorites:

14. Including dividends, the S&P 500 gained 135% from March 2009 through January 2013, during what people remember as the “Great Recession.” It gained the exact same amount from 1996 to 2000, during what people remember as the “greatest bull market in history.”

19. From 2006 to 2011, Hewlett-Packard ($HPQ) spent $51 billion on share repurchases at an average price of $40.80 per share. Shares currently trade at $16.50.

21. Despite the overall population doubling, more babies were born in the U.S. in 1956 than were born in 2009, 2010, or 2011.

27. According to Bloomberg, “The 50 stocks in the S&P 500 with the lowest analyst ratings at the end of 2011 posted an average return of 23 percent [in 2012], outperforming the index by 7 percentage points.”

29. Thanks in large part to cellphone cameras, “Ten percent of all of the photographs made in the entire history of photography were made last year,” according to Time.

32. Fortune magazine published an article titled “10 Stocks To Last the Decade” in August, 2000. By December 2012, the portfolio had lost 74.3% of its value, according to analyst Barry Ritholtz.

44. According to California Common Sense, “Over the last 30 years, the number of people California incarcerates grew more than eight times faster than the general population.”

45. One in seven crimes committed in New York City now involves an Apple product being stolen, according to NYPD records cited by ABC News.

49. According to the Center for Economic and Policy Research, 44% of those working for minimum wage in 2010 had attended at least some college, up from 25% in 1979.

60. The International Energy Agency predicts that the U.S. will become the world’s largest oil-producer by 2020, overtaking Saudi Arabia.

62. According to BetterInvesting, the number of investment clubs has declined by 90% since 1998 from 400,000 to 39,000.

67. During the Federal Reserve’s June 2007 policy meeting, the word “recession” was used three times; the word “strong” was used 61 times. The economy entered recession six months later.

68. Last year, Franklin Templeton asked 1,000 investors whether the S&P 500 went up or down in 2009 and 2010. Sixty-six percent thought it went down in 2009, while 48% said it declined in 2010. In reality, the index gained 26.5% in 2009 and 15.1% in 2010.

71. According to a survey by Paola Sapienza and Luigi Zingales, effectively all economists agreed that stock prices are hard to predict. Only 59% of average Americans felt the same way.

79. Related: 84% of actively managed U.S. stock funds underperformed the S&P 500 in 2011.

80. According to The Wall Street Journal, 49.1% of Americans live in a household “where at least one member received some type of government benefit in the first quarter of 2011.”

85. The U.S. birthrate declined 8% from 2007 to 2010, according to Pew. At 63.2 per 1,000 women of childbearing age, the 2011 U.S. birthrate was the lowest since records began in 1920.

86. According to Wired magazine, “In a 2006 survey, 30 percent of people without a high school degree said that playing the lottery was a wealth-building strategy…On average, households that make less than $12,400 a year spend 5 percent of their income on lotteries.”

88. We are used to hearing how much faster the earnings of the top 1% grow compared with everyone else’s, but we often forget that it used to be the other way around. From 1943 to 1980, the annual incomes of the bottom 90% of Americans doubled in real terms, while the average income of the top 1% grew just 23%, according to Robert Frank.

92. Federal nondefense discretionary spending — all spending minus defense and entitlements — is on track to hit its lowest level as a share of GDP in more than 50 years, according to data from the Congressional Budget Office.

94. According to The Economist, “Over the past ten years, hedge-fund managers have underperformed not just the stock market, but inflation as well.”

95. According to Bloomberg, “Americans have missed out on almost $200 billion of stock gains as they drained money from the market in the past four years, haunted by the financial crisis.

98. “More than 50 million Americans couldn’t afford to buy food at some point in 2011,” writes CNNMoney, citing U.S. Department of Agriculture data. In June 2012, 46.7 million Americans received food stamps.

Fiserv’s Guidance for 2013
Posted by Eddy Elfenbein on February 6th, 2013 at 10:23 am

Seeking Alpha has posted the transcript of yesterday’s earnings call for Fiserv ($FISV). Here’s a key part on the company’s outlook for this year.

We expect 2013 adjusted revenue to increase by more than 10%, and that adjusted internal revenue growth will be in a range of 3% to 4%. These numbers include approximately $50 million in lost revenue, more than 100 basis points of internal growth this year due to the unusual migration of an account processing client that transitioned to its parent’s account processing platform and the impact of the 10-year Bank of America renewal.

We expect 2013 adjusted earnings per share growth of 15% to 18% or a range of $5.88 to $6.07 over 2012. We estimate free cash flow per share will be more than $6.60 per share, an increase of at least 18% over 2012. We expect adjusted operating margin to expand in a range of 10 to 50 basis points. This estimate includes the approximately 60-basis-point negative impact from the revenue headwind and also margin dilution associated with the Open acquisition.

For modeling purposes, we anticipate that our revenue and earnings growth will be sequentially stronger each quarter as we move through the year. A number of our larger recurring revenue client conversions are planned for the second and third quarters of 2013, and the impact of the negative headwinds are also more pronounced in the first half of the year. We also expect the Open Solutions results to increase during the year, consistent with their normal business model, the cumulative effect of integration benefits and the pay-off of the higher cost debt.

We’re in the process of realigning the specific annual targets for our operational effectiveness and integrated sales targets to consider the Open Solutions acquisition. Accordingly, we are now prepared to communicate annual targets for 2013. However, you can be sure we are very focused on these initiatives and we’ll provide you with an update at the end of the quarter — sorry, at the end of the first quarter.

In summary, 2012 was a good year. We made strategic progress, grew recurring revenue, achieved our earnings targets and closed a number of significant sales, all which we believe will accelerate our internal revenue growth, earnings and cash flow. We are starting to see measurable impact from some of our investments and innovation, and are delivering more value to clients. We are also focused on the integration of Open Solutions, which should allow us to deliver new and enhanced value to their more than 3,300 clients. That, combined with the commitment of our more than 20,000 associates, is creating momentum, which should lead to strong results in 2013, and has lifted our confidence for 2014 and beyond.

This was a good quarter for Fiserv. The stock is currently down about 0.6% today.

WEX Inc. Drops on Weak Guidance
Posted by Eddy Elfenbein on February 6th, 2013 at 10:06 am

Before the opening bell, WEX Inc. ($WXS) reported fourth-quarter earnings of $1.07 per share. That was a penny below consensus. Quarterly revenue rose 20.9% to $169 million.

But the stock is getting smacked around this morning due to the company’s weak guidance. For Q1, WXS expects earnings to range between 89 cents and 96 cents per share. The Street had been expecting $1.08 per share. For all of 2013, WXS sees earnings between $4.30 and $4.50 per share. The Street was expecting $4.88 per share. For all of 2012, WXS made $4.06 per share which was a nice increase from $3.64 per share on 2011.

Morning News: February 6, 2013
Posted by Eddy Elfenbein on February 6th, 2013 at 6:33 am

RBS Said to Face Up to $783 Million Libor Manipulation Fine

Dollar Rises vs. Yen on BOJ Governor’s Early Exit

Fed Confirms Hackers’ Breach of Website, Reuters Reports

Obama Urges Congress to Act to Stave Off Cuts

S&P Misled Investors On Bonds’ Risks, Suit Says

S&P Analyst Joked of Bringing Down the House Before Crash

Lenovo’s Diplomatic Response to Dell Buyout

Virgin Media Chief Attracts $16 Billion Buyout as Final Act

4 Reasons To Be Skeptical Of Zynga

UBS Owes Brazil $1.2 Billion Taxes For 2006-09

Google Said in Talks to Invest $50 Million in Vevo Site

Corporate Forces Endangered the Twinkie, but May Save It

Health Insurance Companies Get in Shape for 2014

Joshua Brown: T.I.N.A. (or the Seller’s Dilemma)

Edward Harrison: China’s Huge Demographic Challenges Have Already Begun

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