From Bed Bath & Beyond’s Earnings Call
Posted by Eddy Elfenbein on April 4th, 2012 at 10:04 pm

The transcript is courtesy of Seeking Alpha. Here are some important points:

Before concluding this afternoon’s call, a few additional comments relative to our recently concluded fiscal fourth quarter. Our balance sheet and cash flows remain strong. We ended the fiscal fourth quarter with cash and cash equivalents and investment securities of approximately $1.9 billion. This includes approximately $83.9 million of investments related to auction rate securities.

These securities have an estimated temporary valuation adjustment of approximately $3.7 million to reflect their current lack of liquidity. Since this valuation adjustment is deemed temporary, it did not affect the company’s earnings. As we have said in the past and as we have experienced to date, we believe that given the high credit quality of these investments, we will ultimately recover, at par, all amounts invested in these securities.

Inventories continue to be tailored by store to meet the anticipated demands of our customers and are in good condition. As of February 25, 2012, inventories at cost were approximately $2.1 billion or $57.35 per square foot, an increase of approximately 2.1% on a per square foot basis over last year.

Consolidated shareholders equity at February 25, 2012, was approximately $3.9 billion, which is net of share repurchases, including the approximately $359 million, representing approximately 5.9 million shares repurchased during the fiscal fourth quarter of 2011. As of February 25, 2012, the remaining balance of the current share repurchase program authorized in December 2010 was approximately $919 million.

Cash of $1.9 billion comes to $8 per share. The company may want to consider paying a dividend sometime soon. If Apple can do it, so can BBBY.

Bed Bath & Beyond Earns $1.48 Per Share
Posted by Eddy Elfenbein on April 4th, 2012 at 4:22 pm

Wow! A huge earnings beat from Bed Bath & Beyond ($BBBY). For fiscal Q4, the company earned $1.48 per share. That’s 15 cents better than Wall Street’s consensus. The stock is currently up about 6% after hours.

In December, Bed Bath & Beyond told us to expect Q4 results to range between $1.28 and $1.33 per share, so this was much better than expected. The earnings represented a 32% increase over Q4 of 2010. Quarterly sales rose by 9.1% and the key retailing metric, comparable store sales, rose by 6.8%.

For the year, Bed Bath & Beyond earned $4.06 per share which was also a 32% increase over the year before. Sales rose 8.5% to $9.5 billion. Comparable store sales rose by 5.9%.

Now for guidance. For Q1, Bed Bath & Beyond sees earnings ranging between 79 cents and 83 cents per share. For the full-year, they project earnings “to increase by a high single to a low double digit percentage range.” If we take that mean to 10%, that translates to a full-year forecast of $4.47 per share.

This is the twelfth-straight quarter than Bed Bath & Beyond has expanded its net margins. In the three years since fiscal 2009, total sales have grown by 32% but net earnings are up by 133%. The reason is that net profit margins increased from 5.9% in 2009 to 10.4% last year.

This is very good news. BBBY continues to exceed expectations. I said in December that I thought the Street’s forecast for 2012 of $4.39 was too high. Shows what I know.

At $70 per share and $4.47 for this coming year, the stock is currently going for 15.66 times earnings which isn’t that expensive. Given today’s huge earnings beat, I now have reason to believe that the company’s earnings forecast is on the low side (which is smart given that the fiscal year has just begun).

Here’s a look at BBBY’s earnings-per-share along with the company’s forecast in red. Notice how conservative the red line is.

Here’s a look at BBBY’s quarterly numbers for the past few years:

DirecTV Ad with Kate Upton
Posted by Eddy Elfenbein on April 4th, 2012 at 11:05 am

Here’s Kate Upton in a bikini. In an ad for DirecTV ($DTV). Which is on our Buy List. Therefore, this is relevant stock information.

Up, Up, Down, Down, Down….
Posted by Eddy Elfenbein on April 4th, 2012 at 10:19 am

For the 14th day in a row, the stock market is following its pattern of rising on Monday and Friday and then falling on Tuesday, Wednesday and Thursday.

ADP Says 209,000 Jobs Were Created in March
Posted by Eddy Elfenbein on April 4th, 2012 at 9:08 am

The big jobs report comes out on Friday but we got a sneak preview this morning when private payroll firm ADP said that 209,000 jobs were created last month. Wall Street expected ADP to say 206,000.

The market got knocked yesterday by the release of the minutes from the last Fed meeting. Traders interpreted the comments to be on the hawkish side, meaning that the Fed is growing leery of playing nursemaid to this economy. I’ve long been a skeptic that any form of QE3 will be coming.

As a result, stocks pulled back and gold dropped significantly. That trend may continue today. All eyes will be on Friday’s jobs report, but the market will be closed for Good Friday.

Morning News: April 4, 2012
Posted by Eddy Elfenbein on April 4th, 2012 at 5:56 am

Draghi Tested as German Pay Deals Add to Euro Divergence

Unscramble the Euro Omelet. Win $400,000!

Euro-Region Retail Sales Declined in February, Led by Germany

Occupy London Hinders Burrito Sales More Than Banker Bonuses

Spain Borrowing Cost Rises as Demand Drops at Bond Sale

China’s Wen Urges Breakup of Bank Monopoly as Growth Slows

In China Press, Best Coverage Cash Can Buy

Singapore Dollar Weaker Late As Hopes For Fed Stimulus Wane

Gold Falls for Second Day on Fed Stimulus Stance

Oil Falls a Second Day on Supply as Fed May Halt Stimulus

U.S. Auto Sales Burn Rubber

As Home Rents Head Higher, Owning Regains Its Appeal

Molson Coors Attacks Craft Armada With $3.5 Billion Deal

Regulators Expected to Penalize JPMorgan Over Lehman Collapse

Cullen Roche: Slaves of Some Defunct Economist

Joshua Brown: Hedge Funds Accomplishing Very Little in the Aggregate…

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Ford Posts Best March Sales in Five Years
Posted by Eddy Elfenbein on April 3rd, 2012 at 12:15 pm

From the press release:

Ford Motor Company posted its best March U.S. sales month since 2007 – with the Ford Fusion recording its best month ever, Ford Focus and Ford Edge achieving their best March ever and the F-Series showing the strongest March sales in five years.

Total company sales totaled 223,418 vehicles for March, a 5 percent gain over year-ago levels. Retail sales increased 11 percent for the month.

For the first quarter, Ford Motor Company’s sales were up 9 percent versus year-ago levels, totaling 539,247 vehicles sold. The increases were driven by the popularity of Ford’s most fuel-efficient models posting record sales months.

“Rising gas prices continued to drive strong customer demand for Ford’s fuel-efficient vehicles throughout March and the first quarter,” said Ken Czubay, vice president, U.S. Marketing, Sales and Service. “Ford is answering the call with what we call the power of choice – a full family of cars, utilities and trucks that offer leading fuel economy in their classes.”

March sales highlights:

* Fusion set an all-time monthly sales record, with 28,562 vehicles sold.

* Focus delivered its best March sales performance ever, selling 28,293 cars.

* F-Series sold 58,061 for the month – a 9 percent increase versus last March and F-Series’ best March sales performance since 2007. EcoBoost accounted for 41 percent of the F-150 retail sales, with all V6 engines comprising 56 percent for the month.

* The Ford Edge had it best March sales month ever, with 14,058 vehicles sold.

* Ford began selling its Police Interceptor Sedans and Utilities at the end of March.

During the first quarter:

* Car sales at Ford Motor Company were up 8 percent. The fuel-efficient Focus was the biggest seller among Ford’s car lineup, with sales up 78 percent during this period, with 66,043 vehicles sold.

* Utility sales totaled 150,415 vehicles, a 6 percent increase versus year-ago levels. Escape sales were up 5 percent, making it the strongest-ever first quarter start for Escape – America’s best-selling utility.

* Ford Motor Company truck sales increased 11 percent, with 195,807 vehicles sold. F-Series pickups – America’s top-selling truck for 35 years – posted sales of 143,827 vehicles for the quarter, a 14-percent increase versus the same period in 2011.

Dividends Are Making a Comeback
Posted by Eddy Elfenbein on April 3rd, 2012 at 11:04 am

Now that the first quarter is over, we have some stats on dividends. The S&P 500 paid out 7.09 in dividends (that’s the number adjusted for the index) which is a 15.06% increase over the first quarter of 2011.

I think this will be a very good year for dividends, especially with the dividend news from Apple ($AAPL). The market also responded very well to the five-fold dividend increase from CA Technologies ($CA), plus the recent increase at JPMorgan ($JPM). So far this year, there have been 122 dividend increases in the S&P 500, plus seven new dividend payers. Only three companies have lowered their payouts.

Looking at dividends has been a surprisingly good way of valuing the market over the past few years. You can never be quite sure about a company’s earnings or cash flow since accounting rules allow for enormous latitude. But if a company is willing to send shareholders a check, you can be pretty certain those numbers are legit (though not always).

Dividends also tend to be very stable. Once a company raises its quarterly dividend, there’s an implicit understanding that that’s the new level. Shareholders will put up with a lot, but they do not like cuts in dividends, and woe be unto the company that lowers their payout. The recent recession, however, saw an unusually higher number of cut dividends or suspended payouts altogether. In 2009, annual dividends dropped by 21%. Contrast this with 2001 when the stock market crash led to dividends falling by just 3%.

The lower dividends this time around have been largely concentrated in the financial sector. Part of this is due to rules around receiving TARP payments. I don’t have the exact numbers for the financial sector but the quarterly dividends for the Financial Sector ETF ($XLF) fell about 70%. The Financial Sector currently makes up 15% of the S&P 500.

The good news is that higher profits are leading to higher dividends. Dividends are on pace to hit a new record this year. On top of that, the dividend payout ratio—the percent of profits paid out as dividends—is still below 30% which is far below normal.

Here’s a look at the S&P 500 in the black line along with its dividends in the blue line. The black line follows the left scale and the blue line follows the right. The two lines are scaled at a ratio of 50-to-1 which means that the S&P 500 yields exactly 2% whenever the lines cross.

I think the chart shows some interesting facts. For example, you can see how different the market crashes of 2000-01 and 2008-09 were. In the first, prices soared above fundamentals. In the latter, fundamentals crumbled beneath the price. From 2003 to 2007, stock prices generally followed the trend in dividends. We can also see how much investors panicked during the financial crisis. In March 2009, the S&P 500’s dividend yield eventually reached 4%.

I asked Howard Silverblatt, the head stat guy at S&P, to tell me the dividend estimate for this year. He said it’s $29.70. To equal a dividend yield of 2%, the S&P 500 needs to get to 1,485 which is a 4.6% jump by the end of the year.

Backstage Wall Street
Posted by Eddy Elfenbein on April 3rd, 2012 at 10:11 am

Josh Brown discusses his new book, Backstage Wall Street, with Joe Weisenthal.

Morning News: April 3, 2012
Posted by Eddy Elfenbein on April 3rd, 2012 at 5:48 am

DAX Beating S&P 500 by Most Since ’06 on Economy Optimism

PBOC’s Zhou Urges Fed to Consider Global Effect of Policy Easing

Did Spain Commit Economic Suicide?

Regulator Accuses R.B.C. of ‘Massive’ Trading Scheme

U.S. Economy Enters Sweet Spot as China Slows

US Stocks Climb To Multiyear Highs After Manufacturing Data

Where Housing Once Boomed, Recovery Lags

Oil Drops After Biggest Gain in Six Weeks on Supplies

‘Apple Fever’ to Push Stock to $1,001, Topeka Capital Says

JPMorgan Lead Over Morgan Stanley Widening on Rating Cuts

Small Banks Shift Charters to Avoid U.S. as Regulator

Groupon Hit as Analysts Question Model

F.T.C. Approves Merger of 2 of the Biggest Pharmacy Benefit Managers

Coty Low-Ball Offer Seen Emerging as Avon’s Best Option

Roger Nusbaum: Real Life Retirement Example

Edward Harrison: Faber: Japanese Stocks Will Outperform as US Margins Deteriorate

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