Posts Tagged ‘revenue’

CORPORATE AMERICA REMAINS STRONG

CORPORATE AMERICA REMAINS STRONG

Courtesy of The Pragmatic Capitalist 

If there has been one undeniably bullish trend in the last 18 months it has been the strong earnings picture.  I have given the sell side analysts a fairly hard time over the course of the last year, but the strength in earnings has shocked me and my estimates tend to be quite a bit tougher than the consensus.  I expected the slowdown in mid-year growth to hit the top line harder than it has, but the international diversity of U.S. firms has helped  maintain healthy revenue growth at a time when companies have been incredibly vigilant about cost cuts.  U.S. companies have masterfully weaved through this recession in an effort to protect their profits and the results have been impressive.  With 90% of the S&P reporting in the Q3 earnings season the numbers are very strong:

  • 72% of companies have topped EPS estimates.
  • 60% have topped revenue estimates
  • Just 19% missed EPS estimates.
  • Sales are up 9.8% year over year.
  • EPS growth is 32% year over yar

Of course, the cost cuts have come at a cost as millions of Americans remain out of work.  Thus far domestic revenues have not sustained a level that has resulted in a substantial pick-up in hiring.  But corporations have made up for the less than stellar top line growth by boosting margins.  Margins are currently approaching their 2007 peaks, but likely have some room for expansion. It will be interesting to see how QE2 and the impact of rising input costs influences this picture.  At first blush, the impact does not appear to be widespread, however, we’ll have a better understanding of the Q4 earnings picture in the coming months when pre-announcements begin.  For now, the margin story is intact.  At risk, of course, is the labor force in the case that margins begin to turn.  For now it looks like the combination of strong international sales and weak domestic sales will be enough to help labor markets slowly continue to heal.  In a fluid and low visibility environment, however, this could change given the numerous exogenous risks.

(Figure 1)

The revenue story has been better than expected, however, is far from v-shaped.  Revenues per share remain well off their all-time highs despite a strong rebound in bottom line growth.  Quarter over quarter revenues per…
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California Approaches “Fiscal Meltdown”; Schwarzenegger Declares Fiscal Emergency; Fort Worth Texas Ponders Scrapping Defined Benefit Pension Plans

California Approaches "Fiscal Meltdown"; Schwarzenegger Declares Fiscal Emergency; Fort Worth Texas Ponders Scrapping Defined Benefit Pension Plans

California is broke Courtesy of Mish 

Governor Schwarzenegger has once again furloughed workers, declaring California is in a fiscal emergency. Excuse me for asking but when has California ever not been in a state of fiscal emergency?

Bloomberg reports Schwarzenegger Orders Furloughs Amid California Budget Impasse

California Governor Arnold Schwarzenegger ordered more than 150,000 state workers to take three days of mandatory unpaid time off to conserve cash.

The executive order, effective Aug. 1, stipulates that the furloughs will end when a budget for the fiscal year that began July 1 is enacted, the governor’s press secretary, Aaron McLear, said in an e-mail. It comes after government workers endured furloughs over almost 12 months that ended June 30.

California began its fiscal year without a spending plan after Schwarzenegger and Democrats remained deadlocked over how to fill a $19.1 billion deficit. Controller John Chiang has warned he may again need to issue IOUs to pay bills if the impasse continues into September.

“Every day of delay brings California closer to a fiscal meltdown,” Schwarzenegger said in a statement today. “Our cash situation leaves me no choice but to once again furlough state workers until the Legislature produces a budget I can sign.”

Fiscal Emergency California Style

The Business Spectator reports California state of fiscal emergency: Schwarzenegger

California Governor Arnold Schwarzenegger declared a state of emergency over the state’s finances yesterday, raising pressure on lawmakers to negotiate a state budget that is more than a month overdue and will need to close a $US19 billion ($A21.3 billion) shortfall.

The deficit is 22 per cent of the $US85 billion general fund budget the governor signed last July for the fiscal year that ended in June, highlighting how the steep drop in California’s revenue due to recession, the housing slump, financial market turmoil and high unemployment have slashed its all-important personal income tax collection.

In the declaration, Schwarzenegger ordered three days off without pay per month beginning in August for tens of thousands of state employees to preserve the state’s cash to pay its debt, and for essential services.

California’s budget is five weeks overdue, joining New York among big states with spending plans yet to be approved, and Schwarzenegger and top lawmakers are at an impasse over how to balance the state’s books.


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Here Is Your Economy: Everyone’s Slowing Down, But Apple Is Completely Going Nuts

Here Is Your Economy: Everyone’s Slowing Down, But Apple Is Completely Going Nuts

Courtesy of Joe Weisenthal at Clusterstock 

Well, the after-hours news paints a pretty-much perfect view of the economy. Most earnings continue to disappoint a little: Yahoo, VMWare, etc., all are basically ho-hum.

The exception: Apple, which is going completely bezerk, and is up 3.7% after hours, after killing it on revenues.

Apple’s strong performance is enough to bring the whole market up, but not because it represents anything other than the fact that the company is killing it.


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Arizona Sells Supreme Court Building in 20 Year $300 Million Leaseback Deal for 3 Month’s School Aid

Arizona Sells Supreme Court Building in 20 Year $300 Million Leaseback Deal for 3 Month’s School Aid

supreme court of arizona Courtesy of Mish 

Going into long term debt to pay short-term operating expenses is fiscally unsound. Going into debt for 20 years for 3 months operating expenses is beyond the absurd. Nonetheless, that is exactly what Arizona did.

Inquiring minds are reading Arizona Sells Supreme Court Building in $300 Million Bond Deal.

Arizona, which sold state prisons and offices to raise cash six months ago, plans to borrow $300 million by marketing its Supreme Court building and about a dozen more properties through leaseback bonds starting today.

Investors will hold ownership of the court building in Phoenix, the fifth-largest U.S. city, and the Arizona Schools for the Deaf and the Blind in Tucson for as much as 20 years, with the securities maturing serially from 2012 through 2029, according to offering documents. Lease payments will back the debt, known as certificates of participation.

Arizona, whose foreclosure rate last year was ranked second-highest after Nevada by RealtyTrac Inc., will use the sale to pay for three months of school aid. The state raised $709 million for education payments when it sold and then leased back nine properties to investors in January.

“From an investor point of view, this is great,” state Treasurer Dean Martin, 35, said in an interview. “The state has to have buildings to operate and we’re the largest employer in Arizona.”

Wrong Point of View

Who gives a rat’s ass if "This is great From an investor point of view"?

Here’s what Arizona taxpayers need to decide: "Is this great from ataxpayer point of view?"

Obviously it is not. Just as with other states, this is more kicking the can down the road action in a bury your head in the sand mentality.

Arizona politicians need to accept reality: This economy is going to be weak for a decade thanks in part to refusal of politicians to address fiscal issues, union salaries, and union pensions now.

The problem is not lack of revenue, the problem is state spending gone rampant, with political hacks lacking the discipline to do anything about it. I do not care how favorable the interest rate or other terms are, going into debt for 20 years to get 3 months operating expenses is simply insane.

Mike "Mish" Shedlock


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Six Impossible Things

Six Impossible Things

Opening Night Of FIDM Exhibit For Walt Disney Studios Alice In Wonderland

Courtesy of John Mauldin 

Six Impossible Things 
Delta Force 
Reduce your Deficits! 
Pity the Greeks 
Should the US Bail Out European Banks? 
Italy at Last!

Alice laughed. "There’s no use trying," she said" One can’t believe impossible things."

"I daresay you haven’t had much practice," said the Queen. "When I was your age, I always did it for half-an-hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast."

- From Through the Looking Glass by Lewis Carroll

Economists and policy makers seem to want to believe impossible things in regards to the current debt crisis percolating throughout the world. And believing in them, they are adopting policies that will result in, well, tragedy. Today we address what passes for wisdom among the political crowd and see where we are headed, especially in Europe.

I am reminded of the great line from the movie, The Princess Bride. Vizzini is the short bad guy who is trying to get away from Westley and every thing he attempts does not work. Westley just keeps on coming. At each failed attempt, Vizzini mutters, "Inconceivable." Finally, Vizzini has just cut the rope and The Dread Pirate Roberts (Westley) is still climbing up the cliff.

Vizzini: HE DIDN’T FALL? INCONCEIVABLE.

Inigo Montoya: You keep using that word. I do not think it means what you think it means.

European leaders keep telling us that the break-up of the eurozone is inconceivable. I do not think they know what that word really means. Let’s see if I can explain the problem so that even a politician can understand.

But first, and quickly. We have transcribed the speeches from my recent 7th Annual Strategic Investment Conference I put on with my US partners Altegris Investments. To say they were awesome is somewhat of an understatement. If you have registered for my free accredited investment letter, you should already have gotten a link or will get one soon to the speeches. David Rosenberg, Dr. Lacy Hunt, Paul McCulley, Niall Ferguson, Jon Sundt, Jason Cummins, Gary Shilling and your humble analyst. That is a world class line-up.

If you are an accredited investor (basically $1.5 million net worth) and have not yet signed up for my letter, then go to www.accreditedinvestor.ws and do so now. One…
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Here Kitty-Kitty (CAT)

Here Kitty-Kitty (CAT)

Staring Cat

Courtesy of Karl Denninger at The Market Ticker 

You have to have a rather odd view of "improving" to deal with the report given here as "reflecting economic improvement":

Caterpillar Inc. reported a profit in the first quarter, citing improved economic conditions, particularly in emerging markets, as the heavy machinery maker also raised its forecast for the year.

Ok, so we should have seen a beat on both revenue and earnings, right?  Remember, the first quarter of 2009 was the depth of the recession – the bottom – if you believe the headlines.

So what did we get?

For the first quarter, Caterpillar reported a profit of $233 million, or 36 cents a share, compared with a prior-year loss of $112 million, or 19 cents. Excluding items such as tax charges related to new health-care legislation and prior-year restructuring impacts, per-share earnings rose to 50 cents from 39 cents.

That’s good!  A profit .vs. a loss; exactly what one would expect.  How were revenues? 

Revenue dropped 11% to $8.24 billion.

Analysts polled by Thomson Reuters had forecast earnings of 39 cents a share on $8.84 billion in revenue.

Uhhhhhhhh….. wait a second.

Economic recovery eh?

Machinery sales were down 1% from a year ago – but I thought a year ago was the depths of the recession and we have been recovering since?  So how do we get a negative year-over-year comparison?

Worse, in North America (that’s here!) machinery sales were down 15% with dealer inventories half of year ago levels.  That is, not only is heavy equipment not selling, dealers don’t think it will be in the near future either.  So how did we get big increases?  Asia, up 40%.  Yep, that matters, and it’s what drove the results.

Engine sales were even worse, off 28%, and even in Asia they were down, in that case 15%.

The street is cheering this report on the back of everyone and their brother pumping the company (most especially the fools on CNBS) but the facts are what they are.  With no revenue increases you can argue for improving profit due to firing huge numbers of people all you want, but the top-line, particularly in America, is horribly bad and does not point to any sort of turn-around in construction equipment sales of any sort, nor any improvement in over-the-road trucks and other engine markets (such as marine.)

Disclosure: No position 


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THE BACKWARDS CHECK MARK RECOVERY IN REVENUES

THE BACKWARDS CHECK MARK RECOVERY IN REVENUES

Courtesy of The Pragmatic Capitalist

Investors who are wondering why stocks haven’t rallied this earnings season need look no further than the actual data.  This earnings season is shaping up to be truly spectacular in terms of expectations, but a look under the hood shows that earnings are less than spectacular.  While bottom line growth continues to be robust, the top line growth continues to come in weak (although better than expected).   Not surprisingly, this is in-line with what we have been seeing in segments of the real economy (see “No Recovery On Main Street” for more info).

Earnings season is over half way over and the analysts have never been more wrong.  Thus far, 74% firms have exceeded expectations while just 19% have fallen shy of expectations.  Of course, it’s not unusual for firms to outperform the analysts expectations, but this ratio of 6:1 is practically unheard of.  Zacks investment research notes that the average earnings season sees a ratio of 3:1 which means this earnings season is twice as good as those of the past.  Not only that, but firms are also beating by a much wider margin than normal.  On average, firms beat by 3%, but are beating by 7.5% this earnings season.

Of the firms reporting 72% have outperformed in terms of operating income while only 43% of them have reported earnings that were higher than the same quarter last year.  On the top line, 64% of firms have outperformed this quarter’s revenue estimates while just 27% of firms are reporting higher revenues than the same quarter a year ago.   Margins are coming in at 7.8% vs the 15 year average of 6.6%.  This shows that margin expansion and cost cutting is leading to much of the bottom line growth.

The discrepancy between expectations and reality is nowhere more apparent than it has been in our expectation ratio.  The ratio clearly shows the schism between actual earnings and analysts expectations.  The ratio was essentially flat this week versus last week’s reading, but continues to display a very wide margin between analysts estimates and the underlying income statement components of the ratio.  We would expect the ratio to narrow in the coming quarters as analysts ratchet up their estimates and narrow the divide.  (See here for more on


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Best Buy (BBY) Results Out

Best Buy (BBY) Results Out 

best buyCourtesy of Karl Denninger at The Market Ticker


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BIZARRO MARKET

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BIZARRO MARKET

earnings, cokeCourtesy of The Pragmatic Capitalist

CNBC, Bloomberg, Yahoo Finance, etc are all reporting that companies reported “better than expected” earnings this morning. Let’s take a look at these great earnings:

Coke – $8.27B in revenues vs estimates of $8.66B.   A $400MM MISS.

Caterpillar – $7.98B in revenues vs estimates of $8.86B.    Nearly a $1B MISS.

DuPont – $7B in revenues vs estimates of $7.15B.  A $150MM MISS.

United Technologies – $13.2B vs estimates of $13.92B.  A $700MM MISS.

I can’t ever remember a market where investors turned such a blind eye to top line growth.  It’s truly astonishing.  These are phenomenally bad revenue figures.  There is just no two ways around it.  This trend of rising stock prices on poor underlying earnings cannot and will not last.

Photo: "Coke float," a type of ice cream soda, made with Coca-Cola and vanilla ice cream, by Ginny at Wikipedia.

 


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California impasse ends as Schwarzenegger reaches agreement

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California impasse ends as Schwarzenegger reaches agreement

Arnold Schwarzenegger, CaliforniaCourtesy of Edward Harrison at Credit Writedowns

This came in overnight via the FT.  Most of the shortfall in revenue is made up through spending cuts.  Below are the relevant paragraphs:

The agreement involves cutting nearly $6bn from schools and community colleges and close to $3bn from the state’s university system, although Mr Schwarzenegger said education cuts would be fully “refunded”.

An additional $1.3bn will be cut from Medi-Cal, the health programme for low earners and the poor.

CalWorks, the state’s welfare-to-work programme – and the target of much criticism from Mr Schwarzenegger – will have its funding cut by $528m, while Healthy Families, a programme that provides health insurance for 930,000 low-income children, will be cut by $124m.

The state’s in-home support services programme for the frail and disabled will also have its funding slashed. Mr Schwarzenegger has maintained that the system is a hot-bed of fraud abuses and won approval to begin fingerprinting care-givers and recipients of aid.

Another contentious part of the agreement will clear the way for oil drilling to resume off the coast of Santa Barbara. The prospect of drilling in the area has attracted a lot of criticism and is likely to be fiercely contested by local residents and environmental campaigners.

I should also mention some thoughts from Tim Fernholz via Brad DeLong on why the Federal Government has not given states more money.  He claims it was moderate Senators in Congress who explicitly took out state aid from the February stimulus package.  He writes:

Robert Samuelson, typically known for butchering economics in his column, takes a break today in order to butcher political science. He says the stimulus isn’t working because it is composed of the wrong programs, and he blames President Obama specifically for not including things like fiscal aid to states…. But if Samuelson were to remember what actually happened last February, or even do some superficial research, he’d realize that it was the moderate members of the Senate, led by Sens. Ben Nelson and Susan Collins, who stripped out much of the state funding…. [T]hese senators never did get around to telling anyone the economic logic of their proposal…. So Samuelson will never criticize moderate


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Kimble Charting Solutions

Apple Bullish Breakout Suggesting Tech Follows In Its Path?

Courtesy of Chris Kimble

Is Apple sending a bullish message to the overall Tech market? Sure could be

Apple (AAPL) is working on a breakout above last year’s highs at (1), after creating a series of higher lows over the past year.

Tech ETF QQQ has been a similar-looking pattern to Apple over the past few months, as it is near old highs while creating higher lows.

Is Apple’s upside breakout suggesting that QQQ will follow in its footsteps and breakout?

Str...



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Phil's Favorites

Fed Chair Powell Met with a Sovereign Wealth Fund in August and Had a Call with a Central Bank Holding Tens of Billions in U.S. Stocks

Courtesy of Pam Martens

Jerome Powell, Chairman of the Federal Reserve

This morning the Federal Reserve pumped another $58.15 billion into Wall Street securities firms under the repo loan program it initiated on September 17. That program has been pumping out hundreds of billions of dollars each week to Wall Street with no authorization from Congress, as far as the public is aware.

We decided to take a look at Federal Reserve Chairman ...



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Zero Hedge

Despite Pushback Against FAA, Boeing Shares Extend Plunge As Analyst Downgrades Accelerate

Courtesy of ZeroHedge View original post here.

Boeing said on Sunday that it told U.S. regulators "multiple times" that it had expanded the role of its MCAS system and that the FAA had observed the system operating in flight tests before the 737 Max was certified for service, according to Bloomberg

The statement was posted online as a result of Friday's ...



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Insider Scoop

10 Biggest Price Target Changes For Monday

Courtesy of Benzinga

  • UBS raised the price target for Teradyne, Inc. (NASDAQ: TER) from $47 to $63. Teradyne shares closed at $58.93 on Friday.
  • Bank of America cut the price target on Boeing Co (NYSE: BA) from $400 to $370. Boeing closed at $344.00 on Friday.
  • Raymond James raised the price target for Kansas City Southern (NYSE: KSU) from $151 to $170. Kansas City Southern shares closed at $145.25 on Friday.
  • H.C. Wainwright boosted Foamix Pharmaceuticals Ltd ...


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Digital Currencies

Five hurdles blockchain faces to revolutionise banking

 

Five hurdles blockchain faces to revolutionise banking

Shutterstock

Courtesy of Markos Zachariadis, Warwick Business School, University of Warwick

Blockchain is touted as the next step in the digital revolution, a technology that will change every industry from music to wast...



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Chart School

Gold Stocks Review

Courtesy of Read the Ticker

Gold stocks are swinging back forth between the range, and a break out swing higher is due. Gold stocks are holding a near perfect Wyckoff accumulation pattern. All should get ready to play this sector. Yet we must recognize that gold stocks are a one of the most crazy rides at the stock market fair, so play very carefully.

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GDX PnF chart from within the video

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Important channels around the HUI.
...

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The Technical Traders

Treasuries Pause Near Resistance Before The Next Rally

Courtesy of Technical Traders

Our research team believes the US Treasuries and the US Dollar will continue to strengthen over the next 2 to 6+ weeks as foreign market and emerging market credit and debt concerns outweigh any concerns originating from the US economy or political theater.  Overall, the major global economies will likely continue to see strength related to their currencies and debt instruments simply because the foreign market and emerging markets are dramatically more fragile than the more mature major global economies.

We believe the US Treasuries may surprise investors by rallying from current levels, near price resistance, to levels above $151 on the TLT chart. 

Our belief ...



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Lee's Free Thinking

Look Out Bears! Fed New QE Now Up to $165 Billion

Courtesy of Lee Adler

I have been warning for months that the Fed would need new QE to counter the impact of massive waves of Treasury supply. I thought that that would come later, rather than sooner. Sorry folks, wrong about that. The NY Fed announced another round of new TOMO (Temporary Open Market Operations) today.

In addition to the $75 billion in overnight repos that the Fed issued and has been rolling over since Tuesday, next week the Fed will issue another $90 billion. They’ll come in the form of three $30 billion, 14 day repos to be offered next week.

That brings the new Fed QE to a total of $165 billion. Even in the worst days of the financial crisis, I can’t remember the Fed ballooning its balance sheet by $165 bi...



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Biotech

The Big Pharma Takeover of Medical Cannabis

Reminder: We are available to chat with Members, comments are found below each post.

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Promotions

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Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

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