Int'l Business Machines (IBM)

April 18, 2018

Stocks opened mixed this morning (Dow +21 pts; SPX +.4%). Energy, industrials and materials sectors are up over 1% in early trading. Tech, telecom and consumer staples are trading lower. (Year-to-date, the worst performing sectors are telecom, staples, real estate and utilities.) The VIX Index is up a bit to trade around 16.4. European markets will close up about .5% today and Asia was mostly higher overnight. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

January 19, 2018

Good morning. Today’s update is focused solely on earnings announcements.

IBM (IBM) reported better than expected fourth quarter results. For the first time in 6 years, IBM posted positive y/y revenue growth (+4%). This is a victory. Analysts were not pleased to see that the company’s gross profit margin (at 49.5%) missed forecasts, however. Also, the revenue upside was driven by the legacy mainframe business and not the higher margin cloud computing business. Management’s 2018 guidance was encouraging, implying continued progress shifting from a dying mainframe business to its faster-growing Strategic Imperatives unit. The stock is down 3.5% today. 

American Express (AXP) reported fourth quarter revenue and earnings slightly ahead of Wall Street forecasts. The good news is that revenue rose 10% from year-ago levels and earnings shot up 74%. The bad news is that the new tax law will cost the company a lot of money up front. Tax reform will lower the company’s effective tax rate to 22% this year. But AXP will first have to take a $2.6bil charge to write down deferred tax assets. That’s of course a one-time item and analysts will look past it. Blaming the tax law, management said it would suspend its stock buy-back program to rebuild capital. This seems like a convenient scapegoat. There’s other stuff going on here. First, the company noticed deteriorating credit quality among its credit card loans and had to set aside more money against the possibility of future loan losses. Second, the company has been spending a lot on marketing to boost growth, and is now in danger of running afoul of the Federal Reserve’s capital maintenance rules. The stock is down 3% today. 

Bank of New York Mellon (BK) reported a 2% y/y decline in revenue but an 18% rise in earnings. Management is focused on continuing to cut costs, but efforts this past quarter were offset by higher severance and legal charges. Yes, tax reform will benefit the bank (effective tax rate to 21% from 25%), but the “vast majority” of gains will be spent on higher employee wages and more investment in technology. In other words, investors will not benefit in the near term, and that’s why the stock fell 5% after the announcement. 

Schlumberger (SLB) reported 15% sales growth in the fourth quarter—the highest in several years. Wall Street analysts were, however, expecting it. Management’s guidance implied stable revenue growth in 2018. In addition, capital spending should fall to $2bil from $3.5bil, so profit margins will increase. I will say that analysts are a bit confused by the fact that last quarter the company spent $1bil to buy oil wells in Canada. This is a change of strategy for a company that has always been an oilfield service provider, not a driller. Management’s explanation, and implication that this was a one-time event, is puzzling. The stock is down .7% today, but has run 12% so far this year. 
 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

April 20, 2017

Stocks opened higher this morning, reversing yesterday’s losses. The Dow is up 98 pts and the SPX is currently up .57%. Financials, industrials and energy are leading the way. Utilities, telecoms and consumer staples are in the red. So this is a pretty classic risk-on day for capital markets. The VIX Index is down around 14.5. Most commodities are a bit higher in early trading. WTI crude oil is back up over $50.50/barrel. And by the way, the average price of gasoline around the US is $2.41/gallon. That’s about 15% higher than it was a year ago. Bonds are falling in price, higher in yield. The 5-year Treasury yield is back up to 1.77% and the 10-year yield bounced back up to 2.24%. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

October 18, 2016

Stocks jumped at the open on better than expected earnings announcements. The Dow and SPX are currently up 90 pts & .7%, respectively. Healthcare, the supreme lagger this year, is up 1.2% in early trading. REITs, basic materials and tech are also leading. The VIX Index is down to 15.7. European markets are poised to close up 1+% and Asia was up overnight. The dollar is flat and so is oil, hovering around $49.90/barrel. Bonds are mostly unchanged with the exception of a modest rise in junk. The 5- and 10-year Treasury yields are trading around 1.25% and 1.76%. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.