CWS Market Review – January 25, 2019
“Fear is a Feeling, Not an Inventory Indicator.” – Coreen T. Sol
The inventory market has been unusual this week. This is especially fascinating now that the earnings season is in progress. Up to now the outcomes of the end result seem fairly good. Roughly 25% of S&P 500 corporations have reported fourth-quarter earnings and the "beat rate" is nearly 70%.
Final Friday, S&P 500 acquired a total of over 2,675 copies. S&P 500 reached 14% in just over three weeks. It's a nice little rally. Over the past 14 buying and selling durations, the index has only had three days of loss. An important factor is that the index continues to be above the 50-day shifting common (the graph under the blue line) and the 200-DMA shouldn’t be distant (the pink line)
I'll be careful. Shutdown does not help, and the Federal Reserve will meet next week. I’m afraid that the central bank will stick with an unnecessary improve in interest rates. Hopefully we’ll hear evidence that FOMC is bowing to reality. It is by no means recognized with central banks.
There was no Buy Record end result report this week, however subsequent week we may have a full slate. I'll take a look at all of them this week. I even have an update for Fiserv, which simply reached a new period. A few of our shares on the buying record already seem like huge winners this yr. (Another person notices that the signing financial institution is 21% greater than a yr? Good: I too.) Before we get there, we take a look at the perfect unique job announcement for half a century.
Don't watch for interest hike subsequent week
On Thursday there have been necessary news that didn't get a lot consideration. The preliminary report on unemployment claims was less than 200,000. Particularly, it was 199,000. Because of this this has not happened for almost 50 years. The last time it was lower was in November 1969.
The report on unemployment claims kinda sorta combines with government job reviews, however not exactly. This means that we’ll have another good job report next Friday. Importantly, I feel we see extra people who return to the workforce. Through the recession, many people merely gave up in search of jobs. That's how uncooked things have been. I observed that Walmart needs to rent 900 vans and pay them $ 90,000 a yr. Many corporations need more staff, however now they should pay extra for them.
The Federal Reserve will meet subsequent week on Tuesday and Wednesday. Don't anticipate rates of interest to vary. The Fed could be carried out for a while, but I'm unsure they perceive it yet. Their predictions for this yr have been quite bold. The FOMC member of the media sees two more interest rates this yr, and a large group thinks we’d like three.
Colour me skeptical.
Let's go together with the proof. The US greenback has remained properly. Inflation has been low. The December CPI showed that shopper costs fell slightly because of lower power prices, however even the "core" fee is low. The futures market is at present considering that the Fed fee will rise to 1-in-6 in June. It sounds right. The futures market thinks the Fed has no change this yr with a chance of 71%. Many people assume that the subsequent transfer might be velocity chopping.
However the most effective news has been in the jobs. The US labor market continues to develop and individuals are returning to the labor market. There’s additionally evidence that salaries are lastly enhancing. Economics say that this leads to inflation. Sooner or later, I assume it's proper, but I'd slightly take a look at the actual world over the idea. (This is the rationale for many the reason why I'm not in the Fed.) Simply don't want greater costs proper now.
The housing market crashed in 2018, however it has not but been made. Final month, residence sales fell 6.4%. We do not yet have sales figures for brand spanking new houses (thanks, shutdown), but the current weak spot is definitely as a result of larger mortgages. This is one more reason for the Fed to cool down. Because of this, Sherwin-Williams just lately warned that the fourth quarter is weak.
As prices have supported, I look ahead to rising housing this yr. It appears that evidently for decades the financial system goes to be Kablooey, individuals are still nervous concerning the housing chest. Please. We're not even close to at least one. We only want the Fed's cooperation.
Subsequent week, we’ll obtain the first report on GDP progress within the fourth quarter. This is fascinating because the final two studies have been fairly good: + Four.2% and + 3.Four%. It has been a very troublesome time for the financial system to mix three quarters in an honest progress line (see Chart above). This time we will lastly do it.
As I discussed earlier, the end result interval is young, however early outcomes seem promising. Consensus is 13.5% earnings progress. We should always cross it. Throughout this incomes period I will even pay attention to the 2019 tips. Companies don’t need to provide buyers directions, but better corporations, particularly on the acquisition record. After that, the subsequent week will see the outcome stories of the purchase lists.
Next Week's Revenue
Here's an summary of the Revenue Calendar:
|Eagle Bancorp||EGBN||EGBN||EGBN||EGBN||EGBN||EGBN||-Jan||$ 1.13||$ 1.17|
|Signature Bank||SBNY||17 Jan||$ 2.80||$ 2.94|
|Danaher||DHR||29 Jan||$ 1.27|
|Verify Point Software program||CHKP||30 Jan||$ 1.63||$ 1.63||]] Sherwin-Williams||SHW||31 Jan||$ 3.68|
|AFLAC||AFL||31 Jan||$ zero.94|| Hershey||HSY||31 Jan||$ 1.27|
|Raytheon||RTN||31 Jan||$ 2.88 Helpful Worth|
|Cerner||CERN||5th February  $ zero.63|
|Church & Dwigh t||CHD||February 5th||19659021] $ zero.58|
|Disney||DIS||5th February||$ 1.56|
|Becton, Dickinson||19659021] 5-Feb||$ 2.61|
|Torchmark||TMK||fifth February||$ 1.56|
|Cognizant Know-how Options||CTSH||CTSH||] 19659021] $ 1.07|
|Broadridge Monetary||BR||7th February||$ 0.71|
|Fiserv||FISV||February 7||7 -feb||7-Feb||0.7||19659025] Intercontinental Trade||ICE||7-February||$ 0.92|
|Moody's  MOC||15 Feb||$ 1.68|
|Continental Bui lding Products] CBPX||21-Feb||$ 0.59|
As you’ll be able to see, subsequent week's seven results studies
Tuesday, Danaher and Stryker are able to report. Earlier Danaher (DHR) reported ready for This fall end result between $ 1.25 and $ 1.28 per share. Math tells me that they’ll in all probability win it just a little.
Danaher expects all 2018 earnings to be $ 4.49-4.52 per share. On this context, last yr Danaher issued a suggestion of $ Four.25 to $ Four.35 per share in early 2018. It ought to inform you how nicely issues have gone for them. I really like the fact that our inventory increases control.
With the outcome report, Danaher is probably going to offer the primary 2019 directions. I'm on the lookout for one thing about $ Four.75 to $ Four.80. Don't be stunned in the event that they throw us. This is how the sport is performed. Remember that Danaher also plans to unload her dentistry this yr. We might get an update on Tuesday.
Stryker (SYK) took an enormous hit in December and shares have returned. In the course of the fourth quarter, the company expects $ 2.13 to $ 2.18 per share. Stryker sees a complete of $ 7.25 to $ 7.30 per share in all 2018 earnings. I feel the street will rigorously monitor their Q1 tips. The consensus is $ 1.84, which is probably too high, but does not sweat this. Stryker is a strong company.
The checkpoint software program (CHKP) is scheduled to be reported on Wednesday. This is one other store that led to 2018 with a rough mark. To date 2019 is wanting a lot better. In October, the CHKP reported that it expects fourth-quarter earnings from $ 1.56 to $ 1.67 per share of $ 500 million and $ 528 million in gross sales. It is a pretty big range, but in line with my numbers it is sensible. I don't know sufficient to predict dropping or profitable revenue. Management is the important thing again. Consistency on Q1 is $ 1.38 per share.
The next Thursday is a busy day for us. Four stock lists are to be reported.
AFLAC (AFL) has lately been a robust performer. In October, the duck retailer stated it was coming to the highest of its earlier yr's guided tour. (Warning, math forward.) This guideline was $ three.90 – $ Four.06 per share, and took under consideration the change fee, which was ¥ $ 112.16. If “high end” AFLAC stands at $ 3.98 to $ Four.06 per share, because of this they see This fall being 87 cents and 95 cents per share. Just lately, the yen has risen to about $ 109. I can increase my purchase with AFLAC, however I need to see This fall numbers first.
Hershey (HSY) is considered one of our new inventory this yr. The shares threw on Thursday with another shopper merchandise. Three months ago, the stock hit when it met Wall Street's score of Q3. The lower share worth helped me convince me to add it to this yr's buying listing. Hershey expects a full-yr result of $ 5.33 – $ 5.43 per share. It works for $ 1.22 to $ 1.32 per share for This fall.
Raytheon (RTN) is one other new inventory this yr. We have already got a rise of 8.5% this yr, nevertheless it's early. Three months in the past, the aerospace firm easily gained expectations and increased steerage. Despite good earnings information, shares have been respectable. I feel we received the RTN on the proper time. In October, Raytheon raised its full-yr steering from $ 9.77 to $ 9.97 per share for $ 10.10 to $ 10.11 per share. When the vary is one penny extensive, I feel it's a hint that the company knows what to anticipate. I hope that 2019 steerage can be between $ 11.50 and $ 12 per share.
Sherwin-Williams (SHW) warned us that the This fall report just isn’t good. The painters had been anticipating gross sales to grow in medium-sized numbers. As an alternative, it’s 2%. The corporate stated that they had weak North American gross sales in October and November. Gross sales improved in December but were not sufficient to make the difference.
Before Sherwin stated he was expecting a fourth-quarter outcome between $ Four.07 and $ Four.22 per share. Now it is stated that the revenue is $ 3.55 per share. All year long, the company expects to earn $ 18.53 per share (excluding merger prices). The previous estimate was $ 19.05 and $ 19.20 per share.
I'm not proud of the information, however I'm prepared to offer Sherwin advantage of the doubt. This can be a properly-managed outfit, and their outcomes converse for themselves. I recognize the corporate getting out of the information. This could possibly be a very good yr for Sherwin.
Fiserv is buying as much as $ 84 per share
There’s an previous saying in the movie business: "No one knows anything." Properly, this additionally applies to investments. I advised final week that Fiserv (FISV) offers with First Knowledge. Following the announcement of the deal, Fiserv's shares fell by 8.eight%. Since then, they’ve come back impressively.
On Thursday, Fiserv hit a new prime class. Six days, from low to high, Fiserv obtained over 20%! That's why we promote our positions so not often. No one is aware of anything. This week I’ll increase my Buy purchase to less than $ 84 per share. The result is due on February 7th.
All the things is now. There can be far more news subsequent week. The Fed assembly is on Tuesday and Wednesday. Don't anticipate modifications in rates of interest. The political assertion will probably be on Wednesday afternoon. On Wednesday, the fourth quarter GDP report may also be released. Wall Street is predicted to develop by 2.9%. If this isn’t sufficient information, the January job report will come out on Friday. Ensure you all the time replace your updates on your blog. I’ve more market analysis for you within the next CWS Market Review
P.S. Several readers have asked whether or not I might host a second convention call, especially the outcome interval. That's a good idea. I'm planning now. I'll have extra info soon.
Posted by Eddy Elfenbein on January 25, 2019 at 7:08 pm
The small print of this weblog publish symbolize my own opinions and don’t include a suggestion for a specific safety or investment. Your personal or our affiliates can maintain seats or other shares in the Weblog mentioned on my page
Eddy Elfenbein is a Washington, DC-based mostly speaker, portfolio manager and journalist Crossing Wall Street weblog identify. His buying listing has gained 47% of S&P 500 over the previous 13 years (more)