Earnings Report Card = ? – 07/24/2014

Stocks are creeping higher towards 2000. That is because the Q2 earnings report card has now been filled out. It’s not an honor roll style A, nor a barely getting by C. It is more of a solid B which is good enough to confirm the bullish view already in place.

That is not just my view. That is what Wall Street is telling us by their actions.

Here is the proof. Stocks were pushing all-time highs coming into earnings season. That means expectations were elevated…and often those lofty expectations are hard to top. Since then stocks have nudged a bit higher.

If earnings season was an A we would have been at 2000 by now…and perhaps a spot above.

If earnings season was a C or lower, then we would have retraced to 1950…perhaps down to 1900.

But since stocks have even pressed a little higher, it indicates earnings have met or exceeded most expectations. And thus gets a solid B rating.

Best,

Steve Reitmeister ( aka Reity…pronounced “Righty” )

Executive Vice President

Zacks Investment Research

CWS Market Review – July 11, 2014

July 11, 2014

“Never buy at the bottom, and always sell too soon.” – Jesse Livermore

Friends, allow me to introduce you to Cynk Technologies (CYNK). This is a stock which has soared from 10 cents on June 21 to nearly $22 yesterday.

I should warn you that Cynk has a few minor operating problems. For example, the company has no assets revenues, and only one executive. Or perhaps, only one employee. In fact, we’re not exactly sure if the company exists. Also, they’re based in Belize.

Outside that, things are going swimmingly. You gotta admit — that’s some rally. Cynk has a paper value of $6 billion. The stock has rallied more in the last three weeks than Apple has since their IPO 34 years ago.

Beyond my mocking, there’s an important lesson here. Those of us who force rationalism and sobriety on the market are engaged in a constant war, and we’re not always winning. The suckers are out there. Who knows how garbage like Cynk gets going? Once people start buying it, the irrational exuberance mentality builds on itself. Soon people bid it up simply because they think the stock will go up, which in turn causes more people to buy…which in turn causes the stock to go up.

Remember, there are lots of finance professors today who tell us how efficient the market is, who say that the market is rational and that it’s impossible for an investor to beat the market over the long haul. Please. The market is made of humans, and it has all our virtues and vices. The rally in Cynk Technologies is a perfect example.

In this week’s CWS Market Review, we’ll talk about the big news in the minutes from the Federal Reserve’s last meeting. It looks like the Fed’s QE program will end earlier than we thought. We’ll also look at the big buyback announcement from Bed, Bath & Beyond. Later on, we’ll run down some of our Buy List stocks as they get ready for earnings season. But first, what exactly are the Fed’s plans for the rest of this year?

QE to End during Q4

On Wednesday afternoon, the Federal Reserve released the minutes from their June 17-18 meeting. Even though the policy statement from that meeting was largely what everyone expected, the minutes, which are released three weeks later, contained a surprise. The Fed members plan on ending their bond buying program in October.

Let’s take a step back. The original bond-buying program (Quantitative Easing or QE) had the Fed buying $85 billion worth of bonds each month. That was $45 billion in Treasuries and $40 billion in mortgage-backed securities. At each meeting since December, the Fed has tapered the program by $10 billion.

Projecting forward, I had assumed that would leave the final $5 billion to be tapered at the December meeting. Apparently not. The Fed minutes indicated that they’re looking for a $15 billion taper in October.

The timing here is important because, as I mentioned in last week’s issue, Janet Yellen has said that the Fed will start raising interest rates “something on the order of six months” after QE is over and done with. Some on Wall Street have referred to this as the Fed’s TT strategy, meaning they want a clear separation between tapering and tightening. I think that’s right. We can probably look forward to the Fed´s increasing short-term interest rates sometime next spring, about two months earlier than I expected.

I was baffled by the Fed’s move. On Twitter, I wondered, “Why the heck wasn’t this in the last FOMC policy statement?” Binyamin Appelbaum, the New York Times reporter who covers the Fed, responded, “Really good question.” If they had been considering these steps, this should have been mentioned. Or Janet Yellen could have mentioned it her post-meeting press conference.

I often tease the bond market, but its reaction was surprisingly tame. The yield on the 10-year Treasury is back down to 2.55%. The interesting part of the yield to watch is the one- and two-year Treasuries. The yield for the one-year has basically stayed the same, right around 0.10%. But the yield on the two-year has slowly crept higher. The yield recently broke 0.5%, and the three-year yield hit 1%. Both cases are near three-year highs. What does this mean? It tells us that the market doesn’t expect any rate increases soon. But in about a year, rates will move higher. Until then, the Fed is on the side of investors.

The stock market has now gone 58 trading days in a row without rising or falling by more than 1%. That streak looked like it was going to come to an end on Thursday morning, as the stock market opened lower. Shares of Portugal’s Banco Espirito Santo plunged as investors were concerned about the bank’s viability. This triggered a sell-off in some Europe markets. Fortunately, the stock market founds its legs, and the S&P 500 closed lower by 0.41%.

I do have some concerns about what’s been driving the rally. Companies have opened up their wallets and bought back tons of shares. Lately, that money river is starting to dwindle. Let’s consider some facts: In MarketWatch, Mark Hulbert noted that in June, buybacks fell to an 18-month low. That’s worrisome because there’s been a semi-strong relationship between buybacks and share prices. According to David Santschi, the CEO of TrimTabs, the correlation coefficient between buybacks and stock prices is 0.61.

The few shares outstanding have helped boost earnings-per-share, although nominal profit growth hasn’t been that great. In fact, sales growth has been downright tepid. Hulbert writes, “Over the past five years, for example, per-share sales growth for S&P 500 companies has been an annualized 2.4%, lagging far behind the 20% annualized earnings-per-share growth rate.”

That’s why this earnings season is so important. The growing evidence we have suggests that the economy did much better in Q2 than in Q1. Earnings reports can confirm that. It will also let us know if more consumers are heading out to stores and buying stuff. Janet Yellen and her friends at the Fed have done everything they can to lead consumers to water. Now we have to see if they’ve taken a drink.

Bed Bath & Beyond Announces $2 Billion Buyback

Speaking of stock buybacks, Bed Bath & Beyond (BBBY) decided to make a news splash on Monday when they announced a massive $2 billion share-repurchase program.

This makes a lot of sense if you think your company’s shares are underpriced. I’m not a big fan of share buybacks. I’d rather see that money go to shareholders as dividends. But I have to give credit to BBBY because they’ve actively worked to reduce their share count. Too many buyback programs simply mask executive compensation.

BBBY’s existing buyback program was down to $681 million on May 31. This new program will be wrapped up by the end of FY 2016, which is about 18 months from now. Since 2004, the home-furnishing store has bought back $6.6 billion worth of its stock. It’s painful for me to consider how many companies have wasted billions of dollars in profits buying back inflated shares.

BBBY got a nice bump on Monday, and the shares nearly pierced $60 this week. The company still needs to deliver on its guidance for this year, but this buyback program is a strong vote of confidence from management. Bed Bath & Beyond remains a good buy up to $61 per share.

Three Buy List Earnings Reports Next Week

I’m writing this newsletter early on Friday. Later this morning, Wells Fargo (WFC) is due to report their Q2 earnings. That will be our first Buy List stock to report this season. The bank has increased its earnings for the last 17 quarters in a row, and Wells has topped expectations for the last 10 quarters in a row. That streak may be in jeopardy this time around. Wall Street expects Wells to report $1.01 per share, along with a slight revenue decline.

A few years ago, Wells Fargo went into mortgages in a big way, but backed off considerably last year and this year. They’re now the leading bank in the country, and their earnings report will be an important sign of how well the industry is faring. Keep up with the blog for details on their earnings report.

For most of Wall Street, earnings season will heat up next week. As of now, I know of three Buy List stocks that are due to report next week: eBay on July 16, and Stryker and IBM on July 17. (There could be other earnings reports but some companies aren’t very good at communicating their plans.)

Three months ago, eBay (EBAY) said it expected Q2 earnings of 67 to 69 cents per share. Wall Street had been expecting 70 cents per share. Even though it was a small disappointment, the stock has not fared well. The shares have slid from nearly $60 in March to $48 recently. I think that’s a big overreaction.

I also want to see what they have to say about their full-year guidance. In April, the online showroom reiterated guidance of $2.95 to $3.00 per share. That’s up from $2.71 last year. The stock closed the day on Thursday at $50.33, which is a bargain.

Stryker (SYK) is one of those companies that regularly churn out steady earnings increases. In 2012, they made $4.07 per share, and last year, they made $4.30 per share. For this year, Stryker has given guidance of $4.75 to $4.90 per share. Wall Street expects Q1 earnings of $1.09 per share. I think there’s an outside chance that Stryker will go for a big merger, or possibly be bought out. That seems to be the direction of the industry. Stryker remains a good buy up to $87 per share.

IBM (IBM) has been a disappointment this year. Big Blue has frustrated investors, and the shares lagged during much of the second quarter. The last earnings report wasn’t very good. Since the beginning of July, however, the stock has perked up. For next week’s earnings report, Wall Street expects $4.29 per share for Q2.

One interesting angle is that IBM said it expects earnings of “at least” $18 per share for the entire year. Wall Street doesn’t buy it, but IBM hasn’t backed down. The Street’s consensus is at $17.87. More than earnings, IBM’s problem is topline growth. If their guidance is right, then IBM is going for just 10.5 times this year’s earnings. IBM is a buy up to $197 per share.

A few more quick notes. Satya Nadella, the CEO of Microsoft (MSFT), sent a company-wide e-mail yesterday. In it, he laid out his vision for the company. Although the e-mail wasn’t long on specifics, I like the way he’s taken over things there. MSFT will report earnings on July 22.

Also, Ford Motor (F) said they expect to turn a profit in Europe next year. That’s very good news. The automaker has been bleeding money in the Old World, but we know they’ve been working to turn things around. Ford got as high as $17.45 on Tuesday. I expect to hear more good results later this month.

I also want to lower my Buy Below price on Ross Stores (ROST) to $71 per share. I like Ross, but I want my Buy Below to reflect the stock’s disappointing spring.

That’s all for now. Earnings season will start to heat up next week. Within a few days, we’ll get a sense of how strongly earnings are coming in. We’ll also get a few key economic reports. The Industrial Production comes out on Wednesday, along with the Fed’s Beige Book. Housing starts and building permits are due out on Thursday. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

– Eddy

Named by CNN/Money as the best buy-and-hold blogger, Eddy Elfenbein is the editor of Crossing Wall Street. His free Buy List has beaten the S&P 500 for the last seven years in a row. This email was sent by Eddy Elfenbein through Crossing Wall Street.
2223 Ontario Road NW, Washington, DC 20009, USA

Revenue Growth Absent This Earnings Season

Revenue Growth Absent This Earnings Season

Judging by the market’s mostly bullish reaction to earnings season thus far, one would think that companies are faring pretty well this year. If you value revenue growth, however, you may be surprised to find that this simply isn’t the case.

Heavy Hitters Failing to Grow Revenue

Pharmaceutical giant Pfizer (PFE) this morning became the latest mega-cap company to report first quarter earnings that included a distinct lack of revenue growth. Let’s take a look at some other paltry sales results posted in the past few weeks.

 

    • Pfizer (PFE) – Revenue fell 8.5%

 

    • Chevron (CVX) – Revenue fell 2%

 

    • Kraft Foods (KRFT) – Revenue fell 3.3%

 

    • Clorox (CLX) – Revenue fell 1.9%

 

    • Kellogg’s (K) – Revenue fell 3.1%

 

    • Exxon (XOM) – Revenue fell 1.45%

 

    • MetLife (MET) – Revenue fell 3.4%

 

    • Colgate-Palmolive (CL) – Revenue flat

 

    • Microsoft (MSFT) – Revenue flat

 

    • Raytheon (RTN) – Revenue fell 6.3%

 

    • Procter & Gamble (PG) – Revenue flat

 

    • Lockheed Martin (LMT) – Revenue fell 3.8%

 

    • McDonald’s (MCD) – Revenue flat

 

    • Kimberly Clark (KMB) – Revenue fell 0.7%

 

    • PepsiCo (PEP) – Revenue flat

 

    • DuPont (DD) – Revenue fell 3%

 

    • General Electric – Revenue fell 3%

 

    • IBM (IBM) – Revenue fell 3.9%

 

    • Bank of America (BAC) – Revenue fell 2.7%

    Clearly, the sales environment for many of America’s top companies is very difficult right now. How each individual company deals with its own challenges will have a large impact on performance over the next several quarters – not to mention the next several years.

    The Bottom Line

    So much of a company’s future growth depends on revenue-building initiatives. Unfortunately, companies cut back expenditures following the financial crisis of 2008-2009 and have yet to refocus on growth, most likely due to a lack of near- and medium-term economic visibility. Instead, many companies have concentrated on cutting costs, paying down debt, and improving existing operations. These moves may have increased profitability, but ignoring growth for too long could come back to haunt many companies.

    The trend of weak revenues will likely continue until we see an uptick in quality job creation and an overall return to more growth-centric initiatives, and we certainly aren’t seeing any signs of those factors yet.

    Stay current with all the latest news surrounding dividend stocks, including earnings reports, analyst moves, and much more on The Dividend Daily.

    Ukraine Accord Drives a Relief Rally

    Stocks sold off initially today as earnings season heated up, but progress on the Ukraine crisis drove a relief rally.

    The S&P 500 initially fell as low as 1856.72 in early trading but turned higher to finish up 0.1% at 1864.84.

    Officials from Russia, Ukraine, EU, and US made an agreement that delayed economic sanctions, which implies clear progress toward a peaceful resolution.

    And while the US stock reaction was positive, Russian stocks really put on a show, with the Market Vector Russia ETF Trust (RSX) up 6.1%. Eastern European stocks were also stellar performers.

    We saw quite a few major earnings reports yesterday afternoon and this morning.

    Flash memory producer SanDisk (SNDK) was up a whopping 9.4% after delivering a substantial earnings beat Thursday after the close.

    General Electric (GE) reported revenues that were slightly below consensus but earnings that were better than expected, which lead traders to send the stock 1.7% higher.

    Chipotle Mexican Grill (CMG) delivered a disappointing earnings number, but its revenues were well ahead of expectations and guidance was strong. However, the company announced on its conference call that it would raise its prices to combat high beef costs, an shares plummeted, finishing down 5.9%.

    Investment banks Goldman Sachs (GS) and Morgan Stanley (MS) were also standouts, each exceeding consensus estimates by wide margins. Both stocks rallied today. We also saw solid beats from Baker Hughes (BHI), BlackRock (BLK), and PepsiCo (PEP).

    On the downside, Google (GOOG), which reported after the close Thursday, sold off 3.7% as it missed Wall Street’s top- and bottom-line estimates.

    IBM (IBM) also traded lower as investors were unimpressed with its revenues despite better-than-expected full-year guidance.

    Overall, US market activity was constructive, with a healthy intraday rebound in the small-cap Russell 2000 and the biotech sector and a downward move in utilities stocks — a combination indicating risk-friendliness on the part of traders. On the negative side, housing stocks were weak.

    In economics news, initial jobless claims for last week were 304,000, coming under the 315,000 consensus forecast. Continuing claims were 2.74 million vs. Wall Street’s forecast of 2.78 million.

    The April Philadelphia Fed’s Business Outlook was 16.6, which was ahead of the 10.0 reading expected, as well as last month’s 9.0 reading.

    We’ll be in the heart of earnings season next week, and Monday will be a busy day with reports from the likes of Halliburton (HAL), Hasbro (HAS), Celanese (CE), and Netflix (NFLX).

    In US economics, March Chicago Fed National Activity Index will be reported at 8:30 a.m. ET, followed by March Leading Economic Indicators at 10:00 a.m.

    Earnings Clean Sweep – 04/16/2014

    Tuesday was the first meaty day for earnings season. Gladly the top 6 reports that mattered were all positively received with shares on the rise.

    Before the market open, Coke, J&J and Schwab all impressed. Then afterhours we got solid news from railroad giant CSX along with Intel and Yahoo. That is a broad swatch of industries each boasting solid results which is certainly positive.

    So we ended the session with the S&P just two points under the 50 day moving average. The afterhours beats have the S&P ready for a breakout above. It’s hard to be confident in that notion given all the recent volatility. But if earnings season continues on this positive path then it will be hard for stocks not to trek northwards once again.

    Best,

    Steve Reitmeister ( aka Reity…pronounced “Righty” )

    Executive Vice President

    Zacks Investment Research

    CWS Market Review – April 4, 2014

    April 4, 2014

    “There will be growth in the spring.” – Chauncey Gardiner

    T.S. Eliot famously called April “the cruelest month,” but it’s not so bad for the stock market (Eliot himself was a Lloyd’s Bank employee). Since 1950, the S&P 500 has rallied in 44 times in April while losing ground 20 times, and recent Aprils have been especially good. In the last eight years, the S&P 500 has averaged over 3% in April.

    This April has gotten off to a good start as well. On Thursday, the S&P 500 got as high as 1,893.80, which is yet another all-time intra-day high. I’m not much of a fan of the Dow Jones, but I should note that until this week, the Dow 30 had failed to break its high from December 31. Some bears claimed that this lack of “confirmation” was a bad omen. Well, that mark fell as well. On Thursday, the Dow broke 16,600 for the first time ever.

    What’s the cause for the recent rally? That’s hard to say exactly, but I suspect that the cooling-off of tensions in Eastern Europe has helped a lot. Investors were also buoyed by some remarks by Fed Chair Janet Yellen. We also got some decent economic news this week, and there seems to be some optimism for Friday’s jobs report (as usual, I’m writing this before the report comes out.)

    But the next big event for investors is Q1 earnings season, which starts next week. We already know that crummy weather held back consumers this winter, but it will be interesting to hear what kind of guidance companies have for the spring. In this week’s CWS Market Review, I’ll preview this earnings season. I’ll also focus on two Buy List earnings reports for next week, Bed Bath & Beyond and Wells Fargo. I also have several new Buy Below prices for you. But first, I want to take a look at a question that keeps popping up on Wall Street.

    Are We in Another Bubble?

    There’s been a lot of loose talk lately about how today is similar to the Great Millennium Bubble. A few days ago, the New York Times ran a story titled “In Some Ways, It’s Looking Like 1999 in the Stock Market.”

    Oh please. This is nonsense. Sure, stock prices have rallied, and yes, valuations are higher, but c’mon, we’re nowhere close to the kind of crazy numbers we saw in the late 90s. Back then, all you needed was a dot-com address, a sock puppet and some clever ads, and presto, investors would throw billions of dollars your way.

    Actually, your company didn’t even need to be that fancy. I’ll give you a good example. General Electric (GE) is about the bluest blue chip you can find. The stock is currently going for $26.23 per share. That’s half of where it was 14 years ago, yet the company is expected to earn $1.70 per share this year. Compare that to 2000, when GE’s bottom line was $1.27 per share. So profits are up 34% in 14 years (not so good), while the stock price is down by 50%. GE’s Price/Earnings Ratio has dropped from 42 to 15. My point is that people have forgotten what a real bubble looks like.

    To be sure, there are areas of the market looking bubbly. Actually, to be more specific, it’s areas outside the market that look troublesome. Tech companies are paying some hefty prices for start-ups with little or no revenue.

    Last year, Yahoo shelled out $1.1 billion to buy Tumblr. The company has so little revenue that Yahoo isn’t even required to list it in its financial statements. In business jargon, that’s what we like to call “not good.” A few weeks ago, Facebook paid a massive amount, $19 billion, for WhatsApp, a company with 55 employees. I freely admit that I can’t judge the value of enterprise like that, but there seems to be a fear in Silicon Valley of being left behind in this week’s app of the century, so these prices are getting carried away.

    But that’s not the kind of investing we’ve been doing, and our stocks haven’t done many mega-deals lately (though Oracle did a few years ago). My advice is to ignore all the silly bubble talk, and let’s focus on what the numbers say.

    Breaking down Q1 Earnings Season

    Now let’s take at a look at some current numbers and the outlook for Q1 earnings. Last year, the S&P 500 earned $107.30 (that’s the index-adjusted number; to convert to actual dollar amounts, multiple by 8.9 billion). Currently, Wall Street expects the index make $120.04 for this year and $137.20 for 2015. In my opinion, both numbers are too high, but I’ll get to that in a bit.

    For Q1, Wall Street currently expects earnings of $27.60. Those estimates have drifted lower over the past several months. One year ago, the Street had been expecting over $29 for Q1. As a general rule, earnings estimates start high and gradually fall as earnings season gets closer, so don’t be alarmed about the reduced estimates. By the time earnings season arrives, estimates are often too low. This is part of a game the Street likes to play. There’s nothing Wall Street likes better than beating expectations, so companies know how to play the expectations game. The current Q1 estimate of $27.60 works out to an increase of 7.1% over last year’s Q1. That sounds about right. I think we’ll probably be at about $28 by the time all the reports have come in.

    I also want to touch on an important and often-overlooked point, which is dividends. Payouts have been growing impressively for the last few quarters. Dividends for the S&P 500 grew by 15.1% for Q1. Technically, I should say “dividends-per-share,” because the stock market has been helped by a reduced share count, thanks to stock buybacks.

    Over the last three year, dividends are up by 55%. The S&P 500 paid out $34.99 in dividends last year, and I think it will pay out $40 for this year. Going by Thursday’s close, that gives the index a yield of 2.12%. That’s not bad at all, especially in an environment where interest rates are near 0%, and we know they’ll be stuck on the ground for another year.

    Instead of the $120 that Wall Street expects in earnings from the S&P 500, I think $115 is a more reasonable estimate. (I don’t know if it will be more accurate, but I think it’s a safer assumption.) That gives the S&P 500 a forward P/E Ratio of 16.4, which is quite reasonable. Historically, more bull markets are upended by deteriorating fundamentals than by excessive valuations. How far the markets fall, however, is usually determined by valuations. As long as profits continue to grow, the stock market is a good place to be.

    Is the U.S. Stock Market Rigged?

    This week, Wall Street has been buzzing about Sunday’s 60 Minutes segment with Michael Lewis. He was on to discuss his new book, “Flash Boys,” which covers High Frequency Trading. In the interview, Lewis said that the U.S. stock market is “rigged.” I was disappointed to hear him say that. Lewis is a gifted writer, but I’m afraid he drew an overly simplistic narrative for a complicated issue.

    Let me put your fears to rest. The U.S. stock market is not rigged. Individual investors have no reason to fear that a bunch of super computers are ripping them off. There are serious concerns about HFT, but saying that the market is rigged deflects the debate in a pointless direction.

    I wanted cover this topic because it’s made so much news on Wall Street this week, including an acrimonious debate on CNBC, and I’m afraid Lewis’s interviewed rattled investors. The issue with HFT is an issue we often see: technology is changing the way we do business. Some of the changes are good, and some are bad. Instead of having floor traders, guys who make funny hand signals at each other, the modern market is governed by very fast computers. The HFT guys provide liquidity, and they get paid for it. On balance, that’s much better than the system we used to have.

    I have concerns about HFT causing more numerous and more severe Flash Crashes, and I like to see that addressed. Fortunately, our strategy isn’t based on trading. I change the Buy List just once a year. I guess you could call us Low Frequency Traders. But I want to assure investors that the U.S. market is not rigged.

    Don’t Count out Bed Bath & Beyond

    This Wednesday, April 9, Bed Bath & Beyond (BBBY) will release its fiscal Q4 earnings report. Let me fill you in on the back story. In early January, BBBY cut their Q4 (Dec/Jan/Feb) earnings estimate. They had been expecting earnings to range between $1.70 and $1.77 per share. Now they said it would be between $1.60 and $1.67 per share.

    The stock market wrecked the shares. In one day, BBBY plunged from $80 to $70. It continued to fall for the rest of January, and got as low as $62 per share in early February. If that wasn’t enough, one month ago, the company lowered their Q4 estimates again. This time it was due to the lousy weather. Now they expect earnings between $1.57 and $1.61 per share.

    So where do we stand now? I still like Bed Bath & Beyond, and this is why we have a locked-and-sealed Buy List. We didn’t jump ship in a panic, and the shares have started to rebound. Yesterday, BBBY came within a penny of hitting $70 for the first time in three months. I think the market has basically written off the Q4 earnings report and is now focused on their guidance for Q1.

    For last year’s Q1, BBBY earned 93 cents per share. The Street currently expects $1.03 per share. I’m going to hold off making a forecast, but I’m still optimistic for BBBY. The company has a rock-solid balance, they’re well run and the recovery in housing is good for them. For now, I’m going to keep our Buy Below for BBBY at $71 per share. Don’t count these guys out.

    Wells Fargo Is a Buy up to $54 Per Share

    Next Friday, Wells Fargo (WFC) will be our first Buy List stock to report for this earnings cycle. As I mentioned last week, Wells passed the Federal Reserve’s stress test with flying colors. The Fed also had no objection to WFC’s capital plan, which included a 16.7% increase to their dividend. Wells now pays 35 cents per share each quarter.

    In my opinion, Wells is the best-run big bank in America, and it’s better than a lot of small banks. The shares came very close to breaking $50 this week. Wall Street currently expects earnings of 96 cents per share. My numbers say that’s about right, so don’t expect any major earnings beat. The new dividend gives Wells a yield of 2.81%. I’m keeping our Buy Below at $54 per share.

    Six New Buy Below Prices

    The recent rally has been very good to us. Through Thursday, our Buy List is up 3.29% for the year, which is ahead of the S&P 500’s gain of 2.19%. Three of our stocks, DirecTV (DTV), Stryker (SYK) and CR Bard (BCR), are already up more than 10% this year. Plus, Microsoft (MSFT) and Wells Fargo (WFC) aren’t far behind. This week, I’m raising the Buy Belows on six of our stocks.

    Two weeks ago, I said that I expected Oracle (ORCL) to soon break through $40 per share, and that’s exactly what happened. In fact, the stock hit $42 per share on Tuesday. Oracle hasn’t been this high in 14 years. (Remember how the stock dropped after the last earnings report? It’s funny how quickly people forget those short-term reactions.) This week, I’m bumping up my Buy Below on Oracle to $44 per share. I really like this stock.

    Ford Motor (F) has been especially strong lately. Two months ago, the shares pulled back below $14.50, and it recently closed at $16.39. Ford just reported very good sales for March. I’ll repeat what I’ve said before: I think Ford is worth $22 per share. I’m raising my Buy Below on Ford to $18 per share.

    Three of our healthcare stocks, CR Bard (BCR), Medtronic (MDT) and Stryker (SYK), broke out to new highs this week. I’m expecting more good earnings news from all of them. I’m raising my Buy Below on Bard to $152 per share. Medtronic is going up to $65, and Stryker’s is rising to $90 per share.

    I’ve raised my Buy Below on Qualcomm (QCOM) for the past two weeks, so I might as well make it three in a row. This stock continues to rally higher for us. On Thursday, QCOM topped $81 per share for another 14-year high. I’m raising Qualcomm’s Buy Below to $87 per share. This could be a break-out star for us.

    That’s all for now. First-quarter earnings season kicks off next week. Bed Bath & Beyond reports on Wednesday. Then the big banks start to chime in Friday, when Wells Fargo reports. Investors will also be paying attention to the latest Fed minutes, which come out on Wednesday. If you recall, the market was rather confused by Janet Yellen’s press conference. The minutes may clear things up. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

    – Eddy

    Named by CNN/Money as the best buy-and-hold blogger, Eddy Elfenbein is the editor of Crossing Wall Street. His free Buy List has beaten the S&P 500 for the last seven years in a row. This email was sent by Eddy Elfenbein through Crossing Wall Street.
    2223 Ontario Road NW, Washington, DC 20009, USA

    Sweet and Sour Stocks – 01/21/2014

    The earnings season continues to provide a mixed picture. In the latest round of reports we got a sweet beat from American Express which bodes well for consumer spending. That was followed by a sour pre-announcement by UPS that they will come up short of expectations in Q4 which says the opposite.

    Right now I give this earnings season a grade of C. Not failing, but not impressing anyone.

    On the economic front we actually got 3 solid reports on Friday. Housing Starts continues to impress even with higher mortgage rates. Industrial Production shows building momentum in the manufacturing space. And Consumer Sentiment remains at elevated levels.

    The economic calendar is light this week. So all eyes will be on earnings as it comes into full swing. Let’s hope Corporate America does some extra credit projects to get a grade of B or better before this earnings season ends.

    Best,

    Steve Reitmeister (aka Reity…pronounced “Righty”)

    Executive Vice President

    Zacks Investment Research