Lockheed Martin Q4 results

Posted on | by Todd | Leave a Comment on Lockheed Martin Q4 results

Major Defence contractor Lockheed Martin reported Q4 earnings of $3.25 per share, surpassing the street’s estimate of $3.04 by almost  7%. Full year earnings of $12.38 also beat the consensus  of $12.18 and improved by 24.7% from the year-ago level.

Q4 revenue was announced at $13.75 billion , beating analysts’ expectations of $13.09 billion by 5%. Total 2016 revenues were reported at $47.25 billion, up 16.6% on a year-on-year basis and above the street consensus of $46.46 billion.

For 2017, the firm expects to generate revenues in the $49.5 to $51.25 billion range and expects EPS to be in the range of $12.25 to $12.55.

Despite this solid Q4 report, shares of Lockheed Martin fell 4.5% on the day to $252.00. We see scope for the price to slip lower to the November low of $240.00 over the near-term.

Chart – Lockheed Martin

3M Slips Despite Solid Earnings

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Q4 earnings for 3M printed higher, led by strength in its core industrial unit and steady overseas sales.

The maker of industrial adhesives and “post-it notes” reported Q4 earnings of $1.88 per share on revenue of $7.33 billion, compared to $1.66 per share a year ago. The firm said sales in its industrial division increased by 3% to $2.5 billion, led by automotive original equipment manufacturing.

The company also restated its previous 2017 EPS guidance to reach the $8.45 to $8.80 range.

Despite the upbeat report, shares of 3m fell 2.54% to close at $176.00. This is just 4% below the 5-year high posted in July at $181.50. We would expect good technical support to emerge back at the Mid-November lows around $170.50.

Chart – 3M

Johnson and Johnson Q4 Revenue Falls Short

Posted on | by Todd | Leave a Comment on Johnson and Johnson Q4 Revenue Falls Short

Health care giant  Johnson and Johnson reported higher earnings but revenue numbers fell short of expectations.

J&J announced Q4 adjusted earnings of $1.58 per share, up 9.75 from a year ago and above the street estimate of $1.56 per share. The firm reported net earnings of $3.8 billion , which was in line with estimates of $3.81 billion.

However, Q4 revenue was announced at $18.11 billion, compared to the consensus of $18.25 billion. J&J issued sales and earnings guidance for 2017 for EPS of $6.90 to $7.10 on revenue of $74.1 to $74.8 billion.

Like many of its peers, J&J is facing generic competition and pricing pressure for some of its pharmaceutical products. As a results, shares of J&J fell over 2% to $111.70, which is close to 7% below the November high of $120.50.

Chart – Johnson & Johnson

MacDonald’s Q4 Results

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Despite a solid Q4 earnings report, shares of MacDonald’s Corporation ended the day flat at $121.30.

The fast food giant posted Q4 earnings of $1.44 per share on quarterly revenue of $6.03 billion, which represents a 2.1% increase in earnings and a 10% increase in revenue versus the same period last year.

These Q4 numbers surpassed the expectations of $1.41 per share on revenue of $5.98 billion.

The revenue numbers show a mixed result with company-owned restaurants falling 9% to $3.65 billion, while franchise-operated restaurants grew 3% to $2.38 billion.

Our Algo Engine flagged a short signal in December at $123. We’re watching the price action closely as technically the share price has seen resistance in the $123.00 area.

 

Chart – McDonalds Corp

S&P 500 Update

Posted on | by Todd | Leave a Comment on S&P 500 Update

The Standard and Poor’s 500 index is a widely followed indicator of the general direction of the US stock market, and by extension, global equity markets.

The reason for the wide following is clear. The S&P 500 comprises 505 common stocks and covers 80% of the American equity market on a capitalization basis.

However, so far this year, the S&P 500 index has had wide intra-day ranges but has gone practically nowhere. It finished the fist week of the year near 2277 and at 2275 in the second. It finished last week near 2274.

The technical indicators are not generating clear signals with the 30-day moving average being tested over the last 4 sessions but not broken.

The prospects of business-friendly policies from the Trump administration may be helping to support the market , while fear that much of the good news has already been discounted in the market has tempered enthusiasm for new buyers.

It’s our view that this indecision pattern will be resolved as the US earnings season moves into its second full week. At this point, the risk remains asymmetrically to the downside on weaker earnings reports, versus the upside potential on better-than-expected reports.

Softer Revenue From General Electric

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Shares in General Electric fell to a 1-month low of $30.30 after the company reported Q4 revenue which fell short of expectations.

The company’s Q4 earnings of 46 cents per share were in line with forecasts, but the revenue number of $33.08 billion was lower than the consensus estimate of $33.63 billion.

For calendar year 2016, GE delivered $1.49 of earnings per share, 1% organic growth and returned $30.5 billion to share holders through dividends and share buybacks.

We expect GE’s oil and gas operations merger with Baker Hughes will pay dividends throughout 2017 and would look for buyers to return near the November 4th support level at $27.50

It’s somewhat concerning the rollover in GE and likewise in top market cap US financials. We watch these signals closely as further evidence of structural share price weakness.

Our Algo Engine flagged the short signal setup in GE  at or near the recent high of $32.

Chart – GE

Wesfarmers: Coal versus Coles

Posted on | by Todd | Leave a Comment on Wesfarmers: Coal versus Coles

Given the number of diversified business units which make up Wesfarmers, we believe the most accurate method of share valuation is to look at performance of the sum of the businesses.

At this point, the valuation equation can be reduced to a simple question: Will the increased revenue from higher coal prices offset the loss of market share that Coles has given up to Woolworth’s?

We expect the resource division to generate first-half EBIT of $135 million, which is in the lower part of the $135-$140 million guidance band. Conversely, we have downgraded Coles’ sales growth which reflects industry checks suggesting Woolworth’s won the the Christmas-period grocery trade.

2017 forecast $69 billion, EBITDA $5.5 billion, net profit $2.8 billion, which will produce EPS of around $2.40 reflecting underlying growth of 5%. This places the stock on a forward P/E of 16X and a dividend yield of 5.5%.

US Earnings Update: AMEX and IBM

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Computer giant IBM announced Q4 earnings well above street estimates but lower revenue numbers pressured the stock price lower.

Big Blue reported non-GAAP earnings per share of $5.01 compared to the consensus figure of $4.88. Revenue for Q4 came in at $21.77 billion versus expectations of $21.66 billion. Cloud platform revenue continued to increase which allowed the firm to beat full-year estimates and reach $13.59 in annual earnings per share.

However, despite beating the the Q4 estimates for revenue, overall revenue growth has now dropped for the 19th consecutive quarter. This negative trajectory for overall earnings growth contributed to the sharp intra-day price reversal in IBM shares.

After trading as high as $171.15 after the headline announcement, shares closed lower on the day at $163.50. The next key technical level is found at the December low near $158.00.

American Express reported Q4 earnings which fell short of analysts’ expectations.

The credit card issuer posted adjusted earnings of 91 cents per share on quarterly revenue of $8.02 billion. The street expected earnings of 98 cents per share on revenue of $7.95 billion. In addition, net income fell 8% on a year-on-year basis to $825 million.

AMEX shares have rallied over 20% since hitting the October low of $60.00. We see the business environment improving for for the firm going into 2017. As such, we would expect to see good technical support in the $67.00 area.

 

Key US Earnings Reports

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Goldman Sachs surprised to the upside with Q4 EPS announced at $5.08, which was well above the market estimate of $4.73 and nearly 4 times the EPS of $1.27 reported a year ago. This was based on quarterly earnings of $8.17 billion versus forecasts of $7.76 billion.

Like other banks in the sector, Goldman benefited from a sharp uptick in trading activity. Net revenues from the institutional client services division were up 25% from a year ago, led by a 78% increase from the fixed-income, foreign exchange and commodities unit. Goldman shares closed down $1.45 at $234.

Citigroup had a mixed report with Q4 earnings beating expectations, but missing on their revenue figures. The banking giant announced EPS of $1.14 on revenue of $17.01 billion. Analysts were expecting EPS of $1.12 on revenue of $17.26 billion.

Trading revenue was higher at $3.20 billion, but considerably below the expectations of $3.45 billion. Fixed-income revenue also missed to the downside with Q4 reported at $2.21 billion verses an expected $2.83 billion number. Shares of Citigroup closed down 1.7% at $57.40, well below the one-year high of $61.50 posted January 4th.

Shares of NETFLIX posted an all-time high of $135.15 as earnings were marginally better than expectations, but the number of new subscribers increased sharply. The on-line entertainment company announced Q4 earnings of 15 cents per share on revenue of $2.48 billion.

These numbers were slightly better than the street’s forecast of 13 cents per share on revenue of of $2.47 billion.

More importantly, NETFLIX exceeded its own subscriber growth estimates by gaining 7.05 million new subscribers versus estimates of 5.2 million. This represents the biggest quarterly gain in the company’s history and triggered the initial rally in their shares. By the close, the share price had settle back to $133.25

US Banks – Technical Update

Posted on | by Leon Hinde | Leave a Comment on US Banks – Technical Update

Dow Jones large cap financials JP Morgan & Goldman Sachs were down 3.63% and 3.5% respectively in overnight trade.

The charts below show the price action rolling-over in the past few trading sessions, following the earnings results on Friday that failed to meet market expectations on the revenue front.

This will have ongoing implications for ASX banking stocks. The rally in domestic bank shares were mainly a by-product of the US banking share rally, rather than factors directly related to an earnings pickup within the Australian market.

Chart – JP Morgan

 

Chart – Goldman Sachs