Thursday, January 22, 2015

Markets advance on ECB stimulus

Dow surged 259 (closing near the highs), advancers over decliners better than 3-1 & NAZ added 82.  The MLP index fell 1 to 450 & the REIT index climbed 6+ to the 353s (just a couple away from setting a new record).  Junk bond funds inched higher & Treasuries declined.  Oil is down to the 46s again while gold closed above 1300 on euro stimulus.

AMJ (Alerian MLP Index tracking fund)

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CLH15.NYM....Crude Oil Mar 15....46.31 Down ...1.47  (3.1%)

Live 24 hours gold chart [Kitco Inc.]

Verizon, a Dow stock, missed Q4 profit estimates as a surge in sales of deeply discounted phones squeezed margins.  EPS, excluding some items, was 71¢, short of the projection for 72¢.  Wireless profit margins narrowed to 42%, worse than the 44.1%.  Below-cost prices on popular phones helped lure customers into 2-year contracts.  Those discounts, along with promotions for free tablets & holiday discounts, helped it fend off competition, which offered to cut VZ customers’ bills in half.  The wireless profit margin shrank from 49.5% in Q3 & 47% a year ago.  Lower margins show how expensive it was to drive subscriber growth.  VZ added 2M new monthly subscribers, beating the estimate of 1.7M.  A majority of the additions were driven by 1.4M new tablet customers.  The company only added 672K net phone customers.  Estimates called for twice as many tablets as phones, with 1.2M tablet users & 500K phone customers.  Signing up more subscribers helped VZ forecast 2015 revenue growth that exceeded estimates.  The company projected growth of at least 4%, about $132M.  Analysts were predicting sales this year of $130B, or 2.1% growth.  In Q4, VZ reported a net per share loss of 54¢, which includes year-end charges for pension adjustments, employee benefits & severance costs.  Sales rose to $33.2B, while analysts had estimated $32.7B.  Executives said that monetizing non-strategic assets will be a priority this year.  It hired advisers to help sell 12,K wireless towers & the company has also said that certain landline assets could make more sense with other companies.  The stock dropped 45¢.  If you would like to learn more about VZ, click on this link:

Verizon Earnings Miss Estimates as Discounted Phones Trim Profit Margins

Verizon Communications (VZ)

American Express, another Dow stock, Q4 missed some estimates & the company said it would cut more than 4K jobs this year.  Adjusted EPS, which exclude some one-time items, was $1.22, missing the $1.38 estimate.  Revenue climbed 6.6% to $9.12B, short of the firm’s long-term goal for 8% growth.  AXP took a $206M charge in the qtr to “improve operating efficiencies.”  The lender, led by CEO Kenneth I. Chenault, agreed last year to sell digital travel firm Concur Technologies to SAP SE, resulting in a $719M gain.  The company said it used a substantial portion of that gain to fund the charge.  Headcount won’t decline by 4K because new jobs will be created elsewhere in the company.  AXP had 63K employees at the end of 2013.  Worldwide billed business, a measure of customer spending, increased 6% to $268.5B in Q4, slowing from 9% growth in Q3.  Expenses climbed 3.5% to $6.3%.  The stock fell 3.30.  If you would like to learn more about AXP, click on this link:

AmEx Drops as Profit Misses Estimates, Chenault Cuts 4,000 Jobs

American Express (AXP)

Travelers, another Dow stock, Q4 profit advanced 5.1% as policy sales increased & margins improved.  EPS climbed to $3.11 from $2.70 a year earlier.  Operating profit, which excludes some investment results, was $3.07, beating the $2.54 estimate.  CEO Jay Fishman has been targeting the company’s less profitable commercial clients for price increases.  The goal is to improve margins, either by boosting premium revenue or exiting accounts that were responsible for a disproportionate amount of claims costs.  Return on equity was 16.6%, compared with 15.9% a year earlier.  Book value per share, a measure of assets minus liabilities, climbed to $77.08 from $76.42 on Sep 30.  Policy sales rose 3.6% to $5.84B.  TRV charged domestic business insurance customers 2.4% more at renewal in Q4.  That compares with an increase of 3.1% in Q3.  The insurer posted a combined ratio of 85, meaning it retained 15¢ of each premium dollar after claims & expenses, an improvement from a ratio of 87.7 a year earlier.  Catastrophe costs were $41M before tax, compared with $53M last year & more than $1B in Q4-2012 when the company faced claims from Superstorm Sandy.  Net investment income fell to $637M from $702M a year earlier.  Full-year profit climbed to $3.69B from $3.67B in 2013.  The company repurchased $1B of its stock in Q4 & $3.33B in the year.  The stock rose 3.16.  If you would like to learn more about AXP, click on this link:

Travelers Profit Climbs 5.1%, More Than Estimated, as Policy Sales Rise

The Travelers Companies (TRV)

Stocks liked to hear that $1T in stimulus money is being thrown out.  Germany is not happy, but the other countries overruled its objections.   The REIT had an excellent year in 2014 & is up 26 this year while Dow has been stumbling.  Dow is still down, all of 10, in Jan.

Dow Jones Industrials

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