Plunging Chinese manufacturing and an 11 month low PMI got you down? Don't worry: there's a Europe for that, which overnight reported that manufacturing and service PMI in Germany and, don't laugh, France soared far above expectations (German Mfg and Services PMIs of 50.3 and 52.5, up from 48.6 and 50.4, and above expectations of 49.2 and 50.8; French Mfg and Services PMIs of 48.3 and 49.8, up from 47.2 and 48.4 and an 11 and 17 month high, respectively, blowing away expectations of 47.6 and 48.8). The result was a composite Eurozone Manufacturing PMI of 50.1, above 50 for the first time since February of 2012, up from 48.8 and at a 24 month high - reporting the largest monthly increase in output sunce June 2011, as well as a composite Services PMI of 49.6, up from 48.3, and an 18 month high. In other words, European Composite PMI is expanding (above 50) for the first time since January 2012.
Apple Beats On Stronger iPhone, Weaker iPad Sales; Cash Grows To Record At Slowest Pace In Three YearsSubmitted by Tyler Durden on 07/23/2013 15:53 -0500
Here are the highlights:
- Q3 Revenue of $35.32 billion beats expectations of $35.04 billion; This compares to $35.0 billion a year ago, or the firm barely posted a revenue increase this quarter - the first time in years
- sees Q4 revenue of $34-37 billion, Exp. $36.97 billion;
- Q3 EPS of $7.47, Exp. $7.31
- Q3 Gross margin of 36.9%, Exp. 36.7%; Sees Q4 margin of 36%-37%
- iPhone sales of 31.2 million, Expected 26.1 million
- iPad sales of 14.6 million, Expected 17.4 million
- And since margin did not reflect a pick up in iPhone sales, sure enough the Q3 iPhone ASP was $581, vs Expectations of $597
- AAPL total cash and investment rose to a record $146.6 billion up from $144.7 billion, however the sequential growth of "only" $1.9 billion was the lowest since March 2010
And on those news the stock is up some $15 after hours: hardly indicative of the epic moves in days gone by.
While the NFLX results for the quarter beat on the bottom line with EPS at $0.49 vs Exp. $0.40, and revenue coming right on top of expectations of $1.07 billion, the stock is currently sliding after hours. The reason: despite a massive spending ramp up in the quarter with substantial costs raked up for new content, the firm generated just 630K net total "member additions", below the expectations of a 700K number, and well below recent quarters which saw subscriber growth ramp up to over 2 million in the past quarter. In fact, with all the content spending, NFLX added just 105K more total subs in the June quarter compared to a year ago.
Those who have been following the ongoing "revenue recession" will hardly be surprised that in the trifecta of major corporate earnings releases hitting the tape after the close, there were precisely zero revenue beats. To wit:
- INTC: Revenue misses $12.81bn, Exp. $12.89 bn, cuts guidance.
- EBAY: Revenue misses $3.88bn, Exp. $3.89bn, sees earnings and revenue on lower end of guidance.
- IBM: Revenue misses $24.92 bn vs $25.34 bn; But since this is the largest component of the DJIA, leaving it there may lead to unpleasant consequences for tomorrow's Dow, the company had to inject a mega dose of hopium and boosted its forecast.
Since EPS is the most easily fudgable number in existence (just look at BAC's "non MTM" EPS today), all companies beat on the bottom line. Without looking we will assume that at least 2 out of the 3 are trading higher after hours. And if not, all the three companies need to do to make the algos forget about the top-line non-growth reality is take a page from the YHOO book, hold a very "edgy" video conference call, and see their stocks up 10% tomorrow. Of course, everyone will ignore that the relentless decline in revenues is merely a function of depressed CapEx spending, a tapped out consumer, a crash in EM demand, and major FX headwinds, and blame it all on the [hot|cold] weather.
Even with duelling Fed members today (Bullard vs Plosser) the message from 'the man' led markets on a one-way street all week. Even though Boeing impacted the Dow (and Trannies):
- S&P managed its best week in 6 months (+2.6%);
- Gold's best week in almost 8 months (+5.1% or $62);
- Treasuries' best week in 13 months (10Y -14.5bps);
- High Yield bonds best week in 20 months (+3%); and the
- USD's equal worst week in 21 months (-1.8%).
VIX remains modestly bid and IG credit spreads are underperforming. Market breadth today was weak as S&P volume was very low and the intraday range the lowest in 5 months. The 330ET Ramp was 10 minutes late but just as effective in its goal of running stops to a green Dow as Bullard's words seemed magical.
Gold surged 3.3% or nearly $50 from $1,248/oz to $1,298/oz after Federal Reserve Chairman Ben Bernanke admitted that the U.S. economy continues to need a highly accommodative monetary policy and will do for the “foreseeable future”.
Gold climbed for a fourth day to the highest level in more than two weeks due to safe haven buying after Bernanke also admitted, what many more realistic analysts have been saying for some time, that the 7.6% unemployment rate probably "overstates the health of the labor market."
The only story this morning remains Bernanke's after hours speech, which solidly trumped the FOMC minutes in market impact, and which, in addition to ramping US equity futures to just about new all time highs, sent the EURUSD soaring by almost the same amount (+300 pips) as the actual QE1 announcement on March 18, 2009. Such is the power of verbal currency warfare, when Bernanke hasn't acutally done anything and merely hinted the Fed is as confused as ever about what to do. Of course, as Commerzbank notes this morning, the U.S. economy would have to lose a lot of momentum for the Fed to cancel tapering, and the central bank would only expand the purchase program if the economy collapses, but none of that matters to the "wealth effect" for the 1% where economic destruction simply means more wealth.
"We don’t believe the Chairman’s intentions have changed. Regardless, the Chairman’s credibility is once again damaged. If the Dollar breakdown continues, it will be a sign that the market believes the Chairman has again lost control over policy. The asset clearly in the best position in such an environment is Gold. After such a notable correction in the past 9 months, the precious metal once again becomes a very attractive global asset if monetary policy in the largest economy of the world spins out of control." - Mike O'Rourke
On Monday it was Alcoa, now it is Yum! Brands' turn. The food company, best known for its KFC mystery meat, and over-reliance on a suddenly careening China just reported results which were mixed. Revenue of $2.904 billion was less than the expected $2.92 billion and was 8% lower than the $3.2 billion reported a year ago. Operating profit excluding refranchising gains and losses was $358MM, below expectations of $375MM, leading to a EBIT margin of 12.5% also substantially less than the 14.5% reported a year ago. In short, worldwide operating profit crashed 20% including a 63% drop in China. But thanks to various below the line adjustments, including a tax rate of 22.1% or lower compared to the 23.9% a year ago, the company's EPS of $0.56 beat expectations of $0.54.
In a confirmation that the S&P is starting to get worried about the drones surrounding the McGraw Hill building resulting from the ongoing litigation with Eric Holder's Department of Injustice, not to mention a reminder that US downgrades always happen after hours, while upgrades must hit before the market opens, Standard & Poors just upgraded the Standard & Poors 500 the US outlook from Negative to Stable. On what "receding fiscal risks" did the S&P raise its assessment of the US - the fact that the US is now at its debt limit, that there is no imminent resolution to the credit issue, or the 105% and rising debt/GDP - read on to find out. And of course, the countdown until the S&P wristslap settlement with the DOJ is announced begins now, as does the upgrade watch by Buffett's controlled Moody's of the US to AAAA++++.
Several moments ago, TSLA (hardly) surprised the world when it filed an open-ended S-3 (Shelf) statement, as many had expected it was only a matter of time before the company used the recent surge in its stock price to sell shares. Then, a few moments later, TSLA once again (hardly) surprised the world when it announced a joint $450 million convertible bond and 2.7 million share common stock offering. And because a dilution is not a dilution if the founder is participating in the common offering (buying his own equity at an unprecedented price to "anchor" it as a benchmark- sure why not - after all he is making much on all the other equity he has in the firm that he is not buying, as a result), the stock is trading up after hours.
On the surface, Herbalife's numbers were great. The company reported EPS of $1.27 on expectations of a $1.06 print. The company also boosted its EPS forecast for the full year from a range of $4.45-$4.60 to $4.60-$4.80, putting the Wall Street forecast of $4.66 plainly in the achievable zone. Finally, HLF reported $137MM in cash from operations (compared to $120MM a year ago), which net of CapEx of $24.8MM means Free Cash Flow by that definition of $112.7MM, above the $96MM reported a year earlier. And yet, not even all the cash generated from operations was enough for HLF to fund just its stock buyback in the quarter which amounted to $164.5 million resulting in the Diluted share count plunging from 122.4 million to 108 million. So far so good. There is, however, a "yes but...."
One look at NFLX in the afterhours and one can see the latest and greatest short squeeze in action (courtesy of 14% of the float being short) in a stock which is no stranger to epic moves up as shorts scramble to cover, and just as epic moves to the downside when reality peeks through the hopium clouds every now and then. What is the apparent catalyst? It's not revenue: the firm made $1.02 billion in sales in Q1, precisely as much as Wall Street expected. What the squeeze appears to be focused on instead, is what took the stock into the stratosphere the last time around the management realized it needed to generate some cash as well: rising subscribers, or specifically an increase in total members as of March 31 to 36.3 million, up by 3.05 million in 3 months, and more than some had anticipated. However as there is no free lunch, what is the bottom cash flow line associated with this once again rapid customer expansion? For that we go straight to the company's own definition of Non-GAAP free cash flow which starts with operating cash flow, removes cash associated with DVD content library acquisitions, removes CapEx and nets out other assets. The result...
Curious why the USDJPY is in freefall after hours? Thank Jack Lew, and the after the close release of the semi-annual "Report to Congress on International Economic and Exchange Rate Policies." Traditionally the place where many have looked to see if the US would declare China a currency manipulator (which will never happen for obvious reasons), this time there was a big Easter egg lying in wait for those who did a word search for "competitive devaluation" - namely that it was located in the section discussing Japan.