Posts by Sam Ro

Corporate America's earnings recession may have finally ended

Corporate America’s long earnings recession may have finally come to an end.

Earnings for the S&P 500 (^GSPC) has seen year-over-year declines for five straight quarters. Q3 of 2016 was supposed to have marked the sixth straight quarter of decline, but recent earnings announcements and comments from companies have analysts revising up their estimates in a big way.

“The blended (combines actual results for companies that have reported and estimated results for companies yet to report) earnings growth rate for the S&P 500 is 1.6%, which is above the year-over-year blended decline of -0.5% at the end of last week and the year-over-year estimated decline of -2.2% at the end of the third quarter (September 30),” FactSet’s John Butters observed.

“If the index reports growth in earnings for the quarter, it will mark the first time the index has seen year-over-year growth in earnings since Q1 2015 (0.5%),” he added.

Twitter smashes expectations, announces job cuts

Twitter (TWTR) shares are surging after the company reported better-than-expected performance in the third quarter.

Q3 revenue came in at $615.9 million, beating the estimates for $605 million. Earnings adjusted for nonrecurring items came in at $0.13 per share, smashing expectations for $0.09.

Importantly, Twitter reported 317 million monthly active users (MAU) during the period, which was up from 313 million in Q2 and stronger than the 315 million analysts were looking for. This was up 3% year-over-year.

Mobile MAUs represented 83% of total MAUs.

Average daily active users grew 7% year-over-year.

“We see a significant opportunity to increase growth as we continue to improve the core service,” Twitter CEO Jack Dorsey said. “We have a clear plan, and we’re making the necessary changes to ensure Twitter is positioned for long-term growth. The key drivers of future revenue growth are trending positive, and we remain confident in Twitter’s future.”

The stock is up around 5% in premarket trading.

Tesla Q3 earnings beat expectations, shares surge

Tesla (TSLA) shares rallied after the company reported earnings that were better than expected.

The electric car company announced Q3 revenue of $2.3 billion, which was stronger than the $1.9 billion expected by analysts. Earnings adjusted for nonrecurring items came in at $0.71 per share; analysts were looking for a net loss of $0.54 per share.

During the quarter, Tesla delivered 24,821 vehicles, which is a bit higher than the 24,500 vehicles the company estimated earlier this month. This included 16,047 Model S and 8,774 Model X vehicles. Management noted that 5,065 vehicles “were in transit to customers at the end of the quarter” and would be delivered in Q4.

During the quarter, net orders for Model S and Model X vehicles grew 68% year-over-year.

Management said the company is on track to meet its targets for the second half of the year, which includes delivering 50,000 vehicles.

Tesla shares were up around 5% in after-hours trading.

Goldman Sachs cuts its forecast for S&P 500 earnings

Goldman Sachs analysts have cut their outlook for S&P 500 (^GSPC) earnings through 2018.

They now see earnings per share climbing 5% to $105 (from $110) in 2016, 10% to $116 in 2017 (from $123), and 5% to $122 (from $130) in 2018.

The analysts blame disappointing earnings growth from the financials and information technology sectors. Furthermore, they blame the impact of low interest rates on telecom sector pension liabilities.

This comes amid expectations for an ongoing earnings and revenue recession to end by year-end. Should Q3 earnings growth be negative for the S&P, it will have marked the sixth consecutive quarter of year-over-year earnings declines for the index.

With this earnings backdrop, the analysts expect the S&P 500 to end the year at 2,100. By the end of 2017 and 2018, they expect the index to reach 2,200 and 2,300, respectively.

The analysts’ language for next year was a bit more unsettling.

– Sam Ro is managing editor at Yahoo Finance . Read more :

Why a tax holiday for the $2.4 trillion held overseas would flop

US business activity has been less than stellar, and politicians agree that one remedy for this is corporate tax reform.

One particular idea that’s been floated is a tax holiday for repatriated overseas earnings. You see, America’s biggest companies consist of multi-national corporations that do tons of business outside of the United States. S&P 500 (^GSPC) generate about 44% of sales abroad. And these 500 companies are holding about $2.4 trillion of those earnings outside of the US, according to Goldman Sachs.

While much of these earnings will continue to finance overseas operations, there is a belief that the existing 35% repatriation tax is preventing companies from bringing that cash back to the US where it could serve some sort of stimulative and productive purpose.

Jeff Bezos, Jamie Dimon, Warren Buffett agree on the No. 1 priority for business

What’s the endgame for a business? Is it to enrich investors? Is it to crush competitors? Is it to maximize profits?

For insiders, high stock prices, crippled competition, and fat profits sound great. But for outsiders, including customers and clients of those businesses, none of those ends are very comforting. Indeed, unsavory incentives encourage corporate misbehavior. Consider the recent scandal plaguing Wells Fargo (WFC), where employees were pressured to sell customers products that they didn’t want or need.

A business ceases to be without customers. So it’s critical for businesses to telegraph to their customers that they’re not in the business of screwing people.

What’s their secret?

In their recent talks, all three of these giants of business emphasized one thing: customer first.

JPMorgan Chase is the largest bank in America.

In other words, customers force you to evolve. And by definition, they’re also the best source of feedback regarding the customer.

Fed's Fischer warns: Low rates could lead to 'longer and deeper recessions'

“Low interest rates make the economy more vulnerable to adverse shocks that can put it in a recession,” Fed Vice Chair Stanley Fischer warned. “The limitation on monetary policy imposed by low trend interest rates could therefore lead to longer and deeper recessions when the economy is hit by negative shocks.”

Fischer’s comments were made during a luncheon at the Economic Club of New York.

He added that low rates are a signal that “long-run growth prospects are dim.” He further warned that low rates “threaten financial stability as some investors reach for yield and compressed net interest margins make it harder for some financial institutions to build up capital buffers.”

Since the financial crisis, the Federal Reserve and its central bank peers around the world have employed loose monetary policy in the form of near-zero percent interest rates in their efforts to stimulate growth.

Fischer, however, warns that this type of policy also comes with its dangers.

He continued by arguing that unfortunately it’s just not that simple.

So, what’s behind this?

All hope is not lost, though.

 

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Here's the irony of trying to predict the next stock market crash

When volatility spikes in the financial markets, so does fear of an impending market crash. This fear went parabolic last month as the UK unexpectedly voted to leave the European Union. In the days that followed, markets around the world sold off sharply.

"Feelings of 'This is it!' rise again," Oppenheimer's Ari Wald said.

Ironically, history shows that fear of a crash has a poor track record of predicting crashes. Conversely, some of history's worst crashes came when no was expecting one.

"We continue to note that the sentiment backdrop is far from extreme optimism and instead quickly shifts to gloom and doom during market downturns," Wald wrote in a note to clients. "We saw this again last week as shown by a spike in the number of news stories referencing the words 'Stock Market Crash' to its highest level in years. For comparison purposes, there were significantly fewer occurrences of this through the topping process in 2007."

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Sam Ro is managing editor at Yahoo Finance.

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Citi analyst warns Brexit is bad news for Apple iPhone sales

It continues to be unclear how June's surprise Brexit vote will affect the rest of the world economy.

While the US economy and its companies have limited direct exposure to the UK, the resulting uncertainty could have substantial indirect effects as financial markets go haywire and consumer sentiment goes south.

Citi hardware analyst Jim Suva just cut his forecast for Apple (AAPL) earnings, blaming the Brexit vote among other things.

Regarding the replacement cycle, Suva estimated that the average rate of replacement has increased to 30 to 36 months, up from around 28 months more recently. In other words, iPhone users are waiting an extra two to eight months before upgrading their iPhones.

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Sam Ro is managing editor at Yahoo Finance .

Wall St. bull Tom Lee sees 5 reasons why stocks extend their post-Brexit shock rally

After the world learned that the UK voted to leave the European Union in the so-called Brexit vote, financial markets reacted violently sending stock tumbling. In just two trading sessions, the S&P 500 plunged an eye-popping 5.4%.

But as many market experts warned of the perils of this newfound uncertainty, a handful of pros told their clients something they didn't want to hear: buy stocks.

FundStrat Global Advisors' Tom Lee was among the Wall Street strategists telling clients to think opportunistically, saying that "we believe this pullback will ultimately need to be bought."

A week has gone by since the vote, and the stock market has nearly recovered all of its losses.

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