Daniel Cullinane CPA

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MBA Taxation

Daniel Cullinane CPA

2500 Plaza 5 25th fl  Jersey City NJ 07311                                                          phone 732-516-1648  fax 732-516-9778

                 MBA TAXATION                                                                                                         

Copyright ©​ Daniel Cullinane CPA.

DIVIDENDS

Tesla Inc. (NASDAQ: TSLA) reported fourth-quarter and fiscal-year 2018 earnings after markets closed on Wednesday. For the quarter, the electric car maker posted adjusted diluted earnings per share (EPS) of $2.90 on revenues of $4.54 billion. In the same period a year ago, the company reported a loss per share of $3.35 on revenues of $3.41 billion. First-quarter results also compare to consensus estimates calling for a net loss per share of $0.69 and $5.33 billion in revenues.

Earlier this month, Tesla said it had delivered 63,000 vehicles in the first quarter, compared to a consensus expectation of 75,000 vehicles. The shortfall was particularly great for the Model S and Model X, which combined for deliveries of 12,000 units against expectations for 20,000. The company built 77,000 vehicles in the first quarter, but logistical challenges bedeviled shipments.

In the letter to shareholders, Tesla CEO Elon Musk and CFO Zachary Kirkhorn reiterated the company’s forecast for 360,000 to 400,000 deliveries this year. They even noted that if the Shanghai Gigafactory can reach volume production early in the 2019 fourth quarter, full-year production could reach more than 500,000 vehicles in the 12-month period through June of 2020.

Musk and Kirkhorn also said that they expect to be profitable in the third quarter of this year and that they expect to “significantly reduce” the $702 million first-quarter loss in the second quarter. Free cash flow is expected to be positive in each of the three remaining quarters of 2019.

Tesla reported $2.2 billion in available cash after repaying $920 million in convertible notes. Analysts Gene Munster and Will Thompson at Loup Ventures noted that the company hinted strongly that it will raise additional cash in the coming months. In their opinion, Tesla should raise between $2 billion and $4 billion in order to “appropriately de-risk the business.” While near-term prospects are challenging, over the longer term, the global switch to electric vehicles will pull Tesla along with it.

As for Tesla’s expectations for 2019 deliveries, Munster and Thompson say they anticipate 341,000 deliveries this year, rising to 435,000 in 2020.

Shares traded down about 1.2% at $255.49, after closing at $258.66, in a 52-week range of $244.59 to $387.46. The stock’s 12-month consensus price target before the earnings report was $311.68.

​Many of the world’s largest tech companies have rushed into the cloud computing business as more and more governments and corporations move to store their data and applications with outside vendors. The cloud computing business has become the primary chance for growth, on the top and bottom line, for the firms competing in the segment. Amazon.com Inc. (NASDAQ: AMZN) has been at the top of the market share list since the cloud became big business. Its new earnings show that is still the case. And, its massive cloud business is still growing.

Amazon posted total revenue of $59.7 billion for the quarter that ended March 31, compared to $51 billion in the same quarter a year ago. Net income was $3.6 billion, up from $1.6 billion.

In its cloud business, known as Amazon Web Services, revenue rose to $7.7 billion from $5.4 billion. Operating income was $2.2 billion up from $1.4 billion. AWS, based on its current growth rate, is on a path to post revenue of well over $25 billion, and perhaps higher.

Amazon pointed to the division’s expansion progress:

AWS continued to expand its infrastructure to best serve customers, launching the AWS Asia Pacific (Hong Kong) Region, and announcing plans for the AWS Asia Pacific (Jakarta) Region. AWS now provides 64 Availability Zones across 21 infrastructure regions globally, with announced plans for another 12 Availability Zones and four regions in Bahrain, Indonesia, Italy, and South Africa.

And new efficiency in its systems:

AWS announced the general availability of Amazon EFS Infrequent Access (IA), a new storage class for Amazon EFS that is designed for files accessed less frequently, enabling customers to reduce storage costs by up to 85% compared to the Amazon EFS Standard storage class. With EFS IA, Amazon EFS customers simply enable Lifecycle Management, and any file not accessed after 30 days gets automatically moved to the EFS IA storage class.

Amazon founder Jeff Bezos once said AWS eventually would be bigger than the company’s e-commerce services. At the current rate, he could be right in three to five years.

SALES

The University of Michigan has released its revised consumer sentiment report for the month of April. It appears that the group of people surveyed did not get to see corporate earnings and the strong report on gross domestic product before voicing their opinions. The final reading for April’s index of consumer sentiment ticked down to 97.2 from 98.4 in March and from 98.8 a year earlier.

The breakdown showed a one-point drop in the current economic conditions index to 112.3 in April from 113.3 in March, and it is down 2.3 points from the 114.9 reported a year earlier. The index of consumer expectations dropped to 87.4 in April from 88.8 in March, but it is only down a point from the 88.4 reported a year earlier.

Friday’s sentiment report showed that 44% of consumers anticipated improvements in their finances, versus just 8% who expect their finances to worsen. That was shown to be the best overall reading going back to 2004. And regarding longer-term financial prospects, 60% reported expected to be better off in their finances over the next five years. That was the highest percentage view that the survey of consumers has ever recorded, although the report did indicate that the question was only asked sporadically from 1979 to 1985 and then consistently from 2011 onward.

This report, along with a much stronger than expected first-quarter GDP report earlier on Friday, should help to quell some of those “recession is imminent” fears that the media keeps pounding into the ears of the public. This sentiment report is effectively forecasting that inflation-adjusted personal consumption expenditures will grow by 2.5% in 2019.

According to the University of Michigan’s Richard Curtin, the Consumer Sentiment Index has moved sideways and has seen only small monthly variations since President Trump first entered office. The index has averaged 97.2 over the past 28 months, which was identical to this month’s final reading. The report further noted that “Variations within plus or minus 2.0 percentage points for the Sentiment Index meant that most of the monthly changes were statistically insignificant.”

That said, Friday’s report also indicates just how strong, despite being sideways, this trend has been. It shows that the last time consumer sentiment was as favorable for this long a period was during the late stages of the Clinton expansion. It also should be pointed out that the strength in sentiment has been far higher over the past two years than for roughly 10 years prior, even considering the years after the post-recession recovery was underway.

The S&P 500 has recovered from Friday’s initial selling with a slight 0.21 point gain to 2,926.38, and the Dow Jones industrials were still down about seven points at 26,454 in mid-morning trade. The yield on the 10-year Treasury was still down more than three basis points at 2.50%.24/7 


​The Dow Jones industrial average has surged by 13.79% this year to 26,543.33, which puts it in all-time record territory. Far outpacing that rate of increase, United Technologies Corp. (NYSE: UTX) is the number one Dow stock of 2019, up 32.21% to $140.78.

The primary trigger of the rise is strong earnings, which were above expectations. United Technologies also increased its forecast for the balance of the year.

The company announced its first-quarter earnings on April 23:

Continued organic sales growth momentum across all four business units; Performance of recently acquired Rockwell Collins exceeds expectations; Raises adjusted EPS and reaffirms sales and free cash flow outlook for 2019

– Sales of $18.4 billion, up 20 percent versus prior year including 8 percent organic growth

– GAAP EPS of $1.56, down 4 percent versus prior year including 10 percentage points of headwind from a Rockwell Collins inventory step-up amortization charge

– Adjusted EPS of $1.91, up 8 percent versus prior year

Its new forecast for the balance of the year:

Adjusted EPS of $7.80 to $8.00, up from $7.70 to $8.00;*

There is no change in the Company’s previously provided 2019 expectations for sales of $75.5 to $77.0 billion, including organic sales growth of 3 to 5 percent and free cash flow of $4.5 to $5.0 billion, including $1.5 billion of one-time cash payments related to the portfolio separation.*

*Note: When we provide expectations for adjusted EPS, the adjusted effective tax rate, organic sales and free cash flow on a forward-looking basis, a reconciliation of the differences between the non-GAAP expectations and the corresponding GAAP measures generally is not available without unreasonable effort. See “Use and Definitions of Non-GAAP Financial Measures” below for additional information.

HOT STOCKS

FUTURE

Bernstein’s top Apple analyst says the next cycle won’t start before late 2020.

 Found in the CNBC archives from May 1. Missed it the first time around.

From Sacconaghi, defending his underwater valuation:

I don’t want to detract any credit from what Apple has done with the services business. They’ve built a $40-plus billion dollar business that’s growing in the mid-teens, which is a real testament to execution and their vision for what this business can be. That said, if your profits are down 16% you have a business that’s intrinsically cyclical.

Cyclically, people are saying, this is not a phone at this price that we want this cycle.

Maintains Market Perform rating and $190 price target.

My take: Toni Sacconaghi can argue it round or flat.

​In an incremental commitment to invest $11 billion in electric vehicles, Ford Motor Co. (NYSE: F) on Wednesday announced a $500 million investment in startup truck maker Rivian Automotive. The cash infusion brings with it a seat on Rivian’s seven-member board of directors.

In February, Amazon.com Inc. (NASDAQ: AMZN) led a funding round that raised $700 million for Rivian. Ford’s investment represents the fifth funding round for the startup that had previously raised an estimated $450 million in three earlier rounds of debt financing.

At the time of Amazon’s investment, General Motors Co. (NYSE: GM) also was rumored to be looking at investing in Rivian, but that investment never materialized. GM instead chose the same day to announce that it had launched an electric bicycle for the European market.

Rivian has two vehicles planned for introduction late next year, a five-passenger pickup known as the R1T and a seven-passenger sport utility vehicle called the R1S. Both are said to deliver a range of up to 400-plus miles on a single charge. Both vehicles are expected to boast starting prices at around $68,000.

Ford Executive Chair Bill Ford said, “I have gotten to know and respect [Rivian founder and CEO RJ Scaringe], and we share a common goal to create a sustainable future for our industry through innovation.”

Scaringe commented, “This strategic partnership marks another key milestone in our drive to accelerate the transition to sustainable mobility.”

Ford already has announced plans to build two new fully electric vehicles, a “Mustang-inspired” crossover due in 2020 and a zero-emissions version of its F-150 pickup. Ford expects to develop a third new vehicle using Rivian’s “skateboard” platform. The chassis, pictured below, includes motors, braking, suspension and cooling systems, along with the battery in the middle.Source: Rivian Automotive
.
According to a report in February at the Detroit Free Press, Rivian has been testing its skateboard platform using an F-150 body mounted on the frame. Scaringe told the newspaper, “We need something to keep the weather out while we put a lot of miles on our skateboard, so they’re driving around in Detroit right now, too. They’re all over the place, but nobody knows.”

Scaringe also noted that, at the time, Rivian had no “corporate connection” with Ford. The wheelbase of the F-150 just happened to be the right size to fit the skateboard platform. That hardly seems serendipitous, but that’s what he said.

Rivian has purchased a former Mitsubishi plant in Illinois where it will build its vehicles. Deliveries are expected to begin in 2021.

Ford’s investment is subject to regulatory approval. Ford Automotive President Joe Hinrichs will take the company’s seat on Rivian’s board.

Shortly before the opening bell, Ford shares traded down about 0.8% to $9.42, in a 52-week range of $7.41 to $12.15. The consensus 12-month price target on the stock is $9.27

​CLOUD SERVICES

UNITED TECHNOLOGIES

​LOOKS GOOD

​Stocks were indicated to open higher after a strong payrolls report on Friday morning. Despite a pullback this week, the markets remain near all-time highs and investors have solid double-digit percentage gains in all three major equity indexes year to date. With the thought of “sell in May and go away” entering the fray after such strong gains, investors need to be considering how they want their portfolios positioned for the rest of the year and beyond.

24/7 Wall St. reviews dozens of analyst research reports each day of the week. Our goal is to find new trading and investing ideas for our readers. Some of the daily analyst reports cover stocks to buy, but other reports cover stocks to sell or to avoid.

Additional commentary and trading data have been added on some of the daily analyst reports. The consensus analyst price targets and other valuation metrics are from the Refinitiv (Thomson Reuters) sell-side research service.

These are the top analyst upgrades, downgrades and initiations seen on Friday, May 3, 2019.

Achillion Pharmaceuticals Inc. (NASDAQ: ACHN) was downgraded to Underweight from Equal Weight and the price target was lowered to $2.50 from $5.00 at Barclays. The stock closed up 3.4% at $3.01 on Thursday but was indicated down 3.3% at $2.91 on Friday.

American Express Co. (NYSE: AXP) was raised to Overweight from Equal Weight at Morgan Stanley. RBC Capital Markets started Amex with a Sector Perform rating. Shares closed up 0.2% at $117.25 on Thursday, with a consensus target price of $121.67 and a 52-week trading range of $89.05 to $117.99.

BCE Inc. (NYSE: BCE) was downgraded to Neutral from Buy at Citigroup.

Bottomline Technologies Inc. (NASDAQ: EPAY) was downgraded to Outperform from Strong Buy and the price target was lowered to $55 from $65 (versus a $50.39 prior close) at Raymond James.

Bristol-Myers Squibb Co. (NYSE: BMY) was raised to Overweight from Equal Weight and the price target was raised to $55 from $53 at Barclays. JPMorgan also started it with an Overweight rating and $62 price target. The shares closed up 0.6% at $46.88 on Thursday and were indicated up almost 1% at $47.30 on Friday. The prior consensus target price was $57.10, and the 52-week trading range is $44.30 to $63.69.

Celgene Corp. (NASDAQ: CELG) was downgraded to Equal Weight from Overweight at Barclays.

Cogent Communications Holdings Inc. (NASDAQ: CCOI) was downgraded to Hold from Buy at Deutsche Bank.

Cognizant Technology Solutions Corp. (NASDAQ: CTSH) was down 7.7% at $66.61 on Thursday and was down another 7.7% at $61.50 on Friday after the post-earnings analyst downgrade brigade came out. JPMorgan downgraded it to Underweight from Neutral, and Goldman Sachs downgraded it to Neutral from Buy. KeyBanc Capital Markets cut its rating to Sector Weight from Overweight, and Evercore ISI downgraded shares to In-Line from Outperform. The prior consensus target price was $81.48. The 52-week trading range is $59.47 to $83.35.

Collegium Pharmaceutical Inc. (NASDAQ: COLL) was started with a Buy rating and assigned a $23 price target (versus a $13.90 close) at H.C. Wainwright.

Discover Financial Services (NYSE: DFS) was started coverage with an Outperform rating and assigned a $96 price target (versus an $81.14 close) at RBC Capital Markets.

​While most of Wall Street focuses on large and mega cap stocks, as they provide a degree of safety and liquidity, many investors are limited in the number of shares they can buy. Many of the biggest public companies, especially the technology giants, trade in the low-to-mid hundreds, all the way up to over $1,000 per share. At those steep prices, it’s pretty hard to get any decent share count leverage.

Many investors, especially more aggressive traders, look at lower-priced stocks as a way to not only make some good money but to get a higher share count. That can really help the decision-making process, especially when you are on to a winner, as you can always sell half and keep half.

Every week we screen our 24/7 Wall St. research database looking for stocks covered by top Wall Street analysts that trade under the $10 level and could provide investors with some solid upside potential. While much more suited for aggressive accounts, they could prove exciting additions to portfolios looking for solid alpha potential. Last week’s picks included Vonage and SRC Energy.

Hexo

This is a popular stock in the fast-expanding marijuana/cannabis segment. Hexo Corp (NYSE: HEXO) is a diversified cannabis company, selling a portfolio of cannabis and related products. The company is based in Quebec, where it is a preferred supplier to the province’s provincial cannabis purchaser. Hexo also has national distribution, with plans to expand internationally, and it made our list of the 2018 list of the 10 largest marijuana companies.

Through its hub and spoke business strategy, Hexo is partnering with Fortune 500 companies, bringing its brand value, cannabinoid isolation technology, licensed infrastructure and regulatory expertise to established companies, leveraging their distribution networks and capacity. As one of the largest licensed cannabis companies in Canada, Hexo operates with 1.8 million square feet of facilities in Ontario and Quebec and a foothold in Greece to establish a eurozone processing, production and distribution center. The company serves the Canadian adult-use and medical markets.

Merrill Lynch recently started coverage with a Buy rating and a $10 price target. The Wall Street consensus target for the stock was not available. Shares were trading on Friday at $7.70 apiece.

iPic Entertainment

This company may be poised to strike it rich with the new “Avengers: Endgame” movie having just opened, and no doubt on its way to becoming one of the top Marvel movies. iPic Entertainment Inc. (NASDAQ: IPIC) engages in the operation of dine-in theaters. It provides visionary entertainment escapes, chef-driven culinary and mixology offerings that include movie theaters plus a bar and restaurant.

The analysts at Alliance Global are very positive on the company and noted this in a recent report:

We expect IPIC will benefit from the Avengers blockbuster. Last year, Avengers: Infinity Wars generated $258 million in box office sales during its opening week and went on to generate $679 million in box office sales, the fourth highest grossing movie of all-time. Avengers: Endgame is the culmination of 21 superhero movies and to capture the demand, theaters are extending their hours of operation and dedicating many screens per theater. Given few other solid movies to compete that are currently in theaters, IPIC is also dedicating 4-5 screens per theater to Endgame, based on our checks.

Alliance Global has a $7 price target, though the consensus target is even higher at $8.33. The stock traded Friday at $3.80 a share.


​Kala Pharmaceuticals

The analysts at Oppenheimer just started coverage on this small-cap company with an Outperform rating. Kala Pharmaceuticals Inc. (NASDAQ: KALA) is a clinical-stage biopharma company developing improved therapies for ocular diseases using its novel Mucus Penetrating Particles nanotechnology.

Kala’s lead asset is KPI-121 (loteprednol), approved as the treatment of post-operation inflammation and pain (under Inveltys) and the temporary relief of signs and symptoms of dry eye disease.

Oppenheimer noted this when it initiated coverage:

With strong initial uptake of Inveltys, and KPI-121 regulatory catalyst in 3Q19, we believe KALA is well positioned for top line growth. Our channel checks with ocular surgeons support Inventys prescription growth over the next twelve months. Separately, we believe KPI-121 (if approved) may address a significant unmet need in the nascent dry eye disease market. While we note potential volatility related to KPI-121, we remain buyers as we believe management is proactively preparing to address potential FDA queries on its NDA.

The $11 Oppenheimer price target is well below the $21.67 consensus target, but the shares were trading at $7.50 on Friday.

Northern Oil and Gas

Stifel is very positive on this small-cap energy play. Northern Oil and Gas Inc. (NYSE: NOG) is engaged in the acquisition, exploration, development and production of oil and natural gas properties, primarily in the Bakken and Three Forks formations within the Williston Basin in North Dakota and Montana.

The company is the largest non-operator in the Williston Basin. With Bakken returns continuing to improve to well above 50%, and its operating partners representing what is seen as the best operators in the basin, there is upside potential.

The company announced last week that it will purchase additional Williston Basin properties from VEN Bakken for $165 million in cash, a $130-million 6% three-year senior unsecured note due 2022 and 5.6-million Northern Oil and Gas common shares. The newly divested assets are estimated to produce 6,600 barrels of oil equivalent per day in the second half of 2019 and generate $44.9 million in cash flow from operations. Capital expenditure budget in the second half of the year is projected at $15.6 million.

Stifel is very bullish on the company with a Buy rating and a $6.90 price target. The consensus target is $4.06 and shares were trading at $2.70.24/7 Wall St.
3 Top Mega-Cap Energy Stocks Are Huge Buys as Oil Charges to $70

Range Resources

This is a defensive natural gas stock that many on Wall Street like now. Range Resources Corp. (NYSE: RRC) is primarily a producer of natural gas, with operations in Appalachia, Oklahoma, Louisiana and Texas. The company specializes in developing low-risk, long-lived natural gas reserves in unconventional gas formations.

The company posted solid first-quarter results, with production topping guidance and the company utilizing free cash flow to reduce borrowings on credit facility. This is the second quarter is a row the company has beaten estimates and, despite a somewhat negative outlook by some on Wall Street toward natural gas, the stock is a solid value at current levels.

A stunning $18 price target accompanies Stifel’s Buy rating. The consensus target was last seen at $15.17, and the stock traded at $9.30 a share.

​Samsung recently released its Galaxy Fold, which is a great step forward in a smartphone industry that has been short on innovation recently. Some experts say that the phone has problems almost immediately out of the box. If the problems continue, will they undermine sales of a product that should be the start of a revolution in its industry?

The Galaxy Fold is a 4.6 inch-smartphone that opens up into a 7.3-inch tablet. Samsung believes that means that what people buy as two devices can now become one. However, the challenge is that the product costs almost $2,000, which is a huge sum for even such a clever and useful product. At that price point, it had better be perfect.

Several journalists who tested the phone had problems. According to one review from well-regarded tech site Verge:

Look closely at the picture above (which appeared in the article), and you can see a small bulge right on the crease of my Galaxy Fold review unit. It’s just enough to slightly distort the screen, and I can feel it under my finger. There’s something pressing up against the screen at the hinge, right there in the crease. My best guess is that it’s a piece of debris, something harder than lint for sure. It’s possible that it’s something else, though, like the hinge itself on a defective unit pressing up on the screen.

It’s a distressing thing to discover just two days after receiving my review unit. More distressing is that the bulge eventually pressed sharply enough into the screen to break it. You can see the telltale lines of a broken OLED converging on the spot where the bulge is.

One reason experts believed that people will buy the phone is that it is not an Apple iPhone Xs, which is priced at $999, or more with expanded features. That phone was considered too little an improvement over earlier iPhones, and that dented sales. The Samsung Fold had the opportunity to capitalize on Apple’s errors. If it can break easily, that may be the end of the opportunity.

If the Galaxy Fold has the troubles some reviews found in a very large number of its units, whatever advantages it has will go away. Samsung will have invested what likely was hundreds of millions of dollars in a lemon.

EARNINGS DIP

​CLOUD

​The merger of Sprint Corp. (NYSE: S) and T-Mobile US Inc. (NASDAQ: TMUS) was supposed to conclude this summer, according to the management of the two companies. Each board had approved the deal, and the leaders of the new corporation already had been appointed. Approvals by the U.S. government would come quickly enough to meet the stated time tables.

All those plans were undermined by an expected probe of the deal by the U.S. Department of Justice. T-Mobile can survive the end of the transaction. Sprint most likely cannot.

The Wall Street Journal reports that the Justice Department antitrust enforcement staff have told T-Mobile and Sprint that their planned merger is unlikely to be approved as currently structured, according to people familiar with the matter, casting doubt on the fate of the $26 billion deal.

When concerns about Sprint’s viability were at their lowest in early 2016, shares traded at $2.45. Takeover speculation, and then the T-Mobile offer that came in April 2018, took Sprint’s shares to the offer price of $6.62. Rumors the year before had lifted Sprint’s shares to above $9 in early 2017.

The fact of the matter was that Sprint has been a deeply wounded company for some time. It runs fourth among the four large U.S. wireless carriers based on number of subscribers. The idea behind the merger was that Sprint and third-place T-Mobile could take on market leaders AT&T and Verizon.

Unlike the other wireless companies that showed strong revenue improvement over the past decade, Sprint’s revenue was $35.6 billion in 2008 and $32.4 billion last year. It has lost money in nine of the past ten years. Worse, Sprint carries an extraordinary $36 billion of debt.

Sprint’s most difficult challenge, and one that it cannot overcome with its financial structure and reputation for poor quality, is to gain ground on its rivals. Sprint has roughly 54 million subscribers. T-Mobile has over 78 million, while AT&T and Verizon have 150 million or more. Sprint lost the race to add market share a long time ago. To make matters worse, the overall number of wireless subscribers in the United States is no longer growing.

Sprint needs the T-Mobile deal to be viable, particularly financially. And that deal is now under the threat of not closing.

DIVIDEND STOCKS


​Exxon Mobil Corp. (NYSE: XOM) reported estimated first-quarter 2019 results before markets opened Friday morning. The integrated oil and gas giant posted quarterly diluted earnings per share (EPS) of $0.55 on revenues of $63.63 billion. In the same period a year ago, the company reported EPS of $1.09 on revenues of $68.21 billion. First-quarter results also compare to the consensus estimates for EPS of $1.69 on revenues of $64.82 billion.

Net income in the quarter dropped by 49% from $4.65 billion a year ago to $2.35 billion. Oil-equivalent production rose by 2.4% year over year in the first quarter, from 3.89 million barrels a day last year to 3.98 million barrels a day.

Earnings in the company’s upstream (exploration and production) fell by $268 million due to lower volumes even though prices were higher. Downstream earnings (refining and marketing) dropped by $2.96 billion year over year due to higher crude oil prices, higher maintenance costs and changes in mark-to-market derivatives.

Capital spending totaled $6.89 billion in the quarter, up nearly 42% year over year. Free cash flow tumbled from $6.7 billion to $2.5 billion.[Marijuana Stocks]
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CEO and Chair Darren Woods said:

Solid operating performance in the first quarter helped mitigate the impact of challenging Downstream and Chemical margin environments. In addition, we continued to benefit from our integrated business model. We are making strong progress on our growth plans and expect to deliver sustained value for our shareholders. The change in Canadian crude differentials, as well as heavy scheduled maintenance, similar to the fourth quarter of 2018, affected our quarterly results.

The company did not provide guidance in its press release, but analysts are expecting second-quarter EPS of $1.07 on revenues of $72.64 billion, compared with EPS of $0.92 and revenues of $73.5 billion in the second quarter of 2018. For the full year, analysts are looking for EPS of $4.37 on revenues of $283.47 billion.

Exxon’s shares traded down about 2.5% shortly after Friday’s opening bell to $80.15. The stock’s 52-week range is $64.65 to $87.36. Analysts had a 12-month price target of $85.39 before this morning’s report.

Today is the date of America’s most anticipated corporate annual meeting, that of Berkshire Hathaway Inc. (NYSE: BRK-B). Famed investor Warren Buffett will host the event, which will draw tens of thousands of people to his home town of Omaha. One thing often overlooked about the company is that it is the third largest company in America based on revenue.

That Berkshire Hathaway is so large is a testament to Buffett’s skill as a manager, which sits alongside his reputation as perhaps the greatest investor in American history. Berkshire Hathaway is also among the American companies with the best corporate reputations.

Berkshire Hathaway’s revenue last year was $242 billion, which puts it just behind second place Exxon Mobil and its revenue of $244 billion. The first place company, Walmart, is well ahead of both, with annual revenue of $500 billion. Apple ranks in fourth place and had revenue of $229 billion last year.

Based on another measure frequently used to compare public companies, Berkshire Hathaway is well down the list. On a market capitalized basis, it ranks 10th at $300 billion. That is well behind leader Apple at $998 billion and Microsoft, in second place at $988 billion.

Berkshire Hathaway’s revenue is made up of five components. The largest among these is its sales and services revenue. Premiums from its insurance holdings rank second at $57 billion. It huge railroad and energy holdings rank third at $43 billion. Next, interest and dividends from its vast ownership positions in other companies bring in $7.7 billion. Finally, its leasing revenue is nearly $6 billion.

Among Berkshire Hathaway’s largest insurance holdings are GEICO, Berkshire Hathaway Reinsurance Group and Berkshire Hathaway Primary Group. It also owns the huge Burlington Northern Santa Fe railway company, which employees 45,000 people. Berkshire Hathaway Energy owns PacifiCorp, MidAmerican Energy and NV Energy. Berkshire Hathaway is also in the real estate business. It owns residential real estate company HomeServices of America. Among its industrial holdings are Precision Castparts, Lubrizol and IMC International Metalworking Companies. It also owns home builder Clayton Homes and carpet maker Shaw Industries. These are just among the largest holdings out of dozens.

Buffett also has a portfolio of ownership in some of America’s best-known companies. These include positions in Coca Cola and Apple. They are among Warren Buffett’s top stocks for 2019, and Berkshire Hathaway recently took a position in Amazon.24/7 Wall St.


While the overall stock market has been very strong year to date, with sectors like technology outperforming, the health care sector, which encompasses everything from pharmaceuticals to biotech to medical devices and more, has been absolutely wretched, lagging the S&P 500 by a huge 9%. For many investors who own shares, there may be a degree of dismay, as traditionally health care has been considered somewhat of a safe haven.

The analysts at Jefferies, led by equity strategist Steven DeSanctis, did a deep dive into the sector, looking for underperforming stocks that could hold some solid value going forward. Their overview of the current state of the health care sector noted this:

The pullback in Health Care has little do with fundamentals but more to do with a renewed sense of risk appetite, some unwinding of crowded themes, as well as a shift away from defensively positioned sectors showing secular growth into cyclical growth. ETF flows have sharply turned down after strong inflows in 2018 and the group is over owned by long only investors and hedge funds. Down cap, the last 12 months have seen robust IPO and secondary activity and deals may need to be digested.

We screened the Jefferies list looking for the larger cap leaders and found five that look like very solid ideas now. All are rated Buy at Jefferies.

Abbott Laboratories

This top pharmaceutical and med-tech stock has very solid growth potential. Abbott Laboratories (NYSE: ABT) manufactures and sells health care products worldwide.

The company’s Established Pharmaceutical Products segment offers branded generic pharmaceuticals to treat pancreatic exocrine insufficiency; irritable bowel syndrome or biliary spasm; intrahepatic cholestasis or depressive symptoms; gynecological disorders; hormone replacement therapy; dyslipidemia; hypertension; hypothyroidism; Ménière’s disease and vestibular vertigo; pain, fever and inflammation; migraines; anti-infective clarithromycin; cardiovascular and metabolic products; and influenza vaccines, as well as to regulate physiological rhythm of the colon.

Its Diagnostic Products segment provides immunoassay and clinical chemistry systems; assays used to screen or diagnosis cancer, cardiac, drugs of abuse, fertility, infectious diseases, and therapeutic drug monitoring; hematology systems and reagents; diagnostic systems and cartridges; instruments to automate the extraction, purification and preparation of DNA and RNA from patient samples, and detects and measures infectious agents; genomic-based tests; informatics and automation solutions; and a suite of informatics tools and professional services.

Abbott Labs investors are paid a 1.72% dividend. The Jefferies price target for the shares is $80, and the Wall Street consensus target is $82.78. The stock closed Monday’s trading at $74.51 per share.

Amgen

This biotech giant remains a top stock for investors to buy and a safe way to play the massive potential growth in biosimilars. Amgen Inc. (NASDAQ: AMGN) has been a biotechnology pioneer since 1980 and has grown to be one of the world’s leading independent biotech companies. It has reached millions of patients around the world and is developing a pipeline of medicines with breakaway potential.

Amgen develops, manufactures and markets biologic therapies for oncology and inflammation. The company’s five key marketed products are among the top-selling pharmaceutical products in the world, with expected collective revenues of more than $22 billion in 2019.

Shareholders of Amgen are paid a 3.29% dividend. Jefferies has a price target of $220, and the posted consensus target was last seen at $207.38. The shares were last seen trading at $176.36 apiece.

APRIL NEWSLETTER 1

​PUBLIC OFFERING

​NY TIMES WANTS APPLE INVESTIGATED

​Uber Technologies has filed an amended S-1 form with the U.S. Securities and Exchange Commission (SEC) regarding its initial public offering (IPO). Although Lyft came publicearlier this year, this is the ridesharing IPO that everyone has waited for and expectations are running high.

Uber expects to price its 180.0 million shares in the range of $44 to $50 a piece, with an overallotment option for an additional 27.0 million shares. At the maximum price, the entire offering is valued up to $10.35 billion. The company intends to list its shares on the New York Stock Exchange under the symbol UBER.

The underwriters for the offering are Morgan Stanley, Goldman Sachs, Merrill Lynch, Barclays, Citigroup, Allen, RBC Capital Markets, SunTrust Robinson Humphrey, Deutsche Bank, HSBC, SMBC, Mizuho Securities, Needham, Loop Capital Markets, Siebert Cisneros Shank, Academy Securities, BTIG, Canaccord Genuity, CastleOak Securities, Cowen, Evercore ISI, JMP Securities, Macquarie Capital, Mischler Financial Group, Oppenheimer, Raymond James, William Blair, Williams Capital and TPG Capital.

Uber revolutionized personal mobility with ridesharing, and it currently operates the largest ridesharing service in the world. Management is leveraging its platform to redefine the massive meal delivery and logistics industries.

Some fear Uber still faces the potential skepticism of investors on its early trading days.

In the filing, Uber described its finances as follows:

In 2018, Gross Bookings grew to $49.8 billion, up 45% from $34.4 billion in 2017. Over the same period, revenue reached $11.3 billion, up 42% from $7.9 billion in the prior year. Core Platform Adjusted Net Revenue was $9.9 billion in 2018, up 39% from $7.1 billion in 2017. Net income (loss) was $1.0 billion in 2018 and $(4.0) billion in 2017. Adjusted EBITDA was $(1.8) billion in 2018 and $(2.6) billion in 2017.

The company intends to use the net proceeds from this offering for general corporate purposes, including working capital, operating expenses and capital expenditures.

​HEALTH CARE

​Many of the world’s largest tech companies have rushed into the cloud computing business as more and more governments and corporations move to store their data and applications with outside vendors. The cloud computing business has become the primary chance for growth, on the top and bottom line, for the firms competing in the segment. Amazon.com Inc. (NASDAQ: AMZN) has been at the top of the market share list since the cloud became big business. Its new earnings show that is still the case. And, its massive cloud business is still growing.

Amazon posted total revenue of $59.7 billion for the quarter that ended March 31, compared to $51 billion in the same quarter a year ago. Net income was $3.6 billion, up from $1.6 billion.

In its cloud business, known as Amazon Web Services, revenue rose to $7.7 billion from $5.4 billion. Operating income was $2.2 billion up from $1.4 billion. AWS, based on its current growth rate, is on a path to post revenue of well over $25 billion, and perhaps higher.

Amazon pointed to the division’s expansion progress:

AWS continued to expand its infrastructure to best serve customers, launching the AWS Asia Pacific (Hong Kong) Region, and announcing plans for the AWS Asia Pacific (Jakarta) Region. AWS now provides 64 Availability Zones across 21 infrastructure regions globally, with announced plans for another 12 Availability Zones and four regions in Bahrain, Indonesia, Italy, and South Africa.

And new efficiency in its systems:

AWS announced the general availability of Amazon EFS Infrequent Access (IA), a new storage class for Amazon EFS that is designed for files accessed less frequently, enabling customers to reduce storage costs by up to 85% compared to the Amazon EFS Standard storage class. With EFS IA, Amazon EFS customers simply enable Lifecycle Management, and any file not accessed after 30 days gets automatically moved to the EFS IA storage class.

Amazon founder Jeff Bezos once said AWS eventually would be bigger than the company’s e-commerce services. At the current rate, he could be right in three to five years.

​This weekend will mark another “stockpalooza” wherein Berkshire Hathaway Inc. (NYSE: BRK-A) will host its annual shareholder meeting in Omaha, Nebraska. Most investors tend to follow anything and everything that Warren Buffett says. Having been the world’s richest man in many years probably means he knows a thing or two.

While many of the preliminary events and communications are essentially cheerleading events for Berkshire Hathaway and its shareholders, there was a significant issue that has come to light. After having praised the business model of Jeff Bezos and Amazon.com Inc. (NASDAQ: AMZN), Warren Buffett disclosed in a CNBC interview that Berkshire Hathaway has been acquiring shares of Amazon.

While this would seem to stray from the traditional Buffett investment target, and while previously Buffett said he missed the boat even back in 2017 (when shares were less than half the current price), Buffett made it clear that he was not the one who purchased the Amazon shares for Berkshire Hathaway.

In that CNBC interview, Buffett’s commentary was full of praise for Amazon and remorse for not having bought the stock. Here, these have been meshed together for simplicity, and he said:

One of the fellows in the office that manage money bought some Amazon, so it will show up in the 13F later this month. … I’ve been a fan, and I’ve been an idiot for not buying Amazon shares. … But I want you to know it’s no personality changes taking place. … It’s far surpassed anything I would have dreamt could have been done. Because if I really felt it could have been done, I should have bought it. I had no idea that it had the potential. I blew it.

The implication here is that either Todd Combs or Ted Weschler made the decision to acquire Amazon shares. And if it was telegraphed as being in the 13F filing that will be out in less than two weeks, the Combs or Weschler’s acquisition is definitely showing a profit if the shares were purchased during the first quarter of 2019.

Amazon shares opened up 2019 at roughly $1,540, and the high in the first quarter came in late March at close to $1,820. Amazon’s closing price on Thursday, ahead of this disclosure, was $1,900.82, and the shares were up almost 2% at $1,938 shortly after the opening bell on Friday.

Amazon has a 52-week trading range of $1,307.00 to $2,050.50, and Refinitiv lists its consensus analyst target price as $2,163.47, though some analysts have far higher price targets. Amazon has a $956 billion market cap after Friday’s 2% pop and is one of only three companies, along with Apple and Microsoft, to have recently (or ever) had a $1 trillion market cap.

​Amazon.com Inc. (NASDAQ: AMZN) has announced it will offer free one-day shipping of packages to some members of its Prime service. Over the past few days, it has faced labor union objections about the strain that the service will put on workers. Even with labor issues, Amazon is still among America’s companies with the best reputations.

The new system will require perfect timing and probably more effort from its employees. The number of items that will have to be put through the system quickly could explode. This is how the new shipment method works for Amazon customers who qualify.

Amazon announced the one-day Prime plan on its recent earnings call. Amazon has over 100 million members of its Prime service, although outsiders do not know how many are in the United States. A Prime subscriber gets a combination of free delivery, music and storage features, and its famous streaming video service. The price of Prime is $119 a year. Amazon’s investment to turn two-day service to one-day service will cost the company about $800 million this year.

Amazon Chief Financial Officer Brian Olsavsky announced: “We’re currently working on evolving our Prime free two-day shipping program to be a free one-day shipping program.” In reaction, Retail, Wholesale and Department Store Union President Stuart Appelbaum yesterday said, “With two-day Prime shipping, Amazon fulfillment workers currently face speeds of 200-300 orders per hour in 12-hour shifts. They struggle already to maintain that pace.”

Many Amazon Prime members in large cities already have one-day shipping. For the most part, it is easy to use.

Only some items Amazon sells are available for the one-day shipping service. Amazon puts the number of these in the millions but does not say which categories of items most likely qualify. The process is not without complications.

Available items carry a special logo on Amazon pages that marks them as eligible for the service. Customers can add marked items to their cart. Items are delivered no later than 9 p.m. the next day. However, Amazon shows Prime members by what time they have to order an item to qualify. The process is called “order within” and carries a clock illustration as a visual system to aid Prime members before they put things into their carts. Amazon says that “delivery date may become unavailable within that window of time due to changes in inventory or delivery capacity before you place your order.” Once free one-day shipping is guaranteed, the Prime member gets an email with a confirmation.

Amazon does have a number of rules about one-day shipping. People have to be home to accept the package. Certain large items almost never qualify. In many cases, items sent to offices cannot be delivered. Food items are not part of the service, but Amazon does have a deal with some restaurants for free delivery of food so people can binge watch its streaming video service.

Finally, Amazon has not announced when the new service will be available. So Prime members may have to wait months before they can even take advantage of it. But if you use any of these addresses, you’re still not going to get free same-day delivery.

ONE DAY SHIPPING

​ANALAYST

1st QUARTER LOSS


​Despite what some investors believe was good earnings news which caused a rally in the shares of Ford Motor Company (NYSE: F), its stock continues to trade well below its 52-week high and has performed poorly compared to the stock of General Motors Company (NYSE: GM) over the last year. There remains a good deal of skepticism about Ford’s future, particularly in its core car sales business in the U.S. and China, the world’s two largest car markets.

Ford’s shares are down over 7% in the last year to $10.41. Its 52-week high over that period is $12.15. GM’s shares are up 8% for the same time frame to $39.68. The S&P is up 11%.

A look at Ford’s earnings gives a partial explanation for the weak stock performance. In the first quarter, revenue was $40.3 billion down $1.6 billion from the same period a year ago. Net income was $1.1 billion, down $.6 billion over the same period. Jim Hackett, Ford president and CEO, said: “With a solid plan in place, we promised 2019 would be a year of action and execution for Ford, and that’s what we delivered in the first quarter.” Nevertheless, the numbers went down.

And, sales in the world’s large car markets have been troubled. In the first quarter, Ford’s U.S. sales fell 1.6% to 590,249. If it had not been for strong sales of the F-Series pick-up, the top-selling vehicle in America, the number would have been much worse. the company commented: “F-150 and Super Duty combined sales outstripped our nearest competitor by 94,585 trucks –which is 15,939 higher than this point last year” It is an odd and unclear way to describe a vehicle’s performance.

China sales have been a disaster. In the world’s largest car market, Ford’s sales fell 35.8% to 136,279 in the first quarter. In a statement as part of the release of the numbers: “The company recently announced its new “Ford China 2.0” transformation blueprint to improve sales, accelerate the redesign of its business and sharpen its focus on the Chinese market.” It is hard to believe Ford can recover much in a market with tremendous competition from both local companies, and the largest manufacturers in the world which have to have strong sales in China to be successful overall.

In the first quarter, Ford’s sales in Europe fell 6.2% to 359,400. Roelant de Waard, Vice President, Marketing, Sales and Service, Ford of Europe, said: “I’m very pleased to see that now close to half of our sales come from our commercial vehicles and SUVs.” That is hardly comforting.

Ford’s vehicle sales remain poor enough to worry Wall St. At least that is what the stock price shows.

TRADING LOW

​It’s been hard filtering out the news from the noise in 2019. After the S&P 500 and Nasdaq Composite recently hit all-time highs and rallying about 20% on average since the end of 2018, suddenly more fears have crept into the financial markets and the economy now that the United States and China have traded retaliatory tariffs. And the global growth already was questionable before this trade war broke out. Now investors have to think long and hard about how they want their assets positioned ahead after a 10-year mega-bull market.

One area that investors frequently look to for safety is the so-called value stocks. These companies generally are valued at substantial discounts to the market as a whole, or maybe they are just valued cheaper than their sector peers. Some are cheap based on their share price multiple against earnings, cash flow, EBITDA or even their book value.

One thing that is hard to argue is that a true value stock might not offer real “value” if the underlying company does not or cannot pay a dividend. It’s also hard to use the term “value” if a company’s earnings or core business may be at risk of drying up in a very short time.

24/7 Wall St. has screened the entire S&P 500 for dividend-paying stocks that are trading at less than 10 times expected earnings per share. That implies that the shares are valued at more than a 40% discount to the 17.5 times estimated S&P 500 EPS figure as a whole, as well as about two-thirds the value of a historic 15 times expected earnings during normal times.

Before thinking that value stocks are always “cheap stocks,” note that investors may not want to pay a market multiple for a struggling company for many reasons. Maybe there are operational issues, industry pressures, regulatory pressures, slow or negative growth, or other issues that keep the market from valuing these companies on par with the market itself.

24/7 Wall St. screened the entire S&P 500 for stocks valued less than 10 times expected current year earnings per share (EPS) using data from Refinitiv for estimates. Those were screened as normalized EPS used by Wall Street analysts rather than GAAP numbers, but we also have added some color to explain why each company is at a discount to the market or its peers. Companies with negative earnings or with major earnings contractions that would threaten their dividends ahead were screened out. Industries were screened peer-by-peer for which one represented the best value to focus on only one or two companies and to prevent excessive sector concentration.

It is important always to remember that there is no free lunch in the stock market. There is an entire history of value stocks turning into value traps. Some never manage to recover at all, while other companies do return to greatness.

Here are 13 dirt cheap value stocks that are valued at less than 10 times earnings and that also pay steady dividends deemed safe as of mid-2019.

American Airlines
> About 6.5 times expected earnings

American Airlines Group Inc. (NASDAQ: AAL) has been considered a value stock among the airline industry for some time, but the airlines have become more mainstream for investors and are believed to have fewer earnings shocks and major losses compared to pre-recession periods. Oil prices now more stable and not running back to those prior $100 per barrel levels keep jet fuel costs reasonable. Airlines also get to gouge on fees, and those affected by the 737 MAX plane groundings (American is one of them) have held up relatively well.

With shares near $32.50, the 6.5 times projected earnings figure is based on a consensus estimate of $5.01 per share for 2019. That would be up from $4.55 EPS a year earlier, and the 2020 consensus sees $5.69 EPS. The dividend yield is only about 1.25%.

AT&T
> 8.8 times current and expected earnings

AT&T Inc. (NYSE: T) would be the top yield in the Dogs of the Dow, but it’s no longer even ranked as a Dow Jones industrial average member. After paying billions to acquire DirecTV and then paying billions more to acquire Time Warner, some investors have a much harder time analyzing the value proposition when considering the mix of all the moving parts within AT&T now. That has led to a long slow bleed in the shares, and at $31.20 a share, the $227 billion market cap has to fight for attention, considering that AT&T’s long-term debt is almost $185 billion and the total liabilities are $353 billion. The stock also has lost about one-fourth of its value over the past three years while the overall market has risen.

With $3.52 EPS in 2018, analysts are calling for $3.58 in 2019 and $3.64 in 2020. That is very low growth, even with 7% revenue growth expectations in 2019. AT&T pays out about 60% of its EPS, and that is considered sustainable by most investor views. Its dividend yield is more than twice the Treasury’s long-bond at 6.5%.


​Capital One
> About eight times expected earnings

Capital One Financial Corp. (NYSE: COF) is much better known as a credit card issuer than as a formal bank, but it does have bank and cafe locations in certain regions around the United States. Despite it having grown revenues for years, many investors believe that Capital One will be among the harder-hit banks in the next economic downturn due to such a large exposure to consumer credit cards and the expected rise in delinquencies and charge-offs that would follow such a downturn. Still, it is expected to grow revenues by the low- or mid-single digits, and a recent Jefferies upgrade called for close to a 30% payout increase. That means its $89.50 current share price and current yield of almost 1.8% might jump to over 2.3%, if the firm’s analysis proves to be correct.

Capital One’s $11.19 EPS in 2018 is expected to dip to $11.05 in 2019, but it is then expected to rise to $12.09 in 2020. That’s a lot more money in its pocket.

CVS Health
> About 7.5 times expected earnings

CVS Health Corp. (NYSE: CVS) has fallen far out of favor with the investing community. On top of drug pricing fears and deeper regulations expected ahead in health care, the former CVS Caremark further complicated how to evaluate the shares when it acquired health insurer Aetna in a $69 billion merger. To muddle matters further, Wall Street analysts are atrocious when it comes to factoring in an entire new company structure’s earnings and revenues into models including the acquirer. CVS shares are now down over 50% from their peak in 2015, and the dividend yield is about 3.8%, based on the $53.00 share price. With a market cap of almost $69 billion, CVS is expected to generate annualized revenues of $258 billion by the end of 2020.

With the 2018 EPS of $7.08 expected to fall to $6.84 in 2019, the 2020 consensus estimate of $7.22 EPS would value CVS at less than 7.4 times next year’s earnings estimates. Its dividend is deemed safe, as well with a payout rate of less than 30% of normalized earnings.

General Motors
> About 5.5 times expected earnings

General Motors Co. (NYSE: GM) is currently deemed to be cheaper than rival Ford due to opposite share performance of late. GM has much more exposure to China as its largest car market, and Chinese consumers could become anti-American if the trade war persists. On top of China woes, GM and its rivals have all faced peak-auto sales trends, and many historic car buyers opt for ride-sharing, public transportation or app-order services like Lyft and Uber. Its CEO is one of the most highly paid in America.

At about $37.25 a share, GM’s 2018 earnings of $6.54 per share are followed by consensus estimates of $6.73 in 2019 and $6.24 in 2020, with sales expected to contract less than 1% each year. GM also pays its shareholders a dividend north of 4% and has an earnings payout rate of less than 25% as a buffer to keep a strong dividend.

ALSO READ: Warren Buffett & Berkshire Hathaway Make Key Changes to 2019 Stock Picks

Gilead Sciences
> 9.5 times expected earnings

Gilead Sciences Inc. (NASDAQ: GILD) is a top biotech that seems to have lost its way after effectively helping to cure hepatitis B. Its stock also has been looking for a bottom, while many former investors and traditional investors don’t want to think of the term “biotech” and “value” in the same sentence. Gilead is effectively not growing after three straight years of revenue contraction. If Wall Street analysts are correct, Gilead’s revenue decline is basing out, and there might even be some low-single-digit revenue growth in 2020 as EPS have been basing out as well. The company also has bought back stock, and it spent more than $11 billion to acquire Kite Pharma, as the company hopes to diversify its revenues from HIV and hep-C. Gilead has partnered with small companies to see if it can land a ride into the next mega-blockbuster drug.

Shares are at $65.50, and Gilead trades at roughly 9.5 times expected 2019 and 2020 earnings per share. The $2.52 annualized dividend generates better than a 3.8% yield while investors wait for Gilead to find some growth again. Its shares are down about 45% from the peak in 2015, and even then it still has an $83 billion market cap.

Goldman Sachs
> About 8.5 times expected earnings

Goldman Sachs Group Inc. (NYSE: GS) historically has traded at a premium to its peers, and now the bank holding company is taking on more efforts that might end up making it a virtual bank for consumers that it has ignored until recently. After taking a beating of late, earnings are expected to trough this year and recover in the next. After international scandals followed negative news on the domestic front, Goldman Sachs’s reputation took a hit and its shares now even traded under the stated book value (at 0.94 times book). This doesn’t sound at all like the “Golden Slacks” of the past, but Goldman Sachs does offer a 1.7% dividend yield now.

With a 4% expected sales drop in 2019, that is anticipated to grow by the same amount it dropped next year. And the $25.27 EPS from 2018 is expected to drop to $23.30 in 2019 but recover to $25.89 in 2020. There are of course some issues keeping the stock down for future liabilities, but the shares are down over 25% from the highs at the start of 2018.


​IBM
> 9.6 times expected earnings

International Business Machines Corp. (NYSE: IBM) is somehow still one of the Dow Jones industrials, and it has to be the most hated technology stock with a $100 billion or more market cap. CEO Ginni Rometty has managed to keep running this company since taking over in early 2012, despite the stock losing more than one-third of its value since 2013 while the market has skyrocketed. She is one of the best-paid CEOs in American as well. Now IBM is acquiring Red Hat to lead in the hypercloud and virtualization, among other key initiatives. The market continually discounts IBM’s critical initiatives due to its old-school legacy IT-services operations. Paying out less than half of its normalized EPS still generates a 4.65% dividend yield for what some more brave value investors are calling a long-term turnaround (even if it hasn’t been able to turn around in the past six years or so).

After normalized earnings of $13.81 per share in 2018, IBM’s consensus estimates are $13.91 EPS in 2019 and $14.16 in 2020. An anticipated 3.2% revenue drop in 2019 is expected to see a gain of less than 1% in 2020, prior to factoring in the Red Hat $4.5 billion expected contribution.

Lincoln National
> Less than seven times expected earnings

Lincoln National Corp. (NYSE: LNC) is usually considered a life insurance company, but its four main segments are annuities, retirement plan services, life insurance and group protection. The company is valued at a discount to two key book-value-per-share metrics and it has continued to buy back its own stock while still offering close to a 2.3% dividend yield.

At about $64.50 per share, Lincoln National had earnings of $8.48 per share in 2018 is expected to have $9.32 EPS in 2019 and $10.38 in 2020.

Macy’s
> Seven times expected earnings

Macy’s Inc. (NYSE: M) is the king of value stocks in the domestic retail game. The problem is that no one wants to pay for its earnings stream when Amazon and a plethora of other online retailers have chiseled away the company. Even rival Kohl’s scored a partnership with Amazon that just as easily could have been a Macy’s deal. The company also has continued to close down sub-optimized stores in malls around America. While Macy’s has seen its earnings slide, the reality is that revenues have tailed off only marginally from three years ago. Macy’s is offering investors right at a 7% dividend yield while it struggles to revamp its stores and learn to get buyers away from their computers and smartphones.

Even after a fresh earnings beat, Macy’s saw its shares trade down slightly to about $21.50. That’s almost 50% lower than its 52-week high, and its stock was last seen down almost 70% from its peak in 2015. The $3.09 EPS consensus for 2019 is expected to be $2.90 in 2020, but sales are not expected to fall.24/7 Wall St.
Why Merrill Lynch Says ‘Sell in May and Go Away’ Is Bad Advice in 2019

Navient
> About 6.5 times expected earnings

Navient Corp. (NASDAQ: NAVI) may not be popular among many households due to its association with student loans, but many value investors would say that those students taking loans did so by their own choice. While sales are expected to be down 10% in 2019 and down in mid-single-digits in 2020, Navient’s EPS numbers are expected to grow. At close to $13.50 a share, Navient’s value may seem less now that it has risen from under $9 during the peak-selling pressure last December. Still, analysts generally now expect the stock to keep rising from its $3.2 billion market cap.

Navient had $2.09 EPS in 2018, and consensus analyst estimates were last seen at $2.11 EPS for 2019 and $2.18 for 2020. It offers new investors a dividend yield of almost 4.75%.

Owens-Illinois
> Less than six times expected earnings

Owens-Illinois Inc. (NYSE: OI) manufactures and sells glass containers to food and beverage manufacturers around the world. It’s considered an unexciting business with very small, low-single-digit sales growth expectations. The company’s post-earnings reaction after missing estimates has been atrocious, with a 15% drop so far in May. A fresh Wells Fargo view called for as much as 40% upside based on its value and business position.

After earnings of $2.72 per share in 2018, Owens-Illinois has earnings estimates of $2.90 per share for 2019 and $3.19 in 2020. Despite being valued at less than six times earnings, it has only a 1.2% dividend yield.

Xerox
> About eight times expected earnings

Xerox Corp. (NYSE: XRX) is a technology stock often forgotten about. Many younger workers might not even know about or care about the company, even if it has been around forever. After a recent breakup of the company led by activist Carl Icahn, Xerox shares looked like they were on par to almost double from the lows at one point earlier in 2019. So what if people Icahn’s age were the last ones to use Xerox machines and the like? Paper hasn’t exactly disappeared from the office environment. This company is difficult for some investors to think of long term, but the current share price still generates a 3.1% dividend yield, even after considering how much it has run up.

With a share price of about $32, Xerox’s normalized $3.46 EPS is projected to rise to $3.89 in 2019 and $4.13 in 2020. That’s about 8.2 times expected current year earnings and 7.75 times next year’s earnings, with a 6% expected revenue drop in 2019 and a 4% revenue drop in 2020.

​THIRD LARGEST COMPANY

Stocks were indicated to open higher after a strong payrolls report on Friday morning. Despite a pullback this week, the markets remain near all-time highs and investors have solid double-digit percentage gains in all three major equity indexes year to date. With the thought of “sell in May and go away” entering the fray after such strong gains, investors need to be considering how they want their portfolios positioned for the rest of the year and beyond.

24/7 Wall St. reviews dozens of analyst research reports each day of the week. Our goal is to find new trading and investing ideas for our readers. Some of the daily analyst reports cover stocks to buy, but other reports cover stocks to sell or to avoid.

Additional commentary and trading data have been added on some of the daily analyst reports. The consensus analyst price targets and other valuation metrics are from the Refinitiv (Thomson Reuters) sell-side research service.

These are the top analyst upgrades, downgrades and initiations seen on Friday, May 3, 2019.

Achillion Pharmaceuticals Inc. (NASDAQ: ACHN) was downgraded to Underweight from Equal Weight and the price target was lowered to $2.50 from $5.00 at Barclays. The stock closed up 3.4% at $3.01 on Thursday but was indicated down 3.3% at $2.91 on Friday.

American Express Co. (NYSE: AXP) was raised to Overweight from Equal Weight at Morgan Stanley. RBC Capital Markets started Amex with a Sector Perform rating. Shares closed up 0.2% at $117.25 on Thursday, with a consensus target price of $121.67 and a 52-week trading range of $89.05 to $117.99.

BCE Inc. (NYSE: BCE) was downgraded to Neutral from Buy at Citigroup.

Bottomline Technologies Inc. (NASDAQ: EPAY) was downgraded to Outperform from Strong Buy and the price target was lowered to $55 from $65 (versus a $50.39 prior close) at Raymond James.

Bristol-Myers Squibb Co. (NYSE: BMY) was raised to Overweight from Equal Weight and the price target was raised to $55 from $53 at Barclays. JPMorgan also started it with an Overweight rating and $62 price target. The shares closed up 0.6% at $46.88 on Thursday and were indicated up almost 1% at $47.30 on Friday. The prior consensus target price was $57.10, and the 52-week trading range is $44.30 to $63.69.

Celgene Corp. (NASDAQ: CELG) was downgraded to Equal Weight from Overweight at Barclays.

Cogent Communications Holdings Inc. (NASDAQ: CCOI) was downgraded to Hold from Buy at Deutsche Bank.

Cognizant Technology Solutions Corp. (NASDAQ: CTSH) was down 7.7% at $66.61 on Thursday and was down another 7.7% at $61.50 on Friday after the post-earnings analyst downgrade brigade came out. JPMorgan downgraded it to Underweight from Neutral, and Goldman Sachs downgraded it to Neutral from Buy. KeyBanc Capital Markets cut its rating to Sector Weight from Overweight, and Evercore ISI downgraded shares to In-Line from Outperform. The prior consensus target price was $81.48. The 52-week trading range is $59.47 to $83.35.

Collegium Pharmaceutical Inc. (NASDAQ: COLL) was started with a Buy rating and assigned a $23 price target (versus a $13.90 close) at H.C. Wainwright.

Discover Financial Services (NYSE: DFS) was started coverage with an Outperform rating and assigned a $96 price target (versus an $81.14 close) at RBC Capital Markets.ALSO READ: Is Gilead’s Stock and Revenue Free-Fall Finally Bottoming Out?


​Top Analyst Upgrades and Downgrades: Amex, Bristol-Myers, Celgene, Cognizant, EA, Fortinet, Lyft, Target, Tilray, Walmart and More

By Jon C. Ogg May 3, 2019 9:00 am EDTPrintEmail
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Domtar Corp. (NYSE: UFS) was raised to Buy from Neutral and the target price was raised to $56 from $51 (versus a $45.13 close) at Goldman Sachs.

Electronic Arts Inc. (NASDAQ: EA) was downgraded to Neutral from Buy at MKM Partners, with the firm calling the success of Apex Legends a head-fake in its report.

Fortinet Inc. (NASDAQ: FTNT) was last seen down over 6% at $85.80 after earnings, with a prior consensus target price of $89.15. Citigroup downgraded it to Sell from Neutral and lowered the target price to $78 from $84.

Incyte Corp. (NASDAQ: INCY) was downgraded to Equal Weight from Overweight at Barclays.

Janus Henderson Group PLC (NYSE: JHG) was downgraded to Sell from Neutral at Goldman Sachs.

Kirby Corp. (NYSE: KEX) was raised to Buy from Underperform at Merrill Lynch, a day after its shares popped up 4.7% to $81.84.

Lyft Inc. (NASDAQ: LYFT) was started with an Underweight rating and assigned a $50 price target at Atlantic Equities. Lyft closed up 4.7% at $61.50 on Thursday but was indicated down about 0.2% at $61.35 on Friday. The same firm also assigned a pre-IPO coverage on Uber with a Neutral rating and $55 price target.

MercadoLibre Inc. (NASDAQ: MELI) was raised to Neutral from Negative at Susquehanna.

Synchrony Financial (NYSE: SYF) was started with an Outperform rating and assigned a $39 price target (versus a $34.15 close) at RBC Capital Markets.

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Target Corp. (NYSE: TGT) was downgraded to Market Perform from Outperform at Bernstein. Target closed up 1% at $76.42 on Thursday and was indicated down 0.4% at $76.10 on Friday, with a prior consensus target price of $86.65.

Tilray Inc. (NASDAQ: TLRY) was raised to Hold from Underperform with a $57 price target (versus a $51.04 close) at Jefferies. Shares closed down 3.3% at $50.23 but were indicated up 1.5% at $51.00. The consensus target price was listed as $106.67, but estimates are all over the place on these legalized cannabis stocks.

TripAdvisor Inc. (NASDAQ: TRIP) was raised to Buy from Hold with a $65 price target (versus a $52.44 close) at Deutsche Bank.

Walmart Inc. (NYSE: WMT) was raised to Outperform from Market Perform at Bernstein. After closing down 0.2% at $101.15 on Thursday it was indicated up 0.7% at $101.90, with a consensus target price of $108.97.

Yeti Holdings Inc. (NYSE: YETI) was downgraded to Neutral from Buy at Goldman Sachs, but the firm raised its target price to $33 from $31. This was after a post-earnings drop of 8.8% down to $30.94 on Thursday. The prior consensus target price was $35.09.

Zoetis Inc. (NYSE: ZTS) was downgraded to Hold from Buy at Gabelli.

Thursday’s top analyst calls included American Water Works, Arconic, Cree, Dell Technologies, Humana, Merck, Qualcomm, Square, Tesla, Zynga and many more.


​There are many types of investors in America. Whether you are in your twenties or retired, it is important to know what strategy is the best fit for your portfolio. Investing strategies start to change for investors when they get up into their fifties and sixties, as the retirement age starts to become a reality rather than a distant blur. And after investors reach their formal retirement age and then grow into their seventies, their investing strategies should change even more.

Most retirees and people nearing retirement need to focus on income and safety rather than chasing the next hot growth sector that may be quite risky. Some retirees would prefer to just sit in bonds and rely on those interest payments to help support their retirement income, but even after the rate hike cycle those interest rates remain quite low for many savers — in some cases too low for retirees to live off of if they have normal retirement funds. Even in 2019 and even after the Federal Reserve’s normalization of interest rates, the reality is that retirees and those nearing retirement simply have no choice but to have at least some investments in stocks.

24/7 Wall St. has reviewed many thematic investing strategies since its inception. That has spanned a bull market that turned into the Great Recession and then turned into the greatest bull market of the modern era. The goal always has been to keep investors and readers informed of proper investments options to help investors avoid losing their shirts when things go wrong. This focus here is what we deem to be the 15 best stocks for older investors as of 2019.

Many stocks are targeted toward mature adults and seniors. Some of these thematic companies offer classical investing themes for those who are retired now or will retire within a decade. Sometimes these companies are quite defensive in nature, but others still have exposure to the ups-and-downs of each business cycle. One thing that these companies all have in common is that their products or services are all well-known to older Americans. Another commonality among many of these companies is that retirees interact with or use them every week.

To supplement retirement income from Social Security and from traditional pension, IRA and 401(k) distributions, the best stocks for retirees have to come with dividends. Those dividends also must be considered stable now, as well as in recent years. And the companies paying those dividends should have defendable moats for their businesses to ensure plenty of earnings coverage to keep those dividends growing in the years ahead, even if the business cycle slows down sooner rather than later.

The list of the best stocks for retirees changes over time, and the current views, as of early 2019, are not necessarily intended to be an immediate portfolio of top stocks for new investors to run out and buy at any price. In fact, some of these stocks may even look rather expensive under classic investor screens, when considering the yield of the 10-year Treasury Note has climbed back above 2.50%. The only data being offered around a share price at this time is the dividend yield and market capitalization as of late April 2019. There also are some alternatives to these companies in some cases that could be considered.

Here is a slate of 15 companies that most retirees likely would want to own in their portfolio now.

American Water Works Co. Inc. (NYSE: AWK) is the absolute leader when it comes to American water utilities. It now serves about 14 million people in 45 states with drinking water, wastewater and water infrastructure. The company dates back to the 1880s and has been a public American company again since 2008, after Europe’s RWE utility giant unloaded it back to the U.S. markets (just in time for the Great Recession). Merrill Lynch was recently upbeat on American Water Works, and this is a defensive stock that seems immune to market panics.

The water giant has committed to keep raising its dividend, and in April of 2019 it yielded about 1.8% with a $19 billion market value. This is a classic defensive stock, but it has risen handily with the markets and now screens as among the most expensive large-cap utility stocks in the S&P 500 as investors have been willing to pay such a premium for its business model. Its shares have risen handily over time, and very rarely has it offered investors times where it is down more 10% from its 52-week and all-time highs.


​American Electric Power Co. (NYSE: AEP) is not the largest utility in America, but with a $41 billion market cap and serving millions of Americans in multiple middle-American states, it is quite well-known. AEP dates back to 1906, and the company deserves much public credit for having historically been quite vocal about the importance of dividends for investors, with over a 100-year track record of dividends as a public company. AEP also uses every available source of power in its portfolio, new and old forms alike. Its dividend yield is currently about 3.3%, and the company aims to keep increasing its payout over time.

AT&T Inc. (NYSE: T) may have been a coin-toss with Verizon when it came to historical investing picks for retirees, but AT&T has a substantially higher dividend yield of over 6.5% due to its shares having pulled back so much. The company still has a $235 billion market cap and millions of landline and cellular subscribers, and it owns Time Warner and DirecTV. Its investors haven’t really enjoyed great returns for a while, but they love that juicy dividend. For a rival comparison, Verizon’s yield is closer to 4%, because its shares have risen over the past two years while AT&T shares are down, with some investors having been concerned over its high debt, which has since been less discussed.

Boeing Co. (NYSE: BA) has run into some recent issues for investors with its 737 MAX groundings after two deadly airline crashes, and recent trends on deliveries will affect 2019 numbers. Boeing will recover, though its shares have pulled back about 15% from its peak. The stock is still the single most important in the Dow Jones industrial average by far, due to the index being price-weighted. It also celebrated its 100th anniversary in 2016. With a backlog nearing 6,000 planes and with that backlog nearing $500 billion at list prices, Boeing has managed to mitigate some of the boom-bust cycles of prior decades.

Boeing is also a winner in defense, satellite and space-related spending trends, and it was approaching the $100 billion annual revenue mark before the recent mishap interrupted that trend. Now investors are having to look out longer term than before, but with a $212 billion market cap it has a dividend yield of about 2.2% That dividend yield actually would have been far higher had its shares not more than tripled in the past three or four years.

Carnival Corp. (NYSE: CCL) is the largest cruise line of them all, with a market value of nearly $37 billion. It also has the largest dividend of its peers at 3.7%. It’s no secret that retirees who like to travel love their cruises. Beyond its Carnival brand, the company also owns and operates brands up the cost-scale via lines such as Princess, Holland America, Cunard, Costa, P&O and more. Carnival has been public since the mid-1980s and was founded in 1972, but the Holland America and Cunard brands go back into 1800s. Carnival’s recent guidance had been an issue, but the outlook seems to have stabilized.

Darden Restaurants Inc. (NYSE: DRI) has been around as a leading chain restaurant operator for decades now. It has close to 1,750 locations under its Olive Garden, LongHorn Steakhouse, Cheddar’s, Yard House, Capital Grille, Bahama Breeze, Seasons 52 and Eddie V’s brands. It used to own Red Lobster as well, before selling that for over $2 billion in 2014. Investors here get paid a 2.5% dividend yield, with a market cap of $14.5 billion.

Johnson & Johnson (NYSE: JNJ) products have been used by probably every person in America at one point or another in their lives. The company dates back to the 1880s. It has endless numbers of consumer products, as well as medical devices, and its Janssen unit is its pharmaceutical operation. Raising its dividend in 2018 marked the 56th consecutive year of such hikes. That dividend now comes with a 2.6% yield, and the company has a $370 billion market cap. Proving its resilience, the stock even recovered handily from its asbestos-talc suits in recent months after its most recent earnings report.24/7 Wall St.
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LTC Properties Inc. (NYSE: LTC) is a self-administered real estate investment trust (REIT) that has retirees as its focus. It has been public since the early 1990s and invests in seniors housing and health care properties, with approximately 200 investments spread among more than half of the states in America. These are in assisted living communities, skilled nursing centers and behavioral health care, independent living and memory care communities. As a REIT, it also pays out almost all of its income, and it is currently offering a 4.9% dividend yield.

Merck & Co. Inc. (NYSE: MRK) is one of the two Big Pharma names in the Dow, and it handily outperformed the markets in 2018, now that much of the patent cliff (drug patents expiring) has slowed and with new drug sales coming from multiple cancer targets from Keytruda. Merck collaborates with many otherwise competing pharmaceutical and biotech players. Merck has continued to raise its dividend and is a buyer of its own stock. With close to a $200 billion market cap on last look, Merck has a dividend yield of about 2.9% with a $191 billion market cap. Merck shares had a strong gain in 2018, despite recent profit-taking, while health care stocks gave some gains back.


​Pfizer Inc. (NYSE: PFE) is the other Big Pharma leader in the Dow, and it has many targets for retirees. Some 20 years ago it became one of the most popular drug companies and stocks with the launch of Viagra to treat erectile dysfunction and Lipitor to target high cholesterol. Pfizer underperformed Merck in 2018, but its dividend yield is now 3.6% as its share price is not as high as its rival. Pfizer has a $217 billion market cap.

Procter & Gamble Co. (NYSE: PG) is the top consumer products giant in the world and its shares seem to be back on track for the last year after being considered “dead money” for a four-year period. P&G has too many brands to count, but some are Always, Bounce, Bounty, Braun, Cascade, Charmin, Crest, Dawn, Downy, Gillette and Pampers. The company dates back to 1890 and had paid dividends for 128 consecutive years. At the start of 2019, it said that it has increased its dividend for 62 consecutive years. This is a top defensive company for investors when the stock market gets choppy as well, and its dividend yield now is about 2.8%, with a $260 billion market cap.

Service Corp. International (NYSE: SCI) is in the opposite direction of health care. This is the top death-care company in North America, with more than 2,000 funeral homes and cemeteries in 45 states and internationally. It has made multiple acquisitions over time and has a market value of nearly $7.5 billion. SCI owns crematoriums, cemeteries, funeral homes, end of life services and so on. With the baby boomers still having elderly parents and themselves now retiring in droves, there will be a long and growing client list for the next two decades or so.

Dating back to the 1960s, SCI resumed paying a dividend, and that is now up to a yield of about 1.75%, with lots of earnings coverage to keep increasing its payout for years ahead. Remember, the great game of life is one that none of us get out of alive.

UnitedHealth Group Inc. (NYSE: UNH) is America’s top health care insurer, and its shares have pulled back along with health care spending concerns and trends ahead of the 2020 election. After making many acquisitions over the past few decades to cover millions of Americans’ health insurance, UnitedHealth is also quite well-known to retirees for its Medicare Supplement Plans offered through AARP.

One drawback here is that UnitedHealth paid only a 1.4% dividend yield at the start of 2019, but the pullback in the shares has taken its yield up to 1.6%. As far as why its dividend sounds low, over the past five years its shares more than tripled in price. UnitedHealth is now even a member of the Dow, with a market cap of over $217 billion. It also now is more targeted as a health insurer with an easier model to understand than some of its peers, which are merging into health care conglomerates of sorts.

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Walgreens Boots Alliance Inc. (NASDAQ: WBA) is a top retail pharmacy destination in America and was the latest addition to the Dow, after General Electric was kicked out of the index. It has more than 9,500 Walgreens and Duane Reade retail stores in the United States, with approximately 8 million customers using its stores and website daily. It also recently completed its acquisition of 1,900 or so Rite Aid stores, and it has almost 5,000 international locations under Boots and other brands. Along with some core health care concerns ahead, Walgreens shares have pulled back handily by more than 25% since the peak, and some investors feel the selling pressure has been too great. Walgreens dates back to 1901, and its current dividend yield of 2.8% or so has much room to grow in the years ahead. Its market cap is now just under $50 billion.

Walmart Inc. (NYSE: WMT) is the top retailer in North America and globally. The company is also deemed to be one of the few retail giants that can compete and also thrive in a new online and multichannel retail world dominated by Amazon and a few other top players. Here are just a few statistics on what helps to make Walmart so great:

Nearly 270 million customers per week
Over 11,700 stores under 59 banners in 28 countries and e-commerce sites
Now at $500 billion in annual sales
And employing around 2.3 million people worldwide.

When Walmart raised its dividend in early 2019, that was the 46th consecutive year of hikes. The company also has repurchased billions of dollars worth of its own stock. Its market cap is $295 billion, it is a member of the Dow and its dividend yield is about 2.1%, with lots of earnings per share cushion ahead to allow for more dividend hikes and continued share buybacks in the years ahead.

​From Why Does Apple Control Its Competitors?, the lead editorial in Friday’s New York Times.

Of the 17 most popular screen-time and parental-control apps in the App Store, 11 have been removed or restricted by Apple. The app makers believe they are being punished for competing with Apple’s own screen-time control tools, or worse, for weaning people off Apple devices. Many of the apps had more stringent controls than Apple’s in-house alternatives.

Apple says that the applications — specifically, the parental-control apps — were removed because of their use of Mobile Device Management, a technology that gave third parties access to information such as “user location, app use, email accounts, camera permissions and browsing history.” In other words, Apple says it removed the apps to protect the privacy of the children and parents who installed them.

The actions by Apple highlight the inherent tension in the company’s fierce control over its mobile operating system: On the one hand, the closed environment is a boon to consumer privacy because the company has the leverage to insist upon it; on the other hand, that environment fosters a kind of monopoly…

Even if we take Apple at its word that it was only protecting the privacy and security of its users by removing screen-time and parental-control apps, the state of the app marketplace is troubling. Why is a company — with no mechanism for democratic oversight — the primary and most zealous guardian of user privacy and security? Why is one company in charge of vetting what users can or cannot do on their phones, especially when that company also makes apps that compete in a marketplace that it controls?…

The status quo is untenable. It’s time for American regulators to take a good hard look at app stores and mobile operating systems. It might be time for another United States v. Microsoft.

My take: Or maybe not. The United States might have bigger fish to fry right now.

One day before a decision was due on whether to impose tariffs on automobile imports, the Trump administration on Friday said it would delay a decision for up to six months while the U.S. Trade Representative, Robert Lighthizer, continues to negotiate trade deals with the European Union and Japan.

A statement from White House press secretary Sarah Sanders noted that Lighthizer has been directed by the president to work on an agreement to address the “threatened impairment” of national security resulting from automobile imports. The threat to national security was determined by the Department of Commerce, which presented a report to the president in February recommending a tariff of up to 25% on all imported cars and sport utility vehicles.

The Commerce Secretary Wilbur Ross foreshadowed the report’s conclusion in a May 2018 interview with CNBC: “Economic security is military security. And without economic security, you can’t have military security.” In a March 2019 interview with Fox News, the president seemed to disagree: “What poses a national security risk is our balance sheet. We have to have — we need a strong balance sheet. Otherwise, you don’t have national security.”

A tariff on auto imports would raise the price of vehicles manufactured outside the United States. The president rejected a European Union offer to eliminate its 10% tariff on vehicles imported into the EU in exchange for a U.S. agreement to wipe out its 2.5% tariff on cars and 25% on trucks. Trump rejected that deal out of hand: “I wouldn’t do that deal,” he told Fox’s Maria Bartiromo.

What appears to be happening here is that the president, who has called himself “Tariff Man,” wants to impose tariffs on virtually everything, including autos, but has been warned that tariffs could weaken the country’s strong economic growth. That strong economy holds an important place in the president’s reelection plans, and he has just given himself until mid-November of this year to decide on the auto tariff. A further delay beyond November is not out of the question either, unless, of course, imposing the tariff on autos looks more like a political winner then than it does now. Consumer sentiment has risen strongly ahead of tariff fears.

​SPRINT

​Becton Dickinson

This top health care stock is a solid and safer play now. Becton Dickinson and Co. (NYSE: BDX) is a diversified global medical technology company that produces medical devices, instrument systems and reagents for the health care, life sciences research, clinical, diagnostic and pharmaceutical markets.

The company has grown into a large medical conglomerate with over 49,000 employees covering nearly 50 countries worldwide. The CareFusion acquisition significantly expanded the company’s medical technology footprint in infusion and medication management.

Shareholders are paid a 1.37% dividend. The $285 Jefferies price target compares with the $269.89 consensus target and the most recent close at $225.04 a share.

Gilead Sciences

This company is trading at a very reasonable 9.55 times estimated 2019 earnings. Gilead Sciences Inc. (NASDAQ: GILD) is a biopharmaceutical company that discovers, develops and commercializes therapies for the treatment of HIV/AIDS, liver disease, cancer and inflammation. The acquisition of Kite Pharmaceutical in 2017 allowed for entry into the CAR-T space, indicating a renewed focus in oncology.

The company’s products include Stribild, Complera/Eviplera, Atripla, Truvada, Viread, Emtriva, Tybost and Vitekta for the treatment of human immunodeficiency virus (HIV) infection in adults; and Harvoni, Sovaldi, Viread and Hepsera products for the treatment of liver disease.

Gilead Sciences investors are paid an outstanding 4.07% dividend. Jefferies has set its price objective at $95. The posted consensus target price is lower at $81.35. The stock closed at $61.87 on Monday.24/7 Wall St.
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Quest Diagnostics

With an aging population, this may be a safer way for investors to play health care. Quest Diagnostics Inc. (NYSE: DGX) is the largest provider of clinical diagnostic testing and related services in the United States, delivered through a national network of full-service clinical laboratories and over 2,200 patient service centers.

The company looks to be on track for at least 1% of incremental sales growth from mergers and acquisitions this year, and some on Wall Street feel there is a potential for additional acquisitions that could boost the second half outlook. Quest has indicated the first tranche of the anticipated United Healthcare share gain will happen quickly, but that a significant part of the volume build will span into 2021.

Investors receive a 2.49% dividend. The Jeffries price target is $107. That compares to the analysts’ consensus target of $92, as well as the latest closing share price of $85.18.

SAMSUNG

ELECTRIC TRUCK


One thing to say for Facebook Inc. (NASDAQ: FB): the company thinks inside the box. It’s own box.

With a fine of up to $5 billion looming and regulators around the world looking for ways to rein in the company’s somewhat lackadaisical attitude toward its users’ privacy, Facebook is considering issuing a digital coin that its users could employ to make purchases on the social media site and across the internet generally.

According to a report late Thursday in The Wall Street Journal, the company is working to line up financial firms and online merchants to back its digital Facebook coin, a so-called stablecoin backed by the U.S. dollar and running on blockchain technology. JPMorgan announced its own stablecoin in February.

The Wall Street Journal’s sources said that the Facebook cryptocurrency would work much like the company’s user profile that can be used to login to hundreds of websites. A user’s Facebook crypto-account details could be added to that profile and the account could be used to make online purchases. A user’s account could even be credited with a (minuscule) fraction of a Facebook coin every time the user views an ad or does something else that Facebook can use to keep its ad rates up.Prototype shown with options. View disclaimers.
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And selling user data for advertising purposes is what Facebook is all about. The Wall Street Journal notes that the company is considering letting retailers use the coins it receives from customers to pay for more advertising on the Facebook site. A similar feature using traditional card payments was rolled out on Facebook-owned Instagram in March.

One of Facebook’s goals since its founding has been to tangle itself up in its users’ lives to such a degree that Facebook becomes, in a real sense, an intermediary between who you are and who you interact with and, now, where you spend your money. Given the company’s track record of protecting its users’ private information, it would seem that being able to guarantee that your Facebook coin account is both safe and stable (i.e., one Facebook coin is always equal to one U.S. dollar) ought to be based on something other than the company’s promise that everything will be fine, just trust us.

Facebook itself has had virtually nothing to say about the rumors that it is working on a Facebook cryptocurrency. The newpaper’s sources say that the company is trying to raise $1 billion from card issuers Visa and Mastercard, along with payment processor First Data, to provide the one-to-one backing for the Facebook coin. Facebook is sitting on a $34 billion pile of cash and short-term investments, while Mastercard, Visa and First Data have a combined hoard of less than $20 billion. Why doesn’t Facebook just back its own cryptocoin?

Does Facebook entertain visions of a crypto-future where the Facebook coin replaces the U.S. dollar as the world’s reserve currency? Some company, someday, is going to get there first, so get on board or lose out. This is the opportunity of the century.

One thing that Facebook knows in its very DNA is that being first matters. Do whatever it takes to win and then apologize later if necessary. That’s how Facebook has been run since the beginning, and so far nothing has happened that would cause it to seek a DNA transplant. Maybe a $50 billion fine would have some effect, but a paltry $5 billion almost certainly won’t. Those Facebook coins are going to be great.
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​HARD TO SINK

IMPORT TARIFFS

​It has become pretty obvious that interest rates are going nowhere this year, and they may not go anywhere in 2020 either. The Federal Reserve is worried about slowing growth, and with inflation seemingly contained, the all-new dovish Fed Chair, Jay Powell, has slowed down not only rate hikes, but the balance sheet clean-up as well. Worried investors piled into Treasury bonds this week, driving some yields down to 52-week lows.

So what should investors do now? Look for safe stocks that pay large and dependable dividends, and that is exactly what makes up the Merrill Lynch Income Portfolio. Every sector is represented, and it is a good blueprint for total return accounts.

We screened the portfolio looking for high-yielding Buy-rated companies in each sector and found the following five from different sectors that are solid plays now. Not only are these great total return ideas, but we also looked for companies that have a better risk rating as recent trade issues had stirred up volatility.

AT&T

This is a telecom component on the prestigious Merrill Lynch US 1 list. AT&T Inc. (NYSE: T) is the world’s largest provider of pay TV, with TV customers in the United States and 11 Latin American countries. In the United States, the AT&T wireless network has the nation’s self-described strongest 4G LTE signal and most reliable 4G LTE.

This telecom giant also helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions. Trading at a very cheap 9.4 times estimated 2019 earnings, the company continues to expand its user base, and strong product introductions from smartphone vendors have not only driven traffic but increased device financing plans.

The company reported a mixed bag for the first quarter results, and Merrill Lynch said this:

On a consolidated basis, 1Q revenue, EBITDA, and EPS were all pretty much in line with consensus estimates. Entertainment EBITDA was ahead of both us and the Street, as AT&T was able to bend the cost curve and drive up video average revenue per user. Due to definitional changes, AT&T’s implied capex guidance is $20 billion and not $22 billion where the Street consensus is today.

AT&T investors are paid a massive 6.53% dividend. The Merrill Lynch price target for the shares was last seen at $37, and the Wall Street consensus target is lower at $33.88. The shares were trading on Thursday’s close at $31.62.

Coca-Cola

This top Warren Buffet holding not only offers safety but an incredibly strong worldwide brand with 40% overseas sales. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands.

Led by Coca-Cola, one of the world’s most valuable and recognizable brands, the company’s portfolio features 20 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, it is the number one provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks.

Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy Coca-Cola beverages at a rate of more than 1.9 billion servings a day. With coolers getting packed for picnics, parades and vacations you can bet that they will be stuffed with products from this iconic American company. Also remember that the company also owns 16.7% of Monster Beverage, which continues to deliver big numbers.

Coca-Cola investors are paid an outstanding 3.26% dividend. Merrill Lynch has a price target of $55, while the posted consensus target was last seen at $50.33. The stock closed on Thursday at $49.58 a share.

​The American aircraft carrier USS Abraham Lincoln has been dispatched to the northern Arabian Sea because of the rise in tensions between the United States and Iran. Carriers are often moved into hot spots as deterrents, based on their ability to launch dozens of fighter jets and other aircraft quickly. They are also surrounded by other warships, such as cruisers and submarines. The question about the effectiveness of carriers and their vulnerability to attack is raised whenever they sail in hostile waters. However, carriers are nearly impossible to sink, which challenges the argument that they are a risky and expensive way for the Navy to spend its money.

The Lincoln is among the Nimitz class carriers, which are slowly being replaced by new Gerald R. Ford class carriers. It was launched in 1988. It is one of the world’s largest ships, at 1,092 feet long.

According to The National Interest, there are several reasons carriers are very hard to attack and harder to sink.

First, their speed allows them to outrun many other ships, particularly submarines. Their speed also makes them hard to track.

They have “hundreds of watertight compartments and thousands of tons of armor, no conventional torpedo or mine is likely to cause serious damage,” The National Interest reports.

The carriers also have high-tech sensors that can pick up missiles at great distances. To counter missiles they have “radar-guided missiles and 20 mm Gatling guns that shoot 50 rounds per second.”

Among the most important points The National Interest makes is that carriers are part of large groups of ships, Some of these carry Aegis combat systems, which are highly sophisticated naval defense systems. These groups also include their own submarines and a number of submarine detection methods and deterrents.

The Navy also operates carriers in such a way as to keep them far from potential threats. The National Interest points out that includes staying away from areas that might be mined.

Professor Robert Farley of the Patterson School of Diplomacy and International Commerce at the University of Kentucky, who is an expert in naval ships and defenses, recently wrote:

The United States has spent, essentially, 30 years developing and working out a reconnaissance strike complex that includes multiple redundant systems of surveillance and communication, resulting in a kill chain that transfers information in real time from advanced sensor platforms (satellites, submarine listening posts, drones, patrol aircraft) through communications nodes (satellites, aircraft) to ships, planes, and submarines that can launch and guide missiles to targets.

Finally, each time a carrier is overhauled, many of its systems are upgraded. This allows carriers built decades ago to be fitted with current technology. The Navy also has upgraded the systems on other ships that protect carriers.

The National Interest concludes:

The most important advance of recent years has been the netting together of all naval assets in an area so that sensors and weapons can be used to maximum effect. Initiatives like the Naval Integrated Fire Control – Counter Air program link together every available combat system in a seamless, fast-reacting defensive screen that few adversaries can penetrate.

The USS Abraham Lincoln is already among the most powerful ships in the world, but it will become obsolete with the launch of new Gerald R. Ford class carriers, another example of how the United States is the leader among countries that spend the most on war.

ANALYSTS

BUFFETT IS BUYING