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Marty Chilberg
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I'm a retired CPA who spent the majority of his working career in technology companies. My work included management stints at Atari Inc, Daisy Systems Corp, Symantec Corp and Visio Corp. My last position at Visio (VSIO) was as CFO and VP Finance and Operations.
  • Q2 2015 Estimate Cuts Lower Than Average

    FactSet John Butters, Senior Earnings Analyst

    Jul 2, 2015

    During the second quarter, analysts lowered earnings estimates for companies in the S&P 500 for the quarter. The Q2 bottom-up EPS estimate (which is an aggregation of the estimates for all the companies in the index) dropped by 2.3% (to $28.72 from $29.39) during this period. How significant is a 2.3% decline in the bottom-up EPS estimate during a quarter? How does this decrease compare to recent quarters?

    During the past year (four quarters), the average decline in the bottom-up EPS estimate during a quarter has been 5.0%. During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 3.4%. During the past 10 years, (40 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 5.0%. Thus, the decline in the bottom-up EPS estimate recorded during the second quarter was lower than the 1-year, 5-year, and 10-year averages.

    Why was the decline in the bottom-up EPS estimate for the quarter lower than average? At the sector level, the Energy sector reported the largest increase in the bottom-up EPS estimate for Q2 2015 of all 10 sectors during the quarter. This marks a sharp contrast to last quarter, when the Energy sector recorded the largest decrease in the bottom-up EPS estimate of all 10 sectors.

    The bottom-up EPS estimate for Q2 2015 for the Energy sector increased by 9.4% (to $4.50 from $4.11) during the second quarter. Over this same time frame, the price of crude oil increased by 20.5% (to $59.47 from $47.60).

    Despite the increase in estimated earnings during the quarter, the Energy sector is still predicted to report the largest year-over-year decline in earnings (-60.0%) of all 10 sectors.

    Tags: FactSet
    Jul 03 8:35 AM | Link | Comment!
  • US Weekly Recap July 2, 2015

    FactSet


    Overview:

    • US equities finished lower in holiday-shortened trading this week. The bulk of the damage came from the Greek government's surprise decision to hold a referendum on its creditors' bailout proposal. The continued weakness in China stocks despite a ramp in policy support and the debt crisis in Puerto Rico were some of the other headwinds in focus. In addition, the June employment report came in a bit softer than expected. While the probability of a December liftoff fell below 50% on Thursday, this week's macro-leaning developments did not seem to have a significant impact on broader policy normalization sentiment. This dynamic may have partly been evidenced by the lackluster performance on the part of gold. Despite the extent to which Greece dominated the headlines and drove the volatility in the markets this week, there were a few other notable developments. The M&A theme continued to gain momentum. In addition, several companies announced strategic actions to help boost shareholder value. Sector performance largely fit with the pickup in risk aversion. Utilities was the only sector to finish higher, while other defensive pockets of the market like consumer staples also held up better. Financials and tech were largely in line. The materials sector put in the worst performance, while energy and industrials also lagged.

    Greek drama escalates:

    • The big story this week was the surprise decision by Greek Prime Minister Tsipras to forgo an attempt to secure a last-minute extension of Greece's second bailout program and instead call for a 5-Jul referendum on the creditors' proposals. The government recommended a "No" vote, which it argued would give it better leverage in new negotiations. The move forced the ECB to leave the ceiling on emergency liquidity assistance (NYSE:ELA) for Greek banks unchanged, which in turn forced the government to declare an extended bank holiday and implement capital controls. The stock market was also closed for the week. On Tuesday, Athens missed a ~€1.6B payment to the IMF, while the bailout program expired, leaving ~€16B in untapped support funds. Headlines surrounding the drama over the rest of the week were fairly mixed, driving some of the volatility in US stocks. While the Greek government seemed to move closer to the creditors' demands in a third bailout program proposal, the concessions did not go far enough to re-start negotiations before the referendum. In addition, the government's tone remained fairly combative, which seemed to further anger its creditors.

    What happens next?:

    • As of Thursday, the referendum looked too close to call. A poll by EFSYN early in the week had the "No" vote at 46% and the "Yes" vote at 37%. However, a subsequent poll by GPO showed 47% leaning toward a "Yes" vote, with the "No" camp at 43%. This seemed to fit with the heightened focus in the press on the widespread economic pain from the capital controls. A "Yes" vote is widely seen as the best outcome for the market given that could it force the Tsipras government to stand down and lead to the formation of a unity government that could engage in more productive bailout negotiations with creditors. A "No" vote not surprisingly brings much more uncertainty. While Tsipras has argued that it will increase Greece's leverage in future negotiations, that idea has been widely dismissed by creditors. In addition, the potential for more hostility could force the ECB to get tougher on ELA, lead to a prolonged period of capital controls and even a Greek exit from the Eurozone. The other interesting dynamic revolves around the markets. While the referendum call drove a pickup in risk aversion, contagion was still fairly muted. If this trend continues, it could also dampen the Greek government's ability to force a better deal.

    China, Puerto Rico add to the macro overhang:

    • Greece was not the only macro overhang this week. China stocks came under heavy pressure again. As of the close on Thursday, the Shanghai Composite was off nearly 25% from its 12-Jun peak. Spillover effects remained fairly limited, though there were concerns about the inability of a flurry of policy support measures to provide any notable reprieve. The PBoC cut the benchmark lending and deposit rates by 25 bp to 4.85% and 2.00%, respectively. This marked the fourth easing move since November. It also announced a 50 bp cut in the reserve requirement ratio (NYSE:RRR) for select banks. In addition, margin trading requirements were relaxed, while both the Shanghai and Shenzhen exchanges announced plans to lower transaction fees by 30%. The debt crisis in Puerto Rico also grabbed a lot of headlines this week. Much of the focus was on comments from the island's governor, who conceded on Monday that it could not pay its ~$70B debt pile. He noted that the administration is likely to seek significant concessions from potentially all of its creditors. He also called for the commonwealth to be allowed to restructure its debts under the US bankruptcy code.

    June employment report somewhat softer than expected:

    • The June employment report was the highlight on the economic calendar this week. Nonfarm payrolls increased 223K, just below the 233K consensus. May and April saw a net downward revision of 60K. The unemployment rate fell to a fresh cycle-low of 5.3% from 5.5% in May, while the Street was looking for 5.4%. However, the decline was driven by a 0.3 point drop in the labor force participation rate to 62.6%, the lowest level since October 1977. The big disappointment in the report was on the wage front as average hourly earnings were flat, below consensus expectations for a 0.2% increase. This pushed the y/y rate back down to 2.0% from the 2.3% seen in May that was also the June consensus. Despite the strength in Treasuries and the decline in the probability of a December liftoff to below 50% (per Fed funds futures), there was some skepticism about the influence of the report on the timing of the first rate hike. JPMorgan specifically pointed out that broader measures of labor market underutilization such as long-term unemployed and persons unemployed part-time for economic reasons, displayed notable improvements in June (and in recent months).

    More M&A, strategic actions:

    • The M&A and strategic actions themes rolled on this week, though the tailwind was somewhat muted. The WSJ discussed how the boom is now being driven by concerns about being left behind by rivals who are bulking and becoming more efficient. It added that in many cases, companies are worried that if they do not get bigger, they will become takeover targets themselves. The widely speculated managed care consolidation push remained in focus. However, it was a smaller deal that kicked things off as HNT +12.2% agreed to be acquired by CNC (7.4%) for $6.8B, including debt. In the P&C insurance space, ACE +0.3% announced a $28.3B deal to acquire CB +25.9%. WSH +0.5% and TW (8.7%) announced a merger of equals valued at $18B. In the REIT sector, CSG (11.3%) and GPT (5%) announced an all-stock deal to create a company with an EV of $5.7B. PBY (2.3%) said it would explore a sale after receiving takeover interest. CAG +1.3% surprised the market with its plan to exit the private label business. In addition, EMR (1.3%) highlighted plans to spin its Network Power business and explore alternatives for its motors and drives, power generation and remaining storage businesses.

    Defensive sectors outperform:

    • The utilities sector was the only sector to finish in positive territory this week. It was supported by a combination of the broader risk-off sentiment and some talk of oversold conditions. Deutsche Bank's latest US Equity Insights report noted that the real 4% dividend yield now offered by utilities is very attractive. It also pointed out that unlike consumer staples, utilities have no FX risk. Despite its pullback, the consumer staples sector was still a relative outperformer. THS +5.6% was a standout in the food space on CAG's private label announcement. ENR +6.2% was another big gainer in the wake of its spin out. Telecom held up a bit better than the broader market, though all of the components finished lower for the week. The Street continued to get more positive on T (1.1%). After three upgrades last week, Cowen upgraded the name on Thursday. Consumer discretionary also beat the tape despite the weakness in retail with XRT (2.4%). Gaming stocks WYNN +7.3%, LVS +5.1% and MGM +0.9% were boosted by the better sentiment surrounding Macau. Visa requirements for mainland transit visitors were eased, while the decline in June gaming revenues was not quite as bad as expected.

    Financials, tech largely in line:

    • The financials sector ended largely in line with the broader market this week. Not surprisingly, the lower rate environment was an overhang on the banking group with the BKX (1.8%). However, this dynamic helped REITs, with RWR +0.4%. Asset managers came under pressure (this week saw more outflows from both US stock and bond funds). Several names were down more than 2.5%. M&A provided some support in the P&C insurance group. MBI (30.9%) and AGO (11.8%) sold off on the heightened concerns surrounding Puerto Rico. In tech, there continued to be a good deal of negative sentiment surrounding the HDD space, with WDC (4.2%) and STX (3.8%). A similar dynamic played out in the semi group with respect to memory names SNDK (9.3%) and MU (3%). The former was hit particularly hard by concerns that Toshiba, its manufacturing partner, is being challenged by Samsung to supply chips for next-gen Apple iPhones. AMD +2.4% was one of the few bright spots in the semi space on takeover speculation. YELP (14.2%) was a big decliner following a Bloomberg report that the company will not pursue a sale in the immediate future. In payments, the XOOM +12% acquisition by PayPal weighed heavily on WU (7.9%).

    Materials, energy, industrials lag:

    • The materials sector was the worst performer this week. The industrial metals group came under fairly broad-based pressure with the global risk-off trade. CLF (17%), AKS (15.1%), CENX (7.8%) and VALE (6.1%) were some of the big decliners. In addition, precious metals equities were largely on the defensive with GDX (2.5%). Gold failed to attract any safe-haven buying this week. A selloff in oil on bearish inventory and rig data, along with continued concerns about an Iran deal, weighed on energy. Coal stocks sold off sharply. Some of the weakness was chalked up to a negative preannouncement from BTU (18.3%). There were a few notable developments in industrials. A number of construction and mining equipment names seemed to be hit cautious China comments out of Komatsu. JOY (6.9%), OSK (5.8%) and CAT (2.8%) were some of the big decliners. In addition, cautious sell-side commentary continued to weigh on equipment rental names HEES (11.8%) and URI (6.3%). Despite the selloff in oil, airlines were pressured by news of a Justice Department investigation into potential collusion. AAL (5.8%), DAL (5.6%) and UAL (5.5%) led the move lower.

    Sector Performance (vs S&P 500):

    • Outperformers: Utilities +1.14%, Consumer Spls. (0.54%), Consumer Disc. (0.92%), Telecom (1.08%), Financials (1.15%)
    • Underperformers: Materials (2.55%), Energy (1.98%), Industrials (1.49%), Healthcare (1.41%), Tech (1.25%)
    Tags: FactSet
    Jul 03 8:32 AM | Link | Comment!
  • Renaisance Capital: June 2015 IPOs Most Active Since Dotcom Bubble

    7/1/15 Analyst IPO Blog

    June 2015 saw 35 initial public offerings, more than any month since August 2000, when 66 companies went public. Since then, there have now been just nine months with over 30 IPOs, including six in the past two years.
    The 35 June IPOs raised $5.9 billion, more than the $5.5 billion raised by the 34 IPOs during the entire first quarter.

    June's top IPOs were Seres Therapeutics (MCRB; +131%), Fitbit (FIT; +91%) and Glaukos (GKOS; +61%). Three IPOs raised more than $500 million: Univar (UNVR), Fitbit (FIT) and TransUnion (TRU).

    There were 39 initial filings in June, more than any month since June 2014, including seven that could raise over $500 million. This signals what will likely be an active July and early August in the IPO market. Notable filers include Planet Fitness (PLNT), SunGard (SDS.RC), SunRun (RUN), Blue Buffalo (BUFF) and Patheon (PTHN).

    Jul 02 1:39 PM | Link | Comment!
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