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Franklin Resources (BEN) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.
The Hartford (HIG) has an impressive earnings surprise history and currently possesses the right combination of the two key ingredients for a likely beat in its next quarterly report.
(Bloomberg Opinion) -- Imagine you’re the chief executive officer of a large pharmaceutical corporation with an important drug that’s under attack. More than 2,500 lawsuits have been filed against your company. The plaintiffs aren’t individuals, though, they’re governments — counties, cities and states. And some of the biggest names in the plaintiffs’ bar have agreed to represent these entities, lawyers like Joe Rice, whose firm was said to have earned $1 billion for helping to bring the tobacco companies to heel in the 1990s.You know you’ve got some incriminating-sounding documents in your corporate files — what company doesn’t? — but you also know that the Food and Drug Administration approved your drug. Patients crushed it and snorted it — something that was never intended. And you’re convinced that the plaintiffs are pushing the envelope with the public nuisance laws they are relying on to bring these cases. Yes, your company will probably lose at trial, but you think you have a good chance to win on appeal.Then you look at the army arrayed against you, and it hits you: You’re never going to be able to litigate your way out of this. It’s not just that there are 2,500 lawsuits or that they are being brought by governments. It is what that represents. Government exists to serve the interests of the people, and the people are saying that your company participated in something that inflicted tremendous damage on the country. Hundreds of thousands of people have died. And your company needs to be punished.At this point, you pick up the phone, call your opponents and say, “How much do we need to pay to settle this?”I am obviously not privy to the thinking of the CEOs of the various companies facing opioid lawsuits. But given the news of the last few days, I imagine that their thought process was not too far from what I just described. On Tuesday, the Wall Street Journal reported that three of the distributors being sued — McKesson Corp., Cardinal Health Inc., and AmerisourceBergen Corp. — have offered to pay $18 billion over 18 years to settle their cases. This news leaked less than a week before the start of a big opioid trial in Cleveland, in which the three companies are among the defendants.The next day, Bloomberg News reported that Johnson & Johnson was offering $4 billion to end the litigation, and Teva Pharmaceutical Industries Inc. was proposing to give away $15 billion worth of generic drugs to be freed of the lawsuits. On Thursday, the New York Times reported that the five companies and the states had agreed on the outlines of a settlement that would cost the companies $50 billion.And of course, Purdue Pharma Inc. had already waved the white flag, with a bankruptcy filing last month intended to end the lawsuits by essentially turning the company’s assets over to a trust that would be controlled by the plaintiffs.It is too early to know whether any of these settlement offers will stick. Although the federal judge presiding over the Cleveland trial, Dan Aaron Polster, has asked the CEOs of the three distributors plus Teva to appear Friday to discuss the settlement talks, I’m told that the trial is still likely to begin on Monday, as scheduled.Any settlement will also need approval from the cities and counties that have filed suits. They are deeply suspicious of any deal the states might cut because they remember the outcome of the tobacco litigation. In 1998, the tobacco companies agreed to pay $246 billion over 25 years to the states, but little of that money trickled down to cities and counties. Indeed, a minuscule amount went to anti-tobacco efforts; most of the money is now used to fill state budget gaps.Still, whether it happens next week or next year, the opioid litigation will almost surely end with the companies being sued spending billions to settle it. The stock market practically demands it: Share prices of all the companies that have made settlement offers in recent days have jumped. And continuing litigation drains and distracts a company.Here’s the problem, though. Whenever plaintiffs’ lawyers argue that companies have done bad things and need to pay up, they justify the demand for money by saying it will be used to solve the problem. But will it? In this case, I have my doubts.In an opioid case in Oklahoma a few months ago, a judge ruled that Johnson & Johnson should pay $572 million (later reduced by $107 million), which he calculated would cover opioid abatement services in Oklahoma for just one year. So point one: Ending the crisis will require more money than even Big Pharma can provide.Second, just throwing money at the problem is not going to solve it. States and cities will most likely take different approaches. Some will be better than others. But there is no clear plan coming from the federal government — or anywhere else — about what steps are needed to end the crisis. Until there is, more money is likely to be wasted than not.Third, chances are good that the settlement money will be used for things that have nothing to do with opioids. Again, tobacco in instructive: Settlement money was supposed to be earmarked for tobacco control programs, but in most states the politicians couldn’t resist grabbing it for other purposes.Earlier this summer, during a court hearing, Judge Polster said that “developing solutions to combat a social crisis such as the opioid epidemic should not be the task of our judicial branch.” It was the job, he said, of the executive and legislative branches.He’s right. But that’s just not the American way. In the U.S., when there is a problem with a product, our first instinct is to sue the corporation that made it. When the litigation is settled, money is transferred from shareholders to plaintiffs (and their lawyers). It may be a satisfying resolution, but it rarely solves the problem. To reference tobacco one more time, two decades after the tobacco settlement, 480,000 Americans still die from smoking each year.I suspect the same will be true of the opioid crisis. The companies will settle, the lawyers will pocket millions and the states will get the rest. And the crisis will continue.I’ve said it before, and I’ll no doubt say it again: There’s got to be a better way.To contact the author of this story: Joe Nocera at email@example.comTo contact the editor responsible for this story: Daniel Niemi at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. His latest project is the Bloomberg-Wondery podcast "The Shrink Next Door."For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Investor sentiment upbeat on banks' Q3 earnings, with the major players displaying top-line strength on the back of higher fee income and loan growth.
General Mills' (GIS) focus on key global strategies and cost-saving plans bode well. The company's Pet segment looks strong, while the U.S. Snacks business is troubled.
It looks like Delta Air Lines, Inc. (NYSE:DAL) is about to go ex-dividend in the next 4 days. If you purchase the...
(Bloomberg) -- Taiwan Semiconductor Manufacturing Co.’s plan to spend as much as $15 billion on technology and capacity in 2019 -- roughly 50% higher than originally envisioned -- is spurring hopes that the dawn of fifth-generation networks will rev up global chip and smartphone demand.The primary chip supplier to Apple Inc. told investors it’s sharply increasing its estimate for 2019 capital expenditure to between $14 billion to $15 billion from as much as $11 billion previously, and Chief Financial Officer Wendell Huang said 2020 spending will be similar. The Taiwanese company also projected current-quarter revenue ahead of estimates, an affirmation that the latest iPhones have proven a hit with consumers.Chief Executive Officer C. C. Wei sketched out hopes that the emergence of 5G, the foundation of future technologies from automated factories and smart homes to blazing-fast consumer electronics, will help underpin its business in coming years. TSMC, which is the world’s largest contract chipmaker, and is seen as a barometer for the tech industry thanks to its heft and place in the supply chain, said the advent of 5G-enabled smartphones will result in more chips in devices than before.“We are much more optimistic than six months ago,” Wei said, adding that the 5G momentum was larger than the company expected. TSMC has increased its forecast of the 5G smartphone penetration rate in 2020 to a percentage in the mid-teens from its previous single-digit estimate. Many countries, especially larger ones, were rapidly pushing ahead with 5G rollout plans, Wei added.TSMC Puts All Its Chips on Capex. That’s a Smart Bet: Tim CulpanTSMC’s capital spending plan and outlook prompted price-target hikes from several analysts including at Goldman Sachs and Morgan Stanley. Its shares, which notched a lifetime high just this month, stood largely unchanged Friday in Taipei. More broadly, suppliers including ASML Holding NV, Applied Materials Inc. and Tokyo Electron Ltd. could stand to benefit from TSMC’s capex increase.In addition to 5G, TSMC’s push is driven by growing demand from tech giants such as Apple and Huawei Technologies Co., said Roger Sheng, a semiconductor analyst with Gartner. Although the outlook remains uncertain for 2020, the global semiconductor market is set to make a gradual recovery on the back of the demand related to 5G, AI and automotive applications, according to a note from TrendForce on Oct. 2.“Everyone is waiting to see a bounce back of global smartphone market next year after Apple adopts 5G. The self-designed Huawei chipsets will also push demand, as will Qualcomm’s 5nm chips for next year and AMD’s server chip demand,” Sheng said.On Thursday, TSMC also underlined expectations that Apple, its largest customer, is riding a bounce-back in demand for the iPhones after a lukewarm 2018 iteration. Lower prices and aging handsets are helping drive demand for the iPhone 11 range, and Apple is said to be asking its assemblers to target the high end of an original forecast for 70 million to 75 million unit shipments in 2019.Read more: Apple’s Lower Prices, Users’ Aging Handsets Drive IPhone DemandThe Taiwanese company foresees revenue of $10.2 billion to $10.3 billion in the pivotal December holiday quarter, surpassing an average projection for about $9.9 billion. TSMC gave that sales outlook after reporting net income of NT$101.1 billion ($3.3 billion) for the September quarter, handily beating estimates as the global chip market recovers.Still, fallout from ongoing trade conflicts could crimp an industry revival. While TSMC doesn’t factor trade conflicts into its capex plans, any international trade war will have a negative effect on the semiconductor sector, Wei said. China is an especially important market for TSMC and the semiconductor industry, he added.TSMC and its industry peers had grappled with a plateauing smartphone market, efforts by Apple to move beyond hardware, and U.S. tech-export curbs on No. 2 customer Huawei. But investors are growing more confident that the emergence of 5G will prop up chip prices and demand, while the latest iPhones are firing up consumers. TSMC is in fact straining against capacity constraints in the current quarter, Sanford C. Bernstein analyst Mark Li said.The “iPhone is driving stronger near-term demand. We believe the competitive pricing of iPhone 11 is garnering good traction and has prompted Apple to place more orders at the supply chain,” Li said in an Oct. 10 note.Read more: Taiwan’s Market Fortunes Are Tied to TSMC Like Never Before(Updates with analysts’ hikes and shares from the fifth paragraph)To contact the reporters on this story: Debby Wu in Taipei at email@example.com;Gao Yuan in Beijing at firstname.lastname@example.orgTo contact the editors responsible for this story: Peter Elstrom at email@example.com, Edwin Chan, Colum MurphyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- The strange thing about the “cease-fire” negotiated Thursday in Ankara between the U.S. and Turkey is that one party isn’t actually fighting and the other seems unlikely to abide by it. Turkey’s foreign minister said the agreement “is not a ceasefire” but rather a pause in military operations. He vowed that those operations would continue until Kurdish fighters — aligned with the U.S. until earlier this month — leave the border area entirely. For good measure, he also contradicted Vice President Mike Pence, saying his government never promised not to send its army into the city of Kobani.Nor is it likely that Kurdish forces will agree to Turkish demands. For one, the Syrian Democratic Forces have already struck a bargain with Russia and the Syrian regime, allowing the Syrian army into the semi-autonomous zone it controlled. The deal reached in Ankara was just between Turkey and the U.S.And those are just a few of the problems with the agreement negotiated by Pence and Secretary of State Mike Pompeo. Far from fixing a problem caused by President Donald Trump’s diplomatic bluster and caprice, they have compounded it. The U.S. has essentially acceded to Turkey’s demand for control of a 20-mile buffer zone deep into Syrian territory. The Turks intend to use this new territory to relocate the more than 3 million Syrian Arab refugees now living in Turkey.Turkish President Recep Tayyip Erdogan has been open about this. Just this week, he outlined his plans: “We will secure the area extending from Manbij to the Iraqi border and then facilitate 1 million Syrian refugees’ return home in the first phase and, later on, the return of 2 million people.” But this safe zone is an area that is for the most part historically Kurdish. If the Turkish military and its allied militias are allowed to dominate the area, then it is a near certainty that Kurdish civilians will suffer.And while it’s hard to confirm early reports in the fog of war, that appears to be exactly what is happening. New York Times reporter Rukmini Callimachi tweeted the grisly autopsy report of a murdered Kurdish politician. Public violence like this is meant to send a message that all civilians are targets. In essence, America has agreed to let Turkey solve its Syrian refugee problem by creating a new Kurdish refugee problem.Then there is the message this sends to Erdogan himself. The Turkish leader has humiliated Trump and the U.S. in recent weeks and months. He went ahead with the purchase of a Russian S-400 air defense system this summer, over several U.S. objections, and has faced no sanctions. He ordered his military to violate an earlier safe-haven agreement that to which Turkey had previously agreed. His forces fired artillery on a U.S. outpost last week. And he has metaphorically — and literally, according to the BBC — thrown Trump’s “Don’t be a tough guy” letter into the trash.In exchange for this disrespect and petulance, Erdogan got what he has wanted all along. He started a war to create a buffer zone in northern Syria, then got the U.S. to agree that he be allowed to keep it. Trump is even now repeating Erdogan’s talking points, claiming (without evidence) that the Syrian Kurds have launched attacks into Turkey. “In all fairness they’ve had a legitimate problem with it,” Trump said Thursday, referring to the safe zone. “They had to have it cleaned out. But once you start that, it gets to a point where a tremendous amount of bad things can happen.”That point has already been reached. Bad things are indeed happening, and will continue to happen. And there’s little reason to believe Trump’s capitulation in Ankara will do much to stop them.To contact the author of this story: Eli Lake at firstname.lastname@example.orgTo contact the editor responsible for this story: Michael Newman at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Eli Lake is a Bloomberg Opinion columnist covering national security and foreign policy. He was the senior national security correspondent for the Daily Beast and covered national security and intelligence for the Washington Times, the New York Sun and UPI.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Signs of hope for a Brexit deal and U.S.-China trade war updates. Some disappointing U.S. manufacturing and retail data. Q3 earnings results from the likes of Netflix. And why Google parent Alphabet is a Zack Ranks 1 (Strong Buy) stock. - Free Lunch
The Zacks Analyst Blog Highlights: Delta Air Lines, United Airlines, Spirit Airlines, JetBlue Airways and Alaska Air
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(Bloomberg Opinion) -- On March 12, 2018, Morgan Stanley’s share price reached $59.38. That was a watershed moment — the highest level since November 2007, before the start of the Great Recession.Since then, the Wall Street bank’s stock has stumbled. Heading into this week, Morgan Stanley shares had fallen 26% since that post-recession high, a steeper decline than any of the other largest U.S. banks. Even just looking at 2019, Morgan Stanley’s 8% total return was meager compared with its peers: Citigroup Inc.’s 37.5%, Goldman Sachs Group Inc.’s 24.3%, JPMorgan Chase & Co.’s 22.7%, Bank of America Corp.’s 19.3% and Wells Fargo & Co.’s 10%.So it follows that Morgan Stanley’s surprisingly strong third-quarter results on Thursday led to a swift reaction among investors. Its shares surged more than 4% in pre-market trading, the sharpest initial increase among its rivals. By exceeding expectations pretty much across the board, the bank essentially proved that while it’s been down as of late, it’s by no means out.A quick recap of the earnings report: Like its rivals that reported earlier, Morgan Stanley’s fixed-income trading easily beat expectations, jumping 21% from a year ago compared with analyst predictions of a 5% decline. Its total sales and trading revenue rose 10%, a sharper increase than all peers but JPMorgan, and in aggregate dollar terms was the biggest beat on Wall Street. Morgan Stanley’s investment bankers also topped estimates. It wasn’t perfect, as wealth-management revenue fell just short of forecasts, but overall it could only be described as much better than what analysts had anticipated.Veering into the subjective for a moment, I was struck by just how confident and exuberant Morgan Stanley CEO James Gorman sounded as he kicked off the bank’s earnings conference call. In his opening statement, he spoke forcefully about how he’s looking forward to “gain share in several of our businesses” and emphatically stated that there’s “tremendous upside here.” And I’m not the only one who noticed. In the words of Bloomberg News’s Max Abelson, who was blogging about the results: “Gorman sounds so confident right now. He’s riffing, giving a lot of color, and seems to just be enjoying himself.”Perhaps that’s to be expected after a quarter like this. And, of course, shares can only rise so much on CEO optimism. But the early feedback is in from analysts, and it’s good. “Overall, we are impressed with the revenue strength and wealth management margin and believe that investors should take considerable comfort from this result,” said John Heagerty at Atlantic Equities LLP. “With lots of investors somewhere between negative to indifferent on Morgan Stanley, we’d expect a bit of a lift,” said Evercore ISI’s Glenn Schorr (who, interestingly, has held an “outperform” recommendation for years). Susan Roth Katzke of Credit Suisse called earnings per share “well ahead of what were materially reduced expectations.”The undertone in those last two comments is clear. The market appears to have been too downbeat on Morgan Stanley and is adjusting accordingly. It’s what happens after this initial move that’s tricky. Morgan Stanley’s shares presumably trailed rivals for a reason — did anything from the third quarter drastically change those views? The answer to that question might very well depend on investors’ confidence in Gorman and his executive team. Mike Mayo of Wells Fargo kicked off the conference call by bluntly stating that the bank’s expenses grew faster than revenue and asking whether there’s confidence that will change. “That’s what we’re paid to do,” Gorman said. “We are maniacally focused on it.” Later, Gorman added that Morgan Stanley has proved to be nimble as the industry changes: “We’ve shown a willingness to adjust our business model over time; the build-out of the wealth management was clearly part of that strategy.”I wrote after the bank’s second-quarter earnings that the shift to wealth management, which now makes up about half its revenue, showed Morgan Stanley was playing the long game when trading revenue can be so hit-or-miss from one period to the next. Whether investors want to stick around for the long run remains to be seen. But, at least for one day, traders are on board with Gorman’s vision.To contact the author of this story: Brian Chappatta at firstname.lastname@example.orgTo contact the editor responsible for this story: Daniel Niemi at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Texas Instruments' (TXN) Q3 performance could have been affected by weakness in demand and an uncertain macro environment. Yet, strength in analog & embedded markets is likely to have aided earnings.
Reliance Steel (RS) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.
(Bloomberg) -- The biggest U.S. lenders aren’t ruffled by the push among discount brokers to cut commissions to zero.Wall Street firms from Bank of America Corp. to Morgan Stanley said they’re focused on longer-term client relationships instead of just boosting stock-trading activity. Discount brokers Charles Schwab Corp., TD Ameritrade Holding Corp. and E*Trade Financial Corp. announced this month that they would cut fees to trade U.S.-listed stocks, ETFs and options to zero, sending shares plunging and fueling speculation about potential mergers.“We don’t focus on trying to drive a pure trading type of thing,” Bank of America Chief Executive Officer Brian Moynihan told analysts on Wednesday. “The $0 change won’t affect us much, largely because we frankly introduced it 13 years ago,” and about 87% of the company’s self-directed trading business is already done without commissions, he said.For Morgan Stanley, commissions from buying and selling stocks represents a small portion of the firm’s wealth-management revenue, according to its chief, James Gorman. Instead, the firm sees more potential to expand its financial-advisory services to households worth $1 million to $10 million, as well as those with more than $10 million.“That’s where the growth is,” Gorman told analysts Thursday. “That is where the advice fee is very fair and very reasonable.”As brokerage shares fell after the free-trading announcements, analysts and industry participants speculated that some firms would come under pressure to merge or sell. At least one bank, Goldman Sachs Group Inc., said it’s not interested in buying.“The discount brokerage area is not one that we’re particularly focused on,” Goldman Sachs Group Inc. Chief Executive David Solomon said Tuesday.To contact the reporters on this story: Lananh Nguyen in New York at firstname.lastname@example.org;Jenny Surane in New York at email@example.com;Hannah Levitt in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Michael J. Moore at email@example.com, Steve Dickson, Alan MirabellaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Housing Starts and Building Permits, a fresh Philly Fed survey and, of course, new Initial and Continuing Jobless Claims add to new Q3 earnings data.
(Bloomberg) -- In a quarter when stock and bond desks across Wall Street defied expectations for weak growth, Morgan Stanley’s traders led the pack.Fixed-income was the standout performer, with the firm’s revenue surging 21% instead of dropping 5% as analysts had predicted. That drove the biggest outperformance in trading revenue among major banks, marking a dramatic reversal from the second quarter, when Morgan Stanley pulled up the rear amid an industrywide slump.Prospects for revenue had been dour, with analysts predicting a tough quarter because of volatility in fixed-income markets, continued geopolitical tensions and trade disputes. But banks defied expectations, with JPMorgan Chase & Co. posting its biggest increase in fixed-income trading revenue in almost three years.“Against a relatively difficult trading environment characterized by some seasonality and volatile markets, we performed well,” Chief Executive Officer James Gorman said in a call with analysts. “We’ve been the beneficiary of client-share consolidation and expect this to continue.”The company’s shares, which are up 11% this year, advanced 2.6% in New York trading at 9:39 a.m., the biggest jump on the 67-company S&P 500 Financials Index. The stock has advanced for seven straight days, a run not seen since March.Morgan Stanley has found some traction in scaling back its fixed-income trading unit and focusing on parts of debt markets that are starting to resemble the fast-twitch world of stock trading, where the bank is a leader. While the firm is still the smallest of the five Wall Street banks in fixed-income trading, investment bank chief Ted Pick said earlier this year that its share of the business has steadily climbed.Investment BankThe firm’s investment bankers also outperformed expectations on gains in fixed-income underwriting and merger advice, helping the bank surpass $10 billion in total revenue for a third straight quarter.“The IPO market is quite constructive still,” Chief Financial Officer Jonathan Pruzan said in an interview. He called the pipeline “very healthy.”While Morgan Stanley beat expectations for investment-banking fees, Bank of America Corp. boasted the biggest jump on Wall Street for the quarter, at 27%. But Goldman Sachs Group Inc. reported a bigger drop in than analysts had predicted, down 15% from last year’s third quarter.In fixed-income trading, Morgan Stanley’s result “was well ahead of forecast, as was investment-banking revenue generation -- a consistent theme throughout this week,” Susan Roth Katzke, an analyst at Credit Suisse Group AG, said in a note Thursday.JPMorgan Chase & Co. on Tuesday reported the biggest increase in fixed-income trading revenue in almost three years.Equities revenue at Morgan Stanley, the industry’s stock-trading leader, came in at $1.99 billion in the third quarter, compared with $1.92 billion estimated by analysts surveyed by Bloomberg.Key Results:Net income rose 3% to $2.17 billion, or $1.27 per share. That surpassed analyst estimates of $1.17 per share. Return on equity was 11%.Fixed-income traders generated $1.43 billion in the period, better than the $1.13 billion consensus estimate. Morgan Stanley typically reports the least revenue from bond trading among its top competitors.The firm’s investment bankers posted revenue of $1.54 billion.Wealth-management revenue totaled $4.36 billion. The firm leans on managing money for wealthy individuals and clients for about half its revenue.(Updates with CFO comments in eighth paragraph, competitors’ results beginning in ninth.)To contact the reporter on this story: Sridhar Natarajan in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Michael J. Moore at email@example.com, Steve DicksonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.