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Articles by Stephen Percoco
A Strong Start For Housing In 2020
2019 was a solid year for U.S. housing. While still subject to modest revisions, government figures show that new residential sales increased 10.4% from an estimated 617,000 units in 2018 to 681,000 units in 2019. Single-family housing starts advanced 1.4% to an estimated 888,200 units in 2019 from 875,700 units in 2018. The notable difference in percentage increases between sales and starts is due almost entirely to changes in Federal Reserve interest rate policy.
Brightcove's 'Disappointing' Quarter
On Thursday (2/21), Brightcove (BCOV) reported somewhat disappointing 2019 fourth quarter performance and guidance which caused its stock to plummet 12.8% on the open and end the day down 7.2% (from the previous close). Yet, buyers emerged quickly after the stock got slammed at the open. The stock closed up 6.5% on the day from the opening low. Revenues for the quarter were $47.6 million, up 16.5% vs.
TIPS Outperform Treasurys In Q4 2019 And For All Of 2019
After underperforming for two consecutive quarters, TIPS posted a small gain of 0.5% in the 2019 fourth quarter, significantly outperforming comparable maturity straight Treasurys, which posted a decline of 1.4%. That performance mirrored the trend in the equity markets, which bounced back first on the rumors and then on the news of a Phase 1 trade deal with China.
New Jersey Resources Adjusts To Meet Its Challenges And Opportunities
Under new CEO Steve Westhoven, the business portfolio of New Jersey Resources (NJR) has evolved as it typically does in response to changes in its operating environment. Its regulated utility operations, New Jersey Natural Gas (NJNG) and its Midstream segment, are increasing their contribution to NJR’s total earnings through expanded investment. NJNG is benefiting from continued infrastructure investment and modest customer growth.
Brightcove's Outlook Looks Brighter
Under CEO Jeff Ray, Brightcove is strengthening its sales effort, targeting four faster-growing niche markets and investing to identify new opportunities. These efforts have temporarily disrupted operations in 19Q3 and 19Q4; but management expects to deliver improved performance beginning in 2020. Brightcove's stock price already anticipates improved performance; so further upside requires the company to build upon its market leadership to achieve sustainable revenue and profit growth.
Brightcove's Outlook Looks Brighter
A key change at Brightcove (BCOV) since my previous articles has been the turnover at the top. In August 2017, after three consecutive quarters of earnings misses, Dave Mendels, who had served as CEO for more than four years, agreed with the Board to step down. Andrew Feinberg, Brightcove’s COO, stepped in as interim CEO. In April 2018, Brightcove appointed Hugh Jefferson (Jeff) Ray III as its CEO.
Notes And Analysis From Hewlett Packard Enterprise's Securities Analyst Meeting
At its 2019 Securities Analyst meeting (SAM) held in New York City on October 23, the senior management of Hewlett Packard Enterprise (HPE) said that the company was poised to enter the third phase of its evolution: pivoting to sustainable, profitable growth. Since it was spun-off from HP, Inc. in November 2015, HPE has completed the first two phases of its evolution. Phase 1 was focusing on the business.
Notes And Analysis From HPE's Securities Analyst Meeting
At its 2019 Securities Analyst meeting (SAM) held in New York City on October 23, the senior management of Hewlett Packard Enterprise (HPE) said that the company was poised to enter the third phase of its evolution: pivoting to sustainable, profitable growth. Since it was spun-off from HP, Inc. in November 2015, HPE has completed the first two phases of its evolution. Phase 1 was focusing the business.
Treasurys Outperform TIPS In The Second Quarter Of 2019
Comparable maturity straight Treasurys outperformed Treasury Inflation-Protected Securities (TIPS) in the 2019 second quarter, but only slightly. On average, Treasurys earned a return of 3.2% in the quarter, better than the 3.0% return on TIPS. On a price basis (excluding the inflation adjustment), Treasurys significantly outperformed TIPS. The average TIPS yield rose 5 basis points (bp) in the quarter to 0.45%, while average Treasury yields fell 44 bp to 2.01%.
A Solid First Half For Housing And The Builders
A typical analysis from policy makers, like the Federal Reserve, points out that activity in the housing market has declined so far this year; but that assertion focuses primarily on housing starts. A more complete picture from the national data shows that the housing market bounced back strongly in the 2019 first quarter from a steep 2018 fourth quarter slide. The housing market was also able to hold on to those gains in the 2019 second quarter.
2019 May Be Rough, But There Is Still Attractive Upside Potential In Bed Bath & Beyond
Summary 2019 guidance looks aggressive and BBBY might face higher restructuring charges and other costs if it seeks to accelerate its transformation. That could result in further near-term stock price volatility. Yet, the stock's valuation is exceptionally low, especially vs. peers. Assuming that the transformation plan gets on track, I see significant upside potential in the stock over the next 18-24 months. Bed Bath and Beyond, Inc.
2019 May Be Rough, But There Is Still Attractive Upside Potential In Bed Bath & Beyond
Summary 2019 guidance looks aggressive and BBBY might face higher restructuring charges and other costs if it seeks to accelerate its transformation. That could result in further near-term stock price volatility. Yet, the stock's valuation is exceptionally low, especially vs. peers. Assuming that the transformation plan gets on track, I see significant upside potential in the stock over the next 18-24 months. Bed Bath and Beyond, Inc.
An Update On Bed Bath And Beyond
Bed Bath and Beyond, Inc. (BBBY) reported a fiscal 2019 first quarter loss of $2.91 per share, which included approximately $3.03 per share of unusual charges and expenses. Excluding these unusual items, adjusted EPS was $0.12 per share, at the high end of management’s guidance range of $0.07-$0.12, but lower than last year’s adjusted EPS of $0.38. Net sales of $2.57 billion declined 6.6% from the prior year, slightly below the company’s guidance of $2.6 billion.
Notes And Analysis From Merck's Investor Day
On June 20, Merck (MRK) held an investor day, its first in five years, to highlight its goals and objectives and provide a broad perspective on its five-year performance outlook.
Booz Allen Hamilton Still Looks Cheap
Booz Allen Hamilton (NYSE:BAH) is one of the leading providers of management and technology consulting services to the U.S. government in the areas of defense, intelligence and civil markets. Now 68%-owned by the Carlyle Group, the company went public in November 2010. Since then, BAH refinanced its debt in early 2011 and initiated a regular quarterly dividend of $0.09 per share in February 2012. In May 2012, it paid a special dividend of $1.00 per share to shareholders.
Bed Bath But Not Beyond Hope
Recent stock performance vs. benchmarks. Specialty retailers have been strong relative performers so far in 2018. The S&P Retail Select Industry Index posted a total return of 8.28% through June 29, better than the S&P Composite 1500’s total return of 2.91%. By comparison, the stock of Bed Bath and Beyond produced a negative total return of -8.04%, extending a decline that has seen the stock lose 70% of its value over the past three years. Historical financial performance: Fiscal 2017.
TIPS Outperform Straight Treasuries for the Fourth Consecutive Quarter
A greater increase in TIPS yields ought to have led to TIPS underperforming straight Treasurys. But the negative drag of rising interest rates was more than offset by the CPI inflation adjustment. According to my calculations, the CPI added 1.08% to the average TIPS return during the quarter, the largest inflation adjustment in three years. In a quarter when the pace of Treasury yield increases moderated, TIPS outperformed comparable maturity straight Treasurys.
18Q1 Housing Update
Single-family (SF) starts not seasonally adjusted (NSA) were up 6.9% year-to-date cumulatively through March, but the monthly year-over-year increase decelerated during the quarter. March’s seasonally-adjusted annual rate (SAAR) of 867,000 units was up 5.2%, year-over-year. The three-month SAAR average of 889,000 was down from January’s peak of 897,000, but up 6.0% year-over-year.
TIPS Outperform Treasurys in 2018 First Quarter
In a quarter characterized by rising interest rates, TIPS outperformed comparable maturity straight Treasurys, but still produced a negative return. On average, TIPS fell 1.1%, less than the 1.6% decline in comparable maturity straight Treasurys. During the quarter, the average yield on TIPS rose by two basis points (bp) to 0.36%, while the average yield on straight Treasurys increased by 40 bp to 2.58%.
TIPS Outperform Treasurys In 2018 First Quarter
In a quarter characterized by rising interest rates, TIPS outperformed comparable maturity straight Treasurys, but still produced a negative return. On average, TIPS fell 1.1%, less than the 1.6% decline in comparable maturity straight Treasurys. During the quarter, the average yield on TIPS rose by two basis points (bp) to 0.36%, while the average yield on straight Treasurys increased by 40 bp to 2.58%.
American Express Should Target Slower EPS Growth, Cut Share Buybacks And Boost Its Dividend
AXP management held its 2018 Investor Day on March 7, 2018. Here are some of my notes from the that presentation, as well as thoughts and observations about AXP, its recent performance, strategy and outlook. New Chairman and CEO. CEO Steve Squeri has spent his entire career at American Express, rising through the ranks and leading many of its key business and corporate functions, including merchant services, corporate development and global services.
Toll Brothers Still Has Upside
Toll Brothers reported stronger-than-expected performance in its fiscal 2018 first quarter ended January 31. Net income was $132.1 million ($0.83 per diluted share), up sharply from $70.4 million ($0.42 per share) in the prior year quarter. This year’s net income benefited from a $31.2 million ($0.20 per share) reduction in its deferred tax liability associated with the Tax Cut and Jobs Act.
TIPS Outperform Treasuries In 2017 Fourth Quarter
TIPS finished the year with a very strong performance, their best since the 2016 second quarter. For the 2017 fourth quarter, TIPS posted a total return of 1.8%, much better than the 0.2% on comparable maturity straight Treasurys. This was also TIPS’ strongest quarterly performance of the year. During 2017, TIPS posted gains in three of the four quarters, recording a loss of 0.3% only in the 2017 second quarter. As with straight Treasurys, the TIPS yield curve flattened in 2017.
TIPS Outperform Straight Treasuries in 2017 Fourth Quarter
TIPS finished the year with a very strong performance, their best since the 2016 second quarter. For the 2017 fourth quarter, TIPS posted a total return of 1.8%, much better than the 0.2% on comparable maturity straight Treasurys. This was also TIPS’ strongest quarterly performance of the year. During 2017, TIPS posted gains in three of the four quarters, recording a loss of 0.3% only in the 2017 second quarter. As with straight Treasurys, the TIPS yield curve flattened in 2017.
Notes And Analysis From GE's Investor Update
“You can't grow long-term if you can't eat short-term. Anybody can manage short. Anybody can manage long. Balancing those two things is what management is” - Jack Welch At General Electric’s (GE) Investor Update on Nov. 13, Chairman and CEO John Flannery presented the conclusions of his review of GE’s businesses and the initial framework of his plan to remake GE.
Despite Myriad Concerns, Verizon Looks Cheap
It has been a rough year for telecom stocks. The S&P 500 telecommunications services sector, which includes only three stocks, is down 18.5% year-to-date. Of the three, Verizon (VZ) is the best performer, down "only" 15.9%, while AT&T (T) and CenturyLink (CTL) are down 19.5% and 34.9%, respectively.
Hewlett Packard Enterprise Company Gets Down To (The Enterprise Group) Business
With the spin-offs of its Enterprise Services and Software businesses now complete, Hewlett Packard Enterprise Company (HPE) will now focus on its Enterprise Group (EG) business. HPE still has its Financial Services segment, which mostly supports EG. After the spin-offs, HPE has 73,000 employees, down from 195,000. My previous article on HPE centered mostly on the Software spin-off. This article looks more closely at HPE after the spin-offs.
TIPS Underperform Straight Treasurys in the 2017 Second Quarter
In contrast, comparable maturity Treasury yields declined by 4 bp on average to 2.03%. Short-term Treasury yields rose 8 bp; but medium-term Treasury yields fell by 12 bp and long-term Treasury yields fell by 19 bp. The decline in long-term Treasury yields translated into a very strong total return of 4.1% for the quarter. The average yield on TIPS jumped by 42 basis points (bp) from -0.01% at March 31, 2017 to 0.40% at June 30.
TIPS Outperform Treasurys in January
After the run-up in the fourth quarter, both TIPS and comparable maturity Treasurys delivered positive returns during the first month of 2017. According to my estimates, TIPS posted a monthly return of 0.7%, modestly better than the 0.3% return on comparable maturity Treasurys. (By comparison, the S&P 500 earned a total return of 1.8%.) Investor purchases reduced the average TIPS yield during January from 0.24% to -0.04%, a decline of 28 basis points.
What's Next For Greece?
In my January 2015 article, Greece s Parliamentary Election: The More Things Change . . ., I argued that the new prime minister, Alexis Tsipras, would agree to continue the bailout regime with the troika. Indeed, unless he was willing to take Greece out of the euro, he had no choice. With a need for more money to meet its obligations but without control over the printing presses, Greece would have to accede to the demands of its creditors.
Sell Consolidated Water
On March 16, Consolidated Water (NASDAQ:CWCO) reported earnings for the 2014 fourth quarter that were modestly disappointing. Revenues of $15.3 million were flat with the previous year. Earnings per share of $0.07 were also flat, but below the consensus estimate of $0.13. The company recorded an impairment charge of $860 million, or $0.06 per share, in the quarter on its share of the Ocean Conversion (BVI) Ltd. (OC-BVI) joint venture.
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