Stocks in the News — week of April 14, 2014 (April 17th update)

Morgan Stanley Beats Estimates on First Quarter Earnings and Revenue

(MS, $31.16, up $1.27 in early trading)

Investment banker Morgan Stanley reported a great first quarter today, surprising the market, and far surpassing revenue expectations vs. its peers on Wall Street.  Income from continuing operations was $0.72 vs. the consensus estimate of $0.59, and $0.49 last year.  Revenue came in at $8.8 billion vs. $8.5 billion a year ago.

“The increase in fixed-income and commodities sales and trading revenue contrasted with declines in the equivalent units of JPMorgan Chase & Co. (JPM), Citigroup Inc. (C) and Bank of America Corp. (BAC), which reported results this week and last,” reports Reuters.

Morgan Stanley’s wealth management and investment banking divisions also outperformed expectations.

I reported on March 28 that the Federal Reserve approved Morgan Stanley’s annual capital plan.  The company immediately announced plans to repurchase $1 billion of stock through the first quarter of 2015, and a dividend increase of ten cents per share.

To read more about Morgan Stanley’s balance sheet figures, chart analysis, and my buy/hold/sell recommendation, subscribe now to Goodfellow LLC.  Then read today’s edition of Featured Stocks in Action.  Join us!

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Whirlpool Announces Increases in Dividend, and Stock Repurchase Plan

(WHR, $153.14, up $1.68 in early trading)

Appliance maker Whirlpool Corp. increased its quarterly dividend this week to $0.75 per share, giving the stock a current yield of 1.96%.  Whirlpool also announced a new $500 million share repurchase authorization.  The previous repurchase plan was completed in December.

The company is expected to report first quarter 2014 earnings on the morning of Friday, April 25.

The stock is up 15.8% since I said “buy” on January 31, and it’s up 6.7% since I reiterated my buy rating on March 3.

To read more about Whirlpool’s balance sheet figures, chart analysis, and my buy/hold/sell recommendation, subscribe now to Goodfellow LLC.  Then read today’s edition of Featured Stocks in Action.  Join us!

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* * * Update to the Northern Trust (NTRS) article, below.  After I wrote the article, Northern Trust raised its dividend to $0.33 per quarter.  The new yield is 2.23%.  (04-16-14)

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Northern Trust Misses 1Q Estimates

(NTRS, $59.20, down $2.02 midday)

Shares of investment company Northern Trust Corp. are down today following a first quarter earnings disappointment.   Earnings per share (EPS) came in at $0.75 vs. the consensus estimate of $0.78, and above $0.67 from a year ago, largely due to unexpected repricing of mutual fund assets.  Repricing refers to an industry shift wherein investment companies are changing their price structures of various services, so that there is more consistent income to the firm from a reliable asset base, and less volatility, which typically comes from trading services.

Revenues rose 7% vs. a year ago, and expense control was better than expected.  Assets under custody & under management surprised on the upside, which also happened with JPMorgan Chase & Co. (JPM) in their April 11 earnings report.  This bodes well for pending earnings reports from State Street Corp. (STT) and Bank of New York Mellon Corp. (BK).

Prior to today’s earnings report, Wall Street expected Northern Trust’s EPS to grow 14.3%, 14.6% and 14.2% in 2014 through 2016 (December year-end).  However, those numbers could come down a small amount, as mutual fund repricing could lead to some losses in clientele.  Tim Keaney, vice chairman and chief executive officer of Investment Services at BNY Mellon, says that his firm has lost less than 8% of clients who were affected by recent repricing.

To read more about Northern Trust’s balance sheet figures, chart analysis, and my buy/hold/sell recommendation, subscribe now to Goodfellow LLC.  Then read today’s edition of Featured Stocks in Action.  Join us!

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Citigroup Shares up 3% on Upside Earnings Surprise

(C, $47.25, up $1.57 in early trading)

Citigroup ‘s first quarter 2014 earnings came in higher than expected this morning, pleasing Wall Street, and sending the stock up over 3% in early trading.  The company earned $1.23 per share vs. $1.23 in first quarter 2013.

Profits were aided by the release of $673 million in loan-loss reserves.  Citigroup also released $650 million loan-loss reserves a year ago.

Revenue came in at $20.1 billion vs. the consensus $19.4 billion, helped by rebounding mortgage asset values, growth in loans and deposits, and declining expenses.

On March 28 I discussed my concerns about the stock in Citigroup Capital Plan Rejected: How to Proceed with the Stock.  At that time, the company had just failed its annual Federal Reserve “Stress Test”.  The Fed blamed the rejection on the complexity of Citi’s multinational operations, and cited a recent $400 million fraud within Citi’s Mexican operations.

As a result, Citi’s annual request to increase both the dividend and the share repurchase plan was denied by the Fed.


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More recently, Bloomberg reports, “Citigroup reached a $1.13 billion settlement with bond investors and said it would sell its Honduran consumer bank and one-third of its branches in South Korea. The company also is in talks to sell its retail and credit-card business in Spain to Banco Popular Espanol SA, the Madrid-based lender said in a filing last week.”

Earnings per share (EPS) growth projections have slowed repeatedly this year, now expected to grow 7%, 18%, and 8% in 2014 through 2016.  The PE is 10.0.

On March 28 I recommended that investors sell Citi shares, saying “The stock is likely to continue trading between $47-$51 in the short-term.”

Since that time, the chart has gotten weaker.  I reiterate my sell recommendation.

Goodfellow LLC Rating:  Sell, Volatile, Public. (04/14/14)


C Chart

C data by YCharts

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