dChan
Anonymous ID: e53483 Jan. 28, 2019, 1:36 p.m. No.4942484   🗄️.is 🔗kun

Morgan Stanley "Confident This Early Year Rally Will Fade"

 

On a day when investors puke belwether stocks such as CAT and NVDA on the heels of weak earnings and weak outlooks, it is perhaps worth a brief reminder of just how "tricky" as Morgan Stanley describes it, this earnings season already is.

 

As stocks rebound on a bed of freshly squeezed shorts and expanding central bank balance sheets, earnings expectations have plunged to six month lows…

 

Aggregate results are beating consensus estimates and some areas of the market (like Banks and Semis) are suggesting decelerating/negative growth may be priced, but as Morgan Stanley's Michael Wilson warns:

 

…we are hesitant to draw a bullish signal on either front though given that a) the bar for "beats" has been substantially lowered in the last few weeks and b) those areas of the market seeing the biggest rallies were also those where valuation was at extremes, which is not true of many parts of the market which also happened to be the most favored by investors.

 

As always, given the diverging realities in the chart above, the only solution left for analysts is to create hockey-stick versions of the future - just far enough ahead that its tricky to pin them down and just close enough that commission-takers can spin the narrative of X-years ahead multiples are 'cheap'.

 

A double digit growth rate is certainly healthy but we think that the headline rate hides some troubling trends. 11% net income growth with 6% sales growth would generally imply margin expansion, but in this instance, that 11% is being propped up by a year over year comp that includes a lower tax rate. In other words, depending on one's assumption for the tax based boost to net income, margin expansion is no longer a contributing factor to earnings growth, a change from the trends of the past few quarters. A combination of slowing topline and margin pressures mean the fourth quarter of 2018 is the first quarter in the last five where the market is seeing a deceleration in year over year earnings growth .

 

True, 4Q18 is facing particularly tough comparisons - 4Q17 brought increased spending from the hurricanes and from consumers when it became apparent that tax reform would pass - but the comparisons will not get any easier into 2019 and the consensus is finally figuring this out. Growth expectations have deteriorated sharply beyond 4Q18 on consensus numbers, y/y growth in each of the first three quarters of 2019 is expected to grow 1.3 - 3.5%, numbers dangerously close to our earnings recession call for negative growth for two consecutive quarters, before rebounding to double digit growth levels in 4Q19. While the hockey stick embedded in 2019 forecasts makes sense in the context of the easier comparisons from 4Q18 relative to 1Q18-3Q18, let's not forget these comps are still north of 10 percent. In short, we would feel much better once 4Q19 EPS forecasts embedded something closer to 5%y/y growth, or lower.

 

So the current picture is not great but hope remains that the hockey-sticks will kick in and a dovish de-QTing will save stocks from the dismal circular reality of an economy weak enough to prompt Powell's reversal. However, Morgan Stanley is more concerned that earnings weakness could still dominate the sentiment swing from Powell's flip

rest at link- graphic heavy

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Considering Morgan Stanley had a higher leverage ratio back in '08 of everyone barring JPM and Shitibank this is pretty rich coming from them.

The system needs to purge all the crap debt it created after the '08 crash when the SPY bifurcated from HYG (high grade credit) see cap. This is what got the markets into this position and this is what it is currently having 'issues' with.

 

https://www.zerohedge.com/news/2019-01-28/morgan-stanley-confident-early-year-rally-will-fade

Anonymous ID: e53483 Jan. 28, 2019, 1:56 p.m. No.4942732   🗄️.is 🔗kun

Whirlpool Tumbles After Missing Revenue, Slashing Guidance

 

Following dismal guidance from a chip company (Nvidia), and poor earnings and guidance from an industrial bellwether (Caterpillar), the latest company to surprise investors with its Q4 report was consumer products giant Whirlpool, which is tumbling after hours after reporting Q4 revenue which missed expectations, and projecting full year EPS some 9% below the sellside consensus.

 

WHR reported Q4 revenue of $5.66BN, missing estimates of $5.76BN, and unchanged from a year prior (the company blamed FX for the revenue drop) and even though non-GAAP EPS of $4.75 beat expectations of $4.23 (with GAAP EPS nearly 50% less, at $2.64) it was the company's guidance that shocked investors, as Whirlpool forecast non-GAAP FY EPS of $14-$15.00, the midpoint coming 9% below the consensus estimate of $15.98.

 

Looking at historical data, the company made the following disclosures for various geographical regions:

 

Whirpool North America: the favorable impacts of product price/mix and fixed cost reduction were partially offset by raw material inflation, tariffs and higher freight costs.

Whirlpool Europe, Middle East and Africa: the favorable impacts of product price/mix and restructuring benefits were more than offset by raw material inflation, unfavorable productivity due to unit volume declines and currency.

Whirlpool Latin America: the favorable impacts of product price/mix and higher productivity were partially offset by raw material inflation and unfavorable currency.

Whirlpool Asia: the favorable impacts of product price/mix and restructuring benefits were more than offset by raw material inflation and increased bad debt provision.

 

The common themes: rising raw material prices, tariffs, declining volumes, volume declines, and unfavorable currency movements.

 

As for the key reason why the stock is getting hit after hours, the company now forecasts non-GAAP EPS of $14.00 to $15.00, far below the $15.98 consensus estimate, as "favorable product price/mix, restructuring benefits and reduced share count are offset by a higher tax rate and cost and currency increases."

 

In other words, not even the company's buybacks, and Whirlpool announced it repurchased $1.2 billion in stock in 2018, up from $750MM in 2017, will be enough to offset rising input costs, the stronger dollar, and the company's higher (?) tax rate. For investors this was just the latest disappointing earnings report and guidance cut, and WHR stock tumbled as much as 6% after hour, dropping to levels last seen in early January, before rebounding modestly.

WHR

115.78 -7.71 (-6.19%)

After hours: 9:23AM EST

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wait until tomorrow

Apple, CIT, eBay, Harley, Lockheed, Verizon to name a few.

 

https://www.zerohedge.com/news/2019-01-28/whirlpool-tumbles-after-missing-revenue-slashing-guidance

Anonymous ID: e53483 Jan. 28, 2019, 2:14 p.m. No.4942923   🗄️.is 🔗kun   >>2971

PG&E Tumbles On Report Rejecting Debt Deal, Will Proceed To Bankruptcy

 

PG&E stocks is down over 7% after hours on a Bloomberg report that, according to people familiar with the situation, the company still expects to file for Chapter 11 protection as soon as Tuesday, despite last-minute proposals by investors to keep the utility out of bankruptcy…

 

All the day's gains gone and some…

 

Bloomberg reports that the board evaluated secured-debt arrangements and other forms of capital, but decided they weren’t the best alternatives to address billions of dollars in potential wildfire liabilities, according to one of the people, who asked not to be identified because the information isn’t public.

 

A key stumbling block remains California’s inverse condemnation policy that can hold utilities liable for wildfire damages regardless of whether they’re negligent, according to the people.

 

Investigators have already determined that PG&E’s equipment caused at least 17 major wildfires in 2017, though it remains to be determined whether PG&E will be found liable for November’s Camp Fire, which killed 86 people and destroyed about 14,000 homes, making it the deadliest fire in the state's history.

 

Additionally, Bloomberg reports that PG&E looks set to secure $2 billion in debtor-in-possession term loans on better terms than it was initially expecting. The term loans are part of $5.5 billion total financing to fund operations during a Chapter 11, making it the largest bankruptcy loan package to be syndicated since June 2017, according to Bloomberg data.

 

"The DIP is multiples covered as it is well collateralized by the company’s asset and enterprise values," said Steven Oh, head of credit and fixed-income investments at money manager Pinebridge Investments.

 

"The PG&E loan is more iron-clad than most triple B rated loans in the market."

 

The deal had a BBB- rating from Fitch Ratings… and while some investors had passed (looking for more spread to cover their risk), we are sure will be scooped up by various CLO entities and pitched on to yield-hungry pension funds.

 

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Fuck I can't keep up with all this!

 

https://www.zerohedge.com/news/2019-01-28/pge-tumbles-report-rejecting-debt-deal-will-proceed-bankruptcy