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29 июля, 00:45

Q2 Earnings Season Past the Halfway Mark

Q2 Earnings Season Past the Halfway Mark

28 июля, 16:27

Will Delayed Easter Hit Haverty Furniture (HVT) Q2 Earnings?

Haverty Furniture (HVT) remains encouraged by the solid fundamentals of the company and its solid store expansion plans. However, a delay in Easter is likely to dent the second-quarter's sales.

27 июля, 19:42

When Big Numbers Attack: Corporate Defined Benefit Plans are Not the Problem

I started my career working with corporate pension plans, thus when I saw the following article in my twitter feed causing alarm, I thought some might have an interest in context and reality of the supposed corporate pension crisis. Note that state and local pensions are a completely different story.Per Bloomberg:People who rely on their company pension plans to fund their retirement may be in for a shock: Of the 200 biggest defined-benefit plans in the S&P 500 based on assets, 186 aren’t fully funded. Simply put, they don’t have enough money to fund current and future retirees.The situation worsened for more than half of these funds from fiscal 2015 to 2016. A big part of the reason is the poor returns they got from their assets in the superlow interest-rate environment that followed the financial crisis. It’s left a hole of $382 billion for the top 200 plans. The reality is corporate pension plan participants are completely fine and it is simply a straw man argument that has cost employees from the security that a defined benefit "DB" pension can provide.HOW DO CORPORATE PENSION PLANS WORKI'm going to oversimplify things a bit, but at a high level corporate pensions have assets (straight forward - they are what they are) and liabilities which are the benefits that participants have earned and are owed. These liabilities are a bit more complex because while you generally know roughly what you owe in the future, you don't know exactly what those liabilities will cost in today's dollars. The way corporate pension back into this value is through a discount rate. The end result is liabilities are less today than in the future as you can invest $1 today to cover a larger $ amount in the future. An example... assuming liabilities for a plan are $100 / year for 25 years discounted at 4.3% (more on that later), they are worth $1614 (vs $100 x 25 = $2500) as seen below.Cash Flows Discounted Back to a Present Value at a 4.3% Discount Rate Each YearTotal value of 25 years of $100 / year discounted back at 4.3%THAT BIG NUMBER IN THE HEADLINE IS SCARY$382 billion!!!! That number seems big, but but notice there is not one mention of the relative scale of that. According to P&I as of 9/30/16:Among the 200 largest retirement plans, assets totaled $6.79 trillion as of Sept. 30, up 6.2% from the year earlier. Of this, $4.83 trillion belonged to DB plans (up 5.5%) and $1.96 trillion to DC plans (up 8%).So that big $382 billion number was ~8% of total plan liabilities as of 9/30/16 (global stocks have also happened to go up ~17% since that time so the funded status has likely improved quite a bit since). BUT PLANS WOULD NEVER USE A 4.3% DISCOUNT RATE... MORE LIKE 10%, RIGHT?Corporate pensions are required to discount liabilities at a rate roughly equal to a corporate bond of similar duration as their pension liabilities. The rationale being that's the rough rate a debtor would require, but also because when a plan is fully funded (i.e. 100% assets to cover future liabilities at this discount rate) the plan could simply invest the proceeds in long corporate bonds and call it a day (it's more complex than that, but close enough for this post - it also happens to be the basis of liability driven investing "LDI" and why pensions own a lot of long bonds). The discount rate is extraordinarily low right now given where market rates and spreads are and can be though of how much it would cost a corporation to fund their underfunded status. Looking at Intel's latest annual report (the poster child in the article as they are the most underfunded plan in % terms), we see they used a 4.3% discount rate at year-end. This rate has a huge implications for the liability calculation. Assuming a move up in rates to just 5%, we can see that the present value of liabilities in the previous examples goes down more than 6%. In reality, assuming pensions have a duration of ~20 years, a ~35 bp higher rate as of 9/30/16 would have pushed the underfunded status of pensions to $0 without a change in assets valuations.POOR ANECDOTES DON't HELPBack to Bloomberg:Last month, the 70,000 participants in the United Parcel Service Inc. pension plan learned they won’t earn increased benefits if they work after 2022. Late last year DuPont Co. announced it would stop making payments into its pension plan for 13,000 active employees, and Yum! Brands Inc. offered some former employees a lump-sum buyout to offload some of its pension liabilities. General Electric Co. has a major problem. The company ended its defined benefit plan for new hires in 2012, but its primary plan, covering about 467,000 people, is one of the largest in the U.S. And at $31 billion, GE’s pension shortfall is the biggest in the S&P 500.Now reality of what this means...UPS / DuPont: these moves have nothing to do with past pension liabilities or risk to participants. That has to do with corporations de-risking their balance sheets by moving future benefits from defined benefit (they have the obligation to pay an amount) to defined contribution (a one off payment into a 401k). Benefits that have already been earned are not changed.Yum! Brands: this is an option for employees to leave their plans at the current present value of their liabilities. Options have positive values for option holders, so this is a good thing.GE: $31 billion is certainly GE's problem, but it is not their employees issue unless the company goes bankrupt, cannot make the payment in bankruptcy, and the participant is above the threshold guaranteed by the PGBC (a government agency that backstops corporate pensions for a fee - and are required). None of this likely matters as GE has an equity cushion for participants of $222 billion (i.e. their market cap) and if GE wanted, they could simply add $31 billion in debt to fund their plan and make this optical issue go away (something they may be forced to do down the line in increments given rules)As for Intel (the poster child as the least funded pension), they have unfunded obligation of $2 billion or less than one quarter of earnings.EconomPic Data: Darn Nice Economic Eye Candy

27 июля, 16:27

Can Herbalife (HLF) Keep the Earnings Streak Alive in Q2?

Though Herbalife Ltd. (HLF) raised its earnings guidance for the second quarter, it expects sales and volumes to decline due to the new tougher Federal Trade Commission rules in the U.S.

26 июля, 16:25

Domino's (DPZ) Stock Falls Despite Q2 Earnings & Sales Beat

Despite recording solid earnings and sales growth in Q2, Domino's Pizza, Inc. (DPZ) was down 10% due to dismal international comps growth.

26 июля, 16:16

Chipotle (CMG) Stock Gains on Q2 Earnings Beat & Solid Comps

Improved customer traffic along with an increase in average check drove Chipotle Mexican Grill, Inc.'s (CMG) comps in second-quarter 2017.

25 июля, 17:51

McDonald's (MCD) Tops Q2 Earnings on Solid Comps Growth

Positive guest counts across all the segments drove global comps at McDonald's Corp. (MCD) in second-quarter 2017.

25 июля, 16:44

Starbucks (SBUX) to Report Q3 Earnings: Will it Disappoint?

Positive comps growth along with lower SG&A is expected to boost Starbucks's (SBUX) results.

25 июля, 15:37

Dunkin Brands (DNKN) to Report Q2 Earnings: What's in Store?

Various sales and digital initiatives undertaken by Dunkin' Brands Group, Inc. (DNKN) bode well for revenue growth but challenging comps trend in international markets might mar performance.

25 июля, 15:33

What to Expect from BJ's Restaurants (BJRI) in Q2 Earnings?

Although numerous sales-building initiatives bode well for revenue growth, expenses associated with the same could mar BJ's Restaurants, Inc.'s (BJRI) margins in the second quarter.

24 июля, 18:17

Buffalo Wild Wings (BWLD) Q2 Earnings: Stock to Disappoint?

Increased cost of traditional chicken wings coupled with higher promotional activity as well as labor and operating expenses might dent Buffalo Wild Wings Inc.'s (BWLD) profits in the second quarter.

24 июля, 15:31

Boston Beer (SAM) Q2 Earnings: Soft Depletion to Hurt Again?

Boston Beer Co. Inc. (SAM) has been reeling under soft depletion trends of late, evident from its dismal stock performance.

24 июля, 15:29

Will Whirlpool's (WHR) Q2 Earnings Mark a Turn Around?

While Whirlpool Corp.'s (WHR) long-term plans and solid brands portfolio reflect strength, we cannot ignore the near-term challenges hurting the results.

21 июля, 16:18

McDonald's (MCD) Buckles Up for Q2 Earnings: A Beat in Store?

Various strategic efforts undertaken by McDonald's Corp. (MCD) to improve guest count is likely to drive revenues in the second quarter.

20 июля, 19:36

Q2 Earnings Scorecard and Stock Reports for JNJ, Coke & Honeywell

Q2 Earnings Scorecard and Stock Reports for JNJ, Coke & Honeywell

20 июля, 16:59

Chipotle (CMG) to Report Q2 Earnings: Will it Disappoint?

Higher expenses related to marketing and promotional activities, food costs as well as a soft industry backdrop might hamper Chipotle Mexican Grill, Inc.'s (CMG) performance in the second quarter.

06 июля, 20:51

5 China Stocks for Profits in Second Half of 2017

Most economists think China's growth will remain largely steady.

05 июля, 14:40

KFC расширила сеть в Украине до 11 ресторанов

ООО "Глобальная ресторанная группа – Украина" (GRG), франчайзинговый партнер собственника сети заведений быстрого питания KFC – корпорации YUM! Brands Inc., открыла новый ресторан сети в торгово-развлекательном центре (ТРЦ) "Магеллан" в Киеве.

29 июня, 17:29

KFC расширила сеть в Украине до 11 ресторанов

ООО "Глобальная ресторанная группа – Украина" (GRG), франчайзинговый партнер собственника сети заведений быстрого питания KFC – корпорации YUM! Brands Inc., открыла новый ресторан сети в торгово-развлекательном центре (ТРЦ) "Магеллан" в Киеве.

29 июня, 16:28

BJ's Restaurants (BJRI) Expands in Virginia with New Outlet

BJ's Restaurants, Inc. (BJRI) opened its latest outlet in Fredericksburg, VA.