It was a very good session for the market on Monday, which came into the week somewhat wobbly from the recent trend of failed rallies. There was a sigh of relief from the Syria situation, and the fading non-financial noise has begun to have less impact. On that note, I have to point out that while all S&P 500 sectors were higher, the best performer was utilities, which underscores the big degree of anxiety over a number of issues.

Energy was compelling because crude oil pulled back while most crude-oil related stocks were higher.  Maybe the catch-up phase is finally happening.

S&P 500 Index	+0.81%
Consumer Discretionary (XLY)	+0.75%
Consumer Staples (XLP)	+1.08%
Energy (XLE)	+1.02%
Financials (XLF)	+0.44%
Health Care (XLV)	+0.79%
Industrials (XLI)	+1.00%
Materials (XLB)	+1.34%
Real Estate (XLRE)	+0.46%
Technology (XLK)	+0.77%
Utilities (XLU)	+1.37%

The biggest winner was the S&P 500 Material names, led by J.B. Hunt (JBHT).

Last week, the smartest firm on Wall Street initiated coverage on trucking and logistics company J.B. Hunt with a ‘sell’ rating.  I was baffled by the calls, but this reinforces the need for investors to focus on fundamentals, and not the noise even when it comes from the smartest guys in the room.

The stock opened lower, but it actually rebounded that session, which makes you wonder if institutions held while individuals might have been spooked out of the stock.

Yesterday, J.B. Hunt shares soared more than 6.0% on financial results that saw earnings in-line but stronger than expected revenue. More importantly, the company saw strong volume and pricing power in its largest business: JB Intermodal (JBI).

JBI

• Revenue +14%
• Op Income +20%
• Load Volume +6%
• Rev per Load +8%

Intermodal & U.S. Economy

This is important news beyond J.B. Hunt as it underscores the narrative that continues to reveal itself about this economy.  Intermodal Freight is carried in those containers that ship off those massive cargo ships directly, only on rail or trucks. I pointed out several times recently that orders for Class 8 trucks, which carry those intermodal containers, are at all-time record levels. 

Retail Investors Staying the Course

Charles Schwab (SCHW) reported results that beat the Street, reflecting individual investors are not dissuaded by political headlines, wild gyrations, or Wall Street fear tactics.

• Revenue +15%
• 443,000 new accounts – the highest quarterly level in 18 years
• $65.6 billion net new assets – quarterly record implying annualized growth of 7.8%, highest since 2008
• Advisor Services +27% – a new record
• Retail Services +64% - a new record

After the Bell

Netflix (NFLX) posted results that beat the Street on revenue and earnings, but it was the critical subscriber growth that Wall Street was most concerned about; on that account, management blew away the Street.

Subscribers

• U.S. +1.96 million
• International +5.46 million

2Q Guidance, All Above Consensus

• $3.93 billion versus $3.89 consensus
• $0.79 eps versus $0.66
• 1.2 million Domestic subs
• 5.0 million International subs

There’s a lot of anxiety about guidance this earnings period, of which everyone expects to be up significantly, but this puts huge pressure on guidance and tough comparisons down the line at some point. 

On that note, however, keep in mind that valuations have come down dramatically, and I see more upside for companies that are executing.

Today’s Session

It’s an earnings parade that’s starting to look like a Mardi Gras celebration.   The big names are posting results that are not only clearing very high expectation bars, but are also offering strong guidance, which is putting to rest the notion of an earnings peak.

Three Dow Jones industrial Average Components posted results this morning:

Goldman Sachs

• Revenue $10.03 billion consensus $8.74 billion
• Earnings $6.95 consensus $5.58
• Institutional Client +23%
• Investing and Lending +43%
• Investment Banking +24%
• Investment Management +18%
• Trading revenue $4.39 billion +30.5%
• Fixed Income +23% (note: rivals JPM flat & C -7%)
• Dividend +6.7% to $0.80
• ROE +15.4% (best in five years)

United Health

• Revenue $55.19 billion consensus $54.90 billion
• Earnings $3.04 consensus $2.89
• Insurance $45.46 billion +13.3%
• Customer base +2.2 million
• Buyback 11.6 million shares = $2.65 billion
• Dividend $722 million
• Total return to shareholders +21.2%
• Raised FY EPS range $12.40-$12.65 from $12.30-$12.60

Johnson and Johnson

• Revenue $20.0 billion consensus $19.46 billion
• Earnings $2.06 consensus $2.02
• Strong demand for cancer drugs
• FY Revenue Guidance $81.8 billion from $81.4 billion

Tax Law Note: Johnson and Johnson management to invest $30,000,000,000 in R&D over next four years +15% because of new tax law.

Economic Data

Housing starts and permits came in above consensus with a surge in multi-family.  I’ll have more details on the afternoon note.

 

 

 

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