Category: Company News

For investors cheering this earnings season, there could be trouble ahead.

As the fourth-quarter results roll in, the S&P 500 is poised to post an average earnings growth rate of 12.4 percent, the fifth straight quarter of double-digit growth. These results have boosted the stock market, with the S&P 500 enjoying its best January in more than 30 years.

While companies are reporting great numbers, their outlooks are falling short. And that’s caused analysts to rapidly slash their earnings expectations for the current quarter. In fact, Wall Street’s expectations for earnings growth for the first quarter of 2019 have just turned negative with profits expected to fall on average by 0.8 percent, according to FactSet. That would mark the first year-over-year decline in earnings since the second quarter of 2016.

At the end of September, analysts expected first quarter profits to increase by 6.7 percent, on average, according to FactSet.

Fears of a global economic slowdown is to blame for the shortfall, according to Kristina Hooper, chief global market strategist at Invesco.

“And then there are other issues related to trade in some cases, whether it’s input cost narrowing target margin or supply chain disruption narrowing target margin,” she said in an interview.

This earnings season may seem upbeat so far on the surface as many major companies scored big rallies on beats — in terms of price action, it’s even shaping up to be the best earnings season in 9 years. But the bar was set very low.

Hooper pointed out the change of heart by the Federal Reserve on interest rates made investors overlook the declining earnings picture. The central bank held rates stable last week and pledged ‘patient’ approach to rate hikes, sending stocks to fresh highs.

Now six of the 11 sectors are expected to report a decrease in earnings for the first quarter, with the information technology sector projected to decline the most by 8.9 percent, according to FactSet.

Earnings Before Interests and Taxes (EBIT) margin consensus estimates for 2019 have fallen by 60 basis points since October, the most significant downward revision since the financial crisis, according to Morgan Stanley. The bank also pointed out the ratio of negative to positive guidance for the first quarter is the highest since 2016, when we last had an earnings recession.

“Earnings are deteriorating even faster than we expected,” Morgan Stanley chief U.S. equity strategist Mike Wilson said in a note on Monday. “The earnings revision breadth over the past month has been even more negative than we expected leading us to think are earnings recession trough in the U.S. could be later than 1Q and deeper.”

“That means stocks are unlikely to run away on the upside after a 15 percent rally; and it’s time for investors to act like the Fed and be patient putting new capital to work,” he added.

Target has a new loyalty program with personalized perks up its sleeve.

The discount retailer has plans to take a revamped loyalty program that’s been in somewhat of a stealth mode in Dallas since March to five new markets on Feb. 19: Charlotte, North Carolina; Denver, Indianapolis, Kansas City and Phoenix.

The program is free to members and doesn’t require a Target credit card to sign up. It offers perks like 1 percent back on all Target purchases to redeem later on, and will give out rewards on customers’ birthdays — something Target hasn’t tried before but brands like Starbucks and Panera Bread have. The rewards will be customized based on shopping behavior, with Target determining if the recipient would be more likely to want clothes, a DVD or maybe more groceries.

Then there’s a unique component: The loyalty program also lets shoppers choose which local nonprofits Target should donate toward. In the Dallas market, for example, Target said loyalty members have already directed $250,000 in donations to about 50 organizations.

“We wanted a program that was … not just about collecting points to get savings,” Chief Marketing Officer Rick Gomez said. “We think this is a much bigger platform to build relationships with our guests.”

Other perks of Target’s new program, called Target Circle, include free next-day delivery via its Restock service, where customers can place up to 45 pounds of everyday essentials like paper towels or shampoo in a box, and 50 percent off a one-year membership to Target’s same-day delivery service Shipt.

Without taking them nationwide, Target has tested other loyalty programs, like Cartwheel Perks, which it ended in 2017, saying it was “making adjustments” based on customer feedback. Gomez said the company is still looking to perfect everything before integrating it into Target’s main mobile app all across the U.S.

“I think this strategy is a way for us to grow,” Gomez said, adding that the typical U.S. household has memberships to 29 loyalty programs, but fewer than half are “active” accounts. “Americans love loyalty programs.”

As a retailer, it pays to have loyal customers. Literally.

Nearly 40 percent of customers who consider themselves “loyal” to a retailer say they will spend more on a product from their favorite store, even if it’s cheaper somewhere else, according to a survey by Yotpo, which works with digitally native brands like Untuckit, Away, Adore Me and Chubbies to help with marketing and building their websites.

Then, 52 percent of loyal customers say they’d be willing to join some sort of rewards program, if they’re presented with the option, Yotpo’s survey of 2,000 U.S. shoppers over age of 18 found.

Other companies investing in or revamping their loyalty programs include Nordstrom, Macy’s and Nike. Nordstrom’s “The Nordy Club,” which launched last fall, gives members access to special clearance days, style events and beauty workshops, based on their annual spending.

“Brands can no longer settle for the typical loyalty program because Amazon Prime has upped the ante,” Yotpo executive Raj Nijjer said. “Companies have to take into account that the days of loyalty programs where ‘one size fits all’ and ‘set it and forget it’ are over.”

Not all retailers are going this route. Some of the biggest, like Walmart, don’t offer rewards programs. Instead, Walmart hopes its low prices and massive store presence across the country will be enough to keep consumers coming back.

Slack, Uber and Airbnb are among the hottest companies readying a listing this year.

All that activity from so-called tech unicorns — private start-ups with valuations of more than $1 billion — is setting up for what could be a record $100 billion year in initial public offerings.

For the investor looking for exposure to the red-hot IPO market, CFRA senior director Todd Rosenbluth has a way to play it: Renaissance Capital’s U.S. IPO ETF.

“You get Altice, you get Snap, you get Spotify,” Rosenbluth told CNBC’s “ETF Edge” on Monday. “What’s also intriguing about this ETF besides being very small and not that liquid is that it rebalances every quarter and then a stock can only be inside for two years so you get a short window of time to hold these potential up and coming companies.”

The IPO ETF has far outpaced the rest of the market this year. It has rallied 20 percent, more than double the advance on the S&P 500, and has bounced nearly 30 percent off its Christmas Eve lows. Its largest holdings include Vici Properties, Altice and Invitation Homes.

However, the relatively short time frame before a stock is rotated out of the IPO ETF means investors might be shut out of potential growth, Astoria Portfolio Advisors CIO John Davi says.

“There’s another competing product, FPX, which holds onto stocks for four years,” Davi said on “ETF Edge” on Monday. “The argument could be that it takes longer for you to monetize your IP. So if you think about Facebook, when they IPOed, it took them many, many years for them to actually become profitable and for the stock to accelerate.”

The First Trust U.S. equity opportunities ETF (FPX) tracks the IPOX 100 U.S. index, a collection of the 100 biggest and best U.S. IPOs. Its largest holding, PayPal, debuted in mid-2015 and has a nearly 11 percent weighting.

The White House says President Donald Trump will call for optimism and unity in his State of the Union address, using the moment to attempt a reset after two years of bitter partisanship and deeply personal attacks.

But will anyone buy it?

Skepticism will emanate from both sides of the aisle when Trump enters the House chamber for the prime-time Tuesday address to lawmakers and the nation. Democrats, emboldened after the midterm elections and the recent shutdown fight, see little evidence of a president willing to compromise. And even the president’s staunchest allies know that bipartisan rhetoric read off a teleprompter is usually undermined by scorching tweets and unpredictable policy maneuvers.

Still, the fact that Trump’s advisers feel a need to try a different approach is a tacit acknowledgement that the president’s standing is weakened as he begins his third year in office.

The shutdown left some Republicans frustrated over his insistence on a border wall, something they warned him the new Democratic House majority would not bend on. Trump’s approval rating during the shutdown dipped to 34 percent, down from 42 percent a month earlier, according to a recent survey conducted by The Associated Press-NORC Center for Public Affairs Research.

White House press secretary Sarah Sanders indicated the president would highlight what he sees as achievements and downplay discord.

“You’re going to continue see the president push for policies that help continue the economic boom,” Sanders said Monday night while appearing on “Hannity” on Fox News. “You’re also going to see the president call on Congress and say, ‘Look, we can either work together and get great things done or we can fight each other and get nothing done.’ And frankly, the American people deserve better than that.”

But Washington’s most recent debate offered few signs of cooperation between Trump and Democrats. Under pressure from conservative backers, Trump refused to sign a government funding bill that did not include money for his long-sought border wall. With hundreds of thousands of Americans missing paychecks, Trump ultimately agreed to reopen the government for three weeks to allow negotiations on border security to continue.

With the new Feb. 15 funding deadline looming, Trump is expected to use his address to outline his demands, which still include funding for a wall along the U.S.-Mexico border. He’s teased the possibility of declaring a national emergency to secure wall funding if Congress doesn’t act, though it appeared unlikely he would take that step Tuesday night. Advisers have also been reviewing options to secure some funding without making such a declaration.

“You’ll hear the State of the Union, and then you’ll see what happens right after the State of the Union,” Trump told reporters.

The president’s address marks the first time he is speaking before a Congress that is not fully under Republican control. House Speaker Nancy Pelosi, who won plaudits from Democrats for her hard-line negotiating tactics during the shutdown, will be seated behind the president — a visual reminder of Trump’s political opposition.

In a letter Monday night to House Democrats, Pelosi wrote that she hopes “we will hear a commitment from the President on issues that have bipartisan support in the Congress and the Country, such as lowering the price of prescription drugs and rebuilding America’s infrastructure.”

In the audience will be several Democrats running to challenge Trump in 2020, including Sens. Kamala Harris of California, Cory Booker of New Jersey, Elizabeth Warren of Massachusetts and Kirsten Gillibrand of New York.

Another Democratic star, Stacey Abrams, will deliver the party’s response to Trump. Abrams narrowly lost her bid in November to become Georgia’s first black governor, and party leaders are aggressively recruiting her to run for Senate.

Senate Minority Leader Chuck Schumer previewed Democrats’ message for countering Trump, declaring Monday, “The number one reason the state of the union has such woes is the president.”

While White House officials cautioned that Trump’s remarks were still being finalized, the president was expected to use some of his televised address to showcase a growing economy. Despite the shutdown, the U.S. economy added a robust 304,000 jobs in January, marking 100 straight months of job growth. That’s the longest such period on record.

Trump and his top aides have also hinted that he is likely to use the address to announce a major milestone in the fight against the Islamic State group in Syria. Despite the objections of some advisers, Trump announced in December that he was withdrawing U.S. forces in Syria.

In a weekend interview with CBS, Trump said efforts to defeat the IS group were “at 99 percent right now. We’ll be at 100.”

U.S. officials say the Islamic State group now controls less than 10 square kilometers (3.9 square miles) of territory in Syria, an area smaller than New York’s Central Park. That’s down from an estimated 400 to 600 square kilometers (155 to 230 square miles) that the group held at the end of November before Trump announced the withdrawal, according to two officials who were not authorized to discuss the matter publicly and spoke on condition of anonymity.

However, a Defense Department inspector general report released Monday said the Islamic State group “remains a potent force of battle-hardened and well-disciplined fighters that could likely resurge in Syria” absent continued counterterrorism pressure. According to the Pentagon, the group is still able to coordinate offensives and counteroffensives.

Administration officials say the White House has also been weighing several “moonshot” goals for the State of the Union address. One that is expected to be announced is a new initiative aimed at ending transmissions of HIV by 2030.

Trump’s guests for the speech include Anna Marie Johnson, a 63-year-old woman whose life sentence for drug offenses was commuted by the president, and Joshua Trump, a sixth-grade student from Wilmington, Delaware, who was allegedly bullied because of his last name. They will sit with first lady Melania Trump during the address.

The White House says President Donald Trump will call for optimism and unity in his State of the Union address, using the moment to attempt a reset after two years of bitter partisanship and deeply personal attacks.

But will anyone buy it?

Skepticism will emanate from both sides of the aisle when Trump enters the House chamber for the prime-time Tuesday address to lawmakers and the nation. Democrats, emboldened after the midterm elections and the recent shutdown fight, see little evidence of a president willing to compromise. And even the president’s staunchest allies know that bipartisan rhetoric read off a teleprompter is usually undermined by scorching tweets and unpredictable policy maneuvers.

Still, the fact that Trump’s advisers feel a need to try a different approach is a tacit acknowledgement that the president’s standing is weakened as he begins his third year in office.

The shutdown left some Republicans frustrated over his insistence on a border wall, something they warned him the new Democratic House majority would not bend on. Trump’s approval rating during the shutdown dipped to 34 percent, down from 42 percent a month earlier, according to a recent survey conducted by The Associated Press-NORC Center for Public Affairs Research.

White House press secretary Sarah Sanders indicated the president would highlight what he sees as achievements and downplay discord.

“You’re going to continue see the president push for policies that help continue the economic boom,” Sanders said Monday night while appearing on “Hannity” on Fox News. “You’re also going to see the president call on Congress and say, ‘Look, we can either work together and get great things done or we can fight each other and get nothing done.’ And frankly, the American people deserve better than that.”

But Washington’s most recent debate offered few signs of cooperation between Trump and Democrats. Under pressure from conservative backers, Trump refused to sign a government funding bill that did not include money for his long-sought border wall. With hundreds of thousands of Americans missing paychecks, Trump ultimately agreed to reopen the government for three weeks to allow negotiations on border security to continue.

With the new Feb. 15 funding deadline looming, Trump is expected to use his address to outline his demands, which still include funding for a wall along the U.S.-Mexico border. He’s teased the possibility of declaring a national emergency to secure wall funding if Congress doesn’t act, though it appeared unlikely he would take that step Tuesday night. Advisers have also been reviewing options to secure some funding without making such a declaration.

“You’ll hear the State of the Union, and then you’ll see what happens right after the State of the Union,” Trump told reporters.

The president’s address marks the first time he is speaking before a Congress that is not fully under Republican control. House Speaker Nancy Pelosi, who won plaudits from Democrats for her hard-line negotiating tactics during the shutdown, will be seated behind the president — a visual reminder of Trump’s political opposition.

In a letter Monday night to House Democrats, Pelosi wrote that she hopes “we will hear a commitment from the President on issues that have bipartisan support in the Congress and the Country, such as lowering the price of prescription drugs and rebuilding America’s infrastructure.”

In the audience will be several Democrats running to challenge Trump in 2020, including Sens. Kamala Harris of California, Cory Booker of New Jersey, Elizabeth Warren of Massachusetts and Kirsten Gillibrand of New York.

Another Democratic star, Stacey Abrams, will deliver the party’s response to Trump. Abrams narrowly lost her bid in November to become Georgia’s first black governor, and party leaders are aggressively recruiting her to run for Senate.

Senate Minority Leader Chuck Schumer previewed Democrats’ message for countering Trump, declaring Monday, “The number one reason the state of the union has such woes is the president.”

While White House officials cautioned that Trump’s remarks were still being finalized, the president was expected to use some of his televised address to showcase a growing economy. Despite the shutdown, the U.S. economy added a robust 304,000 jobs in January, marking 100 straight months of job growth. That’s the longest such period on record.

Trump and his top aides have also hinted that he is likely to use the address to announce a major milestone in the fight against the Islamic State group in Syria. Despite the objections of some advisers, Trump announced in December that he was withdrawing U.S. forces in Syria.

In a weekend interview with CBS, Trump said efforts to defeat the IS group were “at 99 percent right now. We’ll be at 100.”

U.S. officials say the Islamic State group now controls less than 10 square kilometers (3.9 square miles) of territory in Syria, an area smaller than New York’s Central Park. That’s down from an estimated 400 to 600 square kilometers (155 to 230 square miles) that the group held at the end of November before Trump announced the withdrawal, according to two officials who were not authorized to discuss the matter publicly and spoke on condition of anonymity.

However, a Defense Department inspector general report released Monday said the Islamic State group “remains a potent force of battle-hardened and well-disciplined fighters that could likely resurge in Syria” absent continued counterterrorism pressure. According to the Pentagon, the group is still able to coordinate offensives and counteroffensives.

Administration officials say the White House has also been weighing several “moonshot” goals for the State of the Union address. One that is expected to be announced is a new initiative aimed at ending transmissions of HIV by 2030.

Trump’s guests for the speech include Anna Marie Johnson, a 63-year-old woman whose life sentence for drug offenses was commuted by the president, and Joshua Trump, a sixth-grade student from Wilmington, Delaware, who was allegedly bullied because of his last name. They will sit with first lady Melania Trump during the address.