Southern Business Review

Category: Company News

  • While there are now fewer 401(k) millionaires, investors did make smart moves during market volatility

    The markets have recovered from their year-end turbulence. Still, you’ll likely see the negative effects of that turmoil when you open up your latest 401(k) statement.

    Average account balances for 401(k), 403(b) and individual retirement accounts dropped for the fourth quarter of 2018 compared to the previous quarter, according to Fidelity Investments.

    The average 401(k) plan balance fell 10 percent to $95,600 from $106,500 in the third quarter.

    The average IRA balance, meanwhile, dropped 11 percent to $98,400 from $111,000 in the third quarter.

    The data is based on information from more than 30 million Fidelity retirement accounts.

    The chart below shows how average retirement account balances have over time.

    The number of 401(k) and IRA millionaires also declined, according to Fidelity. Those people with $1 million or more in their 401(k) plans dropped to 133,800 at the end of the fourth quarter, while the number of people with $1 million or more in their IRAs fell to 138,800.

    Despite the fact that balances fell, there were a few positive trends among savers.

    First, people did not make dramatic changes to their investments, despite the market volatility, Fidelity’s data shows. Just 5.6 percent of account holders made significant changes to their asset allocations in the fourth quarter.

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    Second, the portion of investors who regularly contribute to their retirement savings accounts rose to more than 99 percent in the fourth quarter — the highest since the first quarter of 2011. In 2018, the average total 401(k) contribution was $6,850 and the average total IRA contribution was $4,200.

    Third, the number of workers who took loans from their 401(k) plans dropped to a 10-year low. The portion of workers with outstanding loans from their 401(k) plans fell to lowest level since the second quarter of 2009, according to Fidelity.

  • For stock reaction, it's shaping up to be the best earnings season in 9 years

    Companies are hopping over a lowered bar this earnings season — but are still getting rewarded mightily for it — because investors had expected results to be much worse.

    Companies that reported earnings so far this season have seen their stocks rise 1.12 percent on average. If that performance holds for the rest of the season, it will be the best earnings season in terms of stock performance in nine years, according to Bespoke Investment Group.

    Source: Bespoke Investment Group

    “Part of the reason that the market reacted so positively to the earnings is because expectations had fallen into this earnings season,” Tom Essaye, founder of Sevens Report Research, said in an interview. “From a sentiment perspective, it was definitely better than what people were afraid of. People were afraid the earnings season was going to show businesses are falling off a cliff.”

    “It did not show that, and in the logic of markets, that means we buy stocks,” he added.

    This earnings season turned out to be better-than-feared because investors had braced for more disappointing results with the tax-cut boost fading and a global economic slowdown. Companies are stepping over a low bar because the consensus estimate for S&P 500 growth in the fourth quarter has fallen significantly to 11.9 percent from 17.8 percent five months ago. The stock market is out of its December slump, with the S&P 500 posting a nearly 8 percent gain in the new year.

    The better-than-feared trend is best showcased in tech giant Apple, which saw its shares soaring last week when it reported earnings barely beating estimates andlowered revenue projections on a sales slowdown in China.

    However, investors might have been just ignoring the bad news because the growth estimates in 2019 are pointing to a big deceleration.

    Wall Street analysts are slashing their estimates for the next quarter at a record pace. According to FactSet, the first-quarter bottom-up earnings per share estimate has dropped by 4.1 percent during January, which is a larger decline than the 5-, 10- and 15-year averages.

    “If I’m a bull, one of my big concerns is that where the earnings growth is going to come from and what’s going to stop this decline. What’s going to be a positive catalyst? I don’t think we have one at this moment,” Essaye said.

    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 growth is rolling over even faster than we thought it would with revisions breadth falling in just about every sector. Quite frankly, we are surprised at the lack of acknowledgement of this deterioration by most analysts and commentators. … We think objectivity on quarterly earnings reports is being swayed by the price reaction in the stocks,” Morgan Stanley chief U.S. equity strategist Mike Wilson said in a note on Monday.

    WATCH: Julius Bear CEO on volatility and client activity behind earnings underperformance

  • Alphabet, the last FANG stock to report earnings, isn't a buy until this level, technician says

    Alphabet, the last FANG stock to report earnings, has seen the weakest rebound among its peers off December lows.

    While Facebook, Amazon and Netflix have rallied by 23 percent or more off that bottom, the Google parent has bounced by less than 20 percent.

    Even that rally has pushed it too far, too fast, says Mark Newton, president and technical analyst at Newton Advisors.

    “Alphabet has had a very healthy rally since Christmas Eve. … It’s gotten back about 50 percent of the entire decline we saw since last July. This area is important,” Newton said on CNBC’s “Trading Nation” on Friday. “It’s likely the stock stalls out and starts to pull back a bit.”

    The long-term chart also shows the beginnings of a head-and-shoulders formation, says Newton. That pattern forms when a high, higher high, then lower high suggest the end of a bullish trend. Newton says Alphabet would have to fall below $977 to confirm that pattern.

    “The bottom line is it had a sharp rally, whereas the broader pattern in the stock over the last year has been really flat. And so I’d rather just hold off and wait to buy under $1,050 as opposed to chasing it here,” Newton said.

    Alphabet, which reports earnings on Monday afternoon, would need to drop 7 percent before reaching Newton’s buy level.

    John Petrides, portfolio manager at Point View Wealth Management, is more bullish on Alphabet’s outlook. He says earnings could give the stock more room to run.

    “The stock has had a big run post their Christmas Eve rally here, but I think there could be more to go given their growth rate. Google has had 35 consecutive quarters now where they’ve had 20 plus percent topline growth. That’s amazing,” Petrides said on “Trading Nation” on Friday.

    Heading into the earnings report, Petrides said the company is at the “sweet spot of e-commerce and digital advertising,” so it should benefit from the same tailwinds that lifted Facebook in the last quarter. He is also watching traffic acquisition costs and how it affects margins and how Alphabet plans to spend its free cash haul.

    Disclosure: Point View clients and Petrides have holdings in Alphabet.

  • Bud Light touches nerve with corn syrup Super Bowl ads

    Bud Light attacked rival brands in its Super Bowl ads, but it was the corn industry that felt stung.

    The spots trolled rival brands that use corn syrup. One showed a medieval caravan schlepping a huge barrel of corn syrup to castles owned by Miller and Coors.

    The National Corn Growers Association rebuked the brand for boasting that Bud Light does not use the ingredient.

    The association, which says it represents 40,000 corn farmers nationwide, tweeted that America’s corn farmers were “disappointed” in Bud Light, and thanked Miller Lite and Coors Light for “supporting our industry.”

    Tweet

    Anheuser-Busch, the maker of Bud Light, responded that it “fully supports corn growers and will continue to invest in the corn industry.”

    “Bud Light’s Super Bowl commercials are only meant to point out a key difference in Bud Light from some other light beers,” the company said in a statement. “This effort is to provide consumers transparency and elevate the beer category.”

    MillerCoors also hit back at Bud Light with a tweet clarifying that none of its products use high-fructose corn syrup. It claimed that many Anheuser-Busch products do.

    Tweet

    “Last year, Anheuser-Busch purchased more than 1 billion pounds of corn ingredients. We fully support corn growers and will continue to invest in the corn industry,” the company told CNBC in a statement. “Bud Light’s Super Bowl commercials are only meant to point out a key difference in Bud Light from some other light beers. This effort is to provide consumers transparency and elevate the beer category.”

    –CNBC.com contributed to this story.

  • Harvard researchers see significant increase in long-term birth control use after Trump election

    The number of privately insured women seeking long-acting reversible contraceptives significantly increased in the 30 days following President Donald Trump’s election in 2016, according to a study published Monday.

    Harvard University researchers said a higher-than-expected number of American women ages 18 to 45 sought intrauterine devices and implants immediately after the election.

    The researchers, whose study was published in the Journal of the American Medical Association, looked at women enrolled in commercial insurance during the 30 business days before and after Nov. 8 in 2015 and 2016 and used billing codes to calculate the number of such procedures.

    The researchers said that if they projected their findings to the 33 million insured women in the age group, the number would rise from an expected 4,716 insertions per day to 5,416, or 700 more per day.

    “Our findings could reflect a response to fears of losing contraceptive coverage because of President Trump’s opposition to the ACA or an association of the 2016 election with reproductive intentions or LARC awareness,” study lead author Dr. Lydia Pace said, referring to long-acting reversible contraceptives.

    Long-term birth control is attractive for a few reasons.

    IUDs and implants can remain in place for years, meaning some can last longer than Trump’s presidency. They’re also more effective: IUDs are 99 percent effective compared with 91 percent for the pill, according to Planned Parenthood.

    Although more costly out of pocket — IUDs range from $500 to $1,000 and the implant Nexplanon can cost $1,300 — some women have 100 percent of costs covered by insurance. Pace noted that the study has limitations because the researchers lacked information on race and ethnicity and studied only women with commercial insurance.

    Lower out-of-pocket costs for birth control can be attributed to the Affordable Care Act, which mandates that insurers cover birth control. But one of Trump’s campaign promises was to repeal and replace Obamacare, and that led many women to fear they’ll have to pay for birth control in its entirety.

    Pace said the findings suggest that women value their birth control coverage, and fear of losing that coverage may prompt a change in contraceptive methods.

    “The ACA’s contraceptive coverage mandate is an important strategy to reduce unintended pregnancies,” according to the study. “The Trump Administration has weakened this mandate.”

    Doctors and women’s health organizations agree.

    “At Planned Parenthood, there was a nearly tenfold increase in appointments for IUDs in the first week after the election,” a spokeswoman for the women’s health nonprofit said in an email. “We also saw an unprecedented surge in questions about access to health care and birth control, both online and in our health centers. People were concerned that they might lose their coverage under a new Administration.”

    Mara Gandal-Powers, senior counsel of reproductive rights and health at the National Women’s Law Center, which runs a birth control hotline, said her organization also noticed an uptick in questions about birth control.

    Just after the election and the January 2017 inauguration, the hotline noticed a “significant” increase in questions about long-term contraceptive methods. Some of the increase is because more health providers are recommending the method. But Gandal-Powers said to see that kind of increase in just 30 days strongly suggests women were seeking out IUDs and implants as quickly as possible.

    “Before the ACA, there weren’t cost sharing protections on birth control and we saw it harming people,” Gandal-Powers said. “That is something that we are concerned about … people not getting their care.”

  • A giant IPO wave is coming as 'unicorns' whet investor appetite

    Now that the IPO market has reopened, traders are hopeful that an enormous pile of new stock offerings can be pushed through the door in 2019.

    IPO observers are optimistic, and with some justification: There is an outside chance 2019 could be an all-time record for initial public offerings, passing even the legendary 1999 and 2000 years.

    But for that to happen, a lot of things need to go almost perfectly. There can’t be any more government shutdowns, market conditions have to exhibit low volatility and — most importantly — the public needs to have an appetite to buy very large IPOs at (potentially) very inflated prices.

    That’s a very tall order.

    How big is the IPO market in 2019? Really big.

    Renaissance Capital, which advises institutional buyers on IPOs and maintains the IPO ETF, a basket of roughly the last 60 large IPOs, has a watch list of 226 private companies that are planning to go public in 2019. These companies represent a value of $697 billion.

    Assuming the companies float 15 percent of their value, you get over $100 billion in IPO offerings ($697 billion x 15 percent = $104.55 billion).

    “That will break any record we have ever seen in terms of dollar volume,” Kathleen Smith of Renaissance tells CNBC. It would be bigger than 1999 and 2000, the years that represented the height of the dot.com IPO boom. There were $93 billion of IPOs in 1999 and $97 billion in 2000, according to Renaissance Capital.

    The market has never gotten close to $100 billion in capital raised in a single year since then. In 2014, the total value raised was $85 billion, but $22 billion of that was for Alibaba, the Chinese e-commerce giant.

    In terms of deals lined up for this year, of the 226 companies set to launch there are 119 companies that would be classified as “unicorns,” or private companies with valuations over $1 billion. This group includes well-known names like Uber, WeWork, and Lyft.

    (estimated valuations)

    Uber $76 billion

    GE Health Care $65 billion

    WeWork $47 billion

    Palantir $41 billion

    AirBNB $31 billion

    Lyft $15 billion

    Source: Renaissance Capital

    Renaissance admits the estimate may be conservative. The valuations are based on the last round of private funding. In a normal market, a company would try to go public at a higher level than its last private round.

    That’s the good news. The bad news is it’s not clear who is going to buy all this stock.

    “The issue is the capacity of the buy side to absorb all this issuance,” Smith said. “The constituency of IPO investors today are fewer and more institutional than they were in 1999-2000 when many individuals and small funds were active stock investors.”

    The Wall Street banks that arrange IPOs seem quite confident they can pull off a big 2019, one that will equal or exceed the activity in 2018.

    That’s according to the results of the 2019 BDO IPO Outlook Survey released Monday. BDO polled 100 capital markets executives working at investment banks in December 2018. Nearly half of them (42 percent) expect activity to increase, while 29 percent expect it to stay the same as last year and 29 percent expect it to decrease.

    One important point from the survey is that if the price is not right, the survey participants made it clear that there were alternatives to going public. In fact, an IPO seems to be fairly far down on their wish list of possible exit strategies for these private companies.

    About 53 percent of the 100 U.S. tech CFOs surveyed in BDO’s Technology Outlook Survey believe that pursuing M&A will be the most popular “exit strategy” or choice, followed by remaining private over going public (25 percent), having an IPO in the U.S. (14 percent) or an IPO in a foreign market (8 percent).

    Renaissance’s Smith — who is a buyer of IPOs — is excited about all the well-known companies that may attempt an IPO in 2019. “Seems like a buyers market to me, when there is so much choice of product.”

  • Charlotte Russe files for bankruptcy and plans to shut nearly 100 stores

    Another private-equity backed retailer has filed for bankruptcy.

    Women’s apparel company Charlotte Russe on Sunday filed for Chapter 11 bankruptcy protection and said it planned to shut about 94 stores.

    Charlotte Russe said in a press release Monday morning that it was continuing to pursue a sale of its business after having received a commitment of $50 million in debtor-in-possession financing. During court proceedings, it said it will continue to operate its website and keep open other Charlotte Russe and Peek Kids locations. It has more than 500 shops operating across the U.S.

    The company added it will provide additional information about closing sales and the addresses of the stores set to close “in the near term.”

    In 2009, private-equity firm Advent International bought Charlotte Russe in a $380 million deal. The mall-based apparel brand has since struggled as it tried to downsize its debt load. Early last year, it managed to strike a deal where it reduced its debt by $124 million.

    The CEO of Simon Property Group, the biggest mall owner in the U.S., just last week said he expected more private-equity backed retailers to file for bankruptcy this year, though he didn’t name any particular companies.

    Also on Sunday, FullBeauty, a plus-sized apparel retailer based in New York, filed for bankruptcy protection, adding to a growing roster of retailers to go that route this year. Gymboree and Shopko also filed last month.

  • Louisiana abortion law won't go into effect Monday as the Supreme Court buys itself time

    An abortion law that was set to go into effect in Louisiana on Monday was temporarily put on hold, as the U.S. Supreme Court seeks to buy itself more time amid a rushed flurry of briefs and notices.

    Despite the court’s action, women seeking abortions in the state are being turned away and sent to other states and medical procedures have been canceled amid the confusion, according to court documents filed by the Center for Reproductive Rights, which is representing two doctors and an abortion clinic in the case.

    Conservatives and liberals are closely watching the case, which could reveal how the nation’s top court, newly reconstituted with a fortified conservative majority, is likely to deal with one of the country’s most divisive social issues in the coming years.

    The case is shaping up to be an important test of President Donald Trump’s two appointees to the high court, Justices Neil Gorsuch and Brett Kavanaugh.

    The dispute is over a state law that requires abortion providers to have admitting privileges at a hospital within 30 miles of their clinic. The plaintiffs have said that if the law goes into effect it will leave only one doctor performing abortions in the state, which has a population of nearly 5 million people.

    “Louisiana women are counting on the Supreme Court,” Center for Reproductive Rights CEO Nancy Northup said in a statement. “It has stepped in to block this very same type of law before, so this should be an easy case. The court now has the chance to show that it will stand by its own precedent.”

    One week ago, the nonprofit submitted an application for an emergency stay of the law, citing the Supreme Court’s ruling in 2016 that an identical law in Texas was unconstitutional. Justice Samuel Alito over the weekend granted a temporary stay, through Thursday, in an order that expressly did take any side on the merits of the case.

    Just prior to filing its rebuttal, Louisiana posted a one-page notice online outlining a 45-day process for verifying admitting privileges under the law. It said the protocol would avoid the “abrupt descent into chaos” that the plaintiffs warned about.

    But Alito said that the justices needed more time. In his order, Alito reasoned that “the filings regarding the application for a stay in this matter were not completed until earlier today and the Justices need time to review” the arguments. Alito was automatically assigned the case but the dispute is expected to be reviewed by the full court.

    Democrats and reproductive rights activists have hounded Gorsuch and Kavanaugh, both former appeals court judges, over their views on abortion, especially because Trump had said that he would appoint justices who would overturn the landmark case Roe v. Wade. Both men have said they view Roe as precedent, although they have refrained from saying that it was correctly decided.

    The 2016 case that held Texas’ version of the law unconstitutional was decided by a 5-3 majority including the retired Justice Anthony Kennedy. The opinion was handed down before either Gorsuch or Kavanaugh was confirmed to the bench.

    If the full court acts on the matter, as Alito suggested would happen, it will take five justices to grant a stay. That means Gorsuch, Kavanaugh, or one of the other conservatives on the bench who dissented from the court’s 2016 decision would be required to join the panel’s liberal wing in order to prevent the law from taking effect.

    While many pro-life groups championed Kavanaugh’s nomination, some have soured on the justice just months into his lifetime appointment because they say he has not yet done enough to limit abortion. If the court allows the law to go into effect, delivering a win to social conservatives, views on Kavanaugh could shift.

    “This case will be a real test for the Court, particularly its newest members, as the public waits to see whether the Court respects its own precedent,” Brianne Gorod, chief counsel of the progressive Constitutional Accountability Center, said in a statement.

    The current application before the court is not a formal petition for the top court to hear arguments on the merits of the case, though such a petition is expected. If the court grants review of the case, which only requires four justices, it would likely be argued next term, which begins in October.

  • The Patriots just won the Super Bowl—here's how much money each player will take home

    On Sunday, the New England Patriots faced off against the Los Angeles Rams in the 53rd Super Bowl. The Patriots came out on top, leading the Rams 13 to 3. The franchise not only clinched its sixth Super Bowl win but is now tied with the Pittsburgh Steelers for the most championships in NFL history.

    As champions, each player on the Patriots will receive a $118,000 bonus check for the game, per the NFL’s collective bargaining agreement.

    Both the Rams and the Patriots had also already earned $83,000 per player in postseason play. That number includes $29,000 for the divisional playoff and $54,000 for the conference championship. So each winner on the Pats will go home with a total of $201,000.

    Though they lost, Rams players don’t leave empty handed: Each will receive $59,000 for Sunday’s game. With the rest of the postseason earnings, the individual total playoff bonus will total $142,000.

    Postseason pay is egalitarian, meaning the starters, backups, and injured players all take home the same amount, as long as they’ve spent at least three games on their team’s active or inactive list.

    For highly paid players such as Tom Brady and Rob Gronkowski, $201,000 amounts to just a fraction of what they make in a year. But for other players, such as 25-year-old defensive end Jonathan Jones, who earns an average annual salary of $543,333, the bonus can be significant. The Super Bowl win boosts his yearly earnings by more than 35 percent.

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  • US factory orders unexpectedly fall in November

    New orders for U.S.-made goods unexpectedly fell in November amid sharp declines in demand for machinery and electrical equipment, government data showed on Monday.

    Factory goods orders fell 0.6 percent, the Commerce Department said, after an unrevised 2.1 percent drop in October.

    Economists polled by Reuters had forecast factory orders rising 0.2 percent in November. The release of the report was delayed by a recently ended five-week partial shutdown of the federal government.