Wednesday, April 29, 2015

CIT Group Q1 Earnings Report:

CIT posted an EPS of $0.59 and revenue of 423.8M and both numbers missed estimates of $0.73 and revenue of 456.74M. Most of the lower profits came from its North American finance business, and lower net interest margin. CIT had a net interest margin of 4.34% last quarter, and it dropped to 4% this quarter. These lower margins will aid in the acquisition of OneWest bank expected to close mid of 2015. CIT Group is also extending their stock buyback program by looking to acquire $200M through share repurchase. Although CIT missed estimates, they are still up on net finance revenue from last year. CIT Group’s management does not view this quarter as a setback, because this quarter was in line with internal expectations. With General Electric scaling back their financial arm, CIT Group can take advantage of this opportunity since it fits their business model more than General Electrics. CIT Group also increased assets this quarter from last by increasing the amount of deposits they have.

Tuesday, April 21, 2015

Lam Research (LRCX) 2015 Q1 Earnings

Lam Research Corporation (LRCX) reported earnings for the fiscal quarter ending March 29th, 2015 on April 20th, 2015. Earnings per diluted share came in at $1.40, beating consensus' estimates of of $1.30. Management was upbeat about guidance going forward despite capital spending cuts in the chip manufacturing space by semiconductor giants Intel (INTC) and Taiwan Semiconductor (TSM)

Earnings per share is up about 14% in comparison to this time last year, and management expects 4Q EPS to range between $1.39-1.53 with estimated revenues of anywhere between $1.41 billion to $1.51 billion. Lam Research believes through an assortment of chip products, it can maintain high revenues. The stock rose 9% in the market's after hours and reached $78.50 and is currently trading at about $77.90.

LRCX saw it's increase in EPS due to an increase in revenues. Margins remained relatively constant and if the company can live up to management's expectations to even higher revenues, then Q4 EPS should increase yet again. However, it is important to note that a lot of Lam's optimism is banking on an overall market decrease in 3D Nand prices that would drive demand up which would prove beneficial for Lam.

Chip manufacturer's Applied Materials (AMAT) and KLA Tencor (KLAC) also saw their share's price rise in accordance with Lam's which reflects investor's excitement for the chip manufacturer space.

Saturday, April 18, 2015

Citi posts solid first quarter earnings, surprises 9%

Citigroup reported first quarter earnings on April 16th, 2015. Earnings per share came in at $1.52 per, above consensus estimates of $1.39 per share. Revenue for the quarter was $19.8 billion, down 2% year over year and missing street estimates of $20 billion.

Lower revenues in Citi’s Corporate/Other, Institutional Clients Group, and Global Consumer Banking were offset by lower operating expenses. Operating expenses for the quarter were $10.9 billion, down nearly 10% year over year. The decline in expenses was driven mainly by cost reduction efforts, reduced legal and related costs and repositioning charges. However, the firm experienced higher regulatory and compliance costs.

The trend of improving credit quality continued into first quarter. Total allowance for loan losses was $14.6 billion (2.38% of total loans) down 2.87% year over year. Loans and deposits decreased 6% and 7% year over year to 621 billion and 899 billion respectively.

Overall, a positive first quarter performance for Citi. Although missing revenue, EPS beat by a significant amount. Continued expense management will continue to benefit Citi in the tough interest rate environment. Citi traded up around 2.5% after earnings were released but those gains were completely offset after poor market performance on Friday. The stock closed the week at $53.07.

PNC Financial Services beats 1Q2015 earnings but misses on revenue

PNC Financial Services reported first quarter earnings on April 15th, 2015. EPS for the quarter came in at $1.75, beating estimates of $1.71 per share, for an earnings surprise of 2.3%. First quarter revenue was $3.73 billion against estimates of $3.75 billion and down 1% year over year. Revenue in the first quarter was mainly driven by strong performance in the Retail Banking segment, exhibiting very strong evidence of our investment thesis.

The results were mainly driven by a fall in the provision in credit losses and increases in noninterest income, however partially offset by higher expenses and lower net interest income. Noninterest income and expenses came in at $1.66 billion (+5% YoY) and $2.35 billion (+4% YoY), respectively. Higher expenses were due mainly to investments in bank infrastructure and technology for its banking transformation initiative. Also, the company is about 30% complete with its goal of reducing costs for 2015 by $400 million. Net interest income for the quarter fell to $2.07 billion, down 6% from the previous year. PNC’s net interest margin fell 44 bps to 2.82% year over year.
PNC’s ability to source cheap funds and expand its balance sheet during the quarter should pay off when interest rates begin to rise. Loans grew 3% and deposits grew 6% compared to the previous quarter, despite the tough interest rate environment. Credit quality improved significantly YoY: Provision for credit losses were down 43% to $54 million, while net charge offs fell by about the same percentage to $103 million.

Overall, a decent performance for PNC despite missing on revenue. The performance supports our investment thesis of higher noninterest income and lower expenses, with modest loan growth. This combined with stronger credit qualities and a strong focus on customer satisfaction should pay off for PNC in the long run. PNC has traded down around 2.5% to $90.93 since earnings were reported.

Thursday, April 16, 2015

Bank of America Q1 Earnings

Bank of America reported earnings on 4/15/15 and reported $0.27 EPS and 21.4 billion in revenue. The consensus on Bank of America for this quarter was $0.29 EPS and 21.5 billion in revenue. In addition last year Q1 revenues were 22.8 billion. As a result, Bank of America dropped 1.14% today to $15.64. In Q1 Bank of America has been the worst performing large bank stock in the sector. Bank of America missed EPS because of a 6 billion dollar litigation expense. This was a onetime expense and going forward Bank of America will not have this liability. Net interest income was $484 million and net charge offs were 1.2 billion. Bank of America has decreased their loan book slightly this quarter as they sold their nonperforming loans. Bank of America also increased their assets slightly to 2.14 trillion, this is because of the deposit growth. Bank of America also has a lot of cash on hand as well that is ready to be loaned out or used in stock buybacks or dividends, which Bank of America is planning on a $4 billion stock buyback and dividends of $0.05 per share.  Overall, this is another quarter of weak earnings from Bank of America, they appear to be setting themselves up for a higher interest rate environment, by cutting expenses now and managing their lone book. The highlight of Q1 earnings is that expenses are down 6% as BAC reduces employees and is looking to cut more expenses in the legacy asset services division.