Stock market volatility awoke from its slumber, thanks to the bellicose banter between President Trump and North Korea’s Kim Jong Un. The VIX (CBOE Volatility Index) surged over 50%, while the S&P 500 shed 1.4% and the Russell 2000 lost 2.7%, with the latter index wiping out half its 2017 gains. Treasury prices rallied, as the flight to safety drove the yield on the Ten-Year Treasury down 9 basis points to 2.19%. Meanwhile, corporations continued to report strong second quarter earnings. With over 90% of companies having reported, the blended (combines actual results for companies that have reported and estimated results for companies that have yet to report) earnings growth rate for the second quarter is now 10.2%, which is slightly higher than the earnings growth rate of 10.1% last week. The 12-month CPI measure gained a tenth of a point in July to 1.7 per cent, posting its first rise in five months after steady declines, but still well below the Fed’s two percent target. The absence of inflation creates a serious hurdle for the Fed’s objective of raising interest rates and unwinding its $3.5 trillion balance sheet.
North Korean tensions cooled over the weekend, but keep in mind that Tuesday is “Liberation Day” in North Korea, and that the US and South Korea are scheduled to commence military exercises next Monday. It’s a pretty safe bet that the tweets and threatening responses will continue to flow and could rattle the markets, at least for a few minutes or hours. July retail sales and industrial production will be released, along with earnings reports from some technology and retail companies.
Stocks in the News:
National CineMedia, Inc. (NCMI): The operator of the largest in-theater digital media network in North America, announced that total revenue for the second quarter ended June 29, 2017 decreased 15.9% to $97.1 million from $115.4 million for the comparable quarter last year. Adjusted OIBDA decreased 28.8% to $42.3 million for the second quarter of 2017 from $59.4 million for the second quarter of 2016. For the full year 2017, the Company reaffirmed its outlook of total revenue to be down 6% to 1% and Adjusted OIBDA to be down 12% to 6% from the full year 2016. It’s been a tough year for the movie industry, with many of the summer releases falling short of expectations.
Salem Media Group, Inc. (SALM): For the second quarter, total revenue decreased 2.5% to $66.1 million. Operating expenses on a recurring basis decreased 2.1% to $53.8 million and adjusted EBITDA decreased 3.9% to $12.4 million. Net broadcast revenue decreased 1.4% to $49.3 million and broadcast operating expenses remained consistent at $35.9 million, resulting in a 5.5% decline in station operating income for $13.3 million. The Company was refinanced all its debt on favorable terms, and reaffirmed its dividend policy. Salem Media Group Inc is a domestic multimedia company with integrated operations including radio broadcasting, digital media, and publishing, focused on religious content.
InnerWorkings, Inc. (INWK): Adjusted EBITDA was $16.6 million for the second quarter, up 13% from $14.8 million in the same quarter of 2016, on a 4% increase in gross revenues. The Company also updated its guidance for the rest of the year, and expressed optimism about new business prospects. InnerWorkings, Inc is a marketing supply chain company that provides marketing execution solutions including advertising materials, branded merchandise, product packaging, and retail displays.
Landauer, Inc. (LDR): On a GAAP basis, earnings per diluted share were $0.66 for the third quarter of 2017 compared to $0.76 in the prior year period. Earnings per share were higher in the prior year due to the onetime gain from the divested business. Excluding the gain on the divestiture, pro forma EPS increased approximately 14% year-over-year. Landauer Inc provides technical and analytical services to determine occupational and environmental radiation exposure.
U.S. Auto Parts Network, Inc. (PRTS): Net sales in the second quarter were up 3% to $80.2 million compared to $78 million in the year-ago quarter. Income from continuing operations for the quarter was $26.9 million, or $0.67 per diluted share, compared to $1.2 million or $0.03 per diluted share in the year-ago quarter. The large increase in income from continuing operations was driven by the release of a valuation allowance from the Company’s cumulative tax NOLs, as a result of their recent profitability and expectation to continue to generate net income in the future. U.S. Auto Parts Network Inc is an online provider of automotive aftermarket parts and repair information.
Monmouth Real Estate Investment Corporation (MNR): At quarter end, Monmouth’s property portfolio was 100% occupied, representing the highest occupancy rate in the industrial REIT sector. Additionally, their weighted average building age as of the quarter end is 10 years, representing the youngest portfolio in the industrial REIT sector. Adjusted funds from operations or AFFO were $0.18 per diluted share for the recent quarter, as compared to $0.17 per diluted share a year ago, representing a 6% increase from the previous year. Monmouth Real Estate Investment Corporation is engaged in the ownership and management of industrial buildings subject to long-term net-leases, mainly to investment grade tenants.
Crown Crafts, Inc. (CRWS): Net income for the first quarter of fiscal 2018 was $518,000 or $0.05 per diluted share, compared to net income of $1.1 million or $0.11 per diluted share in the first quarter of fiscal 2017, on a 12.5% decline in revenues. The Company remained debt free, even after the acquisition of Carousel Designs, LLC for $8 million plus the assumption of certain liabilities. Additionally, CRWS announced that its Board of Directors declared a quarterly cash dividend of the company’s Series A common stock of $0.08 per share. This will be paid on October 6, 2017 to shareholders of record at the close of business — as of the close of business on September 15, 2017. This represents an annualized yield of 5.8% based on yesterday’s stock closing price. Crown Crafts designs and distributes, infant and toddler bedding and blankets, bibs, disposable products and accessories.
Motorcar Parts of America, Inc. (MPAA): Net income for the first quarter was $7.6 million or $0.39 per diluted share compared with $7.5 million or $0.39 per share a year ago, on a 1.3% increase in adjusted gross sales. The mild winter resulted in weaker demand for replacement auto parts, but as President and CEO Selwyn H. Joffe points out “We subscribe to the theory that it’s not a question of whether there is a repair for a vehicle, it is just a question of when.” As a car owner, I tend to agree.
Douglas Dynamics, Inc. (PLOW): Net income for the quarter was $14.8 million, or $0.64 per diluted share compared to net income of $16.3 million, or $0.71 per diluted share in the second quarter of 2016. The results for the quarter reflect slightly better than expected pre-season performance for their commercial snow and ice products, which is encouraging following two years of below average snowfall. PLOW is a manufacturer and upfitter of commercial vehicle attachments and equipment. Its products include snow plows, sand and salt spreaders, and turf-care equipment sold under the Blizzard, Fisher, Snowex, Western, and Turfex brands. Between PRTS, MPAA, and PLOW, it feels like we should be routing for really miserable winter weather.
Pioneer Power Solutions, Inc. (PPSI): Reported record revenue for both the second quarter and the first 6-month periods and ended the quarter with a near-record backlog. Adjusted EBITDA increased to $2.5 million during the quarter or 8.1% of revenue compared to $2.2 million or 7.2% of revenue in the second quarter of 2016. Non-GAAP diluted EPS increased to $0.21 per share in the second quarter of 2017 compared to $0.18 in the second quarter of 2016. The Company notes that these results do not reflect any meaningful increase in infrastructure spending or any rebound in the oil and gas sector. Any rebound in these sectors would be incremental to their existing demand. PPSI manufactures, sells and services a broad range of specialty electrical transmission, distribution, and on-site power generation equipment for applications in the utility, industrial, commercial and backup power markets.Tagged: Chicago, Chicago Investment Management, CRWS, Eric Kuby, finance, financial commentary, Fund Fact, Gold, inwk, Kuby's Commentary, LDR, Market Commentary, mnr, MPAA, NCMI, North Star, North Star Financial Services, North Star Investment Management, NSIMC, Oil, PLOW, PPSI, PRTS, S&P 500, SALM, Stocks In the News, VIX, Wealth Management.
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