Home > Blog > Trader talk > Trader Talk: An Analysis of the Markets this Morning

Good morning,

Markets are called to open higher this morning. This is what's happening today:

  • Credit Suisse Group AG, the second-biggest Swiss bank, posted a jump in first-quarter profit as year-earlier charges related to its own debt and bonus payments weren’t repeated;
  • Apple, which has $145 billion of cash, said yesterday it plans to use debt to help finance a $100 billion capital reward for shareholders after a 42 percent stock plunge;
  • The euro’s 25 percent jump against the yen over the past six months underscores the rising pressure on European Central Bank President Mario Draghi to cut interest rates as the region’s exporters lose out to Japan;
  • Italian President Napolitano may announce his nominee for prime minister today;
  • Results due from Credit Suisse, Barclays, Ericsson, France Telecom, Daimler, Glaxo, Heineken, ABB.

What we got to know after the Apple results:

Overall, the company reported results that topped expectations:

  • Apple shares ended up little changed after rising as much as 6% in late trading.
  • Revenue of $43.6 billion surpassed forecasts of $42.3 billion;
  • Per-share earnings of $10.09 topped the consensus of $9.98;
  • iPhone sales of 37.4 million surpassed predictions of 35.4 million; and 19.5 million iPads sold beat estimates of 18.3 million;
  • However, profit margins of 37.5% disappointed compared with the 38.5% predicted by analysts;
  • Also, its revenue guidance of $35.5 billion for the current quarter fell short of forecasts for $38 billion.
  • Apple disclosed the largest share repurchase in history yesterday, boosting an earlier $10 billion program to $60 billion. The unprecedented buyback is part of a plan to return a whopping $100 billion to investors by the end of 2015, or an average of more than $30 billion a year;
  • Apple hiked its quarterly dividend by 15 percent, to $3.05 a share;
  • Apple said it was working on new products and exploring new consumer categories, that some took to mean TVs. Still, Cook hinted the company’s next big product refresh would not come until the fall;
  • Cook pointed out that revenue came in at $43.6 billion — topping the company’s own guidance — but that still wasn’t good enough for some;
  • Tim Cook seemed fed up with increasingly unrealistic expectations for the company as well as the growing view that its most innovative and high-growth days are behind it.

Barclays Research comments after the results, 'In line with our lowered estimates from last Friday, Apple issued guidance for $7 in EPS for the June quarter. While this guidance may provide a “jolt” to some investors, it does serve the purpose of reigning in outlandish predictions while maintaining margins above the key 36% level and helps make the stock investable into new product cycles that likely start in September (with builds hitting in June). The share repurchase also could help smooth the ongoing transition from growth to value holders. While the reception of the iPhone 5 and execution of late has tested our patience, the cash announcement, performance and guidance sets Apple up better into product cycles predicated on platform/service innovations. We retain our most recent risk/reward scenarios and $465 target. Maintain Overweight rating.'

Moving on, Credit Suisse, the second-biggest Swiss bank, posted a jump in first-quarter profit as year-earlier charges related to its own debt and bonus payments

weren’t repeated. Net income amounted to 1.30 billion Swiss francs ($1.37 billion), compared with 44 million francs a year earlier. Earnings compared with the 1.27 billion-franc mean estimate of 12 analysts. Chief Executive Officer Brady Dougan has announced 4.4 billion francs in cost-cutting programs since 2011, which he plans to complete by the end of 2015 to boost earnings. The company last year combined all its money-managing units into one division to boost efficiency and reiterated its commitment to a full-fledged investment bank as Swiss competitor UBS AG scales back.

For more information on Apple and Credit Suisse or other stocks and bonds we follow, contact our offices on 25688688.

Good day and happy trading!

Kristian Camenzuli