Today’s news: CIT Group (CIT), Nucor (NUE) and PulteGroup (PHM) reported fourth-quarter 2017 results this morning.
CIT Group (CIT – yield 1.2%), which operates both bank and financial holding companies, reported fourth-quarter diluted EPS of $0.99, surpassing all analysts’ estimates, when the market was expecting $0.81. Total loans and leases grew, and excess capital far exceeded the company’s goals. Additional highlights from the press release include:
- Sold or have definitive agreements to sell more than $12 billion in loans and leases, including Commercial Air, Financial Freedom, including reverse mortgage portfolio, and NACCO
- Grew average investment securities portfolio by 58%
- Ended 2017 with more than 80% of assets in CIT Bank and 77% of funding from deposits
- Reduced operating expenses by approximately $85 million (excluding noteworthy items)
- Repurchased $3.4 billion in common shares at an average price of $47.84 per share and reduced unsecured debt by $6.9 billion
- Tangible book value per share grew 9% to $49.58
CIT surpassed 50 to reach new all-time highs in December, and is now falling with the broader market. CIT could easily drop to price support at 49. Strong Buy.
Nucor (NUE – yield 2.2%), a low-cost producer of iron and steel products, reported fourth-quarter 2017 EPS of $1.20. After adjusting for gains related to new federal tax legislation, EPS of $0.65 beat all analysts’ estimates, when the market was expecting $0.55. Revenue of $5.09 billion exceeded the consensus estimate of $4.85 billion. Today’s press release details news projects that expand Nucor’s scrap metal mill capacity, the company’s current financial situation, and references to ongoing trade cases in Washington D.C. Investors are welcome to tune in to management’s fourth quarter conference call this afternoon, January 30, at 2:00 pm.
The stock market has taken a downturn thus far this week, so while Nucor’s earnings report is strong, almost all stocks are down this morning. I expect NUE to continue delivering capital gains in 2018. Be ready for anything in the short term, and buy low as the opportunity presents itself. Buy.
PulteGroup (PHM – yield 1.1%), a U.S. homebuilder, reported fourth-quarter 2017 EPS of $0.85, meeting consensus estimates. Revenue and new orders rose, and backlog rose by 35% to $4.0 billion. Pulte spent $251 million on share repurchases during the quarter, and repurchased 11% of outstanding common shares during the full year. In addition, the company added $500 million to its share repurchase plan, bringing the total authorized repurchases to $594 million.
Despite an attractive earnings report, PHM is down today with the broader market. The stock has fantastic fundamentals. Risk tolerant investors should buy now, and cautious investors should wait until we get a more significant stock market correction, which I believe could arrive within a few months. Strong Buy.