Gap Beats Q3 EPS Estimates; Announces $1B Buyback (GPS)

The Gap Inc. (GPS) reported its third quarter earnings results after the closing bell on Thursday.

GPS Earnings in Brief

-Gap posted quarterly earnings of $0.72 per share, beating analyst estimates of $0.71 and a 14% increase from a year prior.
-Revenues came in at $3.98 billion, in line with the consensus estimate.
-Net sales increased 3% in the third quarter, while comparable sales rose 1%.
-Gap’s full year earnings per share guidance was reaffirmed at $2.57 to $2.65.

CEO Commentary

Gap Chairman and CEO, Glenn Murphy commented on the company’s quarterly performance: “This quarter marks our seventh consecutive quarter of positive comp sales growth. We are pleased to maintain our momentum of growing sales and earnings per share this quarter.”

Buyback Plan and Dividend

Gap’s board of directors also announced today that it has authorized up to $1 billion in additional repurchases of its common stock, emphasizing the company’s commitment to returning excess cash to shareholders.

This comes after the company recently raised its annual dividend per share by one-third, from $0.60 to $0.80. The stock now yields 1.91% based on Thursday’s closing price of $41.86. The next dividend will be paid on January 29, 2014 to shareholders of record on January 8, 2013, with an ex-dividend date of January 6, 2014.

G. Moffett Cochran, Silvercrest Asset Management CEO, dies at 63

Bloomberg News

G. Moffett Cochran, co-founder and chief executive of Silvercrest Asset Management Group Inc., a newly public New York-based firm catering to wealthy families, has died. He was 63.

He died Monday at Stamford Hospital in Connecticut, near his home in New Canaan, said his daughter, Lee Cochran. She said he survived 10 years with a neuroendocrine tumor on his pancreas, then his liver, because of experimental treatments with Robert L. Fine, a doctor at the Herbert Irving Comprehensive Cancer Center at New York Presbyterian Hospital-Columbia University Medical Center.

Mr. Cochran raised more than $1 million for the Robert L. Fine Cancer Research Laboratory Foundation Inc., his daughter said.

Silvercrest, of which Mr. Cochran was also chairman, advises families, endowments, foundations and other institutional investors and had $14.6 billion under management as of Sept. 30. The company was the 17th-largest manager of family wealth, according to a ranking in the September issue of Bloomberg Markets magazine.

Family offices, as such firms are known, offer financial counseling and basic investment management as well as advice on markets, investing and estate planning.

“The business of tax preparation and bill paying is a lousy business,” Mr. Cochran told Bloomberg Markets in 2012. “You can't lever it up. We do it, but we insist we get paid for it properly.”

JUDGE'S SON

Silvercrest canceled a p

Hammer of the Gods: Yellen Speaks, Stocks Hit Record Highs

Last week, Thor: The Dark World dominated at the box office, earnings $85.7 million in its opening weekend. And with no blockbusters scheduled to hit the theaters this week, it looks like Thor could top the box office for a second weekend in a row.

The Dow Jones Industrial Average has a bit of a hot streak going as well. It gained 1.3% this week to 15,961.70, the second consecutive week that closed at a record high. The S&P 500 rose 1.6% to 1,798.18, also a record high. The S&P 500 has closed at a record high 36 times this year, the Dow 38 times.

S&P Capital IQ’s Howard Silverblatt puts those numbers in context:

There have been 1,022 new closing highs since 1928, and I've been at S&P for 548 of them, 53.6%. From 1930 through 1953 there were no new closing highs.

Breadth is near a modern day record; YTD 449 are up and 50 are down, the record since 1980 is 458 up, set in 2003.

Given the broad gains, and the very public new highs (S&P 500 and DJIA), sideline investors are most likely feeling the pressure to get in.  Chasing returns is not a good reason to invest, but when enough do it, the short-term impact is more buying and higher prices. If the market stays anywhere near its current level, we may see higher inflow and a corresponding short-term uptick in prices.

Stocks got there boost this week from Fed Chair-to-be Janet Yellen, who explained why she thought tapering had been beneficial. RBS’s Alberto Gallo considers the downsides of quantitative easing:

Janet Yellen’s testimony yesterday was predictably dovish, causing risk assets to rally globally and pushing the S&P 500 to an all-time high. The hearing reaffirmed her commitment to further easing, to avoiding tapering QE too soon, and also to strong forward guidance to keep front-end rates anchored low. Yellen noted that the benefits of QE still exceeded the costs, but we are increasingly concerned about markets addicted to liquidity from unconventional central bank policy. In the US, QE worked to avoid deflation and capital flight, and has kept consumption stable. However relying on QE has reduced the pressure on the government to implement critical reforms to stimulate growth, such as changes to entitlements, health care reform and state spending. There are other side-effects of QE: it has exacerbated increasing income inequality. The top 1% of Americans now earn 20% of US income compared to 10% in 1860 and 8% in 1774. QE can also generate asset bubbles. For example the US HY market shows signs of overvaluation according to our Junk Bubble Indicator, as average credit quality declines, issuance of cov-lite loans increases and M&A and LBO activity rise, similar to 2007.

Combine Yellen’s dovishness–if it really is dovishness–with idiosyncratic company news, and some stocks were guaranteed to take off. Iron Mountain (IRM), for instance, gained 12% this week after the IRS said it had ended a working group considering REIT conversions and would now turn to its application. Pitney Bowes (PBI), meanwhile, rose 11% this week after activist investor Jana Partners revealed it had accumulated a large stake in the stock. Macy’s (M) advanced 11% after reporting much better earnings than forecast by analysts. Marathon Petroleum (MPC) finished the week up 10% as the difference between the price of oil here in the U.S. and the price abroad widened. Rounding out the top-five: J.C. Penney (JCP). The beaten-down retailer rose 9.7% this week, getting a boost from positive analyst comments and hedge-fund purchases.

When even J.C. Penney is rallying, you have to wonder when the hammer will finally come down.

How Growing Chinese Credit Signals Long-Term Opportunity in Gold

I think it’s interesting how people, including the mainstream media, discuss an issue without truly understanding what it really means. It seems that skimming the surface is good enough these days, as no one seems to want to dig a little deeper.

One example is the recent reports from Chinese Premier Li Keqiang, who stated that the Chinese economy must grow at least 7.2% per year in order to limit the unemployment rate at four percent. (Source: “China Premier warns against loose money policies,” Reuters, November 5, 2013.)

As we all know, the Chinese economy is extremely important. As the second-largest nation in the global economy, its ability to manage the Chinese economy and prevent it from weakening further is quite important.

China’s Premier warned against creating even easier monetary conditions within the Chinese economy, as additional money printing could lead to even higher levels of inflation. Currently, the total credit supply is now in excess of $16.4 trillion (or 100 trillion yuan), approximately twice the size of its entire Chinese economy.

Also Read: NYSE Holidays 2014

With the global economy still quite weak, China has had trouble exporting. It is now trying to transition the Chinese economy from export-led to domestically oriented, reducing its reliance on the global economy.

At least, that’s the story on the surface…

Here’s what troubles me: the Chinese economy is slowing, we all know that, yet all of its money printing so far has led to a total amount of credit supply twice the size of its entire economy.

So, what has all of this money printing really done?

It’s caused people in the Chinese economy to react by essentially trading their paper currency for hard assets like real estate and gold bullion. They don’t know how long the paper money will hold its current worth as inflation continues rising; therefore, they are rushing to trade it in for something solid, like gold bullion. And we all know that China is one of the biggest buyers of gold bullion.

And as much as they would like to see lower levels of inflation, the main goal for the leaders in the Chinese economy is to prevent unemployment. Even if that means printing money, they will continue to do so. That means continued buying in hard assets.

What happens when it all ends?

It’s difficult to say, and timing is always tough to call. Can the total credit supply increase to three times or four times the size of the Chinese economy? Perhaps, but I foresee those business people involved in profiting from the excess money supply will continue to trade their paper yuan into gold bullion and other hard assets.

Because the situation in the global economy is weak and the Chinese economy continues to undergo change, the one constant is that gold bullion will remain valuable.

The Chinese government has also been using the wealth created from selling goods to the global economy to buy gold bullion.

With our debt levels continuing to grow, I think many nations are going to become concerned with our ability to actually pay them back. China already owns trillions of dollars of our debt; I doubt it wants another trillion. So from a diversification viewpoint, it makes sense for the Chinese to look at alternatives to U.S. Treasuries, and gold bullion certainly fits the bill.

While the price of gold bullion has dropped, one has to view price action over a long-period of time. Day-to-day and quarter-to-quarter price movements can be volatile; look at the actual demand for physical gold bullion instead.

Will China (and other nations) continue to buy or sell gold bullion? They’re buying, and they’re using this pullback in gold bullion prices to continue accumulating. For the long-term investor, I would follow China’s lead and use this pullback to buy gold bullion, as I believe the demand from China for gold bullion will continue to grow over the next decade.

This article How Growing Chinese Credit Signals Long-Term Opportunity in Gold was originally published at Investment Contrarians

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

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