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MARCH NEWSLETTER 3
March 13, 2018: The S&P 500 closed down 0.6% at 2,765.24. The DJIA closed down 0.7% at 25,006.89. Separately, the Nasdaq was down 1.0% at 7,511.01.
Tuesday was a down day for the broad U.S. markets. At first all three major indices started out positive, but over the course of the day each one turned south. Again, most of this selloff came at the end of the day. The S&P 500 sectors were mostly negative. The most positive sectors were real estate and utilities up 0.2% each. The worst performing sectors were technology and financials down 1.2% each.
Crude oil was down 1.3% at $60.59.
Gold was up 0.5% at $1,327.00.
The S&P 500 stock posting the largest daily percentage loss ahead of the close Tuesday was Qualcomm Inc. (NASDAQ: QCOM) which traded down about 5% at $59.70. The stock’s 52-week range is $48.92 to $69.28. Volume was 38.5 million compared to the daily average volume of 11.3 million.
The stock posting the largest daily percentage gain in the S&P 500 ahead of the close Tuesday was PG&E Corp. (NYSE: PCG) which rose about 6% to $45.08. The stock’s 52-week range is $37.30 to $71.57. Volume was nearly 13 million compared to the daily average volume of 6.8 million.
General Electric Co last year eliminated bonuses for its senior managers for the first time in its 126-year history, saving millions of dollars after losing money in 2017, the industrial conglomerate said on Monday.
All but one of its top executives did not receive a bonus, the company said. The changes led to steep declines in compensation and reflected the company's poor results in 2017, according to the company's annual proxy.
Former CEO Jeff Immelt, who stepped down on Aug. 1, received $8.1 million in 2017, down from $21.3 million the year before. Compensation includes salary, bonus, stock, options and other income. GE eliminated Immelt's 2017 target bonus of $5.4 million and cut about $1 million from his salary.
Current Chief Executive John Flannery earned $9 million in salary and other compensation last year. The company eliminated a $3 million target bonus for him, GE said.
The company also eliminated bonuses for former Chief Financial Officer Jeff Bornstein, former Vice Chair of Business Innovations Beth Comstock and John Rice, the former CEO of GE's global growth organization. The savings on bonuses and other compensation totaled more than $10 million.
The exception was David Joyce, head of GE's aviation business, who received about $5.2 million. While that was down from $12.6 million in 2016, Joyce received a $1.4 million bonus.
"We are holding leaders accountable for performance," GE said in the proxy, noting operating profit fell 11 percent and that the amount in its bonus pool fell 75 percent. GE reported a net loss of 72 cents a share last year.
"Consistent with this commitment to align pay to performance, the bonuses we paid were concentrated in Aviation and Healthcare, which had outstanding years," the company said.
GE said in the proxy it was not changing compensation for board members, other than to add a $30,000 annual payment for members of the new finance committee.
Directors receive $275,000 a year, and additional amounts depending on their committee assignments, the company said.
Boeing Co is doubling down on its landmark new strategy designed to muscle in on the business of maintenance providers by making its next jet the laboratory for in-house services that could radically alter the global business model for selling planes.
Unlike Boeing's last all-new design, the 787 Dreamliner, its proposed new mid-market plane will not bring a flood of revolutionary technical designs to the drawing board.
But it will give the world's largest plane maker a chance to test its new business approach of designing the plane so that it generates lucrative services revenues for Boeing while also offering efficiencies to airlines over the aircraft’s decades-long lifespan.
Along with production costs, the new approach could help Boeing decide whether to invest the $15 billion or more in development needed to build the jet.
"If we decide to launch, it's a big investment and it's an investment that has to contemplate not only the product itself but all of our other strategic objectives," Chairman and Chief Executive Dennis Muilenburg told Reuters.
"So you can imagine we would want to look at this airplane through the lens of lifecycle value as we are growing ourservices business," he said.
Until recently, Boeing and Europe's Airbus sold planes with little involvement in the way they were operated and maintained. Instead, that was work carried out by their own suppliers or third-party shops.
Heavy outsourcing on jets like the 787 expanded the trend by leaving suppliers - such as Mitsubishi Heavy Industries, which supplies the 787's carbon wings - in command of key components.
While Boeing and others squeezed their balance sheets to launch jets, many of their suppliers used their design influence to forge profitable relationships directly with airlines as they conducted part swaps or repairs required by regulators.
"That seems a little out of balance, doesn't it?" said Muilenburg, describing how the pendulum is now swinging back to give Boeing more control over parts and therefore the stream of aftermarket services that comes with owning a part's design.
"We do take the majority of the risk in developing newproducts, and we think that would cause us to want to gain the financial benefit of that risk-taking for the long term," he said.
The long-term approach to the new jet is the latest evidence of changes in the $180 billion aero-aftermarket as planemakers jostle with suppliers - and even airlines - for control of repairs, training and data in pursuit of higher margins.
Last year, Boeing centralized services formerly spread across the company in a new division with a goal to more than treble sales to $50 billion in a decade.
The new unit posted operating margins of 15.4 percent lastyear, compared with 16.1 percent that United Technologies Aerospace Systems, a major supplier, earned from selling new equipment, services and aftermarket parts.
The aftermarket is not entirely new to Boeing, and is common in defense, where Muilenburg ran services between 2008 and 2009. Airbus set ambitious internal targets last week and Canada's Bombardier Inc is banking on maintenance.
But after airplane demand peaked since 2014, Boeing has turned more aggressively to parts and services to help meet a target of doubling margins to the mid-teens by 2020. Its core jet margin widened to 9.6 percent last year from 3.4 percent in 2016.
To support the strategy, Boeing is bringing back key in-house technology like avionics - the brains of a modern jet - partly with an eye to future after market revenue.
"It is important that we build out vertical capabilities that sustain our engineering depth...as airplanes become more digital," Muilenburg said, adding that broader growth in the industry would also provide a boon to suppliers.
Suppliers say Boeing is also less willing than before to share risks - and profits - with them on the systems they do build. Instead it wants them to build to Boeing's designs rather than leaving them with keys to the all-important after market.
Already, there are signs the mid-market jet could see a swing away from risk-sharing towards straight procurement deals,the head of a major supplier told Reuters.
In a bid to expand its global footprint, Southwest Airlines Co. LUV has announced several non-stop flights connecting important cities of the United States. The services are expected to begin this autumn. The carrier’s move is a prudent one as it tries to attract traffic in the locations, which in turn would boost passenger revenues, thus aiding its top line.
The airline will add a daily non-stop flight connecting Houston with Columbus, OH and Louisville, KY and Denver with Memphis, TN. The services will commence from Oct 3 onward. Additionally, the airline will initiate a non-stop seasonal service between Albany, NY and Las Vegas from around the same time. Flights will operate from Sunday to Friday.
Further, the low-cost carrier has decided to increase frequency of services from Phoenix to some of the popular destinations beginning Oct 3. Services between Phoenix and Austin, TX will be raised from four to five roundtrips while that between the city and Denver will be increased to 11 from 10.
Flights connecting Phoenix with New Orleans are now expected to be operated on two roundtrips from an earlier single whereas the service between Phoenix and San Antonio will be increased to four from the initial three roundtrips. Additionally, the service between Phoenix and San Jose, CA will be expanded to seven roundtrips from six previously.
Southwest Airlines Company Price
Southwest Airlines Company Price | Southwest Airlines Company Quote
The carrier will also start non-stop flights between Oklahoma City and Nashville, TN as well as between Denver and El Paso, TX. Flights will operate every Sunday from Oct 7 onward and the same day, the carrier will also introduce a service connecting Oakland, CA with Tucson, AZ. This too will be a weekly operation reserved for Sundays only.
Another weekly service will be effective Oct 6 onward, connecting Cleveland with Orlando, FL and Milwaukee with Fort Myers, FL. These flights will be run only on Saturdays.
The company has extended its ticket booking schedule through Nov 3. The carrier maintains projection for 2018 available seat miles at a rise in the low 5% range, year over year.
Zacks Rank & Other Key Picks
Southwest Airlines carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the airline space include International Consolidated Airlines Group SA ICAGY, Delta Air Lines, Inc. DAL and United Continental Holdings, Inc. UAL. While International Consolidated Airlines sports a Zacks Rank #1 (Strong Buy), Delta Air Lines and United Continental Holdings carry a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Goldman Sachs Group Inc. (NYSE: GS) shares are seeing a nice bump on start out the week after a succession plan was confirmed with the investment bank. Although this was already hinted at by The Wall Street Journal last week, Goldman Sachs seemingly confirmed it Monday morning.
The bank announced that Harvey Schwartz, the firm’s president and co-chief operating officer, has decided to retire effective April 20. David Solomon will serve as sole president and chief operating officer of the firm upon Harvey’s retirement.
The key takeaway from this is that this move also paves the way for David Solomon to take over CEO duties from Lloyd Blankfein, when he eventually decides to step down.
Last week, The Wall Street Journal reported that Blankfein would most likely retire, on his own terms, ahead of Goldman Sachs’ 150th anniversary in 2019, or early that year. When asked about the article, Blankfein joked about it, but neither confirmed nor denied.
Blankfein, board chair as well as chief executive, commented:
Over his 20-year career at Goldman Sachs, Harvey has held leadership roles across a broad range of the firm’s operations – from Securities and Investment Banking to the Executive Office, where he served as Chief Financial Officer; and most recently, as President and Co-Chief Operating Officer. Harvey’s work ethic, command of complexity, and client focus have defined his career at the firm. Harvey has been a mentor to many, and his influence has made an indelible impact on generations of professionals at Goldman Sachs. I want to thank Harvey for all he’s done for the firm.
Shares of Goldman Sachs were last seen up 0.8% at $272.80, with a consensus analyst price target of $268.71 and a 52-week trading range of $209.62 to $275.31.