Following the holiday-extended to the tax changes and said it was …

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Tuesday January 16, 2018

In This Newsletter

Troubles Push GE to Consider a Breakup

Citigroup Earnings Wiped Out by Tax Charge

GM To Take $7B Write-Down On Tax Overhaul

For Businesses, Donald Trump's First Year Is a Net Success

Simon Settles Suit With Starbucks On Teavana Closures

White House Calls Immigration System Risky As Shutdown Looms

Google Plans To Build Out Undersea Cables

UnitedHealth: Tax Overhaul To Boost 2018 Earnings

Maersk and IBM Partner on Blockchain for Global Trade

Energizer to Buy Spectrum's Batteries Unit for $2 Billion

Plus: Market Snapshot, Tomorrow's Calendar, Earnings Reports and Talking Points

Tomorrow's Headlines

Troubles Push GE to Consider a Breakup

General Electric Co.'s chief executive said the company is considering breaking apart the American icon, after a sudden collapse in its profits last year raised questions about the industrial conglomerate's business model.

John Flannery, who took over as CEO last summer, said the Boston company is re-evaluating its strategy and structure, including carving out its major divisions into separately traded units. GE employs about 300,000 people and sells everything from airplane landing gear to hospital incubators around the globe.

"We are looking aggressively at the best structure or structures for our portfolio to maximize the potential of our businesses," Mr. Flannery said on a conference call Tuesday, promising to update investors in the Spring. "We need to continue to move with purpose to reshape GE."

GE spent decades striking deals that once made it the most valuable U.S. company, with a financial-services arm that rivaled the biggest banks and a media empire that included NBC. But since the financial crisis the company has shrunk its operations to focus on its core industrial divisions. It also made big bets on oil and coal markets that have depressed recent results.

After years of underperformance, GE shares tumbled last year -- erasing more than $100 billion in market value -- after the company changed CEOs and revealed that it was struggling to generate enough cash to fund its dividend. On Tuesday, GE disclosed it would book a $6.2 billion charge in its fourth quarter and would have to set aside $15 billion over seven years to bolster insurance reserves at its GE Capital unit, surprising investors with deeper-than-expected problems in a business many thought the company had left behind.

Market Snapshot

Stocks

The Dow Jones Industrial Average surged above 26000 for the first time Tuesday but gave up those gains as shares of energy companies slid along with oil prices. The blue-chip index crossed the latest 1000-point milestone soon after the opening bell and rose as much as 283 points, but it later turned lower.

Treasurys

U.S. government bond prices swung before edging higher Tuesday following the holiday-extended

Citigroup Earnings Wiped Out by Tax Charge

The tax law wiped out Citigroup Inc.'s fourth-quarter earnings and then some, with the bank taking a $22 billion charge that caused it to post a loss of $18.3 billion -- its biggest loss ever for a single quarter.

But investors looked past the immediate results to the near-term future, when they expect the tax law will boost earnings for Citigroup and other banks.

Citigroup Chief Executive Michael Corbat and Chief Financial Officer John Gerspach were upbeat in calls with analysts and reporters, saying the tax changes will bolster their future profits and buoy their clients, echoing the sentiment last week of JPMorgan Chase & Co. CEO James Dimon.

Specifically, Citigroup increased one of its key profitability goals in response to the tax changes and said it was still on track to return capital to

weekend. The yield on the benchmark 10-year U.S. Treasury note settled at 2.544%, compared with 2.551% Friday.

Forex

The dollar edged higher Tuesday as investors locked in gains on recent bets against the U.S. currency. The Wall Street Journal Dollar index, which measures the U.S. currency against a basket of 16 others, was recently up 0.2% at 84.56. The gauge hit its lowest closing value since May 2015 on Monday.

Commodities

Oil prices ended down, giving up their highest levels in about three years as the market took a break from a rally that lifted prices for five-consecutive sessions.

shareholders according to a plan it laid out in July.

Underneath the $22 billion tax charge, Citigroup turned in results that beat analysts' expectations with higher revenue, more lending and flat expenses.

GM To Take $7B Write-Down On Tax Overhaul

General Motors Co. will book a $7 billion write-down stemming from the taxoverhaul bill passed last month, though executives said broader benefits of the tax changes could help the company as it aims to maintain profitability levels amid a slowdown in the U.S. car market.

GM, which reports fourth-quarter results Feb. 6, said Tuesday that 2017 pretax earnings are likely to be "at the high end" of its previous forecast of $6 to $6.50 per share. In October, the nation's largest auto maker said it expected to finish in the middle of that range. Wall Street analysts expect earnings of $6.29 on average, according to FactSet.

GM said it expects similar results in 2018 amid continued strength in its two biggest regions, North America and China, and a recovery in smaller markets including South America.

Wednesday's Calendar

12:00 p.m.

01/12 MBA Weekly Mortgage Applications Survey

12:45 p.m.

01/13 The Retail Economist/Goldman Sachs Weekly Chain Store Sales Index

1:55 p.m.

01/13 Johnson Redbook Retail Sales Index

2:15 p.m.

Dec Industrial Production & Capacity Utilization

3:00 p.m.

U.S. Senate Banking Committee votes on Federal Reserve Governornominee Jerome Powell

3:00 p.m.

Jan NAHB Housing Market Index

7:00 p.m.

U.S. Federal Reserve Beige Book

8:00 p.m.

ACLI Roundtable moderated discussion with Charles Evans and Robert Kaplan

9:00 p.m.

Nov Treasury International Capital Data

9:30 p.m.

Loretta Mester lecture on monetary policy communications

The company added that it expects "further earnings acceleration" in 2019. GM shares were up more than 2% in afternoon trading.

For Businesses, Donald Trump's First Year Is a Net Success

The tax overhaul that President Donald Trump signed into law last month capped a year in which his initiatives on taxes, regulation -- and many of his public pronouncements on the economy -- have been broadly welcomed by business.

It hasn't all been smooth sailing for the president most closely aligned with business interests in decades: he was roundly criticized for his remarks about a deadly white supremacists' rally in Charlottesville, Va., last August. After that, several CEOs resigned in protest from his business advisory councils, although administration officials say they had largely fizzled out by then.

In pure policy terms, however, business groups and executives say the $1.5 trillion of corporate-focused tax changes and the bevy of completed and proposed rule changes aimed at cutting regulatory burdens on business have made 2017 a net success for business.

"If Hillary [Clinton] had been elected, we would have had more regulation and higher taxes," said Byron Wien, an executive at Blackstone Group L.P ., on a recent investor call. "Trump was elected; we have less regulation and lower taxes."

Simon Settles Suit With Starbucks On Teavana Closures

Simon Property Group and Starbucks Corp. have reached a settlement over a lawsuit by the mall owner that had sought to prevent Starbucks from closing Teavana stores in its shopping centers.

In November, an Indiana judge ordered the coffee giant to halt from closing Teavana stores in 77 retail locations owned by Simon. Starbucks filed an

9:30 p.m. 01/12 API Weekly Statistical Bulletin

Earnings Reports

expected Wednesday

Company (stock)

Alcoa Corp. (AA)

ASML Hldg NV ADR (ASML)

Bank Mutual Corp. (BKMU)

Bank of America Corp. (BAC)

Boston Private Fincl Hldgs Inc. (BPFH)

Charles Schwab Corp. (SCHW)

Community Trust Bancorp Inc. (CTBI)

Eagle Bancorp Inc. (EGBN)

Fastenal Company (FAST)

Goldman Sachs Grp Inc. (GS)

H.B. Fuller Company (FUL)

Hancock Hldg Company (HBHC)

Kinder Morgan Inc Class P (KMI)

PacWest Bancorp (PACW)

Plexus Corp. (PLXS)

PTC Inc. (PTC)

SLM Corp (SLM)

U.S. Bancorp (USB)

Xilinx Inc. (XLNX)

FactSet EPS Mean

Estimate 4Q/1.25 4Q/1.29

4Q/0.11

4Q/0.45

4Q/0.23

4Q/0.42

4Q/0.75

4Q/0.88

4Q/0.45

4Q/4.63

4Q/0.84

4Q/0.83

4Q/0.18

4Q/0.74 1Q/0.80 1Q/0.30 4Q/0.19 4Q/0.87 3Q/0.63

appeal against the preliminary injunction.

Starbucks in July said it planned to close all 379 locations of Teavana, a chain of high-end tea shops, by the spring of 2018, noting the stores' underperformance likely would continue, in part because of weak foot traffic in malls.

White House Calls Immigration System Risky As Shutdown Looms

The White House said Tuesday that the current immigration system poses security risks to the U.S., as lawmakers returned to Washington to restart negotiations on immigration and government spending following the holiday weekend.

A possible government shutdown looms at week's end, when the current spending resolution runs out. Several Democrats have said they would withhold support for any funding deal that doesn't also protect from deportation young immigrants dubbed Dreamers.

Congressional aides say they are expecting another short-term deal, which would fund the government for a few weeks at current levels, to come to the table, but they caution that is by no means guaranteed. Aides said the prospects for any immigration deal had diminished after senators last week said President Donald Trump told lawmakers in a meeting that he wanted to stop immigration from "shithole countries."

Mr. Trump has denied having said that. Under questioning from several Senate Democrats at a hearing on Tuesday, Homeland Security Secretary Kirstjen Nielsen said she didn't hear the president use that term in the meeting, saying only that he used "tough language."

The Trump comments came after a bipartisan group of senators had announced a deal on immigration that was met with opposition from conservative lawmakers and some in the White House.

Google Plans To Build Out Undersea Cables

Google is expanding its sprawling network of undersea cables to plug into new regions around the world, in a bid to speed up its cloud-computing business and catch up to rivals Microsoft Corp. and Inc.

The search-engine operator has plans to build three new underwater fiberoptic cables lining ocean areas from the Pacific to the North Sea, extending its private data network to regions competitors haven't touched with similar projects.

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The cables, expected to be finished in 2019, are designed to speed the transfer of data and reroute users to servers around the globe if a region fails or gets overloaded.

Google said the investments could cost hundreds of millions of dollars but are worth the expense to get a better shot at the multibillion-dollar cloudcomputing market.

UnitedHealth: Tax Overhaul To Boost 2018 Earnings

UnitedHealth: Tax Overhaul To Boost 2018 Earnings

UnitedHealth Group said the federal tax overhaul will increase its 2018 earnings by roughly 16%, as it invests part of the windfall in technology and data initiatives.

The health-care giant also beat analysts' expectations on its fourth-quarter earnings, but investors are likely to focus even more closely on the first concrete preview of the tax law's impact on the managed-care industry. UnitedHealth said the overhaul would likely boost its cash flow by about $1.7 billion this year. The company also said it thought benefits of the tax overhaul would be sustainable over time, though it refrained from offering details of its 2019 outlook.

UnitedHealth raised its 2018 earnings outlook to between $11.65 and $11.95 per share, from $10 to $10.30 previously; the new net earnings projection amounts to a range of $11.48 billion to $11.78 billion. The company's adjusted earnings guidance became $12.30 to $12.60 a share, compared with $10.55 to $10.85 previously.

The new range roughly matched the expectations of those analysts who had already adjusted their outlooks to account for the tax overhaul, according to analyst Peter Costa of Wells Fargo, who calculated their average projection at around $12.50 a share. UnitedHealth's corporate-tax rate will drop to roughly 24% from approximately 37% previously.

Maersk and IBM Partner on Blockchain for Global Trade

Shipping giant A.P. Moller-Maersk is the latest company jump onto the blockchain train.

Maersk, which owns the world's biggest container operator, said Tuesday that it will enter a joint venture with International Business Machines Corp. to create a more efficient and secure platform for organizing global trade using blockchain technology.

The companies, which began collaborating on the new technology in 2016, said the new company's platform could be used to streamline operations for the entire global shipping ecosystem. Large companies such as DowDuPont Inc. already have piloted the platform.

The idea came from the current stack of paperwork needed to process and track the shipping of goods. Maersk said the maximum cost of the required trade documentation to process and administer many of the goods shipped each year is estimated to reach one-fifth of the actual physical transportation costs.

The companies said blockchain, the technology behind increasingly popular cryptocurrencies such as bitcoin, is ideal for organizing large networks with different partners like the shipping industry, which transports more that $4 trillion goods a year.

Energizer to Buy Spectrum's Batteries Unit for $2 Billion

Energizer and Rayovac batteries will soon be under the same roof.

Energizer Holdings Inc. said Tuesday it will buy Spectrum Brands Holdings Inc.'s battery and portable lighting business for $2 billion in cash.

The St. Louis-based company said the deal will allow it to better compete in

The St. Louis-based company said the deal will allow it to better compete in Europe and Latin America. Spectrum's battery portfolio includes Varta and Rayovac brands and generated $866 million in revenue last year.

Spectrum, based in Middleton, Wis., said it plans to use the proceeds to reduce debt and reinvest in its core businesses, including through acquisitions. Its remaining businesses include hardware, home and garden improvement, auto care and pet care.

Spectrum said earlier this month it was looking at options for its batteries and appliances business. It said is still looking for a buyer for its appliances business.

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From Dow Jones Wealth Management

Rethinking The Performance Review

By Lee DeLorenzo

Several years ago I noticed that everyone in my 22-person firm dreaded the annual job review. Managers felt like their employees were focused on showing excellence only during the month leading up to their review, while employees felt like their managers were giving them a laundry list of everything they'd done wrong in the month before the review.

To avoid this short-lived focus on employee performance and to create a company culture that was more focused on employees growing within their roles, and good stewardship of our clients and each other, I decided to transform the structure of our job reviews.

Instead of meeting annually, our firm now holds what we call quarterly excellence objectives between employees and their supervisors. Employees and their managers have brief meetings where they assess the individual's performance, their growth in their role, and their adherence to company culture. By meeting more frequently, we avoid the negative anticipation associated with an annual review, and employees are focused on excellence all year round.

We've also expanded the scope of these meetings. Instead of looking only at an employee's performance, we look at two other areas: the employee's growth in his or her role and adherence to our company culture.

Evaluating growth depends on the employee and their specific goals. An employee might want to take an accounting class, read a particular book, or learn how to use PowerPoint. By focusing regularly on growth, we keep our employees from stagnating.

When focusing on company culture, we consider being good stewards to our clients and each other. If employees aren't willing to go above and beyond for another employee when they're in need, they're not going to do well here. The kinder we are and the more we're willing to do for each other and our clients, the better off everyone is.

These reviews are customizable and aren't static. For instance, if we have an adviser who's new to the firm, his or her review might focus more on growth within role than performance. When we're reviewing an employee like a

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