Thursday, October 29, 2009
Goodyear Tire (GT) came in ahead of revenue and earnings expectations yesterday morning, yet the stock traded down almost 20% on the day. The selloff continued today, with the stock falling another 3% today on a B0fA downgrade, down significantly from the 18.00 level from last Friday.
What spooked, if not enraged, investors, was management guiding to a North American segment operating loss for the 4th quarter, after eeking out a profit in Q3:
From the call:
"In North America we expect Q4 segment operating income to be down approximately $75 to $125 million compared with Q3 reflecting first the impact of seasonal trends on unit sales and reduced activity from our other tire related businesses; second sequentially higher raw material costs compared to Q3; and third, timing of recognition of unabsorbed fixed costs related to production cuts, which is an adverse impact compared with Q3. Again Quarter 4 is essentially in line with our plan for 2009."
"Unabsorbed fixed costs" is what had people scratching their heads. On the one hand, GT was bragging about the huge cost savings they'd achieved year to date. Then on the call they say that North American segment would go from a slight profit to a hundred million dollar loss to to extra employees sitting around. Inconsistent to say the least.
Disappointment over the guidance is warranted, but the stock may have over-reacted. Management said that overseas performance would be quite similar to Q3, and a look at those results showed Asia and Latin America did a hell of a job picking up where North America left off.
The stock's massive move off the $4 level in March probably included some extra optimism that was dashed by 4th quarter guidance.
I do NOT like that cash collection was unimpressive. Days sales outstanding (DSO's) were 62, up from 56 in March but still an improvement from last September's 68.
Bonnie - "Nice job. But didn't that come from a federal student loan?"
Ricky - "Yeah, why?"
That's how a cynic could read this GDP report, which (in its defense) points out where and how the government pumped up industries artificially. By all means, I want to see GDP return to growth and a recovering economy.
Note that GDP reporting is usually sequential, as in this September quarter compared to the June 2009 quarter. In most company analysis, results are compared to the year-ago period, so as to adjust for seasonal differences. (You wouldn't compare GapKids' back to school results with, say July numbers, right?) When looked at against last year's 3rd quarter, GDP actually declined 2.2%.
I hope that "actual" growth revives soon. But with unemployment continuing to rise and businesses saying that "real" economic activity is still very slow, I do not buy the argument that we're on the cusp of a recovery.
A recession is typically described as "a decline in GDP for two or more consecutive quarters." So then it IS accurate to call this the end of the recession. The issue is, what other recessions have been ended by similar government involvement, and is this improvement sustainable without free money for cars and houses?
The full report. Worth perusing, especially for the industry detail.
WASHINGTON (AP) -- The economy grew at a 3.5 percent pace in the third quarter, the best showing in two years, fueled by government-supported spending on cars and homes. The Commerce Department's report Thursday delivered the strongest signal yet that the economy entered a new, though fragile, phase of recovery and that the worst recession since the 1930s has ended. Many analysts expect the pace of the budding recovery to be plodding due to rising unemployment and continuing difficulties by both consumers and businesses to secure loans."
Google isn't charging for the service but said it could become ad-supported down the line. The free application receives live traffic feeds and automatically updates maps to keep them current, among other features."
Wednesday, October 28, 2009
What the commercial neglects to mention is that Ally Bank is the Internet arm of GMAC, which this morning is requesting a third government bailout. So Ally plays the good guy, by offering rates above the competition - SOLELY due to the government backing them up, because as the "financer" of necessity to the politically connected auto industry, they get all the money they want.
Other healthy banks are livid to see this kind of advertising, let alone the higher interest rates, from a bank who's business model failed and now relies on taxpayer money. From a Bloomberg article earlier this month:
“The government has created an artificial competitor,” said Christopher Whalen, managing director of Torrance, California-based Institutional Risk Analytics and creator of the IRA Bank Monitor, which rates the health of banks for consumers. “Every bank in the U.S. is at a disadvantage because our government is picking losers as winners.”
“It’s irritating for the community banking industry to see someone who has failed in their business dealings now turning around and saying they are so smart,” said Paul Merski, chief economist of the Independent Community Bankers of America in Washington, which represents almost 5,000 banks. GMAC’s rates “are way out of line with the rest of the industry.”
Gapping down this morning:
K-Sea Transportation (KSP) - down 18%,missed earnings by 58cents
Apollo Group (APOL) - down 15%, weak earnings and an SEC investigation.
Following a 2.6% drop in August, durable goods orders rose 1% in September.
The report showed investment will probably improve going into 2010. Bookings for non-defense capital goods excluding planes, a proxy for future business spending, increased 2 percent in September and were up 11 percent at an annual pace for the quarter.
Union workers at Ford do themselves no favor, voting down cost cuts.
Ford, the only one of the three Detroit automakers to avoid bankruptcy this year, says it needs the modifications to remain competitive with General Motors and Chrysler, whose workers agreed to similar deals in the spring. Compared to its crosstown rivals, Ford has been surging
In an increasingly bitter confrontation, Icahn has approached smaller bondholders in his competing plan to save CIT.
If he prevails in derailing CIT Group's debt-swap plan and gains control of the struggling lender, Carl Icahn said he'll combine the company's bank with the firm's factoring and vending businesses and then spin it off to shareholders
California, the 8th largest economy in the world, pays 1.5% higher interest rates to borrow money than private companies, largely due to weaker transparency.
Federal securities laws that exempt states, cities and school districts from disclosure rules that apply to corporations created an information vacuum that doesn’t help states get the favorable terms they deserve, and boosts yields on public debt issues. A 2008 study found that as many as 25 percent of municipal borrowers go three years or longer without giving investors any information.
Lavish, irresponsible spending has led Marc Ecko into the arms of Iconix Brands, losing control of his own name brand.
"I've had a crazy, wild ride. I've done a lot of things that have been naive," Ecko told The Post. "I'll take my lumps for a lot of things that, in retrospect, were a little indulgent. Life happens. I don't regret any of it."
Tuesday, October 27, 2009
The grants, which range from $400,000 to $200 million, will go to 100 companies, utilities, manufacturers, cities and other partners in 49 states.
"It is fair to say that the current (grid) system is certainly outdated. It's dilapidated," Carol Browner, the president's top adviser on climate change and energy issues, told reporters in a telephone briefing
While AIG was attempting to get clients to accept 40cents on the dollar for Credit Default Swaps it was on the hook for, Geither and the government boys insisted that they be paid out in full. Using taxpayer money. Not cool.
Part of a sentence in the document was crossed out. It contained a blank space that was intended to show the amount of the haircut the banks would take, according to people who saw the term sheet. After less than a week of private negotiations with the banks, the New York Fed instructed AIG to pay them par, or 100 cents on the dollar. The content of its deliberations has never been made public.
Turning Japanese? The US economy may be following their lead in propping up zombie banks that don't even use taxpayer largess to lend to new customers.
With the U.S. government stepping in to keep markets from clearing, today's U.S. economy in many ways resembles the post-bubble Japanese economy of the 1990s. Ultra-loose monetary policy and low demand for credit, combined with high unemployment and consumer deleveraging, could lead to a prolonged slump.
Maurice Greenberg, former leader of AIG, is poaching talent from the taxpayer bailed-out firm. If he competes well enough to push AIG into the abyss, the govt response will be interesting.
Even as he has been lambasting the government for its handling of A.I.G. after its near collapse, Mr. Greenberg has been quietly building up a family of insurance companies that could compete with A.I.G. To fill the ranks of his venture, C.V. Starr & Company, he has been hiring some people he once employed.
“Basically, he’s just starting ‘A.I.G. Two’ and raiding people out of ‘A.I.G. One,’ ” said Douglas A. Love, an insurance executive who has also hired A.I.G. talent for his company, Investors Guaranty Fund of Pembroke, Bermuda
“To me, it’s just going to be a matter of time before the valuation of what he’s building is greater than the valuation of A.I.G.,” said Andrew J. Barile, an insurance consultant in Rancho Santa Fe, Calif.
Monday, October 26, 2009
The full report:
GAO report on the FTHBC
This morning the company guided 2009 earnings down to about 65cents per share, below previous guidance of about 81cents.
Brian Moore, President and Chief Executive Officer of Symmetry Medical, stated, "In anticipation of a softer overall orthopaedic market in the second half of 2009, we had previously guided for a decrease in revenue and proactively implemented cost adjustments to maintain our earnings goals. Since our previous guidance announcement, and particularly in recent weeks, we have experienced greater than anticipated order reductions. We believe this change in order flow will result in a significant shortfall to our revenue and earnings per share, primarily in the fourth quarter."
Mr. Moore continued, "Despite this recent volatility across all segments of the business, we are encouraged by gains in market share we have realized as our customers consolidate suppliers and focus on assuring product quality and supplier stability. Our customers' recent quarterly results highlight their inventory utilization. While this created negative implications for our business in the near term, it should bode well for Symmetry in the future. In addition, our customers have placed a much renewed emphasis on supply chain management and have engaged us in discussions on our contribution to this process. We see these expanding relationships resulting in a mid to long term positive impact on our business.
Well, that's the danger of having one client account for 41% of revenues, according to the last 10q filed by Symmetry. That customer might be Zimmer Holdings (ZMH), whose shares are near 52week highs, as their new leaner inventory strategy improves financial performance while hurting Symmetry's. Hopefully Symmetry is accurate in their view that this temporary shakeup among customer ordering patterns will benefit it in the long term - but the market is certainly skeptical, sending shares down 20% today.
We haven’t seen anything quite like it since the merger of Time Warner and AOL. And that turned out well, right? Jeffrey Bewkes, the chief executive of Time Warner and a major competitor to both Comcast and NBC Universal, has seen this movie before and is glad his company is not the star this time. Ever since he took over the company, he’s been busy trying to undo the merger, spinning off the cable division of the company and planning to do the same with AOL. “Somebody has finally noticed that these things don’t work out so well,” Mr. Bewkes said at a media conference this month, according to Peter Kafka, of the blog Media Memo at AllThingsD. “We love to see our competitors taking risks.
“Quantitative easing has set off another sharp, and so far containable asset bubble,” Smithers said. “But if it gets too high and starts to come down then we’ll go straight back” into recession. The economist said that he stopped buying equities in the 1990s because ofexpensive valuations and began purchasing them again only for a brief period during the lows of the current crisis.
Google's Android operating system is encroaching big time on Microsoft's Windows Mobile clients.
Cellphone makers that have used Windows Mobile to run their top-of-the-line smartphones — including Samsung, LG, Kyocera, Sony Ericsson — are now also making Android devices. Twelve Android handsets have been announced this year, with dozens more expected next year. Motorola has dropped Windows Mobile from its line entirely in a switch to Android. HTC, a major cellphone maker, expects half its phones sold this year to run Android. Dell is using Android for its entry into the cellphone market.
Friday, October 23, 2009
Last night Amazon (AMZN) beat earnings handily, reporting EPS of 45cents versus the street's expectation of 33cents. Shares are up 26% today to $118, on volume of 46million shares with over an hour left before close. Crazy.
Thursday, October 22, 2009
The front page says that $14.6billion has been awarded, saving 30,082 jobs. The math on that should scare the hell out of anyone.
Colorado seems to be in the lead with 4,695 jobs.
Rhode Island saw 5.93 jobs saved or created. Five point nine three.
The index cruised higher today, up 128points to reclaim its >10,000 mark. Three components reported earning before the open.
-->>3M, almost a 6% weight in the index, beat revenue and earnings estimates, sending the stock +3.2%.
Shop Rock.com for all your official Rock band t-shirts and gear. Over 15,000 items in stock every day!
Wednesday, October 21, 2009
FROTHY! Did you know Apple is now worth more than General Electric, Procter & Gamble, and Google?
Steve Jobs is officially the king of Silicon Valley. The Apple CEO snagged the title yesterday when shares of Apple soared to a new yearly high and helped Apple's market cap sail past search-engine giant Google for the first time, reaching $179.3 billion, vs. Google's market cap of $174.3 billion. The stock run-up came amid a buying frenzy after Jobs pulled off another seemingly improbable feat of posting blockbuster results that even beat Wall Street's best estimates.
Among defense arguments for Raj Rajaratnam might be the issue that insider trading LOST him more money than it made him.
The press releases from the Securities and Exchange Commission highlighted about $20.6 million in alleged insider trades that worked. But The Times report indicates that one particularly bad series of 2008 trades involvingAdvanced Micro Devices Inc. more than wiped out that amount of money, losing Rajaratnam's Galleon Group more than $30 million.
As the USA debates how much debt our economy can service, Japan faces even higher indebtedness.
The finance minister, Hirohisa Fujii, suggested Tuesday that the government would sell 50 trillion yen, about $550 billion, in new bonds — or more. “There’s no mistaking the budget deficit stems from the past year’s global recession. Now is the time to be bold and issue more deficit bonds,” Mr. Fujii told reporters at the National Press Club in Tokyo. “Those who may call this pork-barrel spending — that’s a total lie.”
Despite roars over domestic artificial stimulus, China may be in more of a pickle.
The country’s rebound has been powered by 4 trillion yuan ($586 billion) ofspending on railways, roads, power plants and public housing. The program ends next year, forcing Premier Wen Jiabao to find new ways to sustain the expansion with increased consumer spending and the financing of small businesses.
One lender suggests we not aim anger over this mess at ALL banks.
The danger is that we will punish healthy banks for the sins of failed banks. Most bankers have behaved responsibly throughout the crisis. This is the wrong time to tie their hands. Instead, we need these banks to get back to their chartered roles: to provide financial resources to consumers and businesses — large and small, new and old.
But who wants them? Dubai, the country built as a mega-resort, thinks it can just sell more debt to repay existing. So irresponsible, do they think they're US?
The cost of protecting against a default on Dubai’s bonds for five years has fallen 70 percent from a two-year high in February, ranking it between Lithuania and Lebanon, data compiled by Bloomberg show. A successful repayment of the Islamic bond, on which investors were concerned Nakheel may default after a slump in property prices, will make it easier for banks to reschedule $12 billion of Dubai World’s debt that mature during the next three years, the bankers said.
Tuesday, October 20, 2009
The ishares Brazil index (EWZ) is off over 5%, dragging down other emerging markets indexes while the S&P500(^GSPC below) is down only a little.
-Component costs increased less than expected, helping the company report gross margins of 36.6%, over 2.5% higher than Apple's own estimates.
-Total cash and short-term investments at quarter-end were $34billion, or $37per share. They could buy Dell (DELL) and still have $4billion in cash left (actually $16billion, b/c of Dell's ridiculous $12billion cash hoard.)
-Ipod sales down 8% to 10million units, as iphone cannibalizes sales.
-Iphone sales of 7.4milion showed a 7% unit growth year-over-year.
The most important part of the release is the following:
"In accordance with the subscription accounting treatment required by GAAP, the Company recognizes revenue and cost of goods sold for iPhone™ and Apple TV® over their estimated economic lives. Adjusting GAAP sales and product costs to eliminate the impact of subscription accounting, the corresponding non-GAAP measures* for the quarter are $12.25 billion of “Adjusted Sales” and $2.85 billion of “Adjusted Net Income."
Due to the soon-to-be reversed accounting treatment for certain Apple products, the company must recognize revenue and costs for iphone over an extended period, even though CASH FLOW comes immediately. The effect is that "true" net income is 71% higher than the $1.67billion reported.
Apple in typical fashion sandbagged forward guidance (guided too low).
-->> Deutsche Bank raises earnings estimates, and takes the stock target to $250 from $225.
-->> Oppenheimer takes their stock target to $235 from $210
-->> Kaufman target increased to $235 from $214.
Looking to 2010, earnings are estimated at $8.50 per share, pointing to net income of $7.8billion. I estimate Free Cash Flow for 2010 of $11.9billion. Apple could trade at a FCFY(Free Cash Flow Yield) of 7% in a better economic environment, and adding to that the $37 per share of cash they have, the stock would trade at $224, or about 12% higher than where it is today. To get to a higher number, you have to believe that Apple will continue to blow away earnings estimates, earning closer to $10 per share in 2010. I wouldn't bet against it.
WSJ op-ed on the tragedy of Michigan's economy.
State lawmakers will soon face large budget deficits again, perhaps as much as $100 billion across the U.S. Here's some free budget-balancing advice: Steer clear of the Michigan model. The Wolverine state is once again set to run out of money, and it is once again poised to raise taxes even as jobs and businesses disappeared.
Worried about current policies, short-selling whiz David Einhorn is long gold.
he decided to invest in gold, even though futures hit a record price of $1,072 an ounce last week. Gold does well when "monetary and fiscal policies go awry," said the hedge-fund manager best known for shorting toppled investment bank Lehman Brothers. Specifically, Einhorn trashed the team's "too-big-to-fail" policy requiring taxpayers to prop up large, troubled institutions, like banks.
Not sure this is something to cheer, but Delaware court rulings may lead to more management-led buyouts.
One of the relics of 1980s deal-making was the large management buyout — such as the bid for RJR Nabisco — which has since seen its demise. But a recent decision in the Delaware Court of Chancery in the case of In Re John Q. Hammons Hotels, has the potential for bringing about a revival of this deal form.
After a massive insider trading bust, NYTimes examines the (sometimes) thin line between aggressive research and insider trading.
Some investment funds canvass doctors to scout out blockbuster drugs. Others pay meteorologists to forecast weather that will affect the price of oil and wheat. And still others hire corporate executives to provide an inside view of companies and industries. But now some of Wall Street’s biggest hedge funds are watching nervously as prosecutors say thatRaj Rajaratnam, a billionaire fund manager, went too far in this relentless quest for a trading edge.