Genentech Gets Its Groove Back
By JOHANNA BENNETT
AFTER MORE THAN TWO TUMULTUOUS years, shares of biotechnology giant Genentech have investors smiling again.
On Monday, the stock spiked almost 9% after U.S. regulators decided late Friday to approve Genentech's cancer drug Avastin as a treatment for advanced breast cancer, opening the door wider onto a $20 billion market for cancer therapies.
Up until then, Genentech's stock had fallen 28% since late 2005 -- when it closed at a record high $99.66 a share -- due to worries about its pipeline and key drug sales.
But some fans say Genentech could climb 20% or more in the next 12 to 18 months.
Efforts to find new markets for Avastin, already Genentech's top-selling drug, could add billions to future sales, and raise profits even faster than already expected.
"It's a reasonable multiple for this stock given the potential upside to earnings forecasts and the potential for Avastin," says Greg Dunn, an analyst with Thornburg Investment Management. "Despite the current premium, this stock looks attractive."
Some investment pros suggest waiting for a pullback before diving into the stock.
On Monday, several firms raised earnings estimates and hiked price targets. Zacks Investment Research upgraded the stock to Buy from Hold.
"We are seeing a change in sentiment towards Genentech," says Jason Kantor, an analyst with RBC Capital Markets.
Already approved for patients with colon, breast and lung cancer whose tumors have spread, Avastin is being studied as a treatment for kidney and brain tumors.
Meanwhile, Genentech and its majority shareholder, Swiss drug maker Roche, (see Weekday Trader, "Roche Offers Some Good Medicine," Feb. 13, 2008) are testing Avastin on colon, breast and lung cancer patients in the early stages of the disease.
This market could add up to $5 billion to annual revenues by 2012 and triple Avastin sales, says Eric Schmidt, an analyst with Cowen & Co.
"Avastin is a powerful tool, and if it proves to be effective in adjuvant [early stage of cancer] settings, its use will grow tremendously," says Dr. Julia Smith, director at the NYU Cancer Institute's Breast Cancer Screening and Prevention Program.
Founded in 1976, Genentech has grown into the world's second-largest biotechnology drug maker behind Amgen in sales by launching a string of novel drugs that treat blindness, asthma and cancer.
The company is something of a rarity, gaining size without relying on acquisitions.
It does, however, depend on its cancer drugs such as Avastin, Rituxan and Herceptin for 50% of revenues.
By 2009, sales of those three drugs could climb 42% to $8.3 billion, with Avastin reaching $3.7 billion, says RBC's Kantor.
Approved in 2004, Avastin was the first drug designed to starve tumors of their blood supply.
Since 2006, Genentech's new drug launches have lulled.
Genentech has 20 compounds in early-stage development, and insists that building its pipeline is its focus.
"We recognize that our success has raised the bar in terms of what our pipeline needs to look like to drive our continued growth," wrote Caroline Pecquet, a company spokeswoman, in an e-mail to Barron's Online.
For now, analysts say profits depend on finding new markets for older drugs.
Genentech expects to earn between $3.30 a share and $3.45 a share this year compared to $2.94 a share in 2007.
Rituxan has been approved as a treatment for rheumatoid arthritis. Later this year, clinical trial results are expected on lupus and multiple sclerosis.
But all eyes are fixed on Avastin.
The drug's prospects dulled last year. In December, a Food and Drug Administration advisory panel voted 5-4 against recommending Avastin as a breast cancer treatment saying it did not significantly prolong survival.
A study by Roche released Feb. 12 confirmed Avastin slowed cancer's march. And the FDA granted "accelerated approval" pending two studies expected later this year.
Meanwhile, a study testing Avastin on early-stage colon cancer patients is expected in late 2009, though data could get released sooner.
To be sure, Genentech's stock looks expensive by some standards.
At 22.4 times projected profits over the next four quarters, the shares trade at a 60% premium to the Standard & Poor's 500, according to Thomson Financial.
Still, the stock trades well below its five-year median. And the multiple has shrunk since Barron's Online wrote about Genentech in 2006, (see Weekday Trader, "Genentech Crowds the Medicine Cabinet," Oct. 18, 2006).
Genentech has "placed a lot of eggs in one or two baskets," says Steve Silver, an analyst with Standard & Poor's.
If Avastin sales falter or clinical trials fail, the stock will surely fall.
Big Pharma companies are challenging Genentech's cancer drugs. The company could lose royalty revenues if it fails to win an appeal of a recent patent decision.
Still, Genentech has a history of delivering and growing profits, and sits on $6.1 billion in cash and investments.
So as long as doctors use Avastin on more patients, it may be worth paying up for potent returns.
Friday, February 29, 2008
Wednesday, February 27, 2008
Harley Rides Into China, India
From Alpha
Q4 international sales for Harley Davidson (HOG) were up 17% and the company now has its sights set on blowing past that number. India's commerce ministry has now agreed to recognize European engine emission standards for motorcycle engines exceeding 800 cubic centimeters, a standard Harley's bikes already comply with. The door is now open to sell their bikes in one of the world's most populous countries. One hang up, a 60% tariff a various other taxes that cause the price of the bike to double. Harley is seeking a reduction in the tariff to 10%, a level comparable to other imported items in the country. They report having "regular contact" with government regulators on the subject.
Harley spokesperson Bob Klein said "this is step one". Already entering the Chinese market and with sales in Latin America and Europe very strong, HOG has proven its brand will sell very well outside the US.
While neither the China nor India ventures will contribute meaningfully in the near term bearing a blockbuster move, the groundwork is being set for explosive results down the road. Results, it should be noted, that will continue to be strong for decades given the populations of both countries.
Q4 international sales for Harley Davidson (HOG) were up 17% and the company now has its sights set on blowing past that number. India's commerce ministry has now agreed to recognize European engine emission standards for motorcycle engines exceeding 800 cubic centimeters, a standard Harley's bikes already comply with. The door is now open to sell their bikes in one of the world's most populous countries. One hang up, a 60% tariff a various other taxes that cause the price of the bike to double. Harley is seeking a reduction in the tariff to 10%, a level comparable to other imported items in the country. They report having "regular contact" with government regulators on the subject.
Harley spokesperson Bob Klein said "this is step one". Already entering the Chinese market and with sales in Latin America and Europe very strong, HOG has proven its brand will sell very well outside the US.
While neither the China nor India ventures will contribute meaningfully in the near term bearing a blockbuster move, the groundwork is being set for explosive results down the road. Results, it should be noted, that will continue to be strong for decades given the populations of both countries.
Virtualize This
S&P REITERATES STRONG BUY OPINION ON SHARES OF EMC CORP.
EMC; $15.77
EMC's VMWare unit (VMW) says major server makers IBM, Dell (DELL) and Hewlett-Packard (HPQ) will embed its server virtualization software in their servers. We think VMWare's lead over competitors in the space is substantial and the vast majority of the available market is untapped. In our view, VMWare benefits EMC's IT infrastructure leadership position, and EMC's 86% equity stake is also a valuable asset. We think EMC is undervalued on a price-to-book basis relative to peers. We keep our DCF and P/E-blended target price at $19.
EMC; $15.77
EMC's VMWare unit (VMW) says major server makers IBM, Dell (DELL) and Hewlett-Packard (HPQ) will embed its server virtualization software in their servers. We think VMWare's lead over competitors in the space is substantial and the vast majority of the available market is untapped. In our view, VMWare benefits EMC's IT infrastructure leadership position, and EMC's 86% equity stake is also a valuable asset. We think EMC is undervalued on a price-to-book basis relative to peers. We keep our DCF and P/E-blended target price at $19.
Big Blue Rock Solid
S&P REITERATES STRONG BUY ON SHARES OF IBM
IBM; $114.93
IBM authorized a $15 billion stock repurchase plan, and improved its 2008 EPS guidance to "at least $8.25" from a range of $8.20 to $8.30. Additionally, the company announced product enhancements for its mainframe software lines. We believe IBM's software offerings were enhanced by the completion of its acquisition of Cognos on January 31. Overall, we view the company's breadth of products, broad client base, and financial flexibility as attractive. We are maintaining our EPS estimates of $8.25 for 2008 and $9.30 for 2009, and our P/E-based 12-month target price of $140. /T. Smith, CFA
IBM; $114.93
IBM authorized a $15 billion stock repurchase plan, and improved its 2008 EPS guidance to "at least $8.25" from a range of $8.20 to $8.30. Additionally, the company announced product enhancements for its mainframe software lines. We believe IBM's software offerings were enhanced by the completion of its acquisition of Cognos on January 31. Overall, we view the company's breadth of products, broad client base, and financial flexibility as attractive. We are maintaining our EPS estimates of $8.25 for 2008 and $9.30 for 2009, and our P/E-based 12-month target price of $140. /T. Smith, CFA
Kudlow On Dems
From Larry Kudlow
Big Government Obama, Bush Tax Cuts & More
An old friend emailed last night, asking for some info on the Bush tax cuts. He also wanted some insight on the tax and spend proposals being bandied about by big government Obama, Hillary, and others out there.Here’s a portion of my response:Bush cut taxes by 21% for marrieds with 50k; 18% for marrieds with 75k; 17% for marrieds with 125K. Do people know this?Do people really believe that raising taxes at the top end will reduce taxes in the middle? Or grow the economy? Democrats proposing huge spending plans. Who will pay? Top earners? Or middle earners?Who will pay to fix social security and medicare entitlements? Or expanded health entitlements? Do people want a $65b government infrastructure bank? A $150b government bureaucracy for "green tech" projects?
Big Government Obama, Bush Tax Cuts & More
An old friend emailed last night, asking for some info on the Bush tax cuts. He also wanted some insight on the tax and spend proposals being bandied about by big government Obama, Hillary, and others out there.Here’s a portion of my response:Bush cut taxes by 21% for marrieds with 50k; 18% for marrieds with 75k; 17% for marrieds with 125K. Do people know this?Do people really believe that raising taxes at the top end will reduce taxes in the middle? Or grow the economy? Democrats proposing huge spending plans. Who will pay? Top earners? Or middle earners?Who will pay to fix social security and medicare entitlements? Or expanded health entitlements? Do people want a $65b government infrastructure bank? A $150b government bureaucracy for "green tech" projects?
Tuesday, February 26, 2008
More On HP
HEWLETT-PACKARD SHAREHOLDERS HAD every reason to celebrate last week, after the tech giant reported a 38% increase in first-quarter profits and painted a rosier near-term picture than many had expected. The company's shares (ticker: HPQ) rose 8% to 47.40 over the five-day span, and are likely to keep heading higher, along with sales and earnings.
H-P generates roughly two-thirds of its annual revenue overseas, which is "huge" in Bailey's view. The analyst notes that 85% of the personal-computer industry's growth will come from outside the U.S. and Europe in 2008. H-P also is pursuing opportunities in enterprise computing and other businesses, which are likely to pay big dividends in coming years.
H-P generates roughly two-thirds of its annual revenue overseas, which is "huge" in Bailey's view. The analyst notes that 85% of the personal-computer industry's growth will come from outside the U.S. and Europe in 2008. H-P also is pursuing opportunities in enterprise computing and other businesses, which are likely to pay big dividends in coming years.
More on Target
Please link to the below address for a more complete analysis of Target earnings.
http://biz.yahoo.com/bw/080226/20080226005266.html?.v=1
http://biz.yahoo.com/bw/080226/20080226005266.html?.v=1
Target Disappoints
NEW YORK, Feb 26 (Reuters) - Target Corp (TGT.N: Quote, Profile, Research) on Tuesday reported a lower quarterly profit after its shoppers spurned purchases of higher-margin merchandise like clothes in favor of necessities, like food and health-care items.
Target, the No. 2 U.S. discount retailer behind Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research), said profit fell to $1.028 billion, or $1.23 per share for its fiscal fourth quarter ended Feb. 2, from $1.119 billion, or $1.29 per share, a year earlier.
Target's results come a week after Wal-Mart posted a better-than-expected 4 percent rise in its fourth-quarter earnings, as cash-strapped shoppers headed to its U.S. stores in search of cheaper groceries.
Sales at Target had been outpacing those at Wal-Mart, but they have faltered in recent months as its shoppers, worried about the weakening U.S. economy, pull back on purchases of discretionary items like clothes and jewelry.
Target had warned that its fourth-quarter earnings per share would decline compared with a year earlier. (Reporting by Nicole Maestri, editing by Dave Zimmerman)
Target, the No. 2 U.S. discount retailer behind Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research), said profit fell to $1.028 billion, or $1.23 per share for its fiscal fourth quarter ended Feb. 2, from $1.119 billion, or $1.29 per share, a year earlier.
Target's results come a week after Wal-Mart posted a better-than-expected 4 percent rise in its fourth-quarter earnings, as cash-strapped shoppers headed to its U.S. stores in search of cheaper groceries.
Sales at Target had been outpacing those at Wal-Mart, but they have faltered in recent months as its shoppers, worried about the weakening U.S. economy, pull back on purchases of discretionary items like clothes and jewelry.
Target had warned that its fourth-quarter earnings per share would decline compared with a year earlier. (Reporting by Nicole Maestri, editing by Dave Zimmerman)
Friday, February 22, 2008
Whole Foods Update
In 1980, the first Whole Foods Market (WFMI) was opened by John Mackey, a liberal, tree-embracing bohemian with a vision of human and earth symbiosis. With the most righteous of intentions, Mackey grew his business into the nation’s largest natural food vendor. Today, Whole Foods is a hot-spot for health nuts and selective shoppers alike. Listening to Whole Foods’ management, you get the sense that these people are genuinely out there to improve everybody’s wellbeing, especially by helping us get healthier.
As it turns out, the best way to do that is by growing Whole Foods into a mammoth corporation, even if that means eating up the competition. On August 28, it acquired Wild Oats, the next largest competitor, and consequentially has control of practically the entire organic grocery industry now. In fact, the Federal Trade Commission thinks they have a monopoly but the reality is there are plenty of supermarket competitors out there, from Kroger to Safeway; they just aren’t as health-friendly as Whole Foods. Management has plans in place to take advantage of its market leadership position and they fully expect the Company to become the nation’s #1 health guru. When you have true concern for your customers, success inevitably seems to follow. One Company that follows similar guidelines is Google (GOOG), which has a nice $163 billion market capitalization. Google strives to provide unbiased, fair search results as it follows a company motto of “don’t be evil.” The moral of the story: always bet on the good guy, because ultimately he will head in the right direction; up.
Whole Foods is a great example of a modern, progressive Company that is ahead of the curve. Fatty, colored, preserved, brand name foods no longer hold the same value that they once did, and the well-being of body and environment are becoming more and more a part of the “in” society. The Company has a massive competitive advantage in the fact that it is now the only major organic grocer in the country. It already charges a premium for the majority of its products, which should only increase as synergies from the Wild Oats acquisitions are realized. Other supermarkets are trying to break into the huge market that has become the organic food industry, but selling “normal” food alongside organic food does not have the same market penetration, and the variety is not near what Whole Foods offers. As food prices have soared in recent months, led by increases from corn and wheat, Whole Foods has not seen a significant dent in sales. In fact, as conventional foods become more expensive, the premium products Whole Foods offers actually become a bit more attractive from a relative value standpoint.
Organic food revenue has been increasing at an annual rate of approximately 18.7%, and there are no signs of it slowing down. In 1997, organic food represented 0.8% of the entire food market and by the end of 2006 it was 2.8%. Whole Foods gathered roughly 35% of U.S. organic food revenue last year, approximately $5.8 billion, and this was before the acquisition of the second largest player in the space, Wild Oats. Including Wild Oats, Whole Foods will account for almost half of all U.S. organic food revenue. Another point deserving mention is that Whole Foods opened a record twenty-one stores during its fiscal year 2007, and it plans to open just as many in 2008. In a market that can grow between 15% and 20% in any given year, business looks promising for Whole Foods, especially if it is able to gain relative market share for itself. By averaging the annual growth rates of organic and total food sales from 1997 through 2006 and applying this average rate, one finds that organic food sales should be roughly $33 billion by 2010, representing 4.8% of the total food market. Whole Foods’ management stated that it expects to generate over $12 billion of revenue by 2010 and as such, it would command over 1% of the U.S. food market.
As a long-term buy and hold, Whole Foods is highly promising and its future looks bright for years to come. In a few years it will surely be a nationwide icon of organic nutrition. The Company is currently in the middle of an exhaustive integration effort to incorporate Wild Oats into its operations, and therefore I would not recommend it as a short term play, as value will not increase significantly for some time. The Company will be spending heavily all year and its expenses will be high, which represents a good opportunity to invest in the Company on weakness. The stock value should stay relatively flat throughout 2008 before accelerating sometime next year as new store openings and improvements start paying off. With a dividend yield of 2.13, the stock represents a solid value play until management is able to fully integrate the Wild Oats acquisition and begin to benefit from the synergies.
Written by David Urani a Research Analyst for Wall Street Strategies (www.wstreet.com) specializing in the homebuilding, staffing, medical devices, and logistical services industries.
As it turns out, the best way to do that is by growing Whole Foods into a mammoth corporation, even if that means eating up the competition. On August 28, it acquired Wild Oats, the next largest competitor, and consequentially has control of practically the entire organic grocery industry now. In fact, the Federal Trade Commission thinks they have a monopoly but the reality is there are plenty of supermarket competitors out there, from Kroger to Safeway; they just aren’t as health-friendly as Whole Foods. Management has plans in place to take advantage of its market leadership position and they fully expect the Company to become the nation’s #1 health guru. When you have true concern for your customers, success inevitably seems to follow. One Company that follows similar guidelines is Google (GOOG), which has a nice $163 billion market capitalization. Google strives to provide unbiased, fair search results as it follows a company motto of “don’t be evil.” The moral of the story: always bet on the good guy, because ultimately he will head in the right direction; up.
Whole Foods is a great example of a modern, progressive Company that is ahead of the curve. Fatty, colored, preserved, brand name foods no longer hold the same value that they once did, and the well-being of body and environment are becoming more and more a part of the “in” society. The Company has a massive competitive advantage in the fact that it is now the only major organic grocer in the country. It already charges a premium for the majority of its products, which should only increase as synergies from the Wild Oats acquisitions are realized. Other supermarkets are trying to break into the huge market that has become the organic food industry, but selling “normal” food alongside organic food does not have the same market penetration, and the variety is not near what Whole Foods offers. As food prices have soared in recent months, led by increases from corn and wheat, Whole Foods has not seen a significant dent in sales. In fact, as conventional foods become more expensive, the premium products Whole Foods offers actually become a bit more attractive from a relative value standpoint.
Organic food revenue has been increasing at an annual rate of approximately 18.7%, and there are no signs of it slowing down. In 1997, organic food represented 0.8% of the entire food market and by the end of 2006 it was 2.8%. Whole Foods gathered roughly 35% of U.S. organic food revenue last year, approximately $5.8 billion, and this was before the acquisition of the second largest player in the space, Wild Oats. Including Wild Oats, Whole Foods will account for almost half of all U.S. organic food revenue. Another point deserving mention is that Whole Foods opened a record twenty-one stores during its fiscal year 2007, and it plans to open just as many in 2008. In a market that can grow between 15% and 20% in any given year, business looks promising for Whole Foods, especially if it is able to gain relative market share for itself. By averaging the annual growth rates of organic and total food sales from 1997 through 2006 and applying this average rate, one finds that organic food sales should be roughly $33 billion by 2010, representing 4.8% of the total food market. Whole Foods’ management stated that it expects to generate over $12 billion of revenue by 2010 and as such, it would command over 1% of the U.S. food market.
As a long-term buy and hold, Whole Foods is highly promising and its future looks bright for years to come. In a few years it will surely be a nationwide icon of organic nutrition. The Company is currently in the middle of an exhaustive integration effort to incorporate Wild Oats into its operations, and therefore I would not recommend it as a short term play, as value will not increase significantly for some time. The Company will be spending heavily all year and its expenses will be high, which represents a good opportunity to invest in the Company on weakness. The stock value should stay relatively flat throughout 2008 before accelerating sometime next year as new store openings and improvements start paying off. With a dividend yield of 2.13, the stock represents a solid value play until management is able to fully integrate the Wild Oats acquisition and begin to benefit from the synergies.
Written by David Urani a Research Analyst for Wall Street Strategies (www.wstreet.com) specializing in the homebuilding, staffing, medical devices, and logistical services industries.
More On HP
From Alpha
Are we in a recession? Hewlett Packard says a resounding NO.
Hewlett Packard (NYSE: HPQ) joined Microsoft (MSFT) and IBM (IBM) in producing excellent results. HP announced its first quarter results on Tuesday and beat all market expectations. With revenues of $28.5 billion, the company recorded a 13% growth over $25.1 billion reported in the same period last year. Sequentially, the revenue was up marginally by 0.7% from $28.3 billion for the previous quarter. The revenues were higher than market expectations of $27.6 billion.
Sequentially, the earnings (non-GAAP) were flat at $0.86 per share. However, it was substantially higher than market expectations of $0.81 per share, and 33% higher than last year’s $0.65 per share.
HP has been focusing on building its presence in emerging markets. This is evident in its current quarter's results. Forty percent of the revenues were from U.S. markets, 43% from EMEA (Europe, the Middle East and Africa), and 17% from Asia Pacific. In the previous year, the Americas contributed 41%, EMEA 43%, and Asia Pacific 16%. Year-on-year, the highest growth was reported in the Asia Pacific segment with 22%, followed by EMEA growth of 15% and America’s 8%. [Read: HP Looks Recession Proof.]
Segment-wise, Imaging and Printing [IPG] revenues of $7.3 billion were up 4% year-on-year and contributed 26% of the overall revenue. The Personal Systems Group (PSG) brought in 38%, Services brought in 15%, and Enterprise Storage & Servers [ESS] brought in 17% of the revenues. Financial Services and Software each contributed 2% to the revenue pie.
HP spent $3.3 billion on share repurchases in Q1, and expects similar volume of repurchases in the coming quarters.
In terms of outlook, HP expects annual revenues to be between $113.5 and $114 billion compared to market expectations of $112 billion. Sequentially, Q2 revenue outlook of $27.7 to $27.9 billion is higher than market expectations of $27.5 billion.
With the company's view of unfavorable component pricing environment – especially in the memory segment, HP expects a lower non-GAAP EPS of $0.83 to $0.84 which is marginally higher than analyst view of $0.82. For fiscal 2008, non-GAAP EPS outlook is at $3.50 to $3.54 higher than market expectations of $3.37.
In the extended hours trading session on Tuesday, the stock rose 5%, before settling down at $43.95, which is up $0.08 from the previous close of $43.87. On Wednesday morning, it was trading around $47.50, which injected a huge dose of desperately sought positive momentum into the rest of the technology sector.
click to enlarge
Despite a market cap of $113.1 billion, HP has delivered returns comparable to small-cap growth stocks. It is impeccably managed, with tight cost controls, and a well-thought out growth strategy. It is a true blue-chip that has regained its stride in a wonderful way.
Are we in a recession? Hewlett Packard says a resounding NO.
Hewlett Packard (NYSE: HPQ) joined Microsoft (MSFT) and IBM (IBM) in producing excellent results. HP announced its first quarter results on Tuesday and beat all market expectations. With revenues of $28.5 billion, the company recorded a 13% growth over $25.1 billion reported in the same period last year. Sequentially, the revenue was up marginally by 0.7% from $28.3 billion for the previous quarter. The revenues were higher than market expectations of $27.6 billion.
Sequentially, the earnings (non-GAAP) were flat at $0.86 per share. However, it was substantially higher than market expectations of $0.81 per share, and 33% higher than last year’s $0.65 per share.
HP has been focusing on building its presence in emerging markets. This is evident in its current quarter's results. Forty percent of the revenues were from U.S. markets, 43% from EMEA (Europe, the Middle East and Africa), and 17% from Asia Pacific. In the previous year, the Americas contributed 41%, EMEA 43%, and Asia Pacific 16%. Year-on-year, the highest growth was reported in the Asia Pacific segment with 22%, followed by EMEA growth of 15% and America’s 8%. [Read: HP Looks Recession Proof.]
Segment-wise, Imaging and Printing [IPG] revenues of $7.3 billion were up 4% year-on-year and contributed 26% of the overall revenue. The Personal Systems Group (PSG) brought in 38%, Services brought in 15%, and Enterprise Storage & Servers [ESS] brought in 17% of the revenues. Financial Services and Software each contributed 2% to the revenue pie.
HP spent $3.3 billion on share repurchases in Q1, and expects similar volume of repurchases in the coming quarters.
In terms of outlook, HP expects annual revenues to be between $113.5 and $114 billion compared to market expectations of $112 billion. Sequentially, Q2 revenue outlook of $27.7 to $27.9 billion is higher than market expectations of $27.5 billion.
With the company's view of unfavorable component pricing environment – especially in the memory segment, HP expects a lower non-GAAP EPS of $0.83 to $0.84 which is marginally higher than analyst view of $0.82. For fiscal 2008, non-GAAP EPS outlook is at $3.50 to $3.54 higher than market expectations of $3.37.
In the extended hours trading session on Tuesday, the stock rose 5%, before settling down at $43.95, which is up $0.08 from the previous close of $43.87. On Wednesday morning, it was trading around $47.50, which injected a huge dose of desperately sought positive momentum into the rest of the technology sector.
click to enlarge
Despite a market cap of $113.1 billion, HP has delivered returns comparable to small-cap growth stocks. It is impeccably managed, with tight cost controls, and a well-thought out growth strategy. It is a true blue-chip that has regained its stride in a wonderful way.
Thursday, February 21, 2008
Blackberries Are Good For Your Portfolio
WATERLOO, ONTARIO--(MARKET WIRE)--Feb 21, 2008 -- Research In Motion Limited (RIM) (NasdaqGS:RIMM - News)(Toronto:RIM.TO - News) today provided an update on forecasted net subscriber account additions for the fiscal fourth quarter ending March 1, 2008.
RIM now expects net subscriber account additions for Q4 to be approximately 15-20% higher than the 1.82 million net subscriber account additions forecasted by RIM on December 20, 2007. The total BlackBerry® subscriber account base is expected to be approximately 14 million at the end of the quarter.
"BlackBerry smartphones proved to be a big hit throughout the holiday selling season and we're pleased to see RIM's business momentum continuing in the new year," said Jim Balsillie, Co-CEO at RIM. "The seasonal slowdown in net subscriber account additions that we expected in the new year did not occur and our focused execution with partners has continued to produce strong results within both enterprise and consumer segments."
RIM continues to expect Q4 revenue and earnings per share to be within the ranges previously forecast in December. Revenue for the fourth quarter is expected to be in the range of $1.80 - $1.87 billion. Earnings per share for the fourth quarter are expected to be in the range of $0.66 - $0.70 per share diluted.
The number of net subscriber accounts and net subscriber account additions is a non-financial metric and should not be relied upon as an indicator of RIM's financial performance. The number of net subscriber accounts and net subscriber account additions does not have any standardized meaning prescribed by U.S. GAAP and may not be comparable to similar metrics presented by other companies.
RIM will report actual Q4 financial results, including actual net subscriber account additions, and hold its quarterly and year end results conference call, on April 2, 2008.
RIM now expects net subscriber account additions for Q4 to be approximately 15-20% higher than the 1.82 million net subscriber account additions forecasted by RIM on December 20, 2007. The total BlackBerry® subscriber account base is expected to be approximately 14 million at the end of the quarter.
"BlackBerry smartphones proved to be a big hit throughout the holiday selling season and we're pleased to see RIM's business momentum continuing in the new year," said Jim Balsillie, Co-CEO at RIM. "The seasonal slowdown in net subscriber account additions that we expected in the new year did not occur and our focused execution with partners has continued to produce strong results within both enterprise and consumer segments."
RIM continues to expect Q4 revenue and earnings per share to be within the ranges previously forecast in December. Revenue for the fourth quarter is expected to be in the range of $1.80 - $1.87 billion. Earnings per share for the fourth quarter are expected to be in the range of $0.66 - $0.70 per share diluted.
The number of net subscriber accounts and net subscriber account additions is a non-financial metric and should not be relied upon as an indicator of RIM's financial performance. The number of net subscriber accounts and net subscriber account additions does not have any standardized meaning prescribed by U.S. GAAP and may not be comparable to similar metrics presented by other companies.
RIM will report actual Q4 financial results, including actual net subscriber account additions, and hold its quarterly and year end results conference call, on April 2, 2008.
Wednesday, February 20, 2008
HP Earnings Surprise
NEW YORK (MarketWatch) -- Shares of Hewlett-Packard Co. headed higher in premarket trading Wednesday on the heels of its first-quarter earnings release.
After the bell Tuesday, the high-tech heavyweight reported a 38% rise in first-quarter earnings that were driven in large part by strong sales of notebook and desktop PCs.
In addition, Hewlett-Packard stepped up its outlook for the remainder of the year, cooling fears of a slowdown in tech spending that has hit other big players in the space in recent weeks. Shares climbed 4.3% to $45.85 in Wednesday premarket trading.
In a research note issued Wednesday, analysts at Thomas Weisel Partners wrote, "We believe the raised EPS guidance is a result of expected improving business mix and better-than-expected cost reductions resulting from consolidation of IT infrastructure and real estate footprint." They maintained a market-weight rating on the stock.
The world's No. 1 personal computer company said it earned $2.1 billion, or 80 cents a share, compared with $1.5 billion, or 55 cents a share, in the year-ago period. Revenue rose 13% to $28.5 billion from last year's $25.1 billion. Excluding charges and one-time items, H-P would have earned $2.3 billion, or 86 cents a share.
HPQ 43.95, +0.08, +0.2%) beat the estimates of analysts surveyed by Thomson Financial, who forecast the company to earn 81 cents a share on $27.6 billion in sales.
The results were seen as a barometer for the tech sector, which has put in a mixed performance over recent months due to concerns over financial issues and a slowdown in the U.S. economy.
"Our growth was in multiple segments and multiple markets," said Hurd, who noted that during the quarter, 69% of H-P's sales came from outside the U.S.
Among its main business areas, H-P said personal systems, or PC sales, rose 24% from a year ago to $10.8 billion, as total unit shipments climbed 27%. Notebook PC sales totaled $5.66 billion, up 37% from a year ago, and desktop revenue rose 15% to $4.4 billion. The division reported an operating profit of $628 million, up from last year's $414 million.
"In light of the difficult macro economic environment, the H-P results look very solid all around," said Shaw Wu, who covers H-P at American Technology Research.
Imaging and printing remained H-P's most-profitable business area, with an operating profit of $1.2 billion, up slightly from $1.1 billion a year ago. Revenue for the group was up 4% from a year ago to $7.3 billion.
But while most of H-P consumer and commercial printing areas posted improvements over a year ago, the company's consumer printer hardware unit shipments slipped by 2% from last year's first quarter.
Hurd said the results were impacted somewhat by the company halting the production of its own digital cameras and putting more emphasis on graphic arts and commercial printing as part of H-P's Print 2.0 business campaign.
Wu added that H-P's PC and printing results "actually came in better than expected," indicating that the company is continuing to take market share from its top rivals. Wu has a buy rating on H-P's stock.
Among H-P's other business areas, enterprise storage and servers reported operating profit of $673 million on $4.8 billion in sales. Blade server sales rose 81% from a year ago, while industry-standard server revenue grew by 11% and storage sales rose 10% over the prior year.
H-P's software business saw its operating profit nearly triple from a year ago to $51 million and sales rose 11% to $666 million. H-P services division reported operational earnings of $489 million, while revenue grew 11% to $4.4 billion from last year's $3.93 billion.
Hurd also said that for H-P's second quarter, the company expects to earn 77 cents to 78 cents a share on revenue in a range of $27.7 billion to $27.9 billion. Excluding one-time items, H-P estimates it will earn between 83 cents and 84 cents a share. Analysts had forecast H-P to earn 82 cents a share on $27.4 billion in sales
After the bell Tuesday, the high-tech heavyweight reported a 38% rise in first-quarter earnings that were driven in large part by strong sales of notebook and desktop PCs.
In addition, Hewlett-Packard stepped up its outlook for the remainder of the year, cooling fears of a slowdown in tech spending that has hit other big players in the space in recent weeks. Shares climbed 4.3% to $45.85 in Wednesday premarket trading.
In a research note issued Wednesday, analysts at Thomas Weisel Partners wrote, "We believe the raised EPS guidance is a result of expected improving business mix and better-than-expected cost reductions resulting from consolidation of IT infrastructure and real estate footprint." They maintained a market-weight rating on the stock.
The world's No. 1 personal computer company said it earned $2.1 billion, or 80 cents a share, compared with $1.5 billion, or 55 cents a share, in the year-ago period. Revenue rose 13% to $28.5 billion from last year's $25.1 billion. Excluding charges and one-time items, H-P would have earned $2.3 billion, or 86 cents a share.
HPQ 43.95, +0.08, +0.2%) beat the estimates of analysts surveyed by Thomson Financial, who forecast the company to earn 81 cents a share on $27.6 billion in sales.
The results were seen as a barometer for the tech sector, which has put in a mixed performance over recent months due to concerns over financial issues and a slowdown in the U.S. economy.
"Our growth was in multiple segments and multiple markets," said Hurd, who noted that during the quarter, 69% of H-P's sales came from outside the U.S.
Among its main business areas, H-P said personal systems, or PC sales, rose 24% from a year ago to $10.8 billion, as total unit shipments climbed 27%. Notebook PC sales totaled $5.66 billion, up 37% from a year ago, and desktop revenue rose 15% to $4.4 billion. The division reported an operating profit of $628 million, up from last year's $414 million.
"In light of the difficult macro economic environment, the H-P results look very solid all around," said Shaw Wu, who covers H-P at American Technology Research.
Imaging and printing remained H-P's most-profitable business area, with an operating profit of $1.2 billion, up slightly from $1.1 billion a year ago. Revenue for the group was up 4% from a year ago to $7.3 billion.
But while most of H-P consumer and commercial printing areas posted improvements over a year ago, the company's consumer printer hardware unit shipments slipped by 2% from last year's first quarter.
Hurd said the results were impacted somewhat by the company halting the production of its own digital cameras and putting more emphasis on graphic arts and commercial printing as part of H-P's Print 2.0 business campaign.
Wu added that H-P's PC and printing results "actually came in better than expected," indicating that the company is continuing to take market share from its top rivals. Wu has a buy rating on H-P's stock.
Among H-P's other business areas, enterprise storage and servers reported operating profit of $673 million on $4.8 billion in sales. Blade server sales rose 81% from a year ago, while industry-standard server revenue grew by 11% and storage sales rose 10% over the prior year.
H-P's software business saw its operating profit nearly triple from a year ago to $51 million and sales rose 11% to $666 million. H-P services division reported operational earnings of $489 million, while revenue grew 11% to $4.4 billion from last year's $3.93 billion.
Hurd also said that for H-P's second quarter, the company expects to earn 77 cents to 78 cents a share on revenue in a range of $27.7 billion to $27.9 billion. Excluding one-time items, H-P estimates it will earn between 83 cents and 84 cents a share. Analysts had forecast H-P to earn 82 cents a share on $27.4 billion in sales
Tuesday, February 19, 2008
Martha Stewart Living Update
NEW YORK - Martha Stewart Living Omnimedia Inc. is bringing in a new celebrity: popular TV chef Emeril Lagasse.
The New York-based media and merchandising company founded by domesticity maven Martha Stewart announced Tuesday that it bought the rights to the Emeril Lagasse franchise of cookbooks, television shows and kitchen products for $45 million in cash and $5 million in stock at closing.
The final price could rise to up to $70 million if certain benchmarks are achieved.
The company did not acquire Emeril's Homebase, which includes Lagasse's 11 restaurants and corporate office.
Martha Stewart Living said the deal will "contribute immediately to our performance," adding $8 million in earnings before interest, taxes, depreciation and amortization. The acquired assets generated $14 million in revenue in 2007.
Martha Stewart Living expects the deal to close in the second quarter.
Lagasse joined the Food Network in 1993 and has hosted over 1,600 shows. His programs "The Essence of Emeril" and "Emeril Live" reach more than 85 million homes daily.
The New York-based media and merchandising company founded by domesticity maven Martha Stewart announced Tuesday that it bought the rights to the Emeril Lagasse franchise of cookbooks, television shows and kitchen products for $45 million in cash and $5 million in stock at closing.
The final price could rise to up to $70 million if certain benchmarks are achieved.
The company did not acquire Emeril's Homebase, which includes Lagasse's 11 restaurants and corporate office.
Martha Stewart Living said the deal will "contribute immediately to our performance," adding $8 million in earnings before interest, taxes, depreciation and amortization. The acquired assets generated $14 million in revenue in 2007.
Martha Stewart Living expects the deal to close in the second quarter.
Lagasse joined the Food Network in 1993 and has hosted over 1,600 shows. His programs "The Essence of Emeril" and "Emeril Live" reach more than 85 million homes daily.
HP Outlook
By Larry Dignan
Hewlett-Packard (HPQ) reports its fiscal first quarter earnings today after the close, and all eyes will be on the company’s outlook for demand.
Among the key questions: What’s the PC unit growth picture amid slowing consumer demand? Will printers be weaker than expected? And will enterprise demand remain steady?
HP is expected to report pro forma earnings of 81 cents a share on revenue of $27.59 billion That’s down from the seasonal strong fourth quarter where HP delivered revenue of $28.3 billion and pro forma earnings of 86 cents a share.
Here’s a look at the key items:
PC demand. Given Best Buy’s warning about January consumer demand it would be logical to assume that HP’s PC sales may fall short of expectations. Credit Suisse is estimating PC unit growth of 25 percent, but notes that 22 percent growth is possible. The last three quarters have delivered PC unit growth of 30 percent or more. Balancing that potential slowdown, however, would be better component pricing. For instance, Citigroup notes that DRAM prices feel 40 percent to 45 percent and that decline should support profit margins in HP’s PC group.
Server demand. HP is expected to show server unit growth of about 12 percent. Credit Suisse is expecting server revenue of $4.7 billion. Overall enterprise revenue–servers, software and services–is expected to remain solid.
What’s the deal with printer sales? HP is obviously the big dog when it comes to printer market share, but it stands to reason that consumers could cut back here.
Overall, analysts haven’t budged much with HP’s earnings outlook. Bear Stearns analyst Andy Neff said in a research note that HP’s outlook for the first quarter was already conservative so any slowdown may be baked in. The one wild card is whether HP doesn’t raise its outlook for the second quarter. HP is expected to report earnings of 82 cents a share in its fiscal second quarter.
Given that Cisco, Best Buy and Ingram Micro have indicated that January was a rough month for demand, it’s hard to see HP being overly optimistic.
Hewlett-Packard (HPQ) reports its fiscal first quarter earnings today after the close, and all eyes will be on the company’s outlook for demand.
Among the key questions: What’s the PC unit growth picture amid slowing consumer demand? Will printers be weaker than expected? And will enterprise demand remain steady?
HP is expected to report pro forma earnings of 81 cents a share on revenue of $27.59 billion That’s down from the seasonal strong fourth quarter where HP delivered revenue of $28.3 billion and pro forma earnings of 86 cents a share.
Here’s a look at the key items:
PC demand. Given Best Buy’s warning about January consumer demand it would be logical to assume that HP’s PC sales may fall short of expectations. Credit Suisse is estimating PC unit growth of 25 percent, but notes that 22 percent growth is possible. The last three quarters have delivered PC unit growth of 30 percent or more. Balancing that potential slowdown, however, would be better component pricing. For instance, Citigroup notes that DRAM prices feel 40 percent to 45 percent and that decline should support profit margins in HP’s PC group.
Server demand. HP is expected to show server unit growth of about 12 percent. Credit Suisse is expecting server revenue of $4.7 billion. Overall enterprise revenue–servers, software and services–is expected to remain solid.
What’s the deal with printer sales? HP is obviously the big dog when it comes to printer market share, but it stands to reason that consumers could cut back here.
Overall, analysts haven’t budged much with HP’s earnings outlook. Bear Stearns analyst Andy Neff said in a research note that HP’s outlook for the first quarter was already conservative so any slowdown may be baked in. The one wild card is whether HP doesn’t raise its outlook for the second quarter. HP is expected to report earnings of 82 cents a share in its fiscal second quarter.
Given that Cisco, Best Buy and Ingram Micro have indicated that January was a rough month for demand, it’s hard to see HP being overly optimistic.
Sunday, February 17, 2008
ICK Earnings This Week
Two ICK companies report earnings this week.
Hewlett-Packard (HPQ: 43.87, +0.61, +1.41%) is projected to report earnings of 81 cents a share in the fiscal first quarter, according to analysts polled by Thomson Financial.
Whole Foods Market (WFMI: 39.12, -1.70, -4.16%) is likely to report fiscal first-quarter earnings of 36 cents a share.
Hewlett-Packard (HPQ: 43.87, +0.61, +1.41%) is projected to report earnings of 81 cents a share in the fiscal first quarter, according to analysts polled by Thomson Financial.
Whole Foods Market (WFMI: 39.12, -1.70, -4.16%) is likely to report fiscal first-quarter earnings of 36 cents a share.
MSO Earnings This Week
Martha Stewart Living Omnimedia, Inc. (NYSE: MSO) will announce its financial results for the fourth quarter and full-year period ending December 31, 2007, on February 19, 2008, before the market opens. Following the release, the Company will host a conference call with analysts and investors at 10:00 a.m. EST. The live webcast will be accessible to the public on the Company's web site, www.marthastewart.com/ir, and an archived version will be available through March 4, 2008.
Martha Stewart Living Omnimedia, Inc. (NYSE: MSO) is a diversified media and merchandising company, inspiring and engaging consumers with unique content and distinctive products. The Publishing segment encompasses four magazines, including the company's flagship publication, Martha Stewart Living, periodic special issues and books. The marthastewart.com website provides consumers with instant access to MSLO's multimedia library, search and find capabilities, and more. The Broadcasting division produces the Emmy- winning daily, national syndicated program, "The Martha Stewart Show" and Martha Stewart Living Radio, channel 112 on SIRIUS Satellite Radio. In addition to its media properties, MSLO offers beautiful, practical and superior quality Martha Stewart products through licensing agreements with carefully selected companies. For additional information, visit www.marthastewart.com.
SOURCE Martha Stewart Living Omnimedia, Inc.
Martha Stewart Living Omnimedia (MSO: 6.13, -0.04, -0.64%) is expected to report earnings of 65 cents a share in the fourth quarter.
Martha Stewart Living Omnimedia, Inc. (NYSE: MSO) is a diversified media and merchandising company, inspiring and engaging consumers with unique content and distinctive products. The Publishing segment encompasses four magazines, including the company's flagship publication, Martha Stewart Living, periodic special issues and books. The marthastewart.com website provides consumers with instant access to MSLO's multimedia library, search and find capabilities, and more. The Broadcasting division produces the Emmy- winning daily, national syndicated program, "The Martha Stewart Show" and Martha Stewart Living Radio, channel 112 on SIRIUS Satellite Radio. In addition to its media properties, MSLO offers beautiful, practical and superior quality Martha Stewart products through licensing agreements with carefully selected companies. For additional information, visit www.marthastewart.com.
SOURCE Martha Stewart Living Omnimedia, Inc.
Martha Stewart Living Omnimedia (MSO: 6.13, -0.04, -0.64%) is expected to report earnings of 65 cents a share in the fourth quarter.
The Week Ahead
Economic indicators this week include, on Tuesday we will see the National Association of Home Builders' builder sentiment index, which is expected to be flat. On Wednesday we will see the consumer price index for January, which is expected to rise 0.3%. Also Wednesday, we will see the minutes from Jan. 29-30 Federal Reserve meeting, which could move the market. Finally, on Thursday the Philadelphia Fed will release its February business activity index.
Martha Stewart Living Revisted
NEW YORK (AP) -- Shares of Martha Stewart Living Omnimedia Inc. rose, then slipped Friday, even as an analyst initiated coverage with an "Outperform" rating, saying the media company will likely be able to capitalize on its licensing opportunities and healthy performance at its namesake magazine.
David Bank of RBC Capital Markets Corp. said Martha Stewart Living Omnimedia should be able to expand its merchandise licensing business, as the company has a loyal customer base and strong brand awareness. While the company already has deals with businesses such as Macy's Inc. and Costco Wholesale Corp., the analyst predicts it will be able to add more retail partnerships in the future.
In a client note, Bank said he also sees advertising on the rise at Martha Stewart Living magazine, as businesses return to the fold following Martha Stewart's much-publicized prison term.
"As the company moves on, the publishing segment has experienced quarterly advertising growth of at least 20 percent for the past two years," he wrote.
Bank is also pleased with the company's online efforts, which included a relaunch of its Web site in April and the June announcement that Wenda Harris Millard, former chief sales officer of Yahoo Inc. and a founder of DoubleClick, came on board in the new role of president of media.
"Changes made since then have driven pageviews up over 50 percent in the fourth quarter of 2007, which we expect Martha Stewart Living Omnimedia should be able to monetize in 2008," he said.
The analyst gave the company a $9 price target.
Separately, David Kestenbaum of Morgan Joseph & Co. downgraded the company to "Hold" from "Buy" on near-term economic concerns but remained upbeat on its long-term growth potential.
Shares of Martha Stewart Living Omnimedia lost 4 cents to $6.13 after rising as high as $6.44 earlier in the day. Over the past year, the stock has traded between $5.22 and $19.50.
David Bank of RBC Capital Markets Corp. said Martha Stewart Living Omnimedia should be able to expand its merchandise licensing business, as the company has a loyal customer base and strong brand awareness. While the company already has deals with businesses such as Macy's Inc. and Costco Wholesale Corp., the analyst predicts it will be able to add more retail partnerships in the future.
In a client note, Bank said he also sees advertising on the rise at Martha Stewart Living magazine, as businesses return to the fold following Martha Stewart's much-publicized prison term.
"As the company moves on, the publishing segment has experienced quarterly advertising growth of at least 20 percent for the past two years," he wrote.
Bank is also pleased with the company's online efforts, which included a relaunch of its Web site in April and the June announcement that Wenda Harris Millard, former chief sales officer of Yahoo Inc. and a founder of DoubleClick, came on board in the new role of president of media.
"Changes made since then have driven pageviews up over 50 percent in the fourth quarter of 2007, which we expect Martha Stewart Living Omnimedia should be able to monetize in 2008," he said.
The analyst gave the company a $9 price target.
Separately, David Kestenbaum of Morgan Joseph & Co. downgraded the company to "Hold" from "Buy" on near-term economic concerns but remained upbeat on its long-term growth potential.
Shares of Martha Stewart Living Omnimedia lost 4 cents to $6.13 after rising as high as $6.44 earlier in the day. Over the past year, the stock has traded between $5.22 and $19.50.
Friday, February 15, 2008
Obama, Obama
From Larry Kudlow
Obama’s Big-Government Vision
It’s old-fashioned-liberal tax, spend, and regulate.Sen. Barack Obama is very gloomy about America, and he’s aligning himself with the liberal wing of the Democratic party in hopes of coming to the nation’s rescue. His proposal? Big-government planning, spending, and taxing — exactly what the nation and the stock market do not want to hear.Obama unveiled much of his economic strategy in Wisconsin this week: He wants to spend $150 billion on a green-energy plan. He wants to establish an infrastructure investment bank to the tune of $60 billion. He wants to expand health insurance by roughly $65 billion. He wants to “reopen” trade deals, which is another way of saying he wants to raise the barriers to free trade. He intends to regulate the profits for drug companies, health insurers, and energy firms. He wants to establish a mortgage-interest tax credit. He wants to double the number of workers receiving the earned-income tax credit and triple this benefit for minimum-wage workers.The Obama spend-o-meter is now up around $800 billion. And tax hikes on the rich won’t pay for it. It’s the middle class that will ultimately shoulder this fiscal burden in terms of higher taxes and lower growth.This isn’t free enterprise. It’s old-fashioned-liberal tax, spend, and regulate. It’s plain ol’ big government. The only people who will benefit are the central planners in Washington.
The Wall Street Journal’s Steve Moore has done the math on Obama’s tax plan. He says it will add up to a 39.6 percent personal income tax, a 52.2 percent combined income and payroll tax, a 28 percent capital-gains tax, a 39.6 percent dividends tax, and a 55 percent estate tax.Not only is Obama the big-spending candidate, he’s also the very-high-tax candidate. And what he wants to tax is capital.
Obama’s Big-Government Vision
It’s old-fashioned-liberal tax, spend, and regulate.Sen. Barack Obama is very gloomy about America, and he’s aligning himself with the liberal wing of the Democratic party in hopes of coming to the nation’s rescue. His proposal? Big-government planning, spending, and taxing — exactly what the nation and the stock market do not want to hear.Obama unveiled much of his economic strategy in Wisconsin this week: He wants to spend $150 billion on a green-energy plan. He wants to establish an infrastructure investment bank to the tune of $60 billion. He wants to expand health insurance by roughly $65 billion. He wants to “reopen” trade deals, which is another way of saying he wants to raise the barriers to free trade. He intends to regulate the profits for drug companies, health insurers, and energy firms. He wants to establish a mortgage-interest tax credit. He wants to double the number of workers receiving the earned-income tax credit and triple this benefit for minimum-wage workers.The Obama spend-o-meter is now up around $800 billion. And tax hikes on the rich won’t pay for it. It’s the middle class that will ultimately shoulder this fiscal burden in terms of higher taxes and lower growth.This isn’t free enterprise. It’s old-fashioned-liberal tax, spend, and regulate. It’s plain ol’ big government. The only people who will benefit are the central planners in Washington.
The Wall Street Journal’s Steve Moore has done the math on Obama’s tax plan. He says it will add up to a 39.6 percent personal income tax, a 52.2 percent combined income and payroll tax, a 28 percent capital-gains tax, a 39.6 percent dividends tax, and a 55 percent estate tax.Not only is Obama the big-spending candidate, he’s also the very-high-tax candidate. And what he wants to tax is capital.
Wednesday, February 13, 2008
A Latte With A Dash Of Wi-Fi
By Michal Lev-Ram
You know the feeling: You just ordered your caramel machiatto (extra foam), sat down at a table and opened up your laptop. You log on, hoping to quickly check your e-mail, when all of a sudden a screen pops up asking for your name and credit card information. That’s when you realize that hopping online won’t be as quick — or as cheap– as you’d hoped.
Say goodbye to all of that. On Monday Starbucks (SBUX) announced it was dropping T-Mobile’s (DT)’ s $6-an-hour Wi-Fi service for AT&T, which will provide coffee- house customers with two free hours of Internet access a day. With about 7,000 Starbucks locations in the United States, that’s a major boon for AT&T (T). Now the question is, how long will hotels, airports and other venues be able to continue charging sky-high fees for a service that many people see as essential as running water and electricity.
“This is something that people want,” says Morningstar analyst John Owens. “I think customers will embrace this move.”
Of course, Starbucks’ hopes free Wi-Fi will convince coffee drinkers to not only opt for Starbucks but also to stick around longer and buy more lattes. To log onto the company’s new Internet service, customers will need to have an active Starbucks card.
“This is what customers have been asking for,” says Starbucks spokeswoman Sonja Gould. She says a typical Starbucks Internet customer uses one hour of Wi-Fi a day. The company will begin rolling out the new service at select locations this spring. By end of 2008, it will be available at all Starbucks’ U.S. stores.
When Starbucks first introduced its fee-based Wi-Fi service in 2002, it seemed like a novel idea. But today, when many consumers have become accustomed to getting their Wi-Fi for free, the model seems outdated. Last October the Seattle-based coffee chain began providing free Wi-Fi access for iPhone users to buy music on iTunes.
Put simply, people don’t want to pay for Wi-Fi — let alone deal with signing up for it. That’s why JetBlue (JBLU) has begun testing a free in-flight Wi-Fi service that gives limited online access to its passengers.
Jupiter Research analyst Julie Ask says the Wi-Fi offered in hotels, restaurants, airplanes and coffee shops like Starbucks never needs to be completely unlimited and free. But most consumers — who just want to check e-mail or get a quick read of the news — do expect some form of free access.
“It’s a tool that builds loyalty for companies,” says Ask.
Many of Starbucks’ competitors already offer limited free Wi-Fi. Minneapolis-based Caribou Coffee gives customers a free hour a day. Those who don’t will probably need to if they want to compete.
You know the feeling: You just ordered your caramel machiatto (extra foam), sat down at a table and opened up your laptop. You log on, hoping to quickly check your e-mail, when all of a sudden a screen pops up asking for your name and credit card information. That’s when you realize that hopping online won’t be as quick — or as cheap– as you’d hoped.
Say goodbye to all of that. On Monday Starbucks (SBUX) announced it was dropping T-Mobile’s (DT)’ s $6-an-hour Wi-Fi service for AT&T, which will provide coffee- house customers with two free hours of Internet access a day. With about 7,000 Starbucks locations in the United States, that’s a major boon for AT&T (T). Now the question is, how long will hotels, airports and other venues be able to continue charging sky-high fees for a service that many people see as essential as running water and electricity.
“This is something that people want,” says Morningstar analyst John Owens. “I think customers will embrace this move.”
Of course, Starbucks’ hopes free Wi-Fi will convince coffee drinkers to not only opt for Starbucks but also to stick around longer and buy more lattes. To log onto the company’s new Internet service, customers will need to have an active Starbucks card.
“This is what customers have been asking for,” says Starbucks spokeswoman Sonja Gould. She says a typical Starbucks Internet customer uses one hour of Wi-Fi a day. The company will begin rolling out the new service at select locations this spring. By end of 2008, it will be available at all Starbucks’ U.S. stores.
When Starbucks first introduced its fee-based Wi-Fi service in 2002, it seemed like a novel idea. But today, when many consumers have become accustomed to getting their Wi-Fi for free, the model seems outdated. Last October the Seattle-based coffee chain began providing free Wi-Fi access for iPhone users to buy music on iTunes.
Put simply, people don’t want to pay for Wi-Fi — let alone deal with signing up for it. That’s why JetBlue (JBLU) has begun testing a free in-flight Wi-Fi service that gives limited online access to its passengers.
Jupiter Research analyst Julie Ask says the Wi-Fi offered in hotels, restaurants, airplanes and coffee shops like Starbucks never needs to be completely unlimited and free. But most consumers — who just want to check e-mail or get a quick read of the news — do expect some form of free access.
“It’s a tool that builds loyalty for companies,” says Ask.
Many of Starbucks’ competitors already offer limited free Wi-Fi. Minneapolis-based Caribou Coffee gives customers a free hour a day. Those who don’t will probably need to if they want to compete.
Things Go Better With Coke
February 13 2008: 7:56 AM EST
NEW YORK (CNNMoney.com) -- Coca-Cola on Wednesday reported a jump on fourth-quarter profit as strong sales in its overseas markets helped to offset continued weakness in soda sales at home.
Coca-Cola (KO, Fortune 500) said net income rose 79% to $1.2 billion, or 52 cents a share, in the fourth quarter. Revenue rose 24% to $7.3 billion from $5.9 billion in the same period a year earlier.
Excluding restructuring charges and asset writedowns, the company's earnings rose to $1.4 billion, or 58 cents a share, beating Wall Street's forecasts. Non-GAAP earnings reflect a 12% increase over the same period last year, as the company's bottling division took a non-cash impairment charge in the fourth quarter of 2006.
Analysts polled by Thomson Financial had expected the Atlanta-based company to earn 55 cents per share during the quarter on revenue of $7 billion.
"This growth was balanced across our geographies and portfolio of brands," said Coca-Cola chief executive Neville Isdell in a statement.
Worldwide, Coke's carbonated beverage volume increased 4%, and non-carbonated beverages increased 12%; however, in the U.S., soda sales declined 2% in the quarter and for the year, while sales of other beverages including water, juices and energy drinks increased 8% for the quarter and 5% for the year.
Both Coke and Pepsi have seen their share of the North American carbonated beverage market fall recently, as more health-conscious consumers switch to vitamin-infused energy drinks and bottled water.
Last Tuesday, for example, Coca-Cola purchased a 40% stake in Bethesda, Md.-based Honest Tea, a maker of low-calorie tea and juice brands.
"With our strategies in place, our expanded brand portfolio and our geographic balance, we are well prepared to respond to opportunities and challenges ahead and anticipate another good year in 2008," said Isdell.
Last Friday, No. 2 soft drink maker Pepsi (PEP, Fortune 500) posted a 31% quarterly earnings loss from the same period a year earlier, when profits were boosted by a tax benefit.
NEW YORK (CNNMoney.com) -- Coca-Cola on Wednesday reported a jump on fourth-quarter profit as strong sales in its overseas markets helped to offset continued weakness in soda sales at home.
Coca-Cola (KO, Fortune 500) said net income rose 79% to $1.2 billion, or 52 cents a share, in the fourth quarter. Revenue rose 24% to $7.3 billion from $5.9 billion in the same period a year earlier.
Excluding restructuring charges and asset writedowns, the company's earnings rose to $1.4 billion, or 58 cents a share, beating Wall Street's forecasts. Non-GAAP earnings reflect a 12% increase over the same period last year, as the company's bottling division took a non-cash impairment charge in the fourth quarter of 2006.
Analysts polled by Thomson Financial had expected the Atlanta-based company to earn 55 cents per share during the quarter on revenue of $7 billion.
"This growth was balanced across our geographies and portfolio of brands," said Coca-Cola chief executive Neville Isdell in a statement.
Worldwide, Coke's carbonated beverage volume increased 4%, and non-carbonated beverages increased 12%; however, in the U.S., soda sales declined 2% in the quarter and for the year, while sales of other beverages including water, juices and energy drinks increased 8% for the quarter and 5% for the year.
Both Coke and Pepsi have seen their share of the North American carbonated beverage market fall recently, as more health-conscious consumers switch to vitamin-infused energy drinks and bottled water.
Last Tuesday, for example, Coca-Cola purchased a 40% stake in Bethesda, Md.-based Honest Tea, a maker of low-calorie tea and juice brands.
"With our strategies in place, our expanded brand portfolio and our geographic balance, we are well prepared to respond to opportunities and challenges ahead and anticipate another good year in 2008," said Isdell.
Last Friday, No. 2 soft drink maker Pepsi (PEP, Fortune 500) posted a 31% quarterly earnings loss from the same period a year earlier, when profits were boosted by a tax benefit.
Tuesday, February 12, 2008
ICK Returns
A quick analysis of current holdings of ICK stocks.
The stocks we currently own are up 7.3% (not annualized) as of 2/11/08. This is very good portfolio. Our current stocks are Boeing (BA), Costco (COST), Exxon (XOM), Hanesbrands (HBI), Harley Davidson (HOG), Hewlett-Packard (HPQ), Johnson&Johnson (JNJ), Lab Corp (LH), Paychex (PAYX), Target (TGT), Whole Foods (WFMI), and Yum Brands (YUM).
If we look at these stocks before the economic slowdown began or was factored in our gains are 19.6%, as of 11/30/07. Boeing -29.4%, Costco +21.0%, Exxon +24.4%, Hanesbrands +6.2%, Harley +0.8%, J&J, +6.7%, Lab Corp +11.9%, Paychex +6.8%, Target -4.2%, Whole Foods +28.8%, and Yum Brands -56.7% (we had only bought Yum in November).
Once the slowdown or recession is over these stocks will once again break out with the possible exception of Harley. Harley's stock is somewhat tied to the subprime mess. Harley will take longer to recover.
The stocks we currently own are up 7.3% (not annualized) as of 2/11/08. This is very good portfolio. Our current stocks are Boeing (BA), Costco (COST), Exxon (XOM), Hanesbrands (HBI), Harley Davidson (HOG), Hewlett-Packard (HPQ), Johnson&Johnson (JNJ), Lab Corp (LH), Paychex (PAYX), Target (TGT), Whole Foods (WFMI), and Yum Brands (YUM).
If we look at these stocks before the economic slowdown began or was factored in our gains are 19.6%, as of 11/30/07. Boeing -29.4%, Costco +21.0%, Exxon +24.4%, Hanesbrands +6.2%, Harley +0.8%, J&J, +6.7%, Lab Corp +11.9%, Paychex +6.8%, Target -4.2%, Whole Foods +28.8%, and Yum Brands -56.7% (we had only bought Yum in November).
Once the slowdown or recession is over these stocks will once again break out with the possible exception of Harley. Harley's stock is somewhat tied to the subprime mess. Harley will take longer to recover.
Taxes - It's Time For A Change
Yesterday our investment club met. One of our members asked about what everyone thought about Huckabee"s "Fair Tax" plan. Everyone agreed that a simpler tax system is needed. It's amazing how people want a simpler tax system, whether it be a flat rate consumption tax, a flat income tax, or fewer tax brackets with no deductions. Why is it that politicians don't get it? What will it take to get voters really fired up about this issue? And why is Mike Huckabee the only one talking about it?
Huckabee"s Tax Plan
I'd like you to join me at the best "Going Out of Business" sale I can imagine - one held by the Internal Revenue Service. Am I running for president to shut down the federal government? Not exactly. But I am running to completely eliminate all federal income and payroll taxes. And I do mean all - personal federal, corporate federal, gift, estate, capital gains, alternative minimum, Social Security, Medicare, self-employment. All our hours filling out forms, all our payments for help with those forms, all our shopping bags filled with disorganized receipts, all our headaches and heartburn from tax stress will vanish. Instead we will have the FairTax, a simple tax based on wealth. When the FairTax becomes law, it will be like waving a magic wand releasing us from pain and unfairness.
The FairTax will replace the Internal Revenue Code with a consumption tax, like the taxes on retail sales forty-five states and the District of Columbia have now. All of us will get a monthly rebate that will reimburse us for taxes on purchases up to the poverty line, so that we're not taxed on necessities. That means people below the poverty line won't be taxed at all. We'll be taxed on what we decide to buy, not what we happen to earn. We won't be taxed on what we choose to save or the interest those savings earn. The tax will apply only to new goods, so we can reduce our taxes further by buying a used car or computer.
Our current progressive tax system penalizes us for working harder and becoming more successful. As we climb the ladder, the government lurks on each rung, hungry for a bigger bite out of our earnings. The FairTax is also progressive, but it doesn't punish the American dream of success, or the old-fashioned virtues of hard work and thrift, it rewards and encourages them. The FairTax isn't intended to raise any more or less money for the federal government to spend - it is revenue neutral.
The FairTax will replace the Internal Revenue Code with a consumption tax, like the taxes on retail sales forty-five states and the District of Columbia have now. All of us will get a monthly rebate that will reimburse us for taxes on purchases up to the poverty line, so that we're not taxed on necessities. That means people below the poverty line won't be taxed at all. We'll be taxed on what we decide to buy, not what we happen to earn. We won't be taxed on what we choose to save or the interest those savings earn. The tax will apply only to new goods, so we can reduce our taxes further by buying a used car or computer.
Our current progressive tax system penalizes us for working harder and becoming more successful. As we climb the ladder, the government lurks on each rung, hungry for a bigger bite out of our earnings. The FairTax is also progressive, but it doesn't punish the American dream of success, or the old-fashioned virtues of hard work and thrift, it rewards and encourages them. The FairTax isn't intended to raise any more or less money for the federal government to spend - it is revenue neutral.
Obama's Tax Plan
From Larry Kudlow -
This is disturbing news on the taxation front. The Wall Street Journal’s Steve Moore says Obama’s tax plan would add up to a 39.6 percent personal income tax, a 52.2 percent combined income and payroll tax, a 28 percent capital-gains tax, a 39.6 percent dividends tax, and a 55 percent estate tax. In other words, Sen. Obama is a very-high-tax candidate. Whether Wall Street has fully discounted this, I have no idea. Probably not yet. But somebody in the investor class ought to be thinking about it, because it’s not good.Interestingly, at least two of Obama’s top economic advisors — Austan Goolsbee and Jeffrey Liebman — are highly regarded free-market economists. Goolsbee from Chicago, Liebman from Harvard. But somehow their candidate has a very punitive high-tax campaign plan for the economy. I don’t know all the details on Hillary’s tax plan, but I don’t think she is yet in favor of lifting the payroll tax cap, as Obama is. And I think she’d keep cap gains at 20 percent. But none of this is any good.
This is disturbing news on the taxation front. The Wall Street Journal’s Steve Moore says Obama’s tax plan would add up to a 39.6 percent personal income tax, a 52.2 percent combined income and payroll tax, a 28 percent capital-gains tax, a 39.6 percent dividends tax, and a 55 percent estate tax. In other words, Sen. Obama is a very-high-tax candidate. Whether Wall Street has fully discounted this, I have no idea. Probably not yet. But somebody in the investor class ought to be thinking about it, because it’s not good.Interestingly, at least two of Obama’s top economic advisors — Austan Goolsbee and Jeffrey Liebman — are highly regarded free-market economists. Goolsbee from Chicago, Liebman from Harvard. But somehow their candidate has a very punitive high-tax campaign plan for the economy. I don’t know all the details on Hillary’s tax plan, but I don’t think she is yet in favor of lifting the payroll tax cap, as Obama is. And I think she’d keep cap gains at 20 percent. But none of this is any good.
Monday, February 11, 2008
Norfolk Southern
From "The Street"
An economic indicator that uses railroad shipments to gauge the future sees few signs of hope, with one notable exception -- the railroads themselves are doing great.
"I don't see any parting in the clouds," says Drew Robertson, who heads New York-based transportation consulting firm Atlantic Systems. "In every economically sensitive area, I see weakness. There's nothing to indicate that six months from now we will be coming out of a recession."
"I don't see any parting in the clouds," says Drew Robertson, who heads New York-based transportation consulting firm Atlantic Systems. "In every economically sensitive area, I see weakness. There's nothing to indicate that six months from now we will be coming out of a recession."
Robertson tracks railroad shipments on a Web site that's updated weekly. Of the eight principal products shipped by rail, the latest statistics show year-over-year declines in six: food, forest, metals, coal, autos and intermodal.
Only grain and chemicals show advances, a result, says Robertson, of "a boom in the agricultural economy" due to ethanol production and export programs. "It has nothing much to do with economic fundamentals," he says.
The outlook for construction is particularly glum. "There is continuing and consistent weakness, with little shipping in lumber or wallboard or crushed stone or gravel that is used for foundations, and there is not even a baseline yet as far as building up rail traffic and demand in the economy," he adds. "Commodities used in construction have been weak for a year and a half, and I don't yet see them coming back from the dead."
Meanwhile, the decline in intermodal traffic, which reflects the movement of imported Asian products from West Coast ports, indicates that "a very large part of our appetite for imports has gone down and stayed down for the past year."
Railroads are the nation's leading long-distance carrier of bulk commodities, including autos, forest products, chemicals, grains and containers, and a leading carrier of metals. The metal and auto shipments supply the auto industry, while forest products reflect the housing industry. Because railroads haul products well in advance of the time they are consumed, they are commonly seen as leading indicators.
Still, "fewer and fewer people use railroad data," says Mark Vitner, senior economist for Wachovia. "Fifteen years ago, I looked at it all the time, but today it doesn't give us a complete picture because so much more of the U.S. economy is services."
Additionally, Vitner questioned whether railroad data confirm a recession, suggesting the data actually indicate that construction has slipped and that businesses are reducing inventories. The latter trend could continue through the second quarter, he says. But "inventories are already so low that it's hard to imagine a scenario where a pulldown in inventories would pull GDP into a slowdown."
Among the products shipped by rail, the best economic indicator may be chemicals, Vitner says, because they go into every product, from shampoo to BlackBerrys, and because they represent an area in which railroads have lost little market share to trucks. So the rise in chemical shipments may be significant.
In any case, railroads themselves remain profitable, and investors are taking note. Since Jan. 1, 2007, while the S&P 500 index has dropped nearly 5%, the nation's four principal railroads have all been rising.
CSX(CSX - Cramer's Take - Stockpickr) and Union Pacific (UNP - Cramer's Take - Stockpickr) have both risen more than 33%. Burlington Northern Santa Fe(BNI - Cramer's Take - Stockpickr) is up nearly 20%, and Norfolk Southern(NSC - Cramer's Take - Stockpickr) is higher by about 8%.
Looking ahead, Burlington Northern assumes 2008 unit volume will be flat to up slightly, but demand will remain strong. "Pricing will be firm but slightly less robust than in 2007, even with general uncertainty about the economy," said spokesman Pat Hiatte. The company has told analysts that low double-digit EPS growth is achievable, with freight revenue growth in the high single digits.
Meanwhile, Norfolk Southern says it anticipates volume and revenue increases this year. "The weak dollar and strong global demand should bolster exports, partially offsetting the slowdown in domestic demand," Executive Vice President Donald Seale said last month on an earnings conference call. He said 2008 pricing gains should average 4%.
Apple Is Good For You
Apple up in premarket as Citigroup adds to 'top pick live' list
February 11, 2008: 08:13 AM EST
NEW YORK, Feb. 11, 2008 (Thomson Financial delivered by Newstex) -- Shares of Apple Inc. rose in premarket trading Monday after Citigroup (NYSE:C) added the company to its top picks live list.Analyst Richard Gardner said concerns over reductions to iPod and iPhone build plans are already fully reflected in the stock price. Gardner also said he sees 'significant offsets' to sluggish first-half 2008 iPod unit growth, including continued strong demand for PCs, lean inventories, further expansion of Apple's relationship with Best Buy Co. (NYSE:BBY) and the introduction of MacBook Air.He also believes the percentage of iPhones unlocked and used in networks where Apple receives no residuals will decline as the iPhone is officially launched in more countries.Gardner reiterated his buy rating and $212 stock price target.The stock rose 1.4% to $127.22 ahead of the open.
February 11, 2008: 08:13 AM EST
NEW YORK, Feb. 11, 2008 (Thomson Financial delivered by Newstex) -- Shares of Apple Inc. rose in premarket trading Monday after Citigroup (NYSE:C) added the company to its top picks live list.Analyst Richard Gardner said concerns over reductions to iPod and iPhone build plans are already fully reflected in the stock price. Gardner also said he sees 'significant offsets' to sluggish first-half 2008 iPod unit growth, including continued strong demand for PCs, lean inventories, further expansion of Apple's relationship with Best Buy Co. (NYSE:BBY) and the introduction of MacBook Air.He also believes the percentage of iPhones unlocked and used in networks where Apple receives no residuals will decline as the iPhone is officially launched in more countries.Gardner reiterated his buy rating and $212 stock price target.The stock rose 1.4% to $127.22 ahead of the open.
Thursday, February 7, 2008
Bullish On RIMM
Citigroup is out positive on Research in Motion (NASDAQ:RIMM) after hosting an investor call on Feb 4th with the head of Citi's BlackBerry Program that yielded valuable insights from a key decision-maker within one of RIM's largest customers. Reiterates Buy and $140 target.
Key Takeaways - 1) Productivity benefits shelter RIM from layoffs as RIM increasingly is viewed as a non-discretionary spend. 2) Penetration rate of 10% does not suggest saturation. 3) Replacement rate is surprisingly low (avg. useful life is about 2 years). 4) Very low re-deployment of deactivated devices (~5%) further mitigates risk from financial services. 5) MSFT Exchange 2007 not a material threat for some time. 6) Competitive solutions from MOT and NOK do not seem compelling currently.
Firm believes the recent volatility and pullback in RIM shares has been largely due to macro uncertainty and stock market jitters. They note that RIM posted strong Nov-Q results and guidance in December despite a similar same macro backdrop.
Overall, they believe the points brought up during the call are highly supportive of their bull case on RIM.
Key Takeaways - 1) Productivity benefits shelter RIM from layoffs as RIM increasingly is viewed as a non-discretionary spend. 2) Penetration rate of 10% does not suggest saturation. 3) Replacement rate is surprisingly low (avg. useful life is about 2 years). 4) Very low re-deployment of deactivated devices (~5%) further mitigates risk from financial services. 5) MSFT Exchange 2007 not a material threat for some time. 6) Competitive solutions from MOT and NOK do not seem compelling currently.
Firm believes the recent volatility and pullback in RIM shares has been largely due to macro uncertainty and stock market jitters. They note that RIM posted strong Nov-Q results and guidance in December despite a similar same macro backdrop.
Overall, they believe the points brought up during the call are highly supportive of their bull case on RIM.
Also 13 out of the last 14 quarters RIMM has had earnings surprises to the up side.
ETFs A Better Option
Exchange-Traded Funds, or ETFs, are index funds that trade just like stocks on major stock exchanges. Want to invest in the market quickly and cheaply? ETFs are the most practical vehicle. They help the investor focus on what is most important, choice of asset classes.
All the major stock indexes have ETFs based on them, including:
Dow Jones Industrial Average
Standard & Poor's 500 Index
Nasdaq Composite
There are ETFs for large US companies, small ones, real estate investment trusts, international stocks, bonds, and even gold. Pick an asset class that is publicly available and there is a good bet that it is represented by an ETF or will be soon.
ETFs differ fundamentally from traditional mutual funds, which do not trade midday. Traditional mutual funds take orders during Wall Street trading hours, but the transactions actually occur at the close of the market. The price they receive is the sum of the closing day prices of all the stocks contained in the fund. Not so for ETFs, which trade instantaneously all day long and allow an investor to lock in a price for the underlying stocks immediately.
ETFs are economical to buy and especially to maintain over the long-run, making them especially attractive for the typical buy-and-hold investor. Annual fees are as low as .09% of assets, which is breathtakingly low compared to the average mutual fund fees of 1.4%. Although investors must pay a brokerage transaction to purchase them, with discount brokers this becomes negligible with sizable trades. There are a few easy-to-avoid pitfalls to watch out for. Tax effects are also not to be ignored, and ETFs perform well after-tax. They can be margined, and options based on them allow for various defensive (or speculative) investing strategies.
Their safety as a securities instrument (considered separately from the safety of any particular asset class they might represent) is considered the same as stock certificates themselves. Internally, ETFs are far more complex entities than mutual funds. A fascinating combination of players, including brokers, money managers and market specialists combine to make them run smoothly. Legally, ETFs are a class of mutual fund as they fall under many of the same Securities Exchange Commission rules that traditional mutual funds do. But their different structure means that the SEC has imposed different requirements from traditional mutual funds in how they are bought and sold.
ETFs are index funds at heart, so investors are encouraged to study the philosophy of index investing which downplays stock picking in favor of buying the market. But unlike most traditional index funds, investors need not take a passive, buy-and-hold approach. ETFs are also becoming favorites of hedge funds and day traders who like to pull the trigger frequently. Both types of investors may coexist and in fact strengthen each other by lowering overall transaction costs.
All the major stock indexes have ETFs based on them, including:
Dow Jones Industrial Average
Standard & Poor's 500 Index
Nasdaq Composite
There are ETFs for large US companies, small ones, real estate investment trusts, international stocks, bonds, and even gold. Pick an asset class that is publicly available and there is a good bet that it is represented by an ETF or will be soon.
ETFs differ fundamentally from traditional mutual funds, which do not trade midday. Traditional mutual funds take orders during Wall Street trading hours, but the transactions actually occur at the close of the market. The price they receive is the sum of the closing day prices of all the stocks contained in the fund. Not so for ETFs, which trade instantaneously all day long and allow an investor to lock in a price for the underlying stocks immediately.
ETFs are economical to buy and especially to maintain over the long-run, making them especially attractive for the typical buy-and-hold investor. Annual fees are as low as .09% of assets, which is breathtakingly low compared to the average mutual fund fees of 1.4%. Although investors must pay a brokerage transaction to purchase them, with discount brokers this becomes negligible with sizable trades. There are a few easy-to-avoid pitfalls to watch out for. Tax effects are also not to be ignored, and ETFs perform well after-tax. They can be margined, and options based on them allow for various defensive (or speculative) investing strategies.
Their safety as a securities instrument (considered separately from the safety of any particular asset class they might represent) is considered the same as stock certificates themselves. Internally, ETFs are far more complex entities than mutual funds. A fascinating combination of players, including brokers, money managers and market specialists combine to make them run smoothly. Legally, ETFs are a class of mutual fund as they fall under many of the same Securities Exchange Commission rules that traditional mutual funds do. But their different structure means that the SEC has imposed different requirements from traditional mutual funds in how they are bought and sold.
ETFs are index funds at heart, so investors are encouraged to study the philosophy of index investing which downplays stock picking in favor of buying the market. But unlike most traditional index funds, investors need not take a passive, buy-and-hold approach. ETFs are also becoming favorites of hedge funds and day traders who like to pull the trigger frequently. Both types of investors may coexist and in fact strengthen each other by lowering overall transaction costs.
Wednesday, February 6, 2008
Steady and Yummy?
7:20 PM ET) SAN FRANCISCO (MarketWatch) -- Fast-food giant Yum Brands Inc.reported late Monday fourth-quarter net income of $231 million, or 44 cents a share, nearly unchanged from $232 million, or 42 cents, a year ago. Total revenue at the Louisville, Ky.-based company came in at $3.26 billion, up 8%. Same-store sales, or those at outlets open at least a year, climbed 3% worldwide. The average estimate had been for the company to earn 42 cents a share on revenue of $3.14 billion, according to analysts polled by Thomson Financial. Looking to the current year, Yum raised its 2008 profit target from $1.82 to $1.85 per share, excluding one-time gains. Yum shares ended trading Monday up 1.6% at $35.81.(Corrects revenue and estimated revenue figures.)
Monday, February 4, 2008
Microsoft versus Google
By Larry Dignan -
Microsoft bids $44.6 billion for Yahoo in a deal that on the surface looks like a no-brainer. Unless Google bids too.
The logic behind a Google bid for Yahoo makes a lot of sense. In fact, Google buying Yahoo makes more sense to me than Microsoft buying Yahoo (see conference call notes and Techmeme). For starters, Google would make life difficult for Steve Ballmer & Co. And as we all know Google lives to annoy Microsoft.
Meanwhile, despite a sell-off of late Google has the stock currency and the cash to compete with Microsoft. Here’s an estimate that adds some heft to this Google as spoiler idea: Citigroup analyst Mark Mahaney said Yahoo has few options to boost shareholder value right now. Should Yahoo want to remain independent it could outsource search to Google in a move that would boost earnings by 25 percent.
The next logical question: Why wouldn’t Google just buy Yahoo? Is that speculative? You bet. Is it crazy speculation? Not at all.
As I go through the list of potential synergies with Microsoft and Yahoo the overlap is stunning in some areas. Take email–there’s Outlook, Hotmail, Zimbra and Yahoo Mail. Take ad systems–there’s Adcenter and Panama. Take ad exchanges/networks–there’s Right Media, Blue Lithium and aQuantive and probably a few more I’m forgetting. You get the idea.
Now let’s tee up Google. Google buys Yahoo and substitutes Yahoo search for Google’s. Yahoo’s algorithm is booted for Google’s. Monetization rises. Suddenly, Google has destination properties beyond YouTube. Google gets content. Google gets newspaper partnerships. Google gets more users. Google dominates display advertising with DoubleClick and Yahoo in the fold.
The overlap with Google? Not nearly as much as the Yahoo and Microsoft properties have. All Google would have to do is swap search and the deal would be accretive.
Analysts are already handicapping that Yahoo’s price tag will go up a bit–just based on Yahoo’s stakes in Yahoo Japan and Alibaba, two properties Google would love to have too. If Google bids Yahoo’s value would easily eclipse that $31 a share opening volley.
Microsoft bids $44.6 billion for Yahoo in a deal that on the surface looks like a no-brainer. Unless Google bids too.
The logic behind a Google bid for Yahoo makes a lot of sense. In fact, Google buying Yahoo makes more sense to me than Microsoft buying Yahoo (see conference call notes and Techmeme). For starters, Google would make life difficult for Steve Ballmer & Co. And as we all know Google lives to annoy Microsoft.
Meanwhile, despite a sell-off of late Google has the stock currency and the cash to compete with Microsoft. Here’s an estimate that adds some heft to this Google as spoiler idea: Citigroup analyst Mark Mahaney said Yahoo has few options to boost shareholder value right now. Should Yahoo want to remain independent it could outsource search to Google in a move that would boost earnings by 25 percent.
The next logical question: Why wouldn’t Google just buy Yahoo? Is that speculative? You bet. Is it crazy speculation? Not at all.
As I go through the list of potential synergies with Microsoft and Yahoo the overlap is stunning in some areas. Take email–there’s Outlook, Hotmail, Zimbra and Yahoo Mail. Take ad systems–there’s Adcenter and Panama. Take ad exchanges/networks–there’s Right Media, Blue Lithium and aQuantive and probably a few more I’m forgetting. You get the idea.
Now let’s tee up Google. Google buys Yahoo and substitutes Yahoo search for Google’s. Yahoo’s algorithm is booted for Google’s. Monetization rises. Suddenly, Google has destination properties beyond YouTube. Google gets content. Google gets newspaper partnerships. Google gets more users. Google dominates display advertising with DoubleClick and Yahoo in the fold.
The overlap with Google? Not nearly as much as the Yahoo and Microsoft properties have. All Google would have to do is swap search and the deal would be accretive.
Analysts are already handicapping that Yahoo’s price tag will go up a bit–just based on Yahoo’s stakes in Yahoo Japan and Alibaba, two properties Google would love to have too. If Google bids Yahoo’s value would easily eclipse that $31 a share opening volley.
Sunday, February 3, 2008
Yummy Results?
Yum Brands will serve up 1st quarter results after the bell on Monday, February 4 at 4:00pm EST. Yum Brands is expecting to see a 10% earnings growth ths year with most of he growth coming from overseas. In the previous six quarters Yum Brands has surprised to the upside in earnings by about 10%.
Saturday, February 2, 2008
Hey Google Chew On This One
Microsoft's unsolicited bid for Yahoo for $31.00 a share is a bid to keep Microsoft and Yahoo in the game against Google. There is no immediate impact on Google as it will take several months for this deal to be approved and many more months to integrate products. But what if Google were to make a bid for Yahoo. After an acquisition they could divest itself of the Yahoo search engine (might be required by regulators) and keep the Yahoo portal which is the most visited portal on the web, thus driving more Google search and ad revenues.
Yahoo/Microsoft - Will It Succeed?
Yahoo-Microsoft May Lose Market Share
Yahoo (YHOO: Nasdaq) By Cantor Fitzgerald ($19.18, Feb. 1, 2008)
On Feb. 1, before the open, Microsoft extended an unsolicited offer to buy Yahoo! for $44.6 billion, or $31 per share, in equal parts cash and stock.
Yahoo's board of directors is in the process of evaluating Microsoft's proposal, which values Yahoo's enterprise at about six times our 2008 net revenue estimate, 19 times our adjusted earnings before interest, taxes, depreciation and amortization estimate, and 45 times our pro forma earnings per share estimate.
Paraphrasing Microsoft, this transaction seems to be about cost-saving synergies, scale, and consolidation, all in an effort to create a more credible, compelling, and competitive alternative to Google.
We expect a deal to happen, perhaps at a slight premium to the current offer, given Yahoo's weakened market position and Microsoft's obvious need to become more relevant in the consumer Internet services / online advertising arenas.
Nonetheless, we hold little hope that a merged Microsoft/Yahoo entity would radically alter the current competitive landscape; in fact, we think the combined company could actually lose market share to Google and others over time, as product, infrastructure, and cultural integration challenges divert attention/resources from the critical areas of innovation and customer service, and as red tape/size/bureaucracy further increase time-to-market for new products/services.
Reflecting these events, and the shares' early reaction, we are maintaining our
Hold rating on Yahoo's stock, but raising our price target to $31 (from $21). Our price implies a 2008 enterprise value-to-net-revenue multiple of about six times, an enterprise value-to-adjusted-EBITDA multiple of about 19 times, and a price-to-pro forma EPS multiple of 45 times. While these multiples seem high, given Yahoo's competitive struggles and projected three-year revenue growth rate of about 10%-20%, as well as shifting industry dynamics, and comparable company valuations, they are in line with Microsoft's current buyout proposal.
We see a number of potential risks to our rating and to Yahoo's business. These include, among others: the company's ability to attract new clients and maintain current client relationships; fierce competition in the Internet advertising, technology, and services marketplaces; spending decisions and budget allocations by clients or prospective clients; pricing pressure in some lines of business or changes in the availability and pricing of advertising space; and the ability to identify, attract, retain and motivate qualified personnel at a reasonable cost.
Additionally, acquisitions or investments may be unsuccessful and may divert management's attention. Other hurdles include: unmanageable or excessive levels of click fraud; changes in consumer behavior; the company's ability to maintain and/or add to its roster of Network distribution partners; geopolitical and macroeconomic uncertainties that may also negatively impact Yahoo's business; growth management tied to new categories and geographies, value-added services, and client relationships; and, new privacy legislation, industry standards, or other regulations.
Yahoo (YHOO: Nasdaq) By Cantor Fitzgerald ($19.18, Feb. 1, 2008)
On Feb. 1, before the open, Microsoft extended an unsolicited offer to buy Yahoo! for $44.6 billion, or $31 per share, in equal parts cash and stock.
Yahoo's board of directors is in the process of evaluating Microsoft's proposal, which values Yahoo's enterprise at about six times our 2008 net revenue estimate, 19 times our adjusted earnings before interest, taxes, depreciation and amortization estimate, and 45 times our pro forma earnings per share estimate.
Paraphrasing Microsoft, this transaction seems to be about cost-saving synergies, scale, and consolidation, all in an effort to create a more credible, compelling, and competitive alternative to Google.
We expect a deal to happen, perhaps at a slight premium to the current offer, given Yahoo's weakened market position and Microsoft's obvious need to become more relevant in the consumer Internet services / online advertising arenas.
Nonetheless, we hold little hope that a merged Microsoft/Yahoo entity would radically alter the current competitive landscape; in fact, we think the combined company could actually lose market share to Google and others over time, as product, infrastructure, and cultural integration challenges divert attention/resources from the critical areas of innovation and customer service, and as red tape/size/bureaucracy further increase time-to-market for new products/services.
Reflecting these events, and the shares' early reaction, we are maintaining our
Hold rating on Yahoo's stock, but raising our price target to $31 (from $21). Our price implies a 2008 enterprise value-to-net-revenue multiple of about six times, an enterprise value-to-adjusted-EBITDA multiple of about 19 times, and a price-to-pro forma EPS multiple of 45 times. While these multiples seem high, given Yahoo's competitive struggles and projected three-year revenue growth rate of about 10%-20%, as well as shifting industry dynamics, and comparable company valuations, they are in line with Microsoft's current buyout proposal.
We see a number of potential risks to our rating and to Yahoo's business. These include, among others: the company's ability to attract new clients and maintain current client relationships; fierce competition in the Internet advertising, technology, and services marketplaces; spending decisions and budget allocations by clients or prospective clients; pricing pressure in some lines of business or changes in the availability and pricing of advertising space; and the ability to identify, attract, retain and motivate qualified personnel at a reasonable cost.
Additionally, acquisitions or investments may be unsuccessful and may divert management's attention. Other hurdles include: unmanageable or excessive levels of click fraud; changes in consumer behavior; the company's ability to maintain and/or add to its roster of Network distribution partners; geopolitical and macroeconomic uncertainties that may also negatively impact Yahoo's business; growth management tied to new categories and geographies, value-added services, and client relationships; and, new privacy legislation, industry standards, or other regulations.
Friday, February 1, 2008
Exxon's Earnings - Full Speed Ahead
NEW YORK (CNNMoney.com) -- Exxon Mobil made history on Friday by reporting the highest quarterly and annual profits ever for a U.S. company.
Exxon (XOM, Fortune 500) shares gained nearly 2% in pre-market trading on the results, which were underpinned by soaring crude prices.
Exxon, the world's largest publicly traded oil company, said fourth-quarter net income rose 14% to $11.66 billion, or $2.13 per share. That's up from $10.25 billion, or $1.76 per share, in the year-ago period.
That tops Exxon's previous quarterly profit record of $10.7 billion, set in the fourth quarter of 2005, which also was a record for any U.S. corporation.
Exxon also set an annual profit record by earning $40.61 billion last year, or nearly $1,300 per second.
The company's full-year results exceeded its previous record of $39.5 billion in 2006.
In the fourth quarter, revenue rose 29.5% from a year ago to $116.64 billion.
Analysts were looking for the company to report quarterly profit of $10.36 billion on revenue of $114.9 billion, according to earnings tracker Thomson Financial.
Exxon's earnings are sure to draw fire from consumer rights groups, who contend the oil industry is deliberately restricting supply and profiting on the back of U.S. motorists. They have previously called for a windfall profit tax on oil firms, and have proposed breaking up the big oil companies created during the 1990s merger wave.
Exxon attributed its impressive results to strong performance across its divisions, but a large part of the surge in profit can be attributed to soaring oil prices.
Last year, crude prices skyrocketed nearly 60%. That surge helped prices break through the $100 a barrel mark for the first time ever early last month.
Natural gas prices have also increased compared to last year, albeit marginally.
But costs have also increased for the oil companies, and they haven't been able to make as much selling gasoline, which is why profits haven't risen as rapidly as crude prices.
Exxon isn't the only oil giant to report impressive earnings. No. 2 Chevron (CVX, Fortune 500) also reported a jump in quarterly profit on Friday. Conoco (COP, Fortune 500), the nation's third largest oil company, trounced profit estimates by nearly 25% when it reported last week.
Exxon (XOM, Fortune 500) shares gained nearly 2% in pre-market trading on the results, which were underpinned by soaring crude prices.
Exxon, the world's largest publicly traded oil company, said fourth-quarter net income rose 14% to $11.66 billion, or $2.13 per share. That's up from $10.25 billion, or $1.76 per share, in the year-ago period.
That tops Exxon's previous quarterly profit record of $10.7 billion, set in the fourth quarter of 2005, which also was a record for any U.S. corporation.
Exxon also set an annual profit record by earning $40.61 billion last year, or nearly $1,300 per second.
The company's full-year results exceeded its previous record of $39.5 billion in 2006.
In the fourth quarter, revenue rose 29.5% from a year ago to $116.64 billion.
Analysts were looking for the company to report quarterly profit of $10.36 billion on revenue of $114.9 billion, according to earnings tracker Thomson Financial.
Exxon's earnings are sure to draw fire from consumer rights groups, who contend the oil industry is deliberately restricting supply and profiting on the back of U.S. motorists. They have previously called for a windfall profit tax on oil firms, and have proposed breaking up the big oil companies created during the 1990s merger wave.
Exxon attributed its impressive results to strong performance across its divisions, but a large part of the surge in profit can be attributed to soaring oil prices.
Last year, crude prices skyrocketed nearly 60%. That surge helped prices break through the $100 a barrel mark for the first time ever early last month.
Natural gas prices have also increased compared to last year, albeit marginally.
But costs have also increased for the oil companies, and they haven't been able to make as much selling gasoline, which is why profits haven't risen as rapidly as crude prices.
Exxon isn't the only oil giant to report impressive earnings. No. 2 Chevron (CVX, Fortune 500) also reported a jump in quarterly profit on Friday. Conoco (COP, Fortune 500), the nation's third largest oil company, trounced profit estimates by nearly 25% when it reported last week.
Microsoft's Bid For Yahoo
Microsoft Offers To Buy Yahoo For $31 A Share; Deal Would Be Worth $44.6 Billion; Yahoo Mulling Response
Posted by Eric Savitz
Microsoft (MSFT) this morning offered to buy Yahoo (YHOO) for $31 a share in cash and stock, for combined consideration of $44.6 billion. The offering price is 62% above yesterday’s closing level of $19.18. The proposal is designed to solve two problems at once: Microsoft’s struggles at gaining traction in the Internet search and advertising marketplace, and Yahoo’s gradual loss of market share in those same markets; the deal would unite Google’s (GOOG) two biggest foes into one. Microsoft made the offer via a letter to Yahoo yesterday.
Obviously, this would be the biggest acquisition in Microsoft’s history, far ahead of its $6 billion acquisition of online advertising firm aQuantive. But it is no sure thing: this is a hostile offer, and Yahoo has yet to respond.
This week’s disappointing earnings outlook from Yahoo sent the stock spiraling lower, and triggered speculation on the Street that the company would either find a quick fix or become a potential target for activist investors or an acquisition. And Microsoft was always the most likely merger partner. But I’m not sure anyone expected this to happen so quickly.
Yahoo holders would be able to choose to receive either $31 a share in cash or 0.9509 of a share of Microsoft common stock.
This is not the first time the two companies have discussed a deal. In the letter to Yahoo proposing the combination, Microsoft notes that in February 2007 the Yahoo response to a proposed deal was that “”now is not the right time” for such a transaction.
In a statement, Yahoo said its board “will evaluate this proposal carefully and promptly in the context of Yahoo!’s strategic plans and pursue the best course of action to maximize long-term value for shareholders.”
In pre-market trading, Yahoo shares are up $10.08, or 52.6%, to $29.26. Microsoft is off $1.44, or 4.4%, to $31.16. Google, which yesterday reported disappointing fourth quarter earnings results, and which traded down in after hours dealings last night, is off $38.39, or 7%, at $525.91.
Posted by Eric Savitz
Microsoft (MSFT) this morning offered to buy Yahoo (YHOO) for $31 a share in cash and stock, for combined consideration of $44.6 billion. The offering price is 62% above yesterday’s closing level of $19.18. The proposal is designed to solve two problems at once: Microsoft’s struggles at gaining traction in the Internet search and advertising marketplace, and Yahoo’s gradual loss of market share in those same markets; the deal would unite Google’s (GOOG) two biggest foes into one. Microsoft made the offer via a letter to Yahoo yesterday.
Obviously, this would be the biggest acquisition in Microsoft’s history, far ahead of its $6 billion acquisition of online advertising firm aQuantive. But it is no sure thing: this is a hostile offer, and Yahoo has yet to respond.
This week’s disappointing earnings outlook from Yahoo sent the stock spiraling lower, and triggered speculation on the Street that the company would either find a quick fix or become a potential target for activist investors or an acquisition. And Microsoft was always the most likely merger partner. But I’m not sure anyone expected this to happen so quickly.
Yahoo holders would be able to choose to receive either $31 a share in cash or 0.9509 of a share of Microsoft common stock.
This is not the first time the two companies have discussed a deal. In the letter to Yahoo proposing the combination, Microsoft notes that in February 2007 the Yahoo response to a proposed deal was that “”now is not the right time” for such a transaction.
In a statement, Yahoo said its board “will evaluate this proposal carefully and promptly in the context of Yahoo!’s strategic plans and pursue the best course of action to maximize long-term value for shareholders.”
In pre-market trading, Yahoo shares are up $10.08, or 52.6%, to $29.26. Microsoft is off $1.44, or 4.4%, to $31.16. Google, which yesterday reported disappointing fourth quarter earnings results, and which traded down in after hours dealings last night, is off $38.39, or 7%, at $525.91.
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