FULL-YEAR 2008 OUTLOOK
The company raised its full-year 2008 EPS forecast from $1.82 to $1.85 per share, or at least 10% growth. This is prior to significant one-time gain items described later in this release.
David C. Novak, Chairman and CEO, said, "I am pleased to report that we ended our first decade as a public company in 2007 by once again demonstrating the underlying power of our global portfolio of leading restaurant brands. Fueled by strong 2007 same-store-sales growth of 3% and continued profitable international expansion, including record new-restaurant openings of 471 in mainland China and 852 in YRI, we achieved 15% EPS growth. This marks the sixth straight year of delivering on our commitment of at least 10% annual EPS growth.
"Importantly for shareholders, our China and YRI divisions continued to generate outstanding operating results, with full-year same-store-sales growth of +10% and +6%, and operating profit growth of +30% and +18%, respectively. With such powerful results, we generated record cash from operating activities of nearly $1.6 billion and returned an all-time high of $1.7 billion to our shareholders through share repurchases and dividends. Additionally, we announced in October our plan to substantially increase the amount of share buybacks over the next two years, repurchasing a total of up to $4 billion of the company's outstanding common stock.
"As we enter our second decade, we expect 2008 to be another excellent year. We are confident we can continue to build on our track record of growing EPS at least 10% each year by generating 20% operating profit growth from our China Division, 10% from our YRI Division and 5% from our U.S. businesses. Our teams, strategies and financial strength have never been better, and we are totally focused on delivering exceptional results for our shareholders.
"Shareholders should expect us to continue building consistent value by differentiating our global portfolio of brands and driving profitable global expansion through our four key strategies: building leading brands in China in every significant category; driving aggressive international expansion and building strong brands everywhere; dramatically improving U.S. brand positions, consistency and returns; and driving industry-leading, long-term shareholder and franchisee value."
CHINA DIVISION COMMENTS
For 2007, we opened a record 471 new units in mainland China, further strengthening our leadership position in China's rapidly growing restaurant category. In 2006, we opened 364 new restaurants in mainland China.
Mainland China's fourth-quarter same-store-sales growth of 17% was the best ever for the market, while simultaneously achieving record-level unit growth in 2007.
For the fourth-quarter and full-year 2007, the slight decrease in restaurant margin percentage was better than anticipated, as record same-store-sales growth largely offset unusually high food-cost inflation. We expect high food-cost inflation to continue into the first half of 2008 and moderate later in the year.
Foreign currency conversion continued to provide benefit in both fourth-quarter and full-year operating profit, $6 million and $19 million, respectively.
YRI (Yum Restaurants International) DIVISION COMMENTS
For the fourth quarter, YRI's operating profit growth was negatively impacted by 5 percentage points due to incremental investments in KFC sales-growth initiatives, incremental incentive compensation, and selected, market-level organizational restructuring.
For 2007, we opened a record 852 new restaurants in our YRI Division, 94% of which were opened by our franchise and joint-venture partners. This is the ninth consecutive year of at least 3% year-over-year YRI net unit growth. YRI continues to build an enviable development track record.
YRI same-store-sales growth was strong at +5% and +6% for fourth-quarter and full-year 2007, respectively.
Franchise fees, a key driver of our high-return business, passed the $500 million mark during 2007 with full-year growth of 15%.
The strength of foreign currencies versus the U.S. dollar continued to provide benefit in both fourth-quarter and full-year operating profit, $10 million and $24 million, respectively.
Tuesday, April 15, 2008
Harley Still On A Diet
Harley Sales Flattening?
Posted at 04/02/08 18:04 PM
Ticker: HOG
24% of Harley Davidson dealers in our March survey characterized sales as worse than last year, up slightly from our February survey (23%) and November survey (20%). 38% say business is the same, up from 31% in February, and 38% reported that business is better this year, down from 46% in February. The Sportster was cited as the best-selling model by 48% of those polled, jumping from 33% in both our February and November surveys. Other models mentioned in the March survey include the Road King (24%), Roadster (14%) and Soft Tail (10%). 86% of dealers polled were not sold out of any models. The remaining 14% were all sold out of the Super Glide.
Posted at 04/02/08 18:04 PM
Ticker: HOG
24% of Harley Davidson dealers in our March survey characterized sales as worse than last year, up slightly from our February survey (23%) and November survey (20%). 38% say business is the same, up from 31% in February, and 38% reported that business is better this year, down from 46% in February. The Sportster was cited as the best-selling model by 48% of those polled, jumping from 33% in both our February and November surveys. Other models mentioned in the March survey include the Road King (24%), Roadster (14%) and Soft Tail (10%). 86% of dealers polled were not sold out of any models. The remaining 14% were all sold out of the Super Glide.
Target Still On Target
Target Unscathed By Housing Market Woes
Posted at 03/21/08 15:03 PM
Ticker: TGT
In a recent survey of 30 Target stores across the US, 73% reported that business is currently very strong or above average, while only 10% reported sales below average. 33% reported that the weak housing market and economic worries are hurting their business, although an additional 17% expect economic woes to impact business in the future. 57% of respondents stated that their location has excess inventory that would need to be discounted, but many of the items mentioned were seasonal, such as winter clothing and Easter merchandise. The top-selling brands of women’s clothing cited were Mossimo (23%), Isaac Mizrahi (20%) and Jovovich-Hawk (17%).
Posted at 03/21/08 15:03 PM
Ticker: TGT
In a recent survey of 30 Target stores across the US, 73% reported that business is currently very strong or above average, while only 10% reported sales below average. 33% reported that the weak housing market and economic worries are hurting their business, although an additional 17% expect economic woes to impact business in the future. 57% of respondents stated that their location has excess inventory that would need to be discounted, but many of the items mentioned were seasonal, such as winter clothing and Easter merchandise. The top-selling brands of women’s clothing cited were Mossimo (23%), Isaac Mizrahi (20%) and Jovovich-Hawk (17%).
Business Week's No. 6 - Apple
No. 6: Apple
Industry: Computer HardwareSales: $26.5 billion
Net Income: $4.1 billion
Apple (AAPL) launched its latest category-busting gadget, the iPhone, in 2007, and its shares more than doubled. But investors may be more focused now on the stock's 28% plunge since the start of 2008: The Cupertino (Calif.) company has become the poster child for market fears of a slowdown in consumer spending. Chief Executive Steve Jobs has signaled that, despite any recession, Apple won't be trimming its R&D budget. With $18 billion in cash on hand, many expect the product- obsessed Jobs to go on the offensive. He has already announced a corporate version of the iPhone.
Industry: Computer HardwareSales: $26.5 billion
Net Income: $4.1 billion
Apple (AAPL) launched its latest category-busting gadget, the iPhone, in 2007, and its shares more than doubled. But investors may be more focused now on the stock's 28% plunge since the start of 2008: The Cupertino (Calif.) company has become the poster child for market fears of a slowdown in consumer spending. Chief Executive Steve Jobs has signaled that, despite any recession, Apple won't be trimming its R&D budget. With $18 billion in cash on hand, many expect the product- obsessed Jobs to go on the offensive. He has already announced a corporate version of the iPhone.
Monday, April 14, 2008
Johnson&Johnson
JNJ announces 1st Qtr results on Tuesday, April 15. Consensus estimate is for EPS of $1.20 per share.
Look To The SON - Sonoco
From Michael Santoli
BUSINESS DOESN'T GET MUCH more mundane than boxes, bottles and bubble-wrap. Yet packaging stocks have reversed a bout of underperformance. BCA Research notes they tend to do well in "reflationary" climates, with a steeper bond-yield curve. Food exports are a boon, and pricing power has been strong.
Sonoco (SON) is a century-old, $3 billion market-value company that has managed to extract good returns from wrappers and tubes. They make containers for Oreos, Febreeze and countless industrial products. Almost 4
0% of revenue is from abroad. The stock trades at 12-times projected 2008 earnings. Management is focused on cash-flow metrics and sensible acquisitions. The dividend yield is 3.5%. The stock was punished hard beginning last summer from its highs in the mid-40s, as profit guidance was cut, and is now near 29.
As the guidance cuts showed, this is not a business immune to cyclical headwinds. But for the stock to work, it merely has to be less cyclical than the market now fears.
Founded in 1899, Sonoco is a $4.0 billion global manufacturer of consumer and industrial packing products and provider of packaging services, with approximately 335 operations in 35 countries, serving customers in 85 nations. (Tim)
BUSINESS DOESN'T GET MUCH more mundane than boxes, bottles and bubble-wrap. Yet packaging stocks have reversed a bout of underperformance. BCA Research notes they tend to do well in "reflationary" climates, with a steeper bond-yield curve. Food exports are a boon, and pricing power has been strong.
Sonoco (SON) is a century-old, $3 billion market-value company that has managed to extract good returns from wrappers and tubes. They make containers for Oreos, Febreeze and countless industrial products. Almost 4
0% of revenue is from abroad. The stock trades at 12-times projected 2008 earnings. Management is focused on cash-flow metrics and sensible acquisitions. The dividend yield is 3.5%. The stock was punished hard beginning last summer from its highs in the mid-40s, as profit guidance was cut, and is now near 29.As the guidance cuts showed, this is not a business immune to cyclical headwinds. But for the stock to work, it merely has to be less cyclical than the market now fears.
Founded in 1899, Sonoco is a $4.0 billion global manufacturer of consumer and industrial packing products and provider of packaging services, with approximately 335 operations in 35 countries, serving customers in 85 nations. (Tim)
Hold On To GE
This is another great time to buy a great company at discounted price. (Tim)
By ANDREW BARY
GENERAL ELECTRIC'S FIRST-QUARTER PROFIT SHORTFALL FRIDAY shocked Wall Street, embarrassed the company and hurt the credibility of CEO Jeff Immelt. But it doesn't kill the investment case for the company, whose shares now trade about where they stood a decade ago.
GE shares (ticker: GE) tumbled 4.70 points Friday to 32.05 -- a 13% decline and the worst one-day percentage drop in the stock since the 1987 market crash. The plunge is understandable, since GE's profits rarely fall short of the Street's expectations and the first-quarter profit miss was significant. GE earned 44 cents from operations in the period, down 8% from 48 cents in the year-earlier period, and seven cents below the consensus estimate of 51 cents.
GE now expects to earn $2.20 to $2.30 a share in 2008, below the prior consensus of $2.43. The new guidance from GE calls for zero to 5% growth in profits relative to the $2.20 that the company earned last year, which was up 18% from 2006.
A chastened Immelt said he was "disappointed" with the results, which largely reflect a shortfall at GE's huge financial-services unit, General Electric Capital Services. The earnings-miss came less than a month after Immelt reaffirmed GE's '08 guidance of at least 10% earnings growth, and six weeks after he personally spent $5 million to buy GE shares in the open market at about 33 a share.
The GE news, released before trading opened Friday, rocked the stock market as investors worried about the global impact of a slowing U.S. economy and touchy conditions in the credit markets. Investors wondered: "If GE got stung, how will lesser companies fare?"
The Dow Jones industrials fell 257, to 12,325 Friday, while the Standard & Poor's 500 index declined 28 points, to 1333. About 20% of the S&P 500 drop was driven by GE's loss, which sliced $47 billion from its market value, now $320 billion.
GE now trades for a reasonable 14.2 times estimated 2008 profits of $2.25 a share, using the midpoint of the current guidance. It's just 13 times estimated 2009 profits of $2.50 a share. Our 2009 estimate assumes 10% to 11% earnings growth next year, off a base of $2.25. GE has a secure, bond-like dividend yield of 3.9%.
General Electric is one of the best plays on the global-infrastructure boom, due to its strength in gas and wind turbines, jet engines and locomotives. Its infrastructure division, which includes these businesses, generated 23% revenue growth and 17% profit growth in the first quarter -- the brightest spot for the company. This division, which accounts for 40% of GE's earnings, experienced 11% order growth in the period.
BEFORE FRIDAY'S SURPRISE, bullish Street analysts looked for GE shares to trade into the low- to mid-40s in the next year. That might not happen, given the reduced profit outlook. A move to 40 doesn't seem impossible, however, if GE can meet its reduced profit guidance for 2008 and stays on track to earn $2.50 a share in 2009. If GE rises to 40, investors would get a total return, including dividends, of almost 30%.
GE's risk/reward ratio looks pretty good. Even if profit guidance for 2008 falls further -- to say, $2 a share -- downside in the stock probably isn't much lower than 28. That said, Barron's has been overly optimistic on GE, most recently in a cover story when the stock stood at 37 ("GE's Moment," June 4, 2007).
Some Street analysts are souring on GE, including Citigroup's Jeff Sprague, who cut his rating to Hold from Buy on Friday and reduced his price target to 36 from 45. In a report titled "If GE Can't Outshine Now, When?" Sprague wrote that "evidence is mounting that GE is too big and complex to manage effectively. At a minimum, we appear stuck in a framework where something always is underperforming, detracting from the positives in the portfolio."
The big frustration on Wall Street is that GE's powerhouse infrastructure business is being offset by its financial-services arm. GE Capital contributes about 40% of GE's profits. Setbacks in GE Capital's real-estate, commercial and consumer-finance businesses were the main reasons for the first-quarter profit miss. Much of the weakness surfaced at the end of March, surprising Immelt and GE brass.
Pressure is apt to build on GE to shed certain businesses, including real estate and consumer finance, as well as NBC Universal. NBCU, which includes NBC and the Bravo cable network, had disappointing profit growth of 3% in the first quarter. NBCU has no clear connection with the rest of GE, but the benefits of a sale are dubious, if only because entertainment companies are out of favor on Wall Street. Given the low valuations of Time Warner (TWX), Disney (DIS) and CBS (CBS), GE might not get the $40 billion price that has been put on NBCU.
The Bottom Line
If GE can meet its reduced profit guidance for '08 and stay on track in '09, its shares could rebound to 40, for a total return of almost 30%.
The bear case for GE is that GE Capital will continue to suffer from weakening credit conditions, and the growth in GE's infrastructure businesses will slow. GE's price/earnings ratio is about the same as that of United Technologies (UTX). Bears argue GE is fully priced, given its reliance on financial businesses that get accorded low P/E ratios in the stock market.
In Immelt's annual letter to shareholders, he suggested that GE might be a "perfect investment" for today's challenging business and financial environment. Friday's news rendered that an overstatement, but GE remains one of the great global businesses and a company, in Immelt's words, that is "built to perform in good times and bad." One disappointing quarter shouldn't change all that.
By ANDREW BARY
GENERAL ELECTRIC'S FIRST-QUARTER PROFIT SHORTFALL FRIDAY shocked Wall Street, embarrassed the company and hurt the credibility of CEO Jeff Immelt. But it doesn't kill the investment case for the company, whose shares now trade about where they stood a decade ago.
GE shares (ticker: GE) tumbled 4.70 points Friday to 32.05 -- a 13% decline and the worst one-day percentage drop in the stock since the 1987 market crash. The plunge is understandable, since GE's profits rarely fall short of the Street's expectations and the first-quarter profit miss was significant. GE earned 44 cents from operations in the period, down 8% from 48 cents in the year-earlier period, and seven cents below the consensus estimate of 51 cents.
GE now expects to earn $2.20 to $2.30 a share in 2008, below the prior consensus of $2.43. The new guidance from GE calls for zero to 5% growth in profits relative to the $2.20 that the company earned last year, which was up 18% from 2006.
A chastened Immelt said he was "disappointed" with the results, which largely reflect a shortfall at GE's huge financial-services unit, General Electric Capital Services. The earnings-miss came less than a month after Immelt reaffirmed GE's '08 guidance of at least 10% earnings growth, and six weeks after he personally spent $5 million to buy GE shares in the open market at about 33 a share.
The GE news, released before trading opened Friday, rocked the stock market as investors worried about the global impact of a slowing U.S. economy and touchy conditions in the credit markets. Investors wondered: "If GE got stung, how will lesser companies fare?"
The Dow Jones industrials fell 257, to 12,325 Friday, while the Standard & Poor's 500 index declined 28 points, to 1333. About 20% of the S&P 500 drop was driven by GE's loss, which sliced $47 billion from its market value, now $320 billion.
GE now trades for a reasonable 14.2 times estimated 2008 profits of $2.25 a share, using the midpoint of the current guidance. It's just 13 times estimated 2009 profits of $2.50 a share. Our 2009 estimate assumes 10% to 11% earnings growth next year, off a base of $2.25. GE has a secure, bond-like dividend yield of 3.9%.
General Electric is one of the best plays on the global-infrastructure boom, due to its strength in gas and wind turbines, jet engines and locomotives. Its infrastructure division, which includes these businesses, generated 23% revenue growth and 17% profit growth in the first quarter -- the brightest spot for the company. This division, which accounts for 40% of GE's earnings, experienced 11% order growth in the period.
BEFORE FRIDAY'S SURPRISE, bullish Street analysts looked for GE shares to trade into the low- to mid-40s in the next year. That might not happen, given the reduced profit outlook. A move to 40 doesn't seem impossible, however, if GE can meet its reduced profit guidance for 2008 and stays on track to earn $2.50 a share in 2009. If GE rises to 40, investors would get a total return, including dividends, of almost 30%.
GE's risk/reward ratio looks pretty good. Even if profit guidance for 2008 falls further -- to say, $2 a share -- downside in the stock probably isn't much lower than 28. That said, Barron's has been overly optimistic on GE, most recently in a cover story when the stock stood at 37 ("GE's Moment," June 4, 2007).
Some Street analysts are souring on GE, including Citigroup's Jeff Sprague, who cut his rating to Hold from Buy on Friday and reduced his price target to 36 from 45. In a report titled "If GE Can't Outshine Now, When?" Sprague wrote that "evidence is mounting that GE is too big and complex to manage effectively. At a minimum, we appear stuck in a framework where something always is underperforming, detracting from the positives in the portfolio."
The big frustration on Wall Street is that GE's powerhouse infrastructure business is being offset by its financial-services arm. GE Capital contributes about 40% of GE's profits. Setbacks in GE Capital's real-estate, commercial and consumer-finance businesses were the main reasons for the first-quarter profit miss. Much of the weakness surfaced at the end of March, surprising Immelt and GE brass.
Pressure is apt to build on GE to shed certain businesses, including real estate and consumer finance, as well as NBC Universal. NBCU, which includes NBC and the Bravo cable network, had disappointing profit growth of 3% in the first quarter. NBCU has no clear connection with the rest of GE, but the benefits of a sale are dubious, if only because entertainment companies are out of favor on Wall Street. Given the low valuations of Time Warner (TWX), Disney (DIS) and CBS (CBS), GE might not get the $40 billion price that has been put on NBCU.
The Bottom Line
If GE can meet its reduced profit guidance for '08 and stay on track in '09, its shares could rebound to 40, for a total return of almost 30%.
The bear case for GE is that GE Capital will continue to suffer from weakening credit conditions, and the growth in GE's infrastructure businesses will slow. GE's price/earnings ratio is about the same as that of United Technologies (UTX). Bears argue GE is fully priced, given its reliance on financial businesses that get accorded low P/E ratios in the stock market.
In Immelt's annual letter to shareholders, he suggested that GE might be a "perfect investment" for today's challenging business and financial environment. Friday's news rendered that an overstatement, but GE remains one of the great global businesses and a company, in Immelt's words, that is "built to perform in good times and bad." One disappointing quarter shouldn't change all that.
Saturday, April 12, 2008
GE
April 11, 2008, 4:47 pm
Four at Four: All GE, All the Time
Posted by David Gaffen
Sometimes General Electric Co. is a proxy for the stock market. Friday, GE was the stock market. Shares ended the day lower by 12.8%, the worst one-day performance for the stock since Oct. 19, 1987, as more than 335 million shares traded, or about 10% of the listed volume on the Big Board. The sharp decline indicates that this was a massive surprise to investors, and while the company has a reputation of deftly hitting earnings, quarter after quarter, the problems in the credit markets lead one to believe that perhaps this should not have been a surprise. CEO Jeffrey Immelt, speaking on the firm’s conference call, said that “the $500 million plus in commercial finance that we missed in the quarter fundamentally took place with really the inability to do transactions in the last two weeks that we normally could get done and marks that basically we do at the end of the quarter that basically all went negative.” In other words, just like a lot of other financial companies that rely on borrowing money to make certain loans that could not later be sold. “It’s a huge lender and they fund these loans through commercial paper,” says George Feiger, CEO of Contango Capital Advisors, the wealth management arm of Zions Bancorporation. “Why should it be better off than Merrill Lynch or Citigroup or anybody? Essentially, it’s a collateralized lender on a huge scale. Nobody should be surprised GE is having the same mark-to-market problems that every other CLO is having.”
Four at Four: All GE, All the Time
Posted by David Gaffen
Sometimes General Electric Co. is a proxy for the stock market. Friday, GE was the stock market. Shares ended the day lower by 12.8%, the worst one-day performance for the stock since Oct. 19, 1987, as more than 335 million shares traded, or about 10% of the listed volume on the Big Board. The sharp decline indicates that this was a massive surprise to investors, and while the company has a reputation of deftly hitting earnings, quarter after quarter, the problems in the credit markets lead one to believe that perhaps this should not have been a surprise. CEO Jeffrey Immelt, speaking on the firm’s conference call, said that “the $500 million plus in commercial finance that we missed in the quarter fundamentally took place with really the inability to do transactions in the last two weeks that we normally could get done and marks that basically we do at the end of the quarter that basically all went negative.” In other words, just like a lot of other financial companies that rely on borrowing money to make certain loans that could not later be sold. “It’s a huge lender and they fund these loans through commercial paper,” says George Feiger, CEO of Contango Capital Advisors, the wealth management arm of Zions Bancorporation. “Why should it be better off than Merrill Lynch or Citigroup or anybody? Essentially, it’s a collateralized lender on a huge scale. Nobody should be surprised GE is having the same mark-to-market problems that every other CLO is having.”
Friday, April 11, 2008
GE - The Good, The Bad, and The Ugly
By Paul R. La Monica, CNNMoney.com editor at large
April 11, 2008: 11:16 AM EDT
NEW YORK (CNNMoney.com) -- So much for a weak dollar and stronger global economy helping to lift results for large multinational companies like General Electric.
GE did report that international sales grew 22% in the first quarter and that revenue from developing countries soared 38%. But that was not enough to save GE from reporting total sales and earnings that missed analysts' forecasts.
Remember that country where GE is based? The one that many people believe is now firmly entrenched in a recession? GE (GE, Fortune 500) can't escape the economic weakness in the United States.
The stunningly disappointing results is a sobering reminder that first-quarter results for many companies will be poor. Results for major financials like Citigroup (C, Fortune 500), Merrill Lynch (MER, Fortune 500) and Washington Mutual (WM, Fortune 500) are likely to be terrible.
GE indicated that the problems in the financial markets were the big reason behind the weakness.
The company's two financial services units - Commercial Finance and GE Money - both reported steep declines in operating profits.
What's more, GE said that operating profits in both units could post double-digit declines in earnings for all of 2008, helping to push lower GE's own forecast for overall profits for the coming year.
Unfortunately, GE's bad news extends far beyond the credit crunch and is a troubling sign for the entire economy and market.
"This market has folks wondering how deep the water is and how far it is to land," said Todd Campbell, president of E.B. Capital Markets, a research firm catering to institutional investors. "The GE miss reignites investor questions on who will be next and will anyone be spared."
Trouble on many fronts
GE is a proxy for the overall economy, making everything from light bulbs and dishwashers to jet engines, defibrillators and mediocre reality television shows - sorry, as this Web site's former media reporter, I couldn't resist a jab at GE's struggling NBC unit.
GE said that softness in the industrial, healthcare and NBC Universal divisions account for some of the lowered profit forecast.
The one area that is doing well for GE right now is its infrastructure business, thanks largely to orders for energy-related equipment and services.
But GE's industrial unit reported an operating profit decline of 16% in the quarter. The company said that unit volume (i.e. the number of good sold, not the dollar amount) of appliances fell 18% due to the problems in the U.S. housing market.
And even though orders for industrial goods in Latin America and Asia each grew more than 20%, U.S. orders fell 5%.
The company's healthcare business also reported a tough quarter - sales were flat and operating profits fell 17%. GE said that orders for diagnostic imaging equipment dropped 13%.
Even at NBC Universal, which actually was one of the few relatively bright spots for GE in the quarter - it reported a 3% increase in profits - the news is not encouraging.
For the full year, GE said profits at NBC Universal, which include the flagship TV network, cable channels USA and Bravo and the Universal movie studio, are likely to be up less than 5%. That's despite the fact that NBC is airing the Olympics this summer and like other media companies should see a boost from political advertising.
So it's more than just the credit crunch that's affecting GE. People are not buying refrigerators because they aren't buying new houses. Hospitals aren't ordering more X-rays and MRI machines because of budget problems. Advertisers are pulling back on spending due to economic weakness.
It's no wonder then that GE's stock plunged more than 10% Friday morning and dragged down the entire market. The poor results probably spell trouble for all types of GE competitors ranging from appliance maker Whirlpool (WHR, Fortune 500), industrial and medical equipment giant Siemens (SI) and media titans like my parent company Time Warner (TWX, Fortune 500).
There may be some individual companies that will buck the downward trend during this first-quarter earnings period. But overall, it's going to be ugly
April 11, 2008: 11:16 AM EDT
NEW YORK (CNNMoney.com) -- So much for a weak dollar and stronger global economy helping to lift results for large multinational companies like General Electric.
GE did report that international sales grew 22% in the first quarter and that revenue from developing countries soared 38%. But that was not enough to save GE from reporting total sales and earnings that missed analysts' forecasts.
Remember that country where GE is based? The one that many people believe is now firmly entrenched in a recession? GE (GE, Fortune 500) can't escape the economic weakness in the United States.
The stunningly disappointing results is a sobering reminder that first-quarter results for many companies will be poor. Results for major financials like Citigroup (C, Fortune 500), Merrill Lynch (MER, Fortune 500) and Washington Mutual (WM, Fortune 500) are likely to be terrible.
GE indicated that the problems in the financial markets were the big reason behind the weakness.
The company's two financial services units - Commercial Finance and GE Money - both reported steep declines in operating profits.
What's more, GE said that operating profits in both units could post double-digit declines in earnings for all of 2008, helping to push lower GE's own forecast for overall profits for the coming year.
Unfortunately, GE's bad news extends far beyond the credit crunch and is a troubling sign for the entire economy and market.
"This market has folks wondering how deep the water is and how far it is to land," said Todd Campbell, president of E.B. Capital Markets, a research firm catering to institutional investors. "The GE miss reignites investor questions on who will be next and will anyone be spared."
Trouble on many fronts
GE is a proxy for the overall economy, making everything from light bulbs and dishwashers to jet engines, defibrillators and mediocre reality television shows - sorry, as this Web site's former media reporter, I couldn't resist a jab at GE's struggling NBC unit.
GE said that softness in the industrial, healthcare and NBC Universal divisions account for some of the lowered profit forecast.
The one area that is doing well for GE right now is its infrastructure business, thanks largely to orders for energy-related equipment and services.
But GE's industrial unit reported an operating profit decline of 16% in the quarter. The company said that unit volume (i.e. the number of good sold, not the dollar amount) of appliances fell 18% due to the problems in the U.S. housing market.
And even though orders for industrial goods in Latin America and Asia each grew more than 20%, U.S. orders fell 5%.
The company's healthcare business also reported a tough quarter - sales were flat and operating profits fell 17%. GE said that orders for diagnostic imaging equipment dropped 13%.
Even at NBC Universal, which actually was one of the few relatively bright spots for GE in the quarter - it reported a 3% increase in profits - the news is not encouraging.
For the full year, GE said profits at NBC Universal, which include the flagship TV network, cable channels USA and Bravo and the Universal movie studio, are likely to be up less than 5%. That's despite the fact that NBC is airing the Olympics this summer and like other media companies should see a boost from political advertising.
So it's more than just the credit crunch that's affecting GE. People are not buying refrigerators because they aren't buying new houses. Hospitals aren't ordering more X-rays and MRI machines because of budget problems. Advertisers are pulling back on spending due to economic weakness.
It's no wonder then that GE's stock plunged more than 10% Friday morning and dragged down the entire market. The poor results probably spell trouble for all types of GE competitors ranging from appliance maker Whirlpool (WHR, Fortune 500), industrial and medical equipment giant Siemens (SI) and media titans like my parent company Time Warner (TWX, Fortune 500).
There may be some individual companies that will buck the downward trend during this first-quarter earnings period. But overall, it's going to be ugly
Thursday, April 10, 2008
Costco - Same Store Sales
NEW YORK, April 10 (Reuters) - Costco Wholesale Corp (COST.O: Quote, Profile, Research) said on Thursday that sales at stores open at least a year rose a stronger-than-expected 7 percent, helped by higher gasoline prices and strength in foreign currency.
Analysts, on average, were expecting the company's same-store sales to rise 5.7 percent, according to Reuters Estimates.
Costco, the largest U.S. warehouse club operator, said total sales for the five weeks ended April 6 rose 11 percent to $6.57 billion from the same period a year earlier.
It said same-store sales rose 5 percent in its U.S. operations, while they jumped 17 percent internationally.
Excluding gasoline price inflation, it said U.S. same-store sales would have been up 3 percent, while on a local currency basis, it said international comparable sales increased 6 percent in March.
Customers pay an annual membership fee to shop in Costco's warehouse clubs, which sell everything from televisions to diamond rings to bulk-sized packages of toilet paper.
The clubs also sell gasoline, a lure to shoppers looking to fill their cars with cheap fuel.
It also said the average price for a gallon of gasoline during the month was $3.21, up from $2.66 a year ago, helping to boost sales in that category.
On a recorded call, the retailer said sales were strong in deli, frozen food, produce, bakery, and men's and women's apparel. (Reporting by Aarthi Sivaraman and Nicole Maestri)
Analysts, on average, were expecting the company's same-store sales to rise 5.7 percent, according to Reuters Estimates.
Costco, the largest U.S. warehouse club operator, said total sales for the five weeks ended April 6 rose 11 percent to $6.57 billion from the same period a year earlier.
It said same-store sales rose 5 percent in its U.S. operations, while they jumped 17 percent internationally.
Excluding gasoline price inflation, it said U.S. same-store sales would have been up 3 percent, while on a local currency basis, it said international comparable sales increased 6 percent in March.
Customers pay an annual membership fee to shop in Costco's warehouse clubs, which sell everything from televisions to diamond rings to bulk-sized packages of toilet paper.
The clubs also sell gasoline, a lure to shoppers looking to fill their cars with cheap fuel.
It also said the average price for a gallon of gasoline during the month was $3.21, up from $2.66 a year ago, helping to boost sales in that category.
On a recorded call, the retailer said sales were strong in deli, frozen food, produce, bakery, and men's and women's apparel. (Reporting by Aarthi Sivaraman and Nicole Maestri)
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