From Ticker Sense
We all know by now that the sudden 200 point drop in the Dow yesterday was due to a calculation delay caused by information overload by Dow Jones’ data systems. Below we calculate how the intraday price chart should have looked based on the actual price changes of the Dow’s 30 components. As the chart shows, the calculations began to go awry a little after 1:30 pm and continued until the computers finally caught up at 3:00 pm.
From Ticker Sense
Just like one blowup can damage years worth of work to build up positive reputation (JBLU), one big decline can damage months worth of market gains. After days like yesterday, it is good to review the trading ranges of various stocks, sectors and indices to see where they currently stand. Below we provide overbought/oversold charts of US sectors and indices. As shown, many areas that were overbought just two days ago are now oversold. Utilities, materials, and fixed income are the only areas that are currently overbought.
Things got a bit better at Sprint (S) last quarter. Revenue rose from $9.79 billion in the quarter a year ago to $10.44 billion. Net income went from $197 million to $261.
According to The Wall Street Journal, Sprint now has 53.1 million subscribers to 61 million at Cingular (T) and 59.1 million at Verizon Wireless (VZ)(VOD).
Sprint’s forecast for the current year is disappointing. Almost no growth expected.
The means that the Sprint WiMax network roll-out in about two years will be absolutely critical to the company’s long-term prospects and the investment that companies like Intel (INTC) and Motorola (MOT) are making in the technology.
Douglas A. McIntyre
(ADSK) Autodesk restating earnings from 2003 to 2006 for options; stock down 4% pre-market.
(AVNC) Advancis Pharmaceutical reaches agreement with FDA for resubmission of amoxicillin Pulsys application for strep throat.
(AVNR) Avanir Pharma said the FDA requested more data to supplement the application Zenvia for involuntary emotional expression disorder.
(BITS) Bitstream -$0.06 EPS.
(DECK) Deckers Outdoor $1.82 EPS vs $1.31e.
(EAGL) EGL going private by CEO-led private equity group for $36 per share.
(EPIX) EPIX Pharma files formal appeal for Vasovist with the Center for Drug Evaluation and Research.
(EVER) Evercore $0.45 EPS vs $0.35e.
(HD) Home Depot down almost 2% pre-market on muted 2007 guidance.
(HGSI) Human Genome Sciences -$0.36 EPS vs -$0.44e; in pact with Novartis.
(IRM) Iron Mountain $0.18 EPS vs $0.17e.
(JOYG) Joy Global $0.51 EPS vs $0.60e.
(JTX) Jackson Hewitt $0.86 EPS vs $0.92e.
(KOMG) Komag trading up after extending its supply pact with Seagate (STX).
(LCC) US Air may refinance some of its debt.
(LEAP) Leap Wireless up 1.5% after earnings.
(LIZ) Liz Claiborne $0.94 EPS vs $0.97e.
(MRK) Merck raised guidance, but gets more in-line with where estimates are.
(MSO) Martha Stewart $0.25 EPS vs $0.20e.
(NICE) Nice Systems received VoIP order.
(ORA) Ormat $0.12 EPS vs $0.24e.
(PRW) Pro-Pharma submitted orphan drug application in Europe for cancer treatment.
(Q) Qwest said its CFO Oren Shaffer is retiring.
(S) Sprint Nextel $0.29 EPS vs $0.29e.
(SCOP) Scopus appointed a new president.
(SLXP) Salix Pharma $0.29 EPS vs $0.26e.
(SNH) Senior Housing names new CFO; $0.37 EPS & $0.47 FFO vs $0.44 FFO estimate.
(STN) Station Casinos $0.53 EPS vs $0.45e.
(TGEN) Targeted Genetics showed positive Phase I data on HIV vaccine safety.
(ULBI) Ultralife Batteries receives $6+ million contract.
(VSE) VeraSun $0.27 EPS vs $0.20e.
(VSNT) Versant traded up 11% after beating estimates.
Shanghai stocks closed up almost 4% but the rest of Asia fell to partially catch up; European markets are down only about 1% on average.
(WTR) Aqua America $0.19 EPS vs $0.19e.
Jon C. Ogg
February 27, 2007
Jon Ogg is a partner in 24/7 Wall St., LLC and he can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
AQNT started as Outperform at Wachovia.
AV cut to Underweight at Thomas Weisel.
AXP raised to Outperform at FBR.
ADBL raised to Buy at Merriman Curhan Ford.
ADSK raised to Outperform at Baird.
BEAS raised to Peer Perform at Bear Stearns.
BEAV started as Outperform at Wachovia.
BA raised to Neutral at JPMorgan.
BKC started as Buy at AGEdwards.
CBT started as Hold at Jefferies.
CDI raised to Buy at Jefferies.
CIEN raised to Overweight at JPMorgan.
EGLE raised to Outperform at Wachovia.
FDP raised to Mkt Perform at Wachovia.
FNM raised to Mkt Perform at FBR.
GMST cut to Hold at Morgan Joseph.
LLL raised to Neutral at JPMorgan.
LMT cut to Underweight at JPMorgan.
OC started as Neutral at Oppenheimer.
PRAI cut to Underperform at Baird.
PTMK cut to Mkt Perform at FBR.
RRI cut to Underperform at CIBC.
RJET raised to Overweight at JPMorgan.
RNWK raised to Hold at Jefferies.
XPRT cut to Mkt Perform at JMP.
Jon C. Ogg
February 27, 2007
Jon Ogg is a partner in 24/7 Wall St., LLC and he can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers
The February short interest in Yahoo! (YHOO) dropped 4.2 million shares to 79.9 million. Over the last year, the company’s shares are down about 5%, but have been moving up since late December.
Perhaps fewer investors want to bet against the success of Panama. Click rates on Yahoo! search-related ads have been moving up, a sign that the company may not be beaten to death by Google (GOOG).
And, there is the ongoing rumor that Microsoft (MSFT) may try to buy Yahoo! to bolster its online presence. Stranger things have happened.
Douglas A. McIntyre
The short interest in Microsoft fell in February by 30.3 million shares to 78.2 million, a big drop. Investors must have decided that betting against Vista and Xbox was a bad idea.
Although Microsoft (MSFT) has tried to mute expectations for Vista, it appears that over the medium term it will do extremely well and challenges from competition like Google are likely to fail.
Microsoft also seems to be making a smart play by moving into mobile software with Mobile 6 just as broadband wireless is hitting its stride.
Douglas A. McIntyre
Home Depot (HD) obviously does not think the housing market is going anywhere good in 2007. In its forecast for the year, it says its own revenue will grow by zero to 2%. EPS is expected to drop 4% to 9%.
Even beyond 2007, the company’s future looks grim. HD says that revenue beyond next year will grow at about 5% as will earnings.
HD, its growth stock days are over.
Douglas A. McIntyre
At 6.05 AM, most markets in Europe including the FTSE, DAXX, and CAC 40 are now down less than 1%. Some stocks including BSkyB, HSBC, BASF, BMW, SAP, VW, Cap Gemini, and Michelin are showing gains.
Douglas A. McIntyre
S&P, Nasdaq and Dow futures are up substantially at 5.55 AM with the Dow Industrial futures up almost 120 points.
Douglas A. McIntyre
There are certain companies that probably cannot be turned around no matter who runs them. They tend to be in industries where macro-economic trends are against them, like the buggy whip business 150 years ago.
Investors are not likely to get much out of these firms, unless and until the trend that is hurting them is reversed
Qwest (Q) has a vexing set of problems that traps it as landline phone customers drop and cable TV continues its assault on telecoms with VoIP, broadband, and TV.
Unlike its larger brothers AT&T (T) and Verizon (VZ), it does not have a large cellular property to help drive revenue and earnings. It also does not have the capital to build out a fiber network in the hopes that it can offer super-fast broadband and TV to its residential customers.
Qwest shares have had a very sharp ride up over the last two years, besting both AT&T and Verizon, but in the last six months the tables have been turned and Qwest is the laggard.
Qwest’s revenue in 2006 was flat at $13.9 billion. Landline business dropped from $9.1 billion to $8.7 billion. Internet services rose to fill in the hole. Qwest’s revenue has been dropping fairly steadily since 2002. The company has been able to cut costs, but it is now faced with the possibility of spending a great deal of money to try to compete with cable and other rivals
From the 10-K:
"The telecommunications industry is experiencing significant technological changes, and our ability to execute our business plans and compete depends upon our ability to develop and deploy new products and services, such as broadband data, wireless, video and VoIP services. The development and deployment of new products and services could also require substantial expenditure of financial and other resources in excess of contemplated levels."
Qwest missed the cashflow numbers that some on Wall St. expected for Q4 06 and analysts are concerned that the company cannot hit its 2007 forecast. And, beyond that, Q4 continued the trend of flat revenue at just under $3.5 billion. Expenses fell 4.8%, but the company will not be able to cut its way to success.
Morningstar has a "fair value" price on the stock of $5. The stock is currently at $8.58. The research firm’s reasoning is compelling. Qwest’s local phone business is in decline, the company has no plans to significantly upgrade its network, and the company does not have a wireless business of its own.
Tough to overcome that many obstacles.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Below is the short interest is certain stocks listed on the Nasdaq as of February 15,2007. Comparisons in positions are made to those as of January 12, 2007.
Largest Short Positions
Sirius 125.1 million
Level 3 110.0 million
Charter Comm 83.8 million
Yahoo! 79.9 million
Microsoft 78.1 million
Intel 63.5 million
Comcast 48.5 million
Amazon 46.1 million
Symantec 44.1 million
Cisco 42.5 million
Oracle 40.9 million
Applied Mater 40.7 million
Sun Micro 38.5 million
Largest Increases In Short Position
Lawson Software 10.2 million increase
Borland 6.8 million
Sirius 6.3 million
RF Micro 5.8 million
UTStarcom 5.2 million
Express Script 5.2 million
Conexant 4.5 million
Sun Micro 4.2 million
Largest Decreases In Short Positions
Microsoft 30.3 million decrease
Cisco 21.8 million
Oracle 17.3 million
Applied Mater 14.8 million
Brocade 7.4 million
Apple 6.7 million
Broadcom 6.4 million
Comcast 5.5 million
XM 5.0 million
Dell 4.3 million
Yahoo! 4.2 million
Data from WSJ and Nasdaq
Douglas A. McIntyre
From Ticker Sense
Today’s 416 point decline in the DJIA represents the seventh largest point decline in its history. It also ends a streak of 1098 trading days without top ten point gain or loss, which is the fourth longest stretch since 1920. In other words, since October 2002, there has not been a one day point change in the Dow that qualified as one of the ten largest up days or ten largest down days.
While we realize that it is certainly more practical to compare percent changes over point changes, it is still interesting to note that since the early days of the bull market in 2002, today was the first up or down "big day".
Stocks: (BCS)(BP)(BT)(GSK)(PUK)(RTRSY)(UN)(VOD)(BAY)(DCX)(DB)(DT)(SAP)(SI)(ALU)(AXA)(FTE)(STM)(V)
Markets in Europe were off sharply at 5 AM New York time.
The FTSE is down 1.5% to 6,195. Barclays is down 2.8% to 746.5. BP is off .7% to 531. BT is off .7% to 298.75. GlaxoSmithKline is off 1% to 1419. Prudential is down 3% to 663.5. Reuters is down 1.6% to 425. Royal Dutch Shell is up .4% to 1706. Unilver is down .9% to 1363. Vodafone is off 1% to 142.
The DAXX is off 1.7% to 6,704. Bayer is off .4% to 44.01. DaimlerChrysler is off 1.5% to 51. DeutscheBank is off 3.2% to 99.36. Deutsche Telekom is down 1.2% to 13.57. SAP is up .1% to 34.87. Siemens is down 2.2% to 79.94.
The CAC 40 is down 1.8% to 5,486. Alcatel-Lucent is down 2.6% to 9.55. AXA is down 2.4% to 32.15. France Telecom is down 1.6% to 20.54. ST Micro is down .8% to 14.5. Vivendi is down .2% to 29.95.
The SMI Index was down 2% to 8,736. Credit Suisse was down 2.7% to 84.75. Swisscom was down 1.2% to 458. UBS was down 1.8% to 71.3.
Data from Reuters
Douglas A. McInyre
According to Reuters, Australia’s Centro Properties Group has agreed to buy New Plan Excel Realty Trust for about $3.4 billion in cash.
Reuters reports that mutual fund investors are preparing for a significant drop in the value of their holdings.
Reuters writest that Airbus plans to eliminate 10,000 jobs but expects half of those cuts to come at its suppliers.
Reuters also reports that Pfizer (PFE) found that its HIV drug maraviroc take with other drugs can increase the number of patients who suppress the virus by 2x.
Sony (SNE) said that its would catch up with its shortage of PS3 game platforms by May.
Reuters writes that CBS (CBS) reported improved earnings in the latest quarter and revenue rose 2%.
The Wall Street Journal writes that Freddie Mac will stop buying certain kinds of sub-prime loans.
The Wall Street Journal writes that durable goods orders dropped 7.8%
The Wall Street Journal reports that Carl Icahn is fighting to deny the CEO of Blockbuster (BBI) his large bonus.
The WSJ also writes that a judge has put the patent claim by Qualcomm (QCOM) against Nokia (NOK) on hold, likely in the hope that the two sides can reach an agreement.
The New York Times writes that CBS (CBS) is opeing a service to allow fans to upload basketball clips for March Madness, a challenge to the model of YouTube.
FT writes that Univision has hired an executive from Omnicom to be its new CEO.
Barron’s reports that shares in Taiwan Semi are set to show strong gains on any upturn in the cyclical chip market.
Douglas A. McIntyre
RadioShack released fourth quarter and year-end earnings today, and it was a perfect example of leaping over a bar that may have been set just a tad too low. For the fourth quarter, the company posted $.62/share on $84.5 million net income. Blew past the $.43 estimate, but that figure was more like a chalk outline around a dead body than a real consensus figure. Full-year earnings were only $.54/sh, and that’s down from $1.80/sh in 2005. When a company is in the middle of a capitulation of culture, earnings, and brand, estimates can and should swing wildly. There just gets to be too many variables up in the air.
Like what the CEO really intends to do with the company. RadioShack’s future needs to, for the sake of any long-term investors, involve a lot more than standard cost-cutting measures and paring off a few stores. They could pare off 3,000 stores, half their total, but the other 3,000 would still be marked for a slow death. The CC didn’t give us anything meaningful or sweeping in terms of strategy.
Total sales were $1.45 billion for the 4th and $4.77b for the year, with the key 4th qtr figure down about 12.5% yoy. Much of the sales shortfall can be attributed to store closings during the quarter, making 505 closings for the year. But comps were down 5.6% for the year, and that’s not an industry trend that RadioShack can blame the figures on. Best Buy and Circuit City both posted comps above 4%.
RadioShack will be featured in a 24/7 Break-up Analysis shortly, but in the meantime, we will give the company a small pat on the back for passing step one of their multi-stage comeback in exceeding dramatically weak earnings estimates. They have set the bar far higher for fiscal ’07, calling for full-year earnings of $1.00 to $1.20, which would be double what we saw in 2006, but still only about half of what the company earned in ’04 and ’05.
So did management leave room in their estimates for plenty of upside? Sure they did – even if they close another 1,000 stores this year they could still earn $1.30-1.40 if they returned to the operating margins of just a few years ago. Is that likely to happen? Most say no, as their brand has been made a virtual laughing stock, even amongst people who don’t follow the markets. Julian Day earned his stripes as a turnaround manager, but this one if pulled off would make for a career-topper.
Ryan Barnes
By William Trent, CFA of Stock Market Beat
January durable goods orders tumble 7.8 percent – Yahoo! News
New orders for U.S.-made durable goods fell by a much sharper-than-expected 7.8 percent in January as nondefense goods orders saw their biggest monthly decline ever, a government report showed on Tuesday.
A steep drop in orders for Boeing Co. (NYSE:BA – news) airliners helped push down nondefense orders for durable goods, items meant to last three years or more.Excluding volatile transportation orders, which are heavily skewed by aircraft, durable goods orders fell by 3.1 percent in January, their steepest drop since July 2005, the
Commerce Department reported. That followed a downwardly revised gain of 2.8 percent in December.Economists polled by Reuters had forecast that orders for durable goods would fall 2.5 percent, orders excluding transport would drop 0.2 percent and orders excluding defense goods would rise 0.3 percent.
Thus read the headline number, which combined with a selloff in China and a bad print or two to send the markets hazzardously close to closing below the December closing low of 12,194. But we always argue that the month-to-month volatility, compounded by seasonal adjustments that may not always make sense, provide the headline number with little value. Instead, we prefer to look at year/year changes before seasonal adjustments are made.
By William Trent, CFA of Stock Market Beat
When we recently criticized Xerox (XRX) for it’s practice of taking restructuring charges in each of the last seven years while suggesting investors treat them as one-time events, a company representative noted that “First Call estimate for Xerox’s Q4 earnings was 37 cents. That number did not include restructuring. While Xerox provided guidance on restructuring for Q4, analysts posted an adjusted EPS number that excluded any impact from restructuring. Compared to First Call and Xerox’s own Q4 guidance, Xerox did exceed expectations for the quarter at 38 cents adjusted EPS.”
By William Trent, CFA of Stock Market Beat
We’ve always felt that the non-asset based transportation names were the ones to watch. Now it’s official, as anyone who benchmarks performance against the S&P 500 (which is to say practically everyone) will have to keep an eye on them. CH Robinson Worldwide (CHRW) to Join S&P 500: Financial News – Yahoo! Finance
Standard & Poor’s said Monday freight forwarder CH Robinson Worldwide Inc. will replace Health Management Associates Inc. in its widely followed S&P 500 index on Thursday.
We’ve seen that changes in the Dow are often turning points for the stocks involved, but we haven’t heard of such a relationship regarding the S&P 500 (anyone care to enlighten us?) At any rate, with the stock near its 52-week high shareholder’s are likely hoping it is a signal for even better things to come.
By William Trent, CFA of Stock Market Beat
Here’s the rumor. Verizon to Become Largest National Carrier by Swallowing Alltel (Mobile Magazine):
The CDMA landscape in the United States may be set for a pretty significant change as Verizon Wireless is very interested in buying Alltel, effectively making it the largest national cellular phone carrier based on number of subscribers. If the merger goes through and is approved, the Verizon-Alltel conglomerate would “tower over Cingular by about 10 million” customers.
Here are the facts:
Do these add up to a deal? They shouldn’t, but they certainly might.
| Today’s top tickerspy Indexes | |
| Domestic Telecom ... | +2.6% |
| Stem Cell Stocks | +2.3% |
| Pain Management S... | +2.1% |
| Ethanol and Biofu... | +1.9% |
| Savings and Loan ... | +1.8% |
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