According to a report in The Wall Street Journal, Citigroup (C) CEO Charles Prince will offer his resignation at a board meeting on Sunday.
There is speculation that the bank will have to take several billion more in write-downs on mortgage-backed financial instruments.
Douglas A. McIntrye
AMBAC (ABK) Bond insurance company dropping like a rock on fears that it has huge exposures to CDOs. Down to $21.62 from 52-week high of $96.10.
Security Capital Assurance (SCA) Another bond insurance operation. Drops to $7.59 from 52-week high of $34.58.
MBIA Inc (MBI) The third in the trio of bond insurance firms. Drops to $33 from 52-week high of $76.02.
Merrill Lynch & Co (MER) Big losses and potential SEC investigation. Bad combination. Down to $54 from 52-week high of $98.68.
Washington Mutual (WM) Mortgage broker. Falls to $23.59 from 52-week high of $46.38.
Citigroup (C) Down to $35.52 from 52-week high of $57.
Silicon Image (SIMG) Q3 profit drops by half. Shares fall to $4.30 from 52-week high of $13.77.
Douglas A. McIntyre
This is the crus of the news regarding Global Warming and the public companies that made announcements over the last 36 hours:
FPL Group (NYSE:FPL) chairman called the Climate Bill "Well intentioned but fundamentally flawed": Lewis Hay said, “I acknowledge and applaud the willingness of key senators to try and address the important issue of global climate change. Unfortunately, the bill they have proposed, if left unchanged, would reward the country’s biggest emitters of carbon dioxide with billions of dollars of free allowances that they don’t need. Moreover, the bill contains no clear ‘safety valve,’ to ensure that we don’t inadvertently damage the economy.”
Itron (NASDAQ:ITRI) shares were hit very hard (as much as 18%) after earnings today, but Lazard Capital Markets reiterated its BUY rating and $115 price target. Evergreen Solar (NASDAQ:ESLR) shares rose over 10% after ThinkEquity raised its rating from Accumulate tp Buy" after a production facility visit.
NameMedia has filed to come public in a stock offering valued up to $172.5 million as far as the initial filing indications. Lead underwriters are indicated as Credit Suisse and Jefferies, and co-managers are listed as Banc of America and RBC Capital Markets. Its proposed ticker is NAME on NASDAQ.
The company’s proimary business is owning and selling domain names, and it claims to have more than 2,250,000 domain names. The owners of these sites call this sort of operation an "Internet Real Estate owner" and everyone else refers to this sort of business as a Domain Squatter. It owns more than 750,000 domains itself, and it has a "for sale" portfolio of 1,500,000 domain names owned by third parties. It generates revenue primarily from two sources: online advertising in its media business, and the sale of domain names in its marketplace business.
NameMedia financial claims are as follows:
It will have 25,605,071 shares outstanding after the offering. Here is the free email sign-up for twice weekly information on mergers, IPO’s, spin-offs, speculation, and the like that has exclusive content and opinions often not found on the public 247wallst.com site.
Moody’s (MCO) give credit rating of "Aa1" to both Ambac (ABK) and MBIA (MBI). But, no one else on Wall St. seems to see it that way.
According to Reuters "at Thursday’s close, Ambac’s swaps implied a rating of "Caa1," seven levels below investment grade and 14 notches below its actual rating."
The stock market also seems to believe that Ambac (ABK) is hardly "investment grade." Shares in the bond insurance company are down to under $26 today, off over 12%. They are also down from a high of $96.10.
It appears that some traders don’t think Ambac is going to make it out of the current credit crisis alive.
Douglas A. McIntyre
This might not be that unusual for a volatile week during earnings season, but this was a fairly active week for share buyback news announcements. Some are new and some are continuations or expansions. There is no way to cover all the share buybacks during earnings season, and we screened out the micro-cap stocks.
Dell (NASDAQ:DELL) is perhaps the biggest buyback coming down the pipe after this month. It will now be clear to resume its major stock buyback now that it has become compliant again with having its restatement complete and SEC filings current. Dell even said it expects to resume its share repurchase program shortly after it reports its results for the third quarter (so after 11/29). Goldman Sachs added Dell to its Conviction Buy List at the expense of H-P (NYSE:HPQ).
ExxonMobil (NYSE:XOM) missed earnings expectations but noted that during the quarter, the company repurchased roughly 90 million shares of its own stock for about $7.8 billion.
CROCS Inc. (NASDAQ:CROX) authorized a 1 million share buyback planafter Thursday’s major stock drop. The board must have said, "Evenwith ugly shoes, these buyback things that companies have announcedseem to be well received by traders." After traders sent CROX to the Everglades, the company might as well just save its cash.
Allegheny Technologies Inc. (NYSE:ATI) Board of Directors approved a share repurchase program of $500 million, and it increased ATI’s quarterly dividend by nearly 40% to $0.18 per share. This is after a dismal earnings number.
Immersion Corp. (NASDAQ:IMMR) board of directors authorized the repurchase of up to $50 million of the company’s common stock (nearly 3 million shares at current prices, with 30.1 million shares outstanding as of 10/31). If the company lives up to it, that is an impressive buyback plan. Unfortunately its earnings are quite spotty and expected to be that way ahead.
Epicor Software Corp. (NASDAQ:EPIC) Board of Directors has authorized up to $50 million for a buyback plan of its Common Stock that can be repurchased from time to time.
Acuity Brands, Inc. (NYSE:AYI) completed the spin-off of Zep Inc. (NYSE: ZEP) to the stockholders of Acuity Brands. Effective October 31, 2007, the Board of Directors of Acuity Brands authorized the repurchase of an additional 2,000,000 shares, or almost 5%, of its common stock. Also, Acuity has authorization to buy back a remaining 811,400 shares of outstanding common stock under the repurchase program announced in August of this year. Baird just upgraded the company.
UnitedHealth Group (NYSE:UNH) at the Board of Directors’ regular quarterly meeting, held on October 30, 2007 renewed and increased its Stock Repurchase Program up to 210 million shares of the company’s common stock. This includes approximately 50 million shares remaining under the previous buyback plan; at September 30, 2007 the Company had approximately 1.3 billion common shares of stock outstanding.
Health Net, Inc. (NYSE:HNT) board of directors approved a $250 million increase to the company’s share repurchase program. The company launched its share repurchase program in May 2002 with an initial authorization of $250 million. On October 16, 2006, Health Net announced that its board of directors increased the size of the stock repurchase program to $450 million and now Health Net has approximately $346 million in remaining repurchase authority.
PACCAR’s (NASDAQ:PCAR) Board of Directors approved the repurchase of $300 million of its outstanding common stock. PACCAR has invested $978 million to repurchase 27.4 million shares and paid $1.73 billion in dividends during the last three years.
Harman International (NYSE:HAR) announced that it has repurchased4,775,549 shares of its common stock under separate accelerated sharerepurchase programs for a total purchase price of approximately $400million. After a failed merger, what choices are there?
Acxiom Corp. (NASDAQ:ACXM) board of directors has authorized the repurchase of up to $75 million of the company’s common stock over the next 12 months. After a failed merger, what choices are there?
Jon C. Ogg
November 2, 2007
Three days ago proxy advisory firm Glass, Lewis & Co. recommended shareholders of Sirius Satellite Radio (SIRI) and shareholders and XM Satellite Radio (XMSR) vote for a combination of the two satellite radio operators valued at $4.7 billion.
Today advisory firm ISS made the same recommendation. "From a strategic viewpoint, it appears that combination would allow shareholders of both companies to participate in the expected benefits of a larger entity. Our review of Wall Street research reports suggest that operational and cost savings would yield estimated synergies of approximately $6 billion."
Both firms left out the part about slowing subscriber growth and billion dollar plus debt that could put both companies out of business in the next year. The note also failed to mentioned that the iPod has all but ruined the satellite radio business.
The final observation the reports neglected to add was that concerns over the future of the satellite radio industry have pushed both stocks down over 50% in the last year.
Other than those small omissions, the proxy people earned their money.
Douglas A. McIntyre
Sanjay Shrestha, Managing Director, Senior Analyst, Alternative Energy & Industrials at Lazard Capital Markets is maintaining his "BUY" rating on Itron Inc. (NASSDAQ:ITRI) after a big drop from earnings. The note discusses the lowered 2007 guidance reflecting lumpiness, but with a solid outlook the weakness creates excellent buying opportunity.
"Itron reported 3Q07 revenue and operating EPS of $434 million and $0.65, versus our estimates of $430 million and $0.70, and below consensus of $444.3 million and $0.77, respectively. Gross margins were 33.4% versus our expectations of 34.7%. The company also lowered its 2007 EPS guidance to $2.65-$2.75, from $2.75-$3.00 issued in August."
"The disappointing quarter and guidance mainly reflect slower than expected North American sales as utilities delay project orders while they evaluate AMI options. Also impacting the quarter and outlook were slightly higher operating costs and an increasing revenue contribution from lower-margin Actaris sales….. Book-to-bill ratio in the quarter was 1.05:1 and backlog increased to $668 million, up from $656 million sequentially. The Actaris book-to-bill ratio was slightly less than 1:1 but is expected to return to its historical 1:1 level."
Shrestha does note further risks of revenue lumpiness, customer concentration, dependence upon utilities, and regulations. "We are lowering our FY07 and FY08 estimates to reflect the timing of AMI orders but are leaving our 2009 estimates and our $115 target unchanged. Our $115 price target reflects a 25x multiple on our 2009 EPS estimate of $4.60. This multiple is in line with its peer group. We believe that, if anything, Itron should trade at a premium to its peers given its leadership position and increasing visibility on movement of several large-scale AMI projects."
Shares of Itron have been hit hard this morning. ITRI is trading down about 18% around $82.50 and already traded three-times average daily trading volume. Its 52-week trading range is $46.87 to $112.92.
Jon C. Ogg
November 2, 2007
On Wednesday, November 7, 2007, Cisco Systems (NASDAQ:CSCO) will report earnings, and needless to say this will be perhaps the most important event next week. On last look, the First Call consensus was $0.36 EPS on $9.54 Billion in revenues. Those numbers may change slightly as there are three trading days for last minute broker changes. If Cisco’s John Chambers maintains the equivalent to his stance last quarter that "this is the best global growth opportunities seen since the early 1990’s," then it is hard to imagine that traders will be disappointed.
Here was Chambers’ last guidance: The company increased expectations for next year but not focusing on short-term. Chambers raised longer-term guidance to 12-17% from 10-15% range previously given. Sees 2008 now 13-16% and revenue guidance for next quarter is 9.45 to $9.55 Billion (versus $9.38 Billion estimates).
At the start of 2007, 24/7 Wall St. gave the scenario that would generate a $34.00 target by mid-year, and that has yet to be seen. This was also Jim Cramer’s #3 Growth Pick for 2007 and he’s stayed behind it. Now that analysts have chased the targets up, it looks like the average Wall Street price target is now just under $36.00. Cisco’s 52-week trading range is $23.56 to $33.60, but shares havespent almost the entire time since the end of August above $31.00.
We’ll send some more data to our free email list next week and then follow up here in the hours before earnings with many more details and a full chart analysis, Wall Street analyst targets, and option trader pricing expectations. Cisco will also host its Annual Meeting of Shareholders webcast the following week on Thursday, November 15 at 10:00 A.M. PT (1:00 P.M. EST) with presentations from chairman and CEO, John Chambers, and Chief Financial Officer, Dennis Powell.
Jon C. Ogg
November 2, 2007
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
TheStreet.com (NASDAQ:TSCM) is making an acquisition that is moving away from investor news, research, statistics, and other content data. The content provider is acquiring Bankers Financial Products Corp., including BankingMyWay (www.BankingMyWay.com) and RateWatch (www.Rate-Watch.com).
The company serves as a market and pricing strategy partner for more than 5,600 financial institutions. It says it surveys more than 24,000 financial institutions to provide clients with the most accurate up to date competitor rate information and it claims the largest database of rate information in the industry. RateWatch compiles CD, checking and IRA rates, as well as promotional specials. It also compiles lending rates for consumers and mortgage products. It also shows various fees for wire transfers, ATM fees, safe deposit boxes, savings account fees, and checking charges. RateWatch can also compile historical reports. RateQuest is RateWatch’s new online data querying system allowing instant access to accurate and timely competitive data from the financial industry.
This also allows consumers to conduct free searches to find the best banking rates within their city, zip code or state.
The purchase price listed is approximately $25 million, with $16.9 million being cash and 636,081 shares of TheStreet.com’s common stock. It is also said to be an accretive content acquisition. TheStreet.com’s market cap is currently $381 million, and if you wanted a comparison it sure sounds a lot like it is going into some of the same areas as Bankrate.com (NASDAQ:RATE). This is still in the financial content arena, although it is a far cry away from the traditional investment content it is known for.
Jon C. Ogg
November 2, 2007
According to the Detroit News, Ford (F) is close to having a final deal with the UAW.
"Sources familiar with the situation told The Detroit News a deal could come today."
Douglas A. McIntyre
(ALY) Allis-Chalmers $0.37 EPS vs $0.36 est.
(ASVI) A.S.V. Inc. $0.13 EPS vs $0.19 est.
(BEBE) bebe stores traded up 3% despite slight revenue miss.
(CBB) Cincinnati Bell $0.09 EPS vs $0.08 est.
(CI) CIGNA $1.14 EPS vs $0.93 est.
(DUK) Duke Energy $0.48 EPS vs $0.39 est.
(ENCY) Encysive -$0.32 EPS vs -$0.31 est.
(ERTS) Electronic Arts trading up 3% after beating earnings.
(GYI) Getty Images traded up 5% after earnings.
(HAIN) Hain Celestial rose almost 5% after beating earnings expectations.
(HIMX) HIMAX trading up 7% after earnings.
(IP) International Paper $0.57 EP vs $0.57 est.
(ITRI) Itron trading down 11% after earnings.
(LVS) Las Vegas Sands trading down $16+ to $109 pre-market on net loss.
(MSO) Martha Stewart Enterprises -$0.08 EPS vs -$0.13 est.
(NI) NIsource $0.08 EPS vs $0.10 est.
(NTLS) NETELOS $0.18 EPS vs $0.14 est.
(NYX) NYSE $0.76 EPS vs. $0.73 est.
(OMG) OM Group $1.30 EPS vs $1.17 est.
(RDEN) Elizabeth Arden $0.04 EPS vs -$0.05 est.; sees Q2 $1.11-1.16 vs $1.21 est.
(SGMS) Scientific Games down 4% after earnings.
(SYNA) Synaptics traded up 10% after beating earnings expectations.
(VCLK) ValueClick trading down 0.5% after lackluster earnings.
(VIA) Viacom $0.65 vs 0.60
ACW raised to Neutral at R.W.Baird.
AGU cut to sector perform at CIBC.
ARP cut to sector perform at CIBC.
BBBB cut to Neutral at R.W.Baird.
BKC started as Buy at UBS.
CCE raised to Buy at Citigroup.
CLUB downgraded at Deutsche Bank and CIBC.
CSE started as Neutral at UBS.
CT started as Neutral at UBS.
DEO raised to Equal Weight at Lehman.
DISCA started as Mkt Perform at Wachovia.
DVA cut to Underperform at Piper Jaffray.
DUK cut to Hold at Deutsche Bank.
EBAY cut to Peer Perform at Bear Stearns.
ENR raised to Buy at Deutsche Bank.
ERTS cut to Sell at Deutsche Bank.
GBX cut to Mkt Perform at Wachovia.
GENZ started as Sector Perform at CIBC.
GLUU cut to Hold at Deutsche Bank.
GNCMA cut to Hold at Jefferies.
GPCB cut to Underperform at Piper Jaffray.
HLCS cut to Sell at UBS.
KEP cut to Equal Weight at Lehman.
LNCE cut to Neutral at Oppenheimer.
MRO raised to Outperform at Credit Suisse.
MLNM raised to Outperform at FBR.
MOD raised to Neutral at R.W.Baird.
PBG cut to Hold at Citigroup.
PCG cut to Sector Perform at RBC.
RSYS raised to Buy at Jefferies.
S raised to Hold at Deutsche Bank.
VTSS raised to sector perform at CIBC.
YUM cut to Neutral at UBS.
When shares of PetroChina (PTR) begin to trade on the Shanghai exchange on Monday, they may double from their IPO price. The company raised $9 billion in its offering.
According to Reuters "local currency A shares in China’s largest oil and gas producer are likely to close around 35 yuan on their first day of trade, up from their IPO price of 16.70 yuan"
Being a huge oil company in China where the demand appears to be endless is clearly a good business. That is, at least, until supplies dry up.
Douglas A. McIntyre
The new CEO of Siemens (SI) wants margins more like those at GE (GE), which is in many of the same businesses. Oddly enough, over the last year, Siemens shares are up almost 50% while GE’s are less than 20% higher.
But, that is not preventing the new man, Peter Löscher, from planning to reduce head count like a crazy man. According to the FT Siemens is "preparing a series of aggressive earnings targets for senior managers, along with thousands of job cuts." In the first nine months of this year, the operating margin for Siemens’ industrial businesses was 8.5 per cent, against 14.7 per cent for the equivalent activities at GE.
There is no reason that Siemens cannot improve its margins. By all accounts management at the company has not been aggressive at driving down costs. It will now adopt the philosophy of Jack Welch and chop jobs until it is clear that the revenue potential of the company may be hurt. It would not be surprising to see several hundred million dollars of expenses gone by the end of 2008.
That is a lot of jobless people. And, probably another big gain in the SI share price.
Douglas A. McIntyre
Viacom (VIA) today reported revenues increased 24% to $3.27 billion in the third quarter of 2007. Operating income in the third quarter rose 25% to $815 million. Net earnings from continuing operations for the quarter increased 27% to $450 million. Diluted earnings per share from continuing operations for the quarter increased 34% to $0.67.
Almost all of the improvement came due to improvement in results at the company’s film revenue business. Revenue there rose 57% to $1.305 billion. The film "Transformers" and sales of its DVD were a significant contributor.
Douglas A. McIntyre
Markets across Europe were down about 1% at 7 AM New York time.
The FTSE fell 1.1% to 6,516. Barclays (BCS) was down 5.8% to 538.5. Rio Tinto (RTP) was off 3.2% to 4266.
The DAXX fell .9% to 7,814. Deutsche Bank (DB) was off 1.9% to 87.16. Siemens (SI) was down 1.2% to 90.88.
The CAC 40 was off .9% to 5,678. BNP Paribas was off 2.7% to 71.03. Societe Generale was down 4.3% to 107.89.
Data from Reuters.
Douglas A. McIntyre
Begging is not manly, but it can be effective.
Yesterday, according to the FT, "Andris Piebalds, the European energy commissioner, urged Opec to increase oil production." And, Guy Caruso, a senior official at the US Department of Energy, warned that unless OPEC increased production further, the market “will be short of barrels in the first quarter of 2008”.
In the last week or two, as oil has moved toward $100 a barrel, it has begun to occur to government officials, economists, and business leaders that prices at that level could cause a huge slowdown in the global economy. China is already rationing fuel. That cold put a brake on its growth.
OPEC has resisted calls to increase production, but that could change quickly. Its members do not need a deep recession any more than the rest of the world. And, a profound slowdown could drop oil prices by half, it demand plummets. It is hard to remember, but oil has been below $60 in the last year.
A number of OPEC countries also rely on the US and its allies for aid, technology, and military protection. These are valuable bargaining chips for the West, and no one should think that the US and other countries would not hesitate to use them.
OPEC is going to release more oil, and soon.
Douglas A. McIntyre
PC-maker Lenovo, which bought the IBM (IBM) personal computer business, had the kind of break-out quarter that tech companies seem to be racking up with regularity now.
For the three months ended Sept. 30, net profit nearly tripled to $105.3 million, or $1.12 a share, from $37.9 million, or 43 cents a share, a year earlier. Revenue rose 20% to $4.43 billion, from $3.70 billion.
The company said its worldwide shipments were up 23% for the quarter. The Wall Street Journal says that the industry average for the period was less than 16%.
Research from IDC and Gartner show global PC sales rising more quickly than forecast. The sixteen percent number is probably about right. Apple (AAPL) reported a sharp jump in Mac sales, and most data shows HP (HPQ) growing faster than the industry as a whole.
All of that points to some large PC company growing more slowly. The industry cannot have a 16% average improvement if every player is up 23%. Not, at least, with math in its current incarnation.
That probably leaves Dell (DELL) out in the cold. The company has been late in putting its PCs for sale at retail outlets, using 800 numbers and the internet instead. It is trying to catch up with deals at outlets like Wal-Mart (WMT), but that process could take a few years.
Dell looks like the loser in the third quarter. Its shares are near a 52-week high trading at $30. But, that may not last.
Douglas A. McIntyre
It seems while Merrill Lynch (MER) was losing all of that money on mortgage-backed financial instruments it was trying to unload them to save the company’s skin. Nice idea if you can make it work.
Not only did it not work, but it appears that Merrill’s plan is going to lead to an SEC investigation.
Merrill went around to a number of hedge funds and asked them to buy commercial paper issued by a company-linked entity containing mortgages. This would take the investment off the brokerage’s balance sheet. Merrill would agree to buy the securities back in a year with a nice return for the hedge funds.
Merrill probably hoped that the mortgage-backed market would improve and that, a year out, the securities would be worth much more.
But, that’s cheating, isn’t it?
As The Wall Street Journal points out: "At issue with any hedge-fund deals is whether there was an attempt by Merrill to sweep problems under the rug through private transactions kept out of view from investors."
But, why mince words? Merrill wanted to trick its shareholders into thinking that its problems were less than they appeared.
Several big banks are trying to get up enough money so that they can offer short-term loans to funds with illiquid securities operating by companies like Citigroup (C). It may be a bad idea and it may create an artificial floor under the price of the asset, but at least it is done in the full light of day.
If Merrill’s move with hedge funds was not an attempt at fraud, it was at least in the neighborhood.
Being Merrill Lynch just got much harder. So did finding a world-class CEO. Merrill may have thought big losses were the worst of it problems. Now that may not be true.
Douglas A. McIntyre
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