Daily Archives: November 20, 2007

Whole Foods, Whole Earnings (WFMI, UNFI)

Whole Foods (NASDAQ:WFMI) is trading up in after-hours following the company’s earnings report.  It posted 1.743 Billion revenues, and earnings were listed as $0.24 EPS (but that appears to be after $0.10 for pre-open and relocation stores and $0.04 in options).  First Call had estimates at $0.30 EPS and $1.61 Billion in revenues.  Its same store sales for the quarter were up 8%.

The company also boosted its quarterly dividend to $0.20 per share and now sees 25% to 30% sales growth in Fiscal 2008 with another gain in comparable sales between 7.5% to 9.5%.  The high end consumer is still alive and isn’t being driven back to cheaper food.  Other metrics:

  • The Company expects to open a comparable number of new stores in fiscal year 2008 as in fiscal year 2007.
  • Capital expenditures for the fiscal year are expected to be in the range of $575 million to $625 million.
  • The Company currently operates 269 stores totaling 9.3 million square feet and has 87 stores in development totaling 4.5 million square feet.
  • Longer term, the Company’s goal is to reach $12 billion in sales in fiscal year 2010.

Shares closed down 1.8% at $42.25 today, but shares are now up over 7% to $45.32 in after-hours. This could have been somewhat seen if you follow the supply chain with others today, although the internal metrics and guidance was of course a wild card.  This follows the 6.6% rise in shares of United Natural Foods (NASDAQ:UNFI) today after its own earnings.

Jon C. Ogg
November 20, 2007

Posted on: November 20, 2007 – 4:24 pm in Earnings, Food, ,

The 52-Week Low Club (ERIC)(FRE)(FNM)

Giant Interactive (GA) Market unhappy with Chinese game company’s financial results. Drops to $9.56 from 52-week high of $20.46.

Freddie Mac (FRE) Bad earnings and warns on dividend. Falls to $24.31 from 52-week high of $69.85.

Fannie Mae (FNM) Mortgage and FRE concerns. Down to $26.38 from 52-week high of $70.57.

Ericsson  (ERIC) Telecom equpment company gives down-beat forecast. Falls to $24.91 from 52-week high of $43.41.

Douglas A. McIntyre

Douglas A. McIntyre

Posted on: November 20, 2007 – 4:08 pm in HI/LOW, , , ,

Does Big Tobacco Actually Love Pfizer’s Anti-Smoking ‘Chantix’ Pill? (MO, RAI, PFE)

Pfizer (NYSE:PFE) is seeing additional pressure this afternoon.  Apparently the FDA said it is looking into reports that Pfizer has sent out an "early communications notice" to doctors warning them to monitor patients using the popular "stop smoking" pill called Chantix with the note that it might trigger erratic behavior or possibly suicidal thoughts in some users.  The FDA has also noted that Chantix users should also be cautious whendriving or operating autos and machinery, as the drug has reportedlycaused some incidents of drowsiness. 

If you know an ex-smoker, you’d swear up and down that some of them were suicidal when they tried to quit before this drug ever came out.  This may be after that musician in Dallas was shot to death following him having an ‘altercation’ with his girlfriend before he ran out and pounding on a door in the middle of the night, so in all honesty this one might have been seen ahead.  Here is the official communication:

  • "FDA informed healthcare professionals of reports of suicidal thoughts and aggressive and erratic behavior in patient who have taken Chantix, a smoking cessation product. There are also reports of patients experiencing drowsiness that affected their ability to drive or operate machinery. FDA is currently reviewing these cases, along with other recent reports. A preliminary assessment reveals that many of the cases reflect new-onset of depressed mood, suicidal ideation, and changes in emotion and behavior within days to weeks of initiating Chantix treatment. The role of Chantix in these cases is not clear because smoking cessation, with or without treatment, is associated with nicotine withdrawal symptoms and has also been associated with the exacerbation of underlying psychiatric illness. However, not all patients described in the cases had preexisting psychiatric illness and not all had discontinued smoking."

There is always a silver lining somewhere for someone.  If you are Altria (NYSE:MO) or Reynolds American (NYSE:RAI), then you probably just got a little more pep in your step.  Imagine a doctor saying, "I’d rather see you keep smoking and die one breath at a time rather than get suicidal."  Did that really happen that ANY physician said that?  Probably not.  But that is how a trader might view this.

Altria (NYSE:MO) is currently under review for the 24/7 Wall St. Special Situation Investing Newsletter.

Jon C. Ogg
November 20, 2007

Posted on: November 20, 2007 – 3:48 pm in Drug companies, Tobacco, , ,

Reuters.com Leads Online Financial Website Derby

According to Hitwise numbers for October, Reuters.com and CNNMoney.com had the largest web audiences of financial sites which are not part of larger portals like Yahoo!. Reuters.com grew much more quickly. Among other sites reviewed were Forbes.com Dow Jones (DJ) WSJ.com, TheStreet.com (TSCM), The Motley Fool, Portfolio.com, McGraw-Hill (MHP) BusinessWeek.com and Bloomberg.com

The figures are based on percent of US market share of total visits.

Site                           Percent of US Visits                Year-over-Year Change

CNN Money               .0224%                                   (16%)

Reuters.com              .0220%                                    95%

TheStreet.com           .0185%                                    33%

TheFool.com              .0165%                                    59%

Bloomberg.com          .0129%                                    38%

Forbes.com                .0126%                                    14%

WSJ.com (paid)          .0111%                                    58%

Portfolio.com              .0058%                                    NA

BusinessWeek.com    .0049%                                    18%

Douglas A. McIntyre

Posted on: November 20, 2007 – 2:35 pm in Internet, , , ,

Fed Outlook Forecast & Regressing Minutes, Enough Ammo For Bulls & Bears Alike

The FOMC gave its first of its quarterly outlooks for the years ahead:

  • The FOMC now sees slower GDP growth, raised unemployment, and somewhat reduced inflation. 
  • Real GDP Growth expectations have been shaved to 1.8%-2.5% from 2.5%-2.75% for 2008, and 2.3%-2.7% for 2009. 
  • It now forecasts 1.8% to 2.1% for 2008 inflation on PCE measurement, based partly on flattening oil prices.
  • It sees unemployment at 4.8% to 4.9% next year, slightly up from 4.75% previously forecast.

As far as the minutes from the October 30 to 31 meeting,  24/7 Wall St.’s take is that "October vote was a close call" and additional insurance… that isn’t indicative of a FOMC hellbent on cutting rates.

24/7 Wall St. has cautioned against a FOMC forecasting for a myriad of reasons.  Academics speaking but not making an action generates that much more volatility in the credit and equity markets.  The good news is that if you are an active trader, you’ll get three more opportunities to make "Fade the Fed" trades.

Jon C. Ogg
November 20, 2007

Posted on: November 20, 2007 – 2:21 pm in Economy, ,

Wall St. Continues Worries About AMD (AMD)

Much of the strength in HP’s (HPQ) earnings yesterday came from PC sales, particularly laptops. After being up on its quarterly report, HP is fairly flat at mid-day, but chip provider Intel (INTC) is higher by 1.8% which should be expected when the world’s largest PC company does well.

But, the No.2 provider of chips for PC, AMD (AMD) is off 2.4% and trading within fifty cents of its 52-week low. Yesterday, the company launched its newest product, a quad-core chip. On Friday, AMD got $622 million from an investment arm of the Abu Dhabi government. The shares they bought were at $12.70. AMD is at $11.75 today.

The price drop seems out of place until investors look, once again, at AMD’s biggest short-term problem, its debt. AMD owes $5.1 billion in long-term debt and the company currently runs an operating deficit. Wall St, is concerned that the money AMD has raised is not enough.

Based on the company’s operating performance over the last year, it’s not.

Douglas A. McIntyre

Posted on: November 20, 2007 – 12:21 pm in Technology Companies, , ,

Wynn Resorts Tries A Special Dividend (WYNN)

Wynn Resorts, Ltd. (NASDAQ:WYNN) has announced something that would have otherwise been unexpected.  Its Board of Directors (likely Steve Wynn) has declared a cash distribution of $6.00 per share for holders of its common stock. Here are the details:

  • distribution will be payable on December 10, 2007;
  • to stockholders of record on November 30, 2007;
  • WYNN will begin to trade ex-dividend on November 28, 2007.

Wynn shares are up 6% at the open at $132.90 after nearly a $10 drop yesterday after Barron’s panned it and other Macau casino stocks.  24/7 Wall St. issued our own take there, seeing as that shares were already sold off significantly when Barron’s noted that the Macau casinos were trading at "bubble" valuations.  This was also just upgraded today at Jefferies to a Buy rating after it felt the stock had been oversold.

Jon C. Ogg
November 20, 2007

Jon Ogg produces the 24/7 Wall St. Special Situation Investing Newsletter; he does not own securities in the companies he covers.

Posted on: November 20, 2007 – 9:41 am in Casinos, Dividend,

Quality Systems Free From SEC Inquiry (QSII)

Quality Systems, Inc. (NASDAQ:QSII) has issued a release stating that it received a letter dated November 19, 2007, from the Securities and Exchange Commission (L.A. regional office) that informed CFO Paul Holt that the SEC has completed its previously disclosed investigation of trading activities in Quality Systems’ securities.  The SEC does not intend to recommend any enforcement action concerning such activities to the Commission.

Quality Systems already released its earnings back on October 31, and shares have lost roughly 17% since then. While there have not been any trades pre-market, shares are indicated slightly higher than yesterday’s $29.19 close.  Its 52-week trading range is $26.08 to $45.44.

Jon C. Ogg
November 20, 2007

Posted on: November 20, 2007 – 9:23 am in Healthcare, SEC, Software,

GameStop’s Momentum… Game Stopped For Now (GME)

GameStop Corp. (NYSE:GME) has posted earnings of $0.31 EPS (after $0.02 debt retirement cost) and sales were $1.6112 Billion for the quarter.  First Call had estimates at $0.21 EPS and $1.4 Billion revenues.  This was also well above its guidance. 

Unfortunately for what lies ahead….. The company issued guidance of +7% to +9% on same store sales for the quarter.  It also puts EPS at $0.95 to $0.97 for the quarter, but First Call has estimates at $0.97.  Fiscal 2007 was raised to $1.61 to $1.63 with total revenue growth of 28% to 29% on full year same store sales comps at +20% to +21%, but that looks like all the juice is from this past quarter rather than the coming quarter.

The video game sales leader opened 181 stores in the quarter, passing the 5,000 store goal on a global basis.

There is a single message here that we are using for conjecture: "We smoked earnings, but this strength cannot last because there are only so many Wii and Xbox system launches that can take the industry by force, and there are only so many Halo 3 and Madden NFL releases."  You may see a "sell the news" reaction here because of no forward upside, but the truth is that we’ve cautioned about 2008 because the launch schedule isn’t what 2007 saw and the comparable sales will be hard to see any great numbers because of 2007’s strength.  If analysts are overly shocked here then they aren’t able to factor in upgrade cycles and growth cycles that smooth out.

The market feels the same, because shares are down 7% pre-market at $49.25.  The 52-week trading range is $24.87 to $60.80.

Jon C. Ogg
November 20, 2007

Posted on: November 20, 2007 – 8:57 am in Earnings, Video Games,

Target Masks Earnings With Huge Stock Buyback (TGT)

Shares of Target Corp. (NYSE:TGT) are trading higher despite what might be a somewhat disappointing earnings number.  The company posted EPS at $0.56, although First Call had $0.62 EPS as the target.

The language is cautious but not overwhelmingly.  Bob Ulrich, chairman & CEO said, “Our third quarter earnings were disappointing due to soft sales in our higher margin categories, leading to lower-than-expected gross margin in our core retail operations.  However, we have not observed any meaningful change in the intensity of the competitive environment and continue to believe that we are well-positioned to operate in a variety of sales environments going forward.”

The company did announce quite a large kicker.. a $10 Billion share buyback plan, plus update to credit card receivables unit that still has this review in the ‘pending’ status as far as any investors are concerned.

Shares were up marginally after the initial release, but now shares are mixed as the market is digesting weak sales.  Earlier this morning target maintained a 2-4% same store sales growth.

Jon C. Ogg
November 20, 2007

Posted on: November 20, 2007 – 8:37 am in Earnings, Retail, Stock Buybacks,

Pre-Market Stock News (November 20, 2007)

Biogen Idec (BIIB) announced an alliance with Neurimmune Therapeutics to develop treatments for Alzheimer’s Disease.
BJ’s Wholesale (BJ) $0.35 EPS vs $0.33 est.
Blue Coat Systems (BCSI) $0.30 EPS vs $0.24 est.; sees next quarter $0.31 to $0.35 EPS vs. $0.26 est.
DR Horton (DHI) trading up 4% after posting narrower than expected losses at -$0.16 EPS vs -$0.60 EPS; sales down 35%.
Freddie Mac (FRE) posted a $3.29 EPS loss; engaged Goldman Sachs and Lehman to advise on near term financial concerns for capital raising after discussing lower mortgage loan values in its portfolio; apparently considering dividend cut; shares down 6% or more.
Fannie Mae (FNM) trading down 6% with Freddie Mac.
H-P (HPQ) beat earnings and slightly raised guidance; announced an $8 Billion share buyback
JW Nordstom (JWN) beat earnings and raised guidance; stock traded up 10%.
McClatchy Co (MNI) reports that both consolidated advertising and total revenues in October 2007 decreased 9.9%.
New York & Co. (NWY) $0.09 EPS vs $0.07 est; sees next quarter $0.23 to $0.32 EPS vs. $0.30 est.
Retalix (RTLX) $0.23 EPS vs $0.18 est.
Shoe Carnival (SCVL) $0.33 EPS vs $0.32 est.
Van Der Moolen (VDM) announced resignation of COO.
Zale (ZLC) -$0.54 EPS vs -$0.60 est.; sees next quarter $1.87-1.92 EPS vs. $1.80 est.; sees 2008 under plan.

Posted on: November 20, 2007 – 8:05 am in Pre-Market Activity, , , , , , , , , , , , , ,

Freddie Mac (FRE) Disappoints, May Cut Pay-Out, Shares Fall 6%

Freddie Mac (FRE) reported a net loss of $2.0 billion, or $3.29 per diluted common share, in the third quarter of 2007, compared to a net loss of $715 million, or $1.17 per diluted common share, for the same period in 2006. The company also reported a decrease in the fair value of net assets attributable to common stockholders, before capital transactions, of approximately $8.1 billion for the third quarter of 2007, compared to an increase of approximately $300 million for the same period in 2006. Compared to the second quarter of 2007, the company reported declines in both net income and fair value primarily due to increased credit-related expenses and losses on mark-to-market items.

Wall St. has expected a loss of 22 cents on reveue of $1.33

Freddie Mac’s regulatory core capital was estimated at $34.6 billion at September 30, 2007, which represented an estimated $8.5 billion in excess of the regulatory minimum capital requirement, and an estimated $0.6 billion in excess of the 30 percent mandatory target capital surplus directed by the Office of Federal Housing Enterprise Oversight

The firm said it is considering cutting its dividend by 50%

Shares dropped 6% to $25.25 on the news

Douglas A. Mcintyre

Posted on: November 20, 2007 – 7:48 am in Uncategorized,

Top 10 Pre-Market Analyst Calls (AKAM, GLW, DLTR, XOM, MFE, SNP, SBUX, STO, UA, WYNN)

Akamai (AKAM) started as Neutral at B of A.
Corning (GLW) started as Sector Perform at RBC.
Dollar Tree (DLTR) raised to Overweight at Lehman.
Exxon Mobil (XOM) raised to Buy at UBS.
McAfee (MFE) raised to Buy at Jefferies.
Sinopec-China Petroleum (SNP) raised to Neutral from Sell at UBS.
Starbucks (SBUX) raised to Outperform at FBR; downgraded to Sector Perform at CIBC.
Statoil (STO) raised to Buy at UBS.
Under Armour (UA) raised to Buy at UBS.
Wynn Resorts (WYNN) raised to Buy at Jefferies.

Jon C. Ogg
November 20, 2007

Posted on: November 20, 2007 – 7:47 am in Analyst Calls, , , , , , , , , ,

DH Horton (DHI) Rallies On Results

DH Horton (DHI) reported a net loss for its fourth fiscal quarter ended September 30, 2007 of $50.1 million, or $0.16 per diluted share. The quarterly results included pre-tax charges to cost of sales of $278.3 million of inventory impairments and $40.3 million of write-offs of deposits and pre-acquisition costs related to land option contracts that the Company does not intend to pursue. Additionally, the results included a pre-tax goodwill impairment charge of $48.5 million. Net income for the same quarter of fiscal 2006 was $277.7 million, or $0.88 per diluted share. Homebuilding revenue for the fourth quarter of fiscal 2007 totaled $3.1 billion, compared to $4.8 billion in the same quarter of fiscal 2006. Homes closed in the current quarter totaled 11,733 homes, compared to 17,261 homes in the year ago quarter.

Shares rallied on the news.

Douglas A. McIntyre

Posted on: November 20, 2007 – 7:17 am in Housing,

Office Depot (ODP) OK

Office Depot (OPD) said for the third quarter of 2007, sales increased 2% to $3.9 billion. Sales in the North American Retail Division were flat with comparable store sales down 5% for the quarter. Net earnings on a GAAP basis were $117 million compared to earnings of $129 million in the same period of 2006. GAAP earnings per share on a diluted basis were $0.43 for the quarter, versus $0.45 in the third quarter of 2006.

Analysts were looking for EPS of $.40 and revenue of $3.95 billion.

As a result of the independent review of the timing of recognition of certain vendor program arrangements, the Company concluded that the errors were material and the Board of Directors approved a restatement of the periods from the third quarter of 2006 through the second quarter of 2007.

These restatements are non-cash charges and the reduction in net earnings has been offset in the consolidated statement of cash flows by a change in working capital and other items such that net cash provided by operating activities has not changed for the periods restated

Douglas A. McIntyre

Posted on: November 20, 2007 – 7:11 am in Earnings,

Salvation For Cable? GOP Hates FCC Plan

It looked like the FCC was going to have cable companies for dinner. The commission was talking about forcing cable systems to open channels to small networks, and perhaps planning to halt future acquisitions by giants like Time Warner Cable (TWC) and Comcast (CMCSA).

But, GOP Congressmen think that the FCC is getting a bit heavy on the regulation side of things. In a quote picked up by The Wall Street Journal one representative voiced his concerns: "It is a concern that he may be moving away from the light-touch regulation to a much greater role for regulation," said Rep. Marsha Blackburn of Tennessee.

The movement in Congress may be good news for the cable companies. They are losing HD customers to satellite TV companies. And, as Verizon (VZ) and AT&T (T) roll out fiber-to-the-home, the telecom companies are beginning to take cable customers who want packages of TV, voice, and broadband. Last month, the FCC said it would open up bidding for TV service in apartment buildings. That used to be a franchise cable could count on as its own.

Most cable stocks trade at 52-week lows. That has been fueled lately by concerns that the FCC would do more damage to the industry with its planned changes to how the companies could operate.

The GOP wants to keep the FCC out of it, Look for a rally in cable shares

Douglas A. McIntyre

Posted on: November 20, 2007 – 6:44 am in Cable Companies, , , ,

Europe Markets 11/20/2007

Markets in Europe were higher at 6.25 AM New York time.

The FTSE rose .5% to 6,152. Barclays (BCS) was up 3.5% to 508.5. Nothern Rock was down 25.6% to 77.5. Unilever was down 1.3% to 1773.

The DAXX was up .7% to 7,563. Deutsche Bank (DB) rose 1.3% to 83.79. SAP (SAP) rose 1.1% to 35.31.

The CAC 40 moved up .2% to 5,445. France Telecom (FTE) moved up 2% to 27.13. BNP Paribas was up 1.1% to 70.52.

Data from Reuters

Douglas A. McIntyre

Posted on: November 20, 2007 – 6:27 am in International Markets, , , ,

McClatchy (MNI) Bleeding To Death

McClatchy (MNI), the large newspaper chain, reported dismal results for the month of Octobers. The company reported both consolidated advertising and total revenues in October 2007 decreased 9.9%..

Classified advertising fell almost 20% and real estate classified revenue fell almost 30%.

Revenue in the company’s large California newspaper group was down 19%.

It is very hard to imagine that the company can continue to handles its debt service in 2008 if its numbers keep falling at this rate. The company has long-term debt of about $2.6 billion and had interest expenses of over $48 million last quarter on pro forma operating income of just over $90 million.

With debt at that level and revenue running off close to 10%, MNI can’t last in its current configuration for long. It is going to have to start selling assets as fast as it can.

Douglas A. McIntyre

Try the 24/7 Wall St New Media newsletter and follow our opinion on newspaper, entertainment, internet, and telecom stocks.

Posted on: November 20, 2007 – 6:17 am in Old Media,

Goldman’s (GS) Alpha Fund May Have Huge Loss For Year

According to Bloomberg "Goldman Sachs Group Inc.’s (GS) Global Alpha hedge fund may lose about $6 billion in assets this year, a 60 percent decline, because of trades that went awry and client withdrawals, according to two investors."

Even Goldman can’t be perfect all of the time.

Douglas A. McIntyre

Posted on: November 20, 2007 – 6:06 am in Banking,

How Hewlett-Packard (HPQ) Saved The World

Hewlett-Packard (HPQ) earnings always hit the quarterly cycle late. Its fiscal puts it a month behind most companies, so it gets a chance to run the anchor leg of the reporting race.

HPQ is the last big industrial that will report before the holidays, so it was Wall St.’s last chance to see if there was any gas left in the global economic tank. A big miss by Hewlett-Packard could certainly have moved the Nasdaq and tech stocks down another 5%.

The easy story about HP is that notebook sales helped drive up earnings. Revenue for laptops was up 49% and revenue at the company’s PC unit moved up 30% to $10.1 billion. And, in the company’s fiscal fourth quarter ending in October, GAAP operating profit was $2.6 billion and GAAP diluted earnings per share (EPS) was $0.81, up from $0.60 in the prior-year period.

But, more important than the raw top-line numbers was the fact that HP showed strength across all regions. Even the US, where the economy is supposed to be slowing, grew 10% for HP. Asian revenue moved up 20% and the Europe region was remarkably strong with 19% growth.

If HP’s numbers had been bad, shares in Asia could have been pushed down overnight. Instead, they rallied, pulled higher by tech. Casio Computers moved up 3.7%. Toshiba moved up 2.5%.

Whether the market moves up or down between now and year-end, HP will have done more than its part. It demonstrated that a well-run company can turn in results that best the estimates of most, that a modest economy does not have to kill corporate earnings, and that there is still life in every region where most multinationals do business.

Douglas A. McIntyre

Posted on: November 20, 2007 – 6:01 am in Hardware,