Daily Archives: January 9, 2008

Alcoa’s (AA) Good Start

Alcoa (AA) kicked off the earnings season and was rewarded with shares trading up over 3% after hours.

Revenues for 2007 were $30.7 billion, compared to $30.4 billion in 2006. Annual income from continuing operations rose to $2.6 billion, or $2.95 per diluted share, for 2007, a 19 percent increase compared to $2.2 billion, or $2.47, in 2006. And, cash from operations for 2007 increased 21 percent to more than $3.1 billion from $2.6 billion in 2006.

Revenues for the 2007 fourth quarter were $7.4 billion, compared to $7.8 billion a year ago. Net income for the fourth quarter 2007 was $632 million, or $0.75, which includes the restructuring adjustment and the benefit from the agreement to sell the company’s packaging and consumer business. Net income for the fourth quarter 2006 was $359 million, or $0.41.

Douglas A. McIntyre

Posted on: January 9, 2008 – 4:25 pm in Earnings,

The 52-Week Low Club (CFC)(F)(YHOO)(AMD)(Q)

Qwest (Q) Concerns on telecom growth after AT&T (T) discloses slowing business. Drops to $5.46 from 52-week high of $10.45.

Yahoo! (YHOO) Online ad revenue could be slowing. Falls to $21.37 from 52-week high of $34.08.

Ford (F) 2008 will be bad year for auto sales. Trades down to $5.76 from 52-week high of $9.70.

AMD (AMD) Concerns about margins, slow product launches, and PC slowdown. Drops to $5.31 from 52-week high of $20.63.

Countrywide Financial (CFC) Wall St. still concerned about Chapter 11. Sells down to $4.43 from 52-week high of $45.26.

Gannett  (GCI) Very few believers that newspapers can recover. Falls to $31.97 from 52-week high of $63.50.

MBIA (MBI) Cuts dividend. Drops to $11.11 from 52-week high of $76.02.

Douglas A. McIntyre

Posted on: January 9, 2008 – 4:00 pm in HI/LOW, , , , , ,

Fox Business: Close The Network, Keep The Website

Fox Business Network (NWS) posted embarrassing numbers when Nielsen reported the channel had only 6,300 viewers at any given time on weekdays. For a two month period beginning October 15, rival CNBC (GE) had 283,000 viewer per average weekday.

Online FoxBusiness.com does better. According to comScore numbers, in December the site had 365,000 unique visitors and 683,000 visits. CNBC.com had 696,000 unique visitors and 1.489 million visits.

Fox might do better if it closed the network and kept the website.

Douglas A. McIntyre

Posted on: January 9, 2008 – 2:07 pm in Media, ,

Dow Jones Online: WSJ.com Is Small Piece (NWS)

There has been a good deal of debate over whether WSJ.com, now a paid subscription website, will become free to all visitors. The nearly $80 million in subscription revenue would have to be replaced by advertising.

WSJ.com turns out to be a relatively small part of Dow Jones Online, now part of News Corp (NWS).

In December, the Dow Jones & Co. properties had 6.547 million unique visitors and 18.038 million visits. WSJ.com had 2.791 million unique visitors and 4.817 million visits. From an online standpoint, MarketWatch.com is actually a larger property, with 2.038 million unique visitors and 6.515 visits. MarketWatch also has 2x the WSJ.com pageviews because access to its site is free.

Other large Dow Jones destinations are OpinionJournal.com and CareerJournal.com.

Douglas A. McIntyre

Posted on: January 9, 2008 – 1:52 pm in Media,

December Financial Websites: AOL Moves Ahead Of Yahoo! (YHOO)

Based on numbers from comScore, AOL Money, part of Time Warner (TWX) moved ahead of Yahoo! (YHOO) Finance in both unique visitors and total visits.

AOL Money had 13.466 million unique visitors and 79.801 visits. Yahoo! Finance had 13.246 million unique visitors and 76.060 visits. MSN Money (MSFT) was a distant third with 11.020 million unique visitors and 41.889 million visits.

Douglas A. McIntyre

Posted on: January 9, 2008 – 1:39 pm in Media, , ,

An Open Letter To Frank Clegg, AMD (AMD) Board Member

Mr. Clegg,

As a member of the AMD (AMD) board, you know how deeply disappointed the market is with the performance of the company’s CEO Hector Ruiz. AMD shares hit another 52-week low today at $5.77. Wall St. has lost faith in the company’s ability to release products on time and improve gross margins.

Wachovia Capital Markets recently wrote "design problems have prevented AMD from making its quad-core chips broadly available, leaving Intel (INTC) with "essentially no competition" in the quad-core market."

With shares at a five year low, AMD needs a new leader before investors will believe that the company can be turned around.

Douglas A. McIntyre

Posted on: January 9, 2008 – 10:32 am in Management Change, ,

Yahoo! (YHOO) Falls To 52-Week Low

Perhaps it was the figures out of Hitwise showing that Yahoo! (YHOO) is still losing search market share to Google (GOOG). Or, maybe fears that a recession will undercut internet ad grow.

Yahoo! (YHOO) hit a 52-week low today at $21.70. The company’s market cap is now under $30 billion. At the end of last quarter, the firm had over $2.1 billion in cash and short-term investments. It carries its stake in Chinese e-commerce company Alibaba at $1.4 billion. Its piece of Yahoo! Japan is on the books for $476 million. The properties are worth more than that. But, cash plus these interests total about $4 billion.

That leaves Wall St. with an enterprise value of just over $25 billion.

Yahoo!’s revenue run rate is at least $7 billion. At less than four times revenue, the market thinks very little of the company.

Income from operations fell to $150 million last quarter. If that weakens in the first two quarters of 2008, the shares could fall below $15, where they traded in 2003.

Douglas A. McIntyre

Posted on: January 9, 2008 – 9:46 am in Internet, ,

$2 E*Trade (ETFC): Desperately Trying to Save Self–And Still Spinning

From Silicon Alley Insider

e*Trade is finally starting to relate its desperate salvage efforts in more detail–and some of its actions sound positive. Unfortunately, the firm’s PR team still hasn’t stopped spinning, so battered investors can be forgiven for thinking that they still haven’t heard the worst of it.  continued…

Posted on: January 9, 2008 – 8:57 am in Uncategorized

MBIA (MBI) Cuts Dividend, Fights For Survival

MBIA (MBIA) will cut its divdend to $.13 from $.34 and go to the capital markets for cash.

As part of its plan to raise capital to meet or exceed the rating agencies’ Triple-A requirements, its primary insurance operating subsidiary, MBIA Insurance Corporation, intends to issue $1 billion of surplus notes due 2033. The notes are callable at par at the company’s option on the fifth anniversary of the date of issuance and every fifth anniversary thereafter.

Wall St. sold off the company’s shares by 7% ahead of the open. It now trades just above $13, down from a 52-week high of over $76.

Douglas A. McIntyre

Posted on: January 9, 2008 – 8:19 am in Financial Stocks,

Top 10 Pre-Market Analyst Calls (AUO, ESRX, FDO, GRMN, PBR, PZE, PPDI, SFLY, TSO, ZUMZ, CAL, DAL, NWA, UAUA, LCC, AMR)

These are not the only key analyst calls coming out of Wall Street analysts today, but these are the key calls that 247WallSt.com is focusing on in pre-market hours:

  • AU Optronics (AUO) raised to Outperform at Lehman.
  • Express Scripts (ESRX) downgraded to Market Perform at Wachovia.
  • Family Dollar (FDO) downgraded to Underperform at Bear Stearns.
  • Garmin (GRMN) downgraded to Hold from Buy at Deutsche Bank.
  • Petrobras Brasiliero (PBR) downgrades to Sell from Hold at Citigroup.
  • Petrobras Energia (PZE) downgraded to Underperform from Peer Perform at Bear Stearns.
  • PPD Inc. (PPDI) raised to Buy at UBS.
  • Shutterffly (SFLY) raised to Buy at Jefferies.
  • Tesoro (TSO) downgraded to Underperform from Peer Perform at Bear Stearns.
  • Zumiez (ZUMZ) raised to Buy at Piper Jaffray.
  • UBS RAISED AIRLINES: Continental (CAL), Delta (DAL), Northwest Airlines (NWA), UAL (UAUA), and United (LCC) all raised to Buy from neutral; AMR (AMR) raised to Neutral from Sell.  Incidentally, Bear Stearns also raised Delta (DAL) to an Outperform rating.

Jon C. Ogg
January 9, 2008

Posted on: January 9, 2008 – 8:03 am in Analyst Calls, , , , , , , , , , , , , , , ,

Will The Apple Trade For Macworld Work in 2008? (AAPL)

Apple Inc. (NASDAQ: AAPL) hasn’t gotten off to a good 2008 as a stock. Shares closed at $198.08 to close out 2007 and shares very briefly traded north of $200.00 on the opening day of 2008.  But shares closed at $171.25 yesterday.

Historically traders and investors have bought shares and won going into the annual Macworld event with Steve Jobs.  We still have a few trading sessions before Jobs gets to unveil whatever it is that is Apple’s new next big thing.  Maybe it will be a leaner and lighter laptop priced more within reach for most in the U.S., but that is just speculation that varies from house to house.

We ran various calculations with time frames varying ahead of the Macworld event over the last five years.  It isn’t exact science because closing and opening prices are rarely delegated to all.  But in the past buying Apple on the day ahead and even the day after has yielded positive returns.  We’ll follow up later with more specific numbers because we asked for calculations and received different numbers.

With a near 15% pullback, you have to wonder if this challenging market will accommodate this past trend in 2008.  The good news is that over the last few years investors who have tried bottom fishing when Apple shares sell off 10% or 15% have tended to win in the long haul.  Apple’s market cap now sits at roughly $150 Billion, it trades at 33.6 times fiscal September 2008 earnings, and trades at roughly 5-times projected revenues.

Jon C. Ogg
January 9, 2008

Posted on: January 9, 2008 – 7:39 am in PC Companies, Technology Companies,

Beware Tying ALCOA To Peers (AA)

Alcoa, Inc. (NYSE: AA) is set to report earnings today.  First Call has estimates at $0.33 EPS on $6.92 Billion in revenues.  Next quarter’s estimates are $0.60 EPS on $7.03 Billion in revenues.  If the company offers any fiscal 2008 targets, First Call also has its targets of $3.09 EPS on $28.77 Billion in revenues.

Investors have a love affair with anything commodities related and every quarter or year the investment community tries to garner a glimpse of trends in the sector with Alcoa.  About the only thing that can be said besides this being the first of the big metals companies to report earnings is that the coupling between Alcoa and the sector doesn’t really exist.  This has been the case for years.

Alcoa has spent years in restructuring and its issues have seemingly drifted away from any real comparison to other ferrous and non-ferrous metals companies.  That is particularly true if you take into consideration the global wave of mergers that have occurred over the last few years.  Even it being a component of the Dow Jones Industrial Average doesn’t change this fact.

Don’t interpret this as a signal for gains or losses.  Alcoa has a history of beating and missing earnings to the point that Wall Street estimates tend to be more of a range rather than a fixed number.  The ratings are all over the place.  The average price target still appears to be $44+ on last look, roughly 35% higher than current prices.

Any directional moves with the sector are more coincidental rather than normal.  Shares closed at $31.00 yesterday and the 52-week trading range is $28.09 to $48.77.  We’d still expect for Wall Street to make its ties today, although we’d again note that Alcoa isn’t usually the best bogey for the entire industry in the U.S. or international metals markets.

Jon C. Ogg
January 9, 2008

Posted on: January 9, 2008 – 7:00 am in Earnings, Metals,

Countrywide (CFC) Reports December Numbers

According to the Countrywide (CFC) "Our fourth quarter ended with a number of positive operational trends," said David Sambol, President and Chief Operating Officer. "Total loan fundings were $24 billion for the month of December, up slightly from November 2007 and ahead of our forecasts. This pushed our fourth quarter fundings to $69 billion, also exceeding our expectations. Although average daily mortgage loan applications and the pipeline of mortgage loans-in-process decreased from November, this reflected a seasonal decline typically seen this time of year.

"Our mortgage loan servicing portfolio is approaching $1.5 trillion, representing approximately 9 million loans," Sambol continued. "Prepayment speeds continued to decline throughout the quarter, which has enhanced the economic value of our mortgage servicing rights asset.

Douglas A. McIntyre

Posted on: January 9, 2008 – 6:55 am in Financial Stocks,

Silver Lake: A Vote For Private Equity

Most of the news about private equity operations has been bad. Tight credit markets. Broken deals. Buy-outs closed but in trouble because of large debt loads.

Silver Lake, one of the largest private equity firms, got a $275 million investment for a 10% stake, according to The New York Times. The buyer was the California Public Employees’ Retirement System.

Calpers must thing Silver Lake will do a lot better than Blackstone (BX) which has fallen from a $38 peak after its IPO to $18.

Douglas A. McIntyre

Posted on: January 9, 2008 – 6:29 am in Uncategorized,

Europe Markets 1/9/2008 (BP)(BCS)(SI)

Market in Europe were down at 6.20 AM New York time.

The FTSE was off 1% to 6,295. Barclays (BCS) was down 3% to 458.75. BP (BP) was down 4.2% to 607. Marks and Spencer was off 18% to 414.

The DAXX fell .5% to 7,809. Infineon was off 3% to 7.12. Siemens (SI) was down 5% to 98.4.

The CAC 40 sold off .7% to 5,456. Alcatel-Lucent (ALU) was off 2.2% to 4.53. ST Micro (STM) was down 1.8% to 8.8.

Data from Reuters.

Douglas A. McIntyre

Posted on: January 9, 2008 – 6:23 am in International Markets, , , , ,

Lenovo Shares Hit As PC World Implodes

So much for the turnaround at Dell (DELL) and the two-year revival at Hewlett-Packard (HPQ). Even overseas PC companies like Lenovo are being hurt by the perception that US demand for computers is falling.

Lenovo shares "dived more than 14 percent on Wednesday after a broker cut the Chinese firm to sell on growing fears of a U.S. recession," according to Reuters. Since Lenovo sells most of its computers in Asia, the drop in the company’s stock would have to assume a near disaster in the US.

Dell is already back to a 52-week low and HP shares have sold well off their multi-year highs. AMD (AMD) and Intel (INTC) have also been beaten like mules. If the trend continues, Apple (AAPL) could be hurt because of the importance of Mac sales to its fortunes. Microsoft (MSFT) could be vulnerable because of the amount of its revenue that is expected to come from Vista, the new PC OS.

Processors built two years ago are still very fast given the applications needed to be run by most consumers and businesses, That means that the upgrade cycle could go out another several quarters. Vista is not popular enough to pull up computer sales on its own. Buying a PC with a chip that will run a super-computer may have lost its appeal.

Older software and chips may just be so good that pinched consumers and enterprises can pass on the new stuff, at least for now.

Douglas A. McIntyre

Posted on: January 9, 2008 – 6:14 am in PC Companies, , , , , ,

Why No One Wants To Pump $100 Oil

At $100 a barrel, investors would think oil companies could not get crude out of the ground fast enough. Think of the huge profits now that the price of oil has almost doubled in just over a year.

But, there is no big race to get to all of that crude. That may say the worst about the world’s oil supply and where it is likely to stand ten years from now. The heads of several production companies are now saying that the world is reaching a period of "plateau oil". A former senior executive of state oil giant Saudi Aramco told Reuters "Today’s oil prices are high because there are limited new supplies."

While many oil executives argue that crude supplies have not peaked, a shortage is still a probable reason for high crude prices. The weakness of the dollar and hedging could explain relative short-term run-ups in oil prices, but demand in China, the US, India, and other large economies is not slowing. Big producers like Mexico are keeping more of their own oil for gasoline in their own countries and to build out infrastructure.

At least one thing appears to be true. High oil prices do not seem to be sending producers rushing to increase drilling and refining.

Douglas A. McIntyre

Posted on: January 9, 2008 – 6:03 am in Oil & Gas

AT&T (T): The Phone Company Was Supposed To Be Recession-Proof

Wall St. was taken by surprise when AT&T’s (T) chief said that the company was seeing soft home phone and internet business. So far, wireless spending seems OK. Since big company CEOs are trained from birth to be careful what they say in public, it is likely that the big phone operator is sending a message about its earnings.CEO Randall Stephenson told reporters “We’re really experiencing softness on the consumer side of the house from the economy."

The conventional wisdom is that phone companies are close to recession-proof like tobacco companies and consumer goods firms. People will cut back on travel, cars, most shopping, and discretionary items like PCs and household goods. But, who lowers their use of the phone? And,  a DSL connection comes with a price tag of under $20 a month.

It looks like the economic slowdown is moving to spending for goods and services below $50 a month. At least the AT&T news would indicate that. If so, it brings a bunch of industries into play that have been left out of the game.

The next level of things that consumers could cut back on would be fast food, inexpensive consumer goods, gas, and food items. That potentially puts pressure on firms like Kraft (KFT), Procter & Gamble (PG), Sara Lee (SLE), Exxon (XOM), and McDonald’s (MCD). It puts another 5% or 10% of the companies in the S&P 100 at some risk for having earnings hurt in a downturn.

The phone companies was supposed to be recession-proof. That is until it wasn’t.

Douglas A. McIntyre

Posted on: January 9, 2008 – 5:49 am in Telecom, , , , , ,

Wall St. Doesn’t Care About The Primaries

John McCain and Hillary Clinton may have won in New Hampshire. Michigan and South Carolina are next.

But, Wall St. does not care about the primaries. Their results won’t be reflected in whether the market moves up or down. Traders are not watching the vote tallies.

What investors know now is that whoever gets the nomination will campaign until November. The winner will not be sworn in until next January. Putting together an agenda and working it through a potentially hostile Congress could take another year. By then, it is 2009.

A recession is almost certainly underway now. News from the retail, financial, auto, and housing sectors is just too poor. AT&T (T) said yesterday it was seeing softness in consumer spending. It is hard to imagine that the economy will not contract the first two or three quarters of this year. If the recession is deep, it could go on six quarters. By that time, the new president will have been in office for four months.

With no outcome from the elections likely to help the market when it needs it, Wall St. will have to concentrate its hopes on the Fed. Notes from the December meeting indicate that the agency was split on lowering rates. Some governors are still concerned about inflation and do not want to bring down rates too fast. Others think problems in the economy are so severe that rate cuts are essential.

As far as investors are concerned, Bernanke might as well be president.

Douglas A. McIntyre

Posted on: January 9, 2008 – 5:32 am in Economy

Media Digest 1/9/2008 Reuters, WSJ, NYTimes, FT, Barron’s

According to Reuters, Bear Stearns (BSC) replaced its CEO James Cayne who will remain chairman.

Reuters writes that the CEO of Best Buy (BBY) sees the retail climate getting tougher.

Reuters writes that shares in PC company Lenovo dropped on concerns that the US economy is slowing.

Retuers reports that Ford (F) says the US economy is  a concern for hitting its numbers.

Reuters reports that GM (GM) is working on partnerships to expand sales in India.

The Wall Street Journal reports that the head of AT&T (T) says the company is seeing softening of its consumer business.

The Wall Street Journal writes that Calpers has bought about 10% of buy-out firm Silver Lake.

The Wall Street Journal reports that leasing company AWAS is buying 100 Airbus planes.

The Wall Street Journal reports that HP (HPQ) plans to improve the energy efficiency of it PCs by 25% over the next two years.

The New York Times writes that Citigroup (C) is putting all of its mortgage operations into one division.

The New York Times reports that McGraw-Hill (MHP) will cut 3% of its staff.

The FT reports that TV will get a big spending boost from the election.

Barron’s reports that the head of the FCC said that cable was the most expensive and least open network in the US.

Bloomberg reports that Apple (AAPL) iTunes will allow people to rent film including those from Fox and Warner Brothers.

CNN Money writes that Intel (INTC) is betting on making chips for devices smaller than standard PCs

Douglas A. McIntyre

Posted on: January 9, 2008 – 4:13 am in Press Digest, , , , , , , , ,