Daily Archives: February 13, 2008

FMC Corp.: Jim Cramer’s Hidden Agriculture Trade (FMC)

On tonight’s MAD MONEY on CNBC, Jim Cramer wanted to review a hidden undervalued stock in  the market.  Tonight he noted FMC Corp (NYSE: FMC) as a key undervalued stock in chemicals and agriculture.  While he likes the company on its own, he noted that the current inflated prices in Agriculture and potash stocks should actually generate a much higher stock price.  He thinks that because of this company’s pricing power in its its niche that this should be worth a combined $5.7 Billion instead of $4+ Billion today.  In his words, that yields a $70 STOCK.

By now you have seen this sector on fire.  We just noted a hot potash IPO coming soon and just yesterday we noted how the best post-IPO in recent months is also in the sector.  Deere (NYSE: DE) shares indicated lower after earnings this morning and closed lower too.

Just remember one key thing.  Thursday is Valentine’s Day, and fertilizer is only a good gift if your intimate other is a green thumb that hasn’t been able to get to the store in a very long time.

FMC closed up 2.2% at $53.54 today and the 52-week trading range is $35.64 to $59.00.  $70.00 would be a considerable price.  While it still is listed as having a 30+ P/E ratio, this really trades with a 13.8 P/E ratio for fiscal Dec-2008 forward estimates.

Jon C. Ogg
February 13, 2008

Posted on: February 13, 2008 – 7:03 pm in Agriculture, Cramer, ,

Baxter (BAX) Bleeds Patients Further

Heparin, made Baxter International (NYSE: BAX) is one of the most widely used blood thinners in the world.

Today’s disclosure that the U.S. Food and Drug Administration said it never inspected a Chinese facility that made the active ingredient of heparin. That makes Baxter the medical equivalent of Mattel (NYSE: MAT). Wall St. really has to ask why a company as large as Baxter cares so little about its reputation, the safety of millions of patients, and the value of it shares. By the same token, it has done trial lawyers a significant service.

According to The Wall Street Journal "on Monday, Baxter announced that it had temporarily suspended production of heparin because of about 350 reactions potentially tied to the drug, including four deaths, primarily in patients undergoing kidney dialysis and heart surgery." In recent years the drug has gained ground for the prevention of blood clots for patients who are a bed rest.

Baxter made a decision to use a facility in China instead of the US even though the big Asian country has a reputation for exporting unsafe and unregulated products.It is only fair to ask why the firm would exercise such poor judgment given the manner in which the drug is used.

It will be nice to see the Baxter management before Congressional committees in the coming weeks. Baxter staff will also be out in force at the annual tort lawyers convention in Las Vegas.

Douglas A. McIntyre

Douglas A. McIntyre

Posted on: February 13, 2008 – 6:57 pm in Pharmaceuticals,

Visa Shows Year-End Numbers Ahead of IPO

Visa, Inc. has filed an amended S-1 to show its financials for the year-end December 31, 2007.  The company posted revenues of $5.193 Billion, up from $3.902 Billion for 2006.  Here are the growth factors year over year for 2007 vs. 2006:

  • Service Fees $2.58B vs. $2.06B
  • Processing Fees $1.659B vs $1.411B
  • Vol./Support Incentives ($714M) vs, ($890M)
  • International transaction fees $1.193B vs. $911M
  • "other" $473M vs. $410M

The lead underwriters are JPMorgan and Goldman Sachs; and co-managers are listed as Banc of America, Citigroup, HSBC, Merrill Lynch, UBS, and Wachovia.

We are still awaiting this IPO and we’ll have more finite percentages and ranges as that comes available.

Jon C. Ogg
February 13, 2008

Posted on: February 13, 2008 – 5:23 pm in Financial Stocks, IPOs,

Oculus Files To Sell More Securities Than Its Market Cap (OCLS)

Oculus Innovative Sciences, Inc. (NASDAQ: OCLS) has just filed a shelf registration that would allow the company to sell up to $75 million in securities.  The offering can be in stock, debt, warrants, or preferred shares.  The use of proceeds is for general corporate purposes.

There is just one small problem: The company’s market cap is $73.6 million shares.

Oculus has developed, manufactures, and sells a family of products intended to prevent and treat infections in chronic and acute wounds.  Its platform Microcyn is a proprietary oxychlorine small molecule formulation that is designed to treat a wide range of organisms that cause disease, including viruses, fungi, spores and antibiotic resistant strains of bacteria, in wounds.  Microcyn is NOT approved by the FDA.  Its device product is cleared for sale in the United States as a medical device for wound cleaning, or debridement, lubricating, moistening and dressing; is a device under CE Mark in Europe with anti-infective claims; and is approved as a drug in India and as an antiseptic in Mexico.

It recently began enrolling patients in Phase II Microcyn studies in mildly infected diabetic foot ulcers and is currently pursuing strategic partnerships to assess potential applications for Microcyn in several other markets.

Shares rose some 6% today to $5.55, and shares are only down 0.8% in after-hours trading. 

Jon C. Ogg
February 13, 2008

Posted on: February 13, 2008 – 5:12 pm in Medical, Secondary Offering, , ,

Baidu.com Mixed on EPS Blowout But Soft Outlook (BIDU)

Chinese internet search leader Baidu.com, Inc. (NASDAQ: BIDU) has posted earnings and it showed in $0.92 non-GAAP EPS on $78.3 million in revenues.  The estimates from First Call for the Chinese search engine are $0.71 EPS on $77.1 million in revenues.  It also offered guidance of $73.1 to $75.1 million in revenues.  While these revenue forecasts are growth of 93% to 99% year over year, First Call had estimates at $77.01 million in revenues on last look.

The company posted Traffic Acquisition Costs (TAC) of roughly $9.9 million or 12.7% of total revenues, compared to 8.7% in Q4-2006. The company also had an income tax benefit of $2.5 million.  Baidu had $18.3 million in cash and equivalents on hand at the end of the quarter.

Analysts have an average price target north of $379.00, which is still roughly 50% higher than today’s prices. 

Baidu’s shares closed up some 6% at $261.09 in normal trading and shares are up about 1% around $264.00 in after-hours trading.  Shares were briefly higher on the higher EPS number, but that guidance figure may be some pause.  Baidu.com, Inc.’s 52-week trading range is $92.80 to $429.19.

Jon C. Ogg
February 13, 2008

Posted on: February 13, 2008 – 4:44 pm in China, Earnings, Internet,

The 52-Week Low Club (PNW)(DAKT)(ARUN)

Pinnacle West Capital (NYSE:PNW) No special news, just slow sell-off. Down to $36.60 from 52-week high of $50.68.

Daktronics (NASDAQ:DAKT) Bad quarter. Down to $16.53 from 52-week high of $39.

Nxstage Medical (NASDAQ:NXTM) Brokerage downgrade. Falls to $7.79 from 52-week high of $15.61.

Cephalon (NASDAQ:CEPH) PM sell-off. Market not in love with earlier results. Down to $56.20 from 52-week high of $84.83.

Aruba Networks (ARUN) Still dropping from bad quarter. Down to $4.65 from 52-week high of $23.85.

Douglas A. McIntyre

Posted on: February 13, 2008 – 4:21 pm in HI/LOW, , , , ,

XTO Selling $1 Billion In Stock (XTO)

XTO Energy Inc. (NYSE: XTO) intends to sell 20,000,000 shares of common stock in a secondary offering, pursuant to its shelf offering.  Lehman Brothers, Goldman Sachs, and JPMorgan are joint book-runners for the offering, and the overallotment option is for 3 million shares.

Proceeds of the offering are expected to fund recently announced property acquisitions and to repay indebtedness under its commercial paper program.

At current prices, this would indicate a sale of some $1.13 Billion in stock, and today’s market cap is $27.3 Billion.

XTO shares closed up 1% at $56.61, but shares are down roughly 2% on this offering.

Jon C. Ogg
February 13, 2008

Posted on: February 13, 2008 – 4:15 pm in Oil & Gas, Secondary Offering,

Dendreon Shares Losing House Committee Hope (DNDN)

CNBC’s Mike Huckman just announced what is going to be a disappointment for Dendreon (NASDAQ: DNDN) holders, and that may be an understatement.  The House Committee will not be forcing any action or pressing the FDA over Dendreon’s PROVENGE until FDA makes a final decision, and that could be one to three years away.  There had been hopes that the committee would uncover conflicts of interest that have been alleged by many hopeful patients and investors alike.  That doesn’t look to be in the realm of possibilities now.

As a reminder, there is still hope that the EU might actually save it when the FDA wouldn’t.

Dendreon shares are now down over 7% to $5.37, and its 52-week trading range is $3.57 to $25.25.

Jon C. Ogg
February 13, 2008

Posted on: February 13, 2008 – 3:34 pm in Biotech, FDA, , , , ,

MFA Mortgage Ready To Go Vulture Investing In Mortgages (MFA, MFR, NLY, CIM, BX)

MFResidential Investments, Inc. submitted an IPO filing on Tuesday.  The total proposed maximum aggregate amount in securities is listed as $250,000,000 in securities, although this number is merely for filing purposes.  The underwriting group is listed as UBS, Bear, Stearns, Deutsche Bank, and Morgan Stanley. They have applied for the trading symbol “MFR” on the New York Stock Exchange.

MFResidential Investments will target residential mortgage-backed securities (MBS) and residential mortgage loans, as well as other real estate-related financial assets on a leveraged basis.  MFA Mortgage Investments, Inc. (NYSE: MFA) owns MFA Manager, LLC, who will externally manage MFResidential Investments. The company will seek to provide appealing risk-adjusted returns to its shareholders by investing in a diverse spectrum of real-estate financial assets. These assets will be financed through repurchase agreements, warehouse facilities and other forms of borrowing. MFResidential and its manager, MFA, believe that the current housing market situation has provided opportunities to take advantage of low interest rates and credit spreads. MFA engages in similar investing and financing activities for real-estate financial assets.

This isn’t at all the first of the mortgage vulture investing in this sector.  We have been pounding the table on  the Annaly Capital Management (NYSE: NLY) spin-off Chimera Corp. (NYSE: CIM) even before they came public as having the right expertise and model for pulling this off.  The Blackstone Group (NYSE: BX) has also made its vulture ventures known.  Octavian recently went vulture too, although this was on an international scope.  Even hedge fund Marathon announced plans to go vulture investing with TCW Group.

MFA Mortgage has a $1.12 Billion market cap and its shares are unchanged today at $10.70; its 52-week trading range is $5.55 to $11.07.

Rachel Lopez
February 13, 2008

Posted on: February 13, 2008 – 3:08 pm in Financial Stocks, IPOs, Value Investing, , , , ,

A Fresh Nvidia (NVDA) Buys AMD (AMD) Rumor

Another round of rumors has hit the media about Nvidia (NASDAQ: NVDA) buying AMD (NYSE: AMD). Barron’s quotes American Technology Research as saying a deal is possible. The reasoning seems simple enough. “The Intel/AMD road-map of integration of the CPU/GPU could pose a risk to Nvidia, and buying AMD propels Nvidia into a formidable competitor for Intel with the upside coming from Huang’s ability to re-architect AMD’s design.”

Dream on. Nvidia has a market cap of just under $15 billion. Its stock is down about 25% this year. Buying a loser like AMD would push its price so low that shareholders would storm the company’s headquarters. Nvidia is about to announce earnings. A weak forecast could further eviscerate the shares.

In its last quarter, NVDA has operating income of $248 million on revenue of $1.116 billion. The company had a gross margin of 46% in that period. NVDA has a clean balance sheet with over $1 billion in cash.

Over at AMD the company sports a market cap of $3.8 billion, which makes a deal by Nvidia affordable. That is until Wall St. looks at the $5 billion in long-term debt on the balance sheet. AMD had revenue of $1.77 billion and an operating breakeven before write-offs of $1.6 billion for impaired assets.

Nvidia shareholders have a nice company. AMD is a boat anchor.

Douglas A. McIntyre

Read More »

Posted on: February 13, 2008 – 1:10 pm in Semiconductor, ,

Can Baidu.com Recapture Its Earnings Mojo? (BIDU)

After today’s close we’ll get to see earnings out of Chinese internet search leader Baidu.com, Inc. (NASDAQ: BIDU).  The estimates from First Call are $0.71 EPS on $77.1 million in revenues.  Last quarter, the company gave guidance of $74.7 million to $76.7 million in revenues and EPS targets around the time were $0.70 EPS.

Next quarter estimates are $0.64 EPS on $77.01 million in revenues. Estimates for fiscal 2008 are $4.15 EPS on $435.48 million in revenues.

Options traders appear to be braced for a move of up to a range of $15.00 to $18.00 in either direction.  Baidu’s chart has been out of its explosive uptrend for more than a month now and shares have actually pulled back some $150.00 from highs.  To make matters more interesting, Baidu has been spending recent trading sessions under its 200 day moving average that is currently listed as $254.68.  The 50-day moving average is all the way up to $330.57.  Recent lows were roughly $225.00 in recent days.  As of last look, the short interest for January-end in Baidu shares was listed as 3.234 million shares, up almost 40% from mid-January levels. 

When this stock was busy going ballistic last year we noted how the valuations were becoming similar to the old tech-bubble days.  Even after the huge pullback that has been seen, the stock is not cheap by most standards.  With a $8.4 Billion market cap, this trades at 105-times current earnings and almost 60-times projected 2008 earnings.  On a revenue basis, this trades at 36-times current revenues and trades at 19-times projected 2008 revenues.   The question is how much traders are willing to pay for one of the greatest internet growth stories in China.  That answer varies from source to source and from trader to trader.

There can always be the duel of which will matter most between high valuations and a huge sell-off, but we still would think the company will have to beat earnings projections handily and maintain strong guidance to support the current share price and valuations.  Analysts have an average price target north of $379.00, which is still roughly 50% higher than today’s prices.  Baidu.com, Inc.’s 52-week trading range is $92.80 to $429.19.

In the Year of the Rat, Baidu better make sure rats aren’t chewing on the fiber optic cables in China.

Jon C. Ogg
February 13, 2008

Posted on: February 13, 2008 – 12:36 pm in China, Earnings, Internet, , ,

Where Is Fed’s Bully Pulpit?

The rate cuts being made by the Fed are not being passed along to homeowners, consumers, and most businesses. "Companies are paying more to borrow now than before the Fed reduced its benchmark rate by 1.25 percentage point over nine days in January, based on data compiled by Merrill Lynch" according to Bloomberg.

The argument that lenders would give for not lowering rates is that it is more risky to pass out money at almost any interest rate when the economy and credit markets are in trouble. This may be a fair point of view, but it does little to help the economy.

Mr. Paulson over at Treasury prides himself on brokering big deals to help the economy and financial markets. He has no control over the Fed. He does however have a great deal of leverage with the large money center banks.

The Fed may have to lower again, but that does not guarantee more liquidity at lower rates in the wider economy. Bernanke and Paulson are going to have to mount bully pulpits on opposite sides of Hyde Park and talk the lending rates at the consumer and small business level down.

Otherwise, no one but the banks benefits from another cut by the Fed

Douglas A. McIntyre

Posted on: February 13, 2008 – 10:52 am in Economy

AMENDED IPO FILING: Intrepid Potash

Intrepid Potash, Inc. is closer to an IPO as it filed an amended IPO filing this morning. The targeted proceeds from common stock issuance are not specified, however, it has applied to trade on the New York Stock Exchange. The underwriting group is listed as Goldman, Sachs & Co., Merrill Lynch & Co., and Morgan Stanley.

Intrepid Potash claims to be the largest potash producer in the United States and supplies an average of 8.5% of potash consumption in the U.S. annually and 1.5% globally. Potash is composed of potassium, one of three essential nutrients for agriculture. Significant barriers to entry exist in the industry because deposits are rare and geographically concentrated. Intrepid owns 5 potash production plants in New Mexico and Utah with the capacity to produce 1.2 million tons of potash each year. They plan to expand production by 370,000 tons per year over the next 5 years. Increased demand for potash, combined with a limited supply, recently increased prices dramatically. In the last 3 months, Intrepid saw prices increase by 80%, up to $397 per ton. They reported net sales of $140.1 million and net income of $23.1 million at an average of $185 per ton for the nine-month period ended September 30, 2007.

With demand projections likely to continue to increase and Intrepid’s strong position in the potash market in the United States, this may be one IPO that actually goes public and comes out as a hot IPO despite the recent wave of IPO withdrawals.

Rachel Lopez
February 13, 2008

Posted on: February 13, 2008 – 9:55 am in Agriculture, IPOs,

Vonage Problems Persist, But Still Hanging In There (VG)

Vonage Holdings (NYSE: VG) has posted earnings at -$0.07 EPS on revenues of $215.9 million,  These compare to -$0.76 EPS and $181.5 million on a year over year basis, and compares to First Call estimates of -$0.10 EPS and $219.4 million in revenues.

The company did generate positive adjusted operating income in Q4 and reduced its marketing costs and operating structure.  Its average monthly revenue per line in Q4-2007 was $28.19, down from $28.25 in the year-ago quarter and $28.24 reported in Q3-2007. Its average monthly telephony services revenue per line rose to $27.42, in line with $27.41 reported a year ago and up from $27.32 sequentially. Its marketing expense for the quarter was $63 million, or 29% of revenue, which is down from $96 million or 53% of revenue a year ago. Vonage also noted the cost of acquisition will be within $225- $250 for 2008.

Jeffrey Citron, Vonage Chairman, noted, "…Looking to 2008, we are confident in our ability to grow the business profitably and provide customers innovative, feature-rich and cost-effective communications services."  Vonage added 56,000 net subscriber lines during the quarter to end the year at nearly 2.6 million line, while its average monthly customer churn remained essentially flat sequentially at 3.0%.

Its cash and marketable securities and restricted cash on December 31, 2007 was $190 million, including $39 million in restricted cash as collateral for routine business operations.  The change in cash was driven by settlement payments of $202 million, cap-ex of $9 million, and cash from operations of $15 million, and an $8 million increase in restricted cash.  Vonage also has $253 million in convertible debt, which can be put back to the company in December 2008. The Company with its financial advisors is currently in discussions with several parties regarding a refinancing of the debt.

Unfortunately, Vonage is also going to restate its financial statements for the second and third quarters of 2007 to correct the amount of non-cash stock compensation expenses recorded during those periods.  The restatement will apparently not result in a change in  previous revenues, cash flow from operations or total cash and cash equivalents shown in the second and third quarter 2007 financial statements.  It will result in a reduction in non-cash stock compensation will effect a decrease in selling, general and administrative expense of approximately $10 million in the second quarter and approximately $4 million in the third quarter of 2007.  There is also a "material weakness in control procedures" relating to the recording of stock-based compensation expenses.

Vonage is not signaling that it it is on the verge of implosion, even if there are problems and challenges.  Its customer acquisition costs remain high even if marketing and general costs have been reduced.  Its new client additions are also slowing sharply and it still needs to figure out how to lower its churn rates.  Shares were up 1% in earlier pre-market trading, but shares are now down 1.5% at $2.00 in pre-market trading.  We will be making our own call again on this stock in our STOCKS UNDER $10 Newsletter next week.

Jon C. Ogg
February 13, 2008

Posted on: February 13, 2008 – 8:39 am in Earnings, Internet, Telecom, ,

First Solar Shines (FSLR)

First Solar, Inc. (NASDAQ: FSLR) is showing that solar power and alternative energy is far from peaking.  The solar electric power module maker posted earnings at $0.77 EPS on $200.8 million in revenues, while First Call had estimates at $0.53 EPS and $179.7 million in revenues.  First Solar has gotten its cost per watt down 12% in 2007 to a rate of $1.12.

Unfortunately it did not offer guidance, so this pre-market jump could be different after the conference call starts at 8:00 AM EST.  Shares closed at $175.56 yesterday, but shares are up over 14% pre-market to $200.00 in early trading.

Jon C. Ogg
February 13, 2008

Posted on: February 13, 2008 – 7:54 am in Alternative Energy, Earnings,

Deere Beats Earnings, Shares Indicated Lower (DE)

Deere(NYSE: DE) posted earnings at $0.83 EPS versus the First Call estimate of $0.78 EPS.  Its revenues rose 17.5% from Q4-2006 to $5.2 Billion versus $5.07 Billion consensus.

As far as guidance, Deere noted that equipment sales should increase by about 17% for full-year in 2008 and should be up approximately 23% for the second quarter. Deere’s net income is forecast to be about $2.2 billion for the year and in a range of $700 million to $725 million for the second quarter.  The company did realize gains from currency of roughly 3% of the sales increase for both periods.

Deere shares closed up over 2% yesterday to $86.48 and shares are down roughly the same amount in early pre-market trading at $84.25.  The 52-week trading range is $51.26 to $94.77.

Jon C. Ogg
February 13, 2008

Posted on: February 13, 2008 – 7:42 am in Agriculture, Earnings,

Europe Markets 2/13/2008 (VOD)(DB)(ALU)

Markets in Europe were off at 7.30 AM New York time.

The FTSE fell 1.1% to 5,845. Diageo fell 2.5% to 1033. Vodafone (VOD) fell 1.3% to 174.8.

The DAXX fell .6% to 6,926. Deutsche Bank (DB) was up 1.1% to 77.64. Commerzbank rose 3.2% to 21.06.

The CAC 40 moved down .3% to 48.24. Alcatel-Lucent (ALU) fell 3.6% to 4.08. Renault was up 3% to 74.16.

Data from Reuters

Douglas A. McIntyre

Posted on: February 13, 2008 – 7:39 am in International Markets, , ,

Top 10 Pre-Market Analyst Calls (CPLA, CEPH, DYN, HBC, MS, SGP, SLM, TASR, TROW, VISN)

Below are the top analyst calls that 247WallSt.com is looking at this morning:

  • Capella Education (NASDAQ: CPLA) started as Neutral at JPMorgan.
  • Cephalon (NASDAQ: CEPH) raised to Strong Buy at Broadpoint.
  • Dynegy (NYSE: DYN) raised to Buy from Hold at Citigroup.
  • HSBC Holdings (NYSE: HBC) raised to Buy at UBS.
  • Morgan Stanley (NYSE: MS) downgraded to Market Perform from Outperform at Oppenheimer.
  • Schering Plough (NYSE: SGP) raised to Buy at UBS.
  • SLM (NYSE: SLM) raised to Outperform at FBR.
  • Taser (NASDAQ: TASR) started as Overweight at JPMorgan.
  • T. Rowe Price (NASDAQ: TROW) downgraded to Neutral at Credit Suisse.
  • VisionChina Media (NASDAQ: VISN) started as Outperform at Credit Suisse.

Jon C. Ogg
February 13, 2008

Posted on: February 13, 2008 – 7:34 am in Analyst Calls, , , , , , , , , ,

Have A Coke (KO) And A Smile

The Coca-Cola Company (KO)  reported fourth quarter earnings per share of $0.52, an increase of 79 percent versus the prior year on a reported basis, and $0.58 after considering items impacting comparability, an increase of 12 percent.

Revenue from Africa and Eurasia was especially strong

Net operating revenues for the fourth quarter increased 24 percent, driven by a 6 percent increase in concentrate sales, an 8 percent benefit from structural change related to bottler acquisitions, an 8 percent currency benefit and a 2 percent favorable impact from pricing and mix.

The numbers beat the First Call consensus number by $.02.

Douglas A. McIntyre

Posted on: February 13, 2008 – 7:13 am in Earnings,

Apple (AAPL) Looking At Game Console Business

It is not enough that Nintendo, Microsoft (MSFT), and Sony (SNE) are scratching each other’s eyes out in the game console business. It looks like Apple (AAPL) wants in. Given its new visibility with consumers and the "glow" from the iPod, it makes all the sense in the world.

According to The Sydney Herald, Apple has filed with the US Patent and Trademark Office to extend its brand name and trademark to a number of gaming products.

Given Apple’s excellent skills with creating nifty hardware interfaces and consumer electronics, the company might do fairly well against flat-footed operators like Redmond and Sony. Apple might even be able to run a game controller or console component using current versions of the Mac or iPod.

Put the odds of Apple announcing a game platform before the end of the year at 75% or better.

Douglas A. McIntyre

Posted on: February 13, 2008 – 7:04 am in Consumer Electronics, , ,