Daily Archives: February 22, 2008

The 52Week Low Club (CBEY)(BRLC)(BX)(DGX)(LTM)(AVR)

Aventine Renewable Energy (NYSE: AVR) Bad earnings and liquidity issues. Down to $6.79 from 52-week high of $20.85.

Life Time Fitness (NYSE: LTM) Bad outlook from 2008. Sells off to $30.40 from 52-week high of $65.09.

Quest Diagnostics (NYSE: DGX) Forecast is below Wall St. numbers. Falls to $46.44 from 52-week high of $58.63.

Blackstone (NYSE: BX) Environment getting worse for private equity. Drops to $15.25 from 52-week high of $38.

Syntax Brillian (NASDAQ: BRLC) Falls on problems with creditors. Down to $.83 from 52-week high of $9.04.

Cbeyond (NASDAQ: CBEY) Investors not happy with quarterly numbers. Sells down to $15.58 from 52-week high of $46.51.

Douglas A. McIntyre

Posted on: February 22, 2008 – 4:00 pm in HI/LOW, , , , , ,

JB Hunt Transport Chairman Unloads Shares (JBHT)

Earl Wayne Garrison, Chairman of J B Hunt Transport Services, Inc. (NASADAQ: JBHT), just disclosed in an SEC filing that he made a sale of common stock in the company.  It wasn’t a small drop in the bucket either. 

This filing shows that he sold 1.002 million shares at a net price of $28.25 on February 20, 2008.  That’s over $28 million raised and was nearly one-seventh of his holdings.  He still holds 6,337,028 shares of common stock directly, has 17,440 shares in a 401K plan, and has 12,000 in a family account.

That would explain the volume spike from Wednesday.  Shares fell close to 2% that day and shares are down over 2% more since then.  We’d note that shares are up more than $4.00 from the January 2008 lows, but still about 10% under the 52-week highs.  Its 52-week trading range is $23.28 to $31.94, and the market cap is $3.53 Billion.

We don’t always cover insider selling and buying, but when you see sales of this size it is hard to ignore.

Jon C. Ogg
February 22, 2008

Posted on: February 22, 2008 – 1:55 pm in Insider Activity, Transports,

SIRIUS & XM Focus: Merger Or Earnings? (XMSR, SIRI)

Next week we are getting dual earnings reports out of Sirius Satellite Radio (NASDAQ: SIRI) and from XM Satellite Radio (NASDAQ: XMSR).  We are also waiting for a Department of Justice approval decision, and frankly many signs had pointed to a decision coming this week.  Oh well, that’s the government for you.

On Tuesday we’ll get to see earnings out of Sirius Satellite Radio Inc. (NASDAQ: SIRI). The estimates for the satellite radio company from First Call are -$0.13 EPS on $267.4 million in revenues.  Next quarter estimates are -$0.08 EPS on $280.23 million in revenues. Estimates for fiscal 2008 are -$0.30 EPS on $1.25 billion in revenues. Analysts have an average price target north of $3.00. Sirius Satellite Radio Inc.’s 52-week trading range is $2.51 to $3.94.

Next Thursday we’ll get to see earnings out of XM Satellite Radio Holdings Inc. (NASDAQ: XMSR). The estimates for the satellite radio company from First Call are -$0.64 EPS on $303.15 million in revenues.  Next quarter estimates are -$0.39 EPS on $314.98 million in revenues. Estimates for fiscal 2008 are -$1.62 EPS on $1.36 billion in revenues. Analysts have an average price target north of $14.00.  XM Satellite Radio Holdings Inc.’s 52-week trading range is $9.62 to $16.44.

We’ll break these earnings down more over the weekend or shortly before earnings.  If the government wants to throw a curve ball to Wall Street, it will announce its ruling on the merger on one of the earnings days or in between.  Over the last 90 days, SIRI shares are down some 15% or more and XMSR shares are down a slight bit less. 

Jon C. Ogg
February 22, 2008

Posted on: February 22, 2008 – 1:09 pm in Earnings, Mergers and Buy Outs, Satellite, ,

IPO Withdrawal: Transoma Medical (TSMA)

Transoma Medical, Inc. withdrew its IPO filing this morning, citing “unfavorable market conditions.” The company originally filed its IPO paperwork on October 12, 2007 and had planned to trade on the Nasdaq Global Market under symbol “TSMA.”  On last look it was going to sell some 4 million shares at $14 to $16 per share with Piper Jaffray and Thomas Weisel Partners listed as co-lead underwriters.

Transoma Medical is a medical technology company that develops, manufactures, and distributes wireless diagnostic and monitoring products in the chronic cardiovascular disease and biomedical research markets. They generated $37.2 million in revenues for year ending June 2007. They believed that the US market size for monitoring patients with syncope, refractory epilepsy and AF via their Sleuth ECG System is approximately $900 million. Perhaps they overestimated.

Transoma joins two other recent health care IPO withdrawals, Concentric Medical and Critical Homecare Solutions. However, the health care IPO market isn’t the only industry in need of some medical attention.  This week we have even seen a slowdown in the SPAC IPO’s, which you can tell if you check our IPO INDEX.

Rachel Lopez
February 22, 2008

Posted on: February 22, 2008 – 12:39 pm in IPOs, Medical, ,

Siemens (SI) Sees No Business Slowdown

Siemens (NYSE: SI) joins the short list of big companies which claim that they are seeing no weakness in their global businesses.

“It’s clear that we’re entering a phase of slowdown in the world,”  Peter Loescher, 50, said in an interview with Bloomberg Television in New York today. “The impact for us as a company, we don’t see it yet.”

While Mr. Loescher may be from Germany, many CEOs at US companies may think he is from another planet.

Douglas A. McIntyre

Posted on: February 22, 2008 – 12:13 pm in Conglomerates,

Markets Looking To China Rail IPO

China Railway Construction Corp., the second largest Chinese railroad builder, intends to raise $3.6 billion from its IPO offering in Shanghai. Reuters has reported that the state-run company will offer some 2.8 billion A shares for 8.00 to 9.08 Yuan per share. If share prices reach the high end of the range, then this IPO will top size of the IPO of its larger competitor, China Railway Group.

It also appears that a public offering in Hong Kong will follow the Shanghai offering although the specific price range for the 1.706 shares has not been determined and will be limited to select foreign investors.  The listing on Shanghai is anticipated for March 10 and the Hong Kong listing is set for March 13.

In China’s most recent 5 year plan, they allocated $175 billion for investment in railroad infrastructure to alleviate bottlenecks in the booming economy.

Rachel Lopez
February 22, 2008

Posted on: February 22, 2008 – 11:29 am in China, IPOs, , , , ,

Level 3 (LVLT) Near $2

Perhaps the prospect of Level 3 (NASDAQ: LVLT) COO Kevin O’Hara speaking at the Merrill Lynch Communications Services Forum next week drove investors out of the stock. Shares were at $2.50 two days ago and $2.06 today. No bottom for these shares. The have a 52-week high of $6.77.

While the company’s earnings were weak and Level 3 has high debt, all of that news is several days old. The selling of the stock has turned into something of a panic.

Wall St. has probably figured out that the people who run Level 3 are not going anywhere. The CEO and COO have been there for years. The debacle in earnings which has caused a debacle in the share price shows no sign of ending.

Level 3 has a weak board. None of the members have much to recommend them as big company directors. The head of the Nominating and Governance committee is a retired admiral James O. Ellis, Jr. He must have spent a lot of years steaming in circles and running over he own tow rope. Some on needs to get him a compass.

Douglas A. McIntyre

Posted on: February 22, 2008 – 10:18 am in Telecom,

Cbeyond (CBEY) Get Ready For Stock Price Arctic Winter

Cbeyond (NASDAQ: CBEY) shares were hit with the Hammer of Thor today, trading off 33% to $15.58. That compares to a 52-week high of $46.51.

The firm did post rough earnings. Revenue moved up 31% for the fourth quarter to $75.9 million, but operating income fell 27% to $2.9 million due to high expenses. Cbeyond sells integrated packages of voice, broadband, and mobile services to small businesses and its customer churn rate rose.

Cbeyond’s CEO said that "the deteriorating economic environment has increased the number of our existing customers who are unable to pay us." With credit conditions as tight as they are access to capital for small business is likely to be exceeding difficult.

Cbeyond expect 2008 to show only modest growth, at least compared to the past. Revenue is expected to be in the $355 million to $360 million up about 26% from 2007.

The company will need a really fine piece of good news to get back on track.

Douglas A. McIntyre

Posted on: February 22, 2008 – 10:04 am in HI/LOW,

ETF/ETN Launch For Currency Trading (ERE, SZE, CUD, ADE, EGB)

The NYSE Euronext has commenced the launch of trading of an ETF, actually an ETN, that will allow traders to trade several currencies just like buying or selling a stock.

5 Elements Spot Currency Exchange Traded Notes (ETN’s) were launched on the NYSE Arca this morning. The 5 listings track the Euro, Swiss Franc, Canadian Dollar, Australian Dollar, and the British Pound. The listings are as follows:

  • EUR/USD Exchange Rate ETN (NYSE: ERE) tracks the Euro.
  • CHF/USD Exchange Rate ETN (NYSE: SZE) tracks the Swiss Franc.
  • CAD/USD Exchange Rate ETN (NYSE: CUD) tracks the Canadian Dollar.
  • AUD/USD Exchange Rate ETN (NYSE: ADE) tracks the Australian Dollar.
  • GBP/USD Exchange Rate ETN (NYSE: EGB) tracks the British Pound.

Unfortunately, trading data has not been seen.

Rachel Lopez
February 22, 2008

Posted on: February 22, 2008 – 9:50 am in ETF, International Markets, , , , ,

Fannie Mae & Freddie Mac Slammed By Downgrades (FNM, FRE)

2007 and 2008 aren’t turning out to be the best years for GSE’s like Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE).  Things just got worse for these two this morning.

Merrill Lynch has issued a downgrade of nearly the worst sort.  Both GSE shares were downgraded to the ugly "SELL" rating this morning.  Shares were already at a Neutral rating at the firm before the downgrade.  Pzena’s value call looks a little premature.

Part of the reasoning behind the downgrade is a worsening of credit performance….  Gee, who’d a thunk it?

Freddie Mac is down almost 5% at $26.39 at the open and Fannie Mae shares are down 4.2% at $27.77 in opening indications.  With earnings next week, we’ll get to see just how bad things are.  It’s hard to expect any good news.  maybe these two should just consolidate and see if Fleetwood Mac wants to license the the Freddie name.

Jon C. Ogg
February 22, 2008

Posted on: February 22, 2008 – 9:39 am in Analyst Calls, Financial Stocks, ,

Conexant Will Try The Reverse Stock Split Game (CNXT)

Conexant Systems Inc. (NASDAQ: CNXT) is going to try a reverse stock split to juice its shares.  As the stock trades 6 million shares per day and is at the very lowest-end of its $0.55 to $2.09 trading range over the last year, it is of little surprise that the company will try this.  Conexant was literally a $100+ stock at one time back in the tech bubble days.

In a filing, the company said that shareholders at the annual shareholders meeting approved a proposal that would allow for a reverse stock split for a period of up to one year.  The company has also noted that John Marren, who came over from the old GlobespanVirata days, has resigned from the board in conjunction with its annual shareholders meeting.

This is one we have covered with caution in our weekly "10 Stocks Under $10" letter for quite some time.  The company is outside of listing requirements over its minimum price, making this even less of a surprise.  Other companies that have pursued reverse stock splits in recent times have been tech companies such as Sun Microsystems, JDS Uniphase, Nortel, and others.  You can ask around about the opinions of a reverse stock split, but you’ll find more indifference than anything.

Jon C. Ogg
February 22, 2008

Posted on: February 22, 2008 – 9:06 am in Stock Splits, Technology Companies,

Barclays Pushes Oil Price Forecast To $137

Barclays has upped its forecast for the price of oil in 2015 to $137 from a previous level of $93.

According to Reuters "The remorseless move up in long-run prices has not yet fully played out," Barclays said in a research note..

Douglas A. McIntyre

Posted on: February 22, 2008 – 8:54 am in Oil & Gas

Melanoma Patients Have Another Hope With New Orphan Drug Designation (ADH, MEDX)

Adherex Technologies Inc. (AMEX: ADH) has announced that it has received an orphan drug designation for its ADH-1 from the FDA for the use of ADH-1 in conjunction with melphalan for the treatment of Stage IIB/C, III, and IV malignant melanoma.

Adherex is currently conducting a Phase IIb expansion trial in melanoma using systemic ADH-1 in combination with regional melphalan; and Adherex is also evaluating the synergy of systemic ADH-1 in combination with regionally-infused melphalan for the treatment of melanoma in a Phase I/IIb trial. Another Phase I trial is also nearing completion at US Oncology where systemic ADH-1 is being evaluated in combination with three different chemotherapies.

The FDA orphan drug designation could be substantial for this company.  It "could" provide incentives such as funding for clinical studies, study assistance, a waiver of FDA user fees, potential tax credits, and up to seven years of market exclusivity upon marketing approval.

If you will recall the blow-up at Medarex (NASDAQ: MEDX) and the massive options speculation that was trading around the stock before the FDA review, the mere potentiality of this is huge.  This is a very different company and the treatment here is a different treatment as this is malignant.  But traders will likely tie the two at least in relation to each other.  Melanoma is a very under-treated disease in the US and throughout the world with a mega-blockbuster drug potential.  Metastatic melanoma is currently nothing short of a death sentence.

Jon C. Ogg
February 22, 2008

Posted on: February 22, 2008 – 8:52 am in Biotech, FDA, , , ,

Boeing (BA) May Lose Japan Airlines Business

Japan Airlines management is so upset about delays in the Boeing (NYSE: BA) 787 that it may turn to Airbus for planes.

According to Reuters "JAL, which had planned to buy 55 787 planes, favoring their greater fuel-efficiency, was looking at purchasing Airbus planes as it wants to offset the cost of higher fuel prices quickly by using more mid-sized airliners."

It is not clear whether airlines, facing delayed deliver of the 787, can cancel their orders outright. If so, Boeing could see a substantial drop in its revenue.

Boeing stock has already been crushed. It trades at under $82, down from a 52-week high of $107.83.

Douglas A. McIntyre

Posted on: February 22, 2008 – 8:19 am in Airlines,

Europe Markets 2/21/2008 (GSK)(SAP)(ALU)

Markets in Europe were down at 7.35 AM New York time.

The FTSE fell .2% to 5,919. GlaxoSmithKline (GSK) was down 1.2% to 1121. Next was down 4.7% to 1293.

The DAXX dropped 1.1% to 6,828. Daimler was down 2.5% to 54.79. SAP (SAP) was off 1.2% to 32.63.

The CAC 40 fell .5% to 4,833. Alcatel-Lucent (ALU) dropped 1.7% to 4.06. Cap Gemini fell 2.8% to 37.93.

Data from Reuters.

Douglas A. McIntyre

Posted on: February 22, 2008 – 7:43 am in International Markets, , ,

Goldman Sachs Raises United Natural Foods, Sort Of (UNFI)

United Natural Foods Inc, (NASDAQ: UNFI) was beaten like a rented mule last night in after hours trading after an earnings disappointment and an earnings warning.  The company is not yet seeing any leverage or efficiencies from a merger.  Shares this morning will be trading at roughly a four or five year low.

Goldman Sachs is out with a research note this morning that is technically an upgrade.  The brokerage firm is removing this from its Americas Sell List, although the "raised rating" is only a new "neutral" rating.  The stock is now well below Goldman Sachs prior $24 target and this noted "historically low valuations" in the call.

This was just added to the Americas Sell List on January 7, 2008, so the calls on this one would at least be considered timely.

Jon C. Ogg
February 22, 2008

Posted on: February 22, 2008 – 7:35 am in Analyst Calls, Earnings, Food,

Top 10 Pre-Market Analyst Calls (MT, DISCA, FNSR, GILD, GMXR, JDSU, LLTC, NU, UEIC, WMB)

These are some of the research calls we are looking at this morning that are impacting shares in early pre-market trading:

  • Arcelor Mittal (NYSE: MT) raised to Buy at Deutsche Bank.
  • Discovery Holding (NASDAQ: DISCA) raised to Neutral at Credit Suisse.
  • Finisar (NASDAQ: FNSR) started as Outperform at Morgan Keegan.
  • Gilead Sciences (NASDAQ: GILD) downgraded to Market Perform from outperform at Bernstein Research.
  • GMX Resources (NASDAQ: GMXR) started as Buy at Jefferies.
  • JDS Uniphase (NASDAQ: JDSU) started as Market Perform at Morgan Keegan.
  • Linear Tech (NASDAQ: LLTC) raised to Buy from hold at UBS.
  • Northeast Utilities (NYSE: NU) raised to Buy from hold at UBS.
  • Universal Electronics (NASDAQ: UEIC) downgraded to Hold from Buy at Deutsche Bank.
  • Williams Companies (NYSE: WMB) raised to Outperform at RBC Capital Markets.

Jon C. Ogg
February 22, 2008

Posted on: February 22, 2008 – 7:18 am in Analyst Calls, , , , , , , , , ,

NYMEX/CME Merger Speculators Should Consider Regulatory & Price Issues (NMX, CME, NYX, ICE, NDAQ)

We’ve seen the consolidation happening on the global exchanges.  They are becoming larger and larger powerhouses, and some are coming under more and more scrutiny.  This morning’s New York Post ran a piece titled "NYMEX Merger Deal All But Completed" with the estimated terms.  The estimated terms were even listed as $36 per share in cash and 0.1323 CME shares per NMX share.  This article does note "Challenges to the merger could still arise evenafter a deal is signed….. That price might not sit well with someNymex shareholders…"

What we wanted to do was put this in perspective.  Frankly there are more risks here than reward if the current terms are accurate.  Merger speculation has been present on NYMEX at much higher prices before.  NMX closed at $96.29 yesterday, and its 52-week trading range is $86.61 to $148.00.  It has lost roughly one-quarter of its post-IPO value since coming public in late-2006.  CME stock closed at $516.44 (52-week range of $475.17 to $714.48), so the combined price before any dilution would generate a perceived NMX buyout price of $68.32 on the stock side and including the $36 cash offer would net out at $104.32.

The largest fear that merger speculators should have here is a regulatory blockage of a deal, and that is on top of the notion that this premium is essentially an "at the market" buyout at best.  Wall Street and Main Street already saw many wondering how the CME & CBOT merger was even allowed to go through, and the argument that a "clearing monopoly" now exists is not going to go away.  Even though this administration and lax regulatory environment has failed to block a single large merger over "anti-competitive pressure," it is impossible not to think this approval process could be tied up for long enough that a new administration might can the deal.

So who else is left that could actually do a deal?

The NYSE (NYSE: NYX) is already involved in acquiring the Amex, and with its recent share price weakness and a new CEO it would be very hard for the equity exchange giant to be able to jump the hurdle into the futures exchange.  The NASDAQ Stock Market, Inc. (NASDAQ: NDAQ) is just way to small to make a pursuit of this size.

InterContinental Exchange, Inc. (NYSE: ICE) has been left out in the wind as its attempt to buy the CBOT lost out to the CME.  "The ICE" and NYMEX are almost equally yoked as far as market caps, with the ICE being slightly higher as of Thursday.  A merger between those two would perhaps face much less scrutiny from any regulators.

While there is a chance that any first offer could be raised, it sure looks like there is a real chance that this could get blocked by regulators AND by shareholders.  If these "likely" terms are the real deal, we’d probably speculate elsewhere.

Jon C. Ogg
February 22, 2008

Posted on: February 22, 2008 – 6:59 am in Exchange, Exchange News, Mergers and Buy Outs, Rumors, , , , ,

Motorola (MOT): The Bad Penny Keeps Turning Up

LG Electronics, the world’s No.5 handset maker, recently said it could win more share from Motorola (NYSE: MOT)."Yes, we’ll increase our market share sharply," LG’s chief executive Nam Yong said, when asked by Reuters whether Motorola’s poor performance is seen as a chance for the South Korean company.

No problem. Motorola is selling its handset unit. Someone else can deal with the competitive landscape.

That sounded like a good solution, but no one has stepped up to buy the operation from Motorola. The normal suspects like Sony Ericcson and Samsung are not returning investment banker calls. Private equity firms don’t have access to the capital.

Motorola will almost certainly be left holding the bag on its largest unit which is now losing hundreds of million of dollars a year. It is a business which the company tacitly admitted it could not fix when it put it on the block.

That leaves the new management at one of the oldest handset makers in a real fix.

Last year, Motorola lost $1.3 billion on revenue of $19 billion in its handset business. The company would have to lay-off thousand of employees to close even part of that gap. With a lot of lay-offs already completed that does not leave a lot of options.

Save one. Motorola could spin its handset operation out to the public. The current enterprise telecom and set-top businesses would be Motorola A. Those businesses make money so that might be worth more than the company’s current market cap of $26 billion. That value is dragged down by the loses at the handset business.

Motorola B would hold that handset business. It would probably trade at a fraction of revenue the way that GM (GM), Ford (F), and many newspaper companies do. The market would probably acknowledge that weakness by giving the second public company a market cap closer to $3 billion or $4 billion.

The move would help Motorola’s shareholders immensely. They would have one stock with real value. The price of those shares might actually rise. They would have another stock with a low price and great risk. But, if the handset business can be fixed those shares might double or triple.

Someone needs to get the investment bankers on the phone.

Douglas A. McIntyre

Posted on: February 22, 2008 – 6:45 am in Wireless,

OPEC Sends Big Oil Companies Back To The Field (XOM)(BP)

One of the solutions for fighting the high price of oil is to increase the supply. That seems simple enough, but it is expensive, at least for oil companies. OPEC is not lowering prices and demand from regions like India and China is rising.

Companies like Exxon (NYSE: XOM) are seeing margins squeezed at their refineries. Oil prices are high and if they pass that along to consumers in the form of $4 gas demand is going to fall. Shutting a refinery due to lack of demand is an expensive proposition.

To keep supply coming, oil companies are turning to a novel, but expensive, way out. They are finding ways to get more oil from dying fields. BP (NYSE: BP) now thinks it can dig another two billion barrels out of Prudhoe Bay. The means taking out heavier crude, drilling more wells, and using new and costly technology to make the field yield more than it could have a decade ago. One BP executive told Reuters "We’re still drilling 60 or 70 new wells a year and it comes down to a progression of technology, the resource value and the opportunity to access a very large oil in place volume using modern drilling techniques."

While bringing up more oil from existing fields is not a long-term solution to the problem of oil supply, it may extend current reserves for a few more years. That could put some pressure on OPEC and buy time for alternative energies.

That is, if any alternative energies will work on a large enough scale to matter.

Douglas A. McIntyre

Posted on: February 22, 2008 – 6:18 am in Oil & Gas, ,