Daily Archives: April 7, 2008

Rex Energy Files For Secondary (REXX)

Rex Energy Corporation (NASDAQ: REXX) has filed with the SEC for a secondary offering of 8 million shares today.  KeyBanc Capital Markets is listed as the sole selling agent.

As far as the use of proceeds, 4 million shares will be sold by existing shareholders and 4 million shares will be sold by the company.  After the overallotment, if used, the proposed offering based on a recent close would be $128 million, which compares to a market cap of $575 million.

Rex is an independent oil and gas company operating in the Illinois Basin, the Appalachian Basin, and the Southwestern Region of the United States.

You can join our open email distribution list to hear about buybacks, special financings, secondary offerings, M&A, and more previews for other special situations.

Since coming public, Rex has risen steadily and its post-IPO trading range was $7.55 to $17.95.  This came public back in July 2007 with a 9.6 million share offering at $11.00, and KeyBanc was the lead there at the IPO time as well.

 

Rex Energy closed up over 7% today at $18.68, a new high, although shares are down some 3% at $18.05 in after hours trading.

Jon C. Ogg
April 7, 2008

Posted on: April 7, 2008 – 4:07 pm in Oil & Gas, Secondary Offering,

Genentech to Set Biotech Tone For Earnings Season (DNA, OSIP, SGEN, ABT, BIIB)

Thursday after the close, we’ll get to see earnings out of Genentech (NASDAQ: DNA). The estimates from First Call are $0.82 EPS on $3.11 billion in revenues.  Next quarter estimates are $0.86 EPS on $3.24 billion in revenues. Estimates for fiscal Dec-2008 are $3.43 EPS on $13.06 billion in revenues.

Genentech is tied to many other drug and biotech companies because of partnerships, so as the number one biotech stock it has implications in many companies based upon the breakdown of its trends and its individual drug comments.  Below are some of its partners:

  • OSI Pharmaceuticals (NASDAQ: OSIP) for Tarceva,
  • Seattle Genetics (NASDAQ: SGEN),
  • Abbott Laboratories (NYSE: ABT),
  • Roche for Avastin 9and ownership),
  • and Biogen-Idec (NASDAQ: BIIB) for Rituxan.

Analysts have an average price target north of $85.00.  Shares were down almost 1% at $79.00 late today before the market closed.  That price target used to be significantly higher before this on peaked out around $90.00 and fell to under $70.00 in Dec-2007 and Jan-2008.  Genentech’s 52-week trading range is $65.35 to $83.41.

Genentech’s annual meeting of stockholders will also be held on April 15, 2008, so there is another round of much of the same presentation data to see next week.  While the woes of one biotech may be mothers milk for another biotech company, Genentech can create at least somewhat of bias for traders going into an earnings season.  As traders are constantly looking for stocks and sectors with less and less economic sensitivity, that may be more true than in many years and quarters of the past.

Jon C. Ogg
April 7, 2008   

Posted on: April 7, 2008 – 3:45 pm in Biotech, Drug companies, Earnings, , , , ,

ALCOA Earnings Shell Game… Weak Currency, Energy Costs & Weak Industrial Demand (AA)

ALCOA Inc. (NYSE: AA) gave a strange earnings report today.  The aluminum giant gave $0.37 EPS on $7.4 Billion in revenues. First Call had this quarter estimates at $0.48 EPS and $7.2 Billion.  To show how different 2008 is from 2007, this compares to $0.75 EPS and $7.9 Billion during the same quarter last year.

Currency took off $0.08 from EPS according to the company.  The first note we’d make there is that this is one massive currency charge and we’d probably want to hear a better explanation than this.

You’d never know this was a metals play in this environment, mainly because much of their benefit is finished products and it has to import so much back into the U.S.  The weak dollar, poor industrial demand and well-above plan energy costs are all listed as culprits (get used to those three excuses this earnings season).

Shares closed down 4% at $37.44 despite the Goldman Sachs team getting more positive right ahead of earnings this morning.  Its 52-week trading range was $26.69 to $48.77.  Shares were halted on the news.

As a reminder, ALCOA did recently close on a sale of packaging/consumer operations.  That may make at least some of the operational comparisons harder to make.

Jon C. Ogg
April 7, 2008

Posted on: April 7, 2008 – 3:37 pm in Earnings, Metals,

Boeing (BA) Hacks Off A Wing

Boeing (BA) will never finish its 787 Dreamliner, not at least during the lifetime of anyone over 40. The company said it would make a statement about it plans for the plane this Wednesday. It will almost certainly say that the launch of the 787 is off-track again.

According to Reuters "Such a setback would be the third major change to the original schedule and put first delivery of the lightweight, fuel-efficient aircraft as much as 18 months behind the original target."

By the time the plane is ready, fuel will be too expensive to fly it anyway.

Douglas A. McIntyre

Posted on: April 7, 2008 – 3:33 pm in Aerospace,

AMD’s (AMD) Death Rattle

AMD (NYSE: AMD) said things did not go its way in Q1. No one should be surprised. AMD has not had a good quarter in over two year. How CEO Hector Ruiz keeps his job is still the equivalent of a state secret.

AMD said that that it expects revenue for the first quarter ended March 29, 2008 to be approximately $1.5 billion, a 22 percent increase compared to the first quarter of 2007, and down 15 percent compared to the fourth quarter of 2007. The decrease is due to lower than expected sales in each and every one of its businesses.

Sometime between brushing his comb-over and flossing his teeth yesterday morning, Ruiz decided to fire 10% of the poor souls who work for him.

The company has set a new standard for heinous corporate behavior. But, AMD may not be around, at least not as an independent company, for very long. If it posts a couple of more weak quarters, the $5 billion of debt, most of it taken on when the firm bought graphics chip company ATI, will sink the operation. Debt service is always hard to make when a company has negative cash flow.

AMD is up against larger rival Intel (INTC), but it is also fighting a PC market which has started to grow very slowly because the economy is off. There is no rising tide to save AMD, and Intel has pummeled it with new chips for servers and PCs.  AMD has almost no good options. It has already made several sets of employee lay-offs. There is bound to be a limit to that. So, the company may face selling itself or heading to a major reorganization later in 2008.

All of the planned firings sent the stock down after hours yesterday. Shares trade at $6.34, down from over $35 two years ago.

Douglas A. McIntyre

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Posted on: April 7, 2008 – 3:24 pm in Earnings Warning, ,

The 52-Week Low Club (EVVV)(GLS)(RVBD)

4 Kids Entertainment Inc. (NYSE: KDE) not looking so hot, hitting new low of $8.97 today. The 52-week range is $9.33 to $19.90.  Shares bottomed at  $8.94

ev3, Inc. (NASDAQ: EVVV) decreased its quarter outlook today, hitting a new all-time low of $7.32. The medical device maker has a 52-week range of $7.36 to $21.54. Shares bottomed at $7.32

Genesis Lease Limited (NYSE: GLS) down to a new low of $13.39 today. This aircraft leasing company isn’t flying so high. The 52-week range is $13.91 to $28.61. Shares bottomed at $13.39

Lincare Holdings Inc. (NASDAQ: LNCR) down on with the rest on no new developments. Shares hit a new low of $27.03. The 52-week range is $27.31 to $40.91. Shares bottomed at $27.

Riverbed Technology, Inc. (NASDAQ: RVBD) hit a new low today on no news. This wide-area distributed computing solution provider needs to look for better solutions. Shares closed down by $12.33 on a 52-week range of $12.71 to $52.81.

Salary.com (NASDAQ: SLRY) also feeling the market woes. With so many losing jobs, no wonder a people aren’t buying compensation software.  The company hit a new low of $5.27 on a 52-week range of $5.35 to $16.32. Shares closed down at $5.35.

Douglas A. McIntyre

Posted on: April 7, 2008 – 3:02 pm in HI/LOW, , , , , ,

Auction-Rate Securities Knife Palm (PALM)

In what is likely to become almost a routine announcement for public companies, Palm (NASDAQ: PALM)  revised its fiscal third quarter loss.

The device company took at write-down for the value of auction-rate securities carried on its balance sheet. The haircut was $25 million.

The Palm loss jumped from $32 million to $57 million.

Palm may have to take another write-down on the paper in the next quarter if the value of these auction-rate notes, which now rarely trade, falls further.

Douglas A. McIntyre

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Posted on: April 7, 2008 – 2:35 pm in Earnings Warning,

Journal Register Finally Yells ‘Uncle!’ (JRC)

Journal Register Company (NYSE: JRC) has finally announced today that it hired Lazard Freres & Co. LLC as its financial advisor to help the company evaluate strategic options.

It noted concern over the state of the economy and the environment for print advertising.  Frankly, this is a boondoggle of epic proportions.  To top it off, last week it was given potential NYSE delisting notice.

The company tries to make at least some shinola out of an the current environment:

  • It generated $90.3 million of EBITDA in 2007, above its $38.5 million interest expense; reduced debt by $105 million during 2007; has no scheduled principal payments due until Q2-2009.

We have covered the woes of this company in our "Old Media/New Media" weekly newsletter as one of the in-trouble companies for longer than we care to recall.  The "alternatives" left at this point are few and far between now that management has waited this long to hire an advisor.

Shares are down a massive 64% today at $0.185.  Before today, its 52-week trading range was $0.31 to $6.48.  In 2004, this was a $20.00+ stock.  But since that date, this company has been on a crash course to zero.

Jon C. Ogg
April 7, 2008

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and he does not own securities in the companies he covers.

Posted on: April 7, 2008 – 1:49 pm in Media,

Digital Domain Sets IPO Terms (DTWO)

Digital Domain submitted an amendment to its IPO filing this morning. The filing for the offering shows a maximum aggregate offering price of $96.6 million at a maximum offering share price of $14.00 per share for 6 million shares. An actual range has been set at $12.00 to $14.00 per share for this IPO.  The company has applied to trade on the NASDAQ Global Market under the ticker “DTWO.” The underwriters are listed as Thomas Weisel Partners, Oppenheimer and Co., William Blair and Company, Merriman Curhan Ford and Company, and GunnAllen Financial, Inc.

California-based Digital Domain is a leading award-winning visual effects and animation company for movies, television advertising, video games, and interactive visual media. Their technology has been used in films such as Titanic, Apollo 13, The Day After Tomorrow, and The Fifth Element and video games like Halo 3.  They generated pro-forma year revenues of $66 and $79 million in 2006 and 2007, respectively.

You can join our open email distribution list to hear about buybacks, special financings, secondary offerings, M&A, and more previews for other special situations.

Given the slowdown in consumer spending, companies could be looking to Digital Domain for their advertising. We’ll look to see how hot this IPO comes out.

Rachel Lopez
April 7, 2008

Posted on: April 7, 2008 – 12:09 pm in Entertainment, IPOs,

New Search Share Numbers Support Microsoft (MSFT) Bid

New figures from HitWise support the Microsoft (MSFT) contention that Yahoo!’s (YHOO) share of the search market is shrinking ,making it less likely that the portal can compete against Google (GOOG) on its own.

The data, which covers the month of March shows Google’s share of US search going from 66.44% in February to 67.25% last month. In March 2007, Google’s share was 64.13%.

For Yahoo!, the slide has been fairly sharp. It number for last month was a 20.29% share, down from 20.59% in February and 21.26% in March 2007.

It is a trend that seems to be as inexorable as it is unnerving for Yahoo! shareholders.

Douglas A. McIntyre

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Posted on: April 7, 2008 – 10:57 am in Internet, , ,

Starbucks (SBUX): Individual Store Problems Hard To Fix

Perhaps Starbucks (SBUX) has managers who cover small regions of 100 stores each or "spies" from market research companies who visit a certain percent of all the coffee chain’s outlets each month. Management can’t get to all of the more than 7,000 stores in the US part of the chain, but it was not so long ago that Sam Walton hit half of all US Wal-Mart (WMT) locations every year.

The story about the sharp drop in Starbucks shares has been written too many times. It is enough to say that the shares are down 50% due to slowing in US store sales.

The question now is, what does Starbucks do going forward? The company’s CEO and founder Howard Schultz claims that he will re-invent the company so that the experience at each store is better. But, quality control is not a national issue. Ultimately, it is war fought location-by-location.

Our conversations and observations based on visiting to about 50 locations indicates that there is a very wide disparity of customer service, product quality, and store appearance. The stores which are dirty, the stores where employees are slow or less than friendly, and the stores where the actual quality of the product is below the company’s standards are an Achilles Heel for the entire chain. Starbucks had a "retraining" day a month ago, but at most locations it went on for a few hours, which is not enough to address the problems.

Management of huge retail chains is, in essence, management which has to be largely local and well-monitored. Starbucks can send its stores new brewing machines and can take some of the sandwiches off the shelves. The company can offer free WiFi and special deals on Apple (AAPL) iTunes.

The customers who walk into sub-standard stores will not be back. There is nothing to show that SBUX is doing anything of substance to solve that problem

Douglas A. McIntyre

Posted on: April 7, 2008 – 10:48 am in Retail, ,

Biotech Busine$$ Daily (APPY, LIFC, KCI, MNOV, MCU)

AspenBio Pharma (NASDAQ: APPY) entered into a definitive agreement with Novartis Animal Health for AspenBio’s recombinant single-chain bovine products for animals. Shares are up 4% to $6.24.

LifeCell (NASDAQ: LIFC)is to be bought by Kinetic Concepts (NYSE: KCI) for $1.7 billion in cash. The offer is for $51 per share and will allow Kinetic to access the rapidly expanding biosurgery market. Shares of LifeCell are up almost 17% to $50.44 on a 52-week range of $24.53 to $48.28. Kinetic is up almost 6% to $49.79 on a 52-week range of $40.90 to $66.77.

MediciNova (NASDAQ: MNOV) released clinical results on two-year Phase II study of MN-166 on multiple sclerosis. The study showed positive results however the market is not reacting accordingly. Shares are down $0.19, 5%, to $3.81 on a 52-week range of $3.27 to $10.71.

Medicure (AMEX: MCU) continuing to rise on positive results on Aggresat, a tirofiban, released last week. The results show that use of the treatment significantly improved heart attack survival. Today, shares are up over 17% to $0.10 on a 52-week range of $0.05 to $1.64.

Rachel Lopez
April 7, 2008

Posted on: April 7, 2008 – 10:30 am in Biotech, , , , ,

Legacy Reserves Ready To Tap Financial Markets (LGCY)

Legacy Reserves LP (NASDAQ: LGCY) has filed to offer up to $500 million in limited partnership interests and debt securities.

The independent oil and natural gas limited partnership acquires and develops properties in the Permian Basin and Mid-continent regions of the U.S.

Their current market cap sits at $614 million, making this offering relatively large, nearly doubling the current market cap (depending on the break-down of units). So far its shares (units) are up almost 1% on thin trading volume to $20.88 in early morning trading. The 52-week trading range is $17.95 to $30.42.

Rachel Lopez
April 7, 2008

Posted on: April 7, 2008 – 10:00 am in Oil & Gas, Secondary Offering,

Intrepid Potash Sets IPO Terms (IPI)

Intrepid Potash, Inc. is getting closer to its upcoming IPO. The company set the terms in its amended IPO filing this morning. The filing shows an offering of some 24 million shares at a maximum proposed share price of $26.00, totaling $717 million maximum aggregate proceeds. The actual price range for shares is listed as $24.00 to $26.00 for the IPO and the company has applied to trade on the New York Stock Exchange under the ticker "IPI."

The underwriting group is listed as Goldman, Sachs & Co., Merrill Lynch & Co., and Morgan Stanley.  Co-managers are listed as RBC Capital Markets and BMO Capital Markets.

We previously discussed Intrepid’s business and market position from an earlier filing.  Given the gains seen currently and the strong guidance in anything tied to the fertilizer or potash industry, this IPO is one we’d expect to be oversubscribed.

You can join our open email distribution list to hear about other IPO’s, back door plays into IPO’s, spin-offs. break-ups, and other special situations we frequently preview.

Jon C. Ogg
April 7, 2008

Posted on: April 7, 2008 – 9:38 am in Agriculture, IPOs,

2007 Share Buybacks A Record, Hard To Expect Repeat In 2008

One topic we cover at 247WallSt.com with regularity is share buybacks from major companies.  While we are starting to see a slower pace in fresh buyback announcements compared to 2006 and 2007, the rate that companies are buying back shares continues to be very high.

Standard & Poor’s, the world’s has released a preliminary S&P 500 stock buyback report on repurchase activity for 2007.  This shows that S&P 500 Index companies repurchased a record $589 billion in shares during 2007.  What is odd is that this is much larger by more than double the 2007 cash dividends S&P counted of $246 billion.  It is also marginally higher than the "2007 As Reported GAAP earnings" which were listed as some $587 billion. 

This was not only a record according to S&P, but a sharp rise from the years before. The 2007 rate of $589 billion in share repurchases equates to 36.4% increase over the $432 billion that S&P said was spent in 2006.  It represents a 350% increase from $131 billion that S&P recorded back to 2003.

You can join our open email distribution list to hear about buybacks, special financings, secondary offerings, M&A, and more previews for other special situations.

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Posted on: April 7, 2008 – 9:09 am in Stock Buybacks, , , , , , ,

Motorola (MOT) Caves To Icahn Who May Find Little Value Left

Carl Icahn and friends will get two seats on the Motorola (MOT) board, ending fight by the company to keep him out. According to Motorola William R. Hambrecht, founder, chairman and chief executive officer of WR Hambrecht + Co. and co-founder of Hambrecht & Quist, and Keith Meister, a managing director of the Icahn investment funds and principal executive officer of Icahn Enterprises, will be nominated for election to Motorola’s Board of Directors at the 2008 Annual Meeting of Shareholders.

As part of the settlement agreement, all pending litigation between Motorola and Carl Icahn will be dismissed

Icahn may not be happy with what his representatives see when they get on board. Motorola’s handset division is shrinking so fast that its revenue will be well below the $19 billion it did last year and its loss should be up sharply from the $1 billion deficit for that same period.

The MOT handset business may only be worth a couple of dollars a share, meaning that the company could be overvalued at its current share price.

Douglas A. McIntyre

Posted on: April 7, 2008 – 8:18 am in Wireless,

Goldman Sachs Raises ALCOA Estimates Ahead of Earnings (AA)

ALCOA, Inc. (NYSE: AA) is seeing shares trade higher ahead of its earnings report after today’s close.  Goldman Sachs appears to be the initial reason as it has raised its targets on the Aluminum giant.

For this year, Goldman Sachs raised the estimates from $1.90 to a new $2.95 EPS and for next year it raised targets from $2.90 to $3.70 EPS.  Both estimates are now above consensus.

First Call has consensus earnings before the call at $2.92 EPS for this year (Dec-2008) and $3.49 EPS for fiscal Dec-2009. 

This is also part of a broader aluminum call as Goldman Sachs raised 2008 aluminum targets from $1.12/pound to $1.31/pound, and 2009 aluminum targets from $1.21/pound to $1.33/pound.

First Call has this quarter estimates at $0.48 EPS for after today’s close.  As a reminder, ALCOA has a mixed earnings history that is not usually indicative of the broader economy nor for metals in general.

Jon C. Ogg
April 7, 2008

Posted on: April 7, 2008 – 7:43 am in Analyst Calls, Earnings, Metals,

Alliant Techsystems Scores Another Huge Ammo Order (ATK)

Alliant Techsystems (NYSE: ATK) is indicated higher this morning after it has received an additional $415.6 million in small-caliber ammunition orders and modernization funding.  The contracts were awarded by the U.S. Army Sustainment Command in Rock Island, Illinois.

Interestingly enough, ATK said it delivered 1.4 billion rounds of military small caliber ammunition in fiscal 2008 and expects roughly the same in 2009.  This plant order (Lake City) has been expanded to have the capacity for 1.6 Billion rounds per year.

The size of this contract compares to about $4.1 Billion in annual revenues.

Jon C. Ogg
April 7, 2008

Posted on: April 7, 2008 – 7:25 am in Defense,

Top 10 Pre-Market Analyst Calls (AAPL, AMAT, BMC, COLM, SCOR, KLAC, NVLS, TJX, SONC, TIN)

These are the top analyst calls that 247WallSt.com is focusing on this Monday morning:

  • Apple (NASDAQ: AAPL) Raised to Overweight from Market Weight at Thomas Weisel.
  • Applied Materials (NASDAQ: AMAT) Cut To Neutral from Outperform at Credit Suisse.
  • BMC Software (NYSE: BMC) Cut to Neutral from Buy at Goldman Sachs.
  • Columbia Sportswear (NASDAQ: COLM) Cut to Sell From Hold at Citigroup.
  • ComScore(NASDAQ: SCOR) Raised to Buy from Hold at Jefferies.
  • KLA Tencor (NASDAQ: KLAC) Raised to Buy from Hold at Citigroup.
  • Novellus Systems (NASDAQ: NVLS) Raised to Equal-weight from Underweight By Lehman.
  • TJX (NYSE: TJX) Cut to Hold from Buy at Citigroup.
  • Sonic (NASDAQ: SONC) Started as Overweight at Lehman Brothers.
  • Temple-Inland (NYSE: TIN) Raised to Buy from Hold at Citigroup.

Jon C. Ogg
April 7, 2008

Posted on: April 7, 2008 – 6:56 am in Analyst Calls, , , , , , , , , ,

Yahoo! (YHOO) Responds To Microsoft (MSFT) Offer

Yahoo!’s (NASDAQ: YHOO) response to Microsoft’s (NASDAQ: MSFT) can best be described as self-serving. In a letter to Redmond, made public this morning, Yahoo!’ board reasons "Our position is simply that any transaction must be at a value that fully reflects the value of Yahoo!, including any strategic benefits to Microsoft, and on terms that provide certainty to our stockholders."

The letter references Yahoo!’s three year projections for its business. The numbers in this are aggressive and no man, woman, or child who has seen them believes that they can hold up, especially in a slowing economy. The Yahoo! board also says that the company is in conversation with other parties, but there is no evidence that any of these talks are far along. None of the firms are named, which disclosure rules would probably require if the conversations were in final stages. The board cannot come up with a rationale explaining how any of these deals is worth more than the Microsoft offer.

The Yahoo! board also claims that "we recently reaffirmed our Q1 and full year guidance, which is a testament to our ability to perform in line with our expectations despite the current economic environment." But, the range of guidance given by the company at the end of the last quarter is very broad, and Yahoo! is not saying that it will come in at the high end of those forecasts.

The Yahoo! board has done the company no favors. It has tempted Microsoft to lower its offer or simply walk away. A protracted proxy fight will pull both management and the board away from fixing the company.

Yahoo! has been broken for over three years now. It cost the company’s former CEO, Terry Semel, his job. Replacement Jerry Yang has not done a single thing to show that he is any better as a chief.

Yahoo! has not a single legitimate card to play in turning Microsoft down.

Douglas A. McIntyre

Posted on: April 7, 2008 – 5:56 am in Mergers and Buy Outs, ,