Daily Archives: May 10, 2008

China Gets Venezuela Oil Deal, Benefits US

The US has plenty of problems with Venezuela’s mentally troubled dictator Hugo Chavez. The most recent confrontation has been over Chavez financing guerrillas in neighboring Columbia.

While the two nations throw bricks at one another, China has slipped in a side door and cut a huge refinery deal with the Latin American country. Under the terms about 400,000 barrels a day will be produced in Venezuela’s Orinoco Belt. The new refinery there will be built by the Chinese.

According to Bloomberg "The venture between Petroleos de Venezuela SA and China National Petroleum Corp. will pump oil from an area called Junin 4."

At first pass, the deal might seem bad for the US, but the opposite may be true. If Venezuela and China can bring new supply and refinery facilities online, it cuts supply which the most populated country in the world would have to get somewhere else. That may serve to take some upward price pressure off of oil prices over time.

It is the first favor Venezuela has done the US since Chavez was elected.

Douglas A. McIntyre

Posted on: May 10, 2008 – 4:31 pm in Oil & Gas

News Corp (NWS) Walks On “Newsday” Bid, Cablevision (CVC) Shareholders Likely To Get Fleeced

Rupert Murdoch of News Corp (NWS) pulled his $580 million bid for large Long Island paper "Newsday" currently owned by The Tribune Company.

Cablevision (CVC), which has a large portion of its subscriber base on Long Island, has bid $650 million

The turn of events is extremely odd. Murdoch could have saved tens of million of dollars each year by combining key functions at "Newsday" with his NYC daily "The New York Post". The deal would have made both papers much more profitable.

Cablevision gains no ready economies of scale by combining a cable system with a newspaper. The company’s bid is much too high and stands to yield very little benefit for the firm.

Cablevision’s shareholder are likely to knock the stock down and, if the deal goes through, shares could stay down for a long time.

Posted on: May 10, 2008 – 4:18 pm in Old Media, ,

Wal-Mart Earnings To Show Recession’s Best Friend (WMT, TGT)

Wal-Mart Stores Inc. (NYSE: WMT) is set to report earnings this coming Tuesday morning before the open.  The company already gave an approximate revenues number of $94 Billion.  As you will see below, Wall Street is under what the company already gave for guidance, and it looks like even the highest estimate is right under $93.7 Billion. 

The retail behemoth’s estimates from First Call are $0.75 EPS on $92.44 Billion in revenues.  Estimates for next quarter are $0.81 EPS on $99.7 Billion in revenues, and Fiscal Jan-2009 estimates are $3.44 EPS on $405.27 Billion in revenues.  Wal-Mart already gave its same store sales at +3.2% in April, and it forecast same store sales for May on an ex-fuel basis to come in at 0% to 2%.

Target Corp. (NYSE: TGT) will report earnings the following week.  But last week, the April retail numbers showed a +3.1% reading for same store sales during the month of April.  That was slightly under its planned range.  Target also gave a tepid May forecast with sales projected to be in a range of -1% to +1%.

So why do we compare Wal-Mart to Target?  Target was the real thorn in Wal-Mart’s side from 2002 to 2007.  But the economic environment is working in Wal-Mart’s favor.  As consumers face the pinch from tighter finances, higher fuel costs, and higher food costs, all of a sudden it’s Wal-Mart’s advantage.  That won’t last forever, but that’s how it stands now.

Wal-Mart managed to close marginally up with a $0.02 gain to $57.18 on Friday.  It looks like only 6 other components of the Dow Jones Industrial Average closed up Friday.  Wal-Mart is less than $2.00 from its year highs, and are 35% higher than the 52-week low of $42.09.  The stock is also up almost 21% since the close of 2007.  Analysts have an average price target of about $59.00, so Wall Street is going to have to raise forecasts and estimates or we’ll start hearing about how the stock is almost "fully valued" and the like. 

If those First Call estimates were updated properly, Wall Street is artificially low compared to the revenue projections for this quarter that the company just gave on Thursday.

Jon C. Ogg
May 10, 2008

Posted on: May 10, 2008 – 9:12 am in Earnings, Retail, ,

Sirius & XM Investors Hunker Down For Earnings (SIRI, XMSR)

Monday may be quite an interesting day for satellite radio investors.  Sirius Satellite Radio Inc. (NASDAQ: SIRI) and XM Satellite Radio (NASDAQ: XMSR) will both report earnings.  While everyone will be breaking down the subscriber additions and the marketing costs, you know everyone wants to know what the companies each think is going on inside the FCC merger approval process. 

Sirius Satellite Radio Inc. (NASDAQ: SIRI) will have its results on Monday after the close, with a conference call to follow at 4:30 PM EST.  First Call has estimates at -$0.07 EPS on $272.3 million in revenues.  For the coming quarter estimates are -$0.08 EPS on $289.1 million in revenues, and for Fiscal Dec-2008 estimates are -$0.30 EPS on $1.17 Billion in revenues.  With a $2.73 close on Friday, shares are about 15% off of the 52-week low of $2.36.

XM Satellite Radio (NASDAQ: XMSR) is reporting earnings Monday morning, and its conference call will be at 10:00 AM EST.  First Call has estimates at -$0.39 EPS on $313 million in revenues.  Estimates for the following quarter are -$0.43 EPS on $324.2 million in revenues, and for Fiscal Dec-2008 the estimates are -$1.70 EPS on $1.34 Billion in revenues.  With a 4% drop on Friday and a close of $11.80, shares are still up 22% from the 52-week low of $9.62.

With a proposed ratio of 4.6 shares of Sirius per XM share, that wouldmerit a full merger value today of $12.55.  This means that there iscurrently only a 6.4% merger-arb spread at today’s prices.

While the companies may continue on their comments about the merger, it will be perhaps more interesting to get the body language on the company operations to see if there is any underlying body language showing that either company gives its standalone presentation. Both have noted they would be light on guidance until after they get merger approval.

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Jon C. Ogg
May 10, 2008

Jon Ogg is a producer and editor of the "10 Stocks Under $10" weekly newsletter; he does not own securities in the companies he covers.

Posted on: May 10, 2008 – 8:18 am in Earnings, Satellite, ,