Daily Archives: June 17, 2008

Gannett (GCI): USA Today Ad Figures Implode (MHP)(GCI)(NWS)(TWX)(WPO)

Gannett (GCI), the country’s largest newspaper company posted its revenue for the May period.

Advertising revenue dropped 14.3% to $347 million. This was an acceleration from the year-to-date rate of decrease of 11%.

Real estate classified was off over 30%.

Most notable was the sharp decrease in ad revenue at USA Today, the country’s largest newspaper by circulation. Sales were off 18.4% compared to the previous year as ad pages fell from 324 to 260, a 20% decline.

Because of the national nature of its distribution, USA Today’s trends are likely to mirror those of publications including The Wall Street Journal (NWS), Time (TWX), Newsweek (WPO), and BusinessWeek (MHP).

Douglas A. McIntyre

Posted on: June 17, 2008 – 5:09 pm in Old Media, , , , ,

Banks And Airlines Battle To Find Bottom (WB)(WF)

Late news from the bank and airline industries found analysts in surly moods.

Goldman Sachs issued a report saying US banks will have to raise as much as another $65 billion. According to Reuters, "The new capital would be on top of $120 billion already raised by the industry." The brokerage cut its price targets on sixteen banks including Wachovia (WB) and Washington Mutual (WM).

Not to be outdone, the airline industry said it would lose $10 billion this year. The Air Transport Association said total fuel costs for domestic carriers will hit $61 billion.

Douglas A. McIntyre

Posted on: June 17, 2008 – 4:29 pm in Economy, ,

The 52-Week Low Club (CNB)(WB)(GHS)(ZION)

The Colonial BancGroup (CNB) Concerns about balance sheet. Down to $4.12 from 52-week high of $25.50.

Wachovia (WB) The bigger the bank, the harder its falls. Drops to $16.96 from 52-week high of $54.54.

Gatehouse Media (GHS) Newspaper. Falls to $2.73 from $19.60.

Zions Bancorporation (ZION) Yet another bank stock sinks. Drops to $33.42 from 52-week high of $71.43.

Douglas A. McIntyre

Posted on: June 17, 2008 – 2:58 pm in HI/LOW, , , ,

Blank Check IPO Filed: Navios Maritime Acquisition (NM, NNA)

Navios Maritime Acquisition Corporation  is a special purpose acquisition company, or SPAC/Blank Check company, that has filed to come public via an IPO.  It has filed to sell some 22,000,000 units, with each unit representing one share of stock and one warrant with a $7.00 strike price, and has the applied ticker of "NNA" on the NYSE.

Navios Maritime Holdings Inc. (NYSE: NM) has committed to purchase from us 7,600,000 warrants at $1.00 per warrant for a total purchase price of $7,600,000, which will occur simultaneously with the completion of this offering.

The lead underwriters are listed as JPMorgan and Deutsche Bank Securities, and another company called S. Goldman Advisors LLC is listed as well.

Navios formed under the laws of the Marshall Islands for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition, stock purchase or other similar business combination, one or more assets or operating businesses in the marine transportation and logistics industries, with a primary focus on target businesses outside of the drybulk shipping sector.

Jon C. Ogg
June 17, 2008

Posted on: June 17, 2008 – 2:24 pm in IPOs, ,

TSX Lists New Emerging Potash Player (XOM)

The Toronto Stock Exchange has granted a final approval for an emerging potash player to list its shares on the TSX.  Potash One Inc. will trade under the ticker "KCL" on the TSX starting on Wednesday, June 18, 2008.  It looks like it is venture listed already because its website has the full financial disclosures and you can see its most recent balance sheet.  As of that date the company listed that it had 27.236 million weighted average shares outstanding.

The Company holds an option to acquire 100% interest in a 97,240 acre Potash Subsurface Exploration Permit and owns 100% of three other Potash Subsurface Exploration Permits covering 239,103 acres that are contiguous to the Legacy Project in Saskatchewan, Canada. The Legacy Project was previously explored by Imperial Oil Ltd., now part of Exxon Mobil (NYSE: XOM) and Lumsden Potash Corporation and is adjacent to one of the largest producing solution potash mines in the world.

Jon C. Ogg
June 17, 2008

Posted on: June 17, 2008 – 1:49 pm in Agriculture, IPOs, , ,

T. Boone Pickens Still High On Oil… As Are All Speculators

Everyone wants to know if speculators are driving up oil prices.  The answer from the speculators is "No, absolutely not! (wink, wink)" when they are asked.  The Senate Energy and Natural Resources Committee held testimony today with billionaire T. Boone Pickens.

Reuters has run a full excerpt of some of Pickens’ comments.  Most interestingly, Pickens noted that the world production has topped out at 85 million barrels per day with the United States using some 21 million barrels, and total demand being 86.4 million barrels per day.  He also said that increased oversight of the oil markets from the Commodity Futures Trading Commission was a waste of time.  That is an interesting comment when you consider that the head of the CFTC just told lawmakers yesterday that speculators account for a growing share of trading in U.S. oil markets and make up about 70% of trading in the key U.S. oil futures contract. 

247WallSt.com watches its own oil mavericks, particularly Mr. Pickens.  But let’s take this a bit further.  These same imbalances are the same numbers over the last year (except we thought Pickens used the 87 million barrels per day in global demand).  So it is the same exact forces at work that have been at work last year.  This is also much farther than oil  It is corn, it is coal, it is natural gas.

What price will price kill demand?  Pickens already said he believes you’ll see $150 oil. That is likely a $4.40 average national average per gallon at the pump.  When SUV drivers or large sedan drivers are paying north of $100.00 to "fill ‘er up" it should start to cut demand a bit.  Behavior is changing, but only gradually… and again, only a bit.  Your recycling efforts are only worth so much if you burn a gallon on the round trip to recycle.

Even in Houston where oil is king there is at least starting to be some modified behavior.  It is minimal but it is the comments about driving distances being too far and drivers being more efficient on their driving trips.  This change might only end up being housewives and soccer moms carpooling in from the burbs to go to Saks and Neiman Marcus, but it is a start. 

I was just on CNBC today covering the imbalance that the high energy prices are having on transportation stocks, particularly that of the airlines.  Our number one way to play high energy prices isn’t trying to guess and hope which airline or trucker can hold out the longest.  We still prefer alternative energy as the sector to go to for this.  This is why three of our largest gainers in the "10 Stocks Under $10" newsletter have seen such large returns, with one being Capstone Turbine up some 200% from November.  Until that demand gets broken or until a replacement fuel is out there, it’s the spot to be if oil goes to $150 or goes back to $100 per barrel.

Jon C. Ogg
June 17, 2008

Posted on: June 17, 2008 – 1:25 pm in Oil & Gas

Eleven Billion Videos Viewed In April, And No One Made A Dime (GOOG)(NWS)(CSCO)

comScore reports that eleven billion videos were watched in the US in April. Of those 4.2 billion were watched on Google (GOOG) sites, which mean YouTube. No one on Wall St. thinks YouTube makes any money. The poor quality, user created content of dogs doing magic tricks and Nascar clips are not compelling to major marketers.

Fox Interactive, part of News Corp (NWS) was in second place with 558 million videos viewed for the month. Most of those are from MySpace, the social network for people in state prisons and agoraphobics. The lion’s share of these people are also in the amateur video business and use cellphones to collect the content that they then post on their personal pages.

Cisco (CSCO) recently observed that video traffic on the internet would explode between now an 2011. If most of that content remains personal material posted by people who like to see their own creations online, there will be large costs to host and transport the data, but getting advertiser interest will never materialize.

Douglas A. McIntyre

Posted on: June 17, 2008 – 11:28 am in Internet, , ,

Oil & Gas Hedges Galore (APL, TSO, PXP)

It looks like Joe Public isn’t the only one who thought oil and gas prices were through the roof.  It seems that some of the big boys started locking-in prices that seemed extremely high.  This is called hedging or collaring, but we have seen fresh announcements from teh likes of Atlas Pipeline Partners LP (NYSE:APL), Tesoro (NYSE:TSO), and Plains Exploration and Production (NYSE:PXP).

Atlas Pipeline Partners LP (NYSE:APL) announced yesterday that it would discontinue its current hedging strategy in favor of returning to a strategy it had followed until June 2007. The company had hedged about 86% of its natural gas liquids production using crude oil derivative contracts. Because crude oil prices are skyrocketing, the hedges have become "less effective." The terminated contracts run through the next six quarters. Atlas raised its guidance from $1.90-$2.00 per common unit to $2.00-$2.20. That’s the good news.

The not-so-good news is that Atlas will take a charge against earnings of about $10 million for the second quarter, with a total dollar loss on the derivative contracts of approximately $250 million. The stock price is up less than 0.1% in early trading.

Tesoro (NYSE:TSO), an independent refiner/marketer, has also closed its crude oil derivative positions and expects a charge against earnings this quarter of $125 million. The company also lowered guidance by $0.30-$0.50, blaming the change on high energy costs. The refining business is not getting any easier.

Finally today, Plains Exploration and Production (NYSE:PXP) announced that it had acquired crude oil puts on 40,000 b/d of production for 2009 and 2010. The average deferred premium plus interest on the 2009 contracts is $6.19 per barrel and the strike price is $106.16 per barrel. The 2010 contracts carry a strike price of $111.49 per barrel, and an averaged deferred premium plus interest of $12.08 per barrel. Plains also acquired $10-$20 collars on 150 million cubic feet of natural gas production for 2008 and 2009. The company plans to use marked-to-market accounting for these hedges.

There are a couple of morals to these stories. First, try not to be a refining/marketing company. That one’s pretty obvious. Second, crude oil derivative contracts are not effective hedges in the current market. Their cost is too high and the continuously rising cost of crude almost guarantees that the hedge will be ineffective. Expect more of this kind of news from almost every oil and gas company that hedges physical barrels.

Paul Ausick
June 17, 2008

Posted on: June 17, 2008 – 9:59 am in Oil & Gas, , ,

Goldman (GS) Is Golden Again

Goldman Sachs (GS) announed EPS of $4.58, higher than consensus expectations of $3.42. Revenue also beat coming in at $9.42 billion against Wall St.’s guess of $8.74 billion.

Net revenues in Investment Banking were $1.69 billion, 2% lower than the second quarter of 2007 and 44% higher than the first quarter of 2008

Net revenues in Trading and Principal Investments were $5.59 billion, 16% lower than the second quarter of 2007 and 9% higher than the first quarter of 2008.

Net revenues in Asset Management and Securities Services were $2.15 billion, 18% higher than the second quarter of 2007 and 5% higher than the first quarter of 2008.

Compensation and benefits expenses were $4.52 billion, 7% lower than the second quarter of 2007, commensurate with lower net revenues

GS shares were higher in pre-market trading.

Posted on: June 17, 2008 – 7:30 am in Uncategorized,

Best Buy Surprising Good Show (BBY)

Best Buy Co, Inc. (NYSE: BBY) has just posted earnings.  The electronics retail giant posted $0.43 EPS on $8.99 Billion in revenues.  First Call had estimates of $0.37 EPS on $8.587 Billion in revenues.  The company’s same store sales also showed a 3.7% gain.

As far as looking ahead, the company sees $3.25 to $3.40 EPS for fiscal 2009 (excluding new venture costs) with a 1% to 3% same store sales growth and revenues are budgeted at $43 to $44 Billion.  Those estimates for Fiscal Feb-09 are $3.26 EPS and $43.9 Billion in revenues.

Interestingly enough, it looks like its Best Buy stores and "Five Stars" store openings in China are being lowered for this fiscal year.

If you have been expecting a slow retail environment or an actual slowdown then these numbers look great.  Critics may point to slightly lower gross profit as a percentage of revenues (23.7% vs. 23.9%), lower operating income as a percent of revenues (3.1% vs. 3.4%) and a very slight gain in SG&A expenses as a percentage of revenues (3.1% vs 3.4%).  But in today’s environment with a tough consumer and with materials and transportation costs through the roof, these numbers look rather strong.

Shares closed at $45.88 on Monday and were seen at $46.40 on last look at 8:10 AM EST.  The 52-week trading range is $38.75 to $53.90.

Jon C. Ogg
June 17, 2008

Posted on: June 17, 2008 – 7:15 am in Consumer Electronics, Earnings, Retail,

Answers Raises Cash (ANSW)

Answers Corporation (NASDAQ:ANSW) has entered into agreements for a private placement to raise cash up to $13 million via the sale of convertible preferred stock and warrants to Redpoint Ventures.  Thomas Weisel Partners LLC acted as lead-placement agent and Canaccord Adams acted as co-placement agent for the offering.

The transaction was listed as yesterday and consisted of $6 million of series A convertible preferred stock, convertible into 1,333,333 shares of common stock at a conversion price of $4.50 per share, with 50% warrant coverage at an exercise price of $4.95. Redpoint was also issued a second tranche warrant, exercisable over the next 12 months, to purchase up to an additional $7 million of series B convertible preferred stock, convertible into 1,272,727 shares of common stock at a conversion price of $5.50 per share, with 50% warrant coverage at an exercise price of $6.05.

Answers Corp. closed yesterday at $3.92, and its 52-week trading range is $3.30 to $13.40.  prior to this offering, its market cap was a mere $30.8 million.

Answers is the creator of the answer engine offering Answers.com(TM) and WikiAnswers.com(TM).  Redpoint is a Menlo Park, CA, based venture capital firm that specializes in early stage and growth capital investments for the Internet and technology sectors.  Redpoint’s Allen Beasley will join the board of directors at Answers and the firm will get a second board seat if it exercises its second financing.

You can join our open email distribution list to hear about other mergers, IPO’s, secondary offerings, private financings, activist investors, and more.

Jon C. Ogg
June 17, 2008

Posted on: June 17, 2008 – 6:59 am in Internet, Secondary Offering,

Top 10 Pre-Market Analyst Calls (BMC, CNK, CTXS, CME, CTCM, DHT, RDEN, HOV, TPX, WLL)

These aren’t going to be the only impact analyst calls this Tuesday morning, but these are ten of the calls we are focusing on very early this morning:

  • BMC Software (NYSE: BMC) Started as Neutral at UBS.
  • Cinemark (NYSE: CNK) cut to equal-weight at Morgan Stanley.
  • Citrix Systems (NASDAQ: CTXS) Cut to Market Perform from Outperform at FBR.
  • CME Group (NYSE: CME) Raised to Buy from Hold at Citigroup.
  • CTC Media (NASDAQ: CTCM) started as Overweight at Lehman Brothers.
  • Double Hull Tankers (NYSE: DHT) raised to Neutral at JPMorgan.
  • Elizabeth Arden (NASDAQ: RDEN) raised to Outperform at Oppenheimer.
  • Hovnanian Enterprises (NYSE: HOV) Raised to Neutral from Sell at UBS.
  • Tempur-Pedic (NYSE: TPX) cut to Perform at Oppenheimer.
  • Whiting Petroleum (NYSE: WLL) started as Outperform at Wachovia.

Jon C. Ogg
June 17, 2008

Posted on: June 17, 2008 – 6:10 am in Analyst Calls, , , , , , , , , ,

Apple (AAPL) Financial News Flash 10028 (GOOG)(MSFT)

Apple (AAPL) has agreed to license "visual voicemail" technology from Klausner Technology.

The introduction of the new Apple iPhone is unlikely to hurt profits at Research-In-Motion (RIMM), according to Alley Insider. As a matter of fact, RIMM may raise its forecasts.

The new iPhone should help the fortunes of Google (GOOG), Microsoft (MSFT), and Yahoo! (YHOO) all of which have products or services which work on the handset.

Barron’s writes that RBC Capital expects “massive” shipments of iPhones in the company’s fiscal fourth quarter ending September.

Apple’s decision to sell the iPhone in over seventy countries is expected to sharply cut the number of sales of "unlocked" versions of the handset.

Douglas A. McIntyre

Posted on: June 17, 2008 – 5:21 am in Press Digest, , , , ,

Inflation Burns Like A Hay Barn, 5% Or Bust

In the UK, inflation was up enough in May to put the annual run-rate at 3.3% The Bank of England promptly took a look at those numbers and said inflation in the second half could be 4%. The economy in the UK could start to look like that of Brazil fifteen years ago.

According to MarketWatch, "Prices for goods leaving the factory gate hit an annualized 8.9% in May, while the costs of inputs that manufacturers pay soared by 27.9%, the fastest rise since the mid-1970s."

No matter how much the Fed wants to insist that the current upward price pressure in the US economy is moderate, it simply isn’t true. Key commodities cannot post price gains of 40% without the overall cost of doing business as a consumer or enterprise moving up much more than the 3% or so that the Fed and US Treasury mention from time-to-time.

Coming out of the 1960s, when inflation had averaged about 2.5%, it was hard to imagine that it could move above 10% in the very late 1970s. But, the US economy may be setting up for a similar surge now.

The Fed can control interest rates, but controlling the price of crude and most agricultural commodities is beyond its abilities. The markets for those goods is now entirely global and it pushed by force as far afield as China, the Middle East and Russia. Even the weather has conspired against the Fed by dropping record rain on the Midwest, destroying some of the corn crop there.

The situation in the UK is not much different than that in the US. When foods sourced globally are expensive, they are expensive everywhere. That seems obvious, but it has not been part of the inflation projections being issued by the government here.

Hell is coming and inflation is coming with it. The Vegas odds are for a 5% annualized rate in the US before Christmas.

Douglas A. McIntyre

Posted on: June 17, 2008 – 5:08 am in Economy

Warren Buffett Supports InBev Bid For Anheuser-Busch (BUD)

Belgian newspaper De Standaard has reported that Warren Buffett is prepared to throw the Busch family under the bus and support the InBev offer to buy Anheuser-Busch for $46 billion or $65 a share.

More than any other trait, it is Buffett’s good sense that has made him the world’s richest man.

BUD can’t do anything to get the price of its stock up. It already owns 50% of the US beer market and does well overseas. Its plan to buy the part of Mexican brewer Grupo Modelo that it does not already own will simply pile on debt of dilute BUD shareholders.

Buffett can read the Anheuser-Busch stock chart as well as anyone. The company has never traded above $60 before. It the InBev deal goes away, it will never trade there again.

Douglas A. McIntyre

Posted on: June 17, 2008 – 4:46 am in Mergers and Buy Outs,

Yahoo!’s (YHOO) 600 Million Mobile Customers (GOOG)(MSFT)(BIDU)

After some deals in Asia overnight, Yahoo! now claims that its search feature is on 600 million phones.

According to Reuters, "the mobile advertising market is expected to rise to $16.2 billion in 2011 up from $1.5 billion in 2006."

Some Yahoo! shareholders may not want to wait until 2011. Yahoo! also has too much competition in the mobile market. Its new best friend Google (GOOG) has a major initiative there. So does Microsoft (MSFT). In the world’s largest cellular and internet market, search is dominated by Baidu (BIDU), the local favorite.

If, by some stretch of the imagination, Yahoo! could have 20% of the wireless search market in five years, it might pick up an additional $3 billion in sales. By then, Google’s corporate revenue will be that much money every two weeks.

Douglas A. McIntyre

Posted on: June 17, 2008 – 4:38 am in Wireless, , , ,

Disney (DIS) Recruits More Prepubescent Talent

Disney (DIS) has recruited another clueless child, whose parents are undoubtedly surfeited with the idea of becoming multimillionaires, to be its next multimedia star.

The new member of Disney’s stable is Demi Lovato, who is 15 but looks 27. She joins Miley Cyrus, who is also known as "Hannah Montana" to make records, movies, and TV shows. According to The Wall Street Journal, "For Disney, there are few more crucial tasks than finding and developing talent that appeals to 8- to 12-year-olds."

The moves may be good for Disney, but who remembers childhood stars Drew Barrymore and Britney Spears. Spear is so crazy that she roams the moors of Hollywood like the hound of the Baskervilles.

Of course, there is no guarantee that the entertainment company’s latest star will run into personal trouble over time, but the odds are not in her favor.

Douglas A. McIntyre

Posted on: June 17, 2008 – 4:24 am in Entertainment,

Media Digest 6/17/2008 Reuters, WSJ, NYTimes, FT, Bloomberg

Accoriding to MarketWatch, Belgian newspaper De Standaard reports that Warren Buffett support a takeover of Anheuser-Busch (BUD) by InBev.

According to Reuters, economists think the PPI will rise 1%.

Reuters writes that a key Yahoo! (YHOO) executive has left for a venture capital firm.

Reuters reports that Adobe (ADBE) posted disappointing earnings.

The Wall Street Journal writes that the Fed is likely to keep rates unchanged.

The Wall Street Journal reports that hedge funds are going though a major shake-out with smaller firms having hte most trouble.

The Wall Street Journal reports the flood in the Midwest could drive food prices higher.

The Wall Street Journal reports that Intel (INTC) will spin-off its solar panel unit.

The Wall Street Journal reports that Barclays (BCS) may seek more capital.

The Wall Street Journal writes that the new CEO of AIG (AIG) says the company still faces major earnings risks.

The Wall Street Journal reports that Disney (DIS) is adding to its list of teenage stars.

The Wall Street Journal writes that hurdles still remain to closing the Sirius (SIRI) merger with XM (XMSR).

The Wall Street Journal writes that newspaper chain McClatchy (MNI) cut 10% of its work force.

The Wall Street Journal reports that Google (GOOG) will try to get Yahoo! (YHOO) instant messaging service to work with its to expand the network of the products.

The New York Times writes that the head of Lehman (LEH) still remains confident about the firm’s future.

The New York Times reports that Honda (HMC) has launched a hydrogen powered car.

The New York Times writes that Bernanke feel healthcare costs may be among largest challenges to economy.

The FT writes that oil hit a new high near $140 a barrel.

According to Bloomberg, fixed income profits at Goldman Sachs (GS) and Morgan Stanley (MS) mask their reliance on commodities.

Douglas A. McIntyre

Posted on: June 17, 2008 – 2:52 am in Press Digest, , , , , , , , , , , ,

Asia Markets 6/17/2008 (CN)(SNP)

Markets in Asia were mostly lower.

The Nikkei fell a fraction to 14,348. Mazda fell 3.5% to 584. NEC rose 2.5% to 583.

The Hang Seng dropped .4% to 22,947. China Netcom (CN) rose 2.3% to 22.55. China Petroleum (SNP) rose 2.5% to 7.70.

The Shanghai Composite fell 2.8% to 2,796.

Data from Reuters

Douglas A. McIntyre

Posted on: June 17, 2008 – 2:26 am in International Markets, ,