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Goldman Sachs Group Inc. (NYSE: GS) has been an incredible performer among the bulge bracket investment banking firms during the entire credit meltdown and market malaise. Its shares had been holding up better than any of the large cap competitors, partly because of its massive bet against the credit markets and partly because of its other trading efforts outperforming peers. But some evidence is surfacing that a part of this may be peaking or that the firm has lost part of its edge. Today we have seen an SEC filing which may be far more pertinent than an analyst estimate cut and a trader move.
Daily Archives: September 4, 2008
Is Goldman Sachs Losing Its Trading Edge? (GS)
The 52-Week Low Club 9/4/2008 (TEX)(HL)(MTW)(CIEN)(VRSN)
Terex Corporation (TEX) Bad guidance. Drops to $37.12 from 52-week high of $91.21.
Hecla Mining (HL) Price of silver down. Sells off to $5.79 from 52-week high of $13.14.
The Manitowoc Company (MTW) Hurt by drop in Terex. Dips to $21.62 from 52-week high of $51.49.
Ciena (CIEN) Weak guidance. Plunges to $13 from 52-week high of $49.55.
Verisign (VRSN) Some investors still unhappy with last quarter’s numbers. Falls to $28.15 from 52-week high of $42.50.
Douglas A. McIntyre
24/7 Wall St. Most Overpaid CEO Of The Day: Ciena (CIEN) CEO Gary Smith
Shares in Ciena (CIEN), a communications equipment company, fell 25% today to a new 52-week low of $13. The period high was $49.55.
As part of its earnings announcement, Ciena said the future looks grim. The firm forecast revenue in its current, fiscal fourth quarter in a range of $190 million to $210 million, dramatically below the market’s prediction of $264 million according to Reuters Estimates
Markets Boo McCain’s VP Choice
John Tamny of RealClearMarkets
Alongside last Friday’s announcement that Alaska Governor Sarah Palin would be John McCain’s running mate, the Dow Jones Industrial Average fell 170 points. Stocks have shown weakness ever since.
While there are many factors that move markets, a looming electoral contest between a tax-hiking Democrat versus a nominally pro-growth Republican surely weighs heavily on market psyche. It says here that the markets concluded last week that whatever John McCain’s true economic views, on Friday he handed the election to the anti-growth candidate with his selection of Palin.
A Dozen Companies Which Should Lay-Off 10,000 People This Year
The evidence that sales at many companies are struggling and that employment will suffer are almost everywhere. Recently, a division of GMAC said it would let 5,000 people go. According to MSNBC, "Job cuts announced by U.S. employers last month jumped 12 percent over a year ago to cap the busiest summer of downsizing in six years." Job cuts through October could top what they were for all of 2007.
The economy is beginning to look like it did during the deep recessions in the early 1990s and 1973. Eric Rosengren, the president of the Boston Federal Reserve Bank, sees the situation getting much darker in the second half. Speaking of deteriorating financial conditions he said, "It may push the unemployment rate up to 6%, with more than 2 million people losing their jobs since the financial turmoil began last summer.".
Going Nuclear Into Elections (EXC, NRG, D, DUK, PGN, AEE)
Electric utility Exelon (NYSE:EXC) this morning revised guidance for 2008 to a range of $4.15 – $4.30 per share from $4.00 – $4.40 per share. That’s measured on non-GAAP operating earnings; on GAAP earnings, the company adjusted its guidance from $3.70-$4.10/share to $3.90-$4.30/share. The press release cited mark-to-market adjustments in hedging, asset impairments, and costs associated with rate and litigation settlements. Analysts had been predicting GAAP earnings of $4.36/share. The company also announced a share buyback program that will total $1.5 billion over the next six months. This might just be only the tip of the iceberg in nuclear power during an election year.
Exelon is joining nine other companies that have filed applications with the NRC to build 29 new reactors in the US. NRG Energy (NYSE:NRG), Dominion (NYSE:D), Duke Energy (NYSE:DUK), Progress Energy (NYSE:PGN), and Ameren Energy (NYSE:AEE) among others have also filed construction and operating license applications with the NRC.
Legg Mason and the Coming Redemptions & Misses (LM, LMVTX)
Legg Mason Inc. (NYSE: LM) is having a rough morning to say the least. The investment manager’s shares are being hit after Credit Suisse took an already cautious Neutral rating down to an even lower Underperform rating on the stock. The $42.00 target stands, which is under current share prices by about 4%. Credit Suisse believes that the firm is going to be unable to meet earnings expectations for multiple quarters and believes this firm is going to be riddled with redemptions and client defections to other managers as end of year reviews are coming up.
TEPPCO’s Multi-Year Lows on Increased Offering (TPP)
TEPPCO Partners, L.P. (NYSE:TPP) is under a bit of pressure after the energy logistics company has priced a secondary offering of 8,000,000 units. Last night this was listed as a pricing of 7.1 million units, but that number has been increased this morning. As far as a use of funds, TEPPCO intends to use the net proceeds from these sales of units to reduce debt under its revolving credit facility, and it expects to use some of the increased availability under the facility to finance capital expenditures and other growth projects.
Top Pre-Market Analyst Upgrades (ADS, AUTH, BRCM, EXC, NVLS, SAI, SNDA)
These are the top upgrades and positive analyst calls we are seeing this Thursday morning:
- Alliance Data (ADS) Started as Buy at B of A.
- AuthenTec (AUTH) Started as Buy at S&P Equity Research.
- Broadcom Corp. (BRCM) Started as Outperform at Credit Suisse.
- Excelon (EXC) Raised to Buy at Jefferies.
- Novellus Systems (NVLS) Raised to Overweight at Morgan Stanley.
- SAIC (SAI) Raised to Outperform at at Wachovia.
- Shanda Interactive (SNDA) Raised to Outperform at Oppenheimer.
Jon C. Ogg
September 4, 2008
Top Pre-Market Analyst Downgrades (KELYA, KLAC, LRCX, MRVL, PNY, RHI, SNDA, XLNX)
These are the top downgrades and negative analyst calls we are seeing this Thursday morning:
- Kelly Services (KELYA) Cut to Sell at Citigroup.
- KLA-Tencor (KLAC) Cut to Equal-weight at Morgan Stanley.
- Lam Research (LRCX) Cut to Underweight at Morgan Stanley.
- Marvell Technology (MRVL) Started as Neutral at Credit Suisse.
- Piedmont Natural Gas (PNY) Cut to Neutral at Baird.
- Robert Half (RHI) Cut to Sell at Citigroup.
- Shanda Interactive (SNDA) has seen estimate and targets cut by Citigroup, JPMorgan, and Goldman Sachs.
- Xilinx (XLNX) Started as Neutral at Credit Suisse.
Jon C. Ogg
September 4, 2008
Ciena Echoes Telecom & Data Slowdown (CIEN, JDSU)
Ciena Corporation (NASDAQ: CIEN) has come out with earnings and posted a 7% drop in non-GAAP EPS to $0.37 EPS on a 24% revenue rise to $253.2 million. First Call had estimates at $0.37 and $253.6M. Unfortunately the fiber optic and networking company is seeing a slowdown and order delay from its Tier One telecom and data carrier clients. It has now lowered revenue guidance to $190 to $210 million for its fiscal fourth quarter, which is a far cry from the $263 million expected by analysts in the First Call surveys.
Alms For The Poor: Wal-Mart (WMT) August Sales Up
Wal-Mart’s (WMT) US same store sales rose 3% in August. Analysts expected about half that growth rate.
The Wal-Mart news is almost certainly a sign the the middle class is joining those below the poverty line in making the huge retailer their first and only place to shop.
As Online Display Ads Falter, Yahoo! (YHOO) And New York Times (NYT) Torpedoed
It turns out that display advertising on the internet is becoming less popular with most marketers. They are turning to search text ads instead. This is probably not news to anyone in the industry, but now there is fairly solid research on the trend.
According to The Wall Street Journal, "Search ads are forecast to represent 42% of overall U.S. online ad spending in 2008, according to eMarketer, up from 40% in 2007. Display is expected to stay flat, at about 21% of overall spending."
BP (BP) And Russia: Trusting An Untrustful Partner
BP (BP) says it got what it wanted from negotiations with its Russian joint venture partner. in TNK-BP. There will be new independent directors and the current CEO will leave. There may even be an IPO of 20% of the company’s shares.
According to Reuters, "The British oil company had accused its partners of orchestrating a campaign of state harassment against TNK-BP and its officers as a means of securing control of Russia’s third-largest oil producer."
China Economics 101: Stimulation Causes Inflation
The communist central government in China is starting to sweat a slowdown in the national economy of the world most populated country. It has begun to dawn on them that the "law of large numbers" will make 10% GDP growth every year somewhat difficult.
Chinese economists can see a drop in consumption in the big countries especially Japan, the US, and most of the EU.
Boeing (BA): A Strike The Company Can’t Afford
Boeing’s (BA) machinists have decided to strike the company over wage and benefit issues. The union will hold off walking out for two days to see if a last moment deal can be reached.
A compromise seems unlikely. Boeing says it has given the workers its last offer and that the offer is unusually generous.
AIG (AIG): Create New Company, Dump Bad Assets
AIG (AIG) may resort to a tactic that is as old as the hills. It is considering taking its worst assets and moving them into a new company. This would leave AIG with a relatively good balance sheet. Its subprime investments would no longer plague it.
Media Digest 9/4/2008 Reuters, WSJ, NYTimes, FT, Bloomberg
According to Reuters, NY State sent subpoenas to Bank of Americ (BAC) executives over auction-rate securities.
Reuters reports the Boeing’s (BA) machinist union voted to strike but stay on the job two days to see if a settlement can be reached.
Reuters writes that Mitsubishi UFJ said it had no plans to invest in Lehman (LEH).
Reuters writes that US car makers has a poor August but there were some signs of hope.
Asia Markets 9/4/2008
Markets in Asia were mixed.
The Nikkei fell 1% to 12,558. Chip-making equipment supplier Tokyo Electron slid 4.4 percent to 5650.
The Hang Seng dropped .5% to 20,493.
The Shanghai Composite moved up a fraction to 2,277.
Data from Reuters
Douglas A. McIntyre
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Today’s top tickerspy Indexes Platinum and Pall... +6.6% Uranium Stocks +6.4% Modular Building ... +5.7% Manufacturing Equ... +5.7% Discrete Semicond... +5.5% 
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