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Electronic Arts Inc. (NASDAQ: ERTS) shares poor performance stood out even on a down day. It has worked on a game since late 2006 or early 2007 called Tiberium. This first-person shooter was in the same universe as its Command & Conquer series. Apparently, the designs and engines weren’t jiving together, or at least not as well as it wanted for a game that was set to be released in 2009. It had already been delayed. EA has now scrapped the project saying that it had design issues from the start.
Daily Archives: October 1, 2008
EA Learns Lesson of Hot Development Turned Failure (ERTS)
Encore Files Large Shelf Registration (ENP, EAC)
Encore Energy Partners LP (NYSE: ENP) has filed a shelf registration to sell up to $1,000,000,000.00 in securities for its units. It will sell common units representing limited partner interests in Encore Energy Partners LP and debt securities of Encore Energy Partners LP and Encore Energy Partners Finance Corporation.
52-Week High Bear Market Surprises (JPM, CPB, CBSH, FFH, THS)
The 52-week lows are full and full of stocks each day lately. In a bear market it gets harder and harder to find stocks which are on their 52-week highs. The non-perishable food companies are easy to understand. But when some of the 52-week highs are FINANCIAL stocks, that made us do a double-take.
Micron Earnings Show A Turnaround That Can’t Turn (MU)
Micron Technology, Inc., (NYSE:MU) showed a fourth quarter net loss of $344 million, or $0.45 EPS, on net sales of $1.45 billion. These results include a non-cash charge to cost of goods sold of $205 million and the effect of a recovery of $70 million for price adjustments for NAND products purchased from other suppliers. On a non-GAAP basis its earnings were -$0.27 per share. First Call had estimates at -$0.23 on $1.54 billion in revenue.
The 52-Week Low Club 10/1/1008 (GNTX)(SLM)(ATU)(XTXI)
Crosstex Energy (XTXI) Downgraded by Goldman. Drops to $19.92 from 52-week high of $40.39.
Gentex Corportion (GNTX) Cuts revenue outlook, downgraded by Baird. Drops to $12.36 from 52-week high of $22.60.
SLM (SLM) Student loan business exposed to credit crisis. Drops to $8.63 from 52-week high of $53.65.
Actuant Corp (ATU) Weak sales and outlook. Drops to $21.58 from 52-week high of $37.15.
Douglas A. McIntyre
GM (GM) Better Than Expected
General Motors (GM) delivered 284,300 vehicles in September. Sales were down 16% from the same month last year.
Car sales fell 10% to just over 118,000. Light trucks were off 19%.
Cadillac did poorly with unit sales off 39% to just over 12,000. Chevy did well, down 11% to just over 123,000. Chevy full-sized pick-ups did remarkably well, down only 5% to just under 54,000.
All in all, a stellar performance compared with Ford (F).
GM’s shares rose 1% to $9.51 while Ford was off almost 13% to $4.55
Douglas A. McIntyre
GE Raises Liquidity With Buffett & Public Offering (GE, BRK-A, GS)
General Electric Co. (NYSE: GE) is coming out swinging to halt the offensive rumors and credit concerns that have been hindering its stock. The company made two key announcements to fight this. GE will offer at least $12 billion of common stock to the public, plus a 15% share over-allotment option for the underwriters. The offering is expected to be priced prior to Thursday’s market open in the U.S. It has also has agreed to sell $3 billion of preferred stock to Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK-A).
Possible Digital Cinema Financing Winners (BX, JPM, AIXD)
Despite the realm of uncertainties we all face, there is one sector which has survived through the good times and bad times of the last century: movies. Movies haven’t even been killed by the digital revolution as so many feared could happen in the 1990’s. The FT reported this morning that The Blackstone Group (NYSE: BX) and a unit of JPMorgan (NYSE: JPM) were set to announce a financing package of more than $1 billion to fund the conversion of up to 20,000 cinema screens in the US to digital projection systems. Access Integrated Technologies, Inc.(NASDAQ:AIXD), which goes byAccessIT, would likely be one of the key beneficiaries of such a large financing package.
HP’s Virtualization Expansion (HPQ, VMW, MSFT, CTXS)
Hewlett-Packard (NYSE: HPQ) is acquiring LeftHand Networks Inc., a move that takes the company further into hardware for virtualization. LeftHand provides storage virtualization and iSCSI storage area network solutions to enable mid-size companies and remote offices or branches of large corporations to protect critical business data. The purchase price is roughly $360 million in cash.
Ford (F) September Sales: It Couldn’t Get Much Worse
Ford (F) has an atrocious September. The car company reported total sales of 116,734, down 34 percent versus a year ago. Volvo sales were off over 50%.
Overall Ford brand SUV sales dropped 57% to 8,623 units. Sales of the company’s flagship F-series pick-ups were down 42% to 32,727.
Almost every brand in the Ford corporate line-up lost sales. Even with the government’s $25 billion loan guarantee, it is nearly impossible to imagine that Ford can take this kind of beating for another year.
Ford’s shares were down over 13% to $4.53.
Douglas A. McIntyre
Despite Turbulent Times, Disk & Storage Drives A Cheap Port O’ Call (WDC, STX)
This last weekend we began screening for technology stocks with extremely low P/E multiples which are still showing growth. The two giant independent disk drive and hard drive data storage stocks of Western Digital Corp. (NYSE: WDC) and Seagate Technology (NYSE: STX) showed some almost shocking values today and ahead. There are of course caveats as this has been a major growth sector and there are likely to be more analyst estimate cuts in the sector even after the slight cuts seen since last week. There is fierce competition among the top players, and Wall Street has perpetually given these discounted valuations to the market for several reasons.
Will GE (GE) Revise Guidance?
GE (GE) recently revised its guidance. For the the third quarter it moved its estimates to a range of $.43 to $.48 per share from the previous figures of $.50 to $.54
For the full year, it took down the numbers to a range of $1.95 to $2.10 per share from $$2.20 to $2.30 per share.
Today, according to Reuters, "Deutsche Bank cut GE’s 2008 earnings per share estimate by 9 percent to $2." It cut 2009 earnings to $1.95.
"GE Capital’s swap spreads had hit a record wide of 740 basis points earlier on Wednesday and are up from about 398 basis points a week ago."
Wall St, has to wonder what GE’s latest internal numbers are for next year..
Douglas A. McIntyre
New Major Gas Pipeline From Fayetteville Heads North (KMP, ETP, SWN, CHK, BP)
Kinder Morgan Energy Partners (NYSE:KMP) and Energy Transfer Partners (NYSE:ETP) are teaming up again, this time on a joint venture to move up to 2 billion cubic feet of natural gas per day from the Fayetteville Shale to the upper Midwest. The two companies announced the formation of the Fayetteville Express Pipeline LLC (FEP), a 50/50 venture that will carry natural gas 187 miles from Conway county, Arkansas, to an interconnection to the Trunkline Gas Company pipeline that goes north to Chicago and on into Michigan. The projected cost for the FEP is $1.3 billion, and the pipeline is expected to be in service by late 2010 or early 2011.
Boston Scientific (BSX) Slaughters It Shareholders Again
The list of management screw-ups at Boston Scientific (BSX) is almost too long to number. It bought rival Guidant and added $7 billion in debt in the process. Some of Guidant’s products were not as good as due diligence might have indicated, so, by most measures BSX overpaid.
BSX then hit a big bump in the road for its largest product line which is drug-coated stents. The devices keep arteries open and clots away from the vessel walls. That was working fine until medical studies showed that stents were not as effective as believed. Some surveys even showed patients were better off having their chests cracked open for by-pass surgery, a fate not fit for a dog.
A Revival At Level 3 (LVLT)?
Level 3 Communications (LVLT) has done remarkably well this year since it is viewed as a company with only modest growth and positive cash flow prospects. The stock price is slightly down YTD at about $2.70. The NASDAQ is down close to 20%.
Wall St. appears to think that management’s new approach to running the company which includes killing its aggressive M&A activity and focusing on costs will work. Investors also have to believe that the company’s nearly $7 billion in long term debt will not be too much of a drag in a terribly poor credit environment.
Level 3 has a more immediate problem which may show up in its Q3 results. Growth of broadband traffic, especially video content, has begun to slow. As the owner of one of the largest broadband networks in the world, Level 3 cannot post good earnings if it core market is showing only modest growth. Shareholders may look at their positions before LVLT earnings. It will have to show that its broadband transport business is doing better than many analysts expect or face an aggressive sell-off.
Douglas A. McIntyre
Bad ISM Data, Back To 2001 Post-Terror Levels
The Institute for Supply management, or ISM, has released some awful data for the manufacturing sector. It noted that while the overall economy grew for the 83rd consecutive month, the PMI indicates a significantly faster rate of decline in manufacturing during September. That marked a departure from the 2008 trend toward negligible growth or contraction each month. This is also the lowest level for the PMI since October 2001.
AMEX & NYSE Finally United (NYX)
NYSE Euronext (NYSE: NYX) made an announcement that it has completed its acquisition of the American Stock Exchange. This deal has felt as though it has been on the books forever. We don’t know whether to say "Congrats!" or "Finally!" in this merger. We covered the original terms of the deal back on January 17, 2008. It’s been a tough time since then, although not because of the integration. NYSE shares were north of $80 for much of January, yet closed at $39.18 yesterday.
GameStop Grows EU Ops With Micromania Buyout (GME)
GameStop (NYSE: GME) has reached a deal to make another video game chain acquisition. It is in a definitive agreement to acquire Micromania. This chain is France’s leading video game retailer with 332 locations throughout the country from private equity fund L Capital. This is another key geographic add-on for GameStop.
Farmer Mac Raises Needed Cash, At Steep Price (AGM)
Farmer Mac, or Federal Agricultural Mortgage Corp. (NYSE: AGM), has been up against the ropes and reviewing its alternatives. Things have been so bad that at a $4.10 close, that is down from a 52-week high of $34.93. If you just went away part of the summer and were thinking how well farmers were doing, that has changed as Farmer Mac’s investments in GSE’s and Lehman have hurt to the point that it cannot adequately make loans to farmers.
UBS Taking Down Hospital Stocks (CYH, THC, UHS)
UBS has decided to downgrades the hospital sector this morning. It seems that perhaps not all medical and healthcare stocks are immune from a rapidly weakening economy. We have seen downgrades on three of the top publicly traded hospital system stocks as follows:
- Community Health (NYSE: CYH) Cut from Buy to Neutral.
- Tenet Healthcare (NYSE: THC) Cut from Neutral to Sell.
- Universal Health (NYSE: UHS) Cut from Buy to Neutral.
Jon C. Ogg
October 1, 2008
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