Shares closed at $1.94 on Thursday and the 52-week trading range is $1.39 to $6.63.  There is almost 90 minutes left of pre-market trading and we already have close to 4 million shares traded in the pre-market and the stock is surging by almost 15% to $2.23. 

After many disappointments, this one feels like it came a bit out of the blue when you consider the woes of Europe and that it is now based in Europe when so many other tech and communications outfits have been reporting bad numbers.

JON C. OGG

Hiring solutions sales were up 136% to $84.9 million, marketing solutions rose 77% to $49.5 million, and premium subscriptions were up 87% to $33.3 million of the total sales. U.S. revenue was $112 million, or about 67% of total revenues.

The company is putting its first quarter of 2012 sales at $170 to $175 million against estimates of $170.79 million.

For 2012, the social network for professionals is projecting $840 million to $860 million versus about $828.2 million expected.  It also sees full 2012 adjusted EBITDA of $155 million to $165 million (versus $98.7 million for 2011).

The headlines appear to have caused a head-fake.  The stock initially fell on the $0.06 EPS headline, but the shares are up over 4% at $79.87 currently in the after-hours.  Until we see more report data, we will hold off on casting a final verdict.

Since the IPO last summer it has traded in a range of $55.98 to $122.70.  It also claims more than 150 million users now.

JON C. OGG

As far as earnings, SIRIUS XM made over $71 million for the quarter, or $0.01 EPS.  Sales were up 6.5% at $over $783 million.  Estimates from Thomson Reuters were $0.01 EPS and $785.49 million in revenues.  Revenues were projected to be about $3.3 billion against estimates of almost $3.4 billion.

In short, it was mostly in-line.  SIRIUS XM shares have recovered so much from the lows that it has to beat estimates to keep everyone happy.

The law of large numbers catches up to every company in time.  SIRIUS XM added 542,996 subscribers in the quarter and about 1.7 million in whole year of 2011.  For 2012, that projection is to add 1.3 million, which some price increases may increase churn modestly.

The notion that Sirius XM was started with new coverage at Underweight by Barclays earlier this week is only one more item showing concern.

The positive case: If we are really going to get an explosive auto market later on in 2012, SIRIUS XM stands to win.  Analysts still have a price target consensus of about $2.36 on this stock.  Seeking Alpha has a story titled “Buyback And Takeover Chatter For Sirius; CBS Looks Solid” and that might lure more bulls to tout the stock without even reading the article.

The reality is SIRIUS XM is worth over $8 billion today even after the drop, about 4-times Pandora’s $2.2 billion value.  Pandora is also only expected to report almost $420 million in sales for the year ended January 2013.

With almost 4 billion shares, it is too bad that a reverse stock split would only attract short sellers.  Imagine if SIRIUS XM was able to report earnings of $0.10 ot $0.15 per quarter rather than just a penny each quarter.  It would be a psychological boost.  The short sellers would attack it and the company knows that.  There were already 305 million shares in the short interest as of mid-January and that was the highest short interest reading since last May.

SIRIUS XM is trading down almost 2% at $2.15 against a 52-week range of $1.27 to $2.44.  We have already seen 63 million shares trade hands against an average of 55 million shares a day.  If SIRIUS XM is going to trade down on valuation, perhaps Pandora needs some caution as well unless it can score a massive swing higher in paying subscribers.  Pandora shares are trading down almost 3% at $13.51 versus a post-IPO range of $9.15 to $26.00 and versus a $16.00 IPO price.

As a reminder, investors do have stock options that can be used to hedge this one if they want to stick with it for the long haul.

JON C. OGG

The soft drink, beverage and snack maker’s net income for the fourth quarter of 2011 was up 4% to $1.42 billion.  This came to $0.89 EPS, but the pre-item report of non-GAAP came in it $1.15 EPS.  Thomson Reuters was expecting a consensus of $1.13 EPS.  The company’s sales were up by more than 10% to $20.16 billion and that was also slightly above the consensus estimate of $19.89 billion in sales.

Where the story gets interesting the layoffs: 8,700, or about 3% of the company’s work force.  The job cuts are part of a cost-cutting strategy aimed to save $1.5 billion over the next three-years.  It also comes on top of what is said to be a higher push in marketing and advertising.

Cost pressure and a move toward healthier drinks have been a challenge.  Pepsi closed at $66.74 and the 52-week range is $58.50 to $71.89.  Shares are indicated down about 1% ahead of the opening bell.   Investors are currently leaning more toward Coca-Cola Company (NYSE: KO).

JON C. OGG

The company beat earnings by $0.05 at $0.65 per share and revenues rose almost 13% to $3.39 billion versus Thomson Reuters estimates of $3.38 billion.  Whole Foods even raised guidance for its Fiscal year of 2012 to a range of $2.28 to $2.32 earnings per share from a prior target of $2.21 to $2.26 and against a consensus target from Thomson Reuters of $2.27 EPS.  It also raised revenue guidance for 2012 to a range of 13.5% to 15% and that looks mostly in-line with the expected figure of $11.6 billion expected.

Whole Foods is a great growth story, it is an incredibly well run organization, and it deserves a premium over traditional grocery stores which run on razor-thin margins.  Whole Foods has far higher margins and its expansion of its own 365 private-label brand is likely going to help it capture even higher margins even though the products are generally priced lower than other organic and natural brand-label foods. 

So, everything is positive… except for our headline.  The guidance is not exactly far higher than what was already expected.  At the mid-point of its new earnings range, Whole Foods stock trades at a massive 33.9-times the fiscal September 2012 consensus estimate and it trades at 1.2-times expected revenues.

Compare Whole Foods forward 2012 valuations of 33.9-times earnings and 1.2-times sales to The Kroger Company (NYSE: KR) and Safeway Inc. (NYSE: SWY).  Kroger trades at only 10.6-times earnings and only about 0.14-times sales; Safeway trades at 12-times expected earnings and only 0.17-times total sales.
 
The good news for the bulls is that Whole Foods has always been a premium stock.  It is even easy to argue that Whole Foods will always trade at a premium to grocery chains.  It has the whole lifestyle trade attached to it.  Whole Foods is far more of a fun experience compared to most grocery stores, at least until the bill comes.  Whole Foods is arguable the biggest luxury brand that there is. 

The bad news is simple.  Valuations at some point just have to give.  At $77.93 and after the stock hit a new high of $78.31, how can it rise?  The consensus target from analysts is $79.29 and even if that gets raised it can only rise so much.  With a $13.99 billion market cap, it is worth roughly two-thirds of the combined values of Safeway and Whole Foods while it is expected to generate only about 8% of the combined sales of the two food giants.

A great company, at a price that just feels too high to justify on any traditional financial metrics.  The stock can run up on news.  It just looks too hot now under rational evaluations.

JON C. OGG

Dividend investors will be happy as the $0.06 dividend is now a $0.08 dividend after the firm raised the payout today.

Cisco trades at an implied 11.4-times current year earnings estimates, and maybe even a tad less if you factor in the wasted billions used for share buybacks.

We were worried about margin contraction despite the lower SG&A costs as Cisco tries to win more business against competition.  That just did not come about: gross margin rose to 61.3% from 60.2% and the cost of sales rose by more than 7%.  Cisco had given a forecast of 61.5% to 62.0% for the quarter.

Guidance will come in the conference call.  If John Chambers is going to disappoint, it sure did not sound like it when he was speaking with Maria Bartoromo on CNBC.  For the quarter we are already in, the estimates are $0.45 EPS and $11.46 billion in revenues.  For the July year-end, the estimates are $1.77 EPS and $45.83 billion in revenues.

Cisco shares closed up 1.1% at $20.43 and the after-hours reaction has shares up 2.6% at $20.96.  Its 52-week trading range is $13.30 to $22.15.

JON C. OGG

An unfavorable impact from foreign exchange was $3.5 million in sales.  Gross billings (the first revenue counting) is the gross amounts collected from customers for Groupons sold and excludes taxes and net of estimated refunds… That rose by 201% to $1.25 billion in the fourth quarter.

The company “helped 250,000 local merchants across 47 countries grow their businesses while saving Groupon customers billions of dollars.”

Operating income was $15.0 million in the fourth quarter 2011, compared with a loss from operations of $336.1 million in the fourth quarter 2010.  This was the first positive quarter on operating income.  Fourth quarter 2011 operating results included losses of over $40 million principally from less mature markets within the international segment.

Operating cash flow increased 226% to $169.1 million for the quarter; Free cash flow rose 258% to $155.1 million for the quarter. Groupon also finished with $1.1 billion in cash and cash equivalents and no long-term debt.

Here is first quarter guidance: Revenue $510 million to $550 million; income from operations of $15 million to $35 million (includes approximately $35 million for stock-based compensation and acquisition-related expense).  Next quarter’s revenue target from Thomson Reuters is $500.89 million.

The headline loss is killing the stock initially.  After a near two-percent gain to $24.66, Groupon is down 12% at $21.70 in the after-hours session.

JON C. OGG

We have compiled earnings preview on each company using Thomson Reuters consensus estimates and added color on each if applicable.  Some of these are market moving, some are sector moving, and some are just interesting for traders to watch around the earnings reports.

Activision Blizzard Inc. (NASDAQ: ATVI) estimates are $0.56 EPS and $2.2 billion in revenues. At $12.55, the maker of World of Warcraft has been very range bound.

Bunge Ltd. (NYSE: BG) estimates are $1.57 EPS and $13.73 billion in revenues.

Carbonite Inc. (NASDAQ: CARB) estimates are -$0.23 EPS and $16.78 million in revenues. This will be a first real look of a full quarter and unfortunately this one has been cut in half as investors have tempered expectations for the personal data backup service provider.

Lower compensation and SG&A may offset discounting in bundled product offerings as Cisco is seeking more and more of an enterprise’s total technology budget.  Our fear is long-term lower margin compression after years and years of being technology’s envy in gross margin.

Cisco is down ahead of earnings but still just above this $20.00 mark against a 52-week trading range of $13.30 to $22.15.  Analysts have a consensus target of $21.66, but we just saw one target on Tuesday morning from Credit Suisse at $26.00.

As far as expectations… Thomson Reuters has consensus estimates of $0.43 EPS and $11.23 billion in sales.  For the quarter we are already in, the estimates are $0.45 EPS and $11.46 billion in revenues.  For the July year-end, the estimates are $1.77 EPS and $45.83 billion in revenues.

Cisco trades at an implied 11.4-times current year earnings estimates, and maybe even a tad less if you factor in the wasted billions used for share buybacks.

Chart analysis is not worth much here today in all honesty.  Cisco is at a post-reorganization high and back over $20.00.  The 50-day moving average is $18.92 if there is another blow-up, but here are the shorter moving averages… 5-day at $20.08, 10-day at $19.88, and the 20-day is at $19.71.

Options traders appear to only be pricing in a move of up to $0.60 or even a tad less using the monthly options which expire in a week and a half. For whatever this is worth, options traders are much more heavily involved in at-month Call options over Put options with at least a 2.5:1 ratio if you combine weekly and monthly trading volumes.

Cisco has pledged to raise its quarterly dividend of $0.06 ‘in time.’  It has now had four consecutive payments of that rate of $0.06 per share per quarter and that yield comes to only about 1.2% for new investors.  Longer-term, that dividend needs to go over 2% if it wants to entice income-oriented investors.  It is possible that we will get a dividend hike.  If not this quarter, we expect one soon.

JON C. OGG

Jon Marino of PEHub.com noted that P.E. firms are hiring and referenced a follow-up report for BDO USA’s third annual private equity “PErspective” report… 57% of private equity executives increased professional staffing and 62% plan to hire again this year.  This is a complete reversal from the layoff waves of prior years.  Here is more detail from that report.

Whether you like millionaires or billionaires or hate them, the one aspect that is so unfairly portrayed about companies bought by private equity firms is as follows: Most businesses bought by private equity firms need to be turned around or need to be run better.  Sure, they get leveraged up and they scrap inefficient operations.  The dirty secret that private equity firms are not defending enough is that many of these companies would have headed for bankruptcy in the long-term if they had not stepped in.  If that results in a liquidation rather than a pure bankruptcy, guess how many jobs get lost at those companies… all of them, rather than some.

The business sector is not just a one-way street.  Companies hire workers in good times and most fire in bad times.  We even ran our own 2011 Layoff Kings.

JON C. OGG