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What’s Important in the Financial World (5/14/2012) Greek Elections, “The Avengers”

247wallst — Mon, 14 May 2012 10:34:06 +0000

Coalition talks in Greece have broken down and are not likely to resume. This means new elections are almost inevitable. That will delay the ability of the European Union and IMF to know what the future of austerity in Greece — and perhaps its future as an EU member — will be. Alexis Tsipras, leader of political party Syriza, has refused to join with other parties. His position with voters becomes more powerful by the day. Tsipras says he plans to walk away from government cost-cut plans imposed by the EU. For Greeks who are out of work or have lost part of their wages, his appeal is obvious. Whether he can wreck the financial status of Greece with capital market investors is another matter.

Falling Oil Prices

Futures for Brent crude continue to sink closer to $100. Saudi Arabia’s oil minister said that the $100 level would be ideal for his nation’s finances and, he believes, those of the portion of the world that imports oil. Also weighing on futures is the financial fate of the EU and the growing recession there. For the time being, the beneficiaries of the drop in prices are large oil-consuming nations like the United States, China and India. The crippled economy in Europe has more than offset concerns about supply due to tensions over Iran and lower output from refineries. But the apparent advantage for the U.S. cuts another way. The slowdown in Europe that has pushed oil prices down means that U.S. exports to the same regions will begin to fall. Corporate earnings for the first quarter from a number of multinationals show the process already has begun.

Avon Mulls Options

Avon Products (NYSE: AVP) said it will take a week to decide whether it will negotiate a new, sweetened deal from Coty. Coty has just gotten financial support from Warren Buffett’s Berkshire Hathaway (NYSE: BRK-B). Coty raised its offer to $24.75 a share from $23.25. Avon’s board has a number of compelling reasons to take the offer. The first is the legacy of former CEO Andrea Jung, who ran the company into the ground, mostly by mismanaging its overseas operations. It also has been alleged that on her watch there may have been bribery problems overseas. The SEC has begun to investigate Avon. A new CEO, Sherilyn McCoy, formerly of Johnson & Johnson (NYSE: JNJ), has been appointed by the Avon board. That should not stop the board from saving the company and preventing a sharp drop in its stock if Coty is rejected. Avon has no viable turnaround plan, and, in the best case, it will take quarters for McCoy to implement one, if she can at all.

Big Box Office

The Walt Disney (NYSE: DIS) super-hero movie “The Avengers” was the top grossing movie at the U.S. box office this weekend. The same was true in many other countries. Estimates are that the film has taken in $373 million in North America since it opened. Added to overseas ticket sales, the number is closer to $600 million. Only a few films in history have taken in $1 billion — a number “The Avengers” almost certainly will pass. Among films that have approached the figure or exceeded it are those in the Transformers, Batman, Star Wars, Harry Potter and Lord of the Rings franchises, and the two most successful movies of all time — James Cameron’s “Titanic” and “Avatar.” “The Avengers” probably will not make it past these Cameron movies, But it will become a franchise with more releases, which will line the pockets of the Disney film studio operations.

Douglas A. McIntyre

Filed under: Market Open Tagged: AVP, BRK-B, DIS, JNJ

Media Digest (5/14/2012) Reuters, WSJ, NYT, FT, Bloomberg

247wallst — Mon, 14 May 2012 10:16:00 +0000

Several senior JP Morgan (NYSE: JPM) executives will leave the bank in the wake of its $2 billion trading loss. (Reuters)

Yahoo! (NASDAQ: YHOO) ex-CEO Scott Thompson has thyroid cancer. (WSJ)

Greece will have elections because parties could not form a coalition. (Reuters)

Growth problems in China prompt leaders to look at stimulus actions. (Reuters)

Apple (NASDAQ: AAPL) may buy TV maker Loewe. (Reuters)

Chesapeake Energy (NYSE: CHK) receives a $3 billion loan to help finances while it sells assets. (Reuters)

LightSquared is likely to file for bankruptcy protection. (WSJ)

A Wall Street Journal panel of economists predicts slow by ongoing growth. (WSJ)

Nissan says the value of the yen will force production out of Japan, (WSJ)

Leaders in Canada look to China for growth as U.S. markets ease. (WSJ)

Facebook, Groupon (NASDAQ: GRPN) and Zynga (NASDAQ: ZNGA) are rapidly buying start-ups. (WSJ)

Carl Icahn invests in Chesapeake Energy. (WSJ)

General Motors’ (NYSE: GM) Europe operation will fight unions over the ability to cut costs. (WSJ)

Walt Disney’s (NYSE: DIS) “The Avengers” leads the box office again over the weekend. (WSJ)

Angela Merkel loses support in elections in a key German state. (NYT)

Avon (NYSE: AVP) may accept a bid from Coty. (FT)

French President Hollande promises to protect jobs just as several large companies prepare to cut them. (Bloomberg)

JP Morgan may fire its entire London trading staff. (Bloomberg)

India inflation rises to 7%. (Bloomberg)

Douglas A. McIntyre

Filed under: Press Digest Tagged: AAPL, AVP, CHK, DIS, GM, GRPN, JPM, YHOO, ZNGA

“The Avengers” Surges Toward Record

247wallst — Mon, 14 May 2012 10:12:37 +0000

The Walt Disney (NYSE: DIS) super-hero movie “The Avengers” was the top grossing movie at the US box office this weekend. The same was true in many other countries. Estimates are that the film has taken in $373 million in North America since it opened. Added to overseas ticket sales, the number is closer to $600 million.

Only few films in history have taken in $1 billion–a number “The Avengers” will almost certainly pass. Among those which have approached the figure or exceeded it are films of the “Transformers”, “Batman”, “Star Wars”, and “Harry Potter”, and “Lord of the Rings” franchises,and the two most successful movies of all time–James Cameron’s “Titanic” and “Avatar”.

“The Avengers” probably will not make it passed these Cameron movies, but it will become a franchise with more releases which will line the pockets of the Disney film studio operations

Douglas A. McIntyre

Filed under: Media Tagged: DIS, featured

Walt Disney Earnings: A Return of the Consumer

247wallst — Wed, 09 May 2012 10:32:30 +0000

A great deal of the discussion about Walt Disney’s (NYSE: DIS) unexpectedly strong earnings revolved around the fact that movie bomb “John Carter” had not crippled overall earnings per share. And the markets looked toward the future and an anticipated windfall from the unprecedented success of “The Avengers,” which took in more than $200 million in its U.S. debut weekend — a record. Less was said about the roaring success of Disney’s theme parks, which are a reasonable proxy for family consumer spending in the United States.

Disney has net profits of $1.14 billion, up 21% from the same quarter a year ago. Revenue rose 6% to $9.63 billion. The largest improvement among Disney divisions was in its Parks and Resorts operation. Revenue rose 10% to $2.9 billion. Segment profit was up 53% to $222 million.

The results of the theme park division were overshadowed by Disney’s Media Networks, which had $4.69 billion in revenue and $1.73 billion in segment profit. But Disney said this was driven by advertising revenue — a barometer that shows consumer goods and electronics companies feel confident about demand.

Theme part sales may be the single best measure of the willingness of consumers to lay out money they did not have a year ago. A visit to a Disney theme park usually involved air travel, a hotel stay, relatively expensive tickets and several days worth of food. Disney said as much:

Increased guest spending reflected higher average ticket prices, daily hotel room rates and food, beverage and merchandise spending.

Economists often look to car purchases and same-store sales at McDonald’s (NYSE: MCD) to gauge the consumer’s mood. Somewhere between $1 hamburgers and $25,000 vehicles is the cost of visiting a theme park. Cars and hamburgers are selling well. Tickets are too.

Douglas A. McIntyre

Filed under: Earnings Tagged: DIS, featured, MCD

Disney Earnings Good Enough For 52-Week Highs (DIS)

Administrator — Tue, 08 May 2012 20:34:14 +0000

Walt Disney Co. (NYSE: DIS) closed up ahead of earnings on Tuesday and the reaction is following the same trend in the after-hours session. Earnings came in at $0.58 EPS $9.629 billion on a comparable basis and Thomson Reuters had estimates of $0.55 EPS and 6% growth to $9.56 billion in revenues. Adjusted earnings were actually up 18% from the company.

While the bump from The Avengers is a hope, the investment community needs to understand that the benefit on the revenue and income side of that equation actually hits in the current quarter so it will not help Disney’s past quarterly results. In fact, this last quarter was dogged by a large charge to the John Carter franchise that was deemed a flop at the launch.

Disney’s unit performance was as follows:

Media networks rose 9% to $4.692 billion in revenue;
Parks & Resorts rose 10% to $2.899 billion in revenue;
Studio Entertainment was the eye-sore with a drop of 12% to $1.18 billion in revenue;
Consumer products rose 8% to $679 million;
Interactive media rose 13% to $179 million.

Next quarter is one of the larger quarters for Disney and estimates from Thomson Reuters are $0.91 EPS and $11.17 billion in revenues.

Disney closed up 1.1% at $44.30 on the day and shares are up at $45.30 in the after-hours. Keep in mind that this will mark a 52-week high as the prior 52-week trading range was $28.19 to $44.50.

JON C. OGG

Filed under: Earnings, Entertainment, Media Tagged: DIS, featured

Cable Companies’ Future is Online (CHTR, CMCSA, TWC, DIS, VZ, T, PCS, LEAP, FTR, NFLX, AAPL)

Paul Ausick — Tue, 08 May 2012 17:08:54 +0000

The line between mobile wireless carriers and cable and satellite TV providers has been blurring for a couple of years and may be on the way to disappearing entirely before too long. The short version of the story is that wireless broadband, heralded by speedy 4G networks, is showing fast subscriber growth, while cable and satellite subscribers are staying away if not actually “cutting the cord.”

We get more evidence of the switchover today from Charter Communications Inc. (NASDAQ: CHTR), which reported results this morning including miss on an already awful estimated EPS loss of -$0.57. Charter’s EPS loss came in at -$0.95. The company added a scant 20,000 customers for video in the first quarter compared with 141,000 new customers for Internet service.

As we noted last week in our look at earnings from Comcast Corp. (NASDAQ: CMCSA), bundling of services and content is becoming the new way of doing business in the space once dominated by cable providers. For example, Time Warner Cable Inc. (NYSE: TWC) and Comcast both have long-term deals with Walt Disney Co. (NYSE: DIS) to offer WatchESPN, the online and mobile version of Disney’s ESPN network. The cable providers are hoping that the offer of free mobile content will stem the flow of unsubscribers.

Verizon Communications Inc. (NYSE: V) and AT&T Inc. (NYSE: T) also offer high-speed digital content and are working on deals to offer new bundles to customers. Verizon’s attempt to acquire more wireless spectrum in its $3.6 billion deal for SpectrumCo gives the company’s wireless carrier, Verizon Wireless, the opportunity to bundle programming from Comcast and Time Warner Cable along with access to mobile broadband.

The cable providers, in turn, are able to offer a bundle to their customers that now includes Verizon’s high-speed mobile broadband. It should be no surprise that smaller carriers like MetroPCS Communications Inc. (NYSE: PCS), Leap Wireless International Inc. (NASDAQ: LEAP), and Frontier Communications Corp. (NASDAQ: FTR) are struggling.

Research firm Convergence Consulting recently released studies on broadcast and cable TV and bundling. Between 2000 and 2009, cable TV subscriber additions averaged 2 million a year. In 2010 additions totaled 272,000 and in 2011 additions totaled just 112,000. The firm estimates that 2.65 million cable subscribers “cut the cord” between 2008 and 2011, choosing instead to rely on “over-the-top” services from Netflix Inc. (NASDAQ: NFLX) and others. By the end of this year, the firm estimates there will be 3.58 million cord cutters.

Convergence Consulting estimates that the audience for free online/mobile viewing has plateaued at 19% of all TV viewing. But that seems low, especially in light of the cross-licensing deals between the wireless carriers and the content providers like Disney and the cable networks.

The other thing that could raise that plateau is another technological wonder from Cupertino. Rumors of an “insanely great” Internet TV box from Apple Inc. (NASDAQ: AAPL) have been rampant for months, if not years. There are already several options available for these ‘over-the-top’ boxes, but if Apple were to come up with a killer piece of hardware, the ground could shift in a hurry.

Of course the TV and movie industries have learned from the music industry that Apple drives a hard bargain, and they can’t let themselves give up currently large broadcast revenues in exchange for much smaller online sales. What Apple should hope for is that a game-changing device with one or two significant content partners will convince consumers to force the rest of the media moguls to toe the line.

The transition from wired high-speed broadband connections to wireless connections is just starting. There are lots of different companies involved and the one or two with the deepest pockets or that are able to discern what the future holds will prosper. As for the rest, who knows?

Paul Ausick

Filed under: Cable Companies, Earnings, Entertainment, Internet, Telecom, TV, Wireless Tagged: AAPL, cable and wireless bundling, CHTR, CMCSA, DIS, featured, FTR, LEAP, NFLX, over the top programming, PCS, T, TWC, VZ

Media Digest (5/8/2012) Reuters, WSJ, NYT, FT, Bloomberg

247wallst — Tue, 08 May 2012 10:30:38 +0000

The GAO says the government could make $15.1 billion on its AIG (NYSE: AIG) bailout investment. (Reuters)

Facebook CEO Mark Zuckerberg begins the company’s IPO road show. (Reuters)

Comscore says people spent more time on Facebook via mobile devices than on PCs during March. (Reuters)

Yahoo! (NASDAQ: YHOO) CEO Scott Thompson issues an apology to employees over a resume misstatement scandal as its board meets to determine his fate. (Reuters)

Gasoline prices fall for the fifth-consecutive week. (WSJ)

The political turmoil in Greece threatens to break its bailout agreement with Europe. (WSJ)

Walt Disney’s (NYSE: DIS) ABC News and Univision to start a 24-hour news channel broadcast in English. (WSJ)

Electronic Arts (NASDAQ: EA) stock is hurt as its delays launching important games. (WSJ)

The Ontario Teachers Pension Plan says it is opposed to Sprint-Nextel (NYSE: S) CEO Dan Hesse’s reelection to the board of the telecom firm. (WSJ)

Lenovo plans to develop products other than PCs. (WSJ)

A court says that Google’s (NASDAQ: GOOG) Android software violates Oracle’s (NASDAQ: ORCL) IP, but the financial damages likely will be light. (WSJ)

Regulators probably will approve a plan by Anadarko Petroleum (NYSE: APC) to drill 3,700 natural-gas wells in eastern Utah. (WSJ)

The Fed says consumer borrowing rose 10.2% in March. (WSJ)

Hollande of France and Merkel of Germany will meet to talk about the future of the eurozone. (WSJ)

The FAA will delay plans to upgrade fuel tanks on many airline planes. (WSJ)

A new wave of start-ups works on programs to upload personal videos to smartphones. (WSJ)

Spain will begin a new program to help the balance sheets of its troubled banks. (WSJ)

High-yield bond yields hit record lows. (WSJ)

Amazon.com (NASDAQ: AMZN) to sell high-end fashion products. (NYT)

The sales of used SUVs remain good as people move to more fuel-efficient new cars. (NYT)

Scientists begin to look at whether airline seats are strong enough for some heavy passengers. (NYT)

A failure of Greek parties to form a coalition may lead to a new round of elections. (FT)

Spain will have to spend billions of dollars to rescue weak banks. (FT)

Iran will take yuan as payment for oil. (FT)

A credit rating agency downgrade of Morgan Stanley (NYSE: MS) would prompt it to increase its collateral sharply. (FT)

Antitrust investigations against Google (NASDAQ: GOOG) in Europe expand. (Bloomberg)

Douglas A. McIntyre

Filed under: Press Digest Tagged: AIG, AMZN, APC, DIS, EA, ETRS, GOOG, MS, ORCL, S, YHOO

24/7 Wall St. Closing Bell (FSLR, PEP, PG, ILMN, CCL, ANV, AWR, BBEP, CDE, DISH, LPX, TSN, HFC, CHTR, DMD, HL, OMX, THC, WEN, DIS, VRTX, CTSH, BSFT)

Paul Ausick — Mon, 07 May 2012 20:08:20 +0000

The major US stock indexes opened lower this morning following a weekend of elections in Europe. A new Socialist party president in France and a still very cloudy future in Greece have left investors in a quandry. We have more coverage here on the French election and here on the election in Greece. By the last hour of trading, shares had recovered nearly all of the early losses and the three major indexes are either slightly positive or on the way to positive territory. The US dollar index rose today, now up 0.09% at 79.573. The GSCI commodity index is down about -2.3% at 653.60, with commodities mixed on the slightly stronger dollar. WTI crude oil closed down -0.6% at $97.94/barrel and Brent crude trades down -0.08% at $113.09/barrel. Gold settled down -0.4% today, at $1,639.10/ounce.

The unofficial closing bells put the DJIA down nearly 30 points to 13,008.53 (-0.23%), the NASDAQ rose less than 2 points (0.05%) to 2,957.76, and the S&P 500 rose 0.48% or less than 1 point to 1,369.58.

There were several analyst upgrades and downgrades today, including First Solar Inc. (NASDAQ: FSLR) cut to ‘neutral’ at Argus; Pepsico Inc. (NYSE: PEP) raised to ‘overweight’ at Morgan Stanley; Procter & Gamble (NYSE: PG) cut to ‘market perform’ at Wells Fargo; Illumina Inc. (NASDAQ: ILMN) raised to ‘outperform’ with a price target of $55 at Credit Suisse; and Carnival Corp. (NYSE: CCL) cut to ‘neutral’ at Goldman Sachs.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Allied Nevada Gold Corp. (AMEX: ANV) is down about -10% at $25.59 after posting a new 52-week low of $25.37 earlier today; American States Water Co. (NYSE: AWR) is up 3.6% at $37.09; Breitburn Energy Partners L.P. (NASDAQ: BBEP) is down -2.4% at $17.54; Coeur d’Alene Mines Corp. (NYSE: CDE) is down -4.1% at $18.99 after posting a new 52-week low of $18.71; Dish Network Corp. (NASDAQ: DISH) is down -0.93% at $31.02; Louisiana Pacific Corp. (NYSE: LPX) is up 5.9% at $9.49; Tyson Foods Inc. (NYSE: TSN) is up 3.4% at $18.65; and HollyFrontier Corp. (NYSE: HFC) is down -2.4% at $28.82 (more coverage here).

On Tuesday we are scheduled to get earnings from Charter Communications Inc. (NASDAQ: CHTR), Demand Media Inc. (NYSE: DMD), Hecla Mining Co. (NYSE: HL), OfficeMax Inc. (NYSE: OMX), Tenet Healthcare Corp. (NYSE: THC), The Wendy’s Co. (NYSE: WEN), and Walt Disney Co. (NYSE: DIS).

Other standouts from today include the following stocks:

Vertex Pharmaceuticals Inc. (NASDAQ: VRTX) is up about 55% at $58.05. The company’s cystic fibrosis drug study showed significant positive results. More coverage here.

Cognizant Technology Solutions Corp. (NASDAQ: CTSH) is down more than -XX% at $XX. The IT-outsourcing firm showed good results, but guidance was weak. More coverage here.

BroadSoft Inc. (NASDAQ: BSFT) is down -17.6% at $33.68. The communications software maker posted good earnings, but followed that with soft guidance for the second quarter.

Stay tuned for Tuesday. Richmond Fed President Jeffrey Lacker and Dallas Fed President Richard Fisher are giving speeches. We have noted the following events on the schedule (all times Eastern):

7:30 a.m. – NFIB Small Business optimism index
11:30 a.m. – 4-week bill auction
1:00 p.m. – 3-year note auction

Paul Ausick

Filed under: General Tagged: ANV, AWR, BBEP, BSFT, CCL, CDE, CHTR, CTSH, DIS, DISH, DMD, FSLR, HFC, HL, ILMN, LPX, OMX, PEP, PG, THC, TSN, VRTX, WEN

Media Digest (5/7/2012) Reuters, WSJ, NY Times, FT

247wallst — Mon, 07 May 2012 10:22:14 +0000

Voters in Greece and France turn away from German austerity measures set for the region’s weakest nations. (Reuters)

AT&T (NYSE: T) moves into the home monitoring market. (Reuters)

Ally Financial falls back into financial trouble. (Reuters)

LG Electronics will release a Google (NASDAQ: GOOG) TV later this year. (Reuters)

Lenovo to invest $800 million to move into mobile products markets. (Reuters)

The FDA could approve drugs to prevent healthy people from getting HIV. (WSJ)

India starts a Google antitrust investigation. (WSJ)

The “Avengers” will help press the results of Walt Disney’s (NYSE: DIS) movie studio higher. (WSJ)

Barclays (NYSE: BCS) will start a U.S. online bank. (WSJ)

The Oprah Winfrey Network may never make money. (WSJ)

Europe’s banks begin to hold cash again, wary of the region’s financials. (WSJ)

Berkshire Hathaway’s (NYSE: BRK-B) B shares underperform the market so far this year. (WSJ)

Wireless carriers spend less for smartphones, which means some costs will be passed to consumers. (WSJ)

The Washington Post Company (NYSE: WPO) continues to be hurt by flagging results at its Kaplan education division. (WSJ)

The United States will sell more of its shares in AIG (NYSE: AIG). (WSJ)

Rebates that stock exchanges provide brokers may hurt returns to individual investors. (NYT)

Many companies enter the business of using mobile phones for retail payments. (NYT)

The ad prices Facebook charges customers has risen by 20% recently. (FT)

Deals by big pharma to buy smaller rivals continue to be driven by patent expirations. (FT)

Douglas A. McIntyre

Filed under: Press Digest Tagged: AIG, BCS, BRK-B, DIS, GOOG, T, WPO

The 8 Earnings Reports Shaping The Week Ahead (DNDN, EA, RAX, DIS, CSCO, M, NUAN)

Administrator — Fri, 04 May 2012 19:52:44 +0000

24/7 Wall St. often looks at the key earnings reports scheduled for the week ahead. We have the bulk of the S&P 500 earnings behind us and we are now starting to move to the off-calendar quarterly reports. This coming week we are focused on six key companies that are set to report earnings as the key to their sectors. This list may not seem like the most important companies to the broad market, but these will shape the outlook for other companies reporting in the week.

The top earnings we are looking at are as follows: Dendreon Corporation (NASDAQ: DNDN); Electronic Arts Inc. (NASDAQ: EA); Rackspace Hosting Inc. (NYSE: RAX); The Walt Disney Co. (NYSE: DIS); Cisco Systems, Inc. (NASDAQ: CSCO); Macy’s Inc. (NYSE: M); Priceline.com Incorporated (NASDAQ: PCLN); and Nuance Communications Inc. (NASDAQ: NUAN).

We have taken estimates and price targets from Thomson Reuters consensus estimates and have added in color on each.

The shape of the biotech sector is likely to hinge based on the earnings of Dendreon Corporation (NASDAQ: DNDN). VIVUS Inc. (NASDAQ: VVUS) also reports on Monday but Dendreon has many things that biotech investors want: a product on the market, a controversial story, a stock way off its post-approval highs, a history of soft sales with the promise of better times ahead, and a rather large short interest. This is a sales story rather than an earnings story: Thomson Reuters expects sales of $81.2 million for the last quarter, $90.1 million for the quarter ahead (the quarter we are in now, and $378.3 million in 2012. These sales are all from Provenge for late-stage prostate cancer. This is the one that will set the tone for biotech during the week and this stock is back down closer to $11 after having popped to $15 from $8 earlier this year.

Electronic Arts Inc. (NASDAQ: EA) is no longer the leading game company for investors, but it is one of the largest game makers in the world. Its earnings are also ahead of the larger video game giant Activision Blizzard Inc. (NASDAQ: ATVI) which reports later in the week. This is also considered one of the throw-away quarters of the video game sector. Thomson Reuters expects E.A. to report $0.17 EPS on $959.56 million in sales, with next quarter expected to be -$0.32 EPS on $580.9 million in sales. This will mark the year-end report and the growth in the year ahead is expected to go to $1.13 EPS from $0.84 EPS expected and sales are expected to grow to $4.5 billion from $4.17 billion expected.

Filed under: Calendar, Earnings, The Week Tagged: AAPL, ALU, ATVI, CSCO, DIS, DNDN, EA, JNPR, JWN, M, NUAN, NWSA, RAX, VVUS