We have two homebuilder earnings due from Beazer Homes USA Inc. (NYSE: BZH) and PulteGroup, Inc. (NYSE: PHM).  Other key earnings to watch will be from the following: Blackstone Group L.P. (NYSE: BX); Boston Scientific Corporation (NYSE: BSX); CME Group Inc. (NYSE: CME); Dow Chemical Co. (NYSE: DOW); Genworth Financial Inc. (NYSE: GNW); Gilead Sciences Inc. (NASDAQ: GILD); International Paper Co. (NYSE: IP); Kellogg Co. (NYSE: K); MasterCard Inc. (NYSE: MA); Merck & Co. Inc. (NYSE: MRK); Royal Caribbean Cruises Ltd. (NYSE: RCL); Starwood Hotels & Resorts Worldwide Inc. (NYSE: HOT); Trimble Navigation Ltd. (NASDAQ: TRMB); Vertex Pharmaceuticals Inc. (NASDAQ: VRTX); YRC Worldwide Inc. (NASDAQ: YRCW).

We have included Thomson Reuters consensus estimates on each company.  On most we have included pricing data and/or other bits of color for traders to consider.

We have two different homebuilders on deck to report.  Beazer Homes USA Inc. (NYSE: BZH) is expected to post -$0.36 EPS on $211.4 million in sales and we would watch cancellation rates on contracts as well as the quality of the earnings.  Second is PulteGroup, Inc. (NYSE: PHM) with an expected positive earnings of $0.07 EPS on $1.14 billion in sales.  Pulte’s cancellation rates and quality of earnings will also have to be monitored.

Blackstone Group L.P. (NYSE: BX) will show private equity wealth and earnings in the morning.  The firm is expected to report earnings of $0.38 EPS on revenues of $986.75 million.

Boston Scientific Corporation (NYSE: BSX) has been down and out for longer than any current and past holder would like to consider.  Thomson Reuters has estimates of $0.08 EPS on $1.91 billion in sales.

CME Group Inc. (NYSE: CME) is expected to report earnings of $3.71 EPS and $754 million in sales before the market opens.  With a possibility of a state-relocation and the ongoing pressure of exchange mergers we would be watching this one.  At roughly $244.50, the 52-week trading range is $224.69 to $317.27.

Dow Chemical Co. (NYSE: DOW) is expected to turn in earnings of $0.30 EPS on $14.19 billion in sales.  The report is due in the morning.

Genworth Financial Inc. (NYSE: GNW) is expected to report earnings of $0.19 EPS on $2.58 billion in sales.  The shares are now up over 60% from the lows of the last year and the stock still remains pressured due to the mortgage insurance overhang that has been in place for quite some time.

Gilead Sciences Inc. (NASDAQ: GILD) has shocked the market by outperforming despite what appears to be a bad use of effort and capital in the large acquisition.  Still, shares hit a new 52-week high on Wednesday.  Thomson Reuters has estimates of $1.05 EPS and $2.18 billion in sales. 

International Paper Co. (NYSE: IP) is close to being within striking range of a 52-week high and it pays well above a 3% yield today.  Thomson Reuters has estimates of $0.61 EPS and $6.5 billion in sales.

Kellogg Co. (NYSE: K) is lagging and actually close to a 52-week low with shares around the $49.50 mark. The estimates are $0.63 on $2.99 billion in sales.  The bar is set very low here.

MasterCard Inc. (NYSE: MA) will show just what the interchange fee problems look like, but that is not fully reflected at all in current numbers.  The consensus estimates are $3.92 EPS and $1.73 billion in sales. With shares around $357 some are concerned over valuations here.

Merck & Co. Inc. (NYSE: MRK) is reporting early Thursday morning and the company’s higher dividend hike has shares trading very close to 52-week highs with a price of close to $38.70 andf a 52-week range of $29.47 to $39.43.  Estimates are $0.95 EPS and $12.53 billion in sales. To show just how low growth is the estimates of $3.76 EPS and $48.23 billion in sales for all of 2011 are only expected to be $3.83 EPS on $47.62 billion in sales for all of 2012.

Royal Caribbean Cruises Ltd. (NYSE: RCL) may or may not release.  With its rival’s disaster, we are not doing much legwork here.  Thomson Reuters has a projection of $0.15 EPS and $1.78 billion in sales.

Starwood Hotels & Resorts Worldwide Inc. (NYSE: HOT) is key for hotel investors and this one is expected to post $0.57 EPS on $1.42 billion in sales. Starwood has over $1 billion in cash but is still trading at a high 3.7-times book value.

Trimble Navigation Ltd. (NASDAQ: TRMB) is not so widely watched on its own, but it is used as a barometer reading for Garmin.  Trimble estimates are $0.48 EPS and $419.10.

Vertex Pharmaceuticals Inc. (NASDAQ: VRTX) has been in the news with new FDA approvals.  We have Thursday as the tentative date and estimates are $0.73 EPS and $523.66 million in sales.

YRC Worldwide Inc. (NASDAQ: YRCW) is set to report and it is a puzzlement as to how this stock is still alive.  On a reverse split basis the $12.83 price compares to a 52-week range of $7.94 to somewhere over $1,000.  The consensus is listed as -$6.97 EPS but we have no idea how these targets are composed on this company.

Your email address

subscribe

terms and conditions

JON C. OGG

Google Inc. (NASDAQ: GOOG) and Apple Inc. (NASDAQ: AAPL) along with their mapping and navigation services for free or nearly free took away the need for many of those in-car dashboard devices for drivers who practically live in their cars and trucks.  Trimble Navigation Limited (NASDAQ: TRMB) is not anywhere close to its 52-week high today.

As far as what is driving Garmin, maybe it is the personal navigation devices used for exercise and hiking, as well as the marine and aviation products.  Unless rental car companies have decided to make the devices mandatory in all rentals, then it seems likely that there is not a sudden resurgence of device sales.  Then there is the NTSB recommendation to get rid of electronic device use in cars, but Garmin is looking to get more in-dashboard auto sales ahead.

Perhaps investors have noticed that the 18 million shares in the most recent short interest data was the lowest that it had been for a year.  Or maybe it is a dividend yield north of 4%.  Maybe the excitement was a Garmin CFO interview on CNBC that is giving investors more comfort.  In the middle of December, J.P. Morgan counted Garmin as a stock which should be absolutely avoided.  Then there is the issue of LightSquared’s wireless network interference with most GPS devices.

The Garmin CFO and Treasurer interview can be seen here.  Garmin shares are up at $39.40 after hitting a daily high of $39.53, and the prior 52-week trading range was $29.23 to $39.03.

JON C. OGG

2012 Picks in Semiconductors from analyst Bobby Burleson:

Analog Devices Inc. (NYSE: ADI) reiterated Buy with $38 price target; Integrated Device Technology, Inc. (NASDAQ: IDTI) reiterated Buy with $7.00 price target.

“While we remain concerned about near-term softness in PCs and communications and acknowledge the potential for another number cut, we believe the worst cuts are behind us. Heading into 2012, we like names with broad-end market exposure and low PC exposure like Analog Devices and Integrated Device Technology.”

2012 Picks in Communications Technology from analyst T. Michael Walkley:

Apple Inc. (NASDAQ: AAPL) reiterated Buy with $560 price target; QUALCOMM Inc. (NASDAQ: QCOM) maintained Buy with $74.00 price target; and Sierra Wireless, Inc. (NASDAQ: SWIR) with a $9.00 price target.

“While we anticipate global handset units will increase by 7% YoY in 2012 to 1.72B units, we anticipate much faster growth trends for the smartphone  market. In fact, we are modeling 481M smartphone units in 2011 ramping to 650M units in 2012, or 35% YoY growth.”

2012 Picks in New Media & Location Technology from analyst Jeff Rath:

Trimble Navigation Limited (NASDAQ: TRMB); Velti PLC (NASDAQ: VELT); KIT Digital, Inc. (NASDAQ: KITD); and Rovi Corporation (NASDAQ: ROVI).

“We fully expect the US Pay-TV service provider eco-system to undergo an accelerating change as cable providers roll out more robust OTT/Hybrid video offerings in response to growing competitive pressures, and in an attempt to stem ongoing losses of its core video subscribers.”

2012 Picks in Enterprise Software from analyst Richard Davis:

Salesforce.com (NYSE: CRM) and Nuance Communications, Inc. (NASDAQ: NUAN).

“Software companies – at least firms with next generation architectures – are in great shape. Cloud software accounts for less than 10% of installed code. Barring horrific economic headwinds, the “revolutionaries” on which we focus our coverage are very likely to gain market share at the expense of legacy competitors”

2012 Picks in Internet from analyst Michael Graham:

Google Inc. (NASDAQ: GOOG) reiterated Buy with $725 price target and Zillow, Inc. (NASDAQ: Z) listed as n attractive acquisition target and the firm has an organic (non-M&A) price target of $32.00 for the stock.

“We believe the underlying drivers will be growth in online advertising, eCommerce, mobile commerce, and social networking adoption.”

These are the picks we have been sent by Canaccord Genuity’s research relations.  The firm has many other picks in technology which did not make the 2012 list.

JON C. OGG

Aixtron SE (NASDAQ: AIXG) Raised to Equalweight at Morgan Stanley.
Alcatel-Lucent SA (NYSE: ALU) Cut to Neutral at BofA/ML.
AstraZeneca PLC (NYSE: AZN) Cut to Underweight at Morgan Stanley.
Corrections Corporation of America (NYSE:CXW) named as Value stock of the day at Zacks.
Emerson Electric Co. (NYSE: EMR) Raised to Buy at Citigroup.
GlaxoSmithKline plc (NYSE: GSK) Raised to Equal-Weight at Morgan Stanley.
Honeywell International (NYSE: HON) Raised to Buy at Citigroup.
Humana Inc. (NYSE: HUM) Reiterated Buy and raised target to $95 at Argus.
Kirby Corporation (NYSE: KEX) Started as Outperform at Credit Suisse.
Microchip Technology (NASDAQ: MCHP) named as Bear of the Day at Zacks.
OmniVision Technologies Inc. (NASDAQ: OVTI) Cut to Perform at Oppenheimer.
Plains All American Pipeline, L.P. (NYSE: PAA) Raised to Outperform at Wells Fargo.
Rackspace Hosting, Inc. (NYSE: RAX) Raised to Buy at Kaufman Bros.
St. Jude Medical (NYSE: STJ) Raised to Outperform at Credit Suisse.
Teva Pharmaceutical Industries (NASDAQ: TEVA) Reinstated as Outperform at Credit Suisse.
Trimble Navigation Limited (NASDAQ: TRMB) Started as Buy at Janney.
Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX) Cut to Neutral at R. W. Baird.
Whole Foods Market Inc. (NYSE: WFM) named Bull of the Day at Zacks.

Your email address

subscribe

terms and conditions

Earnings per share fell 16% to $0.56 from $0.67 in second quarter 2010, but the ‘pro forma’ earnings came down by 26% to $0.63 EPS from $0.85 in the same quarter in 2010.  Revenue fell 8% to $674 million.  The $0.63 and $674 million compares to Thomson Reuters estimates of $0.66 EPS and $633.75 million.  Free cash flow generation was $196 million in the quarter.

The company has given guidance that is a disappointment as well for 2011: it sees earnings at $2.00 to $2.15 EPS and sees revenues in 2011 at $2.5 to $2.6 billion.  Thomson Reuters has estimates of $2.48 EPS and $2.52 billion in revenues.

The company’s core Automotive/Mobile segment revenue was down 19% to $363 million.  Its “other” 4 areas did grow but the issue is that they grew at a rate that still does not come close to offsetting the bleed-out in the auto segment with revenues as follows: Outdoor rose 1% to $81 million; Fitness rose 25% to $78 million; Aviation rose 13% to $73 million; and Marine rose 6% to $79 million.

If Garmin looks at the map, the North American market is tanking, with growth coming from elsewhere: North America revenue fell 21% to $358 million; Europe revenue rose 12% to $253 million, Asia revenue was up 31% to $63 million.  Garmin also noted a drop in units shipped by 6% year-over-year to 3.8 million units.

Gross margin rose sequentially but fell year-over-year to 48% (versus 47% in the first quarter and 54% in second quarter 2010).  Operating margin fell to 20% (versus 28% in Q2 and 15% a year ago).  Garmin also lowered its margin guidance: 45% to 46% for 2011 on a gross margin basis and 16% to 17% on an operating margin basis.

The improved revenue note for 2011 appears to be from acquisitions as well.  The company noted that the improvement in sales will be driven primarily by the acquisitions of Navigon and Tri-Tronics; the EPS drop is due to the accelerating deferral of high margin revenues and associated costs.  In short, the decline is happening at a rate that may even be faster than Wall Street is expecting.

Garmin may feel like a value stock to many of the hold-out bulls.  The problem is that with a core business decline coming faster than its other segments can possibly grow this is actually a value trap.  After closing at $31.53 on Tuesday, the pre-market is down close to $28.00 in very thin volume indications.  Analysts are already looking for lower numbers in 2012.

Trimble Navigation Limited (NASDAQ: TRMB) was actually higher after its earnings on Tuesday evening.  We have yet to see formal trading but the stock is indicated up above $35 this morning after closing at $33.08 yesterday.

Another business segment has been marginalized by the growth of smartphones and the GPS and PND features offered.  At some point, the company better go hire some of the cigarette executives to help manage the business through a period where the core business faces a secular decline.

JON C. OGG

Anheuser-Busch InBev (NYSE: BUD) Cut to Neutral at BofA/ML.
Atmel Corporation (NASDAQ: ATML) Reiterated Buy and raised target to $17 at Gleacher & Co.
Dow Chemical Co. (NYSE: DOW) Raised to Buy with $49 target at Argus.
Eastman Chemical Co. (NYSE: EMN) Maintained Outperform as Bull of the Day at Zacks.
Hess Corp. (NYSE: HES) Raised to Buy at Argus.
Intel Corporation (NASDAQ: INTC) Reiterated Outperform with $28 target on Focus List at Credit Suisse.
JA Solar Holdings Co., Ltd. (NASDAQ: JASO) Cut to Sell at S&P Equity Research (late Wednesday call).
Lithia Motors, Inc. (NYSE: LAD) Maintained Buy as Value stock at Zacks.
McDonald’s Corporation (NYSE: MCD) Cut to Neutral at Piper Jaffray.
Micron Technology Inc. (NASDAQ: MU) Started as Neutral at JPMorgan.
OpenTable, Inc. (NASDAQ: OPEN) Raised to Buy at BofA/ML.
PMI Group, Inc. (NYSE: PMI) Called as Bear of the Day with $1.75 target at Zacks.
P.F. Chang’s China Bistro, Inc. (NASDAQ: PFCB) Cut to Neutral at Piper Jaffray.
Time Warner. Inc (NYSE: TWX) Reiterated Outperform with $40 target on Focus List at Credit Suisse.
Trimble Navigation Limited (NASDAQ: TRMB) Raised to Overweight at JPMorgan.

You can join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

What is happening is what you will see below on a segment and regional basis.  North America continues to slide in a post-saturation market as Garmin units are gradually being replaced by the free or near-free services offered in Google Inc. (NASDAQ: GOOG) and Apple Inc. (NASDAQ: AAPL) smartphones.  TeleNav, Inc. (NASDAQ: TNAV) has been spotty in growth but it remains a pressure mechanism as well with an AT&T Inc. (NYSE: T) contract extended recently and with the launch of the App for Verizon Communications Inc. (NYSE: VZ) on the iPhone.

Automotive/Mobile revenues fell 31% to $559 million.  Its Outdoor/Fitness revenue rose 15% to $171 million, aviation revenue rose 10% to $71 million, and the marine revenue rose 9% to $37 million. The breakdown is also one of geography.  North America was down about 30% to $537 million, while Europe down 4% to $235 million and Asia was up 46% to $66 million.  Unless everyone out there becomes a fitness guru worried about getting lost, or becomes a boating enthusiast and aviator, the core auto-guidance system business is one that is facing secular pressure that is not going away.

Margins are contracting as well. Gross margin fell to 45% from 46% and operating margin fell to 22% from 28%.  At the same time, Garmin’s effective tax rate rose to 15.0% from 4.7% in fourth quarter 2009.

Garmin did manage to generate $175 million of free cash flow in the last quarter and it ended with a balance of cash and marketable securities of over $2 billion.

Guidance is cautious as well.  Garmin noted, “We expect revenues to decline in 2011 as the growth in the outdoor, fitness, marine and aviation segments, as well as auto OEM opportunities, is offset by ongoing declines in the PND market. We anticipate gross margins to be stable and operating margins to decline slightly from the strong margins generated in 2010. The operating margin declines will be primarily driven by ongoing investment in the business. These factors and an anticipated effective tax rate of 20% result in a forecasted 2011 earnings per share range of $2.25 – $2.50.”

After going back to review our “Garmin stories on earnings” there is one thing that has been present in each of the past reports and which remains present ahead: Secular trends are working against the company.  Management needs to go hire one of the ex-tobacco executives who knows how to properly drive growth in a period of what will otherwise be a long-term slide in revenues.

Trimble Navigation Limited (NASDAQ: TRMB) has not offered any indications as of yet, but Garmin closed at $32.14 and shares are indicated lower by 5% or more in the early pre-market hours.  The pressure has been mounting and will only continue.

JON C. OGG

We do now have a closer comparison for a year over year change.  For the full year 2009, full year non-GAAP operating income of $172.1 million was down 32% from 2008. Full year 2009 non-GAAP operating margin was 15.3% versus 19.0% in 2008.  Trimble’s revenue was $1.13 billion, down about 15% from 2008.  Cash flow from operations for the full year 2009 was $194.6 million, as compared to $176.1 million in 2008.

Today’s numbers might not spell major disaster in the world of global positioning systems nor potentially that of personal navigation devices, but it is no longer showing the great expectations previously sought.  It is also not an apples-to-apples comparison between these two companies, but that is what traders have tried to use for some time in making inferences and references.  Unless there are nasty surprises in the conference call, today’s news is unlikely to move the needle on Garmin Ltd. (NASDAQ: GRMN).

Trimble shares closed up 0.25% at $23.27 and shares are trading at $23.15 in the after-hours session.  The 52-week range is $11.96 to $26.17.

JON C. OGG

If you have spoken to anyone in the navigation and the global positioning systems, there should be no surprise today in the launch.  There might even be rules today or tomorrow against you typing in all these directions onto a little phone to follow directions if you are driving, but only in some cities and states.

Google’s mantra has been “Do no evil.”  The company keeps claiming that it is just offering more and more for consumers.  But it keeps entering more and more spaces outside of search and offering an alternative service that is free in hope that it will generate ad revenues or service revenues out in the future.  That in and of itself might not be evil in intent, but most business models can’t stand up to free competition out of the blue from a company that can take a wrecking ball approach in new launches and has a $22 billion cash arsenal behind it.   If this new Google entrance into more and more new markets for free keeps coming, eventually someone or a group of someones from the business world is going cry out.  And that is the sort of stuff that antitrust regulators have gone after.  Ask Bill Gates.

JON C. OGG
OCTOBER 28, 2009

See More 24/7WallSt. TV Here

Sony’s problems have now affected the company’s earnings. Revenue dropped 17% in the last quarter to $17.6 billion and the company lost $343 million. The firm’s digital camera and TV operation sales fell 27% to $8.1 billion. Sony is up against products from China and Korea which can be made less expensively. Brands don’t count much in the flat screen TV business and may count even less in the camcorder and digital camera markets. Consumers are interested in what works more than the name on the label.

Sony’s PC and video game division’s revenue was down 37% to $2.6 billion. Sony’s PC sales are nowhere near those of Dell (DELL), HP (HPQ), Lenovo, or Acer. Its PS3 game console has been in third place behind the Nintendo Wii and Microsoft (MSFT) Xbox 360 for two years. It is hard to believe that Sony, which dominated the video game business for several years, would fall behind what was a small Japanese electronics company and Microsoft, which has not done anything right in the hardware business since the company was founded.

It is more interesting to look at what Sony has not done in the last decade than what it has done. Al Gore invented the internet during that period, and a lot of consumer electronics devices have been launched that really should have been created by Sony.

Sony would have been the perfect company to invent and market satellite radio. The business almost took Sirius XM under, but Sony had more access to capital and a golden brand that would have helped to push adoption. Sony is already in the content business through its ownership of one of the world’s largest studios and its history in the record industry. Sony should have been the premier if not the only satellite radio company.

Sony’s biggest embarrassment comes when it is compared to Apple (AAPL) which launched the iPod in 2001, just after Sony introduced the PS2. The PS2 is a symbol of Sony’s best days, now long gone. The iPod is the symbol of Apple’s resurrection. Sony’s VAIO PC line had a tiny share of the market. Apple’s Mac has the premium end of the PC market, the end where machines sell for over $1,000, almost to itself. That position should have belonged to Sony.
Sony had a modest handset business. It was so modest that the company combined it with Ericsson’s cellular phone business. The joint venture is doing badly and the Apple iPhone is in such high demand that the company cannot make enough of its latest product to keep its distribution partner, AT&T (T) fully stocked.

Sony looks even worse in the handset business because it missed the consumer success of Apple in the wireless market and the enterprise market success of RIM’s (RIMM) Blackberry. Sony’s brand would have made it a natural leader in the smartphone business. Instead it has no independent position in the sector at all.

Another consumer electronics business that has taken off is the GPS industry. Tiny companies like Tom Tom (TRMB) and Garmin (GRMN) turned themselves into successful operations by pioneering a fairly simple satellite-controlled device that had a terrifically broad market. Sony missed the satellite electronics opportunity twice by failing to see the satellite radio and GPS markets emerging.

One of the most important chances Sony had to stay at the center of the electronics business was to develop software to control key features and functions on PCs and wireless devices. Google (GOOG) recently launched its Android operating system. It works on smart phones and PCs. Sony created OS products for video games, home electronics, and, years ago, for PCs. Sony clearly never saw that software would eventually dominate the hardware world. Now it is too late.

Sony may be remembered as the largest consumer electronics company failure in history. No other company had the Sony brand at that critical period in the late 1990s and early this decade when most of the products that dominate the market today were born. Sony was not in on the ground floor of a single one of them.

Douglas A. McIntyre