Ten American Companies With The Best News For 2011

24/7 Wall St. chose the ten most important pieces of news for major US corporations so far this year. Our evaluation was based on the history of the company and industry involved and the likely long-term effects of the event. The problem with a decision about what news may be important is that headlines are often little more than announcements of transitory events with little or no long-term impact. What appears to be an important item, like the news that the SEC had filed civil fraud charges against Goldman Sachs Group (NYSE: GS) last April, turned out to be a big deal. Goldman settled the matter in July for $550 million, a modest sum for the investment bank. The market effect? Goldman’s shares traded for $156 a year ago and trade for $169 today. The financial media carried stories about the charges for weeks.

Minor headlines may be the beginning of important trends. Nintendo Wii sales fell for the first time in three years during July 2009. The game console had bested the Microsoft Xbox 360 and Sony (NYSE: SNE) PS3 for so long that most analysts suspected that either the recession or a temporary interruption in the availability of supply caused the incident. Wii sales never recovered much, it turned out. The system had aged too much and Nintedo’s two competitors had added enough features and cut prices so low that the market was altered.

The risk that these ten stories here will turn out to be ill-chosen is lessened because most are based on very long-term trends in the industries in which the companies operate. The SEC was not in the habit of filing fraud charges against major financial firms. Ford’s leadership in the recovery of US car companies has occurred for three years, however. A significant event that helps mainntain that trend is likely to be long-lived.

News stories made if they made a significant impact on the media and industry when they broke and illustrated a long-term trend. Even if a selection meets both of those criteria, our choice is an educated guess.

1. Microsoft

The History: Microsoft (NASDAQ: MSFT) and Nokia (NYSE: NOK) were both badly behind in the smartphone market. Microsoft’s Windows Mobile product had fallen well behind other operating systems which were dominated by Apple’s (NASDAQ: AAPL) iPhone, Google’s (NASDAQ: GOOG) Android, the Research In Motion (NASDAQ: RIMM) BlackBerry OS, and Symbian. Nokia’s share of the global handset market had fallen from 39% less than three years ago, after it fought off a challenge from the Motorola RAZR to 32% recently. Nokia’s smartphone operation had been badly damaged by the iPhone.

The News: Nokia and Microsoft announced they would form a partnership to attack the global smartphone marketplace. Nokia will use its large platform of relationships with wireless carriers around the world and its hardware R&D. Microsoft will fashion Windows Mobile to work with next generation og Nokia smartphones.

What’s Next?: Nokia will probably lay off several thousand people as part of an anticipated restructuring. That will leave Microsoft with most of the costs to carry the partnership forward. Microsoft can easily afford the burden because of the ongoing success of its core software businesses. Microsoft came from behind in both the game console and search engine business. It needs a large handset company to do the same in the smartphone industry. Now, it has one.

2. Verizon

The History: Verizon Wireless, owned jointly by Verizon (NYSE: VZ) and Vodafone (NYSE: VOD), has been the largest wireless carrier based on total subscribers for several years, ahead of AT&T Wireless, Sprint-Nextel (NYSE: S), and T-Mobile part of Deutsche Telekom. Verizon had done well marketing handsets from HTC, Motorola, RIM, LG, and Samsung. The most sought-after smartphone, however, was the Apple iPhone which was exclusively sold by AT&T.

The News: Verizon Wireless announced in January that it would offer its own version of the iPhone which took away the most important marketing advantage of its top competitor. The Verizon iPhone reached the market earlier this month. Pre-sales on the Verizon Wireless website were shut off after a day because the available inventory sold out.

What’s Next?: The Verizon iPhone has sold briskly by all accounts. Early research shows that many of the new subscribers are past Android and BlackBerry users and a modest number of switches from AT&T. Verizon is known for the superiority of its wireless network over AT&Ts, which should be a long-term advantage. Apple will release new versions of the iPhone, which may include a low-priced version later this year and a 4G model. Verizon is iPhone-less no longer.

3. Boeing

The History: Boeing has been through one of the greatest launch failures in the history of American industry. Its 787 Dreamliner has been delayed six times due to labor problems, parts problems, software problems, and supplier problems. The tardiness has caused the company rifts with major airlines and threatens to help the sales of larger rival Airbus, which also has built a series of fuel-efficient and light next-generation commercial aircraft.

The News: Boeing announced the launch of its new 747-8 airplane. The aircraft is an upgrade of the original jumbo jet that first flew in the 1960s. Larger than older versions, it also has high-tech wings that cut drag and fuel consumption.

What’s next?: Boeing’s track record of releasing new planes has been badly damaged by the 787 trouble. Airbus has begun to attack the super-jumbo market with its own A 380. The number of planes sold in the largest plane category includes international carriers that fly large loads of passengers more than 6,000 miles and major cargo haulers. Boeing has a success story that can bridge it to the official launch of the Dreamliner.

4. Netflix

The History: Netflix has quickly bested rivals such as Blockbuster with its successful DVD-by-mail service. The operation did not require Netflix to keep expensive stores. Netflix now has more than 20 million subscribers. The movie rental company found that it could get many customers to take their movie rental service via the streaming of premium content to their home PCs and TVs. The success of the project has revolutionized the Netflix business and made it extremely powerful with Hollywood producers.

The News: Nielsen announced a sharp rise in video streaming activity in January. Netflix did better than the other companies analyzed. The increased volume of video served over its service easily bested rivals Hulu, and larger services such as YouTube.

What’s Next?: Netflix has the No. 1 premium streaming video business in the US and there is no clear No.2. Apple (NASDAQ: AAPL) and Amazon.com (NASDAQ: AMZN) have barely entered the industry. Large retailers such as Wal-Mart (NYSE: WMT) are trying to maintain  their own services. The recent history of Netflix subscriber growth indicates that its business should hold its lead and the breathtaking rise in its stock may continue.

5. Google

The History: Google has been for several years considered a one-service company. Almost all of its sales and extraordinary growth have come from its search engine business. Google developed a mobile operating system–Android–less than three years ago. The OS was open sourced so it offered handset companies a low-cost highly flexible software platform.

The News: Data released by several research firms at the end of 2010 and early 2011 show that Android has surpassed Apple’s iPhone operating system in the global mobile OS market. The rate of adoption is so fast that Android may be the largest gainer of share again this year.

What’s Next?: The criticism of Android, like many other Google “experiments,” is that the product is successful with consumers but has little commercial value for the search engine giant. Google management has begun to convince analysts that growing control of mobile OS is a means to a large market share in mobile advertising and search. These sectors are as hotly contested now on smartphones as they were on PCs a decade ago. The leaders in the mobile OS business will set themselves in a position worth billions of dollars in sales each year.

Also Read: A Sudden Rise in February Unemployment

6. Exxon

The History: Oil company stocks and earnings do not mirror the prices of crude, but the correlation is relevant. Exxon Mobil’s (NYSE: XOM) hit all-time highs in 2008 and crude pushed above a record $140.

The News: Exxon Mobil earned $9.25 billion in the last three months of 2010, its most profitable quarter since the record third quarter of 2008. The largest publicly traded oil company said its net income grew 53% in the fourth quarter of last year as it produced more oil to take advantage of higher prices.

What’s next?: Exxon’s stock price is back over $84 after a run from $56 nearly a year ago. Oil prices show little chance of falling much below $90. The ongoing political upheaval in the Middle East will support fears of supply interruption. Demand spikes in large developing nations like China will prod the belief that short-term prices will almost certainly have to rise.

7. McDonald’s

The History: An extraordinary increased dominance in the fast-food market has helped lift McDonald’s shares from $34 five years ago to their recent all-time high of just over $80. That period has also included an unprecedented level of dividend increases and share buybacks which have given shareholders superior returns. McDonald’s menu innovations, which have included the addition of premium coffees and breakfast offerings, have helped same-store sales to continue improve globally.

The News: McDonald’s Corp.’s same-store sales rose 5.3% in January. Wall St. was  concerned that with such a large part of the fast food market, McDonald’s could not sustain a rapid growth rate in a market which continues to have strong competitors such as Burger King.

What’s Next?: McDonald’s will continue to be the beneficiary of two trends. The first is that the overall recovery of the global economy helps most multinationals with broad customer bases. The other is that none of its smaller rivals has created a food product mix that has had any success challenging McDonald’s market share. The one rival it will have to show it can match the home of the Golden Arches is Yum! Brands which is growing rapidly in China.

8. Wells Fargo

The History: Wells Fargo (NYSE: WFC) was among the large banks and investment houses which were nearly destroyed by the credit crisis. The bank added ownership of Wachovia as the government tried to marry weak institutions with viable ones. Wells Fargo did not have the broad diversity of divisions that Citigroup did before 2008 or the powerful M&A and investment banking business that Goldman Sachs Group (NYSE: GS) did. Wells Fargo’s strength in online banking and the retail sector have been critical to its recovery

The News: In the Berkshire Hathaway 13D for the last quarter of 2010, among Warren Buffett’s holdings was a sharp increase in shares of Wells Fargo. Buffett increased his position by 6.2 million shares, a stake worth more than $10 billion. Perhaps more impressive, Buffett liquidated his positions in Wells Fargo rival Bank of America and reduced his investment in several other financial services firms.

What’s Next?: Wells Fargo will not suffer from the loss of trading profits and proprietary trading operations because their businesses were small. The caps the federal government has put on a number of consumer credit transactions may hurt Wells Fargo’s earnings. On balance, analysts believe that the bank is a “safer” investment than most of its rivals. Buffett’s due diligence is almost always good enough for the rest of Wall Street.

9. Ford

The History: The only one of The Big Three that did not go into government-supported Chapter 11 during the credit crisis, Ford had adequate capital to continue aggressive product development. The company took the risk that it could cover $23 billion in long-term debt once the economy began to improve. As the auto sales market began to recover in 2010, particularly in the US, rival Toyota’s sales were damaged by recalls which eventually affected over eight million vehicles worldwide.

The News: Ford reported its U.S. sales were up 24%, year-over-year, in January during which it sold 112,406 vehicles. The figures were above expectations. At nearly the same time, Ford said it would pay off $3 billion in debt.

What’s Next?: It will not take much more debt repayment to get Ford back to an investment grade debt rating. That, coupled with historically low borrowing costs for very large companies should help Ford restructure its balance sheet to the benefit of investors, probably this year. Ford’s sales are likely to continue to improve, particularly in the US. Its reputation for quality has grown based on research data from firms like JD Power. Ford’s new fuel-efficient engines have drawn in many buyers who might have been purchasers of hybrids.

10. Jetblue

The History: Enough time has passed that JetBlue (NASDAQ: JBLU) customers and potential fliers have forgotten its highly publicized customer service problems from just over two years ago. The budget airline has regained its reputation as the primary low-cost, high-quality carrier in the US. Winter storm problems hurt traffic in December

The News: JetBlue Airways reported a large increase in passenger loads (the percentage of available seats that are filled with passengers) for January with an 80% load factor, which is a 5.9% increase over the same period last year. Many airlines had strong January figures, but JetBlue’s were at the high-end of those reported.

What’s Next?: JetBlue is one of the few large carriers which has not been the party to a marriage in the last two years. United has merged with Continental and Northwest with Delta. That has created a US market which is dominated by four airlines which includes American and US Air. The low-price end of the market has not been damaged by the heft of the competition. Along with Southwest (NYSE: LUV), JetBlue has been able to convince Wall Street that the carriers which attract consumers based on ticket prices coupled with the ability to maintain a quality reputation should have improved passengers loads going forward.

Douglas A. McIntyre