Existing Home Sales Sink Across Nation
Existing-home sales fell in 40 of the country's metropolitan areas in Q4, according to the National Association of Realtors [NAR]. This is the first time the organization has ever recorded declines in a majority of U.S. cities. 2006 was the first year to suffer a decline in sales after five record-breaking years. Sales across the country dropped more than 10% in the quarter versus the same period in 2005. The Western states were particularly hard-hit, with sales 17.8% down from the year-ago period. Florida was the worst-performing state in the country with a 30.8% drop in sales. Atlantic City, N.J. was the biggest gainer, with sales up 26%. The value of existing single-family homes declined across the country, with the median sales price down 2.7% to $219,300 at the end of Q4 against $225,300 a year earlier. NAR chief economist David Lereah put a positive spin on the report: "This information confirms 2006 was the year of contraction," he said, "and hopefully the fourth quarter was the bottom of this current business cycle." His optimism is bolstered somewhat by new data on the confidence of U.S. homebuilders, which has risen to its highest level since June.Wall Street Journal
Sources: Reuters, Bloomberg,
Commentary: Existing-Home Sales Dismal, But Expected To Pick Up • Existing Home Sales are Fantastic, According to the National Association of Realtors Anyway • Existing Home Sales And Prices Continue To Fall
Stocks/ETFs to watch: Pulte Homes Inc. (NYSE:PHM), Hovnanian Enterprises Inc. (NYSE:HOV), Toll Brothers Inc. (NYSE:TOL). ETFs: iShares Dow Jones US Home Construction (NYSEARCA:ITB), SPDR Homebuilders (NYSEARCA:XHB), PowerShares Dynamic Building & Construction Portfolio (NYSEARCA:PKB)
Ballmer Says Some Analysts' Vista Estimates 'Overly Aggressive' -- Street Reacts
Shares of Microsoft fell 1.7% to $28.95 in after-hours trading on volume of nearly 12 million shares, following CEO Steve Ballmer's warning to analysts that some of their forecasts for Vista revenues were "overly aggressive." Ballmer adds, "You shouldn't think of a huge surge in fiscal year '08 relative to '07. There's a few that think we are going to do so much better than PC growth." Likewise, operating expenses are seen coming in lower-than-expected, under the $2.7 billion increase from last fiscal year. Regarding competition with Internet search leader Google, Ballmer commented, "We still have a lot more work to do, both on the R&D side and the sales and marketing side. I wouldn't be frustrated. I'd be excited by the opportunities for improvement." Ballmer said Microsoft could boost spending for Internet services and he said the company still plans to use its cash for stock repurchases. T. Rowe Price analyst Ken Allen seemed unmoved by Ballmer's Vista-related comments, noting Microsoft has typically issued conservative guidance.
Sources: Microsoft Strategic Update: transcript [.doc] and presentation [.ppt], Bloomberg
Commentary: Microsoft's Ballmer: We're Wiffing On Vista • Best Buy: Sales of Vista-Based PCs Top Expectations • PC Sales Jump on Demand for Vista
Stocks/ETFs to watch: Microsoft (NASDAQ:MSFT). ETFs: Software HOLDRs (NYSE:SWH), iShares Goldman Sachs Software Index (NYSEARCA:IGV), Technology Select Sector SPDR (NYSEARCA:XLK)
Cisco Gives Apple Another Extention in iPhone Lawsuit
Cisco Systems Inc. said late Thursday it has agreed to give Apple Inc. until Feb. 21 to respond to its iPhone lawsuit. Cisco is suing Apple for trademark infringement after Apple unveiled plans for its long-anticipated multimedia iPhone during MacWorld in January. Cisco acquired the iPhone trademark in 2000 when it bought Infogear. Linksys, a Cisco division, has been selling iPhones for over a year. This is the second extention Cisco has given Apple; the first extention was from Jan. 31 until yesterday. Cisco has said it would allow Apple to use the name, but wants their phones to be able 'to communicate with each other.' Apple has called the lawsuit 'silly,' and argues its phone uses cellular technology while Cisco's operates over the Internet using VoIP, making them non-competitors. Both companies issued statements that they need extra time to reach a settlement.
Sources: Infogear's iPhone Trademark Registration, MSN/Reuters, BusinessWeek
Commentary: Linksys Not-Apple-iPhone (Gizmodo) • Why Apple's iPhone Will Succeed • Is Apple Just Dreaming iPhone Dreams?
Stocks/ETFs to watch: Apple Computer Inc. (NASDAQ:AAPL), Cisco Systems Inc. (NASDAQ:CSCO)
TheStreet.com Beats the Street on Ad Revenue Strength
TheStreet.com's shares jumped 7.2% to $11.15 yesterday following a more than doubling of Q4 earnings to $4 million, or $0.14/share, beating analysts' average estimate by a penny according to a Thomson poll. Revenue rose 44% to $14.4m, helped by a 49% increase in advertising revenue to $4.8m, which outpaced subscription revenue growth of 36% to $8.8m. Chairman and CEO Thomas J. Clarke, Jr. comments, "In the fourth quarter we made solid progress within our strategy of increasing the Company's advertising-based revenue by delivering more content initiatives such as TheStreet.com TV and TheStreet.com Ratings on our free site." TheStreet.com said it had 880 million page views in calendar year 2006 (+80% y-o-y) and average monthly unique visitors increased 46% to 4.4m. Regarding the company's relationship with co-founder Jim Cramer, now a popular figure in financial TV media, Clarke said to expect a contract around mid-2007 or in Q3.
Sources: TheStreet.com Q4 2006 Earnings Call Transcript, Press release, TheStreet.com
Commentary: TheStreet.com CEO: Online Video Ad Market Is 'Astounding' • Dow Jones Nixes Buying TheStreet.com, Says Web Valuations Excessive • TheStreet.com Partners With Stockpickr
Stocks/ETFs to watch:TheStreet.com (TSCM). Competitors: Dow Jones & Co. (DJ), Morningstar (NASDAQ:MORN)
Merger Speculation Sends Anheuser-Busch Shares to Two-Year High
Shares of Anheuser-Busch rose to a two-year high yesterday after a report in a Brazilian newspaper Valor Economico claimed the company was discussing a merger with the world's top brewer InBev. Both companies declined to comment. The paper claimed to have learned of the merger talks between InBev and Anheuser-Busch from three Brazilians on the InBev board. The paper added talks were still at a preliminary stage, and also cited an unnamed investment banker who claimed the merger had "big chances of happening one day." BUD shares were up $1.52, or 3%, to $51.75.
Sources: Business Week, Washington Post, MarketWatch, Reuters
Commentary: Anheuser Busch Sets Up Bud.TV For Internet Reach • Cramer's Take on BUD • Anheuser-Busch Companies Q4 2006 Earnings Call Transcript
Stocks/ETFs to watch:Anheuser-Busch Companies (NYSE:BUD). Competitors: Molson Coors Brewing Company (NYSE:TAP), The Boston Beer Company (NYSE:SAM), Constellation Brands (NYSE:STZ), Redhook Ale Brewery (HOOK). ETFs: PowerShares Dynamic Food & Beverage (NYSEARCA:PBJ), Vanguard Consumer Staples (NYSEARCA:VDC)
Molson Coors Earnings Rise Sharply Following Merger
Molson Coors Brewing Company said profit in 4Q06 rose more than fourfold on strong demand for Coors Light in Canada; earnings beat consensus estimates and sparked shares to their biggest gain in three years. By the numbers, EPS was $1.14 on a profit of $99.2 million versus EPS of $0.26 on net income of $22.4 million, in the year earlier period. Revenue increased 11% to $2.1 billion. Analysts were looking for earnings of $0.93-$0.94 a share. Molson's earnings were partially helped by a lower effective tax rate of just 24% in the recent quarter versus 37% a year ago. Another factor leading to improved earnings was the 2005 merger of Canadian brewer Molson Inc. and American rival Adolph Coors Co. Said Stifel Nicolaus analyst Mark Swartzberg, "We consider the (fourth-quarter) result the most persuasive indicator yet that the Molson merger is a value-creator." Shares rose a new 52-week high yesterday closing up $4.56, or 5.53%, to $87.03.
Sources: Press Release, Bloomberg, Forbes, MSN/Reuters
Commentary: What's On Tap? Molson Coors Looks Good • Molson Coors: Like Watching Beer Dry
Stocks/ETFs to watch: Molson Coors Brewing Company (TAP). Competitors: Anheuser-Busch Companies (BUD), The Boston Beer Company (SAM), Constellation Brands (STZ), Redhook Ale Brewery (HOOK)
Chipotle's Q4 Results Beat Expectations
Natural-food burrito chain Chipotle's Mexican Grill finished its first year as a public company by beating forecasts with a more-than-doubling of Q4 profit. Net income rose to $10.8 million ($0.33/share) from $4.3 million ($0.16/share) a year earlier, ahead of the Street expectation of $0.28. Full-year EPS were $1.28. Revenue spiked 27% to $219.7 million from $173.3 million, beating analyst forecasts of $216.4 million. Same-store sales were up 10.1%. Operating margins rose 170 basis points to 20.3% on higher average restaurant sales and menu price increases for the company's naturally raised chicken, beef and pork offerings. This year, Chipotle plans to add 95-105 new restaurants to its current 570. Margins might be pressured in the short term by higher avocado prices resulting from a cold snap in California and by higher grain prices, which are elevating chicken prices. Chipotle's was spun off last year by McDonald's, and its share price has nearly tripled since the IPO. It is trading at about 39x analysts' 2007 earnings estimate versus a multiple of 20x for its rivals. Chipotle shares rose 4.4% to $64.10 in AH trading after the report.
Sources: TheStreet.com, Press release, Reuters, Business Week
Commentary: Chipotle Mexican Grill: A Close Look • Chipotle Mexican Grill: A Distinguished Spin-off With Great Potential • By Spinning Off Chipotle Entirely, Has McDonald's Given Up on Growth?
Stocks/ETFs to watch: Chipotle Mexican Grill Inc. (NYSE:CMG), McDonalds Corp. (NYSE:MCD). Competitors: Yum! Brands Inc. (NYSE:YUM), Wendy's International (NASDAQ:WEN), Burger King Corp (BKC). ETFs: PowerShares Dynamic Food & Beverage (PBJ)
Tobacco Regulation Bill Reintroduced in Congress
A bipartisan group of legislators yesterday reintroduced a bill designed to bolster the power of the FDA to regulate big tobacco. Sen. Ted Kennedy (D-Mass.) said, on introducing the Family Smoking Prevention and Tobacco Control Act, that "Congress cannot in good conscience allow the federal agency most responsible for protecting the public health to remain powerless to deal with the enormous risks of tobacco." The FDA has long claimed it lacks the authority to regulate tobacco since the industry does not claim its products have health benefits. In 1996, the regulatory body produced evidence that the companies did in fact deliberately feed consumers' nicotine addictions. The industry sued, and in 2000, the Supreme Court ruled the FDA was not authorized by Congress to regulate tobacco. The backers of the new bill believe it will receive a warmer reception in a Democrat-controlled House and Senate. The Altria Group, manufacturer of Marlboro, favors the bill, calling it "a thoughtful legislative approach [that] offers the best way to advance real solutions to the many complex issues involving tobacco." A spokesman for R.J. Reynolds, the country's second-largest cigarette manufacturer, pointed out that restrictions on advertising will almost certainly benefit market leaders who already enjoy strong consumer loyalty.
Sources: Business Week, Reuters
Commentary: Nicotine Study Re-ignites Call for FDA Regulation of Cigarettes • Warning: Cigarettes May Be Good For Your Financial Health • The Tobacco Empire Strikes Back
Stocks/ETFs to watch: Reynolds American Inc. (NYSE:RAI), Altria Group Inc. (NYSE:MO), Loews Corp. Carolina Group (NASDAQ:CG). ETFs: First Trust Morningstar Dividend Leaders Index (NYSEARCA:FDL), WisdomTree LargeCap Dividend (NYSEARCA:DLN), WisdomTree High-Yielding Equity (NYSEARCA:DHS)
Chrysler CEO: 'Goal of Doubling Sales Abroad Unacceptably Low'
Chrysler Group CEO Tom LaSorda believes the struggling carmaker needs to set the bar higher for increased overseas sales, calling a previous goal of doubling Chrysler sales abroad 'unacceptable.' LaSorda is looking into alliances with other auto makers so as to increase expansion even further while cutting costs. LaSorda also hopes Chrysler will know "sooner rather than later" whether parent company DaimlerChrysler will retain its North American unit, or decide to part with it. In other Chrysler Group news, Lithia Motors CEO Sid DeBoer believes Chrysler will maintain its share of the U.S. pickup truck market by sharply cutting costs in the face new competition from GM and Toyota. Lithia is one of the top U.S. retailers of Chrysler-made autos.
Sources: Wall Street Journal, MSN/Reuters (i), (ii)
Commentary: New Direction for DaimlerChrysler? • DaimlerChrysler Earnings: Chrysler Weak, Mercedes and Trucks Strong • DaimlerChrysler AG Q4 2006 Earnings Call Transcript
Stocks/ETFs to watch:DaimlerChrysler (DCX). Competitors: General Motors (NYSE:GM), Ford (NYSE:F), Toyota (NYSE:TM), Honda (NYSE:HMC), Nissan (OTCPK:NSANY)
Spain's BBVA to Buy Compass Bancshares for $9.6 Billion
Spain's second biggest bank, Banco Bilbao Viscaya Argentaria SA, agreed this morning to buy Binghampton's Compass Banchshares Inc. for $9.6 billion. Shareholders will be offered $71.82/share in cash or 2.8 new BBVA shares -- an 8.2% premium on Compass's $66.37 close yesterday (shares closed up $4.59 (7.4%) on the rumors). BBVA is trying to build its position in Texas and California, targeted at Hispanic Americans. Compass operates more than 400 branches in Alabama, Arizona, Colorado, Florida, New Mexico and Texas -- giving BBVA a total of 622 U.S. branches. Compass had been shopping itself and its $31b in assets in recent weeks, in the hopes of getting $70+/share, sources said. Last June, BBVA bought Texas Regional Bancshares Inc. for about $2 billion; it has also purchased Laredo National Bancshares Inc. and State National Bancshares. BBVA has itself been the subject of takeover speculation; possible courters range from Citigroup Inc. to Bank of America. But in a recent note, Dresdner Kleinwort analysts suggested that Spain's #1 bank, Banco Santander Central Hispano, would not allow a large U.S. bank into Spain. BBVA shares fell $0.84 (4.2%) on the news in Madrid this morning.
Sources: Press Release, Wall Street Journal, Bloomberg
Commentary: Is Prudence Passé? Private Equity and LBO Cyclical Sector Targets • Credit Derivatives, Moral Hazard and Systemic Risk
Stocks/ETFs to watch: Banco Bilbao Viscaya Argentaria S.A. (BBV), Compass Bancshares Inc. (CBSS). Compass competitors: Regions Financial Corp. (NYSE:RF), CapitalSouth Bancorp (OTCPK:CAPB), Susquehanna Bancshares Inc. (NASDAQ:SUSQ). BBVA competitors: Banco Santander Central Hispano S.A. (STD). ETFs: streetTRACKS KBW Regional Banking ETF (NYSEARCA:KRE), HOLDRS Regional Bank (NYSEARCA:RKH), iShares Dow Jones U.S. Regional Banks (NYSEARCA:IAT), iShares MSCI Spain Index ETF (NYSEARCA:EWP), iShares S&P Global Financials Sector (NYSEARCA:IXG)
Biogen's Q4 Results Miss Estimates
Biogen Idec reported higher earnings for Q4 on sales of the drugs Avonex and Rituxan, but revenues still came in shy of analyst expectations. The company posted a more-than-doubling of net income to $108.6 million ($0.32/share) from $55.6 million ($0.16) a year earlier. Excluding items, EPS would have been $0.53 against $0.48 last year. Q4 revenue was up 12% to $708.3 million. Analysts were expecting EPS of $0.55 on $714.2 million in revenue. Sales of multiple sclerosis drug Avonex, the company's leading product, rose 6% to $439 million, while sales of oncology drug Rituxan were up 20% to $218 million. Biogen and Genentech co-market Rituxan, and a marketing dispute between the parties is threatening to escalate. Multiple sclerosis drug Tysabri, which was pulled from the market temporarily in 2005, brought in $30 million in sales. Biogen, which co-markets Tysabri with Elan Corp., garnered $18 million of that figure. Biogen is projecting 2007 EPS of $1.69-1.84 or $2.50-2.65 before items and revenue growth in the mid-teens on a percentage basis. Analysts are forecasting adjusted EPS of $2.55 on 15% revenue growth to $3.09 billion. The company's shares were down almost 4% to $48.50 in mid-afternoon trading after the report.
Sources: MarketWatch, TheStreet.com, Reuters. Conference call transcript: Q4 2006
Commentary: Genentech, Biogen, Elan and PML Disease • Investors, Caution: Biologics Have Side Effects Too • Searching for Value Investments in the Drug Stock Universe
Stocks/ETFs to watch: Biogen Idec Inc. (NASDAQ:BIIB). Competitors: Bristol-Myers Squibb Co. (NYSE:BMY), Glaxosmithkline plc (NYSE:GSK), Abbott Laboratories (NYSE:ABT). ETFs: Biotech HOLDRs (NYSEARCA:BBH), First Trust AMEX Biotechnology Index (NYSEARCA:FBT), iShares Nasdaq Biotechnology (NASDAQ:IBB), PowerShares Dynamic Biotech & Genome (NYSEARCA:PBE)
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