California, Fannie Mae Sever Ties With New Century
Fannie Mae, the largest U.S. mortgage loan provider, yesterday informed the once largest subprime lender New Century Financial Corp. that it will no longer buy or sell NEWC mortgage loans. While largely symbolic, FNM's actions may be a death blow: NEWC cannot provide mortgages without the partially government-backed Fannie Mae's business. This is the latest in NEWC's litany of troubles: California yesterday joined a dozen other states in ordering NEWC to stop making new mortgage originations, and to direct current applications to rival lenders. NEWC's banking license is also suspended in New York, it's under investigation by the SEC, the U.S. Justice Department and the Senate Banking Committee, and it has cut 1500 jobs. While NEWC's shares fell yesterday 16% to its lowest ever $1.65, Accredited Home Lenders' shares rose 20% on news that it had received a $200 million lifeline from the Farralon Capital Management hedge fund. NEWC, however, looks increasingly likely to join the privately-held People's Choice Home Loan Co., which yesterday became the latest of more than 20 bankrupted subprime lenders.
Sources: Reuters I, II , East Bay Business Times, Boston Herald, Bloomberg
Commentary: Subprime Fallout: Stocks to Eschew, Stocks to Pursue • Housing Bubble and Real Estate Market Tracker • New Century Jumps 101%; Glad I Sold My Puts
Stocks/ETFs to watch: New Century Financial Corp. (OTCPK:NEWC), Fannie Mae (FNM), Accredited Home Lenders (LEND), Novastar Financial (NFI), Fremont General (FMT), Wells Fargo (NYSE:WFC), Fieldstone (FICC), PMI Group (PMI), MGIG Investment (MGIG)
Related: New Century Home Page
Oracle Beats Street, 'Hitting on All Cylinders'
Oracle reported Q3 net income increased 35% to $1.03 billion, or $0.20/share, on a 27% rise in revenue to $4.41b. Excluding certain items, EPS totaled $0.25, topping analysts' average estimates of $0.22 (Bloomberg) and $0.23 (Thomson). Oracle CFO Safra Catz told reporters "the business is hitting on all cylinders" and in the firm's conference call said, it was its "fastest growing Q3 in more than five years with obvious market share gains across all product segments." Sales of new software licenses increased 27% to $1.39b, beating its own guidance of 16% - 20%, the latter which CFO Catz called "aggressive" in itself. Oracle expects Q4 EPS of $0.34 excluding certain items, in-line with analysts' average estimate. Q4 guidance does not include Hyperion since the $3.3b deal announced earlier this month hasn't closed yet. Oracle's shares gained 2.15% to $17.55 in normal trading yesterday and last traded at $18.15 (+3.4%) following its earnings release on volume approaching 10 million.
Sources: Oracle F3Q07 Earnings Call Transcript, Press release [pdf], Associated Press, Bloomberg
Commentary: Could BEA Systems Be in Oracle's Sights? • Oracle: Street Gets Increasingly Optimistic On FY Q3 Results • Oracle to Buy Hyperion Solutions for $3.3B Cash -- NYT
Stocks/ETFs to watch: Oracle (NYSE:ORCL). Competitors: SAP (NYSE:SAP), IBM (NYSE:IBM), Microsoft (NASDAQ:MSFT). ETFs: iShares Goldman Sachs Software Index Fund (NYSEARCA:IGV), Software HOLDRS Trust ETF (NYSE:SWH), PowerShares Dynamic Software (NYSEARCA:PSJ)
Adobe Beats by a Penny, But Sales Fall; Shares Higher on Guidance
Adobe Systems reported Q1 net income rose 37% to $143.9 million, or $0.24/share, on a 0.9% decrease in sales to $649.4m. Adobe provided Q2 EPS guidance of $0.34 - $0.36 on sales of $700m - $740m, compared to analysts' average estimate of $0.34/share and $718.8m for sales. Adobe plans to hold a customer event on March 27 in New York to announce the release of its Creative Suite 3.0 software, which it says is the biggest product launch in the company's history. On Monday it introduced the first public alpha version of Apollo ("a cross-operating system runtime ... to build and deploy rich Internet applications [RIAs] to the desktop") on Adobe Labs. Its shares gained 1.2% to $40.74 in normal trading and climbed another 3.7% to $42.25 in after-hours activity on volume of over 1.3 million.
Sources: Adobe Systems F1Q07 Earnings Call Transcript, Press release [pdf], Bloomberg
Commentary: Color On Adobe's Quarter: Solid, All Eyes On CS3 Launch • Adobe: Focus Remains on Creative Suite 3 Ahead of Earnings • Internet Ad Revenue on the Rise: How Adobe Can Benefit from this Trend
Stocks/ETFs to watch: Adobe Systems (NASDAQ:ADBE). Competitors: Microsoft (MSFT), Apple (NASDAQ:AAPL). ETFs: Software HOLDRS (SWH), iShares Goldman Sachs Software (IGV), PowerShares Dynamic Software (PSJ)
Related: Adobe Labs: Apollo, Apollo press release, GigaOM: The Coming Apollo vs. Firefox Battle
Quanta Computer Sees Revenue Boost from Vista
World-leading laptop manufacturer Quanta Computer forecasts revenue growth of 25-50% this year, due in part to the launch of Microsoft's Vista OS, said Quanta President Michael Wang in an interview. Quanta has already noted strengthening sales momentum this quarter. The company supplies nine of the ten leading PC vendors in the world and produced over a quarter of the world's laptops last year. Wang expects that figure to rise to 30% in 2007. The company's unconsolidated revenue, excluding some subsidiary revenue, rose 14% last year to 461.52 billion New Taiwan dollars (US$13.99 billion) from NT$403.10 billion in 2005. Wang sees revenue this quarter up 40% from a year ago. Significantly, he also forecasts revenue to approximately match that of the last three months of 2006, despite the fact that Q1 is almost always the company's low season. Although Quanta's profit margins are under consistent pressure from customers hoping to play manufacturers against one another, Wang says they have stabilized. Quanta keeps prices down in various ways, including making components in-house. Still, the company refuses to participate in bidding wars to win customers. Says Wang: "We will not be, and we don't want to be, the price leader."
Sources: Wall Street Journal
Commentary: 10 Reasons Why Microsoft's Vista Has Missed The Mark • Microsoft: Street Still Too Optimistic on Vista Revenues • Don't Sell on Microsoft Vista's Poor Reception
Stocks/ETFs to watch: Quanta Computer Inc. [TPE:2382], Microsoft Inc. (MSFT). Competitors: Oracle Corp. (ORCL), International Business Machines Corp. (IBM). ETFs: iShares Goldman Sachs Software Index Fund (IGV), Software HOLDRS Trust ETF (SWH), PowerShares Dynamic Software (PSJ)
Conference call transcripts: Microsoft F2Q07 (Qtr End 12/31/06)
Gateway Denies Buyout Rumors, Shares Slip Back
Computer maker Gateway Inc. said Tuesday it hadn't discussed acquisition with Taiwan's PC giant Acer Inc. A Gateway spokesman said that while the company doesn't normally comment on rumors, it is not in talks with Acer. Acer Inc. CEO J. T. Wang said recently his company was "hoping to make an acquisition this year," which ThinkEquity analysts said in a note Monday meant Gateway. The speculation sent Gateway shares up 6.7%. In trading yesterday, shares fell 0.8%, and shed another 4.20% in after-hours trading to $2.28, dropping back close to pre-rumor share prices. In its statement, Gateway said it remains "focused on the business at hand."
Sources: MarketWatch, Reuters
Commentary: Report: Gateway May Be Acer Target - Shares Climb • Consumer PCs: HP and Gateway are Hot, Dell is Not • Conflicting Calls On PC Sector: Sell Dell, Buy Gateway
Stocks/ETFs to watch: Gateway Inc. (GTW). Competitors: Dell Inc. (NASDAQ:DELL), Hewlett-Packard Co. (NYSE:HPQ), Lenovo Group Ltd. (OTCPK:LNVGY), International Business Machines Corp. (IBM). ETFs: SPDR Technology (NYSEARCA:XLK), iShares Goldman Sachs Technology Index Fund (NYSEARCA:IGM), iShares Dow Jones US Technology Index (NYSEARCA:IYW)
Conference call transcript: Gateway Q4 2006 Earnings Call Transcript
Google Launches Cost-Per-Action Ad Beta in Threat to ValueClick
Google announced Tuesday the "beta" rollout of an ad product that allows advertisers to pay for a definable action such as a purchase, download, or subscription -- unlike the current model that pays for page-views or click-throughs without regard for end results. Under the "cost-per-action" [CPA] model, advertisers decide (bid on) what they are willing to pay for a given result. Armed with this information, web publishers can then decide whether to run a given ad on their site. Besides reducing the risk of being charged for ineffective ads, the system also eliminates the problem of click fraud - when a person or automated program imitates a legitimate user clicking on an ad, for the purpose of generating a charge per click without having actual interest in the target of the ad. Conversely, the model may prove riskier for content providers, since it gives no guarantee that a provider will make money from any given ad. For now, Google's test is currently limited to about 75 websites and 75 advertisers -- it is not putting cost-per-action ads on search-result pages. Also known as affiliate marketing, CPA ads from Google will compete with the industry's largest affiliate marketer, Commission Junction, owned by ValueClick. For now, the CPA model is still at an early stage; ValueClick's affiliate marketing unit had $112 million in sales for 2006, while Google topped $10 billion in revenues.
Sources: Google's Inside AdWords, New York Times
Commentary: Google's Threat to Ad and Affiliate Networks • Google cost-per-action. Is this how mass media ends? [Faster Future] • Google Checkout Plus CPA Ads: ValueClick Killer
Stocks/ETFs to watch: Google Inc. (NASDAQ:GOOG), ValueClick Inc. (VCLK). Competitors: aQuantive Inc. (AQNT), Yahoo! Inc. (NASDAQ:YHOO), 24/7 Real Media Inc. (TFSM), Think Partnership Inc. (THK), Marchex Inc. (NASDAQ:MCHX). ETFs: Internet HOLDRs (NYSE:HHH), First Trust Dow Jones Internet Index (NYSEARCA:FDN)
Conference call transcript: Google Q4 2006 Earnings Call Transcript • ValueClick Q4 2006 Earnings Call Transcript
Related: Google Advertising, Wikipedia on click fraud
Google Claims More Internet Search Share in February
Google posted 40.3% y-o-y growth in Internet searches in February, well ahead of rivals Yahoo and Microsoft, according to a Nielsen/NetRatings report. The percentage represents approximately 3.6 billion queries. Yahoo trailed well behind Google with 12% growth; Microsoft's MSN unit posted 9.1%. Google claimed 55.8% of all U.S. searches in the month, up from 53.7% in January. Yahoo lost ground, posting 20.7% in February against 22.7% the month before. MSN's held 9.6% of all searches, up from 8.9% in January. Time Warner's AOL lost 6% of its traffic from last year and now holds a 5.1% share of the market. Yahoo announced yesterday that it is expanding its oneSearch service to include U.S. cellphones and will soon roll out more country and language versions. Google's shares fell $2.98 to $444.25 and Yahoo's gained $0.21 to $30.24.
Sources: Nielsen/NetRatings Share Rankings (.pdf), MoneyCentral, MarketWatch
Commentary: Four Reasons Why Google Won't Become King Of All Media • January Search Market Share: Tough Start to the Year for Yahoo!, Microsoft • Google Gets More Search Share, Again
Stocks/ETFs to watch: Google Inc. (GOOG), Yahoo! Inc. (YHOO), Microsoft Corp. (MSFT), Time Warner Inc. (NYSE:TWX). ETFs: First Trust Dow Jones Internet Index (FDN), First Trust IPOX-100 Index (NYSEARCA:FPX), iShares S&P Global Technology (NYSEARCA:IXN)
Conference call transcripts: Google Q4 2006, Yahoo! Q4 2006, Microsoft F2Q07 (Qtr End 12/31/06), Time Warner Q4 2006
Sam Zell In Midst of Revising Bid for Tribune Co.
Sam Zell is in continuing talks with Tribune Company over his bid to buy it, the AP reported yesterday. Though details aren't available, it is believed Zell is revising his bid for the diversified media company which controls some of America's largest newspapers, local TV stations and the Chicago Cubs. Tribune management has reportedly become concerned about Zell's proposed offer involving too large an amount of debt considering the weakening outlook for newspapers. Zell's new bid may raise the size of the equity portion of his bid while lowering debt, rather than an overall increase in the per-share offer price. Zell told the AP that he has no plans to break up the company's various assets. "We cannot look at it from a breakup perspective," he said.
Sources: Wall Street Journal, AP
Commentary: A Sam Zell Takeover May Be Tribune's Best Bet - Barron's • Tribune Reviewing "Self-Help" Plan • L.A. Times Editor Spells Out Its Troubles
Stocks/ETFs to watch: Tribune Company (TRB). Competitors: Gannett Co. (NYSE:GCI), The New York Times Co. (NYSE:NYT), The Washington Post Co. (WPO), The McClatchy Company (NYSE:MNI)
Compact Disc Sales Plummet 20% Since Start of Year
In an indication of what the Wall Street Journal calls a "seismic shift" in the way people now acquire music, CD sales for Q1 2007 are 20% below what they were last year. Digital song sales, which were expected to salvage the industry, have risen 54% in 2007 from last year to 173.4 million, but that is not nearly enough to compensate for the 20% drop in CD sales to 81.5 million units. Overall music sales, both digital and physical, are down 10% this year. Adding insult to injury, one billion songs a month are traded on pirate networks. Eight hundred specialty music stores closed down last year, including Tower Records' 89 locations. The rampant success of Apple's iPod indicates that consumers are as interested as ever in acquiring music, but it also suggests they prefer to buy without either entering a store or handling a CD. If they must go to a store, they head for Wal-Mart or Best Buy, which offer CDs at deep discounts. Best Buy has been reducing the floor space allotted to CDs, and if Wal-Mart follows suit, the picture will grow even gloomier for music companies.
Sources: Wall Street Journal
Commentary: Media Companies Slow to Bridge the Digital Divide • Warner Music Discusses its "Digital Milestone" and the Future of Physical
Stocks/ETFs to watch: Warner Music Group Corp. (NYSE:WMG), Wal-Mart Stores Inc. (NYSE:WMT), Best Buy Co., Inc. (NYSE:BBY), Apple Inc. (AAPL).
Conference call transcripts: Warner Music Group F1Q07 (Qtr End 12/31/06)
Blockbuster CEO Antioco to Step Down
In a victory for activist shareholder Carl Icahn, Blockbuster CEO John Antioco will step down as Chairman and CEO at the end of this year. Blockbuster shares fell 3.5% to $6.86 on the news. The dispute with Icahn concerned Antioco's compensation, which Icahn has considered excessive for several years in view of what he claimed was Antioco's mismanagement of the company's finances. Blockbuster posted losses in eight of the past nine years; Antioco has been at the helm since 1997. This year, Antioco will be awarded compensation totaling $8.04 million, a far cry from the $21.2 million he would have received under his original contract. The loss of Antioco throws into question several of his initiatives, including Total Access, which gives online renters the option of either mailing back their movies or swapping them at a store. Total Access, which has contributed to a more-than-doubling of Blockbuster's stock price over the past year, is Blockbuster's main weapon against rival Netflix -- the shares of which gained 5.2% on news of Antioco's departure.
Sources: Wall Street Journal, Bloomberg, MarketWatch
Commentary: Blockbuster Still Busted [Wall Street Journal] • Carl Icahn Makes Waves at Blockbuster • Blockbuster vs. Netflix: Which Online Rental Service is Better and Why?
Stocks/ETFs to watch: Blockbuster Inc. (BBI). Competitors: Netflix, Inc. (NASDAQ:NFLX), Movie Gallery Inc. (MOVI), Hastings Entertainment Inc. (NASDAQ:HAST), Wal-Mart Stores Inc. (WMT)
Conference call transcripts: Q4 2006
Claire's Stores to be Bought Out by Apollo for $3.1 Billion
Costume jewelry retailer Claire's Stores has agreed to be bought out by by private equity firm Apollo Management LP for $33 per share, or about $3.1 billion, representing a 7.3% premium to the shares' Monday close. The company's shares rose 3.6% to $31.88 on the news. Approximately 70% of the company's sales are in North America, and the sale is expected to assist its expansion into international markets. Claire's already has a JV in Asia and a licensing agreement in place in Turkey and parts of the Middle East. Another private equity firm, Apax Partners, attempted to purchase Claire's but was unable to reach a buyout price acceptable to both sides. Retailers are a popular buy among private equity firms: Dollar General, grocer Albertson's, crafts company Michaels Stores and luxury department store Neiman Marcus were all recently taken private. According to the Wall Street Journal, Claire's, with its "maturing operation with little or no debt but strong cash flow," represents an "ideal" buyout candidate. The retailers in which Apollo holds or has held a stake include Linens 'n Things, General Nutrition Centers, Zale's and Rent-A-Center.
Sources: Bloomberg, Reuters, MarketWatch, Wall Street Journal
Commentary: Retail Same-Store Sales Roundup • Jim Cramer's Mad Money Lightning Round Picks, Oct. 17
Stocks/ETFs to watch: Claire's Stores, Inc. (CLE). Competitors: Tween Brands, Inc. (TWB), Wet Seal Inc. (WTSLA)
TRANSPORT AND AEROSPACE
Board Urges Lear Corp. Shareholders To Approve Icahn Buyout Offer
In a deal J.P. Morgan is calling "fair from a financial point of view," the board of Lear Corp. is recommending shareholders vote to approve Carl Icahn affiliate American Real Estate Partners' offer to buyout the remaining shares it doesn't own for $2.8 billion, or $36 a share. Including assumed debt, the acquisition will cost Icahn $5.3 billion; Icahn currently holds 16% of the shares outstanding. Lear closed up $0.14, or 0.4% to $36.80 in trading yesterday. In a rare interview with Crain's Detroit Business, Icahn partially explained his interest in Lear Corp. as follows: "If you look at my history, I've done this all of my life. You buy companies that are not in favor. You go against the emotion. You go against the tide. You don't go with the crowd, you go against it." Some major shareholders have come out against the deal including 10.1% owner Pzena Investment Management, who last month said Lear shares were worth closer to $60 with earnings likely to recover to $4 a share in the next few years. In other Lear Corp. news, the AP is reporting CEO Robert E. Rossiter received total compensation of $4 million last year while leading the company to a loss of $707.5 million during FY2006.
Sources: Press Release, Reuters, AP, MarketWatch
Commentary: Lear Corp. Officially Agrees to Icahn's Buyout Offer • Lear Corporation: Icahn Offers Buyout, Large Holder Pzena Opposes • Emboldened By Bankruptcy, Parts Makers Finally Telling Detroit 'No'
Stocks/ETFs to watch: Lear Corp. (NYSE:LEA). Competitors: Johnson Controls (NYSE:JCI), Delphi Corp. (OTC:DPHIQ), Visteon Corporation (NYSE:VC). ETFs: Rydex S&P MidCap 400 Pure Value ETF (NYSEARCA:RFV)
Related: Icahn Interview
ENERGY AND MATERIALS
Halliburton Lowers Q1 Forecasts, Sends Sector Down
Halliburton Co., the world's #2 oilfield services provider, said Tuesday its Q1 profit will come in below analyst consensus estimates due to decreased drilling and completion activity in Canada and the northern United States. Halliburton said in a Business Wire release that EPS for Q1 2007 will be $0.49-0.54; analysts had expected profits of $0.60. Halliburton shares closed down 5.9% to $30.50. Other oil-service stocks that fell include BJ Services Company [-2.7%], Nabors Industries Ltd. [-2.1%], and Weatherford International Inc. [-1.7%], as well as the Oil Service HOLDRs ETF [-1.22%].
Sources: Press Release, Bloomberg
Commentary: Why Halliburton's Move to Dubai Makes Cents • Halliburton: Is Its Discount Warranted? • Oil & Gas Service ETFs Are Now Historically Cheap
Stocks/ETFs to watch: Halliburton Co. (NYSE:HAL). Competitors: Schlumberger Ltd. (NYSE:SLB), Baker Hughes Inc. (NYSE:BHI), BJ Services Company (BJS), Weatherford International Inc. (NYSE:WFT). ETFs: Oil Service HOLDRs ETF (NYSEARCA:OIH), PowerShares Dynamic Oil & Gas (NYSEARCA:PXJ), iShares Dow Jones U.S. Oil Equipment & Services (NYSEARCA:IEZ), SPDR Oil & Gas Equipment & Services (NYSEARCA:XES)
War of Words Erupts Between CME and ICE Management: Is a CBOT Bidding War Next?
The Chicago Mercantile Exchange and IntercontinentalExchange, Inc. [ICE] traded claims that its was the best available offer for CBOT (the Chicago Board of Trade]. Merc Executive Chairman Terry Duffy played up his company's more established position in futures trading saying it "positions the combined CME/CBOT company as the leading exchange in global financial markets." Duffy also questioned ICE's claim that it could save $200 million for the combined companies, calling it "significantly exaggerated." Merc management plan to meet with CBOT in Chicago today to talk up their offer. A shareholder vote on the CME-CBOT merger was postponed to after April 4 to allow shareholders a chance to review the competing offers. ICE CEO and Chairman Jeffrey Sprecher responded that his company's all-stock offer is "clearly financially superior" - it's offering $9.9 billion for CBOT versus the $8 billion-plus being offered through CME's cash and stock offer. Sprecher went on to say "CME's rhetoric will not fool CBOT shareholders" adding that "an ICE/CBOT combination would give CBOT shareholders a majority stake in a faster growing, better positioned company." Most analysts still believe CME is a better choice to partner with CBOT - both companies are located in Chicago, have been negotiating for months and offer complimentary futures trading. But it is likely CME will have to up its bid to seal the deal. According to Bank of America analyst Chris Allen, CME will have to up its bid to at least $190 a share to beat out ICE and can afford to pay as much as $230 a share without diluting its per-share earnings.
Sources: Press Release, Wall Street Journal, MarketWatch (i), (ii), (iii), AP
Commentary: IntercontinentalExchange Makes Unsolicited Takeover Bid for CBOT; Shares Jump • The Market Is Warming To Intercontinental Exchange • Cramer's Take on ICE
Stocks/ETFs to watch: CBOT Holdings (BOT), Chicago Mercantile Exchange Holdings (NASDAQ:CME), International Securities Exchange (ISE). Competitors: Nasdaq Stock Market Inc. (NASDAQ:NDAQ), NYSE Group (NYSE:NYX), NYMEX Holdings (NMX). ETFs: iShares Dow Jones US Broker-Dealer Index (NYSEARCA:IAI)
ABN Amro, Barclays Agree to Several Merger Issues
ABN Amro and Barclays are rumored to have agreed on several details regarding a potential merger. Points include the combined company's status as a British plc and the positioning of its HQ in Amsterdam. The company would also have a Dutch chairman. If the merger goes through, the new entity would be Europe's second-largest bank, with a market cap of about $156 billion. Analysts, meanwhile, are expressing skepticism about earlier speculation that Bank of America would either become a rival bidder or purchase ABN's Chicago-based LaSalle Bank holding. Bank of America had $590 billion in deposits as of June 30, 2006, or approximately 9% of all U.S. deposits. Federal regulations cap nationwide deposits at 10%. An acquisition of LaSalle, which has $60.4 billion in deposits, could put BoA in violation. An acquisition of Barclays, however, could make some sense, according to UBS analyst Matthew O'Connor: "...we believe Bank of America would have a lot of interest [in Barclays] given its strong capital markets [business and] BofA's sluggish U.S. growth prospects." Counters Richard Bove, analyst with Punk Ziegel: "Bank of America has repeatedly indicated that it does not want to be a retail bank outside the United States. This would seem to rule out the purchase of ABN Amro or even Barclays."
Sources: Reuters, MarketWatch
Commentary: Barclays Approaches ABN Amro Regarding Possible Takeover • ABN AMRO: Children's Investment Fund Urges Break-Up or Sale • The Long Case for Barclays
Stocks/ETFs to watch: ABN AMRO Holding N.V. [ADR] (ABN), Barclays PLC (ADR) (NYSE:BCS). Competitors: Deutsche Bank AG (NYSE:DB), JP Morgan Chase & Co. (NYSE:JPM), Lloyds TSB Group plc (NYSE:LYG). ETFs: PowerShares International Dividend Achievers (NYSEARCA:PID), iShares MSCI Netherlands Index (NYSEARCA:EWN)
Cintas Shares Off 6.6% on Lowered Guidance
Shares of corporate uniform supplier Cintas Corp. shed 6.6% after the company announced it is lowering its full-year revenue and earnings guidance due to pressures on its customer base. Cintas is now forecasting full-year EPS of $2.03-2.08, down from $2.10-2.20. The company is projecting a revenue range of $3.675 billion-3.725 billion against earlier guidance of $3.77 billion-3.85 billion. Wall Street was expecting EPS of $2.16 on revenue of $3.76 billion. Cintas shares fell $2.66 in AH trading after closing up $0.47 at $40.17. Cintas reported a slight rise in fiscal Q3 net income to $76.7 million ($0.48/share) from $76.6 million ($0.45/share) a year earlier. Revenue for the quarter rose 8.2% to $905.4 million from $836.4 million a year ago. Analysts had forecast Q3 EPS of $0.52 on revenue of $925.1 million.
Sources: Press release, MarketWatch, MoneyCentral
Commentary: Cintas: Rising Earnings, Falling Multiple, Flat Stock • Cintas -- Boring Business, Great Stock
Stocks/ETFs to watch: Cintas Corp. (NASDAQ:CTAS). Competitors: G&K Services Inc. (GKSR)
Conference call transcripts: Cintas F3Q07 (Qtr End 2/28/07)
China Mobile Posts 19% Income Gain on Strong Rural Growth
China Mobile, the world's #1 wireless provider, said this morning its Q4 2006 profits increased 19% to 19.9 billion yuan ($2.6 billion) from 16.7 yuan in Q4 2005. Sales were up 13% from 70.6 to 82.7 billion yuan. Net income figures were slightly lower than analyst consensus estimates of 20.5 billion yuan. Full year net profit was 66 billion yuan, up from 53.6 billion. EPS went from 2.71 to 3.29 yuan. Full year revenue gained 18% going from 243 to 295 billion yuan. The company added 14 million subscribers in Q4 and 53 million on the year. CEO Wang Jianzhou says the company will continue to grow profits by offering faster music and movie downloads through a $3.1 billion network that will start trials in October. He said its strong income numbers came from its development of Chinese rural markets. The company, with 301 million subscribers, controls about 65% of the Chinese moblile market.
Sources: Bloomberg I, II, MarketWatch
Commentary: The Mobile Phone Megatrend: Exploring the New Frontier • Despite the Rumors, iPhone is Not for China • Environment for Chinese Mobile Content Aggregators Will Remain Challenging
Stocks/ETFs to watch: China Mobile (Hong Kong) Ltd. (NYSE:CHL). Competitors: China Telecom Corp Ltd (NYSE:CHA), China Unicom Ltd. (NYSE:CHU), China Netcom Group Corp. (NYSEARCA:CN)
HSBC, Citigroup, Get Key Approval for Chinese Banking
Four foreign banks received approval from the Chinese government to establish locally incorporated subsidiaries in China, but it's still unclear when the institutions will be allowed to start accept deposits in yuan from Chinese citizens. The China Banking Regulatory Commission said Tuesday it has approved the applications of HSBC Holdings PLC's Hongkong & Shanghai Banking Corp., Standard Chartered Bank PLC, Citigroup Inc., and Hong Kong's Bank of East Asia Ltd. to operate in China through a legally incorporated entity. Chinese citizens, who sit on $2 trillion in savings, are understandably considered a huge banking opportunity, but foreign banks have until now been forbidden from offering them loans and deposits in yuan. Before any of the banks can begin operating they must first incorporate, restructure their computer systems subject to government approval, and get local approval for each city in which they operate. Standard Chartered, first off the block with its application, said yesterday that subject to regulatory approval it hopes to commence operations within the next month.
Sources: Wall Street Journal
Commentary: Morgan Stanley to Open First Vietnam I-bank • The Inevitable Collapse of China 's Banks • Stumbling Blocks On China ’s Path To Power
Stocks/ETFs to watch: HSBC Holdings plc ADR (HBC), Citigroup Inc. (NYSE:C)
Conference call transcript: Citigroup Q4 2006
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