Wall Street Breakfast

by: SA Editors
SA Editors
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Corporate Profits and Hiring Down as Mortgage Defaults Begin to Take Toll -- NABE Survey

The National Association for Business Economics [NABE] quarterly survey of business conditions, released Monday, says corporate profits and demand for goods is shrinking, hiring is slowing, and an increase in mortgage defaults may impact businesses over the coming six months. 33% of executives were more pessimistic about first-half economic growth, while only 13% were more optimistic. Only 1/4 of the 107 businesses surveyed said capital spending was rising, the lowest level in over three years; cutback areas included tech hardware and structures. Profit margins grew for the 15th straight quarter, but growth was focused in the goods and services sectors. 51% of those surveyed reported higher material costs, vs. 30% in January. Respondents reported an abundance of unskilled labor, but 35% reported a shortage of skilled labor. The percentage of companies adding new workers hit a three-year low, and companies planning to add new employees also dropped. Global Insight economist Sara Johnson: "The survey indicates job growth will slow, which in turn will affect household income growth and consumer spending... we had expected more vigorous capital spending, but that simply isn't happening." Ken Simonson, Chief Economist, Associated General Contractors of America: "Nearly every indicator... showed slower momentum in the first quarter than previously, with very cautious expectations for the near future."
Sources: Survey summary, Reuters, Bloomberg
Commentary: Economic Report Summary: Retail Sales Improved, But Hold the ChampagneGleanings From the Wharton Economic SummitBearish and Bullish Views on Stock Markets
Stocks/ETFs to watch: S&P 500 Index (NYSEARCA:SPY), Diamonds Trust Series 1 ETF (NYSEARCA:DIA), iShares Lehman Aggregate Bond (NYSEARCA:AGG)


RIM Announces Virtual BlackBerry Software for Windows Mobile Devices

Research in Motion says it will offer a virtual BlackBerry solution for select Windows Mobile 6-based devices from later this year. The BlackBerry application suite will appear as an icon in Windows Mobile 6 and feature easy toggling between Windows and BlackBerry applications. Research-In-Motion-RIMM-chart-04-20-07 The Wall Street Journal reports RIM will sell the software at its online store and through wireless carriers, according to the firm's co-CEO Jim Balsillie. Coverage by AP however, noted RIM has yet to decide whether it will charge a fee for the software download, or if it will come free with a BlackBerry service subscription ($30 - $50 monthly). Mr. Balsillie mentioned RIM is working "very closely with AT&T" in an interview with Reuters. In a press release, a senior analyst at IDC commented: "RIM's decision to expand its support for Windows Mobile will resonate well with customers, developers and carriers alike." Shares of Research in Motion traded slightly higher, +0.08% to $132.59 on Friday.
Sources: Press release, Associated Press, Reuters, The Wall Street Journal
Commentary: Conference Calls Get to the Heart of the Matter for Mobile MakersResearch in Motion: Blackberry Outage Points to Company's VulnerabilityRIMM Fails to Beat Analyst Estimates, Stock Falls 7%
Stocks/ETFs to watch: Research in Motion (RIMM), AT&T (NYSE:T). Competitors: Palm (PALM), Motorola (MOT), Nokia (NYSE:NOK)
Conference call transcripts: Research In Motion F4Q07 (Qtr End 3/3/07)

PC Games Making a Comeback

In a report on the PC game industry today, The NY Times cites NPD data showing domestic retail sales of PC games (ex-online sales and subscriptions) are up 48% to $203 million in the first two months of 2007. "The robust performance we’re seeing in PC game sales can be tied to several key titles across several genres, ... but we’d be remiss not to address the continued success of World of Warcraft [by Blizzard Entertainment, a subsidiary of Vivendi (Games)]," says NPD analyst Anita Frazier. Still, retail sales of console games in '06 including handhelds totaled $6.5b, dwarfing PC games sales of $970m -- only a 1% y-o-y increase and 11.8% short of the $1.1b of sales in '04. Catalysts for change in the PC game software/hardware segments include efforts by Microsoft to make software purchases easier with ratings based on a PC's Vista OS evaluation, plans to expand its Xbox Live network to include PC games, and a $20 wireless PC adapter which allows Xbox controllers to be used with PCs. Dell and HP meanwhile, each acquired a niche PC manufacturer last year, both known for their powerful gaming PCs.
Sources: The New York Times
Commentary: Profiting From the Love of GamingMicrosoft to Bring Xbox Live to PC GamersHP Enters the Niche PC Gaming Market With Its Voodoo Purchase
Stocks/ETFs to watch: Activision (NASDAQ:ATVI), Electronic Arts (ERTS), Midway Games (MWY), Take-Two Interactive Software (NASDAQ:TTWO), THQ (THQI), Microsoft (NASDAQ:MSFT), Vivendi (OTCPK:VIVEF) [EPA: VIV], GameStop (NYSE:GME). Gaming PC Manufacturers: Alienware -- acquired by Dell (NASDAQ:DELL) in '06, Voodoo Computers-- acquired by Hewlett-Packard (NYSE:HPQ) in '06. ETFs: iShares Goldman Sachs Software (NYSEARCA:IGV)

Verizon and Others Land Initial Approval for Saudi Fixed-Line Networks

Verizon Communications is leading one of three consortia approved by the Saudi Communications and Information Technology Commission [CITC] to operate fixed-line networks in Saudi Arabia. The other groups are led by Hong Kong's PCCW and the Bahrain Telecommunications Co., respectively. The approvals mark the end of the monopoly of Saudi Arabia's state-run Saudi Telecom Co., which has about 4 million fixed-line subscribers (a penetration rate of approximately 16% of the kingdom's population). Internet penetration is minimal at just over 3%. The three companies are expected to sell shares in IPOs before the end of next year, according to Abdulrahman al-Fehaid, deputy governor of the CITC. "All of them must offer a 25% stake of their capital to the public and 10% to state pension funds before the start of commercial operations," he said. Verizon's consortium, which includes emerging markets telecom operator Millicom International Cellular, has paid a licensing fee of 5 million riyals ($1.33 million). Fixed-line coverage is forecast to reach at least three regions in three years and the whole kingdom in seven.
Sources: Press release, MarketWatch, Reuters
Commentary: How Verizon's FiOS Will Change the Face of the Telecom IndustryMillicom International Cellular: Lots To LikeWorldwide Fiber to the Home: Stakeholders And Shareholders
Stocks/ETFs to watch: Verizon Communications Inc. (NYSE:VZ), Millicom International Cellular SA (MICC). Competitors: AT&T Inc. (T), Qwest Communications International Inc. (NYSE:Q), Sprint Nextel Corp. (NYSE:S). ETFs: iShares Dow Jones US Telecom (NYSEARCA:IYZ), iShares S&P Global Telecommunications (NYSEARCA:IXP), First Trust Morningstar Div Leaders Idx (NYSEARCA:FDL)
Conference call transcripts: Q4 2006


Time Warner Cable to Give Customers Wi-Fi Hotspots -- AP

Associated Press reports Time Warner Cable is joining forces with Wi-Fi startup FON (whose investors include Google and eBay's Skype) in allowing its home broadband customers to turn their connections into public wireless hotspots -- a practice thus far shunned by U.S. ISPs but popular in Europe. AP says the move could protect Time Warner from a potential 'exodus' as free/cheap municipal wireless access becomes more common. Fon's La Fonera router splits a Wi-Fi connection into encrypted and public channels -- allowing users to decide how much of their bandwidth they share with the Time Warner Cable 23 04 2007 Chartpublic. In the deal, expected to be announced Monday, FON and TWC will split the proceeds from 'alien' (non-Fon) use of hotspots -- expected to be $2-3/day (compared with $10 for a day pass to use a T-Mobile HotSpot at a Starbucks). But IDC research's Godfrey Chua says it's unclear whether revenues will offset the added costs of supporting the additional traffic that Wi-Fi users would bring to a broadband network.
Sources: AP
Commentary: My FON Router ExperienceFON to Give Away Wi-Fi Routers in San Francisco
Stocks/ETFs to watch: Time Warner Cable Inc. (TWC), Google Inc. (NASDAQ:GOOG), eBay Inc. (NASDAQ:EBAY). Competitors: AT&T Inc. (T), WebEx Communications Inc. (WEBX), Cogent Communications Group Inc. (NASDAQ:CCOI), CNet Networks Inc. (NASDAQ:CNET). ETFs: Internet HOLDRs (NYSE:HHH), First Trust Dow Jones Internet Index (NYSEARCA:FDN)
Related: FON website, FON on Wikipedia


Clear Channel Sells Some Assets for $1.5 Billion

Clear Channel Communications will sell its 56-station television division to private equity firm Providence Equity Partners for approximately $1.2 billion. It will also sell 161 radio stations to several buyers for $331 million and is seeking purchasers for its remaining 287. The sale of the TV division is not contingent on the proposed buyout of the company by private equity firms Thomas H. Lee Partners and Bain Capital, who upped their offer to $39 per share last week after shareholders balked at their initial $37.60 bid. The TV division sold at an unexpectedly high price, which some analysts believe could prompt reluctant shareholders to redouble their opposition to a buyout in favor of asset sales. The radio stations fetched a relatively modest price, however, although some speculate that that is simply a reflection of their less desirable markets; the company's remaining radio stations could be sold for more. Shareholders will vote on the buyout on May 8.
Sources: Wall Street Journal, MarketWatch, TheStreet.com
Commentary: Clear Channel Accepts Sweetened Private Equity Bid, but Shares Trade LowerPrivate Equity Pair Raises Clear Channel Bid to $39 a Share -- NYTClear Channel Communications: Get Up, Stand Up - Shareholders Fight Back
Stocks/ETFs to watch: Clear Channel Communications, Inc. (NYSE:CCU). Competitors: XM Satellite Radio Holdings Inc. (XMSR), Sirius Satellite Radio Inc. (NASDAQ:SIRI), Citadel Broadcasting Corp. (CDL), Cumulus Media Inc. (NASDAQ:CMLS). ETFs: PowerShares Dynamic Media Portfolio ETF (NYSEARCA:PBS), PowerShares Dynamic Leisure & Entertainment (NYSEARCA:PEJ)
Conference call transcripts: Q3 2006


Daimler Faces Speed Bumps On the Road To Sell Chrysler - WSJ

Much as DaimlerChrysler may want to wrap up a sale of its North American Chrysler unit by the summer, before negotiations between the Big Three and the United Auto Workers [UAW] union begin, it may not be able to.dcx According to an article in today's Wall Street Journal, legal requirements related to the sale may slow down the sales process to a much slower pace than DaimlerChrysler is hoping for. The UAW and representatives of Tracinda Corp. met yesterday to discuss a possible takeover of Chrysler, though Tracinda's $4.5 billion takeover bid has yet to be taken seriously by DaimlerChrysler. For its part, UAW Local 12 group has opposed DaimlerChrysler's proposed sale of its North American unit, urging the company to endorse an employee-stock-ownership plan [ESOP], granting employees the ability to buy 70% of Chrysler. Tracinda's proposal allows for partial employee ownership, in exchange for waving certain future benefits. DaimlerChrysler CEO Dieter Zetsche will meet with the UAW on Tuesday to discuss progress in the sale of Chrysler.
Sources: Wall Street Journal, Forbes
Commentary: Chrysler Roundup: Second Round of Bids Due; UAW Opposes SaleKirk Kerkorian To Be Left Out of Chrysler Negotiations - WSJDaimlerChrysler Beats Competitors, CEO LaSorda On Track
Stocks/ETFs to watch: DaimlerChrysler (DCX), Magna International (NYSE:MGA). Competitors: General Motors (NYSE:GM), Ford (NYSE:F), Toyota (NYSE:TM), Honda (NYSE:HMC), Nissan (OTCPK:NSANY)


ABN Amro Agrees to Sell Itself to Barclays for $91 Billion

ABN Amro has agreed to sell itself to Barclays for $91 billion (€67 billion) in the biggest financial services transaction in history. The offer amounts to $49.27 (€36.25) per share and includes 3.225 Barclays shares for each ABN share. That represents a 33% premium to ABN's closing price on March 16, the day before talks were announced. ABN has also disclosed that it is selling LaSalle Bank, its U.S. asset, to Bank of America for $21 billion. The sale of LaSalle is thought by some analysts to be an attempt by ABN to thwart a rival bid by reducing the Dutch bank's appeal to a consortium led by the Royal Bank of Scotland. That consortium, the other members of which are Banco Santander Central Hispano and Fortis NV, will meet with Groenink today. Regardless who ultimately wins ABN, the takeover of the bank is expected to unleash a series of European mergers in a sector considered ripe for consolidation. In related news, Royal Bank of Scotland has dismissed as "nonsense" a report in the Sunday Times of London that it will make a solo bid for ABN without Santander or Fortis.
Sources: New York Times, Wall Street Journal, Bloomberg (I, II)
Commentary: Memo to Barclays: ABN Amro's US Banks Are a Mixed BagBarclays To Acquire ABN: Long-term Investor Horizon RequiredTrio of European Banks Eyes ABN Amro
Stocks/ETFs to watch: ABN Amro Holding N.V. (ABN), Barclays PLC (NYSE:BCS), Royal Bank of Scotland Group plc [ADR] (RBSPY), Fortis NV [ADR] (FORSY), Bank of America Corp. (NYSE:BAC). Competitors: HSBC Holdings plc ADR (HBC), Deutsche Bank AG (NYSE:DB), UBS AG (NYSE:UBS). ETFs: First Trust Morningstar Div Leaders Idx (FDL), PowerShares Intl Dividend Achievers (NASDAQ:PID), iShares MSCI Netherlands Index (NYSEARCA:EWN)

Bear Stearns Plans Major EurAsian Expansion -- Financial Times

Financial Times reports Bear Stearns is planning a major European and Asian expansion. It plans to increase European staff from 1,300 to 2,000 and Asia staff from 400 to 800 over the next two years, while qualifying that the expansion would only proceed if current strong economic conditions persisted. European growth will focus on London, which will become the hub of its European operations (which are presently run largely from New York), and include new offices in Paris and Frankfurt (it Bear Stearns 23 04 2007 Chartclosed operations in the two cities in the 1990s). Prime brokerage expansion will be the main focus of its expansion, executives said, along with some expansion of asset management and energy trading. The bank is also expected to open a Middle East regional head office in the coming months, in either Dubai, Abu Dhabi or Qatar.
Sources: Financial Times
Commentary: Bear Stearns Earnings: An Historic LookMajor I-Banks Near 'Junk' Status -- BloombergOversold Large Stocks - An Investment Opportunity?
Stocks/ETFs to watch: Bear Stearns Companies Inc. (NYSE:BSC). Competitors: Merrill Lynch & Co. Inc. (MER), JPMorgan & Chase Co. (NYSE:JPM), Goldman Sachs Group Inc. (NYSE:GS), Morgan Stanley (NYSE:MS), Lehman Brothers Holdings Inc. (LEH). ETFs: iShares Dow Jones US Broker-Dealers Index Fund ETF (NYSEARCA:IAI), streetTRACKS KBW Capital markets (NYSEARCA:KCE)


AstraZeneca to Buy MedImmune for $15.6 Billion

British pharma AstraZeneca plc has announced it will purchase MedImmune Inc. for $15.6 billion. AstraZeneca will pay $58 per share in cash, representing a premium of approximately 53% to MedImmune's share price on April 11, the day before news broke that the U.S. biotech company was for sale. The deal is expected to close in June. In February, takeover speculation was fueled by the disclosure that activist investor Carl Icahn had purchased 2.8 million shares of MedImmune, a company known primarily for its nasal flu vaccine FluMist. Icahn had threatened to launch a proxy fight if the company did not find a purchaser. The transaction will give AstraZeneca 45 new products for its pipeline, a boost it sorely needs after a series of research setbacks. Those products include a refrigerated version of FluMist and the next-generation version of Synagis, an antiviral treatment for babies. AstraZeneca forecasts the transaction will boost earnings in 2009 and achieve $500 million in synergies by that year. It plans to combine MedImmune with recently acquired Cambridge Antibody Technology to create an integrated biologics and vaccine business.
Sources: Reuters, MarketWatch, Bloomberg
Commentary: Biotech Day In Review: MedImmune Puts Itself Up For SaleIcahn's Golden Touch: MedImmune Up 12%MedImmune Considering Possible Sale
Stocks/ETFs to watch: MedImmune Inc. (MEDI), AstraZeneca plc (NYSE:AZN). Competitors: Bristol-Myers Squibb Co. (NYSE:BMY), Valeant Pharmaceuticals International (NYSE:VRX). ETFs: SPDR S&P Biotech (NYSEARCA:XBI), Biotech HOLDRs (NYSEARCA:BBH), iShares Nasdaq Biotechnology (NASDAQ:IBB)
Conference call transcripts: MedImmune Q4 2006

CtW Investment Group Opposes Election of Two Caremark Shareholders To CVS Board

CtW Investment Group, an affiliate of Change to Win (which claims to represent 6 million union member pension plans), has asked CVS/Caremark Corp. shareholders to oppose the election of former Caremark directors Roger Headrick and C.A. Lance Piccolo to the board during the annual meeting on May 9.cvs The reason for the opposition is twofold: the directors in question have been the target of a stock options backdating probe; in addition CtW has questioned whether Caremark rejected Express Script's higher bid as a result of the ongoing investigation, because the CVS bid faced less regulatory hurdles and was likely to close sooner. Caremark has said it properly awarded the stock options, and also points out that shareholders voted to approve the CVS deal by a significant majority (73%).
Sources: Wall Street Journal, Reuters
Commentary: CVS: Loved By Customers and Investment BanksCVS/Caremark Merger ClosesCramer's Take on CVS
Stocks/ETFs to watch: CVS/Caremark Corporation (NYSE:CVS). Competitors: Express Scripts, Inc. (NASDAQ:ESRX), Medco Health Solutions Inc. (NYSE:MHS), UnitedHealth Group Inc. (NYSE:UNH), Wal-Mart (NYSE:WMT), Walgreen Company (WAG), Rite Aid Corporation (NYSE:RAD). ETFs: iShares Dow Jones US Healthcare Provider (NYSEARCA:IHF), Retail HOLDRs (NYSEARCA:RTH)

AstraZeneca Terminates Production of AtheroGenics' AGI-1067; Beats Pretax Estimates

AstraZeneca announced it would cease future development of AtheroGenics' experimental heart drug AGI-1067 after multiple clinical failures. The move will cost AstraZeneca $83 million and means AtheroGenics will reacquire all worldwide rights to AGI-1067, which it said it will continue to develop in a statement. Meanwhile, AstraZeneca reported an 11% increase in pretax profits during 1Q07 on a 13% rise in sales. Net pretax income was $2.27 billion, as the British pharmaceutical company reaped the benefits of a weaker dollar. Reuters consensus estimates called for pretax profits of $2.22 billion.
Sources: Press Release, Reuters, ShareCast, Briefing.com
Commentary: AstraZeneca to Buy MedImmune for $15.6 BillionAtheroGenics' Heart Drug Shows Promise on Secondary GoalsAtheroGenics' Uncertainty Continues, Will Remain for Some Timeazn agix
Stocks/ETFs to watch: AstraZeneca (AZN), AtheroGenics (AGIX). Competitors: Pfizer (NYSE:PFE), Amgen (NASDAQ:AMGN), Biogen (NASDAQ:BIIB), Bristol Myers Squibb (BMY), Glaxosmithkline (NYSE:GSK), Eli Lilly (NYSE:LLY), Teva (NASDAQ:TEVA), Merck (NYSE:MRK), Schering-Plough (SGP), Sanofi-Aventis (NYSE:SNY). ETFs: iShares S&P Global Healthcare Sector (NYSEARCA:IXJ), Pharmaceutical HOLDRS (NYSEARCA:PPH), Vanguard Health Care ETF (NYSEARCA:VHT)

Novartis Beats Street with 11% Q1 Profit Jump

Drug manufacturer Novartis yesterday reported an unexpected 11% rise in Q1 net profit, ahead of forecasts, on strong sales of heart medication Diovan and cancer treatment Gleevec. Net income reached $2.17 billion ($0.92/share) from a restated $1.95 billion ($0.83). Analysts were expecting $1.82 billion. Diovan and Gleevec lifted sales in the pharmaceuticals division by 17% to $5.9 billion while overall net sales were up 18% to $9.8 billion, ahead of rival Roche Holding's 16% gain. The Sandoz generics unit posted a 19% boost in sales. Q1 operating profit came in at $2.453 billion, up from $2.202 billion, on revenue of $9.819 billion, up from $8.301 billion. CEO Daniel Vasella pushed the introduction of Tekturna, a newly approved hypertension drug, during the quarter as diabetes drug Galvus was delayed. The company reiterated its full-year forecast for record-setting operating and net profit. The company expects revenue to grow at least 5% following the removal from the market of Zelnorm, an irritable bowel syndrome medication, on safety concerns.
Sources: Bloomberg, Reuters, Forbes
Commentary: Novartis Lowers Growth Forecast On Suspension of Zelnorm Sales; Shares FallNovartis Gets Sooner Than Expected FDA Approval for Hypertension Drug
Stocks/ETFs to watch: Novartis AG [ADR] (NYSE:NVS). Competitors: Roche Holding Ltd. [ADR] (OTCQX:RHHBY), Merck & Co. Inc. (MRK), GlaxoSmithKline plc [ADR] (GSK), Sanofi-Aventis [ADR] (SNY). ETFs: Pharmaceutical HOLDRs (PPH), Market 2000 HOLDRs (NYSEARCA:MKH), Europe 2001 HOLDRs (NASDAQ:EKH)


Foreign Banks in China Approved to Accept Yuan Deposits

On Monday morning, four foreign banks -- Citigroup, HSBC Holdings, Standard Chartered and Bank of East Asia -- will begin accepting deposits in yuan from private Chinese citizens for the first time. They are also cleared to offer loans to individuals. This marks the culmination of the liberalization of China's financial sector under its obligations to the World Trade Organization, which it joined six years ago. Chinese households have approximately $2 trillion on deposit. The market is among the most desirable in the world for the banking industry because of the country's enormous population, high household savings rate (about 25%) and fast income growth. Citigroup, HSBC and Standard Chartered will target the wealthiest citizens by imposing management fees on balances that dip below 80,000 yuan (about $10,400) or 100,000 yuan ($13,000). Hong Kong-based Bank of East Asia, taking a broader approach, will offer free banking to customers who maintain a balance above 5,000 yuan (approximately $650).
Sources: Wall Street Journal
Commentary: Four Foreign Banks Incorporate in ChinaHSBC, Citigroup, Get Key Approval for Chinese BankingCitigroup CEO Outlines Planned Chinese Expansion
Stocks/ETFs to watch: HSBC Holdings plc (HBC), Citigroup Inc. (NYSE:C), Bank of East Asia Ltd. [ADR] (OTCPK:BKEAY), Standard Chartered plc [London: STAN]. ETFs: BLDRS Europe 100 ADR Index (NASDAQ:ADRU), PowerShares Intl Dividend Achievers (PID), First Trust Morningstar Div Leaders Idx (FDL), WisdomTree High-Yielding Equity (NYSEARCA:DHS), SPDR DJ Wilshire Large Cap (ELR)
Conference call transcripts: Citigroup Q4 2006


Barron's articles likely to move stocks today, culled from our Annotated Barron's Summaries

  • Plugged In editor Mark Veverka says the tech/hardware sector is in for a tepid summer. IBM (NYSE:IBM) and EMC (EMC) warned last week of weakening demand, and price wars between Intel (NASDAQ:INTC) and AMD (NYSE:AMD) are likely to get more vicious. BCA Research says hardware stocks should slide as the industry hits a 'major overproduction cycle.' Bill Whyman of International Strategy & Investment says 9% U.S. tech spending growth will keep tech shares flat at best.
  • Increasing global need for coal and copper has created a strong demand for mining equipment maker Joy Global's (JOYG) merchandise, yet shares are down from $72 in April to $47. 45% of its revenue comes from U.S. coal miners who suffered from the winter's unseasonably warm weather, but coal inventories are declining and miner stocks moving up. International sales should be a source of growth; China is expected to see a 50% jump in power demand by 2010. With 60% market share and low debt, the stock is attracting large institutional investors, and could recover by 30% or more.
  • Domino's Pizza (NYSE:DPZ) shares are up 54% in the last nine months, and the company is paying out a $13.50 dividend and initiating a $200 million buyback -- using a $1.85 billion recapitalization. Cheap debt could prove risky if sales drop; same-store sales declined for the first time in a decade in 2006. Domino's debt load will be 7x 2007 Ebitda of about $261 million. Wheat and corn prices are forecast to climb due to low inventories and high demand. The buyback may give shares a short term boost, but all the good news seems to be priced in to the stock, making serious upside unlikely.
  • Offshore oil driller stocks such as Transocean (NYSE:RIG), Noble (NYSE:NE), GlobalSantaFe (NYSE:GSF), Diamond Offshore Drilling (NYSE:DO) and ENSCO (NYSE:ESV) have been left in the wake of a booming stock market on concerns the cyclical industry may be at or near its top -- shares trade at just 6-7 times 2008e earnings. But Transocean CEO Bob Long says deepwater rigs would continue to be in demand at current prices (deepwater rigs lease for about $425,000/day) even if oil were to fall to the $35-40/barrel range. There are takeover rumblings in the sector -- GlobalSantaFe and Noble are potential targets. And analysts say drillers could boost share prices 50% through earnings-linked dividends instead of the share buybacks they currently favor. Shares may rise sharply.
  • Last week statistical consultants suggested Neurochem (NRMX) adjust its statistical model for analyzing Alzhemed, the Alzheimer-related memory-loss drug. Analysts say this indicates the drug had no significant statistical effect in trials. Shares slid 11% to $11.86, already down from $22 in January. The full study won't be completed until June, but the drug is still the most advanced in the testing stages of all other new generation Alzheimer's drugs. Others companies testing treatments include Myriad Genetics (NASDAQ:MYGN), Elan (NYSE:ELN), Eli Lilly (LLY) and Wyeth (WYE).
  • Ameritrade (NASDAQ:AMTD) shares are down 40% since 2006 while E*TRADE (NASDAQ:ETFC) shares have dipped 20% -- both took beatings last week on weak earnings and 2007 forecast revisions. But depressed prices give credence to ongoing merger rumors; analyst Richard Repetto says a merger could trim at least 15% of combined expenses, boosting pre-tax margins to 59%. The companies are open to the suggestion, so merger prospects should create a price floor. At current valuations, Barron's says both companies may be worth a look.
  • Waste remover and recycler Waste Management (WMI) has achieved 20%+ earnings growth every year since 2003 on a flourishing international business, reorganizing and excising unprofitable segments, and disciplined price-raising. Its low 18 P/E (vs. the industry's 20) and 7.3x enterprise value mean that shares would rise 20% if they mean revert. The company has bought back $2b in shares, and should raise its 2.4% dividend. Rivals Allied Waste Industries (AW) and Republic Services (NYSE:RSG) have potential, but WMI's yields are higher. Steady price increases and hitting projections could see shares ($35) climbing to the mid-$40s.


U.S. Market: S&P 500: Could We Get a Seven-Year Double Top?
Housing: NVR's Earnings: Not As Bad As Feared
IPO Analysis: This Week's IPOs Part I, Part II
Long Idea: Earnings Preview: Five Companies That Could Suprise
Short Idea: Advanced Micro Devices a Sell
Internet: Following Disappointing Q1 Results Yahoo Needs "Plan B" More Than Ever
Telecom: Vonage Blues May Be Spreading To Clearwire
Networking: Amphenol Beats: We Expected Even More Oomph From the Latest Quarter
Hardware: Can NEC's Virtual PC Center Make Thin Clients In?
Chips: Expectations Low for Altera: A Contrarian Chip Play?
Software: SAP's Q1 Results: Did the Company Clean Out the Drawer?
Consumer Electronics: RBC Note May Spark A Rally In Palm
Media: New York Times Company: What I'd Do To Turn Things Around
Healthcare: Is Urologix Showing Its Bottom Yet?
Biotech: Dendreon: Revisiting the Risk/Reward Scenario
Retail: 5 Revenue Drivers To Push Hansen Natural Northward
Transport: Johnson Controls Reaching New Highs Post-Earnings - More Upside In Store?
Gold: Silver: Bring on the Empty ETFs?
Energy: Why I'm Bullish On Coal Stocks
Financial: John Hussman: Problems With Private Equity, Blackstone?
Asia: Chinese Consumers: Acting Globally and Thinking Locally
ETFs: Bad ETFs Are the Exception, Not the Rule
Small-Caps: ManTech International Corporation: A Small Cap with Big Prospects
Sound Money Tips: The Week in Sound Money Tips
Jim Cramer: Latest stock picks
Earnings Call Transcripts: First Data Q1 2007SAP Q1 2007Xerox Q1 2007Caterpillar Q1 2007McDonald's Q1 2007

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