Q3 2009 Earnings Call

October 27, 2009 8:30 a.m. ET

Today’s markets maintain a level of anxiety that another leg-down is coming, namely the notion that we may revisit our former lows of March. As the more bullish investors continue to invest in financial and IT names, it would seem that the vast majority of market movers are taking profits off of the table in the industrial sector of the economy. But while the money seems to be rotating out of the early-cycle names that seem to have gotten ahead of themselves, many of which are up considerably from the bottom, I reiterate that there remains significant opportunity in cyclical-aerospace.

Over the length of the past stock market rally, industrial names enjoyed tremendous gains from the March lows. As one of the sectors to bounce back the strongest, many names like 3M (up over 40% from its lows) (MMM), General Electric (popped over 115%!) (GE) and Caterpillar (over 80% increase) (CAT) have been the darlings of the bulls. Some of the largest gains off of the 2-month stand have been made in industrial names… while similar gains were to be had in financials, information technology, energy and materials. If all of these groups have momentum, why has a shadow been cast on industrials?

More than a third of the year has passed and the markets have rebounded nicely from their lows to turn a small profit on the year. It seems that the worst may be behind us when it comes to equity prices as many stocks have rallied more than 50% this year alone. Here at Bullish Bankers, we published a “Best Stocks of 2009″ newsletter at the beginning of the year, and our equities have performed very admirably when compared to our benchmark, the S&P 500. This article is designed to give a recap of how our equities have performed and give some additional explanation to our initial stock picking process. Through Friday, May 8th, our BB2009 Index has outperformed the S&P 500 by 11.51% on a geometric basis ex-dividend payments. Beside each of the sectors I have listed our three picks and the comparable ETF to show our relative performance on a sector by sector basis.

Consumer Discretionary - (APOL) YTD: -25.52%, (MCD) YTD: -11.69%, (COH) YTD: 25.32%, (XLY) YTD: 11.22%

Everyone wants to know.. how long can the rally last. It’s the same question that was being asked on the other side just one month ago. How low can we go and for how long? The market always seems to remain irrational longer than you think it will and that has certainly played out over the first quarter here in 2009.

To help answer these questions, I always turn to the charts to gauge areas of support/resistance as well institutional demand. Admittedly, technical analysis has been considerably difficult in an environment of rumors, manipulation, intervention and extreme levels of fear and greed, but what it does and will always do well is provide an x-ray into the health or weakness of the market. In general, slices through support and weakness at resistance indicates a deteriorating market while surges above resistance and at support indicate good market strength.

If you want to try the stock trading technique called 'Buying Dividends,' which is the technique of buying stocks before the ex dividend date and selling the stock shortly after the ex date at about the same price, yet still being entitled to the dividend, there are many stocks to choose from. This technique generally works only in bull markets.

When you buy dividends, there are many stocks in many different sectors to choose from. In order to be entitled to the dividend, you have to buy the stock before the ex-dividend date, and you can't sell the stock until after the ex date. The actual dividend may not be paid for another few weeks.

Q4 2008 Earnings Call

January 30, 2009 8:30 am ET

• NY AG mulls bonus pullback. Sources say New York Attorney General Andrew Cuomo may demand the return of $4B in early bonuses paid to Merrill Lynch employees just before being acquired by Bank of America (BAC). The AG's office is also looking into how much BoA CEO Ken Lewis knew about the accelerated bonuses, whether the companies' shareholders had all the necessary information about Merrill's finances and whether federal bailout loans to BoA were used properly. "No longer will this country stand for wasteful spending of tax dollars on bonuses for executives whose companies have taken huge losses and required taxpayer bailouts," Cuomo said. Obama echoed the sentiment, calling Wall Street bonuses 'shameful' and 'the height of irresponsibility.'
• Pfizer's pull-out fee. Two days after Pfizer (PFE) announced its plans to buy Wyeth (WYE) for $68B, Pfizer shares are trading near a 12-year low. Perhaps, as one analyst put it, it's because "people seem underwhelmed by the deal, maybe thinking Pfizer made a safe move with Wyeth rather than trying to shoot the lights out with a more aggressive company better able to produce blockbuster drugs." Pfizer is moving forward with the deal full-force, and has committed to paying Wyeth $4.5B as a breakup fee if the lenders pull out of the deal. The lenders could choose to act if Pfizer's operations or credit rating decline significantly. Wyeth will have to pay $2B if it drops the deal to accept a higher bid from a different company.
• Fannie tries for fewer foreclosures. Fannie Mae (FNM) has reached an agreement with former critic Neighborhood Assistance Corp. of America to help prevent foreclosures by modifying home loans. Bruce Mark, CEO of NACA, had previously called Fannie a 'major roadblock' to foreclosure-prevention efforts, but is now working to reach a similar agreement with Freddie Mac (FRE). NACA, which serves as an intermediary between borrowers and lenders and works with such major lenders as Bank of America (BAC) and Wells Fargo (WFC), helped modify over 20,000 mortgages last year.
• Madoff transfers. Bank of New York Mellon (BK) will transfer $301.4M to Irving Picard, the trustee liquidating Madoff's brokerage, and JPMorgan Chase (JPM) will transfer $233.5M. In exchange, the banks will be indemnified against any claims brought as a result of the transfers. The move is part of Picard's efforts to gather assets to be returned to defrauded investors.
• Roche lowers DNA bid. Roche Holding (RHHBY.PK) lowered its bid price for the 44.2% of Genentech (DNA) it doesn't already own to $86.50 per share from $89 per share, and will take the offer directly to shareholders within two weeks. Genentech had previously rejected Roche's $89/share offer as too low, and though the new bid is lower, it still marks a 2.9% premium on Genentech's recent closing price. A full takeover would allow Roche to cut costs, boost earnings and expand in the U.S. market.
• Amazon profit beat. Amazon (AMZN) reported better-than-expected earnings yesterday (see details below), showing a 9% growth in Q4 profits and 18% growth in sales. The growth has much to do with Amazon's strategy of aggressive discounting, free shipping offers and continued product expansion at a time when most other retailers are scaling back, and CEO Jeff Bezos cited heavy demand for Amazon's Kindle electronic reader. Amazon also forecast strong sales for the current quarter.
• Toshiba tossed by global recession. Toshiba (TOSBF.PK) fell the most in 34 years in Japanese trading after the company forecast its largest ever annual loss. Facing an industry glut and falling prices as the global economic downturn worsens, Toshiba's net loss will probably reach ¥280B ($3.1B) in the fiscal year ending March 31 vs. earlier estimates of a ¥70B net income. To save ¥300B in the next fiscal year, the company is delaying construction of new factories, firing temporary workers, slashing output and cutting research spending. In light of the lower earnings outlook and the possibility Toshiba might have to seek equity financing, Goldman Sachs cut its rating to Sell from Neutral. Shares -17.4% in Japan.
• Dell smartphone? Dell (DELL) may move into the smartphone market as soon as next month, sources say, as a way to boost sales while its core PC business gets hit by the recession. At least one of Dell's models includes a touchscreen and no physical keyboard, like the iPhone (AAPL), while another has a keypad that slides out from beneath the screen. Going up against Apple and Research in Motion (RIMM) in the smartphone market would be a bold move, one that Dell has yet to confirm. "We haven't committed to anything," said one spokesman.
• Japan's recession deepens. Japan's recession showed signs of deepening Friday, with closely watched industrial production plunging 9.6% in December, the second straight month of record decline, and projections of steep drops continuing into 2009. "I've never seen such a steep production fall," Economy Minister Kaoru Yosano said. Meanwhile, joblessness rose to 4.4% from 3.9%, and household spending fell by 4.6%. On Thursday, the government said Japan's economy entered a recession in November 2007, meaning it's been in recession for 14 months. Japan's recent expansion was fueled by exports, and economists say its current recession is being driven by the global downturn rather than domestic factors.
• The Shedlock-Schiff Affair: A Chronicle. Popular econoblogger Michael "Mish" Shedlock triggered a firestorm this week when he took down outspoken investment advisor Peter Schiff, claiming that although Schiff may have been right about the U.S. economy imploding, clients who had invested in his funds in the hopes of profiting from his prophecies had seen their accounts decimated. Big Picture author Barry Ritholtz predicted Shedlock's post would set off fireworks "via a major media outlet." He was right. Today, WSJ's Right Forecast by Schiff, Wrong Plan? does exactly that. "Peter Schiff predicted a collapse of the U.S. financial system. The bust-up he didn't foresee was the one that made mincemeat of investors who took his advice in 2008." Meanwhile, Schiff responds, saying that "the crisis is just beginning and the movements thus far in the dollar, commodities, and foreign stocks, are mere head fakes. Once the speculators have been flushed from the markets, the underlying long-term trends I have been following should return in earnest."
• More joblessness. Initial jobless claims remained elevated, with 588,000 this week after last week's (revised) 585,000 - vs. consensus of 575,000. Continuing claims +66.5K to 4.63M.
• Durables drop. Durable Goods Orders -2.6% in December, worse than the 2% drop expected. November's numbers were revised to -3.7% from -1%. Ex-transport: -3.6% vs. -2.7% consensus. It's the fifth consecutive monthly decrease. Inventories +0.4% to $343.5B, the highest on record, and up 17 of the last 18 months.
• Fewer new home sales. New home sales in December fell 14.7% to 331,000 from Nov. - well short of the 397,000 consensus. November was revised to 388,000 from 407,000. Median price $206,500 vs. $246,900 a year ago. Total new home sales for 2008: 482K down 37.8% from 776K last year.

Earnings: Friday Before Open

• AMETEK (AME): Q4 EPS of $0.66 in-line. Revenue of $624M (+6.9%) vs. $660M. Sees Q1 EPS of $0.54-0.58 vs. $0.59. (PR)
• Cemex (CX): Q4 revenue of $4.5B vs. $4.79B consensus. Majority net loss of $707M vs. +$538M a year ago. (PR)
• Honeywell (HON): Q4 EPS of $0.97 in-line. Revenue of $8.71B (-6.1%) vs. $8.97B. Reaffirms 2009 guidance. (PR)
• Honda (HMC): FQ3 net profit sagged 90% to ¥20.24B vs. consensus of ¥19.75B. Operating profit of ¥102B down from ¥276B a year ago. Sales of ¥2.533T (-17%). Lowers full-year net profit outlook to ¥80B from ¥185B. Shares -9.2% in Tokyo. (DJ)

Earnings: Thursday After Close

• Amazon.com (AMZN): Q4 EPS of $0.52 beats by $0.13. Revenue of $6.7B (+18.2%) vs. $6.44B. "We're particularly grateful for the unusually strong demand for Kindle in the fourth quarter." (PR)
• Ariba (ARBA): FQ1 EPS of $0.21 beats by $0.08. Revenue of $86.1M (+11.8%) vs. $86.8M. (PR)
• Broadcom (BRCM): Q4 EPS of $0.08 misses by $0.19. Revenue of $1.13B (+9.7%) vs. $1.07B. Sees Q1 revenue of $800-875M vs. $953M. (PR)
• CA Inc. (CA): FQ3 EPS of $0.43 beats by $0.05. Revenue of $1.04B (-5.3%) vs. $1.07B. While customers are closely scrutinizing all IT investments, we are seeing considerable interest in our enterprise software as it enables them to increase the effectiveness and cost efficiency of their IT infrastructures..." (PR)
• Chubb (CB): Q4 EPS of $1.58 beats by $0.06. Revenue of $M in-line. Sees 2009 EPS of $4.80-5.20 vs. $5.62. "We are encouraged by the improved rate environment in the fourth quarter... and there are good reasons to believe that this trend will continue into 2009." (PR)
• Eastman Chemical Company (EMN): Q4 EPS of $0.05 misses by $0.30. Revenue of $1.35B (-22.5%) vs. $1.4B. "Capacity utilization likely reached its lowest point in December. We anticipate that our capacity utilization will improve through the first quarter due to a modest increase in demand." (PR)
• Juniper Networks (JNPR): Q4 EPS of $0.321 in-line. Revenue of $923M (+14.1%) vs. $936M. (PR)
• KLA-Tencor (KLAC): FQ2 EPS of -$0.12 misses by $0.06. Revenue of $397M (-37.6%) vs. $394M. (PR)
• Monster Worldwide (MWW): Q4 EPS of $0.27 in-line. Revenue of $291M vs. $312M. (PR)
• PerkinElmer (PKI): Q4 EPS of $0.48 beats by $0.06. Revenue of $495M (+3%) vs. $516M. (PR)
• PMC-Sierra (PMCS): Q4 EPS of $0.07 misses by $0.01. Revenue of $120.8M (-2.3%) vs. $119.7M. (PR)
• Rambus (RMBS): Q4 EPS of -$0.10 beats by $0.13. Revenue of $37.6M (-7.2%) vs. $29.9M. (PR)
• SunPower (SPWRA): Q4 EPS of $0.70 beats by $0.13. Revenue of $401M (+78.7%) vs. $397M. "Long-term solar market fundamentals remain in place and we are encouraged by the commitment to renewable energy by President Obama and Congressional leadership." (PR)
• Varian Medical Systems (VAR): FQ1 EPS of $0.56 beats by $0.05. Revenue of $509M (+12.8%) vs. $501M. Sees FQ2 EPS of $0.59-0.62 vs. $0.64. (PR)

Today's Markets

• Asia markets closed mixed Friday. Nikkei -3.1% to 7,994. Hang Seng +0.9% to 13,278. Shanghai closed. BSE +2% to 9,424.
• Europe is lower at midday. London -0.45%. Paris -1.1%. Frankfurt -1.1%.
• U.S. futures have moved back into negative territory. Dow -0.3% to 8086. S&P -0.4% to 839.50. Nasdaq -0.35%. Crude +0.8% to $41.77. Gold +1.7% to $920.50.
• 30-year Treasurys -0.2%. 10-year +0.11%. 5-year +0.04%. 2-year +0.03%.

Friday's Economic Calendar

• 8:30 GDP Q4 Advance
  8:30 Employment Cost Index
  9:45 NAPM Chicago Business Barometer
  9:55 University of Michigan Consumer Sentiment
  3:00 PM Farm Prices
• Notable earnings before Friday's open: ACI, AME, AXL, CVX, GCI, HON, IVZ, PCAR, PG, SPG, XOM
• Notable earnings after Friday's close: none.

Seeking Alpha editor Eli Hoffmann contributed to this post.

At the end of each trading week, Hillbent scans the market for extremely overbought stocks with a proprietary "E" (weakest) or "D" (next weakest) ranking in terms of negative fundamentals for revenue and earnings stability. The generated result is better known as the "Weekly Dogs With Fleas" watchlist.

Past observations have revealed that such candidates may experience reversal corrections to the downside once the market reconfirms that their fundamentals remain relatively poor.

TWST: Who is at the top of your good company list?

Bullish Calls:

Q3 FY08 Earnings Call

October 21, 2008, 8:30 AM ET

Q2 FY08 Earnings Call

July 21, 2008, 08:30 AM ET

Here is my initial list of replacement candidates for the third quarter 2008 portfolio reshaping:

AA ACMR ACS ACXM ADP AEM AEO AET AFFM AHL AIB AINV ALL AME AN APA ARP ATWO AVID AVZA AXS AYR BAGL BCPC BDK BGC BHI BJS BKS BLL BP BRO BRS BSET CAM CBI CBK CCK CCRT CDNS CFI CKH CMI COG COLM COMS CPB CRDN CROX CSCO CSL CTB DD DELL DFG DLM DRYS DUK DVN EGLE ENH EP ETP FAST FCX FDRY FITB FLEX FLXS FRPT FRZ FSR FTEK FTO GFF GHM GIL GMT GNK HAIN HAL HAR HAST HCC HCN HCP HELE HK HLYS HNT HNZ HOC HON HRS HRZ HTH INFS IPSU IR IRE ISCA ISYS IVN JCI JNX JOSB KCI KEY KMX KOF LMC LPX LRCX LSTR LZB MAN MAS MCRL MGIC MHK MHP MI MKSI MOT MPS MPWR MWA/A MXGL MYE NBR NBTY NFX NG NM NRG NSHA NTGR NVS NWLIA OC OCR ODP OIS OKE OMAB ONNN ORI OSK OXY PAYX PBI PBY PCZ PHX PKD PKI PPC PPG PRE PRU PTEN PVA PWR PXP PZZA RCII RDC RDK ROP RS RTN SAFM SCX SENEB SFY SGIC SGY SI SII SJM SKM SKX SLB SLGN SNDK SNG SNX SNY SPSS STZ SVR SVU SWN TECUA TEX THOR TLK TMS TPX TRMA TRN TRV TSC TSO TTC TXT UNF UNT URI USU VE VLGEA VLTR VZ WAG WDC WFT WGOV WNC WRB WTI WTIU WTM WY XEL Y ZNT ZZ

Q1 FY08 Earnings Call

April 21, 2008, 08:30 AM ET

Stocks discussed in the lightning round session of Jim Cramer’s Mad Money TV program, Wednesday March 5. Click on a stock ticker for more analysis:

Bullish calls:

Oracle (ORCL): “I like Oracle.”
Salesforce.com (CRM): “I like CRM more than I like Orca, the killer tech stock...”
Caterpillar (CAT): “CAT can be bought below $70, pull the trigger. They are no longer hostage to the U.S. economy, and I think that's a terrific thing.”
Global Industries (GLBL): “ I like them... I don't understand why that stock is so darn low...”
Willbros Group (WG): “ … looked like it reported a bad quarter but, by the way, it actually said guidance was good during the conference call.”
Ametek (AME): “They have done everything right. It's cut in right in that pantheon of stocks that are just great American stocks that manufacture things.”
Hudson City Bancorp (HCBK): “It is by far the best-performing bank stock …HCBK is the only bank stock that I've been recommending on this…They had about six bad loans in the whole state of New Jersey. That's for me.”
Spectra Energy (SE)
Duke Energy (DUK): ‘It yields 5%. That's the better bet.’

Q4 FY07 Earnings Call

January 23, 2008, 08:30 AM ET

The water industry can be segmented in several ways, municipal (supplying consumers) vs. industrial (supplying mostly process industries); drinking water vs. wastewater. Within each of these segments the market can then be broken down into different sub-sectors, such as equipment vs. chemicals vs. engineering services, etc. Each sub-segment has its own unique issues and opportunities. For example, chemical usage is in decline, whereas the use of membranes is increasing. Additionally, as a result of the increasing use of pharmaceuticals by consumers, new analytical testing requirements are being developed.

Oh, and one more thing it makes: profits. The company hasn't had a loss in its earnings per share going back before 1990. While earnings were somewhat erratic for a few of those years when eps decreased slightly from the previous one, they are currently on an upward trend. In 2003, eps was 87 cents a share. In 2004, $1.09. In 2005, $1.33. 2006 is expected to finish at $1.70 and look for $1.90 this year. Not coincidentally the stock took off from $8.70 in 2002 and has never gone back, splitting twice since then (prices adjusted for a 2 for 1 split and a 3 for 2 split).

Internal growth and recent acquisitions account for the increase of revenues by over 25% in 2006. It recently bought Land Instruments, SPECTRO, Solartron, and Pulsar. Expect more acquisitions to help drive sales higher, profits as well, along with cost cutting. Also contributing will be new products with better margins.