Q3 2009 Earnings Call

December 2, 2009 9:15 am ET

• GM ousts CEO, vows progress. Faced with large challenges, General Motors said Tuesday CEO Frederick "Fritz" Henderson will step down and Chairman Edward Whitacre will take his place until a permanent replacement is found. Whitacre, the former AT&T chief installed by the Obama administration, said GM needs "to accelerate our progress," and that the next step is to return the company to profitability and repay tens of billions of dollars in loans owed to U.S. and Canadian taxpayers. GM will presumably focus on selling off brands it has struggled to shed outside its four core brands, Chevrolet, Cadillac, Buick and GMC.
• Data suggest fragile recovery. A medley of economic data Tuesday suggested the U.S. recovery is still alive, but fragile. Manufacturing rose for the fourth straight month in November, though at a slower pace. And even as the housing market bounced back in October, construction spending was flat. The ISM said its index of national factory activity slipped to 53.6 in November from 55.7, below economist calls for 55 (readings above 50 indicate expansion). The report's employment index slipped to 50.8 from 53.1 in October, which had been the strongest showing since April 2006. New manufacturing orders rose to 60.3 from 58.5. Pending sales of previously owned U.S. homes rose for the ninth consecutive month to the highest level in 3.5 years. Signs of strength were also evident in U.S. auto sales, which edged higher in November, led by an outsized gain for Hyundai (HYMLF.PK) and mixed results for rivals.
• Another suitor calls as clock ticks for Saab. Beijing Automotive Industry Holding, a possible bidder for GM's Saab, is only interested in parts rather than all of the automaker, sources say. GM said Tuesday it will review all bids for the brand and decide by month-end whether to sell or kill the Swedish unit after Koenigsegg reneged on an agreement to buy the automaker last week. Spyker Cars, Merbanco, and Renco Group have also expressed interest, sources say. Beijing Auto was part of Koenigsegg's bid.
• Google bows to publisher pressure. Under fire from publishers who want to yank their news from its search engine, Google (GOOG) said Tuesday it will allow publishers to set a daily limit on how many articles readers can see for free. The change will let publishers, who have complained that Google is earning revenue off their free content, limit readers to five free articles per day. News Corp.'s (NWS) Rupert Murdoch has been one of the most vocal critics of Google's excerpting from its content.
• Nokia Siemens ups Nortel bid. Nokia Siemens (NOK, SI) is challenging Ciena (CIEN) in bankruptcy court after the U.S. networking gearmaker won an auction for Nortel's optical networking and carrier ethernet business. Nokia Siemens said it's upping its offer to $810M in cash from a prior offer of $770M, which was trumped by Ciena's $769M offer of cash and debt. The court will decide Wednesday whether to approve the deal. If Ciena wins, the deal would vault the company to No. 3 in the optical network equipment market, behind rivals Alcatel-Lucent (ALU) and Huawei Technologies.
• Candidates to BofA: Break it up. Bank of America (BAC) has been told by two prospective CEO candidates that it should consider breaking itself up, sources say. So far, the board overseeing the search has stood fast against such a move, a snag that could delay the replacement process even longer. The search to fill departing CEO Ken Lewis' shoes has already gone beyond several self-imposed deadlines. One of the candidates who suggested a breakup is Michael O'Neill, a Citigroup (C) director and CEO of Bank of Hawaii Corp. (BOH), sources said.
• Cisco plays chicken with Tandberg shareholders. Cisco Systems (CSCO) said Wednesday it now controls 84% of shares in Norway videoconferencing developer Tandberg, and said it will not extend its $3.4B offer past Dec. 3 after pushing it off from a previous Dec. 1 deadline yesterday. If it does not gain control of 90% of Tandberg's shares (which would force the other 10% to sell) by Thursday, Cisco said it will decide whether to withdraw its offer (and watch shares plunge) or waive the 90% condition. Analysts say Cisco would gain operational control of Tandberg at current levels.
• Morgan draws up CICC short list. Morgan Stanley (MS) has shortlisted KKR, Bain, Carlyle, General Atlantic and TPG as bidders for the firm's stake in CICC, one of the most successful investment banks in China, sources say. One foreign buyer - Taiwan's Fubon Financial - was also selected to conduct due diligence, despite possible tensions around cross-border investments. Morgan paid just $37M for a 34.3% stake in CICC 13 years ago. The stake has been profitable for Morgan, but it doesn't like that it lacks control of management decisions at the Chinese bank. Sources say Morgan is seeking $1.2-1.5B for its stake.
• SEC intensifies insider trading probes. The SEC, itself under fire for being lax in its oversight duties, has reportedly delivered at least 36 subpoenas to hedge funds and brokerages over the past month alone. One investigation is said to focus on Sears' (SHLD) aborted pursuit of home-furnishings retailer Restoration Hardware in 2007. Others focus on the role of Goldman Sachs (GS) bankers in roughly a dozen healthcare deals since 2006. It's unclear if the subpoenas are linked to the insider-trading case involving New York hedge fund Galleon Group.
• GE wins pay delay in NBC sale. GE (GE) will delay paying Vivendi (VIVDY.PK) cash for its $5.8B purchase of the French media group's stake in NBC Universal, a move that will help boost GE's cash flow, sources say. The stake purchase is needed for a NBCU joint venture GE plans with cable operator Comcast (CMCSA). Sources said Tuesday that GE and Vivendi agreed to a $5.8B valuation, though the payment schedule was unclear. Now sources say Vivendi will only get its money once the Comcast (CMCSA) deal closes, which could take more than a year due to regulatory reviews. If the deal doesn't close by late 2010, Vivendi would be entitled to a payment of up to $2B from GE. Separately, sources say Comcast and GE agreed to value Comcast's cable channels at as much as $7B, potentially lowering the amount of cash the cable company would have to pay into the JV.
• Mortgage apps inch up. Mortgage applications rose 2.1% last week, including a 1.7% increase in refinancing, MBA said Wednesday. The average 30-year fixed mortgage rate fell three points to 4.79%, the lowest rate since May.
• Northrop yanks Air Force tanker bid. Northrop Grumman (NOC), the third-largest defense company in the U.S., appears ready to pull its bid for the $35B Air Force refueling tanker program, complaining of "financial burdens" over the draft request for proposals, although some analysts think the threat may be a play for more negotiating power. Northrop and partner EADS had been competing since September against Boeing (BA) to build the refueling tankers. The Air Force plans to buy 179 tankers starting in 2011, at the rate of about 15 planes a year.
• Investors gain China foothold. China said it will allow foreign firms and individuals to establish limited partnership firms in the country starting March 2010, a move that could encourage some overseas investors to enter the domestic market. The State Council didn't specify how extensive the change would be, saying only that it would not apply fully to "investment-oriented" partnerships in China. Right now, foreign-invested private equity funds can be structured as limited partnerships through complex offshore platforms, but must be structured as corporations or unincorporated entities if investing onshore through yuan-denominated funds.
• BoJ buckles down on deflation. Just one day after saying it would initiate a new loan program to pump more liquidity into the system, the Bank of Japan injected ¥1T ($11.5B) into short-term money markets Wednesday. On Tuesday, Japan's central bank called a surprise policy meeting to unveil steps to fend off deflationary pressures and a surging yen, saying it will arrange a new ¥10T ($120B) facility. "While Japan's economy is picking up, there is not yet sufficient momentum to support self-sustaining recovery in business, fixed investment and private consumption," the BoJ said.
• Actively managed funds: wheel of fortune? A new study says investors casting their fortune with "active" fund managers in the hope of beating cheaper index funds tend to lose out. "People don't understand the effects of chance [on returns]," said Eugene Fama, co-author of the study and professor of finance at the University of Chicago. Based on 10,000 simulations of what investors could expect from actively managed funds, Fama and Dartmouth professor Kenneth French found that outside the top 3% of funds, active management lags results that would be delivered due simply to chance.

Earnings: Wed. Before Open

• Charming Shoppes (CHRS): Q3 EPS of -$0.42 misses by $0.29. Revenue of $460M (-16.8%) vs. $486M. SSS -13%. (PR)

Earnings: Tue. After Close

• Shanda Games (GAME): Q3 EPS of $0.24 beats by $0.03. Revenue of RMB1.27B ($186M, +45%) in-line. Shares +1.3% AH. (PR)
• Shanda Interactive Entertainment (SNDA): Q3 EPS of $1.08 beats by $0.20. Revenue of RMB1.38B ($203M, +48%) vs. RMB1.35B ($198M). Shares +2.2% AH. (PR, earnings call transcript)

Today's Markets

Asia stocks were mostly higher Wednesday, but Europe markets have moved lower and futures are slightly in the red.

Here is a list of 21 stocks which traded higher Thursday on unusually higher volume. I have added all 21 of these stocks to my watch list (and invite you to as well), but chose only one to write about in detail in this post. This post requires the knowledge of stock options. To learn more about the option strategies outlined in this post, risks, pricing, calculations, other strategies, and options in general, click here.

The table below shows the company, ticker, Thursday's per share % increase, and Thursday's volume increase (% increased compared to 50 day average). For your convenience I have ranked the stocks in order from greatest to least volume % change.

At the end of each trading week, Hillbent scans the equity market for potential anomalies which exhibit extremely oversold and overbought conditions. Past observations have revealed that such candidates may experience reversal corrections to the upside or downside once the market reconfirms that their fundamentals remain solidly intact or relatively poor. From a contrarian perspective, these lists may also serve as a precursor to changes in institutional sentiment and underlying fundamentals.

(The purpose of this report is not to provide specific recommendations, but instead serve as a time-saving reference tool and starting point for investment ideas as the upcoming trading week unfolds. Of course, the results generated are not always perfect and users are strongly encouraged to perform their own due diligence on these names. Note that overbought and oversold conditions are based upon proprietary algorithms and quantitative models instead of conventional technical analysis indicators. As a supplement to this report, please refer to our ETF Trends Report to determine if market direction trends support a bullish or bearish investment bias over short-term, intermediate, and long-term timeframes.)

At the end of each trading week, Hillbent scans the equity market for potential anomalies which exhibit extremely oversold and overbought conditions. Past observations have revealed that such candidates may experience reversal corrections to the upside or downside once the market reconfirms that their fundamentals remain solidly intact or relatively poor. From a contrarian perspective, these lists may also serve as a precursor to changes in institutional sentiment and underlying fundamentals.

(The purpose of this report is not to provide specific recommendations, but instead serve as a time-saving reference tool and starting point for investment ideas as the upcoming trading week unfolds. Of course, the results generated are not always perfect and users are strongly encouraged to perform their own due diligence on these names. Note that overbought and oversold conditions are based upon proprietary algorithms and quantitative models instead of conventional technical analysis indicators. As a supplement to this report, please refer to our ETF Trends Report to determine if market direction trends support a bullish or bearish investment bias over short-term, intermediate, and long-term timeframes.)

Q2 2009 Earnings Call

August 26, 2009 9:15 am ET

American Express (AXP), JP Morgan (JPM), Ruby Tuesday (RT), Charming Shoppes (CHRS)

4:22 PM, Jul 8, 2009 --

• NYSE down 30 (0.5%) to 5,624.57.
• DJIA up 14.8 (0.2%) to 8,178.
• S&P 500 down 1.5 (0.2%) to 879.56.
• Nasdaq up 1 (0.1%) to 1,747.

GLOBAL SENTIMENT

MedcoHealth (MHS), Allscripts-Mysis Healthcare Solutions (MDRX), St. Jude Medical (STJ), Boston Scientific (BSX), Gilead Sciences (GILD), Abbott Labs (ABT), Wellpoint (WLP). Quest Diagnostics (DGX)

Q4 2009 Earnings Call

March 18, 2009 9:15 am ET

This is a year where the threat of a lost weekend due to an ill-timed snowstorm could be a disaster for a struggling retailer.

F3Q09 Earnings Call

November 25, 2008 9:15 am ET

Money managers clean up portfolio holdings before the end of their tax year. Over 48% of US mutual funds close their books between late October and December. Managers sell stocks with large losses to avoid reporting them on their year-end report to shareholders. This causes downward pressure on stocks trading within their portfolio(s) that are at or near 52-week lows. Once the selling subsides, these stocks have historically experienced a price reversal. That said, investors should exercise due diligence before buying any of the companies listed below by analyzing any potential shift in a company's fundamentals and other factors such as sector weight and risk tolerance.

Here are the screen parameters used to select the following "sells" from funds:

F2Q09 Earnings Call

August 27, 2008 9:15 am ET

The Templeton-Nef strategy

Nef, through his firm Nef Value Research LLC, does not work with stock price the way Templeton did, but his approach shares the latter's Depression-era philosophy, bottom-fishing based on a belief that even though some companies would go bankrupt, there would be enough winners make the overall portfolio a success. As it turned out, Templeton succeeded handsomely when he invested that way.

Charming Shoppes, Inc. (CHRS)

F1Q09 Earnings Call

• It's about Time. Time Warner (TWX) is spinning off its 84% stake in Time Warner Cable (TWC). TWC will pay a one-time cash dividend of $10.9B, of which TWX will receive $9.25B, which it says it will distribute to shareholders. "We're bullish on Time Warner Cable's prospects, but its strategic goals and capital needs are increasingly different from those of our other businesses," TWX CEO Jeffrey Bewkes said. He's been under pressure to exit the cable business in order to focus on fixing the ailing AOL.
• Take that, Google. A Yahoo-less Microsoft (MSFT) has a new search-ad trick up its sleeve: cash rebates for products found through Microsoft's live.com. "Live Search cashback" will get you percentage-based rebates deposited directly to your bank account, PayPal (EBAY) account, or by check. Participating vendors include Canon (CAJ), Barnes & Noble (BKS), Circuit City (CC) and Home Depot (HD).
• Icahn group grows. T. Boone Pickens jumped aboard Carl Icahn's movement to topple Yahoo's (YHOO) board in a July 3 vote, buying 10M shares (about 0.75%). Icahn owns or has the option to buy a 4.9% stake in Yahoo. Other teammates include Paulson & Co. (about 3.7%) and Daniel Loeb's Third Point (less than 10M shares). An inside source says the attempt will likely fail due to shareholder support for the current leadership, not to mention co-founders Yang and Filo's 10% stake and Capital World Investors' 10% stake -- and the fact that Microsoft has yet to say it's willing to come back to the table with a new comprehensive offer.
• Like two bookends. Barnes & Noble (BKS) is mulling a bid for rival Borders Group (BGP). The pair are number one and two U.S. booksellers with 20-22% and 10-12% market share respectively, so any deal would raise antitrust concerns. Amazon.com (AMZN) is thought to have about 15% of the market. Borders surprised Wall Street by putting itself up for sale in March amid liquidity issues aggrivated by declining sales, a credit market freeze, and its failure to sell some assets. Its current market cap is $384M, but a buyer will also have to assume almost $550M in debt.
• HP satisfies, but doesn't overwhelm. Hewlett-Packard's (HPQ) FQ2 earnings jumped 16% from a year ago, narrowly exceeding consensus estimates (earnings numbers below). Notebook sales were up 31%, but PC sales were flat. Its PC unit kicked in $544M of HP's $2.2B in profits. Imaging and printing earnings were flat at $1.2B. Services profits were $508M, and software earnings were $93M, up from just $7M a year ago. HP said its recent deal to buy Electronic Data Systems (EDS) will boost its market share in enterprise services, and CEO Mark Hurd promised the deal would help HP reduce costs and produce value for shareholders. Shares are flat in early pre-market trading.
• Corporate Express does deal behind Staples' back. Corporate Express, itself a takeover target of Staples (SPLS), agreed to buy its French rival Lyreco for €1.73B ($2.71B). CE insisted the acquisition was unrelated to Staples' courtship (which it has shunned), although it's clear that CE's post-Staples-offer elevated share price helped enable the move. CE shares fell as much as 8.8% in Amsterdam. Staples took its €2.8B offer directly to shareholders on Monday; it's unclear where things go from here.
• Wall Street's latest woe: Hedging. I-banks that hedged risky holdings by shorting indexes that track real-estate assets and leveraged debt are taking a beating as the indexes post hefty gains, while the assets they were hedging have failed to post like up-moves. Lehman (LEH) appears to be the worst hit, with expected hedging losses of $1.5-2B. Morgan Stanley (MS) is thought to have lost less than half of that, and Goldman Sachs (GS) and Merrill Lynch (MER) even less.
• Did computer bug trip up Moody's? Moody's (MCO) said it will conduct a thorough investigation after a Financial Times investigation alleged the company erroneously awarded AAA ratings to billions of dollars in debt derivatives due to a computer glitch. FT says internal Moody's documents reveal senior staff knew in early 2007 that AAA-rated CPDOs (constant proportion debt obligations -- which use borrowed money to speculate on an improvement in credit quality) should have been ranked as many as four levels lower.
• Penn deal teetering. The $6.1B private-equity buyout of Penn National Gaming (PENN) is under pressure, and the deal's terms may need to be revised to push it through. Buyers, including Fortress Investment Group (FIG), are looking at ways to reduce the purchase price, while the lenders, led by Wachovia (WB) and Deutsche Bank (DB), are balking at the deal's terms. Renegotiations could delay or even kill the deal. Penn's shares, at $43 vs. a deal price of $67, reflect market skepticism.
• Journal changing with the Times. News Corp. (NWS) made WSJ's publisher Robert Thomson its new managing editor, replacing Marcus Brauchli. Previously editor of News Corp.'s Times of London, one can assume that this Murdoch insider will speed the pace of change at the Journal and Dow Jones. Besides strong journalistic credentials, Thomson is also prone to use words like "perspicacious" and "incunabulum."

Earnings: Tuesday After Close

• Analog Devices (ADI): FQ2 EPS of $0.44 beats consensus of $0.41. Revenue of $649M vs. consensus of $627M. Sees Q3 EPS of $0.43-0.45, better than consensus of $0.43, and revenue of $650-665M vs. consensus of $639M. Boosts dividend by 11% to $0.20/share. Shares: flat.
• Dycom (DY): FQ3 EPS of $0.19 beats consensus of $0.12. Revenue of $293M vs. consensus of $291M. Sees Q4 EPS of $0.18-0.23, better than consensus of $0.19. Shares: +7.5%.
• FTD Group (FTD): Sees full-year EPS of $1.31, short of consensus of $1.36. 12% growth in Mother's Day orders. Shares: -1%.
• Health Net (HNT): Sees full-year EPS of $3.45-3.55, better than consensus of $3.44, and revenue of $15-16B vs. consensus of $15.34B. Shares: +0.55%.
• Hewlett-Packard (HPQ): FQ2 EPS of $0.87 beats consensus of $0.85. Revenue of $28.3B vs. consensus of $28.11B. Sees Q3 EPS of $0.82-0.83 vs. consensus of $0.82. Sees full-year EPS of $3.54-3.58, better than consensus of $3.54. Shares: +0.1%.
• Intuit (INTU): FQ3 EPS of $1.39 beats consensus of $1.33. Revenue of $1.31B in-line. Sees full-year EPS of $1.61-1.63, better than consensus of $1.59. Announces $600M stock repurchase plan over the next three years. Shares: +6.25%.
• Phillips-Van Heusen (PVH): Q1 EPS of $0.90 beats consensus of $0.87. Revenue of $626M vs. consensus of $621M. Sees Q2 EPS of $0.63-0.66, short of consensus of $0.66. Sees full-year EPS of $3.21-$3.41, short of consensus of $3.35. Shares: -0.35%.
• Red Robin Gourmet (RRGB): Q1 EPS of $0.43 misses consensus of $0.50. Revenue of $256M in-line. Sees full-year EPS of $2.04-2.23 vs. consensus of $2.15, and revenue of $905-918M vs. consensus of $892M. Shares: -6.9%

Earnings: Wednesday Before Open

• BJ's Wholesale (BJ): Q1 EPS of $0.29 just beats consensus of $0.28. Revenue of $2.31B vs. consensus of $2.27B. Sees 2008 EPS of $2.04-$2.14, better than previous guidance of $1.98-2.08 and consensus of $2.06. Q1 comps gained 9.6%.
• Brown Shoe Company (BWS): Q1 EPS of $0.17 beats consensus of $0.07. Revenue of $554.5M vs. consensus $573M. Sees Q2 EPS of $0.19-0.24, better than consensus of $0.20, and revenue of $585-600M vs. consensus of $599M. Sees full-year EPS of $1.41-1.64, better than consensus of $1.50, and revenue of $2.43-2.48B vs. consensus of $2.49B.
• Charming Shoppes (CHRS): Q1 EPS of $0.01 beats consensus of -$0.06. Revenue of $641M vs. consensus of $725M. Sees Q2 EPS of $0.01-$0.03, short of consensus of $0.04, and revenue of $625-640M vs. consensus of $736M.
• Solarfun Power (SOLF): Q1 EPS of $0.32 beats consensus of $0.16. Revenue of $171M vs. consensus of $136M. Raises full-year guidance to 160-180MW shipments from 160MW.
• Talbots (TLB): Q1 EPS of $0.21 beats consensus of $0.12. Revenue of $542M vs. consensus of $554. Sees 2008 EPS of $0.48-0.52, better than consensus of $0.34. Says Q1 comps declined 9.8%.
• Tween Brands (TWB): Q1 EPS of $0.21 beats consensus of $0.16. Revenue of $252M vs. consensus of $242M. Sees Q2 EPS of $0.00-$0.04, better than consensus of -$0.02, and net sales gains in the mid teens.

Today's Markets

• Asian markets were decidedly undecided Wednesday. Nikkei -1.65% to 13,926. Hang Seng +1.16% to 25,460. Shanghai +2.93% to 3,544. BSE Sensex +0.09% to 17,426.
• In Europe, markets are showing strength at midday. FTSE +0.92% to 6,249. CAC +0.46% to 5,078. DAX +0.31% to 7,141.
• U.S. futures are down at 7:30 AM. Dow -0.23% to 12,820. S&P -0.3% to 1,413.25. Nasdaq -0.24% to 2,002.50.
• Gold +0.63% to $926. Oil +0.88% to $130.09.