Q3 2009 Earnings Call

October 23, 2009 8:00 am ET

• Feinberg unveils pay cuts. So-called pay czar Kenneth Feinberg outlined much-awaited compensation rules for seven TARP recipient firms; top executives at firms such as Citigroup (C), AIG (AIG) and Bank of America (BAC) will have a pay cap of $500K - for many a 90%-plus reduction. Also, rather than cash, the rules require that the majority of salaries be paid in stock held for the long-term. The rules are only valid for two months - November and December - but will also form the basis for next year's reviews. Feinberg said the rulings are significant, and hopes his standards, which seek to strike a balance between compensation and risk-taking, will be "voluntarily picked up in the marketplace." In a brief statement, Treasury Secretary Tim Geithner said he hopes the new framework will encourage these companies to "return taxpayer dollars as soon as possible."
• Fed proposes compensation checks. While Feinberg was busy administering to TARP recipient firms, the Fed proposed a framework to crack down on pay packages that encourage bankers to take excessive risks by subjecting executives, traders and dealmakers' compensation to regulatory scrutiny. Instead of pay limits, the Fed's plan is to monitor pay practices at the nation's 28 biggest institutions, making sure compensation structures reward executives for long-term performance and discourage excessive risk-taking. Skeptics worry firms will continue to outsmart regulators in finding inventive ways to circumvent restrictions. (read the Fed's press release, proposal (.pdf), and Q&A (.pdf))
• Britain mired in recession. U.K. GDP dropped a surprising 0.4% in Q3, according to the Office for National Statistics, the sixth straight quarter of contraction. Economists had expected the British economy to move back to timid growth of 0.2%. Six quarters is the longest string of declines on record, while the 5.9% peak-to-trough drop in output is just short of the 6% contraction recorded in the recession of the early 1980s. The pound (ETF: FXB) fell like a stone following the report (-1% at 5:00 a.m.), retreating from a six-week high. (read ONS's preliminary GDP estimate (.pdf))
• CIT, Goldman near deal. After a week of tense negotiations, sources say CIT Group (CIT) and Goldman Sachs (GS) have reached an agreement over a $1B "make whole" payment CIT would owe Goldman if it files for bankruptcy, connected to a $3B credit facility Goldman extended it last year. The deal calls for Goldman to reduce the facility to just over $2B, and for CIT to pay Goldman $300M if it files for bankruptcy. An agreement opens the door for CIT to strike a deal with its bondholders, who were waiting on the outcome of the Goldman talks; it could also reduce CIT's need for financing from $6B to $4B.
• Nokia wants Apple to pay its dues. Nokia (NOK) filed a patent suit against Apple (AAPL) Thursday, claiming the iPhone violates 10 patents for GSM, UMTS and wireless LAN technologies. Nokia said it has repeatedly asked Apple to license its patents, which it developed as part of a consortium of global telecommunications companies, and says Apple is "attempting to get a free ride" on the back of its innovation. Cellphone royalties typically run at 1-2% of the wholesale price, estimated at $600 for the iPhone; a 2% royalty would put $12 per iPhone in Nokia's pockets.
• Book price-war under review. The American Booksellers Association asked the Department of Justice to investigate this week's book price-war between Amazon.com (AMZN), Wal-Mart (WMT) and Target (TGT), claiming it constitutes illegal predatory pricing that is damaging to the book industry and harmful to consumers. If the trio is allowed to continue selling hot-item books for under $10, the net result "will be the closing of many independent bookstores and a concentration of power in the book industry in a very few hands," it said. While mega-retailers can use book sales as a loss leader to drive traffic, independent bookstores rely almost entirely on profits from books. (read the ABA's letter to the DoJ)
• Amazon: emerging juggernaut. Amazon (AMZN) announced Q3 results that exceeded expectations, including a 28% jump in sales, and offered Q4 guidance that was well above analyst consensus, sending shares up over 14% in after-hours trade (see below). Electronics and other general merchandise (EGM) now accounts for 43% of Amazon's sales, vs. 54% for media. The rate of EGM growth (44%) versus that of media (17%) signifies the online retailer's rapid and successful transition from a bookseller to an "everything store," which will become even more pronounced once it completes acquiring Zappos in Q4. (read Amazon's Q3 earnings call transcript)
• Merck/Schering merger wins EC approval. The European Commission cleared Merck's (MRK) bid to buy Schering-Plough (SGP) in a deal worth more than $41B. "The proposed transaction would not significantly impede effective competition in the European economic area or any substantial part of it," the EC said. Merck agreed to sell its half of the Merial animal health business to Sanofi-Aventis (SNY), its JV partner, for $4B in order to meet antitrust requirements. The merged companies will cut 15% of their combined workforces.
• Fed's Evans warns of weak recovery: The Fed will be in no rush to withdraw fiscal stimulus, Chicago Fed president Charles Evans said yesterday, warning the recovery "is going to be very unsatisfactory in 2010." With weak labor markets and plenty of idle factory capacity, there is a sufficient slack in the economy to set aside inflation fears, he said. If anything, low levels of inflation are a concern.
• BP mulls rival bid for Jubilee. Sources say BP (BP) has hired Goldman Sachs (GS) to advise it on a rival bid to ExxonMobil's (XOM) $4B deal to purchase Kosmos Energy's stake in Ghana's Jubilee field. Goldman reportedly advised Cnooc (CEO) on a potential bid for the same stake. Cnooc's attempt is thought to have been hampered by its relative inexperience in developing such a large field, and Goldman's switch to advising BP implies a Cnooc bid is not forthcoming, analysts say.
• Sept. Leading Indicators: The Conference Board's Leading Indicators Index came in at +1%, vs. +0.6% in August and consensus of +0.8%. With the sixth consecutive increase, the six-month growth rate is now at the highest pace since 1983. The numbers suggest a strong recovery is developing, the group says, but notes "the continued downtrend in employment is keeping this index of current economic conditions from rising faster."

Earnings: Fri. Before Open

• Cache (CACH): Q3 EPS of -$0.43 misses by $0.23. Revenue of $44.9M (-22.7%) vs. $48.3M. (PR)
• Dover (DOV): Q3 EPS of $0.58 beats by $0.10. Revenue of $1.5B (-23.7%) in-line. (PR)
• Honeywell (HON): Q3 EPS of $0.76 beats by $0.04. Revenue of $7.7B (-17%) vs. $7.88B. (PR)
• Ingersoll-Rand (IR): Q3 EPS of $0.70 beats by $0.09. Revenue of $3.48B (-19.2%) vs. $3.56B. Sees 2010 EPS of $2.00-2.40 vs. consensus of $1.98. "The outlook for the strength and timing of the global economic recovery and the performance of our end markets remains cloudy. A preliminary review of our internal cost reduction and productivity improvement actions for next year gives us confidence that we can grow our earnings for 2010 even if our markets remain weak." (PR)
• Schlumberger (SLB): Q3 EPS of $0.65 beats by $0.02. Revenue of $5.43B (-25.2%) in-line. (PR)
• Whirlpool (WHR): Q3 EPS of $1.15 beats by $0.38. Revenue of $4.5B vs. $4.28B. Continues to see uncertain and volatile demand levels in many markets. (PR)

Earnings: Thur. After Close

• Amazon.com (AMZN): Q3 EPS of $0.45 beats by $0.12. Revenue of $5.5B (+28%) vs. $5B. Sees Q4 sales of $8.12B-9.12B vs. consensus of $8.11B. Shares +14.5% AH. (PR)
• American Express (AXP): Q3 EPS of $0.44 beats by $0.06. Revenue of $6B (-16%) vs. $5.9B. Consolidated provisions for losses down 13% to $1.2B. Tier one risk-based capital ratio 9.7%. Sees "broad-based improvements in credit quality" and encouraging trends in spending. Shares -0.5% AH. (PR)
• Broadcom (BRCM): Q3 EPS of $0.16 beats by $0.05. Revenue of $1.25B (-.35%) vs. $1.16B. Sees Q4 revenue flat sequentially. Shares -8.3% AH. (PR)
• Bucyrus International (BUCY): Q3 EPS of $1.21 beats by $0.35. Revenue of $676M (+5%) vs. $623M. (PR)CA Inc. (CA): FQ2 EPS of $0.42 beats by $0.02. Revenue of $1.07B (+1%) in-line. Shares +2.3% AH. (PR)
• Burlington Northern Santa Fe (BNI): Q3 EPS of $1.48 beats by $0.20. Revenue of $3.6B (-27%) in-line. Shares -1.9% AH. (PR)
• Capital One (COF): Q3 EPS of $0.94 beats by $0.80. Revenue of $$4.6B (+11.7%) vs. $4.11B. "We are successfully weathering the storm, but the storm is not over." Shares +8.5% AH. (PR)
• Cheesecake Factory (CAKE): Q3 EPS of $0.29 beats by $0.05. Revenue of $401M (-1%) vs. $397M. Comparable same-store sales down 2.8%. Shares +2.4% AH. (PR)
• Chubb (CB): Q3 EPS of $1.56 beats by $0.29. Total net written premiums of $2.7B (-7%). Raises full-year EPS guidance to $5.90-6.00 from $5.20-5.50, vs. $5.51. Shares -1.74% AH. (PR)
• Compuware (CPWR): FQ2 EPS of $0.12 beats by $0.04. Revenue of $218M (-19%) vs. $201M (one estimate). Shares +5.3% AH. (PR)
• Developers Diversified Realty (DDR): Q3 FFO of $0.44 beats by $0.01. Revenue of $202M (-9%) vs. $194M. Shares +1.1% AH. (PR)
• Eastman Chemical Company (EMN): Q3 EPS of $1.38 beats by $0.25. Revenue of $1.3B (-27%) in-line. Sees Q4 EPS of $0.85 vs. $0.79. Shares +3.2% AH. (PR)
• Emulex (ELX): FQ1 EPS of $0.08 beats by $0.02. Revenue of $86M (-23%) vs. $81M. Sees Q2 revenues of $88M-92M vs. $87M. Shares +2% AH. (PR)
• Informatica (INFA): Q3 EPS of $0.22 beats by $0.02. Revenue of $123M (+8%) vs. $120M. Shares -2.1% AH. (PR)
• Interactive Brokers (IBKR): Q3 EPS of $0.20 misses by $0.11. Revenue of $272M (-45.3%) vs. $298M. Market making income -47% Q/Q and -74% Y/Y due to tighter bid/offer spreads on options. Shares -7.2% AH. (PR)
• Juniper Networks (JNPR): Q3 EPS of $0.23 beats by $0.03. Revenue of $824M (-13%) vs. $797M. Shares +1.6% AH. (PR)
• Lattice Semiconductor (LSCC): Q3 EPS of $0.00 beats by $0.02. Revenue of $49M (-15%) vs. $47M. Shares +5.6% AH. (PR)
• Leggett & Platt (LEG): Q3 EPS of $0.34 beats by $0.06. Revenue of $810M (-28%) vs. $840M. Raises full-year EPS guidance to $0.65-0.75 from $0.55-0.70, vs. $0.64. Shares +0.5% AH. (PR)
• MEMC Electronic Materials (WFR): Q3 EPS of -$0.29 misses by $0.23. Revenue of $310M (-43%) vs. $302M. Shares -3.8% AH. (PR)
• Netflix (NFLX): Q3 EPS of $0.52 beats by $0.06. Revenue of $423M (+3.6%) vs. $420M. Subscriber acquisition cost $26.86 per addition vs. $32.21 a year ago. Churn was 4.4% vs. 4.2% a year ago. Shares -3.3% AH. (PR)
• PMC Sierra (PMCS): Q3 EPS of $0.15 beats by $0.01. Revenue of $131M (-6%) in-line. Shares -0.6% AH. (PR)
• Rambus (RMBS): Q3 EPS of -$0.26 misses by $-0.02. Revenue of $28M (-5%) vs. $27.6M (one estimate). Shares -0.3% AH. (PR)
• Riverbed Technology (RVBD): Q3 EPS of $0.19 beats by $0.04. Revenue of $103M (+18%) vs. $97M. Shares +0.8% AH. (PR)
• Sunpower (SPWRA): Q3 EPS of $0.42 beats by $0.02. Revenue of $466M (+23%) vs. $420M. Shares -11.4% AH. (PR)
• Synaptics (SYNA): FQ1 EPS of $0.48 beats by $0.06. Revenue of $120M (+3%) vs. $116M. Expects Q2 revenue of $128M-134M vs. $137M. Shares +10.1% AH. (PR)
• Synovus Financial (SNV): Q3 EPS of -$1.27 misses by $0.60. Net interest income of $758M (-8%). Shares -7.6% AH. (PR)
• Western Digital (WDC): FQ1 EPS of $1.25 beats by $0.31. Revenue of $2.2B (+4.3%) vs. $2.06B. Says demand remains strong. Shares +1.3% AH. (PR)

Today's Markets

Overseas markets echoed U.S. gains Friday. Futures are marginally higher in light overnight action.

Third-quarter earnings season hits full stride this week with 439 companies confirmed to report. More than of a quarter of these are from the S&P 500 (135 companies). Dow components include 3M (MMM), American Express (AXP), AT&T (T), Boeing (BA), Caterpillar (CAT), Coca-Cola (KO), E.I. DuPont (DD), McDonald's (MCD), Merck & Co. (MRK), Microsoft (MSFT), Pfizer (PFE), Travelers (TRV) and United Technologies (UTX).

Housing data will be the highlight on the economic calendar. The existing home sales data will be influenced by the first-time home buyers' credit. The starts and permits data could be more interesting, especially if they show fear on the part of builders about the subsidy potentially not being renewed.

Q2 2009 Earnings Call Transcript

July 24, 2009 8:00 am ET

• CIT to get much smaller. CIT Group (CIT) reportedly turned down offers from Berkshire Hathaway (BRK.A) and Leucadia National Corp. (LUK) last spring to buy parts of the lender because the offer prices were too low. CIT is now being forced to evaluate a similarly structured breakup as it faces potential bankruptcy, with its aviation-finance and rail-finance operations units the most likely to be sold. CIT will likely keep its vendor-financing department, but could shed its vendor-financing business.
• White House wants to fold OTS. The White House submitted a proposal to Congress to fold the Office of Thrift Supervision into the larger Office of the Comptroller of the Currency, which oversees commercial banks, and to empower the SEC to administer the resolution of large financial firms that operate brokerages. The plan, which is part of a broader effort to create a process for unwinding systemically important institutions that are failing, would try to end the practice of escaping regulation by acquiring a thrift and organizing as a unitary thrift holding company. (Read the Treasury's fact sheet)
• Stock indices head up and away. Better-than-expected quarterly earnings reports have helped stock indices surge forward. The Dow Jones Industrial Average closed at 9,069.29, its first time above 9,000 since January, for a 38.5% gain in less than five months. The S&P 500 has erased half its losses since September, and the Nasdaq is on its longest streak of gains since 1992. Skeptics warn the sharp gains are just a set-up for a sharp pullback.
• Fed seeks consumer protection overhaul. The Federal Reserve submitted its own proposal to Congress yesterday, detailing sweeping new consumer protections for mortgages. Among the proposals were a ban on side payments to mortgage brokers for pushing clients to higher-cost loans and plans to overhaul the content and timing of disclosures to consumers. (Read the Fed's press release)
• SEC sues over fake takeover reports. SEC officials filed a civil lawsuit against Hazem Khalid Al-Braikan, a respected Kuwaiti financier, alleging he made millions in suspicious profits after 'fraudulent' takeover reports sent shares of U.S. companies Harman International (HAR) and Textron (TXT) soaring. The SEC said the case represents 'pretty brazen misconduct,' with Al-Braikan aggressively buying Harman stock and call options in the four days before the fake tender offer, followed by a liquidation of the entire position.
• Qualcomm fined for abusing market power. South Korea’s fair trade regulator is fining Qualcomm (QCOM) a record $208M, accusing the U.S. chipmaker of abusing its market dominance. Qualcomm promised to fight the ruling, which it called 'overly excessive and unwarranted.' South Korean regulators have been investigating Qualcomm since 2006.
• Beijing Auto's Opel bid fails. Xu Heyi, chairman of Beijing Automotive, said the company's bid for General Motors' Opel unit failed because of a disagreement over the intellectual property rights to care designs and technology. Analysts speculate that Beijing Automotive's growing success may have been a factor as well, as "GM has no interest in strengthening a rival in China."
• Tough times for Microsoft. Microsoft (MSFT) reported quarterly earnings after the market closed (see details below), with a $0.02/share miss that dampened hopes of a tech recovery. The company posted its first ever annual decline in sales of its Windows operating system, and saw weak sales across all of its units, but struck a bullish tone, noting "there is some sense we have hit bottom."
• Amazon fails to amaze. Amazon (AMZN) met expectations when it reported quarterly earnings yesterday (see details below), but took a profit hit on a legal settlement and weak sales in high-margin products like videogames. Sales of media, including books and music, were flat in North America. On a more positive note, Amazon's third-party marketplace continued to grow, contributing 30% of unit sales.
• U.K. economy shrinks. The U.K. economy shrank far more than expected in Q2, contracting 0.8% from the previous quarter and 5.6% annually, the largest decline since quarterly records began in 1955. This was the fifth consecutive quarter of GDP contraction in the U.K.
• Jobless claims rise. Initial jobless claims came in at 554K, up 30K from a week ago (revised) and better than the 560K consensus. Continuing claims fell 88K to 6.225M.
• Fewer mass layoffs. Mass layoffs (of at least 50 people) fell 6% in June to 2,763, resulting in 279K job losses, down from record highs in May. Over the year, mass layoffs increased by 1,046 and associated initial claims increased by 104K.
• Home sales increase. Existing home sales rose 3.6% in June to 4.89M/year, vs. consensus of 4.77M. Sales are 0.2% lower than a year ago. NAR chief economist Lawrence Yun said he expects the gradual uptrend to continue, but noted again that new appraisal standards are resulting in lost sales.

Earnings: Friday Before Open

• Arch Coal (ACI): Q2 EPS of -$0.11 misses by $0.05. Revenue of $555M (-29.4%) vs. $634M. Full-year guidance in line. Believes the trough of the current coal market cycle has been reached, and anticipates better industry supply and demand balance in H2. Shares -2.8% premarket. (PR)
• Ashland (ASH): FQ3 EPS of $1.01 beats by $0.09. Revenue of $2.04B (-7.5%) in-line. (PR)
• Black & Decker (BDK): Q2 EPS of $0.63 beats by $0.26. Revenue of $1.19B (-27.4%) in-line. Sees Q3 EPS of $0.35-0.45 vs. $0.52 consensus and full-year EPS of $1.65-2.00 vs. $1.60. (PR)
• Dover (DOV): Q2 EPS of $0.54 beats by $0.08. Revenue of $1.4B (-30%) in-line. "Though quarterly order rates stabilized across most of our businesses, we still do not anticipate a meaningful second half recovery." (PR)
• Ericsson (ERIC): Q2 EPS of 0.26 kroner misses by 0.58 kroner. Revenue of 52.1B kroner vs. consensus of 50.58B. Gross margin 36.3% vs. 37% a year ago. Notes continued growth in mobile subscriptions, although the growth rate has slowed. Shares -6.6% in Stockholm. (PR)
• Exelon (EXC): Q2 EPS of $1.03 beats by $0.06. Revenue of $4.17B (-11.1%) vs. $4.93B. Sees Q3 EPS of $0.90-1.00 vs. $1.05 consensus. Shares -0.5%. (PR)
• Fortune Brands (FO): Q2 EPS of $0.70 beats by $0.06. Revenue of $1.74B (-16.9%) in-line. Sees full-year EPS in line with consensus. (PR)
• Ingersoll-Rand (IR): Q2 EPS of $0.50 beats by $0.11. Revenue of $3.47B (+12.8%) in-line. Sees Q3 EPS of $0.55-0.70 vs. consensus of $0.52 and full-year EPS of $1.39-1.69 vs. $1.32. "Based on our recent order pattern and a review of customer and channel activity, we expect to continue to see reduced activity levels year over year for most of our major end markets for the second half of 2009." (PR)
• Pinnacle Entertainment (PNK): Q2 EPS of $0.08 beats by $0.05. Revenue of $266M (flat). (PR)
• Schlumberger (SLB): Q2 EPS of $0.68 beats by $0.05. Revenue of $5.53B (-18.1%) in-line. Says "the overall sequential rate of revenue decline slowed as a further precipitous drop in North America was offset by slowing rates of decline and some recovery in other parts of the world." (PR)
• Sepracor (SEPR): Q2 EPS of $0.72 beats by $0.33. Revenue of $326M (+10.9%) vs. $280M. Sees full-year EPS of $2.55-2.90 vs. $2.54. (PR)
• T. Rowe Price Group (TROW): Q2 EPS of $0.38 beats by $0.04. Revenue of $442M (-24.6%) vs. $424M. "The second half of 2009 will likely continue to be challenging for both consumers and companies around the world; nevertheless, investors should be encouraged about the prospects for a gradual return to longer-term financial stability and global growth." (PR)
• Wabtec (WAB): Q2 EPS of $0.64 beats by $0.02. Revenue of $334M (-14.4%) vs. $380M. (PR)

Earnings: Thursday After Close

• Amazon.com (AMZN): Q2 EPS of $0.32 in-line. Revenue of $4.65B (+14%) vs. $4.69B. Sees Q3 revenue of $4.75B-5.25B vs. $4.92B. Sees operating income of $120M-210M. (PR)
• American Express (AXP): Q2 EPS ex-items of $0.27 beats by $0.01. Revenue of $6.1B (-18%) vs. $6.3B. Q2 provisions for losses $1.6B vs. year-ago $1.8B. Tier one risk-based capital ratio 9.6% at Q2 end. (PR)
• Ameriprise Financial (AMP): Q2 EPS of $0.58 in-line. Revenue of $1.9B (-5%) vs. $1.8B. (PR)
• Baidu.com (BIDU): Q2 adjusted EPS of $1.71 beats by $0.27. Revenue of $161M (+37%) vs. $158M. (PR)
• Broadcom (BRCM): Q2 EPS of $0.03 misses by $0.21. Revenue of $1B (-13%) in-line. (PR)
• Burlington Northern Santa Fe (BNI): Q2 EPS of $1.18 beats by $0.17. Revenue of $3.3B (-26%) vs. $3.4B. (PR)
• Bucyrus International (BUCY): Q2 EPS of $1.08 beats by $0.25. Revenue of $724M (+17%) vs. $625M. (PR)
• CA Inc. (CA): Q1 EPS of $0.42 beats by $0.04. Revenue of $1.05B (-3%) vs. $1.03B. Sees FY10 EPS of $1.60-1.70 vs. $1.57. Sees FY10 revenue growth high end of 2-4%. (PR)
• Cabot Oil & Gas (COG): Q2 EPS of $0.38 beats by $0.04. Revenue of $205M (-18%) vs. $206M. (PR)
• Capital One (COF): Q2 EPS of -$0.65 beats by $0.08. Revenue of $4.1B (+1%) vs. $3.9B. (PR)
• Century Aluminum Company (CENX): Q2 EPS of -$0.32 beats by $0.50. Revenue of $189M (-65%) vs. $188M. (PR)
• Cheesecake Factory (CAKE): Q2 EPS of $0.32 beats by $0.06. Revenue of $408M (flat) vs. $403M. Q2 same-store sales down 3.2%. (PR)
• Chubb (CB): Q3 EPS of $1.49 beats by $0.18. Net written premiums of $2.8B (-7%) vs. $3B. Sees FY09 EPS of $5.20-5.50 vs. $5.15. (PR)
• Compuware (CPWR): Q1 EPS of $0.22 beats by $0.09. Revenue of $214M (-28%) vs. $218M. (PR)
• Con-Way (CNW): Q2 EPS of $0.64 beats by $0.51. Revenue of $1.1B (-21%) in-line. (PR)
• Developers Diversified Realty (DDR): Q2 FFO of $0.51 beats by $0.01. Revenue of $204M (-8%) vs. $202M. (PR)
• Eastman Chemical Company (EMN): Q2 adjusted EPS of $0.86 beats by $0.15. Revenue of $1.3B (-32%) vs. $1.4B. Sees Q3 EPS of $1.10 vs. $0.82. Sees FY09 EPS high end of $2.00-$3.00 vs. $2.48. (PR)
• Federated Investors (FII): Q2 EPS of $0.52 beats by $0.02. Revenue of $307M (-1%) vs. $314M. Total managed assets $402B. (PR)
• Immucor (BLUD): Q4 EPS of $0.29 beats by $0.20. Revenue of $79M (+15%) vs. $75M. Sees FY10 EPS of $1.10-1.17 vs. $1.11. Sees FY10 revenue of $332M vs. $297M. (PR)
• Informatica (INFA): Q2 EPS of $0.13 misses by $0.06. Revenue of $117M (+3%) vs. $118M. (PR)
• IPC Holdings (IPCR): Q2 EPS of $1.72 beats by $0.36. Revenue of $195M (+240%) vs. $120M. (PR)
• Juniper Networks (JNPR): Q2 EPS of $0.19 beats by $0.01. Revenue of $786M (-11%) vs. $767M. (PR)
• KLA-Tencor (KLAC): Q4 EPS of -$0.15 in-line. Revenue of $282M (-52%) vs. $298M. (PR)
• Leggett & Platt (LEG): Q2 EPS of $0.16 beats by $0.02. Revenue of $757M (-29%) vs. $781M. Sees FY09 adjusted EPS of $0.55-0.70 vs. $0.64. Sees FY09 revenue of $3B vs. $3.1B. (PR)
• MEMC Electronic Materials (WFR): Q2 EPS of $0.03 beats by $0.03. Revenue of $283M (-47%) vs. $231M. (PR)
• Microsoft (MSFT): Q4 EPS of $0.34 misses by $0.02. Revenue of $13.1B (-17%) vs. $14.4B. (PR)
• Netflix (NFLX): Q2 EPS of $0.58 beats by $0.08. Revenue of $409M (+21%) vs. $410M. Sees Q3 EPS of $0.39-0.47 vs. $0.45. Sees Q3 revenue $416M-422M vs. $418M. Raises FY09 EPS guidance to $1.65-1.82 (from $1.56-1.72) vs. $1.72. Raises FY09 revenue view to $1.65B-1.67B (from $1.63B-1.67B) vs. $1.66B. (PR)
• PMC - Sierra (PMCS): Q2 EPS of $0.13 beats by $0.03. Revenue of $123M (-12%) vs. $120M. (PR)
• Rambus (RMBS): Q2 EPS of -$0.23 misses by $0.02. Revenue of $27M (-24%) in-line. (PR)
• RF Micro Devices (RFMD): Q1 EPS of $0.07 beats by $0.07. Revenue of $213M (-12%) vs. $187M. (PR)
• Riverbed Technology (RVBD): Q2 EPS of $0.14 in-line. Revenue of $91M (+12%) vs. $94M. (PR)
• Starent Networks (STAR): Q2 EPS of $0.20 beats by $0.03. Revenue of $78M (+28%) vs. $76M. (PR)
• SunPower (SPWRA): Q2 EPS of $0.24 beats by $0.10. Revenue of $298M (-22%) vs. $263M. Sees FY09 EPS of $1.15-$1.60 vs. $0.96. Sees FY09 revenue $1.35B-1.7B vs. $1.32B. Sees FY09 CapEx $250M-300M. (PR)
• Synovus Financial (SNV): Q2 EPS of -$1.82 misses by $1.28. Pretax income of $145M. (PR)
• Taubman Centers (TCO): Q2 FFO of $0.65 beats by $0.04. Revenue of $159M (flat) vs. $148M. (PR)
• Washington Real Estate Investment Trust (WRE): Q2 FFO of $0.53 beats by $0.03. Revenue of $77M (+12%) vs. $78M. (PR)

Today's Markets

Overseas markets posted modest to strong gains Friday. Futures are moderately higher in overnight trading.

Bloomberg provides a score for companies within the S&P 500 based on an average of all analyst ratings from the street. Below is a table highlighting companies with the best analyst ratings, largest increase in rating, highest price targets, and worst analyst ratings and the valuation attractiveness of each of these companies based on The Applied Finance Group’s (AFG) valuation model.

Companies within each of these groups are ranked from most attractive from a valuation perspective to the least attractive. VE.com will actively track the performance of these recommendations and see how they stack up to the analyst recommendations in each group. AFGview.com, AFG’s professional investor website allows you to compare any company using their rating versus the consensus ratings of the sell side. If you are interested in an analysis on a specific company, contact afgsales@afgltd.com.

Bloomberg has a rating scale for analyst recommendations from one to five (worst to best) based on the number of buy and sell ratings for each stock. Below we highlight the stocks in the S&P 500 that analysts are the most positive on. Thermo-Fisher Scientific (TMO) is the only stock in the index that scores a five. Philip Morris (PM) is the second highest rated stock, followed by Baxter (BAX) and MetLife (MET). Other notables in the top 20 include GameStop (GME), Hewlett-Packard (HPQ), and Google (GOOG).

So far this earnings season, 66% of S&P 500 companies have beaten analyst earnings expectations. But stock price response is the ultimate tell of whether a company had a positive or negative report. Below are all of the S&P 500 stocks that have gone up more than 10% on the first trading day following their earnings reports. As shown, Bed Bath and Beyond (BBBY), which reported on the first day of earnings season, still has the lead with a 1-day change of 24.26%. Pactiv (PTV), US Bancorp (USB), Eastman Chemical (EMN), and American Express (AXP) are the only other S&P companies that have gone up more than 20%. Consumer Discretionary names dominate the list of winners, as investors seem to have underestimated the consumer.

Q1 2009 Earnings Call

April 24, 2009 8:00 am ET

All Eyes on Amazon (AMZN)

All eyes are on Amazon and Oprah's favorite device, the Kindle. Dan Niles, of Alpha One Capital Partners is concerned that Amazon is up 50% for the year and is trading at a 30 multiple. He would buy Ebay instead. Karen Finerman is also leery about the stock and Guy Adami says if Amazon disappoints he might "hold his nose and jump in." However, Jefferies & Co. analyst Youssef Squali points to increasing traffic at the site and thinks they will be in line with estimates.

At the end of each trading week, Hillbent scans for 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 Market Condition Summary to determine if market direction trends support a bullish or bearish investment bias over short-term, intermediate, and long-term timeframes.)

Q4 2008 Earnings Call Transcript

January 30, 2009 8:00 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.

As an investor or trader who suffered through a true crash like in 2008, it is very hard to be optimistic going into 2009. However, if you still have your capital and can look out twelve to sixteen months, America and some of its best American brands are truly on sale right now.

If you choose to invest, it will take a leap of faith, the courage to do what others can’t and the mental strength to ignore the daily volatility. For those who can, stocks are now approaching valuations as low as in 1991 and the 2002 bear market low. There are many negatives and positives to review before making calculated investment decisions about 2009. However, the main risk of the stock market in 2008 was that it had been ignoring bad news and was ready to tumble. I think that has already happened now and while we might not have seen the ultimate low in the market, we’re very near it. That has reversed the reward-to-risk ratio in the investor’s favor to the most positive it has been in years. The opportunities here lie in buying good companies at discounted prices to their private market value. It will likely be one of the best years for individual stock picking, versus owning the major market indexes since 2004.

The Last Hurrah: GM (GM)

Increased confidence in a bailout for autos brought the Dow up and investors jumping into large-cap technology stocks caused the Nasdaq to rally. While home values and consumer confidence plunged, the news did not seem to affect the markets on Tuesday. Jeff Macke, as usual, was far from sanguine; “We’re 4600 points away from break even, exclaims Jeff Macke. We can do it,” he said sarcastically. Pete Najarian was not too excited about the rally because the trading was light until the final minutes. Quint Tatro noted Treasuries were up, and says there will not be a sustained rally until that stops happening. Joe Terranova says the market is digesting all the bad news of the last six weeks.

The stock market route has decimated corporate pension assets over the recent downturn, and Credit Suisse calculates that 128 S&P 500 companies face a potential pension-related hit in 2009 - which could collectively cost the group $200B or more:

If there is half as much future as there is history for Tennessee, then it is a bright future. And according to several independent organizations, Tennessee is one of the best states in the country to do business. The future is looking bright! Here are some interesting facts about the state:

1. The state offers several incentives for new businesses and businesses relocating to Tennessee. They include, tax credits and tax exemptions.
2. 80% of the state land is used for agricultural and forestry purposes.
3. Tennessee most important crops are tobacco, soybeans, and cotton.
4. The agricultural industry produces more than $2.5 billion in cash receipts.
5. In a report issued by the American Legislative Exchange Council Tennessee is the fifth best economy in the country.
6. Tennessee mining industry employs 4,200 workers and it generates income in excess of $800 million.
7. Currently oil, coal and natural gas mined in the state account for 10% of total mineral mining income in Tennessee.
8. The tourism industry economic impact is $14.2 billion.
9. Tennessee’s retail industry employs 315,000 workers and is a $70 billion industry.
10. The state’s manufacturing industry is dominated by the processed foods sector (grain products, cereals and breads).

The following companies are headquartered in Tennessee:

FedEx Corporation (FDX) provides business services worldwide; its services include freight, ground and express shipping. The stock has a market cap of $19.47 billion, a P/E of 21, a PEG of 1.00, and it pays a yield of 0.7%.

International Paper Company (IP) makes papers for writing and printing, market pulp, and other paper products. The stock has a market cap of $7.70 billion, a P/E of 6, a PEG of 0.99 and it pays a yield of 9%.

Unum Group (UNM) operates in the United States, and the United Kingdom as a provider of disability products, and other insurance products. The stock has a market cap of $5.49 billion, a P/E of 8, a PEG 0.65, and it pays a yield of 1.7%.

AutoZone Inc. (AZO) is a distributor and retailer of parts and accessories for automobiles. The stock has a market cap of $6.35 billion, a P/E of 11, and a PEG of 0.79.

Eastman Chemical Company (EMN) makes and markets chemicals, plastics and other products. The stock has a market cap of $3.16 billion, a P/E of 9, a PEG of 1.22, and it pays a dividend of 4.3%.

First Horizon National Corporation (FHN) is a holding company for First Tennessee Bank. The stock has a market cap of $2.26 billion, and it pays a dividend of 6.9%.

Regal Entertainment Group (RGC) manages movie theaters in the United States. The stock has a market cap of $2.07 billion, a P/E of 23, a PEG of 2.01, and it pays a yield of 8.6%.

Corrections Corporation of America (CXW) owns and manages prisons. It provides transportation services for inmates, healthcare, and other services. The stock has a market cap of $2.22 billion, a P/E of 16, and a PEG of 0.81.

King Pharmaceuticals, Inc. (KG) supplies pharmaceutical products in the United States and internationally. The stock has a market cap of $2.03 billion, a P/E of 15, and a PEG of 0.71.

Community Health Systems, Inc. (CYH) renders healthcare services in the United States. The company owns and operates hospitals. The stock has a market cap of $1.71 billion, a P/E of 56, and a PEG of 0.55.

Don't forget to check out the stocks from the states of Wisconsin, Louisiana, Michigan, and Kentucky.

Disclosure: Author does not own any of the above.

Q3 FY08 Earnings Call

October 24, 2008, 8:00 AM ET

Eastman Chemical (EMN), a basic chemical company that's currently $4 off its 52-week low, trades with a forward P/E of 11, a PEG ratio of 1.8 and EV/EBITDA of 5.9.

Eastman expects earnings to more than double in the next five years, going from roughly EPS of $5 to $6 in 2008 to $10 to $11 in 2012. If that happens, Eastman should trade north of $110 by 2012 based on the above metrics.

Q2 FY08 Earnings Call

July 25, 2008, 8:00 AM ET