Green energy experts accept that solar panels are one of the least cost effective ways to reduce your carbon footprint. Nevertheless, many buy solar stocks. They should rethink their investment strategies.

I recently spoke on "Stock Selection in the Era of Peak Oil and Climate Change" at the ASPO 2009 International Peak Oil Conference. Whenever green energy enthusiasts find out that I analyze green energy stocks professionally, they react in one of two ways. Many want to know my top stock pick in general (New Flyer Industries NFI-UN.TO/NFYIF.PK) or in their favorite sector (see below). Others tell me about their own green energy investments.

Bullish Calls:

Bank of America (BAC): "Bank of America's come down way too much."

Q3 2009 Earnings Call Transcript

October 21, 2009 11:00 am ET

• King: Break up the banks! Bank of England Governor Mervyn King stepped up his call to break apart Britain's largest banks, saying more stringent capital requirements won't shield taxpayers from having to bail out more too-big-to-fail banks in the future. "The massive support extended to the banking sector around the world, while necessary to avert economic disaster, has created possibly the biggest moral hazard in history," King said in a speech (.pdf) late Tuesday. His comments were at odds with those of Chancellor of the Exchequer Alistair Darling, who said yesterday focusing on capital rules may be enough to ward off future crises. Meanwhile, on this side of the Atlantic, Paul Volcker keeps pounding the desk to split up banks, but no one's listening.
• State Street slapped with fraud suit. The California AG's office charged State Street (STT) with fraud Tuesday, accusing it of bilking the state's two largest pension funds - Calpers and Calstrs - of $57M, and seeking $200M in overcharges and penalties (complaint (.pdf)). The lawsuit stems from an inquiry launched after a whistleblower claimed State Street secretly and substantially marked up the price of its currency trades. State Street beat Q3 earnings estimates Tuesday, but shares dived 8.4% on news of the lawsuit and a sobering outlook.
• Yahoo defies bears. Shares of Yahoo (YHOO) are up 4.6% premarket after the internet giant beat Q3 earnings estimates handily with the help of some serious cost cutting ($0.13/share vs. $0.06), while revenue was steady from last quarter at $1.13B. "There's a change occurring in Yahoo," CFO Tim Morse said on Yahoo's earnings call (transcript), "that will value that kind of work - that good old-fashioned, get-your-hands-dirty kind of find ways to take costs down or make sure that they don't go up as much as they otherwise would have - type work." Analysts were impressed with the quarter, but said the real test of Yahoo's massive branding initiative would come in Q4. Bernstein's Jeffrey Lindsay summed it up: "The patient is off life support and back in the recovery ward. But it is certainly not out playing soccer again."
• Shedding light on the dark pools. In an effort to bring transparency to famously opaque "dark pool" off-exchange trading cliques on which Wall Street firms execute some of their largest trades, the SEC will reportedly today propose slashing the percent of daily volume in a company's shares that can be executed on the systems before quotes must be publicized to 0.25% from 5%. The move would force dark pools to either bring their prices in line with open markets, or risk losing their order flow. Trading executives warn sweeping rule changes could ultimately hurt the investors regulators are trying to empower.
• AT&T sues LCD makers over price fixing. AT&T (T) sued Samsung Electronics, LG Display (LPL), AU Optronics (AUO) Corp. and other LCD manufacturers, claiming they colluded to fix prices of panels sold in the U.S. "The conspiracy included communications and meetings in which defendants agreed to eliminate competition and fix the prices of LCD panels that were ultimately incorporated into LCD products that they knew would be sold in California and the U.S.," according to the complaint.
• Logi offer: does it make sense? An obscure hedge fund - logi Energy - said it offered to buy $1B of CIT Group's (CIT) debt, but wouldn't identify its source of capital. Logi said the deal could give CIT "wiggle room" as it works to sidestep bankruptcy. CIT wouldn't comment on whether it was seriously considering the offer.
• Volvo sale hits snag. Sources say China carmaker Geely's $2B attempt to buy Ford's (F) Volvo unit is in danger of stalling over disagreements about intellectual property rights. The impasse centers on Ford's concerns about sharing its proprietary technology and plans for new products.
• Morgan mulls giving away Crescent. Sources say Morgan Stanley (MS) may hand over its Crescent Real Estate Equities unit to Barclays (BCS), to whom the business owes $2B which comes due Nov. 2. Morgan bought Crescent for $6.5B in August 2007, and had planned to put its assets into real estate investment funds, but was left holding the bag when markets seized up.
• IRS watchdog says homebuyer plan fraught with fraud. The IRS's internal watchdog will warn the agency again about fraud in the multibillion dollar homebuyer tax credit program. The IRS faces significant challenges in preventing individuals from scamming the tax credit program.
• JPMorgan, Goldman cornering the M&A market. According to a study by Bloomberg News, JPMorgan (JPM) edged out Goldman Sachs (GS) in M&A advisory fees ($1.26B vs. $1.22B) for the first time since 2000. By deepening relationships with corporate clients, the two have created a deep moat around M&A counselling. "It's going to be very difficult for upstart or broad-based firms to come in and usurp what many believe are the insurmountable leads that Goldman and JPMorgan have over competitors," one analyst says.
• Business spending perks up. Industrial bellwether Caterpillar (CAT) joined the ranks of those who say the worst is behind us, as corporate buyers slowly begin reinvesting in their businesses. While Caterpillar's sales were 44% lower than a year ago, CFO David Burritt said he sees "encouraging signs that indicate a recovery may be under way," and predicted sales could rise 10-25% next year (read Caterpillar's Q3 earnings call transcript). Business spending accounts for about 9.5% of U.S. GDP - a fraction of the 68.2% accounted for by consumer spending - but still a potential catalyst for recovery.
• Get ready for pay as you play internet. Internet service providers including AT&T (T) and Time Warner Cable (TWC) are considering returning to usage-based pricing for internet, amid a surge in traffic as more people watch videos online, and after a push by the FCC to force ISPs to treat all web traffic equally. "Some type of usage-based model, for those customers who have abnormally high usage patterns, seems inevitable," an AT&T spokesman said, declining to provide details on the company's exact plans.

Earnings: Wed. Before Open

• Air Products and Chemicals (APD): FQ4 EPS of $1.14 beats by $0.02. Revenue of $2.13B (-21.6%) in-line. (PR)
• AirTran (AAI): Q3 EPS of $0.08 in-line. Revenue of $597M (-11.3%) vs. $600M. Shares -0.9% premarket. (PR)
• Allegheny Technologies (ATI): Q3 EPS of $0.01 misses by $0.02. Revenue of $698M (-49.9%) vs. $738M. Says the worst appears to be behind us, but many customers remain cautious due to the uncertain global economy and are keeping inventories low. Shares -8.8% premarket. (PR)
• Altria (MO): Q3 EPS of $0.48 beats by $0.01. Revenue of $4.32B (+0%) vs. $4.66B. Shares -1.4% premarket. (PR)
• Boeing (BA): Q3 EPS of -$2.23 misses by $0.11. Revenue of $16.69B (+9.1%) vs. $17.16B. Sees full-year EPS of $1.35-1.55 vs. $1.54 consensus. "The 787 cost reclassification and the 747 charge for increased costs and difficult market conditions clearly overshadowed what continues to be otherwise solid performance across our commercial production programs and defense business, We look forward to getting the 787 and 747-8 in the air soon and moving forward with flight test and certification for these two important programs." Shares -2.5% premarket. (PR)
• Deutsche Bank (DB): Q3 net income of €1.4B vs. consensus of €811M and last year's €435M. Pretax profit of €1.3B vs. consensus of €1.19B. Tier 1 capital ratio rose to 11.7% from 11% in Q2. Shares -2.3% premarket. (Bloomberg)
• Continental (CAL): Q3 EPS of $0.02 beats by $0.08. Revenue of $3.32B (-20.2%) in-line. (PR)
• Elan (ELN): Q3 EPS of -$0.06 beats by $0.07. Revenue of $399M (-19.5%) vs. $382M. (PR)
• Eli Lilly (LLY): Q3 EPS of $1.20 beats by $0.18. Revenue of $5.56B (+6.8%) vs. $5.41B. Gross margin as a percent of total revenue increased by 3.7% to 81.1%. Shares +0.4% premarket. (PR)
• FLIR Systems (FLIR): Q3 EPS of $0.38 beats by $0.03. Revenue of $286M (+3.2%) vs. $281M. Shares +2.9% premarket. (PR)
• Freeport-McMoRan Copper & Gold(FCX): Q3 EPS of $2.07 beats by $0.73. Revenue of $4.14B (-10.2%) vs. $4.24B. Reinstates dividend due to strong performance. Shares -0.1% premarket. (PR)
• KeyCorp (KEY): Q3 EPS of -$0.50 misses by $0.09. Takes a $733M provision for loan losses, which KEY says drove the miss. Average deposits were +6% (+$3.6B). Shares -4.7% premarket. (PR)
• Knight Capital Group (NITE): Q3 EPS of $0.32 misses by $0.07. Revenue of $300M (+24.5%) vs. $282M. Shares -6.4% premarket. (PR)
• Manpower (MAN): Q3 EPS of $0.26 beats by $0.09. Revenue of $4.19B (-26%) vs. $3.95B. Sees Q4 EPS of $0.17-0.27 vs. $0.28. "We continued to experience sluggish demand for our services as the labor markets throughout the world were hampered by lack of demand for companies' products and services... the uptick in revenue is muted at this time compared to previous recoveries." Shares -5.3% premarket. (PR)
• Morgan Stanley (MS): Q3 EPS of $0.38 beats by $0.11. Revenue of $8.7B vs. $6.99B. Assets under management $386B vs. $483B last year. Declares $0.05 quarterly dividend. Shares +0.9% premarket. (PR)
• Northern Trust (NTRS): Q3 EPS of $0.72 misses by $0.12. Revenue of $928M (-1.2%) vs. $985M. Shares -5% premarket. (PR)
• Northrop Grumman (NOC): Q3 EPS of $1.29 beats by $0.11. Revenue of $8.73B (+4.1%) vs. $8.58B. (PR)
• Omnicom Group (OMC): Q3 EPS of $0.53 in-line. Revenue of $2.83B (-14.4%) in-line. (PR)
• Penn National Gaming (PENN): Q3 EPS of $0.33 misses by $0.02. Revenue of $620M (+0.4%) vs. $642M. Shares -8.2% premarket. (PR)
• St. Jude Medical (STJ): Q3 EPS of $0.59 beats by $0.01. Revenue of $1.16B (+7%) in-line. Sees Q$ EPS of $0.61-0.63 vs. $0.66. "We are lowering our expectations for our fourth quarter results to accommodate the issues we are experiencing from a limited portion of our customer base in the U.S., but we are confident that our long term growth program is on track." Shares -0.9% premarket. (PR)
• U.S. Bancorp (USB): Q3 EPS of $0.30 beats by $0.03. Revenue of $4.25B (+2.2%) vs. $4.12B. Says credit deterioration moderated somewhat. Shares +0.8% premarket. (PR)
• Wells Fargo (WFC): Q3 EPS of $0.56 beats by $0.19. Revenue of $22.47B (+116.5%) vs. $21.63B. Q3 chargeoffs of $5.1B, up from $4.4B in Q2. Sees credit losses peaking in 2010, "with consumer losses potentially peaking in first half of the year and gradually declining, absent further economic deterioration." Shares -1% premarket. (PR)

Earnings: Tue. After Close

• Amylin Pharmaceuticals (AMLN): Q3 EPS of -$0.19 beats by $0.10. Revenue of $211M (-3%) vs. $219M. Shares -1.1% AH. (PR)
• Canadian National Railway Company (CNI): Q3 EPS of C$0.94. Revenue of C$1.85B (-18%) in-line. Shares -1.6% AH. (PR)
• C.H. Robinson Worldwide (CHRW): Q3 EPS of $0.57 beats by $0.01. Revenue of $1.95B (-16%) vs. $1.96B. Shares -0.8% AH. (PR)
• Cree (CREE): FQ1 EPS of $0.30 beats by $0.08. Revenue of $169M (+20%) vs. $165M. Sees Q2 EPS of $0.28-0.30 vs. $0.23 and revenue of $180M-190M vs. $173M. Shares +3.6% AH. (PR)
• Gilead Sciences (GILD): Q3 EPS of $0.78 beats by $0.11. Revenue of $1.8B (+31%) vs. $1.75B. Shares -2.2% AH. (PR)
• Infinera (INFN): Q3 EPS of -$0.03 beats by $0.09. Revenue of $83M (+3%) vs. $80M. Shares +2.5% AH. (PR)
• Intuitive Surgical (ISRG): Q3 EPS of $1.64 beats by $0.16. Revenue of $280M (+19%) vs. $258M. Shares -5.9% AH. (PR)
• Nabors Industries (NBR): Q3 EPS of $0.18 beats by $0.02. Revenue of $804M (-44%) vs. $820M. Shares flat AH. (PR)
• Polycom (PLCM): Q3 EPS of $0.31 misses by $0.01. Revenue of $243M (-16%) vs. $236M. Shares -5.2% AH. (PR)
• SanDisk (SNDK): Q3 EPS of $0.75 beats by $0.49. Revenue of $935M (+14%) vs. $788M. Shares +0.2% AH and halted. Updated 4:30 p.m.: Shares resume trading, +10.2% AH. (PR)
• Seagate Technology (STX): FQ1 EPS of $0.58 beats by $0.11. Revenue of $2.66B (-12%) vs. $2.62B. Shares -2.9% AH. (PR)
• SLM Corp. (SLM): Q3 EPS of $0.26 beats by $0.22. Net interest income after provision for loan losses of $204M (-29%). Shares +7.8% AH. (PR)
• STMicroelectronics (STM): Q3 EPS of -$0.23 misses by $0.14. Revenue of $2.28B (-16%) vs. $2.25B. Shares +3.7% AH. (PR)
• Stryker (SYK): Q3 EPS of $0.69 in-line. Revenue of $1.65B (+1%) vs. $1.62B. Shares +3.5% AH. (PR)
• Tupperware (TUP): Q3 EPS of $0.54 beats by $0.12. Revenue of $514M (flat) vs. $486M. Raises full-year EPS guidance to $2.84-2.89 from $2.59-2.64, vs. $2.73. Shares +4.5% AH. (PR)
• Walter Industries (WLT): Q3 EPS of $0.45 beats by $0.18. Revenue of $278M (-10%) vs. $223M. Shares +1.7% AH. (PR)

Today's Markets

Overseas markets sustained losses Wednesday. U.S. futures moved lower overnight.

Johnson & Johnson (JNJ)

The following is the author's commentary that appears in the September 2009 issue of "The SPADE Investor".

The Chase for Ten

Historically, aerospace and defense cycles can run 12-15 years. And for nine years running, the SPADE Defense Index has outperformed the broader markets. Even after huge gains by financial stocks since the March market bottom, defense stocks trailed the S&P 500 by just 3.5%at the end of August but have been making up ground lately.

FLIR Systems, Inc. (NDAQ:FLIR) Sep. 8, 2009 close: $23.71

52-week range: $18.81 (Mar. 9, 2009) - $39.24 (Oct. 1, 2008)

I started my "Clean Energy Shopping List" series on the premise that the market was near a peak, and it would be better to wait than to buy now. My market call turned out to be premature (or just plain wrong... time will tell) and the market has since advanced more than I thought it would. But I feel the challenges facing our economy and financial system are too grave not to bring down the market from its current heights eventually, so each rise simply makes me more bearish.

However, I feel the shopping list series is getting tired (or at least I'm getting tired of it), so I'm going to end it now, with just a list of stocks in the series and the articles that cover them. In addition, I'll throw in the few companies I've been thinking about using but have not made it in so far.

About Economic Margin

Created by The Applied Finance Group, The Economic Margin (EM) Framework was developed to evaluate corporate performance from an economic cash flow perspective and is an alternative to accounting-based valuation metrics. EM measures the return a company earns above or below its cost of capital and provides a more complete view of a company’s underlying economic vitality

Q2 2009 Earnings Call

July 23, 2009 8:00 am ET

• Goldman is TARP-free at last. Goldman Sachs (GS) became the first major bank to completely shed its bailout ties, paying $1.1B to redeem the government's TARP warrants and calling the Treasury's valuation 'full and fair' given the government's support of the financial system. With the warrant redemption and the $318M Goldman paid in dividends on its $10B TARP aid, taxpayers received a 23% annualized return for the nine-month transaction.
• S&P flip-flops on ratings. Standard & Poor's unexpectedly switched its rating of some bonds backed by commercial mortgages, upgrading the bonds to AAA just days after the same bonds had been sharply downgraded. The unusual move further damaged S&P's credibility and unsettled investors in the $700B market for commercial mortgage-backed securities [CMBS]. The reversal came after S&P realized bonds with a shorter lifespan were less risky than similarly structured bonds with a longer lifespan, a mistake that could reflect a basic misunderstanding of the way cash flows are distributed across CMBS.
• Bristol-Myers buys biotech firm. Bristol-Myers Squibb (BMY) agreed to acquire Medarex (MEDX), the biotech firm it already owns a 2% stake in, for $2.4B in cash. Bristol-Myers said the $16/share deal, which marks a 90% premium to Medarex's closing price on Wednesday, buys it proven antibody discovery technology and rights to an immunotherapy the companies developed. MEDX +89% premarket (7:00 ET).
• Intel fights antitrust fine. Intel (INTC) is fighting back against a record €1.06B ($1.45B) fine levied by EU antitrust regulators in May, saying the fine violates protections granted by European human rights law. Since the EU antitrust body handles both the investigation and judgment of a given case, companies don't have the opportunity to fully defend themselves as they would in a court. However, the appeal is a bit of a long shot as no EU antitrust appeal has ever won on this argument.
• Amazon's shoe-in to online apparel. Amazon (AMZN) will buy online shoe retailer Zappos.com for around $928M, an aggressive expansion into online apparel after Amazon's solo attempts at selling footwear were unsuccessful. Zappos is known for its fiercely loyal customer base, good customer service and free shipping/free returns policy. AMZN +0.6% premarket (7:00 ET).
• Bair wants large firms to pay. FDIC's Sheila Bair is scheduled to testify before the Senate Banking Committee this morning, and will ask lawmakers to impose fees on the country's biggest financial firms. Bair wants Congress to create an industry-supported Financial Company Resolution Fund which will provide working capital and cover unanticipated losses if the government has to wind down a failed firm. In addition to minimizing government outlays, this would also "provide an economic incentive for an institution not to grow too large."
• SEC targets pay-to-play. The SEC voted unanimously to propose rules preventing investment advisers from managing public programs for two years if they make political contributions. The proposal is an attempt to curb pay-to-play practices, in which public contracts are awarded to those who make political contributions.
• Chrysler warns on dealership legislation. Chrysler warned it could face liquidation for a second time if lawmakers move forward with a plan to reinstate terminated dealership agreements. The House of Representatives has already approved a measure to restore contracts with 789 dealerships, but the bill's future in the Senate is less certain.
• Moody's rebuffed in Berkshire sale. Moody's (MCO) fell 10.3% in after-hours trading following a disclosure by Berkshire Hathaway (BRK.A) that it sold 7.99M shares of the ratings company this week. Though Berkshire remains Moody's largest shareholder, the sale reduced its stake by 17%. Moody's has reported a profit decline for seven consecutive quarters.
• Porsche CEO, CFO resign. Porsche's CEO Wendelin Wiedeking and CFO Holger Haerter both resigned from the company with immediate effect, after coming to "the conclusion that the further strategic development of Porsche... is better off, if they are not on board as acting persons," said a company spokesman. The move is expected to facilitate a merger agreement with Volkswagen (VLKAY.PK).
• eBay beats as Paypal, marketplace show signs of life. eBay (EBAY) managed to beat quarterly earnings expectations (see details below), even as profit fell 29% and revenue fell 4%. The company's PayPal online-payments unit continued to grow strongly and a decline in eBay's core marketplace leveled off.
• ING may sell private banking unit. ING Group (ING) reportedly hired JPMorgan Chase (JPM) to advise it on the possible sale of its private banking business in Europe and Asia. A deal could be worth over $1B.
• House prices rise. The FHFA House Price Index was up 0.9% in May vs. -0.2% consensus, after falling 0.3% in April (revised). Nationwide prices are down 5.6% from a year earlier, and 10.7% from the April 2007 peak.

Earnings: Thursday Before Open

• 3M (MMM): Q2 EPS of $1.20 beats by $0.26. Revenue of $5.7B (-15%) vs. $5.4B. Adjusts guidance for FY '09 - sees EPS of $4.10-4.30 vs. prior guidance of $3.90-4.30. Shares +1.3% premarket (7:40 ET). (PR)
• Alexion Pharmaceuticals (ALXN): Q2 EPS of $0.20 beats by $0.04. Revenue of $92M (+55%) vs. $89M. Shares +1.9% premarket (8:00 ET). (PR)
• AT&T (T): Q2 EPS of $0.54 beats by $0.03. Revenue of $30.7B (-0.4%) in-line. Shares +2.9% premarket (7:45 ET). (PR)
• Bristol-Myers Squibb (BMY): Q2 EPS of $0.56 beats by $0.09. Revenue of $5.4B (+3.5%) vs. $5.3B. Issues upside EPS guidance for FY '09 of $1.95-2.05 vs. prior guidance of $1.85-2.00. (PR)
• Bunge (BG): Q2 EPS of $2.28 beats by $1.57. Revenue of $11B (-23.5%) vs. $12B. (PR)
• Celestica (CLS): Q2 EPS of $0.11 beats by $0.01. Revenue of $1.4B (-25%) in-line. (PR)
• Celgene (CELG): Q2 EPS of $0.46 in-line. Revenue of $629M (+10%) vs. $621M. Shares +8.9% premarket (7:45 ET). (PR)
• CME Group (CME): Q2 EPS of $3.37 beats by $0.14. Revenue of $648M (+15%) vs. $652M. (PR)
• Danaher (DHR): Q2 EPS of $0.89 beats by $0.01. Revenue of $2.7B (-19%) vs. $2.8B. (PR)
• Diamond Offshore Drilling (DO): Q2 EPS of $2.79 beats by $0.15. Revenue of $946M (-0.8%) vs. $942M. (PR)
• EMC (EMC): Q2 EPS of $0.18 beats by $0.01. Revenue of $3.3B (-11%) vs. $3.2B. Sees FY '09 EPS of $0.82 vs. &0.78 consensus. Shares +4.8% premarket (7:30 ET). (PR)
• EnCana (ECA): Q2 EPS of $1.22 beats by $0.25. Revenue of $3.8B (-49%) vs. $4.4B. (EnCana news release (.pdf))
• Fifth Third Bancorp (FITB): Q2 EPS of $1.15 vs. consensus of -$0.34 (may not be comparable). Tier 1 ratio of 12.9%. Shares +7% premarket (7:30 ET). (PR)
• FLIR Systems (FLIR): Q2 EPS of $0.35 in-line. Revenue of $278M (+6.5%) vs. $297M. Shares +1.9% premarket (7:50 ET). (PR)
• Ford Motor (F): Q2 EPS of -$0.21 beats by $0.27. Revenue of $27.2B (-34%) vs. $24.8B. (PR)
• Goodrich (GR): Q2 EPS of $1.15 beats by $0.04. Revenue of $1.7B (-8%) in-line. (PR)
• Hershey (HSY): Q2 EPS of $0.43 beats by $0.08. Revenue of $1.2B (+6%) vs. $1.1B. (PR)
• Huntington Bancshares (HBAN): Q2 EPS of -$0.40 misses by $0.22. Increased provision for credit losses 42% from Q1 to $413.7M. Tier 1 capital ratio of 11.86%. Shares -3.1% premarket (7:50 ET). (PR)
• ITT Educational Services (ESI): Q2 EPS of $1.87 beats by $0.14. Revenue of $317M (+29%) vs. $307M. (PR)
• JetBlue Airways (JBLU): Q2 EPS of $0.05 beats by $0.03. Revenue of $807M (-6%) vs. $800M. (PR)
• Kimberly-Clark (KMB): Q2 EPS of $1.16 beats by $0.22. Revenue of $4.7B (-5.6%) vs. $4.6B. Issues upside FY '09 EPS guidance of $4.10-4.25 vs. $4.12 consensus. (PR)
• Newmont Mining (NEM): Q2 EPS of $0.43 misses by $0.04. Revenue of $1.6B (+7%) in-line. (PR)
• NII Holdings (NIHD): Q2 EPS of $0.79 beats by $0.23. Revenue of $1.1B (-4%) vs. $1B. (PR)
• Omnicom Group (OMC): Q2 EPS of $0.75 beats by $0.01. Revenue of $2.9B (-17%) in-line. (PR)
• PNC Financial Services Group (PNC): Q2 EPS of $0.14 vs. consensus of $0.45 (may not be comparable). Revenue of $4B (+95.5%) vs. $3.65B. (PR)
• Potash Corp. (POT): Q2 EPS of $0.62 misses by $0.07. Revenue of $856M (-67%) vs. $981M. Issues downside Q3 EPS guidance of $0.80-1.20 vs. $1.56 consensus. Issues downside FY '09 EPS guidance of $4.00-5.00 vs. $5.24 consensus. Shares -2.3% premarket (6:50 ET). (PR)
• Raytheon (RTN): Q2 EPS of $1.24 beats by $0.11. Revenue of $6.1B (+4%) vs. $6.2B. (PR)
• Starwood Hotels & Resorts Worldwide (HOT): Q2 EPS of $0.22 beats by $0.05. Revenue of $1.2B (-23%) in-line. Issues downside guidance: sees Q3 EPS of $0.06-0.10 vs. $0.21 consensus, FY '09 EPS of $0.65 vs. $0.76 consensus. (PR)
• Terra Industries (TRA): Q2 EPS of $0.81 misses by $0.10. Revenue of $453.5M (-46%) vs. $568M. (PR)
• Thermo Fisher Scientific (TMO): Q2 EPS of $0.74 beats by $0.08. Revenue of $2.5B (-8%) vs. $2.4B. (PR)
• Wyeth (WYE): Q2 EPS of $0.94 beats by $0.09. Revenue of $5.7B (-4%) vs. $5.6B. Issues upside FY '09 EPS guidance of $3.48-3.58 vs. prior guidance of $3.33-3.53. (PR)
• Xerox (XRX): Q2 EPS of $0.16 beats by $0.05. Revenue of $3.7B (-18%) in-line. (PR)

Earnings: Wednesday After Close

• Alliance Data Systems (ADS): Q2 EPS of $0.95 misses by $0.07. Revenue of $460M (-9%) vs. $481M. Sees Q3 EPS of $1.34 in-line. Maintains 2009 EPS guidance of $5.15 vs. $5.00. (PR)
• Amdocs (DOX): Q3 EPS of $0.53 beats by $0.05. Revenue of $690M (-16%) vs. $679M. Sees Q4 EPS of $0.47-0.51 vs. $0.48. Sees Q4 revenue of $670M-690M vs. $668M. (PR)
• Citrix Systems (CTXS): Q2 EPS of $0.39 beats by $0.01. Revenue of $393M (+0%) vs. $387M. Sees Q3, FY09 revenues flat vs. 2008. (PR)
• Covanta Holding Corp. (CVA): Q2 EPS of $0.21 beats by $0.01. Revenue of $376M (-11%) vs. $391M. Reaffirms 2009 EPS $0.65-0.80 vs. $0.71 and adjusted EBITDA of $500M-540M. (PR)
• C.R. Bard (BCR): Q2 EPS of $1.23 beats by $0.02. Revenue of $625M (+1%) vs. $634M. (PR)
• eBay (EBAY): Q2 EPS of $0.37 beats by $0.01. Revenue of $2.1B (-4%) vs. $2B. Sees Q3 EPS of $0.34-0.36 vs. $0.35. Sees Q3 revenue of $2.05B-2.15B vs. $2B. (PR)
• Equifax (EFX): Q2 EPS of $0.57 in-line. Revenue of $455M (-9%) vs. $453M. Sees Q3 EPS of $0.52-0.57 vs. $0.59. (PR)
• Equinix (EQIX): Q2 EPS of $0.44 beats by $0.11. Revenue of $213M (+7%) vs. $209M. Sees Q3 revenue of $221M-225M vs. $220M. Sees FY09 revenue of $860M-$875M vs. $861M. (PR)

• E*TRADE Financial (ETFC): Q2 EPS of -$0.22 beats by $0.09. Total loan loss allowance was flat at $1.2B, or 5% of gross loans receivable. (PR)

Understanding the amount of accruals a company has on its books and the quality of its reported earnings is especially important during earnings season, as poor earnings quality companies are more likely to have negative earnings surprises and underperform as a result.

With so many companies reporting earnings this week, we wanted to share an analysis of their earnings quality based on The Applied Finance Group’s Earnings Quality score. AFG’s Earnings Quality variable is based on the concept of accruals and is an important indicator, which helps to differentiate between companies with poor and high quality of reported earnings. Watch out for firms with poor EQ score – make sure they are not trying to pad their sales numbers through channel stuffing, for example.

The best performing S&P 500 sector in the first half was Technology. The sector as a whole was up 24% in the first half, and below we highlight the year to date performance of the stocks that make up the sector. Of the 74 S&P 500 Technology stocks, 61 are up year to date and 13 are down. Western Digital (WDC) is up the most with a gain of 134%, followed by Micron (MU), AMD, Apple (AAPL), Teradyne (TER), and Corning (GLW). Motorola (MOT) is up 47%, Google (GOOG) is up 36.4%, Yahoo! (YHOO) is up 26%, and IBM and MSFT are up roughly 24%.

The worst performing stock in the sector this year has been Lexmark (LXK), which is down 38%. FLIR, HRS, and XRX are the other stocks that are down more than 10%.

Stocks may be expensive now, but they won't be forever. Five energy efficiency plays to buy when they're cheap again in efficient HVAC, desalination, thermal imaging, and lighting.

This article continues my Clean Energy Stocks Shopping List series. In the first, I looked at five clean transport stocks I'll be looking to buy when the market falls. In the second, I took a step back, and outlined why it makes sense to wait for better prices than to buy these companies now. Here are five stocks I'll be looking to buy in my all time favorite sector, Energy Efficiency. Future articles in this series will be found here.

While we are hearing horror stories about visitors suspected of having Swine Flu being taken and quarantined within China, we are seeing the reported cases of the Swine Flu on the rise. Surely these are not the total cases, as we are told that only a fraction are actually diagnosed.

The good news is that while we are seeing a spike over the past week in cases, the Death-to-Case ratio is continuing to decline.

Traditional Discounted Cash Flow (DCF) models have been been underutilized in equity analysis over the years primarily because of the assumptions one has to sign off on. We will concentrate on just two of the major issues we have with traditional DCF models, the lack of ability to deal with competition and the perpetuity assumption embedded in a DCF model. These assumptions lead to irrational calculations of intrinsic value and force analysts to make compromising decisions in their model building efforts.

AFG uses a modified DCF model that accurately addresses the competitive nature of the business while also dealing with the perpetuity issue through our Economic Margin decay or competitive advantage period.

Q1 2009 Earnings Call

May 01, 2009; 11:00 am ET

• Chrysler goes bankrupt. It's official - Chrysler has filed for Chapter 11 bankruptcy protection, and announced a deal with Fiat giving the Italian carmaker an initial 20% stake. Obama thanked everyone from unions to executives for fighting to keep the automaker alive, and blamed 'a small group of speculators' for making bankruptcy inevitable. The plan now is for Chrysler to leave bankruptcy protection in a month or two with a lighter balance sheet, new management, fewer dealers, lower labor costs, a Fiat alliance and possibly even a new name.
• Cramdowns get voted down. The Senate rejected an amendment that would have given bankruptcy judges the ability to ease a homeowner's monthly payments and stave off foreclosure. Cramdown fans said the amendment would have helped keep millions of Americans in their homes, but critics argued the plan's arbitrary rules would scare off investors and prolong the housing slump. The defeat of the cramdown bill in the Senate came as the House voted to cap the fees credit card companies can charge.
• Citi's Nikko sale. Citigroup reached a deal to sell Nikko Cordial Securities to Sumitomo Mitsui Financial (SMFJY.PK) for around ¥774.5B ($7.9B), ending Citi's ambitions to create a full-service bank in Japan. The deal will turn Sumitomo Mitsui into a major player in Japan's securities industry. The deal will create an accounting loss for Citigroup, but will raise its tangible common equity, an important move in light of the capital shortfall identified by stress tests.
• Cuomo pension probe widens. New York Attorney General Andrew Cuomo is expanding his probe of pension-fund kickbacks, saying the probe has exposed "a national network of actors" whose schemes are ongoing, and has charged a money manager with making illegal payments to a political consultant in exchange for investment business. The charge is at least the fifth since Cuomo's investigation began.
• BoA board wants Lewis to stay. Bank of America (BAC) directors showed continued support of CEO Ken Lewis despite outside pressure to accelerate a search for his replacement. The subject of succession didn't come up during a board meeting Wednesday, or during recent conversations with regulators. However, the board's continued public support for Lewis will likely raise tensions with angry shareholders who already voted Lewis out of the chairman position. Separately, lawmakers will likely call for hearings on the involvement of the Treasury and Federal Reserve in Bank of America's acquisition of Merrill Lynch.
• Stress test results delayed. The Federal Reserve postponed the release of banks' stress test results while bank executives argue with regulators over the tests' preliminary findings. Originally scheduled for publication May 4, the results likely won't be published until the end of next week.
• UBS demurs on tax case disclosures. Responding to the U.S. lawsuit on tax evasion, UBS said revealing the names of 52,000 U.S. customers would violate Swiss criminal law prohibiting such disclosures and trample on Swiss sovereignty. According to UBS' filing, the disclosure request also violates tax treaties between the U.S. and Switzerland, and is "fundamentally an issue for diplomats, not litigators."
• Fed eyes TALF terms. The Federal Reserve is reportedly preparing to announce new terms for TALF to help revive the commercial real estate market. The Fed will likely roll out new loans with five-year terms to better match the need of investors in commercial mortgage-backed securities, up from the current three-year loan terms.
• AmEx cut to junk. S&P downgraded American Express' (AXP) credit rating amid concerns about the company's long term liquidity. Its counterparty credit rating was cut by two notches to BBB+, while its preferred stock rating was cut to junk territory with a three-notch drop to BB. Further downgrades are possible.
• Disney does the Hulu. Disney (DIS) joined up with video site Hulu (GE, NWS) and will distribute films from Walt Disney Studios and programs from ABC and the Disney Channel through the site. The deal marks a shift in strategy for Disney, which will cede some control over the distribution of its programming in exchange for an equity stake, and brings together three of the biggest broadcast and cable network owners under the same banner. GE's NBC Universal, News. Corp and Disney will each hold roughly a 27.5% stake in the venture.
• Hasbro, Discovery build kids' network. Hasbro (HAS) and Discovery Communications (DISCA) have teamed up to launch a children's entertainment network in 2010. The new network will replace the Discovery Kids network in around 60M homes, and will help Hasbro transform itself into an entertainment company as toys face increased competition from videogames, the internet, movies and TV.
• Personal income falls. U.S. consumer spending fell in April together with incomes. Personal Income fell 0.3% ($34.4B) in March, while disposable income decreased less than 0.1% ($1.8B). Personal consumption expenditures (PCE) declined 0.2% ($24.2B).
• Employment costs rise. Employment costs rose a record low 0.3% in Q1, in-line with consensus. Over the past year, employment costs have risen a record low 2.1%.
• Jobless claims better than consensus. Initial jobless claims were 631K, down from last week's 645K (revised) and better than consensus of 640K. Continuing claims rose 133K to 6.27M.
• Business conditions improve (.pdf). Business conditions in the Chicago area surged to their best reading in seven months, according to the NAPM Chicago Business Barometer. Varied "general comments" included "Record setting Federal debt will harm economic recovery," and "Small business lending is picking up..."

Earnings: Friday Before Open

• American Axle & Manufacturing (AXL): Q1 EPS of -$0.37 beats by $0.18. Revenue of $402M (-31.5%) vs. $427M. (PR)
• Aon (AOC): Q1 EPS of $0.76 misses by $0.12. Revenue of $1.85B (-2.7%) vs. $2.08B. (PR)
• Apartment Investment and Management Company (AIV): Q1 FFO of $0.42 beats by $0.08. Revenue of $349M (+0.4%) vs. $311M. Sees Q2 FFO of $0.37-0.43 vs. $0.44, and full-year FFO of $1.65-1.95 vs. $1.65. (PR)
• Brookfield Properties (BPO): Q1 EPS of $0.32 misses by $0.03. Revenue of $592M (-9.1%) vs. $533M. (PR)
• Chevron (CVX): Q1 EPS of $0.92 beats by $0.11. Revenue of $36.13M vs. $21.14M. Shares +0.4% premarket. (PR)
• Clorox (CLX): FQ3 EPS of $1.17 beats by $0.27. Revenue of $1.35B (-0.2%) in-line. Sees full-year EPS of $4.00-4.15 vs. $4.21, and sales growth of 3-4% vs. a previous 3-5%. Shares +1.6% premarket. (PR)
• Cott (COT): Q1 EPS of $0.28 vs. consensus of -$0.07. Revenue of $367M vs. $377M. (PR)
• Dean Foods (DF): Q1 EPS of $0.52 beats by $0.10. Revenue of $2.7B (-12.2%) vs. $2.9B. "We have significant momentum in our business with an exceptionally strong first quarter behind us and indications of a solid start to the second quarter." (PR)
• Domtar (UFS): Q1 EPS of -$0.07 misses by $0.03. Revenue of $1.39B (+1.3%) vs. $1.39B. "The rapid decline of paper volumes in recent months has been abating." (PR)
• DryShips (DRYS): Q1 EPS of $0.36 beats by $0.17. Revenue of $197M (-15.3%) in-line. Shares +15.3% premarket. (PR)
• FLIR Systems (FLIR): Q1 EPS of $0.35 beats by $0.05. Revenue of $272M (+14.8%) vs. $277M. Full-year guidance in-line. (PR)
• Fortune Brands (FO): Q1 EPS of $0.30 beats by $0.08. Revenue of $1.44B (-20.3%) in-line. (PR)
• James River Coal (JRCC): Q1 EPS of $1.03 beats by $0.22. Revenue of $192M (+39%) vs. $193M. (PR)
• MasterCard (MA): Q1 EPS of $2.80 beats by $0.19. Revenue of $1.16B (-2.2%) vs. $1.21B. Gross dollar volume and purchase volume up 0.3%. Transactions up 5.8%. Shares +1.9% premarket. (PR)
• NiSource (NI): Q1 EPS of $0.62 in-line. Revenue of $2.72B (-17.2%) vs. $2.66B. (PR)
• PPL Corp. (PPL): Q1 EPS of $0.60 beats by $0.14. Revenue of $2.36B (+54.6%) vs. $1.69B. (PR)
• Simon Property Group (SPG): Q1 FFO of $1.61 beats by $0.13. Revenue of $918.5M (+2.6%) vs. $886M. Says it raised $1.6B in Q1. Shares -0.2% AH. (PR)
• TECO Energy (TE): Q1 EPS of $0.16 beats by $0.01. Revenue of $824M vs. $764M. Shares (PR)

Earnings: Thursday After Close

• Ariba (ARBA): FQ2 EPS of $0.15 beats by $0.01. Revenue of $84.7M (+5.2%) vs. $85M. Shares +5.1% AH. (PR)
• Chiquita (CQB): Q1 EPS of $0.49 beats by $0.21. Revenue of $842M (-9.9%) vs. $910M. "While Q1 results were better than expected... the company's full-year expectations remain the same." Shares +14.4% AH. (PR)
• Curtiss-Wright (CW): Q1 EPS of $0.35 beats by $0.01. Revenue of $424M (-2.2%) vs. $420M. Reaffirms full-year guidance. (PR)
• DENTSPLY International (XRAY): Q1 EPS of $0.43 in-line. Revenue of $507M (-9.6%) vs. $524M. (PR)
• Evergreen Solar (ESLR): Q1 EPS of -$0.40 vs. consensus of -$0.08. Revenue of $55.8M (+26.2%) vs. $49.2M. Shares -14% AH. (PR)
• Hartford Financial (HIG): Q1 EPS of -$3.77 misses by $0.72. Sees full-year EPS of $0.05-0.45 vs. $0.98 consensus. Book value per share down 57% to $24.15. Net unrealized investment losses $6.9B, up from $6.8B in Q4. Shares -12.6% AH. (PR)
• Ingram Micro (IM): Q1 EPS of $0.23 beats by $0.10. Revenue of $6.75B (-21.4%) in-line. "With the recession now affecting all regions, we do not expect a pick-up in sales for several more months, perhaps for the remainder of the year. However, we don't feel the market getting worse at this stage..." Shares +3.3% AH. (PR)
• Manitowoc (MTW): Q1 EPS of $0.18 beats by $0.05. Revenue of $1.03B (+4%) in-line. Shares -2.5% AH. (PR)
• McAfee (MFE): Q1 EPS of $0.54 beats by $0.06. Revenue of $448M (+21.1%) in-line. Q2 guidance in-line. Shares +3.9% AH. (PR)
• MetLife (MET): Q1 EPS of $0.20 misses by $0.14. Revenue of $10.22B (-12.%) vs. $11.93B. Net realized investment losses of $618M. Shares -3.8% AH. (PR)
• Monster Worldwide (MWW): Q1 EPS of $0.00 beats by $0.11. Revenue of $254M (-30.6%) in-line. Shares -4% AH. (PR)
• PerkinElmer (PKI): Q1 EPS of $0.26 beats by $0.06. Revenue of $432M (-5.9%) vs. $411M. Shares flat AH. (PR)
• Republic Services (RSG): Q1 EPS of $0.35 beats by $0.05. Revenue of $2.06B (+164.4%) in-line. (PR)
• QLogic (QLGC): FQ4 EPS of $0.20 misses by $0.01. Revenue of $130.5M (-18.3%) vs. $135M. Shares -3.2% AH. (PR)

Today's Markets

Japan moved higher Friday. London was lower. Elsewhere markets were closed. Volume in overnight futures is unusually low.