Q3 2009 Earnings Call

October 27, 2009 4:30 pm ET

With a Return on Capital Employed of 35% and an Earnings Yield of 3.2% Trimble is no longer a value investing opportunity. However, they offer a quality balance sheet and a free cash flow yield of 5.3% and free cash flow margin of 19%. The company’s trailing P/E ratio is 34, though the Enterprise Value to Free Cash Flow ratio of 17 demonstrates the strength of their underlying business. Once there is a rebound in the engineering and construction industry, Trimble should see their revenues turn around.

• MSFT, Yahoo reach search deal. At long last, sources say Microsoft (MSFT) and Yahoo (YHOO) have reached a search deal and will announce it within the next 24 hours. Yahoo will use Microsoft's Bing search-engine technology on its own sites, including the Bing brand, and will supply search text ads on its sites and some of Microsoft's. The deal appears to be structured as a revenue share with no upfront fee, with Yahoo taking 110% the first two years and 90% in the third. The deal is on a smaller scale than previously envisioned, but both Microsoft and Yahoo are hoping that a combined attack will be more effective against Google (GOOG). UPDATE: Microsoft, Yahoo officially announce the deal. Premarket: MSFT +0.8%, YHOO -5.8% (8:30 ET).
• Say-on-pay makes headway. A congressional committee approved a bill that would put new restrictions on executive pay, giving shareholders the right to cast non-binding annual votes on executive compensation and special pay packages, and enabling regulators to ban pay structures that incentivize inappropriate risk-taking. The House of Representatives is expected to vote on the measure on Friday.
• Santander plans bank IPO. Banco Santander (STD) will spin off its Brazilian unit in an initial public offering that could raise at least $3B, creating one of the biggest publicly listed banks in Latin America. The listing will likely occur in the next three months.
• Nasdaq backs flash trading ban. As the debate on flash trading heats up, Sen. Charles Schumer said the Nasdaq Stock Market supports a ban on the trading practice and only 'reluctantly' started offering flashes early last month. Meanwhile, the SEC was apparently investigating the practice even before Schumer's letter calling for action, and may move to ban flash trading 'within the next couple of weeks.'
• Sprint buys Virgin Mobile. Sprint (S) agreed to buy Virgin Mobile USA (VM) for $5.50/share ($483M) in an all-stock deal, and will retire $205M of Virgin's debt. Sprint already owns 13.1% of Virgin, which offers cheap prepaid wireless plans. Sprint is hoping the cheaper, non-contract service will help stem a tide of customer defections.
• IBM buys software maker. IBM (IBM) will buy SPSS for $1.2B, a 42% premium on SPSS' closing price on Monday. The deal, the latest in a series of IBM acquisitions, expands IBM's software portfolio and is a further sign of improvement in the technology sector deal market. The deal should be completed by year-end.
• NJ sues Merrill. New Jersey is suing Merrill Lynch, alleging the firm sold the state's investment division $300M in preferred stock based on misleading information. New Jersey officials said if the state's investment unit "had known Merrill’s true financial condition, it would not have participated in the January 2008 offering and would not have agreed to a conversion in July 2008."
• GM returns to car loans. After a year-long hiatus, General Motors plans to get back into the car-leasing business and is said to be eyeing August 1 as its re-entry date. GM has said credit availability is still hurting auto sales, and that its exit from the leasing business forced many customers to defect to other automakers. Rivals including Ford (F) and Toyota (TM) have scaled back their leasing but haven't pulled out of the business entirely.
• Apple bars Google Voice app. Apple (AAPL) banned two iPhone applications based on Google Voice (GOOG) as the rivalry between the two tech giants grows. An Apple representative said some of the applications offered functions too close to what the iPhone already provides.
• American Air expects alliance approval. American Airlines (AMR) said it expects to win approval by October to form an alliance with British Airways (BAIRY.PK) and Iberia. The airline is betting on intra-alliance competition and global partnerships to help it survive.
• KKR preps Dollar General IPO. Kohlberg Kravis Roberts is reportedly in advanced preparations for an initial public offering of Dollar General and will also serve as one of the lead underwriters of the deal. It marks the first time KKR will underwrite one of its own IPOs as it tries to strengthen its reputation ahead of its own planned listing.
• SEC files fraud charges. The SEC filed suit against four individuals, accusing them of fraud in connection to over $197M raised from at least 900 investors nationwide which was funnelled to a commercial real estate venture. The SEC contends the defendants made "material misrepresentations to investors," including false claims about the use of the funds and the safety of investments.
• Home prices improve (.pdf). The S&P/Case-Shiller 20-City Home Price Index was -17.1% in May vs. last year, narrower than last month's 18.1% drop, and the fourth monthly improvement in a row as "the pace of descent in home price values appears to be slowing." The 0.5% month-on-month increase was the first uptick in three years.
• Consumer confidence. Conference Board's July Consumer Confidence came in at 46.6 vs 49.0 consensus, down from 49.3 in June. The decline was aggravated by a worsening job market, as the percentage of consumers claiming jobs are hard to get rose sharply. According to ABC's poll, consumer confidence registered at -47, up from last week's -50 and breaking the -50 threshold for the first time since mid-June. Twenty-six percent of Americans say it's a good time to buy things, up from 22% last week, while 44% rate their personal finances positively.
• Retail sales. Chain store sales fell 1.6% in the first three weeks of July, Redbook said, worse than the -0.9% expected. According to ICSC, weekly sales were up 1%, but July sales will be off around 5.5% Y/Y with "leaner clearance than last year hurting the reported sales pace."

Earnings: Wednesday Before Open

• American Tower (AMT): Q2 EPS of $0.14 misses by $0.03. Revenue of $423M (+7.5%) vs. $414M. (PR)
• ArcelorMittal (MT): Q2 net loss of $792M ($0.57/share) vs. +$5.84B a year ago and vs. consensus of +$336M. Sales of $15.2B (-60%). Sees Q3 Ebitda of $1.4-1.8B. Says it achieved annualized fixed-cost cuts of $8.4B by the end of Q2. Shares -4.2% in Amsterdam. (Bloomberg)
• Arrow Electronics (ARW): Q2 EPS of $0.31 beats by $0.02. Revenue of $3.4B (-22%) in-line. (PR)
• Brookfield Properties (BPO): Q2 FFO of $0.38 beats by $0.03. Revenue of $619M (-13.5%) vs. $527M. (PR)
• Coca-Cola Enterprises (CCE): Q2 EPS of $0.67 beats by $0.16. Revenue of $5.9B (-0.4%) vs. $6B. Issues upside EPS guidance for FY '09 of $1.44-1.49 vs. $1.33 consensus. Shares +5.9% premarket (8:00 ET). (PR)
• EQT Corp. (EQT): Q2 EPS of $0.20 misses by $0.03. Revenue of $238M (-29%) vs. $236M. (PR)
• General Dynamics (GD): Q2 EPS of $1.61 beats by $0.04. Revenue of $8.1B (+11%) in-line. Shares +2% premarket (8:00 ET). (PR)
• Hecla Mining (HL): Q2 EPS of $0.00 beats by $0.02. Revenue of $75M (+10.5%) vs. $53M. Shares +2% premarket (8:20 ET). (PR)
• Hess (HES): Q2 EPS of $0.31 beats by $0.30. Revenue of $6.8B (-42%) vs. $7.4B. Shares +1.6% premarket (8:00 ET).(PR)
• Honda (HMC): FQ1 net profit fell 96% to ¥7.56B ($79.9M), vs. consensus of -¥56.4B, and vs. a FQ4 net loss of ¥186.1B. Sees full-year earnings of ¥55B, down 60% from last year, but 38% higher than its previous outlook of ¥40B. Revenue of ¥2T (-30%). (WSJ)
• Hospira (HSP): Q2 EPS of $0.73 beats by $0.13. Revenue of $957M (+6.1%) vs. $878M. (PR)
• IAC/InterActiveCorp (IACI): Q2 EPS of $0.02 misses by $0.07. Revenue of $340M (-4%) vs. $335M. Shares +0.5% premarket (8:10 ET). (PR)
• Jones Apparel Group (JNY): Q2 EPS of $0.29 beats by $0.22. Revenue of $804M (-3%) vs. $777M. Shares +9.5% premarket (8:10 ET). (PR)
• MeadWestvaco (MWV): Q2 EPS of $0.22 vs. consensus of $0.01 (may not be comparable). Revenue of $1.4B (-16%) vs. $1.5B. (PR)
• Medco Health Solutions (MHS): Q2 EPS of $0.69 beats by $0.04. Revenue of $14.9B (+17%) vs. $14.5B. (PR)
• Moody's (MCO): Q2 EPS of $0.43 beats by $0.03. Revenue of $451M (-7.6%) vs. $427M. (PR)
• New York Community Bancorp (NYB): Q2 EPS of $0.16 vs. consensus of $0.25 (may not be comparable). Non-performing assets of $341.6M at the end of June, representing 1.04% of total assets, vs. $176.8M, or 0.55% of total assets, at the end of March. (PR)
• Nissan (NSANY): FQ1 net loss of ¥16.5B vs. a net profit of ¥52.8B a year ago, and vs. consensus of -¥108.5B. Last quarter Nissan posted a ¥276.9B loss. Sales of ¥1.51T (-36%). Still sees full-year loss of ¥170B. Sources say Nissan will announce today a new China plant capable of producing 240,000 vehicles/year. (WSJ)
• Penske Automotive Group (PAG): Q2 EPS of $0.22 beats by $0.07. Revenue of $2.3B (-30%) vs. $2.4B. (PR)
• Praxair (PX): Q2 EPS of $0.96 misses by $0.03. Revenue of $2.3B (-26%) vs. $2.1B. (PR)
• Qwest Communications International (Q): Q2 EPS of $0.13 beats by $0.03. Revenue of $3.1B (-9%) in-line. (PR)
• SAP AG (SAP): Q2 net profit of €423M vs. €408M a year ago and consensus of €385M. Revenue of €2.58B (-10%) vs. €2.64B. Software revenue of €543M (-40%) vs. consensus of €556M. Operating margin 27.7%. Sees full-year operating margin of 25.5-27%, up from previous guidance of 24.5-25.5%. Shares +1.8% in Frankfurt. (DJ)
• Sealed Air (SEE): Q2 EPS of $0.34 in-line. Revenue of $1B (-20%) vs. $1.1B. (PR)
• Scotts Miracle-Gro Company (SMG): FQ3 EPS of $2.32 beats by $0.07. Revenue of $1.3B (+9%) in-line. (PR)
• Sprint Nextel (S): Q2 EPS of -$0.13 misses by $0.11. Revenue of $8.1B (-10%) in-line. (PR)
• Wyndham (WYN): Q2 EPS of $0.41 beats by $0.04. Revenue of $920M (-19%) vs. $917M. Issues downside Q3 EPS guidance of $0.53-0.57 vs. $0.58 consensus. Issues in-line guidance for FY '09, sees FY '09 revenue of $3.5-3.9B vs. $3.6B consensus.

Earnings: Tuesday After Close

• American Financial Group (AFG): Q2 EPS of $1.09 beats by $0.16. Revenue of $1.1B (+8%) vs. $815M. (PR)
• Brandywine Realty Trust (BDN): Q2 FFO of $0.56 beats by $0.10. Revenue of $146M (-3%) in-line. Raises full-year FFO to $1.75-1.80 from $1.60-$1.74, vs. $1.71. (PR)
• Carter's (CRI): Q2 EPS of $0.23 beats by $0.17. Revenue of $318M (+5%) vs. $300M. Sees Q3 EPS growth in mid to high single digits. (PR)
• Chicago Bridge & Iron (CBI): Q2 EPS of $0.45 beats by $0.05. Revenue of $1.2B (-14%) in-line. (PR)
• Dreamworks Animation SKG (DWA): Q2 EPS of $0.30 beats by $0.14. Revenue of $132M (-7%) vs. $117M. (PR)
• Fidelity National Information Services (FIS): Q2 EPS of $0.42 beats by $0.06. Revenue of $835M (-4%) vs. $832M. Raises full-year EPS view to $1.71-1.75 vs. $1.62. (PR)
• FMC Technologies (FTI): Q2 EPS of $0.84 beats by $0.23. Revenue of $1.1B (-6%) in-line. Sees full-year EPS of $2.55-2.65 vs. $2.36. (PR)
• Hertz Global Holdings (HTZ): Q2 EPS of $0.12 beats by $0.06. Revenue of $1.8B (-23%) in-line. (PR)
• Integrated Device Technology (IDTI): FQ1 EPS of $0.02 beats by $0.02. Revenue of $116M (-38%) vs. $113M. (PR)
• Life Technologies (LIFE): Q2 EPS of $0.79 beats by $0.13. Revenue of $833M (+126%) vs. $803M. Sees full-year EPS of $2.70-2.80 vs. $2.63. (PR)
• Massey Energy Company (MEE): Q2 EPS of $0.24 beats by $0.08. Revenue of $698M (-16%) vs. $661M. (PR)
• McKesson (MCK): FQ1 EPS of $1.06 beats by $0.20. Revenue of $27B (flat) in-line. (PR)
• Nalco Company (NLC): Q2 EPS of $0.11 misses by $0.13. Revenue of $913M (-14%) vs. $950M. (PR)
• Norfolk Southern (NSC): Q2 EPS of $0.66 beats by $0.02. Revenue of $1.9B (-33%) vs. $2.1B. (PR)
• Panera Bread Company (PNRA): Q2 EPS of $0.65 beats by $0.01. Revenue of $331M (+3%) in-line. Company targets 15-20 new unit openings in Q3. (PR)
• Parametric Technology (PMTC): FQ3 EPS of $0.03 misses by $0.13. Revenue of $226M (-17%) vs. $223M. Sees Q4 EPS of $0.25-0.30 vs. $0.31. (PR)
• Psychiatric Solutions (PSYS): Q2 EPS of $0.63 beats by $0.07. Revenue of $471M (+6%) vs. $469M. Reaffirms full-year EPS of $2.24-$2.32 vs. $2.23. (PR)
• Questar (STR): Q2 EPS of $0.54 in-line. Revenue of $613M (-26%) vs. $525M. (PR)
• SBA Communications (SBAC): Q2 EPS of $0.25 beats by $0.42. Revenue of $136M (+22%) vs. $137M. (PR)
• STMicroelectronics (STM): Q2 EPS of -$0.36 misses by $0.04. Revenue of $2B (-16%) vs. $1.8B. Sees Q3 revenue of $2.07B-2.27B vs. $2.02B. (PR)
• Superior Energy Services (SPN): Q2 EPS of $0.35 misses by $0.09. Revenue of $361M (-21%) vs. $392M. (PR)
• TECO Energy (TE): Q2 EPS of $0.29 beats by $0.04. Revenue of $825M (-7%) vs. $864M. (PR)
• THQ (THQI): FQ1 EPS of $0.10 beats by $0.18. Revenue of $244M (+77%) vs. $203M. Sees Q2 revenue of $85M-95M vs. $123M. (PR)
• Total System Services (TSS): Q2 EPS of $0.27 in-line. Revenue of $415M (-4%) vs. $401M. Sees full-year decline in revenues of 3-5% and in net income of 11-13%. (PR)
• Trimble Navigation (TRMB): Q2 EPS of $0.31 misses by $0.01. Revenue of $290M (-23%) vs. $300M. Sees Q3 EPS of $0.25 vs. $0.27. (PR)
• Western Digital (WDC): FQ4 EPS of $0.76 beats by $0.48. Revenue of $1.9B (-5%) vs. $1.6B. (PR)
• XL Capital (XL): Q2 EPS of $0.96 beats by $0.34. Revenue of $1.73B (-19%) vs. $1.71B. (PR)

Today's Markets

Asian markets were broadly down, but Europe is off to a strong start. U.S. futures have dipped into negative territory.

• Six banks fall short on capital. As news of the preliminary stress test results continues to leak out, sources say at least 6 of the nineteen largest U.S. banks will need additional capital. Some may get extra money from the government, but most of the capital will likely come from the conversion of preferred shares to common equity. The Federal Reserve is in the process of hearing appeals from banks (including Citigroup (C) and Bank of America (BAC)) that were told they need a larger capital cushion. Final test results are due to be released next week.
• Citigroup tries to plug capital hole. Citigroup (C) is trying to convince the government that the bank doesn't need more capital beyond recent plans to shore up its balance sheet and cut costs. However, executives have also told regulators that a capital shortfall identified in the stress tests could be filled by selling large businesses (potentially including core business units), further reducing its balance sheet or asking more investors to convert preferred shares into common stock. In short, anything but accepting additional government aid. Separately, Citigroup has reportedly asked the Treasury for permission to pay bonuses to many key employees. Shares +6.6% premarket (7:00 ET).
• Lewis on the line. Bank of America (BAC) holds its annual meeting today, and shareholders will vote on whether CEO Ken Lewis should be re-elected as the company's chairman of the board. Though Lewis is likely to win re-election to the board by a wide margin, a separate shareholder proposal forcing Lewis to give up his position as chairman is still too close to call. The votes come amid news that the company could require up to $70B in extra capital as a result of the government's stress tests. Shares +3.9% premarket (7:00 ET).
• New mortgage mod rules. The White House unveiled new guidelines in its foreclosure-prevention program to address borrowers with home-equity loans and other second mortgages. The original plan didn't address this group of borrowers, despite the fact that roughly half of seriously delinquent borrowers have a second mortgage. Under the revised plan, companies participating in the loan modification program must automatically modify the second mortgage when the first is reworked. The government will share in the cost of reducing the interest rate on second mortgages for five years.
• Chrysler reaches debt deal. Chrysler's largest lenders and the government reached a major breakthrough on debt reduction, agreeing to write down $6.9B in debt to just $2B ahead of Chrysler's bankruptcy deadline tomorrow. Despite the progress, "there is still some way to go in the negotiations," said a White House spokesman, "so I wouldn't rule anything in or out."
• SEC's fraud-fighting team. After a series of high-profile failings, the SEC is creating a team of specialists to focus on fighting fraud and to make the agency "more smart, more swift and more successful." The idea is a major shift for the SEC, which traditionally has relied on enforcement personnel who were generalists. Details of the new plan are not yet finalized.
• AIG tries to lower default risk. Less than a month after resigning, senior AIG (AIG) executive James Shephard has reportedly decided to stay on as the deputy chief of Paris-based Banque AIG. Insiders say Shephard was pressed to stay in order to help stave off the risk of default on $234B of derivatives; his continued presence at the unit will likely deter several European banks that bought derivatives from taking legal action to force AIG to repay them.
• Verizon, MSFT team up on iPhone rival. Verizon (VZ) is said to be holding talks with Microsoft (MSFT) over a touch-screen music-playing mobile phone that could compete with Apple's (AAPL) iPhone. Talks are still in the early stages, but a phone could be introduced next year. Verizon is also reportedly in talks with Apple about selling a version of the iPhone.
• Falling demand, prices hurt ArcelorMittal. ArcelorMittal (MT) posted a wider-than-expected quarterly loss (see details below) as demand slumped and falling metals prices forced the company to lower the value of its inventories. Steel consumption is expected to drop another 15% in 2009, and the company is bracing for market conditions to 'remain challenging.' Shares -2.0% premarket (7:00 ET).
• Dendreon shares yo-yo on prostate drug. Dendreon's (DNDN) shares plunged dramatically yesterday, falling 45% before trading was halted. The sudden drop was in advance of a meeting at which the company presented data on prostate cancer drug Provenge. As it turns out, Dendreon executives reported that Provenge extended the median survival of prostate cancer patients by 4.1 months and improved 3-year survival by 38%. The findings raise fresh expectations of FDA approval, and sent the stock soaring in premarket trading (+127% at 7:00 ET).
• IBM boosts dividend. IBM (IBM) raised its dividend by 10%, and authorized another $3B in stock buybacks. Despite losing Sun Microsystems (JAVA) to Oracle (ORCL), IBM executives said the company absolutely still has the flexibility to make a major acquisition.
• Retail sales. Retail chain store sales fell 0.7% from a week ago, ICSC reported, and dropped 1.7% Y/Y. Consumer traffic fell for most segments, including grocery, drug, department stores and discounters. Redbook recorded that chain store sales gained 1.6% in the first three weeks of April, better than the 1.3% rise expected. Strong seasonal sales drove the improvement.
• Home prices fall (.pdf). S&P/Case-Shiller's 20-city home price index fell 18.6% in February from a year ago, slightly better than the 19% drop seen last month. All 20 areas were still lower from a month ago, but 16 of the 20 saw an improvement in their annual returns. It's the first time since Oct. 2007 that the index didn't post a record annual decline.
• Confidence ticks up. Conference Board's Consumer Confidence Index improved considerably in April, rising to 39.2 from March's 26.9. Expectations rose to 49.5 from 30.2. "The sharp increase in the Expectations Index suggests that consumers believe the economy is nearing a bottom, however, this Index still remains well below levels associated with strong economic growth."
• Mfg contraction slows. The Richmond Fed's Manufacturing Index contracted more slowly in April, rising to -9 from March's -20. Shipments gained twelve points to -3, new orders rose eighteen points to -2, and the jobs index edged up two points to -26.
• Mortgage apps fall. Mortgage applications fell 18.1% from a week ago, MBA reported. The average interest rate on 30-year fixed-rate mortgages inched down to 4.62% from 4.73%.

Earnings: Wednesday Before Open

• Aetna (AET): Q1 EPS of $0.96 beats by $0.03. Revenue of $8.6B (+10.5%) vs. $8.5B. Reaffirms FY '09 EPS guidance of $3.85-$3.95. (PR)
• American Tower (AMT): Q1 EPS of $0.15 beats by $0.01. Revenue of $409M (+6.9%) vs. $408M. Issues in-line guidance for FY '09, see revenue of $1.64-$1.77B vs. $1.68B consensus. (PR)
• ArcelorMittal (MT): Q1 EPS of -$0.78 misses by $0.39. Revenue of $15.1B (-49.3%) vs. $15.9B. (PR)
• Baker Hughes (BHI): Q1 EPS of $0.82 beats by $0.06. Revenue of $2.7B (-0.1%) vs. $2.6B. (PR)
• Burger King (BKC): FQ3 EPS of $0.34 in-line. Revenue of $600M (+1.0%) vs. $607M. Sees FY '09 EPS of $1.39-$1.42. (PR)
• Endo Pharmaceuticals (ENDP): Q1 EPS of $0.67 beats by $0.04. Revenue of $335M (+15.5%) vs. $338M. (PR)
• FTI Consulting (FCN): Q1 EPS of $0.60 beats by $0.08. Revenue of $348M (+13.3%) vs. $341M. (PR)
• General Dynamics (GD): Q1 EPS of $1.54 beats by $0.08. Revenue of $8.3B (+18%) vs. $7.8B. (PR)
• Hess (HES): Q1 EPS of -$0.18 beats by $0.09. Revenue of $6.9B (-35.8%) vs. $5.6B. (PR)
• IAC/InterActiveCorp (IACI): Q1 EPS of -$0.02 misses by $0.02. Revenue of $332M (-10.4%) vs. $330M. (PR)
• Jones Apparel Group (JNY): Q1 EPS of $0.28 beats by $0.18. Revenue of $891M (-8.6%) vs. $875M. (PR)
• MeadWestvaco (MWV): Q1 EPS of -$0.46 misses by $0.22. Revenue of $1.35B (-10.8%) vs. $1.44B. (PR)
• MedcoHealth Solutions (MHS): Q1 EPS of $0.63 in-line. Revenue of $14.8B (+14.4%) vs. $13.7B. Sees FY '09 EPS of $2.67-$2.77 vs. $2.73 consensus. (PR)
• MGIC Investment (MTG): Q1 EPS of -$1.49 misses by $0.12. Revenue of $435M (+2.7%) vs. $436M. (PR)
• Moody's (MCO): Q1 EPS of $0.41 beats by $0.07. Revenue of $409M (-5.1%) vs. $393M. Declares a quarterly dividend of $0.10/share. (PR)
• PepsiAmericas (PAS): Q1 EPS of $0.20 beats by $0.04. Revenue of $1.1B (-3.7%) in-line. Issues upside guidance for FY '09, sees EPS of $1.83-$1.90 vs. $1.80 consensus. (PR)
• Praxair (PX): Q1 EPS of $0.93 beats by $0.01. Revenue of $2.1B (-20.3%) vs. $2.4B. Sees FY '09 EPS of $3.85-$4.15, revenue of around $9B. (PR)
• Qwest Communications International (Q): Q1 EPS of $0.12 beats by $0.04. Revenue of $3.2B (-6.6%) in-line. (PR)
• Reynolds American (RAI): Q1 EPS of $1.00 beats by $0.05. Revenue of $1.92B (-6.6%) vs. $1.97B. Sees FY '09 EPS guidance of $4.15-$4.45. (PR)
• Rockwell Automation (ROK): FQ2 EPS of $0.29 in-line. Revenue of $1.1B (-24.8%) in-line. (PR)
• Royal Dutch Shell (RDS.A): Q1 EPS of $0.54 misses by $0.54. Revenue of $58.2B vs. $55.2B. Q1 dividend +5% to $0.42/share. "Industry conditions remain challenging, and our focus is on capital discipline and costs." (PR)
• SAP AG (SAP): Q1 EPS of $0.22 misses by $0.07. Revenue of $2.4B (-4%) vs. $2.6B. (PR)
• Sealed Air (SEE): Q1 EPS of $0.33 beats by $0.05. Revenue of $988M (-16.3%) vs. $1.03B. (PR)
• Siliconware Precision Industries (SPIL): Q1 EPS of $0.01 beats by $0.01. (PR)
• Southern Company (SO): Q1 EPS of $0.42 beats by $0.01. Revenue of $3.7B (-0.3%) vs. $3.5B. (PR)
• SPX (SPW): Q1 EPS of $0.81 beats by $0.06. Revenue of $1.2B (-13.9%) in-line. (PR)
• Talisman Energy (TLM): Q1 EPS of $0.30 beats by $0.16. Revenue of $1.8B (-21.5%) vs. $1.7B. (PR)
• Time Warner (TWX): Q1 EPS of $0.45 beats by $0.07. Revenue of $6.9B (-7%) vs. $6.8B. Reaffirms FY '09 guidance of $1.98 EPS. (PR)
• Time Warner Cable (TWC): Q1 EPS of $0.75 beats by $0.14. Revenue of $4.4B (+4.9%) in-line. (PR)
• Tyco Electronics (TEL): FQ2 EPS of $0.14 beats by $0.10. Revenue of $2.5B (-32.9%) vs. $2.4B. Sees FQ3 EPS of $0.01-$0.06, revenue of $2.35B-$2.45B. (PR)
• United Microelectronics (UMC): Q1 EPS of -$0.09 beats by $0.04. Revenue of $319M (-59.6%) vs. $337.5M. (PR)
• ViroPharma (VPHM): Q1 EPS of -$0.77 misses by $0.93. Revenue of $60M (+18.2%) vs. $65M. (PR)
• Waste Management (WMI): Q1 EPS of $0.42 beats by $0.01. Revenue of $2.8B (-14.1%) vs. $3.0B. (PR)
• Wyeth (WYE): Q1 EPS of $0.89 beats by $0.01. Revenue of $5.4B (-5.8%) vs. $5.5B. Reaffirms FY '09 guidance, sees EPS of $3.33-$3.53 vs. $3.50 consensus. (PR)
• Wyndham Worldwide (WYN): Q1 EPS of $0.41 beats by $0.06. Revenue of $901M (-11%) vs. $839M. Reaffirms FY '09 EPS guidance of $1.61-$1.85, FY '09 revenue of $3.5-$3.9B. (PR)

Earnings: Tuesday After Close

• Ace Ltd. (ACE): Q1 EPS of $1.99 beats by $0.03. Shares flat AH. (PR)
• Buffalo Wild Wings (BWLD): Q1 EPS of $0.47 beats by $0.01. Revenue of $131.6M (+35.3%) vs. $129.1M. Shares -11.1% AH. (PR)
• Cabot Oil & Gas (COG): Q1 EPS of $0.41 beats by $0.03. Revenue of $234M (+6.5%) vs. $213M. Shares +4% AH. (PR)
• Carter's (CRI): Q1 EPS of $0.19 beats by $0.03. Revenue of $357M (+33.6%) vs. $335M. Sees Q2 EPS of $0.07-0.10 vs. $0.10. Shares -5.3% AH. (PR)
• Cemex (CX): Q1 operating income of $36M (-29%). Revenue of $3.7B (-32%) vs. $4.03B consensus. (PR)Dreamworks Animation SKG (DWA): Q1 EPS of $0.68 beats by $0.23. Revenue of $263.5M (+67.6%) vs. $211.5M. Shares +14.6% AH. (PR)
• Cerner (CERN): Q1 EPS of $0.52 beats by $0.01. Revenue of $392M (+1.9%) vs. $418M. Full-year guidance in-line. Shares -3.5% AH. (PR)
• Chicago Bridge & Iron (CBI): Q1 EPS of $0.51 beats by $0.06. Revenue of $1.3B (-10%) vs. $1.25B. Shares +17.9% AH. (PR)
• CommScope (CTV): Q1 EPS of $0.14 beats by $0.04. Revenue of $742M (-26.1%) vs. $753M. Q2 revenue guidance in-line. Shares +3.8% AH. (PR)
• E*TRADE Financial (ETFC): Q1 EPS of -$0.41 misses by $0.01. Revenue of $497M (+6%) in-line. Allowance for loan losses increased $120M to $1.2B. Says it will need to further boost its capital position, through selling shares and/or a private cash injection. Shares -27.6% AH. (PR)
• Hertz Global (HTZ): Q1 EPS of -$0.25 misses by $0.03. Revenue of $1.56B (-23.3%) vs. $1.8B. (PR)
• Jones Lang LaSalle (JLL): Q1 EPS of -$0.47 misses by $0.40. Revenue of $494M (-12.4%) vs. $541M. Decreases semi-annual dividend to $0.10 from $0.25. Assets under management fell 11% to $41B. Shares flat AH. (PR)
• Life Technologies (LIFE): Q1 EPS of $0.72 beats by $0.15. Revenue of $785M (+124.1%) vs. $749M. Shares -0.7% AH. (PR)
• Massey Energy Company (MEE): Q1 EPS of $0.51 misses by $0.02. Revenue of $768M (+19.2%) vs. $739M. Says it has taken meaningful action to cut costs, and expects positive cash flow this year. Shares +0.6% AH. (PR)
• Nalco (NLC): Q1 EPS of $0.17 misses by $0.02. Revenue of $868M (-13.1%) vs. $933M. "We are pushing aggressively on productivity to help offset the impacts of weaker end markets." Shares flat AH. (PR)
• Psychiatric Solutions (PSYS): Q1 EPS of $0.50 beats by $0.01. Revenue of $450M (+6.3%) in-line. Sees full-year EPS of $2.24-2.32 vs. $2.21. Shares +8.5% AH. (PR)
• RF Micro Devices (RFMD): FQ4 EPS of -$0.10 misses by $0.05. Revenue of $172.3M (-21.9%) vs. $166.1M. Sees FQ1 EPS of flat vs. consensus of -$0.02. Shares -4.15% AH. (PR)
• Stericycle (SRCL): Q1 EPS of $0.47 beats by $0.01. Revenue of $277M (+8.8%) in-line. Shares flat AH. (PR)
• Sun Microsystems (JAVA): FQ3 EPS of -$0.07 beats by $0.12. Revenue of $2.61B (-20%) vs. $2.86B. Shares -0.2% AH (company is being acquired by Oracle (ORCL)). (PR)
• Superior Energy Services (SPN): Q1 EPS of $0.72 beats by $0.04. Revenue of $437M (-1%) vs. $418M. Shares +1.7% AH. (PR)
• Textron (TXT): Q1 EPS of $0.26 beats by $0.25. Revenue of $2.53B (-23.6%) vs. $2.78B. Sees full-year EPS of $0.45-0.75 vs. $0.97 consensus, and revenue of $11B vs. $11.8B. Launches sale of 19M shares, and $300M in convertible senior notes. Shares -5% premarket. (PR I, II)
• Total System Services (TSS): Q1 EPS of $0.26 misses by $0.04. Revenue of $409M (-2.6%) vs. $474M. Sees full-year revenue of $1.63-1.66B vs. $1.95B consensus. Sees net income down 11-13% vs. a previous 0-3%. Cardholder transaction volume was down 4.3%. Shares -8.3% AH. (PR)
• Trimble Navigation (TRMB): Q1 EPS of $0.28 beats by $0.02. Revenue of $289M (-18.7%) vs. $297M. Sees Q2 EOS of $0.32 vs. $0.35 and revenue of $285-315M vs. $320M. Shares -3.6% AH. (PR)
• Trustmark (TRMK): Q1 EPS of $0.41 beats by $0.12. (PR)
• V.F. Corp. (VFC): Q1 EPS of $0.91 misses by $0.03. Revenue of $1.72B in-line. Sees full-year EPS of $4.70-5.00 vs. consensus of $5.31. Shares -8.2% AH. (PR)

Today's Markets

Overseas markets were broadly higher Wednesday, fueling gains in overnight futures trading.

Q1 2009 Earnings Call Transcript

April 28, 2009 4:30 pm ET

Bullish Calls

Myriad Genetics (MYGN): "This is one of the best performing stocks in the whole world. But buy it lower."

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.)

Now that the nearly $800 billion Stimulus Package is signed into a law, the question is how its provisions would affect the different industries, which companies would present attractive investment opportunities and which ones we should avoid. After discussing the possible effects on the Solar Industry, we now take a look at the Defense Industry.

Defense companies have enjoyed an abundance of government funding over the last several years. The estimated Defense Military outlays for 2009 are approximately 650 Billion, more than double the amount of the last budget before 9/11. As a result, companies involved with defense, homeland security and aerospace have outperformed the broader markets, with the SPADE® Defense Index (DXS) beating the S&P500 Index by 80.3% cumulatively for the 9/10/01 – 2/23/09 period.

• Obama limits exec pay. Obama will announce today a policy of capped compensation for top executives at companies receiving 'exceptional' federal aid in the future. The cap will go into effect at $500,000 annually. Any additional compensation will have to be paid in restricted stock that won't vest until taxpayers have been paid back. The new cap will also require increased transparency in the use of corporate jets, office renovations, holiday parties and golden parachute offers. The cap will not be applied retroactively to companies that have already received rescue money.
• Backing toxic assets. Toxic-asset guarantees are gaining momentum as talks continue on possible bank-rescue plans. Treasury's Geithner is skeptical of setting up an official 'bad bank' and the guarantees would focus on troubled illiquid assets without taking them off banks' balance sheets. Senator Charles Schumer called debt guarantees 'a favorite choice' vs. a bad bank plan that could cost as much as $4T. Not everyone is on board, however. Former Fed governor Mishkin is one of the supporters of the bad bank idea, warning "you have to make sure that when all is said and done, you actually have financial firms that are either healthy and the ones that are not healthy can’t stay in business." Obama will likely release a comprehensive plan sometime next week.
• Live Nation Ticketmaster? Sources say Ticketmaster (TKTM) and Live Nation (LYV) are in merger talks and could announce a deal as early as this week. Combining the two companies would create a music industry powerhouse with a combined market value of over $700M and ties to over 200 artists. If the companies move forward with a merger, they could potentially face antitrust issues from managers, record companies, ticketing companies and concert promoters. Talks are said to be in an advanced stage, but it is not yet clear which company will be acquiring the other.
• AT&T eyes wireless assets. Verizon Wireless (VZ) needs to divest around $3B in wireless assets as part of its purchase of Alltel Corp., and rival AT&T (T) is emerging as a strong bidder. Though other companies are interested in the assets as well, AT&T is in the strongest financial position and could walk away with a large chunk of the assets. Critics say the assets, including 2.1M wireless subscribers in 22 states, shouldn't be transferred from one giant telecom provider to another since it's not in the interest of consumers. The Department of Justice has already said it will examine the sales to make sure there are no competitive issues.
• Panasonic pans to loss. Panasonic (PC) warned it will post an annual loss of ¥380B ($4.2B) vs. previous guidance for a ¥30B profit, and will cut 15,000 jobs as it faces slowing demand and a stronger yen. Panasonic is the world's No. 1 plasma TV maker but the strong yen has taken away the company's competitive edge overseas. "Sales fell in all our business segments in the third quarter," said Panasonic director Makoto Uenoyama. "We expect sharper sales declines in this quarter, and profits are likely to shrink in every segment."
• Mining giant takes profit hit. BHP Billiton (BHP) reported H1 profit fell a larger-than-expected 57% on the costs of closing mines and plants after a precipitous fall in metal prices. Net income fell to $2.6B. CEO Marius Kloppers said reduced demand for steel will have a 'pronounced impact' on this half's earnings along with the weak outlook for the global economy. Cashflow from operations rose 74% to $13B, and the company raised its H1 dividend 41% to $0.41.
• Elpida may seek aid. Japan's Elpida (ELPDF.PK), the world's third-largest maker of memory chips, may seek public funds under a Japanese government program designed to help non-financial companies during the global economic crisis. Elpida could ask for hundreds of millions of dollars and would likely be granted the money in exchange for issuing stock to the Development Bank of Japan. Elpida has been hit by falling chip prices and declining demand. Shares +6.2% in Tokyo.
• Retail sales. Retail chain store sales rose 1.6% from a week ago, ICSC reported, and dropped 2.5% Y/Y. "Though January ended with a solid sales increase for the week, sales volatility clearly continues for retailers and the industry amid a weak year-over-year trend." According to Redbook, national chain store sales fell 2.7% in the first four weeks of January, worse than the expected 2.2% fall. Sales -2.3% Y/Y. Bad weather hurt sales, though snack foods and beverages got a Super Bowl bump.
• Home sales improve. December's pending home sales rose 6.3% to 87.7, NAR said, citing improved affordability conditions. The gain, "spurred by buyers responding to lower home prices and mortgage interest rates, more than offset an index decline in the previous month."
• Mortgage apps rise. Mortgage applications rose 8.6% from a week ago, MBA says, on a seasonally adjusted basis. The average interest rate on 30-year fixed-rate mortgages increased to 5.28% from 5.22%.

Earnings: Wednesday Before Open

• Alcatel-Lucent (ALU): Q4 loss of €3.89B, its eighth straight, including a writedown of €3.91B on goodwill and intangible assets. Analysts expected a profit of €159M net of any writedowns. Sales fell 5.3% to €4.95B, vs. €4.8B consensus. (PR)
• ITT Industries (ITT): Q4 EPS of $0.82 beats by $0.05. Revenue of $2.9B (+16.5%) vs. $2.7B. (PR)
• Kraft (KFT): Q4 EPS of $0.43 misses by $0.01. Revenue of $10.77B (+6.2%) vs. $11.29B. Sees 2009 EPS of $1.88 vs. $2.02 due to currency effect and pension costs, partially offset by improved performance. (PR)
• PP&L (PPL): Q4 EPS of $0.46 in-line. Revenue of $2.5B (+56.6%) vs. $1.5B. (PR)
• Thermo Fisher (TMO): Q4 EPS of $0.88 beats by $0.05. Revenue of $2.6B (+1.0%) in-line. (PR)
• Time Warner (TWX): Q4 EPS of $0.23 misses by $0.03. Revenue of $12.3B (-2.7%) vs. $12.7B. (PR)
• Time Warner Cable (TWC): Q4 EPS of $0.35 beats by $0.03. Revenue of $4.4B (+7.7%) in-line. (PR)
• Windstream (WIN): Q4 EPS of $0.25 in-line. Revenue of $777.5M (-4.8%) vs. $780.9M. (PR)

Earnings: Tuesday After Close

• Ace Ltd. (ACE): Q4 EPS of $1.87 beats by $0.07. (PR)
• Alliance Data Systems (ADS): Q4 EPS of $1.19 beats by $0.03. Revenue of $508M (-2.7%) vs. $528M. Sees 2009 EPS of $5.15-5.20 vs. $5.07. (PR)
• BRE Properties (BRE): Q4 FFOs of $0.68 misses by $0.04. Revenue of $88.3M (+4.6%) vs. $89.6M. (PR)
• Centex (CTX): FQ3 EPS of -$5.34 misses by $2.07. Revenue of $872M (-53.4%) vs. $895M. Finishes quarter with $1.47B in cash. "We continued to move with urgency to reduce our cost structure, accelerating overhead reductions and further reducing land-related spending." (PR)
• Disney (DIS): FQ1 EPS of $0.41 misses by $0.10. Revenue of $9.6B (-8.2%) vs. $10.07B. (PR)
• Electronic Arts (ERTS): FQ3 EPS of $0.56 misses by $0.32. Revenue of $1.65B vs. $1.9B. To reduce workforce by 11% (1,100 jobs). Sees 2009 EPS of -$0.35 vs. $0.60 and revenue of $4.2-4.25B vs. $4.68B. (PR)
• Illumina (ILMN): Q4 EPS of $0.24 beats by $0.07. Revenue of $161M (+42.9%) vs. $155M. (PR)
• Leggett & Platt (LEG): Q4 EPS of $0.03 misses by $0.05. Revenue of $882M (-15.1%) vs. $863M. (PR)
• Massey Energy (MEE): Q4 EPS of $0.63 misses by $0.16. Revenue of $755M vs. $799M. (PR)
• MetLife (MET): Q4 EPS of $0.19 beats by $0.05. Revenue of $13.96B vs. $12.51B. (PR)
• Nalco (NLC): Q4 EPS of $0.36 beats by $0.13. Revenue of $1.03B (-0.3%) in-line. "It will be a difficult year, with expectations for unusually negative currency impacts and continued downward pressure across the global, industrial economy. Our expectation is that we will outperform relative to our competitors." (PR
• Pioneer Natural Resources Company (PXD): Q4 EPS of -$0.15 misses by $0.21. Revenue of $473M (-11%) vs. $477M. (PR)
• Riverbed Technology (RVBD): Q4 EPS of $0.19 beats by $0.01. Revenue of $92.2M (+20.8%) vs. $90.2M. (PR)
• Trimble Navigation (TRMB): Q4 EPS of $0.24 beats by $0.01. Revenue of $268M (-14.3%) vs. $272M. (PR)
• UnumProvident (UNM): Q4 EPS of $0.63 beats by $0.01. Revenue of $2.32B (-12.1%) vs. $2.62B. Sees 2009 EPS of $2.45-2.55 vs. $2.64. (PR)
• Yum! Brands (YUM): Q4 EPS of $0.46 beats by $0.01. Revenue of $3.38B (+3.7%) in-line. "It is important to note that we do not need to access the credit markets in 2009 to finance our company and our strong cash flow and balance sheet provide us with the flexibility to successfully navigate through these challenging financial times." (PR)

Today's Markets

• Asia markets closed in the green. Nikkei +2.7% to 8,039. Hang Seng +2.25% to 13,064. Shanghai +2.3% to 2,108. BSE +0.6% to 9,202.
• In Europe at midday, London +0.4%. Paris +1.1%. Frankfurt +0.8%.
• U.S. futures: Dow -0.1%. S&P +0.01%. Nasdaq -0.2%. Crude +1.7% to $41.49. Gold +0.9% to $900.20.

Wednesday's Economic Calendar

• 7:00 MBA Mortgage Applications
  7:30 Challenger Job-Cut Report
  8:15 ADP Jobs Report
  10:00 Treasury Refunding Announcement
  10:00 ISM Non-Manufacturing Survey
  10:30 EIA Petroleum Status
• Notable earnings before Wednesday's open: AGN, ALU, ARM, CLX, DVN, FNF, GR, ITT, KFT, NI, NOV, PM, PPL, R, RL, SLE, TMO, TWC, TWX, WIN
• Notable earnings after Wednesday's close: AIZ, AKAM, ATML, ATW, AVB, BMC, CBL, CNQR, CSCO, EFX, EOG, EQR, FMC, HAR, HRS, NDN, NVLS, ONNN, PHM, PRU, REG, SUN, THQI, TMK, V, XRAY

Seeking Alpha editor Eli Hoffmann contributed to this post.

Q4 2008 Earnings Call

February 03, 2009, 4:30 pm ET

At the end of each year, I like to re-visit my hits and misses. Let's start with the misses.

My biggest mistake was thinking we didn't need any capitulation (July 25, 2008). The market hit the skids shortly thereafter. At the time I made the call, the S&P 500 was 1,257--now it's 869. That's a loss of around 30%. (Not as bad as Hilary Kramer, but too close for comfort.)

In my last blog post about convicted felon turned fraud fighter Barry Minkow’s expose of corporate officers and directors misrepresenting their resumes, I closed with the following comment, “As a convicted felon, I have learned that where there is smoke there is usually fire.” In this blog post, I take a closer look at Trimble Navigation Limited (NASDAQ: TRMB).

According to a Fraud Discovery Institute (Minkow’s private investigation company) background check, Executive Vice President and Executive Committee member Dennis L. Workman claimed in various SEC filings (latest 10-K here) that he obtained a Master of Science Degree in Electrical Engineering from the Massachusetts Institute of Technology (MIT) in 1969. However, a background check by FDI shows that while Dennis Workman attended MIT from September 19, 1967 to May 31, 1968, no degree was conferred.

My dear friend and mentor, convicted felon-turned-fraud fighter Barry Minkow has a message for deceitful directors and officers of public companies: If you lie about your resume, past experience, and qualifications for your present job and such lies show up in SEC filings, he will find out about it and expose you to investors and regulators.

Minkow and I believe that if you lie about your educational background, you are capable of lying about anything else, too. Investors require honesty from the fiduciaries running their companies. If Barry Minkow can find false credentials in corporate America where company gatekeepers have failed, what other more devastating internal control failures exist that we do not know of?

Q3 FY08 Earnings Call

October 23, 2008, 04:30 PM ET

Q2 FY08 Earnings Call

July 24, 2008, 4:30 PM ET

On Thursday, Marvell (MRVL) reported a strong Q1 2009 that beat analyst estimates helped by its cost-cutting and strong sales of wireless products. Earlier coverage is available here and here.

In my last post on Marvell, I said Marvell’s shares would recover if its options scandal gets sorted. We also saw how it has a better shot at profitability with its contractual obligations with Intel over the XScale deal coming to an end. After having three interim CFOs, Marvell will finally have a permanent CFO, Clyde Hosein who was the former CFO of Integrated Device Technologies (IDTI) and was also at IBM (IBM). Earlier this month, Marvell agreed to pay a $10 million fine to settle backdating charges. So with its management and the options issues seemingly sorting out (I won’t say sorted out, there is still more cleaning up to do), combined with its strong results, the stock is looking up. It shot up 22% and is currently trading around $17.

Trimble (TRMB) shares are sharply higher this morning after the company late yesterday reported a classic beat-and-raise quarter.

Q1 FY08 Earnings Call

April 24, 2008, 4:30 PM ET

Q4 FY07 Earnings Call

January 29, 2008, 4.30 PM ET