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War on Big Business by: Charles Payne

|Includes: Apple Inc. (AAPL), ABC, GLW, SHW, TRV, TXN
You know, I -- I would say that when I -- the one thing I'm clear about is that I'd rather be a really good one-term President than a mediocre two-term President. And I -- and I believe that.-
President Obama to Diane Sawyer

Wow, what a statement! First off it's a direct diss of President Clinton who moved to the center after the 1994 landslide by the GOP. It suggests that the fight against Wall Street is just the beginning. I think that the President has been grappling with the part of his being that wants to stay true to the community organizer roots and play Robin Hood…go to Washington and redistribute as much wealth as possible. Then, there is the part that really wants to be in office for three or four terms. The stubbornness is dangerous for the stock market. The war on prosperity is dangerous for the nation. Tomorrow night we will here about tax cuts for the middle class. Like every initiative taken thus far it's predicated on income, in the wild notion that people that pay a ton of taxes shouldn't have access to those funds during times of general duress.

It plays into the "us versus them" stuff that continues to be the centerpiece of the Administration's game plans. Hopefully, the vitriolic tone will ease up a bit, but none of the things I'm hearing about on the drawing board goes toward growing the economy. Still, when the President says that he wants to be "good" even if it means going against the wishes of the public the implication is there will be many fights, more name-calling, more browbeating, and more villains. Those villains will be businesses. In the meantime, none of the things on the drawing board will lead to job creation, real or imagined. I'm not sure what Democrats in Congress will make of the attitude toward real public opinion rather than all those things we hear are populism but maybe don't resonate to the degree advertised. Many have fallen on their sword and others are trembling in fear. Are they willing to make this their last term in office?

There has to be a focus on creating a climate where there can be sustained job creation. Nickel and dime programs to appease part of the electorate aren't going to cut it, and they already blew the so-called stimulus plan. There has to be real tax cuts to stoke demand and incentivize businesses…all businesses.

Earnings Season

S&P 500 companies have beaten consensus estimates 70% of the time for the first 150 to report. But, this looks like the quarter where investors were prepared to sell first and ask questions later. Initial reactions to earnings releases last night underscore that notion.

Apple (NASDAQ:AAPL) posted revenue of $15.68 billion with $3.67 per share hitting the bottom line. There was a change in accounting that confused the consensus, but the Street was looking for $12.06 billion in revenue. Gross margin edged up to 40.9% from 37.9% y/y.

* iPhone: 8.7m units; +100% y/y
* iPods: 21.0m units; -8% y/y
* Mac: 3.6m units; +33% y/y (grew two times the pace of PC market)
In addition to the excitement over the tablet, the company says that 70% of the biggest 100 companies are experimenting with supporting iPhone use by employees. Initially, the stock moved lower but turned higher.

Texas Instruments (NYSE:TXN) posted earnings of $0.52 on $3.01 billion in revenue; the Street modeled for $0.49 per share on $2.98 billion in revenue. Management offered guidance for the current quarter in a range of $0.44 per share to $0.52 per share on possible revenue as high as $3.19 billion. That blew away the $0.43 per share and $2.84 billion in revenue the Street was forecasting; guess what happened to the stock.

Drug wholesaler AmerisourceBergen (NYSE:ABC) may have logged the cleanest quarter among earnings reports out thus far.  Impressive gross and operating margin expansion was driven by new business wins, generic drug launches, and controlled operating expenses. The company posted earnings per share of $0.52, $0.06 ahead of consensus estimates, but closer to our $0.48 per share expectation. Our financial estimates, which are part of our institutional research product, are included in the Thomson Reuters consensus estimates. The stock is up 100% from the March 2009 lows; we have had a buy rating since April 23, 2009. Ask your representative about this cutting edge product. 

The report from Sherwin Williams (NYSE:SHW) was disappointing in spite of the headline $0.19 per share beat to consensus.  Below consensus earnings guidance for the current quarter supports recent unflattering housing statistics, and a nod to "share gain" by management implies a more aggressive pricing posture. 

Corning (NYSE:GLW) reported fourth quarter financial results that beat the Street's estimates. Earnings per share came is at $0.44 on revenue of $1.53 billion, higher than the consensus estimate calling for earnings of $0.42 per share on revenue of $1.45 billion. The stronger than expected results were fueled by robust glass demand coming from flat panel display manufacturers and portable computer monitors. Looking forward, Corning said that it expected a mild recovery in the developed world economies and continued growth in China. The company said that the overall display glass market should be higher than previous expectations of low seasonal demand, with a sequential volume increase of 8% to 12% in the first quarter of 2010.

Travelers Insurance (NYSE:TRV) reported an extremely strong quarter, with revenues of $6.46 billion and earnings of $2.36 per share, both far ahead of the Street's estimates of $5.8 billion and $1.47 per share, respectively. Travelers came through the financial crisis better than many insurers, partly because it didn't suffer many big investment losses on mortgage-related securities. The company is now considered one of the strongest property and casualty insurers, with a sturdy balance sheet and excess reserves. The stock is indicating to open higher this morning.

Disclosure: None