Posts tagged GE
A big fucking yawn today as less happened in US macro news than in an MBA strategy class (now let Money McBags get this straight Mr. Porter, which one of the five forces involves the ability to continuously print money to get out of debt? Is that the “no threat of entry,” the “no substitute products,” or the “no common sense?” force) or in Hubert Blackman’s hotel suite (and Money McBags fully supports Mr. Blackman’s initiative).
The only mildly interesting news was that Obama has appointed GE’s Jeffrey Immelt to head up his outside panel of economic advisers and Immelt will be named the chairman of the soon to be created Council on Jobs and Competitiveness (which was also christened with the unfortunate slogan of “Lets Not Blow Jobs”). With Immelt having destroyed 31k jobs in his 10 years as GE’s CEO, it is a bit of a curious choice, like appointing Mel Gibson as the ambassador to Israel or nominating Bristol Palin to head up an abstinence campaign (and OH MONEY MCBAGS’ FUCKING GOD, this video appears to be authentic as the douche chills run up and down Money McBags taint).
Other than that, Republicans are getting their panties in a bunch about bailing out soon to be bankrupt states, like the states of hope and optimism (though if it is republican Kristi Noem whose panties are in a bunch, Money McBags would gladly help unbunch them were she to take that fucking dead animal off of her head first. Money McBags isn’t saying that’s a bad haircut, but he’s seen ass hair with more style). Also Money McBags needed to point out that a NY Times poll found that people prefer cutting government spending to paying higher taxes to lower the debt, but then they prefer higher taxes to cutting medicare or social security. No shit captain obvious, but did you really need to run a poll to show that people are fucking self-interested? What’s the poll going to be next week? Do men prefer receiving oral to not receiving it? Or perhaps, is sleeping easier than exercising? When did journalism die?
Internationally, the femen movement continues to draw in supporters (and Money McBags is such a believer in their movement that he will donate all of the proceeds from today’s column to their cause), while Germany’s IFO business confidence index rose to its highest level since reunification (no shit) as economists expect domestic demand to increase as companies further invest in equipment, facilities, and laxatives to produce more of their famed scat films.
The real news today though was earnings and the big story was GOOG who put up a monster Q and yet announced that CEO Eric Schmidt is stepping down because apparently world domination was deemed not successful enough. Replacing Schmidt will be co-founder Larry Page whose algorithm formed the basis of GOOG’s search engine and who will run the company by being less of an asshole. Basically, it sounds like the bureaucracy was winning so this is a way to try to re-energize the spirit of innovation before GOOG becomes MSFT, or Playboy. As for earnings, eps was up ~28% to $7.81 though excluding stock-options, tax benefits, and whatever other parts of GAAP accouting are deemed unnecessary, eps was $8.75. Net revenue was also up 28% to $6.37B as the company advertised the fuck out of shit even though other Google businesses are still struggling to find success like Google TV, Google Buzz, and Google Candwiches.
In other earnings news, BAC posted a loss due to a little something called declining revenue and mortgage fraud. While analysts debate what to actually put in to numbers (since as we all keep learning GAAP accounting is for pussies), we do know that BAC had to write off another $4.1B of mortgages, $2B in mortgage operations, and all credibility (just kidding, they wrote that off years ago). BAC also increased their litigation liability by $1.5B, or only $8.5B below what the liability could be, in more wishful thinking than when Money McBags thinks of this. In theory, BAC earned ~$.04 which was way below the $.14 eps and driven by revenue of ~$22.6B a full $2B below analyst guesses and $22.6B above any value they actually added. Like other manipulated institutions (GS, MS, Lexington Steele’s johnson) trading results were disappointing led by fixed income as buying the dip caused bonds to take a dip (and not this kind of dip).
And lets not forget our new government run institution GE who beats guesses in the Q and that was before their CEO accepted a job as a top adviser to the President. Now Money McBags isn’t implying this is a conflict of interest (because it’s not like a huge company like GE ever needs the government’s help), he is guaranteeing it is a conflict of interest but shit, with the government now in bed with GE, GM, and GS, it’s only a matter of time before G-Unit is performing at White House functions. Revenue at GE was up 1% which was the first positive growth in 9 quarters and earnings from continuing operations rose 31% to $.36 per share (which beat analyst guesses of $.32 per a share) thanks to GE Capital’s profit going from $100MM to $1.1B after they decided to relax the restrictions of decimal points.
Finally, AMD was down 6% despite strong results as investors fear a new CEO will fuck up AMD’s already fucked up competitive position.
In small caps news, KITD continues to sell off after a big run up and Money McBags will be buying more if this bitch falls under $13. As for next week, he is going to be keeping his eye on earnings from KEYN, SMCI, and CRUS (that is when he is not keeping his eye on Chrishell Stause). Money McBags is hella interested in old friend CRUS who we sold out of a while ago but has rallied back since they are still selling a fuckload of chips to Apple, and Apple is selling more than a fuckload of iPhones (perhaps an orgyload?). It remains a ridiculously cheap company if they can continue that relationship but remember, guidance last Q disappointed and the momentum funds ran away from the stock faster than if it were non-christian and they were the new Alabama governor. Money McBags wouldn’t buy ahead of the Q because he hasn’t done any channel checks (though he did check these channels and found them delightful) and as we all know, when small growth companies first show signs of slowing like CRUS did last Q, it is usually time to get out. So let’s pay attention to the Q, pay attention to management’s comments, and most importantly, pay attention to Sofia Vergara, because good things could still be happening at CRUS.
Have a good weekend.
Editors Note: Yes, Money McBags knows the headline pun was fuck awful. Seriously, it hurts his balls to have to use that but as there was no theme today in the market, Money McBags was fucking stumped here. It’s a shame because Money McBags actually thinks it is a decent column (the ass hair reference being one of his favorites), but fuck, he just had nothing and wanted to get the column out already. Unfortunately, not every day can be an anal beads reference.
Oh no they didn’t. The SEC apparently found their shriveled ballsac hidden in Meaghan Cheung’s now empty desk and hired Faye Reagan to skillfully tickle it back to life which has led the re-testosteroned agency to go after the biggest turd in the punchbowl, Goldman fucking Sachs. Holy shit is it on. The government hasn’t gone after one of their own like this since Bill Clinton misplaced a cigar in the Oval Office (and yes, Money McBags considers GS one of the government’s own since they are more intertwined than chocolate and vanilla in a marble cake or Wilford Brimley and Betty White sharing an electric blanket). The SEC is claiming that Goldman Sachs defrauded investors by misleading them about the subprime mortgages they were packaging and selling as part of CDOs. The government’s case centers around the fact that Goldman is full of shit, and less importantly, around the fact that Goldman let John A. Paulson (no relation to former GS CEO and US Treasury Secretary Hank Paulson, and also no relation to other famous frauds such as Bernie Madoff) pick and choose which mortgages were going in to those CDOs despite the fact that Goldman knew Paulson was betting against those securities. To be more precise, the issue centers around a subprime CDO called Abacus, whose name apparently signifies the sophisticaiton of investors who bought this fraud because they apparently were using an ancient roman abacus to calculate the likely value of the CDO after losses as we all know roman numerals and hence roman abacuses, don’t contain a zero. It is the classic case of heads I win, tales you lose, now go get me a fucking vodka tonic and hold the fucking lemon. GS led investors to believe that an independent third party picked the subprime mortgages for their CDOs which was such a boldfaced lie that Money McBags is now going to rename them Boldman Sachs, or BS for short. The suit by the SEC also names Boldman trader “Fabulous” Fabrice Tourre with helping perpetuate this fraud which now vaults him past Milli Vanilli’s Fabrice Morvan as the most famous fraudster named Fabrice. One only wonders if Mr. Touree will also blame it on the rain.
In their defense, Goldman referred to the SEC accusations as “completely unfounded in law and fact” unless you are “talking about securities law and irrefutable details.” The firm did say they will “vigorously contest” the charges “and defend the firm and its reputation.” When reporters reminded them that after the financial crisis and their ties to Washington, their reputation might have already been blown, the Goldman lawyers simply responded with “That’s what she said.”
Taking Boldman out of the equation today, which is a bit like taking Modigliani out of the Modigliani-Miller thereom, jelly out of a PB&J, or facials out of porn, US macro data was positive. Housing starts beat forecasts and rose to their highest level since November of 2008 when everyone was putting up new cardboard boxes. New home starts rose 1.6% to a seasonally adjusted annual rate of 626,000 units and economists were guessing that they would come in at only 610k. Even more interesting is that February’s housing starts were revised up from a 5.9% drop to a 1.1% increase which is a bigger revision than Texas school text books are going through in the school board’s attempt to reverse natural selection.
In earnings news, Bank of America became profitable once again thanks to their trading portfolio. BAC earned $.28 a share which easily beat analyst guesses of $.10 but like JPM, earnings were driven by investment banking and trading profits as profit from the investment bank was $3.2B while overall net income was also $3.2B. So if one does the math, the consumer is still a little bit dicey while paper gains are leading to positive returns. It seems like we have seen this somewhere else before, but Money McBags can’t exactly remember where. Oh yeah, the last 15 fucking years of the financial sector. But don’t worry, nothing to see here, these guys have it all under control this time around. Afterall, 30 day delinquent credit cards fell from 7.23% to 7.07% and the bank wrote off only 12.5% of their card portfolio as uncollectible, so phew. Money McBags was a bit worried that they wouldn’t be able to create enough phony revenue through trading gains to be positive, but as long as credit card delinquencies are only 7.07%, then everything is hunky fucking dory.
In other stock news, GE beat forecasts by besting analyst guesses of $.16 per share and earning $.21. CEO Jeffrey Immelt said “We saw encouraging economic signs, including increases in airline passenger miles and freight loadings, declines in receivables delinquencies, and growth in local advertising markets.” He then said, and “even if we hadn’t seen markets pick up, we spent an inordinate amount of time relearning how Jack Welch “managed” earnings for so long and will be implementing that system once again.” That said, it wasn’t all lobster tails and BJs in Jeffrey Immelt’s exectuive suite as GE Capital’s earning dropped 41% as they couldn’t manipulate paper trades to hide their consumer lending portfolio like the recently profitable banks.
Finally, GOOG reported and is down 6% despite growing earnings by 38% with a 23% increse in revenues. Even though they beat analyst estimates, GOOG apparently missed the whisper number for earnings of $7 and to be honest, the only whisper Money McBags wants to hear is from Lucy Pinder and includes the words “no” and “gag reflex.” GOOG’s call was also notable because CEO Eric Schmidt did not take part in it which caused investors to worry that he may be leaving the company because apparently dominating the world has become less appealing. Money McBags is looking at this as a buy opportunity and if Goog drops into the $530s, he will be adding to his position.
In small cap news, everything is down except CRTX has strangely continued to rally. Money McBags mentioned this the other day and the stock has maintained it’s perky-ness. If you can believe management, the stock is probably 30%+ too cheap, but they have exectued poorly and had to buy growth at high prices in order to stave off the decline of their main drugs. The company reamins cheap if you believe them, but Money McBags is gong to keep sitting this one out as it feels more like a lottery ticket than an investment. That said, if you have some money about which you don’t care and don’t live close enough to a Rick’s Cabaret, doing some work on CRTX and dipping a toe in might not be a horrible idea. They are trading at around 1.5x revenue and are just starting to get the sales team ramped up on the acquired drugs so there could be some decent growth in their portfolio.
Until next week, enjoy your days off.
The market is largely in neutral today as investors await the Fed’s decision on interest rates this afternoon. With the lilkelihood of the Fed keeping rates at their current low levels somewhere between the likelihood of Michael Lewis droning on about his bond trading days in his new book or the likelihood of getting herpes from a night of snorkeling Paris Hilton (and that of course is a trick analogy, since the odds of both of those are 100%), investors are anxiously waiting to see if the language of the Fed will change (and as always, Money McBags votes for a change to Esperanto or perhaps even pig latin, you hear that Enbay Ernankebay?). It is likely that the Fed will tweak the language just enough to hint that their accomodative stance (though not as wide or accomodative as a Larry Craig stance) will only last for so long, but there is unlikely to be enough detail for anyone to feel confident in a time frame. If by now you haven’t figured out that rates are eventually going to go up, Money McBags can’t do anything for you other than to help you strap your helmet back on and buy one of your handmade potholders. In US macro news released today, US housing starts were down in February by 5.9% to 575k, but that was slightly better than the 570k economists were guessing. Multi-family dwelling construction was down 30% which is probably bad news for Mormons and John Edwards. The decline in housing starts though is largely being blamed on snow storms in the South and Northeast where construction was down 15.5% and 9.6% respectively, though construction of igloos was up 58% in both geographies. Surprisingly, the West and Midwest both showed greater than 7.5% increases in new home starts, or on an absolute level, 2 houses.
In international news, the 16 EU countries (there used to be 17 but they kicked out Grumpy) agreed to back Greece with loans if needed. While the plan was almost as vague as a Nostradamus prophecy, the term “sexual relations” to Bill Clinton, or the US’s bank bailout plan, European markets greeted it with open arms and one of those cheek to cheek kissing things they so much love to do. The issue could come to a head in April or May when Greece faces more than 20B euros in debt redemptions which is one hell of a night out in Athens. For 20B Euros there should have a been a huge Greek fiesta with Daniela Eleftheraki serving up plenty of pancakes and ouzo. Bouying this positive news in Europe was German investor sentiment which fell less than expected from “heilige Scheisse” to just a case of schadenfreude. Apparently the Germans are slightly more confident that their weiners will produce adequate amounts of schnitzel.
In stock news, GOOG is once again rumored to be pulling out of China which would put them in the same catergory as Sean Waltman. Money McBags will likely buy any dip caused by these rumors as China is a small part of Goog’s current earnings and even if they were to exit, it would likely only be temporary (forest through the trees my friends, forest through the trees). GE is up on a JP Morgan analyst upgrade as well as comments from their CFO. The analyst thinks credit losses have topped out while the CFO said GE will resume growing their dividend in 2011 (if we still have a global financial market) and will use excess cash for buybacks and acquistions (as opposed to hookers and blow I guess). As long as they aren’t acquiring a crappy network TV station or AIDS, Money McBags is all for them trying to grow the business again.
In small cap news KITD is beginning to run (and remember Money McBags told you all to buy and bought in himself in the low 10s the other week) as they presented at a Roth small cap conference yesterday and also announced a new acquisition and that they are buying back 4MM of their outstanding in-the-money warrants. They are buying a firm called Multicast Media Technologies for $18MM of cash and stock ($4.9MM cash, 1.3MM shares) and post deal will have $15MM in cash and 17.7MM shares outstanding. Now Multicast said they earn around $12MM a year in revenues from annualized recurring licensing fees for its IP video management software and KITD expects the acquisition to be immediately accretive. Now remember, KITD guided to at least 60% revenue growth to more than $75MM and EBITDA margin exceeding 17.5%. They’re now adding $12MM to that revenue and should be able to hit those EBITDA margins because they take out cost quickly in this business as all they really need to do is transfer the data to their platform and then fire everyone at Multicast (Sorry guys, but hey, you’ll have company). But let’s not give KITD the benefit of the doubt and we’ll say they only get 10% EBITDA margins on this acquisition in the first year. So now their EBITDA will go up by $1.2MM to $14.2MM. They are currently trading at $125MM market cap with $15MM cash, so on an EV/EBITDA basis that is around 8x in a worst case scenario. If they can get to the 17.5%+ margin on the acquisition, EBITDA will be at least $15MM and would put them at a 7x EV/EBITDA multiple. The company is trading at 1.5x revenues (and analysts and the company maintain that their competitor Brightcove was valued at 12x revenue, though it’s unclear where that rumor started so it should be discounted by as much as one discounts Donald Rumsfeld’s war strategies or Lehman Brother’s book keeping). The only thing holding this company back is that it just has some fundamentally weird things about it that serve as red flags to old and stuffy institutional investors. They have a promotional CEO (not to say he is bad, but he is clearly only in this business for the short run so the higher he can sell it for and the sooner, the better), they were located in Dubai and now have moved to Prague, they rely on acquisitions, and they are still almost as small as He Pingping (and as an aside, the whole editorial staff here at When Genius Prevailed poured out a thimble this morning for the passing of the great Mr. Pingping who died at the age of 21, thus he both figuratively and literally led a short life. Even though he was only 29 inches tall, he lived life to the fullest. So I ask you all to take a short moment of silence now for Mr. Pingping). That said, the numbers don’t lie (well unless you’re Enron, AIG, Refco, etc.) and this company is headed in the right direction. They could easily get their EBITDA in 2010 to $20MM (remember, their guidance says revenue of at least $75MM and EBITA margins of at least 17.5%, so if we call revenue $100MM since its already at $87 after the acquisition and call margins 20%, because it’s a nice round number, we’re at $20MM of EBITDA) and if they just trade at 8x that, there is almost 50% upside. Plus they think the worldwide online video market is $10B and is only 4% penetrated by the cheaper than digitial video IP solution which they provide. Money McBags may buy some more today or tomorrow as the story remains intriguing and the new acquisition will help them beat their already lowballed numbers (though probably not as low as Abe Vigoda’s balls).
The market continues to sell off as fears grow that Obama’s financial service regulation will limit the profitability of the banks who nearly destroyed the global financial system. How fucking dare he try to regulate these fine bastions of our economy who did nothing to deserve this other than invent complex derivatives based on loans made using lax lending standards to people who couldn’t afford to purchase what they were getting loans for and then trade these derivatives using their customers’ deposits which in turn created a minor global economic recession (and by minor, I mean the exact opposite of that) when these customers could not make payments. Seriously, so they fucked up a little, big freaking deal. What’s next, is the government going to ban foods that kill us or make sure blindfolds are always available in case of a Lady Gaga sighting? Anyway I’ll get off my high horse for now (mainly because have any of you ever tried to type on a high horse? 1. It is extremely difficult to find a place for your laptop and 2. a high horse isn’t exactly steady, especially because of the resulting munchies from being so high) but fear is that while regulations may limit the banks’ ability to give the economy monetary AIDS, they will severely limit profitability and this has caused the market and bank executives to get their panties in a bunch today (which is why Money McBags is always a strong advocate of thongs (barely safe for work link)). Banks now must know how Ron Jeremy felt in the 1980s when the AIDS epidemic struck and he was forced to wear condoms, sure it still felt good (banks can still earn money), and sure he was no longer at risk of dying (the government bailed the banks out), but can’t a dude just enjoy some good old fashion bareback (prop trading)?
In macro news, 43 states reported an increase in the unemployment rate in December, reversing the November trend. All 50 states had higher unemployment rates than last year led by Michigan at 14.6%. Michigan was closely followed by the state of Nevada, the state of Rhode Island, and the state of utter fucking despair. As Money McBags stated a few days ago, the S&P P/E ratio is above it’s historic mean so the market has recovered to the point where we are going to have to see some real economic and earnings progress.
And speaking of earnings progress, GOOG absolutely crushed their quarter today but they are trading down despite beating analyst estimates because they were short of whatever their whisper number was (and the only number Money McBags ever likes having whispered to him is 69). Google’s sales were up 17% to $6.7B and they quintupled their net income which tired net income out so much, it was unavailable for interviews. CEO Eric Schmidt was also giddy calling this an “extraordinary end to a roller coaster year,” and maintained “We are optimistic about the future as a result.” He then went on to say “And China, if you fuck with us again, I know where you live, no really I do, I put China into Google maps and there you were, but the point is, I will track you down should you hack us again and you don’t want to see me when I get mad. I will take away your surfing privileges and that means no more spankwire.com.” (that last quote may have been off the record).
In other earnings news today, people continue to eat the fuck out of some McDonald’s hamburgers as they grew US same stores sales by 1% after 2 months of declines and saw solid international growth with 5.1% growth in Europe and 1% growth in Asia/Pacific/Middle East/Africa or what is known as “the non-white areas.” GE also reported a $.02 earnings beat though it was considered somewhat of a low quality beat as it was driven by tax benefits and not buying new office furniture but simply reupholstering it with pleather. The stock is moving though because big-ticket capital goods orders were up, GE Capital staved off implosion for at least another quarter, and their sale of a majority stake of NBC has investors yawning over NBC’s 30% drop in profitability due to something called producing shitty shows (and NBC, if you’re reading this, Money McBags is available to deliver his Midday Report as part of your National News any day except for Friday, because Fridays are his date nights and he needs his personal time to prepare). Finally AXP and COF are both trading down big today after strong quarters. COF announced that they expect charge-offs to increase (something about people not having jobs) so that explains their drop but AXP did nothing wrong other than be in the financial services industry and already be relatively fairly priced. If AXP continues to sell off, it may bear digging deeper.
In small cap news today HAFC is finally dropping after it’s huge run up that Money McBags has been mentioning here over the past several days. This company is more speculative than the beef and broccoli at a Panda Express located next to a pet store, but someone seems to want to take that risk. Also, KITD pulled their European share offering after raising $31MM in the US markets saying they prefer to find less dilutive ways to eliminate their warrants. Money McBags thinks this is a positive decision for shareholders and KITD remains his favorite potential buy (other than any movie that has a Hayley Atwell nude scene). One small cap company that bears following here is a stock that Money McBags owns and that is MLNK. MLNK is the former CMGI (go ahead and chuckle now, get it out if the way, it will be better for all of us) but now focuses on a core business which is basically a supply chain and rebate/repair management system mostly for computer hardware manufacturers with 70% of their business coming from Fortune 500 companies. They just put up a Q of $18MM of non-gaap operating earnings, have $145MM cash after their TFL acquisition in December and no debt and a market cap of $452MM. So that puts them at around a 4.5x run rate EV/EBITDA if one considers the $18MM per Q a good run rate, but it might not be, it might actually be too low. The company expects ths upcoming Q to be inline with their last one and then they expect to see growth in the second half of the year and they are still cutting costs which contributed to a 500bp margin improvement in the last q. It’s not a dynamic business and probably in a market growing at high single digits plus they rely on a few big customers (HP is 25% or so of revenue) and are highly levered to consumer technology purchases, but this company is cheaper than an AIDS ridden bangkok hooker who hasn’t eaten for a week. Their revenue is starting to come back, they are still streamlining the business and they are making acquisitions, but even should EBITDA somehow drop to $10MM per q, they would still be trading at less than 8x that. Money McBags is a shareholder, and will likely buy more in this downturn, so you should all take a look.
Enjoy your weekend, Money McBags will be back on Monday.