Posts tagged IBM
1/19/10 Midnight Report: Market Goes Down on Earnings, Did it Swallow Idea that the Economy is Improving?
The market sold off today as earnings were more mixed than Tiger Woods’ family tree, housing data continued to remind people that double dipping can cause more than just herpes, and investors were all liquidating their portfolios to get cash to buy those 50% off Amazon coupons at Living Social in order to get in on all of the good vibrations and buy two rabbits for the price of one.
With the market due for a correction more than Sarah Palin’s grammar or Janet Jackson’s boobs, it is not surprising that there was a bit of a sell off as the S&P has become more top heavy than the delightful and appropriately named (and NSFW) Lacey Banghard (and young Lacey having a last name like Banghard would only be eclipsed by either Paul Krugman or Monica Lewinsky changing their last names to Blowhard). So the question now is will investors come back tomorrow or is this the start of the end of the euphoria over QE2, billion dollar government incentive plans, and Justin and Jessica (and Timberlake, Money McBags is watching you so stay away from his binky)? Actually, that was a trick question since with the Fed’s new third mandate to lift stock prices (after their first two man dates with Ricky Martin and Neal Patrick Harris went terribly wrong after they refused to pick up the dropped soap), you all should just buy the fucking dip.
In macro news, housing starts dropped to an annual rate of 529k, which was their lowest rate in a year and down from November’s 553k, analyst guesses of 550k, and a healthy fucking market of ~1MM. With a glut of shadow inventory and foreclosured homes still available, it makes less sense for homebuilders to ramp up production than it makes sense for alliterative North Dakota Senator Kent Conrad to quit to better focus on reducing the debt (hey Kent, um far be it for Money McBags to tell you how to not do your job, but you do know that, 1. they’ll pay someone else your salary so quitting as a way to cut government dead weight won’t actually reduce the debt and 2. you realize if you are not a Senator, NO ONE WILL GIVE A FUCK ABOUT YOUR DEBT CUTTING IDEAS. Seriously Kent, the whole point of being a fucking senator is to have the power to fix shit that pisses you off (for instance if Money McBags were a senator, first he would make Gracie Glam‘s birthday a national holiday, second, he would steal the shit out of soaps from the Lincoln bedroom, and finally, he would try to figure out how to balance the budget while getting everyone health care because that is the shit that fucking matters in this country), so quitting to concentrate on the shit you should be concentrating on as a Senator makes as much sense as people who still use MySpace or anyone who wants to live in Camden.).
Anyway, the bright side of housing starts being down is that the cardboard box industry continues to rise with bigger models released daily for those who want room for a kitchen to warm up their rat chewed and half-eaten bagels. The only other data was that applications for home mortgages increased last week by 5%, however it was driven by a 7.7% increase in refi applications thanks to record low rates and people needing money to pay off their credit card bills.
But the real story was earnings as GS, AAPL, IBM, WFC, and Ashley Dupre all showed their bottom lines. Leading the way was AAPL who shit all over earnings as if earnings were a coprophiliac and AAPL had just eaten a Denny’s Grand Slam breakfast with an extra helping of e coli. The company reported eps of $6.43 which was up from $3.67 a share last year and assraped analyst guesses of $5.40 per share in a way that not only made Kobe Bryant jealous, but will leave guesses walking bowl-legged for the remainder of the year. Sales were up 71% to $26.74B and ahead of analyst guesses of $24.43B as AAPL simply sold the fuck out of some shit. They sold 7.3MM iPads, 19.5MM iPods, and 16.2MM iPhones, as their mobile products continue to sell faster than hot cakes (though to be fair, hot cakes don’t stream porn). With AAPL’s market cap now larger than the entire GDP of Greece or Portugal, investors can take solace in the fact that any slow down in sales will surely be followed by an EU bailout, so buy away.
In other tech news, IBM beat the Street as they earned $4.18 per share vs. guesses of $4.08 per share thanks to an increase in services contracts which gave investors hope that global businesses will continue to up their technology spend to make sure every worker can view spankwire in HD in the privacy of their own cubicles. The company also gave guidance for 2011 eps of “at least $12.56″ per share (up 9% from 2010) and reiterated their target of ~$20 eps by 2015 (of course part of that target involves the upcoming hyperinflation which will make the dollar more worthless than a blackberry in Indonesia (and note to self: cancel trip to Indonesia)).
The other big news of the day was that Goldman announced their Q and quarterly profits droped 53% as Neel Kashkari was not around to backdoor them some of that free government cheese. While their $3.76 eps slightly beat guesses, the story was that their revenue was weaker than the “tabasco sauce” excuse. Net revenue fell 10%, with FICC revenue down 48% (which was FICCing bad, though not worse than that pun) and investment revenue down 10% as GS may simply have run out of markets to manipulate. Earnings were saved by expense management as GS cut their worker comp pool to only $430k per employee which is a mere 10x the median household income in the US but certainly well deserved as it is horribly difficult for traders to push the right buttons on their keyboards (especially as the US government is there to back them should they develop any fat fingers). The comp number was down 13% which is bad not just for GS employees, but also for poor people as less wealth will trickle down to them since we all know that poor people are directly affected by rich people shopping at Tiffany’s, the Mercedes dealer, and Kristin Davis’ house.
GS wasn’t the only financial to report today as WFC put up an inline Q, the trust banks BK, NTRS, and STT (though why anyone would ever trust a bank is beyond MMB) put up mixed to bleh Qs, and AXP pre-announced a shitty Q which will be below analyst guesses. AXP did promise to fix things by laying off 550 employees in a giant circular clusterfuck (AXP needs consumer spend to make money, consumers need jobs to spend money, AXP cuts more jobs. Problem solved, only the opposite of solving the problem, and yes Money McBags knows 550 jobs don’t make a difference for AXP’s consumer spend, but there could be a ripple effect, as opposed to a nipple effect).
Finally, the FCC approved Comcast’s purchase of NBC Universal, so now a shitty cable company can own shitty content (seriously, the last time Money McBags watched anything on NBC, Jerry Seinfeld was considered cutting edge and Saturday Night Live was still a comedy show). The deal was approved with conditions that require the new company to offer its content to online video distributors at the same terms that would be available to competitors, to ensure it doesn’t use its Hulu ownership to wield control over the digital content space, and to get rid of that awful Jay Leno.
In small caps, momentum stock COOL cooled the fuck off after they once again announced a shitty Q but also gave below street guidance for $.06 to $.10 next year. Money McBags mentioned them as a short term momentum play last week as sales of their Zumba fitness for next Q were preannounced as titriffic. As Money McBags warned, COOL has always been a terrible company so buying them was just a trade. They may have another bounce tomorrow so get the fuck out if you haven’t already.
Also in small caps, as Money McBags mentioned yesterday DTLK preannounced a huge quarter and shot up 30%+ and remember Money McBags pointed them out on 10/25 as an interesting little company that was breaking out more than Cameron Diaz’s face. Well this Q they are going to keep up their huge growth by bringing in ~$90MM of revenue which is up from last Q’s guidance of ~$77MM and up 70% from Q4 2009 and we all know 70% growth in little companies that aren’t trading at ridiculous multiples is spanktastic.
Gross margins guidance was for 22% as they are going after bigger deals and trying to steal market share so they must be discounting as much as a used Yugo dealership, but a 200bp drop on 70% growth with solid operating cost management is good enough for Money McBags. So if we take the 22% gross margin and once again gross up their costs by 5% and then apply a 40% tax rate, we are at $.18 GAAP eps for Q4 and guidance is for $.21 to $.24 non-GAAP eps, so the operating cost assumptions seem reasonable. This puts DTLK at a $.72 GAAP run rate or a $.84 non-GAAP run rate (assuming no growth, which may be a conservative assumption, but you all know Money McBags is so conservative that he doesn’t actually kiss on the first date, though mainly because he hates the taste of chloroform) and the company is only trading at 8x to 9x that depending on which number you want to use, and remember, they have ~1/4 of their market cap in cash, so it is still a cheap fucking stock.
In their release, they said the key drivers of growth were closing several multi-million dollar sales at Fortune 100 companies during the quarter and success from their previous investments to expand market share around data center solutions. That sounds perfectly reasonable, but it’s not like the company has some huge competitive advantage. They are basically selling the same shit as everyone else so either they discounted the fuck out of it (which we saw in gross margins) or their sales force somehow became more efficient. That said, their backlog was only $47MM and while that is a record for them, it is only ~1/2 of this Q’s sales, so they are going to need to close a shitload more deals to keep this kind of revenue run rate. And that is why this company will never be a core holding of Money McBags as they simply rely on big deals every Q and eventually those dry up or one gets pushed in to the next Q or some dumb shit like that because that is how non-subscription based sales work.
So look, the company is cheaper than George Michael’s balls and traded up again today in a terrible tape after a 30% up day yesterday. Good things are happening here and there is still reasonable downside protection so this continues to be a good play. Hopefully we get more detail on the drivers of growth on their call next month (and this is a driver of Money McBags’ growth) but the technicals are good and the numbers are good, so enjoy the ride.
Timberrrrr. The market sold off today as a result of tech companies posting earnings that failed to titillate the street, China raising their interest rates to try to stave off an asset bubble that soon may be only a prick away from popping, and the rent still being too damn high. Up until now, the market had been able to continue its rally through the beginning of earnings season as QE2 was there to pump it up like the theme music from Rocky III or a good old Doc Johnson, but with QE2 now fully on the table and the debate moving from if, to when, to how the fuck much, micro news is beginning to be much more important again.
Speaking of QE2, Atlanta Fed Bank President Dennis Lockhart seemingly reinvigorated the gold club by talking about the further devaluation of the dollar that will happen with QE2. Situated in the Fed’s underground lair in Nevada, he informed CNBC that QE2 needs to be big enough to make a difference, and by big enough, he means $100B (no really he said $100B, check the video). So once and for all Lockhart proved that size matters to the Fed and it’s not just the promotion of the notion(al). Lockhart also told viewers that QE2 will help lower interest rates (because real interest rates already below zero for the 7 year and on in just aren’t low enough) and that in turn will help consumer spending and business investment because businesses really need more cash despite the fact that they currently have hoards of it on their balance sheets. This is a more assbackwards attempt to increase consumer spend than hiring Ice-T’s wife and charging consumers for cheek shots.
As far as Money McBags is concerned, the problem isn’t that companies don’t have access to cash to hire, it’s that there is too much fucking uncertainty for them to do anything as nearly 20% of the population remains long-term or pre-long-term unemployed. If anything, government policies should be aimed at GETTING PEOPLE JOBS so they will have money once again to spend on food, shelter, and those delicious chocolate Necco wafers. That in turn will create real demand, which will allow businesses to actually use their cash to invest in their business which equals more hiring and maybe, just maybe, an economy at least a nut hair healthier than Michael Douglas’ throat. So any government intervention (and perhaps Money McBags can get A&E to tape the intervention before the government runs out of the room in denial) should be focused on building bridges, opening tunnels, and erecting shit that will be useful in order to get people working, get money in to their pockets, and test out that the Keynesian multiplier isn’t just another irrelevant concept that doesn’t work in the real world like efficient markets, Mickey Rourke, and monogamy. Either that, or the government should leave the economy the fuck alone.
In other macro news, new home construction was up .3% in September driven by a 4.4% rise in single family homes thanks to the Commerce Department adding card board boxes and new cars to their construction models. While construction was up slightly, the forward looking metric of permits issued (and it is forward looking because it is predictive and not because Nicole Trunfio is standing in front of it) dropped by 5.6% due to a 20% drop in permits for apartments and condos as that market has more capacity than Rungrado May Day Stadium or Kim Kardashian‘s vagina.
Internationally, China raised their rates for the first time since 2007 to try to lift real rates above zero, cool down asset prices, and perhaps avoid a currency war that has put the US dollar in a figurative chinese fingercuff between the Yuan and the Yen. The 25bp rise in rates could signal the start of a new monetary policy to curb China’s asset inflation and that policy will have to be tighter than Kenny Roger‘s face to be successful.
But the real story today was earnings as AAPL and IBM both mildly disappointed the Street and GS, BAC, and COF all either met, beat, or missed guesses depending on what you want to include as one-timers, earnings manipulation, and straight up fraud.
Quick aside: Back in the day, Money McBags covered the financial services sector when he worked for the man and he quickly realized that there was absolutely no way to have any confidence in any of the numbers in 10Qs or 10Ks because an extra provision here or a different nomenclature there, and earnings would be whatever the companies wanted. Given that, Money McBags came up with a simple regression model to pick financial stocks that take balance sheet risk with the independent variables being the number of Wells notices a management team has received, the length of the CEO’s admin assistant’s skirt, the number of times the CFO says the word “risk” in a company one one one, and the color of their helmets. That model reduced his work by 99%, had an r-squared of .95, and actually gave him a track record better than the best sell side analyst who was right only 38% of the time.
But back to the key point which is that AAPL drove the market down despite killing it with revenue growth up over 100% (~$20B vs. ~$10B last year) and iPhone sales up 92%, as they saw margins decline, sales of iPods drop 11% (though buying an iPod when there are iPhones and iPads is a bit like buying an abacus instead of a calculator or DVDs when there is the NSFW Spankwire), and sales of iPads come in below guesses of 5MM at only ~4.19MM. AAPL had earnings of $4.64 per share vs. guesses of $4.08 per share but margins and iPad expectations were enough to send it, and the market down on the day.
The other big tech Q was from IBM where a 7% drop in service contracts served shareholders up with a shit sandwich, despite the company beating analyst guesses on both the top and bottom lines as well as raising full year guidance to above those same analysts’ guesses. Hmmmmm. The company is now trading at ~12.5 this year’s guidance but has been on a hockey stick type run so Money McBags guesses a sell off was due on anything that was just a Khagendra Thapa Magar stiffy below absolutely positive, so it is what it is and now the sell side has a reason to print reports to get more trades. Money McBags loves that S&P Equity Research downgraded IBM to “buy” from “strong buy” because the difference between those is completely non-sensical. Either you buy something, or you don’t. Fucktards.
Also, as mentioned earlier GS announced their Q and beat analyst guesses (wink, wink) on stronger than guessed trading results (unless you were guessing at them last year when they were ~60% higher than they were in this Q). As a result of their spanktastic relative Q (but their shitastic absolute Q), employees on average are now only going to earn ~$370k for the year which means instead of being the super rich assholes in the room, they are now going to be the whiny super rich assholes in the room.
Finally, BAC beat guesses of $.16 per share by earning $.27 per share, that is if one ignores their $10B goodwill impairment charge, and really what’s another $10B among shareholders, especially as it is non-cash? And KO put up a nice quarter and beat guesses all around with a surprising 2% jump in North American sales with continued strong international growth. Money McBags has said it here before, but he owns KO and this is the kind of company you can almost feel ok gambling on because when everything goes down the drain like Money McBags’ hopes and dreams, people are still going to drink the fuck out of some Coke, On top of that, strong aspirational brands that sell a cheap product should continue to do well in emerging markets because those populations strive to adopt American culture and dream of the day when they too can sit on their fat asses all day and spend money they don’t have on things they don’t need while blaming the government for their problems.
In small cap news, for some reason Money McBags dropped ~2k words on JOEZ last night which not only makes him the Charles Dickens of jeggings, but was also the biggest waste of his time since he tried to fucking find barley in a grocery store (and here’s a hint, just ask). One stock to keep an eye on (and just one eye, because you’ll need the other one to watch this) is SPU because it is doing what Money McBags believes technicians would call “going up.”
Look, Money McBags dove in to this company briefly a few months ago as it tripped his screens as being cheap, growing strongly, and having a good balance sheet and on paper it looked almost as good as Kelly Brook. That said, he never wrote it up on the award winning When Genius Prevailed because it had one huge problem, and that was that their business involves selling fruit juice and concentrate in China which is further outside of Money McBags circle of confidence than nuclear physics (because he does understand some fission and fusion and heavy elements). So this is one of those times where Money McBags is just going to tip you off about a stock that looked hella interesting, seems fundamentally sound, and is moving, but that he just can’t confirm anything about, so do with it as you please.
Money McBags will hopefully have more detailed stock analysis tomorrow as on his to do list is WGO’s Q, analysis of OPEN (which if the market turns should drop faster than Andrew Johnson’s support in the Republican party after 1865), and Leticia Cline.
The market ran again today as Fed Ex boosted guidance due to international companies wanting shit faster and macro data headlines were manipulatedly good (like Cameron Diaz‘ face on a magazine cover). The big macro news was that new home sales jumped 24% which is the biggest jump since May of 1980 and totally sounds better than saying new home sales were the second lowest since 1963 (and you remember 1963, the year the Beatles released their first album, JFK was assassinated, Raquel Welch was breaking in to Hollywood, and full muff was the norm). Of course 1963 is also when this data started being recorded, so for all we know it could also be the second lowest month since 1863, but whatever. So before we start handing out lobster tails and buy one get one free blumpkin passes to Amber Lancaster‘s powder room (and Money McBags will take two of those please), perhaps we shoud look at the shittiness (which may be too technical of a term for most) of the absolute number and ignore the relative spin.
To start with, last month’s new home sales were revised down from 300k to 267k which is only a minor 11 fucking percent downward revision (and minor in the way that reading a Thomas Pynchon book gives someone a minor headache or bumping in to Audrina Patridge would give someone a minor stiffy). Anyway, last month’s number of 300k, which is now 267k, means that new home sales fell by 37%, 40%, or 47% last month depending on which of the manipulated numbers from two months ago you want to use as the base line (the 504k initially reported, the 446k downwardly revised number from last month, or the even more downwardly reviesed 422k reported this month, and yes, two fucking months after the data, the numbers are still being downwardly revised because apparently they have yet to hit zero).
The point is, the awfulness of last month’s number keeps getting worse but investors are overlooking that because the headline growth for this month is 24% and 24% growth is a big fucking number (even though in absolute terms it is still the second worst number ever and will more than likely be revised down next month to 305k). So while economists and the Commerce Department can point to growth rates as a sign of accomplishment, it’s as disingenuous as landing on an aircraft carrier and claiming Mission Accomplished in Iraq or telling Rosie O’Donnell she doesn’t look fat in those jeans. In short, last month’s historically bad number gets revised down more and thus this month’s second worst historically bad number gets to look slightly better because of the BS growth rate off of the downward revision. Just imagine how great this month’s number would have looked if it went from one new home sold to two.
Anyway, the 330k number being reported is in fact ~24% higher then the 267k number (but only 10% higher than the 300k number that was actually reported last month) and it beat analyst guesses by 10k and since analysts have proven to be so right over the last 5 years to 3,000 years, a beat is such good fucking news that the commerce department can spend the day admiring the new portrait of Carlos Gutierez instead of trying to fix shit. But lets not let details get in the way of a good rally because that would be like letting a little hepatitis get in the way of boning Pam Anderson.
There wasn’t much international news today except that Europe is starting an anti-trust case against IBM, though if Money McBags were IBM, he wouldn’t trust the europeans in their black jeans and with their love of european fudge pops. The EU is claiming that IBM may have abused their dominant position in the mainframe computer market like the dominant Ariel X abuses her defeated foes in the NSFW Ultimate Surrender Summer Vengeance tournament. This anti-trust case stems out of complaints from a company called T3 communications which is a firm invested in by MSFT and other than Tiger Woods’ ex-wife, MSFT is the foremost authority on anti-trust.
The big stock news of the day is that Fed Ex raised their guidance for fiscal 2011 from $4.40 to $5.00 per share to $4.60 to $5.20 per share and this comes after UPS showed everyone what Brown can do for them by squeezing out a solid quarter last week. UPS’ revised guidance was driven by increased demand for international priority packages where according to a Wellls Fargo analyst: “Growth in Asia has been red hot, fueled by the tech sector and iPhones and handheld devices and discounts on Hello Kitty’s line of dildos.” Fed Ex is feeling good enough about their operational efficiences and global volume growth that they have reinstituted their 401k matching program so now employees can lose the company’s money in addition to their own.
In other stock news, BP is getting a new CEO and hopefully this one won’t won’t be a dud even with a name like Robert Dudley (and that was such a bad pun that Jay Leno should feel free to steal it). Dudley will be the first Amercian born CEO of BP as the company’s board hopes to improve on the langauge barrier between themselves and the US government (as apparently “your shit is not safe” didn’t translate correctly from US regulators to BPs former CEO). Otherwise, it was a light earnings day on the market but Roper industries put up a nice Q despite a rumored take over from Furley Industriies which turned out just to be a wrongly overheard conversation in the company kitchen.
In small cap stocks, IMAX had a strong day on Inception’s continued box office outperformance and the stock has bounced back nicely since Money McBags talked about it as something to avoid the other week. Money McBags favorites CRUS and KITD also had solid days, as did just about everything else in the small cap space, except for IBKR which deserves to go down for how they made Money McBags feel after their earnings announcement last week which he was more highly anticipating than the inevitable Christina Hendricks playboy spread (and yes, it will happen). Money McBags is short on time today so he won’t be getting to any detailed small stock analysis but it should be a busy week with QCOR, IMAX, CTGX, and NTRI reporting so he promises he will have more compny breakdowns for you as necessary. If you are craving for more dick jokes though, Money McBags was busy in the comments section from Friday’s column, so enjoy.
7/20/10 Midevening Report: Republicans fail to stop unemployment benefits from being extended, next up, trying to outlaw wheelchairs for quadriplegics
The market was moderately down today like a dysthymic after downing a plate of sugar coated prozac and a 2 liter of Jolt Cola before it ran up in the late afternoon due to the Senate extending unemployment benefits. Earnings were the biggest disappointment early on with IBM, TXN, and GS all putting up subpar topline numbers (see Money McBags’ prescient headline from yesterday) as if they were a Jerry Bruckheimer film or Greece. That said, macro news also disappointed which is about as surprising as learning that BP may have more problems or Hilary Swank is really a man.
The main US macro news out today was that home construction declined because, well, because people don’t even have enough money to build confidence, much less houses. Construction of new homes fell 5% in June led by a 20% drop in the construction of condominiums and apartments but helped out by the increase in the construction of shanty towns and modern day Hoovervilles (and hopefully soon, Hootervilles, which will be made out of plenty of wood and pure awesomeness). On the positive side, there was a 2.1% increase in the demand for new building permits though the Commerce Department listed it as “wishful thinking,” and on the slightly more positive side Russian spy Anna Chapman may pose for Playboy.
The big news of the day was that the senate is set to extend jobless aid after some guy named Carte Goodwin was appointed to Robert Byrd’s old Senate seat, making it in fact a “good win” for struggling people everywhere (and yes, that was an awful pun, nowhere near as good as someone named Mr. Goodjoint looking like this). Yeah, Money McBags knows spending more money is not the best longterm strategy and that if the government keeps perpetuating this global ponzi scheme, we are all going to be more fucked than Lisa Ann on the set of Who’s Nailin’ Paylin, but having 4MM people surviving on month old pop tarts and feces is certainly not the answer. There are easily other areas where one could cut spending to make up for supporting people who need extended unemployment benefits (like maybe buying 2 or 3 fewer stealth bombers, using credit cards instead of cash in Iraq, and taking memberships to Tranny porn sites out of the SEC’s benefits package).
That said, never before has there been a need to cut costs to allow for extended unemployment and never before has the government tried to do that in the middle of a recession, but apparently Republicans hate winning elections. Look, all of this money gets put right back in to the economy and is a mini stimulus which might buy the US another month or six to give it a chance to hit a patch of dumb luck and thus avoid being knocked in to bolivion. Either way, Republicans blocking this package is among the stupidest political strategy blunders in American history, right up there with Nixon sweating through the Nixon-Kennedy debate, anyone allowing Sarah Palin to be interviewed, and Warren Harding banging a hooker with a teapot (or something like that). Obviously the deficit needs to be better managed lest we fall further in to Keynes’ folly, but cutting extended unemployment benefits is not the way to go unless one wants to speed up the oncoming anarchy and see what happens when crime starts moving to the suburbs.
In stock news, earnings disappointments led the day with Goldman missing estimates of ~$2.98 EPS by earning only ~$2.75 per share ex one-timers and if this keeps up,
theWhite House GS’ management team, may be in trouble. Those one-timers included the $550MM settlement with the SEC, $600MM for a British bank payroll tax, and Raven Alexis the night of the company picnic after wowing her with how deep their structured products run. It is a rare miss for the company, as they have perfected the ability to control both the markets and the government without winning a popular election or being likeable, but every once in a while even the great Ron Jeremy must come up flaccid. The biggest issue with GS’ Q was on the topline driven by revenue from trading of fixed income products, currencies and commodities, falling to $4.4B from $7.4B in Q1 and $6.8 billion in last year’s Q2 which is a more precipitous decline than Lloyd Blankfein‘s hairline (or reputation) and caused him to vociferously utter “inconceivable” to anyone who would listen. Of course with revenue falling, GS had to cut compensation in order to keep some profits (though profitability did fall 82% even with the cuts) and the ratio of compensation to net revenue fell to 43% in the first half from 49% in the first half of last year which means employees will now have to buy the in the lot Lamborghinis rather than have them custom made.
While last week Goldman settled with the SEC and admitted no wrongdoing (which is a bit like Roman Polanski claiming it was consensual or Eddie Murphy claiming he only acted in The Adventures of Pluto Nash and didn’t write or direct it), the VP in charge of the (allegedly) fraudulent Abacus CDO, Fabulous Fab Tourre still faces a law suit from the SEC which could undermine Goldman’s lack of admission of guilt, especially if Fab continues to blame it on the rain (and that reference will never stop being funny). Tourre made a filing today with the courts saying that he isn’t responsible “for any alleged failings” by GS and he didn’t mean to sucker people out of their money, it just seemed like the thing to do.
In other earnings news, IBM’s revenue came in short of analyst guesses at $23.72B vs. guesses of $24.17B due to a drop in service contracts which the company says were merely pushed back in to next quarter and sluggish growth in Europe due to it being siesta season overseas. Also disappointing was TXN, whose earnings and revenue were at the midrange of guidance but failed to outperform whisper numbers (and Money McBags only hopes it was Alice Eve whispering the numbers). Despite a 900bp increase in gross margins, 42% revenue growth, and above street guidance, the stock tumbled today as if it had downed a fifth of Jack Daniels and had vestibular neuritis. On the positive side, Pepsi beat estimates and earnings were driven by strength in emerging markets with sales in Asia/Middle East/Africa up 16% proving that the demand for sugary water is more inelastic than the demand for running water, shelter and malaria medicine. After beating earnings estimates of $1.08 per share by $.01, PEP maintained their 11% to 13% earnings growth estimate for the year despite currency hurting their growth rate by 1% and Coke hurting their feelings by calling them copycats.
In small cap news, just about everything ran up end of day and Money McBags is pressed for time today so he’ll just leave you with one thought: CRUS. Apple reports tonight and CRUS provides an audio chip that goes in to their iPhone. Money McBags has talked about this stock in depth here and all it has done is go up like the age of consent in Georgia over the past 200 years. You can read Money McBags’ analysis of CRUS by using the search function on WGP but he was alerting you to this stock when it was below $10 and his estimates have continued to go up with the surprisingly quick rebound of their energy business. Money McBags thinks they can earn $1.20 per share and with the type of growth they have been witnessing, there is no reason the company shouldn’t trade at 20x that which means you can still earn >25% here. So pay attention to AAPL’s release because strong iPhone sales should bode well for CRUS’ upcoming Q.
4/20/10 Midday Report: Goldman blows quarter out, then offers to blow SEC Chief of Enforcement Robert Khuzami as part of “settlement”
The markets are modestly higher today despite a blow out quarter by Goldman as other blue chip companies mostly met expectations and meeting expectations after an 80% market rally is like trying to impress Grigori Perelman with long division or Tommy Lee with a Hawaiian Tropic girl. The big news is obviously that Goldman released their quarter today by smacking their CDOs on the table and yelling “Securities fraud this!” They demolished analyst guesses of $4.14 eps by earning $5.59 per share on $3.46B of earnings which was 91% growth. Though to be fair, it is not clear how much fraud and market manipulation analysts had in their models as Excel’s goal seek function isn’t yet equipped to handle that. What’s also amazing is how a company who produces nothing other than writing on paper can earn $3B. Anyway, the quarter was so jizztastic for GS that Lloyd Blankfein is going to spend the rest of the day at the spa getting his nails done so they will now match the drapes in his conference room. But all is not well for Goldman, they still have to deal with the SEC’s lawsuit about how they misled investors (but only on that one CDO, wink wink, and if you believe that, Money McBags not only has a bridge he’d like to sell you but he’ll give you a great deal on it) and in the quarter they lowered their compensation payout from 46% to 43% so all of the traders who have been manipulating the market are now going to have trade down from a hooker a day to one every other day and might have to pass up on the third bottle of Dom at their local Rick’s Cabaret.
There is no macro news out today and the only international news is that Greece’s latest bond offering met strong demand. Of course they had to double the previous yield on these short term bonds to 3.65% which was actually below estimates but still hella expensive for the ponzi scheme George Papandreou is running where he will gladly give you three souvlaki’s and a glass of greek wine tomorrow if you pay him for one today. The IMF is starting to get a bit frisky here and is warning about sovereign debt impeding global growth. Wow Captain Obvious, you think? Next week it is rumored that the IMF will issue warnings that staring directly in to the sun may cause blindness, eating foods high in saturated fats may cause obesity, and getting too close to Paris Hilton may cause herpes.
The real story of the day though is earnings with KO, IBM, and J&J mostly meeting expectations but trading down as the market demands quarters to be cleaner than an OCD sufferer’s closet for stocks to appreciate. KO’s profit rose by 20% to $.80 per share taking out one-time charges while their revenue grew 5% to $7.53B. The eps number beat analyst gueses by $.05 per share while the revenue number disappointed as analysts had guessed they would bring in $7.72B. Driving growth was the international business which was up 5% thanks to Brazil and India where sugary sweetnees is still seen as the cool thing to do while North American sales fell 6% thanks to people avoiding higher end products and wanting their teeth to stay cavity free. Money McBags is actually an owner of KO and bought more last week to get some market exposure from a blue chip stock that hasn’t really participated in the recent rally. Despite weak North America sales, KO isn’t going anywhere and will be a place investors go for safety if the market gets chippy again or if it finally consolidates. IBM’s earnings rose 13%, they beat revenue and EPS guidance, and they raised their forecast for the year to at least $11.20 per share and yet the stock is trading down 2% because their service booking dropped 2% in the quarter, margins were slightly below forecasts, and Chewbacca was a Wookie. Finally, JNJ had a 29% increase in earnings yet lowered their outlook due to recent health care legislation which is the same thing every drug company has done so this is more of a non-event than a Larry King divorce. The stock is flatter than Heidi Montag‘s singing voice or her original chest, so a big fucking yawn here.
In small cap news, SFSF got an upgrade today to buy from an analyst at something called Janney Capital Markets or known better as “Morgan Stanley wasn’t hiring.” The analyst raised SFSF to a buy claiming that the worst for them is likely over and that they should be able to continue to grow bookings at 20%. The company has a decent balance sheet with ~$300MM in cash and no debt though most of that is thanks to a recent follow on offering to give them some powder for future M&A and they are already using some of it to buy Inform for $40MM of cash and stock. The company is in a niche space of selling performance/compensation management software for businesses to evaluate employees, essentially outsourcing and making HR more efficient while relegating the number of smiley face cupcakes employees receive. They sell the software as a service which should yield a better multiple than the traditional software model. That said, this comany still has no earnings and guidance is for at best breakeven this year with revenue growth already in decline and estimated to be 17% for 2010. Money McBags is a bit perplexed by this stock as the valuation assumes a hefty growth rate and analysts seem to be valuing them on the fictitious EV/adjusted FCF and anytime a company is being valued on a non-traditional metric, that usually points to something being fucked up (and in this case the fucked up is the earnings which are less positive than Don Rickles at an ugly convention). The company is up 4% on today’s upgrade but Money McBags thinks the valuation is way ahead of itself especially as the company relies on big deals, hence the rebound in the last half of last year. Money McBags is staying away from this stock for now as it seems too rich despite a decent software offering and being in a market less penetrated than Ellen Degeneres, but it is that market potential that keeps SFSF on his radar.
And don’t forget Money McBags is now testing out twitter, for reals this time.