Posts tagged UPS
Fuck yeah was it on today as the cry of “1400 or Bust!” rang through the trading pits (and if it is Melissa Archer’s bust, well, then Money McBags may have to be rooting with his shorts) like other momentous rallying cries such as “The British are coming,” “Remember the Alamo,” and “Who Let the Dogs Out.” That’s right. despite 2MM people protesting in the streets of Egypt demanding that Mubarak let their people earn dough as Egyptians have grown sick and tired of being poor, sick and tired of seeing food prices rise, and sick and tired of having to root for the Pistons (whoops, that’s Detroit, but Egypt-Detroit, potato-potahto. Actually, it’s probably safer to walk the streets of Cairo than Detroit and with much less hobo smell), the market rallied as if it had downed a case of Four Loko spiked with ample amounts of Red Bull and Charlie Sheen’s urine.
With global unrest now a catalyst for the market to go up in the bizarro ponzeconomy™ in which we live where fundamentals have been trumped by regression analysis on historical time periods that look nothing like today’s period, regularly scheduled government bond purchases inflate paper portfolios more than Timothy Geithner’s ego or Lacy Banghard‘s bra, and crossing one’s fingers and hoping it doesn’t hurt is the leading investment strategy, Money McBags guesses all one can do is buy the dip, buy the rip, and buy everything with more beta than a blue chip. Just be ready to get the fuck out before the tattered curtain is peeled back exposing this run up for the Fed induced manipulation it has really been.
Anyway, other than a sovereign nation with touch points to the global energy supply imploding (though not nearly as important these touch points), macro news was rather quiet today. The ISM’s manufacturing report showed that factory activity in the US rose to 60.8 last month which was up from 58.5 in December and was higher than even the highest analyst guess of 59.5 as analysts thought they were playing by the rules of The Price is Right and thus going over would cause them to lose (though what they would lose other than their credibility Money McBags doesn’t know, and yes that is funny because they have no credibility). Money McBags just loves to point out when shit like this happens because in theory with 78 analysts guessing (which should be a large enough sample size), the actual number should be somewhere within the normal curve of guesses, but this result wasn’t even within a fat-tailed standard deviation of the mean which means (pun intended) that those models are either fucked (and if there will be any model fucking, Money McBags hopes that Marissa Miller will be involved) or the measurement is fucked, or more likely, both. The most interesting part of the data though was that the pricing index went from 72.5 to 81.5 and it’s a good thing that Bernanke said inflation is not a problem, because otherwise Money McBags would be more nervous than if he had gotten mouthy with Julie Schenecker (and yes that is sarcasm).
The only other macro news was that construction spending fell to its lowest level in a decade, and if that doesn’t scream recovery then Money McBags’ name isn’t Money McBags (hmmmm). Construction spend fell by 2.5% which was worse than analyst guesses of a .1% rise, once again outside of the entire range of guesses, and about as healthy for the economy as a cancer sandwich with an extra topping of AIDS and Mickey Rourke’s taint. While every sector was down, the biggest drop came in federal construction which fell 12% as the government moved its funds to more pertinent ventures like producing food stamps and new rims for Joe Biden’s Camaro.
In the market, earnings were mostly positive as UPS delivered a solid Q and beat estimates thanks to package volume rising 1.7% which was the result of business picking up and better use of the Maxtender. EPS was up 44% to $1.08, which beat analyst guesses of $1.05, and full year forecasts for eps were a range of $4.12 to $4.35 which would be ~20% growth, ahead of analyst guesses, and a result of strong orders for the Tila Tequila sex tape to be shipped overnight.
Elsewhere, Pfizer was up 5% after a good Q and an announcement that they will slash their R&D budget in 2012, buyback an additional $5B in shares, and try to produce drugs that treat only patients not using a medicaid discount. And finally, Baidu searched for and found a ginormous quarter as their their profit tripled and their market share in China rose to ~73% as inflation pushes up more than just currency.
In small cap news, everything was up including KITD which closed up ~6% a day after their strange set of acquisitions which Money McBags broke down in great detail yesterday. Speaking of Money McBags’ breakdowns (other than the mental one he is currently having over the death of the only positive thing he had in his life, NSFW muff guessing. He’d say more about this but right now the wound is too fresh and his pole is at half mast as a way to mourn), when he analyzed CRUS’ Q last week, he erroneously said they weren’t supplying chips to the iPad which was just flat out wrong. Shit, it was a fucking douchewad mistake, but Money McBags simply missed the iPad product breakdown a few months ago and he hadn’t gone back through the latest delightful presentation on the CRUS investor page (and note to readers, their presentation is actually a really good introduction to the company for new investors because the CEO has a voice over on all of the slides so you’re not just looking at out of context data, but you are hearing about it as well).
Anyway, if Money McBags read and listened correctly, CRUS currently has 5 custom ICs they sell to Apple so that does damper his bullishness a bit as he thought getting in to the iPad would be a step function up for them (which it likely was, but now we’re still on that step). The important question is whether Malene Espensen will ever return Money McBags’ overtures, but the relevant question is can CRUS get more than 5 ICs in to Apple products to get that next leg of audio growth (perhaps their third leg if you will, after the smartphone and the tablet). Regardless, Money McBasgs thinks CRUS is a company that is working right now because they sell a product to the company that is currently dominating the world (like selling gold chains to MR. T in 1984) so they should continue to have success but they are no longer stupid cheap and need find new areas of growth.
Finally, Money McBags was set to break down NEI’s Q today, but he got busy doing other shit and is now more tired than his dick jokes. He went through their Q, updated his model, and found just the right picture of Danica Thrall, but he simply doesn’t have the time right now to give it the write-up it deserves. He will shoot to have this tomorrow, but the basic story is he thinks there is ~10% downside now and 100% upside but it is 90% likely to just do nothing as it’s not what Money McBags would call a high quality company with any kind of disruptive technology, They are a little do shit services company that is winning bigger deals as they compete on price and they might be about to hit some strong growth which was foreshadowed by the expansion of their manufacturing in to Europe. So nothing about Money McBags’s thesis has changed, but he’ll hopefully get to the details tomorrow. Also, watch for SFLY earnings tomorrow. This company has been rocketing the fuck up and looks to be just cockposterously overvalued. Money McBags has never liked this name but he hasn’t paid much attention to them in a couple of years, so he really has no opinion going in to earnings. His gut tells him they are going to have a big Q (because everything else has) but with the way they are priced, a miss should cause a big sell off, like Pam Anderson‘s career once she turned 35. So the name should be volatile either way and Money McBags is curious to dig in because if they miss, it could be a good short candidate.
7/22/10 Midevening Report: Market shoots up on earnings, hopefully it wasn’t sharing a needle with Greece
The market raced up today as if it were Icarus escaping from Crete and rapidly approaching the tantalizing Sun, though with luck it used better wings and thus will avoid the same fate. Despite more negative macro news, a growing and unsustainable debt, and more longterm unemployed people than a fast food addict has bacne, the market is responding positively to a number of earnings reports because apparently four or five data points are much more relevant than the last 3 months of data, statistics, and common sense.
In macro news, new claims for unemployment were out and as usual, were much worse than analyst guesses. Claims rose by 37k to 464k (though next week that number will likely be revised to 470k, because that’s how the (NO) Labor department rolls). Analysts were only slightly off in their predictions of claims rising by 17k and by slightly, Money McBags means whatever the opposite of slightly is, like considerably, greatly, or a fuckload. But hey, only 45% of the 14.6MM unemployed people have been out of work for more than 6 months and if that doesn’t scream market rally, then nothing does (and of course that number doesn’t include people who simply stopped looking for work as they became more discouraged than the Edsel’s marketing team or Stevie Wonder’s shoe polisher after Mr. Wonder downs a Big Gulp and hits a urinal).
In other macro news, existing home sales fell by 5.1% but since analysts had guessed they would fall by 8.1%, the market reacted positively, choosing to ignore the absolute for the relative, which is a bit like getting excited about your daughter sleeping with Magic Johnson and only coming away with herpes. There are 4MM homes on the market which at the current sales pace equates to a 9 month supply of homes which is bad news for sellers but good news for that one guy looking relocate. And finally, the index of US leading indicators fell .2% but that was .1% better than guesses so another pyrrhic victory for the market to celebrate while it ignores the bigger picture like King Pyrrhus ignored the replenishing forces of roman soldiers.
Of course the big news today is earnings where several companies beat guesses, put out better guidance, and did it all with a straight face. UPS beat analyst guesses and gave above street guidance thus figuratively dropping a deuce on estimates and showing what brown can really do. New guidance was for $3.35 to $3.47 per share which was well above analyst guesses of $3.27 per share and driven by their international business and more people buying shit online since they can’t afford gas for their cars. Obviously an increased pace of shipping bodes well for a recovery somewhere so hopefully the uptick is a result of real business needs and not companies shipping left behind picture frames to the people they laid off.
Caterpillar is another company that put up a huge quarter which made more than just lepidopterists happy. The company crawled its way to 31% revenue growth and 93% profit growth while raising their guidance and destroying analyst guesses as if those guesses were freshly laid ant larvae. EPS was $1.09 and guesses were for $.85 eps and in this market, a beat that large is rarer than a Palos Verde Blue or a pair of underwear worn by Paris Hilton. Also, AT&T called up analysts and told them they suck as the company forecast strong growth for the rest of the year. Earnings of $.61 per share beat analyst guesses of $.57 per share and the beat was surprisingly due to their wireline business as more people celebrate the recession with staycations. And finally regional banks everywhere led by PNC, STI, and BBT put up solid earnings on improving credit trends and a lowering of provisions which seems more shortsighted than Mr. Magoo with two eyepatches on but good for them (for now).
In other stock news GM is buying subprime lender AmeriCredit because they have such a great record running lending businesses. This acquisition is like allowing Roman Polanski to pick up the baby sitter or Ben Stein to give you macroeconomic advice. On the heels of this merger, the Federal Government is said to be already building a fund to be able to bail GM out again when they horribly mismanage this subprime book.
In small cap news, a Money McBags favorite, KITD preannounced their quarter this morning. Now look, Money McBags has written about this company more often than Rudy Giuliani talks about 911 or Taylor Rain goes 5-hole because it is ridonkulously cheap and growing faster than Teddy Roosevelt’s reputation after he singlehandedly corralled 3 outlaws for trial in the Dakota Badlands in 1885. Anyway, KITD’s preannouncement today was for at least $22.7MM in revenue for Q2 which is ~110% y/y growth ~30% sequential growth and EBITDA of at least $4MM which is up from $3MM last Q.
But here is the interesting part. Money McBags has been worried about them due to the effect of the Euro dropping faster than the commercial prospects for any yet to be released Mel Gibson movie. He first mentioned his concerns here which had to do with the Euro declining ~25% against the dollar in the Q and KITD being highly levered to the exchange rate. Well the CEO addressed this today saying:
“Our record second quarter results superseded the devaluation of European currencies, which we estimate had about a 4% negative impact on our top-line during the period, as reported in U.S. dollars. We estimate that this currency devaluation actually had a small (less than 1%) positive impact on overall cash-flow, since we have slightly higher proportion of costs than revenues in European currencies.”
Wow. While Money McBags doesn’t quite get how the impact was only a negative 4% topline hit, but he’ll take that number all fucking day like a Spanish worker takes a siesta after five minutes of semi-intense labor. So KITD must somehow be weighted more Asia and less Europe than Money McBags thought or something else is going on because he thought costs and revenues were in local currencies, but whatever. That is a terrific number and Money McBags feels much much better about his low end estimates now being so low as to be more preposterous than a professional wrestler becoming a governor.
The other highly positive news on KITD was that their DSOs fell from a way too elevated 128 days to 90 days which had caused a hella lot of fear from investors because when a weird, dinky little company levered to Europe and growing way too rapidly starts having balance sheet issues, things usually turn out worse than one of Andy Reid’s kids or a school for the deaf trying to sing in a round for their yearly concert.
Oh yeah, Money McBags also loved this tidbit:
“The proliferation of Internet-connected devices, coupled with the accelerating worldwide adoption of broadband connections and video-capable mobile networks (3G and 4G), appears to be fueling a strong, overall long-term growth trend in IP-based video asset management systems. “KIT digital is in the ‘sweet spot’ to benefit from this rising VAMs tide,” said Isaza Tuzman. “With the extinguishment of most of our warrants and the incurrence of previous M&A restructuring charges now largely behind us, we are looking forward to providing greater visibility into our strong financial performance and industry positioning, starting with the reporting of our complete Q2 financial results, to be released in mid-August.”"
So what we learned again is that this is a great space to be in and KITD is not just the biggest global player, but continues to leverage their software and relationships to stay in the sweet spot. Plus, by getting rid of all of their income statement shenanigans that causes this company to report operating EBITDA which is not an easy metric for HFT’s, quant funds, and portfolio managers to easily pick up in any universe screen, KITD will make themselves easier for investors to find and evaluate. As Money McBags fully expects their EPS to be more positive than January Jones‘ prom date, being able to get rid of all the extraneous shit will only help the market properly value this company.
On the strength of their Q and the fact that revenue did not get mobelcrated by the declining Euro (mobelcrated of course being the thing that is just a bit worse than excoriated), Money McBags is going to maintain his initial estimates for this year of ~$95MM revenue and ~$19MM EBITDA. The company has a current EV of ~$175MM so it’s trading at ~8.5x this year’s EBITDA and the company is getting 100% revenue growth. Next year, $150MM revenue and $30MM EBITDA is not unachievable and thus at the high end this company is trading at ~6x EV/EBITDA which is way too low for the kind of growth market this company is in even if it is somewhat of a roll up, headquartered in Prague, and loves to dilute the shit out of shareholders.
But wait, let’s throw out all of the nonsense on the income statement and lets say KITD hits $95MM revenue this year and grows 30% next year (again, a low estimate). With 50% gross margins (which is a low estimate compared to the last few Qs) and say ~$40MM in operating costs, and enough NOLs to make even Wesley Snipes smile, you get ~$.95 eps and after today’s run up, the company is trading at only 10x that. Companies growing topline like KITD in this kind of market should not be trading at 10x forward eps, 2.5x current year revenue estimates, or 6x forward EV/EBITDA.
So if you can deal with the warts and likely volatility, this name should easily trade for 20x eps estimates or 10x EV/EBITDA which gives us at least 50% upside from here. Yesterday Money McBags made the case for CRUS once again, today he is telling you he likes KITD better and reminding you that when the stock dipped below $9 on July 7th, Money McBags told you to load up (of course he told you that all the way down as well, but whatever). In the longrun this company should see very nice appreciation so sit back and enjoy the ride as it might be rocky but it’s should be very profitable.
4/15/10 Midday Report: Tax day causes 53% of the US population to be pissed, other 47% pissed every day about being broke
Oh shit, just when the economy was looking better than a threesome with Hayley Atwell and Alice Eve, new jobless claims for last week rose for the second week in a row and economists didn’t have Easter to blame this time. Well, actually they did, as a government analyst once again warned that the numbers could be skewed since Easter falls on a different day each year. Wow, really? You’re going with that excuse again? Umm, if Money McBags is correct the numbers are seasonally fucking adjusted and since calendars have existed since shortly after the fucking neanderthals were exterminated (which was caused by too much contaminated dinosaur meat since those smallbrained fuckers never learned how to fucking use fire), shouldn’t that seasonal adjustment adjust for Easter? Seriously, it’s not like the day it fell on surprised anyone last year or this year (well, except for maybe Amy Winehouse or the hippocamus-ly challenged), so that excuse is lamer than Spectacular Bid or Boy Meets World reruns. Claims rose by 24k to 484k which is the highest since late February and the highest since the Great Walmart Lockout of 2006. There are still over 10MM people receiving some kind of unemployment benefit and since those benefits don’t include being tucked in by Ashley Dupree (very NSFW, but required viewing), that’s not good. In other macro news, defaults doubled in the government’s loan modification program which is weird to think that people who couldn’t afford mortgage payments still can’t, even at lower rates. It’s like being surprised that a kleptomaniac might want to steal again after being released from jail or that Tiger Woods is likely boning skanks again despite going to the laughable sex therapy (by the way, it’s not called “sex addiction,” it’s called “having a penis”). In positive news, manufacturing production in the US gained as output of factories rose .9% with companies building back inventory while the Empire State manufacturing report demolished expectations. The survey came in at 32%, well above the expected 24%, and Money McBags has no idea what that means other than beating expectations is good and at least New Yorkers have something to cheer themselves up about while watching the Mets.
Internationally, Greece is back in the news again trying to screw up something good we all had going with the markets. It’s like we’d been asking the markets out for 2 years, finally got her to come to dinner, got her home, and as we were about to inspect her large Sharpe ratios, the ruphies wore off. So thank you Greece for scaring the markets again with your rising interest rate spread. Of course there is more of a chance of the Laffer Curve being right than there is of Greece going bankrupt, so Money McBags will be buying at any big market dislocation caused by rumors of our Hellenic friends going to take a ride on the river Styx (though if they go to Styx, they should give a big “domo arigato” to Hades).
Also interntationally, China’s economy is surging like William the Conqueror’s popularity among the French in 1066. GDP was up 11.9% from last year which is more bubble-icious than Gonzo Grape. Not only that, but investment in real estate was up 35.1% and housing prices were up 11.7% in March alone. Wow. China is definitely hitting on all cylinders and their economy is busting out more than Lina Li thanks to the ginormous government stimulus, the artificially deflated currency value, and the accelerating population growth.
In stock news GOOG is running up in to earnings since, you know, they are fucking GOOG. Money McBags should have bought more but it is already an outsized position for him so he’ll root for the best with their earnings report and likely buy any dip. UPS pre-reported their earnings today and grew profit by 37%. They earned $.71 per share, well above analyst guesses of $.58, and upped their full year EPS guidance from $2.70-$3.05 to $3.05-$3.30. Wow. Apparently people really want to ship some shit that can’t be attached in an e-mail. This is a huge signal to the strength of a business rebound. International shipping was up 18% and while US shipping volumes were up less than 1%, it was the first growth in US shipping in two years. So yeah, it is barely up from a much lower base, but this is how things start out. A very encouraging quarter from UPS.
In small cap news, NTRI is starting to run and Money McBags has broken their business down a number of times here. They are cheap but operational issues keep Money McBags from owning this stock. Also, MLNK is trying to rally back from a huge sell off after missing their quarter. Money McBags has analyzed the fuck out of this company but it is ridonkulously cheap on an EV/EBITDA basis, trading at ~4x with a bigger cash cushion than Jennifer Lopez’s ass cushion. This is a small holding of Money McBags and he is currently down ~10% on it but is thinking about nibbling at some more. The biggest issue is that their excuse for missing the quarter made less sense than Kathy Griffin’s career as HP is their biggest customer and was up 10%, yet MLNK’s sales were down 9% even including revenue from an acquisition. It is more head scratching than crabs as to why their revenues performed so poorly and why their guidance was down as the global economy and the consumer are picking up so this company should be seeing revenue growth off of such depressed numbers. That said, the stock has started acting better, so it is worth watching.
The market is bouncing back today even though it is a relatively quiet day news wise (though not as quiet as a Lindsay Lohan straight to video movie premier or a Trappist monk game of hide and seek). Pending home sales in the US rose 1% after falling 16% last month thanks to renewed tax credits and something called math. Sure the 1% rise is good, but it is still down 15% from October, so let’s not break open the bottles of Dom and tins of beluga just yet. The biggest problem with home sales is that frictional unemployment has dropped the frictional and is just plain old unemployment. People are no longer moving between jobs and thus moving to new houses because, to close the transitive logic, there are no jobs. Also, Paul Volcker is supposed to testify in front of the Senate Banking Committee today where the 82 year old will rant about proprietary trading at banks, how he used to walk 2 miles up hill both ways to get to school, and then wonder why none of the dames look like Clara Bow anymore. The banking industry awaits Lord Volcker’s testimony like a necrophiliac awaits the cremation of a loved one.
In global macro news, Australia held their interest rates flat which was somewhat of a surprise since their economy is healthier than a vial of Jack LaLanne‘s urine (and that is for my older readers, but I can assure you young’ens out there that there is nothing on this planet healthier than the dickwater of the workout guru Mr. LaLanne who even at the age of 96 still can still rip a man’s heart out with his pinky finger). For those sheltered Americans out there, Australia is more than just boomerangs, crocodiles, and Miranda Kerr and Patsy Kensit pillow fights (though if it were just Miranda Kerr-Patty Kensit pillow fights, that would be sufficient). For the past several years Australia has benefitted from being close enough to China to supply it with natural resources out the wazzou while serving as a middleman in the shipping/trade business. Additonally, their banks missed out on the opportunity to cut up packages of mortgages and sell them for additional yield by inflating the mortgage market through lending money to speculators who bought and then sold houses to other speculators who couldn’t afford the houses in what is known now as the subprime vicious circle (and the circle was even more vicious than a daisy chain at an overeaters anonymous meeting). The point being, Australia has had a robust economy during this downturn and thus Australia holding their rates is a bit of a good sign that inflation is not running away, but it is more likely just a pause in their monetary rate hikes
As for stocks, Lexmark put up a huge quarter tripling earnings to $.76 a share and giving guidance for next Q of $.80, thus besting the $.62 earnings per share estimates. The printer maker also beat revenue projections and attributed their success to strong customer demand and the fact that HP makes such shitty printers. UPS also saw profits triple, yet their topline was down 2.5% and their CFO said the first quarter ”will be the most challenging of the year.” He then said it will be more challenging than the time they tried to ship a plane full of angry circus bears who hadn’t eaten in a week. However, the CEO said “It looks like this recession is finally over,” so I guess there’s nothing to see here.
In small cap news, ARTG was upgraded or maintained at strong buy today by most analysts on the street even though they chose to dilute shareholders yesterday like ice cubes in a Makers Mark at an overpriced NYC bar. Money McBags addressed this in yesterday’s Midday Report and its comments section, but ARTG has plenty of cash on their balance sheet so the capital raise is likely for a big acquisition and thus investors need have confidence in ARTG’s management team’s ability to negotiate and integrate a large deal before they become shareholders. Estimates are for around $.20 earnings for 2010 but $.25 could be reasonable so the stock isn’t expensive (nor extremely cheap) at 16x to 20x earnings. COOL is up 5% today as investors perhaps forgot the assrapingly bad Q they recently put up (here were Money McBags thoughts) though this should give shorts a better entry point. And TSYS was initiated as a buy by JP Morgan and a $12 price target and this is a company Money McBags has followed off and on for a while and used to own. They basically provide licenses for text messaging to carriers, location based services (like E911), and satcom solutions for the government. You really only need to know that text messaging is still growing 100% a year (TSYS powered almost 2B messages a day last year, which is fuckload of teenagers saying “cu l8r”) and they provide gateways for carriers to be able send these volumes of text messages. These licenses are sold as a step function so the company’s revenues haven’t scaled lockstep with the exponential growth of text messaging, plus there is competition and the pricing keeps coming down. That said, they did recently get a new deal with Verizon and their government business has been a solid performer. Estimates are for TSYS to earn $80MM of EBITDA in 2010 and they are currently trading at around 6.5x EV/EBITA. That is very cheap for a company that can still grow 20%+ (though the growth rate has been declining and that is not all organic growth). Today may be a good entry point though as the stock has been trading down and earnings are in two days so the JP Morgan analyst would not want to release a glowing report of the company two days before earnings were he/she not confident in the numbers. Now look, Money McBags is prone to mocking analysts like Adam Sandler is prone to starring in bad movies and Alexis Texas is prone to having to try on many pairs of jeans until she finds a pair to properly fit her best asset, so having faith in this JP Morgan analyst is a bit hypocritcial (though not as hypocritical as Larry Craig’s gay rights (wide) voting stance), but the timing of the report should be a signal that TSYS’s Q will be good or else the JP Morgan analyst is a complete dope (and unfortunately we can’t rule that out, so let’s say a 25% chance because JP Morgan is mildly reputable). It may be worth picking up some shares for at worst a trade. Money McBags does not own TSYS right now but may buy some before earnings after he does some more digging. If any of you have done work recently on TSYS, feel free to share with the rest of us, and if any of you have Hayley Atwell‘s phone number, feel free to share that too.