Archive for January, 2012

  • Earnings Season So Far
    , January 25th, 2012 at 11:41 am

    Wendy Soong at Bloomberg has some stats on earnings season so far.

    Of the 134 companies in the S&P 500 that have reported so far, 78 have beaten estimates, 16 have reported inline and 40 have missed estimates. That’s a “beat rate” of 58.2% which is fairly low.

    Earnings are tracking at a 4.7% growth rate. Excluding financials, earnings are growing at 14.3%.

  • CA Technologies Outlines its Strategy
    , January 25th, 2012 at 9:32 am

    This is from the earnings call (transcript courtesy of Seeking Alpha):

    Today, we are focused on 3 priorities to build long-term value for CA Technologies customers, employees and shareholders. First, to continue to execute our strategy and improve our operating performance. Second, to provide for a greater return of cash to shareholders through increased dividends and share repurchases. And third, to effectively use the balance sheet to return additional cash in the near term through an accelerated buyback.

    In summary, we are targeting to return to shareholders approximately $2.5 billion through fiscal year 2014, or about 80% of our expected cumulative free cash flow over that period.

    Key elements of the program include: One, an increase in the dividend from an annualized rate of $0.20 per share to $1 per share. That is a yield of approximately 4.5% based on yesterday’s closing market price and currently puts our dividend yield at the top of comparable technology companies. The board and management view returning cash to shareholders through dividends as an important component of our overall approach to enhancing shareholder value.

    Two, a new $1.5 billion share repurchase authorization through fiscal 2014, including an accelerated repurchase of approximately $500 million under an agreement to be executed in the fourth quarter of fiscal 2012. Including the accelerated share repurchase and shares repurchased year-to-date, we expect we will have spent approximately $1 billion to buy back shares during fiscal year 2012. The $1.5 billion authorization replaces the approximately $230 million remaining under our current authorization. We are confident we have the balance sheet capacity to get this done and the program is expected to be funded by available U.S. cash.

    Three, our strategic plan anticipates that we will continue our investment in the business consistent with that of previous years, or approximately $1 billion annually. This includes acquisition activity in the range of $300 million to $500 million per year, on average, through fiscal 2014 and the approximately $600 million we invest on average each year in organic research and development.

  • Hudson City Loses 73 Cents Per Share
    , January 25th, 2012 at 9:04 am

    Hudson City Bancorp ($HCBK) reported a big loss today for its fourth quarter of 73 cents per share. But this big loss was expected because the bank has elected to pay off huge amounts of debt. Excluding that item, Hudson’s operating earnings were 12 cents per share. Although this move caused some short-term pain, it greatly helps the bank’s balance sheet.

    Ronald E. Hermance, Jr., Hudson’s CEO said:

    Our net loss for the quarter was a result of the previously announced extinguishment of structured borrowings. During the past year, the low interest rate environment resulted in elevated levels of liquidity as borrowers prepaid or refinanced their mortgage loans and we experienced a significant increase in the calls of our investment securities. Our options for reinvesting this excess liquidity were limited since the yields available on mortgage-related assets remained at or near historical low levels and we did not believe it would be prudent to put such long-term assets on our balance sheet. As we considered our options for this excess liquidity, we decided that the best long-term solution would be to reduce the amount of borrowings on our balance sheet and therefore we repaid $4.3 billion of structured borrowings. This reduced our total assets to $45.36 billion and reduced the amount of interest rate risk inherent in our balance sheet while having no significant effect on our regulatory capital ratios. The considerable difference in the interest rates we previously earned on the loans and securities that were prepaid compared to Federal funds and other overnight deposits that we held during the quarter and that were used to extinguish the borrowings in December 2011, also contributed to the decline in our operating earnings.

    This extinguishment of debt in the fourth quarter and the restructuring transaction in the first quarter of 2011 were designed to strengthen our balance sheet for the future and improve our net interest margin. To that end, we made great strides in 2011 to meet the future head-on by shrinking our balance sheet, reducing our levels of interest rate risk, increasing our Tier 1 leverage capital ratio and increasing staffing levels in critical areas. We believe it is now critical for Hudson City to focus on the longer-term opportunities that will be available when economic conditions normalize. Patience will be rewarded. Our focus will remain on positioning our balance sheet and adjusting our business model for future growth. In the short term, the announced increase in government-sponsored enterprise (“GSE”) fees in the second quarter of 2012 should make portfolio lenders more competitive in the marketplace. Longer term, an improved economy and a sensible resolution of the GSEs will provide Hudson City with significant opportunities to grow our residential business.

  • Morning News: January 25, 2012
    , January 25th, 2012 at 5:42 am

    Merkel Masters Markets With Euro Austerity

    In Europe, a Conflict Over Bank Capital

    German Business Confidence Rose in January

    U.K. May Slip Closer to Recession as King Says BOE Can Increase Stimulus

    Japan’s First Trade Deficit Since 1980 Raises Debt Doubts

    Bank of Thailand Cuts Rate

    The End of Mutual Funds is Coming

    Obama Calls for Higher Taxes on Wealthy

    Confidence Falls as CEOs Prepare for More Shocks

    Apple’s Profit Doubles on Holiday iPhone 4S Sales

    Yahoo’s Revenue Misses Estimates as Advertising Demand Shrinks

    Ericsson Profit Plunges as Network Sales Slow

    Novartis Cautious on Outlook as Profit Drops 46%

    Roche Makes $5.7 Billion Offer for Illumina in Hostile Bid

    Cullen Roche: Apple Inc. – Bull Versus Bear

    Stone Street: What ZAGG Bulls Are Missing & Why

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  • CA Technologies Posts Huge Earnings, Quintuples Dividend
    , January 24th, 2012 at 6:00 pm

    Wow, CA Technologies ($CA) knocked the cover off the ball. The stock is up 17% in the after-hours market, and that’s on top of rising 1.69% today.

    For fiscal Q3, CA earned 65 cents per share, 11 cents more than Wall Street’s estimate. The company is also raising its annual dividend five-fold. Quarterly revenue came in at $1.263 billion compared with Wall Street’s estimate of $1.21 billion.

    CA also raised its 2012 EPS guidance. The company now sees 2012 earnings (ending March 31st) ranging between $2.21 and $2.25 per share. The old range was $2.13 to $2.18 per share. Wall Street had been expecting $2.15 per share.

    Income from continuing operations rose 34 percent to $263 million, or 54 cents a share, from $196 million, or 38 cents a year earlier, the company, which operates as CA Technologies, said today in a statement. Excluding some items, profit was 65 cents, beating the 54-cent average estimate of analysts surveyed by Bloomberg.

    Revenue rose 10 percent to $1.26 billion, exceeding analysts’ $1.21 billion estimate. Chief Executive Officer Bill McCracken has spent about $1.8 billion on acquisitions in recent years as he seeks to lessen the Islandia, New York-based company’s dependence on mainframe products and expand in technology security and management, including cloud software.

    For the fiscal year ending March 31, CA said sales will rise 6 percent, the high end of its prior range. The company raised its forecast for adjusted earnings to $2.21 to $2.25 from $2.13 to $2.18.

    CA Technologies will return $2.5 billion to shareholders by March 31, 2014, by increasing its annual dividend to $1 from 20 cents, and repurchasing $1.5 billion of stock, including about $230 million remaining under its existing authorization.

    CA is hiking its annual dividend from 20 cents per share to $1.00 per share.

  • Apple Is Sitting on Nearly $100 Billion in Cash
    , January 24th, 2012 at 5:19 pm

    Forget Apple‘s ($AAPL) stunning earnings report; think about all the money that the company is sitting on.

    As of December 31st, Apple has $10.31 billion in cash and cash equivalents, plus $19.846 billion in short-term marketable securities and another $67.445 billion in long-term marketable securities.

    Add it up, that’s $97.601 billion cash in the bank. Or about $112 per share.

    Damn.

  • US Stocks Shake Off Europe
    , January 24th, 2012 at 12:36 pm

    I’ve mentioned a few times that the U.S. stock market has finally disentangled itself from Europe. The problem is that it’s hard to show graphically. Here’s my attempt.

    The following three charts show the S&P 500 on the horizontal axis and the euro/dollar exchange rate on the vertical axis. This is for the the months of October, November and January.

    In October, you can see how high the correlation is (0.9371). In November, the relationship starts to break down. By January, it’s completely gone. This is a major reason why we’ve been rallying.

  • Unemployment: Men Vs. Women
    , January 24th, 2012 at 12:03 pm

    I thought this was an arresting chart. It shows the male unemployment rate (in blue) compared with the female unemployment rate (in red). In a recession, the rate for males typically rises higher than the rate for females. Note what happened in the early 1990s.

    In this latest recession, often called the “man-cession,” the unemployment rate for men soared much higher than women. I think that’s probably due to the recession hitting sectors like construction and homebuilders extra hard.

    Only now is the jobless rate for males coming back to parity to the rate for women.

  • Johnson & Johnson Earns $1.13 Per Share
    , January 24th, 2012 at 8:50 am

    Johnson & Johnson ($JNJ) reported Q4 earnings of $1.13 per share which was four cents per share more than estimates. For the year, JNJ earned exactly $5 per share. The company said that for 2012 they see earnings of $5.05 to $5.15 per share which is below Wall Street’s estimate of $5.21 per share.

    Johnson & Johnson today announced sales of $16.3 billion for the fourth quarter of 2011, an increase of 3.9% as compared to the fourth quarter of 2010. Operational sales increased 4.0% and the negative impact of currency was 0.1%. Domestic sales declined 3.4%, while international sales increased 10.2%, reflecting an operational increase of 10.4% and a negative currency impact of 0.2%. Worldwide sales for the full-year 2011 were $65.0 billion, an increase of 5.6% versus 2010. Operational sales increased 2.8% and the positive impact of currency was 2.8%. Domestic sales declined 1.8%, while international sales increased 12.4%, reflecting operational growth of 7.0% and a positive currency impact of 5.4%.

    Net earnings and diluted earnings per share for the fourth quarter of 2011 were $0.2 billion and $0.08, respectively. Fourth-quarter 2011 net earnings reflect after-tax charges of $2.9 billion, which include product liability expenses, the net impact of litigation settlements, costs associated with the DePuy ASR™ Hip recall program, and an adjustment to the value of a currency option and costs related to the planned acquisition of Synthes, Inc. Fourth-quarter 2010 net earnings included after-tax charges of $922 million representing product liability expenses, the net impact of litigation settlements, and costs associated with the DePuy ASR™ Hip recall program. Excluding these special items for both periods, net earnings for the current quarter were $3.1 billion and diluted earnings per share were $1.13, representing increases of 9.3% and 9.7%, respectively, as compared to the same period in 2010.*

    Net earnings and diluted earnings per share for the full-year 2011 were $9.7 billion and $3.49, respectively. Full-year 2011 net earnings reflect after-tax charges of $4.2 billion, which include product liability expenses, the net impact of litigation settlements, a previously announced restructuring charge by Cordis Corporation, costs associated with the DePuy ASR™ Hip recall program, and an adjustment to the value of a currency option and costs related to the planned acquisition of Synthes, Inc. Full-year 2010 net earnings included a net after-tax gain of $55 million representing product liability expenses, the net impact of litigation settlements, and costs associated with the DePuy ASR™ Hip recall program. Excluding these special items in both periods, net earnings for the full-year 2011 were $13.9 billion and diluted earnings per share were $5.00, representing increases of 4.4% and 5.0%, respectively, as compared with the full year of 2010.*

    The Company announced earnings guidance for full-year 2012 of $5.05 to $5.15 per share, which excludes the impact of special items. This guidance reflects operational growth of approximately 3.5% to 5.5% partially offset by an estimated negative impact of currency of approximately 2.5%.

    “We delivered solid results for 2011, built on the strong growth of our recently launched pharmaceutical products, and continued the steady momentum of new product approvals across all our businesses,” said William C. Weldon, Chairman and Chief Executive Officer. “Our talented people are focused on bringing meaningful innovations to patients and customers to address significant unmet needs, positioning us well to deliver sustainable leadership and profitable growth in health care.”

  • Morning News: January 24, 2012
    , January 24th, 2012 at 5:34 am

    EU Seeks Bondholder Concessions on Greece

    Permanent Rescue Fund Seems Nearer in Europe

    In Europe, Arguing to Apply Some Stimulus Along With the Austerity

    Euro-Area Manufacturing Unexpectedly Expands

    Europe Weighs Tough Law on Online Privacy

    BOJ Sees Recovery Delayed as Europe Bites But Skips Easing

    A Loophole Poses Risks to Investors in Chinese Companies

    India Unexpectedly Cuts Reserve Ratio as BRIC Nations Act to Shield Growth

    Crude Oil Trades Near $100 on Concern Iran May Respond to European Embargo

    U.S. CO2 Emissions to Stay Below 2005 Levels as Coal Use Shrinks

    Meet the New Federal Reserve Members

    Political Push Moves a Deal on Mortgages Inches Closer

    Texas Instruments Beats Estimates in Sign Components Market Bottoming Out

    European Semiconductor Giant STMicroelectronics Predicts Sales Decline

    Chesapeake Stalls Slide in Gas Prices With Cutbacks in Drilling

    Global Macro Monitor: On the Collapse of the Shanghai Composite

    Phil Pearlman: It’s Not How Apple Reports Tonight, It’s Do You Have A Plan?

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