Archive for 2007

  • Suze Sits in for Cramer
    , March 7th, 2007 at 9:10 am

    Courtesy of WallStrip.

  • UnitedHealth Restates Earnings
    , March 6th, 2007 at 10:35 am

    UnitedHealth Group (UNH) finally restated its earnings to account for all the stock options charges. Bear in mind, this has no impact on the company’s future direction, it’s merely restating what has already happened.

    Health insurer UnitedHealth Group Inc. said Tuesday charges to correct accounting for backdated stock option grants reduced profit by $1.55 billion. The company has filed restated financial results for 2006 and prior years, bringing it up to date in its filings with the Securities and Exchange Commission.
    UnitedHealth reported 2006 earnings grew 35 percent to $4.16 billion, or $2.97 per share, from $3.08 billion, or $2.31 per share in 2005. Revenue rose 54 percent to $71.54 billion from $46.43 billion.
    Results were helped by the acquisition of PacifiCare in late 2005, pricing of risk-based medical coverages and cost cutting.
    UnitedHealth said it will make cash payments for additional corporate income taxes of about $100 million, and will record a charge of $55 million, or 4 cents per share, in the first quarter of 2007 for a settlement relating to some employees who exercised options in 2006.
    Under the company’s current accounting method, corrections to stock option granting methods lowered profit by $414 million, including $57 million for 2005, $44 million in 2004 and $313 million for the 10-year period ended Dec. 31, 2003.
    Under its historic accounting method, the company said charges reduced previously reported profit by $1.13 billion, including $238 million in 2005, $158 million in 2004, and $738 million for all prior years through Dec. 31, 2003.

    UnitedHealth has already forecast 2007 earnings between $4.7 billion and $4.75 billion. The problem was that we didn’t know exactly what that worked out to on an earnings-per-share basis. Now we can say that it will be about $3.47 to $3.51 a share.
    So now we have a clearer picture. EPS was up 29% last year. It should be up around 17%-18% this year, and the shares are going for about 16 times earnings. Sounds like a bargain to me.

  • Topps Goes Private Equity
    , March 6th, 2007 at 10:01 am

    Topps Co. Inc. (TOPP), the company known for baseball cards and Bazooka bubble gum, is going the private equity route. Topps agreed to be bought out for $385 million by a group that includes Michael Eisner’s firm, The Tornante Co. LLC.
    Most people didn’t know this company was publicly traded. I remember how popular the shares were in the late-1990s, but Topps hasn’t done much over the long haul.
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  • I Told You Sell-Offs Aren’t Healthy
    , March 6th, 2007 at 7:28 am

    From the Telegraph:

    Goldman Sachs warns of ‘dead bodies’ after market turmoil

    I’m confused. If they’re already dead, what do we have to worry about?

  • Conan on the Sell-Off
    , March 5th, 2007 at 4:19 pm

  • WallSt.Net Podcast
    , March 5th, 2007 at 3:49 pm

    Here’s a podcast I did recently with Kristin Friedersdorf of WallSt.net.

  • Red Robin Reports Great Earnings, But On Closer Inspection, Maybe Not So Great
    , March 5th, 2007 at 3:12 pm

    Last week, Red Robin Gourmet Burgers (RRGB) reported great earnings. The company beat earnings expectations by 16 cents a share, and the stock jumped 7.6%. But David Phillips at 10-Q Detective has read the fine print:

    1. 2006 was a 53-week fiscal year. In fiscal 2006, the fifty-third week added $14.4 million to restaurant sales and $0.11 to diluted earnings per share.
    2. Earnings benefited, too, from a 3.0% drop in its effective tax rate to 30.6% for 2006. The decrease was primarily due to more favorable tax credits and state apportionment factors resulting from a shift in income to states with lower tax rates—aggregate state income tax rate fell 1.9% to 2.6% in fiscal 2006. This creative accounting boosted income about 6 cents per share. Management anticipates that its 2007 effective tax rate will be approximately 32 percent.
    3. In 2006, Red Robin reduced the expected life of its outstanding option grants more than 50% to 2.6 years! By cutting the time it thinks its ‘team members’ will hold options, the burger maker was able to trim compensation costs.
    We estimate that the three aforementioned factors added at least 22 cents to Red Robin’s bottom line in 2007.

    Oh.
    To quote Emily Litella, “nevermind.”

  • The Fall in India
    , March 5th, 2007 at 11:09 am

    Stock markets in Asia were slammed again today. The market in India was particularly hard hit. The major index there, the Sensex (^BSESN), dropped 471 points, which is a fall of 3.66%. The index has now lost 2,400 points in the last two weeks.
    This came as a shock to many, but not to observers of CNBC’s “On the Money.” Last week, one sharp-eyed commentator said that the problems in India are in many respects, worse than China’s.
    Over the last four years, the Sensex has risen 400%. But now the economy is overheating, and government is starting to lose control of inflation. Are you ready for the latest plan to fight rising wheat and rice prices? The government has banned futures trading for wheat and rice. Oh dear lord.
    India is the second-largest producer of wheat and rice, so if you see the price of naan go up, you’ll know who to blame. It’s as if the government read a history of the Nixon Administration, got to the part about their economic policies and said, “Hey, let’s try that!” The government has raised taxes. The central bank has raised interest rates. The current accounts situation is bad and getting worse. As a proportion of the economy, India’s deficit is twice that of the United States. Plus, the country carries a huge debt. There’s an old phrase that the market “climbs a wall of worry,” but in India, the market has charged up a wall of ignorance.
    I admire many things about the Indian economy. I recently profiled Cognizant Technology Solutions (CTSH), which is a New Jersey-based company, but a leading outsourcer to India. The company has had stunning results over the past few years. Coincidentally, Cognizant rang the opening bell today from India.
    But as far as the Indian stock market goes, I think things will soon get much worse.

  • Cramer on Biotech
    , March 5th, 2007 at 7:51 am

    In New York magazine, Jim Cramer looks at four biotech stocks; Genentech, Celgene, Gilead and Genzyme. I’d also throw in Amgen. I really wish JJC would do more articles like this. He’s good at it, and I think he’s right.

  • Economists as Forecasters
    , March 4th, 2007 at 7:02 am

    Don’t get too worried about Greenspan’s forecast for the economy (whatever it is he said). In today’s NYT, Daniel Gross reminds us that economists have been awful predictors:

    The Economist reported that in March 2001 — the month the last recession began — 95 percent of American economists believed that there wouldn’t be a recession. In February 2001, the 35 professional forecasters surveyed by the Federal Reserve Bank of Philadelphia collectively predicted growth at an annual rate of 2.2 percent for the second quarter of 2001 and 3.3 percent for the third quarter. It’s as if meteorologists stood outside as the storm clouds approached and informed television viewers that endless sunshine was ahead.

    Maybe it’s not the economists’ fault. Perhaps predicting recessions is inherently impossible. To do it, you have to expect the unexpected:

    Christina Romer, professor of economics at the University of California, Berkeley, says economists can’t predict recessions for the same reason stock market analysts can’t accurately predict market crashes. “Both kinds of events, by their nature, are not predictable events,” she said. Almost all the postwar recessions were preceded by a shock, like a spike in short-term interest rates, or a sharp rise in oil prices. “It’s impossible to see the shocks coming,” Ms. Romer said.