Archive for October, 2011

  • Morning News: October 21, 2011
    , October 21st, 2011 at 6:55 am

    EU Considers Wielding $1.3T to Break Debt Impasse

    German Bunds Fall Amid European Debt Summit Uncertainty; French Bonds Fall

    German Business Morale Falls for Fourth-straight Month

    ECB Deposits Rise as Banks More Reluctant to Lend to Each Other

    Japan Approves Reconstruction Package, Strong Yen Steps

    As Spain Faces a Possible Recession, Criticism of Its Central Bank Is Growing

    Chinese Trade Case Has Clear Targets, Not Obvious Goals

    Gold Rises In Asia Amid Cautious Trading

    Nordic Banks Offer ‘Best Place to Hide’ From Euro Crisis

    GE Profit Rises 18% in Third Quarter

    Microsoft Sales Exceed Estimates on Strong Corporate Demand

    Irate News Corp. Shareholders to Take Murdoch to the Woodshed

    Hedge Moves Hamper Southwest, Alaska Air

    Blackstone Posts $342 Million Loss Amid Tough Markets

    Wynn Shares Drop on Lack of Special Dividend Announcement

    Roger Nusbaum: Round Up All The ETFs

    Jeff Carter: Will The U.S. Be Different From Greece?

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  • Multiple Contraction Is a Bitch
    , October 20th, 2011 at 11:27 am

    For all of 2011, it looks like earnings for the S&P 500 will come in at $97.62. Of course, that involves some future estimates but since it’s not too far into the future, it will probably be very close.

    Let’s compare this year’s earnings with 2007 when the S&P 500 earned $82.54. Yesterday, the S&P 500 closed at 1,209.88. Yet on the exact same data four years ago, the index was at 1,500.63. Higher earnings, lower prices.

    Normally, earnings multiples are inversely related to bond yields. But the 30-year Treasury has dropped from 4.69% four years ago to 3.17% today. The three-month Treasury bill has dropped from 3.74% to 0.02%.

  • Earnings Season So Far
    , October 20th, 2011 at 10:34 am

    Wendy Soong of Bloomberg has a nice summary of third-quarter earnings season so far. Here are some details:

    Of the 500 companies in the S&P 500, 117 have reported so far.

    88 have reported higher earnings.

    24 have reported lower earnings.

    5 have been unchanged.

    85 have beaten earnings.

    21 have missed earnings.

    11 came inline.

    The share-weighted increase is 14.7%.

    Earnings are tracking at $24.45.

  • Morning News: October 20, 2011
    , October 20th, 2011 at 5:53 am

    Merkel Risks Own Downfall to Save Greece

    France and Germany Split on Crisis Solution

    India’s Food Inflation Quickens to 10.6%

    EU Seeks Curbs on High-Frequency Trading

    Euro Zone Wrangling Hammers Stocks

    Crude Declines a Second Day on Europe Debt Outlook; Brent Premium Widens

    Investment Banking’s Uncertain Future at UBS

    Citigroup to Pay Millions to Close Fraud Complaint

    Abbott Labs to Split Into 2 Companies

    American Express 3Q Profit Jumps 13% As Borrowers Spend More

    Fuel Costs Contribute to Wider Loss at AMR

    Groupon Discounts IPO

    Ford Employees Ratify Contract, Despite Show of Displeasure

    U.S. Solar Panel Makers Say China Violated Trade Rules

    Nicholas Financial: Quality on Sale

    James Altucher: The Top 10 Lists of All Time

    Epicurean Dealmaker: The Land of the Free

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  • The Millennium Thus Far
    , October 19th, 2011 at 9:36 pm

    Since December 31, 1999, the Dow has gained exactly 7.5 points.

    Not percent — points. On a percentage basis, that comes to 0.065% spread out over 11.8 years.

    Suddenly, T-bills don’t look so bad.

    (BTW, with dividends, the total return is 32.25%.)

  • Stryker Beats and Guides Higher
    , October 19th, 2011 at 5:44 pm

    First we had good news from Abbott Labs ($ABT). Now we have more good news from Stryker ($SYK). The company just reported Q3 earnings of 91 cents per share which was two cents better than estimates.

    The company also adjusted its full-year earnings range from $3.65 to $3.73 per share to $3.70 to $3.74 per share. That implies Q4 earnings of $1 to $1.04 per share. The CEO said, “We are on track to achieve double digit sales growth in 2011 and adjusted per share earnings at the high end of the range we targeted at the start of the year.”

    That’s nice to hear. Here are some more details:

    Revenue for the quarter rose 15 percent to $2.03 billion, in line with Wall Street expectations.

    Reconstructive products sales rose 8 percent to $901 million as demand for artificial hips and extremities implant systems helped offset a decline in knee replacement sales.

    “The recon (reconstructive) market continued the softness that began last year,” MacMillan told analysts on a conference call.

    MedSurg product revenue increased by 12 percent on higher sales of surgical, endoscopic and emergency equipment and demand for replacement hospital beds and stretchers.

    Neurotechnology and spine products sales jumped 46 percent to $363 million, primarily due to contributions from recent acquisitions.

    In last week’s CWS Market Review, I cautioned investors not to chase Stryker. This is a good earnings report although the stock is down slightly in the after-hours market. Stryker is a decent buy here but I’d like to see it a little cheaper before I called it an outstanding buy.

  • OMG! Apple Plunges!
    , October 19th, 2011 at 12:49 pm

    From the beginning of 2003 through yesterday, Apple ($AAPL) gained 5,600%; yet people are freaking out today because the stock is down 3.8%.

  • More on Abbott’s Plans
    , October 19th, 2011 at 12:09 pm

    Here’s some more info on the break-up plans for Abbott Labs ($ABT).

    Today Abbott announced that it plans to separate into two publicly traded companies, one in diversified medical products and the other in research-based pharmaceuticals. The diversified medical products company will consist of Abbott’s existing diversified medical products portfolio, including its branded generic pharmaceutical, devices, diagnostic and nutritional businesses, and will retain the Abbott name. The research-based pharmaceutical company will include Abbott’s current portfolio of proprietary pharmaceuticals and biologics and will be named later. Both companies will be global leaders in their respective industries.

    “Today’s news is a significant event for Abbott, and reflects another dynamic change in our company’s 123-year history, strengthening our outlook for strong and sustainable growth and shareholder returns,” said Miles D. White, chairman and chief executive officer, Abbott.

    Abbott’s proprietary pharmaceutical business has delivered market-leading performance with a sustainable mix of products and built a strong pipeline of proprietary medicines through internal discovery, in-licensing and collaboration efforts. Abbott also has leadership positions in its diversified businesses, including established pharmaceuticals, nutritionals, diagnostics, and vascular devices, where the company is now the global leader in interventional cardiology.

    Creating Two Dynamic Health Care Companies

    The research-based pharmaceutical company has nearly $18 billion in annual revenue today and will have a sustainable portfolio of market-leading brands, including Humira, Lupron, Synagis, Kaletra, Creon and Synthroid. An attractive pipeline of innovative R&D assets – in important specialty therapeutic areas such as Hepatitis C, immunology, chronic kidney disease, women’s health, oncology and neuroscience – will help drive future growth.

    The diversified medical products company has approximately $22 billion in annual revenue today and a durable mix of products balanced across four major businesses. It will continue to target double-digit ongoing earnings-per-share growth, with opportunities for geographic expansion, particularly in high-growth emerging markets. The company will have an extensive, broad-based pipeline of new products and technologies as well as opportunities for significant margin expansion.

    Mr. White will remain chairman and CEO of Abbott, the diversified medical products company. Richard A. Gonzalez, currently executive vice president, Global Pharmaceuticals, will become chairman and CEO of the research-based pharmaceutical company. Mr. Gonzalez is a more than 30-year Abbott veteran and was previously president and chief operating officer of Abbott.

    Profiles of the Two Companies

    The two companies have evolved into distinct investment and business opportunities:

    The research-based pharmaceutical company will focus on select specialty products with breakthrough innovation that serve patient needs in some of the most critical medical areas, such as immunology, Multiple Sclerosis, chronic kidney disease, Hepatitis C, women’s health and oncology. This company will continue to generate the majority of its revenue from developed markets. The company’s sustainable portfolio and advancing pipeline, including established biologics expertise, have the potential to deliver accelerating revenue growth in the coming years.

    The diversified medical products company will be one of the largest and fastest growing investment opportunities in medical products with strong sales and ongoing earnings-per-share growth and a large, broad mix of products addressing many essential areas of health care. It will generate nearly 40 percent of its sales in high-growth emerging markets, with further expansion expected in the coming years.

    “Abbott will be one of the largest and fastest-growing global diversified medical products companies, with a compelling portfolio of durable growth businesses in medical technology, branded generic pharmaceuticals and nutritionals,” said Mr. White. “We will continue to grow our product lines, market share and global presence, especially in emerging markets.”

    “The research-based pharmaceutical company will be a leader in its industry with a strong and sustainable portfolio of specialty medicines and a promising pipeline of future products,” said Mr. Gonzalez. “This business has been delivering market-leading performance and is well positioned for future success.”

    Following are brief profiles of the two companies as their businesses exist today:

    The Research-Based Pharmaceutical Company

    Annual Sales: Nearly $18 Billion (based on 2011 estimates)

    Portfolio: Numerous leading medicines, including: Humira, Lupron, Synagis, Zemplar, Kaletra, Creon, Duodopa, Synthroid, Androgel and others.

    Pipeline: Advancing pipeline of promising new specialty medicines and formulations, including more than 20 new compounds or indications in Phase 2 or 3 development across such disease states as immunology, chronic kidney disease, Hepatitis C, women’s health, oncology, and neuroscience, including Multiple Sclerosis and Parkinson’s and Alzheimer’s diseases.

    The Diversified Medical Products Company (Abbott)

    Annual Sales: Approximately $22 Billion (based on 2011 estimates)

    Portfolio: Market-leading positions in established pharmaceuticals (branded generics outside the U.S.), adult and pediatric nutritionals, core laboratory diagnostics, point of care and molecular diagnostics, and medical devices, including vascular devices, diabetes care and vision care. Abbott will have an extensive, broad-based pipeline of new technologies and products.

    Global and Emerging Markets Presence: Products in more than 130 countries with nearly 40 percent of sales in emerging markets today; Abbott is the leading pharmaceutical company in India and has a significant and growing presence in many other emerging markets.

    Transaction Details

    The transaction is intended to take the form of a tax-free distribution to Abbott shareholders of a new publicly traded stock for the new pharmaceutical company. The expected stock distribution ratio will be determined at a future date.

    It is expected that the two companies will each pay a dividend that, when combined, will equal the current Abbott dividend at the time of separation.

    This announcement will not impact Abbott’s ongoing earnings-per-share guidance for 2011. The transaction is expected to be completed by the end of next year, but is subject to final approval by the Abbott board of directors, receipt of a favorable ruling from the Internal Revenue Service on the tax-free nature of the transaction, and the effectiveness of a Form 10 registration statement that will be filed with the Securities and Exchange Commission that will include information about the distribution and related matters. Abbott expects to incur one-time charges related to the transaction during the periods preceding the separation, to be quantified at a later date.

  • Abbott Labs Plans to Split Into Two Companies
    , October 19th, 2011 at 11:48 am

    Big news today for Abbott Labs ($ABT). The company reported third-quarter earnings of $1.18 per share which was one penny better than estimates, and 13 cents more than last year’s third quarter.

    Worldwide sales increased 13.2% to $9.8 billion. The gross margin ratio was 60.4% which was higher than ABT’s guidance. Abbott also narrowed its full-year guidance to $4.64 – $4.66 per share which implies a Q4 range of $1.43 – $1.45 per share. The previous forecast was $4.58 – $4.68.

    But that wasn’t the big news. The big story is that Abbott is planning to split itself into two publicly traded companies, one in diversified medical products and the other in research-based pharmaceuticals.

    Abbott Laboratories, long known for selling a mix of drugs, medical implants and baby formula, said Wednesday it will spin off its branded drug business and become two separate companies with more distinct identities.

    The split-up, announced Wednesday marks a dramatic change in strategy for the 123-year old company, which sells a broad range of products from stents to arthritis drugs to contact lens solution. While many pharmaceutical companies weathered losses as the patents on their blockbuster drugs expired, Abbott has continued to post double-digit sales growth, chiefly because of its anti-inflammatory drug Humira. The injectable drug posted sales of $6.5 billion last year.

    But Abbott’s reliance on the drug has been a concern for investors, overshadowing the company’s performance across other businesses. Humira loses patent protection in 2016 and the company has largely been unsuccessful in developing new therapies to replace the drug.

    CEO Miles White suggested Wednesday the split is about crafting two companies with clearer messages for investors.

    “What happened here is the pharma piece got so big, and is so different, that these two investments make sense separately, and both are of a critical mass and size that they have great sustainability going forward as independent companies,” White told analyst on a teleconference call.

    I like this plan. You often get a great bargain when good companies split themselves up. Plus, this split makes a lot of sense.

    The plan is to have this as a tax-free distribution to shareholders. The company has said that it wants to do this by the end of next year.

  • Twenty-Four Years Ago Today
    , October 19th, 2011 at 7:06 am

    Twenty-four years ago today, the Dow lost 508 points. Since then, we’ve gained 9,839 points but only 80 have come since December 31, 1999.