Correction Prevents Mistakes
Posted by Eddy Elfenbein on May 25th, 2006 at 7:23 am

The Saudi market crash is causing thousands of marriages to be called off:

The stock market crash, which affected more than 3.5 million middle income investors, has delayed the marriages of many people this summer, Asharq Al-Awsat newspaper reported.
Every summer, tens of thousand of Saudis get married but this year, the number is expected to drop by more than 50 percent.
Fahd Al-Harbi, a wedding hall owner, said that many people who had made reservations cancelled them after the crash.
Al-Harbi said that many wedding hall owners would reduce prices to attract customers and that he had reduced his prices by more than 50 percent.
Saleh Al-Muntasheri has postponed his wedding which was scheduled for the summer because of the crash. He said that he had lost SR120,000.
Ahmad Ali is another Saudi who lost money in the crash. He said he had lost SR67,000 which had taken him more than five years to save.
He said he had been forced to cancel his wedding because he could not afford it and that he would not borrow the money.

Donaldson’s Earnings
Posted by Eddy Elfenbein on May 24th, 2006 at 4:19 pm

Donaldson (DCI) just reported earnings of 43 cents a share, two cents better than Street estimates.
The company also narrowed its full-year guidance to a range of $1.49 a share to $1.54 a share. The previous range was $1.47 to $1.57.
Since the company has already made $1.12 a share through the first three quarters of this fiscal year, it means that it’s forecasting earnings of 37 cents to 42 cents a share for this quarter.
It also virtually guarantees a 17th straight year of rising earnings. Here are some historical financials on Donaldson:
Year………….Sales……………..EPS
1990…………$422.9……………$0.19
1991…………$457.7……………$0.21
1992…………$482.1……………$0.23
1993…………$533.3……………$0.26
1994…………$593.5……………$0.30
1995…………$704.0……………$0.37
1996…………$758.6……………$0.42
1997…………$833.3……………$0.50
1998…………$940.4……………$0.57
1999…………$944.1……………$0.66
2000…………$1,092.3…………$0.76
2001…………$1,137.0…………$0.83
2002…………$1,126.0…………$0.95
2003…………$1,218.3…………$1.05
2004…………$1,415.0…………$1.18
2005…………$1,595.7…………$1.27
2006…………$1,690.0…………$1.53 (est)
2007…………$1,780.0…………$1.68 (est)
Revenues for the quarter came in on the low side. Here’s a chart of Donaldson’s EPS. I used a logarithmic scale so you can see how steady the increases have been. The red is the forecasted range. Also, there were some minor charges last year, which explains the slight dip.

Companies don’t get much more dependable than that. Owning DCI is as close as you’ll get these days to owning a bond with a 13% coupon.

Eaton Vance
Posted by Eddy Elfenbein on May 24th, 2006 at 3:47 pm

Here’s a cool stock: Eaton Vance (EV) just reported another solid quarter. The company earned 29 cents a share compared with 23 cents last year, although the Street was looking for 32 cents. No worries, the shares are higher today.
Over the last 31 years, the stock is up about 230,000%–and that doesn’t include dividends. And it’s still not in the S&P 500!

1987 Redux?
Posted by Eddy Elfenbein on May 24th, 2006 at 3:13 pm

Lately, we’ve been hearing a lot of silly talk about how now is “just like 1987.”
Please. I need more than “a new Fed chairman and rising interest rates” to see the similarities. Unless Cutting Crew is getting popular again, then no–this is not like 1987.
There is, however, one big change going on in the market, and it’s actually more important that the level of stocks. I think the leadership of cyclicals stocks has run its course.
Here’s a chart of the Morgan Stanley Cyclical Index (^CYC) divided by the S&P 500:

There are three other times that cyclicals have burned out at this level. On May 10, the ratio peaked at 0.672. It’s fallen back since, and it’s down again today.

Gold Down $20 an Ounce
Posted by Eddy Elfenbein on May 24th, 2006 at 11:02 am

The market is up modestly today. From the Buy List, Medtronic (MDT) is about 4% higher. Expeditors (EXPD) is up about 3% on an upgrade from Robert W. Baird. Donaldson (DCI) reports after the close. Also, Home Depot’s Bob Nardelli’s pay (and performance) is targeted in today’s NYT.
There’s not much of a theme so far. This is one of those rare days when the energy sector isn’t leading or lagging the broader market. The only sector that’s feeling the pain is in the gold pits. The yellow metal is off $20. Gold peaked at $728 on May 11 and 12. It’s down about 10% since then.
A few other items:
Vonage (VG) is down about 15% on its first day of trading.
Are you looking for a medical marijuana stock? Well, here’s Cannasat Therapeutics (CTH.V).
Check out CNBC’s Morning Blog. Liz Claman updates it maybe twice a month. (She calls her readers “bloggers,” as in “hey bloggers!” That’s so cute!)
Have you seen those Washington Mutual (WM) ads with the “stodgy bankers”? It’s a penned-off group of middle-aged, white men who harrumph at all the consumer-friendly things WaMu does. (Given the traditional stereotypes of money lenders, I guess this is an improvement.) In any event, as part of their cost-reduction strategy, the company is laying off 1,400 workers in two of their call centers. I wonder if the stodgy white guys would approve.
Lastly, enjoy the fine prose of “The Relation between Time-Series and Cross-Sectional Effects of Idiosyncratic Variance on Stock Returns in G7 Countries.” There will be a quiz tomorrow.

Medtronic Raises Forecasts
Posted by Eddy Elfenbein on May 24th, 2006 at 9:38 am

Before yesterday, Wall Street had been terrified that the mess over at Guidant was crimping Medtronic’s ICD business. While sales growth was down, it wasn’t nearly as bad as the Street was expecting. Actually, Medtronic wound up having a pretty decent quarter. What’s more, the company raised estimates again. For next year, the company expects earnings of $2.52 to $2.60. For 2008, Medtronic sees earnings of $2.78 to $2.88.

The Bitchiest 8-K Report
Posted by Eddy Elfenbein on May 23rd, 2006 at 5:35 pm

I bet you didn’t know SEC filings could have such a nasty attitude. Check out this Q&A from Expeditors‘ (EXPD) 8-K report:

20. You are generating a lot of cash and you are increasing the dividend. Your working capital is strong, etc. The balance sheet is probably the best in the transportation industry, so what else do you with the cash? You have always reinvested in the business, but you must be getting to the point where there is little else to invest in. Are there locations where you can open other offices? What’s next for your company? Where do you go from here? Is it more of the same in terms of growth? How should we think about the company going forward in terms of next steps? I know it’s an open-ended, broad question, but you have been one of the few companies that have consistently delivered on growth, on promises, etc., and the company has obviously shifted to a level of growth that your peer group has never been able to match. Thanks for indulging the question.
This was not an “open-ended, broad question” it was an interrogation that left us exhausted just reading it. We did not ‘indulge” your question, we endured it.
As much as we love being asked what we are going to do with the cash, we wonder why you don’t look to see what we have done so far? Last year, we generated approximately $280 million in cash flow from operating activities. We bought back $127 million worth of stock and paid out $32 million in dividends and we invested another $91 million into the business via capital expenditures. We ended the year 2005 with $55 million in additional cash. All in all, we think that was a pretty good use of cash.
This year, we estimate that we are going to use about $130 million for capital expenditures and as you note we’ve just raised the dividend to a level that means we might spend about $45 million on dividends. As to stock repurchases we would expect to spend at least as much as we did last year in keeping with our current goal of keeping our outstanding share count relatively flat.
As for the rest of your question, there are many locations where the company can and will open. As our same store sales figures demonstrate, new offices are not the story behind our historical growth and as we have said before, they do not require massive capital outlays.

It seemed like a reasonable question to me. (Sheesh, they should see some of my e-mail.) It’s a good thing they’re making money. Otherwise, they might come across as jerks.

S&P Is Bullish on FactSet
Posted by Eddy Elfenbein on May 23rd, 2006 at 5:16 pm

They give FactSet (FDS) a 12-month price target of $55 a share:

Standard & Poor’s favorable opinion of FactSet Research Systems (FDS) reflects our belief that, at current levels, the shares do not fully reflect the company’s positive business momentum. We see solid fundamentals for its target market, the global financial investment community, and we expect that international markets will offer strong revenue-growth opportunities. We continue to think the company has an important, entrenched position in a niche market with significant barriers to entry.

Medtronic Earned 62 Cents a Share
Posted by Eddy Elfenbein on May 23rd, 2006 at 4:17 pm

In line with expectations:

Medtronic Inc. on Tuesday said quarterly earnings rose on higher sales of its implantable devices to manage irregular heart rhythms.
Fiscal fourth-quarter net income rose to $746.6 million, or 62 cents a share. A year ago, the company reported net earnings of $194.4 million, or 16 cents a share, after taking a charge to settle patent litigation over its spine devices.

The stock hit an 18-month low today.

Dell to Open Retail Stores
Posted by Eddy Elfenbein on May 23rd, 2006 at 2:49 pm

The first one is scheduled for Dallas.

The store, at NorthPark Center, will not carry inventory, Dell spokesman Venancio Figueroa said. Rather, it will allow customers to try out Dell’s products and order them for delivery, Figueroa said.
The store is a pilot initiative to see whether it can spark interest in Dell’s products while letting the company maintain its distinct business model.
Long known for selling computers directly to customers, Dell has seen its stock fall in the last year amid lagging U.S. sales. Some analysts have said the company could boost sales by selling its products through major retailers, but Dell executives have insisted that their business model is more cost-effective.