Frontier Airlines Jumps
Posted by Eddy Elfenbein on September 20th, 2006 at 2:45 pm

I had Frontier Airlines (FRNT) on last year’s Buy List. I hate airline stocks, but FRNT looked like a sound investment at a good price. The stock was doing well until it got slammed after Southwest Airlines (LUV) said it was going to enter the Denver market, Frontier’s home turf. Ultimately, I decided againt keeping Frontier on this year’s Buy List, which was a smart move since the stock has fallen for most of the year.
Shares of Frontier got as low as $6, but have to started to perk up recently. Fuel is a huge cost for the ailines, and crude oil briefly fell below $60 a barrel today. Frontier is up strongly this session and is back over $8 a share.

The Fed Leaves Rates Unchanged
Posted by Eddy Elfenbein on September 20th, 2006 at 2:18 pm

Here’s the statement:

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.
The moderation in economic growth appears to be continuing, partly reflecting a cooling of the housing market.
Readings on core inflation have been elevated, and the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures. However, inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations, and the cumulative effects of monetary policy actions and other factors restraining aggregate demand.
Nonetheless, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.

Once again, Jeffrey M. Lacker wanted a 0.25% increase. Me too.

Earnings Preview for Bed Bath & Beyond
Posted by Eddy Elfenbein on September 20th, 2006 at 1:53 pm

Bed Bath & Beyond (BBBY) reports after the bell. The company has already said it expects 51 cents a share. The AP has a preview:

OVERVIEW: The company operates 819 stores nationwide under the names Bed Bath & Beyond, Christmas Tree Shops and Harmon selling home furnishings, food, gifts and health and beauty care products.
Consumers are being squeezed by rising interest rates, the slowing housing market and higher fuel prices. Rising energy costs have also lifted utilities costs, hurting some companies’ bottom line. Furniture sales have been weak in recent weeks, as people cut back on big-ticket items amid the slowing housing market. However, analysts see Bed Bath & Beyond as a savvier merchandiser and better equipped financially to handle economic pressures, compared with Pier 1 Imports Inc. and other rival chains.
BY THE NUMBERS: Wall Street expects earnings of 51 cents per share, the mean estimate of 24 analysts surveyed by Thomson Financial, on $1.60 billion in sales. The company didn’t provide any financial forecast in its last earnings release in June. (They said 51 cents a share in the conference call.)
ANALYST TAKE: “Given the company’s historical top-line immunity to furniture sales fluctuations and housing turnover, we remain confident that planned 3 percent to 5 percent (same-store sales increases) are achievable,” Goldman Sachs analyst Adrianne Shapira wrote in a client note. Selling, general and administrative costs could pose some risk, “but our gross margin assumptions should prove conservative.” Shapira forecast quarterly earnings of 52 cents per share, which she said was a penny higher than management’s guidance.

Market At 5-1/2 Year High
Posted by Eddy Elfenbein on September 20th, 2006 at 11:09 am

Thanks to Oracle (ORCL) and $61 oil, the S&P 500 has climbed above 1327 for the first time since February 2001. The Dow broke 11600. But will it hold?
The 10-year yield is now down to 4.72%, it’s lowest point since March. The yield on the 30-year bond got down to 4.835%. Our Buy List is now up over 5% for the year. Expeditors (EXPD) is doing well today. Fiserv (FISV) and Sysco (SYY) also hit new highs earlier today.

Dept. of the Obvious
Posted by Eddy Elfenbein on September 20th, 2006 at 10:42 am

Two researchers looked to see if stock spamming works.
*Drumroll*
It does!

Based on a large sample of touted stocks listed on the Pink Sheets quotation system, we find that stocks experience a significantly positive return on days when they are heavily touted via spam, and on the day preceding such touting. Volume of trading also responds positively and significantly to heavy touting. Indeed, on a day when no tout has been detected in our database, the likelihood of a touted stock being the most actively traded stock that day is only 6%. On the other hand, on days when there is touting activity, the probability of a touted stock being the single most actively traded stock is 81%. Returns in the days following touting are significantly negative.

Biomet’s Earnings
Posted by Eddy Elfenbein on September 20th, 2006 at 8:52 am

Biomet (BMET) reported earnings of 42 cents a share this morning. That’s a penny below analysts’ consensus so the stock will probably be under pressure today. Sales were up just 5% to $508 million. The company said that sales at its trauma and spine unit (ick) were $12 million below management’s expectations. Over 330 jobs have been cut from that department. Biomet also said that its “comfortable” with second-quarter estimates of 44 cents to 46 cents a share, and sales of $519 million to $540 million.

Oil Plunges Below $62 A Barrel
Posted by Eddy Elfenbein on September 19th, 2006 at 2:56 pm

The fall in oil continues. In fact, it’s accelerating. Here’s a chart of October light sweet crude:

From AP:

“We’ll see sub-$2.25 a gallon retail (prices) by October,” said Tom Kloza, director of the Oil Price Information Service, adding that prices below $2 can already be found in Kansas, Missouri, South Carolina and other states.

At one point, oil got down to $61.58 a barrel from $63.80 yesterday. Ticker Sense notes the correlation between the price of oil and President Bush’s approval numbers.

The Flat Yield Curve
Posted by Eddy Elfenbein on September 19th, 2006 at 11:31 am

Actually, the yield isn’t even flat anymore, it’s a bowl. The yield on the five-year note is lower than both the 90-day bill and the 10-year bond.
The Federal Reserve came close to flattening out the yield curve earlier this year at about 4.5%. Then the long-end run away from the central bank. But over the summer, long-term yields started to head back down and they crossed the short-term yields on the way.
I still wouldn’t mind seeing another 25 or 50 basis points from the Fed. I think we’ve forgotten how high inflation-adjusted short-term rates can go. I think the basic rule should be to keep interest rates about 3% above the core rate of inflation during an expansion. And during a recession, real rates should be close to zero as possible without going negative.

Our Remarkable Growth
Posted by Eddy Elfenbein on September 19th, 2006 at 10:45 am

Investors these days hear a lot about “the rise of China” or the “rise of India.” In today’s Wall Street Journal, Michael Milken points out:

China and India combined to produce nearly half the world’s economic output in 1820 compared to just 1.8% for the U.S. Our remarkable growth since 1820 has benefited from democratic institutions, a belief in capitalism, private property rights, an entrepreneurial culture, abundant resources, openness to foreign investment, the best universities, immigration and relatively transparent markets. (Hat tip: Prof. Mankiw).

On a related note, Investor’s Business Daily comments on Sweden’s economy:

And it’s wrong to praise Sweden’s current economic performance. Sweden ranks 14th worldwide in per capita income now, but in 1970 it ranked fourth. That’s a big drop.
The average Swede earns $29,800 a year. Not bad, you say? That’s less than the average person in Mississippi. Some model.

FactSet Beat the Street
Posted by Eddy Elfenbein on September 19th, 2006 at 9:55 am

FactSet did it again! This company just keeps delivering the earnings.
This morning, FactSet Research Systems (FDS) reported earnings of 46 cents a share for its fourth quarter (ending in August). Excluding charges for stock compensation, FDS earned 48 cents a share, six cents more than Street estimates.
The shares are up 7% this morning to a new all-time high. Last year, the company made 37 cents a share for the fourth quarter. Sales were up 27% to $105 million.
Not only does the company have strong growth, it has consistent growth. Here are the sales and EPS numbers for the past few years:
Year………………….Sales (mil)…………..EPS
1996…………………$44.35……………….$0.13
1997…………………$58.36……………….$0.18
1998…………………$78.91……………….$0.26
1999…………………$103.83……………..$0.37
2000…………………$134.18……………..$0.49
2001…………………$167.56……………..$0.64
2002…………………$198.29……………..$0.78
2003…………………$222.30……………..$0.98
2004…………………$251.91……………..$1.15
2005…………………$312.64……………..$1.43
2006…………………$387.35……………..$1.64