A federal judge in Florida has ruled the extremely controversial forcing of healthcare on the American people by Obama, as unconstitutional, which resulted in applause from a number of quarters, including the National Federation of Independent Business (NFIB), which represents small business interests in America.
Karen Harned, the NFIB's executive director, said in a statement, "NFIB joined this case to protect the rights of small-business owners ... The individual mandate, which forces citizens to purchase government approved health insurance, undermines this core principle and gives the federal government entirely too much power."
Also supporting the decision by the federal judge was Republican House Speaker and majority leader John Boehner, who said, "Today's decision affirms the view, held by most of the states and a majority of the American people, that the federal government should not be in the business of forcing you to buy health insurance and punishing you if you don't."
This particular case if are more important than any before it, as over half the U.S. States were plaintiffs in the lawsuit.
States that were plaintiffs in the lawsuit included Alabama, Alaska, Arizona, Colorado, Florida, Georgia, Idaho, Indiana, Louisiana, Michigan, Mississippi, Nebraska, Nevada, Pennsylvania, South Carolina, North Dakota, South Dakota, Texas, Utah, Washington, Iowa, Ohio, Kansas, Maine, Wisconsin and Wyoming.
The vast majority of American continue to oppose the imposition of forced healthcare upon them, and want the law repealed.
At specific issue in this case was what has come to be identified as an individual mandate, which forces Americans to acquire healthcare by 2014 or be required to pay a penalty.
Vinson said on that count, "Regardless of how laudable its attempts may have been to accomplish these goals in passing the act, Congress must operate within the bounds established by the Constitution."
The U.S. House of Representatives voted in January to repeal the healthcare reform law, one of the major reasons they were swept into office in unprecedented levels. That and the endless spending by the Obama administration were two of the major catalysts, although there were many others.
Growing expectations are the healthcare law will finally be decided by the Supreme Court as to whether or not it's constitutional.
Monday, January 31, 2011
A federal judge in Florida has ruled the extremely controversial forcing of healthcare on the American people by Obama, as unconstitutional, which resulted in applause from a number of quarters, including the National Federation of Independent Business (NFIB), which represents small business interests in America.
General Electric (NYSE:GE) said they've entered into their largest wind-power deal in Europe, which will have them service installed wind turbines at 8 wind farms located in Spain. The deal will extend over a 10-year period.
The deal is with Spanish wind developer Cobra Energia, whereby General Electric will also provide services for 178 of the wind turbines installed at the wind farms.
Identified as "advance services," General Electric will provide parts, upgrades, troubleshooting and any unplanned maintenance on the turbines. Cobra will do the routine maintenance on the turbines.
All of General Electric 1.5 megawatt wind turbines coming off warranty between 2010 and 2012 will be covered in the deal.
General Electric was trading at $20.19, down $0.01, or 0.05 percent, as of 2:24 PM EST.
In what is somewhat of an embarrassment, Microsoft's (Nasdaq:MSFT) old Windows Mobile platform outsold Windows Phone 7 in the last quarter, according to data from NPD.
While it has to be taken into account Windows Phone 7 launched in the middle of the quarter, even so, it only generated 2 percent in market share against Windows Mobile's 4 percent market share.
Assuming sales at the same pace, Windows Phone 7 would have still only matched the sales of Windows Mobile in the quarter.
When it comes down to it, Microsoft still lacks a major catalyst for Windows Phone 7, and they need make a big deal with a major carrier to get the platform jump started.
Microsoft was trading at $27.58, down $0.18, or 0.63 percent, as of 2:09 PM EST.
Shares of Ford Motor (NYSE:F) continue to take a big hit today, after plummeting 13 percent on Friday, as expectations for the automaker continue to fall, as commodity costs rise.
Goldman Sachs (NYSE:GS) analyst Patrick Archambault lowered his outlook on Ford Sunday, saying, "Our new estimates reflect higher and more back-end loaded fixed costs than we previously modeled."
He added that over the long haul he sees the increase in costs as important to retaining product leadership, adding, "we see these outlays as essential to extending Ford's product leadership."
Fixed cost inflation was boosted to $2.6 billion for 2011, up from the prior estimate of $1.5 billion.
Goldman maintains their "Buy" rating on Ford, which was trading at $15.88, falling $0.40, or 2.43 percent, as of 1:52 PM EST. Goldman lowered their price target on Ford from $22 to $20.
Citigroup (NYSE:C), Barclays (NYSE:BCS) and HSBC (NYSE:HBC), among other financial institutions in Egypt, has evacuated non-Egyptian employees from the region for their safety.
The central bank of Egypt also ordered all banks closed on Monday, as turmoil and danger escalates.
Commenting on evacuating their people, Citigroup said they have about 600 workers in Egypt, with the majority of them being local. Foreign nationals wanting to leave Egypt were evacuated Sunday evening.
Barclays said they pulled out less than 10 of its people, and HSBC said they also pulled out a "small number" of foreign nationals working for them.
Citigroup was trading at $4.78, up $0.07, or 1.38 percent, as of 1:33PM EST.
The recent ruling by a judge in Nevada which blocked 8,900 foreclosures Bank of America (NYSE:BAC) was processing, is being challenged by the giant bank through an appeal.
Nye County District Court Judge Robert Lane issued a temporary restraining order against ReconTrust, a Bank of America subsidiary, in regard to the foreclosures.
Bank of America said in a motion, "The order has created enormous upheaval and confusion in the foreclosure process across Nevada and immediate review is required."
The restraining order, if it remains in place, will be effective until a hearing on February 28.
Bank of America was trading at $13.77, gaining $0.17, or 1.29 percent, as of 1:16 PM EST.
There was never a doubt that Apple (NASDAQ:AAPL) would lose market share in the tablet market, as they were the first major entry there, and imitators would have to follow, cutting into their market share. That was confirmed with Google (NASDAQ:GOOG), as their Android-powered tablets sales soared.
In the last quarter of 2010, Apple's tablet share fell from 95 percent to 77 percent.
Google continues to take bites out of Apple's iPad dominance, as they grew their tablet share from an anemic 2.3 percent in the third quarter to 22 percent in the fourth quarter, giving the iPad its first real competitive challenge in the tablet sector.
The major tablet behind Androids success is the Samsung Galaxy Tab. They and others are high on Android because of Google's additional services like YouTube, among others, as well as what is perceived as a low-cost alternative to iPad.
Last week Samsung said they had sold about 2 million tablets in the fourth quarter.
Other potentially significant challengers to the iPad are the Xoom tablet from Motorola Mobility (NYSE:MMI), which will also be powered by Android, and Research in Motion's (NASDAQ:RIMM) Playbook.
Apple was trading at $339.06, gaining $2.96, or 0.88 percent, as of 12:56 PM EST. Google was at $600.40, down $0.59, or 0.10 percent, as of 12:57 PM EST. Research in Motion was trading at $59.05 , down $1.10, or 1.83 percent, as of 12:57 PM EST.
The chip error of Intel's (Nasdaq:INTC) has given shares of AMD (NYSE:AMD) a boost today, as Intel scrambles to manufacture new chips to replace the faulty ones.
Intel is expected to take a charge of $300 billion on lost revenue in the quarter as a result of their blunder.
AMD shares have jumped over 5 percent in response to Intel's debacle. AMD is Intel's chief rival in the chip sector.
AMD was trading at $7.96, gaining $0.47, or 6.28 percent, as of 12:32 PM EST. Intel was down to $21.20, falling $0.25.
Exxon Mobil (NYSE:XOM) beat expectations in the fourth quarter, as strong demand for oil pushed up the revenue and earnings for the company.
Revenue surged 17 percent in the fourth quarter, jumping to $105.2 billion, or earnings of $1.85 a share, a huge 23 cents a share better than the $1.62 a share analysts had estimated. Analysts had an estimate of $99.1 billion on revenue.
Exxon's Chairman Rex Tillerson said in a statement, “ExxonMobil continues to deliver strong financial and operating results. The full year 2010 earnings, excluding special items, were $30.5 billion, up 57 percent from 2009, driven by higher crude oil and natural gas realizations, stronger refining margins and record Chemical performance. Fourth quarter earnings were $9.3 billion, an increase of 53 percent."
Oil prices in the quarter rose by 12 percent, while Exxon's production grew 19 percent.
For all of 2010, revenue soared to $383 billion, a gain of 32 percent. Earnings for the year came in at $30.5 billion, or 6.22 a share, a huge increase over the $19.3 billion, or 3.98 a share in 2009.
Exxon was trading at $80.26, up $1.30, or 1.61 percent, as of 12:24 PM EST.
Sprint Nextel announced today it has launched 4G services to customer in Jamaica and Taiwan, via partnerships with local wireless providers.
The new service a for unlimited $14.99 day-passes for 4G customers in the two countries.
In December Sprint revealed they had entered into agreements with Digicel of Jamaica and Global Mobile of Taiwan to offer the 4G services to the regions. The is the first 4G international roaming agreements put in place.
Sprint was trading at $4.47, up $0.02, or 0.45 percent, as of 12:10 PM EST.
In a move to expanding its fastener business, Alcoa (NYSE:AA) announced they will acquire the aerospace fastener division of TransDigm Group Inc. for $240 million.
Vitaliy Rusakov, president of Alcoa Fastening Systems said, “The TransDigm (NYSE:TDG) global aerospace fastener business offers a strong portfolio of complementary products and is well known in the aerospace industry for producing highly engineered precision fastening solutions used for critical airframe, engine and equipment applications."
The business, which makes high-strength, high-temperature nickel alloy speciality engine fasteners, slotted entry bearings and airframe bolts, will operate as part of Alcoa Fastening Systems.
Included in the deal will be three manufacturing plants: two based in the UK and one in California. Together they employ 400 workers.
Alcoa was trading at $16.49, up $0.36, or 2.23 percent, as of 12:04 PM EST. Transdigm was trading at $77.60, gaining $0.90, or 1.17 percent.
Kraft Foods (NYSE:KFT) announced their attempt to have a preliminary injunction against Starbucks Coffee Company (Nasdaq:SBUX) was denied by the U.S. District Court for the Southern District of New York.
The General Counsel for Kraft responded saying:
"We're disappointed the judge decided not to grant a preliminary injunction. While we've always acknowledged that there are certain legal hurdles for obtaining a preliminary injunction, we avidly believe this case justifies an injunction and will argue that point vigorously on appeal.
"Importantly, however, today's decision is not a ruling on the core question of whether Starbucks can terminate our contract without compensating us as the contract requires. That question will be decided in arbitration.
"Without proof of material breach, Starbucks only legitimate termination mechanism is to pay Kraft fair market value for the business, plus a premium. We believe more strongly than ever that such a payment is the appropriate outcome in this dispute."
Kraft closed Friday at $30.53, down $0.01, or 0.03 percent. Starbucks closed at $31.73, down $1.30, or 3.94 percent.
The bid for Massey Energy (NYSE:MEE) by Alpha Natural Resources (NYSE:ANR) was stated to be a deal to create a huge coal export company, according to CEO Kevin Crutchfield.
Crutchfield said the deal will create a company that would produce over 27 million tons of metallurgical coal by 2013. Metallurgical coal generates higher prices.
Alpha Natural Resources will start adding to earnings from the deal in 2012, added Crutchfield.
The takeover is valued at $7.1 billion, whereby Massey shareholders will receive $10 a share and 46 percent of the new company's stock.
Both boards gave unanimous approval for the deal to go forward.
Alpha Natural Resources was trading at $53.41, dropping $4.47, or 7.72 percent, as of 11:55 AM EST. Massey was trading at $62.77, gaining $5.55, or 9.68 percent.
The extension of TeleNav's (NASDAQ:TNAV) agreement with AT&T (NYSE:T) should make the stock lighter, according to Canaccord, which sees the core operating fundamentals of the company as strong.
Canaccord says, "Announced two-year extension to AT&T agreement with no changes in terms, removing an overhang on the stock, in our opinion.
"We continue to believe that core operating fundamentals are strong and that opportunities from mobile advertising and commerce exist going forward. All businesses are growing and the outlook is for continued growth...FQ3/11 revenue/EPS guidance of $48M-$50M/$0.15-$0.17 vs. consensus of $46.3M/$0.13. F2011 revenue/EPS guidance of $195M-$200M/$0.79-$0.83 vs. consensus of $190M/$0.70 and previous guidance of $187-192M/$0.64-$0.72."
Canaccord Genuity reiterates a "Buy" rating on TeleNav (TNAV), which closed Friday at 8.95, up $1.58, or 21.44 percent. Canaccord raised their price target on TeleNav from $10 to $15.25.
Intel (Nasdaq:INTC) said they're cutting their revenue projections in the first quarter by $300 million, citing an issue in connection with their recently released support chip.
Via a press release, Intel said they found their new support chip has ports within its 6 Series that could "degrade over time." That could result in devices connected to the ports to underperform or have an impact on its functionality.
The Intel 6 Series chipset is installed in computers with Intel's new second-generation core processors, Sandy Bridge - which started to be shipped on January 9.
Trading on Intel was temporarily stopped on the news, but has since resumed.
Intel said they've stopped shipping the chips and have started manufacturing a new version without the issue.
The company will take a charge against goods sold, and will spend approximately $700 million to take care of the problem.
For the full year, they said revenue shouldn't "be materially affected."
Intel was trading at $21.24, down $0.22, or 1.05 percent, as of 11:45 AM EST.
Hospital lab trends are favoring Cepheid (NASDAQ:CPHD), as they are increasingly showing interest in bringing MDx testing in-house.
Canaccord says, "We reiterate our BUY on Cepheid following a strong quarter against very challenging comparisons (30% revenue growth in Q4/09). The results show that hospital labs are displaying interest in bringing MDx testing in-house with CPHD meeting their needs...Cepheid provided revenue guidance of $245M-$255M, which compares favorably to our previous estimate of $246M. GAAP EPS guidance calls for ($0.01) to $0.04. As a result we are raising our revenue estimate to $250M and lowering our EPS estimate to $0.03 from $0.17."
Canaccord Genuity maintains a 'Buy' rating on Cepheid (CPHD), which closed Friday at $23.91, dropping $0.27, or 1.12 percent. Canaccord boosted their price target on Cephid from $27 to $30.
Under Armour, Inc. (NYSE:UA) had strong sales momentum acceleration in the fourth quarter, led by apparel across all categories. Long term, their new category "Charged Cotton" looks like a winner.
FBR says, "Sales momentum accelerated in 4Q with impressive gains in apparel across categories, aided by strong growth in direct to consumer (+56%), which, coupled with a $0.04 tax benefit, drove upside to our estimate...We expect that "Charged Cotton" - a new category for UA, whereby the company brings its focus on performance to cotton - will be a relatively modest contributor to FY11 top-line growth but has the potential to fuel significant growth longer term, with the prospect of appealing to a broad swath of consumers.
"We are adjusting our FY11 EPS estimate to $1.66 (up from $1.55) on sales of $1.35 billion (+27% year over year) and operating margin of 10.9% (+30 bps year over year)...Our 1Q EPS estimate is $0.21, which assumes sales growth of 28% and operating margin of 6.4%. We are introducing our FY12 EPS estimate of $2.07 (+25% year over year)."
FBR Capital reiterates a 'Market Perform' rating on Under Armour, Inc. (UA), which closed Friday at $59.75, dropping $0.04, or 0.07 percent. FBR raised their PT on Under Armor from $50 to $60.
While Amazon.com (NASDAQ:AMZN) won't escape the short-term punishment of their share price after their recent quarterly report, over the long haul they're still positioned for a successful run.
Kaufman said, "We continue to believe that while Amazon has excellent long-term growth prospects, the stock should trade sideways near term, due to margin pressure, fully priced valuation and tougher comps. Recent financial results support our thesis of top-line growth with margin pressure. That said, we believe Amazon deserves kudos for being able to grow at a high rate despite a very large base. We are keeping our 2011 revenue numbers unchanged at $45.5B, while lowering our earnings estimate by 8% to reflect continued pressure on operating margins."
Kaufman maintains a "Hold" rating on Amazon.com, which closed Friday at $171.14, losing $13.31, or 7.22 percent. Kaufman lowered their price target on Amazon from $163 to $154.
Bypassing all the usual media hype, the question of investors concerning Microsoft (NASDAQ:MSFT) is have they met a real PC market disruptor in the tablet, and is the tablet a fad or a trend.
With mobility being a strong part of technology focus at this time, it's apparent the tablet is more than just a fad, but a trend that should last for some time.
In the short term, it seems the threat to Microsoft if being dragged from future possibilities into an attempt to make it a present reality. That isn't the case.
with Microsoft having over 300 million Windows 7 licenses sold, the relatively paltry sales of 7 million tablets in the last quarter by Apple (NASDAQ:AAPL) doesn't seem so scary.
But, that doesn't mean the long-term threat isn't real, as it is, and Microsoft will have to respond to that threat before it gets too far out of hand.
I don't think they have the type of response this time that they've had in the past, where the have lumbered along in response to potential threats, as this one is outside their PC and Office strength, and bypasses them directly. In other words, tablets are legitimate disruptors which will change the computer landscape very quickly.
Microsoft has been expanding into cloud services, as well as still being able to release a hot product, as Kinect has proven in 2010.
But an assault upon their core business must be taken seriously, and quickly. Short term the threat has been overstated by hype, but in the long term it's real, and the longer Microsoft waits to respond, the more precarious the situation will become.
They have time, but not as much as they've had in the past, and the potential threat is much more dire.
JetBlue Airways (NASDAQ:JBLU) has done nothing since July 2010, according to Soleil, and downgraded the company on low earnings and expectations.
Soleil says, "We are reducing our investment rating on JBLU, slashing our 2011 EPS estimate to $0.32 from $0.46, with consensus currently at $0.50 and, for 2012, are introducing a $0.57 forecast, up 79% from this year...JBLU shares have literally done nothing since our 23 July 2010 upgrade to Buy from Hold, but the Amex Airline Index has risen 20% and the S&P 500 is up 18% over that time frame. We take that weak relative performance as a sign of low expectations, but probably not as low as flat 2011 earnings, and are therefore most comfortable for now on the sidelines here."
Soleil Securities downgraded JetBlue Airways (JBLU) from Buy
to Hold. JetBlue closed Friday at $5.88, falling $0.52, or 8.12 percent. Soleil cut their price target on JetBlue from $8 to $7.
Myriad Genetics (NASDAQ:MYGN) was downgraded by Soleil Securities, with the company citing several concerns they have going forward.
Soleil analyst says, "Our Concerns for 2011/12: 1) A maturing BRACAnalysis franchise. 2) Nominal sales contribution from new products. 3) Potential headline risks associated with development challenges for PARP inhibitors and BRACAnalysis companion tests. 4) ACLU patent challenge case...Model Changes: We're looking for FY11 sales of $389.8MM and EPS of $1.01 - for FY12, we're keeping
expectations intact including sales of $415.2MM and EPS of $1.10."
Soleil Securities downgraded Myriad Genetics (MYGN) from Buy
to Hold. Myriad closed Friday at $19.30, dropping $3.11, or 13.88 percent. Soleil lowered their price target on Myriad from $22 to $20.
With Revlimid accounting for just under 70 percent of Celgene (NASDAQ:CELG) sales, anything that causes sales to drop will result in a significant impact on the company, like slowing sales revealed in the last quarter.
Morgan Joseph says, "Following the company's 4Q10 earnings and conference call, we are more cautious about prospects for Celgene. While we like Revlimid's current growth and CELG's improving pipeline, we believe the key reason Celgene has been able to sustain a very good multiple on the stock is because of strong growth from Revlimid. Revlimid accounts for around 68% of sales and its contribution is expected to rise slightly over the next two years. While Revlimid sales grew at 44% in 2010, they have decelerated slightly since 2Q10, and based on current growth patterns (which are also consistent with management's current guidance), we now think sales will likely continue to decelerate into the end of 2011. By the end of 2011, we expect Revlimid growth to drop to the teens."
Morgan Joseph downgraded Celgene (CELG) from Buy to Hold. Celgene closed Friday at $51.18, falling $3.67, or 6.69 percent.
CARBO Ceramics Inc. (NYSE:CRR) was downgraded by Global Hunter on weak short-term upside, although they look sound in the long term.
Global said, "With increasing service intensity being met with an onslaught of pressure pumping equipment additions, likely increasing the completed well count through 2012, we like the prospects of full absorption of CRR's expanding ceramic and resin coating proppant capacity. Ending the quarter with $2/share in cash and zero debt, along with the prospects of operating cash flows exceeding capex requirements, we expect it to fund growth organically and increase its quarterly dividend 10% post-Q2. Thus the fundamental outlook is sound, but with our 2012 estimate, which is the basis for our $125 price target, which is unchanged. We are lowering our rating from Buy to Accumulate on less near-term upside."
Global Hunter downgraded CARBO Ceramics (CRR) from "Buy" to "Accumulate," while maintaining their price target on the company of $125. CRR closed Friday at $113.61, gaining $3.59, or 3.26 percent.
Guidance from Infinera (Nasdaq:INFN) for the first quarter was anemic after their weak fourth quarter results, causing Miller Tabak to downgrade the company and slash its price target on them.
Miller says, "We grossly over estimated Infinera’s prospects last year after the three exceptionally strong quarters Infinera posted. The 4Q and now 1Q resets have been jarring. We are very disappointed with the Infinera guidance for 1Q. Management drew down the backlog in 4Q and has experienced weak orders so far in 1Q and described visibility as very low. They sharply lowered revenue guidance to $90-$97 million for CY 1Q from $117 million just reported for CY 4Q. They also noted they would experience 2 points of Gross Margin pressure and spend in front of revenues in order to position for the 2H availability of their 40G PIC...Cutting CY 2012 estimate to $0.43 from $1.00...Stock will likely be under considerable pressure for the next 2-3 quarters."
Miller Tabak downgrades Infinera (INFN) from Buy to Hold. Infinera closed Friday at $7.37, plunging $1.61, or 17.93 percent. Miller Tabak slashed their price target on Infinera from $18 to $8.
Chevron Corp. (NYSE:CVX) announced they're going to sell their coal assets, with the goal of divesting of them by the end of 2011. They cited the approximate 10-year to 15-year period for new coal technologies to come online as the reasoning behind their decision.
Chevron Mining Inc. spokeswoman Margaret Lejuste said, "Those technologies are so far into the future, 10 to 15 years in the future, they made the strategic decision to focus on other operations other than mining."
Included in the coal assets sale will be mines in Wyoming, New Mexico and Alabama.
Together the mines in these states produced almost 10 million tons of coal in 2009.
Chevron closed Friday at $93.37, dropping $1.38, or 1.46 percent.
The "Cloud" wasn't able to do it, and challengers from the past haven't been able to do it, but the emergence of the hot tablet market may have finally became the disruptor Microsoft (NASDAQ:MSFT) has feared and competitors have hoped for for years.
In their latest quarterly report, Microsoft's Windows dropped in sales and consumers bypassed desktops for smaller devices. That has generated immense concern over the future of Windows and the PC, as Microsoft has a market share of about 90 percent as far as PC operating systems go.
At this time analysts are somewhat mixed on their response to the threat, with some like Bank of America (NYSE:BAC) saying Microsoft will continue to be able to drive growth via refresh and upgrade cycles.
Others like JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) weren't as optimistic, with Wells saying "tablet demand is likely to weigh on consumer Windows sales," and JPMorgan adding, tablets are sure to "hang over Microsoft like a dark cloud."
Even downwardly revised PC unit shipment targets are being considered too optimistic.
It'll take a couple of quarters more to find out if there is a sustainable trend or not, but Microsoft will know far sooner than the rest of us, and the feeling is this is something that could happen quickly and change the computer dynamic forever.
While Microsoft is more than Windows, the impact would be extraordinary on the company, but could, on the positive side, force it out of its comfort zone and move it into more innovative areas.
None of this will happen overnight, but it's very possible, and probably probable, that Microsoft will continue to lose Windows sales incrementally, which could add up significantly in a relatively short time.
This appears to be the greatest threat to Windows they've had in their history, and probably within about six months we'll know how deep and extensive the threat really is.
Fertilizer demand in 2011 should continue on from 2010, and Potash Corp. (NYSE:POT) will benefit from the ongoing trend.
Canaccord says, "We believe the steady fertilizer purchasing that we witnessed in 2010 will continue through 2011 as farmers globally look at fertilizer purchases to power their crop growth. Furthermore, we believe we are witnessing the early stages of stock rebuilding at the distributor level, which should further add to the demand growth for fertilizers." (Canaccord FY11 EPS estimate is $9.21)
Canaccord Genuity maintains a 'Buy' rating on Potash Corp. (POT), which closed Friday at $174.16, up $0.02, or 0.01 percent. Canaccord raised their price target on Potash from $185 to $207.
Deutsche Bank (NYSE:DB) says they see Amazon.com (NASDAQ:AMZN) accelerating unit growth and operating profits rising 25 percent through 2012.
Recommending to buy Amazon.com on weakness, Deutsche said "particularly as accelerating unit growth (43% in 4Q) should yield improved operating profit dollar growth LT, despite the NT hit on margins."
They added that the "$53 million in spend from operational profits should yield roughly $200 million in incremental profits over 4 yrs."
Deutsche lowered their full year 2011 EPS from $4.25 to $3.91. For 2012, they raised revenue estimates from $51.5 billion to $54.6 billion. They kept 2012 EPS estimates at $5.00.
They reiterate their "Buy" rating on Amazon.com, which closed Friday at $171.14, falling $13.31, or 7.22 percent. Deutsche increased their price target on Amazon from $186 to $192.
Bottomline Technologies (NASDAQ:EPAY) has been quietly moving up under the radar of many investors, as they've been doing it quietly over a period of time, and not in major jumps.
Canaccord says, "Bottomline posted another solid quarter in which the firm reported record orders, 26% operating income growth, and a $0.06 upside. This stock has made a “sneaky” rally inasmuch as the shares have rarely moved much in any given day, but after a few months, the stock is up 30%+. We expect this dynamic to continue. As such we have no hesitation recommending purchase of EPAY at current levels...Our F2011 estimates increase by $1.2 million and $0.06 (inclusive of the Q2 beat). Our estimates imply roughly 13% growth and 180 bps margin improvement."
Canaccord Genuity reiterates a 'Buy' rating on Bottomline Technologies (EPAY), which closed Friday at $22.90, up $2.53, or 12.42 percent. Canaccord raised their price target on Bottomline from $20 to $25.
While capital productivity is getting a slight improvement in 2011, EQT (NYSE:EQT) still looks like they're not going to surprise anyone, although they had their price target bumped up by Canaccord.
Canaccord says, "We are increasing our target from $35 to $38 to reflect higher E&P capital productivity and price realizations...In our view, EQT’s -60% premium (’11E EBITDA) to the group is unwarranted given a weaker CFPS growth (’11-’13E) outlook. Our target is underpinned by a $5 longterm gas price forecast and EQT’s -90% production weighting toward gas. Our revised capital productivity assumption generates ’11 estimated production growth of 32%, which is 2% above guidance and 1% above our prior forecast."
Canaccord Genuity reiterates a 'Sell' rating on EQT Corp. (EQT), which closed Friday at $46.55, losing $0.20, or 0.43. They raised their price target on EQT to $38.
Although Keefe, Bruyette & Woods like the potential of East West Bancorp (NASDAQ:EWBC) in the long term, short-term their valuation causes them to downgrade the bank.
KBW says, "EWBC posted solid 4Q10 results, delivering
ongoing improvement to its NIM and strong C&I loan growth,
maintaining its asset quality, and repaying TARP funding, which returns capital management flexibility to the bank...Downgrading to MP on valuation, but we still believe in East West's potential on a long-term basis and consider it to be a key California franchise."
Keefe, Bruyette & Woods downgraded East West Bancorp (EWBC)
to "Market Perform." KBW raised their price target on EWBC to $22.
ASML (Nasdaq:ASML), Varian (Nasdaq:VSEA), Teradyne (NYSE:TER) Have More Upside than KLA-Tencor (NASDAQ:KLAC) Says Barclays
KLA-Tencor (NASDAQ:KLAC) had a decent quarter, according to Barclays, and should do fairly well in 2011, although GMs could remain under pressure. They like ASML (Nasdaq:ASML), Varian (Nasdaq:VSEA) and Teradyne (NYSE:TER) better in the sector.
Barclays says, "Overall, this was a good quarter for KLAC, notwithstanding a less favorable mix, which weighed on GMs. Looking ahead, we think that the favorable foundry and logic capex mix should help KLAC achieve a $3B+ run rate quite easily, though the metrology and reticle inspection intensive nature of foundry spend might keep a lid on GMs. To this end, we raise our CY11 revenue/EPS to $3.24B/$4.80 (cons $2.8B/$3.93) and introduce CY12 at $3.25B/$4.90 (cons $2.8B/$3.91)...Given our positive view on the cycle, the shares should work - however, at this point, we see greater upside for our favorites, in particular, ASML Inc (ASML), Varian Semi (VSEA) and Teradyne (TER)."
Barclays maintains an 'Equalweight' on KLA-Tencor (KLAC), which closed Friday at $43.69, down $0.99, or 2.22 percent. Barclays raised their price target on KLA from $50 to $53.
Microsemi Corporation (NASDAQ:MSCC) had their EPS estimate slashed by Wells Fargo (NYSE:WFC) on low GAAP operating margins, and were also downgraded by the giant bank.
Wells says, "Microsemi's high reliability business has, in
our view, good long term visibility as a result of the relative stability of the defense, satellite and medical markets. The company also has substantial breadth of commercial markets. Microsemi has established a good track record of integrating acquisitions, consolidated manufacturing operations and reducing costs. However, GAAP operating margins remain relatively low...For FY2011, we decreased our EPS estimate to $0.51 from $0.74 per share and we similarly decreased our FY2012 EPS estimate to $0.99 from $1.27."
Wells Fargo downgraded Microsemi Corporation (MSCC) from
"Outperform" to "Market Perform." Microsemi closed Friday at $22.35, losing $1.33, or 5.62 percent. Wells has a valuation range of $22-$27 on MSCC.
Travelers (NYSE:TRV), ACE (NYSE:ACE), Arch Capital (Nasdaq:ACGL) Better Bets Than Chubb (NYSE:CB) on Valuation
Chubb (NYSE:CB) has a lot going for it, unfortunately for them at this time, peers like Travelers (NYSE:TRV), ACE (NYSE:ACE) and Arch Capital (Nasdaq:ACGL) are trading at or below 1X book value, making them a preferable investment at this time.
Barclays says, "CB has a solid franchise in our view as evidenced by strong 4Q10 underwriting results and aggressive share repurchase activity. However, CB's valuation is above peers, and we prefer other high-quality P&C insurers that trade at or below 1x book value such as Travelers (NYSE:TRV), ACE Ltd (NYSE:ACE) and Arch Capital (Nasdaq:ACGL).
"We are reducing our 2011 EPS estimate for CB to $5.65 from $5.75 (consensus=$5.80) to reflect higher than anticipated catastrophe losses. No change to our 2012 EPS estimate of $5.60 (consensus=$5.73)."
Barclays maintains an 'Equalweight' rating on Chubb Corporation (CB), which closed Friday at $57.97, down $1.36, or 2.29 percent. Barclays has a price target of $59 on Chubb.
AT&T (NYSE:T) was downgraded by UBS (NYSE:UBS), on slowing growth related to a loss of about 150,000 subscribers in the first two quarters. Earnings are expected to follow the subscribers down.
UBS says, "We are lowering our rating on AT&T to Neutral and
reducing our price target based on expectations for lower earnings and FCF growth in 2011 and 2012. Based on our new $2.38 EPS estimate (prior est. $2.55), the stock trades at 11.8x 2011 numbers, a 13% discount to the S&P 500 and roughly in line with its longer term average.
"Given slower growth in 4Q and expectations for increasing
competitive intensity, we now expect AT&T to lose 100K postpaid subscribers in 1Q11 and another 50K in 2Q vs previous expectations for a gain of 100K and 50K. We still expect the company to have positive postpaid sub growth for the year but believe the negative net adds will keep shares range bound until the return to growth."
UBS downgraded AT&T (T) from "Buy" to "Neutral. AT&T closed Friday at $27.49, dropping $0.64, or 2.28 percent. UBS lowered their price target on AT&T from $31 to $29.
Strong crop price should continue on through 2011, and as crop prices go so should fertilizer demand go, and that ends up working strongly for Potash Corp. (NYSE:POT) and other fertilizer companies.
Barclays says, "With a strong correlation between crop price movement and fertilizer equity performance, it is no secret that fertilizer stocks began trending higher in mid-2010 as crop price forecasts started to gradually increase. With crop fundamentals continuing to strengthen on increasing demand and critically low ending inventories, there is no sign of crop price weakness in the short term. In our opinion, until we see crop prices begin to stagnate or even retreat by way of weakening crop fundamentals (either through demand destruction or supply improvements), we expect fertilizer equities to continue to perform well in 2011."
Barclays maintains an 'Overweight' rating on Potash Corp. (POT), which closed Friday at $174.16, up $0.02, or 0.01 percent. Barclays raised their price target on Potash from $165 to $198. Full year 2011 EPS estimate was boosted from $8.15 to $9.03.
Buckeye Technologies (NYSE:BKI) had a good run over the last week, soaring about 30 percent, which brought them a downgrade from UBS (NYSE:UBS), which said they see the good news is fully priced into the share.
UBS says, "The shares have rallied 30% this week alone and
are now within 4% of our recently-revised $28 price target. At this point we do not see justification to take our target higher and believe much of the near-term good news is already priced into the shares."
UBS downgraded Buckeye Technologies (BKI) from "Buy" to "Neutral." Buckeye closed Friday at $24.86, losing 2.11, or 7.82 percent. UBS has a price target of $28 on Buckeye.
For the first time in its history, Microsoft (NASDAQ:MSFT) has a serious contender to its core desktop business, and it appears it's not going to go away anytime soon. We're talking about tablets of course, which should be a major disruptor in Microsoft's universe.
FBR says, "We maintain our MP rating as we (1) remain skeptical about a strong enterprise PC refresh cycle, 2) believe the emergence of tablets will adversely affect the company's core desktop franchise, and (3) evaluate the company's last legitimate effort to becoming a meaningful player in the vital mobile market.
"We are raising our F3Q11 (Mar) revenue and EPS estimates to $16.5 billion and $0.59 from $16.1 billion and $0.54. We are raising our FY11 revenue and EPS estimates to $70.1 billion and $2.62 from $68.5 billion and $2.43. We are raising our FY12 revenue and EPS estimates to $73.9 billion and $2.84 from $73.1 billion and $2.67."
FBR reiterated their "Market Perform" on Microsoft (MSFT), which closed Friday at $27.75, down $1.12, or 3.88 percent. FBR increased their price target on the software giant from $28 to $30.
Thoratec (NASDAQ:THOR) was downgraded by Canaccord on their weak guidance and product pipeline.
Canaccord notes, "Weak 2011 guidance last night came on the
heels of a disappointing discussion about its new product pipeline timelines two weeks ago – especially juxtaposed to Heartware's (Nasdaq:HTWR) – thus we now forecast THOR’s US VAD unit growth will decline 1% in 2012 upon HTWR’s HVAD launch. While THOR posted solid OUS growth in Q4, coupled with our continued belief THOR will significantly grow its DT volume in coming years, expected protracted share loss beginning in 2012 drives our lower top- and bottom-line estimates. We now model EPS CAGR of just 8% through 2013 vs. the comp group CAGR of 14%."
Canaccord Genuity downgraded Thoratec (THOR) from "Buy" to
"Hold." Thoratec closed Friday at $23.13, losing $3.00, or 11.48 percent. Canccord lowered their price target on Thoratic to $23.
Even with low expectations for the quarter, AU Optronics (NYSE:AUO) wasn't even able to meet those, as losses continue to mount at the company.
Ticonderoga says, "AUO reported 4Q10 consolidated sales of NT$102.6 billion (down 17.5% Q/Q). In U.S. dollar terms, 4Q10 sales came in nearly 12% lower sequentially at US$3.52 billion and below our US$3.76 billion forecast. AUO reported an EPS of negative $0.45, much worse than our projection of negative $0.07. Despite reporting the most challenged quarter since 1Q09, we believe that investors are likely to once again search for a bottom in the shares. However, we believe any recovery will be muted as the secular shift toward LCD TV slows and the economics of the panel industry remain challenged. With a slowing secular trend in the LCD market we believe investors are likely to pay an incrementally lower multiple for LCD-related names through each cycle. We continue to remain unexcited by our LCD coverage universe, which also includes LG Display (NYSE:LPL)(Sell) and Corning (NYSE:GLW)(Sell).
"For 1Q11, we are raising our revenue estimate to $3.38 billion from $3.28 billion, and we expect AUO to post a loss of $0.10 per share compared with our previous expectation of a loss of $0.13 per share. For 2011, we are raising our revenue estimate to $14.52 billion from $13.92 billion and increasing our EPS projection to $0.36 from $0.17."
Ticonderoga maintains a 'Neutral' rating on AU Optronics (AUO), which closed Friday at $9.58, down $0.29, or 2.94 percent.
With a strong pipeline and TVR being the top drug for HCV treatment through 2012, Vertex (NASDAQ:VRTX) looks good for the short and long term.
Brean says, "We consider TVR to be the best in class drug for HCV treatment, and to remain so until 2012. Additionally, VRTX has pipeline drugs for RA, CF and epilepsy, but our valuation is driven by a discounted cash flow analysis and a disounted multiples analysis that only incorporates projected TVR and VX-222 revenue, in an effort to be more conservative."
Brean Murray Carret & Co. launched coverage on Vertex (VRTX) with a "Buy" rating. Vertex closed Friday at $39.01, down $0.38, or 0.96 percent. Brean has a price target of $50 on Vertex.
The performance of Riverbed Technology (NASDAQ:RVBD) in their latest quarter was extraordinary; in its geographic scope, as well as in all its verticals.
FBR says, "Last night (Thursday), Riverbed delivered a very good December quarter. While we and most of the Street were expecting a very good quarter, the magnitude of Riverbed's strength across all geographies and verticals was an eye-popping performance on the all-important product revenue front (52% year-over-year growth), a positive dynamic that reinforces our confidence around the company’s impressive growth potential/greenfield opportunity.
"For 1Q11 (March) we are raising our total revenue and pro forma EPS estimates to $160.4 million and $0.18, versus our prior estimates of $152.9 million and $0.15. For FY11, we are increasing our revenue and pro forma EPS estimates to $714.9 million and $0.84, versus our prior estimates of $678.0 million and $0.72. For FY12, we are increasing our revenue and pro forma EPS estimates to $878.2 million and $1.12, versus our prior estimates of $801.7 million and $0.89."
FBR maintains an "Outperform" on Riverbed Technology (RVBD), which closed Friday at $35.53, up $0.62, or 1.78 percent. FBR raised their price target on Riverbed from $41 to $42.
Contrary to some of their peers, Pioneer Natural Resources (NYSE:PXD) has the capital to accelerate drilling at its Eagle Ford Shale and Spraberry Trend projects.
Global Hunter says, "Pioneer is accelerating its drilling activity in the prolific and liquid-rich Spraberry Trend and Eagle Ford Shale plays, with upside to current market expectations. The company's recent sale of Tunisian assets provides substantial capital to further accelerate development."
Global Hunter Securities launched coverage on Pioneer Natural Resources (NYSE:PXD) with a "Buy." Pioneer closed Friday at $91.15, up $1.77, or 1.98 percent. Global has a price target of $120 on Pioneer.
Helmerich & Payne (NYSE:HP) and other land drillers are being viewed as negative by a number of investors, but Global Hunter says they're wrong, and have boosted their EPS estimates for 2011/2012 far above consensus.
Global says, "Negative investor sentiment towards the land drillers has proven to be incorrect, yet again, with the group outperforming the OSX by 500 bps and the overall market by 455 bps yesterday. We think this trend continues, similar to the run in Q4 2010, believing the consensus sell-side estimate to be short 20-30% in most cases for the group. Momentum in the high service intensive plays is unlikely to cease in 2011 or 2012 and the major public drillers should continue to take share as legacy equipment is displaced. No driller is in better position to capitalize on this than HP given its fiscally sound operator base (highest in the group at ~85% of active rig count), under-levered balance sheet and strong cash flows. Ramping up production to three rigs per month suggests it likely delivers more than 50 rigs through 2012. Annualizing last quarter's results and the 2c per share each newbuild adds suggests greater than $5 in earnings power. Despite yesterday's 9.5% move we think the stock has another 20%+ to go."
"We are increasing our fiscal 2011 and 2012 EPS estimates to $4.09 and $5.15 from $3.45 and $4.05, respectively (note consensus as of yesterday was $3.33 and $3.55)."
Global reiterates an "Accumulate" on Helmerich & Payne (HP), which closed Friday at $56.37, down $0.37, or 0.65 percent. Global raised their price target on Helmerich from $62 to $70.
SandRidge Energy (NYSE:SD) has initiated an aggressive drilling campaign to generate growth in oil production and reserves, but the shares will be under pressure on the need for SandRidge to raise more capital.
Global Hunter says, "SandRidge has undergone a radical transformation into an oil-centric company and is launching an aggressive drilling campaign to fuel growth in oil production and reserves. However, the impact of recent financings, and the need for external capital from divestments or additional financing temper our optimism for the shares...Our estimated 2011 cash flow per share of $1.16 per share is also ahead of the recent $1.00 per share
Global Hunter Securities initiateds coverage on SandRidge Energy (SD) with a "Reduce." Sandridge closed Friday at $7.27, up $0.11, or 1.54 percent. Global has a price targeton Sandridge of $6.50.
Even though Apple (NASDAQ:AAPL) enjoyed record phone shipments in its latest quarter, that wasn't enough to keep them in the No. 4 position globally, or move them up, as they were overtaken by Chinese vendor ZTE, which jumped ahead of them.
Apple continues to do well in mature markets, especially North America and Europe. They shipped 16.2 million units in the fourth quarter, over 2 million more than the 14.1 million it shipped in the third quarter.
Data recently released from an IDC report called "Worldwide Quarterly Mobile Phone Tracker," China's ZTE shipped 16.8 million units to leap over Apple, the first time they made the top five in global mobile phone shipments. That gave them a 4.2 percent market share as well.
Ramon Llamas, senior research analyst with IDC's Mobile Devices Technology and Trends team, said, "Change-up among the number four and five vendors could be a regular occurrence this year. Motorola, Research In Motion, and Sony Ericsson - all vendors with a tight focus on the fast-growing smartphone market who had ranked among the top five worldwide vendors during 2010 - are well within striking distance to move back into the top five list."
Along with its usual customer base in Latin America and Africa, along with other emerging markets, ZTE also gained inroads into the American market and Western Europe, offering more hefty smartphones to the market. In the past they gained market share primarily through entry-level and medium-range phones.
The immediate future for the mobile phone market is the growing demand for smartphones, concluded the report.
Taken together, vendors around the world shipped 401.4 million units in the fourth quarter, a big jump from the 340.5 million shipped in the same quarter last year. An increase of 17.9 percent. For the entirety of 2010, global shipments soared from 1.17 billion to 1.39 billion.
For Apple, their market share dropped to 4.0 percent from 4.1 percent in the previous quarter.
Apple closed Friday at $336.10, falling $7.11, or 2.07 percent.
Barrick Gold's (NYSE:ABX) CEO Peter Munk, said at Davos that the uncertain times we live in will continue to add to the attractiveness of gold.
Riots and upheaval in Egypt confirms his assertion, as gold prices spiked on the news, as they did with the EU sovereign debt crisis and the endless printing of digital money by central banks around the world; but worst of all, the Federal Reserve.
All of these elements, and more, will ensure gold prices will continue to rise and be a safe haven for capital.
Munk said, “If you are a utopian, if you believe the problems of currency, the problems of terrorism, the problems of unrest around the world will all be resolved by the end of the year, then gold would have a difficult path. If you believe like I do that we bought ourselves a temporary peace from the panic of last year and the year before, [and] that the fundamentality of the problems are long term still issues, then your attitude will be a bit more positive toward gold.”
Barrick Gold closed Friday at $47.30, gaining $0.93, or 2.01 percent.
While mining stocks have been taking a breather lately, that does nothing to change the dynamics of the industry, which is the continual pursuit of new resources, as well as working existing mines. That's good news for Caterpillar (NYSE:CAT), as many mining companies are flush with cash after a super 2010, and are looking to spend on new equipment.
Consequently, after a solid fourth quarter, Susquehanna is boosting their EPS estimates and price target on CAT raising their guidance.
Susquehanna raised their full year 2011 by 6 percent and their full year 2012 EPS estimate by 5 percent. The new full year 2011/12 EPS estimates were bumped up from $5.90 and $7.50 to $6.25 and $7.85.
They maintain their "Positive" rating on Caterpillar, which closed Friday at $95.68, losing $0.95, or 0.98 percent. Susquehanna boosted their price target on Caterpillar from $105 to $118.
The Wolffork and Wolfcamp Shale plays being worked by Approach Resources (NASDAQ:AREX) need more visibility before it can be known the level of risk or potential connected to the projects.
Global says, "AREX is testing two promising new play concepts - vertical, commingled Wolffork and horizontal Wolfcamp Shale - in the southern Midland Basin. If successful, there is substantial upside in the company's 98,000 acre position. However, given the early nature of the plays and the current valuation, we rate the shares of Approach Neutral.
"We recommend a wait and see approach as the company and other operators cut their teeth on the Wolfcamp shale play. With the recent pick up in activity, we expect to begin seeing some industry data to either de-risk, or disprove, the potential of the play. In all likelihood, as is often the case with early stage development of unconventional plays, initial results may be rather mixed. It often takes a few iterations before drilling and completion techniques can be refined in a play."
Approach Resources (NASDAQ:AREX) closed Friday at $26.26, level with their prior close. Global Hunter has a price target of $26 on them.
According to Global Hunter, which just initiated coverage on Concho Resources, they should be able to grow organically at a 24 percent rate annually for the next several years.
Global says, "Concho is launching an aggressive drilling
campaign on its recently acquired Permian assets which should fuel exceptional growth in production and reserves...The company is well followed and its stock was one of the top performers in 2010. However, our model indicates the company is positioned to grow production organically at a compound annual growth rate of 24% per year for the next several years. In 2011, we expect the company's
production to materially exceed guidance."
Global Hunter Securities started with a "Buy" rating on Concho Resources (CXO), which closed Friday at $91.25, gaining $3.60, or 4.11 percent. Global has a price target of $130 on Concho.
Alpha Natural Resources Inc. has closed the deal to acquire Massey Energy (NYSE:MEE) for around $7 billion. The deal would include cash and stock.
Shareholders of Massey will receive 1.025 share of Alpha share for each share of Massey, plus an additional $10 a share in cash. That would place the value of Massey at about $69.22 a share, a 21 percent premium over their Friday close of $57.23.
This all started back with an explosion at the Upper Big Branch mine in West Virginia, which killed 29 workers and resulted in regulatory restrictions which forced Massey to cut back on production, weakening the company and making them a takeover target.
Massey continues to fight the theory of what caused the accident, where the federal government asserts excessive coal dust buildup, broken water sprayers and worn shearer bits were the cause of the tragedy.
The coal miner says it was the result of a crack in the floor releasing a sudden flow of natural gases which resulted in the accident. An inspection three weeks before the explosion found no large quantities of coal dust from Massey, refuting the government's theory.
Final reports from the government and Massey have yet to be made, with Massey saying they won't release theirs until the government first releases their report.
Massey closed Friday at $57.23, gaining $2.84, or 5.22 percent. Alpha Natural Resources closed at $57.88, up $1.58, or 2.73 percent.
Amazon.com (NASDAQ:AMZN) had a good quarter again, beating consensus EPS estimates, and continuing to enjoy top-line growth. Investments in their distribution network is what weighed on the company for the quarter, but that's good for Amazon over the long haul, as they will be prepared for their next surge in growth the expanded distribution network affords them.
Canaccord says, "Amazon continued to see strong top-line growth and exceeded consensus EPS estimates, though the company’s investments into the expansion of its distribution network pressured pro forma operating margins to their lowest levels in a holiday quarter since the company turned profitable. Ultimately, we believe this is a short-term issue, as these investments scale to the level of the existing infrastructure."
Canaccord Genuity reiterates a "Buy" rating on Amazon.com (AMZN), which closed Friday at $171.14, falling $13.31, or 7.22 percent. Canaccord has a price target of $220 on Amazon.
Amazon.com (NASDAQ:AMZN), even after a sub-par quarter for them, is still an attractive company to invest in, according to analysts, who mostly see the company continuing to grow, with Susquehanna believing international growth, along with growth in apparel and groceries will propel the online retailer forward.
Susquehanna said that "while margins have been frustrating since 3Q, the top-line was also a touch below estimates this quarter. Weaker than expected international results can be attributed to weather-related delivery problems in the UK, which meant some lost sales and tough Y/Y comps."
They believe the first quarter of 2011 for Amazon.com will show strong growth.
Even so, Susquehanna is keeping their "Neutral" rating on Amazon.com, which closed Friday at $171.14, dropping $13.31, or 7.22 percent. Susquehanna boosted their price target on Amazon from $170 to $202.
Susquehanna is reiterating their Neutral rating on Amazon.com (NASDAQ:AMZN) as the firm feels that the only reason the company beat their estimates was the lower than anticipated tax rate.
Terremark (Nasdaq:TMRK), a provider of cloud and colocation services, was acquired by Verizon (NYSE:VZ) Friday, with the share price of Terremark skyrocketing, as well as other cloud providers such as SAVVIS, Inc. (Nasdaq:SVVS).
Terms of the bid were $19 in cash, which was a 35 percent premium over the closing price of Terremark in the previous trading session. Boards of both companies have unanimously approved the deal.
On an equity value basis, the bid values Terremark at 4.4 times trailing sales and 18.6x trailing EBITDA. The deal is expected to close by the end of the third quarter.
Terremark will operate as a wholly owned but independent subsidiary of Verizon. The existing management team will remain in place. The 220 datacenters currently owned by Verizon will be operationally taken over by Terremark.
Savvis, a competing cloud computing company, as mentioned, was brought into the limelight with the deal, now being considered among the top firms remaining which would be attractive to a competitive suitor of Verizon.
Savvis closed Friday at $30.26, gaining $3.69, or 13.89 percent. Terremark closed at $18.92, up $4.87, or 34.66 percent. Verizon closed at $35.63, losing $0.86, or 2.36 percent.
Saying Revlimid maintenance could become the treatment of choice for front-line myeloma, Jefferies sees a strong future for Celgene (NASDAQ:CELG).
Even so, at current valuation, Jefferies believes it'll "require overall survival maturity of Revlimid maintenance trials, resolution of the Revlimid patent overhang, or success with earlier stage pipeline programs," to see major upside for the company.
Jefferies reiterates a "Buy" rating on Celgene, which closed Friday at $51.18, losing $3.67, or 6.69 percent. Jefferies lowered their price target on Celgene from $67 to $65.
NovaGold (NYSE:NG), Barrick (NYSE:ABX), Eldorado Gold (NYSE:EGO) Get Big Push on Friday's Gold Price Move
Underscoring the ongoing fragility of the U.S. and global economies, when some civil unrest in Egypt emerged, investors flocked to gold as their asset of choice, pushing up the share price of miners like NovaGold (NYSE:NG), Barrick (NYSE:ABX) and Eldorado Gold (NYSE:EGO).
This is important to note for investors because it shows people aren't as convinced of the media-induced "recovery" as the mainstream financial media thinks they are, and as soon as some negative news was presented, gold was again seen as the investment of choice.
Once this period of correction is over for gold, we'll see gold prices begin to soar again, and as negative news adds to the mix, along with the realization of the ongoing housing crisis, EU sovereign debt crisis, and other uncertainties remain in place, gold will resume its long-term upward run. It's not a matter of if, only a matter of when.
It appears gold won't be going to much lower before long-term gold investors enter into the arena again; at least the more aggressive of them.
Because of the location of the unrest, oil should be a factor as well, depending on how widespread it becomes.
Eldorado Gold closed Friday at $16.41, gaining $0.30, or 1.86 percent. Barrick Gold closed at $47.30, up $0.93, or 2.01 percent. Novagold closed at $13.67, gaining $0.47, or 3.56 percent.
Friday, January 28, 2011
The agriculture sector continues to have a strong outlook, including fertilizer giant Potash Corp. (NYSE:POT), which is expected to have a strong year in 2011.
Gleacher noted, "while management is confident that global spot prices are likely to rise on strong demand, their guidance did not include higher potash prices, though they do see the potential for prices to move higher as the gap between US and offshore prices narrows. In our view, US prices of $515/st ($565/mt) are likely to stabilize at current levels throughout the spring season as the focus will be on international prices. We believe producers will soon be targeting a $25-$30/mt price increase in Brazil and Southeast Asia as they believe farmers are focusing more on the current strong crop prices rather than the price of potash. Our total gross profit assumption of $4.0bil is in-line with the top-end of the guidance of $3.5-$4.0bil."
They raised full year 2011 and 2012 EPS estimates from $9.00 and $9.55 to $9.70 and $10.25.
Even so, Gleacher continues to keep their "Neutral" rating in place on Potash for now.
Potash was trading at $174.81, gaining $0.67, or 0.38 percent, as of 2:59 PM EST.
Riverbed Technology (NASDAQ:RVBD) is in a multi-year growth pattern for WAN acceleration, according to Needham, which remains positive on the company.
Needham says, "...We have conviction that RVBD is in a multi-year growth pattern for WAN acceleration, as the business driver of datacenter consolidation is still very strong (though years old as a driver). Complementing the “old driver” is cloud-services (large boxes) for both large enterprise and carrier, which is consistently 35-40% of license and accelerating at RVBD....After us being nervous for the MarQ seasonality, RVBD guidance has allayed those concerns, and we believe CY11 will be a strong revenue growth year for Riverbed, which we believe will be a 30%+ revenue grower, a 40%+ EPS grower, and also remains an M&A takeout candidate."
Needham & Company maintains a "Buy" rating on Riverbed Technology (RVBD), which was trading at $36.24, gaining $1.33, or 3.81 percent, as of 2:52 PM EST. Needham has a price target of $48 on Riverbed, boosting it from $32.
Shares of Bottomline Technologies (NASDAQ:EPAY) were up over 12 percent on the day, as they came of their best quarter for orders in the history of the company.
Needham says, "Bottomline posted by far the strongest orders quarter in the firm’s history, which is indicative of the strategic value that Bottomline provides its financial institution customers. Additionally, Q2’s robust orders activity provides Bottomline with incremental revenue visibility to a business that already has more than 85% visibility going into a quarter. We believe that EPAY shares could approach $30 within 12-18 months...We have increased our FY’11, ’12 and ’13 Non-GAAP Net Income estimates by $2.8 million, $1.6 million and $2.4 million respectively. The associated EPS impact is +$0.07, nil and nil respectively (zero EPS impact in fiscal years 2012 and 2013 due to accelerated share creep)."
Needham & Company maintains a 'Strong Buy' on Bottomline Technologies (EPAY), which was trading at $22.89, gaining $2.52, or 12.37 percent, as of 2:44 PM EST. Needham raised their price target on Bottomline from $25 to $28.
Microchip Technology (NASDAQ:MCHP) is the top pick of Susquehanna in the low beta segment, as their risk appears to be lower as lead times have shrunk.
Susquehanna noted, "we believe the risk that another shoe will drop is lower for MCHP than others in the group because its lead times have come down. MCHP remains our favorite low beta semiconductor name."
They raised their due to their full year 2011 and full year 2012 EPS estimates from $2.34 and $2.50 to $2.36 and $2.53.
Susquehanna maintains a "Positive" rating on Microchip Technology (MCHP), which was trading at $37.07, down $0.82, or 2.16 percent, as of 2:35 PM EST.
Even with their strong performance, valuation at the low end of the range caused Susquehanna to increase their price target on Microchip Technology from $38 to $44.
Immunogen's (NASDAQ:IMGN) valuation is too high, according to Needham, which is the result of expectations concerning late-stage T-DM1.
Needham says, "We believe the current valuation is built on high expectations for the late-stage T-DM1 along with the brand-name Roche (OTC:RHHBY) (N/R) partnership, but the value creation for ImmunoGen is modest, due to the mid-single digit royalty. Despite the best efforts of the management team, the remainder of the pipeline remains in a early stage and/or in the hands of the outside partners. We see few value-creating events in 2011 to support the current ~$470MM technology value. Accelerated progress in the earlystage internal pipeline or sizeable collaborations around the unpartnered pipeline products may provide an upside to our current valuation."
Needham & Company reiterates an "Underperform" rating on Immunogen Inc. (IMGN), which was trading at $8.17, down $0.62, or 6.95 percent, as of 2:33 PM EST.
Varian Semiconductor (NASDAQ:VSEA) remains the top pick of Needham in their sector, driven by several catalysts, including a growing core semi business.
Needham says, "VSEA reported a solid F1Q11 (Dec) quarter and provided substantially better than expected guidance. VSEA remains our top mid/large-cap pick in the space, based on our thesis that: 1) new implant applications are driving its core semi business to outgrow WFE over the next few years; 2) VSEA is the best name levered to foundry and logic capex growth in 2011; 3) solid traction in its emerging solar business will drive upside to revenue targets; and 4) the stock warrants a premium multiple based on strong earnings growth potential...We are raising our FY11 (Sep) non-GAAP EPS estimate to $4.00 and FY12 to $4.35 on higher revenue estimates."
Needham & Company maintains a "Buy" rating on Varian Semiconductor (VSEA), which was trading at $43.53, down $0.01, or 0.02 percent, as of 2:25 PM EST. Needham raised its price target on Varian from $48 to $57.
Broadcom (NASDAQ:BRCM) is considered by Susquehanna to have one of the strongest product cycles in 2011 for semis, and remains very optimistic in their outlook concerning the company.
Susquehanna noted they are also gaining momentum in its wireless business at this time.
Guidance from Broadcom was increased to the higher end of its prior range to $1.9 billion.
Driving Broadcom is the demand for connectivity products sold into the tablet and smartphone markets.
Apple's (NASDAQ:AAPL) unit production could drive results past first quarter estimates.
Susquehanna maintains a "Positive" rating on Broadcom (BRCM), which was trading at $44.58, down $1.62, or 3.51 percent, as of 2:20 PM EST.
Citing opportunities in its S&D and Wireless businesses, Needham sees top and bottom line growth strong for Anaren (NASDAQ:ANEN) in 2011.
Needham says, "Anaren delivered solid 2QF11 results, with upside mitigated by a facility expansion, which we nonetheless view as an encouraging sign. With strong demand in its higher margin Wireless business and a historically high level of opportunity in its S&D business, we think the company is positioned to show solid top and bottom line growth...Our forward estimates are largely unchanged for F2011 and F2012, though we introduce C2012 estimates of $201MM and $1.50 NG EPS. We have left the potential reduction in reported R&D expense referenced above as potential upside to our model."
Needham & Company maintains a "Buy" rating on Anaren (ANEN), which was trading at $20.89, down $0.27, or 1.28 percent, as of 1:53 PM EST. Needham boosted their price target on Anaren from $22 to $24.
Liking the general overall performance of Tyco International (NYSE:TYC) in the fourth quarter, FBR sees trends working in their favor.
FBR says, "Tyco delivered a solid all-around performance on key metrics of organic growth (4% versus 2% in the September quarter), a 130-bp increase in margins, and continued operating improvements at Security Solutions (ADT) where margins hit an all-time high of 16.7%...We continue to remain bullish on Tyco and are enthused to see meaningful improvement in orders in the company’s mid- to late-cycle businesses in Flow and Fire (total 49% of revenues). As revenues in these businesses recover, the company’s now-much-leaner cost structure should result in high operating leverage and improvement in earnings. We also see upside from aggressive share repurchases and acquisitions, where the company’s strong FCF (about $1.4 billion in FY 2010) and underlevered balance sheet (11% net debt to cap) provide for ample flexibility. We are raising our 2011/2012 estimates from $2.95/$3.50 to $3.05/$3.60 to reflect improvement in underlying trends."
FBR Capital maintains an "Outperform" rating on Tyco International (TYC), which was trading at $44.69, down $0.05, or 0.11 percent, as of 2:04 PM EST. FBR raised their price target on Tyco from $47 to $51.
The share price of AT&T (NYSE:T) has been priced at a worst-case scenario, according to FBR, who believes the company still has the ability to exceed moderate expectations going forward.
FBR says, "Overall, AT&T demonstrated its ability to outperform modest expectations in FY10, and we believe that this trend should continue in FY11. At this point, we believe that shares are pricing in a worst-case scenario regarding the Verizon iPhone, and "only" moderate net postpaid weakness in FY11 will improve investor sentiment. The next potential catalysts are (1) fewer-than-expected net postpaid losses from the Verizon iPhone launch in February; (2) the potential for a period of iPhone 5 (Nasdaq:AAPL) exclusivity this summer and/or higher HSPA+ network speeds; (3) benefits of progressive wireless data network improvements and substantially higher spending on voice capacity; (4) revenue momentum from the combination of a higher smartphone mix and higher price tiers; (5) sustained cost-structure improvements; (6) potential voice capacity challenges on the Verizon network as voice carriers are replaced with data carriers; and (7) a stronger dividend outlook relative to Verizon, which is likely to continue to invest heavily in its cloud-based initiative-$17B over 5-10 years. These factors underpin our Outperform thesis for T relative to Verizon (NYSE:VZ)(Market Perform), and we believe that shares of Verizon are pricing in perfect execution in FY11, while shares of T have discounted the potentially significant challenges in FY11." (FBR lowers FY11 EPS estimate of AT&T from $2.77 to $2.35).
FBR Capital maintains an "Outperform/Top Pick" rating on AT&T (T), which was trading at $27.57, down $0.56, or 1.99 percent, as of 1:47 PM EST. FBR has a price target of $34 on AT&T.
Shares of Zoll Medical (NASDAQ:ZOLL) dropped over 5 percent today as Wedbush announced they're removing them from their 'Best Ideas List,' citing no short term catalysts.
Wedbush says, "We believe ZOLL will lack the sort of positive near-term catalysts that would be required to sustain the recent run up in the stock. Q1 sales came in below expectations and management guided Q2 sales below consensus views. Our overall view on ZOLL is still very positive, as we believe the company has one of the best new product cycles and one of the most compelling growth and operating leverage stories in the med tech sector. Nevertheless, ZOLL’s financial performance will be more back-end-loaded than we had anticipated, and we think investors will now be somewhat skeptical of the company’s ability to deliver on the full-year guidance. From this point, we think the stock will be driven mainly by the quarterly financial performance - and that involves a waiting game...We have trimmed our Q2 sales number by $3.7 million, to $119.2 million (+11%), and our EPS estimate by $0.01, to $0.19 (+14%)."
Wedbush reiterates an 'Outperform' rating on Zoll Medical (ZOLL), which was trading at $41.00, down $2.59, or 5.94 percent, as of 1:43 PM EST. Wedbush has a price target of $52 on Zoll.
Brigham Exploration (NASDAQ:BEXP) had their EPS and and price target raised by Jefferies, citing the monetization of their Williston Basin happening much sooner than expected.
Jefferies said, "2010 reserve report indicates monetization of BEXP's prolific Williston Basin resource base is occurring even faster and more efficiently than previously expected. Near-term catalysts include a 2nd Rough Rider infill well, a 2nd operated Roosevelt, MT completion, and a long-lateral Richland, MT attempt."
Top-line growth was a little weaker than anticipated, but remains at a high rate.
They raised their full year 2011 EPS estimate from $1.06 to $1.22, and introduced their full year 2012 estimate at $2.14.
Jefferies maintains a "Buy" rating on Brigham Exploration (BEXP), which was trading at $28.60, up $1.19, or 4.34 percent, as of 1:36 PM EST. Jefferies raised their price target on Brigham from $32 to $48.
With their acquisition of Trilogy Advisors expected to close earlier than expected, along with an improving performance in domestic and international markets, Affiliated Managers Group (NYSE:AMG) is positioned for strong growth, according to Jefferies (NYSE:JEF).
They are raising their EPS estimate in the fourth quarter from $1.87 to $1.96, directly related to the deal for Trilogy Advisors closing sooner than originally thought. Full year EPS estimate was boosted from $7.15 to $7.30.
Also noted was increased performance fees and higher asset levels to the EPS revisement.
Jefferies maintains a "Buy" rating on Affiliated Managers, which was trading at $101.36, down $3.22, or 3.07 percent, as of 1:25 PM EST. They raised their price target on Affiliated from $98 to $117.
While Omnicell (NASDAQ:OMCL) did a good job of squeezing out profits in 2010, their top end backlog appears to be slowing down, as they lose momentum going forward.
FBR says, "Omnicell has shown a solid ability to hunker down in 2010 and generate improved profits even as revenue grew only a modest 4% YOY. As we close the books on 2010 and start to look at 2011, we see Omnicell as a company that is continuing to weather the challenges of the lack of activity in the small end of the market. The company’s performance in the larger end of the market has been commendable. However, the top end of its backlog guidance shows only a small level of acceleration versus the backlog posted at the end of 2010."
FBR Capital maintains an 'Underperform' rating on Omnicell (OMCL), which was trading at $13.13, down $0.75, or 5.40 percent, as of 1:12 PM EST. FBR raised their price target on Omnicell from $11 to $12.
There's no doubt Baidu's (NASDAQ:BIDU) fourth quarter results will be impressive, as growth is expected to be over 80 percent for 2010. The question is how Baidu will do going forward, as competition heats up from Google (Nasdaq:GOOG) and privately held Taobao.
Auriga says, "We maintain our rating on BIDU ahead of 4Q10 results despite our expectations of a strong quarter. While BIDU is likely to report Y/Y growth north of 80% in 2010, we believe full year 2011 could be a tough year in terms of competition and growth compared to 2010. We believe increasing competition from Google (GOOG)(NR) and Taobao (private) can impose pressure on BIDU's growth. Consensus' expectations of 61% Y/Y revenue growth are aggressive we believe. Based on our updated model and estimates, we believe the stock is worth $107 vs. our previous price target of $79 and it is fairly valued at these levels. The upside for the stock price from here in 2011 could be limited."
Auriga maintains a "Hold" rating on Baidu (BIDU), which was trading at $106.61, dropping $2.44, or 2.24 percent, as of 1:11 PM EST. Auriga raised their price target on Baidu from $79 to $107.
Amazon.com (NASDAQ:AMZN) disappointed in their recent earnings report, but Goldman Sachs (NYSE:GS) sees that as a temporary blip, and recommends acquiring shares of Amazon on long-term growth prospects and valuation.
The quarter really wasn't that bad for Amazon, as they generated revenue of $12.9 billion, missing consensus by $12.98 billion. Earnings exceeded expectations, coming in at $0.91 a share, up from analysts' estimates of $0.88.
Snow storms in Europe were identified by Goldman as the probable cause to missed revenue in the quarter.
In response, Goldman cut their EPS estimates for full year 2011 to $4.18, and for full year 2012 to $5.95. They introduced an EPS of $8.43 for 2013.
With a valuation at 28x 2012 EPS, along with a projected growth rate of 30 percent, Goldman believes Amazon.com is at a good entry point.
Amazon.com was trading at $168.18, down $16.27, or 8.82 percent, as of 12:35 PM EST.
There have numerous reports through the years concerning a competitor pressing Microsoft (NASDAQ:MSFT) and its desktop franchise, but that is now becoming a reality for the first time as tablets become a real disruptor for the giant software company.
Also of concern is Microsoft and whether or not there will be a strong enterprise PC refresh cycle.
FBR noted, "We maintain our MP rating as we (1) remain skeptical about a strong enterprise PC refresh cycle, 2) believe the emergence of tablets will adversely affect the company's core desktop franchise, and (3) evaluate the company's last legitimate effort to becoming a meaningful player in the vital mobile market.
"We are raising our F3Q11 (Mar) revenue and EPS estimates to $16.5 billion and $0.59 from $16.1 billion and $0.54. We are raising our FY11 revenue and EPS estimates to $70.1 billion and $2.62 from $68.5 billion and $2.43. We are raising our FY12 revenue and EPS estimates to $73.9 billion and $2.84 from $73.1 billion and $2.67."
FBR reiterates their "Market Perform" rating on Microsoft, which was trading at $27.75, down $1.12, or 3.88 percent, as of 12:26 PM EST. FBR raised their price target on Microsoft from $28 to $30.
After a major miss on earnings in the last quarter, Ford Motor (NYSE:F) admitted that they blew it with guidance, and it was a big blow, as it was way off the mark, suggesting too much optimism and not enough reality.
Ford generated earnings of 30 cents a share, while analyst had been expecting a whopping 48 cents a share. There was an obvious disconnect there.
CFO Lewis Booth said, "We recognize that we missed versus people's expectations, but we also will continue to try to do a better job of making people aware what the outlook is."
Booth added that while the company did give guidance on some increased costs, they did fail with Europe. He noted, "We gave pretty clear guidance we were going to have some cost increases in the fourth quarter. We're clearly disappointed that we guided that Europe was going to be profitable."
In other words, the miss was bad enough, but the guidance was atrocious when you consider an 18 cent gap between consensus and performance.
Ford didn't offer any guidance for 2011, but CEO Mulally and Booth said the company will improve pre-cash flow and profits during 2011.
Ford was trading at $16.14, down $2.65, or 14.10 percent, as of 12:05 PM EST.
Goldman Sachs raised their EPS estimates and price target on USG Corp. (NYSE:USG), saying they see the company focusing on increasing margins rather than sales volume in 2011.
They responded by increasing their EPS estimates for full year 2011 and full year 2012 from $1.74 and $0.25 to $1.53 and $0.19, based on stronger pricing power.
Also noted was the reduction in operation costs by the company. Consequently, stronger margins should be sustainable.
Goldman maintains a "Neutral" rating on USG, which closed Thursday at $16.75, down $0.50, or 2.90 percent. Goldman raised their price target on USG from $11 to $12.50.
Comments from Bank of America's (NYSE:BAC) CEO Brian T. Moynihan that the euro has survived a major test and is "holding together," seems to be a very premature conclusion to draw, as the EU sovereign debt crisis hasn't went away by any means.
This was in response to the rescue packages awarded to Greece, and then Ireland, in 2010, along with concerns over other countries and their ability to remain solvent.
Moynihan stated, “We see the euro holding together; it’s a committed-to structure. We think it’s fundamentally there and it’s survived a major testing.”
We think the major testing is still going on, and the worst is yet to come with the euro. Greece and Ireland were the easy countries to deal with, and they had the euro back on its heels. If one of the stronger economies have to be bailed out, it's doubtful the euro could survive, or at best, some countries would probably leave it.
Bank of America was trading at $13.76, gaining $0.09, or 0.62 percent, as of 11:47 AM EST.
AU Optronics (NYSE:AUO) has little in the way of catalysts as it enters 2011, and with there being little in the way of pricing power for TV sets, it appears the year will be another tough one for them.
Ticonderoga says, "TV Shipments Expected to be Flat to Down Q/Q in 1Q11, While IT to Rise. Looking into 1Q11, AU Optronics expects pricing in the TV market to remain flat, while IT pricing is expected to uptick slightly, as many panels are at or below cash cost, as we have been highlighting. For 1Q11 shipments, AU Optronics expects TV shipments to be flat to slightly down, while IT shipments are expected to uptick marginally. Keep in mind, the forecasts from the panel industry have been overly optimistic over the past year. Our estimates are currently under review."
Ticonderoga maintains a 'Neutral' rating on AU Optronics (AUO), which closed Thursday at $9.87, losing $0.13, or 1.30 percent.
Moody's (NYSE:MCO) said they're contemplating cutting the rating of Nokia (NYSE:NOK) one level, citing their ongoing struggles in the smartphone market.
New entries into the smartphone market, such as Apple's iPhone (NASDAQ:AAPL), and others, has the company continuing to lose market share.
Moody's said in a statement, "The rating review was caused by the gradual but steady weakening of Nokia's business profile and competitive position in mobile phones which has started to pressure profitability."
Because of Nokia's strong financial profile, Moody's said the ratings cut would only be one notch if it happens, and it would give Nokia time to hopefully adopt a new strategy to win back share in the smartphone sector.
Nokia is still the largest maker of cell phones in the world, but are getting crushed in smartphones.
At this time, Moody's has a long-term rating on Nokia of "A2," which affects approximately $7.22 billion in senior debt.
The review from Moody's was announced after Nokia reported profits in the fourth quarter plunge 21 percent, while its market share shrunk from 35 percent last year to 31 percent in the quarter.
Nokia was trading at $10.64, up $0.08, or 0.76 percent, as of 11:37 AM EST.
Citing their historical performance in varying levels of economic weakness and strength, Ticonderoga said Amphenol (NYSE:APH) is prepared to perform strongly whichever way the economy goes at this time as well.
Ticonderoga says, "Last night (Wednesday), Amphenol announced that the Board of Directors authorized a new 20 million share stock repurchase program that equates to approximately $1.1 billion with the stock at current levels or over 11% of the shares outstanding in 4Q10...If you are a bull on the economy, we expect Amphenol to benefit from improved tech demand trends without the execution risk of its peers. If you were less optimistic on this recovery, Amphenol has proven its ability to outperform during downturns, and the 2008-2009 performance was the most recent example. Over the past eleven years (through booms and busts), Amphenol has managed to grow revenue by nearly 10% annually with 18% pro forma EPS growth. Over the past five years, sales have risen by 14.5% annually and pro forma EPS has grown by 19% per year. Since 1999, operating margins have expanded from 15.9% to 19.7% in 2010. We believe few companies in the tech supply chain or the tech world can boast such consistent growth performance over this time period, which is one of the reasons we believe Amphenol deserves to trade at a healthy premium to its peers and other tech stocks."
Ticonderoga reiterates a "Buy" rating on Amphenol (APH), which closed Thursday at $56.77, up $1.44. or 2.60 percent. Ticonderoga has a price target on Amphenol of $64.
Shares of Ford Motor Co. (NYSE:F) were getting punished today as the automaker missed big with earnings in the quarter, although they beat expectations in revenue.
Revenue of course is largely irrelevant when the cost of sales is too high, which was the case in the fourth quarter for Ford, which included a $960 million charge for debt conversion offers which had been completed.
Rising expectations and an enamored financial media were largely the culprits behind the miss, as irrational exuberance started to be applied to the automaker.
Lewis Booth, Ford executive vice president and chief financial officer said, "The progress that we made improving our core Automotive business has allowed us to strengthen significantly the balance sheet in 2010, and this will remain a key area of focus for us in 2011. We continue to manage the business for long term profitable growth."
Earnings in the fourth quarter reached 30 cents a share, far below analysts' expectations of 48 cents a share. Revenue rose to $32.5 billion, beating consensus of $30.57 million.
Also part of the drama is the over-hyped attempt at making it appear the American economy is in some type healthy, sustainable recovery. The truth is, as the numbers for Ford show, is it continues to be extremely fragile, and consumers still must be wooed in order to loosen up their pocketbooks.
Ford was the only U.S. automaker not to accept government bailout funds.
Ford was trading at $16.70, dropping $2.09, or 11.12 percent, as of 11:25 AM EST.
Kimberly Clark (NYSE:KMB) made significant headway in the expansion of gross margins in the fourth quarter, impressing Jefferies.
Jefferies said they "are impressed with management's ability to expand gross margins in the 4Q given the difficult consumer environment in developed markets coupled with rampant input cost inflation, 2011 appears to be shaping up as one of restructuring and continued below-trend growth."
They set full year EPS estimates for 2011 and 2012 at $4.95 and $5.30.
Jefferies reiterates their "Hold" rating on Kimberly Clark (KMB), which closed Thursday at $65.13, level with the close on Wednesday. Jefferies raised their price target on Kimberly from $67 to $70.
Goldman Sachs (NYSE:GS) noted recently in a report that Citigroup (NYSE:C) and JPMorgan (NYSE:JPM) remain their two top banking picks.
Concerning large cap banks in general, Goldman said, "We still believe that capital returns, clarity over regulation and continued growth in book values should support large cap banks in 2011."
For Citigroup, Goldman likes their exposure to emerging growth markets and their valuation.
JPMorgan gets their support from Goldman on the release of capital set aside for private label mortgages, which they see pushing the share price of JPMorgan up. Private label mortgages are those not guaranteed by Freddie Mac or Fannie Mae. JPMorgan set aside capital to protect themselves in that segment.
Citigroup was trading at $4.78, falling $0.05, or 0.93 percent, as of 11:15 AM EST. JPMorgan was trading at $45.20, up $0.10, or 0.22 percent.
Alcoa (NYSE:AA) had their price target raised by Goldman Sachs (NYSE:GS), while introducing their EPS estimate for 2013 of $1.40 a share.
Goldman also noted that per Alcoa's Saudi Arabia JV Ma'adan, they'll be coming online with their flat rolled mill and smelter sometime in 2013.
Alcoa has gotten a boost from expectations aluminum demand and prices will continue to move up in 2011, as the share price recovers from a long lull.
Alcoa closed Thursday at $16.47, down $0.13, or 0.78 percent. Goldman raised their price target on them from $16 to $17.
The USDA gave farmers the go ahead to plant GMO alfalfa developed by Monsanto (NYSE:MON).
Also included in the decision is the allowance to plant alfalfa with no restrictions; something opponents of GMO though would be included in the decision, if the planting was allowed to go forward.
Agriculture Secretary Tom Vilsack said, "After conducting a thorough and transparent examination of alfalfa ... APHIS has determined that Roundup Ready alfalfa is as safe as traditionally bred alfalfa."
APHIS refers to Animal and Plant Health Inspection Service, an arm of the USDA, and which made the decision.
While saying he understood the concerns of opponents, Vilsack added farmers in the U.S. need to be allowed to have a choice in whether or not they want to plant GMO alfalfa or other varieties.
Vilsack concluded, "I'm trying to bring people together. This set of actions, it seems to me, provides opportunities for preservation of choice in agriculture, creates a set of forms for building trusting relationships that could lead us to better policy in the future,"
Monsanto was trading at $72.36, falling $1.32, or 1.79 percent, as of 11:02 AM EST.
Even though there are macro challenges still weighing on Align Technology (NASDAQ:ALGN), Brigantine sees key operating metrics heading in the right direction, and continue to like the company.
Brigantine says, "We are pleased by the direction of key operating metrics including case starts, utilization and pricing, particularly given the macro challenges. With expanding product capabilities and emerging market opportunities, we remain buyers and keep a $23 price target."
Brigantine Advisors maintains a "Buy" rating on Align Technology (ALGN), which closed Thursday at $20.90, up $0.39, or 1.91 percent.
Daqq New Energy (NYSE:DQ) should benefit from new restricions of the Chinese government on polysilicon production, which should, at minimum, support polysilicon prices in the short term.
Auriga says, "We reiterate our price target on Buy-rated Daqq following recent press reports of Chinese government mandated restrictions on polysilicon production. The stated goal to reduce pollution and decrease electricity usage should push out marginal suppliers and, at least in the near term, prevent a decline in polysilicon prices when increasing supply should push spot prices lower. We believe DQ meets all of the requirements put forth in the new regulation while continuing production in a more firm price environment. Our research suggests that DQ management was involved with the formation of the new government restriction during the past year, and that the recently announced polysilicon facility destined for production in mid-2012, will also adhere to the new restrictions."
Auriga maintains a "Buy" rating on Daqq New Energy (DQ), which closed Thursday at $13.28, up $0.11, or 0.84 percent. Auriga has a price target on Daqq of $20.
Legg Mason (NYSE:LM) continues to receive a negative outlook from FBR, citing their underperformance against their peers.
FBR says, "We continue to have a negative outlook on LM shares, as we believe the company is in a relatively weaker position than peers, given its persistent net outflows, weaker equity product offerings, and inconsistent performance. In the current environment in which macro improvement and equity market appreciation continue at a steady pace, we expect an overall slowdown in flows into bond funds industrywide as clients re-risk their portfolios. Furthermore, considering that only 27% of LM's assets are invested in equity products, and given the company's revenue-sharing agreements with affiliates, we expect LM investors would not fully participate in a complete market recovery. Although we expect further cost cutting and market appreciation to overcome further outflows and drive higher overall operating margins, we believe the market is mostly pricing in such an improvement, leaving limited upside potential from current levels."
FBR Capital maintains an "Underperform" rating on Legg Mason (LM), which closed Thursay at $34.01, up $0.26, or 0.77 percent. FBR also lowered their price target on Legg Mason from $35 to $34.
Citing a plethora of catalysts, Barclays believes the already solid guidance given by Qualcomm (NASDAQ:QCOM) for the current quarter and full year 2011 is on the conservative side.
Barclays says, "Post close wireless innovator QCOM delivered impressive December quarter results and raised both its March and FY11 outlook sharply (even ex-$250M boost from royalty resolution). We believe QCOM remains a core growth pick given leverage to Smartphones, Tablets, 3G momentum and accelerated 4G deployments. We believe the guidance for EPS and chip margins remains conservative with design and customer wins at Mobile World Congress (2/14/11) and incremental opportunities with AAPL's new iPhone for mid CY11 are likely to further boost sentiment.
"FY11 moves up from $12.7B to $13.9B with extra $650M from chips and $550M from royalties with CY11 device ASP estimate up from $186 to $195. FY11 EPS to over $3.00 from $2.75 and WCDMA/CDMA market size raised again to 775M units from 765M. We believe chip margin guidance of 23% for FY11 versus 30% in December may prove conservative.
"We consider resolution of 2nd larger (we believe) dispute should further lift EPS and while opex moves up again our CY11 EPS moves up crisply from $2.80 to $3.02. Laterals: QCOM's 60 dual core Snapdragon wins for Tablets/Phones could temper sentiment towards NVDA's Tegra."
Barclays reiterates an "Overweight" rating on Qualcomm (QCOM), which closed Thursday at $54.90, up $3.04, or 5.86 percent. Barclays has a price target of $62 on QCOM.
Archer Daniels Midland (NYSE:ADM) should continue to accelerate on the pricing tailwinds they received from corn and soybean prices in 2010.
Jefferies noted, "A lot of margin pushes and pulls, but a 30%+ Y/Y increase in corn/soybean prices should provide significant revenue tailwind and that ADM was well positioned in key commodities and our expectation for a big jump in Ag Services EBIT, and we think ADM could top the $0.80 Street estimate."
They raised their full year 2011 and full year 2012 estimates on ADM from $2.88 and $3.21 to $2.98 and $3.26.
Jefferies maintains their "Hold" rating on Archer Daniels Midland (ADM), which closed Thursday at $33.43, up $0.01, or 0.03 percent. Jefferies raised their price target on ADM from $34 to $36.
Commenting on earnings and revenue of U.S. Airways (NYSE:LCC) and United Continental (NYSE:UAL), Barclays said they see them continuing to grow alongside fuel.
Barclays says, "Yesterday we got solid earnings and strong revenue data points from U.S. Airways (NYSE: LCC) and United Continental (NYSE: UAL) suggesting the revenue environment is accelerating alongside fuel. Capacity outlooks were unchanged, but the market was prepared for that outcome after last week. Cost guidance from both was roughly in line, but revenue data points were encouraging. LCC's revenue guidance was very much in line with our expectations, but UAL's January RASM guidance was by far the biggest upside surprise thus far during earnings season. Our estimates for LCC rise slightly, but our UAL forecast rises substantially on much better than expected revenue trends in 1Q. Given the estimate changes we expect from others for UAL, we expect the shares to rise further relative to the sector.
"Adds up to a powerful outlook; stocks should perform better. Fundamentally, we believe earnings season provided support for our robust earnings and cash flow outlook across the sector in 2011. Rising fuel is a risk, but investors should be mindful of the historical correlation between unit revenue and fuel. Demand acceleration along with rapid changes in the fare structure in recent weeks should allow for significant earnings gains despite rising fuel. As the market's comfort with the sector grows, we believe the shares will trade much better."
United Continental Holdings (UAL) closed Thursday at $26.96, gaining $1.17, or 4.54 percent. US Airways ended the trading session at $11.05, up $0.25, or 2.31 percent.
Considering the steps they had to take in the latest quarter, Flagstar Bancorp (NYSE:FBC) didn't perform too badly, according to FBR, but they still have a long way to go and a lot to prove before confidence in them can be fully restored.
FBR says, "Overall, we thought this was a good quarter for Flagstar, considering the drastic strategic actions the company had to take. The company was able to increase its mortgage originations, while NIM increased over 53 bps to 2.08% from 1.55% as deposit costs dropped more than expected. On the credit side, NPAs declined from $1,141M to $498M due to the sale of the nonperforming residential mortgages. We believe that after shedding problem assets and recapitalizing its balance sheet, Flagstar is better positioned to return to profitability in 2Q11 or 3Q11 and to eventually pay back TARP. However, the company still needs to execute its goals of increasing NIM closer to 2.30% and replacing its brokered deposits with more traditional and stable funding sources, while keeping operating costs at reasonable levels. If Flagstar can demonstrate that it is progressing toward these goals, we would become more constructive on shares."
FBR Capital reiterates a 'Market Perform' on Flagstar Bancorp (FBC), which closed Thursday at $1.65, gaining $0.02, or 1.23 percent. FBR has a price target of $1.75 on Flagstar.