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Zacks Analyst Blog Highlights: Citigroup Inc., Intuit Inc., ENI S.p.A, BP plc and Royal Dutch Shell – Press Releases

Zacks Market Commentaries — Wed, 25 Nov 2009 13:10:28 +0000

For Immediate Release

Chicago, IL – November 25, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Citigroup Inc. (C), Intuit Inc. (INTU), ENI S.p.A (E), BP plc (BP) and Royal Dutch Shell (RDS.A).

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Here are highlights from Tuesday’s Analyst Blog:

Citi Expects Strong Economic Growth

According to the annual report of Citi’s Investment Research and Analysis group, though growth will be strong and even across major economies in the beginning of the year, it will be uneven later. Citi expects Asia, excluding Japan, to experience sustained economic growth. Though the U.S. is expected to see fairly strong economic growth, the recovery will be more gradual in Europe and Japan.

Citi also upgraded its 2010 gross domestic product forecasts for the U.S., Japan, the U.K., Australia, New Zealand, Hong Kong, Korea, Argentina, Hungary, Poland, the Czech Republic and Turkey.

The report also suggested that Central Banks are unlikely to hike key interest rates through the next year. However, credit availability is expected to remain restricted at least for a year or two as banks seek to raise additional capital under regulatory pressure. Also, inflation on a global basis appears to be controlled. Additionally, countries will need to achieve fiscal sustainability to post strong economic growth.

Disappointing Forecast at Intuit

Intuit Inc. (INTU) recently reported results for the first quarter. Revenues increased 2% to $493 million, driven by growth in core businesses.

Revenues from Financial Institutions segment increased 7% while Employee Management Solutions Payroll service increased 9%.

Loss per share came in at 10 cents, much better than the Zacks Consensus Estimate of a loss of 22 cents per share, mainly due to cost control activities undertaken by the management. The company had postponed some of its marketing costs for the quarter.

During the quarter, the company repurchased $300 million worth of stock in the quarter, and the board has now approved a new repurchase program of $600 million. Intuit ended the quarter with more than $1 billion in cash and investments.

Going forward, management expects revenues between $3.3 billion and $3.43 billion in fiscal 2010, up 4% – 8%. Earnings per share are projected between 29 cents and 32 cents. Revenues for the second quarter are projected between $800 million and $835 million, up 1% – 6%. Earnings per share are expected to come between 15 cents and 18 cents.

The forecast was much lower than the street estimates, leading to a 2% fall in share price after the results were announced. On the conference call, management stated that the company is yet to find a significant improvement in business sentiment among small business customers who use the company’s flagship products such as QuickBooks software and Turbo Tax programs.

ENI Buys Uganda Blocks

ENI S.p.A (E) entered into a definitive agreement with Heritage Oil to buy the latter’s 50% interest in blocks 1 and 3A in Uganda . Total consideration for the contract is $1.35 billion. The contract also provides an additional consideration of $150 million, either in cash or in kind, on fulfillment of certain conditions in the future.

The company was pursuing an approach of sustainable development through its expertise and technologies in the African continent. And this transaction is part of this development strategy.

Located in the Lake Albert basin, blocks 1 and 3A have resources of more than 1 billion barrels of oil equivalent. Of this, nearly 70% has already been discovered with approximately 28 wells drilled in the area. The agreement is subject to approval by the competent authorities.

Eni has been producing in the African continent for a long time. The company is currently acting as an operator in many oil-producing countries such as Angola, Ghana, Nigeria, the Republic of Congo, Gabon and Mozambique. Total production per day from these regions currently amounts to about 450,000 barrels of oil equivalent.

Eni’s upstream portfolio spreads over a number of fields in several countries. Its lower reliance on a handful of large fields, both in its existing portfolio and its future growth pipeline, is in contrast to the growth profile of BP plc (BP) and Royal Dutch Shell (RDS.A), both of which are heavily dependent on the delivery of a few key projects.

In addition, Eni’s lack of exposure in the refining and marketing space is also a significant positive in the current compressed margin environment, in our view. We, however, believe that all these positives are already reflected in its valuation. As such, we recommend a Neutral rating for the stock.

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Prieur’s readings (November 25, 2009)

Prieur du Plessis — Wed, 25 Nov 2009 09:33:02 +0000

This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy. Please also add the links to any other worthwhile articles you would like to share to the comments section.

Citi Expects Strong Economic Growth – Analyst Blog

Zacks Market Commentaries — Tue, 24 Nov 2009 22:37:17 +0000

Citigroup Inc. (C) forecasts strong economic growth in many countries in 2010. But although the company expects several countries to experience economic growth, it predicts that the growth will be somewhat uneven.

According to the annual report of Citi’s Investment Research and Analysis group, though growth will be strong and even across major economies in the beginning of the year, it will be uneven later. Citi expects Asia, excluding Japan, to experience sustained economic growth. Though the U.S. is expected to see fairly strong economic growth, the recovery will be more gradual in Europe and Japan.

Citi also upgraded its 2010 gross domestic product forecasts for the U.S., Japan, the U.K., Australia, New Zealand, Hong Kong, Korea, Argentina, Hungary, Poland, the Czech Republic and Turkey.

The report also suggested that Central Banks are unlikely to hike key interest rates through the next year. However, credit availability is expected to remain restricted at least for a year or two as banks seek to raise additional capital under regulatory pressure. Also, inflation on a global basis appears to be controlled. Additionally, countries will need to achieve fiscal sustainability to post strong economic growth.

The rankings of global economies are expected to change significantly in the next 5 to 15 years as Asia is predicted to experience rapid industrialization and increased domestic demand while resource-rich regions such as Africa, the Middle East, Latin America, Russia and Brazil see growth.

Citi is a leading global financial services company and has approximately 200 million customer accounts, doing business in more than 140 countries. Hence, the company’s earnings will be benefited with the accuracy of the forecast.
Read the full analyst report on "C"
Zacks Investment Research

JPMorgan Fortifies China Mgmt – Analyst Blog

Zacks Market Commentaries — Tue, 24 Nov 2009 21:08:26 +0000

JPMorgan Chase & Company (JPM) said on Monday that it has appointed Zili Shao as chairman and chief executive of its China operation. It has also appointed Fang Fang as vice-chairman of its Asia Investment Banking operations.

The company has initiated management changes to strengthen its China operations as Chinese companies are now closely focusing on domestic as well as global expansion.

Mr. Shao, currently the head of the Asian practice at the law firm Linklaters, is experienced in some of the biggest financial deals involving China, including the acquisition of Guangdong Development Bank and Industrial and Commercial Bank of China’s purchase of a $5.5 billion stake in Standard Bank of South Africa. Mr. Shao will assume his new responsibilities at JPMorgan’s China business in late January.

Mr. Fang would be responsible for JPMorgan's investment banking strategy and business development efforts involving China and all markets across Asia including Japan, Australia and India.

With their expertise, both Shao and Fang will help JPMorgan develop additional financial products and services for corporate and investor clients in China.

Business diversification has helped JPMorgan to achieve earnings stability during the ongoing downturn of the economy. This diversity may prove to be as much a positive during the recovery as it was during the downturn. Within traditional banking, a diversified product portfolio will sustain better than many other banks, which have exited some of these areas and become excessively dependent on a few products. Also, JPMorgan will be able to leverage its strong deposit base when interest rates finally rise.

However, while we anticipate continued synergies from the company’s diversification and strong capital position, we believe increasing provisions and worsening credit quality will be a drag on future earnings.

Read the full analyst report on "JPM"
Zacks Investment Research

The New Crude Oil Benchmark That Could Change the Oil Market’s Price Dynamics

Investment U — Tue, 24 Nov 2009 19:46:09 +0000

The New Crude Oil Benchmark That Could Change the Oil Market’s Price Dynamics by Sheena Martin, Contributing Editor Tuesday, November 24, 2009 Earlier this month, the world’s largest oil producer set the table for a move away from traditional light, sweet crude oil. Saudi Aramco, the state-owned company of Saudi Arabia has decided to drop [...]

Solar Energy Initiatives, Inc. (SNRY.OB): Grass Roots Solar

QualityStocks — Mon, 23 Nov 2009 15:13:27 +0000

These days, solar is one of the most popular words in the green lexicon. You hear it everywhere, with most of the talk focusing on the increasingly large solar power plants that are now being built. New designs have dropped the price of large scale solar electricity generation by over 80% in the last 25 [...]

Semtech Beats, Acquires SMI – Analyst Blog

Zacks Market Commentaries — Mon, 23 Nov 2009 14:40:00 +0000

Semtech Corp’s (SMTC) third quarter earnings beat consensus estimates by 6 cents. This follows better-than-expected results reported by the entire peer group, including Maxim Integrated Products (MXIM), Intersil Corporation (ISIL) and Linear Technology (LLTC).

Revenue

Revenue of $75.1 million was up 13.3% sequentially and down 5.7% year over year. The sequential strength was broad-based across all end-markets except industrial and was derived from sequential increases across all product lines except power discrete. The decline from the year-ago period was recession-related.

Asia remained the largest region, with a 61% revenue share. North America was next, representing 23% of total revenue and Europe third, generating the remaining 16%. All three regions witnessed higher demand, with Asia growing 15.2% sequentially, North America growing 4.2% and Europe 20.9%. Both distribution and OEM sales grew in the last quarter, and distributor inventories declined.

Revenue by End Market

All except the industrial end-market saw double-digit sequential growth. The 21.8% and 20.9% increases in the high-end consumer and computing markets, respectively were on account of positive seasonality. The 19.0% sequential increase in communications was driven by strength in infrastructure spending.

The 9.3% sequential decline in industrial was due to weak demand for power discrete products within the military and aerospace segments of the North America region. The advanced communication and sensing product line witnessed the strongest growth, with revenue increasing 27.0% due to momentum at communications infrastructure OEMs.

The power management business grew 20.0%, helped by a more diverse product line and particular strength in high-end consumer and computing applications. Revenue from protection products was up 16.0%, again driven by consumer, communications infrastructure and computing markets. The 31.0% decline in the power discrete business was below management’s expectations, although order rates showed some improvement.

The protection, power management, advanced communication and sensing, and power discrete product lines generated 53%, 24%, 14% and 9% of third quarter revenue, respectively.

Orders

Orders were up strongly in the last quarter and we estimate the book to bill at 1.03. Turns sales increased both sequentially and year over year. We estimate that the backlog increased mid single-digits. Lead times remained short, in the 2-6 week range. Historically, management has always met guided revenue numbers, and in the last quarter revenue exceeded the high end of the guided range. Given the order momentum and backlog growth, we expect the company to meet or exceed guidance in the Jan quarter as well.

Operating Results

The pro forma gross margin for the quarter was 55.4%, up 40 basis points (bps) from the previous quarter’s 55.0%. The gross margin benefited from higher volumes and better product mix. Operating expenses of $24.0 million were higher than the previous quarter’s $2.2 million. The operating margin was 23.4%, up 192 bps from 21.5% recorded in the previous quarter.

The improvement was because of lower SG&A expenses as a percentage of sales, as well as flattish COGS and offset by higher R&D as a percentage of sales. New product development expenses had a significant impact on R&D in the last quarter.

Excluding the impact of restructuring charges, acquisition-related costs, stock compensation expenses and option and restatement related legal expenses on a tax-adjusted basis as well as one-time tax items, the pro forma net income was $16.4 million or 21.9% net margin, compared to $11.8 million or 17.8% in the previous quarter and $16.3 million or 20.5% in the year-ago quarter. Including the special items (-$0.61 per share), the GAAP EPS was -$0.34 compared to $0.12 in the Jul 2009 quarter and $0.19 in the Oct quarter of last year.

Balance Sheet

Inventories were down 4.6%, raising inventory turns from 4.5x to 5.3x. Days sales outstanding (DSOs) decreased from 35 to around 31. The company ended with cash and short term investments of $4.40 per share. Capital additions were $3.8 million in the quarter, netting a free cash flow of $19.5 million.

Guidance

The fourth quarter guidance is for sequential revenue increase of 0-4%, with the GAAP gross margin increasing by up to 40 bps, GAAP R&D of $11.2 million, GAAP SG&A of $ 20 million, interest and other income of $300K, a GAAP tax rate of 14% and a weighted average diluted share count of around 62.2 million. Capital additions are expected to be $10-15 million and depreciation of around $4 million.

Sierra Monolithic Inc. Acquisition

Management announced that the company would be acquiring SMI for $180 million in cash, pick up $8 million of existing unvested stock options standing to the credit of SMI employees and pay out another $12 million in incentives to SMI employees. Transaction costs are currently estimated at around $2.5 million. SMI is expected to generate $15 million in revenue in 2009, which is expected to grow 20-30% in 2010.

The gross margin is expected to be 55-60% (slightly higher than Semtech’s current gross margin). Management also expects the business to require an additional $6-7 million in operating expenses and attract a non-GAAP tax rate of 22-25%. Management expects the business to be accretive to GAAP earnings within the next twelve months.
Read the full analyst report on "SMTC"
Read the full analyst report on "MXIM"
Read the full analyst report on "ISIL"
Read the full analyst report on "LLTC"
Zacks Investment Research

The week ahead

Prieur du Plessis — Sat, 21 Nov 2009 07:15:37 +0000

The video clips in this post provide a handy summary of the reports expected on the economic, financial and corporate front around the globe during the week ahead.

Exponential Growth, Finite World – Analyst Blog

Dirk Van Dijk — Fri, 20 Nov 2009 21:27:04 +0000

I want to talk about the challenge of exponential growth in a finite world. This is a concept that while on its surface seems easy to get, most people don’t fully grasp it.

Any growth rate that is positive will lead to a doubling in size eventually -- the higher the growth rate, the quicker the doubling. A quick "back of the envelope" method of figuring it out is known as the rule of 70. If you divide a growth rate into 70, it will roughly give you the time for something to double. Thus if something is growing at 2% a year, then it will double in about 35 years, at 5% only 14 years, etc. If you want to be more precise, you can always use your Y^x button on your calculator, but the rule of 70 will do for this discussion.

Clearly, exponential growth is what we are looking for when we invest -- better known as compound interest -- and it is vital to anyone’s financial health that they stay on the right side of it. People who get on the wrong side -- for example, by carrying a credit card balance -- are eventually headed towards financial oblivion. If that is you, then your best investment is probably not one of the stocks or ETFs that I recommend, it is paying down you damm Visa bill.

It is also why I try to watch the downside when I make investment decisions. It is far more important to avoid 50% losses than it is to have a 50% gain. After all, if you had a 50% gain in one year, but in the next year you suffered a 50% loss, at the end of two years that dollar would have turned into just $0.75 -- a 25% loss.

However, far more important to the world is the dark side of exponential growth. Let's start with the obvious one: population growth. The table below comes from Wikipedia, but is based on UN data. Note that from 1750 to 1800, the world population grew from 791 million to 978 million -- an increase of 187 million, or 0.4% per year. From 1850 to 1900, it grew from 1.262 billion to 1.650 billion -- an increase of 388 million or at 0.53% per year.

Thus, even very small growth rates can result in some very large increases extended long enough, and as the base grows, the absolute increase gets larger each year even if the rate of increase stays the same. Now look at what has happened more recently. From 1950 to 1999, world population increased by 3.457 billion, more than doubling from 2.521 billion, an increase of 1.78% per year. Lately we have seen a slowdown in the growth rate; from 1999 to 2008 it was just 1.29% per year, but that has meant an increase of 729 million in just nine years, or 92% of the entire world population in 1750.

Looking forward, the U.N does see a further reduction in the rate of growth, to just 0.68% per year, or almost back down to the growth rate in the very earliest days of the Industrial Revolution. But the base is so much larger, the absolute increase is 2.2 billion, or almost the world population of 1950. The effect is that a long-term graph of world population looks like a picture of a rocket launch. And unless you believe in the Mayan calendar or the equally silly "end times" nonsense, this is going to cause some very big problems (not that the end of the world in 2012 wouldn't be a very big problem on its own).

Now look at where the growth is coming from. The combined populations of North America (Mexico is included in the Latin American numbers, so basically the US and Canada) and Europe are actually expected to fall from the current 1.069 billion to 1.020 billion. All of the growth is coming from Asia, Africa and Latin America.

The only thing that can keep up with exponential growth is something that itself grows exponentially. Fortunately, the one thing that grows exponentially at a very fast rate is computing power, which in turn allows for technological advances. So far, technology has managed to hold off the worst of the problems that one might expect. After all, this analysis is not exactly original. It was first made by Thomas Malthus back before world population hit the 1 billion mark.

However, you can eat potato chips, not computer chips. One of the things that technology has done is level the playing field, so that people in Asia and eventually Africa will have the same shot at success as people in the U.S. and Europe. They can see how we live, and surprise, surprise -- they would prefer to live the way we do, and are increasingly able to do so. As they do, the economic growth opportunities will be huge.

That is why I like the emerging markets story so much. However, given the challenges of trying to research foreign firms who might be best positioned to take advantage of these trends, it probably makes sense to use ETFs such as the I-shares MSCI Emerging Market Fund (EEM) or more country-specific variants like the Claymore China Small Cap ETF (HAO) or the Wisdom Tree India Earnings ETF (EPI).

One of the things that has been absolutely key to our ability to have so much higher living standards today than back in, say, 1850 is that we use a lot more energy.

So let’s take a look at energy consumption per capita (the data I’m using comes from here if you want to investigate further). In 2005, people in North America used the equivalent of 8157.9 kilograms of oil per year (kgoe/y) per person, up from 7942.9 kgoe/y in 2000. Thus while our rate of increase in energy consumption was just 0.54% per year, it was on a high base so the absolute increase was 215 kgoe/y over that time.

Now look at Asia (excluding the Middle East). In 2000, they were using 865.2 kgoe/y, and by 2005 it was up to 1051.5 per year. That is an increase of 3.98% per year, or to go back to the rule of 70, it means that if it keeps up Asia’s energy consumption per capita will double by 2022. Combine that with a population that is expected to grow at 0.6% per year, and Houston, we have a problem.

However, note that the absolute increase in energy use per capita in Asia was just 186 kgoe/y, or just 86.5% of the increase in North America, despite the far higher growth rate. However, if the relative growth rates continue, that will not last. If we extrapolate out the growth rates of 2000 to 2005 then by 2015, Asia’s per capita consumption will grow to 1,553.0 kgoe/y, an increase of 501.5, while the absolute increase in North America will be "only" 451.4 kgoe/y.

Put another way, right now we use 7.76x as much energy per person as in Asia (keep in mind these figures include relatively rich countries like Japan and South Korea, as well as basket-cases like Burma and Bangladesh), and by 2015 that ratio will fall all the way down to 5.54x as much.

Now, the peak year for actual oil discovery in the world was in 1964, and as you pump oil out of the ground it is gone. Once you reach the point where you have pumped half the original oil in a field, it is basically impossible to increase the annual output from that field without causing serious damage that eventually results in that oil being trapped forever. Most of the currently producing fields are past their peak. As the International Energy Agency (IEA) found last year:

"Output from the world's oilfields is declining faster than previously thought, the IEA said in its annual report. Without extra investment to raise production, the natural annual global crude oil depletion rate is 9.1%. The findings suggest the world will struggle to produce enough oil to make up for steep declines in existing fields, such as in the North Sea, Russia and Alaska. The effort will become even more acute as prices fall and investment decisions are delayed. Even with investment, the annual rate of output decline is 6.4." (See here for full story.)

Now the situation is better for natural gas (NG) than it is for oil, but eventually that will run out as well. However, we have much more time thanks to the new shale plays here in the U.S. We need to shift to more usage of NG as a bridge towards the eventual goal of producing most of our energy from renewable sources like wind and solar. But given the tiny fraction of the world’s energy they now represent, we will need many years of very fast growth in them to make a substantial dent in world energy needs.

Natural gas also has the benefit of being located here in North America, rather than in rather unstable and hostile areas of the world, the way oil is.

The U.S. cannot continue to run massive trade deficits with the rest of the world. The trade deficit is the source of our external debt, not the fiscal deficit. Our external debt is now (as of 6/30/09) at $13.454 trillion -- up from just $7.744 trillion five years ago. That is a growth rate of 11.7% per year, and is clearly not sustainable (that might be overstating it since it is a gross number; we do hold some debts of other countries that offsets it in part). Still, even if the net growth rate is half that amount, it is clearly unsustainable, and is one of the reasons the dollar is going to be under long-term pressure.

Putting this all together it seems clear to me that the price of energy must continue to rise over the long term. Companies that are going to be able to increase their production of oil, such as Petrobras (PBR) are going to be exceptionally well positioned.

While natural gas should see a big growth in demand, it is not a perfect substitute for oil. Still, big gas producers like EnCana (ECA) have a very bright long-term future. I would also note that what I am saying about oil also holds true for other commodities. Energy and commodities are going to be the real stores of value and of wealth over the next few decades.
Read the full analyst report on "EEM"
Read the full analyst report on "HAO"
Read the full analyst report on "EPI"
Read the full analyst report on "PBR"
Read the full analyst report on "ECA"
Zacks Investment Research

11-18-09 Audio Interview with One World Ventures, Inc. (OTCPK: OWVI)

Stuart T. Smith — Fri, 20 Nov 2009 20:00:23 +0000

Stephen Prior, CEO of One World Ventures (OTCPK: OWVI), is featured in this audio interview conducted by Stuart T. Smith of SmallCapVoice.com. During the interview Mr. Prior provides a company overview, status and answers many questions that investors have poised. One World Ventures, Inc. is a holding company with management resourced in Asia and the United [...]

This Small Oil Producer is Ripe for a Takeover… Here’s How to Profit

Investment U — Fri, 20 Nov 2009 18:18:58 +0000

This Small Oil Producer is Ripe for a Takeover… Here’s How to Profit by Sheena Martin, Contributing Editor Friday, November 20, 2009 Takeovers are big news in the market at the moment. In fact, did you know that takeovers have the biggest one-day gain in stocks for any asset? As my colleague – and takeover expert [...]

Capitalism is alive and well

Andrew Snyder — Fri, 20 Nov 2009 16:03:57 +0000

pBaltimore – (a href="http://www.todaysfinancialnews.com" target="_blank"TFN/a): Hallelujah, the markets work! You have no idea how happy I was this morning when I opened the Wall Street Journal and found an article detailing Goldman Sachs shareholder anger at the recent bonus payouts./p pNow, I don’t care who makes what. That’s between bosses and their worker bees. But I do get a little peeved when Uncle Sam tries to tell some worker he can’t get paid per his contract./p pBefore you go shouting about how Washington saved Wall Street and therefore we, as taxpayers, get a say over pay, let me ask you this. Does your mortgage company tell you what color to paint little Johnnie’s room? Does your car loan provider tell you how fast to#8230;/p

MoneyTV With Donald Baillargeon, 11/20

Stuart T. Smith — Fri, 20 Nov 2009 15:03:25 +0000

LOS ANGELES, CA — (Marketwire) — 11/20/09 — Meteoric rise in stock price, Hollywood technology fosters interest in comics, fire prevention, forex, oil and gas; this week on MoneyTV, hosted by anchor Donald Baillargeon. MoneyTV is the internationally syndicated television program all about money and what makes it happen, (http://www.moneytv.net), featuring informative interviews with company [...]

Crane Co. – Growth And Income – Zacks Rank Buy

Alex Kolb — Fri, 20 Nov 2009 05:00:00 +0000

Crane Co. (CR), which boasts an industry-leading yield of 2.7%, recently declared a quarterly dividend of 20 cents per share. The company also posted solid results for the third quarter, raising the lower end of its earnings outlook.

Company Description

Crane Co. manufactures highly engineered industrial products. Founded in 1855, the company provides products and solutions to customers in the aerospace, electronics, hydrocarbon processing, petrochemical, chemical, power generation, automated merchandising, transportation and other markets. Crane's five business segments are: Aerospace & Electronics, Engineered Materials, Merchandising Systems, Fluid Handling and Controls. Crane has approximately 11,000 employees in North America, South America, Europe, Asia and Australia.

Solid Income

The company recently declared a quarterly dividend of 20 cents per share, noting that it is payable on December 10 to shareholders of record as of the close of business on November 30.

Crane's dividend yield of 2.7% tops the industry average of 1.6%

A Strong Quarter

The company also posted solid results for the third quarter, raising the lower end of its earnings outlook.

Third-quarter earnings per share of 60 cents surpassed the Zacks Consensus Estimate by 25% and matched the year-prior earnings. Sales of $551 million slipped 14% year-over-year.

Management noted that despite a 14% decline in sales from the third quarter of 2008, operating profit and earnings per share were flat compared to 2008, primarily reflecting the company's success in re-aligning its cost base, adding that operating margin improved by 160 basis points, to 10.1%, compared to 8.5% a year ago.

The company said its $305 million in cash, $300 million revolving bank credit agreement and no near-term debt maturities provide it with a solid financial foundation to continue to manage through the current environment, positioning Crane for growth as end markets recover.

Bullish Estimates and a Surging Share Price

The company upped the lower end of its full-year earnings guidance to a range of $1.90 - $2.05 from $1.75 - $2.05.

Analysts boosted the 2009 Zacks Consensus Estimate to $2.05 per share from last month's $1.90. For the following year, analysts polled by Zacks are projecting earnings of $2.21 per share, versus the previous month's $2.08.

Shares of Crane soared past the market by more than 100% over the past year. Zacks Investment Research

Fed Characterizes Declining Dollar as Nominal

QualityStocks — Thu, 19 Nov 2009 18:26:24 +0000

Future voting members of the Fed’s policy setting committee waved off concerns regarding a declining dollar on Thursday, Nov. 19, suggesting that unless the decline becomes volatile or otherwise erratic, concerns about an inflationary impulse are unwarranted. In commentary that seems to suggest the dollar’s decline may be a counterbalance to a historically undervalued renminbi [...]

Goodrich to Acquire AIS Global – Analyst Blog

Zacks Market Commentaries — Thu, 19 Nov 2009 14:20:00 +0000

Goodrich Corporation (GR) has signed an agreement to acquire AIS Global Holdings LLC for approximately $375 million. AIS Global also known as Atlantic Inertial Systems is a leading provider of mission-critical guidance, stabilization and navigation products and systems for the military and defense market. The transaction is expected to close by the end of 2009, subject to customary government approvals.

Goodrich expects the company to be accretive to earnings in fiscal 2010. The acquired company mainly caters to defense prime contractors as well as U.S. and allied military forces around the world. Primary products include inertial sensors, inertial measurement units (IMUs), integrated systems, stability systems and terrain avoidance systems for missiles, military aircraft and land systems.

AIS will become part of Goodrich's Sensors and Integrated Systems business within its Electronic Systems segment. The acquisition will boost the Electronic Systems segment, where operating income fell 11% due to lower sales volume and unfavorable product mix in the recently reported third quarter of fiscal 2009.

Fortunes were down due to lower sales of engine controls, aviation airplane spares, and aviation airplane aftermarket sales. The company expects AIS's portfolio of inertial sensors products to complement its guidance, control and navigation systems products. Based in Charlotte, North Carolina, Goodrich is a supplier of components, systems and services to the commercial and general aviation airplane markets.

The company also supplies systems and products to the global defense and space markets. Its businesses including manufacturing, service and sales are carried out in locations throughout the world. The company’s products and services are sold to customers in North America, Europe and Asia .

Goodrich operates through three business segments – Actuation and Landing Systems, Nacelles and Interior Systems, and Electronic Systems.

Actuation and Landing Systems provide components and systems in aircraft used in take-off and landing, wheels and brakes, as well as actuation systems. Nacelles and Interior Systems produce aero-structures, aircraft interiors including lighting and cargo systems, and other services. The third operating segment, Electronic Systems, produces inputs for in-flight monitoring and control and safety data, as well as ice detection, ISR, and launch and missile telemetry systems.
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Zacks Investment Research

Another Acquisition by Danaher – Analyst Blog

Zacks Market Commentaries — Wed, 18 Nov 2009 15:42:45 +0000

Gilbarco Veeder-Root, a wholly owned unit of Danaher Corporation (DHR), agreed to buy a petroleum dispensing pump (PDP) unit from Larsen & Toubro (L&T) in India. The PDP business unit manufactures, sells, integrates and services petroleum dispensers, LPG equipment, and automation systems solutions. The financial terms of the acquisition were not disclosed.

This acquisition will further strengthen Gilbarco’s position in the fast growing Indian market. Danaher’s management stated that the acquisition reaffirms the company’s interest in India and is in tandem with its long-term growth strategy. The acquired unit will be joining 14 other Danaher companies in India.

The PDP unit will be a part of Gilbarco Veeder-Root’s organization in a new division called Gilbarco Veeder-Root India. Gilbarco supplies integrated fuel control, site management and support services for petroleum marketers and commercial fuelling enterprises.

During its third quarter conference call, Danaher pointed that it was seeing strongly positive growth in China and India, the two high growth countries in Asia. The company said that though the rest of the emerging markets were soft, it witnessed mid-single digit growth in China and India during the quarter. The company is quite bullish on growth opportunities in these two countries.

Danaher is focused on strengthening its competitive position and accelerating its sales and earnings growth potential through acquisitions. During the third quarter, the company completed six acquisitions and announced another two acquisitions to be completed in the fourth quarter.

Danaher Corporation, together with its subsidiaries, designs, manufactures, and markets professional, medical, industrial, commercial, and consumer products, primarily in the United States, Europe, and Asia. Major competitors are Emerson Electric Company (EMR) and Johnson Controls Inc (JCI).

We currently have a Neutral recommendation on DHR.

Read the full analyst report on "DHR"
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Canadian Solar Beats Estimates – Analyst Blog

Zacks Market Commentaries — Tue, 17 Nov 2009 21:20:30 +0000

Canadian Solar Inc. (CSIQ) reported adjusted EPS of 69 cents in the third quarter of fiscal 2009, which pushed past the Zacks Consensus Estimate of 52 cents per share. Also, adjusted EPS for the quarter was far higher than the year-ago quarter’s 31 cents.

Canadian Solar net revenues in the reported quarter escalated to $213.1 million, compared to net revenues of $114.2 million in the second quarter of 2009 and $252.4 million in the year-ago quarter. In the reported quarter, following industry trends, the company witnessed a large spike in shipments, which rose to 102.6 MW, compared to shipments of 48.2 MW in the second quarter of 2009 and 60 MW in the year-ago quarter.

The reported quarter witnessed a huge demand for solar products, with a number of companies setting new peaks of volume sales. JA Solar Holdings Co. Ltd. (JASO) and ReneSola Ltd. (SOL) also set individual company records of higher shipments during the quarter.

Revenue from the European market in the reported quarter accounted for 87.6% of the company’s sales, marginally down from 88.1% in the year-ago quarter. Also, in real terms, revenue from the European market decreased to $186.6 million in the reported quarter from $222.4 million in the year-ago quarter. However the European market witnessed 179% growth in revenues in the reported quarter when compared to only $66.9 million generated in the second quarter of 2009.

Sales from Asia decreased marginally both in real and percentage terms to $13.6 million and 6.4% of sales in the reported quarter from $16.4 million and 6.5% of sales in the year-ago quarter. Similarly, sales from the American market decreased to $12.9 million compared to $13.5 million in the prior-year quarter.

Canadian Solar reported cash and cash equivalents of $103.1 million at the end of first nine months of fiscal 2009 from $115.7 million at fiscal year end 2008. Long-term borrowings decreased to $30.8 million at the end of the first nine months of fiscal 2009 from $45.4 million at the end of fiscal 2008.

Outlook

Canadian Solar reaffirmed its fourth quarter 2009 guidance of shipment range of 128 MW - 138 MW, with gross margins expected to be in the high-teens on a percentage basis. For fiscal 2009, the company expects shipments to be in the range of 295 MW to 305 MW. Fiscal 2010 shipments are expects to be in the range of 600 MW to 700 MW. The company plans to increase its solar module production capacity from existing 820 MW to 1 GW by the end of April 2010, and to increase its internal cell production capacity from 420 MW to 700 MW by June 2010.
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Intel Raises Dividend – Analyst Blog

Zacks Market Commentaries — Tue, 17 Nov 2009 19:05:25 +0000

Intel Corp (INTC) raised the quarterly cash dividend by 12.5%, totaling 63 cents a share in 2010. The dividend yield comes to 3.1%.

The company has been paying a cash dividend for the last 17 years and has raised the dividend 14 times since it started.

Intel has over $8 billion of net cash on its balance sheet, or around $1.58 a share. The $1.25 billion payment to Advanced Micro Devices (AMD) will take another 23 cents a share off the cash balance.

The remaining cash ($1.35 a share) is sufficient to fund its growth plans, even after paying the higher rate of dividend. We also expect Intel to continue generating strong cash flows, based on its leading market position and product development strategies.

Intel’s announcement comes as an indication of the technology turnaround. However, the company is not the first to recognize the gain, or pass it to investors. Texas Instruments (TXN) announced a nice raise in September, as the company started seeing broad-based strength in its business.

Chip companies have rallied strongly from the downturn, both due to changes in market dynamics and a more cautious approach by most players. Companies like Linear Technology (LLTC), Maxim Integrated Products (MXIM), Analog Devices (ADI), National Semiconductor (NSM) and TI were all quick to cut inventories at the first signs of the recession.

The companies also benefited from the growing demand in Asia, as a lot of the manufacturing and particularly, assembling has shifted to the region. Another positive for these companies has been the growing consumption of electronic goods in Asia. Therefore, despite the recession, demand has held up relatively better than other sectors in the recession-dampened U.S. and Europe.
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Stock Market News for November 17, 2009 – Market News

Zacks Market Commentaries — Tue, 17 Nov 2009 14:36:33 +0000

U.S. stocks surged to their 13-month highs Monday as a weaker dollar and a rebound in U.S. retail sales reinforced hopes that an economic recovery is indeed underway. Stocks also got a boost after Fed chairman Ben Bernanke reiterated Fed’s intention to keep interest rates low for an extended period.

Gold advanced 2% to fresh record highs; and the price of silver jumped 5.9%. The initial gains in the equity prices followed strength in Asian markets yesterday. Strength in Asia was partly helped by reports that said Japanese economy grew at its fastest pace in over two years, up 1.2% during the third quarter. To add to the bullish mood in the region, leaders of the Asia Pacific Economic Cooperation promised to keep the stimulus measures in place.

On Monday, the 30-stock Dow Jones industrial average rose 136.49 points, or 1.33%, to 10,406.96. The broad Standard & Poor's 500-stock index was up 15.82 points, or 1.45%, at 1,109.30. The tech-heavy Nasdaq composite index gained 29.97 points, or 1.38%, to 2,197.85. On the New York Stock Exchange, 25 stocks were higher in price for every six that declined.

Bernanke warned of threatening headwinds from rising unemployment and tight credit but added comments supporting the government’s stimulus measures. Yields on US Treasuries declined, with the yield on the 2-years touching its lowest since last January. At session's end, Meredith Whitney questioned the fundamentals of the current stock market rally, and said she expected a double-dip recession next year.

Analysts, meanwhile, raised their ratings on number of firms. Goldman Sachs (NYSE:GS) raised its rating on Nordstrom (NYSE:JWN) from "neutral" to "buy," saying the firm would be a "key beneficiary of a recovery in high-end consumer" demand. Goldman's analysts also started their coverage on Dell (NASDAQ:DELL) with a "buy" rating, saying the company would benefit from the PC upgrade cycle. JP Morgan's (NYSE:JPM) added US Steel (NYSE:X) and AK Steel (NYSE:AKS) to its focus list.

A number of key retailer results are slated for today's release, looked to for guidance on current consumer demand. Among companies reporting today are: Home Depot (NYSE:HD), Target (NYSE:TGT), TJ Maxx (NYSE:TJX), Saks (NYSE:SKS), Autodesk (NASDAQ:ADSK), and Salesforce.com (NYSE:CRM).

Zacks Investment Research

Stephen Roach: Preparing for the next Asia

Prieur du Plessis — Sat, 14 Nov 2009 05:24:41 +0000

In this video interview, Stephen Roach, chairman of Morgan Stanley Asia and author of "The Next Asia: Opportunities and Challenges for a New Globalization", discusses prospects for increased integration and cooperation between the region's economies, explores the pitfalls and potential for countries like India and Japan, and considers whether the "Asian Century" has finally arrived.

The week ahead

Prieur du Plessis — Sat, 14 Nov 2009 05:16:00 +0000

The video clips in this post provide a handy summary of the reports expected on the economic, financial and corporate front around the globe during the week ahead.

Energy Blast – Nov 13, 2009

Robert Amsterdam — Fri, 13 Nov 2009 09:47:22 +0000

The International Energy Agency increased its forecast for 2010 global oil demand as the pace of economic recovery in Asia and the Middle East quickens, but has apparently cautioned that rising oil prices could jeopardize the green shoots of recovery....

Obama’s China Challenge

Frank Holmes — Fri, 13 Nov 2009 06:00:00 +0000

With President Obama scheduled to make his first presidential trip to Beijing this weekend, China Region Fund (USCOX) co-manager Romeo Dator appeared on CNBCrsquo;s ldquo;Power Lunchrdquo; today to discuss the U.S.-China relationship. The other guest in the segment was former U.S. Secretary of Commerce Carlos Gutierrez, who stressed that the U.S. relationship isnrsquo;t the only one thatrsquo;s important to China. [Obama] wonrsquo;t be able to give them a public lecture. Hersquo;s going to find a more assertive, a more confident China. The only thing playing in our favor this time is that the whole of Asia is up in arms about the dollar. Since the Chinese peg their currency to the dollar, itrsquo;s giving them a benefit versus the rest of Asia. The only real chance we have here is for Asia to convince China (to let the yuan appreciate). Romeo predicted that Asia on the whole will grow in importance for investors. I think going forward the Asian countries are going to show stronger growth than wersquo;ll have here in the United States and as a result, thatrsquo;s where money is going to flow. So I think [investors] need to make some sort of allocation toward these markets. Please consider carefully a fundrsquo;s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fundrsquo;s returns and share price may be more volatile than those of a less concentrated portfolio. Holdings in the China Region Fund as a percentage of net assets as of 9/30/09: Baidu 2.12%, Ctrip.com International 1.68%. The Shanghai Composite Index (SSE) is an index of all stocks that trade on the Shanghai Stock Exchange. #09-806

Steel Industry – Industry Outlook

Zacks Market Commentaries — Fri, 13 Nov 2009 05:00:00 +0000

Steel Output Mounting

The Steel industry, which consists of companies engaged in the extraction of iron ore and coke coal for the processing of iron and steel, has the major chunk of sales concentrated with a few producers. The industry includes metal ore exploration and mining services, iron and steel foundries for smelting, rolling, forging, spinning, recycling, stamping, polishing and plating of iron and steel products such as pipes, tubes, wire, spring, rolls and bars.

The largest drivers of steel consumption have historically been the automotive and construction markets, which make up more than 50% of total steel consumption. Other steel consuming industries include appliances, converters, containers, tin, energy, electrical equipment, agricultural, domestic and commercial equipment and industrial machinery. Large automakers such as General Motors, Ford Motor Company ([url=http://www.zacks.com/stock/quote/f]F[/url]), Toyota Motor Corporation ([url=http://www.zacks.com/stock/quote/tm]TM[/url]) and Honda Motor Company ([url=http://www.zacks.com/stock/quote/hmc]HMC[/url]) depend upon the steel industry.

ArcelorMittal ([url=http://www.zacks.com/stock/quote/mt]MT[/url]) is the world’s largest steel company with steel production of 103.3 million tons in 2008. Other major players in the industry are POSCO ([url=http://www.zacks.com/stock/quote/pkx]PKX[/url]), Steel Dynamics Inc. ([url=http://www.zacks.com/stock/quote/stld]STLD[/url]), AK Steel Holding Corporation ([url=http://www.zacks.com/stock/quote/aks]AKS[/url]), United States Steel Corporation ([url=http://www.zacks.com/stock/quote/x]X[/url]) and Nucor Corporation ([url=http://www.zacks.com/stock/quote/nue]NUE[/url]).

The Asia-Pacific region, especially China and India, is witnessing higher production and consumption of steel. This is due to the per capita consumption reaching up to U.S./European levels, which could, theoretically at least, double steel demand in the longer-term. China has set up the largest steel industries in the world, driven by increasing demand for rapid urbanization and large infrastructure projects. The country accounted for nearly 50% of monthly total world production in August 2009.

China’s share is larger than the combined production of the U.S., the European Union (EU), Russia and Japan, which have historically been the largest producers of steel. In 2001, China's annual share of world production stood at 17%, while the EU accounted for the largest share at 18%. In eight years, China's share of world production has almost tripled, while other producers have seen their shares decrease. Ranked behind China are Japan and the U.S.

According to the World Steel Association, global steel output had increased to 107 million tons in the month of September 2009, down marginally (0.6%) from the same month of the previous year. Month-on-month, steel output improved slightly from 106.5 million tons. World crude steel production has continued to show a steady increase since April 2009. Steel production had reached its highest level in July this year on the back of a moderate rise in demand and the resumption of idled facilities by producers. The total output of 103.9 million tons was an improvement of 4% from 99.8 million tons produced in October, but down 11.1% year over year.

All major steel producing countries -- China, Japan, Germany, the U.S., Brazil, Turkey, Russia and the Ukraine -- have shown peak monthly figures so far this year. Production in the Middle East, where demand was buoyant last year due to booming infrastructure spending, edged up by 2.0% in September, while monthly steel output in Asia increased 15% to over 60 million tons. Of this, production in China climbed 28.7% to 39.4 million tons. However, global steel production was down 32.3% in North America while production in Europe saw a drop of 23.7%.

According to the data released by the International Trade Administration, steel prices increased across almost all product groups in September 2009 from August 2009. Hot-rolled sheet prices increased 12.6% to $535 per ton from $475 per ton. Cold-rolled sheet increased 10.04% to $625 per from $568 per ton. Stainless sheet prices increased 2.7% to $2,334 per ton.

Steel prices across all product groups have fallen significantly from the previous year despite recent price increases, with the price of hot-rolled sheet showing a 54.6% decrease and cold-rolled sheet a 41.3% decrease from September 2008.

In 2007, China’s steel industry revealed signs of consolidation in a market that was previously rather fragmented and in need of mergers and acquisitions (M&A). Despite the current slowdown in consolidation within the global steel industry, M&A activity remains a critically important business strategy for companies. While the economic downturn is a significant factor in short-term decisions regarding M&A activity, steel companies expect to make acquisitions over the next three years.

OPPORTUNITIES

We expect global steel demand to improve in the long term with the recovery of the user industries. China is expected to remain the largest consumer of steel going forward. World Steel is forecasting an 8.6% year over year decline in steel production, better than the previous forecast of a 14.1% decline, driven by a strong growth in Chinese steel demand. With signs of a recovery across the world since the beginning of the second half of 2009, the association is anticipating global steel demand in 2010 to grow by 9.2% to 1,206 million tons, which is similar to the level in 2008.

With steel demand picking up in the last couple of months, steel producers are restarting facilities. U.S. Steel Corp. is restarting its blast furnace at its Hamilton, Ontario plant after a nine-month shutdown. The company had closed its Hamilton blast furnace in November 2008. It had suspended the remaining operations at Hamilton and the Nanticoke operation in March 2009 due to a drop in demand. Both the facilities were running at less than half their capacity.

Net losses for Nucor Corporation, the largest recycler of steel scrap in the U.S., narrowed to $29.5 million, or 10 cents per share, for the third quarter of 2009. The result was more positive than the Zacks Consensus Estimate of a loss of 14 cents. Long-term contracts, cost reduction efforts and a dominant acquisition strategy inspire optimism about the company’s performance in the coming quarters.

The third largest steel maker in the U.S., Steel Dynamics Inc. reported net income of $69 million -- 30 cents per share -- for the third quarter of 2009, after reporting losses for three consecutive quarters. The earnings, which were driven by cost reduction through higher production and shipping volumes at the Flat Roll Division and better-than-expected performance in the Metals Recycling segment, were higher than the Zacks Consensus Estimate of 23 cents. However, on a year-over-year basis, earnings were down 69%.

WEAKNESSES

The global steel industry is cyclical, highly competitive and has historically been characterized by overcapacity. Production cuts of up to 35% are occurring to keep operating rates in the low-80s and keep the market balanced. The U.S. domestic production capacity utilization has fallen dramatically since August 2008. Capacity utilization peaked in February 2008 at a level of 91.6%. In May 2009, estimated capacity utilization was 44.3%, less than half of its level six months ago. Capacity utilization reached its lowest point, 40.9%, in December 2008, though it has increased again since May 2009.

Overcapacity in the global steel industry could increase the level of steel imports and result in downward pressure on steel prices. Overcapacity in China has the potential to result in a further increase in imports of low-priced, unfairly traded steel and steel products to the U.S. In recent years, capacity growth in China has significantly exceeded the growth in Chinese market demand. A continuation of this unbalanced growth trend or a significant decrease in China’s rate of economic expansion could result in China increasing steel exports.

Key steel consuming industries such as auto, shipbuilding and construction had been experiencing weak demand in the last quarters, forcing global steel makers to slacken production levels. U.S. Steel, the eighth largest steel producer in the world, the largest integrated steel producer headquartered in North America, and one of the largest integrated flat-rolled producers in Central Europe, slashed production by almost 62% during the second quarter of 2009, while Korean steel maker POSCO cut production by about 15% in December last year. This was the first time in its history that POSCO was forced to take such a measure, proof of the very bad operating environment.

The current low demand from the automotive and residential sectors and rising labor costs are affecting producers in the steel industry. Weak demand and significantly lower operating rates have forced producers to shut down facilities. The slowdown in the U.S./Europe/Japanese economies remains a negative issue facing steel producers. The automotive market has yet to recover fully. Steel shipments are off at a double-digit rate.

As a whole, the steel industry posted weak results in the third quarter of 2009. U.S. Steel Corporation recorded its third sequential loss -- $3.03 billion, or $2.11 per share -- in the third quarter of 2009, in contrast to a net income of $9.19 billion or $7.79 per share in the third quarter of 2008. Commercial metals company AK Steel posted a negligible income of $6.2 million compared to $188.3 million in the same quarter of 2008.

Despite a sharp rise in steel prices in September 2009, the future pricing remains uncertain, and we believe continued demand weakness, production resumption by some mills and lower iron ore and coking coal prices in the second half of 2009 would drive monthly prices down again. The recent significant reduction in global steel production in late 2008 and into 2009 has resulted in decreases in many raw material prices.

We expect that such prices will rebound when global steel production returns to more customary levels. In contrast, prices for steelmaking commodities such as steel scrap, coal, coke, iron ore, zinc, tin and other metallic additions have escalated significantly over the last several years due primarily to growth in worldwide steel production, especially in China.Zacks Investment Research

Syneron Skin Products to Hit Asia – Analyst Blog

Zacks Market Commentaries — Thu, 12 Nov 2009 21:51:53 +0000

Syneron Medical Ltd. (ELOS) announced the commercial launch of the elure topical skin whitening products in several Asian markets. The company will sell these products through its dermatologists, beauty salons and spas in Asia from the first quarter of 2010.

The elure skin whitening product is an enzymatic skin whitening treatment that targets and decomposes melanin to reveal a visibly lighter and exceptionally luminous skin tone. The product uses a naturally occurring bio-active substance, Melanozyme, which decomposes the melanin in a fast and safe manner with no side effects.

In the process, Melanozyme is combined with a bio-activator to diminish the dark colored pigment in the skin. The use of Melanozyme eliminates side effects such as skin redness and burning sensation which are seen in the case of other skin whitening products available in the market.

It has been estimated that skin whitening is one of the fastest growing segments of the global beauty industry. The global whitening market is expected to grow over 10% annually. In particular, the Asian market is estimated to be roughly $18 billion per annum in size and is expected to grow rapidly.

Headquartered in Yokneam Illit, Israel, Syneron Medical was founded in 2000 and is engaged in the design, development, and marketing of aesthetic medical products based on its proprietary electro-optical synergy (ELOS) technology. Its medical aesthetic devices are powered by proprietary software, and use the combined-energy technology of bi-polar radio frequency (RF) and optical energy (laser or non-coherent light).

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Prieur’s readings (November 12, 2009)

Prieur du Plessis — Thu, 12 Nov 2009 07:44:05 +0000

Roubini’s RGE: Global monetary policy outlook

Prieur du Plessis — Thu, 12 Nov 2009 07:41:35 +0000

This posts takes a look at some recent monetary policy trends in advanced economies, as seen by the team of analysts at Roubini Global Economics (RGE).

Nissan Building World’s Cheapest Car – Analyst Blog

Zacks Market Commentaries — Wed, 11 Nov 2009 16:57:35 +0000

Nissan to Build World’s Cheapest Car

Carlos Ghosn, the Chief Executive of the alliance Renault and Nissan (NSANY), has revealed that the company will roll out a small car with its Indian partner, Bajaj Auto, that will be cheaper than any other car in India -- and in the world. The car, which is scheduled for launch in India in 2012, would beat India’s largest automaker Tata Motors’ Nano both in terms of pricing and fuel-efficiency, and become the world's cheapest car.

Presently, Tata Nano is the world's cheapest car. The car has a starting price of about Rs100,000 ($2,150). When Renault and Bajaj started discussing on their "ultra low-cost" car 2 years ago, it has been revealed that the car would have been priced between $2,500 and $3,000. However, at the World Economic Forum meeting in New Delhi, India, Mr.Ghosn announced that the ultra low-cost car would be cheaper than the Nano.

So far, India’s bottom-end motor vehicles market has been well known for motorcycles. After the hearty response to the Tata Nano, automakers around the world realized the huge market potential for small cars in India. Hence the initiative for the world's cheapest car.

Thus, the small car by Renault-Nissan and Bajaj would undoubtedly fuel competition between global automakers for the rapidly growing bottom end of the Indian motor vehicles market. The Indian auto industry markets about 2 million cars per year. Mr. Ghosn expects the number to go up to 6 million in 10 years, factoring in expectations from the ultra low-cost car.

The Renault-Nissan alliance has announced that it would provide technical support to Bajaj, who will design and produce the small car. The alliance has revealed that it is also looking forward to export the car to other emerging markets such as Africa, parts of Asia and Latin America.
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Cereplast, Inc. (CERP.OB) Projects Bio-Plastics to Capture 30% of U.S. Market, Topping $10B by 2020

QualityStocks — Wed, 11 Nov 2009 16:31:22 +0000

Cereplast, Inc., a pioneer in the manufacture of plastics which derive largely from resins based on plant starches, released news announcing projections for its market sector. Expecting a ten-fold sales increase in the U.S. bio-plastics market by 2020, the Company cited the $1B sales figures from 2007 and estimates which show that, within ten years, [...]

The Three Key Economic Issues Obama Will Tackle In His First Asia Trip

Money Morning — Wed, 11 Nov 2009 15:16:03 +0000

By Bob Blandeburgo Associate Editor Money Morning When U.S. President Barack Obama this week makes his first visit to Asia as the nation’s chief executive, he will have no shortage of issues to... Money Morning is here to help investors profit h...

Vodafone Profit Leaps, Lifts Savings – Analyst Blog

Zacks Market Commentaries — Wed, 11 Nov 2009 14:33:46 +0000

Vodafone Group Plc (VOD), the largest wireless carrier in the world by revenue, has announced interim results for fiscal year 2010 with adjusted net income of £4.58 billion (US$7.3 billion) increasing 15% year over year from £3.99 billion (US$6.4 billion) reported a year ago, driven by favorable exchange rate movements and reduced tax. Adjusted earnings exclude one-time items such as impairment losses.

Group Revenue & EBITDA

The telecom giant reported consolidated revenues of £21.8 billion (US$34.8 billion) for the period, representing a 9.3% year over year growth. Favorable exchange rate (euro-sterling) swings and net impact of merger and acquisition initiatives contributed to this growth. Excluding these impacts (organic basis), revenue declined 3% year over year.

Group service revenue declined 2.6% year over year on an organic basis to £20.5 billion (US$32.7 billion), primarily due to weaker contributions from European markets as recessionary conditions curbed demand for wireless services. Adjusted EBITDA increased 2.9% year over year to £7.5 billion (US$12 billion) driven by cost control.

Results by Segment

Europe

Revenues for the European segment increased 3% year over year (down 5.1% on organic basis) to £14.9 billion (US$23.8 billion). Service revenue in Europe declined 4.5% organically as growth in Italy and the Netherlands was more than offset by decreases across Spain, Germany and the UK due to a weaker economy, regulatory pressure and intense competition.

Decline in voice revenue continues to offset growth in data. Revenue in Germany and the UK remains under pressure due to mobile termination rate (inter-operator fees) cuts. Vodafone is also losing customers in the UK as subscribers switch to its major rival Telefonica’s (TEF) O2 which is marketing iPhone in the UK.

Moreover, Deutsche Telekom (DT) and France Telecom (FTE) have recently finalized an agreement to combine their UK units, which will create the largest mobile carrier in the UK.

Africa & Central Europe

This segment posted revenues of £3.7 billion (US$5.9 billion), up 36% year over year. Organically, service revenue fell 3.2% as consistent growth at Vodacom (South Africa) and increase in subscriber count were partly offset by weak contributions from Romania and Turkey. Service revenue at Vodacom increased 4.2% on an organic basis as a result of healthy subscriber accretion.

Asia Pacific & Middle East

Asia Pacific & Middle East segment continues to perform in line with expectation. Revenue surged 15.9% year over year (11.3% organically) to £3.1 billion (US$4.9 billion), driven by continued strong growth in India , the single biggest contributor to organic revenue growth. Service revenue in India increased 20.5% organically boosted by roughly 55% growth in wireless customer base amid intense price competition.

Subscriber Trends

During the six-month period, Vodafone registered roughly 20.6 million net new mobile connections across its operations, bringing the total subscriber base to 323.3 million (83.5% represented by prepaid). India continues to be a key driver for subscriber growth with a net addition of 14 million customers in the first six months of fiscal 2010.

In Europe, the company registered a net loss of 262,000 subscribers during the half-year period. Verizon’s (VZ) mobile unit, Verizon Wireless, in which Vodafone holds a 45% stake, however, posted a net addition of 1.1 million customers.

Outlook

Management has confirmed its outlook for fiscal 2010 with adjusted operating profit projected in the range of £11.0 billion to £11.8 billion (US$17.5 billion to US$18.8 billion), assuming a favorable foreign exchange environment. Free cash flow is projected between £6.0 billion and £6.5 billion (US$9.6 billion to US$10.4 billion).

Vodafone is aggressively pursuing its cost reduction program that includes workforce reduction in Europe . The company has increased its annual savings target to £2 billion (US$3.2 billion) by 2012 from £1 billion (US$1.6 billion) as per earlier expectation. Roughly 50% of the total savings is expected to be realized in 2011.

Moreover, Vodafone continues to accelerate 3G wireless service deployments and expand network availability across Asia, Eastern Europe and Africa. The company’s HSDPA technology based 3G mobile broadband network offers network speeds of 7.2 megabits per second (Mbps) across Europe.

Vodafone has recently upgraded its 3G network in the UK to offer peak download speeds of 14.4 Mbps. Efforts are underway to further upgrade the existing 3G HSDPA network to HSPA+ standard, which will offer future throughput up to 42 Mbps. Moreover, Vodafone is set to launch iPhone in the UK in early 2010.
Read the full analyst report on "VOD"
Read the full analyst report on "DT"
Read the full analyst report on "FTE"
Read the full analyst report on "TEF"
Read the full analyst report on "VZ"
Zacks Investment Research

SOPW, HZHI, BOCL, DrStockPick.com Watch List! for Wednesday November 11, 2009, Solar Power, Inc., Bio-Clean Inc. and Horizon Health International Corp.

Dr. Stock Pick — Wed, 11 Nov 2009 03:22:24 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ DrStockPick.com Watch List! My Picks for Wednesday November 11, 2009 are: ************************************************************** SOPW, Solar Power, Inc., SOPW.OB SOPW is a vertically integrated solar energy solution provider offering the North American commercial and public sector building markets a complete solution through a single brand. Throughout Europe, Asia and Australia [...]

EA Beats, Acquires Playfish – Analyst Blog

Zacks Market Commentaries — Tue, 10 Nov 2009 22:00:08 +0000

Strong Second-Quarter Results

Electronic Arts Inc. (ERTS) reported better-than-expected second-quarter results with a steep rise in net earnings and growth in revenue.

Net income, excluding non-recurring items of 6 cents per share increased 200% from the year-ago loss per share of 6 cents. Earnings also surpassed the Zacks Consensus Estimate of a loss of 6 cents. Effective cost management and a lower tax rate have driven earnings growth.

Due to the higher cost of sales, gross margin on a non-GAAP basis declined to 48% from 51% in the year-ago period. However, lower operating expenses in the quarter resulted in a better-than-expected operating margin, which improved to 2% from -3% in the year-ago period.

The company continues to experience a rise in the top-line. Total non-GAAP net revenue, adjusted for deferred revenue of $359 million related to certain online-enabled packaged goods and digital content, increased 1.7% year over year to $1.15 billion in the quarter. Revenue beat the Street expectation, and was driven by the launch of new game titles, which provided an edge to the company’s quarterly results.

Sales from Publishing (70% of total revenue) slipped 3%, offset by an increase of 26% in Distribution (30% of total revenue) in the quarter. By geography, North American sales declined 14% from the year-ago period, offset by a growth of 36% in Europe and 19% in Asia.

By products, packaged good software sales were impacted by weak consumer spending and as a result, declined 1% year over year. The company lowered its 2009 industry outlook for packaged good software sales. However, Wireless, Internet-derived and Advertising revenue increased 20% in the quarter.

The company generated operating cash flow of $6 million in the quarter versus $328 million of cash used in the previous quarter. Electronic Arts ended the quarter with cash, short-term investments and marketable securities of $2 billion and no long-term debt.

The gaming industry has been facing the brunt of the global meltdown, with sagging video game sales, lack of new game releases and intense price war among major gaming companies such as Sony Corp. (SNE), Nintendo and Microsoft Corp. (MSFT) who recently cut prices of the PS3, Wii and Xbox, respectively. Moreover, retailers remain cautious and consumer spending remains weak.

Although the upcoming holiday season could be weaker than normal, long-term we expect the video game market to get a boost from the recovery in spending. The traditional U.S. video game market is expected to continue growing, with software sales increasing to $19.5 billion in 2013 from $14.7 billion in 2008.

Cost Reduction

The company took decisive action to right-size the cost structure and lower operating expenses. Under the cost-cutting initiatives, the company will close down several facilities and reduce headcount by approximately 1,500 positions or about 17% of its workforce.

Management stated that 1,300 of these positions are included in a restructuring plan. The restructuring is expected to be completed by March 2010. The layoffs will result in an annual cost savings of at least $100 million and restructuring charges of $130 - $150 million.

In fiscal 2010, management plans to increase focus on titles with higher margins. The product portfolio will be narrowed, with fewer than 40 titles scheduled for release, down from around 60 published last year.

Guidance

Electronic Arts forecasted full-year 2010 earnings per share of 70 cents to $1, excluding one-time items. The company also expects to remain profitable in the next two quarters. Revenue, adjusted for deferrals is estimated to be $4.2 - $4.4 billion for fiscal 2010.

Acquisition of Playfish

Electronic Arts announced the acquisition of Playfish Ltd., a leading social games company, for $275 million in cash plus $25 million in equity and other considerations, seeking to expand into the growing social gaming sector and strengthen its focus on new gaming platforms by transitioning to digital and social gaming. Playfish has more than 150 million games installed on platforms such as Facebook, MySpace, News Corp (NWS), Google (GOOG) and Apple (AAPL).

Electronic Arts will subsequently pay $100 million more if the company meets undisclosed profit targets through 2011. Playfish will operate within EA Interactive, a division of EA focused on the web and wireless space.

The Playfish deal is expected to be neutral to adjusted non-GAAP earnings but increase net loss per share on a GAAP basis by 15 cents to 25 cents a share, due primarily to acquisition-related tax expenses, deferred revenue adjustments, additional stock-based compensation and amortization of intangible assets. The company believes Playfish will be accretive to its earnings in fiscal 2011.
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McDonald’s Outdoing Rivals – Analyst Blog

Zacks Market Commentaries — Tue, 10 Nov 2009 15:30:10 +0000

McDonald’s Corporation’s (MCD) comparable sales for the month of October 2009 showed a sluggish growth of 3.3% as against the rise of 8.2% in the same month last year, exposing its sensitivity to rising unemployment, economic downturn, and the discount war amongst fast-food chains to lure consumers.

The company faces stiff competition from Burger King Holdings Inc. (BKC), Wendy’s/Arby’s Group, Inc. (WEN) and Yum! Brands Inc. (YUM). However, these quick-service operators are faring better than casual dining restaurant chains, such as Cosi Inc. (COSI) and Red Robin Gourmet Burgers Inc. (RRGB), as cash-strapped consumers are trading towards fast-food centers due to relative cheap dining options.

System-wide sales at McDonald’s worldwide restaurants climbed 10.3% for the month of October. However, in constant currencies, the rate of increase in system-wide sales dipped to 5.2%.  In the United States , comparable sales remained flat falling 0.1% in October (versus 5.3% increase last year for the comparable month). New menu products, including Angus Third Pounders and McCafe premium coffee line-up continued to support the month's results.

The fast-food giant had earlier indicated that U.S. sales for the month of October would be weak. Still the month’s result fared better than the overall quick-service restaurant industry.

In Europe, comparable sales increased 6.4% in October (versus 9.8% increase last year for the comparable month) fueled by strong performance in the U.K. , Germany and France . A variety of mid-tier items and premium menu options contributed to sales.  Comparable sales in Asia/Pacific, Middle East and Africa (APMEA) rose 4.7% in October (versus 11.5% increase last year for the comparable month) driven by Australia and Japan, partly offset by China.
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Fine Wines – not your grandfather’s Investment Fund!

Contrarian Profits — Tue, 10 Nov 2009 13:13:30 +0000

pUp 9.5% over 12 months, the Liv-ex 100 Fine Wine Index (below) has clawed back some of last year#8217;s losses, when the industry#8217;s main benchmark index fell 14.6% in 2008. So should you be piling into the fine wine market?/p pProbably not. First off, new Asian buyers and a #8220;whole pile of Johnny-come-lately types#8221; are fuelling current demand. A six-litre bottle of Château Pétrus 1982 recently sold for a record £60,000 at auction in Hong Kong, a city where wine imports rose by more than 40% in the first eight months of the year. /p pMeanwhile, in Christie#8217;s spring 2009 global sales, Asian and Chinese buyers accounted for 61% of the total sale value, compared to 7% in 2005. #8220;With demand coming#8230;/p

Prieur’s readings (November 10, 2009)

Prieur du Plessis — Tue, 10 Nov 2009 07:35:48 +0000

Nigel Rendell: Buy Brazil, sell eastern Europe

Prieur du Plessis — Tue, 10 Nov 2009 07:33:46 +0000

This post features an interview with Nigel Rendell, emerging market strategist of RBC Capital Markets about a broad spectrum of emerging-market related issues.

ON Semi Looking Up – Analyst Blog

Zacks Market Commentaries — Mon, 09 Nov 2009 21:37:21 +0000

ON Semiconductor (ONNN) reported second quarter earnings that beat the Zacks Consensus Estimate by 4 cents.

Revenue by End Market

Revenue of $472.9 million was up 12.6% sequentially and down 18.7% year over year. The company saw sequential improvement across all end markets except communications and medical, although all end markets were down on a year-over-year basis. Consumer witnessed the strongest growth, increasing 47.3% sequentially. Automotive and computing also grew double-digits.

Year-over-year declines moderated in all except the communications and medical markets. Computing was again the largest end market in the last quarter, generating 27% of sales, followed by automotive with 18%, comunications 17%, industrial/mil/aero with 17%, consumer 17% and medical 4%.

Revenue by Segment

The double-digit year-over-year decline was across all except the standard products segment, with Digital & Mixed Signal the weakest, followed by Computing & Consumer and Automotive & Power. The Standard Products segment was down single-digits. Standard Products generated 32% of revenue (up 15.5% sequentially), computing and consumer generated 24% (up 21.1%), automotive and power 23% (up 16.5%) and digital and mixed signal 21% (down 2.7%).

Geographically, Asia generated the largest chunk of revenue, with a 68% contribution. Revenue increased 14.5% sequentially. Europe generated 17%, a sequential increase of 45.4%. The Americas brought in 16%, down 14.2% sequentially.

Gross Margin

Gross margin for the quarter was 37.9%, up 590 basis points (bps) from the previous quarter’s 32.0%. The gross margin improvement was across all four segments and was partly attributable to strengthening demand, and partly due to significantly higher utilization rates. Gross margin increased 125 bps from the year-ago quarter.

Gross margins were up across all segments, with the highest margin Digital & Mixed Signal segment growing 132 basis points (bps). The Automotive & Power segment saw the strongest margin expansion, up 808 bps sequentially. The segment now generates margins comparable to the Computing and Consumer segment, which increased 376 bps sequentially. The Standard Products segment continues to lag historical trends, although it grew very nicely by 335 bps. All except the Digital & Mixed Signal segment declined on a year-over-year basis.

Operating Performance

Operating expenses of $100.9 million were higher than the previous quarter’s $97.2 million. However, the operating margin expanded 772 bps sequentially and 311 bps year over year. This higher margin was largely on account of the lower COGS [costs of goods sold], although lower G&A [general and administrative], R&D [research and development] and S&M [sales and marketing] (as a percentage of sales) also contributed.

The Automotive and Power segment saw the greatest sequential expansion in operating margin, followed by Computing and Consumer and then Standard Products. Digital and Mixed Signal grew nicely from the year-ago quarter, but saw a small sequential decline. All other segments declined from the year-ago quarter.

Net Profit

On a pro forma basis, ONNN had a net income of $59.3 million, or a 12.5% net income margin compared to $22.2 million, or 5.3% in the previous quarter and profit of $66.3 million or 11.4% in the third quarter of last year. Fully diluted pro forma earnings per share (EPS) were $0.14 compared to $0.05 in the June 2009 quarter and $0.16 in the comparable prior-year quarter.

Our pro forma estimate excludes restructuring charges, stock-based compensation expenses and amortization of intangibles in the last quarter. Our pro forma estimate may not match management’s presentation due to the addition/exclusion of some items not considered by management. On a fully diluted GAAP basis, the company recorded a net income of $29.9 million ($0.07 per share) compared to a loss of $3.0 million ($0.01 per share) in the previous quarter and a net profit of $57.2 million ($0.14 per share) in the prior-year quarter.

Balance Sheet

Inventories were down 2.0% sequentially, with inventory turns increasing from 4.1x to 4.4x. Days sales outstanding (DSOs) were around 51 days, down from 55 days at the end of the June quarter. The cash and short-term investments balance was $470 million at quarter-end, with the company generating $88 million from operations. ON Semi spent $9.3 million on capex, $23.3 million on the repurchase of long-term debt and $4.1 million on share repurchases. At quarter-end, ON Semiconductor had $729 million of debt on its balance sheet, or a net debt position of $260 million.

Guidance

Management provided guidance for the third quarter. Accordingly, revenue is expected to come in at $480-495 million, up 2-5% sequentially. The GAAP gross margin is expected to be 38-39%. Excluding acquisition-related inventory markup of approximately $2 million and stock-based compensation expenses of approximately $3 million, the non-GAAP gross margin is expected to be 39-40%. GAAP operating expenses were $130-135 million.

Excluding amortization of intangibles, stock based compensation expense, restructuring charges, asset impairments and other charges totaling approximately $25 million, the non-GAAP operating expenses are expected to range between $105 and $110 million. Interest and other expenses are expected to be $10-11 million. GAAP taxes are expected to total $5 million. The diluted share count is expected to be 440 million. Management also expects to spend around $25 million on capex in the fourth quarter.
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Air Products Focuses on China – Analyst Blog

Zacks Market Commentaries — Mon, 09 Nov 2009 17:59:08 +0000

Atmospheric and Specialty gases company, Air Products and Chemicals Inc. (APD) recently opened its new specialty amines plant in Nanjing, China. The facility complements its existing local capabilities to support customers in the growing polyurethane additives and epoxy markets.

The new specialty amines plant is designed to manufacture many of the amine chemistries marketed by the business globally. Air Products already operates two large air separation plants. Air Products focuses on China for growth as the country seems to be having a strong and potential market as well as industries, such as construction, coatings and automobile production.

The new plant has significantly strengthened the supply chain capabilities of Air Products' Performance Materials business in China and throughout Asia. Other strategic capabilities that the company has built for its Performance Materials business include a technology center in Shanghai's Zhangjiang Industrial Park, a triethylenediamine manufacturing facility for polyurethane additives in Changzhou, warehouses in Changzhou, Shanghai, Guangzhou and Nanjing.

The plant has also enhanced Air Products' ability to supply differentiated products. The initial focus will be on several performance-oriented products marketed by Air Products' epoxy additive and polyurethane additive product lines, including the Polycat and Dabco series of amine catalysts, and Ancamine, Ancamide and Sunmide series of epoxy curing agents used in diverse industries, such as coatings, inks, adhesives, construction, appliance and automotive.

This apart, Air Products also plans to build a new world-scale air separation unit (ASU) at its La Porte, Texas industrial gases facility. The energy efficient ASU will replace older assets at the site and provide benefits to customers through higher-reliability pipeline of oxygen and nitrogen supply, and enhanced production of merchant and electronics products including argon and xenon. The new ASU is to be on-stream in October 2011.

The ASU at La Porte will serve customers across Air Products' three major business areas of Tonnage Gases, Merchant Gases and Electronics and increase supply security and reliability. The company expects the ASU to deliver significant productivity gains through decreased energy consumption and operating costs.

Air Products also plans to purchase and operate four existing air separation units to supply industrial gases to Xingtai Iron and Steel Corp., Ltd., one of China’s largest specialty steel manufacturers located in Hebei province, China. Air Products is the second largest industrial gas supplier in North America and the fourth largest in the world. The company serves customers in the industrial, energy, technology and healthcare markets worldwide.

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Intelimax Media Inc. (IXMD.OB) Signs Letter of Intent to Enter Asian Market

QualityStocks — Mon, 09 Nov 2009 16:33:14 +0000

Intelimax Media Inc. is an internet services company focusing on online games, web content and advertising. Using its proprietary gaming and pay-per-click listing platforms, Intelimax has released its own proprietary web properties and social network applications. The company announced today the signing of a letter of intent with Canada Business Network Services Inc. (“CanBiz”) to represent [...]

Going Long on the Dollar? Go Longer on Gold!

Justice Litle — Mon, 09 Nov 2009 12:12:51 +0000

pa href="http://www.taipanpublishing.com" class="alinks_links"Taipan/a Daily#8217;s Justice Litle review the current trends of gold, the U.S. Dollar and small caps.br / Finding suprising strength in the dollar in the short term, he finds greater strength in gold and gold stocks for the long term./p pemJustice Litle, Editorial Director, Taipan Publishing Group /embr / Gold, small caps and the U.S. dollar have had a stable three-way relationship for the better part of the 2009 rally. Now the three could be parting ways./p pDr. Marc Faber is one of the few market wise men whose thoughts are worth pondering. His monthly “Gloom, Boom #038; Doom Report” is always a good read. He is an active, Asia-based investor with decades of experience, hundreds of millions under management, and many prescient calls under his belt./p pFaber#8230;/p

Prieur’s readings (November 7, 2009)

Prieur du Plessis — Sat, 07 Nov 2009 08:10:26 +0000

The week ahead

Prieur du Plessis — Sat, 07 Nov 2009 08:09:15 +0000

The video clips in this post provide a handy summary of the reports expected on the economic, financial and corporate front around the globe during the week ahead.

Avnet Tops Estimates – Analyst Blog

Zacks Market Commentaries — Fri, 06 Nov 2009 21:46:54 +0000

Avnet, Inc. (AVT) recently reported revenues of $4.36 billion for the first quarter of fiscal 2010, down 3.1% from a year ago. Excluding the negative impact of foreign currency exchange rates, revenues declined 0.6%.

Management stated that the impact of global slowdown led to the year-over-year decline, but the business environment is improving.

On a segment basis, Electronics Marketing (EM) sales came in at $2.44 billion, down 9.8% year over year (down 8.0% when adjusted to exclude the impact of changes in foreign currency exchange rates). The rate of revenue decline moderated in the reported quarter and management is encouraged by pace of bookings for this segment in recent months.

Technology Solutions (TS) generated sales of $1.92 billion, up 6.9% year over year (up 10.5% when adjusted to exclude the impact of changes in foreign currency exchange rates), driven by growth in Americas and Europe, Middle East and Asia (EMEA).

The company recently acquired a controlling interest in Vanda Group from Hutchinson Whampoa Limited in a strategic move to expand its presence and customer base across China. The transaction will provide the Technology Group with a strong foothold in the banking and financial sector, where Vanda's flagship product, VisionBanking Suite, is a well-known solution.

Operating margin came in at 2.46%, compared to 2.26% in the previous quarter. Net income declined 33.9% year over year to $67.2 million. Earnings per share (EPS) of 44 cents easily beat the Zacks Consensus Estimate of 34 cents.

During the reported quarter, Avnet generated $6.2 million of cash flow from operations. As a result, Avnet ended the quarter with $987 million of cash and cash equivalents and net debt (total debt less cash and cash equivalents) of $20 million.

Going forward, management expects revenues between $4.10 billion and $4.70 billion in the second quarter of fiscal 2010. Earnings per Share (EPS) are expected between 52 cents and 60 cents.

Earlier, rival Arrow Electronics (ARW) reported a small profit and provided a disappointing forecast. Profit narrowed significantly at Arrow due to restructuring charges. The company provided a conservative guidance for the fourth quarter, due to limited visibility.

Though the early signs of recovery improve business sentiments, IT spending is yet to pick up. The recovery is expected to be slow and steady and visibility is not clear - at least in the near-term. Orders are yet to return to normal levels.

Most of the growth for the company is coming from low margin Asian region.

We would like to be on sidelines before becoming positive on Avnet, Inc.

Based in Phoenix, Avnet is one of the largest distributors of electronic components, computer products and embedded technology serving customers in more than 70 countries worldwide.

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Millipore Falls Short of Ests – Analyst Blog

Zacks Market Commentaries — Fri, 06 Nov 2009 20:54:44 +0000

Millipore Corp. (MIL) reported third-quarter earnings per share of 71 cents, well below the Zacks Consensus Estimate of 93 cents per share.

Revenues for the third quarter grew 4% from the previous year, totaling $412 million. Excluding a 3% unfavorable impact from changes in foreign currency, Millipore generated organic revenue growth of 7%. On a divisional basis, excluding changes in foreign currency, Millipore’s Bioprocess Division generated organic revenue growth of 8%, while the company’s Bioscience Division generated organic revenue growth of 4% from the previous year. In the Americas, revenue grew by 4% year over year while Asia recorded a 16% growth in revenues when compared to a similar period.

Bioprocess Division is sustaining its strong momentum and generating very attractive growth. The division’s performance has returned to tracking the strong fundamentals of the biotech industry and there was also an additional benefit of an increase in vaccine productions.

The company continues to increase its R&D spending in the third quarter and it is improving its innovation capabilities. Higher growth and profitability gives it the opportunity to invest while the general market is in a downturn. This investment will benefit its competitive position over time. The company completed the acquisition of BioAnaLab to extend the Company’s biopharmaceutical services offering to the European market.

Cash and equivalents were $190 million with long-term debt at $907 million and shareowner’s equity was at $1.4 billion.

It generated approximately $112 million of free cash flow, representing 74 % growth over the third quarter of 2008. It also paid down $57 million of borrowings under the company’s $678 million primary revolving credit facility, leaving approximately $14 million drawn against it at the end of the quarter.

Millipore is a life science leader providing cutting-edge technologies, tools, and services for bioscience research and biopharmaceutical manufacturing. As a strategic partner, it collaborates with customers to confront the world's challenging human health issues. From research to development to production, its scientific expertise and innovative solutions help customers tackle their most complex problems and achieve their goals. The company was founded in 1954 and is headquartered in Billerica, Massachusetts. Major competitors of the company include Pall Corp. (PLL).

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Energy Blast – Nov 6, 2009

Robert Amsterdam — Fri, 06 Nov 2009 09:52:32 +0000

Apparently U.N. inspectors have found 'nothing to be worried about' upon their first examination of the formerly clandestine uranium enrichment site in Qom in Iran. 'The [Obama] administration must consider whether it makes sense to grant the regime two more...

Nu Skin Enterprises – Growth And Income – Zacks Rank Buy

Alex Kolb — Fri, 06 Nov 2009 05:00:00 +0000

Nu Skin Enterprises (NUS) recently posted record results for the third quarter. Earnings per share of 41 cents topped the previous year's 26 cents and matched the Zacks Consensus Estimate. Revenue was a record $334.2 million, an increase of 8% year-over-year.

Company Description

Nu Skin Enterprises is a $1 billion direct selling company that markets and distributes premium quality personal care, nutrition and technology products through a global network of more than 750,000 active independent distributors and preferred customers. The company operates three core brands, Nu Skin, Pharmanex, and Big Planet.

The Nu Skin brand has a line of more than 100 premium skin treatment and other personal care products. With a team of more than 100 in-house scientists, Pharmanex uses a pharmaceutical approach that is setting the standard for the dietary supplement industry. Big Planet brings the benefits of technology to everyone with innovative products like Maxvault, a line of products that provide the easiest way to preserve, organize, share, and enjoy your photos and home movies.

Nu Skin Enterprises operates in 48 international markets across the Americas, the Asia Pacific region and Europe, with more than 75 percent of revenue coming from Asia.

A Record Quarter and Bullish Forecasts

The company recently posted record results for the third quarter. Earnings per share of 41 cents topped the previous year's 26 cents and matched the Zacks Consensus Estimate. Revenue was a record $334.2 million, an increase of 8% year-over-year.

Nu Skin boosted its annual earnings guidance to $1.38 to $1.40 per share. The company sees fourth-quarter earnings coming in 32 to 34 cents per share.

Analysts polled by Zacks are calling for 2009 earnings of $1.41 per share, a penny higher than last week and above last month's $1.28.

For the fourth quarter, the Zacks Consensus Estimate of 36 cents per share is up a penny from last week and 5 cents above last month's projection.

Outstanding Fundamentals

Nu Skin's return on equity (ROE) of 25% dwarfs the industry average of 6%. The company's net profit margin of 6% tops the industry average of 3%. Nu Skin pays an industry -leading dividend yield of 2%. Zacks Investment Research

Oil & Gas Industry – Industry Outlook

Zacks Market Commentaries — Thu, 05 Nov 2009 21:16:48 +0000

OUTLOOK

The improving economic scene, both here in the U.S. as well as worldwide, is the main driver of the current oil rally that has seen the commodity settling around the $80 per barrel level. But high levels of product inventories (particularly gasoline), along with still higher supplies, will limit any sustained crude gains, in our view. But way too many factors weigh on oil prices, from OPEC decisions and geostrategic tensions to the value of the U.S. dollar and seasonal variables, to definitively size up each one of them for their respective impact on prices.

In its latest release, the Energy Information Administration (EIA) reported a less-than-anticipated increase in crude stockpiles, which rose by 800,000 barrels for the week ending October 23. However, current crude oil stocks, at 339.9 million barrels, still remain 9% above the year-earlier level as well as above the upper limit of the average for this time of the year. As such, crude oil’s near-term fundamentals remain dismal, to say the least.

At current projections, world crude demand for 2009 is expected to be below last year’s level, which itself was below the 2007 level -- the first time since the early 1980’s of two back-to-back negative growth years.

Last month, the Paris-based International Energy Agency (IEA) provided some positive news in this otherwise bleak supply-demand picture. The energy-monitoring body of 28 industrialized countries hiked its global oil demand forecast for both this year and 2010 by 200,000 barrels per day and 350,000 barrels per day, respectively, citing higher-than-expected consumption in Asia and the Americas.

Our view is that oil should be able to hold onto its recent gains and consolidate around current levels, provided this favorable economic view remains in place. But this does not mean that we will not see any short-term pullbacks. On the whole, we expect oil prices in 2010 to be higher than the 2009 levels, but remain significantly below the 2008 peak levels.

Natural Gas

The overall picture remains particularly weak for natural gas, whose inventories have recently hit a new record high of 3.76 trillion cubic feet (Tcf) and is threatening to test the maximum capacity of 3.89 Tcf. Continued strong domestic production (from a number of unconventional natural gas fields) and recessionary consumption (due to the economic downturn), particularly in the industrial sector, are at the core of the commodity's current woes.

Natural gas prices rallied earlier last year, reaching over $13 per million Btu (MMBtu) in July 2008, before trending down to seven-year low level of sub-$2 per MMBtu (we are referring to Henry Hub spot prices here) in September 2009. This, together with tighter access to credit, has prompted producers to scale back drilling operations over the past few quarters.

The supply picture is expected to reverse in the coming months as the lag effect of the sharp drop in domestic drilling activity takes hold. But we do not think this would be enough to offset the record high inventories (storage levels remaining 12% above their five-year average) and steep recession-related cuts in demand. This translates into limited upside for natural gas-weighted companies and related support plays.

OPPORTUNITIES

The strengthening oil price environment should benefit producers, particularly those international players having attractive growth opportunities in their home markets. Two such standout names are China’s CNOOC Ltd. (CEO) and China Petroleum and Chemical Corporation, or Sinopec (SNP), both of which remain well-placed to benefit from the country’s growing appetite for energy.

CNOOC enjoys a monopoly on exploration activities in China’s very prospective offshore region in addition to having a growing presence in the country’s natural gas and LNG infrastructure. On the other hand, Sinopec is the second largest crude oil and natural gas producer, and the largest refiner and marketer of refined petroleum products in China. Sinopec’s leverage to the lucrative Chinese market and the recent $7.5 billion Addax acquisition is expected to help sustain its growth momentum.

Within the oilfield services group, we prefer to own companies such as Cameron International (CAM) that derives about two-thirds of its revenue from outside North America, thereby playing an offsetting role to the relatively soft U.S. drilling scene. Cameron recently posted better-than-expected third quarter results and raised its 2009 forecast, as a revival in energy prices led to improved drilling activities.

WEAKNESSES

We continue to feel strongly that industry players in the servicing and drilling ends of the business with substantial natural gas-focused and North America-centric operations should be avoided. A major sub-sector that fits that description is the onshore drillers. While we currently don't have any Underperform rated stocks in this group, we remain skeptical of land drillers like Nabors (NBR) and Patterson-UTI (PTEN), given the extent of excess capacity in the sector that is expected to weigh on dayrates and margins well into next year.

As expected, natural-gas woes in North America have pulled down the oilfield services companies' third-quarter results. In particular, we remain wary of service providers like Smith International Inc. (SII), given its high North American exposure (from the W-H Energy acquisition) in the face of a collapse in the region’s drilling activities. We have Neutral recommendation on the company, whose third quarter results came in significantly below expectations.

Within the E&P group, we see little reason for investors to own shares of Stone Energy Corp. (SGY). We believe that Stone’s asset portfolio, centered on the Gulf Coast/Gulf of Mexico regions and lacking meaningful exposure to the emerging shale plays, is not suited for the current environment of low commodity prices and restricted access to capital.

We also maintain our cautious view on oil refiners, given the higher-than-average gasoline and distillate stocks -- a combination that will continue to hurt their profitability going into 2010. Additionally, the sharply lower refinery utilization (at around 82% of capacity) provides enough evidence that refineries are cutting back on production because the economy is still struggling on the demand side.

Being the largest independent refiner, Valero Energy Corp. (VLO) remains particularly exposed to this unfavorable macro backdrop. We have an Underperform recommendation on the company.
Zacks Investment Research

Garmin Reports Robust Quarter – Analyst Blog

Zacks Market Commentaries — Thu, 05 Nov 2009 18:35:37 +0000

Garmin Ltd. (GRMN) reported third quarter earnings that beat the Zacks Consensus Estimate by 32 cents. Fully diluted pro forma earnings per share (EPS) were $1.01, compared to 83 cents in the June quarter and 88 cents in the comparable prior-year quarter. The pro forma number excludes a foreign currency gain in the last quarter.

Revenue

Revenue of $781 million was up 16.8% sequentially and down 10.2% year over year. Both volumes and ASPs contributed to the sequential revenue increase in the last quarter. Total units increased 4.1% sequentially to 3.87 million, while the blended average selling price (ASP) increased 12.2% to $202.08.

Strength was broad-based across geographies. North America contributed 64% of quarterly revenue (up 15.2% sequentially), Europe 30% (up 20.8%), while Asia accounted for the balance (up 13.7%). Although the company usually enjoys better pricing in Europe, the price differential between North America and Europe is fading out.

Revenue by Segment

The auto/mobile, outdoor/fitness, aviation and marine segments generated 69.9%, 16.9%, 7.4% and 5.8% of third quarter revenue, respectively.

The Auto/Mobile segment was up 25.0% sequentially and down 12.9% year over year. The recession had a negative impact on year-over-year comparisons, with ASPs declining 12% and volumes 1%. Sequential strength was due to positive seasonality. Both North American and Asian markets saw strength in the last quarter, while Europe stabilized. The company gained PND market share in North America, which increased from 57% to 60% in the last quarter. Market share in Europe was steady at around 20%.

The Outdoor/Fitness segment was up 22.4% sequentially and 11.4% year over year. The strength in the last quarter was atributable to the success of new products.

The Aviation segment revenue was down 9.7% sequentially and 28.6% year over year. The weakness was due to lower spending, and impacted all the three major areas -- OEM, retrofit and portable.

The Marine segment was down 24.5% sequentially, but up 3.1% year over year. The third quarter decline is in line with normal seasonality. The increase from the year-ago period was due to strength in new products.

Gross Margin

Gross margin for the quarter was 52.4%, down 10 basis points (bps) sequentially, but up 810 bps year over year. The auto/mobile segment margin was up 365 bps sequentially and 1,059 bps year over year. The sequential improvement was on account of lower per-unit costs partially offset by lower ASPs.

All other segments saw gross margin declines compared to the June 2009 quarter. On a year-over-year basis, gross margins improved in all except the outdoor/fitness segment. The outdoor/fitness, aviation and marine segments saw sequential declines in gross margin of 508 bps, 715 bps and 568 bps, respectively. Gross margins in these segments grew -9 bps, 153 bps and 446 bps, respectively, from the year-ago period.

Operating Performance

The operating expenses of $172.9 million were up 13.4% from the previous quarter’s $152.5 million. However, the operating margin expanded 56 bps to 30.3%, compared to 29.8% in the second quarter. The higher operating margin was due to lower R&D expenses, partially offset by higher advertising expenses.

On a pro forma basis, GRMN had a net income of $203.4 million, or a 26.0% net income margin compared to $166.7 million, or 24.9% in the previous quarter, and $184.0 million or 21.1% net income margin in the third quarter of last year.

On a fully diluted GAAP basis, the company recorded a net profit of $215.1 million ($1.07 per share) compared to $161.9 million ($0.81 per share) in the previous quarter and a net profit of $171.2 million ($0.82 per share) in the prior-year quarter.

Balance Sheet

Inventories were up 15.5% sequentially, with inventory turns up slightly from 3.9X to 4.0X. Days sales outstanding (DSOs) were around 67 days, down from 70 days in the June quarter. The cash and short-term investments balance increased $51.6 million to around $1.01 billion, with the company generating $293 million from operations. Garmin spent around $12 million on capex, yielding a free cash flow of around $281 million. Garmin has no long-term debt, and long-term liabilities total $249 million.

Guidance

Management did not provide guidance for the next quarter. However, it did say that PND pricing would weaken in the fourth quarter due to promotional activities, although volumes are expected to be up 40-50% (in-line with normal seasonality). The outdoor/fitness business is expected to be flat sequentially in the fourth quarter. The aviation segment is expected to continue, although year-over-year comparisons are expected to improve. The marine segment is expected to be up sequentially from the seasonally down third quarter.
Read the full analyst report on "GRMN"
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Microchip Beats in Q2 – Analyst Blog

Zacks Market Commentaries — Thu, 05 Nov 2009 17:14:44 +0000

Microchip Technology Inc.’s (MCHP) second-quarter earnings beat the Zacks Consensus Estimate by 2 cents. Revenues beat the consensus by 3.8%. Both revenues and EPS were significantly better than the guidance provided by management.

Revenues

Revenues of $226.7 million was up 17.5% sequentially and down 16% year over year. Revenues came in over the high-end of management’s guidance range of 206-214 million.

The microcontroller segment did extremely well in the last quarter, with all the three categories (8-bit, 16-bit and 32-bit) growing very strongly on a sequential basis. Flash microcontrollers made up the bulk of the shipments in the last quarter. Associated application development systems also did extremely well, with 38,806 units sold, a record for the company. The segment generated over 81% of revenues in the last quarter.

The memory business (mainly serial EEPROMs that support the microcontroller business) was up double-digits on a sequential basis. The segment generated 9% of revenues.

The analog business also grew very strongly, driven by strength in linear, mixed signal, interface, and safety and security product lines. Segment contribution reached 10% in the last quarter.

Over 51% of second quarter revenue came from Asia, a sequential increase of 23.8%. The Americas generated 25% (up 13%), while Europe accounted for the remaining 24%, up 10% from the June 2009 quarter. The year-over-year weakness was mainly due to recession-related weakness, as a result of which growth came off a smaller base.

Operating Performance

The company generated a gross margin of 27.8% in the last quarter, which was a sequential increase of 413 bps, but a year-over-year decline of 613 bps. Higher volumes helped drive utilization rates, which along with cost efficiencies, resulted in the sequential increase in gross margin.

The operating expenses of $62.7 million were higher than the previous quarter’s $56.4 million. The operating margin was 27.8%, up 570 bps sequentially and down 765 bps year over year. The sequential improvement in the operating margin was primarily attributable to lower COGS (as a percentage of sales), although lower R&D and SG&A also contributed. COGS as a percentage of sales was down 413 bps, R&D was down 110 bps while SG&A was down 47 bps. The year-over-year decline was mainly due to lower volumes.

On a pro forma basis, MCHP generated a net income of $52.2 million, or a 23% net income margin, compared to a $29.8 million, or 15.5% in the previous quarter and $82.7 million, or 30.7% net income margin in the same quarter last year.

Pro forma earnings per share was 28 cents, compared to 16 cents in the June quarter and 44 cents in the prior-year quarter. Our pro forma estimate excludes acquisition-related costs, deferred stock compensation, amortization of intangibles and gain on sale of investments in the last quarter. Our pro forma calculations may differ from management’s presentation due to the inclusion/exclusion of some items that were not considered by management.

On a GAAP basis, the company recorded a net income of $44.5 million (24 cents per share), compared to $27.4 million (15 cents per share) in the previous quarter and $75.7 million (40 cents per share) in the prior-year quarter.

Balance Sheet

Inventories were down 4.8% to $108.5 million, yielding inventory turns of 3.7X. Days sales outstanding (DSOs) were around 43 days. The company ended with cash and investments balance of $1.36 billion, down $43.4 million during the quarter. In the second quarter, the company generated $96.6 million cash from operations and paid $62.1 million in dividends. Microchip had $337.4 million in long term debt, amounting to a net cash balance of $1.03 billion. Including long term liabilities, the debt-cap ratio was 35.1%.

Guidance

In the third quarter, management expects revenues of $236-245 million (up 4-8% sequentially).

The GAAP gross margin is expected to be 56.2% to 56.7%, operating expenses 30.1% to 30.3%, other income/expense of -$2.7 million to -$2.9 million, a tax rate of 12.1% to 12.5% and a diluted share count of 187.5 million to 188.3 million. This is expected to result in a GAAP EPS of 27-29 cents.

The non-GAAP gross margin is expected to be 57.0% to 57.5%, operating expenses 26.8% to 27.0%, other income/expense of -$1.1 million to -$1.3 million, a tax rate of 12.8% to 13.2% and a diluted share count of 185.8 million to 186.6 million. This is expected to result in a non-GAAP EPS of 33-35 cents.

Read the full analyst report on "MCHP"
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News Corp. Tops Zacks Estimate – Analyst Blog

Zacks Market Commentaries — Thu, 05 Nov 2009 17:05:42 +0000

News Corp. (NWS) recently reported its first quarter results. Earnings of 22 cents a share surpassed the Zacks Consensus Estimate of 17 cents and climbed 10% from 20 cents posted in the prior-year quarter.

Total revenues tumbled 4.1% year on year to $7,199 million due to fall in Television (down 7.7%), Direct Broadcast Satellite Television (down 4.3%), Newspapers and Information Services (down 17.7%), Book Publishing (down 1.6%) and Other (down 44.4%) segments, offset by rise in Filmed Entertainment (up 20.8%), Cable Network Programming (up 10.5%) and Integrated Marketing Services (up 3.1%) segments.

However, significant cost-cutting initiatives taken by management and robust performance at Filmed Entertainment and Cable Network Programming segments have boosted the operating income by 9.3% to $1,042 million. Management expects fiscal 2010 operating income to increase within a high-single digit to low double-digit percentage range.

Filmed Entertainment posted a record first quarter operating income of $391 million, up 55.8% led by the box-office receipts of more than $880 million till date, due to the worldwide theatrical success of Ice Age: Dawn of the Dinosaurs.

Operating income at Cable Network Programming jumped 41.4% to $495 million due to rise in contributions from FOX News Channel, the Fox International channels, STAR, the Regional Sports networks and Big Ten Network.

News Corporation, which owns The Wall Street Journal, New York Post, Times of London, Sydney Daily Telegraph, and The Australian posted a decline of 81.3% to $25 million in operating income at its Newspapers and Information Services segment due to fall in advertising revenue.

Television segment operating income fell 54.2% to $38 million due to a fall in contributions from the Fox Television Stations and FOX Broadcasting Company on account of the slump in the advertising demand, mainly in the automotive and movie segments.

Direct Broadcast Satellite Television segment operating income tumbled 22.4% to $128 million due to increased programming costs. Operating income at the Integrated Marketing Services segment climbed 7.4% to $73 million.

The Book Publishing segment posted operating income of $20 million, compared to an operating income of $3 million delivered in the prior-year quarter.

News Corp. is a diversified media company with operations carried in the United States, the United Kingdom, Continental Europe, Australia, Asia and Latin America.
Read the full analyst report on "NWS"
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DrStockPick.com Stock Report! 11/05/09, CVG, CVAT, COIN, SYX, SIGA, RTN

Dr. Stock Pick — Thu, 05 Nov 2009 15:30:52 +0000

Dr Stock Pick HOT News & Alerts! _______________________________________ FREE Daily Stock Alerts From DrStockPick.com _______________________________________ Thursday November 5, 2009 DrStockPick.com Stock Report! ************************************************************** Cavitation Technologies, Inc. (OTC Bulletin Board: CVAT) announced recently that it has signed Miura Engineering Co., Ltd. Tokyo, Japan (www.miura21.co.jp) as its new agent to serve markets in Japan for CTI’s Nano-Cavitation Process Systems. Miura is [...]

Company News for November 5, 2009 – Corporate Summary

Zacks Market Commentaries — Thu, 05 Nov 2009 14:22:43 +0000

• Cisco Systems (NASDAQ:CSCO) reported better-than-expected first quarter adjusted earnings of 36 cents a share, versus 37 cents a year ago, beating Zacks estimates of 26 cents a share. Revenues of $9 billion, though off last year's $10.3 billion, exceeded Zacks projections of $8.75 billion. Current quarter revenue guidance was lifted to 1%-4% growth from a year ago to $9.9 billion-$10.2 billion. CEO John Chambers said the numbers "continued to reflect strong sequential growth trends," as he noted an improving economic outlook

• Toyota Motor (NYSE:TM) reported a surprise quarterly profit and halved its annual loss estimate as both its revenue and cost-cutting expectations beat estimates after vehicle demand grew in the US and Asia. The company said it now sees a $2.2 billion loss for its fiscal year ending March

• Costco Wholesale (NASDAQ:COST) reported same-store-sales rose 5% in October, ahead of estimates of a 4.7% gain, as a weak dollar boosted international results

• Hyatt (NYSE:H) priced 38 million shares at $25, on its IPO

• Dr. Pepper Snapple (NYSE:DPS) reported third quarter earnings of 54 cents a share, versus Zacks estimates of 49 cents a share on inline revenues of $1.4 billion

• CVS Caremark (NYSE:CVS) reported earnings of 65 cents, one penny above Zacks estimates, on inline revenues of $24.6 billion

• Time Warner Cable (NYSE:TWC) reported third quarter earnings of 76 cents a share, inline with Zacks estimates on revenues of $4.5 billion

Zacks Investment Research

Zacks Analyst Blog Highlights: Wal-Mart, Target, Claymore China Small Cap ETF, Coca-Cola and Aflac – Press Releases

Zacks Market Commentaries — Thu, 05 Nov 2009 12:25:26 +0000

For Immediate Release

Chicago, IL – November 5, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Wal-Mart (WMT), Target (TGT), Claymore China Small Cap ETF (HAO), Coca-Cola (KO) and Aflac (AFL).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Wednesday’s AnalystBlog:

China Booming Again

The long-term key for China is to generate more consumer demand at home so it is not forever dependent on exports to fuel its growth. This is the mirror image of what the U.S. needs. We cannot forever run trade deficits, consuming more from the rest of the world than we produce.

It is the trade deficit that drives the expansion of U.S. debt held by China, not our fiscal deficit. Remember that point, it is an important one -- and one that the vast majority of talking heads on TV just don’t seem to get. Of course, each country’s exports are another country’s imports, and for every trade surplus, there must be an offsetting trade deficit somewhere else in the world.

So far it has been a pretty sweet deal for the U.S.: we get all the goods that fill the shelves of Wal-Mart (WMT) and Target (TGT), and they get little green pieces of paper. Recently those little green pieces of paper have been going down in value. How much longer does China want to send us real useful stuff in return for those pieces of paper (or, more accurately, little blips inside of computers)?

They have done so thus far because along with the paper, making that stuff they send abroad (actually, they export more to Europe than they do to the U.S.) creates jobs, and China needs jobs for social stability. However, so does the U.S., as our unemployment rate approaches 10%.

The deal is getting progressively less sweet for both sides as the dollars keep on piling up in Beijing. The solution over the long term is for China’s 1.3 billion people, the majority of whom still live in poverty, to start to consume more. If that can be accomplished, then Chinese society will be more stable, it will be able to maintain its employment levels and the U.S. might actually start to add a few jobs.

This would also greatly benefit the millions of smaller non-state-owned firms in China. The best way to play that trend is in the Claymore China Small Cap ETF (HAO), which has by far the largest exposure to the Chinese consumer of any of the China ETF’s. Buying individual stocks that are direct plays on the Chinese consumer is a risky proposition and is probably best left to those who can both read Mandarin and decipher financial statements written in it.

While China’s market has done well so far this year, so have most emerging markets. However, the economies of most emerging markets have not come close to matching the performance of the Chinese economy.

Underpinned by the strength in China, and rapidly growing inter region trade, the World Bank sees all of East Asia growing at a 6.7% rate in 2009, up from 5.3% growth seen back in April. Since Japan’s growth is likely to be rather sluggish (but also improving), that implies solid growth for the rest of the region. As the auto sales numbers yesterday showed, the Korean auto industry is not exactly hurting that much anymore.

In short, there are better places in the world to invest than in the U.S., and most U.S. investors are still far too heavily weighted towards domestic investments. However, you don’t just have to buy ADR’s or ETF’s to have international exposure. U.S. companies that get a high proportion of their sales from Asia will also probably benefit from the growth there. Coca-Cola (KO) would be a good example to take a well-known name. Aflac (AFL) is another, although for them the revenues come from Japan, not China.

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China Booming Again – Analyst Blog

Dirk Van Dijk — Wed, 04 Nov 2009 19:45:11 +0000

The World Bank now estimates that China will grow 8.4% in 2009, up from its June forecast of 7.2% growth. Like the U.S., China embarked on a large fiscal stimulus program, one that relative to the size of its economy is more than three times as large as the American Reinvestment and Recovery Act was.

Well, surprise, surprise -- a bigger package has been more effective than a smaller one at lifting economic growth. China, of course, is in a better fiscal position to invest in its economy than the U.S. That is a legacy of the years of fiscal mismanagement in the U.S. going into the crisis, and the fact that China perpetually runs large trade surpluses while the U.S. runs chronic trade deficits.

For 2010, as some of the stimulus in China wears off -- but as the private economy there regains its footing -- growth of 8.7% is forecast for China by the World Bank. While this is down from the double-digit growth rates that China was running before the world economy went off the rails, relative to the rest of the world, China’s out-performance has stayed about the same.

That means that the financial crisis has not slowed China’s ascendency as a world economic power. It is currently the third largest economy in the world, and it will only be a few more years before it passes Japan to move into second place.

Based on the pace of quarterly improvement so far this year, the 8.7% growth rate for 2010 looks very conservative to me. In the first quarter, China grew at a 6.1% rate, then accelerated to 7.9% in the second quarter and to 8.9% for the third quarter. To reach the 8.4% level for all of 2009 implies a growth rate of over 10.5% in the fourth quarter.

That would imply that on a quarterly basis that growth starts to slow significantly in 2010 for China. That seems unlikely to me as its exports should pick up as the rest of the world starts to recover.

The long-term key for China is to generate more consumer demand at home so it is not forever dependent on exports to fuel its growth. This is the mirror image of what the U.S. needs. We cannot forever run trade deficits, consuming more from the rest of the world than we produce.

It is the trade deficit that drives the expansion of U.S. debt held by China, not our fiscal deficit. Remember that point, it is an important one -- and one that the vast majority of talking heads on TV just don’t seem to get. Of course, each country’s exports are another country’s imports, and for every trade surplus, there must be an offsetting trade deficit somewhere else in the world.

So far it has been a pretty sweet deal for the U.S.: we get all the goods that fill the shelves of Wal-Mart (WMT) and Target (TGT), and they get little green pieces of paper. Recently those little green pieces of paper have been going down in value. How much longer does China want to send us real useful stuff in return for those pieces of paper (or, more accurately, little blips inside of computers)?

They have done so thus far because along with the paper, making that stuff they send abroad (actually, they export more to Europe than they do to the U.S.) creates jobs, and China needs jobs for social stability. However, so does the U.S., as our unemployment rate approaches 10%.

The deal is getting progressively less sweet for both sides as the dollars keep on piling up in Beijing. The solution over the long term is for China’s 1.3 billion people, the majority of whom still live in poverty, to start to consume more. If that can be accomplished, then Chinese society will be more stable, it will be able to maintain its employment levels and the U.S. might actually start to add a few jobs.

This would also greatly benefit the millions of smaller non-state-owned firms in China. The best way to play that trend is in the Claymore China Small Cap ETF (HAO), which has by far the largest exposure to the Chinese consumer of any of the China ETF’s. Buying individual stocks that are direct plays on the Chinese consumer is a risky proposition and is probably best left to those who can both read Mandarin and decipher financial statements written in it.

While China’s market has done well so far this year, so have most emerging markets. However, the economies of most emerging markets have not come close to matching the performance of the Chinese economy.

Underpinned by the strength in China, and rapidly growing inter region trade, the World Bank sees all of East Asia growing at a 6.7% rate in 2009, up from 5.3% growth seen back in April. Since Japan’s growth is likely to be rather sluggish (but also improving), that implies solid growth for the rest of the region. As the auto sales numbers yesterday showed, the Korean auto industry is not exactly hurting that much anymore.

In short, there are better places in the world to invest than in the U.S., and most U.S. investors are still far too heavily weighted towards domestic investments. However, you don’t just have to buy ADR’s or ETF’s to have international exposure. U.S. companies that get a high proportion of their sales from Asia will also probably benefit from the growth there. Coca-Cola (KO) would be a good example to take a well-known name. Aflac (AFL) is another, although for them the revenues come from Japan, not China.
Read the full analyst report on "WMT"
Read the full analyst report on "TGT"
Read the full analyst report on "HAO"
Read the full analyst report on "KO"
Read the full analyst report on "AFL"
Zacks Investment Research

Prieur’s readings (November 4, 2009)

Prieur du Plessis — Wed, 04 Nov 2009 09:32:08 +0000

Celanese Beats Zacks Estimate – Analyst Blog

Zacks Market Commentaries — Tue, 03 Nov 2009 21:55:33 +0000

Celanese Corporation (CE), a leading global chemical company, reported net earnings of 58 cents per share in the third quarter of 2009, beating the Zacks Consensus Estimate of 42 cents. Results, however, were lower than last year’s 78 cents.

Weak pricing and lower volumes, especially for Acetyl Intermediates and Industrial Specialties products on weak global demand led to net sales of $1.3 billion in the quarter, down 28% from the same period last year. The Acetyl Intermediates segment primarily serves customers in the chemical, paint and adhesives industries.

Consumer Specialties: Net sales slid 8% to $271 million in the quarter, driven by lower sales volumes primarily in North America and Europe and negative currency impacts. However, higher pricing, lower raw material and energy costs and benefits from the company’s fixed cost reduction efforts drove a 24% rise in operating profit to $52 million. Consumer Specialties continued to deliver strong performance as higher pricing and Acetate Products venture growth in China -- as well as lower overall costs -- offset modest volume declines resulting from softer product demand.

Advanced Engineered Materials: Significantly lower volumes in many of its end-use industries continued to impact year-over-year performance in the segment. Net sales decreased 19% to $220 million in the quarter, primarily driven by lower volumes in the U.S. and European automotive markets, as well as other consumer and durable goods segments. Operating profits improved 61% to $21 million on lower raw material and energy costs.

Industrial Specialties: Net sales of $236 million reflected a 38% year over year decline driven by lower volumes associated with softer demand for PVOH. The decrease in net sales was also attributed to lower pricing and the negative impacts of currency. However, volumes increased sequentially on improved demand in North America, Europe and Asia, particularly in the company’s emulsions business. Operating profit more than doubled to $44 million compared with $18 million in the same period last year. Margins expanded in the core businesses, following lower raw material costs and the benefits of the company’s fixed spending reduction efforts.

Acetyl Intermediates: Net sales declined 37% to $666 million in the quarter compared with $1,067 million in the same period last year, primarily due to lower pricing and modestly lower volumes. Lower year-over-year industry utilization rates caused by reduced global demand, coupled with lower raw material costs, drove the pricing decline. The company’s operating rates for its acetic acid facilities remained at high levels during the quarter; however, volumes in vinyl acetate monomer and other derivative products were lower, reflecting the reduced demand.

Industry demand in Asia has continued to increase sequentially from its lowest levels in the fourth quarter of 2008. Demand in Europe and the Americas remained weak in comparison, but showed modest improvement during the same period.

Cash and cash equivalents at the end of the quarter were $1.3 billion compared with $548 million at the end of the third quarter of 2008. In 2009, the company received net cash of $168 million from the sale of the PVOH business and an advance payment of $412 million related to the relocation of Ticona’s business in Kelsterbach, Germany. Celanese reduced its net debt at the end of the reported quarter to $2.3 billion from $3 billion last year. However, debt to capital ratio of above 80% is our major concern.

Going forward, Celanese plans to reduce fixed spending by $100 million in 2010, as it streamlines manufacturing operations and administrative functions, including the closure of its facility in Pardies, France. The company also expects volumes to increase across all of its businesses and an adjusted tax rate of below 20%. Celanese expects these changes to add $1 to earnings per share next year.
Read the full analyst report on "CE"
Zacks Investment Research

SAP AG Beats Zacks Consensus – Analyst Blog

Zacks Market Commentaries — Tue, 03 Nov 2009 21:15:25 +0000

SAP AG (SAP) reported third quarter of 2009 net income from continuing operations of 60 cents per share, compared to the Zacks Consensus Estimate of 58 cents.

U.S. GAAP software and software-related service revenues were €1.94 billion (previous year: €1.99 billion), a decrease of 3%. U.S. GAAP total revenues were €2.51 billion (€2.76 billion), a decrease of 9%. U.S. GAAP software revenues were €525 million (€763 million), a decrease of 31% (30% at constant currencies).

In the third quarter of 2009, SAP closed major contracts in several key regions including Dagrofa/SuperGros, Prada S.p.A., SeverStal OAO, Surgutneftegaz OAO, Swiss Life AG, and Telefonica, S.A. (TEF) in EMEA; Banco Industrial S.A., ConocoPhillips (COP), Dolby Laboratories (DLB), Fairfax County, Research In Motion Limited (RIMM) and Valero Services Inc. in Americas; and APL Co. Pte. Ltd, Department of Foreign Affairs and Trade, Australia, HDFC Standard Life Insurance Co Ltd, Philippine Long Distance Telephone (PHI), Samchully Co., Ltd. and Taiwan Power Company in the Asia-Pacific Japan region.

U.S. GAAP operating income was €606 million (2008: €614 million), a decrease of 1%. U.S. GAAP operating income was negatively impacted by restructuring charges of €21 million resulting from the previously announced reduction of positions. The third quarter 2009 operating income was also affected by non-recurring items, particularly litigation expenses and profit resulting from reversals of provisions recorded in the accounting for the acquisition of Business Objects. The net effect of these non-recurring items was an increase of operating income by €2 million.

Operating cash flow from continuing operations for the nine month period ended Sep 30, 2009, was €2.38 billion (2008: €1.97 billion), an increase of 21%. Free cash flow was €2.21 billion (2008: €1.73 billion), an increase of 28%. Free cash flow was 29% of total revenues (2008: 21%). At Sept. 30, 2009, SAP had a total group liquidity of €3.04 billion (Dec. 31, 2008: €1.66 billion), which includes cash and cash equivalents, restricted cash and short term investments. At Sep 30, 2009, net liquidity, defined as total group liquidity less bank liabilities, was €925 million.

SAP AG, together with its subsidiaries, develops, markets, and sells enterprise application software products for corporations, government agencies and educational institutions in Europe, the Middle East, Africa, North America and Latin America, and the Asia-Pacific Japan region. Major competitors are Microsoft Corporation (MSFT), International Business Machines Corporation (IBM) and Oracle Corporation (ORCL).
Read the full analyst report on "SAP"
Read the full analyst report on "IBM"
Read the full analyst report on "ORCL"
Read the full analyst report on "MSFT"
Zacks Investment Research

ATS Medical Reports In-Line – Analyst Blog

Zacks Market Commentaries — Tue, 03 Nov 2009 21:00:27 +0000

ATS Medical, Inc. (ATSI) reported a third quarter 2009 net loss of 1 cent per share, in-line with the Zacks Consensus Estimate but better than the year-ago loss per share of 6 cents.

Total revenues for the reported quarter were $18.8 million, increasing 17.3% year over year. Excluding an unfavorable foreign currency translation (FX), total revenues increased 19.4% year over year. Growth was broad-based across its major business segments.

Heart valve therapy revenues increased 20.5% year over year to $14.2 million. In this segment, Mechanical valve revenues increased 10% year over year to $11.6 million. This was due to higher demand for the ATS Open Pivot Mechanical Heart Valve in Asia and success from the recent launch of the AP360 valve in Japan.

Tissue valve revenues were $1.4 million, compared to $0.3 million in the year-ago quarter. Heart valve repair revenues increased 29% year over year to $1.2 million. ATS Medical received U.S. Food and Drug Administration (FDA) approval and also completed the first implant of a new ATS Simulus semi-rigid band in the reported quarter.

Cryoablation revenues increased 12% year over year to $4.5 million. The company launched the new ATS CryoMaze 10-S Surgical Cryoablation Probe in the U.S. in the third quarter. Furthermore, it received the CE Mark approval to market the new ATS CryoMaze 10-S Probe in Europe in Oct. 2009 and expects to launch the product there in the fourth quarter.

Gross margin in the quarter increased 380 basis points (bps) year over year to 62.9%. The company’s strong cost-cutting initiatives helped it in lowering the operating and net loss margins. Operating loss margin improved 1,400 bps year over year to a negative 3.1%. Net loss margin improved 1,810 bps year over year to a negative 5.2%.

ATS Medical ended the quarter with cash and short-term investments of roughly $12.1 million. The company had no outstanding debt at the end of the quarter and generated positive cash flow of approximately $0.8 million in the third quarter.

ATS Medical reaffirmed its revenue guidance of $77 to $79 million for full fiscal year 2009. The company also expects to generate net income in the fourth quarter of 2009.

Minneapolis, MN-based ATS Medical develops, manufactures and markets medical devices needed for cardiovascular surgery. The company’s main competitor is St. Jude Medical, Inc. (STJ). Other competitors include Medtronic, Inc. (MDT), Carbomedics and Edwards Lifesciences (EW).
Read the full analyst report on "ATSI"
Read the full analyst report on "STJ"
Read the full analyst report on "MDT"
Read the full analyst report on "EW"
Zacks Investment Research

Aerospace & Defense – Industry Outlook

Zacks Market Commentaries — Tue, 03 Nov 2009 20:27:49 +0000

OVERVIEW

Inherently, big defense contractors are expected to eliminate jobs as the Pentagon has lowered spending on traditional weapon systems, while smaller, niche companies may accelerate hiring as the United States garners resources to protect ground troops and strategic computer networks.

Industry pioneer Lockheed Martin Corporation (LMT) aims to reduce 600 jobs as a result of the US Defense Department's decision to terminate the VH-71 presidential helicopter program. The Boeing Company (BA) hinted that Pentagon cuts would claim 1,000 jobs in its defense business, affecting staffing at various work sites in the United States in missile defense and in the Army's Future Combat Systems modernization program, which is now being opened to more competition.

The large commercial aircraft sector is expected to generate most of its revenue from Asia Pacific Japan (APJ) and the Middle East, relying less on U.S. orders because of the current economic climate. However, airline companies worldwide will continue to struggle with the global economic recession, fuel price fluctuations and the difficulty in raising ticket prices, which might have an impact on airplane and engine purchase orders in 2009.

Despite robust business aviation forecasts, there may be short-term customer financing challenges for the business jets segment. Thus, we would generally expect that 2009 to see a fall-off in business jet orders, production and deliveries.

The appetite for both US and non-US Aerospace & Defense assets has been significantly constrained by the ongoing global recession and the resulting squeeze on corporate profits, lack of liquidity and continuing uncertainty about when a recovery is likely to begin. Year-to-date, there have been just six deals with values at or greater than $50 million.

The total value for deals announced during the first half of 2009 with a disclosed value of at least $50 million was just under $600 million, substantially less than total deal values in the first half of 2008 ($11.7 billion), representing a decline of 95% year-over-year. Notably, the largest transaction in 2008 -- Finmeccanica’s acquisition of DRS Technologies, announced in May 2008 for $5 billion -- occurred in the first half of that year. Excluding this transaction, the total deal value for the first half of 2008 was $6.6 billion, which is still much higher than the value of transactions during the first half of 2009.

Financial investors remain on the sidelines as financing remains challenging compared with the same period a year ago. Strategic investors have also experienced a decrease in deal activity involving acquisitions of $50 million or more. To date, there have been four deals announced involving strategic investors. This compares with the 20 deals in the first half of 2008, an 80% decrease over the same period a year ago. Strategic investors have redirected their focus on internal restructuring initiatives.

On an annualized basis, the actual number of deals in 2009 is in line with 2008 (270 compared with 275, respectively). But as the economic downturn intensified in the first half of 2009, the value of those transactions has decreased drastically. The average transaction value for first-half 2008 was $85 million compared with $7.5 million for first-half 2009, representing an approximate 91% decrease.

OPPORTUNITIES

With core defense spending expected to slow, U.S. defense contractors need to identify additional revenue sources for the coming years. 2009 holds potential for interesting merger and acquisition (M&A) activity, mostly smaller deals by larger A&D firms to fill in capability gaps -- particularly in the security, defense electronics and aftermarket services business areas. U.S. defense firms may see opportunities in credit-squeezed markets to pick up U.S. assets at historically low price-to-earnings multiples.

Some large companies are expanding into the adjacent markets of mission support and services, such as performance-based logistics, or PBL, which can provide a more consistent -- albeit riskier though perhaps more profitable -- revenue stream.

Building on the example set by engine manufacturers -- Pratt & Whitney, a United Technologies Corporation (UTX) company, and Rolls-Royce Group -- to get 50% of revenues and 60% of profits from their services business, Aerospace & Defense contractors are learning how to take on, measure and internalize risk and to make support and services offerings profitable. This includes understanding how to service the equipment they manufacture, and assembling the necessary infrastructure, capabilities and people to operate it.

Shifting defense priorities could prove to be a boon for some manufacturers as the Pentagon looks to beef up protection for US ground soldiers. Oshkosh Corporation (OSK) is aiming to induct 300 to 500 workers in Wisconsin and calling back as many as 650 it had let go at a Pennsylvania facility as it looks to fill orders for armored trucks that can deflect roadside bombs. The truck manufacturer also won a $1.1 billion contract to build more than 2,200 Mine Resistant Ambush Protect All Terrain Vehicles for use by US troops in Afghanistan.

Companies are also leveraging strong balance sheets to grow organically and acquire new services business. As product development transitions to production program deliveries, it is anticipated that companies will ramp up their services businesses and profitability should improve.

Overall, in the next two decades, The Boeing Company (BA) forecasts delivery of 29,400 new commercial aircraft worth $3.2 trillion. Honeywell International Inc’s (HON) 2008 forecast predicts 17,000 new business aircraft valued at $300 billion. While we currently don’t have Outperform recommendation on aircraft and engine manufacturers, we have positive outlooks on UTX, BA and HON.

WEAKNESSES

A major Aerospace & Defense sector challenge for 2009 is improving program management and execution. For the past few years, commercial aircraft programs have run late due to global supply chain or design problems. In addition, government aerospace procurements have overrun their budgets.

The root causes for this problem are as follows:

Technical complexity - Today’s programs rely on the use of leading-edge, still-maturing software-based technologies, which require infinitely higher levels of functionality, interoperability and integration. This technical complexity has resulted in increased development time vs. historical programs.
Talent crisis - Twenty-seven percent of employees in the sector are estimated to retire in the next five years. In addition, the National Science Foundation expects the number of science, technology and engineering retirements to increase threefold annually in the next 10 years. Unfortunately, the industry may not be able to attract sufficient new talent to make up for the deficit.
Supply chain challenges - The Aerospace & Defense supply chain management model is transitioning to a global, super-supplier model for the Tier 1 suppliers and original equipment manufacturers (OEMs). These organizations are shedding manufacturing and subsystem assembly work, relying on super- or middle-tier suppliers to take on increasingly complex design and manufacturing tasks.
Politics - Aerospace & Defense programs span multiple years but are budgeted annually. In times of economic stress, other government priorities may prompt cuts in multiyear projects for a number of units. This approach typically results in increased fly-away unit costs.
Program management challenges - Many Aerospace & Defense program schedules are based on a "sunny day" scenario, rather than a more realistic "cloudy day" scenario that contemplates program delays, technical difficulties, supply chain problems and changing requirements. These program management challenges and associated cost overruns need to be addressed by improving cost, schedule, and risk management processes and techniques.

With an increase in passenger traffic and competitors, commercial airplanes have become more commoditized, requiring companies to improve differentiation. Airline manufacturers therefore should promote product and process innovation.

The new Boeing 787 Dreamliner is a good example: It will be the first major aircraft to use composite materials for most of its construction. Featuring an estimated 20% lower direct operating cost, better passenger comfort via higher air pressure and humidity, larger windows and less-frequent maintenance requirements, the 787 has become the most successful aircraft product launch in aviation history, as measured by the number of aircraft ordered prior to first flight.Zacks Investment Research

Diodes Beats by a Penny – Analyst Blog

Zacks Market Commentaries — Tue, 03 Nov 2009 18:02:43 +0000

Diodes Inc. (DIOD) posted third quarter results after the closing bell on Monday. The company swung to a GAAP net profit of $7.0 million, from GAAP net loss of $3.0 million and $4.6 million in the previous and year-ago quarters, respectively. Excluding certain special items, pro forma earnings per share came in at 21 cents, edging past the Zacks Consensus Estimate by a penny.

Diodes is a global designer, manufacturer and supplier of application specific standard products serving the consumer electronics, computing, communications, industrial and automotive markets. The company’s product portfolio includes diodes, rectifiers, transistors, MOSFETs, protection devices, functional specific arrays, amplifiers and comparators, Hall-effect sensors, temperature sensors and power management devices.

The company reported an 8.9% year-over-year decline in revenues to $122.1 million, but grew by 17.5% on a sequential basis. The sequential expansion was driven by a recovery in the demand for Diodes’ products used in LCD and LED televisions, LCD panels, set-top boxes, mobile handsets and notebooks. Moreover, the company’s Asian customers advanced fourth quarter orders to the third quarter due to holidays in China, which further helped the sequential growth.

In terms of geographic regions, Asia contributed 78% to total revenue and posted a growth of 18% sequentially. North America contributed 13% towards top-line and grew 7% over the second quarter, while Europe generated 9% of total revenues and expanded 27% over the same period.

Gross margin recorded a sequential growth of 450 basis points (bps) and a year-over-year increase of 230 bps to 30.8%. The growth was primarily the result of improved capacity utilization at the company’s packaging and wafer fabrication facilities. Total operating expenses, as a percentage of revenue, rose to 21.6% from 20.7% in the last quarter mainly due to higher employee related expenses on account of cancellation of temporary salary reductions, increased commissions and equity compensation expenses.

During the quarter, the company generated $19.4 million of cash from operations and deployed approximately $6.3 million towards capital expenditure. The company also reduced its leverage during the quarter by repurchasing $19.8 million worth of Convertible Senior Notes for common stock. Inventories at the end of the quarter were $82.9 million, an increase of approximately $3 million over the second quarter as a result of increased raw materials.

Moving forward, the company expects fourth quarter revenue to range between $126 and $130 million, while further improvements in utilization at wafer fabrication facilities is expected to push gross margin towards 31% to 33%. The Zacks Consensus Estimate on the company’s full-year earnings is currently pegged at 6 cents per share, which has moved up a penny over the past month as 1 of 5 covering analysts raised expectations. The most accurate estimate is slightly bullish at 7 cents per share.
Read the full analyst report on "DIOD"
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Pacific Asia Petroleum, Inc. (PFAP.OB) Approved for NYSE Amex Listing

QualityStocks — Tue, 03 Nov 2009 16:40:19 +0000

Pacific Asia Petroleum, Inc., a company engaged in the business of oil and gas development, production and distribution in Asia and the Pacific Rim countries, announced this morning that its common stock has been approved for listing on the NYSE Amex. Trading is anticipated to begin Thursday of this week under the new ticker symbol [...]

Ford Turns Impressive Profit – Analyst Blog

Zacks Market Commentaries — Mon, 02 Nov 2009 20:08:35 +0000

Ford Motor Company (F) returned to profitability in the third quarter of the year by posting a net income of $873 million or 26 cents per share, easily clearing the Zacks Consensus Estimate loss of 15 cents per share as well as the year-ago loss of 6 cents per share.

This was, in fact, Ford's first operating profit since the first quarter of 2008. The company, which was on the verge of bankruptcy in the middle of the year, accredited its rebound to improved product line, inviolable structural cost reduction efforts and improved results at Ford Credit.

Although revenue was down 2.5% to $30.9 billion, Automotive revenue rose $100 million to $27.9 billion from the year-ago level. This was attributed to favorable net pricing and higher volumes, primarily in North America, offset partially by unfavorable exchange. Total wholesale vehicles advanced 5% to 1,232,000 units.

The Automotive division reported a pre-tax operating profit of $446 million versus a pre-tax loss of $2.9 billion a year ago. This reflected favorable net pricing, structural cost reductions, lower material costs and improved market share -- not to mention the federal CARS ("Cash for Clunkers") program -- offset partially by unfavorable exchange and lower industry volumes.

Ford enhanced its market share across the globe during the quarter. The automaker’s market share for Ford, Lincoln and Mercury in the U.S. rose by 2.2 percentage points. In Europe, its market share increased 0.6 points to 9.2%, the highest third-quarter level in a decade. The automaker also sustained its market share in the Asia-Pacific Africa region and in the Volvo division.

Automotive: Divisional Performance

In North America, revenue went up 27% to $13.7 billion. The region showed a pre-tax operating profit of $357 million compared to a loss of $2.6 billion a year ago. The increase in revenue can be mainly attributed to hearty response received by the Ford vehicles at the U.S. Government’s cash incentive program for fuel-efficient vehicles – “Cash for Clunkers."

Two of Ford’s models were among the top-10 buy list under the program. They are Ford Focus (ranked fourth) and Ford Escape SUV (ranked tenth). Further, Ford's U.S. hybrid sales improved, fueled by the introduction of hybrid versions of the 2010 Ford Fusion and Mercury Milan, in sharp contrast to a decline in U.S. hybrid industry sales.

In South America, revenue slipped 22% to $2.1 billion. Pre-tax operating profit in the region was $247 million compared to a profit of $480 million a year ago. This was explained by unfavorable exchange, primarily in Brazil and Argentina.

In Europe, revenue fell 22% to $7.6 billion. Pre-tax operating profit was $193 million, compared with a profit of $69 million a year ago. This improvement was attributed to structural cost reductions, lower material costs and favorable net pricing, offset partially by unfavorable volume and mix and exchange.

In Asia-Pacific & Africa, revenue dipped 12% to $1.5 billion. Pre-tax operating profit of $27 million was compared to a profit of $4 million a year ago. This reflected favorable net pricing, joint venture profits in China and cost reductions, offset partially by unfavorable exchange.

Despite being up for sale, Ford’s Volvo unit reported a 3% rise in revenue to $3 billion. The unit showed pre-tax operating loss of $135 million compared with $458 million a year ago. This was attributed to continued progress on cost reductions, favorable exchange and higher volume and mix.

Ford’s Other Automotive -- consisting primarily of interest and financing-related costs -- depicted a pre-tax loss of $243 million in the quarter.

Financial Services

The Financial Services sector revealed a pre-tax operating profit of $661 million, significantly up from $159 million a year ago. This was driven by commendable performance from Ford Credit, which recorded a pre-tax operating profit of $677 million, a staggering rise from $161 million a year ago. The rise in profit implied lower residual losses due to higher auction values and lower provisions for credit losses, offset partially by lower volume.

The company’s Other Financial Services reported a pre-tax operating loss of $16 million in the quarter compared to a loss of $2 million a year ago.

Structural Cost Reduction

Ford was able to reduce its Automotive structural costs by $1 billion during the quarter, thanks to lower manufacturing and engineering costs that included benefits from improved productivity, personnel reduction actions (primarily in North America) and Europe, and progress on implementing its common global platforms and product development processes.

Within the first nine months of the year, Ford has achieved $4.6 billion in Automotive structural cost reductions, exceeding the full-year target of $4 billion drafted in its business plan last year.

Financial Position

Ford had cash and cash equivalents of $10.1 billion as on Sept. 30, 2009. In the first nine months of the year, cash flow from operating activities of continuing operations totaled $800 million. Capital expenditures were $3.4 billion in the same period.

Automotive gross cash was $23.8 billion at the quarter-end, compared with $21 billion at the end of the previous quarter. Automotive operating-related cash flow improved by $2.3 billion to $1.3 billion compared to second quarter. In the first nine months of the year, Automotive operating-related cash outflow was $3.4 billion.

Looking Ahead

Ford anticipates U.S. industry sales of 10.6 million units for 2009, consistent with the previously announced guidance. In Europe, Ford expects industry sales to total 15.7 million units, higher than its previous guidance. The company expects upcoming production to be up both on a year-over-year and a quarter-over-quarter basis.

Ford expects to achieve Automotive structural cost reduction of $5 billion for the year. The company expects capital spending of less than or equal to $5 billion.

Although we are duly impressed by Ford’s overwhelming results, we cannot ignore its exposure to high costs due to incentives and product launches as well as risks emanating from labor contract negotiations. For 2009, the Zacks Consensus reflected a loss of $1.17 per share. This has led us to keep our Neutral recommendation for the stock.
Read the full analyst report on "F"
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The week ahead

Prieur du Plessis — Mon, 02 Nov 2009 07:50:35 +0000

The video clips in this post provide a handy summary of the reports expected on the economic, financial and corporate front around the globe during the week ahead.

Weak Third Quarter for Cliffs – Analyst Blog

Zacks Market Commentaries — Fri, 30 Oct 2009 20:09:32 +0000

Cliffs Natural Resources (CLF), the largest producer of iron ore pellets in the U.S., recorded third-quarter 2009 profits of 45 cents, significantly lower than last year’s earnings of $1.61 per share, on weak iron volumes and prices. However, reported earnings were in contrast to the Zacks Consensus Estimate of a loss of 6 cents. Consistent with weaker year-over-year global demand for iron ore -- the steelmaking raw material -- revenues in the quarter tumbled 44% to $666.4 million.

Performance by Segments

North American Iron Ore: Sales in the segment slipped 47% to $428.2 million on a 31% decline in volumes to 5.5 million tons. Iron ore production halved to 4.6 million tons in the quarter. Demand for iron ore pellets remained weak year over year despite steel demand picking up in the last quarter. Capacity utilization in the North American steel industry ramped from 49% in the beginning of the quarter to 59% at the end. However, the current utilization of 60% remains well below the 2008 levels.

North American Coal: Revenues in the segment plunged 63% to $37.9 million on a 62% drop in volumes to 343,000 tons. Lower sales volume was driven by weak market conditions impacting demand for steel in both US and Europe. Coal production was down 63% to 294 million tons.

Asia-Pacific Iron Ore: Sales dipped 29% to $165.3 million despite a 23% increase in volumes. Average prices for iron ore shipments declined 42% to $62.71 per ton from $108.23 per ton in the year-ago period. Cliffs is currently selling to customers in China under provisional pricing arrangements that are consistent with the 2009 iron ore settlements for iron ore lumps and fines reached between producers and other Asia-based consumers outside of China.

Third-quarter 2009 production of 2.1 million tons in Asia-Pacific Iron Ore was a 53% increase year over year, driven by higher production at Koolyanobbing mine in Australia. We expect production to improve further with production start-up at the Cockatoo Island Joint Venture in 2010 upon completion of a seawall project at the mine.

At the end of the quarter, Cliffs had $359.9 million of cash and cash equivalents, compared with $179.0 million at Dec. 31, 2008. With a debt of $525 million, the company has maintained its debt to capitalization ratio at a comfortable 20%. This should help Cliffs to raise funds for acquisition, if required.

Outlook

Cliffs expects to sell about 17.4 million tons of iron ore in 2009, foreseeing a sequential increase in demand. Recently, certain steelmakers in Europe agreed to a price settlement decrease of about 48% for iron ore pellets. As a result, the company expects average revenue per ton in the North American Iron Ore business segment to be about $75 to $80 in 2009. Currently, the North American Iron Ore business segment is expected to produce 15 million tons in 2009 at a cost of $65 to $70 per ton.

Cliffs has narrowed its sales guidance to 1.8 million tons of coal from 2 million tons at average revenues of $95 to $100 per ton. A reduction in expected production is decreasing leverage over fixed costs, which is expected to result in average cost of sales of $135 to $140 per ton, down from the initial expectation of $150 to $160 per ton in 2009.

Asia-Pacific Iron Ore 2009 sales volume is expected to be 8.5 million tons, an increase from previous expectations of 8.0 million tons. Anticipated production of 8.1 million ton is slightly above the previous expectation of 8.0 million tons. Cliffs expects Asia-Pacific Iron Ore to achieve 2009 revenue per ton of $60 to $65, with costs per ton of $50 to $55 per ton.

Cliffs has a 45% economic interest in Sonoma Coal and expects total production of 2.9 million tons for 2009. Sonoma is expected to have a sales volume of 3.1 million tons. Declining demand for high cost metallurgical grade coal has forced Cliffs to cut production. The company expects sales mix between thermal and metallurgical grade coal to be about 70% and 30%, respectively, compared with the previous guidance of 60% and 40%. As a result, in 2009 revenue per ton is expected to be $100 to $105, with per-ton cost at Sonoma from $85 to $90, higher than the previous estimate of $75 to $85.

We are optimistic about Cliffs’ focus on growing its international exposure after facing a consistent decline in North American production. The recent Wabush mine acquisition -- which owns and operates iron ore mining and pellet facilities in Newfoundland, Labrador and Quebec in Canada -- is consistent with this approach, as the production will be sold primarily in Europe. We reiterate our Neutral recommendation on the stock.
Read the full analyst report on "CLF"
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Estee Lauder Reports In Line – Analyst Blog

Zacks Market Commentaries — Fri, 30 Oct 2009 14:32:10 +0000

The Estée Lauder Companies (EL) reported results for the first quarter of fiscal 2010 with earnings of 85 cents per share. Earnings were in line with the Zacks Consensus Estimate of 85 cents, but were up a robust 223% year-over-year compared to 26 cents reported in the prior-year quarter.

The company’s business in each of its product categories and geographic regions continued to be affected by challenging and volatile economic conditions. Nevertheless, the company was able to outperform because of the better-than-expected sales and lower spending levels in each of the product categories and geographic regions.

The better-than-expected sales were driven by strong sell-in of higher-margin product launches, greater passenger traffic in the company’s travel retail business and improved foreign currency translation. Furthermore, the lower spending reflects caution in many of the company’s businesses given the extent of the global economic downturn and the potential risks in the near term.

However, consolidated revenue for the quarter declined 3.7% to $1.83 billion amid weak global retail demand on account of the economic recession. Top-line growth is typically constrained by low volume growth and limited pricing power.

By product categories -- Skin Care sales increased 1.9% to $687.8 million, while Makeup sales declined 3.4% to $718 million, Fragrance product sales fell by 11.1% to $292 million, and Hair Care product sales declined marginally by 0.9% to $98 million.   By region -- sales in The Americas fell 5.0% to $892 million; in Europe, the Middle East & Africa sales were down 6.2% to $602 million. However, in the Asia/Pacific region, sales went up by 10.7% to $358 million.

In addition, to combat the downturn, in February of this year, management announced a four-year strategic plan (fiscal years 2010 - 2013) to cut costs by $450 million to $550 million, trim headcount by approximately 2,000 employees, or 6% of the work force, realign and optimize the structure of the geographic regions to better leverage scale, improve productivity and reduce complexity, which should accelerate sales growth.  Management expects savings in the range of $175 million to $200 million during fiscal 2010.

At the end of the quarter, the company had cash and cash equivalents of $799 million, and long-term debt of $1,389.4 million representing a debt-to-capitalization ratio of 42.8%.

Based on the strong profits in the first quarter of 2009, management raised its annual earnings for fiscal 2010. Full-year 2010 earnings are now expected to be in the range of $1.95 to $2.10 per share.

Net sales are reiterated to grow in the range of 0% and 2% in constant currency. Foreign currency translation is expected to positively contribute approximately 2% to 3% to sales.

During the fiscal year, the company expects to invest a portion of the savings from the first quarter to build momentum and drive growth. On a product category basis, in constant currency, sales in skin care, hair care and makeup are expected to grow. However, Fragrance sales are expected to decline.

Geographic region net sales growth in constant currency is expected to be led by Asia/Pacific, followed by Europe, the Middle East & Africa. Sales in the Americas are expected to decline.

Management also provided guidance for the second quarter of fiscal 2010. Net sales are expected to increase in the range of 0% and 3% in constant currency. Foreign currency translation is expected to benefit sales by approximately 3% to 4%.

Quarterly earnings are expected to be in the range of 80 cents to 87 cents per share. The company expects to realize savings of approximately $50 million in the second quarter of fiscal 2010, in connection with its long-term strategic plan, as well as certain on-going initiatives.
Read the full analyst report on "EL"
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CB Richard Ellis Misses by a Penny – Analyst Blog

Zacks Market Commentaries — Thu, 29 Oct 2009 17:15:18 +0000

CB Richard Ellis Group Inc. (CBG) reported third quarter earnings of 4 cents a share. Excluding one-time charges, the company earned 8 cents per share which was a penny down from the Zacks Consensus Estimate of 9 cents. The company had earned 27 cents on an adjusted basis in the year-ago period.

CB Richard Ellis reported a net income of $12.4 million or 4 cents a share, down from income of $40.4 million or 19 cents a year earlier.

The credit market downturn and the economic recession have significantly impacted major investment sales and leasing markets globally. Increased unemployment levels coupled with store closures by retailers are significantly impacting the commercial real estate market and thereby impacting the company’s earnings.

However, the company is experiencing the benefits of the cost containments measures and remains right on track to achieve its goal of reducing annualized operating costs by $600 million.

Revenue for the quarter came in at $1.02 billion, down 21% year-over-year. The company operates through five segments: Americas , EMEA (Europe, Middle East and Africa ), Asia Pacific, Global Investment Management and Development Services.

Revenue for the Americas region decreased 21% year-over-year to $646.2 million. The EMEA’s region’s revenue was down 29% to $192.3 million. In the Asia Pacific region, revenues declined 7% from the prior-year quarter to $131.6 million.

The Global Investment Management segment, comprising investment management operations in the U.S. , Europe and Asia , reported a 17% drop in revenue to $32.9 million. The decline was driven by lower asset management, acquisition and incentive fees that had been achieved in the prior-year quarter. Assets under management totaled $34.9 billion at the end of the quarter, down 4% sequentially and 9% year-to-date.

Development Services segment, that includes real estate development and investment activities primarily in the U.S. , reported a 34% decline in revenues to $20.2 million.

The company reported a 19% year-over-year decrease in expenses to $969 million. Operating income was down 47% from the year-ago period to $57 million.

CB Richard Ellis Group Inc. is a commercial real estate services firm with full-service operations in metropolitan areas worldwide. The company offers a range of services to occupiers, owners, lenders and investors in office, retail, industrial, multi-family and other types of commercial real estate assets globally under the CB Richard Ellis brand name and provides development services under the Trammell Crow brand name.

The current market dislocations have resulted in newer opportunities for the company such as distressed assets marketing and service of failed commercial mortgage backed securities loan funds.

Though we remain encouraged with some early indications of stabilization and recovery of market conditions, we think that sales and leasing markets will remain stretched in the near term.
Read the full analyst report on "CBG"
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Stock Market News for October 29, 2009 – Market News

Zacks Market Commentaries — Thu, 29 Oct 2009 14:18:41 +0000

Renewed fears that the global economic recovery is faltering shook investors across Asia, sending stock markets in the region sharply lower Thursday. The Nikkei fell below the 10,000 mark for the first time in three weeks. Dollar and yen rose as hedge funds sold off risky positions and traders trimmed their appetite for risk.

The Nikkei 225 stock average fell 1.8% to 9,891.10 and Hong Kong’s Hang Seng index plunged 2.3% to 21,264.99 points. In Mainland China, the Shanghai Composite Index dropped 2.3% to close at 2,960.47. All other major indices in the region ended in the red.

On Wednesday, US stocks tumbled after a weaker-than-anticipated new home sales report aggravated concerns that the seven-month old rally has gone ahead of any economic recovery. To add to the bearish sentiment Goldman Sachs lowered its projection for the third-quarter gross domestic product. The government's report on third-quarter GDP is due Thursday. Goldman Sachs said it now predicts third-quarter GDP rose at an annual rate of 2.7%, weaker than its earlier forecast of a 3% rise.

This morning the Commerce Department reported the economy grew at a 3.5% rate. The economy's return to growth follows four straight declines. The stimulus spending and the government ‘s cash-for-clunkers program is expected to have boosted consumer spending in the quarter, with residential investments also higher.

The Dow Jones industrial average dropped 119 points, or 1.2%, to close at 9,762.69 and the S&P 500 index declined 21 points, or 2%, to close at 1,042.63. The Nasdaq composite plunged 56 points, or 2.7%, to close at 2,059.61. Volume on the NYSE jumped to 1.68 billion shares as declining issues ran ahead of those that advanced by a whopping nine-to-one margin. The market's volatility index, the CBOE Vix, continued higher, up 12.4% Wednesday to 27.91. Riding high on their safe-haven appeal, US Treasuries headed higher and the $41 billion 5-year note auction received good response. Prices on the 10-year increased 10/32 in price, dropping the yield to 3.415%.

All ten S&P500 sectors were in the red yesterday, led by falls in basic materials (-4.0%), oil and gas (-3.2%), financials (-2.9%) and industrials (-2.6%). The US dollar continued its advance for the fifth straight day, trading up 0.5% against a basket of currencies. The dollar’s rise saw commodities retreating. Crude prices fell 2.8% to $77.79.

Today's reports include: Allergan (NYSE:AGN), Eastman Kodak (NYSE:EK), ExxonMobil (NYSE:XOM), Monster Worldwide (NYSE:MWW), Procter & Gamble (NYSE:PG), and Sprint (NYSE:S).

Zacks Investment Research

Clenergen Corp. (CRGE.OB) Is Taking a Unique Approach to Using Biomass for Power Production

QualityStocks — Thu, 29 Oct 2009 14:03:40 +0000

Clenergen Corporation has taken a unique approach to the problem of using biomass as fuel for power production facilities. The company has approached the issue from an agronomy and plantation management perspective rather than solely from an engineering perspective. Clenergen has achieved the ability to deliver a standard, uniform virgin biomass on a commercial scale [...]

The Rise of the Rest

Trading School — Thu, 29 Oct 2009 10:46:12 +0000

One great thing about my position here as Director of Marketing is my extensive contact list. I say that because I have access to thousands of excellent traders, investors, and economists at my finger tips! So when things around the world catch my attention, I can quickly find someone who can give me the skinny [...]

Harris Tops, Outlook Raised – Analyst Blog

Zacks Market Commentaries — Wed, 28 Oct 2009 19:09:47 +0000

Harris Corp. (HRS) declared better-than-expected results for the fiscal first quarter. Net income was $109 million or 83 cents per share, compared to a net income of $119.4 million or 89 cents per share in the year-ago quarter. EPS of 83 cents was significantly higher than the Zacks Consensus Estimate of 78 cents. Total revenues were $1,203 million mostly in line with the Zacks Consensus Estimate of $1,206 million. However, this was an improvement of 2.6% year over year.

Results were encouraging primarily due to strong performance in both the RF Communications and Government Communications Systems segments. During the reported quarter, Harris received $220 million in orders for the new Falcon III AN/PRC-117G multi-band manpack radio. New orders in the first quarter were $1.5 billion, an improvement of 16.3% over the previous quarter. According to our assessment, in the near-future, the company will benefit from higher defense expenditure by the U.S. government together with new expansion drives in Asia, Europe & Africa.

During the quarter, cost of sales was $812.1 million compared to $791.9 million in the prior-year period. Engineering, selling, & administrative expenses were $212.1 million, compared to $189.6 million in the year-ago quarter. During the same quarter, Harris generated $134.5 million of cash from operations compared to just $37.5 million in the prior-year quarter.

Free cash flow (cash flow from operations less capital expenditures) during the first quarter was $115.9 million, compared to $9.7 million in the year-ago quarter. At the end of the reported quarter, the company had $231.1 million of cash & marketable securities and $1,202.9 million of outstanding debt on its balance sheet.

The Board of Directors of Harris has increased the quarterly cash dividend by 10% from the first quarter of fiscal 2010. The company will now pay quarterly dividend of 22 cents per share compared to the previous quarterly dividend of 20 cents per share. As a result, the annual dividend rate will increase to 88 cents per share from the existing rate of 80 cents.

Government Communications System Segment

Quarterly revenues were $667.7 million, up 9.7% year over year. The revenue growth was driven by a broad base of U.S. government programs including several broadband satellite programs for both the U.S. Navy and Air Force. Operating income was $86 million, compared to $66 million in the year-ago quarter. During the same quarter, this segment received $520 million of new contract.

RF Communications Segment

Quarterly revenues were $423.7 million, up 2% year over year. Operating income was $114 million compared to $142 million in the year-ago quarter. During the reported quarter, Harris generated $709 million worth of new orders compared to $441 million in the previous quarter. Total backlog in this segment at the end of the first quarter was $1.23 billion that includes $760 million in Tactical Radio Communications and $470 million in Public Safety and Professional Communications.

Broadcast Communications Segment

This segment generated $118.7 million, down 25% year over year. Sales declined across all the product lines in both the international and U.S. markets. Quarterly operating income was $0.3 million compared to an operating income of $5.3 million in the year-ago quarter. In the reported
quarter, new order generation was $124 million.

Outlook

Management has raised the financial outlook for the current fiscal year. Revenues for fiscal 2010 are now expected to range between $5.1 billion and $5.2 billion, compared to a range of $5 billion - $5.1 billion given in the previous estimate. This is also better than the Zacks Consensus Estimate of a little over $5 billion. The new estimated GAAP EPS range is $3.74 – $3.84, compared to the previous estimated range of $3.25 – $3.50. Non-GAAP EPS for fiscal 2010 is projected between $3.85 – $3.95 cents, far exceeding the Zacks Consensus Estimate of $3.39.

Read the full analyst report on "HRS"
Zacks Investment Research

Let China’s Middle Class Lead You Into Luxury

Investment U — Wed, 28 Oct 2009 18:49:29 +0000

Let China’s Middle Class Lead You Into Luxury Tony Daltorio, Investment U Research According to the World Bank, the global middle class could grow to 1.15 billion in 2030 – a huge jump from the 430 million middle class folks in 2000. Driving the extraordinary growth is… you guessed it, the emerging “BRIC” nations. In [...]

Waters Corp. Modestly Outperforms – Analyst Blog

Zacks Market Commentaries — Wed, 28 Oct 2009 15:45:42 +0000

Waters Corporation (WAT) reported third quarter 2009 revenues of $374 million, a decrease of 3% over that of $386 million in the third quarter of 2008. On a GAAP basis, earnings per diluted share for the third quarter were 79 cents, compared to 71 cents for the third quarter of 2008. This exceeded the Zacks Consensus Estimate of 77 cents per share.

Business trends in the third quarter suggested a stabilization of demand by major end markets. Customer interest in new products is encouraging and indicates that research-related spending may benefit its future results.

Through the first nine months of 2009, sales for the Company were $1.07 billion, a decrease of 8% in comparison to sales of $1.15 billion in the first nine months of 2008. Foreign currency translation contributed negatively to sales growth during the first nine months of 2009 and reduced sales by 4%. E.P.S. for the first nine months of 2009 were $2.26 compared to $2.21 for the comparable period in 2008.

Waters Corporation operates as an analytical instrument manufacturer primarily in the United States, Europe, Japan, and Asia. The company designs, manufactures, sells, and services high performance liquid chromatography (HPLC), ultra performance liquid chromatography (UPLC), and mass spectrometry (MS) instrument systems and support products, including chromatography columns, other consumable products, and post-warranty service plans.

In addition, the company develops and supplies software based products that interface with the company’s instruments, as well as other manufacturers’ instruments. Waters Corporation was founded in 1958 and is based in Milford, Massachusetts. Major competitors are Agilent Technologies Inc (A), Life Technologies Corporation (LIFE) and Thermo Fisher Scientific Inc. (TMO).
Read the full analyst report on "WAT"
Read the full analyst report on "A"
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Zacks Investment Research

Top Matthews International Funds – Mutual Fund Education

Zacks Market Commentaries — Wed, 28 Oct 2009 06:58:28 +0000

Matthews Pacific Tiger (MAPTX) was incepted in September 1994. The investment seeks long-term capital appreciation.

The fund primarily invests its total net assets in common and preferred stocks of companies located in Asia excluding Japan. As of March 31, its portfolio turnover was 16.76%.

Taiwan Semiconductor Manufacturing, Hang Lung Group Ltd. and Swire Pacific Ltd. are among the key holdings of the fund.

Matthews China (MCHFX) seeks long-term capital appreciation in equity securities of companies located in China.

The fund employs a bottom-up, fundamental investment philosophy with a focus on long-term investment performance. It focuses on companies based in China, including its administrative and other districts, such as Hong Kong.

Richard H. Gao has been lead manager at the fund since January 1999. It has an expense ratio of 1.23%.

Matthews Asian Technology (MATFX) seeks long-term capital appreciation. The fund seeks to achieve its investment objective by investing technology-related companies located in Asia.

The fund has topped total returns of its benchmark index in the last 1-, 3- and 5-year periods.

Shareholders have to make a minimum initial investment of $2,500 to enter the Zacks#1 Rank (“Strong Buy") fund. It distributes its dividends and capital gains annually.

Click here to see all the mutual funds offered by Matthews International.

Zacks Investment Research

Steel Output Mounting – Analyst Blog

Zacks Market Commentaries — Tue, 27 Oct 2009 20:57:53 +0000

According to the data released by the World Steel Association (WSA), global steel output increased to 107 million tons in the month of Sep 2009, down marginally (0.6%) from the same month of the previous year. Month-on-month, steel output improved slightly from 106.5 million tons. World crude steel production has continued to show a steady increase since Apr 2009.

Steel production had reached its highest level in July this year on the back of a moderate rise in demand and the resumption of idled facilities by producers. Total output of 103.9 million tons was an improvement of 4% from 99.8 million tons produced in the last month, but down 11.1% year over year.

All major steel producing countries such as China, Japan, Germany, the U.S., Brazil, Turkey, Russia and Ukraine showed peak monthly figures so far this year. Production in the Middle East, where demand was buoyant last year due to booming infrastructure spending, edged up 2% in September. Monthly steel output in Asia increased 15% to over 60 million tons in September. Of this, production in China − the world’s biggest producer and consumer of steel − climbed 28.7% to 39.4 million tons. However, global steel production was down 32.3% in North America in the month of September while production in Europe saw a drop of 23.7%.

Key steel consuming industries such as auto, shipbuilding and construction have been experiencing weak demand in the last quarters, forcing global steel makers to lower production levels. U.S. Steel Corp. (X) had slashed production by almost 62% during the second quarter of 2009, while Korean steel maker POSCO (PKX) was forced to reduce production for the first time in its history. POSCO curtailed production by about 15% during the period.

However, with steel demand picking up in the last couple of months, United States Steel Corp. is restarting its blast furnace at its Hamilton, Ontario, plant after a nine-month shutdown. U.S. Steel had closed the Hamilton blast furnace in Nov 2008. It suspended the remaining operations at Hamilton and the Nanticoke facilities in March 2009 due to a drop in demand. Both the facilities were running at less than half their capacity.

We expect global steel demand to improve in the rest of 2009 with a strong surge from the user industries. China is expected to continue to remain the largest consumer of steel going forward. The World Steel Association is forecasting a 8.6% year over year decline in steel production, better than the previous forecast of a 14.1% decline driven by a strong uptick in Chinese steel demand. With signs of a recovery across the world from the second half of 2009, the association is anticipating global steel demand in 2010 to grow by 9.2% to 1,206 million tons, which is a restoration to the level of 2008.
Read the full analyst report on "X"
Read the full analyst report on "PKX"
Zacks Investment Research

How to Profit From the Growing Luxury Market in China

QualityStocks — Tue, 27 Oct 2009 18:20:57 +0000

Emerging Asia’s role in the market for high-end luxury goods is mushrooming, reflecting a shift eastward in the global balance of spending power. This shift has crept along for years but has accelerated recently due to the global economic crisis, which has hampered economic growth in many countries. US consumers ended up living beyond their [...]

VF Misses by a Whisker – Analyst Blog

Zacks Market Commentaries — Tue, 27 Oct 2009 18:12:24 +0000

VF Corp. (VFC), a leading manufacturer of branded lifestyle apparel, reported net income of $217.9 million on revenues of $2.09 billion in the third quarter, compared to $233.9 million on revenues of $2.21 billion in the year-earlier quarter. Earnings per share narrowly missed the Zacks Consensus Estimate by a penny at $1.94 compared to $2.10 in the year-ago period. The year-over-year decrease in the EPS was primarily due to higher pension expense and the adverse effect of foreign currency translation.

Segmentwise, revenues in the Outdoor and Action Sports division were relatively flat, while that of the Sportswear and Contemporary Brands division reported 4% and 3% quarterly increase respectively, on a year-over-year comparison. Although revenues were down in the Jeanswear segment, it improved sequentially from the previous quarter with strong performance in the domestic markets. In the Imagewear segment, revenues were down due to high levels of unemployment and reduced consumer discretionary spending.

The International and Direct-to-Customer segments were the key long-term drivers of organic growth and healthy margin. Although the overall International revenues declined 2% during the quarter, revenues were up by as much as 32% in Asia. The Direct-to-Customer segment reported a 6% increase in revenues year over year.

Gross margins during the quarter were near record levels at 44.3%, while operating margins decreased marginally to 15.2% from 15.9% in the year-ago quarter. At quarter end, VF had a strong balance sheet with cash and cash equivalents of $379 million. Cash flow from operations was expected to reach $800 million by the end of the year, which was significantly higher than its previous expectations of $750 million. Inventories during the quarter reduced 13% year over year primarily due to prudent inventory management policies.

With stringent cost-control measures, reduced inventories, and continued focus on high-return investments, VF has revised its earnings guidance upwards at the higher end of its previous outlook for 2009. The company now anticipates earnings in the range of $4.85 to $5 per share. In addition, VF has increased its quarterly dividend by 2% to 60 cents per share, which represents the 37th consecutive year of higher dividends paid to the shareholders.
Read the full analyst report on "VFC"
Zacks Investment Research

In Singapore, A New China A-Shares ETF

IndexUniverse Staff — Tue, 27 Oct 2009 14:14:36 +0000

A new ETF giving access to Chinese A shares is to be launched in Singapore next month.

The United FTSE Xinhua China A50 ETF, to be offered by the asset management subsidiary of United Overseas Bank (UOB), will be the first China A-shares fund to be denominated and traded in Singapore dollars.

Chinese A shares are denominated and traded in Chinese yuan and listed on the Shanghai or Shenzhen stock exchanges. Historically, access to the A-shares market in China has been limited to Chinese nationals and qualified foreign institutional investors (QFIIs) approved by the China Securities Regulatory Commission (CSRC).

The FTSE Xinhua China A50 Index is designed to measure the performance of the 50 largest China A-shares companies, based on market capitalization.

ETFs tracking A shares are already dominant in the Asian market. The Hong Kong-listed iShares Asia Trust, which also tracks the FTSE Xinhua A50 Index, is the largest Asian ETF, with $6.7 billion under management. The China 50 ETF, which tracks the Shanghai Stock Exchange 50 Index, has $3.2 billion under management and is the most heavily traded Asian ETF, with an average daily volume of $200 million in the week ending Oct. 16.

According to Singapore’s Business Times, while the upper limit on the QFII quota for any single investor to invest in China stocks is $1 billion, the quota available for the United FTSE Xinhua China A50 ETF is $100 million, as UOB and Rabobank—the counterparty and designated market maker for this ETF—each have a QFII quota of $50 million.

The iShares Asia Trust does not hold A shares directly; rather, it holds Chinese A-Shares access products (CAAPs) issued by a connected person of a QFII. A CAAP is a security (such as a warrant, note or participation certificate) linked to an A share that synthetically replicates the economic benefit of the relevant A share but carries counterparty risk to the CAAP issuer.

Because of the existence of QFII quotas, A-share ETFs have often traded at premiums to net asset value during periods of significant investor demand.

Outside Asia, investors are generally restricted to ETFs tracking H shares (firms that are incorporated in China but listed in Hong Kong); Red Chips (firms incorporated in Hong Kong with substantial mainland interests, controlled by the Chinese government); P Chips (Hong Kong-incorporated firms with substantial mainland interests that are not under government control); and China-related shares listed on overseas stock exchanges. (IndexUniverse.eu recently published a feature on the range of options available to investors interested in the Chinese stock markets.)

According to the issuer, the total expense ratio for the United FTSE Xinhua China A50 ETF is estimated to be 0.95 percent. The iShares Asia Trust has a TER of 1.39 percent and the China 50 ETF has a TER of 0.50 percent, as per the latest edition of Deutsche Bank’s ETF Liquidity Trends report.

Entree Gold, Inc. (EGI) Receives Critical Mining Licenses

QualityStocks — Mon, 26 Oct 2009 20:28:23 +0000

Entree Gold Inc., a Canadian mineral exploration company, announced today that its application for conversion of the Shivee Tolgoi and Javhlant exploration concessions to mining licenses has been approved by the Mineral Resources Authority of Mongolia. The sites are located in southern Mongolia, not far from the northern border of China, and total over 75,000 [...]

Logitech Tops Zacks Consensus – Analyst Blog

Zacks Market Commentaries — Mon, 26 Oct 2009 17:17:08 +0000

Logitech International (LOGI) reported earnings per share of 11 cents for the second quarter of 2010, higher than the Zacks Consensus Estimate of 6 cents.

Sales for the quarter were $498 million, a decrease of 25% compared to $665 million in the same quarter last year. Excluding the unfavorable impact of exchange rate changes, sales decreased by 24%. Logitech’s retail sales for Q2 declined by 19% year over year, with sales down by 5% in the Americas, 24% in EMEA (Europe, Middle East and Africa) and 28% in Asia. OEM (original equipment manufacturer) sales were down by 54%.

Retail sales in EMEA declined by 24% compared to the prior year with sell-through down by 21%. In the Americas, retail sales fell by just 5% with sell-through down by 9% compared to the prior year. Sell-through was better than expected in both the US and Canada. The Americas made a significant contribution to the strong sequential improvement in the company's gross margin.

Turning to Asia-Pacific, the channel reset in this region is taking a bit longer to complete than expected. As a result, the company experienced a fairly large difference between retail sales which declined by 28% and sell-through which was down by just 1% over the prior year.

Although sales performance was weaker than unit shipments in most product families except for remotes, overall retail average selling price fell by just 5% compared to the prior year, a significantly smaller decline than in the previous two quarters. More importantly, retail average selling price increased by 10% on a sequential basis, with gains in remotes, audio, keyboard desktop and gaming categories.

Sales of products priced above $100 represented 15% of retail sales in the quarter, down from 18% in the prior year but up from 12% in prior quarter. The sequential improvement primarily reflected better performance in the remotes category.

OEM sales fell by 54% year over year. The primary factor in the decline was the console gaming category, where sales were down by more than 80% compared to last year's record performance.

The company ended the quarter with over $0.5 billion in cash, up by 15% compared to the prior year despite the dramatically worse economic environment and significant share repurchase activity during the most recent quarter. Shareowners’ equity was at $0.9 billion and there was no long-term debt at the end of the quarter.

For the third quarter of FY 2010, Logitech expects sales within the range of $575 million to $595 million, gross margin of approximately 31% and operating income in the range of $45 million to $50 million.

Logitech International S.A. engages in design, manufacture, and marketing of personal peripherals for personal computers and other digital platforms -- mice, trackballs, keyboards and desktops, gaming controllers, multimedia speakers, headsets, Webcams, 3D control devices, speakers, headphones, earphones and custom in-ear monitors. The company also provides wireless music solutions for home, remote controls for home entertainment systems and PC-based video security systems for home or small business, among other things. Major competitors include Microsoft Corporation (MSFT) and Koninklijke Philips Electronics (PHG).

We currently have a Neutral recommendation on LOGI.
Read the full analyst report on "LOGI"
Read the full analyst report on "MSFT"
Read the full analyst report on "PHG"
Zacks Investment Research

Gold market – accident waiting to happen or crime scene?

Prieur du Plessis — Sun, 25 Oct 2009 09:36:39 +0000

Gold market analyst Paul Mylchreest, who previously wrote that the gold market was being manipulated surreptitiously by central banks, has revisited this issue in a recent study, as reported in this post.

RightNow Exceeds Estimates – Analyst Blog

Zacks Market Commentaries — Fri, 23 Oct 2009 22:13:00 +0000

RightNow Technologies Inc. (RNOW) reported third-quarter 2009 earnings per share of 6 cents, exceeding the Zacks Consensus Estimate of 1 cent.

Total revenue in the third quarter of 2009 was $38.7 million, compared to $36.2 million in the third quarter of 2008. Recurring revenue increased 15% to $29.7 million from $25.9 million last year. New, renewed and expanded customer relationships included Epson, FICO, iRobot, Lucent-Alcatel, The Men's Wearhouse, Nike, Photobox, TiVo, U.S. Air Force and Virgin Mobile. Professional service revenue was $9 million for the quarter, consistent with Q2 and in line with our expectations. The mix of revenue across geographies for the quarter was 72% for Americas, 19% for EMEA, and 9% for Asia-Pac.

For the third quarter, the average first year contract value was approximately $112,000, which is up from last quarter and last year.

The company had seven deals over $1 million, 83 deals between $100,000 and $1 million, and 388 deals less than $100,000. The average contract term was consistent with historical averages at approximately 20 months.

Cash generated from operations was $4.9 million for the quarter, which is $11.9 million year-to-date ahead of last year. Capital expenditures were $1.4 million for the third quarter and $3.9 million year-to-date.

The company expects GAAP earnings per share in the fourth quarter between a loss of 1 cent to a profit of 1 cent. The current Zacks Consensus Estimate stands at 1 cent.

RightNow Technologies, Inc. provides customer relationship management (CRM) software and services in the United States, Europe, and the Asia Pacific. Its CRM software suite includes RightNow Service, RightNow Marketing, RightNow Sales, RightNow Feedback, RightNow Voice, and RightNow Analytics. Major competitors include Oracle Corporation (ORCL) and SAP AG (SAP).

Read the full analyst report on "RNOW"
Read the full analyst report on "ORCL"
Read the full analyst report on "SAP"
Zacks Investment Research

Danaher Beats Estimates – Analyst Blog

Zacks Market Commentaries — Fri, 23 Oct 2009 15:00:19 +0000

Danaher Corporation (DHR) reported that net earnings for the quarter ended October 2, 2009 were $351 million, or $1.05 per share, a 5.5% decrease as compared to the company’s 2008 third quarter net earnings of $372 million, or $1.11 per share. This was higher than the Zacks Consensus Estimate of 86 cents per share.

Sales for the 2009 third quarter were $2.75 billion, 14.5% less than the $3.21 billion reported for the 2008 third quarter. Core revenues declined 14% in the quarter, compared to the third quarter of 2008. Core revenue refers to GAAP revenue from existing businesses and acquired businesses starting from and after the first anniversary of the acquisition.

The increase in gross profit margin in the three months ended October 2, 2009 was largely due to year-over-year cost savings generated from the fourth quarter 2008 and 2009 restructuring activities in addition to lower year-over-year commodity costs, as costs for many commodities had reached historic highs in the third quarter of 2008.

Operating profit margins for the Company were 16.9% for the three months ended October 2, 2009 compared to 16.3% in the comparable period of 2008. The third quarter 2009 operating profit margins reflect a 310 basis point year-over-year increase resulting from the settlement of litigation between the Company and Align as described above, and also benefited from year-over-year cost savings attributable to the Company’s fourth quarter 2008 restructuring activities as well as 2009 restructuring activities and ongoing efforts to reduce material costs and other operating expenses.

Free cash flow was $472 million in the quarter, with a free cash flow to net income conversion ratio of 134%.

Cash and equivalents were $1.6 billion with long-term debt at $2.9 billion and shareowners’ equity at $11.2 billion.

During the third quarter of 2009, the Company signed a definitive agreement with MDS Inc. to acquire the Analytical Technologies division of MDS, which includes a 50% ownership position in Applied Biosystems/MDS Sciex joint venture (“AB SCIEX") and a 100% ownership position in the former Molecular Devices Corporation.

In a separate, but related transaction, the Company also signed a definitive agreement with Life Technologies Corporation to acquire the remaining 50% ownership position in AB SCIEX. AB SCIEX is a leading designer and manufacturer of mass spectrometers, highly sensitive and sophisticated instruments used by researchers and clinicians to identify and quantify specific molecules in complex samples.

Danaher Corporation, together with its subsidiaries, designs, manufactures, and markets professional, medical, industrial, commercial, and consumer products, primarily in the United States, Europe, and Asia. Driven by a foundation provided by the Danaher Business System, it has 50,000 associates serving customers in more than 125 countries. Major competitors are Emerson Electric Company (EMR) and Johnson Controls Inc (JCI).

We currently have a Neutral recommendation on DHR.
Read the full analyst report on "DHR"
Read the full analyst report on "EMR. JCI"
Zacks Investment Research

Schlumberger Profit Dips – Analyst Blog

Zacks Market Commentaries — Fri, 23 Oct 2009 14:47:52 +0000

Schlumberger Limited (SLB) has reported its third quarter results. Diluted earnings per share from continuing operations were 65 cents, compared to the Zacks Consensus Estimate of 62 cents.

However, operating earnings were lower than both the second quarter earnings of 68 cents per share and year-ago earnings of $1.25. The downtrend was primarily due to a decline in North American drilling activity and weak energy prices.

Total revenue for the quarter decreased nearly 2% sequentially and nearly 25% year over year to $5.43 billion. Oilfield Services revenue was flat sequentially and down 22% year over year to $4.95 billion. WesternGeco revenue decreased more than 17% sequentially and 48% year over year to $463 million.

The Oilfield Services revenue was flat sequentially due to certain geographic strengths that were offset by weaker pricing. Year over year decline was largely due to poor drilling activity in the U.S Gulf of Mexico, partially offset by increased rig count in Canada. Geographically, revenue increase in Latin America was partially offset by the lower Middle East & Asia revenue due to reduced overall activity and the effects of weaker pricing.

North American revenue was flat sequentially but 45% lower year over year, while pre-tax operating income in the region was up significantly quarter over quarter but fell 91% year over year. Latin American revenue increased 8% sequentially but decreased 6% year over year, while pre-tax operating income in the region increased 12% sequentially and decreased 14% year over year.

Europe/CIS/Africa revenue was flat sequentially but fell 18% year over year, while pre-tax operating income in the region decreased 2% sequentially and 33% year over year. Middle East and Asia revenue decreased 6% sequentially and 17% year over year, while pre-tax operating income in the region decreased 7% sequentially and 26% year over year.

At WesternGeco, pre-tax operating income decreased 37% sequentially and 83% from the year-earlier level. Sequentially, the lower operating income was due to reduced sales in North America and the North Sea.

At the end of the quarter, Schlumberger had a cash balance of $4.2 billion and long-term debt of $5.19 billion, representing debt-to-capitalization ratio of 21%.

While North American gas drilling scenario assumes a modest recovery, we do not foresee any major advancement in near-term service pricing. Additionally, revenue for the remainder of the year may also impacted by the discounted pricing made at the beginning of the year.

While these near-term headwinds are expected to weigh on the stock price, the company’s long-term prospects remain positive, given its strong international footprint, particularly in the Eastern Hemisphere.
Read the full analyst report on "SLB"
Zacks Investment Research

Iteris (ITI) Announces Quarterly Financial Results

QualityStocks — Fri, 23 Oct 2009 14:25:28 +0000

Iteris, Inc., a leader in advanced traffic management technologies, today reported financial results for its fiscal quarter ending September 30, 2009. Net sales and revenues increased 1.6% over the preceding quarter, from $14.6 million to $14.9 million, primarily the result of a 20.5% increase in the sale of Roadway Sensors and a 30.5% increase in [...]

Zacks Analyst Blog Highlights: McDonald’s Corporation, Burger King Holdings, Yum! Brands, Chipotle Mexican Grill and Starwood Hotels and Resorts Worldwide Inc. – Press Releases

Zacks Market Commentaries — Fri, 23 Oct 2009 12:44:53 +0000

For Immediate Release

Chicago, IL – October 23, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: McDonald’s Corporation (MCD), Burger King Holdings (BKC), Yum! Brands (YUM), Chipotle Mexican Grill (CMG) and Starwood Hotels and Resorts Worldwide Inc. (HOT).

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Here are highlights from Thursday’s AnalystBlog:

McDonald’s Exceeds Zacks Numbers

The strong U.S. dollar continues to moderate results, trimming the earnings by 5 cents a share. Excluding foreign currency translation and gains, earnings increased 14% to $1.20 per share.

Revenue for the quarter declined 4% to $6,046.7 million, but increased 2% in constant currencies. Revenue from company-operated restaurants declined 7% to $4,093.6 million, whereas revenue from franchise-operated restaurants increased by 5% to $1,953.1 million. Total operating income rose 6% to $1,932.8 million, but jumped 11% in constant currencies.

Despite a sinking global economy, McDonald’s continues to grow same-store sales while maintaining healthy margins by expanding market share. Global same-store sales rose 3.8% with the U.S. sales up 2.5%, Europe up 5.8% and Asia/Pacific, Middle East and Africa up 2.2%. New menu products, including Angus Third Pounders and McCafe premium coffee line-up, boosted U.S. comps.

Recently, the company announced a 10% increase in its quarterly dividend, bringing the total quarterly dividend to 55 cents per share. McDonald’s has returned $1.3 billion to shareholders through dividends and share repurchases during the quarter.

McDonald’s and other fast-food chains, like Burger King Holdings (BKC), Yum! Brands (YUM) and Chipotle Mexican Grill (CMG) are faring better than casual and upscale dining restaurants, as budget-constrained consumers are trending towards lower-priced dining options.

Starwood Reports Mixed Results

Starwood Hotels and Resorts Worldwide Inc. (HOT) has reported third quarter earnings from continuing operations of 22 cents per share. Excluding special items, the company has earned 14 cents per share. Results are ahead of the Zacks Consensus Estimate of 10 cents. While revenues were down in the quarter, the company continued to benefit from the implementation of the cost reduction initiatives.

However, results were well below the prior-year quarter when the company had earned 71 cents per share, excluding special items.

Income from continuing operations, excluding special items, was $26 million, versus $129 million in the prior-year period. Adjusted EBITDA was $179 million, versus $330 million the year-ago period.

Starwood’s net income was $40 million or 22 cents per share compared to $113 million or 62 cents in the prior-year period.

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Big Cities, Big Opportunities

Frank Holmes — Fri, 23 Oct 2009 05:00:00 +0000

One of the biggest drivers of global infrastructure is the rapid rate of urbanization experienced in the developing world. The reason is simple ndash; roughly 70 million people per year in developing countries are moving to cities, so there will need to be more roads, water systems, housing and electrical generation. Nowhere is this trend more apparent than in China, which already has 100 cities with more than 1 million people. It is expected to eventually have 30 cities with more than 10 million people. As you can see in the chart from UBS, Asia will be the main source of this urban growth. The United Nations says that over 1 billion Asian people will move to urban areas by 2030. Another 500 million people are expected to migrate to urban areas in Africa. While this trend has picked up in pace in recent years, the growth of urban centers in the developing world has already been an established trend. Of the 20 largest urban areas in the world in 2005, only four were in the developed world (Tokyo, New York, Los Angeles and Osaka, Japan).nbsp; The infrastructure build-out truly is a global opportunity. As much of the infrastructure focus in the developed world centers around repair and replacement, the focus in the developing world is around providing people with basic needs taken for granted by many of us. We believe emerging-market governments that commit to ambitious infrastructure programs will be the ones with the best economic growth prospects in the coming years. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. #09-740

Philip Morris Tops, Ups Guidance – Analyst Blog

Zacks Market Commentaries — Thu, 22 Oct 2009 22:06:29 +0000

Earlier today, cigarette manufacturer and marketer Philip Morris International Inc. (PM) reported better-than-expected third-quarter results, benefiting from price increases in some markets. Earnings per share came in at 93 cents, 3 cents above the Zacks Consensus Estimate.

On a year-over-year basis, Philip Morris’ earnings per share was flat (excluding a tax benefit of 8 cents in 2008), while net revenues declined 4.6% to $16.6 billion, attributable to unfavorable currency translations and weak results in the European Union (EU), Eastern Europe and Middle East & Africa (EEMA) markets.

Revenue, Volumes & Margins

On an organic basis (excluding currency and acquisitions), revenues increased 4.1% driven by favorable pricing. Cigarette volume was down almost 3% year-over-year to 219.3 billion units, mainly because of declines in EU, EEMA and Asia. The first two regions were adversely affected by the economic crisis (especially in Spain and Ukraine) and unfavorable comparisons due to a strong third quarter in 2008, while Asian volumes suffered from unfavorable trade inventory movements in Pakistan. This was partly offset by strength in Latin America & Canada, buoyed by the acquisition of Rothmans Inc.

Organic cigarette shipment volume declined 4.0%. Marlboro volumes declined 4.3% due to the cigarette market contracting in the EU and EEMA, primarily from the effects of the economic crisis in Spain and the weakening of the premium segment in Russia and Ukraine. Nevertheless, Philip Morris gained market share in Algeria, Argentina, Belgium, Brazil, Bulgaria, Canada, the Dominican Republic, Egypt, Hungary, Korea, Mexico, Pakistan, the Philippines, Portugal, Russia, Slovakia, Switzerland, Turkey and the Ukraine.

The gross margin remained flat at 25.8%, while the operating margin expanded 62 basis points to 17.5%. Interest expense increased 220% from $69 million to $221 million due to a higher average debt level.

Dividends & Share Buyback

Recently, Philip Morris announced a 7.4% increase in its quarterly dividend to 58 cents per share ($2.32 per share annualized). During the quarter, the company repurchased 31.5 million shares for $1.5 billion.

Guidance

Concurrent with the earnings release, management raised guidance for 2009. Annual earnings are expected to be in the range of $3.20 to $3.25 per diluted share versus previous guidance of $3.10 to $3.20. Guidance includes an unfavorable currency impact of 52 cents per share.

Excluding currency, diluted earnings per share are expected to increase by approximately 12% to 14%, including a pre-tax charge of $135 million ($93 million after-tax or $0.04 per share) related to the Colombian Investment and Cooperation Agreement and excluding the impact of any potential future acquisitions, asset impairment and exit costs, and any other unusual events.
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Zacks Investment Research

Job Cuts at Sun Micro – Analyst Blog

Zacks Market Commentaries — Thu, 22 Oct 2009 21:28:56 +0000

In a filing with the SEC, Sun Microsystems Inc. (JAVA) announced to cut its headcount by 3,000 or 10% over the next 12 months, given the delay in getting European Commission clearance for its merger with Oracle Corp. (ORCL).

Sun said that the job cuts will affect all of the company’s major regions, including North America, Europe, Asia and emerging markets. The company expects to incur $75 – $125 million in restructuring charges over the next several quarters. The company said it will record the majority of the charges in the second and third quarters of fiscal 2010.

Oracle, the largest software company, had proposed the acquisition of Sun Microsystems for $7.4 billion ($9.50 a share), which has been slowed by an ongoing antitrust review in Europe and the company is still waiting for clearance by the European Commission.

The delay in approval from the regulatory body is causing Sun Micro to lose about $100 million each month, the company said earlier. The deadline to approve the deal is Jan 19. The deal has been approved by the U.S. regulators.

Previously, Sun had eliminated 7,600 in the past three years. The company, which is under severe financial pressure, has been trying every means to survive the worst recession. The company currently employs 26,000 employees.

Sun’s performance has not been good for quite a number of quarters; the company has been struggling to make profit. It had reported a loss of $2.2 billion in the last year ended June. The company said that customers are being cautious due to the delay in the acquisition, which has resulted in such decline. Moreover, rivals such as International Business Machines (IBM), Hewlett-Packard (HPQ), Cisco Systems Inc. (CSCO) and Microsoft (MSFT) are taking advantage of the delay.

The acquisition of Sun will give Oracle more control over the development of Java, a key technology used in its products. The major issue in the delay lingers on Oracle's potential acquisition of Sun's MySQL – an open-source database software which overlaps Oracle’s own database software. This could smother competition in the database software industry.

Despite cost-cutting efforts and increased layoffs, we remain concerned about the delay in closing the merger, which could erode Sun's profit, and reduces its value for Oracle's business.

We have a Neutral rating on both Oracle and Sun Microsystems.
Read the full analyst report on "JAVA"
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Zacks Investment Research

AQNM, WMT, PSFT, APA, PWRM, NOC, CSRH, IP, CVAT, CVX, DrStockPick.com Stock Report!

Dr. Stock Pick — Thu, 22 Oct 2009 20:40:25 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Thursday October 22, 2009 DrStockPick.com Stock Report! AQNM, WMT, PSFT, APA, PWRM, NOC, CSRH, IP, CVAT, CVX ************************************************************** WMT, Wal-Mart Stores Inc. WMT operates retail stores in various formats worldwide. WMT today presented its global plans for store and club growth next year at its annual conference for the investment [...]

McDonald’s Exceeds Zacks Numbers – Analyst Blog

Zacks Market Commentaries — Thu, 22 Oct 2009 17:56:21 +0000

McDonald’s Corporation (MCD) recently reported third-quarter 2009 results that topped the Zacks Consensus Estimate, driven by effective cost control and rise in comparable sales across all regions. McDonald’s quarterly earnings came in at $1.15 per share, up 10% from $1.05 reported in the prior-year quarter, and surpassed the Zacks Consensus Estimate of $1.11 per share.

The strong U.S. dollar continues to moderate results, trimming the earnings by 5 cents a share. Excluding foreign currency translation and gains, earnings increased 14% to $1.20 per share.

Revenue for the quarter declined 4% to $6,046.7 million, but increased 2% in constant currencies. Revenue from company-operated restaurants declined 7% to $4,093.6 million, whereas revenue from franchise-operated restaurants increased by 5% to $1,953.1 million. Total operating income rose 6% to $1,932.8 million, but jumped 11% in constant currencies.

Despite a sinking global economy, McDonald’s continues to grow same-store sales while maintaining healthy margins by expanding market share. Global same-store sales rose 3.8% with the U.S. sales up 2.5%, Europe up 5.8% and Asia/Pacific, Middle East and Africa up 2.2%. New menu products, including Angus Third Pounders and McCafe premium coffee line-up, boosted U.S. comps.

Recently, the company announced a 10% increase in its quarterly dividend, bringing the total quarterly dividend to 55 cents per share. McDonald’s has returned $1.3 billion to shareholders through dividends and share repurchases during the quarter.

McDonald’s and other fast-food chains, like Burger King Holdings (BKC), Yum! Brands (YUM) and Chipotle Mexican Grill (CMG) are faring better than casual and upscale dining restaurants, as budget-constrained consumers are trending towards lower-priced dining options.
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Zacks Investment Research

QLogic Beats Estimates, Also – Analyst Blog

Zacks Market Commentaries — Thu, 22 Oct 2009 15:25:01 +0000

QLogic Inc. (QLGC) reported second quarter earnings that beat the Zacks Consensus Estimate by 3 cents. Revenue beat the consensus by 4.6%.

Revenue

Revenue of $131.5 million was up 7.1% sequentially and down 23.2% year over year. All product lines other than networking saw sequential increases. All product lines contributed to the year-over-year decline.

Host products generated 72% of revenue, increasing 6.4% sequentially and declining 21.4% from the year-ago quarter. Being the largest segment, it was the strongest contributor to the sequential increase.

Network products, which generated 19% of revenue, declined last quarter, following a flattish performance in the preceding quarter. The product line was down 17.8% from the year-ago quarter.

Silicon products (7% of total revenue) grew 29.6% sequentially, but declined 38.7% from the year-ago quarter. Royalty & Service revenue (3% of total revenue) increased 61.8% sequentially and declined 45.0% year over year.

The U.S. was the largest region for the company, generating 45% of total revenue. However, the business was very weak last quarter, declining 3.8% sequentially and 30.1% year over year.

Asia/Pacific, the second largest region, registered extremely strong growth. Revenue increased 28.4% sequentially and was flat year over year. Around 28% of total revenue came from the region.

Europe, Middle East and Asia (EMEA), which generated around 21% of revenue in the last quarter, saw revenue increase 5.8% sequentially and decline 33.9% from the year-ago quarter. Approximately 7% of revenue came from the rest of the world (ROW), which increased 19.3% sequentially and declined 3.7% year over year.

Operating Results

The pro forma gross margin for the quarter was 65.5%, up 1 basis point (bp) from the previous quarter’s 65.5%. However, it was down 578 bps from the year-ago quarter due to lower volumes, unfavorable product mix and the positive impact of a one-time royalty in the September quarter of last year.

Operating expenses of $52.8 million was higher than the $52.1 million recorded in the previous quarter. The operating margin was 25.3%, up 231 bps from 23.0% recorded in the previous quarter and down 1,187 bps from the year-ago quarter.

All the components of cost -- COGS, E&D, S&M and G&A -- decreased sequentially as a percentage of sales, resulting in the higher operating margin. However, COGS and E&D were significantly higher than the year-ago quarter, more than offsetting the significant decline in G&A and flattish S&M (as a percentage of sales).

Excluding the impact of acquisition-related costs, stock compensation expenses, amortization of intangibles and special charges on a tax-adjusted basis, the pro forma net income in the last quarter was $25.1 million or 19.1% net income margin, compared to $23.9 million or 19.5% in the previous quarter and $45.2 million or 26.4% in the year-ago quarter.

Including these items, the GAAP EPS was 14 cents compared to 13 cents in the June 2009 quarter and 20 cents in the September quarter of last year.

Balance Sheet

Inventories were down 22.3%, yielding inventory turns of 7.8x. Days sales outstanding (DSOs) increased from 51 to around 52. The company ended with a cash and short term investments balance of $340.4 million, up $14.6 million during the quarter.

In the last quarter, the company generated $48.6 million in cash from operations and spent $12.6 million on capex, netting a free cash flow of $36 million. It also spent $14.8 million on acquisition activity and $67.4 million on share repurchases.
Read the full analyst report on " QLGC"
Zacks Investment Research

Novellus Beats, Guidance Strong – Analyst Blog

Zacks Market Commentaries — Thu, 22 Oct 2009 14:46:17 +0000

Novellus Systems’ (NVLS) third quarter earnings beat the Zacks Consensus Estimate by 1 cent. Revenue beat the consensus by 2.6%.

Earlier, ASML (ASML), one of the largest semi equipment companies reported very strong results. Chip companies overall (INTC, AMD, TXN and LLTC, among others) have reported stronger sequential growth, indicating that the sector is exiting the recession. Novellus’ third quarter performance is further evidence of this trend.

Revenue

Revenue of $176.9 million was up 48.4% sequentially and down 29.3% year over year. This reflects stronger demand from foundries and increased expenditure on the memory side, driven by strengthening prices for NAND and DRAM. The end markets driving the current strength are computing and smart phones.

Asia was the largest contributor, generating 62% of total revenue. This represented 70.4% and 24.4% sequential and year-over-year increases, respectively. The greater China region accounted for the largest chunk, generating 36% of total revenue. This was followed by Korea at 20% and Japan at 6%.

Approximately 30% of revenue came from North America, up 39.1% sequentially and down 26.8% year over year. Europe contributed the remaining 8%, down 15.2% sequentially and 56.5% year over year.

Orders

Orders were up a whopping 54.2% in the last quarter, although they continued to decline on a year-over-year basis. We estimate that the backlog increased by around 3.7%. Management stated that lead times were not a hindrance to order fulfillment, although there were some constraints.

Operating Results

The pro forma gross margin for the quarter was 40.7%, up 773 basis points (bps) from the previous quarter’s 32.9%. The improvement in gross margin was on account of a lower cost structure as well as higher volumes that helped increase utilization rates and improve the absorption of fixed overhead costs.

Operating expenses of $72.2 million were flattish sequentially. The operating margin was -0.1%, up 2,751 bps from -27.6% recorded in the previous quarter. All the three components of cost -- R&D, SG&A and COGS -- decreased as a percentage of sales, resulting in the higher operating margin.

Excluding the impact of restructuring charges, the pro forma net loss was $2.5 million or 1.4% net loss margin, compared to -$30.8 million or -25.8% in the previous quarter and net income of $7.3 million or net income margin of 2.9% in the year-ago quarter. Including the special items, the GAAP EPS was -$0.04 compared to -$0.52 in the June 2009 quarter and $0.01 in the Sept. quarter of last year.

Balance Sheet

Inventories were down 8.5%, yielding inventory turns of 2.8x. Days sales outstanding (DSOs) went down from 74 to around 57. The company ended with cash of $483.6 million, up $292.9 million during the quarter. In the last quarter, the company generated $6.7 million in cash from operations and spent $10 million on share repurchases.

Guidance

The fourth quarter guidance is for bookings increase of 25%-50%, shipments and revenue in the $215-$245 million range, non GAAP gross margin of 44-47% and non GAAP EPS of 20-40 cents.
Read the full analyst report on "NVLS"
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Zacks Investment Research

Zacks Bull and Bear of the Day Highlights: Vodafone, Conmed Corp., Caterpillar Inc., Coca Cola Company and Lockheed Martin Corporation – Press Releases

Zacks Market Commentaries — Wed, 21 Oct 2009 13:00:18 +0000

For Immediate Release

Chicago, IL – October 21, 2009 – Zacks Equity Research highlights Vodafone (VOD) as the Bull of the Day and Conmed Corp. (CNMD) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Caterpillar Inc. (CAT), Coca Cola Company (KO) and Lockheed Martin Corporation (LMT).

Full analysis of all these stocks is available at http://at.zacks.com/?id=2676

Here is a synopsis of all five stocks:

Bull of the Day:

We maintain our Outperform recommendation for Vodafone (VOD), the largest revenue generating international wireless carrier. Revenue growth in the last quarter was fuelled by foreign exchange gains and acquisitions.

Additionally, increase in subscriber base was driven by continued healthy net additions in its Indian operation. Vodafone's globally diversified operation provides hedging elements which offset price competition and translation risk that may arise in specific markets. The company continues to accelerate 3G wireless service deployments and expanding network availability across Asia, Eastern Europe and Africa.

Moreover, Vodafone is focused on improving shareholder returns through attractive dividend payouts. Management's outlook for fiscal 2010 remains favorable as operating results are expected to improve with continued growth across incipient markets coupled with ongoing cost saving initiatives and currency exchange translation gains.

Bear of the Day:

Conmed Corp. (CNMD) operates in highly competitive markets against competitors that are much larger, technically competent and possess substantially more assets.

Additionally, many of these competitors offer a range of products not matched by Conmed, which may make Conmed's offerings less attractive to surgeons, hospitals, and group purchasing organizations that are trying to reduce the number of vendors they do business with. In the second quarter, earnings per share were $0.17, compared to the Zacks Consensus Estimate of $0.16 and the year-ago earnings of $0.43.

We have an Underperform rating on Conmed with a target price of $18.

Micro Imaging Technology, Inc.’s (MMTC.OB) Malaysian Distributor Purchases MIT 1000 System

QualityStocks — Wed, 21 Oct 2009 12:36:17 +0000

Micro Imaging Technology, Inc. announced today that Biotek Sdn Bhd has purchased its first MIT 1000 System. Biotek Sdn Bhd was recently signed as the company’s distributor for Malaysia and other Association of Southeast Asian Nations (ASEAN) which includes Indonesia, Singapore, The Philippines, Thailand and Cambodia, in addition to others. Recognized as a premier distributor [...]

Clenergen Corp. (CRGE.OB) Reaches Agreement to Terms to Acquire 1.5MW Biomass Power Plant in Tamil Nadu, India

QualityStocks — Wed, 21 Oct 2009 12:18:49 +0000

Today it was announced that Clenergen Corporation India Private Limited, a wholly owned subsidiary of Clenergen Corporation, has agreed on the terms to acquire a 1.5MW/Hr biomass power plant in Namakkal, Tamilnadu, which will be operational by yearend 2009. Recognized as one of India’s National Demonstration Projects, the plant was shut down in 2007 due to [...]

Vodafone Group, Plc (VOD) – Bull of the Day

Zacks Market Commentaries — Wed, 21 Oct 2009 05:00:00 +0000

We maintain our Outperform recommendation for Vodafone (VOD), the largest revenue generating international wireless carrier. Revenue growth in the last quarter was fuelled by foreign exchange gains and acquisitions.

ProLogis Expands Global Footprint – Analyst Blog

Zacks Market Commentaries — Tue, 20 Oct 2009 16:33:47 +0000

ProLogis (PLD), a leading global provider of distribution facilities, recently leased about 188,000 square feet of its development portfolio in Japan to global customers, thereby strengthening its position in the market.

About 95,000 square feet were leased to Caterpillar Logistics Services Inc., the logistics division of Caterpillar Inc. (CAT), the world’s largest manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. The lessee will occupy space at ProLogis Parc Narita III near Tokyo, Japan.

The company has also leased 93,000 square feet at ProLogis Parc Ichikawa I, a distribution facility near Tokyo, to an unnamed global supplier of office products. This is the sixth such leasing agreement with the lessee, who now occupies approximately 1.2 million square feet across the U.S., Mexico and Japan.

ProLogis owns and manages interests in over 2,500 distribution facilities, service offices and properties spanning 475 million square feet of space. As of June 30, the company had 200.5 million square feet of direct-owned industrial properties – 81.5% of which were located in North America, 14.2% in Europe and 4.3% in Asia.

With nearly 8.5 million square feet of distribution space and 98 acres of land for future development, ProLogis is one of the largest providers of distribution facilities in Japan. Its major customers in the country include Yamato Logistics, diversified producer Daikin Industries, warehouse club chain Costco and leading air and ocean freight firm Kintetsu World Express.
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Zacks Investment Research

TI Beats, Guidance Conservative – Analyst Blog

Zacks Market Commentaries — Tue, 20 Oct 2009 14:16:24 +0000

Texas Instruments (TXN) reported third quarter results that beat the Zacks Consensus Estimate by 3 cents. Revenue beat the consensus by 2.1%.

Revenue

Revenue of $2.88 billion was up 17.2% sequentially, the second straight quarter of 17%+ growth. However, revenue declined 15.0% on a year-over-year basis, the fourth consecutive quarter of double digit decline.

Then again, the rate of decline slowed somewhat, indicating that the company is coming out of the recession. The sequential increase was driven by normalization in the market, as customers stopped reducing inventory and started increasing production.

Segment Revenue

All four segments contributed to the revenue surprise. The Analog business increased 20.4%, Embedded Processing was up 12.3%, Wireless 12.3% and Other 20.1%. The three major businesses within Analog, high volume analog and logic (HVAL), power management and high-performance analog all contributed to the increase. Power management revenue also grew from the year-ago period, driven by battery management, gauges and chargers for notebooks and handheld devices.

Embedded Processing was driven by strength in catalog products (particularly microcontrollers for consumer applications and industrial applications such as air conditioning systems in Asia), DSC and high-end automotive infotainment systems. The DSC business was driven by video security systems and high-performance audio/video receivers.

The increased demand for connectivity products used in smart phones continued to drive Wireless sales. This portion of the business was up 18% sequentially and down 8% year over year.

The baseband business, which generated $450 million in the last quarter, increased 10% sequentially and declined 33% from the year-ago quarter. Basebands currently contribute 16% of total TI revenue, although management is in the process of phasing out this business by 2012.

Orders

Net product orders were $3.1 billion in the last quarter, up 11.1% sequentially and down 3.7% year over year. We estimate that backlog was up 17.6%. Turns sales increased 5.4% in the last quarter, assuming average lead times stayed in the 12-week range.

Operating Results

The pro forma gross margin for the quarter was 51.7%, up 559 basis points (bps) from the previous quarter’s 46.1%, the second straight quarter of significant gross margin expansion. The reason for the continued improvement in gross margins is the higher level of revenue, higher utilization rates, an improving mix of analog and embedded processing business, as well as production efficiencies.

Operating expenses of $657 million were higher than than the previous quarter’s $645 million. The operating margin was 28.9%, up 903 bps sequentially from 19.8%. Most of the increase was related to the lower COGS (as a percentage of sales), although lower R&D and SG&A expenses (as a percentage of sales) also contributed. The Analog, Embedded Processing, Wireless and Other segments generated operating margins of 25.8%, 19.1%, 16.3% and 43.3%, respectively.

The pro forma net income was $586 million, or a 21.0% net income margin compared to $374 million, or 15.2% in the previous quarter and $763 million, or 22.5% in the prior-year quarter. Fully diluted pro forma earnings per share was 46 cents compared to 29 cents in the previous quarter and 57 cents in the September quarter of last year.

The pro forma calculations for the last quarter exclude the impact of restructuring charges, deferred stock compensation expenses and amortization of intangibles on a tax-adjusted basis. On a fully diluted GAAP basis, the company recorded a net profit of $538 million (42 cents per share) compared to $260 million (20 cents per share) in the previous quarter and a net profit of $563 million (42 cents per share) in the prior-year quarter.

Balance Sheet

Working capital management improved during the quarter. While inventories increased 5.0% to $1.1 billion, this resulted in inventory turns of 5.0X, compared to turns of 4.3X in the June 2009 quarter. Days sales outstanding (DSOs) decreased from 46 to 45 days.

Cash generated from operations was $834 million. The company used $251 million to repurchase 10.5 million shares, $226 million on capex and $138 million on cash dividends. The company did not have any long-term debt, although long-term liabilities totaled $803 million at quarter-end.

Guidance

Management provided guidance for the second quarter. Revenue is expected to range between $2.78 billion and $3.02 billion (down 3.5% to up 4.9% sequentially), a pretty wide range. The lower backlog entering the quarter could have prompted management to exercize caution in calling the guidance. The guidance also assumes a sequential decline in the calculator business, which management estimates at around $115 million.

The EPS is expected to be 42 cents to 50 cents. Management continues to expect R&D expense of around $1.5 billion, capital expenses of $800 million and depreciation expense of $900 million for the year. The annual effective tax rate is now expected to be 28%, compared to previous expectations of 27%.
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