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H-P Revenue Down, EPS In-Line – Analyst Blog

Zacks Market Commentaries — Tue, 24 Nov 2009 13:39:13 +0000

Hewlett-Packard (HPQ) reported fourth quarter EPS of $1.14, exceeding the Zacks Consensus Estimate by a penny.

Revenue

Revenue for the quarter came in at $30.8 billion, a decrease of 8.0% from the $33.6 billion reported in the year-ago period and down 5.0% on constant currency basis.

Revenue fell across all businesses, including servers and data storage systems, software, PCs and printers. The Americas reported a 3.0% decline in revenue to $13.6 billion. Revenue declined 17.0% in Europe, the Middle East and Africa (EMEA) to $11.7 billion and 1.0% in the Asia Pacific to $5.4 billion. Revenue from China increased more than 20% from the year-ago quarter.

International markets accounted for 64% of total revenue in the fourth quarter, with revenue in the BRIC countries (Brazil, Russia, India and China) declining 4.0% on a year-over-year basis and accounting for 10.0% of total HP revenue.

Results and Analysis by Segment

The Technology Solutions Group (TSG) was $14.1 billion down 2.6% year over year. Within TSG, Enterprise Storage and Servers (ESS) revenue declined 17.0% year over year, driven by declines across all three business units -- Industry Standard Servers, Business Critical Systems and Storage. Services revenue increased 8.0% year over year, mainly due to the addition of EDS’ revenue. EDS’ integration was ahead of the company’s plans. HP Software revenue fell 16.0% year over year with declines in both the Business Technology Optimization (BTO) portfolio and other software.
Personal Systems Group (PSG) revenue was $9.8 billion, which fell 12.0% year over year despite an 8% year-over-year increase in unit shipments. The company maintained its leading market position in PCs in every region. However, notebook revenue declined 8.0%, while Desktop revenue declined 16.0%. Commercial client revenue was down 15% and Consumer client revenue down 8.0%.
Imaging and Printing Group (IPG) continued to struggle as revenue was $6.4 billion, down 15.0% year over year. Ink supplies, commercial hardware and consumer hardware also reported substantial declines. We believe this segment has come under pressure due to strong competition from cheaper brands. Printer unit shipments decreased 20.0% from which period, with consumer and commercial printer hardware units down 14.0% and 138.0%, respectively. Consumer and commercial hardware revenue declined 17.0% and 32.0%, respectively.
HP Financial Services (HPFS) revenue was $0.7 billion, up 5.0% year over year. Financing volumes increased 6.0%, while in net portfolio assets increased 21.0%.

Operating Results

Gross margins for the quarter were 23.7%, up 60 basis points year over year. This increase in gross margin can be attributed to efficiency gains in services and increased supplies mix in IPG. The company continues to reduce cost; lowering operating expenses by 16.0% from the year-ago quarter. The lower costs are driven by structural changes that drive sustainable improvements. GAAP operating margin for the quarter was 10.2%, up from 8.2% reported in the year-ago quarter.

GAAP diluted net earnings per share (EPS) in the fourth quarter were $0.99, compared with $0.84 in the prior-year period. Non-GAAP financial information excludes after-tax costs related primarily to the amortization of purchased intangibles, restructuring charges and acquisition-related charges of approximately $0.15 per share and $0.19 per share in the fourth fiscal quarter of 2009 and 2008, respectively. Non-GAAP EPS were $1.14, compared with $1.03 in the prior-year period.

HP generated $3.4 billion in cash flow from operations versus $3.9 billion in the previous quarter. Free cash flow was $2.6 billion. The company exited the quarter with long-term debt balance of $13.9 billion, after repaying $1.5 billion of debt.

HP also returned $2.3 billion to shareholders in the form of share repurchases and dividends. The company ended the quarter with $13.3 billion in cash and short-term investments versus $13.7 billion in the previous quarter.

Guidance

For the first quarter of fiscal 2010, HP estimates revenue of approximately $29.6 billion to $29.9 billion, GAAP diluted EPS of $0.90 to $0.92 and non-GAAP diluted EPS of $1.03 to $1.05. Non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.13 per share, related primarily to the amortization of purchased intangibles, restructuring charges and acquisition-related charges.

For the full-year 2009, the company expects revenue of approximately $118.0 billion to $119.0 billion, up from its previous estimate of $117.0 billion to $118.0 billion. The GAAP diluted EPS is expected to be in the range of $3.65 to $3.75, up from its previous estimate of $3.60 to $3.70, and non-GAAP diluted EPS is expected to be in the range of $4.25 to $4.35, up from its previous estimate of $4.20 to $4.30.

Non-GAAP diluted EPS estimates for fiscal year 2010 exclude after-tax costs of approximately $0.60 per share, related primarily to the amortization of purchased intangibles, restructuring charges and acquisition-related charges. These estimates exclude the potential impact of the acquisition of 3Com Corporation that the company announced in November 2009.
Read the full analyst report on "HPQ"
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Energy Blast – Nov 24, 2009

Robert Amsterdam — Tue, 24 Nov 2009 12:00:34 +0000

Turkey's highest court has reversed the decision to have Atomstroyexport build its first nuclear power plant, due to allegations of unfairly high prices issued by the Russian company, and concerns about energy dependency. Russia will give Belarus a 30-40% discount...

Russia’s China Envy

Robert Amsterdam — Mon, 23 Nov 2009 21:58:18 +0000

Vlad Ryzhkov's latest article over in the Moscow Times is worth a read, as it delves into that familiar and beloved topic of the comparative authoritarian models of Russia and China, and the challenged assumption that democracy is good or...

Grigory Pasko: Yuri Luzhkov’s Water Grab

Robert Amsterdam — Mon, 23 Nov 2009 15:55:23 +0000

Water - the oil and gas of the not-too-distant future What's news is this: «The world community is hoping that Russia will soon become a supplier to the countries of Europe not only of energy inputs, but of fresh...

Zacks Analyst Blog Highlights: Dell Inc., Berkshire Hathaway, Burlington Northern Santa Fe Corporation, JPMorgan Chase and Wells Fargo – Press Releases

Zacks Market Commentaries — Mon, 23 Nov 2009 12:49:16 +0000

For Immediate Release

Chicago, IL – November 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: Dell Inc. (DELL), Berkshire Hathaway (BRK.A), Burlington Northern Santa Fe Corporation (BNI), JPMorgan Chase (JPM) and Wells Fargo (WFC).

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 Friday’s Analyst Blog:

Dell Falls Short of Expectations

Dell Inc. (DELL) reported third quarter 2010 EPS of 23 cents, below the Zacks Consensus Estimate of 27 cents.

Revenue for the quarter was $10.75 billion, down 17.0% from $12.97 billion reported in the year-ago quarter and up 1.0% from $10.62 billion reported in the previous quarter. The company’s third quarter reported revenue was adversely affected by the timing of the Windows 7 launch and due to backlog buildup in the company’s SMB and consumer businesses.

Large Enterprise posted revenue of $3.4 billion, an increase of 4.0% sequentially and decline of 23.0% year-over-year. In the last quarter, the company expended its networking partnership with Brocade and Juniper, and introduced products like PowerEdge 11g servers and expanded PowerVault storage systems.

Public revenue for the quarter was $3.7 billion, down 3.0% on sequentially and 7.0% from the year-ago quarter. Shipments were down 12.0% on a sequential basis, due to seasonality in the U.S. public sector business.

Small and Medium Business revenue for the quarter was $3.0 billion, up 5.0% sequentially and down 19.0% from the year-ago quarter. Shipments increased 9% sequentially. The segment benefited from steadily improving demand in both the Americas and the Asia-Pacific region, as well as better performance in EMEA during the second half.

Revenues for Consumer Business were down 10.0% year-over-year, but flat sequentially to $2.8 billion with shipments growing 4% sequentially.

Dell’s total sales in China, India, Brazil and Russia increased 18.0% sequentially and 5.0% over last year. China, the second-largest revenue generating country for Dell, reported revenue increase of 20.0% sequentially and 8.0% from the year-ago quarter.

Buffett Borrows for Rail Acquisition

Warren Buffett, the CEO and Chairman of Berkshire Hathaway (BRK.A) announced on Thursday to borrow $8 billion of loan for the acquisition of Burlington Northern Santa Fe Corporation (BNI). Berkshire Hathaway, which already owns a 22% stake in Burlington Northern, announced earlier this month it would acquire the rest for a total value of $34 billion. Buffet agreed to pay $100 a share in cash and stock to buy the rest of the company.

The $8 billion loan that will be provided by JPMorgan Chase (JPM) and Wells Fargo (WFC) is intended to be paid back in three years’ time.

For Berkshire, the acquisition of Burlington Northern, or BNSF, the second largest railroad, will be its biggest to date. With it, Berkshire is adding a railroad transportation business with its already diverse range of businesses including retail, manufacturing and insurance, as well as several regional electric and gas utilities.

The acquisition is expected to close in early 2010 and is subject to Burlington Northern’s shareholder approval. Post acquisition, Burlington Northern will operate from its headquarters as a wholly owned subsidiary of Berkshire Hathaway.

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Today in Russian Business – Nov 23, 2009

Robert Amsterdam — Mon, 23 Nov 2009 11:27:42 +0000

Prime Minister Vladimir Putin introduced a cash-for-scrap-cars scheme and mortgage support at Saturday's United Russia congress, as he forecasted a 2009 GDP decline of 8-8.5%, 'which would be Russia's worst result since 1994,' notes the Washington Post. Deputy Prime Minister...

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"
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Grigory Pasko: Journalists Are Fleeing Russia

Robert Amsterdam — Fri, 20 Nov 2009 18:20:03 +0000

Если Вы хотите прочитать оригинал данной статьи на русском языке, нажмите сюда. A well-known Russian journalist, head of the Center for Journalism in Extreme Situations Oleg Panfilov in early November moved for permanent residency from Moscow to Tbilisi. In a...

Evgeny Lebedev and the Londongrad Blues

Robert Amsterdam — Fri, 20 Nov 2009 17:44:02 +0000

This week's lunch with the FT features Peter Aspden sitting down for some sushi and a harmless bit of obsequiousness with Evgeny Lebedev, the son of Alexander Lebedev. The conversation has some interesting points ... such as his potshots at...

The Obstacle of Pride

Robert Amsterdam — Fri, 20 Nov 2009 15:15:17 +0000

I like Michele Berdy's columns in the Moscow Times. Who knows how many times inaccurate translations have skewed our understanding of Russia in the mass media:Надувать щёки is not, as the otherwise brilliant Kremlin translators would have it, "to be...

Dell Falls Short of Expectations – Analyst Blog

Zacks Market Commentaries — Fri, 20 Nov 2009 13:51:13 +0000

Dell Inc. (DELL) reported third quarter 2010 EPS of 23 cents, below the Zacks Consensus Estimate of 27 cents.

Revenue

Revenue for the quarter was $10.75 billion, down 17.0% from $12.97 billion reported in the year-ago quarter and up 1.0% from $10.62 billion reported in the previous quarter. The company’s third quarter reported revenue was adversely affected by the timing of the Windows 7 launch and due to backlog buildup in the company’s SMB and consumer businesses.

Revenue by Segment

Large Enterprise posted revenue of $3.4 billion, an increase of 4.0% sequentially and decline of 23.0% year-over-year. In the last quarter, the company expended its networking partnership with Brocade and Juniper, and introduced products like PowerEdge 11g servers and expanded PowerVault storage systems.

Public revenue for the quarter was $3.7 billion, down 3.0% on sequentially and 7.0% from the year-ago quarter. Shipments were down 12.0% on a sequential basis, due to seasonality in the U.S. public sector business.

Small and Medium Business revenue for the quarter was $3.0 billion, up 5.0% sequentially and down 19.0% from the year-ago quarter. Shipments increased 9% sequentially. The segment benefited from steadily improving demand in both the Americas and the Asia-Pacific region, as well as better performance in EMEA during the second half.

Revenues for Consumer Business were down 10.0% year-over-year, but flat sequentially to $2.8 billion with shipments growing 4% sequentially.

Dell’s total sales in China, India, Brazil and Russia increased 18.0% sequentially and 5.0% over last year. China, the second-largest revenue generating country for Dell, reported revenue increase of 20.0% sequentially and 8.0% from the year-ago quarter.

Operating Results

Gross margin for the quarter was 17.3%, below 18.8% reported in the third quarter of 2009. The decline in gross margin took place as gross profit declined at a higher rate than revenue.

In addition, operating expenses declined 10.0% from the year-ago quarter, as a result of a decline in both SG&A and R&D expenses. This translated into an operating margin of 4.5% versus 6.7% in the year-ago quarter. Tax rate for the third quarter was 34.5%, compared to 28.0% in the year-ago quarter.

Earnings per share during the quarter were $0.17, down from $0.37 reported in the year-ago quarter and $0.24 reported in the previous quarter. The EPS for the quarter included a pre-tax expense of expense of $123.0 million or $0.05 per share and $40.0 million or $0.01 per share for amortization of intangibles. Excluding that, the EPS for the quarter comes to $0.23.

Balance Sheet & Cash Flow

Dell’s cash conversion cycle improved by a day to negative 36 days. Cash flow from operations declined to $801.0 billion from $1.0 billion reported in the previous quarter. The company ended the quarter with $13.12 billion in cash and short-term investments versus $11.99 billion in the previous quarter. Long-term debt stood at $3.44 billion at the end of the quarter versus $3.39 billion in the previous quarter.

Guidance

Dell did not provide any guidance for the fourth quarter, but expects seasonal improvement in demand from the consumer end market. However, Public sector demand may be lower. The company expects fourth quarter revenue to improve over the third quarter.
Read the full analyst report on "DELL"
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The Iron (Pipeline) Curtain

Robert Amsterdam — Fri, 20 Nov 2009 13:32:01 +0000

Stephen Fidler at the Wall Street Journal has an interesting piece running today about the annual winter pipeline politics (though the sensible agreement yesterday in Yalta may diminish a lot of fears). There are some interesting facts and numbers in...

Energy Blast – Nov 20, 2009

Robert Amsterdam — Fri, 20 Nov 2009 10:40:01 +0000

Reports have emerged following yesterday's meeting between 'comfortable' duo Vladimir Putin and his Ukrainian counterpart, Yulia Tymoshenko. Bloomberg says Putin's announcement that Ukraine would not be penalized for consuming less gas than was contracted was warmly received by Tymoshenko, who pledged...

Grigory Pasko: Disturbance Factor

Robert Amsterdam — Thu, 19 Nov 2009 19:45:44 +0000

They were shooting...Yesterday. In the forest. In Vladimir Oblast. A shot thundered practically right over my head. Luckily for me and for the duck flushed from the mirror-like marsh, the hunter missed. Если Вы хотите прочитать оригинал данной статьи на...

Remembering Sergei Magnitsky

Robert Amsterdam — Thu, 19 Nov 2009 17:14:54 +0000

Below is the text of a letter from the law firm Firestone Duncan to clients and staff regarding the death of Sergei Magnitsky (I apologize for the conflicting spellings of his name).November 18, 2009Dear clients, partners and friends,On the night...

Hitting Rock Bottom

Robert Amsterdam — Thu, 19 Nov 2009 16:22:34 +0000

The writer Victor Erofeyev has published an opinion article in the New York Times commenting about what motivations Russians to embrace a familiar if ugly past instead of imagining a reformed future. His expression of support here echoes what he...

Energy Blast – Nov 19, 2009

Robert Amsterdam — Thu, 19 Nov 2009 10:12:52 +0000

Russia's EU ambassador says his country aims to reduce greenhouse-gas emissions by 25% through to 2020. Ukraine's President, Viktor Yushchenko, has written an open letter to Dmitry Medvedev, asking him to change the terms of agreement on gas supplies. The...

Corruption and Death in Russia

Robert Amsterdam — Wed, 18 Nov 2009 21:31:06 +0000

Voice of America has published an important piece on the death of Hermitage lawyer Sergei Magnitsky and the practice of medical blackmail in Russian prisons:Magnitsky developed problems with his pancreas and gall bladder as a result of what his American...

Eastman Boosts Guidance – Analyst Blog

Zacks Market Commentaries — Wed, 18 Nov 2009 18:11:54 +0000

Eastman Chemical Co. (EMN) has raised its full year 2009 earnings guidance to $3.50 per share from the initial guidance of $2 to $3 per share, driven by an expected strong growth in its core business. The company is hoping to deliver about 20% or over $6 per share growth in annual earnings by 2012, as the economy recovers completely.

The Zacks Consensus Estimate is pegged at $3.22 for 2009 and at 93 cents for the fourth quarter. Recently, Eastman’s close peers, Dow Chemical Company (DOW) and Dupont (DD) have also predicted strong growth in earnings.

Eastman stands to benefit from its business restructuring and cost-cutting measures, which are expected to result in cost savings of more than $200 million for the full year 2009. Eastman’s earnings of $1.38 per share in the third quarter of 2009 had bettered the Zacks Consensus Estimate of $1.13 per share helped by lower costs.

The company managed margins by reducing its operating costs. However, lower selling prices and volumes across all major segments resulted in a 21% year-over-year fall in Eastman’s top line of $1.3 billion for the quarter. Eastman’s core businesses, including Coatings, Adhesives, Specialty Polymers and Inks, Fibers, Performance Chemicals and Intermediates as well as Specialty Plastics suffered on weak demand from the automotive, building and construction, and packaging markets.

Tennessee-based Eastman, which makes chemicals, plastics and fibers used in everything from paints to furniture, expects to benefit from a better product mix and cost reduction measures in the fourth quarter of 2009. However, the company expects volatility in raw material and energy costs and a decline in sales volume due to normal seasonality having a negative affect on the upcoming quarter.

Eastman expects the growth in earnings investments in sustainable products and emerging markets. The company is eyeing the cigarettes market, which is witnessing high growth on the back of strong demand from Russia and China. Strong demand for cigarettes will help earnings in the company's fibers unit, which also produces base materials for clothing. Eastman produces acetate tow, used to make filters for cigarettes. In the Performance Polymer segment, Eastman is expecting operating earnings of $25 to $50 million by monetizing IntegRex technology investment through licensing.

This apart, Eastman has about $117 million remaining on a share repurchase allocation, and intends to use that up in the next few years. Eastman is more open now to acquisitions or joint ventures than it had previously been, due in part to a new growth strategy. The company recently launched a $250 million note offering for fund growth projects.
Read the full analyst report on "EMN"
Read the full analyst report on "DOW"
Read the full analyst report on "DD"
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Energy Blast – Nov 18, 2009

Robert Amsterdam — Wed, 18 Nov 2009 10:16:47 +0000

In spite of recent measures taken to avoid more EU gas disruptions this winter, and a new Russia-EU partnership set to be discussed in detail at this week's Stockholm summit, Slovakia's Prime Minister can't see Kiev being able to pay its...

Rogozin vs. Sikorski

Robert Amsterdam — Tue, 17 Nov 2009 22:33:58 +0000

A while back we pointed to the Twitter feed of Russia's Amb. to NATO Dmitry Rogozin. Today it looks like he has launched a personal assault on Radoslav Sikorski, the Polish MFA (everybody is just so prickly around this Berlin...

Protest in Support of Khodorkovsky at the Russia National Exhibition in Chicago

Robert Amsterdam — Tue, 17 Nov 2009 22:06:04 +0000

Earlier today we were emailed regarding a small demonstration to be held tomorrow morning in front of the Drake Hotel in Chicago, IL in support of Mikhail Khodorkovsky, coinciding with the Russian National Exhibition (a business conference looking to drum...

Vaclav Havel Warns about Russia’s Democratic Façade

Robert Amsterdam — Tue, 17 Nov 2009 21:47:44 +0000

We could've guessed from the letter he signed earlier this year that the Czech luminary/dissident Vaclav Havel was not done talking about the authoritarian drift in Russia. The Telegraph reports on his speech before a rally commemorating the anniversary of...

Medvedev’s Alternative Vision Light as a Feather

Robert Amsterdam — Tue, 17 Nov 2009 20:24:22 +0000

Adrian Pabst, an academic from the University of Kent, has a well written if not entirely surprising opinion article in The National arguing that a real separation emerging between the Medvedev and Putin camps - "a growing split within the...

GM’s Loss Subsides – Analyst Blog

Zacks Market Commentaries — Tue, 17 Nov 2009 19:52:10 +0000

General Motors (hereafter, GM) -- presently, Motors Liquidation Company (MTLQQ) -- posted a narrower loss in the third quarter (Jul 10 - Sep 30) compared with the results depicted by "Old GM" in the first quarter, before the company was transformed by a stay in Chapter 11.

GM, which began operations as a new company on July 10, 2009, has revealed a net loss of $1.2 billion for the quarter, significantly less than $6 billion it lost in the first quarter. The company’s earnings before interest and taxes (EBIT) before special items for the period were negative at $261 million. GM’s North American market showed a loss of $651 million while GM International Operations recorded a profit of $238 million.

The improvement was attributed to incentive programs including "Cash for Clunkers" and stability in the international market, especially China, Brazil, India and Russia (BRIC). In particular, the China market has been a significant contributor to the company’s results by maintaining a leading market share position.

GM and its joint venture partners in China continue to see an upward trend. They sold more than 478,000 vehicles in the quarter, up from approximately 364,000 and 451,000 units in the first and second quarters, respectively.

The company generated revenue of $28 billion -- up from the revenue recognized by "Old GM" in the prior quarter by $4.9 billion. The improvement in revenue was mainly caused by the Clunkers program and a higher global seasonally adjusted annual rate (SAAR) of 67.8 million units compared to 62.7 million units in the previous quarter, besides GM’s stabilizing global share.

GM’s global share went up 0.3 percentage points to 11.9% in the quarter from the first half of the year. The U.S. market share was flat at 19.5% compared to the first half of the year. In BRIC, the company had 13% of the combined market share, up 0.2 percentage points from the prior quarter.

GM’s dealer inventories decreased 158,000 units to 424,000 vehicles in the U.S. at the end of reported quarter from the end of the prior quarter. Some of the brands that delivered strong retail performance in the U.S. include Chevrolet Camaro and GMC Terrain Chevrolet Equinox, Buick LaCrosse and Cadillac SRX. In the international market, brands that gained attention are Holden, Chevrolet Cruze, Daewoo Matiz Creative, Opel Astra and Chevrolet Agile.

GM’s structural cost has been significantly reduced by restructuring including salaried and hourly headcount reductions, engineering savings and volume related savings. In the first nine months of the year, structural cost declined by $6.7 million to $31.1 million compared to the year-ago period.

Financial Position and Loan Repayment

GM had positive operating cash flow, before special items, of $3.3 billion in the quarter. This reflected a favorable working capital impact from production start-up, timing of supplier payments and lower capital spending. As of Sep 30, 2009, cash and marketable securities grossed $42.6 billion.

GM has announced its plan to accelerate repayment of its outstanding $6.7 billion (13% of the $52 billion that U.S. taxpayers have invested in the company, mainly for a 61% ownership stake) in U.S. Treasury (UST) loans as well as the C$1.5 billion ($1.4 billion) in Export Development Canada (EDC) loans, ahead of the scheduled maturity date of July 2015. Improving global economic situation, stabilizing industry sales and healthier cash position are the underlying factors behind GM’s decision.

GM plans to repay the loans in quarterly installments from escrowed funds, beginning next month with an initial $1.2 billion payment to be made in December ($1 billion to the UST and $192 million to the EDC), followed by quarterly payments. Any escrowed funds available as of Jun 30, 2010, would be used to repay the UST and EDC loans unless the escrowed funds were extended one year by the UST. Any balance of funds would be released to the company after the repayment of the UST and EDC loans.

In addition, GM has begun to repay the German government loans that had been extended to support Opel. As of Sep 30, 2009, the company had a balance of €900 million ($1.3 billion), of which €500 million ($700 million) has been repaid in November. The outstanding amount of €400 million ($600 million) will be repaid at the end of the month.

Road Ahead

For the fourth quarter, GM has projected the industry SAAR volume in the U.S. to be 10.7 million units in the upcoming quarter, down from 11.7 million units in the reported quarter. Globally, the estimated figure is 65.4 million units. For 2010, GM has forecasted total industry volumes to be 62 - 65 million units globally and 11 - 12 million units in the U.S.

GM expects to have negative net cash flows in the fourth quarter due to several factors including cash outflows related to the Delphi settlement and payments for U.S., Canada, Ontario and German government loans. Consequently, cash balances at the end of the year are expected to be materially lower than third quarter levels of $42.6 billion.
Read the full analyst report on "MTLQQ"
Zacks Investment Research

The Gas Comics: EU Sells Out Human Rights to Turkmenistan

Robert Amsterdam — Tue, 17 Nov 2009 19:10:51 +0000

You've got to respect Global Witness ... for a watchdog NGO, they bring a lot of creativity and innovation to their cause (see this past campaign for another example). GW has also done a tremendous job in the past...

Activist Murdered in Moscow

Robert Amsterdam — Tue, 17 Nov 2009 18:45:37 +0000

Ivan Khutorskoy, an anti-fascist activist, has been murdered by gunfire in Moscow today in what some colleagues are calling a possible retaliation. According to the Reuters coverage, the murder may have been related to the arrests of individuals in...

Omnicity Corp. (OMCY.OB) Riding the Broadband Wave

QualityStocks — Tue, 17 Nov 2009 15:55:44 +0000

Omnicity Corp., known for bringing wireless broadband services to rural America, is on top of one of the biggest waves in telecommunications, the rapid expansion of broadband services outside of the traditional urban and suburban base areas. It goes without saying that the communications industry is the nervous system of today’s economy, generating global annual [...]

Unlawfully Jailed Hermitage Lawyer Dies in Custody

Robert Amsterdam — Tue, 17 Nov 2009 12:38:35 +0000

This is horrible, horrible news, especially considering the circumstances behind the arrest of Sergei Magnitsky, a lawyer involved in the William Browder and Hermitage Capital affair (this saga of state corruption is best told in a ten minute film released...

Energy Blast – Nov 17, 2009

Robert Amsterdam — Tue, 17 Nov 2009 09:08:16 +0000

Russia's Energy Minister and the EU Energy Commissioner have signed a memorandum establishing an early warning mechanism to anticipate potential gas cuts and allow time to find solutions to problems before deliveries are physically affected. But the memorandum may be...

Bristow Group Inc. – Value – Zacks Rank Buy

Tracey Ryniec — Tue, 17 Nov 2009 05:00:00 +0000

Bristow Group Inc. (BRS) has surprised on estimates 3 out of the last 4 quarters by an average of 10.50%. The company is trading at 11.7x forward earnings.

Company Description

Bristow Group is one of the largest providers of helicopter services in the world. Its primary customers are in the offshore energy industry in the North Sea, Nigeria, the Gulf of Mexico, Australia, Brazil, Russia and Trinidad. The company provides transportation, maintenance and search and rescue services.

Bristow Surprised by 39.39%

On Nov 4, Bristow Group reported its fiscal second quarter and surprised on the Zacks Consensus Estimate by 26 cents per share. Earnings per share rose 19.5% to 92 cents from 77 cents in the year ago period. Analysts were expecting just 66 cents.

Revenue was virtually unchanged from the second quarter of 2008 at $291.6 million compared to $291.7 million in 2008.

While the operating environment is still challenging in the energy industry, the company saw good operating results in Latin America, Nigeria and Australia during the quarter.

In Australia, the company won new business from several customers and also implemented cost cutting measures which boosted results. Nigeria is also a challenge because of the political environment.

Results in the Gulf of Mexico also fell from the previous quarter but the company said it wasn't as impacted as some of its competitors due to an upgrade in its air fleet which allowed it to serve projects further offshore in deeper water.

Bristow is expecting a turnaround in the energy industry, and therefore its business, by next year.

Zacks Consensus Estimates Jump

Given the big beat in the fiscal second quarter, covering analysts have been scrambling to raise estimates.

The fiscal third quarter Zacks Consensus is up 2 cents in the last week to 70 cents per share. The fiscal 2010 consensus also rose to $2.94 from $2.84 per share in the last 7 days with 2 out of 8 analysts raising during that time.

Value Fundamentals

Bristow Group is a Zacks #1 Rank (strong buy) stock. It has a price-to-book of 0.93. The company has a solid 5-year average return on equity (ROE) of 11.86%.

Zacks Investment Research

Upgrading Sealed Air to Outperform – Analyst Blog

Zacks Market Commentaries — Mon, 16 Nov 2009 21:30:39 +0000

Sealed Air Corporation (SEE) recently reported its third quarter results. The company posted earnings of 38 cents per share, beating the Zacks Consensus Estimate 33 cents as well as prior-year EPS of 28 cents.

Through its stringent cost-control measures and global manufacturing strategy, the company managed to offset the impact of lower sales on its earnings. The company’s global manufacturing strategy, along with its cost reduction program, resulted in approximately $20 million in savings during the quarter.

Sealed Air is pursuing a multi-year global manufacturing strategy to revitalize its bottom line. The company plans to build manufacturing plants close to the markets it serves, with the bulk of production being transferred overseas. Under the first phase of this strategy, the company expects to realize cumulative savings of around $45.0 million in 2009 and $55.0 million in 2010.

Apart from its global manufacturing strategy, the company is also focused on managing its overhead costs. The company realized incremental savings of $38 million year-to-date and this program is expected to result in annual savings of at least $50.0 to $60.0 million starting from 2009.

Though the company reported an 11% decline in total sales for the quarter, it witnessed improved market conditions in some of the developing nations. The company’s sales increased in double digits in Russia, Poland and the Ukraine. The company also saw an improvement in the Latin American region during the quarter. Given its global footprint, Sealed Air is well poised for long-term growth, especially in the markets outside North America.

Based on the improved outlook as well as the company’s efforts to revitalize its bottom-line, we are upgrading the rating on the stock from Neutral to Outperform.
Read the full analyst report on "SEE"
Zacks Investment Research

Video Game “Call of Duty” Pushes Russia’s Buttons

Robert Amsterdam — Mon, 16 Nov 2009 16:24:59 +0000

As many readers are aware, the Russian government has been on a recent censorship tear, including talk of banning off-color and proudly offensive animated TV imports such as The Simpsons, Family Guy, and South Park (oddly, Venezuela's Hugo Chavez has...

MBT Tops, Economy & FX Hurt Sales – Analyst Blog

Zacks Market Commentaries — Mon, 16 Nov 2009 15:00:54 +0000

Mobile TeleSystems (MBT), Eastern Europe’s largest cellular operator, announced results for third-quarter 2009 with earnings per ADS of $1.31 exceeding the Zacks Consensus Estimate of $1.17. Net income, however, dipped 4.1% year over year to $494.4 million on lower revenue and higher interest expenses on US dollar denominated debt.

Revenue, ARPU & Churn
Consolidated revenue declined 19.4% year over year to $2.27 billion, affected by the macroeconomic volatily across key markets and unfavorable exchange rate (rouble versus dollar) movements which hurt the company’s dollar-denominated revenues. On a geographic basis, revenue increased in Russia (7.2% year over year) and Turkmenistan (113.2%) while declining in Ukraine (1.7%), Uzbekistan (1.9%)and Armenia (3.1%).

In Russia , churn (customer switch) increased sequentially and year over year while ARPU (average revenue per user) increased from the previous quarter but declined year over year. Churn at Ukraine declined year over year while increasing sequentially. ARPU at Ukraine increased both sequentially and year over year basis.

Subscriber and Market Share
The company added approximately 1.86 million customers in the quarter (down seqentially), primarily driven by healthy subscriber growth in Russia which registered 1.28 million in net additions. Outside Russia , subscriber base grew in all markets except Ukraine which remained flat year over year. At the end of the quarter, the company served approximately 101.4 million subscribers (68.7 million in Russia ), up 10.5% year over year.

The company continues to maintain its leadership position in most markets it serves. Market share in Russia , Turkmenistan and Armenia remained stable sequentially but declined in Ukraine, Uzbekistan and Belarus.

Outlook
The company has provided its guidance for fiscal 2009 with consolidated revenues expected at $8.25 billion while group OIBDA margin is forecasted in the high 40% range. Estimated capital expenditure for the year is $1.8 billion (up from $1.5 billion) which includes investment in 3G network infrastructure and expansion of proprietary retail distribution network.

Mobile TeleSystems is expanding its 3G network footprint through commercial service roll-outs in selected cities of Russia and surrounding countries. It plans to spend up to $1.6 billion on 3G network upgrades in Russia through 2011 to provide high-speed data transfer services to its customers. The company is securing financing from international lenders to fund the aggressive 3G network deployments.

The company continues to pursue acquisitions and strategic collaborations to strengthen its “mono-brand" mobile retail network while implementing cost optimization programs to lower operating expenses. To further strengthen its retail distribution network, Mobile TeleSystems acquired 100% stake in Russian mobile retail chain Teleforum in October 2009. The mono-brand retail initiative is expected to provide the company a competitive edge over its archrival VimpelCom (VIP).

While expansion of 3G network represents a critical growth driver, associated expenditures to support network deployments and promotional initiatives may tighten free cash flow and margins. Moreover, competition, foreign exchange exposure, regulatory challenges and macroeconomic volatility in Russia and sourrounding countries warrant a cautious view on the stock.
Read the full analyst report on "MBT"
Read the full analyst report on "VIP"
Zacks Investment Research

Stable Authoritarianism

Robert Amsterdam — Mon, 16 Nov 2009 14:47:34 +0000

From time to time, La Russophobe forwards us links to what they are publishing. This posting on subnational authoritarianism in particular is quite interesting. Writing in the Russian Analytical Digest, Vladimir Gelman argues that the processes of political recentralization of...

Video: Hip Hop Putin

Robert Amsterdam — Mon, 16 Nov 2009 14:24:44 +0000

In what are sure to be the most bizarre and cringe-worthy videos of the week, Prime Minister Vladimir Putin showed up as the featured guest on a popular hip hop TV show in Russia. According to the AFP, Putin commented...

The Strongest BRIC Country

Martin D. Weiss, Ph.D. — Mon, 16 Nov 2009 13:57:58 +0000

I have a trick question for you, especially if you're interested in emerging markets: Among the four BRIC countries — Brazil, Russia, India and China — which offers the best stock market performance for American investors? Be careful how you answer, because appearances can ...

Energy Blast – Nov 16, 2009

Robert Amsterdam — Mon, 16 Nov 2009 09:37:08 +0000

Uppsala University in Sweden says the IEA's annual World Energy Outlook 'drastically underplayed the scale of future oil shortages'. Prime Minister Vladimir Putin has won Slovenia's approval for the South Stream pipeline, 'undermining European Union efforts to reduce dependency on Russian...

Today in Russian Business – Nov 16, 2009

Robert Amsterdam — Mon, 16 Nov 2009 09:34:40 +0000

First Deputy Prime Minister Igor Shuvalov has announced that Russia has again raised its target for revenue from various state asset sales next year to 100 billion rubles ($3.5 billion), more than 10 times the original target. 'The state will...

Zacks Industry Outlook Highlights: ArcelorMittal, Steel Dynamics Inc., AK Steel Holding Corporation, United States Steel Corporation and Nucor Corporation – Press Releases

Zacks Market Commentaries — Fri, 13 Nov 2009 12:55:47 +0000

For Immediate Release

Chicago, IL – November 13, 2009 – Zacks.com announces the latest Industry Outlook. Today, Zacks Equity Research discusses the Steel Industry, including ArcelorMittal (MT), Steel Dynamics Inc. (STLD), AK Steel Holding Corporation (AKS), United States Steel Corporation (X) and Nucor Corporation (NUE).

A synopsis of today’s Industry Outlook is presented below. The full article can be read at http://www.zacks.com/stock/news/27253/Steel+Industry.

ArcelorMittal (MT) is the world’s largest steel company with steel production of 103.3 million tons in 2008. Other major players in the industry are Steel Dynamics Inc. (STLD), AK Steel Holding Corporation (AKS), United States Steel Corporation (X) and Nucor Corporation (NUE).

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.

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Zacks Investment Research

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....

Today in Russian Business – Nov 13, 2009

Robert Amsterdam — Fri, 13 Nov 2009 09:28:20 +0000

'The primitive structure of our economy', was one of President Medvedev's keynote complaints in his second annual address, which emphasized the need for technological innovation. The speech was 'disappointing from an investment point of view [...] it was very light...

RA’s Daily Russian News Blast – Nov 13, 2009

Robert Amsterdam — Fri, 13 Nov 2009 08:46:24 +0000

TODAY: Medvedev's state of the nation address warns opposition against using democracy to rock the boat; talks up modernization. Media unconvinced President can match word with deed. Topol-M problem for START replacement talks; Litvinenko suspect Lugovoi willing to speak to...

Richard Russell: Six reasons to invest in gold

Prieur du Plessis — Fri, 13 Nov 2009 07:38:54 +0000

This post features excerpts from Richard Russell's latest Dow Theory Letters, arguing the case for gold bullion.

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

Kinross Increases Exploration – Analyst Blog

Zacks Market Commentaries — Thu, 12 Nov 2009 22:01:45 +0000

Canadian gold mining company Kinross Gold Corporation (KGC) recently received authorization from the Ecuadorian Ministry of Non-Renewable Natural Resources to re-commence advanced exploration activities at the Fruta del Norte (FDN) gold project in Zamora-Chinchipe province of Ecuador, which was put on hold last year as the gold mining activities were halted in the country.

Kinross had acquired the project last year by buying Aurelian Resources (another gold mining stock in Ecuador) for $1.2 billion. With this authorization, Kinross expects to re-commence its drilling program at FDN shortly. The program includes a 20,000 meter drilling campaign to support the completion of a feasibility study. The company plans to use four drills to execute the drilling campaign which is expected to take six months to complete. Kinross expects to complete a pre-feasibility study in January 2010.

Kinross benefits from higher gold prices, exploration projects and acquisitions. The company has cleared its hedge book and thus stands fully levered to spot gold prices. Higher gold prices will flow directly to the top line. About 40% of the reserves are located in Chile and another 40% in Russia. The company’s production is expected to go up more than 30% to 2.4 million-2.5 million oz of gold in 2009, driven by increased production from its three new projects Paracatu, Kupol and Buckhorn.

At the Paracatu mines, Kinross Gold has undertaken an expansion at a cost of $470 million. Annual production at Paracatu is forecasted to increase to about 557,000 oz of gold in the period between 2009 and 2013. Kinross has also undertaken a $270 million expansion project at the Fort Knox mine, which is expected to extend the life of the mine by 5 years and double the life-of-mine production to 2.9 million oz of gold. This will increase Fort Knox’s production to an average of 370,000 oz of gold per year during the 5 years commencing 2010. It will also reduce the average life-of-mine cost of sales to about $390 per oz.

Kinross has recently signed a deal to increase the size of its unsecured revolving credit facility to $450 million, up from $404 million. The new facility will expire in November 2012 and include a term loan for its Paracatu property in Brazil.

Kinross is a Canadian-based gold mining company with mines and projects in the US, Brazil, Chile, Ecuador and Russia. The Bema Gold Corp. acquisition has been a major contributor to Kinross’s profits in the last few quarters. We expect Kinross’s exploration projects and acquisitions to also boost its top line going forward. However, the emerging market growth is declining and production level is shrinking at some of its existing operations. We are also concerned about Kinross’s earnings volatility and lower gold reserve base. Earnings in the last quarter were lower than the Zacks Consensus Estimate. We expect higher mining and administrative costs to further constrain margins.
Read the full analyst report on "KGC"
Zacks Investment Research

Who Got The Power?

Robert Amsterdam — Thu, 12 Nov 2009 14:51:40 +0000

Vladimir Putin has been ranked number 3 in the Forbes list of the most powerful people in the world, President Medvedev comes in 43rd, after Deputy Prime Minister, siloviki chieftain and Rosneft chairman Igor Sechin at number 42. (See the...

How to play the dangerous dollar

Andrew Snyder — Thu, 12 Nov 2009 14:15:38 +0000

pBaltimore – (a href="http://www.todaysfinancial.com" target="_blank"TFN/a): The dollar is a dangerous entity these days. Never has there been such a globally important currency with as much political and financial manipulation./p pThe distortions from reality are mind-boggling, yet all of us depend on the status of the simple fiat for our financial wellbeing. /p pThe person with the most skin in the dollar game is, no doubt, President Obama. The nation’s economy hinges on the fate of the greenback and the White House knows it. That is why it is doing anything it can to slow the slide./p pEven if it is entirely psychological./p pToday, reports are flowing from Washington that show Obama may have plans to use up to $210 billion in TARP money to lower the#8230;/p

Axing Governors

Robert Amsterdam — Thu, 12 Nov 2009 12:22:15 +0000

Nikolai Zobin in today's Moscow Times laments that President Medvedev persistently highlights the level of corruption in Russia, whilst, by all accounts, the problem of graft has increased during his Presidency. (See yesterday's 'corruption blast' for the latest examples). When...

Today in Russian Business – Nov 12, 2009

Robert Amsterdam — Thu, 12 Nov 2009 09:34:17 +0000

The ruble hit an 11-month high yesterday, just after warnings against bets that the currency would continue to mount. The government has apparently decided to abandon some of its more ambitious pre-crisis goals for the 2012 economy, admitting that growth...

Mechel Recovers – Analyst Blog

Zacks Market Commentaries — Wed, 11 Nov 2009 20:43:24 +0000

Mechel OAO (MTL), one of Russia’s leading mining and metallurgical companies, has reported results for its second quarter and first half of 2009.

For the first half of 2009, Mechel reported revenues of $2.4 billion, down 54% from the year-ago period. The company reported net losses of $471.4 million in contrast to net income of $41.1 billion year over year. However, Mechel managed a net income of $219.3 million in the reported quarter after posting losses in the last two quarters. Revenues inched up 8.6% sequentially to $1.3 billion on higher sales volumes. Before this, revenues were impacted by weak demand for steel and coking coal as well as foreign exchange losses.

The Steel segment generated 57% of revenues, which slipped 53.5% year over year to $1.40 billion in the first half of 2009. Unfavorable market conditions and low demand for steel from the end consumer markets – especially auto, construction and machinery − resulted in the decline.

Revenues of $754.7 million in the quarter reflected an improvement of 17.3% from the previous quarter on steel sales volumes picking up slightly. During the first half of 2009, net losses in the Steel segment amounted to $321.5 million against net income of $467.4 million in the same period of 2008. However, Mechel reported a net income of $36.5 million in the quarter against net losses of $467.6 million in the year ago period. Steel production was up 27% to 1.4 billion tons in the quarter while coke output increased 34% to 723 million tons.

In 2009, Mechel foresees demand for steel from the Middle East and Southeast Asia. The company plans to operate facilities at 100% capacity.

By May 2009, Mechel had increased steel-making capacity utilization to 94%, metallurgical commodity products capacity utilization to 95%, including rolled products capacity to about 99%, hardware capacity to about 74%, while forgings and stampings crossed 58%.

The Mining segment generated 27% revenues during the first half of 2009. Sales in the segment plunged 60.5% year-over-year to $674.8 million, driven by a sharp decline in the demand for coking coal. EBIDTA margin of 23.3% more than halved from 51% in the year-ago period driven by higher production costs. In the latest quarter, revenues declined 4% to $330.6 million. Net income was $49.7 million in contrast to a net loss of $65.8 million.

Sequentially, production of coal was down 13% to 3 million tons. Coking coal production was up 19% to 1.2 million tons. Production of steam coal was down 27% year-over-year to 1.76 million tons.

Mechel is banking on Asian markets, particularly, China, Japan and South Korea. In June 2009, Mechel through its subsidiary Mechel Trading AG signed a long-term contract with South Korean Hyundai Steel to supply 300,000 tons of coking coal per annum from 2010. The company has a total supply contract of 2.0 million tons of coking coal and 2.3 million tons of steam coal in 2009 produced at its Yakutugol and Southern Kuzbass mines.

The Power segment produced 10% of revenues, which totaled $256.5 million, down 28.2% from the same quarter of the previous year. Mechel reported a net loss of $4.3 million compared with net income of $7.2 million in the year ago period. The economic crisis resulted in an overall demand for electricity. Moreover, Mechel’s power is expensive as compared to the liberalized electricity in Russia. Quarter on quarter, revenues were down 14.3% to $114.8 million and net losses amounted to $4.6 million.

The Ferroalloy segment yielded 5% of revenues, or $131 million, down 52.9% year over year. Mechel reported a net loss of $202.6 million compared with a net income of $38.9 million. However, revenues increased 43.2% quarter on quarter to $77.2 million. Net income of $126.1 million was driven by higher production costs and lower product prices. Mechel is increasing its output of high quality ferrochrome, an alloy required to produce stainless and special steel.

Mechel has a large capital-spending program. It reported capital expenditures of $223.2 million in the first half of 2009. Total debts were about $6.0 billion in the first half. Higher debts resulting in greater interest burden are a drag on the company’s profitability. Mechel has not provided any financial guidance for the rest of 2009.
Read the full analyst report on "MTL"
Zacks Investment Research

A Green Energy Investing Guideline

Investment U — Wed, 11 Nov 2009 16:03:54 +0000

A Green Energy Investing Guideline by Louise Harris, Investment U Research Typically, when investors think about making money from climate change, they think about buying shares of companies that specialize in biofuels or alternative or green energy. But those aren’t the only ways to profit from the green movement. Deutsche Bank Group (NYSE: DB) [...]

Corruption Blast

Robert Amsterdam — Wed, 11 Nov 2009 15:58:39 +0000

Today has not been a good day for the respectability of Russia's organizations. Firstly we have the weekend's police corruption You Tube video, whose revelations about alleged case fabrications and all manner of other dishonest practices have put quite a...

IDC Expands Services – Analyst Blog

Zacks Market Commentaries — Wed, 11 Nov 2009 15:00:00 +0000

Interactive Data Corporation (IDC) continues to expand its solutions and services. The leading provider of financial market data recently declared that its Real-Time Services business has added new market data coverage to PlusFeed, its low-latency, consolidated global datafeed. The company has also added different emerging market exchanges to PlusFeed services.

Interactive Data has added exchanges like National Commodity & Derivatives Exchange ( India ) in its Level 1 data services and Micex ( Russia ) Level 2 data services, as well as depth-of-market data for Johannesburg ( South Africa ) and Bombay ( India ) Stock Exchanges. Coverage of the Tokyo Financial Exchange ( Japan ) has also been added.

This apart, a few weeks back the company announced that its Pricing and Reference Data service business has enhanced the horizon of the interest rate swap valuation service. This service is of special help to clients, since it provides information to efficiently value portfolios in the over-the-counter (OTC) derivatives segment.

The company is also offering currency swaps in Australian dollars, British pounds, Czech koruna, Danish krone, Euros, Hungarian forint, Japanese yen, Norwegian krone, Polish zloty, Swedish krona, Swiss Francs, South African rand, U.S. dollars, Canadian Dollar and New Zealand Dollar.

The Bank for International Settlements (BIS) mentioned at the end of March 2009 that the notional amount of interest rate and currency swaps outstanding was $342.8 trillion at the end of 2008 and the company claims that it covers a substantial portion of that interest rate swap outstanding.

The new services will help the company in the current economic environment, as it expands its geographic footprint, increase customer satisfaction and improve prospects within existing markets. This should, in turn, translate into a healthier topline. IDC provided decent third quarter results with revenue moving up around 2% from the previous year and EPS exceeding our estimate.

As the company’s business is directly related to the financial services industry, a gradual revival in the sector will expand business opportunities for the company.
Read the full analyst report on "IDC"
Zacks Investment Research

Cop Takes Corruption Campaign To Moscow

Robert Amsterdam — Wed, 11 Nov 2009 14:39:23 +0000

RFE/RL follows the movements of former police major and new You Tube star Aleksei Dymovsky, whose campaign against corruption in the police forces has caused a storm of controversy. According to an article by Brian Whitmore, Dymovsky avowed at a...

Mobius: Taking a closer look at Russian markets

Prieur du Plessis — Wed, 11 Nov 2009 06:20:08 +0000

Emerging markets guru Mark Mobius shares his (bullish) ideas on Russia in this post.

Russian inroads to Latin America continue…

Robert Amsterdam — Tue, 10 Nov 2009 23:02:27 +0000

The Spanish newswire EFE is carrying a small story about how Russia has become the second-largest destination for exports from Uruguay after Brazil. From the Russia side of things, this will likely remain below the radar, but it is worth...

DDR to Raise Capital through TALF – Analyst Blog

Zacks Market Commentaries — Tue, 10 Nov 2009 19:52:07 +0000

Developers Diversified Realty Corporation (DDR), a leading real estate investment trust (REIT), is planning to raise $400 million through Term Asset-backed Securities Loan Facility (TALF program). The TALF was created by the Fed to support the issuance of asset-backed securities (ABS) collateralized by student loans, auto loans, credit card loans and loans guaranteed by the Small Business Administration.

The deal is being eagerly anticipated by the $700 billion market for commercial mortgage backed securities (CMBS), which took a severe beating in 2008 from the economic downturn. With the deal, Developers Diversified would be able to raise significant capital to increase its liquidity. By the end of the third quarter of 2009, the company had over $5 billion of consolidated debt.

Developers Diversified specializes in the acquisition, ownership, development, redevelopment, leasing and management of shopping centers and business centers. The company owns and manages 670 retail operating (including joint ventures) and development properties spanning approximately 148 million square feet of real estate in 44 states in the US, and Puerto Rico, Brazil, Russia and Canada.
Read the full analyst report on "DDR"
Zacks Investment Research

Pasko: Dvorishchi ain’t no Cape Town

Robert Amsterdam — Tue, 10 Nov 2009 19:03:05 +0000

The last week of October was a tense time for the bureaucrats at Minprirody, Russia's Ministry for the Protection of the Environment and Natural Resources, and naturally for Minister Yuri Petrovich Trutnev. He went all the way to Cape Town,...

Fluor Matches Estimates – Analyst Blog

Zacks Market Commentaries — Tue, 10 Nov 2009 18:36:45 +0000

Fluor Corporation (FLR) reported third quarter earnings per share of 89 cents, matching the Zacks Consensus Estimate. Revenue declined by 4% to $5.4 billion, which compares with $5.7 billion in the third quarter of 2008. This change was driven primarily by decreases in the Oil & Gas and Power segments. Revenue in both Industrial & Infrastructure and Government segments was up from last year.

While three of the five business segments reported earnings growth over 2008, the Oil & Gas segment profit declined by 8% and the Global Services segment profit was impacted by a $45 million provision relating to a collection issue on a completed paper mill revamp project.

New project awards for the quarter were $2.9 billion, compared with record awards of $8.8 billion a year ago. Consolidated backlog at the end of the quarter was $28 billion. This represents a $2.9 billion increase from the last quarter and a 23% decrease from a year ago. During the quarter, it removed approximately $1.2 billion from backlog for gas processing expansion project in Russia, which has been delayed indefinitely by the client. Including this project, the cancellations and scope reductions for this year now stand at an accumulative $5.3 billion.

Fluor’s Oil & Gas segment reported quarterly revenue of $2.9 billion, down 11% from the third quarter of 2008, while segment profit declined 8% to $189 million. Declines in both revenue and segment profits reflect declining new award and backlog levels in the recent quarters.

Fluor’s Industrial & Infrastructure segment reported a 26% revenue increase to $1.1 billion and a 49% rise in segment profit to $42 million, reflecting increases in both the infrastructure and mining and metals business lines. Segment profit in the third quarter of 2008 included the impact of a $16 million provision relating to the London Connect infrastructure project.

Revenue for the Government segment rose by 47% to $544 million for the reported quarter. Segment profit for the quarter increased 34% to $24 million, compared to $18 million a year ago. Growth in results can primarily be attributed to contributions from the Savannah River project and LOGCAP IV task orders in Afghanistan.

The Global Services segment reported revenue of $529 million, down 11% from the third quarter of last year. Segment profit was $0.5 million compared with $49 million a year ago, with the majority of the decline attributable to a $45 million provision for the collection issue on the completed paper mill revamp project in Louisiana.

Fluor’s Power segment reported revenue of $317 million, down 40% from the third quarter of 2008. While the segment has continued to replenish backlog throughout the year, revenue declined as a large coal-fired project in Texas progressed closer to completion.

Due to collection issue and recent order cancellations, Fluor has lowered its 2009 earnings guidance to a range of $3.75 to $3.90 per share. The current Zacks Consensus Estimate is $3.85.

Cash and equivalents were $2.3 billion, with negligible long-term debt and shareowners’ equity at $3.1 billion.

Fluor Corporation also announced that its board elected David Seaton to the newly created position of chief operating officer, effective immediately. Seaton, 48, will oversee all five of the company's operating business groups, along with Project Operations, a unit formed earlier this year. He joined Fluor in 1984.

Fluor Corporation through its subsidiaries provides engineering, procurement, construction management, and project management services worldwide. Fluor Corporation was founded in 1912 and is headquartered in Irving, Texas. Major competitors include ABB Ltd (ABB) and Foster Wheeler AG (FWLT).
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Pipeline Pact

Robert Amsterdam — Tue, 10 Nov 2009 15:12:28 +0000

This in from the Wall Street Journal on the somewhat disturbing, political dimensions of Russia's Nord Stream pipeline. Approved just last week by Finland and Sweden after ecological concerns were overcome, the project is now ready to get off the...

Heavy-Duty Recycling

Robert Amsterdam — Tue, 10 Nov 2009 13:46:19 +0000

War as a means of securing energy resources is a familiar narrative. Peace as a means of securing energy resources is rather less typical . . . The New York Times today has a wonderfully ironic story on how decommissioned...

Time To Stop Making Excuses

Robert Amsterdam — Tue, 10 Nov 2009 12:47:10 +0000

President Medvedev proclaimed in his recent Der Spiegel interview that there is little difference between the rights record of Russia and that of its European counterparts: 'Our values are the same as yours. I don't see any major differences in...

Energy Blast – Nov 10, 2009

Robert Amsterdam — Tue, 10 Nov 2009 10:15:40 +0000

The US is apparently willing to give Iran more time to decide whether it will accept the UN's recent proposal on uranium enrichment abroad. Bad news for Gazprom - the company's profits fell by 48% in the first six months...

Today in Russian Business – Nov 10, 2009

Robert Amsterdam — Tue, 10 Nov 2009 10:03:52 +0000

First Deputy Prime Minister Igor Shuvalov has pledged not to fire workers from near-insolvent Avtovaz, but to create new subsidiaries employing up to 15,000 people. Auto sales declined by 51% in the first 10 months of 2009, compared with the...

RA’s Daily Russian News Blast – Nov 10, 2009

Robert Amsterdam — Tue, 10 Nov 2009 09:25:36 +0000

TODAY: Youtube policeman faces slander investigation; Omsk students threatened with expulsion; Committee to Protect Journalists urge global attention to threats against media in Russia. Merkel thanks Gorbachev; Medvedev approves new military bill; advocates abolition of death penalty. Delay for Gazprom...

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.

Clenergen Corp. (CRGE.OB) Plans to Have Operations Across the Globe

QualityStocks — Mon, 09 Nov 2009 19:14:15 +0000

Clenergen Corp. is focused on installing, owning and operating small to medium-sized distributed environmental power systems (DEPS) which will sell power to companies, power grids and local municipalities around the world. The company is looking to produce a renewable and sustainable source of electricity through advanced gasification technologies. Clenergen is unique in the biomass energy [...]

Medvedev Defends Putin’s Presidency Ideas

Robert Amsterdam — Mon, 09 Nov 2009 17:06:48 +0000

Here's a quick extract from President Medvedev's interview with Der Spiegel, (the whole of which can be read here) where he discusses Putin's eyebrow-raising comments about how power is allotted in Russia:SPIEGEL: Putin's recent comment about the next presidential election...

Today in Russian Business – Nov 9, 2009

Robert Amsterdam — Mon, 09 Nov 2009 09:48:11 +0000

At the G20 finance summit in St Andrews, the problem of unemployment was raised as well as 'uneven growth'; Russian Finance Minister Alexei Kudrin has said that 'exit strategies' will have to be considered. Kudrin apparently believes that a second...

Valley Forge Composite Technologies, Inc. (VLFY.OB) Gains ‘Momentum’ with Wheel Products

QualityStocks — Fri, 06 Nov 2009 15:05:16 +0000

One company that is starting to gain recognition is Valley Forge Composite Technologies, Inc. With their headquarters in Covington, Kentucky, the Valley Forge has become a leader in Counter-Terrorism technology and has started to made major progress in the sales of their Momentum Wheel Products. Within these lines of products, Valley Forge is [...]

Russia: The Playground Bully?

Robert Amsterdam — Fri, 06 Nov 2009 14:29:02 +0000

Russia's Foreign Minister Sergei Lavrov is apparently 'astonished' to hear that Poland's Foreign Minister, Radoslaw Sikorski, asked NATO and the US to deploy troops in Europe to provide 'some strategic reassurance', on a recent visit to Washington. Since the scrapping...

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...

Today in Russian Business – Nov 6, 2009

Robert Amsterdam — Fri, 06 Nov 2009 09:41:12 +0000

'We will have to take into account this style of dealing with partners in the future, though this scornful approach toward partners mainly affects the Europeans, not us': Putin reacts to the aborted GM deal. Finance Minister Alexei Kudrin...

RA’s Daily Russian News Blast – Nov 6, 2009

Robert Amsterdam — Fri, 06 Nov 2009 09:10:02 +0000

TODAY: Markelov murder suspect reportedly confesses; vengeance a possible motive? Activist abducted in Moscow. Spy chief issues warning on Georgia; Lavrov surprised at Poland soliciting US help. Medvedev reserves army use for emergencies. Luzhkov lays into Abramovich; new vodka...

Censoring The Census

Robert Amsterdam — Thu, 05 Nov 2009 11:50:57 +0000

As many frequent readers of the Russian media would attest, retrieving accurate data pertaining to any sensitive topic can prove difficult. It is thus reassuring to see that Russia has agreed to hold its census next year, at a cost...

Energy Blast – Nov 5, 2009

Robert Amsterdam — Thu, 05 Nov 2009 09:53:21 +0000

Naftogaz Ukrainy has apparently released a statement admitting that a 'dire economic situation' means that the company is struggling to pay its October gas bill. The Moscow Times reports however that Ukrainian Energy Minister Yury Prodan has assured Russia that...

Teva Reports Strong Quarter – Analyst Blog

Zacks Market Commentaries — Wed, 04 Nov 2009 20:30:40 +0000

Teva Pharmaceutical Industries Ltd. (TEVA) reported earnings of 89 cents in the third quarter of 2009, up 16% from the year-ago period and a cent above the Zacks Consensus Estimate. Strong sales of Copaxone and in the respiratory business helped drive earnings in the reported quarter.

Net sales increased 25% to $3.55 billion, with the Barr acquisition contributing to sales across different geographical segments. The strengthening U.S. dollar adversely impacted net sales by $160 million or 6%.

Revenue performance across key business segments was mixed. While the Pharmaceuticals Sales segment posted growth of 27% with revenues coming in at $3.4 billion, the active pharmaceutical ingredients (API) segment reported an 8% decline in growth with sales coming in at $136 million.

Pharmaceutical segment sales were driven by strong performances in the North American, European and International segments. The launch of generic versions of Ortho Tri-Cyclen Lo and Eloxatin and continued strong sales from existing products like generic versions of Adderall XR, Yasmin and Protonix helped North America sales grow 34% to $2,164 million.

Meanwhile, key branded product Copaxone continued to impress with global in-market sales increasing 38% to $776 million. While U.S. in-market sales increased 53% to $540 million, ex-U.S. in-market sales totaled $236 million, up 12%. Unfortunately, Mylan (MYL) is looking to launch a generic version of Copaxone.

Other products/segments that contributed to growth were Azilect at $64 million, up 39%, women’s health business at $103 million, up 10%, and the global respiratory business at $243 million, up 37%.

We expect the North American pharmaceutical segment to continue posting strong sales going forward. The company has a strong pipeline of products, and as of October 23, 2009 had 210 abbreviated new drug applications (ANDAs) awaiting U.S. Food and Drug Administration (FDA) approval. These represent more than $113 billion in branded sales. About 136 of these ANDAs are paragraph IV challenges including approximately 83 first to file opportunities representing more than $54 billion in branded sales. The launch of Effexor XR in July 2010 should help drive sales.

Pharmaceutical sales in Europe increased 15% to $787 million, mainly due to strong generic sales in Germany, Spain and Poland. International pharmaceutical sales grew 14% to $463 million, driven by increased sales in Russia, Croatia, Israel and certain countries in Latin America.

Gross margin improved to 58.2% (up from 54% in the year-ago period) thanks to higher contributions from innovative and branded products, including Copaxone, ProAir, Azilect and women's health products, and improved gross margins of the U.S. generics base business.

Research & Development expense remained relatively unchanged at $195 million. We expect R&D expense to increase as the company delivers on its plans to double its generic R&D output from its 2007 level by 2012. Teva also intends to expand R&D activity in biogenerics and its innovative and branded franchises.

Selling and Marketing (S&M) expenditures (excluding amortization of purchased intangible assets) increased 36.5% to $662 million mainly due to higher royalty payments on higher Copaxone revenues and the addition of Barr's business which is characterized by higher S&M expenses.

General and Administrative (G&A) expenditures totaled $212 million, or 6.0% of sales, for the third quarter, compared with $156 million, or 5.5% of sales, in the comparable quarter of 2008.

Based on its performance in the first nine months of 2009, Teva raised the lower end of its previously issued earnings guidance by 10 cents. The company now expects earnings in the range of $3.30 to $3.40, up from the previous range of $3.20 to $3.40. For 2010, the company expects earnings in the range of $4.40 and $4.60.
Read the full analyst report on "TEVA"
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GM U-Turn Startles

Robert Amsterdam — Wed, 04 Nov 2009 14:34:26 +0000

It felt as if negotiations would go on for an eternity, with months of stalling: search this site for 'Opel bid' and the stories of stops and starts come thick and fast. Now, just as it seemed that the deal...

Dangers Of Dissent

Robert Amsterdam — Wed, 04 Nov 2009 13:27:29 +0000

A Dissenter's march in Russia wouldn't be a Dissenter's march if it didn't end in large-scale detentions. Saturday night's march was no different, with up to 50 protesters allegedly held. Thanks to la Russophobe, for highlighting this link to activist...

Gas Crisis Cooling Down?

Robert Amsterdam — Wed, 04 Nov 2009 13:01:38 +0000

Winter is upon us, and the last couple of days have seen rumors rumbling about the possibility of another gas interruption - due to payment problems at Ukraine's end. It is alleged that Ukrainian Prime Minister Yulia Tymoshenko alerted Vladimir...

Energy Blast – Nov 4, 2009

Robert Amsterdam — Wed, 04 Nov 2009 10:09:38 +0000

Russia is planning to contribute $6.5 million to the IAEA Nuclear Security Fund in 2010-2015, the fund which supports, among others things, the use of nuclear security measures to counter nuclear terrorism. Satellite photos apparently suggest that Iran has increased...

Today in Russian Business – Nov 4, 2009

Robert Amsterdam — Wed, 04 Nov 2009 09:57:40 +0000

After months of painstaking negotiations, GM has scrapped the Opel sale on the basis that it was 'no longer in the best interests of GM, now that the environment for car sales has started to improve', reports the Independent. The...

India-IMF Deal: Great for Gold?

Frank Holmes — Wed, 04 Nov 2009 06:00:00 +0000

Indiarsquo;s deal to buy 200 metric tons (6.4 million troy ounces) of gold from the International Monetary Fund is a huge deal ndash; not just the fact that the New Delhi government is handing over $6.7 billion for the metal, but what it may mean for gold going forward. India is making a bullish call on gold. The supply of gold continues to decline ndash; the biggest supply is from governments selling their gold to pay for social programs. The IMF is a classic case of this. Whats particularly interesting in this case is that the buyer is a developing economy. I see this as another sign of the wealth shift away from the developed markets of North America and Western Europe toward the emerging world. China has also been a major buyer ndash; its gold reserves have nearly doubled since the start of 2003, when the price was about $345 an ounce. Another thing about India is that its government wont be criticized for buying gold because as a nation, Indians have a cultural affinity toward it. Its how they store their wealth, and they can wear it as jewelry. If the U.S. government went out and spent nearly $7 billion for the IMFrsquo;s gold, there would be no end to the howling. But in India, the citizens say its a good move because they are buying gold, too ndash; they believe in it. The presence of a big bullish buyer may create a big bullish buzz for gold. Wersquo;re seeing it today ndash; gold is nudging close to $1,100 an ounce ndash; and history suggests it may last a while. Around this time in 2005, for example, Russia announced that it was doubling its gold holdings from 5 to 10 percent of its reserves. At that time, gold was selling for about $490 an ounce. A year later, the price was up 30 percent. Of course, Russian purchases werenrsquo;t the only thing that drove up gold ndash; back then the dollar was dropping, federal deficits were colossal, markets were volatile and investors faced negative real interest rates.nbsp; We have the same conditions now, but on an even greater scale following the credit crisis, steep recession and the massive economic stimulus programs created around the world. These factors alone tend to be positive for gold and gold investing ndash; adding a vote of confidence by a serious buyer like India may make a good situation for gold even better. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. #09-773

Will Russia Deliver On Iran?

Robert Amsterdam — Tue, 03 Nov 2009 12:28:09 +0000

Today's POLITICUS in the New York Times tries to fathom the extent to which NATO and the Western powers really trust Russia to cooperate in putting pressure on Iran, regarding its nuclear programme. Whilst certain recent moves by the West...

Energy Blast – Nov 3, 2009

Robert Amsterdam — Tue, 03 Nov 2009 10:08:46 +0000

Russia has reached a new record high in monthly oil production, at more than ten million barrels a day in October, maintaining its position as the world's biggest oil producer. Rosneft is at the forefront of the increase with production...

Today in Russian Business – Nov 3, 2009

Robert Amsterdam — Tue, 03 Nov 2009 10:01:35 +0000

Jason Bush in Forbes suggests that Russia's recovery may be buoyant: 'while the Russian government is still cautiously forecasting 2 percent GDP growth in 2010, many independent economists are already predicting growth of as much as 5 percent next...

RA’s Daily Russian News Blast – Nov 3, 2009

Robert Amsterdam — Tue, 03 Nov 2009 09:08:54 +0000

TODAY: Opposition activist torture claims; Miliband leaves with no breakthrough regarding diplomatic concerns; meets with rights activists; Putin and Medvedev popularity waning?; President in need of own power structure to realize reforms; Stalin resurrection an identity issue; Gorbachev on...

Miliband in Moscow and the need to link Russia-UK relations with human rights

Robert Amsterdam — Mon, 02 Nov 2009 22:53:34 +0000

Bob has an opinion article in today's edition of the Guardian stressing the importance of linking human rights with foreign relations during David Miliband's visit to Russia this week, and elsewhere in the same paper, Mikhail Khodorkovsky's mother has issued...

AGCO’s Outlook Remains Weak – Analyst Blog

Zacks Market Commentaries — Mon, 02 Nov 2009 22:27:58 +0000

Last week, AGCO Corp. (AGCO) reported third-quarter results. The company posted earnings of 13 cents per share, compared $1.01 per share in the prior-year quarter. The significant decline in quarterly earnings was driven by lower sales volumes, weaker product mix and the negative impact of currency translation.

Net sales in the quarter were $1,403.7 million, down 32.7% compared to the third quarter of 2008. AGCO is experiencing soft demand conditions in most of its markets. Lower commodity prices, along with expectations of decreased farm income, are hampering investments in farm equipment around the world. AGCO is aggressively cutting production in order to reduce its own and dealer’s inventories.

Sales in North America were down 31.9% on a constant currency basis due to weaker sales of low horsepower tractors and hay products, as well as reduction in dealer inventory. Unit retail sales of lower horsepower tractors were down due to weakness in the landscaping, residential construction and dairy sectors. This weakness is expected to continue for the remainder of the year.

In the EAME region, quarterly sales were down 30.3%, excluding the impact of foreign currency translation, due to lower volumes in Eastern Europe, Russia, France, Germany, Finland and Scandinavia. The company experienced major demand weakness from the diary and livestock sectors.

Sales from the South American region were down 20.5% (excluding foreign currency exchange impact) due to due to dry weather conditions and the impact of tightened credit on planted acreage and car production. The company saw improved demand conditions in Brazil during the quarter as the Brazilian government’s special financing plan for small farms continued to stimulate sales of lower horsepower tractors.

AGCO expects full year revenue in the range of $6.4 - $6.6 billion, compared to $8.4 billion in 2008. The revenue forecast includes unfavorable currency translation impacts of approximately $500 - $600 million. The company anticipates full-year EPS in the range of $1.30 - $1.50. We concur with the company that the demand for farm equipment is not expected to recover in the near-term.

We maintain an Underperform rating on the stock.
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Stonewalling Progress

Robert Amsterdam — Mon, 02 Nov 2009 20:19:11 +0000

Mikhael Gorbachev has penned an article in the New York Times reflecting on how the period since the fall of the Berlin Wall (the 20th anniversary of which will be celebrated on Friday) has not necessarily heralded a less distrustful...

Grigory Pasko: Fabricated charges of espionage against the ecologist Andrey Zatoka

Robert Amsterdam — Mon, 02 Nov 2009 17:03:20 +0000

An appeal from Russian citizen and ecologist Andrey Zatoka, residing in Dashoguz, Turkmenistan, to you, to me, to our dear readers, to anyone listening. I, Andrey Zatoka, ask for your help with regard to law enforcement agencies that are repressing...

Are Higher Prices the ‘New Normal’ for Oil?

Frank Holmes — Mon, 02 Nov 2009 06:00:00 +0000

This analysis is from Evan Smith and Brian Hicks, co-managers of the Global Resources Fund (PSPFX). Oil prices have bounced more than 150 percent off of December 2008 lows but inventory levels remain at historically high levels despite a healing global economy. However, Goldman Sachs says robust 2010 oil demand growth will deplete these inventories over the next 12-to-18 months and diminishing production rates in key areas around the world will create a supply/demand imbalance. The above chart shows the decline in production from the worldrsquo;s top 230 projects. After peaking in 2009, production from these projects is set to fall for the next several years. Excluding OPEC countries (right chart), the decline rates quadruple from 2007 to 2012 (est). Over that time period, non-OPEC production is expected to fall by 2.5 million barrels per day. Only Brazil, Canada and the former countries of the Soviet Union are expected to see production growth. One of the largest contributing factors for this is chronic decline rates from some of the worldrsquo;s top mature fields. Mexicorsquo;s Cantarell field, one of the largest oil fields in the world, produced 30 percent less oil in 2008 than it did in 2007mdash;a trend thatrsquo;s expected to continue. Norway, the worldrsquo;s 11th largest oil producer in 2008, saw its oil production peak in 2001 and is down 27 percent since. Another big producer, Venezuelarsquo;s state-owned oil company PdVSA has seen annual decline rates of more than 25 percent in certain fields according to the Energy Information Administration (EIA). Adding to the dilemma, many countries without decline-rate issues have been holding out production increases until projects become more cost effective; this is why we recently saw Russia overtake Saudi Arabia as the worldrsquo;s largest oil producer. The Saudis have been content to sit on the sidelines while awaiting the return of higher prices. The same goes for other OPEC countries; PIRA, an oil-industry consultant, says the cost of oil will have to rise above $80 per barrel in order for the cartel to increase production. With oil prices currently hovering around that $80 level, OPEC officials have recently hinted that production increases arenrsquo;t off the table for the cartelrsquo;s upcoming December meeting. Even if we see a production increase out of OPEC, decline rates from maturing fields and high barriers of entry to bring new fields online should keep the supply/demand balance tight for years to come. Brian Hicks and Evan Smith will be co-hosting a free webcast event with U.S. Global Investors CEO Frank Holmes titled ldquo;Whatrsquo;s Driving Energy?rdquo; on Tuesday, November 3 at 12:00 PM ET. The presenters will be detailing the critical factors supporting long-term energy demand. Click Here to Register 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. Because the Global Resources Fund concentrates its investments in a specific industry, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. #09-762

Too big to fail, is still heavy in the derivative market, and primed for a gigantic collapse.

Dr. Stock Pick — Fri, 30 Oct 2009 18:02:13 +0000

Dr Stock Pick HOT News & Alerts! _______________________________________ FREE Daily Stock Alerts From DrStockPick.com _______________________________________ Friday October 30, 2009 DrStockPick.com Article ************************************************************** Too big to fail, is still heavy in the derivative market, and primed for a gigantic collapse. Congress needs a chimney sweep to clean the soot from the smoke they’ve been blowing. Our do nothing congress; well we can’t really say do [...]

British Counsel

Robert Amsterdam — Fri, 30 Oct 2009 11:17:05 +0000

British-Russian relations have suffered greatly in recent years, with a series of incidents souring relations: the Alexander Litvinenko scandal, the British Council restrictions, diplomatic exits and various extradition rows. Foreign Secretary David Milliband will visit Russia next week, the first...

Energy Blast – Oct 30, 2009

Robert Amsterdam — Fri, 30 Oct 2009 09:28:07 +0000

Iran is 'unwilling to accept' a deal that would see most of its enriched uranium shipped abroad. 'Tehran is obviously probing to see whether President Obama can play hardball or whether he can be played.' Russia will share the 'prize'...

Colgate Reports Modest Earnings – Analyst Blog

Zacks Market Commentaries — Thu, 29 Oct 2009 21:23:42 +0000

Colgate Palmolive Company (CL) reported results for the third quarter of 2009 with earnings of $1.12 per share, which was a penny above the Zacks Consensus Estimate of $1.11. Earnings were up 13.1% year-over-year, driven by effective price implementation and ongoing aggressive cost savings program.

Net sales for the quarter were flat year-over-year declining marginally by 0.3% to $3.9 billion as unit volume increased 1.5% and pricing contributed 5.0%. This was partially offset by negative foreign exchange translation of 6.5%. Organic sales (excluding foreign exchange, acquisitions and divestitures) increased 7.0% in the quarter.

North American sales increased 3.0% driven by 1.5% pricing and 5.0% unit volume growth, partially offset by 0.5% negative currency translations. In Latin America, sales grew 5.0% as unit volume increased 3.0% driven by solid gains in Venezuela which were partially offset by an 11.0% negative foreign exchange impact.

In Europe/South Pacific, sales declined 5.5%; however, unit volume increased 2.5% as volume gains in U.K. and Greece, were more than offset by the declines in France, Germany the U.K., Denmark, Greece, Portugal and the GABA business. Sales in Greater Asia/Africa declined 3.0% while unit volume declined 2.5% as volume gains in India, Thailand and Turkey were more than offset by declines in Russia, the Philippines, South Africa and the Ukraine.

Sales in the Hill’s Pet Nutrition business grew 1.5%, however unit volume declined 2.5% and foreign exchange had a negative impact of 0.5%, which was partially offset by a 4.5% increase in pricing. Demand was strong for existing products such as Science Diet Culinary Creations feline products and the expanded line of Science Diet Simple Essentials Treats Canine.

Gross margins expanded 313 basis points (bps) to 59.2% from 56.1% in the prior-year period driven by benefits of restructuring activities and pricing. The operating margin also increased 333 bps to 22.2% versus 19.8% in the prior-year quarter, driven by a 30 bps decline in advertising. Capital expenditures for the first nine months of 2009 were $347 million.

Year-to-date net cash provided by operations increased 34% to $23.7 billion, due to efficient working capital management, especially a reduction in receivable days outstanding. The company has a debt-to-total-capitalization ratio of 52.5%.

Concurrent with the earnings release, management provided the outlook for the remainder of fiscal 2009. Management expects continued improvement in gross margins for the rest of the year, due to moderation in commodity costs and benefits from pricing and cost reduction programs.
Read the full analyst report on "CL"
Zacks Investment Research

Who Needs Friends . . .

Robert Amsterdam — Thu, 29 Oct 2009 14:56:45 +0000

On RFE/RL, Irina Severin ponders the reasons why politicians in ex-Soviet states are so willing to solicit Russian friendliness, when there may be little to thank the Kremlin for in the long-run. Severin examines Moldova, where ex-President Vladimir Voronin was...

AIDS And Foreign Policy

Robert Amsterdam — Thu, 29 Oct 2009 14:32:28 +0000

AIDS experts are aghast to see that rates of HIV in Russia have doubled in the past 8 years, reports the Washington Post. Russia's 'healthy lifestyles' program and advocacy of abstinence have not been effective in combating the problem,...

Admin Test For Academics

Robert Amsterdam — Thu, 29 Oct 2009 10:17:15 +0000

In the New York Times Ellen Barry writes about the outcry among academics St Peterbsurg University (alma mater of Putin and Medvedev) who are concerned about new legislation that may require their work to be submitted to the authorities before...