S&P futures vs fair value: -4.8. Nasdaq futures vs fair value: -8.5.
Futures point to a negative opening due to some worrisome news from the financial sector. Bank of America (BAC) pushed the futures market into negative territory after the company’s earnings fell well short of the consensus estimate. Washington Mutual (WM) and E*Trade (ETFC) missing their earnings estimates is also weighing on the market as is news that the SEC has opened an informal investigation on the stock sales of Countrywide’s (CFC) CEO.
CTXS Citrix Systems: Color on quarter (41.77 ) -Update-
Friedman Billings notes CTXS posted a solid Sept quarter across the board, beating the Street on both the top and bottom line. While CTXS got a great report card for its Sept quarter, they believe the co will be in the “investor detention hall” this morning due to some initial commentary it made around 2008 operating margins, which are now expected to be in the “low 20s” vs. Street expectations in the mid-20 range, due mainly to higher expenses related to the XenSource acquisition. They think this dynamiccould spook some investors that may have to wait until 2009 to see operating margins return to more normalized levels. Firm remains on the sidelines on the name given the neutral risk/reward profile at current levels. Firm raises their tgt from $36 to $42… Jefferies notes that CTXS reported a strong Q3 and guided organic EPS up for December to $0.45–0.46. Looking into 2008, the firm sees several catalysts: continued momentum in PS, the integration and ramping of XenSource, and the debut of Windows Server 2008. The firm raises their tgt to $47 from $42… Additionally, CTXS was downgraded to Hold at Needham.
NE Noble Corp: Reports another strong quarter - Calyon (49.84 )
Calyon notes NE reported strong 3Q07 results with EPS of $1.18, which included a $0.04 one-time charge related to closure of businesses and an ongoing investigation in Nigeria. Firm believes that the deepwater drillers will outperform the market and the strong earnings for NE are a good start to the earnings season. They continue to believe that offshore drilling markets will remain tight, especially internationally. This is expected to drive sharp earnings growth for the offshore drillers in the future.
NYT New York Times: Dumping of stock by Morgan Stanley could reinforce negative instor sentiment towards newspapers - WSJ (18.48 )WSJ reports when Rupert Murdoch made a $5 bln offer for DJ in April, it was encouraging news for one big shareholder in Dow Jones’s fellow family-controlled rival, New York Times. This week, Morgan Stanley dumped its fund’s 7.2% stake in New York Times after NYT’s board didn’t take any action. This might well reinforce negative investor sentiment toward the newspaper industry, which is seeing readers and advertisers flee to the Web. But it also highlights the obstacles for outside shareholders in winning change at family-controlled publishing cos, analysts say. “Trying to be an activist shareholder in the NYT is a futile effort, period,” said Edward Atorino, a media analyst at Benchmark Co. It is not known who bought the block of stock and it is possible it fell into the hands of a buyer friendly to the Ochs-Sulzberger family control. It is also possible that Times Chairman Arthur Sulzberger Jr. will pursue corporate-governance changes at a more-measured pace now that a high-profile critic has taken himself out of play. The sale has also led some investors to question whether the Times can sustain itself as a public co or if it will be forced to explore alternative structures such as taking the company private.
SPWR Sunpower beats by $0.05, beats on revs; guides Q4 EPS in-line, revs in-line; guides FY07 EPS above consensus, revs above consensus; guides FY08 EPS in-line, revs in-line
Reports Q3 (Sep) earnings of $0.33 per share, excluding non-recurring items, $0.05 better than the Reuters Estimates consensus of $0.28; revenues rose 258.8% year/year to $234.3 mln vs the $211.1 mln consensus. Co reports gross margins of 20.4%, street expectations were for 21.3%; Co issues in-line guidance for Q4, sees EPS of $0.33-0.37 vs. $0.36 consensus; sees Q4 revs of $210-220 mln vs. $217.20 mln consensus; expects gross margins in the range of 24-25%. Co issues upside guidance for FY07, sees EPS of $1.20-1.24 vs. $1.17 consensus; sees FY07 revs of $760-770 mln vs. $744.89 mln consensus. Co issues in-line guidance for FY08, sees EPS of $1.90-2.05 vs. $2.00 consensus; sees FY08 revs of $1.1-1.25 bln vs. $1.16 bln consensus.
CY Cypress Semi beats by $0.05, beats on revs (30.91 )
Reports Q3 (Sep) earnings of $0.26 per share, excluding non-recurring items, $0.05 better than the Reuters Estimates consensus of $0.21; revenues rose 54.9% year/year to $449.5 mln vs the $412 mln consensus.
STJ St. Jude Medical beats by $0.01, reports revs in-line; guides Q4 EPS in-line (45.55 )
Reports Q3 (Sep) earnings of $0.46 per share, $0.01 better than the Reuters Estimates consensus of $0.45; revenues rose 12.9% year/year to $927 mln vs the $924.9 mln consensus. Co issues in-line guidance for Q4, sees EPS of $0.47-0.48 vs. $0.48 consensus.
UMPQ Umpqua Holdings reports Q3 EPS of $0.22 vs $0.39 Reuters consensus (18.04 )
Co reports Q3 EPS of $0.22 vs $0.39 Reuters consensus, citing multiple items, including an increase in non-performing loans to $68.9 mln, or 1.13% of total loans, related primarily to the residential development portfolio in their northern California operation. “During this past quarter, the California housing down-turn negatively impacted Umpqua. I have instructed our credit professionals to take an aggressive posture in identifying, reserving for, and resolving problem loans. Accordingly, we believe the third quarter provision for loan losses will be adequate for subsequent charge-offs related to these non-performing assets,” During the third quarter, the Company experienced an increase in non-performing assets related primarily to deterioration in the northern California residential development market. Non-performing loans increased $21 mln during the quarter, to $68.9 mln. Non-performing assets increased $31 mln during the quarter, to $79.2 mln. Subsequent to quarter end, the Company sold $10 mln of other real estate owned with no loss recognized
ELOS Syneron Medical issues downside Q3 and Q4 guidance (22.35 )
Co sees Q3 revs of approx $33 mln vs $36.2 mln consensus, and net profit of $7-8 mln. Co sees Q4 revs of $36-38 mln, vs $40.2 mln consensus. The revenue deficit was primarily due to manufacturing delays in the new VelaShape System and Matrix IR applicator. As a result, the launch of the VelaShape System and Matrix IR applicator were delayed by approx four weeks and occurred only towards the end of the period.
EXM Excel Maritime Carriers tgt raised to $84 at Cantor (75.75 )
Cantor raises their tgt on EXM to $84 from $68. Due to higher-than-expected dry bulk rates, firm is raising their 2008 spot rate forecast. Firm now expects EXM to earn $57,500 per vessel/day and $45,750 per vessel/day for its Panamax and Handymax fleet, respectively (up from $50,000 and $37,500 per vessel/day, respectively). Firm notes co has been able to sign attractive short-term time charters at significantly higher rates, highlighting that the co’s older vessels are no longer receiving a discount in the market. Additionally, the co’s significant spot exposure should drive strong earnings and cash flow growth.
SNE Sony slashes price of PlayStation 3 - WSJ (46.60 ) -Update-
WSJ reports the co is slashing the starting price for PlayStation 3 consoles in the U.S. by $100, its latest attempt to boost slow sales of the machine in time for the holiday season. The move, widely expected after similar actions in Japan and Europe, introduces a new PlayStation 3 model with a 40-gigabyte hard drive for $399. That compares with an earlier entry-level price of $499 on a model with 60 gigabytes of storage capacity. Sony in July lowered the price on the 60-gigabyte model from $599.
ETFC E*TRADE: Further deterioration in balance sheet; tgt cut to $17 - FBR (12.47 )
Friedman Billings says with the further deterioration in the balance sheet since the Sept 17 pre-announcement, firm has less confidence in mgmt’s credit outlook and are incorporating a significantly weaker outlook for 2008. Nevertheless, ETFC now trades at 8.0x their revised 2008 est and 6.8x firm’s 4Q08 run-rate forecast. To reflect their revised credit outlook next year, firm lowers their 12-month target by $5 to $17 per share, or 11.0x their est. Firm believes their target reflects the value of the underlying broker and assigns no value to the bank operations. Firm also notes co reported $0.14 per share loss for 3Q07, compared to FBR’s estimate of $0.08 and consensus of $0.13. The loss for the quarter primarily stemmed from an acceleration of securities impairments totaling $197 million pre-tax, instead of the $150 million charge expected over the 3Q07-1Q08 period.
Cheyne Finance halts payment - FT
FT reports Cheyne Finance has become the first structured investment vehicle to stop repaying its short-term debt after the administrator of the troubled fund won court backing to declare it in breach of insolvency tests. The move came as Cheyne Finance entered final negotiations with four banks bidding for its assets, which stood at $6.6 bln at the start of last month. The hold on repayments of the SIV’s commercial paper will hit short-term debt mkts just as they had begun to show some signs of recovery from the ravages of the summer credit squeeze. But Neville Kahn, a partner at Deloitte, the administrator, said the insolvency would not force it to sell assets at firesale prices and would make it easier to push through a sale. Mr Kahn said it was wrong to assume the holders of mezzanine debt — the lowest-rated tranche — would be wiped out. That suggests holders of the top-rated commercial paper will be repaid in full, in spite of the insolvency.
Cantor raises their tgts on select dry bulk shippers
Cantor raises their tgts on dry bulk shippers, citing stronger-than-expected dry bulk rates. The firm raises their EGLE tgt to $38 from $32, EXM tgt to $84 from $68, GNK tgt to $86 from $75, NM tgt to $18 from $17, OCNF tgt to $35 from $31, PRGN tgt to $32 from $28.
LOGI Logitech Intl SA reports Q2 revs $595 mln vs $558.5 mln (29.49 )
Co doesn’t report EPS due to reviewing the fair value of its short-term investments as of September 30, 2007. Operating income was $80.4 million, up 54 percent from $52.2 million for the same quarter a year ago. Gross margin was 36.3 percent, compared to 34.5 percent in Q2 of FY 2007 - a year-over-year improvement of 180 basis points and equal to the all-time high for the Company. Cash flow from operations was $103 million, a year-over-year improvement of $80 million. Co reaffirmed FY08 revs growth of 15%, which equates to ~$2.38 bln vs $2.36 bln Reuters consensus. Co increased its year-over-year operating income growth goal from 15% to 20%. FY 2008 gross margin is expected to be above the high end of the Co’s long-term target range of 32-34%.
LSTR Landstar System reports EPS in-line, misses on revs; guides Q4 EPS below consensus (42.50 )
Reports Q3 (Sep) earnings of $0.54 per share, in-line with the Reuters Estimates consensus of $0.54; revenues fell 2.2% year/year to $634.8 mln vs the $646.7 mln consensus. Co issues downside guidance for Q4, sees EPS of $0.47-0.52 vs. $0.55 consensus; co sees revs to increase in the low to mid single digits q/q.
TMA Thornburg Mortg upgraded to Market Perform from Underperform at Keefe Bruyette (10.04 )
RX IMS Health: Hearing downgraded to sell from neutral at tier 1 firm (29.56 )
CIBC downgrades select residential companies
CIBC is revising their estimates for the residential companies sayng their latest market model assumes a decline of 24% in housing starts in 2007, and a further decline of 13% in 2008. They expect the recent mortgage related slowdown to start impacting the industry negatively in 3Q07/4Q07. Weaker revenue environment implies higher competitive pressure resulting in higher gross margin compression than they were assuming before. The firm believes stocks of building products companies will continue to be pressured over the next couple of quarters as investor expectations adjust to lower earnings in ‘08. ‘08 The firm is downgrading BECN, BLG and BXC to Sector Perform from Outperform as headwinds created by weakening res. construction, declining estimates & significant leverage will restrict upside in BLG & BXC. BECN is exposed to potential slowdown in non-res. construction.
CX CEMEX S.A. downgraded to Neutral at Credit Suisse -tgt cut to $39 from $43 (32.33 )
Credit Suisse downgrades CX to Neutral from Outperform and cuts their tgt to $39 from $43 based on an unfavorable risk-reward relationship. The firm says the combination of a challenging operating environment ahead, especially in the US, and the lower expected results from Rinker operations; high-investment phase, and further margin pressure from higher energy and distribution costs have led them to revise their forecasts downwards.
Miscellaneous: Jefferies initiates Libbey (LBY 17.50) with a Buy and a $27 tgt saying they believe the riskiest part of Libbey’s current transformation is over… Jefferies initiates Chattem (CHTT 72.54) with a Buy and $90 tgt saying EPS growth at Chattem is accelerating, driven by: 1) EPS accretion and top-line growth acceleration, 2) continued strong trends at the legacy brands of Gold Bond and Icy Hot, and 3) easy comparisons on top of a disappointing new product launch last year… Jefferies initiates Melco PBL Entertainment (MPEL 18.15) with a Buy and $21 tgt saying MPEL is the only pure play (in the U.S. stock market) in the rapidly expanding and lucrative Macau market… Jefferies inititiates Helen of Troy (HELE 18.17) with a Hold and $21 tgt saying HELE should benefit from: 1) solid top-line growth, 2) operating leverage from recent infrastructure investments, 3) large free cash flow and 4) additional acquisitions.
J.P Morgan initiates select Oil and Gas stocks
J.P Morgan initiates select oil and gas stocks, the firm initiates MWE and EROC with Overweights. They also initiates TPP, KGS, KMP, RGNC, and PAA with Neutrals.
BBW Build-A-Bear Workshop misses by $0.03, misses on revs (17.13 )
Reports Q3 (Sep) earnings of $0.15 per share, $0.03 worse than the Reuters Estimates consensus of $0.18; revenues rose 9.8% year/year to $109.8 mln vs the $113.2 mln consensus. As announced on June 28, 2007, the co is presently conducting a review of strategic alternatives, and while this process is underway, will not provide earnings guidance nor will it update or comment further upon the earnings guidance provided prior to the review. The co does not expect to disclose further developments regarding the process until the board’s review of strategic alternatives is complete.
MSTR MicroStrategy: Broadpoint Capital says their channel checks at several Home Depot (HD) stores from different regions of the country indicate that, (85.65 )
Broadpoint Capital notes that while contacts previously suggested MSTR had experienced some ongoing headwinds as of mid-quarter, they believe the co was subsequently able to make modest incremental progress at closing transactions that slipped out of 2Q, and may have closed a fairly large transaction internationally. Therefore, it is possible MSTR’s 3Q results will show sequential improvement for its core Business Intelligence results. While firm sees potential for core BI results to show sequential improvement, it is unclear whether the sudden surge in 2Q rev from subsidiary Alarm.com is sustainable into 3Q. Firm would expect a sequential decline in Alarm.com rev.
BSC Bear Stearns: Citic says it isn’t currently seeking a stake in the co - WSJ (120.41 )
WSJ reports China’s Citic Bank said it hasn’t talked with the co about buying a stake in the U.S. investment firm and won’t undertake such an effort in the next three months. “So far, the company doesn’t have any plan to buy a stake in Bear Stearns and the company promised that it won’t plan such an event in the next three months,” Citic Bank said in a statement to investors on the Shanghai Stock Exchange, where it is listed.
MTG MGIC Investment tgt cut to $27 at FBR; looking for a bottom in ‘09 (26.16 )
Friedman Billings is cutting their tgt on MTG to $27 from $35 and lowering their 2008 EPS est from a positive $3.50 to a negative $4.30 give the extraordinary ramp in loss experience. Firm is now forecasting incurred losses for 2008 at $1.9 bln vs their previous $1.2 bln outlook. Firm is slightly higher than mgmt’s outlook on ‘08 paid claims at $1.7 bln (vs guidance of $1.2 to $1.5 bln) as they are expecting 2007 vintage loans to perform at least as badly as 2006. Firm sees very few positive catalysts for the stock while industry datapoints should remain negative through 2008 at least.
ALL Allstate: Results fall short of consensus - Calyon (57.58 )
Calyon notes ALL reported Q3 operating income of $1.54 per share, shy of the $1.69 consensus and beneath their $1.93 number. Firm notes ALL’s miss relative to consensus is due to unfavorable loss reserve development related to old environmental claims and 2005 hurricane losses that together amounted to $0.14 per share after tax. Firm had counted on seeing favorable development elsewhere that did not materialize. Catastrophe losses of $343 mln accounted for 5 loss ratio points, which is close to “normal.” Firm continues to see an aggressive push to maximize capital utilization. The co can do more as it has room to further increase balance sheet leverage as their debt to total capital ratio is only 20.
THQI THQ Inc: Nollenberger lowering ests, but becoming more positive (24.12 )
Nollenberger says its not secret that Juiced 2 and Stuntman have gotten off to a disappointing start, being met with poor reviews and weak initial sell-through at retail. Importantly though, this is not new news—the stock is already down 27% YTD and sitting near a 52-week low. Firm believe THQI will manage to meet expectations for the Sept quarter. Going forward, however, they believe weak re-orders will force mgmt to lower guidance for FY08, which should create a floor for the stock. Firm is taking down Their numbers for FY08, and conservatively ratcheting down FY09 as well. Even off of these lower numbers, THQI is now trading at just 16x forward earnings. They believe the stock is oversold at current levels and represents a compelling opportunity for patient, long-term investors.
JNS Janus is hot, but raising red flags - WSJ (33.07 )
WSJ reports big, fast-growing stocks have come back into vogue this year. That has led many investors to snap up shares of the co and the mutual-fund co’s stock is looking pricey right now. Janus has been expanding analyst research and diversifying fund holdings and the way it sells its funds. This has helped its share price surge. The run-up has made the stock look like one of the frothy fast growers Janus has long specialized in scooping up. Janus, which has about $200 bln in assets, is trading at a rich 41 times 12-month trailing earnings, compared with about 20 times earnings for its asset-mgmt peer group. This is leaving many analysts hesitant to recommend the stock. That strong performance is the reason the second quarter was the first in six years in which the co recorded positive net inflows for its Janus family funds. Its aggressive stock buybacks also have helped lift its price, with 45 mln shares repurchased over the past six quarters, or an 18% reduction in shares outstanding. Other issues, such as a weaker performance in the company’s big quantitative-investing subsidiary, should make investors proceed with caution. Departures and other staff changes have been another issue.
Credit Suisse initiates coverage of the home healthcare sector with a Market Weight
Credit Suisse initiates coverage of the home healthcare sector with a Market Weight saying they believe the home health market is well positioned as the low-cost setting along the postacute continuum of care. They expect growth in the homecare market to outpace overall healthcare spending over the next several years, driven by several underlying macro factors. The firm says their positive outlook is tempered by a challenging Medicare reimbursement backdrop. The firm is initiating LHC Group (LHCG) with an Outperform and a $26 tgt; Amedisys (AMED) with a Neutral and a $38 tgt; and Gentiva (GTIV) with a Neutral rating and a $21 tgt.
Upgrades: Credit Suisse upgrades Mattel (MAT 21.67) to Outperform from Neutral… Merrill upgrades Palm (PALM 15.89) to Buy from Neutral… Merrill upgrades Texas Capital (TCBI 20.74) to Neutral from Sell… Merrill upgrades Repsol (REP 36.39) to Buy from Neutral. Downgrades: Bear Stearns downgrades EW Scripps (SSP 45.73) to Peer Perform from Outperform… Bear Stearns downgrades Lamar Advertising (LAMR 52.04) and Clear Channel (CCO 26.50) to Peer Perform from Outperform… Citigroup downgrades RenaissanceRe (RNR 63.46) to Sell from Hold… Citigroup downgrades Platinum Underwriters (PTP 35.64), Flagstone Reinsurance (FSR 14.01), and Everest Reinsurance (RE 109.92) to Hold from Buy… J.P Morgan downgrades Net 1 UEPS Techs (UEPS 30.50) to Neutral from Overweight. Miscellaneous: Bernstein initiates Sprint (S 17.72), AT&T (T 41.93) and Verizon (VZ 45.26) with Market Performs.
AMR AMR: British Airways considering a renewed attempt to merge with American Airlines - Times of London (25.10 )
Times of London reports British Airways is looking at merger opportunities that could create a transatlantic super-carrier in response to a plan by Delta and Air France to shake up this lucrative mkt. Aviation sources believe that British Airways is in talks with Sir Michael Bishop, controlling shareholder of bmi, to buy the British carrier. British Airways is also believed to be considering a renewed attempt to merge with American Airlines, despite two previous approaches being struck down by competition regulators. British Airways would have to convince competition authorities that the takeover of bmi posed no threat, as the combined co would control more than half of all Heathrow flights. A British Airways spokesman said: “We have never said we are in talks with bmi. American is already a One World partner and in the long-term we would like a closer relationship with them.”
WM Washington Mutual: Downgrade details (33.07 )
FBR downgraded WM to Underperform from Market Perform and lowered their tgt to $23 from $35, following Q3 earnings. The firm now believes credit trends are eroding much faster in this weakening housing market than they previously anticipated and will put significant pressure on all mortgage lenders’ earnings. They believe the co’s new provision guidance, which now ranges from $2.7B-2.9 bln, will result in the market beginning to factor in a dividend cut in the next few quarters, which would put downward pressure on the stock.
STI SunTrust Banks misses by $0.02 (71.75 )
Reuters Estimates is telling us that an actual for Q3 of $1.26 per share, adjusted for severance expenses and including mark to mark valuation losses on loan warehousing, is comparable to the Reuters Estimates consensus of $1.28. “Clearly, we are not immune to the deterioration in the housing market and related turmoil in the capital markets and change in the credit cycle,” Mr. Wells observed. “That said, we remain encouraged by the underlying strength in key product areas and by the progress of our ongoing drive to enhance productivity and efficiency across the Company.”
Miscellaneous: JMP raises their tgt on Cavium Networks (CAVM 32.80) to $35 from $30 based noting the co delivered strong F3Q07 results… Jefferies raises their tgt on Digital River (DRIV 48.1 
to $51 from $44 to reflect higher conviction in estimates, but firm is leaving numbers unchanged for now… Friedman Billings raises tgt to Illinois Tool Works (ITW 57.66) to $67 from $66 after co reported Q3 results. The firm says believes that ITW’s consistently outstanding ROIC could merit a higher-than-average multiple… UBS initiates Gramercy Capital (GKK 25.30) with a Buy… UBS initiates Highwoods Properties (HIW 37.03), Biomed Realty (BMR 23.59), and United Dominion (UDR 23.67) with a Neutrals… UBS initiates Weingarten Realty (WRI 41.27) and Post Properties (PPS 38.40) with Sells… UBS initiates Tractor Supply (TSCO 47.25) with a Neutral… UBS initiates Home Proproperties (HME 52.40) with a Buy… Oppenheimer initiates Broadridge Financial Solutions (BR 19.2 with a Buy and a $28 tgt saying the co is the leading provider of outsourced investor communications and securities processing. Firm says BR boasts a blue-chip client base, a surprisingly stable revenue stream, significant growth opportunities, and a 7% FCF yield… Oppenheimer initiates Grill Concepts (GRIL 6.40) with a Buy and a $9 saying an infusion of new capital, strong unit economics, and the potential for 100 plus locations in the next 10 years place GRIL in the 25% growth category.
ASD American Standard misses by $0.04, misses on revs; guides FY07 EPS below consensus (34.30 )
Reports Q3 (Sep) earnings of $0.65 per share, excluding non-recurring items, $0.04 worse than the Reuters Estimates consensus of $0.69; revenues rose 7.7% year/year to $1.98 bln vs the $2.01 bln consensus. Co issues downside guidance for FY07, sees EPS of $1.90-1.95 vs. $2.22 consensus. “For the rest of the year, we see continued strength in commercial air conditioning equipment systems, parts, services and solutions with better- than-expected performance,” said Poses. “Job quotes, orders and backlog are expected to grow well, although not as fast as earlier in the year. Strong performance in the commercial part of our air conditioning business should lessen the impact of the weaker residential housing market and warranty costs discussed last quarter.”
BAC Bank of America misses by $0.24, misses on revs (50.03 )
Reports Q3 (Sep) earnings of $0.82 per share, $0.24 worse than the Reuters Estimates consensus of $1.06; revenues fell 11.8% year/year to $16.3 bln vs the $18.01 bln consensus. Lower net income resulted from a $1.33 bln decline in earnings in Global Corporate and Investment Banking given the significant disruption in the financial markets during the quarter. Provision expense increased $865 mln due to consumer and small business credit costs rising from post bankruptcy reform lows, growth and seasoning in various portfolios and stress in several portfolios driven by the weakened U.S. housing market. CEO says, “While the significant dislocations in the capital markets have hurt most participants, we are still very disappointed in our third quarter performance. However, the majority of our businesses experienced solid revenue growth as sales momentum continued, demonstrating the value of our diverse business mix. We continued to invest in our businesses for the long term and to introduce innovative products and services to differentiate Bank of America in the marketplace. While we cannot predict the near term, I am confident that such innovation and execution combined with the advantages of scale and reach are the formula for future success.”
MHP McGraw-Hill beats by $0.10, reports revs in-line (50.92 )
Reports Q3 (Sep) earnings of $1.34 per share, $0.10 better than the Reuters Estimates consensus of $1.24; revenues rose 9.8% year/year to $2.19 bln vs the $2.18 bln consensus. “We are still on course to produce double-digit earnings per share growth in 2007, as well as improved operating margins in the Financial Services and McGraw-Hill Education segments. For Q4, revenues and earnings will not match last year’s results because of challenging conditions in the structured finance market and some softness in education.”
NUAN Nuance Communications profiled in New America section of IBD (20.35 )
IBD reports every day, people experience the co’s software by calling directory assistance, getting account information, checking their flight status or talking to a navigation system. The smallest unit, embedded speech solutions, adds voice control to mobile handsets and smart phones. With one click and a simple command a user can get a business listing, find directions or connect to a person in a co. Sales in the division gained 46% to $14 mln in the third quarter. The dictation and transcription technology unit saw sales swell 38% to $74.3 mln. Its Dragon Naturally Speaking software can convert speech into text at up to 160 words a minute. Buyouts have been integral in building the co into a market leader. They’ve also helped fend off advances of larger rivals, such as IMB (IMB) and Microsoft, (MSFT) who are making inroads into voice recognition. Since 2001, Nuance has made 18 buyouts worth well over $1 bln. Analysts, on average, expect 44% profit growth to 78 cents a share.
HSY Hershey Foods misses by $0.03, misses on revs; guides FY07 EPS below consensus (44.29 )
Reports Q3 (Sep) earnings of $0.68 per share, $0.03 worse than the Reuters Estimates consensus of $0.71; revenues fell 1.2% year/year to $1.4 bln vs the $1.44 bln consensus. Co issues downside guidance for FY07, sees EPS of $2.08-2.12 vs. $2.24 consensus. “Reported net sales for the quarter were down 1%, primarily driven by the timing of seasonal shipments and a significant reduction in inventory levels at distributors. This reduction is the result of slower-than- anticipated improvement in the convenience store class of trade and tighter credit conditions for these distributors. Importantly, Hershey’s international business continued to gain traction behind our joint ventures in emerging markets. Third quarter profitability was curtailed by lower sales, including increased trade promotion, and the impact of higher dairy costs… We do expect a sequential improvement in marketplace performance in the fourth quarter. However, continued competitive activity as well as a tightening of inventory levels at select distributors will dampen sales performance in the fourth quarter. Therefore, organic net sales for 2007 are expected to decrease about 1 percent. Profitability will be impacted by higher dairy costs and increased business investment.”
BAX Baxter beats by $0.04, beats on revs; guides Q4 EPS above consensus (55.30 -0.65)
Reports Q3 (Sep) earnings of $0.70 per share, $0.04 better than the Reuters Estimates consensus of $0.66; revenues rose 7.5% year/year to $2.75 bln vs the $2.68 bln consensus. Co issues upside guidance for Q4, sees EPS of $0.72-0.74 vs. $0.71 consensus
Downgrades: Deutsche Bank downgrades ETrade (ETFC 12.47) to Hold from Buy following earnings… J.P Morgan downgrades Lojack (LOJN 16.92) to Underweightr from Neutral… Deutsche Bank downgrades Ebay (EBAY 40.60) to Sell from Hold and maintains their $33 tgt following earnings, and as underlying fundamentals appear to be getting worse. The firm thinks eBay is facing a worst case scenario in its business, due to 2% transaction volume growth (& potentially declining soon), user dis-engagement, higher ad costs, declining purchase frequency, rising seller costs and operating margin pressures…… UBS downgrades Nalco Holding (NLC 29.54) to Sell from Neutral… UBS downgrades Eagle Bulk (EGLE 31.61) to Neutral from Buy… Brean Murray downgrades MGI Pharma (MOGN 30.67) to Hold from Buy following earings and saying they believe MOGN is fairly valued; looking toward 2008 for next catalysts… Friedman Billings downgrades Washington Mutual (WM 33.07) and Downey Fincl (DSL 45.23) to Underperform from Market Perform and cuts their tgt on WM to $23 from $35, and cuts their tgt on DSL to $40 from $60 saying they now believe credit trends are eroding much faster in this weakening housing market than they previously anticipated and will put significant pressure on all mortgage lenders’ earnings.
TXT Textron beats by $0.17, beats on revs; guides FY07 EPS above consensus, revs above consensus (64.13 )
Reports Q3 (Sep) earnings of $0.95 per share, $0.17 better than the Reuters Estimates consensus of $0.78; revenues rose 15.0% year/year to $3.26 bln vs the $3.14 bln consensus. Co issues upside guidance for FY07, sees EPS of $3.40-3.50 ($0.22 higher than prior guidance) vs. $3.29 consensus; sees FY07 revs of $13 bln vs. $12.79 bln consensus.
Downgrades: Merriman downgrades Occam Networks (OCNW 5.8 to Neutral from Buy noting that OCNW’s long awaited restatement filing has unexpectedly, through a combination of poor communication and uncertain management commentary, raised more questions than it has answered… Merriman downgrades Cbeyond Communications (CBEY 42.70) to Neutral from Buy saying that over the last few weeks, they have become concerned about the likelihood of whether CBEY’s 2008E EV/EBITDA multiple can further expand as well as its ability to materially beat current estimates in 2H07… Baird downgrades IMS Health (RX 29.56) to Underperform from Outperform and lowers their tgt to $24 from $37 saying elongated selling cycles and pricing pressure are expanding globally. IMS’ fixed cost infrastructure has a compounding impact on margin. Firm believes 2008 will struggle to deliver mid-single-digit sales and EPS growth… Wachovia downgrades Knight Transportation (KNX 17.02) to Market Perform from Outperform following KNX’s Q3 downside report coupled with a lack of visibility. Miscellaneous: Caylon initiates select AutoParts & Equipment Suppliers. Firm initiates Goodyear (GT 30.09) with a Buy and $40 tgt; Lear (LEA 33.54) with an Add and $42 tgt; Johnson Controls (JCI 42.13) tgt $42 and Visteon (VC 5.76) tgt $6, with Neutrals. The firm also initiates Gentex (GNTX 21.05) tgt $17, and Magna International (MGA 92.70) tgt $83, with Reduces.
NOK Nokia beats by EUR 0.05, revs light; mkt share up 3% yr/yr; average selling price down sequentially (36.53 )
Co reports Q3 EPS of EUR 0.40, ex items vs EUR 0.35 Reuters consensus; revs +28% yr/yr to EUR 12.9 bln vs EUR 13.242 bln Reuters consensus. Co reports Q3 market share grew to 39% up from 38% in Q2 and 36% in yr ago period. Nokia operating margin of 14.6%, up sequentially from 11.0% in Q2 2007, excluding special items. Nokia device volumes of 111.7 million units, up 11% sequentially and up 26% year on year. Total device operating margin, and Mobile Phones gross margin, increased sequentially, despite Nokia’s total device ASP of EUR 82 decreasing from EUR 90 in Q2 2007.
Sensex ends down 938pts at 17,778 - The Business Standard
The Business Standard reports the Sensex opened with a positive gap of 111 points at 18,827, and went on to gain further ground in morning trades. Aggressive buying in select stocks saw the index zoom past the 19,000-mark to touch a fresh all-time intra-day high of 19,199 - up 483 points from the previouse close. Selling in noon trades saw the index pare gains, and slip into negative zone. The selling pressure was so intense towards the end of the day that the index tumbled all the way to a low of 17,771 - down 1,428 points from the day’s high. The Sensex finally ended (provisional) with a loss of 938 points at 17,778.
Asian stocks gain, led by Mizuho Financial; Hong Kong advances - Bloomberg.com
Bloomberg.com Asian stocks gained for the first time in three days, led by Japanese banks, after JPMorgan Chase reported profit that beat analyst estimates. BHP Billiton climbed after the mining company said the outlook for metals “remains positive.” Japan’s Nikkei 225 Stock Average gained 0.9% to 17,106.09. China’s CSI 300 Index lost 3.6%, the most in five weeks. Benchmarks also fell in Singapore, India, Indonesia, Thailand and New Zealand.
European oil stocks, BG decline; Syngenta, Nokia advance - Bloomberg.com
Bloomberg.com reports European energy stocks fell after analysts forecast “weak” results for oil producers and downgraded shares of BG Group Plc of the U.K. Royal Dutch Shell Plc and Total SA retreated… National benchmarks fell in 12 of the 17 western European markets that were open. The U.K.’s FTSE 100 slid 0.2%, and Germany’s DAX added 0.2%. France’s CAC 40 was little changed. The Stoxx 50 lost 0.1%, while the Euro Stoxx 50, a measure for the euro region, advanced 0.1%.
AKAM Akamai Tech accelerates media delivery at Starbucks stores (33.70 )
Co and Starbucks (SBUX) announces a technology relationship that over time includes the deployment of Akamai-enabled content delivery servers within thousands of Starbucks stores to provide fast and reliable wireless delivery of digital music.
PMI PMI Group announces housing, mortgage, and credit market conditions to adversely affect Q3 (26.65 )
Co sees Q3 EPS of approx ($1.05) vs $0.75 consensus due to incurred losses in its U.S. Mortgage Insurance Operations and a mark-to-market adjustment at its unconsolidated subsidiary FGIC. Co’s review of the Sept mortgage default data on its U.S. mortgage insurance portfolio indicates that credit performance significantly worsened during the month and now expects paid claims, loss adjustment expenses and additions to the reserve for losses, or “total incurred losses,” for its U.S. mortgage insurance operations of approx $350 mln in Q3. Co is withdrawing its Y07 total incurred loss guidance and other financial guidance. Credit conditions also had an adverse effect on the insured credit derivative portfolio of FGIC, in which co is the lead strategic investor, with a common equity ownership of 42%. FGIC conducted a fair value review of its outstanding credit derivative contracts estimates that mark-to-market adjustments will result in a Q3 unrealized loss of approximately $206 mln, pre-tax. FGIC anticipates that as a result of this adjustment it will report a net loss for Q3 of approx $65 mln. As a result of co’s equity ownership in FGIC, co will realize an EPS of ($0.32) in Q3.
ORB Orbital Sciences beats by $0.04, beats on revs; guides FY07 EPS above consensus, revs below consensus; guides FY08 EPS in-line, revs in-line (25.28 )
Reports Q3 (Sep) earnings of $0.26 per share, $0.04 better than the Reuters Estimates consensus of $0.22; revenues rose 46.4% year/year to $289.5 mln vs the $247.9 mln consensus. Co issues raises EPS guidance for FY07, sees EPS of $0.89-0.91 vs. $0.87 consensus, up from $0.82-0.87; sees FY07 revs of $1.05 bln vs. $1.01 bln consensus. Co issues in-line guidance for FY08, sees EPS of $0.93-0.98 vs. $0.98 consensus; sees FY08 revs of $1.08-1.10 bln vs. $1.11 bln consensus.
UNH UnitedHealth beats by $0.03; issues Q4 guidance slightly below Q3; guides FY07 above consensus; issues FY08 guidance (48.60 )Reports Q3 (Sep) earnings of $0.95 per share, $0.03 better than the Reuters Estimates consensus of $0.92; revenues rose 4.0% year/year to $18.68 bln vs the $18.97 bln consensus. Co expects Q4 earnings to be slightly below third quarter results (consensus $0.93). Co guides above consensus for FY07, sees EPS of $3.49-3.50 vs. $3.47 consensus. Co issues guidance for FY08, sees EPS of $3.95-4.00, including contributions from Sierra Health Service, may not compare to $3.92 consensus. Co announces an additional $7 bln buyback targeted by end of FY08.
DHR Danaher beats by $0.04, reports revs in-line (81.40 )
Reports Q3 (Sep) earnings of $1.01 per share, excluding non-recurring items, $0.04 better than the Reuters Estimates consensus of $0.97; revenues rose 12.5% year/year to $2.7 bln vs the $2.69 bln consensus. Co says, “We believe our businesses and end markets remain healthy and our outlook for the remainder of 2007 continues to be positive.”
CSCO Cisco offices are raided in Brazil - NY Times (32.46 )
Brazilian police and Federal Revenue Service officials raided offices of the Brazilian unit of the network equipment company CSCO and arrested top executives as part of a continuing investigation into a smuggling and tax fraud scheme, authorities said late Tuesday. Police accused a group of local businessmen, including employees of Cisco do Brasil, of setting up a scheme to evade import duties and local sales and corporate taxes on behalf of CSCO. The police originally did not name the company involved. However, the federal judge who signed the warrants for the raid, Alexandre Cassetari, confirmed Cisco was the company under investigation.
AAPL Apple opens iPhone to outside software - WSJ (172.75 )
Co’s move to more fully open the iPhone to software created by independent developers could make the product more competitive with rivals such as Microsoft (MSFT) seeking to define technology standards for cellular phones. The decision, announced by Chief Executive Steve Jobs in a letter posted yesterday morning on Apple’s Web site, reversed the Cupertino, Calif., company’s earlier, more restrictive policy on the types of independent software that could be used on the iPhone. That policy had ignited a storm of criticism from independent programmers, who complained in online message boards that Apple was trying to exert too much control over the iPhone, stymieing innovation from others eager to exploit the computing power of the product.
CFC SEC Reviews Countrywide CEO Stock Sales - WSJ (17.35 )
The Securities and Exchange Commission has opened an informal investigation into stock sales by CFC’s chief executive officer, according to people familiar with the matter, deepening problems at the nation’s largest mortgage lender. CFC is one of a dozen companies the SEC is investigating in connection with the fallout from rising defaults on some home loans. At least one area of inquiry, these people say, involves stock sales by founder and Chief Executive Officer Angelo Mozilo through prearranged executive sales plans.
‘Mad Money’ Recap: Lightning Round - TheStreet.com
Cramer was bearish on: China Digital (STV), Clean Energy Fuels (CLNE), Furniture Brands International (FBN), Jack in the Box (JBX), and Cabela’s (CAB).
‘Mad Money’ Recap: Lightning Round - TheStreet.com
Cramer was bullish on: Baidu (BIDU), Focus Media (FMCN), China Mobile (CHL), comScore (SCOR), Raytheon (RTN), Ciena (CIEN), Cisco (CSCO), Yum! (YUM), Guess? (GES), J. Crew (JCG), and Global Sources (GSOL).
Cramer’s ‘Mad Money’ Recap - TheStreet.com
On Wednesday’s action, Jim said “Investors will profit if they devote attention to the dry subject of dry shipping… This industry is one of the great bull markets in the world right now.” Cramer took a break from his discussion of dry bulk shippers to note that eBay (EBAY) Cramer took a break from his discussion of dry bulk shippers to note that eBay. Cramer finished discussion of dry cargo shippers by selecting two of his favorites. Of the conservative variety of dry shippers, Cramer selected Paragon (PRGN) over OceanFreight (OCNF) seeing bigger upside with Paragon. Of the riskier shippers, Cramer selected Diana (DSX) over Genco Shipping & Trading (GNK).
