Archive for April, 2011

  • Gilead Sciences Bombs
    , April 20th, 2011 at 7:58 pm

    Gilead Sciences ($GILD) just reported an awful quarter. Man, this one was UG-LEE!

    GILD earned 87 cents per share for Q1 which was a full ten cents below the Street’s expectation. Revenue dropped 7.7% to $1.93 billion which was $100 million below the Street’s estimate.

    Sales of HIV drug Truvada rose 2 percent to $673.1 million, while sales of Atripla rose 7 percent to $744.5 million — but the totals fell short of respective average analyst estimates of $688 million and $793 million.

    Gilead said U.S. sales were hit by temporary cutbacks at state-funded AIDS drug assistance programs (ADAPs) in Florida and Texas.

    “Investors will want clarity on whether this is indicative of a longer-term trend,” said Cowen & Co analyst Phil Nadeau. “Gilead did maintain its full-year guidance, which suggests that this is not an ongoing problem.”

    The company still expects full-year product sales of between $7.9 billion and $8.1 billion.

    “We believe that the fundamentals of our business remain strong with regard to patient demand and prescription growth in the retail sector,” John Milligan, Gilead’s president and chief operating officer, said on a conference call.

    The company’s quarterly adjusted profit of 87 cents per share fell well below the average Wall Street analyst forecast of 97 cents per share, according to Thomson Reuters I/B/E/S.

    Gilead attributed the mismatch between U.S. demand and its sales revenue to budget problems in Texas and Florida, adding that the federal government recently set a fiscal 2011 ADAP budget of $885 million — up 6 percent from the prior year.

    “The very latest intelligence we have gathered at the state level indicates that there is second-quarter purchasing by ADAP programs, including Florida, within the last week,” said Kevin Young, head of commercial operations at Gilead.

    He said he had not heard about renewed buying by the Texas program.

    The shares are down after-hours. There are a few brights (I don’t want to overstate this; it was a rotten quarter). First, Gilead is keeping their sales target the same. That’s good to know.

    Also, GILD was already very cheap so an earnings miss shouldn’t have a dramatic impact on the shares. Instead of going for 11 times trailing earnings, GILD is now going for 11.4 times trailing earnings.

    I still have eight months before I make my 2012 Buy List decisions, but Gilead just made my job a lot easier.

  • VIX = 14.30
    , April 20th, 2011 at 12:53 pm

    There’s been a lot of talk about the $VIX today which is an index of implied volatility. (Quick definition: Options prices require an input for volatility. Therefore you can take the current options prices and work backwards to see what the market is pricing for volatility). The $VIX just hit a three-and-a-half year low of 14.30.

    The problem is that a lot of talking heads assume that a lower $VIX is good for stocks. It’s neither good nor bad. Volatility just is. I’ve found some evidence that the stock market does a little better than usual when the $VIX is very low, as in under 13.

    Let’s remember that one of the best buying opportunities in the last 200 years came in March 2009 when the $VIX was at 50.

  • A Strong Opening — And Then What?
    , April 20th, 2011 at 11:14 am

    The good news is that we had a very strong opening to the stock market this morning.

    The problem is that for the last several years, the market has performed horribly during the trading day. Most of the market’s gain has actually come when the market is closed — from the closing bell to the next morning’s opening bell.

    (Via: MarketSci)

  • Earnings Preview for Nicholas Financial
    , April 20th, 2011 at 9:48 am

    Nicholas Financial ($NICK) will report its fourth-quarter earnings on May 5th. I’ve probably written more about NICK than any other stock. It’s done incredibly well for us and I’m very happy to say that I continue to see more success for NICK.

    By just about any reasonable valuation, NICK is absurdly cheap. The stock closed Tuesday at $12.16 per share. Let’s look at some numbers. For the first three quarters of NICK’s fiscal year, the company earned $1.01 per share. I’m projecting that they’ll earn 40 cents per share for Q4.

    If someone told me two years ago that NICK could earn 40 cents per share in one quarter, I would have thought they were nuts. And I never would have thought I’d be the one making that projection, but that’s a very reasonable target for NICK’s Q4 earnings.

    That would bring NICK’s full-year earnings up to $1.41 per share which means the stock is going for 8.62 times trailing earnings. That’s an earnings yield of 11.6%. Let’s just say there aren’t many bonds giving you that.

    Additionally, the quality of NICK’s portfolio is increasing. Some of the improvement in NICK’s bottom line is due to lower reserves. I really can’t hold that against the company since it means they were overly conservative during a very rough patch.

    Short-term interest rates continue to be very low which also helps NICK. The company borrows for 5% and lends out for 25% which is an equation I like a lot. Mind you, there could be troubles in NICK’s future like higher oil prices or a downturn in the economy. Yet the company has shown how well it can manage itself during difficult times.

    For the coming fiscal year, I think it’s very reasonable to assume NICK can earn $1.55 to $1.60 per share. If things go well, they can earn as much as $1.70. Even a modest earnings multiple on a conservative estimate means this is a $17 stock.

    Since NICK is so small, it’s not followed by a single analyst on Wall Street. That’s their loss. While I feel very confident about 40 cents per share, I have no idea what the stock will do. I can’t say for certain that the market will finally realize the value in NICK, but I doubt this undervalued gem can stay a secret for long.

    One final note: The stock jumped earlier this year on news of that NICK might be acquired. In my view, the biggest risk was that NICK would go for too low a price. Since we haven’t heard any news since, I think it’s safe to assume that the company felt the same way. If that’s the case, I’m glad they said “no.”

    When NICK hits $17, I bet there will be even more offers.

  • 0% After 15 Years
    , April 20th, 2011 at 8:56 am

    Do you remember what you were doing 15 years ago? If you’re the S&P Bank Index (^BIX), then you’re exactly where you were.

  • Abbott Labs Earns 91 Cents Per Share
    , April 20th, 2011 at 7:59 am

    Abbott Laboratories ($ABT) reported Q1 earnings this morning of 91 cents per share which beat estimates by one penny.

    For the period ended March 31, the North Chicago, Ill., company earned $864 million, or 55 cents per share. Excluding one-time items it earned 91 cents per share. Revenue grew 17 percent to $9.04 billion

    Analysts polled by FactSet expect earnings per share of 90 cents on revenue of $8.82 billion.

    Revenue was led by higher sales of the company’s best-selling product Humira, which increased 18 percent to $1.65 billion. Humira is used to treat inflammatory diseases like rheumatoid arthritis and has historically accounted for nearly one-fifth of the company’s sales.

    Charges included the expense of integrating Solvay Pharmaceuticals and changes to Abbott’s fiscal calendar.

    This is an excellent stock. In January, Abbott said it was expecting full-year earnings of $4.54 to $4.64 per share so they seem to be on target so far. That means the stock is going for about 11 times this year’s earnings.

    On top of that, the shares currently yield 3.76%. In February, the company increased its dividend for the 39th year in a row.

  • Morning News: April 20, 2011
    , April 20th, 2011 at 7:24 am

    Markets Are Booming All Around The World

    Draghi’s ECB Campaign Gains Momentum as German Backing Grows

    Gold Exceeds $1,500 as Dollar Drops on Concern About U.S., European Debts

    Crude Oil Rises for Second Day on Improving Outlook for Global Fuel Demand

    Treasuries Fall, Snap Three-Day Gain, as Asian Stocks Extend U.S. Advance

    Banks Lag S&P as Slower Loan Growth Outweighs Higher Dividends

    Goldman’s Sluggish Growth Raises Concern on Wall Street

    Intel, IBM Results Show Return of Corporate Computing Demand

    Income Slips For Yahoo, But Ads Show Some Promise

    China Mobile First-Quarter Profit Rises 5.4% on Data Sales

    Smartphones and Japan in Focus in Nokia Q1 Report

    Fiat First-Quarter Profit Gains Powered By Ferrari, Brazil Sales

    AES Corp. to Buy Ohio Utility DPL for $3.5 Billion

    Paul Kedrosky: The Crisis of the Flight to Safety Crisis

    Joshua Brown: GOOD: Here’s How Your Taxes Are Spent

  • Stryker’s Earnings Call
    , April 19th, 2011 at 11:11 pm

    From Seeking Alpha:

    Looking at the first quarter, total company sales increased 12% on a reported basis and 10.2% on a constant currency basis. Strong, core MedSurg product growth, coupled with the acquisitions principally reflected in our new Neurotechnology segment, paced our growth. On a GAAP basis, diluted net earnings per share were $0.78, a decrease of 2.5% versus Q1 of 2010. We have noted the Neurovascular inventory step-up, other acquisition and integration-related charges totaling $46 million net of tax as a non-GAAP adjusting item in our earnings release. Excluding the charge, increases are reported U.S. GAAP diluted earnings per share of $0.78 to $0.90 per share. The U.S. GAAP diluted net earnings per share declined up 3% then becomes growth of 13% when excluding the identified non-GAAP items.

    On cash flow, we continued to perform well, with cash flow from operations of $205 million and free cash flow of $150 million. Finally, in the first quarter, we repurchased 4 million shares for a total spend of $250 million. We currently have open authorizations totaling approximately $575 million.

    (…)

    Turning to our outlook, our guidance as Steve noted, remains unchanged. Currency remains positive and if rates hold near current levels, we would expect second quarter sales to be favorably impacted by approximately 3% to 4% when compared to 2010. Using current rates, the full year currency impact on top line sales would be an increase in the range of 1.5% to 2.5% when compared to 2010, up from the original expectation of 0.5% to 1.5%. We are maintaining our outlook calling for net sales of 11% and net sales increase of 11% to 13% in constant currency. Excluding the impact of foreign currency as well as acquisitions, sales growth is projected to be 5% to 7% for the full year. Adjusted diluted net earnings per share are anticipated to be in the $3.65 to $3.73 range, representing an increase of 10% to 12% over 2010 adjusted diluted earnings per share.

    We also now anticipate acquisition and integration-related charges associated with the recently completed Neurovascular business to reduce reported diluted net earnings per share by approximately $0.28 to $0.30 versus the previously noted $0.21 to $0.25, driven by higher costs associated with the inventory step-up, while other integration costs remain on or ahead of plan.

  • Stryker Earns 90 Cents Per Share
    , April 19th, 2011 at 5:09 pm

    Stryker ($SYK) just reported earnings of 90 cents per share which beat Wall Street’s consensus by a penny.

    Stryker reiterated its 2011 EPS forecast of $3.65 to $3.73. Wall Street has been expecting $3.72 per share so that may been seen as a disappointment, but it really isn’t one. This is exactly what they told us in January.

  • Bed Bath & Beyond Breaks $56
    , April 19th, 2011 at 2:41 pm

    I’ve noticed that stocks that beat earnings often seem to have a delayed reaction. Bed, Bath & Beyond ($BBBY) had a great earnings report and despite a soggy market, the shares continue to drift higher.