Archive for June, 2011

  • Morning News: June 24, 2011
    , June 24th, 2011 at 6:27 am

    Draghi Appointed to Succeed Trichet as ECB President

    Banks, Officials Nearing Greek Bond Plan

    EU Vows to Rescue Greece in Exchange for Cuts

    As Greece Ponders Default, Lessons From Argentina

    Asian Nations Welcome Oil Reserves Release

    China Blocks Multi-billion Dollar Airbus Order

    China Accounting Scandals Put Big Four Auditors on Red

    What Now, Chairman Bernanke?

    Americans See Debt Threat, Reject Tax ‘Scare’

    Used Gas Sippers, Keeping That New-Car Value

    Buffett Closes ‘Backdoor’ to Berkshire

    Ford Drops in Quality Survey

    Apple Gets U.S. Antitrust Approval to Bid for Nortel Assets

    Why is there so much Bad Consumer Investment Advice?

    Joshua Brown: Nice Work…If You Can Get It.

    Howard Lindzon: Google and The Government…Google should have Drilled For Oil

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  • Oracle’s Q1 Guidance
    , June 23rd, 2011 at 10:59 pm

    After today’s close, Oracle ($ORCL) held a conference call. For Q1, the company sees earnings ranging between 45 cents and 48 cents per share. Wall Street’s estimate was 46 cents per share.

    The stock dropped about 7% in the after-hours market. I strongly suspect this will fade at tomorrow’s open. Here’s what the company had to say:

    For the year, our operating income grew 27% and even with the Sun Hardware business included in our results for the full year, we delivered non-GAAP operating margins of only 2% — 2 points below our all-time high. The non-GAAP tax rate for the quarter was 23.3% due to several favorable nonrecurring items including agreements with worldwide taxing authorities. EPS grew 25% to $0.75 on a non-GAAP basis.

    The fact that we were able to put up these top line and bottom line results given our size, once again, demonstrates the strength of our diversified portfolio of enterprise products and the breadth and loyalty of our huge customer base and the strength of our operating model.

    We now have $29 billion in cash and marketable securities and operating cash flow increased to a record $11.2 billion. For the year, all free cash flow increased to $10.8 billion. As we’ve always said, we’re committed to returning value to our shareholders through technical innovation, strategic acquisition, stock repurchases, prudent use of debt and a dividend. In this quarter, we repurchased 12.5 million shares for a total of a $422 million. For the full year, we repurchased 40.4 million shares for a total of approximately $1.2 billion. And the board again declared a dividend of $0.06.

    Now the guidance. As you remember, we had a spectacular Q1 last year with New License up 25%, non-GAAP EPS up 38% and GAAP EPS up 20%. So assuming exchange rates remain at current levels, which is right now a positive 5% currency impact on license and revenue growth rates, our guidance for Q1 is as follows: New Software Licenses revenue growth is expected to range from 10% to 20%; Hardware Product revenue growth is expected to range from negative 5 to positive 5 and of course, that does not include the Hardware Support revenue; total revenue on a non-GAAP basis is expected to range from 9% to 12%; on a GAAP basis, we expect total revenue growth from 10% to 13%. Non-GAAP EPS is expected to be $0.45 to $0.48; GAAP EPS is expected to be $0.33 to $0.36. Now this guidance assumes a GAAP tax rate of 29% and non-GAAP tax rate of 28.5%, which is nearly 4 points higher than our tax rate in the previous year. Now, of course, this may end up being different.

    Oracle is a cash flow machine. It’s truly astounding how much money they generate. They’re now sitting on $29 billion in cash. For the last fiscal year, Oracle made $2.22 per share. Based on the most recent after-hours trade, the stock is going for just under 14 times trailing earnings.

  • Oracle Earns 75 Cents Per Share
    , June 23rd, 2011 at 4:07 pm

    Oracle ($ORCL) just reported earnings of 75 cents per share which beat the Street by four cents. Revenue came inline at $10.8 billion which Wall Street won’t like. The shares are down about 6% after-hours which probably won’t last until tomorrow’s open.

    Yes, hardware sales dropped by 6% but that makes up about one-tenth of Oracle’s overall business.

    Let’s remember that Wall Street was originally expecting 66 cents per share. Only after the company gave us guidance of 69 cents to 73 cents did the Street go up to 71 cents. And we learned today that the company delivered 75 cents per share. Folks, this was a good report.

    Oracle Corporation today announced fiscal 2011 Q4 GAAP total revenues were up 13% to $10.8 billion, while non-GAAP total revenues were up 12% to $10.8 billion. Both GAAP and non-GAAP new software license revenues were up 19% to $3.7 billion. Both GAAP and non-GAAP software license updates and product support revenues were up 15% to $4.0 billion. Both GAAP and non-GAAP hardware systems products revenues were down 6% to $1.2 billion. GAAP operating income was up 32% to $4.4 billion, and GAAP operating margin was 40%. Non-GAAP operating income was up 19% to $5.2 billion, and non-GAAP operating margin was 48%. GAAP net income was up 36% to $3.2 billion, while non-GAAP net income was up 27% to $3.9 billion. GAAP earnings per share were $0.62, up 34% compared to last year while non-GAAP earnings per share were up 25% to $0.75. GAAP operating cash flow on a trailing twelve-month basis was $11.2 billion.

    For fiscal year 2011, GAAP total revenues were up 33% to $35.6 billion, while non-GAAP total revenues were up 33% to $35.9 billion. Both GAAP and non-GAAP new software license revenues were up 23% to $9.2 billion. GAAP software license updates and product support revenues were up 13% to $14.8 billion, while non-GAAP software license updates and product support revenues were up 13% to $14.9 billion. Both GAAP and non-GAAP hardware systems products revenues were $4.4 billion. GAAP operating income was up 33% to $12.0 billion, and GAAP operating margin was 34%. Non-GAAP operating income was up 27% to $15.9 billion, and non-GAAP operating margin was 44%. GAAP net income was up 39% to $8.5 billion, while non-GAAP net income was up 34% to $11.4 billion. GAAP earnings per share were $1.67, up 38% compared to last year while non-GAAP earnings per share were up 33% to $2.22.

    “In Q4, we achieved a 19% new software license growth rate with almost no help from acquisitions,” said Oracle President and CFO, Safra Catz. “This strong organic growth combined with continuously improving operational efficiencies enabled us to deliver a 48% operating margin in the quarter. As our results reflect, we clearly exceeded even our own high expectations for Sun’s business.”

  • Medtronic Raises Dividend By 8%
    , June 23rd, 2011 at 12:56 pm

    For the 34th year in a row, Medtronic ($MDT) is raising its quarterly dividend. The company is increasing it from 22.5 cents per share to 24.25 cents. That’s an 8% increase. Annualized, the dividend rises from 90 cents per share to 97 cents per share.

    Going by the price as of 1 pm today, that comes to a yield of 2.56%.

    Last month, MDT told us to expect earnings for this year between $3.43 per share and $3.50 per share. Their fiscal year ends in April. This means the stock is going for 11 times the low-end of the company’s own forecast.

  • Google Still Goes Lower
    , June 23rd, 2011 at 11:57 am

    Last month, I asked the question, “How much is Google really worth?”

    So how much should Google be worth? That’s hard to say. Let’s take a very basic look. Wall Street currently expects Google to earn $33.90 per share this year.

    The S&P 500 is currently trading at 13.85 times this year’s earnings estimate. If Google were carrying that multiple, it would be about $470 per share.

    However, Google is projected to grow its earnings faster than the overall market. Wall Street currently expects Google to earn $39.49 per share in 2012. The S&P 500 is going for 12.2 times next year’s estimate. So if Google carried that multiple, it would be $481 per share.

    When I wrote that GOOG was at $535. Today it’s at $476.

    The earnings estimates are basically unchanged. For 2011, Wall Street expects earnings of $33.88 per share, and $39.47 for 2012.

    Google is now going for 14.1 times this year’s earnings and 12.1 times next year’s earnings. Compared with the S&P 500, this represents a value premium of 8.8% and 6.5%, respectively.

  • Double Bounce!
    , June 23rd, 2011 at 11:05 am

  • Bed Bath & Beyond’s Earnings Trend
    , June 23rd, 2011 at 10:15 am

    Shares of Bed Bath & Beyond ($BBBY) jumped as much as 5.4% this morning. Here’s a look at the company’s earnings trend along with their updated earnings forecast. Just by looking at the chart, you see that the upper-end of the forecast is still well within the recent trend.

    Year-over-year net profit margins have now increased for nine-straight quarters. For the last four quarters, net margins are running at 9.3% which is closing in on the company’s peak of 10% reached in 2005.

    Courtesy of Seeking Alpha, here’s part of yesterday’s earnings call where the company details its forecast for the rest of this year:

    The following are our major planning assumptions for the remainder of fiscal 2011.

    One, including the 12 stores open so far this year, we anticipate that the total number of new store openings will be approximately 40 to 45 stores across all of our concepts. Currently, we believe that fiscal 2011 store openings by concept will be substantially similar to fiscal 2010 with a slight shift to several more buybuy BABY stores and slightly fewer Bed Bath & Beyond stores. As the year progresses and we gain greater visibility, the total number of stores that we will open may be updated. We will continue to place Harmon Face Values health and beauty care offerings in stores across all of our concepts. As always, we remain flexible to take advantage of real estate opportunities that may arise.

    Two, we expect to continue our program of expanding, renovating and/or relocating a number of our stores in fiscal 2011.

    Three, we are modeling a 2 to 4 percentage increase in comparable store sales for the second quarter and full fiscal year.

    Four, based on these comparable store sales assumptions, we are modeling consolidated net sales to increase by 5% to 7% in the second quarter and full year of fiscal 2011.

    Five, assuming these sales levels, in addition to planning the continuation of the shift in the mix of merchandise sold to lower margin categories, we are modeling our operating profit to be in the range of flat to slightly leveraged for the fiscal second quarter and to be slightly leveraged for the full year.

    Six, interest income is expected to be relatively flat versus fiscal 2010.

    Seven, the second quarter and full year tax provision are estimated in the mid- to high-30s percent range with expected variability as taxable events occur.

    Eight, capital expenditures for fiscal 2011, principally for new stores, existing store refurbishments, information technology enhancements, including increased spending on our interactive platforms and other projects, continue to be planned at approximately $250 million, which of course, remains subject to the timing of projects.

    Nine, depreciation for fiscal 2011 is estimated to be approximately $190 million.

    Ten, we expect to generate positive operating cash flow in fiscal 2011 and continue to fund operations entirely from internally generated sources.

    Eleven, in the first quarter, we completed our $1 billion share repurchase program and, thereafter, began our $2 billion program authorized in December 2010, which we continue to model to be completed in approximately 2 years. Our share repurchase program may be influenced by several factors, including business and market conditions.

    Based on these and the other planning assumptions, we are modeling net earnings per diluted share to be in the range of approximately $0.77 to $0.82 for the fiscal second quarter of 2011. For all of fiscal 2011, we are modeling net earnings per diluted share to increase by approximately 15% to 20%.

  • Morning News: June 23, 2011
    , June 23rd, 2011 at 8:05 am

    Derivatives Cloud the Possible Fallout From a Greek Default

    Selling $50 Billion in Greek Assets Is Herculean Task

    Group of 20 Agrees on Steps to Mitigate Food Price Swings

    Biggest Banks May Get Boost From Basel

    High-Speed Rail Poised to Alter China

    Chinese PMI Is On The Verge Of Contraction

    Bernanke Leaves Door Open to Further Easing

    S.E.C. Approves New Reporting Requirements for Hedge Funds

    London Stock Exchange Bid on Knife Edge as TMX Battle Heats Up

    Hulu Seen at 50 Times Earnings in Sale Seeking Netflix Multiple

    Lennar Net Slides 65% on Lower Home Deliveries

    Nissan CEO: Aiming For 10% U.S. Market Share, Seek To Buy Stake In Avtovaz

    Brian Shannon: Stock Trading Ideas for 6/23/11

    Josh Brown: Pitching RIM to Warren Buffett

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  • Bed Bath & Beyond Raises Full-Year Forecast
    , June 22nd, 2011 at 4:35 pm

    Wowie! Bed Bath & Beyond ($BBBY) just had an outstanding earnings report for their fiscal Q1.

    Let’s go over the numbers. For Q1, they earned 72 cents per share. When the last earnings report came out, they told us to expect earnings to range between 58 cents and 61 cents per share. I knew that was low and in last week’s CWS Market Review, I said I was expecting modest earnings of around 63 cents per share.

    Turns out, I wasn’t optimistic enough. The shares are up about 2% after hours.

    I also said that I was looking forward to Q2 guidance of 80 to 85 cents per share. They gave us guidance of 77 cents to 82 cents per share. So I was still in the ballpark.

    This was a great earnings report. The best news of all is that the company also revised their full-year forecast higher. The numbers here aren’t as clear. At the start of the year, BBBY told us to expect an earnings increase for the entire year of 10% to 15%. For 2010, they earned $3.07 which came to $3.38 to $3.53 per share.

    Now BBBY has upped that full-year forecast to 15% to 20%. That translates to a range of $3.53 to $3.68 per share.

    Bed Bath & Beyond Inc. today reported net earnings of $.72 per diluted share ($180.6 million) in the fiscal first quarter ended May 28, 2011, an increase of approximately 38% versus net earnings of $.52 per diluted share ($137.6 million) in the same quarter a year ago. Net sales for the fiscal first quarter of 2011 were approximately $2.110 billion, an increase of approximately 9.7% from net sales of approximately $1.923 billion reported in the fiscal first quarter of 2010. Comparable store sales in the fiscal first quarter of 2011 increased by approximately 7.0%, compared with an increase of approximately 8.4% in last year’s fiscal first quarter.

    During the fiscal first quarter of 2011, the Company repurchased approximately $245 million of its common stock representing approximately 4.8 million shares. This included the completion of the $1 billion share repurchase program authorized in 2007. As of May 28, 2011, the balance remaining of the share repurchase program authorized in December 2010 was approximately $1.892 billion dollars.

    The Company is now modeling net earnings per diluted share to be approximately $.77 to $.82 for the fiscal second quarter of 2011 and to increase by approximately 15% to 20% for all of fiscal 2011.

    Here’s a look at BBBY’s quarterly numbers for the past few years:

    Quarter Sales Gross Profit Operating Profit Net Profit EPS
    May-99 $356,633 $146,214 $28,015 $17,883 $0.06
    Aug-99 $451,715 $185,570 $53,580 $33,247 $0.12
    Nov-00 $480,145 $196,784 $50,607 $31,707 $0.11
    Feb-00 $569,012 $238,233 $77,138 $48,392 $0.17
    May-00 $459,163 $187,293 $36,339 $23,364 $0.08
    Aug-00 $589,381 $241,284 $70,009 $43,578 $0.15
    Nov-01 $602,004 $246,080 $64,592 $40,665 $0.14
    Feb-01 $746,107 $311,802 $101,898 $64,315 $0.22
    May-01 $575,833 $234,959 $45,602 $30,007 $0.10
    Aug-01 $713,636 $291,342 $84,672 $53,954 $0.18
    Nov-02 $759,438 $311,030 $83,749 $52,964 $0.18
    Feb-02 $879,055 $370,235 $132,077 $82,674 $0.28
    May-02 $776,798 $318,362 $72,701 $46,299 $0.15
    Aug-02 $903,044 $370,335 $119,687 $75,459 $0.25
    Nov-03 $936,030 $386,224 $119,228 $75,112 $0.25
    Feb-03 $1,049,292 $443,626 $168,441 $105,309 $0.35
    May-03 $893,868 $367,180 $90,450 $57,508 $0.19
    Aug-03 $1,111,445 $459,145 $155,867 $97,208 $0.32
    Nov-04 $1,174,740 $486,987 $161,459 $100,506 $0.33
    Feb-04 $1,297,928 $563,352 $231,567 $144,248 $0.47
    May-04 $1,100,917 $456,774 $128,707 $82,049 $0.27
    Aug-04 $1,273,960 $530,829 $189,108 $120,008 $0.39
    Nov-05 $1,305,155 $548,152 $190,978 $121,927 $0.40
    Feb-05 $1,467,646 $650,546 $283,621 $180,980 $0.59
    May-05 $1,244,421 $520,781 $150,884 $98,903 $0.33
    Aug-05 $1,431,182 $601,784 $217,877 $141,402 $0.47
    Nov-06 $1,448,680 $615,363 $205,493 $134,620 $0.45
    Feb-06 $1,685,279 $747,820 $304,917 $197,922 $0.67
    May-06 $1,395,963 $590,098 $148,750 $100,431 $0.35
    Aug-06 $1,607,239 $678,249 $219,622 $145,535 $0.51
    Nov-07 $1,619,240 $704,073 $211,134 $142,436 $0.50
    Feb-07 $1,994,987 $862,982 $309,895 $205,842 $0.72
    May-07 $1,553,293 $646,109 $154,391 $104,647 $0.38
    Aug-07 $1,767,716 $732,158 $211,037 $147,008 $0.55
    Nov-08 $1,794,747 $747,866 $203,152 $138,232 $0.52
    Feb-08 $1,933,186 $799,098 $259,442 $172,921 $0.66
    May-08 $1,648,491 $656,000 $118,819 $76,777 $0.30
    Aug-08 $1,853,892 $739,321 $187,421 $119,268 $0.46
    Nov-08 $1,782,683 $692,857 $136,374 $87,700 $0.34
    Feb-09 $1,923,274 $785,058 $231,282 $141,378 $0.55
    May-09 $1,694,340 $666,818 $142,304 $87,172 $0.34
    Aug-09 $1,914,909 $773,393 $222,031 $135,531 $0.52
    Nov-09 $1,975,465 $812,412 $245,611 $151,288 $0.58
    Feb-10 $2,244,079 $955,496 $370,741 $226,042 $0.86
    May-10 $1,923,051 $775,036 $225,394 $137,553 $0.52
    Aug-10 $2,136,730 $874,918 $296,902 $181,755 $0.70
    Nov-10 $2,193,755 $896,508 $305,110 $188,574 $0.74
    Feb-11 $2,504,967 $1,076,467 $461,052 $283,451 $1.12
    May-11 $2,109,951 $857,572 $288,948 $180,578 $0.72

  • The Fed’s Projections
    , June 22nd, 2011 at 2:19 pm

    Here are the new economic projections from the Fed.