Archive for November, 2011

• Morning News: November 24, 2011
  Eddy Elfenbein, November 24th, 2011 at 6:50 am

  German Business Confidence Unexpectedly Rises

  Portugal Paralyzed by Strike

  Asian Stocks Outside Japan Rebound from Seven-Week Low on China

  Dollar Funding Costs Rise to Three-Year High, Reversing Decline

  Oil Climbs From Two-Week Low on U.S. Stockpiles, Saudi Violence

  Chocolate Binge Topping $100 Billion Boosts Cocoa

  U.S. Rating by Moody’s Imperiled Without $1.2 Trillion in Cuts

  Fed Seeks to Bolster Confidence in 31 Largest U.S. Banks With Stress Tests

  Black Friday IPod Deals Show Stores Bowing to Buyers Amid 2% GDP

  Opening Day for Shoppers Shows Divide

  Deere Fourth-Quarter Net Tops Analyst Estimates as U.S. Farm Income Climbs

  Microsoft Signs Nondisclosure Agreement With Yahoo

  AT&T, T-Mobile Deal Hopes Crumble

  Itochu Buys Stake in U.S. Oil-and-Gas Producer Samson

  Ex-Olympus CEO Confident About Accounting Probe

  Joshua Brown: Media Gruesome Groupon

  Marc Chandler: Fiscal Union is the Only Real Solution

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• Morning News: November 23, 2011
  Eddy Elfenbein, November 23rd, 2011 at 6:52 am

  European Banks Get ‘False Deleveraging’

  Bank of Greece: Greece Faces Last Chance to Stay in Euro Zone

  Euro Zone Heads for Contraction

  Belgium, France Lead Govt Bond Market Losses Wednesday

  International Monetary Fund Offers Short-Term Credit as Insurance for Nations

  Crude Oil Drops After German Bond Sale Signals Deepening of Euro Crisis

  3rd-Quarter U.S. Growth Revised Down to 2 Percent

  Financial Finger-Pointing Turns to Regulators

  Fed to Test Six Big Banks for Euro Stress

  U.S. Postal Service Hires Evercore for Restructuring Advice

  F.C.C. Seeks Review of AT&T Merger With T-Mobile

  Groupon’s I.P.O. Pop, Now Deflated

  Merck to Pay $950 Million Over Vioxx

  Black Friday Deals See Stores Bowing to Shoppers

  Epicurean Dealmaker: Sovereign Triviality

  Paul Kedrosky: Going Public Decreases Innovation

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• Medtronic Earns 84 Cents Per Share
  Eddy Elfenbein, November 22nd, 2011 at 11:23 am

  Before the opening bell, Medtronic ($MDT) reported earnings of 84 cents per share which beat expectations by two cents per share. Overall, this was a solid quarter:

  Sales increased for the company’s insulin pumps and heart pacemakers. Weakness persisted in its businesses that sell implantable heart defibrillators and products for spinal surgery, which together make up about 40 percent of revenue.

  Medtronic Chief Executive Omar Ishrak told analysts on a conference call that he expects the pressure on those units to eventually reverse as macroeconomic conditions improve.

  The company also reiterated its estimates for this year which is a diluted EPS ranging between $3.43 and $3.50. The stock is up about 3.5% today.

  Here’s a look at Medtronic’s quarterly results for the past several years:

  Quarter	EPS	Sales in Millions
  Jul-01	$0.28	$1,456
  Oct-01	$0.29	$1,571
  Jan-02	$0.30	$1,592
  Apr-02	$0.34	$1,792
  Jul-02	$0.32	$1,714
  Oct-02	$0.34	$1,891
  Jan-03	$0.35	$1,913
  Apr-03	$0.40	$2,148
  Jul-03	$0.37	$2,064
  Oct-03	$0.39	$2,164
  Jan-04	$0.40	$2,194
  Apr-04	$0.48	$2,665
  Jul-04	$0.43	$2,346
  Oct-04	$0.44	$2,400
  Jan-05	$0.46	$2,531
  Apr-05	$0.53	$2,778
  Jul-05	$0.50	$2,690
  Oct-05	$0.54	$2,765
  Jan-06	$0.55	$2,770
  Apr-06	$0.62	$3,067
  Jul-06	$0.55	$2,897
  Oct-06	$0.59	$3,075
  Jan-07	$0.61	$3,048
  Apr-07	$0.66	$3,280
  Jul-07	$0.62	$3,127
  Oct-07	$0.58	$3,124
  Jan-08	$0.63	$3,405
  Apr-08	$0.78	$3,860
  Jul-08	$0.72	$3,706
  Oct-08	$0.67	$3,570
  Jan-09	$0.71	$3,494
  Apr-09	$0.78	$3,830
  Jul-09	$0.79	$3,933
  Oct-09	$0.77	$3,838
  Jan-10	$0.77	$3,851
  Apr-10	$0.90	$4,196
  Jul-10	$0.80	$3,773
  Oct-10	$0.82	$3,903
  Jan-11	$0.86	$3,961
  Apr-11	$0.90	$4,295
  Jul-11	$0.79	$4,049
  Oct-11	$0.84	$4,132

• Q3 GDP Revised Down to 2%
  Eddy Elfenbein, November 22nd, 2011 at 10:43 am

  The initial estimate was 2.5% but today it was revised down to 2%.

  The economy in the U.S. expanded less than previously estimated in the third quarter, reflecting a drop in inventories that points to a pickup in growth as 2011 comes to a close.

  Gross domestic product climbed at a 2 percent annual rate from July through September, less than projected and down from a 2.5 percent prior estimate, revised Commerce Department figures showed today in Washington. The median forecast of 81 economists surveyed by Bloomberg News called for no revision. Excluding stockpiles, so-called final sales climbed 3.6 percent, the most since last year’s fourth quarter.

  Gains in retail sales, manufacturing and housing this quarter, combined with lean inventories, raise the odds the world’s largest economy will pick up. At the same time, unemployment and stagnant wages mean consumer spending has been fueled by reductions in savings that cast doubt on whether increases will be sustained into 2012, just as the risks from government cutbacks and the European debt crisis intensify.

  Here’s your fun stat of the day: Real GDP growth over the last 15 quarters = 0.09%.

  

• America’s New Age of Plenty
  Eddy Elfenbein, November 22nd, 2011 at 10:18 am

  Fascinating article from Edward Luce at the Financial Times:

  Because of better technology, notably breakthroughs in drilling, the US all of a sudden realises it is sitting on a century’s worth of gas supply. When Mr Obama came to office, the country faced projections of rising natural gas imports from places like Qatar.

  The same technology has unlocked ever-growing estimates of once inaccessible “tight” oil lurking beneath America’s rocks. In its immediate neighbourhood, Alberta’s huge expanse of “tar sands” contains oil reserves that rank Canada second only to Saudi Arabia. In Brazil, recent advances in offshore oil drilling will relegate Venezuela into second place in the region.

  Without any real input from Washington, windfalls just keep dropping into America’s lap. Welcome to a new age of plenty.

• Morning News: November 22, 2011
  Eddy Elfenbein, November 22nd, 2011 at 6:39 am

  France’s AAA Status in Tatters as Yields Surge

  Ireland Faces $26 Billion Fall in Drug Exports

  Spain’s Borrowing Costs Skyrocket

  Debt Crisis Lurches Toward Heart of Euro Zone as Rifts Grow

  Tokyo Exchange Bid Values Osaka Securities at $1.68 Billion

  China Herd Follows the Shorts

  Gold Rebounds From One-Month Low as Sovereign-Debt Concerns Stoke Demand

  Supercomittee Failure Poses Threat to U.S.

  As Layoffs Rise, Stock Buybacks Consume Cash

  Hewlett’s Profit Falls 91%, But It Beats Expectations

  Netflix Stock Plunges, After Rental Giant Sells $400 Million in Stock, Debt

  KKR Near $7 Billion Deal to Buy Most of Oil and Gas Producer Samson

  U.S. Trustee Faults MF Global Customer Committee Proposal

  A Blow to Pinstripe Aspirations

  Roger Nusbaum: Is The Market Frustrated?

  Jeff Miller: Investors’ Guide to the Supercommittee Failure

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• Nike’s Incredible Track Record
  Eddy Elfenbein, November 21st, 2011 at 3:28 pm

  Nike ($NKE) is one of those great stocks that doesn’t get nearly as much credit as it deserves. In 1984, the shares were going for less than 50 cents each (split adjusted).

  Just a few weeks ago, NKE hit an all-time high of $97.68. That’s a gain of more than 21,000% in 27 years which is about 22% annualized. Not many hedge funds can do that. The S&P 500 is up about 610% over the same time span.

  I should add that those numbers don’t include dividends and Nike just raised its dividend by 16% to 36 cents per share. The new dividend works out to a yield of 1.6%.

  In early 1997, Nike got to be super-expensive — over $36 per share (again, split adjusted). Three years later, when the market was peaking, Nike was down to just $13. Still, Nike has managed to rebound and outperform the market even when we measure from its early 1997 peak.

  I like the company a lot but the stock is rather pricey. I think NKE would be a much better buy if it dropped down to $70.

  The chart below shows Nike’s stock along with the S&P 500. For comparison, I’ve given the S&P 500 the same starting base as Nike.

  

• Medtronic Earnings Preview
  Eddy Elfenbein, November 21st, 2011 at 1:36 pm

  From the AP:

  Medtronic Inc., the world’s largest medical device maker, reports fiscal second-quarter earnings Tuesday morning, as investors continue to monitor weak demand, pricing pressures and other issues hurting the entire medical device industry.

  WHAT TO WATCH FOR: Last quarter Medtronic reported declines for its two leading franchises, heart defibrillators and spinal implants, as tighter hospital budgets, reduced patient procedures and safety concerns led doctors to scale back use of the devices.

  Industry competitors like Boston Scientific Corp. reported weaker-than-expected earnings last month, with noticeable declines in sales of defibrillators, which are heart-zapping implants used to treat heart failure. Leerink Swann analyst Rick Wise estimates the market for the devices declined 14 percent in the first nine months of the year, compared with 2010.

  WHY IT MATTERS: Medtronic relies on defibrillators and spinal implants for more than 50 percent of its total sales. Medtronic and other device makers have seen profits drop since the Department of Justice began investigating alleged overuse of defibrillators in January.

  Then in June Medtronic’s spinal business took a major publicity blow after a medical journal alleged that the company downplayed the risks of its InFuse spinal repair protein. According to reports in Spine Journal, Medtronic also failed to disclose millions of dollars in payments to the authors who wrote the initial studies of InFuse. The implant, which is approved to treat degenerative spinal disk disease, accounted for 85 percent, or $750 million, of Medtronic’s total spinal business last year.

  Leerink’s Rick Wise said the ongoing pressure could lead Medtronic to scale back its full-year earnings guidance.

  “Though Medtronic seems well positioned to benefit from recent and upcoming product launches, incremental volume declines in both ICDs (implantable cardioverter defibrillators) and spine, with no clear signs of improvement, could prompt management to take an even more cautious stance on fiscal year 2012 guidance,” Wise wrote in a note to investors. Medtronic has stated it expects fiscal year earnings per share between $3.43 and $3.50.

  WHAT’S EXPECTED: Analysts polled by FactSet expect earnings per share of 82 cents on revenue of $4.07 billion for the company’s fiscal 2012 second-quarter.

  LAST YEAR’S QUARTER: In the second quarter last year Medtronic Inc. earned 82 cents per share on an adjusted basis on revenue of $3.9 billion.

• Gilead Deal on CNBC
  Eddy Elfenbein, November 21st, 2011 at 10:34 am

• Some Perspective
  Eddy Elfenbein, November 21st, 2011 at 10:13 am

  Thanks to today’s sell-off, the Dow is currently only a few points away from where it ended the last century (11,487 on December 31, 1999). In other words, we haven’t gone anywhere in nearly 12 years.

  That’s rough but it’s not unprecedented. On December 12, 1905, the Dow closed at 96.05. It would close at the exact same level on April 17, 1942. That’s 36 years and four months which is roughly the time from Richard Nixon’s resignation to today. The Dow was below 800 back then. Just think if we had seen no gain since then.