Nicholas Financial Earns 23 Cents a Share
Posted by Eddy Elfenbein on February 2nd, 2010 at 11:15 am

This is another very good earnings report from Nicholas Financial (NICK):

Nicholas Financial, Inc. announced that for the three months ended December 31, 2009, net earnings, excluding change in fair value of interest rate swaps, increased 117% to $2,747,000 as compared to $1,267,000 for the three months ended December 31, 2008. Per share diluted net earnings, excluding change in fair value of interest rate swaps, increased 109% to $0.23 for the three months ended December 31, 2009 as compared to $0.11 for the three months ended December 31, 2008. See reconciliations of the non-GAAP measures (below). Revenue increased 8% to $14,365,000 for the three months ended December 31, 2009 as compared to $13,254,000 for the three months ended December 31, 2008.
For the nine months ended December 31, 2009, net earnings, excluding change in fair value of interest rate swaps, increased 97% to $7,114,000 as compared to $3,616,000 for the nine months ended December 31, 2008. Per share diluted net earnings, excluding change in fair value of interest rate swaps, increased 91% to $0.61 for the nine months ended December 31, 2009 as compared to $0.32 for the nine months ended December 31, 2008. See reconciliations of the non-GAAP measures (below). Revenue increased 6% to $42,216,000 for the nine months ended December 31, 2009 as compared to $39,878,000 for the nine months ended December 31, 2008.
According to Peter L. Vosotas, Chairman and CEO, “We are pleased with our third quarter results. These results were favorably impacted by an increase in revenues of 8%, a reduction in the net charge-off rate of 25% and a 20% reduction in the cost of borrowed funds. During the third quarter we opened our 50th branch location in Gastonia, North Carolina. We expect to open a second branch location in Nashville, Tennessee and a branch location in Grand Rapids, Michigan, during our fourth quarter ending March 31, 2010. The Company continues to evaluate additional markets for future branch locations, and subject to market conditions, could open additional branch locations during the year. The Company remains open to acquisitions should an opportunity present itself,” added Vosotas.

This is what I wrote last month:

Let’s make some assumptions for the next earnings report. If the pre-tax yield for the last quarter hit 7% on receivables of $230 million that comes to about $4 million pre-tax for the quarter. With the new shares post stock dividend, that’s 35 cents a share. After taxes, that’s about 22 cents a share.
For the first six months of the fiscal year (ends March 31), NICK made 40 cents a share. So we’re probably talking about stock on its way to making around 80 cents a share for the year during an awful recession. As I see it, this company is almost like an 11% or 12% bond and the credit quality is improving.

I was close. The pre-tax yield was actually 8% but receivables only rose $226 million. That’s an increase of 1.6% from last quarter. Even though the portfolio isn’t growing, the quality is improving. The average cost of borrowed funds dropped down to 3.92%. Best of all, the provision for credit losses fell again. It’s now at 5.34%. This is the fifth straight quarter it’s fallen.
Overall, this is a very good report. Assuming the trends continue, then NICK should be able to earn $1 a share for this calendar year. I still believe these shares are very underpriced.

More Buy List Earnings
Posted by Eddy Elfenbein on February 1st, 2010 at 12:15 pm

The Buy List is recovering today along with the rest of the stock market. Sysco (SYY), which has been a frustrating stock recently, is up today thanks to a good earnings report. For the third straight quarter, the company beat expectations. Sysco earned 45 cents a share which was three cents more than the Street expected. Sales fell for the fifth straight quarter. Reuters writes: “Operating expenses fell 7 percent to $1.23 billion. Sysco has been cutting costs by reducing headcount, bonuses and commissions to offset weak demand.”
Moog (MOG-A) also reported earnings today. This stock gained nearly 50% from its October low to its January high. The company earned 47 cents a share which matched Wall Street’s estimate. This is a big drop from last year.

Moog’s profits slid to $21.6 million, or 47 cents per share, during the quarter that ended on Jan. 2, down from $30.3 million, or 70 cents per share, a year earlier.
The company’s sales rose to $495.2 million from $446.1 million, aided by Moog’s acquisitions last year of a British flight controls business and the Fernau navigation aids unit.
Much of the drop in earnings came from the company’s space and defense business, one of Moog’s strongest performers last year, where operating profits fell by 45 percent to $7.5 million on a 3 percent drop in sales.
Earnings also declined at Moog’s components group, where profits were down 19 percent to $12.1 million, despite a 4 percent increase in revenues to $84.9 million.
Operating profits jumped by 30 percent to $17.6 million at the company’s aircraft controls business, where sales grew by 7 percent to $175 million. Earnings at Moog’s industrial systems business were nearly flat at $11.2 million, despite a 24 percent increase in sales at $136.4 million. The firm’s medical device business, which lost $2.2 million a year ago, returned to profitability with a $139,000 operating profit as sales jumped by 47 percent to $29.4 million.

Absurb Story of the Day
Posted by Eddy Elfenbein on February 1st, 2010 at 11:45 am

Score one for the British media. The Times somehow floats the idea that Goldman’s CEO Lloyd Blankfein is going to get a $100 million bonus. Not only is this nuts, there’s absolutely zero evidence for it. Still, the Times runs with their story which is the potential backlash against a fairy tale.

Goldman Sachs, the world’s richest investment bank, is facing a potential political storm over how much it pays its chief executive, Lloyd Blankfein.
Bankers in Davos for the World Economic Forum (WEF) told The Times they understood that Mr Blankfein and other top Goldman bankers outside Britain were set to receive some of the bank’s biggest-ever payouts, in defiance of President Obama’s attempt to shame banks into cutting bonuses. “This is Lloyd thumbing his nose at Obama,” said a banker at one of Goldman’s rivals. (That’s the kind of quote journalists kill for.)
Mr Blankfein took home his biggest bonus so far in 2007, when he was paid $67.9 million. Goldman’s profits last year were $1.8 billion higher than in 2007. This leaves the bank with a justification to pay him even more although payouts will be made in shares rather than cash to make them more politically palatable. Some rival bankers claim Mr Blankfein could receive up to $100 million, though even a much lower figure could prove politically explosive. (Who the hell is “some rival banker”? How on earth did they get that number?)
Lucas van Praag, Goldman’s spokesman, said:”Although the Board has yet to detemine executive compensation, given everything we have said and done on the subject, the idea that the directors would award Lloyd Blankfein $100 million, or anything close to it, beggars belief.”

In other news, the editors of the Times could potentially drown a bag of cats this afternoon. According to their unnamed business rivals, this would hurt the Times‘ image.

GDP +5.7%
Posted by Eddy Elfenbein on January 29th, 2010 at 6:02 pm

Good news! Real Q4 GDP growth came in at 5.7%. That’s the best growth in over six years. This probably means that the recession is over, even though it still doesn’t feel like it.
Interestingly, the GDP report also showed that nominal GDP increased by a slight 0.81% over the fourth quarter in 2008. This comes after three straight declines. If it weren’t for the lag time, this metric would make a good interest rate peg for the Federal Reserve.

Here’s a look at the Fed fund rates over the same period.

You can see that in the period of 2002 to 2004, the Fed Funds rate was well below nominal GDP growth.

Bin Laden Comes Out Against Dollar
Posted by Eddy Elfenbein on January 29th, 2010 at 1:21 pm

And he’s reading Noam Chomsky:

He called for a worldwide boycott of American goods and the dollar. He faulted the United States for failing to sign the Kyoto Protocol, which sought to curb global warming by restricting greenhouse gas emissions. And he offered a word of praise for Noam Chomsky, the American linguist and liberal political activist.
“Noam Chomsky was correct when he compared the U.S. policies to those of the Mafia,” Al Jazeera quoted Mr. bin Laden as saying. “They are the true terrorists and therefore we should refrain from dealing in the U.S. dollar and should try to get rid of this currency as early as possible.”

By the way, the Saudi riyal is tied to the U.S. dollar.

Ben Bernanke Wins
Posted by Eddy Elfenbein on January 28th, 2010 at 3:45 pm

Ben gets another term. The cloture vote was 77-23 and the confirmation vote was 70-30.
In the cloture vote, Democrats voted 53 to 5, and Republicans voted 23 to 17. The two independents split (Lieberman Yes, Sanders No). Note that Senator Kirk is still in office.
The seven senators who voted for cloture but against the nomination were Boxer, Dorgan, Franken, Harkin, Kaufman, LeMieux and Whitehouse.
Full roll calls after the jump.

Read more…

Lily’s Earnings
Posted by Eddy Elfenbein on January 28th, 2010 at 2:34 pm

The earnings parade continues. Eli Lilly (LLY) just reported Q4 earnings of 91 cents a share which was a penny below expectations although revenues exceeded expectations.

For the full year, Lilly earned $4.33 billion, or $3.94 per share, compared with a loss of $2.07 billion, or $1.89 per share, in 2008. Revenue rose 7 percent to $21.84 billion from $20.37 billion.
Looking ahead, the company expects a profit of $4.65 to $4.85 per share in 2010, excluding any possible impact from the health care overhaul currently being considered by Congress. Analysts expects a profit of about $4.73 per share.

At $4.73 per share, that means the stock is going for 7.5 times this year’s earnings.

The Global Business Oath
Posted by Eddy Elfenbein on January 28th, 2010 at 2:03 pm

Felix Salmon is in Davos and he points us to something that truly cannot be parodied, the Global Business Oath:

As a business leader I recognize that
* The enterprise I lead must serve the greater good by bringing together people and resources to create value that no single individual can create alone,
* My decisions can have far-reaching consequences that affect the wellbeing of individuals inside and outside my enterprise, today and tomorrow,
* As I reconcile the interests of different constituencies, I will face choices that are not easy for me and others.
So I promise that
1. I will manage my enterprise diligently and in good faith and will not let personal considerations and compensation supersede the long-term interest of my enterprise and society at large,
2. I will understand and uphold, both in letter and spirit, the laws and contracts governing my own conduct and that of my enterprise,
3. I will respect and protect the human rights and dignity of all people who are affected by my enterprise and will oppose all forms of discrimination and exploitation,
4. I will respect and protect the right of future generations to enjoy a clean and resourceful planet,
5. I will not engage in nor tolerate bribery or any other form of corruption,
6. I will represent the performance and risks of my enterprise accurately and honestly to each of the constituencies that are affected by it,
7. I will actively engage in efforts to finding solutions to critical social and environmental issues that are central to my enterprise, and
8. I will invest in my own professional development as well as the development of other managers under my supervision.
In exercising my professional duties according to these principles I recognize that my behavior must set an example of integrity and responsible conduct.
This pledge I make freely and upon my honor.

I pledge to use inane sound bites, empty slogans and boring cant in the service of all humanity.
P.S. I misread the title of Felix’s post. “Youthful swearing at Davos” didn’t mean what I had hoped.

Baxter Reports In Line
Posted by Eddy Elfenbein on January 28th, 2010 at 12:20 pm

For the first time in 20 quarters, Baxter International (BAX) failed to beat expectations:

Baxter International reported a 1 percent profit increase for the fourth-quarter on Thursday, meeting Wall Street expectations but failing to impress analysts accustomed to bigger gains from the medical products maker.
The company’s broad mix of medically necessary products — including blood plasma, kidney dialysis treatments and cancer drugs — continued to post solid returns, though analysts said its guidance for 2010 appeared conservative.
Baxter earned $572 million, or 94 cents per share, up from $569 million, or 91 cents per share, a year prior. Revenue rose 11 percent to $3.47 billion from $3.13 billion.
Excluding charges, the Deerfield, Ill., company said it earned $1.03 per share, in-line with estimates by analysts polled by Thomson Reuters.
While the company successfully met Wall Street projections, Leerink Swann analyst Rick Wise noted that the company has beat such estimates the last 20 consecutive quarters. The last period when the company achieved in-line results was in 2004, according to an investment note from Wise.

College Endowments Got Hammered Last Year
Posted by Eddy Elfenbein on January 28th, 2010 at 12:11 pm

The New York Times reports that the average college endowment lost 18.7% last fiscal year which is the worst showing since the Great Depression.

The study, by the National Association of College and University Business Officers and Commonfund, a nonprofit organization that manages university investments, also found that in the last year, many endowment managers increased the move from traditional fixed-income instruments and stocks into alternative investments like private equity, hedge funds, venture capital and private-equity real estate — all of which performed badly in fiscal 2009.
Unusually, the universities with endowments over $1 billion had the greatest decline, an average of 20.5 percent. Harvard, Yale and Stanford, the wealthiest universities, all lost more than 26 percent of their endowment values.
At the same time, the study found, debt rose, especially at the largest universities, and gifts declined.
The 2009 losses in endowment income come on top of an average loss of 3 percent in fiscal 2008. The three-year average return, which most universities use to determine how much of their assets to spend, was negative 2.5 percent, compared with the five-year average of 2.7 percent, and the 10-year average of 4 percent.

If there were only some place these school could receive free market-beating investing advice.