Exxon Mobil’s Earnings
Posted by Eddy Elfenbein on February 1st, 2007 at 11:21 am

For 2006, Exxon Mobil (XOM) earned $39.5 billion. That’s an astounding number.
To put that in perspective, the GDP of the United States for last year was $13.25 trillion. About 27% of XOM’s profits, or $10.8 billion, came from the U.S. So that means that one company makes up nearly 0.1% of the national economy.

American Standard to Split Itself Into Three
Posted by Eddy Elfenbein on February 1st, 2007 at 10:31 am

One of the companies I like to follow is American Standard (ASD). Most people assume that this is a toilet stock. By that, I don’t mean the shares are in the toilet, but that the company literally makes toilets. Actually, both assumptions are incorrect. The company’s main business is Trane air conditioning, and the stock has done very well.
The company has a rather interesting history. American Standard first went public in 1929, which was a good time to be selling shares. In 1968, the company bought WEBCO, which was the Westinghouse Air Brake Company. George Westinghouse’s air brake revolutionized rail travel. When Westinghouse died in 1914, the New York Times wrote that his invention saved more lives than all wars combined.
By 1988, American Standard was threatened with a hostile takeover, so the management decided to take the company private through an LBO. In 1995, American Standard returned to the markets when it IPO’d at $20 a share. The stock reached an all-time high yesterday of $49.47, and that includes a 3-for-1 split. So ASD’s shares are up about 650% in 12 years.
Now for the good news. Today the company announced fourth-quarter earnings of 51 cents a share, and it guided higher for 2007. Now for the really good news—the company will split itself up into three parts. Please take note. Whenever a successful company splits itself up, you can often find outstanding buys. Check out Moody’s stock since it was spun off from Dun & Bradstreet. Or Corporate Executive Board since it was spun off from the Advisory Board Company.
American Standard will sell off its struggling kitchen and bath unit (the toilets), which accounts for about 21% of sales. The WEBCO unit (about 18% of sales), which is now vehicle control, will be spun off to shareholder. ASD shareholders will get one share of WEBCO for every three shares of ASD they own. Lastly, the core air-conditioning business (61% of sales) will change its name to Trane.
The stock is up to $53 this morning.

SEI Investments’ Earnings
Posted by Eddy Elfenbein on February 1st, 2007 at 9:28 am

SEI Investments (SEIC) was our top-performing stock from last year. The company just reported another quarter of solid results. For the last three months of 2006, SEIC earned 62 cents a share. This was three cents more than estimates. For last year’s fourth quarter, the company earned 50 cents a share. For the year, SEIC earned $2.33 a share compared with $1.83 in 2005.

Rollins is Out at Dell
Posted by Eddy Elfenbein on January 31st, 2007 at 5:39 pm

From Bloomberg:

Dell Inc. Chairman and founder Michael Dell replaced Kevin Rollins as chief executive officer and said fourth-quarter results will miss analysts’ estimates. The shares rose 4.3 percent.

My thoughts exactly.

The Buy List So Far
Posted by Eddy Elfenbein on January 31st, 2007 at 5:26 pm

One month down, eleven to go. The Buy List had a great first half of January, followed by a blah second half. For the month, the S&P 500 was up 1.41% while our Buy List was up 1.66%.
The big winners were Respironics (12.85%), Bed Bath & Beyond (10.73%) and Amphenol (9.09%). Our losers for January were Sysco (-6.01%), Nicholas Financial (-4.24%) and WR Berkley (-4.11%).

Fiserv Earns 64 Cents a Share
Posted by Eddy Elfenbein on January 31st, 2007 at 5:00 pm

Fiserv (FISV) just reported fourth-quarter earnings, after charges, of 64 cents a share. This was in line with expectations. Sales were up 19%.
For 2006, Fiserv earned $2.53 a share, up from $2.19 in 2005. The company is also forecasting 2007 earnings growth of 13% to 16%, which works out to earnings of $2.86 to $2.94 per share. That means that Fiserv is going for about 18 times forward earnings.

Today’s Fed Statement
Posted by Eddy Elfenbein on January 31st, 2007 at 2:32 pm

For the fifth meeting in a row, the Federal Reserve does nothing:

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.
Recent indicators have suggested somewhat firmer economic growth, and some tentative signs of stabilization have appeared in the housing market. Overall, the economy seems likely to expand at a moderate pace over coming quarters.
Readings on core inflation have improved modestly in recent months, and inflation pressures seem likely to moderate over time. However, the high level of resource utilization has the potential to sustain inflation pressures.
The Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Cathy E. Minehan; Frederic S. Mishkin; Michael H. Moskow; William Poole; and Kevin M. Warsh.

This is a very positive statement.
The “somewhat firmer economic growth” line replaces “has slowed over the course of the year” from December. That’s a big change. Also, the “substantial cooling” of the housing market is gone and has been replaced with “some tentative signs of stabilization.” In the world of Fedspeak, that’s a jump for joy.
Core inflation has now “improved modestly,” where last month it was “elevated.” With Jeffrey Lacker off the committee, the vote was unanimous.

GDP Grew By 3.5% in Q4
Posted by Eddy Elfenbein on January 31st, 2007 at 9:10 am

The economy continues to plow along. After two quarters of below-trend growth, the economy grew by 3.5% (annualized) in the fourth quarter. This happened even though residential private investment (i.e., home construction) dropped by 19%, the largest decline since 1991.
Here’s GDP growth since 1997:

The drop in residential private investment took 1.2% off GDP growth. Here’s a look at home construction’s share of the economy since 1987:

Over the last four years, the economy has grown by 27.3% (not adjusted for inflation).

AFLAC’s Earnings
Posted by Eddy Elfenbein on January 30th, 2007 at 4:58 pm

AFLAC‘s (AFL) stock is getting beaten up in the after-hours market. The supplemental insurance company reported earnings of 66 cents a share (with insurers, the important number is operating earnings). This was a nice improvement over the 59 cents from last year, but it was a penny shy of expectations. The good news is that AFLAC guided higher for 2007. The company now sees EPS of $3.28 to $3.31.

Eatin’ Good Far from the Neighborhood
Posted by Eddy Elfenbein on January 30th, 2007 at 3:20 pm

Michelle Leder at Footnoted.org spotted this letter from former SEC Chairman Richard C. Breeden to Campbell Soup’s CEO Douglas Conant. Conant is also chairman of Applebee’s compensation committee:

On 29 occasions from from April 2006 through January 2007, Applebees’s corporate aircraft flew into and out of Galveston, Texas, where former CEO Lloyd Hill happens to own a beach house. The nearest Applebees’s restaurant is more than 40 miles away. Though Mr. Hill ceased to be CEO in September 2006, company planes continue the Galveston shuttle.”

Daniel Gross has more on the troubling mix of CEOs and corporate jets.