CrossingWallStreet.com

Steven Tyler Laid Off; Aerosmith's Unemployment Rate Hits 20%

Thu, 12 Nov 2009 19:06:13 -0500

After years of relative stability, the Aerosmith unemployment rate soared to an all-time high of 20 percent Monday following the downsizing of the band's vocal sector, Steven Tyler.
The announcement of the largest-ever round of Aerosmith layoffs sent shock waves throughout the group, but band leaders said that four decades of perfect employment was "unrealistic" and that it was necessary to shed some of the graying, outmoded workforce.

"Explaining to a longtime Aerosmith employee that his or her job is being eliminated is one of the most difficult challenges we face in this business," Aerosmith manager Trudy Green said in a statement released this morning. "We thank Steven for his many years of loyal service, and wish him the best of luck in all his future endeavors."

A Great Earnings Season

Thu, 12 Nov 2009 15:54:13 -0500

At Zacks, Dirk Van Dijk notes what a good earnings season it's been:

It’s almost time to close the books on a fantastic earnings season. With almost 90% of reports in, there have been 339 that have exceeded expectations while only 62 have fallen short -- a ratio of 5.47. While it is true that most companies will normally try to under-promise and over-deliver, this quarter the beats are beating the misses by about twice the normal margin of 3:1.
Nor have all the surprises only been by a penny or two, but there have been lots of companies that simply crushed their earnings estimates. The median surprise is a very high 7.11%. Over the last five years, a median surprise of about 3.0% has been normal. Part of the reason is that expectations were set very low going into the earnings season.

For most companies, their earnings are still below year ago levels, just not as far down as people thought they would be. Only 193 firms have posted positive year-over-year growth, versus 251 that have fallen short of year-ago levels -- a ratio of 0.77.

The disparity between firms beating estimates but having negative year-over-year earnings growth is particularly noticeable in Tech, where the earnings surprise ratio is an awesome 9.25. However, the growth ratio (# of firms with positive growth/# of firms with negative growth) is just 0.49. A similar situation, but not quite as extreme, is true for Materials. Staples and Medical have been both growing earnings and beating expectations.

On the top line, it has also been a successful season so far (relative to expectations), but in terms of actual year-over-year growth it has been downright ugly The total revenues of the 444 firms that have already reported are 13.4% below year-ago levels. A total of 241 firms have reported higher-than-expected revenues, versus 176 that have disappointed, for a ratio of 1.37. On the other hand, only 127 actually had higher sales than a year ago, versus 314 with lower revenues, a ratio of 0.40. Put another way, only 28.6% of all firms reporting so far have had higher sales than a year ago.

In other words, cost-cutting has been the major force driving earnings and earnings surprises. However, the costs to one company are either the revenues of another company or someone’s paycheck, which is then spent to create revenues for firms. The bottom-up data coming out of all these individual firms seems to confirm what we have been getting from the government's macro statistics. The economy is growing due to increases in productivity. Higher GDP with fewer workers.

10 States Facing Budget Disasters

Thu, 12 Nov 2009 10:01:08 -0500

I'll spare you the suspense -- California is one.

Why Lord Why

Wed, 11 Nov 2009 18:00:58 -0500

The Wall Street Journal reports:

Hewlett-Packard Co. agreed

me running slow motion

to acquire

waving my arms

networking-equipment maker 3Com Corp.

screaming

in a deal the companies valued

NOOOOOOOOOOOO....

at $2.7 billion.

OOOOOOOOOO.....

The Humpy Pattern Lives

Wed, 11 Nov 2009 17:29:58 -0500

The S&P 500 closed at its highest level in 13 months. During the day, we got as high as 1105.37, but we haven’t been able to hold 1,100 going into a close yet. The S&P 500 was down slightly yesterday but the Dow was up. In fact, the Dow has been up every day this month.

I still cling to my Humpy Pattern Thesis. This chart below of the S&P 500 CLEARLY shows a rising pattern of surges—humps if you will. I have no idea what it means for the future but I’m passing it on to you.

Thanks Vets

Wed, 11 Nov 2009 09:42:09 -0500

NICK Announces Stock Split

Tue, 10 Nov 2009 13:42:54 -0500

I'm not sure why this is needed, but Nicholas Financial (NICK) has just announced a 10% stock dividend which will be paid on December 7 for shareholders of record of November 20. Think of it as an 11-for-10 stock split.

In other Buy List dividend news, Baxter International (BAX) has raised its quarterly dividend to 29 cents a share from 26 cents. Don't brush off these regular dividend increases, it's often a sign of a strong company.

The Buy List Hits New High

Mon, 09 Nov 2009 17:45:28 -0500

The Buy List jumped 2.25% today. We're now up 38.66% for the year, which is a new high for the year (not including dividends). The S&P 500 is 21.02% for the year.

A Fed Rate Increase By June?

Mon, 09 Nov 2009 11:17:06 -0500

The futures market thinks so:

U.S. Federal Reserve Chairman Ben S. Bernanke may start to increase borrowing costs in June, according to Fed funds futures prices compiled by Bloomberg. Traders assign a 54 percent chance of an increase to at least 0.5 percent at the end of the Federal Open Market Committee’s meeting on June 23, when the American economy is forecast to be in its fourth straight quarter of expansion, according to estimates compiled by Bloomberg.

Barron’s Highlights Altria

Mon, 09 Nov 2009 10:26:54 -0500

Tobacco companies are hated by the public but the stocks are very tempting financially. Over the weekend, Barron’s looked at Altria (MO):

At around 18.50, Altria has one of the lowest price/earnings ratios in the global cigarette industry. It also has one of the highest dividend yields: 7.3%. The stock trades for 10.6 times projected 2009 profits of $1.77 a share and 10 times estimated 2010 earnings of $1.87. Even Reynolds American (ticker: RAI), with weaker brands, sports a slightly higher P/E on a 2010 basis.
At its current price, Altria's stock appears to have little downside and significant appreciation potential. One of the company's prime assets is a 27% stake in international brewer SABMiller (SAB.U.K.), which is worth $11.5 billion, or 30% of Altria's current market value.

Altria has lost some cachet in the investment community since the 2008 separation of its international tobacco operations. The faster-growing spinoff, Philip Morris International (PM), trades around 49, or for 15 times projected 2009 profits, a sizable premium to Altria.

Those are very solid numbers. I’d add that the company has consistently met or beaten earnings for the past few quarters, so it may be going for even less than 10 times next year’s earnings.

Herb Brooks' Pre-Game Speech from Miracle

Sat, 07 Nov 2009 15:32:38 -0500

Kurt Russell also did a version.

Single Letter Ticker Symbols

Fri, 06 Nov 2009 18:17:34 -0500

Congratulations to Hyatt Hotels (H) on their recent IPO. They had the rare honor of getting a single-letter ticker symbol. There are only six left -- I, J P, U, W and Z.

For possible future reference, the symbol CWS is also open.

Bernstein's Target for AMZN = $160

Fri, 06 Nov 2009 15:55:41 -0500

Really? Is that 160 U.S. dollars, or is it pesos?

I've been totally and completely wrong on Amazon (AMZN) but I won't give in so easily. I do not get it's current price of $125 which is 50 times next year's earnings. The analyst at Bernstein sees it going to $160.

Montana Farmers Fear a Buffett ‘Dictatorship’

Fri, 06 Nov 2009 15:26:11 -0500

The WSJ reports on the fear of an Omahalebensraum:

Few states have more at stake in Warren Buffett’s acquisition of Burlington Northern Santa Fe than Montana. The company owns 90% of the state’s tracks, which are the primarily means for Montana farmers and coal miners to ship their goods across the country.
To get a sense of how the deal is being received in the Big Sky state, Deal Journal reached out to Alan Merrill, president Montana Farmers Union, who can watch Burlington Northern’s grain cars rumble along outside his Great Falls, Mont., office six or seven times a day.

For years, Merrill says, the state’s 11,000 farmers have complained about the monopoly that Burlington Northern holds over rail shipping in Montana. He hopes Buffett, who lives in the middle of corn-growing country in Omaha, Neb., will be sympathetic to farmers’ concerns about what they consider to be high rates on their barley and wheat shipments.

Those Evil Drug Companies

Fri, 06 Nov 2009 12:05:24 -0500

Business Week reports:

On Oct. 8, Senator Al Franken (D-Minn.) introduced a bill proposing that drugmakers no longer be allowed to deduct marketing expenses from their taxes, as companies generally can. "This legislation will remove these benefits so pharmaceutical companies can focus on developing new drugs, not excessive marketing schemes," Franken's office said in a statement.

Developing new drugs is a great idea! Of course, that will requite money. Now where would that come from?