Small Cap Bear...

Options 101: Bull Call Spread

noreply@blogger.com (ms) — Sat, 27 Apr 2013 20:26:00 +0000

The bull call spread option trading strategy is employed when the options trader thinks that the price of the underlying asset will go up moderately in the near term.

Bull call spreads can be implemented by buying an at-the-money call option while simultaneously writing a higher striking out-of-the-money call option of the same underlying security and the same expiration month.

By shorting the out-of-the-money call, the options trader reduces the cost of establishing the bullish position but forgoes the chance of making a large profit in the event that the underlying asset price skyrockets. The bull call spread option strategy is also known as the bull call debit spread as a debit is taken upon entering the trade.

Limited Upside profits

Maximum gain is reached for the bull call spread options strategy when the stock price move above the higher strike price of the two calls and it is equal to the difference between the strike price of the two call options minus the initial debit taken to enter the position.
The formula for calculating maximum profit is given below:
Max Profit = Strike Price of Short Call - Strike Price of Long Call - Net Premium Paid - Commissions Paid
Max Profit Achieved When Price of Underlying >= Strike Price of Short Call

Limited Downside risk

The bull call spread strategy will result in a loss if the stock price declines at expiration. Maximum loss cannot be more than the initial debit taken to enter the spread position.
The formula for calculating maximum loss is given below:
Max Loss = Net Premium Paid + Commissions Paid
Max Loss Occurs When Price of Underlying <= Strike Price of Long Call
Breakeven Point(s)

The underlier price at which break-even is achieved for the bull call spread position can be calculated using the following formula.
Breakeven Point = Strike Price of Long Call + Net Premium Paid

Bull Call Spread Example

An options trader believes that XYZ stock trading at $42 is going to rally soon and enters a bull call spread by buying a JUL 40 call for $300 and writing a JUL 45 call for $100. The net investment required to put on the spread is a debit of $200.
The stock price of XYZ begins to rise and closes at $46 on expiration date. Both options expire in-the-money with the JUL 40 call having an intrinsic value of $600 and the JUL 45 call having an intrinsic value of $100. This means that the spread is now worth $500 at expiration. Since the trader had a debit of $200 when he bought the spread, his net profit is $300.
If the price of XYZ had declined to $38 instead, both options expire worthless. The trader will lose his entire investment of $200, which is also his maximum possible loss.
Note: While we have covered the use of this strategy with reference to stock options, the bull call spread is equally applicable using ETF options, index options as well as options on futures.

Commissions

For ease of understanding, the calculations depicted in the above examples did not take into account commission charges as they are relatively small amounts (typically around $10 to $20) and varies across option brokerages.
However, for active traders, commissions can eat up a sizable portion of their profits in the long run. If you trade options actively, it is wise to look for a low commissions broker. Traders who trade large number of contracts in each trade should check out OptionsHouse.com as they offer a low fee of only $0.15 per contract (+$8.95 per trade).

Aggressive Bull Call Spread

One can enter a more aggressive bull spread position by widening the difference between the strike price of the two call options. However, this will also mean that the stock price must move upwards by a greater degree for the trader to realise the maximum profit.

Source: OptionsGuide

Earnings Report: Zynga, Qualcomm, F5 Networks, Yum! Brands

noreply@blogger.com (sJ) — Thu, 25 Apr 2013 14:57:00 +0000

Zynga (ZNGA $3.03 -0.32) reported first quarter earnings of $0.01 per share, excluding non-recurring items (Co guided to ($0.05)-(0.04) on Feb 5), $0.05 better than the Capital IQ consensus of ($0.04), while revenues fell 17.9% year/year to $263.6 million versus the $264.77 million consensus. Co issued downside guidance for the second quarter with EPS loss of ($0.04) - ($0.03), excluding non-recurring items versus the ($0.01) Capital IQ consensus and revenues of $225-235 million versus the. $261.72 million consensus. Daily active users (DAUs) decreased from 65 million in the first quarter of 2012 to 52 million in the first quarter of 2013, down 21% year-over-year. On a consecutive quarter basis, DAUs were down 8% from 56 million in the fourth quarter of 2012. Monthly active users (MAUs) decreased from 292 million in the first quarter of 2012 to 253 million in the first quarter of 2013, down 13% year-over-year. On a consecutive quarter basis, MAUs were down 15% from 298 million in the fourth quarter of 2012. Monthly unique users (MUUs) decreased from 182 million in the first quarter of 2012 to 150 million in the first quarter of 2013, down 18% year-over-year. On a consecutive quarter basis, MUUs were down 10% from 167 million in the fourth quarter of 2012. Bookings were $229.8 million for the first quarter of 2013, a decrease of 30% compared to the first quarter of 2012 and a decrease of 12% compared to the fourth quarter of 2012. Q2 Bookings are projected to be in the range of $180 million to $190 million. Q2 Adjusted EBITDA is projected to be in the range of ($10) million to break even "We are encouraged by the strong execution from our teams and the breakout hit performance of FarmVille 2, which captures the imagination of nearly 40 million players every month....2013 will continue to be a transition year as we face the challenging environment on the web and invest in developing the leading franchises and network across web and mobile platforms and offer our 253 million monthly players a connected experience that can follow them from work to school to home and anywhere in between."

Qualcomm (QCOM $62.12 -3.87) reported second quarter earnings of $1.17 per share, excluding non-recurring items, in-line with the Capital IQ consensus of $1.17, while revenues rose 23.9% year/year to $6.12 billion versus the $6.08 billion consensus. Q2 Key Business Metrics MSM chip shipments: 173 million units, up 14 percent y-o-y and down 5 percent sequentially. December quarter total reported device sales: approx $61.1 billion, up 18 percent y-o-y and 15% QoQ. December quarter estimated 3G/4G device shipments: ~279 to 283 million units, at an estimated average selling price of approximately $214 to $220 per unit. The company issued in-line guidance for the third quarter with EPS of f $0.97-1.05, excluding non-recurring items, versus the $1.04 Capital IQ consensus and revenues of $5.8-6.3 billion versus $5.88 billion Capital IQ consensus. The company issued guidance for FY13, raises EPS to $4.40-4.55, excluding non-recurring items, from $4.25-4.45 versus the. $4.53 Capital IQ consensus. The company raised revenues to $24.0-25.0 billion from $23.4-24.4 billion versus the $24.1 bln Capital IQ consensus.

F5 Networks (FFIV $74.89 +2.54) reported fourth quarter earnings of $1.07 per share, excluding non-recurring items, $0.01 better than the Capital IQ consensus of $1.06, while revenues rose 3.1% year/year to $350.2 million versus the $350.19 million consensus. The company issues downside guidance for Q3, sees EPS of $1.06-1.09, excluding non-recurring items versus the. $1.11 Capital IQ consensus and revenues of $355-365 million versus the $366.89 million Capital IQ consensus. The company also announced today that its board of directors had authorized an additional $200 million for the company's common stock share repurchase program. This new authorization is incremental to the $81.3 million currently in the existing program which was initially authorized in October 2010.

YUM! Brands (YUM $66.51 +2.36) reported first quarter adjusted earnings of $0.70 per share, $0.10 better than the Capital IQ consensus of $0.60;, while revenues fell 7.6% year/year to $2.54 billion versus the $2.56 billion consensus; worldwide system sales grew 1%, prior to FX, including 4% at Yum! Restaurants International (YRI) and 2% in the U.S. System sales declined 9% in China. Same-store sales declined 20% in China (previously reported). Same-store sales grew 1% at YRI and 2% in the U.S. Total international development was 380 new restaurants; 88% of this development occurred in emerging markets. Worldwide restaurant margin declined 2.7 percentage points to 15.9%, including a decline of 7.0 percentage points in China. Restaurant margin increased 1.4 percentage points at YRI and 2.4 percentage points in the U.S. Worldwide operating profit declined 14%, prior to foreign currency translation, including a 41% decline in China. Operating profit grew 19% at YRI and 5% in the U.S.

"While better than expected, the first quarter was extremely difficult for Yum! Brands. As anticipated, intense media attention surrounding poultry supply in China significantly impacted KFC sales and profit. Earnings per share declined 8% versus prior year, as our China Division operating profit fell 41%. Operating profit increased 19% at Yum! Restaurants International and 5% in our U.S. business. The negative media surrounding poultry supply in China has subsided. We have taken steps to enhance our industry-leading supply chain practices, and we're now in the midst of an aggressive quality assurance marketing campaign. However, our sales recovery has been adversely affected by the recent news of Avian flu. This news surfaced during the first week of April and continues to negatively impact same-store sales. We continue to remind consumers that properly cooked chicken is perfectly safe to eat. Historically, the sales impact of Avian flu publicity has initially been dramatic at KFC but relatively short-lived. We will stay the course with our plans to develop at least 700 new units in China this year to lay the foundation for future growth. We have complete confidence in a full sales recovery...There is no doubt 2013 will be a challenging year for our company. With news of Avian flu, there will obviously be more volatility with our China sales recovery. However, given better-than-expected first-quarter performance, our estimated mid-single-digit full-year EPS decline versus prior year remains unchanged. I'm confident we will end the year with momentum and restore our track record of consistently delivering double-digit EPS growth in 2014 and beyond."

Cliff Natural shares soar 7% following beat on earnings

noreply@blogger.com (sJ) — Thu, 25 Apr 2013 14:45:00 +0000

Cliffs Natural Resources (CLF $19.56 +1.63) reported first quarter earnings of $0.60 per share, $0.25 better than the Capital IQ consensus of $0.35, while revenues fell 5.9% year/year to $1.14 billion versus the $1.19 billion consensus.

First-quarter 2013 U.S. Iron Ore pellet sales volume was 3.1 million tons, compared with 3.4 million tons in Q1 of 2012. The decrease was primarily driven by lower YoY volume to one customer due to its bankruptcy in May of 2012.

Cliffs also indicated Q1 U.S. Iron Ore sales volume is historically lower compared with other periods due to seasonal shipping constraints on the Great Lakes. U.S. Iron Ore 2013 Q1 revenues per ton were $119.82, up 2% from $117.40 in the year-ago quarter. The increase was primarily attributable to customer mix and favorable provisional pricing settlements when compared to Q1 of 2012. Cash cost per ton in U.S. Iron Ore was $60.17, down 2% from $61.14 in the prior year's first quarter. The decrease was primarily attributed to lower maintenance expenses. "Looking ahead, Cliffs anticipates the end markets for its products to remain healthy.

In Q1 of 2013, China's annualized crude steel production achieved record levels, while utilization rates in North American remained stable. The Co expects pricing for the commodities it sells to remain volatile, with the potential to significantly decrease or increase at any point in time. Due to this expected volatility and for the purpose of providing a full-year outlook, Cliffs will utilize the year-to-date average Platts 62% Fe seaborne iron ore spot price as of March 31, 2013 of $148 per ton (C.F.R. China), as a base price assumption for providing its full-year revenue-per-ton sensitivities for the Co's iron ore business segments." "Cliffs indicated this assumption does not reflect the Co's internal expectation of full-year seaborne iron ore pricing. As such, with $148 per ton as a base-price assumption for the full year, included in the table below is the expected full-year revenue-per-ton range for the Co's iron ore business segments and the per-ton sensitivity for each $10-per-ton variance from the base-price assumption. The full-year sensitivity per ton for each respective iron ore business segment below reflects the sales volume and realized price achieved for first-quarter 2013 results and Cliffs' realized expectation for the remaining periods in 2013."

Ten Investing Rules To Avoid Losing Money By Paul Farrell

noreply@blogger.com (sJ) — Thu, 25 Apr 2013 08:00:00 +0000

The winning strategy for Main Street investors playing in Wall Street’s casino against killer pros is being patient, minimizing mistakes. Yes, follow his 10 rules and you can win the “loser’s game:”

1. Never speculate

Yes, the financial press acts like Nascar cheerleaders. One says jump on board now, this market is a “muscle car mired in the mud,” soon to get “unstuck.” Another tells investors to gamble: “For higher returns, you need to get into riskier investments.” No wonder Ellis coined the term, “Loser’s Game,” it’s accurate.

2. Your home is not a stock

You live in it. Today many mistakenly assume that rising equity values mean you don’t have to save for retirement. Or that you can use a home-equity loan to buy stuff. Or worse yet, use that money to buy more properties and start condo-flipping. Warning, when the bubble pops it will be too late for you to exit the loser’s game.

3. Save lots more regularly

“Savings glut” is the latest euphemism invented by happy-face economists and politicians. America’s savings rate has dropped from 10% two decades ago to zero, and has only recently started back up. Out-of-control consumption means importing and running trade deficits,. Meanwhile China recycles our dollars into Treasurys. This game is ending. Not saving now won’t help you later. Most retirees have too little set aside.

4. Brokers aren’t your friends

There is an inherent conflict of interest between you and every broker in the world. Even if they’re your neighbor and best friend. Bottom line: They make their living on fees and commissions, and that reduces your returns. They win and you lose. Think index funds.

5. Never trade commodities

Yes, you may want to add a small allocation of energy, metals or other commodity index funds to your long-term portfolio. But short-term trading is a loser’s game, and a fast one. Commodity traders tell me that all amateurs invariably lose all their risk capital within 12-18 months, then they quit trading.

6. Avoid new and exciting deals

Right now, with all the turmoil and risks domestically and globally, chasing hot stocks and exotic opportunities is an instant replay of the irrational exuberance that got us all in trouble with dot-coms in the 1990s, real estate around 2005-2008.

7. Bonds also ride up and down

Movie buffs used to say Fred Astaire was the greatest dancer of all time. Until a woman reviewer noted: Ginger Rogers was the greatest. She did the same as Fred, only backwards in high heels. Great visual when Charlie Ellis reminds us that in the short term bonds also go up and down like stocks. However, you increase your chances of winning the loser’s game remembering that as soon as the Fed increases rates, bond values will crash.

8. Never invest for tax benefits

Every year my accountant reminds me of this rule. Every decision should first make sense as an investment. Same applies if you’re making a business purchase like an SUV. Tax benefits are secondary.

9. Write your goals ... and stick to them

Especially a well-diversified, long-term asset allocation strategy. A budget. A savings plan with regular money going into a retirement program. Career goals. And start living below your means now, save more now, because later will be too late. Put it in writing.

10. Never trust your emotions

Behavioral economics was launched when Ellis wrote the first edition of “Winning the Losers’ Game.” This new science makes it clear investors are their own worst enemy. We’re not rational. We’re too optimistic in spite of impossible odds.

The pros own the game, insiders own the casino, rig the tables. They have more information, get it faster than you do, got more chips to play with, and they spend all day playing ... while you work for a living. You’re an amateur, at the loser’s tables, playing by their rules.

Worse, you can’t win because your emotions trigger too many mistakes, so they will set you up, trip you up and take advantage of your irrational brain.

Source: Market Watch

Gold Trying To Recover From Its Dramatic Drop

noreply@blogger.com (sJ) — Thu, 25 Apr 2013 07:52:00 +0000

Gold futures climbed Thursday in electronic trade, on track for a second consecutive advance, supported by strengthening physical demand for the precious metal and downbeat U.S. economic figures.

Gold for June delivery GCM3 +1.44% pushed higher by $21.90, or 1.5%, to $1,445.90 an ounce in Asian trading hours.

The contract on Wednesday rose $14.90, or 1.1%, on the Comex division of the New York Mercantile Exchange. The gain came as orders for U.S. durable goods fell by a seasonally adjusted 5.7% in March, worse than the 3.2% decline expected by economists polled by MarketWatch.

The generally soft data followed reports that manufacturing activity slowed toward the end of the first quarter, reinforcing worries about sluggishness in the broader U.S. economy.

Further evidence of economic slowing would likely prevent the U.S. Federal Reserve from signaling an early exit from quantitative easing, a monetary policy that’s been supportive for gold, some analysts have said.

Investors will receive weekly U.S. jobless claims data later Thursday. Reports on first-quarter gross domestic product and consumer sentiment in April are slated for release Friday.

Gold prices have had a rough April, with a tumble of nearly 11% putting them in position for their worst monthly slide since September 2011. But analysts have said that global physical demand for gold is still strong.

The U.S. Mint this week stopped sales of its smallest-denomination gold bullion coins as demand reduced government inventories. Year to date, demand for the one-tenth-ounce coins have more than doubled compared with the same time a year ago, the U.S. Mint said in a memo to authorized purchasers, according to The Wall Street Journal.

There have been other reports about shortages of gold bars and coins in some countries, according to Jim Wycoff, senior analyst at Kitco.com.

Source: Market Watch

Weak Economy Aboard Threatens US Recovery

noreply@blogger.com (sJ) — Mon, 22 Apr 2013 06:18:00 +0000

Troubles overseas are threatening the U.S. recovery for the fourth year in a row. This time it's weakening economies abroad, rather than tumbling financial markets, signaling turbulence ahead.

U.S. exports of goods to the European Union are declining outright. Growth in overall U.S. exports has been sputtering for months, after a three-year postrecession surge. And major U.S. companies are reporting increasingly dour overseas outlooks tied to the recession-plagued euro zone and slowing growth in other leading economies such as China.

The renewed fears of a global slowdown come after months of hope that a stronger recovery was finally taking shape.

"Every now and then you see a glimmer, things seem to improve, and then a little bit of bad news comes," World Bank chief economist Kaushik Basu said as the world's finance ministers and central bankers gathered in Washington in recent days to discuss how to revive growth.

The emerging troubles today are different from the scares of the past three years.

In 2010, 2011 and 2012, existential fears of a euro-zone collapse spooked investors around the world. While U.S. equity markets rose substantially over that period, they periodically took sharp slides that frightened businesses and weighed down confidence.

Despite the financial tremors, underlying economic growth remained moderate in the U.S., and most major euro-zone economies muddled through the early years of their crisis. U.S. exports to Europe expanded despite the clouds over the continent, helping to propel the U.S. recovery.

Financial markets have been on a tear since the European Central Bank vowed last summer to protect the euro currency. U.S. stocks, as well, have jumped 15% since last November, buoyed in part by the Federal Reserve's aggressive bond-buying program.

But major economies are languishing. The euro zone's recession is stretching out longer, China faces new fears of a slowdown and worries have re-emerged about a "spring swoon" in the U.S.

"The pickup in financial markets is clearly not translating into a sustained pickup in growth and jobs," International Monetary Fund Managing Director Christine Lagarde said last week. The IMF projects the global economy will expand just 3.3% this year, largely unchanged from 2012. It expanded 5.2% in 2010, the first full year of recovery, and 4% in 2011.

Signs of global weakness are showing up across corporate America.

General Electric Co. (GE) on Friday said Europe's troubles weighed down its results during the first quarter, despite posting higher overall profits. "We planned for Europe to be similar to 2012--down again--but it was even weaker than we had expected," Chief Executive Jeffrey Immelt said. The company's industrial revenue fell 17% in Europe, while other businesses there also struggled.

Falling commodity prices--one result of slowing growth--have put a dent in orders for mining equipment that other manufacturers are receiving. The equipment giant Caterpillar Inc. (CAT) said Friday that its retail sales of machines fell 11% in the first quarter from the same period a year earlier as demand cooled in major markets. The company's sales in the Asia-Pacific region alone were down 24% during the quarter.
The U.S. has its own share of homegrown problems adding to the overseas slowdown. An increase in payroll taxes in January is restraining consumers, hurting retail sales and hammering confidence. Federal budget cuts that started last month are expected to dent growth in the coming months as government workers take furloughs and contractors cut jobs.

The latest hits to U.S. consumers and businesses make overseas customers more important for U.S. companies. But economic trouble in the euro zone is ricocheting around the world and hurting other areas, such as China, which is also seeing exports to Europe struggle. That is contributing to China's weakness and limiting how much Chinese consumers and businesses might buy from American companies.
For McDonald's Corp. (MCD), the world's top-selling restaurant chain, sales have slipped at stores in China, Europe and the U.S. as trouble has spread around the globe. Sales at U.S. and European locations open at least 13 months fell more than 1% in the first quarter, while they dropped 4.6% in China.
McDonald's CEO Don Thompson on Friday blamed the company's troubles in part on Europe's "persistently high unemployment rates and ongoing austerity measures" along with "soft" economic conditions in Asia.

He said U.S. sales faced "significant headwinds," including wavering consumer confidence.
Until recently, many U.S. investors and companies had looked past those risks to the U.S. economy by focusing on stronger growth abroad. That sentiment could be challenged soon. While stock markets and economies frequently diverge, they can't move in opposite directions forever.

Source: Dow Jones

Unemployment rises as real estate and stock market indices rise!

noreply@blogger.com (sJ) — Wed, 10 Apr 2013 04:32:00 +0000

The current job-creation numbers are meaningfully below the level we might expect during a period of record corporate earnings and the reaching of new peaks in the major stock market indices.

The unemployment rate is 7.7%. But, there is another 0.6% of discouraged workers,(about 800,000) mainly the young, minorities and those without the all-necessary high school diploma. Another 0.9% are only marginally employed (whatever that means) and have mostly stopped looking for a job recently. More crushing is the 5.1% of the workforce most impacted by the 2008 downturn, who are working only part-time and would prefer to have a full-time position. That 5.1% part-time workers total 8 million people, who mostly are having trouble making ends meet and most likely have no health plan from their employer, according to Bob Eisenbreis, vice chairman and chief monetary economist at Cumberland Advisers, a New York-based investment firm that makes useful comments on the economy.

These numbers added together suggest that the true unemployment level– when part-time workers are included– is 14.3%–meaning that one in seven of every potential full-time employee in the U.S. economy is not able to earn a proper living wage–and thereby contribute to the snails-pace of economic growth.

To my way of thinking the dropout rate is the most perplexing, because how do these people survive? Moreover, the percentage of people employed is only 58.5%, down from 61%, the level hit in 2008 when Obama was first elected–and to be fair before the meltdown on Wall Street. And the jump in first-time unemployment claims last week was the highest level since last November.

Now comes the sequester–which is meant to slice 1.75% from GDP at a time the economy is supposed to be growing at only a 1.6% pace at best. In other words, fewer people will be earning wages just as bullish sentiment is gaining momentum for a risk-on long position in equities. Everywhere I go seasoned veterans believe the market’s current valuation of about 14 times earnings makes them comfortable for a long-lasting bull market. Because, after all, they argue–there is far more risk in the bond market. Incredibly, perversely almost–the public’s accumulation of fixed income mutual funds and ETFs continues big time.

I can only conclude that maybe corporate earnings will continue to increase, rewarding equity investors, because of the high unemployment rate.

Source: Forbes

Tiffany Net Up However Issues Downbeat 1Q View

noreply@blogger.com (sJ) — Fri, 22 Mar 2013 16:19:00 +0000

Tiffany & Co.'s (TIF) fiscal fourth-quarter earnings rose 0.7% from a prior year weighed down by headquarters relocation costs, while the jewelry retailer's sales fell short of consensus estimates.

Tiffany warned it expects fiscal first-quarter adjusted earnings to decline about 15% to 20% due to gross margin pressure and higher marketing-related costs, while analysts were looking for flat profit. The company predicts earnings growth in all subsequent quarters.

The company forecast fiscal 2014 earnings from operations of $3.43 to $3.53 a share on 6% to 8% sales growth, in line with the current estimate of $3.50 a share on a 6% revenue increase to $4.04 billion from analysts surveyed by Thomson Reuters.

High-end shoppers have continued to snap up Tiffany's fine jewelry, such as canary-yellow diamonds and engagement rings. But sales of silver jewelry--which carry a higher profit margin than fine jewelry--have declined of late as the retailer's less well-heeled customers are swayed by a weak economy, cheaper knockoffs and what some consider a stagnant selection.

Tiffany has plans for an Art Deco collection of silver, onyx and freshwater pearls this spring, as a less-expensive complement to 1920s-style platinum and diamond jewelry it recently created. It also has been developing new products including a new metal alloy--a mix of gold, silver and copper it calls Rubedo--and Tiffany jewelry pieces fashioned from the pinkish-hued metal start at $250 for a small pendant.

For the quarter ended Jan. 31, Tiffany reported a profit of $179.6 million, or $1.40 a share, up from $178.4 million, or $1.39 a share, a year earlier. Last year's per-share earnings were $3.60 excluding costs to relocate Tiffany's New York headquarters staff.

The company's November projection was for per-share earnings of $1.35 to $1.55, below consensus estimates at the time.

Sales increased 4.1% to $1.24 billion, short of the $1.25 billion forecast from Wall Street. Excluding the effect of foreign-currency translation, sales rose 5%.
Same-store sales were flat with the prior year.

Gross margin fell to 59.1% from 60.4%, partly due to pressures from precious metal and diamond costs and a sales-mix shift towards higher-priced, lower margin products.

Shares were trading 3.8% higher at $70.50 premarket. The stock has climbed 18% so far this year through Thursday's close.

Source: Dow Jones

Royal Caribbean Swings to Loss on Impairment Charge

noreply@blogger.com (sJ) — Mon, 04 Feb 2013 17:09:00 +0000

Royal Caribbean Cruises Ltd. (RCL) swung to a fourth-quarter loss as the cruise ship company recorded a massive impairment charge, although net yields--a key industry metric measuring revenue per available cruise day--beat expectations.

For the year, the company projected per-share earnings of $2.30 to $2.50, below recent estimates of analysts polled by Thomson Reuters for $2.67.

Royal Caribbean, whose brands include its namesake line and Celebrity cruises, has seen its North American and Asia markets performing well, although Europe has had larger-than-expected discounting as potential passengers hemmed in bookings because of economic uncertainty and fallout from last year's deadly wreck of the Costa Concordia, a competitor's ship, in January. The accident, off the coast of Italy, brought intense scrutiny to the issue of ship safety, and led Royal Caribbean to temporarily suspend almost all of its marketing.

On Monday, the company said it had recorded a total impairment charge of $413.9 million for its Pullmantur brand, of which about $319.2 million relates to goodwill. The remainder is for a valuation allowance for deferred tax assets, a reduction in the value of the trademarks and an impairment charge related to three aircraft that Pullmantur owns and operates.

Royal Caribbean said its 2013 Wave season--the three-month stretch of heavy bookings at the start of a year--is "broadly off to a promising start." However, it noted that "booking volumes and pricing are down substantially in Spain due to the impact of additional austerity measures there, the lingering impact of the Costa Concordia tragedy and other factors."

"Excluding the Pullmantur impairment charges, our operating results came in remarkably close to our forecast from a year ago, which is notable given the challenging environment," Chief Executive Richard D. Fain said. "Looking forward, we see a tale of two continents; North America is doing well, while parts of Europe continue to be a challenge."

For the quarter, Royal Caribbean reported a loss of $392.8 million, or $1.80 a share, versus a profit of $36.6 million, or 17 cents a share, a year earlier.

In October, Royal Caribbean projected results for the quarter ranging from a per-share loss of two cents to a profit of eight cents a share, well below analyst expectations at the time.
Revenue rose 1.7% to $1.81 billion. Analysts recently expected $1.82 billion.

Net yields were up 1.8% on a constant currency basis versus the company's guidance of an about 1% increase.

Shares rose 33 cents to $37.12 in recent premarket trading. The stock has risen 20% in the past 12 months.

SanDisk's quarterly revenue tops expectations

noreply@blogger.com (sJ) — Wed, 23 Jan 2013 21:14:00 +0000

Chipmaker SanDisk Corp's fourth-quarter revenue topped analysts' expectations, helped by strong growth in solid-state drives.

SanDisk earned $214 million, or 87 cents per share, in the December quarter, on revenue of $1.54 billion. Excluding items, it earned $1.05 a share.

Analysts on average were expecting revenue of $1.526 billion, according to Thomson Reuters I/B/E/S.

SanDisk makes NAND chips used in smartphones, cameras, storage drives and tablets to store data such as movies and photos.

The company's shares were flat in extended trade after closing down 0.63 percent at $47.65 on Nasdaq.

McDonald's Net Up 1.4%, U.S. Business Rebounds

noreply@blogger.com (sJ) — Wed, 23 Jan 2013 20:07:00 +0000

McDonald's Corp.'s (MCD) fourth-quarter profit rose 1.4% as the company's U.S. sales trends rebounded and its profitability improved, though business in Europe and Japan continued to lag.

McDonald's, the world's largest fast-food chain, has seen its quick fixes for the U.S. business prove successful. It recently went back to advertising its "Dollar Menu", rather than some higher-priced items; it shifted its annual McRib limited-time offering to December; and it encouraged restaurants to stay open Christmas Day. U.S. sales at restaurants open at least 13 months, called same-store sales, rose 0.9% in December.

However, negative customer traffic in Europe and continued weakness in Japan offset its U.S. recovery, leading to flat global same-store sales last month. And the company expects to return to a decline in January for the metric, which tends to be a key indicator of restaurant chains' health.

Last October, McDonald's faced its first global decline in monthly same-store sales in nearly a decade, causing concern among investors about its ability to maintain its leading position in the fast-food industry.
McDonald's has touted that its global scale and mix of value-oriented and higher-priced menu items help it return a profit even during tough economic times. But lately, higher food costs and lower consumer confidence have hurt the once-resilient restaurant chain. Meanwhile, its rivals, such as Burger King Worldwide Inc. (BKW) and Wendy's Co. (WEN), are intensifying competition with revamped menus and marketing campaigns.

McDonald's Chief Executive Don Thompson says that the company's top- and bottom-line growth will "remain pressured" in the near term, but adds that, "moving forward, we remain focused on seizing the long-term opportunities in the global marketplace by leveraging our competitive advantages ... to navigate the current environment."

McDonald's shares were recently up a fraction in Wednesday's premarket trading to $93.23. So far this year, the stock has rebounded about 5%, after ending 2012 with a cumulative loss of nearly 10%.
In the recent quarter, McDonald's improved its operating margin to 31.6% from 31.1% the prior year, surprising the market with the growth.

McDonald's global same-store sales increased 0.1%, in line with analysts' expectations, for the fourth quarter. By region, same-store sales rose 0.3% in the U.S.; fell 0.6% in Europe; fell 1.7% in the Asia/Pacific, Middle East and Africa region; and rose 5.4% in Canada and Latin America.

McDonald's reported a profit of $1.4 billion, or $1.38 a share, up from $1.38 billion, or $1.33 a share, a year earlier. Revenue grew 1.9% to $6.95 billion. Analysts polled by Thomson Reuters had most recently forecast earnings of $1.33 a share on revenue of $6.89 billion.

Source: Dow Jones

Apple May See Earnings Drop, but Outlook is Key

noreply@blogger.com (sJ) — Wed, 23 Jan 2013 20:01:00 +0000

Apple Inc. (AAPL) may report its first quarterly earnings decline in nearly 10 years Wednesday afternoon, though investors' attention is already fixated on the company's outlook amid worries of a rapid slowdown in iPhone 5 demand.

The launch of so many new products--including the iPhone 5 and iPad mini--in the last part of the year is expected to weigh on profit margins for Apple's first fiscal quarter, which ended in December.

Still, Apple is expected to post sales growth of 19%, thanks to holiday-fueled demand for those new devices.

But most attention will be fixed on Apple's guidance for the March quarter, amid reports that the company is cutting back production of the iPhone 5 less than four months after its launch, suggesting demand may have already peaked.

"It's all about the guide," Gene Munster of Piper Jaffray told MarketWatch, speaking about the forecast for the March quarter.

It remained unclear how much weakness may already be baked into the stock, which has slid nearly 8% just this month and has shed more than one-quarter of its value since peaking above $700 in late September.

Steven Milunovich of UBS cut his price target on the stock to $650 from $700--the shares ended Tuesday at $504.77--but he added that "current levels are overly discounting the demand picture for Apple's products, as well as future innovations and growth in new markets."

For the December quarter, the company itself projected a 15% decline in earnings per share when it issued its last quarterly report, though analysts are modeling for a less drastic decline.

Apple is expected to report earnings of $13.47 a share, according to the average estimate from FactSet, compared with earnings of $13.87 a share reported for the same period the previous year.

Revenue is expected to jump 19% to $54.9 billion, according to FactSet estimates.

The iPhone is still expected to drive the lion's share of sales and earnings for the quarter. Apple is expected to ship about 48 million units of the iPhone in the December period, with some predicting that number could go higher than 50 million.

Most analysts also expect between 22 million and 23 million iPads to ship during the period, thanks to the launch of the iPad mini. Mac shipments are expected to total a little over 5 million units.

Questions about the health of the iPhone business will center on Apple's forecast for the March quarter.
Analysts are currently predicting earnings of $11.77 a share for the current quarter--a decline of about 4% from the same period last year. Apple is known for guiding below Wall Street's consensus targets, though analysts say if they go too low this time, they may confirm fears of an iPhone slowdown that could hurt the stock further.

"If they have a big miss for December but a phenomenal guide, the stock will go up," Mr. Munster said. "But if they crush December but give a bad forecast, the stock is going to go down."

Mr. Munster currently has a buy rating and $875 price target on Apple, though he has shifted some of his expected iPhone sales in the March quarter to the December period.

Source: Dow Jones

This Earnings Season, Company Revenue Is Up to Snuff

noreply@blogger.com (sJ) — Wed, 23 Jan 2013 19:38:00 +0000

Companies' sales look like they are starting to recover from a six-month slump.

So far this quarter, 66% of companies have reported revenue higher than Wall Street expected, according to Thomson Reuters. While that is slightly above the historical percentage--an average of 62% have beaten sales expectations since 2002--it constitutes a shift from the previous two quarters.

"This is an especially large reversal from recent quarters for sales beats," said Savita Subramanian, a U.S. equity strategist with Bank of AmericaMerrill Lynch, in a note to clients. Sales growth is "crucial" this quarter, she added, since companies have "already lean cost structures."

Sales were dismal in the second and third quarters of last year, when more companies missed analyst expectations for sales than exceeded them.

In fact, sales actually fell in the third quarter, declining 0.8% from the same quarter the previous year. It was the first time that had happened since 2009. The aggregate sales of all companies in the Standard & Poor's 500-stock index came in 1.1% below analysts' expectations, according to Thomson.

In the third quarter shares responded more to whether companies beat sales estimates than earnings estimates for the first time since 2009, according to Bank of AmericaMerrill Lynch. For the companies that beat sales estimates, shares made bigger gains than they had since the bank started tracking that data nearly a decade ago.

It isn't clear whether that trend will stick for fourth-quarter reports. PNC Financial Services Group Inc. (PNC) beat Wall Street estimates on sales, but not earnings, and saw shares gain 3.7% on its report, on a day when indexes rallied broadly.

Tuesday, Google Inc. (GOOG) beat earnings estimates but not sales, and shares still jumped 6.5% Wednesday, as the Dow Jones Industrial Average and Nasdaq Composite Index climbed but the S&P 500 remained mostly flat.

While companies have been reporting surprisingly strong sales, those surprises come amid lowered expectations for corporate sales. Before earnings reports began, analysts expected 1.9% fourth-quarter revenue growth from the previous year. In April 2012, analysts expected nearly four times that percentage, looking for 7.2% sales growth.

And earnings season is still young. Ninety-nine companies in the Standard & Poor's 500-stock index have reported earnings, so nearly four-fifths of the companies in the index have yet to report.

Source: Dow Jones

AMR Swings to 4th-Quarter Profit on Tax Benefit; Posts Annual Loss of $1.88 Billion

noreply@blogger.com (sJ) — Wed, 16 Jan 2013 15:25:00 +0000

AMR Corp. (AAMRQ) swung to a fourth-quarter profit as the parent of American Airlines posted a net benefit of $350 million from an income tax benefit and the settlement of a commercial dispute.

Still the carrier posted an annual loss of $1.88 billion, mostly on a net $1.7 billion in reorganization-related and other charges, and expects that its first-quarter capacity will be 1.7% lower than during the year-earlier period.

AMR's fourth-quarter results were hit by operational disruptions amid impacts from a flurry of pilot sick calls and maintenance issues as well as impacts from superstorm Sandy and an early November snowstorm in the Northeast.

The Fort Worth, Texas-based airline has been preparing to decide on whether to pursue a merger with US Airways Group Inc. (LCC) or to try to emerge from bankruptcy protection as an independent company.

With American's financial performance improving and restructuring steps nearing completion, US Airways made a second merger proposal in mid-November that remains under discussion. A merger could create the largest U.S. airline by traffic, surpassing United Continental Holdings Inc. (UAL).

"Our momentum is growing toward emerging as a strong, healthy and vibrant competitor," said AMR Chairman and Chief Executive Tom Horton. "In fact, with what we have accomplished, we expect to show strong results beginning in the first quarter of 2013."

For the quarter, AMR reported a profit of $262 million, compared with a year-earlier loss of $1.1 billion. Excluding reorganization-related charges and other items, the adjusted loss was $88 million in the latest quarter, compared with an adjusted loss of $209 million a year earlier.

Revenue eased 0.3% to $5.94 billion amid declines in cargo and other revenue. Revenue was nearly flat at American Airlines and edged up 0.8% at regional affiliates.

Consolidated passenger traffic declined 0.3% in the quarter, while capacity was up 0.2%. Load factor--a measure of plane fullness--declined to 81% from 81.4%.

Consolidated passenger revenue per available seat mile was flat and consolidated passenger yield, representing average fares paid, increased 0.5%.

Fuel expenses, including hedging impacts, rose 6.6%.

Source: Dow Jones

U.S. Retail Sales Climb in Dec.; N.Y. Manufacturing Falls

noreply@blogger.com (sJ) — Tue, 15 Jan 2013 19:08:00 +0000

U.S. retail sales rose more than expected in December as holiday shoppers appeared to shrug off fiscal-cliff worries, though future gains could be limited as workers' paychecks are set to shrink.

Retail and food-service sales increased 0.5% in the final month of 2012 to a seasonally adjusted $415.70 billion, the Commerce Department said Tuesday. Economists surveyed by Dow Jones Newswires had expected just a 0.2% rise.

Consumers shelled out more on autos, furniture, personal care and dining out, but sustaining retail growth will be a challenge as payroll taxes increase for most Americans this month.

"The fourth quarter ended on a stronger footing than previously thought," said Dan Greenhaus, chief global strategist at BTIG LLC. However, "nothing in today's data does anything to dispel the notion that consumer spending in the first half of 2013 should be quite weak," he added.

In a last-minute fiscal-cliff deal that held income taxes steady for all but the highest earners, Congress allowed a temporary cut in Social Security withholdings to expire, meaning that Social Security taxes have reverted to 6.2% of salary from the temporary 4.2%. Smaller paychecks could hamper future consumer spending, which accounts for about two-thirds of demand in the U.S. economy.

But in December, consumers continued to buy despite surveys that showed consumer confidence was waning. Motor vehicles and parts sales rose 1.6%. Excluding autos, retail sales were up 0.3%. Gasoline sales fell during the month as pump prices retreated.

Declining gasoline and food costs helped push wholesale prices lower, a Labor Department report showed Tuesday.

The producer price index, which measures how much manufacturers and wholesalers pay for finished goods, decreased a seasonally adjusted 0.2% in December, as food prices fell 0.9%, and overall energy costs, which include gasoline, slid 0.3%. Excluding volatile food and energy costs, producer prices increased 0.1%.
Economists had forecast overall producer prices to fall 0.1%.

Meanwhile, the Federal Reserve Bank of New York's Empire State Manufacturing Survey released Tuesday showed manufacturing activity in the region is still contracting.

The Empire State's business-conditions index fell to -7.78 from a revised -7.30, in December. A reading below zero suggests contraction. Economists had expected the latest index to improve to -2.0.
The Empire subindexes were almost all in negative territory this month, a bad omen for the factory sector at the start of the new year.

"We will see if the other January surveys reported over the next few weeks echo the weakness of the Empire State survey or if they give credence to the idea that the manufacturing sector has gained some traction lately," JPMorgan Chase economist Daniel Silver said.

Finally, a separate Commerce Department report Tuesday showed U.S. business inventories advanced 0.3% to a seasonally adjusted $1.622 trillion in November, and sales rose 1.0% to a seasonally adjusted $1.272 trillion.

Increasing stocks at auto dealerships and furniture stores helped drive the inventory gain.

Source: Dow Jones

Scans - 15th January 2013

noreply@blogger.com (sJ) — Tue, 15 Jan 2013 14:27:00 +0000

AAMRQ - Top short on any weak bounce.

AVTC - This is a classic breakout. Unfortunately I am long-term short and holding my short painfully.

BIOL - Watching this one for a parabolic move to take a short position.

NENE

UNXL - This one is getting choppy and might not be great trader. Just watching for scalp mode short.

GRZG - This one is running up as round #2. Accumulating short position on every bounce.

PSON - How long will this OTC land stock survive? I am holding my long-term short on this one.

UPS, TNT Deal Falls Apart

noreply@blogger.com (sJ) — Mon, 14 Jan 2013 17:38:00 +0000

United Parcel Service Inc. (UPS) said Monday it has abandoned its protracted, $6.8 billion bid to take over smaller Dutch parcel-delivery company TNT Express NV (TNTEY), after encountering unexpectedly stiff objections to the deal from the European Commission's antitrust regulator.

Despite months of negotiations, UPS said it expects the Commission to block the proposed acquisition after a meeting with the antitrust body of the European Union's executive arm last Friday.

UPS had originally expected to receive approval for the deal after a first phase review, but the process dragged on, highlighting the Commission's concerns about future competition in the market for overnight deliveries of parcels in Europe. The acquisition, which would have been the biggest in UPS's 105-year history, was announced in March last year.

The U.S. firm had offered remedies on Nov. 29, and revised its proposal twice to overcome the Commission's concerns, it said.

Negotiations with the Commission continued into the new year, with UPS's hopes increasingly riding on whether it could convince the regulator that sales of UPS and TNT assets to DPD, a small parcel-delivery firm controlled by French state-owned postal group La Poste, might create a credible new European competitor to meet competition concerns.

"We are extremely disappointed with the EC's position. We proposed significant and tangible remedies designed to address the EC's concerns with the transaction," said UPS Chief Executive Scott Davis.
UPS had offered 9.5 euros ($12.67) a share for the Dutch firm, which was split from Dutch postal company PostNL under pressure from shareholders who argued the express business would be an interesting acquisition target for its U.S. rivals. After UPS had announced its bid for TNT, shareholders speculated on a counter bid from FedEx Corp. (FDX), which didn't emerge.

The Commission's tough stance on the UPS-TNT deal echoes a similar position it took in objecting to the $17 billion merger between Deutsche Borse and NYSE Euronext (NYX) early last year largely because it was worried about the combined companies' dominant position in a particular segment of financial services, the exchange-trade derivatives market. For UPS, the Commission's concerns focused on the lack of competition in the overnight parcel-delivery segment if it acquired TNT.

Still, in between its objections to the big securities exchanges and logistics deals, the Commission did approve Universal Music Group's $1.9 billion of EMI Group PLC's recorded music division last July.

Source: Dow Jones

Apple Cuts Orders for iPhone Parts as Demand Slips

noreply@blogger.com (sJ) — Mon, 14 Jan 2013 17:36:00 +0000

Apple cuts orders for iPhone 5 components due to weaker-than-expected demand, people familiar with the situation say. iPhone 5 screens for January-March quarter have dropped roughly half of what the company had previously planned to order, they say Apple Inc. (AAPL) has cut its orders for components for the iPhone 5 due to weaker-than-expected demand, people familiar with the situation said Monday, indicating sales of the latest smartphone haven't been as strong as previously anticipated.

Apple's orders for iPhone 5 screens for the January-March quarter, for example, have dropped to roughly half of what the company had previously planned to order, the people said.

The Cupertino, Calif., company has also cut orders for components other than screens, according to one of the people.

Apple notified the suppliers of the order cut last month, the people said. The move comes as the company has been facing greater challenges from Samsung Electronics Co. and other makers of smartphones powered by Google Inc.'s Android operating system. While Apple has set the agenda for the smartphone market since it released its first iPhone in 2007, South Korea's Samsung, which sells many Android-based models at various price points, has already overtaken the U.S. company as the world's largest smartphone vendor by market share. Demand is also growing for inexpensive smartphones from Chinese makers such as Huawei Technologies Co.

While the popularity of iPhones and iPads has been boosting Apple's earnings and investor expectations over the past few years, there have been concerns in recent quarters about how long the growth momentum can continue. Apple's stock price, which peaked at about $705.07 in September, closed Friday at $520.30, down 0.6%.

Some analysts have mentioned possible order cuts at suppliers and raised questions about demand for the iPhone 5.

Apple may have made particularly large iPhone 5 orders to suppliers for the October-December quarter, because of earlier concerns about manufacturing difficulties with some components such as screens, said Sanford Bernstein analyst Alberto Moel.

Citigroup last month lowered its rating for Apple to Neutral from Buy, citing concerns about iPhone order cuts. The brokerage noted that a sharp increase in iPhone 5 production during the October-December period may have left Apple with more inventory than expected. Still, it also said that "good not great" demand is likely a factor behind order cuts.

"It is unlikely that Apple is cutting orders in a 'great' demand environment," Citigroup analysts said in the Dec. 16 report.

Apple representatives weren't immediately available for comment. In the 2012 third quarter, Apple held 14.6% of world-wide smartphone shipments, down from a peak of 23% in the fourth quarter of 2011 and the first quarter of 2012, according to IDC.

Samsung's market share, meanwhile, rose to 31.3% in the third quarter of 2012, compared with 8.8% in the third quarter of 2010. The Korean company said earlier this month that it expects to report another record operating profit for the fourth quarter of 2012, capping its best year ever amid strong sales of its Galaxy line of smartphones. The company expects an operating profit equivalent to between $8.1 billion and $8.5 billion for the three months ended in December.

Apple is slated to report earnings later this month. The iPhone 5, released in September, represents Apple's effort to maintain its strong position amid intensifying competition. The latest model comes with a longer, four-inch screen compared with the 3.5-inch screens used in all previous iPhone models.
While the iPhone remains dominant in the U.S., other major markets such as China are becoming increasingly important for the company's continued growth.

Last week, Apple Chief Executive Tim Cook met with China Mobile Ltd. Chairman Xi Guohua to discuss cooperation, as the U.S. company tries to gain access to the world's largest mobile carrier with more than 700 million subscribers.

Japan's Sharp Corp. and Japan Display Co. and South Korea's LG Display Co. are the three suppliers of the screens, according to people with knowledge of the matter. When the iPhone 5 was launched, there were concerns that suppliers might not be able to produce enough to keep up with demand.
Apple's cut in orders may also affect first-quarter sales of component makers, some of which are largely dependent on the U.S. company. The fact that some iPhone components are highly customized makes it difficult for suppliers to find alternative buyers in a short time frame. Sharp, one of the suppliers of the screens, has been struggling financially with a cash crunch and losses from its television operations.
Japan's Nikkei reported earlier Monday that Apple has slashed its orders for iPhone 5 components.

Source: Dow Jones

Scans - 14th January 2013

noreply@blogger.com (sJ) — Mon, 14 Jan 2013 10:09:00 +0000

AAMRQ - Great squeezer. Looking to short this one into any big parabolic move. Ideally would love the 1.90s to short into.

TELK - Get mid-day spike along with volume. Won't touch this one yet on the short side. Let it show signs of weakness first. Ideally looking for morning spike and afternoon fade to short into.

APT - Nice 2 day rally. Just watching this one for now. Need a bigger bounce to interest me.

FREE - Took a short position on trend reversal and volume decline. Will cover into any panic. This one could base off around 0.30 and start rallying again.

NENE - 6 days of run-up. Setting up nicely for a short trade soon. No rush though. Let it first show signs of weakness.

AVTC - I have an open short position on this one. This trade isn't working as expected. Probably will cover into any sell-off. It has based nicely around $4.00 and trying to go higher.

RJET - Just watching. Don't like this slow grind up. Need a parabolic move to interest me on the short-side.

PSON - OTC land stock. Surprisingly holding up after a brief sell-off from 1.10s. I am short this position and would love to add on any more bounces. Might box against my shorts if $1.00 can hold up.

GRZG - Another OTC land stock that is slowly grinding up for round #2. I am long-term short on this one and will likely add to my position on further bounce.

Stock Watch - Bio Nitrogen Corp (BION)

noreply@blogger.com (sJ) — Fri, 11 Jan 2013 17:39:00 +0000

Bio Nitrogen Corporation (BION) operates as a biotechnology company and offers production of urea for sale as fertilizer. It owns technologies for the conversion of biomass into urea fertilizer. The company distributes its products through wholesale and retail channels to the agricultural sector, as well as to the commercial and industrial sectors. The company was formerly known as BIO-SNG Technologies International Corp and changed its name to Bio Nitrogen Corporation in May 2011. The company was incorporated in 2011 and is based in Doral, Florida.

BION has had an impressive run from 0.05 to 0.40s which is almost 10x run-up. This also presented an excellent short-selling opportunity. I am currently short this position at 0.30 and plan to hold this few more days, covering in the high 10s.

Scans - 11th January 2013

noreply@blogger.com (sJ) — Fri, 11 Jan 2013 11:47:00 +0000

ORCT has nice run-up. Looking for this one to settle and reverse trend before short entry.

Watching MY for a good entry. Missed this one completely yesterday. Has pulled back alot. Maybe no trade there. Just watching.

FREE had a sick bounce from the lows. Up to 40cents from 10cents. Short this one over-night. Will look to add more on weakness.

HGSH has become illiquid. Strictly watching for a good short entry on more weakness.

NEWL faded nicely from 2.60s yesterday. Missed playing this one short yesterday. Waiting for a bounce to take a short position on this one.

PERI has gapped nicely and still rallying. However the volume has been fading and could show signs of slowdown soon. Might provide good opportunity on short-side for a quick scalp.

PSON is a scam-land stock. Showed weakness earlier this weak, but recovered it and looking to make new high. Will look to box this one for a while to take advantage on the long side against my long-term short.

American Express to Cut 5,400 Jobs

noreply@blogger.com (sJ) — Fri, 11 Jan 2013 02:05:00 +0000

American Express Co. (AXP) will eliminate 8.5% of its staff in the credit-card lender's biggest cost cuts in recent years as it works to shore up its business in light of a tough global economy and rejigger its travel business to better compete in an increasingly digital environment.

The unexpected cuts, announced late Thursday, will cost the company $400 million, mainly tied to severance payments. The lender also will pay $342 million tied to its cardholder rewards program and pay $153 million in refunds to customers related to ongoing regulatory reviews of its business.
The costs come just months after the world's largest credit-card issuer by spending agreed to pay $127.5 million, including $85 million in customer refunds, to settle allegations by the Consumer Financial Protection Bureau, Federal Reserve and other banking regulators that it engaged in unlawful debt-collection practices and mismarketed certain products.

American Express, like other credit-card companies, has benefited from a turnaround in borrower behavior that has led to loan losses. The lender, traditionally known for its well-heeled customer base, bounced back from the financial crisis more quickly than its peers thanks in large part to its focus on affluent borrowers who use their cards frequently but typically pay their bills on time.

Under Chief Executive Ken Chenault, who has led American Express since 2001, the company had strayed from its roots by rolling out new card products aimed at new types of customers, including younger consumers. AmEx revved up its push into the credit-card business, rolling out new cards that allowed customers to carry a balance from month to month. That thrust the company into frenzied competition against scores of card issuers and bank-owned debit cards, which were catching on with young consumers.

But a surge in unemployment made it difficult for borrowers to pay their bills on time, leading to higher losses during the financial crisis.

While losses have improved substantially, the company, along with its competitors, has been hit by deleveraging by consumers, who have grown more conservative about racking up debt since the recession as they work to get their personal finances in order. That has crimped the revenue lenders earn from finance charges and other fees.

Much of the cuts are related to the company's global travel business, shifting more services to digital channels to improve efficiency. The company said it would eliminate 5,400 jobs, or about 8.5% of its head count.

However, the company said the cuts will be offset by hiring for some new positions, and it expects its head count to be down by 4% to 6% by the end of this year from the current base of 63,500 when including those hires.

The cuts, which will be made over the coming year, prompted the company to record a $400 million charge in the fourth quarter.

"We must keep evolving our business to become more efficient, adapt to changing customer preferences and to increase our capacity to invest in growth," Mr. Chenault said during a conference call to discuss the cuts.

The actions will help the company limit operating expense increases to below 3% for the next two years, Mr. Chenault said.

"The expense reduction...is helpful, but at the same time I don't think that it's too much of a difference versus what we had modeled for expense growth over the next year or two," said Donald Fandetti, an analyst with Citigroup Inc.

The company said cardholder spending held up during the fourth quarter, despite the negative impact of Hurricane Sandy. Its so-called billed business increased 8% in the fourth quarter, up from 6% in the third quarter on a reported basis.

It also said it would record $342 million in expenses related to its cardholder rewards program after determining the rate at which its customers redeem points earned on purchases is higher than previously calculated.

Separately, it also is refunding $153 million to cardholders related to late fees, finance charges and bonus rewards for certain customers. Part of the refunds--$33 million--relates to debt-collection issues previously disclosed as part of the regulatory action filed by the CFPB and other agencies in October.

American Express strives to serve customers "accurately and to always fulfill our promises," Mr. Chenault said. "Our aspiration is to meet these objectives 100% of the time, but problems can and do arise, and when they do, we address them."

The moves resulted in a profit of $637 million, or 56 cents a share, in the fourth quarter. Excluding the charges, the company would have posted a profit of $1.2 billion, or $1.09 a share. Analysts polled by Thomson Reuters were expecting earnings of $1.06 a share.

The company's shares were down 0.5% at $60.50 in after-hours trading Thursday. The shares have risen about 5% in the past three months.

Source: Dow Jones

Chrysler Could Be Worth Up To $13.5 Billion In IPO

noreply@blogger.com (sJ) — Fri, 11 Jan 2013 01:59:00 +0000

Chrysler Group LLC, which could be heading for an initial public offering, could be worth anywhere from $9 billion to $13.5 billion on the open market, according to analysts reports.
The auto maker's valuation has come into question because of a dispute between its majority shareholder, Fiat SpA (FIATY, F.MI), and a United Auto Worker's union trust fund that owns a 41.5% stake in the company.

On Wednesday, the trust fund, which provides health-care coverage for retired auto workers, presented Chrysler with a registration demand, calling on the company to initiate the process for holding an IPO. The union trust wants Chrysler to register 16.6% of its shares. It was given the right to demand it register shares as part of a 2009 agreement that helped Chrysler emerge from bankruptcy.

The move came amid an ongoing court dispute between Chrysler's majority owner, Fiat SpA, and the trust over the pricing of the Chrysler shares. The trust is formally known as the UAW Retiree Medical Benefits Trust.

Fiat is trying to use a series of call options on the fund's shares to buy up a 16.6% stake in Chrysler.
Last year, it triggered the first of the call options, offering $139.7 million for a 3.3% stake, a sum that would value all of Chrysler at about $4.2 billion. The union trust countered, asking for $343 million, setting Chrysler's value of $10.3 billion.

On the open market, though, Chrysler could fetch a market value of $13.5 billion, according to Richard Hilgert, a Chicago-based analyst for Morningstar Inc.

"Fiat is still getting the stock cheap," said Mr. Hilgert, even if it ends up paying the trust's price.
USB, in a report released in November, valued Chrysler at $9 billion.

This month, Fiat exercised a second call option, proposing to pay $198 million for another 3.3% stake. Fiat sued the trust in September, claiming it refused to turn over the shares.
Mr. Hilgert said it's unlikely there will be an IPO. "This is merely a chip on the table to gain leverage over Fiat to raise the price," he said.

By initiating the process, Chrysler will be forced to seek a valuation on the company from investment bankers, Mr. Hilgert said. And the union trust can then use that in their case against Fiat, he added.
"You can still retain an investment banker without filing a registration statement," he said.

Chrysler said in a statement Wednesday it would comply with the demand, but that there is "no assurance" this will result in an IPO. A spokeswoman for the union's trust has declined to comment.
Fiat is eager to raise its stake in Chrysler to facilitate the merger of the two companies, but an IPO could be costly and serve as a distraction for the Italian auto maker as it tries to turn around its money-losing operations in Europe.

Source: Dow Jones

Nokia Sees Better Fourth Quarter on Brisk Lumia Sales

noreply@blogger.com (sJ) — Thu, 10 Jan 2013 16:18:00 +0000

Nokia Corp. (NOK) Thursday said brisk sales of its new Lumia smartphone line up has contributed to a better- than-expected result in the fourth quarter, sending shares sharply higher.

Nokia shipped 4.4 million Lumia devices in the fourth quarter, bringing total smartphone shippments to 6.6 million devices, the first increase in smartphone shipment numbers in a year.

The company, which is due to report its full fourth-quarter result on Jan. 24, estimates that its main devices and services unit will reach net sales of 3.9 billion euros in the fourth quarter of 2012, down from EUR6 billion the same quarter 2011, while total device shipments is seen at 86.3 million units, down from 113.5 million units compared with a year ago.
Also contributing to the better-than-expected result was good performance for Nokia's wireless network joint venture with Siemens, which Nokia said delivered "record underlying profits and a third consecutive quarter of underlying profitability."

In a statement, Nokia's Chief Executive Stephen Elop said he is pleased over Nokia's "solid" fourth-quarter performance.

However, Nokia warned that its first quarter performance is likely to be hit by seasonality and the competitive environment in the mobile industry.
At 1324 GMT shares were trading 17% higher at EUR3.498.

Mortgage Rates Mostly Higher in Week

noreply@blogger.com (sJ) — Thu, 10 Jan 2013 16:13:00 +0000

Average mortgage rates in the U.S. were mostly higher during the past week, while the 30-year fixed rate remained near historic lows, according to mortgage-finance company Freddie Mac (FMCC).

Freddie Mac Chief Economist Frank Nothaft said fixed-mortgage rates rose slightly following a positive employment report for December, which showed that the unemployment rate remained at 7.8%.

For the week ended Thursday, the 30-year fixed rate averaged 3.4% compared with 3.34% last week and 3.89% a year earlier. Rates of 15-year fixed mortgages averaged 2.66% compared with 2.64% last week and 3.16% a year earlier.

Five-year Treasury-indexed hybrid adjustable-rate mortgages, or ARMs, averaged 2.67% compared with 2.71% last week and 2.82% last year. One-year Treasury-index ARM rates averaged 2.6% compared with 2.57% a week earlier and 2.76% last year.