Buzz Bits: Dow Stumbles, Nasdaq Climbs
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Earnings Report - MV News
- Intuit (INTU) reported EPS of $0.45 vs $0.42 cons on revs of $763 mln vs $763.02 mln cons.
- H&R Block (HRB) reported 3Q EPS of $0.08 vs $0.12 cons on revs of $955.1 mln vs $1.126 bln cons.
- Chesapeake Energy (CHK) reported 4Q EPS of $0.90 vs $0.76 cons on revs of $1.87 bln vs $1.78 bln cons.
Bell Buzz - Todd Harrison - 3:48 PM
- You can't hide, those dryin' eyes. Note the thrillers, er, drillers as they've finally poked through resistance. OSX 200 now becomes the bovine backstop.
- Through objective eyes, the longer the tape scrapes along above S&P 1450, the higher the probability that we're basing (rather than churning).
- Why do I get an uneasy feeling that there's gonna be further unrest on the Israeli border as a diversion to the Iran nuclear stand-off?
- Trade, don't rationalize.
- Seeing old friends is good for the soul? I hope so, as I plan to see Gym tonight for the first time in over a month. Thanks for the elbow, Macke.
- Some days you're gonna be the windshield, other days you're gonna be the bug. Sometimes, like today, we'll simply watch the windshields and the bugs. No harm, no foul.
- Fare ye well into the bell, Minyans, and have a mindful night.
Link Wray - Kevin Depew - 1:39 PM
- Forget Emerging Markets. CalPERS is going after Emerging Managers.
- Man, if only there was an ETF that allows retail investors to jump on board the private equity bandwagon. Oh. Never mind then.
- Speaking of bandwagons: Is there really a book titled, "Exchange-Traded Funds for Dummies"? Yes.
- Speaking of bandwagons, Part Two: Minyan Barry Ritholtz notes that, "As of today, more people have borrowed money from their their brokers to buy stocks than ever before."
- While Dr. Fil and Prof. Krueger are busy going organic, the question that comes to mind is, what happens if you eat nothing but organic food for an entire month?
- Meanwhile, back in the land of fast food, the "McMissle Mom" is spared prison.
- Mathias Wildt asks, "Is there a better way to show off how rich you are than to pave your yacht's floors with gold?" Good question. What if your boat's sails are made out of hundred dollar bills?
Vibes from Fast Money Minyan Guy Adami: Hewlett-Packard - MV Respect - 11:09 AM
I understand about indecision
But I don't care get if I get behind
People livin' in competition
All I want is to have my peace of mind"
In my humble estimation, Boston's first album is one of the great rock albums of all time. I remember seeing Boston at Madison Square Garden - must have been 1977. They started the show with "Rock and Roll Band," played all the songs from the rest of their debut album then cruised off stage. I mean a Bruce Springsteen concert it was not...but I digress.
Hewlett-Packard (HPQ) really threw me for a loop the other day. I have been very positive on the name since the inception of Fast Money back in June. Going into the company's first quarter numbers I was still loving the stock and was convinced HPQ would trade up through $45 after it reported. On the surface the numbers looked great. Its revenue was up 11% year over year and the company's EPS and revenue guidance for 2007 exceeded Street expectations. Got to tell ya - around 4:10 pm on February 20th I was feeling pretty good. But things went pear shaped very quickly. Turns out the Street did not like Hewlett's rising inventory levels and declining gross margins. HPQ's internal inventory rose to $8.4 bln, up 24% year over year. Gross margins were 23.7%, down from 24.3% in the 4th quarter. The guidance that I thought was strong was not exactly what the market had in mind.
Technically, the stock appears a bit vulnerable as it trades below its 50 day moving average. However, there are a few things that I still like here. On a valuation basis it is still about 11% cheaper than Dell (DELL). Maybe that inventory build that has worried some folks is just Hewlett-Packard getting ready for increased demand. The stiff competition that the company will no doubt face from a Michael Dell led Dell and Eastman Kodak's (EK) announcement that it is entering the printer business, is in my estimation a good development.
One can make the argument that perhaps Mark Hurd and the folks at HPQ took a collective breather after navigating their way through the scandals of last fall. Maybe the new competitive environment they find themselves smack dab in the middle of will refocus the management team on the new task(s) at hand. Time will tell, in the meantime the market takes no prisoners and it looks like they want to get a $39 handle on HPQ. What I do know is this, since 4:15 p.m. on February 20th, peace of mind has not come easy to this Hewlett Packard perma-bull. Maybe I should put on some Carole King.
Earnings Thoughts - Fil Zucchi - 9:50 AM
Whole Foods (WFMI):
- The quarter was not very good. Comps were in-line - as was to be expected - but revenues were weakish. Gross margins were in-line, but other costs took a large bite as operating income was a full 10% below consensus.
- Saved by the merger: the reason for the pop in the stock, IMHO, is WFMI's buy-out of Wild Oats (OATS). OATS was a basket case of a company. Its net income margins are pathetic and it's not been able to turn itself around despite years of efforts by some "turnaround" specialists. The good news for WFMI is that it bought it for next to nothing. If WFMI can eventually improve OATS' margins this acquisition will probably work out OK. In essence WFMI bought itself a bunch of "new stores" for less than what it would have cost them to build them out, and certainly much faster than it could have built them out.
- The other side of the OATS merger is that WFMI has now entered the realm of some meaningful debt, and it does not in any way change the fact that WFMI is just another grocery store. At the end of the story it will trade at the same multiples of all other grocery stores.
EDO Inc. (EDO): I highlighted - and hopelessly jinxed - the chart a little while back. The company missed EPS estimates by a mile. This reminds me a bit of Argon ST (STST) performance two quarters ago. The stock gapped down at the open, made a low and is up 40% since. How EDO behaves in the next couple of days may be far more telling than its earnings report. Keep in mind Minyans that, as I have argued for Applied Signal (APSG) and all other defense contractors, quarter to quarter these guys are at the whim of the political procurement process. Hence IMHO it makes more sense to keep an eye on the broader themes supporting (or not) defense spending, than trying to dissect every line of a quarter's income statement (...and if you wish to accuse me of ex post facto rationalization, I plead guilty as charged).
Positions in WFMI, EDO, STST, APSG
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