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business newsTime Warner Takes a Time Out
By
Justin Sharon
Feb 22, 2011 5:00 pm
With the Dow down triple digits courtesy of Gadhafi, the media giant was unable to bask in the glow of an analyst upgrade this morning and ended off 1.26%.
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The Benchmark Company boosted shares to Buy from Hold, hoisting its price objective by $5 to $44 in the process. The broker cited an accelerating recovery in advertising, which it believes will in turn help sustain high single-digit growth in Networks revenues. An acceleration of $4 billion in authorized share buybacks is also seen as a catalyst, increases are ahead for the 2.75% dividend yield, and Benchmark now projects 6% total annual revenue growth for all of 2011. Time Warner recently reported better-than-expected revenue growth, up 8% year-over-year, and announced stable affiliate fee gains. Overall Network revenue is seen increasing about 25% for the current quarter, aided by the first year of NCAA tournament basketball, while CNN’s ratings erosion has been staunched by recent unrest in the Middle East.
Concerns include a mixed performance from the film division, hit by lower home video sales, and valuation issues on a stock up almost 50% in the past 12 months even after today’s tumble. Benchmark may also yet have reason to regret its contention that “management has proven itself focused on driving shareholder value via operational discipline,” for Time Inc Chief Digital Officer Randall Rothenberg has today followed his boss Jack Griffin out the door. Their respective tenures were thus but four weeks and six months; such managerial musical chairs are rarely ever music to the ears of investors.
Please see So Long, Corner Office: Time Warner Chief Takes Life Lessons to Rehab Center, Time Warner Abandons Plan to Gouge You -- For Now, and Minyanville Mailbag: TiVO, Cable Stocks.
On May 11, 1990, in the heady days after the fall of the Wall, a periodical named The European was launched by publishing tycoon Robert Maxwell. Touted as the continent’s “first national newspaper,” it featured a tabloid arts review known as Elan. A year later its owner disappeared at sea amid an epic pension scandal and £3 billion in debt, while the paper itself sunk without a trace before the decade was out. (Its last issue in December 1998 was emblazoned with the unfortunate headline “Liftoff: Europe aims to be superpower of the 21st century”.)
How Dublin drugmaker Elan (ELN) must wish, like all Ireland, that the country had never entwined itself with Europe. Until about high noon today shares in our headline upgrade were a sea of green, struggling manfully against the tide. They closed down 0.61% with the horrific overall market, but analysts at UBS do see good things in store for the firm and boosted their rating to Buy from Neutral.
Elan CEO Kelly Martin, once a key executive at Merrill Lynch, said all the right things at its recent earnings release, talking about 2010 being “a year of tangible advancement…with demonstrated progress in both the BioNeurology (7% annual sales growth) and EDT -- Elan Drug Technologies -- businesses.” Having just recorded positive cash flow from operations for the first time in nine years, for 2011 it is guiding $200 million in adjusted EBITDA, roughly in line with forecasts. Multiple sclerosis treatments Tysarbi (18% sales growth last year) and Ampyra each have good growth potential, and a 9% decline in operating expenses also augurs well.
However, this stock has historically been inherently volatile, and excluding bapineuzumab, its Alzheimer’s pipeline treatments do not inspire much investor confidence.
Also check out Elan Keeps Jet, Cuts Researchers, The €85 Billion Irish Bailout: the Inside Story, and Which Drugmakers Will Take You Higher?
Much like Mr. Maxwell, Natalie Wood also met an untimely death by drowning, although the actress was much more mourned. She shot to fame of course as a child star with Santa at Macy’s (M) in one of history’s most beloved movies. Miracle might be a stretch to describe today’s earnings at "The World’s Largest Store," but they are far from a total turkey either.
The stock slipped 1.22% on a dire day but fourth-quarter earnings per share of $1.59, excluding one-time charges, beat Street expectations on tighter expense control and a lower tax rate. Initial fiscal 2011 same-store guidance is now seen as up 3%, broadly in line, and Macy’s projects full-year earnings of between $2.25 and $2.30, better than anticipated. The company enjoys relatively less private label exposure than many department store peers (20% of sales), which should help it better navigate coming higher commodity prices with vendors.
Shares still ended lower however, on an admittedly awful day in equities, as investors wonder whether the low hanging fruit has already been picked. Paul Swinand, a researcher with Morningstar, says, “The question is, is there any juice left [in its initiatives]?” Red flags include a 40 basis points fall in gross margins, to 41.3%, amid heightened promotional activity. 2010 cash from operations of $1.5 billion also came in a bit below forecasts on an increase in pension provisions.
Read related content at Retail Doubles Down on the V-Shaped Recovery, Talkin’ Turkey, and Sony, Macy’s Rewarded For Mediocrity.
On a day the Dow ended down 178.46 points Checkpoint Systems (CKP), which makes radio-frequency identification-enabled anti-theft tags for the apparel industry, actually ended up following fourth-quarter results. And this after it was earlier the single worst performing stock on the entire NYSE. When one considers that three-month spell of its earnings missed both the August 4 shoplifting spree of Rudy Giuliani’s daughter and LiLo’s January 22 incident involving a necklace, that’s undeniably impressive. RFID is actually a technology that has been widely used since the 1960s, but it is currently enjoying a renewed lease on life in retail settings. Fourth-quarter per share earnings of $0.36 ex-items fell four cents shy of analyst estimates, though it should be noted that this under-followed firm is only covered by a couple of researchers.
This afternoon’s comeback was unquestionably strong, but with shares up 34% in a year and sporting a hefty P/E multiple, it’s no steal. Especially considering GAAP EPS slid 60% from year-earlier levels on a margin squeeze combined with restructuring and acquisition costs.
Swiped: America’s Most Stolen Products, Shoplifters of the World Unite, and Exposed: The ‘Privacy Expert’ Crusading Against Walmart RFID Tags have more.
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No positions in stocks mentioned.
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