Friday, October 22, 2010

Morning Note...

Thin note today…haven’t read much of real interest.  Futures are ~30bps higher this morning as Q3 earnings continue to roll through.  The latest big names to report better-than-expected bottom line results include Honeywell (HON; -75bps), Ingersol-Rand (IR; -40bps), Ericsson (ERIC; +6.5%), Amazon (AMZN; -1%), (BIDU; +4.5%), Verizon (VZ; -65bps), Schlumberger (SLB; +1.25%), and American Express (AXP; -25bps).  Downside earnings results came from Leggett & Platt (LEG; -9%), Citrix Systems (-3.65%), and QLogic (QLGC; -3%).  Looking ahead, the G20 meeting is set for this weekend…does anything material ever happen at these things?  Asia mixed overnight.  Europe mixed to slightly higher.  USD -15bps.  Oil +125bps.  Gold +15bps. 

This morning’s earnings summary from MSCO:

++ KEY: EPS of 19c vs 5c consensus, a clean beat on better revs, lower provision and lower op costs than MS estimates. Stock should outperform on these numbers
+ AXP: Strong qtr, EPS beat on fee income and lower than expected provisions; Reported EPS 90c vs consensus of 80c
+ CB: Reported operating EPS of $1.69 vs. Consensus of $1.40 and MS of $1.55, driven b y better margins. Chubb repurchased ~3% of shares in 3Q and remains on track to buy ~12% of shares in 2010 while paying a $1.48/share in dividends (~3% yield).

= HON: Reported adjusted 3Q EPS of $0.64 vs cons of $0.62; a small beat as expected with light 4Q guidance
= DOV: Reported operating EPS of $0.98 vs. cons of $0.90 and MSe of $0.89, reported EPS of $1.18 includes a $0.20 tax benefit; a nice beat as expected (although it might not be enough vs. high expectations)
= PAG: Reported 3Q EPS of $0.34 vs. cons of $0.33 and MSe EPS of $0.34; qtr is in-line with higher revs being offset by compressed margins
-  IR: Reported 3Q EPS of $0.80 vs. cons of $0.79 and MS est. of $0.74; headline looks in-line but when you walk through all the puts and takes on the guidance line the bottom line is it looks light
- BUCY: Reported 3Q EPS of $0.94 vs cons of $1.15 and MSe of $1.12; modestly weaker than expected qtr could drive BUCY shares lower

++ CMG: Another Blowout Driven by Strong Comps (11.4% vs. MS +10% and Consensus +7.9%) and Margins (27.7% (+220 bps) vs. MS 25.7% and Consensus 25.6%); The margin this quarter was the best ever
= CAKE: In-Line with Investor Expectations; EPS came in slightly above consensus driven by moderately better than expected same-store sales and a lower than expected tax rate; EPS was $0.37, vs. MS $0.36 and Consensus $0.34. Mgmt guidance was for $0.31-$0.33; Lower than expected tax rate added $0.02 to EPS
- COLM:  Slight miss on inline revs – Guidance for the remainder of year is below the street.  (implies a $0.59 4Q EPS, vs. $0.82 current consensus)
- GAP:  Adjusted EBITDA was only 8M vs. 65M last year, down 87% Y/Y (even worse than last quarter's 77% Y/Y decline).  While the stock has dropped a lot in the last couple weeks, it is hard to see the positives in this release

++ FTNT: Big beat by 6C & $8M with billings +33%y/y, guidance is nicely ahead of consensus
+ SNDK: 25C eps beat with ASP declines less severe than expected though revs were just inline. Mgmt talking about “continued strength in our OEM and retail businesses” and “stable pricing and substantial cost reductions”
+ RVBD: 8C & $12M beat and on the call guided to $155-158M vs St $146M but still looks conservative given the 3Q beat
+ SYNA: Beat by 2C & $1M and guided inline
+ ELX: Beat by 3C & $1M and guided slightly ahead
+ CA: beat by 2C & billings beat by $200M. Mgmt took numbers up into FY11(Mar) just to account for more favorable F/X
+ INFA: Beat by 2C & $4M release talks about “sustained growth opportunity” and “increasing customer demand” for their analytics software
+ CALX: Beat by $2.5M & 8C talking about strong demand in the quarter and 4Q guidance “achievable”
+ PLCM: beats by 3C & $8M press release comments are bullish on demand for their collaboration products
+ CPWR: beat by 3C & $4M
+ NCR: Looks like a slight beat & raise
+/= MCRL: Beat by 3C & $3M and guides down 3-7%q/q which is slightly inline with the street.
= PMCS: Print came inline with the negative pre-announcement
= CYMI: Decent beat but guidance is below the street for 4Q which could be a negative
= QLGC: Printed inline with their positive pre-announcement
=/- VZ: Solid quarter at first blush but given the huge 3Q move; stock now 14.4x consensus 2011 earnings, implying a 15% premium to the S&P500, close-to-record levels.  Stock trades ~8% above base case value of $30.  
- AMZN: Big revenue beat but operating margins weaker than expected at 5.3% vs expectations closer to 6%
- LSCC: Posted a slight miss & guided well below for revs down 2-7%q/q.
- CTXS: Messy with some good, some bad; Beat the quarter on revs & eps with 4Q guidance about inline

GSCO ups AGCO.  JEFF ups RVBD.  OPCO ups USB.  BARD ups LHO.  JEFF cuts ALXN.  OPCO cuts EMC. BARD cuts LSCC, UNP.  RAJA cuts CAT.  RBCM cuts K.  FNF cut at MACQ. 

S&P 500 PreMarket 8:30am (last/% change prior close/volume): 

Today’s Trivia: The majority of genetic research centers on human beings…but what is the 2nd most studied creature in genetic research?
Yesterday’s Question: From last nights NLCS Phillies-Giants game…What does Alcatraz mean in Spanish?

Yesterday's Answer:  Alcatraz is derived from the Spanish “Alcatraces,” which is generally taken to mean “pelican” or “strange bird.” 

Best Quotes:  Couple interesting BBERG stories…

Megadeals Go Missing From M&A Rebound as Companies Avoid Risk 2010-10-22 08:28:28.30 GMT

Oct. 22 (Bloomberg) -- Announced takeovers of more than $25b are set to make up smallest percentage of total deal volume in any year since 2002, according to Bloomberg data. * 73% of transactions this year less than $5b, purchases put dealmaking on pace to surpass last year’s $1.78t in vol., may portend return of more sizeable acquisitions  * BHP Billiton’s offer for Potash only bid this year valued at more than $30b, 2 others valued at more than $25b, including net debt.

Fed’s Hoenig Says More Easing Would Damage Recovery, WSJ Reports 2010-10-22 07:43:15.152 GMT

Oct. 22 (Bloomberg) -- Any further quantitative easing by the Fed would risk damaging the nascent U.S. economic recovery, Federal Reserve Bank of Kansas City President Thomas Hoenig said, WSJ reports, citing remarks he made in N.M. * Hoenig, a voting member of the FOMC, said purchasing what would almost certainly be U.S. government debt may ramp up inflation forecasts to ~2%.

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