More Krugman, Borders, Tech, ReadBurner
– This one is priceless..
– No, not there, how about Central Mass?
– The reason tech companies dominance grows shorter..
– Anyone use this?
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More Krugman, Borders, Tech, ReadBurner
– This one is priceless..
– No, not there, how about Central Mass?
– The reason tech companies dominance grows shorter..
– Anyone use this?
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
Harley Davidson (HOG) gave more insight into the primary reason earnings are dropping in the earnings call.
Financial Services:
“Harley-Davidson Financial Services delivered first quarter operating income of $34.9 million a decrease of $24 million or 40.8% compared to last year’s first quarter. This decrease is primarily due in a reduction in income from securitization. As most of you are aware the first quarter was a challenging time in the securitization markets. In the first quarter of 2007 HDFS sold $540 million of retail motorcycle loans. As part of the transaction HDFS retained $54 million of the subordinated securities on its balance sheet and recognized a loss totaling $5.4 million. This compares to an $800 million securitization transaction with a gain of $13 million during last year’s first quarter. The loss in the first quarter of 2008 was driven by increased securitization funding costs due to capital market volatility and expectation of higher credit losses compared to historical trends.”
“HDFS originated $518 million in retail motorcycle loans in the first quarter of 2008 compared to $630 million in the first quarter of 2007.”
“In terms of credit performance the 30 plus day delinquency rate for managed retail motorcycle loans was 4.78% at the end of the first quarter of 2008 compared to 4.08% at the end of the first quarter of 2007. Consistent with seasonal trends over the past several years’ delinquencies declined from the fourth quarter of 2007 to the first quarter of 2008 and credit losses on managed retail motorcycle loans were 2.71% for the first quarter of 2008 compared to 2.28% for the same period last year.”
“During the quarter the percentage of subprime loans outstanding remain within our historical growth range of 25 to 30% of managed retail loan receivables.”
Pretty straight forward stuff. Delinquencies have risen but not by any means at an alarming rate. The real problem is the ability for HOG to sell the loans at a profit. This is not any different than any other firm trying to sell securitized loans.
The key is that they are not having any problems funding additional loans and are not being forced to hold more than they want…
This will just take some time.
Disclosure (“none” means no position):Long HOG
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A plan seems to be emerging from Citigroup (C). If nothing else, the credit situation was not a worse as people feared.
Citigroup reported a net loss of $5.1 billion, or $1.02 a share, for Q1 with more than $10 billion of write-downs. Revenue fell 48% to $13.22 billion. They took $6 billion of pretax write-downs and credit costs on sub-prime loans. The firm also announced write-downs of $3.1 billion on funded and unfunded highly leveraged finance commitments, a downward credit value adjustment of $1.5 billion related to exposure to monoline insurers, write-downs of $1.5 billion on auction rate securities inventory, and a $3.1 billion increase in credit costs in its global consumer business.
Citi also said they have already sold $4 billion in leveraged loans in April. CFO Gary Crittendon said there will be no “transformational” assets sales (they will sell some, just nothing big) in 2008, no more dividend cuts, and no more equity raising. About 9,000 additional jobs, on top of the 4,000 already announced are going to be cut.
In short, things seem to have bottomed. This is not to say it is a shot up from here. My guess is thing languish for a while until there is some trust back in the financials. The past month has seem an avalanche of bad news out there and as a group the financials have taken the hit and equity prices have remained stable.
Now we look to next quarter for more stabilization and perhaps improvement. If there is improvement, it will be small. Just no further billion dollar write down would be huge at this point. Investors seem to have much more clarity as to both what is happening inside the bank and in the environment it operates in.
For long term folks, it would seem a good time to get in.
Disclosure (“none” means no position):Long C
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This work is licensed under a Creative Commons Attribution 2.5 License.
A plan seems to be emerging from Citigroup (C). If nothing else, the credit situation was not a worse as people feared.
Citigroup reported a net loss of $5.1 billion, or $1.02 a share, for Q1 with more than $10 billion of write-downs. Revenue fell 48% to $13.22 billion. They took $6 billion of pretax write-downs and credit costs on sub-prime loans. The firm also announced write-downs of $3.1 billion on funded and unfunded highly leveraged finance commitments, a downward credit value adjustment of $1.5 billion related to exposure to monoline insurers, write-downs of $1.5 billion on auction rate securities inventory, and a $3.1 billion increase in credit costs in its global consumer business.
Citi also said they have already sold $4 billion in leveraged loans in April. CFO Gary Crittendon said there will be no “transformational” assets sales (they will sell some, just nothing big) in 2008, no more dividend cuts, and no more equity raising. About 9,000 additional jobs, on top of the 4,000 already announced are going to be cut.
In short, things seem to have bottomed. This is not to say it is a shot up from here. My guess is thing languish for a while until there is some trust back in the financials. The past month has seem an avalanche of bad news out there and as a group the financials have taken the hit and equity prices have remained stable.
Now we look to next quarter for more stabilization and perhaps improvement. If there is improvement, it will be small. Just no further billion dollar write down would be huge at this point. Investors seem to have much more clarity as to both what is happening inside the bank and in the environment it operates in.
For long term folks, it would seem a good time to get in.
Disclosure (“none” means no position):Long C
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
Upgrades
Lam Research (LRCX)- AmTech Research Neutral » Buy
IBM (IBM)- Canaccord Adams Hold » Buy
Swift Energy (SFY)- UBS Neutral » Buy
Newfield Expl (NFX)- Friedman Billings Mkt Perform » Outperform
Venoco (VQ)- Jefferies & Co Hold » Buy
Cepheid (CPHD)- UBS Neutral » Buy
Cimarex (XEC)- UBS Neutral » Buy
Forest Oil (FST)- UBS Neutral » Buy
Downgrades
eBay (EBAY)- AmTech Research Buy » Neutral
Emulex (ELX)- Caris & Company Above Average » Average
Artes Medical (ARTE)- Lazard Capital Buy » Hold
j2 Global (JCOM)- Stanford Research Buy » Hold
Caribou Coffee (CBOU)- Cowen & Co Outperform » Neutral
PF Chang’s (PFCB)- Cowen & Co Outperform » Neutral
Cosi (COSI)- Cowen & Co Outperform » Neutral
Illinois Tool (ITW)- Credit Suisse Outperform » Neutral
Astoria Fincl (AF)- RBC Capital Mkts Sector Perform » Underperform
Intl Paper (IP)- Credit Suisse Outperform » Neutral
Esterline Techs (ESL)- Credit Suisse Outperform » Neutral
Procter & Gamble (PG)- Deutsche Securities Buy » Hold
UST Inc (UST)- UBS Buy » Neutral
Sonic Automotive (SAH)- UBS Buy » Neutral
Arcelor Mittal (MT)- HSBC Securities Overweight » Neutral
Spansion (SPSN)- Deutsche Securities Buy » Hold
Old Dominion (ODFL)- Robert W. Baird Outperform » Neutral
Badger Meter (BMI)- Robert W. Baird Neutral » Underperform
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
Upgrades
Lam Research (LRCX)- AmTech Research Neutral » Buy
IBM (IBM)- Canaccord Adams Hold » Buy
Swift Energy (SFY)- UBS Neutral » Buy
Newfield Expl (NFX)- Friedman Billings Mkt Perform » Outperform
Venoco (VQ)- Jefferies & Co Hold » Buy
Cepheid (CPHD)- UBS Neutral » Buy
Cimarex (XEC)- UBS Neutral » Buy
Forest Oil (FST)- UBS Neutral » Buy
Downgrades
eBay (EBAY)- AmTech Research Buy » Neutral
Emulex (ELX)- Caris & Company Above Average » Average
Artes Medical (ARTE)- Lazard Capital Buy » Hold
j2 Global (JCOM)- Stanford Research Buy » Hold
Caribou Coffee (CBOU)- Cowen & Co Outperform » Neutral
PF Chang’s (PFCB)- Cowen & Co Outperform » Neutral
Cosi (COSI)- Cowen & Co Outperform » Neutral
Illinois Tool (ITW)- Credit Suisse Outperform » Neutral
Astoria Fincl (AF)- RBC Capital Mkts Sector Perform » Underperform
Intl Paper (IP)- Credit Suisse Outperform » Neutral
Esterline Techs (ESL)- Credit Suisse Outperform » Neutral
Procter & Gamble (PG)- Deutsche Securities Buy » Hold
UST Inc (UST)- UBS Buy » Neutral
Sonic Automotive (SAH)- UBS Buy » Neutral
Arcelor Mittal (MT)- HSBC Securities Overweight » Neutral
Spansion (SPSN)- Deutsche Securities Buy » Hold
Old Dominion (ODFL)- Robert W. Baird Outperform » Neutral
Badger Meter (BMI)- Robert W. Baird Neutral » Underperform
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Friday’s Picks
Thursday’s Results
Guy Adami likes Microsoft (MSFT) $28.95 Close $29.22 GAIN
Carter Worth says International Coal Group (ICO) $7.20 is a buy as a laggard in the red hot coal space. Close $7.70 GAIN
Pete Najarian prefers Petrohwak Energy (HK) $23.18 which he believes has room on the upside. Close $23.31 GAIN
Tim Seymour recommends shorting Petrobras (PBR) $122.84 for the next 4 or 5 sessions.
Close $125.49 LOSS
2008 Records:
Brian Schaeffer= 0-1
Carter Worth= 1-1
Jon Najarian= 4-3
Jeff Macke= 28-21-1
Tim Seymore= 15-11
Guy Adami= 28-25
Pete Najarian= 30-22
Karen Finerman= 22-24-1
Joe Terrenova= 1-1
2007 Results (Since 6/21):
Guy Adami= 58-46 = 56%
Jeff Macke= 60-40 = 60%
Pete Najarian= 49-41 = 54%
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Krugman, Marriage and Divorce, iPhone, Text Alert
– Is there a more dishonest person alive?
– This was fascinating..
– More price cuts
– This is one of those things you can’t help but ask, “what took so long?”
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
Krugman, Marriage and Divorce, iPhone, Text Alert
– Is there a more dishonest person alive?
– This was fascinating..
– More price cuts
– This is one of those things you can’t help but ask, “what took so long?”
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
Today’s news is positive for shareholders.
Wachovia (WB) announced today that the underwriters of its concurrent offerings of 145,833,334 shares of common stock and 3,500,000 shares of Non-Cumulative Perpetual Convertible Class A preferred stock, Series L, have exercised in full their over-allotment options to purchase an additional 21,875,000 shares of common stock and an additional 525,000 shares of convertible preferred stock. The prices for the additional shares of common stock and shares of convertible preferred stock are the same prices, respectively, at which the 145,833,334 shares of common stock and 3,500,000 shares of convertible preferred stock were sold to the underwriters.
What matters here is the the preferred have a conversion price of $31.20 a share or 25% higher than the current share price. Even the excess share of common stock that were purchased were done so at $24 a share, only a $1 discount to the current prices.
Clearly the dilution and even the need to do this are not great news but the premium paid for the preferred offering clearly illustrate the buyers anticipate price appreciation in the future.
Disclosure (“none” means no position):Long WB
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
Today’s news is positive for shareholders.
Wachovia (WB) announced today that the underwriters of its concurrent offerings of 145,833,334 shares of common stock and 3,500,000 shares of Non-Cumulative Perpetual Convertible Class A preferred stock, Series L, have exercised in full their over-allotment options to purchase an additional 21,875,000 shares of common stock and an additional 525,000 shares of convertible preferred stock. The prices for the additional shares of common stock and shares of convertible preferred stock are the same prices, respectively, at which the 145,833,334 shares of common stock and 3,500,000 shares of convertible preferred stock were sold to the underwriters.
What matters here is the the preferred have a conversion price of $31.20 a share or 25% higher than the current share price. Even the excess share of common stock that were purchased were done so at $24 a share, only a $1 discount to the current prices.
Clearly the dilution and even the need to do this are not great news but the premium paid for the preferred offering clearly illustrate the buyers anticipate price appreciation in the future.
Disclosure (“none” means no position):Long WB
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
The more I hear AutoNation’s (AN) Mike Jackson I like him more. CEO since 2003 (the stock was up 83% before the current malaise) Jackson personally has bought 325,000 shares ($4.9 million) and holds options on about 1.1 million more.
Disclosure (“none” means no position):none
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
The more I hear AutoNation’s (AN) Mike Jackson I like him more. CEO since 2003 (the stock was up 83% before the current malaise) Jackson personally has bought 325,000 shares ($4.9 million) and holds options on about 1.1 million more.
Disclosure (“none” means no position):none
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
Who would have thought major banks and a motorcycle would have the same issue.
Harley Davidson released results today and while sales and profits fell, share repurchases caused EPS to rise.
Revenue for Q1 was $1.31 billion compared to $1.18 billion in the year-ago quarter, a 10.8 percent increase. Net income for the quarter was $187.6 million compared to $192.3 million, a decrease of 2.5 percent compared to the first quarter of 2007. First quarter diluted earnings per share (EPS) were $0.79, a 6.8 percent increase compared to last year’s $0.74. Last years results were impacted by a three week strike by about $.03 cents per share.
CEO Jim Zeimer said “For 2008, the Company now expects earnings per share to decrease between 15 and 20 percent compared to 2007 resulting in expected earnings per share of $3.00 to $3.18.” Zeimer said that he expect to ship about 8% fewer bikes than last year.
During the first quarter, worldwide retail sales of Harley-Davidson motorcycles decreased 5.6 percent compared to the prior year quarter. In the U.S., retail sales of Harley-Davidson motorcycles decreased 12.8 percent for the quarter while the heavyweight motorcycle industry in the U.S. decreased 14.0 percent.
Retail sales of Harley-Davidson motorcycles increased 16.8 percent in international markets during the first quarter of 2008 compared to the first quarter of 2007. First quarter retail sales increased 31.1 percent in Canada; the Europe Region was up 7.8 percent; the Asia Pacific Region was up 19.5 percent; and the Latin America Region was up 53.3 percent.
Cash and marketable securities totaled $333.2 million as of March 30, 2008 vs $310 million last year. HOG repurchased 2.6 million shares of its common stock at a cost of $100.1 million during the first quarter of 2008. On March 30, 2008, the Company had 236.5 million shares of common stock outstanding.
The sales decline in total bikes does diminish much of the “discretionary purchase” talk that has been bantered about. While for a segment of the population they are, in this environment, an 8% decrease from the second strongest year in the company’s history hardly qualifies the purchase as purely discretionary.
So then, if sales are not falling off a cliff and merchandise and parts sales (this means people are modifying existing bikes) are actually increasing, what is the issue?
Here is the issue. Harley-Davidson Financial Services (HDFS) reported first quarter operating income of $34.9 million, a decrease of $24.0 million or 40.8 percent compared to the year-ago quarter. The decrease is primarily due to a reduction in income from securitization. Has HDFS just met last years results, EPS for Q1 would have been $.89 a share. Of course we do not live in a world of “what if’s” but if we are trying to figure out where the issue is, we have to do the exercise.
Essentially HOG faces the same problems Citigroup (C), Merrill Lynch (MER), Wachovia (WB), Bank of America (BAC) and other financial services operators are, people will not buy (or are doing so a vastly lower profit margins) their securitized loans.
Of all the possible reason for an EPS reduction, this has to be the best. Sales are holding up despite predictions of a worse number and international operations are going full bore (the real impact here will not be fully felt until 2009). Simply put, the business of selling bikes is not being severely strained.
It is credit. Not losses on loans, but HOG’s ability to repackage them and sell them for a nice profit. It does also mean that should the credit environment right itself some this this summer, you may see a dramatic revision to the upside from here.
Either way, I’ll take my 3.5% yield and wait.
Disclosure (“none” means no position):Long HOG,C, WB, None
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