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| 2010-07-23 01:44 |
STRESS THE RESULTS
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We knew this
European stress test would be a little funky. Poorly communicated and more than a little convoluted, the results are now pouring in to a mixed
reaction. The first reaction is "Yeah, right!" as only seven banks out of 91 failed. The parameters were:
* Double dip recession + 20% plunge
in stock market.
* Four notch ratings downgrade on securitized positions.
* Once in every 20 year event.
* Applies sovereign debt losses to
trading desks only.
* Loch Ness monster rips apart London.
I guess we had to expect this, but the irony is more losses would have added more
credibility to the results. But, investors may be ready to suspend skepticism. Right now, U.S. investors are selling, mostly taking profits, but there
isn't a stampede. I know many traders that were going to sell today like they do every Friday. There are some technical points moving people to exit,
too, but the market might finish in the black.
List of Failed Banks
Spanish
* Espiga
*
Diada
* Unnim
* Civica
* Cajasur
German
* Hypo Real Estate (this was a
no-brainer)
Greek
* ATE Bank
By: Brian Sozzi, Equity Research Analyst
I am Stressed
After these Results
The market weakened following the stress test results (surprise surprise), despite my sense being they were
in line with expectations. The focus has now shifted onto the methodology (stunk) and overall validity (stunk because the methodology stunk) of the
tests. I am not sure if the tests resolved anything, in fact they may have opened up more questions because they weren't as tough as the market
desired. I would think it would be better to show the most adverse of cases to the market.
Four Earnings Releases
Down...
Thus far, four companies from my coverage universe have reported earnings this week, Whirlpool (WHR), Stanley Black &
Decker (SWK), Columbia Sportswear (COLM), and Snap-On (SNA). I am happy these global companies were out of the gate first with their second quarter
earnings, it has provided great clues into actual trends on the ground instead of drummed up happenings by market goers. In the case of all these
companies, Europe was a bright spot. Read that again. Europe was a bright spot in the second quarter. Columbia Sportswear had 10% plus sales increases
in Europe as retailers restocked shelves and consumer demand returned. Snap-On, a tool company, noted Europe was a positive contributor to results
instead of a negative story. As for Whirlpool and Stanley Black & Decker, positive growth was spotted in Europe.
Ford
Zooms
By: David Silver, Research Analyst
The only American automaker not to take government money is showing what solid planning
and a little bit of luck can accomplish. This morning, Ford (F) announced that revenues increased 17% year over year to $31.3 billion. In a far cry
from what we saw last year at this time, North America was the strongest segment for the company and propelled it to positive cash flow. Management
also expects cash flow for the full year to be solidly positive. This is the sixth straight quarter that Ford has reported a quarterly profit, and CEO
Alan Mulally indicated that he expects Ford to be solidly profitable during 2010, and for 2011 to be even stronger. That being said, Ford lowered the
top end of its guidance for sales in the United States as a result of the economy.
The company sold off Land Rover and Jaguar, is in the midst
of selling Volvo, and is winding down Mercury, allowing it to concentrate on the Ford and the Lincoln brands. The moves have helped the company to
experience something that very few companies are able to say: pricing power. People are willing to pay more for a Ford as quality, safety, and fuel
efficiency for the majority of its vehicles are at or near the "best in class." Another item separating Ford from other automakers is the little
knick-knacks like the Sync system, or the blind-spot alert system. These technological add-ons are helping to separate Ford from the rest of the pack.
Ford paid down a whopping $7 billion of debt during the quarter, and perhaps the best news from the company was when Mr. Mulally stated that
by the end of 2011, the company expects to have more cash than debt. From a company that was saddled with more than $35 billion of debt (currently at
$27 billion), Mr. Mulally has worked to lessen the debt load. The company currently has $21.9 billion of cash, less than the $25.3 billion Ford had at
the end of the first quarter.
Techs Down Despite Good Results
By: Carlos Guillen, Research Analyst
Overall tech shares
are performing poorly in today's trading session. The chip sector, as measured by the Philadelphia Semiconductor Index (SOX), has decreased
approximately 1% from Thursday's closing price. Currently, the majority of the SOX components are in the red. This recent drop comes as investors
continue to appear to not be impressed with the most recent earnings results, and Euro bank stress tests are creating some confusion in the broad
market. Also, poorly received news from SanDisk (SNDK) and Microsoft (MSFT) are not really helping tech stocks today. From a technical perspective,
the SOX tested its 20-day moving average earlier this week and is staggering its way to the upside. A fall though the 20-day moving average may take
the index back down to test support at approximately 325.
SanDisk beat on the top and bottom lines and did not get the welcome that
one might expect mainly because it was announced that the company's CEO would retire by the end of the year. Mr. Harari, 65, has been SanDisk's only
chief executive since it was founded in 1988, and has been the company's public face for more than two decades. His departure has created some
uncertainty in investors' minds about the future of the company, and has brought down shares of SNDK. The company delivered revenue of $1.18 billion
and earnings per share of $1.08, better than the Street's consensus calling for revenue of $1.16 billion and earnings per share of
$0.90.
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Disclaimer: Securities Operations Forum is providing this research to assist investors in determining when to buy and when to sell. All investment decisions are yours and as a result you could make or lose money. Securities Operations Forum, its employees and/or its affiliates and family members may from time to time take positions in the open market or otherwise with respect to the securities discussed, but not have stock ownership equal to or greater than 1% of the outstanding stock of the covered company nor does any employee of Securities Operations Forum sit on the Board of Directors of any covered company. The statements made herein include information obtained from sources believed to be reliable, but no independent verification has been made and we do not guarantee its accuracy or completeness. The statements made herein contain general information and do not constitute an offer to buy or sell any security. |
