April 28 (Bloomberg) -- Radio ShackCorp., the third-largest U.S. electronics retailer, plunged the most in almost six years after first-quarter profit fell more than analysts estimated on slowing sales of wireless-telephone plans.
RadioShack declined $2.35, or 13 percent, to $15.15 at 12:18 p.m. in New York Stock Exchange composite trading, the steepest drop since August 2002. The shares more than doubled in the year after Julian Day, a former Kmart Holding Corp. chief executive officer, took over RadioShack in July 2006. After peaking last June, the stock dropped 50 percent through last week.
Sales fell 4.4 percent, the seventh straight decline, and profit dropped for the first time in eight quarters. Day, who had previously bolstered earnings by cutting costs, failed to stem the deterioration in income from wireless phones and plans. Higher advertising costs also eroded profit.
``We're definitely seeing evidence the cuts are fading and now it's a revenue story,'' Scott Tilghman, an analyst with Soleil Securities Corp. in Baltimore, said in a telephone interview. ``We're not seeing profitable top-line growth.''
Profit dropped to $38.8 million, or 30 cents a share, from $42.5 million, or 31 cents, a year earlier, Fort Worth, Texas- based RadioShack said today in a statement. Sales declined 4.4 percent to $949 million. The shares fell 7.5 percent.
Profit included a gain of about 3 cents a share related to an income-tax issue in Puerto Rico, said Tilghman. Excluding that, profit was 27 cents, he said.
Analysts estimated earnings of 29 cents a share, the average of 16 projections in a survey by Bloomberg. The sales estimate was $945.2 million.
Revenue from less-profitable items, such as global- positioning devices, video game consoles and digital cameras, advanced.
Same-Store Sales
Sales in stores open at least 12 months fell 4 percent, less than some analysts estimated. Rick Weinhart, an analyst with BMO Capital Markets Corp., predicted an 8 percent drop in a research note April 22. Horvers expected a decline of 4.6 percent. Sales in such stores, a measure of retailer health because it discounts the effect of new stores, have dropped for nine straight quarters.
Growth in wireless sales, which make up about a third of revenue, fell after RadioShack switched to AT&T Inc. plans from Verizon Wireless in 2006. Fewer sales of Sprint wireless plans contributed to the sales decline, RadioShack said today.
Sales trends improved in the quarter, Day said in the statement. Same-store sales fell an average of 1.2 percent in February and March.
Gross margin, the share of sales after subtracting the cost of goods sold, narrowed to 47.4 percent from 49.9 percent on sales of less-profitable items and more advertising, the company said.
To contact the reporter on this story: Mark Clothier in Atlanta at mclothier@bloomberg.net
Monday, April 28, 2008
Sweet Life
In the high-price world of finance it is not often that market Titans often come together and we all smile; enter the Candy Man AKA Warren Buffet. Through the sweet financial matchmaking of Berkshire Hathaway, chocolate king Mars (a family owned business) is set to acquire the Govenor of Gun Wrigley. What makes Wrigles such a tasty target, simple: margins. Wrigley gets 47% of its profit form overseas, and controls allmost 20% of the gum market share internationally.
People familiar with the matter tell The Wall Street Journal Mars is set to pay more than $22 billion for Wrigley and could announce the transaction as early as today. Such a price from the producer of Snickers bars and M&M's for the maker of Juicy Fruit would be a tasty bonus for shareholders of Wrigley, whose stock market value is about $17.3 billion, and the Journal says the buyers were prepared to stomach such a rich premium. Berkshire, in providing financing for Mars, would become a stakeholder in Wrigley. Closely held Mars has long been admired by Mr. Buffett, who, as the Journal points out, "is famous for confidence in the staying power of iconic consumer brands such as Coca-Cola."
The deal "would remake the global confectionery landscape," offering Mars a more global reach since "Wrigley generates the majority of its sales outside of the U.S," the Journal adds. Mars, with a 15% global market share, is already the biggest seller of chocolate. Among the other candidates for consolidation that may now feel pressured to join forces are Hershey and Cadbury Schweppes, which discussed a deal last year but didn't find a way to make it work, the Journal notes.
Expect stock for both to rise behind this announcement.
People familiar with the matter tell The Wall Street Journal Mars is set to pay more than $22 billion for Wrigley and could announce the transaction as early as today. Such a price from the producer of Snickers bars and M&M's for the maker of Juicy Fruit would be a tasty bonus for shareholders of Wrigley, whose stock market value is about $17.3 billion, and the Journal says the buyers were prepared to stomach such a rich premium. Berkshire, in providing financing for Mars, would become a stakeholder in Wrigley. Closely held Mars has long been admired by Mr. Buffett, who, as the Journal points out, "is famous for confidence in the staying power of iconic consumer brands such as Coca-Cola."
The deal "would remake the global confectionery landscape," offering Mars a more global reach since "Wrigley generates the majority of its sales outside of the U.S," the Journal adds. Mars, with a 15% global market share, is already the biggest seller of chocolate. Among the other candidates for consolidation that may now feel pressured to join forces are Hershey and Cadbury Schweppes, which discussed a deal last year but didn't find a way to make it work, the Journal notes.
Expect stock for both to rise behind this announcement.
Wednesday, April 23, 2008
Sunny Side Up
A few months back we predicted the decline in the price of oil, and right now we look dead wrong. That's OK, because the SUN will have its day to shine, and very soon.
The introduction of nanotechnology is allowing scientist to double the output of solar photovoltaics every 3 years. If we were able to double output just 7 more times, the sun could provide all of the energy needed to run every appliance in the entire world.
What this means for investors is simply, invest in solar energy companies. Some of our favorites are Ausra and Aussy company that has some amazine new technologies; along with First Solar they are leading the way in the nano revolution.
The introduction of nanotechnology is allowing scientist to double the output of solar photovoltaics every 3 years. If we were able to double output just 7 more times, the sun could provide all of the energy needed to run every appliance in the entire world.
What this means for investors is simply, invest in solar energy companies. Some of our favorites are Ausra and Aussy company that has some amazine new technologies; along with First Solar they are leading the way in the nano revolution.
Sunday, April 20, 2008
Benz meets BMW
What does it say about our world when our automakers are better able to share inforomation then our government agencies? That said, this is a financial blog and not a political one. Irony, all of this good German good will is spurred by the Chinese.
BEIJING (AP) -- Daimler AG, the maker of Mercedes-Benz cars, is discussing sharing components and technology development with rival BMW AG, Daimler CEO Dieter Zetsche said Sunday.
The luxury automakers see each other as direct competitors and the possibility of cooperation reflects the intense pressure on automakers to cut costs amid slow sales growth in the United States and Europe. "We are discussing potentially sharing components. And this might make sense specifically in regard to new technologies," Zetsche told reporters at the Beijing auto show.
Daimler, based in Stuttgart, and BMW, in Munich, might consider jointly investing in basic research but no agreements have been reached, Zetsche said. He gave no other details.
China, the world's second-largest auto market, has been a bright spot for Daimler and other automakers, with overall sales forecast to grow at least 15 percent this year. U.S. sales are expected to decline this year, while those in Europe and Japan are flat.
In China, Daimler says its first-quarter sales soared 42 percent from the same period last year to 8,661 vehicles. The company says China is the No. 2 market for its S-class sedans after the United States, accounting for one-third of sales.
If this sticks this will be big news on the international equities market. Much like the airlines environment of M&A, this is a tech version on the other side of the world. The ability to take advantage of economies of scale is bound to cut overhead cost, for both manufactures; the question is will each manufactures be able to maintain its own unique identity. As you may recall Dodge and Mitusbschi did this is the mid 90s and both suffered.
Thursday, April 17, 2008
Go Go Gadget Google
Investors will be eyeing Google (GOOG) today after the closing bell, as the online search specialist reports first quarter earnings. Analysts are expecting net income of $4.52 per share, 22.8% higher than the same period a year ago. Revenue is expected to come in at $3.61 billion, up 6.5% from the fourth quarter of 2007.
Most companies would kill for that sort of expansion given current economic conditions, but Google's growth clip is off significantly from previous levels. First quarter earnings in 2007 were a whopping 60.6% higher than 2006 numbers, which were almost twice that of 2005.
According to the company, Google generates 44% of its revenue from overseas. Investors should welcome this trend, as online growth rates begin to cool in the U.S. Abroad, however, Internet use is still expanding rapidly.
In recent months, much has been made about Google's relative susceptibility to the continuing economic slowdown. The company doesn't provide formal earnings guidance, and according to The Wall Street Journal analysts rely heavily on data compiled by ComScore, a compiler of online clicking habits. On Tuesday, ComScore reported that, compared to the fourth quarter of last year, first quarter clicks on Google search ads declined 9.3%.
Some investors fear Google has saturated its primary market -- online search --- and is now more exposed to oscillations in economic activity. Small and medium-sized businesses are already scaling back advertising campaigns, eating into Google's bottom line. CEO Eric Schmidt maintains his company's results aren't closely tied to greater economic strength or weakness. Meanwhile, skeptics accuse the company of failing to generate revenue from its forays into other markets, like online document sharing, email and word processing applications.
Most companies would kill for that sort of expansion given current economic conditions, but Google's growth clip is off significantly from previous levels. First quarter earnings in 2007 were a whopping 60.6% higher than 2006 numbers, which were almost twice that of 2005.
According to the company, Google generates 44% of its revenue from overseas. Investors should welcome this trend, as online growth rates begin to cool in the U.S. Abroad, however, Internet use is still expanding rapidly.
In recent months, much has been made about Google's relative susceptibility to the continuing economic slowdown. The company doesn't provide formal earnings guidance, and according to The Wall Street Journal analysts rely heavily on data compiled by ComScore, a compiler of online clicking habits. On Tuesday, ComScore reported that, compared to the fourth quarter of last year, first quarter clicks on Google search ads declined 9.3%.
Some investors fear Google has saturated its primary market -- online search --- and is now more exposed to oscillations in economic activity. Small and medium-sized businesses are already scaling back advertising campaigns, eating into Google's bottom line. CEO Eric Schmidt maintains his company's results aren't closely tied to greater economic strength or weakness. Meanwhile, skeptics accuse the company of failing to generate revenue from its forays into other markets, like online document sharing, email and word processing applications.
Monday, April 14, 2008
Buy low, Sell high
While the old addage still stands true, in this turbulant time its becoming harder to apply traditional fundamentals to the equities market(s). So what can you use as your guide - Greed. That's right, let that little voice in the back of my mind be your guide.
A great example of the big G. Just a few months ago Google was selling at around $700 per share. Had you bought the stock at $400 a share your eyes should have been green with glee.
When looking at your short-term investments (no matter if its long-terms that have come due or a day trade) its a good idea to set some buy/sell limits for yourself. A very simple way is to say -5% and +10%. This way you are in there long enough that you can weather a small storm or you stick around until right before the bubble burst. Its never a good idea to trade on emotion.
Some strong sectors that should bring some solid returns are: aerospace/defense, manufacturing (especially TVs and DvD players), and AOL. While AOL isn't a sector its deal with Verizon, combined with the restructuring makes them a good value pick.
Stay away from companies that are heavy in the export business, the weak dollar is slowing cutting into already slim margins. Restaurants, blame it on the rain or maybe the lack of it. Fuel prices and crop shortages are leading to increased food cost. The problem is that with families pocketbooks being tight its hard to raise prices. A silver lining may be Applebees, Ruby Tuesday, and Red Lobster. Some builders and their suppliers... Need I say more.
A great example of the big G. Just a few months ago Google was selling at around $700 per share. Had you bought the stock at $400 a share your eyes should have been green with glee.
When looking at your short-term investments (no matter if its long-terms that have come due or a day trade) its a good idea to set some buy/sell limits for yourself. A very simple way is to say -5% and +10%. This way you are in there long enough that you can weather a small storm or you stick around until right before the bubble burst. Its never a good idea to trade on emotion.
Some strong sectors that should bring some solid returns are: aerospace/defense, manufacturing (especially TVs and DvD players), and AOL. While AOL isn't a sector its deal with Verizon, combined with the restructuring makes them a good value pick.
Stay away from companies that are heavy in the export business, the weak dollar is slowing cutting into already slim margins. Restaurants, blame it on the rain or maybe the lack of it. Fuel prices and crop shortages are leading to increased food cost. The problem is that with families pocketbooks being tight its hard to raise prices. A silver lining may be Applebees, Ruby Tuesday, and Red Lobster. Some builders and their suppliers... Need I say more.
Wachovia slumps
CHARLOTTE, N.C. (AP) -- Wachovia Corp. will slash its dividend and raise $7 billion in a share sale after reporting a surprise first-quarter loss on Monday of $393 million. The company's shares fell more than 10 percent.
The nation's No. 4 bank, whose results were tainted by exposure to the troubled credit markets, also said it plans to cut 500 jobs in its corporate and investment bank.
"I'm deeply disappointed with our first-quarter results," Chief Executive Ken Thompson told analysts on a conference call. "I know these actions aren't without cost. I wish they weren't necessary, but they are."
The Charlotte-based bank's loss works out to 20 cents a share. That compared with profit of $2.3 billion, or $1.20 a share, a year earlier. Excluding merger-related and restructuring charges, the bank lost $270 million, or 14 cents a share.
Revenue fell 4.5 percent to $7.89 billion from $8.27 billion last year.
Analysts surveyed by Thomson Financial had expected Wachovia to earn 40 cents per share on revenue of $7.98 billion. The earnings estimates typically exclude one-time items.
Wachovia said it will cut its dividend by 41 percent to 37.5 cents per share from 64 cents per share. The move is expected to save $2 billion annually in order "to build capital ratios and provide more operational flexibility," it said.
The bank also said it plans to cut more jobs within its corporate and investment bank, an area that has been hit by a drop in issuance of complex securities. Since October, Wachovia has cut more than 260 jobs in corporate and investment banking, which had about 6,100 employees as of Dec. 31.
Shares in Wachovia fell $2.96, or more than 10 percent, to $24.85 on Monday.
Wachovia is part of a long list of companies that have raised capital in the wake of problems in the mortgage market, including Countrywide Financial Corp., Thornburg Mortgage Inc., Merrill Lynch & Co., Morgan Stanley and Citigroup Inc.
Its share sale will involve 145.8 million shares of common stock at $24 each, raising roughly $3.5 billion. Wachovia also expects net proceeds from a convertible preferred stock offering of about $3.4 billion. The bank said it intends to use the money it raises from the sale for general corporate purposes.
The nation's No. 4 bank, whose results were tainted by exposure to the troubled credit markets, also said it plans to cut 500 jobs in its corporate and investment bank.
"I'm deeply disappointed with our first-quarter results," Chief Executive Ken Thompson told analysts on a conference call. "I know these actions aren't without cost. I wish they weren't necessary, but they are."
The Charlotte-based bank's loss works out to 20 cents a share. That compared with profit of $2.3 billion, or $1.20 a share, a year earlier. Excluding merger-related and restructuring charges, the bank lost $270 million, or 14 cents a share.
Revenue fell 4.5 percent to $7.89 billion from $8.27 billion last year.
Analysts surveyed by Thomson Financial had expected Wachovia to earn 40 cents per share on revenue of $7.98 billion. The earnings estimates typically exclude one-time items.
Wachovia said it will cut its dividend by 41 percent to 37.5 cents per share from 64 cents per share. The move is expected to save $2 billion annually in order "to build capital ratios and provide more operational flexibility," it said.
The bank also said it plans to cut more jobs within its corporate and investment bank, an area that has been hit by a drop in issuance of complex securities. Since October, Wachovia has cut more than 260 jobs in corporate and investment banking, which had about 6,100 employees as of Dec. 31.
Shares in Wachovia fell $2.96, or more than 10 percent, to $24.85 on Monday.
Wachovia is part of a long list of companies that have raised capital in the wake of problems in the mortgage market, including Countrywide Financial Corp., Thornburg Mortgage Inc., Merrill Lynch & Co., Morgan Stanley and Citigroup Inc.
Its share sale will involve 145.8 million shares of common stock at $24 each, raising roughly $3.5 billion. Wachovia also expects net proceeds from a convertible preferred stock offering of about $3.4 billion. The bank said it intends to use the money it raises from the sale for general corporate purposes.
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