Friday, September 19, 2008

ORCL Q1 earnings

Oracle's Q1 earnings beat analyst estimates by 2 cents, with profits coming in at 32 cents per share. New sales were up 14% inline with estimates and profitability was up 28% YoY. Management's Q2 outlook predicts lower sales revenues growing between 2-12% compared with 38% the previous year. Software updates and support are almost 50% of Oracle's earnings, so recurring revenue can easily support profits even with weak sales. This is the main reason ORCL reaffirmed analysts Q2 profit estimates of 35-36 cents a share.

ORCL has responded nicely to earnings. Trading around $18.50 early Thursday it closed at $20.07 today, 8.5% swing in two days. Because ORCL predicts fairly conservative earnings for the next quarter, I recommend continuing to hold the stock in our portfolio. A concern of mine was that SAP was continuing to steal market share from ORCL. Even with the weak economy it seems ORCL has been able to retain a good number of its customers, while preventing SAP from gaining ground.

Wednesday, September 17, 2008

Earnings Target Rises for Nucor

September 16th Wallstreet Journal:

Nucor Corp. raised its third-quarter earnings target, citing improved performance -- including from recent acquisitions -- and a lower-than-expected accounting charge because of a significant decline in scrap prices.
The maker of steel from recycled metal now expects earnings of $2.15 to $2.20 a share. In July, the company forecast $1.80 to $1.85 a share, below Wall Street's then-estimates. Analysts' latest estimate was $1.93, according to a poll by Thomson Reuters. Year-earlier earnings were $1.29 a share.

Recent acquisitions made by Nucor include this year's $1.44 billion purchase of SHV North America, owner of North America's largest scrap purchaser and Nucor's broker of ferrous scrap.

In March 2007, Nucor acquired Harris Steel Group Inc. Those additions more than doubled Nucor's steel products' annual capacity.

Generally, a run-up in steel prices this year is offsetting record-high iron-ore costs and skyrocketing energy costs.

DD Q2 & Current Update 9/17/2008 (James Leahey)

For Q2 DD posted an EPS $1.18, compared to $1.04 last year’s Q2. A lawsuit and a lower tax rate from a onetime tax settlement accounted for $0.07 of the EPS, but after netting that out they still beat the street by $0.04 per share. The strong growth in the Ag and Nutrition segment and emerging markets carried the load this quarter. Ag and Nutrition sales grew 23% this quarter on strong global demand for the company's corn, soybean and crop protection products. A favorable currency exchange rate played a major role in offsetting the high costs they incurred from freight, energy and raw materials. For the second straight quarter, DD has raised the floor on their FY’08 earnings estimate $.05 to $3.45 to $3.55 per share. DD does forecast 2nd half earnings in ’08 to decline from a year earlier though.

The results posted in Q2 were pretty much right along with what we had expected going forward back when we pitched the stock right after Q1 earnings. Fundamentally, nothing has changed as the growth in emerging markets and Ag and Nutrition has been able to prop the earnings up while some of the other segments have posted slower or flat growth because of the current economic conditions. One thing I would like to point out is that in the conference call management did allude to the way that they maintained margins with rising energy and commodity costs was successfully raising prices, and with some of those bubbles bursting I can’t help but think that they are still going to maintain those higher prices, therefore expanding margins. One thing that I have definitely been concerned about is the growing momentum of the dollar relative to other major currencies, because 60% of their revenues came from abroad and currency exchange contributed to 5 percentage points to revenue growth in Q2. As such a widely multinational company, the comeback in the dollar is something to definitely be aware of as that will cut back into revenue growth and create more exposure to the depressed auto and housing industries. Since one of their main drivers of earnings growth has been accelerated growth in the emerging markets, the rebound in the dollar could cut into expected revenue growth in those markets in the future.

Overall, I see no reason to change our position on DD. They seem to be in a relatively stable place right now, as upside and downside seem to be very low right now we shouldn’t expect any significant price volatility for the rest of ’08. I still see it as a long term play as I believe we will reach our price targets sometime in the range of 12-36 months once the domestic and global economies can get themselves back on their feet.

Tuesday, September 16, 2008

GS Q3 08 earnings release 9/16/2008

For the third quarter Goldman Sach's posted eps of $1.81 per share compared with $6.13 per share for the third quarter of fiscal year 2007. The mean street estimate was $1.72 and GS easily beat these expectations however, increased uncertaintly concerning investment banks led the stock down over 5% on the day to a price of $133.01 per share at the close. Some highlights from the earnings release were securities services posted it's second best net quarterly net revenue in history to the tune of $916 million. GS is also the number one world-wide in announced and completed mergers and acquisitions despite decreases in revenue from financial advisory. Other than asset management and securities services, the rest of Goldman Sach's businesses deteriorated throughout the quarter however, relative to their peers, have been able to maintain profitability.

The en vogue question from analysts during the conference call was the potential for GS to merge with a commercial bank in order to increase it's capital base. The response by David Viniar was one of certainty that the company would not merge with a commercial bank in the near future. He added that even if they did merge, the frm could not use these deposits in order to fund their core businesses. Goldman Sachs continues to prove that they are the superior risk managers in the field of pure investment banks. Witnessing the history of the "universal bank" within the United States I do not believe that it is necessary for GS to merge with a larger institution. If anything, we are seeing true darwinism within the industry and it looks like only the most fit banks will survive. I personally believe GS is one of those companies and could benefit moving forward with increased purchasing power due to the lack of a number of viable competitors. I believe that we should hold onto this stock and upon further investigation, look into building our position further after the recent events in the financial markets settle somewhat.

UASBIG Blog Info

Hello all,

This is where we will be posting any updates (earnings, news releases, down more than 5% etc.) for any of the names that are currently in our portfolio. We would like to keep this standardized to ensure consistency and efficiency. Please refer to the following format for how we'd like to see posts:

GS 3Q Earnings 9/16/2008-(Analyst Names)

-First Paragraph- Regurgitation of what press release/management says regarding earnings, as well as whether or not they beat or missed street estimates

Second Paragraph- Your opinion/analysis of the event, implications? Buy more? Sell? Hold? Why?

This needs to be done within 24 hours. So for the companies you have previously been involved with, know these dates. For future companies analyzed, know the dates. Gary Jacobson, DeForest Hinman, Matt Reiner, Professor Smith, and Professor Faugere will all have access to this link. Clearly, any profanity or nonsense will not be acceptable. Keep it professional. We will also be posting dates regarding conference calls and group events through this blog as well as e-mails. Put this website on your favorites and check it like you check your e-mail. We will send out an e-mail regarding log-in information, so be on the watch for that.

Best Regards,
James Fowler and Ed Warner