Saturday, January 31, 2009

IP down 13.3% on Friday

IP was down to $1.40 or 13.3% on Friday...

see article below on analyst downgrades and risks facing IP...

One of the main analysts that covers this stock said earnings will remain "cyclically depressed for IP in the near-term"

This further affirms my point that IP is undoubtedly struggling with a global demand slump and economic crisis. That being said, I think we still bought it at the right time and that even though it may take a few months, this will eventually be a very profitable position being that the company is better positioned than its competitors, and is still the largest company in the paper and forest products industry, and with the most market share.

Thursday, January 29, 2009

ITW 4Q Highlights
-Diluted EPS $0.54 – decrease of 34% YOY. Did beat guidance of $0.44 - $0.52 due to a favorable tax rate.
- Revenues feel 5.9% due to significant loss in base revenues and currency translation.
-Due to the strengthening of the US dollar – ITW revenues were negatively impacted by 4.5% - primarly related to major currencies like the Euro and Pound.
-Non Organic growth such as acquisitions contributed 7.8% to revenues – which is a strength of ITW’s and was a primary catalyst in purchasing this security.
- Operating Margins were 450 basis points YOY due to:
-Rapid declines in their end markets (260 bps)
-increased restructuring cost (80 bps)
-dilutive impact of acquisitions (90 bps)
-Free operating cash flow was $509 million and their cash flow to net income was 218%.
Fourth Quarter 2008 was a very difficult quarter for ITW as well as the rest of the industrials sector. They experienced rapid declines in all of their end markets especially during the months of November and December. When pitching this stock, I felt that ITW end markets would experience a softening, which definitely did occur, more than I expected. This softening was known as one the main concerns with ITW but we felt they could weather the storm better than any other company within this industry because of its proven track record during economic slowdowns and expect ITW to be one of the first to bounce back (expected 4Q 09, 1Q 10).

IP Posts Loss, hurt by mill closures and restructuring charges

-see above links for press release and full summary

International Paper performed well for the greater part of 2008, however was hammered in the 4th quarter. While international demand is definitely slowing, and they are closing mills, this company is still the industry leader, and is the best bet in this sector when it picks back up. I like the strategy that the company is employing to deal with the downturn, and some of the main points are summarized below:

At year end, International Paper had $1.1 billion in cash and $2.5 billion in committed liquidity facilities, and increased its free cash flow in 2008 to about $1.7 billion, or about 160 percent over 2007 levels, by reducing capital spending, focusing on working capital management and reducing overhead spending. In 2009, the company is taking additional measures to improve its cash position including continuing to reduce capital spending, suspending 2009 merit raises for U.S. salaried employees and matching company contributions to the Salaried Savings Plan with shares of company stock rather than with cash.

"International Paper had a solid year overall despite a weak fourth quarter," said International Paper Chairman and Chief Executive Officer John Faraci. "Free cash flow for the year was an all-time record and continued to be strong in the fourth quarter despite a severe contraction of global demand, particularly in North America. We started to take action early in 2008 and continued to focus on maintaining solid free cash flow in the current difficult environment."

I believe we should still hold on to this.

Wednesday, January 28, 2009

GLW Q4 earnings-Rob McMaster

Quick highlights from yesterdays earnings announcement.
-$.13 EPS versus $.20 consensus estimate
-Revenues of $1.1 billion versus $1.16 billion consensus estimate.
-Reducing work force by 13% or 3,500 jobs.
-Corporate restructuring which will result in immediate charge of between $116-$165 million, leading to annualized savings of between $150-$200 million.
-Expecting to reduce prices to unload inventories in Q1, reducing margins.

Seems like a whole lot of bad news for one day. The stock responded by losing 7% almost immediately and ended up a half percent. Today the day after earnings GLW was up 8.81%. After miserably missing earnings GLW is up over 9% in two days. This really isn't surprising because of the deep discount it continues to trade at. Corning can miss earnings for the next few quarters and still be in good shape relative to our purchase price. The only concern of mine is the fact that guidance was really off. Even managements revised earnings weren't even close. Overall these earnings should have been expected due to the weak Q4 retail numbers which have been coming out.

Just wanted to touch on a few positives. First BMW has been pushing its new diesel cars. The claim is that these cars are more fuel efficient and produce less emissions. Corning produces a piece for catalytic converters in diesel engines which is becoming the standard in the industry. Hopefully this new type of car will help counter some lost revenues from weak truck sales. Another positive is at the end of December Emory University purchased Corning's new EPIC system which allows the mass testing of new drug compounds. The group is up 20.38% since the purchase in late November.

Tuesday, January 27, 2009

Dupont Post Quarterly Loss as Demand Slumps-Ed Warner

DuPont posted a fourth-quarter loss on Tuesday on a slump in demand, coupled with severance and restructuring-related charges. DuPont also trimmed its full-year 2009 forecast, citing lower demand for nonagriculture products and the negative impact from a strong U.S. dollar. posted a net loss of $629 million, or 70 cents a share, compared with a year-earlier profit of of $545 million, or 60 cents a share.
Excluding special items, the loss was 28 cents a share. The slump in the U.S. automotive markets has hurt DuPont badly, as it is one of the largest suppliers of paints to car makers. The company has also been stymied by the collapse in the U.S. housing market, since it supplies coatings, countertops and insulation products used in homebuilding. The freeze in the global credit markets and a recession in many developed economies have further crimped growth for DuPont and its peers. U.S. chemical makers have also suffered from a sharp slowdown in many emerging regions, which had been driving growth for them in recent quarters.
-taken from, see full CNBC article @

One of the main reasons for our purchasing this stock was its agriculture business, which is doing well relative to DD's other business segments. Clearly, the decline in autos, construction, and consumer spending is taking a toll on the company. Last quarter when they posted a loss, the group still felt we should hold on to it in our portfolio, and felt that although it will take long to recover, it is still an industry leader with a strong vision. I will listen to the conference call later and we will discuss it in the group's first meeting of the semester this thursday.