Filed under: Major movement, Earnings reports, Forecasts, Bad news, Google (GOOG), Caterpillar (CAT), Schlumberger Limited (SLB), Hershey Co (HSY), Domino’s Pizza (DPZ), Black Friday, Harley-Davidson (HOG), Economic data, Commodities, Oil, S and P 500, DJIA, Housing, Federal Reserve

The stock market had its biggest drop today in a month as investors absorbed a plethora of earnings disappointments, cuts in profit outlooks and pessimistic comments about the economy.

The statistics speak for themselves. The Dow Jones industrial average fell more than 340 points. Bloomberg News notes that, “Ten industry groups in the S&P 500 decreased today, with 458 of the index’s members posting declines. Thirteen stocks dropped for every one that gained on the New York Stock Exchange.”

Bad news was so plentiful today that it’s tough to single out one reason for the market’s sell-off.
Caterpillar Inc. (NYSE: CAT) reported disappointing results and lowered its earnings forecast. Honeywell Inc. (NYSE: HON) spooked investors with talk of slowing growth. Shares of Schlumberger Ltd. (NYSE: SLB) fell after the oil field services company said it drilling projects would be delayed. Even shares of 3M Co. (NYSE: MMM), which reported better-than-expected results, got sucked into the downward spiral as investors were concerned about a planned price cut for its optical films.

Then there’s the continued worry about consumer spending that hurt companies ranging from Harley-Davidson Inc. (NYSE: HOG) to Domino’s Pizza Inc. (NYSE: DPZ) to Hershey Co. (NYSE: HSY) this week. Financial shares continue to get pummeled on concerns about the subprime mortgage meltdown. Wachovia Corp. (NYSE: WB) reported ugly earnings earlier today. About the only sector that seems to be holding on is tech, thanks to yet another blowout quarter from Google Inc. (NASDAQ: GOOG).

Wall Street isn’t just worried about the future, it’s nearly petrified waiting for the next shoe to drop from the flow of earnings reports coming over the next few weeks. Pundits, such as David Joy of RIverSource Investments, weren’t expecting things to get better anytime soon.“When you have earnings expectations that are negative going into the third-quarter reporting season and you start to get some disappointments on top of that after five years of double-digit earnings growth, this market’s going to struggle,” Joy told Bloomberg News.Worst of all, the decline came on the 20th anniversary of the 1987 crash., further jolting the market’s already fragile psychology. Investors can’t help but compare and contrast. People are now freely using the dreaded “R” world.

“It’s been a pretty tough day,” Federated Investors market strategist Linda Duessel, told Reuters. “People are saying there could be a recession because Caterpillar gave some cautionary comments.”

The ball now is squarely in the court of Fed Chairman Ben Bernanke. Is there a case for another rate cut at the end of the month? We’ll have to wait and see. It gives a whole new meaning to the phrase “Trick or Treat.”

Read | Permalink | Email this | Linking Blogs | Comments

Share This

Filed under: Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Initial public offerings

DuPont Fabros is a mega operator of wholesale data centers.

When it talked to upstart Facebook, there was actually some skepticism. Would Facebook hit critical mass? Well, DuPont took a bet on the company - and it’s certainly paid off.

In fact, DuPont has other top-notch customers, like Microsoft (NASDAQ: MSFT), Yahoo (NASDAQ: YHOO), and Google (NASDAQ: GOOG).

And, now DuPont has achieved another milestone; that is, the company went public today — the ticker is “DFT”. The company raised about $640 million.

DuPont focuses on long-term triple-net leases (which, of course, contain nice annual rental increases). A key differentiator is the focus on power capacity. Interestingly, part of the business model includes charging for power usage.

Although, there is signficant customer concentration. For example, about 86% of annualized rent comes from Microsoft and Yahoo.

So far today, shares of DuPont are up about 6.5% to $22.29.

Also visit DealProfiles.com if you want to check out other recent IPO activity.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements.

Permalink | Email this | Linking Blogs | Comments

Share This

Filed under: Rumors, Google (GOOG)

With Google (NASDAQ: GOOG) reporting record quarterly revenue yesterday, the company’s shares are now sitting at a touch under $640 as of yesterday afternoon. Oddly, Google shares did not spike up in after-hours trading on Thursday afternoon after yet another stupendous quarter for the company, with recession and economic fears still in the minds of some investors, even with Google continuing to conquer the internet world.

But at the current share price level, would Google be willing to split its shares (5-for-1, perhaps) in order to make its listed instruments more accessible to non-institutional investors? Google’s IPO price in August 2004 of $85 per share was ratcheted down from over $100 for just this reason, and the shares were sold under dutch auction format in order to give anyone and everyone access to them right on IPO day. Could Google be wanting to revive some of that nostalgia now that its shares are in the stratosphere?

Although Google shares closed at under $640 yesterday, premarket trading this morning is looking at Google shares sitting at $653 (up over 2%), and analysts are raising targets — again — to the tune of $720 and even $900. Google’s shares have been on a virtual roller coaster in the last 16 hours, and today’s action will see more of the same. A share split for Google would also relieve some of the public tension (and attention) on the valuation perception of a single share of Google stock, which some say is bad for the company and the sector (let’s call it “hype days”). Where do you sit? Would a split be a good thing for the company and the internet sector as a whole? Or, possibly more importantly, is Google looking for more retail ownership of its shares?

Read | Permalink | Email this | Linking Blogs | Comments

Share This

Filed under: Google (GOOG), Microsoft (MSFT), Apple Inc (AAPL), Coca-Cola (KO), Intel (INTC), CIT Group (CIT), Research in Motion (RIMM), Cramer on BloggingStocks

TheStreet.com’s Jim Cramer says stocks like CIT need to avoided, not growth stories like Google, Apple and RIM.

At Google (NASDAQ: GOOG) they are not ring-fencing. They aren’t ring fencing at Intel (NASDAQ: INTC) either. Or Microsoft (NASDAQ: MSFT) . Or Coke (NYSE: KO) , for that matter.

What’s ring-fencing? It’s the term being used by financial institutions to keep the mortgage portfolios away from the rest of a company’s loan exposure. I first heard it on the CIT (NYSE: CIT) conference call, a company that for lack of a better analogy, really whiffed at the home mortgage game when things got tough. Actually it’s not the first time I ever heard the term. We had some long horns at a farm in New Jersey. We had to ring fence them so they didn’t gore and kill our horses.

CIT’s not a cattle ranch. It’s a lender.

On its conference call, where it had to issue equity to cover dividends, you could tell there was a real sense of relief from management. As one of the hardest hit non-bank mortgage originators that is still solvent, CIT put together what amounts to a rescue package that allowed them to sell most of their mortgage portfolio to Freddie Mac (NYSE: FRE) to save their balance sheet and allow them to continue to lend to commercial businesses, particularly transportation companies, their true forte. I am sure if you own CIT you are thrilled that everything worked out and all you did was experience a giant loss on your stock’s value.

But if you are trying to choose between stocks, you want to ring fence CIT. You want to stay as far away from this kind of company as possible even if you believe they have cordoned off mortgages because, alas, who needs it? You buy a company like this because it throws off excess cash that is then used to offer a hefty dividend and buy back stock. Some growth — not shrinkage - ain’t bad either.

But CIT offered the exact opposite of all of those.

The shock of that kind of reversal makes you realize how precious a clean growth story is, one that is consistent and can’t really “blow up” in a quarter. One that has much less risk to it.

When we look at what has happened in the credit markets, we are now pricing in risk better, by accepting that some borrowers are going to be deadbeats and making them pay up, not down, for financing.

In the stock market we are re-evaluating risk, too. And we don’t want it. Especially when the reward seems downright minuscule!

When people ask me how come we can play so much for a RIM (NASDAQ: RIMM) or an Apple (NASDAQ: AAPL) or a Google think of ring-fencing. Then you will know that they just might be worth buying even up at these prices.

RELATED LINKS:
Best-Performing Funds Over the Past 20 Years
20 Years of Market-Moving Events
Jim Cramer’s Portfolios of the Week

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com’s sites and serves as an adviser to the company’s CEO. At the time of publication, Cramer had no positions in stocks mentioned.

Permalink | Email this | Linking Blogs | Comments

Share This

Filed under: Earnings reports, Analyst reports, Forecasts, Internet, Google (GOOG), Microsoft (MSFT), Cisco Systems (CSCO), Hewlett-Packard (HPQ), Intel (INTC), International Business Machines (IBM), Stocks to Buy

Google (NASDAQ: GOOG) reported its 3rd quarter numbers Thursday and it came through in incredible style. I say style because Google’s management does not give guidance to analysts, either annually or quarterly. It lets Wall Street just try and figure it out. The second quarter was “disappointing” to many analysts as Google made the revenue line but “missed” the earnings line because of sloppy expense control. Google management did not agree, but they did the classy thing and just let it go by. Google would have the last laugh. Remember all the talking heads who were negative on the name since the IPO, taking their premature victory laps and claiming Google’s super days were over.

I have already stated this in several posts and will re-iterate it: Google is the most relevant company of this decade and probably the next two or three as well. Many people just don’t get this name.

Google’s earnings for the 3rd quarter just proved again that this company has the perfect storm behind it: growing significant market share IN A GROWING MARKET! Trying to put traditional analytical metrics to this company just will not work. This company will become the most valuable technology company in the world — only Microsoft (NASDAQ: MSFT) has a larger market capitalization. Google is now at $203 billion, having just passed Cisco Systems (NASDAQ: CSCO) at $199 billion. Microsoft’s market cap sits at $292 billion.

To put Google in proper perspective, in just a short 38 months of being a public company, Google has surpassed Intel (NASDAQ: INTC), Hewlett-Packard (NASDAQ: HPQ) and IBM (NYSE: IBM) in market value. Now add Cisco and only Microsoft is next — and Microsoft knows its time is coming.

The growth of the search engine optimization sector is evergreen; it only gets bigger. The advertising model and the other ancillary services by Google are the gravy. Do not be surprised to see Google become the number one tech company in the world — and within 5 to 7 years, THE most valuable company in the world.

Georges Yared is the CIO of Yared Investment Research and the author of “Baby Boomer Investing…Where do we go from here?”

Permalink | Email this | Linking Blogs | Comments

Share This

Filed under: Google (GOOG), Wal-Mart (WMT), McDonald’s (MCD), Caterpillar (CAT), Money and Finance Today, Xerox Corp (XRX), Wachovia Corp (WB)

Permalink | Email this | Linking Blogs | Comments

Share This

Filed under: Before the bell, Google (GOOG), McDonald’s (MCD), 3M Corporation (MMM), Caterpillar (CAT), Xerox Corp (XRX), Wachovia Corp (WB), Harley-Davidson (HOG)

Stocks are poised to slip Friday — the 20th anniversary of Black Monday — with index futures lower after Thursday’s flat session.

Boosted in part by tensions between Iraqi Kurds and Turkey, oil prices topped an unprecedented $90 a barrel — reaching $90.02 — in after-hours trading on the New York Mercantile Exchange before settling in the mid $89s in Asia.

Reporting third-quarter results after Thursday’s close, web giant Google (NASDAQ: GOOG) trounced analysts’ forecasts of Q3 EPS $3.78, declaring EPS of $3.91 on 61% higher revenue over last year. A number of brokerages raised their price targets for GOOG in response, to as high as $900.

Companies declaring results Friday include Dow 30 components Caterpillar (NYSE: CAT), 3M (NYSE: MMM), and McDonald’s (NYSE: MCD), as well as Xerox Corp. (NYSE: XRX), Wachovia Bank (NYSE: WB), and Harley-Davidson (NYSE: HOG).

Abroad, European bourses edged lower, but Japan’s Nikkei tumbled 1.71% to 16,814.37.

No economic reports are due out Friday, though investors will tune in this morning to sift through Fed Chief Ben Bernanke’s comments at the St. Louis Federal Reserve Bank’s videoconference on “Monetary Policy Uncertainty,” which begins at 9 a.m. EDT.

Permalink | Email this | Linking Blogs | Comments

Share This

Filed under: Earnings reports, Analyst reports, Analyst upgrades and downgrades, Google (GOOG)

Raising price targets on a stock that is already at an all-time high can be a dangerous game. After earnings yesterday, Google (NASDAQ: GOOG) shares did not move up much after hours. Traders are worried that the company is hiring people too fast and that a recession could hurt even the great search company.

But intrepid analysts will not be dissuaded from thinking Google will do even better.

According to a survey by Barron’s, several large firms raised price targets. Bernstein has pushed its price target from $625 to $720. Credit Suisse has moved its from $600 to $800. And Goldman Sachs has upped its ante from $620 to $900. Google now trades at about $640.

It would seem unlikely that any news, even the launch of a Google Phone, will push shares much higher if the Q3 earnings do not. But, analysts do not want to be left out in the cold if the shares take off again. GOOG is already up 35% in the last month.

The risk is that big Wall Street firms are raising targets and chasing a future that is not there. Google is up against the same cost pressures and recession risks that may trouble many other companies.

Douglas A. McIntyre is an editor at 247wallst.com.

Read | Permalink | Email this | Linking Blogs | Comments

Share This

If you thought Bank of America was bad, with their 32% profit hit last quarter, check out Washington Mutual’s meltdown: a 72% drop in quarterly net income. The cause? Come on now! Mortgage related losses of course! From the Wall Street Journal (h/t Calculated Risk):

Washington Mutual Inc. third-quarter net income plummeted 72%, as the company took a bruising hit to cover home-loan losses.
…
“We’re disappointed with our third quarter results but they reflect the increasingly difficult market conditions that are challenging the banking industry,” said WaMu Chairman and Chief Executive Officer Kerry Killinger.
…
WaMu also had a $147 million write-down on mortgage loans it planned to sell but were instead were moved to the company’s investment portfolio due to the summer’s credit-market seizure that essentially dried up demand for mortgage-related securities.

This is scary to me, and I’m not even a WaMu depositor. WaMu has one of the smallest loan loss reserves out of all the major banks; meaning they are at a higher risk to future system shocks. Further, they are incredibly reliant on deferred interest income - that is equity collected from negatively amortizing loans booked as income (which is insane to begin with). This thin loan loss reserve coupled with imaginary profits puts the bank’s cash position in a very precarious place, especially when it comes to credit-crunch scenarios.

Check out the chart in this post that we’ve looked at in the past to see WaMu’s loan loss exposure compared with the other big players.

Share This

Share This

Bank of America today reported larger-than-expected losses resulting from credit-related losses and poor investment banking returns.  The company, which was one of the few to not report massive write-down charges on their investment portfolios due to subprime mortgage performance prior to releasing earnings, surprised analysts by reporting a 32% drop in profit for the 3rd quarter.

Analysts also questioned the company’s efforts to boost loan loss reserves to further protect against further loan degradation and performance.

From Reuters:

“We knew the credit situation was going to be bad, but this was worse than expected,” said Michael Mullaney, who helps invest $10 billion at Fiduciary Trust Co in Boston, which owns the bank’s shares.

“What causes us concern is the increase in reserves doesn’t appear aggressive, and the bank may need to reserve more in the future, which hits earnings,” he added. “The real surprise was investment banking, where revenue plunged.”

No one, not even Bank of America is immune from the problems associated with housing and the credit crunch.

Share This

Share This