Monday, October 31, 2011

Investopedia: The Market's Bipolar Vistaprint Disorder

Small business service provider Vistaprint (Nasdaq:VPRT) is the gift that keeps giving for both market traders and financial writers. This stock seems to swing wildly between enthusiasm and dejection, a response no doubt due in part to the company's changing business model and the significant risks inherent in the current strategy. While Vistraprint is a consummate second-chance stock, right now does not look like the best time to take a flyer on this name.

The Third Quarter Looked Smudged  
Although Vistaprint's stock did well in the immediate aftermath of the earnings announcement, that may have been due in part to relief that the company met numbers and did not lower guidance again. The results that the company actually reported did not seem so worthy of such enthusiasm.  

Read the full piece at Investopedia:

Investopedia: VCA Antech Cut Down To Value

I have been writing about VCA Antech (Nasdaq:WOOF) for years, albeit not always on a consistent basis, and I clearly remember the baying, barking, and growling from longs when I used to question the company's valuation and business model. This was back when the stock traded in the $30s, mind you, and everyone believed that the veterinary practice roll-up model was bulletproof. Well, I wasn't short the stock then (nor am I now) and I wasn't being paid by hedge funds (nor am I now), but I was right - the business model couldn't support the valuation and investors who ignored the warning signs and hung on took a bruising. (To know more about stock valuation, check out: DCF Valuation: The Stock Market Sanity Check.)

Nowadays, though, it is a different story. I still do not believe that business models predicated on continual acquisitions can work (it's been tried over and over again in people-medicine), but the fact remains that VCA Antech now has a leverageable installed base and an undervalued cash flow stream.

Read the full article here:

Investopedia: Exxon Mobil - Biggest and Best, But Blah?

Investment advisers often recommend that investors seek out the best operators in an industry for their portfolio. When it comes to oil and gas, it is hard to do much better than Exxon Mobil (NYSE:XOM). While this company has gargantuan reserves, a well-earned reputation as a superior capital allocator, and ample cash to share with its investors, it sometimes seems as though Exxon is overlooked in favor of more exciting names. Though Exxon does not boast the highest potential returns in the energy space, investors looking for a lower-beta play may yet want to give it serious thought. 

Ho-Hum Third Quarter  
For better or worse, there were no major surprises in Exxon's third quarter results. Production slid 4% as the XTO acquisition rolls off and liquids production was incrementally weaker (down 7%). Realizations, the price Exxon gets for its oil and gas, were fairly strong - liquids prices rose from 35 to 45% by geography, while weak U.S. gas prices were offset by higher prices in Europe. All told, revenue rose about 31% from last year.

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Investopedia: Merck's Penance Has Gone On Long Enough

By no means is Merck (NYSE:MRK) a perfect company or a perfect stock. Admittedly there are legitimate concerns about the company's pipeline, its ability to ameliorate a big upcoming patent cliff, and the long-term relationship between for-profit health care companies and the federal government. All of that said, this stock has been stagnant long enough and value-oriented investors should consider this name as a long-term revaluation play. (For more on value investing, read The Value Investor's Handbook.)

Decent Third Quarter Results 
To be sure, Merck is not going to blow anyone away with its top-line momentum. Merck posted 8% growth in reported sales growth this quarter, with growth more on the order of 3%, in constant currency terms. While Singulair remains a very significant drug with over 10% of sales, Januvia/Janumet is growing nicely into a number two platform and other newer compounds like Gardasil and Isentress are showing solid growth, as well.

Read the full Investopedia article here:

Investopedia: Manitowoc Has More Room To Grow

Manitowoc (NYSE:MTW) competes in just two broadly-defined markets, construction cranes and foodservice equipment. Unfortunately, these are not especially strong times for either market. Although Manitowoc was not bubbling over with optimism in its latest quarterly report, the Street was nevertheless very encouraged by what it heard. Even though this stock jumped more than 20% in the wake of its third quarter report, investors can still expect more to come from this small industrial stock.

Signs of Progress in Q3  
Overall revenue rose 16% this quarter, with growth in the crane segment leading the way at 21%. Although slower, foodservice revenue growth of 10% was hardly terrible. Manitowoc management doesn't go as far into specifics as investors might like, but they did say that crane demand in the Americas was strong; not much of a surprise, really, considering the growth in markets like Brazil.

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Investopedia: Bulls Onboard Boeing

The stock of American aircraft giant The Boeing (NYSE: BA) seems to always be in "hurry up and wait" mode. Investors and analysts always seem to be more interested in the cycle to come than in the business today. Of course investing is a forward-looking endeavor, but it looks like the long-awaited good times at Boeing are in sight at last.

A Respectable Third Quarter
The good times are close at hand for Boeing, but not exactly here yet. Revenue rose just 4% in the third quarter, as relatively better sales (up 9%) in commercial aerospace offset flat results in the defense business. Within defense, Boeing balanced increased military aircraft revenue with declines in space and service and support revenue.

Read more here:

Friday, October 28, 2011

FinancialEdge: How Protests Could Change Banking

Amidst the macro worries about European sovereign debt and the ignition of the next election cycle, a protest movement called Occupy Wall Street has garnered a great deal of attention for itself. The demands of this movement are vague, and it is an open question as to whether much of what they object to is a byproduct of corporate policy or public policy (or an admixture of the two). Nevertheless, it is clear that their anger is directed, in large part, at some of the biggest banks in this country. (For more on how banking has evolved, read The Evolution Of Banking.)

The question is whether these protesters can actually impact the banks they target and
what options are available to those who share the protesters views and concerns.

The Source of the Problem
The Occupy Wall Street movement is a diverse group with no particular singular principles. Nevertheless, it is not hard to find a lot of potential sources of unhappiness from the conduct of America's large banks.

Read the full column here:

Investopedia: The Haunted Houses Investors Won't Enter

Depending upon your point of view, the financial markets offer either an endless variety of ways to make money or lose money. No one can follow everything, and the wise investor does not even try. So while many savvy investors have decided that they do not have the time, interest, or skills to approach certain areas of the market, others base those decisions on fear. So afraid are some investors, that they turn entire investment categories into something more like haunted houses than financial instruments. 

Writing about gold is a little like throwing meat into a hyena cage - good or bad, it's going to produce a ruckus. Few investment options seem to carry the emotional baggage of gold; its advocates often claim to own nothing else, while it detractors spare no scorn for it.

Why should investors fear gold? For starters, it produces no income. A gold mining operator like Newmont (NYSE:NEM) may pay a dividend, but gold bullion and gold ETFs like SPDR Gold Shares (NYSE:GLD) do not. While that may be a concern for investors who derive all of their income from their investment portfolios, gold is hardly unique in not paying dividends.

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Investopedia: McDonald's Off The Dollar Menu

Combine a worldwide brand with solid execution, good growth, market share expansion, and a healthy dividend and it probably should be no great surprise that the stock is not cheap. Few companies are executing as well as McDonald's (NYSE: MCD) (let alone few restaurant companies), and the stock reflects this. While the company certainly has levers to pull for further growth and is a high-quality name, new investors may want to wait in the hope of a bargain before building a position here.

Juicy Third Quarter Growth 
McDonald's did well for itself in the third quarter. Revenue rose 14% as reported, and 8% on a constant currency basis, as the company saw 5% worldwide comparable sales growth. Comparable store growth was good in the U.S. (helped by a strong September) and surprisingly strong in Europe. Results in Asia were a little disappointing, but still positive.

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Investopedia: Can Akamai Offer More Than Relief?

Akamai (Nasdaq:AKAM) didn't make the internet, but the company's services do help it work better for companies and users. Unfortunately, Akamai is sandwiched between an increasingly commoditized legacy business, and a value-added service model that holds promise but a lot of uncertainty. Although its possible to construct a large and lucrative revenue scenario for Akamai, investors may want to wait for this relief rally to peter out before making a major commitment. 

A Mixed Third Quarter  
Revenue rose 11% in Akamai's third quarter, split between 4% growth in the legacy volume-based service business, and 17% growth in value-added services. Among the company's addressable verticals, commerce was strong (up 23% from last year), and enterprise grew from a smaller base (up 30%), while media and entertainment growth was much more modest at 5%. While Akamai's last three quarters saw management talk down the numbers, this was the first "meet and maintain" in a while.

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Investopedia: Boogeymen That Keep CEOs Awake At Night

Tis the season when kids, and more than a few adults, sacrifice sound sleep in the name of thrills and chills from horror movies. But it's not just Halloween flicks that can lead to sleepless nights. In fact, there are several issues that can keep concerned CEOs from getting all of their beauty sleep. 

Did You Remember to Lock the Doors and Windows?   
There is almost no limit to the number of potentially damaging leaks that spring up in any business. Social media can prove an irresistible opportunity for an executive or employee to offend or embarrass, and disgruntled employees and corporate spies are always looking to hand over your crown jewels to a rival. From harassment and discrimination suits to patent infringement and outright theft, a CEO can never rest easy that what is going on in-house is both proper and likely to stay in-house.

Read the full piece here:

Thursday, October 27, 2011

Investopedia: CAT's Costs Rising, But Revenue Rising Faster

This summer saw almost indiscriminate selling across the industrial stock sectors. Companies like Caterpillar (NYSE:CAT), Cummins (NYSE:CMI), Eaton (NYSE:ETN), and Dover (NYSE:DOV) were all swept up in this rush to sell, even though the underlying businesses are so very different. As Caterpillar reminded the Street with its earnings report, the global construction and mining business is still quite healthy and there is plenty of business left to be done.

Solid Third Quarter Results  
Analyst estimates on CAT fell more than 10%, in the weeks and months before the earnings report, and the company did well, relative to those lowered expectations. Revenue, excluding finance, rose 44% as reported, or 11% on a sequential basis, and 28% on an organic basis; virtually all of that growth came from increased volume. Including the finance operations, consolidated revenue rose 41%.

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Investopedia: Amazon Still Rather Amazing

E-commerce giant Amazon (Nasdaq:AMZN) may still be deep in the shadows of Wal-Mart (NYSE:WMT) in terms of its reported sales, but there are precious few companies this size that are producing growth in excess of 40%. Although the Street was spooked by news that this fourth quarter could be a difficult one for this online retailer, investors would seem to have many more years of well above average growth in store with this name. (For more read Steady Growth Stocks Win The Race.)

Tricky Third Quarter Earnings  
Amazon is having no particular difficulty finding top-line growth, but that growth is coming at a cost. Reported revenue rose 44% this quarter, with organic revenue climbing 37%. Growth in media came in at 24%, with North American media sales growing 21%. Electronics and general merchandise looked strong at 59% growth (up 56% in North America), but this result was below most sell-side expectations.

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Investopedia: Eaton - Well-Balanced But Forever A Bridesmaid?

Even granting that Eaton (NYSE:ETN) has never had the greatest return on invested capital of industrial conglomerates, nor the highest conversion rate of revenue into free cash, the company and stock seem often overlooked. After all, this is a company that is well-balanced between many industrial markets and across the economic cycle. Yet, analysts and institutional investors seem to always be looking to move the brass ring just a little further out of reach. 

A Respectable Third Quarter  
Perhaps part of the problem with Eaton is that they don't post the eye-popping growth that investors get from Cummins (NYSE:CMI) or Caterpillar (NYSE:CAT). After all, growth in the third quarter was a bit under 16% as reported and about 11% on an organic basis - clearly less than that seen at CAT/CMI, though in line with others like Parker Hannifin (NYSE:PH) and Honeywell (NYSE:HON) that compete in many of the same end markets.

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Investopedia: Oracle Expands Its Cloud Business ... RightNow

Oracle (Nasdaq:ORCL) has always been a notably acquisitive company, so it was really only a matter of time before they announced another meaningful deal. Likewise, the company is actively trying to build it out its cloud computing and software as a service (SaaS) business, and stay ahead of the likes of SAP (NYSE:SAP) and (NYSE:CRM), so a deal in the SaaS space was likewise just a matter of time.

Those two timelines met on Monday morning, as Oracle announced that it had reached an agreement to acquire customer service specialist RightNow (Nasdaq:RNOW) in an all-cash deal.

The Deal
Oracle will be paying $43 per share in cash for RightNow. That works out to about a 20% premium to RightNow's prior closing price, and a total net price tag of about $1.5 billion - not exactly a huge deal for a company with $16 billion in net cash on the balance sheet, and over $5 billion of free cash flow in the last quarter. (Free cash flow is a great gauge of corporate health, but it's not immune to accounting trickery. For more, see Free Cash Flow: Free, But Not Always Easy.)

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Wednesday, October 26, 2011

Investopedia: GE Still On A Road To Recovery

For a company as large as General Electric (NYSE:GE), it's basically a given that every quarter will have both good and bad news. Although GE's margins are a cause for concern, and perhaps part of a broader worry about whether corporate America has seen the best of this metric, the order rate is still solid and the company has gone a long way towards fixing the mess left from the credit crunch. (For more, read Earnings Power Drives Stocks.)

Mixed Results for the Third Quarter 
GE's reported consolidated revenue fell just slightly, with reported revenue from GE's non-finance operations down about 2%. On an organic basis, though, GE's industrial revenue rose about 8%. Growth was quite strong in the energy, oil/gas and transportation segments, while the home and business segment,which includes appliances, was fairly weak.

Profitability was not as impressive, though. Reported operating income was up about 15%, but that included a fairly sizable contribution from the improvement at GE Capital. The industrial business, though, saw profits drop about 1%. On the other hand, adjusted operating earnings from continuing ops were up about 11%. All in all, GE continues to make progress, but shareholders cannot rest too easily with those margins.

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Investopedia: Bizarre Baxter

What exactly is Baxter International (NYSE:BAX) supposed to be? It has a huge business in biological therapies for conditions like hemophilia, but also a sizable business in medical devices and equipment. It's not priced as a value stock, it's dividend is too low for an income stock, but it doesn't really grow enough to be a med-tech growth story. All in all, Baxter is a consummate "neither fish nor fowl" company, but that does not mean that it is not worth a serious look from investors looking for a quality health-care name with growth potential. 

A Challenging Third Quarter  
Analysts seemed positive on Baxter's third quarter results, but it is not immediately clear as to why they should be. Organic revenue growth was just 4% - maybe not terrible in the context of a tough health-care market that has laid low even Johnson & Johnson (NYSE:JNJ) and Abbott Laboratories (NYSE:ABT), but not exactly torrid either.

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Investopedia: Dover's Price Underestimates Its Prospects

There have been plenty of industrial companies that have sold off on fears that the sluggish economy in the U.S. and the ongoing banking trouble in Europe is going to start biting into orders. With Dover (NYSE:DOV), it's a little worse as fears of what may happen in industrial markets are coupled with the realities of tougher markets in areas like semiconductors and solar. Even allowing that order growth is slowing a bit and margins may have peaked, Dover's stock price seems to understate the potential of this company. 

Good and Bad In Q3  
Like other industrial conglomerates, third quarter earnings at Dover were a mix of good and bad news. Overall, revenue rose an eye-popping 22%, but acquisitions made a significant contribution (9%). Organic growth was a more modest 10%. Revenue growth at Dover was pretty binary for Dover - there were two high-growth businesses (fluid management and industrial products) and two low-growth businesses (engineered systems and electronic technologies).

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Seeking Alpha: Athenahealth Can't Maintain Its Sky-High Valuation

The market is full of misunderstood companies, as well as perhaps three times that number of companies where management believes Wall Street just doesn't understand the business or the proper value for it. With health IT provider athenahealth (ATHN) being one of the relatively rare companies where a majority of analysts are not positive on the stock and where the current price is above the average price target, it seems like there's some disconnect in this name.

While the top-line growth at athenahealth is indeed impressive, and the growth runway would seem to be long and wide indeed, this is not a stock where investors can afford to be complacent. The stock's valuation already assumes that the company emerges as a major player in healthcare IT, but investors may want to ask whether the company's progress with enterprise-scale customers and sales leverage merits such a lofty expectation.

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Athenahealth Can't Maintain Its Sky-High Valuation

Tuesday, October 25, 2011

Seeking Alpha: Survey - Life Sciences Could Be In For A Rough Year

Investors hoping for a quick turnaround in battered life science companies like Illumina (Nasdaq: ILMN), Pacific Biosciences (Nasdaq: PACB), and Affymetrix (Nasdaq: AFFX) may want to consider new information that suggests the next twelve months could be just as bad, if not worse. A recent survey from GenomeWeb and Mizuho indicates that research labs are battening down the hatches in expectation of poor funding trends and may well be spending less money (and spending that money differently) in the near future.

The Money Tree Is Looking Bare
For all of the talk about how life science discoveries in fields like genomics and proteomics has, is, and will influence Big Pharma and biotechnology, the reality is that it is not companies like Pfizer (NYSE: PFE) and Novartis (NYSE: NVS) that really make up the bulk of this sector's customer base. Life sciences is really an academic lab market – and those labs depend upon the federal government for an exceptionally large percentage of their funding needs. With stimulus spending in the past and the likelihood of lower funding levels for organizations like the National Institutes of Health and sub-institutes like the National Cancer Institute becoming more and more real, the situation is starting to get a bit scary.

Read the full piece here:
Survey: Life Sciences Could Be In For A Rough Year

Investopedia: Microsoft - Little Expected, Little Delivered

Software giant Microsoft (Nasdaq:MSFT) has hit another one of those pockets where there is just not much going on to excite investors. The next iteration of Windows 8 won't come out for months, the company is annualizing the Office 2010 launch, the PC market is soft, and a lot of the company's enterprise products are still building up some momentum. So while this stock looks quite cheap on its cash flow generation potential, value-oriented investors interested in this name have to bring ample patience with them as well. 

A Ho-Hum First QuarterMicrosoft reported overall revenue growth of 7%, which is not so bad in the broader context of mega-cap tech names like IBM (NYSE:IBM) or Oracle (Nasdaq:ORCL). Revenue from Windows was up just 2% as sluggish domestic PC growth hurt sales and rampant software piracy in regions with high PC growth sapped sales. The server and tools segment showed a nice 10% increase in sales, while the business unit was up almost 8% and entertainment was up more than 9%.

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Investopedia: Altera's Growth Story In A Pause

As wireless companies seem committed to never-ending capital spending and network upgrades, it would make sense that key suppliers to this market would be strong secular growth stories. Add a product/technology transition story to the mix and you have a pretty interesting growth story. That's the very short version of the buy thesis on chip company Altera (Nasdaq:ALTR) and while it's a compelling story, it is not without some risks and bumps in the road.

A Tough Third Quarter 
Both Altera and rival Xilinx (Nasdaq:XLNX) told us all that this would be a bad quarter, but results at Altera were actually a little worse than expected. Revenue fell almost 1% from last year and almost 5% from the prior quarter, as telecom spending, which typically makes up close to half of Altera's revenue, dropped sharply and revenue fell almost 13% sequentially. The company's industrial business was not good either, down about 7%, and though the networking/computing segment was strong, up over 30%, it's relatively small.

Read the full article here:

Monday, October 24, 2011

Seeking Alpha: Cubist Fills Its Sales Bag And Pipeline With Adolor

Stuck in a trading range for about five years, Cubist Pharmaceuticals (CBST) has had a pretty good year in 2011. The company resolved a patent dispute with Teva Pharmaceuticals (TEVA) on reasonably good terms, got some patent extensions that should further boost its profit potential on Cubicin, and struck marketing deals with Optimer (OPTR) and AstraZeneca (AZN) to make better use of its own sales force. But that's not all that's working in Cubist's favor recently. The company's pipeline has also come along nicely, as the Calixa deal has delivered two promising compounds, one of which is now in late-stage studies.

That said, it has not been all sweetness and light for Cubist. Investors have been troubled by this company's heavy reliance on Cubicin and the inevitable declines that are coming in operating income, to say nothing of the inefficiencies of operating a salesforce with few compounds to sell. Investors have been waiting for Cubist to do a deal or two and now management has done just that – giving the company an additional product to sell and also adding some clinical compounds outside of its core anti-infective space.

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Cubist Fills Its Sales Bag And Pipeline With Adolor

Investopedia: St. Jude Still A Patient Trade

Investors looking for good growth stories in big-cap med-tech, are not exactly spoiled for choice. Formerly reliable growers like Medtronic (NYSE:MDT), Stryker (NYSE:SYK) and Boston Scientific (NYSE:BSX), are still struggling to reignite growth and quality blue-chips, like Johnson & Johnson (NYSE:JNJ), are muddling through a low-volume environment.

Against that backdrop, St. Jude (NYSE:STJ) is not so disappointing. What's more, while this company does have several formidable competitors hard at work in taking away their business, St. Jude also has a compelling portfolio that could deliver growth re-acceleration in a few years.

Ho-Hum Third Quarter 
Expectations were not high for St. Jude, going into this quarter, and St. Jude did not deliver a lot of growth. Reported revenue rose more than 11%, but organic growth was sub-2%. The company's ICD business remains weak and neuromodulation is looking a little disappointing. Atrial fibrillation delivered 20% growth, though, and the cardiovascular business is getting a big boost from the AGA Medical acquisition.

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Investopedia: Beware Of The Undertow At Riverbed

Shareholders in networking equipment stocks, like Riverbed Technology (Nasdaq: RVBD), F5 Networks (Nasdaq: FFIV), Juniper Networks (Nasdaq: JNPR) and Blue Coat Systems (Nasdaq: BCSI), now have some idea what it's like to be the chew-toy of a Great Dane puppy. The wild swings of the past two years, both in the businesses and the stocks, have left them shaken, chewed up and perhaps even covered with slobber. While the third quarter report out of Riverbed may look like good news, and indeed there are certainly some positives to this story, investors should be a little cautious before fully buying into this name. 

A Solid Third Quarter  
Riverbed hasn't really disappointed in a while, but investors have been put off in prior quarters by shortfalls, relative to whisper numbers and guidance that wasn't as ebullient as valuation would seem to demand. Nevertheless, Riverbed delivered 28% annual revenue growth this quarter, with 12% growth on a sequential basis.

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Investopedia: Still Waiting On Steel Dynamics

Once again, investors are being asked to look ahead to the future with Steel Dynamics (Nasdaq:STLD). Tepid construction activity and iffy auto sales have kept a lid on this very efficient American steel company, but investors write this one off at their own risk. While a roaring recovery across STLD's markets is not likely in the near-term, the current stock price does not seem to account for this company's competitive position nor its full cycle earnings potential.

Q3 - Not Good, But Better than Feared  
Like its larger rival Nucor (NYSE:NUE), Steel Dynamics warned investors earlier that this quarter was not going to be as strong as the original projections suggested. Perhaps counter-intuitively, the stocks in the steel space were actually fairly strong that week as investors seemed to be relieved that conditions were better than their worst-case fears.

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Investopedia: Apple Getting The Benefit Of The Doubt

It's good to be the king. I am willing to bet that if F5 (Nasdaq:FFIV), Google (Nasdaq:GOOG), or EMC (NYSE:EMC) misses its revenue estimate by 5%, the stock is going to get pounded pretty hard. With Apple (Nasdaq:AAPL), though, it seems like analysts, investors, and commentators are willing to go out of their way to find excuses and explanations to soften the blow. This is not to say that Apple does not deserve the benefit of the doubt (it does), but it just highlights that this is a situation where there is a huge fan base that wants the company and its stock to succeed.

A Disappointing Close to the Fiscal Year  
It is a testament to the success of Apple that 39% growth to over $28 billion in quarterly sales is a disappointment. But a disappointment it is all the same, as that top line figure came in about 5% below the average estimate and 10% below the target of the most ardent Apple analyst around.

Continue on here:

Investopedia: Bank Of America Is A Mess Unlike Any Other

Maybe the best thing that can be said about the U.S. banking industry is that it's in better shape than its European cousin. That's faint praise indeed, and Bank Of America (NYSE:BAC) continues to stand out as an especially challenged major U.S. bank. While there is undeniable value in this large banking franchise, it seems like every quarter pushes out the timeline for realizing that value. 

Q3 Earnings are Whatever You Want Them to Be  
Bank earnings are never the easiest to analyze or interpret in good times, and bad times only make it worse. Investors have to countermand all manner of special charges and benefits, and B of A had more than a dozen of them this time around. Making matters worse, no two analysts or investors are going to see exactly eye-to-eye on what constitutes the "real" earnings power.

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Investopedia: Stryker Scraping By

People are still getting sick, but you might not know it by looking at the peaked complexion of most health care companies these days. A weak implantable cardioverter defibrillators (ICD) market has knee-capped names like Medtronic (NYSE:MDT) and St. Jude (NYSE:STJ), weak procedure volume growth has hampered Covidien (NYSE:COV) and Bard (NYSE:BCR) and weak trends in orthopedics and surgery has hurt both Johnson & Johnson (NYSE:JNJ) and Stryker (NYSE:SYK). 

In the case of Stryker, this is an especially painful reminder that the good ol' days when Stryker reliably posted 20% growth are long past. Stryker is doing better than most, and has a brighter outlook than most of its peers, but it can be difficult to get a stock moving when reported growth is so sluggish.

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Investopedia: Pricing Is Strong At CSX

While rail traffic volumes were not very strong throughout much of the third quarter, there is more to railroad financial performance than just railcar volume. Pricing matters, and pricing has been strong at CSX (NYSE:CSX). Although there are more than a few points of concern around CSX's operating environment, the valuation here seems to assume a fairly bearish scenario. 

A Challenging Third Quarter  
While CSX reported revenue slightly above the average analyst estimate, investors should remember that estimates have been sliding for a few months as disappointing volume data, particularly in coal, has weighed on sentiment. Nevertheless, this was still a double-digit quarter as CSX produced 11% volume growth. Carload volume was up less than 1%, but the company reaped more than 10% additional revenue per carload. Of that, pure price increases (as opposed to fuel surcharge and/or mix shifts) were probably on the order of 6-7%.

The link below leads to the full article:

Investopedia: Will eBay's Numbers Match Its Business?

EBay (Nasdaq:EBAY) is a strange business in many respects. Along with Amazon (Nasdaq:AMZN), eBay has been out there almost since the beginning of the internet as a public phenomenon, and it has managed to avoid the malaise and irrelevance that has withered AOL (NYSE:AOL), Yahoo (Nasdaq:YHOO), and a host of businesses that have either taken low-ball bids or gone out of business altogether.

And yet, there are some oddities to eBay's numbers. Though eBay basically dominates online auctions and has built an impressive business out of PayPal, the company's returns on invested capital are not all that spectacular and the company's free cash flow margin has been in prolonged decline. The question, then, may not be so much about eBay's future growth prospects as it is about how much of that growth will ultimately benefit shareholders.

Satisfactory Third Quarter Results
All in all, eBay's third quarter report was fine. Reported revenue rose 32%, while organic revenue growth was more on the order of 18%. The company's marketplaces business saw revenue growth of 17%, while PayPal revenue grew 32% on a 14% increase in registered accounts and 31% increase in net payment volume.

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Investopedia: How Did Intel Do This?

The word "surprise" is a given whenever it's time to talk about earnings season, but Intel (Nasdaq:INTC) went above and beyond this quarter. Is Intel's robust growth, in spite of sluggish shipment data from leading PC makers, a sign that U.S. computer companies are more significant than ever before, is it a sign that Intel is gaining shares or is it a sign that dangerous levels of inventory may be building up in the channel? While Intel looks too cheap, no matter what the answer may be, the degree of volatility in this stock may hinge on the answer.

A Surprising Third Quarter  
To be fair, it's not as though Intel left the Street thunderstruck; revenue rose 28% from last year (and almost 9% from last quarter), and that was about 2% higher than the average analyst estimate. PC Group's revenue rose almost 22% this quarter with strong double-digit sequential growth in the notebook unit. The server group was no slouch either, with 15% growth, and the company's acquisitions of McAfee and Infineon's wireless business seem to be paying off.

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Friday, October 21, 2011

Investopedia: EMC - The Best Company In The Best Business

Tech is cyclical in so many ways. For starters, there is the impact of the overall economy - when times are tough, companies pull back on non-essential IT. There is also a cyclical aspect insofar as the hot space or sector. More experienced investors almost certainly remember when stocks like Cisco (Nasdaq:CSCO), Oracle (Nasdaq:ORCL) or Applied Materials (Nasdaq:AMAT) were the darlings of darlings. More recently, networking names like F5 (Nasdaq:FFIV) and cloud computing/virtualization plays like VMware (NYSE:VMW) have gotten the love.

Why does any of this matter? Well, EMC (NYSE:EMC) is the best of breed when it comes to "Big Data" storage, and data storage is still looking like one of the strongest segments of the tech space.

A Solid Third Quarter
A lot of nervousness has surrounded names like EMC and IBM (NYSE:IBM) going into this reporting cycle, as investors have worried whether companies are pulling back on their IT spending. To that end, EMC's quarter may not have been perfect, but it was good enough to answer the loudest bears.

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Investopedia: Coca-Cola - A Great Company, An Iffy Stock

All of the paeans to Coca-Cola (NYSE:KO) have some basis in truth. Coca-Cola is indeed a remarkable company and a living case study in the value of strong brands and knowing the customer's tastes and expectations. But Coca-Cola is not necessarily the safe stock that everyone assumes it to be. While Coca-Cola will certainly be around for decades to come, paying too much for even a great company's stock can erode a lot of the safety that is supposed to go with the strategy. 

A Respectable Third Quarter  
Coca-Cola basically did as analysts expected it would in the third quarter. Reported revenue rose 45% this quarter, with the overwhelming majority of that "growth" coming from the addition of Coca-Cola Enterprises (CCE). Global case volume growth was about 4% and factor in some modest price increase, Coca-Cola's organic growth rate looks like it was in the range of 6-8%. Encouragingly, while growth in North American remains sluggish (not unlike what rival PepsiCo (NYSE:PEP) has reported), emerging market growth is pretty healthy and especially good in Latin America.

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Investopedia: Lukewarm Performance At IBM

IBM (NYSE:IBM) can be a frustrating stock to evaluate. On one hand, it really is a tech bellweather with its hands in many different cookie jars. On the other hand, in a tech word that craves growth over almost everything else, IBM's sheer size works against it. And then, of course, there is the quality question. It has been quite a while since analysts have had the same sort of existential worries about IBM that currently plague former tech darlings like Hewlett-Packard (NYSE:HPQ), Dell (Nasdaq:DELL) and Cisco (Nasdaq:CSCO). 

A Somewhat Disappointing Third Quarter  
IBM missed the average analyst sales estimate and that's all some tech traders will care about when it comes to evaluating this quarter. It's true, year-on-year growth of 8% (3% in constant currency) is not great, and the 2% sequential decline is also concerning. 

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Seeking Alpha: Boston Scientific Is Not A Safe Turnaround Bet

Another quarter and another disappointment for Boston Scientific (BSX). With a new caretaker CEO at the reins, but only for a year, it an open question as to whether investors can reasonably expect any near-term progress. While there are some bright spots deep in the pipeline, it is going to take many years for them to bear fruit, and BSX will find itself having to battle for share amidst established competition. All in all, this is an investment that requires a great deal of faith - and hope and faith are seldom great partners to have in an investment.

Another Disappointing Quarter
Boston Scientific reported that sales declined 6% on a constant currency basis, with core revenue (that is, excluding divested lines) down 3%. The company's interventional cardiology segment (which includes drug-coated stents) saw revenue fall 4%, while the CRM business (which includes pacemakers and ICDs) fell 12%. Neuromodulation (up 6%) and peripheral intervention (up 4%) weren't bad, but endoscopy (up 6%) is about as close to good news as there was for the quarter. But that business contributes only about 16% of total revenue.

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Boston Scientific Is Not A Safe Turnaround Bet

Seeking Alpha: Intuitive Surgical - A Good Bet For Aggressive Growth Stock Investors

Surgical robotics company Intuitive Surgical (Nasdaq: ISRG) is making a habit of breaking and rewriting the rules about how medical technology stocks are supposed to work. Although equipment companies like Stryker (NYSE: SYK) have had the occasional strong quarter, this has been a tough market for capital equipment and yet, Intuitive is doing fine. The third quarter is supposed to be a weak quarter for procedures in general, especially in this low-volume market, and yet Intuitive seems to be building momentum.

Not surprisingly, this is also a stock that seems immune to what constitutes typical or “appropriate” valuation on a growing med-tech name.

A Stellar Third Quarter
Intuitive had an amazing third quarter, with 30% overall revenue growth. System sales growth of 25% was quite impressive in its own right, and particularly with a roughly 50% acceleration in the growth rate of net new robot placements. Perhaps even more impressive, though, was the 38% growth in instrument revenue and the 30% procedure growth. In a market environment where Johnson & Johnson (NYSE: JNJ) and Bard (NYSE: BCR) are largely scraping to get volume growth and even a share gainer like Covidien (NYSE: COV) is having some challenges, this performance is beyond exceptional.

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Intuitive Surgical: A Good Bet For Aggressive Growth Stock Investors

Thursday, October 20, 2011

Seeking Alpha: Abbott May Be Doing The Right Thing At The Wrong Time

Health care conglomerate Abbott Labs (ABT) certainly knows how to bury a lede. With the tumult in the wake of the company's announced split in two, the company's quarterly earnings went by almost unnoticed. Perhaps that's just as well – too much is made of quarter-by-quarter performance, anyway. When it comes to this transformative move, though, investors might want to ask if this is really the right strategic move at this point in time.

Abbott To Humira – Thanks For The Cash, Now Get Out
Abbott will be splitting into two companies in a tax-free spin-off transaction. One company will continue Abbott's branded pharmaceutical business, while the other company (the one that will continue on as “Abbott”) will take everything else, including the branded generics business.

The branded drug business currently represents about 45% of the company's total sales, but over 60% of pre-tax profits. Of that, Humira (Abbott's incredibly successful monoclonal antibody for autoimmune diseases) is fully half. Unfortunately, Humira is getting a little long in the tooth and analysts have been incessantly worried about its future growth in the face of potential competition from compounds from Pfizer (PFE), Johnson & Johnson (JNJ), and Roche (RHHBY.PK), as well as threat of biosimilars (basically generic forms of biologic drugs).

Read the full piece at Seeking Alpha:
Abbott May Be Doing The Right Thing At The Wrong Time

Investopedia: J.B. Hunt - Doing More With Less Trucking

It isn't a good sign for the truckload freight industry, when a company like J.B. Hunt (Nasdaq:JBHT) is doing better largely by getting away from the traditional trucking business, as fast as it can. While there will always be a place for trucking in the U.S. transportation system, this company is betting its future prosperity on less traditional operations, like intermodal and customized service offerings. 

Mixed Third Quarter Results  
J.B. Hunt's third quarter results were not bad, but they also were not as good as they may appear, at first look. Revenue rose 19%, with more than 40% of that growth coming from fuel surcharges. Growth was led by the intermodal segment (the company's largest), where revenue rose 24% on a 15% overall increase in load volume. The dedicated services and integrated solutions segments grew nicely, as well, with 16 and 21% growth, respectively. The truck segment was the laggard, growing just 2% on a reported basis, but actually shrinking 5% net of surcharges, on a 7% decline in tractors on the road.

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Investopedia: Citigroup On The Mend ... Slowly

It's just a fact of life that it's easier and faster to destroy than it is to rebuild. To that end, Citigroup (NYSE:C) has certainly been a frustrating stock to hold this year as the stock had been nearly cut in half before a recent rally. While this huge bank's third quarter earnings continue to point to progress, the reality is that Citigroup is still a long way from normal, and shareholders have to be content with more short-term disappointment if they want to see the long-term value play out.

Decent Third Quarter Results  
Although analysts had been marking down their expectations, going into this quarter, Citi didn't do too badly. Adjusted core revenue fell 2% on a sequential basis, as modest growth in regional consumer banking (2%) and decent growth in transaction services (7%) was offset by declines in securities and banking 12%. For whatever reason, it helps shareholders, this performance is likely to be the rule for other large banks like Bank of America (NYSE:BAC) (BofA) as well. 

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Seeking Alpha: Powerwave May Fade To Black

Wireless equipment maker Powerwave (PWAV) has given its investors quite the thrill ride over the last four years, but the latest dive may have investors and analysts wondering if this company can ever achieve a sustainable base of business. Bad quarters happen to every company eventually, but very few established companies miss their revenue target by 50% and investors should ask themselves whether the sizable return potential here is still worth the ongoing risk and volatility.

A Terrible Third Quarter
After the close Tuesday, Powerwave announced that it was going to report a horrible third quarter result. Citing significant slowdowns at AT&T (T) and T-Mobile and disruptions in the Mideast and North Africa tied to the political upheavals, management announced that revenue would come between $75 million and $79 million – more than 50% shy of the average analyst estimate of $168 million.

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Powerwave May Be About To Fade To Black

Wednesday, October 19, 2011

Seeking Alpha: Bad Management Ails Johnson & Johnson; New Drugs May Offer A Boost

This has been rough stretch for one of the bluest of the blue chip stocks – health care giant Johnson & Johnson (JNJ). A generally rotten U.S. healthcare market has certainly hampered results, but management has fired a few rounds into its own feet with extreme product quality issues in the consumer care business (leading to numerous recalls) and unimpressive capital allocation and R&D decisions in the device business. All of that said, though, today's poor performance may be prologue to a better day for patient investors.

Low-Quality Third Quarter
There were only a very few bright spots in this quarter, though reported results did not deviate much from analyst forecasts. Revenue looked alright at 7%, but organic constant currency growth was under 3%, and JNJ has become dependent on foreign markets for its growth (international growth clocked in at over 8% this quarter).

To read the full piece, please click this link:
Bad Management Ails Johnson & Johnson; New Drugs May Offer A Boost

Investopedia: Wells Fargo Looking Better As Time Goes By

Wall Street is certainly down on banks once again. Given how weak the economy is and how much debris is still left to clean up from the housing crunch, maybe it's not so surprising. Nevertheless, Wells Fargo (NYSE:WFC) is looking more and more like a bargain as this goes on. The company still has to clean up its balance sheet and the Wachovia integration is going to take time, but this looks like a quality bank that is trading well below its true long run potential. 

A Disappointing Third Quarter 
Although investors seemed reasonably happy with the results posted by Citigroup (NYSE:C), the news was not as encouraging for Wells Fargo. The company actually missed on the top line, and the bottom line results were not so impressive either. Revenue fell 4% sequentially, with net interest income down 5% and non-interest income down 7%. Wells Fargo actually did pretty well on controlling operating expenses (down 5%), but that's not going to encourage investors enough.

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Investopedia: Mattel - Steady, But Not On Sale

There are not too many companies out there that sell products that have been popular across multiple generations, but Mattel (Nasdaq:MAT) is one of them. In many respects, Mattel looks like an excellent company - it offers beloved brands, a strong return on capital and respectable margins. The question for shareholders, though, is whether management is willing to take the sort of risks that will be necessary to really improve growth, and make this more than a steady dividend play.

Solid Third Quarter Results  
On the whole, Mattel delivered neither a positive surprise nor a disappointment for the third quarter. Revenue rose about 9% as reported, with 7% growth when measured in constant currency. Domestic growth was a bit softer than international (6% versus 8%), but balanced all the same. Although the company's Fisher-Price business saw a little revenue erosion on a constant currency basis, the Barbie franchise saw 13% growth.

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Investopedia: Statoil Buys Into Bakken

By most standards, Norway's Statoil (NYSE:STO) is a quality name in the world of major energy companies. Unfortunately for its shareholders, the company's stock price has been bedeviled by worries regarding the company's production volumes, reserve growth and dependence on Norway's offshore energy fields. With Monday's announcement that the company is acquiring Bakken specialist Brigham Exploration (Nasdaq:BEXP), Statoil management is making a solid argument that the company is not sleeping on opportunities to leverage its balance sheet into solid reserve growth.

The Terms
Statoil and Brigham announced that the companies had reached an agreement whereby Statoil will acquire Brigham for $36.50 per share in cash, for a total enterprise deal value of $4.7 billion. That price translates into a roughly 20% premium to Friday's close.

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Seeking Alpha: TIme To Board The ICU Medical Roller Coaster

Prior to the Great Recession, healthcare enjoyed a somewhat inflated reputation for its steady-eddy revenue and earnings. Since then, investors have learned that patient visit counts and hospital capital budgets can create quite a bit of volatility – look no further than the muted performance at major device companies like Medtronic (NYSE: MDT), Johnson & Johnson (NYSE: JNJ), or Bard (NYSE: BCR).

And then there's ICU Medical (Nasdaq: ICUI). Flying in the face of conventional rules about how medical device companies are supposed to act, this has often been a volatile performer in terms of its reported results and the long-term stock action reflects that. With financial performance looking a little haggard, but the company's competitive position still fairly strong, this may well be one of those periodic opportunities to pick up shares in an oft-overlooked small-cap med-tech player.

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Time To Board The ICU Medical Roller Coaster

Tuesday, October 18, 2011

Seeking Alpha: Lincare - Unreasonably Cheap For A Good Reason

On first blush, Lincare LNCR) would look like one of those great undervalued GARP companies that famous investors like Peter Lynch gush about in their memoirs. The thing is, while Lincare may well have a lot of value in it, that value is a little like a bag of gold resting atop a pedestal … in a minefield … surrounded by razorwire … and on fire. Lincare management has indeed done a great job over the years of running this business, but it seems like government price cuts are going to be an unrelenting drag on the company.

A Pretty Mixed Third Quarter
Lincare's third quarter highlights some of the challenges that the company has to deal with now and in the near future. Reported revenue growth of over 13% sounds great, as does the little note that growth would have been nearly 16% without the impact of negative Medicare changes. Unfortunately, the organic growth was more on the order of 6% and that growth was not especially profitable.

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Lincare: Unreasonably Cheap For A Good Reason

Seeking Alpha: VMware Reports Earnings, So Cue The Next Fight

There are certain companies where the valuations and institutional investor love-fests seem to just drive some people to distraction. (NYSE: CRM) is certainly one, and VMware (NYSE: VMW) is another. Whenever these companies report, bears bring out the long knives and do their level best to flense the company and the stock. While VMware's valuation is indeed rich by almost any measurement you name, the fact remains that VMware delivers oodles of growth and institutional tech investors lust for growth above all else. 

Third Quarter Results – Is Good Good Enough?
VMware reported 32% year-on-year growth and 2% sequential growth – excellent results when compared with software giants like IBM (NYSE: IBM) and Oracle (Nasdaq: ORCL) and quite strong relative to smaller growth stories like Red Hat (NYSE: RHT). Of course, this being VMware there has to be a “but” to it.

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VMware Reports Earnings, So Cue The Next Fight

Investopedia: Industrial Slowdown? Not At Fastenal

If the economy really is teetering into a recession again, it is despite relatively encouraging rail traffic numbers and fairly strong sales trends at industrial suppliers. While Fastenal (Nasdaq:FAST) is unquestionably tied to trends in GDP and industrial activity, investors who overlook the consolidation and market share growth potential of this name do so at their own risk.

Earnings Still Growing at a Fast Pace  
Fastenal has more than one wind at its back, and the company has translated this into very solid growth during this economic recovery. For the third quarter, revenue grew 20% and slightly exceeded analyst expectations - a performance all the more impressive as the company routinely reports monthly sales figures. That said, there was some growth deceleration in September (growth was below 19% year on year), so investors should assume that analysts on the wrong side of this story will try to use that tidbit to validate continued pessimism.

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Investopedia: It's Not Geting Any Easier For Google

Companies spend a lot of their corporate adolescence convincing investors that they can carve out a business and take on the big dogs. If they succeed, their reward is a new round of questions about whether or not the company can maintain that momentum and find new markets and opportunities that offer similar margins and returns. 

That, then, would seem to be the challenge for Google (Nasdaq:GOOG). No sane investor questions what the company has accomplished in taking on the likes of Yahoo! (Nasdaq:YHOO), AOL (NYSE:AOL), Microsoft (Nasdaq:MSFT) and Apple (Nasdaq:AAPL), but now the stock sentiment seems pregnant with doubts as to whether the company can find new business on par with the old.

A Mostly Encouraging Third Quarter
Google's third quarter results offer both good and bad news on that score. On the positive side, net revenue rose 37% (gross revenue rose 33%), and revenue from Google-owned sites was up 39 and 15%, sequentially. Mobile also continues to be strong grower, though still a relatively small contributor.

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Seeking Alpha: Is A Stronger FINRA A Good Thing For Investors?

Regular investors don't always seem to know who's minding the store when it comes to supervising brokers, brokerages, and asset managers. While the Securities and Exchange Commission (SEC) gets a great deal of attention, and arguably has the most power, there are a host of other agencies and associations that play significant regulatory roles. Now one of the largest of them, FINRA, is reaching for even more power and authority. While more regulation of such an aggressive industry as financial services may seem logical to some, particularly after the abuses of recent years, FINRA's track record should give investors a moment or two of pause.

FINRA, short for Financial Industry Regulatory Authority, came into being in 2007 with the merger of the National Association of Securities Dealers (NASD) and the New York Stock Exchange's regulatory arm. Though many investors assume that FINRA is a government body, it is not – it is a private corporation that regulates financial services firms that deal with the public (in other words, brokerages and registered representatives like brokers and sell-side analysts).

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Is A Stronger FINRA A Good Thing For Investors?

Monday, October 17, 2011

Seeking Alpha: First Horizon Getting No Benefit Of The Doubt

Like so many other banks, Tennessee’s First Horizon (FHN) committed ample sins during the housing boom, and the path of penance has been long and difficult. While there are still some financially significant potential liabilities left here, patient deep-value investors should give this small regional bank a serious look.

Q3 Was Not *That* Bad
It is hard to say that First Horizon had a good quarter, but the Street has seemingly been looking for problems here for a while. Consequently, it would be par for the course if the emphasis was on what was wrong with the quarter.

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First Horizon Getting No Benefit Of The Doubt

Seeking Alpha: Waiting For Halliburton To Wash Out

Investors looking for an example of how short-term thinking dominates the equity markets these days do not have to go much past the energy sector. There are still plenty of arguments over what “Peak Oil” is supposed to mean, but hardly anybody thinks that long-term oil and natural gas prices are going to substantially lower than today. And yet, nervousness about the near-term economic outlook and short-term oil price declines as investors leery of even well-established service names like Halliburton (HAL).

Okay Results Fail To Impress
This is a market that wants dramatic outperformance and strong upward revisions from management, and Halliburton didn't deliver. Consequently, the fact that revenue was up about 10% sequentially and still a bit stronger that the average analyst guess just isn't going to cut it – particularly when management talked about an increasingly competitive international pricing environment and delays in key growth markets like Iraq and Angola.

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Waiting For Halliburton To Wash Out

Seeking Alpha: Roche May Be Hoping That Anadys Is Cheap Insurance

There is no question that hepatitis C treatments are garnering a great deal of attention from investors in biotech and pharmaceuticals these days. Investors seemingly can't wait to hear the latest clinical data from Pharmasset (VRUS) or the latest prescription data on Vertex's (VRTX) Incivek. So leave it to Roche (RHHBY.PK) then to draw everybody's attention back to a small hepatitis C drug developer that has been largely forgotten by many investors.

A Surprising Deal
Analysts and investors have been waiting for quite a while to see Anadys Pharmaceuticals (ANDS) either find a partner for setrobuvir and ANA773 or find a buyer for the entire company. As often seems to be case, few had Roche on the list of most likely partners, but it is Roche that has stepped up to buy the entire company.

Please read the full story at the link below:
Roche May Be Hoping That Anadys Is Cheap Insurance

Investopedia: Liz Claiborne Starts Over

Sometimes press releases can understate just what's actually going on. That certainly seems to be the case with Liz Claiborne (NYSE:LIZ). While this well-known women's clothing designer and marketer talked about "transactions" in the headline of its recent release, the reality is that the company largely sold itself and is basically going to cease to exist as Liz Claiborne.

From Distribution to Ownership 
Liz Claiborne and J.C. Penney (NYSE:JCP) have had a longstanding relationship, and JCP was already the exclusive license partner for the Liz Claiborne brands. The two companies have taken a big step forward though, as LIZ will be selling the Monet and Liz Claiborne brands to J.C. Penney for $288 million in total cash considerations. LIZ will maintain the international rights for Monet, will continue to supply Liz Claiborne and Monet-branded jewelry to J.C. Penney and will hold a royalty-free license on LCNY and Lizwear, but will otherwise be out of these businesses.

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Investopedia: ASML Sounding The Bottom?

Whither ASML (Nasdaq:ASML) goest? The answer is "more or less wherever memory is going." For now, that means bad news for ASML as companies have significantly pulled back on their capex spending. Eventually, though, these manufacturers will come back and ASML will see the order book swell again.

A Third Quarter That Was Slightly Better Than Expected
Analysts had been looking for a fairly unimpressive quarter from ASML and they were basically right, though ASML did do a little better than hoped. Revenue rose 24% from last year, but fell 5% on a sequential basis. Shipments fell 13% sequentially, with new unit shipments down about 21%.

ASML boasts significant operating leverage and that profitability cuts both ways. Gross margin slid about three full points from the second quarter, while operating income fell 18%.

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