Tuesday, January 31, 2012

Seeking Alpha: Can Align Technology Fix The Gap In Its Valuation?

Although I'm quite willing to bemoan the lack of good growth stories in med-tech today, the reality is that it's not so much a lack of good growth stories as a lack of good undervalued growth stories that is the problem. Align Technology (ALGN) is a good case in point. While this company has a lot of things going for it - including market share, under-penetrated markets, and good profits - valuation has caught up with the shares and company guidance is denting some of its growth expectations.

A Good Quarter, But ...

Align did what it needed to do for the fourth quarter, and then a little extra. Revenue was a bit ahead of expectations and grew 39% from the year-ago quarter (and more than 2% from the third quarter). This overstates things a bit because of the Cadent acquisition, but core Invisalign revenue was up 28%. Case volume growth in the Invisalign business was an impressive 30% and more than offset weakening ASPs.

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Can Align Technology Fix The Gap In Its Valuation?

Seeking Alpha: Skepticism Still Working For Hologic Investors

Investors should always be a little leery of seeing too much love and praise for their holdings; having a few skeptics left to convince leaves some upside. Although Hologic (HOLX) shares have come up nicely in the past quarter, there is still a lot of growth potential in the earnings and in the stock.

Beat, Raise, Rinse, Repeat
Hologic has established a decent track record of slightly outperforming expectations and this fiscal first quarter continued that trend. Revenue rose a little more than 9% this quarter, slightly topping the average guess, as the company logged 10% or better sales growth in its breast health, diagnostics, and skeletal businesses. GYN Surgical was the laggard, with less than 4% growth over last year.

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Skepticism Still Working For Hologic Investors

Seeking Alpha: Danaher Gets Its Ducks In A Row

Some stocks really test value discipline. Investors don't often get a chance to buy Danaher (DHR) shares at especially attractive prices. In fact, it's about a once a year opportunity. With the strong rebound in the shares since the summer of 2011, valuation has become tricky in what is one of the better-run conglomerates around.

Growth A Little Light, Margins Quite Strong
Danaher's quarter was a little mixed, but only in the context of a stock where the expectations are always pretty substantial. Core revenue rose 4% this quarter, with the strongest organic growth coming from life sciences (up 6%) and environmental (up more than 5%). Significantly, all reporting units delivered organic growth this period.

All in all, margins were quite good this quarter. True, gross margin did drop about 250 basis points but that was already widely expected. What was not expected was the 16.5% reported operating margin, nor the segment operating margin of 17.2% - both about half a point better than most sell-side analysts had forecast.

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Danaher Gets Its Ducks In A Row

Seeking Alpha: If High Steel Prices Stick, U.S. Steel Has A Lot Further To Go

All you really need to know about whether U.S. Steel (X) stock will outperform this year is how strong steel prices will be. Simple, right? If only. Although steel prices have been heading higher in recent weeks and commentary from top mini-mills Nucor (NUE) and Steel Dynamics (STLD) has been constructive, there more than a few worries about the health of key markets like autos, construction, and energy.

A Tough Q4, But Who Cares?
By and large U.S. Steel had a disappointing quarter. Sales climbed 12% from last year, but dropped 5% from the third quarter. Shipment volume wasn't bad (especially in flat roll), but pricing was a little disappointing outside of the flat roll business. Worse, costs were quite a bit higher despite improved utilization and overall segment operating profit wasn't a profit at all. At the bottom line, U.S. Steel missed analyst expectations by a fairly significant amount.

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If High Steel Prices Stick, U.S. Steel Has A Lot Further To Go

Investopedia: Altria's Ever-Shrinking Window

It's probably foolish to think that smoking will ever go away entirely. The health risks have long been decided, but people have their vices and smoking has long been among them. That said it seems like governments around the world are on the same page when it comes to reducing the number of places people can smoke, and increasing the cost of doing so. That suggests an ever-shrinking window for Altria (NYSE:MO), but investors can likely wring a great deal of cash flow for many years to come.

Year-End Results Come in as Expected  
Altria's earnings are often a mess, but the company's fundamental performance was more or less in line with expectations. Revenue net of excise tax rose 5%, as weaker cigarette volumes were offset by better performance in smokeless tobacco.

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Monday, January 30, 2012

Seeking Alpha: ABB-Thomas & Betts Deal Is A Good One

Swiss multinational industrial company ABB (ABB) has been teasing investors for a little while now. While management has done a laudable job of cutting costs, seemingly everyone has been waiting for announcements with a little more "oomph" -- specifically, deals that can goose the company's growth rate. After more than a few near-misses, ABB found a deal that should make investors happy, as Thomas & Betts (TNB) looks like the right company at the right price.

The Deal To Be
The boards of ABB and Thomas & Betts have agreed on a deal that (if approved by shareholders) will see ABB acquire the company for $3.9 billion in cash. That works out to $72 per share and a 24% premium to Friday's close. In paying over 10 times EBITDA, ABB is hardly fleecing Thomas & Betts shareholders, especially considering that this company has struggled to produce consistently good returns on capital. Nevertheless, there are some definite synergies that should reduce the effective cost to ABB, as well as the prospects of an eventual recovery in the construction markets that make up a sizable percentage of Thomas & Betts' business.

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ABB-Thomas & Betts Deal Is A Good One

Seeking Alpha: Okay, ISTA Management, It's Time To Step Up

Successfully repelling an unsolicited bid is, and should be, a mixed blessing for any company. In the case of ISTA Pharmaceuticals (ISTA) and Valeant (VRX), it's pretty clear that Valeant was attempting to exploit investor fatigue and pessimism with a low-ball bid. Now that Valeant has retreated, it falls on management to show that they can deliver on that value that they claim Valeant (and, by implication, the broader stock market prior to the bid) failed to recognize.

Valeant Steps Away
Valeant had always said that its $7.50/sh bid for ISTA had a lit fuse attached (an expiration date of January 31), and management decided to pull it a day early. Management at Valeant claimed that this was due to a "lack of progress." But the reality is that ISTA was doing exactly what it said it would do - shopping around for a better offer.

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Okay, ISTA Management, It's Time To Step Up

Investopedia: Colgate-Palmolive Has Growth, But It'll Cost Ya

Perhaps there's nothing better today than a company that is logging very good growth with a set of products that are widely seen as economically-insensitive, day-to-day essentials. That has to be at least some of the explanation for the valuation of Colgate-Palmolive (NYSE:CL). For while this is absolutely an excellent company and a worthy buy-and-hold candidate for dividend-inclined investors, today's price is certainly no bargain.

Q4 Results - Good Growth, the Worst of the Margins?   
Colgate-Palmolive reported revenue growth of nearly 5%, with organic growth of 6% split evenly between volume and price. Oral/personal care (which is the overwhelming bulk of sales) had reported sales growth above 5%. By region, North America saw marginal growth (3.5%), while Europe was actually down 2% on an organic basis. Latin America and Asia/Africa both posted double-digit organic revenue growth. (For related reading, see Analyzing Operating Margins.)

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Investopedia: Nucor's Rally Leaves Little On The Table

Since the title of this article largely hints at the conclusion, let me make it clear that I think Nucor (NYSE:NUE) is one of the best commodity companies in the world and maybe one of the best-run companies in the country. The question for 2012, then, is whether the market for steel products can develop even more favorably than a generally bullish chorus analysts already expect. 

2011 Ends on a Shrug  
Although Nucor's year-on-year comparisons for the fourth quarter look strong, whatever happened last year may as well have happened 100 years ago for all it matters to current market conditions. So, 25% revenue growth and 120% earnings before interest, taxes, depreciation and amortization (EBTIDA) growth is all well and good, but largely irrelevant to investors. (For related reading on EBITDA, see EBITDA: Challenging The Calculation.)

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Investopedia: Riverbed Falls Out Of Bed

Outside of companies with big exposure to carrier spending, this has been a fairly upbeat quarter for tech hardware companies. Riverbed Technologies (Nasdaq:RVBD) wrecked that idyll to some extent on Thursday, warning investors that expectations for 2012 were too high. Although investors are booting this stock out of their portfolios on the day after earnings, a closer look at what's going on suggests a possible opportunity may be developing for patient investors.

Good Fourth Quarter Earnings, but... 
Riverbed posted pretty solid results for the fiscal fourth quarter. Revenue rose 23% from last year and 7% from the prior quarter, leading the company to beat the average estimate by a few million dollars. Product revenue was up 6% and ex-government revenue from enterprise customers was up strongly at 23%. Also encouraging, Riverbed's recovery in Europe continues, though the U.S. growth was not so impressive.

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Friday, January 27, 2012

Seeking Alpha: Amylin Gets Its Yes: Now For The Hard Work

Amylin Pharmaceutical (AMLN) investors got some long-awaited good news Friday afternoon, as the FDA finally granted approval to market Bydureon, an extended-release of Amylin's one-time blockbuster Byetta. Obviously this is a positive development for the company, but now the hard work begins. Amylin's market cap already assumed approval of this drug and now the company has to convince skeptical analysts and investors that it can steer itself to greatness (or buyout) as largely a one-product company.

Don't Tell Me About The Labor Pains, Just Show Me The Baby
Amylin has been working on getting approval of Bydureon since May of 2009, when the company first submitted a New Drug Application (NDA) to the FDA. The first FDA rejection came about a year later when the FDA wanted data on labeling and a risk mitigation strategy. The company resubmitted its response to these fairly routine questions only to get a second rejection in October of 2010 and a request from the FDA for a new trial to assess potential cardiac risk.

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Amylin Gets Its Yes; Now For The Hard Work

FinancialEdge: Blue Collar Can Mean Big Money

One of the curious outcomes of this recent recession and slow recovery may be a rethinking of how Americans view their careers and go about training for them. While attending and graduating from a four-year college has long been billed as the golden ticket to a quality life, there are signs that this may be changing. Although some sort of post-high school training and skill development is very important, it may be the case that blue collar skilled trades should get a second look.

The College Problem
One of the major issues in education today is the growing cost of a four-year college education. Numerous articles and studies have explored how the cost of attending college has not only outstripped inflation, but lapped it many times over in recent decades. This is putting education further and further out of reach for more and more people without resorting to loans, and increasing the student loan debt burden to an almost unsustainable degree.

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Seeking Alpha: Fourth Quarter Results Suggest The Street Still Underestimates 3M

Shares of the multi-armed conglomerate 3M (MMM) are up about 10% since I last discussed the company, but the story hasn't really changed all that much. Trouble in a few businesses masks an otherwise relatively solid story and Wall Street sell-analysts can barely muster tepid enthusiasm for the shares. Europe and assorted technology markets represent a risk to 2012 results, but fourth quarter results suggest that most of the risk here is to the upside.

3M Steps Over A Low Bar In Q4
To be fair, 3M's outperformance in the fourth quarter was against pretty weak expectations. Still, nearly 6% in constant currency revenue growth is nothing to sneeze at. Organic revenue growth of 3.3% (about one-third coming from volume) was not so spectacular, but did represent a sequential improvement - suggesting that 3M's performance may have bottomed in December.

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Fourth Quarter Results Suggest The Street Still Underestimates 3M

Seeking Alpha: Microsemi's Frustrating But Ultimately Undervalued Story

Small-cap semiconductor company Microsemi (MSCC) and I go back a ways. I've owned this stock at various points over the last 16 years and have always managed to make money doing so. I suspect a fair bit of those profits have come from appreciating the company's qualities and prospects at times when the Street was entranced by sexier growth names and then selling as the optimism built.

It's a little hard to really feel good about the December results that Microsemi just posted. Sure, there are good reasons that results were just in-line and that guidance was a little soft, but I hold these shares for performance and not to hear good reasons for underperformance. So, what's a Microsemi investor to do?

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Microsemi's Frustrating But Ultimately Undervalued Story

Investopedia: Nokia Still Has Miles To Go

It says something about a company (and its stock) when the market is apparently willing to hand out plaudits on the basis of "things were less terrible than we thought." It's hard to say that Nokia (NYSE:NOK) is really on the way back, but maybe this fading mobile phone leader has at least found the path to take.

Stepping Over a Low Bar 
Sell-side analysts didn't expect a lot from Nokia, but the company at least delivered that much. Revenue was up 11% sequentially for the fourth quarter, though down 21%. Both the "device" (that is, phones) and networks business saw basically the same 11% sequential growth (networks was a little stronger), but the year-on-year drop for devices was still pretty steep, down almost 30%. (For related reading, see Research In Motion Sliding Toward The Cliff.)

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Investopedia: Silicon Labs Has A Great Growth Story, But Has Already Run

Semiconductors are on the way back in 2012, but timing is still a major factor in making these investments work. Silicon Labs (Nasdaq:SLAB) is a frustrating case in that regard. While few (if any) chip stocks have a better near-term organic growth story, the stock has already been on a solid run since the fall of 2011. While further multiple expansion is possible, recent performance may be tough to replicate.

A Stronger Close to the Year than Most  
While most chip stocks are reporting a washout December quarter, Silicon Labs had the impertinence of reporting actual growth. Revenue rose 6% from the third quarter, as relatively strong results in video tuners and touch controllers drove results above even management's flat guidance.

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Investopedia: Stanley Black & Decker May Be Surprisingly Cheap

Every once in a while it's a good idea for investors to broaden their horizons and re-examine some ideas of the past. While I have been spending a fair bit of time on industrial supply companies and overseas toolmakers like Atlas Copco and Techtronic, it may be the case that there's an interesting stock here in the States. More to the point, Stanley Black & Decker (NYSE:SWK) has some challenges and real risks, but looks surprisingly cheap after its latest earnings report.

The Consummate Noisy Quarter 
Unfortunately, assessing Stanley's quarter takes a fair bit of work for all of the moving parts. The company reported revenue growth of almost 16%, with 6% organic growth from a 5% volume increase and a 1% price increase. This was a pretty solid result. Breaking it down, the Construction/DIY business saw 4% reported growth (or 8% organic growth after excluding Pfister), Industrial was up more than 11% (7% organic), while Security was up almost 47% as reported, but flat on an organic basis.

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Seeking Alpha: Covidien Plays To Its Strengths And Looks Undervalued

Sometimes healthcare is like real estate and success is all about location. For most of the past decade, Covidien's (COV) strengths were not seen as especially valuable - investors wanted the hot growth stories in stents, ICDs, and orthopedic implants, not a company that makes staplers and vessel sealers. Now, though, Covidien is the med-tech name that is showing good growth and the former winners are struggling to follow.

A Solid Start To The Fiscal Year
Covidien reported organic revenue growth of nearly 5% for the fiscal year; not only beating the analysts' guesses, but showing some acceleration from recent trends. The company reported 6% top-line growth from devices, about 4% growth in the pharmaceuticals division, and basically no growth in supplies. Relative to expectations, devices and drugs were surprisingly strong, while supplies were weak.

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Covidien Plays To Its Strengths And Still Looks Undervalued

Seeking Alpha: Slower Growth May Be A Good Thing For First Cash Financial

It was only a few weeks ago when I wrote that investors ought to consider taking advantage of a pullback in pawn store operator First Cash Financial (NASDAQ: FCFS). Since then, the stock has bounced back to the tune of 15%. Now with fourth quarter earnings in hand, it's a good time to review the thesis and what's going on with this Latin American consumer play.

A Fourth Quarter More Or Less As Expected
First Cash Financial gave analysts revised guidance closely before its official earnings release and so the reported earnings weren't too terribly surprising. Revenue was a little disappointing relative to original expectations, though 15% reported growth and 20% constant currency growth doesn't sound so bad. Unusually for FCFS, revenue growth in the U.S. was stronger than in Mexico. More on this in a minute.

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Slower Growth May Be A Good Thing For First Cash Financial

Thursday, January 26, 2012

Seeking Alpha: For St. Jude Bulls, It's A Question Of Faith

In the realm of healthcare stocks too cheap to ignore, there are a lot of different stories to suit individual investor tastes.

Covidien (COV) is the under-appreciated and overlooked story, Stryker (SYK) is the quality story, and Medtronic (MDT) is the "yeah, growth has slowed, but not that much" story. What about St. Jude Medical (STJ), then? St. Jude is the rebound and pipeline story, a story that arguably deliver better growth than the Street presently expects.

A So-So End To The Year, As Expected
St. Jude's growth in fourth quarter came in on the lower range with the likes of Johnson & Johnson (JNJ) as opposed to stronger stories like Covidien and Stryker. Reported sales rose 4%, but organic growth was more on the order of 1% for the December quarter.

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For St. Jude Bulls, It's A Question Of Faith

Investopedia: "Figuring Out" Apple Feels Like A Sisyphean Task

Spare a moment of pity for the Apple (Nasdaq:AAPL) bears and shorts, as they have another difficult day ahead of trying to get over their cognitive dissonance. Simply put, this company remains a remarkable force in consumer technology, and seems to have an uncanny ability to create its own markets. The Gordian knot for Apple investors, then, is trying to make their peace with a valuation that suggests Apple may just be worth a truly breathtaking amount of money.

A Great Start to the Year  
Apple certainly had a good Christmas. Revenue in the fiscal first quarter jumped 73% from last year and 64% from the prior quarter, and did some very bad things to the prior analyst guesses. Revenue was largely strong across the board - PC sales were up 22%, iPhone sales were up 133% and iPad sales were up 99%, while iPod sales declined 26% year-on-year.

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Investopedia: EMC's Steady Growth Still Undervalued

EMC (NYSE:EMC) isn't a hyper-growth story like its majority-owned subsidiary VMware (NYSE:VMW) or emerging storage name Fusion-IO (NYSE:FIO), but it's a dependable leader in a major market. Bears may fret about the magnitude of the IT spending slowdown in 2012 and the potential for management to misspend its growing cash balance, but this stands out as a quality tech holding all the same.

A Good Close to the Year  
EMC doesn't often beat analysts' estimates by a big margin, but the company is a steady performer all the same. As the info storage business was quite strong, fourth quarter revenues rose 14% on an annual comparison and more than 11% sequentially. Mid-range systems grew about 24% this quarter, while the high-range line grew about 11%. Isilon is still a relatively small contributor to EMC, but this acquisition is chugging along at a 100% growth rate right now.

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Investopedia: Coal's Weak, So Buy Peabody

Yes, that title seems counter-intuitive. Why buy a major U.S.-based producer of coal at a time when thermal coal prices are weak and the outlook for metallurgical coal is uncertain? Well, the reality is that it's only when coal markets look terrible, that Peabody Energy (NYSE:BTU) ever looks relatively cheap. While this leading energy company has more work to do in Australia than expected, today's prices represent a relatively good long-term entry point for patient and risk-tolerant investors.

Blame it on the Wombats 
Peabody's fourth quarter was not especially strong, and it's mostly the fault of the acquired operations of Ma carthur Coal in Australia. Honestly, few analysts or institutional investors really care about the revenue of a coal company like Peabody, but it was up 26% from last year, with an 8% increase in tons sold and better than 11% growth from the U.S.

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Wednesday, January 25, 2012

Seeking Alpha: Can Steel Dynamics Keep Up Its Momentum

Although the last couple of quarters have been difficult ones for mini-mill operators Steel Dynamics (STLD) and Nucor (NUE), investors have actually been pretty enthusiastic on the stocks. Whether it's expectations of strength in markets like automobiles, energy, and construction or just a response to cyclical low valuations, Steel Dynamics is up more than 60% since early October lows. That's a big gain for non-owners to miss, but the question is how much is yet left to go.

A Surprisingly Strong End To The Year
Steel Dynamics warned the Street that numbers were too high back in December, but the company managed to do better than those revised expectations. Revenue fell 9% from the third quarter and operating income was cut by almost one-quarter, but the earnings per share came in at $0.14 - two cents above the high end of management's guidance range and three to four cents higher than most analysts'.

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Can Steel Dynamics Keep Up Its Momentum?

FinancialEdge: How To Be A Millionaire

There's no real practical reason to ask "who wants to be a millionaire?" because the only people who won't put their hand up are religious types who've taken vows of poverty and those who are already multi-millionaires. Unfortunately, there's a big gulf between those who want it and those who do the things to make it happen. (For related reading, see 5 Easy Steps To Becoming A Millionaire.)

Based on recent statistics on U.S. household income, millionaire-dom is not something that's going to happen for most people, even with the dubious benefits of inflation. A household earning the median level of income (approximately 50K) and saving an impressive 20% of that would need almost 100 years to save $1 million (excluding taxes and investment gains). It's pretty clear, then, that a would-be millionaire has to think outside the boundaries of "median" experience.
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Seeking Alpha: Stryker Preparing For A Hard Slog In 2012

Diversified med-tech company Stryker (SYK) gave us all a preview of earnings two weeks ago that painted a fairly uninspiring picture in many respects. With the details of the full earnings release now in hand, it's clear that the company has some significant challenges ahead in 2012. Given today's valuation and management's history of navigating past challenges, investors would do well to consider these shares for their portfolios.

Results Broadly As Expected
Stryker reported that revenue rose 11% in the fourth quarter, or a little less than 4% on an organic basis. All of the growth came from MedSurg (up 11%) and Neuro/Spine (up over 46%), as the orthopedics business was up 1% as reported, but down 2% organically.

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Stryker Preparing For A Hard Slog In 2012

Investopedia: Baker Hughes Not Helping The Sentiment On North American Energy

Given how much share of the North American energy services industry is controlled by the Big Four, investors cannot just ignore the trends that come out of the earnings releases. With Schlumberger (NYSE:SLB), Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI) having reported in the past few days, it's pretty clear that business conditions in North America are not great. The question, though, is whether this sector will once again start trading on the strength of oil (versus the weakness in gas) and whether a company like Baker Hughes should trade this far below historical forward valuations.

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Investopedia: Packaging Corp Thinks Outside The Box

Time after time, investors who do a little extra work to identify those companies in commodity industries that do things a little better, see long-term rewards. It was true years ago in steel, when Nucor (NYSE:NUE) pioneered a new model, and it's true, at least to some extent, in containerboard (boxes) with Packaging Corp (NYSE:PKG).

A Good End to the Year, Relatively Speaking 
At first glance, Packaging Corp's earnings aren't going to look all that great. Revenue rose just 4% on a 0.2% increase in containerboard production and 7% increase in box shipments. Given that industry prices were not very strong in the second half of the year, that was a pretty good result for Packaging Corp and a little better than the Street was expecting.

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Investopedia: Is VMware's Road Starting To Turn Uphill?

There's that unpredictable moment in a growth tech stock's life where investors and analysts go from assuming that the trees will grow to the sky to assuming that the lumberjacks are already on site. That may not yet be the case for VMware (NYSE:VMW), but it definitely seems that sell-side analysts are no longer racing to top each others' growth estimates and that there's an increasing concern about the underlying growth of the market.

A Mostly Solid Close to the Year  
VMware reported that total revenue grew 27% this quarter and almost 13% from the September quarter. License revenue rose 22%, but this basically just met the expectations. One of the good news/bad news situations is that VMware is seeing an increasing amount of service and maintenance revenue. This a lucrative stream of revenue for any company, but investors don't tend to prize that much at companies like CA (Nasdaq:CA) or Microsoft (Nasdaq:MSFT).

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Seeking Alpha: Roche Looks To Regain Life Sciences Legitimacy With A Bold Bid For Illumina

It wasn't that long ago that I mused about Roche (RHHBY.PK) having lost its way and much of its relevance in the life sciences space. With a bold announcement Tuesday night, it looks like this Swiss medical giant is looking to fix this problem in a big way. Roche is proposing to acquire sequencing giant Illumina (ILMN) for $44.50 in cash.

The Proposed Deal
At the proposed price, Roche is offering to pay Illumina investors an 18% premium over Tuesday's close, but a 60% premium to Illumina's price when rumors of a possible deal started lifting these shares up off the mat. If the deal goes through, Roche will be paying a lofty 18 times trailing EBTIDA and more than five times trailing revenue.

That may be a reasonably large "if", though. Like most companies in the med-tech space, Roche prefers to keep things quiet and relatively friendly. The fact that Roche is taking this approach suggests that Illumina either turned them down flat or held out for a sweeter price. Now Roche is looking for shareholders to apply pressure on the Illumina board to sit down at the bargaining table.

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Roche Looks To Regain Life Science Legitimacy With A Bold Bid For Illumina

Tuesday, January 24, 2012

Seeking Alpha: Siemens Pushes Almost All Of The Wrong Buttons

In a market already looking for trouble in Europe, Siemens (SI) managed to step on quite a few different landmines with its fiscal first-quarter earnings. Although management continues to expect a second-half rebound in Europe, there are more than enough questions raised by this report to give investors something to chew on for a while.

Disappointing Results From Top To Bottom
Siemens reported 3% organic sales growth for the quarter, missing the average analyst guess by about 3% (landmine #1). Energy was the leader in reported sales (up about 8%), while industrial sales rose about 5%, healthcare climbed less than 1%, and infrastructure sales fell more than 3%.

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Siemens Pushes Almost All Of The Wrong Buttons

Seeking Alpha: Should Value Lead Investors Ignore Zions Bancorp's Lousy Performance

With more than a few major regional banking franchises apparently back up on their feet, do investors have any need to mess with those franchises still struggling to dig out from the wreckage of the credit collapse? Zions Bancorp (ZION) is a good case in point. Current results are pretty uninspiring and the bank risks losing business to healthier rivals like U.S. Bancorp (USB) and Wells Fargo (WFC). On the other hand, this is a banking network with a good market share in many Western markets and relatively low expectations.

Q4 a disappointment all around
Zions is a surprisingly popular stock with a lot of sell-side analysts, but it looks like that enthusiasm got a little ahead of itself for the latest quarter. Reported earnings were about one-third short of expectations and many analysts had the "other items" in this quarter already factored into the estimates.

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Should Value Lead Investors To Ignore Zions Bancorp's Lousy Performance?

Seeking Alpa: Johnson & Johnson Q4 Earnings Show Much Work Remains For Management

Going into this earnings release cycle, the growth expectations for med-tech companies like Johnson & Johnson (JNJ) were already pretty modest. Although this healthcare and consumer giant is actually doing reasonably well from a revenue perspective, operating leverage has been lacking. Though JNJ is among the long list of med-tech names that are trading below fair value, there are more compelling names to own today.

Fourth Quarter Results - Started Okay, But Got Worse
With Stryker (SYK) and St. Jude (SJM) already paving the way to relatively low expectations for the quarter, JNJ's fourth quarter performance didn't disappoint. In point of fact, 4% sales growth is actually pretty good in a market like this. Consumer sales growth was a little soft (up 2.7%), while devices/diagnostics was as expected (up 2.4%) and pharmaceuticals (up 6.6%) were actually stronger than expected.

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Johnson & Johnson's Q4 Earnings Show Much Work Remains For Management

Investopedia: Johnson Controls Has A Lot To Live Up To

As the smoke clears from another disappointing quarter for Johnson Controls (NYSE:JCI), a peculiar theme emerges. In the normally harsh world of Wall Street, this auto parts, battery and building efficiency conglomerate still commands quite a bit of support and optimism from sell-side analysts and institutional investors. The question for Johnson Controls longs may not be so much about the potential of this name as it is about management's ability to realize that potential.

Another Disappointment, Courtesy of Building Efficiency  
Johnson Controls has not been a very dependable company when it comes to meeting expectations, and the company missed again this time around even though estimates took multiple trimmings in the past months. Revenue rose 9% (below a low-teens growth expectation), with strong growth in the auto parts business (up 15%) offset by low single-digit performance in building efficiency (4%) and batteries (4%).

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Investopedia: Research In Motion - New CEO, Same Problem?

With Research In Motion's (Nasdaq:RIMM) market cap in a neck-and-neck race toward the bottom with its market share, the company had to do something to reverse course and stem the losses. While a change in leadership at the top is in fact a big move, it looks as though RIMM did not go far enough. In fact, investors may well be skeptical that this is simply old wine in a new bottle until proven differently.

Meet the New Boss  
RIMM announced over the weekend that co-CEOs Mike Lazaridis and Jim Balsillie would step aside and that former co-COO Thorston Heins would take the reins as the new CEO. At the same time, Barbara Stymiest, a RIMM board member since 2007 and a former executive with Royal Bank of Canada (NYSE:RY) will become the Chair of the board of directors.

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Investopedia: Will Low Prices Gas Halliburton's Margins?

With oil prices hovering near the triple-digit mark, it would make sense that the big energy service companies would be strong. But then who ever said the market always makes sense? With investors worried that the plunging price of natural gas will curtail activity (and margins) in North America, the Big Four ((Schlumberger (NYSE:SLB), Halliburton (NYSE:HAL), Weatherford (NYSE:WFT) and Baker Hughes (NYSE:BHI)) have been relatively weak of late. Unfortunately, while Halliburton's fourth quarter results weren't all that bad, margins worries look to be the story for 2012.

Fourth Quarter Results - Over Here, Over There  
On a headline basis, there wasn't all that much wrong with Halliburton's quarter. The company's revenue was better than expected and earnings were basically OK. Margins, though, are going to drive the discussion.

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Monday, January 23, 2012

Investopedia: Bank Of America's Story Not About Lousy Earnings

Wall Street has never been an especially fair place, and that's certainly the case with banks these days. Said differently, analysts and institutional investors expect different things from different players - for gasping money center banks like Citigroup (NYSE:C) and Bank of America (NYSE:BAC) it's about survival and recovery; for super-regionals like U.S. Bancorp (NYSE:USB) and Wells Fargo (NYSE:WFC) it's more about growth and profitability in the new post-crash market.
(For related reading, see How To Decode A Company's Earnings Reports.)

Poor Operating Performance in the Fourth Quarter
Bank of America seemed to beat expectations on the basis of reported earnings, reporting 15 cents per diluted share versus a loss of 16 cents reported a year ago. Stripping out charges and gains, it looks like Bank of America more or less broke even this quarter (including a 7 cents reserve release). Admittedly, no two analysts or investors may agree completely on what's "core" and what's exceptional, but the reality is that operating performance was weak.

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Investopedia: Intel - Pay Today To Grow Tomorrow

For better or worse, software giant Microsoft (Nasdaq:MSFT) and Intel (Nasdaq:INTC) are still tied together in many investors' minds. Both are former leading lights of the tech universe brought low by the perception that the evolution of new technologies will permanently cripple their growth prospects.
With a growing addressable market in areas like security and data, Intel's ability to flex its R&D and manufacturing muscle may well be underestimated by the Street today.

Beating Lower Numbers for the Fourth Quarter
Intel reported a fourth quarter that was broadly better than published estimates, though still shy of where most analysts had been on the stock a couple of months ago. Revenue slid more than 2% sequentially, but jumped 21% over last year as Intel had little choice but to endure the disruptions to the PC market brought on by the flooding in Thailand (and the subsequent issues with hard disk drive supply).

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Seeking Alpha: Europe Sneezes And Parker Hannifin Catches Cold

Industrial motion control leader Parker Hannifin (PH) spooked the market on Friday, as investors took its earnings and guidance as the "Ghost of Industrial Reports Yet To Come". Although orders to Europe and Asia did indeed trail off throughout the December quarter and margins are a concern, history suggests this is more along the lines of a bump in the road. More to the point, with market leadership and a surprisingly consistent record of performance, value-oriented investors should keep a careful eye on this one.

Slower Motion In Q2
To be sure, Parker Hannifin's second quarter results were not the sort of beat-and-raise encouragement that a market already nervous about the industrial sector needed to see. Revenue rose about 8% (and the large majority of that organic), and that actually bested the average analyst guess. Reported sales growth was fueled by the North American industrial segment (up over 13%), while aerospace (up 8%), international industrial (up 6%), and climate/industrial controls (down 3%) trailed.

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Europe Sneezes And Parker Hannifin Gets A Cold

Seeking Alpha: Zoll Medical About To Become A Very Interesting Growth Stock

Maybe it's true that if you look hard enough, there's always a growth story to be found in any industry. For more than a few years, one of the prime laments in the med-tech space was "where have all the growth stories gone?" Large companies scooped up many interesting small and mid-cap companies, while the poor IPO market led many others to stay private and/or sell-out.

Still, it is by no means true that Intuitive Surgical (ISRG) is the only worthwhile growth story left on the device side of med-tech. ZOLL Medical (ZOLL) deserves a place on this list as well, not only because the company is looking at its third straight year of double-digit growth, and not only because the company has excellent growth prospects from new products, but also because of what the company should be able to do with its operating margins.

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Zoll Medical About To Become A Very Interesting Growth Stock

Investopedia: Can A Better Mobile And Online Performance Push Microsoft To $40?

Perhaps the surest sign that Wall Street doesn't think of Microsoft (Nasdaq:MSFT) as a "true" tech stock anymore is that analysts (and company management) talk about company performance in stodgy year-on-year terms - not the go-go growth sequential comparisons that are so common elsewhere in tech. Be that as it may, even a lumbering giant can cover a lot of ground simply by falling forward, and there may be more potential here than its current price suggests.   

A Tepid Midwinter Report  
Microsoft's fiscal second quarter earnings don't really help the case of investors and analysts who believe Microsoft has more growth potential than the market believes. After all, revenue rose just 5% for the quarter, while operating income fell 2%. While the top number was a little weak relative to analyst guesses, the bottom line number was a little better and operating margin was a little stronger than most analysts expected. (For related reading on operating income, see Analyzing Operating Margins.)

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Investopedia: IBM's Mix Is Appealing, But The Valuation Isn't

Investing is a game of perpetual worry, so there's nothing especially novel about the concerns over the health of IT spending in 2012. The benefit of this to IBM (NYSE:IBM) is that the company is so diverse, so long as there's some spending it will be OK. Moreover, while that pesky "peak margins" argument/worry seems to be popping up again, the company's momentum in software seems encouraging for near-term results.

Good Enough Results for Q4  
IBM didn't blow out the doors for the fourth quarter, but they did well enough. Reported revenue rose about 2% and it would seem like most of the revenue shortfall vis a vis Wall Street estimates was a byproduct of foreign currency - something notorious difficult to model. Software led the growth (up 9%), while service revenue was OK (up 3%) and certainly better than hardware (down 8%).

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Investopedia: Is eBay A Trap?

Years of working as an analyst and investing my own money has made me suspicious of any tech stock that seems to offer both growth and compelling value. More often than not, the growth evaporates and that apparent value becomes a value trap. When looking at eBay (Nasdaq:EBAY) it's worth wondering why the Street isn't bidding this one up higher - is there that much doubt about its ability to keep its hold in e-commerce or build PayPal into an even more substantial player in payment processing? (To know about the technology industry, read A Primer On Investing In The Tech Industry.)

Respectable Fourth Quarter Numbers...  
eBay did more or less what it was expected to in the fourth quarter and a little more. Consolidated revenue rose about 35% as reported and 19% on an organic basis. Revenue growth was led by the payments business, up almost 28%, while the marketplace segment saw revenue growth of 16%. GSI chipped in $364 million in revenue this quarter.

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Investopedia: F5 Networks On The Run Again

For all of the pessimism that seemed to be building about the outlook for tech in 2011, January's earnings reporting season seems to be swinging the market back to some degree of optimism. With a decent quarter in the books and management seeming pretty confident about the pipeline of new business, F5 Networks (Nasdaq:FFIV) looks as though it will enjoy yet another post-earnings run.

A Decent Start to the Fiscal Year  
F5 Networks reported fiscal first quarter earnings after the close on Wednesday and the results (and more importantly, the guidance) pleased the Street. Revenue rose 2% on a sequential basis (and 20% on an annual comparison). Product revenue was a little soft (down 0.5% sequentially), while software revenue climbed 7% and deferred revenue rose about 11%.

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Seeking Alpha: Lincoln Electric's Greatness Doesn't Come Cheap

Arguably the best testament to the quality of Lincoln Electric (NASDAQ: LECO) is the relatively gentle treatment that the Street has given this stock. While many quality industrial names like Cummins (NYSE: CMI), Illinois Tool Works (NYSE: ITW), and Siemens (NYSE: SI) have lagged the market, Lincoln has been rather strong over the past year. As much as this is a great industrial company to own for the long haul, investors may want to hope for another Wall Street freakout regarding the global industrial economy before buying shares.

Four Among Many
Welding and cutting tools are integral to a wide range of industries and so it's probably no great surprise that it's a large and highly fragmented market. Only four companies really stand out in the industry with significant share and Lincoln Electric is the largest with roughly 12% share. After Lincoln comes Colfax (NYSE: CFX) (through its acquisition of Charter International), Illinois Tool Works, and Air Liquide. All together, though, these largest players account for maybe one-third of the market.

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Lincoln Electric's Greatness Doesn't Come Cheap

Seeking Alpha: Nektar Therapeutics - Often Forgotten, But Worth A Look

A few weeks into 2012, it looks like investors are much more eager to take on some risk in their portfolios and biotechs are coming back into favor. With that in mind, it makes sense to check out some of the promising biotechs that languished a bit in 2011. Although Nektar Therapeutics (NASDAQ: NKTR) hasn't had much bad news in a while, in the world of biotech "no news" can be almost just as bad and it seems that the market has perhaps forgotten this name a bit.

Changing Course
Nektar has long been in the business of partnering with larger pharmaceutical companies and licensing its proprietary PEGylation technology. PEGylation basically introduces polyethylene glycol into a compound and alters its performance in the body - most notably by slowing the process of clearing in from the body. Companies including Amgen (NASDAQ: AMGN), Pfizer (NYSE: PFE), and Merck (NYSE: MRK) have licensed this technology for major drugs like Neulasta and PEG-INTRON, but Nektar gets only relatively small royalties for this technology.

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Nektar Therapeutics: Often Forgotten, But Worth A Look

Friday, January 20, 2012

Investopedia: Linear Breaks Formation

It looks like the third week of January is when a little good news came back into the semiconductor world. Though Altera (Nasdaq:ALTR) and Texas Instruments (NYSE:TXN) previously suggested the worst was about to be over, ironically while lowering guidance for the fourth calendar quarter, equipment vendor ASML (Nasdaq:ASML) and analog chip company Linear Technology (Nasdaq:LLTC) gave outright encouraging news with their respective quarterly reports.

Results Still Not Exactly Pretty  
To be sure, enthusiasm about the Linear story is about what's going to happen and not about what did happen. Results in the company's fiscal second quarter weren't that great, as revenue dropped 11% on a sequential basis and 23% on a year-on-year comparison. The revenue shortfall was largely just a byproduct of ongoing industry de-stocking throughout industrial, communications, auto and other markets.

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Investopedia: ASML Seeing Light At The End Of Semiconductor Tunnel

Lithography specialist ASML (Nasdaq:ASML) isn't a typical semiconductor equipment company. ASML owns a significant share of its market and has actually seen prices strengthen over the last decade, while most equipment companies have gone the other route. With ASML's equipment occupying a key space in chip fabrication, investors may well see management's strong guidance as a sign that the semiconductor industry really is on track to rebound in 2012.

A Strong End to the Year  
Although ASML did report both sequential and annual declines in revenue for the fourth quarter, results were nonetheless better than analysts had expected. Revenue fell 17% from the third quarter, but was about 7% above the average analyst estimate. For the quarter, ASML saw system unit sales fall 24% to 41 units.

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Investopedia: PNC Delivers A Surprisingly Average Quarter

Being a well-respected company can have its drawbacks. It's hard to find anyone who doesn't generally think well of PNC Financial (NYSE:PNC), and this regional bank has done well both through and coming out of the credit crunch. With that excellence of execution also comes higher expectations and though PNC actually did pretty well in the fourth quarter by reasonable standards, the Street may nevertheless be disappointed that it wasn't once again one of the best of the best.

Core Results OK, but Some Definite Challenges  
PNC did OK in terms of revenue, announcing that revenue fell 5% from last year and 1% from the September quarter; a result that was in line with the expectations. Within this, reported net interest income (NII) rose 1%, while core NII climbed 3% after some accounting adjustments. Although PNC's net interest margin erosion of three basis points (BPS) is actually good compared to what was expected going into this cycle, it doesn't look as good relative to what we've seen from the likes of Wells Fargo (NYSE:WFC) or Citigroup (NYSE:C). Still, in absolute terms, PNC runs a fundamentally attractively profitable business.

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Seeking Alpha: If Europe Gets Weaker, Be Ready To Buy Intuitive Surgical

The frustrating reality with Intuitive Surgical (ISRG) is that there is not going to be any easy way to get into this stock. Investors either have to accept that the high valuation is the admission price for the best growth story in med-tech or they have to hope for a stumble that drives momentum investors away for a bit. That's a shame, as this is definitely a company to own at the right price.

A Nearly Flawless Quarter In Most Respects
Intuitive reported nearly 28% sales growth in the fourth quarter, easily exceeding even the highest guess on the Street despite a steady upward march in estimates. Revenue growth was quite well-balanced, as revenue from system sales rose 27%, instrument revenue rose 30%, and service revenue climbed 24%.

Intuitive Surgical's robots and proprietary tools have long commanded great margins and this quarter was no exception. Gross margin expanded half a point from last year and about 10bp sequentially, while operating income rose more than 30%.

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If Europe Gets Weaker, Be Ready To Buy Intuitive Surgical

Seeking Alpha: FDA Rejection Of Dapaglifozin Means Little For Lexicon

Shares of small biotech Lexicon Pharmaceuticals (LXRX) sold off sharply in the wake of news that the FDA issued it's much-expected rejection letter to Bristol-Myers Squibb (BMY) and AstraZeneca (AZN) for their experimental diabetes drug, dapaglifozin ("dapa"). Although there are certainly similarities between dapaglifozin and LX4211, arguably the key compound in Lexicon's pipeline, it is the differences that will ultimately decide this contest.

Bad News, As Expected
It interests me how analysts and financial commentators will talk about an event occurring "as expected" and nevertheless still managing to surprise a few investors. In this case, the rejection of dapa was hardly surprising. When Bristol-Myers and AstraZeneca had their panel meeting, the panel voted 9-6 to recommend rejecting the application. Although the FDA has been known to override these votes and grant approval anyway, the safety issues raised by the panel and the FDA's generally very conservative stance on diabetes drug made rejection a virtual no-brainer.

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FDA Rejection Of Dapaglifozin Means Little For Lexicon

Thursday, January 19, 2012

Seeking Alpha: UnitedHealth Posts Positive Earnings; Looks Like A Good Contrarian Bet

Just as deregulation tends to boost industry-wide returns and valuation multiples, the imposition of regulations tends to spook investors and compress multiples. Certainly life has changed quite a bit for health insurance companies in the last four years, but Wall Street may yet be expecting a worst-case scenario that is unlikely to materialize. Although UnitedHealth (UNH) is facing more government influence and interference in its operations, UnitedHealth's scale and operational performance should allow it to still win in the end.

A Good Close To The Year
UnitedHealth is so big now that it doesn't actually turn on a dime. Nevertheless, there were definitely some encouraging developments this quarter.

Reported consolidated revenue rose about 8% (and more than 2% sequentially) as sluggish growth (up less than 2%) in the core managed care business was augmented by 54% growth in OptumHealth and 19% growth in OptumRx. Reported revenue growth at OptumInsight seemed non-existent, but this was due to the disposal of the clinical trials basis; on a like-for-like basis, revenue actually grew 18%.

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UnitedHealth Posts Positive Earnings; Looks Like A Good Contrarian Bet

FinancialEdge: Is Yahoo's Real Opportunity What You Think It Is?

Flogging the rumors of a Yahoo! (Nasdaq:YHOO) buyout is a well-rehearsed move among financial journalists, over the last year or so. Certainly this one-time internet darling still captures a lot of attention, as did the stories about Microsoft (Nasdaq:MSFT) or Alibaba possibly acquiring it. In all of the discussions of what might happen to Yahoo!, though, it seems like there is relatively little acknowledgment that the company have still have its own independent future. (For other acquisitions, see Biggest Merger and Acquisition Disasters.)

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Investopedia: M&T Bank Looking Like A Diesel

There's a good reason that you won't see a diesel-powered car racing around Daytona next month, nor under the hood in the next Ferrari or Lamborghini. Diesel has many good points, including reliability and long-run power, but it is not known for sounding good, looking good or demonstrating great acceleration. That comparison comes to mind now when looking at M&T Bank (NYSE:MTB) - while the underlying quality of this bank is exceptional, it's going to take time for operations to get back up to speed.

A Disappointing Q4 in Some Respects  
Bank earnings always have certain charges, gains and exceptions, so M&T Bank's earnings are not unusual in that respect. All of that said, the earnings reported this quarter were somewhat disappointing.

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Seeking Alpha: The Chip Recovery Is Underway At Xilinx

There's a saying that goes, "Once is happenstance, twice is coincidence, the third time is enemy action". With a small collection of chip company earnings in hand, it does look like the long-await recovering in semiconductors is at hand. As is so often the case, though, the markets have anticipated the reality and Xilinx (XLNX) shares have been bid up to something less than a full bargain.

An Encouraging Third Quarter
Certainly a little context is important when looking at Xilinx's report. For starters, while it was an encouraging report, results were still at the lower end of original (before the late-quarter revision from management) guidance range. It's also important to remember that sales were down - down 8% sequentially and 10% from last year.

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The Chip Recovery Is Underway At Xilinx

Seeking Alpha: A Strong Fourth Quarter May Change Perceptions On BB&T

Going into the credit crisis, BB&T (BBT) had the record and reputation of one of the best banks in the country. Through the credit crisis BB&T proved that its underwriting was sound and that it didn't need assistance to stay in business (and in fact was able to do a sizable FDIC-assisted deal). Post-crisis, though, it seems like a lot of banking analysts have collective amnesia and seem to think that BB&T isn't the bank that it used to be. Perhaps a solid end to 2011 and healthy guidance will start to move attitudes back.

Good Numbers To End The Year
There have been varying degrees of "clean" earnings from large banks like Wells Fargo (WFC), PNC (PNC), and U.S. Bancorp (USB) this reporting season, and BB&T comes in somewhere near the middle. Reported earnings of $0.55 were better than the average guess from analysts, and the adjusted earnings of $0.61 were even better. Those adjustments consist primarily of reversing out a $0.09 gain on securities and a $0.19 valuation adjustment on foreclosed real estate. BB&T's earnings included a reserve release of $0.11 - definitely large relative to the reported earnings.

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A Strong Fourth Quarter May Change Perceptions On BB&T

Seeking Alpha: Bank of the Ozarks Thriving; Consider Buying On Dips

There is no shortage of critics who will bitterly complain about how the Bush and Obama administrations have handled the near-meltdown of the U.S. banking system. One company that is not likely to complain at all is Arkansas's Bank of the Ozarks
(OZRK) as this company has feasted on FDIC-assisted acquisitions and continues to thrive by zigging where others zag. The question, though, is whether the potential returns are still worth the risk.

A Strong Close To The Year
Relative to larger banks like M&T Bank (MTB) or Wells Fargo (WFC), Bank of the Ozarks' earnings are relatively clean and simple. Although net earnings did slide about 7% from the third quarter, the bank nevertheless beat the average analyst guess by about two cents.

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Bank Of The Ozarks Thriving; Consider Buying On Dips

Investopedia: Wells Fargo Continues To Show Its Quality

Although Wells Fargo (NYSE:WFC) certainly made its share of mistakes during the housing bubble, it looks like the company is on track to emerge from the credit crisis as one of the strongest names in banking. Strong while others are still weak, Wells Fargo could yet be on the hunt for assets and expansion opportunities that could take this bank to a new level.

A Good End to the Year  
The fourth quarter of 2011 is shaping up to have been a pretty good quarter for the large banks. Wells Fargo surprised with its revenue this quarter, growing 5% from the third quarter and beat the average estimate by about half a billion dollars.

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Seeking Alpha: Patience With Palomar Could Pay

Few sectors of healthcare have been gutted to the same extent as aesthetics. Although large players with more of a pharmaceutical focus like Allergan (AGN) and Medicis (MRX) have held up reasonably well, that is in large part because a larger part of their business falls under the header of "medically necessary" and is eligible for insurance reimbursement.

For the device companies, particularly the energy-based device (colloquially called "lasers") companies, though, it has been a hard road indeed. While procedure volume has not yet picked up significantly, investors looking for to get in early may want to consider Palomar Medical Technologies (PMTI). If a recovery in aesthetics procedures really is a "sooner or later" event, the low valuation and strong IP could make this an interesting stock again.

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Patience With Palomar Could Pay

Wednesday, January 18, 2012

Investopedia: Check Point Looks To A New Model For Familiar Success

Failure to adapt is one of the surest ways for today's winners to become tomorrow's losers. IT security company Check Point Software (Nasdaq:CHKP) looks to be addressing that risk as best it can, with ongoing product development and migration. While this is by no means the cheapest stock out there, investors may still want to consider this name as a somewhat balanced trade-off of growth and value.

Another Solid Quarter to End the Year  
Check Point reported that revenue rose 12% in the fourth quarter. That more or less matched the averaged analyst estimate. Deferred revenue, though, was up 19% this quarter and seemed to beat expectations by a more meaningful extent. As Check Point moves on with a somewhat new model, investors should expect deferred revenue to be a more meaningful metric.

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Investopedia: Does CSX Have The Most Levers To Pull In 2012?

Broadly speaking, these are still good times for the major railroads in the U.S. The economic recovery continues to fuel a decent recovery in volume, while the price advantages of rail versus truck give the companies leverage on pricing. It also certainly isn't hurting that higher-margin intermodal business is growing (albeit still small) part of revenue.

Against this backdrop, almost any rail would be a decent option. Looking at 2012, CSX (NYSE:CSX) may be an underappreciated relative value play among the top rails. The question for CSX is largely about whether the company can achieve cost/efficiency improvements that could drive better earnings performance than its peers. (For related reading, see Rail Traffic Ends 2011 On A High Note.)

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Seeking Alpha: Fastenal Offers Remakrable Growth

Recent developments in the industrial distribution space haven't exactly dispelled the cliché that Grainger (GWW) is the dependable leader, MSC Industrial (MSM) the balanced growth story, and Fastenal (FAST) the real growth dynamo of this triad. Although Fastenal did indeed post solid results in the fourth quarter, investors may want to ask if it makes sense to pay so much for a levered growth play on U.S. industrial activity.

A Solid Fourth Quarter
Analysts expected quite a lot from Fastenal in the fourth quarter, and the company largely delivered. Revenue rose almost 22%, as the company saw excellent growth throughout the fourth quarter. Monthly sales rose 21% in December (on top of a nearly 21% jump in the prior year) and stores open more than two years saw roughly 18% same-store sales growth in the quarter.

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Fastenal Offers Remarkable Growth, But At A High Price

Seeking Alpha : Should Investors Add Adtran After Fourth Quarter Earnings?

Such is the state of business for companies that supply equipment to carriers like Verizon (VZ) like AT&T (T) that not missing numbers is greeted with the enthusiasm usually reserved for beat-and-raise stories. Certainly these are challenging times for last-mile equipment vendor Adtran (ADTN), but increased home and business demand for broadband and ongoing wireless backhaul buildout could spell better times ahead.

Q4 Results - Good Enough Will Do
Adtran's results weren't great, but the performance at other carrier equipment vendors like Alcatel-Lucent (ALU) and Acme Packet (APKT) wouldn't give any reason to expect them to be so. Nevertheless, a sequential revenue drop of 9% (and a 6% gain from last year) was good enough to meet expectations.

Adtran saw year-on-year growth in both broadband access (up 49%) and internetworking (up 37%), but sequential comparisons were not so exciting (down almost 15% and up about 2%, respectively). Optical access was outright bad, though, as sales dropped 17% from last year and 25% from the third quarter.

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Should Investors Add Adtran After Fourth Quarter Earnings?

Seeking Alpha: A Lack Of Surprises Favors U.S. Bancorp

Never a flashy bank even in the heights of the boom times, U.S. Bancorp (USB) is a pretty good example of what basic "blocking and tackling" can achieve in regional banking. Fourth quarter results were by no means flawless, but U.S. Bancorp continues to perform exceptionally well and may well be one of the best banks in the country today. Better still, widespread investor pessimism on banks has kept a lid on these shares.

A So-So End To The Year
Although U.S. Bancorp had a decent close to the year, it wasn't any kind of blowout. Adjusted earnings of $0.64 just barely beat the consensus, though U.S. Bancorp hasn't had to rely on the large reserve releases of so-called money center banks like JPMorgan (JPM) or Citigroup (C).

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A Lack Of Surprises Favors U.S. Bancorp

Investopedia: Cloud Peak Energy - The Power In Powder

Although 2011 was not an especially strong year for any industrial commodity, it was a pretty lousy year for coal. Export volume stayed pretty high, but momentum was sapped by weakness in met coal and a general cooling-off of what was probably far too much investor enthusiasm to start with. As is almost always the case, it wasn't different this time.

That being said, investors may yet want to bone up on Cloud Peak Energy (NYSE:CLD). As a pure play on the closest thing to clean coal, Cloud Peak could see stronger demand in both domestic and export markets, as well perhaps as interest from larger buyers. (For more, see Earning Forecasts: A Primer.)

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