Archive for September, 2011

Week Sept 23 2011 – Weekly Recap & The Week Ahead

Monday, September 26th, 2011

“If everyone is thinking alike, then somebody isn’t thinking.” George S. Patton

1. S&P cuts Italy’s sovereign credit ratings — S&P lowered Italy’s long-term credit rating to A from A-plus and cut its short-term rating to A-1 from A-1-plus, citing a weak economic outlook and ongoing political gridlock. S&P also said the outlook for Italy’s ratings is negative, meaning a further cut is possible.
2. Japan’s trade deficit widens — Japan’s trade deficit gapped wider than expected in August, coming in at ¥775.3B ($10.1B) vs. July’s ¥72.5B surplus, as growth in exports weakened. Exports rose 2.8% Y/Y and imports jumped 19.2%.
3. Fed decides on $400 billion bond swap — the Fed said it will buy $400 billion of Treasury securities in the 6- to 30-year range and sell an equal amount of maturities of 3 years or less. The purchases would be completed by the end of June 2012.
The Fed also announced a new plan to purchase agency mortgage-backed securities with proceeds of maturing securities.
4. Moody’s downgrades BAC, WFC & C — Moody’s downgraded Bank of America (BAC) to Baa1 from A2. The move comes from a decrease in the probability the government would support the bank, if necessary, but “do(es) not reflect a weakening of the intrinsic credit quality of BofA.” Moody’s cut Wells Fargo (WFC) to A2 from A1 for the same reason. With Citigroup (C), Moody’s confirmed the company’s long-term rating, saying the bank’s stand-alone credit profile has improved, but downgraded the holding company’s short-term rating to Prime-2 from Prime-1.
5. Moody’s Cuts Eight Greek Bank Ratings by 2 Notches — in a widely expected move, Moody cuts The agency cut National Bank of Greece, EFG Eurobank Ergasias, Alpha Bank, Piraeus Bank, Agricultural Bank of Greece and Attica Bank downgraded to Caa2 from B3.

The week ahead — Economic data from Econoday.com:

Week Sept 16 2011 – Weekly Recap & The Week Ahead

Monday, September 19th, 2011

“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in”John D. Rockefeller

1. Talks of China to make investment in Italy — The Wall Street Journal and Financial Times said Italy’s finance minister met last week with a delegation of Chinese officials — including the head of China’s sovereign-wealth fund — in an attempt to persuade Beijing to buy a large amount of Italian sovereign debt.
2. Moody downgraded French banks — Moody’s downgraded Credit Agricole’s (CRARY.PK) credit rating to Aa2 from Aa1 and Societe Generale’s (SCGLY.PK) to Aa3 from Aa2, but maintained its Aa2 rating on BNP Paribas (BNPQY.PK), saying the bank’s “profitability and capital base currently provide an adequate cushion to support its Greek, Portuguese, and Irish
3. Treasury to Accommodate Fed on ‘Twist’ — according to sources, “Operation Twist”, the central bank would buy more longer-term Treasury securities to drive down long-term interest rates by reducing the amount of such debt available to other investors. Operation Twist is one of a number of options the Fed will consider when it next meets on Sept. 20.
4. Central Banks Pour Dollars Into Europe — The European Central Bank said it would coordinate with the U.S. Federal Reserve, Bank of England, Bank of Japan and Swiss National Bank to ensure banks unlimited dollar funding through the end of the year to quell fears that the region’s lenders could fall victim to the euro-zone’s government debt crisis.
5. Economists say recession more likely — A WSJ poll of 53 economists sees a 1-in-3 chance – the highest ratio since the start of the recovery – of the economy slipping into recession over the next year.

The week ahead — Economic data from Econoday.com:

Mobile Payment Updates — VeriFone(PAY) & NXP Semi (NXPI)

Friday, September 16th, 2011

As a follow up to Mobile Payment – Near Field Communications analysis, this article updates the latest events for the two companies mentioned; Verifone (PAY) and NXP Semiconducdor (NXPI).

VeriFone (PAY) (via Yahoo)
VeriFone Systems, Inc. designs, markets, and services electronic payment solutions that enable secure electronic payments among consumers, merchants, and financial institutions worldwide. The company provides countertop electronic payment systems that accept magnetic, smart card, and contactless/radio frequency identification cards; and support credit, debit, check, electronic benefits transfer, and various pre-paid products, as well as offers wireless system solutions.

Reader can access the full Q3 2011 earnings transcript PAY — Q3 Transcript

On Sept 6 2011, VeriFone (PAY) announced Q3 2011 earnings (via Reuter – Q3 2011 earnings release – Sept 6 2011):
* Q3 adj EPS $0.49 vs est $0.46
* Q3 rev up 21 pct
* Sees Q4 adj EPS $0.49-$0.50 vs est $0.49
* Sees Q4 rev $395-$400 mln vs est $395.9 mln
• VeriFone, whose customers are primarily financial institutions, payment processors, petroleum companies and retailers, is seeing growing demand for these mobile payment technologies in the United Kingdom ahead of the 2012 Olympics.
• “In London we have now signed nearly 6000 taxis to five-year processing agreements. UK retailers continue to embrace contactless systems,” Chief Executive Douglas Bergeron said on a conference call with analysts.
• The company continues to work with Google Inc to roll out the Google Wallet mobile payment service, which uses wireless NFC technology on mobile handsets.
• “The next big phase of the Google rollout is currently planned for the end of the month where we go from hundreds of locations to tens of thousands of locations,” CEO Bergeron said on the call.
• Verifone is also working with ISIS — an NFC-based mobile payment joint venture between AT&T , T-Mobile and Verizon Wireless; and PayPal Inc bring mobile payments to point-of-sale terminals in 2012.
• It has also won a $6.9 million contract with the Metropolitan Transportation Authority of New York City to depoly 1000 of its TransitPAY systems on buses which allow NFC-enabled smartphone-based payments.
• If initial rollouts lead to widescale deployment across the industry, the company’s revenue would grow by $100-$150 million in the U.S. and internationally.
Guidance:
• The company expects fourth-quarter adjusted earnings of 49-50 cents per share on sales of $395-$400 million. Analysts were expecting a fourth-quarter profit of 49 cents, on revenue of $395.9 million, according to Thomson Reuters I/B/E/S.
• Growth in North America will likely remain flat in the fourth quarter and will pick up next year, VeriFone said. It expects higher growth from Europe – especially from UK, France and Germany – and from emerging markets.
• Verifone raised its full-year adjusted profit outlook to $1.88-$1.89 a share on sales of $1.289-$1.29 billion, from its prior forecast of an adjusted profit of $1.80-$1.83 a share on sales of $1.17-$1.18 billion.

Technical Analysis:
• Expect PAY to encounter the 50-SMA resistance at around $38 range. The stock displayed a “death-cross” figure back in mid-July 2011 around $43. Looking forward, Mid-October is a better month for PAY.

NXP Semiconductor (NXPI) — As profile inYahoo –
NXP Semiconductors N.V., through its subsidiary NXP B.V., provides mixed signal solutions and semiconductor components primarily in Japan, Europe, South Korea, Rest of Asia Pacific, and the Americas. It offers small signal, power, and integrated discretes; and amplifiers, bipolar transistors, data converters, diodes, rectifiers, microcontrollers, sensors, and thyristors. The company’s products are used principally in automotive, identification, mobile, consumer, computing, wireless infrastructure, lighting, and industrial applications. It also develops audio and video multimedia software solutions for mobile phones. The company, formerly known as KASLION Acquisition B.V, was founded in 2006 and is headquartered in Eindhoven, the Netherlands.
News Updates:
• Marketwire -08/30/11 EINDHOVEN, NETHERLANDS- NXP Semiconductors N.V. (NASDAQ: NXPI – News) today announced that Turkcell (NYSE: TKC – News) (ISE: TCELL), the leading communications and technology company in Turkey, has selected the PN544 near field communication (NFC) radio chip for Turkcell’s recently launched T20 smartphone. The T20 handset, manufactured by Huawei, is one of the world’s first commercially available low-cost Android NFC-enabled smartphones.
On August 17, 2011, NXP Semiconductor (NXPI) announced increase in share buy back to 8,000,000 shares from 5,000,000 previouly.
Marketwire – 08/17/11 EINDHOVEN, NETHERLANDSNXP Semiconductors N.V. (NASDAQ: NXPI – News) announced today that its Board of Directors resolved to increase the number of shares to be repurchased under its stock repurchase plan as announced on July 29, 2011, from 5,000,000 shares to 8,000,000 shares.
On July 30, 2011, NXP Semiconductor (NXPI) announced Q2 2011 earnings (via Bloomberg – July 30 2011):
• Second quarter non-GAAP EPS of $0.51 missed the consensus estimate of $0.52 (GAAP EPS was $0.33). Revenue of $1.1 billion was flat year-over-year.
• NXP, based in Eindhoven, Netherlands, now sees NFC deliveries at the lower end or “perhaps even slightly below” an initially predicted range of 40 million to 100 million units, Chief Executive Officer Richard Clemmer said on an analyst conference call.
• The shortfall is caused by a combination of “formulation and agreement on the specific business models to support the ecosystem,” as well as business challenges some handset makers are experiencing
• “Carriers continue to try to figure out an economic proposition,” Clemmer said in a conference call today. The company still believes a substantial increase in mobile transactions will occur, albeit with a delay of one to two quarters, he said. For 2012, NXP expects a doubling of the number of units.
Guidance:
• Product revenue may fall as much as 5 percent in the third quarter versus the second quarter, the company said, and earnings per share will be in the range of 47 cents to 56 cents.
• For the third quarter, management guided non-GAAP EPS to $0.47 to $0.56, nowhere near the $0.66 consensus estimate and potentially falling short of non-GAAP EPS of $0.49 in the year-earlier quarter. In an ominous sign for the outlook beyond the third quarter, the company reduced its 2011 forecast of near-field communication chip shipments, explaining that mobile-phone operators are not expanding wireless payment systems as quickly as previously anticipated.

Technical Analysis:
• NXPI moved above the 50-SMA resistance at around $19 range on higher volume. The next level of resistance is around $25 (18% higher from the current price $20.23).

Disclosure: the author owns NXP Semiconductor (NXPI).

Week Sept 9 2011 – Weekly Recap & The Week Ahead

Monday, September 12th, 2011

“In the business world, the rearview mirror is always clearer than the windshield”. Warren Buffett

1. ISM services-sector index rises to 53.3% in August — The Institute for Supply Management stated its service-sector index rose to 53.3% in August from 52.7% in July. Economists surveyed by MarketWatch expected the services index to drop to 51.0%.
2. 25 German MPs rebel in prelim European Financial Stability Facility votes — twenty-five lawmakers from Germany’s ruling coalition refused to back a draft law that would boost the powers of the euro zone’s rescue mechanism, underscoring the risk that Chancellor Angela Merkel might fail to secure a conservative majority for the measure.
3. New York subpoenas investors in Goldman securities — New York prosecutors investigating Goldman Sachs (GS) over its mortgage bonds have reportedly subpoenaed Morgan Stanley (MS), hedge funds and other parties that invested in the securities.
4. ECB, Bank of England on hold — The European Central Bank left its key lending rate unchanged at 1.5%; the Bank of England also left its key interest rate on hold at 0.5% and kept its quantitative-easing program on pause.
5. Obama outlines $447B program to reduce unemployment — President Obama unveiled a $447B plan to bring down unemployment, including $240B in payroll tax relief, $49B for extending unemployment insurance, and $50B for transport infrastructure.
6. BofA mulls plan to axe 40,000 jobs — just as President Obama looks to create jobs, Bank of America (BAC) is considering a plan to slash 40,000 positions over a number of years, The Wall Street Journal reported.

The week ahead — Economic data from Econoday.com:

Week Sept 2 2011 – Weekly Recap & The Week Ahead

Tuesday, September 6th, 2011

“Markets can remain irrational a lot longer than you or I can remain solvent.” John Maynard Keynes.

1. Yoshihiko Noda to be Japan’s new prime minister — Finance Minister and fiscal conservative Yoshihiko Noda will replace Naoto Kan as Japan’s next prime minister after beating Trade Minister Banri Kaieda in a run-off vote for the leadership of the ruling Democratic Party.
2. Obama to choose Alan Krueger to top economic post — Barack Obama today plans to nominate Princeton University’s Alan Krueger to replace Austan Goolsbee as Chairman of the White House Council of Economic Advisers.
3. China Widens Reserve Ratio to Limit Inflation — China broadened the base of reserves it requires commercial lenders to deposit with the central bank to control liquidity and limit inflation, economists said.
4. QE3 expectations rise after FOMC minutes — expectations for more bond buying have increased after the minutes from the FOMC’s August 9 meeting showed that some policy makers were in favor of the move in order to help spur the economy, for which the Fed painted a gloomy picture.
5. The U.S. government sued to block Deutsche Telekom’s $39 billion sale to AT&T Inc of T-Mobile USA — the U.S. government citing concerns it will harm competition in the wireless market and lead to higher prices.
6. IMF pours further doubt on strength of EU banks — an IMF analysis shows that marking the sovereign bonds of six highly indebted eurozone countries to market would reduce the tangible common equity of EU banks by about €200B ($287B), or 10%-12%. The countries concerned are the usual suspects of Ireland, Greece, Portugal, Italy and Spain plus Belgium.
7. UAW workers OK strike option — in advance of a contract expiration on September 14, UAW workers in Detroit have voted to give union leaders the option of calling a strike against Ford (F).
8. U.S. said ready to sue big banks over mortgages — a federal U.S. agency is ready to sue more than a dozen major banks, arguing that they misrepresented the quality of mortgage securities they put together and sold in the run-up to the bursting of the housing bubble, according to a published report. The suits are aimed at Bank of America Corp., Goldman Sachs Group Inc., J.P. Morgan Chase & Co., Deutsche Bank AG and others, the report said, citing three unidentified individuals briefed on the matter.
9. Bullish Sentiment Up Again — According to AAII’s weekly poll of investor sentiment, bullish sentiment rose to 38.62% in the latest week. This represents the fourth straight week where bullish sentiment has improved. Chart courtesy from the Bespoke Investment Group.

The week ahead — Economic data from Econoday.com:

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