General Electric's GE earnings for the first quarter were largely in line with our expectation, excluding the tax benefits flowing through GE Capital. For the past few quarters, the company has been riding the back of energy infrastructure, and this quarter's results showed much of the same. Surprisingly, aviation increased revenue and profit 12% and 39%, respectively. Given the weakness in the economy and project delays at Boeing BA and Airbus, we expected weaker numbers in this group. As impressive as energy and aviation were, the rest of the segme nts were equally unimpressive. Consumer and industrial and NBC Universal continued to take the brunt of the recession with a combined profit drop of 50%. These two segments are highly dependent on a strong consumer, so we expect the weakness here to persist until employment picks up and people begin buying houses again. While it is true that GE Capital earned $1.1 billion in profit for the quarter, all of the profit came from a tax benefit of $1.2 billion. Pretax, preprovision income was down 45% to $2.2 billion from $3.9 billion last year, reflecting the shrinking size of GE Capital's balance sheet and fewer financing transactions in the broader market. The results for the quarter were not stellar, but do show that GE's portfolio of businesses has held up far better than others thus far. We are comfortable with our fair value estimate and assumptions.
Daniel Holland
Showing posts with label earnings. Show all posts
Showing posts with label earnings. Show all posts
Friday, April 17, 2009
CITI results April 2009
Iknow everybody is in love with the citi results, but I thought it would be worth noting that $2.5B of "earnings" came from marks on their own debt and also as a result of recent cave in by FASB on fair value accounting, Citi was able to have $631MM pretax lower impairment charges recorded in net revenue in the quarter.
Saturday, February 21, 2009
HEADLINE NEWS WEEK ENDING 2/20/09
Overview
Federal Reserve policymakers have downgraded their outlook for the US economy in 2009 according to their latest projections for real GDP growth, inflation and unemployment. more...
US MARKETS
Treasury/Economics
Treasuries remained in demand throughout this short yet active President’s Day week. The market is still trading very volatile, with double digit yield movements everyday this week. more...
Large-Cap Equities The stock market tumbled this week due to further weakness in the financial sector and fears of a deepening recession. more...
Corporate BondsThere were a handful of issuers that tapped the investment grade market this week as concerns regarding the stimulus package and bank rescue plan kept issuers at bay. more...
Mortgage-Backed Securities Mortgages performed poorly versus Treasuries as the latest US Government policy plan, the Home Affordability and Stability Plan (HASP), intended to stem the foreclosure crisis, may lead to a surge in refinancing. more...
Municipal Bonds The municipal market stalled this week. Two-year AAA-rated general obligation (GO) bond yields rose 3 basis points (bps) through Thursday, to 1.17%. more...
High-Yield The high yield market remains resilient, notwithstanding the onslaught of difficult macro news. more...
INTERNATIONAL MARKETSWestern European EquitiesStocks in Western Europe lost ground over the past week. The stocks with the worst performance were insurance (-19.0%) and banks (-16.1%). more...
Eastern European Equities The CECE index of equities traded in Central Europe (Czech Republic, Hungary, and Poland) lost -14.1% this week, while the Russian stock index RTS went down by -17.1%. more...
Global Bonds and CurrenciesSovereign government bond markets had a mixed week. The long ends of both the Bund and Gilt markets took their main lead from the US Treasury market, closing the week firmer. more...
Emerging-Market Bonds Emerging market dollar-pay debt spreads widened this week. more...
FACTORS SHAPING THE MARKET NEXT WEEK
Next week, investors will be listening closely to Fed Chairman Ben Bernanke during his semi-annual testimony before Congress. more...
For more information, please contact 800 5-PAYDEN or visit payden.com.
If you have difficulties viewing this e-mail and would prefer the Weekly Market Update in plain text format, please e-mail us at paydenrygel@payden-rygel.com. To unsubscribe from this email, please email us at unsubscribe@payden-rygel.com.
Have a great weekend! All rights reserved. Legal terms. Payden & Rygel respects your privacy. Privacy policy.
The investment strategy and investment management information presented on this email and related Web site, payden.com, should not be construed to be formal financial planning advice or the formation of a financial manager/client relationship. Payden.com is an informative Web site designed to provide information to the general public based on our recommendations of investment management and investment strategies and is not designed to be representative of your own financial needs. Nor does the information contained herein constitute financial management advice. The firm makes no warranty or representation regarding the accuracy or legality of any information contained in this Web site, and assumes no liability for the use of said information. Be advised that as Internet communications are not always confidential, you provide our Web site your personal information at your own risk. Please do not make any decisions about any investment management or investment strategy matter without consulting with a qualified professional.
Federal Reserve policymakers have downgraded their outlook for the US economy in 2009 according to their latest projections for real GDP growth, inflation and unemployment. more...
US MARKETS
Treasury/Economics
Treasuries remained in demand throughout this short yet active President’s Day week. The market is still trading very volatile, with double digit yield movements everyday this week. more...
Large-Cap Equities The stock market tumbled this week due to further weakness in the financial sector and fears of a deepening recession. more...
Corporate BondsThere were a handful of issuers that tapped the investment grade market this week as concerns regarding the stimulus package and bank rescue plan kept issuers at bay. more...
Mortgage-Backed Securities Mortgages performed poorly versus Treasuries as the latest US Government policy plan, the Home Affordability and Stability Plan (HASP), intended to stem the foreclosure crisis, may lead to a surge in refinancing. more...
Municipal Bonds The municipal market stalled this week. Two-year AAA-rated general obligation (GO) bond yields rose 3 basis points (bps) through Thursday, to 1.17%. more...
High-Yield The high yield market remains resilient, notwithstanding the onslaught of difficult macro news. more...
INTERNATIONAL MARKETSWestern European EquitiesStocks in Western Europe lost ground over the past week. The stocks with the worst performance were insurance (-19.0%) and banks (-16.1%). more...
Eastern European Equities The CECE index of equities traded in Central Europe (Czech Republic, Hungary, and Poland) lost -14.1% this week, while the Russian stock index RTS went down by -17.1%. more...
Global Bonds and CurrenciesSovereign government bond markets had a mixed week. The long ends of both the Bund and Gilt markets took their main lead from the US Treasury market, closing the week firmer. more...
Emerging-Market Bonds Emerging market dollar-pay debt spreads widened this week. more...
FACTORS SHAPING THE MARKET NEXT WEEK
Next week, investors will be listening closely to Fed Chairman Ben Bernanke during his semi-annual testimony before Congress. more...
For more information, please contact 800 5-PAYDEN or visit payden.com.
If you have difficulties viewing this e-mail and would prefer the Weekly Market Update in plain text format, please e-mail us at paydenrygel@payden-rygel.com. To unsubscribe from this email, please email us at unsubscribe@payden-rygel.com.
Have a great weekend! All rights reserved. Legal terms. Payden & Rygel respects your privacy. Privacy policy.
The investment strategy and investment management information presented on this email and related Web site, payden.com, should not be construed to be formal financial planning advice or the formation of a financial manager/client relationship. Payden.com is an informative Web site designed to provide information to the general public based on our recommendations of investment management and investment strategies and is not designed to be representative of your own financial needs. Nor does the information contained herein constitute financial management advice. The firm makes no warranty or representation regarding the accuracy or legality of any information contained in this Web site, and assumes no liability for the use of said information. Be advised that as Internet communications are not always confidential, you provide our Web site your personal information at your own risk. Please do not make any decisions about any investment management or investment strategy matter without consulting with a qualified professional.
Wednesday, February 11, 2009
Q4 Earnings
Q4 earnings: they made me a pessimist
Econoday Short Take 2/11/09
By Mark Pender, Senior Writer, Econoday
The fourth-quarter earnings season is still dragging on as companies, not surprisingly, are in no hurry to post their results. With two-thirds of the season in the books, data courtesy of Thomson Reuters show year-on-year profit growth for the S&P 500 down just over 41 percent. The quarter began with high expectations but has slid day by day since.
The graph below tracks S&P 500 profits over the past seven years. Companies posted consistent and often very strong profit growth until third-quarter 2007, one quarter ahead of the recession. Profits (blue bars) have contracted every quarter since the third quarter of 2007 and look to continue to contract based on the outlooks for the first and second quarters (outlined bars at right of graph).
There are countless factors offered to explain the movement of the stock market, including financial factors, economic factors, and sometimes even astrological factors. One factor that does track convincingly with the stock market is change in corporate profits. The graph below combines the above graph with a graph of year-on-year change in the S&P 500 index. Only twice, at the pivot of the business cycle, did the direction of stock market change not match up with directional change for profits. The degree of the changes are also matching tightly at a decline of 40 percent for stocks in the fourth quarter against the latest count of a drop of 41 percent for profits and a decline of 24 percent for stocks in the third quarter against a drop of 19 percent in profits. So far in the first quarter, the S&P 500 is at a year-on-year decline of 44 percent, a bit ahead of the 29 percent drop in the outlook for profits — a mismatch that anticipates further contraction in profits.
The outlook matters
I keep telling myself that analyst outlooks matter. But each quarter, year after year, analysts over-estimate corporate results by a mile. In their defense, analysts base their estimates on the company's estimates. Either way, optimism is the system, the system by which company outlooks are offered to the public and priced into the stock market.
Going into the earning season at the beginning of the month, analysts expected virtually no change in profits — no change vs. the current decline of 41 percent. The quarter before, analysts expected virtually no change for third-quarter profits which ended up sinking 19 percent. Their performance is not improving.
Analysts' outlook for the first quarter, which had been up 30 percent at this time last quarter, currently calls for a 29 percent contraction followed by a 25 percent contraction in the second quarter. If the usual overstatement applies, actual contraction may prove much worse.
The government's tally of corporate profits is very slow with the latest data available only for the third quarter. The graph below compares changes in the S&P 500 index (red line) with changes in corporate profits (blue line). The blue line has already peaked, at an annual rate of just over $1.5 trillion in third-quarter 2007. Profits for the third quarter 2008 were $1.3 trillion — a level that is certain to fall.
Bottom Line
If the first-quarter earnings season proves as bad as the current season, this time next quarter the red bars and lines of the S&P 500 index will likely be pointing downward once again. Keeping track of company news and tracking earnings are central to the understanding of the financial markets and the outlook for the economy.
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Legal Notices © Copyright 2000 -
2009 Econoday, Inc.
Econoday Short Take 2/11/09
By Mark Pender, Senior Writer, Econoday
The fourth-quarter earnings season is still dragging on as companies, not surprisingly, are in no hurry to post their results. With two-thirds of the season in the books, data courtesy of Thomson Reuters show year-on-year profit growth for the S&P 500 down just over 41 percent. The quarter began with high expectations but has slid day by day since.
The graph below tracks S&P 500 profits over the past seven years. Companies posted consistent and often very strong profit growth until third-quarter 2007, one quarter ahead of the recession. Profits (blue bars) have contracted every quarter since the third quarter of 2007 and look to continue to contract based on the outlooks for the first and second quarters (outlined bars at right of graph).
There are countless factors offered to explain the movement of the stock market, including financial factors, economic factors, and sometimes even astrological factors. One factor that does track convincingly with the stock market is change in corporate profits. The graph below combines the above graph with a graph of year-on-year change in the S&P 500 index. Only twice, at the pivot of the business cycle, did the direction of stock market change not match up with directional change for profits. The degree of the changes are also matching tightly at a decline of 40 percent for stocks in the fourth quarter against the latest count of a drop of 41 percent for profits and a decline of 24 percent for stocks in the third quarter against a drop of 19 percent in profits. So far in the first quarter, the S&P 500 is at a year-on-year decline of 44 percent, a bit ahead of the 29 percent drop in the outlook for profits — a mismatch that anticipates further contraction in profits.
The outlook matters
I keep telling myself that analyst outlooks matter. But each quarter, year after year, analysts over-estimate corporate results by a mile. In their defense, analysts base their estimates on the company's estimates. Either way, optimism is the system, the system by which company outlooks are offered to the public and priced into the stock market.
Going into the earning season at the beginning of the month, analysts expected virtually no change in profits — no change vs. the current decline of 41 percent. The quarter before, analysts expected virtually no change for third-quarter profits which ended up sinking 19 percent. Their performance is not improving.
Analysts' outlook for the first quarter, which had been up 30 percent at this time last quarter, currently calls for a 29 percent contraction followed by a 25 percent contraction in the second quarter. If the usual overstatement applies, actual contraction may prove much worse.
The government's tally of corporate profits is very slow with the latest data available only for the third quarter. The graph below compares changes in the S&P 500 index (red line) with changes in corporate profits (blue line). The blue line has already peaked, at an annual rate of just over $1.5 trillion in third-quarter 2007. Profits for the third quarter 2008 were $1.3 trillion — a level that is certain to fall.
Bottom Line
If the first-quarter earnings season proves as bad as the current season, this time next quarter the red bars and lines of the S&P 500 index will likely be pointing downward once again. Keeping track of company news and tracking earnings are central to the understanding of the financial markets and the outlook for the economy.
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Legal Notices © Copyright 2000 -
2009 Econoday, Inc.
Friday, January 30, 2009
Market Reflections 1/29/2009
The White House warned Thursday to expect a "staggering" contraction for fourth-quarter GDP in data to be released Friday, news that didn't help any appetite for risk. Durable goods data for December in fact showed staggering losses as did new home sales. Weekly jobless claims continue to deteriorate pointing to another month of severe payroll contraction. All the day's news sent stocks, which had shown resistance to bad news over the last few sessions, down sharply with the Dow industrials losing 2.7 percent.
Earnings news was headed by a massive $5.9 billion loss for Ford and included big losses by big and small companies alike. Earnings have proven far worse than expectations, now at -35% year-on-year vs. expectations at the beginning of the month for barely a 1% decline (data provided by the courtesy of Thomson Reuters).
Money moved back into the safety of gold which gained $20 to end back over $900 at $909.80. All the bad news isn't hurting oil where talk of a strike at Shell refineries and heavy talk of OPEC cutback compliance are keeping prices over $40. However bad conditions are here talk is building that they may be worse in Europe where questions are now being asked over the future of the euro. The dollar gained more than 2 cents against the euro to end at $1.2950.
Money moved out of the Treasury market following a poorly received 5-year auction, a massive $30 billion auction that attracted limited interest and raises questions over how many buyers are left for the government's debt. The 3-month yield rose 4 basis points to 22 basis points with the 30-year up a very steep 22 basis points to 3.63 percent.
Earnings news was headed by a massive $5.9 billion loss for Ford and included big losses by big and small companies alike. Earnings have proven far worse than expectations, now at -35% year-on-year vs. expectations at the beginning of the month for barely a 1% decline (data provided by the courtesy of Thomson Reuters).
Money moved back into the safety of gold which gained $20 to end back over $900 at $909.80. All the bad news isn't hurting oil where talk of a strike at Shell refineries and heavy talk of OPEC cutback compliance are keeping prices over $40. However bad conditions are here talk is building that they may be worse in Europe where questions are now being asked over the future of the euro. The dollar gained more than 2 cents against the euro to end at $1.2950.
Money moved out of the Treasury market following a poorly received 5-year auction, a massive $30 billion auction that attracted limited interest and raises questions over how many buyers are left for the government's debt. The 3-month yield rose 4 basis points to 22 basis points with the 30-year up a very steep 22 basis points to 3.63 percent.
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