Earnings: Ford and AT&T

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So far, this earnings season has been mixed. Concerns have surfaced in the banking, retail, and restaurant sectors. The major concerns are weak sales numbers and short falls in top-line revenue. Companies have announced more layoffs and cost cutting measures to boost bottom line profits. On the other hand we have seen some better than expected technology driven sales and top-line revenues. It would seem that two things are occurring in the technology realms; first, is the B2B play in which many companies are updating and expanding into SaaS and Cloud/Big Data technologies. Second, is the low-cost end-user experience, in which monthly paid services are seeing growth. However, this disparity is not completely being resolved in the equity markets, simply because of the current Fed policy that continues to lift all boats and make treasuries unattractive.

Earnings: F & T

Courtesy of wikipedia

Ford (F) is the only automaker that is not in bed with the government. They managed to hunker down and work through the credit crisis and come out the other side stronger for it. They didn’t have their hat-in-hand asking for bailout money or help from the Nanny State. Ford has seen some strong growth in both domestic and international sales and in the last few years we have seen an attraction to the smaller, high-performance 5-door which was dominant in Europe (some help comes from their WRC success). Europe has remained a drag on Ford, but it IS improving. Revenue rose 12% to $36 billion and the company saw bottom line growth of 31 cents per share. While that is down 14% from a year ago, part of that came from charges for restructuring in Europe. Back that out and look at the pre-tax profit of $2.6 billion and that is a record third quarter for the company. The company is expected to exceed their full-year estimates. Ford has really become a global economic choice leader and much of that is reflective of them following the Japanese example of small, economical, efficient, and make them fast and sporty.

While the WRC is not closely followed in the U.S., it is followed around the world and has traditionally been a competitive platform for Subaru, Mitsubishi and other compact sports vehicles. Ford, following similar to their story when they went after Ferrari in the late 60′s early 70′s and dominated in the Lemans series, has steered their focus to the WRC (World Rally Championship) and have now dominated that series, proving once again that when Ford puts their efforts into racing – they can certainly dominate (winning back-to-back championships in 2006 and 2007). Part of the domestic boost in excitement was created when Ken Block hopped into the Ford Rally Car and produced some exciting videos that have gone viral. The old saying; “Race on Sunday, Sell on Monday!” has worked well for NASCAR. Adopting that strategy for the WRC has helped boost global sales. Sad for me, because I am a Subaru fan and seeing Ford’s domination had been a little crushing. Ford stock is up in the pre-market and their Focus and Fiesta models are still racing and selling well.

Fiesta S2000
Courtesy of the Qatar M-Sport team

Courtesy of wikipedia

AT&T (T) posted revenue slightly below expectations, but did see a rise of 2.2% on a year-over-year basis. The battle remains between #1 Verizon and #2 AT&T in the mobile space. AT&T is on track and beating their expectations on subscribers, but Verizon continues to dominate. While the revenue and bottom-line saw a net increase on a year-over-year basis, these two companies are not in the growth business, they are in the battle of fighting over EXISTING market share. Trying to attract subscribers over from their competitors and the constant stream of new phones means a combination of losing existing customers as they try to gain new customers. The only real answer to boost revenue is to raise prices, because these two companies are running at the very edge of maximum market penetration in this nation. It’s a game played in the margins and marketing. The stock is looking slightly weaker as the earnings came in a little lighter than expectations.

Support & Resistance

INDU 15,500
The market continues to consolidate in the 15,500 area and we could be setting up for a slight roll-over down to the 15,250 level, at least after we have finished climbing that wall of worry. Earnings have been mixed; not bad, and just not great. The concerns about economic growth remain.

NDX 3250+
The NDX is holding up well and we are seeing some good earnings both on sales and revenue. Apple was hoping to get a solid kick from their new iPad release and announcement, but now activist investor Carl Icahn has been bringing weight to bear on the company with his recent DEMAND that Apple commence an IMMEDIATE share buyback. We all know where Steve Jobs will tell him to stick it, the question now; does Tim Cook have the balls?

SPX 1700+
The SPX looks like we will see some contraction coming soon, perhaps today or tomorrow. There has been a few upside surprise earnings, but overall there remains a cloudy mood over the domestic economy and top-line revenues are not boosting enthusiasm. I would look at 1725 as the first support area and then 1700 on any pull back. VIX is holding in the 13 area.

RUT 1080+
The RUT has been the “Tell” for the entire equities market and certainly reflective of the money flow. The index has stalled and I think a pull back to the recent break-out area of 1080 is in the short-term card. The question on the pull-back is whether we get some support in the 1080 level. Continue to look towards the RUT as the general market equity indicator.

Double Dip?

The Weekly Jobless claims fell 12,000 to a seasonally adjusted 350,000, while the previous week was, of course, revised higher by 4,000. The Labor Department is also blaming some problems on a computer system and that California has been backlogged since September. So, pretty much the government is telling us that these numbers are bogus because the biggest state has not been able to get their numbers in correctly, so we really have NO idea what the real weekly claims look like. Of course the partial government shutdown pushed up claims in recent weeks as the government workers applied for benefits. Of course all those government furloughed workers received 100% back-pay, as expected, as that has been the case in every single government shutdown. However 10′s of thousands of them doubled dipped, as they claimed unemployment benefits during the shutdown and now have received back pay.

Story: Furloughed federal workers may double dip

Could this be a better than expected Christmas holiday at the tax-payer’s expense. Think of the 10′s of thousands of government workers that have been paid double in the month (back-pay and unemployment benefits). I am not sure how this will affect holiday sales, but it certainly won’t hurt.

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