Interview: RiverSource Investments---Joy, David---Equity Strategist
Interview: U.S. Treasury Secretary---Snow, John---Politician / Govt Official
>> sign timbing atlanta report being second quarter results 44 cents a share if you exclude items z beat what analysts were looking for by a penny. however, the sales coming in short. $495 million. analysts were looking closer to 511 million. keep in mind real key when you consider scientific atlanta. it is being bought by cisco systems. again, the company coming in n. ahead of expecttations on the profit front but short on the sales front. also after the bell today, earnings out from ranl us about. as for rambus, the company reporting nine cents a share if you include a pretax gain of 5.4 million dollars. analysts were looking for eight cents. as for the sales coming in at 41.6 million, just ahead bhaff analysts were looking for. they’ve been looking closer to $40.5 million. rambus, keep in mind, surged 91% over the past year. the company involved in several legal disputes having to do with patents, for example, it sued companies including sam sung as well as micron. as for the overall markets , stocks recovered today from a two-day decline. lifted to day by positive earnings frorts companies including pfizer and merrill lynch. we want to analyze these interesting market days with david roy from river source investments joining us with his earnings scorecard as well as his outlook for stocks in the days and weeks ahead. and, david, it’s nice to talk you to. we haven’t seen each other.
>> pleasure to be here.
>> i want to start off by asking you about this early start to the earnings season. because certainly it’s been very interesting. very big companies that are considered bellwethers coming out with reports that missed expectations. how significant is that in terms of the overall earnings earnings season?
>> we got off to a sluggish start. you start with alcoa then fell ps dodge. a few of those types of materials companies and industrial companies disappointed. and so there was this paul cast over the earnings season. then intel dispinted. but if you look at the reports so far and the aggregate, they’re really not that bad. they’re actually coming in pretty good. and i think when we step back and look at knit the aggregate, we’ll find that―it will turn out to a decent season.
>> so then you are adjusting your estimates at all given the rally we’ve seen so far, given the fact that we’ve had pretty mixed results out there so far?
>> we have not made any adjustments to our earnings expectations. but we have made adjustments to our economic expectations. and, in fact, a fairly significant adjustment. when i last spoke with you, we were of the view in the first half is going to be fairly soft, not bad. trend like growth. but soft compared to where we’ve been. we now think that we’re going to see very robust growth in the first half, maybe three quarters of the year followed by a much harder landing than what is widely anticipated.
>> why?
>> well, we think the fed is going to be forced to go further than what the market expects right now. the fed is getting no help from the long end of the yield curve. as a rument, we think activity is going to be up around 3.75%, maybe 4% the first half of the year. forcing the fed to maybe go as high as 5%.
>> in terms of not getting the help here, we have the 10-year and 2-year showing the same yields at 4.37%.
>> exactly. the fed’s raised rates 13, 14 time by the end of the month. and, yet, long-term rates are lower than before the fed started. so they’re going to have to go a little further, we think.
>> in that environment then, what do you think the single best investment decision is for someone who’s got fresh money at the start of 2006?
>> i think as a general statement, you want to be in large predictable stocks, large cap, steady sustainable earnings growers and maybe towards the growth side of the style spectrum. as far as sectors go, i think energy is still at the top of our list. we generally like the back end of the economy better than we like the consumer. i think when the slowdown occurs, it will fall most heavily on the consumer.
>> david, thanks so much. and a perfect setup for the next guest. now we’re about to speak with the treasury secretary. we’ll get a lot more on the economy right now. appreciate your time. as we do talk about the economy, we want to point out that housing starts fell to a nine-month low in december. joining us to talk about the economy is john snow live from washington. mr. secretary, thank you for your time today.
>> hey, thank you. glad to be on with you.
>> i would like to start off by asking your thoughts about oil. climbing back above $67 a barrel. taking some people by surprise in terms of the levels that we’ve seen. what kind of drag you are anticipating this could have on the economy?
>> well, it all depends on how long it lasts. these prices aren’t welcomed. they’re most unwelcomed. they act like attacks. and higher taxes don’t help the economy and higher energy prices hurt the economy. the effect here depends very much on whether this is a short term phenomenon or a longer term phenomenon. i certainly hope that we’ll see moderation and energy prices will come back down. so people don’t build these prices into their long-term calculations.
>> you say you hope. but my question is how realistic is that? we’ve been speaking to a lot of investors and energy analysts. one person i spoke with just a day or so ago said that he thought at these levels the iran situation is not even priced in. that if it deteriorates, what kind of fallout do you think we could see on oil prices?
>> well, clearly uncertainty in the middle east is a negative for energy prices. and as i’ve said, energy prices, rising energy prices create headwinds for the economy. the fact of the matter is nobody really knows, do they? where energy prices are going. but higher energy prices always invite supply side adjustments that are beneficial. and they invite demand side conservation adjustments. so there is a self-correcting mechanism here at work when energy prices spike up. but it’s―it’s unwelcomed and it causes short-term―short term headwinds for the economy. no doubt about that.
>> let’s talk about some of that fallout on consumers as well as corporations. some of the inflation numbers seem to indicate a lot of companies out there do not have pricing power at a time that they have higher costs because of the energy situations. are you concerned corporations basically are going to have a hard time boosting earnings because they’re not able to boost the prices?
>> well, remember, we start from a position here where profit margins are pretty good. and where corporate cash flows are good and corporate profittability is strong, is good. and that’s leading to very substantial corporate spending, corporate investment has been up now for the last 10 quarters. so, no, i don’t―i don’t think this is going to have a dramatic effect on profittability or on margins or on capital spending outlook. but clearly some firms, fimples that are energy intensive in their cost structures will be -- will be hit. and get much more than the median firm.
>> let’s talk overseas a little bit. last month you said you expected to see some precious of the chinese currency by march 1. is that still your target date?
>> we don’t have a precise date in mind. what we want to see is continuous movement that takes currency to a situation where they’re really being determined by market forces, by demand and supply. and we’re going to continue to urge our counterparts in china to do just that, to continue to move to greater flexibility. but we don’t have a precise target in mind.
>> given that you’ve not yet seen the move that you had been hoping for, based on everything you’ve said, what will it take for the u.s. to, in fact, say that china manipulates the currency, something thain vestors have been closely watching to see if the u.s. will say?
>> the treasury department will be issuing a report here later in the spring on that subject. and that report is very much factual based. it’s a look at what’s hatching. and it is pretty clear that the chinese need to move to greater flexibility for their sake and for the sake of the global economy. and failure on their part to do so will, obviously, influence the determination we make in that report for the congress.
>> mr. secretary, thank you for joining us.
>> hey, thank you. always good to be on with you.
>> we appreciate it. treasury secretary john snow joining us from washington. want to continue the conversation in a we were having, having to do with energy. a key factor for investors, some very interesting moves today. in fact, we have crude now at the highest price in four months. crude futures ending at $66.83. a gain of more than $1. heating oil and natural gas futures rallying to 2.5%. let’s bring in sue keenan. she’s back from a day at the i’m in ex-. she’s got the latest on the trade today. hi, sue.
>> the latest inventory report from the energy department shows there’s plenty of crude oil and gas yet the focus of investors is elsewhere to potential disruptions to exports from iran now developing a nuclear program and they’re also concerned about nigeria and rush yafmentman financial’s jim steel says the market is “incredibly tense because of the gee yow political situation.” french president shack chirac made hawkish statement that’s increases pressure and ray cosh on says it makes for a bullish scenario when you consider january is one of the warmest months on record. hurting demand for fuel.
>> very few people can sell this market in a economical way and given the very, very cold winter happening in russia right now that is curtailed not only crude exports from that country but also natural gas exports once again which we saw on the beginning of the year with ukraine. so tight market due to weather in europe and gee yow politically some tensions in many important oil producing regions.
>> and as far as inventories go, that was a big story today, many analyst echo the view of john killeda that report is bearish. the energy department saying there was almost three million barrel gain in stockpiles last week, a time when an analyst expected a decline. even so, he says that if these global conflicts continue, we could revisit the record priceded 70 a barrel oil last seen immediately after hurricane katrina. as you noted, we’re already seeing $67 a bare knell after hours traiting. zin deed. thanks so much for that. turn our attention right now to world and national news. the c.i.a. confirms that voice on an audio tape released today is in fact that of osama bin laden. so let’s bring in mark crumpton and get more details. mark?
>> on that tape which aired today on ijaz, bin laden―on al-jazeera bin laden calls for a long-term truce. however, bin laden also warns of more al qaeda attacks against the u.s. saying, “you’ll see them sooner rather than later as iraq isn’t the only battleground as you have seen with other recent attacks in european territory.” despite the latest threats from bin laden, the associated press reports that the department of homeland security says it has no plans to raise the national terror alert. the kidnappers of journalist jill carroll said they want the release of iraqi women and u.s. custody and iraqi officials says six detained iraqi women are scheduled for release bit u.s. military though they say it’s not connected to the kidnapping. vice president cheney says progress in iraq hasn’t come easy but he says it has been steady. the vice president told an audience here in new york that there is still hard work ahead because, in his words, “we’re dealing with enemies who have declared an intention to bring great harm to any nation that op
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Listen Market briefing --- Ellen (slow)
Nasdaq --- Robert (slow)
NYSE --- Deb (fast)
Interview: RBC Capital Markets---Sue, Mark---Analyst
>> i’m ellen braitman sitting in today for ben roethlisberger. you’re watching “bloomberg after the bell.” we will continue to follow technology earnings in the extended hours today. and the focus to day, motorola. if you own one of the razor cell phones, you’re not alone. in fact, the company may confirm sales of the hand sets topped 10 million units for the very first time. however, rival nokia still has the lions share of the hand set market . as for mote role yarks ended the day high bier 3.1%. bringing you the numbers as soon as they break oft bloomberg terminal. also ahead, i’ll speak with john snow live from washington. get his thoughts on the chinese currency. the rise in oil prices and host of other issues. first up, let’s get the settling numbers, see how the benchmark indexes are settling on the thursday session. the dow gaining 24 poipts. the s&p 500 rising shy of seven points. as for the nasdaq, the percentage gainer here with a gain right nouf 22 points. it is that nasdaq. it is chip stocks leading the rally today, leading the two day slide we saw for each of the bench marks. let he is focus in on the nasdaq with robert gray.
>> ellen, yes, the nasdaq moving higher in the session ending that two-day skid. the composite rising 1%. counter balances the 1% decline we saw yesterday for the composite. and tech stocks completely leading the way. i talked to the head of sales trading and cash is going to work in technology. he thinks the intel capital expenditure increase has helped chip morris, an integral capital partners saying there is a belief that companies will beat the forecast this year. not as much concern. lamb research though, it came out and beat and then the stock rose 14.5% in today’s session, beating on revenue and on the earnings per share. and rising on the forecast. several upgrades during the session. we saw the semiconductors rising more than 3%. really powering this―the rally we saw here today on ebay. ebay shares rising 5%. ebay had fall smen 5.5% through last night. but actually turned around and rose in today’s session. and right now we’re going stoned it back to he willen in the studio.
>> i’m going to take it, robert. we have the motorola earnings crossing as we spefment let’s start off with the fourth quarter results. 47 cents a share. if you exclude items, the company coming in with 35 cents a share. a penny better than expectations. however, take a look at that sales number. 10.4 million dollars for the company’s fourth quarter. that is shy on average analysts had been looking for $10.5 billion. the company giving a forecast for the first quarter. and it does say it sees first quarter profit if you exclude items at 27 to 29 cents a share. i want to check on the bloomberg terminal. analyst estimates currently, if i can bring it up, for what the company analysts are expecting on motorola for that first quarterment on average, they’re looking for 28 cents. so, again, you got motorola over that first quarter forecast of 27 to 29 cents a share. analyst at that midpoint, 28 cents a share. as for the gross margin, 3.29 billion for the fourth quarter. and the company saying, again, fourth quarter profit from continuing operations, if you exclude items, 35 cents a share. that is ahead. but the sales were short. keep in mind, as for motorola, the shares themselves, they have been surging up 50% over the past 12 months. nokia, which reports next week up 30% over the same period of time. as for motorola, it is the razor phone that is helping the company. and the chief executive ed zander revived the reputation as a hip designer since the model’s introduction in late 200 4. the company also being held by sales. and here’s analysts think, 27 buys, 11 holds. a lot of optimism that company will continue to grow as for the stock price. gartner estimating mote rolea schaeffer the hand set market rose to 18.8% from 13.5%. the fourth quarter revenue coming in at $4.4 billion. but earnings per share when you sclu certain items that beat analyst estimate business one penny. so we’ll continue to analyze motorola throughout the afternoon. want to turn back to the stock market today. robert was bringing us that update from the nasdaq. a lot of activity as well over at the big board. let’s check in with deborah kostroun over at the new york stock exchange.
>> tharbgs people are focusing on the better than expected earnings. a lot of dividends were anounsd. people looking at that as well n terms of the semiconductors, we did see a rebound in technology and a.m.d. really kind of a big part of that. and what a.m.d. said eased a lot of investor concern. we’re wondering how things were going. concerning what we heard from intel, yahoo and the other tech companies. fairchild semiconductor, pretty good earnings. more records today. the oil services index, s&p 500 index, russell 2,000, small caps, all beating records in today’s session. bank of america raising the oil service company target for 2007. so raising the estimates. and that lead manufacture the oil service stocks to some records. schlumberger had a record. they release earnings tomorrow. a day ahead of that, they announce a two-point stock split. also, remember gold? we talked about it yesterday. it tumbled $10. it rebounded heavily. that helping out gold stocks. down to $141. seen as a safe haven given from that tape we heard from a man that was supposedly bin laden talking about more al qaeda attacks. you did see a flight to safety on gofmente gold rising to the highest closing price in 25 years. another record today, merrill lynch, fourth quarter profit, doing better than expected. they increase the quarterly dividend to 25 cents from 20 cents per share. lehman brothers raising the dividend. and announcing plans to buy back 7.4 billion dollars of their shares. that is up to about 40 million shares. what cove yarks it was lower along with the other banks. what cove yarks fourth biggest bank actually saying that quarterly profit rose 18% to a record. that was on increased lending and also investment banking fees. ellen, back to you in the studio.
>> deb, thanks so much. and with that update of today, we want to continue now back to that after the bell news having to do with motorola. want to analyze this report with mark su. mark is joining us by telephone. mark, thank you for taking time today.
>> good afternoon. at first blush, what is your reaction? you have the shares down 5.7%. so investors don’t like the report.
>> i think recognize thagget stock was up 4% ahead of the numbers, we both were actually solid. and we think the numbers point to motorola’s strong rebound product portfolio. however, it wasn’t a blowout quarter. and the numbers were basically in line at the top line. and in term of the units, i think they shift about 44.7 million hand sets. and we were high and expecting a little bit better at 45.5 million units over the quarter.
>> so if you were looking for more than how disappointed, how disappointed are you on that particular point. that is an important one, how many phones they’re selling.
>> that’s correct. if it was a demand problem, it is something to be worried b however, we think it is more related to tightness across the supply chain. they did have components issues and some of the popular phones they couldn’t make fast enough. so we’re less worried about demand and more concerned about whether they can improve the component availability and get the phones out there. also it is important to know that they did make steady improvements with the upward margin line. and i think that should be able to help them with the earnings growth which should outpace revenue growth.
>> i also want to ask you about market share. one thing that motorola is saying in the earnings release today is that global mobile device market shares estimated at 19%, up 3.1% compared with a year ago. how does that strike you?
>> i think it’s related to most of the revamped product portfolio, particularly the razor. i think a unit for that particular phone is very healthy. they made quite a bit of gains in north america. and also in parts of asia and europe. we’ll hear the datea from nokia laterment so far, they’re making great progress.
>> let’s talk more about the stock. you were talking a little bit about the stock going noolt earnings report. but the real issue seems to be the shares really have been surging, up 50% basically in to today’s close over the past year. a lot of optimism having been built into the share. so where do you see the stock headed from here?
>> i think when we look at motorola, and it has been the top performing stock for us in our wireless portfolio last year, i think it will make steady improvement this is year and most of it is that they’re improving their financial model. whether or not they can continue to gain market share, we think the raste share gains will slow in 2006. but from the turning point, we have a $26 price target on mote role yafment
>> and hold until then
>> that’s correct. we’ll leave it. there thank you so much for joining us. mark sue over at r.b.c. capital markets joining us today as we analyze that earnings report out from motorola. we’ll take a quick break. whether we come back, the latest on the economy. we’ll be joined by u.s. treasury secretary john snow and get his thoughts on the chinese currency and the energy markets . crude oil prices are above $66. what does that mean for economic growth? a lot to discuss. you’re watching “bloomberg after the bell.”
