Updating the Earnings Picture

Those who have not yet drunken the Kool-Aid are watching with wry amusement the furious spin as earnings continue to come in mixed, with some surprising disappointments mixed in amongst the good profits. 

Last night, IBM (which I mentioned positively on CNBC yesterday) was the obvious winner, with good revenue and earnings growth, primarily as a result of their Software company acquisition spree.

Other companies are not showing good organic growth. There is quite a bit of finacial engineering going on. As their numbers mount, it becomes harder and harder to claim that all problems are company specific:

Yahoo:  hurt by slowing growth in its online advertising business — and competition with Google
Profits: They posted a nearly 40% drop in Q3 profits; net income dropped to $158.5 million (11 cents a share), down from $253.8 million (17 cents a share) a year earlier.
Guidance:  lowered sales projections for the fourth quarter
Financial Engineering: A $3 billion stock buy back was announced.
Special Notes: As we have previously warned, they were hit by changes in accounting for stock options

Intel:  The chip giant blamed a price war with AMD for its in line performance.
Profits: Q3 profit fell 35%
Guidance:  futures so bright we gotta wear shades
Financial Engineering: except for these guys: In September, Intel announced that it would lay off more than 10,000 employees.
Special Notes: This past Q saw Intel refresh its product line, announce lay off plans of more than 10 percent of its work force, and cut $5 billion in expenses.

Motorola:  Hurt by Weak Handset Sales; Revenue rose 17% to $10.6 billion from $9.05 billion — but fell short of Wall Street expectations.
Profits
: Q3 profit declines 45%,net income of $968 million, or 39 cents a share. That is down from $1.75 billion, or 69 cents a share
Guidance
:   Lowered guidance to a revenue range of $11.8 b – $12.1 b, from Wall Street’s forecast of $12.1 billion.
Financial Engineering
: nothing mentioned

JPMorgan: the firm weathered a difficult interest-rate and market environment, with a big iBank revs offsetting the decline in retail and credit-card services.
Profits: Q3 profit rose 30%, thanks to record breaking investment-banking fees. Net revs rose 8% to $15.40 billion
Guidance:  conf call started at 9am; Stock trading down $1.10
Financial Engineering: JPM completed the swap of its corp trust unit for Bank of NY’s retail banks, but the $3b deal didn’t close by Sept. 30. They did complete the $1.2 billion sale of its life insurance and annuity unit.
Special Notes:  JPM was exposed to troubled hedge-fund Amaranth as one of Amaranth’s clearing brokers

Novellus:  semiconductor equipment maker held expenses in check, improving its margins.
Profits
: Q3 profit nearly tripled, exceeding analysts’ expectations. Revenue soared 31% GuidanceUh-oh: Forecast that revenue for its current quarter
would come in below analysts’ average estimate, pressuring its shares
lower in evening trading.
Financial Engineering
: "Results for the latest period didn’t include any unusual items"

Its interesting to note that Financials and Services are doing much better than semi-conductors and tech hardware . . . . 

Category: Earnings

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