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Wall St Looks to Earnings
Early fourth-quarter results will set the mood this week on Wall St, any weakness will give the market a reason to test the recent rally.
In New York the major indexes finished with a sixth straight week of gains: the Dow was up 0.8 percent, the S&P 500 up 1.1 percent and the Nasdaq composite index ahead 1.9 percent.
Alcoa Inc (NYSE:AA) will release results on Monday after the market's close and that launches the quarterly earnings season.
Intel Corp (NASDAQ:INTC) and JPMorgan Chase & Co (NYSE:JPM), also Dow components, will likewise issue their report cards in the week and are expected to do well.
The S&P 500 has climbed 7 percent since the start of December while Alcoa has soared 25 percent and JPMorgan has surged 16 percent. Analysts say that such rapid gains leave the market more vulnerable for a pullback and could limit upside potential.
The S&P 500 has struggled to break above 1,280, though a floor appeared to be developing around 1,260, the 14-day moving average and near the 2010 close.
Based on the rally and our own research Heffernan Capital Management have set a range of -8% on a bad earnings week, and + 5% on a good earnings week.
“Friday's December employment report only added to the importance of the earnings data coming this week. A mixed report did nothing to shift investor confidence, however it did raise sensitivity to any potential bad news”, Shayne Heffernan said today.
Next week will also see retail sales data on Friday, which will be closely watched following soft December comparable sales. On Wednesday the Federal Reserve will release the Beige Book.
The Beige Book, an anecdotal report on the economy by region, comes after Chairman Ben Bernanke gave his first congressional testimony since launching a second round of quantitative easing. Bernanke said that the economy may finally be hitting its stride even if growth remains too weak to put a real dent in the U.S. unemployment situation.
“Bullishness is approaching the high end of historic marks on many metrics such as investors surveys, net futures positions on big exchanges, and options Put/Call ratios” Paul Ebeling stated in his weekly report.
Bank stocks, and the White House face a challenge next week after a ruling by Massachusetts' highest court that invalidated the seizures of two homes in foreclosure by Wells Fargo & Co (NYSE:WFC) and US Bancorp (NYSE:USB).
Given the importance of AA, JPM and INTC lets take a closer look at these 3.
ALCOA INC.
Alcoa Inc. (Alcoa) is engaged in the production and management of primary aluminum,
fabricated aluminum, and alumina combined. The Company’s products are used worldwide in
aircraft, automobiles, commercial transportation, packaging, building and construction, oil and
gas, defense, and industrial applications.
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News from the company has been very positive Alcoa Inc plans to restart three idled aluminum smelters in the United States in the first half of 2011, raising its output in a bullish bet on the economy and to meet growing global demand.
The restarted facilities will increase Alcoa`s aluminum production by 137,000 metric tons over the course of 2011 and by 200,000 metric tons on an annual basis thereafter.
Once the plants fire up, Alcoa will still have 674,000 metric tons of idle capacity. The company was on course to produce more than 3.5 million metric tons of aluminum in 2010.
Aluminum prices increased 5 percent in the fourth quarter, and are now trading at a two-year peak of $2,500 per tonne.
Revenue
Periods 2009 2010
March 4147.0 4887.0
June 4244.0 5187.0
September 4615.0 5287.0
December 5433.0 ?????
Valuation Ratios
Company Industry Sector S&P 500
P/E Ratio (TTM) -- 24.87 27.62 18.05
P/E High - Last 5 Yrs. 40.32 33.82 148.16 49.79
P/E Low - Last 5 Yrs. 11.30 5.65 16.01 12.87
Beta 2.10 1.43 1.37 1.32
Price to Sales (TTM) 0.81 7.16 2.99 2.19
Price to Book (MRQ) 1.26 0.73 2.87 2.91
Price to Tangible Book (MRQ) 2.04 0.74 3.29 7.74
Price to Cash Flow (TTM) 12.94 23.54 27.50 11.07
Price to Free Cash Flow (TTM) 19.10 1.76 7.68 51.19
Consensus Estimates Analysis
Sales and Profit Figures in US Dollar (USD) Earnings and Dividend Figures in US Dollar (USD)
# of Estimates Mean High Low 1 Year
Ago
SALES (in millions) Quarter Ending Mar-11 5 5,947.63 6,662.53 5,379.00 5,696.00 Quarter Ending Jun-11 5 6,109.52 6,626.07 5,546.00 5,887.00 Year Ending Dec-11 12 23,730.90 26,644.00 21,453.60 22,149.60 Earnings (per share) Quarter Ending Mar-11 9 0.25 0.39 0.17 0.12 Quarter Ending Jun-11 9 0.29 0.44 0.20 0.17 Year Ending Dec-11 17 1.21 2.20 0.80 0.91
Historical Surprises
Sales and Profit Figures in US Dollar (USD) Earnings and Dividend Figures in US Dollar (USD)
Estimates vs Actual Estimate Actual Difference Surprise %
SALES (in millions) Quarter Ending Sep-10 4,960.04 5,287.00 326.96 6.59 Quarter Ending Jun-10 5,030.86 5,187.00 156.14 3.10 Quarter Ending Mar-10 5,207.39 4,887.00 320.39 6.15 Quarter Ending Dec-09 4,969.46 5,433.00 463.54 9.33 Quarter Ending Sep-09 4,550.88 4,615.00 64.12 1.41 Earnings (per share) Quarter Ending Sep-10 0.05 0.09 0.04 70.13 Quarter Ending Jun-10 0.11 0.13 0.02 13.44 Quarter Ending Mar-10 0.10 0.10 0.00 0.30 Quarter Ending Dec-09 0.06 0.01 0.05 83.66 Quarter Ending Sep-09 -0.09 0.04 0.13 -142.64
Consensus Estimates Trend is Moving Higher
Sales and Profit Figures in US Dollar (USD) Earnings and Dividend Figures in US Dollar (USD)
Current 1 Week
Ago
1 Month
Ago
2 Month
Ago
1 Year
Ago
SALES (in millions) Quarter Ending Mar-11 5,947.63 5,623.55 5,507.05 5,507.05 5,696.00 Quarter Ending Jun-11 6,109.52 5,798.77 5,766.57 5,766.57 5,887.00 Year Ending Dec-11 23,730.90 23,362.30 23,324.40 23,411.60 22,149.60 Earnings (per share) Quarter Ending Mar-11 0.25 0.22 0.21 0.20 0.12 Quarter Ending Jun-11 0.29 0.27 0.27 0.26 0.17 Quarter Ending Dec-11 1.21 1.18 1.17 1.12 0.91
Summary
Heffernan Capital Management expects Alcoa to beat the street again this quarter, starting earnings week well.
JPMORGAN CHASE & CO. (NYSE:JPM)
JPMorgan Chase & Co. (JPMorgan Chase), incorporated in 1968, is a financial holding company. JPMorgan Chase’s principal bank subsidiaries are JPMorgan Chase Bank, National Association (JPMorgan Chase Bank, N.A.), a national banking association with United States branches in 23 states, and Chase Bank USA, National Association (Chase Bank USA, N.A.), a national banking association that is the Firm’s credit card-issuing bank. JPMorgan Chase’s principal nonbank subsidiary is J.P. Morgan Securities Inc. (JPMorgan Securities), its United States investment banking firm. The bank and nonbank subsidiaries of JPMorgan Chase operate nationally, as well as through overseas branches and subsidiaries, representative offices and subsidiary foreign banks.
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Overall
Beta: 1.16
Market Cap (Mil.): $170,596.70
Shares Outstanding (Mil.): 3,909.18
Annual Dividend: 0.20
Yield (%): 0.46
Financials
JPM Industry Sector
P/E (TTM): 12.16 17.34 30.12
EPS (TTM): 199.73 -- --
ROI: -- 0.00 0.95
ROE: 8.94 5.73 6.32
Heffernan Capital Management see JPM undervalued at these levels, in news of late, the company is expanding fast in Asia and Europe that will add long term to profits.
JPMorgan Chase & Co., Morgan Stanley Receive Approval For Their Chinese Domestic
Securities Businesses-AP
Thursday, 6 Jan 2011 10:44pm EST
The Associated Press reported that two U.S. investment banks say they have been given the green light in China to operate domestic securities businesses with local partners. JP Morgan Chase & Co. said that the China Securities Regulatory Commission approved its joint venture with First Capital Securities Co. while Morgan Stanley said its partnership with Huaxin Securities Co. has also been approved. The joint ventures will be able to help local clients raise money by selling stocks and bonds on local Chinese markets. Foreign companies are keen to get into China's expanding domestic securities market. The local partners will have a two-thirds share in the ventures. Morgan Stanley previously had a stake in China's first investment bank, China International Capital Corp., but sold it last year.
JPMorgan Chase & Co. Acquires New European Investment Bank Headquarters In
London
Monday, 20 Dec 2010 03:00am EST
JPMorgan Chase & Co. announced major real estate investments in London, including the acquisition of 25 Bank Street in Canary Wharf, which will become the new European headquarters of its Investment Bank in 2012. The firm has also agreed to purchase 60 Victoria
Embankment, a London building that the firm has been leasing since 1991 and that currently accommodates the firm’s Treasury and Securities Services division. Terms were not disclosed.
Consensus Estimates Analysis are Rising
Sales and Profit Figures in US Dollar (USD) Earnings and Dividend Figures in US Dollar (USD)
# of Estimates Mean High Low 1 Year
Ago
SALES (in millions) Quarter Ending Mar-11 4 25,214.70 25,986.70 24,709.00 -- Quarter Ending Jun-11 4 25,028.20 25,801.00 24,224.90 -- Year Ending Dec-11 8 101,158.00 104,228.00 98,907.70 111,771.00 Earnings (per share) Quarter Ending Mar-11 15 1.06 1.23 0.89 1.10 Quarter Ending Jun-11 14 1.10 1.20 0.98 1.13 Year Ending Dec-11 26 4.59 5.00 4.09 5.02 LT Growth Rate (%) 5 8.00 10.00 6.00 10.80
Historical Surprises Have Been Positive
Sales and Profit Figures in US Dollar (USD) Earnings and Dividend Figures in US Dollar (USD)
Estimates vs Actual Estimate Actual Difference Surprise %
SALES (in millions) Quarter Ending Sep-10 24,757.00 24,335.00 421.96 1.70 Quarter Ending Jun-10 25,579.20 25,613.00 33.80 0.13 Quarter Ending Mar-10 26,210.60 28,172.00 1,961.43 7.48 Quarter Ending Dec-09 26,547.10 25,236.00 1,311.14 4.94 Quarter Ending Sep-09 25,125.20 28,780.00 3,654.83 14.55 Earnings (per share) Quarter Ending Sep-10 0.90 1.01 0.11 12.17 Quarter Ending Jun-10 0.71 1.09 0.38 54.11 Quarter Ending Mar-10 0.64 0.74 0.10 16.22 Quarter Ending Dec-09 0.61 0.74 0.13 21.81 Quarter Ending Sep-09 0.53 0.82 0.29 55.57
Consensus Estimates Trend is Growing
Sales and Profit Figures in US Dollar (USD) Earnings and Dividend Figures in US Dollar (USD)
Current 1 Week
Ago
1 Month
Ago
2 Month
Ago
1 Year
Ago
SALES (in millions) Quarter Ending Mar-11 25,214.70 24,957.30 24,801.00 24,801.00 -- Quarter Ending Jun-11 25,028.20 25,296.00 25,043.50 25,043.50 -- Year Ending Dec-11 101,158.00 101,370.00 101,690.00 101,690.00 111,771.00 Earnings (per share) Quarter Ending Mar-11 1.06 1.04 1.06 1.05 1.10 Quarter Ending Jun-11 1.10 1.10 1.10 1.08 1.13 Quarter Ending Dec-11 4.59 4.60 4.60 4.60 5.02
Valuation Ratios
Company Industry Sector S&P 500
P/E Ratio (TTM) 12.16 17.34 30.12 18.05
P/E High - Last 5 Yrs. 39.15 28.28 151.47 49.79
P/E Low - Last 5 Yrs. 10.07 9.89 115.48 12.87
Beta 1.16 1.25 1.20 1.32
Price to Sales (TTM) 1.71 3.53 6.31 2.19
Price to Book (MRQ) 1.03 1.11 1.41 2.91
Price to Tangible Book (MRQ) 1.54 1.39 1.66 7.74
Price to Cash Flow (TTM) 8.56 5.39 12.71 11.07
Price to Free Cash Flow (TTM) 44.01 1.46 6.61 51.19
% Owned Institutions -- -- -- --
Dividends
Company Industry Sector S&P 500
Dividend Yield 0.46 1.74 1.71 1.58
Dividend Yield - 5 Year Avg. 2.89 1.91 1.64 2.54
Dividend 5 Year Growth Rate -31.84 7.81 7.67 -7.72
Payout Ratio(TTM) 5.84 19.82 30.70 38.19
Growth Rates
Company Industry Sector S&P 500
Sales (MRQ) vs Qtr. 1 Yr. Ago -4.02 4.64 13.30 9.38
Sales (TTM) vs TTM 1 Yr. Ago -11.86 1.93 15.54 9.30
Sales - 5 Yr. Growth Rate 16.85 16.20 19.54 9.92
EPS (MRQ) vs Qtr. 1 Yr. Ago 26.71 517.10 315.81 4.78
EPS (TTM) vs TTM 1 Yr. Ago 199.73 -- -- --
EPS - 5 Yr. Growth Rate 8.72 5.79 10.65 6.68
Capital Spending - 5 Yr. Growth Rate -- 10.69 11.33 4.66
Intel Corp (NASDAQ:INTC)
Intel Corporation, incorporated in 1968, is a semiconductor chip maker, developing advanced integrated digital technology products, primarily integrated circuits, for industries, such as computing and communications. The Company designs and manufactures computing and communications components, such as microprocessors, chipsets, motherboards, and wireless and wired connectivity products, as well as platforms that incorporate these components. It operates in nine operating segments: PC Client Group, Data Center Group, Embedded and Communications Group, Digital Home Group, Ultra-Mobility Group, NAND Solutions Group, Wind River Software Group, Software and Services Group and Digital Health Group. During the fiscal year ended December 26, 2009 (fiscal 2009), it acquired Wind River Systems, Inc., a vendor of software for embedded devices. In May 2010, Micron Technology, Inc. acquired Numonyx B.V.
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Looking to the news for some guidance on how INTC will perform on the earnings stage this week we find that INTC is looking forward to a new round of revenue adding products as hardware makers scramble to deliver new Tablet PCs.
New Intel® Solid-State Drive 310 Series Offers Full SSD Performance in 1/8th the Size
Ultra-Small Intel SSD 310 Enables Dual-Drive Notebooks, Innovative Tablets or Rugged Embedded Applications
• New Intel SSD 310 Series delivers Intel X25-class performance, but in 1/8th the size. • Ultra-compact SSD enables the accelerated performance of an SSD with higher-capacity
HDDs for dual-drive notebooks. • Intel SSD 310 is ideal for tablets, rugged, low-power military or industrial embedded
apps, and was selected by DRS Technologies for its upcoming ARMOR™ tablet PC.
INTC has also been delivering new products across the spectrum and remains undervalued according to Heffenan Capital Management.
Overall
Beta: 1.12
Market Cap (Mil.): $115,241.50
Shares Outstanding (Mil.): 5,578.00
Annual Dividend: 0.72
Yield (%): 3.48
Financials
INTC.O Industry Sector
P/E (TTM): 11.12 3.82 24.63
EPS (TTM): 350.37 -- --
ROI: 22.24 1.40 12.79
ROE: 24.37 3.26 15.18
Historical Surprises have been Positive
Sales and Profit Figures in US Dollar (USD) Earnings and Dividend Figures in US Dollar (USD)
Estimates vs Actual Estimate Actual Difference Surprise %
SALES (in millions) Quarter Ending Sep-10 10,990.80 11,102.00 111.25 1.01 Quarter Ending Jun-10 10,249.20 10,765.00 515.77 5.03 Quarter Ending Mar-10 9,838.96 10,299.00 460.04 4.68 Quarter Ending Dec-09 10,161.70 10,569.00 407.32 4.01 Quarter Ending Sep-09 9,069.86 9,389.00 319.14 3.52 Earnings (per share) Quarter Ending Sep-10 0.50 0.52 0.02 4.54 Quarter Ending Jun-10 0.43 0.51 0.08 19.47 Quarter Ending Mar-10 0.38 0.43 0.05 13.19 Quarter Ending Dec-09 0.45 0.55 0.10 21.39 Quarter Ending Sep-09 0.28 0.33 0.05 17.40
Consensus Estimates Trend
Sales and Profit Figures in US Dollar (USD) Earnings and Dividend Figures in US Dollar (USD)
Current 1 Week
Ago
1 Month
Ago
2 Month
Ago
1 Year
Ago
SALES (in millions) Quarter Ending Mar-11 10,673.00 10,709.00 10,704.20 10,692.90 10,008.80 Quarter Ending Jun-11 10,620.70 10,604.70 10,599.20 10,582.70 9,869.94 Year Ending Dec-11 45,218.70 45,182.60 45,153.30 45,066.90 41,814.80 Earnings (per share) Quarter Ending Mar-11 0.44 0.44 0.44 0.44 0.38 Quarter Ending Jun-11 0.42 0.42 0.42 0.42 0.36 Quarter Ending Dec-11 1.95 1.95 1.94 1.93 1.66
Heffernan Capital Management believe INTC will deliver a great result this week
Valuation Ratios
Company Industry Sector S&P 500
P/E Ratio (TTM) 11.12 3.82 24.63 18.05
P/E High - Last 5 Yrs. 26.27 85.58 61.01 49.79
P/E Low - Last 5 Yrs. 15.40 9.29 11.84 12.87
Beta 1.12 1.36 1.05 1.32
Price to Sales (TTM) 2.70 0.41 2.85 2.19
Price to Book (MRQ) 2.42 1.50 3.76 2.91
Price to Tangible Book (MRQ) 2.72 1.30 4.53 7.74
Price to Cash Flow (TTM) 7.55 1.77 9.65 11.07
Price to Free Cash Flow (TTM) 17.12 3.15 16.40 51.19
Dividends
Company Industry Sector S&P 500
Dividend Yield 3.48 0.29 1.12 1.58
Dividend Yield - 5 Year Avg. 2.14 0.27 1.05 2.54
Dividend 5 Year Growth Rate 28.47 1.36 14.63 -7.72
Payout Ratio(TTM) 33.13 5.81 26.73 38.19
Growth Rates
Company Industry Sector S&P 500
Sales (MRQ) vs Qtr. 1 Yr. Ago 18.24 7.93 53.76 9.38
Sales (TTM) vs TTM 1 Yr. Ago 30.35 8.77 18.34 9.30
Sales - 5 Yr. Growth Rate 0.53 3.21 14.05 9.92
EPS (MRQ) vs Qtr. 1 Yr. Ago 57.04 -1,325.21 -280.34 4.78
EPS - 5 Yr. Growth Rate -7.73 -1.71 11.26 6.68
Capital Spending - 5 Yr. Growth Rate 3.28 -10.19 0.41 4.66
Financial Strength
Company Industry Sector S&P 500
Quick Ratio (MRQ) 2.95 0.55 1.14 0.65
Current Ratio (MRQ) 3.34 0.66 2.18 0.97
LT Debt to Equity (MRQ) 4.35 5.63 14.66 121.21
Total Debt to Equity (MRQ) 4.89 10.70 23.24 178.17
Interest Coverage (TTM) 498.14 2.80 1.46 16.23
Chutinush Taksinapinunt holds a Bachelor of Business Administration degree Majoring in Finance and Banking. Chutinush Taksinapinunt is an experienced Market Maker and Portfolio Manager having worked with some of Thailand’s largest Securities Companies and Financial Insitutions.
Heffernan Capital Management
Shayne Heffernan of Ebeling Heffernan www.ebeling-heffernan.com prepared this report, Mr
Heffernan holds a PhD in Economics serves as CEO of Heffernan Holdings www.heffernan-
inc.com and oversee’s trading at Heffernan Capital Management He is also Co Founder of
Ebeling Heffernan www.ebeling-heffernan.com the fastest growing Financial Services company
in ASEAN.
Corporate Services
Ebeling Heffernan www.ebeling-heffernan.com [email protected]
Funds Management
Heffernan Capital Management www.heffernan-inc.com [email protected]
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Bangkok
Suite 53 Athenee Tower 63 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 THAILAND
Tel: +66 2 126 8000 Fax: +66 2 126 8080
New York
347 5th Avenue, Suite 1402-508 Ny, NY 10016
Tel: +1 646-403-9881 Fax: +1 646-403-8014
Singapore
3 Raffles Place #07-01 Bharat Building Singapore 048617
Tel: +65 6329 6408Fax: +65 6329 9699
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