Quarterly earnings calls are a great opportunity for investors to hear directly from the companies they've invested in and to get clarity from management when they answer questions posed by analysts. I listen to hundreds of calls every quarter, and I'm constantly surprised (and sometimes confused!) by the responses offered by management. This is the first in a series of occasional posts on some memorable quarterly earnings call moments.
Overstock.com (NASDAQ: OSTK). Chairman and CEO Patrick Byrne never ceases to . . . amaze me. While I sometimes come away from their quarterly call more perplexed than ever, Byrne's responses to questions certainly stand out. Here are some of the more memorable comments from their latest quarterly call, held on October 24, 2008.
While commenting on accounting errors that resulted in a financial restatement, Patrick Byrne explained it this way:
"We had been managing to a yardstick that turned out to have a bit of rubber in it at the end of the quarter."
Well, that certainly clarifies things!
Moving on to a conversation on EBITDA and Cap Ex, we hear that OSTK is:
". . . like the proverbial boa constrictor digesting a baby hippo. We ate the baby hippo about three years ago -- actually right now -- and it's moved its way through the boa constrictor."
As I waited for Bear Stearns Cos. (NYSE: BSC) conference call today, I could only shake my head in familiarity. I'm not the only one to see Lehman Brothers in 1998 all over again. Was it only a matter of time before the liquidity crisis hit? Bear Stearns has always been in the eye of the storm.
In the mind's eye of every young investment banker is an image of the people who work for various firms. Goldman Sachs' and Merrill Lynch's associates are stunningly beautiful and slim, the women are blondes with shiny hair and everyone wears French blue Egyptian cotton shirts. At Merrill Lynch and J.P. Morgan, it's all pinstripes and quiet good looks, confidence and understatement. At Lehman and Bear Stearns? Brash is the name of the game, and the young associates look like they're freshly showered after their championship wrestling match. You imagine that half of them are Army reservists, or maybe Navy Seals. Conservative? Only in the cost of their suits.
No, Bear Stearns brings "aggressive" to new heights, and certainly over the last few weeks its stakeholders are running scared. According to CEO Alan Schwartz in today's statements, the liquidity crunch was a phantom, "untrue rumors" that the company was undergoing a run on its assets scared lenders, and suddenly, no one would loan the investment bank overnight funds -- as Jim Cramer says succinctly, it's the "who is still stupid enough to have big trades" that put an institution at risk, fear. As Tom Taulli wrote, all the risk factors were suddenly triggered and Schwartz said those ugly words, "the liquidity position deteriorated," the words no one wanted to hear. Peter Cohan can't believe how quickly we've gone from liquidity concerns to a government bailout, and asks, "Why is the Fed getting involved instead of private investors? How bad is the problem really?"
Yahoo! Inc (NASDAQ: YHOO) Q4 and Full Year 2007 Earnings Conference Call Tuesday, January 29, 2008, 5:00 PM ET
Corporate Participants
Jerry Yang, CEO and Chief Yahoo! Susan Decker, President Blake Jorgensen, Chief Financial Officer
Management Summary
Operator
Good afternoon, ladies and gentlemen, and welcome to the Yahoo! Fourth Quarter 2007 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I'll now turn the call over to Ms. Marta Nichols. Ms. Nichols, you may begin.
Marta Nichols, Investor Relations
Thank you and good afternoon. Welcome to Yahoo!'s fourth quarter earnings conference call. On the call today are members of our executive team, Jerry Yang, Sue Decker and Blake Jorgensen.
Before we begin, I'd like to remind you that matters discussed on this call contain forward-looking statements that involve risks and uncertainties concerning Yahoo!'s expected financial performance, as well as Yahoo!'s strategic and operational plans. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties included among others, the implementation and results of the company's ongoing strategic initiatives, the company's ability to compete with new or existing competitors, reduction in spending by or loss of marketing services customers, the demand by customers for Yahoo!'s premium services, acceptance by users of new products and services and risks related to join ventures and the integration of acquisitions. Other potential factors that could affect the company's business and financial results are included in the company's annual and quarterly reports, which are on file with the SEC. All information discussed on this call is as of today, January 29th, 2008, and Yahoo! does not intend and undertakes no duty to update this information to reflect future events or circumstances.
On the call today, we will discuss some non-GAAP financial measures and talking about the company's performance including operating income before depreciation, amortization and stock-based compensation expense, which will be referred to as operating cash flow, revenue excluding traffic acquisition costs which will be referred to as revenue ex-TAC, free cash flow, non-GAAP net income, and not net income per share. Reconciliations of these non-GAAP measures to the GAAP measures that the company considers most comparable can also be found on our website under Investor Relations. Jerry, Sue and Blake have some prepared remarks; then we'll have a brief Q&A session.
Intel (NASDAQ: INTC) had a good quarter. The market did not agree. But operating income was up 105% to $3 billion on $10.7 billion in sales. Guidance for the current quarter was for revenue as high as $10 billion. Gross margins took a very big jump to 58%, indicating that a price war with Advanced Micro Devices (NYSE: AMD) may be behind the companies.
One of the things that management made clear on the earnings call (see the full transcript here) is that mobile chips are becoming a bigger portion of the company's business. That allows the firm to diversify away from PCs and servers and move into a fairly fast-growing part of the tech market. Sales of handset devices around the world are not showing any signs of slowing.
Management also pointed out that PC sales are expected to grow in the "low double digits" in 2008. From Intel's standpoint that is very good news. It is also an indication that its forecasts for 2008 are very conservative. If so, the sell-off in the company's stock may not have been justified.
The other critical point which management made is that the company is seeing rapid growth in emerging markets. Even if there is a slowdown in the US, this may well be offset by very strong results in Asia. Intel's sales in Europe were very strong in Q4. That could continue into next year.
A final note on the company's comments is that it sees itself being "on track to deliver that third billion dollars of overall structural and efficiency program spending" -- This is likely to allow the company to keep its gross margins close to 60%, and that is impressive.
This morning Deere & Co. (NYSE: DE) reported record earnings for its fiscal third quarter. The company had been expected to show earnings of $1.99 per share, but actually was able to come though with $2.37 a share during the quarter.
Much of this recent quarter's success was a result of strong international sales which helped offset lower sales in the United States. Shares of Deere have started off the day strongly, picking up 3.3% to climb to $120.92 up $3.83 a share.
The company is going to be hosting a conference call starting at 10:00 AM EDT to discuss the quarter in more detail, and we will be covering the call in its entirety. Be sure to refresh your page often as updates will coming often.
9:50 am - Getting ready for this mornings call to get started. We should be under way in about 10 more minutes. Stay tuned.
9:58 am - We should be getting started here in another couple minutes
10:01 am - getting started now, just going through the disclosure statements at this time
10:03 am - Going over quarter results now:
net sales and revenue rose 6% year over year
net sales rose 5%
income from continuing operations saw a 23% jump year over year
Cisco Systems (NASDAQ: CSCO) reported its fourth quarter earnings today after the market close. The company showed earnings during the quarter of 35 cents per share, and the actual earnings for the quarter came out to 36 cents a share excluding special items.
The company will host its quarterly conference 4:30 PM EDT, and we will be covering the entire call, so be sure to refresh your page frequently to make sure you catch all the updated action.
4:25 pm - We have about 5 more minutes before the call gets started. The stock is trading down 0.3% in after hours trading at this time. Stay tuned, we should be under way shortly.
4:29 pm - Just about to get started here... they are playing some easy listening Fleetwood Mac music for us here while we wait for the call to get started.
4:31 pm - getting started now, currently just going over the SEC rules for the call and earnings release
4:34 pm - call is going to be slightly longer today because we are going to look at 3 areas.... Q4 2007, Full year 2007, and next major shift we can expect to see for Cisco
4:36 pm - CEO John Chambers now taking over for his opening remarks. This was the strongest quarter they have seen in many years. Another record from a revenue GAAP and non GAAP income.
As we noted earlier, Starbucks Corp. (NASDAQ: SBUX) put up solid Q3 earnings this afternoon following the market close. The company matched analyst estimates with 21 cents per share, and boasted a 20% jump in net revenues.
The stock has moved strongly higher in after hours trading today. The stock is now trading up X% as investors react to this afternoons news. We are going to be covering this afternoon's call in its entirety, so be sure to refresh your page frequently to make sure you catch all the action of the call.
4:50 pm - tuned into the call and waiting for the action to get started. We should be under way here in about 10 minutes. SBUX is currently trading up 3.1% after hours, and about 15 minutes ago when I was watching the post market trading I saw it get up 6.0% higher at one point. 4:55 pm - About 5 more minutes to go before the call gets started. Tuned in now, listening to a little easy listening music and waiting... shouldn't be too much longer.
5:00 pm - Call getting under way now. Currently just going over the SEC regulations now
5:01 pm - CEO Jim Donald getting started now: Very pleased with this current quarter, and believes fundamentals still strong and looking forward
5:03 pm - opened 668 new stores in the quarter to take the total to 14,396 locations worldwide. Still see substantial oppurtunities for growth internationally
The coffee chain Starbucks Corp. (NASDAQ: SBUX) is going to be releasing its fiscal third quarter results tomorrow following the market close. When the company announces its results analysts are going to be looking to see earnings per share of $0.21.
The last time that the company released earnings was on May 3 when the company matched analyst estimates with 19 cents per share for its fiscal second quarter. In fact, the company has only been able to match estimates for the last 3 quarters in a row, perhaps tomorrow it will finally be able to show estimate beating results. Earlier this month CIBC World Markets analyst John S. Glass told his clients to expect the company to once again match estimates.
The stock could definitely use a good release. Shares have been falling pretty steadily since last November as you can see in the following chart:
As we noted earlier this morning, Archer-Daniels-Midland (NYSE: ADM) reported strong fiscal fourth quarter numbers this morning. The company showed ourth quarter income more than doubled from last year, and traders have been pushing the stock higher in early morning trading. As of 8:45 the stock is now trading up 4.0% in premarket trading.
We are going to be covering this morning's call in its entirety, so be sure to refresh your screen frequently as we will be updating this page regularly.
8:50 am - Getting ready for this mornings call to get under way.
8:55 am - About 5 more minutes and then we should be getting under way with this mornings call 9:01 am - getting under way now, just going through all the SEC regulatory comments now
9:03 am - Patricia Woertz, CEO , going over some full year numbers: 20% increase in yearly revenues, and 65% increase in yearly EPS
9:05 am - COmpany bought back 15.4 million shares of stock during the year
AES Corporation (NYSE: AES), the international power generator operator, reported results that did not surprise to the upside. The stock was down close to 2% in yesterday's trading and is down 13% for the month. Use this price weakness to get into this stock.
Free cash flow was $377M versus $309M prior to capital expenditure for new projects, up 22%. Revenue grew 11% which included 2% for positive currency impacts, or 9% adjusted revenue growth. The forecast free cash flow yield pre-growth cap-ex is currently 10% and is expected to rise to 15% in 2009 and 18% in 2011. This is the highest level in the Power group, according to Lehman Brothers.
In yesterday's conference call, most investors questions focused on its Latin American business, which appeared not to please investors. However, the global aspect of its business and the need for power generation in many of the world's emerging markets makes this a high quality stock to own.
I'd consider using June's price weakness to buy this stock.
National also announced a recapitalization in which the company will repurchase $2.4 billion in stock. Yesterday's announcement said the semi company will actually borrow money for the repurchase -- a big change for this industry which historically has avoided leverage.
Why the confidence? Brian Halla, National's CEO, said in last night's conference call that the recent semiconductor trough saw National's gross margins bottom at 59%. This is the second trough where National has been able to generate high margins and remain cash flow positive. Halla went as far to say that "smoother sailing is ahead". A bold statement for a highly cyclical industry.
Also, National is forecasting 1% to 4% revenue growth for the upcoming quarter which historically has been a down quarter. Higher-end value products which is leading to higher ASP and volume increases is driving the higher revenue, with billings up 16% and bookings up 33%.
ROIC was above 20% and National expressed confidence it can maintain this return level for both the short and longer term.
National is becoming a must own stock. Jump into this company, this could be the beginning of a big upswing.
Wednesday morning, before the market opens, Target Corp. (NYSE: TGT) will be releasing its first quarter 2007 numbers. Analysts are expecting that the company will be announcing earnings per share of $0.71.
Last week, Target's main competitor, Wal-Mart Stores (NYSE: WMT) reported Q1 earnings that failed to impress Wall Street and additionally was forced to lower its Q2 outlook. Both Wal-Mart and Target recently went through a very poor April sales month. When the company announced its weak April sales figures it did not offer any outlook on its current earnings, but did state that same store sales should come in as expected for the first quarter.
Will Target come through with strong earnings? We will just have to wait and see on Wednesday morning, but at this point analysts are betting that it will. Most of the losses the stock took following the weak April sales numbers has already been made up in the market, and out of the 23 analysts who follow the stock, 18 of these maintain a buy rating with the remaining five suggesting holds.
We will be liveblogging Target's investor conference call with up to the minute coverage of the call in its entirety. The call is scheduled to get underway Wednesday morning at 10:30 AM EDT. Be sure to visit us at that time for complete coverage.
Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor'sObserver.
Earnings continue going strong, and a host of important shareholder meetings also take place this week.
Monday May 7
SEC to hold Open Commission Meeting at 9am
McKesson Corporation (NYSE: MCK) to report Q4 earnings; conference call at 5pm. Analysts will concentrate on McKesson's pharmaceutical solutions revenue, new distribution clients/new business, new IT solutions introduced, labor/benefits costs, operating expenses, sector position by business line, and margins.
Electronic Arts Inc (NASDAQ: ERTS) to report Q4 earnings; conference call at 5pm. Investors will look for comments on how the company is integrating its game line-up onto the three new game systems -- PlayStation 3, Xbox 360 and Wii.
Ericsson (NASDAQ: ERIC) will hold a two-day capital markets meeting in Stockholm.
Thursday May 10
Viacom Inc (NYSE: VIA) to report Q1 earnings; conference call at 8:30am. In addition to motion picture results, analysts will focus on VIA's broadcast advertising revenue, and the company's efforts to broaden its relatively-tight-demogaphic cable television audience.
Google Inc (NASDAQ: GOOG) to hold a shareholder meeting at 5pm in Mountain View.
Friday May 11
American International Group (NYSE: AIG) to report Q1 earnings; conference call at 8:30am. Analysts will concentrate of AIG's overall premium growth for its property/casualty unit, along with improved cost controls company-wide -- a pivotal factor for a superior performance, moving forward.
Here is a quick review of Blockbuster Inc's (NYSE: BBI) press release from this morning, while I wait for the conference call to begin.
Blockbuster reported a loss of 26 cents a share, much worse then a consensus estimate loss of 15 cents a share. Revenue, however, outperformed the consensus, $1.47B to $1.36B. The company also announced this morning that it sold its U.K. specialty games retailer Games Station Limited to The Game Group for about $150 million in cash, with the majority of the proceeds going to pay down outstanding debt.
Remember to "Refresh" your web browser to ensure you're seeing real time updates. All times below are EST.
9:50am: Logging into the conference call now, although these never start on time, let alone early. Here comes fifteen minutes of listening to elevator music...
10:00: As a point of interest, I just looked at Blockbuster's stock, and it is trading down 40 cents to $5.81. Still waiting for the call to begin.
10:05: An operator just chimed in to let us know that the call would begin shortly, and then put us back on hold. Tease.
10:08: And here we go. The director of investor relations, Ms. Torres, is reading the standard legal mumbo-jumbo.
10:09: Larry Zine, CFO, gets handed off the call. He said increasing the subscriber growth is the key to the company's economic model. He is now going over the results -- $1.47B in revenue, rental revenues of $1.05B. Blockbuster Total Access offset slowing in-store rentals. The company met its aggressive online growth objective -- adding 800,000 online subs.
10:13: Zine continued, saying the rental industry remained under pressure, putting pressure on rental gross margin. Operating loss was 26 cents per share. The company announced the sale of Game Station, with a large amount of proceeds (about $150 million) going to pay off debt and strengthen the balance sheet. Reduced debt by $500 million since November 2005.
10:16: Zine summarized, saying they are taking the right steps to strengthen the company.
10:17: CEO John Antiocco got the mic. He said the company had 60% of the subscriber growth in the online space. Grew subscriber base by 35%. Nearly doubled online base in five months to 3 million. The company seems real focused on Total Access and the online market.
Quarterly earnings calls are a great opportunity for investors to hear directly from the companies they've invested in and to get clarity from management when they answer questions posed by analysts. I listen to hundreds of calls every quarter, and I'm constantly surprised (and sometimes confused!) by the responses offered by management. This is the first in a series of occasional posts on some memorable quarterly earnings call moments. 
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Before the bell: Wall Street headed higher; automakers, retailers in focus
Waiting for the other shoe to drop: The looming credit crisis
Bet on T&A with J&J (JNJ)
