In last week's preview we took a peek at expectations for Campbell Soup earnings, but now the company is scheduled to report fiscal fourth quarter results this coming Thursday. With Krispy Kreme also among the handful of companies scheduled to report this week, we may yet see whether consumers are turning to comfort foods in these uncertain times.
Campbell Soup Co. (NYSE: CPB), the world's biggest soup maker, is still expected by analysts surveyed by Thomson Financial to post net income of 25 cents per share (up 44.0% from a year ago) on revenue of $1.7 billion (up 7.4%). The Camden, N.J.-based company has just missed earnings estimates in the past few quarters. Its long-term EPS growth forecast is 7.9%, which is less than the industry average, but about the same as rivals Kraft Foods (NYSE: KFT) and HJ Heinz (NYSE: HNZ). The analysts' consensus recommendation is currently to buy Campbell.
Hip, Canadian apparel retailer Lululemon Athletica Inc. (NASDAQ: LULU) is also anticipated to be a big earnings gainer when it reports this week. Net income is expected to come in at 13 cents per share (up 46.2% from a year ago) on revenue of $88.2 million (up 50.3%). Lululemon met expectations when it reported 12 cents per share in the previous quarter. Its long-term EPS growth forecast is a healthy 40.2%, which is better than the industry average and that of rival Under Armour Inc. (NYSE: UA). The analysts' consensus recommendation is currently to buy Lululemon.
This week BT PLC (formerly British Telecommunications PLC) (NYSE: BT) got lots of favorablecoverage for relenting on its plan to remove thousands of iconic red phone boxes. BT announced in June it wanted to replace about one-third of its remaining 12,000 red phone boxes. The company has slowly been dispatching the boxes for years, prompting small local protests all along and a big outcry this summer.
BT proposed a new deal: for £1 a town could keep the box, but with no working phone. A working phone would cost £500 ($900) a year. According to The Telecom, BT says £500 ($900) pounds is only half the annual cost of operating a red phone box. Really, $1,800 a year to maintain a pay phone? This July, residents in Cornwall were told their phone, which had been broken since June, wouldn't be fixed till late August. In protest, they strung up a bunch of tin cans on strings inside the booth.
VeriFone Holdings (NYSE: PAY) makes and services transaction automation systems that enable electronic payments between consumers, merchants and financial institutions. Products include point-of-sale software and terminals, smart card/check readers, receipt printers and Internet commerce software. The firm also makes gas station electronic payment systems that combine card processing and fuel dispensing. Further, it offers a range of client services and customized application development. About 60% of the firm's revenues are generated from customers outside the U.S.
The company pleased the Street last week, when it appointed an interim CFO to replace an officer who resigned following a probe into company accounting errors. VeriFone corrected its books the same day, by deleting $70 million in previously reported fiscal 2007 profits. Management also issued a favorable forecast, guiding Q308 EPS to 34-35 cents (28 cent consensus), Q3 revenues to $256-$258 million ($248.3M consensus), Q408 EPS to 36-39 cents (30 cent consensus), Q4 revenues to $260-$268 million ($255.2M consensus) and FY09 EPS to $1.35-$1.55 ($1.14 consensus). The CEO pointed out that the firm was seeing excellent growth internationally, particularly in emerging markets.
Today started out as though we were going to break the losing streak. After a mixed trading day we markets indeed ended up higher to gain ground rather than posting a third day of triple-digit losses. Oil started out higher this morning, getting back over $116 per barrel before coming back down slightly.
Hewlett-Packard Co. (NYSE: HPQ) came out with strong earnings last night and guided inline to higher without the EDS integration. Shares were up almost 6% at $46.29 at the end of the day. This name alone is probably responsible for more cheers than any today as 32 million shares changed hands.
My perennial near-hero Mark Cuban recently examined the issue of CEO pay, over on his handy soapbox, The Blog Maverick. In his blog post titled "My 2 Cents on CEO Pay," Mr. Cuban outlined his position on the subject and tossed some ideas around. The post makes a good read, and the author makes some good points. Additionally, the 65 or so comments by the readers are well worth the time to cruise them.
I'd like to discuss and expand upon an idea someone presented in addition to those discussed by Mark Cuban. It's actually a reverse scenario to what Mr. Cuban describes as moving chief executive officers into "the cash zone." In the Cuban scenario, the CEO would be paid cash, without additional compensation through stock grants, in order to make their pay more tangible and visible as a business expenditure. Mr. Cuban also asserts that this might more closely align CEO compensation with company performance. It's an admirable idea, but I doubt that it will ever happen.
In this alternate approach, we give the CEO all the stock certificates he or she can swallow. Then we provide an equal number to be divided among all other employees of the company. In this manner of compensation, all employees have their hands on the ball. The concept of laboring to line the pockets of someone else with gold would become extinct. The CEO would suddenly become a real person in the eyes of the rank-and-file laborers. Likewise, the labor force would be inextricably linked to the financial success of the CEO. If labor is to share the risk, they should also share the reward.
A further stop-gap to this scenario would be if upper management deemed that labor cuts were needed to create profitability, or for any reason other than "cause," they and the CEO would be required to surrender share holdings equal to the holdings of the displaced workers. These surrendered shares would then be distributed to the pink-slipped workforce members, with the company paying all applicable taxes on the transfer. Additionally, no party would be allowed to liquidate more than 5% of their holdings in any one year, as long as they were employed by the company, and upper management would be required to maintain holdings at least equal to those of the workforce.
I know it's a lofty scenario, but it sure would beat the heck out of what we have going on now.
No one much liked Mr. Bernanke's comments, which were read as saying the U.S. is on its way into a recession. Results from Best Buy NYSE: BBY) were better than expected, but the Fed news overshadowed it.
The Dow dropped 50.41 points to 12,603.95. The Nasdq sold off 1.35 to 2,361.40. The S&P gave back 2.78 to 1,367.4.
Notable today:
VeriFone Holdings Inc. (NYSE: PAY) was hit after overstated profits led to the resignation of CFO, Barry Zwarenstein, and removed CEO, Douglas Bergeron, from his place as Chairman today. The income was overstated by $36.9 million, much higher than the estimated $29.6 million in overstated income.
Constant Contact, Inc. (NASDAQ: CTCT) soared today after Intuit Marketing Tools Center chose Constant's email marketing service as one of its tools. Intuit's center provides marketing tools to small growing business.
Looking to get more information for investors about how companies calculate their executive pay packages, the SEC sent 350 letters to companies last summer asking them questions about how they paid executives.
But according to (subscription required) The Wall Street Journal, "A majority of the companies have now received second letters, according to an SEC official, and of 26 companies whose cases were closed, 21 were chided for not giving enough information about the role of individual performance in their pay decisions."
I certainly applaud the SEC for trying to get more meaningful disclosure for us but, sadly, none of it will matter unless big institutional shareholders decide to step up to the plate.
It's a pretty well-known fact that compensation consultants are a joke. It's hard to imagine any metric that gives CEOs raises and eight-figure paydays while their share prices tank and their companies bleed red ink. But that happens all the time.
More disclosure is great and should help to expose just how terrible compensation practices are at so many public companies. Maybe, just maybe, it will embarrass some companies into reforming how they calculate executive pay.
But with institutional investors and pension fund managers who, with notable exceptions, sit on their hands while executives like Angelo Mozilo reap hundreds of millions in compensation as their companies sink to the brink of bankruptcy, not much is going to change.
Dateline, January 3, 2007: Bob Nardelli steps down as CEO at Home Depot (NYSE: HD). In leaving, Nardelli, who had been at the head of Home Depot for six years, scooped up a severance package valued at about $210 million, kindly tipped his hat, and slid his resume across the desks of Chrysler. Does this make the man an opportunistic corporate blood sucker, an overcompensated leadership figurehead, or just plain shrewd? My answer to that question would be, none of the above.
When trying to judge the departure of Robert Nardelli relative to his compensation and performance, two things need to be considered right on the front end. First, our jealousy factor must be removed from the equation. Second, we need to remember that compensation packages at this level are negotiated on the front end. Bob Nardelli didn't "get away" with anything. He executed the terms of an employment contract, plain and simple. How many of the ambitious persons reading this blog wouldn't have done exactly the same when given the same circumstances?
Most of the negative sentiment surrounding Nardelli's well-heeled departure emanated from shareholders who were hurt by a slow yet significant decline in HD's share value. But the fact is that within the past four years of Nardelli's tenure, HD's shares provided more consistent performance than the four years prior. Granted, investor's haven't seen Home Depot shares approach the past high of nearly $70, but in light of today's economy they probably won't see anything like that in the near future, and that's certainly not Nardelli's fault.
MOST NOTEWORTHY: Oracle, VeriFone and Air France were today's noteworthy downgrades:
JMP Securities said checks indicate Oracle's (NASDAQ:ORCL) business is slowing along with enterprise software spending. The firm downgraded shares to Market Outperform from Strong Buy.
VeriFone (NYSE:PAY) was downgraded to Neutral from Buy at Merrill Lynch following its announcement it would restate 2007 financials due to errors.
Goldman lowered its rating on Air France (NYSE:AKH) to Neutral from Buy to reflect lower revenue and higher fuel cost assumptions.
Ouch. I hate it when stocks I hold lose half of their worth in one day. Thankfully, I don't own VeriFone (NYSE: PAY), but I used to own Israeli firm Lipman Electronic Engineering, back when I was at the hedge fund. It was a value play and it paid me handsomely.
I don't think VeriFone would say the same thing.
You see, VeriFone bought Lipman in 2006 and announced yesterday that it believes it overstated its profit for the first three quarters of this year by $30 million. To gauge how big a gaffe this really was, $30 million is equivalent to 80% of their total profit.
VeriFone Holdings (NYSE: PAY) is recently down $22.37 to $25.68 after announcing it will restate 1Q, 2Q and 3Q results related to in-transit inventory. PAY's technology enables electronic payment transactions and value-added services at the point of sale. Wachovia says, "we would be buyers into the weakness." PAY set a $200 million private placement of equity on Nov. 27; the sale was expected to close on December 11.
Dow Jones reported on November 30 that PAY's Chairman Douglas Bergeron sold 43,300 shares in four separate sale transactions on November 26, 2007. PAY option volume was heavy on November 29, with 6,505 contracts trading. PAY January option implied volatility of 96 is above its 6-month average of 41 according to Track Data, suggesting larger risk.
Daily Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
While women still earn a fraction of a man's wage in the United States, there is one niche where women are eking out an advantage -- and please check your stereotypes at the door. It's not fashion, or child care, or as spokespeople for psychic hotlines (though I think someone should look into that...). It's the boardroom.
Unbelievably, a report by Corporate Library that looked at pay data from more than 25,000 directors at 3,200+ companies found that women were paid more, on average, then men; $120,000 for women versus a median of $104,375 for men. Of course, given their much smaller numbers -- female directors are outnumbered by males, eight-to-one -- it's not exactly reason to take out our party hats, ladies.
The report doesn't theorize as to why, exactly, women are paid more. I wonder if it's due to the demand for a "product" in limited supply -- directors tend to be officers for other corporations, judges, or other highly-ranked folks. Far fewer of these are women. Hence, the women who are available to serve as directors must be paid more to lend their female presence.
Alternatively, it could be the simple fact that larger companies are more likely to desire diversity on their boards; and it is the larger companies who pay more. I wonder where newly-appointed News Corporation board member, 27-year-old Natalie Bancroft, fits on the director pay scale?
MOST NOTEWORTHY: Circuit City, Best Buy, COTT Corp and o2 Micro were today's noteworthy initiations:
Wachovia started shares of CircuitCity Stores Inc(NYSE: CC) with a Market Perform rating, citing low visibility into near-term fundamentals and low conviction in EPS.
The firm also started shares of Best Buy Incorporated(NYSE: BBY) with a Market Perform rating, citing low visibility into holiday sales and product margin trends and valuation.
Gabelli started COTT Corporation (NYSE: COT) with a Hold rating, as they believe the company's Q3 was disappointing. The firm thinks COTT lacks pricing power, and would look for margin improvement and successful non-carbonated soft drink penetration from the company before recommending the stock
Thomas Weisel started shares of o2 Micro International Limited (NASDAQ: OIIM) with an Overweight rating and $24 target. The firm believes the company is in good position to compete in the high growth markets of power management, advanced lighting and security and surveillance
As investors, corporate governance experts (What does that even mean?) and the SEC debate proposals that would give shareholders greater say over executive pay, there's compelling evidence that the time is right. First, chief executives themselves think they are heinously overpaid. If you need more evidence that CEO pay has gotten out of control, I'm not really sure what to tell you.
Anti good-governance zealots are decrying proposals to give shareholders greater say meddlesome, arguing that it could ruin companies' ability to attract good executives. Happily, The Financial Timessees through this nonsense: Even if chief executives' pay is entirely justified by the value they add, however, it still makes sense to give investors more influence over it. If the present stratospheric levels are needed to attract good CEOs then shareholders will pay up, but if high CEO pay is simply a function of executives' insider power then giving investors control will produce restraint. Either way, plans now afoot to let investors nominate directors are a good first step. They deserve support.
And that's exactly what this is about. Greater shareholder rights is always a good thing -- letting the people whose money is being sent have a greater say in how it's spent makes sense. It's a shame that we even have to have an argument about this.
In last week's preview we took a peek at expectations for Campbell Soup earnings, but now the company is scheduled to report fiscal fourth quarter results this coming Thursday. With Krispy Kreme also among the handful of companies scheduled to report this week, we may yet see whether consumers are turning to comfort foods in these uncertain times.
Today started out as though we were going to break the losing streak. After a mixed trading day we markets indeed ended up higher to gain ground rather than posting a third day of triple-digit losses. Oil started out higher this morning, getting back over $116 per barrel before coming back down slightly. 
Dateline, January 3, 2007: Bob Nardelli steps down as CEO at .gif){kind=logo}
Ouch. I hate it when stocks I hold lose half of their worth in one day. Thankfully, I don't own 
VeriFone Holdings
While women still earn a fraction of a man's wage in the United States, there is one niche where women are eking out an advantage -- and please check your stereotypes at the door. It's not fashion, or child care, or as spokespeople for psychic hotlines (though I think someone should look into that...). It's the boardroom..gif){kind=logo}
The week in preview: Chicken soup (or a doughnut) for the recession-weary soul?
Comfort Zone Investing: Oil's down, which is a start, but not good enough
Stocks have their worst week in six years
