BetterTrades Blog

The nation’s second largest bank, Bank of America Corp. (BAC), prior to the market’s opening bell, made it known that the financial institution posted a loss of more than $2B during the 3Q, as an influx in loan losses compounded the company’s dismal performance. The recent outcome was also affected deeply by a charge resulting from the termination of BAC’s loan provision with the U.S. government.

For the quarter, Bank of America recorded a net loss of $2,24B, or $0.26 per share, in sharp contrast to a profit of $704M, or $0.15 per share from a year ago. The loss was calculated after the company paid out $1.24B in preferred dividends. The company’s downfall was exacerbated by an increase in default loans, which amounted to $10B, up 10% from the 2Q.

In order to combat the bad loan problem, BAC added $2.1B into their reserves, bringing its total to $11.7B. Earnings were affected by a $2.6B pre-tax provision related to several liabilities, as well as a $402M charge for financial aid received from the Treasury Department.

Revenues, meanwhile, managed to increase year-over-year, climbing from $19.9B a year ago to $26.4B, a 32% jump from 2008’s results.

On average, analysts within the financial industry were looking for Bank of America to post a quarterly loss of $0.21 per share on total revenues of $27.61B.

Remarking on the company’s results was CEO and President of the bank, Ken Lewis, “Obviously, credit costs remain high, and that is our major financial challenge going forward. However, we are heartened by early positive signs, such as the leveling of delinquencies among our credit card customers.”

Peeking inside the overall picture, net income from overall deposits plunged 49% from last year’s results, falling to $798M. Bank of America also incurred a deeper loss within their Global Credit Card Services, from $167M to $1.04B, as many consumers throughout the U.S., Canada and Europe are finding it increasingly difficult to pay down credit card debt.

The company’s Home Loans and Insurance segment witnessed its losses widen as well, from $54M during the previous year’s 3Q to its recent loss of $1.63B. Global Banking saw net income of only $40M, an exponential decrease from last year’s tally of $1.02B.

Inside the company’s Global Markets unit, net earnings came in at $2.19B, a complete reversal of the prior year’s net loss of $588M. The surge in income was mainly generated from the addition of Merrill Lynch, as well as from a more favorable trading environment.

Bank of America’s Global Wealth and Investment Management unit saw net earnings increase from $80M a year ago to $271M, again, reflecting the addition of Merrill Lynch services.

Shares of BAC have traded within a wide range over the past year, reaching a high of $25.02 per share, while slipping as low as $2.53 per share. By the close of the October 16 trading session, the company’s stock price dipped more than 4.5%, losing $0.84 to conclude the week at $17.26 per share.

With consumers taking full advantage of the Cash for Clunkers program, vehicle retailers began to bolster their bottom-line as cars and trucks started peeling out of the sales lots. Reporting their company’s quarterly performance results before the opening bell on September 22 was car dealership chain CarMax Inc. (KMX), which saw 2Q earnings skyrocket over last year’s same quarter results.

With the government’s $3B in incentives for buyers to trade in their less-fuel efficient vehicles for a higher rated one, retailers like CarMax saw stellar quarterly results. For the recent period, CarMax recorded net income of $103M, or $0.46 per share, blowing away last year’s net earnings of $14M, or $0.06 per share, nearly 7.5x higher year-over-year.

The quarter surge was aided by a $0.10 gain from the CarMax Auto Finance arm (CAF), resulting in an increase in the fair value of retained subordinated bonds. The CAF arm reported net income of $72.1M, a total reverse of last year’s overall loss of $7.1M.

Additionally, overall revenues generated for the quarter climbed more than 13% year-over-year, from $1.84B to $2.08B. Same store sales, those open for at least one year, jumped more than 8% during the period as well.

Analysts, within the industry, were looking for the vehicle retailer to post a quarterly profit of $0.18 per share on overall revenues of $1.77B.

Tom Folliard, President and CEO at CarMax replied to the company’s earnings announcement, “We are pleased to report healthy increases in both used and wholesale vehicle unit sales. In part, the sales growth was the result of easier year-over-year comparisons. However, it also reflected improving customer traffic trends and an improvement in sales execution.”

Although used car sales did not qualify for the Cash for Clunkers program, CarMax did see an improvement in overall on-site tire kickers.

Folliard later commented, “While customer traffic in the second quarter remained slightly below the prior year level, it has steadily strengthened throughout the first half of the current fiscal year. The government’s CARS, or ‘cash for clunkers,’ program resulted in a spike in traffic in late July and August.”

Looking further into the company’s results, CarMax saw used car sales jump 9.6% during the quarter. With used car sales increasing, the bottom-line was influenced by a 5.6% increase in the average selling price.

Adversely, new car sales plunged 18.5% year-over-year, falling from $77.8M a year ago to $63.2M. However, wholesale vehicle sales for the quarter increased to $237M, up more than 6% from last year’s tally of $223.3M.

Contributing to the overall success incurred by CarMax during the period was an increase in gross profit per vehicle sold, which surged more than 13%, to average $2,120 per vehicle. CarMax also witnessed an increase in extended service plans, which jumped 25.7% over last year’s results, and service department sales inched higher, posting an increase of 1.2%.

Further adding to the company’s bottom-line was a decrease in overall expenses, which was reduced by 3.1% during the 2Q for a total of $218.1M. CarMax has focused considerably on the curtailing of expenses during the economic downturn, so much that the company has reduced costs by 9.4% through the first two quarters of the year. The expense cuts have helped the company save nearly $44M.

Through the first six months of CarMax’s fiscal 2009, the company posted net income of $131.7M, or $0.59 per share, compared to the same period a year ago when the company booked a profit of $43.6M, or $0.20 per share.

By the sound of the closing bell on September 22, shares of KMX surged nearly 10%, adding $1.87 to conclude trading at $21.20 per share. Prior to the close, the stock established a new 52-week trading high at $21.46 per share. The stock, over the past year, has also traded as low as $5.76 per share.

Operating as the nation’s largest electronics retailer, Best Buy Co. (BBY) made it known before the start of trading on September 15 that the company’s earnings during the 2Q plunged, and missed expectations. Despite the horrendous earnings report, Best Buy raised their earnings and sales guidance for the year.

For the current period, Best Buy reported net earnings of $158M, or $0.37 per share, in sharp contrast to last year’s income of $202M, or $0.48 per share, a decrease in profits of almost 22% year-over-year. Results were affected by an increased strength in the purchasing power of the U.S. Dollar, as well as higher expenses.

Quarterly revenues came in higher than in the previous year, advancing from $9.8B to $11.02B, an increase in sales of more than 12%. Best Buy attributes the higher quarterly sales figure to the addition of 170 stores during the period.

Meanwhile, same store sales declined nearly 4%, due in large part to an unfavorable currency exchange rate. Last year’s 2Q same-store sales advanced 4.2%.

Affecting the company’s bottom-line was an increase in selling, general and administrative expenses, which rocketed to nearly 22% of total revenues, or $2.4B. That compares to last year’s expense ratio of 20.8%, or $2.04B.

Within the industry, analysts were looking for the leading electronics retailer to record quarterly profits of $0.42 per share on overall sales of $10.79B.

Best Buy’s COO, Brian Dunn, commented on the company’s results, “I am pleased, but not surprised, with the market share gains we posted during the quarter. Our ability to capture a significant amount of market share in the period is directly correlated to the dedication and expertise of our employees around the world. We have great prices, great people, and great solutions, a combination that gives us confidence in our ability to deliver a better financial outcome for the year than we originally expected.”

Peering deeper into the company’s report, Best Buy revealed that domestic sales increased from $8.13B to $8.27B, an increase of nearly 2%. Gross profits slipped to 24.3% domestically, while same store sales around the county fell 3.1%.

Internationally, overall revenues surged during the quarter, increasing from $1.67B to $2.75B, a jump in sales of more than 64%. Sales were bolstered by Best Buy’s addition of 66 stores throughout the world. Gross profits advanced from the international markets to 24.5%. Contrary to the success within the international markets, same store sales globally plunge more than 8% during the quarter.

Through the first six months of the year, Best Buy generated net earnings of $311M, or $0.74 per share, in contrast to last year’s half-yearly profits of $381M, or $0.91 per share, a decrease in earnings of more than 18%.

Looking ahead, Best Buy is well aware that throughout the economic downturn, consumers have curtailed their spending habits on big-ticket items. Nevertheless, Best Buy has managed to increase their market share with the dissolving of long-time competitor Circuit City earlier this year.

However, the company is certain that spending will remain under pressure given the expected sentiment within the economy. With that said, Best Buy is looking to post annual earnings for fiscal 2010 between $2.70 and $3.00 per share, up from a previously stated range of $2.50 to $2.90 per share.

Annual revenues are expected to fall between $48B and $49B, also revised higher, from a range of $46.5B to $48.5B. Best Buy remains confident that same store sales for the year will range between flat and a decrease of 2%.

Analysts, on a yearly basis, are looking for the company to post earnings of $2.87 per share on total revenues of $47.8B.

Jim Muehlbauer, Best Buy’s Executive VP of Finance and CFO remarked on the company’s outlook, “Our revenue growth modestly exceeded our expectations for the first half and customer traffic patterns have started to indicate signs of stability. Given these improving trends and our expectations for the remainder of the year, we are both raising the bottom-end of our annual EPS guidance and improving our top-end expectations.”

Although the outlook for the company seems appealing, investors thought differently by the close of the September 15 session. By the sound of the closing bell, shares of BBY were down more than 5%, falling $2.09, to end the day at $38.32 per share.

During the past year, the company’s stock has traded within a wide range, reaching a low of $16.42 per share and highs of $45.00 per share.

Prior to the commencement of trading on September 17, one of the world’s largest package delivery companies, FedEx Corp. (FDX) announced that the company’s profits during the 1Q plummeted, a direct result of lower sales and lower fuel surcharges. Despite the dismal release, FedEx did manage to meet analysts’ earnings per share expectations, along with reaffirming their 2Q earnings forecast.

For the 1Q, FedEx posted net earnings of $181M, or $0.58 per share, in sharp contrast to last year’s net income of $384M, or $1.23 per share, a decrease in profits of nearly 53% year-over-year. FedEx’s earnings per share were recently upgraded by the company to an expected $0.58 just last week, up from a range of $0.30 to $0.45 per share.

Meanwhile, overall revenues for the quarter plunged as well, falling nearly 20% year-over-year, from $9.97B to $8.01B. Company officials remarked that overall sales and profits have continued to be affected by the global recession. However, in order to offset these negative impacts, FedEx benefited from more intense cost controls.

On average, analysts within the industry were looking for the world’s second largest delivery company to record a quarterly profit of $0.58 per share on total revenues of $8.24B.

FedEx Chairman, President and CEO Frederick W. Smith commented on the company’s performance, “Better-than-expected FedEx International Priority volume, decisive management actions and our dedicated team members helped drive financial performance above our initial expectations in the first quarter.”

Smith later added, “For more than a year, we have vigilantly managed costs without sacrificing service, invested wisely and minimized job losses so that FedEx will emerge a stronger, more profitable company as the global economic recovery takes hold.”

The company operated within four business segments, FedEx Express, FedEx Ground, FedEx Freight, and FedEx Services. Within their Express unit, FedEx reported revenues of $4.92B, down more than 23% from last year’s total of $6.42B. The company’s Ground segment posted a 2% drop in sales, falling from $1.76B to $1.73B.

The last two segments declined in revenues as well, as the Freight unit plunged 27%, slipping from $1.35B in sales during last year’s 1Q to $982M this year. Lastly, FedEx Services saw its revenues fall more than 12% year-over-year, from $513M a year ago to $451M.

Although FedEx’s 1Q report was disheartening, it did manage to come in better than the company’s 4Q results. During the preceding quarter, FedEx witnessed a net loss of $876M, or $2.82 per share, a much deeper loss than the 4Q of the previous year, which was a loss of $241M, or $0.78 per share. Revenues during the company’s 4Q declined 20% year-over-year to $7.85B.

Looking ahead to the 2Q, FedEx reiterated their projections in which earnings are expected to come in between $0.65 and $0.90 per share. Analysts, in the meantime, are looking for a 2Q profit of $0.83 per share, while expectations are ranging from $0.71 to $0.95 per share.

FedEx’s Executive VP and CFO, Alan Graf Jr., remarked on the company’s upcoming quarter, “While we see signs of improvement in the economy, the year-over-year comparisons will remain very difficult for our second quarter. We remain focused on managing our expenses and generating positive cash flow.”

Heading into the close of trading on September 17, shares of FDX remained in the red for the entire session, giving up $1.74, or 2.2%, to conclude the day at $76.46 per share. The company’s stock price slipped as low $75.55 during trading hours before rebounding marginally.

Over the past year, FedEx stock has traded within a wide range, reaching a high of $96.65 per share, last September, and falling to a low of $34.02 per share in early March of this year.

Despite consumers spending less on eating out, the nation’s largest grocery chain, Kroger Co. (KR) confirmed before the opening bell on September 15 that the company’s profits during the 2Q retreated, due in large part to price cuts in order to retain their current shoppers.

For the recent period, the Cincinnati-based retailer recorded net earnings of $254.4M, or $0.39 per share, in contrast to last year’s 2Q profits of $276.5M, or $0.42 per share, a decrease in net income of nearly 8% year-over-year. Although Kroger has attracted more frequent shoppers who are purchasing more, the customers are buying cheaper items.

Quarterly revenues were down year-over-year, falling from $18.1B to $17.7B, a drop in sales of 2.2%. These totals included the sales of fuel, which greatly affected the company’s overall performance, as the price of gas was much lower this year than was last year. Excluding the revenues generated from the sale of fuel, overall revenues for the quarter would have increased 3.5%.

Analysts, within the industry, were looking for the grocer to post quarterly earnings of $0.44 per share based on overall sales of $18.2B.

David B. Dillon, Kroger’s Chairman and CEO commented on the company’s results, “We remain confident in our strategy. The number of loyal households we serve and the number of items they are buying in our stores grew during the quarter. As a result, we experienced exceptional tonnage growth. Kroger’s customer-focused strategy is generating and will continue to generate long-term value for our shareholders.”

Dillon later added, “We remain on our plan. Our approach and the investments we are making continue to strengthen Kroger today and position us well for future growth. Our customers are increasingly turning to Kroger’s family of stores to meet even more of their everyday household needs.”

Through the first six months of the year, Kroger’s profits have increased, posting net earnings of $685.5M, or $1.05 per share, up from last year’s six-month tally of $662.5M, or $1.00 per share, an increase of almost 3.5%.

Sales, however, are down year-over-year for the comparable period, falling from $41.2B to $40.5B, nearly a 2% decline.

Inside the company’s balance sheet, net total debt for the quarter totaled $7.3B, down nearly $200M from last year. Meanwhile, overall capital investment tallied $518M, up from last year’s total of $461.1M. Kroger also spent $83.6M in order to purchase leased properties during the quarter.

Throughout the quarter, Kroger repurchased 2.8 million shares at an average price of $21.58 per share. The total purchase price for that investment amounted to $60.1M. By the end of the 2Q, there is more than $424M remaining in allocated capital under the $1B repurchase program announced back in January 2008.

Looking ahead to the remainder of the year, Kroger reaffirmed their projected sales growth at established stores to increase between 3% and 4%. Nevertheless, the company did lower their overall earnings guidance for the year, reducing their projected earnings per share from $2.00 to $2.05 per share, downwards to a range between $1.90 and $2.00 per share.

The reduction in guidance from Kroger reflects the company’s expected changes in consumer behavior for the remainder of the year, as the economic environment has taken its toll on consumer sentiment.

Following a dismal quarterly report, shares of Kroger plunged throughout the September 15 trading session, falling $1.65, or 7.5%, to conclude the day at $20.46 per share.

Over the past year, Kroger’s stock has traded within a relatively narrow range, reaching a high of $29.59 per share, while falling as low as $19.39 per share.

Preceding the opening bell on September 3, one of the nation’s leading manufactures and distributors of premium quality, nutritious food products, Del Monte Foods Co. (DLM) confirmed that the company’s profits from the 1Q came in higher than estimated, due to higher selling prices and lower cost expenditures. As a result, Del Monte upwardly adjusted their full-year guidance projections.

For the recent period, the company managed to generate a net profit of $58.6M, or $0.29 per share, a distinct opposite of last year’s quarterly loss of $10.1M, or $0.05 per share.

Revenues, in the meantime, advanced more than 12%, climbing from $726.2M a year ago to $813.7M. Net sales from the company’s consumer products jumped from $383.5M to $401.4M, an increase of nearly 5% year-over-year. Meanwhile, pet product sales advanced from $342.7M a year ago to $412.3M, a jump of more than 20%.

On average, analysts within the industry were looking for the maker of 9Lives cat food, Milk Bone dog treats and Del Monte canned foods to record a quarterly profit of $0.04 per share on overall revenues of $767.1M.

Richard Wolford, Chairman and CEO of Del Monte Foods, remarked on the company’s results, “These results reflect the successful execution of our Accelerated Growth Plan strategy, including fiscal 2009 pricing actions that recouped some of the inflationary cost-driven margin contraction experienced over the past few years, productivity initiatives to drive costs out of our business, and increased investment in our core brands and growth engines to drive margins and expand beyond our current categories.”

Del Monte’s bottom-line was bolstered by the company’s increased efforts to reduce costs. In doing so, DLM saw the cost of goods sold retreat from $566.8M to $553.8M, a decrease in expenditures of more than 2%.

The company also managed to reduce their selling, general and administrative (SG&A) costs from $146.1M to $139M, a drop of nearly 5% year-over-year.

The company’s 1Q results mark the fourth consecutive earnings surprise for Del Monte. In the previous three quarters, the company had topped estimates by an average 29.2%.

With the company’s earnings report simply crushing estimates for the period, Del Monte attuned their fiscal 2010 earnings forecast higher and is now predicting annual earnings to come in between $0.88 and $0.92 per share, up from a previously stated range of $0.76 to $0.80 per share.

Del Monte maintained their views on yearly sales, in which the company is looking for revenues to increase between 4% and 6% year-over-year, based on estimates that their consumer and pet businesses continue with their growth potential. Del Monte posted annual sales in fiscal 2009 of $3.63B.

By the end of 2010, analysts are projecting that Del Monte’s annual earnings come in at $0.80 per share with yearly sales totaling $3.79B.

With the September 3 trading session concluded, shares of DLM surged more than 7%, gaining $0.78, to finish the day at $11.15 per share. During the session, the company’s stock reached a price of $11.61 per share, establishing a new 52-week high. On the contrary, shares of Del Monte have also traded as low as $5.06 per share over the past year as well.