Friday, February 01, 2008

Oshkosh Trucks Maintains Positive Outlook. But...

Oshkosh (OSK) announced earnings and exceeded the Company’s most recent earnings estimate range for the first quarter of $0.35 - $0.40. Oshkosh also reaffirmed its estimate range for fiscal 2008 EPS of $4.15 - $4.35

Robert Bohn Chairman and CEO went on to say “...we are maintaining our positive outlook for the Company as we expect both top and bottom line growth to lead to an EPS range of $4.15 to $4.35 in fiscal 2008. This is an increase of between 16 and 22 percent over the prior year.”

So the man is bullish on the prospects for the coming year. He notes that fire departments are showing good interest in Pierce PUC pump technology but expects weaker municipal spending. Mobile medical trailer and broadcast vehicle are also weak.

Bohn concluded, “Oshkosh is meeting weak market conditions head on by investing in global initiatives to improve distribution in key international growth markets and reducing costs across all businesses. This permits us to maintain our positive outlook for fiscal 2008.

The problem with this statement is that the investor cannot easily follow or monitor performance on an international basis. All financial information in the press release is provided on the basis of operating lines. They do allow that they are turning European refuse operations around and expect to reach profitability in 2009.

When you claim to be expanding internationally you need to provide geographically segmented data. The occasional qualitative comment about US sales being off begs the international question.

Wednesday, January 30, 2008

Royal Caribbean Cruising For a Bruising!

Royal Caribbean Cruises (RCL) reported reduced earnings attributable to higher fuel costs. For 2008 they claim to be 52% hedged for Q1 and 45% hedged for the entire year. The company went to great lengths to state that they provide guidance with fuel priced at the current pump prices except where hedged.

The company needs to be increasingly viewed as an energy play and less as a consumer service stock. The cruises all sound luxurious but investors are getting hammered by energy costs. Management needs to better explain what they are doing in this cost category. One has to wonder if they have the corporate culture to deal with this complication. Cruise executives are usually experts in hospitality. Transportation executives have expertise in fuel cost management.

Second point: Capex is scheduled to be very high over the next few years. Read this quote from the press release

Based on current ship orders, projected capital expenditures for 2008, 2009, 2010, and 2011, are estimated to be $1.9 billion, $2.0 billion, $2.2 billion, and $1.0 billion, respectively. Projected capacity increases for the same four years are estimated at 5.1%, 9.3%, 11.4%, and 6.4%, respectively.”

Immediately preceding management said this:

As of December 31, 2007, liquidity was $1.4 billion, comprising $0.2 billion in cash and cash equivalents and $1.2 billion in available credit on the company's unsecured revolving credit facility.”

I am sure that marketing is very excited about the new product offerings. But finance is probably hiding under their desks.

How will the Capex be funded?

Tuesday, January 29, 2008

American Express Ignores Investment Account

American Express (AXP) announced what should be no surprise. Its card holders are falling behind in their payments to the point where American Express is starting to lose money. They claim that the losses are from every segment and not just from newer unseasoned cards. The press release and conference call went on at great length to discuss and review all the minutiae of running a charge card operation.

The press release embedded income statement abstracts but neglected to include balance sheet info. (Wonder why? Most folks include balance sheet stuff!) While most followers of American Express find the information provided useful let’s consider this. On the balance sheet they have approximately $16 Billion in long term investments. The entire category is 160% of the firm’s net worth.

In today’s traumatized financial market, asset quality is a prime consideration. American Express should have spent more time explaining where their financial assets are in addition to their portfolio of loans to card holders. Are they exposed to derivatives, sub prime problems or other difficulties?

The best that I can find is the following quote attributable to Daniel T. Henry - EVP and CFO

“Our investment optimization process positions us to identify opportunities to increase or decrease our business building investments quickly and thoughtfully. We have a strong planning and forecasting process which dynamically incorporates changes in the environmental conditions, and we remain focused on reengineering, which in recent years has yielded a far leaner expense base.”

Why can we not shine some light into all the cormners and just be safe?

Monday, January 28, 2008

infoUSA Telegraphs Results

infoUSA announced after market close on Friday that its Board of Directors has declared a dividend of $0.35 per share payable March 5, 2008 to shareholders of record Feb 18, 2008. It also announced that it would let you know what the profits are after market close on Jan 31 (Thursday) with the conference call scheduled after Market close on Feb 1 (Friday). Monday the stock is off about 3% in a down market.
The announcement is three weeks before the record date. Was management trying to embed the dividend value into the stock price?

How can investors fathom what is truly going on within the company. Dividends are payable from profits. By declaring a dividend one week before releasing the real numbers for the entire company you are sending messages into the market place.

So the question becomes: Is this a good dividend or a bad dividend? Also if the company adheres to a dividend payout ratio as a stated or implied policy has the company just tipped its hand and told everyone what is happening.

Dividends should be announced after earnings are reported. You can do it on the same day following the earnings release. But a week in advance! Who are we kidding?