Penske Transparency on Comparables?

Penske Automotive Group (PAG) reported results and disappointed investors. Margins are not in line with other publicly traded dealers. Some investors have a few more questions. We all know about the cash for clunkers program. What Penske is not doing is indicating what percentage of their revenues resulted from cash for clunkers. The numbers exist given the government mandated paperwork. This would provide true comparables as the cash for clunkers program will most likely not be repeated.

Also lets take a look at their floor financing and where it comes from. Given the instability of several traditional providers of floor financing what contingency plans is Penske making to ensure this strategically important financing continues under acceptable terms.

SAP -- Do They Understand Sales Cycles

SAP (SAP) reported decreased revenues and increased profits.

We are pleased to report another quarter of increasing margins despite a decline in revenues. This demonstrates our continued success in maintaining tight cost controls," said Werner Brandt, CFO of SAP. "While we are seeing signs of stabilization in the general environment, the market remains difficult. Third quarter software and software-related service revenues came in lower than we expected mainly because of a particularly challenging environment in the emerging markets and Japan."

So the CFO is admitting difficulty in hitting the numbers because of emerging markets and Japan. The sales cycle for SAP has a very long tail. You do not suddenly wake up and say lets install SAP. So what has happened with their customers and qualified prospects resulting in revenues sliding. At the same time they have the incredible foresight to reduce costs so as maintain profits.

Not exactly sure if management is really explaining the issues or just waving its hand over the globe and saying we have a problem overseas somewhere. If they understand the problem they are not discussing it publicly.

US Steel & Voluntary Payments for Health Care/Pensions

United States Steel (X) continued to lose money, disappointed the market and watched investors sell off its stock. This is despite a 42% increase in shipments. If shipments can go up so drastically this means there is no pricing power and you wonder if re-starting several idled facilities was the correct move.

In this confused outlook investors are noting a voluntary payment of approximately $150 million to knock down employee health care and pension benefits. That’s approximately $1 @ share. Pretty sporty of management to do that at this juncture. The question is why. By re-opening facilities have they made a side deal with unions? What would the real reason for a voluntary $150 million payment be?

McGraw-Hill Unanswered Questions

The McGraw-Hill (MHP) people reported more tales of woe. Here are a few items which management puts into the press release and then really fails to follow up with adequate explanation.

BusinessWeek as a brand has experienced approximately 28% declines in ad revenue. We all believe that Bloomberg took it off their hands. But no one is truly sure of the details. It was worth a billion dollars a few years ago. We are fairly certain that MHP is not declaring a capital gain. No info on possible ramifications in any fashion.

Under costs they put out this quote “we reduced total costs and expenses by 5.4% despite a $68 million increase in incentive compensation after substantial reductions in 2008” They really need to explain their compensation system. Who got the money and why?

Billionaire Madoff Investor Found Dead

New York Times is reporting that Jeffry Picower, a prominent philanthropist and one of the largest investors in the vast Ponzi scheme run by Bernard L. Madoff, was found dead in the pool at his Palm Beach, Fla., home on Sunday afternoon. Detectives remain on the scene. Mr Picower had a history of serious health issues. He also was in serious discussions with the trustee who is trying to recover Madoff money. Mr Picower supposedly took out $6 billion more than he put into Madoff investments.