Let's Review Some Earnings, and Add some Truth to "Earnings Labeling"

I don't own nor plan to own some of these (although I'd short a few if I could) but we have some names which are good tells on the economy or specific sectors reporting today. We discussed earlier this week what I'd be looking for here [Earnings Wed-Fri] One point before we go on about the "great news" so far in earnings

Intel... they cut their earnings guidance from 34 cents to 25 a month ago. They came in at 25 cents.. which would of been a HUGE miss if they had not warned a month earlier. Humans, with short memories, and lots of Kool Aid celebrated as if they hit a home run. Big deal. Much of their sales is now overseas by the way... no reflection on US economy.

IBM... decent company but its basically a services/outsourcing firm now with 65% of sales overseas. Not a reflection of US economy. Also, they had 11% sales growth... of that 7% is due to currency (i.e. WEAK DOLLAR). Meaning most of their sales growth is due to nothing but currency exchange. So my question is, what happens when the US dollar strengthens? They turn into a 4% growth company. But CNBC cheers.

I could go on and on - the only strength is US multinationals, many of which are relying on currency exchange to show "growth" (the same for Johnson and Johnson) - this does not help US workers, or US economy - it does help to prop up the stock price for those companies. So don't buy any of this "this is a sign of things are fine in the US". If people get their wish of a stronger dollar, I am really fearful because that would hurt the only things working (multinationals and commodities) - then where will we turn to invest? Oh yes... retailers, and financials. Great.

On to the circus....

Capital One Financial (COF) and Harley Davidson (HOG) I continue to believe are shorts on all pops - they are the exact type of companies who the coming consumer recession is going to hurt. So what did they say? COF is up 4% so far today because hey, financials are sexy again and "all the bad news is in the stock!" ;) earnings out after the close. HOG? It's still a pig... cutting jobs, slashing guidance, cutting production, etc etc. It's only going to get worse from here and a name I highlighted in Monday's piece 'Holy (Holey) Crocs!' as something I've been negative on since right near blog inception last summer. Remember folks - everytime someone tells you "stocks are cheap" they are basing it on a fiction of 2008 earnings. As these estimates get cut, cheap turns to expensive fast. For example Harley just got 20% more expensive in the last 24 hours.

• Harley-Davidson Inc. on Thursday said that it will cut motorcycle production and slash about 730 jobs as the sluggish U.S. economy slows demand for its iconic motorcycles.
• The Milwaukee-based motorcycle manufacturer also reported that it expects full-year per-share earnings to drop as much as 20 percent.
• U.S. retail sales of Harley-Davidson motorcycles were down 12.8 percent in the first quarter. Jim Ziemer, Harley-Davidson's CEO called the results "disappointing," but said that Harley-Davidson's U.S. dealers outperformed the heavyweight motorcycle industry, which was down 14 percent.
• About 370 hourly production workers and 360 non-production employees will lose their jobs over the next several months as a result, Ziemer said. (but I am sure they will find jobs at Walmart or Burger King and the unemployment rate will stay near 5% - they take huge pay cuts, and everyone assures us the US economy is fine, thank you very much)
• "The economic slowdown has affected Harley-Davidson along with many other businesses and sectors, and there's no sign of when things may turn around," CEO Jim Ziemer said in a conference call following the release. (what? everyone tells me "in 6 months" everything will be fine... strange)

Merrill Lynch (MER)? Hey only a $9 billion writeoff - that's GREAT news and things will turn the corner anytime now. This is only the 3rd kitchen sink quarter in a row. Eventually they will write off their whole business and by fourth quarter they will show huge gains by "write ups" - so basically most of their business now is accounting machinations. Excellent. We'll hear the same song and dance from Citigroup tomorrow AM. Here is the dirty secret on most financials - after the Fed is done destroying your buying power through printing of paper US pesos, they will live on, have their 1x big bounce after the "ultimate coast is clear", their CEOs will continue make massive amounts of money and bonuses for this "great performance", then most will be trading sideways for a long time, much like tech stocks did after the bust. Many will never regain old highs - because large parts of their business are either gone forever or for a long time. And if the government ever puts realistic capital ratios on them, their leverage will shrink even farther and their profitability will suffer even more. But on the plus side their CEOs, CFOs and the like will continue to rake in huge salaries, bonuses backstopped by your tax dollar - always a silver lining! But I eagerly await these financials to "bottom" for the 8th month in a row (CNBC telling me they already bottomed for 7 of those 8 months - eventually they are going to NAIL this call) By the way Merrill cutting 4k jobs - 4000 new service workers added to the economy - but again the important thing is the top 10 workers in Merrill get their bonuses! Keep focused on the prize. 4000 people is a small price to pay for huge bonuses for those who deserve them at the top :)

Marriot (MAR) I was curious to see what they had to say about the US market... oops. Once again great GLOBAL growth, helped by WEAK DOLLAR and putrid US growth. Notice a pattern? Again, pray the US dollar craters so that these companies continue to show great earnings (but the consumers of America will continue to pay higher prices through dollar destruction). Also a great quote "US is on sale" - like some streetwalker ... psst Mr Middle Eastern or Asian friend... want some shares of Lehman? Merrill? no? Citi? anything? please... buy something - we need capital! please... please.. we need you.

• Marriott continues to benefit from its global footprint, as revenue per available room (revpar) -- a key hotel operating metric -- outside North America rose 18.5% in the first quarter. The rise was 11.5% excluding currency benefits from the weak dollar. Worldwide revpar rose 6%, or 4.5% excluding currency benefits.
• "While performance at our U.S. hotels reflected slowing economic growth, few markets have witnessed discounting and full service room rates rose 4 percent during the quarter," CEO J.W. Marriott Jr. said in a statement. "With the U.S. on sale through a lower dollar, international guest arrivals are energizing demand in several key markets.

So here's my comment - I don't know the mix of sales between US rooms and non US rooms, but if I knew that we could do the math easily. If the rest of the world generated 18.5% growth, and your overall growth was only 6.5%, how bad was the US? Obviously to weigh down that 18.5% growth to such a large degree it had to be poor, but we don't know how poor without the actual sales mix. Summary: US stinks but hey Marriot is "cautiously optimistic". Aren't we all? ;)

Next! Nokia (NOK!) - OUCH. I wrote "chart action of late makes me worried" .... and boy, down 14% for this bellweather. Unfortunately Google has the same chart. Nokia has one problem. It is not located in the US. No, I am serious. If it was all its products would be priced in US pesos and they would of beat sales due to currency and the stock would be up 20% and the whole stock market would be up 50% since we could say, NO SLOWDOWN. US Pesos save the day! But unfortunately they are in that darn European region which has a strong currency and a central bank which actually fights inflation. Too bad for them. America wins again - I suggest all multinationals move HQ to USA, so you can take advantage of the US peso. This is our economic trojan horse - we will destroy all your multinationals one by one through our collapsing dollar. What's that? That hurts the people of the USA ? Nevermind that... details details. Corporations are what matters!

• Nokia reported a 25 percent jump in first-quarter earnings on new demand from emerging markets, but the world's top mobile phone maker missed expectations and gave a downbeat global forecast, sending its shares plunging.
• Revenue increased 28 percent to 12.6 billion euros ($20 billion), from 9.8 billion euros a year earlier, with strong growth of handsets sales in Asia, the Middle East, Africa and Latin America. (I don't see USA in there? Maybe in 6 months when the boom returns...)
• Even though the Finnish company said it expects the global mobile phone market to grow in volume by 10 percent in 2008, it said the market would lose value in euro terms compared with 2007 because of a weak U.S. dollar, an economic slowdown in the U.S, and possibly in Europe. (what slowdown? no slowdown here... move along... we're booming, rebate checks on the way!)
• "Like many European companies that sell abroad where goods are valued in dollars or currencies linked to the dollar, Nokia is suffering," said Pasi Vaisanen, an analyst at Glitnir Bank. "We've never seen it more clearly than now."
• "North America, which despite a slowdown still accounts for 16 percent of global handset demand, remains a serious problem-child for Nokia," said Neil Mawston of Strategy Analytics

In Steel we have Nucor (NUE) which was fine, but seriously all this fuss over 8% growth? And input costs skyrocketing. Hmmm... now this is a bull market folks, it guides down next quarter yet still the momentum lemmings take the stock up today. They won't give up. I continue to believe steel has some very sharp dangers but I continue to be alone :)

• Steelmaker Nucor Corp (NUE) reported higher first-quarter earnings on Thursday, beating Wall Street estimates, despite soaring raw material costs, especially for scrap metal.
• But its earnings forecast for the second quarter was lower than expected. Nucor shares fell in early trading but rebounded later and were up nearly 4 percent.

Last we have conglomerate United Technologies (UTX) which also did not get CNBC's memo, proclaiming everything is fine, the bottom is in, and in 6 months everything will be booming. Maybe Kool Aid is getting too expensive to Fedex due to fuel costs?

• United Technologies Corp (UTX) has seen signs of slowing U.S. and European economies in parts of its housing-related, refrigeration and fire and security businesses, an executive said on Thursday.
• "As we all would have expected, there are some signs of moderation in order rates in a few or our short-cycle businesses," said Gregory Hayes, vice president of accounting and finance on a conference call with analysts. "Where do we see the weaknesses? Well, the U.S. residential business continues to be a challenge."
• He continued, "As you see the U.S. and a few of these European economies slowing, we are taking costs out of the business."
• Growth in emerging markets remains strong, he said.

Again, the same themes ... over... and over... and over

Tonight? 2 huge momentum favorites - one fallen, one still going - Google (GOOG) and Intuitive Surgical (ISRG) - as I've been stating, charts don't give you 100% accuracy but if you trust the chart, Google is looking like a sick puppy. If it disappoints then we go back to last Friday when the world is ending... just opposite of yesterday's "bull market is back baby" thinking. This is why I continue to hide out in cash and a hedged portfolio - risk is too high either way to place bets. But... the companies are telling us the economy here is degrading. Doesn't matter as long as bulls cling to "everything is fine in 6 months" mantra. So we are in between denial and a hard place. Impossible to tell day to day which side of that we fall on.

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