Thursday, February 12, 2009

Terex (TEX) Warns of Losses, Job Cuts, and Covenants; NetApp (NTAP) Reminds us "Tech is a Great Place" to Invest

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Speaking of earnings reports that speak to the true state of the economy... it looks like the Obamaconomy is coming too late for Terex (TEX). Last time we looked at it, it was a $50 stock that warned and fell 20% [Sep 4, 2008: Terex, IBM - Be Careful What you Wish For]

Terex (TEX) is not a company I follow that closely but have it out there with 1 eye as a "global construction" play. Down close to 20% today as the market takes another sacrifice. I think this will be a "preview" of what to expect in the coming 2 quarters from a litanty of multinationals now that we've achieved our goal of exporting our virus worldwide and causing the rest to slow ... (which again is "happily cheered" by the punditry since it means the US can lead the others out of the morasse - as if its that simple - we led them in, we'll lead them out - 1st grade logic)

Today? It's going to be a $14 stock that is falling 20%ish. (at least based on yesterday's after hours) Note to readers - it is never a good thing when you cannot even see the 200 day moving average on a multi month chart.

Terex Corporation manufactures capital equipment for construction, infrastructure, quarrying, mining, shipping, transportation, refining, and utility industries worldwide.

Outside the litany of typical bad news, there is the word that requires us to shout "Danger Will Robinson" - bank "covenants". Potentially broken covenants sing out "short me!" i.e. "when hedge funds attack".
  • Diversified manufacturer Terex Corp. said Wednesday it fell to a $421.5 million loss in the fourth quarter and said it has already cut or will cut more than 5,000 jobs, including the majority of its temporary work force.
  • Revenue dropped roughly 20 percent to $2.08 billion from $2.59 billion a year ago, as declining demand in the company's aerial work platforms, construction and materials processing businesses continued.
  • The company also provided a dismal revenue outlook for 2009. Terex expects declining demand and the negative effects of the stronger dollar to push 2009 sales down 30 percent to 35 percent compared with 2008, implying sales of $6.43 bilion to $6.92 billion.
  • "We are experiencing increasing levels of cancellations in our backlog for crane and mining products, as well as delays in acceptance of deliveries, as our customers in these areas are not immune to the effects of the global economic downturn," DeFeo said.
  • Terex declined to provide earnings guidance at this time, citing poor visibility.
No worries though, Baltic Dry Index surging and copper is up a bit - the CEO must not be seeing what the pundits are. No visibility? Cmon now - it's clear to the pundits we're on track for the 2nd half recovery. China and Obama will fix this. Ch-obama! they can fix anything.
  • The company, the world's third-largest maker of construction equipment, also said that it may likely violate a credit covenant as early as the end of the first quarter and said it could not "reasonably estimate" how much money it would make or lose in 2009.
  • "Despite the positive generation of cash during the fourth quarter, continued deteriorating business conditions...may likely cause the Company to be in violation of the consolidated fixed charge coverage ratio covenant under its credit agreement as early as the end of the first quarter of 2009," Terex said in its earnings report.
Ummm... Chobama? Please wave your magic wand(s) and make the economic cycle go away?

Here's the secret kids - the financials have shrunk to such a point they are barely going to impact S&P 500 earnings the next 2 years. We're losing energy this year. That leaves things that are tied to the economy. Yee haw... looking good on that front. My $45-$50 EPS target for 2009 S&P 500 might actually brand me a die hard Kool Aid drinker by the time we get to Dec 31, 2009.

Ah yes, let's not forget technology stocks (notice the NASDAQ running each and every day on "hope") because "they're safe!" and will lead the way to an economic rebound (starting July 1, 2009) I remember having this exact same sarcastic comments during summer 2008 as "tech was safe" then too. Or so the "price action" said.
  • NetApp Inc (NTAP), a data storage equipment maker, reported an almost 16 percent drop in quarterly revenue, missing Wall Street forecasts as customers cut spending, sending its shares down 8 percent. The company said it is cutting 540 workers, or about 6 percent of its 8,383 employees.
  • "Even backing out the accrual, it was a huge miss on the revenue line," Whitmore said. "It suggests that demand really deteriorated through the quarter and towards the end of the quarter."
  • Deutsche Bank analyst Chris Whitmore said the results suggest that other hardware makers, including International Business Machines Corp (IBM), EMC Corp (EMC), Hewlett-Packard Co (HPQ) and Dell Inc (DELL), may also face a tougher-than-expected 2009, especially because it comes on the heels of a disappointing earnings forecast from top networking equipment maker Cisco Systems Inc (CSCO). "This tells you that IT budgets and IT spending in 2009 got off on a wrong foot. I do think it has implications for most of the enterprise hardware names," Whitmore said.
  • "This macroeconomic situation is here to stay for a while and it's a lot worse than people thought it would be," Chief Financial Officer Steve Gomo said in an interview.
Not all people Mr. Gomo. Just Kool Aid drinkers.

No position; short thesis mongers

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