Insiders' Blog

MGM Shares Rising as Adjusted Results Top the Street's Low Expectations Nov 5, 2009 12:14PM

Shares of MGM Mirage (NYSE: MGM) are up more than 2.5% today following the casino's Q3 results, reported this morning. The stock most recently traded at $9.65.

MGM reported a $750.4 million loss amid a write-down related to its CityCenter project. On a per share basis, the loss came out to $1.70. Excluding these charges, however, MGM reported breakeven earnings, actually coming in better than the $0.07 loss the Street had been looking for. Sales during the quarter fell 14% to $1.53 billion, also topping the analyst consensus.

On its conference call, MGM execs highlighted several factors which have recently been weighing on the casino operators stock:

• the company gained international and domestic high-end market share.
  
• gained share of the Vegas convention center. Similarly, business bookings during the quarter returned to "more normal levels". Convention bookings are expected to be even better next year. Further, MGM's CEO noted that convention cancellations slowed "dramatically" during Q3.
  
• called the CityCenter project "perfectly complimentary to its LV business".
  
• MGM is encouraged by improvements within Las Vegas last quarter, but "not out of the woods yet".
  
• "cautiously optimistic" on the Q4 and 2010 outlooks.
  
• seeing a "return to normalcy" on credit facilities and is "in good shape" on bank covenants.
  
• sees FY09 total Las Vegas visitation of about 35.4 million. Sees 2010 Vegas visitation rising 7% and room capacity rising 5%. Sees city-wide occupancy at about 80% next year, but above 90% at its resorts.
  
• MGM's bank lenders have "not fussed at all about us" now.
  
• the Macau IPO could happen as early as 2010. MGM said that it and its partners are "determined to take Macau public".
  
• has taken out $700 million in annual costs.

Responding to the quarterly results, analysts at Goldman Sachs attributed the strong quarter "significant upside at MGM Grand and Mirage". Goldman noted that MGM's seven other properties missed the firm's EBITDA guidance. The firm also pointed out that "while YoY change in Las Vegas RevPAR remains under extreme pressure (-23% in Q3), it was better than -31% in Q2 as room rates have modestly improved." Goldman maintains a Neutral rating and $8 price target on shares of MGM.

Early Retail Movers: PLCE, GPS, JWN, TJX Up; ARO, AEO, KSS, URBN, ANF, JCP, COST Down Nov 5, 2009 09:00AM

Early Retails Movers:

Higher:
Children's Place Retail (Nasdaq: PLCE) +4%, Gap Inc. (NYSE: GPS) +3%, Nordstrom Inc. (NYSE: JWN) +2%, TJX Companies, Inc. (NYSE: TJX) +1%.

Lower:
Aeropostale Inc. (NYSE: ARO) -10%, American Eagle Outfitters, Inc. (NYSE: AEO) -10% Kohl's Corp. (NYSE: KSS) -3%, Urban Outfitters Inc. (Nasdaq: URBN) -2%, Abercrombie & Fitch Co. (NYSE: ANF) -2% J. C. Penney (NYSE: JCP) -1.5%, Costco (Nasdaq: COST) 1-%.

Fed Sticks With Easy Money, Would Take Drastic Inflation or Growth To Force Their Hand Nov 4, 2009 05:03PM

The U.S. Federal Reserve has stuck to its commitment to keep the borrowing costs near zero for an "extended period."

The central bank expressed that the economic recovery was growing, despite its unanimous vote to keep the interest rates in a range of zero to 0.25 percent.

In a statement announcing the decision the Fed said it "continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period,"

Fed Chairman Ben Bernanke warned that the rising joblessness and scarce credit for many people and companies could hold back the recovery in the months ahead.

In an attempt the provide support for the mortgage lending and housing market, and to approve the conditions in the private credit market, the Fed will purchase about $175 billion of agency debt. This amount is below the maximum of $200 billion that it had planned to purchase.

Art Hogan, Jefferies Chief Market analyst for Jefferies told StreetInsider.com that the economy is on track to recovery with a 2.5 to 3 percent GDP growth in 2010. In the meantime he expects the value of the dollar to decrease, with commodity prices continuing to rise.

Hogan sees the Fed raising rates in the second-quarter of 2010.

"It will probably start off with a bang, with a move from 0.25 to 1 percent, and probably get to 2 or 2.5 percent by the end of the year (2010)," Hogan stated.

Hogan believes that the only ways that the rates could be raised sooner than the second quarter of 2010, would be drastic uptake in inflation or a dramatic growth in the economy.

Irish Banks Higher as Traders Applaud Bank of Ireland Results (IRE, AIB) Nov 4, 2009 02:43PM

Shares of Bank of Ireland (NYSE: IRE) are rallying sharply today following the bank's most recent results, reported early this morning. The stock is now trading around $10.59, up nearly 24% for the session.

The bank reported a pretax loss during the six months to Sept. 30 of €979 million, or $1.44 billion, which compares to a profit of €647 million in the same period last year. Moreover, Bank of Ireland recorded a bad-loan charge around €1.8 billion, up sharply from the €267 million reported in the first six months of 2008. Bank of Ireland attributed the massive charge to property prices which were cut in half and unemployment that more than doubled since last year.

Despite the large losses, traders are buying shares of Bank of Ireland today as the firm maintained its €6.9 billion loan loss estimate for the next three years through 2011.

Bullishness related to the Bank of Ireland numbers is causing investors to also bid-up shares of Allied Irish Banks (NYSE: AIB), the other major Irish bank. That bank's stock is now up 10% to around $5.12.

Cisco (CSCO) Looks To Connect With Investors In Q1 Nov 4, 2009 12:24PM

Cisco Systems (NASDAQ: CSCO) is trading slightly higher before the company reports their first quarter 2010 earnings results after the market closes today, November 4, 2009. The stock is up about $0.26, or 1.13%, to $23.18.

Cisco reported Q409 EPS of $0.31, topping the Street by 2c, and revs of $8.5 billion, missing just slightly. For Q109, Cisco posted an EPS of $0.42 and revs of $10.3 billion. It should be noted that Cisco expected to see Q4 sales down after they reported their Q309 earnings in May, 2009.

For Q110, Cisco is expected to post an EPS of $0.31 on revenues of $8.74 billion.

Cisco has been up about 4.4% since their fourth quarter earnings release and up about 43% since the onset of 2009. In comparison, the Technology sector has been up about 30% since the start of 2009.

Data from Bloomberg shows that 29 analysts have a Buy rating, 12 have a Hold, and 1 have a Sell rating on Cisco Systems. The analyst consensus price target is $25.83.

Wells Fargo maintains their Outperform rating and a price range of $26 - $28. The firm also sees revs of $8.75 billion and an EPS of $0.31. The firm believes that Cisco benefited from strong fiscal year-end spending as well as an improvement in global networking demand. Wells sees Q1 Q/Q strength driven by Cisco's Switching and Advanced Technology groups.

Wedbush Morgan raised their price target on Cisco to $25 from $22, maintaining a Neutral rating. Wedbush cites a firm product cycle in the carrier routing space and more aggressive sales and marketing.

Piper Jaffray also increase their price target to $27 from $25, reiterating their Overweight rating. The firm says that they believe the demand for networking gear has picked up more than Cisco's guidance offers. Piper states that the demand increase, along with modest inventory restocking and tight operating expense controls set the stage for better than expected results.

Auriga raised their price target to $23 and reiterated their Hold rating on Cisco. The firm says that fundamentals have bottomed and improvements have occurred in the service provider vertical.

Cisco was upgraded to Outperform from Market Perform at William Blair.

During the fourth quarter, Cisco had replaced GM on the symbolically important Dow Jones Industrial Average. The average tracks 30 industrial stocks and is a gauge of how the industrial sector is performing within the American economy.

Cisco Systems will issue its Q110 results via press release at approximately 4:00 PM (EDT) on November 4, 2009. Stay tuned to StreetInsider.com's Earnings section to see our analysis of the highly-anticipated quarterly results within seconds of their release.