AT&T vs. U.S. Government. And President Trump; Turkeys: CBS and Dish Networks Can’t Work Things Out; Lowe’s and Behold! It’s Earnings Win

Trump’d up suit?

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Dontcha just love a good fight? Today’s nasty dispute is brought to us by the U.S. government and AT&T. Not sure who my money’s on yet. You see, the government isn’t down with AT&T’s proposed $85 billion vertical merger with Time Warner. So it went ahead and did the most “American” thing possible: It sued AT&T to block the merger. Knowing that the U.S. government was going to be pesky about the merger, AT&T did what any smart company would do: It pre-emptively retained counsel. And AT&T went for the big guns hiring Dan Petrocelli. You remember him, dontcha? Or maybe you’re just trying to forget? He’s the dude that very shrewdly defended President Trump over lawsuits relating to the infamous Trump University real estate seminars. Oh, the irony. Trump hates the very thought of the merger and that may have something to do with his feud with CNN, which, incidentally, is owned by Time Warner. Petrocelli, who seems to have forgotten all about his Trump days, is arguing that not only does this lawsuit not pose a threat to industry competition, but the merger actually has the potential to lower cable bills. However, I have a hard time believing a cable carrier would willingly lower bills. As for investors, they seem to be on Team AT&T and believe the telecommunications giant will emerge victorious, especially because the last time the government was successful against a vertical merger, Nixon was president. Yikes!

Whose the turkey now?

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OMG! It’s football season and Dish Networks did the unthinkable – to football fans, anyway – and dropped CBS in some markets. “Some markets” includes over 3 million customers in 18 cities who will be feeling the effects of tryptophan sans quality NFL time if a deal is not reached by kickoff time. As if blocking football games isn’t bad enough, some viewers will even be getting deprived of “The Big Bang Theory” which is just so not cool. The issue, of course, is fees. Because it always is. Dish isn’t happy about CBS’s demands for higher fees, especially since Dish viewership is down (note: Google streaming on-demand video). Dish also insists that viewers are watching less CBS and feels that CBS ought to show a little more restraint in its fee demands. CBS, on the other hand, is accusing Dish of punishing its viewers while Dish is calling foul on CBS for not extending its contract until negotiations end.  However why any of this matters is beyond me since, invariably, those fees, on which the two sides eventually agree, usually end up getting passed on to subscribers via their monthly bill anyway. Now subscribers have something to look forward to once those inconveniently-timed negotiations come to a close.

Hurricane win…

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Hurricanes suck. Except for home improvement retailers. Lowe’s would agree. The company just reported third-quarter earnings, much to the delight of Wall Street. As a result of Mother Nature’s very unappreciated wrath, sales at Lowe’s went up 5.7% to $16.8 billion, way more than the predicted 4.6% and $16.6 billion. $200 million of those sales came courtesy of Hurricanes Harvey and Irma that wreaked its proverbial havoc on a large swath of the country. But they helped the home improvement chain take in an $872 million profit that added $1.05 per share, which was three cents higher than analysts’ estimates.  That number was particularly impressive since last year at this time, Lowe’s took in $462 million, nearly half that amount.  But Lowe’s doesn’t owe all its quarterly success to natural disasters. The company also made a big push to cater to professional contractors. And with good reason. They spend more money. Sure DIY home improvement is Lowe’s theme, but the company was savvy enough to recognize an additional opportunity and the fact that the housing market is doing pretty awesome lately only sweetens the pot.  And even though Lowe’s shares dropped a smidge during trading this morning, it can’t be too distraught since the company’s shares are up about 15% for the year.

Toxic Times at Lumber Liquidators; Warren Buffett’s Rose-Colored Portfolio; Argentina Gets Back in Some Good Graces

End in sight?

Image courtesy of iosphere/FreeDigitalPhotos.net

Image courtesy of iosphere/FreeDigitalPhotos.net

Not that this comes as any great shock but Lumber Liquidators took another hit on Wall Street today, this time posting a bigger drop than expected for its third straight quarter. Instead of sales falling an expected 12%, the embattled company ate a much harsher 17% loss. It’s almost hard to believe that it was just last year when the company pulled in a $17.3 million profit with shares gaining 64 cents. But that was just days before the scathing “60 Minutes” report that found that Lumber Liquidators’ wood flooring from China contained excessively high levels of cancer-causing formaldehyde. Today, the company reported that it lost $19.8 million and saw 73 cents shaved off of its shares. The company took in a net loss of $56.4 million, a major 180 from the $63.4 million it reported in 2014. Shares fell 10% today and hit a 7 year low as the company decided not to issue a financial forecast for 2016 – a prudent decision since the company’s not sure if they will be left with any customers. Then there are all those legal and regulatory issues still plaguing the company, the $29 million in legal expenses and a $13.2 million settlement stemming from an entirely unrelated investigation. But at least Lumber Liquidators finally named a new COO, former Lowes exec Dennis Knowles. If he can turn the company around he just might be eligible for a Nobel prize. That’s a big “if.” Lumber Liquidators currently has over 370 stores in the U.S. and Canada and on Sunday, in what seemed like an incredible act of desperation, took out full page ads in Sunday newspapers across the country attempting to reassure customers that its other products are of the highest quality and made using the highest safety standards. Just stay away from their flooring products made in China which are three times as likely to give you cancer.

Everything’s coming up roses…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Warren Buffett addressed his ever faithful shareholders over the weekend and shared with them his thoughts and wisdom gleaned from a storied and insanely successful lifetime in finance. The 85 year old Oracle of Omaha stressed the importance of optimism – an outlook, he feels, our current group of candidates lack since they “can’t stop speaking about our country’s problems (which, of course, only they can solve).” He took some time to share his thoughts on the role of a good effective leader which he feels involves the ability “to define reality and give hope.” Apparently he thinks Hillary Clinton is capable of doing this since that is the candidate he is rumored to be backing. Mr. Buffett’s optimism extends to the U.S. economy – its long-term prospects, anyway – which he feels is only going to get better, especially for the babies being born today whom he calls, “the luckiest crop in history.” And why shouldn’t the world’s third richest man express his optimism? His company, Berskshire Hathaway, was up 21% and took in a record full-year profit of $24.08 billion. Incidentally, Warren Buffett was also rather optimistic about IBM, even though the company has lost a whopping $2.6 billion since the major investment he plunked into it. Go figure. What Mr. Buffett wasn’t optimistic about is the climate change which he calls a major problem for the planet. I guess you would have to agree with him on that. Especially since Leonardo DiCaprio had similar sentiments in his Oscar acceptance speech last night.

You debt-or believe it…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

It seems like only yesterday when hedge fund billionaire  Paul Singer sued Argentina – yes, the country – for full repayment of the biggest sovereign default. Ever. Actually, it was closer to thirteen years ago but at least the two sides settled. Finally. Besides the enormous legal fees that both sides ate, Argentina was often unable to dock its naval ships or fly its Presidential planes in certain cities, lest they get seized by Singer and company. But now the settlement frees up Argentina  to hit up other countries and financial entities for more cash to borrow. Which is probably not the kind of thing you want to hear about a country whose commodities-based economy is on the skids. Oh well. As for the terms of the settlement, Argentina will be forking over $4.65 billion in cash – 75% of the principal – to Singer’s Elliott Management, besides the three other largest remaining creditors, including Aurelius Capital Management, Davidson Kempner and Bracebridge Capital. The agreement still needs approval from the Congress of Argentina which will hopefully check its drama at the door.

Apple vs. Feds Smackdown; Billionaire Country Breakdown; It’s Highs and Lowe’s for Home Improvement Sector

Rotten to the core…

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It’s game on between Apple and the FBI as the two entities tussle about unlocking an iPhone. The Feds feel this request falls under the Writs Act from 1789 that compels companies to assist in law enforcement. Apple is preparing to argue before a Federal court that software code should be protected by the First Amendment while terrorists the world over sit back and enjoy a good laugh at the the expense of the U.S and its constitutional rights. This is all because the Feds want Apple to unlock a phone belonging to San Berbardino shooter/terrorist Syed Rizwan Farook as authorities are convinced there is a lot of valuable intel contained on that one little device. In fact, since early October, Apple has received orders to unlock thirteen other devices, and an L.A. district court judge ruled that Apple should help the Feds bypass that pesky setting which wipes an iPhone clean after ten incorrect password guesses. Apple CEO Tim Cook is adamantly against this backdoor attempt to unlock an iPhone lest it fall into the wrong hands. Cook wants the issue decided by Congress and not the courts. Problem is, phones regularly fall into the wrong hands, as in this case, so what to do about a device that potentially holds vast amounts of life-saving information that could lead to the arrests and capture of more wrong hands?

 

All about the benjamins…

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After owning the title for so long, the city of New York no longer reigns supreme as home to the largest population of billionaires. The title of “Billionaire Capital of the World” now  belongs to Beijing, which is kind of weird since the Chinese economy has taken such a beating these last few months. These new findings come courtesy of the Hurun Report, a Shanghai-based firm that publishes monthly. And while Forbes’ compiles its own list of billionaires, the two publications tend to yield slightly different results, if only because they employ different calculation menthods. Incidentally, Hurun’s results did take into account January 15, the day when China’s economy hit the skids, tanking 40%.  But that still didn’t stop it from adding 32 new billionaires to the list, bringing its grand total identifiable billionaire population to 100. Beijing’s numero uno billionaire is Wang Jianlin, a real estate developer whose net worth is estimated to be $26 billion. Hurun chairman, Rupert Hoogewerf, says that these rankings don’t tell the whole story of China’s vast wealth, and estimates that only about 50% of China’s billionaires were identified. Plenty of the county’s other billionaires prefer to keep their wealth asecret so they don’t end up having to fork a chunk of it to authorities. New York still managed to welcome four more billionaires into its fold, giving the city a grand total of 95. Moscow took the third spot while Hong Kong and Shanghai scored spots four and five respectively.

Lowe’s and behold…

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Home Depot and Lowe’s regaled us with their earnings and it was good news, kind of. Both home improvement chains scored lofty gains in large part due to housing demand, low interest rates and job and wage growth – all super good things. Oh, and this time the warm weather actually helped sales too. But while Lowe’s quarterly sales gains were up 5.5%, Home Depot’s sales gains were way more impressive, gaining close to 9%, suggesting that Home Depot is benefitting way more from housing gains than Lowe’s. Which probably explains why shares of Lowe’s fell a bit today. Apparently Home Depot , according to experts anyway, has a stronger brand image and consumers see it as the go to store for their home improvement needs. Case in point, kitchen products are a big seller for Home Depot and that department killed it this quarter, while Lowe’s kitchen products department performed below average. Ouch. Home Depot also has 2,274 stores compared to Lowe’s 1,857 stores. In any case, Lowe’s is expecting to snag a 6% rise in sales, compared with analysts predictions of less than 5% and the company still added 59 cents per share with sales of $13.24 billion, smacking down predictions of $13.07 billion.

Facebook Fright; Hershey’s Not So Sweet Earnings; Lowe’s Looking to R2D2 for Inspiration?

Not liking this…

Image courtesy of FrameAngel/FreeDigitalPhotos.net

Image courtesy of FrameAngel/FreeDigitalPhotos.net

Facebook just can’t be beat. Or can it? Hmmm. For its sixth straight quarter it toppled Wall Street expectations. It’s third quarter pulled in $3.2 billion which was a 59% whopper of an increase over last year’s equally impressive $2 billion. Wall Street analysts predicted only $3.1 billion. Ha! What do they know. Even its daily active users are up 19% to 864 million. I bet Twitter wouldn’t mind seeing some digits like that. Apparently 30% of us get caught up on our current events via Facebook. Then Facebook earned a hefty $0.43 per share, $0.03 more than what was expected. So how, you ask (and I know you are), is it even remotely possible that the stock took an 11% dive today? For that we can thank Facebook CFO David Wehner, who said some rather fiscally upsetting things during the company’s earnings call. For instance, Facebook costs will increase by a not so modest 55%-75%. Wall Street doesn’t care for stuff like cost increases. It tends to put a damper on things. If the cost increases weren’t upsetting enough, Mr. Wehner also had the audacity to spook Wall Street by mentioning that revenue will slow down. Yikes.

Not sweet on this…

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Image courtesy of lamnee/FreeDigitalPhotos.net

The second largest, publicly traded confectioner just reported its earnings and you can bet they weren’t nearly as sweet as Facebook’s (but then again, what is?). I am talking about Hershey’s of course, maker of everybody’s favorite something or other. For me it’s the classic bar with almonds. Just saying. As for Hershey’s earnings, sales were up 6%. I am sure I assisted in that. Its market share stands at an impressive 31%, having grown .2% this quarter, yet again. But the company sadly missed analysts’ estimates. First of all, the company had revenues of $1.96 billion, which many would find to be a very respectable number. But not for Wall Street who strongly felt that revenue for Hershey’s should have been $1.97 billion. Yes missing that $10 million was kind of a drag. Then there was the earnings per share issue. The candy company gained $1.05 per share. Yet that wasn’t enough to satisfy Wall Street’s craving for $1.08 per share.

How’s that for customer service?

Image courtesy of digital art/FreeDigitalPhotos.net

Image courtesy of digital art/FreeDigitalPhotos.net

Attention humans: Your employment days might be numbered, thanks to Lowe’s. The home-improvement/hardware chain is testing out the use of robots to help customers in its stores. If you happen to be in San Jose, California, you might want to check out four of the new R2D2 wannabes, dubbed OSHbots at the Orchard Supply Hardware. No word on how much this little endeavor is costing and its cost effectiveness over real people. Lowe’s stock, however, is up 11% for the year, so far. Equipped with 3D cameras, screens and other doodads and knick-knacks, the OSHbots can help you find whatever it is you are looking for in the store. Just not an actual human being.