Intel Cuts 2012 Outlook

Wednesday, July 18th, 2012

INTC missed the Q2 topline ($13.5 billion vs Exp. of $13.54 billion), even as it met bottom-line estimates of $0.54, but it is the company’s forecast for 2012 that has caught traders off guard, because the technology company is merely the latest one to revise its outlook for the year lower. To wit: “Revenue up between 3 percent and 5 percent year over year, down from the prior expectation for high single-digit growth.”

From the Press release:

Business Outlook

Q3 2012 (GAAP, unless otherwise stated)

• Revenue: $14.3 billion, plus or minus $500 million.; Wall Street’s estimate was for $14.58 billion
• Gross margin percentage: 63 percent and 64 percent Non-GAAP (excluding amortization of acquisition-related intangibles), both plus or minus a couple of percentage points.
• R&D plus MG&A spending: approximately $4.6 billion.
• Amortization of acquisition-related intangibles: approximately $80 million.
• Impact of equity investments and interest and other: approximately zero.
• Depreciation: approximately $1.6 billion.

Full-Year 2012 (GAAP, unless otherwise stated)

• Revenue up between 3 percent and 5 percent year over year, down from the prior expectation for high single-digit growth.
• Gross margin percentage: 64 percent and 65 percent Non-GAAP (excluding amortization of acquisition-related intangibles), both plus or minus a couple points.
• Spending (R&D plus MG&A): $18.2 billion, plus or minus $200 million, down $100 million from prior expectations.
• Amortization of acquisition-related intangibles: approximately $300 million, unchanged.
• Depreciation: $6.3 billion, plus or minus $100 million, down $100 million from prior expectations.
• Tax Rate: approximately 28 percent, unchanged.
• Full-year capital spending: $12.5 billion, plus or minus $400 million, unchanged

Tags: Acquisition, Amortization, Amp, Bottom Line, Business Outlook, Depreciation, Digit Growth, Equity Investments, Expectation, Gaap, Gross Margin Percentage, Intangibles, Percentage Points, Q2, Q3, Tax Rate, Technology Company, Wit, Year 2012
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Long Bonds Soar on Flight to Safety Due to Eurozone, Weak Employment Concerns (June 4, 2012)

Monday, June 4th, 2012

The Economy and Bond Market Radar (June 4, 2012)

Treasuries rallied this week, sending yields sharply lower across the long end of the curve. Europe was the focal point for most of the week. While Greece still makes headlines, Spain was more in focus as the government planned to borrow to pay for bank bailouts. At the same time, economic data is deteriorating very quickly. On Friday there were a slew of negative data points as May purchasing managers’ indices from around the world disappointed and nonfarm payrolls grew a meager 69,000.

Strengths

• On June 1, the 10-Year Treasury yield fell to 1.45 percent as investors sought perceived safety. This rate is lower than the Near-Term Tax Free Fund (NEARX)’s 30 Day SEC yield on a tax equivalent basis based on a 35 percent tax rate, even though the fund holds bonds that, on average, mature in less than five years. Click here to see returns.

• Retail sales were surprisingly strong in May with same store sales generally beating expectations.
• Brazil cut interest rates by 50 basis points to a record low 8.5 percent.
• European Central Bank president Mario Draghi supported the idea of a bank deposit guarantee. This would likely help prevent a “run” on European banks.

Weaknesses

• May nonfarm payrolls expanded by only 69,000, well below estimates of 150,000. The prior two months were also revised lower by 49,000. Overall it was a very weak report.

• Global purchasing managers’ data released late in the week also disappointed. China was a negative surprise relative to expectation, while European data just confirmed the weakness.

• April’s pending home sales unexpectedly fell 5.5 percent which casts a shadow on the recent strength in the housing market.

Opportunity

• Bonds continue to grind higher and appear to be forecasting benign inflation and slow growth.
• The Fed appears willing to increase monetary accommodation if necessary, which would be a boost to the bond market.

Threat

• China’s economy is slowing faster than expected and government policy makers appear comfortable with this dynamic.
• Europe remains a wildcard with austerity programs under pressure, creating significant uncertainty.

Tags: 10 Year Treasury, Bank President, Basis Points, Bond Market, Brazil, Deposit Guarantee, Economic Data, Employment Concerns, European Banks, Focal Point, Housing Market, Less Than Five Years, Mario Draghi, Market Opportunity, Market Radar, Nonfarm Payrolls, Purchasing Managers, Retail Sales, Slew, Tax Rate, Treasuries
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Caterpillar (CAT) Smashes Earnings Expectations

Thursday, January 26th, 2012

As mentioned quite a few times, despite the broad index movement, this rally has truly been concentrated on cyclical groups since the turn of the year.  Perhaps no company represents cyclical more than Caterpillar (CAT), certainly within the industrial space.  As you can see from the chart below the stock took off at the turn of the year and simply has not looked back despite a bevy of secondary indicators indicating extreme levels of overbought.  There is a relentless asset allocation trade going on here, which seemingly is ignoring traditional levels of excess in this group of stocks.

On a fundamental basis the company continues to stand as one of the best purveyors of the ultimate global multinational with all the benefits of tax rate arbitrage, global labor arbitrage, emerging growth spending (government and private sector), etc.  The company yet again smashed estimates ($2.32 v $1.73) on very impressive 35% sales growth (inclusive of the Bucyrus acquisition).  Guidance for 2012 was also raised.  CAT continues to hit on all cylinders.

• U.S.-based Caterpillar reported net income of $1.55 billion, or $2.32 per share, up from $968 million, or $1.47 per share, in the same quarter last year.  Revenue increased 35% to $17.24 billion.  Analysts polled by FactSet expected a profit of $1.76 per share on $15.95 billion.
• Caterpillar expects a 2012 profit of $9.25 per share and $68 billion to $72 billion in revenue. Analysts expect a profit of $9.07 per share on $66.99 billion in revenue.

Disclosure Notice

Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog

Tags: Acquisition Guidance, Arbitrage, Asset Allocation, Bevy, Caterpillar Cat, Disclosure Notice, Emerging Growth, Extreme Levels, Fundamental Basis, Index Movement, Industrial Space, Mutual Fund, Net Income, Personal Portfolio, Portfolio Securities, Private Sector, Purveyors, Smashes, Stand As One, Tax Rate
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The World’s Tax Havens (60 Minutes)

Tuesday, August 16th, 2011

via Trader Mark, Fund My Mutual Fund

This might be a repeat but an interesting video on 60 Minutes tonight, on the tax havens our corporations use to avoid that ’35%’ that is so oftly cited as a reason the U.S. is uncompetitive.  Of course, that rate is mostly something small business – without armies of tax mavens – have to pay.

13 minute video

Our government is in knots over ways to lower the federal budget deficit. Well, what if we told you we found a pot of money – over $60 billion a year – that could be used to help out?

That bundle is tax money not coming in to the IRS from American corporations. One major way they avoid paying the tax man is by parking their profits overseas. They’ll tell you they’re forced to do that because the corporate 35 percent tax rate is high in relation to other countries, and indeed it seems the tax code actually encourages companies to move businesses out of the country.

Companies searching out tax havens is nothing new. In the 80s and 90s, there was an exodus to Bermuda and the Cayman Islands, where there are no taxes at all.

When President Obama threatened to clamp down on tax dodging, many companies decided to leave the Caribbean, but as we first told you in March, instead of coming back home, they went to safer havens like Switzerland.

Several of these companies came to a small, quaint medieval town in Switzerland called Zug.  The population of the town of Zug is 26,000; the number of companies in the area is 30,000 and growing at an average rate of 800 a year. But many are no more than mailboxes.

Tags: 60 Minutes, 80s, American Corporations, Bermuda Islands, Caribbean, Cayman Islands, Exodus, Federal Budget Deficit, Irs, Knots, Mailboxes, Mavens, Medieval Town, Mutual Fund, Pot, Profits, Tax Havens, Tax Man, Tax Money, Tax Rate
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Warren Buffett Op-Ed: Stop Coddling the Super Rich

Monday, August 15th, 2011

by Trader Mark, Fund My Mutual Fund

Warren Buffet’s op-ed in the NYT is sparking a lot of commentary this morning.  Of course, one could argue he has already ‘made his’ and being over 80 has a different view than those decades younger.  Or that if he believes so strongly he is under taxed he could pay more than his required share to the IRS.  Both are really beside the point.  His main thrust is, aside from some egregious tax level that we are nowhere near, people generally are going to go after opportunities regardless of the tax rate.

• OUR leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.
• While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate.
• These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.
• Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.
• To understand why, you need to examine the sources of government revenue. Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.
• Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.
• I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off.
• And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.
• Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.
• The taxes I refer to here include only federal income tax, but you can be sure that any payroll tax for the 400 was inconsequential compared to income. In fact, 88 of the 400 in 2008 reported no wages at all, though every one of them reported capital gains. Some of my brethren may shun work but they all like to invest. (I can relate to that.)
• I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.
• Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems.
• Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.
• But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.
• My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.

Copyright © Fund My Mutual Fund

Tags: Billions, Blessings, Endangered Species, Federal Tax Bill, Friends In High Places, Government Revenue, Investment Managers, Irs, Legislators, Mutual Fund, Nyt, Owls, Payroll Taxes, Personal Income Taxes, Rich Friends, Tax Burdens, Tax Rate, Taxable Income, Warren Buffet, Warren Buffett
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