To quote the Fed, “economic activity still remains weak”,

however they made it clear that they are hopeful that the cuts will help inflation to moderate over time spurring economic growth. 

This is highly likely to be the last fed cut that we can expect. 

Another prudent quote is “The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity.  The committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.” 

I think the fed has truly realized that they have cut interests rates substantially.  As you should be able to deduce, this is great news for investors.  We can expect no further future rate cuts, and now is the time to jump back in.  The future of the economy is in the hands of consumers now (or in the pockets of consumers). 

Earnings Report Commentary: How do I get this info?  Well it’s not the most in depth research, nor do I view this information as suitable to make investing decisions off of. Buts it’s definitely a introduction in what to look for when analyzing company earnings reports.  These are strong blue chip companies.  All I did was pull up balance sheet/income statement/cash flows from the 10Q and MD&A.  I always start with the MD&A because it discusses topics of financial performance and conditions of a company from the perspective of its management.  Management also discusses trends in sales and expenses, capital resources and liquidity and trends in cash flows.  Much of the financial performance comes from the Income Statement.

A break down of statements:

Income statement:  reports on the financial performance of the firm over a period of time.  Elements include Revenues, Expenses, and Gains and losses (this is just increases/decreases in equity or net assets from peripheral transactions ie selling something at a loss or gain that is outside to the scope of the general operating activities of a company)

Balance Sheet – reports the firms financial position at a POINT IN TIME. Consists of Assets, liabilities, and owners equity

Cash flow statement reports cash receipts and payments.  The CF statement is broken down into operating, investing and financing cash flows.  Ideally we would like to see the majority of income coming from the operating activities as opposed to the other groups, b/c this shows the company’s normal business is profitable. 

Some more earnings news….a little late but better then never J

FMC Technologies (FTI) – reported first quarter earnings growth of 33% on strength from crude oil prices.  Net income was $81.5 million (62 cents per share), compared with the $61.3 million (45 cents/share) the previous year.  FTI has increased its forecast for full year 2008 earnings to 2.80-2.90 per share. 

Mastercard (MA) – announced profits more than doubled and pointed to international credit card growth as the main driver to the business.  Earnings came in at $2.59 per share (some 60 cents higher than analysts predicted)

Express Scripts (ESRX) – reported 33% increase in its first quarter profits.  Net profit increased to $177.2 million (69 cents/share) from $133.7 million (49 cents/share) from a year ago.  ESRX reported mediocre expectation for full-year ’08. 

Constellation Energy Group (CEG) – reported first quarter earnings fell 26% ouch.  Overall though the company earned $145.7 million (81 cents/share).  The company’s revenue fell 6% to $4.83 billion in the first quarter.  CEG was hurt by commodity hedges, coal supplier defaults and lower retail power margins. 

Colgate- Palmovile (CL) – suffered a bit in the first quarter.  Income fell 4% due to restructuring charges and higher provision for income taxes.  First quarter earnings fell to $466.5 billion (86 cents/share)  Sales grew 16% though to $3.71 billion

First Solar (FSLR) – did very well!!!! Earning 57 cents per share during their first quarter.  Consider this they have more than a 700% increase from last years period.  The company reported sales nearly tripling to $196.9 million.  Check updated forecast.  Aided by rising oil prices and a global crave for alternative energy source FSLR is a great stock to watch.

Hess corp. (HES) – doubled their net income reporting first quarter of $759 million (ie $2.34/share).  This increase was due to their ability to increase production in tandem with increasing oil prices.  Revenue and non-operating income rose to $10.7 billion from $7.4 billion in the year-ago period. 

National Oilwell Varco Inc. (NOV) – first quarter earnings rose 44% to $397.6 million ($1.11 per share). 

Cameron International corporation (CAM) – reported that first quarter profit rose 25% due to a strong demand for drilling systems, (very similar to National Oilwell).  Overall the company reported quarterly net income of $126.3 million (55 cents/share).  The company’s revenue jumped 34% to $997 million.  Cameron also raised their full year expectations, looking to make $2.50 to $2.60 per share.  (this is from their previous forecast guidance of $2.45 to $2.55per share)

NRG Energy (NRG) – didn’t do too well the first quarter.  Net income fell 26% to $38 million (16 cents per share).  The company got owned by lowering the value of certain financial instruments to reflect current market conditions. 

Other stocks that follow posted earnings: CSX corp (CSX), Gilead Sciences (GILD), Nokia (NOK), SunPower (SPWR) all reported earnings.  Industry Leaders in the Commission Fund should take a closer look at some of these blue chips.  They posted great earnings. 

In short, CSX Corp. first-quarter earnings rose 63% to $351 million (translates to 85 cents a share).  This surge  in profits surpassed analyst expectations of 64 cents per share.  According to the report this increase was due to increased shipments in ethanol, grain and coal. 

Gilead Sciences (GILD), a long-time favorite of mine, saw first quarter profits increase by 22%, a result of the continued success in AIDS drug sales.  Net profits increased $496.1million (51 cents per share) which beat out analyst expectations.  Like I said, Gilead Science has been a favorite of mine for quite some time….check it out.

Interestingly enough, although SunPower (SPWR) announced a profit increase of 15 cents per share, Wall Street was not pleased. Evidently analysts expected more which lead to disappointment in the financial sector.  I think SunPower is a good buy personally.  Anytime a company’s first-quarter revenue increases by 92% IN ADDITION TO the perceived rise in its second quarter and full year expectations, there are good things to come.  Here are some stats: Net income rose 14%, overall earnings were 1.34 billion (1.09 per share), Revenue increased to 6.29 billion from 5.46 billion last year.  With oil prices seeing no ceiling in sight, and the OPEC gurus refusing to pump out more, oil prices are going to continue to increase. 

On a side note, oil prices advanced 6% last week, the largest weekly gain in 14 months.  Oil is up 77% from a year ago.  IEF is holding the third annual conference in Rome.  The general consensus among oil ministers and some CEO’s is that the fundamentals are sound; they cite speculation as the culprit behind high oil prices.  117 dollars a barrel…..ouch.  The top Libyan official that represents the country said that he predicts oil will hit over $120/barrel and overall volatility will increase.  This is based on the presumption that money is moving from fixed income and equities into commodities.  We have seen huge rises in agricultural commodities in addition to the weak dollar which has made commodities very cheap.  Historically speaking, last year when OPEC increased production by half a million barrels a day, oil prices still went up by 20 dollars.  So they are assuming supply/demand doesn’t really dictate prices.  Of course our academic hunches suggest otherwise.  IEA outlook has demand for oil at 87.23MLN barrels per day, down from 310,000 from the March forecast.  US demand is expected to fall 410,000/day.  As you know commodities and oil are all traded in the US dollar.  That means there’s a direct correlation between the two. 

Look for earnings reports on some of my other favorites:

Jacobs Engineering (JEC) April 22nd

Apple (APPL) April 23

Praxair (PX) April 23

PepsiCo (PEP) April 24

Potash (POT) April 24

Thanks for reading blog 1. I will update as frequently as I can with market commentary.  Look for brief updates since it’s earnings season.  Any suggestions….let ‘em rip……

~ Mehran Salehi

- Ryan