Just like you never want to hear a doctor say "oops" in the operating room, you never want to see a going-concern statement in a financial report about a company you own. Accountants throw these in when they've been over the books, talked to customers, and checked the horoscopes and have concluded there is "substantial doubt" about a company's ability to remain in business. In short, don't blame the accountants if the company files for bankruptcy protection.

You¿d reckon that a going-concern statement would be enough to send investors running to the exits, but it's not. True, many large institutions automatically bail when an existing company gets slapped with one of these, but many individuals (often wrongly) take a chance they know more than the bean counters.

During the tech boom of the late 1990s, many companies actually went public even though they had been hit with going-concern statements. Many of those companies subsequently disappeared. Enough said.

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Thursday, July 17, 2008

Thursday's Earnings Deluge

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Associated Press

Merrill Lynch & Co.

Merrill Lynch & Co. (MEH) says it swung to a loss in the second quarter amid massive write-downs from soured mortgage-backed securities and other risky investments.

The world's largest brokerage also sold its 20% stake in news and data provider Bloomberg LP for $4.43 billion to help offset losses.

Merrill lost $4.89 billion, or $4.97 per share, compared to a year-ago profit of $2.01 billion, or $2.24 per share. The broker reported negative revenue of $2.11 billion versus revenue of $9.46 billion a year earlier.

Shares closed up $2.51, or 9%, at $30.51.

IBM Corp.

IBM Corp. (IBM) says its second-quarter profit leaped 22%. It blew past Wall Street's estimates as its bread-and-butter services division continued to thrive despite economic malaise in the U.S.

The Armonk, New York-based technology company said Thursday it earned $2.77 billion, or $1.98 per share, in the three-month period ended June 30. That's 16 cents per share higher than the average estimate of analysts polled by Thomson Financial.

Sales for the period jumped nearly 13% to $26.8 billion, about $900 million more than analysts were expecting.

Coca-Cola Enterprises

Coca-Cola Enterprises (CCE) says it lost $3.17 billion in the second quarter and it will make changes in North America, where soda sales have declined.

The Atlanta-based Coke bottler says it lost $3.17 billion, or $6.52 per share, compared with profit of $270 million, or 56 cents per share, in the year-ago quarter.

The company says the loss included a $5.3 billion charge to lower the value of a franchise license in North America due to an expected decline in operating income, higher commodity prices and its falling share price.

Analysts polled by Thomson Financial expected profit of 53 cents per share on revenue of about $6 billion, on average.

Coca-Cola Enterprises Inc.'s revenue rose 5% to $5.94 billion from $5.67 billion a year earlier.

JPMorgan Chase

JPMorgan Chase (JPM) reported a 53% profit decline Thursday as defaults rose in mortgages and other loans, but the bank's results were better than the market anticipated.

The bank's shares gained about 5% in pre-market trading. On the heels of Wells Fargo & Co.'s stronger-than-expected results released Wednesday, investors appear more confident that the banking sector, while struggling, will be propped up by some of its healthier players.

JPMorgan Chase & Co. earned $2.00 billion, or 54 cents per share, in the April to June period, down from $4.23 billion, or $1.20 per share, in the same timeframe last year.

Analysts surveyed by Thomson Financial had predicted, on average, a profit of 44 cents share.

JPMorgan Chase took a nearly $3.5 billion provision for credit losses, and lost more than half a billion dollars due to Bear Stearns, the ailing investment bank it bought in March with the help of the government.

But hardy growth in the business of providing traditional banking services and loans to individuals and companies around the world gave JPMorgan a boost. The commercial banking and Treasury & securities segments both saw record earnings and revenue.

JPMorgan marked down the value of its investment bank holdings by $1.1 billion, and bulked up its reserves by $1.3 billion. The bank's total allowance for future loan losses now stands at $13.9 billion.

"Our expectation is for the economic environment to continue to be weak -- and to likely get weaker -- and for the capital markets to remain under stress," said JPMorgan Chase Chief Executive Jamie Dimon in a statement. "We remain conscious that since substantial risks still remain on our balance sheet, these factors will likely affect our business for the remainder of the year or longer."

He added, however, that because of the bank's strong capital base, it "can continue to invest for the future."

JPMorgan Chase shares rose nearly 5% to $37.63 in pre-market trading. The stock is down about 28% over the past year.

In May, JPMorgan closed its acquisition of the 85-year-old Bear Stearns. The deal was worth a total of $2.3 billion: JPMorgan spent $1.4 billion for the firm itself, and an additional $900 million buying up Bear Stearns stock to ensure the deal's approval.

Continental Airlines

Continental Airlines (CAL) says it swung to a second-quarter loss, hurt by record high fuel prices and weakening economic conditions.

For the quarter ended June 30, Houston-based Continental says losses totaled $3 million, or 3 cents per share, compared with a profit of $228 million, or $2.03 per share, a year ago. Excluding $22 million in one-time gains, the carrier says it lost $25 million, or 25 cents per share.

Total revenue has risen 9% to $4.04 billion from $3.71 billion, helped by increased fuel surcharges and international growth.

Thomson Financial says analysts expected a loss of 49 cents per share and revenue of $4.04 billion. Airlines have been struggling with high fuel prices, as jet fuel is one of their largest costs.

Huntington Bancshares Inc.

Huntington Bancshares Inc. (HBAN) says its second-quarter earnings rose 26%, topping Wall Street forecasts, but the regional banking company has lowered its full-year outlook in anticipation of continued losses from loans and leases.

Huntington said Wednesday it made $101.4 million or 25 cents a share, for the quarter ended June 30 compared with profits of $80.5 million, or 34 cents a share, a year ago.

Analysts surveyed by Thomson Financial were expecting earnings of 23 cents per share.

The company based in Columbus has reduced its 2008 earnings forecast to a range of $1.25 to $1.35 per share, from a previous $1.45 to $1.50.

CEO Thomas Hoaglin explains that Huntington continues to put money aside to cover expected credit losses due to an economy he says is unlikely to improve until well into next year.

Nokia Corp.

World No. 1 mobile phone maker Nokia Corp. (NOK) says profits fell 61% in the second quarter mainly because of a one-time gain in the same period last year.

Nokia's net profit was euro1.10 billion (US$1.75 billion), down from euro2.82 billion in the same period last year, while sales rose 4% to euro13.2 billion (US$21.0 billion).

The second-quarter result in 2007 included a euro1.88 billion gain from the formation of Nokia Siemens Networks, a joint venture with Germany's Siemens AG.

Excluding special items, Nokia says its profit rose 8% to euro1.37 billion (US$2.18 billion).

The Finnish company said Thursday its share of the global market for handsets has grown to 40%, from 38% in the second quarter of 2007.

United Technologies Corp.

United Technologies Corp. (UTX) is reporting an 11% gain in profit in the second quarter, prompting the industrial conglomerate to increase its full-year guidance on revenue and per-share earnings.

Earnings rose to $1.28 billion, or $1.32 per share, up from $1.15 billion, or 1.16 per share, in the second quarter in 2007.

The per-share earnings topped expectations of $1.30 by Wall Street analysts surveyed by Thomson Financial.

United Technologies, parent company of jet engine manufacturer Pratt & Whitney, Otis elevator, Sikorsky Aircraft and other businesses, also reported a revenue increase of 12.7%, to $15.7 billion, up from $13.9 billion in the same quarter last year.

United Technologies said it expects revenue of more than $60 billion and earnings per share of between $4.80 and $4.95, up from previous guidance of between $4.65 and $4.85.

TD Ameritrade Holding Corp.

TD Ameritrade Holding Corp. (AMTD) says its quarterly net income soared 29% as the online brokerage handled a large number of trades and its asset-based revenue grew.

The Omaha-based company said it earned $204.4 million, or 34 cents per share, in its third quarter. That's up from $158.7 million, or 26 cents per share, a year ago.

Ameritrade handled an average of 298,000 trades per day during the quarter. That's 22% higher than during the same period a year ago.

That helped boost Ameritrade's revenue to $623.6 million.

Analysts polled by Thomson Financial expected earnings per share of 32 cents on average and revenue of $610.07 million. Ameritrade increased its outlook for the fiscal year by 2 cents per share, to $1.34.

Baxter International

Baxter International (BAX) says strong sales of biotech drugs and vaccines drove second-quarter profit up 26% to beat Wall Street expectations. The drug and medical device maker also raised its full-year outlook.

For the quarter ended June 30, Deerfield-based Baxter has reported net income of $544 million, or 85 cents per share. That's up from $431 million, or 65 cents per share, in the same period last year.

Sales increased 13% to $3.2 billion, aided by favorable foreign currency rates.

Analysts polled by Thomson Financial expected second-quarter earnings of 82 cents per share, on revenue of $3.05 billion.

Baxter now sees 2008 adjusted earnings of $3.28 to $3.32 per share, up from prior estimates of $3.18 to $3.24 per share. Analysts have predicting $3.24 per share.