From Briefing.com: 4:24PM Entegris to delay 10-K filing (ENTG) 10.01 +0.12:Co delays 10-K filing, saying "The integration efforts following the consummation of the Mykrolis merger have required, and continue to require, significant attention and resources from management and the Registrant. Fiscal 2005 is also the first fiscal year in which Registrant is required to assess and report on the effectiveness of Registrant's internal control over financial reporting. As a result of the combined impact of these events and requirement the Registrant is unable to file its Annual Report on Form 10-K for the fiscal year ended August 27, 2005 within the prescribed period without unreasonable effort or expense."
4:17PM Dell reports in-line; guides in-line (DELL) :Reports Q3 (Oct) earnings of $0.39 per share, in-line with the Reuters Estimates consensus of $0.39. DELL reports gross margin 18.6% vs 18.6% Street expectation. Co issues in line guidance for Q4 (Jan), sees EPS of $0.40-0.42 vs. $0.42 consensus; sees Q4 (Jan) revs of $14.6-15.0 vs. $14.91 bln consensus.
Close Dow +93.89 at 10640.10, S&P +10.31 at 1230.96, Nasdaq +20.87 at 2196.68: Finally, the market found a catalyst to help preserve the historical outperformance native to November, perhaps setting the market up for a third consecutive week of gains. Strangely, however, the broad-based rally that closed eight of ten sectors higher was ignited by...
a strong bond auction? At 1:00 ET, the Treasury Dept. sold $13 bln in 10-year notes at a yield of 4.578% and, when indirect bidder participation (i.e. foreign central banks) checked in at a whopping 55.6% - more than twice this year's average of 25% - the 10-year (+18/32) continued to climb, eventually closing the yield at 4.56%. Since high interest rates have continued to be a restraint on the boost that better than expected corporate profits have awarded roughly two-thirds of the S&P 500, the pullback in borrowing costs spurred widespread buying efforts. To wit, the rate-sensitive Financial sector acted as the strongest source of support, as the AMEX Securities Broker/Dealer Index (XBD) closed at a new 52-week high. An afternoon turnaround in the influential Tech sector, which had served as the second largest drag on the market behind Energy, helped lift the Nasdaq into positive territory for good. Discouraging Q2 sales guidance from Cisco Systems (CSCO 17.15 -0.60) was eventually offset by strength in the semiconductor group, led by Intel's (INTC 25.24 +0.44) $25 bln buyback and 25% dividend increase, gains from leading software names and a late-day reversal in Dell (DELL 29.21 +0.19) ahead of its Q3 report. Health Care, Industrials, Consumer Discretionary, and Consumer Staples - in order of their influence on the S&P 500 - also gained at least 1.0% on the session. A 1.9% pullback in oil prices ($57.80/bbl -$1.13) was eventually embraced as more of a benefit, clearing the way for a rally in retail that helped offset General Motors' (GM 23.44 -1.19) surprise 2001 restatement, than the burden Energy's 2.7% sell-off instilled throughout most of the day. Separately, U of M sentiment checked in better than expected, weekly jobless claims remained low and the Sep. trade deficit widened 11% to a record $66.1 bln; however, none of the data altered Briefing.com's economic outlook or impacted stocks much at all.DJTA +1.0, DJUA -1.2, DOT +1.3, Nasdaq 100 +1.3, Russell 2000 +0.7, SOX +1.3, S&P Midcap 400 +0.5, XOI -3.4, NYSE Adv/Dec 1947/1310, Nasdaq Adv/Dec 1714/1285
10:03AM Marvel Enterprises (MVL) Thomas Weisel downgrades Outperform to PEER PERFORM. Thomas Weisel downgrades MVL based on dramatically lower 2006 estimates following "somewhat disappointing" Q3 results. Firm had previously expected classic Marvel toys and merchandise licensing to hold up better in what is arguably a "hammock year" from a movie release and merchandising standpoint. In addition, they had hoped that video game overages would kick in at a meaningful level in 2006 and say it appears they were overly optimistic in regards to that assumption
10:03AM Taylor Capital (TAYC) Ryan, Beck & Co downgrades Outperform to MKT PERFORM. Target $42. Ryan Beck downgrades TAYC following last night's announcement that the co has revised its 3Q05 earnings per share downward by $0.15 to $0.71 from $0.86, due to a change in the hedge accounting treatment under F.A.S. No. 133 and a change in TAYC's amortization of issuance costs related to junior subordinated debentures. TAYC stated that the financial results from prior periods will also be revised. They say the accounting change was related to a derivative position that TAYC had established in 2002 in order to hedge the interest rate risk associated with certain brokered CDs. Firm notes that TAYC determined that the hedge accounting treatment previously applied to its brokered CD swaps needed to be changed under the requirements of FAS 133, and that it was incorrectly amortizing the issuance costs related to junior subordinated debentures.
10:02AM Distributed Energy (DESC) Merriman Curhan Ford initiates BUY. Merriman Curhan initiates DESC as the firm anticipates significant gross margin expansion as the co raises prices and reduces costs on its market-leading hydrogen generation platform. Unlike many alternative energy cos today (particularly hydrogen and fuel cell related endeavors), DESC has established a clear road to profitability and positive cash flow by 2H07 as a result of impressive and achievable revenue growth and margin expansion targets. Firm believes the co is sufficiently capitalized to fuel its aggressive growth plans and get to sustained positive cash flow from operations. Firm thinks the stock could trade up to the $12 range.
10:00AM PlanetOut (LGBT) RBC Capital Mkts downgrades Outperform to SECTOR PERFORM. Target $10 to $8. RBC downgrades LGBT following Q3 earnings. Although the acquisition of LPI is the correct strategic decision for LGBT, firm says it is mixed at best for the stock due to the following: 1) LPI deal not accretive until 4Q06, 2) Magazine industry in state of flux, and 3) LGBT's story shifts from 2006 to 2007.
9:59AM Marchex (MCHX) JMP Securities reiterates MKT OUTPERFORM. Target $20 to $21. Kaufman Bros raises its target on MCHX following Q3 results. Firm says this was the first quarter where we saw the potential upside from the direct navigation business. MCHX is still in the beta stage of retooling 74,000 of the more than 200,000 sites it owns, and already there is increased traffic and monetization, the two key drivers of growth. The publishing platform is in place and hence the heavy lifting has been done. It is not about product development now, but about execution. Firm says the story is just emerging and would recommend the stock to investors.
9:59AM Goldcorp (GG) Prudential downgrades Neutral to UNDERWEIGHT . Target $17 to $15. Prudential downgrades GG and cuts their tgt to $15 from $17 due to the potential purchase of Placer Dome's (PDG) Canadian assets, La Coipa in Chile, and 40% of the Pueblo Viejo project in Dominican Republic. They estimate that this $1.35 bln cash acquisition has a value of $1.1 bln. Also, they stress that they can not calculate a net present value to justify our $1.1 bln "tangible" book value estimate given current gold.
9:57AM Avalon Pharma (AVRX) WR Hambrecht initiates BUY. Target $13. WR Hambrecht initiates AVRX as they believe the co's lead product, AVN944, could be a best-in-class IMPDH inhibitor that is undergoing Phase I evaluation for refractory hematological malignancies and multiple myeloma. Firm expects AVN944 to demonstrate clear signs of activity, i.e. objective responses, when the data are available in 2H06, and for this event to serve as a significant catalyst for AVRX shares. They also note that AVRX is moving forward two programs emanating from AvalonRx that should enter Phase I trials in 2007.
9:56AM Spatialight (HDTV) WR Hambrecht downgrades Hold to SELL . Target $2.5. Hambrecht downgrades HDT and sets a $2.50 tgt following in-line Q3 results. While firm recognizes the positive steps of written qualification from LG and the actual commencement of production shipments, they believe that Street expectations of unit volumes still have much room to come down. Looking into 2006, firm struggles to generate enough volume in their demand model to justify where current expectations sit.
9:56AM Pride Intl (PDE) Morgan Stanley reiterates EQUAL-WEIGHT. Target $30 to $35. Firm says Q3 operating EPS of $0.28 vs the consensus of $0.21 was largely due to a lower than expected tax rate. Guidance for Q4 was flat with Q3 with a tax rate in the mid-30s for 2006. Firm says the debt reduction story is panning out, as PDE has reduced its debt/capital from 55% in 2Q03 to 35% in 3Q05.
9:54AM Carrier Access (CACS) Janco Partners upgrades Accumulate to BUY. Target $9. Janco upgrades CACS following Q3 results. They note that the co also expressed confidence in its longer term opportunities and indicated it would begin buying back shares. Firm believes these factors should be received well, but says offsetting those positives was guidance toward a somewhat softer than expected revenue line in Q4. Firm believes that may hit the shares in the short run but they would be buyers on any such pressure.
3:06PM Urban Outfitters (URBN)
31.41 +1.26: Apparel retailer Urban Outfitters (URBN) matched expectations this morning with its 42.7% year-over-year rise in third quarter net income. With $37.2 million on its bottom line, the company delivered earnings of $0.22 per share. As previously announced, net revenues rose 33.5% to $288.8 million - driven by a 13% increase in total comparable store sales and a surge in wholesale sales. Third quarter same-store sales compare to an 18% rise in the year-ago period.
While each of its three brands posted higher sales, Urban Outfitters' Free People segment fared best, as sales more than doubled while comparable store sales surged 21%. Sales at the company's namesake stores rose about 34% in total and 19% on a comparable store basis. The Anthroplogie unit, meanwhile, posted 24.5% total sales growth and a 7% rise in comparable store sales. Record performances across all brands, coupled with a 170 basis point decline in selling, general, and administrative expenses as a percentage of sales, led to record operating income. The company's operating margin improved 100 basis points to 21.0%.
After consistently surpassing Wall Street's quarterly earnings expectations, the company has instead simply met them over the prior two quarters. Trading at a relatively rich 38.8x estimated full-year (Jan. 06) earnings, high growth expectations are priced into the stock and leave little room for disappointment. According to Reuters Estimates, analysts foresee EPS of $0.25 in the all-important holiday quarter. That translates to 31.6% year-over-year growth.
--Lisa Beilfuss, Briefing.com
2:47PM Four Seasons Hotels (FS)
51.91 -4.76: Shares of Four Seasons Hotels slipped more than 10% during the regular trading session, after the company reported third quarter results below expectations due largely to a negative foreign exchange impact. The Toronto-based luxury hotelier said its loss widened during the latest quarter to $11.4 million, or ($0.31) per share, from a loss of $8.4 million, or ($0.24) per share, a year earlier. Excluding foreign exchange translation and other charges, the company said it would have earned $8.1 million, or $0.22 per share, compared with $9 million, or $0.24 per share, in the year-ago period - well below the consensus estimate of $0.37 per share.
Revenue for the period fell 17.5% from a year ago to $52.20 million. However, given the continued strong demand for luxury travel and lodging, the company said RevPar, or revenue per available room, increased 13.2%. That reflects a gain of 16% for U.S. hotels, 15.4% for Caribbean hotels, and 8.9% for Europe hotels. Operating margins improved 290 basis points to 29.7%, which includes a 410 basis point increase to 27.9% at the company's U.S. hotels.
In addition to the impact of foreign exchange, lower 'other fees' and higher general and administrative expenses contributed to the decline in operating profits. Other fees, which include royalty and management fees from residential operations, fell 46.1% to $3.5 million during the quarter due to lower residential sales. At the same time, general and administrative costs increased 33% from a year ago to $10.4 million. The company attributed the gain to the implementation of a long-term incentive plan, increased staffing, and foreign exchange.
Given current travel trends, Four Seasons said it expects RevPar for worldwide core hotels to increase by approximately 5% in the fourth quarter and approximately 11% for the full year. Additionally, the company sees operating margins increasing 200 basis points and earnings from operations in the range of $55 to $60 million for the year. Analysts, on average, are expecting EPS of $1.34, according to Reuters Estimates.
Despite the lackluster results for the latest quarter, Four Seasons' core hotels and resorts business continues to generate solid results, benefiting from strong luxury travel demand. However, lower residential fees and higher general costs continue to take their toll on the company's bottom-line. Accordingly, shares are down roughly 37% year-to-date. At the current price level, FS trades at 38.7x forward earnings, compared with 25.7x for Starwood Hotels (HOT) and 25.3x for Hilton Hotels (HLT).
--Richard Jahnke, Briefing.com
12:17PM Target (TGT)
56.99 +0.43: With third quarter earnings per share of $0.49 (consensus $0.45), Target Corp. (TGT) continued its six-year long trend of beating or meeting analysts' expectations. The retailer's results exclude a dime per share, which is the net effect of discontinued operations, and reflects 34.5% growth in earnings from continued operations.
Driven by a 5.9% rise in comparable store sales, new store expansion, and credit card operations, Target's top line expanded approximately 12% to $12.2 billion (consensus $12.2 billion). Credit card operations contributed $158 million to earnings before interest expense and taxes.
The company's gross margin jumped 130 basis points to 34.2% primarily due to higher markup. For comparison, Target's closest competitor, Wal-Mart (WMT), posted a 24.2% gross margin in its most recently reported quarter.
Target also announced that its Board has added $2 billion to its current $3 billion share repurchase program; the aggregate $5 billion buyback is expected to be completed in two to three years. Under the program, Target bought $365 million of its common stock last quarter.
Target expressed confidence in its ability to deliver $1.50 or more in diluted EPS in the second half of this year. Beginning in the fourth quarter, though, it believes it is likely to achieve mid-teens EPS growth that is more consistent with its long-term objectives. According to Reuters Estimates, Wall Street expects the company to deliver EPS of $1.07 in the fourth quarter. For the full year (Jan. 06), analysts forecast EPS of $2.66.
TGT shares, trading at 21.0x estimated full-year earnings, are currently priced at a discount to their five-year historical average of 23.3, but at a premium to Wal-Mart, which trades at 18.3x expected full-year (Jan. 06) earnings.
--Lisa Beilfuss, Briefing.com
12:03PM Intl. Game Technology (IGT)
27.22 +1.20: International Game Technology reported better-than-expected fourth quarter results, helped by higher international sales. For the fourth quarter, the Reno, NV-based slot machine maker earned $120.3 million, or $0.33 per share, from continuing operations - three cents better than the consensus estimate of $0.30 per share. The adjusted results exclude charges of approximately $14.9 million, or $0.026 per share, related to the closure of Gulf Coast casinos in the wake of hurricanes Katrina and Rita. In the previous year, the company posted EPS of $0.35, excluding non-recurring items.
Revenue for the latest period totaled $607.6 million, down from $621.7 million last year but ahead of the consensus estimate of $590.62 million. Product sales fell 4% to $300 million, while revenue from gaming operations were down slightly from $308.8 million to $307.6 million. Domestic sales, which have been pressured by the effects of recent hurricane activity and increased competition, slipped 32% from a year ago to $160 million. However, international sales increased 80% to $139.7 million, driven by the sale of 18,500 gaming units in Japan, as well as a stronger product mix.
Although IGT continued to expand its international presence in Asia and Europe during the quarter, its gross margins were crimped by higher sales of lower-margin machines, particularly in Japan. International gross margin declined to 41% compared to 46% in the prior year. Meanwhile, domestic gross margins slipped 1% from last year to 52%, helped by a greater mix of non-machine related revenue and stronger pricing. Due to the larger mix of international sales, total gross margin in the quarter fell to 47% from 51%.
IGT continues to face challenging conditions in the domestic marketplace, as casinos have curtailed purchases of gaming machines, as well as increased competition and recent disruptions caused by hurricanes Katrina and Rita. However, the company is well positioned in the longer-term to expand its worldwide market share through its diverse product base and broad game library. Despite soft expectations for the near-term, the rebuilding of Gulf Coast casinos, as well as shifting demographic trends should provide positive catalysts for long-term growth. At the same time, however, the risks to the downside continue to be competition and margin pressure.
--Richard Jahnke, Briefing.com
11:57AM Whole Foods Market (WFMI)
135.32 -11.46: Shares in Whole Foods went on sale after the company missed analysts' estimates for the first time in the past four quarters. The stock had been priced to perfection, and with the hurricanes blowing through the quarter, investors chose to lock in profits. The largest natural foods grocer reported a pro forma number, excluding the effects of the hurricane, of $0.52 per share - a penny shy of consensus. Including storm costs, Q4 net income plummeted to $9.1 mln, or $0.13 per share, from $28.2 mln, or $0.43 per share earned last year.
Revenues grew 20.2% year/year to $1.12 bln versus the $1.13 bln the street expected. The performance was driven by 12% weighted square footage growth and comparable store sales growth of 13.4%. As previously released, the company estimated sales to be impacted by $5-6 mln as a result of the hurricanes. For the year in full, comparable sales grew by 11%, well beyond the reach of the traditional grocers. Gross margins widened 68 basis points to 35.3% of sales
WFMI raised its FY06 sales growth guidance to 18% to 21%, compared to its previous estimate of 15-20% growth. Comparable sales have averaged 11% over the past five years, a pace it hopes to continue as it is targeting FY06 growth at 8-11%. It fully expects to generate cash flows in excess of capital expenditures, leading to several announcements aimed at returning value to shareholders. These items included a 2-for-1 stock split, a $4 per share special dividend, and a nickel hike in its quarterly dividend. If that weren't enough, the company announced a four-year, $200 mln buyback program. Onlookers may question the level of these cash distributions considering Whole Foods's growth prospects. To that end, the company's capex plans totals $350-360 mln next year, of which 60% will go to opening new stores.
As one of the best performing stocks this year, downside pressure is likely to remain as money is taken off the table. We feel a forward multiple of 45.5x is a bit rich, even for this growth story.
--Kimberly DuBord, Briefing.com
10:30AM Intel (INTC)
25.15 +0.35: Shareholders of Intel received a dose of good news this morning when the leading chip maker announced its board of directors authorized an increase in the quarterly cash dividend to $0.10 per share and the repurchase of up to $25 billion of common stock. The latter figure includes the $7.8 billion remaining under the prior stock repurchase authorization while the dividend increase will translate to a dividend yield of 1.61% based on Wednesday's closing stock price.
This bid to bolster shareholder value has provided a boost to Intel's stock in early trading and has offered a measure of support to the broader market as it is a strong indication of Intel's confidence in its growth, earnings and cash generating potential. It also sends a tacit message to (prospective) investors that Intel believes its current stock price doesn't properly reflect the company's value.
Cynics will view Intel's announcement as a sign of a maturing company that can't find anything better to do with its cash than buy back stock and increase its dividend. Briefing.com doesn't share that cynical view as Intel continues to invest aggressively in advanced manufacturing technologies. Moreover, Intel's ability to return this type of value to shareholders is a sign of the times as strong profit growth, above-average GDP growth, and low interest rates have left it - and so many other companies - flush with cash.
As a shareholder, you want your company to invest capital responsibly. You don't want them spending cash on anything, just because they have the cash. Intel shareholders should be pleased that their company continues to invest heavily in its future and that it recognizes returning cash to shareholders is a much better option than just sitting on the cash. This is good news and it is representative of a financially sound company that is a leader in the technology sector.
Briefing.com raised its rating of the Technology sector to Overweight on September 15. Since then, the sector has been flat versus a 0.9% decline in the S&P 500. Intel, for its part, is up 2.4% over the same period.
--Patrick J. O'Hare, Briefing.com
9:43AM JDS Uniphase (JDSU)
2.24 -0.10: JDS Uniphase, which has struggled to transform itself following an industry-wide glut, reported a slightly wider first quarter loss that matched analysts' expectations, as increased operating expenses offset higher sales and improved margins. The optical components maker also issued better-than-expected revenue guidance for the second quarter, helping to lift shares in early trading.
For the latest quarter, the San Jose, CA-based company posted a net loss, excluding non-recurring items, of $16.2 million, or ($0.01) per share, compared with $14.1 million, or ($0.01) per share, last year. Sales for the period increased approximately 33% from a year ago to $259.2 million, due primarily to its recently acquired Communications Test and Measurement business, Acterna. The results were in-line with analyst projections for a loss of ($0.01) per share and beat revenue expectations of $250.5 million, according to Reuters Estimates.
Although business conditions continue to improve for JDSU, the acquisition of Acterna helped accelerate revenue growth, as well as gross margin improvement. The addition of the Communications Test and Measurement business bolstered the top-line by $95.4 million while generating operating profits of $19.3 million. Conversely, sales for Optical Communications and Commercial and Consumer Products declined 5.3% and 28.4%, respectively. Gross margin expanded to 32% of net revenue, versus 23% a year earlier, reflecting JDSU's more diversified business and the performance of Acterna. Meanwhile, operating expenses jumped to $99.6 million from a year ago to $60.5 million due in part to acquisition-related costs and higher SG&A expenses.
JDSU shares have gained about 77% since early May. At the same time, however, shares are down 25% year-to-date as the company grapples to turn its business around by cutting costs, eliminating troubled operations, and acquiring new businesses. While demand for optical components continues to stabilize, JDSU is poised to gain momentum. Given the company's recent acquisition of Acterna and increased cost-cutting measures, along with strengthening consumer and communication end markets discussed in Briefing.com's Overweight rating on the Technology sector, investors should expect incremental improvements in operations and results.
--Richard Jahnke, Briefing.com
9:37AM Cisco Systems (CSCO)
17.31 -0.44: Expected tempered guidance overshadowed a solid first quarter from Cisco. CEO John Chambers attributed growth in its first quarter to improving business in the US and Asia, but it is concerned about slowing demand in Europe. Cisco generates 64% of revenues from switches and routers, demand for which continues to slow. In the first quarter, the networking company earned $1.26 bln, or $0.20 per share. This compares to last year when it made $1.4 bln, or $0.21 per share. Revenues grew by 10% from last year, but were down 0.5% sequentially to $6.55 bln. Excluding items, earnings per share were $0.25, a penny ahead of consensus but in line when accounting for the aggressive buybacks that took place in the quarter.
The standout metric was gross margin of 67.3%, which management attributed to strong US sales. Product gross margins widened to 68.5%, up from 68.4% in Q4 due to a better product mix of higher margin switches. Service gross margins moved up materially to 66.5% over the last quarter. Router sales fell 3.7% quarter/quarter, but gained almost 14% over the prior period. Switches sales were basically flat sequentially, but rose 3% year/year to $2.68 bln. Advanced Technologies sales grew 4% and 25% to $1.21 bln. The first quarter is typically the weakest for Cisco during which its book to bill dropped below 1. Looking over the last few quarters, the cyclical nature of its business is apparent. Here are the sequential growth figures for total revenues over the past few quarters: Oct-04 +0.8%... Jan-05 +1.5%... Apr-05 +2.1%... Jul-05 +6.4%... and 0ct-05 -0.4%. Cisco repurchased 190 mln shares in the quarter worth $3.5 bln, up from 130 mln in the fourth quarter.
While Dell's (DELL) disappointing pre-release and Cisco's guidance cast shadows over the Nasdaq, we remain overweight the Technology sector. We suggest investors look beyond these "traditional" tech names and focus on secular trends, which we have characterized as "everything portable, everything digital." The convergence of wireless with multimedia is revolutionizing how consumers interact with content. The idea of interconnectivity and mobility is a driving force within many areas of the tech universe from handsets to communication equipment and semiconductors. For this reason, we currently have two "old school" tech stocks as suggested holdings in our Active Portfolio: Motorola (MOT) and Scientific-Atlanta (SFA).
--Kimberly DuBord, Briefing.com
8:42AM General Motors (GM)
24.63: It just keeps getting worse. Shares in General Motors, which reached a 13-year low on Wednesday, are trading lower in Europe after the automaker quadrupled its second quarter net loss to a whopping $1.07 bln. Adding fuel to fire, GM also announced that, because of accounting errors, it will restate 2001 earnings.
The loss in the second quarter was the fourth straight for the failing automaker, marking the longest losing streak in thirteen years. The revision arose after GM figured out that it overestimated the value of its 20.1% stake in Japanese carmaker Fuji Heavy Industries by 57%, according to an amended financial statement filed on Wednesday. In an additional filing, GM stated that its 2001 profits were overstated by as much as $400 mln.
The timing is of interest, as the news comes two weeks after the SEC issued subpoenas over concerns about how GM reports pension and other retiree benefits, along with accounting transactions with its suppliers. The Q2 loss went from $286 mln to $1.07 bln - a staggering figure after its stake in Fuji Heavy was pared down to $650 mln from an estimated $1.5 bln. On a per share basis that equates to a loss of $1.90 versus its previous figure of $0.51. The restatement did not change revenues or cash flow figures.
The 2001 restatement stems from credits GM received from suppliers. These are credits GM receives from suppliers in exchange for commitments for future sales, which were booked in 2001 but should have been booked in subsequent years. The credits should be booked over the life of the product cycle. Delphi, a former unit of GM, filed for bankruptcy protection last month. In March, the supplier said it inflated earnings after finding it booked rebates from suppliers in one lump sum, which again should have been spread over many years. GM said in April that it had properly accounted for transactions with Delphi.
The second quarter revision is water under the bridge, but the restatement and SEC probe will certainly reduce investor confidence in GM's financials. We see no catalysts for investors to steer anywhere near GM's shares, short of the board replacing CEO Rick Wagoner. Drastic times call for drastic measures. We think GM's best option is to call in the best man for the job, Carlos Ghosn. The Brazilian-born Frenchman, Ghosn, is the mastermind behind the revitalization of Renault and Nissan Motors. The latter automaker, once the pride of Japan, was on the brink of bankruptcy until "le cost-cutter" stepped in and, without even speaking Japanese, revived Nissan into one of the most profitable automakers in the world.
--Kimberly DuBord, Briefing.com
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