Thursday, January 22, 2009

Notable News 1 22 09: MSFT, UNH, NOK, DD, KEY, CIT & regional banks

It is just impossible to become excited by a big move on the upside since you know that any jubilation will quickly turn back to despair.  The bad news is likely to continue flowing, virtually uninterrupted for the first half of this year. 

Microsoft missed on its fiscal second quarter profits, reporting a 4.17 billion dollar profit or $.47 per share.  This missed the consensus estimate by 3 cents.  Revenues for the quarter were equally disappointing at 16.63 billion versus the estimate of 17.08 billion. MSFT also announced 5000 job cuts.Yahoo! Finance MarketWatch
This should not be a big surprise after the dismal quarter reported by Intel that also showed a significant slowdown in PC sales during the normally robust 4th quarter.  Nonetheless, Microsoft has fallen over 8% in early trading this morning.  The last trade before posting was at 17.76. 

Unitedhealth (UNH), one of the stocks previously owned, had a dismal year in 2008 but reported earnings for the last quarter in line with estimates.Reuters

Nokia is continuing with its bad news reporting a massive 19% drop in sales and a 69% fall in earnings. MarketWatch

Apple's report was one of the few rays of sunshine. MarketWatch

I am just glad these days to look at the WSJ dividend page and see no dividends reductions or eliminations by companies that I own.  I saw today that Dupont declared its regular dividend and some have speculated that DD would soon cut its dividend.  The troubled CIT Group cut its common stock dividend from 10 cents to $.02 but it really needed to eliminate its common dividend a year ago.    CIT declared it regular dividend on its preferred stock A, currently yielding about 16.75%.CITPRA Stock Quote - Cit Group Inc Stock Quote - CITPRA Quote - CITPRA Stock Price    This preferred stock is non-cumulative with a 6.35% coupon. 
 This is not a good choice for me even at a much lower price.  I am concerned about CIT's long term survivability; the issue is non-cumulative with no maturity, and the common dividend is in danger of being eliminated within a year.   I would go with many REIT cumulative preferred issues that yield more before even considering starting a small position in CITPRA.
On the bright side for CIT, it transformed itself to a bank holding company and received 2.33 billion by selling preferred stock to the Treasury under the TARP program, improving its tangible capital to managed assets to 14.3% on 12/31/08 from 9.2% on 9/30/08.  So, I am a little more confident that my short term senior bonds will be paid at maturity.  

From now on, I will use the phrases equity preferred stock and debt preferred stock to describe traditional preferred and trust preferred respectively.   Regular Preferred and Trust Preferred

Key Bank, one of the issues touted in this week's Barron', reported an awful quarter, reporting a loss of $1.13 including a goodwill impairment charge.

It can hardly be surprising that the number of new home starts in 2008 was the worse on record, a huge 33.3% drop from the housing starts in 2007. Yahoo! Finance

You really do have to look very hard to find a slither of good news in regional bank

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