Business & Finance
Wed, June 30, 2010Tue, June 29, 2010Mon, June 28, 2010Sun, June 27, 2010Sat, June 26, 2010Fri, June 25, 2010Thu, June 24, 2010Wed, June 23, 2010Tue, June 22, 2010Goldman Sachs, Bank of America, Citigroup, JPMorgan Chase and Nike
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Published in Business and Finance on Friday, June 25th 2010 at 14:16 GMT by Market WireCHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: Goldman Sachs Group Inc. (NYSE: [ GS ]), Bank of America Corp. (NYSE: [ BAC ]), Citigroup Inc. (NYSE: [ C ]), JPMorgan Chase & Co. (NYSE: [ JPM ]) and Nike Inc. (NYSE: [ NKE ]).
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Here are highlights from Thursdaya™s Analyst Blog:
Goldman Charged with Securities Fraud
Goldman Sachs Group Inc. (NYSE: [ GS ]) is in the news again for all the wrong reasons. The company and some of its top officers and directors have been charged with securities fraud, and a class action lawsuit has already been filed by the Pomerantz Haudek Grossman & Gross LLP in the United States District Court, Southern District of New York.
The securities fraud lawsuit, which was filed on behalf of the purchasers and receivers of Goldman notes and/or bonds, alleges thatthe company violatedsections 10(b) and 20(a) of the Securities Exchange Act and Rule 10b-5 promulgated under it during the period from December 14, 2006 to June 9, 2010.
Goldman has been charged with providing false and misleading facts regarding its business model and the reasons for its accomplishments during the class period. The company also allegedly failed to disclose the receipt of a Wells Notice from the Securities and Exchange Commission (SEC) in July 2009. A Wells Notice is a letter that the SEC sends to people or firms when it is planning to bring an enforcement action against them.
The securities fraud lawsuit alleges that as a result of such misstating of facts, the companya™s securities had been trading during the relevant period at prices that were artificially puffed up. Following its exposure, the price of Goldman securities dropped substantially.
A few days ago, the SEC postponed Goldmana™s trial date for civil-fraud litigation to July 19, 2010 from June 21, 2010.Goldman had been charged by the SEC for misstating facts and selling poor quality subprime investments to its customers in 2006, without disclosing the risk factors, including the vital role of Paulson & Co., a prime hedge fund, in the portfolio selection process.
Additionally, the SEC accused the investment bank of creating a collateral debt obligation (CDO) called Abacus 2007-AC1, which comprised mortgage-backed securities.
Following up on its civil fraud litigation against Goldman, the SEC is also planning to probe into the investment practices of other industry giants such as Bank of America Corp. (NYSE: [ BAC ]), Citigroup Inc. (NYSE: [ C ]) and JPMorgan Chase & Co. (NYSE: [ JPM ]).
While we believe that Goldman is well positioned to reap the benefits of its strategic cost-balancing initiatives and attractive business mix, we think that such allegations and charges against the company somewhat dampen investorsa™ confidence in the stock.
Also, if such charges are affirmed, the company needs to initiate damage control and incur huge charges. Therefore, such issues are not only a blow to the companya™s reputation, but also a dent in its financials.
Nike Q4 Earnings Meets View
Nike Inc. (NYSE: [ NKE ]) recorded robust fiscal 2010 fourth-quarter earnings thatrose 53% to $521.9 million or $1.06 per share from $341.4 million or 70 cents per share in the year-ago quarter. Quarterly earnings matched the Zacks Consensus Estimate, which moved up a penny in just the past week as 5 of 18 covering analysts raised expectations.
Quarterly Details
Despite macroeconomic headwinds, Nikea™s total revenues grew 8% to $5.1 billion from $4.7 billion in the prior year quarter. The company continued to benefit from its strategy of consistently focusing on innovative products that provide a competitive edge over rivals.
During the quarter, Nike witnessed revenue growth across all geographic regions, except Japan. Revenue growth was primarily led by Emerging Markets, which rose 47% year-over-year, followed by growth in China, Central and Eastern Europe, North America and Western Europe of 12%, 9%, 4% and 2%, respectively.
Nikea™s quarterly gross profit grew 18% year-over-year to $2.4 billion, while gross margin expanded 400 basis points (bps) to 47.4%. The solid growth was dueprimarily to higher in-line product margins, favorable product mix and reduction in discounted close-out sales. Global inventories fell 13% year-over-year to $2.0 billion, mainly due to prudent inventory management policies and efforts to align merchandise mix in-line with sales trends.
Nike ended the quarter with cash and equivalents of $3.1 billion, and a healthy long-term debt-to-capitalization ratio of 4.4%, compared to a cash balance of $2.3 billion and long-term debt-to-capitalization ratio of 5.1% in the year-ago period. During the quarter, the company repurchased 2.9 million shares for about $216 million as part of its four-year $5 billion program approved in September 2008.
Future Orders
Nike reported an increase in future orders scheduled for delivery from June through November 2010, which increased 7% year-over-year to $8.8 billion. Future orders measure customer orders scheduled for delivery in the coming season and are a widely used metric to gauge the performance of retailers.
Guidance
Moving forward, Nike is expected to benefit from its significant brand presencethrough the ongoing soccer World Cup and the upcoming World Basketball Festival in New York. The company expects revenue to increase by a high single-digit rate in fiscal 2011 and by a low double-digit rate in the first quarter of the same fiscal, both excluding currency impacts.
However, Nike also stated that both top and bottom-line performance in fiscal 2011 is likely to come under pressure from unfavorable currency translations, and rising costs of raw materials, labor and freight.
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