Science & Technology
Science and Technology
Science and Technology
Mon, June 7, 2010
Sun, June 6, 2010
Sat, June 5, 2010 Automatic Data Processing, Wal-Mart, Fannie Mae, Freddie Mac and Suntech
CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: Automatic Data Processing (Nasdaq: [ ADP ]), Wal-Mart (NYSE: [ WMT ]), Fannie Mae (NYSE: [ FNM ]), Freddie Mac (NYSE: [ FRE ]) and Suntech Power Holdings Company Ltd. (NYSE: [ STP ]).
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Here are highlights from Thursdaya™s Analyst Blog:
ADP: Job Growth Below Expectations
Automatic Data Processing (Nasdaq: [ ADP ]) reported that the economy gained a total of 55,000 private sector jobs in May, and the job gains it saw for April were revised sharply higher to 65,000 from 35,000. This is the fourth month in a row that ADP has reported job gains, but the numbers are modest relative to the size of the pool of unemployed. The job gains in May were below consensus expectations of 60,000 new private sector jobs.
ADP should be in a good position to gauge the strength of the job market, because it is the largest processor of payroll checks in the country by a very wide margin. However, while over time the ADP numbers generally have a good correlation with the aofficiala private-sector jobs gains and losses reported by the BLS (whose numbers are due out tomorrow morning), in recent months the ADP numbers have been very wide of the mark.
While the fact that the economy is once again gaining jobs is very good news, and news that was really unexpected a few months ago, it is clear that unemployment is still the single most important problem facing the economy. This is not the time to let up on economic stimulus, either fiscal or monetary.
There is still a huge amount of slack in the economy and no sign at all of inflation. Thus any talk of raising the Fed funds rate is extremely premature, and indeed the Fed should probably be doing more to increase the supply of money and credit. The most direct way of doing so would be to further expand the size of its balance sheet by buying Treasury notes. Another thing it could do is cut the interest rate it pays banks to hold on to their excess reserves to entice them to actually make loans to businesses.
It is also premature to obsess too much over the budget deficit. Putting more people back to work will result in higher tax revenues -- not only federal income taxes, but people will spend what they make when working, thus increasing state sales tax receipts.
Of course over the long run we do need to restore some fiscal discipline. However, the long-run deficits really come down to two words: Health Care. The recently passed reform bill did a far better job at expanding coverage than it did in controlling costs, although there were a few good cost control items in the reform that will put a small dent in the long-run deficit, at least according to the non-partisan Congressional Budget Office scoring, but we really need more than a small dent.
More immediately, over the next few months, hundreds of thousands -- if not millions -- of people who have been out of work for a very long time now will lose their last lifeline in the form of extended unemployment benefits. They will be left with no income at all, and have probably already depleted most of their other financial resources.
That will mean a lot fewer customers for Wal-Mart (NYSE: [ WMT ]) and many more people deciding to stop paying their mortgages and just living rent- and mortgage-free until the sheriff eventually kicks them out.
In no state in the nation is the average time between people stopping payment and eviction less than 300 days. The arent freea option will be the only one left to those people. However, it will result in even greater losses at Fannie Mae (NYSE: [ FNM ]) and Freddie Mac (NYSE: [ FRE ]), and since those are both 80% owned by the government, it will mean more losses for taxpayers.
In other words, getting religion on cutting spending right now is mostly a form of self-flagellation. It confuses pain with virtue, and will be about as effective in curing the long-run budget problems as the flagellants of the Middle Ages were in stopping the Black Death. The big difference is that the flagellants were inflicting pain on themselves to be virtuous -- the deficit hawks will be inflicting pain on the long-term unemployed, who are already hurting.
Suntech Power Falls Short
Suntech Power Holdings Company Ltd. (NYSE: [ STP ]) posted lower first quarter results of 11 cents, compared to the Zacks Consensus Estimate per American Depositary Share (EPADS) of 15 cents.
Suntech registered total net revenues of $588.0 million, an increase of 0.8% from $583.6 million in the fourth quarter of 2009 and an increase of 86.3% from $315.7 million in the first quarter of 2009. Total photovoltaic (PV) products shipment increased 11% over the fourth quarter of 2009 and 182% year-over-year.
In the reported quarter, Suntecha™s consolidated gross profit was $114.5 million and gross margin was 19.5%, compared to consolidated gross profit of $138.7 million and gross margin of 23.8% in the fourth quarter of 2009. The sequential gross margin decline was primarily due to a lower average sales price as a result of the substantial depreciation of the Euro versus the U.S. Dollar.
Operating expenses decreased to $51 million compared to $51.7 million in the fourth quarter of 2009. Income from operations was $63.5 million compared to $87.0 million in the fourth quarter of 2009.
Suntech digested foreign currency exchange losses of $24.5 million in the reported quarter compared to $13.2 million in the fourth quarter of 2009. The foreign currency losses in the reported quarter were primarily related to the substantial depreciation of the Euro versus the US Dollar. Net income was $20.7 million compared to net income of $44.0 million in the fourth quarter of 2009.
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