A survey released by the American Automobile Association (AAA) finds air travel will increase by 6% this Thanksgiving over last year's holiday travel season.
"This is definitely a positive sign for an airline industry that has struggled mightily in the last year," said Sandra Hughes, AAA travel vice president. The news comes on the heels of UAL's ambitious 2004 earnings predictions and the Federal government's announcement that all major airports have met the deadline for improving passenger screening.
In today's Motley Fool Take:
- United's Rocky Landing
- Discussion Board of the Day: UAL
- Quote of Note
- Lowe's Expansive Q3
- Shameless Plug: Free Stock-Picking Advice
- S&P Keeps Score
- Retirement Fact of the Day
- Segway on Sale
- Quick Takes: Citigroup, Microsoft, Toys "R" Us, more
- And Finally...
United Airlines' parent UAL
Yes, the country's second-leading air carrier has set its sights on positive earnings come 2004. Like too many airline departures these days, don't be surprised if it's late. While the 2004 target may sound overly ambitious for a troubled company that has posted just over $2 billion in losses over the past year, UAL really only has to convince the Airline Transportation Stabilization Board, which will decide its fate based on a loan guarantee deadline that's now just two weeks away.
United's plan is similar to that of other air carriers, which are scaling back flights, delaying previously placed orders for new aircraft, and expecting to spend less money on labor as a direct result. Specifically, United plans to trim its departure schedule by 6% and retire 49 more jets from its aging fleet. Then, 9,000 job cuts will reduce its payroll to just 74,000 employees. Along with deferring aircraft orders through at least 2006, it expects to save roughly $2.5 billion annually.
Like most corporate restructurings, the numbers may appear convincing on the surface, but questions still remain. Just how will the company compete with the low-priced carriers, given its seasoned industry salaries? If it continues to hold back on fleet replacements, will it have to sacrifice safety or brand quality? Will the various union groups agree that this is the best course for ultimate survival, or will it only foster bad blood down the road? These are questions that only time will answer. In the meantime, let's not forget the plane painting idea.
The major carriers continue to shrink. Where do you see the airline industry in a couple of years? Will the airlines bounce back with the economy, or is the worst yet to come? Is an aisle seat better than the window? All this and more -- in the UAL discussion board. Only on Fool.com.
"The world is a book, and those who do not travel read only a page." -- Augustine (354-430)
Sales shot up 18% to $6.41 billion, while comp sales improved by 4.1% in the quarter. Lowe's earned $339.2 million, ahead of last year's third quarter by a whopping 35%. On a diluted per-share basis, that's $0.43 versus the prior year's $0.32. Analysts were looking for $0.40, so Lowe's handily scores a win there.
There are other measures to applaud, too. Both gross and net margins ticked up. And the company's roughly $3.7 billion in long-term debt remained stable, which is a very good thing.
On the free cash flow front, however, Lowe's continued a slide it began in the second quarter of this year. It generated $406 million from operations and spent $540 million on capital expenditures, meaning it was in the hole (free cash flow-wise) for the quarter by $134 million. For the first nine months of the year, it is still ahead by about $585 million, thanks to a cash-rich Q1.
While we'd like to see positive free cash flow growth quarter after quarter, Lowe's is on an expansion blitz here. So far, the situation's not completely out of whack, but it's something to keep an eye on. With a paltry cash-to-long-term debt position, the last thing we want to see is the company taking on more debt to fund growth.
Looking ahead, it projects sales growth of 16% to 17% for the fourth quarter, and expects to earn $0.33 a share, in line with estimates. It plans to open 37 new stores in its Q4, bringing the 2002 total of new stores to 123. No word on whether Lowe's will reverse its declining free cash flow trend, but we'll be watching.
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There's something about keeping score that appeals to the competitive animal in all of us. This goes beyond sports and, not surprisingly, into investing. (Who was it that said investing is just sandlot football for grownups?)
For those who like to follow the titanic struggle between passive and active investing, Standard and Poor's has found a way to appeal to our stats-loving natures: The Standard & Poor's Indices Versus Active Funds Scorecard (SPIVA).
The first edition was released this past Halloween, and subsequent reports will be released quarterly. When most people talk about index investing, they usually mean investing in a fund that tries to keep up with the S&P 500 or the Wilshire 5000. But the Scorecard breaks the active and passive funds down in 13 categories, based on size (large, mid, and small cap) and style (growth, value, and a "blend" of the two).
So, according to the October Scorecard, who's winning, active or passive investors? Based on returns up to Sept. 30, 2002, the indexers have done better over the past five years: The S&P 1500 (which comprises the S&P 500, the MidCap 400, and the SmallCap 600 indexes, accounting for 87% of the total equity U.S. equity market) beat 62% of all domestic equity funds, posting a -1.2% annualized return vs. a -2.9% average annual return for funds. Likewise, the S&P 500 beat 63% of domestic large-cap funds.
However, over the past three years, active management has taken the upper hand, confirming the old maxim that a bear market is a stockpicker's market. The S&P 1500 and S&P 500 have beaten just 45% and 46%, respectively, of actively managed funds.
Moving to the other investment categories, we find some other interesting results. Common wisdom holds that indexing is most effective with large-cap stocks, since those markets are more "efficient," and that active management is the way to go with mid- and small-cap stocks. However, the SPIVA Scorecard tells a different story.
The S&P MidCap 400 has beaten 73% of actively managed mid-cap funds over the past three years, and 90% over the past five years. The S&P SmallCap 600 has bested 68% and 62% of small-cap funds over trailing three-year and five-year periods, respectively.
It's difficult for actively managed funds to overcome the drag trading fees, management expenses, sales commissions, and marketing budgets have on their returns. And it's difficult for investors to find exactly which fund will consistently outperform the market. The lesson: Over the long term, most investors will do better in an index fund.
How much should you save for retirement? It depends on your age, but at least 5% of your pretax salary is a safe figure. Work up to 10% of your pretax income as you age. If you're within a decade of retirement, shoot for 15% or 20%.
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OK, so maybe this isn't the best time to launch a space-age, Jetsons-meet-the-Flintstones human transporter. The stock market crash has driven our net worth lower than a snake's belly in a wagon rut, and even Bill Gates is worried about being laid off.
Still, we like this thing. We want this thing. And now, we can buy this thing on Amazon.com! After months of reading about it and watching demonstrations on TV, we now have the privilege of shelling out $5,000 for a March delivery of the Segway Human Transporter, a glorified, two-wheeled scooter that balances itself and shuttles you from place to place... all while terrorizing pets and small children.
The Segway could make walking obsolete. Its top speed of 12.5 mph is fast enough to outrun taunting bullies, and, if you're worried about having to extract grandma from the shrubbery, you can notch it down to the "beginner" speed of 6 mph. It's a couch potato's dream: Roll off the sofa, motor to the bathroom, and then whip over to the refrigerator for another beer.
What's not to like about this device? Spend lots of money so you can exercise less, gain weight, and infuriate pedestrians -- all while sporting a look that says, "I'm a rich nerd -- mug me!" Reserve yours today!
If you're interested in the science behind the scooter, in reading a note from inventor Dean Kamen, or in placing a $495 nonrefundable deposit, visit the Segway page on Amazon.
According to The Washington Post, an unexpected development in the pharmaceutical industry is a dearth of expected developments. Few new drugs have been released lately, particularly "breakthroughs" and those unlike other existing drugs. Is it a temporary lull or a sign of flaws in the system? That's the current debate. The problem doesn't appear to be money, as the drug makers are spending three times as much on research and development as they did a decade ago.
Superstar stock analyst Jack Grubman seems to be a gift that keeps on giving to New York prosecutors. Grubman, along with his former employer, Citigroup
Not everything is rosy at Microsoft
Investors who need a reason to look up have one tonight: an extra-impressive Leonid meteor shower is predicted. It's expected to be so spectacular that scientists recommend using naked eyes instead of binoculars or telescopes. Learn more from the New Scientist and CNN.
Today on Fool.com: Rick Munarriz offers 10 tips to save Gap.... Zeke Ashton says share repurchases give more bang for the buck.... In Fool's School, if you're looking for a good rate, and some advice, consider a mortgage broker.... And the Post of the Day: Mishedlo.
Bob Bobala, Robert Brokamp, Tom Jacobs, LouAnn Lofton, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Matt Richey, Jackie Ross, Reggie Santiago, Dayana Yochim