Yesterday the Securities and Exchange Commission (SEC) adopted new rules that require stock analysts to disclose -- on television and in written reports -- any conflicts of interest they have with the companies they cover. The new rules, which critics say don't go far enough, are just one step in the SEC's attempts to restore some investor confidence after the deflation of the dot-com bubble and Enron debacle.
Another step is the SEC's Investor Summit, scheduled for tomorrow, Friday, in Washington, D.C. Our own Bill Mann (TMF Otter) will participate. In case you haven't noticed, for the past week and a half we've been rolling out The Motley Fool Manifesto -- six declarations aimed at improving market practices. Let your voice be heard. We'll relay your questions and comments to the SEC.
Also today, vote in our poll. The SEC is considering a proposal that would require companies to report their financial results more quickly. Get the details and tell us what you think.
After zooming up nearly 5% yesterday, The Motley Fool 50 index took a breather today -- along with the rest of the market -- and lost about 1.5%.
In today's Motley Fool Take:
Pixar Draws From the Past
Some analysts never learn. Over the previous four quarters, computer-rendering specialists Pixar (Nasdaq: PIXR) had topped Wall Street estimates by 39%, 20%, 31%, and 33%, respectively. Harlem Globetrotters gear was probably the appropriate conference call dress code for Pixar executives as, time and time again, the street numbers became toast.
You would think some enterprising analysts would resist the Pavlovian conditioning to low ball, realize their projection models were flawed when it came to Pixar, and find a way to justify estimates 30% higher than the mean to give history its comeuppance. Well, it would've helped as the animation studio behind box-office hits like Toy Story and Monsters, Inc. did it again. Pixar reported first-quarter profits of $0.30 a share -- 30% above consensus targets and three cents ahead of even the most optimistic analyst.
Wall Street's modeling blunders would make for some meaty outtakes at the tail end of the next Pixar release, Finding Nemo, due out in theaters in the summer of 2003. The company raised its full-year earnings expectations from a range between a buck and $1.20 a share to at least $1.15 a stub with $1.25 at the high end.
However, because the home video and DVD release of Monsters, Inc. won't happen until the fall, the company expects to earn no more than $0.08 a share in the current quarter. Analysts were parked at $0.23 a share, clueless apparently to the company's revenue recognition pattern. However, Pixar's revised 2002 income projections indicate that the company should earn between $0.77 and $0.89 a share over the last two quarters of the year. Wall Street is down for just a $0.73 showing.
If history repeats, analysts will mark the company down to a $0.07 forecast this quarter. The company will come back with a nine-cent report. Then the same pros who misjudged the company's success at the box office and how it would affect the bottom line will fail to make the direct correlation between theatrical success and DVD and VHS sales later this year. That's not flying. That's falling with style.
Discussion Board of the Day: Pixar
Pixar also announced that it was going forward into fully funding its 2006 film project. Does that mean the company will ditch Disney (NYSE: DIS) after it completes its next three animated films? All this and more -- in the Pixar Discussion Board. Only on Fool.com.
"Can it be that there is not room for all men on this beautiful earth, under those immeasurable starry heavens? Can it be possible that in the midst of this entrancing nature, feelings of hatred, vengeance, or the desire to exterminate their fellows can endure in the souls of men?" -- Leo Tolstoy, The Raid, 1853
Stanley Works' $30 Million Move
How to save $30 million, by Stanley Works (NYSE: SWK):
Step One: Move your headquarters to Bermuda.
Step Two: There is no step two!
And that's it... now you, too, can enjoy the island life and avoid U.S. income taxes, while not moving a single factory out of America!
With shareholders passing the measure today, Stanley Works joins a list of almost two dozen other companies to make such a move, including Tyco (NYSE: TYC) and Ingersoll-Rand (NYSE: IR). Such maneuvers are, predictably, frowned upon by most lawmakers. "There has not been a day like this in this state since Benedict Arnold sailed to Bermuda," said U.S. Rep. James Maloney of Connecticut, Stanley Works' soon-to-be-departed home. Maloney and others have introduced legislation to prevent companies from lowering their tax bills by setting up overseas headquarters.
The news is not all good for Stanley Works shareholders, however. Because of the way the deal is structured, the IRS views it as a sale of stock. As a result, many shareholders will be hit with a big tax bill once the transaction is complete. A Dow Jones story quotes one employee as saying his retirement is now in jeopardy, because he'll owe between $30,000 and $50,000 for his 3,500 shares of stock.
Ouch!
Debt Dr. Evil
Imitation may be the sincerest form of flattery, but it's also a pretty effective way to bilk unsuspecting consumers.
Credit counseling firm Ameridebt is battling a host of slick admirers using Ameridebt-ish names to pass themselves off as legitimate credit counseling firms. At least 10 impostor companies, using such names as "Ameridebt Group," "Ameridebt Consolidation Group," and "ADCG," have solicited customers via e-mail. Their evil-doings include collecting payment for counseling services and products that they never deliver.
The real Ameridebt is working with the state attorneys general of Pennsylvania and Florida to clear up the confusion created by the spamming impostor firms. In the meantime, if you need help getting out from under debt, start by trying to negotiate a lower interest rate with your lender. If you choose to use a credit counseling firm, be sure to check them out thoroughly, and get direct feedback from Fools on the Credit Card discussion board.
Shameless Plug: Motley Fool Stock Advisor
Looking for some stock ideas? Check out the Motley Fool Stock Advisor, written each month by co-founders David and Tom Gardner. Each issue features an easy-to-follow stock scorecard so you can monitor the performance of their head-to-head investment picks in a multiyear battle. (You should hear them going at it here at Fool HQ...).
McGraw-Hill's (NYSE: MHP) Standard & Poor's Corp. announced that later this year it will release a ranking of its S&P 500 companies based on a number of corporate governance measures, including quality of financial statements, board independence, and the like. Moody's commented that it will be "critiquing" similar areas starting this summer, but does not currently plan to provide rankings. The Foolish Take staff thinks this will be way cool.
Number two lab services company LabCorp (NYSE: LH) agreed to buy competitor Dynacare (Nasdaq: DNCR) for $480 million in cash, at a 26% premium to Dynacare's Wednesday close.
The Bank of Tokyo-Mitsubishi reported an average 1.6% increase in same-store sales at 75 retailers, below the expected 3.5%. It was the smallest monthly gain since September 2001. Increases for Wal-Mart (NYSE: WMT) and Target (NYSE: TGT) fell below Street expectations. Discounter Ross Stores (Nasdaq: ROST) stood out, with an 8% same-store sales gain and a whopping 19% jump in total sales.
Moody's (NYSE: MCO) Investors Service lowered its rating of WorldCom's (Nasdaq: WCOM) long-term debt to junk status. This will raise WorldCom's cost of capital and may well hasten its bankruptcy.
Weekly unemployment claims increased to 411,000 from last week's 405,000, but the four-week moving average declined to 428,000 from 436,500.
And Finally...
Today on Fool.com: In the Drip Port, Rick Munarriz writes that sometimes falling stock prices can actually help your portfolio.... Tom Jacobs relays the true story of a friend in full-service broker hell.... In Fool's School, Selena Maranjian teaches you how to calculate the Dow.... Our Fool Community members brainstorm new ways to Live Below Your Means.
Contributors:
Bob Bobala, Robert Brokamp, Jeff Fischer, Tom Jacobs, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Reggie Santiago, Dayana Yochim
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