AOL and Trump Report
Wednesday, May 06, 1998
by Paul Larson (TMFParlay@aol.com)

CHICAGO, IL (May 6, 1998) -- For a second straight day, both the Fool Port and the general market saw some of its value do a disappearing act. Unlike yesterday, our little online portfolio not only lost moola on the day, but also performed worse than both market indices by dropping 1.57%. Mama said there'd be days like this.

Today was quite an active day in the Fool Portfolio since two of our companies brought home their quarterly report cards. One company had good marks and was proud of its achievements, while the other was full of excuses for its pathetic grades. Ultimately, I think we are happy that the situation worked out the way it did since we are long the good student and short the slacker.

First, the bright student who has plans to conquer the world. America Online (NYSE: AOL) was down today $3 5/8 to bid $85 7/8 ahead of its earnings report. Then after the closing bell this afternoon the company reported profits four cents above the First Call estimate when the company reported earnings of $0.16 per share before restructuring charges.

There was a ton of information released with the earnings, but I will do my best to hit some of the more salient points this evening. At first glance, the outlook remains quite positive at the company. Revenue was up to $693.6 million in the quarter, or about a 54% increase versus the year-ago quarter and roughly 17% sequentially. As I stated in yesterday's recap, top-line growth is more important to the market at this juncture than bottom-line earnings.

To make yet another long story into Cliff notes, the company continues to add subscribers, content, bandwidth, and usage -- all positive news to this Fool's ears. I'm also excited to see the company's international expansion heating up a tad. Jeff Fischer has promised to post a conference call summary by tomorrow that he will link in tomorrow's Fool Port recap. Jeff follows the company much more closely than I do, and I think he will have some interesting comments for Thursday's portfolio report.

Now let's turn to the problem student in the portfolio that I do follow like a hawk. Trump (NYSE: DJT) reported a loss of $0.79 per share this afternoon in a press release that contains so many excuses, rationalizations, and half-truths I don't know where to begin.

Let's first tackle the headline of the press release. The release read, "Trump Hotels & Casino Resorts, Inc. First Quarter Results Exceed Wall Street Earnings Estimates." This is only partially true. First, the First Call mean estimate called for a loss of $0.76 per share just one week ago, which means the company actually *missed* the estimate if you use this recent number.

It doesn't end there, however. I think it is important to note that the earnings estimate was significantly reduced in the past month. Back on April 1 the mean estimate was calling for a loss of only $0.66 per share, a number the company missed by a wide margin. Am I the only one who is tired of this game where a company hoses down the analysts before its earnings so that it can boast about beating reduced expectations?

Dig further into Trump's press release and the obvious spin doctoring only gets worse. The company noted that the first quarter loss of $0.79 per share was less than the $1.17 per share loss posted in the fourth quarter of 1997. Well, duh. The Atlantic City casino business is a seasonal one with the fourth quarter generally being the weakest. Why not use a more meaningful comparison, such as last year's first quarter? Use this comparison and the company's EPS declined from a loss $0.59 last year.

The company then went on to blame the weakness on a low table "hold percentage" at the Taj Mahal in New Jersey. Yes, luck does have a part to play in the casino business, and gamblers do occasionally win more than statistically expected. Knowing a thing or two about the gaming industry, I love how executives seem to always blame "bad luck" here or there when trying to explain poor results. However, you rarely hear a company point out when lady luck has treated them well. The higher results are almost always attributed to "strong operating results" and "increased efficiency." Whatever.

Good luck, bad luck, no luck, let's peek at Trump's numerical results for the quarter. Numbers don't lie.

(Millions)          Q1 1998  Q1 1997 
 Revenues             $292.4    $316.4  
 EBITDA                $48.7     $60.0  
 Net Interest Expense  $52.5     $50.6  
 Net Income           $(17.7)   $(13.9) 
 EPS                  $(0.79)   $(0.59)
With numbers like these, I can see why the company might want to issue as positive a spin as possible! In any case, I think the Fool Port's short position is looking as healthy as it has ever been. Agree? Disagree? Make sure to stop by the Trump message folder and share your thoughts. Trump's stock ended the day down a quarter-point, giving back some of yesterday's gain.

Of course, we will pick over both the AOL and Trump earnings in further detail when we have more time down the road.

Finally, Amazon.com (Nasdaq: AMZN) seems to be a popular stock to discuss around Fooldom this week. Not only did I talk about the company in last night's recap, but so did Dale Wettlaufer in yesterday's Evening News and Brian Graney in today's Fool Plate Special. I suppose that there is nothing like some junk bonds to stir up some controversy. Amazon continued its recent flow south and ended the day down $3 5/16 at $90 1/4.

Have a wonderful evening, Fools.

-Paul Larson

WE DELIVER - Get Fool Portfolio Nightly Reports
delivered straight to your e-mailbox every evening!

Today's FoolWatch: all the latest in Fooldom.


TODAY'S NUMBERS

Stock Change Bid ---------------- AMZN -3 5/16 90.25 AOL -3 5/8 85.88 T -1 3/4 59.56 DD + 3/16 75.88 DJT - 1/4 8.81 XON + 7/16 74.44 INVX + 3/8 24.56 IP + 9/16 52.94 IOM --- 8.00 KLAC -1 1/16 40.44 LU -2 3/16 70.88 COMS - 1/16 34.38 TDFX + 9/16 25.19 SPY -1 5/16 110.22
Day Month Year History FOOL -1.57% 2.22% 24.24% 316.95% S&P: -0.96% -0.62% 13.86% 141.03% NASDAQ: -0.44% -0.63% 18.23% 157.81% Rec'd # Security In At Now Change 8/5/94 710 AmOnline 3.64 85.88 2261.52% 5/17/95 1960 Iomega Cor 1.28 8.00 524.80% 10/1/96 84 LucentTech 23.81 70.88 197.69% 9/9/97 290 Amazon.com 38.22 90.25 136.12% 8/12/96 130 AT&T 39.58 59.56 50.49% 2/20/98 215 DuPont 59.83 75.88 26.81% 2/20/98 200 Exxon 64.09 74.44 16.15% 1/8/98 115 S&P Depos. 95.91 110.22 14.92% 2/20/98 270 Int'l Pape 47.69 52.94 11.00% 1/8/98 425 3Dfx 25.67 25.19 -1.87% 4/30/97 -1170*Trump* 8.47 8.81 -4.06% 8/24/95 130 KLA-Tencor 44.71 40.44 -9.56% 6/26/97 325 Innovex 27.71 24.56 -11.36% 8/13/96 250 3Com Corp. 46.86 34.38 -26.65% Rec'd # Security In At Value Change 8/5/94 710 AmOnline 2581.87 60971.25 $58389.38 9/9/97 290 Amazon.com 11084.24 26172.50 $15088.26 5/17/95 1960 Iomega Cor 2509.60 15680.00 $13170.40 10/1/96 84 LucentTech 1999.88 5953.50 $3953.62 2/20/98 215 DuPont 12864.25 16313.13 $3448.88 8/12/96 130 AT&T 5145.11 7743.13 $2598.02 2/20/98 200 Exxon 12818.00 14887.50 $2069.50 1/8/98 115 S&P Depos. 11029.25 12675.16 $1645.91 2/20/98 270 Int'l Pape 12876.75 14293.13 $1416.38 1/8/98 425 3Dfx 10908.63 10704.69 -$203.94 4/30/97 -1170*Trump* -9908.50 -10310.63 -$402.13 8/24/95 130 KLA-Tencor 5812.49 5256.88 -$555.62 6/26/97 325 Innovex 9005.62 7982.81 -$1022.81 8/13/96 250 3Com Corp. 11715.99 8593.75 -$3122.24 CASH $11558.06 TOTAL $208474.84

Are you a Foolish investor?
The Motley Fool Recommends...
Industry Snapshot
New format! A stock idea, industry overview, top players, and financials -- every two weeks! Get more info or order.

Fool Port Reports
The nightly scoop on the Fool Port Report, delivered straight to your e-mailbox. Get more info or order.

Motley Fool Investment Guide
Just getting started? Been investing for years? Foolishness for investors of all vintages. Get more info or order.

Shop FoolMart!