Independence Day fireworks apparently carried over to Wall Street today as equity markets exploded out of the gate. The Nasdaq fired up a monstrous 3.5% gain, with the Dow and S&P racking up between 1.5% and 2% each.
The fuse was lit just before the open on word that some on Wall Street have declared a new bull market, and further stoked by continued strength in technology. By midday, some familiar dot-com faces -- Yahoo!
It's nice to see the gains, but take a few deep breaths and remember what we've been through the last few years. No matter how heady today is, it's the long haul that matters, and the prices at which we buy and sell our shares, not the prices in between.
In today's Motley Fool Take:
- Schering-Plough's Systemic Sickness
- Discussion Board of the Day: Pixar
- BMC Gets IBMed
- Buffett Kills Berkshire Charities
- Quick Takes: IPOs, VF Corp. & Nautica, Wendy's
- And Finally...
-Plough's Systemic Sickness
Less than two months after reporting plummeting first-quarter revenues and earnings, Schering-Plough
For Q2, Schering now expects to earn $0.12 per share -- substantially below the $0.18 analysts had anticipated. For its fiscal second half, Schering cautioned that earnings could come in below the estimated $0.24 it will earn in the first two quarters. Analysts had been expecting $0.37 per share for Q3 and Q4 combined. For perspective, the company netted $1.42 per share for all of fiscal 2002.
Allergy drug Claritin remains a major source of Schering's pain, as generic over-the-counter competition continues to eat away at U.S. sales. And there's not much Schering can do to contain the damage. First-quarter U.S. sales of Claritin dropped 83%, to $109 million from $659 million a year ago, and while Schering didn't offer any guidance regarding Q2 sales, it won't likely be pretty.
Unfortunately the company's Hepatitis C treatment, Intron/Rebetrol, is likewise under siege in the marketplace and isn't taking up Claritin's slack.
As for its pipeline, Schering's top drugs occupy the allergy/respiratory and anti-infective/anti-cancer spaces. With both Claritin and Intron/Rebetrol representing these two divisions, Schering's results appear increasingly vulnerable to the effects of increased competition.
Bottom line: Despite its 3.7% dividend yield and balance sheet sporting a chunk of cash and little debt, investors should stay away from Schering-Plough -- at least for now. The company's drug pipeline doesn't appear to boast any guaranteed blockbusters, and its star drugs are struggling with relentless competition.
Who knows, Schering-Plough may indeed end up the turnaround story many hope for, but wait for more evidence before jumping in.
Discussion Board of the Day
Was Finding Nemo the best Pixar movie, or simply the most successful financially? Can Pixar do no wrong? What would you do if you were in Pixar's shoes with rival studios wanting to fill Disney's shoes? All this and more -- in the Pixar Discussion Board. Only on Fool.com.
BMC Gets IBMed
Shares of BMC Software
The software maker chopped its earnings estimates for its fiscal first quarter in half, and reduced revenue estimates for the same quarter by about 6%. Given the firm just gave the initial estimates in April, many investors feel there could be more bad news to come.
Also, BMC has typically focused its sales efforts on larger deals -- those with price tags above $1 million. Unfortunately, those deals simply aren't getting made in this market. The company announced a commitment today to go after the smaller, but more abundant opportunities in the sector, which usually prove easier to close.
To give credit where it's due, BMC has actually held up fairly well in what has been a miserable environment for technology spending. The firm has maintained a solid balance sheet, with virtually no debt and nearly $650 million in cash and equivalents on the books.
It is also reasonably well-managed, and has the ability to survive this tough environment and potentially reemerge as a leaner, stronger competitor if it can continue to produce superior products.
However, the company's restructuring efforts are going to take time, and the brutal competition in the sector isn't likely to ease soon. Despite today's 7.8% drop in the shares, there aren't likely to be any near-term catalysts for the stock. That means if you're looking at the shares as a turnaround play, there's no need to be hasty.
Buffett Kills Berkshire Charities
-- By Bill Mann (TMF Otter)
In a surprise announcement on Friday, Berkshire issued a terse statement announcing that the company's charitable giving program is being terminated. Pampered Chef, acquired by Berkshire in October 2002, found itself targeted by several pro-life groups for boycott due to Berkshire's contributions to Planned Parenthood and other abortion proponents. Berkshire itself is a passive vessel in the transaction, but Warren Buffett, its chairman and owner of 38% of the shares, is a large benefactor for several pro-choice groups, and this connection drew the ire of pro-life groups including Life Decisions International.
Pampered Chef , which has a Tupperware-style business model with parties organized by independent contractors, apparently felt the pinch from the boycott and negative publicity, so CEO Doris Christopher approached Buffett with the problem. Buffett, fearing that this program will harm Pampered Chef, took the drastic step of canceling all shareholder-designated donations at Berkshire Hathaway.
The Life Decisions website claimed that they would "continue to monitor [Berkshire Hathaway's] philanthropic activities." Let me be the first to suggest that they not put too much effort into it, as Berkshire has none outside of the terminated shareholder-designated program. Buffett believes (and I fully concur) that most charitable giving by corporations is nothing more than "the use of the stockholder's money to implement the charitable inclinations of the corporate manager." Without this program, Berkshire Hathaway's charitable giving will revert to previous form: It won't exist.
Pampered Chef is a minuscule component of the Berkshire family, so why on earth did Warren Buffett change one of the most beloved programs at the company for the sake of a few gnats biting at it? Success or failure at Pampered Chef has the next best thing to zero effect on Berkshire's overall performance, and every company in history is going to do something that brings the wrath of the one-song orchestras.
Hartmanbirge, a member of the Motley Fool Community, had a theory (free trial required) to which I subscribe. A line from the Berkshire press release from last Friday states what I believe to be the rationale to protect Pampered Chef by killing off a popular program: "...contrary to all that Berkshire has experienced in the past, its ownership is now harming a new subsidiary...." Berkshire Hathaway's stock in trade is its status as a beneficent corporate owner.
Warren Buffett has earned billions for his shareholders by creating an environment in which he receives the "first call" from business owners interested in selling. This is a carefully managed component of Berkshire's success -- and a negative outcome for a new, small Berkshire subsidiary due to policies at the corporate parent is not something that Buffett can risk. He has to react to the problems at Pampered Chef, lest the next business owner ready to sell uses his first call to reach out to someone else.
It's a tragedy, for Berkshire Hathaway's charitable giving program stood out as unique. At the end of the day, Warren Buffett's vast holdings in the company will still go to the causes he sees fit. Berkshire Hathaway was nothing but a passive vessel in Buffett's charity decisions, so those who decry Berkshire's charities baldly miss the point. They may, however, rest assured that Berkshire's removal from the process won't change a darn thing in how Warren Buffett allocates his own money. Some of the other 3,500 charities that have received donations in the last few years will, however, have to go without.
Bill Mann owns shares of Berkshire Hathaway.
Oh goody. The initial public offering (IPO) market may be heating up again. According to an AP story, analysts are once more waxing bullish on IPOs, as they're seeing small signs of increased activity and rosier receptions for newly minted shares. Still, Fools are advised to be very careful with IPOs, as they can be far riskier and less fruitful investments compared with shares of companies with established track records.
Finally, a fast-food darling burped today. Wendy's
Today on Fool.com:
- For updated stories throughout the day, bookmark our ever-changing News section.
- The Cost Economic Policy: Matt Richey has a look at what today's economic policies could mean for tomorrow.
- Dowload No Evil: Is this summer the end of the MP3 loving, or simply the start of some beautiful music?
Bob Bobala, Robert Brokamp, Paul Elliott, Mathew Emmert, Jeff Fischer, Tom Jacobs, LouAnn Lofton, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Matt Richey, Reggie Santiago, Kate Southerland, Dayana Yochim