Posted by: Howard Silverblatt on February 10, 2010
With 80% of the Q4 EPS reported, 10Ks are starting to come in, although the off-fiscals (non-Nov/Dec/Jan, which account for 21.4% of the market value) still out number them. Based on the reported issues, below are some stats.
Buybacks – MSFT ($3.87B vs. $1.54B for Q3,’09) and PG ($1.46B vs. $0.01B) return, as CSCO reduces ($1.37B vs. $1.87B). Overall dollar purchases are ahead by over 50%, but up 35% void of top issues. Year-end sometimes gets complicated by expected option execution, with traditional January execution (postponed to the new tax year) being complicated by a belief that rates will go up in 2010. Expect 37% increase over Q3,’09, which is flat from Q4,’08 and 66% less than Q4,’07. Lots of buybacks announcements, but they come down to authorizations and a willingness to get back in the market – actual buys will depend on market conditions. Given companies are still covering options to prevent dilution the 2010 strike price expiration schedule relative to the market price may be the base for 2010 buybacks. Don’t have a 2010 schedule yet, need the 10Ks – March madness time maybe.
Cash – More invested in pure cash and less in short-term investments. Reported issues ahead of Q3 by 8.8%, but large consummated M&A Q4 deal issues haven’t reported. BA increases $4.8B, CSCO increases by $4.3B (reduced buybacks, see above), T down $2.4B and PG has $2.2B less, Expect slight decline in cash level from record Q3, but still to remain extremely high.
CapEx - Q4 higher, but to sketchy to note. Expect 2009 to be down 22%, with 2010 up 28%, leaving 2010 on par with 2008.
Dividends – Almost all the news is good, from 12/1/09 – 2/9/09 there have been 47 increases and 2 decreases vs. 58 increases and 41 decreases for the 3-months ended Feb’09. Expect more increases, but the decreases will come – still many companies not making what they are paying out.
Pensions – Most of the reported issues are pre-December, with their assets and rates covering a more depressed period (Q4,’09 S&P 500 was up 5.49% vs. -22.56% for Q4,’08). Of the issues reported only one was fully funded, vs. 7 being fully funded for 2008 and 12 for 2007. Expect improved pensions status, but still deeply in the red; 2008 was $308B short, and 2009 is estimated to be in the $200B area – main difficulty in the estimate is the asset shifts during 2009, as well as the payouts for layoffs.
OBEB – Balance sheet obligations are coming in down 4.5%, as shift from employer to employee is expected to continue. Telecommunications is the key sector, as F remains the only 500 auto-maker.
FYI – I, as many on the Northeast corridor, am working remotely today (even though the IRT keeps going – I guess only the budget people can stop it). I’m impressed by the number of people also working remotely – more than in previous incidents (exchange and traders have been ready for over a decade). I’ve been in contact with clients, market people, and institutions, and they appear to be working from home / remotely and getting products and services out. I had two internal meeting for today which quickly added a call-in number, as did one outside one. While this incident was pre-announced, it might be a good time to review remote functionality. And of course, upgrading communications and systems couldn’t hut IT sales, especially with their Q4 margins being so high.