Shipping & Storage

CSX Corporation

Q2 Rev Est.:  $2.50 Bil 

Q2 EPS Est.:  $0.83

On average, analysts are anticipating Q2 revenue for CSX to come in at $2.58 Bil with EPS of $0.94.  Once again, both of these figures are above my estimates of $2.50 Bil in revenue and $0.83 in earnings.  CSX shares have risen nearly 40% over the past 12 months.  This steady increase in share price, along with below-consensus earnings, should cause CSX stock to immediately fall after its July 12 earnings announcement. 

Income Statement
For the three months ended June 30, 2010
Revenue	$2,500
Expenses:
Labor and Fringe	$728
MS&O	$455
Fuel	$285
Depreciation	$231
Equipment	$99
Inland Transportation	$69
Total Expenses	$1,866
Operating Income	$633
Interest Expense	-$142
Other Income, Net	$11
EBT	$502
Taxes	-$177
NI from Cont. Oper.	$325
EPS from Cont. Oper.	$0.83

Trading Recommendation:  Buy Puts

For more on what a “Trading Recommendation” means, please click HERE.

Seagate Technology

Q4 Rev Est.:  $3.09

Q4 EPS Est.:  $0.94

On average, analysts are expecting $2.94 Bil in fourth-quarter revenue for Seagate (“STX”) with earnings of $0.83 per share.  Unlike CSX, these figures are actually below both my revenue and EPS estimates of $3.09 Bil and $0.94, respectively.  Currently, STX shares are trading at a 6-month low.  If the stock continues to remain weak through the first half of July, shares could see a nice jump upward immediately following the earnings announcement.    

Income Statement
For the three months ended July 2, 2010
Revenue	$3,086
Cost of Revenue	$2,174
Product Development	$229
M&A	$109
Amortization	$9
Restructuring	$5
Goodwill Impairment	$0
Total Operating Ex	$2,526
Income from Operations	$560
Interest Income	$2
Interest Expense	-$42
Other, net	$1
Other income, net	-$39
Income before Taxes	$521
Provision for Taxes	$42
Net Income w/ adj.	$493
Diluted EPS	$0.94

Trading Recommendation:  Buy Calls

For more on what a “Trading Recommendation” means, please click HERE.

CSX/STX Ownership

Author:   NO

Author’s Family:  NO

Disclaimer:
· Opinions, estimates and projections contained in this report are of the author as of the date published and are subject to change without notice.
· This report is not, nor should it be construed as, an offer to sell or solicitation of an offer to buy any securities.
· Unless otherwise noted, all research reports provide information of a general nature and do not address the circumstances of any particular investor.

· It is important to do your own due diligence on any position you enter.

Another Strong Quarter for "Ma Bell"

AT&T, Inc.

Q2 Rev Est.:  $31.02 Bil

Q2 EPS Est.:  $0.58

Another great quarter will wrap up for AT&T in the coming week.  On average, analysts are expecting Q2 revenue to come in at $30.88 Bil with earnings of $0.58 per share.  As I was formulating the revenue estimate of $31.02 Bil, three particular models seemed to be the most predictive:   Deseasonal, Dummy Coding, and Autoregression.  Figure 1, below, summarizes the second-quarter results of the three forms of regression.

Figure 1

Q2 Projection
Model	Prediction
Deasonal	$31,238
Dummy	$31,254
Lagged	$30,572
AVERAGE	$31,022

Figure 2

As is evident from the above chart, it appears that AT&T will finally bust out of the narrow revenue range that has plagued the company for the past 18 months.

Figure 3

Income Statement
For the three months ended June 30, 2010
Total Operating Revenue	$31,022
Operating Expenses:
Cost of Sales	$12,479
SG&A	$7,644
Depr. & Amort.	$4,954
Total Oper. Ex.	$25,077
Operating Income	$5,944
Other Income (Expense):
Interest Expense	$812
Equity Invesments	$196
Other Income (Expenses)	$36
Total Other Income	-$580
Income before Taxes	$5,364
Income Taxes	$1,835
Net Income	$3,530
Less:  NI from NCI	-$81
Net Income Attributable to AT&T	$3,449
Diluted EPS	$0.58

After arriving at $0.58 per share, it appears that my quarter-over-quarter estimates for each line of the income statement are relatively stable.  For example, second-quarter operating income is forecasted to be 19.2% of total revenue, compared to 19.6% last quarter.  While this indicates an expected increase in operating expenses, the ending earnings figure is actually higher than the previous quarter (11.9% of revenue vs. 11.3%).

Despite the forecast for strong revenue and earnings, AT&T’s stock price could easily fall after the announcement on July 22.  Companies must generally exceed expectations in order to experience any immediate price appreciation.  For AT&T, I’m not confident that a 0.004% revenue surprise is enough to bolster increased investment in the stock.  So, here is my Trading Recommendation:  if AT&T is selling for $27 or higher on July 21, then buy puts; on the other hand, if the stock is trading at $25 or lower, buy calls.  The area between $25 and $27 includes too many uncertainties—I do not recommend trading the stock within this range.  

For more on what a "Trading Recommendation" means, please click HERE.

If you are not already a Follower, be sure to click the "Follow" button in the right portion of your screen so you can catch all of my new posts as soon as they're released!

AT&T Ownership

Author:   NO

Author’s Family:  NO

Disclaimer:
· Opinions, estimates and projections contained in this report are of the author as of the date published and are subject to change without notice.
· This report is not, nor should it be construed as, an offer to sell or solicitation of an offer to buy any securities.
· Unless otherwise noted, all research reports provide information of a general nature and do not address the circumstances of any particular investor.

· It is important to do your own due diligence on any position you enter.

Blackberry Maker Drops After Earnings

Research in Motion posted a mix-bag of earnings after the bell, today. Revenue came in at $4.24 Bil, or less than one percent shy of my estimate of $4.28 Bil. Analysts, however, predicted quarterly sales of $4.35 B on average, or 2.6% above actual results. On the other hand, EPS was above both mine ($1.30) and analysts' consenus ($1.34) at $1.38.

What really matters, though, is how the stock performed after the results were released. This is a blog geared toward earnings traders and, today, my predictions once again proved their worth. The following is what I wrote in the June 8th article titled "Blackberrys, Search Engines, Oil -- Oh My:"

The June 24 announcement is shaping up to be a bad day for RIMM shareholders. Some may consider my estimates “close” to consensus, but don’t forget the old cliché “miss by an inch, miss by a mile.
Trading Recommendation: Buy Puts

For those who bought puts earlier in the day, you are currently looking at a 40%+ profit! Not bad for only a few hours of work!

Over the next few days, I will be posting my second-quarter earnings estimates for RIMM, so be looking for that. Also, I have compiled new estimates for both AT&T and UPS that will be posted in the coming days.

Research in Motion's release marks the beginning of a new earnings season. Despite the enormous success that we had last season, I am hoping that this one will be even better.

Be sure to click the "Follow" button in the right portion of your screen so you can catch all of my new posts as soon as they're released!

RIMM Ownership
Author: NO
Author’s Family: NO

Disclaimer:
· Opinions, estimates and projections contained in this report are of the author as of the date published and are subject to change without notice.
· This report is not, nor should it be construed as, an offer to sell or solicitation of an offer to buy any securities.
· Unless otherwise noted, all research reports provide information of a general nature and do not address the circumstances of any particular investor.

The Season Starts Again With Adobe Systems

Adobe Systems

Q2 Revenue Est.:  887.74 Mil

Q2 EPS Est.:  $0.43

NOTE:  Adobe will report Q2 earnings after the market close on Tuesday, June 22.

Q2 INCOME STATEMENT
Three Months Ended May 28, 2010
Revenue	$887,737
Cost of Revenue:
Products	$70,310
Services & Support	$20,289
Total Revenue	$90,599
Gross Profit	$797,138
Operating Expenses:
R&D	$173,265
S&M	$302,613
G&A	$92,931
Restructuring	$13,955
Amortization	$20,974
Total Oper. Ex.	$603,739
Operating Income	$193,399
NO Income:
Int & Other	$5,734
Int Ex.	-$2,403
Investments	-$856
Total NO Income	$2,475
Income before Taxes	$195,874
Provision for Inc. Tax	$45,541
Net Income	$150,333
NON-GAAP Adj.
Stock-based Comp.	$55,514
Restructuring	$13,955
Amortization	$37,062
Investment losses	$856
Inc. Tax Adj.	-$28,275
NON-GAAP NI	$229,446
Diluted EPS	$0.43

Analysts are currently forecasting a second quarter revenue figure of $905.51M with EPS of $0.43.  My estimates are slightly less optimistic when it comes to top-line growth; however, I am more optimistic on the company’s ability to generate earnings, which explains why my EPS figure is the same as consensus.

I will not be giving a Trading Recommendation for Adobe Systems (“ADBE”) this quarter.  While I am predicting that Q2 revenue will come in below analysts’ consensus, I do not believe that it will be enough to drag the stock down a significant amount.  Relative to past earnings reports, the stock’s volatility Tuesday and Wednesday should not be too dramatic.  

Trading Recommendation:  None

ADBE Ownership

Author:   NO

Author’s Family:  NO

Disclaimer:
· Opinions, estimates and projections contained in this report are of the author as of the date published and are subject to change without notice.
· This report is not, nor should it be construed as, an offer to sell or solicitation of an offer to buy any securities.
· Unless otherwise noted, all research reports provide information of a general nature and do not address the circumstances of any particular investor.

· It is important to do your own due diligence on any position you enter.