It'll be interesting to see if Robert Johnson, director of economic analysis for Morningstar, will regret his assertion that it wouldn't be surprising if the Dow were to linger in the 13,500 to 14,500 range for some time.
The few times the Dow has surpassed 14,000 in the past, it wasn't long afterwards that it came plummeting down in a most aggressive manner. Johnson says he doesn't think that will happen this time around based upon his belief the economy is stronger than in the past when it hit those numbers.
He cited a stronger banking system and housing market as the main indicators for his outlook.
Johnson also sees stocks as being valued in line with the reality of the performance of the companies rather than being overvalued.
The major problem is most of the outperformance of publicly traded companies in the earnings season has come from cost cutting, even though revenue is up so far with the companies listed in the S&P 500 by 1.2 percent.
It's hard to understand why the Dow is approaching record territory with the very weak global and U.S. economy. There is no doubt the Dow will come crashing down, but it may have more legs on it than bears are thinking at this time.
Even so, this performance is living on borrowed time, as Spain remains a disaster in Europe, the U.S. economy contracted last quarter, the jobless rate for the week ending January 26 jumped by 38,000, and when including people claiming benefits from all programs at the end of the week on January 12, it soared to 5,914,983, a boost of 255,501 from the prior week.
How that is interpreted as something that has legs and isn't a major challenge has to be related to wishful thinking rather than facing reality.
Showing posts with label Morningstar. Show all posts
Showing posts with label Morningstar. Show all posts
Saturday, February 2, 2013
Thursday, September 2, 2010
Morningstar (Nasdaq:MORN) Begins Monsanto (NYSE:MON) Coverage
Morningstar (Nasdaq:MORN) has initiated credit coverage on Monsanto (NYSE:MON), issuing a rating of A+ to begin with.
From a credit perspective, Morningstar said they like what they see with Monsanto. Their credit-relevant ratios are strong, and even with the downward revisement in earnings, they still have "excellent profitability."
Some challenges Morningstar sees are antitrust issues, ongoing high research costs, and not a high amount of diversification.
Their Roundup herbicide business will continue to be under pressure, as China imports have undermined earnings because of patents running out, although that was expected.
On their newer products, an unexpected challenge from DuPont (NYSE:DD) has put added pressure on them, as the weak ecomony allows them to put the idea in minds of farmers on whether or not they need the pricey traits of Monsanto seeds.
DuPont offers some seeds at far less price, and with fewer traits in them. A significant number of farmers have responded and went that route, putting pressure on earnings there as well, with Monsanto responding by slashing prices in order to get farmers to at least try their newest offerings.
Moringstar says they still like the strong moat Monsanto has built, but it does have some weaknesses now, and DuPont is positioned to take advantage of that if they falter in any way.
This is why as far as credit issues go, research and development costs are so important, as Monsanto must get results there to be able to be profitable for the long term. That's no guarantee, and until the economy changes, pricing will be a major issue for the seed giant.
From a credit perspective, Morningstar said they like what they see with Monsanto. Their credit-relevant ratios are strong, and even with the downward revisement in earnings, they still have "excellent profitability."
Some challenges Morningstar sees are antitrust issues, ongoing high research costs, and not a high amount of diversification.
Their Roundup herbicide business will continue to be under pressure, as China imports have undermined earnings because of patents running out, although that was expected.
On their newer products, an unexpected challenge from DuPont (NYSE:DD) has put added pressure on them, as the weak ecomony allows them to put the idea in minds of farmers on whether or not they need the pricey traits of Monsanto seeds.
DuPont offers some seeds at far less price, and with fewer traits in them. A significant number of farmers have responded and went that route, putting pressure on earnings there as well, with Monsanto responding by slashing prices in order to get farmers to at least try their newest offerings.
Moringstar says they still like the strong moat Monsanto has built, but it does have some weaknesses now, and DuPont is positioned to take advantage of that if they falter in any way.
This is why as far as credit issues go, research and development costs are so important, as Monsanto must get results there to be able to be profitable for the long term. That's no guarantee, and until the economy changes, pricing will be a major issue for the seed giant.
Tuesday, August 31, 2010
Citigroup (NYSE:C) Financial Website in Content Deal with TheStreet (Nasdaq:TSCM)
A financial website with the backing of Citigroup (NYSE:C), Morningstar Inc. (Nasdaq:MORN) and Microsoft Corp. (Nasdaq:MSFT), has entered into a content deal with TheStreet.com (Nasdaq:TSCM).
Named 'Bundle,' the financial website focusing on the management of money, will be supplied with content from TheStreet. Bundle will also open up its content to TheStreet, while also providing consumer behavior data.
Investors and partners already using Bundle's website will gain access to TheStreet's content, which also entails the MSN Money site.
Also as part of a deal the two companies will enter into cross-promotional campaigns from time to time.
This is similar to the deals made by TheStreet with Nightly Business Report and Newsweek not too long ago.
Named 'Bundle,' the financial website focusing on the management of money, will be supplied with content from TheStreet. Bundle will also open up its content to TheStreet, while also providing consumer behavior data.
Investors and partners already using Bundle's website will gain access to TheStreet's content, which also entails the MSN Money site.
Also as part of a deal the two companies will enter into cross-promotional campaigns from time to time.
This is similar to the deals made by TheStreet with Nightly Business Report and Newsweek not too long ago.
Tuesday, August 3, 2010
Morningstar (Nasdaq:MORN) Initiates Coverage of Alcoa (NYSE:AA)
Morningstar (Nasdaq:MORN) has initiated coverage on the credit of Alcoa (NYSE:AA), staring them off with a BB+ rating.
Citing ongoing investment in upstream assets, Morningstar said while it's a good strategy in the long term, it will increase stress on its generation of free cash flow.
Morningstar also sees Alcoa heavily dependent on capital markets because of its balance sheet, which includes significant leverage. Other concerns related to credit are its huge liabilities because of the horrid Obamacare, and a big pension fund which is unfunded.
Together they make Alcoa's credit situation a tight one.
The debt load carried by Alcoa at the end of 2009 was $12.9 billion, with earnings of $120 million before EBITDA. There is little to give the idea that any of this will change soon, as aluminum prices aren't assured of increasing in price in a significant manner, especially with confirmation China is definitely continuing to work on slowing down its overheated property market in urban areas.
Morningstar said it sees the credit metrics of Alcoa improving some over the next several years, but that won't do anything to justify an upgrade to an investment-grade rating for the aluminum producer.
Citing ongoing investment in upstream assets, Morningstar said while it's a good strategy in the long term, it will increase stress on its generation of free cash flow.
Morningstar also sees Alcoa heavily dependent on capital markets because of its balance sheet, which includes significant leverage. Other concerns related to credit are its huge liabilities because of the horrid Obamacare, and a big pension fund which is unfunded.
Together they make Alcoa's credit situation a tight one.
The debt load carried by Alcoa at the end of 2009 was $12.9 billion, with earnings of $120 million before EBITDA. There is little to give the idea that any of this will change soon, as aluminum prices aren't assured of increasing in price in a significant manner, especially with confirmation China is definitely continuing to work on slowing down its overheated property market in urban areas.
Morningstar said it sees the credit metrics of Alcoa improving some over the next several years, but that won't do anything to justify an upgrade to an investment-grade rating for the aluminum producer.
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