Away From The Financials - Some Hope

While guidance from financials is generally downbeat again, there are a few outliers reporting good results outside of the banks.

1) State Street may have been a disaster yesterday, but rival Northern Trust is trading up 10 percent as they reported earnings above expectations.

2) United Technologies put in a respectable quarter, with earnings roughly in line with expectations, and reaffirmed 2009 guidance of $4.65 to $5.15.

3) IBM up 4 percent on strong earnings, guidance. IBM pleasantly surprised on earnings and guidance. Fourth quarter earnings of $3.03 was in line with estimates, and more importantly 2009 guidance of "at least" $9.20 a share was well above consensus of $8.75.

For the fourth quarter, Systems and Technology (hardware) revenue was down 20 percent, but software was up 3 percent and the all-important services (more than half of revenues) sector down 4 percent in both Global Services and Global Technology Services.

4) Coach, which had pre-announced disappointing earnings, came in in-line with (reduced) expectations. Margins were lower due to deeper promotions, and North American comparable store sales declined 13.2 percent. They are lowering the number of new store openings. No guidance from the company, but they had already said they would not be providing guidance.

5) US Bancorp reported earnings just shy of consensus ($0.15 vs. $0.18 consensus). The bad news is that like everyone else they are boosting credit reserves and write down more investments. The good news is that deposits--which are desperately needed--grew nearly 6 percent, excluding acquisitions.

6) Our parent General Electric down another 4 percent as Goldman, UBS and Oppenheimer all had comments out. GE will be reporting on Friday.

Goldman said GE is already discounting substantial bad news, reflected in its bonds trading (as if the AAA credit rating will be cut) and its options pricing implying a 50 percent dividend cut in 2010. Also, it is now widely understood that 4Q EPS quality will be low, Goldman says.

UBS said 2009 expectations are too high, that reserves are too low and that 2009 credit losses will exceed their previous guidance.

Oppenheimer also noted the concerns over the credit rating and a potential dividend cut, and also anticipates pressure on 2009 consensus of $1.38.



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