Report: AT&T Weighs Possible Purchase of DirecTV

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Chris Ratcliffe/Bloomberg via Getty Images AT&T (T) has approached DirecTV (DTV) about a possible acquisition of the satellite TV company, the Wall Street Journal reported, citing people familiar with the situation. A deal would likely be worth at least $40 billion, DirecTV's current market capitalization, the newspaper said. A combination of AT&T and DirecTV would create a pay television giant close in size to where Comcast (CMCSA) will be if it completes its pending acquisition of Time Warner Cable (TWC), the Journal said. Representatives for AT&T weren't immediately available for comment outside of regular U.S. business hours. DirecTV spokesman Robert Mercer said the company doesn't comment on speculation.

Invesco's June AUM Declines - Analyst Blog

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Invesco Ltd. (IVZ) reported a drop in its preliminary month-end assets under management (AUM) for Jun 2013. The AUM for the month was $705.6 billion, down 3.3% from $729.6 billion at the end of May 2013.

Unfavorable market returns, reduction in money market AUM and negative long-term flows were the primary reasons for the drop. Additionally, foreign exchange led to a $0.2 billion decline in AUM. At the end of second-quarter 2013, Invesco's average assets were $719.8 billion while the total value of average active assets was $593.9 billion.

In June, Invesco's preliminary active AUM was $581.9 billion, down 3.1% from the prior month. Further, preliminary passive AUM was $123.7 billion, down 4.3% from the prior-month level.

At the end of June, Invesco's total equity AUM fell 1.3% to $321.4 billion from $330.7 billion recorded at the end of May 2013. Moreover, fixed income AUM decreased 2.8% from the prior month to $173.1 billion.

Moreover, Invesco's balanced AUM fell 3.9% to $49.7 billion. Its money market AUM totaled $77.8 billion, falling 5.9% from the previous month. However, alternative AUM came in at $83.6 billion in the reported month, falling 3.4% from the prior-month level.

Notably, all the figures have been adjusted by excluding Atlantic Trust's balanced and equity AUM of $21.2 billion and $0.5 billion, respectively. The latter is to be sold to Canadian Imperial Bank of Commerce (CM) for $210 million.

Among other investment managers, Franklin Resources Inc. (BEN) announced preliminary AUM of $815.0 billion by its subsidiaries for June, down 3.7% from the prior month. Another investment manager, Legg Mason Inc. (LM) is expected to announce preliminary AUM for June by the middle of this month.

Our Viewpoint

We expect Invesco's cost-control initiatives to improve its operating leverage sign! ificantly over the long term. Additionally, meaningful capital deployment activities continue to enhance shareholder value. However, the volatile U.S. dollar, high debt levels and rising expenses remain plausible concerns. Overall, the company is poised to benefit from improved global investment flows, given its broad diversification.

Invesco is scheduled to release fiscal third-quarter 2013 results on Jul 31, 2013. The Zacks Consensus Estimate for the quarter is 52 cents. The earnings ESP (Read: Zacks Earnings ESP: A Better Method) for Invesco is 0.00% for the second quarter. This, along with its Zacks Rank #3 (Hold), reduces the chances for a positive earnings surprise.

Small-Business 401(k)s Are a Ripe Opportunity for Advisors

In news that will probably come as no surprise to advisors, small-business plan sponsors who work with a financial advisor are more likely to be satisfied with their 401(k) plan than those who don’t, a Guardian survey found. Nearly half of small businesses don't have a retirement plan, but many are interested in starting one. 

All around, the survey, released by the Guardian Life Insurance Co. on Monday, paints a picture of ripe opportunity for advisors.

The study found 61% of plan sponsors who work with an advisor on their plan reported being “very satisfied,” compared with 40% who don’t have an advisor. Sponsors are pretty satisfied with their 401(k) plans in general. Ninety-eight percent said they were very or somewhat satisfied with their plan.

The survey was conducted by Brightwork Partners for Guardian in November and December among more than 450 senior executives. Respondents were responsible for employee benefit plans at firms with between 25 and 249 employees.

The survey found 46% of respondents don’t offer a retirement plan, mostly because it is too expensive. However, 58% of those who don’t offer a plan said they were interested in setting one up sometime in the next three years.

Advisors interested in grabbing some of that business should focus on educating their sponsor clients, as there are a couple of areas where they are confused. The survey found 30% of respondents who don’t currently offer a plan aren’t sure which type is best for their firm.

Fiduciary responsibilities are another source of confusion, with nearly 20% of plan sponsors saying they are unhappy with the level of fiduciary support they’ve received. Another third of respondents weren’t even aware they were the fiduciary to the plan.

As with overall satisfaction level, sponsors who work with an advisor were more knowledgeable about fiduciary responsibilities and other plan requirements than those who don’t have an advisor.

“While most plan sponsors are satisfied, there are still areas where employers and employees need help. Small-plan sponsors are increasingly realizing the value of working with third-party support services and financial professionals for outsourced solutions that help save time and mitigate fiduciary risks,” Dubitsky said. “This, and the fact that many non-sponsors are extremely confused by their options in the 401(k) market, reinforces what we have seen at Guardian for a long time – there are more and better opportunities for financial professionals in the small-plan retirement market than ever before.”

As for what specifically sponsors are satisfied with, the survey found 90% believe their plan is successful in recruiting and retaining talented employees, allowing the firm to offer competitive benefits and, most important, helping their employees save for an adequate retirement income.

About the same percentage agree that their plan works well for their employees. About 90% say their 401(k) plan has helped make saving easier for participants.

“Nothing in our history has helped promote retirement savings more than workplace defined contribution plans, and this study tells us that the vast majority of small business owners who offer 401(k) plans are satisfied with both the plan itself and their plan providers,” Doug Dubitsky, vice president at Guardian Retirement Solutions, said in a statement. “Even for small businesses, 401(k) plans are delivering what they were designed to do.”

Is Yahoo Still an Outperform?

With shares of Yahoo! Inc. (NASDAQ:YHOO) trading at around $25.20, is YHOO an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock's Movement

Yahoo has been given an Outperform rating here since December, but has the situation changed? The biggest question investors have is about the new CEO Marissa Mayer. Is she capable of turning Yahoo around? Based on Glassdoor.com, 86 percent of employees approve of the job she's doing. That's an outstanding number. Overall, employees have given Yahoo a 3.4 of 5 rating, which is well above average. A somewhat impressive 68 percent of employees would recommend the company to a friend. Overall, the company culture is strong.

As far as website performance goes, not much has changed. Yahoo is still ranked #4 globally as well as #4 in the United States. Over the past three months, pageviews have declined 0.70 percent, pageviews-per-user have declined 1.23 percent, time-on-site has increased 3 percent, and the bounce rate has declined 7 percent. Now let's take a look at some positives and negatives for Yahoo.

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Positives:

Analysts love the stock: 13 Buy, 20 Hold, 1 Sell Quality debt management Margins still strong Management still steadfast in its belief in Display Improved ad quality Improved user experience Paid clicks increased 16 percent (four consecutive quarters of growth acceleration) Improvements in Search Making acquisitions to improve presence in mobile Divesting unprofitable operations In talks with Apple to potentially remove Google from iOS

Negatives:

Weak guidance Decline in Display business Lack of revenue growth on annual basis Decline in revenue last quarter on year-over-year and sequential basis Price-per-click declined 7 percent Decline in cash and short-term investments (not a big issue)

Now let's take a look at some comparative numbers. The chart below compares fundamentals for Yahoo, Google Inc. (NASDAQ:GOOG), and AOL Inc. (NYSE:AOL). Yahoo has a market cap of $27.92 billion, Google has a market cap of $267.37 billion, and AOL has a market cap of $3.04 billion.

	YHOO	GOOG	AOL
Trailing   P/E	7.31	24.21	3.51
Forward   P/E	16.91	15.07	22.00
Profit   Margin	82.55%	20.92%	47.84%
ROE	29.98%	16.36%	48.46%
Operating   Cash Flow	-$360.33 Million	$16.56 Billion	$365.60 Million
Dividend   Yield	N/A	N/A	N/A
Short   Position	2.30%	1.80%	13.10%

 

Let's take a look at some more important numbers prior to forming an opinion on this stock…

E = Equity to Debt Ratio Is Strong          

The debt-to-equity ratio for Yahoo is slightly stronger than the industry average of 0.10.

	Debt-To-Equity	Cash	Long-Term Debt
YHOO	0.08	$3.01 Billion	$121.47 Million
GOOG	0.10	$50.10 Billion	$7.38 Billion
AOL	0.05	$466.60 Million	$105.90 Million

 

T = Technicals Are Strong

Yahoo hasn't been the top performer in this group over the past three years, but it has still been an impressive performance.

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	1 Month	Year-To-Date	1 Year	3 Year
YHOO	8.38%	26.68%	63.38%	42.91%
GOOG	-0.15%	14.38%	34.57%	48.47%
AOL	8.25%	32.96%	85.43%	60.40%

 

At $25.20, Yahoo is trading above all its averages.

50-Day   SMA	22.73
100-Day   SMA	21.19
200-Day   SMA	18.63

 

E = Earnings Have Been Inconsistent                             

Earnings have been inconsistent, but 2012 was impressive. On the other hand, revenue has left a lot to be desired. Over the past four years, most companies throughout the broader market have seen substantial revenue growth (other than 2012). However, this hasn't been the case for Yahoo.

	2008	2009	2010	2011	2012
Revenue   ($)in   billions	7.21	6.46	6.33	4.98	4.99
Diluted   EPS ($)	0.29	0.42	0.90	0.82	3.28

 

When we look at the previous quarter on a year-over-year basis, we see a decline in revenue and an increase in earnings. The same story has unfolded on a sequential basis. It seems as though Yahoo has a revenue growth problem.

	3/2012	6/2012	9/2012	12/2012	3/2013
Revenue   ($)in   billions	1.22	1.22	1.20	1.35	1.14
Diluted   EPS ($)	0.23	0.18	2.64	0.23	0.35

 

Now let's take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

T = Trends Might Support the Industry

Internet Information Providers have performed well over the past several years. The majority of these companies have been wise to get involved in many hot industries. The problem is that the industry is highly sensitive to market corrections. The following might be an extreme case, but Yahoo dropped more than 60 percent in 2008, and Google dropped more than 40 percent in 2008.

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Conclusion

Contrary to popular belief, Yahoo is well managed. Yahoo is currently making a lot of wise long-term decisions. But that still won't be enough in an economic environment that is likely to weaken in the near future.

Will IAC/InterActiveCorp Break Out?

With shares of IAC/InterActiveCorp (NASDAQ:IACI) trading around $50, is IACI an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

IAC/InterActiveCorp is an Internet company that operates in four segments: Search, Match, ServiceMagic, and Media and Other. Some of the websites the company owns and operates are: Ask.com, About.com, Dictionary.com, Match.com, Chemistry.com, OurTime.com, BlackPeopleMeet.com, OkCupid.com, CollegeHumor.com, Vimeo.com, Tutor.com, and many more. Through its businesses, IAC/InterActiveCorp is able to reach a large audience that engage with its websites on a daily basis. Look for the company to see rising profits as its user base continues to increase.

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T = Technicals on the Stock Chart are Strong

IAC/InterActiveCorp stock has seen a monster surge higher over the last several years. The stock is recovering from a recent pullback and seems to be headed towards all-time high prices. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, IAC/InterActiveCorp is trading above its untangling key averages which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of IAC/InterActiveCorp options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
IAC/InterActiveCorp Options	32.63%	3%	2%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
June Options	Flat	Average
July Options	Flat	Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on IAC/InterActiveCorp’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for IAC/InterActiveCorp look like and more importantly, how did the markets like these numbers?

	2013 Q1	2012 Q4	2012 Q3	2012 Q2
Earnings Growth (Y-O-Y)	60.53%	-20.62%	-37.68%	6.82%
Revenue Growth (Y-O-Y)	15.87%	28.20%	38.23%	40.22%
Earnings Reaction	1.06%	1.46%	-8.41%	5.96%

IAC/InterActiveCorp has seen mixed earnings and increasing revenue figures over the last four quarters. From these figures, the markets have been pleased with IAC/InterActiveCorp’s recent earnings announcements.

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P = Poor Relative Performance Versus Peers and Sector

How has IAC/InterActiveCorp stock done relative to its peers, MeetMe (NASDAQ:MEET), AOL (NYSE:AOL), Yahoo! (NASDAQ:YHOO), and sector?

	IAC/InterActiveCorp	MeetMe	AOL	Yahoo!	Sector
Year-to-Date Return	7.83%	-53.01%	22.42%	30.55%	13.48%

IAC/InterActiveCorp has been a relatively poor performer, year-to-date.

Conclusion

IAC/InterActiveCorp provides information and entertainment services through its wide portfolio of websites to consumers and companies across the globe. The stock has been moving higher in recent years and seems to be getting ready to test all-time high prices. Over the last four quarters, earnings have been mixed while revenues have been increasing, which has pleased investors. Relative to its peers and sector, IAC/InterActiveCorp has trailed in year-to-date performance. Look for IAC/InterActiveCorp to catch up and OUTPERFORM.

Updated: Tesla Soars On Surprise Q2 Profit

Tesla (TSLA) was up 10% after its second-quarter earnings report.

Tesla said it earned a  nickel a share on revenue of $405 million.

Analysts were expecting the company to report a loss of 17 cents a share on $385 million in revenue.

On a GAAP basis, Tesla reported a loss of $30.5 million, or 26 cents a share, compared with a year-earlier loss of $105.6 million, or $1 a share.

In the quarter Tesla made 5,150 deliveries, squeaking past the 4,500 guidance, while gross margins of 22% also came in ahead of forecasts. It touted a 25% increase in production, as it made 500 vehicles a week, up from 400.

The company said it plans to deliver more than 5,000 of its Model S vehicles in the third quarter, with 21,000 for the year as a whole. It sees third-quarter gross margins also in the low 20% range.

The shares have skyrocketed more than 300% since the start of the year, and reached a new all-time high on Tuesday.

Earlier today the stock closed down ahead of the earnings report; there was also news that Tesla is dealing with trademark "trolls" in China. The stock has largely shrugged off BMW's entrance into the electric car market last week.

Energy, utilities companies face earnings tests

SAN FRANCISCO (MarketWatch) — Energy and utilities stocks will face a crucial test this week with several big earnings reports due from sector heavyweights ExxonMobil Corp, Chevron Corp., and Dominion Resources Inc.

Both utilities and energy stocks have been the best performers for the quarter and year, even as the broader market has struggled to find direction. The Dow Jones Industrial Average (DJIA)  declined 0.3% last week and is down 1.3% for the year. The Nasdaq Composite Index (COMP)  fell 0.5% last week for a 2.4% deficit on the year. Only the S&P 500 Index (SPX)  is showing a gain on the year, up 0.8%, as it finished down less than 0.1% last week.

The utilities and energy sectors added to their gains for the quarter and year last week. Utilities stocks are up 4% for the quarter and 13% for the year, while energy stocks are up 4.4% for the quarter and 4.6% for the year.

With quarterly reports out from Dow energy components like ExxonMobil (XOM)  on Thursday and Chevron (CVX)  on Friday, investors will be combing outlooks for evidence of the economic recovery, said Robert Pavlik, chief market strategist at Banyan Partners.

"If the economy is improving you want to hear that demand is improving," said Pavlik. "You want to hear positive comments."

Outlooks this earnings season, while still more negative than average, are slightly less negative than they were halfway through the previous season. Of the 51 S&P 500 companies that have offered a profit outlook, 36, or 70%, have guided below the Wall Street estimate at the time, according to John Butters, senior earnings analyst for FactSet. While that's above the 5-year average of 65%, it's below the 81% at the end of January.

Nearly half the companies in the S&P 500 have already reported this earnings season with more than 130 companies reporting in this week. By market weight, 58% of the energy sector and 66% of the utilities sector will be reporting this week, according to Goldman Sachs data.

Energy sector under pressure to meet low expectations FactSet

The energy sector faces a tough road. Already the sector with the worst expected earnings decline this season, results have yet to even clear those low marks. The energy sector was expected to post an earnings decline of 7.6%. Results so far are showing a 9% decline.

Given the weak earnings outlook, some investors are saying the recent spike in energy stocks and exchange-traded funds like the Energy Select Sector SPDR (XLE) is a classic late-cycle play in an aging bull market. Others see it as a smart bet because of innovation in the industry and higher crude-oil and natural-gas prices. Those higher prices, however, slipped this past week with oil seeing its worst weekly drop since mid-March and natural-gas prices down 2% on the week.

Banyan's Pavlik said he's more interested in how oil-field services companies are doing this season seeing that firms like Baker Hughes Inc. (BHI)  topped earnings expectations recently.

"Now that most of the large shale plays have been found, there's been a drop off in production," Pavlik said. "So, [exploration and production companies are] going to be searching for more types of these wells."

Energy-services companies reporting this week include National Oilwell Varco Inc. (NOV)  and Ensco PLC (ESV) . Other energy earnings this week include ConocoPhillips (COP) , Valero Energy Corp. (VLO) , Hess Corp. (HES) , Phillips 66 (PSX) , and Marathon Petroleum Corp. (MRO)