Thursday, January 31, 2013

Clearwire Off; S&P Threatens Downgrade; Sees Liquidity Risks

Standard & Poor’s yesterday put its corporate credit ratings on Clearwire (CLWR) on CreditWatch “with negative implications,” noting that a downgrade is possible.

The ratings firm currently has a B- corporate credit on CLWR.

S&P credit analyst Allyn Arden said in a statement that the move reflects the firm’s view that “Clearwre faces significant near-term liquidity risks.” He notes that the company entered 2010 with $3.8 billion in cash, with expected cash outflow of $3 billion to $3.2 billion, most of that to build its 4G wireless network.

“Given the substantial capital spending requirements and expected operating losses to support the network deployment, we believe that Clearwire’s cash balances may reach dangerously low levels in the first quarter of 2011,” Arden said.

He notes that new financing could come in the form of spectrum sales or debt issuance, but adds that he thinks “ongoing equity infusions” from existing investors – a group which includes Comcast (CMCSA), Sprint (S) and Time Warner Cable (TWC) – “are critical to the long-term sustainability of Clearwire’s business plans.”

The analyst adds that “a downgrade, if any, could exceed one notch.”

CLWR is down 39 cents, or 5.3%, to $7.01.

Fool Checkup: Viacom Earnings

Viacom (Nasdaq: VIAB  ) reported earnings on Jan. 31. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q1), Viacom missed estimates on revenues and met expectations on earnings per share.

Compared to the prior-year quarter, revenue dropped significantly and GAAP earnings per share grew significantly.

Gross margins grew, operating margins dropped, net margins expanded.

Revenue details
Viacom booked revenue of $3.31 billion. The 27 analysts polled by S&P Capital IQ wanted to see sales of $3.48 billion on the same basis. GAAP reported sales were 16% lower than the prior-year quarter's $3.95 billion.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $0.91. The 30 earnings estimates compiled by S&P Capital IQ averaged $0.91 per share. GAAP EPS of $0.92 for Q1 were 142% higher than the prior-year quarter's $0.38 per share. (The prior-year quarter included -$0.68 per share in earnings from discontinued operations.)

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 46.8%, 210 basis points better than the prior-year quarter. Operating margin was 24.0%, 170 basis points worse than the prior-year quarter. Net margin was 14.2%, 880 basis points better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $3.27 billion. On the bottom line, the average EPS estimate is $0.99.

Next year's average estimate for revenue is $13.99 billion. The average EPS estimate is $4.69.

Investor sentiment
The stock has a three-star rating (out of five) at Motley Fool CAPS, with 134 members out of 146 rating the stock outperform, and 12 members rating it underperform. Among 64 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 60 give Viacom a green thumbs-up, and four give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Viacom is outperform, with an average price target of $57.45.

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Facebook beats analyst expectations, reports $1.58 billion in Q4 revenue - 04:16 PM

(gigaom.com) -- Facebook announced $1.58 billion in revenue Wednesday for the company’s fourth quarter, beating analyst estimates of $1.53 billion. Overall, the company reported $5.09 billion in revenue for 2012, compared to $3.71 billion for 2011, when the company was not yet public. The company saw fourth-quarter earnings of $0.17 per share excluding one-time charges, compared to analyst expectations of earnings of $0.15 per share.

Facebook made crucial gains in mobile this quarter, one of the primary areas that has been used to evaluate the health of the company since its IPO last year. Facebook saw mobile daily active users (DAUs) exceed web DAUs for the first time in the fourth quarter.

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“Today thereâ�?�?s no argument. Facebook is a mobile company,” CEO Mark Zuckerberg said on the earnings call Wednesday afternoon, stating strongly that while the company has made important leaps on mobile, it will not be developing the much-discussed Facebook phone.

The company saw a serious uptick in mobile advertising revenue, which made up 23 percent of its total advertising revenue in the fourth quarter, compared to 14 percent in the third quarter. Mobile is the most important game now for Facebook, as it was for the last earnings report. The company has worked to improve the speed of its native apps in 2012. Zuckerberg highlighted the speed of the company’s apps as a major area of improvement in 2012.

â�?�?Often, doing a good job is focusing on basic issues like performance and stability,â�? he said.

Over the past year, Facebook has focused tremendously on monetization through mobile advertising. COO Sheryl Sandberg emphasized that Facebook is the platform that marketers should consider when allocating their advertising dollars because of the company’s strength among mobile users, obviously contrasting the company to its ad rival Google.

“Facebook is a relatively new marketing platform, so proving that our ads are effective remains an important priority,” she said. “Marketers are realizing that our newsfeed is the most efficient and effective way to reach their customers.”

The company now has 1.06 billion monthly active users as of Dec. 31, as compared to 1.01 billion as of Sept. 30. The company has 618 million daily active users compared to 584 million on average in September, and mobile MAUs are at 680 million compared to 604 million as of Sept. 30.

The company recently released Graph Search, which will likely have its own monetization opportunities, and Zuckerberg was eager to emphasize that while it’s still a beta product, it creates serious long-term opportunities for the company. He took obvious digs at Google in emphasizing Facebook’s collection of personal data and connections that can be used in search, and said the companies had different goals:

“Weâ�?�?re just coming from a completely different place,” he said. “Our whole product is people and structured connections.”

Facebook has gone through a holiday season will the full roll-out of its e-commerce “Facebook Gifts” product. However, the company did not break out revenue from Facebook gifts in its earnings report, stating only that advertising made up 84 percent of revenue, up from 41 percent from the same quarter last year. And the company said only that it is working to figure out how to get people using Facebook Gifts more and making it part of the natural site experience. Revenue from payments and other fees (such as those connected with games) was $256 million, which saw essentially no increase over the previous year after adjusting for accounting changes in December.

This post was updated continuously to reflect Facebook’s afternoon earnings call.

Related research and analysis from GigaOM Pro:
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  • Facebook’s IPO filing: ideas and implications
  • Connected world: the consumer technology revolution
  • Flash analysis: the future of Yahoo

Google Exploring Fees for YouTube Programming

The players competing for online streaming customers continues to grow, and Google (NASDAQ: GOOG  ) hasn't stopped its efforts to gain market share. When Google began actively pursuing Hollywood talent to develop top-flight, original content for its YouTube site a couple years ago, it was pretty clear that the tech behemoth was in the streaming video biz to stay.

In many respects, Google's hinting at a subscription fee for YouTube content, as recently reported in Ad Age, should surprise no one. In fact, Google has said before it would explore ways to generate non-advertising revenue from YouTube -- now the third most popular��site on the Internet -- but, according to Ad Age, that time is nearly here.

The specs
With an expected price range of $1 to $5 a month for a few, select channels, the YouTube subscription service isn't likely to add significantly to Google's $50 billion in annual revenues out of the gate. But, as an initial test, a subscription fee opens up a world of possibilities. There's talk of Google soliciting outside, independent producers to submit content with a revenue split based on subscriptions, as well as charging for some of its more popular, existing content.

Taking the idea even a step further, Google has alluded to a pay-per-view type of arrangement for live events broadcast via YouTube, along with charging for self-help type of programming. An unnamed spokesperson for Google put it this way:

We have long maintained that different content requires different types of payment models.

In other words, if the subscription rollout occurs in Q2 of this year, as some believe, it may look quite a bit different by Q2 of 2014, or that a split from Google's traditional advertising specialization might make sense in the case of YouTube.

Now what?
Success breeds competition, and nowhere is that more true than in the world of investing. Netflix (NASDAQ: NFLX  ) , for all its faults, continues to build its online streaming video cache to the delight of investors. After announcing a surprisingly positive earnings report, Netflix is feeling so giddy, it's decided that institutional investors should invest $400 million via its new debt offering. Naturally, as Netflix grows, so, too, does its competition, and a subscription-based YouTube is just one of many alternatives for streaming customers.

Amazon.com (NASDAQ: AMZN  ) and its Prime service is another online behemoth doing more than dipping its feet into the streaming pool. Multi-million dollar agreements with content providers like Epix is only one of the upgrades Amazon.com is making to its streaming service. Original content, particularly as the playing field includes more and more participants, is becoming a critical part of differentiating oneself in the market. Amazon.com is set to rollout six new shows later this year, all produced in-house. Netflix, too, has original content in the works, scheduled for rollout as early as Feb. 1.

What differentiates Google's YouTube from a Netflix or Amazon.com Prime is its leadership position in generating content. In addition to using media �outlets, Google has the aforementioned Hollywood types, and other industry pros from around the world, already producing quality content.

Will a monthly subscription fee for YouTube offerings, or a pay-per-view arrangement, be a game changer for the tech titan? Nope, but that's the beauty of Google; the new model doesn't have to be an all-or-nothing proposition. With multiple revenue streams, over $48 billion in cash on the books, and a never-ending source of content, Google can afford to experiment with YouTube as much as it needs to.

�����

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European Stocks End Strong Month Lower

European stocks ended an otherwise strong month on the downside Thursday, weighed by weakness in banking and oil and as a number of downbeat economic data and corporate news dented sentiment.

The Stoxx Europe 600 index dropped 0.5% to 287.22, adding to a 0.6% loss from Wednesday. For the month, the index gained 2.7%, marking the strongest monthly performance since July.

The U.K.'s FTSE 100 index lost 0.7% to 6276.88 but jumped 6.4% for January. Germany's DAX retreated 0.5% to 7776.05, trimming its monthly gain to 2.2%. France's CAC-40 shed 0.9% to 3732.60 but gained 2.5% on the month.

"The pace of the gains over the past month has created an element of nervousness and that's a factor that has been sitting on the market for the last couple of days," said Keith Bowman, equity analyst at Hargreaves Lansdown.

"We've had some worries from yesterday's [U.S.] GDP numbers and investors are still mulling that over. At the same time they are looking toward nonfarm payrolls due tomorrow to provide a firmer figure," he said.

U.S. investors also hit the pause button on January's rally, and Facebook shares struggled after its earnings report, falling 2.9%. The stock received at least four analyst downgrades.

Midday in New York, the Dow Jones Industrial Average pulled back 28 points, or 0.2%, to 13882. Still, it was on track to notch its best start to the year since 1997. The Standard & Poor's 500-stock index declined four points, or 0.3%, to 1498 and the Nasdaq Composite Index lost three points, or 0.1%, to 3139.

The broader European market briefly trimmed losses in late-session action, after the Chicago purchasing managers' index rose to the highest level since April 2012. Meanwhile, the U.S. Labor Department said the number of people applying for jobless benefits jumped by 38,000 last week to 368,000, marking the biggest increase since the week after Superstorm Sandy.

In Europe, German unemployment rose above three million people in January, taking the number of unemployed to the highest level since March 2011. However, the jobless rate declined to 6.8% from 6.9% the previous month, below forecasts.

The euro zone's largest economy also posted a sharp drop in retail sales in December, falling 1.7% on the month and 4.7% on the year, stoking fears that the currency area's growth engine may be stalling.

Still, consumer price inflation slowed to 1.7% in January, potentially giving the European Central Bank more room to cut interest rates again.

In market action, Ericsson LM posted some of the biggest gains, rising 7.6% after the telecom-equipment supplier said it expects profitability to improve in the second half of 2013.

On the downside, AstraZeneca sank 3.2%. The U.K. drug maker warned in its quarterly earnings report that sharp declines in revenue and earnings would continue through 2013 after it lost patents on key drugs.

Most bank shares were also under pressure. Royal Bank of Scotland Group shed 1.1%, while HSBC Holdings gave up 1%. The U.K. Financial Services Authority ordered the four largest banks by assets to pay out compensation to small-business customers because of how they marketed products to reduce interest-rate risks.

Cr�dit Agricole fell 1.5% and Commerzbank ended 0.9% lower.

Banco Santander gave up 3.5% after its fourth-quarter earnings missed analyst expectations and net-interest income declined from a year earlier. Spain's IBEX 35 index slumped 2.5% to 8362.30 but gained 2.4% on the month.

The oil sector was under pressure after Royal Dutch Shell slid 2.9%. It posted fourth-quarter results below expectations.

Infineon Technologies jumped 3.9%, after the chip maker backed its fiscal year outlook, even as first-quarter revenue missed market expectations.

In currency markets, the euro was fetching $1.3585 by close of the European session, from $1.3567 late Wednesday in New York. The dollar was at �91.23 from �91.09.

Among commodities, light, sweet, crude for March delivery was down 73 cents at $97.21 a barrel on the New York Mercantile Exchange by the close of European equity markets. Most actively traded gold for April delivery on the Comex division was down $20.50 at $1,659.70 a troy ounce.

Write to Nina Bains at nina.bains@dowjones.com

Salesforce.com: Piper Upgrades

Piper Jaffray analyst Mark Murphy this morning raised his rating on Salesforce.com (CRM) to Overweight from Neutral, while keeping his $115 price target.

He offers four reasons for the upgrade:

  • The stock is down nearly $20 in the past two weeks, moving back below his target.
  • Transaction volume growth has accelerated to 53% in the first two months of Q3, up from 50% in Q2.
  • The company has ramped job postings by 30% in September, the largest increase in 2 years, reflecting a bullish view of business prospects.
  • The skyrocketing Euro will benefit revenue growth.

Nonetheless, the stock is down $1.88, or 1.8%, to $103.07.

Wednesday, January 30, 2013

Why the Dow Shrugged Off Recession Fears This Morning

Ordinarily, you'd expect news that the U.S. economy contracted during the fourth quarter to cause massive selling, as investors would fear the onset of a fall back into recession after a tepid economic recovery over the past several years. Yet the market's response to the Bureau of Economic Analysis' announcement that GDP fell at a 0.1% pace last quarter was relatively muted, with investors apparently concluding that huge cuts in government defense spending were likely anomalous and therefore not indicative of long-term weakness. More encouragingly, consumer-facing categories like residential investment and durable-goods expenditures showed strong gains. The Dow Jones Industrials (DJINDICES: ^DJI  ) has given up only modest ground, falling about 18 points as of 10:45 a.m. EST.

Within the Dow, Caterpillar (NYSE: CAT  ) showed general ambivalence to the economic readings, hanging just below the unchanged level. The drop in net income from year-ago levels that the company reported earlier this week indeed suggests economic weakness across the globe, but shareholders have taken Caterpillar's conservative guidance in stride, looking instead to the realization that eventually, rising populations in emerging markets will require the sorts of investments that will benefit the construction equipment giant.

Elsewhere, Chesapeake Energy (NYSE: CHK  ) soared more than 6% on news that controversial CEO Aubrey McClendon will leave the company on April 1. Apart from the obvious April Fool's references, investors should focus on whether McClendon will receive the tens of millions of dollars in severance benefits that his employment contract provides for in the event of a "termination without cause." Any such payout would be a parting shot at investors who have had to deal with a laundry list of provocative behavior from McClendon in recent years.

Finally, MGIC Investment (NYSE: MTG  ) recovered from a big drop near the open to rise 5.7%. The beleaguered mortgage-insurance company has struggled throughout the housing bust as high delinquency rates led to massive losses for MGIC. Yet as home prices have firmed and mortgage activity has returned to the marketplace, MGIC could well be poised for a long-awaited turnaround.

Is Chesapeake ready to roar?
Find out more about what Aubrey McClendon's departure will mean for Chesapeake by reading our premium report on the stock. Chesapeake has enormous potential, and new leadership could unlock value for shareholders. Find out whether Chesapeake's a buy by getting your copy of the report today. Simply click here now to get instant access, along with updates for a full year.

3 Shares Set to Beat the FTSE 100 Today

LONDON -- Shock, horror! As of 8 a.m. EST, the FTSE 100 (FTSEINDICES: ^FTSE  ) has not yet set another 52-week record! The index is rather flat today, up a meager five points to 6,299. There isn't a lot of relevant economic news going around at the moment, but the general global sentiment is reasonably optimistic -- at least, there's no region in panic right now.

But which individual shares are rising? Here are three constituents of the various indexes on the way up today.

William Hill (LSE: WMH  )
Bookmaker William Hill shares have been soaring, putting on another 2.5% today to take the price up 65% over the past 12 months. Today it was a trading update that triggered the rise, telling us nice things about the firm's fourth quarter and full year to Jan. 1.

Revenue for the year grew by 12%, with operating profit up 20%, and progress was made on a couple of acquisitions in the fourth quarter. A recommended offer was made for Australian and Spanish online businesses from Sportingbet, and the process of valuing Playtech's 29% stake in William Hill Online is under way.

3i (LSE: III  )
Shares in 3i Group are up another 3% this morning, taking the price up to a 52-week record and up nearly 50% over the past 12 months. Back in November, it was reported in the Financial Times that Sherborne Investors, based in Guernsey, intended to invest around 200 million pounds in a company it thought to be undervalued.

And today, 3i told us that Sherborne, through associates including Jeffries International, has been trading heavily in 3i shares since the beginning of January and as of Jan. 15 had acquired and passed on to Jeffries approximately 0.7% of 3i's share capital. Since then, 3i believes Jeffries has gone on to acquire a total of 1.6% of 3i's share capital.

Delcam (LSE: DLC  )
Delcam shares have been flying as well, and today they've jumped a further 7.3% on the back of a pre-close trading update ahead of results for the year to Dec. 31. Revenue for the year is expected to be at least 47 million pounds, with pre-tax profit reaching approximately 5 million pounds.

That's ahead of the current analyst consensus, which suggests profit of about 4.5 million pounds for the year. The shares are on a price-to-earnings ratio of about 20 now, but we have a couple of years of further earnings growth forecast. There is a small dividend expected, with a yield of less than 1%.

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Stocks Down; Chesapeake Stock Soaring

REUTERSGone

The leading stock indexes are down a fraction this morning after data showed that the US economy declined at an annual rate of 0.1% in the fourth quarter.

Shares of Chesapeake Energy (CHK) are up about 10% in the wake of the announcement that scandal-plagued co-founder and CEO Aubrey McClendon willleave on April 1. Analysts at Stifel Nicolaus upgraded the stock to a Buy this morning, though it’s worth noting that analysts at Sterne Agee, RBC Capital Markets and Argus Research all reaffirmed their Hold ratings.

Copano Energy (CPNO) stock is jumping, up 17% after Kinder Morgan Energy (KMP) said it would buy the company in an all-stock deal worth $3.2 billion. Kinder Morgan’s stock is down a fraction.

Phillips 66 (PSX) stock is up 3.5% after fourth-quarter earnings beat estimates on rising margins, mirroring the numbers seen at fellow oil refiner Valero (VLO) yesterday (and that stock gained 13% after its earnings).

The margin between the cost of crude and the price at which refiners sell fuel on the U.S. Gulf Coast averaged $5.11 a barrel in the October-to-December period, the most since 2005 and more than double the average in the same time last year, according to data compiled by Bloomberg.

On the decline are shares of watchmaker Fossil (FOSL), down more than 2.5%. Brean Capital downgraded the stock this morning, in part based on valuation:

We believe the recent aggressive run up in the stock is unwarranted, especially in the near term, as we view China as slowing and Europe and the domestic markets remaining under pressure. Further, with the December Swiss watch data to be released next week (February 5th) and the company announcing 4Q12 results before the open on February 12th, we believe near term material catalysts are clearly on the horizon. We want to emphasize that this call is very much risk/reward and shorter term predicated; we believe that, in the longer term, Fossil will remain a dominant timepiece brand.

Here’s more on McClendon’s departure:

 

 

Toshiba Wins $214 Million Med-Equip Contract

On Tuesday, the Department of Defense announced it has awarded two contracts worth a combined $225.8 million for the supply of radiology systems, subsystems, and components to the U.S. Army, Navy, Air Force, Marine Corps, and federal civilian agencies.

The first contract, for $211 million, goes to Toshiba America Medical Systems and extends an existing fixed-price contract with economic-price-adjustment into a fourth "optioned" year. This contract will be performed in fiscal years 2013 and 2014.

The second contract, for $11.8 million, goes to Toshiba subsidiary Vital Images of Minnetonka, Minn. Also an option-extension, this contract adds a second year to a previously issued fixed-price-with-economic-price-adjustment contract, and it, too, will be performed in fiscal years 2013 and 2014.

Foolish Review: Pfizer Earnings

In the following video, Motley Fool health care analyst David Williamson talks about Pfizer's (NYSE: PFE  ) earnings report. He details how the company managed to cut costs and shore up emerging market sales -- leading to it beating expectations this quarter -- despite the loss of patent protection for its cardiovascular disease prevention drug Lipitor, which was once the greatest-selling drug of all time.

While you can certainly make huge gains in biotech and pharmaceuticals, the best investing approach is to choose great companies and stick with them for the long term. In our free report "3 Stocks That Will Help You Retire Rich," we name stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of.�Click here now�to keep reading.

Tuesday, January 29, 2013

AMR Bondholders Pushing For US Airways Merger

American AirlinesWill they soon have to repaint again?

As American Airlines parent AMR (AAMRQ) works its way out of bankruptcy, the big question has been whether and when the company’s management will agree to a merger with US Airways (LCC), a deal that I’ve argued could be essential to the future of both airlines.

Bloomberg is reporting today that a key constituency — AMR’s bondholders — are have now decided to support a merger:

The bondholders coalesced behind the idea after reviewing confidential data from AMR�s American Airlines�and US Airways, said the people, who asked not to be identified because the talks are private. The promise of more cost savings and other financial benefits from a combined carrier than a stand-alone American helped sway the group, one of the people said.

AMR Corp. has urged that creditors get 80 percent of the equity versus 20 percent for US Airways Group Inc. shareholders, while US Airways favors a 70 percent to 30 percent division, a person said.

While the ad hoc group doesn�t hold a seat on AMR�s unsecured creditors committee, the debt holders� support gives US Airways�an ally as it makes the case for a tie-up that would create the world�s largest airline. AMR said Jan. 3 it expected to decide in weeks to merge or stay independent.

The bondholders are pushing for a resolution before Feb. 15, adds the report. We’ll see if this is going to be enough to persuade AMR CEO Tom Horton to agree very soon to a deal that US Airways has wanted for more than a year. At the least, I’d say the odds of a merger have substantially increased with this news — especially as it comes the day after AMR said it reached agreement with the Transport Workers Union of America over labor terms with the union’s members in the event of a merger.

How Should You Be Playing Arabian American Development?

There's no foolproof way to know the future for Arabian American Development (NYSE: ARSD  ) or any other company. However, certain clues may help you see potential stumbles before they happen -- and before your stock craters as a result.

A cloudy crystal ball
In this series, we use accounts receivable and days sales outstanding to judge a company's current health and future prospects. It's an important step in separating the pretenders from the market's best stocks. Alone, AR -- the amount of money owed the company -- and DSO -- the number of days' worth of sales owed to the company -- don't tell you much. However, by considering the trends in AR and DSO, you can sometimes get a window onto the future.

Sometimes, problems with AR or DSO simply indicate a change in the business (like an acquisition), or lax collections. However, AR that grows more quickly than revenue, or ballooning DSO, can, at times, suggest a desperate company that's trying to boost sales by giving its customers overly generous payment terms. Alternately, it can indicate that the company sprinted to book a load of sales at the end of the quarter, like used-car dealers on the 29th of the month. (Sometimes, companies do both.)

Why might an upstanding firm like Arabian American Development do this? For the same reason any other company might: to make the numbers. Investors don't like revenue shortfalls, and employees don't like reporting them to their superiors.

Is Arabian American Development sending any potential warning signs? Take a look at the chart below, which plots revenue growth against AR growth, and DSO:

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. FQ = fiscal quarter.

The standard way to calculate DSO uses average accounts receivable. I prefer to look at end-of-quarter receivables, but I've plotted both above.

Watching the trends
When that red line (AR growth) crosses above the green line (revenue growth), I know I need to consult the filings. Similarly, a spike in the blue bars indicates a trend worth worrying about. Arabian American Development's latest average DSO stands at 40.0 days, and the end-of-quarter figure is 36.9 days. Differences in business models can generate variations in DSO, and business needs can require occasional fluctuations, but all things being equal, I like to see this figure stay steady. So, let's get back to our original question: Based on DSO and sales, does Arabian American Development look like it might miss its numbers in the next quarter or two?

The numbers don't paint a clear picture. For the last fully reported fiscal quarter, Arabian American Development's year-over-year revenue shrank 11.8%, and its AR dropped 3.6%. That looks OK. End-of-quarter DSO increased 9.3% over the prior-year quarter. It was down 1.2% versus the prior quarter. Still, I'm no fortuneteller, and these are just numbers. Investors putting their money on the line always need to dig into the filings for the root causes and draw their own conclusions.

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  • Add Arabian American Development to My Watchlist.

The Quest to Create a Bionic Eye Gets Clearer

Have scientists finally created a bionic eye? The quest to develop a device that will give some blind people vision again, a retinal prosthesis, has been challenging. Shirley Wang joins Lunch Break with the latest on the research. Photo: Second Sight.

Restoring sight to the blind has proved particularly challenging for scientists, but a new technology combining an eye implant and video-camera-enabled glasses may soon be available in the U.S.

Researchers have been pursuing the development of such a bionic eye for decades, in some cases spending hundreds of millions of dollars to tackle engineering challenges. One device designed to help people with a rare eye condition is awaiting U.S. regulatory approval. It is known as Argus II, made by Second Sight Medical Products Inc. of Sylmar, Calif. Other researchers, including at the Massachusetts Institute of Technology and Stanford University, continue to work on what they believe are even more sophisticated versions.

Second Sight's product uses what is known as a retinal prosthesis that bypasses the dead or damaged cells in the eye needed to detect light. Instead, the device reroutes visual data via the implant to parts of the eye that still work. Like other similar devices under development, it uses a video camera embedded in a pair of eyeglasses to collect visual input in the form of light and transmit it to the implant as an electrical signal.

If Argus II is approved by the Food and Drug Administration, it would be the first retinal prosthesis to hit the market in the U.S. The device is already available in Europe.

Enlarge Image

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The patients most likely to benefit from these devices are those with retinitis pigmentosa, a rare disease that damages and kills the cells in the retina�a tissue layer at the back of the eye�that process light. For people with the condition, their vision grows increasingly blurry until they eventually can't see at all. Some 100,000 patients in the U.S. have the condition.

Another group of patients who may find such technology useful, scientists say, is those with severe macular degeneration. This is an age-related disease that damages the part of the eye that perceives fine detail, according to the National Eye Institute. The various retinal prostheses under development all use video cameras to send light information to chip implants. Most of them use the data to trigger electrodes in the chip to stimulate pixels of light on the retina, which are then processed normally by the brain as images.

The technology tested to date lets the wearer primarily see in black and white. It is most useful for seeing sharp contrasts, such as the painted white line of a crosswalk on a dark road. But scientists hope that they can improve the detail to eventually enable color vision in its wearers.

Barbara Campbell, a 59-year-old vocational rehabilitation counselor, has had virtually no sight since her 40s. She had the Argus II implanted in her left eye in 2009 after hearing about the device through her work at the New York state Commission for the Blind and Visually Handicapped.

Though she was told the device was experimental, Ms. Campbell thought, "anything I gain will be a plus," she said.

Ms. Campbell had a five-hour surgery at New York-Presbyterian Hospital and two months later was fitted for the video glasses. Returning to her apartment, she could see that the light fixtures in the hallway of her building were different from how she remembered they used to be.

While her vision is still limited to discerning large objects such as furniture, she said, she can now see the pole at her bus stop instead of having to locate people standing nearby. When she goes to the theater, she can follow the actors on stage, though she cannot see their facial expressions.

"It's very exciting and it's very cool," Ms. Campbell said. "I felt that my brain now had to become used to using vision again," she said.

Some 50 patients, including Ms. Campbell, have been implanted with the Argus II, with two-thirds of them experiencing benefits. The patients who respond the best can read large letters a few inches tall. Patients report the biggest gains are in improved orientation and mobility, said Robert Greenberg, Second Sight's CEO, who also is a medical doctor.

Designing a bionic eye has been much more difficult than developing other types of aids, such as a cochlear implant for hearing, say scientists. For one thing, visual information is two-dimensional�both horizontal and vertical coordinates must be sent to the brain�while sound waves needed for hearing are one-dimensional.

Another challenge is protecting the implant in the eye, since it essentially has to sit in a bath of organic liquid. "It's like taking your television and throwing it in the ocean and expecting it to work," said Dr. Greenberg. Scientists have spent time working out how to manufacture tiny, airtight boxes that can shield implants when they are in the eye.

A big obstacle has been figuring out how to adequately capture and stimulate enough pixels of light on the retina to produce a clear image. Normal vision is based on more than one hundred million receptors in each eye, but it is impossible to squeeze that many electrodes into a tiny device that has to lay on the retina, said John Wyatt, a professor in the department of electrical engineering at MIT who has been working on a retinal prosthesis since 1988.

Second Sight's Argus II contains 60 electrodes, but some other scientists say that for a retinal prosthesis to be truly useful to patients, hundreds are needed. "In theory, you'd like to have more electrodes, but not if it means an implant that doesn't survive more than a few months" because the device is too bulky and unstable to stay in place in the eye, Dr. Greenberg said. "That was the trade-off we made."

Instead, the company is working to create better video cameras and software, which are external to the eye and easily updated, to better enhance and interpret the information sent to the implant, he said.

Dr. Wyatt and his group at MIT are developing a bionic eye that will contain between 256 and 400 electrodes. They are currently working on their fifth version. Earlier models have been implanted successfully in Yucat�n miniature pigs and temporarily in six humans. They are planning to form a company to commercialize their technology.

At Stanford University, ophthalmology professor Daniel Palanker's group has taken a different approach to the problem. Instead of using electrodes, his team developed rows of tiny "photovoltaic" pixels (like solar panels), powered by the pulsed light from the video goggles, which are implanted under the retina. These implants convert light into electric current that stimulates local retinal neurons, which then send signals to the brain, meaning no wires are necessary to stimulate the retina.

Using this technology, Dr. Palanker expects to be able to fit enough light-powered panels to stimulate 5,000 pixels in a space similar to what the other retinal prostheses use. The device is currently being tested in rats and is expected to begin a human trial in a year or two, he said.

Write to Shirley S. Wang at shirley.wang@wsj.com

This Just In: Upgrades and Downgrades

At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." Today, we'll show you whether those bigwigs actually know what they're talking about. To help, we've enlisted Motley Fool CAPS to track the long-term performance of Wall Street's best and worst.

Who's hot, who's not -- in fertilizer stocks
Wading back into the fertilizer sector Friday, analysts at Dahlman Rose announced a series of three new upgrades -- and at least one commentator believes we could see a few more in short order. Rentech Nitrogen (NYSE: RNF  ) , CF Industries (NYSE: CF  ) , and Agrium (NYSE: AGU  ) -- all three of these fertilizer names scored upgrades to buy courtesy of Dahlman last week. But why?

Rentech Nitrogen Partners
Let's start with Rentech. The company doesn't even report earnings until March 19, which might lead you to believe the analyst is jumping the gun on this one. Then again, with a 17.4 P/E ratio and a 6.5% dividend yield, it might not pay to wait.

Already, analysts on Wall Street have Rentech pegged for an average 12% earnings growth rate over the next five years. But StreetInsider.com says it sees "a number" of upcoming USDA forecasts that could bode well for Rentech, and boost earnings estimates going forward. These include "(1) the annual USDA Long-Term Agricultural Outlook on February 11th, (2) the USDA Prospective Plantings Report on March 28th, and (3) upcoming USDA WASDE releases on February 8th and March 8th."

Dahlman thinks that if "preliminary acreage estimates for 2013/2014 ... exceed 96.5 MM acres for corn [then this] should support fundamentals for the nitrogen participants" such as Rentech. Given that the company's dividend yield and expected growth rate numbers are already high enough to justify the stock's price, any good news at all should prove Dahlman right, and transform Rentech into a "buy."

CF Industries �
Dahlman is similarly upbeat on CF's prospects, and for similar reasons. But here, the prospects for outperformance may be magnified by the ultra-low expectations investors have for CF stock. Right now, the company's carrying a below-average P/E of only 8.2, and it's almost certainly being held back by the belief that earnings will grow at less than 3% going forward. (CF's dividend yield, at just 0.7%, also doesn't really do a lot to make the stock look attractive.)

But CF does have a few things to recommend it. For example, it's more diversified than Rentech, distributing both nitrogen and phosphate fertilizers. For another, it's in a much better situation than Rentech, cash-wise, generating positive free cash flow of $1.7 billion annually -- or nearly 96% of reported net income. In contrast, Rentech is currently burning cash.

Agrium
If by this point you're starting to think that CF Industries might be the better way to play the upcoming USDA ag reports -- well, hold up a sec. Dahlman still has one more recommendation to pitch you: Agrium.

Priced at just 13.6 times earnings, and growing at 6.9% according to consensus estimates, Agrium sits in a happy middle ground between Rentech and CF, cheaper than the one, but growing faster than the other. It's similarly neither hot nor cold on the cash-flow front, generating a bit over $1 billion in cash profit annually -- enough to back up about 79% of reported profit.

But here's the best part: Agrium is already starting to prove Dahlman's thesis right. Last week, Agrium announced �that its Q4 earnings will come in north of $2 a share, beating both the low and the high end of its previous guidance range ($1.50 to $1.90), and positively crushing the $1.73 number that the Street had been expecting it to produce. Agrium says its retail business posted a "record year" in 2012, while its wholesale fertilizer business "also continued to generate better-than-expected results."

Wait! There's more.
As if all that wasn't enough news to consider, StreetInsider.com predicts that the improving prospects for fertilizer producers will extend beyond the three names Dahlman has recommended. According to the ratings aggregator, peer producers PotashCorp (NYSE: POT  ) and Mosaic (NYSE: MOS  ) are also "on watch" for upgrade, based largely on the "on improved outlook" from Agrium.

Foolish takeaway
Should we be excited by this prospect? I'm not so sure.

Priced at 16.3 and 14.5 times earnings, respectively, neither Potash nor Mosaic looks particularly "cheap" to me based on consensus growth rates of 4% and 8% (again, respectively). In fact, when you get right down to it, I'm not all that enthused about buying any of these companies based on mere hopes of what the USDA might or might not say in its upcoming forecasts.

Even if you think the P/E numbers do look cheap today (and really, given the weak growth estimates, the only stock that looks attractive here from a P/E perspective is Rentech), the fact remains that none of these companies is currently generating real free cash flow at anywhere near the rate they claim to be "earning" GAAP profits.

My advice: Don't trust to Dahlman's optimism, or USDA's forecasts, to rescue you from buying overvalued stocks. The fundamentals just don't justify investing in any of these companies today. The valuation argument simply isn't there.

Forget global fertilizer plays. Profiting from our increasingly global economy can be as easy as investing in your own backyard. Our free report, "3 American Companies Set to Dominate the World," shows you how. Click here to get your free copy before it's gone.

Top Stocks For 1/29/2013-20

Company: FIRST LIBERTY POWER, FLPC.OB

Price: 0.46

Change: +4.55%

Volume: 22.1K

First Liberty Power Corp., an exploration stage company, engages in the acquisition, exploration, development, mining, and production of mineral properties in the United States. The company primarily explores for lithium, vanadium, and uranium ores. It holds the rights to an 84 claim, a 12,800 acre property located in Clayton Valley, Nevada; and 66 vanadium-uranium mineral lode claims situated in the northeast corner of San Juan County, Utah. The company was formerly known as Quuibus Technology, Inc. and changed its name to First Liberty Power Corp. in December 2009. First Liberty Power Corp. was founded in 2007 and is based in Las Vegas, Nevada.

THIS IS NOT A RECOMMENDATION TO BUY OR SELL ANY SECURITY!

Monday, January 28, 2013

Top Stocks For 1/29/2013-19

AirMedia Group Inc. (Nasdaq:AMCN) recently announced they have established a strategic partnership to operate a TV channel of CCTV Mobile Media (“CCTV Air Channel”) to broadcast TV programs to air travelers in China. The partnership agreement has a term of 15 years until November 28, 2025. CCTV Air Channel will be run based on AirMedia’s network of digital TV screens in airports and digital TV screens on airplanes. CCTV Mobile Media will be responsible for program planning, production, and broadcasting.

AirMedia Group Inc. is a leading operator of out-of-home advertising platforms in China targeting mid-to-high-end consumers. AirMedia operates the largest digital media network in China dedicated to air travel advertising.

Alliance Bancorp Inc of Pennsylvania (Nasdaq:ALLB) announced recently that Alliance Mutual Holding Company, the Company’s mutual holding company parent, has received conditional approval from the Office of Thrift Supervision and the Pennsylvania Department of Banking to reorganize from the two-tier mutual holding company structure to the stock holding company structure and commence a “second-step” stock offering of shares of common stock of a new holding company.

Alliance Bancorp, Inc. of Pennsylvania is the holding company for Alliance Bank, a Pennsylvania chartered, FDIC-insured savings bank headquartered in Broomall, Pennsylvania. Alliance Bank operates nine full-service branch offices located in Delaware and Chester Counties, Pennsylvania.

Allot Communications Ltd. (Nasdaq:ALLT) recently announced that it has filed a shelf registration statement on Form F-3 with the United States Securities and Exchange Commission (the “SEC”). Under the shelf registration statement, once declared effective by the SEC, Allot may offer and sell from time to time in the future, in one or more public offerings, up to $100,000,000 of ordinary shares, warrants, debt securities or any combination thereof.

Allot Communications Ltd. is a leading provider of intelligent IP service optimization solutions for fixed and mobile broadband operators and large enterprises. Allot’s rich portfolio of solutions leverages dynamic actionable recognition technology (DART) to transform broadband pipes into smart networks that can rapidly and efficiently deploy value-added Internet services.

London’s ‘Bloated’ Banks Shrinking

Banks in London are shedding staff, closing or cutting divisions and seeing pay fall as criticism by politicians, tighter regulations and falling profits take their toll on the financial services sector.

Bloomberg reported that London’s Square Mile district has shrunk more than any financial center in the world as it seeks to shed size and make its operations more efficient. Michael Kirkwood, 64, former head of Citigroup's U.K. division, who began his career in the Square Mile in 1965, was quoted saying, “We’re going to end up with a smaller, more focused financial sector. The entire financial world became too bloated in the run up to the financial crisis, and London was excessively bloated.”

John Mann, a Labor Party lawmaker, was quoted saying, “The whole industry needs to be consolidated and needs to be shrunk. It’s too powerful. That is to the huge detriment of the long-term sustainability of economic growth in this country.”

London houses the world’s biggest center for foreign-exchange trading, cross-border bank lending and interest-rate derivatives. Tighter regulations, including the threat of a financial transaction tax and demands for higher reserves, angry politicians who blame the financial sector for much of Europe’s debt woes, and the falling demand for services in an environment beset by recession or the threat of it have pushed the sector to trim whatever it can, wherever it can. It is doubtful that Britain will emerge unscathed, since a high percentage of the nation’s tax receipts–12%–come from finance.

Philip Keevil, a former head of North American investment banking at S.G. Warburg & Co. and now a partner at New York-based advisory firm Compass Advisers, was quoted saying, “Most of the main sales and trading desks in Europe, Middle East and Africa are here. Insofar as global banks have to make cuts in these areas because of Basel III and other regulations, then the cuts will be in London.”

The Basel Committee on Banking Supervision’s latest capital and liquidity rules will cut investment banks’ return on equity to 7% from 20%, according to a McKinsey & Co. report published in September. That will reduce after-tax profits from $40 billion to $30 billion for the biggest 13 banks, it said.

Many banks are now exiting capital-intensive activities such as proprietary trading. Others, according to Ian Baggs, global banking and capital markets deputy leader at Ernst & Young in London, are concentrating on increasing the volume of trades made with client money in markets such as interest-rate swaps, rather than proprietary trading, which uses the bank’s own money to take positions and carries a high regulatory capital requirement.

Bloomberg data shows that financial services firms in the U.K. cut 58,000 jobs last year, more than any other country in the world and 45% percent of the cutbacks announced by all western European banks. The Center for Economics & Business Research has said that employment for London’s bankers over the next two years will stay under 1998 levels.

Giles Williams, head of KPMG’s financial-services regulatory center of excellence in London, said in the report, “Institutions that aren’t in the top positions in certain products will begin to exit those products. Banks will focus on what they are good at and what they’re famous for.” He added that proprietary trading in fixed income, commodities and derivatives markets will likely be the hardest hit.

A Polarizing Company That Often Poisons Rational Investing Brains

Sometimes when we take a position on a controversial topic, we poison our own thinking. Nowhere is this more apparent than in politics.

Back in 2009, while interviewing Arianna Huffington on CNBC, host Larry Kudlow stated, "I have not changed my point of view for my entire adult life." As our own Morgan Housel later lamented:�

I struggle to think of a worse trait for someone hoping to understand the world. The guy you want to listen to is the one who is constantly saying: "I was wrong. Here's why, and here's how it's changing my outlook."�

There's a name for such a hardheaded phenomenon: the backfiring effect. The idea behind the effect is that when you are presented with factual information that runs contrary to your beliefs, instead of integrating this new knowledge, you actually double down on your previous point of view.

But taking such all-or-nothing stances on important issues isn't limited to politics; when this type of thinking enters our investment mind-set, it can wreak havoc on our portfolios.

Recently, I've been taking a long look at several biases that can poison our investment brains. Below, I'll give you a real-life example of the backfiring effect in action, let you know how you can combat it, and at the end, offer up access to a special premium report.

Is there a more polarizing stock out there?
Back when I used to work at Fool headquarters outside of Washington, D.C., there was a running joke that if you ever wanted to get lots of passionate commenters for one of your articles, all you had to do was write a piece about Sirius XM Radio (NASDAQ: SIRI  ) .

Want proof?�Check out this article, published in January 2009, when Sirius was trading for as low as $0.11 per share. In it, Rick Munarriz makes the argument that analysts shouldn't be discontinuing their coverage of Sirius based on its then-impending debt payments and the speculative nature of the stock.

Rick argued that "one less celebrated analyst tracking the company will leave the ultimate lessons in this hit-or-miss case study unheard and unheeded." In other words, analysts who were dropping the company were missing the chance to glean some important lessons for future investors.

But a look at the comments on the piece reveals some passionate thinking that in no way addresses Rick's argument, and that actually had nothing to do with Sirius at all.

One commenter wrote: "Why would anyone buy a subscription to a rag that spends it's time trying to bury an 11 cent stock that you FOOLS pumped?" Meanwhile, another bemoaned the fact that Rick didn't own any shares of Sirius.�

The funny thing here is that Rick wasn't really presenting any negative facts about Sirius, but the title made it appear as though he was, and that was enough to make these investors irate, and to double-down their allegiance to Sirius.

There were, thankfully, several examples of cool-headed, well-reasoned responses to Rick's main points. For instance, one commenter, clearly understanding Rick's gist, wrote: "I would think the drama at Sirius would make it more interesting to report about and watch."�

What you can do
Of course, I have no way of knowing if any readers actually went out and doubled down on their holdings. The bottom line is that there was a lot of passion, and oftentimes, there's not enough cool-headed reasoning.

One of the toughest things to do as an investor, and as a human being, is to dissociate ourselves from our performance. If I tie all of my self-worth to how I perform as an investor (or as an athlete, cook, or any other pursuit I undertake), then I make it very difficult to honestly assess how I'm doing.

Though I'm far from immune to the backfiring effect, I've found that there are two practices that help me be more honest about my performance.

First -- before doing anything else -- I admit that there's more that I don't know about the world than I do know. By admitting that, I'm accepting the fact that I'm human, and prone to make mistakes.

Second, when I do make mistakes, I need to take the time to acknowledge them --�publicly�-- and investigate them for lessons that can be learned.

But what about Sirius?
Not a lot has changed since 2009. Stories about Sirius still attract a lot of attention, and can get a lot of people's blood boiling.

Despite Sirius XM�being one of the market's biggest winners since bottoming out three years ago, there is still some healthy upside to be had if things go right for it -- and plenty of room for it to fall if things don't. Read all about Sirius in our brand-new premium report. To get started, just click here now.

British GDP Slips in Q4

British GDP declined by 0.3% in Q4 when compared with the previous quarter, according to preliminary data from the country's Office for National Statistics. On an annual basis during the quarter as well as the full year, the indicator was flat.

The Q4 decline is attributable to a drop in the output of manufacturing industries. That sector is estimated to have fallen by 1.8% quarter-on-quarter. The same data for the construction industry indicated a rise of 0.3%, while that for services was flat.

According to a report in The Wall Street Journal, the U.K. is the third high-profile European country to report a Q4 GDP decline, following Spain (0.6%) and Germany (0.5%).

Indications: Stock futures rise on durable goods, Caterpillar

NEW YORK (MarketWatch) � U.S. stock futures gained Monday after equipment-maker Caterpillar Inc. reported a better-than-expected quarterly profit and orders for durable goods jumped in December.

Caterpillar CAT �shares climbed 2.1% in premarket trade after the blue-chip company reported fourth-quarter profit that beat expectations. Read: Caterpillar�s fourth-quarter profit drops 55%.

THE REST OF THE STORY: MARKET SNAPSHOT
Today's stock-market coverage continues in Market Snapshot /conga/story/misc/indy_snap.html231096

Stock-index futures added to modest gains after the Commerce Department reported orders for big-ticket U.S. goods rose 4.6% last month.

S&P 500 Index futures SPH3 rose 2.5 points, or 0.2%, to 1,498.20, while futures on the Dow Jones Industrial Average DJH3 gained 30 points, or 0.2%, to 13,842. Nasdaq 100 futures NDH3 NDH3 rose 3.25 points, or 0.1%, to 2,731.25.

Wall Street rose Friday, with the S&P 500 SPX closing above the 1,500 level for the first time since 2007.

Click to Play Cohen's contrarian view on deficits

Abby Joseph Cohen, senior investment strategist for Goldman Sachs, puts an optimistic spin on the federal budget deficit, explains why stocks are inexpensive and makes the case for investing in Bristol-Myers Squibb.

�Stocks are strong. The next point that needs to be addressed is that stocks are very extended in the short term and a light-volume pullback would do wonders to restore the health of this rally,� said Adam Sarhan, chief executive of New York-based Sarhan Capital, in a note.

Data points and the Fed

A stream of top-tier economic data, culminating Friday with the release of U.S. nonfarm payrolls and other employment figures for January, is on tap this week. The Federal Reserve concludes its first policy meeting of 2013 on Wednesday. See: Wall Street's 'Super Bowl' set to kick off.

Budget concerns may also be in the mix after Rep. Paul Ryan, chairman of the House Budget Committee and the 2012 Republican vice presidential nominee, said he expects steep automatic cuts in federal spending to take place March 1. Read about Ryan's comments.

QE3

No policy changes are expected from the Fed this week, but investors will be on the lookout for further clues to policy makers� assessment of the economic recovery. The U.S. central bank last year said it was committed to holding interest rates near zero as long as unemployment remained above 6.5% and inflation remained below 2.5%.

It�s less clear, however, what it would take to get the Fed to end its open-ended third round of quantitative easing, widely known as QE3, according to Philip Marey, senior U.S. strategist at Rabobank International.

Reuters Federal Reserve headquarters in Washington (2012 file photo).

Minutes of previous Fed meetings have highlighted a wide divergence of opinion over the potential time frame for the program. The liquidity boost provided by the Fed�s QE program has been credited with helping to lift stocks, commodities and other so-called risk assets in recent years.

Corporate Economists Have Rosier View of 2013

Corporate economists are becoming more optimistic about 2013, in a new survey predicting the U.S. economy will expand at a fairly robust pace this year despite continued uncertainty in Washington.

According to the National Association for Business Economics Industry survey, released Monday, 50% of those polled say the economy will advance at a 2.1% pace or better over the next four quarters. That is up from just 36% forecasting that level of growth last October.

“The economy continues to soldier on,” said Timothy Gill, chairman of the NABE Industry Survey Committee and economist at the National Electrical Manufacturers Association. “While the panel was nearly unanimous in its view that the economy will expand over the next four quarters, it was split as to the degree of growth expected.”

Sunday, January 27, 2013

How (and When) to Snag Cheap Fares

When is the best time to get the best value on airfare? It's the most-asked question travelers pose, and as spring break approaches, it helps to know that a recent study puts the average answer for a domestic trip at roughly seven weeks.

"Of course, a million caveats apply," says Jeff Klees, chief executive of CheapAir.com, an airfare-shopping engine. "If you're more flexible on your travel dates and time, you can get away with waiting closer to the time to travel."

In a study of "every possible trip combination" over 11,000 routes, CheapAir dissected more than 560 million fare-search records from 2012's 366 days. "For any given flight, the actual best time to buy might vary, depending on the market, the time of year, the day of week and other factors," Mr. Klees says.

But the short answer is 49 days before your departure for domestic flights, while the sweet spot for international flights is 81 days.

Enlarge Image

Close Augusto Costhanzo

Airlines will vary fare prices based on availability and preference. A typical flight from Los Angeles to Chicago could carry as many as 20 possible price points when the ticket is purchased. If the flight is wide open, all price points will be available.

As fewer seats become available, fares switch to higher levels and if the carrier sees flights filling briskly, it will spike the prices.

"You'll see crazy fares that are literally five times as much as what you would normally pay for a flight," Mr. Klees says.

Of course, if you want to sit in first or business class, plan to pay a premium for it no matter when you buy the ticket. Ditto if you want a seat in the first 10 rows of coach and, increasingly, if you want more leg room.

What's the priciest day to buy a ticket? The day before you fly, with the second worst, two days in advance and the No. 3 spot, three days ahead of time. That pattern sticks through 11 days out, underscoring the need to buy tickets as soon as you can.

The real trick to getting cheap fares is to travel during the so-called shoulder season, according to Anne Banas, executive editor ofSmarterTravel.com. The industry ranks travel into three seasons, high, low and shoulder. High, of course, is when the kids are out of school and the weather is great, or summer, while low is during the depths of winter, when fewer people are traveling, with the exception of the holidays.

"The best time to travel is in the middle of all that, spring and fall when prices are discounted, the weather is mostly decent and seasonal places and events are still open," she says.

Because spring break tends to spread out over a four- to six-week period in March and April, Ms. Banas says there are still deals to be found. It's Easter week, which this year falls on March 25-31, that's tricky.

Though she warns to watch for blackout dates on some packaged deals, she has seen offers to St. Croix in the U.S. Virgin Islands with $300 airfare credit if you book six nights or more and similar airfare credits for the Bahamas. The Atlantis, the biggest resort on Paradise Island in the Bahamas, has a $69-per-adult, per night deal plus other bonuses, though there are booking deadlines.

The best way to find an airfare deal that you consider a value is to track it closely. There are tools on websites such as Kayak.com, AirfareWatchdog.com and TripAdvisor.com that will do the legwork for you. And CheapAir has a price-drop payback offer that will pay the difference, as a travel voucher, if the price of your exact itinerary goes down.

Here's a quick primer on when to find the best deals.

Start early. Once you've got your plans in mind, even if you haven't decided if you can actually afford it, start tracking prices. That will give you a feel for the market conditions.

If you see a great ticket price, be ready to pounce on it. Many times price cuts are short-lived, like 24 to 48 hours.

If you're traveling during peak travel periods�and Easter week is one of them�give yourself more time. Those are likely to fill up fast with prices rising along the way. Best bet: Travel after Easter week.

As with any air travel, be flexible. Sunday and Friday flights are going to cost you more than a Tuesday or Wednesday. But during peak holiday travel like Thanksgiving, price will vary based on timing, Mr. Klees says. Last year, travelers flying Monday through Friday of the holiday week saved $114 over those who booked a Wednesday to Sunday flight.

Another caveat: CheapAir's recommendations come from an in-depth analysis of what happened last year. The industry is long known for its penchant to shift pricing gears at any moment, reacting to the economy, rising fuel prices and declining travel demands.

Write to Jennifer Waters at jennifer.waters@dowjones.com

—Jennifer Waters is a columnist for MarketWatch. Read more at marketwatch.com.

Equinix Trims Rev Outlook; Higher Churn, Discounts; Stock Off

Equinix (EQIX) this afternoon said Q3 and full year revenue will be below previous guidance.

For the quarter, the data center operator now sees revenue of $328 million to $339 million; previous guidance was for $335 million to $338 million. The company noted that the new mid-point of the range is 2.2% lower than it was previously. On the other hand, the company now sees adjusted EBITDA for the quarter of more than $140 million, up from previous guidance of $136 million to $139 million.

For the full year, the company now sees revenue of $1.215 billion, down from a previous forecast range of $1.225 billion to $1.235 billion. Full year adjusted EBITDA is now expected to be about $540 million; previously, the company was expecting $535 million to $540 million.

“This updated guidance is due to underestimated churn assumptions in Equinix�s forecast models in North America, greater than expected discounting to secure longer term contract renewals and lower than expected revenues attributable to the Switch and Data business acquired in April 2010,” the company said. The higher EBITDA reflects “better than expected gross margins and lower than expected cash selling, general and administrative expenses.”

EQIX in late trading is down $18.60, or 17.7%, to $86.49.

Can Alliance Resource Partners Beat These Numbers?

Alliance Resource Partners (Nasdaq: ARLP  ) is expected to report Q4 earnings on Jan. 29. Here's what Wall Street wants to see:

The 10-second takeaway
Comparing the upcoming quarter to the prior-year quarter, average analyst estimates predict Alliance Resource Partners's revenues will grow 14.2% and EPS will contract -29.0%.

The average estimate for revenue is $541.8 million. On the bottom line, the average EPS estimate is $1.37.

Revenue details
Last quarter, Alliance Resource Partners recorded revenue of $511.4 million. GAAP reported sales were 4.9% higher than the prior-year quarter's $487.7 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
Last quarter, non-GAAP EPS came in at $1.42. GAAP EPS of $0.89 for Q3 were 59% lower than the prior-year quarter's $2.16 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Recent performance
For the preceding quarter, gross margin was 31.8%, 220 basis points worse than the prior-year quarter. Operating margin was 17.5%, 550 basis points worse than the prior-year quarter. Net margin was 6.5%, 1,000 basis points worse than the prior-year quarter.

Looking ahead

The full year's average estimate for revenue is $2.03 billion. The average EPS estimate is $5.95.

Investor sentiment
The stock has a five-star rating (out of five) at Motley Fool CAPS, with 710 members out of 731 rating the stock outperform, and 21 members rating it underperform. Among 200 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 194 give Alliance Resource Partners a green thumbs-up, and six give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Alliance Resource Partners is outperform, with an average price target of $75.25.

Is Alliance Resource Partners the right energy stock for you? Read about a handful of timely, profit-producing plays on expensive crude in "3 Stocks for $100 Oil." Click here for instant access to this free report.

  • Add Alliance Resource Partners to My Watchlist.

Why IAC Is Ready to Rebound

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, media and Internet company IAC/InterActive� (NASDAQ: IACI  ) has earned a respected four-star ranking.

With that in mind, let's take a closer look at IAC and see what CAPS investors are saying about the stock right now.

IAC facts

Headquarters (founded)

New York (1986)

Market Cap

$3.5 billion

Industry

Internet software and services

Trailing-12-Month Revenue

$2.6 billion

Management

CEO Gregory Blatt

COO Douglas Lebda

Return on Equity (average, past 3 years)

(5%)

Cash/Debt

$640.7 million / $95.8 million

Dividend Yield

2.3%

Competitors

AOL

CBS Interactive

Hearst Interactive Media

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 90% of the 390 members who have rated IAC believe the stock will outperform the S&P 500 going forward.

Just yesterday, one of those Fools, All-Star Gumpster, tapped IAC as a particularly attractive bargain opportunity:

Results can be volatile given its participation in so many transforming and emerging businesses, but company has consistently generated strong cash flow -- helped by the stability from the dating business. With knowledgeable and connected leadership, company is likely to participate in emerging online business. Some risk that search business can't be maintained, but results in media segment should show improvement as they mature. Option grants are prolific, but judicious share buybacks should be helpful long-term. Recent dip could be a gift to holders for long-term.

If you want market-thumping returns, you need to put together the best portfolio you can. Of course, despite a strong four-star rating, IAC may not be your top choice.

We've found another stock we are incredibly excited about -- excited enough to dub it "The Motley Fool's Top Stock for 2013." We have compiled a special free report for investors to uncover this stock today. The report is 100% free, but it won't be here forever, so click here to access it now.

Want to see how well (or not so well) the stocks in this series are performing? Follow the TrackPoisedTo CAPS account.

GE Wraps Up a Solid 2012

With a market capitalization of $230 billion, General Electric's� (NYSE: GE  ) not the most nimble company out there. Instead of a quick-moving sports sedan, GE would probably be a lumbering tractor-trailer.

A few years ago, that tractor-trailer found itself veering into a ditch on the wrong side of the road. That ditch was full of toxic assets, a product of GE's foray into risky financial transactions. Since then, GE's management team has been focused on both right-sizing this massive vehicle and steering it in the right direction. Slowly but surely, GE's shifting its focus from banking to manufacturing innovation once again.

Shareholders, like the frustrated drivers trying to avoid the sidelined 18-wheeler, have grown somewhat impatient. But this vehicle appears to be turning a corner -- GE's recent year-end results show that the company is hitting on all cylinders. And the global economy's providing a boost as well.

Steady revenue and rising backlog
While GE's $150 billion in revenue no longer matches the pre-crisis level of $180 billion, investors focusing on top-line growth are missing the real story. This year, GE aimed to right-size and strengthen its formerly risky GE Capital unit, and the company did just that. In the fourth quarter, GE Capital profits climbed 12% despite revenue gains of only 2%. An additional $1 billion in dividends was paid by the financial unit to the parent, increasing year-to-date payouts to $6.4 billion. Meanwhile, GE's reducing the cash dedicated to GE Capital, known as ending net investment (ENI). The figure for ending net investment declined from $444.7 to $418.6 billion, or 6.2%, in 2012.

GE's navigated a tough turnaround, but it's not quite cruising in the fast lane. Overall revenue grew only 4% during the year, indicating the company's still puttering along. GE should pick up speed, however, and investors have some visibility into future growth through the company's backlog. In 2012, GE's backlog, also known as orders booked, increased to a record high of $210B. GE's experiencing robust demand on the industrial side of the business, which grew organically by 8% in 2012 and generated 12% growth in profits. Given relative strength in many of GE's most promising markets, this growth should continue into 2013. Strong industrial organic growth coupled with expanding profit margins bodes well for GE shareholders in the coming year.

GE's Growing Backlog | Create infographics

Widening profits

Looking forward, GE's forecast for even further profit margin expansion was the most promising aspect of the recent conference call. Management estimates it can grow industrial profit margins in 2013 by 70 basis points, or 0.07%. Compare that with 2012's expansion of 30 basis points, and investors can look forward to continued profit growth in GE's most critical industrial segments. The following chart reflects fourth quarter profit growth across all of GE's businesses, including GE Capital.

GE's Q4 Segment Profits Variance | Create infographics

As shown, GE's energy businesses, including power and water, oil and gas, and energy management, bolstered the company's bottom line. Combined, these three segments contributed more than 35% of GE's profits during the fourth quarter. On the whole, every segment except home and business solutions posted positive growth during the quarter, amounting to 11% growth overall.

Dividends with a dash of upside
A growing backlog and fatter profit margins are great news, but where's the upside from here? For a second, let's consider recent returns to shareholders. First off, GE raised its dividend five times in the past three years, which amounts to a greater than 3% yield today. GE Capital also paid a special dividend of $4.5 billion to the parent, a one-time transfer that will likely recur in 2013 has GE continues to shrink its financial arm. In terms of share repurchases, GE's made a concerted effort to reduce the share count to less than 10 billion shares outstanding, providing investors with a larger piece of the pie going forward.

At the same time, GE's stock price appreciated 17% during 2012, surpassing the S&P's (SNPINDEX: ^GSPC  ) performance by 3.5%. Still, GE has a variety of long-term investments that are just beginning to take root. Take wind, for instance, where GE controls over 40% of the American wind turbine market. In the coming year, the extension of the tax subsidy for wind producers places GE in a prime position to continue its push into wind, the fastest growing source of new electrical generation in the United States.

Likewise, GE controls 35% of the global market for natural gas turbines, facing off with its struggling counterpart, Germany-based Siemens (NYSE: SI  ) . Expect this natural gas market to continue its rampant growth as well. The projected global increase in power demand is equivalent to the output of more than 2,000 large power plants over 25 years, many of which will likely be fueled by natural gas because of its lower carbon emissions.

Finally, GE remarked on its progress in developing fascinating new opportunities, including the industrial Internet. In a November 2012 report, GE claimed this so-called "Internet of things" could find direct application in sectors accounting for $32.3 trillion in economic activity. So the opportunity's obviously tremendous, and so far GE's making headway. In 2012, the company announced nine new industrial Internet service offerings, with 20 more currently in the pipeline. While it's difficult to assign a value to this futuristic network of machines, it shows that GE's capable of investing in what Google� (NASDAQ: GOOG  ) founder Larry Page recently referred to as "moon shots." These massive bets can only be made by companies with huge research and development budgets, but the willingness to take such risks can payoff in the long run. After all, what sounds like an impossible sci-fi fantasy can all too quickly become a reality in this day and age.

A view into the future
Predicting that the industrial Internet will emerge as the "third industrial revolution" might be a stretch, but getting a glimpse of GE's future is not completely far-fetched. Expect management to continue focusing on its core businesses, those industrial segments creating value in energy, health care, aviation, and infrastructure markets around the world. Similar to 2012, GE expects to generate double-digit earnings growth in these segments, and steadily rebounding economies appear to be facilitating that growth. Whether GE really starts to accelerate in 2013, however, will depend on a few key factors. Most notably, robust growth in emerging markets, a strong housing rebound, and a stable Europe bode well for GE's road ahead.

Despite being sidelined a few years ago, GE's quietly emerging as one of the strongest blue chip stocks on the market. Furthermore, the stock's trading at a reasonable valuation of 11 times forward earnings. For investors, now might be the time to get on board.�

Dig deeper
For GE, the recent financial crisis struck a blow, but management took advantage of the market's dip to make strategic bets in energy. If you're a GE investor, you need to understand how these bets could drive this company to become the world's infrastructure leader. At the same time, you need to be aware of the threats to GE's portfolio. To help, we're offering comprehensive coverage for investors in a premium report on General Electric, in which our industrials analyst breaks down GE's multiple businesses. You'll find reasons to buy or sell GE, and you'll receive continuing updates as major events unfold during the year. To get started, click here now.

Seven Reasons to Invest in Panama in 2013

While 2012 was a banner year for Panama and it's real estate market, experts are predicting 2013 will be even better.  Here are our seven reasons to invest in Panama in 2013.

1. Business growth 

Panama is very pro business, and has enacted tax breaks and broad economic initiatives to incentivize companies to relocate.  Multinational companies have been setting up shop in Panama since 2007, and we expect that trend to continue as the Panama Pacifico region heats up and work starts on the new free trade zone in the Pacific. 

Why are these companies coming?  Because Panama enjoys a geographic position that allows efficient access to major markets in North America, South America, and Europe.  Companies like Proctor & Gamble have consolidated the majority of their Latin American presence to Panama because it makes financial sense to base, for example, salesmen who call on Mexico and Colombia in a centrally located country like Panama.  For the same reason, Caterpillar is building their regional training headquarters here, the same headquarters where they plan to fly in distributors from all over the world to train them on new equipment. 

What are the real estate implications? Executive relocations mean furnished rental demand and increased home sales in certain sectors of Panama City.  The mining sector is also starting to ramp up production in several key areas outside of Panama City, and demand for suitable housing has spiked. 

2. A strong economy 

Consistent gross domestic product increases, low unemployment, and banks with high levels of liquidity.  Panama was hit by the 2007-2010 global slow down, and Panama real estate prices came down by as much as 25%.  However the majority of Panama’s workforce is employed and will continue to be employed by private sector growth and a long pipeline of current and future government projects.

3. Demographics 

Panama, as opposed to Costa Rica for example, appeals to a wide range of demographics.  From retiring baby boomers to young tech expats to families looking for a better life, the allure of Panama is real.  Families moving from countries like Brazil, Colombia, and the UK are drawn to Panama for its comparatively affordable lifestyle, excellent private school system, and it’s relatively safe urban center, Panama City. 

Major shifts in the demographics of a nation can have a large impact on real estate trends for several decades. Just look at what’s happened in Miami with the Brazilians.  It’s the same thing that happened and is still happening in Panama with the massive influx of Venezuelans, some of whom have been here for more than 10 years.

What are the real estate implications?  The demographics driving Panama’s growth are not just coming from one source (like retirees), but multiple sources, meaning a shift (either a reduction or an increase) in demand from any single one of these countries will not affect the market drastically.  Furthermore, many Asian and European countries are just starting to discover Panama. 

4. The Government 

Consistently investing in new infrastructure to make the city more attractive and more livable, fast tracking pro-business laws and policies, including free trade agreements, tax incentives, and government sponsored initiatives in sectors like energy and agriculture.  These are items that have been on the current administration’s desk now for several years and projects are most definitely moving forward. The Panama Canal is producing over $1 billion dollars in revenue and the expanded canal is predicted to generate twice the traffic as the current canal.   That means an additional $2B in canal revenues alone which can be reinvested into projects that benefit Panama’s residents.  By 2015, Panama will have a world class infrastructure system of roads and mass transit, meaning new funds can be used for new projects.  The current administration is pro-growth and pro-business and the administration to follow, much the same as the one that preceded it, will likely be the same. 

Real Estate Implications:  A stable and fiscally sound government that continues to reinvest in infrastructure to create more jobs and a more attractive and livable country will have a compound effect of bringing more business, more immigration, and more demand for real estate. Waves of immigrants flocking to new projects mean increased demand.

5. Liquidity 

Panama's banks are flush with cash.  Panama continues to be an economy with high cash reserves.  Panama’s banks are traditionally very conservative and were not hit by the credit derivatives market. 

Real Estate Implications: banks are still writing mortgages, meaning there is ample credit for buyers.

6. International Banking

Panama is caving in to OECD laws and becoming a recognized international player in the world economy.

7. Increasing diversity

Panama has always been a melting pot of cultures, but now, more than ever, diversity is lending itself to the social landscape. As immigration and working laws are relaxed, we expect an influx of immigrants from countries discovering Panama as well as a second wave from the US, Spain, and Colombia seeking gainful employment and a stake in what may end up being the world’s “golden boy” economy for 2013. 

 

8 Fascinating Reads

Happy Friday! There are more good news articles, commentaries, and analyst reports on the Web every week than anyone could read in a month. Here are eight fascinating ones I read this week.

Predicating the next recession
Bill McBride from the blog Calculated Risk -- one of the smartest economic analysts out there -- is pretty bullish on America right now. "The future's so bright, I gotta wear shades," he recently wrote. But this week he shared some thoughts on what could possibly spark the next recession, including:

3) An exogenous event such as a pandemic, significant military conflict, disruption of energy supplies for any reason, a major natural disaster (meteor strike, super volcano, etc), and a number of other low probability reasons.�

2) Significant policy error. This might involve premature or too rapid fiscal or monetary tightening (like the US in 1937 or eurozone in 2012).�

1) Most of the post-WWII recessions were caused by the Fed tightening monetary policy to slow inflation.�

Desperation
Via Reuters, Business Insider explains how Microsoft (NASDAQ: MSFT  ) CEO Steve Ballmer handles rising talent:

Microsoft�Corp Chief Executive�Steve Ballmer�is not the right leader for the world's largest software company but holds his grip on it by systematically forcing out any rising manager who challenges his authority, claims a former senior executive who has written a book about his time at the company. ...

"Steve is a very good business guy, but make him a chief operating officer, not a CEO, and your business is going to go gangbusters," said Kempin. "I respect that guy (Ballmer), but there are some limitations in what he can and can't do and maybe he hasn't realized them himself."

Incentives
Star journalist Bethany McLean wonders whether prosecuting corporate fraudsters has made much difference:

Think back to the post-Enron years. The government convicted roughly a dozen former Enron executives, including former CEOs Kenneth Lay, who died awaiting sentencing, and Jeffrey Skilling, who is serving a 24-year prison sentence, and took accounting firm Arthur Andersen to trial, resulting in its demise. During that era, former WorldCom CEO Bernie Ebbers, former Quest CEO Joe Nacchio and former Adelphia executives were also convicted for misdeeds.

The goal, of course, was to deter future wrongdoing by those who don't want to play by the rules, and those whose appetite for risk could destroy a company. After that string of prosecutions, pundits (including yours truly) said that the world -- or at least the business world -- would be a much safer and steadier place.

Hmmm. By 2007, just one year after Lay and Skilling were convicted, the financial crisis, which had been decades in the making, was about to come crashing down on our heads. Part of the problem is that in corporate America, the odds are still very much in favor of those who game the system because the government, even at its most aggressive, doesn't have enough resources to go after everyone. In addition, the rules create loopholes that clever people exploit, violating the spirit while still remaining within the letter of the law. On top of that, a lot of what most of us would call wrongdoing doesn't involve intent -- a necessary ingredient for a criminal prosecution. Instead, you find the very human capacity for self-delusion -- and, sometimes, sheer stupidity.

Innovation
The Wall Street Journal details a remarkable breakthrough:

Scientists have stored audio and text on fragments of DNA and then retrieved them with near-perfect fidelity -- a technique that eventually may provide a way to handle the overwhelming data of the digital age.

The scientists encoded in DNA -- the recipe of life -- an audio clip of Martin Luther King Jr.'s "I Have a Dream" speech, a photograph, a copy of Francis Crick and James Watson's famous "double helix" scientific paper on DNA from 1953 and Shakespeare's 154 sonnets. They later were able to retrieve them with 99.99% accuracy.

Pricing power
Michael Corkery writes:

College officials say the long-held faith among many Americans that college is worth whatever it costs is starting to waver under the weight of lackluster job prospects, stagnant wages and a pileup of student debt.

The shift is already threatening to put stress on some schools' finances. Average tuition this past year rose by the smallest percentage in at least 40 years among the 960 private schools that belong to the National Association of Independent Colleges and Universities, which collectively enroll 90% of the students in private colleges. It climbed 3.9% to $29,305.

Ovarian lottery
The Economist lays out its "Where to be Born" index for 2013. This "links the results of subjective life-satisfaction surveys -- how happy people say they are -- to objective determinants of the quality of life across countries," it writes. Here are its findings (this is a partial list; see here for the full table):

Country

Where-to-be-Born Index Rank

Switzerland

8.22

Australia

8.12

Norway

8.09

Sweden

8.02

Denmark

8.01

Singapore

8.00

New Zealand

7.95

Netherlands

7.94

Canada

7.81

Hong Kong

7.80

Finland

7.76

Ireland

7.74

Austria

7.73

Taiwan

7.67

Belgium

7.51

Germany

7.38

United States

7.38

Self-stimulus
Former FDIC chairwomen Sheila Bair offers some contrarian (to be polite) advice:

So folks, get with the program: Stop saving and start borrowing. The government is showing zero tolerance for savers,�keeping interest rates near zero�while�targeting inflation�north of 2%. Every penny saved in your 0.0005% bank accounts is a penny fast losing value. You need to go out there and spend.

Road rage
Calculated Risk shows the total vehicle miles driven over the last 40 years:

Enjoy your weekend.�

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Should Baker Hughes Run Away From Home?

It wasn't a pretty quarter for oil-field services company Baker Hughes (NYSE: BHI  ) . That the Houston-based corporation fell well short of its year-ago results was hardly a surprise. But that it failed to even approach the consensus per-share expectation among its cadre of analysts, obviously, was less than inspiring.

For the quarter, the company recorded earnings from continuing operations of $211 million, or $0.48 per share, versus $331 million, or $0.76 per share, for the final quarter of 2011. The oil-field services analysts who monitor the company had arrived at a mean expectation of $0.61 per share, fully 21% above the company's actual results. Revenues for the quarter came in at $5.22 billion, compared with an anticipated $5.20.

Lest you assume, however, that the quarter will consist of a bevy of substandard results for the oilfield services contingent, look back at the performance of the sector's kingpin, Schlumberger (NYSE: SLB  ) . After items, the larger company managed to beat its per-share earnings of a year ago, the analysts' expectation for the December quarter, and its revenues for the fourth quarter of 2011.

The difference-maker
The key contrast between the two companies' quarters related primarily to Baker Hughes' higher dependence on North American operations. As company CEO Martin Craighead said: "Our fourth-quarter results reflect the challenges faced by the industry as North American activity declined sharply toward the end of the year, and we continue to deal with unfavorable pricing conditions in the pressure pumping market. As a result, we experienced a decline in North America revenues and margins this quarter."

While fully 49% of Baker Hughes' revenues were tied to the ponderous North American market during the quarter -- down from more than 53% in the year-earlier period -- less than a third of Schlumberger's top line was attributable to North America in 2012. And as the former company's revenues on the continent were sliding by about 1.4% year over year, its pre-tax profit margin from North American operations tumbled by fully 40% to 9% of the revenues generated there.

Speed bumps at home
Baker Hughes' declining results on its home continent were attributable to a combination of pressure on pressure pumping operations -- no pun intended -- along with a drop in the U.S. rig count, especially toward the end of the quarter, and the cessation of all Canadian drilling and completion operations by one of Baker's major customers during the quarter. Like Schlumberger, however, Baker Hughes benefited from improved activity levels in the Gulf of Mexico.

Internationally, the company's results were far stronger than those generated at home. In the Europe-Africa-Russia Caspian segment, revenues were up by 10% from those posted in the September quarter. In the Middle East, Asia-Pacific markets revenues rose by $38 million, although operating profits were about flat because of startup costs in Iraq and preparation for unconventional operations in Saudi Arabia. Obviously, both of those expenses bode well for future volumes in the area.

New international ventures
As I've noted to Fools previously, during the quarter Baker Hughes announced that it had reached an agreement to form a joint venture with Paris-based CGGVeritas (NYSE: CGV  ) . The combination will combine Baker Hughes' near-wellbore geomechanical and petrophysical properties with the French company's seismic data to improve customers' ability to conduct shale reservoir exploration.

Given the obvious importance of Baker Hughes' expanding operations outside North America, it's important to note that the company has been awarded a contract to provide integrated services in Brazil's deepwater Santos basin. In addition, it has inked new pacts for work in Indonesia and the Cooper basin of Australia. And in the South China Sea, a new direct award for multiple deepwater exploration wells will materially expand its operations in that emerging area.

A Foolish takeaway
Given the significant differences between the results reported thus far by Schlumberger and Baker Hughes -- and with Halliburton (NYSE: HAL  ) next in line -- a comparison among the three companies vis-a-vis some key metrics might prove enlightening to potential oil-field services investors.

Category

BHI

HAL

SLB

Forward P/E (Times)

10.40

12.73

13.31

PEG Ratio

1.38

1.15

0.92

Operating Margin

12.05%

17.36

18.18%

Forward Annual Yield

1.30%

0.90%

1.40%

Sources: Yahoo! Finance and TMF calculations.

The ordering of the above metrics leaves me with two salient conclusions: first, to the extent that Baker Hughes is able to continue to the reduction in the percentage of its revenues generated in North America, the company will become steadily more attractive to investors. In the meantime, it remains less compelling than either Schlumberger or Halliburton.

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