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| IN THIS ISSUE - August 5, 2011 | www.bullmarket.com |
| Feature Article By BullMarket.com: DigitalGlobe Shares Takeoff After Strong Q2 By NextInning.com: Where is the Bottom? By BullMarket.com: Member Q&A: Diana Shipping By BullMarket.com: Coach Tops Estimates, But Margin Worries Hurt Stock
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| Where is the Bottom? Next Inning Technology Research I have been getting a lot of emails that essentially ask the same questions. The questions are: What is happening to "xyz" stock - why has it fallen so far - where will it bottom - is now a good time to add shares???
Bull Market Report Q) Diana Shipping (DSX, $9.73, -0.07) has been weak - any thoughts on the stock?
Coach Tops Estimates, But Margin Worries Hurt Stock Bull Market Report Coach (COH, $61.03, -4.26), the marketer of designer handbags and other leather accessories, reported its fiscal fourth quarter results this morning. We've been tracking the company for some time now as one of the barometers for the health of the high-end retail segment. Coach didn't disappoint, with sales up 9%, net income 4% higher, and EPS up 7%, despite the company having a substantial presence in Japan and one less reporting week this year. Investors, though, seemed most concerned about tighter gross margins as the stock fell along with the broader market.
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DigitalGlobe Shares Takeoff After Strong Q2 Bull Market Report Shares of Recommended List selection DigitalGlobe (DGI, $26.53, 2.09) were soaring higher after the satellite imagery provider reported Q2 earnings after the bell last night. The company posted a loss of -$0.4 million, or -1 cent per share, compared to a profit of $0.5 million, or 1 cent per share, a year ago. Analysts were looking for a loss of -4 cents per share.
Revenue rose 1% to $81.7 million. Defense and Intelligence segment revenue was essentially flat at $63.1 million. Direct Access revenue grew 31% to $12.6 million. DigitalGlobe also recorded $24.8 million in deferrals related to EnhancedView that was not included in the revenue figure. Meanwhile, $6.4 million of amortized revenue related to NextView, the predecessor of EnhancedView, was included in revenue. "Our first focus area is EnhancedView," Tarr said. "As I mentioned a moment ago, we had no holdback in the quarter. We also passed our critical design review for our enhanced infrastructure buildout, fulfilling our third major milestone on schedule. And last week we received notice from NGA of its intent to exercise the second option here on the EnhancedView contract. "The capital programs related to EnhancedView are all on schedule. Last month, we brought into service two of our four new remote ground terminals. Those new terminals, coupled with upgrades to our Antarctic facility, have increased the effective capacity of our constellation by 34% since December. They also improve our image delivery timelines for other customers by up to 20 minutes, or about 25%." Commercial segment sales rose 5% to $18.6 million, driven by customers that provide location-based services. The company also announced a notable deal with Bloomberg that will give Bloomberg users early insight into oil inventory levels in Cushing, Oklahoma, a major U.S. storage hub. DigitalGlobe won't be selling Bloomberg images, but instead will provide bi-weekly reports on Cushing oil inventory levels based on satellite photos of open-top oil tanks in Oklahoma. In China, DigitalGlobe entered into a joint venture with China Siwei, a GIS developer, and NavInfo, China's leading map and dynamic traffic information service provider. In Russia, meanwhile, the company signed a deal with the Federal Forestry Agency that will allow them to use satellite imagery to monitor 1.3 million square kilometers of Russia's forests. Adjusted EBITDA rose 57% to $59.3 million from $37.8 million. Given the high amount of depreciation the company records each quarter due to the capital intensive nature of launching a satellite into space and also the deferral of certain revenues, we consider adjusted EBITDA to be the most important metric for DigitalGlobe. Adjusted EBITDA margin was 59.2%, up about 850 basis points year over year. Looking forward, the company forecast full-year EPS of between 10-20 cents on revenue of $330-$355 million. It is projecting adjusted EBITDA of between $223-$243 million, with at least 55% EBITDA margin. The company also said that moving forward it will remove the previous limitations it had on its DAP program. In response to an analyst question, Tarr said: "First of all, we don't see our capacity as the constraint on our DAP business. There are other constraints, and those come down to how many different customers there are, potential customers there are for DAP, and the long sales cycle it takes to both close a new DAP account and then bring that DAP facility up and live. So that's more the constraint than our own capacity. "In the past we had limited that because we had a view that by selling a DAP account that would limit our ability to so to speak, shoot once and sell many times. We no longer see that as the constraint or reason to limit the sale of new DAPs. That will take a longer period of time to bring new DAPs up to speed and into the pipeline, close them, and bring them live. "We do think something that we can do in the near term, like what we did in the latter part of the most recent quarter is upsell additional minutes to existing DAP accounts, and that we are focused on. In terms of bringing up our fifth DAP account, we're still tracking to early 2012. And so, that's the status there." BMR Take: This was a quarter of solid progress for DigitalGlobe, highlighted by several nice contract wins, meeting all its EnhancedView metrics, and nice margin expansion. Guidance, meanwhile, was strong with revenue expected to ramp in the second half from having less revenue from EnhancedView deferred, delivering against its commercial backlog, upselling on Direct Access, and increased U.S. government service revenue. | |||||||||
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