For Immediate Release
Chicago, IL – November 10, 2010 – Zacks.com Analyst Blog features: Dendreon Corp. (DNDN), Ambac Financial Group Inc. (ABK), Ultra Petroleum Corp. (UPL), Marsh & McLennan Companies Inc. (MMC) and U.S. Cellular (USM).
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Here are highlights from Tuesday's Analyst Blog:
Loss at DNDN Up on Higher Costs
Dendreon Corp.'s (DNDN) third quarter 2010 loss of 47 cents per share (excluding charges for litigation settlement) was wider than the Zacks Consensus Estimate of a loss of 44 cents per share and the year-ago loss of 23 cents per share (excluding charges for warrant revaluation).
On a reported basis (including special items), the company lost 56 cents per share in the third quarter as against a loss of 40 cents in the year-ago quarter. The wider loss was attributable to higher operating expenses as the company is working on expanding its facilities to market Provenge.
Total revenue in the reported quarter climbed to $20.2 million from $25,000 in the comparable quarter of 2009. The jump was attributable to the launch of Provenge for the treatment of advanced prostate cancer in men. The potential blockbuster drug, for which more than 1,000 prescriptions have been written so far, performed impressively in its first full quarter.
The initial ramp up has been impressive with revenue from Provenge sales being on the rise on a monthly basis. Revenues came in at $5.2 million, $7.2 million and $7.8 million in July, August and September, respectively. Moreover, revenues from the sale of Dendreon's growth engine were approximately $9.5 million in October.
However, total revenue in the quarter fell short of the Zacks Consensus Estimate of $24 million. We note that Dendreon derived its revenues entirely from collaborative agreements prior to the approval of Provenge.
Ambac Seeks Bankruptcy Protection
Yesterday, bond insurer Ambac Financial Group Inc. (ABK) filed for bankruptcy protection under Chapter 11 Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York.
Ambac had for the first time announced that it might file for bankruptcy protection if it fails to pull through its cash position way back in November 2009. The company reiterated that warning after Wisconsin took control of some of the company's worst-hit assets in March 2010.
Ambac feared failure to cover its operating expenses and debt service obligations after second-quarter 2011. Ambac had then stated that failure on its part to pay the due interest or principal will accelerate the maturity of outstanding debt leading the company to raise new capital.
Ambac succumbed to the prepackaged bankruptcy route as it failed to raise additional capital. It was also unable to come to terms with an ad-hoc committee of certain senior debt holders to restructure its outstanding debt through a prepackaged bankruptcy proceeding.
Ambac is also appealing for an interim order that will prohibit certain transfers of equity interests in and claims against the company. The interim order will preserve the company's net operating losses at $7 billion as of June 30, 2010.
Ultra Petroleum Beats, Affirms
Natural gas producer Ultra Petroleum Corp.'s (UPL) third quarter 2010 results exceeded our expectations, primarily based on a strong organic growth and improved margins. Earnings per share, excluding special items, came in at 60 cents, surpassing the Zacks Consensus Estimate of 55 cents and prior-year quarter's 57 cents.
Including unrealized, mark-to-market gain, the company's earnings per share were $1.05, compared with a loss per share of 6 cents in the year-ago quarter. The company reported total operating revenue of $240.4 million, up 54.9% year over year. However, the reported quarter's revenues were below the Zacks Consensus Estimate of $281 million.
Guidance
The company expects full-year 2010 production to be in the range of approximately 213 Bcfe to 216 Bcfe, with the fourth quarter 2010 production expected to be in the range of 56.7 Bcfe to 59.7 Bcfe. Ultra Petroleum further guided toward a capital investment program of $1.45 billion for 2010.
Our Recommendation
We believe that Ultra Petroleum's strong production, reserve-growth prospects and competitive cost structure will help the company to perform better than its peers in the coming months. Moreover, the large acreage position in Marcellus Shale play and Green River Basin of Wyoming provides the company with a multi-year inventory of low-risk development drilling opportunities.
However, the company's sensitivity to gas price fluctuations and operational disruptions in exploration and production keep us concerned.
We are maintaining our long-term Neutral recommendation on the stock. Ultra Petroleum currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
Marsh & McLennan Misses on Taxes
Marsh & McLennan Companies Inc. (MMC) reported its third quarter adjusted operating income of $146.0 million or 27 cents per share, a penny less than the Zacks Consensus Estimate of 28 cents. This also compares unfavorably with the income of $252.0 million or earnings of 48 cents in the year-ago quarter. Adjusted operating earnings per share in both the periods exclude one-time items.
With the prolonged weak economic environment, Marsh & McLennan managed to post improved results on account of top line growth in all lines of businesses. However, this growth was offset by investment losses along with increased operating and income tax expenses.
On a reported basis, Marsh & McLennan witnessed net income of $168.0 million after-tax or 30 cents per share in the reported quarter, down from $221.0 million after-tax or 41 cents per share in prior year quarter. The results included discontinued operations, net of tax, of $43 million or 8 cents per share in the quarter, as opposed to a loss of $18 million or 3 cents per share in the prior year quarter.
Consolidated revenues were $2.52 billion, up 7.2% year over year and 4% on an underlying basis. This also came in marginally above the Zacks Consensus Estimate of $2.51 billion.
However, Marsh & McLennan had an investment loss of $2 million, down significantly from an income of $22 million in the year-ago quarter. Besides, total expenses increased 5.8% year over year to $2.29 billion. Particularly, tax expenses were $55 million against a tax benefit of $46 million in the year-ago quarter.
Mixed 3Q for U.S. Cellular
U.S. Cellular (USM) posted third-quarter 2010 earnings per share of 43 cents, which misses the Zacks Consensus Estimate by a penny but increased 3 cents or 7% from the year-ago quarter. Net income improved 9% year over year to $37.35 million driven by increased penetration of smartphones followed by growth in data and roaming revenues.
USM reported revenues of $1,060.7 million, down 0.32% year over year. Service revenues dipped 0.04% to $983.5 million.
Our Analysis
U.S. Cellular is one of the largest wireless telecommunications network in the United States and has recently launched its 3G LTE services. The company also plans to launch GSM-based LTE 4G services in the near future. It is also offering a huge range of smartphones, which will likely accelerate data revenue growth.
However, the company remains challenged by the increasingly competitive domestic wireless market and intense pricing pressure, which is affecting its customer accretion. Moreover, declining roaming revenues are expected to weigh on U.S. Cellular's financial results. The company also remains challenged by lower cost service plans offered by some of its competitors.
U.S. Cellular currently retains a Zacks #3 Rank (short-term Hold rating). We are also maintaining our long-term Neutral recommendation on the stock.
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