8:03 AM ET, 07/27/2012 - Street Insider
A headline I picked up from my brokerage acct news..
Credit Agricole downgraded BGC Partners (NASDAQ: BGCP) from Underperform to Sell.
Shares of BGC fell more than 8.5 percent on Thursday following Q2 results from the company.
The stock is continuing lower Friday morning, now down about 2 percent to $5.10.
wish i could get more info on why the downgrade - is this one of those after the fact downgrades,as the stock has fallen considerably - or are they expecting more price declines...who knows...
The stock was downgraded because the conference call was a disaster. The financial services business is declining. The VP of Finance was not able to tell an analyst how much money the company spends on dividends per quarter ($28 million) and Lutnick clearly told anyone listening on the call that the dividend was going to be cut in the future. Listen to the call on their website.
The CC was not good . . . way too complacent on cost cutting especially and the market reacted. But I think it could go either way from here.
I too think the dividend will be cut based on the CC comments.
All this needs perspective. This quarter any stock that disappointed took a major hit. FB and other social media stocks. Chipotle dropped about $120. Panera took a major hit too. BGCP is just part of this short term reality.
This analyst is a little late to the party.
Started researching this yesterday. Preliminary thoughts:
1) Management comp is clearly excessive. Although much of the comp is structured as a "bonus" the bonus targets are almost impossible to miss (from 2011 proxy).
2) Distribution cut (its not a dividend, it is mostly a return of capital) possible later in the year (from conference call).
3) Expense reduction is a 2013 story, meaning that there is a decent chance of a GAAP loss in the current quarter (from the conference call) UNLESS they get the strong season pickup in September that they are hoping for.
4) Debt was sold to provide dry powder for a signficant acqusition. Currently trading at a 7.5% yield, which probably equates in today's market to a B+ or BB- rating, implying that equity is quite speculative. (from Finra.com)
5) RE brokerage biz is off to a good start (from conference call and June Q report).
Will post more when I learn more.