Existing Home Sales beginning to gain momentum

Sales of existing homes rose a modest 0.4 percent in January from December to a seasonally adjusted 4.92 million, according to a report released Thursday by the National Association of Realtors.

January’s level is more than 9 percent above the 4.51 million units sold the same period last year.

The report shows signs of life for the housing market, which got off to a discouraging start with last month’s 8.5 percent drop in new home construction.

Foreclosures and short sales combined for 23 percent of existing home sales last month, down substantially from 35 percent this time last year.

Last month, the U.S. median existing-home price rose 12 percent to $173,600 from the year-ago period, the largest surge since November 2005. The swell was assisted by several factors, most notably a drop in distressed homes on the market, emptying inventories and progressing buyer demand.

Total housing inventory fell 5 percent in January to 1.74 million units. At its current rate, inventory amounts to a 4.2-month supply of homes, 2 months fewer than a year ago.

Savings realized in purchases of distressed homes remains noticeable. Foreclosures were reduced 20 percent in January and short sales sold 12 percent below market value.

The reduction in foreclosures and housing inventory could point to a shift in momentum for the housing market.

“Buyer traffic is continuing to pick up, while seller traffic is holding steady,” said Lawrence Yun, chief economist at the National Association of Realtors.

“In fact, buyer traffic is 40 percent above a year ago, so there is plenty of demand but insufficient inventory to improve sales more strongly.”

There has been a regional rise in home sales prices since January 2012. While the West has not experienced a rise in total sales, the 26.6 percent sales price increase is welcomed news for a region that has been flooded by foreclosures since 2009.

The Midwest saw a modest rise in existing home sales in January, specifically Illinois. The state has experienced a recent boon in existing home sales, a more than 31 percent surge from this period a year ago.

The median price for existing homes in the state also increased during the past year, ending January at $125,000, or up 1.2 percent from January 2012’s total of $123,500.

But analysts contend that the housing recovery on the national, regional and local levels could be negatively impacted by how Capitol Hill responds to our current national debt.

“The higher probability that sequestration will be realized means U.S. growth in 2013 likely will be about a quarter point slower than previously estimated,” Michael Feroli, chief U.S. economist at JPMorgan Chase in New York, said in a Feb. 14 research note.

Leading indicators index: Moving forward, but moderate momentum

Scott Kitun/The Medillian

Scott Kitun/The Medillian

The Conference Board Leading Economic Index rose slightly in January, forecasting a slow but steady growth for the nation’s economy.

The Index rose 0.2 percent in January to 94.1, down from a 0.5 percent rise in December.

“The indicators point to an underlying economy that remains relatively sound but sluggish,” Ken Goldstein, economist at The Conference Board said.

For consecutive months, the index rose, suggesting a slow but deliberate expansion in economic activity. Manufacturers’ new orders and consumer expectations were weak in January, but improvements in housing permits and financial components contributed to the modest index boost.

“Credit use has picked up, driven in part by relatively strong demand for auto loans. The biggest positive factor is housing. The housing market is now at twice the level reached during its recessionary lows,” Goldstein said.

The index is constructed to identify turning-point patterns in economic data in a more efficient manner than any individual components.

The leading economic index is a composite average of several individual leading indicators. Some of those indicators include manufacturers’ new orders, nondefense capital goods excluding aircraft orders and building permits.

“The higher probability that sequestration will be realized means U.S. growth in 2013 likely will be about a quarter point slower than previously estimated,” Michael Feroli, chief U.S. economist at JPMorgan Chase in New York, said in a Feb. 14 research note.

The Standard & Poor’s 500 Index fell 0.7 percent to 1,500.89 following the release of the Conference Board Leading Economic Index.

SodaStream: All pop, no fizz

Scott Kitun/The Medillian

Scott Kitun/The Medillian

SodaStream International Ltd., producer of the Revolution automatic home soda maker, saw a huge increase in fourth-quarter earnings as sales in the Americas nearly doubled. The showing beat Wall Street estimates but the company’s stock fell more than 6 percent.

The Israeli-based soda maker posted forth-quarter net income of $7.5 million, or 36 cents per share, up 42 percent from $5.3 million, or $0.26 cents per share, a year ago. On an adjusted basis, the company earned 45 cents per shares, outperforming the 39-cent estimate of analysts surveyed by Thomson Reuters.

Revenue grew 55 percent to $132.9 million from $85.7 million last year. The Americas accounted for $62.8 million of that, up 96 percent from $32 million last year.

The carbonation system developed by SodaStream relies on fruit-flavored concentrates and diet concentrates sweetened by Splenda to allow customers to create their own carbonated soft drink. Many people use SodaStreams to carbonate tap water to create an less expensive version of Pellegrino or La Croix,

Kraft Foods Group Inc. agreed to partner with SodaStream in May, allowing the soda maker to develop Country Time, Crystal Light and Kool-Aid flavors. Since the partnership, SodaStream has experienced record sales, especially in the U.S. where more than 2,900 Walmart stores carry the homemade soda product line.

“Our efforts throughout 2012 to increase global awareness of our brand and retail presence culminated in a very successful holiday season,” Daniel Birnbaum, CEO of SodaStream, said. “For the first time ever we exceeded 1 million soda makers sold in a quarter.”

If there were any negatives in SodaStream’s results, they were shrinking gross margins and rising operational expenses. Gross margin fell from 57 percent to 53 percent, while operational expenses rose 38 percent to $10.2 million in the forth quarter.

For the full year, SodaStream posted a profit of $43.8 million, or $2.09 per diluted share of $2.39, up 60 percent from $27.5 million, or $1.34 per share, in 2011. Revenue rose 51 percent to $436.3 million from $289.0 million.

The company said it expects more revenue growth in 2013. “U.S. sell-through of soda makers and consumables exceeded expectations, continuing our growth trajectory in the world’s biggest soda market,” SodaStream Chief Financial Officer Daniel Erdreich said in a conference call with analysts.

According to Erdreich, the firm expects full-year 2013 revenue to increase approximately 25 percent., excluding share-based compensation expenses. Additionally, the company expects net income to rise about 18 percent in 2013.

Last year, company executives issued guidance calling for 25 percent sales growth with an additional 3 percent boost from the acquisition of the Nordic and Baltic distribution business of its distributor, Empire AB.

“In 2012 the firm’s guidance for sales growth was 28 percent and they did 51 percent,” Oppenheimer analyst Joe Altobello said in a conference call.

The company’s guidance was low because it did not yet reflect the Kraft Foods partnership and the retail performance at Wal-Mart Stores Inc. “Our efforts throughout 2012 to increase global awareness of our brand and retail presence culminated in a very successful holiday season,” Birnbaum said.

SodaStream shares closed down $3.34 to $49.10 Wednesday.

Smithfield Farms eyes growth in future quarters

Scott Kitun/The Medillian

Scott Kitun/The Medillian

Smithfield Foods Inc. sees its net income rise more than 3 percent in the third quarter as the world’s largest pork producer was assisted by higher sales of its packaged meat products.

In the quarter ended Jan. 27, net income rose 3 percent to $81.5 million, or 58 cents per diluted share, from the $79 million, or 49 cents per share, in the year-ago period.

The Smithfield Va. –based company reduced its diluted shares by 13 percent in the third quarter when it bought back 8.2 million shares for $174 million.

Excluding early debt extinguishment charges and consolidation costs of $5.8 million at Spain’s Campofrio, adjusted earnings were 69 cents per share, compared with 51 cents per share estimated by analysts.

Another major contributor to the company’s third quarter performance was a lower than expected tax rate, which resulted in a 68 percent tax reduction of $30.4 million from the $44.6 million paid in the year-ago period.

Quarterly sales rose 3 percent to $3.58 billion from $3.47 billion this period last year, outperforming Wall Street’s estimate of $3.53 billion. The Smithfield Va. –based company experienced double-digit growth in the Eckrich and Armour sausage brands.

“We gained market share in the bacon and dinner sausage categories,” President and CEO C. Larry Pope said.

Executives at the company added that hog production margins were down almost 8 percent this quarter, partly due to slumping live hog market prices and increased rearing costs.

Davenport & Co. analyst Ann Gurkin said, “Expectations are that hog production will return to profitability by next year.”

Smithfield executives agreed that the company expects improvements through the fourth quarter and next fiscal year.

Hog prices have been falling in the last three months as higher payroll taxes and gasoline prices drive U.S. consumers to switch to more affordable meats like chicken.

The company said it expects losses per head in the mid-single digit range for 2013 hog production but sees hog prices increasing in the fourth quarter.

“We are actively working to mitigate commodity risk,” Pope said.
With the company easily beating Wall Street expectations on both EPS and sales during what is traditionally a weak production quarter for the industry, shares were up 10 percent by midday, or $2.32, to $24.62.

Cummins Inc. engine segment drives Q4 net down 30%

Scott Kitun/The Medillian

Scott Kitun/The Medillian

Cummins Inc., pinched by a slowing global economy, said Wednesday that fourth quarter earnings dropped 30 percent, with sales declining in most of the engine maker’s core business segments.

Cummins reported net income of $381 million, or $2.02 per diluted share, down from $548 million or $2.86 per diluted share, in the year-ago quarter. Revenue fell 13 percent to $4.29 billion, from $4.92 billion a year ago.

While Cummins’ fourth quarter was far from stellar and its sales prospects remain ambiguous given the uncertain global economy, Wednesday’s results significantly outperformed Wall Street predictions.

Analysts polled by Thomson Reuters had expected Cummins’ fourth quarter earnings of $1.75 per share, on revenue of $4.04 billion.

“We knew what the US economy was doing, but we really had to wait cautiously to see how the global economy would hit them [Cummins],” High-Point Financial analyst Brad Schaffnit said.

The heavy-duty truck engine maker blamed its revenue decline on a weak global economy.

More specifically, it pointed to the economy’s impact on truckengine demand. Cummins is heavily reliant on international construction, power generation, truck and mining engine demands. Compared to the $2.96 billion in total engine sales this time last year, Cummins’ sales slipped 18 percent to $2.51 billion.

“Like every other company in that industry, until the global economy shows signs of growth, Cummins is in wait and see mode,” Schaffnit noted.

While analysts polled by Thomson Reuters have been forecasting a 2 percent rise in 2013 revenue from Cummins, the company on Wednesday said it expects revenue to remain relatively flat, or even decline slightly, in the new year.

“Unlike what we saw in 2012, with a strong first half and weak second half of the year, I expect this year to be the opposite. It would not be unreasonable to expect first half sales to be down 10 percent year over year and first quarter could be tougher than that, but then we expect some recovery in the second half, possibly up 5 percent over last year,” Executive Director of Investor Relations Mark Smith said in a conference call with analysts Wednesday.

Company executives recently outlined cost-saving methods to combat the declining engine demands caused by a weakened global economy.

The Columbus, Ind. company announced Wednesday it has scaled its workforce back 3 percent by cutting 650 employees.

“The work we have undertaken to reduce costs and lower inventory should benefit the company when the global economy improves,” Linebarger said in a conference call with analysts.

Engine demand is not much better at home for Cummins, given the commercial truck sector’s reduction in truck purchases due to the US economic uncertainty, especially as it relates to freight volume.

“There is uncertainty surrounding the timing and pace of improvement in end markets in 2013,” Linebarger added.

Net income for full-year 2012 was $1.66 billion or $8.74 per diluted share, down from $1.85 billion or $9.55 per diluted share last year. Revenues for the full year were $17.3 billion, down 4 percent from 2011.

In New York Stock Exchange trading Wednesday, Cummins shares closed up $2.99, or 2.6 percent, at $120.38.

Under Armour looking to bring the “Baddest Brand” overseas

Scott Kitun/The Medillian

Scott Kitun/The Medillian

Under Armour, Inc. long-term growth potential is substantial as the mainly North American brand eyes competing against Nike, Inc. for its global share.

As one of the major sports business success stories in recent years, the self-proclaimed “Baddest brand on the planet” is no longer just a newcomer to the sports apparel market.

In the company’s first year, it generated around $17,000 in revenue. Fast-forward to the end of fiscal 2012, and Under Armour has grown to more than $2 billion in revenue.

While playing football at University of Maryland, Kevin Plank set out to build a company that could produce athletic equipment that could impact the athlete’s performance.

In 1996, Plank founded the Baltimore-based company in the basement of his grandmother’s house.

“It started with a simple plan to make a superior T-shirt. A shirt that worked with your body to regulate temperature and enhance performance,” the company says on its website.

Its first big break occurred in 1999, when Warner Brothers Entertainment Inc. contacted Under Armour to outfit its upcoming Oliver Stone movie, “Any Given Sunday”, a football movie staring Al Pacino and Jamie Foxx.

The following year, the now defunct XFL football league made Under Armour its official uniform provider.

Originally designed for football, Under Armour is now engineered for all types of sports from golf to surfing. The company also sells an assortment of everyday apparel such as pants, jackets, and headwear – it even began designing tactical gear for the military.

The technology behind Under Armour’s diverse product assortment for men, women and youth is complex, but the program for reaping the benefits is simple, wear HeatGear when it’s hot, ColdGear when it’s cold.

The company’s website claims “Under Armour is the originator of performance apparel – gear engineered to keep athletes cool, dry and light throughout the course of a game, practice, or workout.”

Electrifying marketing campaigns, such as “Protect This House” and revolutionary athletic equipment have established Under Armour as a highly desired brand within the sports apparel market.

“I used to consider myself a Nike guy, but now, I wear almost exclusively Under Armour,” Chicago resident and Under Armour customer Eddie Milas said. “Their gear is unmatched.”

Scott Kitun/The Medillian

Scott Kitun/The Medillian

In 2012, net revenues increased 25 percent to $1.84 billion, or $1.31 diluted earnings per share, compared with $1.473 billion, or 92 cents per diluted share, in the prior year.

Increased revenues were sparked mostly by the performance of the Charged Cotton and Storm platforms, which contributed to apparel net revenues of $1.39 billion, a 23 percent rise from $1.12 billion in the prior year.

An additional boost to the bottom line was the debut of UA Spine running shoes, which spawned a 32 percent increase in footwear net revenue from $182 million a year ago to $239 million in 2012.

“We closed 2012 strongly, delivering net revenue growth of at least 20% for the eleventh consecutive quarter in the fourth quarter,” Plank said in a conference call.

Underscoring the apparel-maker’s ambitions, the company also recently said that it intends to turn its headquarters into one of the “top campuses” in the United States, and maybe even the world. In 2011, it invested $60.5 million in a 400,000 square-foot expansion to its campus, which will feature a 25,000 square-foot Under Armour store.

In many ways, the Under Armour story is akin to the early days of the Beaverton, Oregon-based apparel giant Nike.

Like Nike, Under Armour has a roster of high profile athletes across every sports platform, including multiple all-stars players such as, the NFL’s Tom Brady and Ray Lewis, baseball’s Ryan Howard, and rookie sensation Bryce Harper.

In fact, Under Armour’s chief competition when it comes to professional and collegiate equipment licensing is Nike.

The fast-growing company designed the uniforms worn by the 2010 BSC National Champion Auburn Tigers – they also design the uniforms for “Chicago’s Big Ten team”, the Northwestern Wildcats.

While Nike is the most direct competition to Under Armour’s growth, there are other capable competitors on its radar. Companies such as, Lululemon, Respect Your Universe [known as RYU] and Joe’s Jeans have emerged as significant road blocks to Under Armour’s goal of controlling the “athlete-engineered” apparel market.

The Vancouver-based Lululemon Athletica Inc. established itself by marketing to women who love yoga. By targeting these women, it was able to engineer designs and fabrics to fit the specific audience. As yoga continues to grow in popularity, so does their stock, the company gave guidance increasing its projected fourth quarter revenues from $435 million to $480 million.

Lululemon trades at over $70 per share, with strong investor interests.

RYU Inc., an athletic wear company focused on the mixed martial arts industry, developed by seeking out the athletes that would use their products most. The company founders sought elite athletes who could provide insight into what exactly they would hope for in their ideal martial arts shorts.

While RYU and Joe’s Jeans may not be nearly as dominant, they both maintain market caps of $37.77 million and $72.16 million respectively, compared to Under Armour’s gaudy market cap of $4.94 billion.

Each of the companies offers a unique product and compelling story, but they all share one thing in common – stock market success.

Under Armour, in particular, has performed extraordinarily. The stock has been reacting to increasing margins and strong top and bottom line growth in recent years. Net income, for example, went from just above $38 million in fiscal 2008 to nearly $180 million by fiscal 2012. Revenues during the same period increased from just above $725 million to almost $1.5 billion.

Over the last 5 years, its shares have climbed almost 70 percent and the stock finished up 28 percent in 2012 alone.

According to Plank in a recent press release, the company expects 2013 net revenues to grow more than 20 percent in 2013, ranging between $2.20 billion to $2.22 billion.

Despite its early success, Under Armour is not without hurdles, with a PE ratio of 41.42, compared to Nike’s PE ratio of 24.73, it cannot continue to rely just on its domestic market – 94 percent in North America.

Analysts like Matthew Boss of JP Morgan Chase warn that “a compound annual growth rate of 34% since 2005 is a double-edged sword,” because it can lead to over-cooking the stock’s price.

Last month Boss set the target price for Under Armour at $45 per share.

To justify such a high valuation it must expand globally and the best way to do that is to take market share in the largest global sports market, soccer-related goods.

Under Armour’s strategy to achieve this continued growth is through continued innovation and global expansion.

Company executives expressed, in a recent press release an intense focus on continuing to revolutionize the industry with its product lines, such as Baselayer and footwear.

They also stated a commitment to expanding further into global markets by increasing the number of retail stores abroad and by earning more endorsement contracts with globally recognized franchises.

Nike is currently estimated to own the largest global athletic market share, just edging out Adidas Group.

From 1994 through 1998, Nike introduced itself as a global brand by endorsing six major international soccer players and clubs, such as Manchester United and David Beckham. Now a $13 billion dollar industry, soccer-related equipment is the primary focus for globally expanding Under Armour.

Under Armour went about making its soccer debut, last year when it signed a 5-year contract with Tottenham Hotspurs, currently ranked fourth in the English Premier League. Additionally, it signed Hannover 96, the sixth ranked team in the German Bundesliga, and Deportivo Toluca, ten-time winner of Mexico’s La Liga.

In 2007, the company opened its first retail location at the Westfield Annapolis mall in Annapolis, Md. In the subsequent years, Under Armour specialty stores and factory outlet locations have popped up in 34 states, including its first retail location outside of North America, in Edinburgh, Scotland.

As for continued product innovation, one of the product lines that the company wishes to expand upon is footwear. More specifically, it wishes to challenge Adidas and Nike’s share in the basketball shoe category. By endorsing young NBA stars such as Milwaukee Bucks Brandon Jennings and Charlotte Bobcats Kemba Walker, Under Armour is beginning to carry its following of amateur athletes from the football fields to the basketball courts.

In keeping with its commitment to innovation, the company recently released a new basketball shoe called “UA Charge” that are unlike any basketball shoe ever seen – including ankle braces as part of the shoe’s upper.

While early reviews of the shoe by nicekicks.com called the shoe, “Ugly and disappointing”, the shoe contributed to a record fourth quarter, with footwear net revenues of $45 million, a 43% increase from $31 million in the prior year’s period.

Under Armour’s corporate culture is ambitious and aggressive as is evidenced by their rocket-like propulsion to the top of the North American athletic equipment market. However, sustaining its growth requires the company to challenge Nike on the global stage and for that, Under Armour must prove that its advantage is undeniable.

Sports Business Profile: Learfield Sports

Scott Kitun/The Medillian

Scott Kitun/The Medillian

Sitting in a small office affixed to Ryan Field, on the campus of Northwestern University, is a staff comprised of just one marketing executive and a handful of interns wholly responsible for maximizing the school’s athletic department revenues.
Working within the large Chicago market, Wildcats have an advantage that most schools do not, media access. But, with few people to work the phones and negotiate sponsorships, it is increasingly more difficult to capitalize on all of the opportunities that media access provides.
“It’s just impossible for a one or two-man crew to keep up with what it takes to compete in today’s sports environment,“ said Danny Spataro, Northwestern Sports Properties general manager.
That was before 2009, when the school hired Learfield Sports to assume all of its sports marketing responsibilities.

Launched in 1975 by Clyde Lear and Derry Brownfield, Learfield Sports has grown into a collegiate marketing outsourcing company that employs more than 250 people and manages sponsorship, media, and marketing inventory for 54 university athletic departments and counting.

“Our primary mission is to maximize collegiate athletic program revenues by the development, sales and implementation of national, regional and local sponsorships,” said Jennifer Duncan, Learfield Sports spokeswoman.

By connecting brands with the tradition and passion of college sports, Learfield offers rights packages that typically include radio, television, digital content, online and social media and signage.

Some of the schools now partnered with the company includes: Alabama, Illinois, Indiana, Missouri, North Carolina, Northwestern and Texas A&M.

With the increased popularity of at-home viewing, college athletic departments depend on brokering TV and radio deals with local affiliates to broadcast their games and sell advertisements.

According to a recent National Collegiate Athletic Association report, Football Bowl Subdivision [FBS] programs have increased their operating budgets by an average of 11 percent year-over-year, since 2009.

In fact, only 23 FBS schools, half of which are partnered with Learfield, made more money than they spent last season.

And, only six of those 23 programs have been able to replicate this for five years in a row, according to the report.

Top-tier schools, on average, lost around $11 million in 2010, a 27 percent increase from the $9 million reported in 2006.

Given the effects of an economic recession and reduced budgets, athletic programs are looking towards sponsorships to increase their financial resources.

And it’s showing up in lots of places. “I’ve been going to Notre Dame and Purdue football games my entire life and I never remember seeing ads on everything like they have now,” Purdue alum Peter Lee said.

It may seem new but the history of college athletics and sponsorships dates back 160 years.

In 1852, Harvard and Yale competed in a rowing meet on Lake Winnipesauke in New Hampshire. Always a rivalry, students from both schools would frequently attend such spirited events, sometimes with as many as 300 onlookers. However, this time would be different.

According to Guy Lewis, author of “The Beginning of Organized Collegiate Sport”, the New England Railroad Company financed and promoted the event. The railroad company selected a popular tourist destination, in order to promote its schedule of train trips to the lake.

The impact of the partnership was over 1,000 event attendees.

This regatta emphasizes that since the origin of intercollegiate athletics, businesses partnerships with college athletics can be lucrative.

Enter sports marketing companies like IMG College LLC and Learfield Sports.

In December, Learfield partnered with University of Illinois, its eighth Big Ten Conference member, as the Division of Intercollegiate Athletics (DIA) exclusive athletics’ marketing partner and multimedia rights holder.

It created “Fighting Illini Sports Properties” in Champaign, Ill. to directly oversee the majority of the school’s athletics’ media rights – including signage, sponsorship, corporate hospitality, event marketing, radio production and sales, and television coaches’ shows and official athletic website advertising.

While Learfield declined to comment on their annual revenue, Hoover’s estimates that their offices in Jefferson City, Mo and Plano, Texas earned $480,000 and $380,000 respectively.

“Learfield Sports is a leader in the collegiate space, and a dominant presence in the Big Ten landscape,” said Mike Thomas, University of Illinois Director of Athletics.

The new partnership will result in a 50 percent increase in net sponsorship value, with significant annual increases each of the following years of a 10-year agreement.

“This new partnership is also a wonderful addition to our portfolio of Big Ten schools and further enhances our relationship with the conference,” Greg Brown, Learfield’s President and CEO, said in a press release.

The increases are mostly due to a financial guarantee, ticket and hospitality purchases, in-kind support, and direct cost savings, specifically in ticket sales.

IMG College and Learfield Sports are also being used by schools to outsource ticket sales.

“This joint venture just makes sense, and we’re pleased to be an equal partner in its growth and development moving forward,” Brown said.

Schools benefiting from this joint venture, such as University of Tennessee, have already reported generating more than $2 million in new ticket sales in just eight months, as well as nearly $500,000 in donations generated for the university as a result of the new season ticket holders.

The school’s athletic department will realize more than $1 million net increase in value compared to last year, according to a press release. Much of this gain can be attributed to Learfield assuming the department’s radio and television production costs.

Throughout the 10-year agreement, the Champaign-based division will generate more than $60 million from all external sponsorship and multimedia rights activities.

On average, these planned partnerships will help the department secure an additional $2 million annually.

On top of the other revenue, Learfield Sports has committed funding to help finance future video board and scoreboard enhancements at Memorial Stadium and Assembly Hall – a major corporate marketing attraction.

Learfield also established a joint venture with Chicago-based Levy Restaurants in 2010, named Learfield Levy Foodservice. This service is already serving more than 100 locations, including stadium concessions at Mizzou, Purdue and Iowa State.

In addition to partnering with more than 50 academic institutions, Learfield has also partnered with two conferences, Big Ten Conference and Missouri Valley Conference, where it focuses less on localized markets and more on national sponsorship.

“We work as the macro version of say, Northwestern Sports Properties. We are more cross-platform in that we [properties] can share data and ideas,” said Scott Bailey, Big Ten Sports Properties General Manager. “With our end-game being that we’re securing national sponsors for our Big Ten Championship events.”

For companies like Learfield and IMG College, partnerships are capital, the more roles they can fulfill the more valuable they become to their potential clients.

The imagination of the schools and the capabilities, entrepreneurship and inventiveness of third parties, such as Learfield Sports, are the only partnership limitation.

“Learfield extends its multi-platform support system throughout its 50-plus partners,” said Danny Spataro, Northwestern Sports Properties General Manager.

Slowing global economy stalls Cummins profit engine

Cummins Inc CMSCummins Inc., pinched by a slowing global economy,said Wednesday that fourth quarter earnings dropped 30 percent, with sales declining in most of the engine maker’s core business segments.

Cummins reported net income of $381 million, or $2.02 per diluted share, down from $548 million or $2.86 per diluted share, in the year-ago quarter. Revenue fell 13 percent to $4.29 billion, from $4.92 billion a year ago.

While Cummins’ fourth quarter was far from stellar and its sales prospects remain ambiguous given the uncertain global economy, Wednesday’s results significantly outperformed Wall Street predictions.

Analysts polled by Thomson Reuters had expected Cummins’ fourth quarter earnings of $1.75 per share, on revenue of $4.04 billion.

“We knew what the US economy was doing, but we really had to wait cautiously to see how the global economy would hit them [Cummins],” High-Point Financial analyst Brad Schaffnit said.

The heavy-duty truck engine maker blamed its revenue decline on a weak global economy.

More specifically, it pointed to the economy’s impact on truckengine demand. Cummins is heavily reliant on international construction, power generation, truck and mining engine demands. Compared to the $2.96 billion in total engine sales this time last year, Cummins’ sales slipped 18 percent to $2.51 billion.

“Like every other company in that industry, until the global economy shows signs of growth, Cummins is in wait and see mode,” Schaffnit noted.

While analysts polled by Thomson Reuters have been forecasting a 2 percent rise in 2013 revenue from Cummins, the company on Wednesday said it expects revenue to remain relatively flat, or even decline slightly, in the new year.

“Unlike what we saw in 2012, with a strong first half and weak second half of the year, I expect this year to be the opposite. It would not be unreasonable to expect first half sales to be down 10 percent year over year and first quarter could be tougher than that, but then we expect some recovery in the second half, possibly up 5 percent over last year,” Executive Director of Investor Relations Mark Smith said in a conference call with analysts Wednesday.

Company executives recently outlined cost-saving methods to combat the declining engine demands caused by a weakened global economy.

The Columbus, Ind. company announced Wednesday it has scaled its workforce back 3 percent by cutting 650 employees.

“The work we have undertaken to reduce costs and lower inventory should benefit the company when the global economy improves,” Linebarger said in a conference call with analysts.

Engine demand is not much better at home for Cummins, given the commercial truck sector’s reduction in truck purchases due to the US economic uncertainty, especially as it relates to freight volume.

“There is uncertainty surrounding the timing and pace of improvement in end markets in 2013,” Linebarger added.

Net income for full-year 2012 was $1.66 billion or $8.74 per diluted share, down from $1.85 billion or $9.55 per diluted share last year. Revenues for the full year were $17.3 billion, down 4 percent from 2011.

In New York Stock Exchange trading Wednesday, Cummins shares closed up $2.99, or 2.6 percent, at $120.38.

Are Manti Te’o’s marketing opportunities sacked?

Scott Kitun/The Medillian

Scott Kitun/The Medillian

Even with the massive controversy – and mystery – surrounding Notre Dame linebacker Manti Te’o and the death of his fake girlfriend, his draft stock and marketing potential may be largely unchanged, according to analysts.

Unlike the NBA, most incoming rookies in the NFL don’t get millions of dollars in pre-draft endorsements.

“In the NFL, you really have to earn it,” said Darren Rovell, a sports business reporter at ESPN.

Rovell estimates that Te’o probably lost between $350,000 and $500,000 in pre-draft endorsements from companies such as Sprint, Subway and Electronic Arts that are traditionally quick to sign athletes. Subway frequently uses athletes to promote its healthy fare and Te’o was one of the leading candidates to grace the cover of the NCAA Football 14 video game.

“Normally, there are pre-draft deals from companies that are aggressive in this space,” Rovell said.

Even if Te’o doesn’t tumble in the NFL draft – he was projected as a top 10 pick by both ESPN and CBSSports.com – his marketing potential is hamstrung, at least in the short term.

“If there were a marketing draft, Manti Te’o was a top 3 pick,” said Darin David, marketing executive at the Marketing Arm. “But now if you were planning to sign Te’o to an endorsement deal, you are going to have to tap the brakes on that.”

Te’o may wind up earning his lost endorsements back, but the damage to his reputation is already too big for teams to ignore, Rovell said.

“The Tiger Woods scandal doesn’t compare, the Lance Armstrong scandal doesn’t compare to this,” he said.

The good news for Te’o is that fans can be both forgetful and forgiving.

“It’s hard to have perspective on those stories, especially in the social media age,” said Dan Lobring, senior director of public relations at Revolution, a Chicago-based sports marketing firm. “Fans, in general, can have a short memory span. It all depends on what he can do on the field, if he apologizes and seeks forgiveness.”

As for Te’o’s draft potential, Andrew Brandt, ESPN NFL business analyst and the director of the sports law department at Villanova, doesn’t believe the scandal will greatly effect Te’o’s selection.

“Obviously talent is most important in draft evaluations but teams will note other issues: medical, issues with drugs, arrests, an agent that’s difficult to deal with, etc.,” Brandt said in an email.

Te’o could run into trouble is if teams are worried about his mental health. Te’o plays middle linebacker, the leader of the defense. If Te’o’s teammates question his leadership and mental state, they will lose faith in him. Brandt he said doesn’t think Te’o’s reputation is quite that tarnished but it could happen.

“The time may come up when a team is on-the-clock and may have to decide between two players,” Brandt said. “The decision maker may allow this to enter his mind in making a tough call about evenly rated players.”

Like Rovell, Brandt, who was formerly a player agent, said he has never seen anything quite as bizarre as the situation Te’o is in now.

The surprising aspect of the Te’o controversy is that he didn’t have any of those issues prior to this scandal. The trials Te’o overcame, the death of both his grandmother and girlfriend in the same week, were the feel-good story of the college football season. The lore surrounding Te’o was instrumental in his campaign for the Heisman Trophy, where he came in second.

This week, Deadspin.com discovered that his deceased girlfriend did not exist.

“He was less than truthful with the media,” Rovell said. “He didn’t mention that he hadn’t met her. At the very least, he was very dishonest.”

Marketing expert David agrees that harm has been done.

“Maybe Te’o was just an innocent victim in this, but regardless, his story just doesn’t read the same anymore.His marketing value was tied as much to his story as his play.”

Constellation Brands ride trading roller coaster Wednesday

Constellation Brands, whose portfolio includes Mondavi Wines and Svedka Vodka brands, reported stronger than expected fiscal third-quarter earnings Wednesday, helped by a sharply lower tax bill. Shares of Constellation Brands Inc. rose in morning trading then fell to close lower.

The company boosted advertising for Modelo, a Mexican beer that Constellation distributes. It was the first ever English-language campaign for Modelo, company executives said.

“We are gaining market-share and have strong marketplace momentum,” CEO Rob Sands told analysts in a conference call. “We are well on our way to reaching our financial goals for the year.”

In the quarter ended Nov. 30, Constellation earned $109.5 million, or 58 cents per diluted share, a 4.5 percent increase from $104.8 million, or 47 cents per diluted share, in the year-ago period. Sales rose 9.4 percent to $766.9 million from $700.7 million last year.

Excluding one-time items, Constellation would have earned 63 cents per diluted share. Analysts surveyed by Yahoo Finance were expecting to earn 55 cents on an adjusted basis.

Although sales were up 5 percent to $2.86 billion from $2.73 billion in 2011, income was down 7 percent to $415.6 billion from $446.8 million last year. According to Constellation executives, the depressed income was a result of large investments in beer marketing and the impact of an increase in bulk wine purchases as a result of poor raw grape harvests in 2012.

Sands also pointed to the affects the fiscal cliff had on the holiday selling period, more specifically the drop in the number of retail shoppers. But, while the overall bottom line was down from a year ago, Constellation executives remain optimistic about the upward trend in wine sales, which Sands said he expects to continue.

“Wines premium and super premium are still up 3 percent and our business performed on par with our holiday season expectations,” Sands said in a conference call with analysts.

Third quarter sales were up 9 percent according to Sands, in large part due to the continued performance of the Mark West brand, which makes the top-selling Pinot noir and had volume growth of 30 percent.

According to Sands, the Mark West brand was acquired with no hard assets, just the brand and its established grape contracts.

“The returns can be better because it gets plugged into an existing winery and it leverages current fixed costs,” Sands said.

Mark West Wines was acquired from Benham’s Purple Wine Co. in late June for $160 million.

Also contributing to the rise in wine sales is the excellent performance of the Opus One brand, particularly in Asia and Europe. According to Constellation executives, Opus One usually sells out of its vintage stock and this year the California based winery experienced a strong harvest, yielding more raw grapes, resulting in more salable product.

For the first nine months, Constellation earned $306.1 million, or $1.62 per diluted share, down 10.5 percent from $342 million, or $1.62 per diluted share, the nine-month period last year. Sales rose 3.7 percent to $2.1 billion from $2 billion last year.

Constellation closed down $1.43, trading at $35.82 per share. Despite a clumsy day of trading, possibly due to poor holiday sales, Constellation is still up 51 percent from a 52-week low of $18.50.