Fair Isaac Corp.

FAIR ISAAC CORP. $26 (New York symbol FICO; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 38.6 million; Market cap: $1.0 billion; Price-to-sales ratio: 1.6; Dividend yield: 0.3%; TSINetwork Rating: Average; www.fairisaac.com) makes FICO Scores and other software that businesses around the world use to make better decisions on customer creditworthiness. Its products also help credit-card issuers control fraud and analyze cardholders’ spending patterns. In its fiscal 2011 third quarter, which ended June 30, 2011, Fair Isaac’s earnings jumped 29.3%, to $23.2 million from $17.9 million a year earlier. Earnings per share rose 45.0% to $0.58 from $0.40, on fewer shares outstanding. The company’s ongoing cost cuts were the main reason for the higher earnings: operating expenses fell by $11 million in the latest quarter....

When investors see a day like Thursday, with a drop of more than 500 points in the Dow Jones Industrials, they can’t help but wonder if we face a replay of the 2007-2009 market plunge. However, though today’s situation could turn out badly, that’s not inevitable. It’s much different from a few years ago. The 2007-2009 drop was mostly about the collapse of the housing boom and everything that went with it. Today there is no boom that could deflate and bring down the economy. Today’s problem grows out of government attempts at ‘fixing’ the economy in recent years. These fixes, which were mostly unsuccessful, bloated government spending and created huge debts. Today’s main market worry is how the U.S. federal government will attempt to fix its budget deficit and bring its debt down to a manageable level. To top things off, the Obama administration has also brought in big changes in health care, union and environmental rules and so on. Some of these changes face court challenges and political opposition. But some are sure to survive and go into effect. Others are sure to follow....

FAIR ISAAC CORP. $30.26 (New York symbol FICO; TSINetwork Rating: Average) (415-472-2211; www.fairisaac.com; Shares outstanding: 45.3 million; Market cap: $1.2 billion; Dividend yield: 0.3%) already dominates the market for software used by businesses around the world to make better decisions on customer creditworthiness with its FICO Scores product. Now the company is profiting from the rising use of credit cards around the world, especially in emerging markets. For example, there are now over 200 million credit cards in use in China, and that could rise to over 900 million by 2020. FICO’s software is already used by 17 of the top 20 credit-card issuers worldwide, and manages 65% of the world’s billion credit cards. Fair Isaac continues to win new clients for its FICO Triad Customer Manager software. Triad can increase a card issuer’s revenue by up to 30%, cut delinquencies by 25%, and increase interest income by 25%....

PLEASE NOTE: Our next Hotline will go out on Friday, July 8, 2011. STANLEY BLACK & DECKER INC., $72.05, New York symbol SWK, has agreed to buy Sweden’s Niscayah Group AB. Niscayah designs and installs security systems, including surveillance cameras and fire alarms, for a wide variety of businesses. This is a big purchase for Stanley, which will pay $1.2 billion for Niscayah, including assumed debt. That’s 94% more than the $619.3 million, or $4.12 a share, that Stanley earned in 2010. The company holds cash of $1.9 billion, so it can easily pay for this purchase without having to sell shares, which would dilute the ownership of existing shareholders....

PLEASE NOTE: Our next Hotline will go out on Friday, July 8, 2011. IAMGOLD CORP., $18.14, symbol IMG on Toronto, has now sold its 18.9% stake in the Tarkwa and Damang gold mines in Ghana to South African mining giant Gold Fields Ltd. IAMGold received cash of $667 million U.S. for these interests. The company now holds over $1.1 billion U.S. in cash and gold bullion. That gives it lots of options to spur its share price: it could raise exploration spending; make an acquisition; pay dividends; or buy back shares....

ACI WORLDWIDE $29 (Nasdaq symbol ACIW; TSINetwork Rating: Speculative) (402-334-5101; www.tsainc.com; Shares outstanding: 33.9 million; Market cap: $967.4 million; No dividends paid) makes software used to process credit card, debit card, ATM, point-of-sale terminal and interbank payment transactions. ACI has more than 750 clients worldwide. Its customers include more than 100 of the world’s 500 largest banks and seven of the top 12 retailers in the U.S. In March 2011, ACI bought ICD Corp. for an undisclosed amount. ICD has over 140 customers who use its software to authorize credit- and debit-card transactions through over 70 different payment processors, including banks and credit card companies....

FAIR ISAAC CORP. $30 (New York symbol FICO; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 40.1 million; Market cap: $1.2 billion; Price-to-sales ratio: 1.9; Dividend yield: 0.3%; TSINetwork Rating: Average; www.fairisaac.com) continues to see slow sales of its FICO software, which lets creditors use a customer’s information to calculate a credit score. That’s because high unemployment continues to hold back demand for new loans. In response, Fair Isaac will cut 9% of its workforce and combine certain facilities. These moves will cost it $0.18 a share. However, the resulting savings should raise its earnings per share by $0.30, to $1.87, in the fiscal year ending September 30, 2011. The stock trades at 16.0 times the new estimate. Fair Isaac is a hold.

FAIR ISAAC $27.90 (New York symbol FICO; TSINetwork Rating: Average) (415-472-2211; www.fairisaac.com; Shares outstanding: 41.7 million; Market cap: $1.2 billion; Dividend yield: 0.3%) plans to cut spending, including laying off 9% of its workforce and combining facilities. In all, these moves will cost the company $10 million, or $0.18 a share. However, savings from this plan should lift its fiscal 2011 earnings per share to around $1.95 from its earlier estimate of $1.66 (Fair Isaac’s fiscal fiscal year ends September 30). The stock trades at 14.3 times the new estimate. Fair Isaac’s long-term outlook is positive. But it needs the global economy to strengthen further to increase its revenue and earnings. As well, governments are increasingly regulating banks and credit-card issuers. That could hurt its sales to its biggest customers....

FEDEX CORP., $98.32, New York symbol FDX, warned that severe winter weather and rising fuel costs are hurting its earnings. In its 2011 third quarter, which ends February 28, 2011, FedEx expects to earn $0.70 to $0.90 a share before unusual items. That’s down from its earlier earnings forecast of $0.95 to $1.15 a share. FedEx earned $0.76 a share in the year-earlier quarter. Even so, the company continues to see rising demand for its package-delivery services as the global economy recovers....

WYNDHAM WORLDWIDE CORP., $32.07, symbol WYN on New York, is the third-largest hotel company in the world, with 7,110 franchised hotels. It operates under a number of brands, including Wyndham Hotels and Resorts, Ramada, Days Inn, Super 8, Wingate by Wyndham, Baymont Inn & Suites, Microtel Inns & Suites, Hawthorn Suites, Howard Johnson, Travelodge, Knights Inn and Ameri-host Inn. In addition to hotels, Wyndham manages a number of vacation resorts, rental properties, luxury clubs and time-shares. This wide range of operations gives Wyndham more consistent cash flow than most of its competitors, who mainly focus on hotels. On November 30, 2010, the company bought James Villa Holidays, which owns 2,300 Mediterranean vacation rental properties. Wyndham now has 97,000 vacation rental properties worldwide....