Thursday, January 22, 2009

Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

  • Shareholder sues BoA. A Bank of America (BAC) shareholder has filed a legal suit against the company, seeking class action status on behalf of all shareholders eligible to vote on the acquisition of Merrill Lynch. The suit names Kenneth Lewis and John Thain as defendants and faults the two for failing to disclose the full extent of Merrill's losses; the Dec. 5 vote to approve the merger was based on an Oct. 31 proxy statement that hadn't been revised to reflect Merrill's poor Q4 performance.
  • Sony slips. Sony (SNE) warned it will post a ¥260B ($2.9B) annual operating loss on falling demand, a strengthening yen and restructuring costs. The forecast is down from an earlier projection of a ¥200B profit, and far worse than earlier consensus estimates of a ¥100B loss. It will be Sony's first operating loss in 14 years, and its biggest loss ever, as the company has fallen behind Apple (AAPL) in portable music, Nintendo (NTDOY.PK) in video games and is losing money on its flat screen TVs. As part of the restructuring plan, Sony said it may consolidate TV production in Japan into one plant, but analysts call for more drastic steps to turn the company around. Shares -2.8% in Japan (7:00 ET).
  • Rescue buyout for Satyam? Media reports say Indian firm Larsen & Toubro, which holds around a 4% stake in Satyam (SAY), is considering presenting a rescue plan to Satyam's board. Investment banking and government sources said L&T would put a price on its bid once KPMG and Deloitte, Satyam's new auditors, release updated audit results. L&T denied the reports. Satyam's board will being a two-day meeting today to discuss how to secure emergency funding.
  • AIG selling prized business. AIG (AIG) has begun the sale of its prized Asian life insurance unit, and hopes to pull in as much as $20B on the unit to help repay its government loans. The unit boasts 20M policyholders across 13 countries, employs 200,000 tied agents and last year made an aggregate operating profit of around $2B. AIG has expressed an interest in selling 49% unit, but would consider a complete sale, and could be willing to accept shares as acquisition currency. Potential bidders include HSBC (HBC), Prudential Financial (PRU) and China Life (LFC).
  • Apple regains some shine. Apple (AAPL) posted better-than-expected quarterly earnings yesterday (more details below), giving depressed shares a healthy boost with gains of over 8% after hours. Overseas demand for iPods, Mac computers and iPhones offset a slowdown in U.S. sales, pushing quarterly sales past $10B for the first time vs. consensus estimates of the first profit drop in five years. The company posted a cautious outlook for FQ2, forecasting EPS of $0.90-1.00 vs. $1.13 consensus and revenue of $7.6-8B vs. $8.2B.
  • Germany's 'Bad Bank Light.' The German government is working on a new 'Bad Bank Light' rescue plan that could help the industry get hundreds of billions of euros of bad assets off its books. According to media reports, the government would take on the bad assets of banks and absorb associated losses, and would also get a claim on future gains. A similar model was successfully used with East German banks after reunification in 1990. The government could take as much as €300B-€400B in bad assets, though the banks themselves would choose which assets to divest.
  • BoJ forecasts deflation. Bank of Japan voted unanimously to maintain interest rates at 0.1%, and lowered its assessment of the economy. BoJ now sees a longer contraction until recovery starts to kick in by the second half of fiscal 2010. Japan will slip back into deflation during the contraction.
  • Retail sales. Retail chain store sales rose 1.1% from a week ago, ICSC reported, and fell 1.8% Y/Y. "Being a low volume month with little incentive to spend will continue to make January a tough month for retailers." According to Redbook, national chain store sales fell 2.5% in the first two weeks of January, worse than the expected -2.2%, noting retailers don't tend to read too much into January. Shops are building very cautious inventories for the spring season.
  • Housing index drops. NAHB's Housing Market Index came in at a record low of 8 vs. 9 consensus. However its index of prospective buyers rose to 8 vs. 7 in December, while its index of home sales for the next six months inched up to 17 from 16. "Clearly, conditions in the nation's housing market aren't getting any better," said NAHB chairman Sandy Dunn, "and they aren't going to get any better until the federal government takes substantial action to encourage qualified buyers to get back in the market."

Earnings: Thursday Before Open

  • AmerisourceBergen (ABC): FQ1 EPS of $0.73 beats by $0.04. Revenue of $16.9B (+4.6%) vs. $17.2B. (PR)
  • AU Optronics (AUO): Q4 EPS of -$0.95 misses by $0.42. Revenue of $1.80B (-62.5%) vs. $1.81B. (PR)
  • Baxter International (BAX): Q4 EPS of $0.91 beats by $0.02. Revenue of $3.13B (+4.1%) vs. $3.15B. (PR)
  • Fifth Third Bancorp (FITB): Q4 EPS of -$3.82 misses by $3.83. Tier 1 capital ratio of 10.59%. Net loss of $2.2B from goodwill impairment, credit actions, higher credit costs and market valuation adjustments. (PR)
  • KeyCorp (KEY): Q4 EPS of -$1.13 misses by $1.11. Revenue of $1.045B (-15.6%) vs. $1.176B. (PR)
  • Knight Capital Group (NITE): Q4 EPS of $0.56 beats by $0.18. Revenue of $330.2M (+28.2%) vs. $261.8M. (PR)
  • Lockheed Martin (LMT): Q4 EPS of $2.05 beats by $0.13. Revenue of $11.1B (+2.7%) in-line. (PR)
  • Nokia (NOK): Q4 EPS of $0.26 misses by $0.02. Revenue of $12.7B (-19.2%) vs. $13.1B. Shares -10.4% premarket.(PR)
  • Potash (POT): Q4 EPS of $2.56 beats by $0.28. Revenue of $1.87B (+30.7%) vs. $1.85B. (PR)
  • SunTrust Banks (STI): Q4 EPS of -$1.08 misses by $1.15. Revenue of $1.93B (+8.8%) vs. $2.16B. (PR)
  • Taiwan Semi (TSM): Q4 EPS of $0.07 in-line. Revenue of $1.96B (-32.1%) vs. $1.95B. (PR)
  • UnitedHealth (UNH): Q4 EPS of $0.78 in-line. Revenue of $20.45B (+9,4%) vs. $20.35B. (PR)

Earnings: Wednesday After Close

  • Amdocs (DOX): FQ1 EPS of $0.55 in-line. Revenue of $754M (+1.6%) vs. $792M. Sees FQ2 EPS of $0.47-0.51 vs. $0.57 and revenue of $700-720M vs. $793M. (PR)
  • Apple (AAPL): FQ1 EPS of $1.78 beats by $0.39. Revenue of $10.17B vs. $9.75B. Gross margins 34.7% vs. 31.9% consensus. Macs 2.52M in line. iPhones 4.36M vs. 4.6M. (8-K)
  • Burlington Northern Santa Fe (BNI): Q4 EPS of $1.79 beats by $0.05. Revenue of $4.37B (+3%) in-line. Commits $2.7B in capital expenses for 2009, $150M lower than 2008. (PR)
  • eBay (EBAY): Q4 EPS of $0.41 beats by $0.02. Revenue of $2.04B (-6.5%) vs. $2.12B. Sees Q1 EPS of $0.32-0.34 vs. $0.40, and revenue of $1.8-2.05B vs. $2.1B. Skype growth 26% to $145M. Active users +1% to 86.3M. Gross merchandise volume +1% to $11.47B. (PR)
  • F5 Networks (FFIV): FQ1 EPS of $0.40 in-line. Revenue of $166M (+7.4%) in-line. While some sales are being pushed into later quarters, others are postponed indefinitely. (PR)
  • Kinder Morgan Energy Partners L.P. (KMP): Q4 EPS of $0.24 misses by $0.29. Revenue of $2.29B (-6.4%) vs. $3.41B. (PR)
  • Polycom (PLCM): Q4 EPS of $0.42 beats by $0.02. Revenue of $263M (-0.1%) in-line. (PR)
  • Seagate Technology (STX): FQ2 EPS of -$0.23 misses by $0.18. Revenue of $2.27B (-33.6%) vs. $2.46B. Sees FQ3 revenue of $1.6-2B vs. $2.19B. (PR)

Today's Markets

  • Asia markets closed lightly up. Nikkei +1.9% to 8,052. Hang Seng +0.6% to 12,658. Shanghai +1.0% to 2,005. BSE +0.4% to 8,814.
  • In Europe at midday, London +1.2%. Paris +0.8%. Frankfurt +1.0%.
  • U.S. futures: Dow -0.6%. S&P -0.6%. Nasdaq +0.3%. Crude +1.4% to $44.18. Gold +0.01% to $850.20.

Thursday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.

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