Tuesday, February 3, 2009

Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby


  • Citi to boost lending. Under pressure to increase lending, Citigroup (C) plans to use $36.5B to issue mortgages, make credit card and other loans and buy distressed assets. According to CEO Vikram Pandit, "The government, on behalf of the American taxpayer, has invested in Citigroup. We have an obligation to repay in ways that go well beyond the $3.41B Citigroup will pay the government each year in dividends associated with its TARP investment." Citi also said it will not use TARP funds for bonuses, dividend payments, lobbying or marketing. Citi is also exploring the possibility of backing out of a nearly $400M marketing deal with the New York Mets.
  • How much did BoA know? Despite rumblings from Bank of America (BAC) that it didn't know Merrill Lynch planned to pay bonuses in December rather than January, former Merrill CEO John Thain said BoA knew about every aspect of the December payouts. Lending support to Thain's claim is a private bonus agreement both firms signed in September when BoA agreed to buy Merrill. The document shows both firms agreed the discretionary bonus pool shouldn’t exceed $5.8B billion, and that 60% should be awarded in cash and 40% in equity or long term cash awards. The agreement also said that the distribution of bonuses to eligible Merrill employees "shall be determined by the company in consultation with the parent." The parent, of course, being Bank of America. The PR battle between Thain and Ken Lewis in the media will likely continue, though one wonders whether BoA can really try to deny this latest claim.
  • Anxious UBS tried MS talks. UBS (UBS) discussed the possible sale of its U.S. brokerage division to Morgan Stanley (MS) late last year, sources say. The talks were preliminary and are unlikely to be revived, and though UBS is said to be no longer looking to sell the unit, it shows the dramatic steps the Swiss bank was willing to take to overhaul its business. The news will raise fresh questions about UBS's stratetegy as the bank suffers from credit-related losses and a U.S. tax investigation.
  • Cheap oil hurts BP. BP (BP) swung to a Q4 loss as the global slowdown pulled down oil prices along with demand (see earnings details below). CEO Tony Hayward said the 'depressed' results mainly reflected the dramatic fall in crude oil prices and adverse effects from non-recurring events, notably a $700M loss at Russian joint venture TNK-BP Ltd. due to a time-lag on excise duty and other impairments. The company's clean replacement costs of supplies, a figure that strips out gains or losses from inventories and exceptional items, was $2.61B vs. consensus of $5.01B. Cash flow from operations will balance with spending at an oil price of $50-$60 per barrel.
  • BoJ buyback scheme. Bank of Japan will buy ¥1T ($11.1B) of shares owned by Japanese banks to stabilize the financial system. The central bank will purchase stocks until April 2010, reviving a plan used more than four years ago when Japan was dealing with a domestic banking crisis. BoJ Governor said the biggest risk facing Japanese banks "is not credit risk. It's volatility in share prices."
  • Aussie rate cut, spending boost. Australia's central bank cut its benchmark rate to 3.25%, its lowest level in 45 years. The government also announced plans to spend an additional A$42B ($27B) to fight recession, with A$12.7B earmarked as handouts for families and A$28.8B for infrastructure spending.
  • Sad stats of the day. According to real estate data service Zillow.com, the U.S. housing market lost $3.3T in value last year, and $1.4T in the fourth quarter alone. Nearly one in six homeowners with mortgages owe more on their home loans than the homes themselves are worth. Home values have fallen for eight straight quarters. "Negative equity will trigger new foreclosures, and that will add to inventory and depress prices."
  • Personal income and outlays. Personal spending fell 1.0% in December, slightly worse than the -0.9% expected. Personal income was down 0.2% ($25.3B) vs. -0.4% consensus. Personal saving rose to 3.6%, the highest since May. But income and spending are worse than they sound, if you bear in mind December's data includes the Christmas shopping bump.
  • ISM mfg index. The ISM Manufacturing Index came in at 35.6 in January, the 12th consecutive month of contraction. The only industries reporting growth were textiles and petroleum & coal products. Nonmetallic mineral products and electrical equipment led the laggards.

Earnings: Tuesday Before Open

  • Archer Daniels Midland (ADM): FQ2 EPS of $0.91 beats by $0.23. Revenue of $16.7B (+1.1%) vs. $17.0B. (PR)
  • Avon (AVP): Q4 EPS of $0.54 misses by $0.05. Revenue of $2.81B (-8.7%) vs. $2.85B. (PR)
  • BP (BP): Q4 net loss of $3.3B. Replacement cost profit of $2.6B, down 24% Y/Y. Sales of $61.5B, down from $79.9B. Quarterly dividend raised to $0.14 from $0.1325. (PR)
  • Celanese (CE): Q4 EPS of -$0.38 misses by $0.43. Revenue of $1.3B (-26.9%) vs. $1.4B. (PR)
  • Dow Chemical (DOW): Q4 EPS of -$0.62 misses by $0.68. Revenue of $10.9B (-23.4%) vs. $13.3B. (PR)
  • D.R. Horton (DHI): FQ1 EPS of -$0.20 beats by $0.32. Revenue of $885.8M (-44.9%) vs. $871.7M. Shares -27.8% premarket. (PR)
  • Emerson Electric Company (EMR): FQ1 EPS of $0.60 beats by $0.03. Revenue of $5.4B (-1.9%) vs. $5.3B. (PR)
  • Myriad Genetics (MYGN): FQ2 EPS of $0.43 beats by $0.11. Revenue of $84.4M (+48.7%) vs. $78.9M. (PR)
  • Schering-Plough (SGP): Q4 EPS of $0.39 beats by $0.09. Revenue of $4.3B (+16.8%) vs. $4.5B. (PR)
  • Tyco International (TYC): FQ1 EPS of $0.61 beats by $0.14. Revenue of $4.43B (-8.5%) vs. $4.38B. (PR)
  • Wisconsin Energy (WEC): Q4 EPS of $0.85 beats by $0.12. Revenue of $1.2B (+4.5%) vs. $1.0B. (PR)

Earnings: Monday After Close

  • AFLAC (AFL): Q4 EPS of $0.98 misses by $0.02. Revenue of $4.26B (+6%) vs. $4.58B. Reaffirms 2009 guidance. (PR)
  • Anadarko (APC): Q4 EPS of $0.16 misses by $0.01. Revenue of $3.81B (+24.4%) vs. $2.48B. (PR)
  • Atheros Communications (ATHR): Q4 EPS of $0.17 beats by $0.02. Revenue of $98.3M (-28.8%) vs. $97.4M. (PR)
  • Crown Holdings (CCK): Q4 EPS of -$0.09 vs. consensus of $0.17. Revenue of $1.88B (+0.3%) vs. $1.95B. (PR)
  • Hologic (HOLX): FQ1 EPS of $0.31 beats by $0.02. Revenue of $429M in-line. Sees FQ2 EPS of $0.26-0.28 vs. $0.29 and revenue of $400-410M vs. $435M. (PR)
  • Plum Creek Timber (PCL): Q4 EPS of $0.52 beats by $0.09. Revenue of $461M (-8.5%) vs. $446M. (PR)
  • SanDisk (SNDK): Q4 EPS of -$1.65 vs. consensus of -$0.60. Revenue of $864M (-30.6%) vs. $767M. "Despite a very difficult pricing environment, macroeconomic turmoil and the impact on consumer purchasing, we delivered sequential revenue growth in Q4. However, we are very disappointed with our bottom line results, which included significant asset impairment and inventory related charges." (PR)

Today's Markets

  • Asia markets closed mixed. Nikkei -0.6% to 7,826. Hang Seng -0.7% to 12,777. Shanghai +2.4% to 2,061. BSE +0.9% to 9,149.
  • In Europe at midday, London -0.25%. Paris -0.3%. Frankfurt -0.4%.
  • U.S. futures: Dow -0.2%. S&P -0.3%. Nasdaq -0.3%. Crude +0.3% to $40.20. Gold -0.1% to $905.90.

Tuesday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.


Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.

After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long.

Found this interesting? Join the discussion!

Most Popular on Seeking Alpha

Most Read

Most Commented

Editors' Picks



Modify your selections or Unsubscribe completely
Powered by ReaderImpact

This email was sent to you by Seeking Alpha
C/O Frank, Rimerman & Co. LLP
1801 Page Mill Road Palo Alto, CA 94304
718-548-4666
ReaderImpact Enterprise API
 

0 comments: