Thursday, February 12, 2009

Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby


  • The new New Deal. The House and the Senate have drafted a compromise stimulus bill totalling $789.5B, all but guaranteeing the largest economic rescue program since Roosevelt's New Deal. Obama hailed the "endeavor of enormous scope and scale," though it may turn out to be just a down payment on efforts to turn around the economy. The package, which exceeds the cost of the entire Iraq war since the 2003 invasion, will expand unemployment insurance, streamline health-care delivery, give Washington more control over local education spending and tilt federal assistance to the poor. Around 35% of the package is earmarked for tax cuts. Obama and Democratic leaders lowered their expectations for job creation to 3.5M from 4M. Both chambers could approve the compromise bill by the end of the week.
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  • Rio rides wave of Chinalco investment. Chinalco (ACH) will invest $19.5B in Rio Tinto (RTP), spending $12.3B on stakes of up to 50% in nine of Rio's mining assets and another $7.2B on convertible bonds. The deal will secure resource supplies for China and will help Rio cut a heavy debt load, but will also raise regulatory scrutiny as the Australian government is anxious to ensure investments from foreign state-owned entities don't come with political or strategic agendas. One of the largest overseas investments by a Chinese company, the deal will potentially double Chinalco's stake in Rio to 18%. Rio strongly denied claims that it's selling out its independence to China, and still needs regulatory and shareholder approval for the deal. RTP -0.4% in London, ACH +5.6% in Shanghai (7:00 ET).
  • Slap on the wrist for bank chiefs. Eight bank CEOs (GS, JPM, BK, BAC, STT, MS, C, WFC) sat through a drawn-out Congressional hearing yesterday in which they were showered with populist outrage by many of the Representatives in the room. The chiefs were scolded for spending money unwisely, and were grilled about their TARP spending. They were also asked by a show of hands to indicate how many owned private jets. Unfortunately for U.S. taxpayers, the session was more focused on political grandstanding ("America doesn't trust you anymore") than on actually trying to ask hard questions and get truthful answers. The upshot for homeowners was the agreement to a temporary moratorium on foreclosures. (Read Deal Journal's Heidi Moore's witty liveblog of the grilling/hearing.)
  • GM pays workers to leave. In its latest cost-cutting move, General Motors (GM) is offering retirement incentives to 22,000 of its 62,000 UAW union members, and would like to see half of them take the offer. Coming in at far less than previous buyout offers, GM has offered certain workers who choose to retire $20,000 in cash and a $25,000 voucher towards a car purchase. To raise cash, sources say GM is also in talks with China's SAIC Motor Corp. about possibly selling GM's stake in their joint venture or other assets. In a bit of good news for the struggling company, the compromise stimulus bill drafted by Congress would erase a tax liability of up to $10B that would have resulted from GM's restructuring efforts.
  • NY AG slams Merrill bonuses. New York Attorney General Andrew Cuomo blasted Merrill Lynch for 'secretly' moving up the date of its bonus payments and providing rich executive rewards despite heavy losses. Cuomo had been trying to obtain information on Merrill's planned bonus payments since late October, and called the bank's lack of disclosure 'a surprising fit of corporate irresponsibility.' He also said the move raised some 'serious and disturbing questions,' including "whether Merrill Lynch and Bank of America (BAC) timed the bonuses in such a way as to force taxpayers to pay for them through the deal funding."
  • Swiss Re loses its leader. Jacques Aigrain, CEO of Swiss Reinsurance (SWCEY.PK), has tendered his resignation as chief executive. He said faltering investor confidence in his leadership left him little choice but to resign, a move he felt would be in the best interest of the company after his tenure ended with major losses and falling share price. Swiss Re named Stefan Lippe as its new CEO. Lippe had been deputy CEO since 2008, and will take up his new role immediately. Shares +4.8% in Zurich (7:00 ET).
  • Morgan, MUFG talk merger. Mitsubishi UFJ Financial Group (MTU) and Morgan Stanley (MS) denied media reports that they have agreed to merge their Japanese brokerage units, but concede they're in preliminary talks. The Nikkei newspaper had reported the two companies planned to merge their Japanese securities units by the end of the year. MTU -3.5% in Japan.
  • Sirius seeks freedom with Liberty. Hovering on the edge of bankruptcy, Sirius XM Radio (SIRI) is in talks with Liberty Media Corp. (LINTA) in a last-ditch attempt to fend off an unsolicited takeover by satellite entrepreneur Charles Ergen. Ergen, who controls Dish Network Corp. (DISH) and EchoStar Corp. (SATS), made an unsolicited offer for Sirius late last year, and is trying to use $175M in bonds that mature Feb. 17 as leverage to force Sirius into a deal. Talks with Liberty are said to be in an advanced stage, but a deal is far from certain.
  • Foreclosures slow dramatically. Foreclosure filings dropped 9.6% from December, RealtyTrac reports, largely due to the combined mitigation efforts of banks and the government - but remain 18% higher than a year ago. In January, one in every 466 houses was the subject of a foreclosure filing. Yesterday, Foreclosures.com said completed foreclosures plunged by more than 25% in January from December, to 72,694 from 97,841. Preforeclosure filings - an indicator of future completed foreclosures - also fell 12%. "Efforts last year by government and industry to lay the groundwork for housing recovery finally are yielding the hoped-for slowdown in the foreclosure hemorrhage," Foreclosure.com president Alexis McGee said.
  • Mortgage apps fall. Mortgage applications slid 9.8% last week to an eight-year low, MBA said, as potential buyers held out for cheaper prices, better terms and government help. The rate on 30-year mortgages dropped to 5.19% from 5.28%. Mortgage originations in Q4 were 80% lower than a year ago, as commercial and multifamily lending slowed to a trickle. For all of 2008, originations fell 60% from 2007 levels.
  • Trade deficit nears 6-year low. December's trade balance was -$39.9B vs. -$36B consensus, down from November's -$41.6B. Exports: $133.8B (-$8.5B). Imports: $173.7B (-$10.2B). The global market for U.S. goods shrank at a record pace, bringing the deficit to its lowest level in nearly 6 years.

Earnings: Thursday Before Open

  • Aetna (AET): Q4 EPS of $0.96 beats by $0.02. Revenue of $8.0B (+11.5%) in-line. (PR)
  • Alexion Pharmaceuticals (ALXN): Q4 EPS of $0.23 beats by $0.15. Revenue of $77.4M (+128.3%) vs. $76.6M. (PR)
  • EnCana (ECA): Q4 EPS of $0.60 misses by $0.17. Revenue of $6.4B (+8.2%) vs. $5.1B. (PR)
  • Life Technologies Corporation (LIFE): Q4 EPS of $0.83 beats by $0.29. Revenue of $544.9M (+62%) vs. $572.9M. (PR)
  • Mack-Cali Realty (CLI): Q4 EPS of $1.00 beats by $0.13. Revenue of $186M (-7.7%) vs. $180M. (PR)
  • Marriott International (MAR): Q4 EPS of $0.34 misses by $0.05. Revenue of $3.78B (-7.5%) vs. $3.86B. (PR)
  • Nexen (NXY): Q4 EPS of -$0.35 misses by $0.66. Revenue of $1.7B (-8.1%) vs. $1.2B. (PR)
  • Patterson-UTI Energy (PTEN): Q4 EPS of $0.64 beats by $0.09. Revenue of $570M (+9.4%) in-line. (PR)
  • Viacom (VIA.B): Q4 EPS of $0.76 misses by $0.01. Revenue of $4.2B (-0.1%) in-line. (PR)

Earnings: Wednesday After Close

  • Activision Blizzard (ATVI): Q4 EPS of $0.31 beats by $0.02. Revenue of $2.15B (+2.3%) vs. $2.15B. Sees Q1 EPS of $0.03 vs. $0.11 and revenue of $550M vs. $964M. Shares -2.3% AH. (PR, earnings call transcript)
  • Alcon (ACL): Q4 EPS of $1.41 beats by $0.09. Revenue of $1.5B (+1.9%) in-line. Sees 2009 EPS of $6.05-6.25 vs. $6.28. (PR)
  • Arris Group (ARRS): Q4 EPS of $0.25 in-line. Revenue of $292M (+17.1%) in-line. Sees Q1 EPS of $0.14-0.19 vs. $0.19 and revenue of $245-265M vs. $280M. Shares -1.2% AH. (PR, earnings call transcript)
  • comScore (SCOR): Q4 EPS of $0.05 beats by $0.01. Revenue of $31.6M (+24.9%) vs. $32.5M. Shares -6.8% AH. (PR, earnings call transcript)
  • Equinix (EQIX): Q4 EPS of $2.74 vs. consensus of $0.25. Revenue of $191M (+37%) in-line. Shares -3.2% AH. (PR)
  • Gildan Activewear (GIL): FQ1 EPS of $0.04 beats by $0.01. Revenue of $184M (-26.5%) vs. $217M. Suspends earnings guidance due to increasing uncertainty regarding the severity and duration of the current economic and financial crisis. Shares -22% AH. (PR)
  • JA Solar (JASO): Sees 2009 EPS of $830-952M vs. $1.1B consensus, citing worldwide macro economic conditions, tight credit markets and resulting issues with project financing. Shares -9.6% AH. (PR)
  • Jarden (JAH): Q4 EPS of $0.83 beats by $0.09. Revenue of $1.35B (-7.9%) vs. $1.3B. Shares +3.2% AH. (PR, earnings call transcript)
  • Las Vegas Sands (LVS): Q4 EPS of -$0.04 misses by $0.08. Revenue of $1.09B (+3.8%) vs. $1.17B. Increases cost-savings target for 2009 to $250M. Shares +4.3% AH. (PR, earnings call transcript)
  • NetApp (NTAP): FQ3 EPS of $0.28 in-line. Revenue of $874M (-1.1%) vs. $912M. Shares -7.6% AH. (PR, earnings call transcript)
  • Masco (MAS): Q4 EPS of -$0.18 misses by $0.13. Revenue of $2B (-25%) vs. $2.11B. Sees 2009 housing starts down 35% to 550,000-600,000. Shares -8.7% AH. (PR)
  • International Coal Group (ICO): Q4 EPS of $0.24 vs. consensus of -$0.06. Revenue of $258M (+25.7%) vs. $292M. Shares -7.3% AH. (PR)
  • Post Properties (PPS): Q4 FFO of $0.41 beats by $0.02. Revenue of $69.8M (-1%) vs. $70.9M. Sees 2009 FFO of $1.05-1.25 vs. $1.42. (PR)
  • Questar (STR): Q4 EPS of $0.99 beats by $0.15. Revenue of $879 vs. $655M. Sees 2009 EPS of $2.50-2.70 vs. $3.13. Shares -6% AH. (PR)
  • Realty Income (O): Q4 FFO of $0.46 in-line. Revenue of $82.7M (+6.8%) vs. $82.4M. Shares +5% AH. (PR)
  • Sequenom (SQNM): Q4 EPS of -$0.25 misses by $0.07. Revenue of $12.2M (+9.9%) vs. $13.8M. Shares -3.85% AH. (PR, earnings call transcript)
  • Taubman Centers (TCO): Q4 FFO of $0.87 beats by $0.06. Revenue of $190M (+6.2%) vs. $173M. Shares +0.2% AH. (PR)
  • Terex (TEX): Q4 EPS of $0.62 beats by $0.01. Revenue of $2.08B (-19.7%) vs. $2.28B. Sees 2009 revenue down 30-35%. General hiring freeze; headcount reductions; eliminating salary increases in 2009 for management; significant reductions in executive long-term compensation. Shares -17.8% AH. (PR)
  • TriQuint Semiconductor (TQNT): Q4 EPS of $0.05 misses by $0.01. Revenue of $149M (+16%) vs. $142.5M. Sees Q1 EPS of -$0.11 to -$0.07 vs. $0.01. Shares +6.1% AH. (PR, earnings call transcript)
  • Willis Group (WSH): Q4 EPS of $0.37 misses by $0.06. Revenue of $799M (+25%) vs. $821M. "We cannot predict the potential impact of the uncertainty of the global economy on current insurance pricing or on potential changes in the buying decisions of clients with any degree of certainty." Suspends guidance. (PR)
  • Winn-Dixie (WINN): FQ2 EPS of -$0.05 beats by $0.01. Revenue of $2.25B (+0%) in-line. Shares +17.3% AH. (PR)

Today's Markets

  • Asia markets closed broadly down. Nikkei -3.0% to 7,705. Hang Seng -2.3% to 13,228. Shanghai -0.6% to 2,248. BSE -1.6% to 9,466.
  • In Europe at midday, London -1.1%. Paris -1.5%. Frankfurt -2.0%.
  • U.S. futures: Dow -1.0%. S&P -1.1%. Nasdaq -0.9%. Crude -1.2% to $35.50. Gold -0.3% to $941.60.

Thursday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.


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