Thursday, February 19, 2009

Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby


  • Fending off foreclosures. Obama unveiled a larger-than-expected $75B housing relief plan yesterday, and set aside $200B of new backing for Fannie Mae (FNM) and Freddie Mac (FRE). The plan will allow as many as 5M homeowners who are underwater or have little equity in their homes to refinance their loans through Fannie and Freddie, and will encourage lenders to modify loan terms. Though the plan drew praise for its use of incentives, critics said it left many issues unsolved, including the difficulty of altering loans packaged into securities or loans not connected to Fannie/Freddie. Many Republicans were also wary of the plan, concerned it will only delay inevitable foreclosures. Notably, the plan will not try to spur demand for real estate and will focus solely on existing at-risk homeowners.
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  • FOMC minutes show recovery doubts. The Fed released minutes from its Jan. 27-28 FOMC meeting, showing participants are beginning to doubt the possibility of an economic turnaround in 2009 and are uncertain about the coming quarters. Also notable was Lacker's dissent: "...he saw no evidence of market failures that made targeted credit programs, including the forthcoming TALF, necessary. Moreover, he was concerned that such programs channel credit away from other worthy borrowers, amount to fiscal policy, would exacerbate moral hazard, and might be hard to unwind." The Fed also released updated economic projections yesterday, forecasting a deeper contraction and an unemployment rate near 9% by the end of the year. (Read the full FOMC minutes)
  • Not-so-secret Swiss bank. UBS (UBS) will turn over the names of around 250 clients as part of a $780M settlement with U.S. prosecutors over a wide-ranging tax-evasion probe. The agreement marks the first time Swiss financial regulators have allowed a Swiss bank to reveal the identity of account holders, with some Swiss lawmakers warning that destroying the secrecy associated with Swiss banks could ruin the country's banking industry. UBS' agreement will settle the criminal case against the bank but not the civil one filed by U.S. tax authorities who have subpoenaed UBS to turn over the names of 19,000 clients believed to be avoiding taxes. Shares +4.8% premarket (7:00 ET).
  • Nestle's net jumps. Nestle (NSRGY.PK) remains cautiously upbeat for 2009 after reporting strong underlying 2008 sales growth of 8.3%. Full year net profit rose 69% to 18B Swiss francs ($15.35B) vs. consensus of 20B francs, helped by a 9.2B franc gain on the sale of part of U.S. eyecare firm Alcon (ACL). Sales rose 2.2% to 109.9B francs. Underscoring its confidence for 2009, the company proposed a dividend increase of 14.8% to 1.40 francs/share and said it would buy back around 4B francs of shares. The world's biggest food group remained vague about the future of its 29% stake in L'Oreal, saying the company will continue its strategic review and doesn't need to take 'any action or decision' when part of its contract expires in April.
  • HP packs down outlook. Hewlett-Packard (HPQ) released Q1 earnings (see details below) and cut its full-year outlook, sending shares down nearly 6% in after hours trading. HP expects last quarter's weak market conditions to persist and believes exchange rates will continue to hurt revenue. The FY 2009 revenue forecast was cut to around $112.5B vs. $118.4B recorded last year and a November forecast that sales this year would rise as high as $130B. CEO Mark Hurd stressed HP's plans to create a leaner cost structure, explaining "we just don't want to bank on the fact that the economy is going to get better."
  • Mortgage apps rise. Mortgage applications surged 45.7% from a week ago, MBA said, on a seasonally adjusted basis. The average interest rate on 30-year fixed-rate mortgages decreased to 4.99% from 5.19%.
  • Retail sales rise. Retail chain store sales rose 0.9% from a week ago, ICSC reported, and dropped 0.9% Y/Y. "Seasonally warm weather combined [with] discounts helped to drive demand for spring fashion while Valentine's Day spending also contributed to the improvement." According to Redbook, national chain store sales rose 0.9% in the first two weeks of February vs. a 0.5% expected gain. Sales -1.6% Y/Y.
  • Housing starts drop. Housing starts fell 16.8% in January from a month ago to 466K/year. Permits dropped 4.8% from December to 521K/year. Completions declined 24.2% to 776K/year. From a year ago, the trio are down 56.2%, 50.5% and 41.7% respectively. Though the housing starts data was bad, commented economist Michael Darda, "do we really want housing starts to rise with housing inventories still close to record levels relative to sales? No, we don’t."
  • Industrial production weakens. Industrial Production fell 1.8% in January from December (vs. -1.5% consensus), and is down 10% from a year earlier. Manufacturing was down a broader 2.5%, led largely by a plunge in auto production. Prior revised to -2.4% from -2%. Capacity utilization fell to 72% from 73.3%.
  • Import/export prices. Import Prices fell 1.1% (vs. -1.2% consensus) in January, the sixth month of declines, but export prices rose 0.5% for the first time in half a year. Import prices are down 12.5% from a year ago. Price indexes for consumer goods, capital goods, and foods, feeds, and beverages were unchanged.
  • BoJ holds rate steady. As expected, the Bank of Japan kept interest rates unchanged at 0.1%, but announced several steps to try to ease the credit crunch. The bank extended the deadline for its commercial paper buying plan and will boost the supply of low-cost funds.

Earnings: Thursday Before Open

  • CVS Caremark (CVS): Q4 EPS of $0.70 beats by $0.01. Revenue of $24.1B (+10%) vs. $23.3B. (PR)
  • Newmont Mining (NEM): Q4 EPS of $0.26 beats by $0.01. Revenue of $1.3B (-4.8%) vs. $1.4B. (PR)
  • Pan American Silver (PAAS): Q4 EPS of -$0.41 vs. consensus of $0.10. Revenue of $46.3M (-46.1%) vs. $75M. (PR)
  • Patterson Companies (PDCO): FQ3 EPS of $0.45 beats by $0.01. Revenue of $811M (+4.4%) vs. $806M. (PR)
  • Regal Entertainment Group (RGC): Q4 EPS of $0.18 misses by $0.08. Revenue of $712M (+18.6%) vs. $722M. (PR)
  • Sprint Nextel (S): Q4 EPS of -$0.01 beats by $0.02. Revenue of $8.43B (-14.4%) vs. $8.55B. Sees subscriber losses in 2009 less than in 2008, excluding WiMAX. Expects to generate positive free cash flow in 2009. Says it has enough cash to meet debt requirements through 2010. (PR)
  • Watson Pharmaceuticals (WPI): Q4 EPS of $0.53 beats by $0.03. Revenue of $645M (+2.9%) vs. $634M. (PR)

Earnings: Wednesday After Close

  • Advance Auto Parts (AAP): Q4 EPS of $0.51 beats by $0.14. Revenue of $1.19B (+8%) vs. $1.15B. Shares +6.6% AH. (PR)
  • Agnico-Eagle Mines (AEM): Q4 EPS of $0.00 beats by $0.01. Revenue of $36.4M. Shares -0.2% AH. (PR, earnings call transcript)
  • Analog Devices (ADI): FQ1 EPS of $0.18 beats by $0.02. Revenue of $477M in-line. Sees FQ2 EPS of $0.08-0.09 vs. $0.10 and revenue down 5-15% sequentially. Shares -0.1% AH. (PR, earnings call transcript)
  • Baidu.com (BIDU): Q4 EPS of $1.31 misses by $0.01. Revenue of $132.2M in-line. Shares -0.3% AH. (PR, earnings call transcript)
  • Brandywine Realty Trust (BDN): Q4 FFO of $0.75 beats by $0.21. Revenue of $155M (-2.9%) vs. $144M. Shares +0.6% AH. (PR)
  • Blue Nile (NILE): Q4 EPS of $0.24 misses by $0.11. Revenue of $85.8M (-23.3%) vs. $93.4M. "Given the uncertainty surrounding the economic environment and consumer spending, we are not providing financial guidance at this time." Shares -9.6% AH. (PR)
  • CBS (CBS): Q4 EPS of $0.34 beats by $0.08. Revenue of $3.53B (-6%) in-line. Cuts dividend to $0.05 from $0.27, which it says will "further strengthen our financial flexibility to meet our debt obligations even in difficult credit markets, and still provide our shareholders with an attractive dividend." Shares +6.4% AH. (PR, earnings call transcript)
  • Dress Barn (DBRN): FQ2 EPS of -$0.02 misses by $0.03. Revenue of $343M vs. $341M. Affirms full-year guidance of $0.70-0.85 vs. $0.81. Shares +7.8% AH. (PR, earnings call transcript)
  • Federal Realty Investment Trust (FRT): Q4 FFO of $1.02 beats by $0.02. Revenue of $134M in-line. Sees 2009 FFO of $3.80-3.92 vs. $3.94. Shares flat AH. (PR)
  • Hewlett-Packard (HPQ): FQ1 EPS of $0.93 beats by $0.07. Revenue of $28.8B vs. $28.5B. Sees FQ2 EPS of $0.84-0.85 vs. $0.89 consensus and revenue down 2-3%. Shares -4.3% AH. (PR, slides, earnings call transcript)
  • Ingram Micro (IM): Q4 EPS of $0.59 beats by $0.22. Revenue of $8.68B (-13.2%) vs. $8.87B. Sees Q1 sales down low-to-mid-twenties percent. Shares -0.9% AH. (PR, earnings call transcript)
  • Kinross Gold (KGC): Q4 EPS of $0.09 misses by $0.03. Revenue of $484M (+72.1%) vs. $506M. Shares -2.5% AH. (PR)
  • LDK Solar (LDK): Sees Q4 revenue of $415-425M vs. $432M. Expects a $210-220M writedown against inventories whose price was deflated by falling solar wafers pricing. Shares -13.4% AH. (PR)
  • Nationwide Health Properties (NHP): Q4 FFO of $0.56 in-line. Revenue of $96.5M (+15.4%) vs. $94.1M. Sees 2009 FFO of $2.20-2.25 to $2.31. (PR) (-from. Wed. evening)
  • Navios Maritime (NM): Q4 EPS of $0.03 misses by $0.07. Revenue of $213M (-30.9%) vs. $210M. (PR) (-from Wed. evening)
  • Oceaneering International (OII): Q4 EPS of $0.93 in-line. Revenue of $526M (+9.2%) vs. $521M. Sees Q1 EPS of $0.60-0.70 vs. $0.76. Shares -0.8% AH. (PR)
  • O'Reilly Automotive (ORLY): Q4 EPS of $0.37 beats by $0.07. Revenue of $1.11B (+84.5%) vs. $1.05B. Sees 2009 EPS of $1.83-1.87 vs. $1.79 consensus. (PR) (-from Wed. evening)
  • priceline.com (PCLN): Q4 EPS of $1.29 beats by $0.24. Revenue of $406M (+21.2%) vs. $378M. Sees Q1 EPS of $0.85-0.95 vs. $0.81 and revenue up 5-10% Y/Y. Shares +12.9% AH. (PR, earnings call transcript)
  • Skechers (SKX): Q4 EPS of -$0.44 beats by $0.03. Revenue of $298M (-1.3%) vs. $293M. Shares +0.3% AH. (PR, earnings call transcript)
  • Synopsys (SNPS): FQ1 EPS of $0.50 beats by $0.09. Revenue of $340M (+7.7%) vs. $335M. Shares +3.1% AH. (PR, earnings call transcript)
  • Trinity Industries (TRN): Q4 EPS of $0.58 misses by $0.04. Revenue of $884M (-19.9%) vs. $1.03B. Sees Q1 EPS of $0.20-0.30 vs. $0.35. Due to uncertain economy, declines to give guidance beyond Q1. Shares +2.4% AH. (PR)
  • Whole Foods Market (WFMI): FQ1 EPS of $0.20 beats by $0.05. Revenue of $2.47B (+0.4%) in-line. Sees full-year EPS of $0.71-0.76 vs. $0.66 and revenue of $185M vs. $178M. Shares +9.1% AH. (PR, earnings call transcript)

Today's Markets

  • Asia markets posted modest gains Thursday. Nikkei +0.31% to 7,558. Hang Seng +0.06% to 13,023. Shanghai +0.78% to 2,227. BSE Sensex +0.3% to 9,043.
  • Europe stocks are mixed-to-flat at midday. London -0.2%. Paris -0.1%. Frankfurt +0.3%.
  • Stock futures moved higher in the overnight session. Dow +0.8% to 7540. S&P +1% to 787.50. Nasdaq +0.7%. Crude +3.1% to $38.58 (inventories at 10:30). Gold -0.2% at $977.
  • Treasury futures are lower. 30-year -0.44%. 10-year -0.33%. 5-year -0.14%. 2-year flat.

Thursday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.


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