Monday, April 27, 2009

Wall Street Breakfast: Must-Know News

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Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

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  • Chrysler gets union concessions. Chrysler reached a tentative agreement with the United Auto Workers union, pending a vote by UAW members. Chrysler also won contract approval from the Canadian Auto Workers union for a contract that could save the automaker C$240M ($197M) annually. A company spokesman called the concessions 'important steps,' but Chrysler still has work out a deal with lenders who hold $6.9B of secured debt. Lenders have softened their stance on partial debt forgiveness, but have yet to reach an agreement with Chrysler.
  • GM readies new viability plan. General Motors (GM) will announce today its third business plan of the last four months, ahead of a June 1 bankruptcy deadline. Among its latest cost-cutting efforts, GM will likely discuss elimination of its Pontiac brand, plans to reduce employees, dealers and plants, and efforts to accelerate planned cuts by as much as four years. GM is also expected to provide an update on its debt-swap efforts with holders of $27.5B of unsecured debt. Shares +6.5% premarket (7:00 ET).
  • Thain fires back on Merrill bonuses. In an interview with the Wall Street Journal, John Thain, former CEO of Merrill Lynch, lashed out at Bank of America (BAC) for lying about the role it played in Merrill's bonus fiasco. "Getting fired is one thing," Thain said, "But nobody has the right to say things that they know aren't true." Thain claims he and BoA CEO John Lewis agreed in writing that the Merrill bonuses could be paid early, and BoA's assertion that the bonus decision was solely Thain's "is simply not true." The issue will likely come up at BoA's annual meeting on Wednesday, when shareholders will almost certainly question management about the controversial acquisition.

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  • Swiss want UBS case dropped. The Swiss government has asked the U.S. to drop its legal case against UBS (UBS) in exchange for the passage of a new tax accord between the two countries. A Swiss official said Geithner seemed 'understanding of the Swiss position' and promised to 'look into it,' but didn't give a definitive answer on the matter. The U.S. and Switzerland are set to begin talks on Tuesday on a bilateral tax treaty.
  • Qualcomm reaches patent settlement. Qualcomm (QCOM) agreed to pay rival Broadcom (BRCM) $891M over four years to settle a series of long-standing legal disputes. Qualcomm will make its first payment of $200M in the current quarter, and the settlement will result in the dismissal of all litigation between the companies, as well as a pledge not to sue each other again. Despite the cost of the payout, the move can be seen as a win for both firms since they can finally move on from their multi-year multi-continent legal fight.
  • AIG bids come in low. AIG (AIG) received second-round bids from three groups for its International Lease Finance Corp [ILFC], the insurer's aircraft leasing business. The bids reportedly value the unit at less than $5B, short of ILFC's book value of $7.6B at the end of last year. Negotiations over the price and terms of the deal will likely take place over the next several weeks.
  • Fed research suggests -5% interest rate. According to an internal analysis prepared for the Federal Reserve's last policy meeting, the ideal interest for the U.S. economy right now would be -5.0%. The analysis is based on the Taylor-rule approach, which estimates appropriate interest rates based on unemployment and inflation. Though a central bank cannot cut interest rates below zero, the research suggests the Fed should use unconventional policies to create the equivalent of a minus 5 percent interest rate.
  • More bank failures. Four more banks were shuttered on Friday, one each in California, Georgia, Idaho and Michigan. The closures will cost the FDIC almost $700M, and brings 2009 bank closures to date up to 29.

Earnings: Monday Before Open

  • BE Aerospace (BEAV): Q1 EPS of $0.41 beats by $0.03. Revenue of $524M (-15.6%) vs. $500M. Issues downside guidance for FY '09: EPS of around $1.50 vs. $1.73 consensus, pro-forma revenues of $1.9B vs. $2.2B consensus. (PR)
  • Check Point Software Technologies (CHKP): Q1 EPS of $0.45 beats by $0.01. Revenue of $195M (+1.8%) vs. $200M. (PR)
  • Corning (GLW): Q1 EPS of $0.10 beats by $0.05. Revenue of $989M (-38.8%) vs. $963M. (PR)
  • Enterprise Products Partners L.P. (EPD): Q1 EPS of $0.41 beats by $0.05. Revenue of $3.4B (-39.8%) vs. $5.1B. (PR)
  • Humana (HUM): Q1 EPS of $1.22 beats by $0.04. Revenue of $7.7B (+10.8%) in-line. Issues FY '09 EPS guidance of $6.10-6.20 vs. $5.90 consensus, revenue of $30.0-$32.0B vs. $30.84B consensus. (PR)
  • Omnicom Group (OMC): Q1 EPS of $0.53 beats by $0.09. Revenue of $2.7B (-14%) in-line. (PR)
  • Smith International (SII): Q1 EPS of $0.52 misses by $0.05. Revenue of $2.41B (+1.7%) vs. $2.56B. (PR)
  • Whirlpool (WHR): Q1 EPS of $0.91 beats by $1.09. Revenue of $3.57B (-22.6%) vs. $3.95B. Reaffirms FY '09 guidance of $3.00-4.00 EPS. (PR)

Today's Markets

  • Asian markets closed mixed. Nikkei +0.2% to 8,726. Hang Seng -2.7% to 14,840. Shanghai -1.8% to 2,405. BSE +0.4% to 11,372.
  • In Europe at midday, markets are trending down. London -0.65%. Paris -1.3%. Frankfurt -1.1%.
  • U.S. futures: Dow -1.7%. S&P -1.9%. Nasdaq -1.4%. Crude -5.5% to $48.73. Gold -0.03% to $913.80.

Monday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.

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